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Transmitted to the Congress
February 1998




Economic Report
of the President

Transmitted to the Congress
February 1998
TOGETHER WITH

THE ANNUAL REPORT
OF THE

COUNCIL OF ECONOMIC ADVISERS

UNITED STATES GOVERNMENT PRINTING OFFICE
WASHINGTON: 1998

For sale by the U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328
ISBN 0-16-049419-2







C O N T E N T S
Page

ECONOMIC REPORT OF THE PRESIDENT

1

ANNUAL REPORT OF THE COUNCIL OF ECONOMIC
ADVISERS*

7

CHAPTER 1. PROMOTING PROSPERITY IN A HIGH-EMPLOYMENT
ECONOMY

19

CHAPTER 2. MACROECONOMIC POLICY AND PERFORMANCE

43

CHAPTER 3. THE ECONOMIC WELL-BEING OF CHILDREN

89

CHAPTER 4. ECONOMIC INEQUALITY AMONG RACIAL AND ETHNIC
GROUPS

119

CHAPTER 5. IMPROVING ECONOMIC EFFICIENCY: ENVIRONMENTAL
AND HEALTH ISSUES

155

CHAPTER 6. RECENT INITIATIVES IN ANTITRUST ENFORCEMENT

195

CHAPTER 7. THE BENEFITS OF MARKET OPENING

215

APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THE
COUNCIL OF ECONOMIC ADVISERS DURING 1997

261

APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EMPLOYMENT, AND PRODUCTION

273

* For a detailed table of contents of the Council's Report, seepage 11




11
1







ECONOMIC REPORT
OF THE PRESIDENT




ECONOMIC REPORT OF THE PRESIDENT
To the Congress of the United States:
For the last 5 years this Administration has worked to strengthen
our Nation for the 21st century, expanding opportunity for all Americans, demanding responsibility from all Americans, and bringing us
together as a community of all Americans. Building a strong economy
is the cornerstone of our efforts to meet these challenges.
When I first took office in 1993, the Federal budget deficit was out of
control, unemployment was unacceptably high, and wages were stagnant. To reverse this course, we took a new approach, putting in place
a bold economic strategy designed to bring down the deficit and give
America's workers the tools and training they need to help them thrive
in our changing economy.
Our strategy has succeeded: the economy has created more than 14
million new jobs, unemployment is at its lowest level in 24 years, and
core inflation is at its lowest level in 30 years. Economic growth in 1997
was the strongest in almost a decade, and the benefits of that growth
are being shared by all Americans: poverty is dropping and median
family income has gone up nearly $2,200 since 1993. We also saw the
biggest drop in welfare rolls in history. Many challenges remain, but
Americans are enjoying the fruits of an economy that is steady and
strong.
THE ADMINISTRATION'S ECONOMIC STRATEGY

From the beginning, this Administration's economic strategy has
had three crucial elements: reducing the deficit, investing in people,
and opening markets abroad.
Deficit reduction. In 1993 this Administration's deficit reduction plan
set the Nation on a course of fiscal responsibility, while making critical
investments in the skills and well-being of our people. When I took
office, the deficit was $290 billion and projected to go much higher. This
year the deficit will fall to just $10 billion and possibly lower still. That
is a reduction of more than 95 percent, leaving the deficit today smaller in relation to the size of the economy than it has been since 1969.
And this year I have proposed a budget that will eliminate the deficit
entirely, achieving the first balanced budget in 30 years.
Beyond that, it is projected that the budget will show a sizable surplus in the years to come. I propose that we reserve 100 percent of the
surplus until we have taken the necessary measures to strengthen the
Social Security system for the 21st century. I am committed to address-




ing Social Security first, to ensure that all Americans are confident
that it will be there when they need it.
Investing in our people. In the new economy, the most precious
resource this Nation has is the skills and ingenuity of working Americans. Investing in the education and health of our people will help all
Americans reap the rewards of a growing, changing economy. Those
who are better educated, with the flexibility and the skills they need
to move from one job to another and seize new opportunities, will succeed in the new economy; those who do not will fall behind.
That is why the historic balanced budget agreement I signed into
law in 1997 included the largest increase in aid to education in 30
years, and the biggest increase to help people go to college since the
G.I. Bill was passed 50 years ago. The agreement provided funds to
ensure that we stay on track to help 1 million disadvantaged children
prepare for success in school. It provided funding for the America
Reads Challenge, with the goal of mobilizing a million volunteers to
promote literacy, and it made new investments in our schools themselves, to help connect every classroom and library in this country to
the Internet by the year 2000.
The balanced budget agreement created the HOPE scholarship program, to make completion of the 13th and 14th years of formal education as widespread as a high school diploma is today. It offered other
tuition tax credits for college and skills training. It created a new Individual Retirement Account that allows tax-free withdrawals to pay for
education. It provided the biggest increase in Pell grants in two
decades. Finally, it provided more funds so that aid to dislocated workers is more than double what it was in 1993, to help these workers get
the skills they need to remain productive in a changing economy.
But we must do more to guarantee all Americans the quality education they need to succeed. That is why I have proposed a new initiative to improve the quality of education in our public schools—
through high national standards and national tests, more charter
schools to stimulate competition, greater accountability, higher quality teaching, smaller class sizes, and more classrooms.
To strengthen our Nation we must also strengthen our families. The
Family and Medical Leave Act, which I signed into law in 1993,
ensures that millions of people no longer have to choose between
being good parents and being good workers. The Health Care Portability and Accountability Act, enacted in 1996, ensures that workers
can keep their health insurance if they change jobs or suffer a family
emergency. We have also increased the minimum wage, expanded the
earned income tax credit, and provided for a new $500-per-child tax
credit for working families. To continue making progress toward
strengthening families, the balanced budget agreement allocated $24
billion to provide health insurance to up to 5 million uninsured chil-




dren—the largest Federal investment in children's health care since
Medicaid was created in 1965.
Opening markets and expanding exports. To create more good jobs
and increase wages, we must open markets abroad and expand U.S.
exports. Trade has been key to the strength of this economic expansion—about a third of our economic growth in recent years has come
from selling American goods and services overseas. The Information
Technology Agreement signed in 1997 lowers tariff and other barriers
to 90 percent of world trade in information technology services.
To continue opening new markets, creating new jobs, and increasing
our prosperity, it is critically important to renew fast-track negotiating
authority. This authority, which every President of either party has
had for the last 20 years, enables the President to negotiate trade
agreements and submit them to the Congress for an up-or-down vote,
without modification. Renewing this traditional trade authority is
essential to America's ability to shape the global economy of the 21st
century.
SEIZING THE BENEFITS OF A GROWING, CHANGING ECONOMY

As we approach the 21st century the American economy is sound
and strong, but challenges remain. We know that information and
technology and global commerce are rapidly transforming the economy, offering new opportunities but also posing new challenges. Our
goal must be to ensure that all Americans are equipped with the skills
to succeed in this growing, changing economy.
Our economic strategy—balancing the budget, investing in our people, opening markets—has set this Nation on the right course to meet
this goal. This strategy will support and contribute to America's
strength in the new economic era, removing barriers to our economy's
potential and providing our people with the skills, the flexibility, and
the security to succeed. We must continue to maintain the fiscal discipline that is balancing the budget, to invest in our people and their
skills, and to lead the world to greater prosperity in the 21st century.

THE WHITE HOUSE
FEBRUARY 10, 1998







THE ANNUAL REPORT
OF THE
COUNCIL OF ECONOMIC ADVISERS







LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS
Washington, D.C., February 10, 1998
MR. PRESIDENT:
The Council of Economic Advisers herewith submits its 1998 Annual
Report in accordance with the provisions of the Employment Act of
1946 as amended by the Full Employment and Balanced Growth Act of
1978.
Sincerely,




<r

Janet L. Yellen,
Chair

Jeffrey A. Frankel,
Member

Rebecca M. Blank,
Member-Nominee




C O N T E N T S
Page

CHAPTER 1. PROMOTING PROSPERITY IN A HIGH-EMPLOYMENT
ECONOMY
The Administration's Economic Strategy
A Credible Plan for Deficit Reduction
Investing in People and Technology
Opening Markets at Home and Abroad
A Record of Accomplishment
Benefits of a High-Employment Economy
Deficit Reduction: Completing the Task
Policies to Raise Growth, Reduce Inequality, and
Increase Opportunity
Strengthening Cities and Communities
Strengthening the Performance of Domestic Markets..
Opening Foreign Markets
Promoting an Economically Sound Environmental
Agenda
Facing the Challenges Ahead
Conclusion
CHAPTER 2. MACROECONOMIC POLICY AND PERFORMANCE
Overview of 1997: A Burst of Growth
Aggregate Spending in 1997
Monetary Policy and Financial Markets
Inflation and the Labor Market
Productivity
Explaining Recent Inflation Performance
Recent Inflation Performance and the NAIRU
Alternative Measures of Utilization and Capacity
A New Era for the Economy?
The Economic Condition of Households
The Confident Consumer
The Condition of Household Balance Sheets
The Personal Saving Rate
The Long-Term Uptrend in the Bankruptcy Rate
Long-Term Growth: Budget Deficits and National Saving ..
Saving in a Closed Economy
Saving in an Open Economy
Implications




11

19
21
22
22
23
25
25
26
28
34
35
36
36
37
42
43
44
45
52
54
57
57
57
60
62
63
64
66
70
74
75
77
77
78

Page

Forecast and Outlook
The Administration Forecast
Components of Long-Term Growth
Productivity
Inflation Considerations
The Demand for Housing
The Near-Term Outlook

CHAPTER 3. THE ECONOMIC WELL-BEING OF CHILDREN
Trends in the Economic Well-Being of Children
The Link Between Income and Children's Well-Being..
Measuring Trends in Child Poverty Rates
Explaining Recent Changes in Child Poverty
Policy Initiatives to Support Family Incomes
Other Measures of Children's Material Weil-Being
Availability of Food
Adequacy of Housing
New Housing Policy Initiatives
Health Status and Health Insurance
Health Outcomes
Health Insurance
Recent Initiatives to Expand Children's Access
to Health Insurance
Child Care and Education
Child Care
Early Childhood Education
Elementary and Secondary Education
Conclusion

78
78
80
81
84
84
85

89
90
90
91
94
98
100
100
101
102
102
102
104
108
109
109
110
Ill
117

CHAPTER 4. ECONOMIC INEQUALITY AMONG RACIAL AND ETHNIC
GROUPS
119
Population Composition
Economic Status
Family Income
Household Wealth
The Role of Family Structure in Income and
Poverty
Education
Differences and Trends in Educational Attainment
Explaining Educational Attainment Gaps
Affirmative Action in Higher Education Admissions ....
Labor Markets
Trends in Labor Market Outcomes
Explaining Earnings Gaps
Discrimination




12

122
124
124
129
131
133
134
136
138
140
141
146
152

Page

CHAPTER 5. IMPROVING ECONOMIC EFFICIENCY:
ENVIRONMENTAL AND HEALTH ISSUES
Cost-Effective Environmental Protection
Tradable Emissions Permits
Air Quality Standards
Climate Change
Non-Point Source Water Pollution
Improving Health Care and Health Insurance Markets
Improving Access and Portability
Consumer Protection and Quality in the Health
Care Industry
Food and Drug Administration Reform
Reducing Teenage Smoking

CHAPTER 6. RECENT INITIATIVES IN ANTITRUST
ENFORCEMENT
Origins and Principles of Antitrust
Mergers
Market Definition
Competitive Effects
Entry
Efficiencies
Electronic Commerce
High-Technology Industries, Innovation, and
Intellectual Property
Innovation and Intellectual Property
Network Externalities
Fast-Paced Technological Change
The Global Marketplace and International Antitrust
Efforts

CHAPTER 7. THE BENEFITS OF MARKET OPENING
Trends in U.S. International Trade
The Sectoral Composition of U.S. Trade
The Geographic Composition of U.S. Trade
U.S. Trade by Domestic Region
Initiatives in Market Opening
Trade-Negotiating Authority
Multilateral Initiatives
Regional Initiatives
Bilateral Initiatives
The Effects of Market Opening
The Benefits of Trade Liberalization
Measuring the Gains from Trade
Trade and the American Worker
Trade and Average Wages




13

155
156
157
162
165
176
180
180
184
187
191

195
196
197
200
202
204
205
206
209
209
210
211
213

215
216
217
218
219
220
221
222
228
233
236
236
237
238
239

Page

Trade and Relative Wages
Trade and Aggregate Employment
Trade and Job Displacement
The U.S. Trade Balance
Foreign Direct Investment
Current Trends in FDI
The Benefits of FDI
Current U.S. Initiatives in Investment Policy
Conclusion

241
244
244
246
249
253
255
258
260

APPENDIXES
A.
B.

Report to the President on the Activities of the Council
of Economic Advisers During 1997
261
Statistical Tables Relating to Income, Employment, and
Production
273

LIST OF TABLES
2-1.
2-2.
2-3.
2-4.
2-5.
2-6.
2-7.
3-1.
3-2.
3-3.
3-4.
3-5.
3-6.
3-7.
3-8.
4-1.
4-2.

Components of GDP and Growth in GDP, 1997
Household Debt Service Burden
Household Credit Card Balances as a Percent of
Income
Expected Effects on Changes in the CPI and Real GDP
of CPI Methodological Changes
Accounting for Growth in Real GDP, 1960-2005
Contribution of Selected Determinants of Demand and
Supply for New Homes
Administration Forecast
Children with Family Incomes Below Different Income
Cutoffs, 1996
Changes in Child Poverty Rate and Selected
Macroeconomic Indicators
Accounting for Changes in Child Poverty
Children in Households Reporting That There Was
Sometimes or Often Not Enough to Eat During the
Last 3 Months
Housing Problems Among Households with Children....
Children with Health Insurance, by Age of Child and
Type of Coverage
Average Number of Physician Contacts in Last Year
for Children Under 15, by Family Income
Uninsured Children by Family Income, 1996
Racial and Ethnic Composition of the U.S. Population..
Ratios of Black and Hispanic to White Median Weekly
Earnings, 1997




14

45
70
73
80
82
85
86
93
95
97
100
101
105
107
108
123
146

Page
7-1.
7-2.
7-3.
7-4.

1-1.
1-2.
1-3.
1-4.
1-5.
2-1.
2-2.
2-3.
2-4.
2-5.
2-6.
2-7.
2-8.
2-9.
2-10.
3-1.
3-2.
3-3.
3-4.
3-5.
3-6.
3-7.
3-8.
4-1.
4-2.
4-3.
4-4.
4-5.
4-6.
4-7.

Tariff Rates of Asia-Pacific Economic Cooperation
Members
Industry Compensation Premiums, 1984
Inward and Outward Foreign Direct Investment, by
Industry, Selected Years
Countries with Which the United States Has
Bilateral Investment Treaties
LIST OF CHARTS
Investment and Government Spending in Overall
GDP Growth
Real Household Income Growth by Quintile, 1993-96....
Federal Budget Deficit as a Percent of GDP
Net Interest as a Share of Federal Outlays
Returns to Education
Inflation and Trend Unit Labor Costs
Computer Prices and Total Inflation
Wage Growth and the Unemployment Rate
Consumer Sentiment
Ratio of Household Net Worth to Disposable Personal
Income
Household Debt by Type
Household Debt Delinquency Rates
Household Debt Service Payments
Alternative Measures of Productivity
Productivity Growth and the End-of-Expansion Effect..
Poverty Rates of Children
Children Living with Their Mother Only, by Marital
Status of Mother
Monthly AFDC and Food Stamp Benefits for a Family
of Four
Infant Mortality Rates and Incidence of Low
Birthweight
Child and Youth Mortality Rates
Children Without Physician Visit Within Past Year
NAEP Long-Term Trend Assessment: Science and
Mathematics Scores
NAEP Long-Term Trend Assessment: Reading Scores...
Median Family Income
Distribution of White Persons by Household Income
Distribution of Black Persons by Household Income
Gini Index for Family Income
Poverty Rates for Persons
Family Structure
High School Completion Rates for 25- to 29-Year-Olds ..




15

232
243
255
259

20
27
27
29
30
56
58
60
65
66
67
68
69
83
83
92
94
96
103
104
107
112
113
125
126
126
127
128
132
135

Page

4-8.

Women Aged 25-29 with 4-Year College Degree or
Higher
4-9. Men Aged 25-29 with 4-Year College Degree or Higher .
4-10. Unemployment Rates
4-11. Ratios of Median Weekly Earnings of Male
Full-Time Workers
4-12. Ratios of Median Weekly Earnings of Female
Full-Time Workers
5-1. Sulfur Dioxide Emissions Permit Prices
5-2. Volume of Sulfur Dioxide Emissions Permit Trades
5-3. Sources of Nitrogen Oxides Emissions in 1995
5-4. U.S. Greenhouse Gas Emissions, Actual and Projected .
5-5. Cumulative World Emissions of Carbon Dioxide,
1950-95
5-6. Projected World Carbon Dioxide Emissions Without
Kyoto Agreement
5-7. Energy Prices and Private Energy Research
5-8. Clinical Trial and Drug Application Approval Times
for New Drugs
6-1. Mergers Filed with the Antitrust Agencies
7-1. Exports and Imports as a Percent of GDP
7-2. U.S. Exports and Imports by Category in 1986 and
1996
7-3. U.S. Goods Exports and Imports by World Region in
1986 and 1996
7-4. Exports of Goods by U.S. Region
7-5. U.S.-Initiated WTO Dispute Settlement Cases by Target
Country
7-6. Real Wages and Labor Compensation, and
Productivity
7-7. Saving, Investment, and the Current Account Balance .
7-8. Real Value of the Dollar and the Trade Deficit
7-9. Growth in Real Imports and GDP
7-10. Foreign Direct Investment Flows
1-1.
2-1.
2-2.
2-3.
2-4.
2-5.
2-6.
3-1.

LIST OF BOXES
Poverty Alleviation, the Earned Income Tax Credit,
and the Minimum Wage
Accounting for the Deficit Surprise During Fiscal 1997.
Turmoil in Asian Economies
Circuit Breakers
Recent Revisions to Capacity and Utilization
The National Bankruptcy Review Commission
Methodological Changes in the Consumer Price Index..
How Does Our Poverty Measure Affect Our Conception
of Poverty?




16

137
137
142
145
145
161
162
164
167
171
171
174
189
197
216
218
219
220

224
240
247
248
249
250

33
48
50
55
62
76
79
91

Page

4-1.
4-2.
5-1.
5-2.
5-3.
5-4.
6-1.
7-1.
7-2.
7-3.
7-4
7-5.
7-6.

Racial and Ethnic Identity and Classification
The President's Initiative on Race
The Clean Water Initiative
Quality Data Collection for Medicare Managed Care
History of Food and Drug Administration Regulation
of Drugs
The Prescription Drug Users Fee Act of 1992
Consolidation in the Defense Industry
The WTO Dispute Settlement Process and U.S. Trade
Policy
Regional Trade Agreements: Building Blocks or
Stumbling Blocks for the Multilateral Process?
APEC Tariff Reductions and Other Initiatives
Industry-Related Differences in Wages
Fears and Facts about Foreign Direct Investment
Bilateral Investment Treaties




17

120
123
176
186
189
190
198
223
229
232
242
251
259




CHAPTER 1

Promoting Prosperity in a HighEmployment Economy
THE PAST YEAR SAW THE NATION'S ECONOMY turn in its
best performance in a generation. Over the course of 1997, output
growth and job creation remained vigorous while inflation declined.
Real (inflation-adjusted) gross domestic product (GDP) grew 3.9
percent, and employment rose by 3.2 million, for an average rate of
267,000 jobs per month. The unemployment rate dropped below 5
percent for the first time in 24 years, yet core inflation (as measured
by the consumer price index, excluding its volatile food and energy
components) averaged only 2.2 percent, its lowest rate in over 30
years. This exceptional economic performance occurred during a
period of historic deficit reduction: the Federal budget deficit, which
reached $290 billion in the 1992 fiscal year, declined to only $22 billion in fiscal 1997. And the Administration has submitted a budget
for fiscal 1999 that projects a balanced budget for the first time
since 1969.
As 1998 begins, the prospects for continued growth with high
employment and low inflation remain excellent. The economy is
remarkably free of the symptoms that often presage an economic
downturn—such as an increase in inflation, an accumulation of
inventories, or evidence of financial imbalance. Inflation fell in 1997,
and developments in East Asia, by reducing U.S. import prices, are
likely to exert additional downward pressure on U.S. inflation in
1998. Economic turmoil in East Asia could affect the global economy,
but if international efforts to restore stability there succeed, the
main effect on the U.S. economy could simply be to allow continued
growth and job creation with a more moderate outlook for interest
rates. Another sign that an expansion is nearing its end would be a
sudden accumulation of inventories, as businesses find their sales
falling short of production. Yet sales were strong in 1997, and inventory-sales ratios are near historical lows. Financial imbalances can
also threaten to disrupt an expansion. But today banks and other
financial institutions do not appear overextended, as they did in the
late 1980s and early 1990s, and the stock market shrugged off a oneday plunge in October (although its continuing high valuation
relative to earnings is a source of concern to some). Although the
business cycle may not have been vanquished, the economy is in fun-




19

damentally sound shape and well-equipped to handle any unexpected
bouts of rougher weather.
A principal force behind the current expansion has been private
fixed investment. Almost none of the growth in GDP over this expansion has come from increased government spending, whereas close to
one-third has come from greater private fixed investment (Chart 1-1).
Because of the Administration's deficit reduction efforts, the contribution of government spending to overall growth has been much
lower than in most previous postwar expansions (real Federal
Government spending has actually declined), while that of private
fixed investment has been substantially higher. One benefit of this
burst of investment has been a rapid expansion of industrial capacity: over the past 3 years average annual capacity growth has
exceeded every previous growth rate since 1968.
Policies such as deficit reduction have contributed to an investment-led recovery and a climate conducive to sustained economic
Chart 1-1 Investment and Government Spending in Overall GDP Growth
Real GDP growth during this expansion has been driven by private spending,
particularly on fixed investment.
Share of real GDP change (percent)

Private fixed investment
F Government spending
l

1954-57

1958-60

1961-69

1970-73

1975-80

1982-90

1991-present

Note: Change in component expressed as fraction of overall change in real GDP.
Sources: Department of Commerce (Bureau of Economic Analysis) and National Bureau of
Economic Research.

growth. But the lion's share of the credit for the economy's performance goes to American workers and firms, who have risen to the
challenges of a competitive global economy and rapidly changing
technology. The role of government in such an economy is not to prop
up economic growth with government spending but, more subtly, to
provide individuals and businesses with the tools they need to flourish through their own efforts. The range of appropriate government



20

policies in such an economy includes promoting private investment
through sound macroeconomic policies, encouraging the formation of
skills through training and education, securing opportunity for the
marginalized members of our society, and—where necessary—providing assistance to the most vulnerable. Using government to
complement, not replace, the market and the private sector has been
a fundamental, guiding principle of this Administration's economic
strategy from the very beginning. And it is this strategy that has
borne fruit over the last 5 years.
Despite the economy's recent exemplary performance, a number of
challenges remain. The first is to preserve and nurture the successes
achieved so far. And although progress has been made in addressing
the longer term problems that have affected the economy since the
productivity slowdown of the early 1970s—problems like slow growth
in wages and incomes and widening income inequality—more needs
to be done. This chapter describes the principles and policies of this
Administration for achieving its two basic, overarching goals: securing high and rising living standards now and in the future, and
ensuring that the benefits of a higher standard of living are extended
to all Americans.

THE ADMINISTRATION'S ECONOMIC STRATEGY
The Employment Act of 1946 (which created the Council of
Economic Advisers), together with its later amendments, gave the
Federal Government responsibility for stabilizing short-run economic
fluctuations, promoting balanced and noninflationary economic
growth, and fostering low unemployment. This Administration's
strategy in pursuing this mandate has focused on getting the fundamentals right: reducing the budget deficit, investing in technology
and the American people, and opening markets at home and abroad.
These were the right policies for encouraging the job creation needed
to move the economy to full employment, and they are the right policies for attacking the longer term problems of sluggish productivity
growth and widening income inequality that began to afflict the economy in the early 1970s.
But there is more to the Administration's policy agenda than can
be measured by aggregate economic statistics alone. Getting the fundamentals right means removing the barriers that block people from
realizing their potential; it means promoting their sense of individual
responsibility and giving them the tools to succeed. Getting the fundamentals right also means fostering a personal commitment by
all Americans to help others, a sense of shared responsibility for
our Nation's children, and a sense of community in an increasingly
multiethnic society.




21

A CREDIBLE PLAN FOR DEFICIT REDUCTION
The policy course set in 1993 has contributed to the Nation's recent
economic health and strength. In 1993 the economy was still recovering from the 1990-91 recession, and it labored under the burden of a
Federal budget deficit that had ballooned to $290 billion, an all-time
record. The linchpin of the Administration's economic strategy was a
credible budget plan that could achieve substantial deficit reduction
over the longer term, yet be balanced and gradual enough to allow the
economy to gather strength and move toward full employment in the
short term. The success of this program rested on achieving an interest rate environment conducive to investment, which would allow the
economy to grow in the face of a contractionary fiscal policy. This in
turn required that financial markets correctly anticipate an appropriately accommodative monetary policy. In large measure, that is
exactly what happened. Long-term interest rates fell to 25-year lows
in 1993, spurring a pickup in economic growth.
A key feature of the Administration's deficit reduction plan was its
credibility. A credible and realistic program for deficit reduction—one
that observers and financial markets judged likely to be fully implemented—was a precondition for the reduction in interest rates that
spurred investment-led growth. Fundamental to the plan's credibility
was the adoption of a set of economic projections that represented
conservative, mainstream forecasts of future growth and inflation.
These projections eschewed the "rosy scenarios" of previous budgets,
which invariably fell short of reality; they were not meant to indicate
the best that the economy could do, but rather how the economy was
most likely to perform given past experience. In fact, the economy's
performance has been stronger than the Administration projected.
In the 1980s expansive fiscal policy required relatively tight monetary policy in the form of high interest rates to prevent the economy
from overheating. This policy mix is particularly unfavorable from
the standpoint of fostering longer term growth: high interest rates
impede capital formation, while burgeoning government deficits
depress national saving and contribute to more borrowing from
abroad. The net result of deficit reduction in the 1990s has been to
promote a more balanced mix of fiscal and monetary policy. Deficit
reduction has also had an important collateral benefit, namely, a
restoration of Americans' confidence in the ability of their government
to manage its own affairs.

INVESTING IN PEOPLE AND TECHNOLOGY
The primary purpose of deficit reduction, however, is to encourage
investment. Hence, this Administration recognized from the outset
that a plan that balanced the budget at the expense of the government's own productive investments would ultimately be
self-defeating. Far from curtailing public investment, the



22

Administration has given investment in people and technology a
major place in its economic agenda.
Government invests in people by promoting public health and safety, encouraging opportunity and individual responsibility, and
assisting in the formation of human capital through education and
training. This last function is especially vital in today's high-technology economy, where a skilled work force is an essential condition for
future growth. Education is critical if Americans are to capitalize on
the opportunities created by new technologies and more open global
markets. And education and training programs are of particular
importance in the present economic environment as a means of preventing poverty and ensuring opportunity for all. The return to
education has risen dramatically since the late 1970s; today, highly
skilled workers command a large premium in the labor market over
their less skilled counterparts. This rising skill premium is an important reason why earnings inequality is greater today than it was in
the late 1970s. Governments have an important role to play in ensuring that all Americans have the opportunity to accumulate the skills
necessary for economic success. This requires initiatives to improve
public education at the primary and secondary levels, as well as programs to make higher education more accessible. It also requires
recognizing that learning must be a lifelong activity in an economy
where technological change is ongoing.
Investing in basic research and the development of new technologies is another important function of government. The private sector
spends billions of dollars every year on research and development.
But economists have long recognized that private sector spending
alone in these areas will be less than the optimum. Since the fruits of
a new scientific discovery, for example, are enjoyed not merely by the
discoverer but by society as a whole, the private incentive for pursuing scientific research falls short of the total social benefit. Moreover,
new theories of economic growth place a special emphasis on
advances in knowledge through research and development as the
motive force behind long-run increases in living standards. This
analysis implies that the return to government investment in basic
research and technology is likely to be especially high.

OPENING MARKETS AT HOME AND ABROAD
A third major component of the Administration's economic agenda
is the promotion of freer and more competitive markets at home and
abroad. Domestically, this has involved the pursuit of initiatives
directed at enhancing competition—particularly in such industries as
telecommunications, electric power, financial services, and health
care—and a vigorous approach to antitrust enforcement. It has also
meant addressing market failures in such areas as health care and
environmental protection. In some cases the effect of these initiatives
is a one-time boost to the level of output, through greater efficiency



23

and lower costs. But these policies can also sometimes lead to a faster
rate of economic growth. For example, past experience provides evidence that sensible deregulation can not only help raise efficiency, but
also spur continued innovation through greater competition.
Moreover, some benefits of these policies are not captured in the GDP
statistics at all, but rather take the form of improvements in our quality of life.
The Administration is also committed to reducing the burden of
government regulation and ensuring that the benefits of new regulations justify their costs. Many government regulations apply to
industries in which technological change is rapidly altering the
nature of market competition. A key precept of this Administration's
approach to regulation, therefore, is that the regulatory process must
be dynamic, with regulatory policies under constant review so as to
minimize their burden on consumers and businesses. Another important precept is to refrain from policies that regulate through
government fiat in favor of policies that use market-based incentives
to attain the desired outcome. Experience with such policies as permit trading for sulfur dioxide emissions suggests that this approach
can help ensure that compliance with socially beneficial goals is
achieved efficiently and cost-effectively.
This Administration has also worked hard to open markets abroad
by encouraging fairer and freer international trade. From his earliest
days in office, the President has advocated an outward-looking, internationalist trade policy. During the Administration's first 4 years the
United States concluded over 200 trade agreements with other countries. Some of these agreements, such as the North American Free
Trade Agreement (NAFTA) and the Uruguay Round agreement of the
General Agreement on Tariffs and Trade, were comprehensive in
scope, whereas others had much more limited aims—but all are vital
to our Nation's competitive future.
Economists generally recognize that an open economy offers both
static and dynamic advantages. First, trade benefits an economy by
allowing it to specialize in what it does best—a point that economists
have made since the early 1800s. Even if a country is more efficient
than its neighbors at producing every good it consumes, it can still
benefit from trade by specializing in the production of goods in which
it is relatively more efficient, and then trading its surplus production
for whatever else it wants to consume. In addition, a new view of
international trade argues that increased trade actually raises an
economy's rate of growth, because increased competition and larger
markets spur the acquisition of new skills and the development of
new technologies. If so, the case for trade liberalization becomes even
more compelling, since raising the economy's growth rate—even by a
few tenths of a percentage point per year—has vastly more significance for long-run living standards than even a relatively large
one-time increase in the level of output.



24

A RECORD OF ACCOMPLISHMENT
Focusing on the fundamentals in shaping economic policy has paid
off by helping to produce an economy that is stronger than it has been
in decades. This past year alone saw a drop in the unemployment rate
to its lowest level in a generation and the forging of a budget agreement that promises to bring the Federal deficit under control for the
first time in decades. Last year also saw significant advances in this
Administration's economic agenda along other fronts.

BENEFITS OF A HIGH-EMPLOYMENT ECONOMY
Driven largely by strong growth in business fixed investment,
growth in real GDP and employment picked up in the second half of
1993 and persisted in 1994. This robust growth led to a series of monetary policy tightenings over the course of 1994, which resulted in
more moderate growth in 1995. In retrospect, 1995 may have been the
pause that refreshes. Economic growth exceeded expectations in
1996, and strong growth continued through 1997. The result has been
a high-employment economy with the potential to overcome some of
the longer term problems of productivity growth and income distribution that built up in the 1970s and 1980s.
A high-employment economy brings enormous economic and social
benefits. Essential to personal economic security is the knowledge
that work is available to those who seek it, at wages sufficient to keep
them and their families out of poverty. A tight labor market increases
the confidence of job losers that they will be able to return to work,
lures discouraged workers back into the labor force, enhances the
prospects of those already at work to get ahead, enables those who
want or need to switch jobs to do so without a long period of joblessness, and lowers the duration of a typical unemployment spell.
Returning the economy to full employment yields a direct benefit by
ensuring that the economy's resources—human and material—are
not squandered by needless cyclical unemployment. On average,
reducing the unemployment rate by a percentage point raises output
by approximately 2 percent; in 1997, 2 percent of GDP was $160 billion, or roughly $600 for every American man, woman, and child.
Wasted resources from not producing at potential, together with the
human cost of unemployment, are intolerable; the elimination of this
waste is the principal benefit of a sustained return to full employment.
But a high-employment economy in which jobs are plentiful and
labor markets tight yields other benefits as well. Short-term economic conditions can affect long-term structural unemployment. A tight
labor market encourages participation by those who might otherwise
be forced to sit on the sidelines, and makes it easier to absorb less
skilled or younger and more inexperienced workers into the labor
force. These new labor market entrants gain much-needed job experi


25

ence, building the skills they will need to hold down a job in the
future. The importance of this can be seen from the experience of
some European countries: prolonged stagnation or recession may
have led to a permanent increase in unemployment there, as the
unemployed and the never-employed have seen their skills atrophy or
become obsolete. Running a high-employment economy, then, may be
one of the surest ways to ensure that an unacceptably large fraction
of our citizens are not consigned to long-term joblessness and economic marginalization.
From the 1980s until the early 1990s, the economy's ability to
reduce poverty through growth alone was hampered by a strong headwind: sustained declines in wages at the low end of the earnings
distribution that offset the benefits of an expanding economy for the
poorest Americans. As a result, holding a job no longer ensured that
a less skilled worker would be able to lift his or her family out of
poverty. This adverse secular trend raises even further the stakes of
maintaining a high-employment economy.
Keeping the unemployment rate low and job growth high is also
necessary if we are to move current welfare recipients into the work
force. Early, indirect evidence here is encouraging: employment and
labor force participation rates among single women who maintain
families—about two-thirds of whom have children under 18—have
increased in the past few years. This is probably in part the result of
recent welfare reform: the greatest acceleration in employment rates
has occurred among those single women most likely to be affected by
welfare reform, namely, those with young children. Nevertheless, it is
obvious that fostering an economy in which job opportunities are
plentiful plays a crucial part in aiding the transition from welfare to
work.
We have begun to see heartening signs that the current expansion
is yielding gains in living standards for all Americans, especially
those at the bottom of the income distribution. The poverty rate fell
to 13.7 percent in 1996, from 15.1 percent in 1993; the poverty rate
for black Americans is at a historical low, and in 1997 unemployment
among blacks fell to its lowest rate since 1973. Since 1993, household
income has grown in each quintile of the income distribution, with the
largest percentage increase going to the poorest members of our society (Chart 1-2). Maintaining a full-employment economy is essential
if this progress is to continue.

DEFICIT REDUCTION: COMPLETING THE TASK
The most significant economic policy event of 1997 was the passage
of a deficit reduction package that will finish the task of balancing the
Federal budget by 1999. This will be the first balanced budget since
1969, and only the ninth since World War II (Chart 1-3).
Some have claimed that the expanding economy, not government
policy, deserves all the credit for vanquishing the deficit. It is cer


26

tainly true that ups and downs in the business cycle have an important effect on both revenues and outlays, leading to fluctuations in
the deficit. But even when cyclical factors are thus accounted for, it
Chart 1 -2 Real Household Income Growth by Quintile, 1993-96
From 1993 to 1996, households in the lowest quintile of the income distribution enjoyed
the fastest growth in real incomes.
Average annual percent change
2.5

Lowest

Second

Third
Quintiles

Fourth

Highest

Source: Department of Commerce (Bureau of the Census).

Chart 1-3 Federal Budget Deficit as a Percent of GDP
The budget is projected to be in balance in fiscal 1999 for the first time since 1969.
Percent of GDP

8

6 -

4 -

2 -

1950

1954

1958

1970 1974 1978 1982 1986 1990
Fiscal years
Sources: Department of Commerce (Bureau of Economic Analysis) and Office of
Management and Budget.




1962

1966

27

1994

1998

is evident that policy has played a major role in bringing the deficit
under control. It is also worth noting that in January 1993, before the
1993 deficit reduction package was adopted, the Federal deficit was
projected to reach $350 billion in fiscal 1998 and to rise to $650 billion
in fiscal 2003, even when the economy was projected to be at full
employment. Finally, it is difficult to imagine that the economy's performance would have been anywhere near as strong as it has been
without a credible and successful attempt to put the government's fiscal house in order. Improvements in economic conditions have played
a part in reducing the deficit, but a balanced budget would not now be
in sight had the Nation remained on the fiscal course in place in 1992.
Although a balanced budget is often taken as the goal of fiscal policy, from an economic standpoint the motivation for deficit reduction
is to raise national saving, thereby augmenting society's future consumption possibilities. When the government's budget is in surplus,
in the sense that revenues exceed outlays, the government makes a
positive contribution to national saving. As discussed in Chapter 2 of
this Report, a case for higher national saving can be based on the high
return on saving in the United States and the fact that private saving remains low. A higher rate of national saving now would lead to a
larger economy when the baby-boom generation retires, thus making
it easier to provide for their retirement without imposing undue burdens on younger generations. Although a balanced budget does not
add to the government's outstanding debt to the public, which past
deficits have ballooned, it does not subtract from it either. Leaving a
large public debt in place implies that a sizable portion of existing
government resources will continue to be absorbed by interest payments, leaving less for all other spending. Indeed, one legacy of the
runup in the national debt that accompanied the deficits of the 1980s
and early 1990s has been a sharp increase in the share of total outlays that must be used to make interest payments on the debt (Chart
1-4).

POLICIES TO RAISE GROWTH, REDUCE INEQUALITY,
AND INCREASE OPPORTUNITY
A significant part of the Administration's economic agenda also
involves investment in people: in a broad sense, this encompasses
education and training, measures to promote health, and policies that
extend opportunity to all Americans. A number of policies have been
put in place to ensure that these investments are made.

Education
The 1997 balanced budget agreement included the largest Federal
investment in education in a generation, in the form of initiatives to
improve the quality and accessibility of primary, secondary, and higher education.



28

Chart 1 -4 Net Interest as a Share of Federal Outlays
Net interest payments now represent twice as large a share of total outlays as they did
in the 1970s.
Percent

16

14

12

10

1967

1972

1977

1982

1987

1992

1997

Fiscal years
Source: Office of Management and Budget.

Higher education is a particular priority. The earnings of college
graduates have risen sharply relative to those of workers with only a
high school education; in today's economy, a college degree has
become as vital for success as a high school diploma was a generation
ago. Even post-high school education that does not lead to a bachelor's
degree (such as an associate's degree program or vocational or technical training) boosts earnings substantially over just completing
high school (Chart 1-5).
Moreover, learning must be a lifelong process. A fundamental characteristic of our economy is constant technological change. Such
progress holds the promise of higher living standards for all, but it
also requires workers to adapt to employers' demands for a welltrained, highly skilled work force. It is therefore critical to provide all
individuals—including those not traditionally thought of as "school
age"—with access to additional education or training.
The President's higher education initiatives reflect these principles.
Specific measures include:
• The largest Pell grant increase in 20 years. The balanced budget
agreement raises the maximum Pell grant by over 10 percent, to
$3,000. Approximately 3.7 million students receive Pell grants, and
close to a quarter of a million families will become eligible for the
grant for the first time.




29

Chart 1 -5 Returns to Education
Earning an associate's degree raises earnings significantly.
Percent change in earnings relative to an individual with a high school diploma only
9th grade
11th grade
Associate's degree
(vocational)
Associate's degree
(academic)
Bachelor's degree
Master's degree
Professional school
Doctorate

150
50
100
-50
0
Note: 1993 data used in calculations.
Source: Calculations by Council of Economic Advisers, based on the Current Population
Survey.

• HOPE scholarships for post-high school education. In his 1997 State
of the Union address, the President called for making the 13th and
14th years of education as universal as a high school education is
today. The HOPE scholarship program accomplishes this by providing a tax credit for higher education expenses of as much as $1,500,
enough to cover tuition at a typical community college.
• A tuition tax credit for Americans of all ages. A 20-percent tax credit for post-high school tuition expenses will be available for the first
$5,000 (and after 2002, $10,000) of qualified education expenses.
This tax credit is offered not just to school-age Americans but to
those already working as well, to permit workers to upgrade their
skills at any time during their life.
• Tax exemptions for employer-provided education benefits. The budget agreement extends Section 127 of the tax code for 3 years,
allowing workers to exclude up to $5,250 of employer-provided education benefits from their taxable income.
• A tax deduction for interest on student loans. Up to $1,000 of interest payments on loans for higher education expenses will be
tax-deductible in any given tax year, starting in 1998. This deduction will rise by $500 each year until 2001.
Because public education in the United States is largely administered by local authorities, the Federal Government's ability to



30

influence primary and secondary education is somewhat less direct.
Nevertheless, this Administration recognizes that there is much that
the Federal Government can do to improve our public schools, and
has worked to enact programs that will ensure that our children have
access to the best possible primary and secondary education. These
initiatives include:
• Establishing national standards. Research shows that students in
countries that have standardized, mandatory examinations do better than students in countries that do not. The Administration's
voluntary national testing program has received full funding; this
will allow for the development of national fourth-grade reading and
eighth-grade mathematics examinations.
• Expanding Head Start. The balanced budget agreement raised
funding for Head Start by $374 million, to $4.4 billion, to reach the
Administration's goal of having 1 million children in the Head Start
program by 2002. Since 1993, funding for this program, which has
shown great success in preparing low-income preschoolers to enter
school, has increased by 57 percent. The program will serve over
830,000 children and their families in 1998, including 40,000
infants and toddlers in the Early Head Start program.
• Establishing a comprehensive literacy strategy. Every child should
be able to read by the third grade. To meet this basic goal, the
President's comprehensive literacy strategy will receive nearly $46
million in new funding in 1998 for State teacher training, family literacy, and tutoring efforts; $210 million was provided in an advance
appropriation to be available in 1999, contingent on authorization
of a literacy initiative such as the America Reads Challenge.
• Increasing funding for charter schools. The President set a goal of
having 3,000 locally designed public charter schools in operation by
early in the next century. Funding for charter schools is increased
by over 50 percent in the balanced budget agreement, to allow the
Department of Education to support nearly 1,000 charter schools by
the end of 1998.

Health
This Administration has made promoting health, increasing access
to health insurance, and improving the functioning of health insurance markets a major priority. The Balanced Budget Act of 1997
allocates $24 billion over 5 years to assist States in providing health
insurance for up to 5 million children through Medicaid or State programs. This represents the single largest investment in children's
health since Medicaid was begun in 1965. The Administration's 1999
budget proposes to expand access to health insurance further by
allowing uninsured Americans between 62 and 65 years old, as well
as 55- to 61-year-olds who have been laid off or displaced from their



31

jobs, to buy into the Medicare program. These measures are fully offset so as not to increase the cost of Medicare to the government.
The Balanced Budget Act also takes important steps toward ensuring that Medicare itself remains viable. Structural reforms—such as
expanded choice among health care plans and the restructuring of
payment systems—will help save $115 billion over 5 years. Recently
passed legislation also provides additional funding for preventive
care, such as mammograms, which can help keep health care expenses down by catching and treating health problems before they become
serious. These and other measures will keep the Medicare trust fund
solvent for at least the next decade. The Balanced Budget Act also created a commission to examine long-term solutions to the problems
that will face Medicare as a result of the demographic changes coming in the 21st century.
The Administration has also promoted policies to improve the functioning of health insurance markets, increase consumer protection,
and improve access to new Pharmaceuticals. The Health Insurance
Portability and Accountability Act of 1996 helps workers who change
jobs by making it easier to carry their health insurance with them to
the new job. In 1997 the President's Commission on Consumer
Protection and Quality in the Health Care Industry, established to
advise the President on changes in the health care system, responded to the President's request to develop and recommend a "Consumer
Bill of Rights and Responsibilities." The President urged the
Congress to pass appropriate and necessary legislation to ensure that
a range of protections are extended to all Americans. And the Food
and Drug Administration Modernization Act of 1997, which codifies a
number of initiatives taken by this Administration as part of the
reinventing government initiative, will help ensure the timely availability of safe and effective new drugs. These policies and others are
considered in greater detail in Chapter 5 of this Report.
Finally, teenage tobacco use is one of the most important public
health concerns that the Nation faces, and it has been rising in recent
years. The increase in the tobacco tax passed last year not only will
help fund the expansions in children's health insurance coverage
described above, but also will help reduce teen smoking. The rise in
the tax complements recent Food and Drug Administration rules to
limit advertising targeted at youth. Finally, the Administration has
indicated its support for national legislation designed to achieve large
reductions in teen smoking, with strict financial penalties on the
tobacco industry if specific targets in this effort are not met.
Welfare Reform and Poverty Alleviation
Welfare reform presents an ongoing challenge: to ensure that our
neediest citizens can maintain a decent standard of living without
creating incentives that encourage a life of dependency. This
Administration has committed itself to a policy that combines work



32

incentives and community efforts to move people off of welfare and
into employment. This has contributed to the largest reduction in
welfare rolls in history.
The same long-term changes in the wage structure that give greater
rewards to education and skill also imply that some workers will find it
difficult to raise themselves and their families out of poverty, even with
a full-time job. To make work pay, all those who work must be guaranteed a minimum level of earnings. The Administration has made an
expansion of the earned income tax credit (EITC), which raises the
take-home pay of eligible low-income workers, a cornerstone of its
strategy to promote work and reduce poverty (Box 1-1). This expansion
has occurred alongside two increases in the minimum wage (the second

Box l~l+~P0wrty Alla^iitttoii, the Earned toeome
Credit, and the Minimum Wage
A typical cash assistance program guarantees its maximum
benefit to those who receive no income* then phases out this ben*
eflt aa the recipient's income from other sources (usually labor)
rises, The disincentive to work that such programs create has
been a major concern—perhaps the major concern—of policymakers with regard to welfare policy. These disincentives will
persist so long as we confine ourselves to considering policies
with this structure*
One way to avoid these work disincentive effects is to design
programs that add to the wages of low-income workers. One
such program^ the earned income tax. credit, was expanded substantially in 1093. Under the EITC, eligible low-wage workers
receive a credit against their income and payroll tax lability;
this credit is rebated in cash if the worker^ income tax ttebility
is zero, The EITC differs from the typical cash assistance pro*
gram in that no benefits are paid to those who do not work? and
benefits rise as earnings increase (up to some threshold earnings level). It therefore largely eliminates the typical program's
work disincentive effects.
Hie asdiiimum wage complements and enhances the ISITC*
When used by itself to guarantee a subsistence level of income,
the minimum wage must be set very high. But an excessively
Mgh minimum wage (that is, substantially above the current
one) eould discourage hiring. On the other hand, using tfca EITC
alone to guarantee an income floor would require payment of a
large subsidy^ which would then have to be phased out slowly to
minimise the disincentive to earn additional income. This
makes the program much more costly, Henee? the minimum
wage and the EITC are best employed jointly in designing an
optimal asttetaitea package.



33

of which, in September 1997, raised the minimum wage from $4.75 to
$5.15 an hour).
In August 1996 the President signed into law a comprehensive,
bipartisan welfare reform bill, which established the Temporary
Assistance for Needy Families program. This created a new system of
block grants to States and dramatically altered the nature and provision of Federal welfare benefits in America. This legislation has
changed the Nation's welfare system into one that requires work in
exchange for time-limited assistance and provides support for families moving from welfare to work.
Although these policies have helped shrink the welfare rolls significantly since 1993, much remains to be done. To that end, two
additional initiatives have been put in place to advance this
Administration's strategy for moving welfare recipients into employment. The first is a tax credit for employers who hire long-term
welfare recipients; the credit rebates to employers up to $3,500 in
wages paid in the first year and up to $5,000 in the second. The second initiative is the Welfare to Work Job Challenge Fund, which will
assist States and communities in moving long-term welfare recipients
into lasting, unsubsidized employment. A hallmark of this fund, for
which $3 billion has been earmarked, is that it is targeted to those
areas of the country most in need of poverty alleviation.
The Child Tax Credit
The Administration proposed a tax cut to help working families
with the expense of raising their children. The Taxpayer Relief Act of
1997 will reduce taxes for 26 million families by providing a tax credit of $500 per child. This credit will benefit over 40 million children
under age 17, including over 10 million children from working families with incomes below $30,000. Because the credit is partly
refundable, large families who have paid significant out-of-pocket
payroll taxes can benefit even if they have little or no income tax liability.

STRENGTHENING CITIES AND COMMUNITIES
This Administration has worked to make Federal resources available for investment in our Nation's cities and communities. First, the
Administration has sought to expand the number of Empowerment
Zones and Enterprise Communities. The initial round of competition,
in 1994, led to the establishment of 95 Enterprise Communities and
9 Empowerment Zones; both urban and rural areas were represented. The Taxpayer Relief Act of 1997 established 22 additional
Empowerment Zones. To compete for these designations, communities submitted strategic plans for revitalization; this requirement is
intended to mobilize local communities and encourage them to harness their talents and resources in framing a plan for local economic
development. Designated zones and communities receive tax benefits



34

and flexible grants and are entitled to apply for waivers of certain
Federal regulations; the underlying principle of the program is that
communities know best how to solve their own problems but may lack
the necessary resources.
The Administration has also worked to promote fair access to
loans and investment capital for residents of low- and moderateincome areas. Reform of the Community Reinvestment Act
regulations required banks to focus on performance—actual lending, investments, and services—rather than paperwork. Since 1993,
conventional home mortgage lending to black Americans has
increased by 67 percent, lending to Hispanic borrowers is up nearly
50 percent, and lending activity in low- and moderate-income communities has risen by 37 percent. The Administration also obtained
$80 million in funding for Community Development Financial
Institutions, which make investment capital and other financial
products available to low- and moderate-income communities. The
President's 1999 budget requests an additional $45 million for this
program.
In addition, the President signed into law the "brownfields" program, which will provide tax incentives for the restoration of urban
land contaminated by pollution. These incentives will leverage more
than $6 billion for nationwide private sector cleanups and the redevelopment of 14,000 contaminated and abandoned sites in
economically distressed urban areas.
Several basic principles inform these policies. First, they seek to
equip communities with the tools they need in order to flourish—they
are helping hands, not handouts. Second, they place the principal
responsibility for community development with the communities
themselves, because they are closest to their problems. Third, they
emphasize private sector engagement rather than government mandates. And finally, they stress results over process: the Enterprise
Communities/Empowerment Zones program, for example, gives communities broad scope to determine for themselves the best path for
development; similarly, the reformed regulations implementing the
Community Reinvestment Act use criteria based on actual outcomes
to judge compliance with its provisions.

STRENGTHENING THE PERFORMANCE OF
DOMESTIC MARKETS
As part of this Administration's commitment to free and open markets, the Antitrust Division of the Department of Justice has worked
together with the Federal Trade Commission to vigorously enforce the
Nation's antitrust laws. Recent cases and investigations reveal that
the Department of Justice and the Federal Trade Commission have
both pursued an aggressive but balanced approach in enforcing
antitrust law; in particular, both agencies have sought to ensure the
continued growth and competitiveness of high-technology industries.



35

Chapter 6 of this Report describes how the antitrust agencies have
worked to attain these goals in several recent cases.
OPENING FOREIGN MARKETS
Progress was also made in 1997 toward opening foreign markets to
U.S. goods, as a number of important international trade initiatives
were made final. Trade agreements affecting three important sectors
were reached, concluding some unfinished business from the
Uruguay Round of multilateral negotiations. The first of these agreements, the Information Technology Agreement (ITA), will eliminate
tariffs on a large array of information technology products, in which
U.S. firms tend to be highly competitive. Also successfully concluded
were an agreement covering financial services, which will foster
broad liberalization of banking, securities, and insurance markets,
and a key agreement to liberalize basic telecommunications services
(including telephone services). Chapter 7 of this Report considers the
Administration's trade policies in more detail.
These negotiations illustrate an important point about trade liberalization. Even though all three agreements involved sectors in which
the United States is generally thought to have a competitive advantage, other countries were willing nevertheless to agree to their
liberalization. They did so because they recognized that the entry of
efficiently produced foreign products in these markets would improve
the competitiveness of their own economies: securing goods of the
highest quality at the lowest possible price is good for any economy.

PROMOTING AN ECONOMICALLY SOUND
ENVIRONMENTAL AGENDA
The Administration took several important steps in 1997 to protect the environment. These included efforts to address global
climate change and to improve air quality. In December representatives of the United States and some 160 other countries, meeting in
Kyoto, Japan, agreed to establish binding limits on industrial countries' greenhouse gas emissions. These limits are intended to stem
the disruptive effects of climate change by stabilizing atmospheric
concentrations of greenhouse gases. (Because developing countries
will emit an increasing share of global greenhouse gases, the
President has indicated that the Kyoto agreement will not be submitted for ratification without meaningful developing-country
participation.)
The Administration has proposed several market-based approaches
to meeting the Kyoto limits. Domestically, tax incentives for energyefficient technologies and research and development will spur early
efforts to reduce emissions. A national system of tradable permits for
greenhouse gas emissions, patterned after the successful permit trading program for sulfur dioxide emissions, will be implemented later




36

under the President's proposal. In addition, the Kyoto agreement
allows for trading in greenhouse gas emissions permits on an international scale, as well as opportunities for firms in the industrial
countries to receive emissions credits for investing in climate-friendly technologies in developing countries. All of these efforts will help
the United States attain its greenhouse gas emissions target in a costeffective way.
In July 1997 the Environmental Protection Agency (EPA) issued a
significantly more stringent standard for ground-level ozone and a new
standard for fine particulate matter in the atmosphere. Although the
Clean Air Act does not allow for the consideration of costs in setting
these standards, under the President's policy the EPA must implement
these health-based standards in a cost-effective manner. The
Administration's plan for achieving the new air quality standards
departs from traditional command-and-control approaches by designing regional strategies that will complement local efforts, and
encouraging the development of trading programs for emissions of
nitrogen oxides, which are ozone precursors. The nitrogen oxide trading program, like the acid rain program and the trading program
envisioned for greenhouse gas emissions, enlists market incentives in
controlling pollution and should reduce pollution more cheaply than do
traditional regulatory approaches. Chapter 5 of this Report provides a
detailed assessment of the Administration's environmental policies.

FACING THE CHALLENGES AHEAD
In many ways the U.S. economy today is very different from that in
which our parents and grandparents lived and worked. Today, 24 percent of families are headed by a single parent, compared with 14
percent 25 years ago. And three in five married mothers with children
under 6 are in the work force—twice as large a share as in 1970. This
makes affordable, quality child care a pressing concern for most families. Meanwhile the nature of the labor market has changed
significantly: few American workers expect to be working for the same
employer—or even to be in the same career—when they retire.
Industry has also changed radically: in the 1950s the information
technology industry barely existed; today it employs a larger share of
the labor force than the automobile industry did in the 1950s and
1960s. And the U.S. population is aging, implying that in the next
century there will be fewer workers for every retiree.
This Administration's economic agenda is designed to deal with
these changes and the challenges they pose. If the American economy
is to maintain its preeminence as the strongest and most dynamic in
the world, both policymakers and citizens will have to meet and overcome a number of challenges in the 21st century.
Several such challenges already loom large for this Administration
and Congress. Perhaps the most important is preparing for the aging



37

of the population, which requires reforming Medicare and Social
Security and promoting retirement security more generally. As
reported above, some progress was made in addressing Medicare's
immediate problems, but comprehensive reforms are still needed to
ensure the program's long-term viability. Likewise, steps will have to
be taken to strengthen the finances of the Social Security system.
For almost 60 years Social Security has provided Americans with
income security in retirement and protection against loss of family
income due to disability or death. A large share of elderly Americans,
particularly those with low incomes, rely on Social Security as their
primary source of pension income in retirement. The system has
enjoyed dramatic success in reducing poverty rates among older
Americans. However, many Americans now fear that Social Security
will not be there for them when they are ready to retire. This concern
reflects the widespread recognition that, under current "intermediate" projections of the Social Security trustees, the system faces a
long-term funding gap: beginning in 2012, unless the system is
reformed by then, the government will be unable to pay current Social
Security benefits in full out of current payroll taxes; it will then have
to draw down the system's trust fund, and by 2029 those funds will be
exhausted. If still nothing has been done, the government would then
face several options which it could adopt singly or in combination: it
could reduce benefits until they are in line with collections, raise payroll taxes to cover an unchanged level of benefits, or finance the
shortfall from other parts of the budget, by raising other taxes, cutting expenditures on other programs, or borrowing and allowing the
budget deficit to increase. One or more of these measures will have to
be taken so long as no changes are made to the present system.
Although the seriousness of the financial imbalance facing Social
Security should not be downplayed, its magnitude is not so large as to
be insurmountable, particularly if early action is taken. For- example,
even if nothing is done and the trust fund is exhausted, payroll taxes
will still be sufficient to permanently finance roughly 75 percent of
benefits. Put another way, the difference between the anticipated
income and the anticipated expenditures of the Old Age, Survivors',
and Disability Insurance program over the next 75 years amounts to
around 21A percentage points of taxable payroll, or approximately 1
percent of GDP. (The imbalance is somewhat larger when viewed over
a longer horizon.) These facts suggest that the problem of placing
Social Security on a sound financial footing can admit of eventual resolution, and the President has proposed a process to devise an
appropriate solution over the next 2 years. The President has also
proposed that any budget surpluses should be reserved until Social
Security reform is achieved.
Medicare reform presents a somewhat thornier problem, in terms
of both its complexity and its scale. Unlike Social Security, Medicare
promises not just the payment of a sum of money but the delivery of



38

a service: health insurance. The government has little influence over
the rate of increase in the cost of providing this service, which has
been rising faster than general inflation for decades, largely driven by
technological advances in medical care. Higher costs for medical care
are projected to account for the bulk of the increase in Medicare
expenditures for the next 25 years or so, after which the aging of the
baby-boom generation will act to raise expenditures still further
through increases in program enrollment. Hence, any long-term
reform will have to involve slowing both the rise in health care prices
and the growth in volume and intensity of use of covered services.
Neither will be accomplished easily.
Before last year's budget legislation was enacted, the trust fund for
the component of Medicare that covers hospital costs was projected to
fall to zero in 2001. The 1997 reforms will delay the trust fund's depletion until 2010. The legislation also calls for the establishment of a
bipartisan commission to assess and recommend the structural
changes that will be needed to ensure Medicare's long-term viability.
A second major policy challenge involves continuing the drive for
more open international markets. Preferential trade agreements are
being negotiated among countries around the world at a rapid pace,
and the United States could easily be left behind through inaction.
Since 1992, countries in Latin America and Asia have negotiated 20
preferential trade arrangements that exclude the United States. One
of these is MERCOSUR, a customs union among four South American
countries. The European Union has begun a process intended to culminate in a free trade agreement with Brazil, Argentina, and the
other MERCOSUR nations; the President of one European nation has
even gone so far as to declare that the economic interests of Latin
America lie with Europe, not the United States. Meanwhile the MERCOSUR nations are attempting to extend their preferential trade
arrangement to the entire continent. It is clear that now, more than
ever, continued engagement with the world trading system will
require an active effort on the part of the United States.
In 1997 the Senate voted to move forward on extending the
President's so-called fast-track negotiating authority. This authority
allows the President to negotiate trade agreements and submit them
to the Congress for a yes-or-no vote, without amendments. However,
in the House of Representatives the vote to renew fast-track was postponed. Some have voiced concern that free trade hurts American
workers and contributes to the U.S. trade deficit. As discussed in
Chapter 7, however, market-opening initiatives do not cause net job
losses to the U.S. economy as a whole, although they do result in a
reallocation of jobs into expanding, export-oriented industries. As the
chapter documents, the jobs created by increased trade are good jobs,
offering high pay. But some workers are indeed hurt by more open
markets, just as some workers are harmed by technological innova-




39

tion, even though market-opening initiatives unambiguously benefit
the economy as a whole.
This Administration has realized from the beginning that the government can minimize the impact of dislocations affecting workers
who lose their jobs, by speeding the adjustment process. For example,
one of the key provisions of NAFTA involved monitoring those industries that were in danger of being adversely affected by the
agreement, and the Administration committed itself early on to providing for dislocated workers through retraining programs. The
President's 1999 budget includes proposals to expand the scope of
trade adjustment assistance and to increase funding for these programs. More generally, the Administration's commitment to investing
in people through education and training serves as a strong complement to its policy of trade liberalization.
A widespread misconception is that one of the benefits of increased
trade comes in the form of an improved balance of trade. Economic
policies do indeed affect the current account (the broad measure of
U.S. international transactions that includes investment income and
transfers as well as trade in goods and services), but it is budget, saving, and investment policies, not trade liberalization policies, that do
so. The Nation's current account deficit equals its borrowing abroad
to finance any excess of investment over domestic saving. The current
account is therefore a macroeconomic phenomenon that mirrors the
gap between what we as a Nation invest and what we save. The large
Federal budget deficits of the 1980s and early 1990s were a form of
negative saving, or dissaving, which reduced the total amount of
national saving available to cover the Nation's investment in plant
and equipment. In an important sense, the Nation was overconsuming in the 1980s, financing its consumption binge by borrowing from
foreigners. The result was a large and persistent current account
deficit.
We still have a current account deficit today, but for a very different reason. The near elimination of the budget deficit has left more
saving available for investment in plant and equipment by the private sector. National saving has risen. But because of the investment
boom during this expansion, the gap between investment and saving
has persisted. Once again, this shortfall is made up by borrowing
from abroad, and the result is a current account deficit. But there is
a big difference between borrowing to invest—as the Nation is doing
now—and borrowing to consume, as it did in the 1980s. In fact, running a trade deficit in order to expand the Nation's productive
capacity is not new to American history—we did much the same thing
in the last century, to build up the Nation's infrastructure, most
notably during the railroad construction boom. Ironically, therefore,
today's trade deficit reflects the economy's current success in growing
more rapidly than our trading partners and investing so much—and
not our free trade policies.



40

It is always difficult to explain this macroeconomic perspective on
the trade deficit to those who are primarily concerned with the microeconomics of their daily lives. But making the case in favor of trade is
particularly important now, because real danger threatens should
countries turn their backs on a progressive and integrated world economic order. Besides postponing the renewal of the President's
traditional trade-negotiating authority, the Congress chose not to
support the sort of financial participation in international institutions that is vital for the sound functioning of the international
system. Meanwhile financial crises in East Asia have made U.S.
international engagement more important, rather than less. Other
emerging-market countries are themselves in danger of reacting to
the East Asian crises by turning inward. It is important for their economic well-being, as well as our own, that they continue along the
path toward an outward-oriented market system, on which they had
until recently been making such astonishing progress. This will
require difficult macroeconomic and structural adjustments on their
part, including reducing their dependence on foreign borrowing. As a
result, these countries will have to reduce their trade deficits, and in
some cases even turn them into trade surpluses. This will inevitably
lead to an increase in U.S. bilateral trade deficits with some East
Asian countries. Again, however, such deficits are not the proper
gauge of the success or failure of U.S. trade policy.
The Nation faces other, broader challenges in shaping economic
policies for the 21st century. First, we must act to help families
address the problems they face in today's economy. More American
workers today are faced with the need to juggle the demands of the
workplace with the demands of family and home. Government must
act to ease this burden by ensuring that families have access to quality child care and health care. For this reason the President's 1999
budget includes a $21 billion increase in funding for child care, to
make it accessible to more families and raise its quality. An important
part of this proposal is increased tax credits for 3 million working
families to help them pay for child care, as well as an increase in block
grants to States that will directly subsidize child care for low-income
families. In addition, the proposal calls for a new Early Learning
Fund, along with support for the enforcement of State child care
health and safety standards, scholarships for up to 50,000 child care
providers per year, and funding for research and consumer education.
We must also continue to invest in our Nation's children. Chapter 3
of this Report shows that the last 3 years have witnessed notable
improvements in children's well-being along several fronts, including
decreases in child poverty, increases in consumption of basic health
care services, and improvements in health status and in some measures of educational achievement. However, many children remain
economically vulnerable. One in five children in the United States
lives in a family whose income is below the poverty line, one in seven



41

does not have access to health insurance, and a large proportion of
children fail to achieve basic levels of proficiency in science, mathematics, and reading. Chapter 3 considers ongoing and proposed
Administration initiatives that address these problems.
Finally, this country's longstanding goal of achieving equality of
opportunity among racial and ethnic groups has not yet been
attained. Chapter 4 of this Report reviews differences in economic status among blacks, Hispanics, non-Hispanic whites, Asians, and
American Indians. Although there has been progress in narrowing
these gaps in the postwar period, it has been very uneven, with rapid
progress in the 1960s and early 1970s followed by 20 years of stagnation from the early to mid-1970s to the early 1990s. For example,
since the mid-1970s the wages of young black college graduates have
fallen relative to those of their white counterparts. Although the current expansion has brought signs of renewed progress, substantial
disparities in economic status persist. For example, the median
wealth of white families is by some estimates 10 times that of black
and Hispanic families. More needs to be done to promote equality of
opportunity for all Americans. Many of the Administration's current
and proposed policies, such as those that encourage community
empowerment and education, are intended to address these disparities. And this Administration has pledged itself to furthering a
dialogue on race in America.

CONCLUSION
The United States today enjoys some of the most favorable economic conditions in a generation: high growth and low unemployment
combined with low and stable inflation. And the success of Americans
in adapting to the new economy in which they find themselves has
been truly remarkable. But that success—and the economy's present
strength—cannot be taken for granted. Recent developments do not
herald the end of inflation, the conquest of the business cycle, or the
permanent reversal of such secular trends as weak productivity
growth and rising income inequality. Rather, there are still long-term
changes at work that demand action by individuals, businesses, and
governments alike. This Administration has put in place a set of policies that has allowed the economy to grow and to flourish—in
particular by putting the Nation's fiscal house in order. But we must
continue to pursue sound policies aimed at opening markets at home
and abroad, promoting private and public investment, and ensuring
that all Americans, regardless of age or origin, have the skills they
need to prosper in a world of change and opportunity.




42

CHAPTER 2

Macroeconomic Policy and
Performance
MACROECONOMIC PERFORMANCE over the past 5 years has
been excellent, and the record in 1997 was truly remarkable. In general, the behavior of the economy last year bore out the analysis of
macroeconomic conditions presented in last year's Economic Report
of the President, which was confident that the economy would continue to grow without rising inflation. What was not anticipated fully
at that time, however, was how rapidly the economy would grow or
how strong the pace of job creation would be—or that inflation would
actually decline.
Last year the Administration forecast 2-percent growth during
1997 with an average unemployment rate of 5.3 percent. This forecast was not meant as an assessment of the best the economy could
do. Rather, it represented a conservative and credible set of economic assumptions to be used for forecasting Federal revenues, outlays,
and deficits in the preparation of the budget. Last year's Report recognized that the actual outcome could be even better. And it was,
with growth at nearly 4 percent and the unemployment rate averaging only 4.9 percent. More jobs were created in 1997 than in either of
the 2 previous years. Yet inflation remained subdued, with the consumer price index (CPI) rising just 1.7 percent during the year.
This chapter's analysis of macroeconomic policy and performance
concludes that the economy should continue to grow with low inflation in 1998. The chapter begins with a review of macroeconomic
performance and policy in 1997, to show in some detail where the
year's growth came from and how inflation remained so tame. The
second section examines the important question of whether our
understanding of inflation and our ability to predict it have changed
in significant ways. This question is part of a broader inquiry into
whether the economy has changed in such fundamental ways that
standard analyses of how fast it can grow without inflation need to
be replaced with a new view. The conclusion reached here is that no
sea change has occurred that would justify ignoring the threat of
inflation when the labor market is as tight as it is now; however, the
unemployment rate at which rising inflation becomes a serious
threat appears to be lower than it was in the 1980s, and the rate of
growth of potential output may be higher.




43

Prudence dictates keeping a wary eye on inflationary pressures,
but, as discussed in Chapter 1, the economy remains remarkably free
of the kinds of imbalances that often appear at the end of expansions.
For example, the analysis in the third section of this chapter indicates
that the financial condition of households remains fundamentally
sound, even though they took on considerable debt in 1997. Two cautionary notes are introduced. First, the rise in the stock market over
the first 7 months of 1997 put price-earnings ratios and other measures of stock market valuation near historical highs. Second,
households are continuing to consume a very high proportion of their
disposable income and are saving little. The implications of this low
saving rate for long-term growth are explored in the fourth section of
the chapter, which also assesses the positive contribution of deficit
reduction. The chapter concludes with the Administration's forecast
and outlook.

OVERVIEW OF 1997: A BURST OF GROWTH
Economic growth exceeded expectations in 1997, and the unemployment rate declined to a 24-year low. Households and firms both
increased their spending at robust rates as continued low inflation,
low unemployment, declining costs of business equipment, and lower
long-term interest rates contributed to a favorable economic environment for both consumers and producers. Federal Government
purchases of goods and services declined in real terms, and purchases by State and local governments increased only modestly. Net
exports continued to be a restraining influence on growth.
Strong investment in new productive capacity in the past few years
has helped the economy accommodate higher spending without rising
inflation. But inflation has also been held in check by several other
favorable developments that have kept prices from accelerating even
as wage growth has picked up. Chief among these have been the rise
in the value of the dollar on foreign exchange markets (which makes
imports cheaper), unusually steep declines in prices for computers,
and continued moderation in employer costs of health insurance.
Late in 1996 the economy was already operating near the consensus estimate of its noninflationary potential. Continued robust
economic growth in the latter part of 1996 and early 1997 promised
to increase resource utilization rates even further, raising concerns
that inflationary pressures would build, and the Federal Reserve
raised short-term interest rates in March. With inflation low and stable—and in light of the turmoil in Asian financial markets that began
to emerge in mid-1997—the Federal Reserve made no further interest rate moves.




44

AGGREGATE SPENDING IN 1997
An accounting of the sectoral contributions to growth in 1997 shows
that increases in private domestic spending for consumption and investment combined exceeded growth in gross domestic product (GDP; Table
2-1). Modest increases in State and local government expenditures
accounted for the increase in total government spending. Net exports
became more negative.
TABLE 2-1.—Components of GDP and Growth in GDP, 1997
Contribution to growth
Item

Billions
of
dollars

Percent
of GDP

Percentage
points

Percent of
total change

Personal consumption expenditures

5,488.6

67.9

2.5

65.2

Gross private domestic investment

1,237.6

15.3

1.5

38.4

1,173.0

14.5

1.1

27.3

845.4
230.2
615.2
327.5

10.5

.8
-.0
.9
.2

21.3

Fixed investment
Nonresidential
Structures
Producers' durable equipment
Residential

2.8
7.6
4.1

.8

Change in business inventories

64.6

Net exports of goods and services

-96.7

-1.2

958.8
1,055.5

11.9
13.1

1,453.9

18.0

Exports
Imports
Government consumption expenditures
and gross investment
Federal
State and local

-.6
21.9

6.0

.4

10.9

-.4

-10.0

1.2
-1.6

31.7

-41.9

.2

6.1

11.5

-.0
.2

-.0
6.1

8,083.4

100.0

3.9

100.0

8,018.8

99.2

3.5

89.1

524.8
929.1

GROSS DOMESTIC PRODUCT
MEMORANDUM: FINAL SALES

6.5

Note.—Data are preliminary estimates. Contribution to growth is measured fourth quarter to fourth quarter.
Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers.

Private Domestic Spending
The factors traditionally thought to determine household spending
are household income, consumer sentiment, and household net worth
in the current and recent years. Signals were favorable for all of these
fundamentals through most of 1997: real disposable personal income
grew 3.7 percent over the four quarters of the year, consumer sentiment remained at or near record highs for most of the year, and
year-end stock market values were up about 30 percent from a year
earlier. Outlays grew even faster than income, and as a result, the
personal saving rate edged down.
Although consumption was robust over the past year, it was not
smooth. Real consumption grew in excess of a 5-percent annual rate
in the first and third quarters, but at only a 0.9-percent annual rate
in the second. No reason for this volatility is apparent; neither fluctuating income, changes in consumer confidence, nor ups and downs
in the stock market explain it. Although the stock market dipped in



45

April after the Federal Reserve's interest rate hike, it had fully recovered by mid-May. At the same time, consumer sentiment continued to
rise. Most of the volatility was in goods consumption; services consumption grew at around a 4- to 5-percent annual rate in each
quarter. Durable goods, which rose at double-digit annual rates in the
first and third quarters but fell at a 5-percent annual rate in the second, accounted for much of the quarter-to-quarter fluctuations in
growth. Light motor vehicle sales of roughly 15 million units in 1997
were about the same as in each of the past 3 years; over this 4-year
period, sales of light motor vehicles were just shy of the record 4-year
pace set in the mid-1980s.
Like those for consumption, the signals for the traditional determinants of business investment—lagged GDP growth, cash flow growth,
and the cost of capital—were strongly favorable throughout 1997.
Several special factors added further impetus to investment spending. Business equipment grew 12 percent over the four quarters of the
year, with strong demand for most types of equipment. Industrial
equipment grew a healthy 7 percent over the year, and transportation
equipment advanced 10 percent, with particularly rapid growth in
aircraft purchases.
The standout categories of business equipment investment in 1997
were office and computing equipment and telecommunications equipment. Growth in real computer spending was fueled in part by price
declines that were even sharper than normal (32 percent over the
past year). Real spending on telecommunications equipment
increased 10 percent. One factor possibly boosting sales in this industry is the rapidly expanding capacity and availability of cellular
telephone and other wireless services. Although nominal spending on
computers and telecommunications equipment represents about 25
percent of investment in equipment, measured relative declines in
computer prices have been rapid, so that these categories now
account for a rising fraction of real equipment purchases.
In contrast to the strength in equipment spending, investment in
nonresidential structures was about flat last year, following solid
gains in 1996. Construction of new office buildings made solid gains,
as the strength in the economy allowed the sector to grow out from
under an overhang of empty office buildings at the beginning of the
decade. These gains were offset by small declines in the construction
of industrial, utility, and mining structures.
A pickup in inventory investment added 0.4 percentage point to
real GDP growth over the four quarters of 1997, with an especially
large buildup in the first quarter. The demand for inventories was
probably a result of strong final sales, which increased faster than
inventories over the first three quarters of the year. As a result, stocks
remained lean in relation to sales.
Residential construction increased 6 percent over the four quarters
of 1997, with much of that growth occurring in the fourth quarter. The



46

pickup toward the end of year reflected in part the pattern of mortgage rates, which after rising through April, fell more than 1
percentage point later in the year. Falling mortgage rates, together
with strong real income growth, resulted in an increase in housing
affordability in the second half of the year. In addition to new home
construction, real estate commissions moved up over the year, as
sales of existing homes grew by 3 percent over 1997 as a whole to
their highest level ever.
When consumption and investment are combined, real private
domestic demand grew 4.8 percent over the four quarters of 1997; this
was somewhat faster than plausible estimates of the sustainable longrun growth rate of the economy. The impact of this surge of private
spending was muted, however, by an erosion in net exports, a continuing decline in real Federal Government spending, and slow growth in
spending by State and local governments.
Government Spending and Fiscal Policy
Government expenditures made only a modest contribution to
growth in real GDP in 1997—and all of that came from expenditures
by State and local governments. Real Federal Government expenditures were lower last year than in 1996. Fiscal policy was tight in
1997, with the adjusted structural budget deficit (the deficit measured at a standardized level of economic activity) declining by $54
billion in fiscal 1997 from $112 billion in fiscal 1996.
These developments reflected ongoing efforts to restore Federal fiscal responsibility, which culminated in the Balanced Budget Act of
1997. The Federal Government's unified budget deficit for fiscal 1997
was $22 billion, a reduction of $86 billion from 1996. The Federal budget position has now improved in each of the last 5 years, the longest
unbroken period of improvement since 1948. Last year's unified
deficit was just 0.3 percent of GDP, the smallest by this measure since
1970. Relative to the size of the economy, last year's general-government deficit (the combined deficit of all levels of government) is
estimated to have been smaller than that of any other large industrial country except Canada. Moreover, last year's primary Federal
surplus (defined as revenues less outlays other than net interest) was
$221 billion; as a share of GDP this was the largest since the 1950s.
It reveals that the overall budget would have shown a substantial
surplus last year were it not for the interest obligations on debt run
up during the period of large deficits.
Much of the long-term progress on the deficit can be traced to the
effects of the Omnibus Budget Reconciliation Act of 1993. However,
last year's improvement in the deficit was considerably greater than
had been anticipated; as recently as February 1997 the projected
deficit for fiscal 1997 was $126 billion.
The continuing vigor of the economy is clearly responsible for part
of this progress toward a balanced budget. Of course, sound policies—



47

including a credible commitment to deficit reduction—have nurtured
the expansion. About $30 billion of the improvement in the deficit
resulted from lower-than-expected expenditures. Robust economic
growth also was responsible for some of the $76 billion in unanticipated revenues collected by the Treasury. However, revenues
increased even more than would have been predicted on the basis of
observed economic growth (Box 2-1).
Box 2-1.—A^eontttiiig for the Dafieit Sui^rke
Fisenl 199?
In last year's budget the current-services deficit for fiscal 109?
was projected at $127.7 billion. (The current-services deficit
assumes no change in taw. The President's budget, which
includes policy proposals, was projected at $125,6 billion,) The
actual budget deficit was $21,9 billion—or $105,8 billion lower
than the eurrent~services projection* Although a full accounting
for this deficit surprise will not be possible for seTeral years? the
ta&le below summarises what is BOW known.
Of the $105,8 billion difference between the actual and the current-services deficit, $30.3 billion was accounted for by
Iower4han~expected outlays. About one-quarter of these savings
were in income security programs such as food stamps, unemployment insurance, and family support programs; spending on
all of these programs is typically linked to economic performance.
The remaining $75.5 billion of the difference was attributable
to unexpectedly high revenues, Only $12.3 billion of this revenue surprise was accounted for by higher-than-expacted
collections of corporate, social insurance* excise, and other
taxes. Most ($63,2 billion) of the unanticipated revenues caine
from individual income taxes. A large portion of the unanticipated individual income tax revenue* $28*2 billion, came in as
payments on 199? obligations* A full accounting of this surprise
will have to wait until 1997 tax returns are processed, but a
large share of the unanticipated collections on 1997 liabilities is
likely related to better4han~expected economic growth in 1997,
Approximately $6,0 Mlliom in additional individual tax receipts
came from payment of back taxes or from taxes on trusts.
Another $29.0 billion of the revenue surprise arrived in the
form of Mgher4han~antieipated final payments and Iower4han~
anticipated refunds on 1996 individual income tax liabilities.
The largest identifiable contributing factor was Mgher4han*
anticipated tax liability on capital gain realisations, which
accounted for $20,1 billion of the $29*0 billion in unanticipated




48

Box %~ls^ontmwt$
payments on 1996 obligations. The remaining $8*9 billion came
from higher4han-eiqpeeted tax liabilities on pensions, dMdenda,
distributions from Individual Retirement Accounts, interest payments, and wages and salaries, which were partially offg^t by
higher4han~anticipated deductions,
Accounting for the Fueal 1997 Deficit Surprise

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1

In national income accounting terms, the slowdown in the growth
of government expenditures and the improving general-government
budget balance have exerted a moderating influence on overall aggregate demand that has partly offset the robust stimulus coming from
private consumption and investment. Nevertheless, the combined
impetus from private and government spending exceeded the
increase in domestic aggregate production, so that net exports
declined further.
Net Exports and the Current Account
U.S. exporters had a good year in 1997, as real exports rose 10.9
percent. However, robust growth in domestic demand pushed real




49

imports up by 13.3 percent. Real net exports fell by $35.8 billion over
the course of the year, and their contribution to growth in real GDP
was -0.4 percentage point.
One useful perspective on the performance of real net exports
comes from looking at the pattern of growth in the global economy. At
least four major locomotives matter for global economic growth: North
America, Europe, Japan, and—in the past decade—the East Asian
industrializing economies. Expectations at the end of 1996 were that
Box 2*2.—Turmoil in Asian Economies
The outbreak of financial crisis in Asia was one of the most
notable—and troubling—developments in the global economy
during 1997, Events began in midyear as a currency crisis and
intensified over the rest of the year, spilling over to the real sectors of the affected economies as well as to the rest of the world.
By May 1997 Thailand was in the throes of the fourth speculative attack on its currency, the baht, since August 1998, By
then the buildup of financial difficulties and balance of payments
pressures had reached such a point that efforts to defend the
baht could not be sustained. Pressures soon spilled over to other
emerging Asian economies (especially Indonesia, Malaysia, and
South Korea), most of which also had some balance of payments
weaknesses* as well as to Eastern Europe* These countries' difficulties shook financial market confidence elsewhere in Asia
and in emerging markets around the world, even those with
sounder policies and economic fundamentals, in a contagion
effect.
Since June, four of the countries in the region (Indonesia, the
Philippines* South Korea, and Thailand) have requested and
received assistance from the International Monetary Fund
(IMF). In each instance the adjustment programs developed by
the domestic authorities and the IMF have included a heavy
emphasis on financial and structural adjustment measures (for
example, to reform bank lending practices and further liberalize
the econ0my)? as well as the more traditional macroecanomic
acijustmente necessary to restore financial market stability, For
each of the affected economies, the question of when their financial and balance of payments situations will stabilize depends,
first and foremost, on whether and how aggressively they implement their policy commitments, and second, on the easing of the
contagion effect from those economies that continue to experience difficulties. In the medium term the return of these
economies' strong growth performance w01 depend significantly
upon the degree to which structural and financial sector reforms
are implemented,




50

growth would slow in the United States and that the other regions
(except Japan) would easily outpace it. Instead, the United States
(and Canada) saw higher growth rates in 1997 (about 4 percent each),
while growth among our trading partners in the other regions slowed.
In Japan the recovery from the recession of the early 1990s came to a
standstill. In Europe growth continued in 1997, especially in a northern tier composed of the British Isles and the Nordic countries. In the
developing economies of East Asia, slowing growth turned to financial
crisis in the second half of the year (Box 2-2).
Growth rates in the United States and its trading partners, along
with exchange rates, are major determinants of short-run fluctuations in real net exports. The fact that income increased more rapidly
here in 1997 than it did in most other advanced industrial economies
worked to increase U.S. imports from those economies more rapidly
than their imports from the United States. The negative effects of the
East Asian crunch on U.S. net exports to developing countries had
barely begun to materialize at the end of the year.
In analyzing the components of real growth, it is appropriate to
look at real net exports. But the focus generally shifts to nominal
imports and exports when examining current income flows between
the United States and the rest of the world. The comprehensive measure of such flows is the current account balance, which comprises not
only the trade balance in goods and services but also net investment
income and transfers.
In a fundamental sense, trends in the current account balance
reflect movements in saving and investment. When the demand for
investment in the United States exceeds the pool of national saving,
the difference is made up by borrowing from foreigners. Conversely,
when saving exceeds investment, the surplus is invested abroad. The
United States first experienced large current account deficits during
the mid-1980s, when net investment fell as a share of national income
and net national saving fell even faster. The deficit shrank briefly as
investment collapsed in the 1990-91 recession, but it has reemerged
in the current expansion. The good news in this expansion is that
investment has been booming. But saving does not appear to have
kept pace. (The interpretation of current trends in saving, investment, and the current account is complicated by the statistical
discrepancy between GDP measured as the sum of all spending on
output and GDP measured as the sum of all income generated in producing that output.)
The current account deficit for the first 9 months of 1997 was about
$8.7 billion greater than in the comparable period in 1996, and the
deficit for the year is likely to be moderately higher than the $148 billion (1.9 percent of GDP) recorded in 1996. Much of the increase
reflects the emergence of a deficit in the balance on investment
income. As a result of past deficits, foreign holdings of U.S. assets are




51

now sufficiently large that the investment income paid to foreigners
now exceeds investment income earned on U.S. holdings of foreign
assets. The balance on all goods and services may show little change
at all from last year's $111 billion. The modest size of the increase in
the trade deficit last year is probably related to changes in the
exchange rate of the dollar.
The effect of exchange rates on the nominal trade balance last year
is complicated. The trade-weighted exchange rate of the dollar rose
about 3 percent during the first quarter of the year (that is, the dollar strengthened against a weighted average of the currencies of our
trading partners). In the long run the effect of a stronger dollar is to
slow exports and probably raise spending on imports, thereby
depressing the trade balance. But in the short run the effects on the
nominal trade balance may go the other way. This is because, with a
stronger dollar, importers do not have to pay out as many dollars to
obtain the foreign currency they need to pay for previous quantities of
imports (in what is called a valuation effect), and because it takes
time for the quantity demanded to adjust. There can be a lag of 2
years or more before price changes have their full effect on trade volumes, but when they do they dominate the valuation effect. (This
pattern of response is often called the J-curve, because the dollar
value of imports at first declines with a stronger dollar but later
rises.) The difficulty in interpreting what happened in 1997 is due to
the fact that in 1996, before the most recent appreciation, the dollar
had also increased in value. Thus the lagged effects from that earlier appreciation may have partly canceled out the immediate effects
from the 1997 appreciation. The delayed effects of the dollar's appreciation, together with the other effects of the East Asian financial
crisis, are likely to show up in a more marked increase in the trade
deficit, by all measures, in 1998.
MONETAEY POLICY AND FINANCIAL MARKETS
The Federal Reserve raised its target Federal funds rate by 25 basis
points in March, to 5.5 percent. The proximate cause of the rate
increase was the perception that strong demand would boost utilization rates, which were already approaching levels that in the past had
been associated with rising inflation. The mild deceleration in GDP
prices in the second half of the year translated into a slight upward
drift in the real Federal funds rate as 1997 came to a close, putting the
real rate slightly above its mid-1995 peak. Moreover, the rise in the
real short-term rate did not appear to feed through to intermediateand long-term real rates, which remained essentially unchanged—or,
by some measures, even declined—in the second half of the year.
Short-term interest rates fluctuated within a narrow range over the
course of the year, whereas long-term rates rose slightly early in the
year but then declined, finishing the year roughly 50 basis points (half




52

a percentage point) lower. Long-term interest rates remain very low.
The yield on 10-year Treasury notes remained within 50 basis points of
its 30-year low, while the 30-year Treasury yield stood near its lowest
level since that bond's introduction in 1977. This largely reflects two
related factors: continued progress in deficit reduction, which lowers
nominal interest rates by reducing expected future real rates, and market participants' expectations of low future inflation, which act to
reduce nominal rates. In addition, turmoil in foreign asset markets in
the second half of the year helped make U.S. securities more attractive
to investors; this "flight to quality" probably boosted demand for U.S.
assets, putting additional downward pressure on nominal interest
rates. The net result was a flattening of the yield curve, with the spread
(the difference in interest rates) between 3-month Treasury bills and
10-year Treasury notes falling to roughly 60 basis points by the end of
1997. This spread is now well below its historical average of 135 basis
points and is roughly equal to the level that prevailed during the 1960s.
The risk premium on corporate debt—measured as the spread
between the yield on Baa-rated corporate bonds and the 30-year
Treasury bond yield—averaged roughly 125 basis points in 1997 (a
Baa rating denotes bonds of intermediate credit quality); this spread
remains quite narrow by historical standards. The spread between
riskier, high-yield corporate debt ("junk" bonds) and 10-year Treasury
securities also remained narrow in 1997 but began to rise toward the
end of the year. Taken as a whole, these low risk premiums suggest
that market participants perceive the financial and business sectors to
be quite healthy; most relevant statistics provide support for this view.
In the banking sector, business loan charge-offs and delinquency rates
remained low, while bank capital ratios remained high. Although business failures increased in 1997, a large portion of this increase appears
to reflect special, one-time factors, not a permanent change in trend.
For equity markets 1997 was a noteworthy year. The rise in stock
prices was checked only slightly following the Federal Reserve's March
tightening, and even sharp declines in some foreign stock markets were
unable to do more than temporarily slow the market's advance. All
three major stock price indexes—the Dow Jones Industrial Average, the
Standard & Poor's (S&P) 500, and the NASDAQ composite—shattered
previous records; the S&P 500, for example, peaked in October at
983.12, a record high and 40 percent above its October 1996 average.
The runup in stock prices appeared to be fueled by continued high profitability in the corporate sector and forecasts of strong future earnings
growth, and it pushed aggregate price-earnings ratios up sharply. By
some measures price-earnings ratios are at levels not seen in decades.
Declines in foreign stock markets spread to domestic markets later in
the year, causing them to retreat from these record highs. On October
27th the Dow posted a 554-point decline—the 12th-largest in percentage
terms in its history. The drop was steep enough to cause the New York




53

Stock Exchange's system of "circuit breakers" to suspend trading temporarily for the first time ever (Box 2-3). The day after the plunge saw
the volume of shares traded on the New York Stock Exchange reach a
record high of 1.2 billion (the market made up much of its previous
day's decline that day). The stock market rebounded quickly following
its October losses, with the S&P 500 index and the Dow finishing
1997 near their highs for the year. Turmoil in East Asia apparently
continued to be a source of downward pressure on stock prices for the
remainder of the year.
The rise in stock prices in 1997 represents the continuation of a
trend that has seen major indexes more than double over the past 3
years. One explanatory factor is market expectations of strong future
corporate earnings. Another possible factor is a reduction of the premium that investors require to hold stocks in lieu of less risky assets.
Such a reduction could occur if the perception has become more widespread that stocks represent an attractive, high-return asset, or if
investors' interest in longer term investments for retirement has
grown. Still other possible explanations are a reduction in investors'
expectations of future inflation or of future real interest rates, or the
effect of financial innovations in channeling a larger share of savings
into the stock market by way of mutual funds and pension funds.
There is some scattered evidence that investors have come to view
stocks as a less risky investment: for example, a survey of individuals' attitudes toward the stock market shows a marked decline in the
perceived riskiness of stocks since 1994. Similarly, participants in the
largest private retirement savings plan in the United States have
directed an increasing fraction of their retirement saving contributions to equities since 1986; however, it is unclear how much this
reflects a reduction in participants' tolerance for risk, a change in
their perception of the riskiness of the stock market, or other factors.
If the risk premium on stocks has declined, this could explain why
price-earnings ratios are at historically high levels; a simple calculation indicates that even a relatively small change in the risk premium
is sufficient to raise price-earnings ratios sharply. Nevertheless, the
possibility exists that price-earnings ratios will eventually return to
more normal levels, given that periods in which price-earnings ratios
are high tend to be followed by slower future growth in stock prices.
INFLATION AND THE LABOR MARKET
Inflation remained remarkably subdued in 1997. Both GDP and core
CPI inflation (a measure of inflation that excludes the volatile food and
energy components) fell over the course of the year, continuing a decline
that began in 1995. Surprisingly, this deceleration of prices occurred in
an economic environment that was characterized by extremely low
unemployment: as 1997 came to a close, the unemployment rate had
been at or below 5.5 percent for almost 2 years, and at or below 5 per-




54

Box 2-3+—Circuit Breakers
^Circuit breakers* are rules that automatically halt trading on a
securities exchange when prices move by a given amount The
hoards of a number of major exchanges, induding the New York
Stock Exchange (NYSE) and the Chicago Mercantile Exchange,
set up circuit breakers in the wake of the 1987 stock market crash,
The NYSE circuit breakers provide a good example of how such
rules operate* Before the October 27th stock market decline* the
circuit breakers were set to halt trading for SO minutes if the Dow
Jones Industrial Average declined more than 350 points from its
morning opening price, and for another hour if the Dow were to fan
an additional 200 points, Both of these Emits were hit on October
27th? and the circuit breakers operated as designed and dosed the
market twice (the second eTent occurred less than an hour before
the closing bell and thus ended trading for the day).
When they were introduced, it was argued that circuit breakers
would reduce the chance of a major market disruption in three
ways; by preventing an overload of the exchanges' trading systems
during periods of extimordinary price movements; by reducing the
possibility that sharp (and possibly unchecked) declines in stock
prices would leave market participants unable to make good on
their trading commitments; and by providing a forced pause in
trading—a chance for market participants to "take a deep breath**
Many observers and market participants criticized the role that
the circuit breakers actually played on October 27th, The trigger
limits had only been adjusted once since 1988, and the percentage
declines in the Dow that they reflected were only about a third as
large as they were when the triggers were set up in 1988.
Furthermore, the securities exchanges now have enormously
greater capacity to process trades than they did in 1987; by all
accounts the record trading volumes on October 27th and 28th did
not remotely threaten to overload the system* And concerns about
fuJfillment of trading commitments appear to have been at
least partially allayed, because traders now have greater access
to emergency credit The "deep breath** argument is more difficultto assess* because nobody knows what would have happened
had the markets not closed early on October 27th. But some critics argue that circuit breakers can add to market volatility by
causing a race to the exit—a sharp selMf in shares—as stock
prices approach the threshold for a trading hall Indeed, many
traders argue that that is just what happened when the NYSE
reopened after the first of its tw0 shutdowns on October 27th, The
NYSE has announced that it will propose modifications to the rule
in 1998,




55

cent for 9 months. The unemployment rate fell from 5.3 percent in the
fourth quarter of 1996 to 4.7 percent in the fourth quarter of 1997; all
major demographic groups participated, with declines of 1.0 percentage
point among blacks, 0.6 percentage point among whites, and 0.6 percentage point among Hispanics.
The pace of job creation was quite rapid. More than 3.2 million jobs
were created in 1997, for an average of 267,000 new jobs per month—a
substantially faster rate than in either of the 2 preceding years. Factory
employment rose significantly, by 230,000 new jobs, while employment
at construction sites rose by 210,000 jobs following a slightly larger gain
in 1996. Among the service-producing industries growth was particularly rapid in computers and data processing (which increased 13 percent)
and engineering and management services (which increased 7 percent).
These hiring gains were matched by large increases in industrial
capacity. Nevertheless, tightness in labor markets was reflected in a continued acceleration of wages during the year. Hourly wages as measured
by the employment cost index (ECI) rose by 3.9 percent in 1997, 0.5 percentage point faster than in 1996. The ECI for total hourly compensation
accelerated by a slightly smaller amount, and continued slow growth in
the cost of benefits—particularly health insurance—kept the growth rate
of total hourly compensation 0.5 percentage point lower than that for
hourly wages. Trend unit labor costs (defined as compensation growth
relative to trend productivity growth) continued to rise moderately
through the year, while overall price inflation fell slightly (Chart 2-1).
Chart 2-1 Inflation and Trend Unit Labor Costs
Inflation has dropped below growth in trend unit labor costs.
Percent

Four-quarter output price inflation
(nonfarm business less housing)

Trend unit labor costs

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

Note: Trend unit labor costs defined as the four-quarter percent change in compensation as
measured by the employment cost index minus 1.1 percentage points.
Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor
(Bureau of Labor Statistics), and Council of Economic Advisers.




56

1997

PRODUCTIVITY
Growth in output per hour worked picked up sharply in 1997: over the
first three quarters of the year the official measure of productivity in the
nonfarm business sector rose at an average annual rate of 2.6 percent.
This measure has exceeded its trend rate of growth in all but one of the
past eight quarters. These recent gains were sufficient to offset the earlier weak performance of this product-side measure of productivity,
bringing it back to its post-1973 trend. (Trend growth in productivity is
discussed in the "Forecast and Outlook" section of this chapter.) Part of
the surge in productivity probably reflected special factors: productivity
growth in the third quarter of 1997 was boosted in part by a decline in
hours worked by self-employed workers; these data tend to be more
volatile and somewhat less reliable than measures of hours worked by
employees. However, even when self-employed workers are excluded,
measured productivity growth in the third quarter remains over twice
as fast as its trend rate. The pickup in productivity growth is significant
because it occurred at the same time that hourly compensation showed
some signs of accelerating. This has kept growth in unit labor costs from
rising by as much as compensation, thus eliminating a potential source
of inflationary pressure.

EXPLAINING RECENT INFLATION PERFORMANCE
Inflation continued to moderate in 1997 even as the unemployment
rate reached a 24-year low. To what extent can recent inflation performance be explained with the traditional tools of macroeconomic
forecasting and analysis?

RECENT INFLATION PERFORMANCE AND THE NAIRU
The present combination of low and declining inflation and sustained
low unemployment would appear to pose a challenge to models of price
inflation based on the concept of a NAIRU, or nonaccelerating-inflation
rate of unemployment. As discussed in the 1997 Economic Report of the
President, historical experience indicates that the chances are high that
inflation will rise in periods when the unemployment rate is very low,
and fall when unemployment is unusually high. The NAIRU can therefore be defined as the unemployment rate at which—absent special
factors—the odds of falling and rising inflation are roughly balanced.
Although a specific value of the NAIRU represents a forecaster's best
estimate of the rate of unemployment that can be sustained on average
without causing an increase in inflation, any estimate of the NAIRU is
subject to some degree of imprecision, inasmuch as there will be periods
when inflation is falling even though unemployment is below the
NAIRU, and vice versa. In addition, the NAIRU itself is not invariant
over time, but is instead affected by such factors as the demographic
composition of the labor force and changes in the structure of labor and
product markets.



57

The 1997 Report indicated that reasonable estimates for the NAIRU
lie between 5 and 6 percent, with a midpoint of 5.5 percent. In 1997 the
unemployment rate averaged 4.9 percent, about one-half percentage
point below the midrange estimate of the NAIRU. A forecasting model
built around a NAIRU of 5.5 percent would therefore have predicted
some acceleration in prices over the course of 1997; one reasonable estimate would have been a 0.3-percentage-point increase in core CPI
inflation. Instead, core CPI inflation finished the year roughly 0.4 percentage point below its year-earlier rate, although 0.1 percentage point
of this deceleration can be accounted for by methodological changes
introduced into the calculation of the CPI.
The observed decline in inflation is consistent with the view that
changes in inflation are influenced by other factors besides labor market
slack (measured here by the gap between the actual unemployment rate
and the NAIRU). A number of factors did in fact help mitigate inflationary pressure in 1997. First, the costs of providing workers with nonwage
compensation (such as health insurance) continued to rise at a very low
rate; as mentioned above, this helped keep growth in labor costs from
adding to inflation. Second, also as noted above, computer prices have
recently declined at a faster-than-average rate; without this decline,
overall inflation would have risen steadily since early 1994 (Chart 2-2).
Although it is always possible to find components of GDP whose prices
are growing faster or slower than the average, relative price changes for
computers are particularly noteworthy in that they are largely driven by
technological change, as opposed to cyclical forces such as shortages in
raw materials, bottlenecks in production, or rising labor costs.
Chart 2-2 Computer Prices and Total Inflation
Declines in computer prices have helped to keep overall inflation from increasing in
recent years.
Four-quarter percent change

5

GDP deflator excluding
computers

Overall GDP deflator

i ...

i

1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic
Advisers.




58

1997

Overall price inflation has been further reduced by sharp declines
in the relative price of imported goods, particularly non-oil merchandise imports. Since the second quarter of 1995 the relative price of all
imported goods has fallen by 14 percent, and the relative price of nonoil merchandise imports has declined by 15 percent. In part this
decline in import prices reflects two interrelated factors: significant
excess capacity—and hence low rates of inflation—abroad, and the
dollar's appreciation against other major currencies. It is difficult to
determine precisely what effect this has had on overall inflation, but
some estimates indicate that this factor could have reversed much if
not all of the increase in inflation that would have been predicted
solely from the gap between the actual unemployment rate and the
estimated NAIRU.
Judged from the perspective of a NAIRU model, therefore, it seems
possible that the economy is currently operating at an unemployment
rate that is inconsistent with stable inflation over the long run, but
that the influence of special, possibly transitory factors has prevented prices and labor costs from accelerating. Although this is a
plausible explanation for recent inflation performance, it is certainly
not the only one; an alternative hypothesis is that structural changes
in labor and product markets have led to further declines in the
NAIRU. If true, this would imply that at least some portion of the
recent decline in the unemployment rate can be sustained without an
eventual increase in inflation.
The rate of unemployment consistent with stable inflation would be
expected to vary over time in response to such factors as shifts in
labor force demographics, changes in the relation between workers'
real wage demands and their productivity, and structural shifts that
alter the degree of mismatch between workers and jobs (both sectorally and regionally). For a number of reasons, however, it is
difficult at present to justify a large additional reduction in the estimated NAIRU on the basis of recent experience. First, the presence of
fortuitous supply shocks clouds the inflation picture significantly;
although it is evident that these shocks have contributed to lower
inflation, the exact extent of this contribution cannot be perfectly
gauged. Second, although inflation in goods and services prices has
not risen as unemployment has fallen below 5.5 percent, some acceleration in wages has occurred (Chart 2-3), which might reflect labor
market tightness. Finally, the unemployment rate has been below 5.5
percent for too short a time to allow any certainty that the risk of a
gradual buildup of inflationary pressure is entirely absent.
However, a small downward revision to the estimated range of the
NAIRU is indeed justifiable. A portion of recent inflation performance
cannot be explained by special factors; moreover, the fact that prices
have not accelerated as the unemployment rate has fallen below 5.5
percent suggests that the estimated range should be shifted down. A




59

model that accounts for supply shocks such as recent declines in relative import prices and that allows the NAIRU to vary over time
indicates that a reasonable range for the NAIRU now has a midpoint
of 5.4 percent, 0.1 percentage point lower than in previous estimates.
The Administration's budget forecast has been revised to reflect this
slightly lower estimated midpoint of the NAIRU's range.
Chart 2-3 Wage Growth and the Unemployment Rate
Wages have accelerated as the unemployment rate has fallen.
Percent

12-month percent change

8

5.0

4.5

Unemployment rate
(left scale)

4.0

3.5

3.0

Wage growth '
(right scale)

~"

1990
1991
1992
1993
1994
1995
1996
1997
Note: Wage inflation is measured by the wages and salaries component of the employment
cost index.
Source: Department of Labor (Bureau of Labor Statistics).

ALTERNATIVE MEASURES OF UTILIZATION
AND CAPACITY
The unemployment rate is a useful predictor of future inflation in
that it can directly indicate the potential for rising inflationary pressure on the cost side, as excess demand in the labor market tends to
raise nominal wages and thus nominal labor costs. The unemployment rate can also proxy for the state of aggregate demand in the
economy, and thus help assess the degree of excess demand in product markets. However, the unemployment rate is not the only
indicator of resource utilization and demand (even for the labor market), nor does it necessarily provide the best forecast of future
inflation. It is therefore of interest to consider what other measures of
resource utilization and labor market tightness suggest about the
current degree of inflationary pressure in the economy.
Several plausible indicators—such as the State insured unemployment rate, the demographically adjusted unemployment rate, and the
unemployment rate for men of prime working age—imply a degree of



60

labor market tightness that exceeds that which has historically been
associated with stable inflation. In addition, an index of help-wanted
advertising (which can be considered a proxy for the job vacancy rate)
fails to reveal a large degree of slack in the labor market at present;
earlier in the expansion some observers argued that this measure
indicated a weaker labor market than did the unemployment rate.
The picture painted by these labor market variables is therefore one
in which the potential for inflationary pressure is relatively high.
The effects of a tight labor market on wages may have been muted
by the presence of widespread worker insecurity, which has been evident since the 1990-91 recession. Despite a strong job market and a
high level of consumer confidence, surveys indicate that workers'
fears of job loss remain high relative to the level that prevailed before
the recession. Quit rates are low as well, which could reflect workers'
unwillingness to leave their current jobs in the hope of "trading up"
to better jobs. And strike activity is at a low ebb, although this is
related at least in part to declines in unionization rates. These factors
suggest that workers may be relatively unwilling to press for the
wage gains that they could normally command in a labor market as
tight as that of today.
One indicator that tempers somewhat the general conclusion that
labor and product markets are tight is the rate of capacity utilization
(both in the manufacturing sector alone and for all industry).
Capacity utilization remains below its peak for this expansion and is
roughly at the level historically associated with stable inflation. It is
also noteworthy that core producer price inflation, which more closely reflects the output price measure that is relevant to manufacturing
capacity utilization, has declined rapidly since the end of 1995. This
suggests that industry has not yet reached the point where production bottlenecks or other capacity constraints are putting upward
pressure on inflation. Gains in capacity, which have followed an
increase in real private investment growth, have helped keep capacity utilization in the noninflationary zone; measured capacity growth
increased sharply after 1993 and has stayed high as real business
fixed investment growth has remained strong. In fact, recent revisions to the capacity utilization data indicate that the economy had
more industrial capacity over the past 4 years than was previously
thought (Box 2-4), making the recent declines in core producer price
inflation somewhat less of a mystery. However, manufacturing represents only about 20 percent of total output, and although total goods
output (which includes manufacturing as well as trade and mining)
accounts for a larger fraction (40 percent), it is still less than half of
the economy. The possibility of overheating in the economy as a
whole, therefore, should not be dismissed.




61

Bon 2»4»—Raeexit Revisions to Capacity amd Utilisation
In December the Federal Reserve revised its estimates of
eapndty and industrial production, on the ba&is of improved
source data* For the preceding 2 years estimates of industrial
capacity and utilisation had largely been extrapolated from
national accounts data on real investment. The recent revision
incorporates direct estimates of utilisation based on survey data
ami industry reporfa, as well as more comprehensive data on
physical output and labor and other inputs.
The new data indicate that industrial capacity has been growing
about 1 percentage point faster than previously estimated, Over
the past 3 years capacity has grown at an average annual rate of
4,7 percent In each of the past 3 years average annual capacity
growth h&% exceeded every previous growth rate since 1988,
Similarly, recent estimates of the rate of capacity utilization were
revised downward by more than a percentage point Currently;
production as a share of total capacity is about 83 percent; this is
only slightly Mgfaer than the series' long-term average.

A NEW ERA FOR THE ECONOMY?
To summarize the chapter thus far, the past few years have seen
rapid growth in output with stable inflation, gradual declines in the
NAIRU, strong growth in profits and stock prices, and a pickup in
productivity that, if sustained, would herald a significant departure
from past productivity trends. Indeed, economic performance in
recent years has been so extraordinary that some have wondered
whether it reflects fundamental structural change in the economy—
change so great that a "new paradigm" is needed to describe an
economy that is in a "new era."
Many such assessments are extreme and unsupportable. In particular, any claim that the business cycle has been vanquished must be
viewed with considerable skepticism. Nevertheless, it is possible to
identify a number of areas in which fundamental changes are probably influencing the economy's current performance, in many cases
favorably.
First, U.S. producers face increased foreign and domestic competition. Exports and imports today play a greater role in the U.S.
economy than at any other time in history. And here at home, deregulation has taken place or is under way in a number of industries,
including telecommunications, transportation, electricity, and banking. Increased competition and more open markets contribute to
greater efficiency, thus helping raise the level of output. But it is possible that greater competition also fosters a faster pace of innovation,




62

inducing long-run improvements in productivity and thus a higher
rate of output growth.
Labor and product markets have also changed in significant ways.
Since the early 1980s the unionization rate has dropped by nearly
half, continuing a decline in union membership that began in the late
1960s. In addition, the use of temporary and contingent employees is
much higher than it was 15 years ago. Although this has probably
made labor markets more flexible, it might also have contributed to
an increase in worker anxiety. Information technology might prove as
revolutionary as the steam engine or the automobile. Adoption of justin-time inventory management by manufacturers also represents a
significant development, since changes in inventories have often been
an important source of business-cycle fluctuations. Whether just-intime inventories will be able to dampen future business cycles,
however, remains to be seen.
Even the public sector has been transformed in recent years. Our
system of social welfare has been changed to help welfare recipients
make the transition to employment. The end of the Cold War saw a
vast amount of defense-related resources freed up for civilian uses.
The government itself is being reinvented to make it more efficient
and responsive. Perhaps most important, deficit reduction has
increased private sector investment; this recent expansion in capital
investment raises productivity by providing workers with more modern and efficient workplaces.
Not all of these changes represent unalloyed boons. Nor is it possible to quantify the effects of these changes on the economy or on
specific groups or sectors with any degree of precision (although these
factors would have to be very large to reverse the post-1973 productivity slowdown to any significant degree). And even if these changes
are having a significant influence on recent economic performance, it
may imply not that a new model of the economy is needed, but rather
that certain key parameters of the current model, such as the NAIRU
or trend productivity growth, have changed. Hence one cannot
declare with any certainty that the old rules no longer apply. But the
factors just described suggest that the economy may be experiencing
some important structural changes that will shape our economic
analysis and forecasts in the years ahead.

THE ECONOMIC CONDITION OF HOUSEHOLDS
Both aggregate statistics and consumer surveys painted an exceptionally favorable picture of the economic circumstances of American
households in 1997. The tight labor market that led to a 24-year-low
in the unemployment rate also lured enough new workers into the
labor market to set an all-time record for the labor force participation
rate. The combination of healthy wage growth and increasing employment helped push real disposable personal income up a solid 3 percent




63

over the year. Despite the stock market volatility witnessed in the
second half of the year, at year's end all major market indexes
remained sharply above their levels at the end of 1996, representing
a substantial boost to household net worth. Largely reflecting this
combination of favorable circumstances and the low inflation rate,
consumer sentiment reached record highs in early summer and
remained near those levels for the rest of the year. Growing income
and wealth together with buoyant sentiment led to a 3.8-percent rate
of spending growth over the four quarters of 1997—outpacing even
the robust growth of disposable income.
Against this backdrop of general prosperity only a few potentially
worrisome trends were discernible. The first was the drop in the personal saving rate implied by the excess of consumption growth over
income growth. A temporary shortfall in personal saving would not
necessarily be a problem, but the personal saving rate has remained
low for about a decade now, raising questions about whether
American households are preparing adequately for the future. A second persistent concern has been the ongoing buildup of household
debt. Upon analysis, however, this growth in debt does not appear
very menacing, both because household assets have risen even faster,
and because households still appear to be able to service their rising
debt loads comfortably. A final potential concern has been the continuing rise in personal bankruptcies despite the robust economy, which
might seem to suggest an increase in the number of households experiencing sudden financial shocks. However, the bankruptcy rate has
been trending upward for about 20 years now, and the available evidence suggests that the uptrend is attributable to a complex mix of
economic, legal, and social developments rather than a dramatic
worsening of the economic shocks hitting households.
THE CONFIDENT CONSUMER
Early in the summer of 1997 the Index of Consumer Sentiment constructed by the University of Michigan reached an all-time high; it
remained near that record level for the remainder of the year (Chart
2-4). Some observers have suggested that consumers have become
overly optimistic, and that a return to more normal levels of confidence could have adverse economic consequences. But a major part of
the surge in consumer sentiment in 1997 can be explained by the
simultaneously favorable values of all four of the indicators that have
historically influenced consumer sentiment: the inflation rate, the
unemployment rate, the performance of the stock market, and, to a
lesser extent, the growth rate of household income. Moreover,
although Chart 2-4 shows that the actual level of sentiment in 1997
has been even higher than would be predicted given the values of
these indicators, the size of the underprediction is not large compared
with typical past prediction errors.




64

The Michigan index comprises two subindexes: one for current conditions and one for expected future conditions. Recently, both have
been hovering near record levels. Roughly two-thirds of the increase
in the index of expected conditions over 1997 can be attributed to the
favorable economic environment, and the remaining underprediction
is not large by historical standards. This suggests that consumers are
not unrealistically optimistic about future developments. However,
very little of 1997's increase in the index of current conditions can be
explained by changes in observed aggregate variables. Again, the magnitude of underprediction is not very large; moreover, there are good
reasons not to attribute this prediction error to irrational confidence
on the part of consumers. Because the current conditions index largely reflects consumers' answers to questions about their own individual
financial circumstances, a plausible interpretation of the prediction
error is simply that economy-wide variables such as the inflation rate
and the unemployment rate do not fully capture the complex elements
that influence consumers' assessments of their personal financial situation. It therefore seems more appropriate to accept consumers' rosy
assessments of their personal financial circumstances at face value.
And judging by past episodes when sentiment has exceeded the predicted value, the danger appears modest of a sudden sharp plunge in
sentiment that would quickly return it to the level that aggregate indicators would predict.
Chart 2-4 Consumer Sentiment
Much of the increase in consumer sentiment recently can be explained by the
exceptional performance of the economy.
Index, 1966:Q1 =100

110

Index of Consumer^
Sentiment

100

90

80

70

60

50

1960

1963 1966

1969

1972 1975 1978

1981 1984

1987

1990

1993 1996

Note: Predicted sentiment is calculated from a model in which the inflation rate, the
unemployment rate, stock market performance, and wages and salaries are independent
variables.
Sources: University of Michigan and calculations by Council of Economic Advisers.




65

Other measures of consumer attitudes also reflect optimism. The
Conference Board's Consumer Confidence Index, the main alternative
to the Michigan index, rose to a 28-year record in December; as with
the Michigan index, a large part of the improvement in the Conference
Board index can be attributed to observable economic conditions. Both
the Michigan and the Conference Board surveys contain many questions that are not incorporated in their overall indexes, and answers to
these other survey questions have also generally been quite favorable.
For example, throughout the year consumers interviewed for the
Michigan survey said they expected low inflation rates to continue and
believed it was a good time to buy automobiles and houses.

THE CONDITION OF HOUSEHOLD BALANCE SHEETS
The exceptional performance of the stock market appears to be one
of the factors contributing to consumers' sanguine assessments of
their financial circumstances. The rise in the stock market boosted
total household net worth by around $2.6 trillion over the course of
1997, following similarly strong gains in 1995 and 1996. Higher stock
prices lifted the ratio of household net worth to disposable income to
record levels (Chart 2-5).
Chart 2-5 Ratio of Household Net Worth to Disposable Personal Income
The stock market boom helped boost the household net-worth-to-income ratio to a
record level in 1997.
Ratio
5.8

5.6
5.4

5.2

5.0

4.8

4.6

4.4

1950
1955
1960
1965
1970
1975
1980
1985
1990
Sources: Department of Commerce (Bureau of Economic Analysis), Board of Governors of
the Federal Reserve System, and Council of Economic Advisers' estimate of 1997 net worth.

1995

Despite the recent boost to stock market wealth, the family home is
still the most valuable single asset most American households own.
On this front, too, 1997 brought encouraging news: the rate of homeownership reached a new all-time record, boosted by robust income



66

growth and relatively low mortgage interest rates. Another factor
that has likely contributed to the increase in the homeownership
rates in the 1990s is the increasing availability of sub-prime mortgage loans, which do not meet traditional industry lending guidelines.
Such loans carry a higher interest rate to compensate lenders for the
extra risk. For example, home buyers who put up less than the traditional 20-percent down payment usually have to purchase private
mortgage insurance to guarantee repayment of the loan; the premium
for this insurance rises as the size of the down payment declines.
Indeed, mortgages that require no down payment at all are now
available for consumers willing to pay very high rates.
Home buyers who take advantage of these loans, of course, take on
more debt than was typical of past buyers who put up a traditional
down payment of 20 percent. The relaxation of down payment constraints is therefore probably part of the explanation for the runup in
mortgage debt depicted in Chart 2-6. Some of this rise, however, is
attributable to the increasing popularity of home equity borrowing. A
substantial part of new home equity borrowing likely reflects the
growing use of home equity loans to buy motor vehicles, to pay for
home repairs and additions, and to finance other large expenses that
might previously have been financed by separate consumer loans.
Home equity loans are an attractive way of financing such expenditures because their interest is tax deductible, whereas the interest on
traditional consumer loans lost its tax-deductible status with the tax
reform of 1986.
Chart 2-6 Household Debt by Type
The ratio of household debt to disposable income has risen sharply since the
mid-1970s, mostly in the form of higher mortgage debt.
Percent of disposable personal income
100

Revolving credit
(including credit cards) >
80

40

20

o

1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996
Sources: Department of Commerce (Bureau of Economic Analysis) and Board of Governors of the
Federal Reserve System.




67

The increasing substitution of mortgage debt for other kinds of debt
suggests that any assessment of the aggregate household balance
sheet needs to look at the value of all debts combined, not just mortgage debt. As Chart 2-6 shows, the uptrend in overall household debt
is somewhat less dramatic than that for mortgage debt alone; the
ratio of total debt to disposable income increased from 77 percent in
1986 to 92 percent in 1997. Nevertheless, the ratio of overall debt to
disposable personal income has been trending upward since the mid1970s, except for pauses around the recessions of the early 1980s and
early 1990s.
The chart does not support the common perception that aggregate
credit card borrowing has soared out of control. Although revolving
debt (which consists mainly of credit card debt) has grown more
rapidly than other kinds of borrowing, it still represents only a modest fraction of consumers' debt load. Most of the runup in total debt
instead reflects the sharp rise in mortgage debt.
Chart 2-7 Household Debt Delinquency Rates
After rising from 1994 to 1996, delinquency rates on credit cards and consumer loans
have stabilized. Mortgage delinquencies edged down to the lowest rate since 1980.
Percent
6

Consumer loans

1980

1982

1984

1986

1988

1990

1992

1994

1996

Note: The mortgage delinquency rate is the percentage of all loans 60 days or more past due.
The consumer loan and credit card delinquency rate is the percentage of loan balances that are 30
days or more past due or nonaccruing.
Sources: Board of Governors of the Federal Reserve System and Mortgage Bankers Association.

The dominance of mortgage debt in household balance sheets
implies that the mortgage delinquency rate is a particularly important indicator of the magnitude of debt repayment problems. Chart
2-7 shows that the mortgage delinquency rate has actually edged
down over the last year and remains well below rates posted in the
mid-1980s, suggesting that comparatively few consumers have found
their rising mortgage debt insupportable. The chart also shows that
although delinquency rates on credit card borrowing and consumer




68

loans have gone up, they remain below their peak levels of the early
1990s and appear to have flattened off in the past year or so.
One probable reason why the continuing runup in debt has not
caused greater repayment problems is that interest rates have fallen,
reducing the payments required to service the outstanding stock of
debt (the debt service burden). The debt service burden has also been
lightened by an increase in the average duration of loans. Chart 2-8
shows that although the aggregate debt service burden has risen substantially since its trough in 1993, it is still below the level attained
in the late 1980s and certainly does not exhibit the relentless uptrend
evident in the ratio of total debt to disposable income.
Chart 2-8 Household Debt Service Payments
The debt service burden fell after the 1990-91 recession but has risen since 1994.
Although high by historical standards, it remains below late-1980s levels.
Percent of disposable personal income

18

17

16

15

14

1960 1963
1966 1969
1972 1975 1978 1981
1984 1987
1990 1993
Sources: Department of Commerce (Bureau of Economic Analysis) and Board of Governors
of the Federal Reserve System.

1996

On the whole, then, aggregate statistics paint a favorable picture of
the financial condition of households. Although household debt has
risen, the aggregate value of household assets has risen even more,
leading to a net gain in aggregate household net worth. Judging from
mortgage delinquency rates, the recent rise in the debt service burden
does not seem to be causing unusual strain. And although credit card
debt has been growing, this category still represents a relatively
minor fraction of the aggregate debt households owe.
Aggregate statistics, however, can sometimes mask divergent trends
among different subgroups of the population. If, for example, the rise
in household assets were occurring entirely among the affluent, and if
the rise in household debt were concentrated among lower income
households, then the increase in aggregate household net worth would



69

not provide much reassurance about the ability of the indebted households to repay their debt. In practice, however, household-level data do
not seem to be telling a story very different from that told by the aggregate data. Although affluent households still hold disproportionate
amounts of stock, the surging popularity of mutual funds and the rise
of 401(k) and other tax-sheltered retirement plans have considerably
increased the fraction of households who benefit directly from stock
market gains. Indeed, a recent poll found that roughly half of
American families own stock in some form. And as Table 2-2 shows,
although the debt service burden for the median household increased
somewhat between 1983 and 1989, by 1995 the combination of falling
interest rates and lengthening debt maturities had reduced the median household's burden to near its 1983 level; the fraction of households
with high or very high debt service burdens (defined as debt service
payments greater than 30 and 50 percent of income, respectively) was
actually lower in 1995 than in 1983.
TABLE 2-2.—Household Debt Service Burden
Item

1983

Debt service burden of the median
household (percent of income) '

1989

1995

12.8

15.2

13.1

188
64

23 1

163
56

Percent of households with debt
service burden:
Over 30 percent
Over 50 percent
1

7.9

Debt service burden is required debt service payments as a percent of income.

Note. —Data are for households whose heads are employed.
Sources-. Board of Governors of the Federal Reserve System and calculations of the Council of Economic Advisers.

THE PERSONAL SAVING RATE
The personal saving rate has been trending downward since the
mid-1980s. According to the preliminary figures currently available,
the personal saving rate in 1997 was only 3.8 percent, down from 4.3
percent in 1996. Given the exuberant level of consumer sentiment and
the large gains in household wealth last year, the fact that there was
a modest decline in the saving rate from 1996 to 1997 is neither surprising nor disturbing; such modest annual fluctuations are of little
consequence. The longer term decline in personal saving, however, has
aroused considerable concern among academic economists and policymakers, for at least three reasons. First, because national saving is the
sum of personal, business, and government saving, low personal saving contributes to a low national saving rate, and low national saving
has a variety of negative consequences, which are discussed in more
detail later in this chapter. Second, the falling saving rate raises questions about whether many American consumers are preparing



70

adequately for their retirement. Finally, families with too little savings
may be unprepared to deal successfully with financial emergencies
such as a spell of unemployment or large medical expenses.
Personal Saving and Retirement
One of the most obvious reasons for households to save is to provide
for a comfortable standard of living in retirement. One way to judge
whether personal saving is too low, then, is to ask whether consumers
appear to be saving enough for retirement. Several recent studies
have examined whether the baby-boom generation, in particular, is
doing enough retirement saving. One set of studies has concluded
that typical baby-boomers need to roughly triple their saving rates if
they hope to maintain their living standards in retirement. Another
study, however, asserts that even if they do not change their saving
behavior at all, the majority of boomers probably will not experience
a sharp drop in living standards upon retirement.
These different conclusions largely reflect a difference in approach.
The first set of studies begins by calculating the gap between the
income that baby-boomers can expect to receive from the combination
of Social Security and traditional pensions, and the income that
would be required to maintain their preretirement standard of living.
These studies then calculate the "target" saving rates that babyboomers would need to achieve to plug that income gap, and show
that the saving rates of typical baby-boom households are only about
a third of the target rates, leading to a "baby boom retirement adequacy index" of 33 percent.
Critics point out that this approach can be misleading, in part
because it is not a measure of the consequences if consumers decide
not to increase their saving. In particular, an index value of 33 percent does not imply that retirement spending will have to be one-third
the level of preretirement spending. For example, consider a household for whom Social Security and pensions will provide sufficient
retirement income to finance spending at 80 percent of preretirement
income, and suppose that the household only needs 85 percent of preretirement income to maintain its accustomed standard of living.
(Spending needs could decline in retirement for several reasons,
notably the decline in commuting and other work-related expenses.)
Such a household could save nothing, and therefore would have an
index value of zero, yet would only experience about a 5-percent
decline in its standard of living at retirement.
An alternative way to evaluate the adequacy of retirement saving
is to calculate the ratio of the level of sustainable retirement spending to the level of spending necessary to maintain standards of living.
Using this measure of retirement adequacy, a recent study calculated
that, under plausible assumptions about the rate of return on savings, and assuming no changes in saving behavior or in the Social




71

Security system, almost half of married-couple baby-boomer households in which the husband works full-time are saving enough to
maintain their standard of living in retirement. (Single baby-boomers
are probably not faring as well, however.) And only about a third of
these married-couple baby-boomer households are projected to suffer
large cuts in their standard of living. These figures improve if home
equity is included in the measure of retirement savings, although
there is some debate whether including home equity is appropriate.
The recent runup in the stock market would improve the picture further, although most of the improvement would likely be concentrated
among the third of households who are already best prepared for
retirement to the extent that they hold a disproportionate share of
equity investments.
Even the optimists, however, acknowledge that current saving
rates of most baby-boom households are not high enough to provide
much of a cushion against the many uncertainties that they face. In
particular, if their retirement savings earn low rates of return, or if
rising medical costs or other unexpected expenses increase their
spending needs in retirement, or if retirement income from sources
other than personal savings falls substantially short of the projections made on the basis of current pension and social insurance
programs, then many baby-boomers may end up wishing they had
saved much more. And even under optimistic assumptions, it appears
likely that unless they boost their saving, most unmarried boomers
will reach normal retirement age with insufficient assets to fully
maintain their preretirement standard of living.
On the whole, therefore, it does appear that unless their saving
rates rise, a very substantial proportion of the baby-boom generation
is at risk of reaching retirement age with insufficient assets to maintain their standard of living. One response may be for them to delay
retirement. Since Social Security and many other pension benefits
are adjusted upward for those who delay retirement, some of the
boomers who are not saving enough to retire at the normal retirement
age may nevertheless be able to retire in relative comfort several
years later. Of course, those who have saved little but whose state of
health or line of work prevents them from remaining in the work force
may have no choice but to accept significantly lower living standards
in their retirement years.
Personal Saving and Financial Emergencies
When consumers are asked about their primary reasons for saving,
the most common answer is that saving is important in order to build
up resources that can be drawn upon in case of emergency. Although
precautionary saving of this kind cannot plausibly explain either the
practice of regular payroll deductions for pension plans or the accumulation of wealth held by the richest few percent of households, it
can account for the consistent finding by consumer surveys that most



72

households usually have on hand an amount of liquid assets that corresponds to between a few weeks' and a few months' worth of spending.
It is difficult to judge whether these liquid assets are enough to
cushion consumers against financial emergencies. Certainly, they
alone would not be enough to fully maintain spending through the
worst possible emergencies such as a long spell of unemployment. But
most households could probably substantially cut their spending during an extended unemployment spell. Also, in today's economy most
consumers have the option of credit card, home equity, or other kinds
of borrowing to finance emergency spending. Indeed, a potential partial explanation of the drop in the personal saving rate over the past
decade is that some consumers have decided that credit cards or other
consumer credit sources can help fill the buffer role traditionally
served by liquid assets.
Unquestionably, credit card availability has risen in recent years.
Particularly notable has been the increase in availability of credit
cards to consumers in lower income and wealth brackets: in 1983 only
28 percent of consumers with annual incomes of less than $15,000 (in
1992 dollars) held credit cards, but by 1995 the ownership rate for
that group had increased to 44 percent. In addition, those groups of
consumers who already had credit cards in 1983 have seen a large
increase in their credit limits in recent years: the median total credit
limit among all consumers with cards increased from about $6,000 in
1989 to over $9,000 in 1995 (both in 1992 dollars).
As might be expected, credit card borrowing has increased as credit has become more available. But the increases in borrowing have
been fairly modest compared with the increases in credit limits.
Table 2-3 shows the distribution of credit balances (the part of the
credit card bill that consumers choose not to pay off at the end of the
month) as a percentage of income for employed working-age consumers in 1983, 1989, and 1995. Whereas the median ratio of credit
card balance to income was close to zero in all 3 years, consumers at
the 75th and 95th percentiles of the distribution had increasingly
large balances relative to their incomes. Still, even in 1995 consumers at the 95th percentile of the distribution had credit card debt
equal to only 22 percent of annual income—a substantial but by no
means unbearable burden.
TABLE 2-3.—Household Credit Card Balances as a Percent of Income
Point in distribution '

1983

1989

1995

Median household

0

0

1

Household at 75th percentile . .

2

3

6

Household at 95th percentile

7

14

22

1

Distribution is that of households according to credit card balances as a fraction of income.
Note. — Data are for households whose heads are employed.
Sources: Board of Governors of the Federal Reserve System and calculations of the Council of Economic Advisers.




73

The available data are consistent with the idea that the expanding
availability of credit card debt may have somewhat reduced the need
for consumers to hold buffer stocks of liquid assets, and thus may
have contributed at least modestly to the drop in the personal saving
rate. But for most households credit availability appears to have
increased considerably more than credit use, so that there appears to
be little reason to worry that typical households have less capacity to
withstand financial shocks. Even the small subset of consumers who
have run up quite substantial credit card debts could plausibly expect
to be able to repay those debts, if they do not experience a major disruption to their income or a large unavoidable expenditure. On the
other hand, consumers with large credit card debts who do experience
a major financial blow may be forced into bankruptcy.
THE LONG-TERM UPTREND IN THE BANKRUPTCY RATE
After remaining roughly stable over much of the 1960s and 1970s,
the personal bankruptcy rate began rising sharply sometime around
the late 1970s or early 1980s. Some have argued that this uptrend
resulted from passage of the Bankruptcy Act of 1978, which eased
some of the burdens of bankruptcy. Other analysts argue that the
approximate correspondence between passage of that act and the
beginning of the uptrend in bankruptcies is just a coincidence, and
that rising bankruptcy rates reflect other social and economic developments that would have led to a rising bankruptcy rate even if the
law had remained unchanged.
One intuitively plausible explanation is that the rise in bankruptcies reflects the increasingly aggressive marketing of credit cards to
high-risk consumers who previously would not have been granted
credit at all. As noted above, it is true that some households have bor- •
rowed increasingly large amounts on credit cards. Some of those
highly indebted individuals presumably end up in bankruptcy if they
lose their jobs or experience other large financial shocks. But there
are reasons to doubt that increased availability of credit cards provides a full explanation of the rise in bankruptcies. First, some
suggestive evidence indicates that credit card debt is not a large fraction of the total debt of consumers who declare bankruptcy;
consumers who end up in bankruptcy court must therefore have borrowed heavily from non-credit card sources. Second, much of the
increase in bankruptcy appears to have come not from low-income
consumers who until recently could not get cards, but from the kinds
of middle-income consumers who have presumably had access to credit cards all along.
If excessive credit card borrowing is not a complete explanation for
the rising bankruptcy rate, what does explain the rise? One possibility is that an increasing number of consumers are simply taking on
more debt than they can manage, in non-credit card form as well as




74

with credit cards. On its face, this explanation seems plausible in
light of the large increases in aggregate household debt over the past
15 years, depicted in Chart 2-6. But as noted above, although the
aggregate debt service burden has climbed recently, it remains below
its late-1980s levels, yet the bankruptcy rate has continued to rise.
And as shown in Table 2-2, the proportion of households who had
either high or very high debt service burdens was actually lower in
1995 than in 1983. Hence, the available data do not seem to support
the theory that bankruptcy has risen simply because increasingly
large numbers of ordinary consumers have unwisely taken out so
much debt that any financial shock will send them into bankruptcy.
Unfortunately, the evidence on alternative explanations is scant,
and no consensus has emerged among experts. One researcher points
out that, under the post-1978 bankruptcy law, up to 15 percent of
households could increase their net worth by declaring bankruptcy;
this researcher and others argue that the rise in the bankruptcy rate
over time largely reflects consumers learning about the costs and benefits of declaring bankruptcy, perhaps partly through advertising by
bankruptcy lawyers. A related hypothesis is that there has been a
decline in the stigma associated with bankruptcy. This theory is consistent with evidence showing that, controlling for other factors,
people who live in areas where the bankruptcy rate has been high in
the past are more likely to declare bankruptcy.
Other authors have suggested that increasing divorce rates, skyrocketing medical costs, or large legal judgments or settlements may
have contributed to the rise in the bankruptcy rate. However,
although each of these factors is clearly important in many individual
bankruptcy cases, none appears to be sufficient to explain more than
a small fraction of the increase in bankruptcies. For example, the
divorce rate stabilized in the mid- to late-1980s, yet bankruptcies
have continued to rise. And some evidence indicates that only a modest fraction of bankrupt consumers have significant amounts of
medical debt or large legal judgments against them.
Whatever is driving the increase in bankruptcies, the rising bankruptcy rate has focused attention on the bankruptcy system. In
response, in 1994 the Congress established a commission to recommend reforms in the bankruptcy system. The National Bankruptcy
Review Commission released its final report in October 1997 (Box 2-5).

LONG-TERM GROWTH: BUDGET DEFICITS AND
NATIONAL SAVING
Since its first budget proposal in 1993, this Administration has
demonstrated a strong commitment to reducing the Federal budget
deficit. As a result, the deficit has declined from $290 billion in 1992
to only $22 billion in 1997, or from 4.7 percent to 0.3 percent of GDP.



75

BOK 2*5*~T!te National Bankruptcy Review Commission
The National Bankruptcy Review Commission, created by
Ckmgreas in 1994 and charged with recommending bankruptcy
reforms, released its final report in October 1997. The commission's proposals for business bankruptcy reform are largely
uncontrwersiaL Perhaps partly because of a lack of compelling
evidence, the commissioners were unable to achieve consensus
on what has caused the rise in personal bankruptcies* and
therefore could not agree on a set of final recommendations for
personal bankruptcy reform. Many of the commission's final recommendations regarding personal bankruptcy were approved
by a bare 5*4 majority of commissioners, and the minority wrote
a series of detailed dissents explaining their objections. The dissenting commissioners argue that the recommendations of the
report are too lenient toward debtors. For example, the majority^ reform plan does not mandate that consumers with incomes
over some threshold be forced to repay a portion of their debts
out of future earnings.
In August 1997 the President and the Congress sealed a historic
agreement that was projected to lead to a balanced budget by 2002;
the continuing robust performance of the economy since August has
improved the outlook further, leading the President to propose a balanced budget for fiscal 1999.
Balancing the budget has been achieved in large part through a
combination of expenditure restraint and increases in income
taxes for the 1 percent of households with the highest incomes. Both
budget cuts and tax increases are difficult and painful measures.
Why did the Administration judge that taking such measures was so
important? Principally because persistent budget deficits as large as
those of the 1980s and early 1990s constitute an unacceptable drain
on national saving.
To see why budget deficits reduce national saving, it is useful to
imagine the private saving of all Americans as flowing into a common
national pool. This pool of saving is then made available to borrowers.
The budget deficit measures how much of this pool of saving is drawn
down by the government; national saving is the amount left in the
pool after the government has borrowed what it needs to pay for that
portion of current expenses that exceed its current revenues.
Because of the reduction in Federal borrowing, net national saving
(gross national saving less depreciation of the private and public capital stock) has increased from 3.1 percent of GDP in 1992 to 6.4
percent in 1997 (on the basis of incomplete data for the year). But
even this net national saving rate is far below the 10-percent average over the period 1960-80.




76

Given the Nation's favorable recent economic performance even
without a high national saving rate, it might be tempting to conclude
that the low national saving rate does not matter. But such a conclusion would be a mistake. There are still good reasons to believe
that the benefits of boosting national saving would outweigh the
short-term pain of cutting back on spending.

SAVING IN A CLOSED ECONOMY
One way of thinking about whether more saving would make the
Nation better off is to ask whether the aggregate capital stock is at
the "golden rule" level—the level that maximizes sustainable per
capita consumption. (Economists call this the golden rule level
because every generation must resist the temptation to consume
more than its share and thereby leave less for future generations.)
Whether an economy is at the golden rule level can be determined
by comparing the net extra output that would be produced by more
capital against the cost of equipping the growing work force with
that extra capital. If the extra output is greater than this cost, then
total national output could be increased by adding to the capital
stock. In the United States, economists estimate that the before-tax
rate of return on additional capital is much higher than the cost of
equipping the work force with extra capital, implying that the
Nation's capital stock is well below the golden rule level.
The golden rule, however, is an imperfect way to judge whether
saving should be higher. The principal problem is that the rule provides no way to weigh the short-term pain from lower current
consumption against the long-term gain from eventually higher
future consumption. A more flexible framework is provided by the
"modified golden rule," which makes explicit assumptions about how
current consumption should be traded off against future consumption. The modified golden rule assumes that society as a whole is
slightly impatient, in the sense of preferring current consumption to
future consumption, and that consumers prefer gradual changes in
the level of consumption and dislike abrupt changes. But under plausible assumptions about the before-tax rate of return, the rate of
impatience, and the degree to which one year's consumption is substitutable for another year's, even the modified golden rule implies
that the saving rate is too low.

SAVING IN AN OPEN ECONOMY
In an economy closed to foreign trade and capital, all domestic investment must be financed by domestic saving. One of the principal
benefits of increasing globalization of trade and capital markets is that
the ability to borrow and lend in foreign markets relaxes the need to
balance national saving with national investment in every year. If
attractive investment opportunities are available at home but domestic



77

saving is insufficient to pursue them, foreign investors can step in;
the resulting excess of investment over national saving is manifested
in a current account deficit. This aspect of globalization has been a
favorable development for the United States, because it has allowed
the economy recently to invest in capital equipment at high rates
despite the persistently low national saving rate. The high rates of
investment in capital equipment over the past few years have been
critical in preventing the kinds of production bottlenecks that have
often led to rising inflation rates at comparable points in past business cycles.
But maintaining national investment above national saving over
long periods does come at a price: growing indebtedness to foreign
investors. In the long run, increased foreign indebtedness means that
apportion of the extra future output generated by the extra investment will be needed to pay a return to foreign lenders. In light of the
demands that will be placed on the economy over the next 30 or 40
years by the retirement of the baby-boom generation, and considering
that countries that are currently lending to us face similar demographic challenges, there remains a strong argument that it would be
better to finance our high investment rates more through higher
national saving and less by borrowing abroad.
IMPLICATIONS
This Administration has believed from the beginning that the case
for a higher national saving rate is compelling. That conviction led to
the Administration's steadfast commitment to reducing the budget
deficit. But as important as the progress on the budget deficit has
been, the net national saving rate is still too low. One important priority for the Administration and the Nation is to address the actuarial
imbalance in the Nation's entitlement programs in a way that
increases the national saving rate and thereby increases the
resources available to meet the impending demographic crunch.

FORECAST AND OUTLOOK
THE ADMINISTRATION FORECAST
The Administration projects GDP growth over the long term at
about 2.4 percent per year—a figure consistent with the experience so
far during this business cycle as well as with reasonable growth rates
of its supply-side components. From the business-cycle peak in the
third quarter of 1990 until the third quarter of 1997, real output
growth has averaged 2.4 percent per year. This figure is the average
of real growth rates of the product side (gross domestic product, 2.3
percent) and the income side (gross domestic income, 2.6 percent).
Because the unemployment rate fell by 0.1 percentage point per year
over this period, the empirical regularity known as Okun's law sug


78

gests that these growth rates overstate the growth of trend output by
0.2 percentage point—a calculation that results in a backward-looking estimate of 2.2-percent growth of potential output.
This estimate is likely understated by about 0.2 percentage point
because of methodological problems with the CPI that have been or
will soon be corrected (Box 2-6). By lowering measured inflation
while leaving nominal GDP unaffected, these methodological changes
will boost measured real output (and better capture its true value).
Box 2-6. — Methodological Changes in the Consumer
Index
The Bureau of Labor Statistics has recently made several
methodological changes that have improved the accuracy of the
consumer prise iiutex; a few more changes are planned over the
ne&t several year§ (Table 2-4). Moat of these improvements have
redueed the measured increase in the CPI> and many of these
also will affect the deflation of nominal output, and therefore
will raiae the growth rate of measure*! real CJDB Changes made
through 1997 include the substitution of generic drags when
patents e&pire on proprietary brands; the correction of a problem in rotating new etores into the survey through a procedure
called ^seasoning** (a problem that was corrected first in the food
category and later in other categories of goods); the modification
of Hie formula for measuring increases in rent; and a change to
measuring transaction rather than list prices for hospital services* Changes scheduled to be made in the aaxt 2 years include
a switch to measuring computer prices by their intrinsic characteristics ("hedonics*}; an update of the market basket from
1982-84 to 1093*95; the use of geometric rather than arithmetic
means to address substitution bias within categories; and more
frequent rotation of the items sampled in categories with many
new product introductions.
The changes made through 1997 have a combined effect of
lowering the CPI inflation rate by 0.28 percentage point per
ye&r» and raising real GBP growth by 0,06 percentage point per
year* Tfeepost* 199? changes, lower CPI inflation by &41 percentage point per year and raise real GDP iprowth by 0,14
percentage point per year,
In addition, continued capital deepening may add a bit to productivity growth as the net capital stock grows faster than GDP. This
would not happen in a steady state where capital and output are
growing at the same pace. But the economy is projected not to reach
a steady state during the forecast period, as the relative price of capital is expected to continue to fall.




79

TABLE 2-4.—Expected Effects on Changes in the CPI and Real GDP ofCPI
Methodological Changes
Percentage-point
effect on:

Year
introduced

Change in method

Real GDP
percent
change

CPI
percent
change

Pre-1998

-0.28

0.06

Generic prescription drugs
Food at home seasoning
Owners' equivalent rent formula
Rent composite estimator

1995
1995
1995
1995

-.01
-.04
-.10

.00
.0
.00
.00

General seasoning

1996

-.10

.06

1997

-.06

.00

-.41

.14

Hospital services index
1998 and after

. .

.03

Personal computer hedonics
Updated market basket

1998
1998

-.06
-.15

.00
.02

Geometric means
Rotation by item

1999
1999

-.15
-.05

.09
.03

-.69

.20

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

COMPONENTS OF LONG-TERM GROWTH
After rising rapidly in the 1970s and 1980s, the labor force
participation rate was relatively flat between 1990 and 1996. But
the participation rate rose 0.3 percentage point to 67.1 percent in
1997—the first year in which it surpassed the 1990 level (after
correcting for the redesign of the Current Population Survey).
One might interpret the pickup in participation in 1997 as
a return toward the rapid growth of earlier decades, but other
explanations, which suggest that the increase in the rate of
participation growth will not endure, are also likely. Given the strong
growth of labor demand, it seems that some of last year's labor force
pickup ought to be interpreted as a cyclical response to a tight labor
market.
The welfare reform law passed in the summer of 1996 may also
have boosted labor force participation growth last year and can be
expected to do so for several years to come. The legislation requires
that, by 2002, States either reduce their welfare caseloads by 50 percent or have 50 percent of the caseload either working or engaged in
work-related activities (such as vocational or job skills training), or
some combination or the two (with some exemptions). This legislation
also set a 2-year time limit on any spell of welfare recipiency and a 5year lifetime limit, except that 20 percent of a State's caseload may be
exempted from this requirement. Rough calculations suggest that the




80

requirement for work-related activities and the 2-year limit on welfare spells together could cause the labor force participation rate to
grow by almost 0.1 percentage point per year over the next several
years.
At the same time, the long-term demographic forces that have
restrained growth in labor force participation in the 1990s are
expected to remain in place. The stalling of the overall participation
rate in the 1990s is accounted for largely by a deceleration in the
participation rate of women; the participation rate for men has
fallen no faster than in earlier years. The child dependency ratio
(the number of children per woman aged 20-54) fell between the
late 1960s and the early 1980s, echoing the earlier pattern in the
birth rate. The decline in this ratio allowed an increasing fraction
of women to enter the labor force between the mid-1970s and
the 1980s, but its subsequent flattening in the late 1980s has
limited further increases in participation.
Balancing these influences, the Administration's long-term outlook
includes a 0.1-percent per year increase in the participation rate
through 2007. Together with population growth of 1.0 percent per
year for the working-age population, this implies labor force growth
of 1.1 percent per year (Table 2-5).
PRODUCTIVITY
A good way to begin the analysis of productivity growth is by examining the recent past. Labor productivity (that is, worker output per
hour) can be measured using either the product-side or the incomeside measure of output (Chart 2-9). By the product-side measure,
labor productivity has grown at a 1.1-percent annual rate since the
business-cycle peak in the third quarter of 1990, whereas the incomeside measure shows productivity growth at a more robust 1.5-percent
annual rate. Because neither of these two measures is perfect, an
argument can be made for averaging them, to yield an estimated
annual rate of 1.3 percent over this business cycle.
By either measure, productivity growth was particularly rapid over
the first three quarters of 1997, as noted earlier. An acceleration in
productivity is not usually observed in the latter part of an expansion
(Chart 2-10); historically, productivity growth has tended to slow
as the economy returns to full employment. This tendency could
reflect several factors, such as overly optimistic hiring decisions
by firms, or firms' having to hire less productive workers as the labor
market tightens. Whatever the explanation, the fact that no
such slowdown is now apparent is evidence that none of these
imbalances are currently present, and that the economy is behaving
as if it remains in a mid-expansion phase, rather than an end-ofexpansion phase.




81

TABLE 2-5.—Accounting for Growth in Real GDP, 1960-2005
[Average annual percent change]
196011
to
1973 IV

Item

1973 IV
to
1990 III

1990 III
to
1997 III

1997 III
to
2005

1.8
2

1.5
5

1.0
0

1.0
1

2.0
0

2.0
-1

11
1

1.1

4) PLUS- Civilian employment rate '
5)

EQUALS- Civilian employment '

20

19

12

10

6)

PLUS: Nonfarm business employment as
a share of civilian employment 12

1

1

2

1

1) Civilian noninstitutional population aged 16 and over
2) PLUS- Civilian labor force participation rate '
3)

EQUALS: Civilian labor force '

-1

21

20

14

11

8) PLUS: Average weekly hours
(nonfarm business)

-5

-4

1

0

9) EQUALS: Hours of all persons
(nonfarm business)

1.6

1.7

1.5

7)

EQUALS- Nonfarm business employment

10) PLUS-. Output per hour
(productivity, nonfarm business)

2.9

1.1

45

28

3

11) EQUALS- Nonfarm business output
12) LESS: Nonfarm business output as a share
of real GDP *

1

42

13) EQUALS- Real GDP

27

1.1

1.1

3

27

3

3

24

(3 0)
3

4
23

1.3

(1.5)

1

(4)

(2 6)

5

23

1

Adjusted for 1994 revision of the Current Population Survey.
Line 6 translates the civilian employment growth rate into the nonfarm business employment growth rate.
Income-side definition.
4
Line 12 translates nonfarm business output back into output for all sectors (GDP), which includes the output of farms and
general government.
5
GDP growth is projected to fall below its long-term trend (2.4 percent) as the employment rate is projected to fall 0.1
percent per year over this period.
2
3

Note.—Detail may not add to totals because of rounding.
Except for 1997, time periods are from business-cycle peak to business-cycle peak to avoid cyclical variation.
Sources: Council of Economic Advisers, Department of Commerce (Bureau of Economic Analysis), and Department of Labor
(Bureau of Labor Statistics).

Because hours worked usually reacts to changes in output with a
lag, hours probably have not caught up with the acceleration
in GDP in 1997. As a result, the growth of productivity over
the four quarters ending in the third quarter of 1997 likely exceeded
its trend rate, as it often does midway through an expansion. A better
estimate of trend productivity growth comes from a model that takes
this lagged adjustment into account. This procedure estimates that
the trend rate of productivity thus far in this business cycle
has been similar to the 1.1-percent annual rate that has prevailed
since 1973. Looking ahead, measured productivity can be expected to
grow at a 1.3-percent annual rate because of the 0.2-percentage-point
effect that the CPI methodological adjustments will have on real
GDP.




82

Chart 2-9 Alternative Measures of Productivity
Since the last business-cycle peak, the income-side measure of productivity has grown
significantly faster than the product-side measure.
Index, 1990:Q3 = 100 (ratio scale)

112

Income-side
measure

110
108
106
104

Official
(product-side)
measure

102
100
98

i

96

i

i

i

i

1988
1989
1990
1991
1992
1993
1994
1995
1996
Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor
(Bureau of Labor Statistics), and Council of Economic Advisers.

i
1997

Chart 2-10 Productivity Growth and the End-of-Expansion Effect
Nonfarm business productivity growth has slowed in the late stages of almost all
previous postwar expansions. Over the past year, productivity accelerated.
Average annual percent change

6

•

D

,-0.6

1949-53

1954-57

Average productivity growth:
full expansion less last four quarters
Average productivity growth:
last (most recent) four quarters of
previous (current) expansion(s)

I

1958-60
1961-69
1970-73
1975-80
1982-90 1991-97:03
Expansion dates (trough to peak)
Sources: Department of Labor (Bureau of Labor Statistics) and National Bureau of Economic Research.




83

INFLATION CONSIDERATIONS
Continued labor market tightness can be expected to put some upward pressure on inflation. With the relative price of investment goods
continuing to fall, strong growth of investment is expected to keep
industrial capacity relatively more ample than labor supply. And the
future development of inflation will also be affected by the factors that
have thus far suppressed it. The restructuring of the Asian economies
virtually guarantees that the price of imports from these economies will
remain low and may fall further. The relative price of computers will
continue to fall, although the rate of decline is expected to return to the
roughly 15-percent annual rate that has prevailed over much of the
1990s. Finally, the methodological changes to the CPI planned to be
implemented before 2000 are eventually expected to lower annual CPI
inflation by another 0.4 percentage point, and the price index for GDP
by 0.1 percentage point. With these considerations in mind, the Administration projects CPI inflation to creep up by about 0.3 percentage
point over the next few years, to 2.3 percent by 2000.

THE DEMAND FOR HOUSING
A surge in the fourth quarter raised residential investment growth
above that of GDP during the past year. New home construction (housing starts and shipments of mobile homes) was roughly unchanged in
1997 from its year-earlier pace, despite a jump in the fourth quarter.
Demographic trends indicate stable demand for housing during the next
decade.
The current shape of the age distribution reflects the legacy of the
baby boom and the baby bust. Because most new households are formed
by young adults, the passage of the first wave of baby-boomers into the
prime years of household formation in the late 1970s was associated
with a rapid pace of home construction and rising house prices. But
household formation fell to an annual rate of about 1.1 million per year
during the first half of the 1990s as the smaller baby-bust cohort moved
into adulthood. Demographic forecasts project a similar rate of household formation over the second half of the 1990s.
In addition to growth in the number of households, demand for new
homes is created by the replacement of homes that are scrapped or
destroyed and by the increase in the number of second homes and
vacant homes (Table 2-6). Replacement demand (which can be estimated over long periods only) has averaged about 300,000 units per year.
The increase in "vacant" homes (which includes second homes) is highly cyclical and has reflected the general economic strength of recent
years, but tends to average about 200,000 units per year. Altogether,
housing demand has averaged 1.53 million units per year thus far in the
1990s and, in light of the demographic forecast, is expected to continue
at a similar pace for the next decade.




84

This projection of the long-run demand for housing is slightly
stronger than what has prevailed thus far in the 1990s, but not quite
as strong as demand in the past 2 years. As Table 2-6 shows, long-run
demand is consistent with a rate of housing starts of roughly 1.40 million units per year, slightly below the 1.48-million-unit pace of
homebuilding in 1997. Of course, economic conditions can push housing
starts away from their demographic fundamentals. Recessions generally slow the pace of both home construction and household formation
as young people remain longer in their parents' homes—this is what
happened in 1990. In good times, people spend more on larger homes
and second homes. If the current good times continue, homebuilding
could exceed these projections of its demographic determinants.
TABLE 2-6.—Contribution of Selected Determinants of
Demand and Supply for New Homes
[Millions, annual average]

Determinant

1970s

1990-96

1980s

1996-2006

Demand:
Household growth

1.73

1.26

1.05

1.10

20
.30

40
.30

18
.30

24
.30

223

196

153

164

Single-family homes

1 14

Multifamily homes.

.62
.37

99
.51
.25

105
24
.26

108
30
.26

175

154

164

.21

-01

00

Change in vacancies
Net removals
Total demand
Supply:

Mobile homes
Total supply ..

2.12

.11

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

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

THE NEAR-TERM OUTLOOK
Both supply- and demand-side considerations argue for some moderation in real GDP growth from its rapid 3.6-percent annual pace of
the past 2 years (Table 2-7). On the supply side, the unemployment
rate has fallen about a percentage point over the past 2 years, and it
is therefore doubtful whether a further decline of this magnitude could
be accommodated without inflationary consequences. Labor force
growth has not kept up with demand in the past 2 years, nor can it be
expected to keep up with a repetition of that kind of demand growth.
On the demand side, some restraint is likely to come from the international economy, where the recent rise in the dollar and the restructuring of several Asian economies may slow the demand for
American-built products. Because the direction of trade responds



85

with a lag to changes in the exchange rate, the large rise in the dollar over the past 2 years is likely to boost demand for imports and
limit growth of our exports. The recent movements of the Asian currencies are particularly dramatic and will make imports from these
economies less expensive. Even so, the cloud formed by the Asian
restructuring has a silver lining: aggressive competition from foreign
producers is likely to restrain domestic inflation—as it has during the
past 2 years.
TABLE 2-7.—Administration Forecast
Actual
Item

1998
1996

1999

2000

2001

2002

2003

2004

1997

Percent change, fourth quarter to fourth quarter
Nominal GDP

5.6

>5.8

4.0

4.1

4.3

4.6

4.6

4.6

4.7

Real GDP (chain-type)

3.2

'3.9

2.0

2.0

2.0

2.3

2.4

2.4

2.4

GDP price index (chain-type)

2.3

4.8

2.0

2.1

2.2

2.2

2.2

2.2

2.2

Consumer price index (CPI-U)

3.2

1.9

2.2

2.2

2.3

2.3

2.3

2.3

2.3

Calendar year average
Unemployment rate (percent)

5.4

4.9

4.9

5.1

5.3

5.4

5.4

5.4

5.4

Interest rate, 91-day Treasury bills (percent)

5.0

5.1

5.0

4.9

4.8

4.7

4.7

4.7

4.7

Interest rate, 10-year Treasury notes (percent)

6.4

6.4

5.9

5.8

5.8

5.7

5.7

5.7

5.7

119.5 422.3

124.0

125.4

126.8

128.4

130.4

132.5

134.5

Nonfarm payroll employment (millions)
1

Preliminary.
Sources: Council of Economic Advisers, Department of Commerce, Department of Labor, Department of the Treasury, and
Office of Management and Budget.

Other factors also are expected to slow the growth of demand.
Business purchases of capital goods have been growing faster than the
overall economy, and because the relative price of equipment investment is falling, this trend is expected to continue. However, some
moderation of the recent torrid pace is expected as business demand
for capital goods becomes more sated. A similar effect may limit
expenditures on consumer durables, where—given the length and
strength of this expansion—pent-up demand has been exhausted.
The rate of inventory investment was particularly strong during the
first half of 1997 and remained high despite tapering off somewhat in
the second half of the year. Because output grew so rapidly, inventories remain lean with respect to sales, and certainly no overhang of
excess inventories exists at this point. Still, the rate of inventory
growth during 1997, at about 5 percent, is in excess of what will be
needed once demand moderates to its trend. As a result, inventory
investment is also expected to restrain near-term growth in demand.



86

As in recent Administration projections, a moderation in output
growth to 2.0 percent is projected in the near term—slightly below the
economy's long-run growth rate, but in line with the consensus of professional economic forecasters. The balance of the Administration's
forecast is built around a growth rate for potential output of 2.4 percent per year. The Administration does not think that 2.4-percent
annual real growth is the best that the economy can do; rather, this
projected growth reflects a conservative estimate of the effects of
Administration policies to promote education and investment and to
balance the budget. The outcome could be even better—as it has been
in the past 2 years. But the Administration's forecast is used for a very
important purpose: to project Federal revenues and outlays and the
Federal budget deficit. For this purpose excessive optimism is dangerous and can stand in the way of making difficult but necessary budget
decisions. In the final analysis, the most important goal is the creation
of a sound forecast that accurately captures likely economic trends.
As of December 1997 the current expansion had lasted 81 months,
making it the third longest in the postwar record. There is no foreseeable reason why this expansion cannot continue. As the 1996
Report argued, expansions do not die of old age. Instead, recent postwar expansions have ended because of rising inflation, financial
imbalances, or inventory overhangs. None of these conditions exists
at present. The most likely prognosis is therefore for sustained job
creation and continued noninflationary growth.




87




CHAPTER 3

The Economic Weil-Being
of Children
AFTER DROPPING SHARPLY IN THE 1960s, the official poverty rate among children trended upward from 1969 to 1993, reflecting
increases in the share of children in single-parent families and
declines in real wages at the bottom of the income distribution.
Recently, however, the picture has improved, as the child poverty
rate declined by 2.2 percentage points from 1993 to 1996.
Other measures of children's material well-being have improved
recently as well. Since the early 1990s the share of children in households reporting that they did not have enough food to eat has
decreased, the share of households with children living in inadequate housing has fallen, and children's use of basic health services
has increased. Continued declines have also been recorded in infant
and child mortality rates, and some measures of children's educational achievement have improved.
Nevertheless, many children remain economically vulnerable. In
1996 one in five children was officially poor; in 1995 one in nine lived
in households paying more than half of their income for housing, and
one in seven did not have health insurance; and in 1994 one in 56
lived in households where children experienced hunger due to inadequate resources for food. These factors place children at risk of both
current and future hardship, as many of these factors may be critical to children's long-term development.
This Administration has adopted a range of strategies to improve
the economic and social well-being of children. The first of these is to
put in place a system that guarantees that children's basic needs are
met. For this reason the Administration has supported major initiatives to expand health insurance, child care, and subsidized housing
and has substantially strengthened the child support enforcement
system. The second strategy is to provide financial support to needy
families in a way that promotes work and personal responsibility. To
achieve these goals the Administration proposed and the Congress
enacted increases in the minimum wage, an expansion in the earned
income tax credit (EITC), and a major restructuring of the welfare
system. The third strategy is to invest in programs that enrich children's educational opportunities, by expanding the Head Start
program and encouraging higher standards for elementary and secondary schools.



89

This chapter begins by describing recent economic and demographic trends that have influenced the economic well-being of children,
and recent programs designed to improve the economic status of families with children. The second section reports on changes in two key
components of children's material well-being: food sufficiency and
housing conditions. The third section describes recent changes in children's health outcomes, access to health care, and health insurance
coverage rates. The concluding section discusses child care and educational programs for children.

TRENDS IN THE ECONOMIC WELL-BEING
OF CHILDREN
THE LINK BETWEEN INCOME AND
CHILDREN'S WELL-BEING
The adequacy of family income is a critical predictor of both the present and the future well-being of children. Children who grow up in
low-income families score lower on standardized academic achievement tests, are less likely to complete high school, complete fewer
years of school, and are likely to have lower earnings when they enter
the labor market than children who grow up in higher income families. Most studies find that family income is more strongly correlated
with children's achievement than parental schooling or family structure.
Low family income might affect children's well-being for any of several reasons. One is that low-income parents may not be able to afford
to invest as much in the things that improve their children's wellbeing, such as food, shelter, medical care, and education. A second is
that the poor are more likely to live in neighborhoods with a high concentration of poverty and thus may face higher crime rates, poorer
quality schools, and more limited connections to mainstream economic activity. A third is that low-income families may experience higher
levels of emotional distress, due to the economic pressures of living on
a limited income.
Finally, income may be highly correlated with children's achievement not because income directly affects child well-being, but because
income is associated with some other, hard-to-measure factor that
does affect child well-being, such as the value that parents place on
education. For example, children from high-income families may perform better on standardized academic tests than children from
low-income families not because they have higher incomes but
because their parents encouraged them to work harder in school. If
this is so, increasing family income will not necessarily increase children's academic achievement unless it also increases parents'
commitment to their children's education. A recent study found that
more sophisticated techniques that control for potential differences



90

across families produced lower estimated impacts of family income on
child well-being than suggested by simple correlations of family
income and child well-being.

MEASURING TRENDS IN CHILD POVERTY RATES
One of the most commonly used measures of the adequacy of family income is the poverty rate. The poverty rate is the percentage of the
population who live in families with before-tax cash incomes below a
defined level of need, called the poverty line. The official poverty line
in use today was devised in the early 1960s and based on the minimum cost of a nutritionally adequate diet. This amount was
multiplied by three, because data from the late 1950s suggested that
the typical family spent one-third of its income on food. Since then the
poverty line has been updated annually for inflation using the consumer price index for all urban consumers. In 1996 the poverty line
for a family of two adults and two children was $15,911. Many people
have argued that the official poverty measure should be modified to
account for family income and family income requirements differently. Box 3-1 describes a recent proposal by the National Research
Council to change the way we measure poverty.

Boss 3~JL—Bow Does Our Poverty Measure Affect Gtn?
Conception of P0wrty?
A 1005 report by the National Besearch Council (NEC) recommended a number of changes in the way we measure poverty,
Its recommendations include the following:
* Defimmg income* On the one hand* the definition of family
income should be expanded to include other important
sources of purchasing power, such as the MTC? food
stampSj and housing subsidies. On the other hand, some
necessary eispenditiires that reduce a famil/s resources
available for basic consumption needs should be subtracted
from income, such as taxes* necessary child care and other
work-related expenditure^ child support payments^ and
out-of-pocket medical esqpendltures,
« Setting & threshold* Poverty thresholds should ha adjusted
to provide a more accurate measure of family income
requirements* Pirstt the consumption bundle used to derive
thresholds should be based om food* clothing* and shelter*
not food <^naumption alone, Seeond* thresholds should
reflect regional variations in housing costs, fHiird, thresholds should be adjusted for family si^e in a more consistent
way than earrentiy Finally, thresholds should be updated
to reflect changes to expenditure patterns over time,



91

Box 3~

A recent study tis&d key elements $f the NEC proposal
to estimate alternative poverty rates from 1901 to 199ft, Th&ie
estimates profaeed
in poverty fri>m 1§01 to 1993 similar to* am<i decreases in pweiiy from 19SS to 1996 somewhat
largertiban^those winder the offieial t&easiire. In addition, wider
the alternative nieasw® a emdObr pr0p0rtiim of the poor are
children* blaek, or members of femate*tieaded Iioiiadboida. These
reflect the faet that tiba n0w meamire'mora aDmpIetelj
for in-Madl transfer^ gneh as food stamps and homing
benefite, 0&<i for work-related es^fenditiires, AB a re^alt^ the new
measure tends to deewaae ttie rd&tiw pwarty rate of persons
who are more lifetly to reeeiw in-Mmd teBaftra^ and to iiKareaw
the relative pover^ jmte of employed I&w4wmm® persona with
Mgher work-related

Chart 3-1 shows that the poverty rate for children declined sharply
from 1960 to 1969 and has since trended upward, with peaks in 1983
and 1993. (Throughout this chapter "children" refers to persons under
age 18 except where stated to the contrary.) Chart 3-1 also illustrates
an experimental poverty measure developed by the Bureau of the
Chart 3-1 Poverty Rates of Children
The child poverty rate rose between 1978 and 1993 after falling steeply in the 1960s. It
has declined again since 1993, especially after including taxes and in-kind benefits.
Percent

30

25

•""

\

^

Official measure

20

15

\

/

v

/ Including taxes and in-kind benefits

I
1960

1963

1966

1969

1972

1975

1978

1981

Source: Department of Commerce (Bureau of the Census).




92

1984

1987

1990

1993

1996

Census, which includes taxes and in-kind transfers in family income.
Including taxes and transfers reduces the estimated poverty rate in
each year but does not substantially affect the trend in poverty from
1979 to 1993. Since 1993, poverty rates have declined more rapidly
under the experimental than under the official measure. This is
largely attributable to recent expansions in the EITC, which affect
the experimental but not the official measure of poverty.
Estimates of changes in the poverty rate are sensitive to the
method used to adjust the poverty line for inflation. Some have
argued that the price index used in the official poverty measure has
overestimated the actual level of inflation. (See the 1997 Economic
Report of the President for a discussion of this issue.) Under some
alternative estimates of poverty that incorporate different inflation
estimates, poverty trends for children are flat or down over the last
several decades.
Table 3-1 shows poverty rates for children of different ages, races,
family status, and incomes in 1996. In that year 20.5 percent of all
children were poor, 9.0 percent were in extreme poverty (defined here
TABLE 3-1.—Children with Family Incomes Below Different
Income Cutoffs, 1996
[Percent of children in each category]
Family income
Demographic
category

Less than half
of poverty line

Less than
poverty line

Less than twice
poverty line

Age of child:1
Under 6

10.5

7.4

6-17

227
18.3

46.2
40.7

Race/ethnicity of child:
White
Black
Hispanic

163

382

20.6

39.9

68.0

147

403

720

Female-headed
Married couple

258
2.8

493

763

10.1

31.0

All children

90

205

432

66

Family status:

1

Children in families.
Note.—Income is before-tax cash income.
Source: Department of Commerce (Bureau of the Census).

as family income less than half the poverty line), and 43.2 percent
were poor or near poor (defined here as family income less than twice
the poverty line). The poverty rate for children under age 6 was 1.25
times that for children aged 6-17, the rate for black and Hispanic children was 2.5 times that for white children, and the rate for children
in female-headed households with no husband present was nearly
five times that for children in married-couple families. Over one-quar


93

ter of children in female-headed families lived in families with
incomes below half the poverty line, and over three-quarters of this
group lived in families with incomes below twice the poverty line.

EXPLAINING RECENT CHANGES IN CHILD POVERTY
Changes in family structure, labor market opportunities, and
transfers are all likely to have an important influence on child poverty. This section briefly describes each of these three factors. It then
estimates the relative influence of these factors on changes in child
poverty since 1979.

Family Structure
Changes in family structure are likely to have had a substantial
influence on child poverty rates over the past few decades. The percentage of children living with their mother only has nearly tripled
since 1960. This reflects increases both in the percentage of children
living with a mother who is divorced or who is married but not currently living with her husband and in the percentage living with a
never-married mother (Chart 3-2). Because children in female-headed households have poverty rates nearly five times those of children
in married-couple households, an increase in the percentage of children in female-headed households is likely to increase child poverty.
Chart 3-2 Children Living with Their Mother Only, by Marital Status of Mother
The percent of children living with their mother only has nearly tripled since 1960.
Percent of all children

25

Mother widowed
Mother divorced or spouse absent
Mother never married
20

1960
1963
1966
1969
1972
1975
1978
Source: Department of Commerce (Bureau of the Census).

1981

1984

1987

1990

1993

Children in female-headed households have a higher risk of living
in poverty for two reasons. First, most single mothers do not receive



94

child support and must therefore rely on a single income. Nearly twothirds of all divorced, separated, or never-married women with
children did not receive child support payments in 1991. Second, that
single income is likely to be lower in a female-headed than in a maleheaded household, because women typically earn less in the labor
market than men. In 1996 the median earnings of full-time, yearround workers were about 25 percent lower for women than for men.
Macroeconomic and Labor Market Conditions
Both macroeconomic and labor market conditions can affect child
poverty because they influence the quality and quantity of jobs available to parents. Table 3-2 shows how changes in child poverty rates
are related to two key indicators of macroeconomic performance: the
unemployment rate and the economic growth rate, as measured by
annual growth in real gross domestic product per capita. The marked
decline in child poverty from 1959 to 1969 coincided with both high
economic growth rates and decreases in unemployment. Some studies
have attributed the decline in poverty over this period to these strong
macroeconomic conditions.
TABLE 3-2.—Changes in Child Poverty Rate and
Selected Macroeconomic Indicators
Change in official
poverty rate of
children
(percentage
points)

Period

Average annual
growth rate in
real GDP
per capita
(percent)

Change in
unemployment
rate
(percentage
points)

1959-69

-13.3

3.0

-2.0

1969-79

24

21

23

1979-89

32

18

-5

1989-93

31

3

1.6

1993-96

-22

18

-15

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

Despite continued strong rates of economic growth, the child poverty rate increased during the 1970s and 1980s. This was partly a result
of the increase in the unemployment rate from 1969 to 1979, and
partly attributable to an increase in wage inequality since the 1970s.
(See Chapter 4 of the 1997 Economic Report of the President for a discussion of these trends.) Two recent studies have concluded that the
increases in overall poverty in the 1980s were largely attributable to
increases in wage inequality and to decreases in the real wages of
low-wage workers.
During the 1990s changes in child poverty have been more closely
aligned with changes in unemployment and economic growth rates.
The increase in child poverty from 1989 to 1993 coincided with
increases in unemployment and low economic growth rates, whereas



95

the decrease from 1993 to 1996 coincided with lower unemployment
and higher rates of economic growth.
Changes in Transfer Policy
One other factor that has had an important influence on child
poverty is changes in the generosity of the tax-and-transfer system.
The real value of cash transfers available to low-income families with
children has deteriorated significantly since the 1970s. This reflects a
decline in the real value of benefits under the Aid to Families with
Dependent Children (AFDC) program, the main cash assistance program for low-income families with children until 1996. Although this
decline was offset somewhat by expansions in food stamps, combined
benefits from both AFDC and food stamps have also decreased (Chart
3-3).
Since 1993, expansions of the EITC have increased the transfers
available to low-income working families. In addition, the welfare system has been restructured to promote work and family responsibility.
These changes are described further below.
Chart 3-3 Monthly AFDC and Food Stamp Benefits for a Family of Four
The purchasing power of AFDC and food stamp benefits has eroded since 1970. AFDC
payments alone have lost nearly half their real value.
1996 dollars

1200
1100

x

AFDC and food stamps

\

900

800

70
0

600

50
0

1970
1973
1976
1979
1982
1985
1988
1991
1994
Note: Each data point represents the maximum benefit paid by the median State.
Sources: U.S. House of Representatives (Committee on Ways and Means), Department of Health
and Human Services, and Department of Agriculture.

Assessing Relative Magnitudes—A Decomposition
Table 3-3 presents estimates of the impact of changes in family
composition, earnings and other before-tax-and-transfer income, and
taxes and transfers on the change in child poverty since 1979. It presents two measures of poverty: the official measure, which is based on
before-tax cash income, and an alternative measure, which includes



96

both taxes and means-tested food and housing transfers. These estimates may not accurately reflect the full impact of each of these
factors on poverty over this period, because they assume that the
observed changes in family composition have not been influenced by
changes in underlying poverty rates for married couples and singleparent families. These estimates may also be sensitive to the order in
which each income source is accounted for in the analysis.
The first line of the table shows the impact of changes in family
structure on changes in the child poverty rate for various periods
since 1979. It shows how changes in the percentage of children living
in each of three family types—married couples, female householders
with no husband present, and male householders with no wife present—would have affected child poverty in each period, if the poverty
rates of each group had not changed. The second line shows the
impact of market earnings. It shows the effect of changes in beforetax-and-transfer poverty rates of children in each family category.
The third line shows the impact of cash transfers (social insurance
and welfare payments). It shows the effect of changes in the percentage of children within each family category whose incomes are
brought above the poverty line when cash transfers are included in
income. The fifth and sixth lines show similar calculations for meanstested food and housing transfers and for taxes.
TABLE 3-3.—Accounting for Changes in Child Poverty
[Percentage points]
1979-89

Factor

1989-93

1979-96

1993-96

Change in official poverty measure attributable to changes in:
Family structure

12

Earnings and other before-tax-and-transfer income
Social insurance and welfare payments

03

23

1.1

3.5

-3.0

1.6

10

-1 1

5

4

32

31

-22

41

.4

-.3

.0

.1

3

0

-25

-22

4.0

Total change m official poverty measure

08

2.9

-4.7

2.2

Change in extended poverty measure attributable to changes in:
Means-tested food and housing transfers
Taxes
Total change in extended poverty measure

Note.—A positive number indicates an increase, and a negative number a decrease, in the child poverty rate resulting from
that factor.
Detail may not add to totals because of rounding.
Sources: Department of Commerce (Bureau of the Census) and Office of Management and Budget.

These calculations imply that the increase of 3.2 percentage points
in the official poverty rate from 1979 to 1989 is attributable to
changes in family structure (1.2 percentage points), increases in
before-tax-and-transfer poverty (1.1 percentage points), and decreases in social insurance and welfare payments (1.0 percentage point).



97

Changes in food and housing transfer payments further increased the
extended poverty measure by 0.7 percentage point.
By contrast, the 2.9-percentage-point increase in the extended child
poverty measure from 1989 to 1993 is mainly attributable to an
increase in before-tax-and-transfer poverty (3.5 percentage points)
and to changes in family composition (0.8 percentage point). These
factors were offset by transfers, which tended to decrease poverty
over this period.
Finally, the table suggests that the 4.7-percentage-point decline in
the after-tax-and-transfer extended child poverty measure from 1993
to 1996 is attributable to both a 3.0-percentage-point decrease in
before-tax-and-transfer poverty and a 2.0-percentage-point increase
in the proportion of children moved out of poverty by taxes and transfers (primarily the EITC). Changes in family structure had a small
impact on child poverty during this period, increasing the poverty
rate by 0.3 percentage point from 1993 to 1996.
Overall, this table suggests that changes in family structure have
put upward pressure on child poverty rates since 1979. The long-term
increase in wage inequality has been reflected in an increase in
before-tax-and-transfer poverty since 1979, although there have also
been cyclical fluctuations in before-tax-and-transfer poverty in the
1980s and 1990s. Finally, the tax-and-transfer system did more to
reduce child poverty in 1996 than in 1979. This largely reflects the
recent expansion of the EITC.
POLICY INITIATIVES TO SUPPORT FAMILY INCOMES
This Administration has established a number of initiatives to
expand the resources available to families with children in a way that
creates positive incentives for work and personal responsibility.
Recent policy initiatives include:
• A higher minimum wage. The Congress and the Administration
increased the minimum wage from $4.25 to $4.75 per hour in
October 1996, and to $5.15 per hour in September 1997, bringing
the minimum wage to its highest level in real terms since 1984.
• An expanded EITC. In 1993 the Congress approved the
Administration's proposal to expand the EITC. The EITC is a refundable tax credit designed primarily for low-income working families
with children. In 1997 the maximum credit for a family with one
child was $2,210 (a 54-percent increase since 1993), and that for a
family with two or more children was $3,656 (a 140-percent increase
since 1993).
• Welfare reform. The Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 dramatically restructured the welfare
system to promote work and personal responsibility, and to allow
States greater flexibility in designing welfare assistance programs.
The law converted the Aid to Families with Dependent Children
program into a new block grant, called Temporary Assistance for
98



Needy Families. To promote work and personal responsibility, the
law includes new work requirements, a 5-year limit on the length of
time that families can receive assistance, and new measures to
strengthen child support enforcement. The law also expands funding for child care to make it easier for families to move from welfare
to work. Even before the new welfare law was enacted, the
Administration had granted waivers to 43 States to allow them to
reform their welfare systems to require work, make work pay, and
encourage parental responsibility.
• Increased child support enforcement. Federal legislation in 1993,
1994, and 1996 included measures designed to make the child support enforcement system more effective. Key reforms include
streamlined procedures to establish paternity, a new-hire reporting
system to track delinquent parents across State lines, uniform
interstate child support laws, computerized registries of statewide
child support collections, and tough new penalties, such as revocation of the driver's licenses of delinquents.
These initiatives have already had noticeable effects. The combination of a higher minimum wage with an expanded EITC
guarantees a more adequate income to working families with children. A single mother with two children can now earn enough, if she
works full-time, to bring her income with the EITC above the poverty line. In addition, because the EITC benefit increases the financial
reward to working, it encourages parents to enter the labor market.
Research has shown that expansions in the EITC have been associated with increases in the employment rate of single mothers with
children.
The changes to the welfare system have already been associated
with a large decline in welfare caseloads. The number of children on
welfare declined by 23 percent from January 1993 to June 1997.
Research suggests that the decline in welfare caseloads from
January 1993 to January 1997 was due to a strong economy and
to recent State welfare reforms that the Federal waiver process
facilitated.
Finally, the child support enforcement system has become more
effective in guaranteeing that absent parents fulfill their obligations
to pay child support. From 1992 to 1996, child support collections
increased by 50 percent, to a record $12 billion. In addition, the number of paternities established for children born to unmarried women
rose to 1 million in 1996, almost double the number in 1992. These
changes are reflected in a substantial increase from 1992 to 1996 in
the percentage of never-married mothers who received child support
payments.




99

OTHER MEASURES OF
CHILDREN'S MATERIAL WELL-BEING
Two alternative measures of the adequacy of housing conditions
and the sufficiency of household food supply suggest that the material well-being of children has improved since 1989. These trends are
consistent with the reduction in child poverty over this period, under
the extended measure of child poverty that includes taxes and meanstested food and housing benefits.
AVAILABILITY OF FOOD
One alternative measure of children's material well-being is the
adequacy of household food supply. It has been shown that households that report having an insufficient food supply consume smaller
quantities of essential nutrients than other households.
Estimates from the Department of Agriculture's Continuing Survey
of Food Intakes by Individuals (CSFII) provide information on the
percentage of children living in households where there sometimes or
often was not enough to eat in the last 3 months. These estimates
may overstate the prevalence of hunger among children, if many
adults typically go without food before they let their children go hungry. Estimates from the CSFII suggest that the percentage of
children living in households without enough to eat has fallen from
4.1 percent in 1989-91 to 3.0 percent in 1994-96 for all children, and
from 13.5 percent to 9.4 percent for children in households with
incomes below 130 percent of the poverty line (Table 3-4).
TABLE 3-4.—Children in Households Reporting That There Was
Sometimes or Often Not Enough to Eat During the Last 3 Months
[Percent]
1989-91

Category
Children in households at or below 130 percent of poverty line

1994-96
9.4

.6

4.1

All children

13.5

.8

Children in households above 130 percent of poverty line

3.0

Source.- Department of Agriculture.

The Department of Agriculture's Food and Nutrition Service has
recently developed a detailed questionnaire that makes it possible to
separately identify whether children or adults in the household experienced hunger. This questionnaire was incorporated into the April
1995 Current Population Survey. The survey found evidence that
hunger is more likely among adults than among children: among
households with children, 4.3 percent had adult members who had
been hungry in the last year due to insufficient resources, but only 1.8



100

percent had children who had been hungry in the last 12 months
because the parents could not afford to buy more food. This survey
also suggests that it is unusual for children to go without food for an
extended period: 0.9 percent of households with children reported
that at least one of their children had skipped a meal in the past year,
and 0.2 percent reported that their children had not eaten for a whole
day at least once in the past year because of insufficient resources.

ADEQUACY OF HOUSING
Estimates from the Annual Housing Survey and the American
Housing Survey present a mixed picture of the changes in housing
conditions of households with children. On the one hand, the percentage of these households that have high rent burdens has
increased substantially. The percentage of households with children
that spend more than half their income on housing has increased
from 6.5 percent in 1978 to 11.5 percent in 1995 (Table 3-5). For
renters with very low incomes (defined as households with incomes
below 50 percent of the median income for their area), this figure has
increased from 31.0 percent to 37.6 percent.
TABLE 3-5.—Housing Problems Among Households with Children
[Percent of all households with children]

Housing cost or condition

1978

1989

1993

1995

All households with children:
Housing costs more than 50 percent of income

65

87

109

11 5

Housing costs 31-50 percent of income

83

151

156

167

Severe physical problems with housing

31

32

20

22

Moderate physical problems with housing

5.6

5.5

5.1

5.0

Crowding (more than 1 person per room)

94

70

63

66

Housing costs more than 50 percent of income

31.0

361

382

376

Housing costs 31-50 percent of income

280

306

291

306

Severe physical problems with housing

7.5

5.8

3.6

3.4

Moderate physical problems with housing

105

120

101

95

Crowding (more than 1 person per room)

219

167

142

170

Very low income households with children:

Note.—Income is before-tax cash income. Very low income is defined as family income below half the median for the area.
Source: Department of Housing and Urban Development (Office of Policy Development and Research).

On the other hand, measures of housing quality for households
with children have shown improvement. The percentage of all households with children living in housing with either moderate or severe
physical problems fell from 8.7 percent in 1978 to 7.2 percent in 1995,
and from 18.0 percent to 12.9 percent for very low income renters. In
addition, households with children were less likely to live in crowded



101

living situations in 1995 than in 1978: the percentage living in housing with more than one person per room dropped from 9.4 percent to
6.6 percent for all households and from 21.9 percent to 17.0 percent
for very low income renters.
These findings are consistent with the results of a recent study
which found that many measures of the housing quality of children in
households in the bottom income quintile had improved since the
early 1970s. These children were more likely to live in modern (that
is, post-1940 vintage) housing and more likely to have air conditioning in the 1990s than in the early 1970s. On the other hand, this
study also found that children in the bottom household income quintile were more likely to live in neighborhoods where their parents
reported that crime was a serious problem in 1991-93 than in 1973-75.

NEW HOUSING POLICY INITIATIVES
This Administration will continue to make housing quality and
affordability high priorities in fiscal 1999. Key initiatives include:
• Expanding the low-income housing tax credit. The low-income housing tax credit gives States the authority to allocate a fixed pool of
tax credits to developers of affordable housing. For fiscal 1999 the
President has proposed increasing the total amount of tax credits
available to each State from $1.25 to $1.75 per State resident.
• The HOME Investments Partnerships Program. The Administration
has expanded funding for the HOME program by 50 percent since
1993, to $1.5 billion in fiscal 1999. This program offers funding to
States, cities, and counties to develop affordable housing options for
low-income families. These funds can be used for rehabilitation of
existing housing, new housing development, and tenant-based
rental subsidies. To date, almost 310,000 families have been awarded assistance through this program.

HEALTH STATUS AND HEALTH INSURANCE
HEALTH OUTCOMES
Over the past 10 years infant and child mortality rates have continued to decline. Other measures, however, such as the incidence of
chronic health conditions and of low birthweight, are stable or
increasing.
One of the most frequently cited measures of children's health status is the infant mortality rate. Infant mortality has continued its
decades-long decline in the 1990s, falling from 9.8 deaths per thousand live births in 1989 to 7.2 per thousand in 1996 (Chart 3-4).
During the same period the incidence of low birthweight (weight at
birth below 2,500 grams, or about 5.5 pounds) has increased slightly,




102

from 7.0 percent of live births in 1989 to 7.3 percent in 1995. This
shows that the improvement in infant mortality in the 1990s has been
entirely due to factors other than reductions in low-birthweight
births. This improvement has been attributed in part to two key
interventions. First, new medical treatments have been developed for
infant respiratory disorders, an important cause of mortality among
preterm infants. Second, there has been a marked decline in sudden
infant death syndrome since researchers discovered that these deaths
could be prevented by placing babies on their backs to sleep.
The slightly increased incidence of low birthweight since the mid1980s is due in part to an increase in multiple births and births to
older women. Failure to prevent low-birthweight births is costly to
society because many of these infants require more-expensive medical
interventions than do infants born at normal weight. In addition, lowbirthweight infants have a much higher risk of infant mortality. In
1995 nearly two-thirds of all infant deaths occurred among the 7.3
percent of all infants born at low birthweight.
Chart 3-4 Infant Mortality Rates and Incidence of Low Birthweight
Infant mortality has continued to decrease since 1989 despite an increase in
low-birthweight births.
Deaths per thousand live births

Percent of live births

30

25

12

Infant mortality
(left scale)

10

^

Low brrthweight
(right scale)

20

15

10

i
1960 1963
1966
1969 1972
1975
1978
Source: Department of Health and Human Services.

1981

1984

1987

1990

1993

1996

Mortality rates of older children have also fallen throughout the
1990s, continuing a steady decline since 1960 (Chart 3-5). Much of the
decline in the 1960s has been attributed to medical interventions,
which have minimized the risk of death from such conditions as congenital anomalies of the heart, infectious diseases, and certain
childhood cancers. By contrast, the reduction in mortality during the




103

1980s has been primarily attributed to a decline in injury-related
mortality.
The one exception to this pattern is among those aged 15-19, whose
mortality rates have increased since 1985. This largely reflects the
more than doubling in homicides among adolescents since 1985. The
homicide rate for black male adolescents has nearly tripled since
1985, and in 1994 it was nearly seven times higher than the homicide
rate for all adolescents.
Other indicators of child health have shown less progress in the
1980s and 1990s. The prevalence of asthma among children has
increased substantially since the mid-1980s. The prevalence of most
other chronic health conditions has fluctuated, without a consistent
upward or downward trend.
Chart 3-5 Child and Youth Mortality Rates
Mortality rates have continued to decline since the mid-1980s for all children and youths
except those aged 15-19.
Deaths per hundred thousand
120

100

80

60

40

20

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

Source: Department of Health and Human Services.

HEALTH INSURANCE
One of the critical determinants of children's access to health care
is whether or not they have health insurance. Research has shown
that children with health insurance coverage are more likely to
receive preventive and primary care, and more likely to have a regular relationship with a primary care provider, than uninsured
children. Insured children are also more likely to receive treatment
for such conditions (when they are present) as injury, asthma, and
acute earache. They are less likely to be hospitalized for conditions




104

that appropriate outpatient care could have prevented, and they
receive less intensive hospital services when admitted to the hospital.
Since 1987 the Congress and the Administration have substantially expanded children's access to health insurance through Medicaid,
the primary government program offering health insurance to lowincome children. Before 1987 Medicaid was mainly restricted to
children in very low income, single-parent families. Since then a
series of legislative initiatives have extended Medicaid to much
broader groups of children. By 1996 all pregnant women and all children under age 6 who had family incomes below 133 percent of the
poverty line, and all children age 13 and younger with family incomes
below 100 percent of the poverty line, were eligible for Medicaid.
Coverage will continue to be phased in for all children born after
September 1983 until poor children of all ages are covered. In addition, many States have expanded children's eligibility for Medicaid
beyond these federally required levels.
The net result of these expansions is that a much larger share of
the child population are now enrolled in Medicaid. Estimates from the
Current Population Survey suggest that the proportion of children
who are enrolled in Medicaid increased from 16 percent in 1989 to 23
percent in 1995 (Table 3-6). For children under age 6 the increase in
Medicaid coverage was even larger, and by 1995, 30 percent of all children under age 6 were covered by Medicaid.
TABLE 3-6.—Children with Health Insurance, by Age of Child
and Type of Coverage
[Percent]
Medicaid

Any insurance

Private insurance

Age of child
1989

1995

1989

1995

1989

1995

Current Population Survey:
Under 6

87.2

86.7

20.3

29.6

70.6

60.4

6-17

86.4

86.0

13.2

19.9

75.3

69.1

86.7

86.2

15.7

23.2

73.6

66.1

Under 6

84.9

88.4

18.7

28.2

67.9

60.1

6-17

85.5

85.7

10.9

16.6

74.0

68.7

85.3

86.7

12.8

20.6

71.8

65.7

AH children
Health Interview Survey:

All children .

.. .

Sources: Department of Commerce (Bureau of the Census) and Department of Health and Human Services (National Center
for Health Statistics).

At the same time that Medicaid eligibility has increased, there has
been a reduction in children's private insurance coverage. This
decline is likely to have been driven in part by a general reduction in
employer-provided health insurance, which has affected both lowand high-income families. It may also have resulted in part from



105

newly eligible families dropping their private insurance coverage in
order to enroll in Medicaid.
Studies have tried to estimate the extent to which the expansion
in Medicaid eligibility has crowded out private insurance coverage.
These studies have produced a wide range of estimates. One study
found that at least one person dropped private insurance coverage
for every two persons made eligible for Medicaid. Two other studies
estimated that anywhere between 0 and 25 percent of new
Medicaid coverage displaced existing private coverage.
Table 3-6 presents estimates of the change in insurance coverage
for children from 1989 to 1995 from two large household-based surveys, the March Current Population Survey and the Health
Interview Survey. Both surveys suggest that the percentage of
children under age 18 with health insurance from any source
remained constant from 1989 to 1995. These surveys provide a
somewhat different picture, however, of the change in total insurance coverage for young children. Whereas the Health Interview
Survey finds a moderate increase in insurance coverage for children
under age 6, the Current Population Survey finds no increase for
this group. This may result from changes in question content in the
Health Interview Survey in 1990. It may also reflect differences in
the way the two surveys ask about health insurance coverage.
Even though there have not been substantial increases in the percentage of children with health insurance, the recent increase in the
percentage of children covered by Medicaid may have important
implications for the quality of children's medical care. On the one
hand, since Medicaid requires no copayments from the insured, covers prescription drugs, and in many States covers services such as
dental care, it may promote greater utilization of medical care than
private insurance. On the other hand, since provider reimbursement levels tend to be much lower under Medicaid than under other
insurance plans, fewer providers may be willing to provide care to
children with Medicaid coverage than to children with private
insurance.
Although research to date on the impact of the recent Medicaid
expansion on children's utilization of medical care is inconclusive,
Table 3-7 suggests that basic medical care services received by lowincome children have increased. The average number of physician
visits per year rose by more than 30 percent for poor children in fair
or poor health, and by more than 10 percent for poor children in
excellent or good health, from 1987-89 to 1993-95. By contrast, during the same period the average annual number of physician visits
decreased for children with family incomes above twice the poverty
level.




106

TABLE 3-7.—Average Number of Physician Contacts in Last Year
for Children Under 15, by Family Income
[Number of contacts]
Fair or poor health

Good or excellent health
Family income
1993-95

1987-89

1987-89

1993-95

Below poverty fine

3.6

4.0

10.8

14.2

Poverty line to twice poverty line

3.8

3.9

15.2

16.2

Above twice poverty line

5.0

4.9

22.6

20.7

Note.—tacome is before-tax cash income.
Source: Department of Health and Human Services (National Center for Hearth Statistics).

This evidence is also consistent with data pointing to an increase in
the share of pregnant women and children receiving at least a minimal level of primary care. The percentage of children under age 5 who
did not see a doctor during the previous year fell from 8 percent in
1983 to 5 percent in 1994, while the comparable percentage of children aged 5-17 decreased from 27 percent to 21 percent (Chart 3-6).
In addition, the percentage of pregnant women who initiated care in
the first trimester of pregnancy increased to a record high of 82 percent in 1996, from 76 percent in 1989.
Chart 3-6 Children Without Physician Visit Within Past Year
Fewer children went without regular doctor visits in the mid-1990s than a decade before.
Percent
30

Ages 5-17

\

25

20

15
Under 5 years of age

10

\
i
1983

1984

1985

1986

1987

1988

Source: Department of Health and Human Services.




107

1989

i
1990

1991

1992

1993

1994

RECENT INITIATIVES TO EXPAND CHILDREN'S ACCESS
TO HEALTH INSURANCE
Despite recent efforts to expand children's access to health insurance, a large share of children remain uninsured. Estimates from the
Current Population Survey suggest that 15 percent of all children did
not have health insurance in 1996. Table 3-8 presents estimates from
the Current Population Survey on the characteristics of these children.
Roughly 21 percent are potentially eligible for Medicaid, because they
TABLE 3-8.—Uninsured Children by Family Income, 1996
Percent of all
uninsured children

Family income and age of child

Below poverty line

326

Under 6

98
109
120

6-11

12-17
Between 100 and 150 percent of poverty line

200

Between 150 and 200 percent of poverty line

164

Above twice poverty line

..

309

Note.—Income is before-tax cash income.
Source: Department of Commerce (Bureau of the Census).

are under age 12 and have family incomes below the poverty level. An
additional 48 percent either are poor children aged 12 and over or
have family incomes between 100 percent and 200 percent of the
poverty level. Their family incomes are low enough so that the cost of
health insurance may pose a significant barrier, but probably not low
enough to guarantee them eligibility for Medicaid.
This Administration has developed a two-pronged effort to continue progress in increasing insurance coverage for low-income children.
The first component is to extend insurance coverage to more lowincome children through the new Children's Health Insurance
Program (CHIP). This program offers $24 billion in new Federal funding to States over the next 5 years to expand health insurance
programs for uninsured low-income children. States have the option
of using the funding to expand children's health insurance coverage
through Medicaid, separate State programs, or a combination of the
two. In general, States must use their allocation to cover children in
families below twice the poverty level, or within 50 percent of the
State's current Medicaid income limits for children if the State
already covers children at or near twice the poverty level. States must
contribute some of their own funds to the program in order to receive
these Federal funds, and they must maintain Medicaid eligibility
standards at least equal to those in effect in June 1997.
In addition, the President will make enrolling eligible uninsured
children in both Medicaid and CHIP a priority. In partnership with



108

the States, health care providers, and business and community
groups, the Administration will identify and encourage successful
outreach campaigns to enroll up to 5 million uninsured children. To
facilitate this effort, the proposed budget for fiscal 1999 includes an
option for States to determine presumptive eligibility for Medicaid
among children at sites such as schools and day care centers. It will
also allow States to receive Federal funding for outreach activities at
a 90-percent matching rate from a fixed pool of funds. These legislative proposals will be complemented by administrative actions to
simplify enrollment of uninsured children.

CHILD CARE AND EDUCATION
CHILD CARE
Over the past two decades the adequacy and affordability of day
care have become increasingly salient issues, as a growing proportion
of mothers with young children have entered the work force. Whereas
30 percent of married mothers with one or more children under age 6
were working in 1977, by 1997 that figure had risen to 61 percent.
This increase in employment of women with young children has
translated into a substantial increase in nonparental child care.
Between 1977 and 1993 the number of children under 5 in nonparental child care whose mother was working more than doubled. By
1993, 47 percent of young children with employed mothers had their
primary day care arrangement in a day care center or a family day
care home, and only 5 percent were cared for by a nonrelative in the
child's home.
The affordability of child care is an especially critical issue for lowincome working families. Although Federal programs subsidize day
care costs for low-income families, a large share of these families do
not have access to subsidized care. Approximately 1 million lowincome children under 13 received federally subsidized care in fiscal
1995. This compares with the approximately 10 million children
under 13 with employed mothers and family incomes below 200 percent of the poverty level.
For families without access to subsidies, the cost of child care can
represent a substantial financial burden. In 1993 child care expenditures represented 25 percent of annual income for those families with
annual incomes below $14,400 with employed mothers and preschool
children in paid child care. Comparable families with annual incomes
above $54,000 spent only 6 percent of their income on child care.
The quality of child care is also a critical issue. Two recent studies
of regulated child care providers offer reason for concern. One study
found that 86 percent of child care centers surveyed provided
mediocre or poor care when judged from the perspective of child
development, and 12 percent were of such poor quality that the children's health and safety needs were only partly met. The second

109


study, of family day care homes, found that 91 percent were of only
adequate quality or less.
The President's fiscal 1999 budget includes a dramatic increase in
Federal investments in child care to increase its affordability and
quality. Key initiatives would:
• Expand child care subsidies. The proposed budget builds on the
increases in child care subsidies legislated in 1996, by expanding
funding for the Child Care and Development Block Grant Program
by $7.5 billion over 5 years. These new funds, combined with funds
provided in welfare reform, would allow States to provide child care
subsidies to more than 2 million low-income children by 2003—
more than double the number of children served in fiscal 1995.
• Increase tax credits for child care expenses. The proposed budget
would increase tax subsidies for working parents who pay for child
care expenditures, by expanding the child and dependent care tax
credit. The President's proposal would offer more help to 3 million
families with annual incomes below $59,000, providing nearly $5
billion in aid over the next 5 years. The President's proposal also
includes a new tax credit for private employers that offer child care
services for their employees.
• Expand after-school care for school-age children. The President's
proposed budget includes $800 million in new funding over 5 years
to dramatically expand the 21st Century Community Learning
Program. This program provides funding to school-community partnerships to establish or expand before- and after-school programs
for school-age children. The program will serve up to half a million
children each year.
• Improve early learning and child care quality. The President's proposed Early Learning Fund would provide $3 billion over 5 years in
challenge grants to communities for programs that improve early
learning and the quality and safety of child care for young children.
The"President's proposed budget also includes funding for scholarships for up to 50,000 child care providers per year, and for
improved enforcement of State health and safety standards.

EARLY CHILDHOOD EDUCATION
Early childhood education programs can play a critical role in
preparing children aged 3-5 for entry into school and can have an
important effect on children's short-run and long-run development.
Research has found that children who participate in early childhood
education programs show large short-run gains in IQ, which persist
until entry into kindergarten. Research has also linked early childhood education to a number of longer term outcomes, such as grade
retention and placement in special education programs. Studies of a
smaller number of programs have also shown early childhood education to be associated with increases in high school graduation rates



110

and post-high school monthly earnings, and with a lower probability
of teen pregnancy.
One of the principal Federal programs supporting early childhood
education for disadvantaged children is the Head Start program. The
major focus of Head Start is support for enriched preschool programs
and development services for children aged 3-5. Federal guidelines
require that 90 percent of all children served be from families with
incomes below the poverty line. Head Start offers disadvantaged children and their parents a range of services that focus on education,
social and emotional development, and health and nutrition. With the
establishment of the Early Head Start program in 1994, for which
disadvantaged children under age 3 are eligible, the range of Head
Start services was extended to younger children as well.
A recent nationwide study found that participation in Head Start
was associated with increased performance on the Peabody Picture
Vocabulary Test and a reduction in grade repetition for white and
Hispanic children, although it did not find similar gains for black children. The study also found that both white and black children who
participated in Head Start were more likely to be immunized against
measles than nonparticipating children from the same family.
The President's proposed budget includes $3.8 billion in additional
funding over 5 years to help reach the goal of expanding participation
in Head Start to 1 million children in 2002, from 714,000 in fiscal
1993. This funding would also allow a doubling of participation in
Early Head Start, to 80,000 children by 2002.

ELEMENTARY AND SECONDARY EDUCATION
One of our society's most important investments in children is elementary and secondary education. Elementary and secondary schools
play a critical role in preparing children for college and for entry into
the labor market. Research has shown that increases in educational
attainment are associated with increases in labor market earnings:
each year invested in elementary or secondary education is estimated to increase annual earnings by 5 to 12 percent. Investments in
elementary and secondary education can also achieve other important social goals, such as the development of an informed electorate.
Measures of Student Performance
One of the key tools used in assessing the performance of our elementary and secondary school students is the National Assessment of
Educational Progress (NAEP). The NAEP has two parts: the longterm trends assessment, which has repeated the same set of
questions since the early 1970s to provide a consistent record of
progress over time, and the main assessment, a more recent set of
tests designed to reflect current testing methodology and educational
content. The main assessment also groups students into three levels



111

of achievement based upon collective judgments about what students
should know and be able to do in each subject area.
Evidence from the NAEP long-term assessment suggests that
achievement in science, mathematics, and reading has improved
since the late 1970s. Charts 3-7 and 3-8 show average NAEP long-term
Chart 3-7 NAEP Long-Term Trend Assessment: Science and Mathematics Scores
Science and mathematics achievement scores have improved modestly since the
mid-1970s for white, black, and Hispanic 13-year-olds.
Score

290
SCIENCE

280
270
260
250
240
230

Hispanic

220

V

Black

\

210
200

i

i

1970

1973

1976

i
1979

1982

1985

1988

1991

1994

1991

1994

Score
290
White

MATHEMATICS

280
270
Hispanic

260

\

250
240
230
Black

220
210
200

o'
1970
1973
1976
1979
1982
1985
1988
Source: Department of Education (National Center for Education Statistics).




112

assessment scores for 13-year-old white, black, and Hispanic students
in these subjects. Chart 3-7 reveals increases in mathematics and science scores since the late 1970s, which have been larger for black and
Hispanic than for white children. Improvement in reading scores has
been somewhat less dramatic overall (Chart 3-8), but both white and
black children have recorded measurable improvement since 1971.
Despite these recent gains, significant challenges remain for the
Nation's educational system. Evidence from the main NAEP assessments suggests that many students do not achieve basic competency
in mathematics, science, or reading. The most recent main assessments found that 38 percent of eighth-grade children performed
below the basic level in mathematics, as did 40 percent in science
and 30 percent in reading. In addition, U.S. students do not perform
well in comparison with students in other countries. According to the
Third International Mathematics and Science Study, a study of half
a million children in 41 countries, U.S. eighth-graders had average
mathematics scores that were below those of 20 other countries.
Although U.S. eighth-graders performed better in science, they were
still outperformed by students in nine other countries.
A second challenge facing the Nation's educational system is the
substantial variation in the performance of schools across the country. A recent study of first-grade students found that those attending
the top quarter of schools with respect to student performance had
average scores in both reading and mathematics nearly 75 points
Chart 3-8 NAEP Long-Term Trend Assessment: Reading Scores
Reading achievement scores have changed little for white and Hispanic 13-year-olds and
improved modestly for black 13-year-olds since 1971.
Score
290

READING
280

White
270
260
250

Hispanic

240
230

Black

220
210
200

1970

1973

1976

1979

1982

1985

1988

Source: Department of Education (National Center for Education Statistics).




113

1991

1994

higher than those of students in the bottom quarter. This difference
is approximately equal to the average achievement gain of students
from the spring of first grade to the spring of second grade. In other
words, by the end of second grade the average student's achievement
in the bottom-ranked schools will just about equal that of students
finishing first grade in the top schools.
Differences in student performance are evident across States as
well. For example, in 1994 the share of fourth-graders in public
schools who scored at or above the basic level in reading ranged
across 39 States from a low of 40 percent to a high of 75 percent, and
in 1996 the share of eighth-graders in public schools who attained at
least the basic level of proficiency in mathematics ranged across 40
States from a low of 36 percent to a high of 77 percent.
Impact of School Inputs on School Performance
A substantial body of research has investigated the extent to which
school quality is related to measurable inputs, such as expenditures
per pupil, pupil-teacher ratios, or the level of teacher training. This
research has had mixed results. On the one hand, most studies that
attempt to relate school resources to students' achievement on standardized tests tend to find only weak evidence that these resources do
influence school quality. This may be because most research in this
area is based on samples that are not large enough to find a statistically measurable effect. A recent study which combined the results
from a large number of other studies found stronger evidence that
school expenditures per pupil are positively associated with student
achievement.
On the other hand, studies that estimate the relationship between
school resources and students' earnings later in life tend to find much
larger effects. A recent study used data from the 1980 Census to estimate the relationship between the average level of school resources in
the State in which workers were born and their subsequent earnings.
This study found that workers who had been born (and probably
attended school) in States with more abundant school resources
earned higher rates of return to each additional year of schooling
than other workers. A decrease in the pupil-teacher ratio by five students was associated with an increase in the rate of return to each
additional year of school of 0.4 percentage point, and a 10-percent
increase in teachers' pay was associated with a 0.1-percentage-point
increase. (The average rate of return for all workers in the sample
was 5 to 7 percent.)
This literature also found that there are important dimensions of
school and teacher quality that are unrelated to school expenditure
patterns. After controlling for student and parent characteristics likely to affect student performance, and even after controlling for
measurable characteristics of schools and classrooms, it is clear that




114

students in particular schools, or enrolled in particular teachers'
classes, consistently perform better than average. This suggests that
certain aspects of teacher or school quality that are not easily measured, such as the teacher's level of enthusiasm or the school's
management style, may be critically related to student performance.

Recent Federal Initiatives in Primary and Secondary Education
Recognizing that the quality of primary and secondary education
can have an important influence on children's later economic opportunities, the Administration has developed and supported a number
of initiatives to improve the quality of America's schools. In his 1998
State of the Union address the President proposed two major new initiatives that would increase the financial resources available to public
schools:
• Smaller classes with qualified teachers in grades 1-3. The President
is proposing that $12.4 billion be devoted over 7 years ($7.3 billion
over 5 years) to reducing class sizes in public schools in grades 1 to
3 from a nationwide average of 22 pupils to an average of 18, and to
helping local school districts hire an additional 100,000 well-prepared teachers. The initiative will also provide funds to States and
local school districts to test new teachers, develop more rigorous
teacher testing and certification requirements, and train teachers
in effective reading instruction. This initiative will help ensure that
every child receives personal attention, learns to read independently, and gets a solid foundation for further learning.
• New construction and renovation of school buildings. The President
is proposing Federal tax credits to pay interest on nearly $22 billion
in bonds to build and renovate public schools. This initiative provides more than double the assistance of the Administration's
earlier school construction proposal, which covered half the interest
on an estimated $20 billion in bonds. Half of this new bond authority would be allocated to the 100 school districts with the largest
number of low-income children, and the other half would be allocated to the States.
These proposals build on a number of ongoing Administration
efforts to improve the quality of primary and secondary education. To
increase the educational opportunities of disadvantaged children, the
Administration has expanded the Title I program, which targets
resources to children in high-poverty schools. In addition, since it is
clear that some important differences in the quality of individual
teachers and schools are not directly related to the level of a school's
financial resources, the Administration has supported initiatives to
change the way schools operate, to better reward performance, and to
grant schools more flexibility in meeting measurable performance
standards. These are the key emphases of the Goals 2000 and the



115

Charter Schools programs. Finally, the Administration has developed
two new initiatives to improve literacy and to increase students'
access to the Internet:
•Title I^-Education for the Disadvantaged. Title I provides funds to
raise the achievement of disadvantaged children. In 1994 the
President proposed, and the Congress adopted, changes to Title I to
focus resources on schools with a high percentage of children from
poor families, to raise standards of achievement for disadvantaged
students, and to give schools greater flexibility in helping students
meet these standards. The appropriation for Title I grants to local
education agencies was increased by about 20 percent from fiscal
1993 to fiscal 1998.
• Goals 2000. Enacted in 1994, the Goals 2000 program encourages
States to set rigorous academic standards for student performance
and to determine whether students are making progress in meeting
these goals. It also provides funding to support reform of individual
schools and for parental information and resource centers in each
State, to help parents become more involved in their children's education.
• Charter Schools. The Federal Charter Schools program supports the
efforts of parents, teachers, and communities to develop innovative
public schools that are free from most of the rules and regulations
that apply to most public schools and are held accountable for raising
student achievement. Since the program's inception in 1995 over 700
charter schools have been established, and Federal funding has
increased from $6 million in fiscal 1995 to $80 million in fiscal 1998.
• The America Reads Challenge. The proposed America Reads program is a multipronged effort to help States and communities
ensure that all children are reading well and independently by the
end of the third grade. Key initiatives include recruiting and training volunteer reading tutors and helping families help their
children build literacy skills. In addition, the Administration has
recruited work-study students in 800 universities to help with
tutoring initiatives.
• Technology. The Technology Literacy Challenge Fund and the
Technology Innovation Grants program are aimed at meeting four
goals: to connect all schools to the Internet, to provide teachers with
professional development in the use of technology, to put modern
computers in all schools, and to provide challenging software that
encourages children to learn more. These initiatives should help
prepare our children for the 21st century and keep the Nation competitive in a global economy.




116

CONCLUSION
It is clear that children have shared in the benefits of the economic recovery of the past 3 years. The child poverty rate fell from 1993
to 1996, and under an extended poverty measure that includes taxes
and means-tested food and housing benefits, the rate was lower in
1996 than in 1989. Other measures of well-being, such as health status, educational achievement, food sufficiency, and housing quality
have also shown improvements during the 1990s. Yet many children
remain vulnerable, either because they have low family incomes, or
because they lack access to health insurance, or because they are not
learning basic mathematics, science, and reading skills in school. For
this reason the Administration will continue to invest in initiatives to
improve the well-being of children. Key initiatives for fiscal 1999 will
focus on increasing access to child care and early childhood education,
improving the quality of primary and secondary education, and
increasing access to affordable housing for families with children.




117




CHAPTER 4

Economic Inequality
Among Racial and Ethnic Groups
THIRTY-FOUR YEARS AGO the signing of the Civil Rights Act of
1964 set the Nation on a course toward racial equality. As the economy surged, income differences narrowed for a full decade. The
sharp recessions of the mid-1970s and early 1980s hit black and
Hispanic Americans particularly hard, however. And in the expansion of the 1980s, economic growth was accompanied by sharp
increases in overall income inequality. As a result, despite the economic growth of this period, income differences between black and
Hispanic families on the one hand, and non-Hispanic white families
on the other, did not diminish. The recession of the early 1990s
brought further economic hardship, as the poverty rate climbed to
near a 30-year high.
Since 1993, incomes have once again been rising. But the present
recovery differs from those of the 1970s and 1980s in one important
respect: economic growth has not been accompanied by sharp increases in income inequality. Moreover, this recovery has been accompanied
by a narrowing of some measures of racial inequality. The median
black family income reached a new high, and the poverty rate for
blacks fell to a new low. After nearly 20 years of stagnation, these
developments have again raised hope for sustained progress toward
economic equality among racial and ethnic groups.
This chapter reviews statistics on the differences in economic status
among racial and ethnic groups—whites, blacks, Hispanics, Asians,
and American Indians—and evaluates various explanations for those
differences (Box 4-1). Three themes are developed in this review. First,
although some narrowing of gaps in economic status among racial and
ethnic groups has occurred, it has been uneven—faster in some periods and for some groups than others—and substantial differences
persist. The median incomes of non-Hispanic white families and of
Asian families are nearly double those of black and Hispanic families.
The median wealth of non-Hispanic white households is 10 times that
of blacks and Hispanics. Poverty rates among Hispanics and blacks
are more than triple those of non-Hispanic whites. Unemployment
rates for blacks are twice those for whites.
Second, the sources or causes of current differences in economic
status across racial and ethnic groups are numerous and complex.
The economic status of a person, a household, or a family reflects a



119

mixture of current conditions, such as the state of the economy, and
more permanent characteristics, such as educational background,
occupational experience, and family background, which have
antecedents in constraints faced in childhood and by previous generations. This commingling of short-term and long-term influences
poses a challenge for the interpretation of trends in racial inequality.
For example, current progress toward racial equality is due both to
the recent effects of the strong economy and to longer term developments such as improvements in educational attainment and reduced
discrimination over the past half-century. The complexity of these
social and economic processes cautions against a simple explanation
of trends in racial and ethnic economic equality.
A third theme of the chapter is that racial inequality and related policy issues are intertwined with the long-term general increase
in economic inequality that extends beyond racial differences.
Lack of progress toward racial economic equality between the
early to mid-1970s and the early 1990s coincided with marked increases in inequality both overall and within racial and ethnic groups.




data presented in

120

The increase in income inequality has two major implications.
First, since blacks, Hispanics, and American Indians are disproportionately represented at the bottom of the income distribution, they
are affected disproportionately by developments that make all those
at the bottom worse off relative to the middle or the top. A second
and more subtle implication is that inequality within racial and ethnic groups has grown relative to inequality between such groups.
Growing income inequality within the previously largely impoverished black population is partly a product of black economic
progress: by some measures more than half of black families have
attained middle-class incomes or higher. Despite persistent gaps in
income between blacks and whites, the growth of the black middle
class, combined with widening inequality within the white population and the general slowdown of economic growth in the 1970s and
1980s, may have fueled opposition to measures or programs perceived to benefit members of minority groups without regard to
individual economic circumstances.
Box 4-1.— eon/mwe*/

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121

The chapter begins with a brief description of recent and projected
changes in the racial and ethnic composition of the population. The
most prominent of these changes are the increase in the proportion of
the population that is Asian or Hispanic and the decrease in the proportion that is non-Hispanic white. The chapter then provides a
detailed description of differences among racial and ethnic groups in
traditional indicators of economic status: family income, poverty, and
wealth. The next two sections of the chapter review the evidence and
the economic literature in two arenas critical to the determination of
economic status: education and the labor market. The chapter ends
with a review of evidence of contemporary racial discrimination.
Although it is difficult to quantify the precise contribution of contemporary acts of discrimination to the wide economic disparities
across racial and ethnic groups, there is substantial evidence that
such discrimination persists in many areas of the economy. Such evidence highlights the need for racial reconciliation, as promoted in the
President's Initiative on Race as well as the President's proposals to
strengthen enforcement of the civil rights laws (Box 4-2).

POPULATION COMPOSITION
Since 1970 the percentage of the population that is non-Hispanic
and white has fallen substantially; the percentages that are Hispanic,
American Indian, and Asian (including Pacific Islanders) have risen
rapidly, and the percentage that is black has risen slowly (Table 4-1).
The large increases in the Hispanic and Asian populations are largely due to immigration and reflect changes in immigration laws,
especially the 1965 Immigration Act, which raised the ceiling on
admissions and ended the system of national origin quotas that had
restricted immigration from the developing worldi The Immigration
Reform and Control Act of 1986, which legalized a large number of
immigrants, also contributed to these changes. Under the assumption
that these trends will continue, the non-Hispanic white population,
currently the majority, is projected to fall to about half of the total
population in the middle of the next century. (These projections
assume there will be no change in rates of intermarriage, although
these rates have been increasing.)
These national population changes mask differences across and
within regions. The geographic distribution of racial and ethnic
groups is important both because it influences the potential for social
and economic interaction among them, and because it affects their
economic fortunes. For example, over this century employment has
shifted from rural to urban areas and, within urban areas, from the
central cities to the suburbs.
Hispanics and American Indians are heavily concentrated in the
West and, to some extent, the South. Asians are concentrated in the
West. Within the South, Hispanics are concentrated in Florida, Texas,



122

Box 4-2.—The President's Initiative on Race
OtoJime 14,188T, fi*e Bre&ideiit
Ram The P&esidte&t ®iwMoii&
for all* responsibility from all» and one cc^mm^iiiity^ of -alt
American Bsce relations ramains an
that too often, <Mmitei'
otir NatioiL The Presidettfte ^Moi* fe:to haw 3 diverse, demoemfe*
ic <x)mmiiMty In wMeh all Americans tw|)ect and eyaa^eleferate 'their diffimosces wMe jembmdtag tiba '

iham, 1b readb &is goal'the FtesMaat:b^ latmcfeed a
effort to deal oparij and honestly with oar
- effort indhides 0todyf-diak^ii% and action',to
tog dbatienga of how to live antd work mom prodtietiwly togetfaer,
n
witti the
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Lntiher King, «fo Day'
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:

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^P^UlStti^OH law* *!*1& ^djDG^Oti^t^t't^Oll $ f^lKJEl m^PEN^fe1"

m »aonr€as for ^mpliapfm re^ri^^s and fetofeal assMitti^ knd^
offeiB^altematIy0i to Mti^attoi! by feo^tag^paimoii of alfemafee
dispute resolution mechanisms. Hie plan would set performance
tto
would piwida for better eoordmatioxi a^ioss Federal
offices, $he AdmiBfetratloB% 1999 budget prop<^i omtaftas ^8ft2 ^
mlMoii for civfl ^hts eirfoK^i^ent
and offio0£h^aa in. eroa^ of $86 million^ or mote tha^Ei 16 peroeiat^ oror 1998 fim&ig. *
TABLE 4-1.—Racial and Ethnic Composition of the U.S. Population
[Percent of population]
Year

American
Indian

Asian1

Black

Hispanic

Non-Hispanic
white

04

0.7

10.9

4.5

83.5

1997 (estimated)

9

38

121

103

729

2050 (projected)

11

87

13,6

238

52.8

2
.5
,6
16

25
1.3
1.3
73

103
9.5

74
2.9
7.9
191

85.8
71.8

1970

1990 by region2:
Northeast .
Midwest
South
West
1

Includes Pacific Islanders.
Detail may not add to 100 percent because data for the category "other" are not shown.
Source: Department of Commerce (Bureau of the Census).
2




123

18.3

51

794
667

and Washington, D.C. And despite massive outmigration over much
of the 20th century, the majority of blacks continue to live in the
South. In fact, net black migration from the South to the North ended
some time in the 1960s.
There are also differences within regions in the racial and ethnic
distribution of populations. In 1990 Hispanics, Asians, and blacks
were much more likely than whites or American Indians to live in the
central cities of metropolitan areas. Hispanics, Asians, and whites
were much more likely than blacks or American Indians to live in the
parts of metropolitan areas outside the central city. Nearly half of
American Indians lived in rural areas; 37 percent lived on reservations or other American Indian and Alaska Native areas.

ECONOMIC STATUS
FAMILY INCOME
Annual income is the most widely accepted indicator of current
economic status. This section reports incomes for families, where a
family is defined as two or more persons related by birth, marriage,
or adoption who reside together. In 1996 the median income of Asian
families was about $49,100, the highest among the groups considered in this chapter. Asians are followed closely by non-Hispanic
whites ($47,100) and, with a $20,000 gap, by blacks ($26,500) and
Hispanics ($26,200; Chart 4-1). Because of the smaller size of the
American Indian population, reliable national data on their incomes
are not available for every year. However, according to the most
recent data (from the 1990 Census), American Indians had the lowest median family income (and the highest poverty rate) of the five
racial and ethnic groups. With few exceptions these rankings have
been stable over the past 25 years.
Black and non-Hispanic white real median family incomes are
somewhat higher than they were 25 years ago, and Hispanic incomes
are somewhat lower. Since 1972, when data for Hispanics first
became available on an annual basis, real median family income has
increased 14 percent among non-Hispanic whites and 9 percent
among blacks, but has fallen 9 percent among Hispanics.
As a result of faster income growth for non-Hispanic whites, the
Hispanic median family income has dropped sharply relative to nonHispanic white income over the past 25 years, and the relative
incomes of blacks has also dropped somewhat over the same period.
However, the Hispanic population has grown tremendously over this
period, primarily because of immigration. The relative decline in the
Hispanic median income reflects, at least in part, compositional
changes in the Hispanic population resulting from the immigration of
persons with relatively little education. The median incomes of both



124

Chart 4-1 Median Family Income
Family income of non-Hispanic whites and Asians has been well above that of blacks
and Hispanics.
Thousands of 1996 dollars
55

55

Non-Hispanic white
45

45

40

40

35

35

30

30

25
20

20

.>0

1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
Note: Prior to 1972, data for whites include Hispanic whites and data for blacks include Hispanic
blacks.
Source: Department of Commerce (Bureau of the Census).

black and Hispanic families are about 56 percent of the non-Hispanic
white median, lower than in 1972. Because these ratios vary by a
fair amount from year to year, it is difficult to identify turning points
precisely. But it is clear that, between the early to mid-1970s and
the early 1990s, black and Hispanic family incomes declined relative
to non-Hispanic white family incomes. Since 1993, however, black
family incomes have increased faster than those of non-Hispanic
white families.

Inequality Within Groups and the Growth of the Middle Class
Although a useful summary measure, median family income is an
incomplete indicator of the economic status of entire groups. For
example, trends in median income do not reveal the dramatic
increases in overall income inequality between the early 1970s and
the early 1990s, nor do they speak to inequality within groups.
Consideration of other indicators of economic status may alter
conclusions about the nature of economic inequality among racial
and ethnic groups. For example, despite their higher median family
income, the poverty rate for Asians exceeds the rate for nonHispanic whites by nearly 6 percentage points, indicating that this
population is economically heterogeneous.
Definitions of "middle class" are necessarily arbitrary. By one indicator—household income between two and five times the poverty
line — a large middle class emerged among both blacks and whites
between 1940 and 1970 (Charts 4-2 and 4-3). The poverty line used



125

here to adjust income corresponds to a 1960s' standard, since the
poverty line was developed in the early 1960s and reflects societal
standards of economic need at that time.
Chart 4-2 Distribution of White Persons by Household Income
Between 1940 and 1970 the white middle class grew. Since 1960 the percent of
high-income whites has also grown substantially.

1940

1950

1960

1970

1980

Note: "Very poor" is household income less than 50 percent of the poverty line, "poor" is 50 to 99
percent, "near poor" is 100 to 199 percent, "middle income" is 200 to 499 percent, and "high
income" is 500 percent or higher.
Sources: University of Michigan Population Studies Center and Reynolds Farley, Russell Sage
Foundation.

Chart 4-3 Distribution of Black Persons by Household Income
Between 1940 and 1970 the proportion of blacks who were poor or very poor fell, and
the black middle class grew.

- 20

1940

1950

1970

1960

1980

Note: "Very poor" is household income less than 50 percent of the poverty line, "poor" is 50 to 99
percent, "near poor" is 100 to 199 percent, "middle income" is 200 to 499 percent, and "high
income" is 500 percent or higher.
Sources: University of Michigan Population Studies Center and Reynolds Farley, Russell Sage
Foundation.




126

1990

According to this measure, the white middle class expanded considerably in each decade from 1940 to 1970, whereas the expansion of
the black middle class was greatest in the 1960s. Some scholars have
pointed to figures such as these as evidence of tremendous black economic progress since 1940. However, that progress has not been
steady. Progress clearly slowed in the 1970s and 1980s. Furthermore,
although Chart 4-3 suggests that moderate growth of the black middle class continued over the 1970s, annual data show little growth
between the early to mid-1970s and the early 1990s. In sum, a substantial economic expansion of the black middle class between the
1940s and the early 1970s was followed by 15 to 20 years of stagnation between the mid-1970s and the early 1990s, with perhaps a
resumption of growth in the mid-1990s.
Chart 4-4 Gini Index for Family Income
Overall and within-group inequality grew steadily from the early 1970s to the early 1990s.
Inequality has been consistently higher for blacks than for whites or Hispanics.
Gini index
0.50

Break in series^.
0.48

0.46

Black
0.44

0.42

0.40

0.38

0.36

White

0.34

1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992

1995

Note: The Gini index is a measure of inequality ranging from zero to one, where zero indicates
perfect equality.
Source: Department of Commerce (Bureau of the Census).

Since the early 1970s, income inequality has increased not
only overall but also within racial groups (Chart 4-4). However, only
among Hispanics has increased inequality taken the form of growth
in the proportions of both upper income and poor families at the
expense of the middle. Although both whites and Hispanics
experienced declines in the proportion of middle-income families,
among whites there was rapid growth in the proportion at
the top, and a small decline in the proportion at the bottom. The
proportion of black families in the middle- and upper income groups
combined has changed little since the mid-1970s, but by some
measures there has been movement of families from the middle of
the income distribution to the top.



127

Poverty
Gaps in poverty rates between non-Hispanic whites and Asians
on the one hand, and blacks and Hispanics on the other, remain
substantial (Chart 4-5). However, the gaps in poverty rates between
blacks and whites have decreased since 1993, after remaining
largely stagnant from the mid-1970s to the early 1990s. In 1996 the
black poverty rate reached its lowest level ever, as did the
difference in poverty rates between blacks and whites. The decline in
the black poverty rate in the current recovery exceeds slightly the
declines recorded in the recoveries of the 1970s and 1980s. The
poverty rate for Hispanics fell slightly from 1993 to 1996, although it
is still high, exceeding the rate for blacks. The poverty rate for
Asians has been flat since 1994.
Chart 4-5 Poverty Rates for Persons
Poverty rates fell over the 1960s and early 1970s, and since then differences across
groups have been relatively stable.
Percent

60

50

50

Black
40

40

30

30

20

20

10

10

Non-Hispanic white
i . . i . . i . . i
1959
1962 1965 1968 1971
1974 1977 1980
Source: Department of Commerce (Bureau of the Census).

1983

1989

1992

1995

Child Poverty
Differences across racial and ethnic groups in the prevalence of
child poverty not only indicate inequality in the current well-being of
children, but also represent differences in economic opportunity that
contribute to future inequality among adults and in subsequent generations. Although child poverty is associated with health, developmental, and educational disadvantages, the importance of low family
income per se as compared with parental education, family structure,
or other characteristics associated with poverty remains in dispute
(see Chapter 3).



128

Since 1993, child poverty rates have generally fallen, but they
remain too high, and differences in child poverty rates across racial
and ethnic groups are stark. Between 1993 and 1996 the poverty rate
for white children fell 1.5 percentage points to 16.3 percent. The rate
for black children fell even more, from 46.1 percent to 39.9 percent,
the lowest rate in more than 20 years but still very high. The rate for
Hispanic children fell marginally after 1993 and stood at 40.3 percent
in 1996, higher than the rate for black children. The poverty rate for
Asian children rose 1.3 percentage points, to 19.5 percent, between
1993 and 1996.
HOUSEHOLD WEALTH
Household wealth—the total value of a household's material and
financial assets, minus its liabilities—contributes to economic
well-being independently of income. Greater wealth allows a household to maintain its standard of living when income falls because of
job loss, family changes such as divorce or widowhood, or retirement. Financial wealth may also be particularly important in the
presence of borrowing constraints. For example, evidence that the
receipt of an inheritance increases entry into self-employment
suggests that a lack of personal financial capital limits small
business ownership.
Wealth has been measured less frequently than income in government statistics. There are two major Federal sources of data on
household wealth for the population: the Survey of Income and
Program Participation (SIPP) and the Survey of Consumer Finances
(SCF). Figures are not comparable across the two surveys for many
reasons: for example, the SCF and the SIPP employ different definitions of "family" and "household."
Measures of wealth show even greater disparities across racial and
ethnic groups than do measures of income. For example, according to
data from the 1993 SIPP, the median net worth of white households
($47,740) was over 10 times that of black or Hispanic households
($4,418 and $4,656, in 1993 dollars, respectively). Figures from the
1995 SCF are $73,900 for non-Hispanic whites and $16,500 for all
other groups combined (in 1995 dollars). Very substantial wealth gaps
between whites on the one hand and blacks and Hispanics on the
other are found even among families with similar incomes.
Differences in wealth result primarily from differences in lifetime
labor market compensation, differences in saving rates and the
return on those savings (including appreciation of the value of assets),
and differences in inheritances or other transfers from relatives.
Holdings among non-Hispanic whites in all major categories of
wealth exceed those of blacks and Hispanics. Three important components of wealth for families are housing equity, holdings of stocks
and mutual funds, and private pension wealth.




129

Home Equity
The most important asset for most households is the equity in their
home. Differences in home equity arise from differences in homeownership rates, in home values, and, among homes of a given value, in
the level of equity accumulated. Since 1993 there have been increases in homeownership among all groups, but the homeownership rate
among non-Hispanic whites is more than 50 percent higher than that
of blacks or Hispanics.
Some evidence suggests that gaps among racial groups in home values, although large, are narrowing. For example, between 1992 and
1995 the median value of the primary residence was unchanged at
about $92,000 for non-Hispanic whites but increased from $54,200 to
$70,000 for all other groups combined. In 1993 the median equity
among homeowners was about $50,000 for whites (in 1993 dollars),
$29,000 for blacks, and $36,000 for Hispanics. These values were
$3,000 to $5,000 higher in 1993 than in 1991 (in 1993 dollars).
This Administration's efforts may have contributed to recent
increases in homeownership and home values among blacks and
Hispanics. The Administration has strengthened regulations under
the Community Reinvestment Act and has stepped up enforcement of
fair lending laws. Data collected under the Home Mortgage
Disclosure Act show that, between 1993 and 1996, conventional home
mortgage lending to blacks has increased 67 percent; such lending to
Hispanics has increased 49 percent. These increases are much larger
than the percentage increase in conventional home mortgage lending
overall in this period.
Discrimination in Mortgage Lending
There are a variety of possible explanations for differences in homeownership rates among racial and ethnic groups. Research has
documented substantially higher denial rates in applications for
home mortgages among blacks and Hispanics than among whites. An
analysis of lending practices in Boston found that applications from
blacks and Hispanics were rejected about 28 percent of the time, compared with 10 percent for whites. However, applications from whites,
blacks, and Hispanics differed along many economic dimensions—
including income, loan-to-value ratios, and the presence of private
mortgage insurance, as well as other characteristics of properties and
applicants—which together explained about two-thirds of the difference in rejection rates. Still, about one-third of the gap remained
unexplained by these factors.
The remaining gap has three possible explanations. The first is that
some relevant economic characteristics correlated with race are
observed by the lender but not by the analyst, and average differences
in those characteristics across racial and ethnic groups account for
the higher denial rate among minorities. However, the Boston study



130

was careful to incorporate extensive controls, including all factors
that lenders, underwriters, and others reported to be important in
making lending decisions. The second explanation is that the higher
denial rate reflects lenders' expectations of higher default rates
among minorities with similar qualifications and other characteristics. This practice—rejecting applications on the basis of group
characteristics—is known as statistical discrimination and is illegal.
The third possible explanation, "noneconomic" or prejudice-based discrimination, in which lenders discriminate against minorities and
lower their profits as a result, is also illegal.
The authors of the Boston study argue that no clear-cut evidence
exists of differences by race in default rates, after adjusting for other
characteristics of applicants and properties such as those measured
in the study. However, this argument and the study itself have been
challenged in subsequent studies, which claim to find evidence of
higher default rates among minorities. Other researchers have
argued in response that differences in default rates between minorities and whites may not be a good indication of their creditworthiness
because, for example, whites might be treated more favorably in foreclosure proceedings. As discussed in the concluding section of this
chapter, audit studies provide additional evidence of discrimination in
home mortgage lending, although continued research is needed on
the extent and nature of discrimination in this area.
Holdings of Major Financial Assets
Whites have higher rates of ownership of every kind of major
financial asset than do blacks or Hispanics, and among those holding
each kind of asset, holdings by whites are much more valuable. This
is not surprising given whites7 greater median wealth. But some gaps
are particularly striking. For example, as of 1993 nearly 95 percent of
black households owned no stocks or mutual funds, and 95 percent
reported owning no private pension wealth (the corresponding figure
for whites is about 75 percent in each category). Differences in stock
ownership in 1993 are particularly important because between 1993
and 1997 the value of common stock appreciated enormously: for
example, the Standard and Poor's 500 index roughly doubled in value.
Another striking difference is in transaction accounts (such as checking accounts), which are held by the vast majority (92 percent) of
non-Hispanic white families but by only 69 percent of all other racial
and ethnic groups combined.

THE ROLE OF FAMILY STRUCTURE IN INCOME
AND POVERTY
Increases in family income and decreases in poverty rates for both
blacks and whites were rapid in the postwar period, especially in the
1960s. Blacks also made progress relative to whites in the 1960s. But




131

black family income was flat from the early to mid-1970s to the early
1990s, and the ratio of black to white family income generally fell over
this period. For example, since 1967 the ratio of black to white average income for all families has fallen slightly, from 0.65 to 0.62.
However, black-white ratios of income within family types have
increased, from 0.71 to 0.80 among married-couple families, and from
0.63 to 0.73 among female-headed families. (The overall ratio of
income is lower than the ratios among these subgroups because a
larger proportion of black families are female headed, a group with
much lower average income than other family types.) During this
period the shift toward female-headed families was faster for blacks
than for whites (Chart 4-6). Some observers have suggested that
these trends—particularly the rise of female-headed families—may
largely explain the persistence of differences in family income and
poverty rates among racial and ethnic groups. However, an adjustment for changes in family structure since 1967 suggests that such
changes explain only about one-fifth of the income and poverty gaps
between blacks and whites observed today. Moreover, this adjustment
may overstate, perhaps greatly, the adverse effects of family structure
on income if those with lower income or lower expected income are
less likely to marry or to stay married.
Chart 4-6 Family Structure
Since 1970 all groups have experienced increases in the proportion of families headed
by single women. The rise has been most pronounced for black families.

Married couple Q Male-headed, no spouse EH Female-headed, no spouse

20

Source: Department of Commerce (Bureau of the Census).

The adjustment amounts to taking a weighted average in which
the average income or poverty rate specific to a racial group and family type in 1996 is weighted by the corresponding percentage of




132

families of that racial group and family type in 1967. The adjustment
shows that if family structure for blacks and whites had not changed
since 1967, in 1996 the black-white ratio of family income would have
been 0.70 rather than 0.62, and the ratio of poverty rates would have
been 2.6 rather than 3.0. Thus, these ratios indicate that roughly onefifth of both the income gap and the poverty gap in 1996 is explained
by changes in family structure after 1967. These are surprisingly
modest effects when one considers that since 1967 the proportion of
female-headed families increased from 28 percent to 47 percent
among black families and from 9 percent to 14 percent among white
families. (Results are similar if the difference in family incomes
rather than their ratio is used to measure the income gap between
blacks and whites; differences in poverty rates rather than ratios suggest a somewhat larger effect of family structure changes since 1967
on the poverty gap. Also, similar adjustments demonstrate that family structure can account for only a small portion of the difference in
income and poverty between Hispanics and non-Hispanic whites.)
If the dramatic changes in family structure since the 1960s account
for only a modest portion of current income gaps among whites,
blacks, and Hispanics, what accounts for the remainder? Since the
labor market is the most important source of family income, a later
section of this chapter investigates gaps among racial and ethnic
groups in labor market outcomes such as earnings and employment.
However, such outcomes are linked to the skills that workers bring to
the labor market, many of which are developed prior to labor market
entry. The next section therefore discusses differences in education
across racial and ethnic groups.

EDUCATION
Education is one of the most powerful predictors of economic status.
Many dimensions of education are important, including the quality of
schooling, the quantity of schooling (often called "attainment," for
example the number of years completed), and student achievement or
learning. The link between educational attainment and earnings has
been well established, in part because data on attainment have been
collected in the Census and in labor market surveys over a number of
years. There is less agreement on the measurement and economic
importance of other dimensions of education. Furthermore, the economic importance of a college education has increased dramatically
over the past 20 years, as the relative demand for highly educated
workers has risen sharply. The focus of this section is on secondary
and postsecondary educational attainment. Of course, differences in
later educational attainment among racial and ethnic groups can
result from effects of discrimination and social and economic disad-




133

vantages experienced in early childhood or in elementary education.
(Chapter 3 discusses early childhood and elementary education.)
DIFFERENCES AND TRENDS IN
EDUCATIONAL ATTAINMENT
Differences
Substantial gaps in educational attainment persist among racial
and ethnic groups. The most recent year for which comparable
national data are available for all groups discussed in this chapter is
1990. Asians had the highest average attainment: in 1990, 40 percent
of Asians 25 years and older had completed 4 or more years of college,
compared with 22 percent of whites, 11 percent of blacks, and about 9
percent of Hispanics and American Indians. About 80 percent of
whites and Asians had at least completed high school, versus twothirds of American Indians and blacks and about half of Hispanics.
For Hispanics, attainment also varies considerably between immigrants and the native-born. For example, Hispanic immigrants have
much lower rates of high school completion than native-born
Hispanics. Asian immigrants, on the other hand, have educational
attainment similar to that of their native-born counterparts.
Trends
To provide an indication of recent changes in educational attainment across racial and ethnic groups, this section examines
attainment for younger persons (those aged 25-29 years).
High school. High school completion rates have increased steadily
over the 20th century. As educational attainment has increased, gaps
in high school completion among racial and ethnic groups have generally narrowed, at least among the native-born. In 1967 the gap
between blacks and whites in high school completion rates was 20
percentage points. This gap has narrowed considerably, but a 7-percentage-point difference remains between blacks and non-Hispanic
whites (Chart 4-7). And although their high school completion rate
has risen since the early 1970s, Hispanics lag far behind and have not
gained ground relative to non-Hispanic whites. In interpreting these
trends, however, it is important to recall that the composition of the
Hispanic population has changed rapidly. The Hispanic population
has roughly doubled in size between 1980 and 1996, and the fraction
that is foreign-born has been growing. In fact, the slow progress in
high school attainment among Hispanics is in large part explained by
the increasing representation of immigrants with less education. For
example, between 1980 and 1990 the proportion of 18- to 21-year-old
dropouts (those who were neither enrolled in nor had completed high
school) fell from 30 percent to 23 percent among native-born
Hispanics, but remained at 47 percent for foreign-born Hispanics.



134

Still, as of 1990 a substantial gap in high school completion rates
remained between native-born Hispanics and non-Hispanic whites.
Postsecondary education. Educational attainment beyond high
school has increased dramatically for blacks, Hispanics, and whites
over the past 30 years, although Hispanics have shown little increase
in the 1980s and 1990s. The percentage of non-Hispanic whites with
a bachelor's degree or higher is more than twice that of their black
and Hispanic counterparts. High school completion rates, college
enrollment rates among high school graduates, and college completion rates among college enrollees combine to determine rates of
college completion. Some of the gaps in college completion rates
reflect differences in high school completion rates. For example, the
gap between blacks and Hispanics in completing 1 or more years of
college is explained almost entirely by lower high school completion
rates among Hispanics. But even among those who have completed
high school, non-Hispanic whites are more likely to enter and to complete college than blacks or Hispanics. Again, Hispanics' low college
attainment rates appear to be due partly to low rates among immigrants: between 1980 and 1990 the proportion of 18- to 24-year-olds
enrolled in college increased from 18 percent to 28 percent among
native-born Hispanics, but remained at about 16 percent for foreignborn Hispanics.
Among women aged 25-29, college completion gaps widened
between whites on the one hand, and blacks and Hispanics on the
other, over the 1980s. In fact, except among white women, there was
Chart 4-7 High School Completion Rates for 25- to 29-Year-Olds
High school completion rates have risen since the late 1960s, and blacks are closing
the gap with whites. The completion rate for Hispanics remains low.

Non-Hispanic white

70

60

>0
1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

Note: Prior to 1 971 , data for whites include Hispanic whites, and data for blacks include Hispanic
blacks.
Sources: Department of Commerce (Bureau of the Census) and Department of Education
(National Center for Education Statistics).




135

relatively little increase in college completion rates over the 1980s for
men or women of these ages (Charts 4-8 and 4-9). However, in the
1990s rates of college completion among black men and women began
to pick up, reflecting an increase in college enrollment rates of black
high school graduates in the mid-1980s. College completion also
increased among white men in the early 1990s.
EXPLAINING EDUCATIONAL ATTAINMENT GAPS
High school completion rates increased sharply in the postwar period. Compared with the rather steady increase in high school
completion, college attendance and completion have fluctuated, especially for males, although they have increased steadily since the
mid-1980s. Increases in college attainment have been attributed to
two developments. First, since the late 1970s growth in demand for
highly educated workers has raised the relative wages of college graduates. Second, because educational attainment has generally
increased over time, the parents of recent high school graduates tend
to be better educated than the parents of high school graduates some
years ago. This is important because parents' and children's education
levels are highly correlated. Federal financial aid has also expanded
dramatically in the 1990s, doubling in real terms since 1993. This
expansion is expected to increase college enrollment and attainment
among low-income students, but it is too early to assess the magnitude of this effect.

Levels
Most studies in the economics literature of gaps in college-level
educational attainment among racial and ethnic groups have
focused on college entry. Parental education and family income are
important determinants of gaps in college entry among racial and
ethnic groups. Both factors affect high school completion as well.
For example, one detailed recent study concluded that differences
among blacks, whites, and Hispanics in family background (primarily parental education and income) can account for all the gaps in
rates of high school completion and college entry among racial and
ethnic groups. The study found that among young people with similar family income and parental education, rates of college entry
appear to be higher among blacks and Hispanics than among
whites. The importance of family background and income differences is reduced when achievement test scores are controlled
for, but the interpretation of this finding is the subject of great controversy. For example, low test scores result at least partly from
disadvantages relating to family background and may therefore be
a mechanism whereby such disadvantages are translated into low
educational attainment.




136

Chart 4-8 Women Aged 25-29 with 4-Year College Degree or Higher
The fraction of women with at least a 4-year college degree has increased for
non-Hispanic whites, blacks, and Hispanics, but considerable gaps persist.
Percent
35

30

Non-Hispanic white

\

25

20

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

Notes: Prior to 1971, data for whites include Hispanic whites, and data for blacks include Hispanic
blacks. Data for blacks and Hispanics are 3-year centered averages. Prior to 1992, series shows
fraction of women completing 4 or more years of college.
Sources: Department of Commerce (Bureau of the Census) and Department of Education (National
Center for Education Statistics).

Chart 4-9 Men Aged 25-29 with 4-Year College Degree or Higher
The fraction of men with a 4-year college degree or higher has tripled for blacks and
nearly doubled for whites and Hispanics, but considerable gaps persist.
Percent
35

35

\

Non-Hispanic white

10

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

Notes: Prior to 1971, data for whites include Hispanic whites, and data for blacks include Hispanic
blacks. Data for blacks and Hispanics are 3-year centered averages. Prior to 1992, series shows
fraction of men completing 4 or more years of college.
Source: Department of Commerce (Bureau of the Census) and Department of Education (National
Center for Education Statistics).




137

Trends
More attention has been paid to explaining differences in educational
attainment among racial and ethnic groups than to explaining their
trends. Large inflows of less educated immigrants have kept the average educational attainment of Hispanics relatively flat. As noted above,
high school graduation rates have increased for native-born Hispanics
but continue to be much lower among immigrants. The narrowing of differences in high school attainment between blacks and whites over the
past 30 years can be largely explained by increases relative to whites in
black parental educational attainment.
As high school completion gaps between blacks and whites were
decreasing steadily, differences in earnings between college and high
school graduates of all races were increasing markedly. Naturally, attention has turned to explaining differences among racial and ethnic groups
in college enrollment and completion. College attendance among high
school graduates has increased for all groups. However, the enrollment
rate among recent graduates began to increase for whites around 1980,
about 5 years before the rate for blacks began to increase. Therefore, the
disparity in college enrollment rates widened in the early 1980s and
translated into wider differences in college completion among racial and
ethnic groups in the late 1980s or early 1990s (Charts 4-8 and 4-9).
One possible explanation of these differences is the increasing direct
costs of college. A recent study found that the schooling decisions of
blacks are more sensitive than those of whites with similar incomes to
tuition and other direct costs, perhaps because of lower wealth among
blacks than among whites with similar incomes. It also found that the
rise in the direct cost of higher education explains some, but no more
than one-third, of the lower propensity of blacks to enter college in the
1980s. However, college tuition and other costs continued to increase in
the late 1980s, a time when black college enrollment began to increase.
The study concluded that the positive effects of rising parental education appear to have more than offset the negative effects of rising costs.

AFFIRMATIVE ACTION IN HIGHER
EDUCATION ADMISSIONS
The term "affirmative action" encompasses a variety of activities
and programs, ranging from outreach and recruitment efforts to programs that consider race as a factor in an evaluation process, which
are intended to increase minority representation in employment, education, or contracting. Under the law, and as reflected in Department
of Education guidelines, colleges and universities may not establish
quotas for admission or set aside a certain number or percentage of
admissions slots based on race. However, they may consider race or
national origin as one factor in making admissions decisions, for the
purpose of remedying the effects of past discrimination or achieving a
diverse student body.



138

Affirmative action in admissions has been the subject of recent contention. The Board of Regents of the University of California voted in
1995 to prohibit universities within its system from considering race
in admissions. The California Civil Rights Initiative, known as
Proposition 209, prohibits the State from utilizing race- or genderbased affirmative action programs in State employment, public
contracting, and education. In Texas et al. v. Hopwood the Court of
Appeals for the Fifth Circuit held that the admissions procedure used
by the University of Texas Law School in 1992 was unconstitutional.
However, this Administration strongly supports affirmative action in
higher education, and the practice remains widespread.
Such programs are intended to serve a variety of societal purposes,
including to remedy past or present discrimination, to secure the educational benefits of a diverse campus community, to compensate for
educational or other disadvantages faced by promising applicants, to
prepare students for an increasingly diverse society, and to train students to serve the needs of diverse communities. But what are the
more narrow economic effects of affirmative action in higher education admissions?
A recent study found that black and Hispanic students are more
likely to be admitted to "elite" institutions of higher education (that
is, those with average Scholastic Aptitude Test, or SAT, scores in the
top 20 percent of 4-year institutions) than non-Hispanic white or
Asian students with similar grade point averages (GPAs) and test
scores. Of course, in assessing student merit and making admissions
decisions, universities consider many criteria, such as letters of recommendation, extracurricular activities, region of residence, and
adverse personal circumstances. The study also found no evidence of
differences by race, after controlling for test scores and grades, in
admissions to the less elite institutions where 80 percent of college
students are educated. Nonetheless, admission to elite institutions is
of interest because of the strong link between college selectivity and
later earnings.
Critics of affirmative action programs in higher education admissions argue that some of the intended beneficiaries may actually be
harmed by such policies. (The same criticism could also be made of
programs for children of alumni or faculty.) They contend that affirmative action programs impede the academic performance of
minority students and increase their college dropout rates by encouraging them to enter colleges for which they may not be well prepared.
However, the study discussed above found little evidence of economic
harm to these students, as measured by graduation rates and earnings. The key question this criticism raises is whether students
admitted to elite institutions because of affirmative action would
have fared better had they instead attended less selective institutions. In fact, attending an elite institution is associated with a lower
college GPA, but a higher graduation rate and higher earnings, for all



139

students, after controlling for SAT scores and high school GPA. The
relationship between college selectivity and both college completion
and earnings is similar for blacks and Hispanics and others.
The higher graduation rate among similar students attending more
elite institutions raises questions about which practices at elite institutions increase graduation rates. Possibilities range from more
engaging professors or classes to better support services. It is also
possible that students expect a higher economic return to additional
investment in education at an elite college and are therefore more
highly motivated to obtain a degree.
The authors of the study argue that the number of applicants
denied admission because of affirmative action programs is small.
But many other students who are rejected may erroneously conclude
that they would have been admitted in the absence of such programs.
As a result, affirmative action in admissions may generate resentment far in excess of its actual aggregate effects. Nonetheless,
individuals denied admission as a result of these policies may bear
some costs—even if those individuals are difficult to identify and are
few in number.
As an alternative to race-conscious admissions policies, some have
called for "color-blind" policies that might target low parental income
or education. Blacks and Hispanics are, of course, a minority of the
population and account for a small minority of the population of
youths with high SAT scores. As a result, although blacks and
Hispanics are much more likely than whites to be poor, they make up
a relatively small share of the low-income population with the SAT
scores or GPA needed to gain admission to elite colleges. Therefore,
targeting low-income applicants alone would very likely result in a
dramatic reduction in minority representation at elite colleges. Classbased, color-blind admissions standards would not yield substantial
numbers of blacks and Hispanics at most top-ranked institutions at
present. Some commentators have therefore concluded that raceconscious admissions policies are needed to retain a semblance of
racial diversity on elite college campuses.

LABOR MARKETS
The largest share of most families' income is derived from earnings
from labor. Changes in labor markets can therefore have considerable
effects on economic inequality across racial groups. Differences in
labor market outcomes among racial and ethnic groups are intertwined with general developments in labor markets. Among the most
important recent developments are technological changes that have
increased the demand for highly educated labor, growing immigration
and international trade, declining trade union membership,
increased participation of women in the labor market, and, most



140

recently, increases in the minimum wage and expansions of the
earned income tax credit. (See Chapter 7 for a discussion of the effects
of international trade on labor markets.) Developments that appear
race-neutral may nonetheless affect racial and ethnic groups differently. For example, since Hispanics, on average, have much lower
educational attainment than whites and blacks, they are more likely
to be harmed by falling demand for less educated workers. However,
lower demand for less skilled workers would not necessarily be
expected to increase wage gaps among racial and ethnic groups for
workers with similar levels of education.
In analyzing changes in racial inequality in labor markets it is
important to bear in mind the growing economic diversity within
racial groups that began to be observed in the mid-1960s. For example, the growing income inequality among blacks described above is
mirrored in the labor market, with college-educated professionals at
one extreme and labor force dropouts at the other. Although both
groups face substantial barriers in the labor market related to race,
the nature of these barriers could be quite different. The growing
labor market diversity within racial groups cautions against the
search for a single explanation for changes over time in differences
among racial groups.
Three periods mark changes in black-white inequality in the labor
market since 1960: a period of rapid progress from 1965 to the mid1970s; a period of stagnation or erosion of gains between the
mid-1970s and the early 1990s; and a period of mixed results since
the early 1990s. The beginnings and ends of these periods are difficult
to determine precisely because focusing on different data series and
different subgroups can yield somewhat different results.
TRENDS IN LABOR MARKET OUTCOMES
Unemployment and Employment Gaps
The current economic recovery has reduced unemployment substantially for all groups. The overall unemployment rate has been
below 6 percent for over 3 years and has been at 5 percent or below
since April 1997. Improvement in the employment situation overall
has been accompanied by a reduction in the difference in the unemployment rate between blacks and Hispanics on the one hand, and
whites on the other. The proportion of black women employed has
risen above that for white women in recent months. However, unemployment rates for blacks are more than double those for whites and
fluctuate more sharply over the business cycle (Chart 4-10).
Men. In 1997 the unemployment rate for black men 20 years and
older was 8.4 percent, its lowest annual average since 1974. At 3.6
percent, the white male unemployment rate for 1997 was also near a
20-year low. Although the ratio of black unemployment to white
unemployment is thus more than 2 to 1, as it has been for many



141

years, for the past 3 years the difference in rates has been roughly 4
to 5 percentage points, smaller than the gaps that prevailed from
1975 to 1994. Among men aged 25-54, the labor force participation
rate for blacks is about 84 percent, about 9 percentage points lower
than the rate for whites. These rates have fallen in the past 25 years
for both blacks and whites, although the decline has been somewhat
larger among blacks.
Chart 4-10 Unemployment Rates
Unemployment rates for blacks and Hispanics are higher and increase more in
recessions than unemployment rates for whites.
Percent

25 ,

25

20

20

15

15

10

10

1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996
Note: Prior to 1972, data for blacks include all nonwhites.
Source: Department of Labor (Bureau of Labor Statistics).

Women. Labor market outcomes for women are important for
understanding differences in economic well-being among racial
groups, for two reasons. First, women's earnings have historically
made up a larger proportion of two-parent family income among
blacks than among whites. Second, because of their much higher rate
of single parenthood, black families rely more heavily on female earnings than do white families. For women aged 20 and above the most
striking employment trend is a long-term increase in labor force participation. Participation rates for black women have long exceeded
rates for white women, but the difference has narrowed considerably
and nearly disappeared by the early 1990s. However, beginning in
1995, participation rates of black women accelerated, reaching 64
percent in 1997. The rate for white women appears to have reached a
plateau at about 60 percent. But because black women also have
higher unemployment rates than white women, their employment-topopulation ratios are much more similar than are their participation
rates. Still, the black female employment-to-population ratio sur


142

passed the white ratio in 1996. Labor force participation rates for
Hispanic women are lower than those for either blacks or whites.
Gaps (both ratios and differences) among racial groups in unemployment rates for women are similar to those for men. The
black-white unemployment ratio for women has remained above 2,
but the difference has been somewhat smaller in the 1990s than in
the 1980s.
Occupations
Like educational attainment, occupation is regarded as an indicator of more permanent economic and social status than are wages or
income in a single year or month. Workers in different occupations
are affected differently by changes in the economy. For example,
workers in blue-collar occupations are more likely than white-collar
workers to be laid off in recessions.
Over the postwar period black men and women have both experienced tremendous change in the occupations in which they work.
Some of these changes were experienced by all workers, black and
white, but some are specific to blacks, due, for example, to reduction
in the most overt forms of discrimination and to large migration flows
out of the rural South.
Women. In 1940, 60 percent of employed black women worked in
domestic service occupations, more than triple the percentage among
all employed women. The proportion of black women employed in
domestic service fell to 35 percent by 1960 and to 2 percent by 1996.
Over the same period, black (and white) women moved in large numbers into other service occupations, as well as into clerical and sales
jobs. The proportion of black women in managerial and professional
occupations increased slowly between 1940 and 1960, then jumped in
the 1960s and 1970s, reaching about 19 percent in 1980.
A major revision of the occupational classification system, implemented after 1982, makes tracking changes over the entire 1980s
difficult. Since 1983 the fraction of black women employed in managerial and professional occupations grew steadily, but increased less
than that of white women. As a result, the gap between white and
black v/omen in the percentage working in managerial and professional occupations widened by more than 2 percentage points over the
past 15 years. Hispanic women are less likely than black or white
women to be employed in managerial and professional occupations,
and more likely to be employed in private household service and in the
relatively low skill blue-collar occupations of operators and fabricators.
Men. In 1940, 41 percent of black men worked as farmers or farm
laborers; that share had fallen to only 14 percent in 1960. (The corresponding percentages for all men were 22 percent and 8 percent,
respectively.) By 1970 employed black men were more likely than
other employed men to work in blue-collar occupations (60 percent
compared with 48 percent). Black men were therefore concentrated in



143

those occupations that were the most affected by the severe cyclical
downturns of the 1970s and early 1980s, and at least until recently by
the long-term decline in manufacturing employment. By 1996 only
about 45 percent of employed black men and 38 percent of all
employed men worked in blue-collar jobs.
In the period between 1960 and 1980 the percentages of black men
and black women who worked in professional and managerial occupations were roughly equal, and both increased by about 10
percentage points. But since 1980 black men have not moved into professional and managerial occupations as rapidly as black or white
women. In 1996 the share of black men working in managerial and
professional occupations stood 6 percentage points behind that of
black women, 11 percentage points behind that of white men, and 15
percentage points behind that of white women.
Hispanic men are the least likely of all the groups considered here
to work in managerial and professional occupations. They are far
more likely than black or white men to work in farming and related
occupations, more likely than black men to work in precision production ("craft") occupations, and slightly less likely than black men to
work in the lower skill blue-collar occupations.

Earnings Gaps
Black-white earnings gaps. By all available measures, the wages of
blacks increased rapidly relative to those of whites in the 1960s and
early 1970s, but progress slowed or reversed between the mid-1970s
and the early 1990s (Charts 4-11 and 4-12). Trends in earnings
inequality among racial groups in the 1990s are less clear. Most wage
series show little progress in the pay of blacks relative to that of
whites. However, one wage series—median annual earnings for fulltime, year-round male workers—does show substantial recent
progress among black men relative to white men, with the blackwhite ratio reaching a new high of about 0.8 in 1996. Firm
conclusions about black-white pay gaps for men in the 1990s are
therefore difficult to reach. Explanations for the narrowing of the pay
gap in the 1960s, as well as the widening between the mid-1970s and
the early 1990s, are discussed below. Researchers have just begun to
examine the record of the 1990s.
Wage growth in the 1960s and early 1970s was faster for black
women than for black men, both relative to white women (Chart 4-12)
and relative to white men. Between 1967 and 1975 the gap in median wages between white and black women fell from about 20 to about
5 percentage points. Among younger women the differential disappeared, and there is even evidence that young, college-educated black
women were paid more than comparable white women in the 1970s.
But the earnings gap increased starting in the mid-1970s and stood
at about 17 percentage points in 1997. Black and white women have
both gained relative to white men.



144

Chart 4-11 Ratios of Median Weekly Earnings of Male Full-Time Workers
Since the 1970s, black men's earnings have held roughly constant relative to those of
white men, while Hispanic men have lost ground.
Percent of white male earnings
100

90

70

60

60

i . i . i . i . i . i . i . i r
1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997
Notes: Prior to 1979, the series for blacks includes other nonwhites. Beginning in 1979 data are for
workers aged 25 and over.
Source: Department of Labor (Bureau of Labor Statistics).

Chart 4-12 Ratios of Median Weekly Earnings of Female Full-Time Workers
Black women nearly closed the pay gap with white women by the early 1970s, but
relative wages of black and Hispanic women have been falling since then.
Percent of white female earnings

100

100

90

80

70

70

60

60

Break in series

1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997
Notes: Prior to 1979, the series for blacks includes other nonwhites. Beginning in 1979 data are for
workers aged 25 and over.
Source: Department of Labor (Bureau of Labor Statistics).

As noted above, whites on average have higher educational attainment than blacks. But sizable pay gaps among racial and ethnic



145

groups remain for workers with similar educational attainment
(Table 4-2). At least until the 1990s, these trends in black-white pay
gaps were more pronounced for younger workers, who tend to bear
the brunt of labor market adjustment. For example, the pay gap
between blacks and whites narrowed most among young college graduates in the 1960s and early 1970s, and then widened most among
this group after 1975.
TABLE 4-2.—Ratios of Black and Hispanic to White Median
Weekly Earnings, 1997
H ispanic-white rati 0

Black-white ratio
Sex

Workers with
high school
diploma only

Workers with
bachelor's
degree only

All workers

Workers with
high school
diploma only

074

075

074

063

078

086

.83

.85

.90

.71

.86

.94

All workers

Men

Women

Workers with
bachelor's
degree only

Note—Data are for full-time workers aged 25 and over.
Source: Department of Labor (Bureau of Labor Statistics).

Earnings gaps for other groups. Less information is available about
differences in pay between whites and other minority groups. The pay
of Hispanic men and women fell relative to that of whites over the
1970s and 1980s. Much of the deterioration in the pay of Hispanics is
linked to educational differences and immigration. For example, differences in pay between Hispanics and whites with similar
educational attainment are much smaller than the overall differences
(Table 4-2). In fact, a recent study reported that, between 1980 and
1990, differences in pay between whites and minorities living in the
same metropolitan areas, with comparable levels of schooling and
working in similar occupations, widened by 2.5 percentage points for
blacks and 4.1 percentage points for American Indians, but by less
than 1 percentage point for Hispanics and Asians.

EXPLAINING EARNINGS GAPS
Differences in pay among racial and ethnic groups can result from
differences in the average quantities of factors related to labor market success, such as educational attainment, and from differences in
the "prices" of such factors, that is, their value in the labor market.
Differences among racial and ethnic groups in the prices these factors
command have been attributed to labor market discrimination. But
differences in the quantities of these factors may also reflect discrimination outside the labor market or even within it. For example, if
blacks with higher educational attainment are discriminated against
in the labor market, their returns to investing in education may be
artificially reduced. Facing a lower return, blacks may invest less in
higher education.



146

Historically, blacks have received less schooling and attended
schools with larger class sizes and smaller budgets than those attended by whites. Largely as a result of the 1954 Supreme Court decision
in Brown v. Board of Education, the Civil Rights Act of 1964, and the
1968 decision in Green v. County School Board, which required active
integration of schools, schools became increasingly integrated in the
late 1960s and early 1970s. Schooling gains can account for perhaps
20 percent of the gains in black workers' relative earnings in the
1960s and early 1970s.
Other factors that explain trends in wage gaps among various
racial groups include migration (especially before the 1960s), regional and industry demand conditions, macroeconomic shocks, and
government intervention. Government intervention to increase economic opportunities for disadvantaged minorities has taken many
forms, including education and training programs, the enactment and
enforcement of civil rights and equal opportunity laws, requirements
(under Executive Order 11246) that Federal contractors engage in
affirmative action programs, and court-monitored affirmative action
programs intended to remedy past practices of discrimination.
Changes to the Mid-1970s
Between 1920 and 1990 blacks experienced two periods of rapid
progress relative to whites in the labor market: the first was during
the wartime economy of the 1940s, and the second was the period
from 1965 to 1975. Migration from the South was substantial in the
1940s, 1950s, and into the 1960s: 10 to 15 percent of all blacks and
roughly 20 to 25 percent of young black men migrated in each of these
decades. Wage gaps between blacks and whites were much larger in
the South than in other regions. For example, in 1960 the black-white
gap in wages was about twice as large in the South (50 to 60 percent
compared with 20 to 30 percent outside the South).
Following passage of the Civil Rights Act of 1964, the relative
wages of black workers increased sharply—more than can be
explained by macroeconomic factors such as growth in gross domestic
product. The improvement in relative wages was by far the greatest
in the South, where State fair-employment laws were weakest, where
institutional discrimination was greatest, and where Federal antidiscrimination efforts were focused. Although there was some progress
in the relative earnings of blacks before 1964, the evidence is overwhelming that progress accelerated substantially in the period from
1964 to 1975, and that Federal attacks on racial exclusion in the
South were critical to this acceleration.
As noted above, gains in years of schooling and school quality
explain perhaps 20 percent of the gain in relative wages for blacks in
this period. There were large increases in the economic returns to
schooling for blacks. In principle, these could result from either
increased quality of schooling or decreased discrimination in the labor



147

market. However, decreased discrimination is the more compelling
explanation, since returns to education increased even among older
cohorts whose education had been completed prior to 1965.
But part of the improvement in schooling and school quality is also
attributable to Federal actions. The Supreme Court ruled in the
Brown decision that segregated schools are unconstitutional. Yet
despite the Brown decision and provisions of the Civil Rights Act that
threatened to cut off Federal aid to segregated schools, in the mid1960s black children in the South still overwhelmingly went to
segregated schools. The dramatic changes came after the 1968 and
1969 Supreme Court decisions that required immediate integration.
Therefore, improvements in school quality that resulted from school
desegregation do not explain improvements in black wages in the
South between 1965 and 1975.
Demand forces seem responsible for much of the improvement in
relative wages between 1964 and 1975. Partly because Federal
actions coincided with a strong economy, the precise role of Federal
action, including the associated voluntary compliance, has been difficult to establish statistically. However, the observation that the most
rapid progress came in the South, where Federal efforts were concentrated, supports the importance of the Federal role. Detailed studies
show that blacks moved into industries in the South from which they
had previously been excluded. For example, after 55 years of neartotal exclusion, black employment advanced rapidly in South
Carolina's textile industry from 1965 to 1975.
A recent evaluation of the impact of the Equal Employment
Opportunity Act of 1972 confirms earlier findings of the importance of
Federal equal opportunity law to the labor market progress of blacks.
The act expanded civil rights coverage of Title VII of the Civil Rights
Act to employers with 15 to 24 employees (previously only larger
establishments were covered), as well as to State and local governments. Blacks employed in the newly covered small establishments in
States where small employers were not already covered by State fairemployment practice laws, largely in the South, were most affected by
this legal change. Blacks gained in relative employment, earnings,
and occupational status in small establishments in Southern States
after 1972.
Changes Since the Mid-1970s
Men. In the mid-1970s and 1980s, wages for less educated workers
and for black and Hispanic workers deteriorated. Wage differences
between blacks and whites grew fastest in the North Central region,
where employment and earnings declined more generally. On the
demand side, the heavy concentration of blacks in central-city manufacturing jobs in the Midwest in the 1970s made them particularly
vulnerable to recessions and the decline of manufacturing employment. Ironically, then, the movement out of the South and into



148

manufacturing employment that had contributed so much to black
economic progress in the 1960s and early 1970s also contributed to
the deterioration of the late 1970s and 1980s.
Labor supply responses such as migration and training can help offset the effects of reductions in labor demand. Lower mobility will
produce larger wage and employment declines in response to demand
shocks. There appears to have been slower adjustment out of declining
areas and industries among blacks and less educated workers, on average, although it is unclear whether this supply adjustment was slower
for minorities than for whites with similar educational attainment.
Perhaps the most important change in the labor market over the
past 25 years has been the increase in the demand for more educated
workers. But wage inequality has generally increased even for workers with the same educational attainment. Although growing wage
differences between blacks and whites could be a symptom of
increased discrimination, the increase in general wage inequality
makes this inference more difficult. The increase in general wage
inequality for workers of the same age and educational attainment
could lead to widening differences in wages between blacks and
whites, as the following example illustrates. Suppose that in 1975 the
median wage for black men aged 30 with a high school degree stood
at the 35th percentile of the distribution of wages for the corresponding group of white men. Suppose further that wage inequality
increased generally after 1975, so that by 1990, wages at the 35th
percentile of the white wage distribution had fallen 10 percent relative to the white median (for this group). Then, even if the black
median wage remained at the 35th percentile of the white wage distribution, the general growth of wage inequality would have resulted
in a 10-percent decline in the black-white ratio of median wages.
Scholars have recently attempted to quantify these effects.
Estimates vary, however, regarding the extent to which the widening
of pay gaps between blacks and whites is accounted for by increasing
general wage inequality. One early study concluded that such effects
could account for the entire increase in black-white wage differences
among young workers in the 1980s. But this conclusion has been challenged. For example, the increase in wage gaps between blacks and
whites has been greatest among young, college-educated workers. But
the median wages of black and white workers for this group were similar in the mid-1970s. Therefore, a general decline at the bottom of
the wage distribution relative to the median cannot account for the
fall of the black median relative to the white median for this group.
For other groups of workers, however, increases in general wage
inequality appear to be more important.
Researchers have also hypothesized that the increase in general
wage inequality among workers of similar ages and education levels
is due to the growing value in the labor market of "unmeasured skills"
(skills not measured by years of schooling or age). Some have hypoth


149

esized further that the growth in wage differences between blacks
and whites is related to differences in unmeasured skills between
blacks and whites. For example, skills differences between blacks and
whites with the same years of schooling might result from differences
in the quality of the schools that blacks and whites attend. Some
studies have attempted to explore this issue by directly examining
school quality or measures of "skill" such as performance on tests of
cognitive achievement or ability. However, important aspects of school
quality may be difficult to measure. Studies find that differences in
test scores can explain a substantial portion of black-white differences in wages in a given year, but have not been able empirically to
account for the reversal in black-white wage convergence since the
mid-1970s.
In addition, a recent study concludes that growing returns to
unmeasured skills are simply not large enough to account for the
stagnation of black economic progress after the mid-1970s. First,
changes in school quality cannot explain the widening of pay gaps
over time within cohorts whose schooling is of fixed quality over their
lifetimes. In principle, an increase in the labor market return to
school quality could lead to a widening of pay gaps between blacks
and whites even within cohorts, if blacks attended lower quality
schools. But second, the study found that even after differences in
schooling, age, location, and unmeasured skills are taken into
account, young, college-educated black men experienced at least a 13percent drop in wages relative to their white counterparts in the
1980s.
In sum, black men's earnings fell relative to those of white men of
similar age and educational attainment in the late 1970s and 1980s.
The evidence available indicates that increasing overall wage
inequality may have contributed to this deterioration and may be
linked to unmeasured skill differences, but these explanations are
incomplete. For example, this explanation does a poor job with young,
college-educated black men, for whom the erosion of relative pay was
substantial. These investigations therefore provide indirect evidence
that discrimination also contributed to widening pay gaps across
racial groups.
Women. Less attention has been paid to recent increases in the
wage gap between black and white women. Since the early 1970s,
working women have made substantial gains in earnings relative to
men. The narrowing of the gender pay gap has been attributed to
greater lifetime labor force participation among women and the dramatic increase in the value of education and work force experience.
As noted above, black women reached virtual pay parity with white
women in the early 1970s, after a long period of steady improvement
(Chart 4-12). Since the mid-1970s, however, the wages of young black
women have fallen about 10 percentage points relative to those of
young white women. The relative decline was more rapid among



150

young college graduates. Chart 4-12 shows only ratios of weekly earnings of full-time workers, but the trends in pay gaps among racial and
ethnic groups for women are similar in other data series (such as
annual earnings of full-time, year-round workers) and for workers of
similar ages and educational attainment.
Both labor force participation rates and attainment of a college
degree rose more for white women than for black women in the 1980s.
Over the 1980s the returns to education also increased. Changes in
demand for specific occupations and the decline in unionization rates
appear to have hurt black women relative to white women. Black
women were also more likely to be employed in declining industries
than white women.
Studies document a widening of pay gaps among racial groups for
women of similar ages and educational attainment. But since white
women's labor force participation rates have increased relative to
those of black women (at least until the mid-1990s), their labor market experience at any age may also have increased relative to that of
black women. And pay tends to rise with greater labor market experience. Thus, a possible yet unexplored explanation for the decrease
in the pay of black women relative to white women since the mid1970s is the increasing relative attachment of white women to the
labor force. Discrimination could also have contributed to the decline
in the black-white earnings ratio among women.

Affirmative Action in Employment
Aside from labor market changes that increased the demand for
more skilled labor, weaker enforcement of antidiscrimination laws
during the 1980s may have contributed to the decline in black workers' relative earnings between the mid-1970s and the late 1980s.
There is evidence that enforcement of equal opportunity and affirmative action laws has an effect on hiring decisions.
Affirmative action programs have proved controversial, but their
aggregate effects remain unclear. Because a variety of civil rights and
antidiscrimination measures were undertaken in a relatively short
time, it has been difficult to distinguish the effects of affirmative
action from those of broader civil rights enforcement. The Office of
Federal Contract Compliance Programs (OFCCP) is responsible for
monitoring the hiring and promotion practices of Federal contractors.
Large government contractors (those with 50 or more employees and
$50,000 or more in Federal contracts) must develop an affirmative
action program to remedy any underutilization of minorities and
women and must make good faith efforts to implement the program.
One approach to assessing the effects of affirmative action on employment, therefore, is to compare government contractors (who are
covered by OFCCP enforcement) with firms that are not government
contractors (noncontractors). This approach, however, is subject to
biases that can lead it to overstate or understate the effects of affir


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mative action plans. On the one hand, noncontractors often take steps
to ensure diversity and compliance with equal opportunity laws, even
though they are not covered by OFCCP rules. This would lead the
method to understate the effects of affirmative action. On the other
hand, increased employment at contractor firms could also result
from a shift of employment from noncontractors to contractors. In this
case the difference between contractor and noncontractor hiring could
overstate the employment effects of affirmative action.
According to these studies, active enforcement by OFCCP during
the 1970s appears to be related to government contractors' increasing
their hiring of minority workers, although the effect is relatively modest. For example, one study found that the employment share of black
males in contractor firms increased from 5.8 percent to 6.7 percent
between 1974 and 1980. In noncontractor firms the share increased
from 5.3 percent to 5.9 percent. The literature also finds that OFCCP
had a significantly positive effect on the employment of black females
and a smaller but still positive effect on white females.
A 1996 study concluded that, in contrast to findings for the 1970s,
there was no consistent evidence of the success of government
antidiscrimination efforts in the 1980s. As noted, in the 1980s OFCCP
enforcement was greatly weakened. Debarments of contractors found
to be noncompliant, awards of back pay to affected employees, and
conciliation agreements following violations all decreased during the
decade. Enforcement has apparently increased in the 1990s as new
initiatives have been adopted that focus enforcement on the worst
offenders, target areas of obvious noncompliance, and strengthen
sanctions.

DISCRIMINATION
No discussion of differences in economic status among racial and
ethnic groups would be complete without a consideration of the ongoing importance of discrimination. Two statements appear to be true.
First, discrimination is far less pervasive and overt today than it was
before the Civil Rights Act of 1964. Second, audit studies and significant judgments in favor of victims of discrimination make it clear that
discrimination against members of racial and ethnic minority groups
persists in many areas of the economy. However, there is far less
agreement about the degree to which current acts of discrimination
are responsible for differences in economic status among racial and
ethnic groups.
Many States' laws dictated a system of race-based classifications
that placed blacks at a disadvantage in the economy, in education,
and before the law. As late as the early 1960s overt racial discrimination was common. For example, newspaper advertisements clearly
stated employer preferences for whites or blacks for specific jobs. The



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practice was common even in States like New York, where antidiscrimination legislation predated national civil rights legislation.
Evidence of continued racial discrimination takes a variety of
forms. Perhaps the most convincing evidence comes from audit studies, in which similar white and minority candidates are sent to the
same sources to seek jobs, rent apartments, or apply for loans for
home mortgages. For example, a white and a black job seeker may be
given similar resumes and sent to the same set of firms to apply for a
job. These studies typically find that employers are less likely to
interview or offer a job to minority applicants, and that minority
applicants are treated less favorably by real estate agents and lenders
and in some types of consumer purchases (such as automobiles and
meals in restaurants). For example, one national study found that the
incidence of unfavorable treatment in the housing market was 23 to
30 percentage points higher for a black or Hispanic auditor than for
his or her "matched" white counterpart. In the area of housing discrimination the Department of Justice recently launched a national
program to test housing developments, seeking evidence of discriminatory practices. Pairs of black and white persons are trained to pose
as prospective tenants and sent to ask about the availability of units.
In a case brought using evidence developed with this technique, the
Department of Justice obtained a consent decree against housing
providers in suburban Detroit that resulted in a $125,000 civil penalty paid to the Treasury and required the defendants to make $225,000
available to the victims of their discrimination.
Various Federal agencies also receive and resolve thousands of discrimination complaints each year. On the one hand, although a
settlement of charges does not always involve admission of discriminatory practice, at a minimum the bringing of a charge indicates the
perception that discrimination has occurred. On the other hand, only
a portion of employees who experience discrimination actually bring
charges. In fiscal 1996 alone, the Equal Employment Opportunity
Commission, which is responsible for enforcing the principal Federal
statutes prohibiting employment discrimination including Title VII of
the Civil Rights Act of 1964, obtained $145 million in monetary benefits (excluding litigation awards) for parties bringing discrimination
charges, through settlement and conciliation. From 1993 to 1997 the
OFCCP conducted 19,852 compliance reviews and 3,192 complaint
investigations and obtained over $158 million in financial settlements, including over $60 million in back pay for 30,171 victims of
employment discrimination by Federal contractors. During the first
term of this Administration, the Department of Housing and Urban
Development (HUD) reached out-of-court settlements on 6,517 housing discrimination cases. HUD took enforcement action on 1,085
cases, either issuing housing discrimination charges or referring
cases to the Department of Justice. During this period HUD obtained
$17.8 million in compensation for victims of housing discrimination.



153

The Department of Justice settled major mortgage lending discrimination suits in the 1990s, including suits against large lenders in the
Atlanta and Boston areas. In fiscal 1997 the Department of
Education's Office of Civil Rights received 1,422 complaints alleging
discrimination based on race, color, or national origin in access to
equal educational opportunities. The office facilitated a change in 249
of these cases.
Less direct evidence of discrimination comes from earnings comparisons such as those described earlier in this chapter. As noted
there, even after adjusting for many characteristics that affect earnings, these studies typically find that blacks are paid less than their
white counterparts. The traditional interpretation is that the unexplained differential reflects discrimination in pay. However, these
studies are not uniformly accepted as providing evidence of discrimination in the labor market: some researchers have argued that the
studies fail to control adequately for differences in average characteristics between groups. Others argue that controlling for such
characteristics may not be appropriate if differences in characteristics
such as education and labor market experience are themselves partly the result of discrimination both outside and within the labor
market.
More direct evidence of labor market discrimination, in addition to
that from audit studies, comes from lawsuits that prove in a court of
law a pattern and practice of discriminatory behavior. But these narrow, albeit powerful, pieces of evidence do not translate easily into
estimates of the aggregate economic impacts on employment or economic well-being of discriminatory behavior. Significant analytical
challenges, requiring a combination of approaches, remain in assessing the contribution of current acts of discrimination to current
differences in economic status among racial and ethnic groups. For
example, minorities who face discrimination by one employer may be
able to find employment with another, nondiscriminatory employer.
(But even in this case, discrimination imposes psychological costs and
additional job search costs on minorities.) This example also suggests
sthat, especially where discrimination is prevalent, reducing discrimination can yield substantial economic benefits, by increasing the
number of nondiscriminatory employers.
It is an important goal of social and economic policy to ensure that
discrimination does not limit the economic opportunities available to
members of racial and ethnic minority groups. This Administration
remains committed to ensuring equal opportunity for all Americans.




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CHAPTER 5

Improving Economic Efficiency:
Environmental and Health Issues
THE U.S. ECONOMY RELIES PRIMARILY on market forces and
price signals to allocate economic resources efficiently. Economists
have long recognized that a system of decentralized, competitive
markets in which businesses and households act in their own best
interest promotes economic growth and well-being. Market prices
signal how resources should be used to produce goods and services of
the highest value, and facilitate the distribution of these goods and
services to those willing and able to pay the most for them. In a wellfunctioning market the price of a good or service reflects both its
marginal value to the consumer and its marginal cost to the producer. So long as there is no divergence between the private and the
social values and costs of these goods and services, the market system is likely to bring about the most efficient allocation of economic
resources. Although economic efficiency is not the only concern of
policymakers, it is important because it largely determines the total
quantity of goods and services available. However, economists also
recognize that sometimes prices might be distorted and that a market economy may fail to allocate resources efficiently. When market
failures occur, appropriate government action may be able to
improve upon market performance and enhance overall economic
well-being. Examples of such action include protecting the environment, promoting health and safety, providing intellectual and
physical infrastructure, and promoting competition.
Potential sources of market failure are:
• Externalities. An externality arises when production or consumption by one person or group provides a benefit to others (for
example, by revealing a useful scientific discovery) without receiving compensation equal to the benefit, or imposes a cost on others
(for example, by polluting the environment) without paying compensation for the full cost.
• Incomplete or asymmetric information. When two parties to an
economic transaction do not have complete information, or do not
have the same information, about the goods or services being
exchanged, they may face distorted incentives that prevent markets from supplying the amount or the type of products most



155

desired. These information problems are especially prevalent in the
market for health care, where incomplete or asymmetric information about a patient's health status or the value of a provider's
services can adversely affect the decisions of both provider and consumer.
• Public goods. A public good is one that many people can use simultaneously without reducing its availability to others, and whose
benefits are such that one person cannot exclude others from enjoying them. An example of a public good is national security, which,
once provided, cannot be denied to anyone residing in the protected
nation.
• Imperfect competition. Imperfect competition may result when a few
suppliers or buyers can exercise market power to limit supply, keep
prices high, and prevent new competitors from entering the market.
Economics provides important insights into the circumstances in
which governments can act to improve upon market performance,
how they can do so in a cost-effective manner, and how the costs and
benefits of such actions are likely to be distributed. Economics has
shown that market mechanisms can be a powerful instrument for
achieving desired policy outcomes without incurring unnecessary
costs. A prime example is the use of tradable pollution permits in
environmental policy, described in detail later in this chapter.
This chapter presents several examples of market failures in the
areas of environmental protection and health care and discusses new
approaches to addressing them. Recent environmental initiatives
include policies to improve air quality, address global climate change,
and reduce non-point source water pollution from agriculture. These
policies are designed to build upon the considerable success of past
efforts in improving the quality of our environmental resources. In
the domain of health care and consumer safety, rules governing
health insurance and drug approval have been reformed, and new
policies are being proposed to improve the performance of health
maintenance organizations and reduce teenage smoking. These policies are intended to further enhance the health and well-being of our
Nation's people. Recent antitrust reforms designed to increase market competition are discussed in Chapter 6.

COST-EFFECTIVE ENVIRONMENTAL PROTECTION
Achieving environmental targets at the lowest possible cost is an
important policy objective. The President's Executive Order 12866,
issued in 1993, directs Federal agencies to design regulations in the
most cost-effective manner to achieve the regulatory objective and to
propose or adopt a regulation only upon a reasoned determination



156

that its benefits justify its costs. Further, the 1995 Unfunded
Mandates Reform Act requires agencies either to certify that the regulatory approaches they adopt to achieve policy goals are the least
burdensome, the most cost-effective, or the least costly among available alternatives, or to state the reasons for choosing an alternative
approach.
TRADABLE EMISSIONS PERMITS
In implementing environmental policy, economists often advocate
the use of market-based mechanisms such as tradable emissions permits for environmental pollutants, to encourage emissions reduction
from those sources where the cost of emissions reduction is lowest and
to foster innovation in emissions control technology. Tradable permits
can be especially useful in achieving quantitative targets for emissions control or abatement.
Under the traditional regulatory approach to environmental protection, a regulatory agency may specify an allowable emissions level
for each firm or facility or require firms to use specific technologies to
reduce emissions. This is often inefficient because the cost of reducing
emissions by a given amount differs from firm to firm. A tradable permit system instead caps total emissions from all firms but neither
places limits on emissions by any one firm nor dictates how the reduction in emissions must be achieved. Instead the regulatory agency
issues permits for emissions in a total amount equal to the cap and
prohibits emissions without a permit. After their initial allocation
(methods for which are discussed below), firms may freely buy and
sell permits among themselves. Any firm that can reduce its emissions for less than the going price of a permit has an incentive to do
so and then sell its unused permits to other firms for which emissions
reduction is more costly. With tradable emissions permits, firms thus
have more choices and can meet environmental standards at lower
cost than under traditional regulation.
An emission permit trading system also gives firms an incentive to
innovate. Firms that develop more effective and cheaper pollution
control measures can sell not only their unused permits but the technology itself. Furthermore, trading systems that allow unused
permits to be saved, or "banked," for future use encourage the early
adoption of unanticipated technological improvements that lower the
cost of emissions controls. These features lower the cost of emissions
reductions still further.
Economists have identified some other key features of successful
emissions permit trading programs. First, firms should perceive that
owning a permit is like owning any other asset. A firm will purchase
a permit only if it expects that the permit conveys a legitimate right
to emit. Similarly, a firm will reduce emissions in order to sell unused
permits only if it believes that the permit will be valuable to other
firms. Thus, if there is a risk that the right to emit or the right to



157

trade will be revoked, both the trading price and the volume of permits traded will be depressed, and some of the efficiency gains from
permit trading will be lost. Of course, the government retains its
authority to restrict or revoke trades for legitimate compliance and
enforcement purposes under terms and conditions specified by law.
A second key feature is broad scope: because trading lowers costs,
it should be permitted among all sources of emissions that cause the
same type of environmental harm. Excluding some sources may raise
costs if emissions from these sources can be reduced at relatively low
cost. However, including all sources of a pollutant in the emissions
cap may not always be practical. For example, emissions from natural sources and from other countries may affect our Nation's
environment but be beyond the control of U.S. regulatory authorities.
Even within our borders, measuring pollutant discharges from all
sources may be prohibitively costly, especially when discharges are
dispersed or affected by weather, as is the case with fertilizer and pesticide runoff from cropland. One way to broaden the scope of a
program is to offer firms subject to the emissions cap a credit for emissions if they contract with uncapped sources to reduce their
emissions. So long as a satisfactory means of measuring and verifying
these reductions can be established, this approach can provide further opportunities to lower the cost of meeting environmental
objectives.
To ensure the broadest possible scope for permit trading, permits
should reflect units of environmental damage from emissions, not
necessarily units of emissions. Permit trading then lowers costs by
allowing trades in emissions that differ with respect to location, time
period, chemical, or pathway (by air or by water, for example). If suitable conversion factors can be devised, trades in different emissions
representing equivalent amounts of environmental damage can be
made. This approach could also help prevent local environmental "hot
spots" from developing. Suppose, for example, emissions from an area
far upwind of a heavily polluted area have half the environmental
effect there of local emissions of the same quantity of the contaminant. Then 2 tons of upwind emissions could trade for 1 ton of local
emissions without changing total effects on the environment.
Likewise, to the extent that different chemicals affect the environment similarly (as, for example, both carbon dioxide and methane
contribute to the global greenhouse effect), the permit trading system
could allow reductions in one pollutant to substitute for reductions in
another by an amount that causes equivalent environmental effects.
Finally, suppose a certain pollutant causes similar environmental
damage whether it is introduced into lakes through the air or by surface water. Then permits for air emissions could be tradable for
permits for water discharges, again encouraging reductions from
those sources with the least costly control opportunities.



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A final key feature of a successful emissions permit trading system
is an effective compliance mechanism that ensures the integrity and
fairness of the system and at the same time ensures that transaction
costs are relatively low. The compliance mechanism will normally
include monitoring and reporting requirements as well as enforcement provisions. Transaction costs include the costs of paperwork,
recordkeeping, notification, and prior-approval requirements for permit trading. Although some requirements are inevitable in operating
a credible trading system, they should be balanced against the need
to keep transaction costs low. High transaction costs could discourage
trading, thus eroding the potential gains from trade, and may make
participation in the program prohibitively expensive for some firms.
Initial Allocation of Permits
A tradable permit system achieves its environmental benefit by
capping pollutant emissions below the level that would otherwise
occur. The costs of reducing emissions are then borne by the firms
responsible for the emissions and (through higher prices) those who
buy their products, as well as by suppliers of inputs such as labor and
capital equipment to these firms. Firms and consumers in related
markets, such as those for substitutes and complements of the goods
produced by the regulated firms, will also be affected.
The government could arrange the initial allocation of permits in
any of a number of ways, for example by auction, by free allocation in
proportion to firms' historical emissions ("grandfathering"), or even
by lottery. Anyone receiving permits may then sell all or some of
them, or use them as needed to keep actual emissions within regulatory requirements. So long as a permit trading system imposes low
transaction costs, the choice of allocation system does not generally
affect the efficiency with which emissions reductions are achieved;
after the permits are first allocated, the trading of permits itself minimizes the cost of pollution reduction. However, the choice of
allocation method does have other consequences. If the method chosen yields revenue to the government, the program presents an
opportunity to lower taxes, such as those on earnings from labor and
investments, without affecting budget balance. Shifting the tax burden in this way, called "revenue recycling," could enhance economic
efficiency and growth as lower taxes increase incentives to work and
save. These economic benefits can significantly lower the net economic cost of reducing emissions.
The allocation system has further implications for who bears the
cost of monitoring and reducing emissions. The extent to which firms
can pass on some of the costs to consumers in the form of higher product prices depends on the degree of competition and the price
elasticities of supply and demand for goods in the markets affected by
the emissions constraint. In some cases, granting free permits to participants in the permit market could go beyond compensating them



159

for their cost share of emissions reductions, leaving them better off
than before the permit system was introduced.

Lessons from the Sulfur Dioxide Program
Practical experience in designing and implementing trading programs for pollution emissions permits is still limited. The highly
acclaimed sulfur dioxide (SO2) program—also called the acid rain program—administered by the Environmental Protection Agency (EPA)
relies on, among other things, a system of tradable permits to reduce
emissions of SO2 from electric utilities. Trading of emissions permits
began in 1992, and to date the program is the only emissions permit
trading program that is national in scope. The SO2 program is being
implemented in two phases. The first phase covers the 110 most heavily polluting electric generating plants. Phase II, beginning in 2000,
will impose a more stringent emissions cap and include a total of
more than 2,000 units. The program has been successful in several
ways: a large number of utilities engage in trading, SO2 emissions
and ambient concentrations have fallen, and the costs of reducing
emissions have been considerably lower than originally forecast.
Why the early cost estimates were higher than the costs actually
realized is a matter of considerable discussion. One contributing factor was a greater-than-expected decline in rail freight rates, which
made low-sulfur coal from the Powder River Basin of Wyoming more
competitive with locally mined, high-sulfur coal in Midwestern markets. Use of low-sulfur coal proved a less costly means of reducing SO2
emissions than the smokestack scrubbers that utilities had anticipated using. A second factor was lower-than-predicted costs of using
scrubbers, in part because of unexpectedly high utilization rates. The
average cost of reducing SO2 emissions using retrofitted smokestack
scrubbers was about $270 per ton in 1995, far below early estimates
of around $450 to $500 per ton.
One measure of the decline in cost relative to expectations is the
trend in emission permit prices (Chart 5-1). Currently, at approximately $100 per ton of SO2, permit prices are well below earlier
estimates of around $250 to $400 per ton. These prices reflect the
short-run marginal cost of reducing SO2. Prices are low partly
because firms, believing that permit prices would be much higher,
overinvested in scrubbers. Average total control costs are likely to be
higher than these short-run marginal costs.
The permit trading program also allows firms to bank unused emissions permits for future use, for example when emissions limits
become more stringent in phase II. By banking, utilities can lower
costs by timing their reductions according to their projections of emissions control costs and permit prices. If firms expect permit prices or
control costs to go up, or if they want to take advantage of newly
available control technology, they can adopt measures to reduce emissions sooner than they otherwise might.



160

Chart 5-1 Sulfur Dioxide Emissions Permit Prices
The sulfur dioxide permit price has fluctuated and fallen over time.
Dollars per ton
160

140

120

100

80

1995
Note: Trades reported by the Emissions Exchange.
Source: Environmental Protection Agency.

1996

1997

Trading programs may not always bring cost savings as large as
those achieved by the SO2 program, nor will they always lead to the
discovery of much cheaper control strategies. Programs that involve
multiple pollutants or international cooperation will necessarily be
more complex. However, the SO2 experience does demonstrate how
such programs offer market incentives to find cheaper ways of reducing emissions, and the flexibility to take advantage of them. Had
regulators simply required all utilities to install scrubbers, utilities
would not have been able to take advantage of the new availability of
cheap, low-sulfur coal, and the costs of pollution abatement would
have been much higher.
Another important lesson from the SO2 program is that efforts to
minimize transaction costs help ensure the successful operation of
markets for pollution permits. But even so, it takes time to develop
the institutions needed to facilitate trading and instill confidence in
the value of credits so that markets run smoothly. The volume of
trade in the market for SO2 permits, a measure of the potential gains
from such trade, started out quite small but has grown rapidly as utilities gained experience with the program. In addition, increased
trading volume and the annual public permit auctions tightened the
range of market prices for permits. In the program's fifth year about
7.9 million allowances were traded, up from 900,000 allowances in
the second year (Chart 5-2).
We now turn to three other areas where the Administration is seeking to improve the environment in a cost-effective manner:



161

Chart 5-2 Volume of Sulfur Dioxide Emissions Permit Trades
Permit trading increased considerably after the first few years of the acid rain program.
Million tons traded

10

4 -

2 -

0
1994

1995

1996

1997

Note: Data show the volume of trades among firms.
Source: Environmental Protection Agency.

attainment of the new air quality standards, policies to address global climate change, and programs to reduce water pollution from
agriculture.
AIR QUALITY STANDARDS
Air pollution has been linked to a variety of health problems ranging from decreased lung function to increased mortality risk. These
adverse health effects are a classic externality: the emitter does not
bear the full cost of its actions. Under the Clean Air Act, the EPA must
periodically review, and may revise as appropriate, national air quality standards for pollutants. State agencies are largely responsible for
developing programs (subject to EPA approval) to meet these standards. In July 1997 the EPA issued a more stringent standard for
ground-level ozone and a new standard for fine airborne particulate
matter. Under the act, these standards must be set so as to protect
public health, with an adequate margin of safety. Courts have confirmed the EPA's interpretation of this to mean that consideration of
costs or feasibility is excluded in setting the standard. However,
under the President's policy the EPA is to implement these healthbased standards cost-effectively.
Efforts to meet air quality standards have traditionally focused on
controlling emissions within "nonattainment areas"—mostly urban
areas where concentrations of pollutants exceed the standard.
Although some States—California, for example—have set up trading



162

programs or used other market mechanisms to reduce the costs of
compliance with air quality standards, most rely on traditional prescriptive approaches to controlling pollution. The Administration's
plan for achieving the new air quality standards departs from these
traditional approaches by designing regional strategies to complement local efforts, and by encouraging the development of nitrogen
oxides (NOX) trading programs among sources in different States.
Regional Strategies and Market-Based Approaches
Studies of air quality have found that high ground-level ozone concentrations are not just a local problem: under certain weather
conditions, ozone and NOX can travel hundreds of miles and contribute
to nonattainment of standards in downwind areas. Under traditional
regulatory approaches, nonattainment areas would have to make
costly emissions reductions within their borders even if upwind
reductions that would have similar environmental impact were available at lower cost. To address this problem, the plan for implementing
the new standards will expand the geographic scope of the program.
Under the Clean Air Act the EPA has the authority to require emissions reductions in any State that significantly contributes to
nonattainment outside its borders. In November 1997 the EPA proposed a regional strategy that would require 22 Eastern States and
the District of Columbia to reduce NOX emissions by an average of 35
percent during May through September (when ozone levels are highest) by 2007. Reductions in NOX emissions, apart from reducing
ground-level ozone, may also reduce excess nutrients in waterways
and the formation of airborne particles linked to adverse health
effects. The design of a cost-effective regional strategy that contributes
to attaining and maintaining the new standards will require careful
attention to the effects of emissions on air quality. Later this year the
EPA will also propose a rule to facilitate trading of NOX emissions
reductions among the States covered by the regional program.
Designing a Trading Program for Nitrogen Oxides
In designing a trading program for NOX, the EPA faces a number of
challenges. These include ensuring adequate scope for the trading
program, ensuring that trading does not adversely affect the environment, and providing for necessary accountability and compliance.
As discussed above, the scope of trading programs like the NOX program is an important determinant of their cost-effectiveness. As more
emissions sources are included in the program, the increased opportunity to trade emissions permits tends to lower the cost of achieving
a given level of emissions reduction. Utilities currently account for
only about 30 percent of NOX emissions, compared with about 65 percent of SO2 emissions (Chart 5-3). Transportation accounts for 49
percent and nonutility combustion for 18 percent of NOX emissions.




163

Chart 5-3 Sources of Nitrogen Oxides Emissions in 1995
Vehicles are the principal source of nitrogen oxides emissions.

Electric utilities
29%

Other 1%
Industrial
processes
4%

Transportation

«_^^_^^^^M_HH^»>

49%

Nonutility
combustion
18%

Note: Nonutility combustion includes residential and commercial heating.
Source: Environmental Protection Agency.

Thus, extending NOX trading to nonutility sources could reduce costs.
However, the scope of the program may be limited by the need to
ensure accountability. For example, some smaller sources have considerably lower control costs than electric utilities, but their claimed
emissions reductions may be more costly to monitor.
Including more sources from different sectors in the trading program may also have desirable distributional effects. Utilities are
likely to pass the cost of compliance on to consumers in the form of
higher electricity prices, and low-income households spend a higher
share of their income on electricity bills than do households near the
median income. Moreover, broader scope can decrease the average
cost of pollution abatement, reducing the burden on all parties,
including the poor.
Another challenge in designing a trading program for NOX within
the context of the regional ozone reduction strategy is to maintain
broad geographic scope while ensuring that trading does not result in
significant adverse environmental effects. The goal of this strategy is
to improve air quality in nonattainment areas cost-effectively. In its
simplest form, the problem of pollution transport can be thought of in
terms of a single downwind nonattainment area that is affected by a
number of upwind pollution sources located at varying distances from
it along a line indicating wind direction. In this case, sources that are
farther upwind will have less impact on the air quality of the area
than sources that are closer, all other things being equal, and such
differences may be as large as 10 to 1. It might then appear that emis


164

sions trading could undercut the effectiveness of pollution controls if
it resulted in shifting emission reductions farther upwind. Trading
ratios that weight the reductions made at different sources according
to their distance from the downwind nonattainment area might be
considered to address this problem. In reality, however, there are a
large number of nonattainment areas spread out over the region, and
several different weather patterns and wind conditions characterize
the ozone pollution episodes that the program is trying to remedy.
Sources affect multiple nonattainment areas in a variety of directions
from them, and it affects any single nonattainment area differently
under different weather conditions. The polycentric nature of this
problem complicates the identification of a unique and stable set of
trading ratios that would work for all relevant cases. Thus, striking
the proper balance between achieving the cost savings from larger geographic scope and limiting the potentially significant adverse
environmental effects of trading is an ongoing challenge.
Like most air pollution control programs, NOX trading programs
would require an estimate of emissions from each regulated source in
order to ensure compliance. The estimation method can have significant implications for cost-effectiveness, both directly, through the cost
of performing the estimate, and indirectly. One indirect implication is
that more costly requirements may limit the number of sources that
could meet the estimation requirements and participate in trading,
and thereby raise costs. On the other hand, a more reliable estimation
method may offer regulators and sources greater confidence in the
permits, and thereby increase the willingness of sources to buy them
or offer them for sale. For example, the SO2 program requires continuous emissions monitoring to provide precise information on
emissions. Such monitoring is expensive and impractical for many
smaller sources and thus may effectively exclude such sources from
participating. But such precise monitoring may not always be necessary. Methods for estimating emissions that provide unbiased,
although less precise, estimates of emissions may be accurate enough
to ensure accountability.
CLIMATE CHANGE
Climate change is a global environmental externality: warming of
the earth's surface results from the accumulation of greenhouse gases
from myriad sources worldwide, none of which presently pay the cost
to others of warming's ill effects. The Intergovernmental Panel on
Climate Change, jointly established by the World Meteorological
Organization and the United Nations Environment Programme, concluded in 1995 that "the balance of evidence suggests that there is a
discernible human influence on global climate." Current concentrations of carbon dioxide (SO2), methane, nitrous oxide (N2O), and other
so-called greenhouse gases have reached levels well above those of



165

preindustrial times. Of these, CO2 is the most important: net cumulative CO2 emissions resulting from the burning of fossil fuels and
deforestation account for about two-thirds of potential warming from
changes in greenhouse gas concentrations related to human activity.
If growth in global emissions continues unabated, the atmospheric
concentration of CO2 will likely double, relative to its preindustrial
level, midway through the next century.
The accumulation of greenhouse gases poses significant risks to the
world's climate and to human well-being. Potential impacts include a
rise in sea levels, greater frequency of severe weather events, shifts
in agricultural growing conditions from changing weather patterns,
threats to human health from increased range and incidence of diseases, changes in availability of freshwater supplies, and damage to
ecosystems and biodiversity.
Climate change is a complex, long-term problem requiring global
cooperation and a long-term solution. No single country has an incentive to reduce emissions sufficiently to protect the global environment
against climate change. Even if the United States sharply reduced its
emissions unilaterally, greenhouse gas emissions from all other countries would continue to grow, and the risks posed by climate change
would not be significantly abated. Since many of these gases remain
in the atmosphere for a century or more, the climatic effects of actions
taken today will primarily benefit future generations. But delaying
action to reduce greenhouse gas emissions until the disruptive effects
of climate change become widespread will considerably reduce the
options for remedial or preventive measures.
The Framework Convention on Climate Change
The threat of disruptive climate change has led to coordinated
international efforts to reduce the risks of global warming by reducing emissions of greenhouse gases. The first international agreement
to address global warming was the Framework Convention on
Climate Change signed during the Earth Summit in Rio de Janeiro in
1992. This convention established a long-term objective of limiting
greenhouse gas concentrations and encouraged the established industrial countries to return their emissions to 1990 levels by 2000. Since
then it has become clear that the United States and many other participating countries will not meet this goal.
To address the lack of progress among many industrial countries
toward meeting this first target, the United States and approximately 159 other nations, in negotiations held in Kyoto, Japan, last
December, agreed to take substantial steps to stabilize atmospheric
concentrations of greenhouse gases. The Kyoto agreement, which
requires the advice and consent of the Senate, would place binding
limits on industrial countries' emissions of the six principal categories
of greenhouse gases: CO2, methane, N2O, sulfur hexafluoride, perfluorocarbons, and hydrofluorocarbons. Each industrial country's "1990



166

baseline" is actually based on its 1990 emissions of CO2, methane, and
N2O and its choice of 1990 or 1995 levels of the other three categories
of gases. The United States agreed to a target of 7 percent below 1990
levels over 2008-2012. To meet that target, net U.S. emissions of
greenhouse gases—all emissions minus removals of CO2 by certain
forest activities such as planting trees—must average no more than
1,484 million metric tons of carbon equivalent per year during that
period (Chart 5-4). The targets for the European Union and Japan are
8 percent and 6 percent below 1990 levels, respectively. Australia, New
Zealand, Norway, Russia, and Ukraine all have less stringent limits.
In sum, over the period from 2008 to 2012, the industrial countries are
Chart 5-4 U.S. Greenhouse Gas Emissions, Actual and Projected
The U.S. emissions target under the Kyoto agreement is about 25 percent below
current projections in 2008-2012.
Billion tons of carbon equivalent
2.5

Projected emissions
without Kyoto agreement

2.0
All greenhouse gases

1.5 .
Carbon dioxide

Kyoto emissions target for the
U.S. is an annual average of
1.484 billion tons during 2008-2012.

1.0

nil i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i I
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

Notes: All greenhouse gases include carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. Carbon equivalence is
calculated assuming a global warming potential over a 100-year time horizon. Targets can be
met through forest activities that remove carbon from the atmosphere and international permit
purchases and credits in addition to domestic emissions reductions.
Sources: Department of Energy, United Nations Framework Convention on Climate Change,
and U.S. Climate Action Report 1997.

expected to reduce their average emissions of greenhouse gases to
about 5 percent below their 1990 levels.
The Kyoto agreement provides opportunities for the industrial countries to trade rights to emit greenhouse gases with each other. They
may also invest in "clean development" projects in the developing
world and use these projects' certified emissions reductions toward
meeting their targets. Both of these mechanisms allow for emissions
reductions to occur where they are least expensive. Many of the details
of these provisions will be worked out in subsequent negotiations.



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Emissions Permit Trading for Greenhouse Gases
One component of the Administration's climate change proposal,
announced last October by the President, is a domestic emissions permit trading program for greenhouse gases starting in 2008. As in the
similar program for SO2, permit trading would allow emissions targets to be met at a lower cost than under a traditional regulatory
approach that sets fixed limits on individual firms' emissions.
As previously discussed, one consideration in designing an emissions permit trading program for greenhouse gases is how initially to
distribute permits. The method of initial allocation would not generally affect the efficiency with which emissions reductions are
achieved, but would have significant distributional implications.
Another issue is where, in the marketing chain of products responsible for greenhouse gas emissions, permits would be required. One
approach, called the permit-to-market approach, would impose the
emissions limits at the point of first sale of the commodities responsible for greenhouse gases. In the case of SO2 emissions, permits would
be required for the sale of fossil fuels and specified in terms of the
amount of SO2 released in their combustion. The requirement would
be imposed at the wellhead or the refinery (in the case of oil or natural gas), at the mine (in the case of coal), or at the port of entry (in
the case of imported fossil fuels). Alternatively, a permit-to-emit
approach would issue permits to consume these fuels or to sell products, such as automobiles, that do so. A hybrid of the two approaches
may also be possible.
The design of an effective greenhouse gas permit system needs to
take several other issues into account. First, a sufficient number of
participants must be included in the domestic permit market to
ensure that the market is competitive and efficient.
Second, the system should include a monitoring mechanism that
assesses compliance in the most cost-effective manner possible. In
the case of a permit-to-market system, since the amount of SO2 emitted per barrel of oil or ton of coal consumed is relatively fixed, the
task of measuring SO2 emissions is straightforward. Moreover, for
accounting purposes firms already collect information and keep
records about their fuel transactions. Under the permit-to-emit
approach, monitoring would likely involve a more complex combination of emissions calculation and measurement for all regulated
greenhouse gas emitters.
Third, a permit system that would allow trades across all sectors of
the economy would minimize total cost. If, for example, the incremental cost of reducing emissions is much lower in electric power
generation than in transportation, one could reduce the cost of meeting the reduction target by allowing permit trading between the two
sectors. The permit-to-market approach would generally allow trades
across sectors. The permit-to-emit approach could also yield the same
result, depending on how it is implemented.



168

Timing Flexibility in Meeting Emissions Reductions
Flexibility about when emissions reductions take place can further
lower the cost of reducing greenhouse gas emissions. A system that
allows participants to borrow emissions permits from the future or to
save unused permits for future use would take advantage of differences in cost abatement opportunities across time.
Three features of the Kyoto agreement contribute to timing flexibility. First, the target for emissions reductions is based on a 5-year
commitment period. For example, the target set for the United States
of a 7-percent reduction in emissions below 1990 levels is specified as
an annual average over 2008-2012. By averaging over 5 years instead
of requiring the United States to meet the 7-percent target each year,
the agreement provides flexibility in the timing of reductions that can
lower costs, especially given an uncertain future. Averaging can
smooth out the effects of short-term events such as fluctuations in the
business cycle and energy demand. It can also lessen the impact of a
year with a hard winter, when energy demand, and thus emissions,
would increase. Further, if firms anticipate that a new technology will
soon be available that lowers the cost of reducing emissions, they
could emit more greenhouse gases in the early years of the period and
less after the technology becomes available. Another advantage of
this approach is that it may avoid forcing a costly rapid turnover of
capital stock for electricity generation.
The Kyoto agreement allows countries to bank unused emissions
rights from one commitment period for use in the next. Should investments in research and development yield some pleasant surprises in
the form of cleaner and more efficient technologies, banking will
encourage the early adoption of these technologies in order to save
unused emissions permits for future periods when the costs of emissions abatement may be higher.
In addition to banking across commitment periods, countries may
bank certified emissions reductions obtained through the "clean
development mechanism" discussed below. Countries may use emissions reductions achieved through this mechanism over the
2000-2007 period to assist in complying with their targets in the first
commitment period. This provides an incentive for firms in industrial countries to begin investing in energy-efficient technologies in
developing countries before 2008.

International Trading in Greenhouse Gas Emissions
Building on the benefits of the domestic trading program just
described, the Administration proposed in Kyoto an international
trading program for greenhouse gas emissions permits. The Kyoto
agreement established the right of countries assigned emissions targets to meet their commitments by trading among themselves. This
establishment of the right to trade provides the foundation for a trad


169

ing regime among industrial countries, but leaves the details to be
agreed upon later. Since it is easier to reduce emissions in some countries than others, and given that greenhouse gas emissions have
equivalent climate effects regardless of their location, allowing global
trading would achieve climate change objectives at lower cost. Such a
global approach would ideally allow trading among all sources of
greenhouse gases in participating countries and could incorporate
opportunities to remove greenhouse gases from the atmosphere, for
example by issuing emissions credits (which could then be sold to
other firms) for reforestation projects.
International trading could take place among firms that have been
allocated permits through domestic trading programs. For countries
that have no domestically tradable permits because they have opted
for a command-and-control or a tax approach to controlling emissions,
it may still be possible instead to arrange exchanges on a government-to-firm or government-to-government basis.
The setting of binding targets among all countries, together with
international trade in permits, could in principle result in a global
market price for permits for greenhouse gas emissions. For example,
the permit price could be expressed in terms of dollars per ton of carbon equivalent emitted. Firms in all countries would reduce their
emissions until the cost of further reductions exceeded this price, at
which point they would buy additional permits. Large differences in
both the patterns of energy use and the efficiency of energy technologies among countries imply that the cost savings from international
permit trading would be large compared with a system without international trading. Put differently, even in comparison with a system
with full domestic trading of emissions permits, international trading
could substantially lower costs. Some models predict that the incremental cost of reducing CO2 emissions may be as little as one-seventh
of the cost of reductions from domestic trading alone. The gains from
international trade in permits would be particularly large if developing countries were to participate.
The Importance of Developing-Country Participation
Negotiations leading up to the Kyoto agreement sought binding
limits on greenhouse gas emissions among industrial nations.
Developing countries have resisted committing themselves to binding
limits on their emissions because of concern that to do so would
severely constrain their economic growth, and because by far the
greater part of accumulated greenhouse gases in the atmosphere is
the result of past economic activity in the industrial countries (Chart
5-5). However, current forecasts project that greenhouse gas emissions from developing countries will surpass those from industrial
countries around 2030, and even sooner if industrial countries are
successful in limiting their emissions (Chart 5-6). Thus, eventual
curbs on emissions from developing countries are essential in order to



170

Chart 5-5 Cumulative World Emissions of Carbon Dioxide, 1950-95
Industrial countries are responsible for the vast majority of accumulated carbon dioxide
in the atmosphere.

Other OECD
countries
27%

United States
27%

Eastern Europe and
former Soviet Union
22%

Other
developing
countries

16%

Note: Other OECD countries include the countries of the European Union, Australia, Canada,
Iceland, Japan, New Zealand, Norway, Switzerland.
Source: Department of Energy.

Chart 5-6 Projected World Carbon Dioxide Emissions Without Kyoto Agreement
Around 2030, annual carbon dioxide emissions from developing countries are expected
to surpass industrial countries' emissions.
Billion tons of carbon equivalent per year
10
Developing countries

Industrial countries

1990

2000

2010

2020

2030

2040

Note: These projections are consistent with the Intergovernmental Panel on Climate Change
IS92A global projection through 2100.
Source: Unpublished calculations by A. Manne, Stanford University and R. Richels, Electric
Power Research Institute.




171

2050

stabilize the amount of greenhouse gases in the atmosphere.
Moreover, some of the least cost opportunities for reducing greenhouse gas emissions are in developing countries, because those
countries now use energy relatively inefficiently. Moreover, those that
are industrializing rapidly have greater scope to build their industry
around cleaner and more efficient energy technologies and fuels than
do mature economies whose capital stock is already in place.
Failure to involve developing countries in an international agreement limiting greenhouse gas emissions could lead to a more rapid
rate of increase in emissions in those countries than would occur
without any agreement at all. This "leakage" effect of emissions
reductions could come about in any of several ways. As industrial
countries reduce their use of fossil fuels in response to emissions controls, future world oil and coal prices are likely to be lower than they
would be otherwise. This is likely to increase energy consumption in
countries not bound to limit their emissions. U.S. industries are also
concerned about their international competitiveness if some countries
remain outside an international agreement, since factories in those
countries will face lower costs for producing goods that take relatively large amounts of energy to manufacture. Some may be concerned
that energy-intensive industries might choose to relocate to countries
not subject to emissions constraints, although there is little evidence
to suggest that this would pose a significant problem in most industries. For example, energy costs for manufacturing industries average
just 2.2 percent of total costs.
Given the projected growth of developing countries' emissions, the
Administration's position is to seek meaningful participation by key
developing countries in the reduction of greenhouse gas emissions as
a condition for the United States taking on binding emissions reductions. The President has indicated he will not submit the Kyoto
agreement for Senate ratification until there is meaningful participation by key developing countries.

Joint Implementation and the Clean Development Mechanism
To encourage participation by developing countries in the climate
change initiative even before they formally sign on for binding emissions limits, the President has proposed a program known as joint
implementation. This program would provide incentives to developing countries to reduce their emissions of CO2 and other greenhouse
gases. The Kyoto agreement embraces the President's proposal in its
designation of a "clean development mechanism" (CDM): U.S. companies that undertake projects that reduce greenhouse gas emissions in
developing countries could count those reductions to meet their commitments. Institutionalizing key elements of joint implementation
through this mechanism would encourage firms in the United States
to transfer a larger volume of cleaner and more energy-efficient technology to developing countries, especially in the electric power



172

generating industry, while providing substantial cost savings to U.S.
firms. It would also provide incentives to expand forests, which
absorb CO2. In addition to the CDM, the agreement allows industrial
countries to undertake joint implementation projects with each other.
A key issue is how to ensure that credits are awarded for actual,
additional emissions reductions, and not simply for projects that
would have been carried out anyway. The Kyoto agreement requires
that emissions reductions occurring through the CDM be certified to
provide real, measurable, and long-term benefits related to the mitigation of climate change, and that the emissions reductions achieved
are additional to any that would occur in the absence of these projects. Future negotiations will focus on developing the rules for
certifying and enforcing projects undertaken through the CDM.
Promoting Clean and Efficient Energy Technology
The President's plan to reduce greenhouse gases commits new
resources to energy research and programs to promote the wider use
of cleaner and more energy-efficient technologies in the U.S economy.
The emissions permit trading system for greenhouse gases is also
likely to encourage more private research and innovation, as companies seek to lower the cost of meeting environmental targets.
Government support for science and technology in general addresses an important market failure. Promising new technologies often fail
to attract sufficient private sector interest if their technical risk is
high and if they create economic and social benefits beyond what the
investing firms can capture for themselves. Economic studies have
shown that private firms, despite intellectual property protection, are
able to appropriate only about half of the total economic benefits from
their own research. This gap between social and private returns may
be particularly large for research on cleaner and more efficient energy technology, when the environmental externalities associated with
energy use have not been fully addressed by environmental and other
regulatory policies.
The appropriability problem is not limited to basic research but
frequently extends to precommercial research as well. Precommercial
research is research that is close to yielding new products or processes, but still far enough away from commercialization that further
development poses a substantial financial risk. New renewable energy industries (wind power, solar energy, and biomass energy, for
example) may face particularly formidable constraints to commercialization. First-of-a-kind products often have high unit costs.
High-volume production provides economies of scale, generates experience in manufacturing and operation, and opens new opportunities
for incremental technological improvements—all of which may lead to
lower costs.
The President's commitment to increase Federal support for new
energy technology seeks to reverse a trend of declining national



173

investment in energy research (Chart 5-7). One reason investment in
energy research has declined since the late 1970s is falling or stagnant energy prices, which reduced the economic incentive to develop
new sources of energy and improve efficiency. In the 1990s it is primarily private sector energy research that has declined. Increasing
government investment in energy research is likely to be complemented by more private research: public research on longer term,
basic scientific studies can open up new, profitable opportunities for
applied research and commercial development by the private sector.
An increase in support for research that raises the rate of progress in
developing cleaner and more efficient technologies would lower the
costs of reducing greenhouse gas emissions.
Chart 5-7 Energy Prices and Private Energy Research
Energy prices and private investment in energy research have followed similar trends
since the 1970s.
Index, 1982 = 100

Billions of 1996 dollars

6

110

100 -

- 5

Private research spending
(right scale)

- 3
Relative price of energy
(left scale)

1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
Note: The relative price of energy is the ratio of the PPI for processed fuels to the PPI for all
intermediate materials.
Sources: Department of Energy and Department of Labor (Bureau of Labor Statistics).

1996

The President's proposal also includes programs and tax incentives
to encourage the wider adoption of existing technologies that can
decrease greenhouse gas emissions. Of particular importance are
technologies that reduce consumption of fossil fuels. In addition to
encouraging clean and renewable energy sources, these programs will
provide economic incentives and other forms of assistance (such as
better information) for improving energy efficiency in industry, transportation, and homes. The President's plan to use Federal
procurement policy to reduce greenhouse gas emissions is another
way to increase market penetration of these technologies.
Until an emissions cap and trading system are in place, however, the
economic incentive to use these technologies may be low, because at
present the price of energy does not reflect the environmental cost of
174




CO2 emissions. This environmental externality results in a market failure to make the most efficient use of new technologies that lower
emissions. Many of these technologies are expected to be more profitable once a CO2 emissions cap is in place and the environmental costs
associated with energy use are more fully reflected in energy prices.
There is also evidence that many households and businesses fail to
invest in some home and building improvements that appear profitable even at today's energy prices. More efficient home refrigerators
and air conditioners, fluorescent lighting, and "low-E" glass for windows, for example, are available on the market and, by some
accounts, offer potentially large energy and cost savings. By spending
money now on these more efficient technologies, proponents argue,
many consumers could quickly recoup their investments in the form
of lower energy bills. But if such investments are in consumers' own
economic interest, why don't they invest in them on their own?
Insufficient knowledge and information may be a key factor: consumers may not be aware of new technologies that could reduce CO2
emissions and save them money on energy bills, or may not be convinced of the economic benefits that could be realized from adopting
them. Lack of up-to-date information on recent technological developments may also lead people to overestimate technical risks—they
may doubt whether a new technology is as reliable as current methods, particularly if the new technology is not yet widely used.
On the other hand, even if a new technology is beneficial for many
users, it may not be so for everyone. People differ in their willingness
and ability to make investments today in order to realize savings in
the future, especially if the initial expense is relatively large. In addition, some consumers may value a product for attributes other than
its energy efficiency—for example, its convenience, size, or design.
And not all consumers may achieve all of the promised energy savings, depending on the climate of the region where they live. These
considerations reflect the great diversity of needs and preferences
among businesses and households and help explain why new technologies may diffuse slowly over time.
Better information about the potential cost savings from improving
energy efficiency may increase the use of technologies that already
meet the market test—that is, that meet consumer standards for
quality and dependability and offer real economic benefits. The
Federal Government is working with the private sector to promote
wider use of such technologies. For example, through the Green
Lights program, the EPA provides technical information to private
companies on the economic and environmental benefits of switching
to new, fluorescent lighting systems. Energy Star is another EPA program, in which innovative products that use significantly less energy
than older generation products are allowed to bear a special, readily
identifiable label. More rapid diffusion of new emissions-saving technologies would make an important contribution toward meeting the
goals of the Kyoto agreement.
175




NON-POINT SOURCE WATER POLLUTION
Protecting the quality of the Nation's water resources has been a
major component of U.S. environmental policy since passage of the
Clean Water Act in 1972. The act regulates water pollution from point
sources—discrete, concentrated sources such as the discharge from
factories and municipal sewage treatment plants—but not from nonpoint sources. Non-point source water pollution is the entry of
pollutants into a body of water from a broad area, such as a cultivated field or the streets and lawns of a city. In recent years attention
has increasingly turned to pollution from these non-point sources,
especially runoff from agricultural operations. Since environmental
regulation has already led to extensive control of point sources of
water pollution, further improvements in water quality are likely to
be less expensive if they address non-point sources. Recently, the
Administration has given renewed emphasis to non-point source
water pollution (Box 5-1).
Agriculture is one of the principal sources of non-point source pollution. The environmental problems caused by agriculture stem

mainly from the runoff of soil, agricultural chemicals, and livestock
waste into lakes, rivers, and estuaries. These pollutants may cause
undesirable algal blooms, impair recreation and fishing, and adversely affect wildlife. Pesticides and nutrients can also leach into
groundwater, threatening drinking water supplies. Soil erosion from
U.S. farmland raises the cost of municipal and industrial water use,
shortens the life span of dams and hydroelectric projects, damages
aquatic habitat, and can contribute to flooding. These off-farm damages from soil erosion have been estimated at $7 billion to $25 billion



176

per year. In 1994 the EPA estimated that at least 6 percent of all U.S.
river miles and 21 percent of lake surface areas were water-quality
impaired (that is, unsuitable for their designated uses). The same
study identified agriculture as a major contributor to impairment in
about 60 percent of those river miles and 50 percent of those lakes
and reservoirs.
Since these environmental effects are largely imposed on other
users of the water resources, and not on the farms that caused them,
agricultural non-point source water pollution is another example of
an environmental externality that market forces alone are unlikely to
solve. In a world of perfect and costless information, the efficient policy response would be to monitor the erosion and runoff from each
farm and reduce it to the point at which the incremental cost of further reduction equals the incremental benefit to the environment.
This textbook approach, however, is often unworkable because the
cost of assessing the pollution caused by each farm can be prohibitive.
Instead, public policies to address non-point source pollution from
agriculture tend to focus on farmers' choice of farming practices,
which is much more easily observed.
Non-point source pollution from agriculture, like many other environmental problems, raises the policy question of whether and how to
encourage the adoption of environmentally friendly technologies.
Examples of such practices include conservation tillage, integrated
pest and nutrient management, precision farming, and buffer zones
along waterways. These practices may actually be profitable for some
farmers to adopt. As discussed above in the context of energy technology, direct subsidies for the adoption of existing technology
improve ecomonic efficiency when the benefits to society at least
equal the costs, including the social cost of subsidies. This section
examines three policy approaches that have been used to encourage
the adoption of farming practices that reduce non-point source pollution: incentive programs, regulations, and emissions trading programs.

Incentive Programs
The U.S. Government has implemented several programs that provide incentives to farmers and ranchers to limit their impacts on the
environment. These include support for State programs through
Section 319 of the Clean Water Act and several important components
of the 1996 Federal Agriculture Improvement and Reform (FAIR) Act.
Three programs account for the bulk of Federal spending on environmental incentive programs for agriculture: the Conservation Reserve
Program (CRP), begun in 1985; the Wetland Reserve Program (WRP),
initiated in 1990; and the Environmental Quality Incentives Program
(EQIP), established by the FAIR act. The CRP and the WRP (both of
which were reauthorized by the FAIR act) establish voluntary contracts with producers in which they agree to adopt certain practices




177

on their land, including establishing long-term conservation easements and taking it out of production for a period of years. In return,
the government provides incentive payments, subsidies for the cost of
the practices, and technical assistance as needed. EQIP provides
assistance for environmental and conservation improvements on the
farm. The FAIR act requires new acres enrolled in the CRP to meet
higher environmental and conservation criteria than land enrolled
under earlier versions of the program, and funds for EQIP are intended to maximize the environmental benefits per dollar expended and
help farmers and ranchers meet national, State, and local environmental standards. Other program provisions, such as Conservation
Compliance, require farmers who cultivate highly erodible land to
adopt conservation practices or else forgo benefits from other agricultural programs. All these programs differ significantly from
traditional regulation in that they are voluntary: no requirements
apply to producers who do not wish to participate.
Efforts to remove environmentally sensitive land from agricultural
production and encourage the adoption of resource-conserving farming
practices have met with much success in reducing soil erosion from
cropland. Between 1982 and 1992, erosion from cropland is estimated to have declined by about one-third.
Regulatory Control of Agricultural Pollution
The Coastal Zone Act Reauthorization Amendments (CZARA)
authorized the first federally mandated program requiring specific
measures to address agricultural runoff as well as four other major
non-point sources of water pollution. The EPA and the Department of
Commerce's National Oceanic and Atmospheric Administration
(NOAA) issued Federal guidelines for implementing CZARA in 1993.
The guidelines set out certain requirements that State coastal nonpoint source pollution control programs must meet, but they allow
States to tailor their programs to their own environmental concerns,
geographic conditions, site characteristics, and farmer preferences.
These programs, currently in the approval process, identify the set of
management measures that may be required of individual farms in
the State. This process is designed to provide enough flexibility to
allow farmers and technical assistance providers to select the practices appropriate for a given farming operation, and to help keep farm
compliance costs low. Existing sources of pollution, such as most agricultural sources, will have 3 to 8 years to comply from the time their
State program is approved, adding further flexibility and cost-saving
opportunities in the timing of implementation.
Trading Water Pollution Credits
To achieve water quality standards cost-effectively, several State
and local governments have experimented with programs that are




178

similar in principle to the air pollution trading programs discussed
earlier, but do not involve marketed permits as such. Much like the
joint implementation projects discussed in the context of climate
change above, these programs allow point sources of pollution to meet
environmental standards by paying non-point sources (such as farms)
to adopt practices to reduce pollution. As already noted, it may be considerably less expensive to attain the same environmental outcome by
reducing pollution from non-point sources than from point sources.
But because verifying pollution reduction from farms is prohibitively
expensive, the agencies administering these programs rely on verifying that farmers have adopted land management practices that are
linked with pollution reduction, assessing credits based on the estimated amount of pollution reduced, and certifying the "trades." Most
of these programs focus on fertilizer and animal waste pollution,
including nitrogen and phosphorus compounds.
Cost savings from such exchanges, if fully implemented, could
reach several billion dollars annually. But few trades have occurred to
date. For example, the Dillon Reservoir program in Colorado provides
opportunities for trading between point and non-point sources. Early
estimates expected significant cost savings from trading for the four
municipal sewage treatment facilities, but few trades between a point
source and a non-point source have occurred since 1984.
The Tar-Pamlico Basin program, implemented in North Carolina in
1989, is not strictly a trading program. Rather, it allows an association of 14 point sources to average all of the members' nutrient
discharges under one cap. Then, if total discharges exceed the cap, the
association must contribute to a State program that subsidizes management practices on farmland to reduce non-point source pollution.
To date, the association has not exceeded its cap, so no contributions
to the non-point program have been required.
Trading has been limited both because the scope of trading opportunities has been constrained and because transaction costs have
been high. To ensure that all sections of water bodies meet environmental standards, trading is often restricted to a local watershed or
certain stretches of a river. Other policy constraints on trades may
further limit the potential gains from discharge credit trading. For
example, point sources are often required to adopt specific pollution
control technologies before they may consider trading. This may limit
the discharge reductions that they buy from other sources and reduce
the potential gains from trading. In the Tar-Pamlico program, point
sources receive only one unit of pollution credit for every two units of
pollution reduction they buy from non-point sources. By explicitly
requiring nonequivalent emissions to be traded, the program increases the cost of participation. Moreover, these point sources must pay a
10-percent administrative surcharge for every pollution credit they
purchase. Finally, programs have often failed to provide assurances



179

that the credits will continue to be honored in the future. This reduces
the economic value of the credits and is another impediment to trading.
Although economic theory indicates that the costs of complying
with environmental regulation can be significantly reduced through a
trading system, the limited experience with water pollution credit
trading has not yet provided substantial cost savings. So far the small
size of the markets for trades, both geographically and in the number
of potential traders, and the regulatory constraints on trades have
generated extra costs that make trading less attractive.

IMPROVING HEALTH CARE
AND HEALTH INSURANCE MARKETS
Without regulation, health insurance markets do not function well.
A variety of policies have been implemented or proposed to address
these shortcomings. This section discusses policy initiatives that this
Administration has promoted to help improve the functioning of these
markets. The Health Insurance Portability and Accountability Act
(HIPAA) of 1996 helps workers maintain continuous insurance coverage by limiting exclusions of preexisting conditions, whereby insurers
do not cover previously diagnosed conditions for some period, and by
expanding guaranteed issue and renewability requirements, which
prohibit insurers from denying coverage or renewal on the basis of
health status or claims experience. The President's 1999 budget
includes policies that improve access to affordable health insurance
for people aged 55-65 and for small businesses. In addition, the
Administration and the Congress are considering legislation to help
ensure that consumers have enough information about health insurance plans and prescription drugs to make informed decisions.
Finally, new initiatives to discourage teenage use of tobacco products
are aimed at protecting those who may lack the maturity to make
decisions about risky behaviors like smoking.

IMPROVING ACCESS AND PORTABILITY
Adverse Selection in Health Insurance Markets
A variety of concerns about health insurance markets relate to the
problem of adverse selection, the danger that only those persons most
likely to need insurance will purchase it. Adverse selection in insurance markets can arise because of asymmetric information: would-be
customers typically know more about their likelihood of incurring
high medical costs than do insurers. If insurance is priced to reflect
the average risk of a particular population (a practice called community rating), some healthier people may choose to go without. The
average risk (or expected medical costs) of the insured pool will then
be higher than that for the whole population, and the insurer will lose




180

money. Insurers will, therefore, seek ways to ensure that they do not
attract a group that is particularly unhealthy. For example, they may
avoid offering comprehensive coverage (by limiting access to specialists or not covering chronic conditions, for example). They may also
engage in targeted marketing or change their health plans to appeal
to healthier persons and discourage sicker ones from enrolling, by
adding benefits, such as health club discounts or coverage for wellbaby care, that are more attractive to persons in good health. In
addition, in an unregulated market insurers may explicitly exclude
higher risk individuals through exclusions of preexisting conditions
or by simply denying coverage. Thus, adverse selection in health
insurance markets can result in underinsurance among both younger,
healthier individuals and the very sick.
Adverse selection is reduced when insurers can insure large
groups of people whose purpose in associating is unrelated to their
preferences for health insurance. Insurers can be reasonably sure
that the members of such groups are not exceptionally unhealthy on
average, and healthy people are not likely to leave the insured pool.
Employee groups, particularly those of larger organizations, are a
natural pool for spreading risk, and this, in part, explains why
employer-based insurance is widespread. The lower premiums
offered to such groups, the tax-preferred treatment of employer-provided insurance, employer subsidies, and the difficulty of obtaining
coverage on the individual market all encourage healthy workers to
purchase insurance through their employers, making adverse selection a much less serious problem.
Small firms might like to pool together to offer insurers larger
risk pools and reduce administrative costs, but these pools may fall
apart, as firms with healthier employees are likely to want to leave
the pool to seek lower premiums on their own. The prevalence of
employer-based insurance may also discourage self-employment or
employment in smaller firms, where obtaining affordable insurance
is more difficult.
Even if one could correct the problem of asymmetric information
directly, by giving insurers the same information that their customers
have, this may not lead to a better outcome, for two reasons. First,
there may be a "missing market" for longer term contracts for health
insurance. Most health insurance contracts are for 1 year, but purchasers might prefer to buy long-term insurance to avoid the
possibility of high premiums or cancellation should they become sick.
In addition, the government cares not only about efficiency and market failures in health insurance markets, but also about improving
access to care. If insurers had more information, they could choose not
to cover some individuals or could charge higher premiums, which is
likely to reduce insurance coverage and access to care.




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Employer-Based Insurance and "Job Lock"
Health insurance coverage in the United States is closely tied to
employment: about 90 percent of the privately insured have employment-related coverage. Thus, changing jobs often means changing
health plans. Before HIPAA, workers starting a new job often had to
wait to qualify for coverage of preexisting conditions. In some cases,
new hires faced waiting periods for any health insurance. However,
one important drawback of employer-based insurance is reduced
mobility between jobs, or "job lock." Waiting periods or preexisting
condition exclusions make it difficult to ensure continuity of insurance coverage when changing jobs. This can be a barrier to job
mobility, particularly for those with chronic conditions. Evidence on
the extent of job lock is mixed: some studies find little or no effect, but
one study estimates that employer-based health insurance can
decrease job turnover rates by up to 25 percent. When a person
obtains coverage through a new employer, he or she may be subject to
preexisting conditions exclusions or waiting periods under the new
plan. In addition to creating costs for individuals, who may stay with
a particular employer in order to keep health insurance, job lock may
also impose costs on the economy by preventing workers from moving
to those jobs where they are most productive. Policies like HIPAA and
the proposed Medicare buy-in may help improve mobility between jobs.
The Health Insurance Portability and Accountability Act
HIPAA contains a number of reforms designed to improve the operation of individual and group health insurance markets. It helps ease
the transition between jobs and into self-employment and improves
access to insurance for those who lack access to employment-based
insurance and for small firms.
Guaranteed issue and renewability. HIPAA prohibits insurers from
declining to cover individuals who were previously covered by a group
plan and who have elected and exhausted their eligibility for extended coverage under COBRA (the Consolidated Omnibus Budget
Reconciliation Act of 1985), which allows workers to buy into their former employer's plan for up to 18 months. HIPAA also prohibits
insurers from refusing to renew coverage on the basis of health status, claims experience, genetic information, or other related factors.
These provisions can help improve access to health insurance for
small firms and individuals. However, HIPAA imposes no restrictions
on the premiums that insurers may charge, so some individuals or
firms may still be effectively excluded by prohibitively high premiums. In addition, insurers may try to find other ways to avoid selling
insurance policies to high-cost individuals, through more targeted
marketing or plan design as described above, for example. Newspaper
accounts report that some insurers may even be instructing their
agents in how to avoid enrolling higher risk applicants.



182

Limiting preexisting condition exclusions. HIPAA generally limits
exclusion periods for preexisting conditions to 12 months. Some exclusions for preexisting conditions are appropriate, because otherwise
people would have little incentive to purchase insurance when they
are healthy, knowing that they could simply sign up after they get
sick. Thus, it is important to design policies that increase accessibility without exacerbating this free-rider problem. HIPAA addresses
this problem by requiring that individuals have continuous coverage
in order to take full advantage of the limits on preexisting conditions
exclusions. If a person was covered for a particular condition at one
job and then changes jobs or elects to purchase individual insurance,
he or she can "credit" the time covered under the previous plan
against the preexisting condition period in the new plan. For example, someone who had 8 months of coverage could be required to wait
no more than 4 months for coverage at a new job (assuming the
employer offers insurance). In addition, those seeking insurance on
the individual market must have 18 months of creditable coverage
and must have exhausted coverage under COBRA (if eligible).
Insurers offering coverage to these persons may not impose preexisting condition exclusions.
Proposals to Improve Access to Health Insurance
for 55- to 64-Year-Olds
Americans aged 55-64 are one of the more difficult-to-insure populations: they have less access to and great risk of losing
employer-based health insurance, and they are twice as likely as
younger people to have health problems. Many lose their coverage
when they lose their jobs as a result of company downsizing or plant
closings. Still others lose insurance when their retiree health coverage is dropped unexpectedly.
To address these problems, the Administration has proposed three
policies as part of its proposed 1999 budget. First, persons aged 62-64
who lack access to employer-provided insurance would be allowed to
buy into Medicare. The premiums, which would be paid in two
parts—one contemporaneously, the second after turning 65—would
cover the full cost of participation, making the policy self-financing in
the long run. Second, displaced workers aged 55 and older who have
lost their employer-based insurance as a result of job loss could also
buy into Medicare. Third, retirees aged 55 and older whose employer
drops their retiree health coverage would be eligible to buy into their
former employer's health insurance through COBRA. Retirees would
pay a higher premium than do other COBRA participants, to reflect
their higher costs. Each of these options provides a competitive alternative to individual insurance for people in this age group.




183

Voluntary Purchasing Cooperatives for Small Businesses
As described earlier, small businesses are at a disadvantage in purchasing health insurance. To address this problem the Administration
has proposed giving States grants to establish voluntary purchasing
cooperatives for small businesses. Small firms could then pool together to negotiate insurance rates that are more affordable than those
offered to them individually. This policy could help the large numbers
of individuals working for small firms who are presently uninsured.
CONSUMER PROTECTION AND QUALITY
IN THE HEALTH CARE INDUSTRY
Health insurance plans are of two general types: fee-for-service plans
pay providers for each service they perform, whereas managed care
plans (such as health maintenance organizations) usually shift some
financial risk to providers. Between 1980 and 1996, the share of workers enrolled in fee-for-service plans fell from 92 percent to 25 percent,
primarily in response to rising health insurance costs. The expansion of
managed care has helped slow the rate of growth in health insurance
premiums by giving providers a greater incentive to control costs. But
perceptions that the quality of care has suffered in managed care plans
have made managed care the subject of criticism from consumer
groups, the press, and the public. The last few years have seen a flurry
of activity by the Congress and State legislatures, regulatory agencies,
health plans, consumer advocates, and others to define a new set of consumer rights, protections, and responsibilities in response to
consumers' concerns about the changing health care system. Although
managed care has focused new attention on these issues, many of the
concerns raised by these groups—and the actions they propose to
address them—are equally important for traditional insurance plans.
The President's Commission on Consumer Protection and Quality in
the Health Care Industry was established to advise the President on
changes occurring in the health care system and, where appropriate, to
make recommendations on how best to promote and ensure consumer
protection and the quality of health care. The commission submitted a
report, including a Consumer Bill of Rights and Responsibilities, to the
President in November 1997. In addition, the Health Care Financing
Administration (HCFA) has promulgated rules designed to protect
Medicare and Medicaid managed care participants.
How Managed Care Works
Managed care organizations typically contract with a group of hospitals and doctors to care for their enrollees. Enrollees generally must
seek care from providers in the plan's network, although point-of-service plans, which allow enrollees to see providers outside the network,
with higher cost sharing, are growing in popularity. ("Cost sharing"
refers to out-of-pocket payments, such as deductibles and copay


184

ments, required of insured individuals who receive care.) Whereas
traditional fee-for-service plans control utilization mainly through
cost sharing, managed care organizations rely on a number of "supply-side" utilization controls. For example, they may require
enrollees to see a primary care physician, or "gatekeeper," before they
can go to a specialist, or may limit the types of treatments that
providers can offer. Another important feature of managed care plans
is that providers often bear some of the financial risk. For example,
managed care plans may pay providers a fixed ("capitated") payment
for each member or use other mechanisms that give providers financial incentives to limit care.
Promises and Pitfalls in Consumer Protection Legislation
Managed care highlights a new challenge to policymakers, namely,
how to protect consumers and promote their informed choice among
health plans without undermining managed care's ability to control
costs. More employers now offer their employees a choice of health
plans—including managed care plans—and many of these ask
employees to pay more for more expensive coverage. This can encourage plans to operate more efficiently, control costs, and provide
higher quality care, but consumers need sufficient information to
make good decisions about what features they want in a health
plan—and how much they are willing to pay for them. Many of the
activities of the President's commission have focused on addressing
the need for more user-friendly information about health plan features and quality, and for strengthening consumer confidence in the
health care system. In addition, government attempts to micromanage the practice of medicine—whether in the name of cost
containment or in the name of consumer protection—are an unwise
use of regulatory authority and would either waste valuable
resources or run counter to the goal of a quality-focused system.
The commission includes consumers, health care providers, health
insurers, health care purchasers, representatives of State and local
governments, and experts in health care quality, financing, and
administration. In drafting its Consumer Bill of Rights and
Responsibilities, the commission was guided by four principles:
• All consumers are created equal. The rights and responsibilities
outlined by the commission should apply to all participants in the
health care system, including beneficiaries of public programs, government employees, persons with individual policies, and those
with employer-based coverage, including self-funded coverage. In
addition, to the extent possible, these rights should be accorded to
those who have no health insurance but make use of the health care
system.




185

Box 5-2.—Quality Data Collection for Medicare
Managed Care
Hie Health Care Financing Adis&nigteation has promulgated
roles that will enable the agency to collect data on quality of oate
in and beneficiary satisfaction with Medicare managed care plam
The National Committee for Quality Assurance, in coiyimction
with HCFA, industry representethres, other purchaser^ and beneficiary advocate^ has developed 40 quality measures related to the
Medicare imputation. These measures build on the Health Plan
Employer Data and Information Set (HEDIS) developed by the
National Committee for Quality Assurance for the nncler~6§ population. HCFA will piablisfa summary date to help beneficiaries
choose among plans. Quality indicators will also allow HCFA to
ensure that Medicare beneficiaries receive appropriate care from
managed care providers, and will help identify areas for quality
improvement.
Currently managed care plans contracting with Medicare may
have no more than 50 percent of their enmllment from Medicare,
This prwMon was designed to help ensuiB that plans contracting
with Medicare offer service of similar qtialitf to that provided in
the private sector, The Balanced Budget Aet of 1997 eliminated
tMs requirement, and new rules will allow HCFA to use actual
quality data* rather than the 50~pereent role, in deciding which
managed care organisations are eligible to contract with Medicare*
This effort wfll improY® HCFA*s ability to ensure high-quality care
and help beneficiaries make informed health plan decisions* In
addition, mom information about these plans could improve confidence in Medicare managed care, en*»-u?aging more
to enroll in these plans.

Quality first. In considering each proposal, the commission asked
whether it would improve the quality of care and of the system that
delivers that care.
Preserve what works. Some elements of managed care and of feefor-service plans must be changed to protect the rights of
consumers. But each delivery system can also point to elements
that have improved quality and expanded access.
Costs matter. The need for stronger consumer rights must be balanced against the need to keep coverage affordable. Ultimately
costs are borne by consumers and their families through higher
health insurance premiums, higher prices, lower wages, fewer benefits, or less coverage.




186

Some reforms proposed by States and consumer groups would make
managed care plans look more like traditional plans—for example, by
requiring health maintenance organizations to accept all providers or
limiting the use of financial incentives that may encourage physicians
to limit treatment. To the extent that these regulations would prohibit practices that have helped managed care plans control utilization
and spending, they could undermine the ability of health plans to control costs, and could ultimately reduce accessibility and affordability.
However, to the extent that such policies improve the delivery of highquality, efficacious care, they could improve health outcomes and may
help offset cost increases.
Among the rights laid out by the commission is the right of consumers to "fully participate in decisions related to their medical care."
In order for consumers to participate in decisions affecting their
health care, both when choosing a health plan and when considering
treatment, they need information. The commission recommended
that plans should disclose all factors—for example, the method of
provider compensation and the plan's ownership of or financial interest in health care facilities—that could influence providers' advice or
treatment decisions. In addition, "gag clauses" and penalties on
health care professionals who advocate on behalf of their patients
should be eliminated, so that providers can freely discuss all treatment options with their patients, and so that patients can make
decisions based on informed consent.

New Rules for Plans Serving Medicare and Medicaid
In 1996, HCFA adopted regulations limiting the use of some financial arrangements for health plans serving the Medicare and
Medicaid populations. These rules prohibited plans from making payments to providers to limit necessary care, required plans to institute
"stop-loss" provisions—which protect providers from very large financial losses—if the compensation method used places physicians or
groups of physicians at substantial financial risk, and required disclosure of information about arrangements that transfer substantial
financial risk to the health care provider. HCFA also banned the use
of "gag clauses" for Medicare plans beginning in 1996 and Medicaid
plans beginning in 1997. In addition, HCFA has sought new ways to
ensure that Medicare managed care plans provide high-quality care
by collecting data on quality and satisfaction in those plans (Box 5-2).
FOOD AND DRUG ADMINISTRATION REFORM
The Food and Drug Administration Modernization Act of 1997 is
designed to ensure the timely availability of safe and effective new
products that will benefit the public health. The act, which codifies a
number of initiatives taken by the Administration as part of its reinventing government effort, includes important provisions that will



187

establish a clearly defined, balanced mission statement for the Food
and Drug Administration (FDA), improve access to certain experimental drugs prior to their final approval, establish a fast-track
approval process for drugs to treat life-threatening or serious diseases, and reauthorize the Prescription Drug Users Fee Act (PDUFA)
of 1992, increasing the resources available for the drug approval
process.
Why Drug Regulation Is Needed
Even without regulation, drug manufacturers would have some
incentive to distribute honest and accurate information about their
products. If a manufacturer repeatedly releases drugs that turn out
to be ineffective or unsafe, its reputation will suffer, and it may have
more difficulty selling new products in the future. The threat of litigation or a public relations crisis can further discourage drug
companies from marketing unsafe products. However, drug companies are not likely to produce enough information about their
products' safety and efficacy without regulation. The legal system
may not provide adequate consumer protection, and regulation
through litigation may come with high transaction costs. For example, companies could set up corporate subsidiaries to issue new drugs
and shield the parent company from loss of reputation. Government
regulation is then needed to remedy this underprovision of information by evaluating and approving drugs before they may be marketed.
Setting the Standard of Proof
Setting the standard of proof for new drug approvals entails balancing two risks. On the one hand, approval of unsafe drugs may
cause injury or death, and approval of ineffective drugs may crowd
out alternative treatments or increase wasteful medical spending. On
the other hand, denials or delays in approval may prevent sick people
from getting more effective treatment.
The FDA has historically focused primarily on minimizing the first
type of risk (Box 5-3). In the late 1980s, however, the focus began to
shift with respect to drugs for life-threatening illnesses, particularly
AIDS. The FDA instituted a fast-track approval process for these
drugs, and more patients were offered early access to these drugs
before final approval. These policies recognize that the risk that a
drug will prove unsafe or ineffective must be weighed against the
risks of the disease itself. The FDA Modernization Act codifies and
expands upon these reforms and establishes a mission for the FDA
that explicitly emphasizes not only protecting the public health, by
ensuring that products approved by the FDA meet high standards for
safety and efficacy, but also designing a review process that does not
unduly limit innovation or product availability.




188

5*3*—History of Pood and Drug Administration
Regulation of
In 1937 an elbdr of stilfamlamid^ an antibiotic, killed 10? people, most of them eMldrenu This tragedy hastened the
enaetmeM, the following year, of food and drug legislation
already pending: the Federal Pood, Bmg? and Cosmetic Act gave
the PDA authority to regulate cosmetics, preseription druga, and
therapexrtte devices, 'The act required that products be shown to
be safe before they are marketed, During the 1940s and 1950s
the Congress subjected a number of other products^ including
food additives and pesticides, to PDA approval and enacted other
requirements.
In 1962 the sleeping pill thalidomide was linked to serious
birth defects in Europe, Although concerns with thaJidomide
related to safety not efficacy* and the drug had not been
approved to the United States, the scare generated support for
extending the FDA's mandate to determining the efficacy of new
drugs. These events culnnnated in the passage of the 1962 Drug
Amendments, which required drag manufacturers to show that
drugs were not only safe but also effective. The effectiveness
requirement was associated with a rapid increase in total drug
development time (Chart 5-8),
Chart 5-8 Ciinica! Trial and Drug Application Approval Times for New Drugs
New drug development time has trended upward since the 1960s, although drug
application approval time is at an all-time low.
Years

12

Total development time

10

Drug application
approval time

JL
1964

1967

1970

1973

1976

1979

1982

1985

Note: Data are 3-year moving averages.
Source: Tufts Center for the Study of Drug Development, Tufts University.




189

1988

1991

1994

Box .5*4*—The Prescription I>rttg Users Pee Act erf 1992
Between 1080 and 1991 the Congress enacted 34 laws that
placed additional demands on the FDA, Yet the agenc/s budget
resources have not always kept pace with growth in the number
of products it reviews. The Prescription Drug Users Fee Act
(PDBFA) of 1992 helped address this problem by allowing the
PDA to assess fees on manufacturers seeking approval for
drugs, PDUFA also set ambitious performance goals for reducing approval time for new drug applications and required that
the feea not offset current funding.
Although faster NDA approval is important, it represents only
a fraction of the total time necessary to develop and approve
new drugs. Nor do shorter NDA approval times necessarily
translate month for month into shorter total drug development
times. The standard of proof for approval determines how many
trials and how much analysis must be completed and is an
important determinant of the time it takes a drug to travel from
the laboratory to the medicine cabinet. In addition? total drug
development time may rise or fall in response to a variety of
other factors, from the efficiency of laboratory analysis to the
chemical complexity of the drug.
Growth in total development time appears to have slowed nev~
ertheless^ and PDUFA is widely viewed as a success. The FDA
has hired more than 600 new reviewers^ and NDA approval
times have fallen to record lows. As a result, PDUPA and its
recent ^authorization have garnered broad industry support, In
fiscal 1995 the FDA reported that 100 percent of the application
backlog had been eliminated* In addition, the agency has met
and exceeded PDUFA% performance goals for action on NBAs.

Improving Efficiency in the Drug Approval Process
Whatever the standard of proof for approval, rapid processing of
new drug applications (NBAs) reduces the health costs associated
with delay. Over the last several years the FDA has endeavored to
streamline the NDA approval process and reduce unnecessary delays,
and NDA approval times have declined significantly, especially for
"priority" medications expected to have important therapeutic value.
For example, seven drugs for AIDS and other life-threatening illnesses were approved in under 6 months in 1995. After rising since the
early 1960s, the growth in total drug development time seems to have
stabilized in the 1990s (Chart 5-8).
The FDA Modernization Act builds on the success of these initiatives
to further streamline the approval process and reduce costly delays in



190

drug application reviews. The act reauthorizes the Prescription Drug
Users Fee Act of 1992, ensuring that the FDA has the resources to
review drug applications quickly and efficiently (Box 5-4).
REDUCING TEENAGE SMOKING
The mere fact that people engage in hazardous behavior is not by
itself evidence of market failure. But an externality exists if their
behavior imposes costs on others, and an information market failure
exists if they are not aware of the full costs to themselves of the activity. Smoking, especially by teenagers, arguably illustrates both types
of market failure. In addition, because the cigarette manufacturing
industry is highly concentrated, with just four firms accounting for
the bulk of sales, market power is also a concern—although the higher prices that might result discourage smoking and ameliorate the
other possible market failures. This section reviews important tobacco policy developments in 1997 and assesses them with respect to the
rationale for government action based on market failure.
Last year marked a historic turning point in the long-running battle between tobacco companies and public health advocates over the
harmful effects of cigarettes. First, a landmark rule by the FDA to
protect children from the damage of tobacco products was upheld by
a Federal judge in North Carolina. Next, the 1997 Balanced Budget
Act took a first step toward reducing teen smoking by increasing the
Federal excise tax on cigarettes. Revenue from this tax increase will
help fund the State Children's Health Insurance Program. In addition, a proposed national tobacco settlement was reached last June
between the major tobacco companies and a group of state attorneys
general. Following an Administration review of the proposed settlement, the President challenged the Congress to pass sweeping
tobacco legislation to reduce teen smoking. Full congressional consideration of such legislation was postponed until this year.
A major objective of both the FDA rule and the proposed settlement
is to reduce access to and use of tobacco products by minors. The FDA
rule prohibits the sale of nicotine-containing cigarettes and smokeless
tobacco to persons under age 18 and imposes a number of restrictions
on manufacturers, distributors, and retailers to limit easy access to
cigarettes and other tobacco products and to decrease the amount of
positive advertising imagery that makes these products appealing to
children and teenagers. The proposed settlement goes beyond these
prohibitions: it would increase the price of cigarettes and impose
penalties on the industry if specific targets for reducing youth smoking are not met. Teens are more sensitive to the price of cigarettes
than adult smokers. Estimates suggest that for every 10-percent
increase in the price of cigarettes, the number of teenage smokers
falls by 7 percent, versus about 4 percent for adults. The President's
call for legislative action sought a comprehensive plan to reduce teen



191

smoking, including even tougher penalties than under the proposed
settlement if targets are not met.
The Rationale for Regulating Smoking
Tobacco use is one of the most important preventable causes of illness and premature death in the United States. Tobacco use is
responsible for over 400,000 deaths each year—about 20 percent of all
deaths. The average smoking-related death costs its victim up to 15
years of life. These facts alone might justify an active antismoking
effort on public health grounds. But to make an economic case for discouraging smoking based on market failure requires evidence that
people are unaware of the risks of smoking or that their smoking
imposes costs on others. This case is less obvious than the public
health case. It is hard to argue, for example, that people do not know
that smoking is hazardous to their health. Indeed, at least one study
suggests that people generally perceive the risks from smoking to be
even greater than is consistent with scientific evidence. Another study
finds that light and moderate smokers' assessments of the impact of
their smoking on life expectancy are realistic, whereas heavy smokers
significantly underestimate the risks. Similarly, it is widely recognized
that smoking is habit-forming and most likely addictive. Yet mature
adults are generally given the freedom to make choices that involve
trading off the best possible health for other pleasures (like playing
dangerous sports, overeating, overdrinking, or sitting on a couch
watching too much TV).
The economic case for discouraging smoking based on incomplete
information focuses therefore on the decision by teenagers to start
smoking. To the extent that young people have short time horizons and
are influenced by industry advertising, they may discount too heavily
the risks of smoking and the difficulty of quitting. The studies cited
above of people's perceptions of the risks associated with smoking did
not include teenagers. The finding that heavy smokers underestimate
the risks included only 50- to 62-year-olds; it is likely that teenagers'
assessments are even more unrealistic. Society may legitimately wish
to limit to adults the right to make such a risky decision as whether or
not to smoke.
Tobacco use also imposes externalities. To the extent that the costs
of treating smoking-related illnesses are not reflected in the insurance
premiums paid by smokers, or in their tax and premium contributions
to programs such as Medicare and Medicaid, smokers impose uncompensated costs on the rest of society. One influential study suggests
that these costs are offset to some extent by the social savings in
reduced pension and Social Security payments due to the premature
death of smokers; it also suggests that existing excise taxes cover the
net external costs of smoking. However, this study does not include the
costs of all diseases in which smoking has been implicated, nor does it



192

consider such additional, potentially large external effects as illness
and death from second-hand smoke.
Thus, reasonable economic grounds exist for policies aimed at regulating and discouraging smoking. Until last year, the tobacco industry
was able to mount a largely successful effort to limit such efforts. It
did, however, face the prospect of numerous lawsuits, including several State-initiated class action suits, aimed at recovering damages for
smoking-related State Medicaid expenditures. Although the industry
had a good record of winning such lawsuits, the ongoing litigation
costs and the huge potential costs of an adverse verdict apparently
made it worthwhile to the tobacco companies to seek a settlement.
Economics of the Proposed Settlement
The proposed tobacco settlement reached last June illustrates some
of the issues that will have to be addressed in any tobacco legislation.
The settlement would impose a one-time $10 billion charge on tobacco firms plus an annual payment, which would be adjusted for
inflation and for the quantity of tobacco sold in the United States. In
effect, the annual payment would function like an excise tax.
Although the figure of $368.5 billion is often cited as the industry's
total payment, this number is misleading in several respects. First,
$368.5 billion is the simple sum of the $10 billion initial payment and
the base value of the first 25 years of annual payments (in constant
1997 dollars). A more economically meaningful approach would calculate the discounted present value of the stream of payments expected
from the settlement, recognizing that a dollar paid 25 years from now
is worth far less than a dollar paid today. For example, using a conservative discount rate of 3 percent, the present value of the first 25
years of payments described in the proposed settlement would be
about $260 billion at current sales volumes. Second, the base payment does not represent the amount that would actually be paid.
Because the annual payment functions like an excise tax, the quantity of cigarettes sold will decline to the extent that the payment is
passed on to consumers through higher cigarette prices. The payment
collected will fall accordingly. (On the other hand, other features of
the proposed settlement, such as the surcharge for not meeting youth
smoking targets and an "excess profits" provision, could increase the
payment.) Third, because it is anticipated that the settlement payment will be fully reflected in the price of cigarettes, the incidence of
the annual payment will fall primarily on continuing smokers, not on
the tobacco companies.
A Federal Trade Commission analysis of the proposed settlement
raises additional concerns about its antitrust implications. The tobacco industry is highly concentrated, as noted above. Gross profit
margins are also high. But even in highly concentrated industries,
where prices may be higher than would prevail under perfect compe-




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tition, rivalry among firms and the illegality of explicit collusion tend
to keep prices below the level that would maximize industry profits.
Numerous economic studies have found an elasticity of demand for
cigarettes in the range of about 0.4 to 0.5 in the short run—meaning
that each 10-percent increase in the price of cigarettes leads to a 4- to
5-percent decline in the number of packs sold. This implies that a
price increase would raise industry profits: not only would the
increase in price be more than enough to offset the decline in the
quantity sold, but total costs would also fall with the reduction in
quantity. Since demand is inelastic, if firms were free to collude they
would have an incentive to raise prices substantially. The Federal
Trade Commission's analysis points to certain aspects of the settlement, most notably its broad antitrust exemption, that could reduce
rivalry and increase collusion. In general, the antitrust laws forbid
collusion to fix prices because higher prices increase industry profits
at the expense of consumer welfare and economic efficiency. In the
case of cigarettes, however, higher prices could further the social policy goal of reducing smoking. Nevertheless, granting a broad
antitrust exemption is neither the most direct nor the most socially
desirable way of achieving higher cigarette prices.
This Administration believes that tobacco legislation must include
stiff penalties that give the tobacco industry the strongest possible
incentive to stop targeting young smokers. The proposed settlement
includes targets to cut teen smoking by 30 percent in 5 years, 50 percent in 7 years, and 60 percent in 10 years. Legislation should further
impose financial penalties that hold tobacco companies accountable to
meet those targets. The Administration supports penalties that are
non-tax-deductible, uncapped, and escalating—so that the penalties
get stiffer and the price increases greater the more the companies
miss their targets. Recognizing that one of the surest ways to reduce
youth smoking is to increase the price of cigarettes, the President has
called for a combination of industry payments and penalties that
could add up to $1.50 per pack to the price of cigarettes over the next
decade. The Administration also supports a number of nonprice
strategies for reducing youth smoking through tobacco settlement
legislation, including public education, counteradvertising, stronger
and more visible warning labels, and expanded efforts to prevent
youth access to tobacco products.




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CHAPTER 6

Recent Initiatives in Antitrust
Enforcement
DURING THIS ADMINISTRATION the Federal antitrust enforcement agencies have been aggressive in enforcing the Nation's
antitrust laws. The Antitrust Division of the Department of Justice
has imposed record fines—over $200 million in fiscal 1997—and the
Justice Department and the Federal Trade Commission (FTC) have
both pursued many important cases and investigations, involving
such firms as Microsoft, Archer Daniels Midland, Toys "R" Us, and
Staples and Office Depot, as well as traders on the NASDAQ overthe-counter stock market. This more aggressive stance does not,
however, return Federal antitrust philosophy to an earlier era in
which big was viewed as inherently bad. Recent cases and investigations suggest that the Justice Department and the FTC have taken
a balanced approach to antitrust enforcement, bringing an action
only when thorough investigation and analysis reveal a substantial
threat to competition. In doing so, these agencies are guided by their
mission to protect the competitive process, recognizing that free markets are likely to provide the best outcomes for society.
This chapter reviews how these agencies have analyzed market
competition in a number of recent cases. In so doing it attempts to
explain some apparent paradoxes in antitrust enforcement—why, for
example, in 1997 the FTC stopped Staples and Office Depot from
merging, even though the vast majority of office products are sold by
neither company, but allowed a merger between the two leading U.S.
manufacturers of large commercial aircraft in an already highly concentrated industry. The chapter begins with a broad overview of the
origins and principles of antitrust efforts in the United States and
then proceeds to survey several recent developments. The most
striking of these has been the growth in corporate merger filings to
record levels. The chapter explores the efforts of the antitrust
enforcement agencies to allow those mergers that reduce costs, without allowing firms to gain the power to raise prices. Next the chapter
discusses the potential impact of electronic commerce on competition. Although electronic commerce will in many cases make
competition work more smoothly, it may also make it easier to establish price-fixing agreements. The chapter also surveys the efforts of




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antitrust enforcers to ensure the continued growth and competitiveness of high-technology industries. Finally, the chapter discusses
international antitrust enforcement, an aspect of antitrust policy that
has become increasingly important as global trade has expanded.

ORIGINS AND PRINCIPLES OF ANTITRUST
As the American economy shifted from agriculture toward industry
during the 19th century, large corporations and trusts began to
emerge, eventually dominating or threatening to dominate a number
of industries. Public opposition to these monopolies mounted, and in
1889 alone, 12 States passed antitrust or antimonopoly statutes. The
Congress followed swiftly. In 1890 it passed the Sherman Act by an
overwhelming margin: 52 to 1 in the Senate and 242 to 0 in the House
of Representatives. The broad contours of American antitrust law
were completed in 1914 with the passage of the Federal Trade
Commission Act and the Clayton Act.
The Sherman Act contains broad bans—with both criminal and
civil penalties—on monopolization, price-fixing agreements, and
other unreasonable restraints on trade. The Clayton Act contains
more specific prohibitions of mergers and of certain forms of price discrimination, exclusive dealing agreements, and tie-in sales (sales
conditioned on the purchase of another product) when the effect may
be to substantially lessen competition or to tend to create a monopoly.
The Justice Department and the FTC have overlapping but distinct
authorities: the Justice Department may bring actions under the
Sherman Act and the FTC under the Federal Trade Commission Act,
but either may bring actions under the Clayton Act. In addition, the
major regulatory agencies, such as the Federal Communications
Commission, the Federal Energy Regulatory Commission, and the
Surface Transportation Board, all review mergers under their own
statutory authority.
The antitrust laws' primary objection to monopolies, cartels, and
other restrictive practices and restraints of trade is that they injure
consumers by increasing prices. Another concern, which has been a
particular focus of economists, is that these high prices inappropriately curtail consumption of the monopolized good. Inefficiencies
arise when sellers charge monopoly prices, because consumers lose
more from the price increase than sellers gain.
Another objection to monopoly was expressed by Judge Learned
Hand, who argued that "Unchallenged economic power deadens initiative, discourages thrift and depresses energy," and that "immunity
from competition is a narcotic, and rivalry is a stimulant, to industrial progress." In a similar vein, the British economist John Hicks
wrote that "the best of all monopoly profits is a quiet life." This complacency on the part of monopolists can impede economic progress.



196

The concern that firms with market power—the power to raise prices
above their production costs—can limit innovation has become an
important part of antitrust enforcement during this Administration.
The choice between competition and monopoly is easy.
Unfortunately, however, that is not usually the choice that antitrust
enforcers face. The industries in which antitrust issues tend to arise
can seldom be appropriately classified as either perfectly competitive
or monopolized. Usually they lie somewhere in between. Firms typically have some market power, but they also have competitors.
Mergers and restrictive practices may create or enhance market
power, but they may also promote efficiencies and hence can benefit
consumers. Identifying corporate conduct whose primary effect is to
lessen competition is the task of antitrust enforcers—a task that often
presents a formidable analytical challenge.

MERGERS
Another challenge for the antitrust enforcement agencies during
this Administration has been the dramatic increase in merger activity. As Chart 6-1 shows, after a lull in the early 1990s the merger
market has come roaring back to life. Both the 1996 and 1997 fiscal
years set new records for the number of merger filings.
Chart 6-1 Mergers Filed with the Antitrust Agencies
Large mergers must be filed with the U.S. antitrust enforcement agencies. Fiscal 1997
was the second consecutive year of record filings.
Number of mergers
4,000

3,000 -

2,000 -

1,000 -

1990

1991

1992

1993

1994

1995

1996

Fiscal years
Sources: Department of Justice (Antitrust Division) and Federal Trade Comission.




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1997

Box 6-1*—Consolidation m tfcta Defense Industry
The recent merger wave m the U.S. defense Industry highlights the difficult tradeoffs involved in antitrust policy and the
balanced approach that the antitrust enforcement agencies have
taken during this Administration. The end of the Cold War and
the ensiling 65-percent real reduction in the Pentagon's procurement budget created intense pressure toward consolidation*
A large share of the defense business is now concentrated in the
hands of a few large firms—notably Lockheed Martin, Northrop
Grumman, Boeing, Raytheon, and General Dynamics—that
have acquired numerous other major defense contractors a$
they exited the industry.
The challenge for the antitrust authorities has been to balance the perceived need for consolidation to reduce overhead
costs against the potential for a reduction in competition. On the
one hand, if the mergers allow defense contractors to eliminate
duplicative overhead costs the Pentagon will be able to purchase
weapons systems more cheaply, On the other hand, if the number of effective bidders falls, prices may rise, forcing either
higher defense budgets or reduced defense purchases,
In a number of cases where anticompetitive effects have been
a concern, instead of trying to block the merger and forgoing the
potential cost savings, the antitrust agencies have tried to adopt
narrowly focused remedies. For example, they have invalidated
exclusivity arrangements, insisted on the divestiture of key
assets, and required the creation of provisional information

In evaluating these mergers and deciding which ones to challenge,
the enforcement agencies must strike a fine balance. A merger may
yield significant cost savings, but it may also threaten to increase
industry concentration (that is, reduce the number of firms in the
industry) and stifle competition, allowing the remaining firms to
increase prices and reduce output. The impact on concentration and
competition is particularly difficult to evaluate in the many industries now experiencing rapid structural and technological change,
such as the defense industry, considered in Box 6-1. The enforcement
agencies must consider who will be the merged firm's competitors in
the future, not just today.
A merger does not have to create a monopoly in order to result in
higher prices and lower output. By increasing concentration, a merger may increase the likelihood of successful collusion, either overt or
tacit, among the remaining firms. Greater concentration may make it
easier for each firm to communicate its intentions to the others, and



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Box $-1*— continued
merging companies An example of tite first
remedy is provided by the 1095 merger of Lockheed Corp. with
Martin Marietta Corp. This merger raised antitrust concerns
tha companies had entered into exclusive teaming
with Hughes and Northrop Grumman Corp.,
respectively* In the wake of a merger, these agreements would
raise the prospect that there might be only one bidder on spacebaaed infrared aarly warning satellite systems, since Hughes
and Northrop Grumman were the leading providers of eleetrooptieal sensors for these satellites. T0 promote competition in
tM§ market, the FTC's consent order forbade Lockheed Martin
enforcing the exclusivity provisions,
, Baytheon Co/s $5*1 billion acquisition of Hughes
Aircraft Co, might have substantially lessened competition in
both infrared sensors and electro-optical systems had the Justice
Department not forced Raytheon to make a large divestiture.
Raytheon agreed to seE off the infrared sensor business it had
acquired from Texaa Instruments Ine^ as well as electro-optical
system^ businesses that it would otherwise have acquired with
the purchase of Hughes. Raytheon also agreed to a firm price on
an jMrFdree missile to compensate for the lost competition from
Hughes* Finally,, Raytheon agreed to maintain an information
firewall to preserve the independence of Raythaon and Hughei
for a new Army antitank missile*

the interests of the firms may be less likely to diverge. The smaller
number of firms may also reduce the benefits and increase the cost of
cheating on the collusive agreement. For example, mergers make
price cutting less profitable because the merger eliminates one firm
from which customers might be attracted away by the price cut. It
may also become easier for colluding firms to detect and punish those
firms that deviate from the agreement.
Mergers may result in price increases even when firms do not collude in any sense. For example, a firm with market power by virtue
of control over a large portion of industry capacity will enhance that
power, and may therefore raise prices, if it acquires still more capacity by merging with a competitor. Another important example of such
a "unilateral competitive effect" arises when formerly standardized
products become differentiated, giving rise to market power as consumers develop brand preferences. Such power is limited by the
availability of competing brands; hence a merger between firms sell


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ing competing brands relaxes the constraint that competition places
on prices. The merged firm recognizes that some of the sales lost
through a price increase on one brand will be recaptured by the other
brand, and therefore be retained by the firm. This encourages the
merged firm to raise the price of both brands. When the brands are
particularly close substitutes, the firm may want to raise both prices
substantially.
Enforcement agencies must balance these concerns about market
power against the efficiencies in production that mergers can make
possible. There are several ways in which mergers can reduce the
average cost of production in an industry. A merger may allow one
firm to take advantage of another's superior technology. Where production processes are composed of multiple distinct activities, a
merger can allow each of the merging firms to specialize in those
activities that it does best. Mergers may also increase efficiency in
industries subject to economies of scale, that is, those in which average production cost declines as output increases. In these industries
a merger may reduce costs by eliminating duplicative fixed costs or
allowing longer production runs.
Consumers benefit from the merger as well if merging firms pass
these savings along in the form of lower prices. The challenge for
antitrust enforcement, then, is to prevent those mergers that would
harm consumers by enhancing market power, but to allow those that
create substantial benefits. To evaluate the market power and the
efficiency effects of mergers, the FTC and the Justice Department use
the framework that they jointly established in the 1992 Horizontal
Merger Guidelines, which were partially revised in 1997. According to
the guidelines, the steps to be taken in a merger review for a merger
among competitors are as follows:
• define the relevant market and calculate its concentration before
and after the merger
• assess whether the merger raises concerns about adverse competitive effects
• determine whether entry by other firms into the market would
counteract those effects, and
• consider any expected efficiency gains.
This chapter discusses each step in turn below.

MARKET DEFINITION
The first step is to determine the relevant market and whether the
merger will increase concentration significantly in that market. The
Merger Guidelines state that the relevant market is generally the
smallest group of products and geographical area such that a hypothetical monopolist in that market would raise the price significantly,



200

taking into account the reduction in demand caused by consumers
curtailing their purchases. Having defined the relevant market, the
agencies determine the market shares of all firms identified as market participants, and use these market shares to calculate an index of
market concentration. Mergers that would increase concentration significantly tend to attract more scrutiny from the enforcement
agencies, because these mergers are more apt to lead to large price
hikes. Typically, therefore, the narrower the relevant market, the
more likely it is that a merger will be investigated.
In 1997 the FTC challenged the merger of Staples Inc. and Office
Depot Inc. because it believed that the relevant product market was
"the sale of consumable office supplies through office superstores," and
these firms were the two largest in that market. Staples countered
that the relevant market was all sales of office products, including
sales by discount stores, drugstores, and wholesale clubs. The combined firm would have accounted for less than 6 percent of this broader
market, which suggested that the firm could not have raised prices significantly after the merger if this market definition were indeed
correct. The FTC maintained, however, that even though most individual items could themselves be bought from many retailers, the size,
selection, and inventory offered by office superstores distinguish them
from other office supply retailers. The FTC's statistical analysis
showed that, when the presence of other potential competitors was
controlled for, Staples' prices were over 5 percent higher in cities where
it did not face competition from other office supply superstores. The
FTC took this as evidence that nonsuperstore sellers of office supplies
do not constrain superstores' prices effectively. This pricing evidence
led the court to accept the FTC's market definition and conclude that
the merger would significantly increase concentration in the office
superstore market and so be anticompetitive.
The key issue in defining the relevant market in a recent merger
between two gypsum drywall producers was not the type of seller, but
rather the sellers' geographic location. In 1995 Georgia-Pacific Corp.,
which had 10 drywall plants nationwide, including one each in New
York and Delaware, proposed to acquire nine drywall plants from a
Canadian-based competitor, Domtar Inc. Two of the nine plants were
located in New Hampshire and New Jersey. The Justice Department
determined that if the relevant geographic market was national, the
acquisition would likely not have raised competitive concerns.
However, the merger would have increased concentration significantly in the Northeastern States, so that if the relevant market were
localized to that region, the merger likely would have led to price
increases there.
To determine the relevant geographic market, the Justice
Department examined whether a small but significant local price
increase by Northeastern producers would be profitable, taking into
account the extent to which customers could switch to producers out


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side the region. The agency considered such factors as current shipping patterns, constraints on production capacity outside the region,
and transportation costs. Gypsum drywall is heavy, bulky, expensive
to ship, and likely to break during transport if handled excessively.
The Justice Department found that drywall plants in the
Northeastern States accounted for the majority of sales to consumers
in those states; sales from plants outside the region were comparatively small. Furthermore, drywall plants outside the Northeast had
relatively little excess capacity. From this evidence, the Justice
Department determined that customers in the Northeast could not
have switched to out-of-region producers in sufficient quantities to
make a local price increase unprofitable. The agency therefore decided that the relevant geographic market was regional, and
Georgia-Pacific, to satisfy the Justice Department's concerns, agreed
that it would divest its New York and Delaware plants.
COMPETITIVE EFFECTS
Defining the market and assessing its concentration are only the
beginning of the merger review process. The next step is to determine
whether the merger would have adverse competitive effects. The 1992
Merger Guidelines recognize that mergers may lessen competition
through either collusion or unilateral effects. Indeed, unilateral
effects received new prominence in the 1992 Merger Guidelines and
have been the dominant concern in several recent mergers.
One recent example where the analysis of unilateral effects suggested significant harm to competition is the acquisition of
Continental Baking Co. by Interstate Bakeries Corp. Continental's
Wonder Bread brand competed against various Interstate brands in
several regions. Although these two firms were by no means the only
producers of white bread in these regions, the Justice Department
concluded that white bread is a highly differentiated product, with
various brands commanding significant customer loyalty, and that
after the merger Interstate would likely have raised prices on its
brands even if other bakers kept their prices constant. Interstate
would no longer be discouraged from raising prices on its own brands
by the risk of customers switching to Wonder Bread, since after the
merger Interstate would own Wonder Bread. Likewise, whereas
Continental was discouraged from raising the price of Wonder Bread
by the prospect of customers switching to Interstate's brands, after
Interstate bought Wonder Bread this would no longer be a worry.
Simulations based on estimated demand elasticities helped convince
the Justice Department that significant price increases would likely
follow the merger, even in the absence of coordination among the
remaining firms. To avoid these price increases, the Justice
Department entered into a consent decree requiring the merged firm
to divest a brand of bread in each of five geographic regions.



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Sometimes the antitrust authorities can limit a merged firm's
power to raise prices without requiring a divestiture, as illustrated in
the merger of Time Warner Inc. with Turner Broadcasting System
Inc. In 1995 Time Warner proposed to acquire Turner in a deal valued
at over $7 billion. Both companies were important providers of programming to local cable system operators. Time Warner owned Home
Box Office (HBO), the leading cable movie channel, and Turner owned
Cable News Network (CNN). Both these channels are "marquee"
channels that cable operators have a strong desire to carry in order to
attract and retain subscribers. The FTC was concerned that if Time
Warner controlled both these marquee channels it would increase the
prices it charged to cable operators. To limit the anticompetitive
effects of the merger, the FTC's consent order prohibited Time Warner
from "bundling" HBO with Turner channels, and CNN with Time
Warner channels. The bundling restriction required that the Time
Warner and Turner channels be offered separately at prices that do
not depend on whether the other is purchased.
It may not be immediately apparent why restrictions on bundling
can sometimes be an appropriate remedy; after all, once the merged
firm controls the price of both channels it could simply implement an
across-the-board price increase. However, a hypothetical example
demonstrates that when a merged firm sells goods that are substitutes for each other, prohibiting bundling can limit price increases.
Consider a cable operator in a city with 50,000 potential subscribers,
and assume that the cable operator earns a dollar in profits from each
subscriber. Suppose that 20,000 of the potential subscribers like
movies: they will subscribe only if the cable system offers a movie
channel. Another 20,000 like news and will subscribe only if a news
channel is offered. The remaining 10,000 like both movies and news
and will subscribe if either is offered. In this city the cable operator
would be willing to pay up to $30,000 for either movies or news, since
in each case 30,000 people will subscribe. However, as soon as the
cable operator buys a movie channel and gets all the subscribers who
like movies, it will be willing to pay only $20,000 for a news channel,
since the only additional subscribers it will attract are the 20,000 people who like news but not movies. Similarly, a cable operator that
already offers news would be willing to pay only $20,000 for movies.
Since some people subscribe if either a movie channel or a news channel is offered, the two channels are substitutes from the point of view
of the cable operator. If movies and news can be sold as a bundle, they
can be sold for $50,000, because a total of 50,000 people will subscribe. On the other hand, if bundling is forbidden and each channel
must be for sale individually, the merged firm will not be able to
charge that much.
Suppose, for instance, that the merged firm tried to sell each channel for $25,000. The cable station would respond by buying only one
of the channels; since the channels are substitutes, once the cable sta


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tion purchases one channel, its willingness to pay for the other channel diminishes to $20,000. If the channels are sold separately, the
most the merged firm could sell them for is $40,000 ($20,000 each).
For this reason, restrictions on bundling such as those in the FTC's
consent order can sometimes limit the exploitation of market power,
even when the firm can charge whatever it likes for its products individually.
ENTRY
The analysis of a merger does not end with defining the market
and determining whether the increase in concentration would allow
the merged firm to raise prices. Entry can in principle constrain the
merged firm's ability to raise prices: a merger that leads to
increased prices may also create opportunities for new firms to
enter the market, charge a lower price to gain market share, and
still earn profits. Loss of sales to new entrants could cause the anticompetitive price increase to be unprofitable. As a result, entry or
the threat of entry can in some cases prevent any appreciable price
increase after a merger.
One difficulty with entry analysis is that it can be highly speculative. It is easy to be overly optimistic and assume that entrants
will materialize and eradicate the anticompetitive effects of a merger. Accordingly, the antitrust enforcement agencies have taken
seriously the Merger Guidelines' caution that entry must be timely,
likely, and sufficient to counter the merger's adverse competitive
effects.
One merger where entry seemed unlikely to offset the effects of
increased concentration was the proposed 1995 acquisition of Intuit
Inc. by Microsoft Corp. Each of the two software firms produced a
popular personal finance program: Microsoft's Money and Intuit's
Quicken together accounted for more than 90 percent of the personal
finance software market. Here the question faced by the Justice
Department was whether other firms were likely to enter this market
in sufficient force to constrain Microsoft's market power once it owned
both programs. Two important features of software markets limited
the likelihood of entry: the importance of reputation and the "lock-in
effect." Purchasers of personal finance software generally prefer a
product that is widely accepted as reliable and successful and that
has a reputation for performance and customer support. It can take
many years and a significant investment for an entrant to develop
such a reputation. Even Microsoft had considerable difficulty overcoming the initial success of Intuit. After 4 years of effort, the market
share of Microsoft's Money remained far less than that of Quicken,
and Microsoft had yet to achieve a positive return on its investment.
The fact that consumers have to put considerable time and effort into
learning to use a given program gives rise to the lock-in effect. Users
of existing software may be reluctant to incur the switching costs of



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learning another program. Future purchasers may likewise hesitate
to invest time and effort in learning to use an entrant's new and
untested product because of the risk that the product may not succeed
in the marketplace, requiring the customer to eventually switch to
the established product.
To make the deal acceptable to the antitrust authorities,
Microsoft planned to transfer part of its assets in Money to another
software developer. Even so, the Justice Department felt that the
importance of reputation and the lock-in effect, among other factors,
meant that entry could not be relied upon to offset the high concentration that a merger of Microsoft and Intuit would have caused.
The merger was challenged, and Microsoft decided not to pursue it.

EFFICIENCIES
The final major step in the merger review process is to consider the
efficiencies promised by the merger. Economists have long recognized
the potential benefits of such efficiencies, and in recent years the
antitrust agencies have been increasingly willing to consider these
benefits when reviewing mergers. Most recently, in April 1997 the
Justice Department and the FTC issued revisions to the section of the
Merger Guidelines devoted to efficiencies. These revisions reflect the
balanced approach of current antitrust enforcement. Under the
revised guidelines, the agencies consider the creation of efficiencies,
but only verifiable, merger-specific efficiencies. Many studies have
suggested that mergers may not produce the synergies and cost savings claimed by managers. Since the agencies understand that it is
easier for firms to claim efficiencies than to realize them, they subject
efficiency claims to careful scrutiny. If the agencies determine that
the claimed efficiencies are likely to be realized and are of sufficient
magnitude that the merger is not likely to be anticompetitive, they
will not challenge the merger.
The proposed merger between Staples and Office Depot illustrates
the increased consideration and scrutiny of efficiencies in antitrust
enforcement. The two firms claimed that by merging they would be
able to take advantage of large cost reductions and efficiencies in purchasing, distribution, operations, and marketing, and that these
savings would be passed on to customers in the form of lower prices.
Consistent with the revised Merger Guidelines, the court deciding the
case considered whether these efficiencies would offset the presumed
anticompetitive effects of the merger. The court refused to accept cost
savings that were not merger-specific and dismissed those that could
not be verified. Also at issue was the degree to which Staples and
Office Depot would pass any cost savings through to consumers. The
companies projected that for every dollar of cost savings their prices
would go down by about 67 cents. However, the FTC presented evidence that historically Staples had passed through only 15 to 17
percent of its achieved cost savings. Accordingly, the court found that



205

the merger's efficiencies would not offset its anticompetitive effects. It
granted the FTC's request for an injunction, leading Staples and
Office Depot to terminate their merger agreement.

ELECTRONIC COMMERCE
The potential impact of electronic commerce on competition is dramatic, as described in a recent White House report titled A
Framework for Global Electronic Commerce. Electronic commerce is
already common in several industries. Travelers, for example, buy
airline tickets from travel agents who use computer reservation systems. Over-the-counter stocks are traded on a computerized system.
And consumers can buy everything from books to automobiles over
the Internet.
The potential for electronic commerce to make the economy function better is clear. Computer networks can inform buyers about
products available in other States or, just as easily, in foreign countries. Cheap information about wide-ranging markets means that
buyers can buy products that they would not otherwise have known
about, and can pay lower prices as well. A seller who is the only supplier in a given area may have little power to raise prices if buyers can
easily compare prices around the country or around the world. Music
stores in Philadelphia will find it pointless to conspire to sell compact
discs at high prices if buyers can easily locate competing dealers
around the country. Putting cheap information in the hands of consumers thus seems likely to make markets more competitive. One
might well wonder if electronic commerce could lessen the need for
antitrust enforcement in many markets.
However, two cases that the Justice Department recently filed and
settled—one against a group of U.S. airlines, and the other against
so-called market makers who execute over-the-counter stock trades—
highlight a straightforward problem with electronic commerce.
Computers do increase the information available in the marketplace,
but not just to consumers; they also make more information available
to producers and other sellers. Sellers may be able to use this wealth
of information to form or maintain cartels.
For a cartel to raise prices successfully, the members must somehow come to an agreement about what prices to charge and must
figure out a way to maintain that agreement. The airline and stock
trading cases illustrate how computer networks can sometimes help
a cartel solve both these problems. They suggest that, rather than
lessening the need for antitrust authorities, the growth of electronic
commerce may in some cases increase it.
In 1994 the Justice Department reached a final settlement in a
price-fixing case involving eight major airlines and the Airline Tariff
Publishing Company (ATP). According to the Justice Department, the



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airlines had used ATP's computerized fare dissemination services to
negotiate increases in fares and to trade fare changes in certain markets for changes in other markets.
The alleged collusive arrangement worked as follows. Each airline
submitted its fare changes or planned future changes to ATP. In turn,
ATP reported the changes to all the other airlines. The resulting data
base was enormous, as each airline offered numerous fares, under
various terms and conditions, on each of thousands of city pairs.
Moreover, these fares changed frequently. In such a complex system
it would seem difficult for the airlines to negotiate or maintain any
price-fixing agreement, much less a covert one. With so many interrelated fares and fare changes, one might ask how one airline would
distinguish, for example, whether another's price change was an
attempt to cheat on a collusive agreement, an attempt to punish a
third airline for deviating from an agreement in another market, or
simply a normal response to increased costs. The Justice Department
alleged that such confusion was avoided by linking fare changes with
alphanumeric footnote designators and by the judicious use of first
ticket dates. Since the ATP data were computerized, this mass of
information could be analyzed by sophisticated computer programs
each day. Aided by these computer analyses, airlines could engage in
intricate but camouflaged negotiations and could monitor cheating on
agreements. The settlement that the Justice Department entered into
with the airlines barred them from using footnote designators, first
ticket dates, and other devices to communicate with each other.
According to one study, price leadership in the airline industry cost
air travelers $365 million per year during the 1980s. Others have
estimated that the cost of such behavior in the airline industry, had it
been left unchecked, could have reached several billion dollars per
year. These figures suggest that the Justice Department's attempts to
eliminate anticompetitive practices in the airline industry could yield
large dividends for consumers.
The stock trading case, which resulted in a 1996 consent decree,
involved transactions in over-the-counter stocks over the automated
quotation system operated by the National Association of Securities
Dealers (the NASDAQ system). This case also revealed how computerized information networks can sometimes make it easier for firms
to maintain agreements to sell at high prices. When an investor
places a buy or sell order for shares of a company traded on NASDAQ,
special traders called "market makers" typically execute the trade.
These intermediaries make their profits from the bid-ask spread, the
difference between the price at which they buy a stock and the price
at which they sell it.
In the NASDAQ case the Justice Department alleged that NASDAQ market makers had agreed to a strategy, or convention, for
quoting stocks that essentially limited their incentives to narrow
spreads. Also working to support the agreement was the fact that the



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NASDAQ computer network provided sellers with ready (essentially
instantaneous) information about the strategies other sellers were
using to quote prices. Market makers that were observed to deviate
from the convention were harassed by other market makers and
threatened with economic harm.
Traditional economic theory predicts that the price-fixing agreement alleged by the Justice Department and the Securities and
Exchange Commission (SEC) could not have been maintained on
NASDAQ, because entry barriers were low and any of over 100 firms
could enter the market for any security. If a price-fixing agreement
kept the bid-ask spread high, some market maker would have been
tempted to offer the security at a price below the best asking price, or
to buy it at a price above the best bid, in an effort to increase market
share. But the rules and common practices that governed the way in
which NASDAQ securities were traded could have combined to deter
market makers from undermining the agreement in this way, with
the computer network used for trades playing a key role.
NASDAQ market makers may decline to trade a security at the
price quoted by other market makers. But if a market maker does execute a trade, the NASD's best-execution rule requires it to make the
trade at the best price quoted on the NASDAQ network. A key feature
of trading on NASDAQ is the widespread practice of preferencing. A
preferencing arrangement between a broker and a market maker commits the market maker to execute trades submitted by the broker. In
combination with the NASD's best-execution rule, this practice could
have sharply limited the benefits that any market maker could have
anticipated from cheating on any anticompetitive agreement, and so
significantly enhanced the ability of a cartel to maintain collusion. A
market maker that attempted to cheat on an agreement would not
expect to significantly increase its market share, because other firms
would, in effect, match its prices instantaneously and retain their preferenced order flow. Thus, a practice that initially seemed to offer a
great deal to investors—a guarantee of the best price available,
regardless of which market maker executes the order—in fact may
have tended to support an anticompetitive agreement.
In 1996 the Justice Department entered into an agreement with
NASDAQ market makers. The market makers agreed not to fix prices
in the future and to commit resources to an ongoing monitoring effort
to ensure that they adhere to the antitrust laws.
The lesson of the airline and NASDAQ cases is that computer networks can sometimes make it easier for sellers to form and maintain
price-fixing agreements, by providing sellers with information about
the prices that other sellers charge. Agreements negotiated by posting
prices on computer networks may prove difficult for the antitrust
authorities to ferret out. In the airline case there was sufficient ancillary information—in particular the use of annotations linking one fare
proposal to another—to convince the Justice Department that a nego


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tiation was taking place. In contrast, when one firm tries to take
advantage of the fact that prices can be quickly and easily changed on
computer systems and raises price for a few instants (at a small cost)
in the hope that others will follow, most antitrust experts believe that
there is no violation of antitrust laws, even if other firms do follow.
Simple price leadership is not banned by the Sherman Act, in part
because there is no adequate way to frame a remedy. Firms in collusion and firms in competition may both move prices in concert.
Antitrust authorities can only try to prevent sellers from negotiating
and offering each other mutual assurances in order to form pricefixing agreements.
It has always been difficult to tell whether firms are being forced by
competition to charge the same prices, or whether they have agreed
to fix prices. The task could become steadily more troublesome as the
electronic age progresses. Antitrust authorities in the electronic age
need to maintain vigilance in seeking out and enjoining illegal agreements. Electronic commerce may make antitrust enforcement more
challenging—and more important.

HIGH-TECHNOLOGY INDUSTRIES, INNOVATION,
AND INTELLECTUAL PROPERTY
Many of the fastest growing and fastest changing U.S. industries
are to be found in such high-technology fields as aerospace, computer
hardware and software, and telecommunications. These industries
present several additional challenges for antitrust enforcers. One is
that antitrust enforcers must promote both competition and innovation in these fields through a balanced treatment of intellectual
property. Another is to account for the tendency for network externalities, common in many high-technology fields, to create a strong
potential for market dominance. A third challenge is to anticipate
future developments in these fast-paced industries and conduct
antitrust policy accordingly.
INNOVATION AND INTELLECTUAL PROPERTY
The key assets in high-technology industries are often not factories
or machines but intangibles such as scientific ideas or the algorithms
contained in computer programs. These assets, unlike physical
assets, can be used by any number of people at once. Without intellectual property protection, firms and individuals would have
insufficient incentive to produce these assets, because they are costly
to produce but cheap to copy or imitate. In recognition of this problem,
the U.S. Constitution empowers the Congress to "promote the
Progress of Science and useful Arts, by securing for limited Times to
Authors and Inventors the exclusive Right to their respective
Writings and Discoveries." Patent and copyright laws do just that.



209

An important initiative of this Administration has been its use of
antitrust enforcement to further encourage innovation and to clarify
the role of intellectual property in antitrust law. The Administration
recognizes that the licensing of intellectual property for use by persons other than its creator can benefit society both directly, by
allowing the more widespread use of intellectual properties, and indirectly, by increasing the return to such assets and thereby
encouraging innovation. Such licenses, however, sometimes contain
restrictions that limit competition and actually discourage innovation. These restrictions may violate the antitrust laws.
The recent case involving the British firm Pilkington pic, the
world's largest float glass producer, provides one example of the
Justice Department's attempts to use antitrust enforcement to
encourage innovation. Beginning in 1962, after acquiring hundreds of
patents worldwide on glass production processes, Pilkington entered
into licensing agreements with all of its principal competitors. These
agreements generally included territorial restrictions, so that each
licensee could construct and operate float glass plants in only one
country or group of countries. These restrictions allegedly limited the
incentives of Pilkington's competitors to innovate in glass processing,
by geographically restricting their opportunities to exploit such innovations. Their incentive to innovate was allegedly further limited by
requirements to report any improvements in float glass technology
and to cede the rights to such improvements back to Pilkington. In
1994 the Justice Department entered into a consent decree with
Pilkington, which, among other prohibitions, enjoined Pilkington
from enforcing its licensing restrictions against U.S. licensees. The
Justice Department's case was strengthened by the fact that
Pilkington's principal patents had expired long before the complaint
was filed. The Department does not, however, in general limit its
attention to restrictions that outlive the life of patents.
The 1995 Antitrust Guidelines for the Licensing of Intellectual
Property explain the balanced approach taken by the antitrust agencies. The guidelines recognize that intellectual property licensing can
create efficiencies by allowing firms to combine complementary factors of production. However, licensing arrangements such as those
used by Pilkington may contain restrictive terms that reduce competition among alternative technologies, and the antitrust agencies
have sought to eliminate such anticompetitive arrangements. In evaluating the licensing of intellectual property, the agencies balance the
procompetitive and anticompetitive effects.

NETWORK EXTERNALITIES
Many high-technology industries such as computers and communications exhibit network externalities: that is, consumers derive more
value from the products of these industries the more people use them.
For example, a computer program often becomes more valuable as its



210

network of users grows, because users like to trade data files and
exchange ideas about how to use the program effectively. Network
externalities can sometimes therefore make entry difficult, because
small firms may be unable to compete effectively against large ones,
whose products enjoy additional value from widespread usage.
The challenge for antitrust policy is to preserve the benefits of network externalities for consumers while preventing firms from
exploiting the market power to which these externalities can give
rise. When sellers agree to standards, consumers benefit because the
products of different sellers are then compatible. Unfortunately, however, firms can sometimes manipulate the standards-setting process
to their own advantage, as the FTC claimed happened in a 1995
action against Dell Computer Corp.
Dell was a member of the Video Electronics Standards Association
(VESA), a standards-setting organization in the computer industry.
In 1992 VESA set a new standard for the design of computer bus
hardware (the hardware that transmits information between a computer's components). According to the FTC, before the standard was
approved, Dell certified that it did not violate any of its intellectual
property rights, but after the standard was implemented the company announced that the standard did violate one of its patents. Since
by then over a million computers using the standard had already
been sold, other computer manufacturers could not switch to an alternative design without creating a compatibility problem. This would
have put Dell in a good position to collect substantial royalties on its
patent, were it not for a settlement with the FTC, in which Dell
agreed not to enforce its patent rights against computer manufacturers using the standard.
FAST-PACED TECHNOLOGICAL CHANGE
The fast pace of change in high-technology industries makes it hard
for antitrust enforcers to anticipate the impact of future developments when deciding the proper course of action. For example, a
merger that seems innocuous today may eliminate future competition. Alternatively, a merger may increase concentration significantly
today but may not pose anticompetitive problems, either because of
entry, as discussed earlier, or because of exit, as revealed by the 1997
merger between Boeing Co. and McDonnell Douglas Corp.
Although the Boeing-McDonnell Douglas merger reduced the number of sellers of large commercial aircraft worldwide from three to two,
thereby sharply increasing concentration, the FTC decided that
McDonnell Douglas's 5-percent market share overstated the company's likely future competitive significance, because this market share
reflected only the filling of old orders. Extensive interviews by the FTC
revealed that advances in aviation design had left McDonnell Douglas
behind: since the firm had not invested as much as its competitors in
improving the technology of its aircraft, the vast majority of airlines no



211

longer considered purchasing its aircraft. As a result, the merger did
not eliminate viable future competition in the commercial aircraft
market. Moreover, after consulting with the Department of Defense,
the FTC concluded that there were no prospects for Boeing and
McDonnell Douglas to bid on the same defense projects. Having concluded that the merger raised antitrust concerns in neither commercial
nor defense markets, the FTC did not challenge the merger.
Future competition was a critical issue in the investigation of Bell
Atlantic Corp.'s 1997 acquisition of NYNEX Corp. The merger did
not increase current concentration in any local telephone market,
because neither Bell Atlantic nor NYNEX competed in each other's
markets at the time of the merger. However, the Justice Department
and the Federal Communications Commission (FCC) needed to
assess the likelihood that, in the absence of the merger, each company would someday enter the other's geographic market, and the
likely extent of other firms' entry. One focus of the Justice
Department's investigation was the effect of the merger on future
competition in local service in New York City and nearby portions of
NYNEX's service area. NYNEX was the dominant supplier in that
area, whereas Bell Atlantic was one of many potential entrants.
After carefully studying the plans of other potential entrants, such
as AT&T Corp. and MCI Communications Corp., the Justice
Department concluded that the prospect for entry by a number of
experienced, capable, and well-financed competitors was significant.
Therefore it was by no means clear how much the loss of Bell Atlantic
as an independent competitive force would adversely affect consumers,
particularly given the evidence concerning efficiencies. The Justice
Department concluded that it could not meet its burden of proving
that the loss of Bell Atlantic as an independent entrant was likely to
have so significant a market impact as "substantially to lessen competition," the test of a violation under Section 7 of the Clayton Act.
The FCC, on the other hand, which also had authority to review
the Bell Atlantic-NYNEX merger, operates under a different statute
with a different substantive standard. Under the FCC's interpretations of the Communications Act of 1934, the merging parties had
the burden of proving that the merger would on balance enhance
competition and be in the public interest. The FCC concluded that
the merger would not enhance competition, and it exercised its
power to place conditions on its approval of the merger. To remedy
the merger's possibly anticompetitive effects, and to advance the
goal, set forth in the Telecommunications Act of 1996, of opening
local telephone markets to competition, Bell Atlantic offered to make
several market-opening commitments, which the FCC accepted
before approving the merger.




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THE GLOBAL MARKETPLACE AND
INTERNATIONAL ANTITRUST EFFORTS
The emergence of a global marketplace for many goods and services
has important implications for U.S. antitrust policy. On the one hand,
as transportation costs and trade barriers fall, many problems in
antitrust become easier. Mergers that would have led to significant
concentration in the absence of international trade may not do so once
one accounts for foreign competitors. Also, domestic price-fixing
agreements will be undermined if foreign competitors are willing to
sell in the U.S. market at a lower price. On the other hand, international price-fixing agreements are more difficult than domestic ones
for U.S. antitrust enforcement agencies to police; success often
requires cooperation with foreign governments or international organizations.
Unlike in the 1980s, when most antitrust fines were imposed in
domestic bid-rigging cases, the vast bulk of the over $200 million
imposed by the Justice Department's Antitrust Division during fiscal
1997 was collected in judgments against large international price-fixing conspiracies. This suggests that even though international trade
may make price fixing more difficult, it will probably remain a serious concern for some time to come.
Criminal prosecution in international price-fixing conspiracies is
generally much more difficult and complex than prosecuting domestic
conspiracies. First, the antitrust authorities must demonstrate that
U.S. antitrust law applies. In 1997 the Justice Department made significant headway on this point, when the First Circuit Court of
Appeals held that Section 1 of the Sherman Act applies to "wholly foreign conduct which has an intended and substantial effect in the
United States," regardless of whether the case is civil or criminal.
Even when U.S. antitrust laws do apply, crucial evidence or culpable
individuals or firms may be located outside the United States and be
beyond the jurisdiction of U.S. courts.
These jurisdictional problems make it imperative that U.S.
antitrust enforcement authorities coordinate their activities and
cooperate with authorities abroad. In several recent investigations,
the United States made good use of its mutual legal assistance
treaties with a number of foreign countries: the Justice Department
sought and received assistance in cartel investigations from several
countries, including Japan and Canada.
In 1994 the Congress passed the International Antitrust
Enforcement Assistance Act (IAEAA), which empowered the U.S.
antitrust enforcement agencies to negotiate reciprocal agreements
with foreign antitrust enforcers. Under these agreements each government will assist the other in obtaining evidence located in the
country of the former, while ensuring confidentiality. Unfortunately,
foreign antitrust authorities have been slow in following the U.S. lead



213

in negotiating these agreements, in many cases because they lack
similar legislative authorization from their own governments. In
April 1997 the United States nonetheless managed to negotiate its
first proposed agreement under the IAEAA, with Australia. The
United States has also been pursuing discussions with the
Organization for Economic Cooperation and Development toward a
formal recommendation by that body that would encourage its member countries to enter into mutual assistance agreements that would
permit more sharing of evidence with foreign antitrust authorities.
At the same time the United States has also worked to improve
international antitrust enforcement through the so-called positive
comity approach. This approach is used in cases where markets outside U.S. jurisdiction are affected by anticompetitive behavior that
harms U.S. interests. Under a positive comity agreement, if one country believes that its firms are being excluded from another's markets
by the anticompetitive behavior of firms there, it will conduct a preliminary analysis and then refer the matter to the foreign antitrust
authority for further investigation and, if appropriate, prosecution. In
April 1997 the Justice Department announced its first formal request
to the European Union under a 1991 positive comity agreement. The
Justice Department asked the Directorate General IV (DG IV), the
European Union's antitrust arm, to investigate possible anticompetitive conduct by European airlines that may be preventing U.S.-based
computer reservation systems from competing effectively in Europe.
DG IV has announced that it is actively pursuing the matter.
Another notable ongoing effort in this domain is the competition
advocacy program undertaken jointly by the Justice Department and
the FTC. The two agencies are working together, in programs funded
by the U.S. Agency for International Development, to educate and
otherwise assist governments of developing countries in setting up
antitrust enforcement programs. This assistance has included helping countries to draft competition laws, setting up implementation
procedures, training their staffs, and, in some countries, placing longterm U.S. advisers in the antitrust office. Several countries in
Eastern Europe have benefited from this extensive interaction with
the U.S. agencies, and the program has now expanded into countries
of the former Soviet Union and Latin America.
Although significant progress has been made in international
antitrust enforcement, the growing importance of international trade
makes it imperative that the antitrust enforcement agencies continue their efforts in this area. To this end, the Justice Department has
established the first-ever International Competition Policy Advisory
Committee, comprised of distinguished business, labor, academic,
economic, and legal experts, to advise it on these cutting-edge issues.
Investing in expanded enforcement and globalization of antitrust
principles will lead to better protection of competition worldwide, and
will yield substantial benefits that can be shared by many.



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CHAPTER 7

The Benefits of Market Opening
THE UNITED STATES HAS LONG RECOGNIZED that open
domestic markets and an open global trading system are superior to
trade protection and isolationism at promoting broad-based growth
and prosperity. For decades our open economy and successful U.S.
leadership in liberalizing global trade and investment have generated important benefits for the American people, in the form of
stronger growth and improved employment opportunities. The
opportunity to acquire goods and services from abroad both encourages us as producers to stay competitive and allows us as consumers
to raise our standard of living. In the 1990s, openness to trade and
investment, combined with U.S.-led liberalization of world markets,
has been essential to our economy's sustained expansion.
This contemporary picture of a prosperous America in an increasingly open world economy contrasts powerfully with the economic
climate and international trade policies that prevailed at home and
abroad some six and a half decades ago. In the early 1930s widespread isolationism had reduced world trade to a level only one-third
that of 1929. Fortunately the Nation's leaders of that era saw that the
path of economic isolation and tit-for-tat protectionism had no exit.
During the 1930s and after, the Administration and the Congress
worked together, through such measures as the Reciprocal Trade
Agreements Act of 1934, the precursor of later fast-track legislation,
to revive international trade, just as the programs of the New Deal
worked to restart the domestic economy. World War II disrupted these
early efforts, but after the war the U.S.-led campaign to open markets
worldwide enjoyed a series of outstanding successes. Those countries
that joined us in welcoming market opening, in particular through
participation in the General Agreement on Tariffs and Trade, have
grown and developed at impressive rates. True, these countries might
have experienced growth even without open markets, but the history
of this century has made it increasingly clear that strong growth is
more likely in open than in closed economies.
Bearing this history in mind, this Administration's strategy for
economic growth includes a campaign to foster the continued liberalization of markets worldwide. Although much has been
accomplished in the postwar period, much remains to be done. As the
United States currently enjoys the benefits of relatively open markets at home, this campaign reflects an export-driven agenda aimed



215

at opening markets abroad, reducing current asymmetries in countries' openness. This chapter surveys the primary elements of this
campaign. It also reviews the impact that international trade has had
on national economies including our own and on the distribution of
the benefits of trade within economies (especially among workers).
This discussion underscores the need for a strong commitment to
trade liberalization not only by the United States, but by all of our
trading partners. The chapter concludes with a presentation of recent
developments in a second important dimension of open international
markets, namely, foreign direct investment, and discusses the implications of the growth of U.S. direct investment abroad and of foreign
investment in the United States. The chapter begins, however, with a
review of recent trends in U.S. trade.

TRENDS IN U.S. INTERNATIONAL TRADE
The role of international trade in the U.S. economy today is unprecedented. Until 1970, U.S. exports and imports combined rarely amounted
to more than one-tenth of gross domestic product (GDP; Chart 7-1).
Since 1970, the real volume of trade has grown at more than twice the
rate of output, so that by 1997 exports alone were 12 percent of GDP,
and imports were equivalent to 13 percent.
Yet trade remains a much smaller component of the U.S. economy
than in most countries: in 1995 only four countries had smaller ratios of
Chart 7-1 Exports and Imports as a Percent of GDP
Trade is an increasingly important component of the U.S. economy, although close to
nine-tenths of U.S. expenditure is still on domestic goods and services.
Percent of GDP

14

12

•"

Imports of goods
and services

10

Exports of goods
and services

Q\

I

.

.

I

.

.

I

.

.

1

.

.

1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995
Source: Department of Commerce (Bureau of Economic Analysis).




216

trade to GDP than the United States. This does not reflect high U.S.
trade barriers, but rather such factors as the size of our economy and the
diversity of our endowments, which favor self-sufficiency, and our geographic location, relatively distant from most trading partners.
Estimates that adjust for such factors have often found that the United
States is more open to imports than are most other major countries. But
the point remains that the United States feels the effects of trade and
pressures for globalization much less than do most other countries.
The rising importance of trade in the U.S. economy is part of a worldwide phenomenon. Technological advances in transportation and
communications have contributed to a rapid expansion of the global
exchange of goods and services. There is also strong evidence that policy reforms in many countries, in particular the removal of trade barriers
and other protectionist measures, have played a significant role in this
explosion of trade. The history of the United States during the interwar
period points to the importance of policy in stimulating or inhibiting
trade. In the years between 1920 and 1930, technological progress continued, but policy moved in a different direction: average U.S. tariff
rates more than doubled. The fact that the volume of trade in those
years fell by half rather than rose reveals the important role that government policies can play.

THE SECTORAL COMPOSITION OF U.S. TRADE
The composition of U.S. trade, both exports and imports, has also
changed markedly. Exports of services have enjoyed particularly
strong growth in recent years, rising from $48 billion (18 percent of
total exports) in 1980 to $237 billion (28 percent) in 1996. Over the
same period exports of agricultural merchandise have risen only from
$42 billion (15 percent of the total) to $61 billion (7 percent). In part
these trends reflect Engel's law (as the incomes of households rise, the
share devoted to food falls) and the evolution of U.S. comparative
advantage in more skill-intensive goods and services. But the impact
of market opening may be discerned in these trends as well.
Innovations in global communications infrastructure and the liberalization of services trade in many countries have promoted greater
trade in services. Large tariff reductions on manufactured products,
negotiated in a series of rounds within the General Agreement on
Tariffs and Trade (GATT), have lowered export costs in that sector.
However, agriculture remains relatively protected in most countries.
Exports of both consumer and capital goods have enjoyed rapid sustained growth since the 1980s (Chart 7-2). These two sectors also
represent the fastest-growing components of U.S. imports. But whereas
growth in exports of these goods has tended to occur relatively evenly
across industries, growth of imports has been more concentrated, with
especially dramatic increases in such categories as computer goods.




217

Chart 7-2 U.S. Exports and Imports by Category in 1986 and 1996
Both exports and imports, most notably in services and in consumer and capital goods,
have grown rapidly, due in part to market opening.

U 1986
• 1996

Exports

100
200
0
0
Billions of 1996 dollars
Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers.

300

200

100

300

The fact that growth is occurring in both imports and exports of
consumer and capital goods may seem contrary to the conventional
logic of international trade theory, which is based on specialization
according to countries' comparative advantage. In fact, this trend
reflects the changing nature of trade. Imports and exports today often
grow in tandem even within very narrowly defined product categories: that is, an increasing share of trade is intraindustry rather
than interindustry. In 1996, for example, 57 percent of U.S. trade
occurred within, rather than between, four-digit SITC commodity
groupings (the SITC is a standard classification of goods in international trade; four-digit categories in this system represent highly
disaggregated product groups), and this share has risen from 51 percent in 1989. Whereas interindustry trade (for example, the exchange
of Chinese sweaters for U.S. computers) is associated with traditional notions of comparative advantage, intraindustry trade (for
example, in automobiles and auto parts) is thought to arise principally from fixed costs in production and consumer tastes for variety.
THE GEOGRAPHIC COMPOSITION OF U.S. TRADE
Canada and Japan remain the United States' leading trade partners, together accounting for one-third of both our exports and our
imports. In recent years Mexico and China have risen quickly to the
third and fourth positions; together they represent about 13 percent
of total U.S. merchandise trade. When trade is broken down by world
region, Europe represents one-fifth of both U.S. exports and imports



218

(Chart 7-3). The Asia-Pacific region has experienced an explosion in
growth of both trade and output over the past two decades and now
accounts for more than one-third of total U.S. trade. This trade is
principally with other industrial countries, although trade with
developing economies in the region is also among the fastest growing
anywhere. Trade with Latin America and the Caribbean is also growing but remains less than 10 percent of the total.
Chart 7-3 U.S. Goods Exports and Imports by World Region in 1986 and 1996
Imports from developing Asia have risen rapidly, but are less important than growing
exports and imports with industrialized partners.
North
America
Industrialized
Pacific
Europe

U 1986
• 1996

Developing
Asia
Latin America
and
Caribbean

Exports

Africa and
other
150

150
50
Billions of 1996 dollars
Note: Industrialized Pacific includes Australia, Japan, Hong Kong, Korea, Singapore, and Taiwan.
Sources: Department of Commerce (Bureau of Economc Analysis) and Council of Economic Advisers.

250

50

250

U.S. TRADE BY DOMESTIC REGION
In a country as large as the United States, the regional distribution
of the gains from trade is a relevant concern. The North Central and
Pacific States remain the largest sources of exports, and both regions
continue to enjoy strong export growth (Chart 7-4). However, the
highest rates of export growth have recently been recorded in regions
and States in the center of the country. This is a positive sign, suggesting that the benefits of trade are being realized throughout the
country, not just in the coastal and border States. The impact of the
North American Free Trade Agreement (NAFTA) on regional trends
in production and exporting has no doubt been significant and may be
partly responsible for the rapid growth in exports from the Mountain,
Southern, and North Central regions. These statistics suggest that
the export opportunities presented by market-opening agreements
can benefit the Nation as a whole.




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Chart 7-4 Exports of Goods by U.S. Region
Although exports are a larger share of Gross State Product on the East and West
Coasts, the fastest growth in exports has come from the central regions of the country.
Export share of
Gross State Product

Q 0 to 5%
H 5 to 10%
H 10 to 15%
• 15% and above

North Central
($145bn; 13%)

New England
($35 bn; 9%)

South Atlantic
($70 bn; 11%)

Note: The first number in parentheses is 1996 goods exports in billions of dollars; the second is
average annual growth in exports in the region over 1991-1996.
Sources: Department of Commerce (Bureau of the Census and Bureau of Economic Analysis)
and Council of Economic Advisers.

INITIATIVES IN MARKET OPENING
This Administration's primary focus in its conduct of international
economic relations is on the continued opening of markets worldwide
to trade. However, experience has shown that there is no universal
solvent for trade barriers: no single strategy works in all situations to
open foreign markets. Accordingly, the Administration has pursued
an active trade liberalization agenda on several fronts. While recognizing the importance of an internationally coordinated effort to
reduce trade barriers on a broad multilateral and reciprocal basis, the
Administration is supplementing these negotiations with liberalization efforts at the regional level. In addition, since market access
impediments may be peculiar to a single country, and may not be of
the type traditionally dealt with in a multilateral forum, the United
States sometimes needs to pursue bilateral negotiations to remove
these obstacles to trade.
As this brief survey shows, the Administration is pursuing greater
market access for both U.S. and other countries' exports in a number
of arenas. The importance of this undertaking is highlighted by the
extent to which large portions of the world economy have previously
been exempt from formal negotiations. Although the trade-liberalizing initiatives described above are generally reciprocal in nature,
they tend to lower foreign barriers more than they do our own. This
is the result of the relatively open position taken by the United States



220

throughout most of the postwar period, which has resulted in U.S.
barriers that are already lower on average than those of our major
trading partners. What is more, the United States has led the way
toward the deregulation of domestic industries. In many cases this
earlier deregulation in the United States has produced highly competitive U.S. industries, well poised to benefit from deregulation
abroad.
TRADE-NEGOTIATING AUTHORITY
The U.S. Constitution places ultimate authority to regulate international trade with the legislative branch. However, for the better
part of this century the Congress has provided the executive branch
considerable authority to negotiate trade agreements with foreign
nations. Most recently, between 1974 and 1993, the Congress repeatedly passed legislation giving the President so-called fast-track
negotiating authority. This legislation allows the President to negotiate sensitive and complex trade agreements with other countries, and
commits the Congress to either accept or reject the entire agreement,
without amendment. In this way the Congress retains its constitutionally mandated final authority to regulate international trade,
while turning over the task of negotiating agreements to the executive branch, which is organizationally better suited for that role.
Fast-track authority lends credibility to U.S. commitments in trade
negotiations. Foreign parties to a trade agreement with the United
States know that the agreed-upon package cannot later be reopened
for renegotiation of individual provisions, which in effect would
reopen the entire package, undermining commitments made by executive branch negotiators. In the absence of fast-track authority, this
possibility is real and can have the effect of preventing other countries from engaging in negotiations with the United States.
The history of executive branch trade-negotiating authority has its
roots in the 1930s, a time when international trade flows were heavily restricted by high tariffs throughout much of the world. The
Congress granted President Franklin D. Roosevelt power to negotiate
tariff reductions. This shift in authority came in the form of the
Reciprocal Trade Agreements Act (RTAA) of 1934, which allowed the
President to reduce U.S. tariffs on a bilateral basis by up to 50 percent in exchange for reductions in barriers faced by U.S. exports. The
RTAA was used often in the 1930s and was repeatedly renewed. The
resulting agreements generated large reductions in tariff barriers
and embodied some of the same principles that formed the basis for
GATT after World War II and, more recently, the World Trade
Organization (WTO).
Under the RTAA and later under GATT, tariffs of participating
countries were reduced from more than 40 percent in the 1930s to less
than 6 percent by the late 1980s. By the 1960s negotiations had
expanded to cover nontariff barriers (NTBs) to trade as well. These



221

include price controls, quantitative restrictions (such as import quotas), and quality control measures. But because the RTAA provided
no authority to reduce these barriers, complications arose in congressional ratification of the Kennedy Round GATT agreement in the late
1960s. The Congress's refusal to implement the entire agreement as
negotiated undermined the credibility of the President's negotiating
efforts. The Nixon Administration confronted this problem by pursuing expanded negotiating authority prior to undertaking a round of
negotiations in which nontariff barriers figured prominently.
For this reason, in 1974 the Congress passed the first fast-track legislation. The primary difference between this new authority and that
granted under the RTAA was that fast-track extended presidential
authority to agreements covering NTBs as well as tariff barriers.
Fast-track bills have also generally called for extensive consultations
between the executive branch and both houses of the Congress and
with private sector advisory committees during the negotiations. The
Congress must also be notified in advance of the intention to conclude
an agreement. In return, the Congress promises to introduce the
implementing bill in both houses, with language unchanged, and to
vote on the unamended bill within 60 days. Through these provisions,
the Congress has historically exerted influence over the negotiations—and hence over the resulting agreements—prior to submission
of the implementing legislation. Fast-track has thus proved successful at facilitating negotiations while keeping the Congress involved in
the process and preserving its ultimate authority to regulate trade.
Since the inception of fast-track, two extremely successful rounds of
GATT negotiations have taken place: the Tokyo Round, signed by
WTO members in December 1979, and the Uruguay Round, concluded in 1993 and signed in April 1994. Agreements resulting from other
negotiations have also been approved by the Congress under fasttrack procedures, including the free trade agreement with Israel in
1985, the U.S.-Canada Free Trade Agreement in 1988, and the North
American Free Trade Agreement in 1993.

MULTILATERAL INITIATIVES
By the conclusion of the Uruguay Round negotiations, participants
recognized that pursuing multilateral liberalization exclusively in the
context of negotiating "rounds" was insufficient. Thus, the final
Uruguay Round agreement included a "built-in agenda" for future, more
focused talks within the WTO. This agenda provides a mandate and an
opportunity to continue the liberalization process within the new organization's regular work program. In some cases the built-in agenda calls
for the review and updating of the rules of the multilateral system,
including its dispute settlement mechanism (Box 7-1); in other areas the
goal is the further opening of markets and the reform or elimination of
practices that distort or restrict trade. In the few years since the
Uruguay Round agreement was concluded, negotiations toward further



222

liberalization have occurred—or are occurring—in several sectors. Some
of these negotiations were launched as a result of commitments contained within existing WTO agreements. Others are the result of
forward-looking initiatives given impetus by the United States and its
trading partners within the Asia-Pacific Economic Cooperation (APEC)
forum and other international organizations.

Box 7*1.—The WTO Dispute Settlement Process and U.S.
The WTO Hspute Settlement Understanding (DSU), part of the
Uruguay Round package of agreements, improves on GATT dispute
settlement proceedingsfeyexpediting dedstornnakmg and institutimplementation of dispute panel ruling^ one of which is the acceptance of cross-sector retaliation for countries that choose not to
abide by the ruling. In the 8 years since its institution, many countries have made efficient use of the reformed dispute settlement
mechanism, largely to the satisfaction of all involved.
The introduction of a atrengthened multilateral dispute settlement system in the WTO* together with new WT0 agreements
cohering the protection of intellectual property rights and trade in
services, has brought about a shift in UJ8> tactics for resolving trade
disputes. During the 1980s the United States frequently resorted to
the bilateral negotiations and unilateral sanctions authorised in
Section 301 of U.S* trade law to resolve differences with other countries This approach was used in particular in the areas of
agriculture, intellectual property protection, and services, which
(MTT covered barely or not at all. Beginning in 1995* however, the
DSU and new WTO rules have permitted the United States to use
multilateral dispute settlement procedures to address the overwhelming majority of issues that have been the subject of Section
301 investigations. The results of 35 complaints filed by the United
States suggest that the DSU process has proved veiy effective, with
the United States prevailing in 9 out of 10 rulings to date. The
United States has also reached a bilateral settlement prior to a formal ruling in eight eases. Seventeen petitions are still pending,
Section 301 investigations can now more often make use of multilateral dispute settlement, at least for disputes with WTO member
in areas subject to WTO commitments, All nine of the Section 301
investigations initiated during 1996, and three of the sk investigations initiated in 1997, have involved resort to the WTO dispute
settlement procedures; a fourth was terminated before WTO consultations were initiated* As Chart 7-5 shows, the DSU process has
been used against a variety of comtries, the majority of whieh are
our major trading partners,




223

The Success of Single-Sector Initiatives
The success of multilateral negotiations in the 4 years since the
Uruguay Round ended has in some ways been remarkable. The traditional practice of conducting negotiations in comprehensive, multisector
rounds had been based on the belief that only an agreement covering
many sectors simultaneously could gain enough political support to be
viable. Usually when two or more countries seek reciprocal trade liberalization, the easiest approach is to find one sector that is heavily
protected in one country and another sector that is heavily protected in
the other. By agreeing to liberalize both sectors simultaneously, each
country can please at least one group of domestic producers.
Chart 7-5 U.S.-lnitiated WTO Dispute Settlement Cases by Target Country
Since their inception in 1995, the WTO dispute settlement procedures have been broadly
used by the United States.

Japan 5

x"\

^

EU and affiliates 11

Korea 3

Australia 2

Canada 2

^
III ^
IIB

Others 10

India 2
Source: Office of the U.S. Trade Representative.

However, recent WTO agreements in financial services, telecommunications, and information technology represent significant
departures from this traditional negotiating format, in that each sector was negotiated separately from the others. Because the United
States is believed to be highly competitive in all three of these sectors, one would have thought that U.S. concessions in some other
sector would be necessary to reach an agreement. But a common element in all three sectors is that they are key inputs into production
in other sectors, and are necessary for economic development and
profitable participation in an advanced, information-driven global
economy. Industrialists in emerging-market countries, for example,
understand that a modern telecommunications infrastructure is



224

essential to economic development. Hence, liberalization of these sectors enjoys weighty domestic support in most countries, so that
cross-sector tradeoffs proved unnecessary. As transportation services
are also important inputs to trade and production in the modern
global economy, it is hoped that the future resumption of single-sector negotiations in this area will bear fruit. Other sectors slated for
individual negotiation under the built-in agenda are agriculture and
government procurement.
Services
Two of the new WTO agreements—those in financial services and
telecommunications—deal with trade in service industries. For most
of its history GATT did not cover trade in most types of services.
Thus the conclusion of a new General Agreement on Trade in
Services (GATS) was an important contribution of the Uruguay
Round. The new agreement made it possible for the first time to
undertake the negotiations that led to the recent financial services
and telecommunications agreements, and should eventually lead to
the liberalization of other services.
GATS provides for the first time a solid framework of trading rules
and obligations for services and the continued expansion and refinement of those rules in multilateral negotiations. However, the
pledges from WTO member countries within GATS itself to liberalize
their services sectors are fairly narrow in scope. Out of some 150
individual service activities identified, most countries have committed themselves to liberalize fewer than 100. Moreover, most of these
commitments are in services where countries have either little
domestic production or little domestic protection. Although it is typical in trade negotiations for countries to liberalize first where the
domestic impact is smallest, in this case it means that GATS as written falls well short of comprehensive liberalization. This was
acknowledged by the signatories at the time. They therefore included in the agreement specific deadlines for future negotiations in key
areas. Some success has been achieved in financial services and
telecommunications; the maritime negotiations, on the other hand,
have been suspended until more comprehensive services negotiations
take place in 2000.
Financial services. Multilateral negotiations on a broad range of
financial services resumed in April 1997. (An earlier attempt had
ended in 1995 with only an interim solution, as the United States
had found some other countries' offers inadequate.) In continuing
these negotiations, the United States emphasized the need for agreement on four principles. Foreign-based firms should be assured of
retaining any rights they had acquired prior to the agreement, of the
right to establish new operations, of the right of full majority ownership, and of substantially full national treatment (that is, legal and
regulatory treatment equivalent to that received by domestic firms).



225

These talks were successfully concluded on December 13 and produced agreement among 102 WTO member countries on broad
liberalization of their banking, securities, insurance, and financial
data services sectors. The commitments apply to about $18 trillion in
global securities assets, $38 trillion in global bank lending, and about
$2.2 trillion in worldwide insurance premiums.
Telecommunications. On February 15, 1997, the United States and
69 other WTO members successfully concluded negotiations on basic
telecommunications services, such as telephone service. The agreement commits countries to provide market access and national
treatment to service suppliers from other WTO members. Sixty-five
countries also agreed to a set of specific procompetitive regulatory
principles. The agreement eliminates certain restrictive practices
in countries that account for 95 percent of world telecommunications
revenues, estimated at about $600 billion in 1996. Before the
agreement, activities representing only 17 percent of telecommunications revenues in the top 20 markets were open to U.S.
companies. The opening of these markets to foreign providers offers
enormous opportunities for U.S. telecommunications firms. Whereas
telecommunications markets in many countries continue to be served
by inefficient government monopolies, markets in the United States
have been largely deregulated. Deregulation, along with a large
internal market, has resulted in a position of competitive advantage
and technological leadership in this area for U.S. suppliers.
Information Technology
Information technology products are often "enablers" for the efficient production of goods in other sectors. Liberalization of this
sector therefore takes on added importance as a source of growth
worldwide. Concluded in Singapore in December 1996, the
Information Technology Agreement (ITA) will liberalize trade in this
half-trillion-dollar market. The agreement covers global information
technology products such as semiconductors, telecommunications
equipment, computers and computer equipment, and software.
Signatories include countries accounting for over 90 percent of trade
in this sector. The agreement also covers office machines and
unrecorded electronic media (such as computer diskettes and CDROMs). Each of the 43 participating countries has agreed to
eliminate tariffs on these products by 2000, although some countries
were granted an extended phaseout of tariffs for a limited number of
products. The agreement will benefit all the countries participating,
but it is especially important for the United States as a major
exporter of information technology products. The ITA also calls for
further negotiations to extend country and product coverage and
eliminate NTBs under an expanded agreement, dubbed ITA-II.
These negotiations are scheduled to conclude by the summer of 1998.



226

Agriculture
Some agricultural tariffs were reduced in various GATT negotiations over the decades, but as in the case of services, comprehensive
agricultural trade barriers only recently became a central focus of
GATT talks. The result was the historic Uruguay Round Agreement
on Agriculture, the first comprehensive agreement to reduce barriers
to trade in agriculture. Among other commitments, the agreement
specifies cuts in agricultural export subsidies, reduces aggregate
support to farmers, converts NTBs to tariffs, binds all tariffs at levels that imply reductions in previously existing tariffs, and provides
for minimum access quotas for products whose trade had been largely eliminated by past protection. Reflecting a general interest in
further liberalization, agricultural negotiations are a part of the
WTO's built-in agenda, with talks scheduled to resume by January
2000.
Government Procurement
Government procurement and contracting account for up to 15 percent of economic activity in some countries, yet are often subject to
policies that discriminate against foreign suppliers. Many countries
maintain explicit preferences for goods and services provided by
domestic firms over those from foreign competitors. Bias toward
domestic producers can manifest itself in many other subtle ways, for
instance in limited advertising for bids and a reluctance to spell out
selection criteria in advance. Governments may also specify contracts in terms of a certain process or method rather than in terms of
the final product. Different firms often develop products that serve
the same purpose, but by different processes. If only domestic firms
use a particular process, and foreign firms another, governments can
in effect exclude foreign suppliers by specifying that process.
Government procurement has historically been excluded from
international trade rules; the nondiscrimination principles contained
in the original GATT of 1947 do not apply. To address this situation,
a group of countries consisting principally of members of the
Organization for Economic Cooperation and Development (the
OECD, which is composed mainly of high-income industrial countries) negotiated the 1979 GATT Agreement on Government
Procurement during the Tokyo Round of multilateral trade negotiations. That agreement was renegotiated and expanded during the
Uruguay Round, and the resulting WTO Agreement on Government
Procurement (GPA) went into effect on January 1, 1996. The GPA
requires signatories to accord nondiscriminatory treatment to the
goods and services, including construction services, of other signatories and to follow transparent government procurement procedures.
The agreement presently applies to government purchases estimated to be worth over $400 billion annually.



227

Although the GPA was a significant achievement, only 26 countries
participate in it, most of them OECD countries; many of the world's
emerging markets in Asia, Latin America, and elsewhere are not signatories. Given the size of the worldwide market (with an estimated
value over $3.1 trillion) and its importance for U.S. exporters, the
United States has long sought to extend rules on government
procurement to all participants in the multilateral system. Largely at
the United States' urging, WTO members agreed in 1996 to establish
the WTO Working Group on Transparency in Government Procurement. Formal negotiations are scheduled to begin by January 1999.

REGIONAL INITIATIVES
During the 1980s the United States turned an eye toward bilateral and regional liberalization initiatives, not with the purpose of
supplanting the multilateral talks, but rather to supplement and
spur progress on that front. Regional agreements can be beneficial,
but they raise some valid concerns: although such agreements can
generate new trade by lowering barriers between participating countries, they may also inefficiently divert trade from nonparticipants
that would otherwise supply goods and services more cheaply. From
the participants' perspective, whether the benefits of trade creation
outweigh the costs of trade diversion depends on how the agreement
is structured. There are reasons to believe trade creation will predominate when the agreement encompasses countries that
geography has made natural trading partners: when costs of transportation are included, countries in close proximity are more likely to
be each other's low-cost suppliers, minimizing the scope for trade
diversion. But for countries on the outside, regional agreements are
more likely to impose costs than provide direct benefits.
Sometimes regional agreements can exert a positive influence on
the multilateral process (Box 7-2) or support the participants' foreign
policy positions. For example, the benefits for the United States of
the free trade agreement with Israel, negotiated in 1985, were more
symbolic than economic. The agreement reinforced political ties
between the two countries, and Israel did reap important economic
benefits from it as well. Similarly, although economic motivations
were significant in the formation of what is now the European Union,
a contributing factor was the desire to engender a sense of community that might prevent another intra-European war. The promotion
of democracy and political stability as well as economic stability and
development is also a factor in the Free Trade Area of the Americas
initiative, discussed below.
In the last 10 years the United States has initiated and signed a
number of important regional initiatives. The agenda for the remainder of this century and beyond includes laying the foundation for open
trade in the Americas as well as moving toward expanded trade
throughout the Pacific Rim.



228

Box 7-2*—Regional Trade AgJFaem^iits: Building Blocks or
Stumbling Blocks for the Multilateral Process?
Does regionalism accelerate or slow the momentum of multilateral liberalization? Some compelling arguments suggest that
the formation of regional blocs can serve as a building block—or
act as a stumbling block—to the multilateral process.
Perhaps the most compelling theoretical argument for protectionism—and the primary mechanism by which regionalism
might act as a stumbling block—is the optimal tariff argument,
Imposing tariffs may enable a country to exploit some monopsony power in its import markets, and so achieve more favorable
terms of trade with the rest of the world. Moreover, a group of
countries setting this optimal tariff in concert may have more
success, because of their combined market power, than if each
acted alone. Fortunately, Article XXIV of GATT, which governs
regional trading arrangements among members, prohibits
increases in tariffs against nonparticipants* (GATS now extends
the same principle to services,) A regional trading arrangement
may also undermine the multilateral process if special Interests
ean manipulate the airangement's more technical aspects (such
as exemptions, phaseotits, and rules of origin) to their advantage or if regional initiatives divert political capital and energy
from multilateral initiatives,
On the other hand* regional arrangements can serve as build*
ing blocks for multOateralism in several ways* They can lock
in countries' unilateral reforms, simplify negotiations by reducing the number of countries involved, and Bet in motion a
process of competitive liberalization in which reluctant countries are prodded into liberalizing by the threat of exclusion
from a regional agreement.
The history of NAFTA provides an example of how regionalism can lock in reforms. By entering into NAFTA, the
then-President of Mexico hoped to prevent Ms successors from
undoing the unilateral liberalizations his government had
undertaken since the mid-1980s, Mexico's reaction to the peso
crisis of 1994-95 showed that this lock-in strategy worked,
Unlike in the 1982 debt crisis, when Mexico raised trade barriers against all its trading partners, in the 1994-95 crisis Mexico
continued to reduce tariffs for its NAFTA partners (while raising tariffs against some other countries).
Negotiating with 150 other countries over dozens of sector^ as
WTO negotiators must do, can be inefficient and difficult. The
process can be made more efficient if countries can join into
customs unions and thus negotiate as a larger unit. Also, within




229

Bent 7i&r-Continued
a group it may be easier to test out mnoYative agreements
in curtate' areas—such as serviees, in^estment^ dispute settlement, and eompetitlon policy—before introducing their
provisions into the mtiltilateral negotiations.
The events rf 1993 demonstrate the power of competitive liberalization. Ttie Administration is said to ha^e made a ^triple
play® that year, with the passage of NAFTA, the pathbreaMng
APEC summit* and the a)nctoaion of the Uruguay Hound* These
not only were landmark achievements in themselves hut interacted with each other in advantageous ways. By pushing
NAFTA through the Congreaa despite strong opposition, the
President revealed the political will to make free trade commitments stick* Combined with the upgrading of APEC
negotiations to a Mgh-profile leaders* meeting in Seattle, the
passage of NAFTA sent a strong signal to the Europeans that
the United States had serious regional alternatives should the
Uruguay Bound of GATT negotiations fall apart. German polieymakerg have reportedly stated that this was part of their
motivation for piwMling on their EU partners to make certain
concessions that allowed the GATT negotiations to be success&Ily concluded in December 1093.
These examples show that there are both positive and negative links between regionalism and the multilateral
negotiations Every regional bloc will have its share of each. In
the and? however,, the evidence suggests that the recent growth
of regionalism has served more to foster than hinder progress
toward Kberalfeation. Those groups of countries that have participated in regional liberaM^ation have often tended to reduce
their barriers against nonmembers at the same time that they
do m internally,
The Free Trade Area of the Americas
The idea of a free trade area encompassing all of the Americas took
its first step toward realization in December 1994, when the
President of the United States and leaders of 33 other Western
Hemisphere countries met in Miami for the first hemispheric summit
since 1967. There they committed their governments to concluding
the negotiation of a comprehensive free trade agreement no later
than 2005, with concrete progress due by the end of the century. The
Miami Summit led to three meetings of the countries' trade ministers,
at which 12 working groups were established to lay the foundation
and begin preparations for actual negotiations toward a Free Trade
Area of the Americas (FTAA).




230

The United States has championed this regional initiative and
remains actively engaged in it, as a means of fostering closer political
and economic ties with and further trade liberalization in our hemispheric neighbors. Building on unilateral liberalizations undertaken
in the late 1980s, many Latin American countries have already negotiated preferential trading arrangements with each other. Examples
include MERCOSUR (which includes Argentina, Brazil, Paraguay,
and Uruguay), the revitalized Central American Common Market,
and the Andean Community. Their dismantling of trade barriers, both
unilaterally and in the context of regional agreements, reflects a significant shift away from traditionally inward-oriented trade policies
toward more liberalized regimes. Although generally reflective of
progressive policy programs, the preferential nature of these arrangements is of concern to the United States, because it means that other
countries are gaining favored access to some of our most natural
trading partners. As these arrangements proliferate, the potential
benefits to the United States of participating in them—and the costs
of remaining outside—are rising. Chile, for example, is now linked in
preferential trading agreements with every major country in the
hemisphere except the United States. For this reason, U.S. exports to
Chile remain subject to tariffs averaging 11 percent, while exports
from other Western Hemisphere countries increasingly enjoy dutyfree access. Although Chile is only one country, it is a salient example
of a growing trend.
An FTAA will bring substantial benefits to all countries in the
region, which had a combined GDP of over $9 trillion and a market of
756 million people in 1995. These benefits include not only a significant reduction of import barriers but also deeper geopolitical ties. The
general lowering of trade barriers will be particularly beneficial to the
United States, since our market already is much more open than
most. Although this benefit could in principle be achieved through the
multilateral process, regional action probably offers more immediate
and complete liberalization.
Asia-Pacific Economic Cooperation
Created in 1989, the APEC forum began to take on deeper significance in November 1993, when the President hosted the first-ever
summit of the leaders of the member countries, in Seattle. This meeting elevated the importance of the organization and set the stage for
a second summit, in Bogor, Indonesia, in 1994. There the leaders
announced the goal of achieving "free and open trade and investment
in the region" by 2010 for the developed-country members and by
2020 for the developing countries in the group (Box 7-3). In Osaka,
Japan, the following year, an agenda was laid out for achieving that
goal, and in 1996, in discussions at Subic Bay in the Philippines,
implementation of the agenda got under way. The most immediate




231

result of the Subic Bay meeting was a call by the APEC leaders for the
elimination of all tariff barriers among member countries to trade in
the information technology sector. This declaration laid the foundation for the Information Technology Agreement described above.
Box 7-3.—APEC Tariff Reductions and Other Initiatives
Mthough APEC members have not yet engaged in formal
negotiations owr tariff reductions, many haw already implemented dramatic reductions in their tariff lewis, Betwete
1988 and 1998 the average applied tariff among AP1C
members fell by more than a third, from 15*4 percent to 9*1 per*
cent (Table 7*1);
Hie progressive lowering of tariff barriers k otdy 0&e aspect
of the APEC Aetion Agenda, 13iis agenda details steps that
AFBC members have agreed to take to promote greater economic interaction throughout the region. Other agenda items
include reducing barriers to competition m the fast-growing air
transport market, and a variety of measures designed to reduce
the cost of doing business in the region. These include the development $f an infraatmeture opportunity data base, the
promotion of uniform customa dasmfieatioms and procedure^
and advances in the hurmoni^atfoii of standards.

TABLE 7-1.—Tariff Rates of Asia-Pacific Economic Cooperation Members
[Percent, simple average]
Economy

1988

1996

61
2.0
67

Australia
Brunei
Canada

156
39
91

Chile
China .
Chinese Taipei (Taiwan)
Hong Kong

199
403
126
0

Indonesia.. .
Japan
Malaysia

203
72
130

13.1

Mexico .. ..
New Zealand
Papua New Guinea

106
150
(')

12.5

Philippines ..
Singapore
South Korea

27.9

15.6

4
192

0
79

Thailand
United States

408
66

170
64

154

9.1

Average
'Not available.
Sources: Institute for International Economics.




232

109
23.0

86
0
90
90
70
(')

Fundamental to relations within APEC is the pledge of "open
regionalism." APEC seeks to serve as a building block to the
multilateral system of liberalization and not a stumbling block. As a
start toward implementing this vision, in November 1996 APEC
served as a catalyst for the ITA. APEC members are engaged in a
process that builds upon the success achieved in the ITA. At the
most recent summit, in November 1997 in Vancouver, Canada, the
APEC leaders agreed to expand APEC's role as a catalyst for global
market opening, by endorsing liberalization initiatives in 15
sectors. Among these are environmental services and technology,
medical equipment and instruments, and chemicals—sectors in
which the United States is a major exporter. APEC will thus
capitalize upon the fact that its collective size and importance in
world trade will help in leveraging multilateral agreements that will
cut trade barriers globally. The leaders' decision recognizes the
importance of taking APEC sectoral initiatives into the WTO
where appropriate, and including binding global agreements, as was
done with the ITA.
With its member countries now accounting for approximately half
of world output and trade, the APEC region has grown in significance
for the United States. Already the share of U.S. exports going to
APEC members has increased from 52 percent in 1986 to 70 percent
in 1996. APEC is also demonstrating its importance in other ways: in
November 1997 APEC leaders embraced a strategy for dealing with
the ongoing currency crisis in East Asia.
BILATERAL INITIATIVES
As successful as these multilateral and regional initiatives have
been, significant barriers to U.S. exports remain, in some countries
more than others. The reduction of formal barriers to trade worldwide
often exposes cross-country differences in institutions and norms that
also serve to limit trade. To the extent these practices are countryspecific, it is sometimes easier to address them on a bilateral rather
than a multilateral or regional basis. This Administration has a
record of actively pursuing remedies to trade barriers abroad. These
efforts are designed not only to liberalize markets for American products, but to provide broad market access for all would-be exporters.

China
China is the world's lOth-largest trading nation and the United
States' fourth-largest trading partner. U.S. exports to China have
nearly quadrupled in the last decade. However, China's wide array of
barriers to trade, together with the relocation of the source of many
of our imports to China, has resulted in a U.S. trade deficit with
China of over $39.5 billion in 1996, an increase of more than $5.7 billion from 1995. Trade data from 1996 show that, when both goods and
services are included, our recorded deficit with China exceeds our



233

deficit with Japan. U.S. exports to China grew a slight 8 percent in
1997 (through November), compared with 21-percent growth in U.S.
imports from China. Further opening the Chinese market to our
exports is an important goal of U.S. bilateral and multilateral negotiations with China.
Negotiating the terms of China's accession to the WTO is a major
part of the Administration's effort to address this trade imbalance.
The focus of the WTO access negotiations rests on opening China's
market to foreign goods and services and bringing China's trade
regime into conformity with international trade rules. The United
States is also pursuing an active bilateral agenda with China to
resolve outstanding issues ranging from market access for U.S. agricultural exports (including citrus, wheat, and meat) to protection for
intellectual property rights.
European Union
The trading relationship between the United States and the
European Union is important and strong, but it has had its frictions.
The U.S.-EU Agreement on Mutual Recognition of Product Testing or
Approval Requirements, concluded in June 1997, is evidence of this
strength. When fully implemented, the agreement will require each
government to recognize the results of product testing and
certification requirements set by the other, thus eliminating the need
for duplicative testing, inspection, and certification requirements for
products in trans-Atlantic trade. The agreement reduces trade
barriers in six areas—telecommunications, medical devices,
electromagnetic compatibility, electrical safety, recreational craft,
and Pharmaceuticals—covering approximately $50 billion in
two-way trade. The agreement will allow products and processes to
be assessed in the United States for conformity to European
standards, and vice versa, saving U.S. exporters more than a billion
dollars annually.
In recent years, however, longstanding divides between the United
States and the European countries have reemerged, along with new
areas of disagreement. In 1997 alone the United States has had to
deal with disputes resulting from decisions made and deadlines set
by the European Commission. The first involved a European ban on
products made with so-called specified risk materials; these are foodstuffs that the European Union considers potentially contaminated
with the agent that causes bovine spongiform encephalopathy, or
mad cow disease. The other disputes involved restrictions on the
imports of furs obtained through the use of leghold traps, the biogenetic alteration of corn, and the process by which wine for export
to Europe is made. The fur dispute was resolved by an agreement to
phase out the use of certain traps in the United States; the other
issues remain outstanding.



234

Japan
Japan is our second-largest trading partner. Our two countries
share a long history of negotiated access to the Japanese market for
U.S. goods. A series of agreements have sought to address a range of
structural features of the Japanese economy that act as market
access barriers; these include closed distribution systems, overregulation, lack of transparency in procurement practices, and
exclusionary business practices. In addition, the two countries have
negotiated sectoral agreements on semiconductors, wood products,
cellular phones, construction, and other goods and services.
Since the beginning of this Administration the United States and
Japan have negotiated 33 trade agreements. Under the U.S.-Japan
Framework for a New Economic Partnership Agreement, reached in
1993, the two countries have negotiated sectoral agreements covering
such sectors as automobiles and auto parts, insurance, financial services, telecommunications, medical technology, and flat glass. These
are generally sectors in which the United States is competitive but in
which our share of the Japanese market often lags behind our shares
in the same sectors in other industrial countries' markets. These
agreements included objective criteria to guide the two countries in
evaluating their success. Under the Framework Agreement, bilateral
agreements on structural issues including deregulation, investment,
and intellectual property rights also were reached.
Although noteworthy progress has been made under many of these
agreements, progress has fallen short in some areas. The United
States places priority on full implementation of its bilateral agreements with Japan and believes that more vigorous enforcement is
necessary to ensure that their goals are achieved. In addition, the
United States continues to seek new market access agreements with
Japan to address barriers in specific sectors. Market opening is consistent with a larger deregulation program currently under way
within Japan. Under the Enhanced Initiative on Deregulation and
Competition Policy, to which the President and the Japanese Prime
Minister agreed in June, four sectors—financial services, telecommunications, housing, and medical devices and Pharmaceuticals—were
identified as the focus of efforts in this area.
The United States also sees the WTO dispute settlement process as
useful in addressing specific Japanese market access barriers. In
December 1997 the United States reached a settlement with Japan
regarding Japan's compliance with a WTO decision against its
discriminatory taxation of distilled spirits. The United States is also
pursuing a case against Japan's varietal testing requirements for
fruit. On another front, the United States challenged an array of
measures that Japan has put in place over the past 30 years to
restrict imports of photographic film and paper, but the WTO panel
did not rule favorably.



235

Negotiations in both regional and multilateral fora have also generated real market opening in Japan. The WTO agreements on
information technology, basic telecommunications, and financial services will increase U.S. market access to many WTO members,
including Japan.

THE EFFECTS OF MARKET OPENING
This Administration's efforts to open markets worldwide, reviewed
in the previous section, are part of a long U.S. tradition of leadership
in market liberalization. These efforts have been remarkably successful: barriers to international transactions, on average, are at a
mere fraction of their 1930s levels. But it is not enough to measure
the extent to which markets have been opened. The bottom line for
the United States is the net benefits this opening brings, not just for
the U.S. economy as a whole but for typical American workers and
consumers. This section discusses the sources of benefit from international trade and some estimates of the impact of trade on U.S. GDP.
This is followed by a discussion of international trade's impact on U.S.
workers.
THE BENEFITS OF TRADE LIBERALIZATION
The benefits to an economy from international trade are of two
types: static gains provide a one-time increase in income, whereas
dynamic gains result in a more or less permanent increase in the
economy's rate of growth. The former can be significant, but it is the
accumulation over time of the latter that can generate much larger
improvements in living standards.
The primary source of the static gains from trade is specialization,
which allows resources to be used more efficiently. When one country
produces and exports those goods that it can produce relatively cheaply (for instance, wheat in the United States) and imports those that
are relatively cheap to produce abroad (for example, coffee from
Brazil), this trade can boost living standards on both sides of the
transaction. Such trade can be beneficial even in cases where one
country could produce both goods more efficiently. This notion, commonly referred to as comparative advantage, is straightforward when
applied to individuals—each of us sometimes purchases from others
some goods or services that we could make or perform even better
ourselves, because we realize that our time is most profitably spent
doing those things we do best. But the principle applies equally well
to countries. When each country specializes in what it produces relatively more efficiently, the resources of both are put to use where they
generate the greatest economic value. Free trade thus is a positivesum, not a negative- or a zero-sum, game.




236

The benefits of more efficient resource allocation are augmented
when economies of scale are present. For some goods, such as automobiles, the average cost of production falls as more of the good is
produced. Again, opening markets to trade allows production of such
goods to be concentrated in those countries that produce them relatively well. They can then produce more of those goods, exploiting
these economies of scale. This helps explain why the United States
trades more with similar countries (Canada and Europe, for example)
than dissimilar ones: such countries presumably have similar
resource endowments, and this limits the potential gains from more
efficient allocation, but they can still gain from exploiting scale
economies. Such trade often offers yet another benefit: besides making goods cheaper, it increases the variety of goods available to both
consumers and producers.
By encouraging continuous productivity improvements, international trade can increase an economy's growth rate; this is the source
of the dynamic gains from trade. Trade stimulates productivity
improvements most directly through its procompetitive effects. By
subjecting domestic firms to foreign competition, trade gives them an
incentive not only to lower prices, but also to strive to enhance productivity, which further reduces prices by lowering average cost.
These gains from increased competition differ from the other gains
from trade in that they are recurring: although competition is only
introduced once, it leads to a cycle of productivity improvements and
quality enhancements that continue to benefit the economy indefinitely. Trade (and international investment, discussed below) can also
lead to increases in the growth rate by facilitating the transfer of
technology between countries. Although the protection of intellectual
property rights in the short term is important for maintaining the
incentive to conduct research and development, over the longer term
the free flow of technological advances across borders will encourage
ever more efficient utilization of the world's scarce resources.
MEASURING THE GAINS FROM TRADE
How are the benefits from liberal trade policies to be gauged in
practice? The difficulty in measuring the effects of international trade
agreements is that they are but one event among many. In an economy the size of the United States, GDP both rises and falls in response
to many factors, most of which have nothing to do with trade agreements.
NAFTA provides a prime example of the problems involved. NAFTA
entered into force in January 1994. The following December, Mexico
experienced a deep economic and financial crisis for reasons unrelated to the agreement. The result, in 1995, was a steep fall in output in
Mexico, an increase in unemployment, and a drop in real wages
there. A natural side effect of the crisis was a dramatic decline in
Mexico's imports, brought on by greatly reduced domestic income and



237

demand, higher import prices due to devaluation of the peso, and, to
a limited extent, higher tariff barriers against non-NAFTA trading
partners. Despite this crisis-induced decline in trade with Mexico, it
is possible to discuss gains for the U.S. economy derived from
NAFTA. Because of the agreement, Mexico did not raise tariff barriers against the United States or Canada, but only against other
countries. As a consequence, not only did U.S. exports to Mexico not
decline by as much as they might have, but some believe the agreement sped the general recovery of the Mexican economy and of
imports from the United States. Seeking to take the extraneous
effects of the crisis into account, the Administration commissioned a
report, which estimated that NAFTA increased U.S. income by $13
billion in 1996.
Despite the difficulty of disentangling the many causes of national
income growth, a large number of studies have assessed the benefits
of trade liberalizations, real and hypothetical. Some have examined
the potential benefits from removing existing restrictive measures. A
recent study of the costs of protection in the United States, for example, suggests potential consumer gains of approximately $70 billion
in 1990 (1.3 percent of GDP) from removing existing barriers. A drawback of these studies is their inability to incorporate all the benefits
of international trade enumerated above. Although they do capture
the static costs of inefficient resource allocation, these studies are
incapable of quantifying the value of forgone varieties, quality
improvements, or productivity enhancements that would take place
in the absence of trade barriers. Thus, studies of this type understate
the benefits from trade.
Another approach to understanding the benefits of trade is to
examine the statistical correspondence between openness and growth
rates across a large sample of countries. Such cross-country studies
hold constant other well-known determinants of growth, such as
investment and education. The common empirical finding is that
increased trade is associated with higher income. For example, one
recent study, using data from 123 countries, estimated that every
percentage-point increase in openness (measured as the sum of
imports and exports, expressed as a percentage of GDP) was associated with a 0.34-percent increase in real income per capita between
1960 and 1985. Since 1960, U.S. openness by this measure has
increased by 12.7 percent of GDP; this estimate would imply that the
increase in trade was responsible for approximately a 4.3-percent
increase in U.S. income per capita by 1997.

TRADE AND THE AMERICAN WORKER
The public debate over trade liberalization tends not to focus on
whether trade brings benefits for the economy as a whole. It is widely



238

conceded that it does. Instead, recent concerns have focused on the distributional impact of increased trade. This issue arises from the
tendency of increased trade to favor some domestic industries while
putting others at a disadvantage. As export-oriented industries expand,
they draw resources away from the rest of the economy, resulting in a
relative decline in other industries. This reallocation of resources will
in all likelihood benefit some groups and injure others. Of particular
concern are the impacts on workers, including average wages, the
wages received by low-skilled relative to more highly skilled workers,
the availability of jobs in the economy, and the extent to which workers
suffer from job dislocation due to trade. This section discusses first the
effects of trade on wages, and then the effects on employment. In each
case we begin by discussing effects in the aggregate (on average wages
and total employment) and then turn to distributional and individual
effects that can be masked by the aggregates.

TRADE AND AVERAGE WAGES
Throughout the first half of the postwar era, real average hourly
wages for U.S. production and nonsupervisory workers increased at
an average rate of about 2 percent per year. Between 1974 and 1996,
however, this measure of real wages fell by roughly 10 percent,
retreating to 1965 levels. The early 1970s also saw a dramatic acceleration in the growth of world trade, to rates that (since 1972) have
consistently outpaced that of world income growth. This trend was
especially striking in the United States, where growth in trade
exceeded growth in output by approximately 3.5 percentage points
per year following 1972. The coincidence of increasing trade and
falling real average hourly earnings suggested to many that international forces were the source of this decline.
This inference is probably wrong, however. To begin with, it is more
appropriate to focus on the level of total compensation (wages of all
workers plus nonwage compensation) than on wages of production
and nonsupervisory workers alone. Wages of production workers have
recently grown less rapidly than overall wages. Nonwage compensation, which includes health care benefits, pension costs, and other
fringe benefits, has grown relative to wages in recent decades—so
much so that total real compensation has increased by almost 8 percent since 1974, despite the decline in real wages. Although this
represents slower growth of total compensation than in the 15 years
before 1974, this slowdown is more appropriately explained by factors
other than international trade, in particular by a slowdown in productivity growth.
The compensation of labor is generally believed to be determined by
worker productivity. Between 1959 and 1973, nonfarm business
productivity (output per worker hour in the nonfarm business sector)
grew at a rate of 2.9 percent per year. Productivity growth slowed,
however, between 1973 and 1990 to approximately 1.0 percent per



239

year. Given the productivity slowdown, one would expect a slower
rate of increase in real compensation during this period. Adjusting
compensation by the consumer price index will not necessarily reveal
this relationship: to producers—the ones making the hiring
decisions—the real output of their workers must be judged only in
terms of the prices received for their goods, not the prices of all goods
and services that consumers buy. This implies that a more
appropriate deflator is the nonfarm business implicit price deflator.
And indeed when this measure of prices is used, a remarkable
correlation is observed between productivity growth and growth in
compensation over both periods (Chart 7-6). Policies aimed at
increasing productivity growth, rather than at reducing
international competition, are therefore more likely to increase the
growth rate of real compensation.
Chart 7-6 Real Wages and Labor Compensation, and Productivity
Using the implicit price deflator, real compensation has kept pace with productivity
growth. Using the consumer price index as a deflator, real compensation has lagged.
Index, 1959 = 100
200

Nonfarm business (NFB) productivity
Real compensation
using NFB implicit price deflator

180

160

140

*

-"*

Real compensation
using the consumer price index

120

100

"~

Real average hourly earnings
using the consumer price index

i . . i . . i . . i . . i . . i . , i . . i . . i . . i . . i

80
1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

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

Although total compensation is thus driven by overall productivity
growth, there is an additional effect related to the industry in which
workers are employed. Standard theories of wage determination
assume perfectly competitive labor markets, in which workers of similar skill should earn comparable compensation even when employed
in different industries. These assumptions, however, are not borne
out in reality. There has long been a relationship between industry
and compensation, such that individuals with similar characteristics
tend to earn more in some industries and less in others (Box 7-4). This




240

raises the possibility that some workers could increase their pay simply by moving to another industry.
A recent study indicates that jobs associated with goods exports tend
to pay wages approximately 12.5 to 18 percent higher than other jobs.
As exporters typically employ relatively skilled workers, a part of this
figure is due to differences in observable skills. But even after this factor is accounted for, a significant wage differential remains: the
adjusted wages of unskilled workers are approximately 7 percent
higher, and those of skilled workers approximately 5 percent higher, in
export-oriented industries than in the rest of the economy; accounting
for differences in nonmonetary compensation results in differentials
that are larger still. Working in export industries thus has the potential to benefit workers—and to benefit unskilled workers even more
than skilled workers.

TRADE AND RELATIVE WAGES
Some commentators have pointed to growing differences in the relative wages of skilled and unskilled workers as an indictment of free
trade. During the 1980s, a time when U.S. trade volumes were rising,
the wages of skilled workers rose between 8 and 15 percent relative
to those of unskilled workers (depending on how one defines
"skilled"). Given the rough coincidence of these changes, it is tempting to single out international trade as responsible for this increasing
wage disparity. Moreover, a significant source of the expansion in
world trade has been the entry into the world marketplace of many
Asian economies well endowed with unskilled workers. Thus, casual
observation seems to support the claim that free trade is detrimental
to unskilled U.S. workers: these workers now compete with a vast
pool of unskilled workers abroad, and the expected result of this competition is a decline in their wages.
Most careful analysis of the direct evidence does not strongly support the notion that international trade is the major source of
increasing wage inequality. Skill-biased technological change, for
instance the use of computers and robotics, has been a more important source. The nature of this technological change has reduced
demand for unskilled workers and increased demand for skilled workers. This phenomenon can be expected to reduce the wages of
unskilled workers relative to those of skilled workers, and perhaps
reduce them absolutely. Although the contribution of international
trade to observed productivity changes has yet to be established,
recent research indicates that international trade is responsible for
only perhaps 10 to 15 percent of the observed increase in wage
inequality during the 1980s.
Furthermore, U.S. trading patterns are inconsistent with the notion
that trade liberalization is substantially depressing the wages of
unskilled workers. Although the surge of imports from some low-wage



241

Box 7-4.—Industry-Related Differences in Wages
Basic economic theory tells us that equally productive workers might to receive equivalent compensation. But there has
long been a fairly stable pattern of differences in wages for similar workers across U.S. industries* as Table 7-2 illustrates* The
table shows that a worker in the petroleum industry for example,, can expect to receive about 53 percent more in compensation than the average U.S. worker with similar characteristics
(such as education, race, and geographic location). Similarly,
workers employed in private household services can expect compensation that is 51 percent below the national average for
similar workers*
There is no single reason for these differences in compensation levels. However^ a number of possible explanations do
present themselves:
* Compensating wage differentials. The work environment
tends to differ from industry to industry. Work may be more
pleasant or safe in some industries, less so in others,
Workers in unhealthy or dangerous environments, for
instance* may receive compensation that exceeds that in otherwise similar jobs,
* Unobserved productivity differences, Our ability to assess the
productive characteristics of workers from survey data is limited. Workers may have skills not reflected in measures of
education, In addition,, firms may provide their workers with
training that makes them more productive on the job, and
their level of compensation may reflect this on-the-job training.
* Effwi&ncy wages* Providing increased compensation may raise
worker productivity for example by increasing motivation and
effort* and may reduce the probability that workers will quit.
To the extent that the benefit to employers of paying higher
wages differ across industries, compensation levels will differ,
* Monopoly rents. Competition is weaker, and therefore profitability higher, in some industries than in others. Workers
may be able to extract some fraction of these higher profits in
the form of higher compensation, Differences in the profitability of firms and the bargaining power of workers can thus give
rise to differences in compensation across industries.
In the ease of compensating wage differentials or exogenous
skill differences^ moving a worker from one job to another will
not make that worker better off. In the first case the worker
is merely being compensated for bearing an additional burden,




242

and in the second for some unobsarvabte productive eapadty* in
the same way that we expect workers to be compensated for
higher levels of education. But in cases where positive wage differentials are due ta skills acquired OB the jab, efficiency wages,
or monopoly rente, increasing the number of export jobs has the
potential of raising the standard of living for workers,
TABLE 7-2.—Industry Compensation Premiums, 1984
[Percent]
Bottom 10 industries

Top 10 industries
Industry

1

Premium

Industry

1

Premium

Petroleum
Tobacco

53.3
42.6

Leather
Repair services

-11.8
-12.3

Communications
Public utilities

37.1
34.2

Entertainment
Apparel

-14.9
-15.0

Transportation equipment
Mining .

28.2
27.7

Other retail trade
Education services

-17.3
-19.4

Primary metals
Chemical

26.2
23.1

Personal services
Eating and drinking

-22.3
-28.3

Paper
Machinery except electrical

19.9
18.2

Welfare services
Private household services

-32.8
-50.8

1

Two-digit Census Industrial Classification industries.
Note.—The premium is calculated as the percentage by which compensation in the industry (wages plus benefits) exceeds
the national average for all industries, after accounting for worker characteristics.
Source: Katz, Lawrence F., and Lawrence H. Summers, "Industry Rents: Evidence and Implications," Brookings Papers:
Microeconomics 1989.

countries has received tremendous attention, the United States still
buys the bulk of its imports from other advanced industrial countries,
whose workers have similar skills and wages. If we define low-wage
countries as those whose average wage is half or less that in the
United States, trade with such countries in 1990 was roughly the
same as it was in 1960, when Japan and much of Europe qualified as
low-wage countries. Imports from low-wage countries were 2.2 percent of GDP in 1960 and rose to only 2.8 percent of GDP by 1990. In
addition, the trade-weighted average hourly manufacturing wage of
U.S. trade partners was 88 percent of that in the United States in
1990; this seems much too small a difference to have produced the
observed changes in relative wages.
This raises a more subtle but no less valid point: in order for
international trade to result in a decrease in the wages of low-skilled
workers, the price of low-skill-intensive imports must necessarily fall.
But prices of such imports actually rose during the 1980s
and 1990s.




243

In short, while trade may contribute a bit to the widening wage gap
between skilled and unskilled workers, the evidence does not suggest
that it is the prime source of the gap, nor that it hurts unskilled workers in an absolute sense.

TRADE AND AGGREGATE EMPLOYMENT
Much of the debate over trade has been over jobs. Critics of more
open trade have claimed that trade destroys jobs; advocates often
argue that trade creates them. According to basic economic theory,
however, in general trade does neither. Today the United States is
close to full employment. In such times, market opening means that
opportunities will decrease in some industries and increase in
others. The effect of export growth in this circumstance is not to
increase the number of jobs but rather to increase the number of
"good" jobs.
There are circumstances, however, in which trade can lead to job
gains: when unemployment rates are high, the expansion in
exporting industries can be accomplished by hiring unemployed
workers. In January 1993 U.S. unemployment was still 7.1 percent
(even though the recession had ended 2 years earlier). During the
next 2 years the number of American jobs supported by exports
rose by 446,000, helping reduce unemployment to its present
level below 5 percent. As the economy comes closer to full employment, however, trade's positive effect on aggregate U.S. real incomes
shows up less in the form of higher employment and more in the form
of higher real compensation for workers.
TRADE AND JOB DISPLACEMENT
As reported in the 1997 Economic Report of the President,
public opinion polls continue to reveal a low sense of job security
among American workers. This is surprising in that, historically, periods of robust economic activity such as the present one have
been characterized by much less anxiety over job loss. This
anxiety is also evidenced by a relatively low propensity for workers to
quit their jobs—a low quit rate suggests uncertainty about
the prospects of finding a new job. Rightly or wrongly, workers
may associate much of their concern about job security with
the expansion of trade. These concerns must be addressed. This
means going beyond aggregate measures of expanding employment
that might mask individual hardship.
The evidence suggests that, for a variety of reasons, trade is not a
primary contributor to total job displacements. Because the U.S.
economy is highly dynamic, a great deal of job turnover occurs as new
firms go into business or expand and others drop out or contract. Data
from the 1980s reveal that trade contributed at most 10 percent of the
observed displacements from manufacturing in the worst year of that



244

decade; in most years it contributed significantly less. Most of the job
loss resulted from other forces, principally technological change.
Trade can lead to increased displacements because an increase in
imports is likely to displace workers in import-competing domestic
industries. However, expanded export opportunities may reduce
the incidence of displacements in other sectors. Some evidence suggests that expanded export opportunities have been sufficient to
offset the effect of growing imports on total displacements. When the
effects of increased imports and exports over the 1980s are combined,
there is evidence that changing trade patterns over this period left
the total volume of displacements relatively unchanged. This is possible because, over time, the displacements resulting from imports
were generally offset by expansion in export-oriented industries,
which served to reduce the number of displacements. The net effect
was then only a reshuffling of displacements across industries and
across time.
Although trade may not have increased the number of displaced
workers in the 1980s, in some cases it may have increased the hardship associated with displacement. By shifting production from one
industry to another, international trade brings about a shift in
employment from one industry to another. This change in the distribution of employment, although it generally increases the quality of
jobs available, can lead to greater transitional hardship than some
other causes of displacement, for instance the closure of an inefficient plant in an otherwise thriving industry, because it is more
likely to involve finding a job in a new industry.
In recognition of the relationship between imports and labor displacements, U.S. trade laws have included provisions for trade
adjustment assistance since 1962. This assistance offers cash benefits, in the form of extended unemployment insurance benefits, and
retraining to workers who lose their jobs as a result of trade. It also
pays for job search assistance and relocation expenses. Since the
inception of these programs, about 2 million workers have been certified as eligible. A smaller number have actually received benefits,
as many found jobs in the meantime.
The Administration is conscious of the need to provide support for
workers injured by international trade, but also aware that not all
workers deserving of such support are now getting it. Accordingly,
the President has made significant reform of the existing trade
adjustment assistance programs a priority. One such reform is to
extend adjustment assistance to all workers displaced from firms
that have shifted production to another country. The NAFTA legislation already provides such assistance to workers displaced from
companies that have shut down their plants and moved production
to Mexico or Canada. Also in need of assistance are displaced secondary workers—those employed as subcontractors or in businesses
that provided services to plants that have moved abroad. The



245

NAFTA legislation offered benefits for these workers as well, but
most have been unaware they were entitled to the same types of benefits as other dislocated workers. These extensions of assistance,
coupled with efforts to streamline the certification process, should
significantly improve the quantity and quality of assistance provided to workers displaced by trade and investment liberalization.

THE U.S. TRADE BALANCE
A popular measure of the impact of trade policies is the trade
balance, or the difference between exports and imports of goods and
services. But use of the trade balance as a measure of the success of
market-opening endeavors is problematic. Changes in the trade
balance are seldom related to specific market-opening efforts; indeed,
the trade balance is generally determined by macroeconomic factors,
not microeconomic barriers to trade.
National income accounting identities demonstrate that the
difference between exports and imports must equal the difference
between national saving and domestic investment. In practice this
relationship applies to the current account balance rather than to the
trade balance. Trade in goods and services is by far the largest component of the current account, but it also includes overseas
investment income and transfers. Measurement issues can also
intrude to obscure the accounting identity. In particular, the
existence in recent years of a large statistical discrepancy between
the income- and the product-side measures of GDP has led to a
situation in which the gap between official measures of saving
and investment has narrowed as the current account has widened
(Chart 7-7). The source of the statistical discrepancy is, by definition,
unknown at present. But if, for example, the current account and
investment are being measured relatively accurately, the current official measure of saving is too high.
Measurement issues aside, in periods when domestic investment
exceeds national saving, the current account balance will
necessarily be in deficit, whatever the state of trade policy. Whether
the Nation is borrowing to finance a consumption binge or an
investment boom, the current account deficit that results will
represent the inevitable consequence of these aggregate borrowing
decisions—not the failure of market-opening policies.
Until the 1980s the current account of the U.S. balance of payments
was seldom far from balance. Since then, however, both the trade balance and the current account balance have been in substantial deficit,
as growth in imports has largely exceeded growth in exports. These
deficits have not arisen because we in the United States have expanded access to our markets while our trading partners have not done
the same. In fact, over this period our major trading partners have



246

Chart 7-7 Saving, Investment, and the Current Account Balance
The current account deficit grew in the mid-1980s as saving fell faster than investment.
In the 1990s, however, both investment and saving are increasing.
Percent of GDP

10

Net national
investment

7

-

Net national
saving plus
statistical discrepancy

Net national saving

Current account balance
-6
1980

1982

1984

1986

1988

1990

1992

1994

1996

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

reduced their trade barriers more than has the United States.Rather,
the explanation is macroeconomic. As Chart 7-8 shows, changes in the
trade deficit have often closely followed movements in the real
exchange rate. The exchange rate, in turn, reflects global demand for
U.S. dollars by those who want to buy U.S. goods and assets, and the
supply of dollars from those who want to use them to buy foreign
goods and assets.
The trade deficit grew in the early 1980s as the Federal
Government maintained a mix of tight monetary policy and expansionary fiscal policy. Growing Federal budget deficits were a drain on
the pool of domestic saving, requiring new investment to be financed
increasingly through borrowing on international capital markets. In
particular, the saving shortfall and tight monetary policy raised U.S.
interest rates, which in turn caused the real exchange rate of the dollar to strengthen. As the dollar appreciated, imports became cheaper
for Americans and U.S. exports more expensive for foreigners, so that
the U.S. trade balance went deep into deficit. The deficit was thus
financed by borrowing abroad. This problem was often referred to as
the "twin deficits," emphasizing the role of the Federal budget deficit
(that is, negative Federal Government saving) in the low overall
national saving rate and the resulting trade deficit.
Since 1992 the Federal budget deficit has fallen steadily and
national saving has increased, yet the trade deficit has once again
grown. This is because of the strong boom in investment. Moreover,



247

Chart 7-8 Real Value of the Dollar and the Trade Deficit
The trade deficit is a macroeconomic phenomenon: increases in the deficit typically
follow an appreciation of the dollar.
Index, 1976 = 100

Percent of GDP

140

5

130

120

Real value of the dollar
(left scale)

Trade deficit

110

100

90

80
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
Sources: Department of Commerce (Bureau of Economic Analysis) and Federal Reserve Bank of Dallas.

the trade deficit tends to widen when the economy is growing rapidly. As Chart 7-9 shows for the United States, import growth is
strongly correlated with growth in national income (as measured by
GDP)—as our incomes rise, we demand more goods and services generally, including more foreign goods and services. The faster our
incomes are rising relative to foreign incomes, the more our demand
for imports can be expected to accelerate relative to that for our
exports (which are foreigners' imports). The result is a growing trade
deficit here at home. Arguably, a current account deficit is less worrisome when it is accompanied by rising saving and investment.
At the beginning of 1997 it seemed likely that the U.S. growth rate
would fall behind that of our trading partners in Asia and elsewhere,
which would help reduce the U.S. trade deficit. Instead, U.S. growth
and import demand remained unusually strong, while much of the
rest of the world grew less rapidly than expected. However, as discussed in Chapter 2, the dollar appreciated, keeping the nominal
trade deficit from widening. The currency crisis and slower growth
that hit East Asia in the second half of the year suggest that the U.S.
deficit is likely to grow in 1998.
The current trade deficit reflects decisions by households and businesses, policy choices, and the strength of the U.S. economy,
particularly in the context of financial instability and slowing growth
abroad. In theory, a smaller deficit might be realized with a different
mix of fiscal and monetary policy, but it would bring problems of its



248

own. In particular, under current conditions of very low unemployment, an increase in the trade balance would simply crowd out
growth in other sectors. The additional demand for U.S. goods and
services would put upward pressure on inflation and interest rates,
and other sectors would have to contract to make room for the rising
net exports. In other words, the trade deficit has acted as a safety
valve for the current economic expansion. Imports of goods have kept
inflation low, while imports of capital have kept interest rates low,
helping to sustain rapid income growth. In the strongly expanding
full-employment economy that the United States now enjoys, it
should be easier for Americans to see that trade deficits do not necessarily reduce output and employment.
Chart 7-9 Growth in Real Imports and GDP
Growth in demand for imports is strongly correlated with income growth.
Four-quarter percent change

Four-quarter percent change

16

40

12

30

;\

I

\

'/ \ »

//

V

Real GDP growth
(left scale)
\

20

Real import growth
(right scale)

10

-10
1981
1983
1985
1987
1989
1991
Source: Department of Commerce (Bureau of Economic Analysis).

1993

1995

1997

FOREIGN DIRECT INVESTMENT
Although trade has been a primary focus of the Economic Report
of the President since its inception, capital flows have become
increasingly predominant in international transactions. A significant
share of these flows has taken the form of foreign direct investment
(FBI), wherein the investor acquires or increases foreign assets in
which it then has some lasting interest or influence. In recent years
growth in recorded FBI has outpaced even the rapid growth of trade.
In the last decade nominal FBI outflows from the United States rose




249

an average of 17 percent per year to reach $88 billion in 1996; growth
in FBI inflows averaged 8 percent per year to $77 billion (Chart 7-10).
Chart 7-10 Foreign Direct Investment Flows
The 1980s saw a surge in foreign direct investment into the United States. In the 1990s,
however, outflows of FDI have once again surpassed inflows.
Billions of dollars
100

U.S. direct
investment abroad

80

\

Foreign direct investment N
in the United States / .

60

/
/

/
/

V

40

20

-20

1960
1963
1966
1969
1972
1975
1978
1981
1984
Source: Department of Commerce (Bureau of Economic Analysis).

1987

1990

1993

1996

Commentators tend to speak in universal terms about the
motivations for FDI, but in reality no single factor determines why
a firm chooses to become a multinational enterprise and operate
affiliates in foreign countries. It may be to take advantage of unique
opportunities only available overseas (for example, to develop new
oil fields), to lower production costs by exploiting international comparative advantage, or to gain or improve access to foreign markets
by avoiding trade barriers and transportation costs. Although a firm
always has alternatives to FDI, such as exporting or licensing foreign firms to produce its goods, sometimes it is more cost-effective
to internalize operations within the firm's command-and-control
structure rather than conduct arm's-length transactions. This is
especially true as telecommunications technology has improved,
making the coordination of foreign operations easier.
FDI and trade are interlinked in a number of ways. Often, FDI is
a substitute for exporting: firms invest in operations abroad in
response to tariffs or other barriers that hinder the export of goods
to those markets. But FDI and trade are also complementary. In
1994 reported intrafirm trade—the cross-border transactions
between affiliated units of multinational companies—accounted for
one-third of U.S. exports and two-fifths of U.S. imports of goods. An
understanding of the large and growing role of FDI in modern trade



250

patterns may be useful in assessing the benefits of this important
aspect of our integrating world economy.
As the importance of international direct investment has
increased, countries have moved to negotiate a set of rules for FBI
along the lines of those for trade. Unfortunately, many misunderstandings remain regarding FBI, which threaten to hinder these
efforts (Box 7-5). Before reporting on the progress of these efforts,
this section reviews recent trends in FBI flows and the ways in
which both the home and the host country benefit from FBI.
Box 7-5.— Fears and Facts about Foreign Direct
Investment
In &a 1080$ concerns arose in the United State that the rapid
rise in inward FBI would have adverse effects on American workers,
Some feared that fomgn-cootelled affiliates that displaced
firms might change the composition of employment> mmmg
jobs to the home , country and offering only %ad* jobs in the United
States, In feet, foreign mtflttoationals in the United States pay higher than average wages, suggetting that in fact they provide
jobs, When net fDI flows turned outward during the 199Cte, the
sera became that UJSL companies would begin outsoumng mueh of
their production to other soimtries, again at the esqpense of jobs and
wages at home, This seeming ^>nferadktion~~tiiat inward and outward PDI would hare similar effects on UJSL woikers—may reflect
how little was actually known about the effects of FDL
Unlike trade* wWch has been the subject of study for hundreds of
years, FBI has been subjected to little rigorous atudy until recently*
As more has been learned about FWt many of these initial fears
have subsided, The following are some fears that have been recently eiqpressed about FBI, and the facts that we now know.
Fear: Won't U,S« industries leare for low-wage developing
countries?
Fact: During the NAFTA debate* mm® voiced concern that lowering barriers to investment to Ifetico would result in a large
movement of UJ3« industry there, m firms ei|ioited low Meodcati
wagg& But aince the passage of NAFTA in 19933 Mexico's sha^e of
the U.3, outward FBI position has deceased, The reason thei?e has
been no mam exodus of U$> industry to Mexico or to other low*w^e
countries is simple: there is no free luncfc— for multinattonals as for
the rest of us, Keal wage& may vary significantly aarc^s countries,
but studies show that these differences are linked to ptMuotodty differences, Just as economic theory would predict Low wages a#e not
a sufficient reason to move production to a foreign mu&tiy, if l<rw pro




251

'rafees the later tmt per wit of output to a
dose to that of the United States* 5fi0 Yast mqfofi&r of UJS;
EDI conti&pas tabe with other Mgh~wage e0uxibi$8, so dearly other
motivations than fee potential for low-wage o&tsmircteg am heWnd
Fear: Are U.S. firms that invest abroad e&partteg j$te?
Pact: It may seem reasonable to suppose that a UJB* firm that
hires workers fa an orerseas affiliate Is contributing to 113* tinemplojmeiit, since the fitm emdd fea htetag U.S» workers to do the
same job hem Evide&ee shows, however, that generafly this is not
the eaae; inereaaes m employment in foreign affiliates of 0J5, firms
ara oftep assodated wife mcreasea in emplo^^meBt at the pai^nt aa
well What employment sijbstituMon there is seems to be oc^riimiig
entirely offshore, batweeii couatries competing for U.8L IT>I, not
between UA parents and tfaeir foreign affiliates Par from export-

*S, WDl abit>ad
• Fact: Witfi the snrge to outward PDI in recent yeaxa, WDI outflows now amount to more than 10 percent <tf grosB private
'nonresMential , fixed iwe&tment, Howe¥0ry- whei-a-ttS, firm
inv^Bta abr$act? that do^s not nec^B0M|Iy/meai^ it woiald hava
- toasted here instead if WDl had not bee-m aai option. It might
then 'ham chosen not- to Invert at all. M&femrer* two-lMrds of
recorded outflows in 1998 were acteally the reinwated earnings
of foreign aifiliatas, not capital orig&taJaiiEg im the United' States.
Considering omly actual eapital outtlow% a recent stedy estimated that outward FDI .-a^^raged only CMJ percent of
nonresMential feed inTestment between 1970 and 1990—and
the share has been trending dowiiward. Capital outflows are
also largely wmpensated by foreign investment inflows,
Evidence suggests- that a {^mpleme&tarity may e^i^t between
ertment, deeMow of domestic and -foreigii firms, which
imply ;tibat redprocal di»et iHTesteient between - the
United States and other industrial countries increases total
investment to all eotmtries that participate,
In short*' opponents ^of FDI ha^e incoirectly framed it as a
^ero-smm; centum,- where for one country to gain? another must
torn Both the theoretical arguments of the benefits of FBI and
the eirfdenee now available suggest that PDI eati provide net
gams for all parties,
.
'




252

CURRENT TRENDS IN FBI
The United States remains both the largest source of and the
largest host to FDI in the world. Throughout most of the postwar
period the United States has been a net direct investor overseas,
with FDI outflows exceeding inflows (Chart 7-10). However, in 1981
the balance of U.S. FDI flows turned inward for the first time, led
by a large expansion of investment in the United States by Japanese
and U.K. firms. This direct investment by foreign firms in the
United States grew rapidly throughout the 1980s, peaked in 1989,
and then dropped sharply in the early 1990s. Investment abroad by
U.S. firms has increased tremendously in the 1990s, so that since
1991 the balance of FDI flows has once again been outward. These
trends continue: in the first three quarters of 1997, FDI outflows in
the balance of payments accounts rose to $94 billion, $14 billion
more than inflows and already surpassing the level for all of 1996
($88 billion).
By 1996 the cumulative direct investment position of foreign
firms in the United States (the inward FDI stock), measured on a
historical cost basis, had reached $630 billion, an increase of 60 percent since 1990. There are some accepted problems in measuring
FDI precisely. U.S. balance of payments accounting rules define FDI
as financial flows from a parent company to an overseas affiliate in
which it has at least 10 percent ownership. Thus, investment in foreign affiliates not financed directly by the parent company is
excluded. In addition, historical cost positions are measured at the
book value of purchases each year and therefore do not adjust for
capital gains (including those due to inflation). Estimates that
attempt to adjust for increases in the market value of assets are
almost double the 1996 historical cost measure. However, historical
cost measurements do indicate the distributional changes of FDI
across countries and sectors.
More than half of the reported FDI stock in the United States
has come from three countries: the United Kingdom holds the largest
share, followed by Japan and the Netherlands. The United Kingdom
is also the largest host to U.S. direct investment abroad, followed by
Canada. European countries are host to half of the stock of U.S.
investment abroad. In 1996 U.S. firms directly controlled overseas
assets of $797 billion, again valued at historical cost; member countries of the OECD were home to over 73 percent of this investment.
Much of the rest was in Bermuda, the Caribbean, and some Asian
newly industrializing economies such as Hong Kong; this investment
is concentrated in sectors such as wholesale trade, finance, real
estate, and services. China, the second-largest host to worldwide FDI,
still represents only a negligible share of U.S. direct investment
abroad. However, between 1992 and 1996 the U.S. position in China
increased at an average rate of 50 percent per year. FDI in other



253

Asian developing countries has been increasing as well; however, the
majority of growth has come from investment in the higher income
economies that are still host to 75 percent of U.S. FBI in the region.
Among developing countries, Brazil, Mexico, and Panama are the
largest hosts to recorded U.S. FBI. Annual FBI flows to these countries represent about 10 percent of the total, but the stock of U.S. FDI
in all of Latin America is still less than 12 percent of the total U.S.
position abroad. Nevertheless, the brightening economic prospects in
Latin America have been accompanied by a pronounced expansion of
the U.S. direct investment position in the region. The emerging markets there are poised to become increasingly important to U.S.
investors in the future, especially if investment barriers are liberalized under the proposed Free Trade Area of the Americas.
Although wages are lower in developing countries, these do not
always entail the cost advantages many people assume (Box 7-5).
Rather, the developing countries that receive the most FDI are usually those regarded as potentially large future markets. This suggests
that companies investing in these countries hope to establish a market presence, in the expectation of profitable future sales, and are not
simply outsourcing production for reexport to other markets.
Although the public image of FDI in the United States is often one
of large manufacturing multinationals, manufacturing accounts for
only one-third of both the inward and the outward FDI stock. Much
FDI in manufacturing occurs in motor vehicles, electronic and electrical equipment, office machines and computers, and chemicals and
allied products. In 1996 these sectors accounted for over half of both
the U.S. FDI position abroad in manufacturing and almost half of the
foreign position in the United States (Table 7-3).
The industrial composition of U.S. FDI has evolved in tandem with
that of the U.S. economy. Much of U.S. outward FDI in past decades
was motivated by the opportunity to use U.S. technology to extract
foreign raw material resources such as oil, coal, and natural gas: in
1980 the petroleum industry accounted for roughly 22 percent of the
outward U.S. FDI position. But this share has been falling steadily,
and in 1996 the figure was less than 10 percent. Between 1980 and
1990 FDI became associated with the relocation of manufacturing
activities abroad, in part because of the rapid expansion of foreign
firms in the U.S. manufacturing sector. More recently, a growing
share of FDI is in service industries—primarily finance, insurance,
and real estate but also wholesale and retail trade and banking—mirroring the evolution of the U.S. economy from a manufacturing to a
services economy. In 1996 service industries accounted for 52 percent
of the U.S. position abroad, exceeding the share of the entire manufacturing sector. However, these figures may overstate the role of
services, which include sectors such as finance where large holdings
of "paper assets" are the norm.



254

TABLE 7-3.—Inward and Outward Foreign Direct Investment, by
Industry, Selected Years
[Billions of dollars]
U.S. direct investment
abroad

Industry

Foreign direct investment
in the United States

1980

1990

1996

1980

1990

Petroleum

47.6

52.8

75.5

12.2

42.9

42.3

Manufacturing

89.3

170.2

272.6

33.0

152.8

234.3

Food and kindred products ....
Chemicals and allied products
Primary and fabricated metals
Industrial machinery and equipment
Office and computing machines

8.3
18.9
6.3
16.1
9.3

15.6
38.0
10.5
30.9
22.2

36.2
69.4
13.6
35.0
21.7

4.9
10.4
3.6
2.9
.4

22.5
45.7
13.7
11.5
2.6

28.1
74.8
18.7
16.3
2.7

Electronic and other electric equipment
Motor vehicles and equipment
Other manufacturing

7.3
11.8
20.6

15.6
20.4
39.3

29.5
31.6
57.2

4.1
.7
6.4

1S.1
3.1
40.1

20.8
12.3
63.3

66.3

194.5

410.7

34.4

179.6

323.6

60.2
18.4
70.4
30.6

92.9
31.9
159.9
38.9

Services

Other industries

.

Communications and public utilities
.

7.3

50.7
20.7

84.3
32.5

27.5

109.7

257.2

5.6

13.4

36.7

15.2
4.6
13.5
1.1

12.2

13.1

37.7

3.4

19.6

29.7

1.3

Wholesale and retail trade
Banking
Finance (excluding banking), insurance, and real estate ..
Other services

All industries

19%

4.4

20.4

.1

3.3

11.4

215.4

430.5

796.5

83.0

394.9

630.0

25.9

Note.—Detail may not add to totals because of rounding.
Source: Department of Commerce (Bureau of Economic Analysis).

Employment in foreign-owned U.S. affiliates rose from 2 million
in 1980 to almost 5 million in 1995. This represents an average annual
increase of more than 6 percent, over three times the rate of growth in
nonfarm U.S. employment over the same period, and led to an increase
in the share of U.S. private industry employment in foreign-controlled
firms from less than 3 percent to 5 percent of total employment. The
share of private industry GDP accounted for by foreign-owned U.S. affiliates has increased from 3 percent in 1980 to 6 percent in 1995. However, these increases largely represent growth during the 1980s and
early 1990s; in fact, by both measures the foreign presence in U.S.
industry has been constant or decreasing in recent years.

THE BENEFITS OF FBI
The benefits of FDI to the economy as a whole seem less clear than
the benefits of trade. Yet in a world where trade results from differences in relative factor abundance, capital mobility should act as a
substitute for trade. This corresponds with the notion that FDI
occurs in response to trade barriers and suggests that capital flows
have welfare implications similar to those of trade. Capital mobility
can also have macroeconomic benefits by relaxing the tradeoff



255

between investment and consumption. However, the benefits of FDI
go beyond increased capital mobility: FDI has direct impacts on
both the host and the home countries that have little in common
with other types of international investment, such as portfolio asset
flows.
Benefits to the Host Country
The nature of the benefits of FDI to the host country is likely to
depend on whether the country is developed or developing, and on the
reasons why FDI is taking place. FDI in the higher income countries
is often a response to market access concerns. By establishing
operations closer to customers, a firm may be able to increase the
quality of support services and the ability to match products to local
tastes. The presence of multinationals also entails all the traditional
benefits of local investment, creating jobs and fostering demand from
local suppliers.
When FDI occurs in developing countries, the gains from fostering
demand from local industry may be even greater. "Big push" theories
of industrialization emphasize that the profitability to a single firm of
adopting new technological advances often depends on other firms'
decisions to do likewise. For example, an automobile assembly plant
requires dependable suppliers of parts and machinery, but these are
not likely to exist locally if no automobile plants exist. In this scenario
the gap between developed and developing countries occurs because
the former have managed to overcome this coordination problem. By
internalizing such transactions, often by using already established
global supply networks, multinationals can overcome the coordination problem and provide the first step toward industrialization in a
developing country.
FDI may have additional advantages in developing countries, particularly over portfolio investment. The ability to own a foreign firm
directly rather than through passive stock holdings may increase the
incentive to invest in countries that offer attractive opportunities
but little domestic entrepreneurial experience. Furthermore, since
the commitments involved in direct ownership imply greater adjustment costs than under stock ownership when conditions turn
unfavorable, FDI can create a more stable investment atmosphere by
discouraging capital flight like that which plagued developing
economies in Southeast Asia in 1997. When investors are forced
to weather financial storms, a country's market volatility and
macroeconomic instability are reduced, and this may help the storms
pass more quickly.
Lastly, through direct control of their affiliates, multinationals provide crucial links in the international dissemination of technology
and best practices. This promotes more efficient production and
resource use in home countries and rising incomes throughout the
world. The recent literature on economic growth emphasizes the



256

importance of an expanding common pool of ideas in increasing
growth rates in all countries. As new trade and investment agreements are negotiated to strengthen global intellectual property
rights, these transfers of knowledge can proceed without destroying
the incentive to innovate or sacrificing the profitability of innovating
firms. FBI is frequently shown to be an important vehicle for increasing productivity in host countries, in some cases contributing
relatively more to growth than does domestic investment. Although
developing countries that now employ outdated technologies may
have the most to gain from new ideas brought in by foreign multinationals, they are not the only beneficiaries. The resurgent
competitiveness of the U.S. automotive industry in the 1990s is often
attributed in part to the adoption of just-in-time inventory practices
used successfully by Japanese production facilities located in the
United States.
Benefits to the Home Country
It might seem natural that foreign investment helps foreigners, but
what is less apparent is that the activities of multinationals can promote growth in their home countries as well (see Box 7-5). By
developing and expanding foreign markets, multinationals provide an
important benefit to the home country, because growth in a country's
trade partners means growth in its export opportunities. And in many
cases, as firms expand their operations overseas, they expand their
management and support operations at home also, increasing
employment both at home and abroad.
Moreover, multinationals create trade by moving goods and services between parents and their foreign affiliates. As already noted,
this intrafirm trade now plays a significant role in total U.S. trade.
Although the move from arm's-length to intrafirm transactions need
not represent "new" trade, evidence suggests that FBI is likely to
increase trade. This can be considered a benefit in itself, by promoting the interchange of goods. FBI often plays an important role
in promoting trade when barriers to traditional exports exist. A
recent study shows that, in 1992, 70 percent of U.S. exports to
Japan were intrafirm exports, as were 74 percent of exports to
Switzerland and 64 percent to Russia. By contrast, only 12 percent
of U.S. exports to Taiwan, our seventh-largest foreign market, were
intrafirm exports.
Arguably, intrafirm trade might not be beneficial if it represents
the foreign outsourcing of goods for production and reexport to the
home country. If this were the case, we might expect to see an
intrafirm trade deficit equal to the amount of value added overseas.
But U.S. intrafirm trade is in surplus: U.S. multinationals export
more to their overseas affiliates than they import from them. This
suggests that, on balance, shipments to foreign affiliates represent
goods to be sold in the overseas market (perhaps after final assembly



257

there) rather than outsourcing for reexport. In a rapidly changing
world environment, firms hoping to enter foreign markets are
increasingly coming to realize that establishing a direct presence in
those markets may be the best way to compete.
CURRENT U.S. INITIATIVES IN INVESTMENT POLICY
Evidence has shown that a stable policy environment is a good
determinant of the amount of FDI a country attracts. Countries that
are prone to nationalization, corruption, and political instability are
less likely to receive foreign investment, whereas those that protect
foreign investors and intellectual property rights do better. This suggests that there are benefits to achieving multilateral standards for
investment rules.
Under the auspices of the OECD, the United States has joined
other countries in negotiations toward a Multilateral Agreement on
Investment (MAI) that will set "high standards for the liberalization
of investment regimes and investment protection...with effective dispute settlement procedures." The goal is to eliminate discrimination
in investment by achieving a uniform set of rules for all signatories,
thereby removing market distortions and facilitating the investment
process.
The MAI is being negotiated principally among the 29 OECD countries that account for the vast majority of worldwide FDI flows. But
the MAI is being designed as a free-standing international treaty to
which other nations may accede. Even though the negotiations are
primarily among similar countries with similar objectives, the negotiations have been difficult at times.
Meanwhile over 1,000 bilateral investment treaties already exist,
primarily between developed and developing countries. The United
States has signed 40 such treaties to date (Box 7-6). With these
treaties the United States has been able to establish deeper agreements more quickly with more countries than it could by negotiating
a single agreement with a large number of countries.
Another recent initiative in which the United States has been
active is the international effort to combat corruption. Corruption is
a particularly thorny problem for multinationals in many developing
countries, and its presence may offset much of the benefit to multinationals of locating in those countries. One recent study estimated
that the effects of corruption were equivalent to an increase in the
marginal tax rate for foreign investors of as much as 21 percentage
points. Given the benefits of FDI to both home and host countries,
this strong disincentive to investment is likely to reduce the welfare
of both. It has also had important legal ramifications for U.S.
investors abroad, who are prohibited under the Foreign Corrupt
Practices Act from bribing foreign officials. This legislation has made
it even more difficult for U.S. multinationals to establish and maintain businesses in countries with pervasive corruption.



258

Box 7-6.—Bilateral Investment TVeaties
For much of the last decade the United States has been actively
piimiing the negotiation of bilateral investment treaties with emerg~
i&g-mark&t cmmtries aim&iil the world The UJ3, goyeiwuaiit plaa&s
priority on negotiating sadk treaties with countries imdergofag eeo~
noniie reform where It tellers the United States can haye a sipiifieant
impact on the adoption of liberal polititoi on the treatment of FDI, The
stnidiitfe of these treaties has also laid the polky grotmdwork for
broader urnMeonntry Mttative§ In the O1GD {tbe MAI) and ev^otrat
ly the WTO, "Ehe stniftere of ow bilateral in^a^meiit treaties protidef
treatment tiiat is as favorable as that received hj their eampetitors—tiiis impfe the better of national or
clear liniits OB fihe expropriation df fewsteieiits, and fair compensation when expropriation does occur
the right to transfer allfimdgrelated to an inv^tmeiit Into and out
Iteite on the ability of the bc^t government to i

ineffident

the right to s&tait mi towstaMrtt dispute with the host government to international arf>iteatio0
the tight of UJS. inT^to^ to eng^e the top managerial personnel

In

where national treatment is the MndKi^g standardj the

are assured treatment no worse than investors Imm any
thkd conntiy resewe, % date^ the UiriteJ States has snose^rfuffly nego>
iMed Mtateral InTestmeat treaties wiftt some 40 mnntries (Ikble 7-4}
and is actively engaged in pweiifag a mtdtttateral vemon of the troadgr
under the auspices of ihe 0BCI).
TABLE 7-4.—Countries with Which the United States Has
Bilateral Investment Treaties
Country and date
Albania
Argentina
Armenia
Azerbaijan
Bangladesh
Belarus
Bulgaria
• Cameroon
Congo (Brazzaville)
Congo (Kinshasa)

Country and date

pending
1994
1996
pending
1989

Croatia
Czech Republic
Ecuador
Egypt .
Estonia

pending
1994
1989
1994
1989

Georgia
Grenada
Haiti
Honduras
Jamaica

Country and date

pending Jordan
1992 Kazakhstan
1997 Kyrgyzstan
. .. 1992 Latvia
1997 Moldova
Mongolia
Morocco
.... pending Nicaragua
pending Panama
1997 Poland
1997
1989

Note.—Years are those when the treaty entered into force.
Source-. Office of the U.S. Trade Representative.




259

Country and date

pending
1994
1994
1996
1994

Romania
Russia .
Senegal
Slovakia
Sri Lanka

1994

. . pending
1990
1992
1993

1996
Trinidad and Tobago
Tunisia
1993
1990
pending Turkey
1991 Ukraine
1996
Uzbekistan
pending
1994
1997
1991

In late 1997 the member countries of the OECD finalized a draft
treaty to outlaw bribery of foreign public officials. Holding multinationals of all nationalities to similar standards will put pressure on
foreign officials to abide by legal and transparent procedures in doing
business with foreign companies, rather than allow them to promote
a "race to the ethical bottom" among companies seeking government
contracts or licensing. It is hoped that, together with the establishment of a common set of investment rules in the MAI, the reduction
of corruption abroad will act as an incentive to FBI, bringing
increased benefits to both home and host countries worldwide.

CONCLUSION
Economies that are open to international trade and investment are
more likely to experience a rising standard of living than are
economies with significant barriers to cross-border economic activities.
Consumers in open economies benefit from a wider variety of goods at
lower prices than do consumers in economies that resist competition
from foreign suppliers. The economy as a whole benefits from an
increased ability to devote its scarce resources to economic activities
that it performs relatively efficiently. Over time, through both international trade and international investment, open economies benefit
from higher rates of productivity growth and innovation that result
from increased participation in international markets.
Many, however, fear that international transactions will disadvantage certain segments of the economy. As this chapter has shown, it
is difficult to associate cross-border interactions with declining real
wages of workers, or even of particular groups of workers. Indeed,
there is evidence that adjustments resulting from growth in international trade have the potential to make workers better off. In the
United States, jobs with exporting firms pay between 5 percent and
10 percent more than do jobs in other sectors of the economy. At the
same time, the Administration recognizes that the transition from
one job to another is not always easy and that assistance must be
provided to those most affected by displacement.
As the United States is already among the most open economies in
the world, the Administration's activities have been directed toward
opening foreign markets to imports not only from the United States
but from other exporters as well. This goal has been actively and successfully pursued in multilateral, regional, and bilateral forums.
Partly reflecting these pursuits, U.S. imports and exports have
increased significantly since 1993. Although much has been accomplished, the Administration maintains an active international policy
agenda promoting free trade throughout the Americas, across the
Pacific, and around the world.




260

Appendix A
REPORT TO THE PRESIDENT ON THE ACTIVITIES
OF THE
COUNCIL OF ECONOMIC ADVISERS DURING 1997







LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS
Washington, D. C., December 31, 1997
MR. PRESIDENT:
The Council of Economic Advisers submits this report on its activities during the calendar year 1997 in accordance with the requirements of the Congress, as set forth in section 10(d) of the Employment
Act of 1946 as amended by the Full Employment and Balanced
Growth Act of 1978.
Sincerely,
Janet L. Yellen, Chair
Jeffrey A. Frankel, Member
Rebecca M. Blank, Member-Nominee




263

Council Members and Their Dates of Service
Name
Edwin G. Nourse
Leon H. Keyserling
John D.Clark
Roy Blough
Robert C. Turner
Arthur F Burns
Neil H Jacoby
Walter W. Stewart
Raymond J Saulnier
Joseph S Davis
Paul W. McCracken
Karl Brandt
Henry C Wallich
Walter W. Heller
James Tobin
Kermit Gordon
Gardner Ackley
John P Lewis
Otto Eckstein
Arthur M.Okun
James S Duesenberry
MertonJ Peck
Warren L Smith
PaulW McCracken
HendrikS Houthakker
Herbert Stein
Ezra Solomon
Marina v.N. Whitman
Gary L Seevers
William J Fellner
Alan Greenspan
Paul W. MacAvoy
Burton G Malkiel
Charles L Schultze
William D Nordhaus
Lyle E. Gramley
George C Eads
Stephen M. Goldfeld
Murray L Weidenbaum
William A. Niskanen
Jerry L Jordan
Martin Feldstein
William Poole
Beryl W Sprinkel
Thomas Gale Moore
Michael L Mussa
Michael J Boskin
John B.Taylor
Richard L Schmalensee
David F Bradford
Paul Wonnacott
Laura D'Andrea Tyson
Alan S Blinder
Joseph E Stiglitz
Martin N Baily
Alicia H Munnell
Janet L Yellen
Jeffrey A Frankel




Position
Chairman
Vice Chairman
Acting Chairman
Chairman
Member
Vice Chairman
Member
.
Member
Chairman
Member
Member
Member
Chairman
Member
Member
Member
Member
Chairman
Member
Member
Member
Chairman
Member
Member
Member
Chairman
Member
Member
Member
Chairman
Member
Member
Chairman
Member
Member
Member
Member
Chairman
Member
Member
Chairman
Member
Member
Member
Member
Chairman
Member
Member
Chairman
Member
Chairman
Member
Member
Chairman
Member
Member
Member
Member
Chair
Member
Member
Chairman
Member
Member
Chair
Member

Oath of office date
August 9, 1946 .
August 9, 1946
November 2 1949
May 10, 1950
August 9, 1946
May 10 1950
June 29, 1950
September 8, 1952
March 19 1953
September^ 1953
December 2, 1953
April 4 1955
Decembers 1956
May 2, 1955
December 3, 1956
November 1 1958
May 7, 1959
January 29, 1961
January 29 1961
January 29 1961
August 3, 1962
November 16, 1964
May 17 1963
September 2 1964
November 16, 1964
February 15 1968
February 2 1966
February 15, 1968
July 1,1968
February 4 1969
February 4 1969
February 4, 1969
January 1 1972
September 9, 1971
March 13, 1972
July 23 1973
October 31 1973
September 4, 1974
June 13, 1975

.

July 22 1975

. .. .

264

January 22, 1977
March 18 1977
March 18, 1977
June 6, 1979
August 20, 1980
February 27 1981
June 12, 1981
July 14, 1981
October 14 1982
December 10, 1982
April 18 1985
July 1, 1985
August 18, 1986
February 2, 1989
June 9, 1989
Octobers 1989
Novemberl3 1991
November 13, 1991
February 5, 1993
July 27 1993
July 27, 1993
June 28, 1995
June 30 1995
January 29 1996
February 18 1997
April 23, 1997

Separation date
November 1 1949
January 20 1953
February 11 1953
August 20, 1952
January 20, 1953.
December 1 1956
February 9 1955
April 29, 1955.
January 20 1961
October 31 1958
January 31, 1959.
January 20 1961
January 20, 1961.
November 15, 1964.
July 31 1962
December 27 1962
February 15, 1968.
August 31 1964
February 1, 1966.
January 20 1969
June 30 1968
January 20, 1969.
January 20, 1969.
December 31 1971
July 15 1971
August 31 1974
March 26, 1973.
August 15, 1973.
April 15 1975
February 25, 1975.
January 20, 1977.
November 15, 1976.
January 20 1977
January 20, 1981.
February 4 1979
May 27, 1980.
January 20 1981.
January 20, 1981.
August 25, 1982.
March 30, 1985.
July 31, 1982.
July 10 1984
January 20, 1985.
January 20 1989
Mayl 1989
September. 19, 1988.
January 12, 1993.
August 2, 1991.
June 21 1991
January 20 1993.
January 20, 1993.
April 22, 1995.
June 26 1994
February 10, 1997.
August 30 1996
August 1 1997

Report to the President on the Activities of the
Council of Economic Advisers During 1997
The Council of Economic Advisers was established by the Employment Act of 1946 to provide the President with objective economic
analysis and advice on the development and implementation of a wide
range of domestic and international economic policy issues.

The Chair of the Council
Janet L. Yellen was appointed Chair on February 18,1997. Dr. Yellen
replaced Joseph E. Stiglitz, who left the Council to become Senior Vice
President of Development Economics and Chief Economist of the World
Bank. Before becoming Chair of the Council, Dr. Yellen served as a
Member of the Board of Governors of the Federal Reserve System. Dr.
Yellen is on leave from the Haas School of Business at the University of
California, Berkeley, where she is the Bernard T. Rocca, Jr. Professor of
International Business and Trade. Dr. Yellen is responsible for communicating the Council's views on economic matters directly to the President through personal discussions and written reports. Dr. Yellen also
represents the Council at Cabinet meetings, meetings of the National
Economic Council (NEC), daily White House senior staff meetings,
budget team meetings with the President, and other formal and informal meetings with the President, senior White House staff, and other
senior government officials. Dr. Yellen is the Council's chief public
spokesperson. She directs the work of the Council and exercises ultimate responsibility for the work of the professional staff.

The Members of the Council
Jeffrey A. Frankel is a Member of the Council of Economic Advisers.
Dr. Frankel is on leave from the University of California, Berkeley,
where he is Professor of Economics. He previously directed the program on International Finance and Macroeconomics at the National
Bureau of Economic Research and is a former Senior Fellow at the
Institute for International Economics.
Alicia H. Munnell was a Member of the Council of Economic Advisers until August 1997. Dr. Munnell currently holds the Peter F. Drucker Chair in Management Sciences at Boston College's Carroll School of
Management. The President has nominated Rebecca M. Blank to suc-




265

ceed Dr. Munnell as a Member of the Council. While awaiting confirmation, Dr. Blank has been serving as Chief Economist. She is on
leave from Northwestern University, where she is Professor of Economics. Dr. Blank previously served as the first Director of the Northwestern University/University of Chicago Joint Center for Poverty
Research and was a faculty affiliate at Northwestern University's
Institute for Policy Research.
The Chair and Members work as a team on most economic policy
issues. Dr. Frankel and Dr. Munnell shared responsibility for domestic macroeconomic analysis, the Administration's economic forecast,
and budget and tax issues. Dr. Frankel is primarily responsible for
international economic issues and certain microeconomic issues,
including those relating to natural resources, the environment, and
industrial organization. Dr. Munnell was primarily responsible for
retirement, health care, welfare reform, and labor issues. Dr. Blank
has taken over responsibility for these issues. She is also responsible
for child and family policy issues and is working closely with the President's Initiative on Race. The Chair and Members participate in the
deliberations of the NEC, and Dr. Yellen is a member of the NEC Principals Committee.
WEEKLY ECONOMIC BRIEFINGS
Dr. Yellen and the Members continued during 1997 to conduct a
weekly economic briefing for the President, the Vice President, and
the President's other senior economic and policy advisers. The Council, in cooperation with the Office of the Vice President, prepares a
written Weekly Economic Briefing of the President, which provides
analysis of current economic developments, more extended discussions of a wide range of economic issues and problems, and summaries
of economic developments in different regions and sectors of the economy. This document serves as a basis for the oral economic briefing of
the President.
MACROECONOMIC POLICIES
A primary function of the Council is to advise the President on all
major macroeconomic issues and developments. The Council prepares
for the President, the Vice President, and the White House senior staff
almost daily memoranda that report key economic data and analyze
current economic events.
The Council, the Department of the Treasury, and the Office of
Management and Budget—the Administration's economic "troika"—
are responsible for producing the economic forecast that underlies the
Administration's budget proposals. The Council, under the leadership
of the Members, initiates the forecasting process twice each year. In
preparing these forecasts, the Council consults with a variety of outside sources, including leading private sector forecasters.




266

In 1997 the Council continued to take part in discussions about the
President's balanced budget plan. The Council also participated in meetings on a range of budget issues including Medicare reform, discretionary spending priorities, and the Administration's tax proposals. The
Council participated in discussions regarding proposals to strengthen
the Social Security system, and in an interagency effort to develop a
package of proposed reforms to the private pension system to promote
higher rates of national saving and greater retirement security.
The Council participates in the Working Group on Financial Markets, an interagency group that monitors developments related to
financial markets and the banking sector. The group includes representatives from the Treasury, the Federal Reserve, the NEC, and various regulatory agencies.
The Council continued its efforts to improve the public's understanding of economic issues and the Administration's economic agenda
through regular briefings with the economic and financial press, frequent discussions with outside economists, and presentations to outside organizations. Drs. Yellen, Frankel, Munnell, and Blank also regularly exchanged views on the macroeconomy with the Chairman and
Members of the Board of Governors of the Federal Reserve System.
INTERNATIONAL ECONOMIC POLICIES
The Council was an active participant in 1997 in the international
economic policymaking process through the NEC and the National
Security Council, providing both technical and analytical support and
policy guidance. In particular, the Council has helped assess the economic impact of international sanctions against foreign nations, and
the efficacy of relaxing restrictions in the U.S.-Japan civil aviation
market. The Council has taken an active role on a range of other international economic issues, including evaluating and explaining the
case for trade liberalization, the Administration's policy approach to
Asia's financial turmoil, U.S. trade remedy laws (antidumping, countervailing duties, safeguards, and Section 301 actions), and the agendas of multilateral and regional forums such as the World Trade Organization, the Asia-Pacific Economic Cooperation forum, and the
proposed Free Trade Area of the Americas.
The Council played a significant role in preparing both the Administration's 1997 Study on the Operation and Effects of the North American Free Trade Agreement and the 1997 APEC Economic Outlook.
The Weekly Economic Briefing of the President also regularly included
articles on international events and issues.
Because of the growing importance of international economic issues
to the U.S. economy, the Council often represents the United States at
international meetings and forums. In November Dr. Yellen gave the
keynote address at the U.S.-R.O.C. Economic Council Plenary Session.
Also in November Dr. Frankel participated in the annual meeting of




267

the APEC Senior Economic Advisers, a meeting initiated in 1996 by
the Council during the APEC Leaders Summit. At this meeting Dr.
Frankel presented a Council paper on the long-term determinants of
growth. In December Dr. Frankel participated in the Joint Economic
Development Group with Israel. The Council also continued annual
meetings with the Economic Planning Agency of Japan and the State
Planning Commission of China, the Council's counterparts in those
countries.
The Council is a leading U.S. participant in the Organization for
Economic Cooperation and Development (OECD), the principal forum
for economic cooperation among the high-income industrial countries.
The Council heads the U.S. delegation to the semiannual meetings of
the OECD's Economic Policy Committee; Dr. Yellen serves as that
committee's chair. In 1997 Dr. Frankel participated in Working Party
3 on macroeconomic policy coordination. Dr. Steven N. Braun, Director, Macroeconomic Forecasting at the Council, led the U.S. delegation
to the OECD annual examination of the United States, and to the
Short-term Economic Forecasters' Meeting. Dr. Christopher Carroll,
Senior Economist at the Council, led the U.S. delegation to the Working Party 1 meeting on structural issues.
MICROECONOMIC POLICIES
During 1997 the Council was an active participant in a range of
microeconomic policy discussions. The Council participated in various
interagency policy discussions on labor market issues, health care,
education, child care, and welfare reform; in the development of the
Child Health Insurance Program; in interagency discussions of proposals to increase health insurance coverage for older workers; and in
a working group investigating alternative measures of poverty. The
Council also participated in working groups on the minimum wage,
training initiatives for displaced workers, and unemployment insurance reform.
The Council has been actively involved in the President's Initiative
on Race and is coordinating production of a document that will present important indicators of social and economic well-being by race
and ethnicity for use by a national audience including educators and
policymakers.
In May the Council issued a report titled Explaining the Decline in
Welfare Receipt, 1993 to 1996. The report examined the causes of the
20-percent decline (2.75 million recipients) in the welfare caseload
that took place between 1993 and 1996 and concluded that roughly 40
percent of the decline was due to the stronger economy, roughly 30
percent to welfare reform policies, and the remainder to other factors
such as the earned income tax credit.
The Council was involved in White House conferences on early childhood development and child care. In conjunction with the early child-




268

hood development conference, the Council released a white paper titled
The First Three Years: Investments That Pay. This report documented
the importance of programs to encourage children's development in the
first 3 years of life and the high long-term payoff of such investments.
As a follow-up to the White House child care conference, the Council issued a report titled The Economics of Child Care. This report
reviewed the economics literature regarding the availability, cost, and
quality of child care and the importance of policies to support access to
affordable, quality care.
In the areas of regulation and competition policy, the Council helped
develop important Administration initiatives to improve the performance of markets, both domestically and internationally. On the
domestic front the Council took part in interagency efforts to increase
competition in electric power markets in a manner consistent with
important environmental and social objectives. The Council contributed to the Administration's analysis of whether and how much to
reform product liability law, and to discussions of the Federal Communications Commission's methods for pricing telecommunications
services. The Council also worked with the Federal Trade Commission, the Department of Justice, and the Department of the Treasury
to consider questions raised by the proposed industry-wide tobacco
settlement. In addition, the Council worked with the Treasury, the
Department of Education, and the Office of Management and Budget
to develop reforms of the college financial aid system to make it fairer
and more efficient.
With respect to international regulation and competition policy, the
Council cooperated with the Department of State and other agencies
to bring more competition to the satellite communications industry, to
support the OECD's adoption of principles for economically sound regulation, to promote efficient infrastructure development in the AsiaPacific region, and to coordinate merger policy with the European
Union.
The Council was also active in a range of policy discussions on natural resources and the environment. The Council took part in the
interagency evaluation of National Ambient Air Quality Standards for
ozone and particulate matter under the Clean Air Act and the implementation plans for the revised standards. The Council was actively
involved in the development and analysis of the Administration's global climate change policy.

The Staff of the Council of Economic Advisers
The professional staff of the Council consists of the Chief of Staff,
the Senior Statistician, 11 senior economists, 5 staff economists, and 3
research assistants. The professional staff and their areas of concentration at the end of 1997 were:




269

Chief of Staff and General Counsel
Michele M. Jolin
Senior Economists
Steven N. Braun
Christopher D. Carroll
Aaron S. Edlin
Keith O. Fuglie
Maria J. Hanratty
Jon D. Haveman
Sanders D. Korenman
Randall W. Lutter
Adele C. Morris
Jeremy B, Rudd
Charles F. Stone

Director, Macroeconomic Forecasting
Macroeconomics and Aging
Regulation, Industrial Organization, and
Antitrust
Agriculture and Natural Resources
Health Care and Labor
International Economics
Labor, Welfare, and Education
Regulation and Environment
Environment and Natural Resources
Macroeconomics
Macroeconomics and Editor, Weekly
Economic Briefing of the President
Senior Statistician
Catherine H. Furlong
Staff Economists

Joseph E. Aldy
Amy N. Finkelstein
Mark R. Hopkins
Mark C. Rainey
Sarah J. Reber

Environment and Natural Resources
Labor and Public Finance
International Economics
Industrial Organization and Regulation
Health Care and Environment
Senior Research Assistant

Ha Yan Lee

Macroeconomics
Research Assistants

Zachary M. Candelario
Daniel K. Chang

Weekly Economic Briefing of the President,
Labor, and Environment
Weekly Economic Briefing of the President
and International Economics

Statistical Office
Mrs. Furlong directs the Statistical Office. The Statistical Office
maintains and updates the Council's statistical information, oversees
the publication of the monthly Economic Indicators and the statistical
appendix to the Economic Report, and verifies statistics in Presidential and Council memoranda, testimony, and speeches.




270

Susan P. Clements
Linda A. Reilly
Brian A. Amorosi

Statistician
Statistician
Research Assistant

Administrative

Officer

Catherine Fibich
Office of the Chairman
Alice H. Williams
Sandra F. Daigle
Lisa D. Branch
Francine P. Obermiller

Executive Assistant to the Chairman
Executive Assistant to the Chairman and
Assistant to the Chief of Staff
Executive Assistant to Dr. Frankel
Executive Assistant to Dr. Blank

Staff Secretaries
Mary E. Jones
Rosalind V. Rasin
Mary A. Thomas

International Economics, Labor, and
Health Care
Environment, Industrial Organization, and
Public Finance
Macroeconomics

Mrs. Thomas also served as executive assistant for the Weekly Economic Briefing of the President.
Michael Treadway provided editorial assistance in the preparation
of the 1997 Economic Report. Michael A. Toman, Resources for the
Future, served as a consultant during the year.
Student interns during the year were Aryeh J. Asian, Elizabeth T.
Burns, Carol L. Capece, Quindi C. Franco, Robert K. Kaproth, Mark
N. Levine, Jennifer A. Meyers, Andrew J. Miller, Praveen Rangnath,
Katharine S. Rogers, Ravi K. Sandill, Kristen M. Scarafia, Courtney
A. Sweeney, Harsh N. Trivedi, and Jennifer H. Yoon. The following
student interns joined the Council in January to assist with the preparation of the Economic Report: Keith H. Monk, Jenny E. Pippin, and
Samuel G. Steckley.
DEPARTURES
The Council's senior economists, in most cases, are on leave of
absence from faculty positions at academic institutions or from other
government agencies or research institutions. Their tenure with the
Council is usually limited to 1 or 2 years. Most of the senior economists who left the Council during 1997 returned to their previous affiliations. They are Timothy J. Brennan (University of Maryland, Baltimore County, and Resources for the Future), William B. English
(Board of Governors of the Federal Reserve System), Phillip B. Levine
(Wellesley College), John D. Montgomery (International Monetary




271

Fund), Raymond Prince (Department of Energy), Christopher J.
Ruhm (University of North Carolina, Greensboro), Jason F. Shogren
(University of Wyoming), and David L. Sunding (University of California, Berkeley). Mark J. Mazur became Senior Policy Adviser and
Chief Economist at the Department of Energy.
Staff economists are generally graduate students who spend 1 year
with the Council and then return to complete their dissertations.
Those who returned to their graduate studies in 1997 are Carrie S.
Cihak (University of Michigan), Cynthia K. Gustafson (University of
California, Berkeley), Andrea Richter (London School of Economics),
Cristian J. Santesteban (Stanford University), and Caroline M.
Thompson (Princeton University). Jason L. Furman accepted a position with the World Bank. Thomas A. Rhoads accepted a position with
Resources for the Future and has since returned to graduate studies
at the University of Wyoming. After serving as research assistants at
the Council, Jennifer C. Daskal accepted a position at the Center on
Budget and Policy Priorities, and Diane M. Whitmore began graduate
studies at Princeton University.
Elizabeth A. Kaminski and Margaret L. Snyder retired in 1997
after serving the Council for 32 and 36 years, respectively. Mrs.
Kaminski served most recently as Administrative Officer, and Mrs.
Snyder retired from the Statistical Office.
Public Information
The Council's Annual Report is an important vehicle for presenting
the Administration's domestic and international economic policies. It
is now available for distribution as a bound volume, on CD-ROM, and
on the Internet, where it is accessible at http://www.access.gpo.gov/eop.
The Council also has primary responsibility for compiling the monthly Economic Indicators, which is issued by the Joint Economic Committee of the Congress. The Internet address for the Economic Indicators is www.access.gpo.gov/congress/cong002.html.




272

Appendix B
STATISTICAL TABLES RELATING TO INCOME,
EMPLOYMENT, AND PRODUCTION







CONTENTS
NATIONAL INCOME OR EXPENDITURE:
B-l.
B-2.
B-3.
B-4.
B-5.
B-6.
B-7.
B-8.
B-9.
B-10.
B-ll.
B-12.
B-13.
B-14.
B-15.
B-16.
B-17.
B-18.
B-19.
B-20.
B-21.
B-22.
B-23.
B-24.
B-25.
B-26.
B-27.
B-28.
B-29.
B-30.
B-31.
B-32.
B-33.

Gross domestic product, 1959-97
Real gross domestic product, 1959-97
Quantity and price indexes for gross domestic product, and percent changes, 1959-97
Percent changes in real gross domestic product, 1959-97
Contributions to percent change in real gross domestic product,
1959-97
Chain-type quantity indexes for gross domestic product, 1959-97
Chain-type price indexes for gross domestic product, 1959-97
Gross domestic product by major type of product, 1959-97
Real gross domestic product by major type of product, 1959-97
Gross domestic product by sector, 1959-97
Real gross domestic product by sector, 1959-97
Gross domestic product by industry, 1959-96
Real gross domestic product by industry, 1977-96
Gross domestic product of nonfinancial corporate business, 195997
Output, costs, and profits of nonfinancial corporate business,
1959-97
Personal consumption expenditures, 1959-97
Real personal consumption expenditures, 1982-97
Private gross fixed investment by type, 1959-97
Real private gross fixed investment by type, 1982-97
Government consumption expenditures and gross investment by
type, 1959-97
Real government consumption expenditures and gross investment by type, 1982-97
Inventories and final sales of domestic business, 1959-97
Real inventories and final sales of domestic business, 1959-97 ....
Foreign transactions in the national income and product accounts, 1959-97
Real exports and imports of goods and services and receipts and
payments of factor income, 1982-97
Relation of gross domestic product, gross national product, net
national product, and national income, 1959-97
Relation of national income and personal income, 1959-97
National income by type of income, 1959-97
Sources of personal income, 1959-97
Disposition of personal income, 1959-97
Total and per capita disposable personal income and personal
consumption expenditures in current and real dollars, 1959-97
Gross saving and investment, 1959-97
Median money income (in 1996 dollars) and poverty status of
families and persons, by race, selected years, 1978-96




275

Page
280
282
284
285
286
288
290
292
293
294
295
296
297

298
299
300
301
302
303
304
305
306
307
308
309
310
311
312
314
316
317
318
320

Page
POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY:
B-34.
B-35.
B-36.
B-37.
B-38.
B-39.
B-40.
B-41.
B-42.
B-43.
B-44.
B-45.
B-46.
B-47.
B-48.
B-49.
B-50.

Population by age group, 1929-97
.
Civilian population and labor force, 1929-97
Civilian employment and unemployment by sex and age, 195097
Civilian employment by demographic characteristic, 1954-97
Unemployment by demographic characteristic, 1954-97
Civilian labor force participation rate and employment/population ratio, 1950-97
Civilian labor force participation rate by demographic characteristic, 1954-97
Civilian employment/population ratio by demographic characteristic, 1954-97
Civilian unemployment rate, 1950-97
Civilian unemployment rate by demographic characteristic,
1954-97
Unemployment by duration and reason, 1950-97
Unemployment insurance programs, selected data, 1965-97
Employees on nonagricultural payrolls, by major industry, 195097
Hours and earnings in private nonagricultural industries, 195997
Employment cost index, private industry, 1980-97
Productivity and related data, business sector, 1959-97
Changes in productivity and related data, business sector, 195997

321
322
324
325
326

327
328
329
330
331
332
333
334
336
337
338
339

PRODUCTION AND BUSINESS ACTIVITY:
B-51.
B-52.
B-53.
B-54.
B-55.
B-56.
B-57.
B-58.
B-59.

Industrial production indexes, major industry divisions, 1947-97
Industrial production indexes, market groupings, 1947-97
Industrial production indexes, selected manufactures, 1947-97 ...
Capacity utilization rates, 1948-97
New construction activity, 1959-97
New housing units started and authorized, 1959-97
Manufacturing and trade sales and inventories, 1954-97
Manufacturers' shipments and inventories, 1954-97
Manufacturers' new and unfilled orders, 1954-97

340
341
342
343
344
345
346
347
348

Consumer price indexes for major expenditure classes, 1954—97
Consumer price indexes for selected expenditure classes, 1954—
97
Consumer price indexes for commodities, services, and special
groups, 1954-97
Changes in special consumer price indexes, 1960-97
Changes in consumer price indexes for commodities and services,
1929-97
Producer price indexes by stage of processing, 1954-97
Producer price indexes by stage of processing, special groups,
1974-97
Producer price indexes for major commodity groups, 1954-97
Changes in producer price indexes for finished goods, 1960-97 ....

349

PRICES:
B-60.
B-61.
B-62.
B-63.
B-64.
B-65.
B-66.
B-67.
B-68.




276

350

352
353
354
355
357
358
360

Page
MONEY STOCK, CREDIT, AND FINANCE:
B-69. Money stock, liquid assets, and debt measures, 1959-97
B-70. Components of money stock measures and liquid assets, 195&-97
B-71. Aggregate reserves of depository institutions and monetary base,
1959-97
B-72. Bank credit at all commercial banks, 1972-97
B-73. Bond yields and interest rates, 1929-97
B-74. Credit market borrowing, 1988-97
B-75. Mortgage debt outstanding by type of property and of financing,
1945-97
B-76. Mortgage debt outstanding by holder, 1945-97
B-77. Consumer credit outstanding, 1955-97

361
362
364
365
366
368
370
371
372

GOVERNMENT FINANCE:
B-78. Federal receipts, outlays, surplus or deficit, and debt, selected
fiscal years, 1929-99
373
B-79. Federal budget receipts, outlays, surplus or deficit, and debt, as
percent of gross domestic product, fiscal years 1934-99
374
B-80. Federal receipts and outlays, by major category, and surplus or
deficit, fiscal years 1940-99
375
B-81. Federal receipts, outlays, deficit, and debt, fiscal years 1993-99 376
B-82. Federal Government receipts and current expenditures, national
income and product accounts (NIPA), 1978-97
377
B-83. Federal and State and local government receipts and current expenditures, national income and product accounts (NIPA),
1959-97
378
B-84. Federal and State and local government receipts and current expenditures, national income and product accounts (NIPA), by
major type, 1959-97
379
B-85. State and local government receipts and current expenditures,
national income and product accounts (NIPA), 1959-97
380
B-86. State and local government revenues and expenditures, selected
fiscal years, 1927-94
381
B-87. Interest-bearing public debt securities by kind of obligation,
1967-97
382
B-88. Maturity distribution and average length of marketable interestbearing public debt securities held by private investors, 196797
383
B-89. Estimated ownership of public debt securities by private investors, 1976-97
384
CORPORATE PROFITS AND FINANCE:
B-90. Corporate profits with inventory valuation and capital consumption adjustments, 1959-97
B-91. Corporate profits by industry, 1959-97
B-92. Corporate profits of manufacturing industries, 1959-97
B-93. Sales, profits, and stockholders' equity, all manufacturing corporations, 1952-97
B-94. Relation of profits after taxes to stockholders' equity and to sales,
all manufacturing corporations, 1947-97
B-95. Common stock prices and yields, 1955-97
B-96. Business formation and business failures, 1955-97




277

385
386
387
388
389
390
391

Page
AGRICULTURE:
B-97. Farm income, 1945-97
B-98. Farm business balance sheet, 1950-96
B-99. Farm output and productivity indexes, 1948-94
B-100. Farm input use, selected inputs, 1948-97
B-101. Indexes of prices received and prices paid by farmers, 1975-97
B-102. U.S. exports and imports of agricultural commodities, 1940-97 ...

392
393
394
395
396
397

INTERNATIONAL STATISTICS:
B-103. U.S. international transactions, 1946-97
398
B—104. U.S. international trade in goods by principal end-use category,
1965-97
400
B-105. U.S. international trade in goods by area, 1988-97
401
B—106. U.S. international trade in goods on balance of payments (BOP)
and Census basis, and trade in services on BOP basis, 197497
402
B-107. International investment position of the United States at yearend, 1988-96
403
B-108. Industrial production and consumer prices, major industrial
countries, 1972-97
404
B-109. Civilian unemployment rate, and hourly compensation, major industrial countries, 1972-97
405
B-110. Foreign exchange rates, 1972-97
406
B-lll. International reserves, selected years, 1952-97
407
B-112. Growth rates in real gross domestic product, 1979-97
408




278

General Notes
Detail in these tables may not add to totals because of rounding.
Because of the formula used for calculating real gross domestic product (GDP),
the chained (1992) dollar estimates for the detailed components do not add to
the chained-dollar value of GDP or to any intermediate aggregates. In
addition, the Department of Commerce (Bureau of Economic Analysis) no
longer publishes chained-dollar estimates prior to 1982, except for selected
series. This change is reflected in these tables.
Unless otherwise noted, all dollar figures are in current dollars.
Symbols used:
P Preliminary.
.... Not available (also, not applicable).
Data in these tables reflect revisions made by the source agencies from
February 1997 through early February 1998.




NATIONAL INCOME OR EXPENDITURE
TABLE B-l.—Gross domestic product, 1959-97
[BILLIONS OF DOLLARS, EXCEPT AS NOTED; QUARTERLY DATA AT SEASONALLY ADJUSTED ANNUAL RATES]
Personal consumption expenditures

Gross private domestic investment
Fixed investment

Year or
quarter

1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981 ..
1982
1983
1984
1985
1986 .
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997?
1992-1
II
Ill
IV
1993:1

II
Ill
IV

1994:1

||
III
IV
1995-1
II
Ill
IV
1996:1
II
Ill
IV
1997:1

||
III
IV*

Gross
domestic
product

507.2
526.6
544.8
585.2
617.4
663.0
719.1
787.8
833.6
910.6
982.2
1,035.6
1,125.4
1,237.3
1,382.6
1,496.9
1,630.6
1,819.0
2,026.9
2,291.4
2,557.5
2,784.2
3,115.9
3,242.1
3,514.5
3,902.4
4,180.7
4,422.2
4,692.3
5,049.6
5,438.7
5,743.8
5,916.7
6,244.4
6,558.1
6,947.0
7,265.4
7,636.0
8,083.4
6,121.8
6,201.2
6,271.7
6,383.1
6,444.5
6,509.1
6,574.6
6,704.2
6,794.3
6,911.4
6,986.5
7,095.7
7,168.9
7,209.5
7,301.3
7,381.9
7,467.5
7,607.7
7,676.0
7,792.9
7,933.6
8,034.3
8,124.3
8,241.5

Total

NonDurable durable
goods
goods

318.1
332.2
342.6
363.4
383.0
411.4
444.3
481.9
509.5
559.8
604.7
648.1
702.5
770.7
851.6
931.2
1,029.1
1,148.8
1,277.1
1,428.8
1,593.5
1,760.4
1,941.3
2,076.8
2,283.4
2,492.3
2,704.8
2,892.7
3,094.5
3,349.7
3,594.8
3,839.3
3,975.1
4,219.8
4,459.2
4,717.0
4,957.7
5,207.6
5,488.6
4,127.6
4,183.0
4,238.9
4,329.6
4,365.4
4,428.1
4,488.6
4,554.9
4,616.6
4,680.5
4,750.6
4,820.2
4,871.7
4,934.8
4,990.6
5,033.8
5,105.8
5,189.1
5,227.4
5,308.1
5,405.7
5,432.1
5,527.4
5,589.3

42.7
43.3
41.8
46.9
51.6
56.7
63.3
68.3
70.4
80.8
85.9
85.0
96.9
110.4
123.5
122.3
133.5
158.9
181.1
201.4
213.9
213.5
230.5
239.3
279.8
325.1
361.1
398.7
416.7
451.0
472.8
476.5
455.2
488.5
530.2
579.5
608.5
634.5
659.4
474.1
481.3
492.5
506.2
506.4
524.2
537.2
553.1
563.2
572.4
583.3
599.3
596.9
602.8
616.0
618.4
626.7
638.6
634.5
638.2
658.4
644.5
667.3
667.6

148.5
152.9
156.6
162.8
168.2
178.7
191.6
208.8
217.1
235.7
253.2
272.0
285.5
308.0
343.1
384.5
420.6
458.2
496.9
549.9
624.0
695.5
758.2
786.8
830.3
883.6
927.6
957.2
1,014.0
1,081.1
1,163.8
1,245.3
1,277.6
1,321.8
1,370.7
1,428.4
1,475.8
1,534.7
1,592.7
1,303.1
1,308.4
1,326.3
1,349.5
1,354.4
1,366.3
1,373.9
1,388.0
1,404.4
1,416.0
1,439.5
1,453.7
1,462.7
1,472.4
1,480.4
1,487.8
1,508.1
1,532.3
1,538.3
1,560.1
1,587.4
1,578.9
1,600.8
1,603.9

Nonresidential
Services

127.0
136.0
144.3
153.7
163.2
176.1
189.4
204.8
222.0
243.4
265.5
291.1
320.1
352.3
384.9
424.4
475.0
531.8
599.0
677.4
755.6
851.4
952.6
1,050.7
1,173.3
1,283.6
1,416.1
1,536.8
1,663.8
1,817.6
1,958.1
2,117.5
2,242.3
2,409.4
2,558.4
2,709.1
2,873.4
3,038.4
3,236.5
2,350.4
2,393.3
2,420.1
2,473.9
2,504.6
2,537.6
2,577.4
2,613.8
2,649.0
2,692.2
2,727.8
2,767.2
2,812.2
2,859.6
2,894.2
2,927.5
2,970.9
3,018.2
3,054.6
3,109.8
3,159.9
3,208.7
3,259.3
3,317.9

See next page for continuation of table.




280

Total

78.8
78.8
77.9
87.9
93.4
101.7
118.0
130.4
128.0
139.9
155.0
150.2
176.0
205.6
242.9
245.6
225.4
286.6
356.6
430.8
480.9
465.9
556.2
501.1
547.1
715.6
715.1
722.5
747.2
773.9
829.2
799.7
736.2
790.4
876.2
1,007.9
1,038.2
1,116.5
1,237.6
755.2
790.7
799.7
816.1
854.3
857.4
872.8
920.3
963.4
1,017.9
1,007.1
1,043.1
1,050.8
1,024.0
1,028.8
1,049.1
1,060.5
1,105.4
1,149.2
1,151.1
1,193.6
1,242.0
1,250.2
1,264.5

Total

74.6
75.5
75.0
81.8
87.7
96.7
108.3
116.7
117.6
130.8
145.5
148.1
167.5
195.7
225.4
231.5
231.7
269.6
333.5
403.6
464.0
473.5
528.1
515.6
552.0
648.1
688.9
712.9
722.9
763.1
797.5
791.6
738.5
783.4
855.7
946.6
1,008.1
1,090.7
1,173.0
755.4
780.5
788.1
809.7
823.5
842.9
858.8
897.5
911.0
941.7
956.9
977.0
998.7
999.6
1,009.4
1,024.6
1,049.4
1,082.0
1,112.0
1,119.2
1,127.5
1,160.8
1,201.3
1,202.4

Total

46.5
49.2
48.6
52.8
55.6
62.4
74.1
84.4
85.2
92.1
102.9
106.7
111.7
126.1
150.0
165.6
169.0
187.2
223.2
272.0
323.0
350.3
405.4
409.9
399.4
468.3
502.0
494.8
495.4
530.6
566.2
575.9
547.3
557.9
604.1
660.6
723.0
781.4
845.4
544.1
556.8
561.0
569.6
580.5
598.8
606.4
630.6
634.6
652.9
667.4
687.5
710.9
722.5
725.4
733.1
750.7
769.3
798.6
807.2
811.3
836.3
872.0
862.3

Structures

18.1
19.6
19.7
20.8
21.2
23.7
28.3
31.3
31.5
33.6
37.7
40.3
42.7
47.2
55.0
61.2
61.4
65.9
74.6
91.4
114.9
133.9
164.6
175.0
152.7
176.0
193.3
175.8
172.1
181.3
192.3
200.8
181.7
169.2
176.4
184.5
200.6
215.2
230.2
171.6
170.4
167.6
167.1
171.7
175.2
177.8
180.7
175.4
185.2
186.8
190.7
197.7
201.1
202.8
200.7
205.7
210.6
217.7
227.0
227.4
226.8
232.9
233.7

Producers'
durable
equipment
28.3
29.7
28.9
32.1
34.4
38.7
45.8
53.0
53.7
58.5
65.2
66.4
69.1
78.9
95.1
104.3
107.6
121.2
148.7
180.6
208.1
216.4
240.9
234.9
246.7
292.3
308.7
319.0
323.3
349.3
373.9
375.1
365.6
388.7
427.7
476.1
522.4
566.2
615.2
372.5
386.3
393.4
402.5
408.9
423.6
428.6
449.9
459.3
467.7
480.6
496.8
513.2
521.4
522.6
532.4
545.0
558.7
580.9
580.2
583.9
609.5
639.1
628.5

Residential

28.1
26.3
26.4
29.0
32.1
34.3
34.2
32.3
32.4
38.7
42.6
41.4
55.8
69.7
75.3
66.0
62.7
82.5
110.3
131.6
141.0
123.2
122.6
105.7
152.5
179.8
186.9
218.1
227.6
232.5
231.3
215.7
191.2
225.6
251.6
286.0
285.1
309.2
327.5
211.3
223.7
227.1
240.1
243.0
244.1
252.4
266.8
276.4
288.7
289.5
289.5
287.8
277.1
284.0
291.4
298.8
312.7
313.5
312.0
316.2
324.6
329.3
340.1

Change
in
business
inventories

4.2
3.2
2.9
6.1
5.7
5.0
9.7
13.8
10.5
9.1
9.5
2.2
8.5
9.9
17.5
14.1
-6.3
16.9
23.1
27.2
16.9
-7.6
28.2
-14.5
-4.9
67.5
26.2
9.6
24.2
10.9
31.7
8.0
-2.3
7.0
20.5
61.2
30.1
25.9
64.6
-.2
10.2
11.6
6.5
30.7
14.5
14.0
22.9
52.4
76.3
50.2
66.2
52.1
24.5
19.4
24.5
11.1
23.4
37.1
31.9
66.1
81.1
48.9
62.1

TABLE B-l.—Gross domestic product, 1959-97—Continued
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Net exports of goods
and services

Government consumption expenditures
and gross investment

Net
exports Exports Imports

National
defense

Federal

Year or
quarter

Total

Total

Nondefense

67.2
55.7
11.5
22.3 112.0
20.6
10.8
65.6
54.9
22.8 113.2
25.3
11.4
22.7 120.9
69.1
57.7
26.0
14.2
27.4
76.5
62.3
25.0 131.4
15.9
29.4
78.1
62.2
26.1 137.7
ZZ:
79.4
18.1
61.3
28.1 144.4
33.6
19.7
81.8
62.0
31.5 153.0
35.4
94.1
20.7
73.4
37.1 173.6
38.9
21.0
41.4
85.5
39.9 194.6 106.6
92.0
21.8
46.6 212.1 113.8
45.3
23.4
92.4
50.5 223.8 115.8
49.3
25.3
57.0
90.6
55.8 236.1 115.9
88.7
28.3
62.3 249.9 117.1
59.3
31.9
93.2
74.2 268.9 125.1
66.2
94.7
33.5
91.2 287.6 128.2
91.8
38.0
-3'.1 124.3
127.5 323.2 139.9 101.9
122.7 362.6 154.5 110.9
43.6
13.6 136.3
'...
-2.3 148.9
46.6
151.1 385.9 162.7 116.1
182.4 416.9 178.4 125.8
52.6
-23.7 158.8
58.9
212.3 457.9 194.4 135.6
-26.1 186.1
63.8
252.7 507.1 215.0 151.2
-24.0 228.7
74.2
293.8 572.8 248.4 174.2
-14.9 278.9
82.2
317.8 633.4 284.1 202.0
-15.0 302.8
82.3
303.2 684.8 313.2 230.9
-20.5 282.6
89.4
-51.7 277.0
328.6 735.7 344.5 255.0
89.9
405.1 796.6 372.6 282.7
-102.0 303.1
97.7
417.2 875.0 410.1 312.4
" -114.2 303.0
-131.5 320.7
452.2 938.5 435.2 332.4 102.9
507.9 992.8 455.7 350.4 105.3
-142.1 365.7
553.2 1,032.0 457.3 354.0 103.3
-106.1 447.2
589.7 1,095.1 477.2 360.6 116.7
-80.4 509.3
628.6 1,176.1 503.6 373.1 130.4
-71.3 557.3
622.3 1,225.9 522.6 383.5 139.1
-20.5 601.8
-29.5 639.4
1992
669.0 1,263.8 528.0 375.8 152.2
-60.7 658.6
1993
719.3 1,283.4 518.3 360.7 157.7
1994
-90.9 721.2
812.1 1,313.0 510.2 349.2 161.0
-86.0 818.4
1995
904.5 1,355.5 509.6 344.6 165.0
965.7 1,406.7 520.0 352.8 167.3
-94.8 870.9
1996
1997*
-96.7 958.8 1,055.5 1,453.9 524.8 350.8 174.0
1992:1
641.3 1,247.9 521.8 372.8 149.0
-8.9 632.4
II
-29.0 635.9
664.9 1,256.4 523.2 374.1 149.1
Ill
-37.6 640.2
677.8 1,270.7 532.0 380.9 151.1
-42.7 649.1
IV
691.8 1,280.0 535.0 375.3 159.7
693.7 1,271.5 521.3 363.6 157.7
1993:1
-46.6 647.1
II
718.7 1,281.2 517.8 361.7 156.1
-57.5 661.2
Ill
-72.1 646.8
718.9 1,285.3 515.7 358.0 157.7
-66.6 679.4
IV
746.0 1,295.5 518.5 359.4 159.1
1994:1
-76.6 678.5
755.1 1,291.0 506.9 344.9 162.0
II
797.9 1,300.8 505.3 348.5 156.8
-87.9 710.1
Ill
-103.4 732.6
836.0 1,332.3 520.4 359.7 160.7
-95.6 763.7
IV
859.2 1,328.0 508.3 343.6 164.7
-98.3 784.5
1995:1
882.8 1,344.7 513.6 346.3 167.3
IJ
-105.4 807.7
913.1 1,356.0 511.2 348.1 163.0
-80.4 831.6
Ill
912.0 1,362.2 512.9 347.3 165.5
IV
-60.1 849.9
909.9 1,359.2 500.6 336.5 164.1
-83.0 850.2
1996:1
933.2 1,384.2 516.4 348.4 168.0
II
958.7 1,407.0 524.6 357.3 167.3
-93.8 865.0
Ill
-114.0 836.7
977.6 1,413.5 521.6 354.8 166.8
993.2 1,422.3 517.6 350.6 167.0
-88.6 904.6
IV
1997:1
-98.8 922.2 1,021.0 1,433.1 516.1 343.3 172.8
-88.7 960.3 1,049.0 1,449.0 526.1 350.6 175.5
II
Ill
-111.3 965.8 1,077.1 1,457.9 525.7 352.1 173.6
IV/>
-87.9 986.9 1,074.8 1,475.6 531.1 357.1 174.0
1
Gross domestic product (GOP) less exports of goods and services plus imports of
2
GDP plus net receipts of factor income from rest of the world.
Source: Department of Commerce, Bureau of Economic Analysis.

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990

1991

-1.7
2.4
3.4
2.4
3.3
5.5
3.9
1.9
1.4
-1.3
-1.2
1.2
-3.0
-8.0

;.;




281

State
and
local

Percent change
from preceding
Final
period
Gross Addendum:
sales of domes- Gross
domesGross Gross
tic
national domes- domespurtic
tic
tic
product chases l product ^
purproduct chases l

508.9
44.8
503.0
524.1
47.6
523.3
541.5
51.8
541.9
55.0
579.1 582.8
614.1
611.7
59.6
657.6
65.0
658.0
709.4
715.3
71.2
79.5 774.0
785.9
823.1 832.2
88.1
901.4
911.8
98.3
983.4
972.7
108.0
120.2 1,033.4 1,034.4
132.8 1,116.9 1,128.4
143.8 1,227.4 1,245.3
159.4 1,365.2 1,382.0
183.3 1,482.8 1,500.0
208.1 1,636.9 1,617.1
223.1 1,802.0 1,821.2
238.5 2,003.8 2,050.5
263.4 2,264.2 2,317.5
292.0 2,540.6 2,581.5
324.4 2,791.9 2,799.1
349.2 3,087.8 3,130.9
371.6 3,256.6 3,262.6
391.2 3,519.4 3,566.2
424.0 3,835.0 4,004.5
464.9 4,154.5 4,294.9
503.3 4,412.6 4,553.7
537.2 4,668.1 4,834.5
574.7 5,038.7 5,155.6
617.9 5,407.0 5,519.1
672.6 5,735.8 5,815.1
703.4 5,919.0 5,937.2
735.8 6,237.4 6,274.0
765.0 6,537.6 6,618.8
802.8 6,885.7 7,037.9
846.0 7,235.3 7,351.4
886.7 7,610.2 7,730.9
929.1 8,018.8 8,180.1
726.1 6,122.1 6,130.8
733.2 6,191.0 6,230.2
738.7 6,260.1 6,309.2
745.1 6,376.6 6,425.8
750.1 6,413.8 6,491.1
763.4 6,494.7 6,566.7
769.6 6,560.6 6,646.7
777.0 6,681.3 6,770.8
784.1 6,741.9 6,870.9
795.5 6,835.1 6,999.2
811.9 6,936.3 7,090.0
819.6 7,029.6 7,191.3
831.1 7,116.8 7,267.2
844.8 7,185.0 7,314.8
849.3 7,281.8 7,381.7
858.6 7,357.4 7,442.0
867.8 7,456.4 7,550.5
882.4 7,584.3 7,701.5
891.9 7,638.9 7,790.0
904.7 7,761.0 7,881.5
917.0 7,867.4 8,032.4
923.0 7,953.2 8,123.1
932.3 8,075.3 8,235.6
944.4 8,179.3 8,329.4
goods and services.

510.1
529.8
548.4
589.4
621.9
668.0
724.5
793.0
839.1
916.7
988.4
1,042.0
1,133.1
1,246.0
1,395.4
1,512.6
1,643.9
1,836.1
2,047.5
2,313.5
2,590.4
2,819.5
3,150.6
3,273.2
3,546.5
3,933.5
4,201.0
4,435.1
4,701.3
5,062.6
5,452.8
5,764.9
5,932.4
6,255.5
6,576.8
6,955.2
7,270.6
7,637.7
6,138.3
6.212.2
6,281.1
6,390.5
6,468.1
6,525.3
6,596.9
6,717.1
6,811.2
6,920.3
6,992.3
7,096.8
7,175.1
7,220.6
7,298.3
7,388.5
7,475.3
7,610.5
7,669.1
7,796.1
7,919.2
8,013.6
8,103.5

8.5
3.8
3.5
7.4
5.5
7.4
8.5
9.5
5.8
9.2
7.9
5.4
8.7
9.9
11.7
8.3
8.9
11.5
11.4
13.0
11.6
8.9
11.9
4.1
8.4
11.0
7.1
5.8
6.1
7.6
7.7
5.6
3.0
5.5
5.0
5.9
4.6
5.1
5.9
8.2
5.3
4.6
7.3
3.9
4.1
4.1
8.1
5.5
7.1
4.4
6.4
4.2
2.3
5.2
4.5
4.7
7.7
3.6
6.2
7.4
5.2
4.6
5.9

9.0
3.0
3.3
7.6
5.4
7.1
8.8
9.9
5.9
9.6
7.8
5.2
9.1
10.4
11.0
8.5
7.8
12.6
12.6
13.0
11.4
8.4
11.9
4.2
9.3
12.3
7.3
6.0
6.2
6.6
7.0
5.4
2.1
5.7
5.5
6.3
4.5
5.2
5.8
7.8
6.6
5.2
7.6
4.1
4.7
5.0
7.7
6.0
7.7
5.3
5.8
4.3
2.6
3.7
3.3
6.0
8.2
4.7
4.8
7.9
4.6
5.7
4.6

TABLE B-2.—Real gnus domestic product, 1959-97
[Billions ef chained (1992) dollars, except as noted; quarterly data at seasonally adjusted annual rates}
Personal consumption expenditures
Year or
quarter

1959
I960
1961
1962
1963 Z! "Ill
1964
1965
1966
1967
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995 .!
1996
. .
1997*

1968 .: :.:

1992:1

II
III
IV

1993:1

||
Ill
IV
1994- 1
II
Ill
IV
1995- 1
II
Ill
IV
1996:1

||
III
IV
1997:1
||
III
IV"

Gross
domestic
product

2,210.2
2,262.9
2,314.3
2,454.8
2,559.4
2,708.4
2,881.1
3,069.2
3,147.2
3,293.9
3,393.6
3,397.6
3,510.0
3,702.3
3,916.3
3,891.2
3,873.9
4,082.9
4,273.6
4,503.0
4,630.6
4,615.0
4,720.7
4,620.3
4,803.7
5,140.1
5,323.5
5,487.7
5,649.5
5,865.2
6,062.0
6,136.3
6.079.4
6,244.4
6,389.6
6,610J
6,742.1
6,928.4
7,191.4
6,175.7
6,214.2
6,260.7
6,327.1
6,327.9
6,359.9
6,393.5
6,476.9
6,524.5
6,600.3
6,629.5
6,688.6
6,703.7
6,708.8
6,759.2
6,796.5
6,826.4
6,926.0
6,943.8
7,017.4
7,101.6
7,159.6
7,214.0
7,290.3

Total

Durable
goods

1,394.6
1,432.6
1,461.5
1,533.8
1,596.6
1,692.3
1,799.1
1,902.0
1,958.6
2,070.2
2,147.5
2,197.8
2,279.5
2,415.9
2,532.6
2,514.7
2,570.0
2,714.3
2,829.8
2,951.6
3,020.2
3,009.7
3,046.4
3,081.5
3,240.6
3,407.6
3,566.5
3,708.7
3,822.3
3,972.7
4,064.6
4,132.2
4,105.8
4,219.8
4,343.6
4,486.0
4,595.3
4,714.1
4,869.7
4,173.8
4,196.4
4,226.7
4,282.3
4,286.8
4,322.8
4,366.6
4,398.0
4,439.4
4,472.2
4,498.2
4,534.1
4,551.3
4,583.5
4,612.9
4,633.5
4,669.4
4,712.2
4,718.2
4,756.4
4,818.1
4,829.4
4,896.2
4,935.0

285.5
327.4
374.9
411.4
448.4
454.9
483.5
496.2
493.3
462.0
488.5
523.8
561.2
583.6
611.1
645.8
476.1
481.1
491.9
505.0
504.0
519.3
529.9
542.1
550.7
555.8
561.7
576.6
572.2
577.7
590.8
593.7
600.7
614.8
611.9
617.1
637.8
629.0
656.1
660.3

Gross private domestic investment
Fixed investment

Nondurable Services
goods

1,080.6
1,112.4
1,151.8
1,178.3
1,215.9
1,239.3
1,274.4
1,303.5
1,316.1
1,302.9
1,321.8
1,351.0
1,389.9
1,412.6
1,432.3
1,459.3
1,314.4
1,312.0
1,321.1
1,339.8
1,337.5
1,347.8
1,356.8
1,361.8
1,378.4
1,385.5
1,393.2
1,402.5
1,408.4
1,411.6
1,413.9
1,416.3
1,422.5
1,431.6
1,433.9
1,441.2
1,457.8
1,450.0
1,465.5
1,464.1

1,728.2
1,809.0
1,883.0
1,977.3
2,041.4
2,126.9
2,212.4
2,262.3
2,321.3
2,341.0
2,409.4
2,468.9
2,535.5
2,599.6
2,671.0
2,765.2
2,383.2
2,403.2
2,413.6
2,437.6
2,445.3
2,455.9
2,480.0
2,494.4
2,510.9
2,531.4
2,543.8
2,555.9
2,571.2
2,594.5
2,608.7
2,623.8
2,646.5
2,666.5
2,672.8
2,698.2
2,723.9
2,749.8
2,776.1
2,811.0

Nonresktential
Total

271.7
270.5
267.6
302.1
321.6
348.3
397.2
430.6
411.8
433.3
458.3
426.1
4749
531.8
595.5
546.5
446.6
537.4
622.1
693.4
7097
628.3
686.0
587.2
642.1
833.4
823.8
811.8
821.5
828.2
863.5
815.0
738.1
790.4
863.6
975.7
991.5
1,069.1
1,192.2
758.2
792.8
798.5
812.2
845.5
846.1
858.6
904.0
939.9
987.8
972.2
1,003.0
1,005.8
977.5
982.0
1,000.8
1,012.2
1,059.2
1,100.3
1,104.8
1,149.2
1,197.1
1,204.6
1,217.9

See next page for continuation of table.




282

Total

610.4
654.2
762.4
799.3
805.0
799.4
818.3
832.0
805.8
741.3
783.4
842.8
915.5
962.1
1,041.7
1,122.3
758.3
782.4
787.3
805.8
814.8
831.1
844.5
880.8
887.8
913.2
922.7
938.5
955.8
954.0
962.3
976.3
1,001.5
1,035.7
1,060.9
1,068.7
1,079.0
1,111.4
1,149.3
1,149.6

Total

464.3
456.4
535.4
568.4
548.5
542.4
566.0
588.8
585.2
547.7
557.9
600.2
648.4
706.5
771.7
846.7
544.4
557.5
560.6
569.1
577.8
595.1
602.3
625.6
626.2
641.2
653.2
672.9
695.7
705.4
708.2
716.8
736.9
759.7
789.3
800.8
808.9
837.0
874.5
866.5

Structures

207.2
185.7
212.2
227.8
203.3
195.9
196.8
201.2
203.3
181.6
169.2
170.8
172.5
179.9
188.7
195.4
172.7
171.0
167.4
165.6
168.0
170.3
171.7
173.1
166.3
174.5
174.0
175.0
179.0
180.9
181.2
178.6
182.1
185.6
190.0
196.9
195.9
193.5
196.7
195.3

Producers' Residurable dential
equipment

260.3
272.4
324.6
342.4
345.9
346.9
369.2
387.6
381.9
366.2
388.7
429.6
476.8
528.3
586.0
657.4
371.7
386.4
393.1
403.5
409.8
424.9
430.7
452.9
460.6
467.3
480.0
499.1
518.1
525.9
528.5
540.5
557.4
577.1
602.9
606.7
616.6
649.3
685.3
678.5

140.1
197.6
226.4
229.5
257.0
257.6
252.5
243.2
220.6
193.4
225.6
242.6
267.0
257.0
272.1
279.7
213.9
224.9
226.7
236.7
237.0
236.1
242.2
255.1
261.3
271.5
269.4
265.9
261.2
250.4
255.5
260.8
266.1
277.2
274.1
271.1
273.3
278.2
280.1
287.1

•P
business
inventories

13.2
10.5
8.6
19.5
17.8
15.6
30.3
42.4
32.0
26.9
27.0
5.4
22.3
24.7
37.7
23.4
-10.2
29.8
38.8
43.3
23.4
-10.2
33.1
-15.6
-5.7
75.3
30.2
11.1
26.4
11.7
33.3
10.4
-3.0
7.0
22.1
60.6
27.3
25.0
62.2
1LO
12.0
5.6
32.3
16.6
15.3
24.2
53.1
75.9
49.7
63.6
48.5
21.6
17.0
22.2
8.0
21.3
37.9
32.9
63.7
77.6
47.5
59.9

TABLE B-2.—Real gross domestic product, 1959-97—Continued
[Billions of chained (1992) dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Net exports of goods
and services
Year or
quarter

Government consumption expenditures and
gross investment
Federal

Net
exports Exports Imports

Total

Total

National
defense

Nondefense

Gross
Final
sales of domesdomestic
State
purtic
and product chases ]
local

2,206.9 2,268.0
71.9 106.6 618.5
86.8 108.1 617.2
2,264.2 2.304.1
2,318.0 2,354.3
88.3 107.3 647.2
2,445.4 2,503.0
93.0 119.5 686.0
2,552.4 2,604.2
100.0 122.7 701.9
2,705.1 2,745.9
113.3 129.2 715.9
2,860.4 2,932.1
115.6 143.0 737.6
123.4 164.2 804.6
3,033.5 3,134.0
126.1 176.2 865.6
3,125.1 3,221.1
3,278.0 3,382.7
135.3 202.5 892.4
142.7 214.0 887.5
3,377.2 3,485.6
3,406.5 3,478.5
158.1 223.1 866.8
3,499.8 3,602.4
159.2 235.0 851.0
3,689.5 3,806.2
172.0 261.0 854.1
3,883.9 3,989.3
209.6 272.6 848.4
3,873.4 3,928.6
229.8 265.3 862.9
3,906.4 3,875.9
228.2 235.4 876.3
4,061.7 4,124.6
241.6 281.5 876.8
247.4 311.6 884.7
4,240.8 4,345.7
4,464.4 4,574.9
273.1 338.6 910.6
4,614.4 4,674.6
299.0 344.3 924.9
331.4 321.3 941.4
4,641.9 4,581.5
4,691.6 4,693.1
335.3 329.7 947.7
-14.1 311.4 325.5 960.1 429.4
316.5 113.3 531.4 4,651.2 4,619.3
334.6 118.5 534.9 4,821.2 4,864.3
-63.3 303.3 366.6 987.3 452.7
348.1 115.9 555.0 5,061.6 5,276.2
-127.3 328.4 455.7 1,018.4 463.7
374.1 121.8 584.7 5,296.9 5,482.8
-147.9 337.3 485.2 1,080.1 495.6
393.4 125.2 616.9 5,480.9 5,663.9
-163.9 362.2 526.1 1,135.0 518.4
409.2 125.3 631.8 5,626.0 5,816.7
-156.2 402.0 558.2 1,165.9 534.4
-114.4 465.8 580.2 1,180.9 524.6
405.5 119.1 656.6 5,855.1 5,986.1
-82.7 520.2 603.0 1,213.9 531.5
401.6 130.1 682.6 6,028.7 6,147.8
401.5 140.5 708.6 6,126.7 6,199.8
-61.9 564.4 626.3 1,250.4 541.9
397.5 142.0 718.7 6,082.6 6,101.6
-22.3
599.9 622.2 1,258.0 539.4
375.8 152.2 735.8 6,237.4 6,274.0
-29.5 639.4 669.0 1,263.8 528.0
354.4 151.2 746.4 6,368.9 6,459.0
-70.2 658.2 728.4 1,252.1 505.7
336.9 149.5 765.7 6,551.2 6,712.7
-104.6 712.4 817.0 1,252.3 486.6
322.6 147.5 781.6 6,712.7 6,837.5
-98.8 791.2 890.1 1,251.9 470.3
317.8 146.1 793.7 6,901.0 7,037.7
. .. -114.4 857.0 971.5 1,257.9 464.2
309.0 148.3 812.9 7,124.2 7,323.4
-142.1 964.4 1,106.5 1,270.6 457.8
374.2 150.8 733.5 6,175.8 6,190.3
-14.8 633.0 647.8 1,258.5 525.1
1992:1
373.3 150.0 734.2 6,203.8 6,246.9
II
-32.5 635.8 668.3 1,257.5 523.3
Ill
378.7 150.9 736.9 6,249.5 6,291.7
-30.8 639.7 670.5 1,266.5 529.6
376.8 157.1 738.5 6,320.7 6,367.0
-40.0 649.1 689.1 1,272.5 534.0
IV
359.2 152.9 738.0 6,297.3 6,382.3
1993-1
-54.7 647.2 701.9 1,250.1 512.1
II
356.7 151.1 745.3 6,344.9 6,422.0
660.1 722.7 1,253.1 507.8
-62.6
Ill
351.1 150.3 749.1 6,379.3 6,475.6
-83.1 646.3 729.4 1,250.5 501.5
IV
350.8 150.4 753.4 6,453.8 6,556.2
-S0.5 679.1 759.7 1,254.7 501.3
1994:1
335.1 151.9 754.7 6,473.0 6,620.2
676.0 773.6 1,241.9 487.2
-97.6
II
335.9 145.1 762.2 6,526.7 6,701.8
-103.9 704.1 808.0 1,243.3 481.2
Ill
-111.1 722.1 833.2 1,268.1 496.4
347.0 149.4 771.7 6,580.4 6,737.5
IV
329.6 151.7 774.1 6,624.8 6,791.3
-105.9 747.3 853.2 1,255.8 481.7
328.7 151.4 777.3 6,654.3 6,813.2
-113.5 760.4 873.9 1,257.7 480.4
1995:1
II
327.4 147.3 782.3 6,685.3 6,817.3
-112.8 777.4 890.3 1,257.3 474.9
III
324.0 149.1 781.5 6,739.3 6,848.9
-92.9 802.4 895.4 1,255.0 473.4
IV
310.3 142.1 785.1 6,771.9 6,870.4
-76.1 824.6 900.7 1,237.7 452.6
1996:1
314.9 145.7 782.4 6,815.0 6,923.2
-100.8 828.2 929.0 1,243.2 460.9
||
323.2 147.2 794.4 6,902.3 7,033.6
-112.6 847.4 960.0 1,265.1 470.7
319.4 146.0 795.9 6,905.0 7,075.3
III
-138.9 851.4 990.2 1,261.5 465.7
IV
313.6 145.7 802.3 6,981.7 7,118.4
-105.6 901.1 1,006.6 1,261.8 459.6
1997-1
303.9 148.5 807.7 7,034.1 7,220.9
-126.3 922.7 1,048.9 1,260.5 452.8
II
309.4 150.2 810.1 7,077.7 7,286.9
-136.6 962.5 1,099.1 1,270.1 460.1
Ill
-164.1 973.0 1,137.1 1,273.4 458.8
310.3 148.0 814.7 7,160.3 7,364.6
IV*>
-141.4 999.3 1,140.8 1,278.5 459.5
312.6 146.6 819.0 7,224.6 7,421.2
1
Gross domestic product (GDP) less exports of goods and services plus imports of goods and services.
2
GOP plus net receipts of factor income from rest of the world.
Source: Department of Commerce, Bureau of Economic Analysis.

1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*




283

Addendum:
Gross
national
product 2
2,222.0
2,276.0
2,329.1
2,471.5
2,577.3
2,727.8
2,901.4
3,087.8
3,166.4
3,314.5
3,413.3
3,417.1
3,532.1
3,726.3
3,950.1
3,930.2
3,903.3
4,118.8
4,314.5
4,543.7
4,687.4
4,670.8
4,769.9
4,662.0
4,844.8
5,178.0
5,346.7
5,501.2
5,658.2
5,878.5
6,075.7
6,157.0
6,094.9
6,255.5
6,408.0
6,619.1
6,748.7
6,932.0
6,192.0
6,225.2
6,270.3
6,334.6
6,351.3
6,375.9
6,415.3
6,489.7
6,540.5
6,609.3
6,635.6
6,691.2
6,711.3
6,721.0
6,758.3
6,804.2
6,834.7
6,930.1
6,940.2
7,023.1
7,091.8
7,144.4
7,198.8

Percent change
from preceding
period
Gross Gross
domes- domestic
tic
prod- puruct chases *
7.4
2.4
2.3
6.1
4.3
5.8
6.4
6.5
2.5
4.7
3.0

7.8
1.6
2.2
6.3
4.0
5.4
6.8
6.9
2.8
5.0
3.0

3i3
5.5
5.8
-.6
-.4
5.4
4.7
5.4
2.8
-.3
2.3
-2.1
4.0
7.0
3.6
3.1
2.9
3.8
3.4
1.2
-.9
2.7
2.3
3.5
2.0
2.8
3.8
4.7
2.5
3.0
4.3

16
5.7
4.8
-1.5
-1.3
6.4
5.4
5.3
2.2
-2.0
2.4
-1.6
5.3
8.5
3.9
3.3
2.7
2.9
2.7
.8
-1.6
2.8
2.9
3.9
1.9
2.9
4.1
4.5
3.7
2.9
4.9
1.0
2.5
3.4
5.1
4.0
5.0
2.1
3.2
1.3

2!o

2.1
5.3
3.0
4.7
1.8
3.6
.9
.3
3.0
2.2
1.8
6.0
1.0
4.3
4.9
3.3
3.1
4.3

L9
1.3
3.1
6.5
2.4
2.5
5.9
3.7
4.3
3.1

TABLE B-3.—Quantity and price indexes for gross domestic product, and percent changes, 1959—97
[Quarterly data are seasonally adjusted]
Gross domestic product (GDP)
Percent change from preceding period l

Index numbers, 1992=100
Year or quarter

GDP
(current
dollars)

Real GDP
GDP
(chain-type chain-type
quantity price index
index)

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997p
1992-1
H
Ill
IV
1993- 1
II
III
IV
1994- t
|
|
Ill
IV
1995-1
||
III
IV
1996:1
|
|
HI
IV
1997-1
II
Ill
IY/»

GDP
implicit
price
deflator

GDP
(current
dollars)

22.95
22.95
8.12
35.39
23.27
36.24
23.27
8.43
23.54
23.54
8.72
37.06
23.84
23.84
9.37
39.31
24.12
40.99
24.12
9.89
43.37
24.48
24.48
10.62
46.14
24.95
24.96
11.52
25.67
49.15
25.66
12.62
26.49
50.40
26.48
13.35
27.64
52.75
27.64
14.58
28.94
28.94
54.35
15.73
54.41
30.48
30.48
16.58
32.06
18.02
56.21
32.05
33.42
59.29
33.42
19.81
22.14
62.72
35.30
35.30
38.47
23.97
62.32
38.46
62.04
42.09
26.11
42.09
65.38
44.55
44.55
29.13
68.44
47.42
47.43
32.46
50.88
50.89
36.69
72.11
55.23
40.96
74.16
55.22
60.34
60.33
44.59
73.91
66.01
75.60
66.01
49.90
70.17
73.99
70.18
51.92
73.16
56.28
76.93
73.16
82.32
75.92
75.92
62.49
85.25
78.53
78.53
66.95
70.82
87.88
80.58
80.58
75.14
90.47
83.06
83.06
80.87
93.93
86.10
86.09
89.72
89.72
87.10
97.08
98.27
93.64
93.60
91.98
97.32
94.75
97.36
97.32
100.00
100.00
100.00
100.00
102.64
102.64
102.32
105.02
105.87
105.09
105.09
111.25
107.97
107.76
116.35
107.76
110.21
110.22
122.29
110.95
115.17
112.46
112.40
129.45
98.04
99.14
99.13
98.90
99.79
99.31
99.52
99.81
100.17
100.17
100.44
100.26
100.88
102.22
101.32
100.88
101.84
101.34
103.20
101.85
102.35
104.24
101.85
102.38
102.83
102.39
102.83
105.29
103.72
103.52
103.51
107.36
104.13
108.81
104.16
104.49
104.74
104.71
105.70
110.68
106.17
105.39
111.88
105.39
106.07
106.09
107.11
113.63
106.94
106.93
114.80
107.36
107.44
107.49
107.46
115.45
108.24
108.02
116.92
108.03
108.61
108.84
108.60
118.22
109.39
109.32
119.59
109.35
109.84
110.92
121.83
109.86
110.54
111.20
122.93
110.59
112.38
111.10
111.05
124.80
111.71
127.05
113.73
111.78
112.27
114.66
112.22
128.66
112.62
112.67
130.10
115.53
113.10
113.05
131.98
116.75
1
Percent changes based on unrounded data. Quarterly percent changes are at annual rates.
Source: Department of Commerce, Bureau of Economic Analysis.




284

8.5
3.8
3.5
7.4
5.5
7.4
8.5
9.5
5.8
9.2
7.9
5.4
8.7
9.9
11.7
8.3
8.9
11.5
11.4
13.0
11.6
8.9
11.9
4.1
8.4
11.0
7.1
5.8
6.1
7.6
7.7
5.6
3.0
5.5
5.0
5.9
4.6
5.1
5.9
8.2
5.3
4.6
7.3
3.9
4.1
4.1
8.1
5.5
7.1
4.4
6.4
4.2
2.3
5.2
4.5
4.7
7.7
3.6
6.2
7.4
5.2
4.6
5.9

Real GDP
GDP
(chain-type chain-type
quantity price index
index)

7.4
2.4
2.3
6.1
4.3
5.8
6.4
6.5
2.5
4.7
3.0
3i3
5.5
5.8
-.6
?4
4.7
5.4
2.8
-.3
2.3
-2.1
4.0
7.0
3.6
3.1
2.9
3.8
3.4
1.2
-.9
2.7
2.3
3.5
2.0
2.8
3.8
4.7
2.5
3.0
4.3
2iO
2.1
5.3
3.0
4.7
1.8
3.6
.9
3^0
2.2
1.8
6.0
1.0
4.3
4.9
3.3
3.1
4.3

1.0
1.4
1.2
1.3
1.2
1.5
1.9
2.8
3.2
4.4
4.7
5.3
5.2
4.2
5.6
8.9
9.4
5.8
6.5
7.3
8.5
9.3
9.4
6.3
4.3
3.8
3.4
2.6
3.1
3.7
4.2
4.4
3.9
2.8
2.6
2.4
2.5
2.3
2.0
3.4
2.8
1.4
2.8
3.9
2.1
1.8
2.7
2.5
2.2
2.5
2.6
3.3
2.1
2.0
2.1
2.8
1.9
2.7
1.9
2.4
1.8
1.4
1.5

GDP
implicit
price
deflator
1.0
1.4
1.2
1.3
1.2
1.5
2.0
2.8
3.2
4.4
4.7
5.3
5.2
4.2
5.6
9.0
9.4
5.8
6.5
7.3
8.5
9.2
9.4
6.3
4.3
3.8
3.4
2.6
3.1
3.7
4.2
4.3
4.0
2.8
2.6
2.4
2.5
2.3
2.0
3.4
2.7
1.5
2.9
3.9
2.0
1.9
2.7
2.4
2.2
2.6
2.7
3.3
2.0
2.1
2.2
2.9
1.7
2.6
1.9
2.4
1.8
1.4
1.5

TABLE B-4.—Percent changes in real gross domestic product, 7939-97
[Percent change from preceding period; quarterly data at seasonally adjusted annual rates]
Personal consumption
expenditures
Year or
quarter

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
.. .
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/>
1992-1
II
Ill
IV
1993-1
II
Ill
IV
1994:1

||
III
IV

1995:1

II
Ill
IV

1996:1

II
Ill
IV

1997:1

II
Ill
IV"

Gross
domestic
product

7.4
2.4
2.3
6.1
4.3
5.8
6.4
6.5
2.5
4.7
3.0
3^
5.5
5.8
-.6
-.4
5.4
4.7
5.4
2.8
2^3
-2.1
4.0
7.0
3.6
3.1
2.9
3.8
3.4
1.2
-.9
2.7
2.3
3.5
2.0
2.8
3.8
4.7
2.5
3.0
4.3

2.0
2.1
5.3
3.0
4.7
1.8
3.6
.9
3!0
2.2
1.8
6.0
1.0
4.3
4.9
3.3
3.1
4.3

Exports and im- Government consumpports of goods tion expenditures and
and services
gross investment

Gross private domestic
investment
Nonresidential fixed

Total

Durable
goods

Nondurable
goods

13.4
2.0
-3.8
11.7
9.7
9.2
12.7
8.5
1.6
11.0
3.6
-3.2
10.0
12.7
10.3
-6.9
.0
12.8
9.3
5.3
-.5
-8.0
1.2
-.1
14.7
14.5
9.7
9.0
1.5
6.3
2.6
-.6
-6.4
5.8
7.2
7.1
4.0
4.7
5.7
13.3
4.3
9.3
11.0
-.7
12.6
8.4
9.6
6.4
3.8
4.3
11.0
-3.0
3.9
9.3
2.0
4.8
9.7
-1.9
3.5
14.1
-5.4
18.4
2.6

4.1
1.5
1.8
3.1
2.1
4.9
5.3
5.5
1.6
4.5
2.7
2.4
1.8
4.4
3.3
-2.0
1.5
5.0
2.6
3.5
2.3
-.4
.9
.6
2.9
3.5
2.3
3.2
1.9
2.8
2.3
1.0
-1.0
1.5
2.2
2.9
1.6
1.4
1.9
5.9

5.7
2.7
2.0
4.9
4.1
6.0
6.3
5.7
3.0
5.7
3.7
2.3
3.7
6.0
4.8

2'.2
5.6
4.3
4.3
2.3
L2
1.2
5.2
5.2
4.7
4.0
3.1
3.9
2.3
1.7
-.6
2.8
2.9
3.3
2.4
2.6
3.3
6.4
2.2
2.9
5.4
.4
3.4
4.1
2.9
3.8
3.0
2.3
3.2
1.5
2.9
2.6
1.8
3.1
3.7
.5
3.3
5.3
.9
5.6
3.2

2i8
5.8
-.7
3.1
2.7
1.5
5.0
2.1
2.2
2.7
1.7
.9
.7
1.7
2.6
.6
2.1
4.7
-2.1
4.3
-.4

Services

Total

Structures

5.2
8.3
2.4
4.4
5.6
7.9
4.1
1.4
-.9
8.7
4.9
4.5
5.0
4.5
1.1
10.4
6.1 11.8
5.3 17.3
15.9
5.1 12.1
6.8
4.8 -1.6 -2.5
1.4
5.2
4.3
7.2
5.4
4.8
4.0 -1.0
.3
-.1 -1.6
3.7
5.4
9.0
3.1
4.5 14.6
8.2
2.4
-2.1
3.5 -10^5 -10.5
4.2
4.8
2.5
4.2
11.8
4.9
4.7
13.7
10.9
3.2
9.6 12.6
6.7
1.9
1.5
?3
7.9
1.9 -4.4 -1.5
4.7 -1.7 -10.4
4.1 17.3
14.3
5.0
6.2
7.3
3.2 -3.5 -10.8
4.2 -1.1 -3.6
4.4
4.0
2.3
4.0
2^2
2.6
-.6
1.1
.8 -6.4 -10.7
2.9
1.9 -6.8
2.5
7.6
1.0
2.7
8.0
1.0
9.0
2.5
4.3
2.7
9.2
4.8
9.7
3.5
3.6
5.4
3.6
2.9
3.4 10.0 -3.9
1.7
2.2 -8.1
6.2 -4.3
4.0
1.3
6.2
6.0
1.7
12.5
5.5
4.0
4.9
3.4
2.3 16.4
3.3
.4 -14.8
2.7
9.9 21.1
3.3
7.7 -1.1
2.0
1.9 12.6
2.3
2.4
14.2
9.5
3.7
5.7
4.3
.7
2.2
1.6
4.9 -5.8
2.3
3.5 11.7
8.2
3.1 13.0
7.9
1.0 16.5
10.0
5.9 15.3
3.9
4.1 -2.1
3.9
14.6 -4.7
3.9
3.9
19.2
6.7
5.1 -3.6 -2.7

Note.—Percent changes based on unrounded data.
Source: Department of Commerce, Bureau of Economic Analysis.




285

Producers' Residura- dential
ble
equipment
12.4
4.1
-2.4
11.6
7.6
12.6
18.2
15.5
-1.0
6.1
8.3
-1.8
.8
12.7
18.5
2.1
-10.5
6.1
15.6
15.1
8.1
-4.4
3.7
-6.4
4.6
19.2
5.5
1.0
.3
6.4
5.0
-1.5
-4.1
6.2
10.5
11.0
10.8
10.9
12.2
3.9
16.9
7.1
11.0
6.4
15.6
5.5
22.3
7.0
5.9
11.4
16.9
16.1
6.2
2.0
9.4
13.1
14.9
19.1
2.6
6.7
23.0
24.1
-3.9

25.5
-7.1
9^6
11.8
5.8
-2.9
-«.9
-3.1
13.6
3.0
-6.0
27.4
17.8
-.6
-20.6
-13.0
23.6
21.2
6.6
-3.7
-21.1
-8.0
-18.2
41.1
14.6
1.4
12.0

-2^0
-3.7
-9.3
-12.3
16.6
7.6
10.1
-3.8
5.9
2.8
24.7
22.2
3.3
18.7
.6
-1.6
10.8
23.1
10.0
16.6
-3.1
-5.0
-7.0
-15.5
8.4
8.5
8.3
17.9
-4.5
-4.3
3.3
7.4
2.7
10.4

Exports

Imports

0.9 10.5
1.3
20.8
1.7
5.4 in
2.7
7.5
13.3
5.3
2.0 10.6
6.7 14.9
2.2
7.3
7.3 14.9
5.7
5.5
10.8
4.3
.7
5.3
8.1 11.0
21.8
4.5
9.6 -2.7
-.7 -11.3
5.9 19.6
2.4 10.7
10.4
8.7
1.7
9.5
10.8 -6.7
1.2
2.6
-7.1 -1.3
-2.6
12.6
8.3 24.3
2.7
6.5
7.4
8.4
11.0
6.1
15.9
3.9
11.7
3.9
8.5
3.9
6.3
6.6
15
2.9
8.9
8.2 12.2
8.9
11.1
9.1
8.3
12.5
13.9
4.1
6.3
1.8 13.3
2.5
1.3
6.0 11.6
-1.2
7.6
8.2 12.4
3.8
-8.1
17.7
21.9
-1.8
7.6
17.7
19.0
10.6
13.1
14.7
9.9
7.2 10.0
7.7
9.3
2.3
13.5
2.4
11.5
1.7 13.1
9.6 14.1
1.9 13.2
25.5
6.8
17.9
9.9
18.4
20.5
4.4 14.6
1.3
11.3

Total

5.7
4i9
6.0
2.3
2.0
3.0
9.1
7.6
3.1
-.6
-2.3
-1.8
L7
1.5
!9
2.9
1.6
1.8
.7
1.3
2.8
3.1
6.1
5.1
2.7
1.3
2.8
3.0
.6
.5
-.9
.0
.0

i!o
2.5
-.3
2.9
1.9
-6.9
1.0
-.8
1.3
-4.0
.4
8.2
-3.8
.6
-.1
-.7
-5.4
1.8
7.2
-1.1
.1
—4
3.1
1.1
1.6

Federal

7.2
-3.1
3.9
8.3
-.4
-1.7
.0
11.4
9.9
1.0
-3.4
-7.1
-7.1
-1.7
-4.9
-.6
-LO
1.6
2.1
1.5
4.2
4.2
3.2
5.4
2.4
6.9
4.6
3.1
-1.8
1.3
2.0

-2.\
-4.2
-3.8
-3.3
-1.3
-1.4
-1.4
-1.4
4.9
3.4
-15.4
-3.3
-4.9
-.1
-10.7
-4.9
13.3
-11.3
-1.1
-4.5
-1.3
-16.4
7.5
8.8
-4.2
-5.2
-5.8
6.6
-1.1

State
and
local

3.5
4.1
6.2
2.9
6.0
6.8
6.7
6.4
4.9
5.7
2.8
2.8
3.3
2.2
3.0
3.6
2.9
.8
.4
3.6
1.6
.0
-2.0
-.3
3^8
5.3
5.5
2.4
3.9
4.0
3.8
1.4
2.4
1.5
2.6
2.1
1.6
2.4
5.4
.4
1.4
.9
-.3
4.0
2.1
2.3
.7
4.0
5.1
1.2
1.7
2.6
-.4
1.9
-1.4
6.3

3'.3
2.7
1.2
2.3
2.1

TABLE B-5.—Contributions to percent change in real gross domestic product, 1959-97
[Percentage points, except as noted; quarterly data at seasonally adjusted annual rates]
Gross private domestic investment

Personal consumption expenditures

Year or
quarter

1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/>
1992:1

II
Ill
IV
1993:1
II
Ill
IV
1994:1

II
Ill
IV
1995-1
||
III
IV
1996-1
||
III
IV
1997:1

II
Ill .
IVA>

Gross
domestic
product
(percent
change)

7.4
2.4
2.3
6.1
4.3
5.8
6.4
6.5
2.5
4.7
3.0
.1
3.3
5.5
5.8
-.6
-.4
5.4
4.7
5.4
2.8
-.3
2.3
-2.1
4.0
7.0
3.6
3.1
2.9
3.8
3.4
1.2
-.9
2.7
2.3
3.5
2.0
2.8
3.8
4.7
2.5
3.0
4.3
.1
2.0
2.1
5.3
3.0
4.7
1.8
3.6
.9
.3
3.0
2.2
1.8
6.0
1.0
4.3
4.9
3.3
3.1
4.3

Fixed investment
Total

NonDurable durable
goods
goods

3.7
1.7
1.3
3.1
2.5
3.7
3.9
3.5
1.8
3.5
2.3
1.4
2.3
3.7
3.0
-.4
1.4
3.5
2.7
2.7
1.5
-.2
.8
.7
3.3
3.3
3.0
2.6
2.0
2.6
1.5
-4
1.9
2.0
2.2
1.7
1.8
2.2
4.3
1.5
2.0
3.6
.5
2.3
2.8
2.0
2.6
2.0
1.6
2.2
1.0
1.9
1.8
1.2
2.1
2.5
.4
2.2
3.6
.6
3.8
2.2

1.1
.2
-.3
.9
.8
.8
1.1
.7
.1
.9
.3
-.3
.8
1.1
.9
-.6
0
1.0
.8
.5
0
-.7
.1
0
1.1
1.1
.8
.8
.1
.6
.2
-.1
-.5
.4
.6
.6
.3
.4
.4
1.0
.3
.7
.8
-.1
1.0
.7
.8
.5
.3
.3
.9
-.3
.3
.7
.2
.4
.8
-.2
.3
1.1
-.5
1.4
.2

1.3
.4
.5
.9
.6
1.3
1.4
1.5
.4
1.2
.7
.6
.5
1.1
.8
-.5
.4
1.3
.7
.9
.6
-.1
.2
.1
.7
.8
.5
.7
.4
.6
.5
.2
-.2
.3
.5
.6
.3
.3
.4
1.2
-.2
.6
1.2
-.2
.7
.6
.3
1.0
.4
.5
.5
.3
.2
.1
.1
.4
5

!i

.4
.9
-.4
.8
-.1

Nonresidential
Services

1.3
1.1
1.1
1.3
1.2
1.6
1.4
1.3
1.3
1.4
1.3
1.1
1.0
1.5
1.3
.7
1.0
1.2
1.2
1.4
.9
.6
.5
.6
1.5
1.4
1.7
1.1
1.5
1.4
.8
.9
.3
1.1
1.0
1.1
1.0
1.1
1.4
2.0
1.3
.7
1.6
.8
.7
1.6
.9
1.0
1.3
.8
.7
.9
1.4
.9
.9
1.4
1.2
.4
1.5
1.5
1.5
1.5
2.0

See next page for continuation of table.




286

Total

2.9
-.1
-.2
1.8
1.0
1.3
2.2
1.4
-.7
.8
.9
-1.1
1.7
1.9
2.0
-1.4
-3.0
2.8
2.5
2.0
.4
-2.2
1.5
-2.6
1.4
4.6
-.2
-.3
.2
.1
.6
-.8
-1.3
.8
1.2
1.7
.2
1.1
1.6
-.3
2.3
.4
.9
3.4
0
.8
2.8
2.2
2.9
-.9
1.8
.2
-1.7
.3
1.1
.6
2.6
2.3
.2
2.4
2.5
.4
.7

Total

2.0
.1
-.1
1.2
1.0
1.4
1.5
.8
-.3
1.0
.9
-.4
1.1
1.8
1.4
-1.1
-1.8
1.4
2.2
1.9
.9
-1.2
.3
-1.3
1.1
2.6
.8
.1
-.1
.4
.3
-.5
-1.1
.7
.9
1.1
.7
1.1
1.0
1.1
1.6
.3
1.2
.9
1.0
.8
2.3
.4
1.5
.6
.9
1.0
-.1
.5
.8
1.4
1.9
1.4
.4
.6
1.7
2.0
0

Total

0.8
.5
-.1
.8
.5
1.1
1.6
1.2
-.2
.4
.7
-.1
0
.9
1.5
.1
-1.2
.5
1.2
1.5
1.1
-.1
.7
-.6
-.2
1.9
.7
-.4
-.1
.5
.4
-.1
-.6
.1
.7
.7
.8
.9
.9
.3
.9
.2
.5
.9
1.1
.4
1.4
0
.9
.7
1.1
1.3
.6
.2
.5
1.1
1.3
1.6
.6
.4
1.4
1.9
-.4

Structures

0.1
.3
.1
.2
0
.4
.6
.3
-.1
.1
.2
0
-.1
.1
.3
-.1
-.4
.1
.2
.4
.5
.3
.4
-.1
-.5
.6
.3
-.5
-.1
0
.1
0
-.4
-.2
0
0
.1
.1
.1
.1
-.1
-.2
-.1
.3
.1
.1
.1
-.4
.5
0
.1
.2
.1
0
-.2
.2
.2
.3
.4
-.1
-.1
.2
-.1

Producers'
durable
equipment
0.7
.2
-.1
.6
.4
.7
1.1
1.0
-.1
.4
.5
-.1
.1
.8
1.2
.1
-.7
.4
1.0
1.1
.6
-.4
.3
-.5
.3
1.3
.4
.1
0
.4
.3
-.1
-.3
.3
.6
.7
.7
.8
.8
.2
1.0
.4
.7
.6
1.0
.4
1.3
.5
.4
.7
1.1
1.0
.4
.1
.6
.9
1.0
1.3
.2
.5
1.6
1.7
-.3

Residential

1.2
-.4
0
.5
.6
.3
-.2
-.4
-.1
.5
.1
-.3
1.1
.9
0
-1.1
-.6
.9
1.0
.4
-.2
-1.2
-.4
-.7
1.3
.6
.1
.5
0
-.1
-.2
-.4
-.5
.5
.3
.4
-.2
.2
.1
.8
.7
.1
.6
0
-.1
.4
.8
.4
.6
-.1
-.2
-.3
-.7
.3
.3
.3
.7
-.2
-.2
.1
.3
.1
.4

Change
in
business
inventories

0.9
-.2
-.1
.6
-.1
-.1
.7
.6
-.4
-.2
0
-.7
.6
.1
.6
-.4
-1.3
1.4
.3
.2
-.5
-.9
1.2
-1.3
.3
2.0
-1.0
-.4
.3
-.2
.4
-.4
-.2
.2
.2
.6
-.5
0
.5
-1.4
.7
0
-.3
2.5
-1.0
-.1
.6
1.8
1.4
-1.5
.9
-.8
-1.6
-.2
.3
-.8
.7
.8
-.2
1.8
.8
-1.6
.7

TABLE B—5.—Contributions to percent change in real gross domestic product, 1959—97—Continued
[Percentage points, except as noted; quarterly data at seasonally adjusted annual rates]

Government consumption expenditures
and gross investment

Net exports of
goods and services

1.1
2.0
.5
1.3

1.0
1.9
.3
1.3

'.2
.1

o'
.1
.2
0
0
.2
0
.3
.2
.2
.2
.2
.1
.2
.1
.1
.2
.2
.2
.2
-.1
0
-2
.5
.1
0
.1
.1
.4
.1
.2
.2
.1
.6
.2
-.1
.3
0
.4
.1
.1
.2
0

-.2
-.5
-.7
-.3
-.7
-.3
-.2
-.3
-.6
-.3
.2
1.0
-1.5
-.9
-.8
-.2
.7
-.3
.1
-1.1
-2.2
-.7
-.8
-.6
-.4
-.4
—4
'.1
-.7
-.9
-1.3
-1.0
1i
-1.6
-.4
-1.4
-.1
-1 2
-1.3
-1.3
-.4
-1.8
-.8
-2.0
-1.4
-1.1
-1.1
-.9
-.2
-.3
-1.5
-1.7
-1.6
-.8
-2.1
-2.5
-1.7
-.2

Source: Department of Commerce, Bureau of Economic Analysis.




287

-is

-.4
_4
-A
-.3
0
-.8
-.9
-1.2
9
-1.0
-1.4
-.4
-1.5
-.6
-6
17
-1.2
-.3
-1.5
8
-1.9
-1.4
-1.1
-.6
-1.0
_j
-.2
-1.2
-1.6
16
-.8
-1.7
-2.3
-1.6
-.1

0
-.1
0
-.1
0
0
0
-.2
-.2
0
-.1
-.1
0
0
.1
0
-il
-.1
_i

o'
0

-.1
-.1
-A
-.1
0
-.2
-.1
-.1
il
0
0

-.2
-.1
.1
.4
-fi
I I I

.7
1.0
1.4
1.2
.2
1.1
.2
2.7

.2
.2

-.1

-0.5
0
0
-.4
-.1
-.2
-.4
-.5
-.2
-.7
-.2
-.1
-.3
-.6
-.3
.2
.9
-1.4
-.8
-.7
-.1
.7
-.2
.2
-1.0
-1.8
_5

0 0 1 1

.1
.1

is

.1
.7
.8
.9
-.1
-.7
-.2
.5
.2
.3
.6
1.0
.8
.6
.5
.5
.2
.7
.9
.7
1.2
.4
.3
.2
8
-.7
.7
-.8
1.9
-.3
1.3
1.0
1.2
.5
.9
.8
1.0
.3
.8
.2
2.2

-.2
.8
-.9
2.0
-.2
1.7
1.0
1.4

0

-.1
0
-.5

I

.2
.3
.5
0
.3
0
.3
.2
.4
0
.4
1.0
.5
_2

-0.5

01

0

0.1
.1
.1
.1
.1
.1
.1
.1
.1
.1
.1

O O l l

.8

l

0

l

-1.0
-.4
-1.3
1.1

.8
.1
.3
.4
.6
.1
.3
.1
.4
.3
.5
0
.4
1.2
.7
-.1
.5
.2
.8
.8
1.0
.1
-.7
-.2
.6
.2
.5
.8
1.2
1.0
.8
.6
.6
.3
.8
1.1
.9
1.3
.6
.2
.2
6

Serv- Total Total National Nondedefense fense
ices

l

1995-1
II
Ill
IV
1996-1
II
Ill
IV
1997-1
II
Ill
IV/>

. .

0

Goods

1.3
0
1.0
1.3
.5
.4
.7
1.9
1.7
.7
-.1

1.0
-.4
.5
1.1
0
-.2
0
1.3
1.2
.1
-.4

'.2
.5
-.1
.6
4

-.8
-.8
-.2
-.5
-.1
0
-.1
.1
.2
.1
.4
.4
.3
.5
.2
.7
.4
.3
_2
il
.2
0
-.2
-.4
-.3
-.2
-.1
-.1
-.1
-.1
.4
3

-2.3
.2
-.2
.3
-.8
.1
1.5
-.7
.1
0
-.1
-1.0
.3
1.3
-.2
0
-.1
.6
.2
.3

-2.2
-.3
-.4
0
_g
-A
.9
-.9
-.1
-.3
-.1
-1.2
.5
.6
-.3
-.4
-.4
.4
-.1
0

-.5
-.4
.1
-.1
.4
.3
0
.2
.6
.3
.4
.1
.3
.6
.7
1.2
1.1
.6
.3
.6
.6
.1
.1
-.2
0
0

0.3
-.2
.4
.6
-.3
-.4
-.2
1.3
1.2
.2
-.5
-.8
-.9
-.3
-.5
-.2
-.1
-.1
0
0
.1
.2
.3
.5
.4
.3
.5
.4
.3
_i
-il
0
-.1
-.4
-.3
-.3
-.2
-.1
-.1
-.5
_}

'A
-i
-1.8
-.2
-.4
0
-1.0
0
.7
-1.0
-.1
-.1
-.2
-.8
.3
.5
-.2
-.3
-.6
.3
.1
.1

0.7
-.2
.1
.4
.2
.2
.2
0
0
-.1
.1
0
.1
.2
0
.1
.1
0
.1
.2
0
.1
0
_2
il
-.1
.1
.1
0
-.1
.2
.2
0
.2
0
0
0
0
0
.4
-.1
.1
4
-.4
-.1
-.1
0
.1
-.4
.3
.1
0
-.3
.1
-.4
.2
.1
-.1
0
.2
.1
-.1
_i

State
and
local

CD | CD

II
Ill
IV
1993-1
II
Ill
IV
1994-1
II
III
IV

.. .

-0.4
.8
.1
-.2
.2
.4
-.3
-.3
-.2
-.3
0
.3
-.3
-.2
.9
.9
.9
-1.0
-.7
0
.6
1.7
-.2
-.6
-1.4
-1.6
-.4
-.3
.2
.8
.6
.4
.7
-.1
-.6
-.5
.1
-.2
-.3
.2
-1.2
.1
-6
-1.5
_ jj
-L3
.2
-1.0
-.3
-.4
.3
-.4
.1
1.1
1.0
-1.3
-.6
-1.4
1.8

Total

CD

1992:1

. .

Services

CD

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997^

Federal

Imports

Exports

Net
exports Total Goods

I

Year or
quarter

-.1
.5

.2
.3
.1
.5
.6
.1
.2
.3
0
.2
-.2
.7
•1
.4
.3
.1
.3
.2

TABLE B-6.—Chain-type quantity indexes for gross domestic product, 1959—97
[Index numbers, 1992=100; quarterly data seasonally adjusted]
Personal consumption expenditures

Gross private domestic investment
Fixed investment

Year or
quarter

1959 .
I960
1961
1962
1963
1964
1965 . . . .
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979 .
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997* .
1992:1

II
Ill
IV
1993:1
II
Ill
IV
1994:1

II
III
IV
1995-1
II
III
IV
1996:1

||
III
IV

1997:1

II
III
\\IP

Gross
domestic
product

35.39
36.24
37.06
39.31
40.99
43.37
46.14
49.15
50.40
52.75
54.35
54.41
56.21
59.29
62.72
62.32
62.04
65.38
68.44
72.11
74.16
73.91
75.60
73.99
76.93
82.32
85.25
87.88
90.47
93.93
97.08
98.27
97.36
100.00
102.32
105.87
107.97
110.95
115.17
98.90
99.52
100.26
101.32
101.34
101.85
102.39
103.72
104.49
105.70
106.17
107.11
107.36
107.44
108.24
108.84
109.32
110.92
111.20
112.38
113.73
114.66
115.53
116.75

Total

33.05
33.95
34.64
36.35
37.84
40.10
42.64
45.07
46.41
49.06
50.89
52.08
54.02
57.25
60.02
59.59
60.90
64.32
67.06
69.95
71.57
71.32
72.19
73.02
76.79
80.75
84.52
87.89
90.58
94.14
96.32
97.92
97.30
100.00
102.93
106.31
108.90
111.71
115.40
98.91
99.45
100.16
101.48
101.59
102.44
103.48
104.22
105.21
105.98
106.60
107.45
107.86
108.62
109.32
109.80
110.65
111.67
111.81
112.72
114.18
114.45
116.03
116.95

Durable
goods

21.10
21.53
20.72
23.14
25.39
27.73
31.24
33.88
34.42
38.20
39.56
38.29
42.11
47.46
52.37
48.77
48.74
54.96
60.06
63.21
62.90
57.85
58.51
58.44
67.01
76.75
84.21
91.79
93.13
98.97
101.57
100.98
94.56
100.00
107.23
114.87
119.46
125.09
132.19
97.45
98.49
100.70
103.36
103.18
106.29
108.47
110.97
112.72
113.77
114.99
118.02
117.13
118.25
120.93
121.53
122.95
125.84
125.25
126.32
130.55
128.75
134.31
135.16

Nondurable
goods

45.87
46.56
47.42
48.91
49.93
52.39
55.18
58.19
59.12
61.80
63.44
64.99
66.16
69.06
71.33
69.94
70.99
74.50
76.44
79.11
80.92
80.58
81.27
81.75
84.16
87.14
89.15
91.98
93.75
96.41
98.61
99.56
98.57
100.00
102.20
105.15
106.86
108.36
110.40
99.44
99.26
99.95
101.36
101.19
101.97
102.64
103.02
104.28
104.81
105.40
106.10
106.55
106.79
106.97
107.15
107.62
108.30
108.48
109.03
110.29
109.70
110.87
110.76

Nonresidential
Services

28.53
29.78
30.98
32.52
33.98
36.04
37.96
39.88
41.82
43.98
46.10
47.96
49.72
52.40
54.76
56.08
58.03
60.47
63.01
65.96
68.06
69.34
70.39
71.73
75.08
78.15
82.06
84.72
88.27
91.82
93.90
96.34
97.16
100.00
102.47
105.23
107.89
110.86
114.77
98.91
99.74
100.17
101.17
101.49
101.93
102.93
103.53
104.21
105.06
105.58
106.08
106.72
107.68
108.27
108.90
109.84
110.67
110.93
111.99
113.05
114.13
115.22
116.67

See next page for continuation of table.




288

Total

Total

34.37
34.09
34.22
34.36
34.19
33.86
37.28
38.23
40.04
40.69
43.87
44.06
48.31
50.25
50.94
54.48
52.10
49.91
53.37
54.82
56.54
57.98
55.16
53.91
59.34
60.08
66.41
67.28
75.33
72.43
69.14
67.68
60.12
56.50
66.07
67.99
78.71
75.78
84.34
87.73
88.78
89.79
82.77
79.49
84.32
86.78
77.91
74.29
83.51
81.23
97.32
105.43
102.02
104.23
102.71
102.76
102.05
103.93
104.45
104.77
109.24 - 106.20
103.11
102.86
94.62
93.39
100.00
100.00
107.58
109.25
123.44
116.86
125.44
122.81
132.97
135.26
150.83 143.26
96.79
95.93
99.87
100.30
101.02
100.49
102.85
102.75
104.00
106.96
107.05
106.08
107.79
108.63
114.37
112.43
118.91 113.32
116.56
124.96
117.78
123.00
119.79
126.89
127.25 122.01
121.78
123.66
124.24
122.83
124.62
126.62
127.84
128.06
132.20
134.00
135.42
139.21
136.41
139.77
137.73
145.39
141.86
151.45
152.40
146.70
146.74
154.08

Total
26.47
27.95
27.70
30.11
31.62
35.34
41.46
46.50
45.77
47.76
51.20
50.70
50.63
55.16
63.19
63.52
56.88
59.61
66.65
75.75
83.05
82.66
87.07
83.23
81.82
95.97
101.90
98.32
97.22
101.46
105.55
104.90
98.18
100.00
107.58
116.22
126.65
138.33
151.78
97.58
99.93
100.48
102.01
103.57
106.67
107.96
112.13
112.25
114.94
117.08
120.62
124.70
126.44
126.95
128.49
132.10
136.19
141.48
143.54
145.00
150.03
156.75
155.33

Structures

50.71
54.74
55.48
57.98
58.62
64.71
75.03
80.17
78.13
79.24
83.51
83.78
82.41
84.94
91.86
89.94
80.53
82.50
86.52
95.96
108.01
115.27
124.37
122.50
109.79
125.44
134.63
120.16
115.77
116.35
118.91
120.18
107.32
100.00
100.95
101.94
106.35
111.51
115.47
102.07
101.07
98.97
97.89
99.32
100.66
101.50
102.33
98.31
103.13
102.86
103.45
105.82
106.93
107.12
105.54
107.63
109.68
112.32
116.40
115.79
114.39
116.26
115.45

Producers'
durable
equipment
18.37
19.12
18.67
20.83
22.41
25.23
29.81
34.43
34.08
36.15
39.15
38.46
38.76
43.69
51.77
52.84
47.32
50.22
58.05
66.80
72.21
69.01
71.56
66.97
70.08
83.52
88.10
88.99
89.24
94.99
99.73
98.24
94.20
100.00
110.52
122.66
135.91
150.77
169.14
95.62
99.42
101.14
103.82
105.43
109.32
110.80
116.51
118.51
120.22
123.49
128.42
133.30
135.31
135.98
139.06
143.41
148.48
155.10
156.09
158.63
167.05
176.32
174.57

Residential

58.14
54.01
54.16
59.35
66.34
70.20
68.15
62.05
60.10
68.29
70.31
66.10
84.23
99.20
98.56
78.21
68.06
84.09
101.89
108.62
104.65
82.52
75.92
62.10
87.62
100.39
101.75
113.95
114.22
111.96
107.84
97.80
85.76
100.00
107.56
118.39
113.94
120.64
124.00
94.84
99.71
100.53
104.93
105.08
104.67
107.38
113.10
115.84
120.37
119.44
117.90
115.80
111.02
113.29
115.63
117.96
122.91
121.51
120.18
121.17
123.36
124.19
127.29

TABLE B-6.—Chain-type quantity indexes for gross domestic product, 1959-97—Continued
[Index numbers, 1992=100; quarterly data seasonally adjusted]
Exports of goods and
services
Year or
quarter

Imports of goods and
services

Government consumption expenditures
and gross investment
Federal

Total

Goods

11.24
11.53
14.23
13.58
14.30
13.80
14.94
14.54
15.64
16.11
17.73
18.32
18.41
18.08
19.30
19.69
19.79
19.72
21.35
21.16
22.47
22.31
25.03
24.73
24.94
24.90
27.62
26.90
33.96
32.78
36.66
35.93
35.81
35.69
37.51
37.79
38.00
38.69
42.24
42.71
46.77
47.23
52.86
51.83
52.32
52.43
48.71
47.58
47.44
46.20
49.85
51.36
51.65
52.76
54.30
56.65
62.87
60.28
71.63
72.85
80.61
81.36
88.27
87.29
93.82
93.43
100.00
100.00
102.94 103.35
111.41 113.62
123.74
127.91
134.03 140.05
161.77
150.82
98.13
99.00
99.44
99.20
99.93
100.05
102.75
101.52
101.22
101.22
103.24
103.70
100.74
101.07
106.21
107.75
106.79
105.73
111.72
110.12
115.54
112.93
120.44
116.88
122.68
118.92
121.59
126.09
129.35
125.50
133.54
128.96
134.88
129.52
138.00
132.53
133.15 138.85
140.92 148.48
152.94
144.30
150.53 161.76
163.11
152.17
156.29
169.26
Source: Department of Commerce, Bureau

1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*
1992-1
II
Ill
IV
1993-1
II
III
IV
1994-1
II
Ill . .
IV
1995-1
II
Ill
IV
1996-1
II
Ill
IV .
1997-1
II
Ill
\\!P.




Services

Total

9.78
15.94
10.82
16.15
11.54
16.05
12.59
17.87
13.39
18.34
14.99
19.32
16.17
21.37
17.10
24.55
18.60
26.34
19.55
30.26
20.76
31.99
22.59
33.35
23.60
35.13
23.45
39.01
27.58
40.76
32.27
39.66
34.40
35.19
37.98
42.08
40.46
46.59
43.52
50.62
43.99
51.47
46.78
48.03
51.66
49.28
51.65
48.66
50.76
54.81
55.50
68.12
55.65
72.53
63.06
78.65
69.94
83.44
76.04
86.73
83.20
90.13
90.74
93.62
94.77
93.01
100.00
100.00
101.96
108.89
106.38 122.13
114.27 133.05
120.51 145.22
127.12 165.40
101.08
96.84
99.98
99.91
100.29
100.23
98.65
103.02
101.21
104.93
102.15
108.03
101.81 109.04
102.68
113.56
103.28
115.65
106.46
120.79
106.99
124.56
108.79
127.54
110.39
130.63
111.42
133.09
116.70
133.85
118.59 134.65
117.43
138.87
120.19
143.51
120.28
148.03
124.14 150.48
125.27
156.80
126.25 164.30
128.46
169.98
128.51
170.53
of Economic Analysis.

Goods

13.06
12.84
12.83
14.72
15.32
16.33
18.64
21.58
22.72
27.41
28.91
30.05
32.57
37.00
39.61
38.51
33.65
41.26
46.28
50.43
51.30
47.49
48.46
47.24
53.66
66.64
70.84
78.10
81.72
85.01
88.58
91.27
91.23
100.00
110.49
125.56
137.50
151.06
173.27
95.67
99.78
101.46
103.10
106.20
109.72
110.70
115.32
117.72
123.81
128.48
132.22
134.62
137.92
138.31
139.15
143.42
148.97
154.49
157.37
163.58
172.24
178.53
178.74

289

Services
28.14
30.35
29.83
31.23
31.18
31.98
32.92
37.10
41.64
42.39
45.06
47.41
46.06
47.63
45.70
44.65
42.32
45.28
47.02
50.36
51.08
49.82
52.68
55.49
59.97
74.85
80.37
80.72
91.14
94.38
96.88
104.26
100.97
100.00
101.91
107.31
113.82
120.06
131.77
102.06
100.45
94.87
102.62
99.34
100.63
101.79
105.89
106.61
107.69
107.58
107.34
113.37
112.23
114.52
115.14
119.13
119.94
120.29
120.90
127.64
130.41
133.58
135.44

Total
48.94
48.84
51.21
54.28
55.54
56.65
58.36
63.66
68.49
70.62
70.22
68.59
67.34
67.58
67.14
68.28
69.34
69.38
70.01
72.05
73.18
74.49
74.99
75.97
78.13
80.58
85.47
89.81
92.26
93.44
96.06
98.94
99.55
100.00
99.08
99.09
99.06
99.54
100.54
99.59
99.51
100.22
100.69
98.92
99.16
98.95
99.29
98.27
98.38
100.35
99.37
99.52
99.49
99.30
97.94
98.37
100.10
99.83
99.85
99.74
100.50
100.77
101.17

Total
68.29
66.18
68.76
74.48
74.21
72.95
72.96
81.28
81.34
90.22
87.11
80.90
75.19
73.90
70.29
69.85
69.68
68.99
70.09
71.54
72.59
75.63
78.77
81.33
85.74
87.83
93.87
98.18
101.21
99.36
100.67
102.64
102.16
100.00
95.78
92.17
89.08
87.92
86.71
99.45
99.11
100.31
101.14
97.00
96.19
94.98
94.95
92.28
91.13
94.02
91.23
90.99
89.95
89.66
85.72
87.29
89.15
88.21
87.04
85.76
87.14
86.89
87.04

National
defense

81.85
80.17
83.51
88.45
86.22
82.48
80.84
92.66
104.71
106.69
101.56
92.88
83.49
79.91
74.82
72.80
71.78
70.43
70.89
70.99
72.13
74.71
78.77
84.23
89.05
92.63
99.55
104.68
108.89
107.92
106.86
106.86
105.79
100.00
94.32
89.66
85.84
84.56
82.24
99.59
99.34
100.79
100.28
95.58
94.92
93.42
93.36
89.19
89.40
92.33
87.71
87.46
87.12
86.22
82.56
83.79
86.01
85.00
83.44
80.86
82.33
82.58
83.18

Nondefense
38.65
35.54
36.44
43.88
47.89
52.02
55.56
56.27
55.66
54.18
55.41
54.56
56.70
60.39
60.11
63.34
65.13
65.97
68.55
73.17
74.04
78.21
79.09
74.46
77.85
76.17
80.02
82.25
82.32
78.25
85.45
92.31
93.28
100.00
99.33
98.24
96.88
96.01
97.46
99.10
98.54
99.13
103.23
100.46
99.29
98.76
98.81
99.77
95.36
98.13
99.69
99.46
96.80
97.94
93.33
95.70
96.72
95.93
95.69
97.54
98.71
97.27
96.33

State
and
local
34.90
36.32
38.57
39.70
42.09
44.98
48.00
51.09
53.58
56.61
58.17
59.80
61.75
63.12
65.03
67.35
69.32
69.90
70.18
72.68
73.87
73.88
72.41
72.22
72.69
75.44
79.47
83.85
85.87
89.24
92.78
96.31
97.68
100.00
101.45
104.06
106.23
107.88
110.48
99.69
99.79
100.15
100.37
100.30
101.29
101.81
102.40
102.57
103.59
104.89
105.21
105.64
106.33
106.22
106.71
106.33
107.97
108.17
109.04
109.78
110.10
110.73
111.31

TABLE B-7.—Chain-type price indexes for gross domestic product, 1959-97
[Index numbers, 1992=100, except as noted; quarterly data seasonally adjusted]
Gross private domestic investment

Personal consumption expenditures

Fixed investment
Gross
domestic
product

Year or
quarter

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*

. . .

1992:1

||
III
IV
1993:1
II
Ill
IV
1994-1
II
Ill
IV
1995-1
II
Ill
IV
1996-1
II
Ill
IV
1997:1

II
III
\Mp

.

.

22.95
23.27
23.54
23.84
24.12
24.48
24.95
25.66
26.48
27.64
28.94
30.48
32.05
33.42
35.30
38.46
42.09
44.55
47.42
50.88
55.22
60.34
66.01
70.18
73.16
75.92
78.53
80.58
83.06
86.10
89.72
93.64
97.32
100.00
102.64
105.09
107.76
110.22
112.46
99.14
99.81
100.17
100.88
101.85
102.38
102.83
103.52
104.16
104.74
105.39
106.07
106.93
107.49
108.03
108.60
109.35
109.86
110.59
111.10
111.78
112.27
112.67
113.10

Total

22.81
23.19
23.44
23.69
23.99
24.31
24.69
25.34
26.01
27.04
28.16
29.49
30.82
31.90
33.62
37.03
40.04
42.32
45.13
48.41
52.76
58.49
63.73
67.40
70.46
73.14
75.84
78.00
80.96
84.32
88.44
92.91
96.82
100.00
102.66
105.15
107.89
110.47
112.72
98.90
99.70
100.30
101.10
101.83
102.46
102.80
103.57
104.00
104.68
105.61
106.31
107.05
107.69
108.19
108.63
109.34
110.13
110.80
111.61
112.21
112.49
112.91
113.27

Durable
goods

41.38
41.18
41.27
41.47
41.61
41.82
41.44
41.25
41.89
43.28
44.47
45.44
47.10
47.60
48.29
51.35
56.04
59.16
61.73
65.23
69.62
75.56
80.64
83.81
85.48
86.71
87.76
88.91
91.59
93.28
95.29
96.59
98.54
100.00
101.22
103.27
104.27
103.83
102.16
99.59
100.09
100.10
100.23
100.47
101.00
101.38
102.03
102.28
103.02
103.85
103.94
104.35
104.43
104.25
104.07
104.25
103.89
103.72
103.45
103.27
102.50
101.74
101.14

Nondurable
goods

24.49
24.84
24.99
25.18
25.48
25.80
26.27
27.14
27.78
28.85
30.19
31.66
32.65
33.74
36.39
41.59
44.83
46.53
49.18
52.59
58.33
65.30
70.57
72.81
74.64
76.71
78.72
78.73
81.82
84.83
89.28
94.62
98.06
100.00
101.46
102.77
104.48
107.15
109.15
99.15
99.74
100.39
100.72
101.26
101.38
101.27
101.92
101.90
102.23
103.31
103.64
103.85
104.32
104.70
105.05
106.02
107.04
107.29
108.26
108.90
108.89
109.24
109.56

Nonresidential
Services

18.47
18.96
19.33
19.62
19.94
20.28
20.72
21.32
22.03
22.97
23.91
25.20
26.73
27.91
29.17
31.41
33.97
36.50
39.46
42.62
46.08
50.96
56.17
60.80
64.86
68.17
71.62
75.28
78.23
82.16
86.55
91.22
95.78
100.00
103.62
106.85
110.53
113.76
117.04
98.63
99.60
100.29
101.48
102.43
103.35
103.93
104.79
105.50
106.37
107.24
108.27
109.37
110.23
110.96
111.58
112.27
113.20
114.29
115.26
116.02
116.70
117.42
118.04

See next page for continuation of table.




290

Total

29.01
29.13
29.13
29.11
29.04
29.21
29.69
30.29
31.10
32.30
33.85
35.27
37.05
38.69
40.80
44.91
50.48
53.33
57.29
62.10
67.72
74.18
81.09
85.38
85.20
85.87
86.81
88.97
90.93
93.46
96.06
98.37
99.70
100.00
101.50
103.32
104.71
104.50
104.14
99.61
99.80
100.10
100.49
101.06
101.42
101.65
101.85
102.57
103.10
103.63
103.96
104.43
104.86
104.82
104.74
104.57
104.31
104.63
104.50
104.23
104.07
104.11
104.16

Total

27.95
28.08
28.03
28.03
27.98
28.15
28.64
29.25
30.08
31.31
32.87
34.28
36.05
37.64
39.74
43.69
49.22
52.12
56.19
61.09
66.71
73.03
79.94
84.47
84.38
85.01
86.20
88.56
90.44
93.25
95.85
98.24
99.63
100.00
101.53
103.40
104.78
104.70
104.54
99.60
99.80
100.10
100.50
101.08
101.45
101.69
101.91
102.64
103.19
103.71
104.04
104.48
104.90
104.88
104.83
104.70
104.50
104.85
104.75
104.52
104.47
104.55
104.62

Total

31.51
31.61
31.50
31.48
31.53
31.69
32.06
32.55
33.40
34.59
36.04
37.76
39.59
41.00
42.59
46.75
53.30
56.33
60.05
64.38
69.71
75.96
83.48
88.28
87.52
87.48
88.31
90.22
91.34
93.73
96.16
98.42
99.93
100.00
100.65
101.89
102.33
101.26
99.88
99.91
99.92
100.07
100.11
100.49
100.66
100.66
100.80
101.36
101.89
102.20
102.12
102.21
102.61
102.40
102.11
101.74
101.29
101.21
100.82
100.31
99.93
99.73
99.53

Structures

21.16
21.13
21.01
21.18
21.38
21.68
22.31
23.11
23.84
25.03
26.68
28.42
30.61
32.83
35.38
40.24
45.03
47.22
50.95
56.30
62.88
68.66
78.22
84.45
82.23
82.94
84.86
86.47
87.85
92.10
95.61
98.78
100.09
100.00
103.26
107.00
111.49
114.09
117.87
99.35
99.66
100.07
100.91
102.15
102.90
103.56
104.42
105.46
106.16
107.37
109.00
110.40
111.19
111.92
112.43
112.97
113.50
114.58
115.30
116.11
117.23
118.44
119.71

Producers'
durable
equipment
39.74
39.99
39.90
39.66
39.52
39.50
39.55
39.67
40.59
41.70
42.88
44.48
45.88
46.51
47.30
50.85
58.59
62.19
65.90
69.59
74.13
80.67
86.60
90.24
90.58
90.04
90.15
92.24
93.22
94.59
96.45
98.23
99.84
100.00
99.57
99.86
98.89
96.62
93.63
100.15
100.02
100.06
99.77
99.80
99.72
99.45
99.32
99.69
100.15
100.14
99.46
99.09
99.35
98.83
98.29
97.60
96.84
96.38
95.65
94.72
93.88
93.27
92.64

Residential

21.43
21.58
21.61
21.65
21.48
21.65
22.26
23.07
23.87
25.14
26.88
27.74
29.35
31.14
33.89
37.39
40.86
43.49
47.99
53.72
59.75
66.22
71.62
75.45
77.19
79.41
81.45
84.87
88.34
92.06
95.08
97.80
98.85
100.00
103.71
107.11
110.93
113.64
117.09
98.82
99.52
100.20
101.46
102.54
103.41
104.25
104.64
105.79
106.36
107.45
108.83
110.17
110.65
111.15
111.75
112.29
112.80
114.37
115.10
115.68
116.65
117.57
118.47

TABLE B-7.—Chain-type price indexes for gross domestic product, 1959-97—Continued
[Index numbers, 1992=100, except as noted; quarterly data seasonally adjusted]
Exports and
imports
of goods and
services

Government consumption expenditures and
gross investment

Exports

Total

Year or
quarter

1959

Imports

Federal

Total

National
defense

Nondefense

State
and
local

Final
sales
of
domestic
product

Total

Gross domestic
Gross Gross
purnado- chases '
Less
tional
food product mestic
Less
and
prodfood
energy
uct Total and
energy

18.10 18.61 18.10 19.51 17.45 22.79 22.44
18.34 18.75 18.20 19.82 17.82 23.11 22.75
18.66 19.01 18.38 20.48 18.24 23.38 23.00
19.15 19.42 18.74 21.12 18.83 23.68 23.28
19.61 19.90 19.19 21.67 19.25 23.97 23.58
20.15 20.58 19.77 22.75 19.63 24.32 23.94
20.73 21.19 20.41 23.22 20.17 24.80 24.39
21.56 21.89 21.07 24.04 21.14 25.51 25.07
22.47 22.55 21.72 24.72 22.35 26.34 25.83
23.74 23.84 22.92 26.34 23.60 27.50 26.95
25.19 25.13 24.18 27.65 25.23 28.80 28.21
27.21 27.08 25.94 30.30 27.31 30.33 29.73
31.32
29.33 29.42 28.24 32.71 29.23 31.91
31.46 32.00 31.01 34.53 30.97 33.26 32.71
33.88 34.51 33.66 36.54 33.32 35.15 34.64
38.17
37.45 37.89 37.24 39.31 37.00 38.28
41.36 41.95 41.10 43.84 40.80 41.90 41.72
43.99 44.63 43.85 46.33 43.38 44.37 44.15
47.11 48.18 47.21 50.34 46.19 47.25 47.18
50.28 51.47 50.82 52.84 49.26 50.71 50.65
54.82 56.10 55.81 56.58 53.73 55.06
55.22
60.86 62.20 62.05 62.34 59.70 60.15 61.10
66.84 68.31 68.23 68.26 65.57 65.82
66.72
71.32 72.94 72.96 72.59 69.93 70.02 70.64 69.04
74.51 76.08 76.20 75.44 73.16 73.00 73.31 71.99
78.23 80.36 81.23 77.53 76.40 75.77 75.90 74.65
81.01 82.74 83.51 80.20 79.51 78.43 78.34 77.30
82.69 83.96 84.49 82.16 81.59 80.51 80.40 80.10
85.15 85.26 85.62 84.04 85.02 82.98 83.11 82.88
87.39 87.18 87.30 86.75 87.52 86.06
86.13 86.09
90.21 89.79 89.79 89.70 90.51 89.69 89.78 89.56
94.06 92.92 92.92 92.84 94.91 93.62 93.83 93.35
97.45 96.88 96.47 97.95 97.86 97.31 97.30 97.00
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
102.50 102.51 101.77 104.29 102.49 102.65 102.48 102.65
104.85 104.84 103.63 107.70 104.85 105.11 104.85 105.16
108.28 108.34 106.83 111.88 108.24 107.79 107.52 107.93
111.83 112.03 111.02 114.47 111.71 110.28 109.86 110.06
114.47 114.74 113.66 117.35 114.32 112.56 111.77 111.94
99.16 99.38 99.61 98.82 99.00 99.14 99.04 99.04
99.92 100.01 100.23 99.48 99.86 99.81 99.76 99.76
100.33 100.44 100.58 100.09 100.25 100.17 100.28 100.25
100.59 100.17 99.57 101.61 100.89 100.88 100.92 100.94
101.71 101.79 101.23 103.15 101.65 101.85 101.71 101.82
102.24 101.94 101.39 103.27 102.44 102.38 102.28 102.43
102.77 102.83 101.97 104.89 102.74 102.84 102.64 102.88
103.26 103.48 102.48 105.84 103.13 103.53 103.28 103.49
103.95 104.04 102.90 106.73 103.90 104.17 103.80 104.10
104.61 104.97 103.65 108.08 104.39 104.75 104.46 104.86
105.07 104.83 103.68 107.57 105.21 105.41 105.24 105.50
105.75 105.53 104.31 108.42 105.89 106.09 105.88 106.18
106.92 106.89 105.37 110.44 106.93 106.95 106.66 107.03
107.85 107.59 106.30 110.61 108.00 107.50 107.33 107.70
108.55 108.33 107.20 111.03 108.67 108.05 107.79 108.22
109.80 110.56 108.44 115.44 109.35 108.63 108.29 108.77
111.27 111.85 110.38 115.28 110.92 109.39 109.01 109.38
1996:1
II
111.23 111.47 110.58 113.63 111.08 109.91 109.50 109.67
112.07 112.05 111.16 114.25 112.07 110.65 110.15 110.34
Ill
IV
112.76 112.74 111.94 114.72 112.77 111.17 110.79 110.86
113.74 114.10 113.14 116.44 113.54 111.85 111.32 111.36
1997-1
II
114.14 114.46 113.46 116.87 113.95 112.37 111.55 111.81
Ill
114.54 114.71 113.62 117.30 114.44 112.78 111.90 112.10
IV'
115.47 115.71 114.41 118.76 115.33 113.22 112.31 112.51
1
Gross domestic product (GDP) less exports of goods and services plus imports of goods and services.
2
Percent changes based on unrounded data. Quarterly percent changes are at annual rates.
Source: Department of Commerce, Bureau of Economic Analysis.

I960
1961
1962
1963
1964
1965
1966
1967
1968 Z Z
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
... .
1991
1992
1993
1994
1995
1996
1997/>
1992-1
II
Ill
IV
1993-1
II
Ill
IV
1994-1
II
Ill
IV
1995:1
II
Ill
IV

28.74
29.10
29.51
29.48
29.44
29.64
30.61
31.55
32.80
33.48
34.54
36.04
37.27
38.50
43.78
54.11
59.72
61.62
64.17
68.16
76.48
84.17
90.31
90.76
91.32
92.30
89.82
88.54
90.99
96.00
97.91
98.74
100.31
100.00
100.07
101.24
103.44
101.61
99.39
99.86
100.10
100.07
99.98
99.97
100.22
100.04
100.03
100.44
100.99
101.40
102.11
103.21
104.09
103.57
102.88
102.50
102.14
101.47
100.35
99.90
99.72
99.21
98.71

20.94
21.14
21.14
20.89
21.30
21.75
22.05
22.56
22.65
23.00
23.60
24.99
26.53
28.44
33.44
48.04
52.13
53.69
58.54
62.68
73.39
91.45
96.39
93.13
89.64
88.90
85.99
85.95
90.99
95.35
97.81
100.37
100.02
100.00
98.75
99.39
101.62
99.41
95.52
98.95
99.60
101.03
100.42
98.82
99.45
98.55
98.19
97.64
98.87
100.34
100.72
101.12
102.82
101.77
100.75
100.28
99.83
98.76
98.75
97.42
95.52
94.81
94.30




291

Percent change 2

Gross domestic
purchases '

22.95
23.27
23.54
23.85
2413
24.49
24.96
25.68
26.49
27.65
28.95
30.49
32.07
3343
35.32
38.48
42.11
44.58
47.45
50.91
5526
60.37
6605
70.22
73.20
75.97
78.57
80.62
83.08
86.12
89.75
93.66
97.33
100.00
102.64
105.08
107.74
110.19

99.14
99.81
100.17
100.87
101.84
102.37
102.83
103.51
104.16
104.73
105.38
106.05
106.90
107.46
108.00
108.58
109.33
109.83
110.55
111.06
111.73
112.22
112.62

1.0
1.4
1.2
1.3
1?
11
1.9
2.8
3?
4.4
47
5.3
S?
42
5.6
89
94
S8
6S
73
85
9.3
94
6.3
4.3
3.8
3.4
2.6
3.1
3.7
4.2
4.4
3.9
2.8
2.6
2.4
2.5
2.3
2.0
3.4
2.8
1.4
2.8
3.9
2.1
1.8
2.7
2.5
2.2
2.5
2.6
3.3
2.1
2.0
2.1
2.8
1.9
2.7
1.9
2.4
1.8
1.4
1.5

1.0
1.4
1.1
1.2
13
16
1.9
2.8
30
43
47
5.4
S3
41
5.9
10?
93
S8
69
74
90
10.7
9?
5.9 ...„.„
3.8
3.5 3.7
3.2 3.5
2.6 3.6
3.4 3.5
3.6 3.9
4.2 4.0
4.5 4.2
3.7 3.9
2.8 3.1
2.5 2.7
2.3 2.4
2.5 2.6
2.2 2.0
1.7 1.7
3.2 3.8
2.9 2.9
2.1 2.0
2.6 2.8
3.2 3.5
2.3 2.4
1.4 1.8,
2.5 2A
2.0 2.4
2.6 3.0
3.0 2.5
2.5 2.6
3.0 3.2
2.5 2.6
1.7 1.9
1.9 2.1
2.7 2.3
1.8 1.1
2.4 2.5
2.4 1.9
1.9 1.8
.8 1.6
1.3 1.1
1.5 1.5

TABLE B-8.—Gross domestic product by major type of product, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Goods
Final Change
in
Gross sales of busidomestic domes- ness
product
tic
product inventories

Year or
quarter

1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997^
1992:1
||
III
IV
1993-1
II
Ill
IV
1994:1
II
Ill
IV
1995:1
||
III
IV
1996:1

||
III
IV

1997:1

. .

507.2
526.6
544.8
585.2
617.4
663.0
719.1
787.8
833.6
910.6
982.2
1,035.6
1,125.4
1,237.3
1,382.6
1,496.9
1,630.6
1,819.0
2,026.9
2,291.4
2,557.5
2,784.2
3,115.9
3,242.1
3,514.5
3,902.4
4,180.7
4,422.2
4,692.3
5,049.6
5,438.7
5,743.8
5,916.7
6,244.4
6,558.1
6,947.0
7,265.4
7,636.0
8,083.4
6,121.8
6,201.2
6,271.7
6,383.1
6,444.5
6,509.1
6,574.6
6,704.2
6,794.3
6,911.4
6,986.5
7,095.7
7,168.9
7,209.5
7,301.3
7,381.9
7,467.5
7,607.7
7,676.0
7,792.9
7,933.6
8,034.3
8,124.3
8,241.5

503.0
4.2
523.3
3.2
541.9
2.9
579.1
6.1
611.7
5.7
658.0
5.0
709.4
9.7
774.0
13.8
823.1
10.5
901.4
9.1
972.7
9.5
1,033.4
2.2
1,116.9
8.5
1,227.4
9.9
1,365.2
17.5
14.1
1,482.8
1,636.9
-6.3
1,802.0
16.9
2,003.8
23.1
2,264.2
27.2
2,540.6
16.9
2,791.9
-7.6
3,087.8
28.2
3,256.6 -14.5
3,519.4
-4.9
3,835.0
67.5
4,154.5
26.2
4,412.6
9.6
4,668.1
24.2
5,038.7
10.9
5,407.0
31.7
5,735.8
8.0
5,919.0
-2.3
6,237.4
7.0
6,537.6
20.5
6,885.7
61.2
30.1
7,235.3
7,610.2
25.9
8,018.8
64.6
6,122.1
-.2
10.2
6,191.0
6,260.1
11.6
6,376.6
6.5
6,413.8
30.7
6,494.7
14.5
6,560.6
14.0
6,681.3
22.9
52.4
6,741.9
6,835.1
76.3
6,936.3
50.2
7,029.6
66.2
7,116.8
52.1
7,185.0
24.5
7,281.8
19.4
7,357.4
24.5
7,456.4
11.1
23.4
7,584.3
7,638.9
37.1
7,761.0
31.9
7,867.4
66.1
7,953.2
81.1
8,075.3
48.9
8,179.3
62.1

Total

Change
in
business
inventories

Total

Final
sales

252.0
257.8
260.4
281.2
292.7
313.2
342.9
380.6
394.5
426.7
455.8
467.5
493.2
539.8
619.2
665.7
718.1
804.0
883.7
996.5
1,115.2
1,191.1
1,342.6
1,333.2
1,426.9
1,607.0
1,669.8
1,720.6
1,804.8
1,942.9
2,124.0
2,203.8
2,234.0
2,321.0
2,422.1
2,581.4
2,667.9
2,785.2
2,945.1
2,281.1
2,301.3
2,329.4
2,372.3
2,388.3
2,408.7
2,412.0
2,479.6
2,531.2
2,568.6
2,582.8
2,643.0
2,650.5
2,637.8
2,673.3
2,710.2
2,733.2
2,782.7
2,797.8
2,826.9
2,904.6
2,936.0
2,952.1
2,987.9

3.1
247.8
4.2
92.3
1.7
254.6
3.2
95.1
-.1
257.5
2.9
94.3
3.4
275.1
6.1 104.5
287.1
2.7
5.7 111.0
4.0
308.1
5.0 120.5
9.7 133.3
6.7
333.3
366.8
13.8 149.0
10.2
384.0
5.5
10.5 153.8
417.6
9.1 167.8
4.6
6.3
446.2
9.5 178.6
2.2 180.2
.0
465.3
484.7
3.2
8.5 187.0
7.2
529.9
9.9 209.3
601.8
17.5 241.4
14.6
14.1 256.7
11.0
651.6
-7.5
724.5 -6.3 288.1
787.1
10.6
16.9 322.5
10.2
860.6
23.1 366.9
969.3
27.2 416.9
20.3
1,098.3
16.9 475.0
12.5
1,198.7
-7.6 502.9 -2.7
1,314.5
7.5
28.2 546.0
1,347.7 -14.5 544.4 -15.5
1,431.8
-4.9 586.1
4.0
1,539.6
67.5 655.1
43.6
8.6
1,643.6
26.2 713.2
1,711.0
.6
9.6 741.3
21.5
1,780.6
24.2 764.7
16.4
1,932.0
10.9 837.0
2,092.3
31.7 907.3
21.3
2.5
2,195.8
8.0 935.7
2,236.3 -2.3 926.6 -16.6
2,314.0
7.0 965.9 -10.9
2,401.6
16.1
20.5 1,012.7
2,520.2
61.2 1,072.5
33.6
2,637.8
30.1 1,133.9
29.1
2,759.3
16.9
25.9 1,212.0
2,880.6
64.6 1,284.9
30.8
2,281.4
-.2 944.6 -18.8
1.1
10.2 955.7
2,291.0
11.6 969.2 -11.1
2,317.8
6.5 994.2 -14.9
2,365.8
30.7 980.8 20.6
2,357.5
2,394.2
14.5 1,014.9
7.0
14.0 1,009.4
14.2
2,398.0
2,456.7
22.9 1,045.9
22.5
52.4 1,052.3
2,478.8
29.0
2,492.4
40.5
76.3 1,062.1
2,532.6
50.2 1,082.3
29.3
2,576.9
35.6
66.2 1,093.4
2,598.4
52.1 1,108.9
41.6
2,613.4
24.5 1,120.8
26.9
19.4 1,143.9
21.6
2,653.9
2,685.7
26.2
24.5 1,162.1
17.2
2,722.1
11.1 1,183.4
23.4 1,214.8
2,759.3
18.1
2,760.7
37.1 1,216.3
33.3
2,795.0
31.9 1,233.5 -1.1
2,838.4
31.8
66.1 1,248.0
2,854.9
81.1 1,275.3 46.8
2,903.2
18.6
48.9 1,305.3
2,925.7
62.1 1,310.9
25.9

II
III
IVp
Source: Department of Commerce, Bureau of Economic Analysis.




Durable goods
Change

292

business
inventories

Final
sales

Nondurable goods
Final
sales

155.5
159.5
163.2
170.7
176.1
187.6
199.9
217.8
230.2
249.8
267.6
285.1
297.7
320.6
360.3
394.9
436.4
464.6
493.7
552.5
623.3
695.8
768.4
803.3
845.7
884.5
930.4
969.7
1,015.9
1,095.0
1,185.0
1,260.1
1,309.7
1,348.1
1,388.9
1,447.6
1,503.9
1,547.3
1,595.7
1,336.8
1,335.4
1,348.6
1,371.6
1,376.7
1,379.3
1,388.6
1,410.8
1,426.5
1,430.2
1,450.3
1,483.5
1,489.4
1,492.6
1,510.0
1,523.6
1,538.7
1,544.5
1,544.4
1,561.5
1,590.4
1,579.6
1,597.9
1,614.8

Change
in
business
inventories

1.1
1.6
3.0
2.7
3.0
1.0
3.0
3.6
5.0
4.5
3.2
2.2
5.3
2.7
2.9
3.1
1.2
6.3
12.8
6.9
4.3
-4.9
20.6
1.0
-S.9
23.9
17.6
9.0
2.8
-5.5
10.5
5.6
14.3
17.9
4.4
27.7
1.0
9.0
33.8
18.5
9.1
22.7
21.4
10.1
7.4
'.4
23.4
35.8
20.9
30.6
10.5
-2.5
-2.1
-1.7
-6.2
5.3
3.9
33.0
34.3
34.4
30.3
36.2

Services

192.7
206.8
220.8
236.1
252.0
271.4
291.5
319.2
349.5
383.9
418.2
458.5
503.8
550.5
600.5
665.6
745.8
823.8
916.4
1,023.1
1,131.7
1,274.1
1,423.3
1,566.9
1,720.9
1,871.8
2,054.6
2,224.2
2,398.2
2,600.0
2,795.3
3,016.9
3,201.3
3,411.1
3,589.5
3,772.3
3,980.7
4,187.3
4,432.8
3,338.4
3,387.5
3,432.1
3,486.4
3,527.4
3,561.8
3,612.4
3,656.1
3,695.1
3,749.6
3,800.8
3,843.9
3,903.0
3,961.4
4,011.0
4,047.3
4,096.2
4,162.2
4,208.1
4,282.7
4,338.2
4,400.1
4,462.3
4,530.4

Structures

62.5
61.9
63.6
67.8
72.7
78.4
84.7
88.0
89.6
100.0
108.3
109.7
128.4
146.9
162.9
165.6
166.7
191.2
226.8
271.8
310.6
319.1
350.0
342.0
366.8
423.6
456.3
477.4
489.3
506.7
519.4
523.1
481.4
512.3
546.5
593.2
616.8
663.6
705.5
502.3
512.4
510.1
524.4
528.8
538.6
550.2
568.5
568.0
593.1
602.9
608.8
615.5
610.2
617.0
624.4
638.1
662.8
670.1
683.3
690.8
698.2
709.8
723.2

TABLE B-9.—Real gross domestic product by major type of product, 1959-97
[Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates]
Goods
Year or
quarter

1959
I960
1961
1962
1963
1964 ..
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980 ..
1981
1982 . .
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*
1992:1

II
III
IV
1993-1
II
Ill
IV
1994:1

||
Ill
IV
1995-1
II
Ill
IV
1996-1
II
Ill
IV
1997-1
II
Ill
IV/>

Final Change
in
Gross sales of busidomestic domes- ness
tic
product
product inventories
2,210.2
2,262.9
2,314.3
2,454.8
2,559.4
2,708.4
2,881.1
3,069.2
3,147.2
3,293.9
3,393.6
3,397.6
3,510.0
3,702.3
3,916.3
3,891.2
3,873.9
4,082.9
4,273.6
4,503.0
4,630.6
4,615.0
4,720.7
4,620.3
4,803.7
5,140.1
5,323.5
5,487.7
5,649.5
5,865.2
6,062.0
6,136.3
6,079.4
6,244.4
6,389.6
6,610.7
6,742.1
6,928.4
7,191.4
6,175.7
6,214.2
6,260.7
6,327.1
6,327.9
6,359.9
6,393.5
6,476.9
6,524.5
6,600.3
6,629.5
6,688.6
6,703.7
6,708.8
6,759.2
6,796.5
6,826.4
6,926.0
6,943.8
7,017.4
7,101.6
7,159.6
7,214.0
7,290.3

2,206.9
2,264.2
2,318.0
2,445.4
2,552.4
2,705.1
2,860.4
3,033.5
3,125.1
3,278.0
3,377.2
3,406.5
3,499.8
3,689.5
3,883.9
3,873.4
3,906.4
4,061.7
4,240.8
4,464.4
4,614.4
4,641.9
4,691.6
4,651.2
4,821.2
5,061.6
5,296.9
5,480.9
5,626.0
5,855.1
6,028.7
6,126.7
6,082.6
6,237.4
6,368.9
6,551.2
6,712.7
6,901.0
7,124.2
6,175.8
6,203.8
6,249.5
6,320.7
6,297.3
6,344.9
6,379.3
6,453.8
6,473.0
6,526.7
6,580.4
6,624.8
6,654.3
6,685.3
6,739.3
6,771.9
6.815.0
6,902.3
6,905.0
6,981.7
7,034.1
7,077.7
7,160.3
7,224.6

13.2
10.5
8.6
19.5
17.8
15.6
30.3
42.4
32.0
26.9
27.0
5.4
22.3
24.7
37.7
23.4
-10.2
29.8
38.8
43.3
23.4
-10.2
33.1
-15.6
-5.7
75.3
30.2
11.1
26.4
11.7
33.3
10.4
-3.0
7.0
22.1
60.6
27.3
25.0
62.2
-.5
11.0
12.0
5.6
32.3
16.6
15.3
24.2
53.1
75.9
49.7
63.6
48.5
21.6
17.0
22.2
8.0
21.3
37.9
32.9
63.7
77.6
47.5
59.9

Total

Total

785.2
796.8
799.4
857.8
886.4
940.8
1,017.8
1,106.9
1,120.2
1,170.8
1,204.7
1,188.8
1,216.8
1,305.9
1,424.5
1,403.1
1,380.2
1,479.5
1,555.1
1,652.0
1,706.0
1,689.7
1,761.8
1,681.0
1,748.9
1,926.4
1,966.1
2,018.8
2,077.9
2,181.0
2,301.8
2,304.8
2,262.7
2,321.0
2,391.5
2,514.2
2,574.2
2,662.6
2,808.6
2,289.2
2,301.2
2,327.2
2,366.4
2,363.6
2,383.2
2,382.7
2,436.5
2,476.7
2,508.6
2,508.4
2,563.1
2,563.4
2,548.5
2,576.8
2,608.1
2,614.6
2,658.8
2,673.1
2,704.1
2,769.3
2,796.7
2,815.4
2,852.9

Final
sales

1,706.7
1,762.6
1,853.3
1,940.6
2,011.7
2,055.0
2,171.0
2,269.2
2,295.4
2,265.9
2,314.0
2,370.7
2,453.9
2,545.0
2,635.5
2,739.4
2,289.3
2,290.7
2,316.0
2,360.1
2,332.9
2,368.1
2,368.6
2,413.2
2,424.5
2,433.8
2,458.9
2,498.4
2,513.5
2,525.3
2,557.4
2,583.8
2,604.1
2,635.5
2,634.0
2,668.4
2,699.6
2,711.8
2,760.7
2,785.3

Source: Department of Commerce, Bureau of Economic Analysis.




293

Durable goods
Change
in
business
inventories

Final
sales

604.4
637.6
703.1
758.2
793.6
819.8
897.0
951.9
963.9
934.2
965.9
1,007.0
1,056.7
1,124.3
1,205.8
1,295.0
945.2
953.8
1LO
12.0
970.0
5.6
994.8
32.3
977.3
16.6 1,009.0
15.3 1,003.4
24.2 1,038.2
53.1 1,040.4
75.9 1,044.7
49.7 1,062.1
63.6 1,079.4
48.5 1,094.9
21.6 1,110.6
17.0 1,137.2
22.2 1,154.3
8.0 1,171.9
21.3 1,210.0
37.9 1,211.4
32.9 1,230.1
63.7 1,245.8
77.6 1,281.4
47.5 1,320.4
59.9 1,332.3

-15.6
-5.7
75.3
30.2
11.1
26.4
11.7
33.3
10.4
-3.0
7.0
22.1
60.6
27.3
25.0
62.2

Change
in
business
inventories

-17.8
4.9
49.7
10.0
.9
23.5
17.6
22.4
2.7
-16.6
-10.9
15.8
32.3
27.3
15.9
28.9
-18.7
1.2
-11.4
-14.8
20.7
7.0
13.8
21.9
28.0
39.1
28.2
33.8
39.1
25.2
20.2
24.7
16.3
17.0
31.3
-.9
29.9
43.8
17.5
24.5

Nondurable goods
Final
sales

Change
in
business
inventories

1,122.6
2.0
1,142.6 -10.3
1,160.9
26.1
1,189.0
20.1
1,223.5
10.3
1,239.2
2.4
1,274.8 -6.1
1,317.2
11.0
1,331.3
7.6
1,331.8
13.4
1,348.1
17.9
1,363.8
6.2
1,397.5
28.2
1,421.9
-.2
1,433.2
9.1
1,451.6
33.3
1,344.2
18.1
1,336.9
9.7
1,346.0
23.4
1,365.3
20.5
1,355.6
11.6
1,359.2
9.7
1,365.2
1.4
1,375.3
2.1
1,384.3
25.0
1,389.3 36.8
1,397.2
21.4
1,419.3 29.7
1,419.1
9.1
1,415.5 -3.9
-3.4
1,421.8
1,431.3
-2.8
1,434.5 -8.3
1,429.3
4.3
1,426.5
6.6
1,442.6
33.8
1,458.3 33.8
1,437.5
33.8
1,449.0
30.1
1,461.8 35.4

Services

1,115.3
1,167.1
1,219.9
1,277.5
1,336.9
1,406.3
1,472.5
1,557.8
1,639.4
1,712.0
1,774.1
1,824.0
1,875.8
1,936.1
2,004.4
2,063.3
2,123.5
2,182.9
2,250.5
2,334.3
2,391.3
2,441.4
2,475.8
2,518.7
2,598.4
2,678.0
2,797.8
2,903.2
3,011.6
3,128.6
3,208.5
3,295.4
3,332.3
3,411.1
3,469.5
3,542.9
3,614.7
3,686.6
3,790.5
3,379.4
3,398.6
3,424.2
3,442.3
3,447.0
3,454.1
3,480.4
3,496.4
3,510.4
3,533.9
3,559.7
3,567.7
3,583.1
3,610.5
3,630.6
3,634.5
3,648.4
3,684.9
3,689.0
3,723.9
3,743.9
3,774.4
3,804.8
3,839.0

Structures

299.4
296.5
304.7
322.2
343.9
367.0
385.4
385.9
380.2
403.6
408.8
391.1
427.4
459.0
469.0
420.5
382.3
418.3
458.7
498.1
511.7
475.9
468.8
428.5
460.7
523.1
550.3
558.4
554.6
550.8
546.0
533.3
484J5
512.3
528.7
554.9
555.0
582.2
599.4
507.1
514.4
509.4
518.5
517.5
522.8
530.3
544.5
538.6
559.0
562.1
560.1
559.0
550.9
553.4
556.7
565.7
584.9
585.0
592.9
595.1
595.7
600.7
606.3

TABLE B-10.—Gross domestic product by sector, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Business '
Year or
quarter

Gross
domestic
product

Households and institutions

Nonfarm '
Total

Total

1

Nonfarm
less
housing

Housing

Farm

Total

Private
households

Nonprofit
institutions

General government 2
Total

Federal

382.4
12.4
418.0
35.6
3.6
8.9
57.9
31.8
18.9
4313
3927
139
3.8
329
386
198
101
615
403.4
41.4
3.7
10.7
444.8
20.1
14.5
34.2
65.5
479.3
434.7
44.6
15.6
3.8
11.8
36.3
20.2
70.1
47.4
16.7
3.8
505.5
20.4
12.8
38.1
458.1
74.8
50.2
17.9
3.9
80.4
545.5
495.3
19.3
14.0
40.5
591.9
538.4
4.0
53.5
21.9
19.3
15.3
86.0
42.3
47.1
647.5
590.6
57.0
21.3
4.0
17.2
22.9
96.1
23.4
4.2
681.5
620.6
60.8
22.2
19.2
106.5
51.6
743.4
4.4
22.7
21.7
118.4
56.5
678.6
64.8
26.1
4.4
798.1
728.2
69.9
29.5
25.0
60.2
25.2
129.5
834.1
32.4
759.2
74.9
4.5
27.9
64.3
26.2
142.9
905.8
824.1
81.7
35.6
4.6
68.2
28.1
31.1
155.9
88.7
4.6
995.6
906.9
32.6
39.0
34.3 170.1
73.1
1,104.9 1,007.9
96.9
43.0
4.8
38.2
76.9
49.8
185.0
1,198.6 1,092.8
105.9
47.4
47.2
4.6
42.6 203.7
83.5
47.4 227.1
91.7
1,302.7 1,188.4
114.3
52.0
4.6
48.8
5.4
464
57.1
51.7 2458
97.9
1,469.6 1,3446
125.0
139.4
62.4
5.9
1,650.3 1,510.9
47.2
56.5 266.9
106.1
1,877.1 1,721.3
155.8
54.7
69.8
6.5
63.2 289.7
113.8
6.4
2,099.7 1,923.6
176.1
77.3
71.0 316.0
122.3
64.5
2,290.2 2,085.0
87.1
6.1
205.1
56.1
81.0
350.8
135.6
2,561.9 2,326.6
97.6
6.2
151.0
235.3
69.9
91.5 386.4
6.3 102.0 419.2
2,649.5 2,390.0
259.5
65.1 108.2
164.0
2,900.8 2,624.1
276.7
6.3 112.9 445.3 173.5
492 119.2
3,221.1 2,918.6
302.5
7.3 123.9 481.7
190.8
68.5 131.2
3,453.1 3,121.1
332.0
67.1 140.9
7.3 133.6 519.6 203.6
7.7
3,653.7 3,295.2
358.5
145.9 551.9 211.1
63.0 153.7
386.4
7.7
3,868.0 3,481 6
221.3
651 173.3
165.6 586.0
4,169.6 3,750.4
419.2
8.3 186.8
63.8 195.1
621.0 230.0
451.4
76.2 214.6
8.9 205.7 660.3 240.5
4,487.5 4,036.1
9.4 228.5 709.0 252.7
4,717.3 4,234.1 483.2
79.6 237.9
509.9
9.1 248.3 750.7 268.1
4,835.6 4,325.7
72.9 257.4
543.2
10.1 269.0 781.0 274.4
5,103.8 4,560.6
80.6 279.1
10.7 285.8
5,380.1 4,822.9
557.1
73.0 296.5
808.5 276.9
594.4
11.0 301.7 832.7 275.2
5,718.1 5,123.6
83.5 312.7
629.2
11.8 319.9 858.9 275.5
6,001.3 5,372.0
73.5 331.8
6,311.6 5,652.8
658.8
89.4 346.0
11.5 334.6
281.4
889.0
11.4 355.0 919.7 285.9
689.4
6,702.6 6,013.2
94.8 366.3
9.7 260.4 771.7 274.4
5,000.9 4,475.0
525.9
79.2 270.1
1992:1
II
5,062.7 4,531.5
531.2
80.3 278.3
10.0 268.3 780.0 275.8
5,121.0 4,549.7
571.3
84.1 281.7
10.2 271.5 784.8 275.2
Ill
10.4 275.8 787.6 272.1
544.4
78.7 286.2
5,230.6 4,686.2
IV
10.5 279.6 801.4 278.9
5,282.0 4,725.6
556.5
71.0 290.1
1993:1
5,333.4 4,778.7
554.7
II
76.2 294.5
10.6 283.9 805.0
276.2
Ill
10.7 288.2
557.1
5,398.6 4,841.5
65.1 298.9
812.0 277.2
10.8 291.6 815.7
5,506.2 4,945.9
560.3
275.3
IV
79.9 302.4
10.8 295.1 825.4 277.5
5,572.3 4,984.5
587.8
90.7 305.9
1994:1
10.9 298.7 831.8
277.7
5,684.9 5,101.6
583.3
85.0 309.6
II
Ill
5,756.2 5,158.0
598.2
11.1 303.8 834.7
80.8 314.9
273.6
608.4
11.3 309.2 838.9 272.0
5,858.8 5,250.4
77.5 320.5
IV
11.7 313.8
5,923.8 5,305.7
618.2
275.4
69.6 325.5
849.9
1995:1
5,952.4 5,326.2
11.8 318.3 855.8 275.2
626.2
71.1 330.1
II
6,032.2 5,403.0
629.2
73.4 333.5
11.9 321.6 862.2 276.1
Ill
11.9 326.0 867.6 275.3
6,096.6 5,453.3
643.3
79.8 337.9
IV
83.4 340.3
11.8 328.5 878.3
645.1
6,165.6 5,520.5
280.5
1996:1
652.8
6,289.2 5,636.3
11.6 332.3 886.1 281.9
II
88.6 343.9
11.4 336.6 893.9
664.4
6,341.7 5,677.3
92.5 347.9
282.1
Ill
11.1 341.0 897.8 281.1
673.0
6,450.0 5,777.1
93.0 352.0
IV
93.4 357.7
11.1 346.6 909.4 286.2
6,573.1 5,892.5
680.6
1997.- 1
II
686.8
11.3 352.3 915.8 286.2
97.1 363.6
6,657.9 5,971.0
11.4 357.9
692.7
286.1
Ill
6,736.8 6,044.2
95.0 369.3
923.2
6,842.5 6,145.2
697.3
93.7 374.7
11.6 363.1 930.5 285.4
IV*
1
Gross domestic business product equals gross domestic product less gross product of households and institutions and of general
ment. Nonfarm product equals gross domestic business product less gross farm product.
2
Equals compensation of general government employees plus general government consumption of fixed capital.
Source: Department of Commerce, Bureau of Economic Analysis.

1959 . ..
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*

507.2
526.6
544.8
585.2
617.4
663.0
719.1
787.8
833.6
910.6
982.2
1,035.6
1,125.4
1,237.3
1,382.6
1,496.9
1,630.6
1,819.0
2,026.9
2,291.4
2,557.5
2,784.2
3,115.9
3,242.1
3,514.5
3,902.4
4,180.7
4,422.2
4,692.3
5.049.6
5,438.7
5,743.8
5,916.7
6,244.4
6,558.1
6,947.0
7,265.4
7,636.0
8,083.4
6,121.8
6,201.2
6,271.7
6,383.1
6,444.5
6,509.1
6,574.6
6,704.2
6,794.3
6,911.4
6,986.5
7,095.7
7,168.9
7,209.5
7,301.3
7,381.9
7,467.5
7,607.7
7,676.0
7,792.9
7,933.6
8,034.3
8,124.3
8,241.5




436.9
451.1
464.9
499.5
525.9
564.7
613.8
670.4
703.7
766.1
823.3
860.3
933.9
1,028.3
1,154.6
1,246.0
1,351.5
1,516.0
1,697.5
1,931.9
2,164.1
2,346.3
2,631.8
2,714.7
2,950.0
3,289.6
3,520.2
3,716.7
3,933.1
4,233.4
4,563.7
4,796.9
4,908.5
5,184.4
5,453.1
5,801.6
6,074.7
6,401.0
6,797.4
5,080.1
5,143.0
5,205.2
5,309.3
5,353.0
5,409.6
5,463.7
5,586.1
5,663.0
5,769.9
5,837.0
5,936.3
5,993.5
6,023.5
6,105.5
6,176.5
6,249.0
6,377.7
6,434.2
6,543.1
6,666.5
6,755.0
6,831.8
6,936.2

294

State
and
local

26.1
286
31.3
33.8
36.7
40.0
43.7
49.0
54.9
61.9
69.3
78.7
87.7
96.9
108.1
120.3
135.4
1479
160.9
175.9
193.7
215.2
235.4
255.2
271.8
290.9
316.0
340.7
364.7
391.0
419.8
456.3
482.6
506.6
531.6
557.5
583.4
607.6
633.8
497.3
504.2
509.6
515.5
522.5
528.9
534.8
540.4
547.8
554.1
561.1
566.9
574.5
580.6
586.1
592.3
597.8
604.2
611.8
616.7
623.3
629.6
637.1
645.1
govern-

TABLE B-ll.—Real gross domestic product by sector, 7939-97
[Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates]
Business '
Year or
quarter

Gross
domestic
product

Households and institutions

Nonfarm '
Total

Total

1

Nonfarm
less
housing

Housing

Farm

Total

Private
households

Nonprofit
institutions

General government 2
Total

Federal

33.7 105.0
232.1
149.8
78.6
415.1
18.5
35.3
160.0
112.1
18.6
85.9 429.3 236.4
169.4
35.6
87.8 444.6 241.5
113.1
18.1
180.4
34.9 117.2
92.3
461.8 251.7
17.9
475.7
189.9
35.9
17.7
254.3
120.1
95.6
123.4
99.4
492.4
256.8
198.9
34.6
17.5
210.0
36.5 127.9
105.0 509.3 258.8
16.9
35.4 132.6
220.3
542.1 276.4
16.3
110.9
37.7
231.2
136.9
16.3
115.2 571.1 295.1
240.3
36.5 141.0
120.6
592.6
300.6
15.5
301.7
251.1
37.5 145.5
14.7
126.5
607.3
258.7
38.7 144.0
126.4
609.7
288.9
13.8
40.4 147.2
276.1
269,3
13.1
130.6 611.3
282.7
40.4
151.4
135.4 611.5 263.5
12.7
12.4
295.9
40.3 154.9
139.6
614.8 253.8
311.7
39.3 156.1
10.7
143.2
625.2
252.0
315.4
46.4
149.2
631.1 249.0
161.2
10.1
323.4
44.7
10.4
247.5
163.0
150.6
634.3
47.0
639.1 246.3
333.6
167.5
10.5
155.0
44.9
351.7
170.3
10.8
157.5 649.2 247.3
370.7
48.3 173.7
163.1 654.2 245.1
9-4
46.7
246.7
395.6
178.7
8.3 169.8
660.9
174.7
411.6
60.0 182.7
662.3
248.3
7.8
418.7
180.4
62.6
666.6
250.3
188.0
7.6
421.3
40.2
184.8
668.7
254.2
192.3
7.6
56.7
437.5
197.1
188.2
8.7
258.2
676.0
66.9
203.4
8.7
451.9
194.6
693.2
263.9
459.7
64.2
213.5
9.0 204.3 709.9 266.9
473.9
65.3 224.1
724.2
272.3
8.9 215.2
58.2 240.6
491.0
9.5 231.0 741.3 274.1
506.8
65.9
253.4
10.1 243.3
758.1 276.2
70.8 264.1
774.7
280.3
515.9
253.8
10.2
526.8
71.6
9.4 262.6 781.1 281.0
272.1
543.2
80.6 279.1
10.1 269.0 781.0 274.4
267.7
542.1
71.0 290.1
279.8
10.3
782.3
562.7
258.4
85.0 297.9
10.4
287.5
782.6
577.0
74.2
305.1
10.8 294.3 780.3 248.1
585.7
75.5 311.2
10.1 301.1
775.9
240.9
779.4
595.3
79.9
9.6 311.0
236.1
320.6
1992:1
531.3
79.3
277.3
9.9 267.4 779.3 275.8
II
81.4 277.2
532.9
10.1 267.1
780.3
275.0
Ill
570.1
82.8 279.8
782.3 274.0
269.6
10.1
IV
78.7
538.5
272.7
282.0
10.3 271.7
782.0
546.2
74.0
1993:1
284.6
10.3 274.2 782.7 271.3
II
74.7
541.0
289.4
10.4 279.0 782.6 269.2
Ill
61.0 292.5
540.6
10.3 282.2 782.5 267.0
IV
74.4
540.6
283.6
781.3 263.5
293.9
10.3
1994:1
561.9
86.3 294.9
10.3 284.6 782.4 262.5
II
554.4
85.4 296.9
259.8
10.3
286.6
783.0
Ill
86.4 298.8
288.4
564.5
10.4
783.6
257.6
IV
569.8
81.9 301.0
10.5 290.5 781.5 253.8
1995:1
573.9
76.2
292.0
10.8
782.9
252.0
302.8
II
576.7
76.1
304.3
10.8 293.4 782.9 251.0
Ill
71.5 305.9
295.1
574.9
10.8
781.8 249.3
582.4
IV
73.1 307.4
296.7
10.7
773.6
240.3
579.3
76.6
1996:1
307.6
10.5 297.1
769.9
240.5
II
582.6
76.2
310.4
300.1
778.9
242.8
10.3
Ill
588.7
74.6
10.0 302.5
778.1
241.3
312.5
IV
74.7
314.4
592.3
9.6 304.8 776.6 238.9
1997 1
79.0
777.7
594.9
316.9
9.6 307.4
238.2
II
80.4 319.2
237.1
595.6
9.6 309.6
778.8
Ill
595.7
79.6
321.7
9.7 312.1 781.1 236.3
IV*
595.1
80.5 324.6
9.7 314.9
780.1 232.7
1
Gross domestic business product equals gross domestic product less gross product of households and institutions and of general
ment. Nonfarm product equals gross domestic business product less gross farm product.
2
Equals compensation of general government employees plus general government consumption of fixed capital.
Source: Department of Commerce, Bureau of Economic Analysis.

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*

2,210.2
2,262.9
2,314.3
2,454.8
2,559.4
2,708.4
2,881.1
3,069.2
3,147.2
3,293.9
3,393.6
3,397.6
3,510.0
3,702.3
3,916.3
3,891.2
3,873.9
4,082.9
4,273.6
4,503.0
4,630.6
4,615.0
4,720.7
4,620.3
4,803.7
5,140.1
5,323.5
5,487.7
5,649.5
5,865.2
6,062.0
6,136.3
6,079.4
6,244.4
6,389.6
6,610.7
6,742.1
6,928.4
7,191.4
6,175.7
6,214.2
6,260.7
6,327.1
6,327.9
6,359.9
6,393.5
6,476.9
6,524.5
6,600.3
6,629.5
6,688.6
6,703.7
6,708.8
6,759.2
6,796.5
6,826.4
6,926.0
6,943.8
7,017.4
7,101.6
7,159.6
7,214.0
7,290.3

1,721.7
1,758.2
1,795.8
1,911.7
1,997.7
2,122.6
2,268.8
2,419.3
2,470.5
2,590.4
2,670.8
2,673.9
2,777.3
2,958.2
3,159.1
3,125.4
3,100.1
3,298.2
3,475.8
3,687.8
3,804.8
3,779.9
3,878.4
3,772.7
3,946.5
4,266.0
4,425.4
4,563.0
4,699.8
4,882.2
5,049.4
5,097.0
5,026.4
5,184.4
5,317.2
5,530.6
5,657.4
5,842.9
6,094.4
5,119.0
5,156.7
5,198.6
5,263.1
5,260.6
5,287.9
5,318.5
5,401.9
5,447.5
5,520.7
5,547.5
5,606.6
5,618.6
5,622.1
5,672.2
5,716.7
5,750.2
5,838.1
5,854.9
5,928.5
6,009.6
6,064.4
6,114.4
6,189.3




1,677.4
1,710.8
1,748.5
1,868.0
1,953.4
2,083.2
2,227.7
2,383.8
2,430.5
2,555.0
2,634.6
2,635.1
2,736.5
2,920.6
3,127.5
3,095.6
3,050.3
3,256.4
3,431.8
3,652.2
3,763.2
3,741.4
3,816.7
3,705.9
3,916.3
4,211.8
4,357.8
4,499.0
4,635.1
4,826.9
4,984.9
5,026.5
4,954.9
5,103.8
5,246.2
5,446.0
5,582.7
5,766.8
6,013.7
5,039.7
5,075.3
5,115.8
5,184.4
5,186.7
5,213.4
5,257.1
5,327.6
5,361.7
5,435.8
5,461.6
5,524.8
5,542.0
5,545.6
5,600.2
5,643.0
5,673.0
5,761.3
5,779.8
5,853.3
5,929.7
5,983.2
6,034.0
6,108.0

1,524.7
1,548.3
1,576.8
1,685.1
1,760.9
1,881.4
2,014.4
2,159.8
2,195.9
2,310.9
2,380.0
2,373.6
2,464.3
2,634.3
2,827.3
2,781.6
2,733.9
2,929.7
3,093.7
3,295.2
3,388.4
3,346.2
3,406.8
3,291.9
3,497.0
3,774.7
3,906.2
4,039.3
4,161.0
4,335.8
4,477.9
4,510.5
4,428.1
4,560.6
4,704.1
4,883.3
5,005.7
5,181.4
5,419.2
4,508.4
4,542.4
4,545.7
4,645.9
4,640.5
4,672.5
4,716.5
4,787.1
4,799.8
4,881.5
4,897.1
4,954.9
4,968.1
4,968.8
5,025.4
5,060.6
5,093.9
5,179.0
5,191.3
5,261.3
5,335.3
5,388.2
5,439.2
5,514.2

295

State
and
local

186.4
196.2
206.4
213.6
224.6
238.4
253.0
268.4
279.2
294.8
307.8
321.5
334.9
347.4
360.2
372.6
381.7
386.4
392.6
401.8
409.3
414.5
414.2
416.4
414.4
417.6
429.2
443.0
452.0
467.3
481.9
494.5
500.1
506.6
514.5
524.2
532.2
535.2
543.8
503.5
505.3
508.4
509.3
511.4
513.4
515.5
517.8
519.9
523.2
526.0
527.8
530.9
531.9
532.6
533.5
529.6
536.3
537.0
537.9
539.9
542.1
545.2
547.9
govern-

TABLE B-12.

ross domestic product by industry, 1959-96
[Billions of dollars]
Private industries

Gross AgriculManufacturing
domes- ture,
Contic
for- Mining strucproduct estry,
tion
Dura- Nonble durable
and
Total
fishing
goods goods

Year

Finance,
TransStainsurporta- Wholetistition sale Retail ance, Services cal
and
trade
and
dispublic trade
real
creputilities
estate
ancy 1

Government

Based on
1972 SIC:

1959

507.2

20.3

12.5

23.7

140.3

81.7

58.6

44.9

36.0

49.1

68.6

48.4

-1.6

64.8

I960
1961
1962
1963
1964

526.6
544.8
585.2
617.4
663.0

21.4
21.7
22.1
22.3
21.4

12.9
13.0
13.2
13.5
13.9

24.2
25.2
27.0
28.8
31.5

142.5 82.6
142.9 81.7
156.7 92.1
166.1 98.3
177.9 105.9

59.8
61.3
64.6
67.8
72.0

47.2
48.7
51.8
54.7
58.1

37.6
38.7
41.3
43.0
46.3

50.4
51.7
55.4
57.9
63.5

73.2
77.7
82.2
86.8
92.7

51.6
55.0
59.3
63.4
69.1

-3.2
-2.8
-1.8
-3.0
-1.5

68.9
73.0
78.2
83.9
90.1

1965
1966
1967
1968
1969

719.1
787.8
833.6
910.6
982.2

24.2
25.4
24.9
25.7
28.6

14.0
14.7
15.2
16.3
17.1

34.6
37.7
39.5
43.3
48.4

196.3
215.3
220.8
241.1
254.4

118.8 77.5
131.1 84.3
134.1 86.7
146.3 94.8
154.4 100.0

62.2
67.1
70.4
76.2
82.5

49.9
54.3
57.7
63.3
68.4

68.0
72.7
78.2
86.6
94.2

99.7
107.8
117.0
126.6
136.1

74.7
82.7
90.8
99.4
110.8

-.8
3.3
1.3
.9
-1.5

96.3
106.9
117.9
131.2
143.3

1970
1971
1972
1973
1974

1,035.6
1,125.4
1,237.3
1,382.6
1,496.9

29.8
32.1
37.3
54.8
53.0

18.7
18.9
19.7
23.8
37.1

51 1
56.1
62.5
69.7
73.6

2496
263.0
290.5
323.5
337.4

1462
154.2
172.6
195.7
202.2

1034 881 721
108.9 97.2 77.9
117.9 108.3 87.0
127.8 119.2 97.6
135.3 129.8 111.0

1002
109.2
118.8
130.9
136.7

1460
162.8
176.2
192.9
208.7

1205
130.4
144.9
163.1
179.3

19
6.1
4.3
3.4
5.5

1576
171.7
187.8
203.8
224.8

1975
1976
1977
1978
1979

1,630.6
1,819.0
2,026.9
2,291.4
2,557.5

54.7
53.5
54.1
63.1
74.5

42.8 75.1 354.9
47.6 84.9 405.5
54.1 93.8 462.6
61.5 110.6 517.1
71.2 124.7 571.3

207.0
239.9
277.6
316.9
343.5

147.8
165.6
185.0
200.2
227.9

142.2
161.2
179.1
202.2
219.0

121.0
129.0
142.2
160.9
182.3

152.8
172.2
190.2
215.6
234.2

226.6
250.0
283.4
328.0
370.6

199.1
223.9
255.5
294.6
333.2

12.1
19.9
18.2
18.1
28.2

249.3
271.2
293.5
319.8
348.2

1980
1981
1982
1983
1984

2,784.2
3,115.9
3,242.1
3,514.5
3,902.4

66.7
81.1
77.0
62.5
83.5

348.7
388.1
377.4
397.3
469.5

235.7
264.0
272.4
292.8
311.1

242.1
276.2
293.0
328.1
357.8

195.2
216.3
219.5
229.1
264.3

245.9
270.4
288.1
321.9
362.2

418.3
470.9
504.0
565.3
625.6

377.3
426.2
471.8
521.5
590.4

27.6
14.9
-2.5
37.1
5.0

385.5
426.5
461.9
492.4
533.8

1985
1986

4,180.7
4,422.2

84.3 132.8 185.5 803.1 477.1 326.0 376.6 280.7 395.0
82.0 86.3 207.3 833.2 487.0 346.2 393.8 293.5 415.2

690.6
760.4

651.1
712.2

2.4 578.6
23.3 615.0

88.3 217.0 889.2 513.3 375.9 420.5 300.8 435.8
99.9 233.4 971.5 556.6 414.8 443.4 336.3 459.3
96.3 242.2 1,013.5 574.9 438.6 460.9 356.3 490.2

829.7
891.4
959.3

784.6 -15.4 653.2
877.8 -47.3 694.9
965.5 13.2 739.2

.. .

.. .

112.7
151.7
149.5
127.5
134.2

128.6
129.6
129.8
138.9
165.0

584.4
652.1
649.8
690.2
780.6

Based on
1987 SIC:

1987
1988
1989

4,692.3 88.5
5,049.6 88.9
5,438.7 101.9

1990
1991
1992
1993
1994

5,743.8
5,916.7
6,244.4
6,558.1
6,947.0

108.7 112.3 245.2 1,031.4 572.8 458.6
102.9 101.1 228.8 1,028.1 558.3 469.8
112.4 92.2 229.7 1,063.6 573.4 490.3
106.1 94.6 242.4 1,116.5 615.7 500.8
119.2 94.9 268.7 1,216.1 679.2 536.9

17.4
10.1
44.8
52.6
14.6

792.5
839.5
873.6
902.7
933.5

7,265.4 111.0 99.8 286.4 1,286.3 716.8 569.5 622.4 484.4 637.6 1,361.3 1,440.3 -28.2
1995
7,636.0 129.8 113.6 306.1 1,332.1 749.0 583.1 645.3 516.8 667.9 1,448.5 1,539.5 -59.9
1996
Equals gross domestic product (GDP) measured as the sum of expenditures less gross domestic income.
Source: Department of Commerce, Bureau of Economic Analysis.

964.1
996.3

1




296

482.1
511.6
528.7
561.7
598.7

367.2
388.1
406.4
423.3
468.0

503.5
517.4
544.3
573.2
615.3

1,024.1
1,081.6
1,147.9
1,218.1
1,267.6

1,059.4
1,107.6
1,200.8
1,267.0
1,350.4

TABLE B-13.—Real gross domestic product by industry, 1977-96
[Billions of chained (1992) dollars]
Private industries
Year

Gross AgriManufacturing
culdomes- ture,
Contic
for- Mining strucproduct estry,
Dura- Nontion
ble durable
and
Total
fishing
goods goods

Not

StaTransalloFinance,
porta- Wholetisti- Gov- cated
insurerntion sale Retail ance, Services cal ment by
disindusand
trade
and
try '
public trade
real
creputilities
ancy 1
estate

Based on
1972 SIC:

-4.4
23.2
-.9

742.7
786.0
830.7

712.5 37.3 717.4
759.5 34.5 731.6
787.3 49.5 739.4

374.5
386.2
387.9
422.6
465.0

862.8
878.1
875.8
900.0
945.0

810.8
830.0
838.1
862.8
920.8

87.1 232.9 976.4 534.6 442.1 423.8 298.1 496.8
83.6 239.0 967.6 527.4 441.0 421.7 333.0 526.6

968.1
969.0

963.9 3.0 777.9
996.8 28.6 795.7

7.3
35.8

891 864 2396 10417 5650 4779 4539 3228 5092 10157 10414 -184 8100
82.2 104.4 248.8 1,111.0 615.9 494.8 468.2 343.8 537.6 1,069.4 1,099.1 -54.6 829.0
89.1 92.8 251.9 1,106.0 612.9 492.8 474.5 366.3 553.4 1,101.8 1,149.5 14.7 847.7

534
22.9
9.5

1977
1978
1979

4,273.6
4,503.0
4,630.6

57.3
55.2
59.4

82.4 213.8 796.5 435.1 361.9 346.8 201.0 364.5
84.6 221.2 836.5 461.7 374.0 362.8 215.5 389.9
73.6 227.8 864.8 470.5 395.4 378.7 228.2 389.1

1980
1981
1982
1983
1984

4,615.0
4,720.7
4,620.3
4,803.7
5,140.1

58.2
72.3
76.0
54.6
73.2

82.0
81.4
78.8
73.7
82.0

1985
1986

5,323.5
5,487.7

85.4
85.9

1987
1988
1989

56495
51865.2
6,062.0

1990
1991
1992
1993
1994

6,136.3
6,079.4
6,244.4
6,389.6
6,610.7

214.7
195.4
172.8
181.0
210.1

822.6
858.5
810.0
856.7
948.1

451.2
468.6
427.9
448.3
521.8

371.5
390.5
386.2
413.8
426.1

385.0
391.0
379.6
405.2
422.1

226.0
241.1
246.5
251.5
286.8

44.5
22.0
-3.4
49.7
6.5

748.8 -17.0
749.4 11.7
3.4
748.3
753.0 -15.1
760.1 18.0

Based on
1987 SIC:

99.4 96.9
101.4 97.5
112.4 92.2
102.3 96.4
119.1 102.5

247.5
229.0
229.7
234.3
249.8

1,090.0
1,050.2
1,063.6
1,100.8
1,193.2

600.4
568.0
573.4
608.3
671.3

489.4
482.2
490.3
492.5
522.0

491.7
512.8
528.7
551.9
584.1

360.5
381.2
406.4
416.5
448.6

546.4
534.1
544.3
566.2
601.2

,109.0
,105.7
,147.9
,174.3
,196.9

1,181.7
1,174.2
1,200.8
1,223.5
1,256.5

18.5
10.3
44.8
51.3
13.9

867.0 25.3
873.7
7.8
.0
873.6
875.8 -3.7
878.3 -33.8

6,742.1 111.4 108.4 254.1 1,273.7 731.2 543.2 593.8 457.5 622.5 1,231.1 1,298.8 -26.3 877.4 -61.3
1995
6,928.4 111.7 101.9 264.3 1,323.7 785.5 541.0 608.9 493.3 648.5 1,258.5 1,342.9 -54.7 874.1 -48.1
1996
1
Equals the current-dollar statistical discrepancy deflated by the implicit price deflator for gross domestic business product.
2
Equals GDP less the statistical discrepancy and the sum of the most detailed industry groups shown here.
Source-. Department of Commerce, Bureau of Economic Analysis.




297

TABLE B—14.—Gross domestic product of nonfinaneial corporate business, 1959—97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Net domestic product

Year or
quarter

Gross
domestic
product
of
noninancial
corporate
business

Domestic income

Consumption
of
fixed
capital

Total

Indirect
business 1 Total
axes

Corporate profits with inventory valuation and capital
consumption adjustments

CompensaProfits
tion
Profits after tax
of
employ- Total Profits Profits
ees
before tax
Divi- Undistax iability Total dends tributed
profits

20.7
171.5 43.2
43.6
181.2 40.7
40.3 19.2
185.3 41.6
40.1 19.5
20.6
200.1
49.1
45.0
22.8
211.1 54.9
49.8
226.7 61.2
56.0 24.0
27.2
66.2
246.5 71.4
71.4
29.5
274.0 76.1
27.8
292.3 73.0
67.5
33.6
323.2 77.5
74.0
358.8 72.5
70.8
33.3
378.7 58.3 58.1 27.2
402.0 68.8 67.1
29.9
447.1
80.4 78.6
33.8
40.2
505.9 87.1 98.6
42.2
556.8 74.8 109.2
41.5
580.3 97.3 109.9
657.4 118.4 137.3 53.0
742.6 139.4 158.6 59.9
852.9 154.0 183.5 67.1
69.6
968.1 147.2 195.5
1,058.5 130.1 181.6 67.0
1,171.5 160.3 181.4 63.9
1,217.0 142.1 133.7 46.3
59.4
1,280.5 181.5 157.4
73.7
1,421.7 239.0 191.0
69.9
1,521.9 243.5 167.6
1,603.2 226.0 151.5 75.6
93.5
1,715.5 258.6 214.9
1,846.7 294.3 260.6 101.7
1,950.0 276.7 237.0 98.8
2,056.0 275.3 237.3 95.7
85.4
2,090.6 269.7 218.1
2,195.3 295.6 257.8 91.1
2,290.7 346.4 308.6 105.0
2,426.7 437.1 392.3 128.8
2,555.5 474.6 438.3 139.4
2,682.9 545.8 477.2 154.8
2,866.5
2,548.4 2,152.8 285.5 236.3 82.4
2,878.9
3,202.2
1992:1
2,911.0
2,579.2 2,183.2 290.0 262.6 93.6
3,236.1
II
2,926.7
2,588.9 2,209.3 278.9 254.4 89.9
3,270.5
Ill
3,341.7
2,664.0 2,236.1 328.2 277.9 98.4
3,012.0
IV
2,667.7 2,253.5 316.0 275.6 92.5
3,015.9
3,351.8
1993:1
II
2,709.2 2,279.9 334.4 306.9 104.7
3,063.0
3,400.3
2,740.1 2,301.5 345.5 303.1 102.9
3,444.3
Ill
3,099.!
2,809.6 2,327.8 389.9 349.0 120.0
3,181.9
3,525.2
IV
2,868.9 2,372.5 405.4 359.1 119.5
3,249.3
1994:1
3,624.5
II
2,931.1 2,409.8 427.0 380.7 124.6
3,317.3
3,668.9
3,373.2
2,980.9 2,439.2 444.1 400.7 130.1
3,729.1
Ill
3,456.4
3,059.2 2,485.2 472.0 428.9 141.1
3,816.4
IV
3,469.2
3,073.5 2,519.3 449.0 437.6 140.8
3,833.6
1995:1
II
3,092.7 2,538.4 450.3 428.3 135.3
3,860.4
3,489.8
3,163.7 2,568.6 494.3 443.1 140.1
3,940.4
3,564.9
Ill
3,603.7
3,198.5 2,595.5 504.8 444.3 141.5
3,986.8
IV
3,232.0 2,613.1 525.4 463.4 149.2
3,645.2
4,030.7
1996:1
II
3,722.7
3,302.5 2,668.6 542.8 477.4 154.1
4,112.9
3,345.9 2,704.7 553.3 483.4 156.8
3,769.7
Ill
4,165.8
3,388.3 2,745.3 561.7 484.4 159.0
3,818.3
4,220.1
IV
3,893.4
3,461.2 2,801.9 575.4 494.5 159.4
4,299.7
1997:1
II
3,950.4
3,513.3 2,840.1 586.7 501.5 161.8
4,361.1
Ill
3,585.7 2,880.6 618.2 534.2 174.1
4,031.0
4,446.3
IV*
2.943.6
1
Indirect business tax and nontax liability plus business transfer payments less subsidies.
Source: Department of Commerce, Bureau of Economic Analysis.

1959
1960
1961
1962
1963
1964
1965
1966
1967 .
1968
1969 ZII
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*

267.5
278.1
285.5
311.7
331.8
358.1
393.5
431.0
453.4
500.5
543.3
561.4
606.4
673.3
754.5
814.6
881.2
995.3
1,125.4
1,284.1
1,429.7
1,553.8
1,767.3
1,823.4
1,950.3
2,187.5
2,319.3
2,416.3
2,589.6
2,805.2
2,950.9
3,084.0
3,132.1
3,262.6
3,430.4
3,709.7
3,905.3
4,132.4

23.6
24.5
25.1
26.0
27.0
28.4
30.3
33.2
36.3
39.9
44.1
48.5
53.0
57.6
62.6
73.3
87.5
96.9
108.8
124.4
143.9
165.4
193.2
209.7
222.7
228.7
238.9
253.2
263.6
279.7
297.4
308.4
320.2
330.5
340.3
360.7
373.4
393.4
413.3
323.3
325.1
343.8
329.7
335.8
337.3
344.5
343.4
375.1
351.6
355.9
360.0
364.4
370.6
375.4
383.1
385.5
390.2
396.2
401.8
406.3
4107
415.3
471.0




243.8
253.6
260.5
285.7
304.8
329.8
363.2
397.8
417.2
460.5
499.2
512.8
553.4
615.8
691.8
741.3
793.7
898.4
1,016.7
1,159.7
1,285.8
1,388.4
1,574.1
1,613.7
1,727.6
1,958.8
2,080.4
2,163.1
2,326.1
2,525.5
2,653.5
2,775.6
2,811.9
2,932.2
3,090.1
3,349.0
3,531.9
3,739.0

26.0
28.3
29.5
32.0
34.0
36.6
39.2
40.5
43.1
49.7
54.7
58.8
64.5
69.2
76.3
81.4
87.4
95.1
104.1
116.4
125.4
141.6
170.4
1771
189.0
210.2
224.4
235.8
246.7
263.5
280.8
296.8
318.0
3370
358.5
389.0
399.8
421.8
439.7
330.4
331.8
337.8
348.0
348.2
353.8
359.7
372.3
380.4
386.1
392.;
397.1
395.7
397.1
401.3
405.2
413.2
420.2
423.7
430.0
432.2
4370
445.3
444.4

217.8
225.3
230.9
253.7
270.8
293.2
324.0
357.4
374.1
410.8
444.5
454.0
488.9
546.6
615.5
659.9
706.3
803.3
912.6
1,043.2
1,160.4
1,246.8
1,403.7
1,441.6
1,538.6
1,748.6
1,856.0
1,927.3
2,079.3
2,262.0
2,372.7
2,478.8
2,493.9
2,595.1
2,731.6
2,960.1
3,132.1
3,317.2

298

12.9
10.6
10.1
13.0
14.4
18.4
23.4
25.1
22.2
21.3
18.4
12.5
18.7
24.7
37.3
45.2
43.6
56.3
67.2
80.0
87.9
69.2
64.2
34.2
33.8
49.5
25.4
2.1
45.5
79.4
34.8
23.3
8.2
33.1
55.9
104.9
110.6
126.0

Inventory
valuation
adjustment

-0.3
-.2

22.9
21.1
20.7
24.3
27.0
32.1
39.0
41.9
39.7
40.4
37.5
31.0
37.1
44.8
58.4
67.0
68.4
84.4
98.7
116.4
125.9
114.6
117.5
87.4
97.9
117.3
97.6
75.9
121.4
158.8
138.3
141.6
132.8
166.7
203.6
263.5
298.9
322.4

10.0
10.6
10.6
11.4
12.6
13.7
15.6
16.8
17.5
19.1
19.1
18.5
18.5
20.1
21.1
21.7
24.8
28.0
31.5
36.4
38.1
45.3
53.3
53.3
64.2
67.8
72.3
73.9
75.9
79.4
103.5
118.4
124.6
133.6
147.7
158.6
188.3
196.4

153.9
169.0
164.5
179.5
183.1
202.2
200.2
228.9
239.6
256.1
270.6
287.8
296.9
293.0
303.0
302.9
314.2
323.3
326.6
325.5
335.1
339.8
360.1

124.0
29.9
129.7
39.3 -2LJ
134.3
-8.f
30.2
.i
33.2
146.3
143.5
39.6 -12.5
144.2
58.0 -17.1
147.6
52.5
-is.
155.6
73.4
150.4
89.2
-4.3
158.7 97.4 -15.1
158.5 112.1 -21.2
166.8 121.0 -23.6
183.4 113.5 -50.3
189.1 103.9 -37.8
191.4 111.6 -9.3
A
189.3 113.6
200.3 113.9 -5.1
-5.4
194.3 129.1
191.8 134.8 -2.7
199.4 126.1
3.3
3.5
207.0 128.2
5.9
208.1 131.7
3.6
207.7 152.4
65

!o
-L2
-2.1
-1.6
-3.7
-5.9
-6.6
-4.6
-6.6
-20.0
-39.5
-11.0
-14.9
-16.6
-25.0
-41.6
-43.0
-25.7
-9.9
-9.1
-5.6
5
1L4
-20.7
-29.3
-17.5
-13.5
4.0
-7.5
-8.5
-16.1
-24.3
-2.5
49

Capital Net
con- ntersump- est
tion
adjustment

-0.1
.5
1.2
4.1
5.0
5.7
6.5
6.8
7.0
7.1
7.5
6.7
6.3
8.4

fi

-1.6
-4.0
-2.6
-4.5
-6.8
-8.4
4.6
18.3
33.2
53.7
75.4
63.1
64.4
63.1
57.2
51.5
47.6
45.3
46.3
60.8
60.5
71.1
79.7
48.9
49.3
33.0
50.1
52.9
44.5
42.2
45.7
50.6
61.4
64.6
66.7
61.7
59.8
60.4
60.1
67.1
70.8
72.6
74.0
77.4
79.3
80.4
81 fi

3.1
3.5
4.0
4.5
4.8
5.3
6.1
7.4
8.8
10.1
13.2
17.1
18.1
19.2
22.5
28.3
28.7
27.5
30.6
36.3
45.1
58.2
71.9
82.5
76.6
87.8
90.6
98.1
105.3
121.0
145.9
147.5
133.7
104.2
94.5
96.3
102.0
88.5

110.2
106.0
100.8
99.7
98.2
95.0
93.1
91.9
91.1
94.3
97.6
102.1
105.2
104.0
100.8
98.2
93.5
91.2
88.0
81.3
83.9
86.6
87.0

TABLE B-15.—Output, costs, and profits of nonflnandal corporate business, 1959-97
[Quarterly data at seasonally adjusted annual rates]

Year or quarter

Gross domestic
product of
nonfinancial
corporate
business
(billions of
dollars)
Current Chained
(1992)
dollars dollars

1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971 .. ..
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996

Current-dollar cost and profit per unit of real output (dollars)1

Total
cost
and
profit 2

Consumption
of
fixed
capital

Indirect
business 3
taxes

Compensation
of
employees

Corporate profits with
inventory valuation and
capital consumption
adjustments
Total

Profits
tax
liability

Profits
after
tax 4

Net
interest

0.188
0.047
0.003
0.023 0.025
.004
.193
.043
.023
.020
.023
.004
.193
.043
.020
.004
.192
.047
.027
.020
.004
.192
.050
.021
.029
.192
.032
.052
.020
.005
.193
.056
.021
.035
.005
.034
.201
.056
.022
.005
.209
.052
.032
.006
.020
.217
.007
.052
.030
.023
.047
.025
.232
.022
.009
.247
.038
.020
.011
.018
.024
.252
.011
.043
.019
.047
.027
.011
.260
.020
.026
.278
.048
.012
.022
.024
.018
.312
.042
.016
.024
.330
.055
.032
.016
.034
.014
.346
.062
.028
.364
.068
.029
.039
.015
.071
.040
.017
.392
.031
.435
.066
.035
.020
.031
.475
.058
.030
.028
.026
.041
.502
.069
.027
.031
.529
.062
.042
.036
.020
.532
.075
.025
.051
.032
.538
.063
.033
.090
.028
.554
.063
.033
.089
.025
.565
.027
.053
.035
.080
.577
.087
.056
.035
.031
.094
.590
.062
.039
.033
.613
.087
.056
.046
.031
.640
.056
.086
.030
.046
.027
.058
.042
.660
.085
.063
.032
.673
.091
.028
.679
.072
.028
.103
.031
.027
.677
.086
.122
.036
.687
.090
.027
.128
.037
.101
.023
.690
.140
.040
.034
1992:1
.063
.669
.089
.026
II
.674
.061
.033
.090
.029
Ill
.676
.058
.031
.085
.028
IV
.069
.672
.099
.030
.030
1993:1
.681
.095
.068
.030
.028
||
.069
.028
.680
.100
.031
III
.027
.679
.102
.072
.030
IV
.027
.078
.675
.113
.035
1994:1
.673
.115
.034
.081
.026
II
.677
.085
.026
.120
.035
III
.124
.087
.027
.679
.036
IV
.028
.678
.129
.038
.090
1995:1
.687
.084
.123
.038
.029
jl
.037
.028
.689
.122
.086
III
.094
.027
.685
.132
.037
IV
.037
.096
.026
.686
.133
1996:1
.687
.138
.099
.025
.039
II
.024
.689
.100
.040
.140
Ill
.101
.691
.141
.022
.040
IV
.102
.040
.693
.142
.021
1997-1 .
.697
.143
.103
.021
.040
II
.104
.698
.144
.040
.021
Ill
.107
.695
.149
.042
.021
'Output is measured by gross domestic product of nonfinancial corporate business in chained (1992) dollars.
2
This is equal to the deflator for gross domestic product of nonfinancial corporate business with the decimal point shifted two places to
the3 left.
Indirect business tax and nontax liability plus business transfer payments less subsidies.
4
With inventory valuation and capital consumption adjustments.
Source: Department of Commerce, Bureau of Economic Analysis.




267.5
910.3
940.4
278.1
285.5
960.5
311.7 1,041.5
331.8 1,101.1
358.1 1,178.5
393.5 1,275.2
431.0 1,364.4
453.4 1,399.1
500.5 1,487.7
543.3 1,546.9
561.4 1,532.5
606.4 1,594.1
673.3 1,719.4
754.5 1,819.7
814.6 1,786.8
881.2 1,759.3
995.3 1,901.3
1,125.4 2,041.8
1,284.1 2,177.1
1,429.7 2,224.2
1,553.8 2,229.9
1,767.3 2,331.9
1,823.4 2,298.8
1,950.3 2,405.1
2,187.5 2,641.2
2,319.3 2,747.3
2,416.3 2,835.4
2,589.6 2,973.9
2,805.2 3,130.1
2,950.9 3,179.8
3,084.0 3,210.2
3,132.1 3,168.8
3,262.6 3,262.6
3,430.4 3,374.4
3,709.7 3,586.3
3,905.3 3,719.7
4,132.4 3,887.8
3,202.2 3,217.0
3,236.1 3,238.4
3,270.5 3,267.0
3,341.7 3,328.2
3,351.8 3,310.2
3,400.3 3,352.5
3,444.3 3,387.2
3,525.2 3,447.7
3,624.5 3,526.1
3,668.9 3,559.8
3,729.1 3,594.6
3,816.4 3,664.9
3,833.6 3,664.9
3,860.4 3,683.2
3,940.4 3,747.7
3,986.8 3,782.9
4,030.7 3,801.8
4,112.9 3,872.4
4,165.8 3,913.7
4,220.1 3,963.5
4,299.7 4,022.2
4,361.1 4,068.9
4,446.3 4,146.5

0.294
.296
.297
.299
.301
.304
.309
.316
.324
.336
.351
.366
.380
.392
.415
.456
.501
.524
.551
.590
.643
.697
.758
.793
.811
.828
.844
.852
.871
.896
.928
.961
.988
1.000
1.017
1.034
1.050
1.063
.995
.999
1.001
1.004
1.013
1.014
1.017
1.022
1.028
1.031
1.037
1.041
1.046
1.048
1.051
1.054
1.060
1.062
1.064
1.065
1.069
1.072
1.072

299

0.026
.026
.026
.025
.025
.024
.024
.024
.026
.027
.028
.032
.033
.033
.034
.041
.050
.051
.053
.057
.065
.074
.083
.091
.093
.087
.087
.089
.089
.089
.094
.096
.101
.101
.101
.101
.100
.101
.101
.100
.105
.099
.101
.101
.102
.100
.106
.099
.099
.098
.099
.101
.100
.101
.101
.101
.101
.101
.101
.101
.100

0.029
.030
.031
.031
.031
.031
.031
.030
.031
.033
.035
.038
.040
.040
.042
.046
.050
.050
.051
.053
.056
.064
.073
.075
.079
.080
.082
.083
.083
.084
.088
.092
.100
.103
.106
.108
.107
.108
.103
.102
.103
.105
.105
.106
.106
.108
.108
.108
.109
.108
.108
.108
.107
.107
.109
.109
.108
.108
.107
.107
.107

TABLE B-16.—Personal consumption expenditures, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Durable goods
Year or
quarter

FurniPersonal
conMotor ture
vehi- and
sumption
expendi- Total 1 cles house- Total 1
tures
and
hold
parts equipment

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978

Nondurable goods
Cloth- Gasoing
line
and and
shoes oil

Food

318.1 42.7 18.9
18.1 148.5 80.7
332.2 43.3 19.7
18.0 152.9 82.3
342.6 41.8 17.8
18.3 156.6 84.0
363.4 46.9 21.5
19.3 162.8 86.1
383.0 51.6 24.4
20.7 168.2 88.3
411.4 56.7 26.0
23.2 178.7 93.6
444.3 633 299
251 1916 1007
481.9 68.3 30.3
28.2 208.8 109.3
. .
509.5 70.4 30.0
30.0 217.1 112.5
559.8 80.8 36.1
32.9 235.7 122.2
604.7 85.9 38.4
34.7 253.2 131.5
648.1 85.0 35.5
35.7 272.0 143.8
702.5 96.9 44.5
37.8 285.5 149.7
770.7 110.4 51.1
42.4 308.0 161.4
851.6 123.5 56.1
47.9 343.1 179.6
931.2 122.3 49.5
51.5 384.5 201.8
1,029.1 133.5 54.8
54.5 420.6 223.1
1,148.8 158.9 71.3
60.2 458.2 242.4
1,277.1 181.1 83.5
67.1 496.9 262.4
1,428.8 201.4 93.1
74.0 549.9 289.2
1,593.5 213.9 93.5
82.3 624.0 324.2
1,760.4 213.5 87.0
1980
86.0 695.5 355.4
1,941.3 230.5 95.8
91.3 758.2 382.8
1981
1982
. . . 2,076.8 239.3 102.9
92.5 786.8 402.6
2,283.4 279.8 126.9 105.3 830.3 422.9
1983
2,492.3 325.1 152.5 117.2 883.6 446.3
1984
2,704.8 361.1 175.7 126.3 927.6 466.5
1985
2,892.7 398.7 192.4 140.3 957.2 490.8
1986
3,094.5 416.7 193.1 150.4 1,014.0 513.9
1987
3,349.7 451.0 207.5 162.8 1,081.1 551.2
1988
3,594.8 472.8 214.4 173.3 1,163.8 588.4
1989
3,839.3 476.5 210.3 176.0 1,245.3 630.5
1990
1991
3,975.1 455.2 187.6 178.5 1,277.6 650.0
1992
4,219.8 488.5 206.9 189.4 1,321.8 660.0
4,459.2 530.2 226.2 204.9 1,370.7 686.8
1993
1994
4,717.0 579.5 246.6 226.2 1,428.4 714.5
4,957.7 608.5 254.8 240.2 1,475.8 735.1
1995
1996
5,207.6 634.5 261.3 252.6 1,534.7 756.1
1997/>
5,488.6 659.4 262.9 267.6 1,592.7 776.4
4,127.6 474.1 199.1 184.8 1,303.1 657.3
1992-1
II
4,183.0 481.3 204.0 186.5 1,308.4 652.3
Ill
4,238.9 492.5 208.3 190.6 1,326.3 657.9
IV
4,329.6 506.2 216.1 195.5 1,349.5 672.3
4,365.4 506.4 212.4 198.0 1,354.4 676.4
1993:1
II
4,428.1 524.2 224.3 202.1 1,366.3 684.1
Ill
4,488.6 537.2 228.5 207.6 1,373.9 690.2
IV
4,554.9 553.1 239.6 212.0 1,388.0 696.6
1994:1
4,616.6 563.2 244.1 216.2 1,404.4 703.9
II
4,680.5 572.4 243.3 223.5 1,416.0 711.8
Ill
4,750.6 583.3 245.4 229.7 1,439.5 718.5
IV
4,820.2 599.3 253.7 235.4 1,453.7 723.7
4,871.7 596.9 249.1 235.8 1,462.7 729.3
1995-1
II
4,934.8 602.8 252.7 237.2 1,472.4 733.0
Ill
4,990.6 616.0 258.9 242.5 1,480.4 737.0
IV
5,033.8 618.4 258.5 245.1 1,487.8 741.2
5,105.8 626.7 262.4 246.5 1,508.1 748.4
1996:1
5,189.1 638.6 264.0 253.8 1,532.3 752.2
II
Ill
5,227.4 634.5 260.0 254.2 1,538.3 757.4
IV
5,308.1 638.2 258.9 255.9 1,560.1 766.6
5,405.7 658.4 265.7 263.8 1,587.4 775.5
1997:1
II
5,432.1 644.5 252.7 265.4 1,578.9 771.4
Ill
5,527.4 667.3 268.7 269.9 1,600.8 779.3
\\lp
5,589.3 667.6 264.6 271.5 1,603.9 779.5
1
Includes other items not shown separately.
2
Includes imputed rental value of owner-occupied housing.
Source: Department of Commerce, Bureau of Economic Analysis.

1979 : :.:




26.4
27.0
27.6
29.0
29.8
32.4
341
37.4
39.2
43.2
46.5
47.8
51.7
56.4
62.5
66.0
70.8
76.6
84.1
94.3
101.2
107.3
117.2
120.5
130.9
142.5
152.1
163.1
174.4
185.9
199.9
205.9
211.3
225.5
236.5
247.8
254.7
264.3
277.6
219.6
222.3
228.1
232.1
231.3
235.4
238.0
241.6
244.1
245.0
249.0
253.2
252.5
253.4
256.4
256.5
259.8
265.7
265.7
266.2
275.2
274.8
280.5
279.8

300

11.3
12.0
12.0
12.6
13.0
13.6
148
16.0
17.1
18.6
20.5
21.9
23.2
24.4
28.1
36.1
39.7
43.0
46.9
50.1
66.2
86.7
97.9
94.1
93.1
94.6
97.2
80.1
85.4
87.1
96.6
109.2
103.9
106.6
107.6
109.4
114.4
122.6
124.6
102.3
105.8
109.4
108.9
109.7
107.6
105.5
107.7
106.2
105.1
111.8
114.3
115.3
115.8
113.9
112.7
117.1
125.7
121.4
126.0
128.5
121.6
123.5
124.6

Services
Fuel
oil
and
coal
4.0
3.8
3.8
3.8
4.0
4.1
44
4.7
4.8
4.7
4.6
4.4
4.6
5.1
6.3
7.8
8.4
10.1
11.1
11.5
14.4
15.4
15.8
14.5
13.6
13.9
13.6
11.3
11.2
11.4
11.4
12.0
11.3
10.9
10.7
10.5
10.2
11.6
10.9
10.4
11.8
10.6
10.8
10.8
10.5
10.9
10.7
11.7
10.1
10.6
9.8
9.6
10.3
10.2
10.7
11.7
11.3
11.2
12.0
11.0
11.0
10.9
10.7

Household
operation

Total1 Housing 2

127.0
136.0
144.3
153.7
163.2
176.1
1894
204.8
222.0
243.4
265.5
291.1
320.1
352.3
384.9
424.4
475.0
531.8
599.0
677.4
755.6
851.4
952.6
1,050.7
1,173.3
1,283.6
1,416.1
1,536.8
1,663.8
1,817.6
1,958.1
2,117.5
2,242.3
2,409.4
2,558.4
2,709.1
2,873.4
3,038.4
3,236.5
2,350.4
2,393.3
2,420.1
2,473.9
2,504.6
2,537.6
2,577.4
2,613.8
2,649.0
2,692.2
2,727.8
2,767.2
2,812.2
2,859.6
2,894.2
2,927.5
2,970.9
3,018.2
3,054.6
3,109.8
3,159.9
3,208.7
3,259.3
3,317.9

45.0
48.2
51.2
54.7
58.0
61.4
654
69.5
74.1
79.7
86.8
94.0
102.7
112.1
122.7
134.1
147.0
161.5
179.5
201.7
226.6
255.2
287.9
313.2
339.0
370.6
407.1
442.2
476.6
512.9
547.4
586.3
616.5
646.8
672.8
712.7
750.3
787.2
826.4
636.6
643.4
649.9
657.4
662.2
668.8
675.8
684.4
698.1
707.8
717.7
727.2
736.1
745.6
754.7
764.6
773.8
782.5
791.8
800.7
810.5
821.2
831.9
842.2

Trans- MediElec- porta- cal
tricity tion
care
Total and
gas
1

18.7
20.3
21.2
22.4
23.6
25.0
265
28.2
30.2
32.3
35.1
37.8
41.0
45.3
49.8
55.5
63.7
72.4
81.9
91.2
100.0
113.0
126.0
141.4
155.9
168.0
180.3
186.9
194.9
206.6
219.8
226.3
237.6
248.2
268.8
283.7
300.7
315.9
328.7
241.5
248.8
243.6
259.0
260.3
264.0
274.1
276.7
274.8
287.1
286.2
286.6
290.6
299.1
305.8
307.3
310.7
317.5
313.4
321.8
320.8
326.7
328.8
338.6

7.6
8.3
8.8
9.4
9.9
10.4
109
11.5
12.2
13.0
14.0
15.2
16.6
18.4
20.0
23.5
28.5
32.5
37.6
42.1
46.8
56.3
63.4
72.6
80.7
84.7
88.8
87.2
88.9
94.1
98.8
98.7
104.9
106.6
115.8
116.6
119.5
125.3
127.2
102.1
106.2
106.6
111.4
112.4
112.6
119.2
118.8
118.2
120.0
115.6
112.8
113.8
118.8
123.3
122.2
124.8
126.7
122.8
126.8
124.9
127.2
125.2
131.5

10.5
11.2
11.7
12.2
12.7
13.4
145
15.9
17.3
18.9
20.9
23.7
27.1
29.8
31.2
33.3
35.7
41.3
49.2
53.5
59.1
64.7
68.7
70.9
79.4
90.0
100.0
107.3
118.2
130.5
137.8
143.7
145.3
158.1
170.2
186.2
203.1
218.4
236.3
154.9
156.9
156.0
164.5
166.8
168.6
170.7
174.5
179.6
184.5
188.3
192.6
196.4
201.1
205.7
209.2
212.3
216.6
219.7
224.8
228.9
233.4
238.5
244.3

16.4
17.6
18.7
20.8
22.6
25.8
28.0
30.7
33.9
39.2
44.7
50.4
56.9
63.8
71.6
80.6
93.5
106.7
123.0
140.0
158.0
181.2
213.0
239.4
267.8
294.1
321.8
346.1
381.1
428.7
477.1
537.7
586.5
646.6
695.6
731.6
772.8
808.1
855.C
624.2
640.6
655.0
666.8
680.8
690.8
701.6
709.2
717.8
726.5
735.9
746.4
760.5
768.4
776.5
785.8
790.3
803.3
811.9
826.9
841.0
849.6
859.7
869.7

TABLE B-17.—Real personal consumption expenditures, 1982-97
[Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates]
Durable goods
Year or
quarter

FurniPersonal
Motor ture
consumption
vehi- and
expendi- Total » cles house- Total'
tures
and
hold
parts equipment

Food

Cloth- Gaso- Fuel
oil
line
ing
and and
and
coal
shoes oil

3,081.5 2855 1339 913 10806 565.1 1571 91.0 128
3,240.6 327.4 160.5 103.5 1,112.4 579.7 167.3 93.0 12.9
3,407.6 374.9 187.7 115.5 1,151.8 589.9 179.9 95.9 12.8
3,566.5 411.4 211.2 125.3 1,178.3 602.2 186.5 97.8 13.0
3,708.7 448.4 224.8 140.6 1,215.9 614.0 199.9 102.5 13.4
3,822.3 454.9 216.2 149.9 1,239.3 620.8 205.4 105.3 13.0
3972.7 4835 2294 1608 12744 6416 2100 1065 132
4,064.6 496.2 230.3 170.9 1,303.5 650.1 220.7 108.1 12.6
41322 4933 2243 1735 13161 6629 2179 1073 112
4405:8 462.0 193.2 177.0 1,302.9 659.6 215.9 103.4 10.8
4,219.8 488.5 206.9 189.4 1,321.8 660.0 225.5 106.6 10.9
43436 5238 2189 2078 13510 6753 2342 1087 107
4,486.0 561.2 230.0 229i4 1,389.9 687.9 247.1 109.8 10.7
4,595.3 583.6 229.5 248.4 1,412.6 690.5 257.5 113.1 10.5
47141 611 1 2313 2695 14323 6897 2677 1141 106
4,869.7 645.8 232.8 296J 1I459.3 689.9 278.2 115.9 10.0
4,173.8 476.1 201.7 183.7 1,314.4 661.0 220.4 104.8 10.5
1992:1
II
4,196.4 481.1 204.5 186.0 1,312.0 653.9 223.2 106.1 11.9
Ill
4,226.7 491.9 207.4 191.3 1,321.1 656.4 227.7 108.2 10.5
IV
4,282.3 505.0 213.9 196.4 1,339.8 668.6 230.9 107.3 10.7
4,286.8 504.0 209.1 200.4 1,337.5 670.1 228.8 107.2 10.8
1993:1
II
4,322.8 519.3 218.4 205.0 1,347.8 674.1 233.4 108.6 10.3
Ill
4,366.6 529.9 219.8 210.9 1,356.8 677.9 235.9 109.8 10.9
IV
4,398.0 542.1 228.4 214.8 1,361.8 679.2 238.6 109.0 10.9
4,439.4 550.7 231.6 219.1 1,378.4 684.3 243.1 109.2 11.9
1994:1
4,472.2 555.8 228.4 226.1 1,385.5 689.8 242.7 109.6 10.2
II
Ill
4,498.2 561.7 227.3 232.2 1,393.2 687.9 248.1 109.9 10.7
4,534.1 576.6 232.6 240.3 1,402.5 689.5 254.7 110.7 10.2
IV
4,551.3 572.2 226.2 241.4 1,408.4 690.8 255.3 112.7 10.0
1995:1
II
4,583.5 577.7 227.5 244.6 1.411.6 690.2 257.0 113.2 10.6
Ill
4,612.9 590.8 232.9 251.5 1,413.9 690.6 259.1 113.0 10.4
IV
4,633.5 593.7 231.6 256.2 1,416.3 690.6 258.7 113.6 11.1
4,669.4 600.7 233.4 259.2 1,422.5 692.4 261.6 112.9 11.1
1996:1
II
4,712.2 614.8 234.2 269.9 1,431.6 690.3 268.4 114.5 10.4
Ill
4,718.2 611.9 229.7 272.3 1,433.9 687.3 270.8 114.1 10.6
4,756.4 617.1 228.0 276.8 1,441.2 689.0 270.0 114.8 10.3
IV
4,818.1 637.8 233.4 287.4 1,457.8 694.6 277.1 114.7 9.4
1997:1
II
4,829.4 629.0 223.1 292.3 1,450.0 688.2 273.8 116.1 10.1
Ill
4,896.2 656.1 238.7 301.1 1,465.5 689.5 281.3 116.2 10.4
IV *
4,935.0 660.3 236.0 305.9 1,464.1 687.3 280.6 116.7 10.1
1
Includes other items not shown separately.
2
Includes imputed rental value of owner-occupied housing.
Note.—See Table B-2 for data for total personal consumption expenditures for 1959-81.
Source: Department of Commerce, Bureau of Economic Analysis.

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*




Services

Nondurable goods

301

Household
operation
TotaM

Housjpo2

Total

1,728 2
1,809.0
1,883.0
1,977.3
2,041.4
2,126.9
22124
2,262.3
23213
2,341.0
2,409.4
24689
2,535.5
2,599.6
26710
2>65.2
2,383.2
2,403.2
2,413.6
2,437.6
2,445.3
2,455.9
2,480.0
2,494.4
2,510.9
2,531.4
2,543.8
2,555.9
2,571.2
2,594.5
2,608.7
2,623.8
2,646.5
2,666.5
2,672.8
2,698.2
2,723.9
2,749.8
2,776.1
2,811.0

5009
511.8
531.8
551.1
565.5
583.4
6009
614.6
6272
635.2
646.8
6547
674.3
688.2
7002
713.8
642.6
645.5
648.5
650.6
650.6
652.4
655.8
660.0
666.8
672.2
677.0
681.1
683.7
686.7
689.7
692.8
695.6
698.7
701.7
704.8
708.3
712.0
715.6
719.2

1

187.0
193.0
197.7
205.6
209.8
219.4
2292
237.6
2401
243.4
248.2
261 5
270.5
282.9
2896
295.3
243.6
249.9
243.3
256.1
256.6
257.7
265.2
266.3
263.1
274.1
272.3
272.4
274.3
282.4
287.5
287.5
288.7
292.0
285.8
291.7
288.0
294.2
295.7
303.1

Trans- MediElec- porta- cal
tricity tion care
and
gas

90.3
93.0
93.6
96.1
95.1
98.4
103.4
105.6
1037
107.0
106.6
1123
112.5
115.0
1178
116.9
103.2
106.8
106.6
109.7
111.0
109.2
114.7
114.1
113.8
115.8
111.4
108.9
109.7
114.8
118.7
116.9
119.0
119.7
114.8
117.7
113.8
117.8
115.7
120.3

109.9
117.0
128.6
140.6
145.7
151.0
1590
160.8
1599
152.3
158.1
1631
175.2
185.2
1946
202.7
155.4
156.7
160.5
159.6
160.3
161.9
163.8
166.6
170.3
173.6
176.7
180.1
182.5
183.8
185.4
189.0
192.1
193.8
195.4
197.0
199.3
200.9
203.9
206.6

4422
459.7
472.4
490.7
510.3
537.3
5613
575.8
6028
621.6
646.6
6553
662.1
674.9
6881
711.8
638.2
645.9
650.3
652.2
653.7
654.3
656.4
656.7
658.1
661.1
663.2
666.0
669.5
672.9
677.0
680.4
679.4
686.2
689.8
697.1
704.4
708.8
714.2
719.6

TABLE B-18.—Private gross fixed investment by type, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Nonresidential
Structures
Year or
quarter

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
i
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*

Private
fixed
investment

Total
nonresidential

74.6
75.5
75.0
81.8
87.7
96.7
108.3
116.7
117.6
130.8
145.5
148.1
167.5
195.7
225.4
231.5
231.7
269.6
333.5
403.6
464.0
473.5
528.1
515.6
552.0
648.1
688.9
712.9
722.9
763.1
797.5
791.6
738.5
783.4
855.7
946.6
1,008.1
1,090.7
1,173.0
755.4
780.5
788.1
809.7
823.5
842.9
858.8
897.5
911.0
941.7
956.9
977.0
998.7
999.6
1,009.4
1,024.6
1,049.4
1,082.0
1,112.0
1,119.2
1,127.5
1,160.8
1,201.3
1,202.4

Total 1

Nonresidential Utilibuildings ties
including
farm

Producers' durable equipment
Mining
exploration,
shafts,
and
wells

46.5
18.1
10.6
4.9
49.2
19.6
12.0
5.0
12.7
48.6
19.7
4.6
13.7
52.8
20.8
4.6
55.6
13.9
21.2
5.0
62.4
23.7
15.8
5.4
74.1
19.5
6.1
28.3
84.4
21.3
7.1
31.1
85.2
20.6
7.8
31.5
92.1
21.1
33.6
9.2
24.4
37.7
9.6
102.9
106.7
25.4 11.1
40.3
111.7
27.1 11.9
42.7
126.1
47.2
30.1 13.1
150.0
35.5 15.0
55.0
165.6
61.2
38.3 16.5
61.4
169.0
35.6 17.1
35.9 20.0
187.2
65.9
39.9 21.5
223.2
74.6
91.4
49.7 24.1
272.0
65.7 27.5
323.0
114.9
73.7 30.2
350.3
133.9
405.4
86.3 33.0
164.6
409.9
94.5 32.5
175.0
399.4
152.7
90.5 28.7
110.0 30.0
468.3
176.0
128.0 30.6
502.0
193.3
494.8
123.3 31.2
175.8
495.4
126.0 26.5
172.1
181.3
133.3 27.1
530.6
142.7 29.4
566.2
192.3
148.9 27.5
575.9
200.8
181.7
547.3
126.1 31.6
557.9
169.2
113.2 34.5
604.1 176.4
119.2 32.8
128.7 32.0
660.6
184.5
723.0
200.6
143.8 33.2
781.4 215.2
159.8 33.3
845.4
230.2
175.3 33.0
544.1 171.6
117.2 34.3
1992:1 ....
170.4
114.0 34.8
II ...
556.8
110.6 34.7
Ill ..
561.0 167.6
IV ..
167.1
111.0 34.2
569.6
113.6 33.8
1993:1 ....
580.5
171.7
II ...
598.8
175.2
117.6 32.7
III..
606.4
121.5 32.2
177.8
IV ..
180.7
124.2 32.5
630.6
175.4
120.7 32.1
1994:1 ....
634.6
130.9 31.6
II ...
652.9
185.2
667.4
III..
130.0 32.0
186.8
IV ..
133.2 32.4
687.5
190.7
138.9 33.2
197.7
710.9
1995:1 ....
144.1 33.5
II ...
722.5
201.1
725.4
III..
145.6 33.5
202.8
146.4 32.7
IV ..
733.1 200.7
750.7
149.8 33.4
205.7
1996:1 ....
II ...
769.3 210.6
155.5 32.9
217.7
162.5 32.7
Ill ..
798.6
171.2 34.1
IV..
807.2
227.0
227.4
1997:1 ....
811.3
174.0 32.0
172.1 33.7
II ...
836.3 226.8
872.0
177.5 33.2
III..
232.9
177.6 33.1
862.3 233.7
1
Includes other items, not shown separately.
2
Includes new computers and peripheral equipment only.
Source: Department of Commerce, Bureau of Economic Analysis.




2.5
2.3
2.3
2.5
2.3
2.4
2.4
2.5
2.4
2.6
2.8
2.8
2.7
3.1
3.5
5.2
7.4
8.6
11.5
15.4
19.0
27.4
42.5
44.8
30.0
31.3
27.9
15.7
13.1
15.7
14.4
17.5
17.1
13.3
16.6
16.7
16.3
16.1
16.2
12.8
13.3
13.3
13.8
16.0
16.8
16.8
16.6
15.7
15.8
17.0
18.1
18.3
16.1
15.8
15.0
15.7
16.0
16.5
16.0
16.1
15.6
16.2
16.8

302

Information processing
and related equipment
Total

1

Total

Computers and
peripheral

Other

Industrial
equipment

±T>

28.3
29.7
28.9
32.1
34.4
38.7
45.8
53.0
53.7
58.5
65.2
66.4
69.1
78.9
95.1
104.3
107.6
121.2
148.7
180.6
208.1
216.4
240.9
234.9
246.7
292.3
308.7
319.0
323.3
349.3
373.9
375.1
365.6
388.7
427.7
476.1
522.4
566.2
615.2
372.5
386.3
393.4
402.5
408.9
423.6
428.6
449.9
459.3
467.7
480.6
496.8
513.2
521.4
522.6
532.4
545.0
558.7
580.9
580.2
583.9
609.5
639.1
628.5

4.0
4.7
5.1
5.4
6.1
6.8
7.8
9.6
10.0
10.6
12.9
14.3
14.9
16.5
19.8
22.9
23.5
27.2
33.1
41.8
49.9
58.9
69.5
72.7
82.0
98.6
104.2
108.8
109.8
118.2
127.1
124.2
122.6
134.2
141.6
152.1
172.8
195.1
211.7
129.2
133.0
137.7
136.8
137.2
138.1
145.0
146.0
147.6
149.4
152.8
158.5
162.9
173.0
174.3
181.1
188.0
190.9
201.1
200.3
202.8
208.4
219.5
216.0

0.0
.2
.3
.3
.7
.9
1.2
1.7
1.9
1.9
2.4
2.7
2.8
3.5
3.5
3.9
3.6
4.4
5.7
7.6
10.2
12.5
17.1
18.9
23.9
31.6
33.7
33.4
35.8
38.1
43.3
38.9
38.1
43.9
48.6
51.8
65.6
78.7
85.1
41.9
44.4
44.6
44.9
47.1
47.1
49.8
50.5
49.9
50.6
51.5
55.1
57.3
64.7
67.0
73.5
76.4
76.8
80.9
81.0
81.8
84.5
88.1
86.0

4.0
4.5
4.8
5.1
5.3
5.8
6.6
7.9
8.1
8.6
10.4
11.6
12.1
13.1
16.3
19.0
19.9
22.8
27.5
34.2
39.8
46.4
52.3
53.9
58.1
67.0
70.5
75.4
74.0
80.1
83.8
85.2
84.5
90.2
93.0
100.3
107.2
116.3
126.6
87.3
88.6
93.1
91.9
90.1
91.0
95.2
95.5
97.7
98.8
101.2
103.4
105.6
108.3
107.3
107.6
111.6
114.1
120.3
119.3
121.0
123.9
131.3
130.0

8.4
9.3
8.7
9.2
10.0
11.4
13.6
16.1
16.8
17.2
18.9
20.2
19.4
21.3
25.9
30.5
31.1
33.9
39.2
47.4
55.8
60.4
65.2
62.2
58.2
67.4
71.7
74.6
75.9
82.9
91.5
89.8
86.4
89.3
97.9
109.3
121.5
127.5
134.4
86.2
87.7
90.5
92.8
94.0
95.4
98.1
104.1
105.4
107.0
110.8
114.0
118.1
123.0
123.0
121.8
124.7
129.2
128.2
127.9
127.7
134.9
137.5
137.3

Transportation
and
related
equipment

8.3
8.5
8.0
9.8
9.4
10.6
13.2
14.5
14.3
17.6
18.9
16.2
18.4
21.8
26.6
26.3
25.2
30.0
39.3
47.3
53.6
48.4
50.6
46.8
53.7
64.8
69.7
71.8
70.4
76.0
71.2
75.5
79.5
86.2
99.9
118.6
125.7
134.5
150.0
79.5
87.8
85.5
91.9
92.9
102.9
96.4
107.5
113.1
115.5
119.8
126.1
129.9
123.6
122.9
126.4
127.1
130.8
140.0
140.1
137.7
147.1
159.9
155.3

Residential

28.1
26.3
26.4
29.0
32.1
34.3
34.2
32.3
32.4
38.7
42.6
41.4
55.8
69.7
75.3
66.0
62.7
82.5
110.3
131.6
141.0
123.2
122.6
105.7
152.5
179.8
186.9
218.1
227.6
232.5
231.3
215.7
191.2
225.6
251.6
286.0
285.1
309.2
327.5
211.3
223.7
227.1
240.1
243.0
244.1
252.4
266.8
276.4
288.7
289.5
289.5
287.8
277.1
284.0
291.4
298.8
312.7
313.5
312.0
316.2
324.6
329.3
340.1

TABLE B-19.—Real private gross fixed investment by type, 1982-97
[Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates]
Nonresidential
Producers' durable equipment

Structures
Year or
quarter

Priuato
nlvaie

fixed
investment

Total
nonresidential Total »

Nonresidential
buildings
including
farm

Utilities

Mining
exploration,
shafts,
and
wells

Information processing
and related equipment
Total

610.4 464.3 207.2
32.2
39.5
126.6
26.7
34.2
185.7
654.2 456.4
117.6
35.4
762.4 535.4
30.3
212.2
137.6
799.3 568.4 227.8
27.0
155.2 35.6
15.8
36.5
144.5
805.0 548.5 203.3
799.4 542.4
142.4 30.7
15.5
195.9
15.8
145.3 30.0
196.8
818.3 566.0
150.2 30.9
13.9
832.0 588.8 201.2
16.1
152.0 28.1
203.3
805.8 585.2
15.7
126.9
181.6
741.3 547.7
32.0
783.4 557.9
13.3
113.2 34.5
169.2
842.8 600.2
16.0
115.3 31.8
170.8
15.8
119.9 29.9
172.5
915.5 648.4
14.3
128.8 30.0
962.1 706.5 179.9
188.7
1,041.7 771.7
13.9
140.0 29.3
13.4
195.4
1,122.3 846.7
148.9 28.0
12.7
172.7
34.6
118.1
758.3 544.4
1992:1 ....
782.4 557.5
114.4
II ...
13.3
34.8
171.0
13.4
110.4 34.6
167.4
787.3 560.6
III..
13.7
IV ..
109.8 33.9
165.6
805.8 569.1
15.2
111.3 33.4
168.0
814.8 577.8
1993:1 ....
114.4
16.2
31.7
II ...
170.3
831.1" 595.1
16.4
117.1 31.0
171.7
Ill ..
844.5 602.3
IV..
16.2
118.5 31.0
173.1
880.8 625.6
1994:1 ....
15.1
114.3 30.3
166.3
887.8 626.2
15.1
123.1 29.6
174.5
913.2 641.2
II ...
16.2
922.7 653.2
Ill ..
29.8
120.6
174.0
16.7
IV..
121.8 29.8
175.0
938.5 672.9
30.4
16.3
125.5
179.0
955.8 695.7
1995:1 ....
30.4
129.4
II ...
14.2
180.9
954.0 705.4
Ill ..
13.8
130.1 30.1
181.2
962.3 708.2
IV ..
13.1
130.3 29.2
178.6
976.3 716.8
29.7
132.7
13.6
182.1
1,001.5 736.9
1996:1 ....
13.9
II ... 1,035.7 759.7
137.0 29.1
185.6
14.1
28.7
141.7
Ill .. 1,060.9 789.3
190.0
148.4 29.5
IV .. 1,068.7 800.8 196.9
13.8
13.6
150.1 27.5
195.9
1,079.0 808.9
1997:1 ....
28.7
147.1
II ... 1,111.4 837.0 193.5
13.0
13.4
150.1 28.0
196.7
Ill .. 1,149.3 874.5
148.4
IV/>
13.6
27.8
195.3
1,149.6 866.5
1
Includes other items, not shown separately.
2
Includes new computers and peripheral equipment only.
Source: Department of Commerce, Bureau of Economic Analysis.

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/>




303

1

Total

260.3
272.4
324.6
342.4
345.9
346.9
369.2
387.6
381.9
366.2
388.7
429.6
476.8
528.3
586.0
657.4
371.7
386.4
393.1
403.5
409.8
424.9
430.7
452.9
460.6
467.3
480.0
499.1
518.1
525.9
528.5
540.5
557.4
577.1
602.9
606.7
616.6
649.3
685.3
678.5

54.5
63.4
79.8
88.0
94.1
97.5
106.6
116.2
116.2
117.8
134.2
147.9
165.1
201.8
253.1
305.2
126.7
132.4
138.6
138.9
140.5
143.2
152.5
155.5
158.1
160.8
166.1
175.6
184.5
199.3
205.2
218.2
232.8
244.8
264.3
270.4
281.4
296.9
320.5
322.1

Computers and
peripheral
equipment 2

4.7
7.1
11.6
14.5
16.7
21.0
24.0
29.4
29.4
32.4
43.9
56.1
67.2
102.8
160.8
224.7
39.2
43.4
45.7
47.5
51.0
53.2
58.4
61.7
62.2
64.1
67.1
75.3
82.7
97.2
106.8
124.4
138.7
152.0
170.0
182.4
195.8
216.1
240.5
246.6

Other

67.0
70.4
79.0
81.9
84.6
80.2
85.7
88.1
88.2
85.9
90.2
92.3
99.4
107.0
116.3
126.9
87.7
88.9
92.8
91.5
89.6
90.3
94.6
94.8
96.8
97.8
100.2
102.8
105.1
107.9
107.2
107.8
111.7
114.0
120.3
119.3
121.5
124.4
131.5
130.4

Industrial
equipment

85.5
78.5
89.9
94.1
93.5
91.1
95.3
101.5
95.0
88.3
89.3
96.5
105.5
113.4
117.0
122.8
86.8
88.1
89.8
92.6
93.4
94.2
96.5
102.0
102.8
103.8
106.7
108.9
112.1
114.9
114.1
112.5
114.8
118.8
117.6
116.9
116.8
123.5
125.6
125.1

Transportation
and
related
equipment

63.7
71.7
85.1
88.4
85.6
82.1
87.1
78.9
81.2
81.7
86.2
98.3
113.2
118.9
125.0
138.3
79.9
87.9
85.4
91.5
91.9
101.5
94.8
105.2
108.8
110.0
113.5
120.5
124.0
117.3
115.7
118.6
119.2
121.8
129.5
129.7
127.5
136.0
146.8
143.0

Residential

140.1
197.6
226.4
229.5
257.0
257.6
252.5
243.2
220.6
193.4
225.6
242.6
267.0
257.0
272.1
279.7
213.9
224.9
226.7
236.7
237.0
236.1
242.2
255.1
261.3
271.5
269.4
265.9
261.2
250.4
255.5
260.8
266.1
277.2
274.1
271.1
273.3
278.2
280.1
287.1

TABLE B-20.—Government consumption expenditures and gross investment by type, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Government consumption expenditures and gross investment
Federal
Year or
quarter

Total

Total

Tntfll
lUldl

National defense
P
P
ufOSS
sumpinvestment
tinn
lion
expend- Struc- Equiptures ment
itures

112.0 67.2 55.7
42.0
2.5
11.2
113.2 65.6 54.9
2.2
42.5
10.1
2.4
120.9 69.1 57.7
43.9
11.5
131.4 76.5 62.3
2.0
47.8
12.5
137.7 78.1 62.2
1.6
49.6
11.0
144.4 79.4 61.3
49.9
1.3
10.2
153.0 81.8 62.0
52.0
1.1
8.9
173.6 94.1 73.4
61.2
1.3
11.0
194.6 106.6 85.5
71.3
1.2
13.0
212.1 113.8 92.0
1.2
78.9
11.8
223.8 115.8 92.4
80.0
1.5
10.9
236.1 115.9 90.6
78.6
1.3
10.7
1.8
7.7
249.9 117.1 88.7
79.2
268.9 125.1 93.2
82.3
1.8
9.1
83.7
2.1
287.6 128.2 94.7
8.9
323.2 139.9 101.9
9.7
90.1
2.2
2.3
362.6 154.5 110.9
97.0
11.6
2.1
385.9 162.7 116.1
101.3
12.6
2.4
416.9 178.4 125.8
109.6
13.8
118.4
457.9 194.4 135.6
2.5
14.6
507.1 215.0 151.2
130.7
2.5
18.0
572.8 248.4 174.2
3.2
150.9
20.1
633.4 284.1 202.0
3.2
174.3
24.5
684.8 313.2 230.9
4.0
29.4
197.6
735.7 344.5 255.0
35.4
214.9
4.8
796.6 372.6 282.7
4.9
236.3
41.5
875.0 410.1 312.4
257.6
6.2
48.5
272.7
938.5 435.2 332.4
6.8
52.9
992.8 455.7 350.4
7.7
287.6
55.1
7.4
48.7
1,032.0 457.3 354.0
297.9
6.4
1,095.1 477.2 360.6
303.3
51.0
1,176.1 503.6 373.1
312.7
6.1
54.3
325.4
4.6
1,225.9 522.6 383.5
53.5
319.7
5.2
1,263.8 528.0 375.8
50.9
1,283.4 518.3 360.7
311.1
5.1
44.5
1,313.0 510.2 349.2
301.6
5.8
41.8
6.4
1,355.5 509.6 344.6
298.6
39.6
1,406.7 520.0 352.8
305.7
6.8
40.2
1,453.9 524.8 350.8
6.3
311.2
33.3
50.4
317.2
5.2
1992:1 .... 1,247.9 521.8 372.8
5.5
51.4
II ... 1,256.4 523.2 374.1
317.3
52.7
Ill .. 1,270.7 532.0 380.9
323.5
4.8
IV .. 1,280.0 535.0 375.3
320.7
5.5
49.1
312.4
46.4
1993:1 .... 1,271.5 521.3 363.6
4.8
311.5
4.9
45.4
II ... 1,281.2 517.8 361.7
5.4
Ill .. 1,285.3 515.7 358.0
310.6
42.0
IV .. 1,295.5 518.5 359.4
5.3
309.8
44.3
1994:1 .... 1,291.0 506.9 344.9
5.4
39.7
299.8
300.7
5.5
II ... 1,300.8 505.3 348.5
42.2
I I I . . 1,332.3 520.4 359.7
308.7
6.1
45.0
IV .. 1,328.0 508.3 343.6
297.3
6.1
40.2
299.9
7.0
1995:1 .... 1,344.7 513.6 346.3
39.5
6.2
II ... 1,356.0 511.2 348.1
299.8
42.2
Ill .. 1,362.2 512.9 347.3
303.2
6.0
38.1
IV .. 1,359.2 500.6 336.5
291.6
6.5
38.5
298.2
6.7
1996:1 .... 1,384.2 516.4 348.4
43.5
II ... 1,407.0 524.6 357.3
7.3
307.8
42.2
Ill .. 1,413.5 521.6 354.8
6.6
38.8
309.3
IV .. 1,422.3 517.6 350.6
6.6
307.6
36.3
1997:1 .... 1,433.1 516.1 343.3
30.7
306.4
6.3
II ... 1,449.0 526.1 350.6
311.3
6.2
33.1
Ill .. 1,457.9 525.7 352.1
6.2
311.6
34.3
6.4
IV/> 1,475.6 531.1 357.1
315.5
35.2
Source: Department of Commerce, Bureau of Economic Analysis.

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/>




State and local
Nondefense
Tntfll
lUlal

P
sumptinn
lion

expenditures

11.5
10.8
11.4
14.2
15.9
18.1
19.7
20.7
21.0
21.8
23.4
25.3
28.3
31.9
33.5
38.0
43.6
46.6
52.6
58.9
63.8
74.2
82.2
82.3
89.4
89.9
97.7
102.9
105.3
103.3
116.7
130.4
139.1
152.2
157.7
161.0
165.0
167.3
174.0
149.0
149.1
151.1
159.7
157.7
156.1
157.7
159.1
162.0
156.8
160.7
164.7
167.3
163.0
165.5
164.1
168.0
167.3
166.8
167.0
172.8
175.5
173.6
174.0

304

9.9
8.8
9.0
11.3
12.4
14.0
15.1
15.9
17.0
18.2
20.0
21.9
24.6
27.8
29.2
33.2
38.0
40.4
45.7
50.4
55.2
64.3
71.7
72.3
78.2
77.9
84.9
89.7
90.7
89.9
101.9
113.9
120.6
131.4
136.2
141.6
144.9
145.7
152.9
128.5
129.1
130.9
137.0
134.7
134.3
136.4
139.4
142.6
138.5
141.8
143.5
144.9
144.2
145.8
144.7
146.4
145.9
144.6
146.0
151.7
152.9
153.1
153.8

P
investment
Structures

Pnn
i»on-

Total

Equipment

1.5
0.2 44.8
1.7
.3 47.6
1.9
.5 51.8
2.1
.8 55.0
2.3
1.1 59.6
2.5
1.6 65.0
2.8
1.8 71.2
2.8
2.0 79.5
2.2
1.8 88.1
2.1
1.6 98.3
1.9
1.5 108.0
2.1
1.3 120.2
2.5
1.3 132.8
2.7
1.3 143.8
3.1
1.2 159.4
3.4
1.4 183.3
4.1
1.4 208.1
4.6
1.6 223.1
5.0
1.9 238.5
6.1
2.3 263.4
6.3 - 2.4 292.0
7.1
2.9 324.4
7.7
2.8 349.2
6.8
3.2 371.6
6.7
4.5 391.2
7.0
5.0 424.0
7.3
5.4 464.9
8.0
5.2 503.3
9.0
5.6 537.2
6.8
6.6 574.7
6.9
7.9 617.9
8.0
8.6 672.6
9.2
9.3 703.4
10.3
10.5 735.8
11.2
10.2 765.0
10.4
9.0 802.8
11.0
9.1 846.0
11.3
10.2 886.7
10.8
10.3 929.1
10.3
10.1 726.1
10.2
9.9 733.2
9.6
10.5 738.7
11.0
11.6 745.1
11.5
11.5 750.1
10.9
10.8 763.4
11.3
10.1 769.6
11.1
8.6 777.0
10.3
9.1 784.1
9.7
8.6 795.5
9.9
8.9 811.9
9.4 819.6
11.8
12.1
10.3 831.1
10.7
8.2 844.8
10.9
8.8 849.3
10.1
9.2 858.6
11.1
10.4 867.8
11.6
9.9 882.4
11.3
10.9 891.9
11.4
9.6 904.7
11.2
9.9 917.0
10.5
12.0 923.0
10.9
9.6 932.3
10.6
9.6 944.4

tion
expenditures

30.9
33.7
36.7
39.1
42.2
46.0
50.5
56.5
62.9
70.8
79.8
91.6
102.9
113.4
126.4
144.0
164.9
179.7
196.1
214.5
235.9
261.3
285.3
307.9
326.2
350.8
382.6
412.7
441.1
471.3
507.2
550.1
579.4
603.6
631.6
663.8
698.6
730.9
762.9
592.6
600.8
607.4
613.6
621.4
628.9
635.0
641.1
651.6
659.2
668.6
676.0
686.9
696.2
702.4
708.8
717.6
727.0
735.9
743.3
751.7
757.4
766.1
776.5

Gross
investment
<\trnr
oiruc-

tures

12.8
12.7
13.8
14.5
16.0
17.2
19.0
21.0
23.0
25.2
25.6
25.8
27.0
27.1
29.1
34.7
38.1
38.1
36.9
42.8
49.0
55.1
55.4
54.2
54.2
60.5
67.6
74.2
78.8
84.8
88.7
98.5
100.5
108.1
108.7
113.4
121.0
128.5
138.6
109.9
108.6
107.1
106.9
104.1
109.9
109.8
111.1
107.2
110.8
117.6
117.9
118.1
122.3
120.5
123.0
123.2
128.1
128.6
133.9
137.7
138.0
138.5
140.3

equipment

1.1
1.2
1.2
1.3
1.5
1.7
1.8
2.0
2.2
2.3
2.6
2.8
2.9
3.3
3.8
4.6
5.1
5.3
5.4
6.1
7.1
8.1
8.5
9.4
10.8
12.7
14.8
16.4
17.2
18.6
21.9
23.9
23.4
24.0
24.7
25.6
26.4
27.3
27.6
23.6
23.8
24.2
24.6
24.6
24.6
24.8
24.8
25.3
25.5
25.8
25.8
26.1
26.3
26.5
26.8
27.0
27.2
27.4
27.4
27.5
27.6
27.7
27.6

TABLE B—21.—Real government consumption expenditures and gross investment by type, 1982—97
[Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates]
Government consumption expenditures and gross investment
State and local

Federal
Voor or
Tear nr
quarter

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/>
1992:1

II ...
Ill ...
IV...

1993:1

II ...
Ill ...
IV...

1994:1

II ...
Ill ...
IV...

1995:1

II ...
Ill ...
IV...

1996:1

II ...
Ill ...
IV...
1997-1
II ...
Ill ...
IVp

Tntfll
luuJI

960.1
987.3
1,018.4
1,080.1
1,135.0
1,165.9
1,180.9
1,213.9
1,250.4
1,258.0
1,263.8
1,252.1
1,252.3
1,251.9
1,257.9
1,270.6
1,258.5
1,257.5
1,266.5
1,272.5
1,250.1
1,253.1
1,250.5
1,254.7
1,241.9
1,243.3
1,268.1
1,255.8
1,257.7
1,257.3
1,255.0
1,237.7
1,243.2
1,265.1
1,261.5
1,261.8
1,260.5
1,270.1
1,273.4
1,278.5

Total

429.4
452.7
463.7
495.6
518.4
534.4
524.6
531.5
541.9
539.4
528.0
505.7
486.6
470.3
464.2
457.8
525.1
523.3
529.6
534.0
512.1
507.8
501.5
501.3
487.2
481.2
496.4
481.7
480.4
474.9
473.4
452.6
460.9
470.7
465.7
459.6
452.8
460.1
458.8
459.5

Tntal
luldl

316.5
334.6
348.1
374.1
393.4
409.2
405.5
401.6
401.5
397.5
375.8
354.4
336.9
322.6
317.8
309.0
374.2
373.3
378.7
376.8
359.2
356.7
351.1
350.8
335.1
335.9
347.0
329.6
328.7
327.4
324.0
310.3
314.9
323.2
319.4
313.6
303.9
309.4
310.3
312.6

National defense
«
r
uiOSS
iiOnsumpinvestment
tinn
HOD

expend- Struc- Equipitures tures ment
282.0
293.3
301.3
318.2
331.1
341.1
345.3
340.9
338.9
338.7
319.7
306.0
292.2
280.6
275.5
273.2
318.3
316.5
321.2
322.6
308.5
307.1
305.0
303.2
292.4
291.5
298.7
286.2
285.6
283.1
283.8
269.7
271.3
278.4
278.1
274.4
270.3
273.9
273.6
274.8

5.6
6.6
6.4
7.9
8.6
9.2
8.5
6.9
6.4
4.7
5.2
4.7
5.0
5.4
5.6
5.0
5.2
5.5
4.8
5.4
4.6
4.6
4.8
4.7
4.7
4.8
5.3
5.2
5.9
5.3
5.1
5.4
5.6
6.0
5.4
5.4
5.0
4.9
4.9
5.0

32.0
37.0
41.7
48.6
53.7
58.4
51.9
53.8
56.1
54.1
50.9
43.8
39.7
36.5
36.5
30.7
50.7
51.3
52.7
48.9
46.1
44.9
41.3
42.9
38.1
39.6
42.9
38.1
37.1
38.9
35.1
35.1
37.9
38.7
35.8
33.7
28.2
30.3
31.7
32.6

Nondefense
Total
lUlal

113.3
118.5
115.9
121.8
125.2
125.3
119.1
130.1
140.5
142.0
152.2
151.2
149.5
147.5
146.1
148.3
150.8
150.0
150.9
157.1
152.9
151.1
150.3
150.4
151.9
145.1
149.4
151.7
151.4
147.3
149.1
142.1
145.7
147.2
146.0
145.7
1485
150.2
148.0
146.6

r
Pnn
oiOSS
uonsumpinvestment
uun
expend- Struc- Equipitures tures ment

102.3
3.2
8.6
8.4
4.7
105.9
8.7
102.3
5.2
107.4
5.7
8.9
5.4
9.4
110.6
109.2 10.3
5.9
104.8
6.8
7.6
7.4
114.8
7.9
123.8
8.5
8.3
123.6
9.2
9.3
131.4
10.3
10.5
129.9 11.0
10.3
130.4
9.9
9.1
9.4
128.0
10.0
125.3
11.1
10.0
9.3 11.9
127.6
10.4
130.4
10.1
129.9 10.2
9.8
130.7
9.6
10.5
11.7
134.5
10.9
11.4
130.0
11.5
10.7
129.5
10.9
129.1 11.0
10.2
130.8
8.7
10.8
132.7
9.9
9.2
127.1
8.7
9.3
9.4
130.8
9.0
9.6
131.1 . 11.1
11.2
129.8
10.5
8.4
9.8
129.0
9.9
130.0
9.1
123.4
9.6
9.0
9.9
125.0
11.0126.5 10.2
10.6
124.6 10.0
11.9
125.1
10.7
10.0
127.7
113
98
9.1
128.2
13.8
127.8
11.2
9.3
126.6
9.0 11.3

Con-

tion

Total

CAJJCIIU-

itures
531.4
534.9
555.0
584.7
616.9
631.8
656.6
682.6
708.6
718.7
735.8
746.4
765.7
781.6
793.7
812.9
733.5
734.2
736.9
738.5
738.0
745.3
749.1
753.4
754.7
762.2
771.7
774.1
777.3
782.3
781.5
785.1
782.4
794.4
795.9
802.3
8077
810.1
814.7
819.0

Note.—See Table B-2 for data for total Government consumption expenditures and gross investment for 1959-81.
Source: Department of Commerce, Bureau of Economic Analysis.




305

455.6
458.2
467.9
487.8
513.3
525.5
545.3
566.3
583.2
593.8
603.6
615.8
633.4
646.0
653.6
666.7
599.0
601.7
605.9
607.9
610.8
613.5
617.5
621.5
627.2
631.6
635.9
639.0
643.2
645.0
646.8
648.9
646.6
654.2
655.7
657.8
661 1
664.3
668.6
672.6

Gross
Cfrnr
ouuc-

tures

67.0
66.3
73.8
80.9
85.9
87.8
91.6
93.5
100.7
101.3
108.1
106.1
107.1
109.5
112.8
117.5
110.8
108.8
106.8
106.1
102.7
107.4
107.0
107.2
102.7
105.5
110.6
109.6
108.4
111.3
108.6
109.8
108.9
112.9
112,6
116.6
1184
117.2
117.2
117.4

equipment
10.7
12.1
14.2
16.4
18.0
18.8
20.0
23.0
24.7
23.6
24.0
24.5
25.2
26.1
27.4
28.8
23.6
23.8
24.2
24.6
24.5
24.4
24.5
24.7
24.9
25.0
25.2
25.4
25.7
26.0
26.2
26.5
26.9
27.3
27.6
28.0
283
28.6
29.1
29.2

TABLE B-22.—Inventories and final sales of domestic business, 1959-97
[Billions of dollars, except as noted; seasonally adjusted]
Inventories 1
Quarter

Fourth quarter:
1959 .
1960
1961
1962
1963
1964
1965
1966
1967
1968 .
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992-1
II
Ill
IV
1993:1

M
III
IV
1994-1
II
Ill
IV
1995:1

||
III
IV

1996:1

II
III
IV

1997:1

||
III
\Mp

Nonfarm
Total2

130.7
134.4
137.6
145.2
147.6
153.3
168.1
185.5
197.7
213.2
232.7
240.9
259.7
287.8
343.1
396.3
408.3
441.7
492.8
580.6
675.5
736.0
781.9
767.2
786.7
860.0
875.0
862.5
927.4
992.8
1,044.6
1,082.4
1,058.1
1,065.5
1,070.8
1,076.2
1,077.9
1,099.5
1,102.1
1,104.9
1,114.8
1,132.2
1,150.0
1,168.9
1,200.6
1,234.8
1,246.5
1,250.8
1,261.5
1,264.9
1,276.9
1,287.1
1,294.5
1,306.1
1,318.1
1,334.1
1,342.2

Farm

31.8
32.6
34.2
36.2
33.3
31.9
36.2
36.8
36.3
39.5
42.7
41.2
48.2
58.9
75.3
66.0
70.0
66.6
71.9
96.6
113.6
113.3
103.7
109.2
105.6
108.5
105.9
94.3
97.9
102.0
103.6
108.3
97.2
104.9
104.0
104.8
104.9
110.1
105.6
101.3
101.5
106.6
100.3
99.9
104.1
105.2
100.5
97.6
100.5
97.7
104.3
106.0
102.6
107.2
107.7
109.1
108.9

Total*

98.9
101.8
103.4
109.0
114.4
121.4
131.9
148.6
161.4
173.8
189.9
199.7
211.5
228.8
267.8
330.3
338.4
375.1
421.0
484.0
561.9
622.8
678.2
658.0
681.1
751.5
769.1
768.2
829.5
890.8
941.0
974.1
961.0
960.6
966.8
971.5
973.1
989.3
996.5
1,003.7
1,013.4
1,025.6
1,049.7
1,069.0
1,096.5
1,129.6
1,146.0
1,153.2
1,161.0
1,167.2
1,172.6
1,181.2
1,191.9
1,198.9
1,210.4
1,225.0
1,233.3

Manufacturing

51.6
52.8
54.3
57.6
59.6
63.2
68.2
78.3
85.2
91.4
99.0
102.8
103.5
109.4
125.1
158.2
164.5
181.1
202.8
228.4
268.7
296.5
318.1
299.5
302.6
333.4
325.3
314.6
332.9
358.8
382.1
399.7
383.4
379.2
378.1
380.1
375.5
378.4
381.9
383.5
384.0
388.9
396.4
403.9
413.3
423.7
428.6
430.8
431.1
433.2
432.5
436.3
440.3
443.3
448.0
453.5
458.3

Wholesale
trade

18.3
18.6
19.1
19.9
21.3
22.7
24.3
27.7
29.9
31.7
35.2
39.0
42.1
46.0
54.8
69.8
69.3
77.2
866
101.9
120.5
138.5
151.4
150.3
154.1
169.0
173.4
177.2
190.6
208.5
218.4
232.4
235.5
236.9
240.5
242.0
245.3
247.8
248.4
251.9
254.5
255.9
262.5
268.2
277.5
287.6
292.9
296.2
298.0
300.7
303.2
300.3
300.8
306.2
310.8
316.1
318.0

Retail
trade

20.0
21.4
20.9
22.3
23.6
24.9
27.7
30.1
31.1
34.4
37.7
38.7
44.9
50.0
58.7
64.2
64.7
73.3
81.2
94.5
105.3
113.7
123.9
123.5
138.0
157.3
171.9
176.8
199.5
213.8
232.7
237.1
240.1
240.1
244.1
246.4
249.4
260.4
262.2
263.3
267.3
270.9
279.3
284.2
290.7
298.5
303.4
304.8
306.2
303.5
306.0
312.5
313.0
313.3
313.2
314.7
316.2

Other
9.0
8.9
9.2
9.2
9.8
10.6
11.7
12.5
15.3
16.3
18.1
19.3
20.9
23.4
29.2
38.0
39.8
43.5
50.4
59.1
67.5
74.0
84.9
84.6
86.4
91.8
98.4
99.5
106.4
109.6
107.8
104.8
102.0
104.4
104.1
103.0
103.0
102.8
103.9
105.0
107.6
110.0
111.6
112.6
115.0
119.8
121.1
121.4
125.7
129.8
130.9
132.1
137.7
136.1
138.3
140.7
140.8

Final
sales of
domestic
business3

36.5
37.7
39.5
41.8
44.5
47.4
52.5
55.6
59.2
65.1
69.1
72.9
79.4
88.5
97.5
105.4
118.0
129.7
145.0
167.6
186.4
204.8
221.8
232.8
255.4
276.7
297.7
315.7
333.1
362.8
384.9
403.4
413.1
423.4
427.7
432.8
441.9
443.5
449.6
454.1
463.6
467.6
474.5
482.2
489.2
495.1
499.9
507.2
512.7
519.8
529.5
533.1
542.6
550.0
556.2
565.2
572.8

Ratio of inventories
to final sales of
domestic business
Total

3.58
3.57
3.48
3.47
3.32
3.23
3.20
3.33
3.34
3.28
3.37
3.31
3.27
3.25
3.52
3.76
3.46
3.40
3.40
3.46
3.62
3.59
3.53
3.29
3.08
3.11
2.94
2.73
2.78
2.74
2.71
2.68
2.56
2.52
2.50
2.49
2.44
2.48
2.45
2.43
2.40
2.42
2.42
2.42
2.45
2.49
2.49
2.47
2.46
2.43
2.41
2.41
2.39
2.37
2.37
2.36
2.34

Nonfarm

2.71
2.70
2.62
2.61
2.57
2.56
2.51
2.67
2.73
2.67
2.75
2.74
2.66
2.59
2.75
3.13
2.87
2.89
2.90
2.89
3.01
3.04
3.06
2.83
2.67
2.72
2.58
2.43
2.49
2.46
2.44
2.41
2.33
2.27
2.26
2.24
2.20
2.23
2.22
2.21
2.19
2.19
2.21
222
2.24
2.28
2.29
2.27
2.26
2.25
2.21
2.22
2.20
2.18
2.18
2.17
2.15

1
Inventories at end of quarter. Quarter-to-quarter change calculated from this table is not the current-dollar change in business inventories (CBI) component of GDP. The former is the difference between two inventory stocks, each valued at their respective end-of-quarter
prices. The latter is the change in the physical volume of inventories valued at average prices of the quarter. In addition, changes calculated
from this table are at quarterly rates, whereas CBI is stated at annual rates.
2
Inventories of construction establishments are included in "other" nonfarm inventories.
3
Quarterly totals at monthly rates. Final sales of domestic business equals final sales of domestic product less gross product of households and institutions and of general government and includes a small amount of final sales by farms.
Note.—The industry classification of inventories is on an establishment basis. Estimates for nonfarm industries other than manufacturing
and trade for 1986 and earlier periods are based on the 1972 Standard Industrial Classification (SIC). Manufacturing estimates for 1981 and
earlier periods and trade estimates for 1966 and earlier periods are based on the 1972 SIC; later estimates for these industries are based on
the 1987 SIC. The resulting discontinuities are small.
Source: Department of Commerce, Bureau of Economic Analysis.




306

TABLE B-23-—Real inventories and final sales of domestic business, 1959—97
[Billions of chained (1992) dollars, except as noted; seasonally adjusted]
Inventories l
Nonfarm
Quarter

Fourth quarter:
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982 .
1983
1984 ..
1985
1986 ..
1987
1988
1989
1990
1991
1992:1
II
Ill
IV

Total 2

Farm

Total2

Manufacturing

Wholesale
trade

Retail
trade

Other

Final
sales of
domestic
business3

Ratio of inventories
to final sales of
domestic business
Total

Nonfarm

2.10
2.78
59.4
37.6
144.3
56.5
148.2
303.6
89.1
2.13
2.80
147.0
57.9
150.6
312.4
90.7
38.3
63.6
2.08
2.74
40.1
153.5
59.3
155.1
318.6
92.9
62.3
2.09
2.73
66.7
61.9
336.7
94.4
40.1
160.8
165.2
2.08
2.70
42.2
169.5
66.3
171.5
353.1
95.7
70.3
2.09
178.4
180.4
2.65
70.3
45.0
74.2
372.6
92.0
2.06
2.59
48.4
194.2
81.7
74.7
94.4
192.6
400.3
2.23
199.4
2.73
49.8
84.6
217.6
445.0
93.1
88.5
2.30
206.4
88.4
234.4
2.80
56.9
91.0
474.5
95.6
2.28
94.1
2.77
58.1
217.8
95.8
245.0
497.5
99.2
2.37
61.4
221.7
2.85
100.6
256.0
524.8
99.2
102.3
2.38
2.84
62.6
224.0
102.4
108.0
256.0
533.0
96.8
2.35
2.81
234.4
113.8
253.1
551.1
100.8
64.9
116.1
2.28
2.71
252.7
101.1
69.9
124.9
119.0
259.8
576.5
2.36
77.4
122.4
277.7
2.76
261.1
615.0
102.5
134.8
2.54
2.93
80.8
254.6
132.9
133.0
296.8
646.8
97.8
2.37
2.77
289.7
81.5
265.6
127.5
628.3
103.9
126.3
2.38
303.4
660.4
2.75
81.7
277.5
135.9
102.5
136.0
2.37
2.75
87.1
291.7
143.7
146.5
311.8
692.1
109.3
2.35
2.71
93.2
311.9
158.8
325.8
733.6
111.8
153.1
2.36
115.7
2.72
91.5
319.3
153.1
166.3
338.5
752.8
2.35
2.69
88.7
319.9
171.3
338.9
751.3
108.6
148.9
2.43
774.1
2.80
94.4
318.9
176.0
118.2
157.2
343.5
174.1
2.35
91.7
2.75
319.2
153.3
329.5
751.3
125.5
2.26
2.58
92.4
338.2
763.4
166.2
173.5
329.5
108.6
2.34
358.4
832.4
2.66
96.7
355.7
186.4
189.6
115.0
2.31
370.8
194.8
353.9
855.8
121.8
2.63
105.1
201.3
2.26
349.7
2.57
111.6
384.3
204.4
201.9
868.2
120.2
2.29
2.58
115.1
393.8
208.5
354.8
902.5
111.5
223.9
2.25
113.7
411.7
2.49
231.3
217.8
364.3
927.2
98.9
2.28
420.7
960.7
98.9
2.52
108.9
245.0
223.3
383.5
2.30
2.54
103.4
968.4
101.4
421.8
231.3
390.1
243.5
2.31
99.7
2.55
103.0
419.2
236.9
384.0
967.2
243.3
2.26
380.7
2.50
105.4
426.6
237.2
965.3
101.5
242.0
2.25
104.1
965.7
2.49
428.9
244.3
239.8
377.5
103.8
2.24
967.4
2.48
102.2
432.3
245.1
241.6
378.5
105.1
2.21
244.7
374.8
104.7
2.45
102.6
438.1
247.2
969.2
2.25
102.7
2.48
435.8
246.0
376.1
979.2
1993:1
100.6
256.5
II
2.24
439.4
247.1
378.4
101.1
2.47
101.5
985.1
258.0
Ill
2.24
380.4
249.7
992.0
98.0
2.47
102.3
442.0
259.6
2.23
998.7
97.4
IV
2.45
104.6
448.2
250.2
380.9
263.0
2.24
2.47
449.7
251.2
384.7
100.8
1994:1
106.5
266.2
1,008.6
||
2.25
387.3
105.0
2.49
107.9
453.9
272.7
255.6
1,023.5
III
2.25
259.4
2.49
108.3
458.2
389.6
1,033.1
107.9
275.8
IV
2.27
265.7
1,047.7
109.1
2.50
110.1
461.9
279.9
392.0
2.29
464.1
1,061.4
2.52
112.8
271.0
393.1
107.3
1995:1
284.5
II
2.29
2.52
273.9
395.1
1,069.9
103.9
112.8
466.6
288.2
Ill
2.29
100.5
2.50
114.0
471.0
288.7
276.8
397.8
1,077.3
IV
278.4
1,083.4
2.28
2.50
116.6
474.3
399.8
99.9
288.6
2.27
1,087.0
2.48
118.7
478.2
279.9
402.9
98.2
1996-1
285.5
II
2.25
287.4
1,091.4
99.3
2.46
119.5
484.5
281.3
403.0
Ill
2.27
2.48
484.7
292.4
280.1
406.6
1,099.3
100.9
120.1
IV
282.4
2.25
292.7
409.7
1,105.9
102.5
2.46
121.1
491.1
2.26
2.47
103.8
1997:1
124.5
495.1
288.1
414.9
1,120.5
292.8
||
105.7
2.28
422.1
1,138.0
2.50
126.7
498.5
294.7
294.3
III
2.27
295.4
108.0
2.49
128.2
505.0
298.0
425.8
1,147.6
IV*
110.7
2.27
431.1
1,160.0
2.49
510.3
297.6
301.6
129.6
1
Inventories at end of quarter. Quarter-to-quarter changes calculated from this table are at quarterly rates, whereas the change in business inventories component of GOP is stated at annual rates.
2
Inventories of construction establishments are included in "other" nonfarm inventories.
3
Quarterly totals at monthly rates. Final sales of domestic business equals final sales of domestic product less gross product of households and institutions and of general government and includes a small amount of final sales by farms.
Note—The industry classification of inventories is on an establishment basis. Estimates for nonfarm industries other than manufacturing
and trade for 1986 and earlier periods are based on the 1972 Standard Industrial Classification (SIC). Manufacturing estimates for 1981 and
earlier periods and trade estimates for 1966 and earlier periods are based on the 1972 SIC; later estimates for these industries are based on
the 1987 SIC. The resulting discontinuities are small.
Source: Department of Commerce, Bureau of Economic Analysis.
400.8
411.3
419.9
439.4
457.2
472.7
503.0
545.4
577.5
604.3
631.3
636.7
659.0
683.7
721.5
744.8
734.6
764.4
803.2
846.6
869.9
859.7
892.8
877.2
871.5
946.8
977.0
988.1
1,014.5
1,026.2
1,059.5
1,069.9
1,066.9
1,066.8
1,069.5
1,072.5
1,073.9
1,082.0
1,086.1
1,090.0
1,096.0
1,109.3
1,128.2
1,140.7
1,156.6
1,168.7
1,174.1
1,178.3
1,183.9
1,185.9
1,191.2
1,200.7
1,208.9
1,224.8
1,244.2
1,256.1
1,271.1




307

TABLE B-24.—Foreign transactions in the national income and product accounts, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year or
quarter

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/»
1992:1

II
Ill ....
IV ...

1993:1

II
Ill ....
IV ...

1994:1

II
Ill ....
IV ...
1995:1

II
Ill ....
IV ....

1996:1

II
Ill ....
IV ....

1997:1

II
Ill ....
IV*..

Receipts from rest of the world
Exports of goods and
Reservices
ceipts
of
Tntal 1
i oiai *
factor
inTotal Goods2 Services2
come

25.0
30.2
31.4
33.5
36.1
41.0
43.5
47.2
50.2
55.6
61.2
70.8
74.2
83.4
115.6
152.6
164.4
181.7
196.6
233.5
300.3
361.9
399.5
379.5
374.6
421.8
411.1
427.1
481.8
591.9
678.3
734.8
757.9
777.3
809.4
897.7
1,041.2
1,105.1
773.1
779.2
774.0
783.0
792.7
810.0
800.0
835.0
839.6
878.3
914.4
958.2
998.1
1,034.1
1,054.2
1,078.4
1,076.1
1,092.0
1,099.0
1,153.4
1,170.4
1,221.9
1,235.2

20.6
25.3
26.0
27.4
29.4
33.6
35.4
38.9
41.4
45.3
49.3
57.0
59.3
66.2
91.8
124.3
136.3
148.9
158.8
186.1
228.7
278.9
302.8
282.6
277.0
303.1
303.0
320.7
365.7
447.2
509.3
557.3
601.8
639.4
658.6
721.2
818.4
870.9
958.8
632.4
635.9
640.2
649.1
647.1
661.2
646.8
679.4
678.5
710.1
732.6
763.7
784.5
807.7
831.6
849.9
850.2
865.0
863.7
904.6
922.2
960.3
965.8
9869

16.5
20.5
20.9
21.7
23.3
26.7
27.8
30.7
32.2
35.3
38.3
44.5
45.6
51.8
73.9
101.0
109.6
117.8
123.7
145.4
184.0
225.8
239.1
215.0
207.3
225.6
222.2
226.0
257.5
325.8
371.7
398.5
426.4
448.7
459.7
509.6
583.9
617.5
687.1
442.1
445.9
447.7
459.0
451.2
462.2
447.9
477.7
475.7
499.2
518.9
544.6
560.7
578.6
591.1
605.1
606.1
613.9
609.7
640.5
656.2
690.0
691.1
7111

4.2
4.8
5.1
5.7
6.1
6.9
7.6
8.2
9.2
10.0
11.0
12.4
13.8
14.4
17.8
23.3
26.7
31.1
35.1
40.7
44.7
53.2
63.7
67.6
69.7
77.5
80.8
94.7
108.2
121.4
137.6
158.8
175.4
190.7
198.9
211.6
234.6
253.3
271.7
190.3
190.0
192.5
190.1
195.8
199.0
198.9
201.7
202.8
210.9
213.7
219.0
223.9
229.2
240.5
244.7
244.1
251.1
254.0
264.2
266.0
270.3
274.8
7758

Payments to rest of the world
Transfer payments
pay.
ray
(net)
ments
of
From
From
Serv- factor
Total
inpersons governices2 come
ment
(net)
(net)

Imports of goods and
services
Total

2

Total

4.3
5.0
5.4
6.1
6.6
7.4
8.1
8.3
8.9
10.3
11.9
13.0
14.1
16.4
23.8
30.3
28.2
32.9
37.9
47.4
70.4
81.8
95.6
96.9
97.6
118.7
108.1
106.5
116.0
144.7
169.0
177.5
156.2
137.9
150.8
176.5
222.8
234.3

25.0
30.2
31.4
33.5
36.1
41.0
43.5
47.2
50.2
55.6
61.2
70.8
74.2
83.4
115.6
152.6
164.4
181.7
196.6
233.5
300.3
361.9
399.5
379.5
374.6
421.8
411.1
427.1
481.8
591.9
678.3
734.8
757.9
777.3
809.4
897.7
1,041.2
1,105.1

140.7
143.3
133.8
133.9
145.6
148.9
153.2
155.6
161.1
168.3
181.9
194.6
213.6
226.4
222.6
228.5
226.0
227.1
235.4
248.8
248.2
261.6
269.4

773.1
779.2
774.0
783.0
792.7
810.0
800.0
835.0
839.6
878.3
914.4
958.2
998.1
1,034.1
1,054.2
1,078.4
1,076.1
1,092.0
1,099.0
1,153.4
1,170.4
1,221.9
1,235.2

Goods

22.3
22.8
22.7
25.0
26.1
28.1
31.5
37.1
39.9
46.6
50.5
55.8
62.3
74.2
91.2
127.5
122.7
151.1
182.4
212.3
252.7
293.8
317.8
303.2
328.6
405.1
417.2
452.2
507.9
553.2
589.7
628.6
622.3
669.0
719.3
812.1
904.5
965.7
1,055.5
641.3
664.9
677.8
691.8
693.7
718.7
718.9
746.0
755.1
797.9
836.0
859.2
882.8
913.1
912.0
909.9
933.2
958.7
977.6
993.2
1,021.0
1,049.0
1,077.1
1,074.8

15.3
15.2
15.1
16.9
17.7
19.4
22.2
26.3
27.8
33.9
36.8
40.9
46.6
56.9
71.8
104.5
99.0
124.6
152.6
177.4
212.8
248.6
267.8
250.5
272.7
336.3
343.3
370.0
414.8
452.1
484.5
508.0
500.7
544.9
592.8
676.8
757.5
809.0
885.4
516.8
541.1
557.2
564.4
570.8
593.2
592.8
614.4
622.4
663.8
699.2
721.7
739.3
767.0
762.9
761.0
778.4
802.9
820.2
834.6
855.8
880.1
905.6
900.0

1
Includes
2

7.0
7.6
7.6
8.1
8.4
8.7
9.3
10.7
12.2
12.6
13.7
14.9
15.8
17.3
19.3
22.9
23.7
26.5
29.8
34.8
39.9
45.3
49.9
52.6
56.0
68.8
73.9
82.2
93.1
101.1
105.3
120.6
121.6
124.1
126.5
135.3
146.9
156.7
170.1
124.5
123.8
120.6
127.4
122.9
125.4
126.1
131.6
132.8
134.1
136.9
137.5
143.5
146.1
149.1
149.0
154.8
155.8
157.5
158.6
165.2
168.9
171.6
174.8

1.5
1.8
1.8
1.8
2.1
2.4
2.7
3.1
3.4
4.1
5.8
6.6
6.4
7.7
11.1
14.6
14.9
15.7
17.2
25.3
37.5
46.5
60.9
65.8
65.6
87.6
87.7
93.6
107.1
131.7
154.8
156.4
140.5
126.8
132.1
168.3
217.5
232.6

124.2
132.3
124.3
126.4
122.1
132.7
130.9
142.7
144.2
159.3
176.1
193.5
207.4
215.3
225.6
221.9
218.2
224.3
242.3
245.6
262.5
282.3
290.1

2.4
2.4
2.7
2.8
2.8
3.0
3.0
3.2
3.4
3.2
3.2
3.6
4.1
4.3
4.6
5.4
5.4
6.0
6.0
6.4
7.5
9.0
13.4
16.7
17.7
20.6
23.1
24.3
23.3
25.1
26.1
28.4
-12.1
32.0
36.6
37.3
33.6
39.8
39.4
27.5
30.7
27.8
42.0
31.1
33.6
35.0
46.6
31.9
33.6
36.5
47.3
33.8
32.4
33.5
34.6
41.6
34.7
35.4
47.4
35.2
36.5
36.9
48.9

0.4
.5
.5
.5
.6
.7
.8
.8
1.0
1.0
1.1
1.2
1.3
1.3
1.4
1.2
1.2
1.2
1.2
1.3
1.4
1.6
5.2
6.2
6.5
7.4
7.8
8.1
8.7
9.1
9.6
9.9
10.4
9.6
13.3
14.2
14.8
15.9
17.9
9.4
9.7
9.2
9.9
13.1
13.1
13.4
13.7
14.0
14.1
14.2
14.4
14.5
14.3
14.9
15.4
15.4
15.8
15.9
16.7
17.0
17.6
18.2
18.5

1.8
1.9
2.1
2.1
2.1
2.1
2.1
2.2
2.1
1.9
1.8
2.0
2.4
2.5
2.5
3.2
3.5
3.7
3.4
3.8
4.1
5.0
5.0
7.0
7.8
9.7
12.2
12.9
11.2
11.4
11.4
13.3
-27.9
16.6
17.3
16.4
11.5
16.3
13.2
12.4
15.0
12.9
26.1
12.6
14.8
15.5
26.2
11.2
12.9
15.7
25.8
12.0
11.0
11.3
11.8
19.2
11.2
11.9
22.9
10.5
10.8
10.0
21.7

From
business
0.1
.1
.1
.1
.1
.2
.2
.2
.2
.3
.3
.4
.4
.5
.7
1.0
.7
1.1
1.4
1.4
2.0
2.4
3.2
3.4
3.4
3.5
3.1
3.3
3.3
4.6
5.1
5.2
5.4
5.8
6.0
6.8
7.3
7.6
8.3
5.7
6.0
5.8
5.9
5.5
5.7
6.2
6.7
6.7
6.6
6.7
7.1
7.2
7.1
7.4
7.4
7.1
7.6
7.7
7.8
7.7
8.1
8.7
8.7

Net
foreign
investment

-1.2
3.2
4.3
3.9
5.0
7.5
6.2
3.9
3.5
1.7
1.8
4.9
1.3
-2.9
8.7
5.1
21.4
8.9
-9.0
-10.4
2.6
12.5
7.4
-6.1
-37.3
-91.5
-116.9
-142.9
-156.4
-118.1
-92.4
-78.6
7.3
-50.5
-78.6
-120.0
-114.4
-132.9
-19.9
-48.7
-56.0
-77.2
-54.2
-74.9
-84.9
-100.4
-91.6
-112.5
-134.2
-141.8
-125.8
-126.7
-116.9
-88.0
-116.9
-125.6
-156.4
-132.9
-148.4
-146.0
-168.9

capital grants received by the United States (net), not shown separately. See Table B-32 for data.
Certain goods, primarily military equipment purchased and sold by the Federal Government, are included in services. Beginning with
1986, repairs and alterations of equipment were reclassified from goods to services.
Source: Department of Commerce, Bureau of Economic Analysis.




308

TABLE B-25.—Real exports and imports of goods and services and receipts and payments of factor
income, 1982-97
[Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates]
Exports of goods and services
Goods1
Year or quarter

Total

Total

Durable
goods

Nondurable
goods

Services1

Receipts
of
factor
income

Imports of goods and services
Goods1
Total

Total

Durable
goods

Nondurable
goods

Services1

Payments
of
factor
income

1982
1983
1984

311.4
303.3
328.4

213.5
207.3
223.7

117.0
114.6
127.0

98.4
94.4
98.1

98.5
96.8
105.9

143.5
138.2
160.3

325.5
366.6
455.7

257.4
292.4
363.1

138.4
166.8
221.9

115.6
123.1
140.2

68.9
74.4
92.9

100.7
95.9
121.9

1985
1986
1987
1988
1989

337.3
362.2
402.0
465.8
520.2

231.7
243.6
270.5
321.4
361.7

137.3
145.3
165.7
205.5
236.7

95.3
99.1
105.0
115.8
124.9

106.1
120.3
133.4
145.0
158.7

140.5
134.6
141.9
170.2
189.9

485.2
526.1
558.2
580.2
603.0

385.9
425.5
445.2
463.2
482.7

244.1
266.7
278.5
290.1
302.6

142.0
158.8
166.8
173.2
180.1

99.7
100.2
113.1
117.1
120.2

116.8
120.9
133.0
157.1
176.7

1990
1991
1992
1993
1994

564.4
599.9
639.4
658.2
712.4

391.6
419.2
448.7
463.7
509.8

260.0
279.6
300.9
317.5
356.5

131.6
139.6
147.8
146.2
153.5

173.1
180.8
190.7
194.5
202.9

190.6
161.1
137.9
147.3
168.4

626.3
622.2
669.0
728.4
817.0

497.3
497.1
544.9
602.0
684.1

310.9
312.7
346.4
389.4
456.0

186.4
184.4
198.4
212.5
227.8

129.4
125.3
124.1
126.5
133.2

170.2
145.7
126.8
128.8
160.0

1995
1996
1997p

791.2
857.0
964.4

573.9
628.4
725.8

411.2
463.3
553.4

164.1
169.1
181.1

218.0
229.9
242.5

207.7
214.2

890.1
971.5
1,106.5

749.2
823.1
944.1

511.7
569.9
669.4

237.2
253.5
277.8

141.2
149.0
163.5

200.7
210.2

1992:1
||
III
IV

633.0
635.8
639.7
649.1

440.3
445.1
448.3
461.0

294.5
298.4
299.5
311.1

145.8
146.6
148.8
149.9

192.8
190.7
191.3
188.2

141.9
143.5
133.4
132.7

647.8
668.3
670.5
689.1

521.2
543.6
552.8
561.8

331.2
344.6
351.0
359.0

1900
199.0
201.8
202.8

126.7
124.7
117.7
127.4

125.6
132.6
123.9
125.2

1993-1
II
Ill
IV

647.2
660.1
646.3
679.1

454.1
465.3
452.0
483.5

308.0
318.3
309.8
334.0

146.1
147.0
142.1
149.6

193.1
194.8
194.2
195.9

143.3
145.6
149.3
150.8

701.9
722.7
729.4
759.7

578.7
597.8
603.1
628.3

372.9
383.5
389.5
411.8

205.7
214.3
213.5
216.4

123.3
124.9
126.3
131.4

119.9
129.6
127.5
138.0

1994:1
||
III
IV

676.0
704.1
722.1
747.3

479.1
501.2
518.4
540.4

334.8
352.6
361.8
376.9

144.6
149.1
156.8
163.6

197.0
203.1
204.1
207.5

155.3
161.3
173.0
184.2

773.6
808.0
833.2
853.2

641.4
674.6
700.0
720.4

421.8
447.6
464.8
489.7

219.4
226.6
234.8
230.4

132.3
133.6
133.5
133.2

139.3
152.3
166.9
181.4

1995-1
II
Ill
IV

760.4
777.4
802.4
824.6

550.4
565.7
580.4
599.1

388.7
406.4
416.2
433.5

162.3
160.8
165.5
167.8

210.6
212.5
222.6
226.2

200.8
211.4
207.0
211.5

873.9
890.3
895.4
900.7

733.5
751.4
753.6
758.2

499.7
512.7
511.9
522.6

233.5
238.5
241.2
235.7

140.7
139.3
142.1
142.9

192.9
198.9
207.5
203.5

1996:1

828.2
847.4
851.4
901.1

605.2
619.2
623.0
666.2

439.1
459.1
460.8
494.0

168.4
164.5
166.4
177.0

224.0
229.3
229.4
236.8

208.0 929.0
208.1 960.0
214.8 990.2
226.0 1,006.6

781.4
811.7
841.7
857.5

540.4
559.8
582.6
596.6

241.3
251.9
259.4
261.6

147.8
148.8
149.3
150.0

199.4
203.7
218.1
219.8

263.3
280.1
287.2
280.8
services.

158.4 234.0
161.8 250.8
165.8 256.9
168.1
Beginning with

||
III
IV

922.7 686.2 517.0 176.0 238.9 224.6 1,048.9 891.3 630.8
962.5 725.8 555.8 179.2 240.8 236.3 1,099.1 938.4 660.7
973.0 731.8 559.8 181.1 245.0 242.5 1,137.1 972.7 688.5
999.3 759.4 580.9 188.0 245.1
1.140.8 973.9 697.5
1
Certain goods, primarily military equipment purchased and sold by the Federal Government, are included in
1986, repairs and alterations of equipment were reclassified from goods to services.
Note.—See Table B-2 for data for total exports of goods and services and total imports of goods and services for
Source: Department of Commerce, Bureau of Economic Analysis.
1997-1
II
Ill
IV/>




309

1959-81.

TABLE B-26.—Relation of gross domestic product, gross national product, net national product, and
national income, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
PIUS:
Rpreintc
Receipts

Year or
quarter

1 occ
L6SS:

Payments
Gross of factor of factor Equals:
Gross
domestic income income national
from
to
product rest of
rest of product
the
tha
me
world
world

Less: Consumption of
fixed capital

Total

510.1
1.5
54.6
507.2
4.3
529.8
56.6
1.8
526.6
5.0
5484
54
18
581
5448
589.4
60.4
1.8
585.2
6.1
6219
6174
21
630
66
2.4
668.0
66.0
7.4
663.0
2.7
724.5
70.2
719.1
8.1
3.1
793.0
75.9
787.8
8.3
3.4
839.1
82.3 ,
833.6
8.9
916.7
89.8
4.1
910.6
10.3
988.4
5.8
98.3
982.2
11.9
6.6 1,042.0 107.0
1,035.6
13.0
6.4 1,133.1 116.5
1,125.4
14.1
7.7 1,246.0 127.6
16.4
1,237.3
11.1 1,395.4 140.0
1,382.6
23.8
14.6 1,512.6 162.5
1,496.9
30.3
14.9 1,643.9 188.7
1,630.6
28.2
15.7 1,836.1 206.0
1,819.0
32.9
17.2 2,047.5 228.6
2,026.9
37.9
2,291.4
47.4
25.3 2,313.5 258.3
70.4
37.5 2,590.4 296.7
2,557.5
46.5 2,819.5 339.4
2,784.2
81.8
60.9 3,150.6 388.5
3,115.9
95.6
65.8 3,273.2 424.3
3,242.1
96.9
65.6 3,546.5 ; 445.3
3,514.5
97.6
3,902.4
87.6 3,933.5 461.5
118.7
87.7 4,201.0 486.6
4,180.7
108.1
4,422.2
106.5 , 93.6 4,435.1 517.9
107.1 4,701.3 545.8
116.0
4,692.3
131.7 5,062.6 582.2
144.7
5,049.6
5,438.7
154.8 5,452.8 625.4
169.0
156.4 5,764.9 651.5
5,743.8
177.5
140.5 5,932.4 679.9
5,916.7
156.2
6,244.4
126.8 6,255.5 713.5
137.9
132.1 6,576.8 727.9
6,558.1
150.8
168.3 6,955.2 777.5
6,947.0
176.5
7,265.4
217.5 7,270.6 796.8
222.8
232.6 7,637.7 830.1
7,636.0
234.3
8,083.4
868.0
140.7
124.2 6,138.3 687.2
6,121.8
1992:1
II
132.3 6,212.2 692.4
6,201 ?
143.3
Ill
6,271.7
124.3 6,281.1 770.1
133.8
IV
126.4 6,390.5 704.3
6,383.1
133.9
122.1 6,468.1 721.8
6,444.5
145.6
1993:1
II
132.7 6,525.3 720.7
6,509 1
148.9
130.9 6,596.9 735.3
6,574.6
153.2
Ill
142.7 6,717.1 733.6
6,704.2
155.6
IV
144.2 6,811.2 823.3
6,794.3
161.1
1994:1
6,911.4
II
159.3 6,920.3 753.1
168.3
Ill
6,986.5
181.9
176.1 6,992.3 762.2
7,095.7
IV
193.5 7,096.8 771.4
194.6
207.4 7,175.1 780.1
7,168.9
213.6
1995:1
226.4
II
215.3 7,220.6 790.6
7,209.5
Ill
225.6 7,298.3 799.0
7,301.3
222.6
221.9 7,388.5 817.3
IV
7,381.9
228.5
218.2 7,475.3 815.5
7,467.5
226.0
1996:1
II
7,607.7
227.1
224.3 7,610.5 824.1
242.3 7,669.1 835.4
Ill
7,676.0
235.4
248.8
245.6 7,796.1 845.6
IV ...... 7,792.9
1997:1
248.2
262.5 7,919.2 855.0
7,933.6
II
282.3 8,013.6 863.0
8,034.3
261.6
Ill
269.4
290.1 8,103.5 871.6
8,124.3
882.5
IV" .... 8.241.5
Source: Department of Commerce, Bureau of Economic Analysis.

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983 Z
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997"




Less:

Eg* Indirect Busibusi- ness Statistical
naness
Govern- tional tax and trans- disfer crepanPrivate ment product
nontax paycy
liability ments

40.5
42.1
431
44.6
463
48.6
52.0
56.6
61.5
67.3
74.3
81.2
88.9
97.8
107.1
124.5
146.3
161.3
181.0
206.8
239.9
276.0
318.0
346.2
365.2
378.4
399.5
424.4
447.0
478.0
515.1
534.3
556.4
585.4
594.5
638.6
653.0
682.7
717.0
560.9
564.7
641.5
574.3
590.5
588.1
601.1
598.1
685.2
614.9
623.3
631.2
638.3
647.4
654.7
671.7
669.2
676.8
687.7
697.2
705.4
712.3
720.3
729.8

310

14.1
14.5
150
15.8
167
17.4
18.2
19.3
20.8
22.4
24.1
25.8
27.6
29.9
32.9
38.0
42.4
44.7
47.6
51.5
56.8
63.4
70.4
78.1
80.1
83.1
87.1
93.5
98.7
104.2
110.3
117.3
123.5
128.2
133.4
138.8
143.8
147.4
151.1
126.3
127.7
128.6
130.0
131.3
132.7
134.2
135.5
138.1
138.1
138.9
140.2
141.9
143.2
144.3
145.6
146.2
147.2
147.8
148.4
149.6
150.6
151.3
152.7

455.5
473.2
4903
529.0
5590
602.1
654.3
717.1
756.7
827.0
890.0
935.0
1,016.6
1,118.3
1,255.4
1,350.0
1,455.2
1,630.0
1,818.9
2,055.2
2,293.6
2,480.1
2,762.1
2,848.9
3,101.3
3,472.0
3,714.5
3,917.2
4.155.5
4;480.5
4,827.4
5,113.4
5,252.5
5,542.0
5,848.9
6,177.7
6,473.9
6,807.6
5,451.1
5,519.7
5,510.9
5,686.2
5,746.2
5,804.6
5,861.5
5,983.5
5,987.9
6,167.3
6,230.1
6,325.4
6,395.0
6,429.9
6,499.2
6,571.2
6,659.8
6,786.4
6,833.6
6,950.4
7,064.2
7,150.7
7,231.9

41.9
45.5
481
51.7
547
58.8
62.7
65.4
70.4
79.0
86.6
94.3
103.6
111.4
121.0
129.3
140.0
151.6
165.5
177.8
188.7
212.0
249.3
256.4
280.1
309.5
329.6
344.7
364.8
385.5
414.7
442.6
478.1
505.6
532.5
568.5
582.8
604.8
619.5
495.7
497.9
507.1
521.7
520.6
525.9
534.4
549.4
556.9
564.4
573.2
579.4
578.9
580.9
584.0
587.3
594.0
599.0
600.9
625.3
610.2
616.2
625.4
626.2

1.4
-1.6
1.4
-3.2
15 -28
1.6
-1.8
18
-30
2.0
-L5
2.2
-.8
2.3
3.3
2.5
1.3
2.8
.9
3.1 -1.5
3.2
1.9
3.4
6.1
3.9
4.3
3.4
4.5
5.0
5.5
12.1
5.2
6.5
19.9
7.3
18.2
8.2
18.1
9.9
28.2
11.2
27.6
13.4
14.9
15.2
-2.5
37.1
16.2
18.6
5.0
2.4
20.9
23.9
23.3
24.2 -15.4
25.4 -47.3
26.3
13.2
17.4
26.5
26.3
10.1
28.4
44.8
28.2
52.6
30.5
14.6
32.2 -28.2
33.6 -59.9
35.4
27.6
24.5
37.4
28.5
52.7
28.6
28.8
64.6
27.8
71.0
489
27.7
28.2
47.5
29.0
45.0
29.7
6.3
42.4
30.1
30.7
15.2
-5.4
31.5
31.8
1.2
32.0 -20.2
32.5 -45.0
32.7 -48.9
32.7 -50.3
33.5 -50.2
33.8 -79.5
34.2 -59.5
34.4 -64.3
35.0 -73.5
35.9 -103.2
36.2

PIUS:

Subsidies
less cur- Equals:
rent sur- National
plus of
govern- income
ment
enterprises
0.1
.3
13
1.5
9
1.4
1.7
3.0
2.9
3.1
3.6
4.9
5.1
6.4
5.9
4.5
8.1
7.4
10.1
11.1
11.7
15.2
16.9
21.1
25.6
25.5
21.9
25.1
31.0
28.5
24.2
25.3
23.6
27.1
31.1
26.6
25.2
25.4
26.1
24.6
25.4
26.9
31.5
33.0
32.8
30.2
28.5
28.1
25.9
25.1
27.4
24.8
25.1
25.7
25.5
25.3
25.2
24.9
26.0
26.1
26.0
25.8
26.4

413.9
429.8
4448
479.0
5063
544.1
592.0
648.9
685.5
747.3
805.4
840.6
908.6
1,005.3
1,132.3
1,214.9
1,305.9
1,459.4
1,638.0
1,862.3
2,078.5
2,244.5
2,501.4
2,600.8
2,793.3
3,164.4
3,383.4
3,550.3
3,813.0
4,145.3
4,397.3
4,652.1
4,761.6
4,990.4
5,266.8
5,590.7
5,912.3
6,254.5

4,927.9
4,981.5
4,949.5
5,102.6
5,159.8
5,236.9
5,281.7
5,388.7
5,423.2
5,556.3
5,636.1
5,747.3
5,807.9
5,862.4
5,953.4
6,025.5
6,108.8
6,229.4
6,303.3
6,376.5
6,510.0
6,599.0
6,699.6

TABLE B-27.—Relation of national income and personal income, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
L(JSS:

Year or quarter

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997"

National
income

Corporate
profits
with
inventory
valuation
Net
and
capital interest
consumption
adjustments

52.9
514
52.5
60.5
663
73.3
841
89.8
874
94.2
90.9
78.7
920
106.7
1201
109.2
1282
154.9
1843
209.0
213.1
188.3
2070
182.3
235.2
290.1
304.0
2938
333.2
382.1
3800
3971
411.3
4280
492.8
5705
650.0
7359

PI US:

Contributions
for
social
insurance

Wage
accruals
less
disbursements

10.2
112
13.1
14.6
161
18.2
21 1
24.3
281
30.4
33.6
40.0
454
49.3
565
71.8
800
85.1
1007
120.5
150.3
191.9
2345
264.9
275.9
318.5
337.2
3631
372.2
398.9
4566
4673
448.0
4143
402.5
4123
425.1
4251

18.8
219
229
. .. .
25.4
285
30.1
316
40.6
455
50.4
578
62.0
696
79.5
979
111.7
121 1
137.7
1554
177.0
204.2
225.0
2616
280.6
3019
345.5
375.9
4020
423.3
4628
4912
5185
543.5
5714
596.0
6305
659.1
6920
732.0
419.2
444.2
1992:1
565.1
4,927.9
II
437.2
570.1
417.5
4,981.5
Ill
5748
376.1 408.1
4 949.5
412.4
IV
575.7
454.6
5,102.6
5853
411.2
459.2
51598
1993:1
||
5940
4046
4782
52369
III
598.7
492.8
5|281.7
398.9
3954
541.2
53887
IV
6061
512.0
1994:1
619.2
397.2
5,423.2
||
562.0
6282
4056
55563
III
590.1 415.6
633.4
5,636.1
430.7
617.7
IV
641.2
5,747.3
432.7
613.2
650.1
5,807.9
1995-1
||
4297
6280
58624
6551
III
662.4
419.5
672.8
5,953.4
685.7
IV
668.6
418.6
6,025.5
717.7
416.2
6,108.8
1996:1
677.3
II
6,229.4
688.7
738.5
422.5
7396
Ill
6968
4309
63033
IV
705.1
747.8
430.6
6,376.5
1997:1
7195
4405
779.6
65100
II
795.1 448.1
726.9
6,599.0
Ill
827.3
735.0
451.8
6,699.6
IV/>
746.6
Source: Department of Commerce, Bureau of Economic Analysis.
413.9
4298
4448
479.0
5063
544.1
5920
648.9
6855
747.3
8054
840.6
9086
1,005.3
1 1323
1214.9
13059
1>59.4
16380
1,862.3
2,078.5
2,244.5
25014
2,600.8
27933
3,164.4
3,383.4
35503
3]813.0
41453
43973
46521
4>61.6
49904
5|266.8
55907
5,912.3
62545




311

0.0

o

0
.0
0
.0
0
.0
0
.0
0
.0
6
.0
_1
1
1
-.2
.0
1
.0
-4
.2
-.2
0
.0
0

o

1
-.1
-158
4.4
133
13.1
11
1.2
.0
.0
0
-63.0
701
_1
-.1
-522
52.4
3
.3
13.1
131
131
13.1
1.1
1.1
11
11
12
1.2
1.2
1.2

Personal
interest
income

22.7
250
269
29.3
324
36.1
403
44.9
495
54.6
608
69.2
757
81.8
941
112.4
1230
134.6
1557
184.5
2236
274.7
3372
379.2
4032
472.3
508.4
5433
560.0
5955
6745
7044
6992
6672
651.0
6681
718.9
7357
7688
674.1
673.0
6612
660.4
6603
6537
647.8
6421
641.4
6564
674.1
700.4
713.9
7194
7179
724.2
7223
727.8
7427
7498
7572
7661
772.6
779.1

Equals:

Govern- Business
ment
Personal transfer transfer Personal
dividend payments payments income
to
income
to
persons persons

12.7
134
14.0
15.0
161
18.0
202
20.9
221
24.5
251
23.5
235
25.5
277
29.6
292
35.0
395
44.3
505
57.5
672
66.9
774
79.4
88.3
1051
101.1
1099
1309
1429
1536
1594
185.3
2048
251.9
291 2
3215
152.3
154.5
1608
170.1
1778
1821
187.8
1935
192.1
2003
2085
218.5
243.4
2486
2542
261.5
2874
290.0
2920
2952
3125
3183
324.5
330.7

25.7
275
315
32.6
345
36.0
391
43.6
523
60.6
675
81.8
970
108.4
1241
147.4
1857
202.8
2175
234.8
2628
312.6
3557
396.3
4266
438.5
468.7
4980
522.5
5568
6049
6665
7491
8357
889.8
9309
990.0
10420
10941
816.4
831.0
8425
853.0
8749
8860
895.3
9031
9173
9262
9348
945.4
972.4
9856
9964
1,005.7
10276
1,039.0
10463
10551
10805
10900
1,098.4
1.107.3

1.3
13
1.4
1.5
17
1.8
20
2.1
23
2.5
28
2.8
30
3.4
38
4.0
45
5.5
59
6.8
79
8.8
102
11.8
128
15.1
17.8
207
20.8
208
21 1
213
208
225
22.1
237
25.0
260
27 1
21.9
225
228
22.9
223
220
22.0
222
23.1
236
24.0
24.4
24.6
248
251
25.4
25.6
25.9
261
264
267
269
27.2
27.5

394.4
4125
430.0
457.0
480.0
514.5
556.7
605.7
650.7
714.5
779.3
837.1
9002
988.8
1 1075
U15.9
13190
M59.4
16161
l!825.9
2 055.8
2,293.0
25685
2,727.2
2 900.8
3,215.3
3,449.8
36584
3i888.7
4 184.6
45010
48042
4i981.6
52772
5i519.2
57918
6450.8
64952
6 874.4
5,164.2
5,237.7
5 277.7
5J429.3
5 369.4
5*504 1
5^544.2
56591
5,616.3
57666
5838.1
5,946.1
6,053.1
61148
6'l79.1
6,256.2
6 359.4
6,461.3
65419
6618.4
67462
6829.1
6,906.9
7.015.4

TABLE B-28.—National income by type of income, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Compensation of employees
Wages and salaries

Total

Year or
quarter

National
income '

Supplements to wages and
salaries

Government

Other

Total

Employer
contributions for
social
insurance

labor
income

Total

ftthpr
UlllCI

Proprietors' income with inventory valuation
capnai consumption adjustments
Nonfarm

Farm

Total

Total

Proprietors'
income 2

Total

Proprietors'
income 3

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*

413.9
429.8
444.8
479.0
506.3
544.1
592.0
648.9
685.5
747.3
805.4
840.6
908.6
1,005.3
1,132.3
1,214.9
1,305.9
1,459.4
1,638.0
1,862.3
2,078.5
2,244.5
2,501.4
2,600.8
2,793.3
3,164.4
3,383.4
3,550.3
3,813.0
4,145.3
4,397.3
4,652.1
4,761.6
4,990.4
5,266.8
5,590.7
5,912.3
6,254.5

281.2
296.7
305.6
327.4
345.5
371.0
399.8
443.0
475.5
524.7
578.3
618.1
660.1
726.8
813.1
892.4
951.3
1,061.5
1,182.9
1,338.5
1,503.3
1,653.9
1,827.8
1,927.6
2,044.2
2,257.0
2,425.7
2,572.4
2,757.7
2,973.9
3,151.6
3,352.8
3,457.9
3,644.9
3,814.9
4,012.0
4,215.4
4,426.9
4,703.4

259.8
272.8
280.5
299.3
314.8
337.7
363.7
400.3
428.9
471.9
518.3
551.5
584.5
638.7
708.6
772.2
814.7
899.6
994.0
1,121.1
1,255.7
1,377.6
1,517.6
1,593.9
1,684.8
1,855.3
1,995.7
2,116.5
2,272.7
2,453.6
2,598.1
2,757.5
2,827.6
2,970.6
3,094.0
3,254.0
3,442.6
3,633.6
3,878.4

46.0
49.2
52.4
56.3
60.0
64.9
69.9
78.3
86.4
96.6
105.5
117.1
126.7
137.8
148.7
160.4
176.1
188.7
202.4
219.8
236.9
261.2
285.6
307.3
324.5
347.8
373.5
396.6
423.1
450.4
479.4
517.2
546.0
567.8
584.3
602.2
623.0
642.6
665.4

213.8
223.7
228.0
243.0
254.8
272.9
293.8
321.9
342.5
375.3
412.7
434.3
457.8
500.9
560.0
611.8
638.6
710.8
791.6
901.2
1,018.8
1,116.4
1,232.0
1,286.7
1,360.3
1,507.5
1,622.1
1,720.0
1,849.5
2,003.2
2,118.7
2,240.3
2,281.5
2,402.9
2,509.7
2,651.8
2,819.6
2,991.0
3,213.0

21.4
23.8
25.1
28.1
30.7
33.2
36.1
42.7
46.6
52.8
60.0
66.6
75.6
88.1
104.4
120.3
136.6
162.0
188.9
217.4
247.5
276.3
310.2
333.7
359.4
401.7
430.0
455.9
485.0
520.3
553.5
595.2
630.4
674.3
720.8
758.0
772.9
793.3
825.0

10.9
12.6
13.3
15.1
16.7
17.5
18.3
22.8
24.9
27.6
31.5
34.1
38.9
45.1
55.3
63.7
70.6
82.2
94.1
107.3
123.2
136.4
157.1
168.3
182.2
212.8
226.9
239.9
249.7
268.6
280.4
294.6
307.7
323.0
335.7
353.0
366.0
385.7
408.4

10.6
11.2
11.8
13.0
14.0
15.7
17.8
19.9
21.7
25.2
28.5
32.5
36.7
43.0
49.2
56.5
65.9
79.7
94.7
110.1
124.3
139.8
153.0
165.4
177.2
188.9
203.1
216.0
235.4
251.7
273.1
300.6
322.7
351.3
385.1
405.0
406.8
407.6
416.6

51.9
51.9
54.4
56.5
57.8
60.6
65.1
69.4
71.0
75.3
79.1
80.2
86.5
98.3
116.8
115.7
121.8
133.6
147.4
169.5
185.0
176.6
187.6
179.6
191.9
248.7
268.6
279.5
305.1
335.3
357.4
374.0
376.5
423.8
450.8
471.6
489.0
520.3
544.7

10.9
11.5
12.1
12.1
11.9
10.8
13.0
14.1
12.7
12.8
14.6
14.8
15.4
19.5
32.6
25.8
24.1
18.6
17.5
22.2
25.3
12.2
21.9
14.5
4.1
23.2
23.6
24.2
31.5
27.5
36.3
35.4
29.3
37.1
32.4
36.9
23.4
37.2
40.9

11.8
12.3
12.9
12.9
12.7
11.6
13.9
15.0
13.7
13.8
15.8
16.1
16.9
21.2
34.5
28.4
27.5
22.6
21.8
27.0
31.1
19.4
30.2
23.4
12.8
31.6
31.5
32.1
39.2
35.1
43.9
43.3
37.2
45.2
40.4
44.8
31.4
45.0
48.5

40.9
40.5
42.3
44.4
45.8
49.8
52.1
55.3
58.2
62.5
64.6
65.4
71.1
78.8
84.2
89.8
97.7
115.0
129.9
147.4
159.7
164.4
165.7
165.1
187.8
225.5
245.0
255.3
273.6
307.8
321.1
338.6
347.2
386.7
418.4
434.7
465.5
483.1
503.8

40.2
39.8
41.8
43.9
45.2
49.2
51.9
55.4
58.3
63.0
65.0
66.0
72.0
79.3
85.9
93.4
99.2
116.3
131.0
148.7
160.9
165.2
160.7
158.2
172.2
199.7
210.5
215.9
238.2
272.0
284.8
312.7
325.0
363.1
392.7
415.0
438.8
455.3
474.6

1992:1

4,927.9
4,981.5
4,949.5
5,102.6
5,159.8
5,236.9
5,281.7
5,388.7
5,423.2
5,556.3
5,636.1
5,747.3
5,807.9
5,862.4
5,953.4
6,025.5
6,108.8
6,229.4
6,303.3
6,376.5

3,577.1
3,626.5
3,669.2
3,707.0
3,749.3
3,796.3
3,837.6
3,876.2
3,937.4
3,988.0
4,028.7
4,093.9
4,153.2
4,187.9
4,238.0
4,282.6
4,322.2
4,403.9
4,461.0
4,520.7

2,916.5
2,956.2
2,988.2
3,021.7
3,045.5
3,079.3
3,111.0
3,140.4
3,190.7
3,232.3
3,267.2
3,325.9
3,384.3
3,417.7
3,463.3
3,504.9
3,540.3
3,612.3
3,664.0
3,718.0

561.4
567.2
569.8
572.5
581.1
581.5
586.3
588.4
596.0
601.3
603.5
608.0
617.2
621.1
625.1
628.5
635.6
640.3
645.5
648.9

2,355.1
2,389.0
2,418.3
2,449.2
2,464.5
2,497.7
2,524.7
2,552.0
2,594.8
2,631.0
2,663.7
2,717.8
2,767.1
2,796.7
2,838.2
2,876.4
2,904.7
2,972.0
3,018.4
3,069.0

660.7
670.3
681.0
685.3
703.8
717.0
726.6
735.8
746.7
755.6
761.5
768.1
768.9
770.2
774.6
777.7
781.9
791.5
797.0
802.7

319.9
322.7
325.1
324.2
330.0
334.7
337.1
340.9
347.1
352.0
354.6
358.3
361.0
363.6
368.0
371.4
376.8
383.6
388.6
393.6

340.8
347.6
355.9
361.1
373.8
382.3
389.5
394.9
399.5
403.7
406.9
409.8
407.9
406.6
406.7
406.2
405.0
407.9
408.4
409.1

410.2
420.8
426.6
437.4
440.3
452.2
446.2
464.4
463.9
474.7
471.6
476.1
478.2
484.4
491.7
501.5
509.3
520.0
523.8
528.3

35.9
37.1
39.0
36.5
29.7
36.3
25.6
38.0
46.4
38.8
33.2
29.1
20.6
21.3
22.9
28.9
31.9
36.5
40.1
40.4

43.7
44.9
47.8
44.4
37.7
44.2
33.8
46.0
54.3
46.7
41.1
37.0
28.6
29.3
30.8
36.8
39.8
44.3
47.9
48.1

374.4
383.8
387.6
401.0
410.6
416.0
420.6
426.5
417.5
435,9
438.4
447.0
457.6
463.1
468.7
472.6
477.4
483.5
483.7
487.9

350.8
360.7
364.4
376.3
383.5
389.0
394.8
403.4
408.1
410.9
416.6
424.3
431.3
436.6
442.4
444.7
448.8
456.4
456.1
460.0

II ...
Ill ..
IV ..

1993:1

II ...
Ill ..
IV ..

1994:1

II ...
Ill ..
IV ..

1995:1

II ...
Ill ..
IV ..

1996:1

II ...
Ill ..
IV...

47.9 494.4 466.3
40.2
401.3 412.3 534.6
657.8 3,134.9 813.6
6,510.0 4,606.3 3,792.7
415.1 543.6
43.6
51.2 500.0 470.8
662.0 3,180.8 820.7
405.6
II ...
6,599.0 4,663.4 3,842.7
667.7 3,229.6 827.9
48.5 506.3 477.0
410.2 417.7 547.2 40.9
Ill ..
6,699.6 4,725.2 3,897.3
46.4 514.4 484.3
416.4 421.4 553.3 39.0
IV*
4,818.6 3,980.8 674.2 3,306.7 837.7
1
National income is the total net income earned in production. It differs from gross domestic product mainly in that it excludes depreciation charges and other allowances for business and institutional consumption of durable capital goods and indirect business taxes. See Table
1997:1

B-26.
See next page for continuation of table.




312

TABLE B-28.—National income by type of income, 1959-97—Continued
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Rental income of persons
with capital consumption
adjustment
Year or
quarter
Total

Rental
income
of
persons

Capital
consumption
adjustment

Corporate profits with inventory valuation and capital consumption adjustments
Profits with inventory valuation adjustment and without
capital consumption adjustment
Profits
Total
Total

Profits
before
tax

53.4
17.7
53.1
52.9
19.8
-2.0
51.4 51.0
-2.1
18.6
51.1
20.6
19.2
51.3
51.0
-2.0
52.5
21.2
56.4
-2.0
60.5 56.4
20.0
22.0
20.7
61.2
66.3 61.2
-1.9
22.6
68.0
73.3 67.5
21.0
23.0
-2.0
78.8
84.1 77.6
-2.2
21.8
23.9
89.8 83.0
85.1
-2.5
22.5
24.9
87.4
80.3
81.8
-2.7
23.6
26.3
22.7
86.9
90.6
-3.2
94.2
25.9
23.4
83.2
89.0
90.9
-3.9
27.3
78.4
71.8
-4.2
78.7
23.6
27.8
85.5
90.1
-4.9
92.0
24.6
29.5
97.9
104.5
106.7
24.3
30.3
-6.0
-7.0
25.8
32.8
120.1 110.9 130.9
25.7
34.4
-8.6 109.2 103.4 142.8
140.4
24.7
-10.2
128.2 129.4
34.9
35.7 -11.5
173.8
154.9 158.9
24.3
36.4 -13.6
203.5
184.3 186.8
22.8
209.0 213.1 238.1
24.8
-16.5
41.3
26.9
-20.0
213.1 220.2 261.8
46.9
188.3 198.3 241.4
33.9
-23.6
57.5
207.0 204.1
44.5
229.8
-26.5
70.9
182.3 166.8 176.7
46.5
75.0 -28.5
46.1
212.8
235.2 203.7
75.1 -28.9
50.1
79.4 -29.4
244.2
290.1 238.5
304.0 230.5
48.1
229.9
79.3 -31.2
-31.5 293.8 234.0 222.6
41.5
73.0
44.8
77.9 -33.1 333.2 272.9 293.6
55.1
382.1 325.0 354.3
90.1 -35.0
51.7
91.4
348.1
-39.7
380.0 330.6
371.7
61.0
-38.1 397.1 358.2
99.1
411.3 378.2 374.2
67.9
107.5 -39.6
79.4
-48.1 428.0 398.9 406.4
127.5
105.7
148.5 -42.8 492.8 456.9 465.4
124.4
535.1
172.0 -47.6 570.5 519.1
132.8
-47.0 650.0 598.4 622.6
179.8
146.3
676.6
193.3 -47.0 735.9 674.1
148.1
-49.5
197.6
411.1
77.2
444.2 411.4
115.3 -38.2
79.5
437.2 404.3 426.2
118.1 -38.6
145.4
-75.9
69.5
376.1 359.4 368.0
454.6 420.5
91.2
131.1 -39.8
420.3
99.7
431.7
-45.1 459.2 419.2
144.8
105.6
-41.0 478.2 444.4 461.5
146.6
492.8 459.8
106.1
149.4
459.6
-43.3
111.5
153.3 -41.9 541.2 504.1 508.9
112.7
1994:1
-58.4
512.0 470.8 475.1
171.2
||
126.0
-43.0 562.0 510.2
525.3
169.0
Ill
130.1
-43.9 590.1 535.0
556.2
174.0
128.9
IV
-45.0 617.7 560.3 583.9
173.9
-45.7 613.2 560.4
130.5
1995-1
610.7
176.2
II
132.3
178.0 -45.7 628.0 577.2 615.0
Ill
131.5
177.3
630.6
-45.9 672.8 621.4
634.1
685.7 634.5
137.1
187.7 -50.6
IV
143.4
189.5 -46.1 717.7 659.8
1996:1
664.9
||
144.6
191.0 -46.4 738.5 676.8 682.2
III
739.6 676.4 679.1
148.0
195.5 -47.5
IV
149.2
-48.1 747.8 683.4
197.3
680.0
149.0
1997:1
197.9
-48.9 779.6 711.9 708.4
II
148.7
197.6
-48.9 795.1 725.7 719.8
Ill
148.0
197.7
-49.7 827.3 757.1 753.4
-50.4
IV
146.6
197.0
2
Without capital consumption adjustment.
3
Without inventory valuation and capital consumption adjustments.
Source: Department of Commerce, Bureau of Economic Analysis.

1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/>
1992-1
. ||
Ill
IV
1993:1
II
III
IV ... .




313

Profits
tax
liability

Profits after tax
Total

Divi- Undisdends tributed
profits

12.7
29.7
28.4 13.4
14.0
28.2
32.4
15.0
16.1
34.9
18.0
40.0
20.2
47.9
51.4 20.9
22.1
49.2
24.6
51.2
49.4
25.2
23.7
44.0
23.7
52.4
25.8
62.6
81.6 28.1
30.4
91.0
89.5 30.1
35.9
109.6
130.4 40.8
46.0
154.6
173.8 52.5
59.3
156.6
69.5
148.6
113.6 69.8
135.5 80.8
150.1 83.2
92.8
133.4
116.1 110.2
166.5 107.0
217.3 116.8
206.8 138.9
231.2 151.9
240.8 163.1
263.4 169.5
300.2 195.8
348.5 216.2
409.4 264.4
447.6 304.8
336.1
143.9 267.2 162.1
150.9 275.2 164.6
127.6 240.4 170.9
149.7 270.6 180.4
149.2 282.5 188.0
165.4 296.1 192.5
161.2 298.4 198.3
184.9 324.0 204.2
163.0 312.1 203.2
182.8 342.5 211.6
194.6 361.6 220.0
206.2 377.7 230.2
209.6 401.0 255.5
209.1 405.9 260.8
218.8 411.8 266.8
215.3 418.8 274.4
226.2 438.7 300.7
232.2 450.0 303.7
231.6 447.5 305.7
226.0 454.0 309.1
241.2 467.2 326.8
244.5 475.3 333.0
258.2 495.2 339.1
345.6

23.6
22.7
22.8
24.0
26.2
28.0
30.9
33.7
32.7
39.4
39.7
34.4
37.7
41.9
49.3
51.8
50.9
64.2
73.0
83.5
88.0
84.8
81.1
63.1
77.2
94.0
96.5
106.5
127.1
137.0
141.3
140.5
133.4
143.0
165.2
186.6
213.2
229.0

17.0
15.0
14.3
17.4
18.8
22.0
27.8
30.5
27.1
26.6
24.1
20.3
28.6
36.9
53.5
60.6
59.4
73.7
89.6
108.6
121.3
97.3
79.1
43.8
54.8
66.9
40.6
5.8
59.5
100.5
67.9
79.4
77.7
93.9
104.5
132.3
145.0
142.8
105.2
110.6
69.5
90.3
94.5
103.6
100.1
119.7
108.9
131.0
141.6
147.5
145.6
145.1
145.0
144.5
138.0
146.4
141.8
144.9
140.3
142.3
156.1

Capital
conInven- sumptory
tion
valu- adjustation
ment
adjustment

Net
interest

-0.2
.5
1.2
4.1
5.1
5.8
6.6
6.9
7.1
7.3
7.8
6.9
6.5
8.8
9.2
5.8
-1.3
-4.0
-2.5
-4.1
-7.1
-10.1
3.0
15.5
31.5
51.5
73.5
59.8
60.2
57.1
49.3
38.9
33.1
29.1
36.0
51.4
51.6
61.8
69.7
32.7
32.9
16.7
34.1
40.0
33.8
33.0
37.1
41.2
51.8
55.1
57.4
52.9
50.8
51.5
51.1
57.9
61.6
63.2
64.4
67.7
69.4
70.3
71.3

10.2
11.2
13.1
14.6
16.1
18.2
21.1
24.3
28.1
30.4
33.6
40.0
45.4
49.3
56.5
71.8
80.0
85.1
100.7
120.5
150.3
191.9
234.5
264.9
275.9
318.5
337.2
363.1
372.2
398.9
456.6
467.3
448.0
414.3
402.5
412.3
425.1
425.1

-0.3
-.2
.3
.0
.1
-L2
-2.1
-1.6
-3.7
-5.9
-6.6
-4.6
-6.6
-20.0
-39.5
-11.0
-14.9
-16.6
-25.0
-41.6
-43.0
-25.7
-9.9
-9.1
-5.6
1L4
-20.7
-29.3
-17.5
-13.5
4.0
-7.5
-8.5
-16.1
-24.3
-2.5
4.9

-2L9
-8.6
.2
-12.5
-17.1
-4l8
-4.3
-15.1
-21.2
-23.6
-50.3
-37.8
-9.3
.4
-5.1
-5.4
-2.7
3.3
3.5
5.9
3.6
6.5

419.2
417.5
408.1
412.4
411.2
404.6
398.9
395.4
397.2
405.6
415.6
430.7
432.7
429.7
419.5
418.6
416.2
422.5
430.9
430.6
440.5
448.1
451.8

TABLE B-29.—Sources of personal income, 1959-97
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Wage and salary disbursements1
Private industries
Year or
quarter

Personal
income

Total

Total

Goodsproducing
industries
Total

Manufacturing

Distributive
industries

Service
industries

Government

Other
labor
income1

Proprietors' income
with inventory
valuation and
capital
consumption
adjustments
Farm

46.0
10.6
86.9
38.8
65.1
213.8
109.9
113.4
49.2
11.2
41.7
223.7
89.8
68.6
52.4
44.4
89.9
11.8
69.6
228.0
114.0
56.3
13.0
243.0
122.2
96.8
47.6
73.3
14.0
50.7
127.4
100.7
60.0
76.8
254.8
15.7
64.9
54.9
82.0
272.9
136.0
107.3
59.4
115.7
69.9
17.8
87.9
293.8
146.6
78.3
19.9
321.9
161.6
128.2
65.3
95.1
86.4
21.7
134.3
72.0
101.6
342.5
169.0
25.2
80.4
184.1
96.6
110.8
375.3
146.0
412.7
200.4
157.7
105.5
28.5
90.6
121.7
158.4
117.1
32.5
99.4
203.7
131.2
434.3
36.7
457.4
126.5
107.9
140.4
209.1
160.5
137.4
119.7
43.0
501.2
228.2
175.6
153.3
148.7
49.2
170.3 133.9
560.0
255.9
196.6
1973
160.9
56.5
211.8
148.6
186.8
611.8
276.5
176.0
65.9
163.4
277.1
211.6
198.1
638.6
1975
79.7
188.6
710.8
309.7
238.0
219.5 181.6
1976
94.7
266.7
202.3
242.7 202.8
791.6
346.1
1977
219.6
110.1
901.2
300.1
274.9 233.7
392.6
1978
237.1
124.3
1,018.8
442.5
335.3
308.5 267.8
1979
1,116.4
356.4
261.3
139.8
307.2
336.7
472.5
1980
285.6
153.0
388.0
368.5 348.6
1,232.0
514.9
1981
165.4
307.3
1,286.7
515.1
386.2
385.9 385.7
1982
177.2
405.7 426.4
401.2
325.0
1,360.3
528.2
1983
347.6
188.9
445.9
445.2 475.6
1,507.5
586.6
1984
373.8
203.1
1,622.1
620.7
468.9
476.5 525.0
1985
396.6
216.0
1,720.0
637.3
481.2
501.6 581.0
1986
235.4
535.4 653.7
660.4
497.2
423.1
1,849.5
1987
450.4
251.7
575.3 . 720.9
2,003.2
707.0
530.1
1988
479.4
273.1
2,118.7
732.4
548.1
779.5
606.8
1989
634.1
517.2
300.6
852.1
2,240.3
754.2
561.2
1990
322.7
562.5
546.1
646.6 888.6
2,281.5
746.3
1991
765.7
567.8
351.3
972.6
2,418.6
583.5
680.3
1992
699.4 1,024.7
592.9
584.3
385.1
2,505.3
781.2
1993
741.4 1,072.7
824.4
602.2
405.0
2,638.5
620.8
1994
648.4
623.0
406.8
2,806.5
864.4
783.1 1,159.0
1995
642.6
407.6
674.7
823.3 1,257.5
2,989.9
909.1
1996
665.4
416.6
876.0 1,375.6
3,211.8
960.1
705.9
1997*
561.4
752.7
340.8
666.2 936.2
2,355.1
571.5
1992:1
567.2
347.6
953.4
579.6
II
673.6
2,389.0
761.9
Ill
569.8
355.9
681.5 972.2
2,418.3
583.0
764.6
599.7
361.1
2,512.2
572.5
699.9 1,028.6
783.6
IV
2,394.4
566.7
749.7
581.1
373.8
677.5 967.2
1993:1
581.5
382.3
697.7 1,020.2
592.8
2,497.8
II
779.9
Ill
586.3
389.5
597.2
704.3 1,034.0
2,524.8
786.5
588.4
1,077.4
394.9
718.2
2,604.2
614.9
808.6
IV
600.7
797.1
596.0
399.5
715.8 1,029.4
2,542.3
1994:1
618.4
403.7
2,630.7
601.3
737.9 1,072.3
820.5
II
Ill
603.5
406.9
2,663.4
626.9
832.9
748.0 1,082.5
637.1
608.0
409.8
847.2
763.6 1,106.7
2,717.5
IV
643.4
617.2
407.9
2,754.0
854.8
769.9 1,129.3
1995:1
644.5
621.1
406.6
778.7 1,146.3
2,783.5
858.5
II
Ill
406.7
788.4 1,169.0
867.7
650.2
625.1
2,825.1
628.5
406.2
876.4
655.3
795.5 1,191.4
2,863.3
IV
635.6
405.0
804.4 1,214.3
2,903.6
659.1
884.9
1996: I
674.1
640.3
407.9
II
819.2 1,245.3
2,970.9
906.3
408.4
645.5
3,017.3
680.1
917.2
Ill
829.0 1,271.1
648.9
409.1
685.6
927.8
840.6 1,299.5
IV
3,067.9
3,133.7
694.1
657.8
412.3
856.8 1,334.1
942.9
1997:1
II
662.0
415.1
867.0 1,359.8
3,179.6
952.8
700.3
667.7
417.7
Ill
3,228.4
961.4
880.8 1,386.3
706.0
674.2
421.4
723.1
899.6 1,422.4
3,305.5
983.5
IV/>
'The total of wage and salary disbursements and other labor income differs from compensation of employees in Table
cludes employer contributions for social insurance and the excess of wage accruals over wage disbursements.
See next page for continuation of table.

1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971

1972 : : : : : ..
1974™;.:

394.4
412.5
430.0
457.0
480.0
514.5
556.7
605.7
650.7
714.5
779.3
837.1
900.2
988.8
1,107.5
1,215.9
1,319.0
1,459.4
1,616.1
1,825.9
2,055.8
2,293.0
2,568.5
2,727.2
2,900.8
3,215.3
3,449.8
3,658.4
3,888.7
4,184.6
4,501.0
4,804.2
4,981.6
5,227.2
5,519.2
5,791.8
6,150.8
6,495.2
6,874.4
5,164.2
5,237.7
5,277.7
5,429.3
5,369.4
5,504.1
5,544.2
5,659.1
5,616.3
5,766.6
5,838.1
5,946.1
6,053.1
6,114.8
6,179.1
6,256.2
6,359.4
6,461.3
6,541.9
6,618.4
6,746.2
6,829.1
6,906.9
7,015.4

259.8
272.8
280.5
299.3
314.8
337.7
363.7
400.3
428.9
471.9
518.3
551.5
583.9
638.7
708.7
772.6
814.6
899.5
993.9
1,120.8
1,255.9
1,377.7
1,517.6
1,593.9
1,685.3
1,855.1
1,995.9
2,116.5
2,272.7
2,453.6
2,598.1
2,757.5
2,827.6
2,986.4
3,089.6
3,240.7
3,429.5
3,632.5
3,877.2
2,916.5
2,956.2
2,988.2
3,084.7
2,975.4
3,079.3
3,111.1
3,192.6
3,138.3
3,232.0
3,266.9
3,325.6
3,371.2
3,404.6
3,450.2
3,491.8
3,539.2
3,611.2
3,662.8
3,716.9
3,791.5
3,841.6
3,896.1
3,979.7




314

10.9
11.5
12.1
12.1
11.9
10.8
13.0
14.1
12.7
12.8
14.6
14.8
15.4
19.5
32.6
25.8
24.1
18.6
17.5
22.2
25.3
12.2
21.9
14.5
4.1
23.2
23.6
24.2
31.5
27.5
36.3
35.4
29.3
37.1
32.4
36.9
23.4
37.2
40.9
35.9
37.1
39.0
36.5
29.7
36.3
25.6
38.0
46.4
38.8
33.2
29.1
20.6
21.3
22.9
28.9
31.9
36.5
40.1
40.4
40.2
43.6
40.9
39.0

Nonfarm

40.9
40.5
42.3
44.4
45.8
49.8
52.1
55.3
58.2
62.5
64.6
65.4
71.1
78.8
84.2
89.8
97.7
115.0
129.9
147.4
159.7
164.4
165.7
165.1
187.8
225.5
245.0
255.3
273.6
307.8
321.1
338.6
347.2
386.7
418.4
434.7
465.5
483.1
503.8
374.4
383.8
387.6
401.0
410.6
416.0
420.6
426.5
417.5
435.9
438.4
447.0
457.6
463.1
468.7
472.6
477.4
483.5
483.7
487.9
494.4
500.0
506.3
514.4

B-28 in that it ex-

TABLE B-29.—Sources of personal income, 1959-97—Continued
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Rental
income
of
persons
with
capital
consumption
adjustment

Year or
quarter

1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/»

...

Transfer payments to persons
Personal
dividend
income

17.7
18.6
19.2
20.0
20.7
21.0
21.8
22.5
23.6
22.7
23.4
23.6
24.6
24.3
25.8
25.7
24.7
24.3
22.8
24.8
26.9
33.9
44.5
46.5
46.1
50.1
48.1
41.5
44.8
55.1
51.7
61.0
67.9
79.4
105.7
124.4
132.8
146.3
148.1

12.7
13.4
14.0
15.0
16.1
18.0
20.2
20.9
22.1
24.5
25.1
23.5
23.5
25.5
27.7
29.6
29.2
35.0
39.5
44.3
50.5
57.5
67.2
66.9
77.4
79.4
88.3
105.1
101.1
109.9
130.9
142.9
153.6
159.4
185.3
204.8
251.9
291.2
321.5

Personal
interest
income

22.7
25.0
26.9
29.3
32.4
36.1
40.3
44.9
49.5
54.6
60.8
69.2
75.7
81.8
94.1
112.4
123.0
134.6
155.7
184.5
223.6
274.7
337.2
379.2
403.2
472.3
508.4
543.3
560.0
595.5
674.5
704.4
699.2
667.2
651.0
668.1
718.9
735.7
768.8

Total

27.0
28.8
32.8
34.1
36.2
37.9
41.1
45.7
54.6
63.2
70.3
84.6
100.1
111.8
127.9
151.3
190.2
208.3
223.3
241.6
270.7
321.5
365.9
408.1
439.4
453.6
486.5
518.6
543.3
577.6
626.0
687.8
769.9
858.2
912.0
954.7
1,015.0
1,068.0
1,121.1

Old-age,
Governsurvivors, Government
ment
disability, unememployand
ployment Veterans ees
health
insur- benefits retireinsurance
ment
ance
benefits
benefits benefits

10.2
11.1
12.6
14.3
15.2
16.0
18.1
20.8
25.5
30.2
32.9
38.5
44.5
49.6
60.4
70.1
81.4
92.9
104.9
116.2
131.8
154.2
182.0
204.5
221.7
235.7
253.4
269.2
282.9
300.4
325.1
352.0
382.3
414.0
444.4
473.0
507.8
537.6
566.7

2.8
3.0
4.3
3.1
3.0
2.7
2.3
1.9
2.2
2.1
2.2
4.0
5.8
5.7
4.4
6.8
17.6
15.8
12.7
9.7
9.8
16.1
15.9
25.2
26.3
15.9
15.7
16.3
14.5
13.3
14.4
18.1
26.8
38.9
34.0
23.6
21.4
22.0
21.8

4.6
4.6
5.0
4.7
4.8
4.7
4.9
4.9
5.6
5.9
6.7
7.7
8.8
9.7
10.4
11.8
14.5
14.4
13.8
13.9
14.4
15.0
16.1
16.4
16.6
16.4
16.7
16.7
16.6
16.9
17.3
17.8
18.3
19.3
20.2
20.2
20.8
21.6
22.4

2.8
3.1
3.4
3.7
4.2
4.7
5.2
6.1
6.9
7.6
8.7
10.2
11.8
13.8
16.0
19.0
22.7
26.1
29.0
32.7
36.9
43.0
49.4
54.6
58.0
60.9
66.6
70.7
76.0
82.2
87.6
94.5
102.2
109.0
116.6
124.5
133.6
142.5
153.4

Family
assistance 1

0.9
1.0
1.1
1.3
1.4
1.5
1.7
1.9
2.3
2.8
3.5
4.8
6.2
6.9
7.2
7.9
9.2
10.1
10.6
10.7
11.0
12.4
13.0
13.3
14.2
14.8
15.4
16.4
16.7
17.3
18.0
19.8
22.0
23.3
24.0
24.3
23.3
21.7
18.8

Other

5.7
6.1
6.5
7.0
7.6
8.2
9.0
10.3
12.2
14.5
16.2
19.4
23.0
26.1
29.5
35.7
44.7
49.1
52.4
58.4
66.8
80.8
89.7
94.1
102.6
109.9
118.7
129.3
136.6
147.6
163.6
185.6
218.2
253.8
272.8
289.3
308.0
322.5
338.2

Less:
Personal
contributions
for
social
insurance

7.9
9.3
9.7
10.3
11.8
12.6
13.3
17.8
20.6
22.9
26.2
27.9
30.7
34.5
42.6
47.9
50.4
55.5
61.2
69.8
81.0
88.6
104.5
112.3
119.7
132.7
149.0
162.1
173.7
194.2
210.8
223.9
235.8
248.4
260.3
277.5
293.1
306.3
323.6

405.4
77.2
152.3
674.1
838.3
20.4
39.2
107.8
23.0
242.5
245.2
412.2
40.4
247.4
79.5
154.5
673.0
853.5
108.6
23.1
250.2
18.9
69.5
160.8
865.3
416.9
38.7
109.0
23.4
661.2
258.5
249.7
18.8
660.4
.
91.2
170.1
875.8
421.5
37.1
251.4
110.5
23.5
264.2
19.1
99.7
897.2
177.8
437.6
34.5
114.2
23.7
267.3
660.3
20.0
255.2
...
105.6
182.1
908.0
441.9
34.4
115.9
271.4
653.7
20.5
24.0
259.2
446.4
106.1
187.8
917.3
34.7
117.4
647.8
24.0
274.6
261.6
20.3
111.5
193.5
642.1
925.3
451.8
32.6
119.0
19.8
24.2
277.9
265.2
112.7
192.1
641.4
940.4
463.3
27.7
120.5
20.0
24.3
284.6
272.0
470.4
126.0
200.3
656.4
949.8
23.9
20.1
123.8
287.3
276.2
24.3
130.1
208.5
674.1
958.8
475.8
21.6
125.9
24.4
290.7
278.8
20.5
128.9
700.4
482.4
218.5
969.8
20.9
127.6
282.9
20.1
24.2
294.5
130.5
243.4
498.4
997.0
21.0
130.0
713.9
289.1
20.7
23.9
303.1
719.4 1,010.4
132.3
248.6
505.8
21.0
132.9
291.5
20.8
23.5
306.3
131.5
254.2
717.9 1,021.5
511.1
21.8
21.1
134.8
294.5
23.2
309.6
137.1
261.5
516.0
724.2 1,031.0
22.0
136.6
22.8
313.2
297.2
20.5
143.4
287.4
529.5
23.0
21.4
722.3 1,053.2
300.5
138.3
22.5
318.5
....
144.6
290.0
1,064.8
535.4
22.1
142.2
727.8
21.9
22.0
321.3
305.0
148.0
292.0
143.7
742.7 1,072.4
540.0
21.3
21.7
324.2
308.2
21.6
149.2
295.2
545.6
21.4
20.7
749.8 1,081.5
145.9
311.5
21.6
326.2
1997:1
149.0
1,107.2
558.9
22.1
22.4
150.4
312.5
757.2
19.7
333.8
318.2
II
148.7
564.4
318.3
21.9
22.4
152.7
766.1 1,117.0
19.0
336.6
321.3
III
569.4
148.0
324.5
154.2
772.6 1,125.7
21.6
22.5
18.2
339.8
324.8
IV"
330.7
146.6
574.1
156.3
779.1 1,134.8
21.5
22.3
18.1
342.5
330.2
1
Consists of aid to families with dependent children and, beginning with 1996, assistance programs operating under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
Note.—The industry classification of wage and salary disbursements and proprietors' income is on an establishment basis and is based on
the 1987 Standard Industrial Classification (SIC) beginning 1987 and on the 1972 SIC for earlier years shown.
Source: Department of Commerce, Bureau of Economic Analysis.
1992-1
||
III
IV
1993:1
II
Ill
IV
1994-1
II
Ill
IV
1995-1
||
Ill
IV
1996-1
II
Ill
IV

...




315

TABLE B-30.—Disposition of personal income, 1959-97
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Less: Personal outlays

Year or quarter

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1983
1989
1990
1991
1992
1993
1994
1995
1996
1997P

Personal
income

Less:
Personal
tax and
nontax
payments

Equals:
Disposable
personal

Total

44.5
349.9
324.7
48.7
363.8
339.6
379.7
50.3
350.5
402.2
54.8
371.8
422.0
58.0
392.5
56.0
458.5
422.1
494.8
61.9
456.2
534.7
71.0
494.7
77.9
572.9
523.0
92.1
622.5
574.6
669.4
109.9
621.4
109.0
728.1
666.1
108.7
791.5
721.6
132.0
856.8
791.6
967.0
875.4
140.6
1,056.8
159.1
956.6
156.4
1,162.6 1,054.8
1,277.1 1,176.7
182.3
210.0
1,406.1 1,308.9
1,585.8 1,467.6
240.1
1,775.7 1,639.5
280.2
312.4
1,980.5 1,811.5
360.2
2,208.3 2,001.1
371.4
2,355.8 2,141.8
369.3
2,531.5 2,355.5
395.5
2,819.8 2,574.4
437.7
3,012.1 2,795.8
459.9
3,198.5 2,991.1
514.2
3,374.6 3,194.7
532.0
3,652.6 3,451.7
594.9
3,906.1 3,706.7
4,179.4 3,958.1
624.8
624.8
4,356.8 4,097.4
4,626.7 4,341.0
650.5
690.0
4,829.2 4,580.7
5,052.7 4,842.1
739.1
5,355.7 5,101.1
795.1
886.9
5,608.3 5,368.8
987.9
5,886.6 5,661.0
636.7
4,527.5 4,250.0
1992:1
||
4,597.7 4,304.8
640.0
4,627.1 4,359.5
650.6
Ill
4,754.5 4,450.0
674.8
IV
662.5
4,707.0 4,488.4
1993-1
II
685.6
4,818.5 4,549.5
4,848.7 4,609.8
695.5
Ill
IV
716.4
4,942.8 4,675.2
712.9
4,903.4 4,738.2
1994-1
II
5,016.1 4,803.3
750.5
739.9
5,098.2 4,876.1
Ill
753.0
5,193.1 4,950.7
IV
1995-1
766.5
5,286.6 5,007.3
II
795.1
5,319.6 5,074.3
798.9
Ill
5,380.2 5,136.4
820.0
5,436.2 5,186.3
IV
5,519.4 5,261.3
840.0
1996:1
II
887.8
5,573.5 5,347.8
Ill
897.3
5,644.6 5,390.6
922.6
IV
5,695.8 5,475.4
955.7
1997-1
5,790.5 5,574.6
||
979.2
5,849.9 5,602.8
Ill
998.0
5,908.9 5,700.8
IVp
1,018.5
5,996.9 5,765.8
1
Percents based on data in millions of dollars.
Source: Department of Commerce, Bureau of Economic Analysis.
394.4
412.5
430.0
457.0
480.0
514.5
556.7
605.7
650.7
714.5
779.3
837.1
900.2
988.8
1,107.5
1,215.9
1,319.0
1,459.4
1,616.1
1,825.9
2,055.8
2,293.0
2,568.5
2,727.2
2,900.8
3,215.3
3,449.8
3,658.4
3,888.7
4,184.6
4,501.0
4,804.2
4,981.6
5,277.2
5,519.2
5,791.8
6,150.8
6,495.2
6,874.4
5,164.2
5,237.7
5,277.7
5,429.3
5,369.4
5,504.1
5,544.2
5,659.1
5,616.3
5,766.6
5,838.1
5,946.1
6,053.1
6,114.8
6,179.1
6,256.2
6,359.4
6,461.3
6,541.9
6,618.4
6,746.2
6,829.1
6,906.9
7,015.4




Personal
Personal Interest transfer Equals:
conpay- Personal
sumption paid
ments
saving
by
expendi- persons to rest
tures
of the
world
(net)
318.1
332.2
342.6
363.4
383.0
411.4
444.3
481.9
509.5
559.8
604.7
648.1
702.5
770.7
851.6
931.2
1,029.1
1,148.8
1,277.1
1,428.8
1,593.5
1,760.4
1,941.3
2,076.8
2,283.4
2,492.3
2,704.8
2,892.7
3,094.5
3,349.7
3,594.8
3,839.3
3,975.1
4,219.8
4,459.2
4,717.0
4,957.7
5,207.6
5,488.6
4,127.6
4,183.0
4,238.9
4,329.6
4,365.4
4,428.1
4,488.6
4,554.9
4,616.6
4,680.5
4,750.6
4,820.2
4,871.7
4,934.8
4,990.6
5,033.8
5,105.8
5,189.1
5,227.4
5,308.1
5,405.7
5,432.1
5,527.4
5,589.3

316

6.1
7.0
7.3
7.8
8.9
10.0
11.1
12.0
12.5
13.8
15.7
16.8
17.8
19.6
22.4
24.2
24.5
26.7
30.7
37.5
44.5
49.4
54.6
58.8
65.5
74.7
83.2
90.3
91.5
92.9
102.4
108.9
111.9
111.7
108.2
110.9
128.5
145.2
154.5
112.9
112.1
111.4
110.4
110.0
108.3
107.9
106.6
107.6
108.7
111.4
116.1
121.1
125.2
130.9
137.1
140.1
143.0
147.4
150.5
151.9
153.1
155.1
157.9

0.4
.5
!5
.6

!s

.8
1.0
1.0
1.1
1.2
1.3
1.3
1.4
1.2
1.2
1.2
1.2
1.3
1.4
1.6
5.2
6.2
6.5
7.4
7.8
8.1
8.7
9.1
9.6
9.9
10.4
9.6
13.3
14.2
14.8
15.9
17.9
9.4
9.7
9.2
9.9
13.1
13.1
13.4
13.7
14.0
14.1
14.2
14.4
14.5
14.3
14.9
15.4
15.4
15.8
15.9
16.7
17.0
17.6
18.2
18.5

25.2
24.2
29.2
30.4
29.5
36.4
38.7
40.1
49.9
47.8
47.9
62.0
69.9
65.2
91.5
100.2
107.8
100.4
97.2
118.2
136.2
169.1
207.2
214.0
176.1
245.5
216.4
207.4
179.9
200.9
199.4
221.3
259.5
285.6
248.5
210.6
254.6
239.6
225.6
277.5
292.9
267.6
304.5
218.6
269.0
239.0
267.6
165.2
212.8
222.1
242.4
279.2
245.4
243.8
249.9
258.1
225.7
254.0
220.4
215.9
247.0
208.2
231.1

Percent of disposable
personal income ?
Personal outlays

Total

92.8
93.4
92.3
92.4
93.0
92.1
92.2
92.5
91.3
92.3
92.8
91.5
91.2
92.4
90.5
90.5
90.7
92.1
93.1
92.5
92.3
91.5
90.6
90.9
93.0
91.3
92.8
93.5
94.7
94.5
94.9
94.7
94.0
93.8
94.9
95.8
95.2
95.7
96.2
93.9
93.6
94.2
93.6
95.4
94.4
95.1
94.6
96.6
95.8
95.6
95.3
94.7
95.4
95.5
95.4
95.3
95.9
95.5
96.1
96.3
95.8
96.5
96.1

Personal Personal
consumption saving
expenditures

90.9
91.3
90.3
90.4
90.7
89.7
89.8
90.1
88.9
89.9
90.3
89.0
88.8
89.9
88.1
88.1
88.5
90.0
90.8
90.1
89.7
88.9
87.9
88.2
90.2
88.4
89.8
90.4
91.7
91.7
92.0
91.9
91.2
91.2
92.3
93.4
92.6
92.9
93.2
91.2
91.0
91.6
91.1
92.7
91.9
92.6
92.2
94.2
93.3
93.2
92.8
92.2
92.8
92.8
92.6
92.5
93.1
92.6
93.2
93.4
92.9
93.5
93.2

7.2
6.6
7.7
7.6
7.0
7.9
7.8
7.5
8.7
7.7
7.2
8.5
8.8
7.6
9.5
'9.5
9.3
7.9
6.9
7.5
7.7
8.5
9.4
9.1
7.0
8.7
7.2
6.5
5.3
5.5
5.1
5.3
6.0
6.2
5.1
4.2
4.8
4.3
3.8
6.1
6.4
5.8
6.4
4.6
5.6
4.9
5.4
3.4
4.2
4.4
4.7
5.3
4.6
4.5
4.6
4.7
4.1
4.5
3.9
3.7
4.2
3.5
3.9

TABLE B-31.—Total and per capita disposable personal income and personal consumption expenditures
in current and real dollars, 1959—97
[Quarterly data at seasonally adjusted annual rates, except as noted]

Year or

1959
1960
1961 .
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/>
1992:1

II
Ill
IV

1993:1

II
Ill
IV

1994:1

II
Ill
IV
1995:1

11
Ill
IV

1996:1

II
Ill
IV

1997:1

II
Ill
\\!P

Disposable personal income
Per capita
Total (billions of
dollars)
(dollars)
Chained Current Chained
Current
(1992)
(1992)
dollars
dollars dollars dollars

Personal consumption expenditures
Total (billions of
Per capita
(dollars)
dollars)
Chained Current Chained
Current
(1992)
(1992)
dollars
dollars dollars dollars

349.9
363.8
379.7
4022
4220
458.5
494.8
534.7
5729
622!5
669.4
728.1
791.5
856.8
967.0
1,056.8
1,162.6
1,277.1
1,406.1
1,585.8
1,775.7
1,980.5
2,208.3
2,355.8
2,531.5
2,819.8
3,012.1
3,198.5
3,374.6
3,652.6
3,906.1
4,179.4
4,356.8
4,626.7
4,829.2
5,052.7
5,355.7
5,608.3
5,886.6
4,527.5
4,597.7
4,627.1
4,754.5
4,707.0
4,818.5
4,848.7
4,942.8
4,903.4
5,016.1
5,098.2
5,193.1
5,286.6
5,319.6
5,380.2
5,436.2
5,519.4
5,573.5
5,644.6
5,695.8
5,790.5
5,849.9
5,908.9
5,996.9

318.1
332.2
342.6
3634
3830
411.4
444.3
481.9
5095
559.8
604.7
648.1
702.5
770.7
851.6
931.2
1,029.1
1,148.8
1,277.1
1,428.8
1,593.5
1,760.4
1,941.3
2,076.8
2,283.4
2,492.3
2,704.8
2,892.7
3,094.5
3,349.7
3,594.8
3,839.3
3,975.1
4,219.8
4,459.2
4,717.0
4,957.7
5,207.6
5,488.6
4,127.6
4,183.0
4,238.9
4,329.6
4,365.4
4,428.1
4,488.6
4,554.9
4,616.6
4,680.5
4,750.6
4,820.2
4,871.7
4,934.8
4,990.6
5,033.8
5,105.8
5,189.1
5,227.4
5,308.1
5,405.7
5,432.1
5,527.4
5,589.3

1,533.9
1,569.2
1,619.4
16975
17593
1,885.8
2,003.9
2,110.6
22023
2,302.1
2,377.2
2,469.0
2,568.3
2,685.7
2,875.2
2,854.2
2,903.6
3,017.6
3,115.4
3,276.0
3,365.5
3,385.7
3,464.9
3,495.6
3,592.8
3,855.4
3,972.0
4,101.0
4,168.2
4,332.1
4,416.8
4,498.2
4,500.0
4,626.7
4,703.9
4,805.1
4,964.2
5,076.9
5,222.7
4,578.1
4,612.4
4,613.8
4,702.5
4,622.3
4,703.9
4,716.9
4,772.5
4,715.3
4,792.8
4,827.3
4,884.9
4,938.9
4,940.9
4,973.0
5,003.9
5,047.6
5,061.3
5,094.8
5,103.8
5,161.1
5,200.9
5,234.1
5,294.8

1,975
2,013
2,066
2156
2229
2,389
2,546
2,720
2882
3,101
3,302
3,550
3,811
4,082
4,562
4,941
5,383
5,856
6,383
7,123
7,888
8,697
9,601
10,145
10,803
11,929
12,629
13,289
13,896
14,905
15,790
16,721
17,242
18,113
18,706
19,381
20,349
21,117
21,976
17,801
18,028
18,088
18,533
18,304
18,692
18,756
19,070
18,878
19,267
19,530
19,844
20,160
20,239
20,416
20,579
20,853
21,012
21,229
21,373
21,689
21,865
22,034
22,312

8,660
8,681
8,814
9098
9*294
9,825
10,311
10,735
11081
11468
11,726
12,039
12,366
12,794
13,566
13,344
13,444
13,837
14,142
14,715
14,951
14,867
15,064
15,053
15,332
16,309
16,654
17,039
17,164
17,678
17,854
17,996
17,809
18,113
18,221
18,431
18,861
19,116
19,497
18,000
18,085
18,036
18,330
17,975
18,247
18,246
18,413
18,154
18,409
18,493
18,667
18,834
18,798
18,871
18,942
19,071
19,081
19,161
19,152
19,331
19,439
19,518
19,700

1,394.6
1,432.6
1,461 5
15338
15966
l',692'.3
1,799.1
1,902.0
19586
2,070.2
2,147.5
2,197.8
2,279.5
2,415.9
2,532.6
2,514.7
2,570.0
2,714.3
2,829.8
2,951.6
3,020.2
3,009.7
3,046.4
3,081.5
3,240.6
3,407.6
3,566.5
3,708.7
3,822.3
3,972.7
4,064.6
4,132.2
4,105.8
4,219.8
4,343.6
4,486.0
4,595.3
4,714.1
4,869.7
4,173.8
4,196.4
4,226.7
4,282.3
4,286.8
4,322.8
4,366.6
4,398.0
4,439.4
4,472.2
4,498.2
4,534.1
4,551.3
4,583.5
4,612.9
4,633.5
4,669.4
4,712.2
4,718.2
4,756.4
4,818.1
4,829.4
4,896.2
4,935.0

1,796
1,838
1,865
1948
2023
2',144
2,286
2,451
2563
2,789
2,982
3,160
3,383
3,671
4,018
4,353
4,765
5,268
5,797
6,418
7,079
7,730
8,440
8,943
9,744
10,543
11,341
12,019
12,743
13669
14,531
15,360
15,732
16,520
17,273
18,093
18,837
19,608
20,490
16,229
16,402
16,570
16,877
16,976
17,177
17,363
17,574
17,774
17,978
18,199
18,419
18,578
18,774
18,938
19,055
19,291
19,562
19,660
19,919
20,247
20,303
20,612
20,796

7,873
7,926
7,954
8220
8434
8,817
9,257
9,674
9854
10,313
10,593
10,717
10,975
11,508
11,950
11,756
11,899
12,446
12,846
13,258
13,417
13,216
13,245
13,270
13,829
14,415
14,954
15,409
15,740
16,211
16,430
16,532
16,249
16,520
16,825
17,207
17,460
17,750
18,179
16,410
16,454
16,522
16,692
16,671
16,769
16,891
16,968
17,092
17,178
17,232
17,326
17,356
17,438
17,505
17,540
17,642
17,765
17,745
17,848
18,046
18,051
18,258
18,361

Gross domestic
per capita
(dollars)
Current Chained
(1992)
dollars dollars
2,864
12,478
2,913
12,519
2,965
12,595
3136
13156
3261
13520
3,455
14,112
3,700
14,825
4,007
15,612
4194
15835
4,536
16,408
4,845
16,739
5,050
16,566
5,419
16,900
5,894
17,637
6,524
18,479
6,998
18,192
7,550
17,936
8,341
18,721
9,201
19,400
10,292
20,226
11,361
20,571
12,226
20,265
13,547
20,524
13,961
19,896
14,998
20,499
16,508 21,744
17,529
22,320
18,374
22,801
23,264
19,323
20605
23934
21,984
24,504
22,979
24,549
23,416
24,060
24,447
24,447
25,403
24,750
26,647
25,357
27,605
25,616
28,752
26,088
30,177
26,847
24,070
24,281
24,315
24,366
24,474
24,516
24,881
24,663
25,061
24,608
24,671
25,250
25,432
24,732
25,866
24,989
26,158
25,120
26,546
25,352
26,764
25,396
27,115
25,559
25,564
27,338
27,428
25,524
27,706
25,649
27,944
25,728
28.213
25,791
28,680
26,111
28,869
26,116
29,243
26,333
29,715
26,599
30,030 26,760
26,901
30,295
30,664 27,124

Population
(thousands)1
177,130
180,760
183,742
186 590
189 300
191,927
194,347
196,599
198 752
200,745
202,736
205,089
207,692
209,924
211,939
213,898
215,981
218,086
220,289
222,629
225,106
227,726
230,008
232,218
234,332
236,394
238,506
240,682
242,842
245 061
247,387
249,956
252,680
255,432
258,161
260,705
263,194
265,579
267,869
254,338
255,032
255,815
256,543
257,151
257,785
258,516
259,191
259,738
260,351
261,040
261,692
262,235
262,847
263,527
264,169
264,680
265,258
265,887
266,491
266,987
267,545
268,171
268,772

'Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning 1960. Annual data are averages
of quarterly data. Quarterly data are averages for the period.
Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).




317

TABLE B-32.—Gross saving and investment, 1959-97
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Gross saving
Gross private saving

Gross government saving

Gross business saving
Year or
quarter

Total

Total

Undis- Corporate
Perand nontrib- corporate
sonal
1
uted- consumpsaving Total corpotion of
rate
fixed
profits2 capital

Total

108.5 82.3 25.2 57.1
16.5
40.5 26.2
1959
1134 816 242 574
1960
153
421 318
15.7
43.1 28.3
1961
116.3 88.0 29.2 58.8
1962
126.8 96.5 30.4 66.1
21.5
44.6 30.3
1349 99.8 295 702
1963
240
462 351
1964
145.3 112.3 36.4 75.9
48.7 32.9
27.3
160.4 123.8 38.7 85.1
1965
33.1
52.0 36.6
56.7 39.2
171.1 131.9 401 919
352
1966 ...
1967
173.8 144.1 49.9 94.2
32.7
61.5 29.7
1968
185.1 145.4 47.8 97.6
30.2
67.3 39.7
202.1 148.2 47.9 100.3
74.2 53.9
1969
26.0
197.3 163.8 62.0 101.8
20.7
81.2 32.6
1970
1971
214.3 189.7 69.9 119.8
88.9 23.9
30.5
1972
243.9 201.7 65.2 136.5
39.0
97.8 41.5
296.4 241.3 91.5 149.7
42.7
107.1 55.1
1973
1974
301.2 251.7 100.2 151.5
27.0
124.5 51.5
297.3 301.2 107.8 193.5
47.2
1975
146.3 -3.9
340.0 316.5 100.4 216.1
54.8
161.3 23.5
1976
1977
394.7 348.6 97.2 251.4
70.5
181.0 46.1
476.9 404.5 118.2 286.3
79.5
206.8 72.4
1978
540.6 448.8 136.2 312.5
239.9 90.7
1979
72.6
547.2 489.2 169.1 320.1
44.1
1980
276.0 56.8
56.4
1981
650.8 581.7 207.2 374.4
318.1 68.1
49.4
346.2 -5.3
1982
604.3 609.6 214.0 395.6
589.0 618.4 176.1 442.4
365.2 -29.4
1983
77.2
378.4 14.0
1984
750.7 736.7 245.5 491.2 112.8
399.4 15.2
745.6 730.5 216.4 514.1 114.7
1985
424.4 10.8
719.8 708.9 207.4 501.5
77.1
1986
447.1 53.6
1987
779.6 726.0 179.9 546.1
99.1
876.0 807.2 200.9 606.3 128.3
478.0 68.8
1988
99.7
515.1 92.0
1989
906.3 814.3 199.4 614.8
903.1 860.3 221.3 639.0 104.7
534.3 42.7
1990
556.4
3.3
1991 .... 934.0 930.6 259.5 671.2 114.8
585.4 -66.5
1992 .... 904.3 970.7 285.6 685.1 115.5
1993 .... 949.5 979.3 248.5 730.8 131.9
594.5 -29.8
1994 .... 1,079.2 1,030.2 210.6 819.6 167.6
638.6 49.0
1995 .. 1,165.5 1 093 1 254.6 838.5 172.4
653.0 72.4
1996 .... 1,267.8 1,125.5 239.6 885.9 202.1
682.8 142.3
1997*
2256
717.0
920.3 976.6 277.5 699.1 138.2
560.9 -56.3
1992:1
564.7 -65.3
II .... 914.0 979.3 292.9 686.4 121.7
Ill ... 899.9 986.7 267.6 719.1
77.6
641.5 -86.9
IV ... 883.0 940.3 304.5 635.8 124.5
574.3 -57.3
932.0 1,001.1 218.6 782.5 121.9
590.5 -69.1
1993:1
II .... 942.1 977.3 269.0 708.3 120.3
588.0 -35.2
Ill ... 943.8 973.3 239.0 734.3 133.2
601.1 -29.4
IV ... 980.1 965.6 267.6 698.0 152.1
598.1 14.5
1,062.4 1,048.6 165.2 883.4 145.8
1994:1
685.2 13.8
II .... 1,065.5 995.7 212.8 782.9 167.7
614.9 69.7
Ill ... 1,071.0 1,021.2 222.1 799.1 175.5
623.3 49.7
IV ... 1,118.0 1,055.3 242.4 812.9 181.3
631.2 62.7
1,136.8 1,078.7 279.2 799.5 148.1
1995:1
638.2 58.0
II .... 1,133.4 1,064.0 245.4 818.6 158.1
647.4 69.4
Ill ... 1,167.7 1,098.8 243.8 855.0 187.2
654.7 68.9
IV ... 1,224.0 1,130.7 249.9 880.8 196.0
671.7 93.3
1,215.9 1,119.3 258.1 861.2 190.8
1996:1
669.2 96.7
II .... 1,256.3 1,106.3 225.7 880.5 202.6
676.8 150.0
Ill ... 1,295.9 1,145.1 254.0 891.1 202.3
687.7 150.8
IV ... 1,303.0 1,131.4 220.4 911.0 212.6
697.2 171.6
1997:1
705.4 198.9
1,332.9 1,134.0 215.9 918.1 211.5
II .... 1,396.9 1,178.1 247.0 931.1 217.6
712.3 218.8
Ill ... 1,411.6 1,159.6 208.2 951.4 230.0
720.4 251.9
IV"
729.9
231.1
1
Includes private wage accruals less disbursements not shown separately.
2
With inventory valuation and capital consumption adjustments.
3
Consists mainly of allocations of special drawing rights (SDRs).
See next page for continuation of table.




Capital
grants
ConConsump- Current
sump- Current received
by the
tion surplus
tion surplus United
or
or
of
of
deficit Total fixed deficit States
fixed
(-)
capital (NIPA)
capital (NIPA) (net) 3

Federal

318

Total

12.8
178
13.6
14.0
172
13.0
15.9
15.6
5.6
12.0
24.3
2.2
-8.5
-2.4
8.7
5.1
-49.9
-31.9
-19.3
-2.8
13.0
-26.8
-20.6
-92.8
-131.8
-111.9
-116.9
-127.9
-77.2
-67.0
-56.4
-94.0
-132.2
-215.0
-182.7
-117.2
-103.6
-39.2
-202.2
-213.9
-231.5
-212.5
-211.2
-181.7
-182.2
-155.8
-139.9
-93.6
-118.3
-117.0
-121.2
-108.6
-105.5
-78.9
-82.6
-40.2
-28.3
-5.9
15.9
34.7
60.8

10.2
105
10.7
11.2
118
12.1
12.5
13.0
13.9
14.9
15.6
16.2
16.9
18.2
19.9
22.0
24.0
25.4
27.0
28.9
31.5
34.1
37.1
41.9
42.6
44.1
46.1
49.6
51.7
54.3
57.0
60.7
63.9
65.9
67.9
69.5
70.9
71.2
716
65.2
65.8
66.0
66.5
67.0
67.5
68.4
68.8
69.1
69.6
69.3
69.8
70.3
70.9
71.0
71.3
71.0
71.4
71.2
71.3
71.4
71.5
71.6
71.9

State and local

2.6
74
2.9
2.8
54
.9
3.4
2.6
-8.3
-2.8
8.7
-14.1
-25.3
-20.5
-11.1
-16.9
-73.9
-57.2
-46.3
-31.7
-18.4
-61.0
-57.8
-134.7
-174.4
-156.0
-162.9
-177.5
-128.9
-121.3
-113.4
-154.7
-196.0
-280.9
-250.7
-186.7
-174.4
-110.5

13.5
140
14.7
16.3
179
19.9
20.8
235
24.1
27.6
29.6
30.4
32.4
43.9
46.4
46.5
46.0
55.3
65.4
75.1
77.7
83.6
88.7
87.5
102.4
125.9
132.0
138.8
130.8
135.8
148.4
136.7
135.5
148.6
152.9
166.2
176.0
181.5

-267.4
-279.6
-297.5
-279.0
-278.2
-249.2
-250.6
-224.6
-209.0
-163.2
-187.6
-186.8
-191.5
-179.5
-176.5
-150.2
-153.6
-111.6
-99.5
-77.1
-55.5
-36.8
-10.8

145.9
148.5
144.6
155.2
142.1
146.5
152.7
170.4
153.7
163.3
168.0
179.7
179.2
178.0
174.5
172.1
179.3
190.2
179.1
177.5
182.9
184.1
191.1

3.9
40
4.3
4.6
49
5.2
5.7
6.3
6.8
7.6
8.5
9.6
10.7
11.7
13.0
16.0
18.4
19.4
20.7
22.5
25.4
29.2
33.3
36.2
37.5
39.0
41.0
43.9
47.1
49.9
53.3
56.6
59.6
62.3
65.5
69.4
72.9
76.2
795
61.1
62.0
62.7
63.5
64.3
65.2
65.8
66.6
69.0
68.5
69.6
70.4
71.5
72.4
73.3
74.3
75.2
75.8
76.5
77.2
78.2
79.2
79.7
80.8

9.6
99
10.4
11.7
130
14.7
15.1
17.3
17.3
20.0
21.1
20.8
21.7
32.2
33.4
30.5
27.6
35.9
44.7
52.6
52.3
54.4
55.4
51.3
64.9
86.9
91.0
94.9
83.8
85.9
95.1
80.1
75.8
86.3
87.4
96.8
103.1
105.3

84.8
86.6
82.0
91.7
77.8
81.3
86.9
103.7
84.7
94.8
98.4
109.3
107.7
105.6
101.1
97.8
104.1
114.4
102.6
100.4
104.7
104.9
111.4

0.9
.7
.7
0
«-2.0
0
0
0
0
1.1
1.2
1.1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

o

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

TABLE B-32.—Gross saving and investment, 1959—97—Continued
[Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates]
Addenda:

Gross investment

Year or quarter

1959
. .
I960
1961
1962
1963
1964
1965
1966 . . .
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 .
1991
1992
1993
1994
1995
1996
1997»
1992: 1
II
Ill
IV
1993: 1

II ...
Ill
IV
1994: 1
II
III
IV
1995: 1
||
III
IV
1996-1
II
III
IV

.

.

1997:1

||
III .
IV*>

Total

106.9
110.2
113.5
125.0
131.9
143.8
159.6
174.4
175.1
186.0
200.7
199.1
220.4
248.1
299.9
306.7
309.5
359.9
413.0
494.9
568.7
574.8
665.7
601.8
626.2
755.7
748.0
743.1
764.2
828.7
919.5
920.5
944.0
949.1
1,002.1
1,093.8
1,137.2
1,207.9
944.8
951.3
952.5
947.7
1,003.0
989.0
991.3
1,025.1
1,068.7
1,107.8
1,086.2
1,112.6
1,138.0
1,113.2
1,122.7
1,175.1
1,165.6
1,206.0
1,216.4
1,243.5
1,268.6
1,323.4
1,308.4

4
For details on
5

Gross
private
domestic
investment

78.8
78.8
77.9
87.9
93.4
101.7
118.0
130.4
128.0
139.9
155.0
150.2
176.0
205.6
242.9
245.6
225.4
286.6
356.6
430.8
480.9
465.9
556.2
501.1
547.1
715.6
715.1
722.5
747.2
773.9
829.2
799.7
736.2
790.4
876.2
1,007.9
1,038.2
1,116.5
1,237.6
755.2
790.7
799.7
816.1
854.3
857.4
872.8
920.3
963.4
1,017.9
1,007.1
1,043.1
1,050.8
1,024.0
1,028.8
1,049.1
1,060.5
1,105.4
1,149.2
1,151.1
1,193.6
1,242.0
1,250.2
1,264.5

Gross
government
investment 4

29.3
28.2
31.3
33.2
33.5
34.5
35.4
40.1
43.5
44.3
43.9
44.0
43.1
45.4
48.3
56.0
62.7
64.4
65.4
74.6
85.3
96.4
102.1
106.9
116.5
131.7
149.9
163.5
173.5
172.9
182.7
199.4
200.5
209.1
204.5
205.9
213.4
224.3
226.9
209.5
209.3
208.9
208.8
202.9
206.5
203.4
205.2
197.0
202.4
213.2
211.2
213.0
215.8
210.8
214.1
222.0
226.3
223.6
225.3
223.3
227.4
227.1
229.7

Net
foreign
investment 5

Statistical
discrepancy

Gross
saving
as a
percent
gross
national
product

-1.2
3.2
4.3
3.9
5.0
7.5
6.2
3.9
3.5
1.7
1.8
4.9
1.3
-2.9
8.7
5.1
21.4
8.9
-9.0
-10.4
2.6
12.5
7.4
-6.1
-37.3
-91.5
-116.9
-142.9
-156.4
-118.1
-92.4
-78.6
7.3
-50.5
-78.6
-120.0
-114.4
-132.9

-1.6
-3.2
-2.8
-1.8
-3.0
-1.5
-.8
3.3
1.3
.9
-1.5
1.9
6.1
4.3
3.4
5.5
12.1
19.9
18.2
18.1
28.2
27.6
14.9
-2.5
37.1
5.0
2.4
23.3
-15.4
-47.3
13.2
17.4
10.1
44.8
52.6
14.6
-28.2
-59.9

21.3
21.4
21.2
21.5
21.7
21.7
22.1
21.6
20.7
20.2
20.5
18.9
18.9
19.6
21.2
19.9
18.1
18.5
19.3
20.6
20.9
19.4
20.7
18.5
16.6
19.1
17.7
16.2
16.6
17.3
16.6
15.7
15.7
14.5
14.4
15.5
16.0
16.6

-19.9
-48.7
-56.0
-77.2
-54.2
-74.9
-84.9
-100.4
-91.6
-112.5
-134.2
-141.8
-125.8
-126.7
-116.9
-88.0
-116.9
-125.6
-156.4
-132.9
-148.4
-146.0
-168.9

24.5
37.4
52.7
64.6
71.0
46.9
47.5
45.0
6.3
42.4
15.2
-5.4
1.2
-20.2
-45.0
-48.9
-50.3
-50.2
-79.5
-59.5
-64.3
-73.5
-103.2

15.0
14.7
14.3
13.8
14.4
14.4
14.3
14.6
15.6
15.4
15.3
15.8
15.8
15.7
16.0
16.6
16.3
16.5
16.9
16.7
16.8
17.4
17.4

Personal
saving
as a
percent
of
disposable
personal
income

7.2
6.6
7.7
7.6
7.0
7.9
7.8
7.5
8.7
7.7
7.2
8.5
8.8
7.6
9.5
9.5
9.3
7.9
6.9
7.5
7.7
8.5
9.4
9.1
7.0
8.7
7.2
6.5
5.3
5.5
5.1
5.3
6.0
6.2
5.1
4.2
4.8
4.3
3.8
6.1
6.4
5.8
6.4
4.6
5.6
4.9
5.4
3.4
4.2
4.4
4.7
5.3
4.6
4.5
4.6
4.7
4.1
4.5
3.9
3.7
4.2
3.5
3.9

government investment, see Table B-20.
Net exports of goods and services plus net receipts of factor income from rest of the world less net transfers plus net capital grants
received by the United States. See also Table B-24.
6
Consists of a U.S. payment to India under the Agricultural Trade Development and Assistance Act. This payment is included in capital
grants received by the United States, net.
Source: Department of Commerce, Bureau of Economic Analysis.




319

TABLE B-33.—Median money income (in 1996 dollars) and poverty status of families and persons,
by race, selected years, 1978-96
Families^

Year

Number
(millions)

ALL RACES
1978 4
1979
1980
1981
1982
1983*
1984
1985
1986 6
1987
1988
1989
1990
1991
19927
1993
1994
1995
1996
WHITE
1978 4
1979
1980
1981
1982 5
1983
1984
1985
1986
1987 6
1988
1989
1990
1991
1992 7
1993
1994
1995
1996
BLACK
1978
1979*
1980
1981
1982 5
1983
1984
1985
1986 6
1987
1988
1989
1990
1991
1992 7
1993
1994
1995
1996

Median
money
income
(in
1996
dol- 2
lars)

Persons
below
poverty level

Below poverty level
Female
householder

Total

Number
(millions)

Percent

Number
(millions)

Percent

Median money income (in 1996 dollars)
of persons 15 years old and over with
income 23
Males

Number
(millions)

Percent

All
persons

Females

Yearround
full-time
workers

All
persons

Yearround
full-time
workers

57.8
59.6
60.3
61.0
61.4
62.0
62.7
63.6
64.5
65.2
65.8
66.1
66.3
67.2
68.2
68.5
69.3
69.6
70.2

$41,003
41,530
40,079
38,986
38,459
38,869
39,917
40,443
42,171
42,775
42,695
43,290
42,440
41,401
40,900
40,131
41,059
41,810
42,300

5.3
5.5
6.2
6.9
7.5
7.6
7.3
7.2
7.0
7.0
6.9
6.8
7.1
7.7
8.1
8.4
8.1
7.5
7.7

9.1
9.2
10.3
11.2
12.2
12.3
11.6
11.4
10.9
10.7
10.4
10.3
10.7
11.5
11.9
12.3
11.6
10.8
11.0

2.7
2.6
3.0
3.3
3.4
3.6
3.5
3.5
3.6
3.7
3.6
3.5
3.8
4.2
4.3
4.4
4.2
4.1
4.2

31.4
30.4
32.7
34.6
36.3
36.0
34.5
34.0
34.6
34.2
33.4
32.2
33.4
35.6
35.4
35.6
34.6
32.4
32.6

24.5
26.1
29.3
31.8
34.4
35.3
33.7
33.1
32.4
32.2
31.7
31.5
33.6
35.7
38.0
39.3
38.1
36.4
36.5

11.4 $25,418 $37,335
11.7 24,975 37,060
13.0 23,888 36,552
14.0 23,462 36,033
15.0 22,895 35,540
15.2 23,095 35,454
14.4 23,558 36,249
14.0 23,784 36,453
13.6 24,500 37,069
13.4 24,565 36,851
13.0 25,077 36,263
12.8 25,171 35,959
13.5 24,361 34,788
14.2 23,580 34,941
14.8 22,875 34,480
15.1 22,913 33,744
14.5 22,995 33,468
13.8 23,228 33,150
13.7 23,834 33,538

$9,456 $22,410
9,227 22,329
9,380 22,098
9,505 21,693
9,662 22,424
10,090
22,823
10,371 23,289
10,524 23,698
10,894 24,112
11,457 24,259
11,783 24,596
12,177 24,848
12,089 24,719
12,068 24,474
24,707
11,982
11,994 24,397
12,139 24,631
12,488 24,479
12,815 24,935

50.9
52.2
52.7
53.3
53.4
53.9
54.4
55.0
55.7
56.1
56.5
56.6
56.8
57.2
57.7
57.9
58.4
58.9
58.9

42,695
43,336
41,759
40,952
40,379
40,701
41,809
42,509
44,105
44,729
44,981
45,520
44,315
43,525
43,245
42,672
43,284
43,905
44,756

3.5
3.6
4.2
4.7
5.1
5.2
4.9
5.0
4.8
4.6
4.5
4.4
4.6
5.0
5.3
5.5
5.3
5.0
5.1

6.9
6.9
8.0
8.8
9.6
9.7
9.1
9.1
8.6
8.1
7.9
7.8
8.1
8.8
9.1
9.4
9.1
8.5
8.6

1.4
1.4
1.6
1.8
1.8
1.9
1.9
2.0
2.0
2.0
1.9
1.9
2.0
2.2
2.2
2.4
2.3
2.2
2.3

23.5
22.3
25.7
27.4
27.9
28.3
27.1
27.4
28.2
26.9
26.5
25.4
26.8
28.4
28.5
29.2
29.0
26.6
27.3

16.3
17.2
19.7
21.6
23.5
24.0
23.0
22.9
22.2
21.2
20.7
20.8
22.3
23.7
25.3
26.2
25.4
24.4
24.7

8.7
9.0
10.2
11.1
12.0
12.1
11.5
11.4
11.0
10.4
10.1
10.0
10.7
11.3
11.9
12.2
11.7
11.2
11.2

9,570
9,314
9,431
9,611
9,793
10,266
10,494
10,728
11,109
11,750
12,073
12,415
12,385
12,350
12,260
12,233
12,313
12,680
12,961

26,622
26,090
25,409
24,895
24,205
24,297
24,867
24,951
25,854
26,111
26,471
26,398
25,414
24,647
23,939
23,867
24,000
24,601
24,949

38,028
38,131
37,595
36,879
36,487
36,400
37,490
37,465
38,104
37,710
37,484
37,545
36,111
35,657
35,300
34,564
34,344
34,505
34,741

22,621
22,524
22,311
22,055
22,726
23,129
23,520
24,034
24,481
24,708
24,965
25,143
25,016
24,831
24,993
24,951
25,297
24,980
25,358

5.9 25,288
1.2
7.6 30.6 15,948 29,125
8,617 20,966
50.6
1.6 27.5
49.4
8,477 20,639
6.2 24,540
1.7 27.8
1.2
8.1 31.0 16,150 27,481
49.4
6.3 24,162
1.3
8.6 32.5 15,269 26,452
1.8 28.9
8,731 20,809
6.4 23,101
1.4
9.2 34.2 14,804 26,093
52.9
8,538 19,918
2.0 30.8
9.7 35.6 14,505 25,915
6.5 22,317
1.5
8,638 20,312
56.2
2.2 33.0
53.7
6.7 22,938
1.5
9.9 35.7 14,209 25,953
8,773 20,531
2.2 32.3
9.5 33.8 14,267 25,586
51.7
6.8 23,302
1.5
9,308 21,196
2.1 30.9
6.9 24,477
1.5
8.9 31.3 15,702 26,205
50.5
2.0 28.7
9,153 21,275
50.1
7.1 25,201
1.5
9.0 31.1 15,492 26,865
9,400 21,422
2.0 28.0
7.2 25,422
1.6
9.5 32.4 15,490 26,963
51.1
2.1 29.4
9,598 22,068
7.4 25,636
9.4 31.3 15,974 27,475
9,747 22,371
1.6
49.0
2.1 28.2
1.5
9,964 22,613
46.5
7.5 25,571 * 2.1 27.8
9.3 30.7 15,954 26,197
25,787
7.5 25,717
9.8 31.9 15,448
9,997 22,261
48.1
2.2 29.3
1.6
7.7 24,823
1.8
51.2 10.2 32.7 14,932 26,067 10,156 22,042
2.3 30.4
8.0 23,600
1.9
9,938 22,655
50.2 10.8 33.4 14,610 25,711
2.5 31.1
8.0 23,391
1.9
49.9 10.9 33.1 15,858 25,588 10,324 22,058
2.5 31.3
1.7
46.2 10.2 30.6 15,862 25,838 11,163 21,839
8.1 26,148
2.2 27.3
1.7
9.9 29.3 16,479 25,530 11,285 21,701
45.1
8.1 26,737
2.1 26.4
1.7
9.7 28.4 16.491 27.136 11.772 21.990
43.7
8.5 26.522
2.2 ?6.1
!
The term "family" refers to a group of two or more persons related by birth, marriage, or adoption and residing together. Every family
must include a reference person. Beginning 1979, based on householder concept and restricted to primary families.
2
Current dollar median money income adjusted by CPI-U-X1.
3
Prior to 1979, data are for persons 14 years and over.
4
Based on 1980 census population controls,- comparable with succeeding years.
5
Reflects implementation of Hispanic population controls; comparable with succeeding years.
6
Based on revised methodology; comparable with succeeding years.
7
Based on 1990 census adjusted population controls; comparable with succeeding years.
Note.—Poverty rates (percent of persons below poverty level) for all races for years not shown above are: 1959, 22.4; 1960, 22.2; 1961,

21.9; 1962, 21.0; 1963, 19.5; 1964, 19.0; 1965, 17.3; 1966, 14.7; 1967, 14.2; 1968, 12.8; 1969, 12.1; 1970, 12.6; 1971, 12.5; 1972, 11.9;
1973,11.1; 1974,11.2; 1975,12.3; 1976,11.8; and 1977,11.6.
Poverty thresholds are updated each year to reflect changes in the consumer price index (CPI-U).
For details see "Current Population Reports," Series P-60.
Source-. Department of Commerce, Bureau of the Census.




320

POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY
TABLE B-34.—Population by age group, 1929-97
[Thousands of persons]
Age (years)
Julyl
1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957 .
1958
1959
1960 .. ..
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975 ..
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994 '
1995
1996
1997

Total
121,767
125,579
130,880
132,122
133,402
134 860
136,739
138,397
139 928
141*389
144 126
146*631
149 188
152 271
154*878
157 553
160 184
163 026
165 931
168*903
171 984
174,882
177 830
180 671
183*691
186 538
189*242
191 889
194 303
196*560
198712
200,706
202 677
205 052
207,661
209 896
211909
213 854
215 973
218 035
220 239
222*585
225,055
227 726
229*966
232 188
234307
236,348
238,466
240 651
242 804
245,021
247,342
249,949
252,636
255 382
258^089
260 602
263,039
265,453
267.901

Under 5
11,734
10,612
10,418
10,579
10,850
11301
12,016
12,524
12979
13,244
14406
14*919
15607
16410
17*333
17312
17*638
18057
18566
19*003
19494
19,887
20175
20341
20,522
20469
20*342
20165
19824
19*208
18563
17,913
17376
17166
17,244
17101
16,851
16487
16121
15617
15564
15*735
16,063
16451
16,893
17228
17*547
17695
17,842
17963
18052
18195
18,508
18,851
19,187
19489
19^670
19694
19,526
19,324
19.150

5-15

16-19
9,127
9,302
9,822
9,895
9,840
9730
9,607
9,561
9361
9,119
9097
8*952
8788
8542
8,446
8414
8460
8637
8744
8*916
9195
9*543
10215
10683
11025
11 180
12007
12736
13516
14,311
14200
14*452
14800
15289
1 5*688
16039
16,446
16769
17017
17*194
17276
17*288
17242
17167
16812
16332
15,823
15295
15,005
15024
15*215
15198
14*,913
14461
13,970
13736
13879
14122
14379
14,874
15.211

26,800
26,897
25,179
24811
24,516
24231
24*093
23,949
23907
24,103
24468
25209
25852
26721
27279
28894
30227
31480
32682
33,994
35272
36*445
37368
38494
39765
41205
41626
42297
42938
43,702
44244
44*622
44840
44816
44*591
44203
43,582
42989
42 508
42*099
41298
40,428
39552
38838
38144
37784
37,526
37461
37,450
37404
37*333
37593
37*972
38588
39,146
39802
40386
41009
41666
42,157
42.648

20-24
10,694
11,152
11,519
11,690
11,807
11955
12,064
12,062
12036
12*004
11814
11>94
11700
11680
11552
11350
11062
10832
10714
10*616
10603
10756
10969
11 134
11483
11959
12,714
13269
13746
14*050
15248
15J786
16480
17202
18*159
18153
18*521
18975
19527
19*986
20499
20*946
21297
21590
21,869
21902
21*844
21737
21,478
20942
20*385
19846
19*442
19309
19,357
19211
18949
18553
18136
17,650
17.594

Note.—Includes Armed Forces overseas beginning 1940. Includes Alaska and Hawaii beginning 1950.
All estimates are consistent with decennial census enumerations.
Source: Department of Commerce, Bureau of the Census.




321

25-44
35,862
37,319
39,354
39,868
40,383
40861
41,420
42,016
42521
43,027
43657
44288
44916
45672
46103
46495
46786
47001
47194
47379
47440
47*337
47192
47140
47084
47013
46994
46958
46912
47001
47194
47721
48064
48473
48,936
50482
51749
53051
54302
55*852
57*561
59400
61379
63470
65528
67692
69733
71735
73673
75651
77338
78595
79943
81207
82444
82516
82 831
83*155
83513
83*847
83.771

45-64
21,076
22,933
25,823
26,249
26,718
27196
27,671
28,138
28630
29*064
29498
29*931
30405
30849
31*362
31884
32394
32942
33506
34*057
34591
35il09
35663
36203
36722
37255
37782
38338
38 916
39,534
40 193
40*846
41437
41999
42*482
42898
43235
43522
43801
44*008
44150
44,286
44390
44504
44500
44462
44,474
44547
44,602
44660
44*854
45471
45*882
46294
46766
48355
49595
50906
52258
53,734
55.452

65 and
over
6,474
7,363
8,764
9,031
9,288
9,584
9,867
10,147
10494
10,828
11 185
11,538
11921
12397
12*803
13203
13*617
14076
14525
14*938
15388
1 5*806
16248
16675
17*089
17457
17778
18127
18451
18755
19071
19,365
19680
20107
20*561
21020
21*525
22061
22696
23*278
23892
24*502
25134
25707
26,221
26787
27*361
27878
28,416
29008
29*626
30124
30,682
31237
31,766
32273
32779
33164
33560
33,867
34.076

TABLE B-35.—Civilian population and labor force, 1929-97
[Monthly data seasonally adjusted, except as noted]
Civilian labor force
Civilian
noninstitutional
population'

Year or month

Employment
Total

Total

Agricultural

Non-

X,,

Unemployment

Not in
labor
force

Civilian
labor
force
participation
rate*

Thousands of persons 14 years of age and over

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947

99,840
99,900
98,640
94,640
93,220
94,090
103,070
106,018

1947
1948
1949
1950
1951
1952 5
1953
1954
1955
1956
1957
1958
1959
I9605
1961 5
1962
1963
1964
1965
1966
1967
1968
1969
1970
19715
1972 5
1973
1974
1975
1976
1977 5
1978
1979
1980
1981
1982
1983
1984
1985 s
1986
1987
1988
1989
19905
1991
1992
1993 5
1994
1995
1996 5
1997

101,827
103,068
103,994
104,995
104,621
105,231
107,056
108,321
109,683
110,954
112,265
113,727
115,329
117,245
118,771
120,153
122,416
124,485
126,513
128,058
129,874
132,028
134,335
137,085
140,216
144,126
147,096
150,120
153,153
156,150
159,033
161,910
164,863
167,745
170,130
172,271
174,215
176,383
178,206
180,587
182,753
184,613
186,393
189,164
190,925
192,805
194,838
196,814
198,584
200,591
203.133

49,180
51,590
55,230
55,640
55,910
56,410
55,540
54,630
53,860
57,520
60,168

47,630 10,450
38,760 10,090
45,750 9,610
47,520 9,540
50,350 9,100
53,750 9,250
54,470 9,080
53,960 8,950
52,820 8,580
55,250 8,320
57,812 8,256

37,180
28,670
36,140
37,980
41,250
44,500
45,390
45,010
44,240
46,930
49,557

1,550
12,830
9,480
8,120
5,560
2,660
1,070
670
1,040
2,270
2,356

Civil- Unemian
em- ployploy- ment
rate,
ment/ civilian
tion 3 workers4
ratio

K

Percent

44,200
43,990
42,230
39,100
38,590
40,230
45,550
45,850

55.7
56.0
57.2
58.7
58.6
57.2
55.8
56.8

47.6
50.4
54.5
57.6
57.9
56.1
53.6
54.5

3.2
24.9
17.2
14.6
9.9
4.7
1.9
1.2
1.9
3.9
3.9

42,477
42,447
42,708
42,787
42,604
43,093
44,041
44,678
44,660
44,402
45,336
46,088
46,960
47,617
48,312
49,539
50,583
51,394
52,058
52,288
52,527
53,291
53,602
54,315
55,834
57,091
57,667
58,171
59,377
59,991
60,025
59,659
59,900
60,806
61,460
62,067
62,665
62,839
62,744
62,752
62,888
62,944
62,523
63,324
64,578
64,700
65,638
65,758
66,280
66,647
66.837

58.3
58.8
58.9
59.2
59.2
59.0
58.9
58.8
59.3
60.0
59.6
59.5
59.3
59.4
59.3
58.8
58.7
58.7
58.9
59.2
59.6
59.6
60.1
60.4
60.2
60.4
60.8
61.3
61.2
61.6
62.3
63.2
63.7
63.8
63.9
64.0
64.0
64.4
64.8
65.3
65.6
65.9
66.5
66.5
66.2
66.4
66.3
66.6
66.6
66.8
67.1

56.0
56.6
55.4
56.1
57.3
57.3
57.1
55.5
56.7
57.5
57.1
55.4
56.0
56.1
55.4
55.5
55.4
55.7
56.2
56.9
57.3
57.5
58.0
57.4
56.6
57.0
57.8
57.8
56.1
56.8
57.9
59.3
59.9
59.2
59.0
57.8
57.9
59.5
60.1
60.7
61.5
62.3
63.0
62.8
61.7
61.5
61.7
62.5
62.9
63.2
63.8

3.9
3.8
5.9
5.3
3.3
3.0
2.9
5.5
4.4
4.1
4.3
6.8
5.5
5.5
6.7
5.5
5.7
5.2
4.5
3.8
3.8
3.6
3.5
4.9
5.9
5.6
4.9
5.6
8.5
7.7
7.1
6.1
5.8
7.1
7.6
9.7
9.6
7.5
7.2
7.0
6.2
5.5
5.3
5.6
6.8
7.5
6.9
6.1
5.6
5.4
4.9

Thousands of persons 16 years of age and over

...

...

....

....

59,350
60,621
61,286
62,208
62,017
62,138
63,015
63,643
65,023
66,552
66,929
67,639
68,369
69,628
70,459
70,614
71,833
73,091
74,455
75,770
77,347
78,737
80,734
82,771
84,382
87,034
89,429
91,949
93,775
96,158
99,009
102,251
104,962
106,940
108,670
110,204
111,550
113,544
115,461
117,834
119,865
121,669
123,869
125,840
126,346
128,105
129,200
131,056
132,304
133,943
136.297

1
Not seasonally adjusted.
2
Civilian labor force as percent of civilian noninstitutional f
3
Civilian employment as percent of civilian noninstitutional
4

Unemployed as percent of civilian labor force.
See next page for continuation of table.




57,038
58,343
57,651
58,918
59,961
60,250
61,179
60,109
62,170
63,799
64,071
63,036
64,630
65,778
65,746
66,702
67,762
69,305
71,088
72,895
74,372
75,920
77,902
78,678
79,367
82,153
85,064
86,794
85,846
88,752
92,017
96,048
98,824
99,303
100,397
99,526
100,834
105,005
107,150
109,597
112,440
114,968
117,342
118,793
117,718
118,492
120,259
123,060
124,900
126,708
129.558

.
population.

322

7,890
7,629
7,658
7,160
6,726
6,500
6,260
6,205
6,450
6,283
5,947
5,586
5,565
5,458
5,200
4,944
4,687
4,523
4,361
3,979
3,844
3,817
3,606
3,463
3,394
3,484
3,470
3,515
3,408
3,331
3,283
3,387
3,347
3,364
3,368
3,401
3,383
3,321
3,179
3,163
3,208
3,169
3,199
3,223
3,269
3,247
3,115
3,409
3,440
3,443
3.399

49,148
50,714
49,993
51,758
53,235
53,749
54,919
53,904
55,722
57,514
58,123
57,450
59,065
60,318
60,546
61,759
63,076
64,782
66,726
68,915
70,527
72,103
74,296
75,215
75,972
78,669
81,594
83,279
82,438
85,421
88,734
92,661
95,477
95,938
97,030
96,125
97,450
101,685
103,971
106,434
109,232
111,800
114,142
115,570
114,449
115,245
117,144
119,651
121,460
123,264
126.159

2,311
2,276
3,637
3,288
2,055
1,883
1,834
3,532
2,852
2,750
2,859
4,602
3,740
3,852
4,714
3,911
4,070
3,786
3,366
2,875
2,975
2,817
2,832
4,093
5,016
4,882
4,365
5,156
7,929
7,406
6,991
6,202
6,137
7,637
8,273
10,678
10,717
8,539
8,312
8,237
7,425
6,701
6,528
7,047
8,628
9,613
8,940
7,996
7,404
7,236
6.739

TABLE B-35.—Civilian population and labor force, 1929—97—Continued
[Monthly data seasonally adjusted, except as noted]
Civilian labor force
Civilian
noninstitutional
population1

Year or month

Employment
Total

Total

Agricultural

UnNon- employagriment
cultural

Not in
labor
force

Civilian
labor
force
participation
rate2

sept'::::::: : : : : : : .: .: : : : :""
Oct

Nov
Dec
1995:Jan
Feb
Mar
Apr
May
June
July
Aug

sept ':::"":..:.:::::::::"::
Oct

Nov
Dec
1996:Jan
Feb
Mar
Apr
May
June
July

::r:r::
. .

:

Aug I:::::..:.:::::::::::::::: : : : : : :
Sept
oct .::::::::::::::::::: ::::::
Nov

Dec
1997: Jan 5
Feb
Mar
Apr
May
June
July
Aug
Sept
Nov
Dec

oct ..I:::.:.:::.:::::::::::::::::"::::::::::::"

195,953
196,090
196,213
196,363
196,510
196,693
196,859
197,043
197,248
197,430
197,607
197,765
197,753
197,886
198,007
198,148
198,286
198,453
198,615
198,801
199,005
199,192
199,355
199,508
199,634
199,773
199,921
200,101
200,278
200,459
200,641
200,847
201,061
201,273
201,463
201,636
202,285
202,389
202,513
202,674
202,832
203,000
203,166
203,364
203,570
203,767
203,941
204,098

130,638
130,698
130,441
130,638
130,782
130,567
130,669
131,221
131,318
131,754
131,916
131,893
132,100
132,167
132,171
132,598
131,873
131,951
132,335
132,256
132,490
132,684
132,640
132,470
132,768
133,116
133,306
133,405
133,680
133,686
134,214
133,911
134,341
134,794
134,977
135,060
135,729
135,689
136,115
136,043
136,060
136,206
136,294
136,404
136,439
136,406
136,864
137,169

121,971
122,118
121,955
122,303
122,907
122,643
122,714
123,271
123,601
124,085
124,531
124,729
124,716
124,976
125,000
124,975
124,496
124,526
124,791
124,735
125,002
125,303
125,203
125,116
125,246
125,771
125,951
126,057
126,321
126,591
126,867
126,995
127,338
127,715
127,746
127,899
128,541
128,515
129,035
129,275
129,494
129,392
129,661
129,747
129,761
129,910
130,575
130,777

3,306
3,343
3,351
3,411
3,408
3,296
3,339
3,457
3,435
3,494
3,581
3,573
3,525
3,612
3,626
3,548
3,344
3,458
3,389
3,385
3,297
3,445
3,346
3,347
3,488
3,544
3,472
3,382
3,466
3,412
3,454
3,415
3,466
3,477
3,363
3,423
3,453
3,340
3,387
3,462
3,418
3,389
3,452
3,379
3,422
3,327
3,384
3,385

118,665
118,775
118,604
118,892
119,499
119,347
119,375
119,814
120,166
120,591
120,950
121,156
121,191
121,364
121,374
121,427
121,152
121,068
121,402
121,350
121,705
121,858
121,857
121,769
121,758
122,227
122,479
122,675
122,855
123,179
123,413
123,580
123,872
124,238
124,383
124,476
125,088
125,175
125,648
125,813
126,076
126,003
126,209
126,368
126,339
126,583
127,191
127,392

8,667
8,580
8,486
8,335
7,875
7,924
7,955
7,950
7,717
7,669
7,385
7,164
7,384
7,191
7,171
7,623
7,377
7,425
7,544
7,521
7,488
7,381
7,437
7,354
7,522
7,345
7,355
7,348
7,359
7,095
7,347
6,916
7,003
7,079
7,231
7,161
7,188
7,174
7,080
6,768
6,566
6,814
6,633
6,657
6,678
6,496
6,289
6,392

Unemployment
rate,
civilian
workers4

Percent

Thousands of persons 16 years of age and over
1994:Jan5
Feb
Mar
Apr
May
June
July
Aug

Civilian
employment/
population
ratio3

65,315
65,392
65,772
65,725
65,728
66,126
66,190
65,822
65,930
65,676
65,691
65,872
65,653
65,719
65,836
65,550
66,413
66,502
66,280
66,545
66,515
66,508
66,715
67,038
66,866
66,657
66,615
66,696
66,598
66,773
66,427
66,936
66,720
66,479
66,486
66,576
66,556
66,700
66,398
66,631
66,772
66,794
66,872
66,960
67,131
67,361
67,077
66,929

66.7
66.7
66.5
66.5
66.6
66.4
66.4
66.6
66.6
66.7
66.8
66.7
66.8
66.8
66.8
66.9
66.5
66.5
66.6
66.5
66.6
66.6
66.5
66.4
66.5
66.6
66.7
66.7
66.7
66.7
66.9
66.7
66.8
67.0
67.0
67.0
67.1
67.0
67.2
67.1
67.1
67.1
67.1
67.1
67.0
66.9
67.1
67.2

62.2
62.3
62.2
62.3
62.5
62.4
62.3
62.6
62.7
62.9
63.0
63.1
63.1
63.2
63.1
63.1
62.8
62.7
62.8
62.7
62.8
62.9
62.8
62.7
62.7
63.0
63.0
63.0
63.1
63.2
63.2
63.2
63.3
63.5
63.4
63.4
63.5
63.5
63.7
63.8
63.8
63.7
63.8
63.8
63.7
63.8
64.0
64.1

6.6
6.6
6.5
6.4
6.0
6.1
6.1
6.1
5.9
5.8
5.6
5.4
5.6
5.4
5.4
5.7
5.6
5.6
5.7
5.7
5.7
5.6
5.6
5.6
5.7
5.5
5.5
5.5
5.5
5.3
5.5
5.2
5.2
5.3
5.4
5.3
5.3
5.3
5.2
5.0
4.8
5.0
4.9
4.9
4.9
4.8
4.6
4.7

5
Not strictly comparable with earlier data due to population adjustments as follows: Beginning 1953, introduction of 1950 census data
added about 600,000 to population and 350,000 to labor force, total employment, and agricultural employment. Beginning 1960, inclusion of
Alaska and Hawaii added about 500,000 to population, 300,000 to labor force, and 240,000 to nonagricultural employment. Beginning 1962,
introduction of 1960 census data reduced population by about 50,000 and labor force and employment by 200,000. Beginning 1972, introduction of 1970 census data added about 800,000 to civilian noninstitutional population and 333,000 to labor force and employment. A subsequent adjustment based on 1970 census in March 1973 added 60,000 to labor force and to employment. Beginning 1978, changes in sampling and estimation procedures introduced into the household survey added about 250,000 to labor force and to employment. Unemployment
levels and rates were not significantly affected. Beginning 1986, the introduction of revised population controls added about 400,000 to the
civilian population and labor force and 350,000 to civilian employment. Unemployment levels and rates were not significantly affected.
Beginning 1990, the introduction of 1990 census-based population controls, adjusted for the estimated undercount, added about 1.1 million to the civilian population and labor force, 880,000 to civilian employment, and 175,000 to unemployment. The overall unemployment rate
rose by about 0.1 percentage point.
Beginning 1994, data are not strictly comparable with earlier data because of the introduction of a major redesign of the Current Population Survey and collection methodology.
Beginning 1997, data are not strictly comparable with earlier data due to the introduction of revised population controls which added
about 470,000 to the civilian population, 320,000 to the labor force, and 290,000 to employment. Unemployment rates and other percentages
of labor market participation were not affected.
Note.—Labor force data in Tables B-35 through EM4 are based on household interviews and relate to the calendar week including the
12th of the month. For definitions of terms, area samples used, historical comparability of the data, comparability with other series, etc., see
"Employment and Earnings."
Source: Department of Labor, Bureau of Labor Statistics.




323

TABLE B-36.—Civilian employment and unemployment by sex and age, 1950—97
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]
Civilian employment
Males
Year or month

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1996: Jan
Feb
Mar
May
June
July
Aug
Sept
Oct
Nov
Dec
1997-. Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec

Total

58,918
59,961
60,250
61,179
60,109
62,170
63,799
64,071
63,036
64,630
65,778
65,746
66,702
67,762
69,305
71,088
72,895
74,372
75,920
77,902
78,678
79,367
82,153
85,064
86,794
85,846
88,752
92,017
96,048
98,824
99,303
100,397
99,526
100,834
105,005
107,150
109,597
112,440
114,968
117,342
118,793
117,718
118,492
120,259
123,060
124,900
126,708
129,558
125,246
125,771
125,951
126,057
126,321
126,591
126,867
126,995
127,338
127,715
127,746
127,899
128,541
128,515
129,035
129,275
129,494
129,392
129,661
129,747
129,761
129,910
130,575
130,777

Total
41,578
41,780
41,682
42,430
41,619
42,621
43,379
43,357
42,423
43,466
43,904
43,656
44,177
44,657
45,474
46,340
46,919
47,479
48,114
48,818
48,990
49,390
50,896
52,349
53,024
51,857
53,138
54,728
56,479
57,607
57,186
57,397
56,271
56,787
59,091
59,891
60,892
62,107
63,273
64,315
65,104
64,223
64,440
65,349
66,450
67,377
68,207
69,685
67,538
67,765
67,817
67,888
68,079
68,266
68,362
68,374
68,373
68,686
68,590
68,773
69,209
69,248
69,415
69,565
69,765
69,586
69,711
69,748
69,656
69,785
70,352
70,195

16-19
years
2,186
2,156
2,107
2,136
1,985
2,095
2,164
2,115
2,012
2,198
2,361
2,315
2,362
2,406
2,587
2,918
3,253
3,186
3,255
3,430
3,409
3,478
3,765
4,039
4,103
3,839
3,947
4,174
4,336
4,300
4,085
3,815
3,379
3,300
3,322
3,328
3,323
3,381
3,492
3,477
3,427
3,044
2,944
2,994
3,156
3,292
3,310
3,401
3,270
3,309
3,268
3,345
3,359
3,340
3,323
3,259
3,376
3,346
3,212
3,318
3,353
3,388
3,384
3,367
3,456
3,328
3,350
3,362
3,358
3,448
3,528
3,519

20
years
and
over

Total

39,394
39,626
39,578
40,296
39,634
40,526
41,216
41,239
40,411
41,267
41,543
41,342
41,815
42,251
42,886
43,422
43,668
44,294
44,859
45,388
45,581
45,912
47,130
48,310
48,922
48,018
49,190
50,555
52,143
53,308
53,101
53,582
52,891
53,487
55,769
56,562
57,569
58,726
59,781
60,837
61,678
61,178
61,496
62,355
63,294
64,085
64,897
66,284
64,268
64,456
64,549
64,543
64,720
64,926
65,039
65,115
64,997
65,340
65,378
65,455
65,856
65,860
66,031
66,198
66,309
66,258
66,361
66,386
66,298
66,337
66,824
66,676

17,340
18,181
18,568
18,749
18,490
19,551
20,419
20,714
20,613
21,164
21,874
22,090
22,525
23,105
23,831
24,748
25,976
26,893
27,807
29,084
29,688
29,976
31,257
32,715
33,769
33,989
35,615
37,289
39,569
41,217
42,117
43,000
43,256
44,047
45,915
47,259
48,706
50,334
51,696
53,027
53,689
53,496
54,052
54,910
56,610
57,523
58,501
59,873
57,708
58,006
58,134
58,169
58,242
58,325
58,505
58,621
58,965
59,029
59,156
59,126
59,332
59,267
59,620
59,710
59,729
59,806
59,950
59,999
60,105
60,125
60,223
60,582

16-19
years
1,517
1,611
1,612
1,584
1,490
1,547
1,654
1,663
1,570
1,640
1,768
1,793
1,833
1,849
1,929
2,118
2,468
2,496
2,526
2,687
2,735
2,730
2,980
3,231
3^45
3,263
3,389
3,514
3,734
3,783
3,625
3,411
3,170
3,043
3,122
3,105
3,149
3,260
3,313
3,282
3,154
2,862
2,724
2,811
3,005
3,127
3,190
3,260
3,101
3,121
3,118
3,109
3,182
3,156
3,192
3,128
3,320
3,308
3,297
3,256
3,254
3,246
3,298
3,353
3,241
3,231
3,257
3,210
3,222
3,206
3,270
3,327

Note.—See footnote 5 and Note, Table B-35.
Source: Department of Labor, Bureau of Labor Statistics.




Unemployment
Males

Females

324

Females

20
years
and
over

Total

20
20
Total 16-19 years Total 16-19 years
years and
years and
over
over

15,824
16,570
16,958
17,164
17,000
18,002
18,767
19,052
19,043
19,524
20,105
20,296
20,693
21,257
21,903
22,630
23,510
24,397
25,281
26,397
26,952
27,246
28,276
29,484
30,424
30,726
32,226
33,775
35,836
37,434
38,492
39,590
40,086
41,004
42,793
44,154
45,556
47,074
48,383
49,745
50,535
50,634
51,328
52,099
53,606
54,396
55,311
56,613
54,607
54,885
55,016
55,060
55,060
55,169
55,313
55,493
55,645
55,721
55,859
55,870
56,078
56,021
56,322
56,357
56,488
56,575
56,693
56,789
56,883
56,919
56,953
57,255

3,288
2,055
1,883
1,834
3,532
2,852
2,750
2,859
4,602
3,740
3,852
4,714
3,911
4,070
3,786
3,366
2,875
2,975
2,817
2,832
4,093
5,016
4,882
4,365
5,156
7,929
7,406
6,991
6,202
6,137
7,637
8,273
10,678
10,717
8,539
8,312
8,237
7,425
6,701
6,528
7,047
8,628
9,613
8,940
7,996
7,404
7,236
6,739
7,522
7,345
7,355
7,348
7,359
7,095
7,347
6,916
7,003
7,079
7,231
7,161
7,188
7,174
7,080
6,768
6,566
6,814
6,633
6,657
6,678
6,496
6,289
6,392

2,239 318 1,922 1,049
834
1,221 191 1,029
1,185 205 980 698
184 1,019 632
1,202
2,344 310 2,035 1,188
1,854 274 1,580 998
1,711 269 1,442 1,039
1,841
300 1,541 1,018
3,098 416 2,681 1,504
2,420 398 2,022 1,320
2,486 426 2,060 1,366
2,997 479 2,518 1,717
2,423 408 2,016 1,488
2,472 501 1,971 1,598
2,205 487 1,718 1,581
1,914 479 1,435 1,452
1,551 432 1,120 1,324
1,508 448 1,060 1,468
1,419 426 993 1,397
440 963 1,429
1,403
2,238 599 1,638 1,855
2,789 693 2,097 2,227
2,659 711 1,948 2,222
2,275 653 1,624 2,089
757 1,957 2,441
2,714
4,442 966 3,476 3,486
4,036 939 3,098 3,369
3,667 874 2,794 3,324
3,142 813 2,328 3,061
811 2,308 3,018
3,120
4,267 913 3,353 3,370
4,577 962 3,615 3,696
6,179 1,090 5,089 4,499
6,260 1,003 5,257 4,457
4,744 812 3,932 3,794
4,521 806 3,715 3,791
4,530 779 3,751 3,707
732 3,369 3,324
4,101
3,655 667 2,987 3,046
3,525 658 2,867 3,003
3,906 667 3,239 3,140
4,946 751 4,195 3,683
5,523 806 4,717 4,090
5,055 768 4,287 3,885
4,367 740 3,627 3,629
3,983 744 3,239 3,421
3,880 733 3,146 3,356
3,577 694 2,882 3,162
3,972 757 3,215 3,550
4,004 727 3,277 3,341
4,054 755 3,299 3,301
4,002 741 3,261 3,346
3,976 732 3,243 3,383
3,827 673 3,154 3,268
3,990 796 3,194 3,357
3,608 709 2,899 3,308
3,801 702 3,099 3,202
3,739 746 2,993 3,340
3,809 739 3,070 3,422
722 2,969 3,470
3,691
3,843 750 3,093 3,345
3,753 741 3,012 3,421
3,749 740 3,009 3,331
3,619 710 2,909 3,149
3,324 643 2,681 3,242
3,639 740 2,899 3,175
3,507 697 2,810 3,126
3,517 705 2,812 3,140
3,536 698 2,838 3,142
3,526 670 2,856 2,970
3,330 654 2,676 2,959
3,467 582 2,885 2,925

195
145
140
123
191
176
209
197
262
256
286
349
313
383
385
395
405
391
412
413
506
568
598
583
665
802
780
789
769
743
755
800
886
825
687
661
675
616
558
536
544
608
621
597
580
602
573
577
615
581
573
570
570
559
491
590
550
578
597
609
591
651
583
531
601
555
587
567
593
551
564
556

854
689
559
510
997
823
832
821
1,242
1,063
1,080
1,368
1,175
1,216
1,195
1,056
921
1,078
985
1,015
1,349
1,658
1,625
1,507
1,777
2,684
2,588
2,535
2,292
2,276
2,615
2,895
3,613
3,632
3,107
3,129
3,032
2,709
2,487
2,467
2,596
3,074
3,469
3,288
3,049
2,819
2,783
2,585
2,935
2,760
2,728
2,776
2,813
2,709
2,866
2,718
2,652
2,762
2,825
2,861
2,754
2,770
2,748
2,618
2,641
2,620
2,539
2,573
2,549
2,419
2,395
2,369

TABLE B-37.—Chilian employment by demographic characteristic, 1954—97
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]
Year or
month

1954
1955
1956
1957 '....
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967 .
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1996:Jan
Feb
Mar ..
..
Apr
May ..
..
June ...

All
civilian
workers

60,109
62,170
63,799
64,071
63,036
64,630
65,778
65,746
66,702
67,762
69,305
71,088
72,895
74,372
75,920
77,902
78,678
79,367
82,153
85,064
86,794
85,846
88,752
92,017
96,048
98,824
99,303
100,397
99,526
100,834
105,005
107,150
109,597
112,440
114,968
117,342
118,793
117,718
118,492
120,259
123,060
124,900
126,708
129.558
125,246
125,771
125,951
126,057
126,321
126,591
126,867
July 126,995
Aug
Sept .... 127,338
Oct
127,715
Nov
127,746
127,899
Dec
128,541
1997:Jan
Feb
128,515
Mar .. 129,035
..
129,275
129,494
June ... 129,392
{uiy 129,661
Aug
129,747
Sept .... 129,761
129,910
Oct
Nov
130,575
130,777
Dec

&:
:

Total

Males

Females

Both
sexes
16-19

53,957
55,833
57,269
57,465
56,613
58,006
58,850
58,913
59,698
60,622
61,922
63,446
65,021
66,361
67,750
69,518
70,217
70,878
73,370
75,708
77,184
76,411
78,853
81,700
84,936
87,259
87,715
88,709
87,903
88,893
92,120
93,736
95,660
97,789
99,812
101,584
102,261
101,182
101,669
103,045
105,190
106,490
107,808
109,856
106,594
107,237
107,313
107,289
107,446
107,698
107,860
107,936
108,377
108,597
108,594
108,752
109,154
109,211
109,528
109,721
109,906
109,779
109,851
109,832
109,904
110,063
110,604
110,729

37,846
38,719
39,368
39,349
38,591
39,494
39,755
39,588
40,016
40,428
41,115
41,844
42,331
42,833
43,411
44,048
44,178
44,595
45,944
47,085
47,674
46,697
47,775
49,150
50,544
51,452
51,127
51,315
50,287
50,621
52,462
53,046
53,785
54,647
55,550
56,352
56,703
55,797
55,959
56,656
57,452
58,146
58,888
59,998
58,350
58,631
58,576
58,639
58,731
58,929
58,988
58,966
59,094
59,284
59,159
59,337
59,631
59,686
59,855
59,955
60,093
59,893
59,967
59,949
59,981
60,025
60,545
60,416

16,111
17,114
17,901
18,116
18,022
18,512
19,095
19,325
19,682
20,194
20,807
21,602
22,690
23,528
24,339
25,470
26,039
26,283
27,426
28,623
29,511
29,714
31,078
32,550
34,392
35,807
36,587
37,394
37,615
38,272
39,659
40,690
41,876
43,142
44,262
45,232
45,558
45,385
45,710
46,390
47,738
48,344
48,920
49,859
48,244
48,606
48,737
48,650
48,715
48,769
48,872
48,970
49,283
49,313
49,435
49,415
49,523
49,525
49,673
49,766
49,813
49,886
49,884
49,883
49,923
50,038
50,059
50,313

3,078
3,225
3,389
3,374
3,216
3,475
3,700
3,693
3,774
3,851
4,076
4,562
5,176
5,114
5,195
5,508
5,571
5,670
6,173
6,623
6,796
6,487
6,724
7,068
7,367
7,356
7,021
6,588
5,984
5,799
5,836
5,768
5,792
5,898
6,030
5,946
5,779
5,216
4,985
5,113
5,398
5i593
5,667
5,807
5,555
5,627
5,570
5,597
5,671
5,683
5,686
5,526
5,826
5,811
5,732
5,736
5,742
5,755
5,776
5,849
5,851
5,735
5,768
5,699
5,750
5,813
5,976
5,983

Total

Males

Females

6,152
6,341
6,534
6,604
6,423
6,623
6,928
6,833
7,003
7,140
7,383
7,643
7,877
8,011
8,169
8,384
8,464
8,488
8,783
9,356
9,610
9,435
9,899
10,317
11,112
11,565
11,588
11,688
11,624
11,941
12,885
13,414
13,937
14,652
15,156
15,757
16,533
16,536
16,823
17,214
17,870
18,409
18,900
19,701
18,579
18,503
18,626
18,728
18,860
18,884
19,003
19,133
19,037
19,112
19,162
19,154
19,316
19,296
19,508
19,512
19,563
19,584
19,786
19,989
19,955
19,857
19,984
20,061

3,773
3,904
4,013
4,006
3,833
3,971
4,149
4,068
4,160
4,229
4,359
4,496
4,588
4,646
4,702
4,770
4,813
4,796
4,952
5,265
5,352
5,161
5,363
5,579
5,936
6,156
6,059
6,083
5,983
6,166
6,629
6,845
7,107
7,459
7,722
7,963
8,401
8,426
8,482
8,693
8,998
9,231
9,319
9,687
9,151
9,119
9,213
9,227
9,311
9,307
9,366
9,482
9,373
9,406
9,437
9,434
9,523
9,569
9,528
9,583
9,631
9,649
9,714
9,869
9,786
9,780
9,818
9,790

2,379
2,437
2,521
2,598
2,590
2,652
2,779
2,765
2,843
2,911
3,024
3,147
3,289
3,365
3,467
3,614
3,650
3,692
3,832
4,092
4,258
4,275
4,536
4,739
5,177
5,409
5,529
5,606
5,641
5,775
6,256
6,569
6,830
7,192
7,434
7,795
8,131
8,110
8,342
8,521
8,872
9,179
9,580
10,014
9,428
9,384
9,413
9,501
9,549
9,577
9,637
9,651
9,664
9,706
9,725
9,720
9,793
9,727
9,980
9,929
9,932
9,935
10,072
10,120
10,169
10,077
10,166
10,271

Note.—See footnote 5 and Note, Table B-35.

Source: Department of Labor, Bureau of Labor Statistics.




Black

Black and other

White

325

Both
sexes
16-19

396
418
430
407
365
362
430
414
420
404
440
474
545
568
584
609
574
538
573
647
652
615
611
619
703
727
689
637
565
543
607
666
681
742
774
813
801
690
684
691
763
826
832
853
822
782
822
855
874
823
843
818
857
850
808
832
856
875
912
863
850
815
831
832
823
857
855
872

Total

FeMales males

Both
sexes
16-19

7,802
8,128
8,203
7,894
8,227
8,540
9,102
9,359
9,313
9,355
9,189
9,375
10,119
10,501
10,814
11,309
11,658
11,953
12,175
12,074
12,151
12,382
12,835
13,279
13,542
13,969
13,410
13,360
13,420
13,434
13,587
13,512
13,604
13,629
13,511
13,653
13,680
13,692
13,736
13,722
13,816
13,864
13,837
13,836
14,040
14,237
14,180
14,067
14,128
14,149

4,368
4,527
4,527
4,275
4,404
4,565
4,796
4,923
4,798
4,794
4,637
4,753
5,124
5,270
5,428
5,661
5,824
5,928
5,995
5,961
5,930
6,047
6,241
6,422
6,456
6,607
6,412
6,391
6,406
6,409
6,490
6,425
6,478
6,544
6,421
6,483
6,495
6,515
6,501
6,506
6,487
6,535
6,565
6,571
6,641
6,766
6,690
6,680
6,700
6,628

3,433
3,601
3,677
3,618
3,823
3,975
4,307
4,436
4,515
4,561
4,552
4,622
4,995
5,231
5,386
5,648
5,834
6,025
6,180
6,113
6,221
6,334
6,595
6,857
7,086
7,362
6,998
6,969
7,014
7,025
7,097
7,087
7,126
7,085
7,090
7,170
7,185
7,177
7,235
7,216
7,329
7,329
7272
7,265
7,399
7,471
7,490
7,387
7,428
7,521

509
570
' 554
507
508
508
571
579
547
505
428
416
474
532
536
587
601
625
598
494
492
494
552
586
613
631
601
581
623
641
674
615
607
590
609
622
582
615
633
658
665
624
596
599
621
642
621
656
628
630

TABLE B-38.—Unemployment by demographic characteristic, 1954-97
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]
Year or
month

All
civilian
workers

1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986 ... 1 . .
"..
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1996:Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
1997:Jan
Feb
Mar

Total

Males

3,532 2,859 1,913
2,852 2,252 1,478
2,750 2,159
1,366
2,859 2,289 1,477
4,602 3,680 2,489
3,740 2,946 1,903
3,852 3,065 1,988
4,714 3,743 2,398
3,911 3,052 1,915
4,070 3,208 1,976
3,786 2,999 1,779
3,366 2,691
1,556
2,875 2,255 1,241
2,975 2,338 1,208
2,817 2,226 1,142
2,832 2,260 1,137
4,093 3,339 1,857
5,016 4,085 2,309
4,882 3,906 2,173
4,365 3,442 1,836
5,156 4,097 2,169
7,929 6,421 3,627
7,406 5,914 3,258
6,991 5,441 2,883
6,202 4,698 2,411
6,137 4,664 2,405
7,637 5,884 3,345
8,273 6,343 3,580
10,678 8,241 4,846
10,717 8,128 4,859
8,539 6,372 3,600
8,312 6,191 3,426
8,237 6,140 3,433
7,425 5,501 3,132
6,701 4,944 2,766
6,528 4,770 2,636
7,047 5,186 2,935
8,628 6,560 3,859
9,613 7,169 4,209
8,940 6,655 3,828
7,996 5,892 3,275
7,404 5,459 2,999
7,236 5,300 2,896
6,739 4,836 2,641
7,522 5,520 2,982
7,345 5,444 2,974
7,355 5,397 3,006
7,348 5,407 2,972
7,359 5,538 3,028
7,095 5,214 2,889
7,347 5,297 2,933
6,916 5,027 2,710
7,003 5,057 2,808
7,079 5,097 2,779
7,231 5,302 2,839
7,161 5,266 2,761
7,188 5,157 2,842
7,174 5,115 2,766
7,080 5,069 2,746
6,768 4,846 2,657
6,566 4,656 2,427
6,814 4,880 2,669
June
6,633 4,771 2,607
J«iy
6,657 4,837 2,631
Aug
6,678 4,854 2,626
Sept
6,496 4,721 2,642
Oct
Nov
6,289 4,469 2,460
6,392 4,534 2,518
Dec
Note.—See footnote 5 and Note, Table B-35.
Source: Department of Labor, Bureau of Labor

fc-




Black and other

White

Females

Both
sexes
16-19

Total

423
373
382
401
541
525
575
669
580
708
708
705
651
635
644
660
871
1,011
1,021
955
1,104
1,413
1,364
1,284
1,189
1,193
1,291
1,374
1,534
1,387
1,116
1,074
1,070
995
910
863
903
1,029
1,037
992
960
952
939
912
1,011
954
956
950
951
911
921
911
886
915
964
946
944
985
945
909
865
961
968
942
943
897
836
757

673
601
591
570
923
793
788
971
861
863
787
678
622
638
590
571
754
930
977
924
1,058
1,507
1,492
1,550
1,505
1,473
1,752
1,930
2,437
2,588
2,167
2,121
2,097
1,924
1,757
1,757
1,860
2,068
2,444
2,285
2,104
1,945
1,936
1,903
1,956
1,878
1,940
1,933
1,905
1,875
1,992
1,895
1,950
2,003
1,952
1,938
1,991
2,037
1,996
1,915
1,975
1,923
1,814
1,824
1,835
1,781
1,843
1,892

946
774
793
812
1,191
1,043
1,077
1,345
1,137
1,232
1,220
1,135
1,014
1,130
1,084
1,123
1,482
1,777
1,733
1,606
1,927
2,794
2,656
2,558
2,287
2,260
2,540
2,762
3,395
3,270
2>72
2,765
2,708
2,369
2,177
2,135
2,251
2,701
2,959
2,827
2,617
2,460
2,404
2,195
2,538
2,470
2,391
2i435
2,510
2,325
2,364
2,317
2,249
2,318
2,463
2,505
2,315
2,349
2,323
2,189
2,229
2,211
2,164
2,206
2,228
2,079
2,009
2,016
Statistics.

326

Males

431
376
345
364
610
517
498
599
509
496
426
360
310
300
277
267
380
481
486
440
544
815
779
784
731
714
922
997
1,334
1,401
1,144
1,095
1,097
969
888
889
971
1,087
1,314
1,227
1,092
984
984
935
971
1,009
1,033
1,024
998
941
1,035
905
985
986
985
925
988
962
995
960
931
973
882
891
907
900
884
943

Females
242
225
246
206
313
276
290
372
352
367
361
318
312
338
313
304
374
450
491
484
514
692
713
766
774
759
830
933
1,104
1,187
1,022
1,026
999
955
869
868
889
981
1,130
1,058
1,011
961
952
967
985
869
907
909
907
934
957
990
965
1,017
967
1,013
1,003
1,075
1,001
955
1,044
950
932
933
928
881
959
949

Black
Both
sexes
16-19

79
77
95
96
138
128
138
159
142
176
165
171
186
203
194
193
235
249
288
280
318
355
355
379
394
362
377
388
443
441
384
394
383
353
316
331
308
330
390
373
360
394
367
359
354
344
367
375
356
325
364
392
366
404
376
381
389
398
373
347
387
339
313
334
350
319
378
376

Total

906
846
965
1,369
1,334
1,393
1,330
1,319
1,553
1,731
2,142
2,272
1,914
1,864
1,840
1,684
1,547
1,544
1,565
1,723
2,011
1,844
1,666
1,538
1,592
1,560
1,578
1,509
1,590
1,589
1,547
1,520
1,624
1,627
1,616
1,650
1,645
1,607
1,644
1,698
1,622
1,525
1,587
1,590
1,484
1,491
1,511
1,488
1,510
1,560

Males

448
395
494
741
698
698
641
636
815
891
1,167
1,213
1,003
951
946
826
771
773
806
890
1,067
971
848
762
808
747
779
798
841
816
802
768
859
779
833
827
847
746
805
782
795
745
732
791
718
702
714
713
696
755

Females

458
451
470
629
637
695
690
683
738
840
975
1,059
911
913
894
858
776
772
758
833
944
872
818
777
784
813
799
711
749
773
745
752
765
848
783
823
798
861
839
916
827
780
855
799
766
789
797
775
814
805

Both
sexes
16-19

279
262
297
330
330
354
360
333
343
357
396
392
353
357
347
312
288
300
268
280
324
313
300
325
310
302
304
276
301
320
292
279
318
356
308
336
310
315
328
333
314
292
306
285
266
280
302
274
314
331

TABLE B—39-—Civilian labor force participation rate and employment/population ratio, 1950—97
[Percent;1 monthly data seasonally adjusted]
Employment/population ratio

Labor force participation rate
Year or month

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966 ...
1967
1968 ...
1969
1970
1971
1972
1973 ... .
1974
1975 ..
1976
1977 ....
1978
1979
1980
1981
1982
1983 ..
1984
1985 ....
1986
1987
1988
1989
1990
1991
1992
1993 ...
1994
1995
1996
1997
1996:Jan
Feb
Mar
Apr
May
June
July
Aug
Sept.

Both
Both
All
All
Black
sexes
civilian Males Fe- sexes White Black Black civilian Males Feand
and
workworkmales 16-19
males 16-19 White other Black
other
years
ers
years
ers

51.8
59.2 86.4 33.9
56.1
52.2
57.3
59.2 86.3 34.6
51.3
57.3
59.0 86.3 34.7
50.2
57.1
58.9 86.0 34.4
48.3
58.2 64.0
55.5
58.8 85.5 34.6
58.7 64.2
56.7
59.3 85.4 35.7
48.9
59.4 64.9
85.5 36.9
50.9
60.0
57.5
49.6 59.1 64.4
57.1
59.6 84.8 36.9
47.4 58.9 64.8
55.4
59.5 84.2 37.1
46.7 58.7 643
593 83.7 37.1
560
59.4 83.3 37.7
47.5 58.8 64.5
56.1
46.9 58.8 64.1
55.4
59.3 82.9 38.1
46.1
58.3 63.2
55.5
58.8 82.0 37.9
58.7 81.4 38.3
45.2
58.2 63.0
55.4
58.7 81.0 38.7
44.5 58.2 63.1
55.7
58.4 62.9
45.7
56.2
58.9 80.7 39.3
48.2
58.7 63.0
59.2 80.4 40.3
56.9
48.4
59.2 62.8
59.6 80.4 41.1
57.3
48.3
59.3 62.2
59.6 80.1 41.6
57.5
60.1 79.8 42.7 49.4 59.9 62.1
58.0
60.4 79.7 43.3
57.4
49.9 60.2 61.8
49.7 60.1 60.9
60.2 79.1 43.4
56.6
60.4 78.9 43.9
60.4 60.2 "59.9
51.9
57.0
60.8 78.8 44.7 53.7
60.8 60.5 60.2
57.8
61.4 60.3 59.8
61.3 78.7 45.7 54.8
57.8
61.5 59.6 58.8
61.2 77.9 46.3 54.0
56.1
61.6 77.5 47.3 54.5 61.8 59.8 59.0
56.8
56.0
62.5 60.4 59.8
62.3 77.7 48.4
57.9
57.8
63.3 62.2 61.5
63.2 77.9 50.0
59.3
63.7 77.8 50.9
57.9 63.9 62.2 61.4
59.9
56.7
64.1 61.7 61.0
63.8 77.4 51.5
59.2
55.4
63.9 77.0 52.1
64.3 61.3 60.8
59.0
54.1
64.3 61.6 61.0
64.0 76.6 52.6
57.8
64.0 76.4 52.9
53.5
64.3 62.1 61.5
57.9
64.4 76.4 53.6
53.9
64.6 62.6 62.2
59.5
64.8 76.3 54.5
54.5
65.0 63.3 62.9
60.1
54.7 65.5 63.7 63.3
60.7
65.3 76.3 55.3
65.6 76.2 56.0
54.7
65.8 64.3 63.8
61.5
65.9 76.2 56.6
55.3
66.2 64.0 63.8
62.3
66.7 64.7 64.2
66.5 76.4 57.4
55.9
63.0
53.7
66.9 64.4 64.0
66.5 76.4 57.5
62.8
66.2 75.8 57.4
51.6
66.6 63.8 63.3
61.7
66.4 75.8 57.8
51.3
66.8 64.6 63.9
61.5
66.3 75.4 57.9
51.5
66.8 63.8 63.2
61.7
625
666 751 588 527 671 639 634
53.5
66.6 75.0 58.9
67.1 64.3 63.7
62.9
66.8 74.9 59.3
52.3 67.2 64.6 64.1
63.2
67.1 75.0 59.8
51.6
67.5 65.2 64.7
63.8
52.7 66.9 64.2 64.0
62.7
66.5 74.7 58.9
66.6 74.9 59.0
52.6 67.2 63.7 63.4
63.0
66.7 75.0 59.0
52.3 67.1 64.1 63.9
63.0
52.4 67.1 64.3 63.9
66.7 74.9 59.1
63.0
66.7 75.0 59.1
52.9 67.2 64.5 64.3
63.1
66.7 75.0 59.0
51.9
67.1 64.4 63.8
63.2
52.1
67.2 65.0 64.5
66.9 75.2 59.2
63.2
66.7 74.7 59.3
51.1
67.0 65.0 64.5
63.2
67.3 64.7 63.9
66.8 74.8 59.4 52.6
63.3
67.0 75.0 59.6
52.7
67.4 65.0 64.5
63.5
Nov ..
67.4 64.9 64.5
67.0 74.9 59.7
51.9
63.4
Dec
67.0 74.9 59.7
52.2 67.4 64.7 64.3
63.4
1997:Jan
67.1 75.1 59.7 51.9
67.5 64.9 64.5
63.5
Feb
52.6 67.5 64.8 64.6
67.0 75.0 59.7
63.5
Mar
52.4 67.6 65.3 64.6
67.2 75.1 59.9
63.7
Apr
67.1 75.1 59.8
52.0 67.5 64.9 64.3
63.8
May
67.1 74.9 59.8
51.9
67.5 65.2 64.4
63.8
June
67.1 75.0 59.8
51.2
67.5 65.0 64.3
63.7
July
67.1 74.9 59.8
51.4
67.4 65.1 64.7
63.8
Aug
67.1 74.9 59.8
67.4 65.7 65.4
51.0
63.8
Sept
''
67.0 74.7 59.9 51.0
67.4 65.5 65.2
63.7
Oct
67.4 64.9 64.5
66.9 74.8 59.7
50.9
63.8
Nov
67.1 75.1 59.7
51.8
67.5 65.4 64.8
64.0
Dec .
67.2 75.0 60.0
51.6
675 656 65.0
64.1
1
Civilian labor force or civilian employment as percent of civilian noninstitutional population
Note.—Data relate to persons 16 years of age and over.
See footnote 5 and Note, Table B-35.
Source: Department of Labor, Bureau of Labor Statistics.

ocf

zz

: .:




327

82.0 32.0
45.5
47.9
84.0 33.1
83.9 33.4
46.9
46.4
83.6 33.3
81.0 32.5
42.3
81.8 34.0
43.5
82.3 35.1
45.3
43.9
81.3 35.1
39.9
78.5 34.5
79.3 350 39.9
78.9 35.5
40.5
39.1
77.6 35.4
39.4
77.7 35.6
77.1 35.8
37.4
77.3 36.3
37.3
77.5 37.1
38.9
77.9 38.3
42.1
78.0 39.0
42.2
77.8 39.6
42.2
43.4
77.6 40.7
76.2 40.8
42.3
74.9 40.4
41.3
75.0 41.0
43.5
75.5 42.0
45.9
74.9 42.6
46.0
71.7 42.0
43.3
72.0 43.2
44.2
46.1
72.8 44.5
73.8 46.4
48.3
73.8 47.5
48.5
72.0 47.7
46.6
71.3 48.0
44.6
69.0 47.7
41.5
68.8 48.0
41.5
70.7 49.5
43.7
44.4
70.9 50.4
71.0 51.4
44.6
71.5 52.5
45.5
46.8
72.0 53.4
72.5 54.3
47.5
72.0 54.3
45.3
70.4 53.7
42.0
69.8 53.8
41.0
41.7
70.0 54.1
704 553 434
44.2
70.8 55.6
70.9 56.0
43.5
43.4
71.3 56.8
43.4
70.6 55.5
70.7 55.8
43.7
70.7 55.9
43.3
70.7 55.9
43.6
44.1
70.9 55.9
71.0 55.9
43.6
71.0 56.0
43.5
42.4
71.0 56.1
70.9 56.4
44.3
71.1 56.4
43.9
71.0 56.4
43.0
71.1 56.4 43.4
71.2 56.5
43.1
71.2 56.4
43.5
71.3 56.7
43.8
71.4 56.8
43.9
71.5 56.7
43.8
71.3 56.8
42.8
71.3 56.9
43.0
71.3 56.9
42.7
71.1 56.9
42.7
71.2 56.9
43.0
71.7 56.9
43.9
715 57.2
44.3
in group specified.

55.2
56.5
57.3
56.8
55.3
55.9
55.9
55.3
55.4
55.3
55.5
56.0
56.8
57.2
57.4
58.0
57.5
56.8
57.4
58.2
58.3
56.7
57.5
58.6
60.0
60.6
60.0
60.0
58.8
58.9
60.5
61.0
61.5
62.3
63.1
63.8
63.7
62.6
62.4
62.7
635
63.8
64.1
64.6
63.6
63.9
63.9
63.9
63.9
64.0
64.1
64.1
64.3
64.3
64.3
64.3
64.4
64.4
64.6
64.7
64.7
64.6
64.6
64.6
64.5
64.6
64.9
64.9

58.0
58.7
59.5
59.3
56.7
57.5
57.9
56.2
56.3
56.2
57.0
57.8
58.4
58.2
58.0
58.1
56.8
54.9
54.1 "537
55.0 54.5
54.3 53.5
51.4 50.1
52.0 50.8
52.5 51.4
54.7 53.6
55.2 53.8
53.6 52.3
52.6 51.3
50.9 49.4
51.0 49.5
53.6 52.3
54.7 53.4
55.4 54.1
56.8 55.6
57.4 56.3
58.2 56.9
57.9 56.7
56.7 55.4
56.4 54.9
56.3 55.0
57.2 56.1
58.1 57.1
58.6 57.4
59.4 58.2
58.1 57.2
57.8 57.0
58.1 57.1
58.3 57.1
58.6 57.7
58.6 57.3
58.8 57.6
59.1 57.6
58.7 57.0
58.8 57.5
58.9 57.6
58.8 57.5
58.8 57.6
58.7 57.5
59.2 57.8
59.1 58.0
59.2 57.8
59.2 57.7
59.7 58.5
60.2 59.2
60.0 58.9
59.6 58.3
59.8 58.5
60.0 58.5

TABLE B—40.—Civilian labor force participation rate by demographic characteristic, 1954—97
[Percent;1 monthly data seasonally adjusted]
Black and other or black

White
Year or month

All
civilian
work- Total
ers
Total

Males

16-19
years

Females

20
years Total
and
over

16-19
years

33.3
34.5
35.7
35.7
35.8
36.0
36.5
36.9
36.7
37.2
37.5
38.1
39.2
40.1
40.7
41.8
42.6
42.6
43.2

40.6
40.7
43.1
42.2
40.1
39.6
40.3
40.6
39.8
38.7
37.8
39.2
42.6
42.5
43.0
44.6
45.6
45.4
48.1

Males

20
years Total Total
and
over

16-19
years

Females

20
years Total
and
over

16-19
years

20
years
and
over

Black and other

1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972

.

58.8
59.3
60.0
59.6
59.5
59.3
59.4
59.3
58.8
58.7
58.7
58.9
59.2
59.6
59.6
60.1
60.4
60.2
60.4

58.2
58.7
59.4
59.1
58.9
58.7
58.8
58.8
58.3
58.2
58.2
58.4
58.7
59.2
59.3
59.9
60.2
60.1
60.4

85.6
85.4
85.6
84.8
84.3
83.8
83.4
83.0
82.1
81.5
81.1
80.8
80.6
80.6
80.4
80.2
80.0
79.6
79.6

57.6
58.6
60.4
59.2
56.5
55.9
55.9
54.5
53.8
53.1
52.7
54.1
55.9
56.3
55.9
56.8
57.5
57.9
60.1

87.8
87.5
87.6
86.9
86.6
86.3
86.0
85.7
84.9
84.4
84.2
83.9
83.6
83.5
83.2
83.0
82.8
82.3
82.0

32.7
34.0
35.1
35.2
35.5
35.6
36.2
36.6
36.5
37.0
37.5
38.0
38.8
39.8
40.4
41.5
42.2
42.3
42.7

64.0
64.2
64.9
64.4
64.8
64.3
64.5
64.1
63.2
63.0
63.1
62.9
63.0
62.8
62.2
62.1
61.8
60.9
60.2

85.2
85.1
85.1
84.2
84.1
83.4
83.0
82.2
80.8
80.2
80.1
79.6
79.0
78.5
77.7
76.9
76.5
74.9
73.9

61.2
60.8
61.5
58.8
57.3
55.5
57.6
55.8
53.5
51.5
49.9
51.3
51.4
51.1
49.7
49.6
47.4
44.7
46.0

87.1
87.8
87.8
87.0
87.1
86.7
86.2
85.5
84.2
83.9
84.1
83.7
83.3
82.9
82.2
81.4
81.4
80.0
78.6

46.1
46.1
47.3
47.1
48.0
47.7
48.2
48.3
48.0
48.1
48.6
48.6
49.4
49.5
49.3
49.8
49.5
49.2
48.8

31.0
32.7
36.3
33.2
31.9
28.2
32.9
32.8
33.1
32.6
31.7
29.5
33.5
35.2
34.8
34.6
34.1
31.2
32.3

47.7
47.5
48.4
48.6
49.8
49.8
49.9
50.1
49.6
49.9
50.7
51.1
51.6
51.6
51.4
52.0
51.8
51.8
51.2

48.7
49.3
49.0
48.8
49.8
50.8
53.1
53.1
53.1
53.5
53.7
54.2
55.2
56.5
56.9
58.0
58.0
58.7
58.3
57.5
58.5
57.9
58.7
59.5
60.4
61.7
60.3
59.3
59.9
60.1
60.3
60.2
60.5
60.8
60.2
61.0
60.9
61.2
61.4
61.7
61.9
61.4
61.5
61.0
61.7
62.3
62.4
61.4
61.9
62.4

32.2
34.2
33.4
34.2
32.9
32.9
37.3
36.8
34.9
34.0
33.5
33.0
35.0
37.9
39.1
39.6
37.9
40.4
36.8
33.5
35.2
34.6
36.3
39.8
38.9
39.9
39.6
36.9
39.3
40.3
40.7
38.6
35.3
39.3
38.6
39.7
37.6
40.2
40.5
40.8
42.7
38.5
37.5
36.0
38.4
39.8
40.6
39.4
41.7
43.6

51.2
51.6
51.4
51.1
52.5
53.6
55.5
55.4
55.6
56.0
56.2
56.8
57.6
58.6
58.9
60.0
60.1
60.6
60.6
60.0
60.8
60.2
60.9
61.4
62.6
64.0
62.3
61.5
61.9
62.0
62.3
62.4
63.1
63.0
62.4
63.2
63.3
63.4
63.5
63.9
63.8
63.8
63.9
63.5
64.1
64.6
64.6
63.6
63.9
64.4

Black

1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986 .
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1996:Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov . ..
Dec
1997:Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec

60.4
60.8
61.3
61.2
61.6
62.3
63.2
63.7
63.8
63.9
64.0
64.0
64.4
64.8
65.3
65.6
65.9
66.5
66.5
66.2
66.4
66.3
66.6
66.6
66.8
67.1
66.5
66.6
66.7
66.7
66.7
66.7
66.9
66.7
66.8
670
67.0
67.0
67.1
67.0
67.2
67.1
67.1
67.1
67.1
67.1
67.0
66.9
67.1
67.2

60.4
60.8
61.4
61.5
61.8
62.5
63.3
63.9
64.1
64.3
64.3
64.3
64.6
65.0
65.5
65.8
66.2
66.7
66.9
66.6
66.8
66.8
67.1
67.1
67.2
67.5
66.9
67.2
67.1
67.1
67.2
67.1
67.2
67.0
67.3
674
674
67.4
67.5
67.5
67.6
67.5
67.5
67.5
67.4
67.4
67.4
67.4
67.5
67.5

79.6
79.4
79.4
78.7
78.4
78.5
78.6
78.6
78.2
77.9
77.4
77.1
77.1
77.0
76.9
76.8
76.9
77.1
77.1
76.5
76.5
76.2
75.9
75.7
75.8
75.9
75.6
75.9
75.8
75.8
75.9
75.9
76.0
75.6
75.8
759
758
75.8
75.9
75.9
76.0
76.0
75.8
75.8
75.8
75.7
75.7
75.7
76.0
75.9

60.1
62.0
62.9
61.9
62.3
64.0
65.0
64.8
63.7
62.4
60.0
59.4
59.0
59.7
59.3
59.0
60.0
61.0
59.6
57.3
56.9
56.6
57.7
58.5
57.1
56.1
58.1
58.0
57.1
57.9
58.1
57.3
57.4
54.6
57.1
570
56.0
56.4
55.8
56.1
56.5
56.0
56.4
55.6
55.5
55.2
55.7
56.8
58.1
56.3

82.0
81.6
81.4
80.7
80.3
80.2
80.1
80.1
79.8
79.5
79.2
78.9
78.7
78.5
78.5
78.4
78.3
78.5
78.5
78.0
78.0
77.7
77.3
77.1
77.3
77.5
77.0
77.3
77.3
77.2
77.3
77.4
77.5
77.3
77.3
775
77.4
77.4
77.6
77.5
77.6
77.6
77.4
77.5
77.4
77.4
77.3
77.2
77.5
77.5

43.2
44.1
45.2
45.9
46.9
48.0
49.4
50.5
51.2
51.9
52.4
52.7
53.3
54.1
55.0
55.7
56.4
57.2
57.4
57.4
57.7
58.0
58.9
59.0
59.1
59.5
58.7
59.0
59.0
58.9
59.1
58.9
59.0
59.0
59.2
593
59.6
59.6
59.5
59.5
59.6
59.5
59.6
59.6
59.5
59.5
59.6
59.5
59.4
59.7

48.1
50.1
51.7
51.5
52.8
54.5
56.7
57.4
56.2
55.4
55.0
54.5
55.4
55.2
56.3
56.5
57.2
57.1
55.3
54.1
52.5
53.5
55.1
55.5
54.7
54.1
54.8
54.9
54.5
53.7
54.3
54.3
54.1
53.7
55.5
555
55.8
54.9
54.5
55.1
54.3
55.4
54.1
54.4
55.0
53.6
53.8
52.8
53.1
53.6

42.7
43.5
44.4
45.3
46.2
47.3
48.7
49.8
50.6
51.5
52.2
52.5
53.1
54.0
54.9
55.6
56.3
57.2
57.6
57.6
58.1
58.3
59.2
59.2
59.4
59.9
59.0
59.3
59.4
59.3
59.4
59.2
59.4
59.4
59.5
596
59.9
59.9
59.8
59.8
60.0
59.8
60.0
60.0
59.9
60.0
60.0
60.0
59.9
60.1

59.9
60.2
59.8
58.8
59.0
59.8
61.5
61.4
61.0
60.8
61.0
61.5
62.2
62.9
63.3
63.8
63.8
64.2
64.0
63.3
63.9
63.2
63.4
63.7
64.1
64.7
64.0
63.4
63.9
63.9
64.3
63.8
64.5
64.5
63.9
MS
645
64.3
64.5
64.6
64.6
64.3
64.4
64.3
64.7
65.4
65.2
64.5
64.8
65.0

1
Civilian labor force as percent of civilian noninstitutional population in group specified.
Note.—See Note, Table B-39.
Source: Department of Labor, Bureau of Labor Statistics.




328

73.6
73.4
72.9
70.9
70.0
70.6
71.5
71.3
70.3
70.0
70.1
70.6
70.8
70.8
71.2
71.1
71.0
71.0
71.0
70.4
70.7
69.6
69.1
69.0
68.7
68.3
68.6
68.4
68.9
68.6
69.1
68.1
69.4
69.1
68.3
68.7
68.9
68.1
68.4
68.1
68.0
67.9
68.0
68.5
68.4
69.3
68.6
68.3
68.3
68.1

46.3
45.7
46.7
42.6
41.3
43.2
44.9
43.6
43.2
41.6
39.8
39.9
41.7
44.6
43.7
43.6
43.8
44.6
40.7
37.3
40.6
39.5
40.8
40.1
39.5
37.4
38.8
37.3
40.3
42.2
41.9
37.5
43.3
39.9
37.6
40.1
37.4
37.6
39.7
42.0
38.0
37.4
37.6
37.0
34.9
36.6
36.0
37.0
36.6
35.8

78.5
78.4
77.6
76.0
75.4
75.6
76.2
76.3
75.1
74.5
74.7
75.2
74.8
74.4
74.8
74.7
74.6
74.4
75.0
74.6
74.3
73.2
72.5
72.5
72.3
72.2
72.2
72.2
72.4
71.8
72.4
71.8
72.6
72.8
72.2
72.3
72.8
71.8
71.9
71.3
71.8
71.7
71.7
72.4
72.5
73.3
72.6
72.3
72.1
72.0

TABLE B-41.—Civilian employment/population ratio by demographic characteristic, 1954-97
[Percent;1 monthly data seasonally adjusted]
Black and other or black

White
Year or month

All
civilian
work- Total
ers
Total

Females

Males

16-19
years

20
years Total
and
over

16-19
years

Females

Males

20
years Total Total
and
over

16-19
years

20
years Total
and
over

16-19
years

20
years
and
over

41.9
42.2
43.0
43.7
42.8
43.2
43.6
476
42.7
42.7
43.4
44.1
45.1
45.0
45.2
45.9
44.9
43.9
43.3

24.7
26.4
28.0
26.5
22.8
20.3
24.8
23.2
23.1
21.3
21.8
20.2
23.1
24.8
24.7
25.1
22.4
20.2
19.9

43.7
43.9
44.7
45.5
45.0
45.7
45.8
448
44.9
45.2
46.1
47.3
48.2
47.9
48.2
48.9
48.2
47.3
46.7

43.0
43.8
43.5
41.6
42.8
43.3
45.8
46.0
45.7
45.1
44.2
44.1
46.7
48.1
48.8
50.3
51.2
52.0
51.9
50.6
50.8
50.9
52.3
53.4
54.4
55.6
54.1
53.8
54.1
54.1
54.6
54.4
54.7
54.3
54.2
54.8
54.8
54.7
55.0
54.8
55.6
55.5
55.0
54.9
55.9
56.3
56.4
55.5
55.8
56.4

19.2
22.0
20.9
20.2
19.2
18.5
22.1
22.4
21.0
19.7
17.7
17.0
20.1
23.1
23.8
25.8
25.8
27.1
25.8
21.5
22.1
21.6
24.5
26.1
27.1
28.5
27.4
24.9
27.6
27.7
28.8
28.0
27.1
24.9
26.8
27.2
26.9
28.1
29.3
28.4
32.2
28.4
25.0
26.8
28.4
29.0
29.0
28.0
28.4
29.2

46.5
47.2
46.9
44.9
46.4
47.0
49.3
49.3
49.1
48.5
47.5
47.4
49.8
50.9
51.6
53.0
53.9
54.6
54.7
53.6
53.6
53.8
55.0
56.1
57.1
58.4
56.8
56.7
56.7
56.8
57.2
57.1
57.5
57.3
57.0
57.6
57.7
57.4
57.6
57.5
58.0
58.3
58.1
57.8
58.7
59.1
59.2
58.3
58.6
59.2

Black and other

1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972

... .

55.5
56.7
57.5
57.1
55.4
56.0
56.1
55.4
55.5
55.4
55.7
56.2
56.9
57.3
57.5
58.0
57.4
56.6
57.0

55.2
56.5
57.3
56.8
55.3
55.9
55.9
55.3
55.4
55.3
55.5
56.0
56.8
57.2
57.4
58.0
57.5
56.8
57.4

81.5
82.2
82.7
81.8
79.2
79.9
79.4
78.2
78.4
77.7
77.8
77.9
78.3
78.4
78.3
78.2
76.8
75.7
76.0

49.9
52.0
54.1
52.4
47.6
48.1
48.1
45.9
46.4
44.7
45.0
47.1
50.1
50.2
50.3
51.1
49.6
49.2
51.5

84.0
84.7
85.0
84.1
81.8
82.8
82.4
81.4
81.5
81.1
81.3
81.5
81.7
81.7
81.6
81.4
80.1
79.0
79.0

31.4
33.0
34.2
34.2
33.6
34.0
34.6
34.5
34.7
35.0
35.5
36.2
37.5
38.3
38.9
40.1
40.3
39.9
40.7

36.4
37.0
38.9
38.2
35.0
34.8
35.1
34.6
34.8
32.9
32.2
33.7
37.5
37.7
37.8
39.5
39.5
38.6
41.3

31.1
32.7
33.8
33.9
33.5
34.0
34.5
34.5
34.7
35.2
35.8
36.5
37.5
38.3
39.1
40.1
40.4
40.1
40.6

58.0
58.7
59.5
59.3
56.7
57.5
57.9
56.2
56.3
56.2
57.0
57.8
58.4
58.2
58.0
58.1
56.8
54.9
54.1

76.5
77.6
78.4
77.2
72.5
73.8
74.1
71 7
72.0
71.8
72.9
73.7
74.0
73.8
73.3
72.8
70.9
68.1
67.3

52.4
52.7
52.2
48.0
42.0
41.4
43.8
41.0
41.7
37.4
37.8
39.4
40.5
38.8
38.7
39.0
35.5
31.8
32.4

66.8
67.5
65.8
60.6
60.6
61.4
63.3
63.4
60.4
59.1
56.0
56.3
59.2
60.0
60.6
62.0
62.7
62.8
62.6
61.3
59.9
60.0
60.8
61.7
61.1
61.4
61.1
60.8
60.9
60.8
61.5
60.8
61.2
61.8
60.5
61.0
61.0
61.1
60.8
60.8
60.6
60.9
61.1
61.1
61.7
62.8
61.9
61.8
61.9
61.1

31.6
32.8
31.4
26.3
25.8
26.4
28.5
28.7
27.0
24.6
20.3
20.4
23.9
26.3
26.5
28.5
29.4
30.4
27.7
23.8
23.6
23.6
25.4
25.2
24.9
23.7
24.6
25.4
26.1
27.3
28.8
24.3
24.3
24.5
23.9
24.6
22.0
23.3
23.4
26.5
22.6
23.3
24.6
22.5
22.8
24.2
22.5
25.9
23.8
22.9

79.2
80.4
81.3
80.5
76.0
77.6
77.9
75.5
75.7
76.2
77.7
78.7
79.2
79.4
78.9
78.4
76.8
74.2
73.2
Black

57.4 76.0
51.5 79.0 40.7
41.3 40.6 53.7
58.2 76.5
54.3 79.2 41.8
43.6 41.6 54.5
54.4 78.6 42.4
44.3 42.2 53.5
58.3 75.9
42.5 41.9 50.1
56.7 73.0
50.6 75.7 42.0
44.2 43.1 50.8
51.5 76.0 43.2
57.5 73.4
54.4 76.5 44.5
45.9 44.4 51.4
58.6 74.1
56.3 77.2 46.3
48.5 46.1 53.6
60.0 75.0
55.7 77.3 47.5
49.4 47.3 53.8
60.6 75.1
53.4 75.6 47.8
47.9 47.8 52.3
60.0 73.4
51.3 75.1 48.3
46.2 48.5 51.3
60.0 72.8
47.0 73.0 48.1
44.6 48.4 49.4
58.8 70.6
47.4 72.6 48.5
44.5 48.9 49.5
58.9 70.4
49.1 74.3 49.8
47.0 50.0 52.3
60.5 72.1
47.1 51.0 53.4
49.9 74.3 50.7
61.0 72.3
49.6 74.3 51.7
47.9 52.0 54.1
61.5 72.3
49.9 74.7 52.8
49.0 53.1 55.6
62.3 72.7
51.7 75.1 53.8
50.2 54.0 56.3
63.1 73.2
52.6 75.4 54.6
50.5 54.9 56.9
63.8 73.7
63.7 73.3
51.0 75.1 54.7
48.3 55.2 56.7
47.2 73.5 54.2
45.9 54.8 55.4
62.6 71.6
62.4 71.1
46.4 73.1 54.2
44.2 54.9 54.9
45.7 55.2 55.0
62.7 71.4
46.6 73.3 54.6
63.5 71.8
48.3 73.6 55.8
47.5 56.4 56.1
49.4 73.8 56.1
48.1 56.7 57.1
63.8 72.0
64.1 72.3
48.2 74.2 56.3
47.6 57.0 57.4
48.1 74.7 57.0
47.2 57.8 58.2
64.6 72.7
48.6 73.8 55.8
47.0 56.4 57.2
63.6 71.9
49.0 74.1 56.1
47.6 56.8 57.0
63.9 72.2
48.0 74.0 56.3
47.3 56.9 57.1
63.9 72.1
48.9 74.0 56.1
63.9 72.1
46.5 56.8 57.1
49.0 74.0 56.2
47.3 56.8 57.7
63.9 72.2
47.2 56.8 57.3
64.0 72.4
49.0 74.2 56.2
64.1 72.4
47.7 56.9 57.6
48.3 74.3 56.3
July
46.7 57.0 57.6
64.1 72.3
46.3 74.4 56.3
Aug
Sept
48.7 74.3 56.7
49.0 57.2 57.0
64.3 72.4
Oct
48.4 74.5 56.7
64.3 72.5
48.9 57.2 57.5
Nov
47.1 74.3 56.8
64.3 72.3
48.6 57.3 57.6
Dec
47.9 74.5 56.7
64.3 72.5
47.6 57.3 57.5
1997:Jan
47.4 74.5 56.8
64.4 72.5
47.3 57.5 57.6
Feb
64.4 72.5
47.7 74.6 56.8
47.2 57.5 57.5
Mar
64.6 72.7
48.0 74.7 56.9
47.3 57.6 57.8
64.7 72.8
47.8 74.8 57.0
48.6 57.6 58.0
47.2 57.8 57.8
64.7 72.9
49.0 74.8 57.0
Marine
64.6 72.6
46.8 74.7 57.1
47.5 57.8 57.7
64.6 72.6
47.2 74.7 57.1
47.5 57.8 58.5
{uiy
46.8 74.6 57.0
46.5 57.8 59.2
Aug
64.6 72.5
46.4 57.8 58.9
Sept
47.7 74.5 57.0
64.5 72.5
48.7 74.4 57.1
64.6 72.5
46.3 57.9 58.3
Nov
46.9 57.8 58.5
64.9 73.0
50.6 74.9 57.1
Dec
50.0 74.7 57.4
47.6 58.1 58.5
64.9 72.8
1
Civilian employment as percent of civilian noninstitutional population in group specified.
Note.—Data relate to persons 16 years of age and over.
See footnote 5 and Note, Table B-35.
Source: Department of Labor, Bureau of Labor Statistics.

1972
1973
1974
1975
1976
1977 ..
1978
1979
1980
1981
1982
1983
1984
1985
1986 . .
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1996:Jan
Feb
Mar
Apr
May
June

oct .::::::

57.0
57.8
57.8
56.1
56.8
57.9
59.3
59.9
59.2
59.0
57.8
57.9
59.5
60.1
60.7
61.5
62.3
63.0
62.8
61.7
61.5
61.7
62.5
62.9
63.2
63.8
62.7
63.0
63.0
63.0
63.1
63.2
63.2
63.2
63.3
63.5
63.4
63.4
63.5
63.5
63.7
63.8
63.8
63.7
63.8
63.8
63.7
63.8
64.0
64.1




329

73.0
73.7
71.9
66.5
66.8
67.5
69.1
69.1
65.8
64.5
61.4
61.6
64.1
64.6
65.1
66.4
67.1
67.0
67.1
65.9
64.3
64.3
65.0
66.1
65.5
66.1
65.6
65.2
65.1
64.9
65.5
65.3
65.8
66.4
65.1
65.5
65.8
65.7
65.5
65.0
65.4
65.7
65.7
65.9
66.5
67.5
66.8
66.3
66.5
65.8

TABLE B-42.—Civilian unemployment rate, 1950-97
[Percent;1 monthly data seasonally adjusted]

Year or month

All
civilian
work- Total
ers

Males

Females

4.7
5.7 11.4
5.3
5.1 12.7
4.4
3.3
2.8
8.1
2.5
8.3
2.4
3.0
28
89
3.6
80
2.5
2.9
2.8
7.9
3.3
7.2
5.5
4.9
6.0 11.4
5.3 13.5
4.4
3.8
4.2 11.6
4.9 10.2
4.1
3.4
3.8 11.1
4.8 11.2
3.6
4.7 10.6
4.3 4.1 12.4
6.2
6.8
6.8 17.1
6.8 14.3
4.7
5.5
5.2 15.3
5.9 13.5
4.7
5.5
5.4 15.3
5.9 13.9
6.7
6.4 17.1
5.7
7.2 16.3
55
52 147
46
62 146
5.7
5.2 17.2
4.5
6.5 17.2
5.2
3.9
6.2 16.6
4.6 15.8
3.2
5.5 15.7
.
4.5
4.0 14.1
3.8
3.2 11.7
2.5
4.8 14.1
3.8
3.1 12.3
2.3
5.2 13.5
2.2
3.6
2.9 11.6
4.8 14.0
2.1
4.7 13.3
3.5
2.8 11.4
4.4 15.0
4.9
3.5
5.9 15.6
4.4
6.9 17.2
5.9
5.3 16.6
5.6
4.0
6.6 16.7
5.0 15.9
4.9
3.3
6.0 15.3
4.2 13.9
6.7 16.6
5.6
15.6
3.8
4.9
8.5
7.9 20.1
6.8
9.3 19.7
7.7
7.1 19.2
5.9
8.6 18.7
7.1
5.2
8.2 18.3
6.3 17.3
4.3
7.2 17.1
6.1
5.3 15.8
42
68 164
58
51 159
7.4 17.2
7.1
5.9
6.9 18.3
7.4 20.1
6.3
7.9 19.0
7.6
9.4 21.9
9.7
8.8
9.9 24.4
9.6
8.9
9.2 21.3
9.9 23.3
7.4 19.6
7.5
6.6
7.6 18.0
6.2
7.4 17.6
7.2
7.0 19.5
7.1 17.6
6.1
7.0
6.9 19.0
5.4
6.2 15.9
6.2
6.2 17.8
4.8
5.6 14.4
5.5
5.5 16.0
5.4 14.0
4.5
5.3
5.2 15.9
5.7 16.3
5.0
5.6
5.5 14.7
6.4
6.4 17.5
7.2 19.8
6.8
7.1
7.0 18.6
7.5
7.9 21.5
6.4
6.9
7.2 20.4
6.6 17.5
5.4
6.1
6.2 19.0
6.0 16.2
4.8
5.6 16.1
5.6
5.6 18.4
54
5.4 15.2
54 181
4.6
4.2
4.9
4.9 16.9
5.0 15.0
5.7
4.8
5.8 16.6
5.6 18.8
5.4 15.7
4.8
5.5
5.6 18.0
4.9
5.4 15.5
5.5
5.6 18.8
5.4 15.5
5.5
4.8
5.6 18.1
4.8
5.5 15.2
5.5
5.5 17.9
4.6
5.3 15.0
5.3
5.3 16.8
June
4.7
5.4 13.3
5.5
5.5 19.3
4.3
5.3 15.9
5.2
5.0 17.9
5.2
4.6
5.2 14.2
5.3 17.2
4.4
5.4 14.9
5.3
5.2 18.2
5.4
4.5
5.5 15.3
Nov
5.3 18.7
4.3
5.5 15.8
5.3
5.1 17.9
Dec
5.3
4.5
5.3 15.4
1997:Jan
5.3 18.3
4.4
5.3
5.5 16.7
Feb
5.1 17.9
4.4
Mar
5.2
5.3 15.0
5.1 17.9
4.2
5.0 13.7
5.0
4.9 17.4
3.9
5.1 15.6
4.8
4.5 15.7
4.2
5.0 14.7
5.0
5.0 18.2
June
4.1
5.0 15.3
4.9
4.8 17.2
July
4.1
4.9
17.3
5.0 15.0
Aug
4.8
4.1
5.0 15.5
4.9
4.8 17.2
Sept
4.1
4.7 14.7
4.8
4.8 16.3
Oct
3.9
4.7 14.7
Nov
4.6
4.5 15.6
4.1
4.7
4.7 14.2
4.6 14.3
Dec
1
Unemployed as percent of civilian labor force in group specified.
2
Data for 1950 are for March; data for 1951-54 are for April.
Note.—Data relate to persons 16 years of age and over.
See footnote 5 and Note, Table B-35.
Source: Department of Labor, Bureau of Labor Statistics.

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965 . .
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982 . .. .
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1996:Jan
Feb
Mar

Slay'z::
ig :::
SP&:::::




Expert-

Rnth

20
20
16- years
16- years
19
19
and Total years and
years over
over
5.1
4.0
32
2.9
5.5
44
4.2
4.1
6.1
5.2
5.1
6.3
54
5.4
5.2
4.5
3.8
4.2
3.8
3.7
4.8
5.7
5.4
4.9
5.5
8.0
7.4
7.0
6.0
57
6.4
6.8
8.3
8.1
6.8
6.6
6.2
5.4
4.9
4.7
4.9
5.7
6.3
5.9
5.4
4.9
48
4.4
5.1
4.8
4.7
4.8
4.9
4.7
4.9
4.7
4.5
4.7
4.8
4.9
4.7
4.7
4.7
4.4
4.5
4.4
4.3
4.3
4.3
4.1
4.0
4.0

330

sexes
16-19
years

12.2
8.2
85
7.6
12.6
11.0
11.1
11.6
15.9
14.6
14.7
16.8
147
17.2
16.2
14.8
12.8
12.9
12.7
12.2
15.3
16.9
16.2
14.5
16.0
19.9
19.0
17.8
16.4
16.1
17.8
19.6
23.2
22.4
18.9
18.6
18.3
16.9
15.3
15.0
15.5
18.7
20.1
19.0
17.6
17.3
16.7
16.0
17.7
16.9
17.2
16.9
16.6
15.9
16.5
16.9
15.8
16.6
17.0
16.8
16.9
17.3
16.5
15.6
15.7
16.5
16.3
16.2
16.4
15.5
15.2
14.3

White

4.9
3.1
28
2.7
5.0
3.9
3.6
3.8
6.1
4.8
5.0
6.0
49
5.0
4.6
4.1
3.4
3.4
3.2
3.1
4.5
5.4
5.1
4.3
5.0
7.8
7.0
6.2
5.2
51
6.3
6.7
8.6
8.4
6.5
6.2
6.0
5.3
4.7
4.5
4.8
6.1
6.6
6.1
5.3
4.9
4.7
4.2
4.9
4.8
4.8
4.8
4.9
4.6
4.7
4.5
4.5
4.5
4.7
4.6
4.5
4.5
4.4
4.2
4.1
4.3
4.2
4.2
4.2
4.1
3.9
3.9

Black
and
other

9.0
5.3
54
4.5
9.9
8.7
8.3
7.9
12.6
10.7
10.2
12.4
109
10.8
9.6
8.1
7.3
7.4
6.7
6.4
8.2
9.9
10.0
9.0
9.9
13.8
13.1
13.1
11.9
11.3
13.1
14.2
17.3
17.8
14.4
13.7
13.1
11.6
10.4
10.0
10.1
11.1
12.7
11.7
10.5
9.6
9.3
8.8
9.5
9.2
9.4
9.4
9.2
9.0
9.5
9.0
9.3
9.5
9.2
9.2
9.3
9.5
9.3
8.9
9.2
8.9
8.4
8.4
8.4
8.2
8.4
8.6

Black

::.:::

:::::
10.4
9.4
10.5
14.8
14.0
14.0
12.8
12.3
14.3
15.6
18.9
19.5
15.9
15.1
14.5
13.0
11.7
11.4
11.4
12.5
14.2
13.0
11.5
10.4
10.5
10.0
10.5
10.1
10.6
10.6
10.2
10.1
10.7
10.7
10.7
10.8
10.7
10.5
10.7
11.0
10.5
9.9
10.3
10.3
9.6
9.5
9.6
9.6
9.7
9.9

wage
and
salary
workers

6.0
3.7
34
3.2
6.2
4.8
4.4
4.6
7.3
5.7
5.7
6.8
56
5.6
5.0
4.3
3.5
3.6
3.4
3.3
4.8
5.7
5.3
4.5
5.3
8.2
7.3
6.6
5.6
55
6.9
7.3
9.3
9.2
7.1
6.8
6.6
5.8
5.2
5.0
5.3
6.6
7.2
6.6
5.9
5.4
5.2
4.7
5.4
5.3
5.4
5.3
5.5
5.1
5.3
5.0
5.0
5.1
5.2
5.1
5.1
5.0
4.9
4.7
4.7
4.8
4.6
4.7
4.7
4.5
4.4
4.5

Women
who
men,
spouse 2 maintain
present families
Marriprt

4.6
1.5
14
1.7
4.0
2.6
2.3
2.8
5.1
3.6 •••• •"•••••
3.7
4.6
36
3.4
2.8
2.4
1.9
4.9
1.8
4.4
1.6
4.4
1.5
5.4
2.6
3.2
7.3
2.8
7.2
7.1
2.3
2.7
7.0
5.1
10.0
4.2
10.1
9.4
3.6
2.8
8.5
83
2.8
4.2
9.2
10.4
4.3
11.7
6.5
12.2
6.5
10.3
4.6
10.4
4.3
4.4
9.8
3.9
9.2
8.1
3.3
8.1
3.0
3.4
8.3
4.4
9.3
5.1
10.0
4.4
9.7
3.7
8.9
8.0
3.3
3.0
8.2
2.7
8.1
7.9
3.2
7.4
3.1
7.4
3.1
7.6
3.0
8.7
3.0
7.7
3.0
9.0
3.0
8.5
2.9
8.4
3.0
8.5
2.9
8.7
3.1
8.5
2.9
8.7
2.8
8.8
2.8
8.7
2.8
7.9
2.7
2.7
7.9
2.7
8.0
7.6
2.6
2.6
8.0
7.8
2.6
7.8
2.6
2.4
8.1
7.7
2.6

TABLE B-43.—Civilian unemployment rate by demographic characteristic, 1954—97
[Percent;1 monthly data seasonally adjusted]

Year or month

White
Black and other or black
All
Females
Males
Males
Females
civilian
20 Total
20
20
20
work- Total
Total 16-19 years Total 16-19 years
ers
Total 16-19 years Total 16-19 years
years and
years and
years and
years and
over
over
over
over
Black and other

1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972

5.5
4.4
4.1
4.3
6.8
5.5
5.5
6.7
5.5
5.7
5.2
4.5
3.8
3.8
3.6
3.5
4.9
5.9
5.6

5.0
3.9
3.6
3.8
6.1
4.8
5.0
6.0
4.9
5.0
4.6
4.1
3.4
3.4
3.2
3.1
4.5
5.4
5.1

4.8
3.7
3.4
3.6
6.1
4.6
4.8
5.7
4.6
4.7
4.1
3.6
2.8
2.7
2.6
2.5
4.0
4.9
4.5

13.4
11.3
10.5
11.5
15.7
14.0
14.0
15.7
13.7
15.9
14.7
12.9
10.5
10.7
10.1
10.0
13.7
15.1
142

4.4
3.3
3.0
3.2
5.5
4.1
4.2
5.1
4.0
3.9
3.4
2.9
2.2
2.1
2.0
1.9
3.2
4.0
3.6

5.5
4.3
4.2
4.3
6.2
5.3
5.3
6.5
5.5
5.8
5.5
5.0
4.3
4.6
4.3
4.2
5.4
6.3
S9

10.4
9.1
9.7
9.5
12.7
12.0
12.7
14.8
12.8
15.1
14.9
14.0
12.1
11.5
12.1
11.5
13.4
15.1
14.2

5.1
3.9
3.7
3.8
5.6
4.7
4.6
5.7
4.7
4.8
4.6
4.0
3.3
3.8
3.4
3.4
4.4
5.3
4.9

9.9 10.3
8.7 8.8
8.3 7.9
7.9 8.3
12.6 13.7
10.7 11.5
10.2 10.7
12.4 12.8
10.9 10.9
10.8 10.5
9.6 8.9
8.1 7.4
7.3 6.3
7.4 6.0
6.7 5.6
6.4 5.3
8.2 7.3
9.9 9.1
10.0 89

4.9
4.3
5.1
7.5
6.8
6.2
5.2
5.0
5.6
5.9
7.3
6.9
5.8
5.7
5.4
4.6
4.1
4.0
4.1
5.0
5.5
5.2
4.6
4.3
4.1
3.7
4.4
4.3
4.1
4.2
4.4
4.0
4.1
4.0
3.9
4.0
4.2
4.3
3.9
3.9
3.9
3.7
3.7
3.7
3.5
3.7
3.7
3.5
3.4
3,4

10.4
9.4
10.5
14.8
14.0
14.0
12.8
12.3
14.3
15.6
18.9
19.5
15.9
15.1
14.5
13.0
11.7
11.4
11.4
12.5
14.2
13.0
11.5
10.4
10.5
10.0
10.5
10.1
10.6
10.6
10.2
10.1
10.7
10.7
10.7
10.8
10.7
10.5
10.7
11.0
10.5
9.9
10.3
10.3
9.6
9.5
9.6
9.6
9.7
99

14.4
13.4
15.0
18.4
26.8
25.2
24.0
26.8
22.0
27.3
24.3
23.3
21.3
23.9
22.1
21.4
25.0
28.8
297

9.9
8.4
7.4
7.6
12.7
10.5
9.6
11.7
10.0
9.2
7.7
6.0
4.9
4.3
3.9
3.7
5.6
7.3
69

9.2
8.5
8.9
7.3
10.8
9.4
9.4
11.9
11.0
11.2
10.7
9.2
8.7
9.1
8.3
7.8
9.3
10.9
114

20.6
19.2
22.8
20.2
28.4
27.7
24.8
29.2
30.2
34.7
31.6
31.7
31.3
29.6
28.7
27.6
34.5
35.4
384

8.4
7.7
7.8
6.4
9.5
8.3
8.3
10.6
9.6
9.4
9.0
7.5
6.6
7.1
6.3
5.8
6.9
8.7
8.8

11.8
11.1
11.3
14.8
14.3
14.9
13.8
13.3
14.0
15.6
17.6
18.6
15.4
14.9
14.2
13.2
11.7
11.4
10.9
12.0
13.2
12.1
11.0
10.2
10.0
9.9
10.2
9.3
9.6
9.9
9.5
96
9.7
10.7
9.9
10.3
10.0
10.7
10.4
11.3
10.1
9.6
10.5
9.9
9.4
9.6
9.6
9.5
9.9
97

40.5
36.1
37.4
41.0
41.6
43.4
40.8
39.1
39.8
42.2
47.1
48.2
42.6
39.2
39.2
34.9
32.0
33.0
29.9
36.0
37.2
37.4
32.6
34.3
30.3
28.7
30.7
32.6
30.0
31.4
29.1
275
23.2
36.6
30.7
31.6
28.7
30.1
27.7
30.4
24.6
26.3
33.3
25.5
25.9
27.2
28.6
28.8
31.9
33.1

9.0
8.6
8.8
12.2
11.7
12.3
11.2
10.9
11.9
13.4
15.4
16.5
13.5
13.1
12.4
11.6
10.4
9.8
9.7
10.6
11.8
10.7
9.8
8.6
8.7
8.8
9.0
7.9
8.4
8.5
8.2
8.5
8.9
9.0
8.6
8.9
8.9
9.5
9.3
10.0
9.2
8.6
9.2
9.0
8.4
8.4
8.4
8.3
8.4
81

Black

1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1996:Jan
Feb
Mar
Apr
May
June
July
Aug

3.6
3.0
3.5
6.2
5.4
4.7
3.7
3.6
5.3
5.6
7.8
7.9
5.7
5.4
5.3
4.8
4.1
3.9
4.3
5.8
6.4
5.7
4.8
4.3
4.1
3.6
4.2
4.2
4.2
4.2
4.3
41
4.1
3.8
3.9
3.8
3.9
3.8
3.9
3.8
3.8
3.6
3.3
3.6
3.5
3.6
3.6
3.6
3.4
36

5.9
5.3
6.1
8.6
7.9
7.3
6.2
5.9
6.5
6.9
8.3
7.9
6.5
6.4
6.1
5.2
4.7
4.5
4.7
5.6
6.1
5.7
5.2
4.8
4.7
4.2
5.0
4.8
4.7
4.8
49
4fi
4.6
4.5
4.4
4.5
Oct
Nov
4.7
Dec
4.8
1997Jan
4.5
Feb
4.5
Mar
4.5
Apr
4.2
4.3
May
:
4.2
June
July
4.2
Aug
4.2
Sept
4.3
4.0
Oct
Nov
3.9
Dec
3,9
1
Unemployed as percent of civilian labor force in group specified.
Note.—See Note, Table 8^42.
Source: Department of Labor, Bureau of Labor Statistics.

sept . .::"" :

5.6
4.9
5.6
8.5
7.7
7.1
6.1
5.8
7.1
7.6
9.7
9.6
7.5
7.2
7.0
6.2
5.5
5.3
5.6
6.8
7.5
6.9
6.1
5.6
5.4
4.9
5.7
5.5
5.5
5.5
5.5
53
5.5
5.2
5.2
5.3
5.4
5.3
5.3
5.3
5.2
5.0
4.8
5.0
4.9
4.9
4.9
4.8
4.6
4.7

5.1
4.3
5.0
7.8
7.0
6.2
5.2
5.1
6.3
6.7
8.6
8.4
6.5
6.2
6.0
5.3
4.7
4.5
4.8
6.1
6.6
6.1
5.3
4.9
4.7
4.2
4.9
4.8
4.8
4.8
49
46
4.7
4.5
4.5
4.5
4.7
4.6
4.5
4.5
4.4
4.2
4.1
4.3
4.2
4.2
4.2
4.1
3.9
39




4.5
3.8
4.4
7.2
6.4
5.5
4.6
4.5
6.1
6.5
8.8
8.8
6.4
6.1
6.0
5.4
4.7
4.5
4.9
6.5
7.0
6.3
5.4
4.9
4.7
4.2
4.9
4.8
4.9
4.8
4.9
4.7
4.7
4.4
4.5
4.5
4.6
4.4
4.5
4.4
4.4
4.2
3.9
4.3
4.2
4.2
4.2
4.2
3.9
40

14.2
12.3
13.5
18.3
17.3
15.0
13.5
13.9
16.2
17.9
21.7
20.2
16.8
16.5
16.3
15.5
13.9
13.7
14.3
17.6
18.5
17.7
16.3
15.6
15.5
14.3
16.4
15.6
16.0
15.6
15.6
14.6
15.9
15.3
14.6
15.1
15.8
15.0
15.1
14.8
15.1
14.6
13.0
15.8
15.0
15.1
14.4
14.3
12.8
11.3

14.2
13.0
14.5
17.4
16.4
15.9
14.4
14.0
14.8
16.6
19.0
18.3
15.2
14.8
14.9
13.4
12.3
11.5
12.6
15.2
15.8
14.7
13.8
13.4
12.9
12.8
14.3
13.3
13.2
13.3
12.9
12.9
11.8
13.0
11.7
12.0
13.0
13.2
13.1
14.4
13.0
12.2
12.7
12.8
13.7
13.1
13.7
12.3
11.6
11.1

331

9.3
8.0
9.8
14.8
13.7
13.3
11.8
11.4
14.5
15.7
20.1
20.3
16.4
15.3
14.8
12.7
11.7
11.5
11.9
13.0
15.2
13.8
12.0
10.6
11.1
10.2
10.8
11.1
11.6
11.3

no

107
11.7
10.6
11.5
11.3
11.5
10.3
11.0
10.7
10.9
10.2
10.0
10.7
9.8
9.4
9.6
9.6
9.4
10?

31.7
27.8
33.1
38.1
37.5
39.2
36.7
34.2
37.5
40.7
48.9
48.8
42.7
41.0
39.3
34.4
32.7
31.9
31.9
36.3
42.0
40.1
37.6
37.1
36.9
36.5
36.7
31.8
35.2
35.2
31.3
351
43.8
38.7
36.6
38.6
41.1
38.1
40.9
36.8
40.5
37.7
34.5
39.1
34.6
33.9
37.6
30.1
35.0
36.2

7.0
6.0
7.4
12.5
11.4
10.7
9.3
9.3
12.4
13.5
17.8
18.1
14.3
13.2
12.9
11.1
10.1
10.0
10.4
11.5
13.5
12.1
10.3
8.8
9.4
8.5
9.1
9.8
10.0
9.6
9.6
91
9.3
8.7
9.8
9.4
9.7
8.5
9.0
8.8
8.9
8.4
8.4
9.0
8.3
7.9
7.9
8.3
7.8
ftfi

TABLE B-44.—Unemployment by duration and reason, 1950-97
[Thousands of persons, except as noted; monthly data seasonally adjusted1]
Duration of unemployment
Year or month

Unemployment

27
Less
than 5-14 15-26 weeks
5 weeks weeks and
weeks
over

12.1
3,288 1,450 1,055
425 357
574
137
9.7
2,055 1,177
166
8.4
516
148
84
1,883 1,135
1,834 1,142
482
132
78
8.0
3,532 1,605 1,116
495 317
11.8
2,852 1,335
815 366 336
13.0
2,750 1,412
805 301 232
11.3
2,859 1,408
891
321
239
10.5
785 667
4,602 1,753 1,396
13.9
14.4
3,740 1,585 1,114
469 571
3,852 1,719 1,176
503 454
12.8
4,714 1,806 1,376
728 804
15.6
534 585
14.7
3,911 1,663 1,134
535 553
14.0
4,070 1,751 1,231
1,117
491
482
13.3
3,786 1,697
404 351
983
11.8
3,366 1,628
287 239
10.4
2,875 1,573
779
177
8.7
893
271
2.3 1,229
2,975 1,634
8.4
810 256
4.5 1,070
2,817 1,594
156
827 242
4.4 1,017
133
7.8
2,832 1,629
428 235
4.9 1,811
4,093 2,139 1,290
8.6
668 519
11.3
6.3 2,323
5,016 2,245 1,585
566
12.0
6.2 2,108
4,882 2,242 1,472
601
5.2 1,694
4,365 2,224 1,314
483 343
10.0
574 381
5.2 2,242
9.8
5,156 2,604 1,597
8.4 4,386
14.2
7,929 2,940 2,484 1,303 1,203
15.8
8.2 3,679
7,406 2,844 2,196 1,018 1,348
913 1,028
14.3
7.0 3,166
6,991 2,919 2,132
766 648
11.9
5.9 2,585
6,202 2,865 1,923
706 535
5.4 2,635
6,137 2,950 1,946
10.8
7,637 3,295 2,470 1,052
820
11.9
6.5 3,947
13.7
6.9 4,267
8,273 3,449 2,539 1,122 1,162
8.7 6,268
10,678 3,883 3,311 1,708 1,776
15.6
10,717 3,570 2,937 1,652 2,559
20.0
10.1 6,258
18.2
7.9 4,421
8,539 3,350 2,451 1,104 1,634
8,312 3,498 2,509 1,025 1,280
15.6
6.8 4,139
8,237 3,448 2,557 1,045 1,187
15.0
6.9 4,033
943 1,040
14.5
6.5 3,566
7,425 3,246 2,196
6,701 3,084 2,007
5.9 3,092
801 809
13.5
730 646
11.9
4.8 2,983
6,528 3,174 1,978
7,047 3,265 2,257
5.3 3,387
822 703
12.0
13.7
8,628 3,480 2,791 1,246 1,111
6.8 4,694
8.7 5,389
17.7
9,613 3,376 2,830 1,453 1,954
8.3 4,848
8,940 3,262 2,584 1,297 1,798
18.0
9.2 3,815
7,996 2,728 2,408 1,237 1,623
18.8
7,404 2,700 2,342 1,085 1,278
16.6
8.3 3,476
16.7
8.3 3,370
7,236 2,633 2,287 1,053 1,262
6,739 2,538 2,138
995 1,067
15.8
8.0 3,037
7,522 2,673 2,397 1,133 1,233
16.1
8.3 3,539
7.9 3,532
7,345 2,731 2,259 1,107 1,212
16.5
7,355 2,606 2,264 1,103 1,318
17.2
8.3 3,474
17.4
8.5 3,601
7,348 2,538 2,351 1,073 1,312
7,359 2,778 2,350 1,027 1,336
17.0
8.5 3,459
17.4
8.2 3,357
7,095 2,542 2,177 1,033 1,323
974 1,326
8.2 3,386
7,347 2,711 2,342
16.8
17.1
8.5 3,079
6,916 2,516 2,190 1,020 1,262
8.4 3,226
7,003 2,535 2,227 1,039 1,223
16.8
8.4 3,186
Oct
7,079 2,473 2,292 1,085 1,216
16.5
7.8 3,333
Nov
7,231 2,879 2,224 1,025 1,170
16.1
989 1,189
7.9 3,174
Dec
7,161 2,622 2,382
15.8
1997:Jan
964 1,186
7.9 3,191
7,188 2,678 2,251
15.9
7,174 2,580 2,341 1,031 1,127
15.9
8.2 3,147
Feb
Mar
15.4
7.9 3,148
7,080 2,618 2,325 1,003 1,076
15.4
Apr
6,768 2,471 2,177 1,033 1,055
8.1 3,038
15.3
7.8 2,961
May
6,566 2,542 2,067 1,054 1,022
6,814 2,541 2,188 1,031 1,038
15.3
7.9 3,094
June
6,633 2,446 2,097 1,061 1,067
16.5
8.2 2,954
July
6,657 2,564 2,121
950 1,077
15.8
7.9 3,010
Aug
6,678 2,484 2,115 1,031 1,078
15.9
Sept
8.1 3,007
7.7 2,934
919 1,071
Oct
6,496 2,558 1,912
16.3
Nov
899 966
7.8 2,886
6,289 2,423 2,048
15.6
936 1.028
7.7 2.991
Dec
6.392 2.531 1.922
16.3
1
2 Because of independent seasonal adjustment of the various series, detail will not add to totals.
3 Data for 1967 by reason for unemployment are not equal to total unemployment.
Beginning January 1994, job losers and persons who completed temporary jobs.
Note.—Data relate to persons 16 years of age and over.
See footnote 5 and Note, Table B-35.
Source: Department of Labor, Bureau of Labor Statistics.

332

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966 2
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1996:Jan
Feb
Mar
Apr
May
June
July
Aue
Sept

Reason for unemployment

Average Median
Job losers3
(mean) duraduraOn
tion
tion
Total layoff Other
(weeks) (weeks)

394
334
339
675
735
582
472
746
1,671
1,050
865
712
851
1,488
1,430
2,127
1,780
1,171
1,157
1,090
943
851
850
1,028
1,292
1,260
1,115
977
1,030
1,021
931
1,108
1,043
1,008
1,078
1,112
1,002
993
953
1,002
936
999
960
953
949
993
958
909
928
894
891
893
963
815
961

836
736
678
1,137
1,588
1,526
1,221
1,495
2,714
2,628
2,300
1,873
1,784
2,459
2,837
4,141
4,478
3,250
2,982
2,943
2,623
2,241
2,133
2,359
3,402
4,129
3,733
2,838
2,446
2,349
2,106
2,431
2,489
2,466
2,523
2,347
2,355
2,393
2,126
2,224
2,250
2,334
2,214
2,238
2,198
2,155
2,080
2,052
2,166
2,060
2,119
2,114
1,971
2,071
2.030

Job
leavers

Reen- New
entrants trants

438
431
436
550
590
641
683
768
827
903
909
874
880
891
923
840
830
823
877
1,015
965
983
1,024
1,041
1,004
1,002
976
791
824
774
795
817
759
792
739
690
699
751
762
785
802
829
849
861
804
797
776
808
827
812
894
853
732
655
692

945
909
965
1,228
1,472
1,456
1,340
1,463
1,892
1,928
1,963
1,857
1,806
1,927
2,102
2,384
2,412
2,184
2,256
2,160
1,974
1,809
1,843
1,930
2,139
2,285
2,198
2,786
2,525
2,512
2,338
2,477
2,470
2,506
2,492
2,747
2,409
2,546
2,495
2,444
2,491
2,518
2,567
2,499
2,608
2,497
2,422
£,338
2,333
2,263
2,173
2,263
2,247
2,229
2.170

396
407
413
504
630
677
649
681
823
895
953
885
817
872
981
1,185
1,216
1,110
1,039
1,029
920
816
677
688
792
937
919
604
579
580
569
619
586
569
558
545
568
609
562
559
581
587
627
596
623
617
569
573
510
564
554
560
555
560
552

TABLE B-45.—Unemployment insurance programs, selected data, 1965-97
All programs

Year or month

Covered
employment 1

Insured
unemployment
(weekly
average)"

State programs
Total
benefits
paid
(millions
of
dollars) 24

Insured
unemployment 3

Thousands

1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997p
1996- Jan
Feb
Mar
Apr
May
June
July
Aue
Sept
Oct
Nov
Dec
1997- Jan
Feb
Mar
Apr

51,580
54,739
56,342
57,977
59,999
59,526
59,375
66,458
69,897
72,451
71,037
73,459
76,419
88,804
92,062
92,659
93,300
91,628
91,898
96,474
99,186
101,099
103,936
107,156
109,929
111,500
109,606
110,167
112,146
115,255
118,068
M20.567

..

. .

May ::.: : : .:

June
July
Aug
Sept
Oct
Nov
Dec*

Initial
claims

Exhaustions 5

Insured
unemployment as
percent
of
covered
employment

Benefits paid
Total
(millions
of
dollars)4

Average
weekly
check
(dollars)6

Weekly average; thousands

1,450
1,129
1,270
1,187
1,177
2,070
2,608
2,192
1,793
2,558
4,937
3,846
3,308
2,645
2,592
3,837
3,410
4,592
3,774
2,560
2,699
2,739
2,369
2,135
2,205
2,575
3,406
3,348
2,845
2,746
2,639
2,656
2,369

2,360
1,891
2,222
2,191
2,299
4,209
6,154
5,491
4,517
6,934
16,802
12,345
10,999
9,007
9,401
16,175
15,287
24,491
21,000
13,838
15,283
16,670
14,929
13,694
14,948
18,721
26,717
826,460
«22,950
22,844
22,386
22,915

1,328
1,061
1,205
1,111
1,101
1,805
2,150
1,848
1,632
2,262
3,986
2,991
2,655
2,359
2,434
3,350
3,047
4,059
3,395
2,475
2,617
2,643
2,300
2,081
2,158
2,522
3,342
3,245
2,751
2,670
2,572
2,595
2,321

232
203
226
201
200
296
295
261
247
363
478
386
375
346
388
488
460
583
438
377
397
378
328
310
330
388
447
408
341
340
357
356
324

21
15
17
16
16
25
39
35
29
37
81
63
55
39
39
59
57
80
80
50
49
52
46
38
37
45
67
74
62
57
51
53
48

3,507
3,343
3,170
2,941
2,358
2,387
2,554
2,258
2,188
2,050
2,108
2,754
3,041
3,039
2,936
2,508
2,073
2,211
2,232
2,110
1,973
1,759
2,021
2,450

2,568.1
2,371.7
2,247.9
2,130.0
1,793.7
1,550.6
1,838.7
1,599.6
1,452.0
1,520.0
1,418.6
1,928.8
2,299.5
2,072.9
2,111.1
1,885.9
1,534.5
1,495.5
1,649.8
1,424.8
1,416.0
1,333.5
1,284.7
1,844.8

2,642
2,652
2,639
2,584
2,554
2,573
2,535
2,524
2,468
2,470
2,444
2,518
2,453
2,375
2,294
2,274
2,263
2,326
2,300
2,308
2,233
2,229
2,241
2,282

371
369
389
356
349
355
334
325
335
334
338
355
334
311
312
333
326
341
319
325
308
308
318
317

58
53
55
61
53
52
56
49
47
46
44
53
53
51
52
55
47
47
50
44
43
41
43
48

3.0
2.3
2.5
2.2
2.1
3.4
4.1
3.5
2.7
3.5
6.0
4.6
3.9
3.3
2.9
3.9
3.5
4.6
3.9
2.8
2.9
2.8
2.4
2.0
2.1
2.4
3.2
3.1
2.6
2.5
2.3
2.3

2,166
1,771
2,092
2,032
2,128
3,849
4[957
4,471
4,008
5,975
11,755
8,975
8,357
7,717
8,613
13,761
13,262
20,649
17,787
12,610
14,131
15,329
13,607
12,565
13,760
17,356
24,526
23,869
20,539
20,401
20,125
20,645

37.19
39.75
41.25
43.43
46.17
50.34
54.02
56.76
59.00
64.25
70.23
75.16
78.79
83.67
89.67
98.95
106.70
119.34
123.59
123.47
128.14
135.65
140.55
144.97
151.73
161.56
169.88
173.64
179.62
182.16
187.29
189.51
192.73

2.4
2.4
2.4
2.3
2.3
2.3
2.2
2.2
2.2
2.2
2.1
2.2
2.1
2.1
2.0
2.0
2.0
2.0
2.0
2.0
1.9
1.9
1.9
2.0

2,488.2
2,305.3
2,188.1
2,073.8
1,744.3
1,504.0
1,782.3
1,549.1
1,405.4
1,467.3
1,371.3
1,871.7
2,242.0
2,020.2
2,058.1
1,837.3
1,495.9
1,457.8
1,608.3
1,385.0
1,369.6
1,283.7
1,236.8
1,787.7

191.92
193.85
193.45
192.11
189.02
187.70
176.96
184.79
188.92
189.07
190.43
192.30
194.44
196.38
196.75
194.50
193.43
191.22
188.09
184.69
191.35
191.80
191.80
193.99

**

**Monthly data are seasonally adjusted.
1
Includes persons under the Mate, UCFE (Federal employee, effective January 1955), RRB (Railroad Retirement Board) programs, and UCX
(unemployment compensation for ex-servicemembers, effective October 1958) programs.
2
Includes State, UCFE, RR, UCX, UCV (unemployment compensation for veterans, October 1952-January 1960), and SRA (Servicemen's Readjustment Act, September 1944-September 1951) programs. Also includes Federal and State extended benefit programs. Does not include
FSB (Federal supplemental benefits), SUA (special unemployment assistance), Federal Supplemental Compensation, and Emergency Unemployment Compensation programs, except as noted in footnote 8.
3
Covered workers who have completed at least 1 week of unemployment.
4
Annual data are net amounts and monthly data are gross amounts.
5
Individuals receiving final payments in benefit year.
6
For total unemployment only.
7
Latest data available for all programs combined. Workers covered by State programs account for about 97 percent of wage and salary
earners.
8
Including Emergency Unemployment Compensation and Federal Supplemental Compensation, total benefits paid for 1992 and 1993 would
be approximately (in millions of dollars): for 1992, 39,990 and for 1993, 34,876.
Note.—Insured unemployment and initial claims programs include Puerto Rican sugar cane workers beginning 1963.
Source: Department of Labor, Employment and Training Administration.




333

TABLE B—46.—Employees on nonagricultural payrolls, by major industry, 1950—97
[Thousands of persons; monthly data seasonally adjusted]
Goods-producing industries
Year or month

Manufacturing

Total
Total

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997?
1996: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
1997- Jan
Feb
Mar
Apr
May

..

June .:: ...::r : : :
July
Aug :.
" :"..: "...
Sept
Oct
NOVP
Dec*

45,197
47,819
48,793
50,202
48,990
50,641
52,369
52,855
51,322
53,270
54,189
53,999
55,549
56,653
58,283
60,763
63,901
65,803
67,897
70,384
70,880
71,211
73,675
76,790
78,265
76,945
79,382
82,471
86,697
89,823
90,406
91,152
89,544
90,152
94,408
97,387
99,344
101,958
105,209
107,884
109,403
108,249
108,601
110,713
114,163
117,191
119,523
122,257
118,058
118,550
118,804
118,966
119,263
119,516
119,691
119,983
120,019
120,248
120,450
120,659
120,909
121,162
121,344
121,671
121,834
122,056
122,440
122,492
122,792
123,083
123,495
123,865

18,506
19,959
20,198
21,074
19,751
20,513
21,104
20,967
19,513
20,411
20,434
19,857
20,451
20,640
21,005
21,926
23,158
23,308
23,737
24,361
23,578
22,935
23,668
24,893
24,794
22,600
23,352
24,346
25,585
26,461
25,658
25,497
23,812
23,330
24,718
24,842
24,533
24,674
25,125
25,254
24,905
23,745
23,231
23,352
23,908
24,265
24,431
24,738
24,247
24,383
24,377
24,398
24,432
24,453
24,433
24,468
24,439
24,479
24,508
24,540
24,581
24,653
24,670
24,667
24,702
24,714
24,713
24,765
24,771
24,814
24,891
24,980

Mining

901
929
898
866
791
792
822
828
751
732
712
672
650
635
634
632
627
613
606
619
623
609
628
642
697
752
779
813
851
958
1,027
1,139
1,128
952
966
927
777
717
713
692
709
689
635
610
601
581
574
573
573
576
577
577
579
577
574
574
571
570
571
571
574
574
572
573
576
574
574
573
576
574
572
572

Construction
2,364
2,637
2,668
2,659
2,646
2,839
3,039
2,962
2,817
3,004
2,926
2,859
2,948
3,010
3,097
3,232
3,317
3,248
3,350
3]575
3,588
3,704
3,889
4,097
4,020
3,525
3,576
3,851
4,229
4,463
4,346
4,188
3,904
3,946
4,380
4,668
4,810
4,958
5,098
5,171
5,120
4,650
4,492
4,668
4,986
5,160
5,400
5,627
5,214
5,309
5,340
5,356
5,384
5,408
5,417
5,433
5,441
5,467
5,495
5,521
5,542
5,604
5,609
5,599
5,628
5,622
5,625
5,637
5,642
5,650
5,680
5,730

Total
15,241
16,393
16,632
17,549
16,314
16,882
17,243
17,176
15,945
16,675
16,796
16,326
16,853
16,995
17,274
18,062
19,214
19,447
19,781
20,167
19,367
18,623
19,151
20,154
20,077
18,323
18,997
19,682
20,505
21,040
20,285
20,170
18,780
18,432
19,372
19,248
18,947
18,999
19,314
19,391
19,076
18,406
18,104
18,075
18,321
18,524
18,457
18,538
18,460
18,498
18,460
18,465
18,469
18,468
18,442
18,461
18,427
18,442
18,442
18,448
18,465
18,475
18,489
18,495
18,498
18,518
18,514
18,555
18,553
18,590
18,639
18,678

Durable
goods
8,066
9,059
9,320
10,080
9,101
9,511
9,802
9,825
8,801
9,342
9,429
9,041
9,450
9,586
9,785
10,374
11,250
11,408
11,594
11,862
11,176
10,604
11,022
11,863
11,897
10,662
11,051
11,570
12,245
12,730
12,159
12,082
11,014
10,707
11,476
11,458
11,195
11,154
11,363
11,394
11,109
10,569
10,277
10,221
10,448
10,683
10,766
10,915
10,724
10,749
10,718
10,749
10,762
10,778
10,766
10,788
10,771
10,780
10,791
10,803
10,821
10,836
10,848
10,856
10,864
10,891
10,910
10,957
10,952
10,985
11,019
11,050

Nondurable goods

7,175
7,334
7,313
7,468
7,213
7,370
7,442
7,351
7,144
7,333
7,367
7,285
7,403
7,410
7,489
7,688
7,963
8,039
,8,187
8,304
8,190
8,019
8,129
8,291
8,181
7,661
7,946
8,112
8,259
8,310
8,127
8,089
7,766
7,725
7,896
7,790
7,752
7,845
7,951
7,997
7,968
7,837
7,827
7,854
7,873
7,841
7,691
7,622
7,736
7,749
7,742
7,716
7,707
7,690
7,676
7,673
7,656
7,662
7,651
7,645
7,644
7,639
7,641
7,639
7,634
7,627
7,604
7,598
7,601
7,605
7,620
7,628

Note.—Data in Tables B-46 and B-47 are based on reports from employing establishments and relate to full- and part-time wage and salary workers in nonagricultural establishments who received pay for any part of the pay period which includes the 12th of the month. Not
comparable with labor force data (Tables 6-35 through B-44), which include proprietors, self-employed persons, domestic servants,
See next page for continuation of table.




334

TABLE B-46.—Employees on nonagricultural payrolls, by major industry, 1950-97—Continued
[Thousands of persons; monthly data seasonally adjusted]
Service-producing industries
Year or month

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*
1996:Jan
Feb
Mar
Apr
May
June
July
Au£
Sept
Oct
Nov
Dec
1997:Jan
Feb
Mar
Apr

M?y

June
July
Aug
Sept
Oct
NOVA>
Dec*

. ..

Total
26,691
27,860
28,595
29,128
29,239
30,128
31,264
31,889
31,811
32,857
33,755
34,142
35,098
36,013
37,278
38,839
40,743
42,495
44,158
46,023
47,302
48,276
50,007
51,897
53,471
54,345
56,030
58,125
61,113
63,363
64,748
65,655
65,732
66,821
69,690
72,544
74,811
77,284
80,084
82,630
84,497
84,504
85,370
87,361
90,256
92,925
95,092
97,519
93,811
94,167
94,427
94,568
94,831
95,063
95,258
95,515
95,580
95,769
95,942
96,119
96,328
96,509
96,674
97,004
97,132
97,342
97,727
97,727
98,021
98,269
98,604
98,885

Transportation and
public
utilities

Wholesale
trade

4,034
4,226
4,248
4,290
4,084
4,141
4,244
4,241
3,976
4,011
4,004
3,903
3,906
3,903
3,951
4,036
4,158
4,268
4,318
4,442
4,515
4,476
4,541
4,656
4,725
4,542
4,582
4,713
4,923
5,136
5,146
5,165
5,081
4,952
5,156
5,233
5,247
5,362
5,512
5,614
5,777
5,755
5,718
5,811
5,984
6,132
6,261
6,426
6,195
6,203
6,211
6,229
6,246
6,270
6,296
6,299
6,290
6,293
6,303
6,288
6,351
6,376
6,405
6,421
6,431
6,434
6,443
6,289
6,473
6,497
6,498
6,488

2,643
2,735
2,821
2,862
2,875
2,934
3,027
3,037
2,989
3,092
3,153
3,142
3,207
3,258
3,347
3477
3,608
3,700
3,791
3,919
4,006
4,014
4il27
4,291
4,447
4,430
4,562
4,723
4,985
5,221
5,292
5,375
5,295
5,283
5,568
5,727
5,761
5,848
6,030
6,187
6,173
6,081
5,997
5,981
6,162
6,378
6,483
6,657
6,421
6,429
6,437
6,443
6,457
6,469
6,481
6,497
6,513
6,538
6,549
6,559
6,570
6,593
6,611
6,622
6,630
6,634
6,664
6,675
6,687
6,712
6,730
6,743

Retail
trade
6,743
7,007
7,184
7,385
7,360
7,601
7,831
7,848
7,761
8,035
8,238
8,195
8,359
8,520
8,812
9,239
9,637
9,906
10,308
10,785
11,034
11,338
11,822
12,315
12,539
12,630
13,193
13,792
14,556
14,972
15,018
15,171
15,158
15,587
16,512
17,315
17,880
18,422
19,023
19,475
19,601
19,284
19,356
19,773
20,507
21,187
21,625
22,131
21,340
21,393
21,463
21,479
21,547
21,600
21,651
21,692
21,718
21,791
21,847
21,912
21,917
21,922
21,945
22,029
22,026
22,079
22,159
22,189
22,215
22,258
22,373
22,425

Finance,
insurance,
and real
estate

1,888
1,956
2,035
2,111
2,200
2,298
2,389
2,438
2,481
2,549
2,628
2,688
2,754
2,830
2,911
2,977
3,058
3,185
3,337
3,512
3,645
3,772
3,908
4,046
4,148
4,165
4,271
4,467
4,724
4,975
5,160
5,298
5,340
5,466
5,684
5,948
6,273
6,533
6,630
6,668
6,709
6,646
6,602
6,757
6,896
6,806
6,899
7,053
6,831
6,848
6,856
6,867
6,888
6,897
6,910
6,917
6,925
6,941
6,949
6,962
6,971
6,980
6,992
7,019
7,029
7,034
7,058
7,068
7,082
7,108
7,132
7,155

Government
Services
5,356
5,547
5,699
5,835
5,969
6,240
6,497
6,708
6,765
7,087
7,378
7,619
7,982
8,277
8,660
9,036
9,498
10,045
10,567
11,169
11,548
11,797
12,276
12,857
13,441
13,892
14,551
15,302
16,252
17,112
17,890
18,615
19,021
19,664
20,746
21,927
22,957
24,110
25,504
26,907
27,934
28,336
29,052
30,197
31,579
33,117
34,377
35,597
33,698
33,938
34,064
34,150
34,277
34,390
34,465
34,560
34,621
34,717
34,800
34,884
34,990
35,091
35,176
35,334
35,451
35,522
35,684
35,702
35,850
35,945
36,109
36,290

Total
6,026
6,389
6,609
6,645
6,751
6,914
7,278
7,616
7,839
8,083
8,353
8,594
8,890
9,225
9,596
10,074
10,784
11,391
11,839
12,195
12,554
12,881
13,334
13,732
14,170
14,686
14,871
15,127
15,672
15,947
16,241
16,031
15,837
15,869
16,024
16,394
16,693
17,010
17,386
17,779
18,304
18,402
18,645
18,841
19,128
19,305
19,447
19,655
19,326
19,356
19,396
19,400
19,416
19,437
19,455
19,550
19,513
19,489
19,494
19,514
19,529
19,547
19,545
19,579
19,565
19,639
19,719
19,804
19,714
19,749
19,762
19,784

Federal

1,928
2,302
2,420
2,305
2,188
2,187
2,209
2,217
2,191
2,233
2,270
2,279
2,340
2,358
2,348
2,378
2,564
2,719
2,737
2,758
2,731
2,696
2,684
2,663
2724
2,748
2,733
2,727
2,753
2,773
2,866
2,772
2,739
2,774
2,807
2,875
2,899
2,943
2,971
2,988
3,085
2,966
2,969
2,915
2,870
2,822
2757
2,700
2,782
2,782
2,779
2,774
2,770
2,757
2,752
2,743
2,740
2,732
2,732
2,728
2,723
2,716
2,709
2,708
2,703
2,694
2,689
2,690
2,680
2,687
2,696
2,689

State and
local
4,098
4,087
4,188
4,340
4,563
4,727
5,069
5,399
5,648
5,850
6,083
6,315
6,550
6,868
7,248
7,696
8,220
8,672
9,102
9,437
9,823
10,185
10,649
11,068
11,446
11,937
12,138
12,399
12,919
13,174
13,375
13,259
13,098
13,096
13,216
13,519
13,794
14,067
14,415
14,791
15,219
15,436
15,676
15,926
16,258
16,484
16,690
16,956
16,544
16,574
16,617
16,626
16,646
16,680
16,703
16,807
16,773
16,757
16,762
16,786
16,806
16,831
16,836
16,871
16,862
16,945
17,030
17,114
17,034
17,062
17,066
17,095

Note (cont'd).—which count persons as employed when they are not at work because of industrial disputes, bad weather, etc., even if they
are not paid for the time off; and which are based on a sample of the working-age population. For description and details of the various
establishment data, see "Employment and Earnings."
Source: Department of Labor, Bureau of Labor Statistics.




335

TABLE B—47.—Hours and earnings in private nonagricultural industries, 1959-97l
[Monthly data seasonally adjusted, except as noted]
Average weekly hours
Year or month

Total
private

Manufacturing
Total

Overtime

Average hourly earnings
Total private
Current 1982 2
dollars dollars

Manufacturing
(current
dollars)

Average weekly earnings, total private
Level
Current
dollars

1982
dollars 2

2.7 $2.02
39.0
$6.69
$2.19
40.3
$78.78 $260.86
38.6
39.7
2.5
2.09
6.79
2.26
80.67
261.92
2.4
2.14
38.6
39.8
6.88
2.32
265.59
82.60
38.7
40.4
7.07
2.8
2.22
2.39
85.91 273.60
38.8
2.8
7.17
40.5
2.28
2.45
278.18
88.46
38.7
40.7
7.33
3.1
2.36
2.53
91.33 283.63
38.8
3.6
2.46
7.52
2.61
41.2
95.45 291.90
41.4
2.71
294.11
38.6
3.9
7.62
2.56
98.82
3.4
..
38.0
7.72
2.82
40.6
2.68
101.84 293.49
37.8
3.6
3.01
40.7
285
7.89
107.73 298.42
37.7
3.6
3.04
7.98
3.19
40.6
114.61 300.81
37.1
3.0
3.23
8.03
3.35 119.83 298.08
39.8
3.57
36.9
2.9
39.9
3.45
8.21
127.31 303.12
37.0
3.5
3.70
8.53
3.82 136.90 315.44
40.5
3.94
36.9
40.7
3.8
8.55
4.09
315.38
145.39
4.24
302.27
36.5
3.3
8.28
4.42
40.0
154.76
2.6
36.1
4.53
8.12
4.83 163.53 293.06
39.5
8.24
36.1
4.86
5.22
40.1
3.1
175.45 297.37
36.0
3.5
5.25
8.36
5.68 189.00 300.96
40.3
40.4
6.17
35.8
3.6
5.69
8.40
203.70 300.89
35.7
3.3
8.17
6.70
40.2
6.16
219.91 291.66
2.8
35.3
39.7
7.78
111 235.10 274.65
6.66
35.2
2.8
7.69
7.99
39.8
7.25
255.20 270.63
8.49
2.3
7.68
7.68
267.26
34.8
38.9
267.26
3.0
35.0
40.1
8.02
7.79
8.83 280.70 272.52
3.4
35.2
40.7
8.32
7.80
9.19
274.73
292.86
7.77
9.54
34.9
3.3
8.57
40.5
299.09 271.16
3.4
271.94
34.8
40.7
8.76
9.73
7.81
304.85
3.7
34.8
7.73
9.91
41.0
8.98
312.50 269.16
34.7
41.1
3.9
7.69
266.79
9.28
10.19
322.02
7.64
3.8
10.48 334.24 264.22
34.6
41.0
9.66
3.6 10.01
7.52
10.83 345.35 259.47
34.5
40.8
40.7
3.6
10.32
7.45
11.18 353.98 255.40
34.3
34.4
3.8 10.57
7.41
41.0
11.46
363.61
254.99
41.4
4.1 10.83
11.74
34.5
7.39
373.64 254.87
4.7 11.12
12.07
34.7
7.40
256.73
42.0
385.86
4.4 11.43
12.37
34.5
7.39
394.34
255.07
41.6
34.4
4.5 11.81
7.43
12.78
255.51
41.6
406.26
7.54
4.8 12.26
13.17 424.20 260.89
34.6
42.0
12.64
33.9
4.2 11.62
7.41
251.06
40.1
393.92
4.4 11.64
34.4
41.4
7.40
12.60
400.42 254.72
34.4
12.54
4.3 11.66
7.39
41.3
401.10 254.18
12.71
34.3
4.5 11.71
7.40
253.73
41.5
401.65
7.40
34.3
4.6 11.74
12.73
41.6
402.68 253.74
7.44
12.77
258.07
34.7
4.5 11.81
41.7
409.81
4.5 11.81
7.42
12.80
254.45
34.3
41.6
405.08
7.44
34.5
41.7
4.5 11.86
12.85 409.17 256.69
12.87
34.7
4.5 11.91
7.45
258.46
41.7
413.28
12.87
34.4
41.7
4.5 11.91
7.42
409.70 255.26
7.44
4.6 11.98
12.93
Nov
34.5
41.7
413.31 256.71
4.7 12.03
258.64
34.7
12.99
417.44
Dec
42.0
7.45
1997-Jan
.
34.4
4.7 12.05
7.46
13.02 414.52 256.51
41.8
4.7 12.10
7.47
Feb
13.03 421.08 260.09
34.8
41.9
Mar
13.07
34.8
4.9 12.14
42.1
7.49
260.78
422.47
Apr
4.9 12.14
7.49
13.07 418.83 258.54
34.5
42.1
13.11 420.56 259.60
May
34.5
4.8 12.19
7.52
42.0
7.54
260.89
13.12
June
34.6
4.6 12.23
41.8
423.16
July
34.4
4.7 12.24
13.11 421.06 259.11
7.53
41.8
4.7 12.31
7.56
34.6
13.20 425.93 261.63
Aug
41.8
4.7 12.35
7.56
13.22
34.5
41.9
426.08 260.92
4.8 12.40
7.58
Oct
34.5
42.0
13.35 427.80 261.49
Nov
4.9
12.47
7.62
13.36 433.96 265.09
34.8
42.1
4.9 12.48
7.62
13.37
Dec*
34.6
42.3
431.81 263.62
1
For production or nonsupervisory workers; total includes private industry groups shown in Table B-46.
2
Current dollars divided by the consumer price index for urban wage earners and clerical workers on a 1982=100 base.
3
Percent changes are based on data that are not seasonally adjusted.
Note.—See Note, Table 6-46.
Source: Department of Labor, Bureau of Labor Statistics.

1959
1960
1961
1962
1963
1964
1965
1966
1967 .
1968
1969
1970 .
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*
1996- Jan
Feb
Mar
Apr
May
June
July
Aug
Sept

Oct.. :::::.. :::::::::..:.:::::..: "...

sept: . :". :;:




"..

336

Percent change
from year
earlier 3
Current 1982 2
dollars dollars

4.9
2.4
2.4
4.0
3.0
3.2
4.5
3.5
3.1
5.8
6.4
4.6
6.2
7.5
6.2
6.4
5.7
7.3
7.7
7.8
8.0
6.9
8.5
4.7
5.0
4.3
2.1
1.9
2.5
3.0
3.8
3.3
2.5
2.7
2.8
3.3
2.2
3.0
4.4
2^
3.0
2.6
3.6
4.6
2.4
3.5
4.5
2.5
3.9
5.5
5.1
5.2
5.4
4.6
4.4
3.6
3.9
4.4
3.1
4.3
5.2
3.4

4.2
.4
1.4
3.0
1.7
2.0
2.9
.8

I'.l
.8
-.9
1.7
4.1
-.0
-4.2
-3.0
1.5
1.2
-.0
-3.1
-5.8
-1.5
-1.2
2.0
.8
-1.3
.3
-1.0
-.9
-1.0
-1.8
-1.6

~:o
~:e
.2

2.1
-2.5
-.1
.2

~:e
1.8
-.5
.7
1.4

~:&
2.1
2.0
2.1
2.7
2.2
2.3
1.4
1.8
2.2
1.0
2.3
3.4
1.9

TABLE B-48.—Employment cost index, private industry, 1980-97

Year and month

Service-producing

Goods-producing

Total private
Total Wages
com- and
pen- salasation ries

Benefits 1

Manufacturing

Total Wages
Total Wages
com- and Bene- com- and Benepen- sala- fits 1 pen- sala- fits 1
sation ries
sation ries

Nonmanufacturing

Total Wages
Total Wages
com- and Bene- com- and Benepen- sala- fits 1 pen- sala- fits 1
sation ries
sation ries

Index, June 1989=100; not seasonally adjusted
December:
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996: Mar
June
Sept
Dec
1997: Mar
June
Sept
Dec

64.8
71.2
75.8
80.1
84.0
87.3
90.1
93.1
97.6
102.3
107.0
111.7
115.6
119.8
123.5
126.7
127.9
129.0
129.8
130.6
131.7
132.8
133.9
135.1

67.1
73.0
77.6
81.4
84.8
88.3
91.1
94.1
98.0
102.0
106.1
110.0
112.9
116.4
119.7
123.1
124.4
125.6
126.5
127.3
128.6
129.7
131.0
132.3

59.4
66.6
71.4
76.7
81.7
84.6
87.5
90.5
96.7
102.6
109.4
116.2
122.2
128.3
133.0
135.9
136.6
137.4
138.1
138.6
139.4
140.1
140.8
141.8

66.7
73.3
77.8
81.6
85.4
88.2
91.0
93.8
97.9
102.1
107.0
111.9
116.1
120.6
124.3
127.3
128.2
129.3
130.1
130.9
131.4
132.7
133.6
134.1

69.7
75.7
80.0
83.2
86.4
89.4
92.3
95.2
98.2
102.0
105.8
109.7
112.8
116.1
119.6
122.9
123.9
125.1
126.1
126.8
127.5
128.9
129.9
130.6

1996: Mar
June
Sept
Dec
1997: Mar
June
Sept
Deb

127.7
128.8
129.7
130.6
131.4
132.5
133.6
135.2

124.4
125.5
126.4
127.4
128.5
129.7
130.9
132.5

136.0
137.0
137.7
138.7
138.7
139.7
140.4
141.9

128.2
129.4
130.3
131.1
131.4
132.7
133.7
134.3

123.9
125.1
126.1
126.8
127.5
128.9
129.9
130.6

60.5
68.2
73.2
78.3
83.2
85.7
88.3
90.9
97.3
102.6
109.9
116.7
123.4
130.3
134.8
137.1
137.7
138.6
138.8
139.7
139.9
140.9
141.5
141.5

63.3
69.5
74.1
78.9
82.9
86.6
89.3
92.6
97.3
102.3
107.0
111.6
115.2
119.3
122.8
126.2
127.6
128.6
129.5
130.2
131.6
132.5
133.8
135.3

65.3
71.1
75.9
80.2
83.7
87.7
90.3
93.4
97.8
102.2
106.3
110.2
113.0
116.6
119.7
123.2
124.7
125.8
126.7
127.5
129.0
130.1
131.5
133.1

58.4
65.1
69.6
75.2
80.4
83.6
86.8
90.2
96.1
102.6
109.0
115.7
121.2
126.7
131.5
134.7
135.5
136.2
137.2
137.4
138.5
139.2
139.8
141.4

66.0
72.5
76.9
80.8
85.0
87.8
90.7
93.4
97.6
102.0
107.2
112.2
116.5
121.3
125.1
128.3
129.3
130.4
131.3
132.1
132.6
133.8
134.6
135.3

68.9
74.9
79.1
82.5
86.1
89.2
92.1
95.2
98.1
101.9
106.2
110.3
113.7
117.3
120.8
124.3
125.4
126.5
127.7
128.4
129.1
130.3
131.3
132.2

59.9
67.5
72.4
77.5
82.7
85.0
87.5
89.8
96.6
102.3
109.5
116.1
122.6
130.0
134.3
136.7
137.5
138.5
138.8
139.8
139.9
141.0
141.4
141.7

64.2
70.4
75.1
79.6
83.4
87.0
89.7
92.9
97.5
102.3
106.9
111.5
115.1
119.0
122.6
125.9
127.2
128.2
129.1
129.8
131.1
132.1
133.3
134.7

66.2
72.1
76.8
81.0
84.2
88.0
90.6
93.7
97.8
102.2
106.1
109.8
112.6
116.0
119.1
122.5
123.9
125.1
125.9
126.8
128.2
129.3
130.7
132.1

59.1
66.1
70.6
76.2
81.1
84.4
87.5
91.0
96.8
102.8
109.3
116.2
122.0
127.4
132.3
135.3
136.0
136.7
137.5
137.9
138.9
139.5
140.2
141.5

125.4
126.5
127.7
128.4
129.1
130.3
131.3
1322

137.0
138.3
139.1
140.2
139.4
140.8
141.7
142.1

127.1
128.1
129.0
130.1
131.0
132.0
133.1
135.0

123.9
125.0
125.8
127.0
128.2
129.2
130.6
132.3

135.9
136.6
137.3
138.3
138.8
139.4
140.0
141.9

10.5
12.7
7.3
7.0
6.7
2.8
2.9
2.6
7.6
5.9
7.0
6.0
5.6
6.0
3.3
1.8
1.6
2.4
2.4
2.3
1.7
1.8
1.9
1.4

9.7
9.7
6.7
6.0
4.8
4.3
3.1
3.6
5.0
4.9
4.5
4.3
3.2
3.4
3.0
2.7
2.8
2.9
2.9
3.1
3.1
3.0
3.3
3.8

8.9
8.9
6.5
5.5
4.0
4.5
3.0
3.4
4.4
4.5
3.8
3.5
2.6
3.0
2.7
2.9
3.3
3.5
3.3
3.5
3.5
3.4
3.8
4.2

12.6
11.8
6.8
7.9
6.4
4.1
3.7
4.0
6.4
6.2
6.3
6.3
5.0
4.4
3.8
2.3
1.6
1.5
1.6
1.9
2.1
2.0
2.0
2.6

-0.1
.9
.6
.8
-.6
1.0
.6
.3

0.7
.8
.7
.9

1.0
.9
.6
1.0
.9
.8
1.1
1.3

0.1

Index, June 1989=100; seasonally adjusted

137.3
138.4
139.0
140.2
139.4
140.7
141.7
142.0

127.5
128.5
129.4
130.4
131.5
132.4
133.6
135.6

124.7
125.7
126.6
127.7
129.0
130.0
131.4
133.3

135.3
136.1
137.0
137.8
138.3
139.1
139.6
141.8

129.1
130.2
131.3
132.2
132.4
133.6
134.6
135.4

Percent change from 12 months earlier, not seasonally adjusted
December:
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996: Mar
June
Sept
Dec
1997: Mar
June
Sept
Dec

9.6
9.9
6.5
5.7
4.9
3.9
3.2
3.3
4.8
4.8
4.6
4.4
3.5
3.6
3.1
2.6
2.7
2.9
2.9
3.1
3.0
2.9
3.2
3.4

9.1
8.8
6.3
4.9
4.2
4.1
3.2
3.3
4.1
4.1
4.0
3.7
2.6
3.1
2.8
2.8
3.2
3.4
3.3
3.4
3.4
3.3
3.6
3.9

11.7
12.1
7.2
7.4
6.5
3.5
3.4
3.4
6.9
6.1
6.6
6.2
5.2
5.0
3.7
2.2
1.6
1.7
1.8
2.0
2.0
2.0
2.0
2.3

9.9
9.9
6.1
4.9
4.7
3.3
3.2
3.1
4.4
4.3
4.8
4.6
3.8
3.9
3.1
2.4
2.3
2.7
2.8
2.8
2.5
2.6
2.7
2.4

9.4
8.6
5.7
4.0
3.8
3.5
3.2
3.1
3.2
3.9
3.7
3.7
2.8
2.9
3.0
2.8
2.9
3.0
3.3
3.2
2.9
3.0
3.0
3.0

10.8
12.7
7.3
7.0
6.3
3.0
3.0
2.9
7.0
5.4
7.1
6.2
5.7
5.6
3.5
1.7
1.3
2.0
1.9
1.9
1.6
1.7
1.9
1.3

9.7
9.8
6.6
6.5
5.1
4.5
3.1
3.7
5.1
5.1
4.6
4.3
3.2
3.6
2.9
2.8
3.0
3.0
2.9
3.2
3.1
3.0
3.3
3.9

8.8
8.9
6.8
5.7
4.4
4.8
3.0
3.4
4.7
4.5
4.0
3.7
2.5
3.2
2.7
2.9
3.3
3.5
3.3
3.5
3.4
3.4
3.8
4.4

12.5
11.5
6.9
8.0
6.9
4.0
3.8
3.9
6.5
6.8
6.2
6.1
4.8
4.5
3.8
2.4
1.7
1.6
1.8
2.0
2.2
2.2
1.9
2.9

9.8
9.8
6.1
5.1
5.2
3.3
3.3
3.0
4.5
4.5
5.1
4.7
3.8
4.1
3.1
2.6
2.5
2.8
3.1
3.0
2.6
2.6
2.5
2.4

9.4
8.7
5.6
4.3
4.4
3.6
3.3
3.4
3.0
3.9
4.2
3.9
3.1
3.2
3.0
2.9
2.9
2.9
3.4
3.3
3.0
3.0
2.8
3.0

Percent change from 3 months earlier, seasonally adjusted

0.4
0.8 -0.2
0.6
0
0.8
1996: Mar
1.0
.8
.9
.9
.8
June
'..
.9
1.0
.7
.7
Sept
!s .7 .8 .4 .7
.7
.7
.6
.8
.6
.9
Deb
.8
.6
.8
.6
0
-.6
1997: Mar
.9
1.1
.7
.8
LO
.9
June
.9
.8
.7
.9
.8
.9
^5
.8
Sept
.4
1.5
1.1
.2
Dec
1.2
1.2
1
Employer costs for employee benefits.
Note.—The employment cost index is a measure of the change in the cost of
occupations and industries.
Data exclude farm and household workers.
Source: Department of Labor, Bureau of Labor Statistics.




337

1.1
.8
.7
.9
1.0
.8
1.1
1.4

0.1
.6
.7
.6
.6

lie

0.5
.9
.8

'.2
.9
.7
.6

0.9
.9
.9
.5
!9
.8
.7

.8
.8
1.4

!5
.7
.4
.4
.4
1.4

labor, free from the influence of employment shifts among

TABLE B-49.—Productivity and related data, business sector, 1959-97
[Index numbers, 1992=100; quarterly data seasonally adjusted]

Year or
quarter

Output per hour
of all persons

Hours of all
persons2

Output1

Compensation
per hour 3

Real compensation
per hour 4

Unit labor
costs

Implicit price
deflator *

Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm
ness business ness business ness business ness business ness business ness business ness business
sector sector sector sector sector sector sector sector sector sector sector sector sector sector

1959

50.5

54.2

33.7

33.5

66.7

61.7

13.1

13.7

63.1

66.0

25.9

25.3

25.6

25.0

1960
1961
1962
1963
1964
1965 ..
1966
1967

1968 : : :.
1969....

51.4
53.2
55.7
57.9
60.5
62.7
65.2
66.6
68.9
69.2

54.8
56.5
59.1
61.2
63.8
65.7
68.0
69.2
71.6
71.6

34.3
34.9
37.2
38.9
41.4
44.2
47.2
48.1
50.5
52.0

34.0
34.7
37.0
38.7
41.3
44.2
47.4
48.2
50.7
52.3

66.7
65.7
66.8
67.2
68.3
70.6
72.5
72.3
73.3
75.2

62.0
61.3
62.6
63.3
64.8
67.3
69.7
69.7
70.9
72.9

13.6
14.2
14.8
15.4
16.2
16.8
17.9
18.9
20.5
21.9

14.3
14.8
15.4
15.9
16.7
17.2
18.2
19.3
20.8
22.2

64.7
66.6
68.9
70.5
73.2
74.8
77.5
79.5
82.5
83.7

67.7
69.3
71.5
73.0
75.4
76.7
78.8
80.9
83.8
84.9

26.6
26.7
26.6
26.6
26.7
26.8
27.5
28.4
29.7
31.7

26.1
26.1
26.0
26.0
26.1
26.2
26.8
27.8
29.0
31.0

25.8
26.1
26.3
26.5
26.8
27.2
27.9
28.7
29.8
31.1

25.3
25.6
25.8
26.0
26.3
26.7
27.3
28.2
29.3
30.5

1970
1971
1972
1973
1974
1975
1976
1977
1978
1979

70.5
73.6
76.0
78.4
77.1
79.8
82.5
83.9
84.9
84.5

72.6
75.6
78.2
80.7
79.4
81.5
84.5
85.8
86.9
86.3

52.0
54.0
57.6
61.6
60.6
60.0
64.0
67.6
71.7
73.9

52.1
54.1
57.8
62.0
61.1
60.0
64.3
67.9
72.3
74.3

73.7
73.3
75.7
78.5
78.6
75.2
77.6
80.6
84.5
87.4

71.8
71.5
73.9
76.9
77.0
73.6
76.1
79.2
83.1
86.1

23.6
25.1
26.7
29.0
31.8
35.1
38.2
41.2
44.8
49.2

23.8
25.4
27.0
29.2
32.1
35.3
38.4
41.5
45.2
49.5

85.4
87.0
89.6
91.6
90.5
91.5
94.1
95.3
96.5
95.0

86.1
87.8
90.6
92.3
91.3
92.1
94.6
96.0
97.3
95.7

33.5
34.1
35.1
37.0
41.3
44.0
46.2
49.0
52.8
58.2

32.8
33.5
34.5
36.2
40.4
43.3
45.4
48.3
52.0
57.4

32.4
33.9
35.0
36.8
40.3
44.2
46.5
49.4
53.0
57.6

31.9
33.3
34.3
35.5
39.1
43.2
45.6
48.6
51.9
56.4

1980
1981
1982
1983
1984
1985
1986
1987
1988
1989

84.2
85.7
85.3
88.0
90.2
91.7
94.0
94.0
94.6
95.4

86.0
86.9
86.3
89.9
91.4
92.3
94.7
94.5
95.2
95.7

73.0
74.8
72.5
76.1
82.5
85.7
88.5
91.1
94.6
97.8

73.4 86.6
74.8 87.2
72.4 85.0
76.8 86.5
82.8 91.5
85.8 93.5
88.7 94.1
91.3 97.0
95.1 100.0
98.1 102.5

85.4
86.1
83.9
85.5
90.6
92.9
93.7
96.7
99.9
102.5

54.5
59.6
64.1
66.7
69.6
73.0
76.8
79.8
83.5
85.8

54.8
60.1
64.6
67.3
70.1
73.4
77.2
80.)
83.6
85.8

92.7
92.0
93.1
94.0
94.0
95.2
98.3
98.5
99.0
97.1

93.3
92.8
93.9
94.8
94.7
95.7
98.8
98.9
99.1
97.1

64.7
69.5
75.1
75.8
77.2
79.7
81.7
84.9
88.2
89.9

63.8
69.2
74.8
74.9
76.7
79.5
81.5
84.7
87.8
89.7

62.8
68.7
72.7
75.4
77.7
80.0
81.7
83.8
86.8
90.4

61.9
67.9
72.2
74.7
77.0
79.6
81.4
83.6
86.4
90.0

1990
1991
1992
1993
1994

96.1
96.7
100.0
100.2
100.6

96.2 98.6
96.9 96.9
100.0 100.0
100.1 102.7
100.5 107.0

98.8
97.1
100.0
103.0
107.0

102.7 90.7
100.2 95.1
100.0 100.0
102.8 102.6
106.4 104.3

90.6
95.1
100.0
102.3
104.1

97.4
97.9
100.0
99.6
98.7

97.3 94.4
97.9 98.3
100.0 100.0
99.3 102.4
98.5 103.7

94.1 94.1
98.1 97.7
100.0 100.0
102.2 102.5
103.6 104.8

93.8
97.6
100.0
102.5
104.9

1995
1996

100.5
102.0

100.7 109.5
102.0 113.3

109.8 108.9
113.6 111.0

109.0
111.3

106.9
110.4

106.7
110.1

98.4
98.7

98.3 106.3
98.4 108.2

106.0 107.2
107.9 109.2

107.3
109.1

1992:1

99.4
99.9
99.7
101.0

99.3 98.8
100.0 99.6
99.7 99.8
101.1 101.7

98.8 99.5
99.6 99.7
99.8 100.1
101.8 100.7

99.5 98.6
99.6 99.5
100.1 100.7
100.7 101.2

98.6
99.6
100.7
101.2

99.7
99.8
100.2
99.9

99.7 99.3
99.9 99.6
100.2 101.0
99.9 100.1

99.2 99.3
99.6 99.7
101.0 100.1
100.1 100.9

99.2
99.8
100.1
100.9

1993:1

100.1
99.7
99.9
101.0

100.1
99.6
100.0
100.8

101.4
102.1
102.8
104.6

101.6
102.3
103.2
104.8

101.4
102.4
102.9
103.6

101.5
102.6
103.2
103.9

101.8
102.4
102.9
103.3

101.6
102.1
102.5
103.0

99.8
99.7
99.6
99.2

99.6
99.4
99.3
98.9

101.7
102.7
103.0
102.3

101.6
102.5
102.5
102.1

101.7
102.3
102.7
103.4

101.8
102.3
102.6
103.3

1994:1

100.7
100.7
100.5
100.7

100.6
100.7
100.4
100.8

105.2
106.9
107.3
108.5

105.2
106.9
107.3
108.6

104.5
106.1
106.7
107.7

104.6
106.1
106.8
107.8

104.0
104.0
104.4
105.1

103.8
103.9
104.2
105.0

99.5
98.8
98.3
98.3

99.2
98.7
98.1
98.2

103.3
103.2
103.9
104.3

103.2
103.1
103.8
104.2

103.9
104.4
105.1
105.8

103.8
104.5
105.3
106.0

1995:1

100.2
100.4
100.6
101.1

100.3
100.5
100.8
101.2

108.7
108.7
109.8
110.7

108.9
108.9
110.2
111.0

108.5
108.3
109.2
109.5

108.5
108.4
109.3
109.7

105.8
106.6
107.3
108.1

105.6
106.4
107.1
107.9

98.3
98.3
98.4
98.6

98.2
98.1
98.98.4

105.6
106.1
106.7
107.0

105.3
105.8
106.3
106.6

106.5
107.0
107.4
107.8

106.8
107.2
107.5
107.8

1996:1

101.6
102.3
102.0
102.5

101.7
102.2
102.0
102.4

111.4
113.2
113.5
115.0

111.7
113.5
113.8
115.3

109.6
110.7
111.3
112.2

109.8
111.0
111.6
112.6

108.9
110.1
111.0
111.9

108.7
109.8
110.6
111.5

98.4
98.8
98.9
98.9

98.3
98.5
98.6
98.5

107.1
107.7
108.8
109.2

106.9
107.4
108.5
108.9

108.4
108.9
109.6
110.0

108.4
108.8
109.4
109.8

.

II
Ill ....
IV
II
Ill ....
IV
II
Ill ....
IV
II
Ill ....
IV
II
Ill ....
IV

102.6
100.2
100.0
102.6
106.3

113.8 113.1
112.8
99.4
109.7 110.6
102.9
102.8 116.6
116.9 113.3
99.1 109.9
110.5
113.7
II
103.4 117.8
114.2 114.0
99.6 110.1
110.0 111.0
110.9
103.5
118.0 113.7
99.9
104.4 118.9
114.1 115.2
Ill .... 104.6
119.2 113.7
114.8 100.5
100.1 110.2
109.9 111.3
111.2
1
Output refers to real gross domestic product in the sector.
2
Hours at work of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based primarily
on 3establishment data.
Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also includes an estimate
of 4
wages, salaries, and supplemental payments for the self-employed.
Hourly compensation divided by the consumer price index for all urban consumers.
5
Current dollar output divided by the output index.
Source: Department of Labor, Bureau of Labor Statistics.
1997:1




338

TABLE B-50.—Changes in productivity and related data, business sector, 1959—97
[Percent change from preceding period; quarterly data at seasonally adjusted annual rates]
Output per hour
of all persons

Output1

Compensation
per hour3

Hours of all
persons2

Real compensation
per hour4

Unit labor
costs

Implicit price
deflator *

Vpor «r
ICdl 01

quarter

Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm
ness business ness business ness business ness business
sector sector sector sector sector sector sector sector

Nonfarm Busibusiness ness
sector sector

Business
sector

1959

4.2

4.2

8.5

9.0

4.1

4.6

4.2

4.0

3.5

1960
1961
1962
1963
}964

1.7
3.5
4.7
3.9
4.6

1.2
3.1
4.6
3.4
4.3

1.8
1.9
6.5
4.5
6.4

1.6
1.9
6.9
4.5
6.8

.1

.5

4.4
3.4
4.1
3.5
4.6

2.6
2.9
3.5
2.3
3.8

3.2
2.7
2.4
3.0
2.2
3.3

1965
1966
1967
1968
1969

35
4.0
2.2
3.4
.4

30
35
1.7
3.4
.1

70
6.7
1.9
4.9
3.0

70
7.1
1.7
5.2
3.0

1970
1971
1972
1973
1974

2.0
4.3
3.3
3.2

1.4
4.1
3.4
3.1

-.1
3.8
6.7
7.0

-.2
3.8
6.9
7.3

0

Nonfarm Busi- Nonfarm
business ness business
sector sector
sector
-0.2

0.6

1.1

3.2
.3
-.5
.1
.3
3
2.3
4.0
4.3
6.7

1.1
.9
.9
.7
1.0

1.1
.9
.8
.8
1.2

17
2.5
2.9
3.9
4.3

15
2.3
3.3
3.9
4.2

4.4
4.5
3.3
5.2
9.4

4.5
4.5
2.9
3.6

1.7
.6
1.7

2.1
1.1
2.4

4.3
4.0
4.5
3.7
5.2

34
2.6
-.3
1.4
2.5

39
3.6
-.0
1.7
2.9

3.7
6.7
5.7
8.1
7.0

33
5.8
5.8
7.9
6.8

21
3.7
2.5
3.8
1.5

1.7
2.8
2.7
3.5
1.3

2.5
.4
-.2
-.2
.5
2
2.6
3.4
4.6
6.6

1.9
1.9
3.0
2.2

1.4
2.0
3.1
1.9

5.7
2.0
2.9
5.2

5.7
2.3
2.9
4.9

11.6

11.6

6.6
5.2
6.0
7.7

7.2
4.9
6.3
7.6

-1.6

-2.0

-1.2

-.3
3.4
4.0
.1

7.8
6.4
6.3
8.6
9.7

7.2
6.5
6.4
8.2
9.9

-1.6

-1.5

-1.5

-.4
3.3
3.7
.1

1975
1976
1977
1978
1979

3.5
3.4
1.7
1.1
-.4

2.7
3.6
1.6
1.3
-.8

-1.0

-1.7

-4.3

-4.3

10.3

10.1

3.1
3.9
4.9
3.4

3.4
4.0
5.0
3.6

8.8
7.9
8.9
9.7

8.6
8.0
9.1
9.5

-1.5

-1.7

10.1

10.3

1980
1981
1982
1983
1984

-.3
1.8
-.5
3.2
2.5

-.4
1.1
-.8
4.2
1.7

-1.2

-.9
.7

-.8
.7

10.8

10.8

-2.4

-2.4

11.2

9.7
7.4
4.2
4.2

11.1

-.8
1.2
.9
.0

-.6
1.1
1.0
-.1

7.6
8.0
.9
1.8

1985
1986
1987
1988
1989

1.6
2.6
-.1
.6
.8

1.3
3.3
.2
.5

1.0
3.2
.1
.3

1990
1991
1992
1993
1994
1995
1996

-1.7

-1.6

6.7
5.7
6.1
2.9

7.1
5.7
6.4
2.8
-1.2

-1.2

1.0
2.9
1.3
1.3

-1.1

.9
2.7
1.4
1.4

10.0

9.5
5.4
6.1
7.3
8.6

10.6

8.5
8.2
.1
2.5

9.1
9.3
5.9
3.7
3.0

9.8
9.6
6.4
3.4
3.1

3.2
2.5
3.9
4.0
1.9

3.6
2.5
4.0
3.6
2.1

3.0
2.1
2.6
3.5
4.2

3.4
2.2
2.6
3.4
4.2

5.6
6.4
6.9
8.6

1993:1

II
Ill
IV
1994:1

II
Ill
IV

1995:1

II
Ill
IV

1996:1

II
Ill
IV
1997: I
II
Ill

1.7
5.8

1.9
6.0

1.0
2.6
-.2
.7
.6

3.9
3.3
2.9
3.8
3.4

3.6
3.4
3.0
4.1
3.2

2.2
.7
3.0
3.2
2.5

2.5
.8
3.2
3.3
2.6

4.9
5.2
3.9
4.6
2.8

4.6
5.2
3.8
4.4
2.7

.5
.7
3.2
.1
.4

.8

.7

.1

.2

5.5
4.9
5.2
2.3
1.7

.3
.6
2.1
-.4
-.9

.1
.7
2.1
-.7
-.8

5.0
4.1
1.7
2.4
1.2

5.0
4.2
1.9
2.2
1.4

4.0
3.8
2.4
2.5
2.2

4.2
4.1
2.4
2.5
2.3

-.0
1.5

II
Ill
IV

6.1
7.9

.7
.7
3.4
.2
.4

1992:1

4.9
8.5

9.5
7.5
4.2
4.4

8.0
2.2
-.7
5.4
-3.8
-1.3

.7
4.3
-.9
0
-.7
.7
-2.1

.9
.7
2.0
2.2
2.5

2.5
-3.1

-2.5

-2.5

-1.9

-2.0

3.2
2.7
4.1

3.0
3.0
3.9

-.2
2.6
3.7

-.2
2.8
3.5

5.7
4.8
5.2
2.6
1.6

.2
1.3

2.3
3.5

2.6
3.5

2.4
2.0

2.4
2.2

2.5
3.3

2.5
3.1

-.3
.3

-.3
.2

2.6
1.8

2.4
1.8

2.3
1.9

2.3
1.7

7.1
2.6

6.2
3.2
.8
7.9

5.6
3.0
.7
8.4

7.7
4.3
4.4
2.0

5.0
.5
1.6

4.8
1.1
1.2

0
1.4
5.5

.5
1.6
5.6

2.8
2.0
1.5
3.0
3.5
2.1
1.6
2.7

3.0
2.1
1.4
3.2
3.8
1.7
1.5
2.6

-1.2

5.9

-4.0
-1.8

1.7
3.3

-1.1

.6
-1.1

1.3
-1.6

.8
1.1
1.6
1.9
2.2

-1.7

-2.3

-2.5

.4
1.9
2.4

2.7
2.8
7.1

-.8
2.6
3.9
6.1

3.3
4.5
2.2
2.7

7.9
3.6
4.7
2.0
2.5
2.5
1.8
1.6

2.6
6.4
1.5
4.5

1.6
6.6
1.5
5.0

3.5
6.3
2.3
3.8

2.8
5.9
2.6
3.7

3.0
-.2
1.7
2.5

3.2
.3
1.3
2.8

.0

.8
.2
4.2
3.0

1.2
.2
4.6
3.0

2.9
-.7
3.5
1.0

2.9
-.6
3.5
1.4

2.6
3.2
2.6
3.2

2.6
3.1
2.7
2.9

-.2
.1
.5
.7

2.6
6.8
1.0
5.4

.6
4.0
2.0
3.4

.6
4.4
2.1
3.6

2.7
4.7
3.3
3.3

2.8
4.4
2.9
3.3

5.6
3.8
4.0

4.0
1.5
_2

4.2
1.4
-.1

4.4
3.3
4.3

4.5
3.3
3.9

-1.2

1.9

1.8

1.8
2.4
4.0

1.4
2.4
4.1

5.9
3.9
3.8

-1.0

-1.8

.9
1.5
2.3
2.7
4.0
2.0
2.7

2.8
6.6
.9
5.4

-1.1

1.9
-3.2

-1.6

-1.4

1.9
2.0
1.6
1.7

-1.5

-.4
-.4
-.1
-1.6

.9

-1.5
-1.0

-.9
-.3
-1.6

-3.2

6.6
3.9
1.0
-2.6

-3.7

6.1
3.9
-.1
-1.5

.3

3.9
-.2
2.4
1.8

4.4
-.2
2.4
1.6

2.0
2.1
2.7
2.5

2.1
2.5
3.2
2.4

-.2
-.1
.6
.5

4.8
2.3
1.9
1.2

4.2
2.3
1.6
1.3

3.1
1.5
1.2
1.0

-.6
1.3
.6
-.1

-.5
1.0
.2
-.1

.5
2.2
4.4
1.4

.9
2.1
3.9
1.5

2.9
1.6
1.7
1-3
2.3
2.1
2.4
1.7

1.9
2.2
2.3

2.1
2.2
1.9

2.5
.9
.3

3.1
.9
-.2

2.0
1.5
1.1

2.4
1.4
1.2

-2.5
-2.0

1.2
-2.0
-2.3

1

2.3
1.7
2.0
1.7

Output refers to real gross domestic product in the sector.
Hours at work of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based primarily
on establishment data.
3
Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also includes an estimate
of wages, salaries, and supplemental payments for the self-employed.
4
Hourly compensation divided by the consumer price index for all urban consumers.
5
Current dollar output divided by the output index.
2

Note.—Percent changes are based on original data and may differ slightly from percent changes based on indexes in Table B-49.
Source: Department of Labor, Bureau of Labor Statistics.




339

PRODUCTION AND BUSINESS ACTIVITY
TABLE B-51.—Industrial production indexes, major industry divisions, 1941-91
[1992=100; monthly data seasonally adjusted]
Total
industrial
production

Year or month

1947
1948
1949
1950
1951
1952
1953
1954
1955
1956 ....
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968 .
.
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997p
1996Jan
Feb
Mar
Apr
May
June
July
Aug
Sept

Manufacturing
Total

217
22.6
214
247
268
27.8
302
286
32.2
.
. . .
336
34.1
319
35.7
36.5
367
39.8
421
450
495
... .
538
55.0
.
...
581
60.7
587
59.5
653
70.6
696
63.4
69.3
74.9
793
82.0
797
810
767
79.5
86.6
880
... .
890
93.2
974
991
98.9
970
100.0
103.6
1092
114.5
1185
124.5
115.3
1167
116.3
117.5
1183
1189
....
1189
119.3
1196
1197
Nov
120.6
Dec
1209
1997:Jan
121.3
Feb
1221
Mar ...
.
... .
1225
Apr
123.1
May
123.3
June
1235
July
1245
Aug
1252
Sept
1256
Octp
126.5
Nov
127.5
Dec?
128.1
Source: Board of Governors of the Federal Reserve System.

Oct.":::: :




206
21.3
202
235
25.4
26.4
288
26.9
30.3
316
31.9
297
33.5
34.1
342
37.3
395
42.2
468
510
52.0
549
57.4
548
55.6
615
66.9
659
59.3
65.4
71.2
758
78.5
755
76.7
721
76.3
83.8
85.7
881
92.8
97.1
990
98.5
962
100.0
103.8
1100
116.0
1202
127.0
116.7
118.1
117.4
119.0
1197
120.4
120.9
121.1
1215
121.5
122.5
1231
123.5
1244
124.9
125.4
125.7
1261
1269
1279
128.0
128.9
130.5
131.1

:: :

340

Durable

197
20.6
187
227
25.6
27.2
307
27.1
31.0
320
32.2
282
32.4
32.9
323
35.9
383
41.0
466
51.8
52.3
54.9
57.1
527
52.5
586
65.4
641
56.1
61.9
68.1
736
77.4
734
74.6
682
72.2
82.7
85.6
874
92.0
98.1
100.5
99.0
95.5
100.0
105.7
114.4
123.9
131.7
142.4
126.7
128.9
127.1
130.4
131.3
132.4
132.8
133.5
1334
133.3
134.9
1353
136.1
137.8
138.7
139.5
140.1
141.2
1424
144.3
144.4
145.4
147.8
148.8

Nondurable

214
22.1
217
242
25.0
25.4
265
26.7
29.6
31 1
31.6
319
35.1
35.9
370
39.3
414
44.1
471
500
51.6
549
57.8
578
60.2
655
68.8
683
64.0
70.5
75.7
789
79.9
783
79.5
777
81.9
85.3
860
891
93.8
96.0
973
97.9
97.0
100.0
101.7
1052
107.4
108.0
111.1
106.0
106.7
107.1
106.9
107.5
107.9
108.3
108.0
1089
109.1
109.6
1103
110.2
110.4
110.5
110.8
110.7
1105
1109
111.0
111.3
112.0
112.7
113.1

Mining

564
593
526
587
644
63.9
656
643
71.7
754
755
693
72.5
73.9
744
765
795
827
858
904
92.1
956
99.5
1020
995
1015
1025
1019
99.7
100.5
103.4
1065
108.3
1115
1156
1112
106.6
113.9
1110
1026
102.1
1047
1032
104.8
102.6
100.0
100.1
1026
102.3
1039
106.0
100.6
1022
103.9
104.5
1044
105.5
105.2
104.9
1050
104.4
103.6
1029
103.7
1060
106.7
105.5
106.7
1057
1065
1063
106.5
106.2
105.8
106.1

Utilities

107
119
127
145
165
17.9
194
209
23.3
256
27.3
286
31.5
33.7
356
382
409
444
471
507
53.3
576
62.7
665
69.7
742
77.1
761
76.9
79.9
82.0
844
86.8
873
85.0
823
83.7
86.7
888
864
89.4
93.9
971
98.3
100.4
100.0
103.9
1053
109.0
112.5
112.5
112.3
1135
114.5
112.5
1137
113.0
109.4
111.3
1115
112.1
113.6
1127
112.5
110.3
109.6
112.5
111.8
1109
1138
113.0
115.1
116.7
114.5
114.9

TABLE B-52.—Industrial production indexes, market groupings, 1947-97
[1992=100; monthly data seasonally adjusted]

Year or month

Total
industrial
production

Final products

Total

Total

23.7
21.7 21.0
22.3 18.6
25.5
24.4
23.4 19.4
26.2
22.6 21.7
26.4
21.4 21.1
24.3
23.2 18.0
24.7 23.8
29.2 24.8
28.6
27.8
26.8 25.7
27.5
25.8 21.4
29.6
28.1
23.2 21.4
30.8
27.8 27.5
31.7
29.8
29.3 24.2
30.2 29.4
32.1
29.6
28.6 27.9
27.3 22.3
34.5
32.2 30.1
33.0
36.3 26.3
36.8
33.6 31.9
34.2
29.9 27.7
34.1 32.8
37.9
35.1
31.3 27.1
34.8
39.0
31.9 31.3
24.9 25.6
41.7
35.7 34.3
38.1
31.2 29.4
39.6
35.7 29.6
43.1
36.5 35.5
40.4
36.7 35.8
44.5
32.6 30.5
43.1
46.6
39.8 38.8
39.5 33.1
48.7
42.1 41.0
45.5
43.2 35.7
48.1
51.1
45.0 43.3
45.3 39.0
51.8
53.3
49.5 47.6
55.8 44.2
55.8
53.8 52.1
54.5
55.6 48.7
58.7
55.0 54.2
55.8
48.9 49.3
59.2
58.2 52.8
61.0
58.1 56.8
60.7 58.6
61.4
63.1
58.5 56.3
64.1
58.7 56.5
60.7
49.2 54.6
64.2
62.7 57.8
66.0
59.5 57.0
69.3
67.7 66.2
70.2
65.3 61.9
72.4
72.4
74.7 70.0
70.6 66.5
72.4
70.2
64.6 64.7
69.6 66.3
67.4
63.4 62.4
60.8 57.0
70.9
74.1
76.1
69.3 66.8
75.5 63.9
79.5
87.2 71.8
79.8
74.9 72.4
82.6
82.9
79.3 77.2
89.6 74.9
81.5
81.4 73.6
82.9
82.0 79.7
79.7 79.3
79.6
62.3 69.7
83.8
80.1
84.3
81.0 81.2
61.6 70.7
76.7 78.3
78.8
84.2
59.1 64.4
83.2
86.2
79.5 80.0
74.3 73.1
86.7
86.6 87.0
89.4 80.1
87.5
95.4 77.3
87.6
88.5
88.0 89.3
90.7
89.0 90.3
97.5 82.6
91.3
93.7 100.7 89.1
93.2 93.3
93.6
97.4 97.9
96.7 107.1 94.5
95.9
97.7 108.9 95.9
96.7
99.1 99.9
97.1
98.9 99.5
97.3 100.9 96.0
97.0 97.7
97.0
90.3 95.2
98.1
100.0 100.0 100.0 100.0 100.0 100.0
103.6 103.4 103.0 111.0 108.0 101.5
109.2 107.5 107.1 122.7 117.2 104.0
114.5 111.3 109.9 122.3 121.1 106.9
118.5 114.6 111.8 123.9 127.3 108.3
124.5 119.6 114.4 130.0 132.3 110.1
115.3 111.7 109.7 118.3 121.7 107.1
116.7 113.5 111.2 123.2 124.0 108.0
116.3 112.7 110.7 111.2 124.8 108.6
117.5 114.0 111.2 125.7 126.1 107.5
118.3 114.3 111.6 125.8 128.2 107.7
118.9 115.0 112.1 128.3 130.6 107.8
118.9 115.3 112.1 130.8 127.8 107.8
July
Aug
127.4 128.8 107.6
119.3 115.0 111.7
Sept
119.6 115.6 112.4 125.5 128.6 108.7
Oct
119.7 115.3 112.1 120.7 127.4 108.9
Nov
120.6 116.3 113.1
124.5 128.8 109.7
Dec
120.9 116.8 113.6 125.9 130.4 109.9
1997:Jan
121.3 116.8 113.2 127.4 128.5 109.4
Feb
122.1 117.2 113.1 128.5 130.1 109.0
Mar
122.5 117.9 113.4 129.0 132.0 109.1
Apr
123.1 118.0 113.4 122.3 131.4 109.9
May
123.3 118.6 113.9 124.6 132.1 110.1
June
123.5 118.6 113.5 126.7 132.3 109.4
July . .
124.5 119.2 113.9 120.3 134.4 110.3
Aug
125.2 120.5 114.6 131.6 132.5 110.3
Sept
125.6 120.3 114.5 132.8 131.1 110.2
Oct"
126.5 121.1 115.4 131.2 131.0 111.4
Nov/>
127.5 122.2 116.3 138.5 134.1 111.5
Dec"
128.1 122.6 116.6 135.0 136.6 111.9
'Two components—oil and gas well drilling and manufactured homes—are
Source: Board of Governors of the Federal Reserve System.
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959 .
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*
1996:Jan
Feb
Mar
Apr
May
June




Materials

Intermediate
De- prod- Total
Auto- Other Nonmotive dura- durable Total ! Busi- fense ucts
prodble
ness and
space
ucts goods goods

Consumer goods

341

Equipment

8.3
16.3 16.0
22.6
9.7
23.9
17.2 16.7
15.3 14.6 10.2
22.6
16.6 15.6 11.9
26.3
23.1 19.1 29.3
27.6
27.7 21.6 41.2
27.5
29.4
30.1 22.5 49.4
26.3 19.8 43.5
29.3
26.9 21.4 39.8
33.2
29.5 24.8 38.9
34.7
30.7 25.8 40.6
34.7
27.5 21.8 40.8
33.9
30.2 24.5 43.0
37.5
31.0 25.1 44.2
37.7
30.6 24.4 44.9
38.5
34.0 26.5 52.0
40.8
36.1 27.8 56.1
43.1
38.1 31.1 54.3
45.9
43.1 35.6 60.1
48.9
50.2 41.3 70.6
51.9
53.4 42.1 80.6
54.0
54.9 43.9 80.7
57.1
56.4 46.8 76.8
60.2
52.4 45.1 65.1
59.3
49.1 42.9 58.5
61.1
53.7 48.9 56.8
68.2
59.9 57.2 55.5
72.6
61.9 59.7 54.7
70.0
56.7 53.3 53.7
63.2
58.6 55.3 54.6
69.6
64.3 62.0 54.4
75.7
71.0 69.3 55.9
79.9
77.6 77.3 57.7
82.0
79.1 76.7 63.2
77.7
82.8 78.0 64.5
77.6
77.7 70.6 72.6
75.8
76.4 68.3 80.4
81.0
87.6 79.2 89.5
86.9
91.8 82.5 103.8
89.1
90.0 82.0 113.0
92.7
92.9 85.1 117.5 100.7
99.9 93.5 117.1
102.5
103.7 98.8 117.4 102.9
103.2 98.2 115.9
101.9
98.8 95.7 106.7
97.5
100.0 100.0 100.0
100.0
104.1 105.8 93.8 102.5
108.1 112.5 86.9 106.3
113.8 121.5 81.4 108.3
119.6 129.7 76.9 110.8
128.7 141.8 75.3 115.0
115.1 124.4 75.4 107.6
117.5 127.1 76.6 108.7
116.3 125.2 77.8 109.5
118.8 128.4 77.3 109.0
119.1 128.6 77.5 110.4
119.9 130.1 76.5 111.4
121.0 131.3 77.2 110.8
120.7 131.0 77.3 111.4
121.1 131.5 77.5 111.9
121.0 131.6 76.9 111.9
121.8 133.0 76.5 113.7
122.4 134.0 76.2 113.0
123.1 134.9 75.5 113.5
124.6 136.5 75.6 114.1
125.8 137.5 75.7 114.1
126.0 137.9 75.4 114.7
126.8 139.0 75.6 114.9
127.7 140.2 76.0 114.7
128.6 141.6 74.9 114.6
130.9 144.6 75.0 115.3
130.6 144.4 74.7 115.2
131.3 145.4 74.7 116.4
132.5 147.1 75.1 116.6
133.1 147.8 75.2 117.2
included in total equipment, but

Dura- Nonble durable

22.1 18.4
23.0 18.9
21.0 16.9
25.1 21.3
27.8 24.3
28.2 24.8
31.3 28.9
28.9 25.0 "2lO
34.2 30.6 26.3
35.1 30.7 27.6
35.1 30.6 27.4
31.6 25.8 27.3
36.4 30.7 31.2
36.9 31.1 31.7
36.9 30.4 33.0
40.2 33.8 35.8
42.8 36.0 37.9
46.3 39.3 41.3
51.6 45.0 45.3
56.2 49.6 48.9
55.7 47.8 49.8
59.4 50.7 54.7
62.9 53.3 59.2
60.7 48.4 59.5
61.6 48.6 62.0
67.9 54.9 68.4
74.3 62.8 73.4
72.8 61.0 73.7
63.9 50.8 65.6
71.4 58.5 74.3
76.9 64.6 78.9
81.0 70.2 81.6
83.9 73.3 84.4
80.3 67.7 80.7
81.4 70.4 82.3
75.1 62.6 74.6
78.3 68.2 81.0
85.9 79.5 84.5
86.3 80.9 83.2
86.3 82.3 85.7
90.4 87.5 90.9
95.1 93.6 94.8
97.0 95.7 97.2
97.2 95.3 98.1
95.9 93.2 96.9
100.0 100.0 100.0
104.1 107.1 101.8
112.3 119.5 106.9
120.8 134.4 108.6
126.2 144.7 108.3
134.2 158.3 112.9
122.6 139.9 105.1
123.7 141.3 105.9
123.2 139.6 105.9
125.1 142.9 107.2
126.1 144.3 107.8
126.5 145.0 108.0
126.5 145.1 109.1
127.4 147.1 108.6
127.5 146.5 109.6
127.9 147.2 110.1
128.4 148.4 110.4
129.0 149.3 111.4
129.7 150.2 111.6
131.0 152.2 112.6
131.3 153.0 112.5
132.5 155.1 113.0
132.4 155.4 111.8
133.0 156.9 111.9
134.9 159.3 113.5
134.9 160.3 112.3
136.1 161.3 113.3
136.9 163.2 113.2
138.3 166.0 114.3
139.3 167.4 114.8
not in detail shown.

Energy

"5U
57.8
61.1
61.8
57.3
60.7
61.5
62.0
64.1
67.9
70.7
73.9
78.6
81.3
85.0
89.4
93.8
94.6
98.2
98.9
96.3
94.2
96.5
97.9
98.9
101.4
102.2
100.2
96.7
94.7
99.5
99.1
95.2
96.2
98.5
99.5
100.6
100.8
100.0
99.6
101.4
102.6
103.5
104.1
102.0
103.1
104.4
103.9
104.4
104.6
103.2
103.6
103.9
103.8
103.0
102.7
103.6
103.8
103.4
103.7
103.7
103.2
104.6
103.9
105.5
105.3
104.5
105.0

TABLE B-53.—Industrial production indexes, selected manufactures, 1947-97
[1992=100; monthly data seasonally adjusted]

Year or month

Primary
metals
Total

1947
1948 ..
1949
1950
1951
1952
1953
1954 .
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997*
1996:Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
1997:Jan

Feb
Mar
Apr
May

June

{uiy
Aug

Sept
Oct*
NOVP
Dec*

Iron
and
steel

68.6
71.3
60.0
75.5
82.1
75.0
85.0
68.8
89.4
88.8
85.0
67.4
78.8
78.5
77.0
82.6
89.1
100.5
110.6
117.4
108.5
112.4
120.9
112.5
106.7
119.5
135.6
131.4
104.7
117.1
119.0
128.0
130.0
108.0
113.9
80.5
88.2
98.7
98.4
91.2
97.8
106.2
104.9
104.0
96.7
100.0
105.7
113.4
117.2
118.9
124.6
115.8
116.0
117.6
118.0
117.7
119.1
117.7
120.1
121.3
121.9
120.8
120.5
119.4
121.6
121.8
122.3
124.2
124.9
125.2
125.5
125.9
127.4
128.5
129.6

97.1
101.6
86.7
106.9
119.5
105.2
121.3
94.3
125.3
123.0
118.5
89.3
102.8
104.5
99.8
104.0
113.3
128.9
141.4
145.7
134.6
139.0
151.4
140.9
128.9
143.3
163.1
158.0
127.0
139.9
138.0
147.5
148.4
119.0
126.6
80.5
90.0
98.9
98.8
86.8
95.4
107.6
106.2
106.4
96.0
100.0
107.1
113.7
117.7
117.6
123.1
116.7
114.3
116.3
116.4
115.6
118.4
116.7
118.9
118.5
121.9
119.3
118.0
118.8
119.9
119.6
121.2
123.9
122.6
122.2
121.8
124.5
126.5
127.9
128.8

Fabricated
metal
products

38.2
38.9
35.1
43.0
45.9
44.8
50.6
45.5
52.0
52.7
54.1
48.5
54.4
54.5
53.1
57.7
59.6
63.3
69.6
74.5
77.9
82.1
83.5
77.4
77.0
84.5
93.9
90.1
78.1
86.5
94.7
98.2
101.6
94.4
93.0
84.9
87.2
95.2
96.5
95.6
101.9
106.1
104.8
101.2
96.2
100.0
104.4
112.2
116.6
119.6
123.0
117.7
118.7
118.5
118.4
119.2
119.5
120.0
120.1
120.4
120.8
120.9
120.6
120.6
121.7
122.1
122.5
122.7
121.9
122.4
122.8
122.7
124.2
125.4
127.1

Durable manufactures
1 IndusTransportation
equipment
trial
Electrimacal
chinery machinMotor
and
ery
Total vehicles
equipand
parts
ment

15.1
15.1
12.9
14.5
18.4
20.0
20.9
17.8
19.5
22.4
22.3
18.8
21.9
22.0
21.4
24.0
25.6
29.2
32.8
38.1
38.9
39.2
42.4
41.1
38.2
44.3
51.8
55.1
47.7
50.1
56.6
63.3
70.2
70.5
74.7
65.8
65.2
78.9
81.2
81.8
86.0
97.1
103.0
100.1
95.4
100.0
109.9
124.8
142.7
155.3
171.4
148.7
151.3
152.2
152.4
153.8
155.1
155.8
157.8
157.3
157.6
159.9
161.3
162.8
164.0
165.1
167.8
168.0
168.8
172.2
175.9
173.7
176.3
177.5
179.3

5.5
5.7
5.4
7.4
7.4
8.5
9.7
8.6
9.9
10.7
10.6
9.7
11.8
12.8
13.6
15.7
16.1
17.0
20.3
24.4
24.5
25.8
27.5
26.3
26.4
30.2
34.4
34.1
29.3
32.9
38.1
42.2
46.9
48.6
51.0
51.7
55.9
66.7
68.4
71.0
75.6
82.5
85.8
87.7
89.6
100.0
110.7
133.2
170.9
199.3
231.6
185.6
192.5
192.6
194.8
197.1
200.0
200.4
201.9
203.9
204.8
207.7
210.5
211.1
217.4
220.8
223.7
226.3
229.7
235.5
236.8
237.5
240.8
247.0
251.5

19.0
20.7
20.8
24.9
27.8
32.3
40.6
35.3
40.6
39.4
42.2
33.3
37.7
39.0
36.7
42.4
46.5
47.7
56.7
60.8
59.5
64.6
64.1
53.8
58.2
62.2
70.8
64.4
57.9
65.9
71.9
77.5
78.7
70.3
66.9
63.0
70.5
80.5
88.8
94.1
96.1
101.1
105.1
102.3
96.5
100.0
103.8
107.1
105.7
106.5
115.5
103.1
104.9
94.7
107.8
108.2
108.3
110.3
109.6
107.7
105.9
108.8
109.1
110.9
111.4
112.3
110.7
110.8
113.0
112.2
117.0
118.8
118.2
122.2
121.0

Source: Board of Governors of the Federal Reserve System.




342

26.5
28.8
29.5
38.0
34.8
29.8
37.6
32.4
43.4
35.2
36.9
27.3
35.4
40.0
35.1
42.7
47.3
48.5
62.0
60.9
53.6
64.2
64.5
51.9
65.0
71.0
82.7
71.4
60.5
79.7
92.4
96.8
89.0
65.8
62.8
56.9
72.1
87.3
95.0
94.2
94.9
100.2
101.2
95.3
88.5
100.0
113.6
129.8
131.0
130.2
136.9
128.8
130.2
108.7
135.1
135.2
134.6
137.9
135.8
130.1
125.4
130.7
130.1
133.4
133.3
134.0
129.7
129.2
132.5
130.0
138.9
141.2
139.6
146.9
141.6

Nondurable manufactures

Lumber
and
products
40.6
42.2
37.3
45.3
45.2
44.6
47.1
46.8
52.3
51.7
47.4
48.2
54.6
51.5
53.9
56.8
59.5
63.9
66.4
68.9
68.2
70.2
70.1
69.7
71.5
81.9
82.2
74.6
69.5
79.0
86.1
87.5
86.3
80.4
78.1
70.3
83.3
89.8
92.0
99.6
104.9
105.1
104.3
101.6
94.5
100.0
100.8
105.9
107.8
111.8
114.8
107.5
108.3
111.5
112.3
112.4
114.7
111.6
113.5
112.6
111.6
115.2
110.2
111.4
114.2
114.9
115.9
116.4
117.0
116.1
115.4
113.3
112.5
115.2
114.8

Apparel Textile Printing
mill
and
prodprod- publishucts
ucts
ing

47.2
49.2
48.8
52.5
51.5
54.2
54.9
54.2
59.9
61.3
61.1
59.4
65.4
66.7
67.1
69.9
72.7
75.3
79.5
81.6
81.2
83.2
85.9
82.5
83.5
88.6
89.3
85.3
77.9
91.8
98.0
100.4
95.3
95.4
97.3
96.3
100.3
102.2
98.6
101.8
105.5
103.5
100.3
97.2
97.8
100.0
102.4
106.5
107.1
102.2
99.7
100.7
103.6
102.4
103.4
103.2
102.9
102.2
102.9
102.3
101.6
101.2
100.0
100.5
99.5
100.1
99.8
99.8
99.6
99.7
99.1
99.1
99.3
98.8
100.0

34.1
36.5
33.7
38.3
38.0
37.6
38.6
36.1
41.2
42.3
40.3
39.8
45.0
44.1
45.4
48.5
50.3
54.3
59.1
62.7
62.7
70.0
73.6
72.0
76.0
83.3
86.7
78.9
75.2
83.5
88.3
88.6
91.5
89.0
86.3
80.1
89.9
90.4
86.5
90.5
96.3
95.0
96.5
93.2
92.7
100.0
105.2
110.6
109.9
106.7
109.8
102.4
104.6
107.7
105.7
106.9
108.9
107.6
108.2
107.3
107.5
108.0
105.9
107.0
107.0
108.0
109.2
107.2
109.1
110.7
110.7
111.4
111.7
112.9
113.1

22.7
23.9
24.5
25.7
26.2
26.1
27.3
28.4
31.3
33.2
34.4
33.6
35.9
37.3
37.5
38.9
40.9
43.4
46.2
49.7
52.4
53.3
55.9
54.3
54.8
58.5
60.0
59.1
55.3
60.4
66.3
70.1
72.0
72.4
74.3
77.5
81.4
87.0
90.2
93.4
102.5
103.4
103.5
103.1
99.1
100.0
100.6
100.7
101.5
101.5
104.8
99.7
101.0
100.3
100.5
101.7
101.2
101.4
101.4
102.1
102.6
103.1
103.2
103.2
103.3
103.6
104.4
104.5
104.1
104.1
104.4
105.1
106.7
107.4
106.8

Chemicals
and
products

7.5
8.2
8.0
10.1
11.4
11.9
12.9
13.1
15.3
16.4
17.3
17.9
20.8
21.6
22.7
25.2
27.6
30.2
33.7
36.7
38.4
43.2
46.7
48.6
51.7
58.2
63.6
65.9
60.1
67.2
72.4
76.4
79.2
75.9
77.3
71.0
76.0
79.3
79.4
82.4
87.0
92.2
95.1
97.3
96.4
100.0
101.4
104.7
107.5
110.5
115.1
107.9
108.0
108.0
108.1
109.1
109.5
110.8
110.8
112.0
113.2
113.5
114.9
115.2
114.6
113.6
115.2
114.5
114.6
114.3
114.5
115.6
116.1
115.8
116.6

Foods

31.1
30.8
31.1
32.2
32.8
33.5
34.2
34.9
36.9
39.0
39.6
40.6
42.6
43.8
45.0
46.4
48.1
50.3
51.5
53.4
55.8
57.3
59.2
60.1
62.0
65.3
66.6
67.5
67.1
70.9
74.6
77.2
77.9
79.7
81.4
82.4
84.6
86.4
88.9
91.2
93.5
94.9
95.9
97.0
98.4
100.0
102.0
103.7
106.8
107.3
109.6
106.6
107.0
107.4
107.1
106.8
107.1
107.2
105.9
107.0
107.8
108.2
109.0
109.3
109.4
110.0
109.2
109.2
108.8
110.0
108.9
108.6
109.3
111.0
111.1

TABLE B-54.—Capacity utilization rates, 1948-97
[Percent;1 monthly data seasonally adjusted]
Manufacturing
Total
industry

Year or month

1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997/>
1996-Jan
Feb
Mar
Apr

May

::::

sept
Set
Nov

:""'.'"'::;: : :.:

June
July
Aug

Dec
1997-Jan
Feb
Mar
Apr
M?y
June
July
Aug
Sept
Otfp
Nov/>
Dec^

. .

87.0
873
873
81.1
794
84.4
884
84.3
746
79.3
835
858
860
815
80.8
745
75.7
808
79.8
787
81.3
840
84.1
823
793
802
813
831
83.4
824
82.7
818
825
819
825
82.7
828
82.6
825
824
82.2
825
825
824
826
825
826
824
82.3
826
82.8
827
830
833
83.4

Total

825
742
828
85.8
854
89.3
801
87.0
861
836
75.0
816
801
77.3
814
83.5
856
89.5
91 1
872
871
866
794
779
834
877
83.4
729
782
826
852
853
795
783
718
74.4
798
78.8
787
81.3
838
83.6
814
779
794
805
825
82.8
814
81.7
808
815
806
814
816
817
817
815
814
811
815
815
814
817
816
816
814
813
815
818
816
818
824
82.5

Durable
goods

87.5
872
867
772
747
814
880
83.1
706
757
808
844
856
784
76.8
680
70.1
776
76.8
757
77.9
81 7
82.0
790
747
766
788
815
82.1
808
81.0
804
81 3
796
812
81.3
815
813
813
807
802
807
804
804
809
809
808
806
807
808
81.4
810
810
819
81.8

1
Output as percent of capacity.
Source: Board of Governors of the Federal Reserve System.




343

Nondurable
goods

863
866
865
828
826
864
873
839
763
818
853
864
849
810
804
775
808
829
815
828
859
864
85.7
844
819
827
824
836
835
820
826
814
818
819
816
818
819
821
818
823
823
825
829
826
826
826
827
825
821
823
822
823
827
830
83.2

Primary
processing

Advanced
processing

873
762
88.5
90.2
849
89.4
806
92.0
894
847
75.4
830
798
77.9
815
83.8
878
91.0
914
85.3
861
865
799
787
855
905
85.1
721
792
838
859
860
772
772
686
74.5
800
791
799
845
868
86.1
839
796
823
841
874
871
856
86.0
848
848
852
851
854
860
858
859
860
860
860
857
855
861
861
862
860
858
860
858
857
857
863
86.7

800
732
798
83.4
859
89.3
800
842
844
831
74.9
81 1
805
77.2
816
83.4
846
88.8
91 1
880
873
864
789
771
822
862
825
733
776
819
848
849
808
788
735
744
797
786
781
799
823
825
803
772
782
789
804
808
795
79.8
791
800
786
798
799
798
799
796
794
790
795
797
796
797
797
796
794
794
796
800
797
800
806
80.6

Mining

81.2
835
865
888
873
903
923
92.3
897
898
909
909
914
934
93.9
863
80.4
860
84.3
776
803
852
86.9
898
884
865
862
876
871
888
89.8
861
874
888
893
893
902
899
896
896
890
883
876
882
901
906
895
905
896
903
900
901
898
895
89.7

Utilities

-

94.5
951
967
96.2
946
95.2
935
87.3
844
852
850
854
866
859
825
793
797
819
835
806
825
849
863
857
863
846
872
873
890
902
893
906
916
922
905
914
907
877
892
891
895
906
898
895
877
870
892
885
877
899
892
908
920
901
90.3

TABLE B-55.—New construction activity, 1959-97
[Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]
Private construction
Total
new
construction

Year or month

Total

Public construction

Nonresidential buildings and other
construction1

Total 2

New
housing
units

Total

Commercial 3

Industrial

Total
Other 4

Federal State and
local *

55.4
54.7
56.4
60.2
64.8

1959
I960
1961
1962
1963 .
New series
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974 .
1975
1976
1977
1978
1979
1980
1981 .
1982
1983
1984
1985
1986
1987 ..
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997p
1996- Jan
Feb
Mar
Apr
May
June
July
Aug

sept::::::::::::::
Oct

Nov
Dec
1997: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec/'

Residential
buildings 1

"""

'."'

39.3
38.9
39.3
42.3
45.5

24.3
23.0
23.1
25.2
27.9

19.2
17.3
17.1
19.4
21.7

15.1
15.9
16.2
17.2
17.6

3.9
4.2
4.7
5.1
5.0

2.1
2.9
2.8
2.8
2.9

9.0
8.9
8.7
9.2
9.7

16.1
15.9
17.1
17.9
19.4

3.7
3.6
3.9
3.9
4.0

12.3
12.2
13.3
14.0
15.4

75.1
81.9
85.8
87.2
96.8
104.9
105.9
122.4
139.1
153.8
155.2
152.6
172.1
200.5
239.9
272.9
273.9
289.1
279.3
311.6
369.0
401.4
429.9
441.6
455.6
469.8
468.5
424.2
452.1
478.6
519.9
534.1
568.6
600.7
550.7
546.1
548.6
562.9
562.3
568.2
567.0
571.0
580.0
584.1
586.2
579.1
577.1
592.4
593.9
596.9
595.8
594.2
603.0
603.7
605.7
611.8
611.3
611.8

54.9
60.0
61.9
61.8
69.4
77.2
78.0
92.7
109.1
121.4
117.0
109.3
128.2
157.4
189.7
216.2
210.3
224.4
216.3
248.1
298.8
323.6
345.3
351.0
360.9
371.6
361.1
314.1
336.2
362.7
399.4
406.8
437.1
461.9
420.3
421.7
421.2
431.1
428.5
438.6
436.8
443.6
444.4
449.0
448.9
447.0
444.4
452.0
452.7
457.6
459.9
456.9
464.3
465.2
468.8
469.6
469.4
472.9

30.5
30.2
28.6
28.7
34.2
37.2
35.9
48.5
60.7
65.1
56.0
51.6
68.3
92.0
109.8
116.4
100.4
99.2
84.7
125.5
153.8
158.5
187.1
194.7
198.1
196.6
182.9
157.8
187.8
210.5
238.9
230.7
247.2
260.2
237.4
239.3
243.0
248.8
249.7
250.2
249.4
249.2
249.0
247.9
248.3
247.9
246.7
251.4
254.0
259.9
259.7
257.3
258.8
260.0
263.8
265.7
268.1
271.9

24.1
23.8
21.8
21.5
26.7
29.2
27.1
38.7
50.1
54.6
43.4
36.3
50.8
72.2
85.6
89.3
69.6
69.4
57.0
94.6
113.8
114.7
133.2
139.9
138.9
139.2
128.0
110.6
129.6
144.1
167.9
162.9
179.4
185.5
171.1
173.5
176.5
181.4
181.8
182.4
181.2
181.1
180.6
179.9
180.0
179.1
178.3
183.4
184.1
185.2
185.3
182.8
182.9
183.8
186.7
189.9
190.1
193.5

24.4
29.7
33.3
33.1
35.2
39.9
42.1
44.2
48.4
56.3
61.1
57.8
59.9
65.4
79.9
99.8
109.9
125.1
131.6
122.6
144.9
165.1
158.2
156.3
162.8
175.1
178.2
156.2
148.4
152.2
160.5
176.1
189.9
201.8
182.9
182.5
178.3
182.3
178.8
188.4
187.4
194.3
195.4
201.1
200.6
199.1
197.7
200.6
198.8
197.7
200.2
199.7
205.5
205.3
205.0
203.9
201.3
200.9

7.9
9.4
9.4
9.3
10.4
12.5
13.0
15.3
18.8
21.7
21.7
17.2
17.0
19.7
24.7
34.0
41.7
48.7
53.9
53.4
71.6
88.1
84.0
83.2
86.4
89.2
85.8
62.2
53.2
57.9
64.4
75.4
86.7
93.6
79.3
80.1
79.5
83.1
82.7
87.9
85.8
90.5
89.4
92.5
93.2
92.2
94.9
96.0
94.0
89.0
91.8
92.3
96.0
94.7
93.9
94.3
92.4
93.8

5.0
7.2
9.3
8.4
8.5
9.6
9.3
7.8
6.7
9.0
11.5
11.7
10.5
11.3
16.2
22.0
20.5
25.4
26.1
19.5
20.9
24.1
21.0
21.2
23.2
28.8
33.6
31.4
29.0
26.5
28.9
32.5
32.1
30.6
33.4
32.1
31.4
31.9
30.2
32.0
30.5
31.0
32.8
34.7
33.2
30.8
31.9
32.2
30.5
29.3
30.5
31.0
31.8
31.5
30.7
30.0
29.4
28.1

11.5
13.1
14.6
15.4
16.3
17.8
19.8
21.1
22.9
25.6
27.9
28.9
32.4
34.5
39.0
43.7
47.7
51.0
51.6
49.8
52.4
52.9
53.2
52.0
53.2
57.1
58.8
62.6
66.2
67.8
67.2
68.2
71.1
77.5
70.2
70.3
67.5
67.3
65.9
68.5
71.1
72.9
73.2
73.8
74.2
76.2
70.9
72.5
74.2
79.4
77.9
76.3
77.7
79.1
80.5
79.6
79.4
79.0

20.2
21.9
23.8
25.4
27.4
27.8
27.9
29.7
30.0
32.3
38.1
43.3
44.0
43.1
50.1
56.6
63.6
64.7
63.1
63.5
70.2
77.8
84.6
90.6
94.7
98.2
107.5
110.1
115.8
116.0
120.5
127.3
131.5
138.8
130.4
124.3
127.3
131.8
133.8
129.6
130.2
127.4
135.6
135.2
137.3
132.1
132.7
140.3
141.2
139.3
135.9
137.3
138.7
138.4
136.9
142.2
141.9
138.9

3.7
3.9
3.8
3.3
3.2
3.2
3.1
3.8
4.2
4.7
5.1
6.1
6.8
7.1
8.1
8.6
9.6
10.4
10.0
10.6
11.2
12.0
12.4
14.1
12.3
12.2
12.1
12.8
14.4
14.4
14.4
15.9
15.6
15.3
15.7
15.7
15.4
16.2
16.2
15.3
14.9
14.4
16.9
15.5
16.0
14.1
14.8
15.9
14.9
14.7
14.1
14.1
14.9
14.6
15.5
16.8
17.1
16.9

16.5
18.0
20.0
22.1
24.2
24.6
24.8
25.9
25.8
27.6
33.0
37.2
37.2
36.0
42.0
48.1
54.0
54.3
53.1
52.9
59.0
65.8
72.2
76.6
82.5
86.0
95.4
97.3
101.5
101.5
106.1
111.4
115.9
123.4
114.8
108.6
111.9
115.7
117.6
114.3
115.2
113.0
118.7
119.7
121.3
117.9
118.0
124.4
126.3
124.6
121.8
123.2
123.8
123.9
121.4
125.4
124.9
121.9

1
Beginning 1960, farm residential buildings included in residential buildings; prior to 1960, included in nonresidential buildings and other
construction.
2
Incjudes residential improvements, not shown separately. Prior to 1964, also includes nonhousekeeping units (hotels, motels, etc.).
3
Office buildings, warehouses, stores, restaurants, garages, etc., and, beginning 1964, hotels and motels; prior to 1964 hotels and motels
are4 included in total residential.
Religious, educational, hospital and institutional, miscellaneous nonresidential, farm (see also footnote 1), public utilities (telecommunications, gas, electric, railroad, and petroleum pipelines), and all other private.
5
Includes Federal grants-in-aid for State and local projects.
Source: Department of Commerce, Bureau of the Census.




344

TABLE B-56.—New housing units started and authorized, 1959-97
[Thousands of units; monthly data at seasonally adjusted annual rates]
New private housing units authorized 2

New housing units started
Year or month

Private (farm and nonfarm)

Private and public 1
Total
(farm and
nonfarm)

l

Type of structure
Nonfarm

Total

1 unit

2 to 4
units

5 units
or more

Type of structure
Total

1 unit

2 to 4 5 units
units • or more

77.1
938.3
28 2.9
1,208.3
192.9
187.4
746.1
64.6
25 7.5
998.0
722.8
67.6
33 8.7
1,064.2
273.8
716.2
87.1
47 1.5
1,186.6
383.3
1,334.7
750.2
118.9
59 0.7
465.6
100.8
108.4
450.0
720.1
464.9
1,285.8
422.5
709.9
84.8
1,239.8
445.1
86.6
563.2
61.0
347.7
61.1
325.1
971.9
376.1
650.6
73.0
417.5
71.6
1,141.0
694.7
527.3
1,353.4
84.3
574.4
80.9
571.2
1,323.7
625.9
85.2
612.7
85.0
535.9
88.1
616.7
1,351.5
646.8
84.8
780.9
906.1
132.9
885.7
120.3
1,924.6
906.2
148.6 1,037.2
2,218.9
1,033.1
141.3
117.0
795.0
882.1
820.5
118.3
1,819.5
1,074.4
381.6
643.8
64.3
366.2
68.1
(3)
3
63.9
204.3
939.2
675.5
199.8
64.0
( 3)
289.2
1,296.2
893.6
93.1
85.9
309.5
(3 )
414.4
121.7
1,690.0
1,126.1
121.3
442.7
(3)
462.0
125.0
1,800.5
1,182.6
130.6
487.3
(3)
125.4
429.0
122.0
1,551.8
981.5
444.8
( )
3
710.4
330.5
114.5
365.7
109.5
1,190.6
( )
287.7
319.4
564.3
101.8
91.1
985.5
546.4
319.6
88.3
80.0
1,000.5
365.8
522.0
1,605.2
901.5
133.6
113.5
570.1
121.4
544.0
922.4
1,681.8
142.6
616.8
93.4
576.1
1,733.3
956.6
120.1
656.6
1,769.4
108.4
542.0
1,077.6
84.0
583.5
408.7
1,024.4
89.3
1,534.8
421.1
65.3
348.0
75.7
58.8
1,455.6
993.8
386.1
3
317.6
1,338.4
931.7
55.2
67.0
339.8
(
260.4
793.9
54.3
37.5
1,110.8
262.6
137.9
948.8
753.5
43.1
35.6
152.1
30.7
139.0
910.7
45.8
138.4
1,094.9
4
29.4
132.6
1,199.1
986.5
52.3
)
160.2
3
4
223.5
1,068.5
62.2
35.0
1,371.6
241.0
)
(3)
244.1
63.7
33.7
1,332.5
997.3
271.5
( 3)
270.8
45.2
1,425.6
1,069.5
65.8
290.3
(3)
4
298.1
44.2
1,442.3
1,055.6
70.5
316.1
( 3)
)
284
64
1,047
274
22
1,385
(3
297
35
1,425
1,083
60
282
(3
24
249
60
1,438
1,119
259
(3
74
284
252
1,128
55
1,486
(3
4
64
286
1,457
)
48
1,101
292
(3 )
4
1,094
64
228
1,432
274
46
( 3)
)
4
44
284
1,454
67
1,077
)
310
(3)
37
256
62
1,405
1,061
282
(3)
277
1,391
45
1,029
70
292
(3)
4
245
1,349
1,003
68
)
58
278
()
Nov
293
1,391
65
60
1,016
310
Dec
281
65
341
48
1,405
999
4
1997-Jan
207
1,052
62
43
1,395
281
4)
Feb
44
273
1,069
68
)
1,438
301
Mar
1,034
71
292
1,457
45
352
Apr
310
40
1,442
1,060
68
314
4
May
34
270
1,432
1,053
66
313
(3)
4)
332
1,402
70
37
1,049
283
)
(3)
4
3
July
37
279
1,414
1,030
77
307
)
(3)
A!*
262
1,397
1,027
66
304
42
( 3)
Sept
280
1,460
1,065
69
46
326
(3 )
77
Oct
342
1,487
1,087
63
323
(3)
( 44 )
NOVA330
1,440
1,061
58
321
40
(3)
(4)
Deep
372
1,071
1,482
92
319
55
()
()
1
Units in structures built by private developers for sale upon completion to local public housing authorities under the Department of Housing and Urban Development "Turnkey" program are classified as private housing. Military housing starts, including those financed with mortgages insured by FHA under Section 803 of the National Housing Act, are included in publicly owned starts and excluded from total private
starts.
Authorized by issuance of local building permit: in 19,000 permit-issuing places beginning 1994; in 17,000 places for 1984-93; in 16,000
places for 1978-83; in 14,000 places for 1972-77; in 13,000 places for 1967-71; in 12,000 places for 1963-66; and in 10,000 places prior
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970 .
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995 .
1996
1997*
1996:Jan
Feb
Mar
Apr
May
June
July
Augy

ffzuz:

June ::::::::::

1,553.7
1,296.1
1,365.0
1,492.5
1,634.9
1,561.0
1,509.7
1,195.8
1,321.9
1,545.4
1,499.5
1,469.0
2,084.5
2,378.5
2,057.5
1,352.5
1,171.4
1,547.6
2,001.7
2,036.1
1,760.0
1,312.6
1,100.3
1,072.1
1,712.5
1,755.8
1,745.0
1,807.1
1,622.7

:i
!i
:j

1,531.3
1,274.0
1,336.8
1,468.7
1,614.8
1,534.0
1,487.5
1,172.8
1,298.8
1,521.4
1,482.3
3
(3
(

IS

(i
|J
iii
P
P'

i:

i!

:i
:i
J)
Jj

PI
U

ii!

1,517.0
1,252.2
1,313.0
1,462.9
1,603.2
1,528.8
1,472.8
1,164.9
1,291.6
1,507.6
1,466.8
1,433.6
2,052.2
2,356.6
2,045.3
1,337.7
1,160.4
1,537.5
1,987.1
2,020.3
1,745.1
1,292.2
1,084.2
1,062.2
1,703.0
1,749.5
1,741.8
1,805.4
1,620.5
1,488.1
1,376.1
1,192.7
1,013.9
1,199.7
1,287.6
1,457.0
1,354.1
1,476.8
1,475.9
1,444
1,520
1,429
1,522
1,476
1,488
1,492
1,515
1,470
1,407
1,486
1,353
1,375
1,554
1,479
1,483
1,402
1,503
1,465
1,395
1,507
1,527
1,531
1,519

1,234.0
994.7
974.3
991.4
1,012.4
970.5
963.7
778.6
843.9
899.4
810.6
812.9
1,151.0
1,309.2
1,132.0
888.1
892.2
1,162.4
1,450.9
1,433.3
1,194.1
852.2
705.4
662.6
1,067.6
1,084.2
1,072.4
1,179.4
1,146.4
1,081.3
1,003.3
894.8
840.4
1,029.9
1,125.7
1,198.4
1,076.2
1,160.9
1,133.6
1,138
1,188
1,156
1,215
1,142
1,214
1,164
1,222
1,148
1,104
1,133
1,024
1,125
1,237
1,142
1,133
1,098
1,134
1,149
1,091
1,181
1,122
1,161
1,092

to 1963.

4
Series discontinued December 1988.
Source: Department of Commerce, Bureau of the Census.




345

TABLE B-57.—Manufacturing and trade sales and inventories, 1954-97
[Amounts in millions of dollars; monthly data seasonally adjusted]

Year or month

Sales1

Inventories2

46,443
73,175
1954
51,694
79,516
1955
87,304
54,063
1956
89,052
55,879
1957
87,055
54,201
1958 '
1959
92,097
59,729
60,827
94,719
1960
1961
95,580
61,159
65,662 101,049
1962
1963
68,995 105,463
73,682 111,504
1964
120,929
80,283
1965
87,187 136,824
1966
90,820 145,681
1967
98,685 156,611
1968
105,690 170,400
1969
108,221 178,594
1970
116,895 188,991
1971
131,081 203,227
1972
153,677 234,406
1973
1974
...... 177,912 287,144
182,198 288,992
1975
204,150 318,345
1976
229,513 350,706
1977
260,320 400,931
1978
297,701 452,640
1979
327,233 508,924
1980
1981
355,822 545,786
347,625 573,908
1982
1983
369,286 590,287
410,124 649,780
1984
1985
422,583 664,039
430,419 662,738
1986
457,735 709,848
1987
497,157 767,222
1988
527,039 815,455
1989
545,909 840,396
1990
1991
542,815 834,287
567,176 842,204
1992
867,513
595,049
1993
637,585 930,049
1994
681,597 985,905
1995
1996
716,763 1,004,425
693,216 990,600
1996Jan
699,473 990,843
Feb
700,685 989,251
Mar
711,826 993,660
717,503 992,630
712,727 992,101
June
720,755 996,582
July
719,660 998,876
Aug
724,357 999,312
Sept
728,644 1,003,742
Oct
730,974 1,003,740
Nov
728,394 1,004,425
Dec
737,464 1,007,618
1997:Jan
747,790 1,011,899
Feb
745,460 1,013,376
Mar
746,769 1,017,150
Apr
742,945 1,019,025
May
750,027 1,026,255
June
757,485 1,027,787
July
752,886 1,030,243
Aug
762,543 1,037,172
Sept
759,880 1,040,265
Oct*
757,296 1,044,312
Nov

f&V::::

1
Annual
2

Ratio3

1.60
1.47
1.55
1.59
1.61
1.54
1.56
1.56
1.54
1.53
1.51
1.51
1.57
1.60
1.59
1.61
1.65
1.62
1.55
1.53
1.61
1.59
1.56
1.53
1.54
1.52
1.56
1.53
1.67
1.56
1.53
1.56
1.55
1.50
1.49
1.52
1.52
1.53
1.48
1.44
1.41
1.42
1.39
1.43
1.42
1.41
1.40
1.38
1.39
1.38
1.39
1.38
1.38
1.37
1.38
1.37
1.35
1.36
1.36
1.37
1.37
1.36
1.37
1.36
1.37
1.38

Merchant
wholesalers

Manufacturing

Total manufacturing and
trade
Sales'

Inventories2

23,355
26,480
27,740
28,736
27,248
30,286
30,878
30,922
33,358
35,058
37,331
40,995
44,870
46,486
50,229
53,501
52,805
55,906
63,027
72,931
84,790
86,589
98,797
113,201
126,905
143,936
154,391
168,129
163,351
172,547
190,682
194,538
194,657
206,326
224,619
236,698
242,686
239,847
250,394
260,635
279,002
299,116
311,265
300,439
303,090
301,666
309,477
313,247
310,052
313,851
313,854
315,971
316,461
319,296
316,306
319,725
322,967
322,923
326,909
323,567
328,315
332,895
330,178
335,366
334,064
332,339

41,612
45,069
50,642
51,871
50,203
52,913
53,786
54,871
58,172
60,029
63,410
68,207
77,986
84,646
90,560
98,145
101,599
102,567
108,121
124,499
157,625
159,708
174,636
188,378
211,691
242,157
265,215
283,413
311,852
312,379
339,516
334,749
322,654
338,109
369,374
391,212
405,073
390,950
382,547
384,138
405,028
429,089
434,434
431,192
431,462
431,363
431,352
430,298
429,802
430,543
431,647
432,674
434,038
435,200
434,434
435,743
437,873
438,560
441,508
443,460
444,823
446,602
448,447
449,152
452,139
453,955

Ratio3

1.81
1.62
1.73
1.80
1.84
1.75
1.74
1.77
1.74
1.71
1.70
1.66
1.74
1.82
1.80
1.83
1.92
1.83
1.72
1.71
1.86
1.84
1.77
1.66
1.67
1.68
1.72
1.69
1.95
1.78
1.73
1.73
1.68
1.59
1.57
1.63
1.65
1.65
1.54
1.48
1.41
1.41
1.39
1.44
1.42
1.43
1.39
1.37
1.39
1.37
1.38
1.37
1.37
1.36
1.37
1.36
1.36
1.36
1.35
1.37
1.35
1.34
1.36
1.34
1.35
1,37

Sales1

Inventories2

8,993
9,893
10,513
10,475
10,257
11,491
11,656
11,988
12,674
13,382
14,529
15,611
16,987
19,576
21,012
22,818
24,167
26,492
29,866
38,115
47,982
46,634
50,698
56,136
66,413
79,051
93,099
101,180
95,211
99,225
112,199
113,459
114,960
122,968
134,521
143,760
149,506
148,306
154,150
161,681
172,973
188,811
201,723
195,063
195,298
197,334
199,853
200,079
199,977
203,814
202,719
203.437
205,490
205,712
205,560
207,506
211,801
210,195
209,926
210,008
210,772
211,041
208,336
213,372
212,299
210,864

10,637
11,678
13,260
12,730
12,739
13,879
14,120
14,488
14,936
16,048
17,000
18,317
20,765
25,786
27,166
29,800
33,354
36,568
40,297
46,918
58,667
57,774
64,622
73,179
86,934
99,679
122,631
129,654
127,428
130,075
142,452
147,409
153,574
163,903
178,801
187,009
195,550
200,062
207,663
215,878
234,893
253,066
255,808
254,314
254,045
254,151
257,612
256,740
256,122
256,053
256.189
254.654
255,526
255,670
255,808
257,895
258,088
259,389
258,046
259,029
264,154
262,314
264,899
268,112
268,183
270,627

Retail
trade
Ratio3

1.18
1.13
1.19
1.23
1.24
1.21
1.21
1.21
1.18
1.20
1.17
1.17
1.22
1.32
1.29
1.31
1.38
1.38
1.35
1.23
1.22
1.24
1.27
1.30
1.31
1.26
1.32
1.28
1.36
1.28
1.23
1.28
1.32
1.29
1.30
1.28
1.29
1.33
1.32
1.31
1.30
1.31
1.27
1.30
1.30
1.29
1.29
1.28
1.28
1.26
1.26
1.25
1.24
1.24
1.24
1.24
1.22
1.23
1.23
1.23
1.25
1.24
1.27
1.26
1.26
1.28

Sales1

Inventories2

14,095
15,321
15,811
16,667
16,696
17,951
18,294
18,249
19,630
20,556
21,823
23,677
25,330
24,757
27,445
29,371
31,249
34,497
38,189
42,631
45,141
48,975
54,655
60,176
67,002
74,713
79,743
86,514
89,062
97,514
107,243
114,586
120,803
128,442
138,017
146,581
153,718
154,661
162,632
172,732
185,610
193,670
203,775
197,714
201,085
201,685
202,496
204,177
202,698
203,090
203,087
204,949
206,693
205,966
206,528
210,233
213,022
212,342
209,934
209,370
210,940
213,549
214,372
213,805
213,517
214,093

20,926
22,769
23,402
24,451
24,113
25,305
26,813
26,221
27,941
29,386
31,094
34,405
38,073
35,249
38,885
42,455
43,641
49,856
54,809
62,989
70,852
71,510
79,087
89,149
102,306
110,804
121,078
132,719
134,628
147,833
167,812
181,881
186,510
207,836
219,047
237,234
239,773
243,275
251,994
267,497
290,128
303,750
314,183
305,094
305,336
303,737
304,696
305,592
306,177
309,986
311,040
311,984
314,178
312,870
314,183
313,980
315,938
315,427
317,596
316,536
317,278
318,871
316,897
319,908
319,943
319,730

Ratio3

1.51
1.43
1.47
1.44
1.44
1.41
1.47
1.44
1.42
1.43
1.42
1.45
1.50
1.42
1.42
1.45
1.40
1.45
1.44
1.48
1.57
1.46
1.45
1.48
1.53
1.48
1.52
1.53
1.49
1.44
1.49
1.52
1.56
1.55
1.54
1.58
1.55
1.54
1.52
1.51
1.50
1.55
1.52
1.54
1.52
1.51
1.50
1.50
1.51
1.53
1.53
1.52
1.52
1.52
1.52
1.49
1.48
1.49
1.51
1.51
1.50
1.49
1.48
1.50
1.50
1.49

data are averages of monthly not seasonally adjusted figures.

Seasonally adjusted, end of period. Inventories beginning January 1982 for manufacturing and December 1980 for wholesale and retail

trade are not comparable with earlier periods.
3

Inventory/sales ratio. Annual data are: beginning 1982, averages of monthly ratios; for 1958-81, ratio of December inventories to monthly
average sales for the year; and for earlier years, weighted averages. Monthly data are ratio of inventories at end of month to sales for
month.
Note.—Earlier data are not strictly comparable with data beginning 1958 for manufacturing and beginning 1967 for wholesale and retail

trade.
Source: Department of Commerce, Bureau of the Census.




346

TABLE B-58.—Manufacturers' shipments and inventories, 1954—97
[Millions of dollars; monthly data seasonally adjusted]
Inventories2

Shipments1
Year or month
Total

1954
1955
1956
1957

23,355
26,480
27,740
28,736
27,248
1959
30,286
1960
30,878
1961 .
30,922
1962
33,358
1963
35,058
1964
! 37,331
1965
40,995
1966
44,870
1967
46,486
1968
50,229
1969
53,501
1970
52,805
1971
55,906
63,027
1972
1973
72,931
1974
84,790
1975
86,589
98,797
1976
1977
113,201
1978
126,905
1979
143,936
1980
154,391
1981
168,129
1982
163,351
1983
172,547
1984
190,682
1985
194,538
194,657
1986
1987
206,326
1988
224,619
236,698
1989
242,686
1990
1991
239,847
250,394
1992
1993
260,635
1994
279,002
1995
299,116
1996
X
311,265
300,439
1996- Jan
Feb
303,090
Mar
301,666
Apr
309,477
313,247
May
June
310,052
July
313,851
313,854
Aug
315,971
Sept
Oct
316,461
Nov
319,296
Dec
316,306
1997:Jan
319,725
Feb
322,967
Mar
322,923
Apr
326,909
May
323,567
June
328,315
332,895
July
Aug
330,178
Sept
335,366
334,064
Oct
Nov
332,339

'

1958 ..:.:..: :

Durable Nondurable
goods goods
indus- industries
tries
11,828
14,071
14,715
15,237
13,553
15,597
15,870
15,601
17,247
18,255
19,611
22,193
24,617
25,233
27,624
29,403
28,156
29,924
33,987
39,635
44,173
43,598
50,623
59,168
67,731
75,927
77,419
83,727
79,212
85,481
97,940
101,279
103,238
108,128
118,458
123,158
123,776
121,000
128,489
135,886
149,131
160,101
167,166
160,363
162,473
160,768
165,496
168,781
167,524
168,762
168,960
171,415
169,368
171,426
169,504
171,403
174,862
176,224
178,482
175,900
180,687
183,827
181,131
185,496
183,602
182,797

11,527
12,409
13,025
13,499
13,695
14,689
15,008
15,321
16,111
16,803
17,720
18,802
20,253
21,253
22,605
24,098
24,649
25,982
29,040
33,296
40,617
42,991
48,174
54,033
59,174
68,009
76,972
84,402
84,139
87,066
92,742
93,259
91,419
98,198
106,161
113,540
118,910
118,847
121,905
124,749
129,870
139,015
144,099
140,076
140,617
140,898
143,981
144,466
142,528
145,089
144,894
144,556
147,093
147,870
146,802
148,322
148,105
146,699
148,427
147,667
147,628
149,068
149,047
149,870
150,462
149,542

Total

41,612
45,069
50,642
51,871
50,203
52,913
53,786
54,871
58,172
60,029
63,410
68,207
77,986
84,646
90,560
98,145
101,599
102,567
108,121
124,499
157,625
159,708
174,636
188,378
211,691
242,157
265,215
283,413
311,852
312,379
339,516
334,749
322,654
338,109
369,374
391,212
405,073
390,950
382,547
384,138
405,028
429,089
434,434
431,192
431,462
431,363
431,352
430,298
429,802
430,543
431,647
432,674
434,038
435,200
434,434
435,743
437,873
438,560
441,508
443,460
444,823
446,602
448,447
449,152
452,139
453,955

Total

Materials
and
supplies

23,710
26,405
30,447
31,728
30,194
32,012
32,337
32,496
34,565
35,776
38,421
42,189
49,852
54,896
58,732
64,598
66,651
66,136
70,067
81,192
101,493
102,590
111,988
120,877
138,181
160,734
174,788
186,443
200,444
199,854
221,330
218,193
211,997
220,799
242,468
257,513
263,209
250,019
238,166
239,404
253,691
265,915
271,329
267,964
268,245
268,392
268,648
268,657
268,294
269,493
270,537
270,794
271,616
272,198
271,329
272,652
274,170
274,633
276,992
278,084
279,166
280,800
281,878
281,762
283,477
284,463

7,894
9,194
10,417
10,608
9,970
10,709
10,306
10,246
10,794
11,053
11,946
13,298
15,464
16,423
17,344
18,636
19,149
19,679
20,807
25,944
35,070
33,903
37,457
40,186
45,198
52,670
55,173
57,998
59,136
60,325
66,031
63,904
61,331
63,562
69,611
72,435
73,559
70,834
69,427
72,544
78,401
85,040
83,846
85,722
86,049
85,891
85,844
85,483
84,397
85,307
84,805
85,018
84,227
84,154
83,846
84,033
84,147
84,982
85,066
85,373
86,081
86,461
86,360
87,175
87,261
87,163

Work
in
process

Finished
goods

9,721
10,756
12,317
12,837
12,408
13,086
12,809
13,211
14,124
14,835
16,158
18,055
21,908
24,933
27,213
30,282
29,745
28,550
30,713
35,490
42,530
43,227
46,074
50,226
58,848
69,325
76,945
80,998
86,707
86,899
98,251
98,162
97,000
102,393
112,958
122,251
124,130
114,960
104,572
102,632
107,244
105,810
110,559
106,519
106,456
107,003
107,500
107,734
108,228
108,368
108,874
108,712
109,806
110,655
110,559
110,804
111,395
111,780
112,555
112,939
113,043
113,931
114,626
113,995
115,099
116,275

I not seasonally adjusted figures.
Seasonally adjusted, end of period. Data beginning 1982 are not comparable with data for prior periods.

2

Note.—Data beginning 1958 are not strictly comparable with earlier data.

Source: Department of Commerce, Bureau of the Census.




Nondurable goods industries

Durable goods industries

347

6,040
6,348
7,565
8,125
7,816
8,217
9,222
9,039
9,647
9,888
10,317
10,836
12,480
13,540
14,175
15,680
17,757
17,907
18,547
19,758
23,893
25,460
28,457
30,465
34,135
38,739
42,670
47,447
54,601
52,630
57,048
56,127
53,666
54,844
59,899
62,827
65,520
64,225
64,167
64,228
68,046
75,065
76,924
75,723
75,740
75,498
75,304
75,440
75,669
75,818
76,858
77,064
77,583
77,389
76,924
77,815
78,628
77,871
79,371
79,772
80,042
80,408
80,892
80,592
81,117
81,025

Total
17,902
18,664
20,195
20,143
20,009
20,901
21,449
22,375
23,607
24,253
24,989
26,018
28,134
29,750
31,828
33,547
34,948
36,431
38,054
43,307
56,132
57,118
62,648
67,501
73,510
81,423
90,427
96,970
111,408
112,525
118,186
116,556
110,657
117,310
126,906
133,699
141,864
140,931
144,381
144,734
151,337
163,174
163,105
163,228
163,217
162,971
162,704
161,641
161,508
161,050
161,110
161,880
162,422
163,002
163,105
163,091
163,703
163,927
164,516
165,376
165,657
165,802
166,569
167,390
168,662
169,492

Materials
and
supplies

8,167
8,556
8,971
8,775
8,676
9,094
9,097
9,505
9,836
10,009
10,167
10,487
11,197
11,760
12,328
12,753
13,168
13,686
14,677
18,147
23,744
23,565
25,847
27,387
29,619
32,814
36,606
38,165
44,039
44,816
45,692
44,106
42,335
45,319
49,396
50,674
52,645
53,011
53,995
55,069
58,163
62,530
60,741
62,561
62,422
61,779
61,682
61,187
60,727
60,635
60,506
60,638
61,028
60,852
60,741
60,706
61,191
61,157
61,067
61,160
60,987
60,906
60,944
61,491
61,545
60,872

Work
in Finished
proc- goods
ess
2,440
2,571
2,721
2,864
2,827
2,942
2,947
3,108
3,304
3,420
3,531
3,825
4,226
4,431
4,852
5,120
5,271
5,678
5,998
6,729
8,189
8,834
9,929
10,961
12,085
13,910
15,884
16,194
18,612
18,691
19,328
19,442
18,124
19,270
20,559
21,653
22,817
22,815
23,536
23,394
24,685
26,185
26,668
26,358
26,253
26,266
26,334
26,318
26,373
26,240
26,568
26,489
26,652
26,728
26,668
26,788
27,032
27,076
27,363
27,785
27,580
27,744
28,149
28,358
28,928
29,319

7,415
7,666
8,622
8,624
8,506
8,865
9,405
9,762
10,467
10,824
11,291
11,706
12,711
13,559
14,648
15,674
16,509
17,067
17,379
18,431
24,199
24,719
26,872
29,153
31,806
34,699
37,937
42,611
48,757
49,018
53,166
53,008
50,198
52,721
56,951
61,372
66,402
65,105
66,850
66,271
68,489
74,459
75,696
74,309
74,542
74,926
74,688
74,136
74,408
74,175
74,036
74,753
74,742
75,422
75,696
75,597
75,480
75,694
76,086
76,431
77,090
77,152
77,476
77,541
78,189
79,301

TABLE B-59-—Manufacturers' new and unfilled orders, 1954—97
[Amounts in millions of dollars; monthly data seasonally adjusted]

Year or month
Total

1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984 . ..
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1996:Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
1997:Jan
Peb
Mar

May""Z!"
June
July
Aug
Sept
Oct
Nov

22,335
27,465
28,368
27,559
27,193
30,711
30,232
31,112
33,440
35,511
38,240
42,137
46,420
47,067
50,657
53,990
52,022
55,921
64,182
76,003
87,327
85.B9
99,513
115,109
131,629
147,604
156,359
168,025
162,140
175,451
192,879
195,706
195,204
209,389
228,270
239,572
244,507
238,805
248,212
257,698
279,733
300,353
314,197
308,892
303,957
306,561
308,467
315,764
313,081
318,488
311,958
319,894
322,392
322,400
316,898
323,864
326,537
321,146
325,544
324,042
329,554
331,138
335,040
336,264
336,631
345,136

New
orders1
Durable goods
industries
NonCapital
durable
goods
goods
Total
industries, industries
nondefense
11,566
10,768
12,469
14,996
13,003
15,365
13,448
14,111
13,387
13,805
14,732
15,979
14,944
15,288
15,359
15,753
16,078
17,363
18,671
16,840
17,732
20,507
18,851
23,286
20,258
26,163
21,265
25,803
6,314
22,606
28,051
24,114
7,046
29,876
24,682
27,340
6,072
26,016
29,905
6,682
29,144
35,038
7,745
42,627
33,376
9,926
11,594
40,465
46,862
41,957
43,181
9,886
51,307
48,206
11,490
54,073
61,035
13,681
72,278
17,588
59,351
21,154
79,483
68,121
76,967
79,392
21,135
83,654
84,371
21,806
78,064
84,077
19,213
19,624
87,311
88,140
100,164
92,715
23,669
102,356
93,351
24,545
91,557
103,647
23,982
26,094
98,579
110,809
106,194
31,108
122,076
113,516
126,055
32,988
118,924
125,583
33,331
118,957
30,471
119,849
31,524
121,905
126,308
124,617
31,694
133,081
149,542
35,697
130,191
138,885
161,469
40,561
144,234
169,963
43,913
140,472
168,420
45,260
140,404
163,553
43,748
140,294
166,267
45,608
144,138
164,329
39,593
144,555
44,488
171,209
142,699
170,382
41,982
173,087
45,044
145,401
144,754
167,204
40,314
175,113
46,931
144,781
147,377
175,015
46,293
148,764
43,081
173,636
146,882
43,162
170,016
45,094
148,061
175,803
147,665
46,264
178,872
173,944
147,202
44,505
148,432
177,112
43,751
147,599
176,443
44,211
181,584
147,970
47,211
149,459
181,679
47,412
148,845
186,195
47,987
150,054
186,210
48,625
150,603
186,028
49,930
149,618
58,770
195,518

Unfilled2
orders

Total

48,266
60,004
67,375
53,183
46,609
51,717
44,213
46,624
47,798
53,417
64,518
78,249
96,846
103,711
108,377
114,341
105,008
105,247
119,349
156,561
187,043
169,546
178,128
202,024
259,169
303,593
327,416
326,547
311,887
347,273
373,529
387,196
393,515
430,426
474,154
508,849
531,131
519,199
493,184
458,245
467,369
482,605
517,647
491,058
491,925
496,820
495,810
498,327
501,356
505,993
504,097
508,020
513,951
517,055
517,647
521,786
525,356
523,579
522,214
522,689
523,928
522,171
527,033
527,931
530,498
543,295

Unfilled orders—shipments
ratio 3

NonDurable durable
goods
goods
industries industries

Total

45,250
56,241
63,880
50,352
43,807
48,369
41,650
43,582
45,170
50,346
61,315
74,459
93,002
99,735
104,393
110,161
100,412
100,225
113,034
149,204
181,519
161,664
169,857
193,323
248,281
291,321
315,202
314,707
300,798
333,114
359,651
372,097
376,699
408.688
452.150
487,098
509,124
495,802
469,654
436,442
441,677
458,520
491,911
466,577
467,657
473,156
471,989
474,417
477,275
481,600
479,844
483,542
489,189
491,399
491,911
496,311
500,321
498,041
496,671
497,214
498,111
495,963
501,027
501,741
504,167
516,888

3,016
3,763
3,495
2,831
2,802
3,348
2,563
3,042
2,628
3,071
3,203
3,790
3,844
3,976
3,984
4,180
4,596
5,022
6,315
7,357
5,524
7,882
8,271
8,701
10,888
12,272
12,214
11,840
11,089
14,159
13,878
15,099
16,816
21,738
22,004
21,751
22,007
23,397
23,530
21,803
25,692
24,085
25,736
24,481
24,268
23,664
23,821
23,910
24,081
24,393
24,253
24,478
24,762
25,656
25,736
25,475
25,035
25,538
25,543
25,475
25,817
26,208
26,006
26,190
26,331
26,407

3.42
3.63
3.87
3.35
3.02
2.94
2.71
2.58
2.64
2.74
2.99
3.25
3.74
3.66
3.79
3.71
3.61
3.32
3.26
3.80
4.09
3.69
3.24
3.24
3.57
3.89
3.85
3.87
3.84
3.53
3.60
3.67
3.59
3.63
3.64
3.96
4.15
4.08
3.51
3.15
2.93
2.84
2.96
2.94
2.92
2.96
2.91
2.88
2.91
2.94
2.91
2.92
2.97
2.94
2.96
2.98
2.93
2.90
2.86
2.89
2.84
2.80
2.85
2.78
2.82
2.89

NonDurable durable
goods
goods
industries industries
4.12
4.27
4.55
4.00
3.62
3.47
3.29
3.08
3.18
3.31
3.59
3.86
4.48
4.37
4.58
4.45
4.36
4.00
3.85
4.51
4.93
4.45
3.88
3.85
4.20
4.62
4.58
4.68
4.74
4.29
4.37
4.47
4.41
4.43
4.46
4.85
5.15
5.07
4.30
3.80
3.51
3.43
3.54
3.56
3.52
3.58
3.51
3.46
3.51
3.53
3.50
3.50
3.56
3.52
3.54
3.57
3.49
3.44
3.40
3.44
3.36
3.32
3.38
3.30
3.35
3.44

0.96
1.12
1.04
.85
.85
.92
.71
.78
.68
.72
.71
.79
.75
.73
.69
.69
.76
.76
.86
.91
.62
.82
.74
.71
.81
.82
.75
.69
.62
.69
.64
.68
.70
.83
.76
.77
.76
.79
.75
.70
.75
.67
.71
.69
.68
.66
.66
.67
.67
.68
.67
.68
.70
.71
.71
.71
.69
.71
.71
.71
.71
.71
.71
.70
.70
.70

'Annual data are averages of monthly not seasonally adjusted figures.
adjusted, end of period.
Ratio of unfilled orders at end of period to shipments for period; excludes industries with no unfilled orders. Annual figures relate to seasonally adjusted data for December.
Note.—Data beginning 1958 are not strictly comparable with earlier data.
Source: Department of Commerce, Bureau of the Census.
2
Seasonally
3




348

PRICES
TABLE B-60.—Consumer price indexes for major expenditure classes, 1954—97
[For all urban consumers? 1982-84=100]
Housing

Food and
beverages
Year or
month

All items
(CPI-U)

Total 1

Food

Total

HouseOther
hold Apparel Trans- Medical Entergoods
Fuel and furnish- and
care tainment and
Shelter other
ings upkeep tion
services
utilities
and
operation

£

43.1
269
28.2
225
226
26.1
22.7
26.8
23.0
42.9
25.8
27.8
43.7
27.2
23.1
26.2
28.0
23.6
44.5
27.7
28.1
28.9
24.0
24.3
44.6
28.9
24.5
24.8
28.6
30.2
291
24.7
25.4
45.0
29.8
29.7
45.7
29.6
25.2
26.0
29.8
30.0
25.4
46.1
30.1
299
304
26.3
46.3
30.2
25.8
26.3
30.8
306
306
26.1
266
46.9
30.9
31 1
31.4
26.6
47.3
31.0
315
26.5
27.0
47.8
31.9
31.5
32.2
26.6
324
27.8
26.7
49.0
32.3
338
33.4
34.1
30.8
27.1
51.0
33.3
35.0
28.8
42.0
27.4
53.7
34.3
34.8
36.2
35.3
32.0
30.1
43.6
56.8
35.7
36.7
38.1
37.1
34.0
32.6
28.0
45.2
36.4
59.2
38.8
40.1
39.2
35.5
29.1
46.8
37.5
41.4
61.1
40.5
40.4
38.0
37.0
31.1
48.6
39.5
39.4
38.7
41.8
32.5
49.7
62.3
39.9
43.1
42.1
44.4
41.2
40.5
34.3
64.6
41.2
48.8
48.2
51.1
44.4
69.4
49.3
45.8
40.7
45.8
55.5
55.1
56.8
50.7
45.4
53.8
60.2
48.8
63.4
72.5
50.1
59.8
49.4
75.2
56.9
62.1
53.8
51.5
55.1
61.6
67.3
57.4
54.7
70.4
78.6
60.6
65.8
54.9
59.0
65.5
81.4
62.4
61.7
65.2
72.2
72.0
60.5
58.5
74.7
84.9
72.6
79.9
79.9
70.1
68.9
64.8
79.9
70.5
82.4
86.7
75.4
81.1
81.0
86.3
90.9
83.1
86.8
909
935
904
905
864
930
953 932
936
97.4
96.9
97.8
96.5
97.3
96.9
94.9
98.0
97.0
99.4
99.6
99.5
99.5
99.1 100.2
100.2 100.2
99.3
103.9 103.2 103.2 103.6 104.0 104.8
101.9 102.1 103.7
107.6 105.6 105.6 107.7 109.8 106.5
103.8 105.0 106.4
104.1
109.6 109.1 109.0 110.9 115.8
105.2 105.9 102.3
113.6 113.5 113.5 114.2 121.3 103.0
107.1 110.6 105.4
118.3 118.2 118.2 118.5 127.1 104.4
109.4 115.4 108.7
124.0 124.9 125.1 123.0 132.8 107.8
111.2 118.6 114.1
130.7 132.1 132.4 128.5 140.0 111.6
113.3 124.1 120.5
136.2 136.8 136.3 133.6 146.3 115.3
116.0 128.7 123.8
140.3 138.7 137.9 137.5 151.2 117.8
118.0 131.9 126.5
144.5 141.6 140.9 141.2 155.7 121.3
119.3 133.7 130.4
148.2 144.9 144.3 144.8 160.5 122.8
121.0 133.4 134.3
152.4 148.9 148.4 148.5 165.7 123.7
123.0 132.0 139.1
156.9 153.7 153.3 152.8 171.0 127.5
124.7 131.7 143.0
160.5 157.7 157.3 156.8 176.3 130.8
125.4 132.9 144.3
154.4 151.4 151.0 150.6 168.6 124.7
124.1 130.0 139.9
154.9 151.3 150.8 151.2 169.4 125.0
124.3 131.2 140.4
155.7 152.1 151.6 151.7 170.1 125.2
124.6 134.8 141.2
156.3 152.7 152.3 151.8 170.1 125.4
124.8 134.9 143.1
May"!!""
156.6 152.5 152.0 152.0 170.1 126.7
124.4 133.7 144.4
June
156.7 153.1 152.6 152.7 170.7 128.4
124.5 130.8 144.0
July
157.0 153.6 153.2 153.6 171.9 129.0
124.7 128.3 143.5
Aug
157.3 154.2 153.7 154.0 172.3 129.4
124.8 128.1 142.8
Sept
157.8 155.0 154.6 153.9 172.0 129.8
125.1 131.5 143.2
Oct
158.3 155.8 155.4 154.0 172.5 128.7
125.0 133.4 143.9
Nov
158.6 156.2 155.9 153.9 172.4 128.4
124.8 133.4 144.8
Dec
158.6 156.6 156.3 154.0 172.3 129.4
125.0 130.3 145.2
1997:Jan
159.1 156.9 156.5 155.1 173.6 130.8
124.9 129.6 145.0
Feb
159.6 156.9 156.5 155.8 174.6 131.0
125.2 131.9 144.8
Mar
160.0 157.1 156.6 155.9 175.2 129.9
125.4 134.5 144.9
160.2 157.1 156.6 155.8 175.3 128.9
125.5 136.1 144.8
160.1 157.1 156.6 155.9 175.3 129.0
125.8 135.3 144.4
May"!!!!!!
June
160.3 157.1 156.6 156.9 176.0 131.9
125.7 132.4 144.0
160.5 157.5 157.0 157.5 177.0 132.1
125.6 130.2 143.7
J«iy
Aug
160.8 158.1 157.6 157.6 177.5 131.4
125.2 130.0 143.8
Sept
161.2 158.4 157.9 157.7 177.2 132.1
125.4 133.0 144.3
Oct
161.6 158.7 158.2 157.7 177.8 130.8
125.4 134.9 144.5
Nov
161.5 158.9 158.5 157.7 177.7 131.1
125.2 134.7 143.9
Dec
161.3 159.1 158.7 157.7 178.1 130.0
125.1 131.6 143.2
1
Includes alcoholic beverages, not shown separately.
2
Household fuels—gas (piped), electricity, fuel oil, etc.—and motor fuel. Motor oil, coolant, etc. also
Note.—Data beginning 1983 incorporate a rental equivalence measure for homeowners' costs.
Source: Department of Labor, Bureau of Labor Statistics.

1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969 .
1970
1971
1972
1973
1974
1975
1976
1977 .. .
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1996:Jan
Feb
Mar




: : : : : :!:

349

17.8
18.2
18.9
19.7
20.6
21.5
22.3
22.9
23.5
24.1
24.6
25.2
26.3
28.2
29.9
31.9
34.0
36