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http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis H E A R I N G S (42) Joint Economic Committee (Paul Douglas, Chairman) (1959, Page 1 ) Economic Report of the President (See next folder for testimony on request of President for increase in ceiling of the public debt and increase in interest rate ceiling on savings bonds and new Treasury bond issues. --Appearance No. (43). http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2/6/59 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ' Joint Economic Committee SENATE HOUSE Paul H. Douglas (111.) CHAIRMAN John Sparkman (Ala. ) J. William Fulbright (Ark.) Joseph C. O'Mahoney (Wyo. ) Prescott Bush (Conn.) John Marshall Butler ( M d . ) Jacob K. Javits (N. Y.) Wright Patman (Tex.) V. CHAIRMAN Richard Boiling (Mo.) Hale Boggs (La. ) Henry S. Reuss ( W i s . ) Thomas B. Curtis (Mo.) Clarence E. Kilburn ( N . Y . ) William B. Widnall (N. J.) http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Miss Muehlhaus MAR 20 1959 1 of the united s* % DfM* 'NT* Gbalratnt Hearings bef«r« your' C«iai.tfc»t 00. Fewawry 6f 1, trust y0m fdll fin4 to (Signed) C. C. Balderston GEMiBCHiia* http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis " *t Replies to Questions by Senator Douglas and Congressman Patman at Joint Economic Committee Hearings February 6, 1959 Question by Senator Douglas: Would it not be preferable, in implementing monetary and credit policy, for the Federal Reserve to rely on w* open market operations to achieve restraint or ease, but refrain from changing discount rates? In these circumstances interest rates generally would not rise, or not rise as much, in periods of credit restraint. When there is considerable unemployment and excess capacity, would you agree that this result would be desirable, sincer higher interest rates would tend to "hold back full recovery?" Answer; As an instrument of credit policy the discount rate is one aspect of the discount operation as a whole, which functions as a complement to the open market instrument. In a period of rising business activity, demands for bank credit may rise to such an extent that banks are unable to meet these demands on the basis of their existing reserves. There are essentially two ways in which banks can obtain additional reserves; the Federal Reserve System can, on its own initiative, supply reserves by purchase of Government securities in the open marketj alternatively, banks can on their own initiative increase their reserves by borrowing at Federal Reserve Banks. When credit demands are in such strength as would promote growth in credit and money in excess of the expansion of goods and services available for purchase, the Federal Reserve, in the interest of economic stability, tempers the amount of reserves available ta meet such demands. When the Federal Reserve does not furnish on its initiative all of the reserves sought by banks in circumstances of very active credit demands from http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2- private sources credit conditions in the economy as a whole tend ta tighten, Individual banks, finding that their available reserve funds are not adequate to permit them to meet all credit demands, may react to the situation l»"-" either by selling or running off liquid assets, or by borrowing from their Federal Reserve Bank. In either event, one effect is likely to be a rise in market interest rates. Which method a particular bank uses to adjust its position wiH depend on a number of factors, including the kinds and amounts of securities or other open market paper in its portfolio, its earning rate on these securities, and the rate it must pay on borrowings at the discount window. Banks are generally reluctant to become indebted to the Federal Reserve except for very short periods, and when in debt feel constrained to liquidate assets. The deterrents to borrowing are greatly weakened if market yields on securities owned become and remain substantially higher than the discount rate. In these conditions, banks may even be induced to borrow for profit, a development which renders difficult effective administration of the discount window. Federal Reserve Banks, in acting on member bank requests for credit, must therefore weigh each request in the light of the needs of the individual bank, the uses to which reserves are being put, and the general character and rate of credit expansion in the economy. While banks may expect that requests based on temporary needs resulting from reserve shifts beyond their individual control will be met, it is recognized that borrowing at the Federal Reserve is a privilege, not a right. Continued borrowing under circumstances pointing to unhealthy or unsound expansion of credit will be discouraged. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -3Federal Reserve Regulation A, revised in February I95$f sets forth the following guiding principles applicable to member bank borrowing: Federal Reserve credit is generally extended on a short-term basis to a member bank in order to enable it to adjust its asset position when necessary because of developments such as a sudden withdrawal of deposits or seasonal requirements for credit beyond those which can reasonably be met by use of the bank's own resources,. Federal Reserve credit is also available for longer periods when necessary in order to assist member banks in meeting unusual situations, such as may result from national, regional, or local difficulties or from exceptional circumstances involving only particular member banks. Under ordinary conditions, the continuous use of Federal Reserve credit by a member bank over a considerable period of time is not regarded as appropriate. In applying these principles it is of prime importance that the general reluctance of banks to borrow at the Federal Reserve be reinforced by a discount rate with real deterrent power at times when a tempering of bank credit growth is in the public interest. In other words, in order to make the discount mechanism an effective supplement to open market operations the Federal Reserve is obliged to maintain discount rates not markedly lower than market yields on the most readily available alternative source of bank reserves, Treasury bills. If the Federal Reserve in these circumstances did not adjust its discount rates to keep them "in touch" with market rates, the task of administering the discount window to prevent excessive credit expansion would become very difficult. In the absence of a rate deterrent to borrowing, Federal Reserve Bank officers would be without workable guidelines in acting on a great number of borrowing requests from banks, many of whom would be in the position of profiting directly from the relatively low rate on borrowings* http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The need for frequent reappraisal of the discount rate in order to maintain the effectiveness of the discount operation as a credit instrument is recognized in the Federal Reserve Act itself. Section 14(d) of the Act empowers each Federal Reserve Bank "To establish from time to time, subject to review and determination of the Board of Governors of the Federal Reserve System, rates of discount to be charged by the Federal reserve bank for each class of paper, which shall be fixed with a view of accommodating commerce and business; but each such bank shall establish such rates every fourteen days, or oftener if deemed necessary by the Board;" (Italics added) At times conditions are such that market rates and discount rates vary from each other for extended periods* When credit demands are relatively light and banks have abundant reserves with negligible borrowings, short-term market rates are likely to fall well below the discount rate. This occurred in 1954 and also in 1958, There have been other times when market rates have remained above the discount rate for a considerable period and have been little affected by changes in the discount rate. For example, last year the market yield on 90-day Treasury bills rose sharply from below 1 per cent in July to around 2-3/4 per cent by early October, while discount rates were raised from 1-3/4 per cent to 2 per cent in August and September, as shown on the attached chart. Since early October the yield on 90-day Treasury bills has fluctuated generally within a narrow range—between 2-5/B and 3 per cent, while discount rates were raised in late October to 2-1/2 per cent and in early March to 3 per cent-*-a total increase of 1 percentage point. Rates on longer term securities likewise rose http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -5sharply in the summer and early fall and have shown little further change since early October, In this period member bank borrowings have averaged close to $500 million, a much smaller amount than prevailed in other **"* recent years when market interest rates were around present levels0 The recent period provides an excellent illustration of the fact that market rates are strongly influenced by other factors than Federal Reserve policies. Rising market rates of interest almost inevitably follow along with rising business activity because expansion of credit demands are an essential accompaniment of such a rise, The discount rate is essentially a technical rate, relating to the availability of borrowed reserve funds for banks. It is not a rate at which public and private borrowers xn the market can avail themselves of funds, In periods of active credit demands, market rates will generally array themselves in closer relationship to the discount rate, because banks are always in a position to supplement their lending capacity by borrowing at the Federal Reserve, It is to keep this source of supplementary lending power under continuous and effective regulation that the Federal Reserve must rely on flexible adjustment of the discount rate to changing market and economic conditions* In any case, if the discount rate were not used for this purpose but access to the discount window were limited by instruction, a similar impact on market rates of interest would occur,, as individual banks sold Treasury bills or other securities to acquire the reserves denied through the discount window. Conceivably, the short-run impact on market rates would be greater. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -6Question by Mr, Patman: What is the effect of the Federal Funds Market on the Federal Reserve discount operation? Are not banks using this market really by-passing the Rederal Reserve? nf •** Answer: The existence of the Federal Funds Market, a loosely organized market in which banks having excess reserves lend these balances to other banks, usually for one day, enables many banks to manage their reserve positions to a closer degree of tolerance than would otherwise be possible* The net result may be that the banking syousm has fewei pockets of excess reserves, and perhaps also a smaller total volums of reserves<» Another way of saying the same thing is that short-run reserve shifts through the Federal unds Market result in more nearly optimm use by the banking system of the existing reserve base, with less use c^ Reserve Bank credit* From the standpoint of the individual bank,, borrowing reserves in the Federal Funds Market as a way to adjust to a reserve deficiancy adds a liability to its balance sheet* In this respect Federal Funds borrowing is similar to borrowing from the Federal Reserve* In either case, adjustment by borrowing is a temporary expedient; if the need for reserves continues, the bank will be obliged to reduce its holdings of securities or curtail its lending activities to bring its reserve position into balance. While an individual bank which borrows Federal Funds may thus avoid borrowing at a Federal Reserve Bank, it does not necessarily follow that the existence of the Federal Funds Market materially impedes http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -7Federal Reserve discount policy. In the first place, participation in the Federal Funds Market is confined to a relatively small number of banks, most of them the larger banks in financial centers. In the second place, transactions through the Federal Funds Market do not alter the total supply of reserves available to the banking system, which can be influenced by Federal Reserve policy actions. The supply of funds in the market is closely related to the general state of reserve availability for the banking system. When reserve availability is tight,, interest rates in the Federal Funds Markets will tend to rise to, or close to? the discount rate. With the supply of reserve funds limited at such times,, the discount mechanism, including the discount rate, can perform effectively its function of supplementing the open market instrument in regulating the volume of money and credit so that it is kept in alignment with the needs of the economy at a stable level of prices® http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Question by Mr. Patmanj Have not interbank deposits increased rapidly, approaching the same level that existed prior to the passage of the Federal Reserve Act when too much money was concentrated in too few i*--* banks? Answer; Prior to the establishment of the Federal Reserve System, banks kept substantial portions of their cash liquidity reserves in the form of deposits at other banks. Under today's conditions, however, the first line of reserves of member banks is maintained in the form of legal reserves on deposit at Federal Reserve Banks. Under these circumstances, banks now maintain balances at other banks primarily as a part of correspondent relationships—for liquidity purposes, to facilitate check clearance, and to obtain a variety of services and advice. The total of interbank balances increased substantially between 3939 and 19^4 5> as the table shows. There has again been some growth in the last year or so, but total interbank balances held at member banks were only $600 million higher in 1958 than in 19U5« New York banks actually held fewer deposits due to domestic banks in 1958 than in 19U5> although they continued to hold substantial deposits for foreign banks. Moreover, as would be expected, a substantial portion of total interbank balances held by member banks represented the approximately $I| billion which nonmember banks keep on deposit—an amount which in large part represents the legal and working reserves of nonmember banks. The growth of member bank interbank deposits for the period shown is of diminished significance when compared to the large growth in http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the total of demand deposits of all banks» Interbank deposits at member banks, which represented 2? per cent of total demand deposits of all banks in 1939, declined by 19U5 to 16 per cent, and in recent years have re^tr~' mained at about 11 per cento March 17, 19£9 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -10- t Selected Data en Interbank Demand Deposits and Total Demand Deposits, 1939-1958 (Millions of dollars) Year (June call date) Demand deposits of domestic banks held Nonmemb er bank s—All commercial banks--* balances due try member banks All member "1 | Re serve demand deposits from Country adjusted =/ New York | Chicago ( city banks domestic banks Per cent of member bank interbank deposits to total demand deposits 1939 2,992 7li6 2,920 U39 19U5 19 U6 19H7 191*8 3,271 33127 19U9 2,898 2,830 2,680 1,171* l,oU7 1,056 1,055 962 5,510 5,220 a, 773 l*,75l U,ii60 1,108 997 885 798 762 11,061| 10,391 9,612 9,u33 8,861; I/ I/ I/ 3,163 3,037 69,053 79,U76 82,186 82,697 81,877 1600 13ol 11.7 11*4 10.8 1950 1951 1952 1953 195U 2,692 2,7u4 3,193 2,979 3,23V 977 1,006 U,8u8 u,996 5,621; 3,211* 3,39U 3,833 3,8a3 3,958 86,960 9k, 15k 96, 898 1,212 9,368 9,659 11,013 10,9u7 11,956 85,oUo 5,71*4 850 913 1,060 1,049 11.0 10C9 11 06 11.3 1202 1955 ) 1956 1957 1958 3,129 3,080 2,775 1,125 5,979 6,078 5,61i8 6,115 1,2U9 1,321 1,2U3 1,267 Il,a82 11, 62? 10,799 11,676 3,811 3,081* 1,136 1,175 1,287 i,ite 1,3.33 1,211 6,220 25,9 I/ U,ooo 3,816 3,96U 98,132 103, 23k 10k9llik 105,706 106,169 llol 11.1 10.2 11.0 I/ Beginning with December 31, 19^7, the all-bank series was revised; previous data not strictly comparable* 2/ Excludes interbank and U 0 S» Government deposits and collection items; data are partly estimated prior to 191*7< http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WIIKIY PER CENT PER A N N U M 6 CORPORATE Baa MOODY'S 3 S COMMERCIAL PAPER / OPEN MARKET F. R. DISCOUNT RATES ' TREASURY BILLS MARKET YIELDS i ii i iii iiiiI0 1952 1954 1956 L a t « » t Figures Plotted: FEBRUARY ZO n>tm of mtman or rut rtafu. nscm/i trsreu http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1958 1960 i, «. WUMM 1C. O'H http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis €ongre*0 of tfjr ©mtefc States JOINT KCONOMIC COMMITTEE «MM»rr t» HE. I (A) «r *•*.• LAW m. WTM MHMHJ) , Wlilim MoC I DUWT%I ••* 0 WTw«iwft^V4 bard if wire 8yet 25> &. C. <lMur Mr !• to •xpvtiM tlM tteak* of tte Joint Conitt«« and it» *t«ff for your *tloontrlbutiob u> U» r«c«at bearing* on UM Report of tte Both the nrint^d tmnMrlpt of UM tte raemltte* » report ejrt now la ea- io«in« herortUi a oopy I. WJuey, ^K Director. Miss Muehlhaus Mr. Roy L. Reierson Vice President Bankers Trust Company 16 Wall Street New York. N. Y. Dear Mr. Reierson: Enclosed are ten copies of Chairman Martin's recent statement before the Joint Economic Committee. We regret that we are unable to furnish the 550 copies requested in your telegram today, but you are most welcome to reproduce the statement in any quantity you desire. Our stock of copies, unfortunately, is virtually exhausted and the stencils from which it was made are also badly worn. For your information, the text of the statement will be carried in the February issue of the Federal Reserve Bulletin which perhaps will be out in a week or ten days. Sincerely yours, (Signed) Chas. Molony Charles Molony Special Assistant to the Board Enclosures CM: ilk cc: Miss Muehlhaus http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM „Board of Governors Jerome W. Shay Subject: Memorandum* to be prepare^, for the Joint Economic Committee. ""or the Board's information, there are attached excerpts from the transcript of the hearing before the Joint Economic Committee on February 6, when Chairman Martin testified before the Committee From the excerpts it will be be noted that Senator Douglas requested a memorandum concerning the possible discontinuation of the rediscount function. It will be noted also that Congressman Patman asked that the memorandum discuss certain other points including effects on the rediscount function of Federal funds activities. The second memorandum requested by Senator Douglas will relate to his suggestion for a "central board of trade" for transactions in Government securities. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis These matters are receiving the attention of the staff. Excerpts from Chairman Martin's testimony before the Joint Economic GoFinittee on February 6, 1959, re memoranda to be supplied to the Committee * Senator Douglas. I would like to raise a technical question ilhich might take more time than we have here, but I would like your general comments, either now or later, on this proposal* You have the three classic methods of financing the debt— check the recession, maintain stability in the price level, open market operations, and offering member banks their reserve requirements. In changing your rediscount rate you, of necessity, influence the rate of interest along with the government and along with those other parts too* I have come to feel that it would be desirable if the government were neutral on the question of the interest rates. I criticized my own administration, as you remember, for artificially depressing the interest rate in early 195l» I am very frank to say that I think the Treasury has artificially raised the rate in recent years, and when you raise the discount rate that, of necessity, you raise the general interest rate. Your purpose in this, of course, is to diminish the demand for funds and hence tone down the level of activity and when this is done, with considerable unemployment and idle capacity existing, the result is to hold back full recovery. I had wondered whether the same result could not be obtained directly through open market operations, namely, that when you want to http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis e:xpand the currency, purchase government securities, building up member banking reserves, and when you want to contract, sell, and therefore shrink member banking reserves, then let the interest rate be determined If in the open market with the government and the reserve outside of that. Have you given consideration to that? Mr. Martin. You would eliminate the discount and try to have the open market operation do the same thing? ¥e will give you a memorandum on that. Senator Douglas. T*Jill you be willing to shoot from the hip on it now? Mr. Martin, I don't think you can administer the discount window—you change the i/diole operation. Senator Douglas. You are not compelled to accept the government bonds that are presented to youa That is optional on your part. Mr0 Martin, That is true, but the administration of that window gets to be very difficult. Senator Douglas. But you can simply close it down, Mr. Martin. Well, there are many instances if you did that where you would work a real hardship on individual bankse You have to think of each of these in relation to the needs of the particular bank0 If you just shut it down as a general control«~ I think it has a real weakness, that is, I mean your suggestion has a real weakness, Senator. Senator Douglas. It is eleven minutes past twelve. It is not the time for a long discussion, but I think there is more to it than you seem to basically believe. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I think it would have this great advantage—it would remove the struggle of the politics over the interest rates. I am very frank to say that this Administration has boosted it <•»•••'* and that many of your actions have contributed to it. Perhaps it should be a matter of public policy, but I would like to see at least an experiment made with the government neutral on the question of the interest rate, where you can alter the total supply. You could use that as an instrument of control, but have the interest rates adjust in terms of that supply and the demand for bonds* Now, if you and your experts have time, I would appreciate it if you would present a memorandum on that, Representative Patman, May I interrupt. In the same memorandum I wish, you would state your opinion of the federal funds that are available now, and this comparatively new market, Mr. Martin, where you state it would be a squeeze on many banks without the discount window which is now seldom used, as you know, that the federal funds are available in New York now at the same rates that the banks would have to pay the Federal Reserve, Is that not so? Mr. Martin. I think that is about right. Representative Patman. So they are really by-passing the Federal Reserve, it seems to me, and I would just like to have your memorandum to cover that, http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Martin, I will be very glad to prepare you one. Representative Patman, And also in the bank deposits, Mr, Martin, Yes. -4*Representative Patman, It seems to me the bank deposits have increased rapidly and that we are approaching possibly the same level that existed prior to the passage of the Federal Reserve Act when too much money *»•*""' was concentrated in too few banks« Mr, Martin0 Well, we will be glad to cover both of those parts» # * * > • * *- Senator Douglas,, I was privileged to spend a few days at being in control at the open market operations,, Mr, Martin, We appreciate that, Senator, Senator Douglas.,, I was struck with the fact that you had a limited number of dealers to whom you bought, I think at that time it was twelve or fifteen. Is that right? Mr, Martin, That is right. Senator Douglas, And you dealt with each of these at arm's length with a separate telephone connecting the control with each of the dealers, and I wondered if you had ever considered the possibility of a central board of trade where all the dealers would be brought together and when the purchase and sales would be allowed-«-it would be quite open— competitive biddinge Mr. Martin, We have actively considered it, and it is being considered at the present as a possible method of operation,, It is not an easy problem to work out, having come out of the stock exchange, I at one time thought it would be desirable to have it on the stock exchange. You see, there are different types of markets. This is not an auction continuously. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis _ -5Senator Douglas. Has your study progressed far enough so that you could present methods and the advantages and disadvantages of a central, Mr. Martin. If you will give us some time on that* ¥e are in i*'*' the process of collecting a lot of material. Senator Douglas, You think you could do it in a span of two or three months? Mr. Martin, I think so. Senator Douglas. And then submit it to such other committees of Congress as might care to see it as well? http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Martin, We would be very pleased to do that. This article is protected by copyright and has been removed. Article Title: Treasury Cash Competition Seen Growth Key by Martin: Financing Through Banks Called Aid to Inflation Journal Title: American Banker Date: February 9, 1959 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis This article is protected by copyright and has been removed. Article Title: Martin Discusses Budget - Prices Journal Title: Dow Jones News wire Date: February 6, 1959 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis This article is protected by copyright and has been removed. Article Title: Economic News (multiple entries) Journal Title: Associated Press News wire Date: February 6, 1959 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis A YEAR OF RECESSION AND RECOVERY Mr. Chairman: When I testified before your Committee last year, on behalf of *r~ the Federal Reserve Board, economic activity in this country was receding. Contraction in output and employment was general. rising at a disturbing pace. Unemployment was No one could be sure how far downward adjustment would go, or how long it would last. We pointed out then that, with the exception of the catastrophic recession of the thirties, every moderate cyclical decline since World War I had been checked in the course of a year. It was further emphasized that many forces were present in the economy that were favorable to eventuaj m recojv£ry. But at that time we did notjknow, nor did we then expect, that vigorous recovery would so soon be in full swing, and that contraction from 1957 levels of activity would be shorter in duration than most preceding economic recessions. Even while the Committee's Hearings were going on, some were beginning to view the outlook more optimistically. In January, corporations, taking advantage of easier conditions and lower interest costs in financial markets, were offering an increasing volume of new issues in anticipation of future needs for funds, and to refund shorter-term debt. State and local governments were bringing to market bond issues that were deferred earlier, and were stepping up the pace of bond offerings to provide for public works. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 2 - Farmers continued to foresee favorable output and price conditions in agriculture and were bidding up further the prices of farm land. Bankers, with slackened customer demand for credit and with strengthened reserve, positions, were bidding more aggressively for assets. By February, bankers were accelerating expansion of the assets and deposits of their institutions, thus increasing more rapidly the economy's stock of cash balances and raising its over-all liquidity. Within a matter of weeks following last year's hearings, personal income and consumer spending had ceased to decline and, in fact, showed modest recovery. an upward trend. Production and employment soon after resumed Whether these developments, though encouraging, fore- shadowed wide revival in activity was not known at the time; not until the June-July period did the current flow of information and reports provide substantial confirmation that general economic recovery was actually under way. From that stage on, currently available data, reflecting trends in markets, production, and employment, showed that recovery was both broadly based and vigorous. Pickup in employment, however, lagged behind that of output as is usual in early phases of cyclical upswing. At the year end, eight months after recovery set in, the level of total output in the economy approximated that prevailing at the output peak of 1957. Recovery has been so rapid and widespread as to indicate that the revival phase of the economic cycle has by this time probably run its course. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The economy has reattained its prerecession level and now appears to be entering a phase of resumed economic growth. Federal Reserve Action to Combat Recession „.-•* This brief review of changing levels of economic activity during 1958 provides a backdrop for specific comments about Federal Reserve policy and action over the past 16-month period of recession and recovery. As reported to you last year, Federal Reserve policy began to shift in a counter-recession direction in late October and early November of 1957. About that time, the System directed its open market operations to supplying reserves more liberally to the banking system. It also re- duced the discount rates on member bank borrowings from the Reserve Banks. „„ i n * As the stream of factual information verified the emergence of • "«»* recessionary trends, Federal Reserve actions and policies became more aggressive and discount rate, open market, and reserve requirement instruments were actively applied in complementary fashion to foster ease in credit markets and encourage bank credit and monetary expansion. From late fall 1957 through April 1958, there were four reductions in Federal Reserve Bank discount rates, from 3-1/2 per cent to 1-3/4 per cent. Through continuing open market operations from late fall of 1957 to early last summer, the Reserve System supplied the commercial banks with some $2 billion of reserve funds. Through three successive reserve requirement reductions in late winter and early spring of last year, the System released for the use of member banks about $1. 5 billion http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 of their required reserves. The total amount of reserve funds supplied by the System to commercial banks over the nine months, November 1957-July 1958, was *-- •* enough to enable member banks to reduce their discounts at the Reserve Banks from $800 million to about $100 million, to offset sales of gold to foreign countries amounting to about $1.5 billion, and to finance a , commercial bank credit expansion of almost $8 billion. ""I iiiii*>i"««« Monetary expansion mtaammt, from February through July stimulated by this Federal Reserve action was at an exceptionally rapid rate--at an annual rate of 13 per cent for all deposits, including time and demand deposits. For the active money supply; that is, demand deposits and currency seasonally adjusted, the rise was at an annual rate of 8 per cent. After the shift in Federal Reserve policy in the summer, expansion in the active money supply slackened, and for the year as a whole it amounted to about 3-1/2 per cent. Broader Effects of Monetary Action Although the immediate impact of Federal Reserve policy was on commercial banks, it clearly had broader effects upon the economy generally. For one thing, since commercial banks are direct participants in some degree in all important credit markets, expansion in bank lending and investing activities intensified competition among all lenders for the acquisition of the available supply of credit-worthy loans and securities. This worked to reduce the cost of financing to borrowers generally -businesses, farmers, consumers and home buyers, and all levels of government. It also widened access of all potential borrowers to credit funds, http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . 5- Another effect of the credit ease was a greater willingness on the part of banks and other lenders to make new loans to business customers arid to renew outstanding credits. This facilitated the orderly run-off o£excess business inventories accumulated in the preceding boom. It also furthered the completion of business programs of plant and equipment expansion begun in that period. With a $6 billion reduction in business inventory holdings and a significant cutback in fixed investment programs since recession began, it is perhaps remarkable that business loans outstanding declined only $1 1/2 billion in the year ending September 1958, The ability of businesses to maintain their bank borrowing and also to borrow more readily in capital markets not only cushioned downward pressures on investment spending but helped many companies to minimize cutbacks in their working force and payrolls, to maintain dividends, and to strengthen liquidity positions. In housing markets, the easier conditions broadened the availability of mortgage funds. Discounts were reduced on FHA and VA mortgages subject to ceiling interest rates, and interest rates on new conventional mortgages also fell. As bank credit expansion gained in momentum, banks participated in mortgage investment more actively than at any time since the boom housing year of 1955. The increased availability of mortgage funds at lower cost, together with the maintenance of personal income, was promptly reflected in a step-up of builder activity in constructing new houses. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 6 - In the consumer instalment credit area, the increased availability of funds made it possible for lenders to meet sound demands for credit more readily, thus bolstering lagging demand for consumer durable goodev On some transactions, terms were eased and, in addition, new credit plans were developed and extended. Easier credit conditions permitted lenders to be more liberal in granting renewals and extensions of time for repayment of outstanding credit. Thus, the volume of repossessions and credit losses was less than would otherwise have been the case, with benefits to both borrowers and lenders. Increased availability of funds also had an important impact on State and local government financing and spending. In many cases, the lower cost of financing encouraged States and municipalities to borrow in order to finance capital projects. In a few cases, lower market rates enabled local governments that had a legal ceiling on permissible interest rates to return to the market. N -«—""-^S.. The increase in spending by State and local governments from the summer of 1957 to the summer of 1958 was a billion dollars more than in the corresponding period of the preceding year. These observable effects of easier monetary conditions which developed from efforts to combat recession were, of course, important and salutary. They are not to be overly stressed, however, for monetary action is always only one element in Government counter-recession policy. In turn, Government policy is always only one element in the total economic scene. Businesses, individuals, and State and local governments, in the light of their own circumstances, were taking actions to adjust and adapt http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 7 - their situations and to redirect their energies. Their actions undoubtedly shaped the recovery and gave it momentum* *~* Changing Expectations Achievement of monetary ease to combat recession so promptly and amply was not without its problems. One of the most acute was the build-up of prices in the bond market as speculators counted on continuing business recession, credit ease, and still higher bond prices. Psychological reactions and expectations always play a role in swings in economic and financial developments, but were of particular importance in financial markets last summer as the economic outlook changed from one of a continuing recession to one of early, vigorous recovery. At that time, the improved economic outlook led to a sharp change in expectations in regard to renewed inflationary pressures and a turnabout in the trend of interest rates. A much larger Federal deficit loomed up •*• "••""• • lll««»*fct than had been estimated, as well as the crisis and threat of military action in the Middle East, Concern about the drain of gold from the nation's monetary reserves through sales of gold to the industrial nations of Europe was a further cause of uncertainty. The fact that the Canadian Government announced a major refunding operation at sharply higher interest rates was also a complicating factor. In these circumstances, heavy market sales by holders of U. S, Government securities in anticipation of higher interest rates sharply depressed bond prices. Initially, this selling stemmed from temporary http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 8- holders who had bought in anticipation of a continued rise in Government security prices. Some of these holdings had been acquired with funds borrowed on thin margins in connection with the Treasury's June financing operations. In many cases, selling was forced because the margins vanished as security prices declined. Prices of Government securities continued to decline under pressure of steady liquidation and the reluctance of investors to purchase market offerings in view of changed prospects for credit demands and inflationary threats. On July 18, the Federal Open Market Committee concluded that the market situation had become disorderly and decided to intervene temporarily in the medium- and long-term sectors of the Government securities market. This action was within the framework of the Committee's established operating rules. From July 18 to July 23 the System purchased $1.2 billion of securities involved in a Treasury refinancing and a small amount of other notes and bonds. Thereafter, as market conditions became more orderly, no further Federal Reserve open market transactions were effected outside the usual area of short-term Government securities. During late July and early August, sales of Treasury bills by the System together with other factors that absorb reserves more than offset the large volume of reserves ,_ ^^^j supplied to the market by Federal Reserve intervention in the Government bond market. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 9 - Shift in Federal Reserve Policy By this time, there was clear evidence in current statistics that recovery in economic activity and production, though not yet in employment, had gained considerable momentum and was likely to go forward without serious setback. Moreover, in view of the strength of consumer demand, further decline in business inventory holdings and capital outlays was no longer likely. Monetary policy was now reinforcing the existing foundation of productive activity and preparing the economy for a new advance. About this time, inflationary expectations began to spread. The abrupt upward shift of interest levels in central money markets, while precipitated by liquidation of speculative positions in Government securities, reflected investor demand for an interest premium to cover the risk of a depreciating purchasing power of invested funds. It was accompanied by a significant shift in investor allocation of newly available funds to common stocks instead of fixed interest obligations, with hedging against inflation a frequent explanation of the change in investor policy. Large current and prospective demands for credit by the Federal Government, State and local governments, and home purchasers, also influenced the rising cost of borrowed funds. In the stock market, the volume of trading was expand- ing rapidly and the rise in stock prices carried the yields on common stocks below the yields on bonds of the same companies. Developinents in our financial markets, as well as the very large deficit which the Federal Government was facing, were occasioning concern, abroad as well as at home, about the future of the dollar. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The extent of - 10 - concern among foreign financial leaders was clearly evident last fall at the annual meeting of the International Bank and Monetary Fund at Ne\v Delhi, India. ^..* In the light of the rapidly changing economic situation, in many ways highly encouraging but with inflationary and speculative psychology spreading, the Federal Reserve, during the summer, began to moderate the policy of credit ease with a view to tempering the rate of bank credit and monetary expansion. System open market operations after midsummer supplied only a portion of the reserves needed to meet rising credit demands and to offset the reserve drain of a continued gold outflow. As a result, member banks were obliged to draw down their excess reserves and to increase their borrowings from the Federal Reserve Banks. Such borrowing was made more costly when Reserve Bank discount rates were raised in the late summer from 1-3/4 per cent to 2 per cent, and at mid-fall when they were again raised to a level of 2-1/2 per cent. Since last summer, bank credit and the money supply have continued to expand but at a rate much reduced from earlier in the year. Some seasonal expansion in business loans was supplemented by a rapid growth of real estate loans. On the other hand, bank holdings of short-terin U. S. Government securities rose only moderately despite a substantial increase in their supply to finance the Treasury's deficit. With business sales and liquidity showing rapid rise, the higher interest rates that developed in the http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 11 market helped to attract a substantial volume of funds of nonbank investors, . •«•<». ••MM.**"'!*"1' especially business corporations, into the purchase of the new short-term Treasury issues. As a consequence, the Treasury was able to finance ^* most of its deficit outside the banking system, and at the same time banks were able to meet private credit demands accompanying economic recovery, with only a moderate further growth in total bank credit and money. Regulation of Margin Requirements In addition to its broader monetary responsibilities, the Federal Reserve is directed by law to prescribe margin requirements to guard against excessive use of credit for purchasing or carrying stock market securities. By providing a means of dealing directly with this volatile type of credit, margin requirements serve as a special-purpose supplement to the general instruments of Federal Reserve action. Since the flow of credit into the stock market fluctuates with general business conditions, changes in margin requirements are usually correlated with policy actions that affect general credit availability. Following the stock market decline in the early fall of 1957, total credit to customers for purchasing and carrying stock market securities declined by about 5 per cent and was back to about the level outstanding in mid-1955. With this indication of abatement of credit use in the stock market, the Board of Governors, early in January 1958, reduced the required margin from 70 to 50 per cent. With the increasing activity and rise in stock prices accompanying economic recovery, stock market credit rose sharply, reaching by July a http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 12 - level about 20 per cent above the volume at the beginning of the year. In view of the rapid rise in credit to finance trading in or temporary ownership of stocks and the emerging investment psychology favoring purchased stocks as an inflation hedge, the Board, early last August, restored the required margin to 70 per cent. As outstanding stock market credit continued to rise following this action, the Board, in mid-October, raised the required margin to 90 per c e n t . / The Current Situation The shift in monetary policy during the fall aligned monetary expansion more closely with the developing potential of the economy. Consumer spending on durable goods and housing continued to expand and was reflected in high levels of output of household durables, in a pickup in production of 1959 autos, and in a rise in new housing starts to one of the highest levels in recent years. Business inventory policies were switching from liquida- tion towards accumulation, and there was a widespread, though small, upturn in capital expenditures. At the same time, Federal, as well as State and local government spending, was expanding rapidly in accordance with budgetary authorizations adopted earlier* In financial markets moderate curtailment of credit availability and higher interest rates served to dampen speculative excesses then developing, to restrain and spread out the volume of new corporate and municipal security financing, and to facilitate the financing of the large Federal deficit outside the banking system. The restraint of corporate http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 13 - and municipal security financing followed some anticipatory borrowing by these issuers earlier in the year when long-term interest rates were lower. At the turn of the year, business capital financing was again rising, an(^. there was a large calendar of authorized but unissued State and local government securities. Total economic activity, measured in real terms, has regained its earlier peak. The active money supply has increased by about 2-1/2 per cent above the prerecession level, and holdings of other liquid assets, including time deposits, are up sharply. The financial basis for further growth is established. While economic prospects are generally favorable, there are several areas -- unemployment, exports, prices, and Federal finance -- that are matters for continuing concern. Despite the rapid recovery in production and sales, unemployment remains disquietingly high. The lag in employment is in part the result of a marked increase in productivity. The present availability of capital and manpower resources represents a potential for near-term growth of the economy without inflation. As output of goods and services expands in response to growing demands, opportunities for employment should increase as they have in past periods of economic expansion. In exports, which declined sharply until early last year, recovery has not yet set in. The export decline was largely in materials and fuels and was due in part to the ending of boom conditions abroad^ resumption of economic expansion is now beginning in industrial countries abroad and eventually there should be some improvement in foreign demand for our http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 14 - exports. It is significant, however, that the European countries which announced a broader convertibility for their currencies at the end of 1958--and other countries too — are giving our exports of manufactures *••* stiff competition in price and quality, and these countries are now able to devote a larger share of their resources to their own exports than they could in earlier postwar yeai^s. While this reflects progress towards international balance, our producers need to adjust to these competitive forces abroad if they are to share in growing world markets. Prospects for our international payments position thus merge with the third problem; that is, our price system. A market economy such as ours depends upon the price mechanism to allocate resources by reflecting the interplay of demand and supply. The price mechanism cannot do its job of efficient resource allocation in accordance with the changing demands of consumers unless there is some flexibility in individual prices. This does not mean that wide swings in the general price level are desirable. The price paid by Smith represents the income of Jones. But there is cause for concern when, in spite of a decline in the demand for his product, Jones raises his price, and an opportunity to stimulate both output and employment is thwarted. This is particularly disturbing when it comes on top of a price rise that Jones made when the demand for his product increased. Such a one-way movement of prices--whether it is explained as demand-pull, cost-push, or both - - i s not compatible with an efficient market system. If it were to be continued, it would pose a serious threat http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 15 - to the otherwise favorable prospects for healthy growth in consumption jr—-— and production. Now as to Federal finances, it is essential at this stage of the*" economic cycle that the Government should attain a balanced budget and then achieve some surplus as economic advance continues. Whatever the desirable level of expenditures, deficits, while justified in time of •••-• _ . , recession, should be avoided when economy is at a high level of activity. It is also of vital importance to have a healthy, broad-based Government securities market that enables the Treasury to lodge its debt outside the banking system. In other words, the Treasury must be able to compete effectively and flexibly with other borrowers for the available supply of savings. Appropriate debt management policies, while contributing to financial stability, are in turn dependent on such stability. Investors cannot be induced to purchase fixed income securities if they fear a steady erosion of the purchasing power of the dollar. The banking system has an important role to play in aiding the Treasury's financing. This role involves assistance in the broad distribu- tion of securities and, in accordance with the volume of reserves made available and the meeting of essential private credit demands, the retention by banks of that portion of the Government debt that is consistent with stability of the dollar. ""'*'"" ' « •"*•'" """"' *""" '*"i"*'1"'™"11'• Resort to financing Government deficits through .1.^ the banking system entails the creation of new supplies of money rather than http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 16 the use of existing funds. In a period of high economic activity, this is a high road to monetary inflation. There can be no effective control of inflation if the banking system is made the major source of funds to „,-- finance government deficits. Government Policies and Economic Growth As the United States economy emerges from the recession of 195758, it seems likely, if past experience is a guide, that we are on the threshold of a new period of economic growth. This is an opportune occasion, therefore, to consider the question of appropriate public and private policies to foster steady expansion of the economy. Economic growth is a principal objective of governmental policy in every country of the world. The rate of growth is widely accepted as an indicator of the performance of an economy. A word of caution is in order, however, regarding the very difficult task of measuring growth. Growth measxirements, particularly when they cover long periods of time and comparisons of one country with another, are necessarily approximations. They vary with a host of factors, including the scope of activities covered, both public and private; the character of such activities; quality as contrasted to quantity of output; and many others. Nevertheless, regardless of these measurement difficulties, growth estimates, properly constructed and interpreted, can be useful aids in appraising economic performance. it***-.... ...Miiiiiiiiiiir^iiiuWMTOiiii Desirable economic growth goes beyond increases in line with a growing population and labor force. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis It involves a rate that makes possible - 17 - rising living standards through increasing consumption per capita for present and future generations. This requires increasing output per worker; that is, higher productivity through advancing technology. ^.-* In our economy, consumption takes the form mainly of consumer purchases of the goods and services supplied in free markets by private producers and merchants. Our living standards also encompass services provided by the various levels of government. Fundamentally, economic growth at a more rapid rate than population increase is the response of men to their ever-increasing wants. Among the other reasons for seeking economic growth is the importance of demonstrating to the world that free economies under democratic political systems can outperform regimented economies under dictatorial political systems in providing high and rising living standards for all of the people. Economic progress, however, cannot be measured merely by percentage increases in the quantity of output. Also at stake is the opportunity to live as free men, the responsiveness of the productive system to the desires and tastes of consumers, the quality of goods and services, the degree of leisure and opportunities for using it in a satisfying way, and our willingness to aid other nations seeking similar advantages. These aspects of our economic performance will have a great influence on how the rest of the world judges the merits of free versus regimented economies. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis _ . 18 - Economic Growth WithoutjEnflation When we consider the influence of governmental policies on economic growth, it is useful to distinguish between two related aspects of the process. First, growth involves expanding capacity to produce goods and services. Second, it involves expanding demands for goods and services at a rate sufficient to utilize the expanded capacity. The first aspect of growth--an expanding output potential--depends upon such basic factors as additions to the labor force, advancing technology, and a flow of savings combined with a desire and ability on the part of producers to use them in the creation of a growing stock of modern plant and O O * equipment. The other aspect of growth depends upon a balanced expansion in demands for final product by the major sectors of the economy—households, businesses, governments at the State and local as well as the Federal level, and demands from abroad. For growth to be sustainable, an equilibrium between these two sides of growth must be maintained. If total demands do not keep up with the output potential, over-aH growth will slacken, for the inducement to business to add to productive capacity will lessen. If total demands tend to run ahead of the output potential, the general price level will begin to rise and this, in turn, will have an adverse impact both on growth of demands and on means of financing increased and improved capacity. It will also have adverse effects on the efficiency with which resources are utilized; likewise, the equity or fairness with which final products are distributed in markets among consumers, businesses, and savers. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 19 What then is the function of monetary policy in relation to these two aspects of growth? In general, it is to attempt to provide credit and monetary resources and an atmosphere in financial markets conducive to the basic growth factors. « At the same time, aggregate demand for goods and services should expand in close relation to the capacity to produce, On the demand side, growth basically depends on spending out of incomes earned in the production of goods and supplying of services. Monetary policy facilitates the expansion of money holdings, through sound credit expansion, consistent with the growing capacity of the economy to produce without inflation. On the supply side, basic growth factors are the labor force, technology, and investment of savings. Growth of the labor force is to some extent influenced by over-all demands, but more generally by population growth, age distribution, and social customs. Technological progress and the desire to save and invest savings productively are influenced by the monetary environment. An atmosphere of price and financial stability in general is necessary both to the incentive to save and to rapid technological advance* Thus, through continuous efforts to safeguard the value of the dollar and to create a climate of financial stability in which savers can have confidence in the future value of their investments, monetary policy makes a contribution to economic growth quite apart from its influence on demands for goods and services. It is for these reasons that price and financial stability is essential to the achievement of maximum economic growth. We have had a fairly http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 20 - ^J good growth record over our history, but we have had too much instability in our levels of employment and prices. A major problem is to moderate this instability so that the losses in ejmj^ioy.ment and output of recession periods will not depress our longer-term rate of growth. Currently there is trends. widespread concern about the danger of renewal of inflationary The Federal Reserve shares that concern. <^_.-. Mi this situation is not to forecast inflation. _ _ .._ To point to dangers in Public and private actions appropriate to present circumstances can prevent these dangers from materializing. Among potential inflationary factors first,perhaps foremost, is the budgetary position of the Federal Government. As the economy moves up toward more intensive utilization of its productive resources, it is essential that deficits give way to surpluses. There is no mystery about this source " of danger. If the will exists, the way will be found. It clearly lies in adaptation of Federal expenditure and tax policies in order to produce a budgetary surplus in prosperous times. Second, there are the problems arising from the so-called cost-push inflation which is part of a spiral process stimulated by demand pressures. In the period ahead there is a strong prospect that demands will continue <f to expand. In these circumstance^ we must recognize the dangers both of wage increases in excess of productivity growth and of price increases beyond what the traffic will bear. Business and labor leaders have a paramount responsibility to the general public as they make wage and price decisions over the coming year. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 21 - Then there is the easy acceptance of the idea that a little inflation is not seriously harmful. The experience in the government bond market, to which I alluded, is a vivid example of the influence of inflationary expectations in financial markets. To the extent that such attitudes come to be reflected in decisions on wages, prices, consumption, and investment, they help to bring about their own realization. These are the major reasons for concern about the possible development of inflationary pressures. To be fully aware of a danger, and to face up to it, is not to despair or to capitulate, nor does it mean being blind to other national needs, including sustained economic growth. The Federal Reserve System will continue to the best of its ability to contribute, so far as it can, to continuing prosperity and economic growth, without inflation. Such decisions as it must make within its particular province manifestly are not enough to assure attainment of the national objectives to which we all subscribe. management, labor, agriculture What this Congress decides, what and, indeed, the public generally decide to do will win or lose the battle against debasement of the currency with all of its perils to free institutions. The state of the nation tomorrow -- its progress and prosperity -rests with the decisions of today. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ECONOMIC ADVMCE AM) HIGH UNEMPLOYMENT Employment gains have lagged output gains in this recovery, as they usually do. The lag, however, has been greater than in preceding postwar recovery periods, and the level attained by unemployment has been both higher and somewhat more sluggish in its response to rising activity. Thus, while real GKP and industrial production are currently both within striking distance of earlier highs, nonfarm employment—up 700,000 from its recession low—has regained less than a third of its recession loss of 2.U million jobs. Since September, there has been little evidence of any extensive general rehiring of workers other than for seasonal reasons. In the two preceding postwar recession-recoveries, employment stabilized for a number of months after the recession bottom, but once recovery set in, employment increases were not halted until a new peak was reached. What accounts for the slower pic&u p in employment in this cycle than in preceding postwar cycles? Several factors may be mentioned. (l) Productivity increases in manufacturing industry have apparently been higher this time than in the earlier recovery periods, reflecting very high modernization investment in preceding boom as well as the greatly expanded industrial research and development programs of the boom period. For instance, automobile output in December, while only k per cent lower than in December 1956, provided one-fifth less in production worker employment than two years earlier. The railroads, while carrying about as much freight as in late 1957, provided 10 per cent http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2- less employment. Similarly, the coal mines have been about equalling output levels of a year ago with about 15 per cent fewer employees. The larger productivity gains of this recovery period may also be a factor in recent stabilizing of average hours of work per week in all manufacturing industry. Virtually all of the recession decline in hours worked had been recovered by last September and there has been no further gain since. In earlier postwar cycles, hours of work continued to increase long after this stage of recovery. It is important here to note that, since 1955> there seems to have been a downward drift in the length of the workweek. (2) It may well be that labor cost increases of recent years have made management more cost conscious than in any earlier period and that greater efforts are now being applied to limiting employment and overtime increases in order to keep costs down. Also, postwar growth in fringe benefits now makes record-keeping costs and benefit liabilities rise rapidly as new workers are hired, and this would operate to slow down management decisions to add to work forces. t (3) In machinery and other industries associated with investment outlays, employment has shown little recovery rise because expansion in fixed investment has not yet shown marked revival. In the past, expansion of nonproduction worker employment, associated especially with research and development, has been correlated with rising investment. In the preceding two cycles, business investment had shown much more revival than has been shown up to the present point in this cycle. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -3Nonmanufacturing employment, which had shown strong growth through the whole postwar period, with only modest slackening of expansion in the two preceding downturns, declined moderately in this recent recession and has shown little expansive tendency in recovery. Judging by the rise in nonindustrial GNP since last spring, perhaps as sharp or sharper productivity gains have "been experienced in nonmanufacturing activities as in manufacturing industries during this recovery period. Presumably these nonmanufacturing activities are digesting earlier postwar increases in their working force. (5) The industries in which recession declines in employment have been highest and greater than in preceding recessions have been durable manufacturing, railroads, and mining. These industries have been subject to a secular decline in postwar years in employment of semi-skilled workers, with reductions in semi-skilled jobs more accentuated in each succeeding recession-recovery period. This means, of course, a sizable problem of transfer of employment to other gainful activities, a problem that can be only resolved slowly. With the rise in employment opportunities lagging, that is to say, showing slower advance than in preceding postwar recoveries, what about the unemployment problem and prospects over the months ahead ? Unemployment has been higher all through this recessionrecovery period than in earlier postwar cycles. It reached a seasonally adjusted high of 7.5 per cent of the labor force in the summer and declined to about 6 per cent subsequently. In numbers of unemployed, the decline has been about 1 million workers. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -ItWhile unemployment has been higher than in preceding cyclical dips, the general pattern of rise and decline has not been dissimilar to that of preceding cycles. The seasonally adjusted unemployment did not fall below ^.5 per cent of the labor force in the 19^9-50 recovery until about 12 months after recession ebb, and in the 1953-5^ recovery this rate was not pierced until after 10 months. In the Korean boom, the unemployment rate fell to under 3 per cent, but in the 1955-57 boom, 4 per cent constituted a floor and most of the time the rate fluctuated just above h per cent. In the two earlier postwar recoveries, employment rose and unemployment declined at the same time that sizable additions were being made to the working force. In the recent recession, part of the rise in unemployment was due to the large number of secondary earners who entered the working force when primary earners had their pay reduced or lost their jobs. The recent decline in unemployment has reflected in part withdrawal from the work force of many of these secondary earners as well as withdrawal of some older and younger workers for want of job opportunities. Recovery in job opportunities has been uneven for different groups of workers. Younger workers have generally faired better than older workers, and females better than males. Relatively high rates of unemployment persist for durable goods workers, semi-skilled and unskilled workers, and for nonwhite workers. Among those with long duration unemployment, durable goods workers, miners, and railroad workers are numerous in relation to their role in the labor force. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -5Recovery re-employment has also been uneven geographically. In California, employment has returned to prerecession highs. In Michigan, it has fluctuated only seasonally and unemployment is currently well above last year's rates. At midsummer, the number of substantial surplus labor markets was 89 out of 1^9> and by the present month the number of such markets had declined by only 13* The concentration of substantial surplus markets continues to be in the east and midwest. Two observations about current labor market conditions seem warranted from this review. First, on the supply side, a conjuncture of secular and cyclical forces seems to have contributed to the present volume and composition of unemployment. As we have noted, a high proportion of the unemployed is concentrated in durable goods and related industries, making the continuing unemployment problem a cluster of localized problems rather than a general problem. But this may also work to make unemployment slack linger on. The terms "technological unemployment" and "labor immobility" undoubtedly will be used more frequently again to describe a possibly slower decline in the unemployment rate than featured the earlier cycles. However, given appropriate job opportunities, the American worker has b^en extremely mobile in adopting to new occupations and new conditions. Second, on the demand side, the labor market in the recent period has, on the whole, been experiencing a less vigorous demand for labor than in the comparable phase of the other postwar cycles. But as consumption expenditures rise further and as capital expenditures begin actively to expand, demand for labor will surely strengthen, and particularly in the durable goods areas where unemployment is now http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r -6concentrated. Gains in worker productivity are typically high in the recovery phase of the cycle and then slow down in the expansion phase. Gains in output in the expansion phase increasingly require utilization of older facilities and these facilities take more manpower per unit of output. How fast available manpower resources will be taken up in the period ahead depends on the pace of further expansion in aggregate demand and especially of durable goods demand and on the strength of competitive responses, especially price response, in meeting additional growth in demand. If expansion in money demand is dissipated in price advance, the employment impact will, of course, be lessened. Taking into account the relatively larger pool of unemployed manpower at this stage of the present cycle compared with earlier postwar cycles, it seems reasonable to observe that manpower availability will not become a limiting factor on the further increase in total production nearly so soon as it did in the two preceding cycles. If inflationary tendencies can be checked, currently available manpower resources and unused capacity can provide the basis for an \ extended period of economic growth. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis This article is protected by copyright and has been removed. Article Title: Secretary Anderson said today the American people can stand higher taxes if necessary but need not have them if President Eisenhower's 77 billion dollar budget is kept in balance Journal Title: Dow-Jones Ticker Date: February 5, 1959 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis This article is protected by copyright and has been removed. Article Title: Washington—Add Secretary Anderson's Testimony Journal Title: Associated Press News Wire Date: February 5, 1959 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis TREASURY DEPARTMENT Washington STATEMENT BY SECRETARY OF THE TREASURY ROBERT B. ANDERSON BEFORE THE JOINT ECONOMIC COMMITTEE, 10:00 A.M. EST., THURSDAY, FEBRUARY 5, 1959 I welcome the opportunity to appear before your Committee and to discuss the governments fiscal outlook and some of its implications for the nation's economy. First, I should like to discuss the budget for the fiscal year I960. We estimate total receipts of $77.1 billion. Of this total, $40.7 billion is expected to come from individual income taxes, and $21.4 billion from corporation income taxes. The assumptions for the calendar year 1959 underlying these figures are $374 billion for personal income, and $47 billion for corporate profits. These income assumptions were arrived at after careful studies and consultations utilizing all data and judgment available both inside and outside the government. The increases they represent imply a continued vigorous recovery, but at a slightly lesser rate than we experienced after the 1954 recession. Somewhat larger revenue gains, too, were attained in moving out of the recession of 1954, if we adjust the timing of corporate tax payments for comparability. The personal Income figure of $374 billion compares with a rate for December 1958 of $359 billion; the corporate profits assumption of $47 billion for 1959 compares with a rate for the fourth quarter 1958 of $44 billion. I present these estimates with the full realization that the revenue results for fiscal 1959 will turn out to be substantially less than we originally estimated. ^ j" I believe, however, that our assumptions for fiscal I960 are sound and will turn out much closer to the mark. They are within the range of calculations made by private estimators, and I understand that similar figures have also been mentioned by some of the experts that have testified before your Committee. Let us now look at our present situation in a broader perspective. We are well along in the recovery from a recession which is now substantially contributing to the largest peace-time deficit in our history — $12.9 billion at present estimates. A-435 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 2Of this deficit, about half will result from a shortfall in revenues. The remaining is the result of increases in expenditures over original budgetary estimates. The drop in revenues in fiscal 1959 is the direct result of the recession. The increase in expenditures reflects for the most part increases that came about automatically or through actions not primarily related to the recession. Among these are the higher cost of the agricultural program because of larger crops, the Federal Government pay increases, higher defense expenditures, and the proposed subscription to the International Monetary Fund. Some $2 billion of spending, chiefly FNMA mortgage purchases, the extension of unemployment benefits, and direct housing loans by the Veterans Administration, represent actions designed to combat the recession. What conclusions seem to follow from this experience? First, it seems to me that the economy has once more demonstrated remarkable resilience and resistance to recession. This is indicated by the fact that personal income declined very little, and that the recovery set in very quickly. I attribute this good performance to the inherent qualities of our economy, to the confIdence and good sense maintained by our people, and to the automatic stabilizers that have become a part of the economy. Second, I am concerned with the size of the deficit that the recession in large part produced and with its continuation in a period of growing prosperity. A deficit of this magnitude, unless quickly corrected, can produce serious inflationary pressures in the longer run, even though in the short run these pressures are held in check by excess plant capacity and other factors. The extended unemployment benefits proved timely, but the economy turned around before several of the others could have their full budget effect. Meanwhile these expenditures will continue as we move closer to increased prosperity. Third, the decision by the Administration and fche Congress to avoid a major tax cut last spring has been justified by events. Had we resorted to a tax cut we would not have had this demonstration of the economy's inherent recuperative powers. We would have helped develop a philosophy that tax relief was necessary to pull us out of a downturn. Also, a tax cut would have increased our present deficit and our public debt, and with them the danger of inflationary pressures in the future. I fear, however, that price pressures may eventually revive, if we do not finally close the budget gap. I sincerely believe that a nation as rich and productive as ours must, in times of prosperity, at least pay its way. We can afford to do all that http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 3is necessary,, and much that is desirable, and pay for it. But we should not reach for everything at the same time. Even a rich country can get into trouble if it keeps spending beyond what it pays for currently. Some people seem to feel that to be for meeting current expenses from current revenues means to be "against or "negative." Let us not be misled. The fact of the matter is there is almost nothing which is more positive and more important to be for than fiscal soundness. This is an essential condition of our economic health, without which we can have neither adequate military security nor the adequate provision of other needed governmental services. Meeting our expenses currently and all that that means in the way of fiscal soundness and a healthy economy is a highly positive objective which deserves the support of everyone. Growth requires capital formation, through saving and investment. As a consequence, we should meet our expenditures out of current revenues in prosperous times. A Federal deficit financed outside the banks tends to absorb resources that could otherwise go into private capital formation. A deficit, during prosperity, which is financed through the banks, in itself of course brings inflationary consequences. .A current deficit and the fear of people from saving because of possible inflation. If we ever reach the point to speculate is safe but to save is to in trouble. future deficits can keep loss of these savings to where people believe that gamble then we are indeed If rising prices which will follow from continued deficits cut into saving habits, the result will be further to diminish the supply of capital for economic growth. We cannot indefinitely expect people to continue their saving if they expect prices to go on rising indefinitely. Our habits of saving, ouf financial institutions, our monetary system, must not be jeopardized. Our needs for capital will increase as our labor force begins to expand more rapidly in the early sixties. This expanding labor force, the result of the high birth rate of the forties, will give a powerful impetus to the economy. But if job opportunities are to be found, with a rising degree of productivity, investment in plant and equipment will have to advance correspondingly. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis c - 4Finally, orderly finances in our country are a key to maintaining the strength of the free world3 and our role in it. Our prestige in the world is not enhanced if we fail to practice what we preach. The world watches us very closely. On my trip to and from New Delhi, for the annual meetings of the International Bank and Monetary Fund, I was impressed to discover how well informed foreign officials are about even the details of our budget. But more than prestige is at stake here. If we run continuing large deficits in prosperity and so almost inevitably drive up prices, we may price ourselves out of world markets. Aside from the losses that this will mean to us, how are we to discharge our world-wide responsibilities if our international economic position weakens? Because we are for sustainable and healthy growth, because we are for increasing job opportunities, because we look to the long run and a possibly long period of world tension, we must be for the maintenance of orderly finances and a stable dollar. I believe that the time to face this issue is now. Americans have faith in their money. That faith is justified. Confidence, if shaken, is hard to re-establish. That is why we must keep our expenditures under control, and the budget in hand. Your Committee has asked me to deal with certain questions. I would now like to turn to the first three of these. With your permission, I shall then ask Mr. Charles Gable, who assists Under Secretary Baird and myself in debt management matters to discuss with you the fourth question, relating to the management of the public debt. Question 1: What would you regard as the proper division of labor between tax policy and monetary policy as instruments of economic stabilization during the coming year? Answer: The first consideration of tax policy is, of course, to keep intact the system by which the United States Government raises its revenues to finance the government service that the nation requires. Tax policy and monetary policy should continue to work closely to foster economic health with stability of prices as our economy grows. After a deficit of $12.9 billion expected for fiscal year 1959 > the President's budget proposes a budget balance for the fiscal year I960. For quite a few months ahead, the net effect http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r c - 5- of fiscal policy will still be to stimulate the economy. As prosperity advances, so will our revenues until the deficit is eliminated at a high level of economic activity if spending is under control. At the income levels projected in the budget, the tax system is expected to produce revenues approximately equal to proposed expenditures in fiscal I960. If we achieve our objectives there will be no need, consequently, for an increase in taxes. By eliminating the deficit, tax policy will greatly ease the task of monetary policy. If we fail to keep I960 expenditures within income, we contribute to inflationary pressures and complicate the problems of monetary management. Tax policy will render additional assistance to monetary policy by avoiding further permanent borrowing by the Treasury in the market. This will also facilitate the Treasury's own job of handling the public debt. Question 2: Is the present structure of the Federal tax system adequate in light of the nation's economic growth and stability requirements? If not, what changes would you recommend? Answer: I believe that any tax structure can always be improved. By that I do not mean to say that we cannot live with our present taxes. We certainly can. If new imperative revenue needs should arise, we could live with higher taxes than the present. Ours is the most productive economy in the world and I do not believe that it would be crushed by its tax burdens, if we are reasonable. We must constantly evaluate in terms of continuing economic growth both elements of tax reform and, when proper, tax reduction. While these are closely related, they are not necessarily identical. I The Treasury has been studying and continues td study various improvements in the tax system and in tax administration. In this we are cooperating, and shall continue to cooperate, with the appropriate committees of Congress. Many of the adjustments under review are of a technical character. Their application depends in many cases on the resolution of administrative difficulties. It depends further on future business conditions and other factors that cannot now be foreseen. As this is a continuing study both in the Treasury and the committees of the Congress, it would be premature to attempt any detailed discussion. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 6The Committee questions deal also with the relation of taxes to the stability of the economy. I take it that this refers principally to the cushioning effect that declining tax collections can have during a recession. Illustrative of this effect, of course, is the sharp decline in collection of corporate taxes growing out of the recent recession. It also focuses our attention on the fact that deficits may well continue after the economy has moved up and is advancing toward full prosperity. This sort of complex problem deserves, and will have, our continuing study. The high degree of resilience which our economy has just demonstrated seems to suggest that we should be cautious and analytical in our evaluations and flexible enough, if some future downturn should require it, to be willing to use whatever instrument seems most appropriate to the occasion. In this connection, some advance planning is proper so that the right decisions can be appropriately taken when we are confronted with cyclical movements in our economy. Question 3: Under what circumstances can we reduce Federal taxes? What are the prospects for realizing these circumstances? Answer: The circumstances and prospects of tax reduction would first depend very much on future expenditures and the maintenance of our economic growth. Economic growth can be expected to raise our revenues but it will produce no surplus if we do not control expenditures. Unless we spend v/isely we will have trouble taking care of such new requirements as may prove really essential. Next, tax reduction must be weighed against debt reduction out of surplus. I believe that in years of prosperity we should endeavor to achieve some debt reduction. This policy commends itself as an act of fiscal soundness. It would ea£e the task of monetary policy and the management of the public d£bt. Circumstances for a tax reduction would depend further upon the degree to which we can succeed in avoiding inflation. At times of inflationary pressure we should aim at some budget surplus. I would not now want to prescribe a precise formula or to try to predict a precise time when tax reduction might properly be considered. I have tried to point out the varying factors which would influence our judgment at the time when such a Judgment seems to be appropriate. I will now ask Mr. Gable to answer your fourth and final question. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis •** TREASURY DEPARTMENT Washington Statement by Mr. Charles J. Gable, Jr., Assistant to the Secretary of the Treasury on Management of the Public Debt, before the Joint Economic Committee, February 5, 1959. I would like to review with you this morning some of the current problems which the Treasury faces in its debt management program. These are not problems which can be solved by applying a rigid set of rules. There are certain basic principles which we always try to follow, but the very fact that the economic environment and the market atmosphere in which the Treasury operates is constantly changing means that our approach to debt management must always be flexible. The impact of changing circumstances on debt management policies was clearly illustrated by our experience in the calendar year 1958. The past year was a year in which the debt was growing again and as you will note from Chart 1, the debt at the end of December 1958 amounted to $283 billion. This is a large debt any way you look at it and one which is woven into the asset structure of every major class of investor in the country. In the savings bond program alone an estimated 40 million individuals own bonds and about 8 million are buying bonds currently through payroll savings plans. The $283 billion public debt at the end of December represents an amount equal to 63$ of the total gross national product. It is an amount equal to more than $1,600 for each man, woman and child in America. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Not - 2only is the United States Government the largest single debtor in the country, it accounts for one-third of the total debt owed by all individuals, all corporations and all levels of Government in the Nation. Chart THE PUBLIC DEBT Office of the Secretary of the Treasury After some reduction in debt early in the post-war period the public debt grew steadily again under the burden of heavy defense requirements and the Korean War, reaching a peak of $28l billion on December 31, 1955* During the calendar years 195& ar*d 1957* under the impact of two http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis C' -3years of budget surpluses, the debt was reduced to $275 billion. That $6 billion reduction has been completely erased, however, by deficit financing in the calendar year 1958, which increased the debt by $8 billion to a new high of $283 billion. This was the largest increase in the public debt for any year in the post-war period. The Job of adding a net amount of $8 billion to the debt in as sound a manner as possible last year required the Treasury to go to the market 6 times during the year to raise new cash of $17 billion, plus $2 billion more cash raised through additions to weekly bill offerings. This large amount of new cash borrowing was needed not only to cover the deficit but also to cover the retirement of other securities growing mainly out of marketable maturities paid off in cash and the redemption of the wartime F and G savings bonds which are now maturing. At the same time the Treasury issued $50 billion of new securities in exchange for maturing issues ($28-1/2 billion publicly held and $21-1/2 billion held by Federal Reserve banks and Government investment accounts) so that the total of $69 billion new marketable securities issued during the year reached a new post-war high. \ As part of this $69 billion job the Treasury issued $2.'=9 billion of long-terra bonds and $16.7 billion of intermediate-term notes and bonds running from 4 years to 8-1/2 years to maturity. As a result, the aver- age length of the marketable debt was increased by two months during the year — from 4 years and 7 months to 4 years and 9 months. This was done despite the inability of the Treasury to extend any debt beyond http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2-1/2 years to maturity in the unsettled market environment which characterized the last half of 1958. The slight lengthening of the debt last year was in contrast to declines of approximately 6 months each in the average length of the debt during the two preceding years and, as shown in Chart 2, brought the average back almost to the level of five years ago when the long post-war decline in the average length of the debt came to an end. Chart 2 AVERAGE LENGTH OF THE MARKETABLE DEBT. (Callable Bonds to Maturity Date)"' 1952 '53 '55 '56 '57 '58 *Partially tax-exempt bonds to earliest call date. Office of the Secretary of the Treasury Despite the fact that there was an $6* billion increase in the total debt in 1958, there was a reduction of $3 billion in the amount of marketable debt becoming due within one year. Five years ago the under-one- http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r - 5year debt stood at $80 billion. One year ago it was $75-1/2 billion. It is now $72-1/2 billion, of which $51 billion is held by the public and $21-1/2 billion held by Federal Reserve banks and Government investment accounts. The Job of Treasury financing in 1958 was made somewhat more difficult by the fact that Government investment accounts, which had provided a market for approximately $2 billion a year for Government securities on average during the post-war period as a whole, showed a decline of $.8 billion in their investments. This was true because of the excess of expenditures over receipts in the Unemployment Trust Fund, the Federal Old-age and Survivors Insurance Trust Fund and the Highway Trust Fund. Treasury financing in the first half of 195^ was conducted in the atmosphere of recession, with rising bond prices, falling interest rates, and monetary ease. In this atmosphere it was appropriate that Treasury offerings were designed primarily to appeal to commercial banks, as debt management sought to complement monetary policy in its endeavor to increase the money supply and to better assure the avail\ ability of adequate credit for economic recovery. As a result commercial bank holdings of the debt rose by $5.8 billion in the first half of the year, even though the total debt was rising by only $1.4 billion. With the exception of Series E and H savings bonds held mostly by small savers, all types of nonbank investors liquidated Government securities in the first half of the year, with most of the liquidation being accounted for by nonfinaneial corporations at a time when their http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 6Chart 3 CHANGES IN PUBLIC DEBT OWNERSHIP IN 1958 $Bil. Gov't Invest. Accts. Total +8 Private Nonbank Investors Banks +7.0 Fee/era/ , Reserve •^H2- Components of Private Nonbank January -June 1958 Individuals JlL. +4 - Com'l ' Savings Institutions k H.8f &«i»;ti«i»i« +.7 'E£H Bonds Other ^g | 1 ^ 3 *~~v —-Sf^-^-—"-v^~ '-~**~~l—-*^-^-v .. +8 •••4 0 •—^ w^ ' J-6.3J -4 —• N^—"S-^-X^<-^f —^s—-—^-^-^ -»»^->, ."•N- - f*t ***S- • —~— - -_— ^" -^i-—» r~ j WJMM\ *^« ' // / ^—^-^—^-S^J^-^-. * Corps, and Other Short-term Holders s^-^-^_^N.--*-^\_^X^X^^~N^--^lW*-—^ -*^w^> • IW^^-^A^^^^. July- De<:ember 1 958 1bill +3.0 +.9 1+2 J| gjjggjjjg r5-]! ;+«); ; ';fxx ^9 +.4 Jft-l2» -4 Office of the Secretary of the Treasury profits were shrinking and their tax liabilities were at a low point. Even the sale by the Treasury of $2.9 billion of new long-term bonds \ during the first half of the year did not result in a net increase in the holdings of Government securities by individuals and savings institutions since the bonds were paid for, in effect, by selling shorter maturities to banks. In the second half of the year, with the economy entering into a period of vigorous economic recovery, two-thirds of the $6.6 billion increase in the public debt was absorbed by investors outside of commercial banks thereby lessening somewhat the inflationary impact of http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis c - 7Federal deficit financing at a time when other demands for funds were rising and monetary policy sought1 properly to temper the rise in money supply. Furthermore, all of the increase in bank holdings was outside of the larger financial centers. The Treasury would have preferred, however, that a larger part of its financing outside of the banks during the second half of the calendar year had been through longer term savers — such as individuals and savings institutions — rather than through nonfinancial corporations. In the latter case investment in Government securities is typically in the shortest term obligations available and is only one step away from an increase in money supply. On the other hand, longer term securities are purchased by savers with more permanent investment goals in mind. The fact that savings institutions did add somewhat to their holdings of Government securities in the second half of 1958> reversing earlier trends, is an encouraging sign, however. Individuals added fur- ther to their 3 and H savings bond holdings in July-December 1958, but again reduced their holdings of the larger investor type F and G sav- ings bonds and their holdings of marketable securities during the second half of 1958. The persistence of the post-war trend of savings institutions away from Government securities is highlighted by the fact that the four major groups of savings institutions — insurance companies, mutual savings banks, savings and loan associations and pension funds — have reduced their holdings of Government securities from $27-1/2 billion in http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 8December 1952 to $26 billion in December 1958. This was done at a time when the assets of these institutions were growing by approximately $100 billion. As is shown in Chart k, therefore, the proportion of assets of each of these types of institutions invested in Government securities has shown in most cases a substantial decline during the last 6 years. Even in the case of rapidly expanding savings and loan associations, which have been building up reserves in the form of Government securities, their percentage of assets invested in Governments has declined slightly. Chart 4 SAVINGS INSTITUTION INVESTMENT IN GOVERNMENTS December 1952 and 1958 Gov'ts Held Life Insurance Companies Mutual Savings Banks Savings and Loan Associations— State and Local Pension FundsCorporate Pension Funds As Percent of Assets $10.3 BiL_. 7.2.... Ea~/s» 9.5..__ II!!|!iii!!!!I 7.3____ \ l.8____ 3.8____ _ "-5.3____ 2.3. 2.3____ Bin () Office of the Secretary of the Treasury http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 ! 1 1 1 10% 20% 30% 40% 50% - 9An analysis of individuals' savings during the last 6 years shows rather clearly that no individual savings found their way into Government securities on net balance during these years, despite substantial increases in E and H bonds. During the past 6 years individuals had new savings of $137 billion available for investment either through savings institutions or directly in securities and mortgages. Of this total $106 billion was placed directly in savings institutions, and as has been already indicated in Chart k no part of this flow of savings on net balance reached the Government securities market. Moreover, as Chart 5 shows, none of the remaining individuals' savings was invested directly in United States Government obligations Chart 5 INDIVIDUALS SAVINGS SINCE 1952 $Bil. 100 II p** Savings tht 50 Corporate 6 State and Local 5/to Securities B * *%$!$• •<4rYrrYf Mnrtnt inftSm*** Office of the Secretary of the Treasury http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis \ E and H Bonds +7 r - 10 either. An increase of $7 billion in E and H bond holdings vas completely offset by a decline in holdings of other Government securities. In effect, then, all of the funds available for direct investment during these 6 years vent into corporate securities, into mortgages or into State and local government issues. In the latter case, of course, the Treasury is up against a particularly difficult debt management problem in trying to make its securities attractive to individuals who have the opportunity of buying tax-exempt State and municipal offerings. A satisfactory solution to the problem of making Government securities attractive to savings-type investors is not easy to find. The Treasury is, however, exploring all possible ways of encouraging greater participation in Government security ownership by these purchasers. A discussion of the environment in v/hich Treasury financing took place in 1958 vould not be complete without reference to the rather dramatic changes in the market environment in which the Treasury had to do its financing. With interest rates declining and bond prices rising early in the year the Treasury had little difficulty selling securities which were priced very close to the market at the time they were issued. I Subsequent market rises resulting from investor anticipation of continuing recession and monetary ease made each new security look quite attractive soon after issuance. As a result, particularly with regard to the 2-5/8$ seven year bond which was offered in June, there was an increased amount of speculative activity in new Government issues on the assumption of a continuation of these trends. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis c - 11 The June intermediate-term bond vas put out as one part of an optional offering in exchange for maturing securities and was subscribed for in an amount of more than $7 billion — considerably in excess of what had been expected by either the financial community or by the Treasury. This large amount presumably could have been properly digested by the market, however, if the trends of recent months had continued. But improvement in business news, plus rumors in the financial community as to a possible reversal in monetary policy, resulted in a sharp turnaround in the bond market. As a result many speculative buyers who had financed their purchases on little or no margin were forced to liquidate them. The resulting disturbance was very unsettling to the entire ^rket. It is clear in retrospect that the reversal in bond prices reflected a legitimate change in investor expectations as economic recovery set in. Furthermore, there is no reason to believe that speculation had more than a temporary effect in depressing bond prices. But it is true, nevertheless, that the abruptness of the change in the market was accentuated by excessive speculation. A recurrence of such activity should be prevented. The general pubI lie should be better protected against such excesses. Furthermore, dealers in Government securities under such conditions are unable to perform their vital functions of maintaining an orderly and active market for Government securities. The Treasury is at present studying this problem and consultations are underway with the Federal Reserve System and with various other groups in the financial markets to see what steps can be taken to restrain undue speculation without at the same time hampering legitimate dealer operations. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 12 Two more factors during the summer added further to an unsettled Government bond market. The first of these was the temporary shock of the coup d'etat in Iraq. The second was more fundamental — the growing realization on the part of investors throughout the country that the Federal Government was faced with its largest post-war deficit, a factor which was obviously very important in the development of an inflationary psychology during the fall despite the continued stability of commodity prices. As a result largely of this psychology, a buoyant stock market hit new highs and bond prices — for corporates and municipals as well as for Governments -- hit new lows, thus adding to the cost of borrowing for business and for all levels of Government. The Treasury's market financing job in 1959 should be smaller in dollar volume than in 1958 -- both in terms of refunding and new cash issuance. Nevertheless the 1959 financing schedule is very heavy. We have already raised over $4 billion in new cash in January through the issuance of $.9 billion of 21-year bonds, $2.7 billion of 16-month notes and $.6 billion of additional Treasury bills, bringing the debt up to $286 billion by the end of January. Although the entire deficit for fiscal 1959 has been financed and the debt is expected to fall by June 30> "the Treasury will nevertheless need additional cash borrowing amounting to an even larger amount than that raised in January between now and the end of the fiscal year to cover retirements of securities coming due. We also will need an amount which we are not yet prepared to estimate to cover the heavy seasonal deficit in July-December 1959 which will occur even with a balanced budget for the fiscal year I960 as a whole. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ( C - 13 - The refunding job this year consists not only of a weekly amount of $2 billion or so of Treasury bills which have to be rolled over, but also $15 billion of maturities in February, $l|-l/2 billion in May, $13-1/2 billion in August and $9 billion in November. The February refunding, the largest of the year, was announced last Thursday and we have offered holders of the maturing securities a choice between a new 3-3/^ certificate maturing February 15, I960 or a h% note maturing 3 years from now, both priced at par. The books on this exchange offering closed last night and we expect to announce preliminary results tomorrow afternoon. Sometime before the end of the present fiscal year, the Treasury will ask for new legislation on the debt limit. We are now operating under a temporary debt ceiling of $288 billion. That temporary ceiling will expire on June 30, 1959> at which time the ceiling will revert to the permanent debt limit of $283 billion. With a $285 billion public debt now estimated for June 30 an increase in the permanent debt limit to that amount seems indicated, depending, of course, on the final outcome of the fiscal 1959 budget picture. In addition temporary financing I needs will require a substantial increase in the public debt :— and in the temporary debt limit — during July-December 1959> even though with a balanced budget this would represent financing which could be repaid during January-June 19&0. The environment in which the Treasury's 1959 financing program will take place will, of course, depend on a great many factors. Perhaps the two most important relate to the progress of the Nation's economic http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis growth and the way in which the Federal Government's fiscal programs are handled. The rate of economic growth and the extent to which demands for funds exceed available savings will, of course, set the basic environment in terms of interest rates and credit availability in which the Treasury will have to operate. Our borrowing, just like that of any other debtor, will continue to be done in a market environment in which neither maturing issues nor new issues are supported by the Federal Reserve. Government borrowing is borrowing which must be done and cannot be postponed. Because of its size Treasury borrowing terms obviously have a greater impact on interest rates than the terms of any other borrower. At times monetary policy may seem to make debt management more costly and more difficult, but that should not be allowed to detract from the appropriateness of an independently conceived and operated monetary policy as a fundamental tool in the control of inflation. We will continue in 1959 to pursue the major objectives which have guided our operations during the past year. The Treasury will continue to secure its necessary funds at as reasonable a cost to the taxpayer as I possible consistent with the major objective of contributing 'to sound economic growth. We will continue to secure our funds as largely as possible from true savers rather than from commercial banks in order to reduce the inflationary potential of our financing operations during a period of rising economic activity. We will also continue to take advantage of every opportunity which arises to extend the maturities of our issues in order to reduce to a minimum the disturbing effect of Treasury financing operations on the http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 15 money markets and on the flotation of new corporate and municipal issues and in order to provide the Federal Reserve with the greatest freedom possible to conduct effective monetary policy. If we do not seek every opportunity to accomplish debt extension we will find the short-term debt increasing to a new high in the years immediately ahead. The under-one-year debt, as is shown in Chart 6, stood at $72-1/2 billion on December 31, 1958* If no more securities longer than one year to maturity are issued during the remainder of 1959 the under-one-year debt will increase by $11-1/2 billion during the year. Furthermore, the passage of time will bring more of the debt within the Chart 6 _ POTENTIAL GROWTH OF SHORT-TERM DEBT* DEC. !958-'62_ (Assuming No Debt Extension) Potential Growth during Each Calendar Year Outstanding Dec.31,1958 Potential Dec.31,1962 129'/2 120 '62 '61 '60 80 '59' 40 * Marketable maturities within one year (partially tax-exempt bonds to earliest call date). ^Includes January short-term financing. Office of the Swmttfy of th« Treasury http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Debt extension needed to keep under l-yeor debt at present level. - 16 one year area in 19&0, in 1961 and in 1962 so that financing exclusively in the one year area during the next 4 years (and with no increase in outstanding debt) would bring the amount of under-one-year debt to $129-1/2 billion — about 75$ of the total marketable debt outstanding — by the end of 1962. The importance of sound fiscal policy in setting the environment in which debt management operations are undertaken cannot be overemphasized. The fact that a budget deficit means a larger amount of money to be raised is only a relatively minor part of this problem. Far more important is the psychological reaction of investors to the prospect of the effect of future inflation upon the purchasing power of the dollars which they invest if they lack confidence in the ability of the Federal Government to manage its fiscal affairs soundly and to take whatever additional steps are necessary to minimize inflation. This is true not only in relation to Government securities, but to all other fixed dollar obligations as well. A budget deficit in a period of prosperity, and a growing public debt, mean just that much less opportunity for an expansion of mortgage debt, corporate debt and State and local \ government debt without running the risks of serious monetary" inflation. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis This article is protected by copyright and has been removed. Article Title: Hansen Tells Committee of Justice Dept. Studies Journal Title: Dow-Jones ticker Date: February 4, 1959 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis eprfment uf Qv&tltt For Release 10:30 A.M. EST Wednesday, February 4, 1959 STATEMENT BY VICTOR R. HANSEN, ASSISTANT ATTORNEY GENERAL IN CHARGE OF THE ANTITRUST DIVISION, BEFORE THE JOINT ECONOMIC COMMITTEE, CONGRESS OF THE UNITED STATES, FEBRUARY 4, 1959, ON ECONOMIC REPORT OF THE PRESIDENT, JANUARY 1959 I appear this morning in response to your Chairman's letter to the Attorney General, dated January 28, 1959. Attached to that letter was a list of four questions you wished me specifically to treat. First, what can antitrust contribute rl objectives of the Employment Act of 1946?" to attainment of the Second, as an out- growth of that inquiry, ''how would economic growth be promoted by'f the ''three recommendations to strengthen antitrust policy'1 contained in the President's 1959 Economic Report? And, finally, merging your third and fourth queries, what role should antitrust • play vis-a-vis "inflationary price movements"? I. Antitrust and the Employment Act of 1946 At the outset, I emphasize the community of interest which I share with this Committee in the achievement of the fundamental II objectives of the Employment Act of 1946. The Act specifically states that maximum production is to be promoted in a manner calculated to foster free competitive enterprise. in our system are closely related. \J USCA, http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The tx^o, indeed, The more effectively free com- Title 15, Section 1021, Ch. 21. petitive enterprise functions, the greater the opportunity for maximizing employment and the achievement of economic growth with relative price stability. Antitrust enforcement programs are shaped by considerations of enforcement resources. Such limited resources must be devoted to striking down illegal restraints affecting those sectors of the economy which are most significant in terms cf employment and production. To the extent that we are successful in such important economic sectors, we believe our contribution to the attainment of the objectives of the Employment Act of 1945 is both positive and direct. In sum, then, the Employment Act specifies free competitive enterprise as an indispensable element of that environment in which its goals are to be achieved. And, antitrust, to repeat, is a prime form of government action seeking to insure that free competition flourishes. Accordingly, antitrust has a real role to play in the scheme of the Employment Act. II. The Economic Report's Legislative Recommendations for Improving Antitrust's Effectiveness However, this role can -- and should be -- stepped up. Five proposals for enhancing competition by improving our antitrust laws were transmitted to the Congress by the President in his Economic I/ Report of January 1959. to me. Three of these are of particular concern One deals with Federal Regulation of the merger of banking institutions through the acquisition of assets. 2/ Second is the pro- Economic Report of the President, January 1959, p. 53. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 posal to require that advance notification be given to the antitrust enforcement agencies by firms of significant size that are engaged in interstate commerce when they propose to merge. Third is the proposal that the Attorney General be given the power to issue civil investigative demands under which the necessary facts may be elicited when civil procedures are contemplated in antiII trust cases. These recommendations were first presented to the 84th Congress and were again presented to the 85th Congress. Com- prehensive hearings were held on these proposals and they have made some legislative progress. It is our sincere hope that the 86th Congress will enact all three proposals into law. (a) Curbs on Bank Mergers The need for reasonable curbs on bank mergers stems from present Section 7's failure to cover asset -- as distinct from stock -acquisitions by banks. This Section provides, as to stock acquisi- tion, that it applies to all corporations "engaged in commerce." Section 7's asset acquisition portion, in sharp contrast, covers only corporations "subject to the jurisdiction of the Federajl Commission.' Trade Further, Section 11 of the Clayton Act exempts banks from Federal Trade Commission jurisdiction by specifying authority to enforce compliance'' with ;f that Section 7 ''is hereby vested . . . in the Federal Reserve Board where applicable to banks, banking associations, and trust companies.:( On the basis of these pro- visions the Department of Justice, as well as most other authorities, 3/ Ibid. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis has concluded that asset acquisition by banks are not covered by Section 7 as amended in 1950. As a result, Section 7 is for prac- tical purposes useless to cope with a bank merger trend that the Chairman of the Board of Governors has indicated has been of considerable concern to the Federal Reserve Board and which the Comptroller of the Currency also described as ''fairly large.:1 As you are aware the Federal Banking Agencies have recommended amendment of the banking laws, dealing with bank mergers which would require prior approval of those agencies under standards which we consider are much less stringent than those of the Clayton Act. I will not go into the merits of the two proposals before this Committee except to say that I favor an amendment of Section 7 of the Clayton Act. And such step should be taken soon. For the current decline in Commercial Bank competition bodes ill for our free enterprise system. Small newcomers to markets depend on banks -- rather than equity markets -- for financing. As the number of banks diminishes via mergers, such newcomers, it follows, have fewer and fewer sources on which to rely. * our free Thus, that flow of new concerns on which' enterprise system depends for vitality may be curbed by increasing bank mergers. (b) Pre-Merger Notification The second legislative proposal deals with pre-merger notification. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Before mergers can be appraised, they must of course be discovered, Our experience has been that a good part of the time and effort of the staff is occupied with ferreting out, before they occur, those mergers with potential anti-competitive effects. At best, these discovery techniques are cumbersome. The first step in the discovery procedure is to list and briefly review all mergers and acquisitions reported by such trade journals, financial newspapers, and manuals of investment, as the Wall Street Journal, the Commercial and Financial Chronicle and Standard Corporation Records. This initial investigation aims roughly to gauge the economic effect of acquisitions, proposed or consummated. Should this limited review indicate an acquisition may have adverse effects on competition, a more comprehensive investigation is initiated. If it appears that the merger may have those anti-competitive effects Section 7 proscribes, we then seek from the parties involved detailed information concerning the merging companies and any affected industry. In addition, the Department makes use of data al- ready in its files or data secured from other companies, government agencies, and trade associations. Pre-merger notification should substantially ease this investigative burden. No longer would it be necessary to commit a large number of attorneys to the merger surveillance function. More important, many mergers not presently publicized in advance of consummation would be brought to our attention. Not only will Section 7's enforcement burden be eased, but pre-merger notification will benefit the business community. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Lawyers representing merging companies have a£ times stated that disruption of business plans is lessened by Department action before merger consummation. Even in cases where merging companies do not choose to utilize our clearance program, some nonetheless urge that if the Department is to proceed at all, we sue before consummation. Pre-merger notification, it seems clear, should systematize the process by which mergers are sifted and thus enable more prompt action if it is merited. Further, we believe evenhanded enforcement requires notification With that requirement, no longer would the company that seeks advance approval watch its close-mouthed rival consummate a merger; and thereafter rely on the natural indisposition of an enforcement agency or a court to attempt to unscramble the omelet. Thus minimized is the element of chance discovery in any decision to sue. (c) Civil Investigative Demand The third legislative proposal we have labeled a :'civil investigative demand." This proposal would enable the Department of Justice to compel production of documents by corporations, partnerships, and associations - but not individuals - during the investigative or pre-complaint stage of civil proceedings. The need for its prompt enactment seems clear. law, the Department has no such power. Under present Where criminal proceedings are contemplated, of course, grand jury process adequately enables production of both documentary and oral evidence. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Where the Depart- ' dent proceeds with an eye to civil proceedings, however, experience shows the Antitrust Division is severely handicapped. Some potential defendants may voluntarily grant access to their records. Where voluntary disclosure is denied by business concerns, the Government may be forced to resort to filing a complaint and then make use of discovery processes of the Federal Rules to gather evidence. Effective enforcement, however, requires comprehensive investigation before - rather than after - formal proceedings have been filed. In pre-complaint merger investigations, the civil investigative demand is particularly important for Section 7 has no criminal sanction. Accordingly, we cannot resort to grand jury to secure docu- ments from companies under investigation. So it is that enactment of this civil investigative demand is vital to more effective antimerger work. Finally, worthy of possible Congressional action might be amendment of Section 8 of the Clayton Act. This Section presently prohibits a person, within certain limitations, from concurrently serving on the Board of Directors of competing corporations. Confining the proscription of the statute to interlocking directorates closes the door only part way. An obvious loophole exists when a person may lawfully be a director of one corporation, while at the same time be an officer of another with which it competes. The proposed amendment to Section 8 would bar persons from serving as officers http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis of competitive corporations. In our continuing investigations and studies under Section 8, we have found this practice sufficiently common to suggest the need that the loophole be closed. III. Antitrust's Role vis-a-vis Inflation I turn next to a brief discussion of the following statement taken from the Economic Report of the President on which you asked me to comment: Self-discipline and restraint are essential if agreements consistent with a reasonable stability of prices are to be reached within the framework of free competitive institutions on which we rely heavily for the improvement of our material welfare. 4/ Reading this statement in context, I gather that the President is referring to collective bargaining agreements and is, in effect, urging management and labor to exercise restraint in the negotiation of such agreements in order to avoid inflationary results. This quotation, then, bears not at all on the question whether ''our free competitive institutions are * * * functioning sufficiently well to create adequate market restraints." Finally, I should like to comment on the role which I believe antitrust enforcement can play in combatting inflation. This is a matter which has absorbed my interest since early last fall when the Attorney General was asked to serve on an informal Cabinet Committee to study the problems of inflation. 4/ Specifically, we looked Economic Report of the President, pp. 5-6. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis into two questions - first, could enforcement of the antitrust laws be used as an effective instrument of public policy in combatting inflation? And, second, if enforcement could be so utilized, how could it best be anti-inflation oriented? We concluded that while antitrust law enforcement has very definite limitations as an antiinflation instrument, there are areas in which enforcement if coordinated with a government-wide anti-inflation program, can be made an effective arm of that program. Antitrust's limitations as an anti-inflation weapon stem from a number of factors. First is the insulation of significant sectors of the economy from the jurisdiction of the federal antitrust laws because of specific Congressional exemption, or exemption through the Courts' interpretations of the antitrust statutes. Second, and of equal importance, is the limited resources available for antitrust enforcement. These resources are too meager to mount a broad- gauge enforcement program oriented toward the curbing of inflation in all sectors of the economy. And third, anti-monopoly enforce- ment under Section 2 of the Sherman Act, in view of the structural characteristics of contemporary markets, makes protracted litigation inescapable and short term results doubtful. Thus, Section 2 enforcement cannot be expected to produce immediate effects against inflation. Notwithstanding these limitations antitrust enforcement can and is being used to achieve prompt and effective short term results in the easing of upward pressir es on prices by attacking illegal http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis restraints of trade which induce such inflationary effects. En- forcement of this character can be expeditiously prosecuted under criminal and civil procedures. Effective remedies can produce im- mediate results in the elimination of the illegal restraints. In this connection I should point out that the President has appointed two committees to function in the area of price stability and economic growth. One, the Cabinet Committee on Price Stability for Economic Growth, headed by Vice President Richard M. Nixon and the other, the Committee on Government Activities Affecting Prices and Costs, headed by Dr. Raymond J. Saulnier. It is anticipated that both of these committees will make antitrust enforcement an effective arm of such programs as they may develop in the areas of their responsibility. And, finally, with respect to the inflationary pressures said to stem from the behavior of prices in the so-called administered price industries, we believe that the most effective approach is through vigorous enforcement of the anti-merger provisions of Clayton Act, Section 7. And such anti-merger enforcement might we^.1 focus on the newly emerging industries. By this approach we hope to pre- vent in the incipient stage the development of industrial market structures which, if not inhibited by government action, would ultimately expand the concentrated administered price sectors of our economy. Effective Section 7 enforcement today will, in our view, bring supply, demand and price into more normally competitive relationship in such new and growing industries of tomorrow as chemicals, http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 10 plastics and electronics. By so doing we would avoid -- a decade or so from now -- that pattern of undue concentration which today plagues autos and steel. And in connection with administered price industries, I would like to mention that the Department successfully concluded its efforts to block the proposed merger of the Bethlehem Steel Corporation and the Youngstown Sheet and Tube Co. As you know, when the proposed merger was announced, we filed suit under Section 7 of the Clayton Act. On November 20th Judge Weinfeld ruled that the merger would substantially lessen competition and tend to create a monopoly in many lines of commerce in many sections of the country. He relied upon, among other things, the substantial increase in the level of economic concentration in the steel industry that would result from the merger. In rejecting an affirma- tive defense that the merger would enable the companies to offer more competition to United States Steel, the Court pointed out that other steel producers could with equal force argue that they should be permitted to merger in order to afford more challenging competition to U.S. Steel and Bethlehem and thus the already highly concentrated steel industry would head in the direction of :'triopoly;' Judge Weinfeld's opinion was the first to be rendered after trial in a suit by the Government under Clayton Act Section 7, as amended in 1950. We learned last week, with some regret, that the defendants will not appeal the decision to the Supreme Court. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 11 ( Now I would like to describe briefly our antitrust enforcement program for the current year. First, we shall increasingly emphasize our merger work. Building on precedents of this past year, our merger program should expand. Proceedings under Section 7 may well be an effective tool to prevent undue concentrations of economic power. As the Attorney General's National Committee to Study the Antitrust Laws has stated -- a prime goal of antitrust is to "assure . . . some limitation on economic power incompatible with the maintenance of competitive conditions." To that end, Section 7 may be uniquely suited. Thus, Section 7 may enable the Antitrust Division to present to the courts essential problems of industry structure in more manageable proportions than is true in Section 2, Sherman Act trials. If Bethlehem-Youngstown be a guide for trial of future antitrust issues, problems in concentrated industries may be presented to courts and decided in comparatively short periods of time. Second, we recently moved into new phases in several major investigations under the Sherman Act. had their origin some time ago. Some of these investigations We have long been planning means for moving decisively and effectively. This sort of investigation, I emphasize, is really the other side of the Section 7 coin. By proceeding under Section 7 in newly emerging industries, our aim is to prevent - or at least minimize the sort of undue concentration that today characterizes certain industries. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 12 Third, apart from the essentially structural problems, we shall continue our focus in those areas of the economy which most significantly influence the cost of living. Here our goal is to insure price flexibility and avoid rigged price rises. Thus, antitrust should make some contribution to the Administration's over-all effort to control inflation and insure reasonable price stability. Finally, I touch briefly on our program in the so-called criminal area. Here our antitrust work is essentially an adjunct to the task of the Criminal Division of this Department. Here our effort will be to mesh into this Department's overall program the antitrust laws' unique weapons. details at this point would be premature. Disclosure of Therefore, I will simply note that in the year ahead we should expect our several major investigations touching on racketeering to reach fruition. IV. CONCLUSION In sum, let me reiterate that I am fully cognizant of the importance of the role that vigorous enforcement of the antitrust \ laws can and should play in the achievement of the objectives of the Employment Act of 1946. For this reason I believe we must strengthen our antitrust enforcement resources. In this re- gard, we have the promise of real added help in the present Budget Message. That Budget Message requests a ten per cent increase of this Division's appropriation. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 13 The additional funds will be utilized to expand not only the staff of attorneys, but also will put in motion a program of expansion of the economic staff over the next three years which, in accordance with the recent recommendations of two outstanding economic consultants, will increase the size of the economic staff. This expansion will permit the introduction of more effective economic analysis in antitrust enforcement and better direct enforcement toward the objectives of the Employment Act of 1946. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 14 EXECUTIVE OFFTCE OF THE PRESIDENT BUREAU OF THE BUDGET Washington 25, D. C 9 FOR RELEASE ON DELIVERY Expected at 10:00 a.m. Wednesday, January 28, 195>9 STATEMENT OF MAURICE H. STANS, DIRECTOR OF THE BUREAU OF THE BUDGET, BEFORE THE JOINT ECONOMIC COMMITTEE CONCERNING THE I960 BUDGET Mr. Chairman and Members of the Committees I know this Committee recognizes the importance to the Nation1 s economy of actions on the President's budget proposals. Therefore, I welcome this opportunity to talk with you about the I960 budget, and look forward to cooperating with this and other Committees of the Congress toward the objective of a sound fiscal policy that will help promote economic growth and price stability. In this statement, I shall discuss the expenditures of the Federal Government. I understand that the Secretary of the Treasury has been invited and will appear before you to discuss revenues and new revenue proposals. General budget policy.—The President has made clear his conviction that the budget expenditures of the Federal Government should be in, balance with receipts for the fiscal year I960. The period covered by this budget—starting next July and ending 17 months from now—is expected to be one of unprecedented prosperity. Even now, with recovery not yet complete, personal income and gross national product have reached all-time highs. It is the administration1 s position that in a period of growing prosperity, following hard on the heels of our largest peacetime deficit, the Government http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 2- should live -within its income, particularly in light of the present high level of general tax rates. It is the only course that is consistent with fiscal responsibility. A continuation of unbalanced budgets with a piling up of deficits, especially during such periods, would create inflationary pressures and cheapen the value of our money. Inflation, as we all know, is an unfair and hidden tax on personal incomes, savings, pensions, and insurance. Of course, in reaching a balanced budget in I960 we expect to get most of our help from improved receipts. On the expenditure side, we have provided first for national security needs and other essential activities while working also for the objective of a balanced budget. Budget totals,—The following table shows the budget totals for the four fiscal years 1957 through I960. You will note that (l) budget expenditures are estimated to be 3*9 billion dollars less in I960 than in 1959', and (2) there is a small estimated surplus in I960, which actually amounts to 70 million dollars. HJDGET TOTALS (Fiscal years, In billions) 1957 actual http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I960 1959 estimate estimate 69. U $69.1 71.9 $68.0 80.9 $77.1 77.0 +1,6 -2.8 -12.9 +0.1 70.2 76.3 82. h 76.8 Budget receipts . ..,...................*. $71.0 Budget surplus (+) or deficit (-)., 1958 actual \ - 3The Committee may be interested in knowing the factors which account for the 3.9-billion-doliar decrease in the budget expenditure totals between 1959 and I960. I would like to subnit for the record the attached table 1 listing the major increases and decreases in I960. As that table shows, a nonrecurring item recommended for 1959 accounts for the largest single decrease. This item is the proposed additional United States subscription to the International Monetary Fund. Next, three large temporary programs are terminating. These are the acreage reserve, the temporary advances to States for extended unemployment compensation, and the special purchases of mortgages on low-cost housing. Third, certain major increases which are largely uncontrollable for the I960 budget will partially offset the decreases just listed. Interest payments on the public debt are estimated to rise. Past commitments will lead to larger expenditures for construction of civil public works and of merchant ships« Space exploration and the defense education program enacted in 1958 also involve higher expenditures. Fourth, some other significant decreases will occur in the normal course \ of events without special congressional or administrative action, Farm price support payments are estimated lower than in 1959 but higher than in 1958. The Department of Agriculture expects that crop yields in calendar 1959 will not be as high as in calendar 1958, when yields were an unprecedented 11 percent above the previous record level. The increase in postal rates enacted last year and the parcel post rate increase to be made administratively this year will have a fuller effect in I960 and will thus reduce net expenditures http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -1 of the Post Office Department0 Moreover, the expenditures in 195>9 for retro- active pay raises will not recur, Fifth^ legislation is being proposed which, if enacted, will bring reductions of Ul5> million dollars in net budget expenditures in 1960fr These proposals include increased postal rates, more flexible interest rates on guaranteed loans to veterans, and a transfer to trust fund financing of Federal-aid highways in national forests and public lands. Sixth, certain housing programs and the Export-Import Bank are proposed to be made self-financing in I960 by stepping up the sale of portfolio assets, in some cases by exchanging them for Government bonds. Thus, disbursements for new loans or mortgage purchases would be covered by realizations on old ones0 Finally, tlia net effect of all other changes between 1959 and I960 is a decrease of 3U6 million dollarse The largest item in this category is an estimated decrease of U62 million dollars in expenditures for military assistanceo I believe that this table clearly shows that the recommended reduction t in the total of budget expenditures is not being achieved "toy proposals which would impair the security and welfare of the country. The major budgetary action has been, after providing for the national defense, to restrain large increases which could not be financed from current revenues. In addition to those legislative proposals which will bring reductions in I960 budget expenditures (and which were shown in item 5> of "the table just referred to), the budget contains recommendations for other legislation to achieve long-run economies by adapting programs to changed circumstances. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 5These proposals to adjust programs in the light of current conditions would bring budgetary savings in the years beyond 1960. Together with the rise in revenues from a growing economy, they could produce surpluses which might be applied to reduce the public debt, to lessen the burden of taxes, or to meet the cost of essential new Government services—some of which will inevitably be needed as our Nation grows and progresses. Consolidated cash statement.—For this Committee^ which is interested in studying the economic impact of the budget, the consolidated figures of Federal receipts from and payments to the public are at least as important as the regular budget totals. These consolidated figures cover both budget and trust fund transactions and eliminate intragovernmental and noncash transactions. The following table gives these consolidated totals for the fiscal years 1957 through 1960. FEDERAL GOVERNMENT RECEIPTS FROM AND PAYMENTS TO THE PUBLIC (Fiscal years. In billions ) 1957 actual 1958 actual 1959 estimate I960 estimate Receipts from the public .............$82,1 Payments to the public............„,...*.. 80.0 $81.9 83.k $81.7 fo.9 92.9 Excess of receipts over payments—. 2.1 Excess of payments over receipts.... - 1*5 13«2 0.6 As this table shows, total Federal receipts from the public in fiscal I960 are expected to exceed payments to the public by 626 million dollars. This figure exceeds the budget surplus in I960 mainly because (l) cash payments of interest on redeemed savings bonds are less than the accrued interest http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 6included in budget expenditures and (2) trust fund receipts exceed trust fund expenditures. I would like to supply for the record the attached table 2 which gives Federal payments to the public by function for 1958, 1959, and I960 along with 19U8 for comparative purposes. Detailed figures covering all the intervening years as well appear on page 929 of the 1960 budget document. From 19U8 to I960, total Federal payments to the public increase at a faster rate than budget expenditures over this period. This faster growth reflects (l) rising outlays from some of the older trust funds, particularly the old-age and survivors insurance fund, and (2) the payments from new trust funds created since 19U8, such as those for highways and the secondary market operations of the Federal National Mortgage Association, In 19U8, total Federal payments to the public were 36.5 billion dollars. In I960, they are estimated to be 92.9 billion dollars. With two exceptions, payments for every function of the Government will be higher in I960 than in 19U8. These exceptions are international affairs and veterans' benefits, for which special post-World War II conditions led to higher expenditures in 19U8. \ Of course, the largest dollar change since 19li8, as is to be expected when comparisons are made with a period prior to the Korean conflict, is in major national security. Apart from the major national security programs, by far the largest amount of payments—and the largest increase since 19^8—on a consolidated cash basis are for the labor and welfare activities of the Government. Federal payments for labor and welfare programs are estimated to be over http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 719 billion dollars in I960. This total is 13>.9 billion dollars more than in 19U8, The amounts involved are much larger than the budget expenditures for these programs because of the benefit payments from social security and retirement trust funds. The table shows that payments for two other functions are estimated to increase by more than 5? billion dollars between 19U8 and I960. These are commerce and housing, and agriculture. The first refleets, among other factors, the sharp rise in grants for Federal-aid highwaysj the second, the increase in farm price support payments from a period when they were probably abnormally low because of special post-World War II conditions. In conclusion, I would like to repeat my belief that, whether we look at regular budget expenditures of 77 billion dollars or the total payments to the public of 93 billion dollars in I960, the Government is not balancing its income and outgo at the expense of essentials. Practically all of the programs of the Government under this budget will continue at very high levels, I hope that the Congress will accept and approve the general policy and dimensions of the budget recommended by the President. It is my sincere belief \ that the best interests of the country would be served if the executive and legislative branches work together to balance the I960 budget at the proposed level of about 77 billion dollars. Attachments (2) http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ( RECONCILIATION BETWEEN 1959 AND I960 BUDGETED EXPENDITURES (In millions) 1959 expenditures (latest estimate, as shown in I960 budget) •«••••••••••« $80,871 1» Non-recurring 195>9_. item (supplemental) International Monetary Fund capital contribution. ............ ..... -1,37!? 79,U96 2- Terminated temporary programs "" Acreage reserve~Cl.es s increase in conservation reserve) «•.»••«,•...•**••»•«•.••.•••••••»•*.*•»*.••. $5lO Augmentation of unemployment benefits ......... ....... Ul2 Purchase of low-cost housing mortgages by FNMA..... ... 358 3« Uncontrollable major increases Interest on debt » < , « 0 , « « o e < > e « « * * » * « » » . «•*»•• » e f t » * « « » « « 500 Construction of public works, buildings and ships ( committed) »«. *•«<>. *••»•«««.«•*•»*•«•«•••••**• 217 New outer space and defense education programs......, 172 -1,280 78,216 +889 79,105 decreases C C C prOgraHls o » a e « e o e o « o . o « » o i > o o o e » « e « o o 9 « . e . « » • • • » . » » Postal revenues (1958 law and iith Class increase) ... „ Retroactive pay in 1958— net , e o . o « . « o . .......... ..«.. 5- Legislative proposals for reduction in I960 Postal rate increases 77777777777777777777* »• o e «*«••«• V €TjSr3.nS J»O3'liS o e « o o « u a o u o f f p « o e e o a o o o o o o o c « o » o o < > * « & * » Transfer to trust fund of cost of forest and public lands highways in interstate system* ..•«».».. 253 177 265 -695 350 ^ J) 32 77,995 6« Sales of assets in I960 ~~ mortgagese , „00 » 0e o 0 < , , 0 . o c e . e 8 e i > 8 c 6 o « o o » c . . 0 0 6 , 9 College housing loans .,«.»*»<>o, ««».«».«»«.•»»<>*•«,»»», Export-Import Bank loans0 o . o 0 . e o O C O O c o e o e o 0 3 5 0 0 6 o o e < . o 50 23U -6 19 77737S 7. All other changes Other decreases in programs (including military assistance IU62) , less other increases in programs . . . e 0 . . . , . . . . . , I960 expenditures . 0 5 , , 0 6 c 0 c o o 0 < , « o e 0 o 0 o < , 0 . C o . ^ 0 * o o o a . o e o S e . o o . , e < , 0 e . e « , o » c 8 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 77,030 Table 2 Includes Bidget and Trust Fundsj Excludes Major Intragovernmental and Noncash Transactions (Fiscal years. In millions) 19^8 actual 1958 actual 1959 estimate I960 estimate Major national security.... ........... $12,998 International affairs and finance. 5,5^-2 Veterans8 services and benefits 6,90^ Labor and welfare 3,1^9 Agriculture and agricultural resources.... 531 Natural resources......................... 755 Commerce and housing...................... Mi-9 General government..... ............... 1,385 $1A,^60 2,668 5,682 16,1*4-0 ^.?321 1,570 2,996 1,6*20 $1^6,^50 2,510 5,856 18,^97 7,02*41,7^1 6,656 1,97*4- 2,099 5,7^2 19,056 5,875 1,735 5,579 2,082 Function Interest I/. Deposit funds, net 2/ Allowance for contingencies..*............ Subtotal,, Expenditures by agencies, as employers, for Federal employees8 retirement (-) 3/« Deduction from Federal employees' salaries for retirement (-) Increase (-) or decrease in clearing account for outstanding checks, etc. *4_/o0 Adjustment to daily Treasury statement DCISXS C » 0 * » » « C C * « O O O O * 0 « * * O 0 0 6 » O W * « » 0 * « » 0 0 Total Federal payments to the public.... ....oooo.o 3,909 73 5,883 -97 5,636 29 6*,250 2 35,695 85,2*4-3 200 96,573 100 9^3*7 -586 -7*4-9 -723 -236 -666 -7*4-8 -723 507 -579 -177 -112 - P<£- f 36,^93 *" ** *** 83,14-13 9^,899 92,875 Ij Since 195^-, includes adjustment for change in public debt interest checks, coupons, and accruals outstanding. . 2/ Excludes deposit funds of Government-sponsored enterprises which are allocated by major function. 3/ In 1957 and prior years the Government's payment as employer was made in a lump sum to the Civil Service Commission and was not included in any functional category as a payment to the public <> From 1958, the individual agency payments are included in the applicable functional category, but the total is deducted from payments in a lump sum. IjJ Since 195^, excludes that part of clearing account which is for public debt interest checks, coupons, and accruals outstanding. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis B O A R D OF G O V E R N O R S OF THE F E D E R A L R E S E R V E SYSTEM Office Correspondence Date_j^g^y 3,1959 To Chairman Martin Subject: Hearings before Joint Economic From Jerome ¥. Shay Committee on Presidents Economic Report In connection with your appearance before the Joint Economic Committee on February 6, it may be helpful to outline below principal points that have been raised at the current hearings through February 2: On January 28 ^ when Budget_Director Stans testified, Senator Douglas opened the hearing 'with a statement that, in his view, the President's Economic Report is "concerned more about inflation than about unemployment or the virtual stagnation of the level of production"; that the "recession is still with us"$ that "we are not at maximum levels of employment and production because our policies have been geared too much to holding down prices*^ and that "public policy must embrace more than price stability." The Republican members present (Congressmen Curtis, Kilburn, Widnall) objected to this statement as a prejudging of the hearings, while the Democrats present (Senator O'Mahoney and Congressmen Patman and Reuss) defended the statement. (A copy of the Stans' prepared testimony is attached.) Congressman Patman referred to the present $8 billion of interest per year on the national debt and asked Stans if any agency of the Government was making any effort at debt or interest reduction. In reply to Stans1 answer that the matter was one for Secretary Anderson, Patman said that "the Treasury is captive of the Federal Reserve System which the President regards as an independent fourth branch of the Government" and that, therefore, "the Treasury is virtually helpless." Patman went on to say that "nothing is done to reduce the debt becaiise a big debt is profitable to the banking system." During Patman1s questioning, Stans said he would prefer a tax increase to deficit; he agreed that the national debt stands in the way of national progress and tha^ some tax collections should be applied to debt reduction! and he also -agreed that the Federal Reserve can set interest rates. Patman1s concluding observation that, since our interest so much higher than "the 2-1/2 per cent rate prevailing in the USSR/1 it is impossible for us to compete successfully with Russia. During the Stans1 testimony, Congressman Reuss indicated that he would have preferred a I?9 billion budget, the additional $2 billion to be raised by plugging tax loopholes, and to be used towards relief of depressed areas, defense and increasing the Development Loan Fund. Senator OfKahoney seems to feel that unless more funds available for Government development of our water resources, we cannot http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis To: Chairman Martin -2- expect to keep ahead of the USSR. ¥hile this apparently sectional approach was not particularly representative, other questioning of Stans also suggested that the President's budget failed in some respects to provide for adequate expenditures for "deserving" projects, e.g., relief of depressed areas and national defense. During the hearing on January 30s the matter last referred to was discussed in answer to Congressman Widnall's question, which was — "What should be the priority of Federal spending if we are faced with a deficit, as we probably are?15 The panel of economists testifying that day included Richard Musgrave, William Fellner, Walter Heller, Benjamin Ratchfordj Paul Samuelson, and Herbert Stein. The 'Widnall question was characterized by Senator Douglas as "the most important question for these hearings." National defense was given first priority by a majority of the panelists, with foreign aid and aid to education tying for second priority. In this connection Congressman Boiling has regular"Lj asked "How much growth can be expected to result from the President's recommended growth measures included in his Economic Report at page 6??11 Almost without exception^ the various panelists who have thus far testified have shown very lukewarm enthusiasm for the President's list. In answer to questioning by Congressman Curtis, the panelists on January 30 seemed generally agreed that the President's Economic Report should not have suggested the possibility of a tax cut. Most of the panelists seemed to doubt that "Federal economic policies during 195B carried serious danger of inflation in 1959." The question to that effect was asked by Congressman Boiling. The ensuing discussion seemed to indicate that sentiment of the panelists was pretty well divided on whether taxes should be increased. Ratchford, Samuelson, and Stein seemed to agree that any increase in expenses (whether to solve unemployment or any other problem) not offset by tax increases would be a serious inflationary threat. The others seemed to see the transcendant problem as national defense and growth, rather than inflation which, they felt, could be dealt with when a threat of inflation became much clearer. Congressman Patman again criticized the extent of commercial bank holdings of Government securities and past reductions of reserve requirements which enabled them, he said, to buy such securities and create money at no cost to them. In this connection, he renewed his proposal to have the Federal Reserve Banks, rather than the commercial banks, buy all Government securities not absorbed by non-bank investors, and to "immobilize11 the resulting increase in reserves by increasing reserve reqiiirements. To this, he would add a program by the Fed to peg Government securities at 2-1/2 per cent. This was quickly characterized by Paul Samuelson as a "highly inflationary" scheme. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis To: Chairman Martin -3~ The session of the hearings on February 2, poorly attended by Committee members, involved another panel. Perhaps the predominating tone was set by Robert Eisner, an economist at Northwestern University, who said that, "The decision to accept unemployment, whether in the view that it is necessary to prevent prices from rising or for any other reason, is a decision to accept a lower rate of growth." Both he and Daniel Hamberg, economist at the University of Maryland, seemed to agree with a suggestion of Congressman Boiling that monetary policy cannot stimulate growth and monetary policy as an anti-inflationary tool can restrain growth and have highly discriminatory effects. At this session of the hearings particularly, the goal of dollar stability seems to run a very poor second to increased rates of growth. Attachment r. Y loung http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r F E D E R A L R E S E R V E SYSTEM Office Correspondence *p0 Chairman Martin From Jerome ¥. Shay^ Date February 2,1959 Subject: Questions raised during December 1958 hearings before the Joint Economic Committee It may be helpful in connection with your appearance before the Joint Economic Committee on February 6 to set forth below principal points expressed by Committee members at the December Ij-li, 1958, hearings of the Committee on "Relationship of Prices to Economic Stability and Growth.1* Senator Paul Douglas (Dem., 111.) He indicated that he saw nothing detrimental in Government deficit financing through use of bank credit "so long as total national resources are being used at less than capacity,," as such financing would encourage employment of total resources He seemed sympathetic to some legal procedure which would provide full public disclosure of contemplated price or increases in order to bring an informed public opinion to bear on demands of unions and management. (See suggestions of Senator O'Mahoney and Congressman Reuss, below.) He suggested that if the regulation of consumer credit should be restored^ the regulation should require lenders to make full and complete disclosure to borrowers of all interest costs. (Compare suggestion of Congressman Fatman^ below.) Note* The Board has been asked for a report on Senator Bush's bill to give the Board standby authority to regulate consumer credit. Sjgnator_jjoseph Q^Mahoney _(Dem., Wyo.) The Senator seemed concerned that the Treasury does so much financing ^through^bills when, "according to Federal Reserve spokesmen, Treasury bills virtually the same as money5!l since he views the result as a "terrific increase in the velocity of money which is inflationary.n Apparently3 he feels that, with our large corporations, there is no real price competition in business that can be relied upon to affect pricing policy. He said he would reintroduce his 19l|B bill to require 30 days» advance notice of proposed price or wage increases in dominant lines of commerce, during which periods public hearings would be held in order that full disclosures might be made to the public. (He has introduced such a bill.) http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis To: Chairman Martin -2- Representative Wright Patman (Dem., Texas) He urged reduction of Government debt3 especially in good times, and deplored the magnitude of the interest burden on the debt. He indicated that unless the debt is reduced, Government programs would have to be curtailed or taxes increased. Then cama the usual one — that the fiscal burden could be eased if Federal Reserv^ Banks^ rather than commercial banks3 bought all Government securities not absorbed by non-bank investors3 to be followed by increases in reserve requirements to offset resulting increases in bank reserves, all of which would reduce the real interest cost to the Government because of Federal Reserve Bank payments of earnings to the Treasury. He suggested that increased purchases of Government securities by the Fed might be alternatives to either curtailed spending or tax increase. He suggested that tax-exempt securities be made taxable. He urged that if consumer credit controls were restored, the interest rate chargeable by regulated lenders should be subjected to a regulatory maximum, since the down-payment and maturity provisions of the regulation would reduce the lenders1 risk. Representative RicharaBoiling (Dem., Mo.) He saw "^care^talk11; about J-nflation as a "club to beat down sound and essential Government programs.," and "to prevent the functioning of public policy at all levels." Apparently, he believes that the cold war is a "real kind of war" to which the public must be aroused, and that continued failure to institute the necessary measures jbqjout-distance Russia, cannot be tolerated, He said that we have a "massive policy decision" to make to meet that situationj and seemed sympathetic to institution of some direct controls of the war-time variety if necessary to lead in the contest with Russia. Representative Henry Reuse (Dem., Wis.) He seemed prepared to push for his bill (l) to require the President to include in his Economic Report specific recommendations on credit and monetary policy, and (2) to establish a mechanism whereby an informed public opinion can be brought to bear on price or wage increases. (He has reintroduced such a bill in this Congress, and an identical bill has been introduced by Senator Clark. The Board has been asked for reports on these two bills.) http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis To: Chairman Martin -3- Representative Thomas B. Curtis (Repub.} Mo.) He suggested that the impact of taxes and improved quality of goods and services on the general price level need;.to be determined. (He raised this point with you a year ago.) He suggested further, that if the general increase in the price level reflects little except improved quality^ then monetary and credit policy may have restricted growth rather than inflation. He suggested also that the tax deduction for interest} because it encourages business borrowing to the point of greatly enhanced demand which runs up interest rates generally? may contribute to inflation. He seems to feel that the tax deduction for interest may in fact encourage a preference for high interest rates. He suggested further that, as Government activity increases, which requires higher taxes, the general price level will necessarily rise to offset the tax increases. (Congressman Curtis is also a member of the House ¥ays and Means C omraittee.) cc: Mr. loung http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Question 1 of Senator Douglas' Press Release on Hearings. What do you regard as the proper division of labor between tax policy and monetary policy as instruments of economic stabilization during the coming year? Most observers expect 1959 "to be a year of steady and fairly rapid business expansion, featured by inventory rebuilding, renewed growth in private capital outlays, higher levels of State and local government expenditure, a large volume of construction, particularly of houses_, and further sizable expansion in the cash expenditures of the Federal Government. In this kind of situation, the division of labor between fiscal and monetary policy will grow out of the essential characteristics of the two types of governmental financial policy. Monetary policy can be adapted more quickly to changing economic conditions than can expenditure and tax policy, which requires a lengthy legislative process before expenditure programs or the tax structure can be altered. Fortunately, our present fiscal system, depending as it does so heavily on income taxes, has I a built-in flexibility of yield conforming to the swings"of economic activity. • As gross national product rises, tax yields respond more than proportionately. This growth in tax yields is being counted on to produce a balanced budget in fiscal 1960. In cushioning the recession last year, built-in flexibility both of taxes and expenditures was important. Provisions for unemployment compensation helped to maintain consumers' incomes during a period of declining employment. Certain expenditure programs were also stepped up. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2. Economic expansion during 1959 niay be such as to produce even larger tax receipts than have been projected in the President's budget, but we should also bear in mind that, if for any reason expansion lags, revenue may fall short of the budget estimates, continuing the Government's deficit position. Likewise, any expenditure programs not contemplated in the budget will threaten the narrow balance foreseen for fiscal I960. Even if the budget estimates are borne out on both the receipts and expenditure sides for the next fiscal year, the Government this calendar year faces a cash deficit of about $7-5 billion. This deficit will arise because tax receipts are concentrated in the last half of the fiscal or first half of the calendar year. Therefore, if restraint on expansion in aggregate demand relative to output availability proves to be necessary during the current calendar, it will have to come mainly from monetary policy, with such help as can be provided by appropriate debt management policies that will place as much as possible of the new Treasury offerings outside the banking system with savings type investors. In viewing prospects for the months ahead, we would naturally feel more comfortable if the calendar year budget were more nearly in balance and if a larger surplus were in sight for the next fiscal year. But we are quite prepared to exercise our responsibilities as best we can in the situation as it develops, including actions to combat strong inflationary pressures should they emerge. We do believe, however, that Congress should be cautious about authorizing additional expenditure programs unless it is also prepared to consider necessary tax levies to finance them. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Question k of Senator Douglas' Press Release on Hearings. If price movements during 1959 follow the 1958 pattern, would an easier monetary and credit policy "be in order? What program would you recommend as to priority and specific actions in the fiscal and monetary fields for 1959? The influences "bearing on changes in prices of individual commodities and services at this time are different in a great many respects than those prevailing a year ago. Price movements in 1959> therefore, are not likely to be similar to 1958- But even if they were this would not dictate a similar monetary policy. Monetary policy actions are taken against the background of the total economic situation as we see it and on the basis of our best combined judgment about both current and prospective economic trends, with particular reference to credit demands. Prices are merely one among many indicators we watch. I cannot give you priorities or specific programs for monetary policy because this is continually being re-examined and depends for its effectiveness on remaining flexible. Should inflationary tendencies become dominant or should credit demands for speculative or other unsustainable commitments become vzgorous, we would, of course, feel obliged to take appropriate action to deal with the situation. Should recovery falter for any reason we would naturally be prepared quickly to rechart our course and adjust credit conditions as the circumstances might indicate. In the fiscal field, I believe we should be studying intensively all well thought out proposals for eventual tax reform that will help to promote economic growth and also all the methods and techniques of debt management that can contribute to a wide ownership of the public debt and to a healthy and efficient Government securities marked. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 86th CongresSy^Lst Session / . ^^ s -^ «^'Lj* **•• Economic Indicators JANUARY 1959 Prepared for the Joint Economic Committee by the http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis " / /) Council of Economic Advisers UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1959 JOINT ECONOMIC COMMITTEE (Created pursuant to Sec. 5 (a) of Public Law 304, 79th Cong.) WRIGHT PATMAN, Texas, Chairman JOHN SPARKMAN, Alabama, Vice Chairman RICHARD BOILING (Missouri) PAUL H. DOUGLAS (Illinois) HALE BOGGS (Louisiana) j. WILLIAM FULBRIGHT (Arkansas) HENRY S. REUSS (Wisconsin) /^^f * TT^x-mxr S\\T • > TIJ™* AC B. Tt CURTIS r-T-m-rTc (Missouri) n^/r-V JOSEPH C. O MAHONEY (Wyoming) J J THOMAS ° CLARENCE E. KILBURN (New York) RODERICK H. RILEY, Executive Director JOHN W. LEHMAN, Clerk COUNCIL OF ECONOMIC ADVISERS RAYMOND J. SAULNIER, Chairman KARL BRANDT PAUL W. McCRACKEN [PUBLIC LAW 120—81sT CONGRESS; CHAPTER 237—IST SESSION] JOINT RESOLUTION [S. J. Res. 55] To print the monthly publication entitled "Economic Indicators" Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That the Joint Economic Committee be authorized to issue a monthly publication entitled "Economic Indicators," and that a sufficient quantity be printed to furnish one copy to each Member of Congress; the Secretary and the Sergeant at Arms of the Senate; the Clerk, Sergeant at Arms, and Doorkeeper of the House of Representatives; two copies to the libraries of the Senate and House, and the Congressional Library; seven hundred copies to the Joint Economic Committee; and the required number of copies to the Superintendent of Documents for distribution to depository libraries; and that the Superintendent of Documents be authorized to have copies printed for sale to the public. Approved June 23, 1949. Charts drawn by Graphics Unit, Office of the Secretary, Department of Commerce. ll http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Contents TOTAL OUTPUT, INCOME, AND SPENDING The Nation's Income, Expenditure, and Saving Gross National Product or Expenditure National Income Sources of Personal Income Disposition of Personal Income Per Capita Disposable Income Farm Income Corporate Profits. . . . . .... ........... ......... . . . . . . . . . . . . . . . . . ......_...._......_....„.,. . Gross Private Domestic Investment Expenditures for New Plant and Equipment ................ Page 1 2 3 4 5 6 7 8 9 10 EMPLOYMENT, UNEMPLOYMENT, AND WAGES Status of the Labor Force Nonagricultural Employment Average Weekly Hours—Selected Industries Average Hourly Earnings—Selected Industries Average Weekly Earnings—Selected Industries PRODUCTION AND BUSINESS ACTIVITY Industrial Production Production of Selected Manufactures Weekly Indicators of Production. New Construction. Housing Starts and Applications for Financing Sales and Inventories—Manufacturing arid Tirade. . .. . Merchandise Exports and Imports 11 12 13 14 15 . .. . 16 17 18 19 20 21 22 PRICES Consumer Prices Wholesale Prices Prices Received and Paid by Farmers 23 24 25 CURRENCY, CREDIT, AND SECURITY MARKETS Currency and Deposits .-•••. Bank Loans, Investments, and Reserves Consumer Credit Bond Yields and Interest Rates Stock Prices ^6 27 28 29 30 FEDERAL FINANCE Budget Receipts and Expenditures Cash Receipts from and Payments to the Public 31 32 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis iii TOTAL OUTPUT, INCOME, AND SPENDING THE NATION'S INCOME, EXPENDITURE, AND SAVING Current estimates show a marked increase in total income and expenditures between the second and third quarters of 1958. [Billions of dollars] 1957 Year Second quarter Third quarter Excess of receipts Economic group 1958 ExRe- pendceipts itures or expenditures (-) Excess of receipts ExRe- pendceipts itures or expenditures (-) (+> Third quarter Excess Excess of reof reEx- ceipts Ex- ceipts Re- pendRe- pendceipts itures or(+) ex- ceipts itures or expendpenditures itures (-) (-) (+) Seasonally adjusted annual rates Consumers: Disposable personal in come .305. 1 Personal consumption ex- 308.7 45.6 43. 9 -19. 7 0) — 20. 3 53. 7 -5. 3 1. 2 1. 2 Excess of transfers (4~) or of net exports ( — ) . 4. 8 -3.5 22.5 49. 2 66. 7 4. 9 291 5 19 2 20 4 65.3 1. 5 314.0 288. 3 46 4 Excess of investment (_) International: Foreign net transfers by government Net exports of goods and services n 20. 7 Personal net saving ( + ) _ Business: Gross retained earnings Gross private domestic investment 307. 5 r»O0 284. 4 (*) 1. 2 1. 7 3. 6 1. 7 —.5 —.5 Government (Federal, State, and local): Tax and nontax receipts or 116. 2 accruals Less: Transfers, interest, 28. 8 and subsidies (net) 117. 3 111. 1 C1) 28. 7 33. 5 34. 1 87 4 88 6 77 6 C1) Net receipts Total government expenditures Less: Transfers, interest, and subsidies (net) Purchases of goods 114. 5 114 5 123. 2 126. 2 28 8 28. 7 C3. 5 34. 1 85 7 85. 8 89. 7 92. 1 r Surplus •(+) <> deficit (— ) on income and product account. Statistical discrepancy 1.7 .7 GROSS NATIONAL PRODUCT.. 440. 3 440. 3 .7 * 445. 6 445. 6 i Not available. NOTE.—For explanation and use of this arrangement, see Senate Report No. 1295, Joint Economic Report, pp. 92-93, 99-105, and Economic Report of the President, January 1953, Appendix A. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . 7 -1. 1 .7 C1) -12.2 2. 8 429. 0 429. 0 -1. 1 0) 439.0 439.0 Detail will not necessarily add to totals because of rounding. Sources: Department of Commerce and Council of Economic Advisers. C1) GROSS NATIONAL PRODUCT OR EXPENDITURE Gross national expenditures rose $10.0 billion (seasonally adjusted annual rate) between the second and third quarters of 1958, according to current estimates, increases occurred in all major components except net exports of goods and services. BILL ONS OF DOLLARS - • -- -- 500 BILLIONS OF DOLL.ARS 500 SEASONALLY ADJUSTED ANNUAL RATES 1 a*******3"******* ^------ GROSS NATIONAL PRODUCT 400 400 X «*»**"** mM mi ^^ s " ~^* ***m* -^^^^^ ^ - _ • ' ^~****** - 300 300 PERSONAL CO ^SUMPTION EXPENDITU RES v^ .— -. , —-' • — _ - . —- 200 200 • - GOVERNMENT PURCHASES OF GOODS AftD SERVICES 100 100 \ §B S-*—-^1* ^ GROSS PRIVAT *. DOMESTIC INVES- 'MENT . - 0 NET EXPORTS OF (SOODS ^/ AND SERVICE; i 1 I I 1952 I 1 1 1953 1 1 1 1954 1 1 I 1 1 1 ! 1 Period 1939 1948 1949 1951. .. 1952 1953 1954 1955 1956 1957 203. 7 316. 6 316. 5 370. 7 384. 1 401. 5 393.9 425. 5 436. 0 440. 3 1 1 1958 , cow CIL OF ECONOMIC ADVISERS SOURCE : DEPARTMENT OF COMMERCE. Total gross national product in 1957 prices 1 ! 1957 1956 1955 [Billions of dollars] Personal Net Gross Total conexports gross sump- private of goods national tion domestic and product expend- invest- services ment itures 91. 1 259. 4 258. 1 329. 0 347.0 365. 4 363. 1 397. 5 419. 2 440. 3 67.6 178. 3 181.2 209.8 219.8 232. 6 238. 0 256.9 269. 4 2844 9.3 43. 1 33. 0 56. 3 49. 9 50. 3 48. 9 63. 8 68. 2 65. 3 0.9 3. 5 3. 8 2. 4 1. 3 —.4 1. 0 1. 1 2. 8 4. 9 Government purchases of goods and services Federal Total l 13.3 34.5 40. 2 60. 5 76.0 82.8 75.3 75.6 78.8 85. 7 Total i National defense2 5.2 19.3 22. 2 38. 8 52. 9 58.0 47.5 45.3 45.7 49.4 Other State and local 1.3 11. 6 13.6 33.9 46.4 49. 3 41. 2 39. 1 40.3 44. 3 3. 9 8. 2 8. 9 5.2 6.7 9.0 6. 7 6. 6 5.7 5.5 8.2 15.2 17.9 21.7 23.2 249 27.7 30. 3 33. 1 36.3 43.7 44 9 44 9 43. 9 43. 7 44 1 44 5 5.8 5. 1 5.2 5.7 6.3 6.9 8.0 35. 9 36.0 36.1 37.8 38.6 39. 1 39.9 Seasonally adjusted annual rates 1957: First quarter Second quarter Third quarter Fourth quarter 1958: First quarter Second quarter Third quarter 1 Less 2 441. 6 442. 8 442. 4 434. 1 418. 0 419. 0 428.3 436. 3 441. 2 445. 6 438.9 425. 8 429.0 439. 0 279.8 282.5 288.3 287.2 286.2 288. 3 291.5 Government sales. Includes expenditures for military services, international security and foreign relations (except foreign loans), development and control of atomic energy, promotion of the merchant marine, promotion of defense production and economic stabilization, and civil defense. For further details, see Economic Report of the President, January 1955 (p. 137), and National Income, 1954 Edition (p. 148). http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 65. 9 67.0 66. 7 61. 5 49. 6 49. 2 53. 7 5. 6 6. 0 4. 8 3. 3 1.7 1. 7 1. 7 85. 0 85. 7 85. 8 86. 9 88.3 89. 7 92.0 49. 1 49. 7 49.7 49. 1 49. 7 . 50. 7 52. 2 These expenditures are not comparable with the "major national security" category in The Budget of the United States Government for the Fiscal Year Ending June SO, 1959, and shown on p. 31 of Economic Indicators. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. NATIONAL INCOME Compensation of employees rose $4.6 billion (seasonally adjusted annual rate) between the second and third quarters of1958. There were only small chanses in other components of noncorporate income. BILLIONS OF DOLLARS BILLIONS OF DOLLARS 40O 400 SEASONALLY ADJUSTED ANNUAL RATES TOTAL NATIONAL INCOME 300 300 COMPENSATION OF EMPLOYEES X 200 200 PROPRIETORS* AND RENTAL INCOME V. CORPORATE PROFITS AND ^ INVENTORY VALUATION ADJUSTMENT NET INTEREST- 1952 =1= I 1953 1954 1955 1956 1957 1958 COUNCIL OF ECONOMIC ADVISERS SOURCE: DEPARTMENT OF COMMERCE1 [Billions of dollars] Period 1939 1948 19491951 1952 1953 1954 1955 1956 1957 . . 1957* First quarter Second Quarter Third quarter Fourth quarter.. 1958: First quarter Second quarter Third quarter 1 Includes 3 Total national income Compensation of employees * Proprietors* income Farm Net interest 72.8 223. 5 217.7 279. 3 292.2 305.6 301.8 330.2 349.4 364.0 48. 1 141. 0 140. 8 180. 3 195. 0 208.8 207.6 223.9 241.8 2546 43 2.7 7.3 22.4 7.3 17.8 12.9 22.7 8.3 16. 3 9.4 26.0 15.3 26. 9 10. 2 27.4 13.3 10. 5 12.7 27.8 10. 9 11.8 30.4 10. 7 11.6 30.8 10. 9 11.6 31,4 11.8 Seasonally adjusted annual 361.5 364. 1 368. 7 361.5 350.6 352. 4 (2) 251.6 2549 257.3 254 8 250.9 250.7 255. 3 11.5 11.6 11.8 11.5 12.6 13.4 13.3 employer contributions for social insurance. (See also p. 4.) Not available. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Business and professional Rental income of persons 31. 1 31.4 31.7 31.3 30. 6 30.7 31. 1 11.4 11.7 12. 0 12.2 12. 1 12. 1 12.2 Corporate profits and inventory valuation adjustment Total Profits Inventory before valuation taxes adjustment 46 42 48 6. 3 7. 1 8. 2 9. 1 10.4 11.3 12.6 rates 5.7 30.8 28.2 41. 0 37.7 37.3 33.7 43. 1 42.9 41.9 6. 4 33.0 26.4 42.2 36.7 38.3 34 1 449 45.5 43.4 -0.7 —2.2 1. 9 — 1.2 1. 0 -1.0 —.3 -1.7 -2.6 -1.5 12. 1 12.5 12.8 12.9 13.0 13. 1 13.2 43.7 42.0 43. 1 38.8 31.3 32.5 (2) 46. 1 43.5 44 2 39.9 31.7 32.0 (3) 9 4 1 5 -1. 1 -1. 1 — *% .'5 .2 NOTE.—Detail will not necessarily add to totals because of rounding, Source: Department of Commerce. SOURCES OF PERSONAL INCOME Personal income declined $1 billion (seasonally adjusted annual rate) in December. A less than usual volume of year-end extra and special dividends and lower transfer payments accounted for the decline. Wages and salaries continued to rise. BILLIONS OF DOLLARS BILLIONS OF DOLLARS SEASONALLY ADJUSTED ANNUAL RATES 350 TOTAL PERSONAL INCOME LABOR INCOME ^ 150 I FARM PROPRIETORS' INCOME BUSINESS.PROFESSIONAL, BUSINESS.PROFESJ AND RENTAL INCOME ^ DIVIDENDS AND PERSONAL INTEREST | \ \ Ml M i l l J 1 L_L I I I I I I 1 I 1953 1954 111 1955 SOURCE: DEPARTMENT OF COMMERCE. Period Total personal income 1939 _ _ _ 1949__ . 1951 . _ 1952 .. 1953 1954 1955 1956 1957 72.9 208. 3 256. 7 273. 1 288.3 289. 8 310. 2 330. 5 347. 9 1957: November. December. 1958: January _ _ February. March April 350. 2 348. 4 348. 2 346. 4 347. 1 348. 1 349. 9 352. 0 3 358. 8 356. 1 357. 8 357. 5 360. 4 359. 3 Mav June July. ... August September. October November.4 . December _ 1958 COUNCIL OF ECONOMIC ADVISERS [Billions of dollars] Labor income Proprietors' income Less: Per(wage and Rental sonal conPersonal Transfer salary disDivitributions Business income paybursements Farm of for social dends interest and proincome ments and other l persons insurfessional labor income) ance 4. 3 46. 6 7. 3 2. 7 3.0 0. 6 5.8 3.8 137. 4 12. 9 22. 7 2.2 12. 4 8. 3 7. 5 9. 4 175. 5 16. 3 26. 0 9.4 3.4 12. 6 9.0 11.2 190. 2 15. 3 26. 9 10.2 13.2 12. 1 3.8 9. 0 204. 1 13. 3 27. 4 3.9 10. 5 9.2 13.4 14.3 12. 7 202.5 27. 8 10. 9 16.2 4.6 14. 6 9.8 218.0 11.8 30.4 5.2 10.7 17.5 11. 2 15. 8 235. 2 11. 6 30. 8 10. 9 17.0 5. 7 12.0 18. 6 247. 1 11. 6 31.4 12. 4 21. 5 6. 6 18. 8 11.8 Seasonally adjusted annual rates 247. 2 11. 4 31.2 12.2 23.0 12. 6 6. 6 19. 1 246.5 11. 8 12. 2 19.2 31. 2 6. 6 23. 3 10. 8 244. 2 12. 0 30. 9 12.2 6.7 12. 5 19. 3 23. 9 242. 2 12. 7 12. 1 30. 4 23. 8 6.7 12.4 19. 3 241. 5 IS. 0 12. 1 30. 5 6.6 12.4 24.8 19. 3 13. 4 240.9 30. 6 12. 1 6. 6 12.4 19. 3 26. 1 242. 0 13. 7 12. 1 30. 7 6. 7 12.4 26.4 19. 3 244. 7 13. 2 12. 2 6. 7 30. 8 12. 5 19. 3 26. 0 3 251. 2 13. 1 12. 2 7. 0 12. 5 19. 3 26. 5 31. 0 247. 6 13.3 12. 2 12. 5 19. 4 6. 8 26. 8 31. 1 248. 6 13. 5 6.8 27. 0 31.3 12. 5 19. 5 12.3 13.4 248. 2 31. 6 12. 3 26. 9 12. 4 6. 8 19. 5 251. 3 13.3 6. 8 12.4 26. 6 12.3 19. 5 31. 8 252. 2 13. 3 12. 4 6.8 26. 1 10. 6 31. 9 19. 6 1 Compensation of employees (see p. 3) excluding employer contributions for social insurance and the excess ol wage accruals over disbursements. 2 Personal income exclusive of net income of unincorporated farm enterprises, farm wages, agricultural net interest, and net dividends paid by agricultural corporations. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1956 Nonagricultural personal2 income 67.1 192.1 237.0 254.3 271.5 273.8 295.0 315.4 332. 7 335.2 333.0 332.5 330. 1 330.5 331.0 332.4 3 335. 1 342. 0 339. 2 340. 9 340.7 343. 6 342. 5 3 Includes lump-sum retroactive salary payments to Federal employees at an annual rate of $4.6 billion ($380 million multiplied by 12). * Preliminary estimates, not charted. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. DISPOSITION OF PERSONAL INCOME Disposable personal income rose $6.5 billion (seasonally adjusted annual rate) between the second and third quarters of 1958. Total consumer expenditures rose $3.2 billion. BILLIONS OF DOLLARS BILLIONS OF DOLLARS 350 350 300 250 - 250 - 200 200 - 150 1952 1953 1957 1958 COUNCIL OF ECONOMIC ADVISERS SOURCE:" DEPARTMENT OF COMMERCE Equals: Less: DisposPersonal Personal able income taxes * personal income Period 1939 1948 . 1949 1951 1952 1953 1954 . 1955 1956 1957 1957: First quarter _ .. Second quarter Third quarter Fourth quarter 1958: First quarter Second quarter Third quarter. ._-. . 72. 9 210. 4 208. 3 256. 7 273. 1 288.3 289.8 310.2 330. 5 347.9 2.4 21. 1 18. 7 29. 2 34.4 35. 8 32.9 35.7 40. 1 42. 7 342. 3 348.4 351. 8 349.7 347. 3 349. 8 357. 5 42. 3 42. 7 43. 1 43.0 42. 3 42.3 43. 5 i Includes such items as fines, penalties, and donations. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 34631°—59- http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Less: Personal consumption expenditures Total Saving Equals: as percent Personal of disNonsaving posable Durable durable Services income goods goods Billions of dollars 70.4 67. 6 6. 7 35. 1 22. 7 178. 3 189. 3 98.7 189.7 181. 2 24. 6 96.6 227.5 209. 8 29. 5 110. 1 238.7 219. 8 29. 1 115. 1 252. 5 232. 6 32.9 118. 0 32. 4 256.9 238.0 119.3 274.4 256.9 124. 8 39.6 269.4 38.4 131.4 290.5 284.4 39. 9 305. 1 138.0 Seasonally adjusted annual rates 300. 0 279. 8 40. 2 135. 5 282. 5 305.7 39.5 137. 1 40.4 288.3 308.7 140.5 287. 2 39.6 138.8 306.8 286. 2 36. 3 305.0 139.8 307.5 35. 6 141. 4 288.3 291.5 314.0 36. 1 142.9 25. 8 56.9 60.0 70.2 75. 6 81. 8 86.3 92. 5 99. 6 106. 5 2. 9 11.0 8. 5 17. 7 18. 9 19. 8 18.9 17.5 21. 1 20.7 4. 1 5.8 4.5 7.8 7.9 7.9 7.3 6.4 7.2 6.8 104. I 105. 9 107. 4 108.7 110. 1 111.3 112. 5 20. 3 23.2 20.4 19. 6 18.8 19. 2 22. 5 6.8 7. 6 6. 6 6.4 6.2 6. 2 7. 2 PER CAPITA DISPOSABLE INCOME Per capita disposable income, measured in both current and constant prices, rose in the third quarter. SEASONALLY ADJUSTED ANNUAL RATES 2,000 2,000 1,800 1,800 1,600 1,600 1,400 1.4OO ^200 1,200 L ! f \ f 1953 1952 1954 1956 1955 ^SEE FOOTNOTE 2 ON TABLE BELOW. SOURCES: DEPARTMENT OF COMMERCE, DEPARTMENT OF LABOR, AND COUNCIL OF ECONOMIC ADVISERS. 1939 1948 1949 1951 1952 1953 1954 1955 1956 1957 1957 prices 2 Current prices 70.4 189. 3 189.7 227. 5 238. 7 252. 5 256. 9 274. 4 290. 5 305. 1 . __ _ .. f I f In 1958 COUNCIL OF ECONOMIC ADVISERS Total disposable personal income (billions of dollars)l Period i 1957 142. 6 221. 4 223. 9 246. 5 252. 9 265. 2 269.0 288.0 300. 4 305. 1 Per capita disposable personal income (dollars) * Current prices 538 1,291 1,271 1,474 1,520 1,582 1,582 1,661 1,727 1,782 1957 prices 2 Population (thousands) 3 1,089 1,510 1,501 1,597 1,610 1,662 1,657 1,743 1,786 1,782 131, 146, 149, 154, 157, 159, 162, 165, 168, 171, 028 631 188 360 028 636 417 270 176 196 1,786 1,796 1,786 1,762 1,726 1,722 1, 748 170, 170, 171, 172, 173, 173, 174, 151 839 612 393 054 705 460 Seasonally adjusted annual rates 1957: First quarter Second quarter Third quarter Fourth quarter 1958: First quarter Second quarter Third quarter 1 2 . _. Income Jess taxes. Dollar estimates in current prices divided by consumer price index on a 1957 base. 3 Includes armed forces overseas. Annual data as of July 1; quarterly data centered in the middle of the period, interpolated from monthly figures. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 300.0 305. 7 308. 7 306. 8 305.0 307.5 314. 0 304.0 306.9 306.6 303.8 298.7 299. 1 304 9 1,763 1,789 1,799 1,780 1,762 1,770 1,800 Sources; Department of Commerce, Department of Labor, and Council of Economic Advisers. FARM INCOME Farm operators' net income (seasonally adjusted) was slightly lower in the third quarter of 1958 than in the second quarter, though still appreciably higher than last year. BILLIONS OF DOLLARS BILLIONS OF DOLLARS SEASONALLY ADJUSTED ANNUAL RATES 40 40 30 30 20 NET FARM INCOME (INCL. NET CHANGE IN INVENTORIES)!/ 1 1952 1953 1954 1955 JflNCOMETOF FARM OPERATORS FROM FARMING. SOURCE: DEPARTMENT OF AGRICULTURE. Period 1939 1948 1949 1951 1952 1953 1954 1955 > 1956 1957.. Realized gross farm income * . -.. - 1957: First quarter Second quarter Third quarter Fourth quarter 1958: First quarter Second quarter Third quarter _ 10. 6 34.9 31. 8 37.3 37. 0 35. 3 33. 9 33.3 346 34. 3 34. 4 34. 3 34. 3 34. 3 37.0 38.0 37. 7 1956 1957 1958 COUNCIL OF ECONOMIC ADVISERS* Farm operators' income Net income 2 Net income per farm including net change in Excluding Farm proIncluding inventories duction net change net change in invenin invenexpenses Current 1957 3 tories tories prices prices 4 Billions of dollars Dollars 6.2 4. 4 4. 5 1,660 697 18.9 16. 1 17. 8 3, 065 3,483 18.0 12. 9 13.8 2,259 2, 658 22.2 15.2 16. 3 2,951 3, 139 14.4 22.6 15.3 2,829 2, 978 21.4 13. 9 13.3 2,502 2,662 12. 2 12. 7 2,542 21. 7 2,440 21. 9 11. 5 11. 8 2,435 2,313 12.1 11.6 22.5 2,341 2,413 10. 8 11.6 23.5 2, 388 2,388 Seasonally adjusted annual rates 23. 4 11.0 2, 390 11.5 2,370 10.7 23. 6 2, 390 2,390 11.6 10. 9 23. 4 11. 8 2,430 2,430 23. 6 10. 7 2,370 2,350 11.5 24. 2 12. 8 12. 6 2,650 2,600 24. 4 13.4 13.6 2,820 2,760 24.8 12.9 13. 3 2,800 2, 750 i Cash receipts from farm marketings, valoe of farm products consumed in farm households, gross rental value of farm dwellings, and Government payments to 8farmers. Realized gross farm income less farm production expenses. Excludes farm wages paid to workers living on farms and any income to farm people from nonfarm 3 sources, which in 1957 amounted to $1.8 billion and $6.3 billion, respectively. Data prior to 1946 differ from farm proprietors' income on pages 3 and 4 because of revisions by the Department of Agriculture not yet incorporated into the national income accounts of the Department of Commerce. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 10 Number of farms (millions) 5 6.4 5.8 5.7 5.5 5.4 5. 3 5.2 5.1 5.0 49 4.9 4.9 4.9 49 48 48 48 * Dollar estimates in current prices divided by the index'of prices paid by farmers for items used in family living on a 1957 base. * The number of farms is held constant within a given year. Source: Department of Agriculture. CORPORATE PROFITS Corporate profits (seasonally adjusted) rose slightly in the second quarter of 1958. tttLUQNS Of DOLLARS BILLIONS OF DOLLARS I957 I952 It NO ALLOWANCE FOR INVENTORY VALUATION ADJUSTMENT. SOURCE: DEPARTMENT OF COMMERCE. I958 COUNCIL OF ECONOMIC ADVISERS. [Billions of dollars] Corporate profits before taxes Period 1939 1948 1949 1951 1952 1953 1954 1955 1956 1957 _ _ _ __ _ _ _ _ __._ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ ___ _ _ _ __ _ _ _ 6. 4 33. 0 26. 4 42. 2 36.7 38. 3 34. 1 44. 9 45. 5 43. 4 __ _ _ __ . _ _ Corporate tax liability Corporate profits after taxes Total 5.0 20. 5 16. 0 19.7 17. 2 18. 1 16. 8 23. 0 23. 1 21. 8 1. 4 12. 5 10. 4 22. 4 19. 5 20. 2 17.2 21. 8 22. 4 21.6 Dividend payments Undistributed profits 1. 2 13.3 8.5 10.7 8.3 8.9 7.0 11.8 11.0 9.4 3. 8 7. 2 7. 5 9. 0 9. 0 9. 2 9. 8 11. 2 12. 0 12. 4 Seasonally adjusted annual rates 1957: First quarter Second quarter Third quarter Fourth quarter 1958: First quarter Second quarter Third quarter 46. 1 43. 5 44. 2 39. 9 31. 7 32.0 . ._ 0) i Not available. NOTE.—See p. 3 for profits beiore taxes and after inventory valuation adjustment. !8 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 23. 0 21. 7 22. 0 19. 9 16. 1 16.3 C1) C1) 23. 1 21. 8 22. 1 20.0 15. 5 15.7 12.5 12.6 12.7 12.0 12.5 12.4 12. 5 Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 10. 6 9. 2 9.4 8.0 3.0 3.3 0) GROSS PRIVATE DOMESTIC INVESTMENT Gross private domestic investment rose $4.5 billion (seasonally adjusted annual rate) between the second and third quarters of 1958, mainly due to a $3.0 billion reduction in the rate of inventory liquidation. BILLIONS OF DOLLARS ISO BILLIONS OF DOLLARS eo i—; SEASONALLY ADJUSTED ANNUAL RATES 60 ACROSS PRIVATE DOMESTIC INVESTMENT NEW CONSTRUCTION^ h" ...,„««««««••• 20 CHANGE IN BUSINESS INVENTORIES \_^r -20 J L L. J 1952 f 1954 1953 _] I 1956 1955 l_ J 1957 L 1958 COUNOl OF ECONOMIC ADVISERS SOURCE: DEPARTMENT OF COMMERCE [Billions of dollars] Period 1939 1948 1949 1951 1952 1953 1954 1955 1956 1957. Total gross private domestic investment 9.3 43. 1 33.0 56. 3 49.9 50.3 48. 9 63.8 68.2 65. 3 Change in business inventories Fixed investment New construction l Total 8.9 38.4 36.0 46. 1 46. 8 49. 9 50.5 58. 1 62. 7 64. 3 Total 4.8 19. 5 18.8 24. 8 25. 5 27. 6 29. 7 34. 9 35. 7 36. 5 Residential nonfarm 2.7 10. 1 9.6 12. 5 12. 8 13.8 15.4 18.7 17. 7 17.0 Other Producers7 durable equipment 2. 1 9.3 9.2 12.3 12. 7 13. 8 14. 3 16. 2 18. 1 19. 5 Total Nonfarm 4.2 18. 9 17.2 21. 3 21.3 22.3 20.8 23.1 27.0 27. 9 0.4 4. 7 -3. 1 10. 2 3. 1 .4 — 1. 6 5. 8 5.4 1.0 0.3 3.0 — 2.2 9. 1 2. 1 1. 1 -2. 1 5.5 5.9 .2 28.7 28.1 28.0 26.7 22.9 22. 3 22.3 1. 1 2.9 2. 2 -2.3 -9.5 -8.0 -5.0 .6 2.0 1.3 -3. I -9.3 -7. 8 -5. 4 Seasonally adjusted annual rates 1957: First quarter Second quarter Third quarter _ „ _ Fourth quarter 1958: First quarter Second quarter Third quarter _ 65.9 67.0 66.7 61.5 49. 6 49. 2 53.7 64. 8 64. 2 64. 6 63.8 59. 2 57.2 58. 6 36. 1 36. 1 36. 6 37. 1 36. 3 34.9 36. 3 i "Other" construction in this series includes petroleum and natural gas well drilling, which are excluded from estimates on p. 19. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 17. 2 16.5 16. 9 17. 6 17. 1 16. 2 17. 9 18.9 19.6 19.7 19.6 19. 2 18.7 18. 4 NOTE.—Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 9 EXPENDITURES FOR NEW PLANT AND EQUIPMENT The October-December survey of business expenditures on plant and equipment indicated that anticipated capital outlays in the fourth quarter would be $29.9 billion (seasonally adjusted annual rate), slightly higher than expenditures in the third quarter. A further moderate rise to $30.5 billion in the first quarter of 1959 was indicated. BILLIONS OF DOLLARS BILLIONS OF DOLLARS 1959 1952 J/SEE NOTE 3 ON TABLE BELOW. SOURCES: SECURITIES AND EXCHANGE COMMISSION AND DEPARTMENT OF COMMERCE. , COUNCIL OF ECONOMIC ADVISERS [Billions of dollars] Manufacturing Period Total ! Total 5. 51 1939... 1948__. 1949_._ 22.06 1950 . 20.60 1951___ 1952___ 1953___ 1954__. 25. 64 26. 49 28. 32 26. 83 28. 70 35. 08 36. 96 30. 53 1955_ 1956___ 1957___ 1958 3 19.28 1.94 9. 13 7. 15 7.49 10. 85 11. 63 11. 91 11. 04 11. 44 1495 15. 96 11. 50 Durable goods 0.76 3. 48 2.59 3. 14 5. 17 5.61 5.65 5.09 5.44 7. 62 8. 02 5. 54 Transportation Nondurable goods 1. 19 5. 65 4. 56 4.36 5. 68 6. 02 6.26 5. 95 6.00 7.33 7.94 5. 96 Mining 0.33 .88 .79 .71 .93 .98 .99 .98 .96 1.24 1.24 .92 Railroads Other. 0. 28 1.32 1. 35 1. 11 1.47 1. 40 1.31 .85 . 92 1. 23 1. 40 . 76 0.36 1. 28 .89 1. 21 1. 49 1. 50 1. 56 1. 51 1. 60 1.71 1.77 1. 50 Public utilities 0. 52 2. 54 3. 12 3.31 3. 66 3.89 4. 55 4 22 4.31 490 6. 20 6. 10 Commercial and other 2 2.08 6. 90 5. 98 6. 78 7. 24 7. 09 8. 00 8. 23 9. 47 11. 05 10. 40 9.74 Seasonally adjusted annual rates 6. 64 10. 15 1. 81 16. 37 1. 54 1957: Third quarter 37. 75 8.23 8. 14 1. 24 10.21 6.43 1.91 36. 23 1. 26 Fourth quarter 15. 27 7.57 7.70 1. 15 5.87 9.63 1. 69 1958: First quarter 32. 41 1. 02 13. 20 6. 62 6. 58 1.00 9. 73 5.97 .77 1. 40 30. 32 11. 53 5. 57 .92 Second quarter 5. 96 9. 85 1. 29 6. 10 29. 61 .63 10. 86 5. 16 Third quarter 5. 70 .88 9.68 6. 3.2 1. 64 29. 93 10. 79 . 59 5. 11 . 91 Fourth quarter 3 . . 5. 68 9.94 1. 72 6. 41 . 54 11. 06 30. 51 .84 1959: First quarter 3 5. 35 5. 71 1 adjustments, when necessary, for systematic tendencies in anticipatory data. Excludes agriculture. These figures do not agree with the totals included in the gross national product " Commercial and other includes trade, service, finance, communications, and estimates of the Department of Commerce, principally because the latter cover construction. 3 agricultural investment and also certain equipment and construction outlays Estimates based on anticipated capital expenditures as reported by business between late October and early December 1958. charged to current expense. Detail will not necessarily add to totals because of rounding. NOTE.—Annual total is the sum of unadjusted expenditures; it does not necesSources: Securities and Exchange Commission and Department of Commerce. sarily coincide with the average of seasonally adjusted figures, which include 10 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis EMPLOYMENT, UNEMPLOYMENT, AND WAGES STATUS OF THE LABOR FORCE Total employment declined by 700/000, approximately the usual December chanse. 4.1 million in December, slightly more than is usual at this time of year. Unemployment increased to MILLIONS OF PERSONS-!' MILLIONS OF PERSONS-!' 75 75 50 1958 14 YEARS OF AGE AND OVER. SOURCE: DEPARTMENT OF COMMERCE. COUNCIL Of ECONOMIC ADVISERS Total Civilian employment Unemployment Insured unemployment 2 labor Civilian All pro% of civilian State proforce (inlabor Agricul- Nonagri- Number labor force grams grams as cluding Total force * tural cultural armed Unad- Seas, (thousands % of covered forces) * justed adj. of persons) employment Thousands of persons 14 years of age and over 55, 600 55, 230 45, 750 9, 610 36, 140 9,480 17. 2 5,1 l Period 1939 .. New definitions: 1 1952. 1953-.. 1954-. _ _ _ — 1955 1956. . 19571957: November December 1958* January February March. April Mav June July August September October November. December - 66, 560 67, 362 67, 818 68, 896 70, 387 70, 746 70, 790 70, 458 69, 379 69, 804 70, 158 70, 681 71, 603 73, 049 73, 104 72, 703 71, 375 71, 743 71, 112 70, 701 62, 966 63, 815 64,468 65, 848 67, 530 67, 946 68,061 67, 770 66, 732 67, 160 67, 510 68, 027 68, 965 70, 418 70, 473 70, 067 68, 740 69, 111 68, 485 68, 081 61, 035 61, 945 60, 890 62, 944 64,708 65,011 64, 873 64, 396 62,238 61, 988 62, 311 62, 907 64,O61 64, 981 65, 179 65, 367 64,629 65, 306 64, 653 63, 973 6,792 6,555 6, 495 6,718 6,572 6, 222 5,817 5,385 4,998 4,830 5,072 5,558 6, 272 6,900 6, 718 6, 621 6, 191 6,404 5,695 4, 871 i See Monthly Reports on the Labor Force, Department of Commerce, for definitions, methods of estimation, periods to which data pertain, etc, a Weekly averages. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 54, 243 55, 390 54, 395 56, 225 58, 135 58, 789 59, 057 59, 012 57, 240 57, 158 57,239 57, 349 57, 789 58, 081 58, 461 58, 746 58, 438 58, 902 58, 958 59, 102 1 1,932 1,870 3,578 2, 904 2, 822 2, 936 3, 188 3,374 4,494 5, 173 5, 198 5, 120 4,904 5,437 5, 294 4,699 4, 111 3,805 3,833 4,108 3. 1 2; 9 5.6 44 42 43 47 5.0 6.7 7.7 7.7 7.5 7. 1 7. 7 7.5 6.7 6. 0 5.5 5. 6 6.0 4.9 5.0 5.8 6.7 7.0 7.5 7.2 6. 8 7. 3 7. 6 7.2 7.1 5.9 6. 1 1,064 1,058 2,039 1,388 1,312 1,560 1,623 2, 256 3,065 3, 375 3, 505 3,527 3,186 2,847 2,717 2,374 2,062 1,862 1,957 3 2, 300 2.9 2.8 5.2 3.4 3. 1 3.5 3.6 5. 1 6.9 7.6 7.9 7.9 7. 1 6.3 6.0 5. 2 45 4. 1 43 3 5.0 Sources: Department of Commerce, Department of Labor, and Council of Economic Advisers. 11 NONAGRICULTURAL EMPLOYMENT Employment in nonogrr culture* I establishments declined by 100/000 (seasonally adjusted) in December. in construction accounted for most of the change. Fewer ,'obs MILLIONS OF WAGE AND SALARY WORKERS* MILLIONS OF WAGE AND SALARY WORKERS * 20 MANUFACTURING ALL NONAGRICULTURAL ESTABLISHMENTS 18 16 52 12 DURABLE • GOODS - XiINDUSTRIES 10 NONDURABLE GOODS INDUSTRIES - 8 6 1956 4.0 12.0 CONTRACT CONSTRUCTION 1957 1958 WHOLESALE AND RETAIL TRADE (ENLARGED SCALE) (ENLARGED SCALE) 11.5 1957 * SEASONALLY ADJUSTED DATA SOURCE: DEPARTMENT OF LABOR Period 1939 1952 1953 1954 1955 1956 1957 . . 1957: November. December. 1958: January February March April May . June July . August September. October November22. December . Total, unadjusted Total 30, 311 48, 303 49, 681 48, 431 50, 056 51, 766 52, 162 30,311 48, 303 49, 681 48, 431 50, 056 51, 766 52, 162 52, 316 52, 610 50, 477 49, 777 1:9, 690 49, 726 49, 949 50, 413 50, 178 50, 576 51, 237 51, 136 51, 378 51, 825 51, 758 51,516 51, 223 50, 575 50, 219 50, 054 50, 147 50, 315 50, 411 50, 570 50, 780 50, 582 50, 825 50, 736 COUNCIL OF ECONOMIC ADVISiRS [Thousands of wage and salary workers *] GovernManufacturing ment Contract Wholesale Mining construc- and retail (Federal, Durable NonduraTotal State, tion trade goods ble goods local) 4, 683 10, 078 5,394 6,612 3, 995 1, 150 845 16, 334 9,340 6,994 2,634 10, 281 6, 609 885 17, 238 10, 105 852 2, 622 6,645 7,133 10, 527 9, 122 15, 995 6,873 6,751 777 2,593 10, 520 9,549 16, 563 7,014 6,914 2,759 10, 846 777 16, 903 9,835 11,221 2,929 7,277 7,068 807 9,821 16, 782 6,961 11, 302 7,626 809 2,808 Adjusted for s iasonai variation 9,562 16, 455 6,893 2,710 7,671 789 11, 290 16, 252 9,393 6,859 784 2,679 11, 237 7, 747 9, 155 15, 965 2,652 6,810 7,754 766 11,305 8,895 15, 648 7,766 6,753 747 2,455 11, 235 8,717 15, 389 6,672 733 2,573 11, 116 7,788 8,566 15, 243 6,677 2, 624 7,816 723 11,050 15, 202 8, 498 6,704 11,087 718 7,835 2,698 8,556 15, 275 6,719 2, 698 7,877 713 11, 105 8,596 15, 312 6,716 7, 903 11, 121 709 2, 693 8, 605 15, 330 6, 725 701 2, 711 7, 989 11, 175 8,801 15, 529 8,005 6,728 707 2,698 11, 151 15, 358 8,625 7,986 6,733 708 11, 154 2,698 8,914 15, 664 6, 750 2,692 7,962 11, 110 708 8,940 15, 667 6,727 2,550 8,017 11, 100 708 1 Includes all full- and part-time wage and salary workers in nonagrieultural establishments who worked during or received pay for any part of the pay period ending nearest the 15th of the month. Excludes proprietors, self-employed persons, domestic servants, and personnel of the armed forces. Total derived from this table not comparable with estimates of nonagrieultural employment of the civilian labor force reported by the Department of Commerce (p. 11) which in- 12 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1958 Other 7,632 11,563 11,797 11,795 12, 197 12, 629 12, 835 12,843 12,817 12,781 12, 724 12, 620 12, 598 12, 607 12, 647 12, 673 12, 664 12, 690 12, 678 12, 689 12, 694 elude proprietors, self-employed persons, and domestic servants' which count persons as employed when they are not at work because of industrial disputes; and which are based on an enumeration of population, whereas the estimates in this table are based on reports from employing establishments. 2 Preliminary estimates. Source: Department of Labor. AVERAGE HOURS - SELECTED INDUSTRIES The average workweek of production workers in manufacturing industries increased from 39.9 in November to 40.2 hours in December, in line with seasonal changes. HOURS PER WEEK HOURS PER WEEK NONDURABLE MANUFACTURING DURABLE MANUFACTURING 42 40 38 I ! M i i ( 1 1 1 1 Ul 1 1 I I I MJ -JJ t I I 11 1 . 1 I I 1956 1958 1955 1957 1958 1957 1958 RETAIL TRADE 1955 1956 1957 1958 1956 COUNCIL OF iCONOMIC ADVISERS SOURCE: DEPARTMENT OF LABOR ' [Hours per week, for production workers or nonsupervisory employees] Vlanufaeturini 1 Period 1939.... 1948. 1949. 1951 1952 1953 1954 1955 1956 . . 1957 . 1957: November .. December. . 1958: January................ February March- » . April May June.— .. . _. July August September.. . October...3 . November . December 3 . , *...-.. .. „. . . . ..... . . . ._ _ * Data beginning with January 1948 are not strictly comparable with those for earlier periods. > Preliminary estimate*. 34631" http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Durable goods Total 37. 7 40. 1 39. 2 40. 7 40.7 40. 5 39. 7 40. 7 40. 4 39.8 39. 3 39. 4 3&7 38.4 38.6 38.3 38. 7 39.2 39. 2 39. 6 39.9 39.8 39.9 40.2 "D.-Jl J5_ ff Nondurable construction goods 38. 0 40. 5 39. 5 41. 6 41. 5 41. 3 40. 2 41.4 41. 1 40.3 39. 7 39. 7 38. 9 3ae 39. 0 38.8 39. 1 39. 6 39. 4 39. 8 40. 2 40. 1 40. 3 40. 7 37 4 39 6 38 8 39 5 39 6 39 5 39 0 39 8 39. 5 39 1 38. 8 39. 0 38. 3 38. 1 38. 1 37. 7 38. 1 38. 7 39. 0 39. 4 39. 5 39. 4 39. 4 39. 6 32 6 137 3 36 7 37 2 38 1 37 o 36 2 36 2 36 4 36 1 34 4 34. 9 35 2 33.0 35.2 35. 5 36 3 36 2 36. 3 36. 7 36. 5 36. 8 35 4 C3) •D _ x f t » i Itetaii trade m 42 7 40 3 40 4 40 2 39 9 39 2 39 1 39 0 38 6 38 1 37 5 38 3 37 8 37 8 37 8 37 8 37 8 38. 2 38 7 38 7 38. 0 37 9 37 8 * Not available. Source: Department of Labor. 13 AVERAGE HOURLY EARNINGS * SELECTED INDUSTRIES Average hourly earnings of production workers in manufacturing industries increased to $2.19 in December, 9 cents above the level of December 1957. DOLLARS PER HOUR * 3.10 DOLLARS PER HOUR 2.4O BUILDING CONSTRUCTION CURRENT PRICES 2.30 3.00 2.80 2.70 ! 90 Ll-ii i i ! M t i i t f i r i I i i i i t 1955 t i f t t I i i t t i t f i i t I i i i t_M 1956 (957 g 60 LLJ i i i I i t ' t i i t t t t i t r t t t i t i t i i f t t t i i i t f t t ! t t t t JL 1958 1955 1956 ' 1957 1958 1.80 NONDURABLE MANUFACTURING CURRENT PRICES^ 1.80 1.60 1.70 1.50 1.40 1955 1956 1957 1958 1955 1956 SOURCE: DEPARTMENT.OF LABOR. Period 1939 . 1948 1949. 1951 1952 _. 1953 1954 -.-..' 1955._ 1956 1957 1957: November December 1958: January. February March April May_ June July August September '. October 3 November December3 _ ._ . 1 1 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1958 COMNCtt OF ECONOMIC ADVISERS [For production workers or nonsupervisory employees] Building Durable goods Nondurable goods All manufacturing manufacturing construction manufacturing Current 1957! Current 1957 1957 Current 1957 Current prices prices prices prices l prices prices * prices prices 1 Current prices $0. 633 1. 350 1. 401 1. 59 1.67 1.77 1.81 1.88 1.98 2.07 2. 11 2. 10 2. 11 2. 10 2.11 2. 11 2. 12 2. 12 2. 13 2. 13 2. 14 2. 14 2. 17 2. 19 $0. 542 1.088 1. 137 1.26 1. 32 1.40 1.45 1.50 1.57 1.64 1.66 1.63 1,68 1.68 1.67 1. 68 1.69 1. 70 1. 71 1.71 1.71 1.71 1. 471 () $1. 281 1.579 1. 654 1. 72 1.77 1.86 1.90 1.97 2.05 2.07 2.08 2.08 2.07 2.06 2.06 2.05 2.06 2. 06 2.07 2. 07 2. 08 2. 08 2. 410 () $0. 698 1. 410 1. 469 1.67 1. 77 1.87 1. 92 2.01 2. 10 2.20 2.24 2.24 2.24 2.24 2.25 2. 25 2. 26 2. 27 2.28 2. 29 2. 30 2.29 2.33 2.35 $1. 413 1.649 1.734 1.81 1.88 1.96 2.01 2. 11 2. 17 2.20 2.21 2.21 2.20 2.20 2. 19 2. 19 2.20 2. 21 2.21 2. 23 2. 24 2.23 2, 426 () Earnings in current prices divided by consumer price index on a 1957 base. Data beginning with January 1948 are not strictly comparable with those for earlier periods. 14 1957 3 $0. 582 1.278 1.325 1.48 1.54 1.61 1.66 1.71 1.80 1.88 1.91 1.92 1.92 1. 92 1.93 1.94 1. 94 1. 94 1. 94 1. 93 1. 95 1. 95 1. 96 1. 97 $1. 178 1. 495 1. 564 1.60 1.63 1.69 1. 74 1. 79 1,86 1.88 1.89 1.90 1.89 1.88 1.88 1.89 1. 89 1. 89 1.88 1.88 1.90 1.90 1.90 (4) $0. 932 $1.887 1. 848 2 2. 161 2. 285 1.935 2. 19 2.37 2.31 2.45 2.61 2.48 2.72 2.60 2.66 2.79 2.80 2.90 2.96 2. 96 3.03 2.99 3.05 3.01 3.07 3.02 3.02 3.08 3.06 2.98 3.06 2.98 3.06 2.98 2. 97 3.06 3.09 3. 00 3.09 3. 00 3. 13 3. 04 3.04 3. 13 3.04 3. 413 (4) () 2 Preliminary estimates. * Not available. Source: Department of Labor. Retail trade 1957 prices > $1. 097 1. 273 1.342 1. 37 1. 40 1.47 1.52 1.57 1.62 1.64 1. 64 1.61 1.65 1.65 1. 63 1.64 1.64 1.65 1.66 1. 66 1. 66 1. 66 1.4 66 () AVERAGE EARNINGS - SELECTED INDUSTRIES Average weekly earnings in manufacturing again increased sharply, and at $88.04 in December were $5,30 above the level of a year ago. DOLLARS PER WEEK DOLLARS PER WEEK 100 BUILDING CONSTRUCTION CURRENT PR NONDURABLE MANUFACTURING CURRENT PRICES 65 60 1957 19561 1958 1957 SOURCE DEPARTMENT OP LABOR Period 1939 1948 . 1949.. 1951 .. . 1952 1953 . .... 1954 1955 1956 _ 1957 1957: November December 1958: January February. . .. March . April May June July.... August _ September October . 3 November December 3 1 2 COUNCIL OF ECONOMIC ADVISERS [For production workers or nonsupervisory employees] Durable goods Nondurable goods Building All manufacturing manufacturing manufacturing construction 1957 Current 1957 Current 1957 Current 1957 l Current prices prices 1 prices prices l prices prices * prices prices $23. 86 54 14 5492 64 71 67.97 71. 69 71.86 76.52 79.99 82.39 82. 92 82. 74 81.66 80. 64 81. 45 80. 81 82. 04 83. 10 83. 50 8435 85. 39 85. 17 86.58 $48. 30 63.32 6484 70. 11 72.00 75. 30 75.25 80. 29 82.72 82.39 81.94 81.76 80. 29 79. 14 79.39 7a69 79.81 80. 76 80.99 81.97 82.98 82. 77 83. 98 $26. 50 57. 11 58.03 69.47 73.46 77.23 77. 18 83.21 86. 31 saee 8a93 87. 14 86. 46 87.75 87.30 88.37 89.89 89.83 91. 14 92.46 91. 83 93. 90 95. 65 $53. 64 $21. 78 $4409 2$30. 39 2$61. 52 50. 61 59. 19 66. 80 68. 85 80. 53 51.41 60.70 68.51 83.77 70.95 75.27 58.46 63.34 81.47 88.27 77.82 60.98 6460 88.01 93.23 63.60 81. 12 66.81 91.76 96.39 80.82 64 74 67.79 94 12 98.55 68.06 71.42 87.31 96.29 101. 04 89.26 71. 10 73.53 101. 92 105. 40 sa 66 73. 51 73.51 106. 86 106. 86 87. 88 74 11 73.23 10423 102. 99 87.88 74.88 73.99 106. 45 105. 19 85.68 73.54 72. 31 108. 06 106. 25 8485 73. 15 71.79 101. 64 99. 74 85.53 73.53 71.67 107. 71 104 98 85.00 73. 14 71.22 108. 63 105. 77 85.96 73.91 71.90 111. 08 108. 05 87.36 75. 08 72.96 110. 77 107. 65 87. 13 75. 66 73.39 112. 17 108. 80 88.57 76. 04 73.90 113. 40 110. 20 89.85 77.03 74.86 114 25 111. 03 89. 24 76.83 74 66 115. 18 111. 93 77. 22 91.08 7490 110. 80 107. 47 78.01 Earnings in current prices divided by consumer price index on a 1957 base. Data beginning with January 1948 are net strictly comparable with those for earlier periods. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1958' Retail trade Current 1957 prices prices * $23. 14 43.85 45.93 50. 65 52. 67 5488 56.70 58.50 60.60 62. 48 62.25 62. 43 63. 50 63. 50 63. 13 63.50 63.88 6494 66. 18 66. 18 64 98 6481 64 64 $46. 84 51.29 5423 5488 55.79 57.65 59.37 61. 39 62.67 62. 48 61. 51 61.69 62. 44 62. 32 61. 53 61.83 62.14 63. 11 64 19 64 31 63. 15 62.98 62.70 3 Preliminary estimates. « Not available. _„ 0 Source: Department of Labor. IS PRODUCTION AND BUSINESS ACTIVITY INDUSTRIAL PRODUCTION The index of industrial production (seasonally adjusted) rose in December to 142 (1947-49=100), 1 point above November but 3 points below August 1957. INDEX, 1947-49 * 100 180 INDEX, I947-49-IOO 180 160 120 120 1952 1953 1955 1954 1956 1957 1958 COUNCIL OF ECONOMIC ADVISERS SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. [1947-49=100, seasonally adjusted] Manufactures Total Por-inrl production 1939 _ . . 1948 __ ._ . _ 1949 ... . ... 1951 1952 1953. . _ 1954 1955 : 1956. 1957. _ 1957: November .' December .. _ . . 1958: January February _ March _ . April May . June _ _ _ ._ July . _ August.. . . SeptemberOctober. _ November December1 . _ _ _. 16 • Preliminary estimates, not charted. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 58 104 97 120 124 134 125 139 143 143 139 135 133 130 128 126 128 132 134 136 137 138 141 142 Total 57 103 97 121 125 136 127 140 144 145 141 137 135 131 129 128 130 134 136 138 139 140 144 144 Durable 49 104 95 128 136 153 137 155 159 160 154 146 142 137 135 131 134 139 141 144 145 146 152 152 Nondurable 66 102 99 114 114 118 116 126 129 130 128 127 127 125 124 125 126 129 132 133 133 134 135 136 Source: Board of Governors of the Federal Reserve System. Minerals 68 106 94 115 114 116 111 122 129 128 123 123 121 118 112 109 109 112 116 120 123 122 123 123 PRODUCTION OF SELECTED MANUFACTURES In December, small offsetting changes in manufacturing output occurred among durable goods industries, of most nondurable industries increased slightly. Output INDEX, 1947-49*100, SEASONALLY ADJUSTED INDEX, 1947-49 »100, SEASONALLY ADJUSTED 220 140 120 1958 1955 SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. COUNCIL Of ECONOMIC ADVISERS [1947-49=100, seasonally adjusted] Durable manufactures Period 1939... . 1948 1949... _ _. 1951 1952 ... 1953 1954 1955. - _ _ • . 1956 . 1957.. 1957: November.. December 1958: January February March . April.. . May June July.. _. August September. October November December * 1 2 Preliminary FabriTranspor- Lumber Textiles Primary cated Machin- tation and and metals metal ery equipprod- apparel products ment ucts 54 107 90 126 116 132 108 140 138 131 121 107 100 95 91 86 91 103 102 109 113 122 123 123 estimates, not charted. Not available. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Nondurable manufactures 52 104 93 122 121 136 123 134 135 139 141 135 129 124 122 118 120 125 129 132 135 133 136 137 38 104 93 130 147 160 142 155 171 168 163 156 151 144 141 137 137 141 144 147 148 147 150 152 47 102 102 135 154 189 175 203 199 213 203 194 191 185 183 178 182 185 185 186 178 183 205 203 80 106 93 113 111 118 115 127 123 114 107 103 110 108 109 105 110 114 118 120 118 118 125 (2) 80 103 97 106 105 107 100 109 108 105 101 97 97 97 95 98 99 102 107 108 109 110 112 112 ConPaper Chemical Foods, sumer and and petro- bever- durable printleum ages, and goods ing products tobacco 66 103 101 118 118 125 125 137 145 148 149 146 146 144 142 143 143 146 148 150 150 153 152 153 49 103 100 132 133 142 142 159 167 172 171 169 168 164 163 164 165 168 171 174 174 175 176 178 65 100 100 105 106 107 106 109 112 112 110 113 114 114 113 113 114 116 116 116 116 116 116 116 Source: Board of Governors of the Federal Reserve System. 102 101 114 105 127 116 147 131 130 128 119 113 110 104 97 105 111 114 115 103 108 134 137 17 WEEKLY INDICATORS OF PRODUCTION Weekly indicators of production continued at a high level during most of December but fell towards the end of the month, reflecting holiday shut-downs. MILLIONS OF TONS 3 MILLIONS OF SHORT TONS (DAILY AVERAGE) 10 i i I i i i i f i i i I i i U i i i i11 i i l I J i i I i i i i I i i SOURCES: AMERICAN IRON AND STEEL INSTITUTE, DEPARTMENT OF THE INTERIOR, EDISON ELECTRIC INSTITUTE, AND WARPS AUTOMOTIVE REPORTS. Period Weeklv average: 1954 1955 1956 1957 1957: November December 1958: January February March. .. . April . May June July August September October November December 3 Week ended: 1958: December 6__ 13__ 20__ 27__ 1959: January 33_ ID 3 . 173. Electric Bituminous Freight Paper board Steel produced l Cars and trucks power coal mined loaded produced assembled (thousands) Index distributed (thousands Thousands (thousands (thousands (1947-49 = (millions of of net of short Total of tons) Cars Trucks of cars) kilowatt-hours) tons) 2 100) tons 1,694 2,245 2,204 2, 162 1,956 1,679 1,525 1,446 1,412 1,290 1,422 1,661 1, 458 1,650 1,783 1,995 1,998 1, 971 105.4 139.7 137.2 134.6 121. 8 104. 5 94.9 90.0 87. 9 80. 3 88.5 103.4 90.7 102.7 111.0 124. 2 124.3 122. 7 8, 883 10, 318 11, 292 11, 873 11, 904 12, 129 12, 247 12, 212 11, 764 11, 239 11,261 11, 872 12,051 12,579 12,214 12, 146 12, 386 12, 949 1,303 1,542 1,693 1,644 1,559 1,487 1,450 1,310 1, 228 1,183 1,139 1,419 1,313 1,287 1,438 1,459 1,421 1,470 652 724 728 683 627 555 543 528 537 528 549 622 552 631 642 682 615 531 236 269 274 272 286 263 224 262 270 257 260 272 234 296 286 311 304 262 125. 6 176. 7 132. 8 138.5 157. 9 146.5 120. 9 116. 3 103, 2 88. 8 96.6 99.0 82.8 53.5 3a9 71. 9 149.7 1443 106.0 152. 7 111. 6 117. 6 136. 3 126.4 103.7 98.0 86. 2 71.9 79.8 82. 1 68.4 42.0 29.0 56. 7 126.2 1248 1,985 1,985 2,011 1, 840 2,058 2,085 2, 123 123.6 123. 6 125. 2 114 5 128. 1 129. 8 132. 2 13, 017 13, 450 13, 534 12, 379 12, 364 1,461 1,504 1,505 1,243 1,391 594 589 571 432 468 277 310 296 *321 170.0 160. 7 159. 4 120. 1 111. 5 156. 6 147.4 137. 9 136. 0 104 9 97.7 1343 »Weekly capacities (net tons) as of January 1 are: 2,384,549 (1954), 2,413,278 (1955), 2,455,300 (1956), 2,559,631 (1957), and 2,699,320 (1958). 2 Daily average for we 3k. 3 Preliminary, weekly data not charted. 18 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis COUNCIL OF ECONOMIC ADVISERS 5 304 19.7 24 0 21.2 20. 9 21.6 20. 1 17.2 18.3 17.0 16.9 16.8 16. 9 144 11. 5 9.9 15. 2 23. 5 19. 6 I 22. 6 22. 8 23.4 15. 2 13. 8 22.3 J * For Dee. 22-31. For Jan. 1-10. Sources: American Iron and Steel Institute, Edison Electric Institute, Department of the Interior, Association of American Railroads, National Paperboard Association, and Ward's Automotive Reports. NEW CONSTRUCTION Expenditures for both public and private construction (seasonally adjusted) increased durins December, for the seventh consecutive month. Construction contracts continue higher than a year previously. BILLIONS OF DOLLARS BILLIONS OF DOLLARS 30 20 i I I I I I I f I I I 1 I I I I I I I I-I I I I I I I I I I 1 I I I I l I I l I 1952 1958 SOURCES: DEPARTMENT OF COMMERCE AND DEPARTMENT OF LABOR COUNCIL OF ECONOMIC ADyiSEIB [Billions of dollars] Period 1939. 1952.1953___ 1954 1955_ 1956 1957 __ __, 1957: November December 1958: January February.. Mareh_ April May June July August^ September October . November 4 December _ __. .__. _ _ Total new construction 8.2 34. 8 37. 1 39.6 44. 6 46.3 48. 1 v 49. 2 50. 1 48.8 48. 0 47.6 46.6 46. 5 47. 1 47.8 48. 5 49. 4 51.3 52.5 53. 7 Private Federal, Construction contracts * State, and Total Residential Eastern 3 48 States 2 37States Other local (nonfarm) private 4. 4 2. 7 3.6 1.7 3. 8 12. 8 23.8 11. 0 16.8 10. 9 25. 7 17.4 13. 8 11. 9 11. 4 15.4 27.7 12. 3 11. 9 19.8 32.6 18.7 13.9 12. 0 23.7 3 33.3 17.7 15. 6 31. 6 24. 6 13. 0 34. 0 17. 0 32. 2 17.0 14 1 25.3 Seasonally adjusted annual rates 34. 8 17. 7 17.2 14. 4 26. 5 33. 5 34.6 17,5 17.1 15. 5 20. 3 25.3 34.0 17.3 16. 6 14. 9 31.2 (3) 17.2 33.6 16.3 14. 5 29.6 33. 1 16. 8 16. 3 14. 5 32. 1 32.4 16. 2 16. 2 14.2 30. 1 32. 4 16. 2 16.2 14. 2 35. 9 32. 7 16. 6 16.1 14.4 41.8 17.2 33. 1 15.9 14.7 38.8 33.6 18.0 15.6 14.9 42. 6 34.2 18. 5 15.7 36.2 15.3 35.3 19. 5 15.9 16.0 39.5 36.2 20.2 16.0 16. 4 36. 5 36. 6 20.6 16.0 17. 1 1 Compiled by F. W. Dodge Corporation; seasonally adjusted by the National Bureau of Economic Research. Omits small contracts, and covers rural areas less fully than urban. * Series begins January 1956. The 37 Eastern States data are probably indicative of the 48 States trend for other periods. * Revised series beginning January 1956; not comparable with prior data. Series discontinued beginning January 1958. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis * Preliminary estimates. NOTE.—Series on new construction revised beginning January 1957. Detail will not necessarily add to totals because of rounding. Sources: Department of Commerce, Department of Labor, and F. W. Dodge Corporation (except as noted). 19 HOUSING STARTS AND APPLICATIONS FOR FINANCING Private nonfarm housing starts (seasonally adjusted) rose again in December, reaching an annual rate of 1,430,000 units. VA appraisal requests continued to decline but applications for FHA commitments rose slightly. MILLIONS OF UNITS MILLIONS OF UNITS 0.5 1952 1953 1954 1955 1956 I/ SEE FOOTNOTE 2 ON TABLE BELOW. SOURCES: DEPARTMENT OF LABOR, FEDERAL HOUSING ADMINISTRATION (FHA), AND VETERANS ADMINISTRATION (VA). [Thousands of units I New nonfarm housing starts Period Total Annual total: 1950 1953 1954 1955 1956 1957 Monthly average: 1950. 1953. 1956_ 1957. 1957: November December 1958: January. February March April Mav June _ July August September _ October November 5 6 _ December i J.C*J 1, 396. 0 1, 103. 8 1, 220. 4 1, 328. 9 1, 118. 1 1, 041. 9 116. 3 92. 0 93. 2 86.8 78.2 63. 4 67. 9 66. 1 81. 4 99. 1 108.5 112. 9 112. 8 124. 0 121. 0 5 111. 0 5 102. 0 91. 0 Publicly financed 43. 8 35. 5 18. 7 19. 4 24. 2 49. 1 3.6 3.0 2.0 4. 1 2. 5 .9 5.0 5. 1 4. 1 4. 9 7. 2 11. 6 4. 2 9. 4 10. 1 5 2. 0 5 2. 0 1.5 Total 1, 352. 2 1, 068. 3 1, 201. 7 1, 309. 5 1, 093. 9 992. 8 112. 7 89.0 91. 2 82. 7 75. 7 62. 5 62.9 61.0 77.3 94. 2 101.3 101.3 108. 6 114. 6 110.9 5 109. 0 5 100. 0 89. 5 Privately financed Government programs VA Total i FHAi 686. 7 486. 7 3 200. 0 156.5 408.5 252.0 583. 3 276. 3 307. 0 276. 7 392. 9 669. 6 460. 0 189. 3 270. 7 296. 7 168. 4 128. 3 57. 2 40. 6 16. 7 34. 0 21. 0 13.0 22. 6 38.3 15. 8 24. 7 14.0 10. 7 6.4 21. 4 15.0 14.2 4. 6 18. 9 4. 1 17. 4 13. 3 14. 1 2. 8 11. 3 16. 5 19. 6 3. 1 27. 4 22. 7 4. 8 32. 0 6.0 26.0 8.5 36. 5 28.0 29.7 10. 6 40. 3 13. 1 43. 6 30. 5 14.3 46.3 31.9 14. 7 49. 4 34. 7 11.0 36. 8 25. 8 9.2 34. 2 25. 0 1 Excludes armed forces housing: 2,567 units in 1956, 18,573 units in 1957, and 23,744 units in 1958. 2 3 Units represented by mortgage applications for new home construction. 4 Partly estimated. Not available. 20 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1957 1958 COUNCIL OF ECONOMIC ADVISERS Proposed home construction Private, seasonally Applications Requests adjusted for FHA comfor VA 2 annual mitments appraisals 2 rates 397. 7 (4) 253.7 251. 4 338. 6 535. 4 306. 2 620. 8 197. 7 401. 5 198. 8 159.4 33. 1 (4) 21. 1 21. 0 16. 5 33. 5 16. 6 13. 3 1,009 14. 7 3. 7 1,000 13. 6 3. 5 1,020 17. 3 5.2 915 20. 6 5.3 918 25. 0 8.4 983 31. 6 24 8 1,039 34.6 29. 2 1, 057 33.4 28.4 1, 174 31.8 28. 5 1, 228 33.6 28.5 1,255 36. 8 26. 7 5 1, 260 31. 8 19. 1 5 1,830 22. 3 15.3 1,480 23. 0 14. £ 5 Preliminary estimates. Not charted. NOTE.—Detail will not necessarily add to totals because of rounding. Sources: Department of Labor, Federal Housing Administration (FHA), and. Veterans Administration (VA). 6 SALES AND INVENTORIES—MANUFACTURING AND TRADE Manufacturers' sales (seasonally adjusted) increased again in November. New orders and inventories were unchanged. Distributors1 sales and inventories rose in November, and according to preliminary estimates retail sales rose 3 percent in December. BILLIONS OF DOLLARS,SEASONALLY ADJUSTED BILLIONS OF DOLLARS, SEASONALLY ADJUSTED 100 TOTAL AND MANUFACTURING .20 nli i I I I I 1 I I I I I I I I I I 1 I I I I 1 1 I i I i l I 1 I I I l l I I I l I I I l i M i f INDEXJ947-49»IOO. SEASONALLY ADJUSTED 160 oil i f j i I I j | I I I 1 IJ | f 1 | \ I l l | l I I I I I l l l \ l..) 1955 1 1956 I ,957 i 111 111 i 1958 1958 MANUFACTURING, RETAIL TRADE, AND WHOLESALE TRADE. SOURCE: DEPARTMENT OF COMMERCE AND BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. Period Manufacturing and trade Manufacturing Inven-2 Sales * tories Inven-2 New l Sales * tories orders Wholesale COUNCIL OF ECONOMIC ADVISERS Ketail Inven-2 Sales i Inven-2 Sales i tories tories Billions of dollars, seasonally adjusted 1951 1952 1953 1954 1955 _._ ... 1956 1957 1957: October November December 1958: January February March April May _ _ _. June Julv August- _ September October November 44 December 44. 7 45.9 48. 4 47. 4 52. 3 54. 8 56.3 55. 7 54 7 54. 5 53.8 52. 1 51. 3 52. 1 52. 4 53.2 54. 0 54.4 54. 8 55.6 56. 2 73.8 75. 4 78. 6 75. 5 81.7 89. 1 90.7 91. 1 91.0 90.7 90.0 89. 3 88. 5 87. 6 86. 9 86.4 85. 9 85.4 85.0 84.9 85. 1 1 Monthly average for year and total for month. 2 Book value, end of period, seasonally adjusted. 8 22.3 22.8 24.5 23.5 26.3 27. 7 28.4 28. 1 27.2 26.7 26. 4 25.5 24. 9 24 9 25. 2 25.7 26. 3 26.4 26. 8 27. 2 27. 6 42. 8 43. 8 45.4 43.0 46. 4 52.3 53. 5 54 1 53.9 53. 5 52.9 52. 4 52.0 51. 5 50.9 50.2 49.8 49.4 49.3 49. 3 49. 3 Book value, end of period, except annual data, which are monthly averages. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 245 23. 6 23. 1 22. 5 27.2 28.3 27.3 26. 2 26. 0 25. 1 24 4 24 1 24 8 24 5 25.0 25.8 26. 4 26. 1 27. 0 27. 9 27. 9 9.4 9.6 9.8 9.7 10.6 11.3 11.3 11.0 10.9 10.9 10.7 10. 5 10.3 10.7 10. 7 10. 9 11. 0 11. 1 11.4 11.5 11.6 9.7 10.0 10.5 10. 4 11.4 13.0 12.7 12. 8 12. 8 12.7 12. 6 12.5 12. 4 12. 2 12. 1 12. 1 12. 1 12. 1 12. 1 12. 1 12. 1 13.0 13. 5 14 1 14 1 15.3 15.8 16.7 16.7 16. 6 16.8 16.7 16. 1 16. 1 16. 5 16. 6 16. 6 16. 7 16. 9 16. 6 16. 9 17. 0 17 5 21.2 21.6 22.7 22.1 23.9 23. 9 245 242 24 3 24 5 245 243 24 1 23. 9 23. 9 24 1 240 23. 9 23. 7 23.5 23.7 Department stores Inventories 3 Index, 1947-49 = 100 seasonally adjusted 112 131 121 114 118 131 128 118 136 128 148 135 152 136 129 155 154 133 150 138 130 147 124 146 142 131 130 143 134 144 133 147 148 140 147 148 150 135 152 135 153 137 145 Sales i Preliminary estimates. Sources: Department of Commerce and Board of Governors of the Federal Reserve System. 21 MERCHANDISE EXPORTS AND IMPORTS In the first-11 months of 1958, commercial exports (merchandise exports excluding grant-aid shipments) were 17 percent lower than in the corresponding period of 1957. In the first 9 months, imports were 3 percent lower than a year earlier. BILLIONS OF DOLLARS 2,5 BILLIONS OF DOLLARS 2.5 2.0 2.0 MERCHANDISE EXPORTS EXCLUDING GRANT-AID SHIPMENTS 1958 1952 COUNCIL OF ECONOMIC ADVISERS SOURCE: DEPSSTSfENT OF COMMERCE. [Millions of dollars] Merchandise exports Period 1936-38 monthly average 1949 monthly average 1951 monthly average 1952 monthly average 1953 monthly average 1954 monthly average 1955 monthly average 1956 monthly average 1957 monthly average 1957: October—. November December 1958: January February. March-— .. April.. .' May June • July August September October November Total _ _ _._ _ .__ _ __ __ 247 1, 004 1, 253 1,267 1, 314 1, 259 1,296 1, 591 1,734 1, 674 1, 683 1, 639 1,511 1,345 1,557 1, 531 1, 638 1, 408 1,419 1, 396 1,362 1, 599 1. 596 Grant-aid shipments 1 (2) (2) * Beginning with 1950, figures include only Department of Defense shipments of grant-aid military supplies and equipment under the Mutual Security Program. Shipments for the first 6 months of the program (July-December 1950) amounted to 282 million dollars. 22 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 89 166 293 188 105 146 113 74 87 95 108 100 114 122 131 99 129 113 122 181 188 Excluding grant-aid shipments (22) () 1, 164 1, 100 1,022 1,071 1,191 1,444 1,621 1,600 1,596 1,543 1, 402 1,245 1,442 ,409 ,506 ,309 ,290 ,283 ,240 ,418 .408 Merchandise imports 207 552 914 893 906 851 949 1,051 1, 082 1, 148 1, 043 1, 141 1, 095 962 1, 072 1, 057 1, 063 1,037 1,050 952 1, 074 Excess of exports over Imports Total 40 452 339 374 408 408 347 540 653 526 640 498 416 383 485 473 575 371 369 443 287 Excluding grant-aid shipments (2) (2) 2 Not available. NOTE.—Detail wffl not necessarily add to totals because of rounding. Sources: Department of Commerce and Department of Defense. 250 207 116 220 242 393 540 452 553 402 307 284 371 352 444 273 240 330 166 PRICES CONSUMER PRICES Consumer prices rose fractionally in November. Although food prices declined slightly, prices for new automobiles, and for a number of other goods and services increased. INDEX, 1947-49-100 ISO INDEX, 1947-49*1 140 130 — 110 100 1958 SOURCE: DEPARTMENT OF LABOR. . COUNCIL OF ECONOMIC ADVISERS [1947-49=100] Period 1939 ... 1948 1949 .. 1951 __ 1952 ___ 1953 1954 1955 1956 1957 . . 1957: October . . November December 1958 r January February March April May ._ ~ June Julv August September October November Housing All items Food 59. 4 102. 8 101. 8 111.0 113. 5 114. 4 114. 8 114. 5 116. 2 120. 2 121. 1 121. 6 121. 6 122.3 122.5 123. 3 123. 5 123. 6 123. 7 123. 9 123.7 123. 7 123. 7 123. 9 47. 1 104. 1 100.0 112. 6 114. 6 112. 8 112. 6 110.9 111. 7 115. 4 116.4 116.0 116. 1 118.2 118.7 120. 8 121. 6 121. 6 121. 6 121. 7 120.7 120. 3 119. 7 119. 4 Total * 76. 1 101. 7 103. 3 112. 4 114.6 117.7 119. 1 120.0 121. 7 125. 6 126. 6 126. 8 127.0 127. 1 127.3 127.5 127. 7 127. 8 127.8 127.7 127.9 127. 9 127.9 128. 0 Rent 86.6 100. 7 105.0 113. 1 117. 9 124. 1 128. 5 130.3 132. 7 135. 2 136.0 136.3 136. 7 136.8 137.0 137. 1 137. 3 137. 5 137.7 137. 8 138. 1 138. 2 138. 3 138. 4 Apparel Transportation 52. 5 103. 5 99. 4 106. 9 105. 8 104. 8 104.3 103.7 105. 5 106.9 107. 7 107. 9 107. 6 106. 9 106. 8 106. 8 106. 7 106.7 106. 7 106. 7 106.6 107. 1 107.3 107.7 70.2 100.9 108.5 118.4 126.2 129. 7 128.0 126. 4 128. 7 136.0 135. 8 140.0 138. 9 138.7 138.5 138.7 138. 3 138. 7 138.9 140. 3 141.0 141. 3 142. 7 144. 5 Medical Personal care care 72. 6 100. 9 104. 1 111. 1 117.2 121. 3 125. 2 128.0 132. 6 138.0 139. 7 140. 3 140. 8 141.7 141. 9 142.3 142. 7 143. 7 143. 9 144. 6 145. 0 146. 1 146. 7 147. 0 59. 6 101. 3 101. 1 110. 5 111.8 112.8 113. 4 115. 3 120. 0 124. 4 126. 2 126. 7 127. 0 127.8 128.0 128. 3 128. 5 128.5 128. 6 128. 9 128.9 128. 7 128. 8 129. 1 Reading Other and goods recreaand tion services 63.0 100. 4 104. 1 106.5 107.0 108.0 107.0 106. 6 108. 1 112.2 113. 4 114. 4 114. 6 116. 6 116. 6 117. 0 117. 0 116.6 116. 7 116. 6 116.7 116. 6 116. 6 117. 0 70. 6 100. 5 103. 4 109. 7 115. 4 118. 2 120. 1 120. 2 122. 0 125. 5 126.8 126. 8 126. 8 127.0 127.0 127. 2 127. 2 127.2 127.2 127.2 127. 1 127. 1 127.2 127.3 1 Includes, in addi< ion to rent, homeowner costs, utilities, housefurnisnings, etc. Source: Department of Labor. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 23 WHOLESALE PRICES The average of prices in primary markets was unchanged in December. Continuing the pattern of the past several months, prices of farm and food products declined while industrial prices rose. INDEX, 1947-49*100 INDEX, 1947-49 «IOO 120 OTHER THAN FARM PRODUCTS AND FOODS (INDUSTRIAL) 1952 1953 1955 1954 1956 1957 SOURCE: DEPARTMENT OF LABOR 1958 COUNCIL OF ECONOMIC ADVISERS [1947-49 = 1001 All commodities Period 1939 1948 1949 1951 1952 1953 1954 1955 . 1956 1957 1957: November December 1958: January February March April May • June July August September October November December .- . . . . .„ Source: Department of Labor. 24 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ....... . _ _ _ _ _ _- _. . __ 50. 1 104. 4 99 2 114. 8 111. 6 110. 1 110. 3 110. 7 114. 3 117. 6 118. 1 118. 5 118. 9 119. 0 119. 7 119. 3 119. 5 119. 2 119. 2 119. 1 119. 1 119. 0 119. 2 119. 2 Farm products 36. 5 107. 3 92 8 113.4 107 0 97. 0 95. 6 89. 6 88.4 90. 9 91. 9 92. 6 93. 7 96 1 100. 5 97. 7 98. 5 95. 6 95. 0 93. 2 93. 1 92. 3 92. 1 90. 7 Processed foods 43. 3 106. 1 95 7 111. 4 108 8 104. 6 105. 3 101. 7 101. 7 105. 6 106. 5 107. 4 109. 5 109. 9 110. 7 111. 5 112. 9 113. 5 112. 7 111. 3 111. 1 110. 0 109. 5 108. 8 Other than farm products and foods (industrial) 58 1 103. 4 101 3 115. 9 113 2 114 0 114 5 117 0 122. 2 125. 6 125. 9 126. 1 126 1 125 7 125 7 125. 5 125. 3 125. 3 125. 6 126. 1 126. 2 126. 4 126. 8 127.2 PRICES RECEIVED AND PAID BY FARMERS The index of prices received by farmers fell 5 points in the month ended December 15. (parity index) was unchanged, and the parity ratio fell 1 point. The index of prices paid INDEX, 1910-14« 100 INDEX ,1910-14-100 325 325 PRICES PAID, INTEREST, TAXES, AND WAGE RATES 300 275 275 250 250 225 225 200 • I I I I 1 I I I I M I ! I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I II I I I I M I ! I I ! I I I 1 M I I I I I I I I I I I I I . 20Q 1958 •^RATIO OF INDEX OF PRICES RECEIVED TO INDEX OF PRICES PAID, INTEREST, TAXES, AND WAGE RATES. SOURCE: DEPARTMENT OF AGRICULTURE. COUNCIL OP ECONOMIC ADVISERS Prices received by farmers Period 1939 . . 1948 1949 . __ _ _ 1951 1952 __ 1953 . 1954 1955 1956 1957._1957: November 15 December 15 _ 1958: January 15 February 15 ___ March 15 _ April 15 __ .. . May 15 June 15 July 15 _ August 15 _ _ _ September 15 October 15 November 15 December 15 Ail farm products __ Crops 95 287 250 302 288 258 249 236 235 242 242 243 247 252 263 264 264 255 254 251 258 252 251 246 1 Percentage ratio of index of prices received by iarmers to index of prices paid, interest, taxes, and wage rates. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 82 255 224 265 268 242 242 236 240 233 223 219 224 229 245 252 246 232 228 225 232 227 225 220 Prices paid by farmers All items, interest, Family ProducLivestock taxes, and tion and living wage rates items products items (parity index) Index, 1910-14=100 121 107 120 123 250 251 260 315 238 272 243 251 282 268 273 336 274 271 287 306 272 270 253 279 252 274 281 255 249 236 281 273 249 230 278 285 258 249 286 295 260 258 289 298 263 289 263 299 264 301 289 267 302 290 265 273 304 280 269 293 271 293 275 306 280 294 271 306 270 275 305 293 277 293 270 305 269 275 304 291 272 280 305 290 291 271 275 307 274 272 308 293 270 308 291 273 Source: Department oi Agriculture. Parityl ratio 77 110 100 107 100 92 89 84 82 82 81 81 82 83 87 86 86 84 83 83 85 82 81 80 25 CURRENCY, CREDIT, AND SECURITY MARKETS CURRENCY AND DEPOSITS The total of demand deposits and currency increased more than seasonally in November. BILLIONS OF DOLLARS 26O BILLIONS OF DOLLARS 260 220 220 40 1952 COUNCIL OF KONOAMC ADVISERS SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Total U.S. deposits Governand ment curderency posits l End of period 1951 19521953--.. 1954 _ 1955. . 1956 ;...-... 1957 1957: November December 1958: January. February March. _ April '. May__ June ... July < L _5_ August 5 September October 5. 5 _ November ._ 189. 9 200.4 205. 7 214. 8 221. 0 226. 4 232. 3 227. 0 232. 3 227. 7 228. 0 230. 9 234.4 234.2 239. 5 237. 2 238.7 238. 1 240.5 243.4 3.9 5. 6 4.8 5. 1 4.4 4.5 4.7 3.8 47 2. 9 42 6. 4 6.0 6. 1 10.0 4.8 6.2 5.0 42 6. 3 [Billions of dollars] Total excluding U. S. Government deposits 2 Demand deposits and currency Time de- 3 Total Demand Currency posits Total deposits outside adjusted* banks 9a2 26. 3 61.5 1245 186. 0 27. 5 65.8 129. 0 101.5 194.8 70.4 130.5 102.5 28. 1 200. 9 27.9 106. 6 134.4 209. 7 75. 3 28.3 138.2 109.9 78.4 216. 6 82.2 111.4 28.3 139.7 222.0 28.3 110.3 89. 1 138. 6 227. 7 107. 2 28.5 87.6 135.7 223. 3 28.3 89. 1 110. 3 227.7 138. 6 107.6 27.3 89. 8 135.0 2248 105.6 27.4 90. 9 133.0 223. 9 1046 27. 4 132.0 92.5 2245 107.2 27.6 93.6 228.4 134 8 946 27. 8 105.8 133.5 22R 1 1340 106.2 27.8 95.5 229. 5 27.9 232.4 96.5 108. 1 135. 9 28.0 97.0 107.5 135.5 232.5 97.2 ioa i 27. 9 233. 1 135.9 97.4 28.0 236.2 110.8 138.8 111. 6 96.7 28.8 140.3 237. 0 1 Includes U. S. Government deposits at Federal Reserve Banks and commercial 2 and savings banks, and U. S. Treasurer's time deposits, open account. Includes deposits and currency held by State and local governments. 3 Includes deposits in commercial banks, mutual savings banks, and Postal Savings System, but excludes interbank deposits. 4 Includes demand deposits, other than interbank and U. S. Government, less cash items in process of collection. 26 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Demand deposits and currency, seasonally adjusted Demand Currency Total deposits outside adjusted banks 134- 0 138.2 132. 2 133.1 134-0 135. 0 135. 5 135.4 137. 6 137.3 136. 7 137.9 138.5 105. 9 105. 1 104.7 105.5 106.4 107.2 107. 6 107. 4 109.5 109.2 108. 9 110. 0 110. 3 28. 1 28. 1 27.5 27.6 27.6 27.8 27.9 28.0 28. 1 28,1 27. 8 27.9 28. 2 * Preliminary estimates. NOTE.—Monthly data are for the last Wednesday of the month, except the unadjusted data for December 1957 and June 1958, which are for call dates. Detail will not necessarily add to totals because of rounding. Source: Board of Governors of the Federal Reserve System. BANK LOANS, INVESTMENTS, AND RESERVES Commercial bank loans rose $1.1 billion in November, compared to a decline of $100 million in November 1957. Borrowings at Federal Reserve Banks rose and exceeded excess reserves in December. BILLIONS OF DOLLARS BILLIONS OF DOLLARS 200 ISO 160 100 20- 1955 END OF MONTH COUNCIL OF ECONOMIC ADVISERS SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. [Billions of dollars] All commercial banks End of period 1949 1951 _______ 1952_ 1953. 1954 __ 1955_ 1956 ____________ 1957 1957: October November December »_••__ 1958: January February March April May June 4 July 4 August __ _ 4 September October 4 4 November December 4 Total loans and investments 120. 2 132. 6 141. 6 145.7 155. 9 160. 9 165. 1 170. 1 167.9 167. 3 170. 1 167. 7 168. 6 171. 4 175.6 175. 4 179. 9 177. 6 180.0 179. 5 181. 4 183.6 Loans 43.0 57.7 64. 2 67.6 70.6 82. 6 90.3 93.9 93.0 92. 9 93.9 92. 0 92. 1 93. 0 93.5 92. 9 95. 6 93.6 93.8 94. 2 94. 9 96. 0 Total 77.2 74,9 77.5 78. 1 85. 3 78.3 74.8 76.2 74. 9 74. 3 76. 2 75. 6 76.5 78. 4 82. 1 82.5 84 3 84. 0 86.2 85.3 86.5 87.6 Investments U. S. GovOther ernment securities securities 67.0 10. 2 61. 5 13.3 63.3 14 1 63.4 147 69.0 16.3 16.7 61. 6 58.6 16. 3 58. 2 17.9 17.6 57.3 56.9 17. 4 58.2 17.9 57. 7 17.9 58. 3 18.2 59. 6 18.9 62.8 19.3 63. 1 19. 4 64. 2 20. 1 64. 1 19. 9 66. 1 20.2 647 20. 6 66.0 20. 5 67.3 20.3 1 Member banks include, besides all national banks, those State banks that have taken membership in the Federal Reserve System. a Commercial, industrial, and agricultural loans; revised series beginning January 1952 and again October 1955. Such loans by weekly reporting member banks represent approximately 70 percent of business loans by all commercial banks. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Weekly reporting member1 banks Business loans 3 13.9 21. 6 23.4 23.4 22.4 26. 7 31.3 32.2 31.8 31.5 32.2 30.6 30.4 31.0 30.2 29.8 30.4 29.5 29. 9 30. 2 30.3 30.6 31.4 All member banks * 8 BorrowReserve balances ings at Federal Required Excess Reserve Banks 17.0 0.8 0. 1 .8 18. 5 .3 .7 19. 6 .8 .7 19.3 .8 18.5 .8 .1 18.3 .6 .6 18.4 .6 .8 18.5 .5 .8 18.6 .5 .8 18.4 .5 .8 .6 18.8 .7 18.7 .6 .5 18.4 .6 .2 18. 1 .6 .1 .6 17.8 .1 .1 17.6 .7 18. 0 .6 .1 .1 18.0 .7 17.9 .6 .3 .6 17.9 .5 .5 18.0 .4 18.0 .5 .5 18. 4 .5 .6 1 Data are averages oi daily figures on balances and borrowings during the period. * Preliminary estimates. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Board of Governors of the Federal Reserve System. 27 CONSUMER CREDIT In November, consumer credit outstanding increased $300 million, compared to approximately $280 million in November 1957. BILLIONS OF DOLLARS SO BILLIONS OF DOLLARS 50 TOTAL CREDIT OUTSTANDING 10 2 ^ I952 1953 1954 1957 1958 COUNCIL OF ECONOMIC ADVISERS SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. [Millions of dollars] End of period Total consumer credit outstanding 1939 . 1948 1949.. 1951 _. 1952. . 1953_. 1954 1955 __ 1956 1957 1957: October... November. December. 1958: January.. February. Mcrch April Mev June Julv August September. October November. 7,222 14, 398 17, 305 22, 617 27, 401 31, 243 32, 292 38, 670 42, 097 44, 774 43, 162 43, 438 44, 774 43, 904 43, 017 42, 500 42, 617 42, 985 43, 079 42, 923 43, 128 43, 144 43, 164 43, 464 Total 4,503 8,996 11, 590 15, 294 19, 403 23, 005 23, 568 28, 958 31, 827 34, 095 33, 484 33, 566 34, 095 33, 713 33, 278 32, 940 32, 888 32, 91:0 33, 008 33, 074 33, 1G5 33, 079 33, 052 33, 126 Automobilel paper 1,497 3,018 4, 555 5,972 7, 733 9,835 9,809 13, 472 14, 459 15, 409 15, 505 15,459 15, 409 15,235 15,030 14, 793 14, 691 14, 613 14, 590 14, 507 14, 514 14, 332 14, 164 14, 066 Other Repair and consumer moderni- Personal zation goods loans loans 2 paper l 1, 620 2,901 3,706 4,880 6, 174 6,779 6,751 7,634 8, 510 8,692 8, 229 8,289 8,692 8, 495 8,277 8, 179 8, 124 8, 158 8, 190 8, 197 8, 254 8,312 8,411 8, 528 1 Includes all consumer credit extended for the purpose of purchasing automobiles and other consumer goods and secured by the items purchased. 2 Includes only such loans held by financial institutions; those held by retail outlets are included in "other consumer goods paper." 28 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Non instalment credit outstanding Instalment credit outstanding 298 853 S98 1,085 1,385 1,610 1,616 1,689 1,895 2,091 2,078 2,095 2,091 2, OG9 2,041 2, 019 2,017 2,038 2,048 2,061 2, 091 2,107 2,128 2, 146 1,088 2,224 2,431 3,357 4, 111 4,781 5,392 6, 163 6,963 7,903 7, 672 7, 723 7,903 7, 914 7,930 7,949 8,056 8, 101 8,180 8,249 8,306 8,328 8,349 8,386 Total 2,719 5,402 5, 715 7,323 7,998 8,238 8,724 9,712 10, 270 10, 679 9, 678 9,872 10, 679 10, 191 9,739 9,560 9,729 10, 075 10, 071 9,849 9, 963 10, OG5 10, 112 10, 338 Charge accounts 1,414 2,673 2,795 3,605 4,011 4, 124 4,308 4,579 4,735 4,829 4,044 4, 147 4, 829 4, 290 3,754 3,579 3, 772 4,010 4,012 3,927 3,956 4,033 4, 191 4,297 InstalInstalment ment credit excredit 3 3 tended repaid 6,872 15, 585 18, 108 23, 576 29, 514 31, 558 31,051 39, 039 40, 063 42, 426 3,547 3,428 4,088 3,088 2,742 3, 156 3, 335 3, 371 3,477 3,483 3,385 3,297 3,475 3,338 3 Credit extended or repaid during the period. NOTE.—Series revised beginning January 1957. Source: Board of Governors of the Federal Reserve System. 6,060 13, 284 15, 514 22, 985 25, 405 27, 956 30, 488 33, 649 37, 194 40, 158 3,456 3,346 3,559 3,470 3,177 3,494 3,387 3,349 3,379 3,417 3,294 3,383 3,502 3,264 BOND YIELDS AND INTEREST RATES Rates on Treasury bills declined somewhaf in late December and early January. Yields on corporate and municipal bonds averaged about the same in December as in November, but yields on U.S. Government securities increased. PERCENT PER ANNUM PERCENT"PER ANNUM 1958 1952 SOURCES: SEE TABLE BELOW COUNCIL OF ECONOMIC ADVISERS Period 1951 1952 1953 1954 1955 . 1956 .- . 1957 1957: December 1958: January . February March April May .. June _ Julv August September October No veir.l; or. December Week ended: 1958: December 6 13 20 27 4 1959: January 3 10 44 17 _ . _ „ _ _ _ __ . _ _ _ _ [Percent per annum | U. S. Government High-grade security yields municipal 3-month bonds Taxable 2 Treasury (Standard3 & l bonds bills Poor's) 1. 552 2. 57 2.00 1. 766 2. 68 2. 19 2. 94 2. 72 1. 931 . 953 2.55 2.37 1.753 2.84 2.53 2.658 3.08 2.93 3. 267 3. 47 3.60 3. 102 3. 30 3.47 3.32 3.24 2.598 3.28 3.37 1. 562 1. 354 3. 25 3. 45 1. 126 3. 12 3. 31 3. 14 1.046 3.25 3.20 . 881 3. 26 3.36 . 962 3.45 3.60 1. 686 3. 74 2.484 3. 75 3.96 2. 793 3. 76 3. 94 2. 756 3. 70 3.84 2. 814 3. 80 3.84 2. 806 2. 805 2. 904 2. 739 2. 690 2. 678 2.808 1 Rate on new issues within period. 2 First issued in 1941. Series includes: October 1941-March 1952, bonds due or callable after 15 years; April 1952-March 1953, bonds clue or callable after 12 years; April 1953 to date, bonds due or callable 10 years and after. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 3. 3. 3. 3. 3. 3. 73 77 83 84 83 84 3.81 3.82 3.83 3.86 3.86 3.86 Corporate bonds (Moody's) 2.86 2. 96 3. 20 2. 90 3.06 3.36 3.89 3.81 3.60 3.59 3.63 3. 60 3.57 3. 57 3. 67 3. 85 4.09 4. 11 4.09 4.08 3.41 3.52 3. 74 3. 51 3. 53 3.88 4.71 5. 03 4 83 4.66 4 68 4 67 4. 62 4 55 4.53 467 487 4 92 4 87 4 85 Prime commercial paper, 4-6 months 2. 16 2.33 2. 52 1.58 2. 18 3.31 3.81 3.81 3.49 2.63 2.33 1.90 1.71 1.54 1. 50 1. 96 2.93 3.23 3.08 3.33 4.06 4.06 4.06 4.09 4. 10 4.09 4 85 4 84 4 85 4 86 4 86 4.85 3.20 3.38 3. 38 3. 38 3.31 3.25 Aaa Baa 3 Weekly data are Wednesday figures. * Not charted. Sources: Treasury Department and Board of Governors of the Federal Keserve System (except as noted). 29 STOCK PRICES Stock prices again reached a new high in early January. INDEX, 1939 »100 500 INDEX, 1939 » 100 500 400 30O 200 100 1958 SOURCE: SECURITIES AND EXCHANGE COMMISSION Period Weeklv average: 1948 1949— 1951 1952 1953 _ 1954 1955 _ . 1956 •_ 1957 1957: December 1958: January February _ _ March April May . _ June ' Julv August _. September. _ October November December Week ended: 1958: December 5 . . 12 19 26 2 1959: January 2 _ . 92.. _ COUNCIL OF ECONOMIC ADVISERS Compositel index [1939 = 100] Manufacturing TransDurable Nondura- portation " Total goods ble goods http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Trade; finance, Mining and service 132. 7 127.7 184 9 195. 0 193. 3 229. 8 304. 6 345. 0 331. 4 298. 5 304. 7 304 0 310. 8 311.9 322.9 330. 6 339. 2 351. 7 360. 5 376. 4 387.8 392. 8 136. 8 132. 1 206.8 " 220. 2 220. 1 271. 3 374 4 438. 6 422. 1 376. 1 381. 6 378. 1 388.2 387.4 401. 4 411. 7 423.6 442.0 452. 9 474. 2 487.4 489. 8 1243 116. 0 178. 5 188. 8 192. 6 245.2 352. 4 409.8 391. 2 335. 6 346. 6 345. 8 351. 6 339.8 353.2 362. 2 376. 5 399.4 412. 9 437. 2 448. 0 451. 4 148. 6 147. 2 233. 1 249. 3 245. 2 295. 2 394 4 465. 1 450. 7 413.2 413.6 407.7 421. 6 425. 7 438. 4 449. 6 458. 9 472. 9 481. 1 499.2 514. 3 515. 6 158. 1 136. 0 199. 0 220. 6 218. 7 232. 6 320. 0 327. 1 275. 4 2147 230. 2 231. 3 230. 6 233. 1 249. 0 259. 2 268. 8 282. 6 292. 2 310.6 327. 0 329.8 99.3 98. 1 112.6 117. 9 121.5 135. 8 152. 9 155. 8 156. 0 . 152. 3 157.8 160. 5 161. 7 165. 7 168. 9 171.3 173. 4 173.9 177. 5 183. 4 189. 8 198.7 156. 9 160. 7 207. 9 206. 0 207. 1 235.6 296. 9 306. 3 277. 5 257. 9 269.7 277.5 283. 4 285. 6 301. 0 305. 1 311. 9 324 6 337.2 345. 5 361.9 374.9 133. 0 129. 4 204 9 275. 7 240. 5 267.0 312.9 357.5 342. 4 274 5 272. 1 266.8 283. 2 287. 0 300. 1 318.9 330.7 341. 1 340. 6 343. 9 341.4 339. 0 385.9 390.6 397. 2 397.7 406.9 410. 0 483.5 489. 4 492. 7 493. 4 506.5 506. 7 442. 4 450. 0 454 9 458.2 471.9 474. 2 512. 1 516. 2 517.9 516. 3 528. 5 526.8 328. 2 328.5 329. 2 333.2 340.7 347.5 190. 3 193. 2 205. 7 205. 6 208.6 216.3 367. 8 372. 1 380.7 379. 1 382.7 385.5 336. 4 337. 8 340. 5 341.3 345.0 343. 8 1 Include* '.Htf roimnon stocks: »s .or durable poods manufacturing, 72 for nondurable goods iimmifurMirlntt. l'l for iniiispnrlu!.inii. 2U for utilities, 31 for trade, fnwncv, utui tferviw, and 1 1 for mining, Indexes are for weekly closing prices. 30 Utilities a Not charted. Source: Securities and Exchange Commission. BUDGET RECEIPTS AND EXPENDITURES The budget deficit for the first 5 months of the current fiscal year was $10.1 billion. For the same period of last year, there was a deficit of $6.9 billion. BILLIONS OF DOLLARS BILLIONS OF DOLLARS NET BUDGET RECEIPTS 1955 1956 FIRST 5 MONTHS 1957 1958 BUDGET SURPLUS (t) OR DEFICIT (-) (ENLARGED SCALE) - m m up! n FIRST 5 MONTHS 1955 IS5S 1957 * ESTIMATED SOURCES:TREASURY DEPARTMENT AND BUREAU OF THE BUDGET. Period Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 1957: year 1944 _ year 1953 _. year 1954 _ year 19o5__ year 1956 year 1957__ year 1958 3 year 1959 "October _. November. .. December _ . _ « _ 1958." January February _ March _ April May June . .. Julv 4 4 August _ _. 4 September __ „ 4 October 4 _ . November . _ Cumulative totals for4 first 5 months: Fiscal year 1958 4 . Fiscal year 1959 1953 1854 1957 •£S~ 1S58 FISCAL YEARS COUNCIL OF ECONOMIC ADV'.SERS [Billions of dollars] Net budget expenditures Net Major national security 1 Budget budget Department surplus (-f) receipts Total or of Defense Total deficit (-) military functions 43. 6 95. 1 76. 8 76. 1 -51. 4 64. 8 74. 3 51. 8 43. 6 -9. 4 64. 7 47. 9 67.8 40. 3 -3. 1 60. 4 42. 1 64. 6 -4.2 35. 5 66. 5 68. 2 41. 8 35. 8 H-L6 44. 4 71. 0 69. 4 38. 4 4-1.6 69. 1 45. 0 -2. 8 71.9 39. 0 67. 0 79.2 46. 8 40. 8 -12. 2 3. 1 6. 5 3.7 3. 2 -3.4 5. 8 4.8 3.5 3. 1 -1. 0 6.0 5. 8 3. 8 3.3 +. 1 4. 8 6. 0 3. 8 3. 1 -1. 2 6.3 5. 5 3. 6 3.2 +.8 9.5 5. 7 3. 7 3. 1 +3. 8 3.5 6. 1 3. 7 3. 2 -2. 6 4. 9 5. 8 3. 7 3. 2 -.9 10. 8 6. 6 4. 4 4-4.2 3.9 2. 9 6. 6 3. 8 3. 2 -3.7 6. 2 4. 8 3. 7 3.2 -1. 4 7. 2 6. 6 3.9 3.5 4-. 6 2. 8 7. 1 4.3 3.8 -4. 4 6.2 5.0 3. 7 3. 2 — 1.3 23. 4 22. 7 i Includes military functions of Department of Defense, military assistance and defense support portions of tbe mutual security programs, Atomic Energy Commission, and stockpiling and defense production expansion. »Includes guaranteed securities, except those held by the Treasury. Not all of total shown is subject to statutory debt limitation. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1956 - 30. 3 32.8 18. 4 19. 4 16. 0 16. 9 Public debt (end of 2 period) 202. 6 266. 1 271. 3 274. 4 272.8 270. 6 276. 4 283. 1 274. 2 274.9 275. 0 274. 7 274. 8 272. 7 275. 2 275. 7 276. 4 275. 6 278. 0 276. 8 280.3 283. 2 -6.9 -10. 1 274. 9 283. 2 a 4 Estimate, "1959 Federal Budget Midyear Peview," September 11, 1958. Preliminary. NOTE.—Detail will not necessarily add to totals because of rounding. Sources: Treasury Department and Bureau of the Budget. 31 CASH RECEIPTS FROM AND PAYMENTS TO THE PUBLIC In the third quarter of the calendar year 1958, cash payments to the public exceeded cash receipts by $5.5 billion. The comparable figure last year was $2.4 billion. BILLIONS OF DOLLARS BILLIONS OF DOLLARS t!5 (ENLARGED SCALE) EXCESS OF CASH RECEIPTS M EXCESS OF CASH PAYMENTS 1952 1953 . i 1954 PRELIMINARY ESTIMATES. SOURCES: BUREAU OF THE BUDGET AND TREASURY DEPARTMENT. 1955 1956 CALENDAR YEARS 1 1 957^ 1957 t, 1958 it COUNCIL OF ECONOMIC ADVISERS [Millions of dollars] Cash receipts from the public Period Fiscal year total: 1955 19561957 1958_ 1959 i _ Calendar year total: 1954 1955 1956 _ 1957 .. _ Quarterly total, not adjusted for seasonal variation: 1 957 : First quarter Second quarter Third quarter » _ .. . Fourth quarter . . _ 1958: First quarter Second quarter2 _ Third Quarter _ ._ __ ._ _ ._ _ _ . Cash payments to the public 67 836 77 088 82, 107 81, 893 80, 357 70 538 72 617 80 008 83, 413 94, 066 — 2 702 + 4 471 +2 099 — 1, 520 — 13, 709 68, 589 71, 448 80, 330 84, 520 69, 661 72, 188 74, 807 83, 326 — 1, 072 — 740 4-5, 524 + 1, 194 24, 617 24, 846 18, 653 16, 404 23, 618 23, 181 18, 274 19, 814 21,574 21, 099 20, 839 19, 626 21, 764 23. 791 4-4, 802 + 3, 273 -2, 447 — 4, 435 4-3, 993 + 1, 416 -5.516 1 2 Estimate, "1959 Federal Budget Midyear Review," September 11, 1958. Preliminary. NOTE.—Detail will not necessarily add to totals because of rounding. Sources: Bureau of the Budget and Treasury Department. For Kale by the Superintendent of Documents, U.S. Government Printing Office, Washington 25, D.C. Price 20 cents per copy ; $2.00 per year; $2.75 foreign. 32 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Excess of receipts (-f-) or payments ( — ) .„...„ February 6 — Friday « ^57 Senate Office Building Monetary and Credit Policy for the Coming Year -- 10;00 a.m. WILLIAM McC. MARTIN, JR., Chairman, Federal Reserve Board 1. What do you regard as the proper division of labor between tax policy and monetary policy as instruments of economic stabilization luring the coming year? "~"2. What is the current policy of the monetary authorities? --3. What, if any, elements exist in the current situation which suggest or might permit a resurgence of inflationary forces in the next 12 or 15 months? k. If price movements during 1959 follow the 1958 pattern, would an / easier monetary and credit policy be in order? What program would you y recommend as to priority and specific actions in the fiscal and monetary fields for 1959? / 5. With the benefit of hindsight, do you agree with the contention j/ that monetary and credit policy could and should have been eased some months prior to the ifth quarter of 1957? Monetary and Credit Policy Recommendations — http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2:3Q P.«m> \ SEYMOUR E. HARRIS, Chairman, Department of Economics, Harvard University http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis "V -•-"• --^ • .- x ' • '-' f'~' ,1 ; • [.-'/} r .,-•'• -' '--- - V - S r , . - . - • • • • . ' . . - • in connection tdth jr$«r a^MKnaKMi ea id^m«^f 4t fe^for* Joint «ie«n(»«ici QpwEltt«»t Hr* &UQP hwi «nggiMitii4 tbat to n a tlwi pHaeJ^«I 'point* thwkt «oitidi ' th* temt «p«itloiyi h«n» b*«n stkad at tht nitli i w i e t to ttt iiipaet $f feiisk »*3?g«y« tci tli« Cl^ftoii Ant to a^wr b«nk MHfi«r* «n4 oa» twa?«tofor* iMMltt fc^ th» f »dtar«|. b«ikln|: «§«K*i«» for on this sot Hr. \f , - '• _^ fl :•£ ' •••* http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis po»itdfln. « In a&ch »«s«ion of Gettgr*** 0vwr the paat foar y^*r« t « iio^rd h*« *HM&GHttand*4 !»gt*l*tlQii ultb tfeat wn&tf * (1) Kate* all toanfc «*fi*r* aa%J**t to prior tii* $^tva£Ur of tfe« CNtrr*s«^» th« Seen! of Cio**ri*or»f ca* til* 2%<te*l Sapoaii Xnatirane* Osfpor* ttofi, d«p«oding upon tlm acteiPtt of ^» r««fllt4Qi twak («t present, prte* «ppror»l in ,ate««iagr^ tnl^r M «•***£ la vhich th« iwrgtr nniAi. r t«ti3.t in * (2) %*eijRi««U4r WKpitoi lisa bank *up«rvl»ory Al condition, adaquacy of e^plt«If in<t liir and (3) to oaiiaalt *4th tha otter two to tlie ttttfeGt of tli* Miriir ^oa <^patiti0n, and o .raqiuurt' th* pinion of "tbt on that iuui th* .TOt^ wiui i»cofor«t«<i in Boxrci inm oppoitd mi iaMMiclaMiit to **ctjLoii 7 of til* aovir b*r»k awfg«r * throxxgh aoqol»ltion» of •s«*t*^ on til* gmstd thKt imfo^otiitfit of t^* CEiii'ioii Aot la iaooinriyit«Eit nitb -Hi* Jioaird** pia«r r«oiMii1rfli^,os in Hi* fi*M of $i**clit r*g^yil4oft and »l»o on til* ground tfc*t mxch m «f«mdra»nt Hi* Board to p*** 'opott IAS teftt MrpHf* «f*a thm^li «pproy»d igr til* Gonpivoll*rf til* f iE§f OP tit* liNit* bank Hi* ioai1*! liaa i^awatiaiiad tii« *f f «UT«n»«« of prqpoaala for illMit&oii* of tMsie M*rf«r»* to b» glvan to Mi Attorney and Hi* Bo*rd, on th* ground tlt*t latiaao* tpprovel of the to at*r* piior notifioation i*loh wald not ^v* tli*t • a*Ff*r «o^<l %* fr** from attaitlr afl*ip it It h&» 0«oa&riii^l7Viiai^^^^j^^ th* proper appfon^i is m mstdtettftt to taetion ? of 'Hi* ^H«^ton Mt to oenw n*ri*r* http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis if tttofc ******* &m^lM tei^i **$&w«it* far notification. ®*i* h*» also IMMH tfe* approach *d«Q«*t*cl Ir (4 MM, frtb^^rtog mi* approach has qo**U<Kui la ground groun io tke uiw of tiw nei^l it laiiiuSit of | l i • oo«^» Y» « WitW to*iconidderad, * coniera, i t £ttetor« «ffiMiMa tbt Mici intirwt* ; th* ^ *' ^•^°* pit>poiwfct» fur If In ry «oii Us* ««* «nd If tto* lunik' ***dt&!g -f^M III* aurgtr noti]U to « bMQk§ tifani <MNB*ift4oii lor tfewi c&ntlntting bonk nf «* f tlwi iMtk abwwrb^d m^M iwlPi th* Be«ni*» fitly s»«rg«r§ OCMA 'Hits i in in tt If s 0wit«^0£*t*d •cquiai tlon 0f th« ttock ff a bank «»f aoqtttalUon wid«r th* i» a bank tiui Holding ta falleir eo«tpmrf tliat it* dlaaroral | oqy «Pfitt0 €f transaction* *ub jaot it IMP ttet th* th* pra*«rrmUon of ooi*tittei* it h** tmiter d»nia<l http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . a i - - bank ^PHt *3.«e Mrvsliii «i * <to«a torf «tttiWy nr «ploy»« otli«r iMUlit ^ idth ««rt«l» stated axo«ptt«ia| and ^it Bo«rsl statute l * a r 8 S t |br t^wAitarttleii «f th» «f£iot of apos February 3 By Hand Bob-Herewith the answer to the broad question you raised. We will go over the testimony and supply you with any additional capsule answers coming out of the testimony. WMM Enclosure http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Why not finance any unavoidable Federal deficit by: (a) selling to nonbank investors whatever amount of Government securities they will purchase; (b) selling the balance needed to cover a deficit to the Federal Reserve or to the commercial banks; and (c) preventing any pyramiding expansion of the money supply in consequence thereof by an appropriate bank reserve or asset holding requirement? This solution to the Government deficit problem is a "printing press" solution. It would relate money creation and expansion to Federal deficits and not to the needs of the economy. It would make yields on Federal securities the product of Government fiat rather than the product of supply and demand forces in the market. It would remove an essential restraint on Government spending because any resulting deficit could seemingly be financed at minimum cost and effort. It would commit the Government to a patently inflationary financial policy, with forewarning to investors that they could not count on the purchasing power of dollars invested in Government or any other fixed income securities. The time it would take for this forewarning to be fully understood by investors, domestic and international, would not be long. The nonbank market for Government securities would quickly atrophy. Sooner or later, obligatory monetization of public debt would become the only method available for financing deficits. An accelerating inflationary spiral would, in brief time, engulf the economy. The foregoing is a short and direct diagnosis of the probable consequences of the suggested method of financing Government deficits. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2- Technically, the Federal Reserve could be given authority to raise the required reserves of commercial banks sufficiently to cover the creation of reserve funds which would result from its purchases of deficit finance securities. Alternatively, if the monetization device were to allocate Treasury securities not sold to nonbank investors among commercial banks, the Federal Reserve technically could be provided with an authority to require the banks to retain the securities they were obliged to purchase. But these authorities would be quite beside the point. They would not prevent the fundamental tie-up of deficit spending of Government and money creation. They would not provide the public with assurances that the value of money would be preserved. And they would raise grave questions, shattering to public confidence, about the maintenance of a private enterprise economy. Advocates of this solution to the financing of Federal deficits may say this is all exaggeration because only small deficits would in fact need to be financed through the banking system. But once the procedure were established, how could any investor in Government securities be sure that it would not be expanded at any time. In such a case, his reaction would certainly be to withdraw from investment in Government securities and concentrate his investment in other securities. In order to keep interest rates on Government securities from rising-in fact, in order to maintain a functioning market for these securities at all--Federal Reserve intervention in the market would become unavoidable http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -3- We have now outstanding a. marketable Federal debt of around $175 billion. Each year we have refundings in the neighborhood of $30 billion, aside from Treasury bills which total $30 billion and turn over nearly four times a year. If these refundings are not taken up by holders of maturing issues, the Treasury has to borrow the cash to retire them. Usually, the Treasury must borrow each year large amounts of cash, quite aside from any deficit, to pay off holders of maturing debt who decline to subscribe to exchange offerings. Accordingly, the amount of securities that could potentially become available for direct sale to the banking system in any year under the proposal could be simply huge. The larger the amount of Government securities that investors were inclined to sell from their holdings of nonmatured marketable issues, or to redeem from their holdings of nonmarketable securities, the more intractable and unmanageable the financing problem of Treasury would become. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis February 3, 1959 FCR RELEASE Friday, February 6, 1959 lehman. - 5321 CONGRESS OF THE UNITED STATES JOINT ECONOMIC COMMITTEE Senator Paul E. Douglas (D., Illinois),, Chairman of the Joint Economic Committee, today announced that hearings on the Economic Report of the President will be concluded on Monday and Tuesday, February 9 and 10, 1959The attached schedule of witnesses and subjects for the final week of hearings was released. The questions are, of course, intended to suggest the general content rather t than limit the particular hearing. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis February 9 -- Monday -- Old Supreme Court Chamber (P-63, Senate Wing of the Capitol) Panel: Labor and Management Comments on the Economic Report Labor Comments 10:00 a.m. WALTER REUTHER, Vice President, American Federation of Labor-Congress of Industrial Organizations Management Comments 11:00 a.m. WALTER FACKLER, Department of Economic Research, Chamber of Commerce of the United States 11:30 a.m. RALPH ROBEY, Economic Adviser,, National Association of Manufacturers Panel: Additional Comments by Group Representatives http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2:$0 p.m. American Farm Bureau Federation--CHARLES B. SHUMAN, President Federal Statistics Users' Conference--VINCENT A. FERRY., Vice Chairman National Farmers Union--JOHN A. BAKER, Director, Legislative Services Division \ National Grange—ROY BATTLES, Assistant to the Master ' National Independent Union Council—DOW MAHON, Secretary Also invited; Connittee for Economic Development Railway Labor Executives Association United Mine Workers of America February 10 -- Tuesday -- ^57 Senate Office Building 10:00 a.m. The Defense Department Budget and Plans W. J. McNEIL} Assistant Secretary of Defense (Ccmpt roller) 1, What significant changes in the Department of Defense program are included in the budget for fiscal 1960? What impact on the total level and on the character of economic activity do you anticipate from these changes? 2. What pattern of defense expenditures and contract placement, "by quarters, is contemplated in the budget for fiscal I960? 3. What criteria vere followed in arriving at the total budget proposed for national defense? For apportioning this total among various programs? http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FOR RELEASE Friday, January 30, 1959 Lehman - 5321 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CONGRESS OF THE UNITED STATES JOINT ECONOMIC COMMITTEE Chairman Douglas Announces Second Week of Hearings on the President's Economic Report Senator Paul H. Douglas (D., Illinois), Chairman of the Joint Economic Committee; today announced that hearings on the President's Economic Report would continue during the week be»*' ginning Monday, February^, 1959» The attached schedule of witnesses and subjects for the second week of hearings was released. These questions are, of course, intended to suggest the general content rather than limit the particular hearing. Plans for the final days of hearings will be announced next week. February 2 — Monday — 457 Senate Office Building. Panel: 10:00 a.m. Factors Affecting Economic Growth. 1. When we talk of economic growth, do we mean expansion of GNP? or of GNP per capita? or of productive capacity? 2. What are the principal factors explaining the growth that has taken place? 3. How important a factor is research and development? What evidence do we have that research and development "pays off" in clear-cut contributions to industrial and economic growth? What contribution to national economic growth can be expected to result from the development of specific areas and regions? 4-. Can we count on the contribution of these factors to maintenance of growth to continue in at least the same degree as in the past? What basic changes, if any, in public policies would contribute to providing the conditions in which growth-impelling forces would be encouraged? 5. Can we have a higher rate of growth in the future without devoting to capital formation a larger proportion of our resources than in the past? ?vill not a faster rate of growth require an increase in the rate of saving?. What problems of income distribution must we expect to find associated with a relative increase in the rate of expansion of our productive capacity? 6. Would devoting a larger proportion of our resources to capital formation give rise to greater difficulties in maintaining stability in the general level of prices and in the rate of employment and other resource use? 7. The word "dynamic" is frequently used to describe the American economy. What implications are there in the dynamic characteristics of the economy with respect to the opportunities to expand our productive capacity? for limitations upon such expansion? What account should be taken of these implications in comparing the growth of the United States economy with that of a less dynamic economy? How is the comparison of the growth of our economy with that of the Soviet Union affected? HAROLD J. BARRETT, Development Department, E. I. du Pont De Nemours & Co. ROBERT EISNER, Professor of Economics, Northwestern University JOSEPH L. FISHER, Associate Director and Secretary Resources for the Future DANIEL HAMBERG, Professor of Economics, University of Maryland http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 7. HANS HEYMANN, Jr., Economist the RAND Corporation ROBERT E. JOHNSON, Economist and Actuary, Western Electric Co. HERBERT E. STRINER, Economist, Operations Research Office, The Johns Hopkins University ALAN T. WATERMAN, Director, National Science Foundation http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis February 3 -- Tuesday — ^57 Senate Office Building 10:00 a.m. Panel: The Structure of Business and the Employment Act of 1. How would you evaluate the contribution of current antitrust policy to attainment of the Employment Act's objectives of economic growth and stability? What revisions in these policies would provide opportunity for a greater contribution? 2. Seme examinations of recent United States experience suggest that relative immobility of important types of resources is an important factor in rising costs and, therefore, upward price pressures. One example is the "hoarding11 of skilled and technical labor services needed in connection with a good deal of investment in plant and equipment. To what extent are such barriers reflections of concentration of economic power? Can antitrust policy be more effectively directed toward reducing the barriers to free resource movement? 3. The strong market position of large business and the bargaining power of large labor organizations have been identified in many discussions as contributing importantly to inflationary tendencies apparent in recent years. To what extent can this interpretation be factually supported? If this be the case, what changes in antitrust and related policies are called for to assure that such power is appropriately reduced or otherwise modified in the public interest? http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PADRAIC P. FRUCET, Economist, Chamber of Commerce of i^ie United States HORACE M. GRAY, Professor of Economics, University of Illinois ALFRED E. KAHN, Professor of Economics, Cornell University CARL KAYSEN, Professor of Economics, Harvard University MARK S. MASSEL, Senior Staff Member, The Brookings Institution EUGENE V. ROSTCW, Dean, Yale Law School February k — Wednesday -- ^57 Senate Office Building 10:30 a,m, Antitrust Policy and Employment Act Objectives WILLIAM PIERCE ROGERS, Attorney General of the United States 1. What consideration is given, in the shaping and application of antitrust policies, to the contribution they can make to attainment of the objectives of the Employment Act of 2. Under what are termed additional measures for economic growth (page 53 of the Economic Report), the President includes three recommendations to strengthen antitrust policy. In your opinion, how would economic growth be promoted by these measures? 3. The Economic Report also includes the statement that "selfdiscipline and restraint [by labor and management] are essential if agreements consistent with reasonable stability of prices are to be reached within the framework of [our] free competitive institutions." If, as this seems to imply, our free competitive institutions are not functioning sufficiently well to create adequate market restraints, is this because antitrust policies are not being vigorously enough pursued or because the statutes are too limited? If the latter, will the measures recommended by the President be sufficient to overcome the deficiencies of the law? *K To what extent do you believe inflationary price movements result from restraints on the freedom of enterprise, nonccmpetitive market practices, and immobility of resources, compared with inadequate fiscal and monetary restraints? ^ http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis February 5 — Thursday — ^57 Senate Office Building Fiscal Policy for the Coming Year — 10:00 a.m. ROBERT B. ANDERSON, Secretary of the Treasury 1. What would you regard as the proper division of labor between tax policy and monetary policy as instruments of economic stabilization during the coming year? 2. Is the present structure of the Federal tax system adequate in light of the Nation's economic growth and stability requirements? If not, what changes would you recommend? 3. Under what circumstances can we reduce Federal taxes? What are the prospects for realising these circumstances? k. What do you foresee as the Treasury's principal debt-management problems in the year ahead? What effect on interest rates and the availability of credit to sensitive sections of the market, such as housing, do you anticipate from debt-management operations during 1959? What assumptions about the broad outlines of monetary policy underlie the Treasury's debt-management program for 1959? Fiscal and Budgetary Policy Recommendations http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -- 2:30 p»m» February 6 -- Friday -- ^57 Senate Office Building Monetary and Credit Policy for the Coming Year — 10;00 a.m. WILLIAM McC. MARTIN, JR., Chairman, Federal Reserve Board 1. What do you regard as the proper division of labor between tax policy and monetary policy as instruments of economic stabilization during the coming year? 2. What is the current policy of the monetary authorities? 3. What, if any, elements exist in the current situation which suggest or might permit a resurgence of inflationary forces in tha next 12 or 15 months? k. If price movements during 1959 follow the 1958 pattern, would an easier monetary and credit policy be in order? What program would you recommend as to priority and specific actions in the fiscal and monetary fields for 1959? 5. With the benefit of hindsight, do you agree with the contantion that monetary and credit policy could and should have been eased some months prior to the kfh quarter of 1957? Monetary and Credit Policy Recommendations — http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2;3Q p.m. \ SEYMOUR E. HARRIS, Chairman, Department of Economics, Harvard University Lehman - 5321 FOR IMMEDIATE RELEASE Monday, January 26, 1959 CONGRESS OF THE UNITED STATES JOINT ECONOMIC COMMITTEE Chairman Douglas Announces Hearings on the President1s Economic Report Senator Paul H. Douglas (D., Illinois), chairman of the Joint Economic Committee, has announced plans of the Joint Committee to hold hearings commencing January 27 on the President's Economic Report which was transmitted to Congress January 20, Under the Employment Act of 1946, the President1s Economic Report is referred to the Joint Economic Committee, which is to review it and 11 ... file a report with the Senate and House of Representatives containing its findings and recommendations with respect to each of the main recommendations made by the President in the Economic Report ..." At its meeting today, the committee approved a general plan for hearings and released the attached schedule of witnesses and subjects for the first week, with lists of questions. These questions are, of course, intended to suggest the content rather than limit the particular hearing. Detailed plans for the remainder of the hearings will be released later in the week. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2. SCHEDULE OF HEARINGS ON THE PRESIDENT'S 1959 ECONOMIC REPORT January 27 — Tuesday — Old Supreme Court Chamber (P-63, Senate wing, The Capitol) 10:00 a.m. Council of Economic Advisers - (Executive Session) RAYMOND J. SAULNIER, Chairman, accompanied by KARL BRANDT, and PAUL W. McCRACKEN, Members 1. What are the levels of employment, production, and purchasing power needed in 1959 to carry out the objectives of the Employment Act? 2. What are the current and foreseeable trends in employment, production, and purchasing power? 3. What assumptions with respect to prices, national income, personal income, corporate profits, and the like, underlie the President1s Economic Report? Are these assumptions consistent with those upon which the Budget is based? Are these assumptions consistent with attainment of Employment Act objectives in calendar 1959? 4. In discussing the economic outlook for 1959 and in formulating its recommendations, does the Economic Report take account of likely developments with respect to the broad outlines of monetary and credit policy to be expected this year? Do you expect that realization of the Report's program and the Employment Act objectives in 1959 will require any significant changes in monetary policy during the year? If so, what changes would be desirable? t 5. With the advantage of hindsight, do you now think different public policies should have been adopted after mid-1957? If so, what changes would you have made? http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 3. January 28 — Wednesday — Room 362 Old House Office Building 10:00 a.m. The Federal Budget MAURICE H. STANS, Director, Bureau of the Budget 1. What are the major changes in expenditures and revenues contemplated in the President1s budget for fiscal year I960? 2. What assumptions with respect to prices, national income, personal income, corporate profits, and the like, underlie the President's budget? 3. In preparing the budget how have the objectives of the Employment Act of 194-6 been taken into account; how is the budget expected to contribute to their achievement? 4. What effect are changes in the budget estimated to have on the gross national product and on Federal revenues? http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis January 29 — Thursday — Room 362 Old House Office Building 10:00 a.m. P an el: Economic Outlook 1. What is the outlook for labor force, hours of work, and productivity in comparison with long-run trends? 2. What are the likely trends in receipts and expenditures of Federal, State and local governments? 3. What is the outlook for business fixed investment; for international trade and investment; residential construction; for inventories? 4. What is the outlook for consumer buying of durables, nondurables, and services? http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5. What is the outlook for prices? Labor Force, etc. EWAN CLAGUE, Commissioner, Bureau of Labor Statistics, Department of Labor Government Demand LOUIS J. PARADISO, Asst. Director & Chief Statistician, Office of Business Economics, Department of Commerce Housing Investment and Demand ROBINSON NEWCOMB, Consulting Economist Investment Demand MARTIN R. GAINSBRUGH, Chief Economist, National Industrial Conference Board *i • Inventories and Consumer Demand IRWIN FRIEND, Professor of Economics, University of Pennsylvania International Trade and Investment WILLIAM F. BUTLER, Vice President, Chase Manhattan Bank Agriculture ORIS V. ILLS, Administrator, Agricultural Marketing Service, Department of Agriculture LOUIS H. BEAN, Consulting Economist 5. Janua.ry 30 — Friday — Room 362 Old House Office Building 10:00 a.m. Panel: Policy Implications of the Economic Outlook 1. What, if any, changes in governmental economic policies are called for in the year ahead? 2. What would you regard as the proper division of labor between tax policy and monetary policy as instruments of economic stabilization during the coming year? 3. What relative emphasis should these policies place on the expansion of investment and of consumption? http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis GERHARD COLM, Chief Economist, National Planning Association WILLIAM J. FELLNER, Professor of Economics, Yale University WALTER W. HELLER, Professor of Economics, University of Minnesota BENJAMIN U. RATCHFORD, Professor of Economics, Duke University PAUL A SAMUELSON, Profess of Economics, Massachusetts Institute of Technology HERBERT STEIN, Director of Research, Committee for Economic Development
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