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The Midyear Economic
Report of the President
TRANSMITTED TO THE CONGRESS
July

1950

Together With a Report to the President
THE ECONOMIC SITUATION AT MIDYEAR 1950

By the

COUNCIL OF ECONOMIC ADVISERS

The Midyear Economic
Report of the President
TRANSMITTED TO THE CONGRESS
July 26, 1950

Together With a Report to the President

THE ECONOMIC SITUATION
AT MIDYEAR 1950
By the

COUNCIL OF ECONOMIC ADVISERS

UNITED STATES- GOVERNMENT PRINTING OFFICE

WASHINGTON : 1950

Additional copies of this report are for sale by the Superintendent of Documents,
U. S. Government Printing Office, Washington 25, D. G.
Price of single copy, 40 cents

LETTER OF TRANSMITTAL
THE WHITE HOUSE,
Washington, D. C., July 26,1950.
The Honorable the PRESIDENT OF THE SENATE,
The Honorable the SPEAKER OF THE HOUSE OF REPRESENTATIVES.
SIRS: I am presenting herewith a Midyear Economic Report to the
Congress. This is supplementary to the Economic Report of the President
of January 6, 1950, and is transmitted in accordance with section 3 (b)
of the Employment Act of 1946.
In preparing this report, I have had the advice and assistance of the
Council of Economic Advisers, members of the Cabinet, and heads of
independent agencies.
Together with this report, I am transmitting a report, The Economic
Situation at Midyear 1950, prepared for me by the Council of Economic
Advisers in accordance with section 4 (c) (2) of the Employment Act of
1946.
Respectfully,

CONTENTS
Page

THE MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
Expanding production and supply
The duty of Government
The responsibilities of individuals
Summary of legislative recommendations
Summary of economic developments in first half of 1950 . . . .
THE ECONOMIC SITUATION AT MIDYEAR 1950 (a report to the
President by the Council of Economic Advisers)

1
2
9
13
14
15
19

To the Congress of the United States:
Recent international events make it more important now than ever before
that we maintain and expand our strength on the home front. For the
sinews of all our strength, everywhere in the world, are found in what we
achieve here at home. We must make full use of our great productive
resources, our ever-improving industrial and scientific techniques, and our
growing labor force. We must redirect a part of these resources to the
task of resisting aggression. And in doing this, we must not let inflation
undermine our efforts.
The world responsibilities of the United States have become heavy.
Clearly, they will become still heavier before the united efforts of the free
nations of the world produce a lasting peace. The American people know
how much is at stake. They are prepared to shoulder their tasks without
flinching.
The facts should warn us equally against easy indifference and sensational
alarm. This is not the time for business as usual. We are not now living
under peaceful world conditions. But neither are we engaged in a general
or widespread war. We are in a situation between these opposite extremes,
and economic policy should be guided accordingly. It is urgent to make
some shifts in economic policy now. We must also speed up our preparation now to take more drastic action later if it should become necessary
to do so.
Economic policy, to the best of our ability and foresight, should proceed in line with our appraisal of the developing situation. While it should
not lag behind, it should not run blindly ahead.
The international policy of the United States is directed toward averting
a full-scale war. We are following the only course open to a free and
strong nation in the face of the challenge confronting us. We are acting
together with other free peoples, through the United Nations, to put
down the aggression in Korea, and to build the combined strength needed
to deter aggression elsewhere.
The response of the whole Nation to developments in the Far East has
already provided an overwhelming demonstration of unity in the conduct
of our international policy. This has lifted the spirits of our friends all
over the world. In these difficult times, there is the same need for unity
on the economic front here at home. If our economy should fail to realize
its full potential, our international strength and our domestic strength
would both be affected. We cannot afford division on the home front,
when some of our young men are fighting overseas. We cannot afford an

economy which performs below its best, when nothing but the best will
assure the triumph of freedom and of right.
This unity in our economic affairs is attainable. We have gathered a
wealth of practical experience about how our economy works, and about
what promotes its strength and progress. Five years after the greatest
of all wars, and even before the events of last month, we had reached the
highest levels of peacetime production and employment ever known. We
had passed through a period of inflation and conquered a postwar recession without permitting it to deepen into a depression. Based upon this
record, those who work in private enterprise and those who work in Government—of both political parties—have reached agreement upon many
national economic policies. This is far more important than some of the
surface disagreements.
We must expand the area of agreement in the trying times ahead. And
trying times they will be. We must enlarge our military outlays and related
programs, when we had hoped to be able to reduce them further. We must
realize that the engagement in Korea will be costly and may not be short.
We must prepare against the possibility that other crises may arise elsewhere. We must continue to recognize that both economic and military
aid will be required for the further strengthening of the free peoples of
the world.
All of this means new problems for our economy—soluble problems, but
not easy ones.
Our economy has the human and material resources to do the job ahead—
if we achieve the unity which will enable us to do our best.
Strong evidence of the power of the United States economy is contained
in the record of its performance during the first half of this year. That
record is summarized at the end of this Economic Report, and is detailed
in the accompanying report of the Council of Economic Advisers, "The
Economic Situation at Midyear 1950."
Viewed in its entirety, the economy at midyear 1950 had made a remarkable recovery from the moderate recession of 1949. New records of peacetime production, employment, and real incomes were reached. Reasonable
balance of prices had been achieved. The outlook in mid-June was for
stability and new growth on a sound basis. Toward the end of June, however, the Korean outbreak brought rapid changes. The necessity for large
new public outlays began to have both economic and psychological impacts.
Many important prices commenced to rise rapidly. New private and public
policies are needed quickly to deal with these new developments.

Expanding Production and Supply
The productive strength of the American economy is basic to our domestic well-being and our international security. Under current conditions,
we face a twofold task: first, to get as much total production as we can;

CHART 1

PRODUCTION AND EMPLOYMENT
GROSS NATIONAL PRODUCT (1949 PRICES)
BILLIONS OF DOLLARS
0
50

200

1929
1939
1946
1948
1949

INDUSTRIAL PRODUCTION
PERCENT OF 1935-39 AVERAGE
0
50

200

100

150

' |

1929
1939
1946

ii
i
•, *

1948
1949
NOW^

i
j

i
i

EMPLOYMENT (CIVILIAN)
MILLIONS OF PERSONS
0
20

1929
1939
1946
1948
1949

-tS SECOND QUARTER, I95O, ANNUAL RATE, SEASONALLY ADJUSTED.
& JUNE I95O, SEASONALLY ADJUSTED.
£/

JUNE 1950.

SOURCES: COUNCIL OF ECONOMIC ADVISERS, BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM, AND DEPARTMENT OF COMMERCE.

and second., to emphasize the right kind of production and the best utilization of the product.
The more successful we are in this twofold task, the less difficult it
will be to meet promptly the increased military demand for goods and
services, both for ourselves and for the free nations associated with us—
without impairing the civilian economy or weakening the industrial potential upon which our military potential depends.
Increased production of the right kind of goods will lessen inflationary
strains. If we allow inflation to develop by failing to take adequate
measures, it will cost more to meet our military requirements, and it
will be more difficult to maintain the smooth functioning of the economic
machine and the high civilian efficiency and morale which are foundations
of our military strength.
In the emergency created by World War II, we were forced to enlarge
our military strength until it absorbed almost one-half of the output of the
economy. This built up such extensive inflationary pressures as to require all-inclusive controls. In the more limited current situation, we
should be able with more limited measures to meet our military requirements and at the same time to avoid inflation. This does not mean that
we can meet our enlarged international obligations without some sacrifice
of domestic consumption. Some sacrifice is called for, and I am confident
that the American people are ready to do their part. But in determining
sound policy at this time, we should measure the requirements of the
present world situation against the recent growth and productive power of
our economy, and its capacity for further growth.
Our total output of goods and services, measured in constant dollars
(1949 price level), was about 151 billion in 1929. By 1939, it was about
160 billion. In 1946, the first full year after the war, it was about 248
billion. Two years later, in 1948, it was about 256 billion. Despite the
moderate recession in 1949, our total output is now running at an annual
rate of about 267 billion dollars. This rate is about 13 billion dollars higher
than a year ago, and about 8 billion higher than in the peak quarter of
1948. It is more than 100 billion dollars higher than in 1939. All of these
figures are stated in terms of the 1949 price level, and therefore reflect real
changes.
The index of industrial production was 110 in 1929, and about the same
in 1939. In 1946, the first full year after the war, the index was 170.
At the middle of this year, it had risen to 199, higher than ever before
in peacetime and 23 points higher than the average for last year.
Civilian employment averaged 47 */% million in 1929, and 45J/2 million
in 1939. It averaged 59/2 million in 1948, declined to 58/2 million in 1949,
and mounted to almost 61/2 million in June 1950.
An even more vivid illustration of the expanding strength of our economy
is afforded by these specific items:

CHART 2

GROWTH OF PRODUCTION
SELECTED ITEMS AND PERIODS, 1929-50
ALUMINUM

STEEL

THOUSANDS OF SHORT TONS

MILLIONS OF SHORT TONS

300

600

900

100

200
I

.i
ELECTRIC POWER

BITUMINOUS COAL

BILLIONS OF KILOWATT HOURS

MILLIONS OF SHORT TONS

200
1

400
1

600
1

i ' ... . - .._• .
. 1
:
/
;.
.
i
1
t
" > . . : . < ..." . . '. .1
. : ./.:;. ,.,,;. A i
\
\ . .: * r ;-'^ ,.: : \
I '.:.'.-. * , \\

1929
1939
1944
1946
1948
1949

t / . . . ' .

' . " ' : .

. . . .

PETROLEUM

FOOD

BILLIONS

PERCENT OF 1935-39 AVERAGE

OF BARRELS

' . . '1

100
1

1929
1939
1944
1946
1948
1949

JUNE I960, ANNUAL RATE, FOR ALL

ITEMS EXCEPT FOOD, WHICH SHOWS ESTIMATE FOR 1950.

NOTE: DATA INCLUDE THE FOLLOWING ITEMS: ALUMINUM-PRIMARY PRODUCTION ; STEEL-INGOTS AND
STEEL FOR CASTING; ELECTRIC POWER-UTILITY PRODUCTION; PETROLEUM-CRUDE PRODUCTION.
THE WARTIME PEAK WAS 1944 FOR ALL EXCEPT ALUMINUM (1943, 920 THOUSAND SHORT TONS).
SOURCES: DEPARTMENT OF INTERIOR, AMERICAN IRON AND STEEL INSTITUTE,
FEDERAL POWER COMMISSION AND DEPARTMENT OF AGRICULTURE.

Steel production in 1929 was 63 million tons, and in 1939 it was 53
million. During the war year 1944, it rose to a peak of 90 million. The
annual rate at the end of June 1950 was more than 100 million, an all-time
record.
Aluminum production was 114 thousand tons in 1929, and 164 thousand
in 1939. The current annual rate is 743 thousand, which is about 10
percent higher than a year ago or two years ago, and almost as high as the
record output of 776 thousand in the war year 1944.
Electric power output rose from 92 billion kilowatt hours in 1929 to
128 billion in 1939, and to 228 billion in the war year 1944. It has expanded
each year since the war, and now stands at an annual rate of 317 billion.
We produced about a billion barrels of crude petroleum in 1929, and more
than 1J4 billion in 1939. This rose to more than 1.6 billion in the war
year 1944. The figure now is well above that, at an annual rate of about
1.9 billion.
The index of food production, which was 97 in 1929 and 106 in 1939,
rose to 140 during the war, when we were feeding millions all over the
world. It now stands at about 139.
These indications of our growing resources are not adjusted for increases
in population. In many cases, of course, our total output is a more important
measure of our economic strength than output per capita. But even allowing for population increases, output per capita and standards of living
are very much higher than before the war. For example, civilian food
consumption per capita in 1950 is estimated at about 11 percent above
the 1935-39 average; and industrial production is about 65 percent greater
on a per capita basis.
Still another measure of our growing productive power is output per
man-hour. Using 1929 as the base year, it is estimated that the index of
total output per man-hour for the American economy as a whole was
about 125 in 1939. During and since the war, there have been great gains
in productivity, and for the first half of 1950 the best preliminary estimates
indicate that the index has risen above 165.
Agriculture as well as industry has participated in these productivity
gains. Farm output per worker has been about 43 percent higher during
the last four years than in the four years immediately prior to World War II.
These record levels of production and productivity make us better able
to perform the new and harder tasks ahead. It is sometimes said that,
since there was a "slack" in the economy when World War II started
which does not exist now, we could then undertake a greater expansion
more easily than we can now carry forward a smaller expansion. It is
true that we are riow utilizing to the limit some plant capacities and some
other facilities for production and distribution. Consequently, the increasing military demand will necessitate measures to restrict less essential uses
in order to maintain military supply; and measures in some cases are needed
to increase the total supply of vital materials. It is also true that any given
amount of increased military outlays and procurement will produce in-

CHART 3

PRODUCTIVITY
OUTPUT PER MAN-HOUR

PERCENT OF 1929 AVERAGE

PERCENT OF

1929 AVERAGE

200

100

1939

1929

1944

I960,
FIRST

J/ INDEX

OF GROSS

NATIONAL

PRODUCT

(CONSTANT PRICES)

HALF

PER MAN-HOUR.

NOTE:- COMPARISONS BETWEEN PEACETIME AND WARTIME PERIODS SUBJECT TO
CONSIDERABLE ERROR DUE TO CHANGES IN COMPOSITION OF OUTPUT.
SOURCE:

COUNCIL OF ECONOMIC

ADVISERS

flationary pressures much more rapidly than if existing capacities and
facilities were not already being so fully utilized. But clearly, our economy
is far more able to satisfy the additional requirements now to be imposed
upon it than if it had not already risen to such high levels of fundamental
productive capacity.
For example, an economy is stronger for whatever tasks lie ahead, when
it is actually producing more than 100 million tons of steel a year, although
this involves full utilization of its capacity, than it would be if it were producing 85 million tons of steel but had unused capacity of 5 million tons. It
is easier to divert part of the steel which is now being produced to new
purposes, than it would be to build the plants required to lift capacity from
90 million tons to 100 million. Likewise, an economy which is employing 61J/2 million civilian workers, with less than 3J/2 million unemployed, is stronger for whatever tasks may lie ahead than if it were employing only 58 million workers and had about 7 million unemployed. It is
easier to divert the production of skilled workers to new purposes, or even to
put them on new jobs, than it would be to train millions of workers whose
skills had been lost through years of enforced idleness. These examples apply
to other sectors of the economy as well.
Furthermore, while the business recovery has been pronounced since a
year ago, there is still some slack in the economy as a whole. We have not
yet reached maximum employment and production. Even with exist-

ing capacities,, it is estimated that total industrial output could now be
increased by some 5 percent or possibly more, and this would lift the index
of industrial production from 199 to nearly 210. Unemployment, which
now stands at less than 3J/2 million, could be reduced by 1 to 2 million—that
is, to a level of about 2J/2 to IJ/i million—without serious strain upon the
labor force. There were times during the last war when civilian unemployment was less than 1 million. There are also many part-time workers
available for full-time jobs. Even without an unusual increase in the labor
force or in hours of work, the present material and human resources of our
economy are sufficient to lift total production by the end of this year to an
annual rate about 8 to 10 billion dollars above the current rate. This
would result in an annual output rate, at the end of this year, of well
over 275 billion dollars (measured in current prices).
Most important of all, even when we shall have taken up the present slack
in the economy, we shall not have reached the longer-range limits of our
total productive potential. National output per man-hour has in the long
run increased about 2 to 2/2 percent a year, and total output, which reflects also population growth, has increased over 3 percent a year. With
the enormous improvements in plant and technology already accomplished,
this rate of increase should be equaled or even exceeded in the years immediately ahead. This means that, with maximum employment and
production achieved and then maintained in a growing economy, it will be
well within our reach to increase our total annual output in real terms by
9 to 10 billion dollars in 1951 and correspondingly in succeeding years.
This appraisal of our general productive strength is significant, but it does
not cover the whole situation with which we now must deal. The specific
requirements of our enlarged military effort cannot be spread over the
whole economy. Instead, they will fall most heavily upon certain sectors,
and our expansion of production can only partly be concentrated within
these specific sectors. In many of these sectors, moreover, shortages and price
increases were apparent even before the developments in Korea. These
shortages have become more critical during the past month. They must
be dealt with promptly, not only to support the military effort but also
because if they are allowed to get out of hand they will increase the dangers
of general inflation.
The steel industry has been operating above rated capacity almost continuously since April, and an increase in the military use of steel under the
program which I have recommended will further increase the strain on
supplies. Copper has been in such short supply that demand has exceeded
output, and domestic stocks have been dwindling. Aluminum production
is now going forward at 100 percent of capacity, and is booked solid for six
months ahead. And the stepped-up military and stockpiling program
will add to demand.
These shortages, and some others in strategic areas, have been reflected
in the price structure. During the first half of this year, before the Korean
situation, wholesale price increases were generally moderate. But there

were sharp increases in the prices of lumber, copper, zinc, scrap steel, and
rubber. For example, since January, the price of copper has risen about 22
percent and the price of zinc about 50 percent. During the past four weeks
rubber prices have risen about 45 percent, tin about 17 percent, print cloth
about 22 percent, and wool tops about 10 percent. The daily spot index
of 28 commodities has risen from a level of 264 on June 23, prior to the
Korean outbreak, to 290.7 on July 20, a rise of 10 percent in four weeks.
In the interests of the military effort, action is needed now to direct the
use of some commodities essential to the national defense, and in some
cases to increase the output. This is necessary also to reduce inflationary
pressures.
Thus we are faced with an over-all economic situation which is essentially
strong although threatened by considerable general inflationary pressure,
coupled with intense and rising pressures in limited areas.

The Duty of Government
A primary duty of Government is "to provide for the common defense."
In fulfilling this responsibility, the test is not how far we can go without
placing strain upon the domestic economy or without creating inflationary
pressures. We must go as far as changing circumstances may require. In
the final analysis, there are no limits except our total strength to guide us
in our determination to resist aggression and thus to strive for peace.
But the question remains as to how much of our total economic strength
must be shifted from peacetime production to defense purposes in the
current situation. On the basis of searching study of the best information
now available, I have recommended to the Congress the substantially
increased programs which should now be undertaken to resist aggression
and further to build up our preparedness. I have also indicated that other
programs will be needed.
The realities of the current situation now require certain changes in
national economic policy. These changes will take us in the right direction at once. And if the situation should become even more serious later on,
the measures which I now propose for the current situation are also the
measures which would make us more ready for further steps.
Appropriate agencies of Government have for several years been preparing the detailed plans for these further steps, if and when needed. If it
should become necessary, I shall without hesitation ask the Congress for the
grant of the powers to implement these further plans, whether for complete
economic mobilization or for further intermediate action depending upon
the need.
But the foregoing examination of our expanding material and human resources indicates that the substantial increases in our military forces and
in supporting activities now under way do not call for a complete set of
economic controls now—if business, labor, and consumers practice modera-

tion, and if adequate steps are taken at once to adjust private and public
policies and programs to our supply needs and to the curbing of inflation.
First of all, for the immediate situation, we should rely in major degree
upon fiscal and credit measures. These general measures can be helpful not
only in restraining inflationary pressures, but also in reducing the civilian
demand for some specific products, such as automobiles and housing, thus
making available for necessary military use a larger proportion of an already
short supply of some critical materials. The more prompt and vigorous
we are with these general measures, the less need there will be for all of
the comprehensive direct controls which involve the consideration of thousands of individual situations and thus involve infinitely greater administrative difficulties and much greater interference with individual choice and
initiative.
Since I made tax recommendations to the Congress in January, the situation has changed drastically. There is now no need to reduce any taxes to
stimulate business recovery. That recovery even before the development in
Korea was more vigorous than most expected, and increased military spending will now accelerate this trend. The need to reduce, and as rapidly
as possible to remove, the deficit is also greater now, because of the reappearance of strong inflationary forces. The amount of revenues required to
accomplish this will also be greater, because the military situation and the
general world outlook make inevitable an overall increase in public outlays
of many billions of dollars in this fiscal year. Substantial tax increases now
are called for by the requirements of sound budget policy and by the threat
of inflation. The general business situation makes this feasible.
I am therefore recommending, for immediate action, an interim revenue
measure to yield about 5 billion dollars of new revenue on a full year basis.
The tax bill now pending should be revised to produce these results. All
excise tax cuts and other revenue-losing provisions should be eliminated.
The loophole closing, the dividend withholding, and the life insurance company provisions should be retained. The revised corporate income tax rate
structure contained in the pending bill should be adjusted to provide a rate
of 25 percent on the first $25,000 of income and 45 percent on the balance,
beginning with 1950 incomes. Individual income tax rates should be
increased to the "tentative" levels adopted in 1945, by removing the percentage reductions from those levels made in 1945 and 1948. This should
be effective beginning with one-quarter of 1950 incomes, and would be
accompanied by an increase in the withholding rate from 15 to 18 percent,
beginning with the last quarter of 1950.
The immediate enactment of this tax program is vital, but this interim
measure alone will not be enough. It will be necessary, when the necessary
studies can be completed and when the extent of our new obligations can
be more clearly determined, to raise still additional revenues to avoid a
deficit during times when economic policy and budgetary policy call for a
balanced budget or a surplus.

The sharp increase in defense outlays makes it imperative to reexamine
all Federal programs which might compete for materials and other resources
required for national defense. In addition to the restrictive policy already
put in force for housing credit, I have directed other agencies to revise
their programs, giving particular attention to public works projects, loan
programs, and procurement and inventories of supplies and equipment.
The primary purpose of these actions is to reduce the demand for scarce
resources, and they will also help to reduce Federal expenditures. Some
reductions in expenditures can be expected in agricultural price supports
with the demand for foodstuffs high, and in veterans' readjustment benefits as employment opportunities increase. We should guard, however,
against indiscriminate Budget slashes. Indeed, in addition to direct military programs, a number of other Government programs, such as stockpiling
and power development, will have to be expanded in response to the international situation. We should act selectively, curtailing those programs
which compete with defense needs, and orienting other operations to the
support of the defense program.
In addition to action in the fields of taxation and expenditures, other
restraining measures of a general character are needed to deal with the
extreme tightness of supply and the upward movement of prices in some
important areas. These developments have occurred even with the economy somewhat below maximum production and employment, and even
before the events of last month. Such shortages and price movements
could very quickly be aggravated by increases in military procurement,
by an intensification of consumer buying or business speculation supported
by excessive credit, or by a combination of these factors.
Even under less compelling circumstances, I have urged that the Government should have certain credit-control authority to act promptly if necessary. I have on several occasions recommended that the Government's
authority to restrain consumer credit, which terminated in the middle of
1949, should be restored. It is highly desirable that this be done now,
because many of the products financed by consumer credit are heavy users
of materials critically needed for defense production.
The construction industry, which is now operating at very high levels,
is also a major user of critical materials. With respect to types of housing
credit extended directly or guaranteed or insured by Federal agencies, I
have already directed that limitations be imposed wherever permitted by
existing law. Further authority to restrict real estate credit, particularly
privately financed loans, should be granted. Authority is also needed to
restrain commodity speculation.
These general restraining measures will reduce total demand, and thus
release materials for military uses. But they cannot operate with sufficient
speed or selectivity to serve the military need for those commodities where
the shortage of supply is already apparent and will very quickly be intensified. These shortage situations, if neglected, could intensify the pressure
894762—50

upon prices, militate against an equitable distribution of available supply,
and thus force us to invoke more sweeping controls which might be avoided
if we take more moderate action now. I am therefore recommending that
the Congress immediately enact legislation to authorize the following:
priorities and allocation of materials and facilities needed for the national
defense and for essential civilian use; limitation of nonessential uses;
restraint of inventory hoarding; and requisitioning of supplies.
Such measures to assure the necessary distribution of available supply
are essential. Our main effort, however, must be to concentrate upon
production and more production. The generally strong condition of our
economy affords assurance that production, in general, will move steadily
forward. But shortages of some critical commodities are now so great
that, even with allocation measures, we can have no assurance of enough
supply for military security and essential civilian use. Moreover, if future
events should compel further rapid expansion of our military efforts, it
would then be too late to commence the lengthy process of increasing basic
capacity and supply. Unlike some measures which can be delayed until the
immediate need is greater, this problem must be tackled long before the need
becomes critical. I therefore recommend to the Congress, for immediate
action, a program of guarantees and loans for capital expansion, development of technological processes, and production of essential materials.
We cannot afford longer to risk the possibility of future desperate shortages
of some of the most essential requirements for our national security.
Along with these special measures, we must continue to concentrate on
the over-all task of maintaining our general economy in maximum health
and encouraging its productive impulses. It is also imperative that we
continue to pursue the international economic programs which are directed
toward a more prosperous and more peaceful world. Many phases of
national economic policy are involved in these tasks. In previous Economic
Reports, I have set forth in detail how we may build upon existing programs
to maintain the stability and enlarge the strength of the American economy
as part of a strong world economy. Some of these programs now need
to be reshaped or retarded, in view of the greater urgency of military undertakings. But the continuing importance of many of these programs should
not be lost through concentration solely upon the military situation.

The Responsibilities of Individuals
The changes in national economic policy, which I am recommending
at this time, are based upon the proposition that we must look also to individual and voluntary adjustments within our free economy to see us safely
through the type of economic situation which is now unfolding. If conditions do not change very materially, we should continue to place large
reliance upon these voluntary adjustments.
Our growing productive strength, as I have pointed out in earlier Economic Reports, depends largely upon business policies. It depends upon

judicious enlargement of capacity and investment, to make full use of a
growing labor force and an expanding technology. It depends upon
pointing production along those lines which are most needed under changing circumstances. It depends upon price and income practices which
maintain a balance between full output and buying power, so as to avoid
either inflation or deflation.
The course of business policies during the five years since World War II
has, in the main, been an encouraging example of sensible adjustment to
new problems as they arise. That is one very important reason why we
now stand at unprecedented peaks of production, employment, and general prosperity. Further careful adjustment of capacity and investment to
current and foreseeable conditions, combined with restrained pricing and
other market adjustments, can give us the volume and kinds of production
which the Nation needs. This is more essential now than ever before.
The expansion of certain types of production, which is now doubly urgent
because of international tensions, should not be held back by fears that
capacity would become excessive for peacetime use if international tensions should subside. The experience of the last five years has indicated
that our domestic markets and the consumption requirements of our people
are plentiful and growing. The facilities of most of our great industries
are interchangeably useful for an expanding peacetime economy or for
an expanding military force. Our obligation to resist aggression is no
clearer than our obligation to maintain full prosperity at home when peace
is made secure. With a growing population and working force, this full
prosperity will absorb an ever-increasing output. The intelligent course
for business now, in its own interests as well as those of the country,
is to remember these long-range prospects even as it adjusts to shorter range
developments.
Labor also has great responsibilities, rising in proportion to its increasing
strength and influence upon the course of the whole economy. Labor
should continue and enlarge its contribution toward increasing productivity,
and toward even more effective use of manpower. Wage demands of a
character which might lead to another inflationary spiral should be avoided.
Above all, labor should join with management in the further consolidation
of industrial peace. Work stoppages in vital industries are something we
simply cannot afford under current conditions.
Every person in the United States is a consumer. The buying practices
of the general public will be an important influence upon the economy under
conditions which are now developing. The best rule to follow is to buy
normally. The current outlook is that serious shortages of consumer goods
will not develop, unless they are created artificially by speculative or panicky
acquisition of goods far in excess of actual need. This rule applies to
business buying as well. Those of us who are not now called upon to
make great sacrifices should certainly, in justice to those in the armed
services, refrain from hoarding or avarice.

We cannot now take action against all the contingencies of the future.
But if we deal promptly and realistically with the problems of the present,
the foundations will be firmly established for meeting new problems as they
arise.
Working cooperatively together, through their free enterprise system and
their Government, the American people have won a great war and established a unique prosperity.
Our task now is to help to restore and maintain the peace of the world,
and to protect and advance our economic strength. These two purposes
are inseparable.
We have achieved unity in our policies to resist foreign aggression. We
must seek and achieve the same unity in economic policies, which will enable
us to make that resistance successful as rapidly as possible. All else must
yield to this controlling consideration in the minds and hearts of the
freedom-loving people of the United States.

Summary of Legislative Recommendations
1. On account of the cost of expanding our military strength, and to help
contain inflationary pressures, an interim revenue measure should be enacted
immediately to yield substantial additional revenue in the current fiscal
year. The tax bill now pending should be revised as follows:
(a) All excise tax reductions and other revenue-losing provisions
should be eliminated, but the loophole closing, the dividend withholding, and the life insurance company provisions should be retained;
(b) The revised corporate income tax rate structure contained in
the pending bill should be adjusted to provide an increase in the normal
tax rate from 21 to 25 percent; taking into account the 20 percent
surtax, this would increase the tax rate on corporate income in excess
of $25,000 to 45 percent, beginning with the year 1950;
(c) Individual income tax rates should be increased to the "tentative" levels adopted in 1945, by removing the reductions from those
levels made in 1945 and 1948. This increase should be effective
beginning with one-quarter of 1950 incomes, and would require an
increase in the withholding rate from 15 to 18 percent, beginning with
the last quarter of 1950.
2. As a safeguard against inflationary buying, and to reduce the demand
for scarce materials, authority should be granted to regulate consumer
credit, to restrain mortgage credit, particularly for housing, and to limit
speculation in commodities.
3. In view of the mounting shortage of some commodities required for
the national defense, authority should be granted for priorities and allocations of these commodities, for the limitation of nonessential uses, for
the prevention of inventory hoarding, and for the requisitioning of supplies.
4. To expedite the production of certain commodities needed for the

military and for adequate stockpiling, and to guard against a dangerous
shortage of these materials in the event of any emergency calling for further expansion of our military efforts, a program should be adopted
which provides loans and incentives for the expansion of capacity, for technological developments, and for the production of essential supplies.

Summary of Economic Developments in First
Half of 1950
The first half of 1950 brought recovery from the mild recession of 1949,
and a rapid approach to new peaks of postwar prosperity. But at midyear,
it became clear that further substantial increases in output, particularly in
some lines, will be needed to meet the enlarged needs resulting from the
international situation.
Civilian employment in June of this year was 61.5 million, about 1.9
million higher than a year earlier, and slightly higher than in any previous
June. Nonagricultural employment was 2.5 million higher than in June
1949, while farm employment decreased. From May to June, employment
increased by about 1% million.
Unemployment, after reaching a postwar peak of 4.7 million in February,
was reduced to 3.4 million, or 5.2 percent of the civilian labor force, in
June. A year earlier, it was 6.0 percent of the labor force; in February of
this year, 7.6 percent. Unemployment at much higher rates persists in
some localities, but is being reduced.
Total production of all goods and services rose to an all-time high annual
rate of about 267 billion dollars in the second quarter of this year, compared with about 254 billion in the lowest quarter of the 1949 recession,
and with the peak rate of 259 billion in the fourth quarter of 1948. These
comparisons are in constant dollars (1949 prices) and are also adjusted for
seasonal variation. The industrial production index of 199 in June 1950
also exceeded the previous postwar peak reached in late 1948, and was 18
percent higher than in June 1949. Manufacture of steel and automobiles,
and construction activity, are now at new highs. The 1950 agricultural
output, however, is expected to be slightly lower than in 1949.
Productivity per man-hour in manufacturing, according to some recent
estimates, appears now to be rising at an annual rate of about 3 percent.
Output per farm worker during 1945-49 was about 43 percent higher
than during 1935-39.
Prices moved moderately upward during the first half of 1950, with
sharp rises in a few commodities in short supply. Wholesale prices rose
4.0 percent, and in June were 1.8 percent above the June 1949 level, but
still 7.4 percent below the postwar peak. The largest advances were in
wholesale farm and food prices. The rise in industrial prices was less
pronounced, except for a steady advance in building materials and sharp
rises in some metals and in rubber. Consumer prices rose 1.6 percent dur-

ing the half-year, with very sharp increases in the last two months. In
June, they were slightly higher than a year earlier and 2.5 percent below
their postwar peak.
Since the events in Korea, there has been a marked rise in prices covering
a wide range of commodities. In major part, this has been due to accelerated business and consumer buying, to speculation created by exaggerated
fears of shortages, and to the ability to raise prices in such an atmosphere.
In the farm field, seasonal declines in the supply of livestock, and the substantial reduction in cotton acreage, have been strong contributing factors.
The Bureau of Labor Statistics spot index for 28 commodities has risen 10
percent in the four weeks since the Korean outbreak, while the weekly
index of all wholesale prices has risen 3.7 percent.
Wage and salary payments rose during the first half of 1950, to a seasonally adjusted annual rate of 139.8 billion dollars in the second quarter oi
the year, about 4.6 billion dollars higher than a year earlier, and about 4.3
billion higher than in the first quarter of 1950. Rising employment and
higher wage rates both influenced this trend. Manufacturing wage rates
reached a new high of $1.45 an hour in June. Private pension plans continued their rapid spread.
Work stoppages caused the loss of twice as much work time in the first
five months of 1950 as in the same period of 1949. Conclusion of agreements in the bituminous coal industry, and with the Chrysler Corporation,
ended the two principal work stoppages of the half-year. In May, the outlook for industrial peace was brightened by the highly significant five-year
contract between the General Motors Corporation and the United Automobile Workers.
Profits have risen since 1949. In the second quarter of 1950, corporate
profits before taxes were running at a seasonally adjusted annual rate of
31.0 billion dollars, 17 percent higher than a year earlier. The level of
profits after taxes permitted substantial increase of liquid assets, despite
higher dividends and a higher level of plant and equipment financing.
Farm income (realized net income of farm operators), at a seasonally
adjusted annual rate of 11.6 billion dollars in the second quarter of 1950,
was 15 percent below that of a year earlier.
Credit expansion, associated with the recovery of business since the latter
part of 1949, proceeded rapidly during the first half of this year, closely
paralleling the expansionary pattern of 1948. This expansion has reflected
very active demand for consumer durables and housing, with the stimulus
of easier terms, and also increased financing of purchases of securities.
Consumer instalment credit has been rising constantly, and at the end of
June reached a total of 12.0 billion dollars, 2.9 billion dollars higher than a
year earlier.
Personal income in the second quarter of 1950 was at a seasonally adjusted annual rate of 213.7 billion dollars, an increase of about 4.0 percent
from the fourth quarter of 1949. The distribution of veterans' insurance

dividends made total personal income slightly higher in the first quarter
of 1950 than in the second. But all the major components of earned income,
except farm income and rental income, were higher in the second quarter.
Personal consumption expenditures of 184.5 billion dollars in the second
quarter of 1950 were 2.2 percent higher than in the fourth quarter of 1949,
adjusted for seasonal variation. The proportion of personal consumption
expenditures devoted to durable goods in the first half of 1950 was the
highest on record.
Personal net saving rose from a seasonally adjusted annual rate of 6.2
billion dollars in the fourth quarter of 1949 to 15.3 billion in the first
quarter of 1950, and declined to 10.1 billion in the second quarter. These
unusual changes reflected the disposition of veterans' insurance dividends,
received mainly in the first quarter. Personal debt has been rising faster
than personal income since 1947.
Private domestic investment in the second quarter of 1950 was proceeding at a seasonally adjusted annual rate of 44 billion dollars, less than
3 billion below the all-time peak of the fourth quarter of 1948, and nearly
13 billion above the recession low reached in the fourth quarter of 1949.
Outlays for construction and equipment have been rising since the summer
of 1949, and by the second quarter of 1950 were well in excess of those
of any previous quarter in history. Inventory accumulation was resumed
early in the year, and during the second quarter was proceeding at a
substantial rate.
Construction activity rose to a seasonally adjusted annual rate of 26.4
billion dollars in June 1950, a peacetime high. Rising costs of materials
and labor evidenced some strain on the capacity of the building industry.
The increase of 20 percent in private construction, from the first half of
1949 to the first half of 1950, was due to the unprecedented volume of
residential building. Most other types of private construction were less
active than last year, though contracts for commercial and industrial building have been increasing in recent months. Public construction, in the
first half of 1950, was substantially above the level of a year earlier.
Corporate financial requirements during the first half of 1950 were
much higher than a year earlier, primarily on account of the resumption
of inventory expansion. Higher profits, however, have enabled corporations
as a group during the first half of 1950 to maintain a highly liquid position.
The export surplus (the excess of our exports of goods and services over
our imports) in the first half of 1950 was running at a rate of 4 to 5 billion
dollars a year less than in the first half of 1949. Imports, after some decline,
recovered and reached a higher level. Exports were considerably lower than
a year before, and now are almost down to the prewar relationship to gross
national product. Nearly all major export commodities have shown a decline, with cotton an important exception. Factors underlying the decline of
exports and of the export surplus have been the increased foreign restrictions
against use of dollars in payment for imports, the devaluation of foreign cur-

rencies, and perhaps most basically the increased foreign production which
enabled those countries to get along with less imports from the United
States.
Government fiscal transactions in the first half of 1950 were considerably
influenced by the veterans' insurance dividend distribution. At seasonally
adjusted annual rates. Federal cash receipts in the first half of 1950 were
40.4 billion dollars and cash payments 43.3 billion, resulting in a cash deficit
at an annual rate of nearly 3 billion dollars. State and local fiscal operations
during the half year showed a continued deficit at an annual rate of about
2 billion dollars.
Excluding the veterans' dividend distribution. Federal cash payments during the first half of 1950 were about 2% billion dollars below receipts
on a seasonally adjusted basis, and were about 4.5 billion below the
level of payments in the first half of 1949. This drop reflected chiefly lags
in expenditures for international and defense programs, and somewhat
reduced outlays for farm price supports. These developments in the consolidated cash statement of Federal fiscal transactions have been paralleled
by developments in the conventional budget.
HARRY S. TRUMAN.
JULY 26,1950.

The Economic Situation
at Midyear 1950

A Report to the President
By the

COUNCIL OF ECONOMIC ADVISERS

LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS,
Washington, D. C., July 24,1950.
The PRESIDENT:
SIR : The Council of Economic Advisers herewith submits a report,, The
Economic Situation at Midyear 1950, in accordance with section 4 (c) (2)
of the Employment Act of 1946.
Respectfully,

jZe^x^f^
Chairman.

Contents
Page

I. FIVE YEARS IN RETROSPECT
Five phases of postwar economic development
The transitional phase: from the war's end to early
1946
The expansion phase: from early 1946 to late 1947...
The climax of inflation: from late 1947 to beginning of
1949
The recessionary phase: the first seven months of 1949.
The process of recovery: since mid-1949
What we have learned from the record
II. THE PROBLEMS AHEAD
The economic impact of international developments
The tasks of private adjustment
The range of public policy
III. ECONOMIC DEVELOPMENTS IN THE FIRST HALF OF 1950
The course of employment and production
Employment
Unemployment
Production
Relation between production and employment
Prices, wages, and profits
Prices
Wages and related matters
Profits
Money and credit
The flow of goods and purchasing power
Personal income, consumption expenditures, and
saving
Business investment and
finance
International transactions
Government transactions
Summary: The Nation's Economic Budget

25
27
27
27
29
31
33
37
40
40
43
45
50
50
50
52
53
55
56
56
60
63
66
68

68
76
82
88
95

APPENDIXES
A. THE NATION'S ECONOMIC BUDGET
B. STATISTICAL TABLES RELATING TO EMPLOYMENT, PRODUCTION,
AND PURCHASING POWER

101
113

HE recent international developments require us to take stock of our
economic position. This we propose to do in three parts: (1) A
general interpretation of the economic events of the past five years and
of their current significance; (2) an analysis of problems ahead and of
desirable policies; and (3) a detailed description of economic trends during
the first half of 1950.

I. Five Years in Retrospect
The need for an interpretive review of the past five years is enhanced,
rather than reduced, by the foreign situation. The variety of problems
which the economy has faced since VJ-day has been so broad, and the
adjustments which have been made to these problems have been so significant, that they provide an excellent starting point for an appraisal of the
existing situation and of desirable economic policy.
This is true because, during these five years, the United States economy has
been tested by the difficulties of reconversion, inflation, and recession. It
has surmounted these tests with relatively small hardships, measured by
earlier history. There are now new problems confronting us. But the
ability already displayed to cope with the various situations which have
arisen since VJ-day should provide us with a practical understanding of
the present and a good measure of guidance and confidence for the future.
Most indicators reveal the highest levels of peacetime prosperity yet
achieved. Civilian employment reached almost 61^2 million in June. The
pulse of activity is strong in almost every important sector. Measured in
1949 prices, our total output of goods and services was running at an annual
rate of about 267 billion dollars (268 billion in current prices) for the second
quarter of 1950. This contrasts with an annual rate (also in 1949 prices) of
about 151 billion in 1929, about 160 billion in 1939, about 254 billion in the
lowest quarter of the 1949 recession, and about 259 billion in the previous
peak reached in the fourth quarter of 1948. Even more important is the
prospect that we shall move considerably higher in production and employment during the remainder of the year. This was in prospect even before
the new international developments late in June.
The unusual speed and scope of the recovery from the recession of 1949
rounds out an extensive series of business changes since the war, in an economy vastly different not only in size but also in character from prewar.
The economist is now challenged to make a fresh analysis, trained not upon
the prewar situation, but rather upon a postwar economy which has

expanded far above prewar levels, and which has been altered in many
respects by changes in structure and in business policies as well as by the
legislative programs of the 1930's and by the fiscal policies of the postwar
period.
It is true that the experience during these five years was not a complete
test of our capacity to maintain maximum production without inflation
or to avoid deep or prolonged downturns of business activity. Some temporary factors, carrying over from the war, were still available last year
to provide some elements of strength which may not be present in the years
ahead. The time may come, although it is not immediately in prospect,
when we shall be put to a more searching test than in 1949 of our ability
to substitute new factors of demand when older ones disappear or diminish.
Should these circumstances arise, they may require more extensive business
adjustments, and a different interplay of public policies, than those which
proved so effective in 1949. Nor was the inflationary danger of 1946-49,
which we surmounted, as great as might arise in the future. Nonetheless,
the experience between 1945 and 1949 was of vital significance. During
those years, we went through a range of events which would probably
have been burdensome enough to generate serious and extensive economic
troubles under earlier circumstances. The difficulties presented by that
particular range of events have thus far been overcome successfully. This
demonstrates that our economy has far greater elements of stability and
strength than most people had supposed. We must build upon that strength.
Further, the current period is sufficiently remote from World War II
to release us from most of the dangers to the economy which are inherent
in a postwar readjustment. The high and increasing level of general
prosperity which we enjoyed during the first half of this year, on a fairly
stable basis, should now be placed in a new frame of reference and associated
with a new set of data and problems. If that prosperity is menaced in the
future, it will be less in consequence of some lingering problems of the past
five years than in consequence of new developments with which we shall
have to deal as they arise. This is strikingly true of the near future, in the
face of an economic situation altered by the recent turn of international
developments.
A review of the problems which have been met and surmounted since
the end of the war will set in perspective the extent to which the first half
of 1950, prior to the Korean developments, found us on much sounder economic ground than previously, with much improved ability and therefore
greatly enlarged confidence to deal with whatever problems may arise in
the future. More specifically, this review has a direct bearing upon the
problems of the immediate future, when concern about inflation is again
entering the public mind, and when the international situation necessitates
a sharp increase in the output of some products.

FIVE PHASES OF POSTWAR ECONOMIC DEVELOPMENT
Within five years, we have experienced five business phases which have
been clearly defined. It will be profitable to examine each of these in
some detail.
The transitional phase: from the war's end to early 1946
The prevalent fear toward the war's end was that a drastic reduction in
public outlays, plus the rapid demobilization of our armed forces, would lead
to heavy unemployment and business dislocation for a substantial period of
time. Many estimates of potential unemployment ran as high as 8 million.
This crisis did not materialize. True, by early 1946 industrial production
had declined more than 30 percent from the May 1945 level, and employment in manufacturing had decreased more than 20 percent. Unemployment rose from about one-half million on VE-day to about 2.7 million in
February 1946. But by the end of the first quarter of 1946, the posthostilities decline was concluded.
The main reasons for the mitigation of demobilization dislocation resided both in public policy and in private action. On the public side, much
legislation was enacted to speed industries through the recovery process
and to make sure that they had ample funds for the work to be done. The
payment of discharge allowances to veterans placed funds in the hands of
those consumers who would most quickly spend them for civilian goods.
Other programs were encouraging veterans by the hundreds of thousands
to enter colleges and training schools; this had the effect of holding them
temporarily off the labor market.
Even with these public policies at work, there could have been vast
unemployment if industry had been unequal to the technical and managerial task of quick reconversion. But no such shortcoming appeared.
Instead, business manifested great skill and celerity, displaying a genius
no less notable than that which had converted the country to the tasks of
war. The relatively quick composition of differences between management
and labor was another factor. The process of reconversion was stimulated
by the confidence that the markets were waiting for the goods to flow.
There were vast reservoirs of funds in the hands of consumers and business
to help maintain demand as war buying declined.
The great demand on the part of consumers and business for goods
and services caused all producers to crowd the capacity of existing facilities.
Extra shifts of workmen brought about an increase in the number employed, even before new capital investment was made feasible by increasing
supplies of raw materials and building products.
The expansion phase: from early 1946 to late 1947
In this period, the expansion of production, employment, and personal income surged strongly forward. Unemployment dropped below
2 million. New capital investment began in earnest. The ending of price
control in the second half of 1946 opened the way for a threatening cycle
894762—50

of increasing prices, rising cost of living, aggressive and successful demands
for higher wages, increasing costs of production, and again a rise in prices.
But this process had little adverse effect upon production and consumption
during 19463 which were dominated by accumulated consumer and business
demand. The economy was carried to high prosperity levels and full employment by the end of 1946. By early 1947, it was obvious that we had
entered into magnitudes of activity vastly higher than before the war. It
soon became clear, also, that this was not purely a restocking boom. The
high tempo of activity reflected profound changes throughout the entire
economy, in its industrial capacity and productive potential, and in the size
and distribution of currently earned national income.
In early 1947, however, many analysts had become somewhat pessimistic.
They took the view that the growing volume of durable goods beginning to
appear in the market would divert consumer buying from nondurables.
This view proved to underestimate the total situation. By this time, foreign
demand and the Government policy of assisting war-torn nations to rehabilitate their economies caused a tremendous increase of foreign buying in
American markets. In the first half of 1947, our excess of exports of
goods and services over imports mounted to an annual rate of 12 billion dollars. Exports of agricultural products were especially large. When it became apparent that this export surplus could not be maintained indefinitely,
there were renewed declarations that a business slump was imminent.
But new factors of strength appeared within the domestic economy. As
the export surplus declined rapidly toward the end of 1947, capital investment by business expanded, home building increased, and the economy
continued to move forward.
The increase in business expenditures for new nonagricultural plant
and equipment, from an annual rate of 12.6 billion dollars in the first
quarter of 1947 to an annual rate of 19.8 billion dollars in the final quarter
of the year, was in itself enough to counterbalance the decrease in the
export surplus. This was due, for the most part, to the normal reaction
of business managers to mounting profits and to the vision of a vast market
demand, buttressed by a great store of personal savings and by high and
increasing personal income. Government policies gave support to the
trend of capital investment. The management of the public debt was
directed toward the stabilization of interest rates^ with a view to maining a financial environment which would facilitate the great industrial
capital expansion required in the postwar period.
Private residential construction accounted for about two-thirds of the
increase of about 4 billion dollars in total private investment in new construction from 1946 to 1947. The credit policies and programs of Government played an indispensable part in the expansion of the market
demand for homes. This expansion depended upon low interest rates,
small or nominal down payments, and long periods of amortization.
Without public assurances, the policies of private investment institutions
could not have been extended far enough to permit this type of financing.

The combined efforts of private enterprise and Government were sufficient to dissipate the danger of large-scale unemployment and business dislocation during the reconversion period. It remained to be seen whether
they could be equally successful in dealing with the postwar inflation.
The climax of inflation: from late 1947 to beginning of 1949
Toward the latter part of 1947, the postwar investment programs of
business were in full swing, backed by ample funds and activated by the
unexpected ease of reconversion. Characteristic of such periods, business
investment at first increased much more rapidly than the output of industry.
This rising investment, in turn, increased the spendable incomes of consumers. In addition, wartime savings were still large. The international
situation required a high level of public outlays. Some restraints upon
buying were available, but they were not adequate to deal with the mounting
inflationary pressures.
Notwithstanding the jump in the demand for materials for home building and other construction and for new equipment, as well as an increase
in personal consumption expenditures and employment, there was very
little enlargement of industrial production from the first half of 1947 to
the second half. At the same time, a short supply of some important
farm products at home and abroad contributed to the excess of total
demand over total supply. This situation was conducive to rapid price
increases which began in July. Between June and December, the index
(percent of the 1926 averages) of wholesale prices of goods other than
farm and food products rose from 131.6 to 145.5. The index for farm
products rose from 177.8 to 196.7, with parallel increases in the price of
food products. Wage increases added to the pressure on costs and prices.
In the third quarter of the year, business loans increased rapidly and bank
deposits were correspondingly expanded.
By midyear 1947, wholesale prices had risen longer and further than they
did after World War I. When prices continued to rise at an accelerated
rate during the second half of the year, there was increasing concern. It
was felt that the longer prices rose, the more serious would be the ultimate
reversal in business conditions. Many programs to forestall another disastrous depression had been established during the 19305s. But they had
not been tested. No one could be sure that they would be effective in
controlling a downward trend, in a more dynamic economy which had
been carried so far into inflationary dangers.
A first test, although not a complete one, of these anti-deflationary programs came early in 1948. Speculation in the grain markets had continued
to drive grain prices upward until the middle of January 1948. After a
period of two weeks in which quotations softened, the bottom dropped out of
the market in much the same manner as in 1920, and the stage seemed to be
set for a catastrophic decline in agricultural prices similar to that which, in
1920, had ushered in a serious postwar depression.

Two Government policies prevented a repetition of the 1920 collapse
of agricultural markets. Most immediate was a limited control of trading practices in commodity markets, under which changes in prices in a
single trading session were held to a narrow range, 10 cents per bushel
in the case of wheat. For several successive trading sessions the price
of wheat dropped the limit, and on February 13 reached a level 74 cents
per bushel below the price a month earlier. This restrictive rule prevented a mass attack upon the market, however, and it forestalled utter
demoralization.
Before farm income was significantly affected, the influence of a more
important program, that to support farm prices, halted the market break.
The farm price support program was valuable in stopping the drop in
farm prices before any great damage had been done. It was even more
important in preventing fear in the business world generally that an
agricultural collapse was in the making which would be the prelude to a
general deflation. For the business world had good cause to believe that
1920 would not repeat itself in a collapse of agricultural income. It was
known that, long before farm income dropped to a point where the farmer
would cease to be an important factor in the demand for manufactured
and other goods, the program of supporting farm prices near a parity level
would come into action.
These factors go far to explain why there was no break in industrial
production or employment. Some industrial prices continued upward
even while farm prices were falling. New business investment plans were
carried through. There were no general declines in wholesale or retail
price levels except in the case of farm and food products, and these quickly
rallied. Industrial prices and profits continued to rise. New capital
investment was expanding, following two years of heavy investment in enlarging productive facilities. Government expenditures were increasing
because of the foreign situation. Nonagricultural employment was increasing, and unemployment in the second half of 1948 was as low as it had been
in any corresponding period since the war. National income was establishing a new record in each successive quarter of the year. The total disposable
income of consumers also rose steadily, in buying power as well as in dollars.
All these increases in demand were occurring during a period when
some bottlenecks in the productive process had not yet been broken. The
effect of large investment upon production had not yet made itself felt.
In fact, during the last nine months of 1948, industrial production increased
very little.
In late 1947 and during 1948, there were efforts to obtain a comprehensive
program to deal with inflation. But these efforts were not successful, and
the inflation ran its course, although it was modified by the Government
surplus and debt-retirement policy.
In this quick survey of the inflationary movement, it is important to recall
that there were some curbs upon the boom although they did not prove to

be sufficient. Even at the peak, speculation and business excesses were not
comparable to those of earlier periods. Self-restraint was manifest in many
quarters. Moreover, the banking and credit structure, changed in significant respects, did not fan the fires as in the late 1920's. The Government
had some powers which were used to dampen buying and credit. This
composite of private and public policies prevented the situation from getting
out of hand. It helped to make the recession more controllable when it
came.
The recessionary phase: the first seven months of 1949
The central cause for the recession was to be found in the unwillingness
or inability of buyers of all types to absorb at current high prices the full
product at full employment of a highly productive industry and a flourishing
agriculture. That is probably a characteristic of almost all recessionary
movements. This condition had first manifested itself, as at earlier times,
in the agricultural sector. The great improvement in agricultural production at home and abroad led to a decline in farm prices. The index of
prices received by farmers (percent of the 1910-14 average) had undergone a fairly unbroken decline from 297 in mid-July of 1948 to 255 in
mid-February of 1949. The effect upon wholesale food prices was only
slightly delayed, and their course paralleled that of farm prices. Retail
prices responded more slowly. But the decline in retail food prices brought
the forward movement of the consumers' price index to a halt in September 1948, and this index declined during the last quarter of the year despite
a continued advance in prices of other consumer goods and services.
However, the farm situation, while a contributory factor, would probably
alone not have brought on the general recession. There were more important developments in the relationship between the general price level for
almost all types of goods and services, and the incomes and buying habits
of consumers. Personal consumption expenditures dropped in the fourth
quarter of 1948. In the meantime, it became apparent that output was
going to increase if full employment were maintained. This trend,
combined with the increasing price consciousness of consumers, altered
the outlook of business regarding the supportability of maximum output
and employment at the current price structure.
For nearly three years, merchants had been building up their inventories
as rapidly as goods became available, because they were confident that they
could rely upon maintenance of the existing market demand, and perhaps
upon some further expansion, even at increasing prices. Toward the end
of 1948, when that confidence was shaken, merchants began to reduce their
orders for new goods to prevent further accumulation of inventories as
expansion of sales became dubious and as price declines seemed in the
offing.
Industrial production reached a postwar peak of 195 (percent of the
1935-39 average seasonally adjusted) in October 1948, and was still above
190 in January 1949. Operating plans of industrial managers then began

to show the effect of the unplanned accumulation of inventories in the plants
of manufacturers. Production was cut back, moderately in February and
then much more rapidly. It became increasingly clear that a definite break
in the inflationary movement had developed, and that the change was not
merely a hesitation in the course of expanding business such as had occurred
in the first quarter of the preceding year. In each of four successive
months, beginning with March 1949, the industrial production index
dropped 5 points. In July, partly due to vacations, the decline was 8
points, carrying the index down to 161. The drop of 34 points from
November 1948 to July 1949 was more than 17 percent, wiping out the
entire increase in the index of industrial production since the spring of
1946.
The effect of the decline in industrial production was augmented because
the relationship of prices to the income structure, and some anticipation of
price declines, had led even earlier to a pronounced shift in private construction. The record level of new housing starts in the first half of 1948
maintained expenditures during the second half well above those of the
same period in the preceding year. But the trend was reversing. In 1947,
the number of housing starts climbed each month until a peak was reached
in October, and expenditures for private construction increased each month
from May until November. After May 1948, there was a continuous
decline in the number of new housing starts. Expenditures for private
construction fell slowly but constantly after August.
Nonagricultural employment, which was 1.3 million higher in December
1948 than the average for the first half of that year, declined 1.9 million
from December 1948 to February 1949, while the labor force declined
only 1 million. There was also a seasonal decline in agricultural employment, so that unemployment increased in the two months from 1.9 million
to 3.2 million. The subsequent seasonal increase in agricultural employment in the spring was not large enough to offset the growth in the labor
force and the further moderate decline in nonagricultural employment. In
June 1949, there were 3.8 million unemployed, and in July the number
mounted to 4.1 million.
The importance of the changes in inventories during the period under
consideration has caused many to refer to the business recession of 1949
as an "inventory recession." It is true that much of the decline which
took place could be traced to and connected with this sector of the economy.
It is also true that, when inventories had fallen considerably below the
requirements of the current level of business activity, a process of inventory
rebuilding attended the upturn. But it is characteristic for inventory
changes to appear early in recessions. The extent to which the general
decline proceeds is determined by how far "inventory adjustments" are
accompanied and followed by more fundamental drops in industrial production, employment, prices, capital investment, and national income.
These more fundamental factors dropped only slightly in the 1949 recession.

To say that they did not drop further because it was merely an "inventory
recession3' confuses a description of what happened with an explanation
of events. An important reason why the decline did not go further was
that there were new factors in the business structure and in the programs
and policies of Government. It is debatable whether these new factors
and programs would have been sufficient under different circumstances;
but they were sufficient under the conditions of 1949.
The process of recovery: since mid-1949
The recessionary movement had become formidable during May and
June of 1949. This confronted the Council of Economic Advisers with
the difficult task of advising whether or not drastic measures should be
proposed in connection with the Midyear Economic Report of the President.
In its own Midyear Economic Review,, the Council said that industrial
production would drop and unemployment would rise further in July. The
previous record of business cycles offered much evidence that revival would
not set in prior to a sharp drop in industrial prices, and in June these prices
had fallen less than 6 percent from their inflationary peak. Nonetheless, the
Council, upon analysis of the whole situation, felt that drastic measures
were not needed. We felt that the recessionary movement was even then
being brought to a halt.
Manufacturers had not been content to cut back production enough
to balance it against new orders. They had reduced operations sufficiently
to permit a reduction in their inventories each month, even while consumer
buying continued at high levels. By midyear it seemed clear that the
fundamental factors of demand were strong enough to stimulate a rapid
increase in industrial output.
The optimism of the Council at that time rested upon analysis of a
postwar economy differing considerably from any in which the characteristics and events of business cycles had been previously studied. The
war years had lifted national income and personal income far above old
levels; moved employment into a range which was called fantastic when
first prophesied; established vast funds of liquid savings in the hands of
consumers and businessmen; created an enormous public debt; and left
problems of national security, of obligations to veterans, and of aid to
foreign nations which multiplied the peacetime expenditures of Government. Added to these factors, there was a wide range of anti-deflationary
programs which the Government had established following the catastrophic deflation of 1929-33. It was felt that this combination of forces
would quickly activate a strong recovery, if supplemented by business
confidence and some further moderate adjustments in business policy.
Thus it was that the Council's emphasis in midyear 1949 converged
upon the factor of business confidence. New capital investment in building
construction and in producers' equipment had always been extremely
volatile, because plans for investment are largely determined by expectations with respect to future markets and future profits. Plans can change

CHART 4

ECONOMIC INDICATORS
CHANGES FROM A YEAR AGO
PERCENTAGE

CHANGE

PERCENTAGE CHANGE

EMPLOYMENT

m
zm

TOTAL
CIVILIAN
EMPLOYMENT

fo'&vj
K'-V-l'-V-J
l;:#:;::1
r.:rr-J

NONAGRI CULTURAL
EMPLOYMENT

MANU FACTURING
EMP LOYMENT

CONTRACT
CONSTRUCTION
EMPLOYMENT

'•''•:•.•'•:
•vX<;V''i
f.\V-:-.V

AGRICULTURAL
EMPLOYMENT

-10 —

-10
UNEMPLOYMENT

PRODUCTION
50

50
5X

40
/
• f,

-™

GROSS NATIONAL
PRODUCT
11049 PRICESlJ/
i,ca/_^

"^
4*

INDUSTRIAL
PRODUCTION

—

TOTAL
PRIVATE
PRIVATE
,. RESIDENTIAL ,.
CONSTRUCTION-^ CONSTRUCTION-^

PRODUCERS'
PLANT AND
EQUIPMENT
EXPENDITURES
(NONFARM)-^

-10

PUBLIC
CONSTRUCTION

-10
20

INCOME
10

•
NATIONAL
INCOME -£/

COMPENSATION
OF EMPLOYEES 2/

PERSONAL
DISPOSABLE
INCOME J/

WEEKLY
EARNINGS
(MANUFACTURING)

IlllilJIli
I HI
I I
IIIIIIHIII

CORPORATE
PROFITS
AFTER
TAXES J^/

-10

FARM

PROPRIETORS'
INCOME I/

-20

PRICES

-10

•^

FARM
PRODUCTS

E18

p!3J
ALL
COMMODITIES

INDUSTRIAL
ALL
(OTHER THAN FARM ITEMS
PRODUCTS AND FOODS)

WHOLESALE

FOOD

CONSUMERS'

SOURCE: APPENDIX B.

RENT

APPAREL

J/ CHANGES FROM 1949, SECOND QUARTER, TO 1950, SECOND QUARTER.
FROM JUNE 1949 TO JUNE 1950

HUH

**•

ALL OTHER CHANGES ARE

-10

quickly when expectations change. Pessimism in the business world can
go far toward vindicating itself, by inducing a contraction in new investment which forces the business slump which is feared. Optimism in the
face of declining business, if it leads to continuance of new investment
at a high level, may permit a market adjustment to be worked out while
the basic economic factors of consumer income and buying power are
but little impaired. Such optimism may thereby justify itself.
Considerable optimism when business activity is declining has not been
unusual at the beginning of a recession. Emphatic assurances that a
break in a business boom could not become a depression, because fundamental factors in the economy were strong, have often been given by
national leaders and by business experts. But seldom, if ever, before 1949
has that business optimism which demonstrates itself in sustained new longterm investment survived a decline in industrial production as great as
that which took place in the first half of 1949.
While business investment was indeed retarded during the recession, the degree of confidence and strength manifested throughout the first
half of 1949 was encouraging. Private construction expenditures during this period were at a seasonally adjusted annual rate of 17.0 billion
dollars, compared with 17.4 billion in the first half of 1948 and 12.2 billion
in the first half of 1947. The usual seasonal pattern was followed, and
in each month after the low in February there was an increase in construction expenditures. This was also true of residential construction, which
accounted for about one-half of the new construction. Even more remarkable was the high expenditure, though at a reduced rate, for new
plant and equipment. This meant further extension of productive capacity
following three years of almost feverish activity for that purpose. These
business expenditures in the first half of 1949 had exceeded those for the
same period in 1948. This led the Council of Economic Advisers to
conclude that business optimism would survive the further slackening of
industrial activity in July, and would permit the seasonal elements of
economic expansion in the late summer to act upon an economy which
had not suffered further deterioration.
The reaction to price adjustments was also reassuring. Business in the
main did not take these adjustments as a bad omen, but instead recognized that they were laying the foundation for a resumption of economic
growth. Price declines are always to a degree depressing, because they
cause losses on current stocks and hesitancy about future buying. One
of the most delicate of all economic operations is to achieve price reductions sufficient to reactivate buying, without letting price deflation go far
enough to undermine morale, disorganize business relationships, and generate a panic. That this delicate operation was so effectively consummated
during 1948 and 1949, through myriads of business decisions, was a heartening demonstration of the application of improved economic knowledge
to the practical realities of business life.

Most important of all, the recession of prices and some cutting down of
business plans did not generate a general decline in the incomes of the
great body of the buying public. It is when prices and incomes chase
each other downward that the spiral of depression is irrevocably under way.
Businessmen in 1949 made great efforts to hold lay-offs to a minimum,
and wage cuts were rare. This helped to maintain purchasing power.
Furthermore, the whole income structure was strong because of wide
improvements in private and public policy,, adopted over the years, including collective bargaining, minimum wage laws, and old age and unemployment benefits. There were also payments to veterans. Government
expenditures, much greater than before the warj contributed to the maintenance of income and demand.
High income levels and large market demand on the part of consumers
are the foundation of economic strength, and furnish an important impetus to business investment. This consumer strength, usually impaired but
little in the first months of a business reversal, did not become enfeebled
later on in 1949 by developments which in earlier periods had transformed
an economic adjustment into a disaster. Personal income in the second
quarter of 1949 was only 3 percent below that in the final quarter of 1948,
and personal consumption expenditures had fallen by less than 1 percent.
Other programs also cushioned the shock. The farm price support
program forestalled any collapse of agriculture, such as destroyed the
market demand of farmers in 1920 and in the years after 1929. The regulation of security exchanges, and of the issue of securities, prevented the
building up of a speculative structure as in the twenties. Monetary and
credit policies, supplementing the sound banking structure of the Federal
Reserve System, maintained abundant and cheap credit, protected debtors
from the dangers attending maturing debt in periods of business stress, and
prevented financial crises such as those which ushered in earlier depressions.
General fiscal policy was also an important factor toward inducing the
recovery. When business declined, the tax system operated automatically
to reduce revenues. Certain programs, such as unemployment insurance,
increased payments to the public. These "built-in" stabilizing factors
contributed to the budget deficit but they also contributed to business
revival.
The recovery phase began in August 1949. The trend of several business
indexes was not changed for a number of months, but the shift from contraction to expansion was indubitable. Industrial production rose rapidly,
the index mounting from 161 in July to 170 in August. Employment in
manufacturing increased by 350 thousand, or more than 2.5 percent. Unemployment, which had increased more than one million from April to July,
declined 400 thousand. Expenditure for private construction continued its
upward movement, and new housing starts, which had been maintained at
the high level reached in May, began a new upward surge which in August
almost reached and in September and October surpassed the highest pre-

ceding level in the postwar period. The sale of automobiles continued to
expand.
The irregularity of business recovery alter a recession was heightened
by serious industrial disputes during the autumn and winter months. Unemployment shifted up and down,, and in the three winter months grew 1.3
million to the disturbing level of 4.7 million. But the recovery movement was
strong enough to rebound after each setback, and when the coal stoppage
was concluded early in March 1950, progress became sustained and rapid.
By June 1950, the industrial production index had climbed to 199,, four
points above the previous postwar peak, private construction had far
surpassed earlier levels, nonagricultural employment was larger than in the
same month in any preceding year, unemployment had dropped to 3.4
million, business profits were increasing, new investment by business was
growing, and the real incomes of consumers were increasing. All this was
before the Korean development.
WHAT WE HAVE LEARNED FROM THE RECORD
The first general conclusion which we can derive from the record of the
past five years is this: our economy is far more resistant to shock than it
was after World War I. It is better prepared to deal with inflationary or
deflationary dangers. Those who point out the "exceptional" reasons
for this overlook the fact that many of these "exceptional" items are just
as integral a part of our economy today as the conditions which made for
greater instability were an integral part of the economy of 30 years ago.
For these new developments are not to be found simply in the larger magnitudes of the current economy. They reside in new patterns of business
behavior and new programs of Government which have come successfully through hard tests.
There is need for further improvement, but we can build confidently
upon what we have thus far achieved. This leaves little room either for
those extremists who would pillory business or for those who would hamstring effective public policy. The interplay of private and public action
in overcoming the dangers of reconversion, inflation, and recession indicate
conclusively that this interplay will continue to be necessary. It calls for
ever-increasing understanding and cooperation. The domestic situation
makes this desirable; the world situation makes it imperative.
The second conclusion to be drawn from the record of the past five years
i? that the healthiest and safest condition for an economy such as ours is
maximum utilization of our productive resources, although the types of
output and use may shift with changing needs. During the inflation of
1948, there were some who said that a lower level of total activity would
provide a cure for the dangers of inflation. But when we entered upon that
lower level of fundamental activity, we felt even more insecure and yearned
for the day when full production might be restored. It became abundantly
apparent that this lowered level of activity did not add to the confidence of

business, the security of workers, or the ease of solution of public problems.
On the contrary, it made business less sure of itself, labor more restive,
and the problems of Government more difficult. The American economy
must make maximum utilization of its resources in order to thrive and to
fulfill its inescapable domestic and world responsibilities.
It follows from this, as a third cpnclusion to be drawn from the postwar
period, that we must draw a sharp distinction between the sound elements
of maximum production and the unsound elements which threaten its maintenance. Inflation, for example, threatens the maintenance of full production. But it is no solution to overcome inflation by private or public policies
which turn the whole economy downward. For this not only carries us into
an even more difficult situation, but also leaves us with the prospect of a
restoration of inflationary trends as we shake off the recessionary threat
and move vigorously upward again.
Despite the inflationary dangers which they may produce, programs
essential to our national security or general economic strength must be
undertaken. For example, we cannot now refrain from very large
expansion of military and related efforts, although there is no practical way
of undertaking this expansion without risking inflationary pressures.
This does not mean that inflation should be taken lightly. It erodes
national strength by distorting the economy. The distribution of income
and wealth is altered, impairing the position of persons and institutions
receiving relatively fixed incomes and owning assets of fixed money value.
Production is channeled into unsustainable patterns, thus sowing the seeds
of depression. Public morale is shaken. Confidence in the financial
future may be impaired with serious implications for later periods of inflationary pressure.
For this reason, we must seek by improved business practices and improved
public policies to remove or contain the inflationary threats arising from
necessary enlargement of essential national programs. If the expansion of
these programs goes even beyond the amounts recently recommended for
increased defense, which an expanding economy should be able to absorb
with rigorous fiscal and credit policies and limited controls, it would then
become necessary to consider even more drastic controls and even more
substantial reductions of other programs.
The fourth conclusion to be drawn is that stability and economic strength
are advanced by private and public policies which adjust themselves to our
need and prospects for stable growth, instead of adjusting themselves to
the inevitability of the business cycle. If business in 1949 had assumed that
a postwar depression was inevitable, and had run for cover accordingly,
the protective curtailment of investment and employment would have accentuated the downturn. Instead, while making some adjustments, business kept its eyes riveted upon our prospects for national growth, and the
policies which it correspondingly adopted contributed mightily to the resumption of that growth. Similarly, if the Government had reacted to
the recession by excessive retrenchment policies, these would have enlarged

the downturn. Instead., the pursuit by the Government of a range of
national policies necessary to our economic health, and supportable by the
resources of a full economy, helped greatly to reverse the recessionary trend
and to restore the trend toward maximum business activity and employment. Confidence is no substitute for sound policy. But sound policy must
rest upon confidence commensurate with our natural resources, our business
equipment and skills, and our uniquely proficient working population.
That confidence and that long-range viewpoint are essential now, if we
are to cope successfully with the problems raised by the Korean developments. These developments call for many changes in programs and in
emphasis, but the principle still stands. The targets for needed levels of
production and employment, required under the Employment Act of 1946,
are not merely abstract aspirations. They can guide private and public
economic policy along lines that will best serve our national needs.
Each of these conclusions has direct relevance to the current economic
situation, and to the emerging difficulties presented by international developments.

11. The Problems Ahead
ERY recent events have placed international developments, and
their impact upon the domestic economy, in the forefront of public
attention. It is manifestly impossible to predict the future sequence of
these developments. This makes it difficult to discern the appropriate
economic policies which should now be followed. But the difficulty does
not remove the necessity. The fact that our future programs may be largely
influenced by the action of other nations does not force us to drift aimlessly.
The need for maintaining the American economy at maximum strength
and productivity has become even greater than before. In domestic economic affairs no less than in international, we must be prepared and watchful, retaining enough flexibility to change our course quickly as conditions
change.

THE ECONOMIC IMPACT OF INTERNATIONAL DEVELOPMENTS
The economic outlook at midyear before the Korean development was
highly favorable. Production and employment had attained a new peacetime record level for the month of June. Despite attainment by the
economy of levels above 1948, when inflationary conditions had become
dangerous and were soon to lead to a recession, there was no serious threat
of inflation. Considering the pace of the business revival, price rises in
general had been moderate; although certain markets, such as those for nonferrous metals and building materials, were under pressure because demand crowded supply. In wide areas of the economy, some margin of
unused productive capacity was still available. There had been very
large new investment in productive plant and equipment, which increased capacity substantially above that of 1948. The labor force had
grown more rapidly than employment, and, despite the high level of employment in June, there was a margin of between 1 and 2 million in the
number of job seekers above a number which would represent a comfortable
but not a tight labor situation. The prospect a month ago was that we
could achieve maximum production and employment without inflation by
the end of the year. This would have completed the business recovery, and
would have placed us in good position for healthy growth in the years
ahead commensurate with normal increases in the labor force and constant
improvement of technology.

At midyear, however, there occurred the outbreak of hostilities in Korea,
followed by the certainty that our military exertions and defense prepara
tions will need to be increased greatly for a considerable period of time,
We cannot yet judge the extent or duration of this new turn of evenU
If other nations were to force this country into defense programs comparable to those of war, a full war economy would then need to be established. If the Korean situation were to be followed by a situation of
heightened and prolonged tension requiring that we be fully prepared for
military effort at many points in the world, the resulting increase in expenditures would require even more extensive economic controls than those
thus far proposed.
The current request for an additional 10 billion dollars for increasing our
armed forces and our military outlays, while very sizable, does not involve
full mobilization of our military might or the placement of our civilian
economy on a full wartime footing. But the increasing preparations for
defense which must now be made will have a very substantial effect upon
the domestic economy, even though not all of the additional appropriations
will be expended this year. The stepping up of military procurement will
cause further tightening of the market situation in important areas of the
economy. There has been and will be some increased forward buying, both
by business and by consumers. There will be a larger demand for labor,
and a tendency toward wage increases of a magnitude which would increase
the costs of production and add to the pressure on prices.
Such increased pressures, superimposed upon an active economy, could
quickly create a sufficiently serious inflationary situation to require the whole
gamut of comprehensive and direct controls, if advance buying by business
and consumers should approach the proportions of hoarding or rampant
speculation, or if prices and wages should commence to spiral. This would
also follow if further changes in the international situation should require
the stepping up of military efforts and procurement even more rapidly
than has thus far been proposed. But if neither of these contingencies
develops, price, wage, and manpower controls should be avoidable. There
is some margin of unused capacity in most industries, even apart from the
use of double shifts and overtime work, and there is still a substantial
reserve in the labor force. The utilization of these reserves, plus some necessary capacity expansion, should cover military needs on the present scale
without a complete set of controls, if production is effectively channeled
into essential areas through material allocation, and, above all, if total
demand is held in check by strong tax and credit measures.
Output per man-hour was estimated to be about 11 percent above the
1945 level in the first half of the year. This means an average gain of
about 2.4 percent per year (compounded), slightly higher than the average rate in the prewar decade. With vast recent improvements in plant,
technology, and skills, we should certainly be able to maintain at least the
recent rate of increase in output per man-hour over the next few years.

Coupled with this productivity trend, there is the certainty of a growing
labor force. The labor force, in fact, is likely to increase more rapidly
than is indicated by the size of the normal annual increment, because many
new workers are drawn into industry when the economy is working at high
speed. Additional labor power is also available in the current body of 3.4
million unemployed workers, and among those who now work only parttime. While substantial numbers of men will be drawn into the armed
forces, it seems clear that the labor force will be large enough to permit
sizable increases in civilian employment.
Without an unusual increase in the labor force, or in hours of work, maximum employment would involve by the end of 1950 an increase in our
annual rate of total output of about 8 billion dollars at present prices.
But our potential increase in production is considerably greater, allowing
for the further reduction of unemployment by 1 to 2 million, for possible
enlargement of the labor force, for the possibility of full-time employment of many who are now employed only part-time, and for the full use of
existing plant capacities. In succeeding years, we can expand about 3
percent annually.
With this output potential, the economy is in good shape to deal with
increased programs of substantial scope. Nor does the fact that there is so
much less slack in the economy than there was in 1939 mean that we are
faced with unmanageable problems. It is true that additional procurement
programs, coming in a period of boom, create greater problems of scarcity
and inflationary pressures. But these problems can be dealt with more
expeditiously than the time-consuming process of shifting an economy from
low gear into high.
Now that we are in high gear, however, we must exert every effort to
produce even more. Our economy is so flexible, and its demands so varied,
that the increase of total production up to the limits of our resources will
be the most effective general effort that we can make. The more we produce, the more fully we can supply the most essential purposes without
diversions which would impair other sectors of the economy.
But the increase of total production will not in itself be enough. The
kind of situation in which we now find ourselves, and the immediate outlook, will impose concentrated strains upon some lines of supply much
greater than the average strains upon the economy as a whole. The increased need for steel, and other items entering into military and related
uses, will be relatively much greater than the increased demands upon the
economy as a whole. And the increased need for these special products
will converge largely upon areas where supply is already tight, and the
utilization of existing capacity complete or almost complete. This means
that the expansion of production in these specific lines must take precedence over the expansion of other lines. This involves special problems of
labor utilization as well as use of facilities and materials. It also means that,
in special lines, expansion of total output probably cannot proceed rapidly

enough to avoid the necessity of some diversion from less essential use to the
most essential use. It follows that policies directed toward the expansion of
specific lines, and toward influencing the composition of the demand for
and the distribution of these products, are likely to become just as urgent
as policies to reduce the total level of demand to counteract general
inflation. Both types of policies are now needed. This must be taken into
account, as we turn to a consideration of the private action and public
policy called for by the existing situation.
THE TASKS OF PRIVATE ADJUSTMENT
The business policies which have carried us through almost a year of
production increases should, with some adaptation, be helpful in the treatment of the problems lying immediately ahead.
Since early 1949, the Council has urged that businessmen expand plant
capacity and investment to meet the constantly expanding requirements of
an economy operating at maximum production and employment. The
extent to which this course has been pursued, even under the threat of the
1949 recession, contributed greatly to the speed and durability of the advance
in output and employment. In many of the important sectors of the economy, the recent upward revision of business investment intentions should
not be reversed because of current developments. In some outstanding
areas, indeed, further expansion has become a more crucial need.
There need be no fear that this enlarged productive capacity would
become unusable if and when international tensions subside. With
enlarged capacity available, the great and growing domestic market for
goods and services of all kinds should never reach the end of the road.
We are now too far from the termination of World War II to talk about
postwar backlogs which will eventually be worked down, except in a few
areas. A very high and growing level of current demand should be regarded
as a permanent feature of a 270-billion-dollar economy, able to move
forward at the rate of 9 to 10 billion dollars a year.
There are many illustrations of the fact that a level of demand which was
regarded by many as "abnormal" in 1948 was below the level which should
be regarded as normal and necessary for 1950 and in the years ahead.
Such is the dynamic quality of our economy. Some thought that the
Nation's steel production was above a sustainable level two years ago. Since
then, however, the industry has substantially enlarged its capacity and is
planning further enlargement. But even before the international events
of last month, the industry had been straining capacity, despite incomplete
recovery of the Nation from a business recession. Thus, the further expansion of the steel industry would be good business even in an entirely
peacetime context. The only effect of the present international situation
is to make that expansion more urgent. To assume that this accelerated
expansion should not be undertaken, because it might exceed the need
if international tensions should subside, would neglect the vital need of
894762—50

today. It would be unrealistic when measured by the standards of desirable
and attainable peacetime growth for the economy as a whole.
There are other situations where capacity has lagged behind the requirements of an expanding economy. Iron ore as well as nonferrous metals are
examples. The increased demand, which will be injected into the economy
by enlarged defense expenditures, will be superimposed upon a great
civilian demand. If this increased demand imposes an excessive strain
upon supply in important areas, the most lasting solution will be for
the supply to be increased. Business policy should take this into account.
Some situations will occur, however, where the alternative of reducing demand will be the only immediate solution.
The problem of pricing policy is accentuated by recent developments.
In most of the areas where prices have been rising, further increases are
not needed to provide the incentives for enlarging supply, because profit
rewards are now adequate. Restraint and moderation in pricing policy are
vitally significant at this time, when international uncertainties have already led to unwarranted price and inventory developments in some
areas. Many of these areas are more or less subject to conscious price
policy, and businessmen have an opportunity to serve their country as well
as themselves by extreme caution in pricing.
Another area in which business needs to exercise judgment and foresight is in the management of inventories. These in the main have been
skillfully handled since the war. The accumulation of inventories, since
the beginning of the recovery movement, has perhaps not been excessive
in view of the depletion which previously occurred. But enormous damage
could be done if businessmen now engaged in a speculative race for goods
to avoid a feared shortage later on. If inventories are carefully managed,
a shortage later on should not occur, for reasons which have already been
advanced. But panicky action could produce an artificial shortage, disorganize the markets, cause substantial business losses in a speculative race,
and increase the pressure for more legislative curbs. It could also seriously
impair essential Government programs.
It is also important that banks adjust their lending operations to the new
military and economic situation. This will require selectivity of loan policy, so that bank credit will be available for business expansion which is
needed for industrial mobilization, while bank credit for speculative uses and
for nonessential purposes which compete with military programs for
manpower and materials must be sharply restricted.
Wage policy is inseparably connected with price policy. The Council
of Economic Advisers, in January, committed itself to the desirability of a
wage-price policy which sought to stabilize prices and to gear wage increases to general advances in productivity. This policy, which of course
requires variations to cover differing individual situations, has recently
been endorsed by important business organizations. It has been incor-

porated in the five-year contract of one of our largest industrial concerns and
the union which represents its employees.
The possibility that strong and general inflationary impulses may develop
within the economy calls for great moderation in the area of wages as well
as prices. It is less important now to speculate whether wages chase prices
or vice versa, than it is to make sure that neither commences to chase the
other. In considering wage policy, it should be remembered that the
only production which is available for civilian consumption is civilian production. To the extent that increased production is channeled into military purposes, it cannot be translated into civilian enjoyments. Labor also
has an interest in helping the effort to train and channel workers into
the most necessary jobs. The more extensively this is done on a voluntary
basis, the more feasible it will be to avoid manpower controls.
The opportunity is now afforded to consumers as such to make an affirmative contribution toward economic stability. The safest rule for consumers,
in their personal interests as well as that of the Nation, is to follow their
normal buying habits. A wild scramble to purchase durables, or to build
up an inordinate reserve supply of soft goods, could turn a manageable
economic situation into one of utmost gravity. The avoidance of this should
be urged through every channel of popular communication.
Those who operate as producers and consumers throughout the vast and
varied American economy are confronted with a responsibility somewhat
different in degree, but essentially the same in principle, as that which
they have met during the postwar years. It is the need for economic understanding, mutual accommodation, and concern for the national well-being.
There is no escape from the fact that in the final analysis the cost of national
security must be borne by the people. The record throughout the trials of
reconversion, inflation, and recession indicates that the American public
can meet their new problems with equal or even greater success.
THE RANGE OF PUBLIC POLICY
Public policy cannot be adjusted simultaneously to each of the possible
contingencies of the future, particularly when so many of these are beyond
the control of this Nation. An effort to do this would impair the effectiveness of current action directed to current problems. The degree of effectiveness demonstrated, in adjusting what we do now to what is needed
now, will be the surest token that we can adjust later to whatever may be
needed later on. The uncertainties of the future should not generate either
paralysis or excessive action in the present.
We must maintain our domestic economy in a position to serve as a
tower of strength for all the efforts of the Nation, not only during an
emergency of a few weeks or months, but for years which may be many in
number. The north Korean attack is a warning to the world to be prepared against the possibility of similar aggression at other points. The
United States must be ready to bear its share of the burden of the common

defense. The heavier defense expenditures, which we are now undertaking,
will not end when the mandate of the United Nations has been enforced in
Korea. We are striving to avoid a major war, but there may be other
alarms and possibly other attacks, and we must be prepared to meet them
no matter how long may be the period before full peace is established.
Economic policy must now be adjusted to the prospect of this long pull.
If the pull proves to be short, we shall lose little by being prepared; if
it proves to be long, we shall gain much. Our efforts now should be
directed toward developing and maintaining maximum national economic
power indefinitely.
This statement of basic principles prompts three broad conclusions regarding public policy in the light of the current situation:
First, these policies should be designed to bring about a quick increase
in production. Such an increase is essential not only to supply our military
requirements, but also to meet the essential needs of our growing population.
Second, public policies should ensure that defense requirements and
essential civilian needs have priority over other uses. Hoarding must not
be tolerated, nor can we allow needed scarce materials to be used for
nonessential purposes.
Third, public policies should provide protection against the threat of a
new inflation. An increase of 10 billion dollars in military appropriations,
coming at a time when our economy is already operating at near-maximum
levels, will greatly increase demand for goods and for labor, thus putting
pressure on our price and wage structure. A sharp and continued rise
in prices and wages at this time would not only impose hardships on
domestic consumers; it would weaken our whole economy and would
impede our military effort.
In considering the economic effects of the proposed increases in defense
expenditures in the setting of the current economy, we find firm
ground for believing that it will be possible to make and maintain substantial enlargements in these expenditures without resorting to all of the
controls of a war economy. But we must take some important steps now.
The first and most important of these is to use fiscal and credit policies
to the fullest extent feasible for the restraint of inflationary pressures. On
the fiscal side, this means that we should seek to reduce the size of the
cash deficit substantially or, better still, to remove it entirely. For the
maintenance of a large deficit creates and aggravates inflationary pressures
in a time like this. The economy is strong enough to bear the burden of
financing the needs which have now been outlined, without deficit financing
and extensive increases in the money supply.
Before the north Korean attack, the domestic economy was moving
into a range of national income which would have substantially enlarged
budget receipts. The acceleration of economic activity, resulting from
the expansion of defense preparation, is hurrying the enlargement of production and employment and accordingly the growth of tax revenues. The

imperative need now is to provide additional sources of revenue, to cover
the new defense and related expenditures as rapidly as possible. Such a
program will help to curb inflationary forces (a) by restricting the enlargement of the money supply, and (b) by reducing the buying power
of consumers and business.
In our judgment, the economy is now strong enough to bear the burden
of substantial increases in tax rates in accord with this principle and to do
this without endangering the maintenance of maximum production. There
are, of course, alternative sources from which this amount of revenue could
be obtained, but we cannot urge too strongly that some combination of
methods should be applied immediately toward this end. The program
of other restraints, now being recommended, will prove woefully inadequate without a prompt and drastic increase in taxes.
The fiscal policies we have recommended would not sufficiently eliminate
the inflationary threat. There would be delay in the increase of Federal
tax collections, and in the meantime Government spending would considerably exceed Treasury receipts. There is also the danger that consumers
and businessmen may engage in panicky buying.
Further restraint upon civilian demand for goods should now be imposed
through the control of consumer credit, and through the tightening of
credit for building construction. Administrative measures have been taken
to tighten terms on residential loans insured, guaranteed, or made by the
Government. Further legislation is needed to tighten both private and
governmental lending policies. In addition, further controls should be
established over commodity speculation.
In addition to fiscal and credit policy, it is important to recognize that
pressures in specific areas will far exceed the pressures upon the economy
generally. Shortages already exist with respect to some of the essential
elements of a military program. The prices of some of these commodities
have risen much more rapidly than average prices during the first half of
this year, and some price increases have been accelerated in recent weeks.
This requires a compulsory allocation program, not only to assure adequate
military supply, but also to prevent price and cost increases in these limited
areas from spreading outward through the whole economy. It will not be
enough, in this connection, to establish a program which enables the military
to procure promptly the materials which it needs. This alone would only
aggravate competitive bidding by other users. The inevitable rise in prices
would move into the costs of production of most producers of goods
and services. The program should therefore provide for limitation of
nonessential use. This would reduce the total demand to match the
supply. There should also be the power to requisition hoarded or unnecessary supplies of these essential commodities, and to prevent excessive
inventory accumulation.

Careful analysis of available material requirements for the expanding
defense effort indicates that some specific measures should now be taken
to expand capacity and accelerate production, as a supplement to allocation. We cannot afford to be caught short of essential supplies. The
experience during World War II developed a number of useful methods,,
such as loans, guarantees, and purchase contracts, to expand capacity,
finance essential production, and speed technological development.
We do not recommend the employment of general controls over prices
and wages at this time. The productive potential of the nation has risen
well above the level of two years ago. Business and labor have both had
a bitter though brief taste of the consequences of inflation., and should profit
by their added experiences as to how to ward it off. But the recent upsurge of prices and advanced buying indicates how quickly we can pass
over into a dangerously inflationary situation. These tendencies, if not
promptly checked, are sure to generate additional wage demands. The
speed with which they can be checked depends not only upon private
restraint, but also upon much higher taxes, vigorous restraint upon
credit, and a strong allocations program. These measures, in our judgment, should be undertaken at once. At the same time, the appropriate
agencies of Government should continue and intensify their development of plans for the utilization of more sweeping controls over the pricewage structure and over the utilization of manpower. These efforts
should be brought at once to so high a stage of development that, if the
need becomes clear, a request to and action by the Congress would enable
their immediate application.
Other Government programs may here be mentioned briefly. Future
developments beyond the control of this Nation might make it necessary
to pare down or defer some of these domestic programs even more than is
now being done. But we should bear in mind that some of these
programs are affirmative reinforcements of our economic stability and
growth, and consequently of our military potential. The economic significance of these programs has been depicted fully in previous reviews.
It need not be reiterated in detail in this review which concentrates upon
the significance of recent changes in the domestic and international
situation.
One problem which does deserve renewed emphasis is that of dealing
with such unemployment as may occur despite our best efforts to avoid it.
Even with unemployment further reduced, those who are unemployed
should not be left without the adequate protection that our Nation can so
well afford. The first line of defense against hardships caused by unemployment is unemployment insurance. The test of 1949 revealed clearly
that the Nation-wide system was deficient, whether measured by extent of
coverage or duration and size of benefits. Action is needed this year to improve the Federal-State unemployment insurance system along the lines
recommended by the President. Without such action, many of the State

legislatures will probably not act in 1951, and considerable delay would then
result in achieving these necessary improvements.
The Council of Economic Advisers has confined its proposals at this midyear to a relatively short list. We are mindful of the crowding of the congressional calendar with transcendently important issues of international
policy. We have therefore thought it best at this stage to identify only
those matters wThich appear to us to be of greatest urgency in the current
situation. Our views on a broader range of programs, inseparably connected
with the stability and growth of the American economy, have frequently
been stated.

III. Economic Developments in the First
Half of 1950
THE COURSE OF EMPLOYMENT AND PRODUCTION
HE FIRST HALF of 1950 brought large gains in employment and
production. These gains have moved us much closer to maximum
levels. But at midyear the development in Korea indicated the need for
further increases in output.

Employment
In June of this year, almost 61.5 million persons held civilian jobs,
a new record for June.
The contrast with a year ago is impressive. From June 1949 to June
1950, the civilian labor force increased by almost 1.5 million, while unemployment decreased by about 400 thousand. Nonagricultural employment
expanded by 2.5 million. Agricultural employment declined by 650 thousand. Total civilian jobs increased by 1.9 million. (See chart 5.)
The developments from May to June were significant. There was a
net addition of more than 2 million persons to the labor force. Unemployment, however, increased by only slightly more than 300 thousand. Almost
a million more persons found jobs in agriculture and about 800 thousand
more found work in nonagricultural lines.
Agricultural employment of 7.2 million in the first half of 1950 was
considerably below the same period of the years immediately preceding.
It was 700 thousand below the first half of 1949 and 300 thousand below the
first half of 1948. In contrast, there has been a notable upward trend in
nonagricultural employment. The average of 51.3 million for the first
half of 1950 indicates a gain of 1.2 million over the first half of 1949,
and a gain of 600 thousand over the first half of 1948. The increase in
nonagricultural employment during the first half of 1950 has been steady
since February, with the improvement from May to June being particularly
noteworthy. (See appendix table B-9.)
Between January and June of this year, total manufacturing employment increased by about 650 thousand, to 14.6 million, with almost all of
the increase taking place in durable goods industries. Moderate increases
occurred in contract construction, which rose to 2.4 million in June, and in
transportation, trade, and service. Changes from May to June of 1950

CHART 5

LABOR FORCE
Civilian employment reached an all-time June high of 61.5 million in
June I960. Nonagricultural employment was 2.5 million higher than
in June 1949, while agricultural employment was 650 thousand lower.
MILLIONS OF PERSONS*

MILLIONS OF PERSONS*

1948

1949

I960

Unemployment reached, in February 1950, a postwar peak of
4.7 million or 7.6 percent of the civilian labor force.
By June, it was reduced to 3.4 million, or 5.2 percent of
the civilian labor force.
PERCENT

PERCENT

10
UNEMPLOYMENT
AS PERCENT OF CIVILIAN LABOR FORCE

tantf
F

1948

1949

*I4 YEARS OF AGE AND OVER.
SOURCE:

DEPARTMENT OF COMMERCE.

I960

indicate that durable goods manufacturing and construction showed the
most important increases in employment. (See appendix table B-10.)
Unemployment
The favorable upward trend in employment has been accompanied
by a favorable downward trend in unemployment. After reaching a
postwar peak of almost 4.7 million in February of this year, unemployment dropped by about half a million in each of the three succeeding
months to a level of about 3.1 million in May. In June, it rose to 3.4
million, but this increase was less than seasonal. Unemployment now
represents about 5.2 percent of the civilian labor force, compared with
6.0 percent a year ago, and with a postwar high of about 7.6 percent in
February of this year. (See appendix table B-9.)
Currently in the United States (including Hawaii), there are 9 major labor
market areas and 22 smaller labor market areas where unemployment
is 12 percent or more of the labor force. This is a decided improvement
over April. In 13 of these areas, there is no indication of long-standing
distress and there is reason to believe that continued improvement in
national economic conditions will reduce the burden of unemployment.
In the 18 other areas, the problem of unemployment seems more chronic in
character.
The incidence of unemployment has been relatively more severe during
recent months for semiskilled workers and unskilled nonfarm laborers.
The highest rates have been as usual among workers under 25 years of age,
both male and female. Much of the unemployment in this younger group
results from frequent job changes as they are getting oriented in the labor
force.
In June of this year the unemployment total of 3.4 million included
slightly under a million persons who had been unemployed and looking
for work unsuccessfully for 15 weeks or longer. This number, which had
been increasing steadily since the beginning of 1949, started dropping somewhat in May and June of this year. There was a slight reduction in
June, for the first time this year, in the number of persons unemployed
six months or longer (estimated currently at 450 thousand). The duration
of unemployment for those 65 years and over is about double that for teenage youth.
Early in 1950 a large number of workers were exhausting their claims for
unemployment compensation benefits prior to finding another job. During
the first quarter of 1950, this happened to about 730 thousand persons, the
highest number for any quarter since 1940. There has also been a sharp increase in the average monthly number of general assistance cases reported
by the Social Security Administration, from 462 thousand for the first quarter
of 1949 to 628 thousand for the first quarter of 1950. The increase would
have been even greater, except that many unemployed persons cannot
qualify for public assistance because of the rigid means tests applied in many
States.

There are slightly over a million persons who consider themselves fulltime workers, but who are working on limited schedules because of slack
work5 materials shortages, and similar economic reasons. Most of these
workers have the equivalent of a 3- or 4-day workweek. This is about
one-half million below a year ago. In addition, there are about 1 million
persons who regularly work part time, but who would prefer and could
accept full-time work if such jobs were available.
Production
The value of all goods and services produced in the second quarter of
1950 is estimated at a seasonally adjusted annual rate of 268 billion dollars.
This is 5.6 percent higher than in the fourth quarter of 1949, and slightly
above the peak reached in the fourth quarter of 1948. (See appendix table
B-l.) Moreover, with prices below 1948, the real output of the economy
is now at a new record—about 3 percent above the fourth quarter of 1948.
Even with normal conditions, we would need an increase of about 3 percent by the end of the year. The present international situation calls for a
substantially greater increase.
Industrial production. The index of industrial production in June rose
to a new postwar high of 199 percent of the 1935-39 average. (See chart
6.) This represented a gain of 18 percent over June 1949, and 11 percent over December. It exceeded by 2 percent the previous postwar peak
of 195 reached in October-November 1948.
The recovery in durable manufactures has been especially marked, the
June output being 16 percent above December 1949, and about 2 percent
above the previous peak of October 1948. The most important changes
in output since the 1949 lows are summarized in table 1. (For further
details, see appendix table B-l5.)
TABLE 1.—Changes in industrial production since 7949 lows
Index, 1935-39^1001
Item

Low period of 1949

1949 low
Industrial production: total .
Manufactures: total
Durable goods
Nondurable goods
Minerals

_
._

June
1950

Percent
increase
from 1949
low to
June 1950

June-July 2

165

199

2
June-July
October3 2
June-July
October 3

172

207
236
183
151

20
35
16
35

175
158
112

1
2

Adjusted for seasonal variation.
The effects of plant-wide vacations in July, mainly in nondurable lines, are currently only partly allowed
for in the seasonally adjusted index. In order not to overemphasize the usual July dip, the average for June
and
July is used.
3
Production was reduced by work stoppages in October.
Source: Board of Governors of the Federal Reserve System (see appendix table B-15).

Private surveys suggest that industrial capacity has been expanding at
the rate of at least 3 percent a year, while industrial output has barely
surpassed the peak reached nearly two years ago. On this basis, present

CHART 6

INDUSTRIAL PRODUCTION
industrial production in June reached a new postwar high, 2 percent
above the previous peak in October-November 1948 and 18 percent
above the level of June 1949.
PERCENT OF 1935-39 AVERAGE

PERCENT OF 1935-39 AVERAGE

250

200

150

1948

1949

1950

SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.

capacity could without undue strain turn out something like 5 percent more,
which would raise the index of industrial production to about 210. In the
present emergency, industrial output could doubtless be raised more than
this by overtime work and by using extra shifts. In some individual industries, there is a considerable margin for expanding output; in others, little
if any slack exists at present production rates. Larger capacity is needed,
not only to meet the current defense needs, but to provide for the growing
peacetime requirements of our expanding economy.
The changes in output have varied markedly from industry to industry,
due to a variety of causes. Work stoppages early in 1950 were largely responsible for a drop of 3 points in the index of total industrial output.
Immediately after the settlement of the coal strike, there was a sharp
increase in the output of most durable goods. Since April, the steel industry
has been operating at or slightly above rated capacity, which is more than
3 percent above last year. Output of steel in May and June set new alltime records.
Automobile production continued to increase in the first half of 1950,
and has been one of the major factors of strength in the economic situation.

In spite of a prolonged work stoppage in the Chrysler plants, output in the
first half of this year was more than 20 percent higher than in the first
half of 1949.
Electric power production has shown steady expansion during the postwar period. The output of electric power in June of this year was about
12 percent greater than in June 1949.
Private construction outlays in June 1950 were 25 percent above June
1949, and public construction increased 6 percent in the same interval.
(See appendix table B-16.) The boom in construction has been a key
factor in the recovery since mid-1949.
Agricultural production. Present indications are that total farm production for sale and for farm home use in 1950 will be about 2 percent
below the 1949 levels. The July crop reports indicate a lower output of
several major crops, due partly to smaller acreages under the Federal allotments, and partly to the fact that prospective crop yields are not up to last
year's high levels. In general, the reductions that are now in sight apply to
those crops which are in surplus, especially cotton and grains. Food output
is expected to be slightly larger than last year. The production of livestock
and livestock products is increasing, and further increases are expected in
the second half of the year. The supplies of all foods and feeds are fully adequate to meet our needs for the coming year.
Relation between production and employment
During recent years, there has been a gradual reduction in the number
of workers employed in agriculture without a corresponding decrease in
farm output. (See appendix tables B-9 and B-14.) Year to year changes
in farm production per worker are greatly affected by weather. But there
is little doubt that productivity per worker has increased since prewar
days. It is estimated that output per farm worker averaged 43 percent
higher during the period 1945-49 than during the period 1935-39. We
should expect some further increase in agricultural output per man, and
possibly some further declines in agricultural employment levels.
Increases in labor productivity are now being widely reported. The
amount of the over-all increase cannot yet be statistically computed on a
satisfactory basis. Nevertheless, it seems certain that a net increase in
productivity is occurring. The limited data that are available suggest that
output per man-hour in manufacturing may be increasing in line with the
long-run trend commonly estimated at about 3 percent a year. In a majority of those industries where roughly comparable data are available,
output since midsummer 1949 has increased more than employment or
man-hours. This reinforces the conclusion that, with full utilization of
manpower, the total output of the economy can grow considerably in the
months ahead without serious strain, although there will be a tight situation in certain industries where plant capacity and the supply of raw materials are already under some pressure.

PRICES, WAGES, AND PROFITS
Prices
The rising tempo of business activity during the first half of 1950 exerted
upward pressure on prices. The price increases prior to the Korean
development were on the whole moderate. This is all the more significant
since the economy within six months had moved rapidly from a condition
with substantial slack to a level of activity close to conditions of maximum
employment and production. Although the output of most industries during the first half of 1950 was adequate to meet current levels of demand,
shortages reappeared for a number of basic commodities, particularly in
some raw and semifinished materials, and resulted in some sharp price
increases. The rapid expansion of business gave prices a generally strong
tone but there was reasonable expectation that improvement in supply
would take place, and that this would help to restrain prices.
Subsequent to the change in the international situation, there has been
a broad upward surge in prices.
The present pace of price increases
largely reflect speculation and rumors about the impact of the stepped-up
defense program upon supply as well as increased buying by business and
consumers. This has created an atmosphere conducive to price increases.
Wholesale prices. Wholesale prices rose 4.0 percent from December 1949
to June 1950. The June level was 1.8 percent higher than a year earlier,
but was 7.4 percent below the postwar peak. The largest advances were in
wholesale farm and food prices. Industrial prices moved upward more
moderately. However, in the four weeks since Korea the BLS daily spot
price index of 28 commodities has risen 10 percent. The more comprehensive weekly BLS index of wholesale prices has increased 3.7 percent
during the same period, a rise almost as great as during the first six months
of 1950. (See chart 7, table 2, and appendix table B-22.)
Wholesale farm prices rose 7.1 percent from December 1949 to June
of this year, but were still 1.7 percent below a year earlier and 16.7 percent
below their postwar peak. Although prices paid by farmers also rose
during this period, the greater increase in prices received by farmers caused
the parity ratio to rise moderately. In June the parity ratio was 97, compared with 95 in December 1949. The major rise in farm prices occurred
during the second quarter of 1950, but particularly noteworthy was the fact
that they rose also during the first quarter. There was no repetition of the
sharp break in farm prices which had characterized the first quarters of
1948 and 1949. (See appendix table B-23.)
The rise in farm prices during the first half of the year was due to a
combination of factors. Since most basic crops during the second half of
1949 were generally at or below support prices, this stimulated a heavy
movement into the loan program, thus reducing the free supply and
strengthening prices. The planned curtailment of 1950 acreage for the
basic crops, and the sharp reduction in the prospective yield of winter wheat,
caused some further upward pressure.

CHART 7

WHOLESALE PRICES
Wholesale prices moved upward during the first half of 1950. The
overall rise in industrial prices was moderate, but there were sharp
advances for some basic commodities. Farm and food prices rose
more than industrial.
PERCENT OF 1926 AVERAGE
220

PERCENT OF 1926 AVERAGE
220

200

200
FARM

PRODUCTS

180

160

140

..OTHER THAN FARM PRODUCTS
AND FOODS
(INDUSTRIAL PRICES)

120

•±

100 t^

o M I 1 1 1 1 1 1 1 1 iTi 1 1 1
1947
1946

d 100

iTi 1 1 iTI o
1948

1949

I960

PERCENTAGE CHANGES
DECREASE
POSTWAR PEAK TO JUNE 1950

ALL ITEMS

FARM PRODUCTS

OTHER THAN FARM
PRODUCTS AND FOODS

SOURCE: DEPARTMENT OF LABOR

The increase in incomes and employment in the first half of 1950 expanded
the demand for farm products. This was particularly true of meat and
livestock. The market for choice grades of beef cattle was strong. Hog
prices were weak during the first quarter of 1950, but rose sharply during
the second quarter. Not all farm commodities participated in the price
rise. Large seasonal increases in supply held down the prices of dairy
products, poultry, and eggs during the first six months of 1950.
Wholesale food prices rose 4.1 percent from the last month of 1949 to
June 1950. In June, they were slightly lower than a year earlier, and
14.6 percent below their postwar peak. The major rise took place during
the second quarter.
TABLE 2.—Changes in wholesale prices
Percentage change
Commodity group

December June 1949 to December
1948 to June December 1949 to June
1949
1949
1950

AH oommnditifis
Farm products
Foods. _
Other than farm products and foods _
Hides and leather products
Textile products
Fuel and lighting materials
TVTfttals and mfital products
Building materials
_ _
Chemicals and allied products
Housefurnishing goods
_.
Miscellaneous

.
_

_ _
__

Special groups:
Raw materials
Semimanufactured articles
Manufactured products

-4.9

-2.1

+4.0

-4.8
-4.6
-5.0

-8.2
-4.1
-.1

-3.5
-5.2
-5.2
-3.9
-5.3
-11.0
-2.1
—6. 3

+.6
-.5

-.5
-1.3
-.8
-.3

+7.1
+4.1
+2.3
+1.5
-1.2
+1.8
+2.4
+6.2
-.6
+1.9
+3.7

-4.5
-8.9
-4.4

-3.0
-1.2
-1.8

+5.1
+2.3
+3.7

1:1

Source: Department of Labor. (See appendix table B-22.)

Since the recent change in the international situation, wholesale farm
prices have risen 6 percent and food prices have gone up 7 percent. The
increase in farm prices is not quite as large as that which took place during
the first six months of 1950 but the increase in food prices is greater. Farm
and food prices are now at the highest levels since the beginning of 1949.
A large part of these increases is due to the advances in livestock and wholesale meat prices, which rose 9 percent and 10 percent respectively. Although
we are now in the period when supply seasonally declines, these increases
are far greater than would appear to be warranted by seasonal factors,
particularly since prices of these products were high before the Korean
development. Cotton and soybean prices also rose sharply, as well as prices
of fats and oils. The rise in cotton prices has been in part due to a substantial reduction in acreage, and in part to speculation.
Industrial prices rose 2.3 percent during the half year, but in June
they were 3.1 percent below their postwar peak. During the first quarter, these prices continued the over-all stability which had characterized

them since last June. This over-all stability was, however, the composite
of diverse movements. The prices of building materials were moving
up. Later in the quarter, textile prices began to decline, while those
of chemicals and some metals began to rise.
During the second quarter, as demand continued to expand, the general
level of industrial prices rose moderately. The increases were particularly marked for such materials as nonferrous metals, lumber, scrap
steel, and rubber. Textile prices, after some further decline, began to move
up in June. Chemical prices first showed strength and then declined,
mainly those of fats and oils.
The events in Korea have had a less pronounced effect thus far on the
general level of industrial prices than on farm and food prices. Since that
situation developed, industrial prices have advanced about \l/% percent.
However, individual commodities, mainly raw and semifinished, such as tin,
lead, many textiles, and chemicals, have advanced very sharply.
The steady advance in the prices of building materials during the half
year reflected the boom in residential construction. Building materials
prices increased 6.2 percent, and are up 7.4 percent from their August
1949 low. They have now virtually regained their postwar peak. There
has been a very sharp rise in lumber prices, and in June they hit a new postwar peak. Other prices showed only moderate changes during the first half
of the year, although brick and tile, cement, and structural steel reached
new postwar peaks. Paint and paint material prices have continued to
decline, with supplies of raw materials ample. The rise in building materials
prices has been accompanied by some increase in the prices of houses.
The prices of copper and zinc also advanced sharply, reflecting the boom
in durable goods, as well as purchases for the stockpiling program. Supplies of copper and zinc are below present levels of demand. Beginning
in March, the price of zinc underwent a series of increases which raised
it 50 percent. Copper began to advance in April, rising 22 percent to a
level 1 cent below its postwar peak of 23.4 cents per pound. On the
other hand, the price of lead displayed weakness during this period, as
supplies were ample to meet demand and the needs of the stockpile
program were not great. However, in July, the price of lead advanced
9 percent.
Capacity operations in steel increased the demand for scrap steel greatly,
causing prices to rise sharply. Then, after approaching their postwar peaks,
a moderate reaction occurred. Although no general advance in steel
prices occurred, individual companies raised their prices on particular products, while so-called conversion deals were numerous.
Rubber prices have more than doubled during the first half of
1950. The rise resulted partly from interruptions in normal marketing,
caused by political difficulties in the Far East, but primarily because demand
was increasing, particularly in the United States. In June, this market also
reacted somewhat, but late in the month under the influence of the develop894762—50

ments in Korea, rubber prices rose again to exceed their previous peak.
Increases in tire prices accompanied the rise in rubber prices, and the
advances in the prices of other industrial materials were accompanied by
some less extensive price advances at subsequent levels of fabrication.
Consumers3 prices. Consumers' prices rose 1.6 percent from December
1949 to June 1950. They fluctuated moderately during the first four
months, but increased sharply in May and June. The rise from April to
May was 1.3 points or 0.8 percent, and from May to June 1.6 points, or almost 1 percent—the greatest monthly increases since July 1948. In June,
the consumers' price index was slightly above the level of a year earlier, and
2.5 percent below its postwar peak. The sharp rise in wholesale food
prices since Korea indicates that retail food prices will probably increase
sharply in July, thus advancing the level of consumers' prices. Consumer
incomes have risen somewhat more than the increase in consumers' prices,
so that the real purchasing power of consumers increased moderately during
the half year.
The fluctuations in retail food prices have accounted for most of the
changes in the consumers' price index. Changes in other retail prices
have been moderate. Rents continued their steady upward creep. Apparel prices, which had declined steadily from late 1948, leveled off. The
cost of electricity and refrigeration rose slowly. Fuel prices rose through
the first four months of the year, and then declined seasonally. (See
chart 8, table 3, and appendix table B-21.)
TABLE 3.—Changes in consumers' prices
Percentage change
Item

December
1948 to
June 1949

All items
Food
Apparel
Rent .
Fuel, electricity, and refrigeration
House furnishings. _
_
Miscellaneous

__ _

June 1949 to
December
1949

December
1949 to
June 1950

-1.1

-1.2

+1.6

-.3
-5.0
+.9
-1.6
-5.7
+.1

-3.4
-2.4
+1.3
+3.0
-1.0
+.8

+3.7
+1.*4
-.6
-.1
-.1

Source: Department of Labor. (See appendix table B-21.)

Wages and related matters
Total wage and salary payments reflected the general pickup in economic activity during the first half of 1950. (See appendix table B-5.)
They rose to a seasonally adjusted annual rate of 139.8 billion dollars in the
second quarter, an increase of 4.6 billion dollars over the second quarter of
1949 and 4.3 billion over the first quarter of 1950. This increase was due
mainly to rising employment levels and higher wages for manufacturing
workers, although increased overtime also had some influence.

CHART 8

CONSUMERS' PRICES
Consumers prices, after moderate fluctuations during the first four
months of 1950, increased sharply in May and June because of large
advances in retail food prices. Rents continued to rise. Other prices
showed slight change.
PERCENT OF 1935-39 AVERAGE
220

PERCENT OF 1935-39 AVERAGE
220

200 -

'- 200

180 -

- 180

160 -

- 160

140

- 140

120 -

- 120

100 b

rfe:

d 100

0 I I I M I I I I I I I I I I I I I I I I I I M I I I I I I I I I I I I I I I I I I I I I I I I I I t I ll 0

1946

1947

1948

1949

1950

PERCENTAGE CHANGES
DECREASE

INCREASE
POSTWAR PEAK TO J U N E 1950

ALL ITEMS'

.4 J U N E 1949 TO J U N E 1950

FOOD

RENT

-'ALSO INCLUDES HOUSEFURNISHINGS.FUEL, ELECTRICITY, REFRIGERATION, AND MISCELLANEOUS GOODS
AND SERVICES NOT SHOWN ON THIS CHART.
1950 IS POSTWAR PEAK.

SOURCE: DEPARTMENT OF LABOR.

Average hourly earnings in manufacturing reached an all-time high of
$1.45 in June of this year, about 5 cents higher than a year earlier. These
increases have occurred in both durable and nondurable manufacturing.
The new minimum wage also brought about slight advances in average
hourly earnings in such industries as lumber and wood products, tobacco,
and apparel. Average weekly earnings of manufacturing workers reached
a new record level of $58.89 in June, about $4.38 above June 1949. (See
appendix tables B-ll, B-12, and B-13.)
In general, the pressure for wage advances in some industries and for
pension and insurance plans in others continued strong throughout the first
half of 1950. General wage advances were made oftener in nonmanufacturing industries than in manufacturing; wage advances were particularly noteworthy in the construction industry. The spread of pension plans
continued at a rapid pace. The number of organized workers affected by
new pension plans or by increased employer contributions to established
plans negotiated during the first five months of 1950 exceeded the total for
all of 1949. Many of the negotiations in 1950 were characterized by less
hesitancy than usual about making long-term commitments. Most of the
agreements negotiated this year, in contrast with many of last year's contracts, do not contain wage reopening privileges that can be exercised
before the end of the first contract year.
The contract announced on May 23 between General Motors and the
UAW-CIO is highly significant, because there are no provisions for reopening the contract within a five-year term. It also carried forward the two
basic principles underlying the wage provisions of the 1948 contract. First,
it provides for quarterly cost-of-living adjustments of 1 cent for each 1.14
points change in the Bureau of Labor Statistics Consumers' Price Index,
without limit upward, but reaching a lower limit at 3 cents below the present
cost-of-living allowance. Second, it provides for annual 4-cent increases in
wage rates based on a technological "improvement factor" in place of the
similar 3-cent provision of the previous agreement. Thus the new contract
gives renewed recognition to the principle of sharing productivity gains with
workers on a regular basis.
The company has also agreed upon company-financed pensions integrated
with Federal old-age and survivors insurance for workers retiring at
65 years or older with at least 10 years of service. Unlike other recent
labor-management contracts, the agreement provides for monthly benefits
exceeding $100 in the event of higher Federal old-age benefits. The agreement allows retirement for disability after 15 years of service and age 50,
liberalizes the present insurance plan without additional cost to employees,
and provides for company payment of half the cost of hospitalization and
surgical benefits for workers and their families.
The agreement between the United Mine Workers and the bituminous
coal operators provided for a general wage increase of 70 cents a day,
raising the daily rate to $14.75, and increased the operators' contributions

to the welfare fund from 20 cents per ton to 30 cents. The contract runs
until June 30, 1952, subject to earlier termination on or after April 1, 1951.
Anthracite miners and the Progressive Mine Workers of America were
provided with adjustments similar to those in the bituminous contract.
During the first five months of 1950, 20.4 million man-days of idleness
resulted from work stoppages, or twice as many as the 10.2 million man-days
idle during the first five months of 1949. This was due largely to the
Chrysler tie-up, which kept about 90,000 workers idle for 99 days, and to the
extended coal stoppages which finally involved over 300,000 miners. The
number of work stoppages was about 1,545 in the first five months of 1950,
compared with 1,612 stoppages in the first five months of 1949.
The 99-day Chrysler controversy was ended on May 4 with an agreement
which provides pension and social insurance benefits, increased vacation
pay for some workers, and some job and interplant wage adjustments. The
wage disputes in the telehone industry are now in the process of being
settled, company by company.
Profits
The general expansion in economic activity, and the rise in wholesale
prices during the first half of 1950, brought a sharp rise in business profits.
In the second quarter of 1950, corporate profits before taxes (not adjusted
for inventory valuation) were running at an estimated seasonally adjusted
annual rate of 31.0 billion dollars, compared with 26.4 billion at
'their low point in the second quarter of 1949, a rise of 4.6 billion or
about 17 percent. During the same period, the gross national product rose
12.8 billion dollars, or about 5 percent, demonstrating the greater volatility
of the profit structure. Corporate profits before taxes reached their postwar
peak in the third quarter of 1948, at an annual rate of 35.3 billion dollars.
(See chart 9 and appendix table B-29.)
After taxes, corporate profits in the second quarter of 1950 were at an
estimated seasonally adjusted annual rate of 18.9 billion dollars, compared
with 16.4 billion dollars in the second quarter of 1949. This represents
a return of over 4.5 percent on sales and almost 9 percent on net worth,
compared with over 4 percent and 8 percent respectively a year earlier.
Net income of farm proprietors before taxes in the second quarter of
1950 (after adjusting for changes in the value of physical inventories and
for seasonal variations) was at an annual rate of 11.6 billion dollars, compared with 13.7 billion a year earlier, a decline of 15 percent. This was
1.2 billion dollars below the first quarter level. The rise in farm prices
during the first half of 1950 was not sufficient to offset the effects of lower
marketings and higher costs.
Net income of unincorporated business and the professions (not adjusted
for inventory valuation) in the second quarter of 1950 was at a seasonally
adjusted annual rate of 23.6 billion dollars before taxes, compared with
20.1 billion dollars in the second quarter of 1949, a rise of about 17 percent.

This income component had been remarkably stable throughout 1949. (See
appendix table B-4.)
Although the general level of corporate profits was substantially higher
than a year earlier, the profit experience was markedly divergent among
industries. In the manufacturing field, the profits before taxes of
such industries as electrical machinery, automobiles, chemicals, building
materials, rubber products, paper and allied products, and textiles were
considerably higher during the first quarter of 1950 than a year earlier. On
the other hand, in such industries as apparel, petroleum, iron and steel,
machinery, transportation equipment, and nonferrous metals, profits during
the first quarter of 1950 were substantially below their levels a year earlier,
although in most cases they were running well above their 1949 low points.
The differential structure of profits reflects the uneven impact of the increase in the demand for different commodities, as well as the effect of
special factors such as that of the coal strike on the operation of the steel
industry. The expansion in the level of activity during the second quarter
of 1950 has improved the profit position of most industries. (See appendix
tables B-31 and B-32.)
CHART 9

CORPORATE PROFITS
Corporate profits during the first half of I960 rose as production
expanded and prices advanced. Dividends were at their postwar
high, and the level of undistributed profits also increased.
BILLIONS OF DOLLARS
40

BILLIONS OF DOLLARS
40
ANNUAL RATES, SEASONALLY ADJUSTED

PROFITS BEFORE
TAXES^

DIVIDEND PAYMENTS

j
2

I
3

1948

\
4

1949

28
I960

U NO ALLOWANCE FOR INVENTORY VALUATION ADJUSTMENT, SEE APPENDIX TABLE
£/ PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS.

SOURCE: DEPARTMENT OF COMMERCE

(EXCEPT AS NOTED)

B-4.

There continues to be a significant difference in the profit experience by
size of firm. The manufacturing corporations having assets of less than
1 million dollars reported profits in the first quarter of 1950 well below the
levels of a year earlier. The larger corporations were doing about as well
as a year earlier, while the largest corporations with assets of over 100 million
dollars were doing better. The lag in earnings of the smaller firms is accounted for by the fact that sales for these concerns during the first quarter
of 1950 were still substantially below the level of early 1949, while the sales
of the larger concerns were about as large. (See appendix table B-33.)
The availability of profits as a source of funds for different purposes is
greatly influenced by the trends in prices. When prices are rising, as they
were in the postwar period through 1948, part of the profits are locked up
in the higher replacement costs of inventories. When prices are falling,
affecting adversely the level of profits as in 1949, the lower replacement
costs of inventories free funds for other purposes. The funds thus freed
offset to that extent the reduction in profits as a source of funds for such
purposes as expansion of plant and equipment and the payment of dividends.
During the first half of 1950, wholesale prices rose, thus increasing the
replacement costs of inventories.
As the following table shows, the net availability of funds from corporate
profits after taxes, after allowing for the change in the costs of replacing
inventories, was at an annual rate of 16.8 billion dollars in the first half of
1950. While about 12 percent below the level in the first half of 1949, this
level was high enough to permit a further substantial increase in the liquid
assets of corporations after increasing the volume of dividends and financing
a high level of plant and equipment. (See table 4 and "Corporate Finance"
in the section on Business Investment and Finance.)
TABLE 4.—Corporate profits and changes in costs of replacing inventories
[Billions of dollars]
Corporate profits

Period

1946
1947
1948
1949

Before
taxes

Annual rates, seasonally adjusted:
1949— First half
Second half
._ _- _
1950— First half »
1

After
taxes

23.5
30.5
33.9
27.6

13.9
18 5
20.9
17.0

27.4
27.9
30.1

16.9
17.1
18.4

Net funds available from corporate profits
for other purChanges in
costs of reposes, after
placing invenallowing for
changes in
tories l
costs of replacing inventories
5.2

12 7
18 9
19 2

—2.2
—2.2

19.1
19.3
16.8

-2.2
1.6

Inventory valuation adjustment with sign reversed.
2 Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE: Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

8.7

2.0

The generally rewarding level of profits, reflecting the improved business
situation, has been one of the factors which encouraged business to expand
its plant and equipment expenditures substantially above levels previously
anticipated. (See appendix table B-17.) In the main, the level of profits
is ample enough to provide funds for a volume of investment higher than
that being currently undertaken, although many firms are exceptions.
MONEY AND CREDIT
The general upturn in business has been accompanied by a large rise
in credit during the first half of 1950. In contrast to early 1949, when
most types of credit expanded only slightly or declined, credit developments
this year have closely paralleled the expansionary pattern of 1948.
In the first six months of last year, total commercial bank loans contracted by 1.5 billion dollars. The decline came to an end during the
summer, and in the autumn a marked rise got actively under way. During
the last quarter of 1949, such loans expanded 1.3 billion dollars, or 500
million dollars more than in the fourth quarter of 1948. In the first six
months of 1950, loans of commercial banks rose 1.8 billion dollars, or
about the same as in the corresponding period of 1948. (See table 5 and
appendix table B-25.)
The rise in bank credit and other types as well during the first half of this
year reflected a very active demand for consumer and mortgage credit, and
credit for purchasing securities. Business loans showed a moderate seasonal
decline, but much smaller than last year's.
The total dollar volume of nonfarm mortgage recordings made by all
types of financial institutions attained a record level—nearly 7 billion
dollars—during the first six months of the year, nearly 30 percent above
the corresponding period of last year and almost 20 percent above the first
half of 1948. The net increase in mortgage debt was nearly 2.5 billion
dollars, bringing the total up to over 39.5 billion dollars at the end of
June. An important factor was the large-scale mortgage purchases of the
Federal National Mortgage Association.
TABLE 5.—Money and credit expansion—selected items
[Billions of dollars]
Percentage change during
the first half
, oftyear 1

Item

1948

Commercial banks:
Loans
Investments: total
U. S. Government securities -- _
Weekly reporting member banks:
Loans: total
Commercial, industrial, and agricultural
Instalment credit
Privately-held money supply
.

_
_
...

19502

+1.8
-4.2
-4.4

-1.5
+.6
+.6

+1.8
+.3
-.6

+.4
—.3
+1.1
-4.3

-1.7
-2.4
+ .5
-3.5

+ 7
-.3
+1.1
+.5

^Change based on data for December 31 and June 30.
2 Estimates based on incomplete data; by Council of Economic Advisers.
Source: Board of Governors of the Federal Keserve System (except as noted).

1949

Consumer instalment credit has been steadily rising since last spring,
and at the end of June reached a total of 12.0 billion dollars and was 2.9
billion dollars above the level of a year earlier. During the first half of
this year,, the rise was more than twice as large as in the first six months of
1949. Accompanying this rise, there has been a progressive relaxation of
credit terms. (See chart 10 and appendix table B-24.)
Credit for purchasing or carrying securities, most of which was advanced
by banks, also has risen markedly over the last year, but still is very small
in relation to total loans. Total customer borrowing on margin account
has increased about 500 million dollars, or about 75 percent since June 30 of
1949. Total commercial bank loans on securities other than Federal
Government securities amount to less than 5 percent of their total loans.
A seasonal decline in business loans is to be expected during the first
part of the year. This year the decline was very moderate. At the city
banks, a 300-rmllion-dollar decline in business and agricultural loans was reported for the first six months. It was no greater than the decline which
occurred in the first six months of 1948, and 2 billion dollars smaller than
CHART

CONSUMER CREDIT
Since June 1949, total consumer credit has expanded by 3.5
billion dollars, reaching a total of 19.6 billion.
BILLIONS OF DOLLARS
20

BILLIONS

OF DOLLARS

1948

1949

1950

END OF MONTH
J/ P R E L I M I N A R Y ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS.
SOURCE: BOARD OF GOVERNORS OF THE

FEDERAL RESERVE SYSTEM

(EXCEPT AS NOTED)

last year's. In June, business loans of city banks started to rise again at a
substantially more rapid rate than in 1948, whereas in 1949 it was August
before the contraction ended. Inventory buying associated with recent
international events probably will not be reflected in bank credit until
later. (See appendix table B-25.)
As a result of the concentration of tax payments which is normal for
the first quarter, and a decline of more than 3 billion dollars in the holdings
of Government securities by Federal Reserve and commercial banks, the
money supply (privately-held deposits and currency) decreased by about
2.7 billion dollars in the first quarter of 1950. (See appendix tables B-26
and B-27.) The decline, however, was only about one-half as large as
occurred in the first quarters of 1948 and 1949. The smaller first quarter
drain on private deposits this year was primarily a reflection of the change
in the Government's financial position brought about through smaller tax
payments and larger Government cash expenditures. In the second quarter
of the year, the money supply again rose substantially, more than offsetting
the first quarter decline.
The rise in borrowing has not resulted in a general tightening in credit
terms. Through the first half of the year, business loan rates and private security yields showed little change. Private financial institutions
showed increased willingness to make mortgage loans on more favorable
terms. (See appendix table B-28.)
In view of the substantial business recovery we have had in the past year,
the over-all rise in bank credit did not appear alarming prior to the
Korean development. But the rate at which credit has been advancing
recently as shortages have appeared in many sectors of the economy is a
cause for concern. Any substantial increase in defense expenditures will
make necessary effective measures of credit restraint.
THE FLOW OF GOODS AND PURCHASING POWER
Personal income, consumption expenditures, and saving
Personal income. Personal income in the second quarter of this year
attained an annual rate of 213.7 billion dollars seasonally adjusted, a gain
of 8.3 billion dollars, or 4 percent, over the last quarter of 1949. The
decline of 2.7 billion dollars at an annual rate from the first quarter of this
year was due to the reduced flow of payments on the veterans' life insurance
dividend. All major components of earned income except farm and rental
income were higher in the second quarter than in the first.
About 2.1 billion dollars (8.5 billion at an annual rate) was distributed
to veterans as a dividend on National Service Life Insurance in the first
quarter of the year. In the second quarter, the payment was largely completed by paying out an additional 500 million dollars (2.0 billion at an
annual rate). Over 14.5 million veterans received checks which averaged
about $180 apiece. While actual payments were concentrated in the first
quarter, the effects spread over a much longer period. Part of the rise in

CHART 11

PERSONAL INCOME
Personal income rose by almost I0)£ biUion dollars (annual rate),or
5.1 percent, from the second half of 1949 to the first half of 1950.
The peak in the first quarter was caused by the veterans' dividend.
BILLIONS OF DOLLARS

BILLIONS OF DOLLARS
250

200

—

200

BUSINESS, PROFESSIONAL, AND OTHER INCOME-//

150 —

100 —

100

1948

i949

-'OTHER INCOME CONSIST OF RENTS, INTEREST, AND DIVIDENDS
SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED)

I960

other income may be attributed indirectly to the dividend. (See chart 11.)
During the first half of 1950, total compensation of employees rose by
6.4 billion dollars to 146.6 billion dollars, but not all this increase was
reflected in take-home pay. The social security tax was increased from
2 to 3 percent of covered wages, effective in January, and there was an
increase in employer contributions to private funds, which are considered
as an addition to the compensation of workers. (See appendix table B-6.)
Business and professional income also rose throughout the first half of
this year. Farm income, the only principal component of income to
decline, fell by almost 10 percent. Since 1948, the decline has been in the
neighborhood of one-third. (See chart 11 and appendix tables B-4
andB-5.)
Almost all the increase in personal income was reflected in spendable
income, which increased 4.2 percent during the half year. (See appendix
table B-7.) Allowing for the lower level of prices, total real disposable income in the second quarter of 1950, although below the first quarter, was
2.8 percent higher than in the last quarter of 1948, the previous peak. But,
because of the upward trend in population, there was very little increase in
real per capita disposable income from the last quarter of 1948 to the second
quarter of this year. (See appendix table B-8.)
Distribution of income. Data showing how income is distributed among
high- and low-income receivers are not available for 1950. In the year
1949, for the first time since the end of the war, there was an increase in
the proportion of the Nation's spending units having less than $2,000 annual
money income. Thirty percent of spending units in 1948 had incomes of
less than $2,000, compared with 36 percent in 1947. In 1949, the proportion increased to 33 percent. (See table 6.)
TABLE 6.—Distribution of the Nation's spending units by income level
Percent of all spending units
Annual money income before taxes

Under $1,000
$1,000 to $1,999.
_
$2,000 to $2,999
$3,000 to $3,999
_
$4,000 to $4,999
$5,000 to $7,499
$7,500 a n d over _ _ _

.
__

.
„

All income groups

1945

1946

1947

1948

20
27
23
15
7
5
3

17
23
25
17
8
6
4

14
22
23
17
10
9
5

12
18
23
20
12
10
5

14
19
21
19
11
11
5

100

1949

Source: Board of Governors of the Federal Reserve System.

The drop in farm income, and higher unemployment in 1949 than in preceding years, contributed to the rise in the proportion of units having less
than $2,000. Both farmers and unskilled workers fared less well than
other occupational groups in 1949, according to the 1950 Survey of Consumer Finances. Recently, there has been a decrease in unemployment but
no gain in farm income.

Personal consumption expenditures. Personal consumption expenditures
at a seasonally adjusted annual rate of 184.5 billion dollars in the second
quarter of 1950 were 3.9 billion dollars, or 2 percent, above the last quarter
of 1949. Consumers' prices were slightly higher. (See charts 8 and 12.)
The payment of the NSLI dividend in the first quarter of 1950 undoubtedly had a major influence on the rise in consumer spending, especially
on the purchase of durables. In 1949, the strongest factor in the consumer
picture was the demand for automobiles, while sales of other durables and
nondurables were substantially below 1948. Automobile sales continued
to increase during the first half of this year. The most significant change
from 1949, however, was an increase of about 10 percent in purchases of
furniture and household equipment. Expenditures for food and other
nondurables also increased, and expenditures for services continued to move
upward, partly as a result of increases in rents and utility costs. (See appendix table B-2.)
Since mid-1948, service charges and rents have continued to rise, while
prices of consumer goods have declined. Because of this, from the third
quarter of 1948 total services have increased almost as much as total consumption expenditures. In actual quantities, however, purchases of goods
increased as rapidly as purchases of services throughout 1948 and 1949 and
more rapidly during the first half of 1950.
Personal saving and dissaving. The rate of saving in the first half of
this year has been greatly distorted by the payment of 2.6 billion dollars of
the veterans' dividend on National Service Life Insurance. A considerable
part of this was used to add to liquid assets, to retire debt, or to buy homes,
all of which adds to saving. The total volume of personal net saving rose
from 6.2 billion dollars at an annual rate in the fourth quarter of 1949 to
15.3 billion in the first quarter of 1950, when most of the veterans' dividend
was distributed. Personal saving then declined to 10.1 billion in the second
quarter.
The rate of saving in relation to disposable income in the postwar period
has fluctuated greatly. After reaching a low in the second quarter of 1947,
savings rose rapidly to a peak in the fourth quarter of 1948, and then declined as income declined in 1949. A major part of the fluctuation was
probably due to changes in direct investment in personal business, particularly in inventories, while "household" saving has been more nearly constant. The sharp rise in saving in 1948 was associated with tangible investments in farms, businesses, and homes, while the increase in debt was larger
than the increase in financial assets. (See table 7.) In the recession year
1949, on the other hand, increases in financial assets were slightly greater
than in 1948, and there was a less rapid growth in mortgage debt, consumer
credit, and personal business debt. Investment in homes declined moderately, and investment in personal businesses dropped by 5 billion dollars.
Similar detail is not available for 1950, but it is evident that, as a result of the

CHART

PERSONAL INCOME, SPENDING, AND SAVING
Consumer incomes rose substantially in first half of I960 due in part to
payment of the National Service Life Insurance dividend. Expenditures
rose less than income and the rate of saving increased.
BILLIONS

OF D O L L A R S

BILLIONS OF DOLLARS

210

ANNUAL RATES, SEASONALLY ADJUSTED

DISPOSABLE PERSONAL INCOME
(PERSONAL INCOME LESS TAXES)

200

190

180

PERSONAL CONSUMPTION
EXPENDITURES
170

170

160

150

I
3

I
2

1948

I
3

1949

I960
PERCENT

PERCENT
15

15
PERSONAL NET SAVING
AS PERCENT OF DISPOSABLE INCOME

10 -

r~i

1948
-^

•*

-*"!

'-'

_
5

! EI n,
3

1949

PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS.

SOURCE: DEPARTMENT OF COMMERCE

(EXCEPT AS NOTED)

rn_

<
o
1

2-^

1950

veterans' dividend, cash and deposit holdings, after allowance for seasonal
factors, have increased at a more rapid rate than in the rise in debt.
The net addition to personal saving of 10.9 billion dollars in 1948 and
8.6 billion in 1949 represents a much larger total saving on the part of
those families whose assets increased more than their debts, offset in part
by dissaving on the part of other families. Slightly more than 3 out of
every 10 spending units spent more than they earned in 1949, a somewhat
larger proportion than in 1948, according to the 1950 Survey of Consumer
Finances. In 1949, as in previous years, large numbers of families at all
income levels spent more than they earned. Between 1948 and 1949, however, the increase in dissaving was almost wholly among families with
incomes under $3,000.
TABLE 7.—Components oj personal saving
[Billions of dollars]
Item

1948

Increase infinancialassets

Currency, deposits, U. S. Government bonds, and saving and loan shares
Insurance reserves (private)
__ . .
Corporate and State and municipal securities
Less* Increase in debt
Mortgage debt (residential)
Consumer debt
Business debt

Equals: Net financial saving

1949

7.8

8.0

14
3.5
29

1.9
3.8
24

41
2.5
29

35
2.3
22

—1.7

Plus: Net tangible investment

. _

Personal business investment
Purchases of new homes

12.6

7.0

6.4
6 2

1.3
5.6

10.9

8.6

Plus* Errors and omissions

1.6

Equals' Net personal saving
NOTE.—Detail will not necessarily add to totals because of rounding.
Sources: Department of Commerce and Securities and Exchange Commission.

Dissaving may take the form of liquidating bank deposits or other assets,
or increases in consumer credit. The rapid rate of increase in consumer
debt in the latter part of 1949 has been resumed, after the normal seasonal
contraction, during the first part of this year. The veterans' dividend had
no discernible effect in reducing instalment debt, and in the case of automobile purchases it may have stimulated debt incurrence by furnishing a
down payment. As shown in chart 10, by the end of June 1950 consumer
debt had risen to 19.6 billion dollars, or over 3.5 billion above a year earlier.
The ratio of consumer debt to disposable income was only slightly below
that during the same period in 1939. Mortgage debt also rose rapidly
in 1949 and the first half of this year.
The rapidity of the rise in personal debt, which has been growing faster
than income since 1947, has given rise to some concern that the volume
of debt is becoming too high for economic stability. In 1949, over 50

CHART 13

PERSONAL INCOME AND DEBT
The ratio of personal debt to income at the end of last year was
far below that of 1929 and 1939.
BILLIONS OF DOLLARS

BILLIONS OF DOLLARS

200

150

100

DISPOSABLE
PERSONAL
INCOME

50
PERSONAL
-*-DEBT I/

1929

1939

1945

1948

1949 &

L/ END OF YEAR.
£/ PRELIMINARY ESTIMATE FOR PERSONAL DEBT BY COUNCIL OF ECONOMIC ADVISERS.

SOURCE: DEPARTMENT OF COMMERCE

(EXCEPT AS NOTED)

percent of consumer units had debts of some kind, about 20 percent had
mortgages on homes, and 22 percent had instalment debt. However,
total personal and noncorporate debt and interest in relation to incomes
are now much lower than prewar. As chart 13 shows, the ratio
of noncorporate debt to personal disposable income has fallen from 87 percent in 1929 and 74 percent in 1939 to 47 percent in 1949. As a result
of the lower debt ratio and of lower interest rates, the ratio of personal
interest payments to disposable income was only 2.7 percent in 1949, compared with 7.9 percent in 1929 and 4.6 percent in 1939. Furthermore, many
families who have gone into debt also have reserves of liquid assets. Since
the war, financial assets have grown as rapidly as personal debt.
The stock of financial assets in the hands of consumers, farmers, and
personal business is now above 400 billion dollars or over twice as great as
annual disposable personal income. About half these assets are in a form
readily convertible into cash. The ratio of total financial assets to income
has fallen since 1939, principally because of the rise in the price level.
The ratio of liquid assets, including cash, Government bonds, and saving and

loan shares, to personal income after taxes has risen from about 80 percent
to over 100 percent.
Nevertheless, there are disturbing factors in the debt and asset situation.
The distribution of liquid assets is highly concentrated in the upper income
groups. The upper 20 percent of families, in terms of annual income, owned
54 percent of bank deposits and Government bonds in early 1949. These
groups also hold large amounts of corporate and State-local securities which
are not commonly owned by families with less income. At the beginning
of 1950, 31 percent of all spending units had no Government savings bonds
or bank deposits, a slightly higher proportion than in 1949, and 58 percent
had less than $500. (See table 8.) Fifty-six percent of the spending
units in the under $1,000 income group, and 39 percent in the
$1,000-$3,000 income group, had none of these assets at the beginning of
1950. This concentration of liquid assets among higher income groups
does not provide as accessible a reservoir of purchasing power as if they
were more broadly distributed.
Moreover, while the level of personal debt and the interest burden are
still relatively low, some categories of debt have been rising very rapidly,
particularly consumer instalment debt and mortgage debt. The increase
in consumer credit, which has been stimulated by progressive lengthening
of repayment periods and lower down payments, has been a potent factor
in the high and increasing demand for houses and for consumers' durables.
The stepped-up military requirements since the Korean development will
involve increased demands for many of the important types of materials
which are already in short supply and which are used in the production
of these consumer items.
TABLE 8.—Percentage of the Nation's spending units having no liquid assets or less
than $500 1
Annual money income before taxes
Asset holdings and period

All
spending
units

No liquid assets:
1947
1948
1949 2
1950
Liquid assets of less than $500 or no liquid assets:
1947
.
__
1948
1949
1950 2
. _

Under
$1,000

$1,000$2,999

$3,000$4,999

$5,000
and over

24
27
29
31

51
56
56
56

27
34
38
39

10
14
19
21

2
5
4

50
54
57
58

78
77
79
78

58
66
67
68

34
45
54
53

10
15
22
26

12 Includes deposits, saying and loan shares, and U. S. Government bonds. Does not include currency.
Estimates based on incomplete data.
Source: Board of Governors of the Federal Reserve System.

894762—50

Business investment and finance
Gross private domestic investment during the second quarter of 1950
was running at a seasonally adjusted annual rate of 44.0 billion dollars,
compared with the low point of 31.2 billion in the fourth quarter of 1949,
a rise of nearly 13 billion. (See chart 14, table 9, and appendix table B-3.)
During the same period, the gross national product increased by 14.2 billion
dollars, from a seasonally adjusted annual rate of 253.8 billion to 268.0
billion. (See appendix table B-l.)
The all-time peak rate of gross private domestic investment (46.8 billion
dollars) was reached in the fourth quarter of 1948. This was 17.5 percent of the gross national product, contrasted with 16.6 percent for the
year 1948, 12.9 percent for the year 1949, and 16.4 percent in the second
quarter of 1950.
The greater part of the fluctuation in total business investment in the
past 2 years has occurred in the inventory component. As table 9 shows,
the annual rate of business investment exclusive of inventories (i. e.5 investment in construction and equipment alone) dropped by only 2.5 billion
dollars from the fourth-quarter 1948 peak to the third-quarter 1949 low,
and then rose by 5.7 billion dollars to an all-time record rate of 42.0 billion
in the second quarter of 1950. New highs were also reached in the second
quarter in outlays for producers' durable equipment and for private housing,
the two largest components of the private construction and equipment total.
TABLE 9.—Gross private domestic investment 1
[Billions of dollars, annual rates, seasonally adjusted]
Total gross
private
domestic
investment

Period

Construction and equipment

Total

Nonfarm
residential
construction

Other
private
construction

Producers' Inventory
change >
durable
equipment

1948: Second half

46.2

38.7

8.6

9.4

20.6

+7.6

1949: First half
Second half . .

34.4
31.6

36.9
36.6

7.7
8.9

9.3
8,6

20.0
19.0

-2.5
-5,0

1950: First half

. .-

1948: Third quarter
Fourth quarter
1949: First quarter-.
Second quarter
Third quarter
Jb'ourth quarter
1950: First quarter...J
Second quarter

42.2

40.6

11.3

8.9

20.4

+1.6

45.7
46.8

38.6
38.8

8.8
8.3

9.4
9.5

20.4
20.9

+7.1
+8.0

37.5
31.3
32.1
31.2

37.2
36.6
36.3
36. S

7.8
7.6
8.2
9.5

9.4
9.2
8.7
8.6

20.1
19.8
19.4
18.7

+.3
-5.3
-4.2
-5.7

40.5
44.0

39.2
42.0

11.0
11.6

8.9
8.9

19.3
21.5

+1.3
+2.0

i See appendix table B-3 for further details.
»After inventory valuation adjustment.
* Estimates based on incomplete data; by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

Plant and equipment. After a steady but moderate decline during 1949,
total outlays for plant and equipment (on a seasonally adjusted basis) rose

CHART 14

BUSINESS INVESTMENT
Most of the change in gross private domestic investment since early
1948 has reflected inventory movements. Investment in producers1
equipment and in housing reached new highs in the second quarter
of I960.
BILLIONS

OF DOLLARS

BILLIONS

DOLLARS

ANNUAL RATES, SEASONALLY ADJUSTED

TOTAL GROSS PRIVATE
DOMESTIC INVESTMENT
40

PRODUCERS' DURABLE
EQUIPMENT
20

NET CHANGE IN *r
BUSINESS INVENTORIES

\
\

-10

-10
I

1948

1949

I960

J-/ PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS.
SOURCE: DEPARTMENT OF COMMERCE

(EXCEPT AS

NOTED)

substantially during the first half of 1950. (See appendix table B-3.)
These fluctuations reflect mainly a 1949 decline and a 1950 recovery in
purchases of equipment.
An upward trend in new orders received by producers of machinery and
equipment set in during the latter part of 1949, and became more pronounced in early 1950. There is no sign yet of any slackening in these
orders. The general improvement in business conditions has created more
optimistic anticipations, and greater stress is being placed on reduction of
costs by replacement of obsolescent equipment.
The most recent survey of anticipated business plant and equipment outlays, conducted by the Department of Commerce and the Securities and
Exchange Commission in April and May, pointed to a sustained high level
of such investment during the latter part of this year. (See appendix
table B-17.) For the third quarter, respondents anticipated plant and
equipment outlays somewhat greater than those of the corresponding quarter of 1949, and much more than seasonally higher than those of the first
quarter of 1950, when expenditures were curtailed by steel shortage due to
work stoppages. The third-quarter outlook reported in the survey reflects
the expectations of profitable investment by public utilities and manufacturers at higher levels than a year earlier; businessmen in the other major
fields estimated their outlays in both the second and third quarters of 1950
at a little below those of a year before. On the basis of the reports for the
first three quarters of 1950, it would appear that plant and equipment outlays for the whole year 1950 may set a new annual record in the gas and
electric utility field, and may nearly equal 1949 for nonfarm business as a
whole.
Nonfarm inventories. A major development during the first quarter of
1950 was the resumption of nonfarm inventory accumulation. This was
a large element contributing to the recovery movement of the economy
during the first half of the year. Under the stimulus of expansion in
demand in the first half of 1950, the level of production was restored to
the point where a substantial accumulation of inventories is again taking
place.
During the first quarter, nonfarm inventories were being accumulated
at a seasonally adjusted annual rate of 2.1 billion dollars. In the second
quarter, the rate rose to 2.6 billion. Compared with a peak annual rate
of liquidation of 4.7 billion in the fourth quarter of 1949, this represented
a net upward shift of 7.3 billion, accounting for half of the total rise in
gross national product. (See appendix table B-3.)
The rate of growth of inventories reached in the second quarter of 1950
may be slightly in excess of what will be needed on the average to keep
pace with the historical long-run trend of business expansion. Stocks do
not appear excessive in relation to current production and sales. At mid-

year, however, there were some evidences of efforts to accumulate extra
inventories in anticipation of possible shortages.
The book value of business inventories in manufacturing and trade
rose from 53.6 billion dollars at the end of December 1949, on a seasonally
adjusted basis, to 55.2 billion dollars at the end of May 1950. In dollar
terms, they were still about 6 percent below the peak level of 58.6 billion
dollars reached in November 1948. But when adjusted for changes in
prices, the current volume of inventories is probably close to the peak level.
The largest increases in book value of inventories have taken place in the
trade segment. In the first five months of 1950, the book value of retail
inventories increased about 4.2 percent and that of wholesale inventories
about 4.7 percent, after allowance for seasonal variation. The increase
in manufacturers' inventories was only 1.9 percent. During the previous
period of inventory liquidation, the largest decline had been in manufacturers' inventories, which fell more than 11 percent from January to
November 1949. Trade inventories fell 8 percent from the November
1948 peak to December 1949. (See appendix tables B-18, B-19, and
B-20.)
Corporate finance. During the first half of this year, reflecting changes
in working capital needs, the total financial requirements of corporations
were considerably above the first half of 1949. In the first six months of
last year, corporations liquidated about 4 billion dollars of their inventory holdings and accounts receivable. This year the working capital
requirements of corporations increased. With their plant and equipment
expenditures only 600 million dollars below the level of a year ago, their
financial requirements for plant and equipment, inventories, and receivables were 4.5 billion dollars above the first half of 1949. Corporations
continued to increase their liquid asset holdings at about the same rate as
a year ago despite their larger requirements for funds. (See chart 15 and
appendix table B-34.)
Corporations as a group were able to meet from internal sources of funds
all of their financial requirements for plant and equipment outlays and
for additions to inventories. During the first half of the year, rising
total profit levels permitted an increase in retained earnings about 15 percent above the first six months of 1949, while dividend payments continued
to increase. The total amount of funds obtained by corporations from
outside sources was less than 2 billion dollars, and exceeded by only
some 400 million dollars the amount corporations themselves invested in
further liquid asset accumulation. Last year, when their investment in
inventories and customer accounts was declining, corporations were able
to finance their plant and equipment expenditures internally, and in addition they had sufficient funds to retire debt and accumulate liquid assets.
The experience during the last 18 months, when corporations on balance
were self-financing, is in striking contrast to the developments in the period

1946-48 when they needed more than 10 billion dollars annually from
external sources.
New security issues (the bulk of which were public-utility issues) were the
only important source of external funds during the first half of the year.
The total volume of funds obtained from this source was about 1 billion
dollars less than during the first six months of 1949; but a higher portion was
in stock issues.
Corporate bank loans and trade debt showed a moderate seasonal decline
during the first half of the year. To a smaller extent than last year proceeds
from new security issues were used to retire bank loans.
CHART 15

SOURCES AND USES OF CORPORATE FUNDS
The total corporate financial requirements for inventories, receivables and
plant and equipment were substantially higher in the first half of I960
than in the corresponding period of 1949. On an overall basis, internal
sources of funds were adequate to meet these requirements.
BILLIONS OF DOLLARS

-4

-2

SOURCES
i;;i949,'iFiRST"HALPi;i;;:i:i:i:ii;|

RETAINED
EARNINGS

|[l950v FIRST

... "

DEPRECIATION
RESERVES

OTHFR
|ij(
SOURCES^

HALFJ/

^^^^^

USES
PLANT AND
EQUIPMENT OUTLAYS

CHANGE!' , , ,

iiMCvMiixM^^^^^^^^^^^

.„..,'

IN INVENTORIES

OTHER
USES

ii;j949,yFiRsfiHALFiii;i£

•
L

.//PROFIT ESTIMATES FOR 1950, FIRST HALF, BY COUNCIL OF ECONOMIC A D V I S E R S .
I/ NEGATIVE ITEM IN 1949 RESULTED FROM DECLINE IN TRADE PAYABLES, FEDERAL INCOME TAX LIABILITY, AND BANK LOANS.

SOURCES: DEPARTMENT OF COMMERCE ESTIMATES BASED ON SECURITIES EXCHANGE
COMMISSION AND OTHER FINANCIAL DATA (EXCEPT AS NOTED).

Though there are substantial differences between the financial positions
of large and smaller corporations, on an over-all basis corporate liquidity is
very high at the present time. At the end of June, corporations held around
40 billion dollars in cash, deposits, and Government securities, only about
2 billion dollars less than their total accumulation at the end of the war.
As a measure of their liquidity, the ratio of their cash, deposits, and Government securities to their current liabilities is now about 70 percent, compared with 61 percent at the end of 1948, 64 percent at the end of 1947,
93 percent at the end of 1945, and about 45 percent in 1940 and 1941.
This present high degree of liquidity of business corporations, together
with rising profits and the favorable business outlook, should promote a
continued high level of business investment and perhaps a further increase.
The major problem now is to channel investment into those areas where
it is most needed to support our increasing international commitments.
Construction. Construction activity was at a peacetime high during the
first half of 1950 whether measured in dollars or in physical terms. It was
a strong expansionary force during this period. Total new construction activity, including both public and private, was running at an annual rate
of 26.4 billion dollars in June, about 20 percent higher than a year earlier.
For the first half of 1950, total construction activity was at an annual rate
of 25.9 billion dollars, up 17 percent from the first half of 1949. About
three-fourths of the current outlay is private and one-fourth public. The
new peak in construction activity is in major part the result of the housing
boom, which began in the late spring of 1949. (See appendix table B-16.)
The very high current rate of construction involves heavy demands for
labor and materials. Construction wages and the prices of building materials have been rising since midsummer of 1949.
Private construction activity during the first six months was at an annual
rate of 19.1 billion dollars, a rise of 20 percent, compared with a year earlier.
Nonfarm residential construction activity rose 47 percent, while other private
construction declined about 5 percent. Nonfarm housing starts reached the
unprecedented level of 142 thousand units in June, after making new records
in March, April, and May with 110 thousand, 126 thousand, and 140
thousand, respectively. For the first six months, starts totaled 680 thousand
compared with 449 thousand during the same period of 1949, a rise of over
50 percent. The unusually mild winter in much of the country was a
factor in achieving this high level of starts, but housing starts have continued very high throughout the first half of the year.
The increase in the construction of private multifamily units, which was
so noticeable in 1949, continued in 1950. Nearly 37 percent more multifamily units were started in the first six months of 1950 than in the same
period of 1949, facilitated by the use of section 608 of the National Housing
Act which provides for insurance of loans for rental projects.
Nonresidential private construction during the first half of 1950 was
somewhat lower than in the first half of 1949. Construction of stores,

restaurants, and garages was slightly higher, while factory construction
was considerably less. Industrial construction rose more than seasonally
through the first half of 1950, however, and the increase in contracts
indicates a further rise. Public utility construction outlays during the
first half of 1950 were 6 percent below the first half of 1949, and farm
construction was down 16 percent. On the other hand, private institutional construction was at higher levels during the first half of 1950 than
a year earlier, v/ith large rises reported for hospitals and religious
institutions.
Public construction in the first half of 1950 was at an annual rate of
6.8 billion dollars, a rise of 9 percent over a year ago. The largest increases
were for schools, hospitals, and other types of public building where the
needs are still great. Expenditures for conservation and development also
showed a large increase. Highway expenditures were slightly higher than
during the first half of 1949.
Expenditures for public housing were substantially higher in the first
half of 1950 than a year earlier, although the level of activity is still low.
Moreover, after expanding rapidly in the second half of 1949, the rate of
activity leveled off during the first half of 1950. During the first six months
of 1950, the number of public housing starts was less than 10 thousand, compared with about 23 thousand in the same months of 1949. Most of the
public housing has been under State or local auspices. Federal subsidized
low-rent housing under the Housing Act has been relatively insignificant
in amount.
International transactions
In the first half of 1950, both United States exports of goods and services
and the surplus of these exports over imports were running at a rate of
4 to 5 billion dollars a year less than during the first half of 1949. With
the shrinkage of United States exports that has taken place over the past
12 months, exports and the export surplus were reduced for the first time
since the war to a proportion of the gross national product not significantly
greater than before the war. Thus, their importance as a factor in the net
demand for United States production was considerably reduced. Their
relation to gross national product in recent periods, compared with prewar
and with their postwar peak, is shown in table 10.
TABLE 10.—United States international transactions as percent of gross national product
[Percent]
Exports of
goods and
services 1

Period
1936-38 average _
Annual rates:
1947, first half (postwar peak)
1949 first half 2
1950, first half

1
2

Export
surplus i

4.8

4.2

0.6

8.8
68
4.9

3.6
39
3.9

5.2
2 9
1.0

Includes income on investments.
Estimates based on incomplete data; by Council of Economic Advisers.
Source: Department of Commerce (except as noted).

Imports of
goods and
services 1

CHART 16

EXPORTS AND IMPORTS
OF GOODS AND SERVICES
The continued reduction in exports in the first half of I960, together
with the rise in imports, resulted in the lowest export surplus since
the war.
BILLIONS OF DOLLARS

BILLIONS OF DOLLARS

5 —

- 5

I
2 I960
I/

INCLUDES INCOME ON INVESTMENTS.

& PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC A D V I S E R S .

SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED)

The decline in the export surplus since the first half of 1949 resulted
almost entirely from a fall in total exports; imports of goods and services
rose only slightly in value. It should be noted that a considerable part of
the decline in the export surplus and most of the decline in total exports
had already taken place by the end of 1949. Further declines occurred
in the first quarter of 1950 but in the second quarter it appears from preliminary data that the trend has been stopped. (See chart 16 and table 11.)
Although the value of imports of goods and services in the first half of
1950 was only slightly higher than in the first half of 1949, this value
represented a significant increase above the second half of 1949, especially
when seasonal factors in our imports of services are taken into account.
The change in our export surplus since the second half of 1949 resulted
about equally from a fall in our exports of goods and a rise in our imports
of goods, nonseasonal changes in services having been relatively small. The

rise in merchandise imports brought their dollar value back to the prerecession level of early 1949. (See appendix table B-35.)
TABLE 11. — United States exports and imports of goods and services
[Billions of dollars]
Exports of
goods and
services 1

Period

1936-38 average
19461947—
1948
1949—

Imports of
goods and
services *

Surplus of
exports of
goods and
services *

4.1
14.7
19.8
17.1
16.0

3.6
7.0
8.3
10.4
9.7

0.5
7.8
11.5
6.7
6.2

17.9
17.3
16.1
17.0

10.0
10.0
10.9
10.6

8.0
7.3
5.2
6.5

17.3
17.8
14.7
14.0

10.2
9.7
9.4
9.6

7.1
8.1
5.4
4.4

12.8
13.2

10.1
10.4

2.6
2.8

Annua 1 rates:
1948— First quarter
Second quarter _ _
Third quarter
Fourth quarter
194 9— First quarter
Second quarter. _ _
Third quarter
Fourth quarter . .
1950— First quarter 2
Second quarter

_ _ _
_

_ _ _ _ _ _ __

1
8

Includes income on investments.
Estimates based on incomplete data; by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

This expansion in the dollar value of merchandise imports in the first
part of 1950 continued a movement which had begun with the recovery
of United States business activity in mid-1949, before the devaluation of
foreign currencies. This is brought out by the monthly figures shown in
chart 17. It has taken the form mainly of an increase in the quantity
of goods purchased. Despite declining dollar prices, particularly in semimanufactured products, which followed the devaluations abroad, sharply
rising world prices for foodstuffs, mainly coffee and cocoa, and subsequent
increases in certain raw materials, such as rubber, and semimanufactured
materials such as copper, have given average import prices a slightly rising
tendency. Upward movements were sharply accentuated by the outbreak of
hostilities in Korea.
The additional dollars which the recent rise of imports made available
to foreign countries were more than offset by the decline in our foreign
aid, which was being provided during the first half of this year at an annual
rate about 2 billion dollars lower than in the first half of 1949. (See table
12 and appendix table B-37.) Since foreign purchases from us were
considerably below their 1949 levels, however, foreign gold and dollar
reserves increased substantially.
The reduction of Government aid in accordance with the reduced needs
of foreign countries^ and the replenishment of their gold and dollar reserves,
are both desirable. Foreign reserves are still below adequate levels. The
reduced figure for the net outward flow of American capital in the first

quarter of this year resulted from an accelerated return of short-term
capital, as foreign countries repaid commercial debts to us. This bulge
in debt repayment is a desirable but temporary phenomenon.
The decrease of merchandise exports brought their value in the first
five months of 1950 down 28 percent below the first five months of 1949, and
brought their quantity down by 22 percent. The decline has affected nearly
all important commodities except cotton, the exports of which have in fact
increased. The largest absolute drop, accounting for one-third of the reduction in total exports, was in shipments of certain foodstuffs, namely, wheat
and other grains. Among the other commodities most affected were
machinery, iron and steel-mill products, automobiles, textiles, coal, petroleum, and tobacco.
TABLE 12.—Financing the surplus of goods and services supplied to foreign countries
[Billions of dollars]
Means of financing
Period

1936-38 average
1946
1947

1948
1949

Annual rates:
1948— First quarter
Second quarter
Third quarter
__
Fourth quarter
1949— First quarter
Second quarter
Third quarter
Fourth quarter
1950— First quarter
Second quarter

Surplus of
Liquidation
exports of
S. Gov- of foreign
goods and U.
gold and
ernment
services *
dollar
sources a
assets s
(net)
(net)

Outflow
of United
States
private
capital *
(net)

0.8
1.9
4.5
.8

-0.2
.4
.8
.9
.6

-0.1
.5
.4

Other
means of
financing •
(net)

0.5
7.8
11.5
6.7
6.2

5.0
5.8
5.1
5.9

8.0
7.3
5.2
6.5

5.4
3.8
4.5
6.5

1.3
2.1
.6
-.9

.9
1.2
.9
.5

.4
.2
-.8
.3

7.1
8.1
5.4
4.4

6.7
6.6
5.9
4.6

1.5
.3
-1.8

.7
.5
.6
.6

-.3
-.5
-1.5
1.0

2.6
2.8

4.4
4.9

-1.9
-2.8

.3
.8

-.3
-.1

-.3

1
Includes income on investments.
2
Includes grants and loans but excludes subscription to the capital of the International Bank for Reconstruction
and Development and the International Monetary Fund. For detail,' see appendix table B-37.
3
Includes net sales of gold to the United States and net liquidation of foreign dollar assets, including longterm investments. Excludes liquidation of assets held by the International Bank and the International
Monetary
Fund.
4
Includes both long-term and short-term capital but excludes purchase of obligations of the International
Bank.
6
Includes private gifts, net dollar disbursements by the International Bank and the International Monetary
Fund, and allowance for errors and omissions.
6
Estimates based on incomplete data; by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

The decline of exports appears to have ended in the first few months of
the year, and the levels then reached may be maintained or perhaps exceeded
in the second half of this year, even apart from any increases that may
result from recent international developments.
Effects of devaluation on United States foreign trade. The effect of the
currency devaluations upon our imports appears so far to have been rela-

CHART 17

EXPORTS AND IMPORTS
QUANTITY AND UNIT VALUE
Both the quantity and unit value (average prices) of exports in early
I960 were below the second half of 1949. The quantity and unit value
of imports were higher.
PERCENT OF 1 9 3 6 - 3 8 AVERAGE
300

PERCENT OF 1936-38 AVERAGE
300

U.S. MERCHANDISE EXPORTS

200 -

- 200

100

PERCENT OF 1936-38 AVERAGE
300

J F M A M J J A S O N D j J F M A M J

PERCENT OF 1936-38 AVERAGE
300

U.S. IMPORTS FOR CONSUMPTION

- 200

200 -

100

1949
SOURCE: DEPARTMENT OF COMMERCE.

I960

lively limited. Until recently, the average dollar price of our imports was
about 5 percent less than in early 1949, though above the June-November
1949 levels. The quantities, except in the case of foodstuffs, are greater.
Most of the price decline since early 1949, however, was not attributable
to the devaluations, since the declines occurred to a considerable extent
before devaluations took place.
The increase in the quantity of goods imported has undoubtedly been
given some impetus by the lower values of foreign currencies. But part
of the increase since last summer probably reflects the temporarily depressed
level of purchases at that time caused by the expectation that devaluation
might occur. It is also to be noted, from chart 17, that the quantity of
imports, particularly of crude and semifinished materials, began to rise with
the recovery in United States business activity, somewhat earlier than
can be accounted for by devaluation. Moreover, the sharpest increases in the
first few months after devaluation occurred in imports of crude foodstuffs;
these increases appear to have resulted largely from seasonal factors, not
from devaluation. (See chart 17 and appendix tables B-43 and B-44.)
So far as exports are concerned, shipments of food, semimanufactured and
finished manufactured products declined somewhat after devaluation, but
in recent months exports of the latter two classes of commodities appear
to have recovered slightly, while exports of crude materials are substantially higher than they were in the months preceding devaluation. (See
appendix tables B-40 and B-41.)
Prior to the devaluations, many foreign countries were already intensifying restrictions on imports from us in order to stop losses of gold and dollar
reserves. To this extent devaluation, by making our goods more expensive
abroad, may have been in large part a substitute for direct import restrictions
that had been or would otherwise have been imposed, rather than a cause
of additional curtailment of our exports. It seems clear, however, that
devaluation has contributed to the recent improvement in the dollar positions of many countries by shifting price relationships between goods that
foreign countries must pay for with dollars and goods that can be paid for
with other currencies.
Changes in areas of total export surplus. The decline in our exports of
goods and services to countries participating in the European Recovery
Program, their dependencies, and nonparticipating countries in the sterling
areas, accounted for nearly one-half of the total reduction in our export
surplus of goods and services from the first quarter of 1949 to the same period
of 1950. But we maintained a large surplus with Western Europe, and also
with Japan. As a result of our lower exports to, and our heavier purchases
from other parts of the world, particularly the Latin American Republics,
our export surplus with these other major areas was reversed. (See appendix table B-36.) For the first time since the war we developed an import
surplus with the Latin American countries as a group, and with the nonEuropean countries in the sterling area. We also had an import surplus

on merchandise trade alone with Africa and Australia, and an approximately balanced merchandise position with Canada for the first time since
the war. (See appendix tables B-38, B-39, and B-42.)
This development should not be interpreted as meaning that dollar payments are now purely a Western European and Japanese problem. In the
first place, the developments in the first quarter of 1950 may be partly temporary. But more fundamental are two other considerations. One is that the
cut in our surpluses with some areas results in part from the enforcement in
these areas of more rigorous restrictions by them against imports from the
United States. To this extent, the reduction in our export surplus with the
world as a whole and with particular areas may mean not that their excess
demand for dollars under existing world price relationships has disappeared
but merely that it has been suppressed by direct controls of external trade
alone, rather than by price adjustments or by excise or other taxes, which
would affect both internal and external trade on a nondiscriminatory basis.
The other fundamental consideration is that the existence of a surplus
with one area does not mean that dollar payment difficulties, if any exist,
are necessarily caused by the trading and financial relations of that area
with the United States. A United States export surplus with one area may
be normal and desirable; dollar difficulties of that area may arise from inability to earn dollars in other areas. This will depend in part upon its
competitive position in other areas and in part upon the volume of dollars
which these other areas obtain in the United States through earnings or
capital imports. Thus, it is generally believed that Western Europe will
continue to import from the United States more than it exports to it after
the European Recovery Program ends, and that it can be self-supporting
only if it earns gold and dollars in other areas.
Government transactions
NOTE.—As has been customary in previous reports, government transactions are
here measured on the so-called consolidated cash basis, rather than in terms of the
conventional budget. Cash payments to and receipts from the public reflect the volume of current cash transactions between government, on the one hand, and the public, including business, foreign countries, and international institutions, on the other.
All intragovernmental transactions are eliminated. Such data are more useful for
assessing the immediate economic impacts of government programs than are the data
in the conventional budget. A detailed description of the concepts used is given
in the Budget of the United States, 1950, page 1375.

All levels of government combined—Federal, State, and local—directly
employed some 10 percent of the total number of civilians employed in the
United States during the first half of this year. Government purchases
of goods and services represented about 15 percent of the total gross national product. In the field of new construction alone, government activity
accounted for 25 percent of the total. Total cash payments by all levels of
government, including such transfer payments as old-age pensions, public
assistance and unemployment compensation, amounted to a figure nearly
one-fourth as large as total gross national product.

These figures indicate the major role played by government in the
Nation's economy. In terms of annual rates, total cash payments by all
levels of government amounted to about 62.5 billion dollars during the first
half of this year, of which the special dividend in repayment of past excessive premiums under the National Service Life Insurance program, computed at an annual rate, accounted for somewhat over 5 billion. Total
cash receipts were at an annual rate of about 57.5 billion dollars, or about
5 billion dollars less than cash payments. Quite apart from the relationship between total payments and total receipts, the very large and relatively stable programs represented by these dollar figures exert a major
impact on economic developments. (See table 13.)
TABLE 13.—Government cash receipts from and payments to the public
[Billions of dollars, annual rates, seasonally adjusted]
Calendar year 1949
Eeceipt or payment
Total
Cash receipts:
Federal _ _ ._ __
State and local

Total cash receipts
Cash payments:
Federal.
State and local

_
_

. _ . _
__

Total cash payments
Surplus (+) or deficit (-):
Federal
State and local. _ .

._ __

Total, surplus (+) or deficit (— )

_ ..

First half

Calendar
year 1950,
Second half first half i

41.3
16.3

41.5
16.0

41.2
16.5

40.4
17.1

57.6

57.5

57.7

57.4

42.6
17.5

42.5
17.3

42.9
17.8

43.3
19.2

60.2

69.8

60.6

62.5

-1.3
-1.3

-1.0
-1.2

-1.6
-1.3

-2.9
-2.1

-2.5

-2.3

-2.9

-5.0

* Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See appendix A.

Cash payments by the Federal Government. Excluding the NSLI dividend, Federal cash payments to the public declined from 42.6 billion dollars
in 1949 to an annual rate of 38.1 billion during the first half of this year.
Including disbursement of the dividend, the annual rate of total payments during the first half was 43.3 billion.
The major explanation for the decline of 4.5 billion dollars in the annual
rate of total Federal cash payments (apart from NSLI dividend) to the
public lies in the area of international programs, aggregate payments for
which declined by some 2.1 billion dollars. This large decline resulted
partly from anticipated trends, partly from a repayment to the Treasury
by the International Monetary Fund of cash previously received, and
partly from a lag of expenditures behind expected schedules. The other
major areas of decline were in net cash expenditures for farm price support; and in expenditures for defense, where there was also a lag behind
expected schedules, as well as an intensified efficiency drive resulting in a
considerable reduction in civilian payrolls.

These and other declines were more than sufficient to bring about a
decline in total cash payments (excluding the NSLI dividend), despite
a continued very high level of unemployment compensation and public
assistance payments and a steady increase in public works. Unemployment compensation payments were at a postwar peak during the first
quarter of this year, reflecting the peak unemployment prevailing during
those months; and did not decline sufficiently during the second quarter
to bring the rate for the half-year below the 1949 level.
TABLE 14 —Federal cash payments to the public, by type of recipient and transaction
[Billions of dollars, annual rates, seasonally adjusted]
Calendar
year 1949

Classification of payment
Direct payments for goods and services:
To individuals
_ _ _
_ _
T o business a n d international
,__
.
_ _ _ _ _
Loans and transfer payments to individuals (excluding NSLI dividend)
Loans, investments, subsidies, and other transfers to business and agricultureLoans and transfer payments to foreign countries and international institutions
Clearing account and adjustment to Daily Treasury Statement _ _ _ _
Subtotal
NSLI dividend
Total Federal cash payments

_
_.

. _

Calendar
year 1950,
first half *

95
9.1
11.4
6.8

97
8.1
10.9
6.0

62
-.3

4.1
—.7

42 6

38.1
252

42.6

43.3

1 Estimates based on incomplete data.
2 Total of 2.6 billion dollars for the first half of 1950, expressed as an annual rate.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See appendix A.

Cash payments by State and local governments. Incomplete information
indicates that cash payments by State and local governments during the
first half of 1950 continued their upward trend, running at an estimated
annual rate of about 19.2 billion dollars, compared with 17.5 billion in
1949. (See table 14 and chart 18.)
This upward trend reflects the continuing pressure of wartime backlogs,
large population changes, and a lagging response to the postwar rise in
the general level of prices, wages, and salaries.
Federal cash receipts, the cash deficit, and changes in the publicly held
Federal debt. Federal cash receipts from the public during the first half
of this year were at an annual rate of 40.4 billion dollars, or about 1 billion
below the first half of 1949. (See table 15 and chart 18.) This decline
occurred despite the 50 percent increase in the rate of employment tax in
support of the old-age insurance system, which became effective as of
January 1, 1950, and which increased the annual rate of cash receipts by
about three-quarters of a billion dollars; and despite a decline of similar
magnitude in tax refunds, which produced a corresponding increase in
net cash receipts.
There was a sharp drop of over 2 billion dollars in the rate of receipts
from the corporate profits tax. Since these taxes are collected with a lag
of about one year from the period when the liability actually accrues, this

CHART 18

GOVERNMENT CASH RECEIPTS FROM
AND PAYMENTS TO THE PUBLIC
The net cash position of the Federal Government showed a deficit of
about 3 billion dollars during the first half of 1950, which was more
than accounted for by the NSLI dividend. State and local
governments continued to show a cash deficit.
FEDERAL
BILLIONS OF DOLLARS
^—DEFICIT
PAYMENTS/- 43.3--

PAYMENTS,

RECEIPTS/

41.3

RECEIPTS/ 40.4

y
1950, First Half"

1949

STATE AND LOCAL
BILLIONS OF DOLLARS
-DEFICIT

PAYMENTS/

RECEIPTS/

1950 f FirstHair

1949
CALENDAR

YEARS

-'ANNUAL RATES, SEASONALLY ADJUSTED
SOURCE: SEE APPENDIX A

894762—50

17.1

drop reflected the much lower level of 1949 profits in comparison with
1948. The present high and rising level of profits, with the accompanying
increase in tax liabilities accruing, will not be reflected in cash receipts until
the first quarter of the calendar year 1951.
The only other category of receipts showing a considerable decline
during the first half of this year was that of personal income taxes not
withheld, i. e., largely taxes on the incomes of fanners, professional persons,
and unincorporated businesses, and on dividends, interest, rents, and other
sources of income not subject to withholding. As with corporate taxes,
payments during the first half of this year were based in large part on the
income levels of 1949. The present rising level of incomes and tax liabilities will not be fully reflected in receipts until next year.
Receipts from surplus property continued their steady decline, and now
represent only a minor source of revenue. Other major categories of
receipts—personal income taxes withheld, employment taxes, and excises—
apart from the increase in the OASI tax rate, and from technical changes
in reporting and deposit practices, have shown only very moderate changes
over the past 18 months. There was a slight dropping off during the second
half of last year, and a roughly compensating increase during the first half
of this year. If business conditions continue to improve, this increase may
be expected to continue and accelerate.
Excluding the NSLI dividend, Federal cash receipts from the public
would have exceeded cash payments, on a seasonally adjusted basis, by about
2*4 billion dollars during the first half of this year, compared with the cash
deficit of nearly l/ 2 billion in 1949. Taking into account the very large
and rapid disbursement of the insurance dividend during this period, however, the annual rate of total payments exceeded the rate of receipts by
nearly 3 billion dollars.
TABLE 15.—Federal cash receipts from the public
[Billions of dollars, annual rates, seasonally adjusted]
Source of cash receipts

Calendar
year 1949

Calendar year
1950, first
half i

Direct taxes on individuals
..
Direct taxes on corporations
Employment taxes
Excises and customs
Surplus property receipts
.
Deposits by States, unemployment insurance
Veterans' life insurance premiums
Other
Less? Refunds of receipt??.
. ,

18.4
12.0

2.5
7.9
.5
1.0
.4
1.4
—2.8

18.3
9.9
3.2
7.9
.3
1.1
.4
1.4
—2.1

Total Federal cash receipts from the public

41.3

40.4

i Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See appendix A.

Apart from the broad trends in the annual rates of receipts and payments,
the importance of regular seasonal changes in the relation between receipts

and payments should be recognized. In recent years, there has been a large
excess of cash receipts over cash payments in the four months of December
to March, and June and September have also shown surpluses. This is
due to the relative concentration of tax payments in those months under
the present tax laws, and it entails problems of transfer of funds from
individuals and corporations to the Treasury and imposes a serious, although
temporary, pressure upon the reserves of banks through which the transfers are made.
Following the usual pattern, the concentration of tax payments in the
early months of 1950 carried cash receipts high enough to produce a cash
surplus of about 1.5 billion dollars in the first quarter of the year, notwithstanding the effects of the business recession of the preceding year and the
increase in payments over those of the first part of 1949 arising from the
NSLI dividend. April and May were, as usual, deficit months, and June a
month of surplus. In the first six months of the year, there was a cash deficit
of less than 200 million dollars. The publicly held debt was enlarged by
about 1.7 billion dollars from the December 31, 1949 level, and on June 30
was about 219.5 billion. This increase was largely absorbed by individuals
and nonbank corporations and associations.
Federal budget receipts, the budget deficit, and changes in the national
debt. The foregoing analysis has been in terms of the consolidated cash
statement of Government transactions, rather than in terms of the so-called
conventional budget. The conventional budget, however, is equally important in many respects. It is the conventional budget with which most
businessmen and legislators are chiefly concerned. It is the deficit in that
budget which is found disquieting by many whose own decisions about
business plans are influenced by pessimistic views about the threat to
national credit, and by many legislators in determining their attitude upon
a wide range of national economic policies. In the recent postwar years,
there has been continuous discussion of the budget, the budget surplus, and
the budget deficit, and very seldom has it related to any other than the conventional budget, transmitted by the President to the Congress and reported upon daily in the statement of the Treasury as the fiscal year advances. A budget surplus means a reduction in the national debt, the objective of everyone. A budget deficit means an increase in the national debt.
Even though a substantial fraction of this increase may represent a corresponding increase in the assets of Federal trust accounts, businessmen and
legislators are concerned about it.
Because of seasonally high tax receipts and a lag in expenditure programs,
budget receipts and expenditures for the first half of this year were in close
balance, with a budget surplus of nearly 200 million dollars. The balance
in the general fund of the Treasury at the close of the half year was 5.5
billion dollars, up about 800 million from the December 31 figure. The
increase was more than sufficient to offset the increase of about 200 million
dollars in the gross public debt during the half year.

Budget expenditures during the last half of 1950 will be determined by
legislative action which has not been completed, and by international conditions which will certainly bring about a large increase in defense expenditures. There is little speculative risk in assuming that economic activity
will continue to increase, however, and it is possible to observe the effect upon
the trend of budget receipts.
Expanding business is creating larger tax obligations for individual income taxes, for corporation income taxes, and for excise taxes. Not all of
these greater liabilities will be represented in increased tax payments this
year. Throughout 1950, corporations will be paying income taxes upon
profits in the recession year, 1949, and they will not pay taxes upon the
higher profits of 1950 until next year. Most individuals who pay taxes
upon estimates filed early in the year will not revise those estimates upward
on account of the improvement in income occurring in 1950 until near
the deadline, which is next January 15.
Federal revenue from excise taxes responds more quickly to improving
business, and in the second quarter of the year receipts from this source
began to grow. The same trend appeared in the very large item of income
taxes paid by employers and withheld from wages of workers. This source
of budget receipts accounted for 10.1 billion dollars of Treasury revenue
in the fiscal year just closed, and in May and June these receipts were 366
million dollars larger than in the same months of 1949. This was an increase of 20 percent, and reflects the inevitable result of greater employment, higher wage rates, and longer workweeks with overtime pay. The
growth of economic activity in 1950 has already been great enough to
assure a substantial increase in Federal revenues, an appreciable part of
which will be realized in the last half of the year, limiting the deficit which
is to be expected in that period of relatively low tax receipts.
Cash receipts of State and local governments; the cash deficit. As was
shown in table 13 above, incomplete information indicates that the steady
upward trend in the cash receipts of State and local governments since the
end of the war continued into the first half of this year. It is estimated that
total cash receipts were running at an annual rate of about 17 billion dollars
during this period, compared with about 16.3 billion dollars in 1949.
Reports on the finances of State and local governments are neither sufficiently complete nor sufficiently prompt to permit an analysis at the present
time of the effects of the 1949 decline in business activity.
The steadily rising trend in State and local receipts is a reflection not
only of rising economic activity, but also of increased rates in old taxes and
of widespread adoption of new taxes. Under the pressure of postwar financial needs, State legislatures have been increasingly disposed both to adopt
new State taxes and to grant wider tax authority to local governments, and
local governments have been prompt to take advantage of this.
As has been true throughout the postwar period, the increase in the cash
receipts of State and local governments was somewhat less than the increase

94:

in cash payments, and the cash deficit rose accordingly. It is estimated that
the cash deficit during the first half of this year represented an annual rate
of about 2.1 billion dollars, compared with 1.3 billion in 1949.
SUMMARY: THE NATION'S ECONOMIC BUDGET
The economy in the second quarter of 1950 was producing goods and
services at a rate of 268 billion dollars per year. This is in the neighborhood
of 5 percent above the rate at midyear 1949. Since prices had not changed
significantly over-all, the dollar increase approximately reflects the real
increase in economic activity by the second quarter. This carries us to a
level of activity surpassing that of the second half of 1948. (See table 16.)
TABLE 16.—Indexes of gross national product, current and constant prices
[First half of 1948=100, seasonally adjusted]
Current
prices

Period
1948— First half
Second half
1949— First half
Second half
1950— Fiist half 1
First quarter
Second quarter *„

100.0
105.1

100.0
101.6

101.7
100.6

100.5
100.6

. .

104.9

104.1

103. 9
106.1

103.5
104.9

.
..

..
.

Constant
prices

Estimates based on incomplete data; by Council of Economic Advisers.
Source: Department of Commerce and Council of Economic Advisers.

The rate of increase in production of goods and services from the fourth
quarter of 1949 to the second quarter of this year, if continued, would be
sufficient to provide full employment before the end of the year.
The Nation's Economic Budget summarizes the main developments
in national income and expenditures. (See table 17 and chart 19.) The
largest increase in expenditures from the last half of 1949 to the first half
of this year, both in absolute terms and percentagewise, was in business
investment. Gross investment at an annual rate increased by 10.6 billion
dollars or about 33 percent over the period, compared with a rise in consumer expenditures of about 3.6 billion dollars or about 2 percent. Table
18, which is derived from the national economic accounts presented in appendix A, shows the areas in which expansion has taken place.
Most of the increase in private domestic investment is attributable to
the swing from inventory liquidation in 1949 to inventory accumulation
in 1950, resulting in an increase in effective demand of over 6.5 billion
dollars (annual rate). A second important contribution to the increase
in private domestic investment was made by a rise of over 25 percent in
residential construction over the last half of last year (seasonally adjusted).

TABLE 17.— The Nation's Economic Budget
[Billions of dollars, annual rates, seasonally adjusted]
1949, second half
Economic group

Receipts

Expenditures

1950, first half i

Excess of
receipts
Re(+)or ceipts
deficit
(-)

Expenditures

Excess of
receipts
(+)or
deficit
(-)

CONSUMERS
Disposable income relating to current production.
Government transfers and net interest payments

169.3
16 5

Disposable personal income .
Expenditures for goods and services
Personal savings (-}-)

186.0

173.8
*22 3
179 8

2 196. &

+6.2

183 4

+12.7

BUSINESS
Retained business receipts from current production
Gross private domestic investment
Excess of receipts (+) or investment ( — )

30.8

31.6

28.5

— 8

42.2

-13.7

INTERNATIONAL

Government loan transfers abroad
Net foreign investment
Excess of receipts (+) or investment (— )

-.8

— 3

—2 0

+1>7

GOVERNMENT (Federal, State, and local)
Tax payments or liabilities
Adjustment to cash basis

56.7

Cash receipts from the public
Purchases of goods and services
Government transfers

57.7

59.4

-2.0

1.0

57. 4

43 0

17.6

60 6

Cash payments to the public
Excess of receipts (+) or payments (— )

41 4
21.1

62.5

-2.9

-5.0

ADJUSTMENTS
For receipts relating to gross national product
Other adjustments
Total: Gross national product

_ .

-2.8
-.8

—2.8
— 3
254.1

254.1

+3.5

+.8

265.2

265. 2

1
2

Estimates based on incomplete data. See appendix A for first half 1949.
Includes 2.6 billion dollars (5.2 billion at an annual rate) of the nonrecurrent payments on the NSLI
dividend.
NOTE.—Items relating to current production of goods and services are shown in roman type. Transfer
payments and receipts and subtotals including them are in italics; they are not included in the gross national
product. Detail will not necessarily add to totals because of rounding.
Source: Based on data from the Department of Commerce and Bureau of the Budget. (See appendix A.)

Outlays for producers' durable equipment were somewhat higher in the
first half of this year and in the second quarter increased substantially, thus
reversing the downward movement which had taken place since the 1948
peak.
The increase in consumer goods purchases can best be appraised in connection with a somewhat more detailed view of the receipts side of the
Nation's Economic Budget. (See table 19.)

CHART

THE NATION'S ECONOMIC BUDGET
Business investment rose about I0!/2billion dollars (annual rate)
from the last half of 1949 to the first half of I960. Consumer expenditures increased about 3/£ billion dollars, which was much
less than the increase in disposable income.
BILLIONS OF DOLLARS
ANNUAL RATES, SEASONALLY ADJUSTED
-50

150

CONSUMERS

1949,
SECOND HALF

I960,
FIRST HALF

BUSINESS
1949,

SECOND HALF

1950,

FIRST HALF

INTERNATIONAL

1949,
SECOND HALF

1950,
FIRST HALF

GOVERNMENT
1949,

SECOND HALF

1950,

FIRST HALF

EXCESS OF RECEIPTS (+), EXPENDITURES (-)
1949, SECOND HALF

1950, FIRST HALF

CONSUMERS

BUSINESS
INTERNATIONAL
GOVERNMENT

SOURCE : SEE APPENDIX A

TABLE 18.—Change in selected expenditure items of the Nation*s Economic Budget
Change from 1949, second
half to 1950, first half 1
Expenditure items
Billions of
dollars *
Consumer expenditures
Durable goods.. . _ _
Nondurable goods
Services.. ._ _

_. .

Gross private domestic investment
Construction
Residential (nonfarm)
Nonresidential
Producers' durable equipment
Change in inventories

_
_ _

_ _ _ _ _ _
_

Government cash payments to the public .
Federal
NSLI dividend .
Other
State and local

T^otal gross national expenditures-

Percent

-1-3.6
+2.0
+.2
+1.4

+2.0
+8.0
+.2
+2.5

+10.6
+2.7
+2.4
+.3
+1.4
+6.6

+33.5
+15.4
+27.0
+3.5
+ 7.4

+1.9
+.4
+5.2
-4.8
+1.4

+3.1
+.9
-11.2
+7.9

+11.1

+4.4

1
2

Based on preliminary estimates for 1950, second half.
Annual rates,^seasonally adjusted.
Source: See appendix A.
TABLE 19.—Change in selected receipt items of the Nation's Economic Budget
Change from 1949, second
half, to 1950, flrat half 1
Receipt items
Billions of
dollars'2

Disposable personal income
Government transfer payments and net interest
NSLI dividend
Other _
Income from current production
Wages and salaries
Farm income- _ _
_
Other income
Less: Personal taxes
Business receipts
Corporate profits before tax. __
Inventory valuation adjustment
Capital consumption allowances
Less: Corporate taxes and dividends

+10.2

_ _
_
_
__..
.' ' _

_..

Cash receipts from the public.
Federal
State and local

__
________

_
.

Total receipts relating to gross national product

+5.8
+5.2
+.6
+4.7
+3.2
-.3
+1.8
+.2

Percent
+5.5
+35.2
+3.6
+2.5
+2.4
-2.4
+4.4
+1.1

-2.3
+2.2
-3.8
+.7
+1.5

-7.5
+7.9

-.3
—.8
+.6

-.5
-1.9
+3.6

+11.1

+4.4

+3.6
+8.1

1
Based on preliminary estimates for 1950, first half.
;2 Annual rates, seasonally adjusted.
Source: See appendix A.

In the first half of this year, disposable income of consumers exceeded
the rate of the last half of 1949 by about 10.2 billion dollars or over 5 percent. About half of this increase is attributable to the payment of the
veterans' dividend, computed at an annual rate. However, income derived from current production, particularly wages, business and profes-

sional incomes, dividends and rental incomes, increased by nearly 4.7 billion
dollars or about 2.5 percent. Only farm incomes showed a continued
decline.
The fact that disposable personal income increased by 5.5 percent, and
consumer expenditures by only about 2 percent, may in part be explained
by the behavior of veterans who used a considerable portion of their dividend for payment of outstanding debts, to accumulate liquid assets or to
make payments on new homes. Another part of the dividend was used
for the purchase of durable goods, sales of which increased by 8 percent
in the first half of 1950 over the second half of 1949. The proportion of
expenditures devoted to durable goods was higher than in any previous
period, postwar or prewar. Expenditures for nondurable goods increased
scarcely at all. The disparity between the increase in durable and nondurable expenditures may reflect in part the nonrecurring special payments
to veterans during the first half of the year.
The same factors that are reflected in the expenditure and receipt sides
of the Nation's Economic Budget also affect the relationship of saving and
absorption of saving. (See the third and sixth columns of table 17.) The
increases in personal saving and in the Government cash deficit are both
inflated by the receipt or payment of the veterans' dividend during the
first six months of this year, which appears to be doubled when counted at
an annual rate. Excluding the veterans' dividend, the combined cash
deficit of Federal, State and local governments (expressed as a seasonally
adjusted annual rate) shows a substantial decline from the second half
of 1949.
The large increase in the excess of business investment over retained
corporate receipts reflects the increase of funds spent for residential construction and especially for inventory accumulation. While several factors
were of significance in the expansion of the last six months, inventory movements were outstanding. This was true even before international events
gave a new impetus to further inventory accumulation.
This analysis of the Nation's Economic Budget indicates that the expansion of the last six months has rested not only upon the shift from
inventory liquidation to accumulation, and upon the payment of the extraordinary veterans' dividend, but also upon factors of more lasting duration.
Prior to the Korean development, it was to be expected that the economy,
during the rest of the year, would continue to move towards maximum
employment and production in a steady manner. Since then, the request
for additional military appropriations, and greatly accelerated consumer
and business buying, have resulted in an increasing threat of shortages,
price increases, and other inflationary developments. It is with these most
recent developments, and the prospect of further developments initiated
by the changed international situation, that public policy must now concern
itself.

Appendix A
The Nation's Economic Budget
Contents
Page

A-l.
A-2.
A-3.
A-4.
A-5.
A-6.

The Nation's Economic Budget, 1949-50
Consumer account, 1949-50
Business account, 1949-50
International account, 1949-50
Government account (Federal, State, and local), 1949-50 .
Federal cash receipts from the public other than borrowing,
1949-50
A-7. Federal cash payments to the public by function, 1949-50 .
A—8. Federal cash payments to the public by type of recipient and
transaction, calendar years 1949 and 1950

101

105
107
108
108
109
110
110
Ill

Appendix A
The Nation's Economic Budget
Estimates of incomes,, prices, and production have always been used as an
aid in the study of economic trends and business cycles. The need for national accounts on a systematic and current basis has become much more
widely recognized in the postwar world, however. A national economic
policy, whether it be for the purpose of raising living standards, providing
for national security, obtaining a balance in international payments, maintaining full employment, or a combination of objectives requires informative
and reliable national accounting.
Consequently there has been a concerted effort all over the world to
develop better systems of measuring the sources and disposition of the
Nation's productive energies. In many countries these accounts are needed
as a guide to internal development and investment policies, whether carried
out with foreign aid or by other means. In the United States the need for
national accounts is implied in the task prescribed by the Employment Act
of 1946, which requires setting forth foreseeable trends as well as the levels
of employment, production, and purchasing power needed to carry out
the policy of the act.
The Nation's Economic Budget (table A-l) is a summary of the national
accounts. It contains a number of the most significant magnitudes, such
as (column 1) the income of consumers, the total cash revenues of the
Government, and business receipts, which include corporate retained earnings and business reserves against depreciation. It also shows the gross
output of the economy in current prices, and the portion of that output
which is bought by consumers, business, and Government (column 2).
Column 3 in the Nation's Economic Budget, "excess of receipts or deficit,"
includes consumer saving, the Government cash surplus or deficit, and
the excess of gross investment over business receipts. The total excess
of receipts must equal the total deficit, since national income and product
are conceptually equal. Consumer saving, for example, which is an excess
of receipts, must be matched by a deficit of receipts of business or Government, or both.

103

In the Nation's Economic Budget the main flows of income, those arising
from productive activity, are shown in roman type in column 1, and
important supplementary flows, Government interest payments, and transfers to individuals, are shown in italics. The items in roman type, income
arising from current production, when added together, provide one measure
of current output of the economy. This measure is matched by the sum
of expenditures for current output which is shown in roman type in column
2. Government cash payments are broken into Government expenditure
for goods and services (current output) and supplementary or transfer
payments. The latter include transfers to individuals, Government interest,
and cash loans to foreign countries or international organizations. The
receipt of these items, as mentioned before, is shown in italics in column 1.
Transfer payments are equal to receipts of transfers just as expenditures
for current production are equal to receipts.
While the Nation's Economic Budget gives a comprehensive view of the
economy, additional detail is needed for analytical purposes. Such detail
is shown in the tables that follow, the "accounts," or sectors of the Nation's Economic Budget. More complete statistics on national income and
product and their constituents are published currently in the Survey of
Current Business, in the National Income and Product Supplements to the
Survey, and in the Budget of the United States. These are the primary
sources from which the Nation's Economic Budget is drawn. See also the
Council's Annual Review of January 1950, appendix A, for a more extended
discussion of the Nation's Economic Budget.
The tables A-2 to A-5, which follow, show the composition of the consumer, business, international, and Government accounts. Tables A-6, A-7,
and A-8 deal with the cash transactions of the Federal Government, providing information on receipts and expenditures which are useful for economic analysis.

104

TABLE A—1.— The Nation's Economic Budget, calendar years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1949, second half

1949, first half
Excess of

Economic group

receipts
(+)or
Receipts Expenditures
deficit
(-)

Receipts Expenditures

1950, first half *

Excess of
Excess of
receipts
receipts
(+)or
(-h)or Receipts Expenditures
deficit
deficit
(-)
(-)

CONSUMERS
1 Disposable income relating to current production
2. Government transfers and net interest payments

172.8
16 0

169 3

173.8

3. Disposable personal income
4. Expenditures for goods and services
5. Personal savings (-j-)

189 0

186.0

196.2

16.5

177.9

22.3

179.8

+11 2

+6.2

183.4

+12.7

BUSINESS
6. Retained business receipts from current production

29.7

7 Gross private domestic investment

8. Excess of receipts (+) or investment ( — )

28.5

30.8
34 4

31 6

—4.7

—.8

42.2

-13.7

INTERNATIONAL
9. Government loan transfers abroad
10. Net foreign investment
11 Excess of receipts (-j-) or investment ( — )

1.7

—.3

.5
1.2

—.3

-2.0

1.7

GOVERNMENT (Federal, State, and local)
12 Tax payments or liabilities
13» Adjustment to cash basis

55.8
1.7

14. Cash receipts from the public
15 Purchases of goods and services
16. Government transfers

57.5

57.7

43.6

16.2

17. Cash payments to the public
18 Excess of receipts (+) or payments ( — )

59.4

56.7
1.0

69.8

-2.0

60.6

—2.S

57.4

43.0
17.6

41.4
21.1
62.5

—2.9

-5.0

ADJUSTMENTS
19 For receipts relating to gross national product
20. Other adjustments
21.

Total: Gross national product
See footnote on following page.

- _

-1.4
-8.3

— 1.4

—3,8

257.0

-2.8
-.8
254.1

+3.5
+.8
265.2

i Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE.—Items relating to current production of goods and services are shown in roman type. Transfer payments and receipts and subtotals including them are in italics; they are
not included in the gross national product. Detail will not necessarily add to totals because of rounding.
Explanatory notes:
Lines 1-5: See table A-2, Consumer Account.
Lines 6-8: See table A-3, Business Account/
Lines 9-11: See table A-4, International Account.
Lines 12-18: See table A-5, Government Account.
Line 19: Includes the statistical discrepancy and the current surplus of Government enterprises less Government subsidies. The statistical discrepancy represents the difference
between two in dependent estimates of gross national product: one arrived at by estimating the income received from current output and one by estimating expenditures for this output.
The adjustment fof statistical discrepancy brings the estimate on the receipts side-into agreement with that on the expenditure side of the accounts.
Line 20: An adjustment is necessary to balance the sum of the transfers on the receipts side with that on the payments side because of the fact that somewhat different bases for
measurement have been used in estimating various components of receipts and payments. Most of the discrepancies reduce to a difference in timing between the recording of a receipt
and a payment. A correction must be made for the difference between the time a tax liability is incurred or payments are made and the time a receipt is recorded by the Government.
Payment is sometimes made for goods produced in a previous period; interest payments on a cash basis differ from the accrued interest shown under consumer receipts, etc.
Sources: This table is based on the national income and product statistics of the Department of Commerce and on Federal cash receipts from and payments to the public estimated
by the Bureau of the Budget.
:
;

TABLE A—2.—Consumer account, calendar years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1949

Receipts or expenditures
Total

First
half

Second
half

1950,
first
half i

Personal income arising from current production of goods and
services

189 8

191 5

188.0

192 7

Wage and salary receipts and other labor income
Farm proprietors' income
Business and professional income 2
__ .
_ _
Dividends
_
Private interest and rental income
Business transfer payments

134.9
13.4
21.0
7.8
12.0
.7

135.4
14.3
21.3
7.8
12.0
.7

134.4
12.5
20.6
7.8
12.0
.7

137.6
12.2
21.8
82
12.2
.7

...

Plus: Net interest paid by Government
Dividend on National Service Life Insurance
Other Government transfers to individuals ..
Equals: Total personal income _
Less: Personal tax and nontax payments
Equals: Disposable personal income

Less: Consumer expenditures.. _ _

Durable goods
Automobiles a n d parts. _ _ _ _ _
Other __ _
Nondurable goods..
Food
Clothing and shoes .
Other
Services
Housing
_ _
Other
Equals: Personal saving

_ _ _ _ _ _ _ _ . _ __

4.7

4.6

4.7

11.6

11.4

11.8

4.7
5 2
12.4

206.1

207.7

204.6

215.0

18.7

18.9

187.4

189.0

186.0

196.2

178.8

177.9

179.8

183.4

23.8
9.5
14 3
98.5
58 6
18.6
21 3
56 5
17.2
39 3

22.7
8.6
14 0
99.3
58 9
19.2
21 2
55 9
17.0
39 0

25.0
10.3
14 7
97.8
58 4
18.0
21 4
57 0
17.4
39 6

27.0
11.0
16 0
98.0
58 5
17.9
21 6
58 4
18.0
40 4

8.6

11.2

6.2

12.7

189.8
18.7
171.1

191.5
18.7
172.8

188.0
18.7
169.3

192.7
18.9
173.8

ADDENDUM

Personal income arising from current production
Less: Personal tax and nontax payments
Equals: Disposable income arising from current production

1 Estimates based on incomplete data; second quarter by Council of Economic Advisers.
2 Includes adjustment for inventory valuation.
NOTE.—Detail will not necessarily add to totals because of rounding.

894762—5

107

TABLE A—3.—Business account, calendar years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1949

Receipts or investment

First
half

Total

Second
half

first half i

27.6

27.4

27.9

30.1

10.6
7.8
9.2

10.4
7.8
9.1

10.7
7.8
9.4

11.8
8.2
10.2

Plus: Capital consumption allowances *
Corporate inventory valuation adjustment 8 -

18.8

18.4
2.2

19.2
2.2

19 9
-1.6

Equals: Retained business receipts from current production

30.2

29.7

30.8

28.5

Less: Gross private domestic investment

33.0

34.4

31.6

42.2

17.3
8.3
9.0
19.5
-3.7
-3.1

17.0
7.7
9.3
19.9
-2.5
-2.2

17.5
8.9
8.6
19.0
-5.0
—4.0

20.2
11.3
8.9
20.4
1.6
2.4

-2.8

-4.7

—.8

—13.7

Corporate profits before tax
Less: Corporate profits tax liabilities
Dividends
_
Equals: Corporate undivided profits

C onstruction
Residential (nonfarm)
Other private construction _ _ __
Producers' durable equipment
Change in inventories
Nonfarm only
__

2.2

- -

._-

_ _. _

Equals: Excess of receipts} (+) or investment (—).

__.. _

i Estimates based on incomplete data; second quarter by Council of Economic Advisers.
3 Includes capital consumption allowance on corporate and noncorporate capital, including residences.
3 This adjustment is required because corporate income is reckoned inclusive of changes in the book value
of inventory, as is customary in business accounting, whereas only the value of the real change in inventories
is counted as current output in the gross national product.
NOTE.—Detail will not necessarily add to totals because of rounding.
TABLE A—4.—International account, calendar years 1949 and 1950
[Billions of dollars, seasonally adjusted annual rates]

1949
Receipts or investment
Total

Second
half

0.9

1.6

0.1

0.2

-.5

1.0

1.7

-.3

6.2

7.6

4.9

2.7

5.3
.5

5.9
.5

4.7
.5

4.2
.4

1.2

-.3

Receipts:
Net long-term loans *
Payments to the International Monetary Fund and International
Bank ». _
.
Total Government loan transfers abroad
Investment:
Surplus of exports of goods and5 services 4
Less: Net unilateral
transfers:
Government6
Private
Equals: Net foreign investment.
Excess of receipts (+) or investment (—)_

.
_
_
. .

1950,
first
half

First
half

-2.0
1.7

Estimates based on incomplete data.
* Includes only cash withdrawals under loan agreements. Does not include noncash transactions such as
lend-lease
and surplus property credits.
3
Cash payments on subscriptions. In the first half of 1950 the International Monetary Fund returned
over
500
million
dollars of cash (annual rate) to the U. S. Treasury in exchange for United States notes.
4
Includes a seasonal adjustment in services.
* Net unilateral transfers are included with Government or private expenditures for goods and services.
For example, remittances (gifts) made by American citizens to relatives or charitable groups abroad are
included with consumer expenditure. Government aid in the form of grants is included in Government
purchases of goods and services. Thus, net unilateral transfers must be deducted from the export surplus
to6avoid double counting.
Unilateral aid included in table A-8 is on a Daily Treasury Statement basis and is gross.
NOTE.—Detail will not necessarily add to totals because of rounding.

108

TABLE A—5.—Government account (Federal', State, and local), calendar years 1949 and 7950
[Billions of dollars, annual rates, seasonally adjusted]
1949

Receipts or expenditures

Receipts:
Tax and nontax payments or liabilities: 2
Federal .. .
State and local
_

Total

First
half

Second
half

39.2
17.0

39.0
16.8

39.4
17.3

1950,
first
half i

41.6
17.8

56.2

55.8

56.7

59.4

—1.8

+3.2

-1.8
+3.5

-1.9
+2.9

-1.7
-.4

Cash receipts from the public. _

57.6

57.5

57.7

57.4

Expenditures:
Purchases of goods and services:
Federal
State and local

25.3
17.9

26.0
17.6

24.7
18.3

22.5
19.0

43.3

43.6

43.0

41.4

11.6
4.3

11.4
4.3

11.8
4.4

17.6
4.5

1.0

1.7
-1.2

.3
+1.1

-.7

21.1

Total
.
_ .
Adjustment to cash basis:
Noncash receipts 3
Excess of cash receipts over tax liabilities or payments 4 .

Total
Other Government payments:
Transfers to individuals
Cash interest payments to the public 5
Loans to foreign governments and subscriptions to 6the International Bank and International Monetary Fund
All other 7...
Total..
Cash payments to the public
Cash surplus (-}-) or deficit ( — )
Federal:
C ash payments
Cash receipts

_ o

16.9

16.2

17.6

60.2

59.8

60.6

-2.5

-2.3

-2.9

42.6
41. 3

42.5
41.5

42.9
41.2

-1.3

-1.0

17.5
16.3

17.3
16.0

17.8
16.5

19.2
17.1

-1.3

—1.2

—1.3

-2.1

62.5
-5.0

Addendum
_ _

Surplus (+) or deficit (—)

._ _ _

State and local:
Cash payments
Cash receipts _ . _ .

Surplus (+) or deficit (— )
1
2

-1.6

43.3
40.4
-2.9

Estimates based on incomplete data.
Personal and indirect business tax payments, corporation tax liabilities, and contributions for social
insurance.
3
Consists of deductions from Government employees' salaries for retirement funds, and Government
'contributions
to retirement funds, national service life insurance and Government life insurance funds.
4
Includes excess of corporation tax receipts over liabilities and excess of personal tax receipts over payments. Cash receipts also include some items of miscellaneous receipts not included in tax and non-tax payments, such as receipts of sales from surplus property.
5 Does not agree with net interest paid by Government (table A-2) which is on a net accrual basis and
includes
interest paid by Government corporations.
6
See table A-4, International account.
7
Includes all other cash payments less noncash payments for goods and services. Other cash payments
include net payments by Government corporations (except capital formation), net prepayments, and the
excess of checks paid over checks issued. Noncash purchases of goods and services include deductions from
Government employees' salaries for retirement funds and the Government contribution to such funds.
NOTE.—Detail will not necessarily add to totals because of rounding.
Explanatory note
This table reconciles cash receipts and payments to the public with estimates of Government receipts and
expenditures included in the national income and product accounts. Cash receipts or payments represent
the consolidated cash accounts of the Federal Government, including the trust funds, and State-local governments. All intragovernmental transactions are excluded. The receipts of Government corporations and
the Post Office are offset against expenditures and the net expenditure included as a cash payment. Grantsin-aid to] State and local governments are included as a cash payment of the Federal Government and not
included as either a receipt or payment of the States or localities.

ICQ

TABLE A—6.—Federal cash receipts from the public other than borrowing, calendar years 1949 and
1950
[Billions of dollars, annual rates, seasonally adjusted]
1949

Cash receipts
Total
Direct taxes on individuals 2
Direct taxes on corporations
Employment taxes
..
Excises and customs
Surplus property receipts
Deposits by States, unemployment insurance ^ ^ _ _ _ ^
Veterans' life insurance premiums
Other
. _
. Refunds of receipts _ _
^
_
Total cash receipts

First
half

Second
half

1950,
first
half

18.4
12.0
2.5
7.9
.5
1.0
.4
1.4
-2.8

18.5
12.1
2.5
7.9
.7
.9
.4
1.4
-2.8

18.3
11.9
2.5
8.0
.3
1.1
.4
1.4
-2.8

—2.1

41.3

41.5

41.2

40.4

18.3
9.9
3.2
7.9
.3
1.1
.4

1.4

12 Estimates based on incomplete data.
Includes personal income taxes, and estate and gift taxes.
NOTE.—Detail will not necessarily add to totals because of rounding.
TABLE A-7.—Federal cash payments to the public by function, calendar years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1949

Function
Total
National defense .
_
International affairs and finance
Veterans' services a n d benefits
_ _ .
Social welfare, health, and security
Agriculture and agricultural resources
Interest on the public debt
_
_ ._
Other
Deduction from Federal employees' salaries for retirement
Clearing account for outstanding checks and telegraphic reports
Total Federal cash payments to the public

_._

1
2

First
half

Second
half

1950,
first

half 1

12.9
65
7.1
2.8

3.0
M.2
6.9
-.3
-.3

12.9
7.3
7.1
2.6
2.8
3.9
6.4
—.3
-.2

12.9
57
7.0
2.9
3.2
34.5
7.3
—.3
—.3

12.0
M.4
11.6
3.2
2.6
4.0
6.6
—.4
—.7

42.6

42.5

42.9

43.3

Estimates based on incomplete data.
This figure takes into account the return of excess cash of over .5 billion dollars (annual rate) to the
U. S. Treasury by the International Monetary Fund for special United States notes. Without this transaction,
the figure would be 4.9 billion dollars.
3
Includes over 2 billion dollars resulting from a nonrecurring change in the method of reporting interest
payments, amounting to 4.6 billion dollars at an annual rate in the last half of the year.
NOTE.—Detail will not necessarily add to totals because of rounding.

110

TABLE A—8.—Federal cash payments to the public by type of recipient and transaction, calendar
years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1949

Payment

Total

Direct cash payments for goods and services: 3
Payments to individuals for services rendered:
Military 3
_.__
__._
Civilian wages and salaries (excluding Post Office):
Defense*
__
. .
_
Other Federal 4
Grants5 and loans in aid for performance of specified services,
net
_
Total

__.

Payments to business for goods and services:
Public works:
Defense
Other Federal
_
_
Grants-in-aid and loans for public works
Other goods and services:
Defense.6
_ _
Civilian
Payments to foreign countries and international institutions for
goods and services.-._
_
Total

....

Loans and transfer payments to individuals:
Social insurance and public assistance:
Federal employees' retirement benefit payments .
Old-age and disability benefit payments
Unemployment insurance benefit payments. . _ _
Grants-in-aid for public assistance
_
Readjustment benefits, pensions, and other payments to veterans 7.
Loans to8 home owners, net
Interest —
Other
Total
Loans, investments, subsidies, and other transfers to business and agriculture:
Farmers:
Price support, ne't (including supply programs)
International wheat agreement
Other loans and direct subsidies to farmers 10
Business:
Home mortgage purchases from financial institutions. ..
Loans, net
Direct subsidy payments ..
Subsidy arising from postal deficit
Interests
Total
Loans and transfer payments to foreign countries and international institutions:
European recovery program loans and grants
.
Other loans (net
withdrawals)
Other grants u
__
.
Subscriptions to the International Bank and Monetary Fund (net
cash withdrawals) .
. _Total
Clearing account and adjustment to Daily Treasury Statement
Total Federal cash payments to the public
Footnotes on*following*page.

Ill

First
half

Second
half

1950,
first
halfi

3.8

3.7

4.0

2.4
2.5

2.4
2.4

2.3
2.5

2.1
2.7

9.5

9.2

9.7

.2
1.4
.4

.2
1.3
.3

.2
1.5
.5

.3
1.6
.6

5.4

5.4
.9

4.7
(6)

5.4
(6)
.8

9.1

9.0

9.2

8.1

.2
1.0
1.9
1.1

.2
.9
1.7
1.0

5.6
-.1

.3
1.0
2.0
1.1

(fl)

5.8
-.1

1.3
.5

1.2
.4

5.4
-.2

1.4
.6

.3
1.1
2.0
1.2
10.3
-.3
1.3
.3

11 4

11.1

11.6

16.1

1.8

11
1
8

(9)

.7
.1
(9)
.6
3.0
6.8

.5
.1
(9)
.5
2.8
6.4

4.2
1.8

4.8
(9)
2.0

.2
6.2

(9)

.6
.8
.2
(9)

.6
3.1
7.3

(9)

4
1

.6
2.8
6.0

1.6

3.4
.1
1.1

-.5

7.0

5.4

4.1

3.6
(9)

-.3

-.2

-.3

-.7

42.6

42.5

42.9

43.3

1 Estimates based on incomplete data.
2
Differs from the national income concept of "Government purchases of goods and services" by excluding
farm price support expenditures and unilateral aid to foreign countries. Grants to States and localities for
public works, here included as a Federal expenditure, would be included in the national income accounts
as3a State and local expenditure. There are other less significant differences between the two concepts.
Excludes terminal leave pay and food and clothing allowances which are primarily paid in kind.
4
Excludes payroll deductions for Federal employees' retirement.
8
Includes all grants-in-aid and loans to public bodies for purposes other than public works and public
assistance. Includes, in addition, one-third of Federal expenditures for veterans' tuition, books, and supplies.
6 This figure is obtained as a residual by deducting all other expenditures from total cash payments to the
public. Owing to the fact that data are incomplete for fiscal 1950, the residual would be subject to a high
margin
of error and has not been computed.
7
Includes cashing of terminal-leave bonds, mustering-out pay, and national service and Government life
insurance refunds and benefits in addition to veterans' pensions and readjustment benefits. Includes only
one-third of payments for veterans' tuition, books, and supplies.
s Includes a small amount of interest on tax refunds in addition to interest on the public debt. In addition, it includes payments at an annual rate of 0.3 billion dollars to business and 0.1 billion dollars to
individuals in the last half of 1949 resulting from a nonrecurring change in the method of reporting interest
payments. Interest paid to business includes over 100 million dollars of interest paid each year by the
Federal Government to State and local governments. Interest in table A-2 is net, and is on an accrual
rather than a cash basis; it includes interest paid by State and local governments and by Government
corporations.
9
Less than 50 million dollars.
10
Includes expenditures of Rural Electrification Administration, formerly considered a grant-in-aid for
public
works. REA and Farmers Home expenditures are included on a gross, rather than net, basis.
11
Includes expenditures for Mutual Defense Assistance Program except for payment of an estimated
15 million dollars in the first half of calendar 1950 to the Department of Defense for stocks transferred abroad.
NOTE.—Detail will not necessarily add to totals because of rounding.

112

Appendix B
Statistical Tables Relating to Employment,
Production, and Purchasing Power
CONTENTS
National income or expenditure:
B-l. Gross national product or expenditure, 1929-50
B-2. Personal consumption expenditures, 1929-50
B-3. Gross private domestic investment, 1929-50
B-4. National income by distributive shares, 1929-50
B-5. Personal income, 1929-50
B-6. Relation of national income and personal income, 1929-50
B-7. Disposition of personal income, 1929-50
B-8. Total and per capita disposable personal income in current and 1949
dollars, 1929-50
Employment and wages:
B-9. Labor force, employment, and unemployment, 1929-50
B-10. Number of wage and salary workers in nonagricultural establishments, 1929-50
B-ll. Average gross weekly earnings in selected industries, 1929-50
B-l2. Average hourly earnings in selected industries, 1929-50
B-l 3. Average weekly hours in selected industries, 1929-50
Production and business activity:
B-l4. Physical production index of goods and selected services, 1929-50, . .
B-15. Industrial production index, 1929-50
B-16. New construction activity, 1929-50
B-l 7. Business expenditures for new plant and equipment, 1929-50
B-l8. Inventories and sales in manufacturing and trade, 1939-50
B—19. Manufacturers' inventories by stage of fabrication and as ratios to
sales, 1946-50
B-20. Sales, stocks, and outstanding orders at 296 department stores,
1939-50
Prices:
B-21. Consumers' price index, 1929-50
B-22. Wholesale price index, 1929-50
B-23. Indexes of prices received and prices paid by farmers, and parity ratio,
1929-50

Page
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137

Money, banking, and credit:
Page
B-24. Consumer credit outstanding, 1929-50
138
B—25. Loans and investments of all commercial banks and weekly reporting
member banks, 1929-50
139
B-26. Deposits and currency, 1929-50
140
B-27. Estimated ownership of Federal securities, 1939-50
141
B-28. Bond yields and interest rates, selected years, 1929-50
142
Corporate profits and finance:
B-29. Profits before and after tax, all private corporations, 1929-50
143
B-30. Sales and profits of large manufacturing corporations, 1939-50
144
B-31. Relation of profits before and after taxes to stockholders' equity, private
manufacturing corporations, by industry group, 1948—50
145
B-32. Relation of profits before and after taxes to sales, private manufacturing
corporations, by industry group, 1948—50.
146
B-33. Relation of profits before and after taxes to stockholders' equity and
to sales, all private manufacturing corporations, by size class,
1948-50
147
B-34. Sources and uses of corporate funds, 1946-50
148
International transactions:
B-35. The international transactions of the United States, 1947-50
149
B—36. United States exports and imports of goods and services, by area,
1937 and 1947-50
150
B—37. United States Government grants, loans, and other transfers to foreign
countries, 1947-50
151
B—38. United States merchandise export surplus, by area, 1936—38 quarterly
average and 1947-50
152
B—39. United States merchandise exports, including reexports, by area,
1936-38 quarterly average and 1947-50
153
B—40. United States domestic merchandise exports, by economic class,
1936-38 quarterly average and 1947-50
154
B—41. Indexes of quantity and unit value of United States domestic merchandise exports, by economic class, 1936—38 quarterly average
and 1947-50
155
B-42. United States general merchandise imports, by area, 1936-38 quarterly
average and 1947-50
156
B—43. United States merchandise imports for consumption, by economic
class, 1936-38 quarterly average and 1947-50
157
B-44. Indexes of quantity and unit value of United States merchandise
imports for consumption, by economic class, 1936—38 quarterly
average and 1947-50
158
Summary:
B-45. Changes in selected economic'series since 1939 and 1949
159

114

Statistical Tables Relating to Employment, Production,
and Purchasing Power
TABLE B-l .—Gross national product or expenditure, 1929-501
[Billions of dollars]
Gross
national
product

Period

1929
1930
1931 ._
1932
1933 . .
1934

._.

1935
1936
1937
1938
1939
1940
1941__
1942
1943
1944

1945
1946
1947
1948
1949

GovernPersonal
Gross
purconsumpprivate
Net foreign ment
chases
of
tion exdomestic investment goods and
investment
penditures
services

103.8

78.8

15.8

0.8

8.5

90.9
75.9
58.3
55.8
64.9

70.8
61.2
49.2
46.3
51.9

10.2
5.4
.9
1.3
2.8

.7
.2
.2
.2
.4

9.2
9.2
8.1
8.0
9.8

72.2
82.5
90.2
84.7
91.3

56.2
62.5
67.1
64.5
67.5

6.1
8.3
11.4
6.3
9.9

-.1
-.1
.1
1.1
.9

9.9
11.7
11.6
12.8
13.1

101.4
126.4
161.6
194.3
213.7

72.1
82.3
91.2
102.2
111.6

13. 9
18.3
10.9
5.7
7.7

1.5
1.1
-.2
-2.2
-2.1

13.9
24.7
59.7
88.6
96.5

215.2
211.1
233.3
259. 1
255.6

123.1
146.9
165.6
177.4
178.8

,10. 7
28. 7
30.2
43.1
33.0

-1.4
4.6
8.9
1.9
.4

82.8
30.9
28.6
36.6
43.3

Annual rates, seasonally adjusted
1949— First half
Second half

_. .

257.0
254.1

177.9
179.8

34.4
31.6

1.2
-.3

1950— First half *

265.2

183.4

42.2

-2.0

41.4

1949— First quarter
Second quarter
Third quarter. _ _ _ ._
Fourth quarter

258.8
255.2
254.4
253.8

177.4
178.4
179.0
180.6

37.5
31.3
32.1
31.2

1.0
1.3
.1
-.7

42.9
44.3
43.2
42.8

262.5
268.0

182.4
184.5

40.5
44.0

-1.9
-2.0

41.4
41.5

1950— First quarter.
Second quarter

__
_.

43.6
43.0

1
The figures for 1946-50 are based on the revised series of national income and product of the Department
of Commerce. For detail, see the "Survey of Current Business," July 1950.
2 Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

TABLE B—2.—Personal consumption expenditures, 1929—50 l
[Billions of dollars]
Durable goods

Nondurable goods

Services

Total
exAutopendimoHoustures Total biles Other Total Food' Clothings Other Total ing* Other
and
parts

Period

1929. .

78.8

9.4

3.2

6.1

37.7

19.7

9.2

8.9

31.7

11.4

20.2

1930 .
1931
1932
1933. .
1934

70.8
61.2
49.2
46.3
51.9

7.3
5.6
3.7
3.5
4.3

2.2
1.6
.9
1.0
1.4

5.1
4.0
2.8
2.5
2.9

34.1
29.0
22.7
22.3
26.7

18.1
14.8
11.4
11.5
14.3

7.9
6.8
5.0
4.6
5.6

8.1
7.4
6.4
6.2
6.9

29.5
26.6
22.8
20.6
20.9

11.0
10.2
9.0
7.8
7.5

18.5
16.4
13.8
12.7
13.4

56.2
62.5
67.1
64.5
67.5

5.2
6.4
7.0
5.8
6.7

1.9
2.3
2.4
1.6
2.1

3.3
4.1
4.6
4.1
4.6

29.4
32.9
35.2
34.0
35.3

16.3
18.5
20.0
19.0
19.3

5.9
6.5
6.7
6.6
7.0

7.2
7.9
8.6
8.4
8.9

21.7
23.3
24.9
24.7
25.5

7.6
7.9
8.4
8.7
8.9

14. 1
15.4
16.5
16.0
16.5

72.1
82.3
91.2
102.2
111.6

7.9
9.8
7.1
6.8
7.1

2.7
3.3
.7
.8
.9

5.1
6.4
6.4
6.0
6.2

37.6
44.0
52.9
61.0
67.1

20.7
24.4
30.5
35.3
38.9

7.4
8.8
11.0
13.7
15.3

9.5
10.8
11.4
11.9
12.9

26.6
28.5
31.2
34.4
37.4

9.2
9.9
10.6
11.1
11.7

17.4
18.7
20.6
23.3
25.7

123.1
146.9
165.6
177.4
178.8

8.5
16.6
21.4
22.9
23.8

1.1
4.2
6.6
7.5
9.5

7.4
12.4
14.8
15.4
14.3

74.9
85.8
95.1
100.9
98.5

43.0
50.3
56.6
59.9
58.6

17.1
18.6
19.1
20.0
18.6

14.8
16.9
19.4
21.0
21.3

39.7
44.4
49.1
53.7
56.5

12.2
13.0
14.6
16.1
17.2

27.5
31.4
34.5
37.6
39.3

39.0
39.6

1935
1936
1937
1938
1939. . .
1940
1941
1942
1943..
1944
1945
1946
1947
1948
1949..

. _

_. . _
. .

.. . _

Annual rates, seasonally adjusted
1949— First half.
Second half

..__ 177.9
179.8

22.7
25.0

8.6
10.3

14.0
14.7

99.3
97.8

58.9
58.4

19.2
18.0

21.2
21.4

55.9
57.0

17.0
17.4

1950—First half «

183.4

27.0

11.0

16.0

98.0

58.5

17.9

21.6

58.4

18.0

40.4

1949— First quarter
Second quarter _ _ _
Third quarter
Fourth quarter

177.4
178.4
179.0
180.6

22.4
23.0
24.7
25.3

8.2
9.1
10.2
10.4

14.2
13.9
14.5
14.9

99.4
99.2
97.6
97.9

59.1
58.7
58.4
58.3

19.3
19.1
18.0
18.1

21.0
21.4
21.2
21.5

55.6
56.2
56.6
57.4

16.8
17.1
17.3
17.6

38.8
39.1
39.3
39.8

1950— First quarter
Second quarter *

182.4
184.5

26.9
27.2

10.8
11.3

16.1
15.9

97.5
98.5

58.3
58.7

17.7
18,1

21.5
21.7

58.0
58.8

17.9
18.2

40.1
40.6

1
The figures for 1946-50 are based on the revised series of national income and product of the Department
of Commerce. For detail, see the "Survey of Current Business," July 1950.
2 Includes alcoholic beverages.
3
Includes shoes and standard clothing issued to military personnel.
* Includes imputed rental value of owner-occupied dwellings.
s Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

116

TABLE B-3.—Gross private domestic investment., 1929-50

[Billions of dollars]
Nonfarm producers'
plant and equipment
Total
Farm
gross
equippriment
vate
and
domesEquip-3 Con- contic Total 2 ment struc- struction 2 4 tion 8
nvest ment 2

Period

Residential
construction
(nonfarm)26

Net change in business inventories
Other
priNonvate
confarm
after
struction 7 Total revalu- Farm
ation
adjustment

1929- .

15.8

9.8

5.6

4.2

1.1

2.8

0.5

1.6

1930
19311932
1933 _
1934

10.2
5.4
.9
1.3
2.8

7.6
4.6
2.5
2.3
3.1

4.3
2.8
1.6
1.6
2.2

3.4
1.8
1.0
!9

.9
.5
.3
.3
.4

1.4
1.2
.5
.3
.4

.5
.4
.2
.1
.1

-.3
-1.4
-2.6
-1.6
-1.1

6.1
8.3
11.4
6.3
9.9

3.8
5.2
6.6
4.7
5.7

2.9
3.9
4.7
3.4
4.0

1.0
1.3
1.9
1.4
1.7

.6
.8
1.0
.8
.8

.7
1.1
1.4
1.5
2.7

.1
.1
.2
.2
.2

13.9
18.3
10.9
5.7
7.7

7.4
9.3
5.8
4.6
6.3

5.3
6.6
4.1
3.5
4.7

2.1
2.7
1.7
1.1
1.6

1.0
1.3
1.0
.9
1.2

3.0
3.4
1.8
1.0
.8

10.7
28.7
30.2
43.1
33.0

8.7
15.6
20.3
23.5
22.6

6.3
10.7
14.6
16.7
16.1

2.4
4.9
5.7
6.8
6.5

1.4
2.5
3.8
4.6
4.7

1.1
4.0
6.3
8.6
8.3

1935---,.1936
1937 -_ - 1938
1939 .

. .-

1940
1941
1942
1943.
1944-..
1945
1946
1947.
1948
1949

_. _.

1.8

-0.3

()
-1.7
-2.6
-1.3
.2

2
8 !s
()
-.3
-1.3

.9
1.0
2.3
-1.0
.4

.4
21
1.8
-1.1
.3

.5
-1.1
.5
.1
.1

.2
.3
.1
8
()
.1

2.3
3.9
2.1
-.9
-.8

2.0
3.4
.8
-.5

.2
.5
1.3
-.4

.2
.5
.6
1.0
1.2

-.7
6.1
-.8
5.5
-3.7

-.6
6.3
1.4
4.4
-3.1

-.1
-.2
-2.2
1.2
-.6

Annual rates, seasonally adjusted
1949— First half
Second half

34.4
31.6

23.3
21.9

1950— First half a

42.2

23.2

16.9

1949— First quarter
Second quarter
Third quarter
Fourth quarter

37.5
31.3
32.1
31.2

23.5
23.0
22.2
21.6

16.6
16.3
16.0
15.5

40.5
44.0

22.3
24.3

16.0
17.8

6.3
6.5

1950— First quarter
Second quarter

16.4
15.8

4.8
4.6

7.7
8.9

1.2
1.2

25
-5.0

-2.2
-4.0

-.3
-1.0

6.4

4.6

11.3

1.4

1.6

2.4

-.7

6.9
6.7
6.2
6.1

4.8
4.8
4.7
4.4

7.8
7.6
8.2
9.5

1.2
1.2
1.2
1.3

.3
-5.3
-4.2
-5.7

.1
-4.5
-3.2
-4.7

.2
-.8
-1.0
-.9

4.5
4.8

11.0
11.6

1.4
1.4

1.3
2.0

2.1
2.6

-.8
-.6

6.8
6.2

1 The figures for 1946-50 are based on the revised series of national income and product of the Departmen
of 2Commerce. For detail, see the "Survey of Current Business," July 1950.
Items for 1945 and earlier years are not comparable with those for later years, nor with figures shown in
Table B-16. Revisions of construction estimates noted under Table B-16 have been incorporated in
Table
B-3 for 1946 and subsequent years only.
3
Total producers' durable equipment less "farm machinery and equipment" and farmers' purchases of
"tractors" and "business motor vehicles." These figures assume that farmers purchase 85 and 15 percent,
respectively, of all tractors and motor vehicles used for productive purposes.
* Industrial buildings, public utilities, gas- and oil-well drilling, warehouses, office and loft buildings,
stores, restaurants, and garages. Includes hotel construction prior to 1946 only.
fi Farm construction (residential and nonresidential) plus "farm machinery and equipment" and farmers'
purchases of "tractors" and "business motor vehicles." (See footnote 3.)
6 Includes construction of hotels, tourist cabins, motor courts, and dormitories since 1946 only.
7 Includes religious, educational, social and recreational, hospital and institutional, and miscellaneous
nonresidential.
8
Less than 50 million dollars.
s Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

117

TABLE B~~4.—National income by distributive shares, 1929—501
[Billions of dollars]
Business and professional income
and inventory
valuation
InComadjustment
Total pencome
nation- sation
of
al
emIn- In- farm
in- 2 ofployprocome ven- priecome ees3
tory
of
unin- valu- tors
Total corpoation
rated adenter- justprises ment

Period

1929

87.4

1930
1931..
1932
1933.
1934

1935
1936 .
1937
1938 .
1939

Corporate profits
and inventory
valuation
adjustment
Rental inNet
come
In- interof
est
Corperpo- vensons
tory
rate valuTotal prof- ation
its
adbefore justtax* ment

50.8

8.3

8.1

0.1

5.7

5.8 10.3

0.5

6.5

75.0
58.9
41.7
39.6
48.6

46.5
39.5
30.8
29.3
34.1

7.0
5.3
3.2
2.9
4.3

6.3
4.7
2.9
3.4
4.3

.8
.6
.3
-.5
-.1

3.9
2.9
1.7
2.3
2.3

4.8
6.6 3.3 3.3
3.6
1.6 -.8 2.4
2.5 -2.0 -3.0
1.0
2.0 -2.0
.2 -2.1
1.1 1.7 -.6
2.1

6.2
5.9
5.4
5.0

56.8
64.7
73.6
67.4
72.5

37.1
42.7
47.7
44.7
47.8

5.0
6.1
6.6
6.3
6.8

5.0
6.2
6.7
6.1
6.9

-.1
-.1
(5)
.2
-.2

4.9
3.9
5.6
4.4
4.5

2.3
2.7
3.1
3.3
3.5

5.8

1940. _.
1941
1942 .
1943
1944

81.3
103.8
137.1
169.7
183.8

51.8
64.3
84.9
109.2
121.2

7.7
9.6
12. 6-.
15.0
17.2

7.8
10.2
12.9
15.1
17.2

-.1 4.9
-.6
6.9
-.4 10.5
-.2 11.8
-.1 11.8

3.6
4.3
5.4
6.1
6.5

1945
1946. ..
1947
1948 .
1949 ..

_. 198.7

182.7
180.3

123.0
117.1
128.0
140.2
140.6

18.7
20.6
19.8
22.1
21.0

18.8 -.1
22.4 -1.8
21.3 -1.5
22.5 -.4
20.3
.7

6.3
6.6
7.1
7.5
7.3

.
..

223.5
216.8

12.5
14.8
15.6
17.7
13.4

3.0
4.9
6.2
4.3

9.8

4.8

1.0
-.7

4.5
4.5
4.4
4.3
4.2

9.2
14.6
19.9
24.3
24.0

9.3 -.1
17.2 -2.6
21.1 -1.2
25.1 — 8
24.3 -!3

4.1
4.1
3.9
3.4
3.1

19.2
18.3
24.7
31.8
29.9

19.7 -.6
23.5 -5.2
30.5 -5.8
33.9 -2.0
27.6
2.2

3.0
2.9
3.5
4.1
4.7

3.2
5.7
6.2
3.3
6.5

-.2
-.7
(5)

Annual rates, seasonally adjusted
1949— First half.
Second half

218.3
215.4

141.0
140.1

21.3
20.6

1950— First half •

219.1

144.4

1949— First quarter.
Second quarter
Third quarter. .
Fourth quarter

218.8
217.8
216.7
214.2

141.5
140.5
140.0
140.2

1950— First quarter . 6
Second quarter

217.2
221.0

142.3
146.6

20.4
20.1

.9
.5

14.3
12.5

7.4
7.2

29.6
30.1

27.4
27.9

2.2
2.2

4.6
4.8

21.8

22.6

-.8

12.2

7.2

28.4

30.1 -1.6

5.0

21.5
21.1
20.7
20.6

20.7
20.1
20.0
20.3

.8
1.0
.7
.3

14.9
13.7
12.2
12.8

7.4
7.4
7.2
7.3

28.8
30.4
31.8
28.4

28.3
26.4
28.2
27.6

.5
3.9
3.7
.8

4.6
4.7
4.8
4.8

21.4
22.2

21.6 -.2
23.6 -1.4

12.8
11.6

7.3
7.2

28.4
28.4

29.2 -.7
31.0 -2.6

5.0
5.0

i The figures for 1946-50 are based on the revised series of national income and product of the Department
of Commerce. For detail, see the "Survey of Current Business," July I960.
* National income is the total net income earned in producti on by individuals and businesses. The concept
of national income currently used differs from the concept of gross national product in that it excludes depreciation charges and other allowances for business and institutional consumption of durable capital goods.
3 Includes wage and salary receipts and other labor income (see appendix table B-5), and employer and
employee contributions for social insurance.
* See appendix table B-29 for corporate tax liability (Federal and State income and excess profits taxes)
and
corporate profits after taxes.
6
Less than 50 million dollars.
«Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

118

TABLE B-5.—Personal income, 1929-50l
[Billions of dollars]

Total
personal
income

Period

Salaries,
wages,
and other
labor
income 2

Proprietors' and
rental
income 3

Dividends
and
personal
interest4
income

Transfer
payments

Nonagricultural
personal
income 8

1929

85.1

50.5

19.7

13.3

1.5

76.8

1930
1931
1932
1933
1934

76.2
64.8
49.3
46.6
53.2

46.3
39.2
30.5
29.0
33.8

15.7
11.8
7.4
7.2
8.7

12.6
11.1
9.1
8.2
8.6

1.5
2.7
2.2
2.1
2.2

70.0
60.1
46.2
43.0
49.5

59.9
68.4
74.0
68.3
72.6

36.8
42.1
45.9
42.8
45.7

12.1
12.6
15.4
14.0
14.7

8.6
10.1
10.3
8.7
9.2

2.4
3.5
2.4
2.8
3.0

53.4
62.8
66.5
62.1
66.3

78.3
95.3
122.7
150. 3
165.9

49.5
61.5
81.4
104.5
116.2

16.3
20.8
28.4
32.8
35.5

9.4
9.9
9.7
10.0
10.6

3.1
3.1
3.2
3.0
3.6

71.5
86.1
109.4
135. 2
150.5

171.9
177.7
191.0
209.5
206.1

116.9
111.1
122.3
135.0
134.9

37.5
42.0
42.4
47.3
41.7

11.4
13.2
14.5
16.1
17.2

6.2
11.4
11.8
11.2
12.3

155. 7
158.8
170.8
187.0
188.2

12.1
12.6

188.8
187.8

1935
1936
1937
1938
1939 _

. _

1940
1941
1942
1943
1944
1945 .
1946
1947
1948
1949

- -

..
_ _
.

Annual rates, seasonally adjusted
1949— First half _
Second half

1950— First half 6. .

207.7
204. 6

135.4
134.4

43.0
40.4

17.1
17.3

215.0

137.6

41.2

17.8

18.3

198.6

1949— First quarter.
Second quarter. _. .
Third quarter
Fourth quarter ..

208.6
206.8
203.8
205. 4

135.7
135.2
134.4
134. 5

43.8
42.2
40.1
40.7

17.1
17.1
16.8
17.8

11.8
12.4
12.6
12.5

189.0
188. 5
187.3
188.2

1950— First quarter 6
Second quarter

216.4
213.7

135.5
139.8

41.5
41.0

17.7
17.9

21.6
15.0

199. 3
197.9

1 The figures for 1946-50 are based on the revised series of national income and product of the Department
of Commerce. For detail, see the "Survey of Current Business," July 1950.
2 Differs from "compensation of employees" in appendix table B-4, in that it excludes employer and
employee contributions to social insurance. Includes wage and salary receipts and other labor incomecompensation for injuries, employer contributions to private pension and welfare funds, pay of military
reservists not on full-time active duty (pay for full-time active duty included in military wages and
salaries), directors' fees, jury and witness fees, compensation of prison inmates, Government payments to
enemy prisoners of war, marriage fees to justices of the peace, and merchant marine war-risk life and injury
claims.
3
See appendix table B-4, for major components: business and professional income, income of farm
proprietors,
and rental income.
4
See appendix table B-6, for dividend payments and net interest paid by Government and table B-4
for other net interest payments.
« Equals personal income exclusive of net income of unincorporated farm enterprises, farm wages, agricultural net rents, agricultural net interest, and net dividends paid by agricultural corporations.
« Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

TABLE B—6.—Relation of national income and personal income, 1929—50l
[Billions of dollars]
Less:

Plus:

CorpoExcess
rate
of
Nation- profits Contri- wage
and
inbutions
al
acto
income ventory social cruals
valu- insur- over
disation ance burseadjustments
ment

Period

Government
transfer
payments

Net
interBusi- Equals:
perest
ness sonal
paid Divi- trans- income
by dends fer
Govpayernments
ment

1929

87.4

10.3

0.2

0.9

1.0

5.8

0.6

85.1

1930
1931
1932
1933
1934

75.0
58.9
41.7
39.6
48.6

6.6
1.6
-2.0
-2.0
1.1

.3
.3
.3
.3
.3

1.0
2.0
1.4
1.5
1.6

1.0
1.1
1.1
1.2
1.2

5.5
4.1
2.6
2.1
2.6

.5
.6
.7
.7
.6

76.2
64.8
49.3
46.6
53.2

56.8
64 7
73.6
67.4
72.5

3.0
4 9
6.2
4.3
5.8

.3
6
1.8
2.0
2.1

1.8
2.9
1.9
2.4
2.5

1.1
1.1
1.2
1.2
1.2

2.9
4.6
4.7
3.2
3.8

.6
.6
.6
.4
.5

59.9
68.4
74.0
68.3
72.6

81 3
103.8
137.1
169.7
183.8

9 2
14.6
19.9
24.3
24.0

23
2.8
3.5
4.5
5.2

0.2
-.2

2.7
2.6
2.7
2.5
3.1

1.3
1.3
1.5
2.1
2.8

4.0
4.5
4.3
4.5
4.7

.4
.5
.5
.5
.5

78.3
95.3
122.7
150.3
165.9

182.7
180.3
198.7
223.5
216.8

19.2
18.3
24.7
31.8
29.9

6.1
6.0
5.7
5.2
5.7

(32)
(2)
(2)
()
(2)

5.6
10.9
11.1
10.6
11.6

3.7
4.4
4.4
4.5
4.7

4.7
5.8
6.6
7.5
7.8

.5
.6
.7
.7
.7

171.9
177.7
191.0
209.5
206.1

.
. ..

1935
1936
1937
1938
1939
1940
1941
1942
1943
1944

. _
..

—

-..

1945 .
1946
1947
1948
1949

Annual rates, seasonally adjusted
1949— First half
Second half _ _
1950— First half

1949— First quarter. . _
Second quarter
Third quarter __ _. -_
Fourth quarter
1950— First quarter 3
Second quarter

_-_

218.3
215.4

29.6
30.1

5.6
5.6

219.1

28.4

6.8

218.8
217.8
216.7
214. 2

28.8
30.4
31.8
28.4

5.7
5.6
5.6
5.7

217.2
221.0

28.4
28.4

6.7
6.8

-.1

.1
-.3

11.4
11.8

4.6
4.7

7.8
7.8

.7
.7

207.7
204.6

17.6

4.7

8.2

215.0

11.2
11.7
11.9
11.8

4.6
4.6
4.7
4.7

7.9
7.7
7.4
8.2

.7
.7
.7
.7

208.6
206.8
203.8
205.4

20.9
14.3

4.7
4.7

8.1
8.2

.7
.7

216.4
213.7

1 The figures for 1946-50 are based on the revised series of national income and product of the Department
of 2Commerce. For detail, see the "Survey of Current of Business," July 1950.
Less than 50 million dollars.
* Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

ISO

TABLE B-7.—Disposition of personal income, 1929-50l

Personal
income

Period

Less:
Personal
tax and
nontax
payments

Less:
Equals:
Equals:
Disposa- Personal
conPersonal
ble
sumption
net
personal expendi- saving
income
tures

Net
saving as
percent
of disposable
income

Billions of dollars
1929

85.1

2.6

82.5

78.8

1930 -

1931
1932
1933
1934

76.2
64.8
49.3
46.6
53.2

2.5
1.9
1.5
1.5
1.6

73.7
63.0
47.8
45.2
51.6

70.8
61.2
49.2
46.3
51.9

2.9
1.8
-1.4
-1.2
_ 2

3.9
2.9
-2.9
-2.7
-.4

1935 .
1936
1937
1938
1939

39.9
68.4
74.0
68.3
72.6

1.9
2.3
2.9
2.9
2.4

58.0
66.1
71.1
65.5
70.2

56.2
62.5
67.1
64.5
67.5

1.8
3.6
3.9
1.0
2.7

3.1
5.4
5.5
1.5
3.8

78.3
95.3
122.7
150.3
165.9

2.6
3.3
6.0
17.8
18.9

75.7
92.0
116.7
132.4
147.0

72.1
82.3
91.2
102.2
111.6

3.7
9.8
25.6
30.2
35.4

4.9
10.7
21.9
22.8
24.1

171.9
177.7
191.0
209.5
206.1

20.9
18.8
21.5
21.2
18.7

151.1
158.9
169.5
188.4
187.4

123.1
146.9
165.6
177.4
178.8

28.0
12.0
3.9
10.9
8.6

18.5
7.6
2.3
5.8
4.6

1940
1941 ._.
1942
1943
1944

1945
1946 _
1947
1948
1949

3.7 |

4.5

Annual rates, seasonally adjusted
1949— First half
Second half
1950— Fjrst half

1949 — First quarter
Second quarter
Third quarter
Fourth quarter..
1950— First quarter 2
Second quarter

207.7
204.6

18.7
18.7

189.0
186.0

177.9
179.8

11.2
6.2

5.9
3.3

215.0

18.9

196.2

183.4

12.7

6.5

208.6
206.8
203.8
205. 4

18.7
18.7
18.7
18.7

189.9
188.2
185.1
186.8

177.4
178.4
179.0
180.6

12.5
9.8
6.2
6.2

6.6
5.2
3.3
3.3

216.4
213.7

18.7
19.1

197.7
194.6

182.4
184.5

15.3
10.1

7.7
5.2

i The figures for 1946-50 are based on the revised series of national income and product of the Departmen t
of 3Commerce. For detail, see the "Survey of Current Business,'' July 1950.
Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

121

TABLE B-8.—Total and per capita disposable personal income in current and 1949 dollars, 1929-50
Total disposable
personal income
(billions of
dollars) 1

Period

Current
prices
1929
1930
1931
1932
1933
1934

- -.

1945
1946
1947
1948
1949

.
--

1935
1936
1937
1938
1939
1940
1941
1942
1943
1944

._-

...

- - -

.__

..
-

---_
_

..- ._

1949
prices 2

Per capita
disposable income
(dollars) 1
Current
prices

1949
prices 2

Consumers'
price
index
(1949=
100)

Population
(thousands) 8

82.5

114.0

678

936

72.4

121,770

73.7
63.0
47.8
45.2
51.6

104. 4
98.0
82.8
82.8
91.2

599
508
383
360
408

848
790
663
659
722

70.6
64.3
57.7
54.6
56.6

123, 077
124,040
124.840
125. 579
126. 374

58.0
66.1
71.1
65.5
70.2

100.0
112.8
117. 1
109.9
119. 4

456
516
552
505
536

786
881
909
847
912

58.0
58.6
60.7
59.6
58.8

127. 250
128,053
128.825
129,825
130, 880

75.7
92.0
116.7
132.4
147.0

127.7
147.9
167.9
177.2
1.91. 7

574
691
867
970
1,065

968
1,110
1,247
1,298
1,388

59.3
62.2
469.5
474.7
<76.7

331,970
133, 203
134,665
136,497
138,083

151.1
158.9
169.5
188.4
187.4

191.8
188.3
179.7
186.2
187.4

1,082
1,125
1,177
1,285
1,256

1,374
1,333
1,248
1,270
1,256

< 78. 8
<84.4
<94.3
101.2
100.0

139, 586
141, 235
144,024
146, 571
149, 215

100.3
99.7

148, 639
149, 947

Annual rates, seasonally adjusted
1949— First half
Second half
1950— First half 8

__
..

1949 — First quarter
Second quarter _._
Third quarter
Fourth quarter
1950 — First quarter 8
Second quarter

189.0
186.0

188.4
186.6

1,272
1,240

1,268
1,244

196.2

197.8

1,298

1,308

99.2

151, 188

189.9
188.2
185. 1
186.8

189.1
187.8
185.3
187.7

1,280
1,264
1,237
1,243

1,275
1,261
1,239
1.249

100.4
100.2
99.9
99.5

148, 338
148, 918
149, 578
150, 290

197.7
194.6

200.5
195.0

1,310
1,285

1,329
1,288

98.6
99.8

150,903
151, 444

1 The figures for 1946-50 are based on the revised series of national income and product of the Department
of 2Commerce. For detail, see the "Survey of Current Business," July 1950.
Dollar estimates in current prices divided by the consumers' price index on the base 1949=100 to give a
rough
measure of changes in buying power of disposable personal income.
3
Estimated population of continental United States, including armed forces overseas; annual data as
of July 1 and quarterly and semiannual data as of middle of period, interpolated from published monthly
estimates. Population in continental United States is currently estimated at 150,520,000 on April 1, according to preliminary counts for the 1950 Census; including armed forces overseas, it is 150,930,000. Estimates
made prior to the 1950 Census results and used'in this table put total population, including armed forces
overseas, at 151,188,000 on April 1, which is 258,000 higher than the first official results of the 1950 Census.
Intercensual estimates used here for 1941 through second quarter of 1950 will be adjusted later to take care
of this small difference.
4 The consumers' price index has been roughly adjusted to take account of the understatement during the
price-control period. This adjustment is in line with the report of the Technical Committee (better known
as the Mitchell committee) on the consumers' price index. The unadjusted index will be found in appendix
table B-21.
* Estimates based on incomplete data; second quarter by Council of Economic Advisers.
Sources: Department of Commerce and Department of Labor (except as noted).

122

TABLE B-9.—Labor force, employment, and unemployment, 1929—50
Civilian labor force
Total
labor
force
(includ- Armed
forces *
ing
armed1
forces)

Period

Employment
Total
civilian
labor
force

Total

Agri- Nonagricultural cultural

Unemployment

Unemployment
as percent of
total
civilian
labor
force

Thousands of persons, 14 years of age and over
Monthly average:
1929

1930
1931
1932
1933
1934

_ -

1935
1936
1937 .
1938
1939
1940
1941
1942.
1943
1944
1945
1946
1947
1948
1949

- - _

1949~-First half
Second half.
1950— First half

1949 January
February.
March
April
May
June
July
August
September
October __ _
November
December
1950 —January
February
March
April
May . .
June

_
.

49, 440

260

49, 180

47,630

10, 450

37, 180

1,550

3.2

50, 080
50, 680
51, 250
51,840
52, 490

260
260
250
250
260

49,820
50, 420
51,000
51, 590
52, 230

45, 480
42, 400
38, 940
38, 760
40, 890

10, 340
10, 290
10, 170
10, 090
9,900

35, 140
32, 110
28, 770
28,670
30, 990

4,340
8,020
12, 060
12, 830
11,340

8.7
15.9
23.6
24.9
21.7

53, 140
53, 740
54, 320
54, 950
55, 600

270
300
320
340
370

52,870
53, 440
54, 000
54, 610
55, 230

42, 260
44, 410
46, 300
44,220
45, 750

10,110
10, 000
9,820
9,690
9,610

32, 150
34, 410
36, 480
34, 530
36, 140

10, 610
9, 030
7,700
10, 390
9,480

20.1
16.9
14.3
19.0
17.2

56, 030
57, 380
60, 230
64,410
65, 890

390
1,470
3,820
8,870
11, 260

55, 640
55, 910
56,410
55, 540
54, 630

47, 520
50, 350
53, 750
54, 470
53,960

9,540
9,100
9,250
9,080
8,950

37, 980
41, 250
44, 500
45, 390
45, 010

8,120
5, 560
2,660
1,070
670

14.6
9.9
4.7
1.9
1.2

65, 140
60,820
61,608
62, 748
63, 571

11, 280
3,300
1,440
1, 306
1,466

53, 860
57, 520
60, 168
61, 442
62, 105

52, 820
55, 250
58, 027
59, 378
58, 710

8,580
8,320
8,266
7,973
8,026

44, 240
46, 930
49, 761
51, 405
50, 684

1,040
2,270
2,142
2,064
3,395

1.9
3.9
3.6
3.4
5.5

62, 732
64, 411

1,483
1,450

61, 249
62,960

58,060
59, 359

7,940
8,112

50,120
51, 247

3,189
3,602

5.2
5.7

63, 776

1,347

62,429

58,555

7,233

51, 322

3,874

6.2

61, 546
61,896
62, 305
62, 327
63, 452
64,866
65, 278
65, 105
64, 222
64,021
64,363
63,475

1,468
1,508
1,491
1,492
1,469
1,468
1,463
1,468
1,459
1,445
1,436
1,430

60, 078
60, 388
60, 814
60,835
61,983
63, 398
63,815
63, 637
62,763
62,576
62, 927
62, 045

57,414
57, 168
57, 647
57,819
58, 694
59, 619
59, 720
59,947
59,411
59, 001
59, 518
58, 556

6,763
6,993
7,393
7,820
8,974
9,696
9,647
8,507
8,158
7,710
7,878
6,773

50, 651
50, 174
50, 254
49, 999
49, 720
49, 924
50, 073
51, 441
51, 254
51,290
51, 640
51, 783

2,664
3,221
3,167
3,016
3,289
3,778
4,095
3,689
3,351
3,576
3,409
3,489

4.4
5.3
5.2
5.0
5.3
6.0
6.4
5.8
5.3
5.7
5.4
5.6

62,835
63, 003
63, 021
63, 513
64,108
66, 177

1,408
1,366
1,346
1,330
1,320
1,311

61,427
61, 637
61, 675
62, 183
62, 788
64, 866

56,947
56, 953
57, 551
58,668
59, 731
61,482

6,198
6, 223
6,675
7,195
8,062
9,046

50, 749
50, 730
50, 877
51,473
51, 669
52, 436

4,480
4,684
4,123
3,515
3,057
3,384

7.3
7.6
6.7
5.7
4.9
5.2

1
Data for 1940-50 exclude about 150,000 members of the armed forces who were outside the continental
United States in 1940 and who were therefore not enumerated in the 1940 census. This figure is deducted by
the Census Bureau from its current estimates for comparability with 1940 data.
2 Includes part-time workers and those who had jobs but were not at work for such reasons as vacation,
illness, bad weather, temporary lay-off, and industrial disputes.

NOTE.—Labor force data are based on a survey made during the week which includes the 8th of the
month.
Detail will not necessarily add to totals because of rounding.
Sources: Department of Labor (1929-39) and Department of Commerce (1940-50).

894762—50

-9

123

TABLE B-10.—Number of wage and salary workers in nonagricultural establishments, 1929-50l
[Thousands of employees]
Total
wage
and
salary
workers

Period

Montly average:
1929

Manufacturing

Total

Gov^ransernCon- portament
tion Trade Fi- Serv- (FedMin- tract
conNon2
Dura- dura- ing struc- and
eral,
ublic ( ) nance ice a State,
ble
tion utilible
goods goods
and
ties
local)
(8)

31,041

10,534

1930
1931
1932
1933
1934

29, 143
26,383
.. 23, 377
23, 466
25,699

9,401
8,021
6,797
7, 258
8,346

1935
1936
1937
1938
1939

26,792
28, 802
30, 718
28,902
30,287

8,907
9,653
10,606
9,253
10,078

4,683

1940
1941
1942
1943
1944

32,031
36,164
__. 39, 697
42,042
41,480

10, 780
12, 974
15,051
17, 381
17, 111

40,069
41, 412
43, 371
44, 201
43,006

42,993
1949—First half
Second half— 43,019

1945
1946
1947
1948
1949

(»)

1,078

1,497

3,907

6,401

1,431

3,127

3,066

1,000
864
722
735
874

1,372
1,214
970
809
862

3,675 6,064
3,243 5,531
2,804 4,907
2,659 4,999
2,736 5,552

1,398
1,333
1,270
1,225
1,247

3,084
2,913
2,682
2,614
2,784

3,149
3,264
3,225
3,167
3,298

(3)
5,394

888
937
1,006
882
845

912
1,145
1,112
1,055
1,150

2,771
2,956
3,114
2,840
2,912

5,692
6,076
6,543
6,453
6,705

1,262
1,313
1,355
1,347
1,382

2,883
3,060
3,233
3,196
3,228

3,477
3,662
3,749
3,876
3,987

5,337
6,945
8,804
1,077
0, 858

5,443
6,028
6,247
6,304
6,253

916
947
983
917
883

1,294
1,790
2,170
1,567
1,094

3,013
3,248
3,433
3,619
3,798

7,055
7,567
7,481
7,322
7,399

1,419
1,462
1,440
1, 401
1,374

3,362
3,554
3,708
3,786
3,795

4,192
4,622
5,431
6,049
6,026

15, 302
14, 461
15,247
15,286
14, 146

9,079
7,739
8,373
8,315
7,465

6,222
6,722
6,874
6,970
6,681

826
852
943
981
932

1,132
1,661
1,982
2,165
2,156

3,872 7,685
4,023 8,815
4,122 9,196
4,151 9,491
3,977 9,438

1,394
1,586
1,641
1,716
1, 763

3,891
4,408
4,786
4,799
4,781

5,967
5,607
5,454
5,613
5,813

14,307
13, 986

7,712
7,218

6,595
6,768

981
883

2,044
2,267

4,016
3,942

9,358
9,518

1,752
1,772

4,760
4,803

5,776
5,847

869

8( )
8
8
3

(33)
()

14, 218

7,568

6,650

2,064

3,900

9,279

1, 797

4,747

5,823

1949—January _...-February
March
April
May
June
July
August
September _..
October
NovemberDecember-..

43, 449 14, 782
43, 061 14, 649
42, 918 14, 475
42, 966 14, 177
42, 731 13,877
42,835 13,884
42, 573 13, 757
42,994 14, 114
43, 466 14, 312
42, 601 13, 892
42, 784 13, 807
43, 694 14, 031

8,044
7,923
7,819
7,656
7,441
7,392
7,255
7,302
7,409
6,986
7,050
7,303

6,738
6,726
6, 656
6,521
6,436
6,492
6,502
6,812
6,903
6,906
6,757
6,728

991 2,016
986 1,926
981 1,947
984 2,036
974 2,137
968 2,205
943 2,277
956 2,340
948 2,341
5593 2,313
917 2,244
940 2,088

4,054
4,024
3,975
3,991
4,021
4,031
4,007
3,992
3,959
3,871
3,892
3,930

9,388 1,731
9,292 1,735
9,310 1,749
9,478 1,757
9,342 1,763
9,336 1,774
9,220 1,780
9,213 1,780
9,409 1,771
9,505 1,767
9,607 1,766
10, 156 1,770

4,723
4,712
4,720
4,768
4,804
4,834
4,851
4,836
4,833
4,794
4,768
4,738

5,764
5,737
5,761
5,775
5,813
5,803
5,738
5,763
6,893
5,866
5,783
6,041

1950—January
February
March4
April
May*
June *

42, 125
41, 661
42, 295
42, 913
43,312
43,865

7,342
7,324
7,418
7,554
7,811
7,961

6,638
6,673
6,685
6,613
6,605
6,684

«861
«595
938
938
938
941

4,701
4,696
4,708
4,757
4,792
4,829

5,777
5,742
5,769
5,915
5,900
5,832

1950— First half . ... 42,695

13, 980
13, 997
14, 103
14, 167
14,416
14,645

1,919 3,869
1,861 3,841
1,907 3,873
2,068 3,927
2,234 3,887
2,397 4,000

9,246
9,152
9,206
9,338
9,333
9,396

1,772
1,777
1,791
1,803
1,812
1,825

»Includes all full- and part-time wage and salary workers in nonagricultural establishments who worked
or received pay during the pay period ending nearest the 15th of the month. Excludes proprietors, selfemployed persons, domestic servants, and personnel of the armed forces. Not comparable with estimates
of nonagricultural employment of the civilian labor force reported by the Department of Commerce (appendix table B-9) which include proprietors, self-employed persons, and domestic servants; which count
persons as employed when they are not at work because of industrial disputes, bad weather, or temporary
lay-offs, and which are based on an enumeration of population, whereas the estimates in this table are based
on reports from employing establishments.
* Data for the trade and service divisions, beginning with 1947, are not comparable with data shown for
earlier years because of the shift of the automotive repair service industry from the trade to the service division.
« Not available.
• Estimates based on incomplete data.
' Data reflect work stoppages in bituminous coal mining.
NOTE.—Detail will not necessarily add to totals because of rounding.
Adjustments have been made to levels indicated by data of unemployment insurance agencies and the
Bureau of Old-Age and Survivors Insurance through 1947, and have been carried forward from 1947 benchmark levels, thereby providing consistent series.
Source: Department of Labor.

124

TABLE B-l 1.—Average gross weekly earnings in selected industries, 7929—50
Manufacturing
Period
Total
Monthly average:
1929

Bitumi- Build- Class I
Ketail Hotels
nous ng con- steam Tele- Wholesale
(year 1
trade round)
Dura- Noncoal
strucrail- phone trade
ble durable mining tion
roads
goods goods

(2)
(22)
(2)
( 2)
(2)
()

$25. 72

(2)

$28. 49

(2)

22.21
17.69
13.91
14.47
18.10

(22)
(2)
(2)
()
$22.97

27.76
26. 76
23.34
23.09
24.32

(22)
(2)
( 2)
(2)

()

(22)
(2 )
(2)
(2)
()

(22)
(2)
(2)
(2)
()

(22)
(2)
( 2)
( 2)
()

(2)

19.58
22.71
23.84
20.80
23.88

24.51
27.01
30.14
29.19
30.39

26.76
28.01
29.20
30.26
30.99

(22)
()
$29. 81
31. 53
31.94

(22)
(2 )
(2)
(2)
()

(22)
()
(22)
( 2)
()

(22)
(2)
(2)
(2)
()

24.71
30.86
35.02
41.62
51.27

31.70
35.14
41.80
48.13
52.18

31.55
34.25
38.65
43.68
46.06

32. 44
32.74
33.97
36.30
38.39

(22)
()
(22)
(2)
()

(22)
( 2)
()
(22)
()

(2)

52.25 53.73 45. 69
58.03 56.24 51.22
56. 59
54.22
63.30
72.12 * 68. 85 59.14
63.28 70.95 « 60. 53

(»)
44.04
44.77
48.92
51.78

(22)
()
$51.99
55.58
57.55

(32)
()
$40.66
43.85
45.93

$29.36
31.41
32.84

70.94
54.99

70.80 560.39
71.03 561.00

50.90
52.71

57.23
57.84

45.56
46.32

32.60
32.99

52.97

63.76

69.78 5 62. 37

53.40

58.52

46.49

33.21

51.35
51.33
51.07
49.67
50.41
50. 97
51.55
51.31
52.59
52.47
52.07
52.69

76.32
73.56
7 70. 54
72.33
72.98
7 59. 90
M7.94
7 49. 51
7 52. 46
763.10
68.17
7 48. 74

70.88
70.53
69.83
70.33
71.81
71.44
71.28
71.95
70.69
71.80
70.21
70.26

60.21
61.64
60.00
62.51
60.69
57.27
60.37
62.64
60.98
58.98
61.60
61.45

49.84
50.84
50.82
50.58
51.84
51.46
51.90
51.57
52.61
53.29
54.40
52.49

57.24
56.82
56.88
57.12
57.83
57.49
58.18
57.10
57.35
58.36
57.86
58.20

45.51
45.14
44.95
45.31
45.98
46.45
46.95
46.87
46.58
46.06
45. 63
45.83

32.41
32.47
32.53
32.35
32.99
32.85
32.90
32.93
32.90
32.84
33.13
33.24

52.91 747.36
53.06 7 49. 83
53.04 78.75
52.21 72.86
52.87 70.01
53.74
(')

68.76
67.00
68.83
70.70
73.60
(')

61.69
62.37
63.73
61.69
(2)
(2)

53.13
53.69
52.98
53.44
53.76
(a)

58.14
58.27
58.56
58.69
58.74
(2)

46.58
46.26
46.26
46.47
46.86
(')

33.06
33.51
33.07
33.12
33.29
C2)

$25. 03

$27.22

1930
1931
1932
1933
1934

23. 25
20.87
17.05
16.73
18.40

24.77
21.28
16.21
16.43
18.87

1935
1936
1937
1938
1939

20.13
21.78
24.05
22.30
23.86

21.52
24.04
26.91
24.01
26.50

1940
1941
1942
1943
1944

25.20
29.58
36.65
43.14
46.08

28.44
34.04
42.73
49.30
52.07

1945
1946
1947
1948
1949

44.39
43.82
49.97
54.14
54.92

49.05
46.49
52.46
57.11
58.03

$46. 96
50.61
51.41

1949— First half
Second half- _

54.64
55.13

57.90
58.01

50.80
52.11

1950— First half «...

57.12

60.74

1949—January
February
March
April . _
May
June
July
August
September _ _ .
October
November...
December

55.50
55.20
54.74
53.80
54.08
54.51
54.63
54.70
55.72
55.26
54.43
56.04

58.8?
58.49
57.83
57.21
57.21
57.82
57.31
57.89
58. 69
58.17
56.82
59.19

1950—January
February
March
April 8<L__
May
June *

56.29
56.37
56.53
56.93
57.72
58.89

59.40
59.47
59.74
60.97
61.72
63.14

8( )
2

(2)

8( )
2

(2)
(22)
()

8( )
2

(2)

1
Money payments only; additional value of room, board, uniforms, and tips not included.
23 Not available.
Not available. Series beginning April 1945 includes only employees subject to provisions of the Fair
Labor Standards Act and is not comparable with preceding series which includes all employees. Beginning
June
1949, data relate to nonsupervisory employees.
4
Not strictly comparable with previous data.
56 Preliminary average; does not include any retroactive wage payments.
Estimates based on incomplete data.
7
Data reflect work stoppages, or 3-day workweek.
NOTE.—Data are for production workers hi manufacturing and mining, hourly-rated employees in railroads, and for all nonsupervisory employees in other industries. Data are for payroll periods ending closest
to the middle of the month except in railroads where monthly data are used.
Adjustments have been made to levels indicated by data of unemployment insurance agencies and the
Bureau of Old-Age and Survivors Insurance through 1947, and have been carried forward from 1947 benchmark levels, thereby providing consistent series.
The half-year data are straight arithmetic averages of the monthly figures and not strictly comparable
with the annual averages which have been weighted by data on man-hours.
Source: Department of Labor.

125

TABLE B—12.—Average hourly earnings in selected industries, 1929-50
Manufacturing
Period
Total
Monthly average:
1929

I
Bitumi- Build- Class
nous ing con- steam
Tele- WholeRetail Hotels
railsale
(year
Dura- Noncoal
struc- roads phone trade
trade round)
1
ble durable mining tion
goods goods

$0. 566

(2)

.552
.515
.446
.442
.532

(22)

()
$0. 497
.472
.556

(22)
(2 )
( 2)
(2)

.550
.556
.624
.627
.633

.577
.586
.674
.686
.698

(2)
(22)
()
(22)

()

.745
.794
.856
.878
.886

.661
.729
.853
.961
1.019

.724
.808
.947
1.059
1.117

(2)
(22)
(2)
(2)
()

.883
.993
.059
.139
.186

1.023
1.086
1.237
1.350
1.401

1.111
1.156
1.292
1.410
1.469

(22)
()
$1. 171
1.278
1.325

1949— First half
Second half- _

1.402
1.401

1.468
1.470

1.324
1.327

1950-Firsthalf6...

1.432

1.498

1949—January
February
March
April
MayJune
July
August .
September. _.
October
November- _ .
December

1.405
1.401
1.400
1.401
1.401
1.405
1.408
1.399
1.407
1.392
1.392
1.408

1.467
1.466
1.464
1.467
1.467
1. 475
1.477
1.473
1.482
1.458
1.457
1.476

1950— January
February
March
April ».. _
MayZe
June 6

1.418
1.420
1.424
1.434
1.443
1.454

1.485
1.483
1.486
1.498
1.509
1.525

1930
1931
1932
1933. _
1934
1935
1936
1937
1938
1939

__.

1940
1941
1942 _
1943
1944

...

1945
1946
1947 ._
1948
1949

$0.681

(2)

.684
.647
.520
.501
.673

(22)
()
(22)

$0.636

(2)

.644
.651
.600
.595
.602

(22)
(2)
()
(22)

(22)
( 2)
(2)
( 2)

(22)
(2)
()
(22)

(2)
(22)
()
C22)
()

.815
.824
.903
.908
.932

.651
.659
.676
.712
.714

(22)

()
$0. 774
.816
.822

(22)
()

(2)
(2)

.958
1.010
1.148
1.252
1.319

.717
.751
.824
.897
.938

.827
.820
.843
.870
.911

(2)
(2)
(2)
(2)
(2)

1.379
.240
.942
1.478
.401
1.116
1.681
.636
1.171
1.284
.898 * 1. 848
.941
1.935 51.414

(3)
1.124
1.197
1.248
1.345

$1. 268
1.359
1. 414

$1. 009
1.088
1.137

.943
.941

1.928 56 1. 346
1.941
1. 482

1.325
1.367

1.408
1.419

1.132
1.141

.736
.749

1.354

.987

1.989

6 1. 549

1.382

1.449

1.152

.758

.327
.323
.323
.321
.323
.324
.332
.319
.328
.325
.325
.334

.947
.941
.938
.934
1.946
1.951
1.910
1.897
1.943
1.978
1.999
1.919

1.918
1.930
1.933
1.934
1.930
1.924
1.922
1.932
1.938
1.944
1.947
1.964

1.333
1.343
1.318
.359
.367
.354
.369
.354
.540
1.537
1.543
1.547

1.298
1.317
1.327
1. 324
1.343
1.340
1.348
1.343
1. 363
1.377
1.402
1.367

1.403
1.403
1.401
1. 407
1.421
1.416
1.426
1.403
1.409
1.427
1.425
1.423

1.132
1.123
1.121
1.127
1.141
1. 147
1.148
1.146
1.150
1.140
1.138
1.126

.735
.738
.731
.732
.738
.745
.746
.745
.746
.743
.753
.759

.343
.350
.353
.356
.359
.364

1.933
1.962
2.009
2.024
2.006
(2)

1.976
1.988
1.995
1.986
2.000
(2)

1.550
1.567
1.532
1.546
(2)
(2)

1.380
1.391
1.376
1.381
1.382
(2)

1.432
1.446
1.453
1.460
1.454
(2)

1.153
1.145
1.148
1.153
1.160
(2)

.753
.765
.755
.758
.760
(2)

()

()
$0. 795

()

(2)
(2)
(2)

(2)
(2)

()

(2)
(2)
(2)

8
(2)
(2)
(2)
(2)
(2)

(2)
(2)
C2)
C2)
C2)
(2)

8
§
8
$0. 650
.709
.743

1
Money payments only: additional value of room, board, uniforms, and tips not included.
'
Not available.
3
Not available. Series beginning April 1945 includes only employees subject to provisions of the Fair
Labor Standards Act and is not comparable with preceding series which includes all employees. Beginning
June
1949 data relate to nonsupervisory employees.
4
Not strictly comparable with previous data.
6
Preliminary
average; does not include any retroactive wage payments.
6
Estimates based on incomplete data.
NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in railroads, and for all nonsupervisory employees in other industries. Data are for payroll periods ending
closest to the middle of the month except in railroads where monthly data are used.
Adjustments have been made to levels indicated by data of unemployment insuance agencies and the
Bureau of Old-Age and Survivors Insurance through 1947, and havejbeen carried forward from 1947 benchmark levels, thereby providing consistent series.
The half year data are straight arithmetic averages of the monthly figures and not strictly comparable
with the annual averages which have been weighted by data on man-hours.
Source; Department of Labor.

126

TABLE B-13.—Average weekly hours in selected industries, 1929-50
Manufacturing

Class I
Bitumi- Building
steam Tele- WholeRetail Hotels
nous
(year
consale
rail- phone trade
Noncoal
trade round)
strucDurable
Total goods durable mining tion
roads
goods

Period

Monthly average:
1929

C1)

38.4

44.8

C1)

1930
1931
1932
1933
1934

42.1
40.5
38.3
38.1
34.6

32.6
34.8
33.9

0)
0)
41.9
40.0
35.1

33.5
28.3
27.2
29.5
27.0

0)
(0
(0
0)
28.9

43.1
41.1
38.9
38.8
40.4

0)
0)
0)
0)
(0

(0
0)1
C)
(0
(0

1935
1936 _
1937
1938
1939

36.6
39.2
38.6
35. 6
37.7

37.3
41.0
40.0
35.0
38.0

36.1
37.7
37.4
36.1
37.4

26.4
28.8
27.9
23.5
27.1

30.1
32.8
33.4
32.1
32.6

41.1
42.5
43.2
42.5
43.4

0)
0)
38.8
38.9
39.1

(0
(0
(0
(0
(0

1940
1941
1942
1943
1944

38.1
40.6
42.9
44.9
45.2

39.3
42.1
45.1
46.6
46.6

37.0
38.9
40.3
42. 5
43.1

28.1
31.1
32.9
36.6
43.4

33.1
34.8
36.4
38.4
39.6

44.0
45.6
46.9
48.7
49.1

39.5
40.1
40.5
41.9
42.3

1945
1946
1947_
1948
1949

43.4
40.4
40.4
40.1
39.2

44.1
40.2
40.6
40.5
39.5

42.3
40.5
40.1
39.6
38.8

42.3
41.6
40.7
38.0
32.6

39.0
38.1
37.6
337.3
36.7

48.5
45.9
46.3
46.1
43.1

(2)
39.4
37.4
39.2
38.5

(0
(0
0)
(0
C)
C1)
(0

0)1
C)
(0
(0
0)
(0
(0
0)
0)
0)
(0
(0
0)
(0
(')

0)
0)
(0
0)
(<)

41.0
40.9
40.7

0)
0)
40.3
40.3
40.4

0)
0)
45.2
44.3
44.2

1949— First half
Second half. _

39.0
39.4

39.4
39.4

38.4
39.3

36.5
28.3

36.7
36.6

44.9
41.4

38.4
38.6

40.6
40.8

40.2
40.6

44.3
44.1

1950— First half < _ _ _

39.9

40.6

39.1

32.0

35.1

40.3

38.6

40.4

43.8

1949—January
February
March
April . _
May
June
July
August-.
September _._
October
November
December

39.5
39.4
39.1
38.4
38.6
38.8
38.8
39.1
39.6
39.7
39.1
39.8

40.1
39.9
39.5
39.0
39.0
39.2
38.8
39.3
39.6
39.9
39.0
40.1

38.7
38.8
38.6
37.6
38.1
38.5
38.7
38.9
39.6
39.6
39.3
39.5

39.2
37.9
536.4
37.4
37.5
530.7
525.1
526.1
£27.0
531.9
34.1
525.4

37.0
36.5
36.1
36.4
37.2
37.1
37.1
37.2
36.5
36.9
36.1
35.8

45.2
45.9
45.5
46.0
44.4
42.3
44.1
46.4
39.6
38.3
40.0
39.9

38.4
38.6
38.3
38.2
38.6
38.4
38.5
38.4
38.6
38.7
38.8
38.4

40.8
40.5
40.6
40.6
40.7
40.6
40.8
40.7
40.7
40.9
40.6
40.9

40.2
40.2
40.1
40.2
40.3
40.5
40.9
40.9
40.5
40.4
40.1
40.7

44.1
44.0
44.5
44.2
44.7
44.1
44.1
44.2
44.1
44.2
44.0
43.8

1950—January
February
March
April <
May 4*
June

39.7
39.7
39.7
39.7
40.0
40.5

40.0
40.1
40.2
40.7
40.9
41.4

39.4
39.3
39.2
38.5
38.9
39.4

524.5
525.4
39.2
36.0
34.9
0)

34.8
33.7
34.5
35.6
36.8
(0

39.8
39.8
41.6
39.9
0)
0)

.38.5
38.6
38.5
38.7
38. 9
C1)

40.6
40.3
40.3
40.2
40.4
C1)

40.4
40.4
40.3
40.3
40.4
(0

43.9
43.8
43.8
43.7
43.8
0)

44.2

1
2

(0
0)
0)
0)
(0
(0

(0
0)
0)
(0

Not available.
Average for year not available because new series was started in April 1945. Beginning with June 1949
data
relate to nonsupervisory employees only.
3
Not strictly comparable with previous data.
*6 Estimates based on incomplete data.
Data reflect work stoppages, or 3-day workweek.
NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in railroads, and for nonsupervisory employees in other industries. Data are for payroll periods ending closest to
the middle of the month except in railroads where monthly data are used.
Adjustments have been made to levels indicated by data of unemployment insurance agencies and the
Bureau of Old-Age and Survivors Insurance through 1947, and have been carried forward from 1947 benchmark levels, thereby providing consistent series.
The half-year data are straight arithmetic averages of the monthly figures and not strictly comparable
with the annual averages which have been weighted by data on man-hours.
Source: Department of bor.

127

TABLE B-14.—Physical production index of goods and selected services, 1929-50
[1935-39=100.1]

Production of
selected services

Production of goods

Nonagricultural production

Period
Total
Agriprocultural
duction
proof goods duction

Weights: 2
Total
Nonagricultural

Total

Industrial
production

Construction

Electric
and gas
utilities

TeleTrans- phone
porand
tation telegraph

100.0

19.5

78.0
100.0

65.6
81.6

9.0
11.1

5.8
7.2

1929

110

113

110

157

117

110

1930
1931
1932
1933
1934

95
84
68
72
74

95
104
101
93
79

95
79
60
67
73

91
75
58
69
75

132
109
68
50
59

87
84
76
77
81

104
89
73
76
83

106
101
91
84
86

1935
1936
1937
19381939

87
99
110
93
109

96
85
108
105
106

85
103
111
90
110

87
103
113
89
109

70
102
103
103
121

87
97
104
100
111

88
101
110
95
106

90
98
102
102
108

1940
1941
1942.
1943
1944 . .

122
153
184
206
201

110
114
128
125
130

125
162
197
225
218

125
162
199
239
235

127
162
168
95
61

123
141
158
183
191

117
146
185
220
230

115
126
135
143
147

1945
1946.
1947
1948 .
1949

178
161
174
183
174

129
134
129
141
140

190
168
185
193
182

203
170
187
192
176

63
115
133
157
168

187
188
214
243
248

217
198
208
209
194

158
182
196
207
212

. _

1949— First half
Second half

(3)
(3)

(4)
(4)

186
179

181
170

162
173

249
247

199
188

(33)
()

1950— First half 5.-.. _

(3)

(*)

198

189

190

269

194

(3)

1 All half-year data have been seasonally adjusted except the electric and gas utilities for which no satisfactory adjustment factor is available.
2 Computed from the Department of Commerce national income data. The weight factors are percentages of the national income for each industry to the total for the 5 industries. The agriculture weight excludes net rents paid by landlords living on farms, imputed rents, and subsidy payments. The weight
for construction has been adjusted to include force account and other construction done outside of the contract construction industry, the weights for other industry groups to exclude such construction. Manufactures and minerals of the industrial production index were weighted into the total indexes separately
but only the total industrial production index is shown here. See appendix table B-15 for the individual
components of the index of industrial production.
3 Not available.
* Because of the extreme seasonal nature of agricultural crop production, only an annual index has been
computed.
« Estimates based on incomplete data.
NOTE.—A composite index of production of goods and services has not been compiled because of the
inadequate data for measuring the production of services. The only service production data used were for
transportation and for communications by telephone and telegraph. Data for measuring such services
as wholesale and retail trade, finance, insurance, real estate, Government, and communication other than
telephone and telegraph were inadequate for separate indexes and for an index for all services other than
transportation, telephone, and telegraph.
Sources: Based on the following data:
Agricultural production: Department of Agriculture index of /arm output which measures the physical
volume of farm production for human use.
Industrial production: Federal Reserve index of industrial production.
Construction: Department of Commerce value of new construction activity deflated by their index of
construction costs and converted into relatives with 1935-39 as 100.
Electric and gas utilities: Based on the following series: Electric power produced by utilities as reported
by the Federal Power Commission, and sales of manufactured and mixed gas to consumers as reported by
the American Gas Association. The two series are converted into relatives with the average for the period
1935-39 as 100. The relative series are combined into an index with electric power given a weight of 85
and gas 15, the respective percentages of the revenues of each of the utilities to the total revenues produced
by both in the base period 1935-39.
Transportation: Department of Commerce index of transportation.
Telephone and telegraph: Based on Department of Labor production indexes for 1935-49 and on a series
of Works Progress Administration for 1929-34. These indexes are for class A telephone carriers and the
principal wire-telegraph and ocean-cable carriers which file annual reports with the Federal Communications Commission.

128

TABLE B-15.—Industrial production index, 1929-50
[1935-39=100, adjusted for seasonal variation]

Period

Monthly average:
1929
_..

Total
industrial
production

Manufactures
Minerals
Total

Durable

Nondurable

110

91
75
58
69
75

90
74
57
68
74

67
41
54
65

84
79
70
79
81

1935
1936
1937
1938
1939

87
103
113
89
109

87
104
113
87
109

83
108
122
78
109

90
100
106
95
109

112
97
106

1940
1941
1942
1943
1944

125
162
199
239
235

168
212
258
252

139
201
279
360
353

115
142
158
176
171

117
125
129
132
140

1945
1946
1947.
1948
1949

203
170
187
192
176

214
177
194
198
183

274
192
220
225
202

166
165
172
177

137
134
149
155
135

1949—First half....
Second half..

181
170

188
179

214
189

167
170

143
126

1950-Firsthain..

189

219

181

138

1949—January
February
March
April
May..
June.
July
August
September..
October
November...
December...

191
189
184
179
174
169
161
170
-174
166
173
179

198
196
193
184
179
175
168
178
184
176
179
188

227
225
223
212
201
194
185
193
199
175
181
203

175
173
168
162
161
161
154
165
172
177
177
176

149
149
136
148
145
133
123
129
119
112
141
132

1950—January
February....
March.
April
May'
June*

183
180
187
190
195
199

192
192
194
199
203
207

209
207
211
222
231
236

179
180
181
180
181
183

130
118
144
140
145
151

1930
1931
1932
1933
1934

____

Estimates based on incomplete data.
Source: Board of Governors of the Federal Eeserve System.

129

132

107
93
67
76

TABLE B-16.—New construction activity, 1929-50
[Value put in place, millions of dollars]
Private construction

Public construction

Total
Resi- NonNonresinew
den- Other
Mili- resicon- Total dential
tial
Total
struc- pri- buildden- High- Other
pri- 2 public tary
tion i vate
and
tial ways pubing buildvate
lics
ing
naval build(non- (noning
farm) farm)

Period

1929

10, 793

8,307

3,625

2,694

1,988

2,486

659

1,266

542

1930
1931
1932
1933
1934

8,741
6,427
3,538
2,879
3,720

5,883
3,768
1, 676
1,231
1,509

2,075
1,565
630
470
625

2,003
1,099
502
406
456

1,805
1,104
544
355
428

2,858
2,659
1,862
1,648
2,211

29
40
34
36
47

660
612
415
230
363

1,516
1,355
958
847
1,000

653
652
455
535
801

4,232
6,497
6,999
6,980
8,198

1,999
2,981
3,903
3,560
4,389

1,010
1,565
1,875
1,990
2,680

472
713
1,085
764
786

517
703
943
806
923

2,233
3,516
3,096
3,420
3,809

37
29
37
62
125

328
701
550
672
970

845
1,362
1, 226
1,421
1,381

1,023
1, 424
1,283
1,265
1,333

8,682
11, 957
14, 075
8,301
5,259

5, 054
6,206
3,415
1,979
2,186

2,985
3,510
1,715
885
815

1,025
1,482
635
233
351

1,044 3,028
1,214 5,751
1,065 10, 660
861 6,322
1,020 3, 073

385
1,620
5,016
2,550
837

615
1,646
3,685
2,010
1,361

1,302
1,066
734
446
362

1,326
1.419
1,225
1,316
513

5,633 3,235
12, 000 9,638
16, 627 13, 131
21, 572 16, 665
22, 594 16, 204

1,100
4,015
6,310
8,580
8,290

1,020
3,341
3,142
3,621
3,228

1,115
2,282
3,679
4,464
4,686

2,398
2,362
3,496
4,907
6,390

690
188
204
158
137

937
354
599
1,301
2,056

398
895
1,514
1,856
2,129

373
925
1,179
1,592
2,068

1935
1936
1937
1938
1939

..
...

1940
1941
1942
1943
1944

, . _

1945
1946
1947
1948
1949

Annual rates, adjusted for seasonal variation

1950— First half

- -

1949 — January
__ _
February
March
April
May
June
July
August
September _
October
__ _
November
December
1950— January
February
March
April
M a y4
June

7,712
8,868

3,418
3,038

4,782
4,590

6,192
6,588

126
148

1,932
2,180

2,152
2,106

1,982
2,154

25, 852 19, 102 11, 306

3,366

4,430

6,750

128

2,166

2,226

2,230

22, 092
22, 344
22, 260
21, 876
21, 996
22, 056
22,008
22, 236
22, 764
23, 208
23, 820
24, 468

16, 128 7,908
16, 164 7,824
16, 104 7,740
15, 708 7,500
15, 660 7,572
15, 708 7,728
15, 828 7,992
15, 864 8,112
15, 996 8,472
16, 500 9,024
17, 136 9,504
17, 652 10, 104

3,600
3,564
3,480
3,420
3,312
3,132
3,084
3,048
2,916
2,940
3,096
3,144

4,620 5,964
4,776 6,180
4,884 6,156
4,788 6, 168
4,776 6,336
4,848 6,348
4,752 6,180
4,704 6,372
4,608 6,768
4,536 6,708
4,536 6,684
4,404 6,816

120
132
120
120
120
144
132
144
144
156
156
156

1,896
1,932
1,956
1,896
1,944
1,968
1,896
1,992
2,376
2,412
2,268
2,136

2,160
2,220
2,124
2,124
2,184
2,100
2,112
2,136
2,028
1,920
2,076
2,364

1,788
1,896
1,956
2,028
2,088
2,136
2,040
2,100
2,220
2,220
2,184
2,160

24, 816
25, 524
26,004
26, 196
26, 160
26, 412

18, 072
19, 200
18, 948
19, 248
19, 440
19, 704

10, 356
11, 472
11, 256
11, 484
11, 532
11,736

3,240
3,324
3,288
3,324
3,492
3,528

4,476
4,404
4,404
4,440
4,416
4,440

6,744
6,324
7,056
6,948
6, 720
6,708

132
144
120
120
120
132

2,112
2,196
2,172
2,136
2,184
2,196

2, 208
1,836
2,556
2,448
2,160
2,148

2,292
2,148
2,208
2,244
2,256
2,232

22, 104 15, 912
23, 084 16, 496

1949— First half
Second half

_ _

_ _ _ _ _ _

1 Excludes construction expenditures for crude petroleum and natural-gas drilling, and therefore does not
agree
with the new construction expenditures included in the gross national product.
2
Includes public utility, farm and other private construction, not separately'shown.
3 Includes residential, sewer and water, miscellaneous public service enterprises, conservation and development, and all other public construction not separately shown.
* Estimates based on incomplete data.
NOTE.—Series revised to include architectural and engineering fees, land development costs and profits on
land development, operative builders' margins, additions and alterations, dormitories and other shelter in
"private residential building"; privately-owned sewage disposal and water supply facilities, and privatelyowned toll bridges and roads, parks, playgrounds, race tracks, stadiums, swimming pools, and similar
recreational facilities, in "other private construction"; and construction of atomic energy facilities in "public
construction." For detail see Construction and Construction Materials, Statistical Supplement, May 1950.
Sources: Department of Commerce and Department of Labor.

130

TABLE B-17.—Business expenditures for new plant and equipment, 1929-50
[Millions of dollars]
Manufacturing and mining Transportation
Total i

Period

1929
1930
1931
.
1932
1933
1934 - .

9,165
7,610
4,712
2,608
2,137
3,080

Other

840

(4)

4,729

(3)

865
360
164
101
218

(*)
(*)
(44)
(4)
()

(4)
(44)
( 4)
()
(4)

4,204
2,917
1,514
1,044
1,402

166
306
525
238
280

(4)
(*)
(44)
()
280

(4)
(44)
( 4)
()
480

1,782
2,321
2,875
2,452
1,850

Total

Manufacturing

Mining

3,596

(3)

2,541
1,435
930
992
1,460

(3)
(33)
(3)
(3)

(3)
(33)
(3)

()

Commercial
and
miscellaneous 2

Electric
and gas
utilities

()

Railroad

1935
1936
1937
1938
1939

3,738
5,077
6,730
4,520
5, 200

1,790
2,450
3,330
1,830
2,310

(33)
(3)
(3 )

()
1,930

(33)
(3)
()
(3)
380

1940
1941
1942
1943- _
1944

6,490
8,190
6, 110
4, 530
5,210

3,140
4,080
3,170
2, 610
2,890

2,580
3,400
2,760
2,250
2,390

560
680
410
360
500

440
560
540
460
580

390
340
260
190
280

550
710
680
540
490

1,980
2,490
1,470
730
970

6,630
12, 040
16, 180
19,230
18, 120

3,650
6,470
8,150
9,140
7,990

3,210
5,910
7,460
8,340
7,250

440
560
690
800
740

550
570
910
1,320
1,350

320
660
800
700
520

630
1,040
1,900
2,680
3,140

1,480
3,300
4,430
5,390
5,120

1945
1946
1947. .
1948
1949

Annual rates, not adjusted for seasonal variation
5,100
5,160

1949— First half
Second half

18, 240
18, 000

8,220
7,760

7,460
7,040

760
720

1,480
1,220

540
520

2,920
3,360

1950— First half «

16, 460

7,600

6,980

620

1,060

340

3,000

4,460

17, 840
18, 640
17, 480
18, 520

8,160
8,280
7,480
8,040

7,400
7,520
6,760
7,320

760
760
720
720

1,440
1,520
1,240
1,200

520
560
560
480

2,720
3,120
3,160
3,560

5,040
5,160
5,040
5, 280

14, 800
1950— First quarter 5
Second quarter5
18, 120
Third quarter
_ _ . . 17, 920

6,680
8,520
8, 360

6,080
7,880
7,680

600
640
680

920
1,200
1,160

320
360
400

2,600
3,400
3,280

4,240
4,680
4,720

1949 — First quarter
Second quarter
Third quarter _
Fourth quarter

1 Excludes agriculture.
2 Commercial and miscellaneous include trade, service, finance, and communication for all years shown.
Prior to 1939, miscellaneous also included transportation other than railroad, and electric and gas utilities
which are not available separately for these years.
s4 Not available separately for years prior to 1939.
Included in commercial and miscellaneous prior to 1939.
* Estimates for second and third quarters of 1950 are based on anticipated capital expenditures of business.
NOTE.—These figures do not agree with those shown in column 2 of table B-3 and included in the gross
national product estimates of the Department of Commerce, principally because the latter cover certain
equipment and construction outlays charged to current expense. Figures for 1929-44 are Federal Reserve
Board estimates based on Securities and Exchange Commission and other data.
Detail will not necessarily add to totals because figures are rounded to the nearest 10 million dollars.
Sources: Securities and Exchange Commission and Department of Commerce (except as noted).

'31

TABLE B—18.—Inventories and sales in manufacturing and trade, 1939—50
[Adjusted for seasonal variation]

20, 172 11, 109

1939

Inventories

1
CQ

Ratio of a^
inventori
monthly sal

Inventories i

Period

1.73 11, 465

3
5,100

Millions of
dollars

<*
jg

2.11 3,175 2,505 1.21

Millions of
dollars

S
£

5,532

3,504

Ratio of average
inventories to
monthly sales 3

Millions of
dollars

Retail trade

Inventories l

33 tn OT

K^ en Q}

Ratio of average
inventories to
monthly sales '

05 O
bfi-t-»
33 n

Wholesale trade

Inventories *

Millions of
dollars

Manufacturing
Ratio of average
i n v e n t o r i e s to
monthly sales *

Total manufacturing
and trade

1.53

_ - 22, 184
28, 772
31, 013
31, 143
30,887

12, 520
16,412
19, 240
22, 372
24,084

1.68
1.53
1.60
1.36
1.30

12, 819 5,852
16, 960 8,168
19, 287 10, 425
20,098 12,822
19,507 13,788

2.06
1.78
1.77
1.51
1.45

3,325
4,182
3,858
3,684
3,980

2,802
3,620
4,012
4, 273
4,561

1.16 6,040 3,866 1.47
1.03 7,630 4,624 1.46
1.02 7,868 4, 803 1.71

30, 571
42, 709
- 51,692
58, 546
53, 628

24,181
27,800
34, 739
38, 190
35,997

1.27
1.29
1.38
1.45
1.56

18,390
24, 818
29, 818
34, 066
30, 899

12, 883
12, 841
17, 076
18,998
17, 815

1.48
1.65
1.64
1.68
1.84

4,638
6,665
8,653
9,511
9,031

4,983
6,601
7,754
8,355
7,500

.82
.82
1.03
1.09
1.23

1949— First half. _. 56,435 36,358
Second half. 53,628 35,658

1.59 33,251 17,980
1.53 30,899 17,650

1.89
1.78

9,002
9,031

1949—January
February. ...
March
April
May
June
July
August
September..
October
November..
JDecember- _

58,532
58,367
58, 216
57, 806
56, 858
56, 435
55, 320
54,631
54, 617
54, 356
53,996
53,628

36, 215
36, 561
37,065
35, 879
36, 039
36r391
34,820
37, 137
37,239
34,603
35, 496
34,651

1.62
1.60
1.57
1.62
1.59
1.56
1.60
1.48
1.47
1.57
1.53
1.55

34,409
34,409
34, 223
34, 018
33, 566
33, 251
£2,367
31, 638
31,076
30, 744
30, 547
30,899

17, 881
18, 175
18, 451
17, 643
17, 741
17,989
17, 114
18, 946
18, 865
16, 805
17,313
16, 857

1.91
1.89
1.86
1.93
1.90
1.86
1.92
1.69
1.66
1.84
1.77
1.82

1950—January
February. _.
March
April4
May

54, 125
53,932
54, 513
54, 748
55, 228

35, 678
36,463
37,946
36, 822
39,283

1.51
1.48
1.43
1.48
1.40

31, 136
31,098
31, 103
31, 214
31, 500

17,650
18,035
19, 144
18, 456
20, 100

1.76
1.73
1.62
1.69
1.56

1940
1941
1942
1943
1944
1945
1946
1947
1948
1949

5,277
5,735

1.38
1.31

7, 543 6,315
11, 226 8,358
13, 221 9,909
14, 969 10, 837
13, 698 10,682

1.20
1.11
1.22
1.32
1.34

7,662
7,360

1.22 14, 182 10, 716
1.24 13, 698 10, 648

1.35
1.33

9,464
9,479
9,293
9,330
9,153
9,002
9,091
9,061
9,186
9, 137
9,113
9,031

7,723
7,680
7.890
7,422
7,539
7,718
7,157
7,522
7,518
7,120
7, 553
7,291

1.23
1.23
1.19
1.25
1.23
1.18
1.26
1.21
1.21
1.29
1.21
1.24

14, 659
14, 479
14, 700
14, 458
14, 139
14, 182
13, 862
13, 932
14, 355
14,475
14, 336
13, 698

10,611
10, 706
10,724
10,814
10, 759
10, 684
10, 549
10, 669
10,856
10,678
10,630
10, 503

1.40
1.36
1.36
1.35
1.33
1.33
1. 33
1.30
1.30
1.35
1.36
1.33

8,991
9,034
9,128
9,396
9,455

7,173
7,327
7,677
7,294
7,938

1.26
1.23
1.18
1.27
1.19

13,998
13,800
14, 282
14, 138
14, 273

10,855
11, 101
11, 125
11,072
11,245

1.28
1.25
1.26
1.28
1.26

.86
.86

7,361
7,400

1
Book value, end of period.
2 Monthly average shown for year and half year and total for month.
* Average inventories based on centered averages of end-of-period figures.
< Estimates based on incomplete data.
NOTE.—The inventory figures in this table do not agree with the estimates of "change in business inventories" included in the gross national product since they cover only manufacturing and trade rather than
all business, and show inventories in terms of current book value without adjustment for revaluation.
Source: Department of Commerce.

TABLE B-19.—Manufacturers'" inventories by stage of fabrication and as ratios to sales, 1946-50
[Not adjusted for seasonal variation]
Total manufacturing

Period

Book value of
inventories at
end of period
(billions of
dollars)

Durable goods industries
Book value of
inventories at
end of period
(billions of
dollars)

Nondurable goods industries

Ratio of average inventories
to monthly
sales i

MateMateMaterials
rials
rials
FinFinFinand
and
and
ished
ished
ished
goods goods goods goods goods goods
in
in
in
process
process
process

Book value of
inventories at
end of period
(billions of
dollars)

Ratio of average inventories
to monthly
sales *

MateMaterials
rials
FinFinand
and
ished
ished
goods goods goods goods
in
in
process
process

1946
1947
1948
1949.

17.8
20.7
22.2
19.2

7.3
9.4
12.0
11.9

9.0
10.3
11.4
9.2

2.7
3.8
4.7
4.6

1.58
1.45
1.37
1,40

0.50
.50
.53
.66

8.8
10.3
10.8
10.0

4.5
5.6
7.3
7.3

0.92
.92
.95
.97

0.47
.51
.58
.70

1949— First half
Second half- _

20.5
19.2

12.4
11.9

10.5
9.2

5.2
4.6

1.48
1.32

.67
.66

10.0
10.0

7.2
7.3

1.03
.94

.72
.68

22.3
22.1
21.8
_.
21.5
May
21.0
June. . _
20.5
July
20.1
August
19.8
September. ._
19.2
October
19.1
November. . . 18.9
December
19.2

12.3
12.3
12.5
12.4
12.4
12.4
12.2
12.0
11.7
11.6
11.7
11.9

11.6
11.5
11.4
11.3
10.8
10.5
10.1
9.9
9.5
9.3
9.1
9.2

4.9
5.0
5.2
5.2
5.3
5.2
5.1
4.9
4.7
4.5
4.5
4.6

1.56
1.56
.40
.49
.51
.37
.54
.27
.19
.34
.32
.27

.65
.67
.62
.68
.72
.68
.78
.64
.59
.66
.65
.64

10.7
10.6
10.4
10.2
10.2
10.0
10.0
9.9
9.7
9.8
9.8
10.0

7.4
7.3
7.3
7.2
7.1
7.2
7.1
7.1
7.0
7.1
7.2
7.3

1.05
1.06
.96
1.03
1.04
1.02
1.09
.90
.87
.87
.92
.99

.72
.73
.67
.72
.73
.73
.78
.64
.62
.63
.68
.72

19.4
19.4
19.4
19.3
19.4

11.9
11.7
11.7
11.7
11.9

9.2
9.2
9.2
9.3
9.5

4.7
4.7
4.7
4.8
4.8

1.25
1.29
1.07
1.14
1.09

.64
.66
.55
.58
.56

10.3
10.2
10.2
10.0
10.0

7.2
7.0
7.0
7.0
7.0

1.00
1.00
.90
.98
.93

.72
.70
.62
.68
.65

1949—January
February
March _
April

1 950—January. _ .
February
March
April 2
May
1

Average inventories based on centered averages of end-of-period figures.
2 Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.

'33

TABLE B—20.—Sales, stocks, and outstanding orders at 296 department stores, 1939—50
Millions of dollars 1
Period

Monthly average:
1939

Sales
(total for
month)

Stocks
(end of
month)

Outstanding
orders
(end of
month)

Ratio of
stocks
to sales

Ratio of
orders
to sales

Ratio f
orders
to stocks

128

344

1940
1941
1942
1943
1944

136
156
179
204
227

353
419
599
509
535

108
194
264
530
560

2.60
2.69
3.35
2.50
2.36

0.79
1.24
1.47
2.60
2.47

0.31
.46
.44
1.04
1.05

1945
1946
1947
1948
1949

255
318
337
352
333

563
715
826
912

729
909
552
465
350

2.21
2.25
2.45
2.59
2.58

2.86
2.86
1.64
1.32
1.05

1.29
1.27
.67
.51
.41

304
362

862
858

302
398

2.84
2.37

1.10

.35
.46

1949—First half
Second half
1950—First half 3

2.69

296

881

327

2.98

1.10

.37

1949: January
February
March
April
May
June
July
August
September
October
November
December

267
256
321
348
322
313
234
283
334
343
397
583

797
856
924
913
874
806
756
799
861
952
990
788

381
313
239
207
283
390
410
501
444
350

2.98
3.34
2.88
2.62
2.71
2.58
3.23
2.82
2.58
2.78
2.49
1.35

1.46
1.49
.98
.69
.64
.90
1.67
1.45
1.50
1.29
.88
.51

.49
.44
.34
.26
.24
.35
.52
.51
.58
.47
.35
.38

1950: January
February
March
April
May 3

256
247
320
326
329

787
853
920
947
897

390
393
326
277
218

3.07
3.45
2.88
2.90
2.73

1.52
1.59
1.02
.85
.75

.50
.46
.35
.29
.28

1 Not adjusted for seasonal variation.
2 Not available.
s Estimates based on incomplete data.
Note: These figures represent retail sales, stocks, and outstanding orders as reported by a sample of 296 ot
the larger department stores located in various cities throughout the country and are not estimates of total
sales, stocks, and outstanding orders for all department stores in the United States. Data are not available
prior to 1939.'
Source: Board of Governors of the Federal Reserve System.

'34

TABLE B-21.—Consumers' price index, 1929-50
For moderate-income families in large cities
[1935-39=100]

All
items

Period

Food Apparel

Rent

Fuel,
elec- House
tricity, furMisceland re- nish- laneous
frigerings
ation

1929

122.5

132.5

115.3

141.4

112.5

111.7

104.6

1930
1931
1932
1933
1934

119.4
108.7
97.6
92.4
95.7

126.0
103.9
86.5
84.1
93.7

112.7
102.6
90.8
87.9
96.1

137.5
130.3
116.9
100.7
94.4

111.4
108.9
103.4
100.0
101.4

108.9
98.0
85.4
84.2
92.8

105. 1
104.1
101.7
98.4
97.9

98.1
99.1
102.7
100.8
99.4

100.4
101.3
105.3
97.8
95.2

96.8
97.6
102.8
102.2
100.5

94.2
96.4
100.9
104.1
104.3

100.7
100.2
100.2
99.9
99.0

94.8
96.3
104.3
103. 3
101.3

98.1
98.7
101.0
101 . 5
100.7

1940
1941
1942
1943
1944 . _

100.2
105.2
116.5
123.6
125. 5

96.6
105. 5
123 9
138.0
136.1

101.7
106.3
124.2
]29.7
138.8

104.6
106.2
108 5
108 0
108.2

99.7
102.2
105.4
107.7
109.8

100.5
107.3
122 2
125.6
136.4

101 1
104.0
110 9
115.8
121.3

1945 - _
1946
1947
1948 - 1949

128.4
139.3
159.2
171.2
169.1

139.1
159.6
193.8
210.2
201.9

145. 9
160.2
185.8
198.0
190.1

108.3
108.6
111.2
117.4
120.8

110.3
112.4
121.1
133.9
137.5

145. 8
159.2
184.4
195.8
189.0

124.1
128.8
139.9
149.9
154.6

169.6
168.6

202.6
201.2

193.3
187.0

120.2
121.4

137.4
137.6

192.4
185.5

154.3
155.0

1935
1936
1937
1938
1939

. .

_ .

_ ..

_ _

1949— First half. _ _
Second half

1950— First half

167.8

198.0

185.0

123.1

140.0

185.3

155.1

1949— January 15. .
February 15
March 15
April 15
May 15
June 15 .
July 15....
August 15
September 15 ._
October 1 5
November 15
December 15

170.9
169.0
169.5
169.7
169.2
169.6
168.5
168.8
16,9.6
168.5
168.6
167.5

204.8
199.7
201.6
202.8
202.4
204.3
201.7
202.6
204.2
200.6
200.8
197.3

196.5
195.1
193.9
192.5
191.3
190.3
188.5
187.4
187.2
186.8
186.3
185.8

119.7
119.9
120.1
120.3
120.4
120.6
120.7
120.8
121.2
121.5
122 0
122.2

138.2
138.8
138.9
137.4
135.4
135.6
135.6
135.8
137.0
138.4
139.1
139.7

196.5
195.6
193.8
191.9
189.5
187.3
186.8
184.8
185.6
185.2
185.4
185.4

154.1
154.1
154.4
154.6
154.5
154.2
154.3
154.8
155.2
155.2
154.9
155.5

166.9
166.5
167.0
167.3
168.6
170 2

196.0
194.8
196. 0
196.6
200 3
204 6

185.0
184.8
185.0
185.1
185 1
185 0

122.6
122.8
122.9
123 1
123 5
123 9

140^0
140.3
140.9
141.4
138 8
138 9

184.7
185.3
185.4
185.6
185 4
185 2

155.1
155.1
155.0
154.8
155 3
155 3

1950 —January 15
February 15.
March 15_
April 15
May 15
June 15

.
_ _ _ _ _ _

_
_ _ _ _ _

Source: Department of Labor.

'35

TABLEfB-22.—Wholesale price index, 7929-50
[1926=100]

Period

Monthly average:
1929
1930 .
1931... .
1932
1933 .
1934
1935, __
1936
1937
1938
1939

. .

Farm products

All commodities

Other than farm products and foods

3
Is

*!
oa o

£
3
1
a
S
1
H

•d

if
«S M SI
•is,
i
3"c3
03 rj

1
.2
3
s> S3
.3
"3

s| i

•-H O

SB,
11

o> °*
w

•8
o
o
^

95.3 104.9

99.9

91.6 109.1

90.4

83.0 100.5

95.4

94.0

94.3

82.6

86.4
73.0
64.8
65.9
74.9

88.3
64.8
48.2
51.4
65.3

90.5
74.6
61.0
60.5
70.5

85.2 100.0
75.0 86.1
70.2 72.9
71.2 80.9
78.4 86.6

80.3
66.3
54.9
64.8
72.9

78.5
67.5
70.3
66.3
73.3

92.1
84.5
80.2
79.8
86.9

89.9
79.2
71.4
77.0
86.2

88.7
79.3
73.9
72.1
75.3

92.7
84.9
75.1
75.8
81.5

77.7
69.8
64.4
62.5
69.7

80.0
80.8
86.3
78.6
77.1

78.8
80.9
86.4
68.5
65.3

83.7
82.1
85.5
73.6
70.4

77.9 89.6
79.6 95.4
85.3 104.6
81.7 92.8
81.3 95.6

70.9
71.5
76.3
66.7
69.7

73.5
76.2
77.6
76.5
73.1

86.4
87.0
95.7
95.7
94,4

85.3
86.7
95.2
90.3
90.5

79.0
78.7
82.6
77.0
76.0

80.6
81.7
89.7
86.8
86.3

68.3
70.5
77.8
73.3
74.8

73.8
84.8
96.9
97.4
98.4

71.7 95.8 94.8
76.2 99.4 103.2
78.5 103.8 110.2
80.8 103.8 111.4
83.0 103.8 115.5

77.0 88.5
84.4 94.3
95.5 102.4
94.9 102.7
95.2 104.3

77.3
82.0
89.7
92.2
93.6

1940
1941
1942
1943.
1944

78.6 67.7 71.3
87.3 82.4 82.7
98.8 105. 9 99.6
103.1 122.6 106.6
104.0 123.3 104.9

83.0
89.0
95.5
96.9
98.5

100.8
108.3
117.7
117.5
116.7

1945
1946 _.
1947
1948
1949

105.8
121.1
152.1
165.1
155.0

106.2
130.7
168.7
179.1
161. 4

99.7
109.5
135.2
151.0
147.3

118.1
137.2
182.4
188.8
180.4

128.2
148.9
181.2
188.3
165.5

-4-3

i z*

100.1 84.0 104.7 117.8
116.3 90.1 115.5 132.6
141.7 108.7 145.0 179.7
149.8 134.2 163.6 199.1
140.4 131.7 170.2 193.4

95.2
101.4
127.3
135.7
118.6

104.5
111.6
131.1
144.5
145.3

.S3
S

94.7
100.3
115.5
120.5
112.3

1949— First half.
Second half.

157.5 170.8 163.2 149.6 180.9 142.8 133.3 172.6 197.6 120.4 147.3 114.7
152.5 160.5 159.7 145.1 180.0 138.2 130.1 167.8 189.3 117.0 143.2 109.8

1950— First half.

153.8 160.5 157.4 146.8 180.2 137.2 131.7 169.3 195.6 115.9 145.8 112.1

1949— January
February
March
April...
May
June
July August
September
October
November
December

160.7
158.4
158.6
157.1
155.8
154.5
153.6
152.9
153.5
152.2
151.6
151.2

173.0
168.9
171.8
170.8
171.5
168. 8
166.2
162.3
163.1
159. 6
158.8
154.9

165.8
161.6
162.9
162.9
163.8
162.4
161.3
160. 6
162.0
159.6
158.9
155.7

152.9
152.1
151.0
149.0
146.9
145.5
145.1
145.0
145.3
145.0
145.0
145.4

184.8
182.3
180.4
179.9
179.2
178.8
177.8
178.9
181.1
181.3
180.8
179.9

146.1
145.2
143.8
142.1
140.4
139. 1
138.0
138.1
139.0
138.0
138.0
138.4

137.0
136.2
134.4
131. 9
130.1
130.0
130.1
129.6
129.9
130.6
130.2
130.4

175.4
176.3
175. 4
172.4
168.9
167.1
167.9
168.2
168.2
167.3
167. 3
167.8

202. 3
201.5
200.0
196.5
193.9
191.4
189.0
188.3
189.4
189.3
189.6
190.4

126.3
122.8
121.1
117.7
118.1
116.7
118.0
119. 6
117.6
115.9
115.8
115.2

148.2
148.5
148.2
147.1
146.3
145.3
143.0
142.9
142.9
143.0
143.4
144.2

117.3
115.3
115.7
115.6
113.5
111.0
110.3
109.8
109.6
109.0
109.7
110.7

1950—January
February.
March
April. ..
May ...
June-

151.5
152. 7
152. 7
152.9
155.9
157.3

154.7
159.1
159.4
159.3
164.7
165.9

154.8
156.7
155.5
155.3
159.9
162.1

145.8
145.9
146.1
146.4
147.6
148.8

179.3
179.0
179.6
179.4
181.0
182.6

138.5
138.2
137.3
136.4
136.1
136.8

131.4
131.3
131.5
131.2
132.1
132.7

168.4
168.6
168.5
168.7
169.7
171.8

191.6
192.8
194.2
194.8
198.1
202.2

115.7
115.2
116.3
117.1
116.4
114.5

144.7
145.2
145.5
145.8
146.6
147.0

110.0
110.0
110.7
112.6
114.7
114.8

Source: Department of Labor.

136

TABLE B-23.—Indexes of prices received and prices paid by farmers, and parity ratio, 1929-50 l
[1910-14=100]

Prices
received

Period

Prices paid
(including in
terest, taxes,
and wage
rates)

Parity
ratio »

Monthly average:
1929-

148

160

1930
19311932
1933

125
87
65
70
90

151
130
112
109
120

83
67
58
64
75

1939

109
114
122
97
95

124
124
131
124
123

1940
1941
1942
1943
1944

100
123
158
3192
3196

124
132
152
170
182

104
113
108

3206
3234
275
285
249

189
207
240
259
250

109
113
115
110
100

256
242

254
247

101

1934—
1935
1936
1937

1938--

1945
1946
1947
1948
1949

1949—First half
Second half. _.

s
92
93
78
77

1950—First half

241

251

1949—January 15
February 15. _
March 15
April 15
May 15
_
June 15
July 15
._
August 15
September 15.
October 15
November 15.
December 15.-

265
255
258
256
253
249
246
244
247
242
237
233

256
252
255
254
253
252
250
249
248
246
245
246

104
101
101
101
100

100
98
97
95

1950—January 15
February 15—
March 15
April 15
May 15
June 15

235
237
237
241
247
247

249
248
250
251
254
255

94
96
95
96
97
97

1 Revised series; see Agricultural Prices, Supplement No. 1, January 1950, for details;
2 Ratio of prices received to prices paid (including interest, taxes, and wage rates).
3 Includes subsidy payments between October 1943 and June 1946.
Source: Department of Agriculture.

137

TABLE B-24.—Consumer credit outstanding, 1929-50
[Millions of dollars]
Total
consumer
credit

End of period

Instalment credit
Total

Automobile
sale credit

Other *

Charge
accounts

Other
consumer
credit 2

1,318

1,840

1,749

2,721

2,688
2,204
1,518
1,588
1,860

928
637
322
459
576

1,760
1,567
1,196
1,129
1,284

1,611
1,381
1,114
1,081
1,203

2,522
1,933
,453
,243
,326

5,434
6,788
7,480
7,047
7,969

2, 622
3,518
3,960
3, 595
4, 424

940
1,289
1,384
970
1,267

1,682
2,229
2,576
2,625
3,157

1,292
1,419
1,459
1,487
1,544

,520
,851
2,061
1,965
2,001

9,115
9,862
6,578
5,378
5,803

5,417
5,887
3,048
2,001
2, 061

1,729
1, 942
482
175
200

3,688
3,945
2,566
1,826
1,861

1,650
1,764
1, 513
1,498
1,758

2,048
2,211
2,017
1,879
1, 984

1945
1946
1947
1948
1949

6,637
10, 191
13, 673
16,319
18, 779

2, 364
4,000
6,434
8,600
10,890

227
544
1, 151
1, 961
3,144

2,137
3,456
5,283
6,639
7,746

1,981
3,054
3,612
3, 854
3,909

2, 292
3, 137
3, 627
3,865
3,980

1949—January
February. March
April
May . _ _ _ _
June
_ _ _ _ _
July
August _ _
September
_ _
October
November
December

15, 748
15,325
15, 335
15, 595
15,843
16, 124
16, 198
16,453
16, 803
17, 223
17, 815
18, 779

8,424
8,339
8,429
8,630
8,888
9, 123
9,335
9,622
9,899
10, 166
10, 441
10, 890

1,965
1,996
2,105
2,241
2,386
2,499
2,610
2,761
2,876
2,986
3,085
3,144

6,459
6,343
6,324
6,389
6,502
6,624
6,725
6,861
7,023
7,180
7,356
7,746

3,457
3,169
3,121
3,232
3,235
3,274
3,123
3,064
3,123
3,197
3,454
3,909

3,867
3,817
3,785
3, 733
3,720
3,727
3,740
3,767
3,781
3,860
3,920
3,980

1950—January
February
March
Aprils
May 3
June 3

18,344
18, 126
18,302
18, 610
19,091
19. 600

10,836
10, 884
11,077
11,315
11,667
12.000

3,179
3, 256
3,355
3,470
3,615
3.800

7,657
7,628
7,722
7,845
8, 052
8.200

3,506
3,233
3,211
3,241
3,296
3.400

4,002
4,009
4,014
4,054
4,128
4. 200

1929

7,628

1930
1931
1932
1933
1934

6,821
5,518
4,085
3,912
4,389

1935
1936
1937
1938
1939
1940
1941
1942
1943
1944

_
- -

3,158

1
Includes other sale credit and loans including repair and modernization loans insured by Federal
Housing
Administration.
2
Includes single-payment loans of commercial banks and pawnbrokers, and service credit.
3
Estimates based on incomplete data; June by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System (except as noted).

138

TABLE B—25.—Loans and investments of all commercial banks and weekly reporting member banks,
1929-50
[Billions of dollars]
Weekly reporting
member banks

All commercial banks

End of period 1

Total
loans
and
investments

1929— June 2
1930— June 22
1931— June 2
1932— June 2
1933—June 2

. __

1934—June

1935— June 2
1936
1937
1938
1939

- - -

1940
1941
1942
1943
1944
1945
1946
1947
1948
1949

_„

- -

- - -

1949— January
February
March
April
May
June
July
August - _ _
September
October
November
December
I960 — January 4 4
February
March4 4 _
April4
May
June 4 _

_ _

_
-_ _. _ _

Investments
Loans
Total

U. S. Government
obligations

Other
securities

Total
loans

Commercial, industrial, and
agricultural loans

49.4

35.7

13.7

4.9

8.7

16.7

(3)

48.9
44.9
36.1
30.4
32.7

34.5
29.2
21.8
16.3
15.7

14.4
15.7
14.3
14.0
17.0

5.0
6.0
6.2
7.5
10.3

9.4
9.7
8.1
6.5
6.7

17.0
14.7
11.3
8.9
8.5

(33)
( 3)
(3)
(3)
()

34.6
39.5
38.3
38.7
40.7

14.9
16. 4
17.1
16.4
17.2

19.7
23.1
21.2
22.3
23.4

12.7
15.3
14.2
15.1
16.3

7.0
7.8
7.1
7.2
7.1

8.0
9.2
9.4
8.4
8.8

(33)
()

43.9
50.7
67.4
85.1
105. 5

18.8
21.7
19.2
19.1
21.6

25.1
29.0
48.2
66.0
83.9

17.8
21.8
41.4
59.8
77.6

7.4
7.2
6.8
6.1
6.3

9.4
11.4
10.3
10.8
13.0

5.0
6.7
6.1
6.4
6.5

124.0
114.0
116.3
114.3
120.2

26.1
31.1
38.1
42.5
43.0

97.9
82.9
78.2
71.8
77.2

90.6
74.8
69.2
62.6
67.0

7.3
8.1
9.0
9.2
10.2

15.8
19.4
23.3
25.6
24.9

7.3
11.3
14.6
15.6
13.9

114.6
113.3
112.6
112.5
113.4
113.8
114.7
117.9
118.5
119.5
119.7
120.2

42.5
42.0
42.4
41.3
40.9
41.0
40.5
41.2
41.7
41.8
42.7
43.0

72.1
71.3
70.2
71.2
72.5
72.7
74.3
76.7
76.8
77.7
77.0
77.2

63.0
62.2
60.9
62.0
63.2
63.2
64.4
66.7
66.7
67.6
66.9
67.0

9.1
9.1
9.3
9.2
9.3
9.5
9.8
10.0
10.2
10.1
10.1
10.2

25.3
24.9
25.0
24.0
23.7
23.9
23.0
23.5
24.0
23.9
24.6
24.9

15.4
15.2
14.9
14.2
13.6
13.2
12.9
13.0
13.4
13.7
13.8
13.9

121.2
120.6
120.3
120.4
121.2
122.4

42.9
43.1
43.7
43.8
44.1
44.8

78.3
77.5
76.7
76.6
77.1
77.6

68.0
67.1
65.8
65.6
66.1
66.4

10.3
10.4
10.9
11.0
11.0
11.2

24.6
24.6
24.9
24.9
25.0
25.6

13.9
13.9
13.8
13.5
13.4
13.6

4.6
3.8
4.4

1
Reporting date nearest end of period.
2
June data are used because complete end-of-year data prior to 1936 are not available for U. S. Government obligations.
3 Not available prior to May 12,1937, when the loan classification was revised.
< Estimates for all commercial banks based on incomplete data; June by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System (except as noted).

894762—50-

-10

139

TABLE B-26.—Deposits and currency, 1029-50
[Millions of dollars]
Foreign United
Total
States
bank
deposits
and
deposits Government
currency
(net)
balances a

End of period *

Deposits adjusted and currency
(privately held money supply)
Total

Demand
Time 4 Currency
deposits
outside
adjusted 3 deposits
banks

1929

55, 521

563

403

54,555

22, 809

28,189

3,557

1930
1931.1932
1933
1934__

54, 439
49,004
45, 811
42, 813
51, 122

656
403
169
-22
-13

535
740
788
1,303
4,865

53, 248
47, 861
44, 854
41, 532
46, 270

20, 967
17, 412
15,728
15, 035
18, 459

28,676
25. 979
24, 457
21, 715
23, 156

3,605
4,470
4, 669
4,782
4,655

55, 718
60,450
60,964
63,191
68,359

426
479
564
607
1,217

4,019
3,611
4,585
4,518
3,889

51, 273
56, 360
58, 815
58,066
63,253

22, 115
25, 483
23, 959
25, 986
29, 793

24, 241
25, 361
26, 218
26, 305
27, 059

4,917
5,516
5,638
5,775
6,401

1940
1941
1942-.
1943
1944

75,238
82, 811
104,306
127, 959
155,960

1,896
1,498
1,615
2,265
2,157

3,334
4,977
11, 392
13,306
23,578

70,008
76,336
91,299
112, 388
130, 225

34, 945
38, 992
48, 922
60,803
66, 930

27, 738
27, 729
28,431
32, 748
39,790

7,325
9,615
13, 946
18, 837
23, 505

1945
1946
1947
1948
1949

180,806
171, 657
175, 348
176, 121
177, 313

2,141
1,885
1,682
2.103
2,150

27,872
5,768
3,658
4,899
5,382

150, 793
164.004
170, 008
169, 119
169, 781

75, 851
83, 314
87, 121
85, 520
85, 750

48, 452
53,960
56, 411
57, 520
58. 616

26, 490
26, 730
26, 476
26, 079
25, 415

1949—January
February . _
March
April
May.
- ._June
July
_
August
September
October
November .,
December

174, 900
174, 400
172,600
172,000
171,300
171, 602
171, 500
173, 800
174, 400
174,900
175, 300
177, 313

2,200
2,200
2,100
2,000
1,800
1,927
1,900
1,900
1,900
2,000
2,100
2,150

4,400
5,900
6,400
4,500
3,900
4,049
3,200
5,000
6,200
5,300
5,000
5,382

168,200
166,300
164,200
165,500
165,600
165, 626
166,300
166,900
166,300
167,700
168,100
169, 781

85,400
83,400
81,100
82, 400
82, 500
81, 877
83,100
83,400
83, 100
84,300
85,000
85, 750

57, 600
57, 800
58,000
58,100
58,200
58, 483
58,400
58, 400
58, 400
58, 400
58,000
58,616

25,200
25,100
25,100
24,900
25,000
25, 266
24,900
25, 100
24.900
24,900
25, 100
25, 415

. _ . . _ 177, 100
176,200
176,000
176, 300
177,000
178,800

2,200
2,200
2,300
2,400
2,400
2,500

5,100
5,900
6,600
5,300
5,100
6,000

169, 700
168,200
167, 100
168,500
169, 500
170,300

86,400
84,500
83,300
. 84,500
85,300
86,000

58,700
59,000
59,300
59, 500
59,500
59,700

24,500
24,700
24,600
24,600
24,700
24,600

1935 .
1936
1937
1938
1939

_._

. _

_„. _

1950—January 5 ..
February *
March*
April68
May
June*

-_.

i Reporting date nearest end of period.
* Includes Treasury cash and balances at commercial, savings, and Federal Reserve banks.
Includes demand deposits, other than interbank and U. S. Government, less cash items in process of
collection.
4
Includes deposits in commercial banks, mutual savings banks, and Postal Savings System.
• Estimates based on incomplete data; June by Council of Economic Advisers.
Note.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System (except as noted).
3

140

TABLE B-27.—Estimated ownership of Federal securities, 1939-50
[Billions of dollars—par values l ]
Gross debt and guaranteed obligations outstanding
Held by public
Held by
U.S.
Government
Total a
State
Com- Federal
agencies Total
local mercial
by and
Reserve
and trust held
governbanks
* banks
public
ments
3
funds

End of period

Nonbank
private
corpoIndi- 8
rations viduals
and
associations »

1939

47.6

6.5

41.1

0.4

15.9

2.5

12.0

10.4

1940
1941
1942
1943
1944

50.9
64.3
112.5
170.1
232.1

7.6
9.5
12.2
16.9
21.7

43.3
54.7
100.2
153.2
210.5

.5
.7
1.0
2.1
4.3

17.3
21.4
41.1
59.9
77.7

2.2
2.3
6.2
11.5
18.8

12.5
16.3
27.4
41.2
56.0

10.9
14.1
24.5
38.4
53.5

278.7
259.5
257.0
252.9
257.2

27.0
30.9
34.4
37.3
39.3

251.6
228.6
222.6
215.6
217.8

6.5
6.3
7.3
7.9
8.1

90.8
74.5
68.7
62.5
66.8

24.3
23.3
22.6
23.3
18.9

65.3
59.5
57.5
54.4
54.3

64.8
64.9
66.6
67.6
69.5

252.7
252.7
251.7
251.6
251.9
252.8
253.9
255.9
256.7
256.8
257.0
257.2

37.4
37.5
37.7
37.5
37.5
38.3
38.5
38.8
39.4
39.3
39.3
39.3

215.3
215.2
214.0
214.1
214.4
214.5
215. 4
217.0
217.3
217.5
217.7
217.8

7.8
7.9
7.9
7.9
8.0
8.0
8.0
8.1
8.1
8.1
8.1
8.1

62.7
62.1
60.5
61.8
62.7
63.0
64.6
66.4
66.5
67.3
66.8
66.8

22.1
22.3
21.7
21.1
19.7
19.3
18.5
17.5
18.0
17.3
17.7
18.9

54.8
54.6
55.3
54.7
55.2
55.2
55.1
55.8
55.5
55.5
55.8
54.3

67.9
68.3
68.6
68.5
68.8
68.9
69.1
69.2
69.2
69.3
69.3
69.5

256.9
256.4
255.7
255.7
256.4
257.4

39.0
38.4
37.6
37.3
37.4
37.9

217.9
218.0
218.1
218.4
219.0
219.5

8.1
8.2
8.7
8.7
8.6
8.5

67.4
66.4
64.9
65.3
65.9
66.0

17.8
17.7
17.6
17.8
17.4
18.3

54.8
55.6
56.7
66.2
56.6
56.2

69.7
70.0
70.2
70.3
70.5
70.5

1945
1946
1947
1948
1949

1949 — January. _
February.. _
March
April
May
June
July
August
September
October.
November. _ _
December
1950 —January
February.
March
April
May
June 7 _

_ _ _
.

* United States saving bonds, series A-D, E, and F, are included at current redemption values.
2 Securities issued or guaranteed by the U. S. Government, excluding guaranteed securities held by the
Treasury.
»Includes trust, sinking, and investment funds of State and local governments and their agencies, and
Territories and insular possessions.
«Includes commercial banks, trust companies, and stock savings banks in the United States and in
Territories and insular possessions; excludes securities held in trust departments.
«Includes insurance companies, mutual savings banks, savings and loan associations, dealers and brokers
and foreign accounts in this country. Beginning with December 1946, the foreign accounts include investments by the International Bank for Reconstruction and Development and the International Monetary
Fund in special non-interest-bearing notes issued by the U. S. Government; beginning with June 30,1947,
they include holdings of Federal land banks.
* Includes partnerships and personal trust accounts.
* Estimates based on incomplete data; by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Treasury Department (except as noted).

141

TABLE B-28.—Bond yields and interest rates, selected years> 1929-50
[Percent per annum]

U. S. Government security
yields

Period

High grade corporate bond
yields
(Moody's)

Bank
rates on
shortterm
business
loans

Bankers
acceptances 90
daysNew
York

9-12
Long-term bonds
month
certifiAaa
cates of
15 years bonds
indebted- Partially
and over,
taxness
exempt 2 taxable

Baa
bonds

4.73
4.49
3.60
3.26
3.01

5.90
7.76
5.75
5.03
4.96

(33)
(3)
(3)
()
2.1

5.03
.63
.13
.43
.44

Federal
Reserve
Bank
discount
rateNew
York

0)
0)
(0
(0
0)

3.60
3.31
2.79
2.74
2.41

0.75

2.05
1.98

2.47

2.77
2.73

4.33
3.91

2.0
2.6

.44
.44

.81
.82
.88
.14
.14

1.66
(5)
5
(5)
()
(5)

2.37
2.19
2.25
2.44
2.31

2.62
2.53
2.61
2.82
2.66

3.29
3.05
3.24
3.47
3.42

2.2
2.1
2.1
2.5
2.7

.44
.61
.87
1.11
1.12

*4 1.00
1. 00
.00
.34
.50

1949— First quarter
Second quarter
Third quarter
Fourth quarter

.22
.20
.06
.09

(55)
(5)
(5)
()

2.40
2.38
2.24
2.20

2.71
2.71
2.63
2.60

3.46
3.46
3.41
3.34

2.70
2. 74
2.63
2.65

1.19
1.19
1.06
1.06

.50
.50
.50
1.50

1950— First quarter
Second quarter

1.14
61.19

(55)
()

2.24
2.31

2.58
2.61

3.24
3.25

2.60
2.68

1.06
1.06

1.50
1.50

1929 average
1933 average
1935 average
1937 average
1939 average _

1941 average
1943 average. .
1945 average
1946 average. .
1947 average
1948 average
1949 average

_ -

1
2

5.16
2.56
1.50
1.33
1.00
4

1.00
1.00

Tax exempt prior to March 1,1941; taxable thereafter.
Average of yields on all outstanding partially tax-exempt Government bonds due or callable after 12 years,
in 31929 and 1933; and after 15 years, from 1935.
Not available.
4
From October 30, 1942, to April 24, 1946, a preferential rate of 0.50 percent was in effect for advances
secured by Government securities maturing in 1 year or less.
No partially tax-exempt bonds due or callable in 15 years and over.
6
Beginning June 1,1950, series is based on three note issues maturing July 1,1951.
Sources: Treasury Department, Moody's Investors Service, and Board of Governors of the Federal
Reserve System.

142

TABLE B-29.—Profits before and after iax^ all private corporations ^ 1929—50 ]
[Billions of dollars
Corporate profits after tax

Corporate
profits
before
tax

Corporate
tax
liability 2

1929

9.8

1.4

8.4

5.8

2.6

1930
1931
1932
1933
1934

3.3
-.8
-3.0
.2
1.7

.8
.5
.4
.5
.7

2.5
-1.3
-3.4
— 4
LO

5.5
4.1
2.6
2.1
2.6

-3.0
-5.4
-6.0
-2.4
-1.6

3.2
5.7
6.2
3.3
6.5

1.0
1.4
1.5
1.0
1.5

2.3
4.3
4.7
2.3
5.0

2.9
4.6
4.7
3.2
3.8

9.3
17.2
21.1
25.1
24.3

2.9
7.8
11.7
14.4
13.5

6.4
9.4
9.4
10.6
10.8

4.0
4.5
4.3
4.5
4.7

2.4
4.9
5.1
6.2
6.1

19.7
23.5
30.5
33.9
27.6

11.2
9.6
11.9
13.0
10.6

8.5
13.9
18.5
20.9
17.0

4.7
5.8
6.6
7.5
7.8

3.8
8.1
12.0
13.4
9.2

Period

1935
1936
1937
1938
1939

1940
1941 .
1942
1913
1944

1945
1946
1947
1948
1949

.
.

. . . .

Total

Dividend
payments

Undistributed
profits

-.6
-.3
W

-.9
1.2

Annual rates, seasonally adjusted
1949— First half
Second half .

27.4
27.9

10.4
10.7

16.9
17.1

7.8
7.8

9.1
9.4

1950— First half 4

30.1

11.8

18.4

8.2

10.2

1949— First quarter
Second quarter
Third quarter
Fourth quarter. _.

28.3
26.4
28.2
27.6

10.9
10.0
10.8
10.6

17.4
16.4
17.3
16.9

7.9
7.7
7.4
8.2

9.5
8.7
10.0
8.7

29.2
31.0

11.4
12.1

17.8
18.9

8.1
8.2

9.7
10.7

1950— First quarter 4
Second quarter

1 The figures for 1946-50 are based on the revised series of national income and product of the Department
of 2Commerce. For detail, see the "Survey of Current Bvsiness," July 1950.
Federal and State corporate income and excess profits taxes.
3
Minus 8 million dollars.
* Estimates based on incomplete data; second quarter by Council of Economic Advisers.
NOTE.—No allowance has been made for inventory valuation adjustment. See appendix table B-4 for
profits before tax and inventory valuation adjustment.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

143

TABLE B-30.—Sales and profits of large manufacturing corporations, 1939-50
[Millions of dollars]
Nondurable goods industries
(94 corporations) *

Durable goods industries
(106 corporations) »
Period

Profits

Sales

Before taxes After taxes

1939

6,748

734

597

3,843

476

400

1940
1941
1942
1943
1944

8,750
12,806
15, 362
20,633
22,085

1,226
2,175
2,326
2,389
2,192

830
982
782
755
726

4,257
5,485
6,408
7,607
8,263

617
980
1,069
1,293
1,339

443
538
438
506
529

38,161
12,623
19,831
23,818
24, 152

1,288
607
2,312
3,107
3,192

574
295
1,355
1.836
1,888

8,371
8, 940
11,313
13,364
12,790

1,133
1,426
1,787
2,208
1,843

555
908
1,167
1, 474
1,211

1945
1946
1947
1948
1949

Totals for period, not adjusted for seasonal variation
1949— First half
Second half

12,546
31,606

1,629
1,563

957
932

6,294
6,496

893
949

577
634

1949— First quarter
Second quarter
Third quarter
Fourth quarter .

6,149
6,397
6,322
5,284

830
799
866
697

487
470
508
424

3,243
3,051
3,163
3,333

496
397
446
503

321
256
292
342

1950— First quarter

5,969

898

529

3,251

505

323

1
See Federal Reserve Bulletin, June 1949, and subsequent issues, for similar data for the following industry
groups: primary metals and products, machinery, automobiles and equipment, foods and kindred products,
chemicals and allied products, and petroleum refining.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Compiled by the Board of Governors of the Federal Reserve System and based on published reports of various industrial corporations.

144

TABLE B—31.—Relation of profits before and after taxes to stockholders* equity, private manufacturing
corporations, by industry group, 1948—50
Percentage ratio of profits (annual rate) to stockholders'
equity
Industry group

1949

1948
total

Total

1950,
first
First Second Third Fourth quarter
quarter quarter quarter quarter
Before Federal taxes

25.6

18.5

20.4

16.8

18.8

18.0

19.6

21.3
21.9
30.9
20.5
30.4

19.5
20.2
13.0
13.3
14.2

16.8
18.4
16.8
17.6
14.8

20.0
20.8
8.4
10.0
14.4

23.2
22.0
10.8
16.0
12.8

18.0
19.6
16.0
9.6
14.8

15.6
16.4
18.0
11.6
16.8

Furniture and fixtures
Paper and allied products
Printing and publishing (except newspapers) .
Chemicals and allied products
Products of petroleum and coal . ._ _

26.8
26.7
24.0
25.0
26.7

14.6
17.3
19.0
21.2
15.2

16.0
19.6
23.2
22.8
18.0

12.4
14.0
19.6
16.8
14.8

13.2
14.8
21.2
22.4
14.0

16.8
20.8
12.0
22.8
14.0

15.6
20.8
20.4
25.2
12.8

Rubber products
Leather and leather products
Stone, clay, and glass products
Primary nonferrous metal industries
Primary iron and steel industries .

21.5
17.8
24.3
22.3
23.8

13.6
11.1
21.2
13.0
17.0

13.6
11.6
18.8
21.6
25.6

11.6
7.6
21.2
8.0
17.6

10.8
12.8
24.4
9.2
14.4

18.4
12.4
20.4
13.2
10.4

14.8
10.8
20.4
16.0
20.0

27.5

17.8

20.0

14.0

20.4

16.8

18.4

27.3
27.6

19.3
22.2

23.6
22.0

20.4
16.4

17.2
17.6

16.0
32.8

18.4
29.2

14.2
34.7

12.5
37.6

15.2
33.6

11.2
36.0

11.6
46.8

12.0
34.0

12.0
39.2

22.6

20.0

20.8

19.2

20.8

20.7

12.4

16.0

5.2

13.6

14.8

10.0

All private manufacturing corporationsFood
Tobacco manufactures _ __
Textile mill products
Apparel and finished textiles
Lumber and wood products

._ _

... .

Fabricated metal products
Machinery (except electrical and transportation)
Electrical machinery
Transportation equipment (except motor
vehicles)
Motor vehicles and parts
Instruments; photographic and optical goods;
watches and clocks
Miscellaneous manufacturing (including
ordnance) . .

After Federal taxes

16.1

11.7

12.8

10.4

12.0

11.6

12.0

Food
Tobacco manufactures
Textile mill products
Apparel andfinishedtextiles ..
Lumber and wood products

12.9
13.7
18.8
12.2
19.3

11.8
12.6
7.6
7.6
9.0

9.6
11.6
10.0
10.4
8.8

12.4
12.8
4.4
5.2
9.2

14.4
13.6
6.4
9.6
8.0

10.8
12.4
9.6
5.2
10.0

9.2
10.0
10.8
6.4
10.4

Furniture and fixtures _
«_
Paper and allied products
Printing and publishing (except newspapers)
Chemicals and allied products
Products of petroleum and coal

16.0
16.4
14.6
15.8
19.8

8.1
10.7
11.4
13.2
11.9

9.2
12.0
14.4
14.0
13.2

6.4
8.4
11.6
10.0
11.6

7.2
9.2
13.2
14.0
11.2

9.6
13.2
6.4
14.8
11.6

8.4
12.8
12.8
15.6
10.0

Rubber products
Leather and leather products
Stone, clay, and glass products .
Primary nonferrous metal industries
Primary iron and steel industries.

12.4
10.4
15.0
14.1
14.7

8.6
6.2
13.2
8.0
9.9

8.0
6.4
11.2
13.6
14.8

7.2
3.6
13.2
4.0
10.0

6.8
7.2
15.2
5.6
8.4

12.4
7.6
13.2
8.8
6.4

9.6
6.4
12.4
10.4
11.6

17.0

10.4

12.0

7.6

12.0

10.0

11.2

16.6
16.1

11.6
13.5

14.0
12.4

12.4
10.0

10.4
10.8

9.6
20.8

10.8
17.2

8.2
19.8

7.8
21.9

9.6
19.6

6.8
20.8

7.2
27.2

7.6
20.0

7.2
22.8

14.0

12,1

12.4

11.6

11.2

13.2

12.8

12.2

7.1

10.0

2.0

7.6

8.8

5.2

All private manufacturing corporations.

Fabricated metal products . .
Machinery (except electrical and transportation)
Electrical machinery
.
..
Transportation equipment (except motor
vehicles)
Motor vehicles and "parts. .
.._ ..
Instruments; photographic and optical goods;
watches and clocks
Miscellaneous manufacturing (including
ordnance)

Source: Federal Trade Commission and Securities and Exchange Commission.

145

TABLE B—32.—Relation of profits before and after taxes to sales, private manufacturing corporations,
by industry group, 1948-50
Profits in cents per dollar of sales
Industry group

1949
1948
total

Total

First
quarter

Second
quarter

Third
quarter

Fourth
quarter

1950,
first
quarter

Before Federal taxes
All private manufacturing corporations
Food
Tobacco manufactures. _
Textile mill products
Apparel and finished textiles
Lumber and wood products
__
Furniture and
fixtures
._
Paper and allied products
Printing and publishing (except newspapers)
_ _ _
Chemicals and allied products
Products of petroleum and coal
Rubber products
Leather and leather products
__
Stone, clay, and glass products
Primary nonferrous metal industries. _.
Primary iron and steel industries ...
Fabricated metal products.. _ _ ._
Machinery (except electrical and transportation)
Electrical machinery
Transportation equipment (except motor vehicles)
Motor vehicles and parts..
Instruments; photographic and optical
goods; watches and clocks
Miscellaneous manufacturing (including ordnance)

11.1
5.6
8.3
13.5
5.1
15.4
9.2
13.8

9.3
5.5
8.2
6.9
3.7
9.3
5.9
10.5

9.9
4.6
7.7
8.9
4.8
10.4
6.5
11.5

8.5
5.6
8.2
4.9
3.1
9.2
5.2
9.1

9.5
6.5
8.5
5.9
4.3
8.1
5.7
9.5

9.3
5.3
8.2
7.8
2.6
9.4
G.I
12.0

10.1
4.8
7.4
9.0
3.5
11.2
5.9
12.3

8.5
13.9
17.4
8.2
5.6
13.9
14.2
12.2
11.5

7.4
13.2
12.0
6.0
3.9
13.9
10.7
10.9
8.7

9.1
13.2
13.8
6.2
4.1
12.3
15.2
13.4
9.8

7.7
10.8
11.8
5.0
2.9
14.0
7.5
10.8
7.1

8.6
14.5
11.6
4.5
4.3
15.7
8.8
9.9
9.5

4.3
14.4
10.9
8
'o
13! 6
11.3
9.3
8.4

8.5
15.6
10.7
6. 6
4.2
14.1
13.5
12.7
9.7

12.0
10.1

10.6
9.1

11.8
9.0

10.7
7.1

10.2
7.9

9.7
12.5

10.7
11.3

7.0
12.0

6.3
13.5

7.2
12.0

5.5
12.1

6.1
15.4

6.2
14.3

6.2
15.3

12.5

11.6

12.0

11.3

11.5

11.7

12.6

9.5

6.2

8.4

2.7

6.9

6.7

5.5

After Federal taxes
All private manufacturing corporations
Food
Tobacco manufactures .
Textile mill products
Apparel and finished textiles
Lumber and wood products.
Paper and allied products
Printing and publishing (except newspapers)
Chemicals and allied products _
Products of petroleum and coal
Rubber products
_
Leather and leather products
Stone, clay, and glass products
Primary nonferrous metal industries ...
Primary iron and steel industries
Fabricated metal products
Machinery (except electrical and transportation)
Electrical machinery _ _ _ _
Transportation equipment (except motor vehicles
Motor vehicles and partsInstruments; photographic and optical
goods* watches and clocks
Miscellaneous manufacturing (including ordnance)

7.0
3.3
5.1
8.2
3.0
9.8
55
8.4

5.8
3.3
5.1
4.1
2.1
6.0
3.3
6.5

6.1
2.7
4.8
5.3
2.9
6.4
3.7
7.0

5.2
3.4
5.0
2.7
1.6
5.8
2.7
5.5

6.0
4.0
5.3
3.5
2.5
5.2
3.1
5.7

6.0
3.2
5.2
4.7
1.4
6.4
3.5
7.7

6.2
2.8
4.6
5.4
1.9
7.1
3.2
7.5

5.2
8.8
12.9
4.7
3.3
8.6
9.0
7.5
•7.1

4.5
8.2
9.4
3.8
2.2
8.6
6.7
6.4
5.1

5.7
8.1
10.3
3.7
2.2
7.2
9.5
7.9
5.8

4.6
6.5
9.2
3.1
1.4
8.6
3.9
6.2
3.8

5.4
9.1
9.1
2.9
2.5
9.7
5.6
5.7
5.7

2.3
9.2
9.0
5.5
2.7
8.7
7.7
5.7
5.1

5.4
9.6
8.2
4.2
2.5
8.6
8.5
7.5
5.9

7.3
5.9

6.4
5.6

7.1
5.1

6.4
4.5

6.2
4.8

5.7
7.9

6.4
6.7

4.0
6.9

3.9
7.9

4.5
7.1

3.3
7.1

3.7
9.0

3.9
8.4

3.7
8.9

7.8

7.1

7.2

6.9

6.7

7.4

7.7

5.6

3.6

5.2

1.1

3.9

4.1

2.9

Sources: Federal Trade Commission and Securities and Exchange Commission.

146

TABLE B-33.—Relation of profits before and after taxes to stockholders' equity and to sales, all
private manufacturing corporations, by size class, 1948—50

1949
Assets class
(thousands of dollars)

1948
total

First
quarter

Total

Second
quarter

Third
quarter

Fourth
quarter

1950,
first
quarter

Ratio of profits before Federal taxes (annual rate) to stockholders' equity
All sizes .
1 to 249_250to999._- .
1,000 to 4,999
5,000 to 99,999
100,000 and over-

_ _

25.6

18.5

20.4

16.8

18.8

18.0

19.6

15.5
23.8
24.8
26.4
26.1

9.8
14.1
15.5
17.7
23.2

14.4
17.2
17.2
20.0
22.4

10.4
12.8
15.2
16.0
18.8

14.0
16.0
16.0
17.2
30.8

0.4
10.4
13.6
17.6
20.8

8.8
13.2
17.2
18.4
21.6

Profits before Federal taxes in cents per dollar of sales
All sizes
1 to 249
250 to 9991,000 to 4,999
5,000 to 99,999
100,000 and over-

11.1

9.3

9.9

8.5

9.5

9.3

10.1

4.0
7.4
9.0
11.3
13.2

2.7
5.2
6.5
9.0
11.8

4.0
6.2
7.0
9.7
12.2

2.8
4.8
6.5
8.2
10.5

3.8
6.0
6.9
8.9
11.9

0.1
39
5! 7
9.1
12.6

2.5
5.1
7.3
9.5
12.8

Ratio of profits after Federal taxes (annual rate) to stockholders' equity
All sizes _ -- _

_ -

1 to 249^-.
250 to 999
1,000 to 4,999
5,000 to 99,999 „.
100,000 and over

16.1
8.8
14.2
14.8
16.1
16.9

11.7

12.8

10.4

12.0

11.6

12.0

4.9
7.8
9.0
10.8
13.5

8.4
9.6
10.0
12.0
14.4

4.8
6.8
8.8
9.6
12.0

8.4
9.2
9.2
10.4
13.6

-2.0
5.6
8.0
11.2
14.0

4.0
7.2
10.0
11.2
13.6

Profits after Federal taxes in cents per dollar of sales
All sizes .

7.0

5.8

6.1

5.2

6.0

6.2

1 to 249 _
250 to 999
1,000 to 4,999
5,000 to 99,999
100,000 and over

2.3
4.4
5.4
7.0
8.6

1.4
2.9
3.8
5.6
7.6

2.4
3.5
4.0
5.9
7.8

1.3
2.5
3.7
5.0
6.7

2.3
3.4
4.0
5.5
7.6

-0.6
2.0
3.3
5.8
8.4

1.1
2.7
4.2
5.8
8.1

Sources: Federal Trade Commission and Securities and Exchange Commission.

TABLE B-34.—Sources and uses of corporate funds, 1946-50l
[Billions of dollarsl
Half year totals 2

Annual totals
Source or use of funds
1946

Uses:
Plant and equipment outlays
Inventories (change in book value)
Change in customer receivables
Cash and U. S. Government securities
Other current assets

Total uses
Sources:
Internal:
Retained profits and depletion allowances.
Depreciation allowances
Total internal sources
External:
Change in trade debt
Change in Federal income tax liability
Other current liabilities
Change in bank loans
Change in mortgages _ _ _ _
Net new issues .

1947

1948

11.6
11.2
4.8
-4.7
-.7

15.0
7.1
7.5
1.0
-.1

17.5
5.0
2.4

22.2

30.5

7.6
4.3

1949

1950,
1949,
first half first half 3

16.1
-4.6
-.4
2.7
-.2

8.2
-2.5
-1.6
1.2
-.2

7.6
.9
.1
1.3
(4)

25.4

13.6

5.1

9.9

11.6
5.2

12.8
6.0

8.6
6.7

4.4
3.2

5.1
3.5

11.9

16.8

18.8

15.3

7.6

8.6

4.0
-1.6
1.8
3.3
.6
2.3

4.4
2.3
.4
2.6
.8
4.4

.9
.8

-2.2
-2.4
0)
-1.6
.5
5.4

-2.6
-1.2
.1
-2.1
.2
3.4

^i.6

5.9

-1.0
.6

(4)

-.5
.1
2.5

Total external sources

10.4

14.9

9.3

-.3

-2.2

1.7

Total sources

22.3

31.7

28.1

15.0

5.4

10.3

-.1

-1.2

-2.7

-1.4

-.3

— 4

Discrepancy (uses less sources)

1 Excludes banks and insurance companies.
2 Not adjusted for seasonal variation.
aEstimates based on incomplete data; retained profits and depletion allowances by Council of Economic
Advisers.
* Less than 50 million dollars.
Sources: Department of Commerce estimates based on Securities and Exchange Commission and other
financial data (except as noted).

148

TABLE B-35.—The international transactions of the United States, 1947-50
[Millions^! dollars]
1950

1949

Type of transaction

Exports of goods and2 services:
Recorded goods
Other goods3

total

First Second Third Fourth First Second
Total quarter
quarter quarter quarter quarter uarter »

15,253 12, 653 12,000
774
724
337

3,325
123

3,362
93

2,684
86

2,629
35

2,381
43

Total goods
15,977 13, 427 12,337
Services
2,673 2,290 2,296
Income on investments. _. 1,146 1,375 1,323

3,448
577
298

3,455
636
351

2,770
600
315

2,664
483
359

2,424
482
284

4,323

4,442

3,685

3,506

3,190

()
3,300
(4)

Total exports

_ __

Imports of goods and services:
Recorded goods
_ . _
Other goods 3
Total goods
Services
Income on investments...
Total imports.
Surplus of export of goods and
services:
Recorded goods
Other goods
Total goods
Services
Income on investments. _.

19, 796 17,092 15, 956

Total means of financing
Errors and omissions

(4)
(4)
4

5,756
344

7,124
709

6,627
517

1,790
170

1,601
160

1,478
115

1,758
72

1,885
83

6,100
1,940
249

7,833
2,239
284

7,144
2,242
329

1,960
492
98

1,761
586
71

1,593
685
68

1,830
479
92

1,968
487
82

<<)(

8,289 10, 356

9,715

2,550

2,418

2,346

2,401

2.537

2,600

9,497
380

5 529
6

5,373
—180

1,535
-47

1,761
-67

1,206
—29

871
-37

496
-40

(4)

9,877

5 59

5,193

1,488

1,694

1,177

834

456

(4)

733
89

5
1,09

54
994

85
200

50
280

—85
247

i
267

-5
202

(4)

6,73

6,241

1,773

2,024

1,339

1,105

653

372

—448

—471

47
11

-12
22

Total surplus of exports- 11,50
Means of financing surplus of
exports
of goods and services: 4
Liquidation of gold and
dollar assets by foreign
countries
Dollar disbursements by:
International Monetary Fund
International Bank..
United States 6 Government sources:
Unilateral transfers _.
Long- and short-term
loans
United States private
sources:
Remittances
Long- and short-term
capital

2,500
(4)

1,900

(4)

600

«
700

4 46

46
30

20
17

1,94

4,16

5,30

1,38

1,55

1,291

1,074

1,008

1,100

3,89

178

100

112

138

112

100

'86

120

154

200

12,48
7,74
-98 -1,01

7,21
-97

2,03
-25

2,30
-28C

99
38

1
2

1,83
-49

1,04
5

84
-18

-700

800
-100

Estimates based on incomplete data; by Council of Economic Advisers.
Figures for recorded exports of goods in 1947 have been adjusted to include goods shipped to United
States armed forces abroad for distribution to civilians in occupied areas in order to make them comparable with figures for subsequent years. Such shipments are included in exports as recorded by the Bureau of the Census beginning in 1948 but were not so included in prior years.
a Includes goods sold to or bought from other countries that have not been shipped from or into the United
States customs area and other adjustments.
< Not available.
*6 All figures for means of financing are on a net basis.
Excludes subscription to the capital of the International Bank for Reconstruction and Development and
the International Monetary Fund. For detail see table B-37.
' Excludes 7 million dollars of long-term and 1 million dollars of short-term notes guaranteed by the International Bank.
Source: Department of Commerce (except as noted).

'49

TABLE B—36.—United States exports and imports of goods and services, by area, 1937 and 1947—50
[Billions'lof dollars]
Annual rates
Area

1937

1947

1949

1948

1950

First Second Third Fourth First Second
quar- quar- quar- quar- quar- quarter
ter
ter
ter
ter
ter 1

Export surplus of goods and services: 2
Total

0.28

11.51

6.74

7.09

8.10

5.36

4.42

2.61

ERP countries. .
.28 5.43
ERP dependencies...
-.31
.34
Europe, except ERP countries— -.03
.33
Canada and Newfoundland... .
[ 1.17
Latin-American
Republics
\
2.08
Other 4
I 2.15

3.65
.10
.03
.44
1.17
1.34

3.62
.14
.03
.59
.78
1.93

3.86
.26
.05
1.09
.81
2.03

2.64
.31
.02
.30
.58
1.50

2.42
.09
.02
.22
.46
1.22

2.13
-.18
-.02
.22
-.19
.66

(33)
(3)
(3)
(3)
()
(3)

13. 20

I-

Exports of goods and services: 2
Total

17.09

17.29

17.77

14.74

14.02

12.76

7.22
.93
.56
2.69
4.82
3.58

5.92
.86
.27
2.49
4.27
3.28

6.11
1.00
.22
2.41
3.96
3.59

6.17
.98
.23
3.05
3.68
3.65

4.79
.91
.20
2.48
3.35
3.02

4.52
.81
.20
2.34
3.44
2.70

4.30
.68
.18
2.12
3.18
2.30

8.29

10.36

10.20

9.67

9.38

9.60

10.15

ERP countries
1.33
1.79
ERP dependencies
.50
.59
Europe, except ERP countries-.23
.15
Canada and Newfoundland ...
( 1.52
Latin- American Republics
1 2.29 { 2.73
Other* _
.
I 1.43

2.27
.76
.24
2.05
3.10
1.94

2.49
.86
.18
1.82
3.18
1.66

2.31
.73
.18
1.96
2.87
1.62

2.15
.60
.17
2.18
2.78
1.51

2.10
.72
.18
2.13
2.98
1.48

2.16
.86
.20
1.91
3.36
1.64

4.55

19.80

ERP countries
1.60
ERP dependencies
.18
Europe, except ERP countries-.13
Canada and Newfoundland
(
Latin- American Republics
| 2.64
{
Other <
I
Imports of goods and services: 2
Total .

4.27

1
Estimates based on incomplete data; by Council of Economic Advisers.
23 Includes income on investments.
Not available.
< Includes international institutions.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

i no

2.80

(33)
()

§
()
3

(3)

10.40
(3)
(3)

8( )
3

(3)

TABLE B—37.—U. S. Government grants, loans, and other transfers to foreign countries, 1947—50
[Millions of dollars]
1949

Type of aid

1947
total

1948
total

A. Unilateral payments:
UNRRA and post-TJNRRA
84
761
Civilian supplies distributed
by the armed forces
1 009 1,448
Transfers to Philippines _
130
91
Chinese aid
168
Korean aid program
Greek-Turkish aid
74
348
International Refugee Organ89
ization
15
Interim aid
_ _
12
546
European recovery program .
1,398
133
Other
288
Total unilateral payments- 2,250
Less unilateral receipts
303
Equals: Net unilateral payments

1,947

B. Long-term loans and investments:
Lend-lease credits
Surplus property including
ship sales
_
273
Export-Import Bank loans
797
United Kingdom loan
2 850
Subscriptions toInternational Bank
317
International Monetary
Fund
2 745
European Recovery Program.
Other
_
161

Total

19 50

First Second Third Fourth First Second
quar- quar- quar- quar- quar- quarter
ter
ter
ter
ter
ter i

1,059
20<*
109
30
171

287
53
49
3
52

253
44
43
11
43

334
59
12
4
41

185
47
5
12
35

109
40
16
22
34

(2)
(2)
(2)
(2)
(2)

(2)

3, 732
182

906
39

1,119
46

940
39

767
58

771
40

(2)
(2)

4,344
183

5, 559
255

1,409
27

1,576
19

1,447
156

1,127
53

1,049
41

(2)
(2)

4,161

5, 304

1,382

1,557

1,291

1,074

1,008

1,100

192
454
300

24
163

16
50

8
42

476
18

425
59

281
11

98
12

7, 143
294

1,442
443

675
205

359
64

Equals net long-term loans
and investments, including
International Bank and International Monetary Fund-__ 6,849
Less subscriptions to International Bank and International Monetary Fund___ 3,062

999

470

Total long-term loans and
investments
Less repayments
- _

(2)

(2)
(2)

16
22

30
14

54
15

(2)

161
55

75
41

80
45

121
49

(2)
(2)

295

106

100

Equals net long-term loans
and investments excluding
International Bank and
International Monetary
Fund

3,787

999

470

295

106

C. Outflow of short-term capital
(net)

108

-92

173

-1

-2

144

Total net unilateral payments,
loans and investments, excluding International Bank and International Monetary Fund
(A+B-j-C)
.. 5,842

5,068

5,947

1,676

1,661

1,469

1,141

1,107

Estimates based on incomplete data; by Council of Economic Advisers,
a Not available.
Source: Department of Commerce (except as noted).

151

(2)

1,200

TABLE B-38.- -United States merchandise export surplus, by area, 1936—38 quarterly average and
1947-50
Total
merchandise Canada »
export
surplus

Period

Other
Western
Hemisphere

ERP
countries 2

Other
Europe

Asia «

Australia
and
Oceania

Africa

Millions of dollars
Quarterly average:
1936-38
1947 .
1948
_
1949

120
2,396
1,382
1,343

27
246
88
101

-7
448
214
114

130
1,150
802
807

1
73

1949— First quarter
Second quarter
Third quarter
Fourth quarter _

1,535
1,761
1,206
871

94
188
125
1

174
158
107
14

910
999
668
652

-85
(4)

546
(4)

1950— First quarter 3
Second quarter

496
600

(4)

-61
313
183
228

13
41
-3
18

15
123
98
70

8
13
2
1

271
279
209
153

20
11
25
13

60
112
69
35

-9
(4)

101
(4)

-13
(4)

-38
(4)

10.8
1.7
-.2
1.3

12.5
5.1
7.1
5.2

Percentage of total
Quarterly average:
1936-38
1947
1948
1949

100
100
100
100

22.5
10.3
6.4
7.5

-5.8
18.7
15.5
8.5

108.3
48.0
58.0
60.1

.8
3.0
.4

-50.8
13.1
13.2
17.0

1949— First quarter
Second quarter
Third quarter
Fourth quarter

100
100
100
100

6.1
10.7
10.4
.1

11.3
9.0
8.9
1.6

59.3
56.7
55.4
74.9

.5
.7
.2
.1

17.7
15.8
17.3
17.6

1.3
.6
2.1
1.5

3.9
6.4
5.7
4.0

1950— First quarter. .

100

-17.1

110.1

20.4

-2.6

-7.7

-1.4

-1.8

1 Includes Newfoundland and Labrador.
2 Turkey is included with ERP countries and excluded from Asia. Exports to and imports from Germany in the postwar period relate almost wholly to trade with the three western zones.
3 Estimates based on incomplete data; by Council of Economic Advisers.
* Not available.
NOTE.—Detail will not necessarily add to totals because of rounding in this table and in tables B-39and
B-42.
Source: Department of Commerce (except as noted).

152

TABLE B—39.—United States merchandise exports, including reexports, by area, 7936—38 quarterly
average and 1947-50
Total
Other
exports
includ- Canada J Western
Hemiing
sphere
eexports

Period

ERP
countries 2

Other
Europe

Asia 2

Australia
and
Africa
Oceania

Millions of dollars
Quarterly average:
1936-38
1947 .
1948
1949
1949— First quarter
Second quarter
Third quarter
Fourth quarter
1950— First quarter 3
Second quarter

_ _

742
3,835
3,163
3,000

115
528
486
489

136
1,017
841
725

282
1,324
1, 046
1,018

31
118
49
41

122
562
507
524

23
80
38
49

32
205
196
154

3,325
3,362
2,684
2,629

472
571
473
442

836
738
669
656

1,160
1,189
843
880

42
46
35
39

599
582
474
443

54
50
47
44

163
186
142
124

2,381
2,500

397
(4)

640
(<)

785
<«)

403
(4)

(4)

36
(<)

84
(<)

Percentage of total
Quarterly average:
1936-38
1947 _
1948
1949 .

100
100
100
100

15.5
13.8
15.4
16.3

18.3
26.5
26.6
24.2

38.0
34.5
33.1
33.9

4.2
3.1
1.5
1.4

16.4
14.7
16.0
17.5

3.1
2.1
1.2
1.6

4.3
5.3
6.2
5.1

1949— First quarter
Second quarter
Third quarter
Fourth quarter

100
100
100
100

14.2
17.0
17.6
16.8

25.1
22.0
24.9
25.0

34.9
35.4
31.4
33.5

1.3
1.4
1.3
1.5

18.0
17.3
17.7
16.9

1.6
1. 5
1.8
1.7

4.9
5.5
5.3
4.7

1950— First quarter. _

100

16.7

26.9

33.0

1.5

16.9

1.5

3.5

1 Includes Newfoundland and Labrador.
2
Turkey is included with ERP countries and excluded from Asia. Exports to Germany in the postwar
period relate almost wholly to exports to the three western zones.
*4 Estimates based on incomplete data; by Council of Economic Advisers.
Not available.
NOTE.—Data in this table cover all merchandise, including reexports, shipped from the United States
customs area to foreign countries including, in 1947 to 1950, goods destined to United States armed forces
abroad for distribution in occupied areas as civilian supplies.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

153

TABLE B-40.—United States domestic merchandise exports, by economic class, 1936—38 quarterly
average and 1947-50
Total
domestic
exports

Period

Crude
materials

Crude
foodstuffs

Manufactured
foodstuffs

Semimanufactures

Finished
manufactures

Millions of dollars
Quarterly average:
1936-38
1947
1948 ...
1949

731
3,791
3,133
2,971

167
400
372
445

34
337
316
335

42
439
328
221

130
446
343
339

358
2,168
1,773
1,631

1949— First quarter
Second quarter
Third quarter
Fourth quarter

3,289
3,332
2,658
2,607

466
549
329
436

396
349
325
270

256
270
174
187

386
387
310
272

1,786
1,776
1,520
1,442

1950— First quarter !
Second quarter

2,354
2,475

256

1,328
(2)

429
«

(2)

200

(2)

141

(2)

Percentage of total
Quarterly average:
1936-38
1947
1948
1949

100
100
100
100

22.8
10.6
11.9
15.0

4.7
8.9
10.1
11.3

5.7
11.6
10.5
7.4

17.8
11.8
10.9
11.4

49.0
57.2
56.6
54.9

1949— First quarter ...
Second quarter
Third quarter
Fourth quarter. _ _

100
100
100
100

14.2
16.5
12.4
16.7

12.0
10.5
12.2
10.4

7.8
8.1
6.5
7.2

11.7
11.6
11.7
10.4

54.3
53.3
57.2
55.3

1950— First quarter

100

18.2

8.5

6.0

10.9

56.4

* Estimates based on incomplete data; by Council of Economic Advisors,
2 Not available.
NOTE.—Data in this table cover all domestic merchandise shipped from the United States customs area
to foreign countries including, in 1947 to 1950, goods destined to United States armed forces abroad for distribution in occupied areas as civilian supplies.
Detail will not necessarily add to totals because of roundingj
Source: Department of Commerce (except as noted).

TABLE B—41.—Indexes of quantity and unit value of United States domestic merchandise exports,
by economic class, 1936—38 quarterly average and 1947—50
[1936-38=100]
Total
domestic
exports

Period

Crude
materials

Crude
foodstuffs

Manufactured
foodstuffs

Semimanufactures

Finished
manufactures

Quantity indexes
Quarterly average:
1936-38
1947
1948
1949

100
275
214
220

100
123
100
126

100
397
362
435

100
478
350
297

100
203
144
150

100
332
257
252

1949— First quarter
Second quarter
Third quarter
Fourth quarter

232
242
199
200

129
155
93
126

495
438
439
368

317
365
235
271

162
167
144
128

262
267
235
227

1950— First quarter

181

125

287

210

120

209

Unit value indexes
Quarterly average:
1936-38 .
1947
1948
1949...

100
188
200
185

100
195
223
212

100
248
255
225

100
218
223
177

100
169
184
174

100
182
193
181

1949— First quarter .
Second quarter
Third quarter
Fourth quarter

193
188
182
179

216
212
212
208

233
233
216
214

191
175
175
163

184
179
165
164

190
186
181
177

1950— First quarter

177

205

202

160

164

178

NOTE.—The indexes of quantity are a measure of the volume of trade after the influence on value of changes
in average prices has been eliminated. The indexes of unit value provide a measure of change in the average
prices at which trade transactions are reported in official foreign trade statistics, including change in average
prices that result from changes in the commodity composition of trade. The indexes for 1947 to 1950 are
based on data which include goods destined to the United States armed forces abroad for distribution to
civilians in occupied areas.
Source: Department of Commerce.

894762—50

11
155

TABLE B—42.—United States general merchandise imports, by area, 1936—38 quarterly average
and 1947-50

Period

Total
general Canaimports da!

Other
Western
Hemisphere

ERP
countries a

2
Other
Europe Asia

Australia
and
Africa
Oceania

Millions of dollars
Quarterly average:
1936-38
1947
1948
1949

622
1,439
1,781
1.657

88
282
398
388

143
569
627
611

152
174
244
211

30
45
49
35

183
249
324
296

10
39
41
31

17
82
98
84

1949— First quarter
Second quarter
Third quarter
Fourth quarter. .

1,790
1,601
1,478
1,758

378
383
348
441

662
580
562
642

250
190
175
228

34
33
33
38

328
303
265
290

34
39
22
31

103
74
73
89

1950— First quarter _ a__
Second quarter — .

1,885
1,900

404
(0

725
(0

239
(0

45
(4)

302
(<)

122
(4)

Percentage of total
Quarterly average:
1936-38
1947
1948
1949

100
100
100
100

14.1
19.6
22.3
23.4

23.0
39.5
35.2
36.9

24.4
12.1
13.7
12.7

4.8
3.1
2.8
2.1

29.4
17.3
18.2
17.9

1.6
2.7
2.3
1.9

2.7
5.7
5.5
5.1

1949— First quarter
Second quarterThird quarter
Fourth quarter

100
100
100
100

21.1
23.9
23.5
25.1

37.0
36.2
38.0
36.5

14.0
11.9
11.8
13.0

1.9
2.1
2.2
2.2

18.3
18.9
17.9
16.5

1.9
2.4
1.5
1.8

5.8
4.6
4.9
5.1

1950— First quarter .

100

21.4

38.5

12.7

2.4

16.0

2.6

6.5

1
2

Includes Newfoundland and Labrador.
Turkey is included with ERP countries and excluded from Asia. Imports from Germany in the postwar
period relate almost wholly to imports from the three western zones.
3
Estimates based on incomplete data; by Council of Economic Advisers.
* Not available.
NOTE.—Data in this table cover all merchandise received in the United States customs area from foreign
countries. General imports include merchandise entered immediately upon arrival into merchandising
channels, plus entries into bonded customs warehouses.
Detail will not necessarily add to totals because of rounding.
Source* Department of Commerce (except as noted).

156

TABLE B-43.—United States merchandise imports for consumption, by economic class, 1936-38
quarterly average and 1947—50

Period

Total
imports for
consumption

Crude
materials

Crude
foodstuffs

Manufactured
foodstuffs

Semimanufactures

Finished
manufactures

Millions of dollars
Quarterly average:
1936-38
1947
1948
1949

615
,416
,773
,650

190
441
537
464

85
254
318
333

95
164
183
185

126
311
408
356

120
246
327
312

1949— First quarter . _
Second quarter
Third quarter
Fourth quarter

.758
,590
1, 501
1,750

504
449
424
478

340
302
287
403

182
198
194
168

398
336
306
385

336
305
290
315

1950— First quarter
Second quarter *

1,869
1,885

(2)

537

(2)

422

(2)

413

185
(')

(2)

312

Percentage of total
Quarterly average:
1936-38
1947
1948
1949

100
100
100
100

30.9
31.1
30.3
28.1

13.8
17.9
17.9
20.2

15.4
11.6
10.3
11.2

20.5
22.0
23.0
21.6

19.5
17.4
18.4
18.9

1949— First quarter
Second quarter
Third quarter
Fourth quarter

100
100
100
100

28.7
28.2
28.2
27.3

19.3
19.0
19.1
23.0

10.4
12.5
12.9
9.6

22.5
21.1
20.4
22.0

19.1
19.2
19.3
18.0

1950— First quarter

100

28.7

22.6

9.9

22.1

16.7

1
2

Estimates based on incomplete data; by Council of Economic Advisers.
Not available.

NOTE.—Imports for consumption include merchandise entered immediately upon arrival into merchandising or consumption channels, plus withdrawals from bonded customs warehouses for consumption.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).

157

TABLE B—44.—Indexes of quantity and unit value of United States merchandise imports for
consumption, by economic class, 1936—38 quarterly average and 1947—50
[1936-38=100]
Total imports for
consumption

Period

Crude
materials

Crude
foodstuffs

Manufactured
foodstuffs

Semimanu- Finished
manufacfactures
tures

Quantity indexes
Quarterly average:
1936-38—
1947
1948
1949
1949— First quarter
Second quarter
Third quarter
Fourth quarter

1950 —iFirst quarter

100
108
123
120

100
129
139
125

100
96
109
119

100
83
91
97

100
130
149
142

100
84
103
101

121
116
111
131

129
118
116
136

121
116
104
135

93
105
100
88

140
129
130
169

105
98
94
106

136

153

121

186

107

Unit value indexes
Quarterly average:
1936-38 .
1947
1948
1949
1949— First quarter
Second quarter
Third quarter
Fourth quarter.

_-_

.. _
. __

1950— First quarter

100
213
235
224

100
180
203
195

100
311
343
330

100
208
212
202

100
191
217
199

100
245
266
258

235
224
220
217

206
200
193
185

330
306
324
352

205
199
205
203

225
208
187
182

267
261
258
249

223

185

410

197

176

245

NOTE.—The indexes of quantity are a measure of the volume of trade after the influence on value of changes
in average prices has been eliminated. The indexes of unit value provide a measure of change in the average
prices at which trade transactions are reported in official foreign trade statistics, including changes in average
prices that result from changes in the commodity composition of trade.
Source: Department of Commerce.

158

TABLE B-45.—-Changes in selected economic series since 1939 and 1949
1939=100
Source:
Appendix
table
No.

Economic series

1949

Total

First
half

Second
half

Percentage change to
1950, first half 1
1950,1 Prom 1949, Prom 1949,
second
first
first
half 2
half 2
half

B-l__- Gross national product
Personal consumption expenditures
- -Gross private domestic investment
Net foreign investment
Government purchases of goods
and services

280

281

278

290

+3.2

265

264

266

272

+3.1

+2.0

333
44

347
133

319
(3)

426
(3)

+22.7
-266.7

+33.5
-566.7

331

333

328

316

-5.0

-3.7

B-4..._ National income
Compensation of employees _

299
294

301
295

297
293

302
302

+.4
+2.4

+1.7
+3.1

B-7- — Personal income
Disposable personal income
Personal net saving .

284
267
319

286
269
415

282
265
230

296
279
470

+3.5
+3.8
+13.4

+5.1
+5.5
+104.8

B-8.— Per capita disposable personal income:
Current dollars _
1949 dollars

234
138

237
139

231
136

242
143

+2.0
+3.2

+4.7
+5.1

B-9..._ Labor force, including armed forces
Civilian labor force
Employment
Nonagricultural
Agricultural
Unemployment

114
112
128
140
84
36

113
111
127
139
83
34

116
114
130
142
84
38

115
113
128
142
75
41

+1.7
+1.9
+.9
+2.4
-8.9
+21.5

-1.0
-.8
-1.4
+.1
-10.8
+7.6

B-ll... Average gross weekly earnings:
Manufacturing
Bituminous coal mining
Building construction

230
265
233

229
297
233

231
230
234

239
267
230

+4.5
-10.1
-1.4

+3.6
+15.9
-1.8

B-14.._ Physical production index of goods
and selected services: Total
Agricultural
Nonagricultural

160
132
165

(44)
()
169

(44)
()
163

8180

(44)
()
+10.6

B-15... Industrial production* Total
Durable manufactures
Nondurable manufactures
Minerals

161
185
154
127

166
196
153
135

156
173
156
119

173
201
166
130

+4.4
+2.3
+8.4
-3.5

+11.2
+15.9
+6.5
+9.5

B-16-- New construction: Total
Private
Residential
__
Nonresidential
Other private .
public

276
369
309
411
508
168

270
363
288
435
518
163

282
376
331
387
497
173

315
435
422
428
480
177

+17.0
+20.0
+46.6
-1.5
-7.4
+9.0

+12.0
+15.8
+27.5
+10.8
-3.5
+2.5

B-17.... Business expenditures for new plant
and equipment

B 18

+4.4

348

351

346

317

-9.8

-8.6

Inventories' Total
Manufacturing
Wholesale trade
Retail

266
270
284
248

280
290
284
256

266
270
284
248

274
275
298
258

-2.1
-5.3
+5.0
+.6

+3.0
+1.9
+4.7
+4.2

Sales' Total
Manufacturing
Wholesale trade
Retail _

324
349
299
305

327
353
306
306

321
346
294
304

335
366
299
316

+2.4
+3.9
-2.3
+3.4

+4.4
+5.8
+1.7
+4.1

170
212
189
116

171
213
192
115

170
211
186
116

169
208
184
118

-1.1.
-2.3
-4.3
+2.4

-.5
-1.6
-1.1
+1.4

B-21... Consumers' price index: All items
Food
Apparel
Rent
See footnotes at end of table, p. 160.

159

TABLE B-45.—Changes in selected economic series since 1939 and 7949—Continued
Percentage change to
1950, first half »

1939=100
Source:
Appendix
table
No.

Economic series

1949

Total

B-22... Wholesale price index: All commodities
- Farm products
Foods
Other than farm products and
foods

201
253
229

First
half

204
262
232

Second
half

1950,1 From 1949, From 1949,
first
second
first
half 2
half 2
half

198
246
227

199
246
224

-2.3
-6.0
-3.6

-1.4
+1.2

+.9

181

184

178

181

-1.9

262

269

255

254

-5.9

-.4

203

207

201

204

-1.2

+1.6

B-24... Consumer credit outstanding, end of
period

236

202

236

246

+21.6

+4.4

B-29... Corporate profits:
Profits before taxes
Profits after taxes
Dividend payments
Undistributed profits

425
340
205
767

422
338
205
758

429
342
205
783

463
368
216
850

+9.9
+8.9
+5.1
+12.1

+7.9
+7.6
+5.1
+8.5

451

«358

«329

-27.0

-8.1

8273

•260

•304

+11.6

+16.9

B 23

Prices received by farmers
Prices paid by farmers (including interest taxes and wage rates)

B-39... Merchandise exports, including reexports
B-42

General merchandise imports..

404

•266

i Estimates based on incomplete data.
J Changes are computed from data as reported and therefore may differ slightly from changes computed
from
the indexes shown here.
8
Indexes not computed because of negative values,
4
Not available.
' 1936-38 average =-100.

]6o

Full text of Economic Report of the President : Midyear Report 1950

FRASER