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Transmitted to thf L
Febioi



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Economic Report
of the President

Transmitted to the Congress
February 1991
TOGETHER WITH

THE ANNUAL REPORT
OF THE

COUNCIL OF ECONOMIC ADVISERS

UNITED STATES GOVERNMENT PRINTING OFFICE
WASHINGTON : 1991

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







CONTENTS

ECONOMIC REPORT OF THE PRESIDENT.
ANNUAL REPORT OF THE COUNCIL OF ECONOMIC
ADVISERS*

11

CHAPTER 1. FOUNDATIONS FOR ECONOMIC GROWTH

21

CHAPTER 2. ECONOMIC DEVELOPMENTS AND PROSPECTS

37

CHAPTER 3. OIL PRICE SHOCKS AND ECONOMIC POLICY

79

CHAPTER 4. FLEXIBILITY AND CHANGE IN THE ECONOMY

Ill

CHAPTER 5. INNOVATION AND REFORM IN THE FINANCIAL
SECTOR

155

CHAPTER 6. ECONOMIES IN TRANSITION AROUND THE WORLD

193

CHAPTER 7. TRADE LIBERALIZATION AND ECONOMIC GROWTH

233

APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OF
THE COUNCIL OF ECONOMIC ADVISERS DURING 1990

265

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

279

*For a detailed table of contents of the Council's Report, seepage 15.




(iii)







ECONOMIC REPORT
OF THE PRESIDENT




ECONOMIC REPORT OF THE PRESIDENT
To the Speaker of the House of Representatives and the President of
the Senate:
Just over 8 years ago the longest peacetime economic expansion
in U.S. history began. By the start of the 1990s the unemployment
rate had fallen to levels not seen since the early 1970s, and inflation remained relatively low and remarkably stable when compared with the 1970s. More than 20 million new jobs were created
by our dynamic and diverse market economy—the largest and the
most productive in the world. Reflecting both the evolving needs
and wants of the American people and the rapid advance of technology, some industries and regions experienced much more robust
job growth than others. And, as is normal during economic expansions, the rate of growth of the Nation's output varied from year to
year.
The events of 1990 were a reminder that even a healthy economy
can suffer shocks and short-term setbacks. In early August, Iraq invaded and occupied its small, defenseless neighbor Kuwait and
threatened Saudi Arabia. Oil prices rose substantially on the world
market, and business and consumer confidence plummeted. These
shocks hit an economy that was already growing slowly for several
reasons, including worldwide increases in interest rates, tightened
credit conditions, and the lingering effects of a successful attempt
begun in 1988 by the Federal Reserve to prevent an acceleration of
inflation. U.S. output turned down in the fourth quarter of 1990,
and it became clear that the economy had entered a recession. I
know that in some regions of our country, people are in genuine
economic distress.
This temporary interruption in America's economic growth does
not signal a decline in the basic long-term vitality of the U.S. economy. Indeed, there were important economic achievements in 1990.
Even though many analysts had earlier forecast increased inflation, the underlying rate of inflation was contained and showed
clear signs of declining by the end of the year. Low inflation is essential to lower interest rates and strong economic growth. The
U.S. trade deficit declined for the third year in a row, and U.S.
firms remained competitive in world markets. Exports of American
products reached an all-time high in 1990 and exceeded those of
any other nation. Productivity in U.S. manufacturing continued to
grow impressively. Some regions and industries experienced relatively strong job growth.




My Administration's economic policies are designed both to mitigate the current downturn and to provide for a solid recovery and
the highest possible rate of sustainable economic growth. Because
these policies are credible and systematic, they reduce uncertainty
and pave the way to higher growth with sustained job-creating expansions. With these policies in place, the current recession is expected to be mild and brief by historical standards.
Economic growth is projected to recover by the middle of this
year. Inflation and interest rates are expected to decline. With the
adoption of my pro-growth initiatives, the recovery and ensuing expansion are projected to be strong and sustained, and to be accompanied by continued progress toward lower inflation.
As the Nation proceeds into the 1990s, it is important to remember the simple secret of America's economic success in the 1980s: a
government policy that allowed the private sector to serve as the
engine of economic growth. We must also remember that economic
growth is the fundamental determinant of the long-run success of
any nation, the basic source of rising living standards, and the key
to meeting the needs and desires of the American people.
The process of growth necessarily involves change. Advances in
technology, shifts in world market conditions, and changes in
tastes and demographics have created major new industries and
dramatically altered the fortunes of existing industries. The lesson
of history is clear. Attempts to protect special interests by blocking
the economy's natural, market-driven evolution—through regulation, subsidy, or protection from competition—reduce the economy's flexibility and impair its ability to grow and to create jobs.
Growth and prosperity are enhanced by strengthening and extending the scope of market forces, not by substituting government dictates for the free choices of workers, consumers, and businesses.
TOWARD RENEWED GROWTH

The budget law enacted last fall gives fiscal policy a strong and
credible medium-term framework. It increases the ability of the
fiscal system to dampen the impact of the current recession, while
providing for strong controls to reduce Federal spending as a percentage of our gross national product. A major reason that the
budget deficit is expected to increase this year—before declining
steadily thereafter—is the increase in payments to those adversely
affected by the current downturn and the reduction in tax receipts
as incomes grow more slowly. These automatic responses to the recession will help cushion its effects.
I am committed to maintaining a tax system that will sustain
strong economic growth. My proposal to reduce the tax rate on capital gains would give a needed boost to the economy and set it on a
strong course of economic growth and job creation for years to




come. A lower capital gains tax rate would encourage entrepreneurial activity, which plays a critical role in creating new jobs,
new products, and new methods of production. It would reduce the
bias in favor of debt financing and thereby decrease the financial
risks borne by U.S. corporations and their workers and shareholders.
The Federal Reserve's control of inflation throughout the recent
long expansion has given it the credibility necessary to mitigate
the current downturn significantly without triggering an increase
in inflationary expectations. Federal Reserve action in recent
months will also help to alleviate tight credit market conditions
that have hampered the economy. It is important that the Federal
Reserve sustain money and credit growth necessary for the maintenance of sustained economic growth, especially during an economic
downturn. And, while unwarranted risks should be avoided, I believe that sound banks should be making more sound loans.
Comprehensive banking reform will help to alleviate tight credit
conditions by reducing unnecessary restrictions on the banking
sector. Healthier depository institutions are essential for a sound
financial system. Lifting restrictions on interstate banking activities and on the ability of banks to combine with commercial and
other financial firms will increase banks' competitiveness. These
changes will enhance banks' ability to attract capital and reduce
the risk of a contraction in lending.
Some have argued that the government should react to the
recent oil price shock by reregulating energy markets. They would
do well to remember the lessons of the 1970s, when regulation
worsened the impacts of two oil shocks and forced Americans to
waste many hours in long and unnecessary lines at gas stations.
Long-term uncertainties about energy prices make it vital that U.S.
energy policy be based, in both the short run and the long run, on
the flexibility and efficiency that only well-functioning markets
can provide.
My Administration's National Energy Strategy calls for removing unnecessary barriers to market forces so that ample supplies of
reasonably priced energy can continue to foster economic growth.
The Strategy also outlines initiatives to enhance the energy security of the United States and its friends and allies, to encourage costeffective conservation and efficiency measures, to increase the use
of alternative fuels, and to continue to mitigate the environmental
consequences of energy use.
SUPPORTING LONG-RUN GROWTH

The Federal Government cannot mandate or effectively direct
economic growth, but it can and should create conditions that encourage market-driven growth. That requires reducing barriers to




saving, investing, working, and innovating. Encouraging growth
also requires sustaining and expanding the role of market forces
and, thereby, enhancing the economy's flexibility. Attempts to
second-guess the market and to direct government support to particular firms, industries, or technologies in the name of promoting
growth are inevitably counterproductive.
The multiyear Federal deficit reduction package adopted last
year, the largest and most comprehensive such package in U.S. history, will reduce the Federal budget deficit by nearly a half-trillion
dollars over the next 5 years relative to baseline projections. This
substantial reduction in government borrowing will raise the national saving rate and increase the pool of funds available to finance job-creating private investment in new productive capacity
and new technology.
My Administration remains firmly committed to taking additional steps to lower the cost of capital and to encourage entrepreneurship, saving, investment, and innovation. I have again asked the
Congress to reduce the tax rate on long-term capital gains and to
make the research and experimentation tax credit permanent. To
encourage private saving, my budget again includes Family Savings Accounts and penalty-free withdrawals from Individual Retirement Accounts for first-time homebuyers. My Administration will
seek increased Federal support for research that has broad national benefits, and we will make the results of government-supported
research more accessible to the private sector so that they can be
brought more quickly to market.
Strong economic growth will continue to require a sound national transportation infrastructure. My Administration's proposals for
restructuring highway programs, centered around a new National
Highway System program, would make a substantial contribution
to meeting those demands.
Economic growth requires skilled and adaptable workers as well
as modern capital and new technology. Excellence in education is
the key to increasing the quality of the U.S. labor force. My Administration is strongly committed to making the U.S. educational
system second to none, so that U.S. workers can continue to compete effectively with their peers in other nations. To meet this goal,
the performance of U.S. elementary and secondary education must
be dramatically improved. More money will not ensure excellence;
America is already a world leader in spending on education. Fundamental reform is necessary.
Government policies should be designed to put power in the
hands of individuals and families—to give them the tools and incentives to improve their own lives. Thus students and their families must be given greater freedom to choose among competing
schools, and talented and skilled individuals must be freed from




unnecessary obstacles to entering the teaching profession. My Administration will seek enactment of a new Educational Excellence
Act that would support choice in education, alternative certification for teachers and principals, rewards for outstanding teachers
and for schools that improve their students' achievements, and innovative approaches to mathematics and science education.
The Immigration Act of 1990, the first major reform of legal immigration in a quarter-century, will substantially increase the
overall level of immigration, particularly of skilled workers. These
new workers will contribute to U.S. economic growth, as well as to
the Nation's social and cultural vitality.
The Americans with Disabilities Act is the most significant extension of civil rights legislation in two decades. It will enable
more of our citizens with disabilities to enter the economic mainstream and thus to better their own lives while contributing to the
Nation's economic strength.
Last year important legislation passed that will give power and
opportunity to individuals. The expansion of the Earned Income
Tax Credit, the new health insurance credit, and the other child
care provisions in the 1990s budget legislation will put dollars for
child care directly in the hands of parents, instead of bureaucracies. The Homeownership and Opportunity for People Everywhere
(HOPE) initiative in the National Affordable Housing Act will
expand homeownership and give more families a stake in their
communities. My Administration strongly supported the expansion
of medicaid to provide health insurance to more pregnant women
and children in low-income families.
But there is more to be done. My Administration will continue to
press for the establishment of enterprise zones to encourage entrepreneurship, investment, and job creation in distressed communities. We will propose initiatives focused on infant mortality, preventive measures, and nutrition to improve the health of those
least able to provide for their own needs.
FLEXIBILITY AND REGULATION

The remarkable flexibility of the U.S. economy, which stems
from its reliance on free markets, is a major national asset. Flexibility enables the economy to cushion the effects of adverse developments, such as oil price shocks, and to take full advantage of innovations and other new opportunities. Indeed, the responsiveness
of the economy to new opportunities is an important spur to innovation and a source of economic dynamism.
Government regulation generally serves to reduce economic flexibility and thus should have a very limited role. Where regulation is
necessary, regulatory programs should pass strict cost-benefit tests




and should seek to harness the power of market forces to serve the
public interest, not to distort or diminish those forces.
The lesson of the savings and loan crisis, to which my Administration responded swiftly, is not that competition and innovation
are incompatible with safety and soundness in the financial sector.
Rather, this experience shows that poorly designed regulation, inadequate supervision, and limits on risk-reducing diversification
can combine to produce behavior that undermines creditors' confidence and imposes unnecessary burdens on taxpayers.
We can and must ensure the safety and soundness of our banking system and continue to provide full protection for insured deposits while allowing competition to improve efficiency and encourage innovation. My Administration's proposals for comprehensive
reform of the regulatory system governing banks will achieve these
goals. In addition, these reforms will enhance the ability of U.S.
banks to compete in the global markets for financial services.
Last year's farm legislation embodied important steps toward a
market-oriented agricultural policy and away from government
domination of this vital and progressive sector. Farmers have been
given additional flexibility in planting decisions, in a way that will
both sustain farmers' incomes and save taxpayers' money.
Market-based initiatives can and should play a key role in environmental policy as well. In 1989 my Administration proposed comprehensive legislation to combat air pollution. This proposal broke
a logjam that had blocked congressional action for more than a
decade, and a landmark clean air bill was enacted last year—the
most significant air pollution legislation in the Nation's history.
The centerpiece of this bill is an innovative, market-based program
for controlling—at the least possible cost to the economy—the
emissions that produce acid rain. All provisions of this legislation
will be implemented so as to minimize unnecessary burdens on
American workers and firms.
Economic growth and environmental protection are compatible,
but only if environmental goals reflect careful cost-benefit analysis
and if environmental regulation provides maximum flexibility to
meet those goals at least cost. My Administration will continue to
be guided by the responsibilities of global stewardship; we will seek
both to protect the environment and to maintain economic growth
to give all the world's children the chance to lead better lives than
their parents.
LEADERSHIP IN THE GLOBAL ECONOMY

Throughout the postwar period, the United States has led the
world toward a system of free trade and open markets. The benefits of global economic integration and expanded international
trade have been enormous, at home and abroad. U.S. firms gain




from access to global markets; U.S. workers benefit from foreign investment in America; and U.S. consumers can buy goods and services from around the world. Competition and innovation have been
stimulated, and businesses have increased their efficiency by locating operations around the globe. The phenomenal prosperity and
vitality of market-oriented economies—and the bankruptcy of the
socialist model—point the way to future progress and growth.
My Administration will continue to push aggressively for open
markets in all nations, including our own, and will continue to
oppose protectionism. Protectionist trade barriers impose burdens
on the many to serve the interests of the few and can only reduce
the Nation's competitiveness. Government attempts to overrule the
decisions of the international marketplace and to manage trade or
investment flows inevitably reduce economic flexibility and lower
living standards.
My Administration's top trade policy priority continues to be the
successful completion of the Uruguay Round negotiations of the
General Agreement on Tariffs and Trade (GATT). Success in the
Uruguay Round would open agricultural markets, lower or eliminate tariffs on many products, strengthen the GATT system, and
extend it to cover important new areas—such as services, investment, and intellectual property—critical to U.S. economic vitality.
These improvements would significantly increase the ability of the
global economy to raise living standards in the United States and
around the world. Failure, on the other hand, would increase trade
frictions and could lead to a destructive new round of protectionism.
In addition, my Administration has moved to pave the way
toward a hemispheric zone of free trade. We have announced our
intention to begin negotiations on a free-trade agreement with
Mexico. My Enterprise for the Americas Initiative promises to fuel
growth and prosperity throughout this hemisphere by removing
barriers to trade and investment. This initiative also aims to provide official debt reduction to countries engaged in significant economic reforms and thereby to build on my Administration's ongoing support for commercial debt reduction.
America remains a beacon of hope to peoples around the world.
Our Nation continues to demonstrate by shining example that political democracy and free markets reinforce each other and together lead to liberty and prosperity. Nations in this hemisphere and
the emerging democracies of Eastern Europe are eagerly moving to
follow America's example. The challenges these nations face as
they fundamentally restructure their economies are enormous. My
Administration will continue its strong support and assistance for
their vital and historic efforts.




LOOKING AHEAD

In my Economic Report last year I stated that I looked forward
to the 1990s with hope and optimism. Despite the economic events
of 1990, we have reason for both hope and optimism in full measure as the Nation approaches the next American century.
Following sound economic policy principles, my Administration
seeks to achieve the maximum possible rate of sustainable economic growth. We must continue to adhere to those principles if we are
to soften the impacts of the current recession and to strengthen the
foundation for strong growth in the years to come. Economic
growth remains the key to raising living standards for all Americans, to expanding job opportunities, and to maintaining America's
global economic leadership.

THE WHITE HOUSE

(/

FEBRUARY 12, 1991




10

THE ANNUAL REPORT
OF THE
COUNCIL OF ECONOMIC ADVISERS







LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS,
Washington, D.C., February 4, 1991
MR. PRESIDENT:
The Council of Economic Advisers herewith submits its 1991
Annual Report in accordance with the provisions of the Employment Act of 1946 as amended by the Full Employment and Balanced Growth Act of 1978.
Sincerely,




Michael J. Boskin
Chairman

Richard L. Schmalensee
Member

John B. Taylor
Member

13

//




CONTENTS
Page

CHAPTER 1. FOUNDATIONS FOR ECONOMIC GROWTH
Recent Developments and Prospects
Developments in 1990
The Outlook
Building on Strength
Policies for Renewed Growth
Fiscal Policy
Monetary and Financial Sector Policy
Policies to Support Growth
Encouraging Investment and Improving Education...
Strengthening Market Forces
Giving Power and Opportunity to Individuals
Limiting Regulation and Making It Work
U.S. Leadership in the Global Economy
International Trade Liberalization
International Macroeconomic Issues
Support for Economies in Transition
Conclusion
CHAPTER 2. ECONOMIC DEVELOPMENTS AND PROSPECTS
The U.S. Economy in 1990
Monetary Policy and Credit Markets
Federal Budget Developments
Economic Growth and Employment
Prices and Wages
Summary
Monetary and Fiscal Policy Outlook
Monetary Policy
Fiscal Policy
Summary
The Economic Outlook
The Outlook for the Short Term
The Prospects for Growth in the Longer Term
Summary
Conclusion
CHAPTER 3. OIL PRICE SHOCKS AND ECONOMIC POLICY
Size and Duration of Oil Price Shocks
Recent Oil Price Movements
Comparison with Previous Shocks




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Page

Summary
The Effects of Oil Price Shocks
Effects on Inflation
Effects on Real Growth
Estimates of the Effects
Summary
Macroeconomic Policies
The Advantages of Systematic Policies
Designing Fiscal and Monetary Policies
Lessons from Previous Shocks
Summary
Short-Run Energy Policy Response
The Dangers of Reregulation
Energy Futures Markets and Speculation
Strategic Oil Reserves
Summary
f
Longer Term Energy Policies
Long-Term Trends in Energy Prices and Use
Energy Security
Strengthening Market Forces
Summary
Conclusion
CHAPTER 4. FLEXIBILITY AND CHANGE IN THE ECONOMY
The Process of Dynamic Change
Sources of Economic Change
The Changing Structure of the U.S. Economy
Preserving the Flexibility of the Economy
Summary
Education Reform for an Adaptable Work Force
The Current State of Education
Toward an Effective Educational System
Summary
Agriculture: Technological Success and the Need for
More Flexible Policies
Technological Change and Productivity Growth
Consumer Demand and International Trade
Toward a Market-Oriented Farm Policy
Summary
Health Care: Dynamic Technology and Changing Demographics
Recent Trends
Perceived Problems of the Existing System
Why Health Care Markets Perform Poorly
Summary
Telecommunications: Technological and Regulatory Innovation



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Ill
Ill
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Lessons from Deregulation
Maintaining a Dynamic Industry
Summary
Defense Industries: Adjusting to the End of the Cold
War
Historical Experience
The Problem and Potential of Defense Conversion
Summary
Conclusion
CHAPTER 5. INNOVATION AND REFORM IN THE FINANCIAL
SECTOR
Development of Financial Institutions in the United
States
Banks and Savings and Loans
The Great Depression and Banking Reform
Summary
The 1970s: Inflation, High Interest Rates, and New Competition
Rise of Money Market Funds
Internationalization
Summary
The S&L Crisis
Vulnerability to Interest Rate Increases
Insolvency and Closure
Resolving the S&L Crisis
Summary
Reform in the Financial Sector
Context for Depository Institution Reform
Issues in Deposit Insurance Reform
Deposit Insurance Reform: Inducing Market-Based
Incentives
Removing Regulatory Obstacles
Federal Credit Programs
Summary
Conclusion
CHAPTER 6. ECONOMIES IN TRANSITION AROUND THE WORLD
Forces for Change
The Failure of Economic Policies
Repercussions of Economic Policy Failures
Early Attempts at Reform
Summary
Principles for Economic Reform
Macroeconomic Reforms
Structural Reforms
Summary
Implementing Economic Reforms



17

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Page

The Need for Comprehensive Reform
Example: Reforming Polish Agriculture
Summary
Eastern Europe and the Soviet Union
Poland, Yugoslavia, and East Germany
Hungary and Czechoslovakia
The Soviet Union
Challenges in 1990 and 1991
Summary
Reform in the Americas
Recent History of Latin American Reforms
Mexico
Chile
Summary
The Role of the United States
U.S. Support for Eastern Europe
U.S. Support for Latin America
Working with Multilateral Institutions and Other
Governments
The Role of the U.S. Private Sector
Summary
Conclusion
CHAPTER 7. TRADE LIBERALIZATION AND ECONOMIC GROWTH
The Gains from Free Trade and Losses from Protectionism
Efficiency, Productivity, and Growth
Import Protection and Managed Trade
Summary
Global Trade and the Uruguay Round
Process and Timing of the Negotiations
Areas of Negotiation
Summary
U.S. Pro-Trade Initiatives in the Americas and Elsewhere
U.S.-Mexico Free-Trade Area
Initiatives for the Americas
Structural Impediments Initiative
Summary
Multinational Corporations and the Trade-Investment
Linkage
The Benefits of Foreign Direct Investment
U.S. Foreign Direct Investment Policy
Summary
Conclusion




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APPENDIXES
A. Report to the President on the Activities of the
Council of Economic Advisers During 1990
B. Statistical Tables Relating to Income, Employment,
and Production

Pa e

s

265
279

LIST OF TABLES, CHARTS, AND BOXES
Tables

2-1 Growth of Real GNP and Components, 1982-90
2-2 Economic Performance and Projections for the United
States and other G-7 Nations, 1989-90
2-3 Economic Outlook for 1991
2-4 Alternative Projections and Their Impact on the Deficit, 1991-92
2-5 Accounting for Growth in Real GNP, 1948-96
2-6 Administration Economic Assumptions, 1991-96
4-1 Aging of the U.S. Population, 1960-2040
5-1 Credit Provided by Private Financial Intermediaries....
7-1 Parents of U.S. Multinational Corporations vs. U.S.
Affiliates of Foreign Multinational Corporations:
U.S. Operations in 1988
7-2 Parents of U.S. Multinational Corporations and U.S.
Affiliates of Foreign Multinational Corporations:
Input Supply Choices, 1977 vs. 1987

50
53
71
73
74
75
136
156
260
261

Charts

2-1
2-2
2-3
2-4
2-5
2-6
2-7
2-8
2-9
2-10
2-11
2-12
3-1
3-2
3-3
3-4
3-5
4-1
4-2
5-1
5-2
5-3

Real GNP Growth
Federal Funds Rate
Money Supply
Interest Rates
Long-Term Government Bond Yields
The Unemployment Rate
Regional Employment Growth
Consumer Prices
Oil Prices
The Employment Cost Index
Reductions in the Federal Budget Deficit, NIPA Basis.
The Fiscal 1992 Budget Cycle
Energy Consumption per Dollar of GNP
Inflation and Oil Shocks in the United States
Inflation and Oil Shocks in Japan
Oil Spot Prices and Futures Prices
Real Energy Prices
Labor Force Shares by Industry
Defense Purchases as a Percent of GNP, 1939-1996
Deposits and Money Market Funds
Composition of Loans to Businesses
Assets at U.S. Offices of Foreign Banks




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84
95
96
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114
150
165
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166

Charts

5-4 New Mortgage Interest Rates and Thrift Portfolio
Yields
7-1 Estimated Increase in U.S. GNP from a Successful
Uruguay Round
7-2 U.S. Trade with Mexico and Canada, 1989
7-3 World Stocks of Foreign Direct Investment, 1988

169
239
254
257

Boxes

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

Revised National Income and Product Accounts
Sectoral and Regional Income and Employment
Why Did Gasoline Prices Rise So Fast?
Futures Markets Speculation and Price Volatility
International Comparisons of Energy Use
Texas Alternative Certification Program
How the "Triple Base" Provision Works
Incentives in the Market for Health Insurance
Inflation-Proof Bonds and Mortgages
Alternative National Deposit Insurance Systems
Economic Reform in China, 1978-90
The 1948 West German Erhard Reforms
The Role of the IMF in Economic Reform
The Income Effects of a Successful Uruguay Round
"Nontrade" Policies Can Cause Trade Disputes
Export Subsidies: Who Gains and Who Loses?
The Composition of U.S.-Mexico Trade
Foreign Direct Investment: Who Invests and Where?...




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CHAPTER 1

Foundations for Economic Growth
THE LONGEST PEACETIME EXPANSION in the Nation's history began in 1982. Throughout the expansion, inflation remained
relatively low and stable compared with the 1970s. By the end of
the 1980s, the unemployment rate had fallen to levels not experienced since the early 1970s. As is normal in times of robust economic progress, growth varied from year to year during the expansion. After a rapid recovery from late 1982 through 1985, growth
slowed temporarily in 1986, gained considerable strength in 1987
and 1988, and turned sluggish in 1989 and 1990.
The first year of the 1990s served as a reminder that even a
healthy economy faces the risk of short-term setbacks from external shocks and other disturbances. In August Iraq outraged the
world by invading and occupying Kuwait. In the weeks that followed, oil prices rose sharply on the world market, and uncertainty
about the timing of the resolution of the Persian Gulf crisis caused
business and consumer confidence to plummet. These developments
were a substantial shock to an economy that had already slowed
for several reasons, including worldwide increases in interest rates,
tightened credit conditions, and the lingering effects of a monetary
policy that had begun to tighten in 1988 in a successful attempt to
prevent an increase in inflation. In the fourth quarter of 1990 U.S.
output, as measured by real (inflation-adjusted) gross national
product (GNP), turned down, and it became clear that the economy
had entered a recession.
The Administration's economic policies are designed both to mitigate the current downturn and to strengthen the foundations for a
solid recovery and a return to sustained economic growth. The
dominant factor in the success and failure of nations, long-term
growth is the fundamental source of improvements in living standards. By responding systematically and prudently to ongoing developments, the Administration's economic policies reduce uncertainty and maintain the credibility so important to long-run growth
and to the ability to respond to shocks that may occur in the
future.
The global wave of market-oriented reform—most visible in Eastern Europe—shows that the world has learned from America that
reliance on free markets is the key to sustainable long-term growth




21

and prosperity. In the U.S. economy, free markets fuel and direct
the process of economic growth. Market forces in the financial
sector channel savings into growth-enhancing investment opportunities; these forces both reward and encourage entrepreneurship—
the economy's sparkplug.
The flexibility of the market-based U.S. economy both increases
its resilience in the face of disturbances and enhances its ability to
make the most of new opportunities. That, in turn increases the incentives for productive innovation. As the global economy becomes
more integrated and the pace of technological and economic change
quickens, flexibility grows ever more important.
The proper role of government is not to supplant or suppress the
private market forces that drive the process of economic growth,
but to create an environment within which rapid growth can occur.
Because regulation inevitably reduces flexibility, its role in the
economy must be limited. Barriers to saving, investing, working,
and innovating must be reduced.

RECENT DEVELOPMENTS AND PROSPECTS
The downturn in the U.S. economy in the latter part of 1990 does
not signal any decline in its long-run underlying health or basic vitality. As stated in last year's Report, economic expansions end because of external shocks, imbalances in demand, or policy mistakes.
The oil price shock of 1990 makes clear that the economy is episodically buffeted by external shocks. If sound fiscal, monetary,
regulatory, and trade policies are maintained, however, such
shocks will have smaller effects on the economy, downturns will be
shallower and shorter, and expansions will be longer. In fact, with
such policies now in place, the current downturn is expected to be
shorter and milder than the average post-World War II recession.

DEVELOPMENTS IN 1990
The oil price shock, the sudden drop in consumer and business
confidence, and the uncertainty about when the Persian Gulf crisis
would end were undoubtedly the key factors in the downturn in
late 1990. Oil prices more than doubled between July and October,
before declining toward the end of the year and again in early 1991
after the outbreak of hostilities in the Gulf. Consumer and business
confidence may have been reduced by the superficial similarity of
this oil price shock to those of the 1970s, when unemployment and
inflation soared.
The oil price shock hit an economy that was already growing
slowly. A worldwide rise in long-term interest rates early in the
year—partly due to anticipated increases in the demand for capital
in Eastern Europe and to concerns about accelerating inflation—




22

put upward pressure on borrowing rates in the United States and
slowed the growth of consumer and business spending. This rise occurred when long-term interest rates were already high, in part because of large Federal budget deficits and the prospect that they
might continue indefinitely.
The Federal Reserve had initiated a more restrictive monetary
policy in the spring of 1988 to ward off an increase in the underlying inflation rate. The lagged effects of this policy also slowed the
economy in 1989 and 1990, as higher interest rates discouraged
spending. This tightening successfully contained inflationary pressures, and left monetary policy with much more latitude—compared with the inflationary policies of the 1970s—to ameliorate the
adverse effects of the oil price shock.
Tighter credit markets reduced the availability of loans to some
creditworthy borrowers, and this also contributed to the slowdown.
Banks and other financial institutions tightened lending standards
for a number of reasons: A slowing economy increased the risks of
lending to businesses. The value of collateral on residential and
commercial real estate loans fell with declining real estate values.
Overly zealous bank examiners discouraged some banks from
making new loans. And the need to increase the ratio of capital to
loan assets to meet minimum capital requirements forced some
banks to curtail loan growth. Stricter lending standards for commercial and residential loans slowed business investment and housing construction.
There were several favorable economic developments in 1990.
The underlying inflation rate was contained. After a temporary increase in the first quarter, the growth rate of the GNP fixedweighted price index, the broadest measure of economy-wide inflation, declined later in the year, as did the rate of change in the employment cost index—a measure of wage pressures in private labor
markets. Compared with 1988, when inflationary pressures were
becoming evident and the Federal Reserve began to take actions to
contain them, the employment cost measure of wage inflation grew
more slowly during 1990, rather than more rapidly as many had
feared.
The continued decline in the trade deficit was also good news. Including trade in both goods and services, the trade deficit has declined from $144 billion in 1987 to $77 billion in 1990. U.S. firms
remained competitive in world markets, exports reached a new
record, and the United States remained the world's leading exporter. Labor productivity in manufacturing continued its recent strong
growth. And, although growth fell for the overall economy, some
regions experienced relatively strong employment gains.




23

THE OUTLOOK
The Administration projects that real economic growth will be
0.9 percent over the four quarters of 1991, with the downturn continuing through the first quarter and a recovery beginning near
the middle of the year. Inflation is expected to remain under control, declining substantially from the temporarily high levels
reached as a result of the oil price shock. Continued progress in
gradually lowering the underlying rate of inflation is also expected.
Interest rates are projected to be lower on average in 1991 than in
1990, reflecting slower growth in credit demand during the downturn, as well as lower inflation rates.
The current downturn is expected to be short and shallow for
several reasons. Most firms have kept inventories low relative to
sales, reducing the need for a sharp cut in production to work off
excess inventories. Such inventory corrections accounted for much
of the decline in output in earlier postwar recessions. Moreover,
net exports are projected to improve, both because the Nation's
major trading partners are expected on average to experience
stronger growth than the United States, and because the decline in
the value of the dollar since 1989 has lowered the price of U.S exports on world markets. Oil prices remain a source of uncertainty
in the outlook, but they have declined substantially since their
peak in October, particularly since the start of Operation Desert
Storm. Finally, both fiscal and monetary policies are well positioned to mitigate the downturn. There is a downside risk that the
tightness in credit markets evident in 1990 will continue into 1991,
a consideration that poses special challenges for monetary policy.
Assuming adoption of the Administration's growth initiatives—
including a lower tax rate on long-term capital gains, tax incentives to reduce barriers to household saving, reforms to strengthen
the financial sector, and increased investment in children, education, infrastructure, space, and high technology, all within the context of lower structural budget deficits—the long-term outlook is
excellent. Growth is expected to strengthen in 1992, with the economy in a relatively high-growth recovery through 1993 before returning to a solid, sustainable expansion. With sound economic
policies in place, there is no fundamental obstacle to an expansion
in the 1990s at least as long and strong as the record expansion of
the 1980s.

BUILDING ON STRENGTH
In designing policies to cushion the current downturn and enhance long-run U.S. economic performance, it is critical to remember that the Nation already has the largest and most productive
economy in the world. The historic changes that began in Eastern




24

Europe in 1989 represent, in part, the triumph of the basic principles upon which the American economy has been built. The flexibility and adaptability of free markets have given America both
the highest living standard of any major economy and the means
to ensure the Nation's continued prosperity.
With less than 5 percent of the world's population, the United
States produces about 25 percent of the world's total output (measured by GNP). The U.S. economy is more than twice as large as the
next largest economy, that of Japan. The average standard of
living of Americans—as measured by GNP per capita—is above
that in other major industrialized countries. U.S. productivity is
also higher than in those other nations; as measured by GNP per
worker in 1989, productivity in West Germany and Japan was only
about three-fourths of that in the United States.
Economic growth in a flexible market economy involves change
as well as expansion; the waxing and waning of individual industries and sectors is natural and healthy. In the United States, as in
most other industrialized nations, changes in demand, productivity,
and demographics have produced a long-term shift in employment
from goods-producing to service-producing sectors. Dramatic advances in productivity have kept manufacturing's share of total
real output roughly constant throughout the postwar period, even
though its share of total employment has declined.
America is unsurpassed in basic research and has by far the
world's largest share of contributions to scientific literature. U.S.
firms have a distinct edge in many knowledge-intensive products,
and the United States continues to produce larger volumes of many
high-technology products than any other nation.
Recent increases in foreign investment in the United States reflect both the size and health of the American economy and the
trend toward greater global economic integration. Those who are
concerned about this investment neglect the lessons of history.
Fears of foreign investment were widespread in Europe in the
1950s and 1960s, when the issue was American investment overseas. However, as Europeans have since learned, foreign investment that helps to build plants and equip workers can increase
productivity and raise standards of living. Foreign investment in
the United States is a sign of America's strength and a vote of confidence in its economic future.

POLICIES FOR RENEWED GROWTH
Fiscal policy—the Federal Government's taxation, expenditure,
and borrowing policies—and monetary policy—decisions directly affecting the money supply and interest rates—can have powerful effects on the economy in both the short run and the long run. The




25

government's policy toward the financial sector—the regulation
and supervision of banks and other financial institutions—significantly affects both the short-run stability of the economy and its
long-run ability to channel savings efficiently into productive investments.
When unemployment increases or inflation seems to be accelerating, fiscal and monetary policies can alleviate the economy's immediate problems. But a sequence of short-sighted discretionary reactions can produce poorer performance on average than adherence to well-designed credible, systematic policies. Businesses and
households are forward-looking, and expectations about future economic conditions and macroeconomic policies affect their decisions.
Frequent discretionary changes in policy impede long-term planning and thus undermine the economy's performance.
Signals about the goals and approach that will guide monetary
and fiscal decisions must be clear and credible. Credibility provides
the latitude to respond to short-run developments without altering
the public's expectations that policy will continue to be stable and
systematic. But credibility, like respect, must be earned; monetary
and fiscal actions must be consistent with stated long-run goals and
policies.
Accurate and timely economic data reduce uncertainty and enhance the soundness both of private sector decisionmaking and of
macroeconomic policy analysis and implementation. The Administration is thus committed to continuing improvements to the Nation's statistical infrastructure.

FISCAL POLICY
During an economic downturn, government expenditures—such
as unemployment compensation—increase, and tax receipts fall relative to what they otherwise would be. Although they temporarily
increase the budget deficit, these changes in taxes and expenditures work as "automatic stabilizers" to reduce declines in income
and spending and thus to hasten recovery. They are systematic and
fast-working, unlike discretionary changes in fiscal policy, which
require legislative actions, may take too long to enact, and are difficult to reverse.
To sustain robust economic growth, the United States must
maintain a high rate of investment in new capital and new technology. That, in turn, requires an adequate flow of national saving.
The substantial Federal budget deficits of recent years have decreased the national saving rate. Sound, growth-oriented fiscal
policy thus requires that the Federal budget deficit be reduced.
The Omnibus Budget Reconciliation Act of 1990 contains the
largest and most comprehensive deficit reduction package in U.S.
history. It is designed to reduce the Federal deficit by a total of
nearly one-half trillion dollars over the next 5 years, relative to



26

what it would otherwise be, with the deduction in the deficit
phased so as to minimize adverse short-term effects on the economy. The resulting higher level of national saving will fuel economic
growth and contribute to U.S. prosperity for years to come. In addition, the new budget law achieves two key fiscal policy objectives.
First, it contains credible enforcement mechanisms, using caps
on spending and pay-as-you-go rules, to prevent new legislation
from increasing the budget deficit. The caps put into effect the
concept of a "flexible freeze": Within each discretionary spending
category, any spending increases must be offset by spending cuts to
stay within the cap. Across-the-board spending cuts are required
whenever the caps or rules are violated.
Second, new systematic procedures enhance the ability of the
automatic stabilizers to cushion downturns in the short run. Under
the new law, deficit targets are adjusted for changes in economic
conditions, as reflected in the Administration's forecast. That permits the automatic stabilizers to work more effectively. In contrast,
the previous law had no procedure for adjusting the deficit targets
without suspending the entire enforcement mechanism.
Another important element of the Administration's fiscal policy
is a commitment to a tax system with low marginal tax rates and
the lowest possible barriers to economic growth. The Administration has proposed a reduction in the tax rate on long-term capital
gains. A capital gains tax cut would affect real estate and other
asset values favorably, thereby alleviating capital and balance
sheet problems in both financial and nonfinancial corporations. It
would reduce the existing bias against financing through equity
rather than through debt. It would also increase long-term economic growth by stimulating saving, lowering the cost of capital, and
encouraging investment. And it would encourage entrepreneurship
so essential for the creation of new jobs and the commercialization
of new ideas.
To further stimulate private saving, the Administration has proposed Family Savings Accounts. Contributions to these accounts
would not be tax-deductible, but withdrawals of earnings and contributions after 7 years would not be taxed. The Administration
also proposes to ease requirements for withdrawals from Individual
Retirement Accounts for people buying a home for the first time.
That would make these accounts more attractive to young people
and thereby increase private saving.
MONETARY AND FINANCIAL SECTOR POLICY
Monetary policy also has an important role to play in mitigating
the current downturn and providing for strong growth and a gradual reduction in inflation. Because of the past and potential future
changes in the structure of the economy, monetary policymakers
must necessarily consider a number of indicators—including



27

output, general price indexes, interest rates, exchange rates, futures prices, money, and credit—in judging the direction of the
economy and the impact of monetary policy. But, barring changes
in the relationship between money and income, an important characteristic of a credible and systematic monetary policy is a commitment to sustain the rate of growth of money and credit during a
downturn. Such a commitment would automatically bring about a
reduction in interest rates and soften the downturn. It is important
to recognize, however, that a decline in interest rates during a
downturn may not be a sign of monetary easing, especially if the
growth of money and credit has slowed.
It is vital to maintain a credible commitment to long-run goals
and policies when responding to temporary disturbances. The relatively low and stable inflation rates that prevailed before the 1990
oil price shock permit the Federal Reserve to cushion the downturn
without leading businesses and households to expect higher future
rates of inflation.
Tight credit conditions may create special challenges for monetary policy in the year ahead. The reduction by the Federal Reserve in banks' reserve requirements implemented toward the end
of 1990 was aimed at alleviating these conditions and will help to
moderate the downturn. In encouraging sound banking practices,
the Federal Reserve and other bank regulators should not pursue
overly stringent regulations that unnecessarily restrict creditworthy borrowers. Historical experience and research show that sustained money growth can go a long way toward offsetting other
sources of credit market tightness.
The Administration's proposal for comprehensive banking reform
will reduce unnecessary and antiquated restrictions on the banking
industry and thereby help to ease tight credit conditions. Healthier
banks are essential if the financial system is to provide adequate
supplies of credit during economic downturns as well as in periods
of expansion. Lifting restrictions on interstate banking activities
and on the ability of banks to combine with commercial and other
financial firms will enhance banks' ability to attract capital and
thus reduce the risk of a contraction in lending.

POLICIES TO SUPPORT GROWTH
Efforts to protect special interests by resisting the economy's natural evolution are often futile, generally sap the economy's vitality,
and always reduce its flexibility and ability to benefit from change.
Instead, growth must be supported by policies that increase the
role of market forces, while ensuring that opportunities are enhanced for all Americans and that the Nation's environment is
protected.



28

ENCOURAGING INVESTMENT AND IMPROVING
EDUCATION
Continued growth in productivity and living standards requires
investment in new buildings and equipment, advances in technology, and improvements in the skills of U.S. workers. All these must
be encouraged if America is to leave its children a legacy of global
economic leadership.
Investment in plant, equipment, and commercial technologies is
the task of the private sector. Because market forces guide investment funds to their most productive uses, the government can generally only slow economic growth by second-guessing private investment decisions. Government's primary task is to create conditions under which high levels of productive investment, guided by
market forces, can fuel rapid growth. The multiyear deficit reduction program enacted in 1990 is an important step in this direction.
Reducing the tax rate on long-term capital gains and enacting the
Administration's proposals to increase private saving would also
significantly reduce barriers to robust long-term economic growth.
In addition, of course, governments at all levels must recognize
their shared responsibility to provide an efficient U.S. transportation infrastructure, which is necessary for sustained economic
growth. Legislation passed in 1990 will make it easier for airports
to finance needed capacity expansions. The Administration will
seek both increases in Federal funding for highways and a restructuring of highway programs that will give the States greater flexibility, while ensuring that the 150,000 miles of roads in the National Highway System will be maintained, rehabilitated, and expanded.
The Federal Government has an important role to play in the
process of technological change. Some research projects offer the
potential of large benefits to the economy as a whole but do not
offer much prospect of profit to any private firm that might undertake them. The knowledge generated by these projects would be
valuable, but no firm could prevent others from capturing most of
that value. Such "spillovers" are important in the case of basic research, the results of which cannot generally be directly incorporated into a marketable product or process. The Administration
has proposed substantial increases in Federal support for basic research, and the President has announced his intention to double
the budget of the National Science Foundation.
Some areas of applied research promise advances in generic, precompetitive technologies that would also have large spillovers. The
Administration will seek increased support for such research and
will make the results of government-supported research more readily available to the private sector for speedier commercialization.
Adoption of the Administration's proposed reform of the antitrust




29

law governing joint ventures would increase the ability of the private sector to take advantage of research opportunities with industry-specific benefits. Finally, the Administration will again seek to
make the research and experimentation tax credit permanent to
enhance incentives for private-sector investment in new technology.
Education is the key to increasing the skills of the U.S. labor
force. If America's children continue to learn less in school than
their counterparts abroad, America's workers will not long continue to earn more. The United States already spends more per pupil
in elementary and secondary education than all its major competitors, but it does not receive an adequate educational return on this
investment.
The Administration will continue its strong support of the fundamental reform necessary to achieve excellence in U.S. elementary
and secondary education. The key to successful reform is to harness the power of market forces: Schools should be able to compete
for students. Parents and students must be afforded more choice
among schools, and unnecessary barriers to entry into the teaching
profession must be swept away.
The Administration will introduce a new Educational Excellence
Act, which will stimulate fundamental reform and restructure the
Nation's education system by promoting educational choice and alternative certification for teachers and principals. And, to help
ensure that all students enter school ready to learn, the Administration has significantly expanded the Head Start program. The
President will continue his close work with the Nation's Governors
to advance the vital cause of educational excellence.
The Immigration Act of 1990, the first major reform of legal immigration in 25 years, will enhance the quality of the American
labor force. This legislation will significantly increase the level of
skill-based immigration and reaffirm the Administration's commitment to family reunification as a central tenet of U.S. immigration
policy.

STRENGTHENING MARKET FORCES
Free, competitive markets for goods and resources maintain high
U.S. living standards and both guide and stimulate the process of
economic growth. The long-run performance of the economy is thus
enhanced by policies that extend the scope of market forces and
maintain market flexibility.
The Administration remains committed to an energy policy that
relies on the flexibility and power of market forces to ensure that
all the Nation's resources are efficiently utilized. In the aftermath
of Iraq's invasion of Kuwait, some called for increased regulation of
energy markets. But these policies would increase the economic




30

burden of the oil price shock, bring back the gasoline lines of the
1970s, and make the economy less flexible and efficient. They are
firmly opposed by the Administration. The Nation's Strategic Petroleum Reserve was tested in October and November, and an
internationally coordinated program to make government-controlled stocks available to the marketplace began with the outbreak
of hostilities in the Persian Gulf.
The National Energy Strategy, which was under development
well before the onset of the Gulf crisis, continues the successful
policy of reliance on market forces. It recognizes that in an increasingly integrated global economy, U.S. energy security cannot be
separated from that of the Nation's friends, allies, and trading
partners; all countries are affected by sharp, unanticipated price
changes in world energy markets. It reflects the need to foster economic growth through the availability of ample supplies of reasonably priced energy. Implementation of the National Energy Strategy would enhance energy security by increasing the diversity of
energy supplies, removing barriers to competition in energy markets, encouraging economical conservation, and increasing Federal
support for. energy-related research with potentially significant
spillover benefits.
Strong economic growth requires a financial sector that is sound,
efficient, and innovative. Banks in the United States still operate
under a regulatory system that dates from the 1930s. That system
attempts to keep banks healthy and the deposit insurance system
sound by limiting competition, but it is simply no longer workable.
U.S. banks face increasing competition from other institutions and
markets around the world. The long-term vitality of U.S. banks
depends on their ability to compete effectively. The Administration's
proposal to reform financial sector regulation would make banks
financially healthier and better able to compete, while ensuring the
soundness of the deposit insurance system.
An important planting flexibility provision of farm legislation
enacted in 1990 makes market incentives a more important determinant of farm production decisions. This provision will save about $7
billion in Federal spending over the next 5 years.

GIVING POWER AND OPPORTUNITY TO INDIVIDUALS
Without a healthy, growing economy, poverty in the United
States cannot be reduced. But growth alone is not enough. It
should be supplemented by policies designed to give power and opportunity to individuals—to give them both the incentive and the
means to participate fully in the economy.
In 1990, after a 3-year debate, the Congress passed child care legislation consistent with the President's objectives of limiting governmental interference with parents' decisions, not discriminating



31

against working families who care for their own children, and targeting assistance to those most in need. The 1990 budget act provides an increase of about $18 billion in assistance to low-wage
workers with children over the next 5 years by expanding the
Earned Income Tax Credit.
The Administration's Homeownership and Opportunity for
People Everywhere (HOPE) initiative was also signed into law in
1990. This initiative will enable low-income families to become
homeowners and give them a greater stake in their communities.
Increased tenant ownership and control of public housing would
further help to build the bonds of community in distressed neighborhoods. And the Administration's enterprise zone proposal would
encourage entrepreneurship, investment, and job creation in urban
and rural pockets of poverty.
The landmark Americans with Disabilities Act is the most important extension of civil rights protection in two decades. It will
permit many disabled Americans to participate fully in the Nation's economic mainstream and to contribute to and benefit directly from America's growth and prosperity.
Medicaid coverage was expanded in 1990 to improve prenatal
care and child health in low-income families and to reduce infant
mortality. The Administration's new infant mortality, preventive
care, and nutrition initiatives would make significant contributions
to the health of low-income Americans.
LIMITING REGULATION AND MAKING IT WORK
When markets can work well, regulation can only reduce flexibility and slow growth. Even when markets work poorly, the inevitable imperfections of regulation often make its use costly and inefficient. Regulation should be employed only when its benefits clearly
exceed its costs. Regulatory targets should be chosen by careful
cost-benefit analysis, and the methods of regulation should minimize the costs and disruptions of reaching those targets. Cost-minimization requires that incentives be carefully structured and that
firms and workers be allowed maximum flexibility to meet well-designed performance standards. In particular, economic growth and
environmental protection can be compatible, but only if environmental regulation does not impose unnecessary costs on the economy.
After the President's leadership had broken a logjam that had
long blocked congressional action, the first comprehensive amendments to the Clean Air Act in more than a decade were signed into
law in 1990. This legislation incorporated a flexible and innovative
market-based system that will secure a substantial and permanent
reduction in the sulphur dioxide emissions that cause acid rain.
The reduction will be achieved at an estimated cost 20 percent



32

lower than the cost of traditional, less flexible command-and-control regulation. The Administration is committed to implementing
all provisions of this legislation so as to minimize unnecessary burdens on American workers and firms.

U.S. LEADERSHIP IN THE GLOBAL ECONOMY
The principle that market forces, not government planners, are
the best source of lasting prosperity is as valid in global markets as
it is within individual economies. The Administration accordingly
remains strongly committed to removing barriers to trade and investment in all nations, to opposing pressures for protectionism
and government management of trade, to supporting market-oriented reform around the world, and to pursuing macroeconomic
policies conducive to strong noninflationary growth in the United
States and the world economy.
INTERNATIONAL TRADE LIBERALIZATION
Since the end of World War II, the United States has led the
world toward a system of free trade and open markets. As a consequence of this policy and of natural economic forces, America's economic prospects have become closely linked with those of other
countries. Increased global economic integration has expanded
markets for U.S. exports, encouraged innovation, and expanded the
choices available to American consumers. World trade, which has
grown more than ll/2 times as fast as world income since the early
1960s, has improved the living standards of all Americans. In
recent years exports have made an important contribution to U.S.
economic growth.
Policies that target particular industries for protection from
international competition, whether by means of tariffs or quotas, or
through the newer device of managed trade, impose costs on the
economy as a whole. Such policies limit consumer choice, raise domestic prices, reduce competition, impair the flexibility and competitiveness of the U.S. economy, and invite retaliation against
U.S. exports. This Administration will continue to resist protectionist pressures and to work to open markets here and abroad.
Sustained strong worldwide growth in the 1990s will depend on
continued progress toward a free and open multilateral trading
regime. Completing the Uruguay Round of multilateral trade negotiations, under the auspices of the General Agreement on Tariffs
and Trade (GATT), remains the top trade priority of the Administration. In the Uruguay Round the United States has sought a significant agreement that reduces or eliminates tariffs in all nations
in several broad sectors of manufacturing and that phases out
other barriers to trade in textiles and agriculture. A key aim of the




33

negotiations is to strengthen and modernize GATT rules and to
extend them to new areas such as services, investment, and intellectual property.
In 1990 the Administration undertook several other market-opening initiatives that will both spur growth in this hemisphere and
support the wave of market-oriented reform sweeping Latin America. A U.S.-Mexico free-trade agreement was endorsed by the Presidents of both countries. The Enterprise for the Americas Initiative
aims to expand trade through free-trade agreements, to encourage
liberalization of investment regimes in order to increase capital
formation in the region, and to reduce official debt of countries
pursuing strong economic reform programs. Additional measures to
reduce trade barriers were also undertaken to help support cooperation on anti-narcotics efforts with Andean countries. As the benefits of these programs to the United States and its trading partners in the hemisphere become apparent, a clear signal of the
gains from freer trade and sound economic policies will be sent
around the world.
The Administration also initiated and completed a first round of
bilateral market liberalization talks with Japan called the Structural Impediments Initiative. The aim of these talks is to open
markets and reduce structural barriers to trade and balance of
payments adjustment in both the United States and Japan.
INTERNATIONAL MACROECONOMIC ISSUES
The increased integration of the world economy has significant
implications for macroeconomic policies. Both monetary and fiscal
policies in the United States have fundamental effects on exchange
rates and trade flows. These policies also affect the economic performance of other economies, although to a lesser extent than the
U.S. economy itself.
American economic leadership requires that U.S. macroeconomic
policy maintain an environment conducive to strong noninflationary growth. That will benefit the U.S. economy and contribute to
economic growth and stability abroad. A sustainable trade balance
and relatively stable exchange rates are part of such a policy environment.
Coordination of macroeconomic policies across countries can help
governments increase sustainable growth worldwide. The regular
economic meetings of heads of state, finance ministers and other
officials of the G-7 nations (United States, Germany, Japan,
United Kingdom, France, Canada, and Italy) provide a framework
within which economic issues of mutual concern can be discussed.
This evolving process of cooperation has achieved some important
successes. During the recent expansion, economic growth was
strong and inflation rates among countries tended to converge to




34

lower levels. In the last several years, trade imbalances have declined significantly. International macroeconomic policy coordination continues to be essential as the world economy reacts to the
effects of the oil price shock and changing credit conditions.

SUPPORT FOR ECONOMIES IN TRANSITION
The emerging democracies of Eastern Europe, many nations in
Latin America, and other countries around the world have learned
from America's example. As nations adopt democracy, their new
leaders turn away from central planning and government control
of economic activity and toward reliance on flexible market forces.
The economic collapse of communism has made it clear that free
people working in free markets are best able to create high and
rising living standards.
American support for democracy and free markets throughout
the world provided a major impetus to what the President has
called the "Revolution of 1989" in Eastern Europe. In 1990 many
governments in this region deepened their historic efforts to rebuild their failed economies. Many nations in Latin America increased their reliance on market forces and opened their economies
to international trade.
The United States continued to provide extensive technical and
financial assistance to the emerging democracies of Eastern
Europe, and the President was instrumental in establishing the
group of 24 Western governments that has already committed
about $20 billion in assistance to Eastern Europe. The United
States was also instrumental in encouraging the World Bank and
the International Monetary Fund to increase lending in this
region. And U.S. initiatives aimed at reducing barriers to trade and
investment provided powerful support for the forces of reform in
Latin America.

CONCLUSION
Writing on the eve of the American Revolution, Adam Smith was
the first to make clear the power of flexible, competitive markets
to raise living standards and the costs of misguided interference
with market forces. As the United States prepares for a new century, Smith's principles remain central to sound economic policymaking.
Policies that remove barriers to market forces and thus increase
the economy's flexibility can encourage investment, innovation, entrepreneurship, and growth. Credible and systematic macroeconomic policies can keep the current downturn mild and brief, add
strength to the recovery, and provide the foundation for a sustained expansion in the 1990s. The Administration's proposed




35

growth incentives and its proposals for education and financial
sector reform and for giving power and opportunity to individuals,
along with its other major initiatives, can significantly contribute
to the economy's long-term health and vitality.
In 1991, as always, the United States confronts both economic
challenges and exciting opportunities. The U.S. economy remains
the largest and most productive in the world, and its flexibility and
resilience give America the ability to meet its challenges and make
the most of its opportunities. But the Nation cannot take economic
growth for granted. Unless sound policies are followed, there is no
guarantee that American living standards will continue to rise substantially from one generation to the next or that the United
States will remain the world's leading economy. The Nation must
choose between sound policies that will promote long-term growth
and policies that will reduce economic flexibility, stunt incentives,
and place its economic future at risk.




36

CHAPTER 2

Economic Developments and Prospects
AFTER ALMOST 8 YEARS of expansion, the economy entered a
recession during the latter part of 1990. In the fourth quarter of
the year, real gross national product (GNP) registered its largest
decline since 1982, and industrial production fell sharply. The
downturn was caused in large part by the economic effects of Iraq's
invasion of Kuwait. That caused a jump in oil prices and directly
reduced business and consumer confidence. Those factors, coupled
with continuing uncertainty about the timing of the resolution of
the crisis, dealt a substantial blow to an economy already sluggish
from other factors. These included worldwide increases in interest
rates, unexpectedly tight credit conditions, and the lingering effects
of a tightening of monetary policy from early 1988 through mid1989 that was undertaken in a successful attempt to prevent an increase in inflation.
Several factors suggest that the economic downturn is not likely
to last long and that a recovery will begin by the middle of 1991.
Inflation, after adjusting for the temporary impact of the oil price
increase, remained under control during 1990 and slowed at the
end of the year, giving the Federal Reserve greater latitude to mitigate the recession without causing an increase in inflation expectations. The prospect for export growth continues to be strong. Inventories remain relatively low, suggesting that firms need not cut
production as much as in previous recessions to reduce inventory
levels. Interest rates declined toward the end of the year following
passage of the new budget law, an easing of monetary policy, and
the decline in economic activity. Lower interest rates stimulate
credit-sensitive sectors of the economy and, after a lag of several
quarters, will increase growth.
The Administration forecasts that growth will be 0.9 percent
over the four quarters of 1991. It is expected that the downturn
will continue through the first part of 1991 and the recovery will
begin around the middle of the year. If the Administration's proposed policies are enacted, the long-term economic outlook is good.
Growth should strengthen in 1992 and remain well above the rates
of the past 18 months through the mid-1990s. Inflation and interest
rates are projected to decline gradually.




37

Even greater uncertainty surrounds this year's outlook than has
been the case for the past few years. The future path of oil prices
remains uncertain. An early resolution of the Persian Gulf crisis
could restore consumer and business confidence and strengthen
growth early in 1991. However, the rapid political changes in Eastern Europe and the economic effects of Iraq's invasion of Kuwait
once again illustrate how quickly widely held views about economic
prospects can become outdated.

THE U.S. ECONOMY IN 1990
Real GNP grew only 0.3 percent during 1990, well below the very
strong 4V4-percent annual rate during 1987-88 (Chart 2-1). Growth
in the first part of 1990 was an extension of the modest growth in
1989, when real GNP grew 1.8 percent. But in the last part of 1990
the economy turned down. The unemployment rate rose 0.8 percentage point during the last 6 months of 1990. Despite the increase, the unemployment rate was low compared with the average
over the previous 15 years. Consumer price increases excluding
food and energy—a measure of core, or underlying, inflation—accelerated in the first quarter but were slowing at the end of the
year. These developments in 1990 were influenced by, and in turn,
affected monetary policy, fiscal policy, and conditions in credit
markets.
MONETARY POLICY AND CREDIT MARKETS
Monetary policy and credit market developments in 1990 were
influenced by policy actions and developments that occurred in previous years. For example, the rapid economic growth in 1987 and
1988 pushed capacity utilization to high levels and reduced unemployment rates to the lowest levels since the early 1970s, but it also
spurred serious concern about the possibility of rising inflation. In
the spring of 1988, the Federal Reserve began to reduce the flow of
money and credit gradually and to increase interest rates. The Federal Reserve's goal was to reduce inflationary pressures by engineering a "soft landing"; that is, by reducing overall demand
slowly enough to avoid causing a recession. Since then, the difficulties inherent in distinguishing more permanent threats of rising inflation from temporary but sharp price-level changes, coupled with
the long and variable lags through which monetary policy affects
economic activity, have complicated the task of predicting the economic consequences of any given level of monetary restraint.
After falling about IVz percentage points in the second half of
1989, the Federal funds rate remained relatively constant in the
first half of 1990, but it declined sharply in the fourth quarter and
in early 1991. (The Federal funds rate, a short-term interest rate at




38

Chart 2-1 Real GNP Growth
Real GNP growth slowed in 1990 after rapid growth in 1987 and 1988 and moderate growth in 1989.
Percent change (Q4/Q4)

6

5.0

1.9

0.3

1986

1987

1988

1989

1990

Source: Department of Commerce.

which banks lend reserves to other banks, is a short-run indicator
of the stance of monetary policy.) Long-term interest rates rose
early in the year, then declined slightly before rising again in late
summer. In the last quarter they fell sharply, responding to a slowing economy, expected declines in short-term interest rates, and
the passage of the new budget law. Throughout the year, evidence
mounted that credit was becoming less available, causing serious
problems in credit-sensitive sectors.
Monetary Policy
The ultimate goal of the Federal Reserve is to promote strong,
noninflationary economic growth. The Federal Reserve pursues its
goal by influencing interest rates, especially the Federal funds
rate, and by regulating the volume of bank reserves relative to demands by depository institutions—reserve availability. Changes in
reserves and the Federal funds rate affect the supply of money and
credit, inflation, and economic growth. In general, the Federal Reserve acts to raise the Federal funds rate when inflationary pressures increase and economic growth is very rapid, and it acts to




39

lower the Federal funds rate when inflation expectations appear to
be falling and weaker economic growth or recession is more likely.
The Federal Reserve maintained a level of reserve availability
that resulted in a relatively constant Federal funds rate in the first
half of 1990. From January to July the rate averaged 8V4 percent,
below the 1989 average, but nearly 1% percentage points above its
level in early spring 1988, when the Federal Reserve began to
tighten policy to contain inflationary pressures (Chart 2-2). This
tightening of policy was a factor in lowering economic growth in
1989 and 1990.
Chart 2-2 Federal Funds Rate
The Federal funds rate was relatively flat in the first 7 months of 1990 and fell thereafter. By year-end,
it had nearly returned to spring 1988 levels.
Percent per annum

11

10

1988

1989

1990

Note: Data are monthly averages of daily figures.
Source: Board of Governors of the Federal Reserve System.

In July 1990 the Federal Reserve noted that lack of credit in
some regional and sectoral markets might be creating a tighter
monetary policy than suggested by the level of the Federal funds
rate alone. Thus, the Federal Reserve increased the availability of
reserves, reducing the Federal funds rate 25 basis points (there are
100 basis points in a percentage point) to 8 percent.
In October the Federal Reserve again increased reserve availability, reducing the Federal funds rate by another 25 basis points.
This reduction came soon after the budget summit negotiations
were completed and a comprehensive budget plan was proposed.
During the rest of the year mounting concern about declining em-




40

ployment and production, lagging money growth, and tight credit
conditions led to a series of reductions in the funds rate, resulting
in a cumulative decline of 125 basis points from early July. By
early February 1991, the Federal funds rate had fallen further to
around 6*A percent, its lowest level in 3 years. In addition, as
market interest rates fell at the end of the year, the discount
rate—the rate at which the Federal Reserve Banks lend reserves to
member institutions—was lowered from 7 percent to 6.5 percent.
That was the first reduction in the discount rate since August 1986.
An additional reduction to 6 percent occurred in early February
1991.
In December the Federal Reserve eliminated the requirement
that banks hold reserves against net Eurodollar liabilities and time
deposits held by businesses. That was done to enhance bank incentives to lend, in light of accumulating evidence of credit constraints.
Movements in other short-term interest rates were either similar
to or anticipated the general pattern of the Federal funds rate. The
rate on 3-month Treasury bills rose slightly over the first few
months of 1990. It then declined, evidently reflecting anticipations
of later declines in the Federal funds rate, and fell to 6.4 percent
by the end of the year.
In addition to considering the Federal funds rate carefully, the
Federal Reserve monitors the growth of money and credit and attempts to maintain money supply growth within announced
ranges. In February 1990 the Federal Reserve announced it would
maintain the 3- to 7-percent target range for growth in its M2
money aggregate, provisionally established in the middle of 1989
for the four quarters of 1990 (see Appendix Table B-67 for definitions of the money supply). The target range for M3 was set at 2*/2
to 6V2 percent for 1990. In July, however, that range was lowered
to 1 to 5 percent, as the restructuring of the savings and loan industry reduced actual and expected M3 growth relative to GNP
growth. That is, the velocity of M3, the ratio of GNP to M3, appeared likely to have undergone a shift.
Growth in monetary aggregates was relatively low in 1989. M2
was below the lower bound of the target range through the first
half of 1989, although growth accelerated in the second half. M2
growth was 4.6 percent during 1989, below the 5.2-percent growth
during 1988. M3 growth was 3.3 percent during 1989, down from 6.3
percent in 1988.
From the fourth quarter of 1989 through the middle of the first
quarter of 1990, M2 growth accelerated. However, M2 growth
slowed substantially after February, and from early April through
the end of the year M2 was consistently in the lower half of the
target range. The slower growing economy probably contributed to



41

lower M2 growth by reducing the public's demand for monetary
balances (Chart 2-3). M2 grew 3.7 percent during 1990, while M3
grew 1.5 percent.
Chart 2-3

Money Supply

M2 growth was below the middle of the target range in 1989 and stayed in the lower half of the range
through most of 1990.
Billions of dollars
3500 |

7% Upper Limit

3400

3300

[

3200 \-

x^CXX^- 3% Lower Limit

/ ^^^

7% Upper Limit

3% Lower Limit

3100

3000

i

i

i

i

i

i

i

i

i

i

i

1989

1990

Note: Data are weekly.
Source: Board of Governors of the Federal Reserve System.

Long-Term Interest Rates
While short-term interest rates were relatively stable in the first
half of the year, long-term interest rates were more volatile (Chart
2-4). After declining somewhat in the second half of 1989, longterm rates rose sharply in the first few months of 1990. The yield
on 10-year Treasury bonds increased 75 basis points between December 1989 and March 1990.
Concern about a possible increase in the underlying inflation
rate caused by the temporary jump in inflation in the first quarter
may have contributed to the rise in long-term rates. A more important factor, however, was the anticipated increase in the demand
for capital associated with developments in Eastern Europe and the
unification of Germany. These events caused interest rates to rise
around the world, as shown in Chart 2-5.
The expected increase in the demand for financial capital did in
fact materialize during 1990. In 1989 West German governments
ran a surplus of about 0.2 percent of gross domestic product (GDP).



42

Chart 2-4 Interest Rates
While short-term rates were relatively flat, long-term rates rose in early 1990. Both fell toward the end
of the year.
Percent per annum
9.5

\

\
\
\

8.5

k

\
i\

10-Year Treasury Bonds
(constant maturities)

x

*- —'

/

.

\
\
N

8.0

7 5 r

-

3-Month Treasury Bills

7.0

6.5

1989

1990

Note: Data are monthly averages of daily figures.
Source: Board of Governors of the Federal Reserve System.

With greater capital needs at home to finance the rebuilding of the
deteriorated infrastructure of the former German Democratic Republic, the surplus became a deficit of about 3 percent of GDP in
1990. Because long-term interest rates in the United States are influenced by developments in world markets, and because those
rates play a large role in determining real economic activity, their
rise contributed to the domestic economic slowdown in the United
States.
After peaking in May, long-term rates fell 65 basis points
through the end of July. This drop was erased after Iraq invaded
Kuwait. The jump in oil prices renewed concerns about the risks of
higher inflation. The general uncertainty surrounding the Persian
Gulf crisis, and, in particular, about the future course of oil prices,
increased the riskiness of lending funds for the longer term and
put upward pressure on interest rates.
By mid-December, however, long-term rates had fallen back to
their early January levels, with the yield on 10-year Treasury
bonds reaching 8 percent before rising slightly at the very end of
the year. One reason long-term rates began to fall was the expectation that the multiyear budget law would lower the Federal Gov-




43

Chart 2-5

Long-Term Government Bond Yields

Long-term bond yields rose around the world in early 1990, pushed up by increased demand for
capital and concerns about accelerating inflation.
Percent per annum

10

Japan

1989

1990

Note: Data are weekly average of daily figures.
Source: Board of Governors of the Federal Reserve System.

ernment's future credit demands and thus ease demand pressure in
long-term credit markets. Other factors including falling oil prices
in late November and December, declining economic activity, and
easing monetary policy also contributed substantially to the decline.
Credit Market Developments
By midyear, surveys indicated that bank lending standards had
tightened and that credit was becoming more difficult to obtain. As
the year progressed, the effects of the tightening began to appear
in aggregate bank lending figures. From August through October
commercial and industrial loans at commercial banks fell at an
annual rate of 3.3 percent. In addition, a Federal Reserve survey of
senior bank lending officers in October reported that nearly twothirds of respondents had tightened their lending standards for
construction and land development loans in the previous 3 months,
and almost half had tightened their standards on commercial and
industrial loans. Overall, bank credit increased about 5.1 percent
during 1990, compared to a 6.9-percent rise during 1989.




44

Tightened lending standards and slower growth in bank lending
were partly the result of a sluggish economy. Demand for credit
usually falls as the overall economy weakens. Moreover, as the
economy slows, the probability of bankruptcy increases. To compensate for the increased risk of lending, lending standards may have
become stricter. Concerns about overzealous bank examiners may
have discouraged some banks from making loans, and declining
real estate values reduced the value of collateral on residential and
commercial real estate loans.
Tighter lending standards during the year cannot be entirely attributed to caution in the face of a slow economy or an anticipated
recession. The restructuring of bank lending portfolios in anticipation of meeting the capital guidelines established in the Basle
framework, an international banking agreement setting minimum
capital adequacy requirements, also contributed to credit market
tightness. The new guidelines require higher capital reserves on
loans with greater risk of default. Thus, for example, more capital
must be held against a portfolio of commercial and industrial loans
than against a portfolio of equal size that contains only government-backed securities. By changing the relative cost of different
types of assets, these guidelines changed the incentives for extending different types of credit. Thus, while the growth of commercial
and industrial loans by banks slowed during 1990, the growth of
bank credit extended to governments or borrowers with government guarantees increased.
Although business borrowing from banks slowed in 1990, business borrowing from other sources offset some of the slowdown.
Overall domestic nonfinancial sector debt (excluding Federal debt)
was up 5.6 percent at an annual rate for the first 11 months of
1990. By October and November, however, this debt was rising at a
slower 4 percent rate. These rates were lower than the 1989 growth
rate of 7.6 percent.

FEDERAL BUDGET DEVELOPMENTS
Federal spending, tax, and borrowing activities have an important influence over economic activity. The slowdown in the economy and the large financial transactions associated with the resolution of the savings and loan (S&L) crisis require that particular
care be taken in describing budgetary and deficit changes for 1990
and beyond.
In fiscal 1990 (October 1989 through September 1990) total Federal expenditures were $1,253 billion. Transfer payments (including
grants-in-aid to State and local governments) accounted for roughly
half this total. Federal purchases of goods and services accounted
for one-third of Federal spending. The other major component was
interest payments on the Federal debt. Among these components,



45

the largest increase from fiscal 1989 occurred in transfer payments,
which grew 9.6 percent. Federal purchases of goods and services
rose 4.3 percent.
Federal tax receipts grew more slowly in fiscal 1990 than in
fiscal 1989. That was mainly a result of two factors: slower growth
in household income, which reduced the growth of individual
income and payroll tax payments; and falling business profits,
which reduced corporate income tax receipts. Corporate profits
were $299 billion in fiscal 1990, down from $326 billion in fiscal
1989. Corporate income tax receipts fell 9.7 percent in fiscal 1990,
after rising 9.6 percent in fiscal 1989. Total receipts rose 4.1 percent in fiscal 1990, compared with 9 percent in fiscal 1989.

The Federal Deficit
From 1979 to 1983 the consolidated Federal budget deficit as a
percentage of GNP increased steadily to 6.3 percent, its highest
level since World War II. (The difference between Federal outlays
and receipts is the deficit.) The deficit-to-GNP ratio was around 5.2
percent between 1984 and 1986, and then fell to its recent low of 3
percent in 1989, primarily as a consequence of reductions in Federal spending. Since 1980 the ratio of tax receipts to GNP has been
19 percent, while the ratio of outlays to GNP has been 23.1 percent.
The ratio of the deficit to GNP rose in 1990, mostly due to spending increases. The ratio was expected to remain high, which led to
concerns that interest rates would also remain high, harming prospects for long-run growth. These concerns led to enactment of the
Omnibus Budget Reconciliation Act, signed in November 1990. The
budget law is expected to reduce future deficits substantially from
what they would have been in the absence of the act. Nevertheless,
by all conventional measures the current deficit is large and will
remain large during the next few years.
Federal budget accounting distinguishes between on-budget and
off-budget outlays and receipts. The more comprehensive consolidated budget combines both on-budget and off-budget accounts.
Some items are classified as off-budget based on economic reasons;
others, for legislative or government accounting reasons. Currently,
outlays and receipts of the Social Security trust funds are offbudget, yet changes in these trust funds affect total government
saving and thereby the net borrowing requirements of the Federal
Government. In fiscal 1990 Social Security receipts exceeded outlays, which was the main factor leading to an off-budget surplus of
$57 billion. As a result, the fiscal 1990 on-budget deficit of $277 billion substantially exceeded the $220 billion consolidated budget deficit.
The financial transactions of the Resolution Trust Corporation
(RTC) and other deposit insurance programs have made the inter


46

pretation of the effect of the budget on the economy more complex.
The RTC reimburses federally insured depositors in failed savings
and loan institutions. The funds required to pay the full value of
these deposits are large, and the problems created by the incentives associated with deposit insurance have had negative effects on
the economy (see Chapter 5 for a discussion of deposit insurance).
Transactions of the RTC and other deposit insurance programs
are classified as on-budget. Unlike most other on-budget expenditures and receipts, however, these transactions have little effect on
interest rates and the overall economy. Though they are valuable
for other reasons, measures of the budget deficit that include deposit insurance financing can be misleading for evaluating the
macroeconomic effects of the deficit. As noted above, for this purpose, deposit insurance outlays should be excluded and the Social
Security surplus included. Hence, of the various accounting measures, movements in the consolidated budget deficit excluding deposit
insurance probably best measure the impact of Federal borrowing on
credit markets and the economy.
To understand how borrowing to cover deposit insurance differs
from borrowing to cover other government outlays, consider the
following example. Suppose the RTC acquires a failed S&L with insured deposits of $100 million and assets, such as mortgages and
loans, worth only $85 million. To do this, the RTC would borrow
$100 million to pay off the depositors and acquire the S&L's assets
worth $85 million. The remaining $15 million is an accrual of net
Federal indebtedness and acknowledges the liabilities incurred earlier when the S&L could no longer support the insured depositors.
(This portion of the RTC outlays is sometimes termed "hole-filling.") The entire $100 million paid out to depositors is likely to be
redeposited in the financial sector. The depositors chose to hold
$100 million in the S&L on the assumption their money was safe;
the RTC's confirmation of its safety is unlikely to cause them to
change the level of deposits they hold or any other aspect of their
economic behavior.
There are also unlikely to be any credit-market effects. The RTC
has directly or indirectly provided $100 million to honor the deposit
insurance commitment to depositors. Since these funds are likely
to be redeposited, the financial sector can be expected to receive an
infusion of $100 million that solvent institutions will want to invest
in interest-bearing assets. The increased demand for assets corresponds exactly to the $100 million increase in assets the government sells to the market. Therefore, in contrast to what happens
when the government borrows to purchase goods and services,
there will be no direct effects on interest rates in the financial
sector.




47

The acquisition and subsequent disposition of S&L assets by the
ETC are expected to lead to a large swing in the consolidated and
on-budget deficit measures. Net ETC expenditures are currently
large because the RTC is acquiring insolvent S&Ls and paying out
funds to depositors. By fiscal 1992, these expenditures are projected
to be falling; that is, expenditures for acquiring S&L assets minus
the receipts from sales of these assets are expected to be smaller
than in the preceding year.
An alternative measure of the deficit that is useful for assessing
the effects of the deficit on credit markets and the economy comes
from the national income and product accounts (NIPA), published
by the Department of Commerce. The NIPA deficit does not include transactions, such as loans, that are an exchange of existing
assets and liabilities. Accordingly, nonadministrative RTC and deposit insurance funding are excluded from the NIPA deficit, and
the Social Security surplus is included. On a NIPA basis, the Federal deficit was $158 billion in fiscal 1990, an increase of roughly
$28 billion from 1989. In contrast, the consolidated deficit was $220
billion in fiscal 1990, an increase of $68 billion from 1989.
It is also important to distinguish between the actual deficit and
the structural deficit, especially when the economy is in a downturn or boom. In a downturn, tax revenues decrease and expenditures, especially for entitlement programs such as unemployment
insurance, increase. The rising deficit that results helps keep the
economy from going deeper into recession. During booms the opposite happens, and the falling deficit helps keep the economy from
overheating. The structural deficit removes the effects of these
swings in economic activity from the deficit calculation by assuming a steady level of employment and trend GNP growth. This cyclical
adjustment can be made in both the consolidated budget deficit and the
NIPA budget deficit measures. In fiscal 1990 the NIPA structural
budget deficit was only about $9 billion higher than in 1989, compared
with a $28 billion increase for the actual NIPA deficit. That difference
suggests that the economic slowdown accounted for more than twothirds of the increase in the actual NIPA deficit in 1990.
All these deficit measures are typically reported in current dollars. Even if spending and receipts were to increase only at the
rate of inflation, the deficit would rise. Moreover, the economic effects of the Federal deficit depend on its size in relation to the size
of the economy. To adjust for the economy's size, the ratio of the
deficit to GNP is often reported. Even though the structural deficit
increased slightly from 1989 to 1990, for instance, it declined slightly as a percent of GNP.
Other issues arise when measuring the deficit and interpreting
its economic effects. Some economists have argued that deficit
measures should reflect the reduction in the real value of outstanding liabilities caused by inflation. With a Federal debt held by the



48

public of roughly $2.5 trillion, an inflation rate of 4 percent would
reduce the real value of the debt outstanding by about $100 billion
in one year. This revaluation lowers the real value of government
liabilities and therefore could be thought of as lowering the deficit.
But even with this adjustment the deficit would still be large.
The economic importance of the deficit depends, in part, on the
level of private saving. By definition, a decrease in the budget deficit increases public saving. Private saving plus public saving constitute national saving, which, together with inflows of foreign capital, provides the funds available for investment in the United
States. Low public saving caused by a large Federal deficit is particularly detrimental to investment and future economic growth
when private saving is low, as it has been for several years.

ECONOMIC GROWTH AND EMPLOYMENT
The growth slowdown during 1990, as in 1989, was concentrated
in interest- and credit-sensitive sectors such as residential investment, commercial real estate, and consumer spending on durable
goods. In addition, export growth slowed from its extremely fast
pace of the previous 3 years. The manufacturing sector was hard
hit as both production and employment fell.

Consumption and Saving
Consumer spending rose 0.2 percent in real terms during 1990,
below the 1.2-percent growth in 1989 and substantially below the
rates of the mid-1980s (Table 2-1). (Spending in real, or inflationadjusted, terms is measured in constant 1982 dollars. Box 2-1 describes an important upcoming NIPA data revision.) Real disposable personal income, a key determinant of consumer spending, fell
0.4 percent during 1990. That compares with a 1.7-percent gain in
1989 and a 4.3-percent rise during 1988. Consumer outlays and
income rose at roughly the same rate in 1990, leaving the personal
saving rate at 4.5 percent, essentially unchanged from its average
1989 value. While the saving rate for 1990 was substantially above
the 1987 low of 2.9 percent, it remained well below the 6.5-percent
average of the post-World War II period and below that of most
other industrialized countries.
Spending on consumer services rose 2.2 percent during 1990, led
by a 6.5-percent spending increase in medical care. However, consumer purchases of nondurable goods, of which food and clothing
account for nearly 70 percent, fell during the year, after a slight
0.7-percent rise during 1989. Rising gasoline prices reduced real
spending on gasoline and also contributed to the decline in spending on nondurables.
Consumer purchases of durable goods declined during 1990. Interest rates on consumer loans, frequently used to finance purchases of durable goods, remained high during the year. Measures



49

TABLE 2-1.—Growth of Real GNPand Components, 1982-90
Item

1982 to 1986 *

1987

1990 2

1989

1988

Percent change, fourth quarter to fourth quarter
GNP.
Personal consumption expenditures
Presidential fixed investment
Residential investment
Government purchases of
goods and services

4.3

5.0

3.5

4.5

2.3

5.5
14.7

6.1
-2.2

4.1

2.0

1.8

0.3

4.1

1.2

.2

5.3
-.1

4.5
-7.1

.9
-8.7

1.1

.3

3.8

Annual level, billions of 1982 dollars
Inventory investment
Net exports of goods and
services

17.7
-84.5

22.8
-118.5

23.6
-75.9

23.8
-54.1

-1.1
-37.5

1

Average annual rate.
Preliminary.
Source: Department of Commerce.
2

of consumer confidence, which often are directly related to purchases of durables, plunged in the last 5 months of the year. Spending on motor vehicles declined, and the number of autos sold
during 1990 was down 4 percent from 1989, the second straight
yearly decline.
Several additional factors contributed to declining automobile
demand, including the large number of vehicles already owned by
consumers and the tendency for owners to keep vehicles longer. Financing arrangements also contributed to weak sales. Interest
rates on new car loans remained high, the average length of auto
loans fell, and lenders required larger downpayments.

Residential Investment
In 1990 residential investment was 5.1 percent below its 1989
level, the third straight year of decline. Housing starts reached
their lowest levels since 1982, averaging more than 13 percent
below 1989. For all of 1990, starts in the Northeast were only 44
percent of their recent 1986 peak. For the country as a whole,
multiunit starts continued their 5-year slide.
Many factors contributed to the decline in residential investment. Housing starts were held down by oversupply in many regions. Vacancy rates for rental housing units remained relatively
high. Builders and developers found credit more difficult to obtain.
The low growth of consumer income in 1990 and rising mortgage
rates in the first half kept demand low.
House prices rose in the early part of 1990 but declined somewhat during the rest of the year. The median price of a new singlefamily house reached $130,000 in April 1990, before declining by 7.7
percent by November. For the year the median new house price
rose 2.5 percent, its smallest rise since 1982. In the fourth quarter
of 1990, prices of existing homes were down nationally about 1 per


50

Box 2-1.—Revised National Income and Product Accounts
The Bureau of Economic Analysis (BEA) produces the UJSL
national income and product accounts, the most comprehensive
and consistent set of production and income statistics available
for the United States, The NIPA are frequently revised as new
data arrive and measuring methods are improved* In the first
month after the end of a calendar quarter, the GNP accounts
are released for the previous quarter, These data, the advance
figures, are revised in the following 2 months as data for the
previous quarter continue to arrive and be processed, These
monthly revisions are called thepreliminary and the final. Every
year, BEA releases revisions to the NIPA for the current and
the previous 3 years, reflecting new data from various annual
surveys and other information not available when the final estimate is released.
About every 5 years BEA produces a comprehensive "bench*
mark" revision, in which all NIPA components are subject to
change. In the upcoming benchmark revision, the base year for
the calculation of constant-dollar (inflation-adjusted, or real)
GNP will change from 1982 to 1987,
Real GNP measures the value of goods and services the
Nation produces at prices in a given "base" year* Valuing the
goods and services at one year's prices is necessary so that
physical quantities of goods can be added meaningfully and
compared across time. Since late 1985 the base year has been
1982.
Maintaining the base year for too many years, however, results in an increasingly inaccurate picture of the economy,
since the importance of goods with high relative prices in the
base year tends to be overemphasized. This bias is likely to be
more important as the economy moves further away from the
base year, because producers and consumers are likely to be
using fewer goods with high relative prices. Moving to 1987 as
a base year should provide a better picture of the current economy, since the current price structure is more like the 1987
structure than the 1982 structure.
The differing relative price structure between 1982 and 1987
will result in different real GNP growth rates when measured
in constant 1982 and constant 1987 dollars. Since early 1989,
BEA has published a small set of GNP data in 1987 dollars in
addition to 1982-dollar data. Between 1983 and 1989 real
growth averaged 3.6 percent in 1987 dollars and 3.9 percent in
1982 dollars. The difference is typical of benchmark revisions
and reflects the size of the bias that builds up as the base year
becomes more distant.




51

cent from their average in 1989. Prices fell even more in the regions most affected by the economic slowdown, such as New England.
Business Fixed Investment
Business fixed investment—spending by businesses on new plant
and equipment—grew 0.9 percent in real terms during 1990. Spending on new structures was down 5 percent, with continued weakness in new office-building construction. An oversupply of offices—
vacancy rates nationwide were around 20 percent in the third
quarter of the year—reduced new construction activity. However,
spending on industrial buildings—new plants—was up 8.4 percent
during 1990, after a nearly 20-percent increase in 1989.
Total equipment purchases rose 2.8 percent in real terms during
1990. Information-processing and related equipment continued to
increase faster than total equipment purchases, rising 3.3 percent
during the year. Auto purchases by businesses jumped 12.4 percent,
but industrial equipment purchases fell during 1990.
Inventory Change
The real level of business inventories fell by $1.1 billion in 1990,
and the ratio of real inventories to sales was below the 1989 figure.
This is unusual during the early stages of a downturn, and is one
factor pointing to a mild recession rather than a more serious slide.
In most business cycles, an overaccumulation of inventories toward
the end of the expansion leads to production shutdowns and layoffs, creating a sharper downturn in production and employment
than the underlying demand conditions would have produced.
Some economists suggest that computerization and the adoption of
new inventory and production management techniques (the just-intime method, for example) during the last decade have allowed
firms to reduce the size of their normal inventory holdings and to
respond more flexibly to changing economic circumstances. With
inventories relatively low at the start of this downturn, a protracted period of inventory reduction that would deepen the downturn
is less likely than in the typical postwar recession.
Exports and Imports
Export growth was strong in the second half of the expansion,
averaging 14.6 percent at an annual rate between the fourth quarter of 1986 and the fourth quarter of 1989. Though growth in real
exports of goods and services slipped to 5 percent in 1990, real exports reached an all-time high during the year, and the United
States remained the world's largest exporter. Some categories of
exports were stronger than others. Exports of capital goods rose 8.2
percent and exports of consumer goods rose a strong 17.5 percent.
Exports of foods, feeds, and beverages fell during 1990.




52

Exports of services (other than profits and interest income) have
become increasingly important to the economy, accounting for
about 17 percent of total exports in 1990. For the year as a whole,
exports of services rose 7.7 percent in real terms, compared with
merchandise export growth of 8.6 percent.
Two of the major determinants of export demand contributed to
slower export growth. First, although it remained at relatively low
levels compared with the mid-1980s, the foreign exchange value of
the dollar rose about 16 percent from late 1988 to June 1989. By
December 1989, it was still 3.3 percent above its level in December
1988. Changes in demand for U.S. exports lag behind price changes,
so by increasing the price of U.S. exports in overseas markets, the
dollar's rise through most of 1989 may have helped to reduce
demand for U.S. export products in 1990. In contrast to 1989, the
dollar fell during most of 1990. By December it had fallen almost 7
percent against the yen and almost 14 percent against the deutsche
mark compared with December 1989. All else being equal, the declining dollar in 1990 points to rising export growth in 1991.
Slower growth in countries that trade extensively with the
United States also contributed to slower export growth in 1990. For
example, Canada, which typically accounts for about 22 percent of
our merchandise exports, and the United Kingdom both were in a
recession in the second half of 1990. Growth also slowed in other
European economies in 1990 (Table 2-2). However, growth in Germany and Japan increased in 1990. For the first 11 months of 1990,
the merchandise trade deficit with Japan was down about 17 percent compared with the first 11 months of 1989.
TABLE 2-2.—Economic Performance and Projections for the United States and Other
G-7 Nations, 1989-90*
[Percent]
Country

1989

Canada
France
Germany

iSr"^""""""""»":""":""^"""""i"":"

Japan
United Kingdom
United States

Consumer price inflation 2

Real GNP growth

3.0
3.6
3.9
3.2
4.9
2.2
2.5

1990

1989

1990
1.1
2.5
4.2
2.6
6.1
1.6
.9

4.7
3.3
3.2
6.0
1.7
5.9
4.8

Total unemployment rate
1990

1989

4.1
3.4
2.6
6.3
2.4
4.6
5.2

7.5
9.4
5.6
12.1

2.3
6.2
5.2

8.1
8.9
5.0
11.1

2.1
5.8
5.4

1
Data
2

for 1990 are projections, except for the United States, which are preliminary full-year estimates.
Consumer prices are measured by the private consumption deflator.
Note.—Data for GNP growth and price inflation are percent changes from previous year.
Data for Germany are only for western Germany.
Source: Organization for Economic Cooperation and Development, OECD Economic Outlook, December 1990; Department of Commerce;
and Department of Labor.

Imports grew 3.2 percent in 1990, compared with a 6-percent increase in 1989. In contrast to the early part of the expansion, when
imports of consumer goods and autos rose rapidly, consumer goods
and auto imports posted almost no increase in 1990. Instead, capital goods imports were the fastest growing major category of im


53

ports. For the year, real petroleum imports were up 2.5 percent;
however, they fell sharply in the fourth quarter.
As a result of continued export growth and slowing import
growth, the real net export deficit narrowed for the fourth consecutive year. By the end of the year, the real net export deficit was at
its lowest level since mid-1983.

Government Purchases of Goods and Services
Government purchases of goods and services, at the Federal,
State, and local levels, grew 3.8 percent in real terms during 1990.
Federal purchases rose 5.5 percent. Nondefense purchases rose 8.3
percent; however, excluding changes in Commodity Credit Corporation inventories, nondefense purchases rose 3.8 percent. Defense
purchases rose 4.7 percent during 1990, with an increase in the
fourth quarter partially reflecting spending in support of Operation
Desert Shield. State and local purchases rose 2.5 percent during
1990, with a relatively strong 8.2-percent increase in spending on
structures.

Industrial Production and Capacity Utilization
Sluggish consumer spending on goods, falling residential construction, and slowing export growth caused manufacturing output
to fall during 1990 after slowing substantially in 1989. Sharp declines in the fourth quarter led to a 1.4-percent fall in overall industrial production during 1990, as production of motor vehicles
fell more than 20 percent. Excluding motor vehicles and parts, industrial production fell 0.5 percent during 1990, compared with a
1.8-percent rise during 1989.
Slowing production in the first half and falling production in the
second half pushed down capacity utilization in the industrial
sector 3.3 percentage points during 1990. In December capacity utilization in manufacturing fell to 79.3 percent, well below the 85percent rate in April 1989, its recent peak. Utilization rates generally declined across all industries. Utilization in motor vehicle
manufacturing fell to 57 percent.

Employment
The civilian unemployment rate rose in the second half of 1990,
after remaining around a 15-year low for most of 1989 and the first
half of 1990. By December the unemployment rate had risen to 6.1
percent, about where it had been in mid-1987 (Chart 2-6). From
June to December the jobless rate for men rose 0.9 percentage
point, while the rate for women rose 0.7 percentage point. In the
second half of the year, the unemployment rate rose 1.5 percentage
points for blacks and 1.9 percentage points for teenagers. For the
entire year the civilian unemployment rate averaged 5.5 percent.
Labor force growth slowed in 1990, particularly in the first half
of the year. The labor force grew by about 250,000 people in the



54

Chart 2-6

The Unemployment Rate

The unemployment rate rose in late 1990 but was still low compared to much of the period since the
early 1970s.
Percent of civilian labor force
12

December 1982

10.8%

^^

11

10

December 1990
6.1%

\

i
1972

i

i

I

1974

i
1976

i
1978

1980

1982

1984

1986

1988

1990

Source: Department of Labor.

first half, about a quarter of the average gain experienced in the
first halves of 1988 and 1989. Much of the slowdown in the first
part of 1990 can be traced to a decline in the teenage labor force,
which fell by more than 500,000 people. The slower labor force
growth, due at least in part to the softening economy, contributed
to the stability of the unemployment rate in the first half of the
year and tempered the increases in the second half.
There was a net gain of about 650,000 jobs in 1990, following a
gain of over 2 million jobs in 1989. The net gain for the year consisted of an increase of about 1.4 million jobs in the first 6 months
of the year, followed by a decrease of 810,000 jobs in the second
half. The number of service-producing jobs rose by 1.4 million
during the year, but the number of jobs in the goods-producing
sector fell by 790,000. Temporary hiring to conduct the 1990 census
accounted for some of the first-half gain and second-half decline.
Census hiring added about 365,000 jobs to the first-half gain. The
reduction in the census work force following completion of the
census accounted for about 45 percent of the second-half decline.
Although overall employment growth slowed in 1990, the slowdown was spread unevenly across industries and regions. Every in-




55

dustry is affected by both general economic conditions and factors
unique to its business. As a result, during general upswings in economic activity some industries and regions experience shrinking
employment and income. Likewise, in downturns, some continue to
grow. Chart 2-7 illustrates differences in regional employment
growth during 1990, and Box 2-2 summarizes the year's industrial
and regional developments.
Chart 2-7 Regional Employment Growth
Employment declines were concentrated in New England, while employment grew fastest in the Mountain and
Pacific regions.
New England

Middle Atlantic

South Atlantic

Note: Growth from November 1989 to
November 1990.
Source: Department of Labor

H 4.0% and over

H 2.0% to 3.9%

Q 1.0% to 1.9%

D Less than 0.0%

Q 0.0% to 0.9%

Productivity
Growth in labor productivity in the nonfarm business sector fell
0.8 percent in 1990. Low or negative labor productivity growth is
typical in an economic slowdown, as firms tend to keep workers
even when demand slows in order to avoid costly search and training when demand increases again.
Manufacturing productivity continued its recent trend of relatively strong growth compared with other sectors. Manufacturing
productivity grew 3 percent in 1990, compared with 3.3 percent in
1989. Rising labor productivity in manufacturing helped to hold the
growth of unit labor costs to 0.3 percent, after a 0.6-percent rise in
1989. Very slow growth of unit labor costs in manufacturing is one




56

Box 2-2.—Sectoral and Regional Income and Employment
During any phase of the business cycle, some industries
shrink or grow slowly while others expand rapidly* Differences
in employment growth across regions depend on the particular
mix of expanding and contracting industries in each region.
Much of the decline in employment in 1990 in both New England and the Middle Atlantic States can, for example, be
traced to the contraction in the construction, real estate, and
finance industries. Regions dependent on durable-goods manufacturing were hurt by declining sales of consumer durables
such as automobiles. Total manufacturing employment fell by
about 570,000 over the year, with more than 79 percent of the
decline coming from durable goods manufacturing industries.
Some regions had relatively strong employment gains in
1990, Employment in the Mountain region was bolstered by
employment gains in service industries, particularly recreation
and tourism. Although the decline in construction has hurt the
timber industry in the Pacific Northwest, the region's diversified industrial base, especially in the production of aircraft and
high-technology goods, permitted relatively strong overall employment growth.
However, the changing fortunes of most industries have effects that are spread out across all regions, The contraction in
the construction industry was felt nationwide as housing starts
reached their lowest levels since 1982. Reflecting the sharp decline in the residential housing market, jobs in construction
and real estate declined in the second half of the year.
Sluggish orders and sales contributed to the slowdown in employment growth in wholesale and retail trade across all regions. In contrast, all regions gained from the substantial
growth in health services, which accounted for nearly 82 percent of the net job gain in the economy over the year. Softening business activity across the country was reflected in the
fourth quarter decline in business services employment, which
provides support services such as data-processing and advertising.
indicator that underlying inflationary pressures did not rise in
1990.
PRICES AND WAGES
Compared with the expansions of the 1970s, inflation remained
relatively low and stable throughout most of the recent expansion,
which contributed greatly to its longevity. Consumer price inflation




57

averaged only 3.1 percent a year from the business cycle trough in
November 1982 through December 1986. Core consumer price inflation averaged a higher but steadier 4.3 percent over the same
period (Chart 2-8). Much of the reduction in inflation from the late
1970s and early 1980s was due to the successful imposition and
maintenance of a stable and credible monetary policy.
Chart 2-8 Consumer Prices
Overall consumer price inflation rose temporarily in 1990. However, "core" inflation, a measure that
excludes food and energy prices, remained under control and was declining at the end of the year.
Percent change from year earlier

16

Average of All Items
Excluding Food and Energy
1982-90 = 4.5%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

Source: Department of Labor.

Broad-based measures of inflation indicated that inflation was
contained in 1990. The GNP fixed-weighted price index, a measure
that includes prices of all goods and services in the economy rather
than just consumer goods and services, was up 4.5 percent in 1990,
the same as in 1989. After rising substantially in the first quarter
of 1990, inflation measured by this index was below the 1989 average in each of the last three quarters of the year.
Price developments in early 1990 resembled those of the first
half of 1989 when a temporary rise in crude oil and food prices
pushed consumer price inflation to 5.7 percent. Consumer and producer prices were buffeted by the effects of unusually cold weather
in December 1989, which substantially reduced available supplies
of fresh fruit and vegetables and drove up the cost of petroleumbased fuels. Led by price increases in energy and food, consumer
price inflation rose to an annual rate of 8.5 percent from December




58

1989 to March 1990. A more than 21-percent annual rate increase
in apparel prices contributed to core consumer price inflation of 7.5
percent in the first quarter.
By the middle of the year, smaller food price increases and falling oil prices were reducing inflation. From March to June, consumer prices rose at a 3.5-percent annual rate, and producer prices
for finished goods rose at a negligible 0.3-percent annual rate. Core
inflation also retreated substantially, to 3.9 percent at an annual
rate.
The Iraqi invasion of Kuwait in early August and its impact on
oil prices dominated price-level movements in the second half of
1990. Crude oil prices jumped from $22 a barrel on August 1, the
day before the invasion, to their 1990 peak of $40 a barrel in the
middle of October (Chart 2-9). Prices retreated below $26 a barrel
before ending the year at around $28 a barrel. Oil prices fell rapidly to around $20 a barrel in early 1991, following the beginning of
Operation Desert Storm.
Chart 2-9 Oil Prices
Crude oil prices more than doubled from early summer to mid-October but fell thereafter.
Dollars per barrel
50

40

30

20

10

J

i

Jan

i

Feb

i

Mar

I

Apr

i

May

i

Jun

i

Jul

i

Aug

1990
Note: West Texas Intermediate crude, nearest month futures contract.
Source: New York Mercantile Exchange.

i

Sep

i

Oct

i

Nov

I

Dec

Jan
1991

Consumer and producer energy prices responded quickly to the
August oil price shock. In the last quarter of 1990, prices of other
goods and services that rely heavily on oil as fuel or as material
input rose in response to rising energy costs. For example, public




59

transportation prices rose more than 32 percent at an annual rate,
primarily because of rising airline fares. The surge in energy and
energy-related prices contributed to overall consumer prices rising
at an annual rate of 6.4 percent in the second half of the year. The
oil price decline since October reduced inflation in November and
December and should continue to reduce consumer and producer
price inflation in the early part of 1991.
Excluding food and energy, the consumer price increase of 4.8
percent in the second half of 1990 was far more moderate than the
overall increase in prices. In addition, producer prices for goods
before any processing, excluding food and energy, fell for the last 4
months of the year, suggesting that slowing economic activity was
reducing upward pressure on prices.
Although price changes were affected primarily by changes in
energy and, to a lesser extent, food prices, some longer run inflation trends continued in 1990. Price increases for consumer services
continued to rise faster than those for consumer goods. From 1982
to 1989 services prices rose 4.8 percent at an annual rate, while
prices for consumer goods less food and energy rose 3.3 percent.
During 1990 the services price index rose 5.7 percent, led by a 9.9percent rise in the price of medical care services.
Wage inflation moderated in 1990, an indication that the underlying inflation rate was under control and even declining. The
growth in the employment cost index, a measure that includes the
cost of employer-paid benefits as well as wages and salaries, began
to fall in the last three quarters of 1990 after rising consistently
throughout 1989 and the first quarter of 1990 (Chart 2-10). Continuing a trend from the last few years, benefits increased at a
faster pace than wages and salaries: 6.6 percent compared with 4
percent during 1990.
Indicators point to moderating inflation in the future. The Commodity Research Bureau's index of futures prices for raw commodities, which fell 8.2 percent during 1989, reached a peak in May
1990 and fell at an annual rate of 16 percent through the rest of
the year. A sustained decline of this size suggests continuing moderation of producer and consumer goods prices.

SUMMARY
• After growing sluggishly for the first part of 1990, the economy
entered a recession in the latter part of the year. The jump in
crude oil prices reduced spending on other products, and declining business and consumer confidence contributed to reduced spending at the end of the year.
• Interest rates were declining by the end of the year in response to a softer economy, lower underlying inflation, monetary policy easing, and the new budget law.



60

Chart 2-10

The Employment Cost Index

After being relatively flat from the second half of 1989, growth in wages and salaries, as well as total
compensation, fell in the last three quarters of 1990.
Percent change from 3 months earlier, annual rate

16
L

Total Compensation

12
10
8
6
4i
Wages and Salaries Only

2
I i i i I i i i I i i i I i i i I i i i I i i i I i i i I i
1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

Note: All private industry.
Source: Department of Labor.

• The budget deficit—as measured in the national income and
product accounts—increased as a percent of GNP from 2.5 percent in fiscal 1989 to 2.9 percent in fiscal 1990. After adjusting
for the cyclical weakness in the economy, the deficit declined
slightly as a percent of GNP from fiscal 1989 to fiscal 1990.
• Housing and consumer spending were most affected by the
slowdown. Stricter credit conditions also contributed to the
slowdown.
• The overall inflation rate, as, measured by the fixed-weighted
price index for all goods produced in the economy, rose temporarily in the first quarter of 1990 but was below^the 1989 average in each of the last three quarters of the year.

MONETARY AND FISCAL POLICY OUTLOOK
Monetary and fiscal policies exert a powerful influence on the
economy and therefore can have profound effects on the prospects
for achieving an early recovery from the current downturn and increasing long-term growth. The Administration strongly supports
stable, credible policies that provide the flexibility to mitigate the




61

downturn while maintaining a long-term focus on the goal of
strong, noninflationary economic growth.

MONETARY POLICY
Monetary policy should be credible, systematic, and consistent
with the goal of mitigating the downturn and allowing the economy to move toward a higher level of sustainable growth with a low
and stable inflation rate. The Federal Reserve faces several challenges in implementing monetary policy in 1991.
In July 1990 the Federal Reserve set a preliminary target range
of 2V2- to 6V2-percent growth for M2 during 1991, down half a percentage point from the 1990 range. This reduction is consistent
with the longer term goal of gradually reducing the underlying
rate of inflation. But with a weakening economy, it is essential
that money growth stay well within this range. Changes in velocity
that appear long-term may require the Federal Reserve to reconsider its preliminary target range. The target range for M3 is set at 1to 5-percent growth, reflecting the expectation that M3 growth
will continue to be affected by the ongoing restructuring of thrift
institutions.
In formulating monetary policy, consideration must be given to
the cyclical regularity that interest rates tend to fall as the
demand for private credit falls in a weakening economy. This tendency is particularly important to recognize if the Federal funds
rate continues to be the focus for short-run implementation of Federal Reserve policy, because a decline in interest rates during a
downturn may not be a sign of monetary easing, particularly if the
growth of money and credit has slowed. A restrictive monetary
policy would jeopardize a solid recovery from the current slowdown
and hamper prospects for long-run growth. By further reducing the
discount rate and taking action to lower the Federal funds rate as
money and credit growth slowed, inflationary pressures eased, and
the downturn continued in early 1991, the Federal Reserve has
taken action that will help mitigate the current recession.
Other challenges arise in the area of bank regulation. Through
bank regulations and supervision, the Federal Reserve and other
bank regulators have an important influence over lending activity.
Regulators should continue prudent oversight of bank lending. It is
important, however, that lending be available to creditworthy borrowers, and that regulators not be so stringent that sound banks
cannot make sound loans to sound borrowers.
The restructuring of bank assets to meet the requirements of the
Basle framework may present the Federal Reserve with additional
policy challenges. In the longer term, the movement away from
short-term, adjustable-rate loans (like commercial and industrial
loans) to longer term, fixed-rate loans, such as many mortgages




62

and mortgage-backed securities, may increase the exposure of
banks to sudden swings in short-term interest rates. Since banks
must offer competitive rates to attract funds, a quick rise in shortterm interest rates would tend to raise their costs relative to their
income. These possibilities would adversely affect economic growth.
Bank regulators are currently studying ways to incorporate this interest rate risk into capital guidelines.
FISCAL POLICY
The new budget law, signed in November 1990, includes deficitreduction guidelines and budget process reforms that will have substantial beneficial effects on the economy in 1991 and the years
beyond. The budget law is expected to reduce the deficit by almost
one-half trillion dollars over the next 5 years from what it otherwise
would have been.

The Effects of Fiscal Policy
Fiscal policy comprises the spending, tax, and borrowing activities of the Federal Government. Earlier in this chapter, several different measures of the deficit were discussed. While changes in the
deficit have important effects on the economy, the composition of
the underlying expenditure and tax changes can have extremely
important effects as well.
Increases in Federal purchases have the potential to boost
demand and stimulate the economy temporarily, but eventually
they put upward pressure on inflation and interest rates. That
upward pressure will harm interest-sensitive activities in the economy such as investment and ultimately lower the economy's productive capacity. When considering the composition of Federal
spending, investments should be pursued that promote long-run
growth, such as research and development and public infrastructure
projects that pass stringent cost-benefit criteria.
The size and structure of Federal taxes and transfers also have
significant effects on the economy. High marginal tax rates have
been shown to discourage work effort, saving, and investment. Thus,
a guiding principle behind the landmark tax reforms of 1981 and
1986 was to lower tax rates significantly.
The effective tax rate, the rate actually paid on earnings or investment income, may differ from the more commonly quoted statutory tax rate. A prime example occurs in the case of capital gains.
Consider a growth stock, purchased for $1,000 in 1970 and sold in
1990, that pays no dividends. Over this period the average annual
inflation rate was 6 percent. Suppose that the stock had an average
annual real return of 2 percent. In 1990, the stock would sell for
$3,765.63 more than the purchase price. Tax payments would be 28
percent of this capital gain and would be collected when the asset
is sold, rather than each year as the asset increases in value. This




63

deferral of tax payments lowers the effective tax rate. A large portion of the increase in the value of the asset, however, is due to
inflation and is not a real gain. In fact, the after-tax real return on
the asset is only 0.73 percent, well below the pretax real return of
2 percent. The net effect of inflation and deferral leads to an effective tax rate of 63 percent on the real capital gain, much higher
than the 28 percent statutory tax rate.
The effects of fiscal policy on the economy also depend crucially
on expectations for future spending and taxes as well as on their
current levels. The new budget law, for example, reduces the
budget deficit from what otherwise would be expected. Economic
theory and empirical evidence indicate that expectations of deficit
reduction in future years, if the deficit reduction commitment is
credible, can lower interest rates as financial market participants
observe that the government will be lowering its future demand in
the credit market. That can mitigate a potential short-run contractionary effect. In other words, expectations of lower interest rates
in the future will lower long-term interest rates today. Lower longterm interest rates will reduce the cost of capital, stimulating investment and economic growth relative to what would be predicted
if expectations were ignored.

Projected Deficit Reduction: 1991-95
Calculating how much the new budget law and its enforcement
provisions, known as the Budget Enforcement Act, are expected to
cut the deficit requires an estimate of the preexisting baseline deficit. The baseline is calculated from a simulation of future expenditure and revenue patterns that assumes no intervening policy
changes. The calculation depends, for example, on economic assumptions about GNP growth and inflation, and demographic
changes in the population. Any tax or spending changes that are
already part of the law, such as cost-of-living increases for entitlement recipients, are incorporated in the baseline calculation. By
calculating the deficit reduction against the preexisting baseline,
the size of the reduction is measured relative to what the deficit
would have been had no changes in the law occurred and the underlying baseline assumptions materialized.
Obviously, different economic assumptions will produce different
baselines and also different future levels of the deficit. However,
different economic assumptions will have a relatively small effect
on the estimated reduction in the deficit relative to the corresponding baselines.
The majority of the budget law's deficit reduction comes from
slowing the growth of expenditures. Discretionary spending, which
is spending whose levels the Congress sets each year, is expected to
account for roughly 40 percent of the reduction from the baseline.




64

Much of this total is expected to come from reductions in defense
outlays.
Slowing the growth of entitlement and mandatory spending programs, which are statutory obligations such as medicare and agriculture programs, is expected to account for roughly 20 percent of
the 5-year deficit reduction. The smaller deficit resulting from the
combination of spending and tax changes, relative to the baseline,
will also reduce interest payments on the debt by a significant
amount over the next 5 years.
The new budget law raises almost $150 billion in additional tax
revenue over the fiscal 1991-95 period. While marginal tax rates
for the upper tail of the income distribution were reduced from 33
to 31 percent, marginal tax rates in the extreme upper tail increased from 28 to 31 percent. The affluent will pay higher taxes as
a consequence of a new phaseout of personal exemptions, limitation
of itemized deductions, and new excise taxes levied on selected
luxury items, such as expensive furs, jewelry, and cars. About onequarter of the total revenue increase comes from excise tax increases on gasoline, alcohol, and tobacco.
The new budget law also provides significantly more assistance to
the working poor by adding about $18 billion to the earned income
tax credit (EITC) over the next 5 years. The EITC is a refundable
tax credit given to low-wage taxpayers with children.
Chart 2-11 shows the change in the projected NIPA and NIPA
structural deficit for the next 5 years. The NIPA structural deficit
is expected to decline in each of the next 5 years, as the provisions
of the new budget law are fully implemented. In contrast, the
NIPA deficit is expected to increase in 1991 as the automatic stabilizers cushion the effect of the downturn. After 1992 the NIPA deficit is also expected to fall steadily.
Budget Process Reform
By reforming the budget process the new budget law has improved the credibility and stability of fiscal policy. These reforms
significantly increase the strength of the previous budget law and
give fiscal policy a longer term focus. The new law defines two
main types of spending: mandatory and discretionary. Under the
new law, mandatory spending and tax legislation is limited by a
"pay-as-you-go" test. Under this test any new mandatory spending
legislation or proposed tax decreases for the next 5 years must be
offset by a corresponding decrease in other mandatory spending or
by an increase in tax revenue.
Legally binding caps have been established on discretionary
spending for each of the next 5 years. For 1991 through 1993, caps
are placed on three separate categories of discretionary spending:
domestic, defense, and international. In 1994 and 1995, a single cap
covers total discretionary spending. In each year the spending on




65

Chart 2-11 Reductions in the Federal Budget Deficit, NIPA Basis
With the new budget law, the structural deficit is expected to decrease in each of the next 5 years;
the actual deficit is expected to rise before falling.
Billions of dollars

80

60
40

While the structural
deficit declines...

20
0
...automatic stabilizers

-20

cause the actual
deficit to rise.

-40
-60

1991

1992

1993

1994

1995

Fiscal Year
Reduction in
Actual NIPA Deficit
from Previous Year

Reduction in
NIPA Structural Deficit
from Previous Year

Source: Department of Commerce.

different programs within a category can change, but total spending for each category cannot exceed the cap. Hence, the caps impose
a "flexible freeze" on spending. Moreover, saving in one category
cannot be credited to another category. The discretionary caps will
be adjusted for inflation and a limited set of technical factors.
Funding for the military operation in the Persian Gulf will not count
against the defense discretionary spending caps.
Discretionary spending that exceeds the caps, or mandatory spending or receipts legislation that violates the pay-as-you-go rule, will
trigger sequesters, which are automatic, across-the-board cuts in discretionary or mandatory spending. "End-of-session" sequesters
would take effect 15 days after the Congress adjourns at the end of
the fiscal year. They apply to the category that violates the rule. If
domestic discretionary spending violates its spending caps, for example, it is cut. If the pay-as-you-go rule is violated, entitlement
spending is reduced. An end-of-session sequester has already taken
place for the fiscal 1991 budget because new spending legislation,
as a result of an unintentional drafting error, violated the spending
cap on international discretionary programs.
A "within session" sequester can be applied to discretionary
spending during the fiscal year if supplemental appropriations leg-




66

islation—appropriations made for the fiscal year, during the fiscal
year—violate the discretionary spending caps before the last quarter of the fiscal year. If supplemental legislation violates these caps
during the fourth quarter, a "look-back" sequester lowers the following year's caps by the amount of the overrun. An example of
how the three types of sequesters would work in the fiscal 1992
budget cycle is given in Chart 2-12.
Chart 2-12 The Fiscal 1992 Budget Cycle

Fiscal 1992
Jan 1,1991

Apr1

Jul 1

Oct 1

Jan 1,1992

Apr 1

Feb4,1991
I
The Administration submits I The Congress adjourns.
fiscal 1992 budget to the Congress.
Within 15 days, "end of
It includes updated economic I
session" sequester for
forecasts, meets discretionary I both discretionary and
spending limits, and abides by
»pay-as~you-go" spending
the "pay-as-you-go" rule.
may take effect

JuM

Oct 1

Jan 1,1993

A "look-back" sequester
may reduce discretionary
caps for fiscal 1993.

A "within session" sequester
on discretionary caps
may take effect.

The Congress develops
and passes concurrent
budget resolution and
appropriations bills.

Sources: Council of Economic Advisers and Office of Management and Budget.

Under the new budget process, discretionary funding that the
President designates as being required to meet an emergency and
that the Congress designates as an emergency by statute, would
not count against the discretionary caps. If the emergency funding
affected mandatory spending, it would not be counted for pay-asyou-go purposes. Because the President now has the authority to
require that all items meet the enforcement provisions, other than
those the President designates an emergency, the Congress cannot
avoid the discretionary caps or pay-as-you-go rule by passing emergency supplemental appropriations bills.
The budget law sets overall deficit targets for each year and
allows the deficit targets to be adjusted in response to changes in
short-run economic conditions in fiscal 1992 and 1993. If economic
growth is lower than expected, the deficit target is raised. If eco-




67

nomic growth is higher than expected, the deficit target is lowered.
Adjusting for changing economic conditions preserves the "automatic stabilizers" built into spending programs and the tax code.
When growth is low, entitlement spending increases and tax revenues fall, increasing the budget deficit but cushioning personal incomes and spending. The opposite happens when growth accelerates. In fiscal 1994 and 1995 the President can choose not to adjust
the deficit targets.
Several additional reforms have been made in the budget process. Budget resolutions, which are used by the Congress to place
spending limits on its committees, will now cover 5 fiscal years.
That will make the long-term implications of budget legislation
more apparent when members vote on the resolutions. Furthermore, the Social Security trust fund is now protected by "firewalls," procedural rules in both the House and Senate that make it
difficult to pass any resolution that would reduce the actuarial balance of the fund.

Federal Credit Reform
Another important feature of the new budget law reforms the
budgetary treatment of Federal credit programs. Government
spending on credit activities is best measured by the subsidies embodied in Federal direct loans and loan guarantees. For years, the
budget did not record these expenses, which reduced the scrutiny
given to credit programs. The Federal Credit Reform Act of 1990,
part of the 1990 budget law, requires that the subsidy cost of Federal credit be treated in the same manner as other Federal spending
in the budget process.
Additional steps were taken to ensure the financial soundness of
federally sponsored, privately funded businesses, called government-sponsored enterprises (GSEs). The contingent liabilities incurred by GSEs have risen dramatically. Both the Treasury Department and the Congressional Budget Office are required to
submit studies on the financial soundness of these institutions.
These studies will provide the background for legislation, to be introduced by September 15, 1991, that will ensure the fiscal health
of GSEs (see Chapter 5 for more detail).

Budget Outlook for Fiscal 1991 and Fiscal 1992
The consolidated and NIPA deficits are expected to be higher in
fiscal 1991 than they were in fiscal 1990. Automatic stabilizers are
likely to add to the budget deficit in fiscal 1991, but they will help
mitigate the downturn without altering the course of long-term
structural deficit reductions. An increase in expected outlays of deposit insurance funds in fiscal 1991 also contributes to the higher
projected consolidated budget deficit, but as described earlier, RTC
and other deposit insurance outlays have a negligible net effect on




68

capital markets. For fiscal 1991 the consolidated deficit is expected
to be $318 billion, compared with $220 billion in fiscal 1990, with
deposit insurance outlays projected to rise by $53 billion. On a
NIPA basis, which excludes spending for deposit insurance, the deficit is expected to be $204 billion in fiscal 1991, compared with $158
billion in fiscal 1990.
For fiscal 1992 both the consolidated and NIPA deficits are projected to improve, compared with fiscal 1991. The consolidated deficit is expected to be $281 billion, and the NIPA deficit is expected
to be $182 billion. Much of this improvement is due to a return to
more normal growth projected for fiscal 1992.
The economic downturn followed by the projected upswing will
obscure the tendency for the structural deficit to decline. The
structural NIPA deficit is projected to fall by $7.5 billion in fiscal
1991 and then by an additional $16.2 billion in fiscal 1992.
SUMMARY
• The Administration supports stable, credible policies that provide the flexibility to mitigate the downturn while maintaining
a long-term focus on the goal of strong economic growth and
low and stable inflation.
• An important characteristic of a credible and systematic monetary policy is a commitment to sustain the rate of growth of
money and credit during a downturn. That commitment would
allow interest rates to decline and mitigate the downturn.
• The Omnibus Budget Reconciliation Act of 1990 is a substantial and credible deficit reduction agreement that is expected
to reduce the deficit by almost one-half trillion dollars over the
next 5 years and add to national saving and long-term growth.
• Because of the downturn, the automatic stabilizers are likely
to add to the budget deficit in 1991, but they will help bring
the economy to a quick recovery without altering the course of
long-term structural deficit reductions.

THE ECONOMIC OUTLOOK
The Administration projects that the downturn in the economy is
likely to continue into the early part of 1991 and that recovery is
likely to begin by the middle of the year. After the recovery, the
economy is then expected to return to a strong growth path of
around 3 percent through the mid-1990s. In the long run, projected
reductions in labor force growth may lead to lower real GNP
growth, unless they are offset by increased immigration or greater
labor force participation.




69

THE OUTLOOK FOR THE SHORT TERM
Reductions in real consumer income during the last two quarters
of 1990, low levels of consumer and business confidence, and continued tight credit conditions all point to a further decline in real
activity in the first quarter of this year.
There have been eight other recessions since World War II. The
average recession lasted 11 months, two lasted 16 months, and one
was only 6 months. The typical recession has been associated with
a 2.6-percent decline in real GNP from peak to trough, although
declines have been as high as 4.3 percent and as low as 1 percent.
Compared with the average of these previous recessions, the current downturn is likely to be shallow and relatively short, and the
prospects for a recovery of economic growth by mid-1991 are good.
The economy continues to have low inventories relative to sales, indicating that a prolonged period of inventory liquidation is not
likely in the short term. More importantly, in the early stages of
previous downturns both inflation and interest rates were either
high or rising. In 1982, for example, the Federal Reserve had to
follow a stringent monetary policy to reduce entrenched inflation
expectations. In the current situation, the core inflation rate is
moderating and is far lower than in the 1974-75 and 1981-82 recessions, partly because the Federal Reserve has followed a credible,
systematic policy in recent years. Moderating inflation, coupled
with Federal Reserve credibility in fighting inflation, leaves room
for the Federal Reserve's policy to soften the downturn without
raising expectations of higher inflation.
Additional developments in 1990 point to growth recovering in
the second half of 1991. Lower long-term interest rates will begin to
have positive effects on investment spending. The loosening of
monetary policy that occurred in the fourth quarter of 1990 and
early 1991 will also begin to affect consumer and business spending
in the middle of 1991. Some analysts estimate that it takes at least
five quarters for a change in the value of the dollar to have a substantial effect on exports and imports. Thus, the lagged effects on
exports of the decline in the foreign exchange value of the dollar
are likely to be felt well into 1991. In addition, real net exports are
expected to improve because the Nation's major trading partners
are expected, on average, to experience stronger growth than the
United States.
A final important ingredient to recovery is a successful resolution to the Persian Gulf crisis. Oil prices have already declined substantially, which will remove a large drag on the economy. In addition, successful resolution of the crisis will strengthen the economy
by boosting consumer and business confidence.
The Administration expects real GNP to increase 0.9 percent from
the fourth quarter of 1990 to the fourth quarter of 1991 (Table 2-3).




70

This rate is higher than the 0.3-percent growth during 1990 because
of the fourth-quarter decline in 1990. The sectors most likely to contribute to economic growth are those that are particularly sensitive
to lower interest rates, easier credit conditions, and the lower
dollar in 1990. For example, residential construction, consumer durables, and business spending on new plant and equipment are
likely to improve as the year progresses. Exports of manufactured
goods and farm commodities are likely to rise. A return to higher
export growth for manufacturing would also stimulate further
spending on new plant and equipment needed to meet the rising
export demand.
TABLE 2-3.—Economic Outlook for 1991
1991 Forecast

1990 »

Item

Percent change, fourth quarter to fourth quarter
0.3

Personal consumption expenditures
Nonresidential fixed investment
Residential investment
Federal purchases of goods and services
State and local purchases of goods and services

0.9

!9

Real gross national product

.5
1.6
1.5

-8.7

5.5
2.5

6NP implicit price deflator
Consumer price index 2
Compensation per hour s
Output per hour 8

4.0
6.2
-1.8

-.1

-3.9

1.8

4.3
4.3
6.0
1.6

Fourth quarter level
Unemployment rate (percent)4.
Housing starts (millions of units, annual rate)
1
Preliminary.
8
For urban wage earners and clerical
3
Nonfarm business, all persons.
4

5.8
1.0

6.6
1.2

workers.

Unemployed as percent of labor force including resident Armed Forces.
Note.—Based on seasonally adjusted data.
Sources: Council of Economic Advisers, Department of Commerce, Department of Labor, Department of the Treasury, and Office
of Management and Budget.

Inflation in 1991 should be lower than in 1990, barring a resurgence of oil price rises or other price shocks. The economic slowdown in 1990 created excess capacity in many industries and eased
tightness in labor markets, which will contribute to downward
pressure on underlying inflation during the year.
In 1992, growth is expected to be robust as the economy continues to rebound from its sluggish growth in 1989-90 and the downturn that began in late 1990. Business investment and construction
activity are expected to be especially strong. The unemployment
rate is projected to decline.

Forecast Uncertainties
Economic forecasting is an imprecise science. Natural disasters
and other unexpected developments can cause forecasts to go awry.
Changes in the policies upon which the forecasts are based can
cause actual events to be substantially different from the forecast.




71

Ultimately, economic forecasts are based largely on predictions
about human behavior, usually taking the previous patterns of behavior as a guide. But human behavior is complex, difficult to predict, and subject to change. People do not always respond the same
way, or with the same speed, in what appear to be similar circumstances.
Forecasts made around turning points of the business cycle are
even less precise than those made during extended expansions.
Moreover, the conflict in the Persian Gulf creates uncertainty
about future oil price developments.
In the longer term, another important area of uncertainty arises
from the possibility of rising protectionism and increasing trade
frictions between countries. If the Uruguay Round of the General
Agreement on Tariffs and Trade is not completed successfully,
countries may begin to close their markets to protect their domestic industries. That would increase the risk of slower long-term
growth for all countries. In addition, an increase in the barriers to
trade would lead to a decrease in U.S. exports, which have been a
key source of growth for the economy over the last few years. The
downturn facing the United States and other countries around the
world jeopardizes more open trading, because governments and
workers typically seek to maintain domestic employment levels by
reducing imports during downturns. (Chapter 7 discusses the role
open foreign markets play in economic growth.)
Table 2-4 illustrates the uncertainties of economic forecasting by
providing a range of short-term outcomes. The higher growth alternative is consistent with a sharper and faster rebound in economic
activity than the Administration projection. The lower growth alternative is consistent with the behavior of real growth during an
average postwar recession.
Since real growth, inflation, interest rates, and employment
affect Federal spending and receipts, the projected budget deficit
also varies across the three projections. A slow recovery with relatively high unemployment, low income growth, and higher interest
rates will lower tax receipts and increase spending through automatic stabilizers, leading to a higher deficit. On the other hand, a
faster, more robust acceleration in income and employment growth
could substantially cut the deficit from the Administration projection.

THE PROSPECTS FOR GROWTH IN THE LONGER TERM
Short-term projections are heavily influenced by recent events.
Developments that temporarily raise or lower the overall level of
demand can have a substantial effect on the near-term outlook for
real growth and inflation. In the longer term the main determi-




72

TABLE 2-4.—Alternative Projections and Their Impact on the Deficit, 1991-92
Item

Calendar year 1991

Calendar year 1992

Percent change,
fourth quarter to fourth quarter
Real gross national product:
Higher growth
Administration
Lower growth

1.3
.9
-1.3

3.8
3.6
3.5

GNP implicit price deflator:
4.5
4.3
4.1

Higher growth
Administration
Lower growth

4.2
3.8
3.6

Percent
Total unemployment rate:
6.5
6.7
7.1

6.4
6.6
6.9

6.7
6.4
6.2

Higher growth
Administration
Lower Growth

6.6
6.0
5.7

Interest rate, 91-day Treasury bills:
Higher growth
Administration
Lower growth

.

.

Billions of dollars
(Fiscal years)
Budget deficit:
204
207
222

Higher growth
Administration
Lower growth . . ..

186
193
225

Note.—Deficit on a consolidated basis excluding deposit insurance outlays.
Sources: Council of Economic Advisers, Department of the Treasury, and Office of Management and Budget.

nants of average growth are the factors that influence the overall
supply of goods and services generated in the economy.
One way to focus on supply factors is to decompose real GNP
growth into four components: (1) labor force growth, the growth in
the number of people available for work each year; (2) the change
in the share of the labor force that is employed, or the employment
rate; (3) the growth in the number of hours an employed person
works each year, represented as the growth in average weekly
hours; and (4) labor productivity growth, the growth in the amount
of goods and services that can be produced with an hour of labor.
Table 2-5 shows the contribution of various factors in expected
average real GNP growth during the next 6 years, compared with
previous periods.

Growth During the Next 6 Years
Economic growth is projected to average about 2.6 percent a year
during the next 6 years (see Table 2-6 for year-by-year projections).
This projection assumes an average rise of 1.3 percent a year in the
labor force, a lower growth rate than in the 1980s. Slower labor
force growth results both from slight reductions in projected labor




73

TABLE 2-5.—Accounting for Growth in Real GNP, 1948-96
[Average annual percent change]
1948 IV

1973 IV

1981 III

1990 III

1981 III

1981 III

1990 III

1996 IV

to

to

Item

to

to

GROWTH IN:

15
.2

18

1.1
.4

0.9

1.8
_l

2.4
_4

1.6
2

1.3
.1

17
.1

20
.1

1.8

1.4

1.8
_4

2.1
-.7

2.1
.0

1.1
_.l

9) EQUALS- Hours of all persons (nonfarm business)
10) PLUS: Output per hour (productivity, nonfarm business)

13
2.0

13

2.1
1.0

1.0
1.8

11) EQUALS: Nonfarm business output
12) LESS- Nonfarm business output as a share of real GNP 2

3.3

o

2.0
_1

3.1
4

2.8
2

13) EQUALS: Real GNP

3.3

2.2

2.8

2.6

1) Civilian noninstitutional population aged 16 and over
2) PLUS: Civilian labor force participation rate
3) EQUALS: Civilian labor force
4) PLUS- Civilian employment rate
5) EQUALS- Civilian employment
6) PLUS: Nonfarm business employment as a share of civilian employment l ...
7) EQUALS: Nonfarm business employment
8) PLUS- Average weekly hours (nonfarm business)

1
Line
8

six translates the civilian employment growth rate into the nonfarm business employment growth rate.
Line 13 translates nonfarm business output back into output for all sectors, or GNP, which includes the output of farms and
general government.
Note.—Data may not add due to rounding.
Time periods for the first two columns are from business cycle peak to business cycle peak to avoid cyclical effects.
Sources: Council of Economic Advisers, Department of Commerce, Department of Labor, Department of the Treasury, and Office
of Management and Budget.

force participation rates and from slower growth in the workingage population. In the postwar period, growth in the working-age
population averaged 1.5 percent, but it is predicted to rise at only a
0.9-percent rate over the next 6 years. Labor force participation
and population growth projections also depend on factors such as
immigration. The labor force growth projections assume lower
levels of immigration than in the 1980s. However, the Immigration
Act of 1990, which allows a substantial increase in immigration
and emphasizes skill-based entry criteria, may increase the size of
the labor force, which would lead to faster labor force growth than
reflected in Table 2-6. It could also increase productivity.
Decreases in the unemployment rate are expected to contribute
less than 0.1 percentage point on average, each year to real GNP
growth from 1991 to 1996. A fall in the unemployment rate in the
1991-92 period, as the economy rebounds from the current slowdown, contributes the most to GNP. As the economy nears full employment, increases in employment make smaller contributions to
growth.
Average weekly hours are expected to decline slightly and to
have little effect on average real GNP growth during 1991-96. In
1991 and 1992, hours seem likely to recover somewhat from their
cyclically low levels in 1990. In the latter part of the period the
long-term downward trend in average weekly hours is expected to
reassert itself.




74

TABLE 2-6.—Administration Economic Assumptions, 1991-96
Item

1990 »

1991

1992

1993

1994

1995

1996

Percent change, fo urth quarter to fourth quarter
Real GNP

03

09

36

3.4

3.2

3.0

30

Real compensation per hour *

1.8

1.6

2.0

2.1

2.0

2.0

2.0

_.l

1.6

1.9

1.9

1.9

1.9

1.9

6.2

4.3

3.9

3.6

3.5

3.4

33

Output per hour * ..
Consumer price index a

/tnnual level
4

Interest rate, 91-day Treasury bills (percent)
Unemployment rate (percent)6

7.5

6.4

6.0

5.8

5.6

5.4

5.3

119.6

119.0

120.8

122.9

125.1

127.3

129.2

5.4

6.7

6.6

6.2

5.8

5.4

5.1

1
2 Preliminary.
Nonfarm business,
8

all persons.
For urban wage earners and clerical workers.

> resident Armed Forces.
• Unemployed as percent of labor force including resident Armed Forces.
Sources: Council of Economic Advisers, Department of Commerce, Department of Labor, Department of the Treasury, and Office
of Management and Budget.

A key assumption underlying the average 2.6-percent growth
rate is that labor productivity will average 1.8 percent over the
forecast horizon. After 1991, assuming the Administration's progrowth initiatives are adopted, underlying economic growth is expected to approach 3 percent and labor productivity is projected to
be 1.9 percent. That is very close to the 1.7-percent average rate of
productivity growth since 1950. It is below the 2.4-percent rise from
1950 to 1969, but higher than average productivity growth in the
1980s. This rise in labor productivity will be facilitated by the
higher level of capital accumulation that results from lower Federal borrowing and lower real interest rates.
Inflation and interest rate projections are consistent with the
longer term assumptions concerning monetary and fiscal policy.
These projections reflect a monetary policy aimed at gradually reducing the underlying inflation rate over the next 6 years. In response to lower inflation and reduced Federal borrowing requirements, interest rates, both nominal and real, are likely to decline.

Growth Beyond the Mid-1990s
For the years beyond the mid-1990s, demographic factors suggest
that the average rate of real GNP growth will slow. Labor force
growth, for example, is expected to decline substantially throughout the next 40 years. Since 1948 the labor force has grown by 1.7
percent a year. However, from 1990 to 2010 labor force growth is
projected to average about 0.9 percent a year and is projected to
decline 0.2 percent a year from 2010 to 2030. That is consistent
with a projected slowdown in population growth and a projected decline in the overall labor force participation rate.




75

Population growth (the Census Bureau middle projection) is projected to average just under 0.5 percent a year from 1990 to 2030,
less than half the rate of annual average population growth between 1960 and 1990. The overall labor force participation rate is
projected to rise through about 2000, the last year the baby-boom
generation is entirely within the range of working ages that have
traditionally had the highest participation rates. As the population
ages, the overall participation rate would decline even without a
fall in the participation rate of any single demographic group.
Overall labor force participation is projected to show little net
growth between 1990 and 2010 and to decline after 2010.
The projection of slowing real GNP growth over the very long
term rests upon demographic projections that are largely extrapolations of current and past population growth and labor force behavior. Several factors would cause the simple extrapolations to
understate the average rate of economic growth: an unexpected increase in fertility rates; an increase in labor force participation
rates for older Americans, perhaps due to increasing longevity; or
an increased number of highly skilled immigrants. Nevertheless,
the simple extrapolations provide a benchmark against which longterm growth projections can be compared.
It is also important to note that although real GNP growth is
likely to decline over the next 40 years, this does not suggest that
productivity growth will decline. With real output per hour rising
at 1.9 percent a year, the standard of living would more than
double by 2030. Sound policies that create incentives for saving and
investment and a better educated work force will help to ensure
the maximum sustainable rise in the standard of living.

SUMMARY
• The downturn that began in the second half of 1990 is expected
to continue into early 1991, with the economy recovering by
mid-1991. While future oil prices remain uncertain, oil prices
in the range they reached following the successful beginning of
Operation Desert Storm will reduce the drag on the economy
caused by the oil shock in the latter half of 1990.
• Economic activity will be further strengthened by lower interest rates and the decline in the value of the dollar that occurred in 1990. Inflation is projected to moderate, barring an
unexpected rise in oil prices above their late 1990 levels.
• In the longer term, several factors have paved the way for increased private capital accumulation and faster productivity
growth. The economy's underlying medium-term growth potential is likely to be about 3 percent a year. Inflation and nominal
interest rates are projected to decline.




76

• In the very long term, the average rate of real GNP growth is
likely to fall, due to a slower growing labor force. If productivity growth holds up, living standards will continue to increase.

CONCLUSION
The economy, which was already growing sluggishly for various
reasons, entered a recession in the latter part of 1990. The downturn was caused in large part by the economic effects of the oil
shock following Iraq's invasion of Kuwait.
Recovery is likely to begin by mid-1991, making the downturn
relatively mild. In contrast to other slowdowns, the economy entered this recession with low inventories, thereby decreasing the
likelihood of substantial further cuts in production. Unlike previous postwar recessions when inflation was rising, in the current situation core inflation is relatively low and money growth has been
slow, thus there is room for flexibility in Federal Reserve policy to
mitigate the downturn without raising inflation expectations. Declines in the exchange value of the dollar in 1990 and the monetary
policy easing that occurred at the end of 1990 and early 1991 will
also help to increase growth in 1991.
Over the longer term, the new multiyear, enforceable budget law
will lower the structural Federal deficit and, therefore, Federal
borrowing requirements. Combined with a monetary policy aimed
at maintaining strong economic growth while gradually reducing
the underlying inflation rate, both nominal and real interest rates
are likely to decline. Credible monetary policy and growth-oriented
fiscal policy will facilitate higher levels of capital accumulation,
raise labor productivity, and enhance the economy's growth potential.




77




CHAPTER 3

Oil Price Shocks and Economic Policy
IN THE SECOND HALF OF 1990, the world economy was hit
with a sudden oil price increase reminiscent of the 1970s. From an
average of about $17 a barrel in June 1990, the price of oil rose to
an average of $36 in October, before declining in November and
December and again in January 1991. This oil price shock was triggered by the Iraqi invasion of Kuwait, and the U.S.-led response to
this act of aggression averted an even larger and longer lasting oil
price shock.
Because oil is used widely, large and abrupt increases in its price
have significant implications for the world economy and for both
macroeconomic policy—fiscal and monetary policy—and policies
concerned with energy and other markets. During 1989 the United
States and the other major industrialized market economies used
about 37 million barrels of oil products each day. Other countries,
including less developed countries, consumed an additional 28 million barrels of these products. In the United States, uncertainty
about oil prices and the resolution of the Persian Gulf situation
contributed to the erosion of consumer and business confidence evident at the end of 1990. It is widely expected that as the situation
is resolved, confidence will rise and oil prices will stabilize in a
range not far from that prevailing before the price shock began.
But even then considerable uncertainty about future oil prices is
likely to remain.
Perceptions about the effects of oil price shocks on the U.S. economy reflect, in large part, the extremely high inflation and unemployment rates recorded at the time of the oil price shocks of 197374 and 1979-81. At the time of the first oil price shock, the inflation rate, as measured by the consumer price index, soared to 12.3
percent in 1974, followed by a rise of the unemployment rate to a
postwar record high of 9 percent in May 1975. Similar adverse effects occurred at the time of the second oil price shock. Inflation
rose to 13.3 percent in 1979, and the unemployment rate eventually
reached 10.8 percent, a new postwar high, in November 1982.
Although the recent oil price shock increased inflation and unemployment, there is no reason to believe that the deterioration of economic performance will be as large or as long lasting as the experience of the 1970s might suggest. Not only does it now appear that




79

this shock will be less severe, but the U.S. economy is now better
able to adjust to any given change in oil prices. Compared with the
1970s, more systematic macroeconomic policies have kept the underlying rate of inflation relatively low and relatively stable in
recent years. The resulting credibility that inflation will be contained enables monetary policy to respond to the recent shock
without causing a prolonged recession or a permanent increase in
inflation. In addition, a policy of deregulation has increased the
flexibility of energy and other markets to respond to price shocks,
and the amount of oil used has decreased relative to the size of the
economy.
With the benefit of hindsight, it is clear that misguided macroeconomic policies in the period preceding the previous oil price
shocks brought on high and rising underlying inflation. That made
it unlikely that a more expansionary monetary policy would have
been able to reduce the ensuing output declines without producing
unduly large increases in prices. It is just as clear that misguided
energy policies, both those in place when the shocks hit and those
instituted afterward, significantly reduced the economy's flexibility
and thus its ability to temper the effects of the shocks. It was regulation, and not events in the Middle East, that forced U.S. consumers to wait in long lines to buy gasoline. Historical experience,
along with economic research on the oil price shocks of the 1970s,
has taught us much about designing macroeconomic and energy
policies for a world subject to such shocks. Given the prospect of
continuing uncertainty regarding future oil prices, it is essential
that our policies correctly reflect the meaning and importance of
energy security, let markets work to balance the forces of supply and
demand, and set out a credible long-term course for the future.

SIZE AND DURATION OF OIL PRICE SHOCKS
Most price changes merit little attention from policymakers.
Indeed, prices that adjust continually to reflect changing conditions
are a sign of a healthy, flexible economy. A price shock, on the
other hand, is a large and unexpected change in the price of a commodity that can affect the economy as a whole. The most important price shocks to the U.S. economy during the past two decades
have been changes in the price of oil. Because oil is consumed in
significant amounts and is used intensively in the production of
other goods, and because the United States imports a large amount
of oil, oil price shocks can have large economy-wide repercussions.
RECENT OIL PRICE MOVEMENTS
The recent increase in oil prices began in July 1990, when the
members of the Organization of Petroleum Exporting Countries




80

(OPEC) began negotiations to reduce their supply of oil to the
world market. The spot market price, the price at which crude oil
for near-term delivery is bought and sold, rose from an average of
about $17 a barrel in June 1990 to almost $21 at the end of July.
After Iraq invaded Kuwait on August 2, the spot price rose
quickly, reaching about $28 a barrel on August 6. The spot price
went as high as $40 a barrel in mid-October and then generally declined through the end of 1990. Soon after the start of Operation
Desert Storm in mid-January 1991, the spot price fell to about $20
a barrel, not far from its level just before Iraq invaded Kuwait.
Soon after Iraq's invasion, uncertainty concerning the timing of
the resolution of the Gulf crisis increased uncertainty about future
oil supplies, which in turn increased the precautionary demand for
oil inventories. Several countries began to increase their oil production in August, and by November these additional supplies had
completely offset the loss of 4-3 million barrels in daily exports from
Iraq and Kuwait. However, these production increases left less
standby crude supply and unused refining capacity to meet future
contingencies. Changes in the spot price of oil reflect uncertainty
about future supply conditions. However, the price of oil expected
to prevail further in the future has changed relatively little since
the oil price shock began; the price of oil to be delivered near the
end of 1991 has typically differed by less than $4 a barrel from its
pre-invasion level.
It is clear that the proximate cause of the rapid oil price increase
late in the summer of 1990 was Iraq's invasion of Kuwait and its
threat to Saudi Arabia. Had Iraq dominated both Kuwait and
Saudi Arabia, it would have controlled almost one-half of the
world's proven oil reserves. The international community responded to this aggression vigorously, deploying multinational forces and
initiating an embargo against Iraq. These responses to the Iraqi
threats to both peace and economic security have averted even
sharper and longer lasting increases in the price of oil and a greater
deterioration of economic conditions.

COMPARISON WITH PREVIOUS SHOCKS
The oil price shock that began in 1990 differs significantly from
the price shocks of the 1970s in several respects. Before the sharp
1973-74 increases, oil prices had fallen for several decades relative
to the prices of nonenergy goods and coal. That decline in real oil
prices encouraged greater oil use and discouraged further exploration and investment in oil production.
By the early 1970s the rapidly growing oil demand brought on by
robust growth of the world economy led to an increasingly tight
world oil market. OPEC began to engineer a series of large price
increases, eventually tripling the world price of oil from 1973 to




81

1974. Oil prices remained relatively stable until 1979, when the
second price shock, often associated with the Iranian revolution
and the outbreak of the Iran-Iraq war, began. By the end of 1981
oil prices had more than doubled.
Both of the earlier shocks followed several years of stable or
slowly falling oil prices. In contrast, oil prices were highly volatile
before the recent oil shock. In the first half of 1986 oil prices fell
dramatically, plummeting by more than 50 percent to about $12 a
barrel in July 1986. Between 1987 and 1989 oil prices fluctuated
within the $13 to $22 range. During 1990 oil prices fell from a high
of over $23 in early January to a low of less than $16 in late June.
Since the recent shock began in July, world oil prices have continued to be far more volatile than they were in the initial stages of
earlier shocks.
Another difference is the duration of the shocks. In both of the
earlier oil shock periods, oil prices increased steeply and fairly
steadily over a period of more than 2 years. In the recent episode,
oil prices rose substantially through mid-October, generally fell
through the end of 1990, and declined sharply after the successful
start of Operation Desert Storm in mid-January 1991.

SUMMARY
• Price shocks are large and unexpected changes in the price of
a particular commodity important to the economy as a whole.
Oil price shocks are the most common and most significant
price shocks.
• The recent price shock differs significantly from the oil price
shocks of the 1970s. In addition to being less severe, it followed
a period of volatile prices in contrast to the period of relatively
stable prices that preceded each of the earlier shocks.

THE EFFECTS OF OIL PRICE SHOCKS
The effect of a shock on the performance of the economy depends
on many factors. In addition to the macroeconomic and energy policies pursued before and during an oil price shock, the underlying
structure of the economy determines how it is affected by a shock
of a given magnitude and duration. In this section the effects are
discussed in the context of policies that do not change in response
to shocks, and, in particular, of a monetary policy that does not
adjust money and credit growth.

EFFECTS ON INFLATION
Since oil products are used both directly and as inputs to the production of other goods and services, increases in oil prices directly
and indirectly raise the overall price level unless rapid offsetting




82

wage and price declines occur elsewhere in the economy. Higher
prices for oil immediately raise the price of gasoline, heating oil,
and other petroleum products and thereby directly affect the general price level (Box 3-1). The larger the share of expenditures devoted to petroleum products, the larger the direct contribution of
oil price shocks to inflation. Indirect effects arise because prices for
goods and services often reflect the costs of oil used in their production or distribution. The more oil intensive the economy's production processes, the larger the indirect contribution of oil price
shocks to inflation.

By raising the overall level of prices, an oil shock may eventually
also lead to a higher level of nominal wages. That in turn may lead
to further price increases, which would amplify the increase in the
aggregate price level caused by the oil shock. The United States is
fortunate that its wage-setting arrangements do not rapidly transmit the higher inflation caused by an oil price shock into excessive
increases in wages and salaries. Some have suggested that the centralized bargaining more commonly used in many European economies to set wages allows such an excessive reaction of wages to
higher prices, even when there have been no compensating productivity gains. The more gradual wage adjustments characteristic of




83

the relatively decentralized labor markets in the United States
tend to raise labor costs less when oil price shocks take place.
It is important to distinguish between continuing inflation and a
once-and-for-all increase in the price level. An increase in oil prices
raises overall prices to a higher level, producing a bout of temporarily higher inflation while prices are moving toward this higher
level. As prices finish adjusting to the oil price shock, however, this
component of inflation disappears. The inflation rate then reverts
toward the underlying rate of inflation, which depends on the longrun growth rate of money and credit and of the economy's productive capacity.
Oil intensity and, more generally, energy intensity are important
indicators of the sensitivity of the general price level to an oil price
shock: the greater the intensity, the greater the effect of a price
shock on the general price level. The energy intensity of the U.S.
economy, measured as the ratio of primary energy use to real national output, decreased by more than 28 percent between 1972 and
1989 (Chart 3-1). At the same time, the share of oil in total energy
Xuse fell from 46 percent to 42 percent, with an even larger decline,
from 30 percent to 21 percent, outside the transportation sector.

Chart 3-1 Energy Consumption per Dollar of GNP
Energy intensity in the United States has fallen substantially since the 1973-74 oil price shock.
Thousand Btu per 1982 dollar of GNP

28

26

24

22

20

18

I

1949

I

1953

I

I

1957

1961

I

1965

I

I

1969

1973

Source: Department of Energy.




84

I

1977

I

1981

1985

1989

The trend toward lower energy intensity in the United States,
which mirrors a similar trend in other major industrialized countries, reflects two forces. First, the efficiency of residential, commercial, industrial, and transportation energy use has improved
significantly since 1973. For example, the average energy intensity
of steel production fell by 20 percent between 1973 and 1987, and
the amount of energy used to heat 1 square foot of residential
space declined by 30 percent. Many of these adjustments reflect a
market economy's response to higher relative prices of oil after the
price shocks of 1973-74 and 1979-81. At the same time, the mix of
outputs in the economy as a whole has shifted away from energyintensive heavy industrial products, such as steel, toward less
energy-intensive products and services.
Energy and oil intensity in the United States is somewhat higher
than in several other large industrialized nations. In addition, oil
products are more highly taxed in these countries, so that any
given dollar increase in crude oil prices will produce a smaller percentage increase in the prices of gasoline and other oil products
than in the United States. These differences suggest that oil price
shocks will have a larger effect on inflation in the United States
than in these other countries.
EFFECTS ON REAL GROWTH
The major macroeconomic effects of an oil price shock stem from
reduced demand for goods and services by consumers and businesses. This decline in real spending will lead to temporarily slower
growth of real gross national product (GNP) and employment. The
reduction in output may be large enough to cause a recession, especially if the oil price shock occurs in a weak economy. However,
even if oil prices were to remain high, these demand effects are
temporary, and eventually the economy would return to its longrun growth path.
Terms-of-Trade Effects
Higher world oil prices mean that consumers must pay more to
foreign suppliers for each barrel of imported oil, leaving them less
to spend on goods produced in the United States. Consumers who
use relatively more oil to heat homes in colder climates, for example, or to commute longer distances, will be relatively more affected by oil price increases. Hence, consumer spending is likely to fall
off more in regions of the country that use relatively more oil.
Spending in oil-producing regions in the United States, on the
other hand, might rise as incomes increase, especially if higher oil
prices lead to more exploration and increased drilling. On balance,
however, the overall effect on the economy is to reduce consumer
spending.




85

The increase in the relative price of imports affects the terms-oftrade; that is, the terms at which U.S. goods are traded for imports.
At current U.S. oil-import levels of more than 7 million barrels
daily, each $10 increase in the per-barrel price of oil would, if it
persisted for a year, shift about $26 billion from the United States
to foreign suppliers of oil. As a result of this increased expenditure
for imported oil, the Nation's trade deficit is likely to rise.

Money and Credit Market

Effects

Another important channel through which demand is reduced is
through the higher overall price level generated by the oil price
shock. The higher price level results in reduced real supplies of
money and credit—nominal money or credit deflated by the price
level—unless nominal supplies are raised proportionately. Lower
real supplies of money and credit cause a tightening in credit markets and thereby raise interest rates above what they would otherwise be. Empirical analysis indicates that the adverse effect on
output and unemployment of an oil price shock that stems from
the decline in the real volume of money and credit is quantitatively significant.
Of course, this credit tightening effect does not take place in the
absence of other factors that might affect interest rates. In the
second half of 1990, for example, the weakening economy and the
new budget legislation started interest rates on a downward trajectory. But, in general, lower real money and credit growth rates that
result from an oil shock would tend to keep interest rates higher
than they otherwise would be.
Higher interest rates reduce household spending on consumer
durables like automobiles and furniture, which are often purchased
on credit. The tightened money and credit market conditions are
also likely to lead to reduced business investment spending for
equipment, factories, and inventories. Residential construction may
also be adversely affected by the rise in interest rates.
It is important to emphasize that both short- and long-term interest rates affect spending. Long-term interest rates are importantly
affected by expectations about future short-term interest rates. The
shorter and milder an oil price shock is expected to be, the less expectations about future short-term interest rates would be likely to
change. Consequently, long-term interest rates would also be expected to change less. Thus, spending that depends on long-term interest rates would not be affected as much by a price shock that is
expected to be shorter and milder.

Confidence

Effects

Survey measures of consumer and business confidence dropped
dramatically when the recent oil price shock began. That decline
may have reflected not only lowered expectations of upcoming eco-




86

nomic performance, but also uncertainty about oil prices, about economic conditions generally, and about prospects for war. Such a
loss of confidence typically leads consumers to postpone purchases
of big-ticket items such as new homes, furniture, automobiles, and
other consumer durables. Heightened uncertainty also induces
businesses to postpone investment in plant, equipment, and inventories.
The decline in consumer and business confidence in the second
half of 1990 may have reflected the perception that the oil price
shocks of the 1970s were primarily responsible for the substantial
increases in inflation and unemployment rates that ensued. Although the oil price shocks of the 1970s did raise inflation and unemployment rates, the misguided macroeconomic policies carried
out around the time of the shocks contributed significantly to those
increases. Consumers and businesses therefore may have overestimated the likely adverse economic effects of the recent oil price
shock.

Overall Demand Effects
The terms-of-trade, credit tightening, and confidence effects will
reverberate through the economy. Slower consumer spending will
lead to a larger cumulative effect on economy-wide spending and
income, as growth of output and employment, and thus of income,
slow in response to the initial slowdown in spending. If the oil price
shock is transitory, as expected, this process will be reversed when
prices fall.
Structural changes and reforms since the 1970s have made both
energy and other markets more flexible and therefore better able
to respond to changes in energy prices. In addition, the decline in
oil intensity means that each dollar increase in the price of oil puts
less upward pressure on costs and therefore on prices. Since the
smaller increase in the price level reduces the real supplies of
money and credit by a smaller amount, there is less upward pressure on interest rates. And smaller interest rate increases, in turn,
mean that spending declines less. For the same reason, countries
that have lower oil intensity may experience smaller interest rate
increases and spending declines than countries with greater oil intensities. In addition, the now-deregulated energy markets in the
United States allow the economy to adjust more flexibly and rapidly to oil price increases, as do energy futures markets, which are
discussed below.

Effects on Productive Capacity
An oil price shock may temporarily reduce the economy's capacity to supply goods and services until producers' plant and equipment and workers' skills realign to higher oil prices. The amount
by which capacity is curtailed is influenced significantly by the




87

flexibility and responsiveness of markets. Shifts in the demand for
various goods and services as a result of an oil price increase alter
the demand for workers in regions and industries that produce
these goods and services. Job relocation involves costs and takes
time. During the transition, some additional unemployment may
result.
After an oil price increase, production processes are likely to be
too reliant on oil and energy. Depending on how long businesses
expect a new, higher level of the relative price of oil to remain in
effect, they may switch to production processes that use less
energy. They may also produce fewer energy-intensive goods and
services, sales of which will decline when higher energy costs are
passed on to consumers. Thus, it would be reasonable to expect a
shift of plant and equipment and workers' skills away from oil-intensive transportation and the sectors that rely heavily on transportation and toward less oil-intensive sectors. An oil price shock
that is expected to be short-lived would not require substantial adjustments of this kind, and associated frictional losses may be minimal.

ESTIMATES OF THE EFFECTS
Economists generally agree that output and inflation respond to
oil price shocks as described above. However, there is more disagreement and uncertainty about the size of the effects. By examining a number of econometric models, which reflect the experience with previous oil shocks, quantitative ranges for the effects
that reflect this uncertainty can be developed. The ranges of magnitudes reported here are based on a variety of models and reflect
some, but not all, of the structural and expectations effects discussed above.
For example, the analysis does not explicitly take into account
the economy's reduced energy intensity since the 1970s. Most
models based on historical data reflect the past, including past
energy intensity, and are thus quite likely to overestimate the effects of oil price shocks on today's economy. In addition, reduced
regulation, particularly of the energy sector, now permits the economy to respond more freely to changing oil prices. Thus, historical
relationships may somewhat overstate the impact that an oil price
shock would have today. Another factor that the analysis has not
explicitly allowed for is the decline in consumer and business confidence that may result from an oil price shock, a factor that has
been important in the second half of 1990.
A factor that the analysis does endeavor to incorporate is that
both consumers and businesses base their actions on expectations
of the future, sometimes by using data from futures markets. This
forward-looking behavior allows a quicker adjustment of output




88

and prices to changing economic conditions. Moreover, long-term
interest rates may change in anticipation of upcoming conditions,
rather than lagging behind them. Of the econometric models examined, those that incorporate forward-looking behavior suggest that
output growth is likely to be curtailed less than other models predict. This difference in models is reflected in the ranges.
Consider, for example, the effects on the U.S. economy of an increase in the price of oil of 50 percent from a level of $20 that lasts
for four quarters before returning to pre-shock levels. Smaller or
shorter oil price shocks will have commensurately smaller effects,
while larger shocks will have more serious consequences.

Impact on Output
Following the onset of an oil price shock, output growth would be
expected to slow as the factors described above suppress real
demand growth. The diversion of more income to pay for imported
oil reduces real consumer spending on U.S. goods and services. In
addition, the higher price level reduces the real supplies of money
and credit, thereby raising interest rates and reducing credit-sensitive expenditures compared with what they would otherwise be.
The spending declines and subsequent repercussions resulting from
the four-quarter, 50-percent oil price shock would be expected to
reduce real GNP growth by about 1 percentage point to IVfe percentage points on average over the four quarters that follow the
onset of the shock. The decline in real output is also likely to slow
employment growth. The unemployment rate would be expected to
rise by an average of about one-half of 1 percentage point over the
same four-quarter period. In the year following the beginning of
the shock, higher imported oil prices would raise the trade deficit
by about $15 billion to $25 billion.
There is less certainty about the quarter-by-quarter pattern of
the effects on the economy than about the sizes of the four-quarter effects reported above. The output declines are likely to be largest in the quarters immediately following the onset of an oil price
shock. The effects of the oil shock on real GNP growth are expected to diminish as time passes, however. As the frictions associated
with a shock dissipate, the economy would be expected to resume
growth along its longer run growth path. And as it recovers toward
that path, the economy is forecast to grow faster than it would otherwise. Thus, after having its real growth initially suppressed, the
economy rebounds.

Impact on Inflation
Such an oil price shock would also be expected to raise inflation,
but, as with the output effects, the change is temporary. As measured by the consumer price index, the inflation rate is forecast to
exceed what it would have been otherwise by about IVi percentage




89

points to 2l/2 percentage points over the four quarters following the
onset of the shock. The GNP implicit price deflator measures the
prices of all the goods and services produced by the Nation. Inflation as measured by the GNP deflator would be less affected because petroleum products constitute a larger share of household expenditures than of total national production. This illustrates the
point that the effects on prices, and on the economy generally, are
related to oil intensity. The GNP deflator in the four quarters following the onset of the shock could be expected to be about threefourths of 1 percentage point to IVfe percentage points higher than
it would have been otherwise.
The temporarily higher inflation rate would be expected to reach
its peak in the quarter after the shock begins, and would taper off
thereafter. Though inflation is raised on average during the four
quarters following the beginning of the shock, much of the increase
takes place in the first two quarters. By the fourth quarter, inflation would likely revert to near its underlying rate.
To the extent that oil prices fall, the mirror image of these processes would be observed; inflation would then be expected to be
temporarily lower than otherwise. The temporarily changed pattern of inflation during and after the large, sharp decline in oil
prices in 1986 demonstrated how these effects operate. After
having been relatively low and relatively steady at about 4 percent
for a few years, inflation dropped sharply to about 1 percent after
oil prices plummeted in 1986. It then returned to near its earlier
level after oil prices stopped their decline.

SUMMARY
• An abrupt increase in oil prices temporarily raises the inflation rate and lowers the real growth rate.
• Oil price shocks lower employment and output by reducing the
income consumers have to spend on goods produced in the
United States and by reducing the real supplies of money and
credit.
• Structural changes in the energy sector have significantly increased the flexibility and reduced the vulnerability of the U.S.
economy to oil price shocks.
• The energy intensity of most industrialized economies and oil's
share in total energy use have fallen significantly since the
1970s, reducing their sensitivity to oil price shocks.

MACROECONOMIC POLICIES
The Administration remains committed to the goal of strong economic growth. Keeping inflation low and stable is essential to
achieving this goal. Although the recent oil price shock has reduced




90

economic growth and raised inflation, the proper design of macroeconomic policies can ensure that these effects will be temporary
and that the economy will soon return to solid growth with lower
inflation.
THE ADVANTAGES OF SYSTEMATIC POLICIES
Systematic monetary and fiscal policies directed toward longterm goals are likely to lead to better economic performance than a
sequence of discretionary reactions to economic news aimed at affecting near-term economic conditions. Businesses and households
base their assessments of the future on their expectations of interest rates, inflation, tax rates, and other important economic variables. Such forward-looking assessments are important factors in
their plans and decisions. Frequent and unanticipated policy
changes produce uncertainty in the private sector and reduce the
ability of businesses and households to make informed long-term
plans.
One of the most important advantages of systematic policies is
that they lead to policy credibility, the belief that policies will be
adhered to consistently over the long run. Credibility permits policymakers to respond predictably to shocks of various kinds without creating undue concern that long-term expectations will
change inappropriately.
Even though it might be quite complex, a well-designed systematic
policy is likely to lead to better economic performance than either
discretionary policies or rigid policies. For example, some argued in
the 1960s and 1970s that the growth rate of the money supply
should be held constant. While such a policy might have been appropriate at one time, it is clearly too rigid because of shifts in the
relationship between money and income in response to deregulation and innovation in the financial sector.
Adhering to a systematic policy may require changes in instruments such as the money supply growth rate or interest rates, for
example, to address shocks such as sudden steep increases in oil
prices and shifts in the relationship between the money supply and
income. Under a systematic policy, money and credit growth rates
might change in the wake of an oil price shock or other major disturbances to ameliorate the adverse effects on unemployment and
output. Once the price shock has passed through the economy, the
policy would readjust monetary and credit policy instruments in a
way that would continue to guide the economy toward its longer
run goals.
The response to the October 1987 stock market plunge illustrates
how monetary policy can respond predictably and temporarily to a
shock without unduly raising long-term inflation expectations. In
the period following the decline in the stock market, the Federal




91

Reserve temporarily increased the availability of bank reserves. Because the Federal Reserve's credibility had been enhanced by its
having curbed inflation, the public believed that this action was
temporary, and therefore it did not change its long-term inflation
expectations. And when the Federal Reserve judged that this financial shock had passed through the system, it adjusted the supply of
bank reserves to a path consistent with progress toward its goal of
price stability.
DESIGNING FISCAL AND MONETARY POLICIES
Both fiscal policy and monetary policy have a role to play in
mitigating the impact of a price shock and allowing the economy to
return quickly to its long-run growth path. Changes in government
spending or tax receipts, which would occur automatically as the
economy fluctuates, alter the aggregate demand effect of a price
shock. Similarly, the Federal Reserve's policy tools can influence
money growth and interest rates to temper the shortfall in production and employment.

Fiscal Policy
A well-designed fiscal policy will automatically respond to an oil
price shock. To the extent that real GNP, incomes, and employment decline, income tax revenues and other income-related tax
payments will automatically fall and transfer payments provided
by programs like unemployment insurance will automatically rise.
These "automatic stabilizers" will cushion the reduction in aftertax income and spending power and thereby help sustain spending
and employment. Such automatic stabilizers mean that the deficit
will automatically rise as tax receipts fall and government expenditures rise relative to what they would otherwise be.
The Omnibus Budget Reconciliation Act of 1990 makes changes
in the budget deficit reduction law that give these automatic stabilizers more flexibility to work effectively. The previous formulation
of the deficit reduction law set nominal dollar deficit targets that
could be suspended if economic growth was forecast to be less than
1 percent for two consecutive quarters. Otherwise, deficit targets
did not change even if oil price or other shocks changed macroeconomic conditions. In this sense, the old law actually put constraints
on the operation of these automatic stabilizers. The revisions embodied in the new budget law require the deficit targets to be adjusted through fiscal 1993 in response to changes in economic conditions as reflected in annual forecasts made by the Administration.
The new budget legislation has other systematic and credible features: It sets caps on spending levels for the next 5 years, phases in
spending and revenue changes over 5 years to avoid causing a
shock to aggregate demand, and provides for more stringent en-




92

forcement of the budget rules. The recent oil price shock does not
require any alteration in this long-run plan for attaining fiscal balance.
It is appropriate for monetary policy to respond to this change in
fiscal policy by permitting the decline in interest rates that would
accompany the anticipated decline in future government borrowing
brought on by the deficit reduction plan. Adjusting the instruments
of monetary policy in this direction can encourage the private
sector to increase spending, especially on growth-enhancing investment projects, enough to offset declines in employment and production that might otherwise arise from the shift in fiscal policy. The
oil price shock does not alter the appropriateness of this monetary
policy response.
Additional discretionary changes in fiscal policy designed to
offset the temporary effects of the price shock would not be appropriate, although tax reform is still needed to improve incentives for
saving and investment. Discretionary changes in the instruments of
fiscal policy, such as changes in public spending, require legislative
approval, which typically takes many months. It may well be that
the effects of the recent oil price shock will not last as long as the
gestation period for a discretionary fiscal policy response. As a
result, automatic fiscal policy responses are likely to be more effective than discretionary responses in addressing oil price increases
and many other types of shocks.

Monetary Policy
Monetary policy has a key role to play in ensuring that a onetime increase in oil prices is not converted into an increase in the
underlying inflation rate—via a wage-price spiral, for example. The
U.S. economy has benefited during the recent expansion from a
monetary policy that has helped keep the underlying rate of inflation relatively low and relatively steady compared with the 1970s.
This move to prevent inflation from rising as economic growth
quickened in 1987-88 has prevented a repetition of a key policy
mistake of the 1970s: that is, policy spurring the economy along a
path of accelerating inflation. The credibility that this experience
has built, combined with the recent relatively low inflation rates,
gives the Federal Reserve more elbow room to allow inflation to rise
temporarily when a price shock strikes without causing long-run inflation expectations to rise.
As long as the relationship between the M2 measure of the
money supply and GNP remains stable, the Federal Reserve can
lead the economy toward lower inflation by gradually reducing the
long-run growth of the money supply. Such a policy does not preclude allowing higher or lower growth rates of M2 over shorter periods, as called for either by shocks to the relationship between the
money supply and GNP or by other shocks.




93

Given the stability of the relationship between GNP and money,
keeping money supply growth from falling in the face of a downturn in GNP caused by an oil price shock is essential to preventing
an unnecessarily large and prolonged decline in economic growth.
Depending on the size of the shock, a temporary increase in money
supply growth might be necessary to stabilize economy-wide spending and to help offset ,the decline in GNP that occurs when an oil
price shock reduces real income and raises the general price level.
Maintaining money supply growth or increasing it somewhat
may result in a temporary increase in nominal GNP growth. But
eventually nominal GNP growth should return to a path consistent
with low and stable inflation. Given credible monetary policy, an
increase in nominal GNP growth need not cause an increase in
long-run inflation expectations. A one-time increase in the price of
oil would warrant only a short-run increase in nominal GNP
growth. The oil price shock itself will cause only a temporary increase in the inflation rate if nominal GNP growth reverts to a
rate consistent with the trend toward low and stable inflation after
the one-time adjustment attributable to the price shock.

LESSONS FROM PREVIOUS SHOCKS
The experiences of the United States and other large industrialized countries during the previous oil price shocks show the crucial
role that maintaining credible and systematic long-run fiscal and
monetary policies play in allowing the economy to respond relatively smoothly.
Before the onset of each of the oil shocks of the 1970s there was
considerable concern that the overly expansionary monetary and
fiscal policies during the preceding years were building increasingly high rates of inflation into the major industrialized economies.
Thus, the monetary policy authorities had relatively little credibility: There was little reason to believe that inflation would be restrained even before the oil price shock occurred.
Chart 3-2 plots U.S. consumer price inflation during the 1970s,
with a focus on the periods before and after oil price shocks. The
chart reveals the often overlooked fact that the inflation rate was
rising, and rising at a fairly rapid rate, in the period preceding each
of the oil price shocks of the 1970s.
After having been very low and stable until the mid-1960s, inflation then rose steadily, apart from its temporary suppression when
price controls were in effect in the early 1970s. The oil shock of
1973-74 then put additional upward pressure on the inflation rate.
To prevent inflation and inflation expectations from spiraling further upward, monetary policies were tightened generally. With
little credibility, there was little room for monetary policy to
permit the price shocks to affect only the price level without giving




94

Chart 3-2 Inflation and Oil Shocks in the United States
Inflation was high and rising before the two oil price shocks of the 1970s but was relatively low and
steady before the 1990 shock.
CPI, Percent change from year earlier

14

12

x*"

10

1971 Q4to1974Q4

1977Q1 to1980Q1

1988Q3to1990Q3

-7

-5

-3

-2

-1

Number of Quarters Before/After the Oil Price Shock
Source: Department of Labor.

0
1973 Q4

1

1 g7g Q1

1990 Q3

firms and households the impression of continued accommodation
and tolerance of higher inflation. An increase in money growth
could not credibly be viewed as temporary.
As the contractionary effects of the 1973-74 oil price shock and
restrictive policies took hold, policy again returned to an overly accommodative stance. The deceleration in the growth of the money
supply that accompanied the 1973-75 recession was followed by a
reacceleration: ,The money supply grew at double-digit rates from
1975 through 1977. Fueled by faster growth in the money supply,
spending grew at rates incompatible with low inflation, culminating in the high and rising inflation rates at the end of the 1970s.
These inflation rates resulted from growth in demand that continually outstripped growth in supply. So long as demand, which
was fueled primarily by excessively expansionary monetary policy,
grew more rapidly than the economy's ability to supply goods and
services, prices rose. Similar boom-and-bust patterns were being repeated in other industrialized countries as well. Having excessively
stimulated demand, these countries found they had little credibility
to ease policy temporarily in response to the second oil price shock
without further raising inflation and expectations of it. Thus, to




95

prevent their already uncomfortably high inflation rates from accelerating, many countries including the United States again tightened monetary policy when the 1979-81 oil price shock struck.
Japan, a notable exception, provides a useful comparison. Japan
had high and rising inflation rates when the 1973-74 oil price
shock occurred, and inflation remained above 20 percent in the
period immediately after the onset of the shock (Chart 3-3). Like
other countries, Japan experienced a severe recession in 1974-75
because the oil shock hit when there was little policy credibility or
room for adjustment of the instruments of policy. To remedy that
situation, the Japanese Government moved to a more systematic
and credible monetary policy in the latter half of the 1970s. By reducing money growth, the government lowered inflation and then
kept it in check. This policy produced inflation that was low and
falling by the time the second oil price shock hit.
Chart 3-3 Inflation and Oil Shocks in Japan
Inflation was high and rising and remained high in the first oil price shock but was low and remained low
in the second oil price shock.
CPI, Percent change from year earlier
25

20

15

10

1977Q1 to1980Q1^.X
'*'

-8

-7

-6

-

5

-

4

-

3

Number of Quarters Before/After Oil Price Shock

-

2

1
1973Q4
-j 979 Q-J

0

1

2

3

4

1990Q3

Source: Department of Commerce.

The more credible systematic stance of monetary policy followed
in Japan between the two oil price shocks made it possible for
Japan to avoid much of the negative economic impact that other
industrialized economies experienced during the second oil shock
without generating fears that inflation and expectations of inflation would spiral upward. As a result, inflation was not permanent-




96

ly raised, and output remained close to its longer run path. In fact,
by the definition of recession used in the United States, Japan completely avoided a recession following the second oil shock.

SUMMARY
• Systematic monetary and fiscal policies allow for changes of
the instruments of policy in response to oil price shocks without sacrificing long-term policy goals. For example, automatic
stabilizers allow for some temporary deficit increases as the
economy weakens after an oil price shock, without altering the
long-run path to structural deficit reduction.
• Macroeconomic policy responses to oil price shocks in the 1970s
were constrained because past policy mistakes had engendered
a lack of credibility. The United States entered the two oil
price shocks of the 1970s with excessive monetary expansion
causing high and rising inflation.
• The relatively low and steady underlying inflation rate that
preceded the 1990 oil price shock enables monetary policy to
respond more appropriately without losing its credibility in
controlling inflation.

SHORT-RUN ENERGY POLICY RESPONSE
The principle of providing for flexible responses to changing
short-run conditions while maintaining a clear and consistent focus
on long-term objectives is an appropriate guide for energy sector
policies as well as for monetary and fiscal policies. Given the high
value of maintaining flexibility in the face of changing market conditions, pressures to impose price control and allocation schemes
and to limit trading in energy futures markets should be resisted.
Release of oil from government-controlled strategic reserves can,
under some conditions, play a useful role in cushioning the impact
of oil price shocks.

THE DANGERS OF REREGULATION
Energy market regulation, like regulation in other markets, can
reduce the efficiency of the economy. Incorrect price signals result
in a misallocation of supplies among consumers and, as both investment and innovation are affected over the longer term, can reduce
output and adversely affect both producers and consumers. In addition, because regulation reduces flexibility, regulated markets react
poorly to price shocks and thus exacerbate their effects. The benefits of relying on markets rather than regulation in the energy
sector can best be understood by reviewing how regulation raised
the costs of the oil price shocks of the 1970s.




97

In the aftermath of the 1973-74 oil price shock, domestic crude
oil prices were held substantially below world market levels. As a
result, domestic prices for petroleum products, which reflected an
average of the prices of controlled domestic and uncontrolled imported crude oil, were also below world market levels. Individual
decisions regarding the use of oil products were based on these distorted prices, even though each additional barrel of oil demanded
was met through increased imports at the higher world price.
Greater use of oil and increased demand for oil imports was the inevitable result.
Although the process of oil price decontrol began before the
1979-81 oil price shock occurred, the combination of the remaining
price controls and a burdensome and complex allocation system
had a particularly pernicious effect. While artificially low prices inflated demand, the allocation system distributed available products
in a way that magnified imbalances between demand and supply.
As a direct result, consumers wasted many hours waiting in long
gasoline lines.
Substantial deregulation of energy markets over the last 15 years
now allows markets to respond quickly and flexibly to changing
conditions. In the second half of 1990, oil and natural gas markets
freed from earlier price controls and restrictions generally functioned well (Box 3-1). In sharp contrast to the 1970s, gasoline lines
did not reappear. While the higher petroleum product prices that
follow an oil price shock may be unwelcome to consumers and
energy-using firms, they are clearly preferable to the alternative of
policy-induced shortages caused by misleading price signals and
government-directed misallocation of oil supplies.

ENERGY FUTURES MARKETS AND SPECULATION
In the wake of Iraq's invasion of Kuwait, some commentators
have blamed speculation in oil futures markets for oil price volatility and have suggested that the government limit futures market
trading. Because futures markets play a central role in increasing
energy market flexibility, however, a significant limitation on trading would impede, rather than aid, adjustment.
Futures markets provide a public forum in which commitments to
deliver a standard amount of a commodity at a specified future
date and location can be bought and sold. Trading in organized
spot and futures markets serves two important functions: price discovery and risk-shifting. Price discovery is achieved by placing accurate information regarding the latest market activity in a centralized public forum. In this respect, commodity markets are no
different from stock markets. Risk-shifting, or hedging, is an activity undertaken by firms or individuals with a direct business interest in the production, distribution, or use of the commodity being




98

traded. Producers of a commodity might wish to protect against a
price decline by locking in a future commitment to deliver at a
known price. Processors desiring to protect against a possible rise
in product prices can hedge by buying future delivery commitments at a known price.
The prices that balance demand and supply of spot and future
delivery commitments reflect current market expectations of nearterm and long-term prices. Chart 3-4 shows that prices of oil for
delivery at the end of 1991 have been far less volatile than prices
for delivery in the near future. The relationship between spot and
futures market prices observed since August 1990 has consistently
reflected the expectation that the Gulf crisis would be relatively
short-lived.
Chart 3-4

Oil Spot Prices and Futures Prices

Although the spot price of oil has fluctuated widely, the futures market price of oil to be delivered in
December 1991 changed relatively little between June 1990 and January 1991.
Dollars per barrel
45

40

Spot Price

35

30

25
December 1991 Futures Price

20

15

10

i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i
June

July

August

September

October

November

1990

December

January

1991

Note: West Texas Intermediate Crude. Spot price is nearest month contract.
Source: New York Mercantile Exchange.

Opportunities for hedging provided by oil futures markets serve
the public interest in two main ways. First, hedging allows firms
participating at only one stage of the oil business to remain viable
in the volatile world oil markets of the late 1980s and early 1990s.
Second, hedging has allowed buyers to be more aggressive in taking
advantage of spot market opportunities. For example, as oil prices
fell sharply in the first half of 1990, oil companies accumulated unusually large private stocks. Their ability to hedge against a con-




99

tinued decline in prices using oil futures markets allowed them to
share the risks of holding these large stocks.
Speculative trades are transactions not motivated by a direct interest in business activities related to the commodity being traded.
A speculator goes "long" by purchasing the rights to future delivery of a commodity in the expectation that its price will rise as the
specified delivery date approaches. If prices actually rise, the speculator profits by selling this right; if prices fall, the speculator loses
the difference between the price at which he is committed to take
delivery and the actual price at the delivery date. A speculator
goes "short" by selling a commitment to deliver the commodity at
a future date, hoping that prices will fall. "Long" speculators add
to the demand for futures, driving up futures prices. "Short" speculators, by selling their promise to deliver in the future, add to the
supply, and thus drive futures prices down.
Because the underlying motivation for an individual futures
market transaction is impossible to determine, the claim that speculation has caused higher oil prices cannot be conclusively supported or refuted. The available evidence, however, suggests that speculation is more likely to have lowered prices than to have raised
them in the aftermath of Iraq's invasion of Kuwait (Box 3-2).

grated oil companies, trade houses, refiners, marketers, producers, ena-ctsei's, and: ^^^^^^^^^:^^^ &mw®m i$fa%&^r
, m oil markets. Because all but the last category of participants
may engage fa both risk-shifting and speculative trades, it is
inip^Me to mea&ire
directly, *.; : - v
> According to recent data from the Commodity Futures Trad• ing Commission, large
in ml'marb^ g&tii&rd^

outstanding future delivery commitments in August and September - l^)»'VWto^)TO^-'
'*1*aA»^%w^/
^nh^f mi^tJ^^ "Igaytf*^
• of these purely
immediate aftermath

•

markets in the
was' therefore 4tf

reduce

'

:

y - ."'.T''";

Following the rules of the New York Mercantile Exchange, as
soon as oil futures prices dropped $7.50 the day after Operation
Desert Storm began, oil futures trading was automatically suspended for an hour. Under conditions such as these, a trading suspension is appropriate because it gives the marketplace time to absorb
unusual bursts in volume or information flows. However, once in-




100

formation has been widely disseminated, there is no economic basis
for stopping the market from expressing its evaluation of future
conditions. Limits on futures trading that impede risk-shifting
transactions would impose a real economic burden, but they would
not stop speculation. Closing futures markets would simply shift
activity to offshore markets or to private, unreported transactions,
thereby obstructing the price discovery process. Ironically, the
public at large, having the least access to information, would be
most disadvantaged. In a fluid economic situation, ignorance is
hardly ever bliss.
STRATEGIC OIL RESERVES
The strategic oil reserves of the United States and other countries are intended both to deter the use of the "oil weapon" by exporting nations and to cushion the effect of sizable, temporary
supply disruptions by augmenting the supply of oil. At the beginning of 1991, 586 million barrels of oil, equal to about 80 days of
U.S. imports at 1990 import rates, were held in the U.S. strategic
reserve.
Policies for the use of strategic reserves should aim to complement
the production increases and consumption declines that naturally
follow an adverse price shock, not to substitute for them. Similarly,
strategic reserves should not be used to respond to oil price movements other than adverse price shocks, since to do so would have
the effect of substituting government storage of oil for private storage.
The magnitude of energy price movements is one important indicator of the seriousness of a disruption. Prices of petroleum products rose substantially from July to October 1990, but, adjusted for
inflation, they remained well below historical peaks. Indeed, the
average inflation-adjusted retail price of gasoline in the fourth
quarter of 1990 was lower than in most of the 1950s and in the first
half of the 1980s.
In the present situation, United States policy has emphasized the
replacement of embargoed oil with additional production from
other sources. Saudi Arabia, Venezuela, the United Arab Emirates,
the United States, and other producers have, in recent months, increased production by an amount sufficient to offset fully the loss
of supplies from Iraq and Kuwait. These production increases have
eliminated the need for continued depletion of existing private and
public stocks. Had the price impact of the supply disruption been
immediately attenuated through the release of strategic reserves,
these production increases might not have occurred. Conservation
of existing stocks can be especially attractive in situations where
anxieties over the possibility of severe supply disruptions in the
near future are a major influence on current prices.




101

Coordination among countries holding strategic reserves is important, since the market for oil is a world market, and a release of
reserves by any one country will lower prices for consumers throughout the world. Coordination of releases can allay concerns that
some countries will seek to benefit from releases made by others
while withholding their own reserves. The International Energy
Agency (IEA) is the primary mechanism for coordinating the use of
strategic reserves. Such coordination was demonstrated in early
January 1991 when IEA member governments agreed to make government-controlled stocks available to the marketplace if hostilities
broke out in the Persian Gulf region. This program was begun following the start of Operation Desert Storm.

SUMMARY
• Price controls and government-directed allocation schemes significantly magnified the adverse effects of prior oil price
shocks. Their reintroduction would be an inappropriate response to energy supply disruptions.
• Closure of oil futures markets would impede risk-shifting and
price discovery in oil markets with few, if any, offsetting benefits.
• Strategic oil reserves can cushion the effects of temporary
supply disruptions. Releases should be coordinated internationally and with other response measures.

LONGER TERM ENERGY POLICIES
Primary reliance on markets to determine prices, quantities, and
technology choices provides the foundation for sound longer term
energy policies, and thus for the Administration's National Energy
Strategy (NES). Such policies can sustain economic growth and
blunt the effects of any future oil price shocks. However, either for
structural reasons or because of government-created barriers, private markets cannot always be expected to work efficiently. In
those situations, as the NES recognizes, policy can be applied to
promote efficient market operation.
For example, reducing the extent to which the United States and
its friends and allies obtain energy from insecure sources of supply
offers national security and foreign policy benefits to which private
market forces are unlikely to give adequate weight. Private markets may also not give adequate weight to environmental considerations. As the NES recognizes, however, policies concerned with
energy security or environmental protection must be well-designed
to avoid excessive costs and to ensure that economic growth can
continue to be fostered through the availability of ample supplies
of reasonably priced energy.




102

LONG-TERM TRENDS IN ENERGY PRICES AND USE
Longer term energy policies must not be influenced by the
widely held misconceptions that energy prices will almost certainly
rise and that the United States is a profligate user of energy. The
record of the past 40 years shows that the real price of energy has
Tio* risen steadily. Rather, the real prices of crude oil, oil products,
and electricity have fluctuated significantly, with periods of falling
as well as rising prices (Chart 3-5).
Chart 3-5 Real Energy Prices
Real energy prices do not show a long-term upward trend.
1982 dollars per million Btu equivalent

20

Electricity

15

10

1949

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

Source: Department of Energy.

A review of the basic forces that will influence energy markets
in the years ahead gives mixed signals regarding future price
movements. Some factors point to a tightening market in the
medium or long run. Oil analysts project that production in the
United States and the Soviet Union, currently the world's largest
oil producer, will continue to decline. OPEC, whose member states
already account for about one-third of world production and about
three-fourths of proven reserves, is expected to supply a rising
share of the world's oil. At the same time, world energy demand
could begin to grow rapidly if the rates of increase in energy efficiency observed since 1973 are not maintained, or if rapidly grow-




103

ing energy use outside the major industrialized countries becomes a
more important factor in the world market.
Other factors, however, suggest a future in which real oil prices
rise slowly, if at all. In recent years, growth in the world's proven
oil reserves has far outstripped growth in oil production. Since
1973, when higher oil prices began to stimulate more exploration,
world oil reserves have risen by about 50 percent, while world
crude oil production has increased by less than 10 percent. At the
1990 production rate, the world now has about a 45-year supply of
proven reserves; at this same production rate, the world had less
than a 30-year supply of proven reserves in 1973. Oil-exporting
countries with large reserves recognize that high oil prices encourage greater use of other existing forms of energy and accelerate the
development of new energy and end-use technologies. Economic
and environmental considerations that have increased the use of
natural gas as a substitute for oil should also help to keep oil
prices low. The uncertain outlook for energy prices increases the
value of policies that are flexible enough to serve national interests
under a wide variety of energy market conditions.
The common belief that the United States is a wasteful energy
user is also not supported by the data. International comparisons
show that U.S. energy use trends do not differ markedly from those
in other countries. Economy-wide energy intensity has declined in
other major industrialized countries, as in the United States, since
1973. Moreover, direct comparisons of energy use per unit of output
in individual sectors show that energy intensities across countries
have increasingly converged. Differences in natural resources, population density, industrial mix, urban layout, commuting distances,
and dwelling sizes appear to account for much of the variation in
energy use patterns across countries (Box 3-3).

ENERGY SECURITY
A key goal of longer term energy policy is to reduce the vulnerability of the U.S. economy to energy price shocks and possible
supply disruptions. Popular opinion aside, our vulnerability to oil
price shocks is not determined primarily by the level of our oil imports. In an increasingly integrated world economy, America's
energy security cannot be separated from that of its friends, allies,
and trading partners. For one thing, the price of oil bought and
sold in the United States is determined on world markets by global
supply and demand, not by U.S. production and consumption. In
addition, the Nation's ability to export goods and services depends
on the health of foreign economies, and exports now account for
about one-eighth of GNP. Thus oil price shocks can have substantial indirect effects on the U.S. economy through their impacts on
the economies of our major trading partners. For these and other




104

Box 3-3.—International Comparisons of Energy Use

Recent data §how that the- avtoage new cat imrcbased in the
United States achieve a levelof fuel economy Slightly tetter
than the comparable Average level in Japan and idose to that
in Germany * However^ in 1988 the United Stated had 673 passenger cars for every thoutand peope^ compared to only 476
ears per thousand people in West Germany and 251 cars per
thousand people in Japan* Moreover* in the same year, the average ear trawled more than 10400 mites in the United
States, compared with 8,000 in Germany and only 6,500 in
Japan*
In part, divergent patterns of vehicle ownership and use are
attributable to large differences in retail gasoline prices—
German and Japanese retell prices were respectively $2,20 and
$S4S a gallon in 1988, compared with a U«S. price of $OJ5,
Higher foreign prices to a large extent reflect differences in
taxes on gasoline: Combined Federal* State, and local taxes of
$0,29 a gallon were far below German and Japanese taxes of
$1.42 and $L60f respectively. However, comparisons with
Canada and Australia, which also have high annual miles of
travel per vehicle despite gasoline prices significantly above
UJS, levels, suggest that low population density and longer
commuting distances are major reasons for our additional
travel
A greater reliance on automobiles, rather than the energy
inefficiency of those automobiles, is therefore the primary
reason the United States uses so much oil in its transportation
sector. Assuming that the efficiencies of on4he-road fleets
equalize as older cars are replaced, differences in transportation fuel use can only be narrowed further using policies that
reduce UJS. car travel
Energy use in residential heating provides another example
of the importance of choosing an appropriate basis for comparisons. Correcting only for climate differences, the United States
used more heating energy per dwelling than other industrialized countries in 1987 (although the gap between the United
States and other countries narrowed substantially over the last
15 yearsX However, when the greater floor space in a typical
American home is taken into account, the United States was
among the more efficient users of residential heating energy.
reasons, modest changes in U.S. energy production, consumption,
or imports are unlikely to have much impact on the Nation's
energy security.




105

The maintenance of strategic petroleum reserves and agreement
among reserve-holding nations on credible policies for their coordinated use can provide both a deterrent to deliberate supply disruptions and an effective offset to disruptions that may occur. Energy
security can also be significantly enhanced by expanding and diversifying the sources of oil and energy supplies available to the United
States and its friends and allies. The United States, as a leader in
exploration and drilling technology, can play an important role in
identifying and developing new reserves. Efforts in this area should
focus on natural gas as well as on oil, since gas development that
displaces oil consumption can enhance energy security and also
provide environmental benefits. The removal of remaining barriers
to the development of economically viable domestic oil and gas resources, the increased use of coal, nuclear, and renewable energies,
and the exploitation of efficient energy conservation opportunities
can also contribute to energy security.
Energy diversification efforts will involve some shift toward domestic energy sources. But it must be recognized that opportunities
for increasing U.S. petroleum production are limited: By 1990 U.S.
production had declined by 22 percent from its peak in 1970. Moreover, a large-scale substitution of high-cost domestic energy for lowcost imported energy could significantly slow economic growth. It
simply makes no sense to spend large sums to displace imported
energy when supply diversification or strategic reserves can provide comparable energy security benefits at lower cost.
Even the total elimination of energy imports would not insulate
the economy from oil price shocks. There would be no terms-oftrade effects under such circumstances, but conditions on the world
oil market would still be reflected in domestic prices. For example,
although the United Kingdom is not a net importer of oil, its producers and consumers faced higher oil prices after Iraq invaded
Kuwait. The only way to decouple domestic and world energy
prices is to manage trade in energy products. Such a policy would
have much higher long-run costs than those imposed by energy
price fluctuations.

STRENGTHENING MARKET FORCES
Federal actions can promote efficiency and competition in energy
markets in several ways. The movement toward complete deregulation of wellhead prices for natural gas, pursuant to the Natural
Gas Wellhead Decontrol Act of 1989, is contributing substantially
to the economy's flexibility. Currently, new gas pipelines require
the approval of the Federal Energy Regulatory Commission
(FERC), which also regulates rates charged for the transmission of
gas. The pipeline approval process should focus on environmental
and safety factors rather than on the extraneous considerations




106

that enter into current FERC proceedings. Pipeline rates should be
regulated only to prevent monopoly abuses, and regulation should
be implemented in a way that fosters economic efficiency.
Retail electricity rates are regulated at the State level, and competition has traditionally played a minor role in electricity markets. In recent years, however, State regulators have begun to
allow competition for the right to construct new generating facilities. The Federal Public Utility Holding Company Act, which limits
an electric utility's participation in competition to build new capacity outside of its service area, should be reformed to increase the
role of market forces. Steps should also be taken to ensure that
access to the high-voltage transmission network is not controlled in
a manner that restricts competition.
State regulation of electric utilities has generally had the effect
of tying profits to the amount of power sold, thereby discouraging
utilities from assisting their customers in pursuing cost-effective
conservation opportunities. Some States have adopted integrated
resource planning programs that allow utilities to promote, undertake, or subsidize conservation investments on their customers'
premises. Such programs can speed the diffusion of efficient new
conservation technologies. By helping users reduce their demand
for electricity, these programs reduce the need for new generating
plants.
Utility programs that subsidize conservation investments on customer premises must be carefully designed if they are to be both
efficient and equitable. The price of electricity itself already provides customers with an incentive to conserve. They receive a
return on their investments in conservation in the form of lower
electricity bills. However, in some areas the retail price of power is
below the cost of production from new capacity. In such circumstances the conservation incentive provided by electricity prices is
generally too low. Therefore, a utility subsidy for customer conservation investments equal to the difference between the price of
electricity and the cost of producing it can enhance economic efficiency. But providing a subsidy equal to the full cost of producing
electricity from new capacity is both inefficient and inequitable. It
is inefficient because conserving consumers are paid both the cost
of the power saved (through the subsidy) and its price (through
lower electricity bills). As a result, consumers may be induced to
make conservation investments that raise, rather than lower, the
total utility and consumer cost of balancing demand and supply for
electricity. It is inequitable because the utility must recoup the
double payment to conserving customers by raising the rates
charged to other customers.
Adverse environmental impacts are another social cost of power
production, and it is sometimes asserted that these impacts merit




107

the provision of additional utility subsidies for customer conservation investments. However, electricity prices already reflect utilities' costs of compliance with environmental regulations. If society's valuation of environmental effects rises, the proper remedy is
to tighten environmental regulation. That approach will reduce environmental impacts directly and also increase incentives for conservation by raising electricity prices.

Energy Research and Development
Market forces also need to be strengthened in the area of research and development. Private firms are likely to underinvest in
research that promises widespread benefits if the firm carrying out
the research cannot use patents or other means to prevent other
firms from capturing most of those benefits. Government's proper
role is to support basic, precompetitive research in the energy
sector rather than to pick winners and losers. Premature government commitment to a selected technology can foreclose the development of other, more attractive alternatives or of a diversified set
of technologies suited to specific applications or regional markets.
The lack of a clear yardstick for measuring technological promise
or valuing research progress presents a challenge for both the initial allocation of research resources and the assessment of ongoing
programs. A policy that supported only technologies whose commercial viability was imminent might produce an impressive batting average without making any real contribution to technological
advancement. Yet, there must be some reliance on market signals
to avoid permanent commitments to technological dead ends. One
promising approach to balancing these two competing concerns is to
rely on government-industry consortia in which industry supplies a
major share of funding and plays a major role in setting the research agenda.

Energy Use Standards
Some have suggested that the adoption of stringent energy use
standards provides a low-cost approach to reducing energy use.
While efficiency standards can play a constructive role in certain
circumstances, their significant potential for causing economic harm
must be recognized. Unlike regulatory reform, energy use standards
generally limit rather than expand flexibility and choice. Moreover, the goal of energy policy is to enhance prospects for economic
growth while meeting legitimate energy security and environmental concerns, not to minimize energy use.
It is sometimes argued that energy-efficiency standards are justified because consumers do not purchase goods with the lowest combined purchase and energy costs. But, claims that standards are a
no-lose proposition often fail to account fully for all product attributes important to consumers. In choosing among various




108

models of cars, for example, consumers value performance features
as well as energy efficiency and cost. Indeed, absent such preferences it is difficult to explain the popularity of optional powerful
engines that increase the cost of cars while decreasing their energy
efficiency. Without evidence that structural or government-created
barriers exist and cannot be addressed directly, government regulation of energy efficiency should be viewed with skepticism.

SUMMARY
• The long-run outlook for energy prices is uncertain. Therefore,
long-run policies should be flexible enough to serve national interests under a wide variety of energy market conditions.
These considerations support continuation of the Nation's successful policy of market reliance.
• Energy security can best be pursued through the accumulation
of strategic reserves and diversification of energy supplies. An
excessive focus on minimizing energy imports can have significant adverse economic impacts.
• Further regulatory reform at the Federal and State level can
improve the operation of energy markets. Policy should strive
to maximize flexibility and choice and to avoid the introduction of new distortions.

CONCLUSION
The same policy principles are appropriate for macroeconomic
policies and energy market policies. Systematic policies that permit
predictable responses to changing short-run conditions, while maintaining a clear and credible focus on long-run objectives, should be
pursued. Such policies will position the economy to meet the challenge presented by oil price shocks.
Well-designed policies can significantly reduce but not entirely
eliminate the unfavorable effects of such shocks. Large and abrupt
increases in oil prices can still adversely affect the economy. These
oil price shocks present policymakers with the prospect of temporarily higher inflation and slower real growth rates.
Experience with the price shocks of the 1970s has led to policies
better able to handle an oil price shock. Having produced a low
and steady inflation rate and earned the credibility that comes
from such performance, the Federal Reserve has preserved the latitude to cushion the impact of oil price shocks without increasing
inflation expectations. The removal of price and allocation regulations in energy markets allows market forces to guide products to
their most valued uses, while the decrease in the intensity of
energy use has made the overall economy less sensitive to oil price
shocks. Strategic petroleum reserves in the United States and




109

other countries can now cushion the effect of large temporary
supply disruptions by increasing the supply of oil. For these reasons, the U.S. economy is now able to adapt more readily to an oil
price shock than it was in the past.




110

CHAPTER 4

Flexibility and Change in the Economy
ONE OF THE MOST IMPORTANT strengths of the U.S. economy is its flexibility. Flexibility enhances the ability of a market
economy to respond to change and, thereby, enhances the rewards
to innovation. Strong demand for an innovative new product both
rewards the innovator and is the signal that draws additional resources into production to meet the demand. An innovation that
lowers cost drives down price, signaling greater availability to potential consumers and causing them to increase consumption. In
this way, the U.S. economy enhances the private and social benefits of desirable changes, such as technological improvements, and
thereby encourages such changes. This dynamism has generated
the high standard of living that the United States and other freemarket economies enjoy and is one of the major reasons that people
all over the globe are now moving to reform their economies to increase their reliance on free markets.
Flexibility also reduces the cost of adverse changes, such as a
sharp, unexpected increase in the world price of oil. As discussed in
the previous chapter, such shocks may increase unemployment
temporarily, but a flexible economy adjusts to new circumstances
effectively and can return rapidly to full employment.

THE PROCESS OF DYNAMIC CHANGE
A clear picture of the dynamic nature of the U.S. economy can
be produced by a simple visual inspection of a modern home, which
may contain a microwave oven, a home computer, a videocassette
recorder (VCR), many Pharmaceuticals, nonstick cookware, and numerous other products that did not exist a few decades or even a
few years ago. The introduction and diffusion of all of these products required innovation, followed by the dedication of capital,
labor, and other resources to new uses.
This reallocation of resources occurs without government planning. The government took no action to guarantee that between
1985 and 1990 thousands of video rental stores would open so that
the owners of VCRs would have movies to rent. Individual entrepreneurs made the decision to risk their capital and their labor to
undertake these new ventures. A comparison of the rate of intro-




111

duction of new products and the growth of new industries in
market economies and in nonmarket economies shows that the government is not nearly as good as the market at organizing the reallocation of resources that must accompany innovation. The ease
with which resources can be shifted to the production of new goods
and services raises the returns to innovation and thus encourages
it.
The improvement in our lives provided by new products generally is not captured in statistics on real income growth. The increase
from one year to the next in the number of cars, computers, video
games, VCRs, or other products can be measured. But the qualitative leap in consumer welfare that occurs when a completely new
product is introduced is extremely difficult to capture. Thus, conventional measures of economic progress, such as real income
growth, will always tend to understate the benefits of the innovation and change that are the hallmarks of a free market economy.
Such qualitative changes are very difficult to predict, and government interference in market forces can suppress them without
anyone even being aware of the loss. Thus a benefit to the economy
of the significant deregulatory initiatives of the last 15 years is the
greater potential for innovation that enhanced flexibility provides.
Indeed, the U.S. economy is arguably more flexible than other
market economies, which tend to be encumbered by greater government involvement in direct production of goods and services and by
restrictions on labor market practices. The long-run growth rate of
the U.S. economy is dependent on continued efforts both to eliminate government policies that inhibit flexibility and to resist pressures to reimpose unnecessary regulation on the economy.

SOURCES OF ECONOMIC CHANGE
The forces driving change come from several sources. On the
supply side, changes in technology create entirely new products and
eliminate the demand for others. For example, the invention of the
transistor and the development of the microprocessor made possible desktop computers, VCRs, facsimile machines, compact disk
players, and a host of other products that never existed before,
while virtually destroying the vacuum tube industry. Innovation
also increases productivity and thus lowers the cost of existing
goods and services.
Population growth, immigration, and other demographic forces
are also sources of supply-side change. Throughout its history the
United States has absorbed wave after wave of immigrants, integrating them into the economy and thereby increasing production.
Recently, the economy has demonstrated its flexibility by accommodating a tremendous increase in the number of women working
outside the home. Between 1970 and 1990, the labor force participa-




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tion of women increased from 43 percent to almost 58 percent, and
this huge influx of new workers was not accompanied by a fall in
the relative earnings of women workers. In fact, during the latter
part of this period the earnings gap between female and male
workers narrowed.
On the demand side, changes in the demographic composition of
the economy and changes in people's tastes and preferences alter the
demands for particular goods and services. The increasing fraction
of the population that is elderly has greatly increased the demand
for health care, for example, and the general movement toward
suburban living and longer commutes has increased the demand
for petroleum.
The international economy is another source of change in both
supply and demand conditions. The end of World War II, and the
reduced industrial capacity that the war left in other countries,
created an enormous opportunity for exports and overseas investment for U.S. firms. More recently, the growth in international
travel has created an opportunity for domestic airframe manufacturers; the leading domestic manufacturers now export more than
half of their civilian aircraft production.

THE CHANGING STRUCTURE OF THE U.S. ECONOMY
The broad dimensions of historical change in the U.S. economy
are illustrated by Chart 4-1, which shows dramatic reallocations of
resources within the U.S. economy over the last 150 years. The
growth of manufacturing and service industries and the relative
decline of agriculture have required an impressive reallocation of
capital, labor, and other resources. Yet government did not have to
decide that workers should be moved from farms or factories into
banks or hospitals. These movements were brought about by
market forces, driven in turn by changing demands, demographics,
and the introduction of new technology.
Growing Manufacturing Productivity and the Service Sector
Recent decades have seen a continuing shift in employment from
goods-producing to service-producing industries. The goods-producing sector accounted for 41 percent of nonfarm employment in
1946, 28 percent in 1980, and 23 percent in 1990. A similar shift of
employment toward the service sector has taken place in other advanced economies. In 1966, for example, the goods-producing sector
accounted for 37 percent of employment in the 24 nations of the
Organization for Economic Cooperation and Development, which
includes most of the industrialized market economies of the world.
By 1988 this figure had fallen to 30 percent.
Over the 1980s the service-producing sector of the economy had a
net increase of 20 million jobs, which exceeded the 19 million net
job increase in the overall economy. The two industries adding the




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Chart 4-1 Labor Force Shares by Industry
U.S. workers have moved out of agriculture, first into manufacturing and then into services.
Percent

100

1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1989

•

Agriculture

Q Manufacturing1

Q Transportation and Trade

0 Other Services

1
1ncludes manufacturing, mining, and construction.
Sources: Department of Commerce and Department of Labor.

most jobs were business services, including advertising and computer and data-processing services, and health services (discussed
below). More than 5 million net new jobs, or 27 percent of the net
employment gain in the 1980s, were in business or health services.
This growth in service-sector employment has absorbed labor resources freed by rising manufacturing productivity, just as the
growth in manufacturing employment absorbed resources released
by rising productivity in agriculture in earlier decades. Manufacturing productivity increased at an average annual rate of 4.5 percent
from 1982 to 1990. This allowed manufacturing to maintain a
roughly constant share of real gross national product (GNP), even
though only about half of the 3 million manufacturing jobs lost between 1980 and 1982 were regained by 1990.
Within these broad sectoral movements, many other changes occurred. During the last 10 years increased demand for convenience
was a major force for change. The growth in retail grocery stores
during the decade reflected this trend, as the concept of a "super"
store with one-stop shopping for groceries, drugs, flowers, hardware, and other products took hold. Eating and drinking establishments enjoyed rapid growth, partially because the increase of two-




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worker families raised the value of people's time. On the supply
side, advances in computer technology led to rapid expansion of
such industries as computer and data-processing services, which
alone added 499,000 jobs during the last 10 years.
Changing lifestyles and family structure have also led to a rapid
increase in industries providing care to the old and the young. Industries providing residential, nursing, and personal care, largely
for the elderly, and child day-care facilities added 825,000 net new
jobs from 1982 to 1990.

Flexibility and Change in Labor Markets
The constant reallocation of resources from shrinking industries
to growing industries means that jobs are constantly being created
and lost in the economy. This process of reallocation occurs without
necessarily preventing the achievement of full employment.
Indeed, the simultaneous creation and destruction of jobs continues
whether the overall economy is in an expansionary period or a recession. During the two contractions between January 1980 and
November 1982, for example, total employment fell by 2.1 million
jobs. However, this net decrease consisted of a loss of 2.8 million
manufacturing jobs, partially offset by increased employment outside of manufacturing. Even within manufacturing, jobs were both
created and lost. It is estimated that in an average quarter during
this period, 6 percent of all manufacturing jobs disappeared, while
5 percent were created.
Simultaneous employment gains and losses can be seen at the
level of individual establishments. A recent study of data from Wisconsin for the period 1977-82 found that each year 45 percent of all
establishments experienced net employment gains, with an average
net gain of 30 percent; 47 percent experienced net job losses, with
an average net loss of 21 percent; and the remaining 8 percent
maintained stable net employment levels.
The dynamic nature of the labor market is also evident in unemployment statistics. In November 1988, for example, the jobless
rate was 5.3 percent, and 6.5 million workers were unemployed.
The following month both of these statistics were essentially unchanged. On the surface this lack of change might seem to indicate
a static labor market. Yet, out of the 6.5 million unemployed in November, 3.0 million had left unemployment by December. About
half of them had found jobs; the other half had withdrawn from
the labor force. In the same month, roughly 1.5 million previously
employed workers became unemployed and 1.5 million people entered or reentered the labor force and began looking for work.
This continual reallocation of workers requires that labor markets be flexible and that workers be mobile. Studies estimate that
the average worker holds more than 10 jobs in a lifetime. Survey
data show that every year 10 percent of all workers change occupa-




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tions. This number does not include the number of people who
change jobs but remain in the same occupation. Only 1 out of 10
workers who change occupations does so because of layoffs. Most
change occupations to earn higher pay or improve their working
conditions.
Geographic mobility is an important aspect of labor market flexibility. The movement of workers out of agriculture and into manufacturing and services was accompanied by a major migration from
rural to urban areas. Over the last two decades, the percentage of
the population residing in the Northeast and Midwest has declined
from 51.9 percent to 44.1 percent, reflecting a movement to the relatively fast-growing South and West.
The decline in the Northeast population share slowed during the
1980s, as strong growth in financial services, real estate, and other
industries produced gains in per capita income in both New England and the mid-Atlantic States. Overall, about 6 percent of the
population moves to a different county each year, and about 3 percent moves to a different State. This mobility of people within and
between regions is an important reflection of and contributor to
the economy's flexibility.

PRESERVING THE FLEXIBILITY OF THE ECONOMY
The dynamic nature of the U.S. economy and the value of flexibility have important implications for economic policy. The incentives for firms to undertake innovation and investment are greatly
affected by the overall macroeconomic environment, by the structure
of taxation, and by legal rules governing the protection of intellectual property and product liability.
To maintain a flexible and innovative economy, macroeconomic
policy should seek to foster growth and predictability through credible and systematic monetary and fiscal policy. The tax structure
should not erect barriers to saving, investment, or innovation.
Product liability rules should protect consumers from product-related harm in ways that do not unduly discourage the introduction of
new products. (These issues are discussed in more detail in Chapter
4 of the 1990 Economic Report.)

The Benefits of Economic Deregulation
Reduction in market flexibility is an important and often overlooked effect of regulation. When the Federal Government regulated airline routes and fares, one effect was that fares were generally
too high. But another effect, which was not visible until the regulations were removed, was that regulation prevented airlines from
developing efficient route networks. After deregulation the airlines
evolved "hub-and-spoke" systems to channel passengers into airports where they could be connected more efficiently to their ultimate destinations. As a result, airlines operate more efficiently,




116

and most travelers today have a greater range of flight choices at
lower real prices. Similarly, telecommunications regulation had,
and continues to have, adverse effects on innovation by restricting
which firms may enter particular segments of the industry.
It is not coincidental or surprising that the adverse effects of regulation are often not perceived until after the regulation is removed.
By its very nature, stifled change is difficult to detect. If unexploited technology is observed "sitting on the shelf," then one can investigate whether regulation is preventing its adoption. But it is impossible to know to what extent regulation, by preventing change,
stifles the incentive even to develop new ways of doing things. It is
therefore also impossible to know the extent of the lost opportunities.
There are inherent institutional reasons why government regulation tends to inhibit change. Regulation is a legal institution, and
legal processes rely heavily on precedent. This reliance creates a
bias in favor of the old and against the new. In addition, regulators
face an extremely difficult problem: They are trying to make rules
that constrain firms to act differently than they otherwise would.
Regulators must do this knowing that the firms will always have
better information about their costs, customers, and technology.
Accomplishing the regulators' goals in a static world in which technology and institutions do not change would be hard enough, but it
is harder still in a world of constant change in which the regulators will always lag behind the firms in understanding what is
going on. For this reason, regulators have an incentive to prevent
regulated markets from changing too rapidly.
These institutional biases against change inherent in government regulation do not mean that regulation is never desirable.
Unregulated markets that generate serious pollution problems,
have serious failures in the availability of information, or are inevitably served only by monopoly firms do not perform well. Regulation based on careful balancing of benefits and costs can sometimes
improve performance in these markets. Such regulation will, however, almost always impose some reduced flexibility. In balancing
the costs and benefits of government regulation, these costs of reduced flexibility should not be forgotten, even though they are
subtle and difficult to quantify.
Government interference can also adversely affect the flexibility
of labor markets. As discussed below, some States have responded
to concerns about our educational system by increasing certification
requirements for teachers. Unnecessary certification requirements
create an artificial barrier that prevents qualified teachers from
moving from one State to another or moving into teaching from
other professions. In the long run, this barrier will increase the
cost and decrease the effectiveness of education.




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Adapting to Changes in Technology and Institutions
Failure to adapt longstanding government policies to a changing
economy can be extremely costly. Regulation of railroads began in
the 1890s, when they had a monopoly on the transportation of
many goods. In the late 1970s, long after railroads had lost much of
their business to trucks, regulation still treated them as monopolies, and partial regulation continues today. The decline of railroads when trucking developed was perhaps inevitable, but it was
surely hastened by a regulatory regime that greatly limited the
railroads' ability to compete. Similarly, regulation and other government policies in the banking and financial services sector have
for decades failed to adapt to changing technology and market conditions, and reform is badly needed (Chapter 5).
Just as government regulation inhibits change in the affected
markets, regulation is itself resistant to change. Once any regulatory regime is established, a constituency that benefits from it is
created. No matter how out of date or counterproductive the regulatory regime becomes, that constituency is likely to resist efforts
to change or end it. Therefore, it is to be expected that regulatory
institutions will not adapt themselves well to changing circumstances, a tendency that should be considered when evaluating the
long-run net benefits of deregulation.

Lowering International Barriers to Trade and Investment
In addition to being a driving force for change, free international
trade can facilitate domestic adjustment to change. U.S.
agricultural exports absorbed some of the increased output made
possible by growth in agricultural productivity and thus cushioned
the fall of agricultural employment. Further reductions in barriers
to international agricultural trade would yield even greater benefits from high U.S. agricultural productivity.
The United States currently has a low rate of domestic saving by
historical and international standards. The free flow of foreign capital into the United States has maintained domestic nonresidential
investment (and ultimately productivity growth) at a level above
that which domestic saving would support.
Thus international trade and investment flows provide an additional channel of flexibility to the economy. Administration efforts
to reduce international barriers will further improve this flexibility
(Chapter 7).

Cushioning the Effects of Change
Despite its benefits, economic change can impose short-term
costs. Workers with obsolete skills and firms facing declining
demand or using outmoded technologies face declining incomes. It
is good social and economic policy to cushion such blows and to facilitate the retraining or retooling necessary to move such re-




118

sources into other uses. But the government should not try to prevent change itself in order to mitigate its consequences. Such efforts are ultimately futile; they only serve to squander a portion of
the beneficial effects of change and, cumulatively, to reduce the
economy's flexibility.
This mistake is apparent in the farm policies of the United
States, and, to an even greater extent, in those of Europe and
Japan. Rapidly rising agricultural productivity, combined with relatively slow growth in the demand for food and other agricultural
products, required that resources move out of the agricultural
sector. The market signal for this needed reallocation is that farm
incomes do not rise as fast as incomes in other sectors. Many aspects of farm policy have, however, attempted to squelch this
signal by maintaining some farm prices and farm incomes at artificially high levels. Though farm policy has not ultimately succeeded
in preventing a dramatic movement of labor out of agriculture, it
has significantly reduced the benefits of agricultural productivity
growth. If government policies that interfere with efficient allocation of agricultural resources were eliminated both in the United
States and abroad, all nations would benefit from a more efficient
worldwide agricultural sector.
Sometimes the economy must respond to changes that are inherently adverse. But if the initial shock is unavoidable, the government only makes things worse by preventing the economy from
adapting to it. A good example of this policy mistake is the energy
policy of the 1970s. When the Organization of Petroleum Exporting
Countries raised the world price of oil in 1973, and when the Iranian revolution and Iran-Iraq war raised it again in 1979, the result
was unquestionably damaging to the U.S. economy (Chapter 3). The
urge to try to soften this blow by regulating the price of oil is understandable, but the result was the creation of artificial shortages
and a delay in the adoption of energy-conserving technologies.
Integration with the world economy also generates the need for
adjustments in labor markets. Increasing imports can lead to reduced employment in domestic industries, generating demands for
government protection from the forces of change. Such protection
can come in many forms, but the two most widespread are subsidies and trade barriers. The U.S. textile, machine tool, auto, and
other industries have received trade protection at various times.
Many European nations give enormous subsidies to their steel and
shipbuilding sectors. Subsidies and trade protection for declining
industries are often a source of trade disputes among nations, but
the strongest argument against protectionist policies is that they prevent the efficient movement of resources among sectors, both within
and across nations. The last decade has seen increasing awareness
in many advanced economies that such policies are counterproduc-




119

tive. In Sweden, for example, subsidies to declining industries
equaled 43 percent of manufacturing profits in 1977-78, but such
subsidies have since been cut dramatically.
The economy as a whole benefits greatly if workers from industries subject to effective foreign competition are allowed to move to
other sectors, but these moves are often painful for the workers involved. The decline of particular industries also creates problems
for particular localities or regions that are heavily dependent on
them.
Existing policies appropriately seek to mitigate these human costs
and to facilitate retraining and reemployment, not to prevent labor
market adjustments. The unemployment insurance system provides
up to 26 weeks of income protection, and in some cases unemployed
workers are eligible for extended benefits. A wide array of State
and community-based programs for workers are provided through
the Job Training Partnership Act. Such programs provide educational instruction, job training, counseling, and other support services.
These programs can be designed to enhance flexibility. For example, the transferability of unemployment benefits across States
allows displaced workers to move to another State where opportunities may be better, without immediately losing benefits. Some
States have experimented with combinations of job search assistance, job training, and the provision of a lump sum benefit either
at the time of reemployment or to finance the startup of enterprises.
Ultimately, the most important thing that the government can
do for workers in declining industries is to provide an environment
conducive to the creation of new jobs elsewhere in the economy.
Thus, these workers, too, are dependent upon government policy
that fosters growth and maintains market flexibility.

SUMMARY
• The ability of the U.S. economy to change and evolve is one of
its greatest strengths.
• Flexibility encourages innovation and increases its benefits,
and raises living standards.
• Government policies can maximize the flexibility of the economy by forgoing unnecessary regulation, avoiding attempts to
stymie the inevitable rise and fall of particular economic sectors, and removing barriers to innovation.




120

EDUCATION REFORM FOR AN ADAPTABLE WORK
FORCE
A key determinant of the flexibility of the economy is the quality
of its work force. Education raises skill levels that increase job performance and productivity. Well-educated workers have the basic
skills necessary to adapt to the changing demands of a dynamic
economy and are able to compete with their peers in other nations.
Unfortunately, primary and secondary education in this country
does an inadequate job of producing such workers. Parental involvement and student dedication—especially to homework—is essential to the success of any school system. But greater parental
and student effort alone cannot ensure success. Comprehensive
reform of American elementary and secondary education is necessary.
The educational system should encourage innovation and promote excellence among teachers and students. It should strive to
earn the same high reputation as the U.S. postsecondary educational system, in which there is significant diversity and choice. It
should provide the foundation that enables workers to adapt and
respond to changing workplace technologies and economic conditions. And it should provide all high school graduates with the
backgrounds necessary for advanced study or entering the work
force.
Many school districts have outstanding educational systems and
achieve these goals. And in every school district in the Nation
there are talented and dedicated teachers and administrators as
well as concerned parents who work hard to improve the educational system. Success requires a commitment to excellence from
school administrators, teachers, and parents as well as from students themselves. However, despite some successes, too many State
and local educational systems are notably inflexible and resistant
to meaningful and effective change. Because they need not compete
for students and are not held accountable for the quality of the education they provide, many State and local education agencies in
this country have become entrenched bureaucracies. As a result,
U.S. students often receive unacceptably poor educations. Parents
often find they have little power to ensure that their children receive a sound education, and many choose to send their children to
private schools.
The primary fiscal responsibility for public education lies with
State and local governments, which determine the institutional
framework for the operation of the educational system. Local
school boards and State education agencies determine who may
teach, what schools students attend, how long students are in class,
and even the general instructional methods that are adopted. The




121

Federal Government has traditionally provided only a small fraction of total support for education at the elementary and secondary
levels; in 1988 it provided only 6.3 percent of the funds spent on
education for kindergarten through grade 12.
As well-intentioned as school boards and education agencies may
be, a system that is not required to compete for its students and is
not judged by their performance is hard pressed to avoid the mediocrity and resist the insularity that comes with being the only
"free" game in town. As a result, although the United States
spends more money per pupil than almost any other country in the
world (in 1989 U.S. per pupil expenditures were $5,172), the return
on this substantial investment is unacceptably low.

THE CURRENT STATE OF EDUCATION
Evidence of the inadequacy of education in the United States can
be found in the workplace and in the schools themselves.

Evidence from the Workplace
Today's high school graduate is often ill-prepared for the world
of work. The 1990 National Assessment of Educational Progress,
which reported the results of a nationwide test of students conducted between 1986 and 1988, found that only 6 percent of 17-year old
students demonstrate the capacity to solve multistep problems and
use basic algebra; only 8 percent have the ability to draw conclusions and infer relationships using scientific knowledge; and only 5
percent can synthesize and learn from specialized reading materials.
Firms are finding it increasingly necessary to develop remedial
training programs in reading and mathematical skills; they spend
an estimated $20 billion annually on such programs. Even institutions of higher learning are adapting their course offerings to reflect the poor preparation of many freshmen; the fraction of colleges offering remedial instruction has increased from 79 percent
to more than 90 percent since 1980.
A second-rate educational system cannot support a first-rate,
world-class economy. Workers unable to read and grasp complex
concepts in mathematics and science cannot hope to adapt to
changing technologies in the workplace. Poor training in mathematics and science at the elementary and secondary levels also
contributes to declining trends in college enrollment in these areas.
This pattern threatens the creative foundation needed to discover
and introduce advances in technology.

Previous Reform

Efforts

In 1983 a commission appointed by the Secretary of Education
issued the report A Nation at Risk, which painted a bleak portrait
of the quality of education in elementary and secondary schools in




122

the United States. The report struck a responsive chord. Reacting
to its recommendations and challenges, State and local educational
systems embarked on plans to introduce fundamental changes.
It is nearly a decade later, and not much of consequence has
changed. To be sure, many bills were introduced in State legislatures in response to the report, and many were passed. Forty-five
States increased graduation requirements for core courses in subject areas such as mathematics, sciences, humanities, and social sciences. Many States also made teacher certification requirements
much stricter and, in an effort to attract higher quality teachers,
increased salary levels significantly. Teachers' salaries in public elementary and secondary schools increased by 18 percent in real
terms between 1980 and 1990. Expenditures per pupil have also increased 28 percent in real terms since 1982.
Despite the efforts in the 1980s, there has been no noticeable
change in the performance of the Nation's schools. Though students
are taking more mathematics, science, and reading courses, test results show that no performance improvements have been made in
these subject areas since the appearance of A Nation at Risk. The
percentage of students graduating from high school remains unacceptably low, falling from 73 to 72 percent since the report's release.

International Comparisons
U.S. high school students consistently perform far below their foreign counterparts, especially in their knowledge of mathematics and
science. In an assessment of learning in six major developed countries in 1988, U.S. students ranked last in mathematics and second
to last in science. Even the best U.S. students do not compare favorably with foreign students. The International Assessment of
Educational Progress found that a very select group of collegebound American students scored far below a less select group of
Canadian students on a standardized test, and no better than an
even broader group of Hungarian students.
Other indicators are also very telling. U.S. students spend an average of only 3V2 hours a week on homework. That compares
poorly with the 24 hours a week on average that high school seniors spend watching television. Studies show that European students spend far less time watching television and more time studying.
Finally, American students spend much less time in school than
their foreign counterparts. Even though the American system of
education is highly decentralized, the 180-day school calendar is
nearly national in scope. School calendars ranged from 226 to 240
days in pre-unification West Germany. In Japan, schools are open
243 days on average. Some argue against lengthening the school
year on the ground that it is the quality, not the quantity, of in-




123

struction that is at issue. Certainly, merely lengthening the school
year is not the panacea for the ailing U.S. school system, but it is
an issue deserving study and consideration by the States. Evidence
suggests that in countries with longer school years, more material is
covered and at a much less hurried pace than in American classrooms. Thus even in U.S. school systems that attain high standards
of excellence, the quantity of educational material provided to students is not competitive by world standards.
TOWARD AN EFFECTIVE EDUCATIONAL SYSTEM
The Administration is fully committed to promoting excellence
in the U.S. educational system and has undertaken significant initiatives to this end. In September 1989, the President convened a
summit of cabinet officials and U.S. Governors to discuss the state
of American education. Only the third such summit in American
history, it was the first ever on education. As a result of this
historic meeting, the President and the Governors agreed upon six
clearly defined goals for the American educational system to reach
by the year 2000:
• All children in America will start school ready to learn;
• The percentage of students graduating from high school will
increase to at least 90 percent;
• Students will leave grades 4, 8, and 12 having demonstrated
competency in challenging subject matter, including English,
mathematics, science, history, and geography; and every school
in America will ensure that all students learn to use their
minds well, so they may be prepared for responsible citizenship, further learning, and productive employment in our
modern economy;
• U.S. students will be first in the world in science and mathematics achievement;
• Every adult American will be literate and possess the knowledge and skills necessary to compete in a global economy and
exercise the rights and responsibilities of citizenship; and
• Every school in America will be free of drugs and violence and
offer a disciplined environment conducive to learning.
The President outlined these goals in his 1990 State of the Union
Address. In July 1990, the President issued The National Education Goals: A Report to the Nation's Governors^ and the President
and the Governors established a National Education Goals Panel
that also includes participation of the congressional leadership. The
panel will recommend a measurement and assessment system that
will provide the Nation with information on the progress being
made in reaching these goals.
To help ensure that all American children start school ready to
learn, the Administration has significantly expanded the Head



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Start program. And to ensure that the national education goals are
achieved, the Administration will propose a new Educational Excellence Act. Initiatives in this important proposal would stimulate
fundamental reform through promoting educational choice and alternative certification for teachers and principals, promote local
control and innovation by providing increased flexibility in funding
in exchange for greater accountability, reward schools that demonstrate improved achievement among students, and provide incentives for innovative approaches to mathematics and science education.

Programs of Choice
The U.S. public educational system must be opened to the invigorating and challenging forces of market competition by enabling
teachers, parents, and students to choose their schools. Over time,
the schools that survive will be the most innovative and effective
institutions, those capable of responding to the changing educational needs of society.
Schools that must compete for students will work harder to deliver quality education. A school choice program can become the catalyst for greater diversity and help eliminate mediocrity in the educational system. An important step in this direction is the magnet
school concept in which schools specialize in particular subject
areas or interests—such as science, mathematics, or the performing
arts—and students and their parents choose which school to
attend.
The Administration has advocated adoption of choice programs
in as many jurisdictions as possible across the country. There is no
one "preferred" approach to educational choice. A statewide choice
plan exists in Minnesota, while a choice demonstration plan including both public and private schools has been launched in Milwaukee, Wisconsin. In 1990 seven States adopted plans allowing various forms of choice. Before 1990 five other States had enacted interdistrict choice plans. The Administration's new Center for
Choice in Education has been established to provide information
and assistance to anyone interested in learning about or implementing educational choice.
A key to the success of a choice-based program is granting individual public schools the freedom to innovate. Schools must be
freed from the grip of bureaucracies distant from the classroom.
One popular version of this self-run school approach is to leave the
governance of each school to a team composed of the principal,
teachers, and parents. Such an arrangement creates a personal
stake in the success of the school, rather than reliance on a central
bureaucracy. It also provides parents and teachers an effective
voice in determining how a school should change to attract students in an open-choice educational system.



125

Accountability
Unless teachers, school administrators, and elected or appointed
officials are held accountable for the quality of the education they
provide, the success of open-choice programs and self-run schools
will be limited. Merely adopting new approaches does not ensure
success. Schools and teachers must be held accountable for what
their students learn.
To this end, State and local education agencies must work together to develop and publish objective measures of the output of the
educational system. Meaningful performance measures are necessary for the success of school choice programs, allowing parents
and students to leave choice programs that are failing. Such performance measures include basic competency tests for graduation
from high school; annual tests to determine student progress;
changes in high school drop-out rates; and high school transcripts
that provide meaningful information on course content and student
skills to parents, employers, and colleges.
At the Federal level, the Department of Education is charged by
law to "collect, collate, and from time to time, report full and complete statistics on the condition of education in the United States."
The National Center for Educational Statistics (NCES) has developed a series of national measures of the output of the educational
system. The NCES publishes an annual digest of education statistics and periodically publishes the National Assessment of Educational Progress. The NCES publishes an annual selection of indicators on the condition of education in the United States. The 1990
report confirms the dismal state of public education in this country. Each of these reports provides an ongoing basis for parents to
test the success of education reform; they are important tools for
increasing accountability.
Alternative Teacher Certification Programs
Each State sets up standards that determine who can teach in
public elementary or secondary school systems. Differences in certification requirements across States produce substantial limitations
on teachers' job market options. Although many States have
formal reciprocity agreements, teachers still encounter significant
barriers when they try to cross a State line. Until recently, for example, to win a permanent teaching position in a Rhode Island
school system, a person qualified to teach in Massachusetts was required to have a master's degree and 6 years of teaching experience, three of them in Rhode Island. This particular limitation is
being eased somewhat, since the six New England States along
with New York have agreed to accept the teaching credentials of
applicants from other States in the region, providing they complete
extra education requirements within 2 years.



126

Eliminating unnecessary barriers to entry into the teaching profession within each State is at least as important as eliminating
the barriers between States. Most States currently require that an
individual either graduate from a 4-year college as an education
major or take a certain number of education courses before being
allowed to teach. Talented individuals who decide to switch careers
and become teachers find they have to complete either a traditional teacher preparation program or, under fairly recent reforms in
some States, complete a graduate degree program in education.
While these requirements discourage many talented professionals seeking a career change from entering the teaching profession,
they do not ensure that the school system is getting high-quality
teachers. In fact, the poor academic performance of teachers in the
subject areas they teach led many States to impose minimum grade
requirements for education majors.
The solution to the problem of attracting talented teachers, however, is not to regulate the industry further but to open it up to the
competitive process and to reduce certification requirements in ways
that do not threaten but instead encourage excellence in teaching.
Currently, 28 States have implemented some form of alternative
teacher certification program. Mainly small pilot programs, these
are based on the general principle that an individual with a bachelor's degree in a specific field of study can be a successful teacher,
given some minimum level of training in education (Box 4-1). The
minimum varies across States, but all programs reflect the belief
that the minimum needed to guarantee quality is far less than that
currently required by traditional certification routes.
It is important to recognize that removing unnecessary barriers
to teaching does not threaten the stature of the profession. First,
one already well-defined qualification for entry into the teaching
profession, the acquisition of a 4-year college degree, will not
change. Second, what helps promote respect for the teaching profession is effective teaching, not unnecessary certification requirements. The experience in Texas and in numerous other programs
suggests that lowering the barriers to entering the teaching profession can improve the quality of primary and secondary education.
SUMMARY
• Public schools in the United States are failing to prepare students for either the world of work or higher education. This
failure threatens the ability of the United States to maintain
its leadership in the world economy.
• Competition and accountability are essential if schools are to
innovate and improve the quality of education.




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Alternative certification programs can enhance the quality of
education by removing unnecessary barriers to entry into the
teaching profession.
Box 4-1*—Texas Alternative Certification Program
Starting with one school district in 1985, the Texas State
school system has taken a national lead in introducing alterna*
tive teacher certification programs. The program is currently
operating in nearly 20 percent of the State's school systems,
and the number of teachers certified by the alternative route
has grown from 276 in the first year to 1,241 in 1990. In a typical program, a candidate with a bachelor's degree takes 1 to 3
education courses, learning basic classroom management,
along with disciplinary and evaluation skills. The candidate is
then assigned to Ms or her own classroom for the year, receiv*
ing a first-year teacher's salary and a year of experience on
the career ladder. Throughout the internship year, the candidate works closely with a mentor, often meeting on a daily
basis for support and problem-solving. In addition, interns take
other education courses throughout the year.
The alternative programs have been very successful in attracting highly qualified, diverse interns. In 1990f 30 percent of
the interns were men and 52 percent were minorities, compared with traditional education programs, where 23 percent
of the enrollees are men and 12 percent are minorities. Interns
are older than the traditional education major: 90 percent are
over 24, and 50 percent are over 30 years of age.
Evaluations of the program thus far suggest it is working
very well. On State certification exams, interns do as well as or
better than teachers who follow the traditional route* Studies
show that teachers qualified by the alternative route are comparable in quality to teachers qualified through the traditional
route.

AGRICULTURE: TECHNOLOGICAL SUCCESS AND
THE NEED FOR MORE FLEXIBLE POLICIES
The agricultural sector illustrates dramatically both the tremendous dynamism of the U.S. economy and the costs of government
policy that tries to inhibit change. Technological progress and the
increased integration of world markets have transformed the U.S.
farm sector, leading to growing production of wheat, corn, meats,
and other products using a fraction of the labor force previously devoted to agriculture. At the same time, a complex structure of Fed-




128

eral farm policies has evolved that often inhibits the efficient use
of agricultural resources. These programs impose significant costs
on taxpayers, consumers, and the economy as a whole, thereby lessening the potential benefits of agricultural progress.

TECHNOLOGICAL CHANGE AND PRODUCTIVITY
GROWTH
Technological innovation has been a driving force behind dramatic changes in both agricultural production and agriculture's
role in the economy. Many important technological changes in agriculture occurred in response to market signals. The initial great
surges in farm mechanization, for example, came in response to the
farm labor shortages associated with the Civil War. The widespread adoption of mechanization allowed fewer workers to cultivate more land and facilitated agriculture's westward expansion.
The advent of tractors around the close of World War I not only
increased each worker's productivity, but also freed land from the
production of food for draft animals.
The demands on farm output associated with World War II, coupled with increasingly limited opportunities to bring more land
into production, provided the impetus for a new wave of technological innovations that increased the productivity of each unit of land
and livestock. Following World War II, farmers increased crop
yields greatly through the adoption of chemical fertilizers and pesticides, irrigation, and improved seed varieties such as hybrid corn.
Corn yields per acre, for example, more than tripled from 1945 to
1990. Improved livestock breeds, artificial insemination, and greater feeding efficiency enhanced the productivity of the livestock
sector as well. The average dairy cow produced almost three times
as much milk in 1989 as in 1945.
In response to changing technology, the use of agricultural labor
in 1989 was about one-fifth of what it had been a half century
before, while the use of chemical inputs increased 16 times. Agricultural productivity per unit of all production inputs increased
about two and one-half times between the 1930s and 1980s. Government has had a long and important role in supporting and disseminating agricultural research, but innovations also come to the farm
sector because private entrepreneurs are able to profit from them.
What are the major implications of these dramatic changes in
productivity? First, employment in farming fell rapidly as fewer
and fewer farm workers were required to meet the food demands of
the nonfarm sector. While this decrease means that farming has
become much less representative of the American lifestyle—less
than 3 percent of the American labor force is employed on the
farm today, compared with 21 percent in 1930—it also means that
labor was freed from agriculture to contribute to the growth of other



129

sectors. Industries that emerged to support a more modern agriculture, such as financial institutions, farm equipment and fertilizer
manufacturing and distribution, and food processing, were important new sources of employment.
Second, agricultural supply expanded faster than agricultural
demand. Accordingly, real farm prices have trended downward in
the United States since the Civil War. The decline in agricultural
prices contributed to the fact that American consumers now spend
only about 16 percent of their disposable income on food—near the
lowest in the world—and are among the best-nourished people in
the world.

CONSUMER DEMAND AND INTERNATIONAL TRADE
In addition to technology, other factors have been important
sources of agricultural change. Changing consumer tastes and preferences have affected the relative profitability of alternative crops
and products and reshaped the composition of agricultural production. The health-motivated interest in low-fat foods, for example,
has contributed to the rapid growth in the production of poultry
meat since 1980, while the output of other livestock products has
been roughly constant.

Product Changes Within Agriculture
Consumer demand sometimes shifts in response to exposure to
new agricultural products through international trade. Kiwi fruit,
for example, entered the U.S. market relatively recently from New
Zealand. Rapid consumer acceptance created the incentives for the
development of a domestic industry, and U.S. kiwi production grew
from an estimated 5,000 tons in 1980 to 40,000 tons in 1989.
Another demand-side factor with potentially large effects on the
agricultural sector is the growing consumer concern with food
safety and the environmental effects of chemical-intensive farm
production techniques. Some trends in frontier research in biotechnology could help farmers respond to these consumer concerns.
Bioengineered crop varieties that are resistant to diseases and
pests are now emerging as proven technologies. Their adoption
could ultimately reduce the intensity with which chemical inputs
are used and again change the nature of agricultural production
and the surrounding infrastructure.

Interaction with World Markets
One of the great benefits of productivity growth in U.S. agriculture has been the expansion of the supply of food and other agricultural products to countries all over the globe. Expanded trade, along
with the direct transfer of agricultural technology to producers in
other countries, has improved diets and living standards around
the world. And, as U.S. agriculture has become more important to




130

the world, trade has become more important to the economic performance of U.S. agriculture.
Agricultural exports increased sharply in the 1970s; during that
decade the value of exports increased from about 12 percent to
more than 25 percent of farm cash receipts. In the 1980s, total exports as a percent of production fell somewhat, but remained very
high for key commodities. Depending on the year, anywhere from
40 percent to 80 percent of U.S. wheat production, for example, and
30 percent to 50 percent of soybeans were consumed in other countries.
The importance of exports to U.S. farm income—combined with
adverse world market conditions and rising international tensions
over agricultural trade barriers in the mid-1980s—encouraged the
United States to put agriculture at the top of its list of priorities
for the Uruguay Round of General Agreement on Tariffs and
Trade negotiations (Chapter 7). A successful conclusion to these
trade talks, aimed at lowering barriers to agricultural trade worldwide, would help open foreign markets further to U.S. farm products. In return, U.S. barriers to imports would come down as well,
bringing the benefits of increased competition in agricultural products to the U.S. marketplace.
TOWARD A MARKET-ORIENTED FARM POLICY
The long-term decline in U.S. farm prices has been one of the
great benefits of increasing productivity in agriculture. Farmers,
though, fearing that lower prices would mean lower incomes, have
sought and secured a significant degree of government assistance
in keeping the prices they receive from falling. Government agricultural policy, which partly insulates farmers from market forces, operates at the expense of consumers and taxpayers. The sharp escalation of farm program costs in the mid-1980s, together with some of
the adverse effects of inflexible farm programs, highlighted the
need for policy reforms.
The Costs of Failing to Accommodate Market Forces
Government farm programs consist principally of two types of
subsidies: direct payments, financed by taxpayers; and programs
that hold farm prices above free-market levels, paid for by consumers at the grocery store. At their peak in 1986, Federal subsidies of
both types to U.S. producers of wheat, rice, feed grains, sugar,
milk, and beef were valued at almost $27 billion—that is an average of $12,000 for each U.S. farm, although many farms receive no
subsidies.
One recent study estimated that economy-wide income would have
been roughly $9 billion higher in 1987 in the absence of these subsidies. In other words, the benefits to consumers and taxpayers of al


131

lowing the market to allocate agricultural resources would have
outweighed the loss of farm subsidies to producers by $9 billion.
It is also instructive to examine some of the problems caused by
specific policy measures designed to counteract market signals. A
key component of U.S. agricultural policy is the provision of price
floors for major commodities. Prices of wheat, feed grains, soybeans, rice, and cotton are held above the floor by allowing farmers, or sometimes other farm product suppliers, to pledge their
crops as collateral to the government in exchange for a loan.
Pledged crops are valued at the legislated support price. By putting
their crop "under loan" when the market price is below the support price, suppliers remove some portion of the current crop from
the market, which helps pull the market price back up toward the
support price. Should the market price rise above the support
price, crops under loan may be redeemed from the government and
offered to the market. If not redeemed by loan repayment, the government acquires the crop collateral and the crop is said to have
been "forfeited."
The prices of sugar, milk, and several other commodities are also
maintained above legislated price floors. A combination of government purchases of dairy products—including cheese, butter, and
nonfat dry milk—and restrictions on the quantities of these products that can be imported is used to support milk prices to dairy
farmers, for instance. (The sugar support system is discussed in
Chapter 7.) Under each of these programs, farmers are guaranteed
at least the support price—regardless of supply and demand conditions.
A system of Federal regulations called "marketing orders" sets
minimum prices for about 80 percent of fluid milk sales; 45 other
marketing orders place restrictions on the quality or the quantity
sold of various fruits, vegetables, nuts, and specialty crops. Milk
orders reduce competition, and studies have shown that they raise
retail milk prices. Orders that merely enforce minimum grade,
size, and maturity standards can also interfere with competition,
and can affect consumer choices and prices by removing some product from the market. The kiwi fruit order, for example, which
began in 1984, after U.S. kiwi production had begun to expand,
puts size and grade requirements on kiwis grown in California. The
1990 farm legislation extends the same requirements to kiwi imports. These requirements may well inhibit competition in a
market that did not even exist until imports created it.
Over time, policymakers have learned that when support prices
for export crops are set too high, U.S. commodities accumulate in
government warehouses, while other countries benefit from the absence of U.S. competition. Foreign farmers expand production and
their share of the export market at the expense of the United



132

States. The high wheat support prices set in the 1981 farm legislation have often been cited as one reason for the sharp drop in U.S.
wheat exports and the large buildup in government-held stocks
during the early to mid-1980s. Support prices for wheat and other
exported commodities were lowered in 1985 legislation, but policymakers have not had this same incentive to lower the price floors
for commodities subject to competition from imports, such as dairy
products and sugar.
"Deficiency" payments are another major component of farm
programs. They are paid to qualifying wheat, feed grains, rice, and
cotton producers and are based on a "target" price, which is set
higher than the support price for these crops. Each qualifying
farmer receives a check from the government in an amount equal
to the difference between the legislated target price and the
market price or support price, whichever is higher, multiplied by
qualifying production.
These deficiency payments are made in proportion to a farmer's
crop acreage. As a result, the distribution of deficiency payments is
dramatically skewed toward large, often wealthy farmers. In 1988,
for example, more than 40 percent of direct payments, which include deficiency payments and a smaller amount of some other
payment types, went to fewer than 4 percent of all farms. These
farms averaged almost $62,000 in payments, almost $100,000 in net
cash farm incomes, and more than $800,000 in net farm worth.
Furthermore, the incentive to overproduce provided by a target price
set well above the market price requires offsetting measures to control program costs, such as requiring farmers to take land out of
production. Farmers thus have been required over the years to cede
some of their production decisions to the government.

1990 Farm Legislation
In recent decades, farm legislation has been written often, but
each law has retained the general structure of the original 1930s
legislation. The 1985 legislation introduced important market-oriented reforms, such as more flexible approaches to determining
support prices for exported commodities. Support prices for most
program commodities began to be based on a 5-year moving average of market prices, rather than being set independently of price
trends. U.S. farm exports performed considerably better after this
change.
The most significant change of the 1990 farm legislation, the
Food, Agriculture, Conservation, and Trade Act of 1990, in conjunction with the Budget Reconciliation Act, is the "triple-base"provision, which extends increased planting flexibility to farm program
participants while reducing the acreage qualifying for deficiency
payments. This planting flexibility provision (explained in Box 4-2)
makes market prices more important to production decisions. It




133

will thus help reverse the longstanding tendency of farmers to
overproduce crops whose target prices are set above market prices.
Two particularly important outcomes are likely. First, the production of existing and potentially profitable alternative crops that do
not qualify for deficiency payments, such as soybeans and other oilseeds, can now expand. Second, environmentally sound crop-rotation practices might be encouraged in some agricultural regions
where substitute crops are available or are likely to be introduced.
Box *-l—How the *frfple-Basef* Provision Works
Every .y0$r the government assigns farmers an "acreage
base*- and a "payment yield" for each program crop, such as
com, historically planted on the farm* Under the 1985 farm
bill/a farmer could receive deficiency payments for producing
corn o#ly if some portion of the corn acreage base was put into
a conserving use and not planted to com* Deficiency payments
ware not made on this idled, or conserved, acreage, and the
feimer could incur penalties for planting certain crops, such as
soybtaiis, on it
- ,
;
The 1090 f»m legislation added to the /ieficiency payment
acres and conservation acres a third mteg&ty$w£ does not
qualify for d&fwiemcy payments, but th&t m&y te f^m^A to any
zmpmmpt fruits and vegetable®. The Wlltet tidM> thirdcatego*
ry~the flexible acres—at 15 i^itjenfcof tfeta^te^^.
By disallowing deficiency payments on this IS percent, the
flexibility provision reduces government outlay Farmers can,
however, offset some of the lost subsidy by planting crops with
the greatest market returns on the triple-base acreage. Therefore* the provision makes market signals ipgtore important to
farm production decisions.
The flexibility provisions of the 1990 legislation also create considerable taxpayer savings, as farm subsidies are eliminated on 15
percent of the farm program acreage base. This change is projected
to save about $7 billion over 5 years and is an important component of the overall deficit reduction package. However, while reducing deficiency payments and increasing the importance of
market prices in farm production decisions, the 1990 farm legislation retains high and rigid price supports for dairy products and
sugar and continues extensive government management of some
markets, such as peanuts. While the Administration applauds the
move toward increased flexibility that the 1990 farm legislation
represents, continued efforts to reduce distortions created by farm
policy are desirable.




134

SUMMARY
• A series of technological revolutions has dramatically increased the productivity of agriculture, freeing labor from agriculture, lowering the cost of farm products, and enhancing the
prosperity of the economy.
• Productivity growth also facilitated a tremendous increase in
agricultural exports, linking the future of U.S. agriculture to
the openness and growth of world agricultural markets.
• U.S. agricultural policy, as evidenced by 1990 farm legislation,
is gradually being changed so that agriculture is more able to
respond to market signals, but further reforms are necessary
to reduce the distortions created by farm policy and the burden
of farm support on consumers and taxpayers.

HEALTH CARE: DYNAMIC TECHNOLOGY AND
CHANGING DEMOGRAPHICS
Health care has been one of the fastest growing and most innovative sectors of the U.S. economy during the last three decades. Although many factors have contributed to the rapid pace of change,
the fundamental driving forces have been technological advances
and shifts in the demographic makeup of the population. These
forces, along with the lack of market incentives for cost-conscious
behavior, have resulted in escalating costs and much concern about
lack of access to health care for many Americans—particularly the
33 million people who lack health insurance coverage. While government programs finance care for many of the poor and elderly,
increasing government involvement in the health care financing
system has aggravated the problems of cost and access.

RECENT TRENDS
The most dramatic illustration of the growing importance of the
health sector is its rising share of GNP. In 1960, health care accounted for 5.3 percent of GNP; its share rose to 11.6 percent in
1989. To put those numbers in perspective, total health care spending in 1989 was twice as large as Federal spending on defense, and
more than six times larger than the value of U.S. farm output.
The growing share of health care in the U.S. GNP can be traced
to developments on both the supply and demand sides of the health
care market. On the supply side, technological advances have made
possible a vast array of medical treatments unheard of even a
decade ago. Developments in diagnostic equipment and pharmaceuticals, for example, have promoted earlier and more successful
treatment of many diseases. Much of this technology, however, is
costly. Therefore, while technological advance has undoubtedly im


135

proved the quality of treatment received, it has simultaneously
made that treatment more expensive.
On the demand side, economic growth favors health care expenditures. As incomes rise, people tend to attach more importance to
trying to live longer and healthier lives. Most advanced economies
have experienced increases in the share of resources devoted to
health over time.
In addition to technological advances and economic growth,
health costs have increased because of the aging of the population.
Older individuals incur more health expenditures, on average, than
the young or middle-aged. The percentage of Americans aged 65
and older rose from 9.2 percent in 1960 to a projected 12.6 percent
in 1990, representing an increase of 14.9 million older Americans.
During this period, life expectancy rose by more than 5 years and
infant mortality rates declined by 63 percent. These statistics indicate that increases in the amount of resources devoted to health are
not necessarily bad, since to a large extent they represent an investment in health, the changing preferences of a wealthier society, and
the extra cost of a longer lived population.
Table 4-1 shows that the aging of the population will continue to
exert a large influence on the health care system for several decades. Even without above-average increases in medical prices, the
rise in the elderly population means that the United States will
pay much more for health care in the coming decades unless dramatic developments occur that reduce costs.
TABLE 4-1.— Aging of the U.S. Population, 1960-2040
Population
(millions of persons)

July

Total

Age 65 and over

Age 65 and over
as percent of
total population

I960

180.7

16.7

9.2

1980

227.8

25.7

11.3

2000 »

268.3

34.9

13.0

2020 *

294.4

52.1

17.7

20401

301.8

68.1

22.6

1

Middle series projection, January 1989.

Note.—Includes Armed Forces overseas.
Source: Department of Commerce, Bureau of the Census.

PERCEIVED PROBLEMS OF THE EXISTING SYSTEM
Despite the beneficial effects of much spending on health care,
there is a general perception that the U.S. health care system
should perform better than it does. Costs are seen to be out of control, and millions of households do not have health insurance and
are perceived to have inadequate access to care.




136

Rising Government Health Care Costs
Health care costs paid by Federal, State, and local governments
have exploded. The combined total spent by all levels of government on health care rose from $28.1 billion in 1960 (in 1989 dollars)
to $253.3 billion in 1989 and is expected to continue to rise. These
escalating costs place great stress on the ability of governments to
fund current and future liabilities in health care.
Medicare, the principal program for providing medical care to
the elderly and disabled, illustrates the changes in government
spending on health. Medicare expenditures were $17.6 billion (in
1989 dollars) in 1967, the first full year of the program, and 19.5
million people were enrolled. By 1989 the Federal Government was
spending $100 billion on medicare, and 33.6 million elderly and disabled Americans were enrolled. The enormous increase in outlays
for medicare can be traced to the increase in the number of people
covered by the program, general increases in medical care expenses,
and the increased share of program costs borne by the Federal Government. For example, the Federal Government originally shared
equally with enrollees the cost of covered physician services, but in
recent years beneficiaries have paid only 25 percent of the cost.
Even when all benefits and patient payments are included, the
Federal Government pays out $3 for every $1 spent by medicare
patients.
Medicaid, the program that funds health care for some of the
poor, illustrates the effect of changing demographics on both the
type of care received and increasing government costs. Started in
1965, medicaid was initially designed as a joint Federal/State program to provide health care for women and children receiving welfare payments and the disabled. Medicaid eligibility has expanded
in recent years, but even today it is not designed to provide medical care for all poor Americans. Total medicaid expenditures in
1967 were only $7.6 billion (in 1989 dollars). In 1989, the Federal
Government financed 57 percent of a total medicaid bill of $59.3
billion.
The most significant trend in recent years has been the increase
in medicaid spending on nursing-home care for the elderly. Spending on long-term care for the elderly accounted for about 25 percent of all medicaid spending in 1989. As the number of elderly
citizens continues to rise, the costs of long-term care will also increase.

Health Care Price Inflation
Rapid increases in the real price of health care have contributed
to the overall rise in health care spending. From 1980 to 1989 the
price index for medical care rose by 99 percent, twice as fast as the
average for all goods and services, though difficulties in measuring



137

the inflation rate in technologically dynamic sectors suggest that
the real difference in inflation rates was probably somewhat less.
Those rapid price increases, combined with growth in the volume
of services demanded, raised total health care expenses.
The health care sector has responded to cost escalation in several
innovative ways. One of the most significant changes is the growth
in health maintenance organizations (HMOs) and preferred provider organizations (PPOs). HMOs charge a fixed annual fee for medical services, rather than a separate fee for each service provided.
In a PPO, a group of providers negotiates prices and patient
volume with a large health care purchaser, such as an insurance
company or employer. Through their greater potential for supplying cost-effective care, HMOs and PPOs provide competitive alternatives to traditional fee-for-service insurance policies. The rapid
growth of HMOs and PPOs illustrates both the important role of
competition and the ability of the health care sector to respond innovatively to the challenge of cost escalation.

The Medically Uninsured
One of the most critical deficiencies of the U.S. health care delivery system is the large number of people who lack health insurance. Although estimates vary, recent calculations place the
number of uninsured Americans at around 33 million. Because the
very poor are usually covered by government programs such as
medicaid, many of the uninsured are employed workers or children
and spouses of workers. They may lack insurance coverage because
their employers cannot afford to offer it, they cannot afford to purchase it on their own, and they do not qualify for government-subsidized programs.
Many of the uninsured are not poor; 39 percent of uninsured
Americans have incomes more than twice the official poverty level.
Many young, healthy workers prefer not to purchase insurance
when given a choice, since the cost of a policy outweighs its perceived benefits. To a great extent, the lack of access to health care
or affordable insurance is due to the increase in health care costs
during the last few decades.
Two policies enacted in 1990 will help to protect families particularly at risk from lack of insurance. Low and moderate income
families will receive a tax credit covering part of the cost of purchasing medical insurance covering the whole family rather than
just obtaining single coverage for the worker. In addition, medicaid
coverage was extended to all pregnant women and children up to
age 6 in families with incomes below 133 percent of the poverty
line. The Administration's new infant mortality initiative and its
proposed expansion of the Special Supplemental Food Program for
Women, Infants, and Children, along with a variety of initiatives




138

emphasizing preventive care, will further enhance the health of
low-income families.

WHY HEALTH CARE MARKETS PERFORM POORLY
Why is the health care sector able to perform so well in meeting
certain demands yet unable to control costs or provide adequate
services to all who need them? The institutional structure of the
U.S. health care delivery system and the poor incentives for cost
control it provides are at least partially to blame.

Health Insurance and "Third-Party Payments"
The most important institutional feature of the existing system
is the prevalence of Federal or private insurance policies. People
purchase insurance because they want to be protected from the
costs of accidents, fire, or, in the case of health insurance, disease
and sickness. But one consequence of insurance coverage is that
those who are protected from harm by an insurance policy have
less reason to take actions to reduce the probability that any harm
will occur.
When harm does occur, consumers covered by insurance face diminished incentives to minimize the cost of care, since someone
else pays the bills. The effect of insurance generally to diminish
the incentive to minimize cost is called moral hazard (Box 4-3). In
the context of health care, insurance provides an incentive to increase the quantity of services consumed, since the patient does not
pay the full cost of additional services.
Federal and private insurance distorts consumer incentives to a
large and increasing extent. In 1970, patients paid 41 percent of the
costs of their care out-of-pocket. By 1989, that percentage had
fallen to 24 percent. Increasingly, health care expenses are paid by
third-party payers, primarily the government and insurance companies. Although ultimately the cost of care must be paid by recipients (in the case of private insurers) or taxpayers (in the case of
Federal insurance), consumers of medical treatment who have insurance do not generally need to be concerned at the margin about
either the cost of the services they receive or even whether those
services are necessary or cost-effective. Consequently, unlike most
markets for goods and services, medical care does not have built-in
incentives to equate costs and benefits at the margin.
Health insurance differs from fire or auto insurance in the
extent to which its structure creates incentive problems. Until recently, health insurance has tended to cover more and more of the
care received by patients. For example, many policies have small
deductibles, so that patients do not have to pay for even routine
care, such as a physical exam or treatment for a sore throat. This
type of "first-dollar coverage," as it is called, is analogous to homeowners' insurance that would pay not only for the damage caused




139

Box 4-&—Incentives in the Market for Health Insurance
One of the most important issues that arise in examining the
mounting cost of health care in the United States is the extent
to which the widespread use of insurance distorts incentives to
make cost-effective choices. In health care and other markets,
insurance coverage reduces the incentive to balance costs and
benefits at the margin because the consumer does not pay the
full cost of the treatment. This phenomenon, called moral
hazard, is common to all insurance markets* Using health care
as an example, consider the situation confronting an insured
consumer who visits a physician. If the insurance policy pays
80 percent of the cost of treatment, the price to the consumer
of care costing $100 is only $20. Therefore, the consumer would
purchase the treatment even though he may value it at less
than $100, Alternatively, if the consumer could prevent the
need for treatment by spending $40, he may not do so because
his cost would exceed his savings of $20, even though the true
savings is $100*
Thus, insurance coverage creates a gap between the price
paid by the consumer and the cost of providing care, so that
the choice made is inefficient* The health sector has responded
to the moral hazard problem in several ways. The most direct
response is to place restrictions on the care that is reimbursed
by increasing the deductible. Larger deductibles force the consumer to pay the full price of treatment for relatively low-cost
care, at least until the deductible is reached. That is an effective way to encourage the consumer to make cost-conscious
choices and thus reduce the overall cost of health care for the
average consumer.
A second approach to reducing moral hazard is to encourage
the physician to make efficient choices. That is one goal of
health maintenance organizations and other capitated systems
in which care providers are paid a fixed amount per policy, regardless of the amount of care provided. The physician, therefore, has no incentive to provide excessive care. In fact, providers in capitated systems may face incentives to save money by
providing less than the needed amount of care. In HMOs, however, care decisions are most often made by salaried physicians
who do not have a direct economic stake in the amount of care
provided, Professional standards and concern for the reputations of individual capitated systems further enhance the physician's incentives to balance the costs and benefits of treatments.




140

by a house fire, but also for a burnt pan caused by leaving the
stove on too long. The analogy in auto insurance would be a policy
that paid not only for damages resulting from moving accidents,
but also for paint chipped when a car is scraped in a parking lot by
another car's opening door. The cost of such policies would be
much higher than typical home or auto policies.

Government Regulation
Government regulations, especially those that require insurers to
provide specific benefits, have a large effect on the cost of health
insurance. Health insurance policies are regulated by the States,
and every State requires that insurance companies doing business
in their State include certain benefits. That means that it is illegal
for an insurance company to offer a bare-bones, low-cost insurance
policy to consumers who only want to insure against catastrophic
accidents or illnesses. The States instead require that virtually all
consumers purchase coverage for a package of treatments that
varies from State to State. The required benefits can include maternity care, alcoholism and drug abuse treatment, mental health
care, chiropractors, and assorted other treatments, regardless of
the consumer's willingness to pay for such coverage.
These requirements raise the cost of health insurance and make it
too expensive for many individuals and firms. As a result, many individuals who would willingly purchase low-cost insurance against
catastrophic illness are not allowed to do so. A recent study estimated that as many as one-fourth of the uninsured, or more than 9
million people, lack health insurance because of the high cost of
policies due to State regulations.
Another effect of government involvement in financing health
costs occurs through the means-testing of the medicaid program. To
target benefits at the poor, income limitations are set to restrict
eligibility. If earnings exceed the maximum allowed, all benefits
are taken away. (Medicaid availability is also affected by participation in other means-tested programs, particularly aid to families
with dependent children.) For low-income families, this loss of medicaid eligibility can create a large penalty for employment, since
medical benefits potentially worth thousands of dollars, as well as
peace of mind, can be lost if replacement health insurance is unavailable.

Employer-Based Insurance and Tax-Free Health Benefits
One fundamental characteristic of the U.S. private health insurance system is that it is predominantly employer-based; that is,
most Americans with health insurance obtain it through their employer. Providing insurance through employment is a natural
mechanism for achieving the risk-sharing benefits of insurance.



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Economies in administrative, sales, and purchase costs also enhance the desirability of employer-based group insurance.
By covering everyone in a large group, insurers avoid the problem of "adverse selection," which occurs because those most likely
to need expensive care, such as the chronically ill, are also the
most likely to seek insurance. However, these advantages pertain
primarily to large employers. Small firms are less likely to offer insurance if they have employees particularly likely to need care,
and the economies in administrative expenses are much reduced
for small groups. Firms with fewer than 50 workers incur administrative costs of about 25 to 40 percent of total claims, versus only
5.5 percent for firms with 10,000 or more employees.
Typically, health insurance is not only organized in the workplace, it is largely paid for by employers, although much of the cost
may be shifted back to workers in the form of wages lower than
they would otherwise earn. On average, employers pay about 90
percent of the premium for single workers and 75 percent of the
cost of family coverage. This practice makes sense for firms and
workers because the cost of employer-provided health insurance is
tax-deductible for firms, and workers do not pay income or payroll
tax on these benefits.
The tax treatment of employer-provided insurance means that
taxpayers subsidize the provision of health insurance to workers.
As a result, incentives are not only distorted by the existence of insurance, but individuals are also induced to carry more insurance
than they would if they faced its true cost. Thus employees tend to
demand both more health insurance and more health care than
they would if they had to pay the full price. The increased demand
for health care drives up the average price, if there is no offsetting
rise in the supply of care made available.
The financing and regulation of the health care sector thus combine to reduce significantly the flexibility of health care markets.
Fundamentally, consumers do not have adequate incentives to avoid
services that are too expensive, and providers who are not cost-efficient are not disciplined by the market. Without these incentives,
markets cannot function well. Health care reform, designed to control the rate of cost increase and improve health care access, must
confront the problem of creating appropriate incentives for health
care consumers and providers.

SUMMARY
• The health care sector grew rapidly during the last three decades due to advances in technology, the aging of the U.S. population, and increased government financing of health care expenses.



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• Many of the inefficiencies in health care are attributable to
the dilution of market incentives and the reduction in market
flexibility created by third-party payments and governmentmandated benefits.
• Health care policy reform will not be successful unless it improves the incentives for health care consumers and providers
to balance costs and benefits.

TELECOMMUNICATIONS: TECHNOLOGICAL AND
REGULATORY INNOVATION
The telecommunications industry, like the health care industry,
has been undergoing particularly rapid change. As few as a dozen
years ago, it consisted almost entirely of regulated service providers and dominant equipment providers with substantial market
power; today, much of the regulation has been removed and competition is vigorous in many of its component markets. Deregulation
is a natural experiment that demonstrates the benefits of increased
flexibility and the hidden costs of regulation. Because the crucial
local telephone exchange segment of the industry will remain regulated for the foreseeable future, careful thinking is required to
design its regulation to minimize those hidden costs.

LESSONS FROM DEREGULATION
Deregulation of telecommunications began with Federal Communications Commission (FCC) and judicial decisions of the 1950s,
1960s, and 1970s. It continued with the breakup of American Telephone and Telegraph (AT&T) in the early 1980s, the passage of The
Cable Communications Policy Act of 1984 (the 1984 Cable Act), and
further deregulatory decisions in the 1980s. These policy changes
helped transform the telecommunications industry from a structure dominated by regulated monopolies into one in which several
deregulated competitive sectors coexist with a remaining regulated
monopoly component. Both the difficulty of bringing about this
transition and the benefits that it has generated provide lessons
about government regulation and market flexibility.
Adapting to Changing Circumstances
The early history of the telecommunications sector was characterized by extensive competition. In the period following the expiration of Alexander Graham Bell's original patents in 1893 and
1894, many new firms entered the telephone business, eroding the
monopoly held by AT&T, which had evolved from Bell's original
company. By 1907, 49 percent of installed telephones were controlled by non-Bell companies, and most Bell operating subsidiaries
faced some direct competition.



143

AT&T then adopted an explicit strategy of reducing competition
through mergers and acquisitions and willingly accepting regulation,
both to exclude competitors legally and also to blunt public criticism of monopoly. By 1932 Bell's market share had returned to 79
percent, and direct competition had been virtually eliminated.
With the passage of The Communications Act of 1934, the regulated monopoly structure of the telephone system was completed. In
1970 AT&T controlled 95 percent of local and long-distance telephone revenues, and its Western Electric manufacturing subsidiary
provided almost all of Bell's equipment needs.
Changing technology eventually made this monopoly regime unsustainable. As early as the 1950s, other companies sought permission to sell types of telephone equipment that AT&T did not
produce. The development of economical microwave transmission
technology made competition for long-distance telephone service
feasible, and the FCC permitted a competitor to enter this market
in a limited way in 1969. The completely regulated monopoly structure of the telecommunications industry might have made sense in
1930, but by the 1970s it clearly was incompatible with the new
state of technology. Competition, not regulated monopoly, emerged
as the appropriate policy for the equipment and long-distance components of the telephone industry.
The history of the cable television segment of the industry offers
the same lesson. In the 1960s, cable TV provided television to
remote areas that could not receive standard broadcast signals.
Cable TV operators clearly had a monopoly over an important segment of the entertainment market in these areas, and the widespread practice by State and local governments of regulating cable
TV rates developed in this era. Later, cable evolved in many areas
into an alternative to "over-the-air" TV, and it also faced increasing competition in the broader entertainment market from direct
satellite broadcasts and widely available videocassette rentals. Regulation of cable TV rates persisted, however, until the 1984 Cable
Act deregulated them except in areas with limited broadcast competition. Again, policy had to change to recognize the change in the
underlying industry conditions.
Thus, in telephone equipment, cable TV, and long-distance telephone service, a regulatory regime appropriate to a technology at one
stage gave way, slowly and reluctantly, to new policy appropriate to
new technological realities. Of course, the evolution of telecommunications regulation is not over. Today, local telephone service
remains largely a regulated monopoly, because it does not make
economic sense for more than one company in an area to build a
complete system of copper wires, fiber optic cables, and switches
connecting all customers. That too could change if, for example,
radio technology developed that was competitive with the wired



144

system for nonmobile communications. More likely, technological
developments that cannot yet be anticipated will change the
nature of the industry in ways that will make the current regulatory structure obsolete.
Unanticipated Benefits of Deregulation
Deregulation and the ensuing competition in the markets for
telecommunications equipment and long-distance service facilitated
development of products and services that did not exist before. The
development of the facsimile (fax) machine in different versions offered by many different companies could not have occurred if telephone equipment had remained regulated. In addition to the fax,
an enormous variety of portable telephones, answering machines,
and computers with built-in communication abilities have all
emerged in the deregulated equipment market.
New services have also been introduced, based both on new technologies and new arrangements that were either not permitted or
not conceived of under regulation. Today, cellular technology has
taken mobile telephones from the realm of spy-movies and given
them to 4.4 million subscribers. Long-distance competition has reduced the cost and expanded the range of "800" and "900" number
services available to businesses, thereby increasing the flexibility
with which they reach their customers and suppliers. Combined
with deregulation of the surface freight industry, the fax machine,
electronic data interchange, and other new communications technologies are changing the way firms organize the distribution networks that connect their factories, stores, and customers. Some of
these changes were anticipated when deregulation was contemplated, but most were not.

MAINTAINING A DYNAMIC INDUSTRY
The policy framework that will ultimately replace the old framework of near-total regulation is still emerging. Ahead are a number
of policy choices that offer opportunities to increase the benefits of
deregulation. The principle of designing government policy to
foster flexibility is crucial in order to ensure that the United States
has the most effective telecommunications infrastructure possible.
Maximizing the Scope for Competition
In several markets in the telecommunications sector, current
policy inhibits competition. Cable TV operators are subject to competition from other media, but in most cases State or local governments grant a franchise to a single cable operator in a given area,
preventing operators from competing with each other for customers. Local telephone companies are also prohibited by law from
acting as cable operators. These restrictions reduce the power of



145

competition to discipline cable prices and services and give cable
operators inadequate incentives to adopt the latest technology.
The FCC and many States also continue to regulate AT&T's longdistance rates, despite the presence of competition in these markets. This vestige of an earlier era now serves primarily to inhibit
competition.
Another area in which government policy could further recognize the potential for competition is in the management of the electromagnetic spectrum. The spectrum consists of the range of frequencies in which radio-based technologies such as broadcast television and radio, cellular telephone, and microwave transmissions operate. The range of frequencies with desirable technical properties
is limited and therefore is a scarce resource that must be allocated
efficiently.
The FCC allocates particular "bands" of frequency to specific
uses and then assigns the right to operate in these bands to specific
private parties. Assignment and allocation of spectrum bands require administrative hearings that can be very cumbersome and
time-consuming. As a result, competition among technologies and
among different firms seeking to operate a given technology is
greatly reduced.
Without the force of competition, spectrum bands are not necessarily used in ways that generate the greatest social value. The invention of new technologies is stifled because of the inability to get
access to the spectrum, and there is an inadequate incentive to
refine existing technologies to conserve the amount of spectrum
used. If instead of assigning spectrum rights administratively, the
Federal Government auctioned them to the highest bidder and permitted their sale and reassignment, the flexibility of the telecommunications sector would be greatly increased. In particular, when
portions of the spectrum previously reserved for government use are
made available to the private sector, they should be auctioned off
without restrictions on resale. The resulting competition would
likely lower prices and increase the diversity of available service
offerings for over-the-air communications and broadcast media generally.
The government also limits competition by restricting the entry of
the regulated local telephone companies into unregulated businesses.
Under the terms of the consent decree governing the breakup of
AT&T, local operating companies are not allowed to manufacture
telephone equipment, offer various information services, or provide
most long-distance service.
It might appear that keeping these particular firms out of these
businesses would not have serious costs so long as other firms are
free to enter. The government, however, has no way to determine
who the most qualified or most advanced potential competitor



146

might be. Further, there are reasons to believe that the local telephone companies might have much to offer these other markets.
Experience developed in the construction or operation of the hardware and software for the telephone system itself could be very valuable in developing information services for sale to customers.
These and other potential "economies of scope" between the local exchange and other markets are limited or lost when the telephone
companies are barred from related businesses. The lesson from
easing previous restrictions is that increased competition produces
additional benefits that cannot be foreseen today.
These restrictions reflect a concern that local telephone companies would have unfair advantages in competing against others in
markets that are somehow connected to the local exchange. For example, the local telephone companies might try to hide some of the
costs of their competitive activities within the regulated local exchange sector, thereby transferring the costs to the local ratepayers. They might also exploit their knowledge of the technical details of the local network, or even design the configuration of the
network in ways that favor their product offerings in the related
competitive businesses.
These are real concerns that must be addressed. If the local telephone companies are permitted to compete, regulators will need to
scrutinize their activities to prevent ratepayers from subsidizing
the competitive businesses and to ensure that the regulated firms
do not unfairly exploit their monopoly position. Monitoring of regulated firms competing in unregulated markets will be imperfect,
and it will not be a costless process. But regulators have developed
better monitoring tools than they previously had, and the alternative is the extreme option of banning firms from participating in
related businesses without even attempting to make competition
work.
The principle that the government should not decide what activities within an industry particular firms may perform also applies
to the development, ownership, and syndication of programming
for broadcast and cable television. Government restrictions on ownership, carriage, or syndication of programming inhibit competition, reduce efficiency, and are generally an ineffective means of
addressing any problems of market power that may exist in these
markets.

Regulatory Approaches that Encourage Innovation
Traditionally, monopolies are regulated by what is called cost-ofservice regulation. Regulators determine the total costs incurred by
the monopolist in providing the regulated services and then set
prices designed to recover those costs, including a competitive rate
of return on the capital invested in the regulated company. This
method is intended to ensure that the company will not lose



147

money, but also that it will not be able to charge prices in excess of
its costs.
The fundamental problem with this approach is that a firm subject to cost-of-service regulation has limited incentives to reduce its
costs or improve its services. A reduction in costs will eventually be
translated into a reduction in allowed revenues, leaving the firm
no better off. If improved products lead to a rise in profits, prices
will eventually be reduced by regulation to bring revenues and
costs back into line. Again, the benefit to the firm has been reduced. A firm presented with these incentives will not seek change
and innovation as aggressively as one that is able to retain the
profit from doing so.
Recently, economists and regulators have become interested in
developing forms of regulation that would prevent abuses of monopoly power while preserving incentives for innovation. These approaches are often referred to loosely as "incentive regulation." All
forms of incentive regulation are designed to preserve the overall
or long-run relationship between prices and costs but to sever or
limit that relationship in the short run or for specific investments.
In other words, if a firm reduces its costs or improves its products,
it would be permitted to keep some of the profit that the innovation generates.
The key to maintaining the incentive to innovate is to tie the
regulated firm's price level to some overall or general indicator of
costs, rather than to actual costs incurred. For example, prices
could be allowed to rise each year by the rate of inflation, minus a
fixed percentage reflecting expected productivity improvements.
Alternatively, the firm's prices could be tied to a general index of
costs in the industry. In these ways, regulators could achieve a
better balance between the desire to prevent monopoly profits from
being earned and the goal of maintaining incentives for efficiency
and innovation.

SUMMARY
• Telecommunications is a dynamic sector in which regulation
must continually evolve to reflect changing conditions.
• Deregulation has permitted innovation that could not have occurred under the previous regulatory regime.
• To promote the continued dynamism of the industry, public
policy should seek to maximize the scope of competition and
avoid preventing particular firms from competing in particular
sectors.
• Incentive regulation is an attractive policy innovation that has
the potential to reduce the adverse effects of continued regulation on technological innovation.



148

DEFENSE INDUSTRIES: ADJUSTING TO THE END
OF THE COLD WAR
With the end of the cold war, U.S. defense expenditures are
scheduled to be reduced by substantial amounts in the next decade.
Although the current situation in the Persian Gulf creates some
uncertainty about the immediate future, the scheduled reductions
would continue the recent trend that saw defense spending fall in
real terms starting in 1987. One obvious impact of these spending
decreases will be a substantial reduction in the size of the defense
sector, creating a challenge and opportunity for markets to adapt.
HISTORICAL EXPERIENCE
The historical experience with fluctuations in defense expenditures shows that the U.S. economy has little difficulty responding to
shifts in defense spending. As shown in Chart 4-2, government expenditures on defense have varied considerably since the late
1930s. Industry responded quickly when defense needs increased,
most notably during wartime but also in more recent years. Defense purchases of durable goods, for example, increased more than
50 percent from 1980 to 1984. Declines in spending also provided
opportunities for demonstrating the economy's flexibility. Even
during the period of greatest reduction, when defense spending fell
from 41 percent of GNP in 1944 to 4 percent in 1947, the economy
adjusted quickly. Although total output fell in 1946 and 1947 because of the dramatic decline in government spending, consumption and private fixed investment rose as the United States made
the transition to a peacetime economy.
A similar temporary decrease in real GNP occurred at the end of
the Korean war. As defense spending dropped from 13.2 percent
of GNP in 1953 to 11.2 percent in 1954, the economy fell into a
recession that lasted 10 months. In 1955, output grew 5.6 percent
even though defense spending continued falling to 9.6 percent of
GNP. As shown in Chart 4-2, defense spending as a percentage of
GNP was lower during the Vietnam war than during previous conflicts. Given this smaller role, it is not surprising that the declines
in defense spending as the war ended in the early 1970s had virtually no impact on growth.
This historical experience suggests that future defense cuts will
not adversely affect the economy as a whole, since the relative importance of defense in the U.S. economy has been declining since the
early 1950s, and even the increases of the early 1980s made only a
small, temporary bump in the downward trend. The relatively
small role played by the defense sector in the U.S. economy helps
to ensure that the transition to lower spending levels will be man


149

Chart 4-2 Defense Purchases as a Percent of GNP, 1939-1996
Projected declines in defense purchases are small by historical standards.
Percent
45
40
35
30
25

20
15

Projected

10
5

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

Calendar Year
Sources: Department of Commerce and Council of Economic Advisers.

ageable and that resources will be able to move to alternative uses
with little impediment.
Under current budget plans, defense spending in 1996 will be
lower by 1.7 percentage points of GNP than in 1990. Since the
economy successfully adapted to more rapid reductions following
World War II and the Korean war, there is little reason to think
that the present changes will be troublesome. The precise magnitudes of the spending cuts are uncertain, and some of the decreases
could be delayed, or even reversed, by changes in the world situation or an extended deployment in the Persian Gulf.

THE PROBLEM AND POTENTIAL OF DEFENSE
CONVERSION
The key problem with the transition of the defense sector to
lower spending levels is that the impact is not broad-based but
tends to affect drastically firms in only a few industries. The resources of these firms, both the physical capital and the skilled
labor, are somewhat specialized for military production and so are
reduced in value when defense cuts occur. The communities in
which these firms are located will also be adversely affected as em-




150

ployment is reduced. Although these disruptions may require some
difficult adjustments, defense cuts are an opportunity to allow
market forces to redirect resources toward other productive uses.
Government policy should seek to ensure that the transition occurs
as smoothly as possible. In that way, the harm to communities will
be minimized, and unemployment effects will be reduced.
One possible additional concern with cuts in defense spending is
their potential effect on the defense industrial base and U.S. technological superiority. In managing the proposed spending cuts, the
ability of the United States to continue to produce the equipment
needed to fight future conflicts should be maintained. Furthermore, the advantage the United States has in defense technology
should be protected through continued investment in research, although some of the priorities may be shifted. The defense technology base can also be protected by relaxing procurement regulations,
particularly those that restrict the transfer of defense technology
to civilian uses.
Facilitating the Redeployment of Resources
The Federal Government has programs in place that address the
problems facing workers and communities affected by defense reductions. It is important to recall that even in times of expanding
budgets, some firms and workers lose contracts, as purchases shift
to different products or services. Therefore, the problems caused by
expected defense cutbacks can be viewed as a somewhat larger version of the typical shifts in demand that occur in a dynamic economic environment. The true "peace dividend" is not the amount of
money saved in the Federal defense budget, but rather the real resources that are made available as defense spending declines. The
economy will benefit from the end of the cold war only if these resources are allowed to shift to new, high-value uses. The reduction
in overall government spending will also reduce interest rates and
stimulate investment throughout the economy.
Sectoral shifts take place continuously in the U.S. economy, so it
is useful to ask whether anything about the defense industry
merits special treatment. Because defense spending is exclusively a
government endeavor, some have argued that the government has
a special obligation to protect those who are affected by declines in
Federal defense spending. This argument suggests that government
contracts are an entitlement and that any reduction in spending
should be offset by compensation. Similar arguments have been
made to support policies targeted toward assisting workers adversely affected by other changes in Federal policy.
It would be unwise to accord special treatment to workers or
firms directly affected by changes in Federal spending. In addition
to the practical difficulties of determining fairly who is actually affected, such an approach effectively divides the work force into two



151

groups, one that receives both Federal support and funding and
special privileges when that support is reduced, and all other workers. To the extent that such a policy gave defense workers special
benefits, it would be extremely unfair to workers in other sectors.
This approach would also make it difficult and costly for the Federal Government to change spending patterns in response to changes
in society's needs and priorities. The existing rigidity in government spending patterns already makes it difficult to eliminate programs and policies that have outlived their usefulness.
For several reasons, defense firms sometimes cannot easily transfer their engineering and production capacity to civilian uses. Although many products have both military and civilian uses, many
others have characteristics unique to the military. For those firms
producing products limited to military uses, the transition to civilian production means dealing with an entirely different set of products. The emphasis in military procurement on producing a limited
number of high-performance items with the latest technological advancements, such as fighter aircraft, does not typically encourage
the development of organizational skills needed to produce highquality but not necessarily state-of-the-art products for civilian
buyers at lower cost. Conversion to civilian production means responding to different customers, with goals and constraints often
much different from those of the government. Selling to civilian
markets differs markedly from competing with only a few other
firms for government contracts in a highly politicized environment.
Although the effects of defense spending cuts are likely to be felt
in most sectors of the economy, a few industries will be most affected. Producers of aircraft, radio and TV communication equipment,
missiles and space vehicles, and ships are expected to incur some of
the largest employment losses. Job changes will probably be more
evenly distributed among States because of the wide geographic
dispersion of defense production. Many of these forecasts are tentative, however, because of uncertainty about the eventual magnitude of the cuts and which individual spending programs will be
reduced or eliminated.
The most appropriate policy for dealing with the problems of defense cutbacks is to cushion the effect of change by providing the
same assistance to affected defense workers that is available to all
workers displaced by economic changes. Many such programs are
available to workers who lose their jobs because of spending cuts.
The Job Training Partnership Act provides training opportunities
for those workers whose skills are no longer in demand, and the
Employment and Training Administration of the Department of
Labor also has numerous programs for addressing the needs of displaced workers. In addition, the President's Economic Adjustment
Committee, chaired by the Secretary of Defense and composed of 18



152

Federal departments and agencies, is explicitly charged with providing financial assistance and other support to communities affected by defense spending reductions. These existing programs
should be sufficient to ease the transition for workers displaced by
defense spending cuts of the size now likely to occur.

Effect of Reduced Recruiting on Civilian Labor Markets
Changes in the Nation's defense budget are also likely to reduce
the military's need for manpower. During the 1980s the four military services recruited and trained nearly 3.1 million young men
and women, or about 300,000 people each year. This number is expected to decline substantially in the decade ahead. Although the
size of the reduction is difficult to forecast with certainty, the services could reduce their annual recruiting by about 100,000 inductees below the average of the 1980s. This number can certainly be
absorbed easily in an economy that produced a net employment increase of 19 million jobs during the 1980s and will reduce the
impact of the lower rates of labor force growth expected during the
next decade.
It is not widely known that the military services are one of the
largest single providers of vocational training in the United States.
Each year, trained veterans return to civilian life with skills that
are highly valued by civilian employers. In the short term, the
economy will benefit from the release from military service of a
large number of well-trained veterans. Over the long term, the
military services will continue to provide training and employment
for hundreds of thousands of young people.

SUMMARY
• Proposed cuts in defense spending over the next few years
start from a much smaller share of GNP and are modest in
size relative to the demobilizations after World War II, the
Korean war, and the Vietnam war.
• The economy will adjust smoothly to reductions in defense
spending, but some workers and firms will need to adapt to
new circumstances.
• Programs are in place to help workers and communities adjust
to reductions in defense employment.

CONCLUSION
The ability of the U.S. economy both to generate and to accommodate change is remarkable; the economy's flexibility is one of its
major assets. The high U.S. standard of living is due in large part
to a flexible economy that encourages innovators to invest in finding new ways to do things and allows entrepreneurs to marshal the
resources necessary to bring new products and processes to market.



153

The government affects the flexibility of the economy in many
ways. Flexibility is enhanced by creating an environment conducive to investment and innovation, by minimizing regulatory interference in markets, by lowering barriers to international trade and
investment, and by providing a competitive and accountable educational system. The evolution of the agriculture, health care, and
telecommunications sectors illustrates the potential for innovation
but also demonstrates the harm of government policies that reduce
flexibility. Reduced military spending will provide another opportunity to benefit from the economy's ability to redirect resources to
new uses.
Change generally creates both winners and losers, and the U.S.
political system always allows the losers to argue for protection
from the impersonal forces of the market. The true long-run costs
of accommodating such demands for interference with market
forces is almost always underestimated because the value of the opportunities lost when the economy's ability to change and adapt is
reduced can never be fully known. If it is decided that victims of
change must be helped, the assistance should not inhibit the economy's natural evolution. Doing so would reduce the economy's flexibility and thus throw away a significant portion of the possible
benefits of change.




154

CHAPTER 5

Innovation and Reform in the
Financial Sector
THE U.S. FINANCIAL SECTOR plays an integral role in ensuring a growing, healthy, and flexible economy. The institutions that
make up the sector—banks, savings institutions, finance companies, securities firms, insurance companies, investment funds, and
others—serve as intermediaries between savers and investors.
These institutions also provide transaction services, help reduce
risks, and efficiently allocate capital to productive activities that
generate economic growth.
The roles played by particular financial institutions and markets
have changed substantially in recent decades, and the markets for
financial services have become more global. But, apart from piecemeal reform, the regulatory structure governing the financial
sector dates from the 1930s. The Administration believes that the
Federal deposit insurance system and the regulation of many financial institutions must be reformed and modernized, and it has
recently advanced a comprehensive proposal to this end, which is
discussed in this chapter.
Today, nearly all economic activity depends on services provided
by the financial sector. Every retail transaction involving the use
of a check or credit card initiates a process that can require the
transmission of information and funds across the country, sometimes in seconds. Most businesses usually require daily services
from financial institutions. American banks, savings and loans
(S&Ls), and credit unions currently hold more than $3.5 trillion in
deposits and, along with other financial intermediaries, extend
hundreds of billions of dollars of new credit every year (Table 5-1).
Americans invest in well-diversified portfolios of securities
through mutual funds and save for their retirement through pension funds. Through the financial markets Americans invest in securities issued by companies seeking the capital needed to finance
productive activities. Investment banks underwrite new issues of
securities, thus reducing the risks faced by the issuing companies.
By facilitating trade among investors, securities exchanges and securities firms enhance the liquidity of financial markets and thus
allow capital to flow to productive uses. On a typical day the ownership of billions of dollars worth of common stock in companies




155

TABLE 5-1.—Credit Provided by Private Financial Intermediaries
[Billions of dollars]
1984-86
Commercial Banks

561

.

1987-89

469

350

166

Insurance Companies

296

385

Pension Funds

136

171

Finance Companies

143

118

Mutual Funds

303

141

Other

111

152

Savings Institutions

....

Note.—Credit flows are 3-year totals.
Source: Board of Governors of the Federal Reserve System.

changes hands through U.S. stock exchanges. An even larger dollar
volume of trade takes place through brokers and dealers in the
money market.
Insurance companies pool the risks of their customers and thus
allow individuals and businesses to insure against fire and other
casualties. By purchasing life insurance individuals can provide enhanced financial security for their loved ones. Over 150 million
Americans currently have life insurance, with face values representing aggregate coverage in excess of $8 trillion.
The various institutions in this sector have evolved as the need
for their services has developed and as technological advances and
innovations have allowed them to provide more sophisticated products and better service. Innovations, such as the automated teller
machine and telephone banking, have changed the way business is
transacted. Computer technology has increased the speed and reduced the cost of information processing. Entrepreneurs, supported
by advances in financial economics, have produced a wide array of
new financial products. Investors can purchase mutual funds whose
values track market indexes. Firms exchange fixed and variable interest payments on debt in swap transactions. Money market
mutual funds provide savers a means of investing in a diversified
portfolio of short-term debt instruments.
With this rapid innovation, the sector has also experienced considerable stress. In part, the stress has been the result of increasing
competition. Here, as elsewhere, competition is a positive force and
should produce stronger, more efficient institutions, which in turn
provide better services to consumers and businesses. Some of the
stress, however, is due to the outmoded government regulatory environment within which financial institutions operate. As the financial sector has evolved technologically and as its competitive
arena has expanded from the United States to the entire world, existing regulation has, at times, unnecessarily constrained its effi


156

cient operation. Comprehensive regulatory reform throughout the
entire financial sector is, accordingly, a high priority.
Those who invest the capital needed for growth must have confidence in these financial institutions. Such confidence is warranted
only if the financial sector is sound and vital. In the past, when
confidence in the financial sector has faltered, so has the economy.
The President has long been committed to ensuring the integrity
of the financial sector. As Vice President, he chaired the Task
Group on Regulation of Financial Services, which in 1984 outlined
the essential ingredients for comprehensive reform of the Federal
financial regulatory system. Immediately upon taking office, the
President responded to the problems of the savings and loan industry. Enactment of the Administration's recent comprehensive
reform proposals will significantly revise the Federal Government's
role as insurer of deposits and regulator of the financial sector.
These proposed reforms are based on four principles. First, a
safety net for small savers should be maintained. Second, the safety
net should be designed to reward those financial institutions that
manage their affairs prudently and to ensure that poorly managed
institutions bear the cost of their mistakes. Third, regulations
should be flexible and allow financial institutions to respond to
changes in global markets. Fourth, rules should be applied consistently across all institutions engaged in the same activities.

DEVELOPMENT OF FINANCIAL
INSTITUTIONS IN THE UNITED STATES
Financial institutions have always played a key role in economic
growth, entrepreneurial activity, and industrial expansion in the
United States. Before the Revolutionary War, colonists depended
primarily on English financial institutions, although there were a
few exceptions. Benjamin Franklin, for example, founded the first
successful fire insurance company in America in 1752. After the
war, an American financial sector quickly developed. The first commercial bank opened in 1781, followed by the first securities exchange, which would later become the New York Stock Exchange,
in 1792, the first life insurance company in 1812, and the first
building and loan association in 1831.
The U.S. financial sector has usually been both healthy and efficient. Major changes in regulatory or other policies have generally
been made only in response to distress in the financial sector and
have accordingly been infrequent. Thus, a policy-oriented review
will tend to focus on periods of financial distress.




157

BANKS AND SAVINGS AND LOANS
With the exception of the First and Second Banks of the United
States, each of which existed for 20 years, all banks formed before
1863 were chartered by the States. Americans generally distrusted
large and powerful banks, and rural communities distrusted urban
banks. That led State legislatures to pass laws strictly limiting the
ability of their banks to branch—a limitation that persists today in
some States.
The development of a large number of geographically constrained banks made the U.S. banking system unique. Other countries generally have a limited number of banks, many with
branches throughout the country. About 12,000 commercial banks
currently operate in the United States, compared with about 150 in
Japan, 550 in the United Kingdom, 65 in Canada, and 900 in Germany. The large number of banks in the United States does not
necessarily imply a more competitive banking system. Banks' activities are limited to particular geographic areas, and the number
of bank charters is limited, so that bank charters may convey some
local monopoly power.
The National Bank Act of 1863 instituted federally chartered
banks. National banks were not allowed to branch until 1918, and
then only by absorbing other banks. Provisions of the McFadden
Act of 1927 and the Glass-Steagall Act of 1933 allowed national
banks to follow the branching regulations of the State in which
they operated but restricted banks from branching across State
lines. The Bank Holding Company Act of 1956 restricted interstate
banking by prohibiting bank holding companies from acquiring
banks in a second State unless the State expressly authorized the
acquisition by statute.
Before the mid-1800s banks showed little interest in providing financial services to households, instead focusing almost exclusively
on the needs of commercial and industrial customers. In the 1830s
building and loan associations began to meet household demands
for financial services. Establishing a practice followed later by
S&Ls, savings banks, and credit unions, these early thrifts typically
accepted small deposits from individuals and pooled them to provide a source of housing and consumer finance. Early thrifts were
chartered, regulated, and supervised by the State within which
they operated.

Depositor Runs and Panics
Banking is conducted on a fractional reserve basis; that is, banks
and thrifts accept deposits and make investments and loans, retaining reserves equal only to a fraction of their total deposits. Although depository institutions hold some securities, many of their
assets are the loans they have made. Some of these loans, such as




158

home mortgages, are relatively easy to value and consequently can
be purchased and sold in secondary markets. Others, such as unsecured commercial loans, are generally illiquid because they are not
easily valued by potential buyers, who are unfamiliar with the borrowers and their businesses. This information problem also makes
it difficult to establish the overall value of an institution.
The lack of liquidity of many loans combined with fractional reserve banking creates the possibility of depositor runs on even solvent institutions. If depositors lose confidence in an institution—
whether justified or not—and want to withdraw more cash than
the institution holds in reserve, the bank or thrift just cannot deliver. Aware of these risks, depositors are likely to withdraw their
funds when they think other depositors are losing confidence. Such
behavior produces depositor runs—sudden, massive withdrawals.
To cover withdrawal demands, the institution may be forced to sell
its outstanding loans, and because purchasers may place a lower
value on those loans than the institution, owners of the otherwise
solvent institution can lose their investment in the institution.
Throughout the 19th century and into the early 20th century, depositor runs plagued banks. Often runs were isolated, affecting
only a single institution or a group of institutions. In some cases,
however, depositor runs spread throughout the system, causing
panics that had profound consequences for the economy. As deposit
balances shrank, the money supply fell, and banks had to curtail
lending. Firms that could not borrow the funds they needed to operate had to shut down and lay off workers.
The banking panics of 1893 and 1907 are two examples. In 1893
the money supply fell 6 percent, real gross national product (GNP)
fell 3 percent, and the civilian unemployment rate rose significantly. In 1907 the money supply fell 5 percent, real GNP fell more
than 8 percent, and the unemployment rate tripled. Although
other factors were also involved, these banking panics are generally acknowledged to have generated .or contributed significantly to
the economic downturns that ensued.
Lender of Last Resort
In response to the demonstrated danger of banking panics, the
Federal Reserve System was created in 1913. Its primary objective
was to use its powers to create currency and bank reserves to make
the supply of currency responsive to economic activity and to prevent or deal with banking panics. The Federal Reserve served as a
lender of last resort. A bank facing a depositor run would meet
withdrawal demands by borrowing currency from the Federal Reserve. However, the Federal Reserve's ability to deal with panics
was limited. It could only lend to banks that were members of the
Federal Reserve System, and it required eligible loans and securities as collateral when it lent.




159

THE GREAT DEPRESSION AND BANKING REFORM
The 1920s were prosperous years for most Americans, as the rewards of past industrial investments fueled rapid growth in living
standards. At the same time, banking grew increasingly competitive. Between 1921 and 1929, 5,712 banks failed—nearly 20 percent
of the more than 29,000 banks that existed at the end of 1920.
Urban banks consolidated in an attempt to attain sufficient size to
meet the demands of their rapidly expanding commercial customers. Banks began to offer new services to keep customers, and distinctions between banking and securities firms blurred.
When the "Roaring Twenties" ended with the stock market
crash of 1929, many banks lost funds directly through their stock
holdings and perhaps indirectly through losses on loans to stock
market investors. As the developing recession deepened, depositors
lost confidence and a severe banking panic ensued. Instead of responding to the panic by easing constraints on money growth and
thus minimizing the impact of the panic, the Federal Reserve allowed the money supply to fall. That contributed to a severe contraction in bank lending, which in turn reduced economic activity
and led to further loan losses for banks.
This downward spiral resulted in the wholesale collapse of the financial system and the beginning of the Great Depression. During
the 4 years 1930-33, 9,096 banks failed—36 percent of the banks
that had existed at the beginning of 1930. Total deposits in commercial banks fell 39 percent. Real GNP declined 30 percent from
1929 to the low point of the Depression. From 1929 to 1933 the unemployment rate soared from 3 percent to nearly 25 percent.
The Federal Government responded to the collapse of the banking system by enacting the Banking Acts of 1933 and 1935. These
laws established the Federal Deposit Insurance Corporation (FDIC)
to prevent depositor runs by insuring bank deposits. They also reduced competition among banks by prohibiting the payment of interest on demand deposits and by placing a ceiling on the interest rate
that could be paid on time deposits. Finally, they prohibited banks
from participating in much of the securities industry. Continued
constraints on entry into banking further limited competition.
These banking laws stabilized the banking industry; there has
not been a system-wide panic since their passage. Deposit insurance
worked because the FDIC had no discretion. If a bank failed, the
FDIC paid off its insured depositors, no questions asked. With this
guarantee, insured depositors had no reason to initiate a depositor
run. The rate of bank failures also dropped dramatically. Only 537
banks failed between 1934 and 1954—less than one-half the
number of failures in any single year during the 1930-33 period.
Although the reforms helped to stabilize the economy, they clearly
entailed significant costs. Depositors no longer received interest on




160

their checking accounts, were limited in the interest they could receive on their savings accounts, and, because competition was reduced, paid more for services received from securities firms.
Along with thousands of banks, more than 1,700 S&Ls failed
during the Great Depression. Individuals withdrew their savings as
they lost confidence in S&Ls or to deal with their own financial
problems. S&Ls also had to contend with defaults on many of their
home mortgages. To restore confidence in S&Ls, the Federal Government in 1932 established the Federal Home Loan Banks, which
served as lenders to S&Ls and hence enhanced their liquidity.
Moreover, just as the FDIC was established to insure deposits at
commercial banks, the Federal Savings and Loan Insurance Corporation (FSLIC) was established in 1934 to insure deposits at S&Ls.
The Federal Housing Administration (FHA) was also established
to insure lenders against the risk of default on mortgage loans.
Long-term, fixed-rate mortgages, which were to play a key role in
the later S&L crisis, first appeared during the Depression, following the introduction of FHA mortgage insurance.
Two features of the banking reforms of the 1930s would contribute to problems many years later. The deposit interest rate ceiling
would contribute to disruptive "credit crunches" in the 1960s and
1970s. As market interest rates rose above the deposit interest rate
ceilings, funds flowed out of banks and thrifts, causing liquidity
crises for the institutions and disrupting credit flows to business
and mortgage lending. Moreover, the price of deposit insurance did
not reflect risk. Both features would contribute to the S&L crisis 50
years later.
The regulatory response to the Great Depression also addressed
problems in the financial markets. The Securities Act of 1933 was
intended to protect investors who purchased newly issued securities. The Securities Exchange Act of 1934 was designed to protect
investors that bought and sold existing securities against fraud and
market manipulation.

SUMMARY
• Consumers and businesses rely on the financial sector for a
wide variety of services, which enhance living standards and
the Nation's economic vitality.
• Federal and State laws greatly constrained banks from operating in more than one State and from branching within States.
Although some of these restrictions have been lifted, many are
still in place.
• Federal banking regulations adopted to deal with the collapse
of the banking system during the Great Depression have succeeded in eliminating the threat of bank runs and panics. But




161

the laws also reduced competition among financial institutions
and contributed to today's problems in the industry.

THE 1970s: INFLATION, HIGH INTEREST RATES,
AND NEW COMPETITION
For nearly 30 years after the Great Depression, the financial
sector experienced an era of relative profitability and little stress.
That began to change in the late 1960s and early 1970s with increases in the level and volatility of the rate of inflation, the advent
of the electronic age and new competition, and the increasing internationalization of the world's economies.
The average annual rate of inflation rose from less than 2 percent in 1950-65, to about 4.5 percent in 1966-73, to nearly 9.5 percent in 1974-81; in that last period the rate was also very volatile,
ranging from about 6 percent to almost 14 percent. As the level
and volatility of inflation increased, so did the level and volatility
of interest rates. Faced with higher levels of inflation, lenders demanded higher interest rates, since the dollars with which they
would be repaid in the future would be able to purchase less than
the dollars they were lending. These higher, more volatile interest
rates increased the general level of risk for all commercial and financial companies, but the S&L industry was particularly hard hit.

RISE OF MONEY MARKET FUNDS
Financial markets and institutions developed an array of new instruments to help businesses and individuals deal with the uncertainties of high and volatile interests rates. Adjustable-rate mortgages gave borrowers the option of paying lower average rates if
they were willing to bear the risk that interest rates might increase. (See Box 5-1 for discussion of inflation-proof bonds and
mortgages.) Interest rate swap contracts allowed a borrower to
obtain a fixed rate loan indirectly by first borrowing from a bank
at a variable rate and then "swapping" its variable interest rate
payments with a borrower that had borrowed at a fixed interest
rate. Securities exchanges issued bond futures contracts, which effectively allowed market participants to borrow or lend at specified
interest rates at a future date.
Inflation and high interest rates also led to the development of a
major new form of competition to banks and thrifts—the money
market mutual fund. When interest rates rose in the 1970s, interest
rate ceilings on bank and savings and loan deposits were significantly below the market interest rates being paid on short-term lowrisk debt instruments. Investors looking for interest rates higher
than banks and thrifts could pay turned quickly to the new money
market mutual funds, which invested primarily in instruments




162

Box 5-L~Inflation-Proof Bonds and Mortgages
Bonds and mortgages typically specify constant payments
over their entire maturity. Their interest rates are set high
enough to compensate lenders for the expected inflationinduced erosion of the purchasing power of future payments*
Inflation-proof assets are fundamentally different; They preserve the purchasing power of interest payments and principal
by changing them proportionately with a measure of the overall price level such as the consumer price index. Because inflation-proof assets eliminate the financial risks of unanticipated
inflation and the need to compensate lenders for that risk,
their guaranteed real, or inflation-adjusted, interest rates are
lower than those on typical assets,
Compared to payments on a 30-year, 10*percentr fixed-interest-rate mortgage, payments on a 4-percetrt, real interest-rate,
inflation-proof mortgage would start more than one-third
lower. Payments would rise at the same rate as the average
price of the items in household budgets and move similarly to
the rent would-be homeowners pay, (Adjustable-rate mortgages
help reduce borrowing costs by shifting interest rate risk to
borrowers, but their payment levels are not designed to track
income and price levels*} To the extent that a borrower's real
income falls over time, payments on an inflation-proof mortgage would become more burdensome.
Inflation-proof bonds and mortgages are not common. These
debt instruments have generally developed only in countries
where inflation has been relatively high and variable* One
reason is that when inflation is expected to be relatively low
and stable, the cost of introducing these instruments may
appear to outweigh the benefits they offer. In that case, borrowers and lenders seem to prefer the certainty of constant
payments.
Recent clarifications of the regulatory and income tax status
of inflation-proof bonds and mortgages have removed important obstacles to their use in the United States.
such as short-term government (Treasury bills) and corporate (commercial paper) debt securities. Low information processing costs
made it profitable for money market funds to deal with even small
investors. By bringing borrowers and lenders together, albeit with
help from the marketplace, these funds played a role similar to the
intermediary role banks and thrifts traditionally played.
The success of money market funds increased the demand for
commercial paper by providing small investors with low-cost, indi-




163

rect means of accessing that market. Assisted by improved technology that reduced the cost of conveying information to financial
markets, corporations, particularly large ones, began to bypass
banks and borrow directly in financial markets by issuing commercial paper. Nonbank finance companies began to increase their
lending activities at about the same time. Thus, banks were being
bypassed on both the borrowing and the lending side of the business. Charts 5-1 and 5-2 illustrate these phenomena. Chart 5-1
shows the growth of money market funds relative to total commercial bank deposits. Chart 5-2 shows the increasing competition for
business lending among banks, finance companies, and the commercial paper market.
The opportunity to invest savings conveniently and at low cost
through mutual funds represented a substantial increase in competition for savings that had traditionally been deposited in banks
and thrifts. In addition, increased information processing capabilities as well as greater sophistication on the part of business managers led to a revolution in cash management techniques, which reduced idle cash balances in business accounts. These competitive
pressures resulted in the phasing out of interest rate ceilings on
bank and thrift deposits by 1986. As banks and thrifts began to
offer higher interest rates on deposits, the growth of money market
funds slowed, but they remained strong competitors.
It is important to realize that while banks and thrifts struggled
to meet new competition, consumers of financial services benefited
from the increased competition. Savers were able to earn higher
rates of interest, both from money market funds and, once deposit
interest rate ceilings were eliminated, from banks and thrifts. Borrowers also benefited from the development of alternative sources
of funds and increasing competition among lenders.
INTERNATIONALIZATION
At the same time that the financial sector has experienced dramatic change on the domestic front, it has also faced new challenges internationally. Many financial institutions now operate in
a global marketplace and face worldwide competition. Industrial
firms increasingly need assistance with international financial
transactions from their bankers, which requires banks to have a
greater presence throughout the world.
In addition, U.S. banks are facing greater competition from foreign banks at home, while only a few U.S. banks are significantly
increasing their business overseas. Chart 5-3 illustrates the rapid
growth in the total assets of U.S. offices of foreign banks. Foreign
banks and the U.S. chartered banks they own have been particularly successful in penetrating the business lending market. Their
share of U.S. business loans rose from 10.4 percent in 1975 to 28.5




164

Chart 5-1 Deposits and Money Market Funds
Money market funds, which compete with bank deposits, have grown significantly since their introduction.
Billions of 1982 dollars
2000

1500

-

1000

500

1973

1975

1977

1979

1981

1983

1985

1987

1989

Note: Bank deposits are the sum of money stock measures of demand deposits, other checkable deposits at
commercial banks, and time and savings accounts at commercial banks less deposits held by money
market funds. GNP implicit price deflator is used to deflate nominal figures.
Sources: Board of Governors of the Federal Reserve System and Department of Commerce.

Chart 5-2

Composition of Loans to Businesses

Loans by finance companies and nonfinancial commercial paper have become a significant source of
commercial credit.
Billions of 1982 dollars
1000

800 -

Finance Company Loans
to Business

600

400 -

Commercial & Industrial
Bank Loans
200 -

1973

1975

1977

1979

1981

1983

1985

1987

Note: GNP implicit price deflator is used to deflate nominal figures.
Sources: Board of Governors of the Federal Reserve System and Department of Commerce.




165

1989

percent in June 1989. At the end of 1989 the foreign share of U.S.
banking assets was 20.4 percent.
Chart 5-3

Assets at U.S. Offices of Foreign Banks

Foreign bank assets in the United States have increased rapidly since the late 1970s.
Billions of dollars
800

700 -

1974 1975

1976 1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

Source: Board of Governors of the Federal Reserve System.

Different countries impose different rules and regulations on
their banks that affect their ability to compete with banks from
other countries. In an effort to make capital requirements—the
minimum amount of owner's equity required as a percentage of
total bank assets—more consistent worldwide, the central bank
governors of 11 industrial nations endorsed the Basle framework
for measuring capital adequacy and achieving minimal levels of
capital based on credit risk. The minimum capital standards associated with the Basle framework are being phased in over a 2-year
period that began December 31, 1990, and will require some U.S.
banks either to shrink in size or to raise additional capital during
that period.
These new capital standards focus on credit risk, but need to be
realigned to reflect other risks that banks may bear such as foreign
exchange risk, interest rate risk, and equity position risk. Bank
lending practices could continue to be distorted until capital standards are balanced to reflect these other risks. Such reorientation of
the Basle framework to more accurately reflect the different types
of risk is currently under active consideration.




166

SUMMARY
• Higher and more volatile rates of inflation in the 1970s led to
higher and more volatile interest rates and increased stress in
the financial sector.
• Money market mutual funds began to compete with banks and
thrifts for the savings of Americans. Initially, banks and
thrifts were constrained in their ability to compete by deposit
interest rate ceilings, and these money market funds grew rapidly.
• The Basle framework established international capital standards based solely on credit risk. The Administration encourages efforts to realign these standards to more accurately reflect
the different types of risk.

THE S&L CRISIS
The increase in interest rates in the late 1970s and early 1980s
had a profound effect on the savings and loan industry. The rate
increase was, as we have seen, a major factor in the emergence of
money market mutual funds as major competitors to S&Ls for the
funds of savers. But higher interest rates had an additional effect
on S&Ls: They produced large and widespread losses on mortgage
portfolios.
These interest rate increases and resulting losses proved to have
far-reaching consequences. About half of all S&Ls in business in
1970 no longer existed in 1989; more than 2,700 had merged, gone
out of business, or been placed under the control of government
regulators. By the end of 1986 the Federal Savings and Loan Insurance Corporation itself was deemed insolvent. While the ultimate
cost of the S&L crisis will reflect many factors, the Administration
estimates that, including costs incurred prior to 1989, the resolution of the crisis will cost between $130 billion and $176 billion.
The crisis has also led to fundamental changes in the way that
S&Ls operate and in the regulations that guide them.

VULNERABILITY TO INTEREST RATE INCREASES
For decades S&L assets consisted predominantly of fixed-rate
mortgages that typically covered a term of 20 to 30 years. At the
end of 1980, for example, FSLIC-insured institutions held more
than three-fourths of their assets in residential mortgages and in
mortgage-backed securities, which are bonds whose values parallel
those of mortgages.
Although the assets of S&Ls consisted largely of fixed-rate mortgages, their deposit liabilities were primarily short-term. When interest rates rose on other assets that households might hold, such
as Treasury bills, deposit interest rates had to be increased compa-




167

rably to enable S&Ls to retain the deposits that provided their
funding. The costs to S&Ls increased, even though revenues from
outstanding mortgages remained fixed. This fundamental mismatch of short-term, and thus adjustable-rate, deposit liabilities
and long-term, fixed-rate mortgage assets left S&Ls vulnerable to
interest rate increases.
In the two decades following World War II, interest rates
changed only modestly and relatively gradually. The rates S&Ls
earned on outstanding mortgages tended to be above the interest
rates they paid on deposits and similar to prevailing mortgage interest rates. In such circumstances, the mismatch between shortterm deposits and long-term, fixed-rate mortgages causes few problems.

Net Worth Imperiled
Serious troubles for the S&Ls began in the second half of the
1960s. As the economy prospered and inflation began to increase,
interest rates on newly issued mortgages began to rise considerably
above those on the mortgages S&Ls already held (Chart 5-4). Longterm interest rates then rose to much higher levels in the late
1970s and early 1980s, as inflation rose to historically high rates
and monetary policy was tightened to subdue that inflation.
Mortgages originated in prior years and still held by S&Ls now
provided less interest income than newly issued mortgages. As
Chart 5-4 indicates, in 1980, for example, thrifts earned an average
yield of 9XA percent on outstanding mortgages, while the prevailing
rate on newly issued mortgages was about 12 % percent. Since the
market value, or price, of a fixed-rate asset falls as the interest
rate rises, the sharp increase in mortgage interest rates slashed the
value of the outstanding mortgages held by S&Ls.
A 3 ^-percentage point increase in mortgage rates would suggest
a fall in the market, or economic, value of a typical outstanding
mortgage of about 20 percent. A typical S&L might hold 80 percent
of its assets in mortgages. Thus, if the value of assets other than
mortgages remained unchanged, a 31A point increase in mortgage
interest rates would imply a fall of about 16 percent in the total
value of the S&L's assets. For an S&L that initially had capital
equal in value to 4 percent of assets, such an increase in interest rates would result in the value of the S&L's liabilities exceeding
the value of its assets by 12 percent as long as the value of the deposits and other liabilities remained constant. If the S&L owners
were required to make good on all of their liabilities, the increase
in interest rates would have reduced the value of their capital from
4 percent to negative 12 percent of the original value of assets.
Regulators require S&Ls and other institutions with insured deposits to have net worth, or capital, that meets or exceeds a specified percentage of their liabilities, which has often been in the




168

Chart 5-4 New Mortgage Interest Rates and Thrift Portfolio Yields
In the late 1970s and early 1980s, interest rates on new mortgages rose well above the average yield
on mortgages in thrift institutions portfolios, thereby sharply reducing the value of these portfolios.
Percent per annum

16

14

,
"~

Contract Interest Rate
On Newly Originated
Mortgages

12

10

Mortgage Portfolio
Average Yield

I

I

l

I

1965

I

I

I

I

1970

I

I

I

I

1975

I

I

I

I
1980

I

I

I

I
1985

Source: Department of the Treasury.

range of 5 percent. The book-value measure regulators use to value
assets, liabilities, and therefore the owner's stake in the institution,
or net worth, is imperfect for several reasons. It relies mainly on
historical costs to value assets and liabilities and often does not
capture changes in their economic value. Moreover, it typically
measures only the value of tangible assets. Thus, the value of the
institution's charter (right to operate) and customer relationships
(goodwill) may not be captured.
An institution is economically solvent when its economic net
worth or capital, the amount by which the market value of its
assets (both tangible and intangible) exceeds the market value of
its liabilities, is positive. Thus, a decline in the market value of
assets larger than its economic capital pushes an institution into
economic insolvency. The enormous capital losses implied by the
interest rate increases shown in Chart 5-4 and approximated above
were almost certainly large enough to push a substantial portion of
the S&L industry into economic insolvency, even allowing for the
value of unmeasured intangible assets. The book-value method did
not reflect the fall in the value of mortgages held by S&Ls. In fact,
because mortgages could be carried at book value, regardless of




169

their market value, this decline in value would not be immediately
signaled by book-value accounting. Book-value accounting would reflect the economic losses associated with the fall in the value of
mortgages gradually as interest expense on short-term liabilities
increased relative to interest income on long-term assets.
Transactions with little economic significance can also be undertaken to affect the value of capital, as calculated under book-value
accounting. When interest rates fall, the market values of assets
such as fixed-rate mortgages rise relative to their book values. Financial institutions can sell these assets in the secondary market
to realize those higher market values and thereby bolster their
measured capital. On the other hand, when increases in interest
rates or default risks lower the market values of assets below their
book values, institutions can retain those assets on their books at
book value.
Troubled institutions seeking to raise the accounting value of
their capital can issue new debt, the market value of which at issuance is also book value. The funds raised can then be used to buy
back a larger book-value amount of the institution's previously outstanding debt, since the market value of that debt is below its book
value due to the institution's troubled condition. That "refinancing" makes the accounting value of capital rise, since the book
value of liabilities falls.
The decline in interest rates after 1982 could not (and did not)
restore the industry's health. Just as the rise in interest rates on
new mortgages above rates on existing fixed-rate mortgages provided homeowners with an incentive to keep their mortgages longer,
the decline in mortgage rates provided an incentive for homeowners to refinance by taking out new, lower interest rate mortgages
and paying off their outstanding mortgages. In 1986, for example,
nearly half of the mortgages originated by thrift institutions were
refinancings. By 1989 the fraction of mortgage debtors who had refinanced was more than double its 1977 level. Such refinancings reduced the costs to borrowers but also reduced the income of lenders.
Thus, S&Ls did not gain as much when interest rates fell as they
lost when interest rates rose.

Deposit Rate Deregulation and Lending Liberalization
As noted earlier, the elimination of interest rate ceilings allowed
S&Ls to pay higher interest rates on deposits and thus slowed the
flow of funds out of the thrifts. To reduce the thrifts' problems associated with being heavily concentrated in long-term, fixed-rate
mortgages, the Congress relaxed restrictions on the ability of federally chartered S&Ls to engage in consumer, business, and commercial real estate lending. Adjustable-rate home mortgages were also
permitted. State-chartered S&Ls in some States were given greater
freedom by their regulators to operate in nontraditional spheres.




170

These changes were designed to enhance the industry's health by
permitting S&Ls to compete more effectively for deposits, to diversify across a broader set of assets, and to reduce their exposure to
interest rate risk. Though these changes were generally beneficial
to S&Ls, subsequent events showed the danger of giving new, unfamiliar powers to weak or insolvent institutions.
Many blamed this deregulation and liberalization for causing the
S&L crisis that emerged in the late 1980s. However, S&Ls had suffered substantial economic losses before much of the significant deregulation of deposit interest rates and the loosening of lending restrictions in the 1980s. Many of the S&Ls that later failed were already economically insolvent before this deregulation and liberalization. In fact, the deregulation and loosening arose largely in response to the severe problems S&Ls were having. As discussed later,
insolvent firms had especially great incentives to pursue the risky
ventures newly open to them. Failing to provide appropriate supervision in the light of the S&Ls' enhanced opportunities to make
risky investments proved to be a costly mistake.

INSOLVENCY AND CLOSURE
The combination of high interest rates and loss of deposits to
money market funds created liquidity problems for many S&Ls,
which found it increasingly difficult to meet withdrawal demands.
These thrifts could have raised funds by selling existing mortgages;
however, accounting principles would have required the thrifts to
recognize the loss taken on mortgages sold. Doing so would have
forced economically insolvent institutions into actual insolvency
(based on book-value measures of capital). Thus, if an S&L did not
sell its mortgages, it would have to be closed for not meeting depositor withdrawal demands. If it did sell its mortgages and recognize its economic losses, it would have to be closed for not meeting
its capital requirements.
Rather than force the closure of a substantial portion of the S&L
industry, the Congress authorized various actions by regulatory
agencies to assist troubled institutions, and the Federal Home Loan
Bank Board—the chief regulator of S&Ls—changed the regulatory
accounting procedures used to measure capital. However, by allowing S&Ls to amortize their mortgage losses over several years, instead of recognizing those losses immediately, regulators did not
eliminate the problem but merely postponed it. One study claims
almost half of the insolvent thrift institutions at the end of 1988
had already been insolvent, under the accounting measures that
regulators had abandoned, for 4 years or more.
Another reaction to the inadequate levels of capital was also controversial. Given the increased risk of insolvency, the Federal
Home Loan Bank Board would have been justified in setting higher




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minimum capital ratios. Higher ratios would have protected the deposit insurance fund and the public against the increased interest
rate risk. Instead, the bank board lowered the minimum capital
ratios required. In early 1980, minimum capital requirements were
more than 5 percent of liabilities. They were lowered in late 1980
and again in 1982 to 3 percent of liabilities. A number of regulations were also adopted that further reduced the stringency of capital requirements.
Even when the regulatory accounting measures did indicate that
minimum capital standards were being violated, closure did not
always occur. The Federal Home Loan Bank Board ran into resistance when S&L lobbying diluted and delayed legislation providing
funds for FSLIC to close insolvent thrifts. In addition, budgetary
stringency did not provide sufficient examination and supervision
staff and resources to keep pace with the unfolding crisis. In 1986
the Chairman of the Bank Board testified to the Congress that lack
of funds prevented his agency from dealing with almost 100 problem S&Ls.

Incentives of Undercapitalized Institutions
The price that banks and thrifts pay for deposit insurance—
unlike the premiums paid for other types of insurance—does not
take into account the financial position or financial health of the
individual institution that holds the insured deposits. The premium
does not vary with the riskiness of the assets held by the institution and is the same whether the institution is financially sound or
near collapse. Such fixed-price insurance gives bank and thrift
owners an incentive to take risks, since neither depositors nor the
deposit insurer needs to be compensated for risk.
So long as an institution is well-capitalized, its owners are unlikely to take imprudent risks since their own funds are at stake.
That changes as an institution becomes undercapitalized. No longer
having significant (or perhaps any) equity, owners have little to
lose. If the S&L becomes insolvent, the owners will eventually be
forced to surrender ownership, and any remaining assets of the
S&L will be used to pay off depositors. In such cases, some owners
might decide that risky investments are worth a gamble, for if the
investments are profitable enough to return the institution to economic health, the owners retain the net worth of the S&L. If the
investment fails, the deposit insurer will repay any losses on insured deposits. The closer an institution comes to insolvency, the
more rewards become one-sided: Heads, the S&L owners win; tails,
the deposit insurer loses.
Many economically insolvent institutions expanded at phenomenal rates, doubling or tripling their assets every year, in attempts
to regain solvency. The worse off the thrift, the higher the rate of
return that is needed to return to economic health. That was a




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principal attraction of investing in risky ventures: the greater the
possibility of high rewards, the greater the possibility of recovery.
In fact, it was inadequately capitalized S&Ls that ventured most
heavily into higher risk investments.
Undertaking such a strategy required that funds be raised to
invest. Federally guaranteed deposit insurance enabled undercapitalized, but still operating S&Ls to retain and attract the funds required to invest in high risk ventures at nearly default-free interest rates. Whether economically solvent or not, insured institutions
could attract virtually unlimited funds by offering sufficiently high
interest rates on their federally insured deposit accounts. The
safety of the deposits was altered neither by undercapitalization
nor by the riskiness of the investments they funded.
Estimates of the Cost
Some gained and some lost from the S&L crisis, but the cost to
the public as a whole was large. The inflation-induced rise in interest rates that reduced the value of the S&Ls' mortgages bestowed
gains of equal value on their borrowers by reducing the real value
of mortgage payments. Depositors also benefited as the level of deposit rates at all institutions were bid up by the attempts of insolvent thrifts to garner more funds.
If some investors acquired insolvent institutions from the government for "below-market" prices, then wealth was also transferred
from the public to those investors. And, unfortunately, there is the
reality of ill-gotten gains. By the end of 1990, the Department of
Justice had obtained nearly 400 convictions in major fraud cases in
connection with the S&L crisis.
The cost to the public of resolving the crisis will be spread over
several years. Who bears that burden depends on how the Federal
spending and tax programs are changed to absorb those costs. The
Administration cost estimate of $130 billion to $176 billion (including pre-1989 costs) is considerably below the $300 billion to $500
billion estimates that others have reported. The huge difference is
entirely illusory, for these two estimates refer to different calculations of the same cost to the public. The former estimates how
much it would cost to resolve the S&L crisis completely now. The
latter estimates are obtained by adding up all the future repayments required on the bonds that must be issued to fund the current cost. Such an estimate would be akin to claiming that a 10percent, 30-year, $100,000 home mortgage costs $315,925, which in
fact is the undiscounted sum of the repayments required by that
mortgage.

RESOLVING THE S&L CRISIS
The Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA)—originally proposed by the President—




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sought to minimize present costs of past difficulties and to prevent
future crises. Though it did not finish the task of financial reform
and rebuilding, FIRREA achieved a number of important objectives. It preserved the integrity of the deposit insurance system by
ensuring that depositors lost none of their federally insured funds;
set limits on the activities of inadequately capitalized institutions;
established and provided for funding the Resolution Trust Corporation so that it could quickly begin to reorganize economically insolvent institutions; and established the Office of Thrift Supervision
within the Department of the Treasury to replace the Federal
Home Loan Bank Board as the chief regulator of S&Ls. It established the Savings Association Insurance Fund within the FDIC to
replace the insolvent FSLIC. In addition, the law strengthened
criminal and civil sanctions for illegal activities involving financial
institutions.
Perhaps most importantly, FIRREA raised the minimum capital
requirements for federally insured savings institutions, so that
S&Ls will have to meet capital requirements no less stringent than
those for national banks. Capital at these levels will provide a legitimate and substantial buffer between thrifts and the deposit insurance fund. Further, in December 1990, the Office of Thrift Supervision proposed that the capital requirement for a thrift reflect
its exposure to interest rate risk. If implemented, that requirement
would give thrifts an incentive to reduce their interest rate risk exposure.

SUMMARY
• S&Ls have faced problems since interest rates began to rise in
the mid-1960s. Contrary to what is often asserted, their problems did not originate with deposit-rate deregulation or liberalized lending restrictions.
• Meeting the more stringent capital requirements called for in
FIRREA will provide the deposit insurance fund and the public
with a buffer against future difficulties.

REFORM IN THE FINANCIAL SECTOR
The financial sector provides services that are essential for economic growth, and thus it is important for this sector to operate
effectively. Reform required to ensure that the financial system
functions smoothly and efficiently is well under way. The Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 was
only the first step in this program. The Federal Credit Reform Act
of 1990, enacted as part of the Omnibus Budget Reconciliation Act
of 1990, will help the government make better use of the resources
it puts into its Federal credit programs, while comprehensive re-




174

forms recently proposed by the Administration, if enacted, will substantially alter the role the Federal Government plays as regulator
of depository institutions and insurer of their deposits.
CONTEXT FOR DEPOSITORY INSTITUTION REFORM
Since the insurance program and many of the rules regulating
banks and thrifts were drawn up during the Great Depression, dramatic developments have changed the financial sector. Many of the
conditions that created the problems of the 1930s no longer exist
today. More efficient means of addressing those that still remain
may now be available. Moreover, any regulatory reform should
allow the market to play its role in efficiently allocating resources.
The goal of reforming banks and thrifts should be to ensure that
the financial system is efficient, competitive, and free from the
danger of disruptive panics. The reforms of the 1930s succeeded in
eliminating panics, but the constraints those reforms created and
under which banks and thrifts still operate hinder their efficiency
and competitiveness in today's environment.
As a general rule, government intervention in the private sector
may be appropriate when the market fails, that is, when competitive private markets do not exist or cannot function well. A market
failure alone, however, does not necessarily justify government
action. Regulation should also pass cost-benefit tests, and be carefully designed to provide strong incentives for efficiency. Otherwise, the cure may end up being worse than the corresponding disease.
Reform of depository institutions must be considered in the
proper context. The right to operate a depository institution comes
with both benefits and costs. It is important to think about these
costs and benefits both within the competitive framework of banking and in the broader context of the entire financial sector. Relative to nonbanking firms, banks and thrifts have certain advantages: access to Federal deposit insurance, to the payments system
that provides rapid check clearing, and to borrowing from the Federal Reserve. However, they are also required by the Federal Reserve to hold reserves that do not pay interest and are constrained
in their activities by laws and regulation.
If banks and thrifts faced no competition from outside banking,
vigorous competition within banking would result in any net benefit or cost being transferred to the consumers of financial services.
Thus, a net benefit would accrue only to individual institutions
with local monopoly power associated with a bank or thrift charter.
However, banks and thrifts also compete with other members of
the financial sector, which requires that a delicate balance be
maintained as the financial sector evolves. If the benefits and costs
associated with the right to operate a depository institution result




175

in a net benefit relative to nonbanking firms, depository institutions will have an advantage relative to those firms, making it difficult for the nonbanking firms to compete. However, if the result
is a net cost relative to nonbanking firms, depository institutions
will have difficulty competing.
The banking reforms of the 1930s may have initially tipped the
scales in favor of depository institutions. They faced little competition for savings or intermediated lending from other institutions.
Moreover, limitations on competition and restrictions on entry generally made banks and thrifts profitable, but these limitations also
allowed inefficient institutions to survive. They were less profitable
than efficient providers of banking services, but facing limited competition, they could still continue to operate.
The proof is in the numbers. In any competitive industry one
would normally expect to see new firms entering the industry and
inefficient firms failing. In banking, the failure rate was remarkably low for many years. Between 1945 and 1975 the annual failure
rate of commercial and industrial enterprises was more than 11
times higher than the failure rate for commercial banks. The low
failure rate in banking is consistent with low levels of competition
and the survival of inefficient institutions.
The evolution of the financial sector and reductions in impediments to competition in banking have greatly reduced, if not eliminated, any advantage banking institutions may have had in the
past. In an increasingly competitive environment, inefficient banks
and thrifts will not survive. Many will be absorbed by better-managed institutions. Others will fail. Thus, it should not be surprising
to see an increase in the rate of consolidation and even failures as
competition increases. Consolidation of banking or the potential
failure of inefficient depository institutions should not be used as a
justification to avoid comprehensive reform. Faced with continued
competition from nonbank financial institutions, an inefficient
banking system will be neither safe nor sound in the long run.

ISSUES IN DEPOSIT INSURANCE REFORM
President Franklin Roosevelt was one of many who initially opposed the creation of a Federal deposit insurance system for fear
that it would encourage excessively risky bank operations. "The
minute the Government starts to do that the Government runs
into a probable loss . . . , " Roosevelt said. "We do not wish to make
the United States Government liable for the mistakes and errors of
individual banks, and put a premium on unsound banking in the
future/1
Roosevelt's fears were unfounded in the years following enactment of the insurance program. With only limited competition,
banks and thrifts had little reason to pursue excessively risky




176

strategies. Limited competition increased profitability and the
value of holding a bank or thrift charter. Excessively risky strategies put this value at risk and, therefore, were not generally pursued.
As competition increased, however, profit opportunities for banks
and thrifts eroded and the value of their charters decreased, causing a gradual decline of the economic capital in depository institutions. High interest rates accelerated the decline of economic capital among S&Ls. For banks, the erosion of economic capital has
been more gradual and less severe. In fact, most banks have substantial tangible capital and remain well-capitalized. Nonetheless,
losses in economic capital, due to the deterioration of charter
value, combined with deposit insurance premiums that are insensitive to risk-taking, have given weak banks increased incentives to
take undue risks. With less to lose, they are willing to take greater
risks.
In most industries, incentives to take excessive risks are kept in
check by the market. The cost of capital for firms pursuing risky
strategies increases. This mechanism operates weakly in banking
since banks are largely financed through insured deposits. The government guarantee virtually eliminates any concern insured depositors might have about the actual operations of a bank or thrift.
Thus, these investors in a bank or thrift offer no discipline to the
managers. This lack of market discipline not only makes it easier
for poorly managed institutions to operate, it also makes business
difficult for prudent managers who compete with poorly managed
institutions for both loans and deposits.
Pros and Cons of a Federal Role in Deposit Insurance
Deposit insurance is generally recognized as having been quite
successful in eliminating banking panics and the credit contractions and recessions associated with such panics. However, some
have argued that the current problems in the banking and thrift
industries reflect a fundamental danger in having the Federal Government extend a broad blanket of protection over deposits—a
danger that can only be eliminated by curtailing the government's
role.
These observers contend that well-organized political pressures to
forbear in closing insolvent institutions, to extend the insurance
guarantee to uninsured depositors, and to underprice coverage all
undermine regulatory supervision. In the long run, they argue, the
nature of our political process and its incentives for government
policymakers are inconsistent with a sound insurance operation. In
this view, the recently exposed flaws in Federal deposit insurance
policies are no accident. They reflect a basic bias in the political
process.




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Another argument made against Federal deposit insurance is
that government regulation and supervision are inherently less effective than market forces in balancing risk with depositor protection. Although regulators may be competent, dedicated, and wellintentioned, their incentives to monitor banking institutions carefully are unlikely to match the incentives for monitoring that the
private sector is able to generate. Moreover, private market participants are unlikely to be subject to political pressure that may
result in costly delays or inaction.
Supporters of continued Federal involvement in deposit insurance argue that because the potential liabilities are so large, only
Federal insurance is credible. Depositors, they say, simply will not
be so certain that the private market will be able to guarantee
their deposits, and that uncertainty can lead to the kind of bank
panics that the Federal deposit insurance system has so successfully eliminated. It is also argued that a private deposit insurance
system would not appropriately assess the risks to check clearing
and interbank fund transfer systems and to the overall economy
that might be associated with the forced closure of very large institutions.
These analysts also argue that the lack of market discipline inherent in deposit insurance can be adequately controlled while retaining the Federal guarantee. They believe that the deficiencies in
the current system can be corrected by improving oversight and supervision, by offsetting incentives to take undue risks with stronger
penalties for excessive risk-taking, by requiring banks and thrifts
to hold more capital, and by intervening sooner to minimize losses
at failing institutions.
Many other nations also have deposit insurance systems, but
there are significant differences in form, and some systems are
even administered by the private sector (Box 5-2). Because many of
the systems are relatively new and have not faced a severe test, it
is difficult to compare the efficacy of alternative systems.

Should Some Banks Be Considered Too Big to Fail?
Some observers argue that the Nation's largest banks are too big
to fail. A run by uninsured depositors on the largest banks would
have consequences for the overall economy so severe that they outweigh all other considerations, they argue. The principal concerns
are systemic problems associated with the payments system and
the possibility that such a run on a large institution may lead to
runs by uninsured depositors on other large institutions. Hence, if
one of the largest banks were to become insolvent, these observers
would advocate protecting both insured and uninsured depositors,
while the owners would lose their investment in and control over
the bank.




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Box 5^2--^Alteiiative National Deposit Insurance Systems
At least ! ^| 24 members of the Organization for Eco8 |p
nomic
Development have national deposit insurance sj^^^i||lfew of them work exactly like the Federal
Deposit Ins^ij^^^^l^ioration in the United States, There are
broad
rotes of the systems, who administers
them, the;;^i|^^
coverage, and 'membership and
:; : : :
fanding^in^i^^?fS^ ' - ' '
••
Deposit
ipystems are administered in three differ*
ent ways/
the FDIC* are officially sponsored and administered l^li^^^rnment. Generally, other governmentsponsored £&t$jjg^
systems do some regulation, but they 4o iof tove the extensive supervisory and examination roleslif Ifie RDIC* There is wide variation in the degree
of autonomy
lasurance agencies have from the central
bank and , t^eaipry tor finance ministry. Privately administered
insurance
;ar& about as common as government^sponsored systeittft-A, few countries maintain systems that are jointly managed fe^^fip^blic and private sectors.
The majoriip of national deposit insurance systems have
some fixed eefliifr;:tif coverage for deposits* Most systems have
a lower
the United States. Some nations, such as
the United
use a system in which only a fraction of
systems implicitly provide coverage
deposits is
for u
by encouraging mergers between
healthy
systems are funded in one of two
National
ways:
premiums before any losses are incurred, or
assessment of members when a loss is incurred, The
example of the first method; member
banks
trlbute a certain percentage of deposits to an
each year. The United States has the
highest
major industrial country that charges
premiums,
makes use of risk-based premiums, de*
signed to
in the financial health of institutions. Some
raeeive' additional financing from central
banks,
|a^ammesf or both, and most have arrange*
ments with
governments to borrow funds when needed.
Others argue that no bank should be considered too big to fail.
They contend that such a policy weakens the market discipline applied by uninsured depositors and other creditors and thus encourages undue risk-taking by the biggest institutions. This argument
implies that the total cost of "bailing out" a large institution on




179

the brink of failure is hard to measure, since in addition to the immediate cost of the bailout, one must also consider the increase in
the potential cost of future bailouts that become more likely as a
result of the initial bailout. Opponents of a too-big-to-fail policy also
argue that a policy of effectively extending insurance coverage to
uninsured depositors of large institutions gives these institutions
an unfair advantage over smaller institutions.
The too-big-to-fail dilemma comes down to a conflict between
principle and practicality. If the cost of bailing out an insolvent institution is clearly exceeded by the likely costs to the overall economy of allowing it to fail, then even if one agrees in principle that
no institution should be considered too big to fail, it would be impractical to allow the failure. The key to resolving this conflict is to
minimize the costs of such failures. Potential costs associated with
systemic risks to the payments system have been greatly reduced
by recent improvements in the public and private payment systems. Contagious uninsured depositor runs are less likely if uninsured depositors have confidence in other large banks. Banking
reform that provides for the accurate measurement of capital and
prompt corrective action before institutions are on the brink of failure should significantly reduce the possibility that the public would
lose confidence in several large institutions at the same time.

DEPOSIT INSURANCE REFORM: INDUCING MARKETBASED INCENTIVES
Under the current system of deposit insurance, incentives on the
part of poorly capitalized banks and thrifts to take undue risks
must be constrained by regulation. In essence, examiners must
question the decisions made by management. Prudent management
from the bank or thrift owners' perspective differs from prudent
management from the regulators' perspective. Regulators want to
hold down costs to the insurance fund by minimizing the likelihood
that the institution will fail. Institution owners want to maximize
the value of their wealth.
For weak institutions, particularly those on the verge of failure,
these divergent goals lead to clear conflict between regulators and
management and require the imposition of tight and detailed regulatory constraints. The managers are trying to get funds out of the
institutions and to the owners, while regulators want to keep funds
in the institution to reduce the cost of failure to the insurance
fund. Managers inevitably have superior information, and regulators thus face a task that is both difficult and critical.
The level of regulation and pressure on regulators might be reduced if the incentives of owners and the deposit insurer were
more closely aligned. Before considering possible means to this end,
it is important to emphasize that a reduction in the regulation of




180

depository institutions does not imply a reduction in their supervision. The distinction needs to be clear. Regulations specify what
types of activities institutions can and cannot engage in. Supervision entails observing what an institution does, but intervening
only when the actions taken expose the institution to undue risks
that could threaten the solvency of the institution. Thus, a healthy,
well-capitalized institution might be allowed great flexibility but
would still be carefully supervised. In fact, reduced regulation
might on balance entail more, not less, supervision.
Limiting the Scope of Deposit Insurance
Insured depositors have little incentive to monitor the managers
of depository institutions. However, uninsured depositors and nondeposit debtors of a bank or thrift do have incentives to monitor
managers, since their claims on an institution are at risk if the institution fails. The ability and incentive to withdraw funds as riskiness increases serves, in turn, to discipline managers. Thus, one
way to increase market discipline is to limit the scope of deposit insurance and thereby force banks and thrifts to rely more heavily on
uninsured sources of funds. Limiting the amount of deposits insured would also limit any potential liability of taxpayers if an institution fails.
Currently, deposit insurance covers up to $100,000 per depositor
at each institution. By using trust arrangements, joint accounts,
and a variety of other arrangements, however, a depositor can
easily insure many times this limit at a single institution. In addition, a depositor can have insured accounts at any number of different institutions. Thus, depositors can have considerably more
than $100,000 protected by the deposit insurance safety net.
Several ways of limiting insurance coverage have been suggested.
First, the amount of coverage that a depositor can obtain at any
one institution could be limited more effectively. This approach is
broadly consistent with the notion that deposit insurance should
protect only small depositors. It is also likely to reduce the aggregate amount of insured deposits and thus reduce potential taxpayer
liability for failures and increase the use of noninsured sources of
funds by banks and thrifts. Uninsured depositors or debtholders
would exert beneficial discipline on management. An expanded
version of this approach would limit the coverage that a depositor
can obtain system-wide. This approach, however, would present
some administrative problems since information on total deposits
held by an individual in all insured institutions is not readily available.
Second, institutions could be prohibited from offering interest
rates on insured deposits that are significantly higher than market
rates on comparable claims such as U.S. Treasury bills. Such a
system would not constrain the use of insured deposits by well-cap-




181

italized institutions, but it would help prevent weak institutions
from gambling for resurrection by using funds obtained by offering
above-market rates on insured deposits. Compared with the first
approach, this approach would probably result in less reduction in
the aggregate amount of insured deposits, so potential taxpayer liability for failures would be higher, and banks and thrifts would
rely less on uninsured sources of funds.
A third approach would effectively require institutions to designate particular assets as collateral for insured deposits. Well-capitalized institutions might be allowed to use almost any type of
asset as collateral. Poorly capitalized institutions would be required
to use only relatively safe and easily marketed assets as collateral.
Such a system would not restrict well-capitalized institutions- but
would constrain the types of risks poorly capitalized institutions
could take using insured deposits.
It is important that any limitations on the scope of deposit insurance be implemented gradually. Such limitations may reduce the
aggregate amount of deposits and thus the funds available for lending by banks and thrifts. Also, to the extent insured deposits are
replaced by uninsured deposits, runs by uninsured depositors may
become more likely. Historical experience with rapid reductions in
deposits during the "credit crunches" of the 1960s and 1970s and
during banking panics that took place before the introduction of
Federal deposit insurance shows that rapid contractions in the aggregate amount of deposits can have severe implications for the
economy.
Although alternative sources of funds for borrowers exist, these
sources cannot be expected to grow at the rate that would be required to supplant such a sudden, sharp reduction in lending. If
banks and thrifts are given time to develop sources of funding
other than insured deposits, they may continue to compete effectively with a less comprehensive safety net. If that is the case, then
reducing the scope of deposit insurance coverage may have little
effect on aggregate bank and thrift lending. Thus, any such reform
must be very careful to provide for a gradual phase-in.

Prompt Closure
A second way to tap the forces of market discipline is to close
institutions promptly when their capital levels fall to zero. That,
however, is easier said than done. Even though prompt closure may
be a goal, inaccuracies in the measurement of capital will ultimately make it nearly impossible to know when an institution's capital
reaches exactly zero. Moreover, since capital measurement is not
an exact science, banks and thrifts are very likely to challenge closure decisions involving measured capital levels that are close to
zero. The process of prompt closure is more likely to succeed to the
extent capital measurement is accurate.




182

The more extensive use of subordinated debt by banks and thrifts
would also facilitate prompt closure of insolvent institutions. In the
event of bankruptcy, claims of subordinated debtholders are honored only after those of uninsured depositors, general creditors,
and the deposit insurer. If an institution with subordinated debt
were to fail, the deposit insurer would pay off insured depositors or
transfer them to another institution, along with cash or assets to
compensate the receiving institution for its new deposit liabilities.
The proceeds from the sale of the remaining assets would then be
used to pay off the general creditors, the uninsured depositors, and
the deposit insurer. After they were all paid, anything left would
go to the holders of subordinated debt.
Well-managed and well-capitalized banks and thrifts would be
able to issue subordinated debt on reasonable terms, but institutions that followed risky or careless strategies would only be able
to issue such bonds at very high rates of interest. Thus, the cost of
these funds would be responsive to how well a bank or thrift was
being managed. Since they would suffer losses before the deposit
insurer, subordinated debtholders would exert discipline on management that would be consistent with the protection of the deposit
insurance fund. Moreover, they would provide a countervailing
force to offset political pressure on regulators to forbear. In essence, holders of subordinated debt would represent a market force
that would help ensure safety and soundness in the banking
system by rewarding good management and penalizing poor management.
Private Reinsurance of Deposits
A third way to induce market discipline is to set up a system in
which the private sector would reinsure a fraction of deposits. The
Administration has recommended that the FDIC adopt a demonstration project to determine the feasibility of privately reinsuring
deposits. Such a system would introduce private monitoring of risks
and market incentives into both the determination of deposit insurance premiums and closure decisions. Under such an arrangement
private insurers would bid for the right to cover a pro rata fraction
(perhaps 5 or 10 percent) of depositor losses for a given institution,
and the government insurance fund would cover the remainder.
The percentage of private deposit insurance could vary inversely
with institution size, so that the amount of deposits privately insured in any one institution would be of sufficient size to warrant
careful monitoring by the private insurer but not so large as to
limit severely the pool of firms that could provide insurance.
The government fund would set its premium for each institution
after considering the premium rate charged by the private insurer
and thereby benefit from the pricing analysis performed by the private market. The terms of the private insurance contract would




183

allow readjustment of insurance premiums if the riskiness of the
insured institution changed. When a private insurer altered its premium, the Federal insurer could follow. To reduce the cost of providing insurance, private reinsurers presumably would share information obtained in supervisory examinations.
Private reinsurance of deposits might be one way to capture
many of the benefits claimed for private insurance. Independent
sources of private capital would be at risk, and thus market forces
would be involved in both monitoring bank and thrift performance
and setting premiums. Of course, if private insurers are to have the
appropriate incentives in assessing the risks inherent in insuring
deposits, they must expect to bear the full cost of any mistakes
they might make in assessing the financial condition of the institutions they reinsure. Thus, private deposit insurers would have to be
required to be very well-capitalized.
Private insurers would also have incentives to develop accounting and control systems that would minimize the cost of deposit insurance. Market signals of growing problems at an institution also
could be used to trigger government interventions up to and including closure.
A considerable benefit from this system would be the interaction
between the private and public sector insurers. This interaction may
facilitate the evolution of banking. As the private insurers gain experience in assessing and monitoring the risks faced by depository
institutions, they, in conjunction with the government insurer,
might propose innovative new insurance products. These products
might trade off premium rates with restrictions on banking activities, closure policies, or asset portfolio choices. For example, an insured institution might commit to avoid certain risky practices in
exchange for lower insurance premium rates. Instead of expending
energy trying to circumvent regulations, part of the private sector
would have the incentive to try to design efficient regulatory
schemes.
REMOVING REGULATORY OBSTACLES
The high levels of inflation and resulting high interest rates that
were the primary cause of the S&L crisis did not have a similar
effect on banks. Because the loans they made were usually shortterm and had adjustable interest rates, banks were not very exposed to interest rate risk and thus were not hurt significantly
when rates rose. The recent downturn in the economy and, in particular, real estate has taken its toll on banks and has resulted in
some failures. Moreover, the rate of bank failures rose throughout
the preceding economic expansion. Given increased competition in
banking, a rise in the failure rate is not surprising. But continued




184

stress within the system indicates that it is time for a reevaluation
of existing regulation of depository institutions.

Safety and Soundness Through Interstate Banking
One of the most obvious ways to increase the safety and soundness
of banks and thrifts is to allow them to spread their risks by diversifying their loan portfolios. However, laws and regulations restricting interstate banking and branching inhibit this diversification.
The rationale behind restrictions on interstate banking is similar
to the rationale against branch banking within States. Rural communities have traditionally opposed branching because they feared
that urban branch banks would funnel deposits from rural into
urban areas, leaving rural areas with no sources of loans. Likewise,
States did not want national banks to ship deposits to neighboring
States.
Restrictions on branching and interstate banking, however, have
not kept deposits from flowing across community and even State
borders. Although smaller community banks and thrifts do lend locally, on average they find that they take in more deposits than
they can lend profitably. Instead of making unprofitable loans locally, these institutions lend some funds to larger institutions,
which in turn use these funds to finance loans elsewhere. Regardless of branching restrictions, banks and thrifts only make loans
that appear to be profitable. Likewise, large institutions do not
forgo profitable lending opportunities just because they are in
small communities.
Geographic restrictions not only have failed to serve their intended purpose, but they have occasionally hurt the local communities
they were meant to protect. When local economies are hit by periodic economic downturns, local banks and thrifts suffer loan losses,
which reduce their capital and consequently require them to contract their lending. If local banks or thrifts are the only sources for
loans, even for borrowers who are still in good financial condition,
this contraction in lending might exacerbate the local economic
downturn. On the other hand, a well-diversified bank or thrift
could easily absorb loan losses in a single community and thus continue to be able to lend to creditworthy borrowers there.
Many of these geographic restrictions are gradually being
eroded. At the end of 1990, all but four of the States allowed bank
holding companies of other (but not necessarily all) States to acquire banks in their State. Most of these laws extend such opportunities after a specified date to banks from any State that offers reciprocal treatment. Important limitations on interstate branching
still exist, however. Although a holding company may own banks
in several States, each bank must be separately organized and capitalized. This limitation creates redundant costs and reduces the
benefits of geographic diversification. To the extent that interstate




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branching restrictions still prevent banks and thrifts from diversifying efficiently, they are obstacles to the efficiency, profitability,
safety, and soundness of the financial sector. Accordingly, the Administration will propose legislation to allow interstate banking and
branching.

Improving Efficiency in Financial Services
It is impossible in the United States for consumers to obtain a
full range of financial services from any single institution. Continuing Federal constraints bar depository institutions from offering
certain financial services and prohibit nonbank financial service
companies from offering deposit and checking services. A company
that wants to raise money may go to its banker for a loan but has
to go to an investment bank for help in issuing new equity.
Other industrialized countries have financial systems that are
more integrated than that of the United States. Germany, for example, has more than 300 "universal" banks, which are allowed to
offer a full range of banking and financial services. These institutions may accept deposits, make consumer and commercial loans,
underwrite and trade securities, and provide investment counseling. The United Kingdom also has a universal banking system.
Many British banks form subsidiaries for certain activities, but
bank solvency is usually assessed on a consolidated basis. In contrast to the U.S. banking system, British and German banks are
not required to use a holding company structure or "firewalls" between departments performing diverse functions. Under the Second
Banking Directive of the European Community (EC), EC banks will
be able to operate throughout the Community after 1992, which is
expected to spread the practice of universal banking throughout
Europe.
The Administration believes that to remain competitive in the
world market for financial services, U.S. financial firms must be
able to affiliate in financial service holding companies and be allowed to offer a full menu of financial services. Potential synergistic relations among affiliates that might lead to more efficient delivery of financial services by eliminating redundant costs should
not be constrained. However, different financial affiliates in the
same holding company should be separately capitalized, and their
financial ties should be sufficiently segregated so that any problems that might arise in one affiliate do not spill over into the
others. In particular, depository affiliates must be structured so
that depositors and the deposit insurance fund are insulated from
risks taken by other affiliates of the holding company. In constructing such legal firewalls, it is important that the synergistic benefits
of offering full product lines are not lost in the process.
Commercial firms offer a potentially large source of new capital
and innovative ideas to a restructured financial services industry.




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Commercial firms are already allowed to affiliate with savings and
loans. It has been argued that potential synergies and efficiencies
can be gained from combining commercial firms with other financial institutions.
For example, banking relies heavily on information processing.
Competitive banks and thrifts in the future will inevitably depend
on advanced information processing technology. The affiliation of
depository institutions with firms with expertise in information
processing would likely lead to improvements in the information
processing technology upon which banks rely. More advanced automated teller machines, increased use of optical scanners in check
processing, and closer monitoring of information related to outstanding loans are just a few of many potential advances.
Historically, commercial affiliation with banks has been resisted
for two primary reasons: fear that economic power would become
too concentrated, and concern that financial problems in the commercial firm could jeopardize the safety and soundness of the bank.
These concerns have been heightened by the recognition that banking regulators could not be expected to monitor effectively the activities of commercial firms.
While these concerns are legitimate, a total prohibition of affiliation between commercial firms and banks is not warranted. The
Administration proposes to allow commercial firms to affiliate with
banks. Concerns regarding commercial affiliation would be addressed by constructing legal firewalls and by monitoring and regulating the transactions between the commercial firm and the bank.
In particular, the bank 'and the commercial company would be
barred from engaging in financial dealings that could be construed
as indirectly providing the commercial company benefits arising
from the bank's access to Federal deposit insurance.

FEDERAL CREDIT PROGRAMS
The Federal Government is the country's largest supplier or
guarantor of credit. By 1990 it had $210 billion in outstanding
direct loans, $630 billion in outstanding guarantees of loans made
by private lenders, and $855 billion in outstanding loans or guarantees made by government-sponsored enterprises (GSEs), privately
funded businesses that make or repackage and sell loans in specific
markets. Measured in net terms (loans minus repayments), Federal
loans and guarantees accounted for 20 percent of all funds raised
in the United States in fiscal 1990. The bulk of Federal credit supports housing, while smaller amounts are directed toward agriculture, business, and education.
The vehicles for providing Federal credit have changed substantially in the last decade. Federal loan guarantees and GSE credit
market activities increased over the 1980s while direct Federal




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lending fell substantially. As recently as 1985, $52.8 billion in new
direct loans were made; by the end of 1990 the volume of direct
loans had declined 68 percent.

The Need for Federal Credit Reform
Important reforms in the Federal Government's direct role in
credit markets occurred in 1990. Before the reforms, the deficit or
surplus figures in the Federal budget never recorded the true costs
of Federal credit programs. Because credit budgeting was based on
cash flows, a direct loan was treated just like an expenditure even
though a loan that did not default, unlike an expenditure, would be
repaid in subsequent years. These repayments were then recorded
as collections when they were received.
Loan guarantees, an alternative way to provide credit assistance,
did not appear to cost the government anything at the time the
guarantee was made. Since no initial outlays were associated with
a guarantee, it was not reflected in the budget unless the borrower
defaulted, and then only in the year of the default. This treatment
of credit programs in budget accounting, along with increasing
pressure to reduce the Federal deficit, partially explains the shift
in emphasis from direct to guaranteed loans since the mid-1980s.
As long ago as 1967, the President's Commission on Budget Concepts recognized that the budget did not adequately measure the
costs of Federal credit activity. The Commission recommended that
the budget include only the subsidy cost of direct loans, rather
than their disbursements and subsequent repayments. Thus, if the
full costs of a loan, including expected default and administrative
costs as well as the government's interest costs, were expected to
be completely repaid, the loan would be recorded as an expenditure
of zero. However, because it was believed that financial techniques
were not able to measure subsidies accurately, this recommendation was never fully implemented, and was soon abandoned entire-

ly.

Because the budget has not explicitly reflected the subsidies associated with loan programs at the time credit is extended, few attempts have been made to compare the costs and benefits of Federal credit programs with each other or with other programs. There
are some warning signs, however, that these programs may have
problems. In 1988 the government added a significant amount of
capital to and restructured the bankrupt Farm Credit System. Student loan defaults reached 15.6 percent in fiscal 1988, and Veterans
Administration loan defaults have more than tripled from fiscal
1981 to fiscal 1988. In 1989 the General Accounting Office (GAO)
reported that Federal Housing Administration losses were five
times higher than their fiscal 1988 financial statements had estimated.




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Previous Federal accounting and administrative practices may
have hindered effective oversight of credit programs. Some agencies rolled over their debt, paying off delinquent loans by issuing
new loans. Other loans were kept on the books long after the borrower had defaulted. Some Federal lenders were audited only infrequently. Until a recent GAO audit, for example, FHA books had
not had a complete, outside audit for 14 years.

The Federal Credit Reform Act of 1990
The Federal Credit Reform Act of 1990, which the Administration strongly supported, is intended to measure more accurately
the costs of Federal credit programs, make the budgetary treatment of credit programs equivalent to that of other Federal spending, match benefits to the needs of borrowers, and improve resource allocation among credit programs and between credit and
other spending programs. Under the new law, subsidy costs are separated from the unsubsidized cash flows of Federal credit programs
and, for the first time, the subsidies, and only the subsidies, are included in the budget.
Beginning in 1992 the government will maintain three types of
accounts for each Federal credit program: liquidating, program,
and financing accounts. The liquidating account will display cash
flows for loans obligated or guarantees committed before fiscal 1992
and thus will not be subject to reformed budgetary treatment. The
program account will display the subsidy costs and administrative
expenses of new loans and guarantees, and the nonbudgetary financing account will record the cash flows associated with this new
credit. Separate financing accounts will be maintained for direct
loans and loan guarantees. The costs of new loans and guarantees
measured in the program accounts will be included in the budget.
The Credit Reform Act will place the costs of credit programs on
equal footing with direct expenditures. That will help policymakers
make the best use of Federal resources. In addition, this reform
will help Federal agencies operate credit programs on a more fiscally prudent basis.

Reforms of Government-Sponsored Enterprises
Other new legislation, passed in 1990, began the process of reforming GSEs. The activities of GSEs are often closely related to
other Federal credit programs. For example, a large GSE, the Student Loan Marketing Association, or "Sallie Mae/' purchases federally guaranteed student loans from private lenders and sells new
securities based on these loans. By converting private contracts
into securities available to the general public and by providing subsidies, GSEs increase the amount of capital available to finance investment in the relevant markets, particularly housing and education, though they also presumably displace some private financing




189

that would otherwise be available. In some cases, GSEs have also
played an important role in bringing new financial instruments to
the market.
GSEs benefit from their special relationship with the government. Although debt securities of the GSEs and their securitized
loans receive no explicit government guarantee, their Federal charter and other privileges lead to a perception that the government
would come to their rescue in time of trouble. The government has
not discouraged this perception and has reinforced it by its response to the financial troubles of the Farm Credit System. This
implicit guarantee allows GSEs to borrow at low interest rates,
near those of Treasury securities. In addition, some GSEs are
exempt from the Federal corporate income tax, most are exempt
from State and local income taxes, and most do not have to register
with the Securities and Exchange Commission.
There are certain parallels between GSEs and the thrift industry. At the end of 1990, GSE liabilities were roughly the same size
as savings and loan deposits. GSEs and thrifts benefit from implicit
or explicit government guarantees of their liabilities, which allow
them to borrow substantial amounts with only a very small base of
equity. GSEs have some of the lowest capital ratios of any domestic
financial intermediaries. Like thrifts, GSEs are legally required to
serve the credit needs of particular markets, and they are unable
to diversify their investments among different sectors of the economy.
Despite these similarities, GSEs thus far have shown few signs of
trouble, perhaps because most were not as exposed as S&Ls were to
losses caused by increases in interest rates. Nevertheless, the Administration, recognizing that GSEs have the potential for problems, has taken several steps to ensure that they remain financially sound. In May 1990 the Department of the Treasury proposed
four principles to govern GSEs: They should maintain adequate
capital; they should be sound enough to achieve the equivalent of
an AAA bond rating in the absence of any implicit guarantee; the
government should eliminate any potential conflicts of interest in
GSE regulation; and GSEs should disclose the economic value of
their relationship to the Federal Government.
The Budget Enforcement Act of 1990 takes additional steps to
ensure the financial soundness of GSEs. The Treasury Department
is required to submit a study, along with proposed legislation, by
April 30, 1991. This study will provide an objective assessment of
the financial soundness of GSEs, the adequacy of the existing regulatory structure, the financial exposure of the Federal Government,
and the effects of GSEs on Treasury borrowing. The Congressional
Budget Office (CBO) is also required to present a report by the
same date. The CBO study will focus on many of the same issues




190

and report on alternative regulatory and oversight mechanisms for
GSEs. By September 15, 1991, the committees of jurisdiction must
report legislation in the House of Representatives to ensure the financial soundness of GSEs and to minimize the possibility that a
GSE might require future government assistance. The Senate will
then do the same. Finally, the President's annual budget message
must include an analysis of the financial condition of GSEs and the
financial risks to the government posed by GSEs.

SUMMARY
• Legislative reform that recognizes the rapidly changing nature
of the financial sector is essential to ensure a sound and safe
financial system.
• Comprehensive reform of financial institutions is needed to increase the flexibility and competitiveness of the financial
system.
• A financial sector that is inefficient and inflexible cannot meet
the overall needs of the economy. Financial institutions must
be free to exploit synergies and economies of scale and scope
where they exist.
• Regulatory reform should be adaptable to future changes in
the economic environment. Market forces should be harnessed
to help ensure the safety and soundness of the financial
system.
• The November 1990 budget law substantially reforms the budgeting for Federal credit programs, altering the treatment of
direct and guaranteed loans and taking steps to reduce the potential risks to taxpayers from GSEs.

CONCLUSION
The financial sector is faced with a number of challenges that
have arisen in recent years as the economic environment has
changed. The unexpectedly high inflation in the 1970s and the resulting rise in interest rates represented a significant shock to the
financial system; together these factors were the primary underlying cause of the S&L crisis. Reform of the S&L industry has been
initiated with the FIRREA law.
The recent budget agreement included important provisions to
ensure that Federal credit programs use their resources more efficiently. The Treasury Department is preparing a proposal to
ensure that GSEs remain financially sound.
The financial sector has made essential contributions to economic growth and development throughout the history of the Nation.
To allow the sector to continue to thrive and to play a vital role in
future economic growth, significant reform of the regulatory struc-




191

ture governing the financial sector is necessary. The Department of
the Treasury's recently released study of Federal deposit insurance
and regulatory reform discusses these issues in detail. The Administration's legislative proposals reflect the findings of that study
and the policy principles outlined in this report and discussed in
this chapter.
Comprehensive reform requires the reform of deposit insurance
and the removal of regulatory obstacles that hamper the flexibility,
efficiency, profitability, and safety of banks and thrifts. Deposit insurance should be structured to increase market discipline, which
leads to prudent management of banks and thrifts. The Administration proposes to remove obstacles to interstate banking and
branching that effectively make banks and thrifts less safe by constraining their ability to diversify their loan portfolios and sources
of deposits. Constraints on combinations of various types of financial service firms hamper efficiency by necessitating parallel facilities that create redundant costs. These constraints reduce the flexibility and competitiveness of U.S. institutions in the global arena
and should also be eliminated.




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CHAPTER 6

Economies in Transition
Around the World
THE REMARKABLE WORLDWIDE MOVEMENT toward reliance on competitive market forces continued during 1990. Fundamental reforms were put in place in several Eastern European
countries. Dramatic economic and philosophical transformations
were also under way in many nations in the Western Hemisphere.
Many countries were embracing democracy, discarding their centrally controlled or state-dominated economies, and moving toward
systems in which private ownership of property predominates and
most resources are allocated through markets. The pace of change
has been great, but events in 1990 also demonstrated that the task
of transforming failed economies is formidable. This chapter focuses on the transformation process as it is unfolding in Eastern
Europe and Latin America.
The transitions under way in Eastern Europe reflect the failure
of command systems to provide either political freedom or a decent
standard of living. The massive historical experiment conducted
throughout the 20th century that contrasted market-oriented and
centrally planned economies has ended with the economic failure
of communism. A little over three decades ago Nikita Khrushchev,
then Premier of the Soviet Union, boasted "We will bury you/' in
reference to the alleged superior economic performance of the
Soviet Union. Today, although accurate comparisons are difficult,
recent estimates of per capita gross national product (GNP) in the
Soviet Union have been as low as $1,780, less than one-tenth of per
capita GNP in the United States. The contrast between the two
systems in Germany is even more stark. Starting from the same
point at the end of World War II and sharing a common culture,
East and West Germany went two different ways. West Germany
achieved one of the highest standards of living in the world, while
East Germany became an industrial wasteland with rundown, outmoded factories and a poisoned environment.
Renewed respect for democracy and market forces is also sweeping the Western Hemisphere. A "quiet revolution" in the way that
Latin American policymakers seek solutions to their countries'
complex problems has taken hold. Almost every country in the
region has begun to move away from policies, pursued for decades,




193

that discouraged trade and gave government an extensive role in
the economy. Instead they are turning toward economies less controlled by government and more reliant on market forces. The
President has recognized the tremendous opportunity presented by
these changes with his Enterprise for the Americas Initiative,
which is aimed at expanding trade, investment, and growth in the
hemisphere, as well as with his commitment to conclude a freetrade agreement with Mexico.
Change also has become apparent in other regions. Nations as diverse as New Zealand, Benin, and Mongolia engaged in debates
about far-reaching market-oriented reforms. Several African countries have adopted programs that encourage private markets and
reduce government management of the economy. A push for privatization in the mid-to-late 1980s reversed the trend toward increased state control of the economy in Western Europe, with the
United Kingdom and France leading the way. The success of the
newly industrializing economies of Asia—Hong Kong, Singapore,
South Korea, and Taiwan—has offered strong evidence of the gains
from outward-looking policies that reward entrepreneurship.
These worldwide changes promise to settle intellectual debates
that have persisted for decades. During the 1960s and 1970s the
"convergence hypothesis" held that the capitalist and communist
systems would eventually evolve toward each other, with the final
result a hybrid of the two systems. In Latin America, it was argued
that policies that insulated the economy from world markets and
expanded the role of government would promote quick industrialization. It is now unmistakably clear that these hypotheses have
been rejected. The developed market economies are clearly not
evolving toward socialism, and the leaders in Eastern Europe and
Latin America are not trying to find a hybrid "third way." These
leaders instead push for market-oriented economies with individual
choice and private property rights as the foundations of progress
and prosperity.
It is impossible to predict the speed or even the eventual outcome of the reforms now under way. The collapse of communist
and military dictatorships presents enormous opportunities to improve living standards for hundreds of millions of people, but those
opportunities come with no guarantees of quick success. As command systems collapse, they must be replaced with systems that
provide appropriate incentives to producers and consumers. Fundamental reform needs time to work, and dislocations are inevitable.
Economic change can be difficult even in well-developed market
economies, as was discussed in Chapter 4. Change is even more difficult when it is dramatic and revolutionary. In emerging democracies, economic transformation must make its way within the context of policy debates that accompany the expansion of political




194

freedom. These debates may slow the reform effort at times, or
even create backlash against the reforming government, but they
impart legitimacy to the new economic system. If governments are
to build and sustain popular support for market-oriented reform,
there must be widespread understanding of how much there is to
gain and realistic expectations about the difficulty of the task
ahead. In the longer run, history strongly suggests that decentralization of economic power in a free-market economy will support
both prosperity and democracy.

FORCES FOR CHANGE
The pressure for market-oriented change was reflected clearly in
developments in Eastern Europe and Latin America during 1989
and 1990. In Eastern Europe, 1989 closed with Poland and Yugoslavia planning ambitious adjustment programs that were put in
place in early 1990 and that quickly reduced high inflation rates,
stabilized foreign exchange rates, and eliminated shortages. East
and West Germany were unified on October 3, 1990, less than a
year after the fall of the Berlin Wall in November 1989. By the end
of 1990, both Czechoslovakia and Hungary had announced plans to
accelerate their reform efforts. In Latin America, Chile's new
democratic government took office in March 1990 committed to
continuing the country's program of economic reform. Mexico's
current government accelerated reforms that were begun in the
mid-1980s, while Argentina, Peru, Venezuela, and a number of
other countries initiated significant market-oriented reforms.
The fall of the Berlin Wall and the events that followed raised
hopes and expectations around the world. More than anything else,
the undying and universal desire for political freedom motivates the
tremendous upheaval in Eastern Europe and the ongoing struggle
for democracy in Latin America. But the denial of economic freedom also crystallized discontent. The yearning for economic freedom has been evident in the vibrant underground economies of
South America, where enormous amounts of effort are devoted to
avoiding onerous regulations and licensing requirements. The
simple freedom to make choices in everyday life has a value
beyond its positive effects on living standards.

THE FAILURE OF ECONOMIC POLICIES
A fundamental motivation for change in Eastern Europe and
Latin America was the failure of their economies to perform adequately. The economic policies followed in these countries failed because they were unable to provide adequate incentives for producers
to supply efficiently the goods and services that consumers wanted
to buy. In a well-functioning market economy, producers must




195

make goods that consumers want; otherwise, their products go
unsold and their businesses fail. Producers also have an incentive
to produce those goods efficiently—that is, at the lowest possible
cost for a given quality—because they can keep the savings gained
by reducing costs. If demand increases, prices rise, encouraging
producers to produce more and consumers to consume less. If
demand falls, the process happens in reverse. In smoothly functioning markets the price moves to equate, at the margin, the value
consumers place on the goods they purchase with the value of the
resources used to produce them. This process, repeated for countless goods and services, ensures that the economy's scarce resources are used efficiently to satisfy consumer needs and desires.
Interference in the operation of the market breaks this crucial
link between producer cost and consumer value. In Eastern Europe
and Latin America, widespread use of price controls, reliance on inefficient public enterprises, extensive barriers to competition with
the rest of the world, and government regulation of production and
investment have all obstructed the normal operation of markets.
The lack of enforceable property rights, whether through legal restrictions in Eastern Europe or through inadequate protection in
Latin America, severely limited incentives for entrepreneurs.
In Eastern Europe, production levels were, until recently, decreed by central plans. Consequently, there was no reason to expect
that the output produced met the wants or needs of the population.
Surpluses and shortages occurred regularly, but managers had
little incentive to adjust their production as long as quotas were
met. Government investment choices caused chronic underproduction of consumer goods, leading to widespread rationing and long
lines at shops. Incentives to innovate were almost completely
absent, except in the defense sector. But the command economies
proved unable to transfer their high levels of defense technology
into improvements for consumers.
Production and investment controls were less extensive in Latin
America than in communist regimes, but government intrusion
into economic decisions was still pervasive. As in Eastern Europe,
inefficient public monopolies were common, and public funds were
channeled into favored industries regardless of the economic consequences. High tariffs and nontariff barriers protected inefficient
enterprises. The proliferation of government-owned firms combined
the natural inefficiency of monopoly with the waste and misallocation too frequently found in public enterprises.
Price controls and subsidies have been common in both regions.
Where prices were set administratively, they were usually poor
guides to the efficient allocation of resources. Price controls on agricultural products have kept food prices down but reduced output.
Subsidies in Latin America and Eastern Europe have distorted pro-




196

duction and consumption decisions, leading to shortages and bottlenecks.
The prevalence of inefficient public enterprises and unsuccessful
attempts to limit subsidies and other expenditures have contributed to large fiscal and external trade imbalances for many Latin
American and Eastern European nations. Many of these countries
lack a broad-based, efficient tax collection system and face limits
on the public's willingness to hold government debt. Borrowing
abroad has proven to be no answer: In the absence of sound policies, large external debts can result in capital flight and discourage
foreign investment where it is desperately needed. Large deficits,
therefore, lead to pressures for excessive money creation, eventually causing rampant inflation in most countries.
Some economies in both regions were also weakened by the
burden of high military spending. Although estimates are imprecise, perhaps as much as a fifth of the Soviet Union's output may
have been allocated to the defense sector in recent years. This massive effort, moreover, was ultimately ineffective, as free world governments matched or exceeded Soviet capabilities throughout the
1980s.
REPERCUSSIONS OF ECONOMIC POLICY FAILURES
The impact of these policies on living standards was devastating.
Per capita income in Poland is now estimated by the World Bank
to be about $1,860, compared with an average of $17,470 in the
major industrial countries. In Argentina and Peru, real per capita
incomes in 1988 were virtually unchanged from 1965 levels. Mexican real per capita income grew during most of that period, but
nonetheless declined after the 1982 debt crisis. Meanwhile, the
newly industrializing economies of Asia followed an export-oriented
strategy, and real per capita income grew at an average rate of
nearly 7 percent a year between 1965 and 1988. Although some of
these Asian governments directed private activity using taxes, subsidies, and other means, such interference was far less extensive
than in many other developing countries, private entrepreneurship
was encouraged, and world prices generally guided decisionmaking.
Over time, the weaknesses of the political and economic systems
of Eastern Europe and Latin America and the contrasting success
of market-oriented economies became readily apparent. Once momentum for fundamental change began to build, ideas flowed
easily across national borders. The information technology revolution allowed ideas to spread more quickly than ever (for example,
most East Germans could receive West German television before
the Berlin Wall fell) and created pressure for change that overwhelmed the communist governments of Eastern Europe.




197

EARLY ATTEMPTS AT REFORM
As the economic problems in Latin America and Eastern Europe
worsened, piecemeal reforms were attempted, but these efforts
were doomed to failure. Many Eastern European countries experimented with reforms that coupled economic decentralization with
partial price decontrol. The premise was that, with reduced central
control, state-owned firms would be run as if they were operating
in well-functioning markets. Although aggregate planning goals
were still announced, individual enterprises could set their own
planning targets and were made responsible for output decisions
and trade in raw materials and other inputs. In addition, the
system of price controls was made more flexible, and some smallscale private enterprise was allowed.
These early reforms went furthest in Hungary during the 1980s,
where they helped create a sector of small-scale private businesses.
They were also attempted to varying degrees in Yugoslavia beginning in the 1950s, in Czechoslovakia during 1966-68, and in the
Soviet Union beginning in 1987. The People's Republic of China initiated a more comprehensive reshaping of its economy beginning in
1978, which also incorporated decentralization, relaxation of price
controls, development of a small private sector, significant tax reforms, and the partial reopening of the economy to international
trade (Box 6-1).
Early reform efforts by Latin American countries typically followed their debt crises of the early 1980s. These reforms concentrated on restoring the confidence of domestic and foreign investors
by reducing inflation and the fiscal deficit and improving the trade
balance. Argentina and Brazil, for example, both confronted extremely burdensome external debts, recessions, and high inflation
rates. In response they adjusted their currency exchange rates to
make their goods more competitive in world markets and initiated
various plans to curb the escalation of wages and prices.
In both Eastern Europe and Latin America, these early efforts
failed to produce the desired results, in large part because they did
not adequately restore or put in place the foundations of well-functioning market economies. Private property rights were generally
absent in Eastern Europe, severely limiting profit incentives and
discouraging entrepreneurship, and state-owned monopolies were
retained. In Latin America efforts to reduce trade imbalances were
not coupled with policies to remove barriers to competition in domestic markets, to break up state-owned monopolies, or to improve
efficiency by privatizing public enterprises. Fiscal deficits continued to run out of control and to generate inflation because enterprises owned and managed by the government had no incentives to
control costs, and there was capital flight from many countries.




198

Bex 6~L—Economic Reform in China, 1978-90

The People's Republic of China initiated a comprehensive reshaping of its economy beginning in 1978, Reforms began in
the agricultural sector and were later extended to the industrial sector. Direct planning controls were relaxed, economic decisionmaking was decentralized, more private activity was permitted, and more prices were allowed to be set in markets. In
addition, there was a move to open the Chinese economy to
world markets. The practice of ordering all firms to remit most
of their profits to the state was gradually replaced with a
broad-based system of taxes on profit. Low marginal tax rates
were used to encourage investment and provide incentives for
management and workers to take efficiency4mproving measures,
Chinese reform produced important successes. Agricultural
output grew at an annual rate of 8 percent from 1979 to 1984
before slowing, compared with an annual growth rate of 2 percent from 1958 to 1978. The share of state enterprises in total
production fell from 81 percent to 60 percent between 1979 and
1987, reflecting the greater dynamism and growth of private
enterprises. The share of goods subject to mandatory planning
and state-fixed prices fell from two-thirds to one-third by 1987.
Remaining price controls, however, reduced the impact of the
reforms by distorting the input and production decisions of
firms. In some cases, local authorities hindered the implementation of reforms. Furthermore, the tragic events in Tiananmen Square in June 1989 and the ensuing political crackdown
led to a slowdown in the pace of reform. In some areas, central
control was reasserted and the reforms rolled back.
SUMMARY
• The trend toward market-based economies stems in part from
clear, historical evidence that government-dominated economies simply do not work well. Even where markets exist, extensive government interference discourages private initiative
and can cripple the economy.
• Early attempts at economic reform focused either on decentralizing economic decisionmaking or on macroeconomic stabilization; they foundered largely because they did not include the
positive incentives that come from private ownership and competition.




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PRINCIPLES FOR ECONOMIC REFORM
There is no established policy package for reform—no universal
blueprint exists—so each country must design its own transition to
a healthy market economy. A growing consensus has emerged,
however, on a number of principles necessary for successful reform:
establishing sound fiscal and monetary policies, removing domestic
price controls, opening the economy to international market forces,
creating property rights and private property, promoting domestic
competition, and reforming and limiting the role of government.
No modern economy has completed a successful reform implementing all these principles at once. It has been difficult enough
for countries to succeed in implementing one or two of them when
others were already in place. Latin American countries began their
transitions with more of the elements of a market economy than
the countries of Eastern Europe. In both regions, the pace of events
has raised expectations that the transformation can occur quickly
and easily, but the sheer magnitude of the task indicates that perseverance and patience are required.
MACROECONOMIC REFORMS
Three of these principles—establishing sound fiscal and monetary policies, removing domestic price controls, and opening the
economy to international market forces—are often described as
macroeconomic reforms because they apply to the entire economy.
They are central to creating the conditions for economic stability.
They are also essential to successful structural reform in both Eastern Europe and Latin America. In Poland and Yugoslavia, macroeconomic reform has succeeded quite rapidly in reducing inflation
to lower levels. But implementing these macroeconomic principles
is not, by itself, adequate to produce a healthy market economy.
Indeed, without structural reform to introduce a competitive private sector into the economy, macroeconomic reforms will not succeed in restoring sustained growth.
Macroeconomic reforms can produce rapid output growth when
the basic structure of a market economy is in place. That is what
happened when the West German economy was rebuilt after World
War II (Box 6-2). The West German program coupled price decontrol and monetary reform. It succeeded almost immediately in increasing economic activity, leading the way to the postwar German
"economic miracle/'
Establishing Sound Monetary and Fiscal Policies
Any successful reform effort must involve sound monetary and
fiscal policies. Otherwise, producers and consumers lack a firm
basis for planning—there is no hope of fostering long-term invest-




200

Erhard Reforms

he German economy lay in
mm 0f*iM;hird its 1936 level belli?p^uction and trade patterns,
increased by capital forawtion
i^pfcion was aggravated
pricing controls, and uncertainty
taefc crowds traveled to the
from farmers; an extensive black
replaced currency in many
Host currency and tank ac~
100 to 64, but debts were
In addition, price controls were
monetaiy pslw w^ adopted,
were prodded for in*

^^TI^-^^^-T-. ^-*^rrc,^- -.

them Ludwig Erhard.
astaWMi^ sound and
stable macroeconomic conditions. Consumer prices increased 20
of 1948, but inflation
annual rate of just over 1 percent
ifeat had b^n hoarded or sold
only
to'tfe;:!*^
generaEy available* Keal industrial production increased 40 percent in the second half of
"IMS ^^^^'^m^^^ tl percent annually between 1949
aiii ;:^M^^
also grew rapidly, But
the reform was not painless: unemployment rose from 3 percent in the first half of 1948 to more than 10 percent in the
rrfbtm could not have produced such ixnpres*
sive results if West Germany after the war had not had key
It had the legal framework necestotact businesses, and highly
fiscal pdid^ in
place since 1946 helped set the stage for the reforms to sue*
ceed. In addition, the Marshall Plan and private aid from
" abroad were critical during the initial reconstruction phase, By
- the early 1950s, however, foreign aid had diminished; robust
economic growth worldwide and the Korean war stimulated
demand for German exports and fueled economic growth.




201

ment and economic restructuring in the extremely uncertain climate created by high and volatile inflation.
One lesson from countries that have successfully ended hyperinflation, including West Germany after the war, is that strong fiscal
discipline is critical to ensure price stability. Otherwise, fiscal deficits arise that increase the pressure to print money. Fiscal success,
of course, requires tight controls on government spending and
credit policies. In particular, the government must limit the subsidies it gives to consumers and to loss-making state enterprises.
State enterprises must face so-called "hard budget constraints"; the
government must not cover the losses they may incur. Fiscal discipline will then allow the implementation of a monetary policy
aimed at preventing excessive money creation and providing a
steady supply of credit to the economy.
Achieving price stability requires establishing effective mechanisms for controlling the growth of money and credit. As a first
step, this requires central banking reform, particularly in Eastern
European countries. It is widely agreed that the central bank
should have a high degree of independence from the central government, so that it can resist political pressures to finance government spending with money creation and can pursue the objective
of price stability. Independence could prove particularly important
during the transition period, when uncertainty and inflation pressures may require a strong anti-inflation stance, with tough limits
on money growth.
In addition, controlling the growth of money and credit requires
a sound banking system, as discussed below. Central banks play an
important role in monitoring the banking system and in serving as
lenders of last resort. Establishing and controlling the total supply
of credit to the banking sector will help to ensure that state enterprises face a hard budget constraint. Adequate supervisory capabilities also must be developed early. The collapse of the Chilean
financial system in the late 1970s, for example, had its origins in
inadequate supervision of external borrowing and domestic lending
by Chilean banks.
The tax system should be designed to raise revenues so that the
printing press is not used to finance necessary government spending.
Such a tax system should limit distortions to prices and economic
incentives. Establishing a broad tax base allows marginal tax rates
to be reduced. Tax revenue in Latin America is often generated
from only a few sources, such as tariffs, and can be highly distortionary. An exception is Colombia, which has one of the most advanced income tax systems in the developing world, with a broadbased value-added tax and sophisticated adjustments for the effects
of inflation. Other countries, such as Bolivia, Chile, and Jamaica,




202

are now experimenting with broad-based income taxes, value-added
taxes, or excise taxes.
In Eastern Europe, fundamental administrative mechanisms for
collecting taxes are largely absent or primitive. The old regime received revenue through its ownership of enterprises and was able
to transfer funds through simple accounting entries. As economic
decisionmaking was decentralized and private firms increased in
importance, government revenues deteriorated. Tax and collection
systems will need to be established that can generate reliable
sources of revenue for the government as the old sources of funding
diminish.
In economies that have suppressed inflation and allocated goods
through rationing, the stock of domestic monetary assets outstanding is often unsustainably large. Where such a "monetary overhang" is present, macroeconomic stabilization requires that it be reduced. If consumers and producers hold large cash balances, decontrolling prices could lead to an inflationary surge in demand. The
government could reduce the monetary overhang by selling real
assets, such as housing, or financial assets, such as government
bonds. This approach is not confiscatory, may help establish the
government's credibility, and creates markets. The privatization of
real assets is a high priority, but it may be difficult to sell these
assets quickly, as discussed below. The sale of government bonds at
market interest rates helps to establish a bond market, which in
turn gives the monetary authorities an instrument to control the
money supply.
Bonds must be serviced, and so using bond issues to resolve the
monetary overhang could worsen the fiscal deficit. During the transition, bond issues may need to pay high real interest rates, which
would lead to higher interest payments on national debt. That in
turn could cause lenders to be concerned about the government's
ability to service its debt. If a government chooses to sell bonds to
deal with the monetary overhang, it is critical to adopt monetary
and fiscal polices that are both credible and strong.
Because buyers must be assured that government bonds will be
serviced in full, governments should consider using whatever assets
they have to support these bonds. Countries could use their available resources—such as copper, gold, or future oil revenues—to
back bonds wholly or in part. Such bonds would be tradable, and
legal mechanisms would be developed to assure the public that the
assets would be available to service the debt.
Currency reform is an alternative approach to reducing the monetary overhang; this was the approach postwar Germany used successfully. In a currency reform the central government replaces existing monetary assets with new assets, usually of lesser value. A
confiscatory currency reform is a tax on holders of currency and




203

other financial assets. Such a tax will provide few benefits unless it
is part of a comprehensive economic reform package. Repeated currency reforms can disrupt economic activity, reduce the government's credibility, and contribute to a loss of confidence and capital
night.

Removing Domestic Price Controls
In economies with extensive price controls, prices bear no relationship to economic value, defined either by domestic costs or by
international prices. By comparison, in market economies production and investment decisions are decentralized, and flexible
market prices guide economic activity. However, concerns about
sharp price increases, particularly for staples such as bread, lead
some to suggest delaying price reform, at least until after measures
have been taken to deal with the monetary overhang. The problem
with delaying price reform is that output will decline as the command system is dismantled unless the old system is quickly replaced
with an incentive system based on accurate prices to encourage efficient production. Economies in transition thus need early and comprehensive price decontrol.
Wages are a key price that must be liberalized. In a well-functioning market economy, wages are free to adjust so that valuable
skills are rewarded and workers are encouraged to shift to occupations and regions where they are most productive. Until enterprises are operating under market incentives, however, they have
little reason to set wages appropriately or to restrain their costs.
Consequently, to avoid a wage-price spiral during the transition
period, temporary and limited restrictions on wage increases in
state enterprises may be desirable. Once firms face market constraints, all wage limitations should be eliminated to allow wages
to move to their appropriate levels.
Financial markets also should be liberalized so that savers receive an adequate return and investors face correct incentives
when making investment choices. As a first step, at least, interest
rates should be positive after adjusting for expected inflation. Government intervention in financial markets, particularly in Latin
America, often led to negative real interest rates and was a major
contributor to poor investment decisions and capital flight.

Opening the Economy to International Market Forces
Another key principle of macroeconomic reform is to open the
economy to international market forces by establishing currency
convertibility and liberalizing trade. Currency convertibility has
more than one definition, but here it refers to the ability to trade
the country's currency, at market exchange rates, for foreign currency (and goods) either at home or abroad. To say that a currency
is convertible does not mean that trade is free. Western industrial




204

countries with convertible currencies retain tariffs and other barriers to trade. Thus, the benefits to a reform program from convertibility of the currency should be thought of as part of the larger
process of eliminating restrictions on international transactions.
The transformation to a market economy cannot be successful
unless a country's currency is a credible medium of exchange and
convertible within its borders. In the Soviet Union today, certain
cities and republics restrict ruble purchases by nonresidents and
erect trade barriers against each other. Certain deposit accounts
are not convertible for currency. The January 1991 Soviet currency
reform further reduced confidence in the ruble. These costly distortions are reflections of the fundamental failure of existing economic policies.
Convertibility for international trade and other current account
transactions, along with other measures to liberalize trade, is a critical early reform. It increases the range of goods that can be purchased by consumers and producers. It may also expand domestic
production by increasing the availability of imported inputs and
capital goods. Further, convertibility moves domestic prices toward
market-determined world prices, guiding domestic enterprises
toward efficient production and investment decisions.
Opening the economy to international market forces also helps
create a competitive environment in two important ways. First, it
helps expose firms to the discipline of the international market.
That is particularly important in smaller countries where the efficient operating scale of firms in some industries is large relative to
the size of the domestic market. Without foreign competition, state
enterprises in these countries may face little domestic competition
at the start of a reform effort, allowing them to remain viable by
raising prices at the expense of consumers. External convertibility
and trade liberalization therefore are also pro-competitive policies
that can enhance productivity.
Second, opening the economy to international forces allows new
domestic firms to overcome domestic barriers to competition. For
example, reducing tariffs on vehicle imports allows small-scale private transporters to compete by importing trucks from abroad.
A potential problem with early convertibility is that firms likely
to be viable in the long run might experience severe financial difficulties during the transition from controlled to world prices. The
balance of payments also could deteriorate until the supply side of
the economy responds to the new market incentives and exports
rise. Both of these problems could be addressed by converting existing trade barriers into temporary tariffs—sometimes called the tariffication approach. This approach has several advantages: It replaces a potentially complex array of existing trade distortions
with a single gap between domestic and world prices, makes the




205

degree of protection more transparent, and sets the stage for eventual tariff reduction.
With the support of the World Bank, a number of Latin American countries have made important progress in opening trade as
part of their reform efforts. Bolivia and Mexico, in particular, replaced quotas and nontariff barriers with reduced, uniform tariffs.
In a number of countries, more competitive exchange rates and the
elimination of export barriers contributed to a significant increase
in nontraditional exports. Argentina and Peru have eased exchange restrictions that had led to black markets for foreign exchange in recent years.
Many economists support focusing initially on convertibility for
trade and other current account transactions while temporarily delaying convertibility for international capital flows. They argue
that remaining market distortions or a lack of confidence in the
economic future of the country could lead to capital flight. But capital account convertibility must not be delayed too long. External
convertibility on capital transactions may be important in providing venture and working capital to private firms during the transition. It also facilitates the import of foreign know-how.
One historically important example in which the import of foreign technology was the centerpiece of a reform effort followed the
Meiji restoration in Japan in 1868. Spurred by a desire to emulate
the economic success of the West, Japan within a remarkably short
period of time overhauled its central government, changed what
was being taught in its schools, and shifted the energies of its
people toward commerce. The linchpins of the Japanese transition
were the concentration on importing foreign technology and technical assistance, the development of a transportation infrastructure
conducive to commerce and trade, and the privatization of government production facilities. Entire factories were imported, along
with technical advisers who operated the machinery until Japanese
workers and managers were capable of doing it on their own.
Full convertibility for international capital flows may be delayed
without obstructing the reform process when other measures to attract foreign investment are in place. Hungary adopted a foreign
investment law that guarantees repatriation of profits. As a result,
it seems to have taken the lead in Eastern Europe in attracting foreign capital. As discussed further below, the creation of Enterprise
Funds for Hungary, Poland, and Czechoslovakia reflects the Administration's emphasis on ensuring that adequate financing is
provided to newly emerging private sectors.
When a reforming government decides to make its currency convertible for some set of international transactions, it must also
choose between fixing the exchange rate or allowing it to move
freely to its new equilibrium level. Authorities may choose to fix




206

the exchange rate as part of a comprehensive stabilization package.
If backed up by a credible noninflationary monetary policy, a fixed
exchange rate may help reduce inflation expectations and thereby
ease the transition to price stability. Choosing an appropriate level
for the fixed rate is not easy, however. The higher the fixed value
of domestic currency relative to foreign currency, the cheaper are
foreign goods relative to domestic goods. Thus, while a high exchange rate reduces initial pressure on inflation by holding down
the prices of imported goods, a low exchange rate enhances the
competitiveness of domestic firms in world markets and reduces
the likelihood of large trade deficits. Letting the exchange rate
move freely to a new equilibrium allows the market to balance
these opposing forces.
STRUCTURAL REFORMS
In addition to the principles discussed above, comprehensive
reform requires structural measures. Private property and privatization should be institutionalized, domestic competition must be
promoted, and the role of government must be reformed and limited. Most reforming countries of Eastern Europe have been slow to
adopt these principles, which are central to the development of
markets. Latin America already has private property rights and
private firms, but many nations in the region could benefit greatly
by promoting domestic competition, accelerating privatization, and
continuing to redefine the role of the public sector.
Property Rights and Private Property
A successful transition to a market economy requires that private
property rights be firmly established and that a legal system be developed to define and protect these rights. In addition, productive
assets must be put into private hands through the process of privatization. Otherwise, producers have no incentive to respond to
prices and to take risks, and the reform effort will fail to generate
increased supplies of products consumers want to buy.
Private property and property rights are most notably absent in
the command economies of Eastern Europe and the Soviet Union,
where economic activity was based on the idea that almost all
property belonged to the state. Although small-scale entrepreneurial activity was tolerated in some Eastern European countries in
recent years, most control over the allocation of resources remained in the hands of the government. The public debate about
private property in the Soviet Union has also been a political
debate about commitment to change following 70 years of indoctrination about the evils of profit and capitalist enterprise. During
Lenin's New Economic Policy of the 1920s, reforms encouraged private producers, especially farmers, to expand production. Many
farmers successfully raised output and prospered, only to have that




207

very success considered criminal during the Stalinist purges and
collectivization drives of the late 1920s and 1930s. As a result, the
most successful farmers and entrepreneurs were punished by expropriation of their property, exile to labor camps, and, in many
cases, execution.
In Latin America, the institution of property rights has long
been established but has not always been well respected. Government nationalization of industries, sometimes through expropriation, is one aspect of a legacy of not respecting property rights.
More recently, inefficient and slow legal systems have discouraged
private entrepreneurship.
Privatization of state enterprises is an urgent, albeit complex,
task. The task is more difficult by several orders of magnitude than
the privatizations that have occurred in developed market economies over the last 10 years. In Eastern Europe, for example, the
government owns most of the land, buildings, and machinery.
There are enormous benefits to transferring ownership to the private sector even though local citizens generally have little savings
to invest, financial markets are not sufficiently developed to provide credit, and the widespread sale of domestic equity to foreigners raises political concerns. An added consideration is the widespread belief that those who profited under the old regime—and
who, therefore, are among the few who can afford to make large
equity investments—do not deserve to benefit from those activities.
Privatization requires expertise in accounting, financial markets,
and the law. In most cases, the books of large government enterprises bear no relation to economic reality. That may make it
easier for insiders to purchase these firms at very favorable prices
and realize large gains. Concerns about such "sweetheart deals"
have slowed privatization in both Eastern Europe and Latin America. Perhaps not surprisingly, in Eastern Europe the "spontaneous"
or decentralized privatization of small enterprises and the development of new private firms has far outpaced government efforts to
privatize large-scale enterprises.
In nearly all Latin American countries the process of privatization has recently accelerated. A number of countries have privatized enterprises as part of debt-for-equity programs. In 1990 Argentina and Mexico completed privatization of a number of large
state firms and announced others, and other countries such as
Chile and Costa Rica also stepped up their privatization efforts.
Throughout the region, however, some of the largest enterprises
remain in government hands and will be difficult to privatize or restructure, partly because of resistance from labor unions.
One question is the order in which to privatize enterprises. The
Polish reform plan up to this point has been based on the "conventional" view that companies with positive net worth should be pri-




208

vatized first. Enterprises that are money losers, have high debt
burdens, or are expected to need significant internal restructuring
before they become viable are to be privatized later after the restructuring takes hold. By contrast, the reform plan in Yugoslavia
is focused on privatizing loss-making industries first, presumably
because this approach would reduce the subsidies the government
must pay.
There are several possible methods of privatizing enterprises
that can be used in conjunction with each other. Enterprises can be
sold to workers or to the highest bidder, or deals can be individually negotiated and then presented to the government for approval.
Another method is to distribute vouchers to the general public that
allow citizens to purchase portions of firms at favorable rates,
either directly or through investing in holding companies that
accept management responsibility. The favorable equity implications of widespread domestic ownership has inspired Czechoslovakia to consider this latter approach. Poland is favoring a "menu"
approach: In some cases, a combination of methods could be used in
a single privatization, while in other cases the enterprise may
choose among the legally allowed options.
A crucial element of the reform agenda must be the creation of a
private housing market In much of Eastern Europe the decay of
the housing stock and a desperate lack of available housing creates
real impediments to the free movement of workers. In many instances, workers cannot move to areas where there are jobs, because there is no housing for them and their families. Creation of a
private housing market could be an important first step toward
both improving labor mobility and raising living standards. Housing should be privatized, and builders and investors allowed to purchase land for construction. Property also must be transferable so
that existing and new housing can be efficiently allocated.
Promoting Domestic Competition
Another principle for a successful transition involves a range of
measures to create not only private, but also competitive industries.
Desocializing without also demonopolizing confers little benefit. Actions to promote competitive domestic market structures include
restructuring existing firms, facilitating the entry or establishment
of new firms, and putting in place an antitrust policy to promote
competitive domestic markets. In addition, as noted above, competition can also come from abroad.
Competition is generally enhanced if existing state-owned enterprises are split into smaller, viable firms before privatization. Unrelated or unprofitable activities can be jettisoned, and monopolies
can be split into separate, competing firms. The restructuring of
viable firms may also involve adoption of new technologies and the
reallocation of labor and capital to new uses. Accounting and finan-




209

cial techniques must be brought to bear to ensure that firms are
operating on a sound financial basis.
Private sector activity can also be encouraged by the sale of
assets of state enterprises to the private sector. Consider the challenge of creating transportation industries, such as trucking. In
most command economies, firms produce many of their own inputs
including transportation services. Thus, most trucks are owned by
large state enterprises that have little incentive to compete with
each other. If a state enterprise is divided into several viable firms
and its trucks are sold outright, their purchase by entrepreneurs
could aid the development of a private distribution system.
Barriers to the creation of new firms must be removed. In Eastern Europe there has been rapid growth of new firms over the past
year but the public sector continues to dominate. These new firms
are usually small and often are at a disadvantage in competing
with the state enterprises for inputs and credit, but they have
proved very successful where the efficient scale of firms is small or
where entrepreneurship is important.
Policies to protect competition also are required. While it is natural and desirable to want to sweep away many regulations as vestiges of the government-dominated systems that reforming countries have rejected, laws are needed to ensure that creation of a
private sector does not merely replace a public monopoly with a
private one. A basic antitrust law aimed at preventing cartel behavior by firms producing the same product and mergers that
create monopoly is essential.
During the transition, basic banking and credit market functions
must be developed quickly. In command economies, banks mainly
serve a bookkeeping role, allocating credit as directed by the central government plan. Retail banking as understood in market
economies barely exists. The use of checking accounts is limited,
and check clearing can take weeks. An important early role for the
central banks of Eastern Europe can be to help create and then
monitor a payments system. The economies of Eastern Europe also
will need a competitive banking system that provides access to
credit for new and restructured firms.
Well-developed financial markets serve other roles as well. They
allow risks to be shifted to those who are most willing to bear
them. They allow firms to diversify and hedge and to mobilize private savings. Yet, many of the existing banks have distorted balance sheets from years of financing state enterprises without concern for creditworthiness. Reform requires a tremendous amount of
expertise; systems and methods of credit evaluation and ways to
manage risk must be introduced. Technical assistance from abroad
will be useful in creating efficient banks.




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Reforming and Limiting the Role of Government
A successful transition to a market economy in Eastern Europe
requires a complete overhaul in the role of the government, to reorient it toward the tasks appropriate to a market economy. In
Latin America, reduced government involvement in the economy
would free resources for private use, allowing the private sector to
grow and prosper, reward investors, and raise funds for investment. Some tasks, such as putting a sensible tax system in place,
as discussed earlier, are formidable. Important new functions for
reforming governments range from collection of meaningful economic data to environmental regulation.
The government must also develop a social safety net. As economic restructuring takes place, many workers will lose their jobs because inefficient enterprises are likely to be shut down or to fail to
become viable under private management. Although these dislocations are a prerequisite for building a more productive economy,
the hardships that fall on workers and their families can and
should be cushioned. Unemployment compensation and worker retraining are effective approaches to dealing with these problems,
and they can also help to minimize worker resistance to reforms.
Many features of a well-designed, targeted social safety net, such as
unemployment insurance, are also important to encourage workers
to incur risks and change jobs in response to labor market signals.
Labor mobility is critical if contraction of the state sector is to free
workers for private sector activities.
Governments should facilitate the establishment of a sound education system that can produce a work force able to build and operate a modern market economy. One advantage held by some of the
Eastern European countries, such as Hungary and Poland, is the
relatively high level of education of their workers. With educated,
well-trained labor forces, one of the essential requirements for a
growth economy is in place. Sound training in business and economics is also required. It is important that the policymakers and
populace understand the economic rationale for market-based
reform, for without popular support, reform programs will not succeed.

SUMMARY
• Certain fundamental principles—formulating sound monetary
and fiscal policies, removing domestic price controls, opening
the economy to international market forces, ensuring property
rights and private property, creating competition, and reforming and limiting the role of government—are essential for a
successful transition to a healthy market economy.




211

• Numerous countries have attempted the difficult task of implementing one or more of these principles. But no modern economy has implemented all principles at one time.
• Latin America starts with more of the elements of a market
economy in place than does Eastern Europe. In both regions,
however, healthy market economies require both macroeconomic and structural reforms.
• Macroeconomic reforms provide a stable economic backdrop for
the planning decisions of investors and entrepreneurs. Such reforms allow prices, wages, and interest rates to respond to domestic and world market forces, which helps to assure that the
economy's resources are allocated productively and in accordance with peoples' wants.
• It is essential that economic reform elicit competitive, privatesector activity. Structural reforms contribute by firmly establishing private property rights, putting productive assets into
private hands, and promoting competitive behavior through,
for example, antitrust laws.

IMPLEMENTING ECONOMIC REFORMS
The preceding discussion of economic principles to guide the
transition to a market-oriented economy highlights the complexity
and difficulty of the reform effort. What methods should be
chosen? Which principles should be emphasized first? How rapidly
should the reforms be implemented? These choices are difficult
enough from a technical viewpoint. They are made even more difficult by the need of new democratic governments to build popular
support for reform.
The temptation to underestimate the difficulty of the task ahead
must be resisted. The legacy of state control will take time to overcome. Even successful reform will require a difficult transition
period, as workers and other resources are reallocated to productive uses based on market-determined prices. In Eastern Europe, in
particular, after 40 or more years of job security, unemployment,
even if modest by Western standards, may be quite frightening. If
unrealistic expectations are generated by the promised benefits of
market reform, support for the necessary changes could collapse.
It is important to realize, however, that the welfare of citizens in
the Eastern European economies can be dramatically improved, even
if output declines for a period of time. Under the old regime, these
economies often reported rapid output growth, but output was frequently mismeasured through the use of nonmarket prices that
overstated the value of shoddy goods. More important, higher production did not necessarily improve living standards because the
goods produced were not the ones that consumers wanted. If these



212

countries have early success at producing the goods and services
that individuals really want, actual well-being would no doubt rise
far more than official statistics would show.

THE NEED FOR COMPREHENSIVE REFORM
The linkages and complementarity among many of the reform
principles suggest that ideally they should be implemented simultaneously. Administratively, however, it is infeasible to do everything
at once. Some changes are also clearly preconditions for others. For
example, a legal infrastructure supporting both private ownership
and the transfer of property rights is absolutely necessary to the
process of privatization and the stimulation of private investment.
The most important characteristic of a successful reform program
is that it be comprehensive and rapidly implemented. A command
economy cannot be meshed with a market economy. Consequently,
implementing half of a reform program achieves much less than
half of the benefit of comprehensive reform. Half measures lead instead to confusion and falling output because productive individual
incentives have not yet replaced the command system. Since a slow
pace of reform will only prolong the pain of the transition and aggravate the inevitable disruptions, the reforms should be implemented as rapidly as possible.
There is general agreement that reforming countries must address first any existing problems of high inflation and severe balance of payments deficits. Without initial measures to reduce the
uncertainty of the investment and production climate, attempts at
privatization and price reform are unlikely to elicit the desired increases in private-sector investment and output. In short, the ability of the government to articulate and carry out a credible macroeconomic program provides an essential backdrop for private sector
activity. Enterprise restructuring and privatization must, however,
follow soon after.
Reforms such as privatization, price reform, and trade liberalization clearly go hand in hand. Privatization of monopolistic state enterprises, for example, could simply result in private monopolies
that produce less and at higher prices than firms in a competitive
setting, unless such entities are first dismantled or exposed to foreign competition. Trade liberalization and domestic price reform
are closely related because world prices are usually the best guide
to most internal price relationships. Domestic price reforms go
hand in hand with privatization because managers cannot be expected to make sound investment, production, or employment decisions without rational price guides. In fact, it may not be possible
to judge accurately the viability of many state enterprises until
they have operated under market conditions with accurate price
signals. Financial market reforms must also be under way and pri-




213

vate sector financial institutions in place with a functioning payments system before investment decisions can be effectively transferred from government to private control.

EXAMPLE: REFORMING POLISH AGRICULTURE
The challenge of restructuring the Polish agricultural-food
system illustrates the need for comprehensive reform. This sector
begins with a solid base on which to build: Despite earlier collectivization efforts, privately owned farms accounted for 70-80 percent of land in agriculture and a similar percentage of output even
before reforms began. Production is already diversified, and considerable export potential exists, but numerous structural impediments associated with the centrally planned economy must be removed to improve the sector's performance.
First, although most farms are considered "private," the lack of
a well-functioning land-transfer system still hinders the consolidation of these small, uneconomic units (on average about 12.5 acres)
into more efficient operations. Until recently, most land was transferred to the State Land Fund for reallocation, with political factors dictating who was allowed to purchase it.
Second, the lack of competition in the sectors providing agricultural production infrastructure, such as the farm input and processing sectors means that the incentives for efficient farm production decisions are missing. The input sector remains state-controlled: continuing inefficiencies and monopoly activity keep farm
input prices excessively high, supplies for private farms inadequate, and input quality very poor. Until recently, farm inputs
were provided only to farms that agreed to sell their output to
state enterprises. That made it very difficult for a private marketing system to develop, even after private activity was authorized in
the procurement sector and output prices were deregulated.
Food processing facilities are outmoded due to the lack of competition. Many facilities operate far below capacity and without concern for either the quality of the commodities processed or the
foods produced. State slaughter facilities, for example, purchase
pigs only according to weight—without taking into account fat content or other quality factors of potential concern to consumers.
This system induces farmers to fatten pigs excessively and gives
consumers meat containing large amounts of waste.
Third, inadequate capital markets and domination of foreign
trade by state enterprises hinder the growth of private sector activity throughout the food distribution system. Modernizing existing
plants requires capital and, therefore, capital markets and banks
that lend long-term investment capital. Private enterprises must
also have access to modern production inputs at reasonable prices.
For example, setting up private meat shops was hindered by the




214

lack of refrigerators, which only state retailers could import! Until
access to international markets is achieved and transportation networks are demonopolized, private distribution, processing, and
retail ventures can only expand slowly.
Fourth, freer trade of farm products is necessary to remove distortions in farm prices and to induce increases in farm output.
Access to foreign markets for Poland's potential farm exports is as
important as access to imported farm inputs, such as fertilizer.
Lifting wheat export restrictions, for example, could help bring artificially depressed farm prices in line with higher world prices, encouraging increases in output and contributing much-needed foreign exchange.
This extended discussion of reform in Polish agriculture shows
that private ownership of farms is only one step toward a wellfunctioning farm economy. For private farmers to take advantage
of new opportunities, many other changes also need to be introduced. These include providing full property rights in land, competition in the distribution system, and access to international markets for both inputs and outputs.

SUMMARY
• Reforms must be comprehensive if they are to succeed. Rapid
implementation is the best way to limit the inevitable disruption associated with reform.
• The success of reforms is best measured by their ability to encourage production of goods consumers want, not solely by
changes in measured output.
• It is generally accepted that macroeconomic stabilization
should be the initial priority for reforming countries with high
inflation and severe external imbalances, but rapid structural
reform must begin simultaneously or follow soon after.
• The difficulty of making a successful transformation is often
underestimated. Realistic expectations about the benefits and
costs of reform can sustain support for the adjustment effort.

EASTERN EUROPE AND THE SOVIET UNION
The degree to which the former command economies have implemented the basic reforms needed to effect a successful transition to
a market economy varies significantly. This section summarizes
the recent developments in several Eastern European countries
where the reform process is well established and in the Soviet
Union. Poland, Yugoslavia, and the former East Germany began
their reform efforts in early 1990. Czechoslovakia and Hungary
moved to accelerate their reform plans during the year. Bulgaria
and Romania have not yet proceeded very far on the path toward




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economic reform and have faced considerable political uncertainty
and disruption. In Bulgaria a political impasse delayed the adoption of a comprehensive reform program. Although reform was debated in Romania, and some privatization occurred, lack of public
support during 1990 stalled progress toward implementing price
reform and other essential elements of a comprehensive reform
program. In the Soviet Union, hopes that comprehensive economic
reform would be implemented quickly were dashed in late 1990 and
early 1991 by an abrupt shift in government policy.
It is too soon to judge the full economic impact of reform programs. Even under ideal conditions, transition to healthy market
economies will take time. Moreover, several external shocks affected the economies of Eastern Europe in 1990. It will take time for
these countries to realize the benefits of the reforms taken to date.

POLAND, YUGOSLAVIA, AND EAST GERMANY
Although Poland, Yugoslavia, and East Germany took different
paths, these countries had in common in 1990 programs focusing on
macroeconomic reforms as the first step. Poland's program was the
most ambitious and comprehensive. Enacted in January 1990, Poland's program emphasized quick measures to stabilize the economy, including price reform, steps to close the budget deficit, restraint of monetary growth, and establishment of a convertible currency at a fixed rate. The fiscal balance moved from a deficit of
about 8 percent of GNP in 1989 to a surplus in 1990. The inflation
rate dropped sharply but then settled at a higher than desirable
level of about 5 percent a month. Authorities were able to stabilize
the foreign exchange value of Polish currency and to maintain current account convertibility, while rebuilding the stock of foreign exchange reserves as exports to the West surged and imports fell. Activity in the newly emerging private sector appears to have increased significantly in 1990. However, reflecting a decline of about
25 percent in the sales of the socialized industrial sector, real GNP
is reported to have fallen 12 percent in 1990. Measured unemployment had moved from negligible levels before the reform to above 8
percent.
The Polish program involves putting in place a far-reaching set
of provisions to establish competitive industries and independent financial institutions. The privatization of existing enterprises
moved slowly until late in the year, when the government completed its first large privatization and began the process of privatizing
a number of other large companies, using a "menu" of different
techniques. Finally, almost all price controls were removed, though
wage flexibility was still limited by the central government
through tax policy.




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In 1990 the government of Yugoslavia embarked on a comprehensive program to stop soaring inflation. In its initial phase, the
program devalued and fixed the nominal exchange rate of Yugoslavia's currency. Wages were temporarily frozen, while most
prices were allowed to adjust freely, and import barriers were lowered. The 1990 program built on earlier structural and institutional
reforms to recapitalize the banking system and restructure lossmaking state enterprises.
The initial results of the stabilization program were quite positive. Monthly retail price inflation fell from 64 percent in December 1989 to near zero in the second quarter of 1990, and the decline
in real output was less than that experienced by Poland. By midyear,
however, fiscal problems began to appear, reflecting inadequate
controls over public sector spending. Monetary policy was eased
under pressure from illiquid enterprises and workers' demands for
faster wage growth. Inflation jumped up to the range of 8 to 10
percent a month. In January 1991 there were worrisome developments in the stance of monetary policy that cast further doubt on
inflation prospects. Even more discouraging were the escalation of
ethnic rivalry and signs of political disintegration, which threaten
the chances of implementing a coherent program.
In the former East Germany, unification caused far-reaching
changes in the economy. Adopting the currency and many legal
and economic institutions of the former West Germany through
unification has reduced many uncertainties that have plagued
transitions in other countries. Nonetheless, output in the third
quarter of 1990 was 30 percent below its level a year earlier, although not all the decline was due to the reforms. Unemployment
rose to about 7 percent of the work force, and roughly 20 percent of
the population was underemployed. Real wages rose, perhaps reflecting the need to dissuade workers from emigrating to the
former West Germany, and labor productivity declined. Competitive problems for firms with outmoded equipment and products and
substandard product quality, hidden prior to unification, are now a
concern. On the other hand, the flow of investment from the western portion of Germany is expected to grow, supporting a rebound
in growth in the medium term.

HUNGARY AND CZECHOSLOVAKIA
Reform proceeded less rapidly in Hungary and Czechoslovakia.
Entering 1990 the problems of inflation and declining output were
not as severe in these countries as in Poland and Yugoslavia. Thus,
macroeconomic reform may not have appeared critical. However,
as 1990 proceeded, the pressures for reform grew.




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Many of Hungary's subsidies were removed, although those for a
few key goods, including some food and energy products, remained.
The external trade performance of the economy was good, with a
hard currency trade surplus of near $1 billion in 1990, despite poor
agricultural performance due to drought and the impact of the Persian Gulf crisis. However, inflation remained high at over 30 percent a year, and the size of the fiscal deficit is troubling. Official
unemployment stood at 1.7 percent at year-end. Industrial production was down about 10 percent in 1990, but production by small
firms boomed. The privatization program began to take hold in
1990 with the process of privatization under way for 20 large state
enterprises. A second group of 20 firms to be privatized was to be
announced in early 1991. Sales of small enterprises to individuals
were brisk, and the government planned to privatize 16,000 small
firms in the next 2 years. As 1991 began, Hungary was taking steps
to implement a 3-year reform program, including an expansion of
external convertibility for international trade transactions.
After a year of focusing on political and legislative reform, the
Czechoslovakian Government implemented a comprehensive economic reform effort in January 1991. The program decontrolled
about 85 percent of all prices, established partial convertibility for
the international trade of goods, and tightened fiscal policy. Small
business privatization through auction began in January, but legislation to allow privatization of large state enterprises had not yet
been passed. Over the 12 months to September 1990, output fell
about 3.5 percent, and unemployment remained below 1 percent.

THE SOVIET UNION
In late 1990 and early 1991 economic reform efforts in the Soviet
Union appeared to come to a halt. The government's decision to devalue large denomination ruble notes, announced in January 1991,
caused disenchantment and created uncertainty about future economic prospects. The threatened increase of KGB involvement in
economic affairs is likely to stifle private incentives and entrepreneurship. These developments have dimmed hopes for market
reform and further damaged an economy that had already deteriorated sharply in 1990. Official statistics estimated the decline in
output for 1990 at about 2 percent, but the actual decline in living
standards appeared to be much worse. Most of the reduction in
output was in manufacturing, construction, and transportation.
The problems in transportation reflected the critical nature of
Soviet distribution problems; the collapse of the distribution system
could lead to widespread food shortages in 1991 despite record harvests. The balance of payments on international transactions was
expected to be in deficit by $14 billion in 1990. Arrears on loans




218

from abroad may have exceeded $5 billion, and the fiscal deficit,
which reached 8 percent of GNP in 1990, could rise further in 1991.
The Soviet Union remains an important trading partner of Eastern Europe. Therefore, the prospects of the region depend importantly on the health of the Soviet economy. But the recent retreat
of economic reform in the Soviet Union raises concerns that its
economy will continue to deteriorate and slow progress throughout
Eastern Europe. Reforms initiated in 1987 began to dismantle the
command system but did not replace it with market mechanisms or
incentives. Fundamental change must occur if the Soviet Union is
to reverse the deterioration in living standards.
CHALLENGES IN 1990 AND 1991
Several economic shocks complicated the reform efforts of the
region in late 1990 and continued into 1991. Together they represent a formidable challenge to the region's democratically elected
leaders.

The End of the East Bloc Trading Regime
The shift toward convertible currency trade at market prices
within Eastern Europe and the Soviet Union in January 1991 presents a difficult challenge for the region. From 1949 until the end of
1990, trade between the countries of Eastern Europe and the Soviet
Union was conducted essentially through bilateral barter arrangements governed by the Council for Mutual Economic Assistance
(CMEA). The unit of account was the "transferable ruble," which
could not be exchanged for any other currency. Trade was thus
conducted at nonmarket prices, and trade surpluses were merely
reflected in accumulation of transferable ruble balances. Over
time, the effect was to reinforce central planning and make the
Eastern Europeans and the Soviet Union more dependent on each
other.
Although the nonconvertible currency system of CMEA was
wasteful and inefficient, it is widely agreed that on average it benefited the Eastern European countries with respect to the Soviet
Union over the past decade. Essentially, Eastern Europe received
oil and natural gas from the Soviet Union at below world market
prices. The effect of CMEA's end will vary across countries. Hungary has already had some success reorienting its trade toward the
West, for instance, while Bulgaria, with fully 50 percent of its
trade with the Soviet Union, faces a more difficult challenge.
Moreover, the former East Germany has sharply reduced its
demand for Eastern European products, and concerns about the
economic and political stability of the Soviet Union make the trade
outlook even more uncertain. Eastern European countries are negotiating bilateral agreements governing trade among themselves
and with the Soviet Union in 1991.




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Other Shocks
The increase in the price of oil following Iraq's invasion of
Kuwait in August was a significant shock to the economies of Eastern Europe. The task of estimating the impact of oil price shocks
and designing policy options is difficult for developed market
economies, let alone the economies of Eastern Europe. (Chapter 3
of this report discusses oil price shocks and economic policy.) Because these are economies in transition, the market mechanism—
even in the countries where reform has gone furthest—does not
work as quickly, smoothly, or efficiently as it does in industrial
economies to adjust demand to the higher price of energy. Although the price of oil has fallen since October 1990 and especially
since the start of Operation Desert Storm in January 1991, future
oil prices remain uncertain.
In addition to the oil price effects, Soviet shipments of oil to Eastern Europe fell approximately 20 percent in 1990 because of Soviet
production declines. Several Eastern European countries also were
to receive oil from Iraq as debt payment. The international embargo on Iraq meant that this oil had to be replaced by purchases at
world market prices. Some countries also lost substantial construction contracts and worker remittances from the Mideast.
Another adverse shock in 1990 was a drought that affected Southeastern Europe. Bulgaria, Hungary, and Romania were the most severely affected. The costs of the drought included the loss of crops
and reduced livestock populations, as lack of feed grains forced
many farms to send their animals to slaughter sooner than
planned.

Implications for the Transition
Taken together, these shocks represent a formidable challenge to
Eastern European governments. If sound policies are maintained
and oil prices stabilize in a range not far from that prevailing prior
to the 1990 Iraq invasion of Kuwait, these challenges should be
manageable. However, these are pressing concerns, and they can
create pressure to ease up on adjustment efforts. Delaying reform,
however, would only aggravate the economic costs of these shocks
and risk a return to the piecemeal reforms that were so unsuccessful in the mid-1980s. Countries that can build a consensus to accelerate reforms have much to gain.

SUMMARY
• Poland, Yugoslavia, and East Germany, starting from different
circumstances, are all undergoing rapid transformations to a
market economy. Although the output and unemployment
costs of the transition have been greater than initially expect-




220

ed, the measures taken are the basis for a significant improvement in living standards in the medium term.
• Hungary and Czechoslovakia in 1990 adopted more gradual
programs, but by the end of the year both had plans to accelerate their reform efforts.
• The apparent abrupt halt to reform efforts in the Soviet Union
aggravated an economic situation that had deteriorated badly
during 1990.
• Recent adverse economic developments complicate the efforts
of Eastern European countries to make successful transitions
to market economies. The challenge facing these countries is to
maintain and intensify their reform effort, with the support of
the Western industrial countries, despite the uncertainties
they face in 1991.

REFORM IN THE AMERICAS
Major steps have been taken by governments throughout Latin
America toward open, market-oriented economies and away from
outmoded statist institutions. Prospects are now better than ever
before for the integration of the economies of North and South
America through broadly expanded trade and investment linkages.
RECENT HISTORY OF LATIN AMERICAN REFORMS
Most recent Latin American reform efforts are rooted in the adverse economic environment of the early 1980s and the failure of
policies pursued for decades. By 1990, it was widely accepted that a
new approach to solving the economic problems of the region was
essential. Almost every country in Latin America now recognizes
the need to move away from inward-looking policies, such as efforts
to substitute domestic production for imports, toward trade-opening
policies designed to strengthen competitiveness in world markets.
The role of the public sector and of cumbersome state-owned enterprises is being widely reassessed, and deregulation and privatization have appeared on policy agendas throughout the region. As in
Eastern Europe, correcting price distortions, reforming public expenditure and taxation policies, and improving the performance of
financial markets are now important components of many of these
countries' market-oriented strategies.
Much-needed and welcome political transformations are accompanying the trends in economic policy. Argentina in 1983, Uruguay
in 1984, Brazil and Guatemala in 1985, Panama in 1989, and Chile
and Nicaragua in 1990 are among the countries abandoning authoritarian regimes to join the ranks of Latin American democracies. Chile's new democratic government is effectively demonstrat-




221

ing that an open and democratic political system can reinforce the
benefits of an expanding market economy.
The 1990s should be a decade of great opportunity for the region.
With sustained world growth and expanded trade opportunities
being sought through the Uruguay Round of multilateral trade negotiations and other Western Hemisphere pro-trade initiatives (discussed in Chapter 7), the restructured economies of Latin America
have great potential to prosper. Perhaps most encouraging for the
other countries of the region are the recent performances of
Mexico and Chile, two countries at the forefront of the Latin American reform movement.

MEXICO
Mexico provides one of the best modern examples of a country
engaged in economic restructuring. The difficult movement toward
a more market-oriented, open economy has been under way for a
number of years. The reform process recently has been accelerated
by the current President of Mexico, and the benefits of market-oriented reforms are now being realized. The roots of the reform effort
are different than in Eastern Europe, but Mexico did share some of
the characteristics of the command economies. Public sector expenditures represented nearly 50 percent of GNP in 1982, for example, and the inefficiencies of the 1,150 state-owned enterprises,
accounting for 25 percent of GNP in 1983, stifled economic performance. Mexico also maintained a restrictive import policy with
extensive government control over trade and a highly overvalued
exchange rate.
Mexico's debt crisis—precipitated in 1982 when oil prices fell, interest rates rose, and holdings of foreign exchange dwindled—necessitated the imposition of stringent macroeconomic stabilization
measures. To restore external balance and stem the outflow of private capital, the exchange rate was adjusted to reflect market
forces, and domestic spending was reduced. External equilibrium
was attained initially at the expense of price stability, real wages,
growth, and employment. But the success of the effort facilitated
the restructuring of Mexico's external debt service, which allowed
attention to turn to curbing inflation and reviving economic activity.
Mexico's economic restructuring has focused on reducing the
public sector's role, increasing external competitiveness, improving
public finances, and modernizing the financial system. More than
750 state-owned enterprises have been privatized, merged, or liquidated, and subsidies to the remaining entities have been reduced.
These actions brought greater economic and financial efficiency to
the state-owned sector and helped reduce public sector expenditures below 40 percent of gross domestic product in 1989. Fiscal




222

and financial system reforms have also been important. Tax policy
reforms closed corporate tax loopholes and improved the tax collection system, banking activities were progressively exposed to
market forces, and the goal of returning banks to private ownership was recently announced.
A major initiative to reduce trade barriers has promoted the efficiency and modernization of domestic industries and successfully
contained inflationary pressures. The opening-up process was enhanced when Mexico reversed a longstanding antitrade policy by
joining the General Agreement on Tariffs and Trade (GATT) in
1986. Extensive import-licensing requirements were largely replaced with tariffs, which were then lowered significantly.
After many difficult years recent economic performance has been
fairly good. GNP grew about 3 percent in 1989, and is thought to
have grown faster in 1990. Inflation last year increased somewhat
from its 1989 level, which had been the lowest rate in 10 years. The
increase in economic activity is fueled by new dynamism of the private sector, which has been both reflected in and fueled by strong
growth in private investment and private capital inflows from
abroad. After declining by a third between 1981 and 1983, real private fixed investment grew at an average annual rate of 5.6 percent between 1983 and 1989.
Mexico must still meet the challenge of sustaining economic
growth—a necessity if widespread poverty is ultimately to be alleviated. The Mexican Government's commitment to market-oriented
reforms is strong, although big hurdles are still ahead. The process
of privatization, for example, has only recently been extended to
the largest, most complex state-owned enterprises, such as the telephone system. The strong interest of the United States in Mexico's
success is illustrated in the President's commitment to negotiating
a free-trade agreement with Mexico (discussed in Chapter 7). The
Administration strongly backed Mexico's commercial bank debt-reduction agreement completed in March 1990. This agreement contributed to a significant reduction in debt and debt service, and increased confidence in the economic policies of the Mexican Government.
CHILE
Chile is unusual in Latin America in that its current reform efforts build on the dramatic economic restructuring in favor of private enterprise and markets that took place in the mid-1970s. After
the overthrow of the socialist government in 1973, the country
switched from extensive state intervention in most economic activities to a system based on private initiative. Price controls were removed, trade barriers were reduced, financial sector liberalization
was undertaken, and many state enterprises and financial institu-




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tions were privatized. However, Chile's transition to a market economy and the presence of an authoritarian government represented
a contradiction that could not endure. With the return to power of a
democratic government in March 1990, Chile's strong free enterprise
system is matched by a freely elected democratic government for the
first time in nearly 20 years.
Like other countries of Latin America, Chile suffered an economic crisis in the early 1980s. The country was battered by many of
the same external factors that hurt its neighbors and developing
countries all over the world, including a deterioration in its terms
of trade (as the price of oil rose and the price of copper, Chile's
chief export, fell), a rise in international interest rates, and a recession in the international economy. A heavy international borrower
both before and after these factors came into play, Chile's debtservicing difficulties became unmanageable as interest rates rose
and foreign exchange earnings fell. Faulty macroeconomic policies
included inflationary levels of debt-financed domestic spending and
an overvalued exchange rate that encouraged imports and discouraged exports. These policies heightened the debt crisis and deepened the economic recession. Poor supervision of the banking
system also contributed to the bankruptcy of many enterprises and
a financial crisis.
As elsewhere, emergency stabilization measures were the first
stage of economic reform. To redress the severe external and internal imbalances, the overvaluation of the exchange rate was ended
with a sharp devaluation, and automatic wage indexation was suspended. Emergency measures included large public employment
programs, debt rescheduling, and guarantees that private debt
would be repaid. For a few years the government focused on cushioning the effects of the recession, discouraging capital flight, and
improving the trade balance.
In 1985 the government moved to supplement emergency measures with a more comprehensive reform program aimed at improving several fundamental structural problems: the lack of export diversity, the low level of savings and investment, and a precarious
financial system. The plan involved reducing import tariffs and
strengthening export incentives; improving public finances through
the sale of state enterprises, tax policy reform, and conservative
public spending policies; and creating a more favorable climate for
private savings and investment through tax, pension, and housing
policy reforms. Bank supervision was strengthened, and banking
reform began in the mid-1980s. As a continuation of banking and
financial policy reform, the central bank was given greater autonomy in 1989.
Between 1984 and 1989 the Chilean economy emerged from the
recession and grew at an average rate of 6.3 percent a year. Unem-




224

ployment declined, real wages increased, inflation dropped, and exports other than copper, such as fruit, forestry, and fishery products, performed very well. Private savings improved significantly,
too, rising from about 2.2 percent of GNP in 1984 to 9.6 percent in
1989. Although stronger world copper prices since 1987 helped buoy
economic performance, much credit goes to the successful implementation of the reform program.
The new democratically elected government remains strongly
committed to an open market economy with a low level of state involvement. It is also directing new attention to social programs to
alleviate poverty. In carrying out its constitutional mandate, the
government faces the challenge of meeting its social priorities
while maintaining the strict fiscal policies that have helped reduce
external debt. This Administration's strong commitment to improving trade and investment relations between the United States and
Chile can help sustain Chile's efforts and contribute to their success.

SUMMARY
• Governments throughout Latin America are rejecting earlier
models of economic development, which stressed inward-looking policies and extensive state ownership, for a market-based
approach that emphasizes openness and private enterprise.
• Some of this reorientation stems from the debt crisis of the
early 1980s, which prompted stringent stabilization measures
and revealed the underlying weaknesses of the structures of
these economies.
• Many Latin American countries have embarked on sweeping
reform programs. Mexico and Chile are strong examples, and
efforts are also being made in Argentina, Peru, Venezuela, and
elsewhere.

THE ROLE OF THE UNITED STATES
In both Eastern Europe and Latin America, the Administration
has provided strong support for the transitions to democratic societies and free-market economies. First and foremost, this effort involves continued leadership through promoting our democratic
ideals, building support among other industrial countries for the
reforms, and making clear that markets offer the best hope for sustained growth in living standards.
This leadership is backed up by humanitarian, technical, and financial assistance and endorsement of measures to open markets
and expand trade. The Administration has assisted Bulgaria, Hungary, Poland, the Soviet Union, and other countries in coping with
severe shortages of necessities, such as food and medicine.




225

The U.S. Government's economic technical assistance is designed
to support strong and comprehensive reform programs including
social safety nets. The Administration also has encouraged democratic institution building in Eastern Europe. That assistance has
supported an independent press and electronic media, the democratic political process, and the rule of law (for example, helping to
draft legislation and support for an independent judiciary). It has
also supported social and cultural pluralism through educational
programs and cultural exchanges.
The public discussion of how to help reforming countries has
been focused excessively on the need for financial assistance, which
is only one part of the answer. Absent sound reform policies, this
money would most likely be wasted. Assistance should be designed
to mesh with and encourage the reform effort so that it is used to
accelerate rather than delay necessary reforms. While assistance
must be responsive to short-term needs, it is important to develop
long-term assistance priorities that reinforce the fundamental reforms needed to establish long-term, sustainable growth.

U.S. SUPPORT FOR EASTERN EUROPE
In Eastern Europe the Administration is committed to encouraging the rapid transition of centralized command economies to free
market systems. A vital component of this commitment is economic
technical assistance.
The U.S. technical assistance effort offers a range of options that
countries in transition can choose from, depending on their needs.
This range includes providing management training and market
economics education, giving technical assistance on energy issues,
and helping to set up banking systems. The U.S. Government, for
example, has helped to establish a regional environmental center
in Budapest and has provided assistance to reduce pollution in
Krakow, one of Eastern Europe's most polluted cities. Much of the
assistance is directed to the private sector rather than the government. Legislation in 1989 provided assistance to Hungary and
Poland. In 1990, Congress approved legislation expanding the U.S.
assistance effort to $439 million in fiscal 1991 and extending funds
to other economies in transition in Eastern Europe.

Polish Stabilization Fund
A key element of U.S. Government support for Poland was a U.S.
contribution to a $1 billion stabilization fund in January 1990. The
U.S. Government provided a $200 million grant to the fund, with
other governments contributing primarily in the form of loans or
lines of credit.
The fund was designed to provide credibility to the Polish reform
plan by supporting the Polish Government in its effort to stabilize
the exchange rate. Reducing inflation was a cornerstone of the




226

Polish program, which included measures to open the economy to
foreign competition, fix the exchange rate to the U.S. dollar, and
make the Polish currency convertible. Given the uncertainties associated with this initial attempt to transform a centrally planned
economy into a market system and the importance of adhering to a
fixed exchange rate to break inflationary expectations, the fund appears to have bolstered confidence that the reform measures could
and would be sustained. The fund was renewed for 1991.
Some people have questioned whether the stabilization fund represents an efficient use of official assistance, noting that Poland
has not drawn upon the resources of the fund. The fact that the
fund did not need to be used, however, suggests that it provided
confidence and support for the Polish program.

Assistance to New Private Enterprises
Another element of the U.S. Government assistance effort is creation of Enterprise Funds. Funds were established in 1990 for Hungary and Poland, and in November 1990 the President announced
that a fund would also be created for Czechoslovakia. These funds
promote development of the private sector by providing grants and
loans to entrepreneurs, making equity investments, and supporting
technical assistance. They are thus an important source of venture
capital to new firms.

Trade Measures for Eastern Europe
To promote market reforms and ensure that these countries face
open markets, the Administration has concluded business and investment agreements with Poland and Czechoslovakia and granted
most-favored-nation (MFN) status to Czechoslovakia in 1990. In
January 1991, the President requested MFN status for Bulgaria.
(MFN status had already been given to Hungary, Poland, and
Yugoslavia.) MFN status ensures that the United States will provide tariff treatment as liberal as that provided to other trade partners, except those with which it has a free-trade agreement. The
Administration is also negotiating bilateral investment treaties and
is working to relax existing trade restrictions with a number of
countries in the region. Expanded trade opportunities are critical
to creating a supportive external environment for reforms. Therefore, the United States and other countries should examine ways to
expand trade opportunities for Eastern Europe.

U.S. SUPPORT FOR LATIN AMERICA
The U.S. Government has long been active in providing technical
assistance and supporting market-oriented reforms in Latin America. In June 1990 the President unveiled his Enterprise for the
Americas Initiative (EAI) to expand free trade throughout the
hemisphere and lay the foundation for long-term growth in Latin




227

America and the Caribbean. The initiative consists of three parts:
trade, investment, and debt. Chapter 7 discusses the trade elements
of the initiative. On the investment side, the President proposed
that the Inter-American Development Bank provide loans in support of reform of the investment regime. The President has requested that the Congress authorize a 5-year grant of $500 million
to provide further support for investment reform, particularly privatization. These efforts are aimed at developing the private sector
and improving the environment for private foreign investment. In
that sense, the initiative parallels the goals of the Enterprise
Funds for Eastern Europe.
Latin America would also benefit through the EAI from reduction of the substantial debt owed to the U.S. Government. For some
loans, the stock of debt would be significantly reduced, and interest
payments on the amounts that remained could be paid in local currency and used by the country in support of environmental
projects. Other loans could be sold to investors making equity investments in the economy. The reduction in debt and debt-service
payments would be contingent on these countries pursuing economic reforms including an open investment regime. The debt reduction supported by the EAI complements continuing U.S. initiatives
to reduce the burden of the region's commercial bank debt.
The EAI has been extremely well received throughout the
region, where leaders have acclaimed the initiative as the most important opportunity in hemispheric relations in years. Persistent
efforts both in the United States and in each Latin American and
Caribbean country to follow through on the vision of the initiative
will be required to bring about real results. The EAI is a significant
addition to the Administration's ongoing technical and financial
assistance programs in the region. Other Administration initiatives,
such as the Andean Trade Preference Initiative and the proposal
for a U.S.-Mexico free-trade agreement, supplement the EAI and
are described in Chapter 7.

WORKING WITH MULTILATERAL INSTITUTIONS AND
OTHER GOVERNMENTS
In his speech to the annual meetings of the World Bank and IMF
in September 1990, the President stressed the central role the multilateral institutions can play in helping economic reform in the
1990s. Both institutions have long been involved in support of economic reform in Latin America and Africa, and both are expanding
their efforts in Eastern Europe. In 1990 the IMF supported the
reform programs of Hungary, Poland, and Yugoslavia. Bulgaria
and Czechoslovakia joined the World Bank and the IMF in September 1990. (Czechoslovakia had been an original member of these institutions before withdrawing in 1954.) In January 1991 Czechoslo-




228

vakia embarked on an IMF program, and new programs for Hungary and Poland are expected to follow soon (Box 6-3).
In addition, at the initiative of the United States, the IMF has
modified its policies so that it can help Eastern European and
other member countries cope with higher import costs and other
adverse trade effects stemming from the Persian Gulf crisis. The
Administration also participated in the quick establishment of the
European Bank for Reconstruction and Development and encouraged the World Bank to expand its policy-oriented lending program
in support of critical structural reforms. Through policy advice and
lending, the international financial institutions will take a leading
role and advance the interest of the United States and other countries as well.
At the Houston Economic Summit in July 1990, the President, on
behalf of the heads of state of the seven leading industrial nations,
requested that the IMF lead a number of international institutions
in a study of the Soviet economy. That study, presented to the
President in December 1990, provides a comprehensive analysis of
the Soviet economy. The report recommends that dramatic marketoriented reform proceed quickly and concludes that, when reform
begins, technical assistance, not large-scale financial aid, is essential to successful reform.
The effectiveness of the U.S. Government assistance effort is enhanced by effective cooperation and coordination with other governments. The stabilization fund for Poland is just one example.
Another is the effort, now under way, to work with Poland's other
official creditors to reduce Poland's stock of official debt. U.S. efforts to create a stable, growth-oriented global economy after
World War II paved the way for others to join the ranks of global
economic powers. These countries now can share the responsibilities of supporting this effort for the economies in transition. The
President was instrumental in establishing a group of 24 Western
governments (called the G-24) to coordinate assistance for Eastern
Europe on a case-by-case basis in support of IMF-led adjustment efforts. The G-24 has already coordinated about $20 billion in grants,
credits, guarantees, and technical assistance for Eastern Europe.

THE ROLE OF THE U.S. PRIVATE SECTOR
The private sector can contribute to reform in emerging market
economies through several different avenues. The President announced on May 12, 1990, the creation of the Citizens Democracy
Corps to channel voluntary assistance to Central and Eastern
Europe. The President has appointed the steering commission, and
it is beginning its work. Other organizations involve retired executives and financial sector experts. For example, the International
Executive Service Corp organized a number of technical assistance




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Box 6-3.— The Bole of the IMF in Economic Eeform
The International Monetary Fund, an organization of 154
member countries, provides technical assistance, policy advice,
and financial support to countries undertaking extensive structural and maeroeconoinic reforms, IMF financial support is
planned in conjunction with the government officials of the
country itself and requires strict adherence to an agreed schedule of policy adjustments and quantitative performance targets* Disbursement of support funds is conditional on meeting
these targets.
Types of Support. Standby arrangements are loans that
focus on fiscal, monetary, and exchange-rate policies aimed at
overcoming short-term balance of payments difficulties. Repayment is to be made in 3% to 5 years. Extended arrangements
are loans that support medium-term (3 to 4 years) programs of
macroeconomic and structural reforms* Eepayment is to be
made in 4 % to 10 years. Structural adjustment facility and enhanced structural adjustment facility arrangements provide resources to support medium-term (3 years) structural reform
programs in low-income countries,
The Compensatory and Contingency Financing Facility*
This facility provides IMF loans for the following purposes.
The compensatory element provides resources to members to
cover temporary export shortfalls or excessive import costs of
certain foodstuffs due to price fluctuations beyond their control. The contingency element provides protection to members
with IMF programs against potential future adverse external
shocks beyond their control that could otherwise jeopardize
their economic performance under their IMF programs. In
1990, at the initiative of the United States, the facility was
modified to allow financing for higher oil import costs and certain other losses due to the Gulf crisis.
What is conditionality? To ensure that nations with IMF financial support make consistent and substantial progress in attaining program goals, the IMF and the member country agree
in advance to quarterly or semiannual target levels for a
number of policy variables, such as domestic credit creation,
international reserves, and government budget deficits. A
country's drawings on IMF resources are conditional on attaining these intermediate targets. If these targets are not met, the
IMF usually requires corrective policy actions before additional
drawings may be made,




230

missions in 1990. Volunteers, including nonprofit organizations and
universities, have already made a substantial contribution.
Ultimately, governments cannot and should not be the main
source of financing to the private sector in these countries. Private
firms here and in other countries also play a critical role in supporting the transition. Eastern European countries are blessed with
able, well-trained work forces but lack entrepreneurs and capital.
Meanwhile, direct investment and other forms of long-term capital
inflows will be the key to a successful transformation in Latin
America. Over time, the number of attractive business and investment opportunities will grow as these countries move toward free
markets.

SUMMARY
• Financial assistance alone will not resolve the difficult challenges facing the countries of Eastern Europe, the Soviet
Union, and the developing countries of Latin America.
• The U.S. effort has focused on technical assistance aimed at
making the transition a sustained success over the long term.

CONCLUSION
The worldwide movement toward market reliance and political
freedom continues to gather momentum. Nations in Eastern
Europe are dismantling their command systems and endeavoring
to replace them with thriving private sectors. This task will be long
and difficult, and both governments and their citizens must understand that decades of neglect and state control cannot be overcome
without a painful transition period. Given sufficient time to work,
comprehensive reform will improve living standards dramatically
as producers begin to make efficiently the goods that consumers
want to buy.
The Latin American countries do not operate under as high a
degree of state control as did the communist countries of Eastern
Europe, but they also need to undo the extensive damage caused by
failed economic policies. In both regions, the normal operation of
markets was obstructed through widespread government interference and reliance on inefficient public enterprises.
Successful economic reform requires the rapid and comprehensive implementation of several critical policy principles. Establishing sound monetary and fiscal policies, decontrolling domestic
prices, and opening the economy to international market forces
will set the foundation for economic stability. These principles
must be accompanied by a set of structural reform efforts that promote efficiency and provide production incentives. The structural
reforms require establishing private property rights and privatiza-




231

tion of public enterprises, promoting domestic competition, and reducing and reforming the role of government.
The convincing lesson from earlier piecemeal reform efforts in
both Eastern Europe and Latin America is that only comprehensive reform programs can hope to create dynamic, growing economies. Implementing only part of the needed reforms is likely to
yield little benefit. Without comprehensive reforms, output may decline substantially because individual incentives to produce are
absent, and living standards cannot be increased. The reforms
should also be implemented as quickly as politically and socially
possible, since delays only prolong the pain and disruption of the
transition period.
Reform efforts under way throughout the world present an enormous opportunity to improve living standards of hundreds of millions of people. Financial and technical assistance from the United
States and other developed economies, combined with perseverance
and patience in the countries in transition, can ensure that these
nations make the most of their great new opportunities.




232

CHAPTER 7

Trade Liberalization
and Economic Growth
THE GLOBAL TRADING SYSTEM has been a driving force of
economic growth and prosperity, with world trade increasing more
than one and a half times as fast as world income since the early
1960s. The fraction of U.S. production sold abroad has more than
doubled since then, and exports now account for about one-eighth
of gross national product (GNP). As the world's largest economy,
the United States has greatly benefited from the rapid growth of
trade. By promoting innovation, flexibility, and competition, the expansion of trade and the globalization of markets and firms have
stimulated economic growth and improved living standards.
Many natural economic forces—such as the declines in transportation and communication costs—have contributed to the growth of
trade, but trade liberalization through substantial reductions of
tariff barriers has also been a significant factor. Seven rounds of
multilateral trade negotiations, conducted under the auspices of
the General Agreement on Tariffs and Trade (GATT), have helped
reduce average tariffs in industrial countries on manufactured
goods from over 40 percent in 1947 to about 5 percent today. GATT
has also promoted trade by establishing internationally accepted
rules of fair play that have prevented and resolved numerous commercial conflicts between nations.
A number of recent bilateral and regional economic policy initiatives have also helped to lower barriers to trade. In the Western
Hemisphere, for instance, implementation of the U.S.-Canada FreeTrade Agreement has reduced many trade and investment barriers. Further market opening would come from a U.S.-Mexico freetrade agreement as well as from the hemisphere-wide system of
free trade envisioned in the Enterprise for the Americas Initiative.
The current round of GATT negotiations, known as the Uruguay
Round, is aimed at further lowering trade barriers and at preventing increased protectionism and government management of trade.
An important goal of the United States and other countries in the
Uruguay Round is to modernize and improve the rules embodied in
the articles of the General Agreement on Tariffs and Trade. This
includes extending rules to areas either previously uncovered or for
which coverage is neither systematic nor explicit, such as services,




233

intellectual property rights, and foreign investment; deepening and
broadening coverage of agriculture and textiles; applying rules
more thoroughly to developing countries; strengthening the dispute
settlement procedures; and updating unfair trade rules to reflect
modern business practices. Another goal is to cut tariffs worldwide
and eliminate them altogether in several large manufacturing sectors.
Unfortunately, the negotiations were suspended in December
1990 due to an impasse in the part of the talks dealing with agriculture. Successful completion of the Uruguay Round is important.
In recent years, the world has experienced a rise in nontariff barriers, managed trade arrangements, and other protectionist measures that have hindered the expansion of trade and offset marketopening initiatives. The opening of markets around the world that
would come from the success of the current GATT negotiations
could greatly increase U.S. and world GNP. By contrast, a breakdown of the multilateral trading system could increase protectionist
pressures to erect trade and investment barriers. Just as market
opening stimulated economic growth, increased protection can
reduce long-run growth and prosperity. In addition, an escalating
cycle of import protection that led to a severe and sudden rise in
trade barriers could contribute to a short-run economic downturn;
the ensuing declines in income and employment might, in turn, increase pressures for protection. The last great cycle of antitrade
policies contributed significantly to the Great Depression of the
1930s.
Today's trading environment is vastly more complicated than it
was in previous eras. New, complex products and services now permeate the world marketplace; trade barriers are more intricate;
and companies are increasingly globalized. Through foreign direct
investment and other international linkages, such as joint ventures
and production-sharing arrangements, multinational companies
have dispersed their production, research, and marketing facilities
throughout the world. The result has been greater integration of
the world's markets and firms. Today, companies compete worldwide not only through exports, but also through the location of facilities. Globalized companies are also playing an increasing role in
world trade; for example, two-thirds of U.S. exports are traded by
multinational corporations, with about two-fifths of these exports
traded "internally" between the parents of multinationals and
their affiliates located abroad. International trade and foreign
direct investment are now inextricably entwined.




234

THE GAINS FROM FREE TRADE AND LOSSES
FROM PROTECTIONISM
Trade—whether between individuals within a town, between
towns within a country, or between countries—is a natural economic process. The tendency for individuals to engage in trade
stems from the fundamental fact that voluntary trade benefits all
participants. Even within a town, the exchange of goods and services permits greater efficiency and prosperity for all residents because it allows individuals to specialize in what they do relatively
well. Clearly, it would be an inefficient use of a town's resources if
all its citizens grew all of their own food, made all of their own
clothes, and built their own shelters. With a division of labor and
trade among individuals, the town will produce more goods using
its available resources.
Countries, like individuals, are not all equally proficient at producing all goods. Just as specialization and trade among individuals in a town make everyone better off, international trade increases the prosperity of all nations by allowing countries to concentrate on what they do well and to trade for goods that they are
relatively less efficient at producing. Technology, for example, enables U.S. companies to develop and manufacture many advanced
goods more cheaply than companies from developing countries—
even though American wages are many times higher than developing country wages. For less technologically advanced goods, the
United States may also enjoy higher labor productivity. This productivity advantage, however, may not be enough to overcome the
wage difference. As a result, firms from developing countries may
be able to produce such goods at a lower cost.
If market forces are allowed to act freely, countries will make
the products they are relatively cost efficient at producing and will
trade for other products. Since this international division of labor
is cost effective, all goods will be cheaper; consequently, all nations
will benefit. Trade barriers restrict the market forces that lead to
this efficient international division of labor. Removing trade barriers increases the well-being of all nations by allowing a more efficient international allocation of resources.

EFFICIENCY, PRODUCTIVITY, AND GROWTH
In 1817 when David Ricardo first argued that trade benefits all
nations, an efficient international allocation of resources was relatively simple. Countries made certain products and traded for
others. Today, trade is much more complex. Firms increasingly
engage in international joint ventures, technology-sharing arrangements, and long-term supply contracts, as well as direct investments in foreign companies and facilities. Through these interna-




235

tional linkages, firms achieve greater productivity and risk-sharing
in research and development, marketing, and manufacturing.
Thus, by improving the efficiency and flexibility of the allocation of
resources, the globalization of firms and increased competition
among them boost the prosperity of all nations.
Open markets and multinational firms increase efficiency by allowing companies to take advantage of national differences in productivity and resource costs. But they also promote efficiency even
more directly. The development, production, and marketing of
some products and services require large up-front investments. Unrestricted international trade and investment permit firms to
attain the most efficient scale of operation, thereby increasing productivity and lowering average costs. The realization of these
economies of scale is generally good for business and benefits consumers by increasing their choice of products and raising the purchasing power of their incomes.
These beneficial effects, usually called the efficiency gains from
trade, are permanent, although this fact is not universally understood. For instance, it has been claimed that the economic cost of a
major rise in trade barriers worldwide would be no greater than
that of a mild recession. This claim, however, misses the point that
recessions typically last for less than a year, while protectionist
trade barriers impose costs that would lower incomes around the
world for decades. Thus, even if the costs of a mild recession and
an increase in protection were comparable on an annual basis, a
major rise in trade barriers would have a much greater total cost.

Globalization and the Flexibility of the Economy
In today's rapidly changing world marketplace, flexibility is important: An efficient allocation of resources this year may not be
efficient next year. The globalization of markets and companies increases the ability of the U.S. economy to respond to changes in technology and the state of the world economy. Access to foreign markets, technologies, and capital allows resources to move more
quickly from one sector to another when patterns of international
competitiveness shift. It also permits U.S. companies to respond
more rapidly and effectively to changes in technology, products,
and markets. The globalization of production networks also implies
that reducing trade barriers in a particular foreign market may
well lead to outcomes other than increased exports from the
United States. These alternative outcomes include increased exports by companies that are affiliated with U.S. multinationals but
located abroad; increased exports by foreign multinationals located
overseas; and the establishment by U.S. companies of new facilities
in the foreign market through direct investment.




236

Pro-competitive Effects of Trade
Competition helps push companies to produce efficiently goods
that consumers want and to charge competitive prices. If a domestic manufacturer tried to charge too much for its products, for example, consumers would buy from the competition. Trade barriers,
which tend to restrict import competition, reduce these beneficial
effects. Import competition promotes cost efficiency, quality awareness, and competitive pricing by domestic firms. As discussed below,
added competition can also encourage the rate of innovation.
Investment Effects of Removing Trade Barriers
Freeing up international trade and investment promotes a more
efficient use of resources. These efficiency gains, however, reflect
only part of the benefits from an open trading system. To the
extent that capital becomes more efficient and profitable, investing
in new capital becomes more attractive. Market-opening initiatives
can improve the investment climate, thereby promoting investment
and spurring growth. An example can be seen quite clearly in the
investment-led growth that Spain experienced after it joined the
European Community (EC) in 1986. Membership in the EC committed Spain to removing all barriers to the movement of goods,
people, and capital between Spain and the other EC nations.
During the following 2 years, Spanish investment grew at an
annual rate of 14 percent—almost three times the rate of growth of
Spanish income. In contrast, investment in Spain grew more slowly
than income during the first half of the 1980s. While the lowering
of trade barriers was not the only factor stimulating Spanish investment, the induced capital formation magnified the efficiency
gains from liberalization by providing additional productive resources.
Long-Term Growth Effects of Trade
Long-term growth has many sources. Growth of the labor force,
for instance, provides more workers every year and thus the possibility of more output every year. Another source of long-term
growth is improved technology and the rise in output per worker—
that is, in labor productivity—that accompanies it. The effectiveness with which capital and labor are combined to create output is
constrained by technical and managerial know-how. Advances in
such know-how are primarily produced by profit-motivated firms.
To develop new products or improve manufacturing efficiency for
existing products, a firm must invest in knowledge creation. The
return on such investments is the profit that flows from the temporary advantage that the innovation gives the firm over its competitors. From an economy-wide perspective, these profit-motivated innovations allow more output to be produced from the economy's re-




237

sources. The resulting productivity growth boosts the growth of
living standards.
International trade can promote long-term growth by encouraging
technological innovation. By permitting innovators to sell to a
larger market, trade may increase the profitability of innovation.
That, in turn, spurs innovation and growth of productivity and incomes. For instance, access to foreign markets may allow firms to
spread research and development costs over more sales, thereby increasing the profitability of innovation. However, this pro-innovation effect of a larger market may be partly offset by the fact that
there may be more competing innovators and innovations in a
larger market. Depending on the circumstances, trade may stimulate innovation and productivity growth by confronting firms with
a stark choice between innovating and going out of business.
The globalization of firms and markets also spurs technological
progress through the international exchange of technical knowledge. Domestic companies, for example, often use imported components in making final goods. Foreign innovations that improve the
quality or lower the price of such components improve the quality
and lower the price of the final goods. A closely related pro-growth
effect is the way in which international trade and investment may
help alleviate duplication of research effort, thereby permitting
more efficient use of the world's research resources.
The notion that international trade increases economic growth is
centuries old and widely accepted today. Quantitative estimates of
the impact of market opening on growth are more difficult to
obtain than its efficiency effects, however, because economists have
begun only recently to develop analytic frameworks that can capture the links between trade, innovation, and growth. Typically, estimates of the gains from market opening incorporate only the efficiency effects. However, in assessing the quantitative impact of
market-opening initiatives such as the Uruguay Round, it is important to include the innovation and growth effects as well, since
they are potentially quite large (Box 7-1 and Chart 7-1).

IMPORT PROTECTION AND MANAGED TRADE
Just as opening markets is beneficial, policies that protect markets from international competition reduce efficiency and impede
growth. Import protection policies take many forms: Tariffs reduce
import competition by taxing imports, import quotas restrict the
quantity of imports directly, and voluntary restraint agreements
(VRAs) reduce imports by inducing foreign producers to decrease
their exports. Policies that manage international market forces or
alter market outcomes, such as government management of
market shares, prices, or the composition of imports or exports, are
examples of managed trade.




238

Box 7-1*—The Income Effects of a Successful Uruguay
Successful eoiripi^tioii of the Uruguay Round would raise
U.S. income sig^Ac^tly; Tlie substantial reduction of tariff
and nontariff trad^lbarriers resulting from a successful conclusion of the round would.'"'boost U.3. income by enhancing the
efficiency of the U*S. economy. Additionally, a more open
world trading and investment system would promote growth
by encouraging innovation and investment. Chart 7-1 shows
projected growth paths with and without successful completion
of the Uruguay BotmcL Taking growth and efficiency effects together, it is estimate! that the level of U.S. GNP would be 3
percent higher in the year 2000 than it would be without the
reduction of trade barriers that is likely to result from successful completion of the Uruguay Round. Of course, U.S. income
would be higher even during ihe years preceding 2000. Adding
up the annual gains over the next 10 years yields an impressive $1.1 trillion,

Chart 7-1 Estimated increase in U.S. GNP from a Successful Uruguay Round
Reduced trade barriers resulting from a successful Uruguay Round would boost U.S. income
substantially.
Trillions of 1989 dollars
7.5

U.S. GNP with
Reduced Trade Barriers

7.0

j = $1.1 Trillion, Estimated
Gain in income over 10 Years

6.5
U.S. GNP at Trend Growth

6.0

5.5

i

5.0
1990

1991

1992

1993

1994

1995

1996

1997

Sources: Office of the U.S. Trade Representative and Council of Economic Advisers.




239

1998

1999

2000

Protectionist policies in general, and managed trade in particular, dampen U.S. productivity and growth for many reasons. When
governments interfere with market forces, the allocation of resources reflects political interests and power, which do not usually
produce an allocation of resources that maximizes economic efficiency or average living standards. Moreover, such allocations typically involve a delicate political balancing, which makes it difficult
to react flexibly to changes in the international economy or shifts
in competitiveness. Also, governments rarely have the necessary
information, background, or general understanding of commercial
realities to make good business decisions. Finally, detailed government intervention may diminish competition, which is essential to
the proper functioning of the free-market system. When governments determine market shares, sales, or prices, they lessen the
pressure on firms to produce efficiently and price competitively.
Indeed, managed trade often results in market cartels.
The Costs of Protection
The cost of import restrictions drives home the importance of
open markets. Import restrictions of all kinds tend to reduce
import competition, thereby raising the prices of both imports and
those domestic products that compete with them. Higher prices
benefit domestic producers of the goods but harm consumers who
buy them. In this sense, import restrictions are like a sales tax on
imports that is used to finance a production subsidy to the protected
domestic industry.
In the clothing and textile sector, for example, trade is managed
in great detail by a worldwide web of thousands of bilateral quotas
involving more than 50 countries. The quotas and their associated
growth rates are renegotiated under an international agreement
known as the Multi-Fiber Arrangement. Every few years since
1974, the Multi-Fiber Arrangement itself has been renegotiated.
Additional quotas are intermittently placed on new fabrics and
new suppliers when their exports rise enough to disrupt domestic
production. In the United States, imports of textiles and clothing
are restricted by hundreds of these bilateral quotas, as well as by
relatively high tariffs. U.S. producers benefit from the higher
prices on each item they sell, while U.S. buyers lose because they
must pay higher prices on each item they buy, whether imported
or domestic. It has been estimated that protection in this sector
cost American consumers about $11 billion in 1987, while U.S. producers gained slightly more than $4 billion.
This pattern of gains and losses is similar for import restrictions
on other products. Between 1981 and 1985, for example, the
number of imported Japanese automobiles was restricted by a voluntary restraint agreement. One study estimates that this VRA
cost U.S. consumers $5.8 billion in 1984, while U.S. automakers




240

gained only $2.6 billion. The imports of machine tools are currently
restricted by VRAs. The consumer cost of VRAs on machine tools
was $48 million in 1988, while the gain to U.S. machine tool manufacturers was only $11 million. Since consumers of machine tools
are typically U.S. manufacturers themselves, the VRAs have an additional effect. By raising the cost of important inputs, the VRAs
may reduce the competitiveness of other U.S. manufacturing firms.
Sugar provides another complex example of import protection.
The U.S. Department of Agriculture (USDA) must by law enforce a
price floor of 18 cents per pound of sugar. Moreover, the USDA
must maintain that price with no cost to the government. The
problem is that the world price of sugar is far below 18 cents, and
it fluctuates. If sugar imports were not managed, almost all U.S.
consumers would buy less costly imported sugar, driving the U.S.
market price below 18 cents. Since the USDA stands ready to buy
unlimited quantities from U.S. producers at 18 cents, it would be
forced to purchase the entire U.S. sugar output every year. That, of
course, would violate current law. The solution implemented by
USDA is to manage a set of trade restrictions that reduces sugar
imports enough to ensure that U.S. demand meets supply above 18
cents a pound. Moreover, since market conditions change in the
United States and the rest of the world, government officials must
adjust these import restrictions to keep the market price near 18
cents a pound. It has been estimated that import restrictions on
sugar cost American consumers $1.9 billion in 1987, while producers benefited by only $1 billion.

The Myth that Protection Saves Jobs
Although it is commonly asserted that protection saves jobs, this
assertion is misleading. Protection does not save jobs in the long
run for the economy as a whole, it merely keeps jobs in the protected
sectors. Removing protection can, however, lead to short-run unemployment as displaced workers look for new jobs. The studies of voluntary restraint agreements mentioned above also calculated the
consumer cost of the relevant protectionist policies relative to the
number of jobs "saved." What these calculations actually show is
the consumer cost of keeping one person employed in the protected
sector instead of some other sector. To take one example, the consumer cost per job "saved" by the machine tool VRAs was estimated to be $120,000 a year.

Political Economy of Protectionist Policies
The discussion of protection leads to the issue of why some sectors are protected, while others, indeed most, are allowed to adjust
to import competition. More generally, it raises the question: //
consumers always lose more than producers gain, why do the United
States and other countries have import restrictions?




241

The answer is that the cost to consumers is spread over many
millions of people, while the gain to producers is divided among
many fewer people. As a result, producers often find it worthwhile
to pay the cost of organizing and influencing their governments.
Since the per consumer cost of import restrictions is typically low,
consumers generally do not find it worthwhile to pay the cost of
participating in such efforts.
Fairness in Trade
To many, the economic effects of trade barriers are only part of
the story. To them it is simply unfair that some governments discriminate against foreign products through the use of tariffs or
other barriers to trade. Overly bureaucratic procedures that
impede imports, unilateral decisions that imports do not mesh with
certain tastes or standards, and seemingly arbitrary health standards provide examples of governmental discrimination against foreign products that go against many peoples' notion of fair play.
The concept of fairness in trade is embodied in the principles of
GATT. A basic GATT precept, for example, is the most-favorednation (MFN) rule. Under MFN, countries that are members of
GATT must treat all other members equally in their application of
trade measures. Most countries, including the United States, prefer
to reduce trade barriers in concert with other nations, in part because resistance to lowering protection is likely to be mitigated if it
can be done on a more equal, or fairer, basis. The exchange-of-concessions approach to trade negotiations endorsed by GATT (discussed below) embodies this notion of fairness.
Another concept related to fairness is that of "national treatment," that is, the idea that the products of domestic and foreign
firms should receive equal treatment with respect to domestic
taxes and regulations. In the process of assessing and mediating
many international disputes over alleged unfair trade barriers,
GATT typically applies the national treatment rule by determining
if the products of foreign firms are being treated differently from
those of local firms.
SUMMARY
• Markets and companies are increasingly global in scope. The
resulting increase in trade and investment benefits the United
States and the world as a whole by allowing resources to be
more productively and flexibly utilized.
• Opening markets to international trade pushes companies to
produce efficiently goods that consumers want and to charge
competitive prices. Open markets also improve efficiency by allowing companies to operate at the most efficient scale of operation.




242

• Reducing barriers to international trade and investment can
improve the investment climate and increase the rate of innovation, thereby increasing the rate of growth of living standards.
* Managed trade and protectionist policies are harmful because
they reduce the efficiency and flexibility of the economy and
hinder economic growth.

GLOBAL TRADE AND THE URUGUAY ROUND
GATT has contributed significantly to the rapid growth of world
trade. By facilitating the reduction of trade barriers through multilateral trade negotiations, GATT has stimulated trade growth directly. Trade has also been fostered more indirectly by the
strengthening and continued acceptance of GATT's rules governing
international commerce. Just as domestic business laws are essential to the smooth functioning of commercial relationships within a
country, GATT is important in facilitating trade among countries.
Today, the GATT system is facing many challenges. The original
agreement was written primarily to deal with trade in manufactured goods among developed countries, yet today only about threefifths of world export earnings come from manufactures. Services
account for about one-fifth of world export earnings, agriculture accounts for about one-tenth, and oil and minerals account for the
rest. Moreover, in recent years many developing countries have
become important participants in the trading system, yet they are
not fully subject to GATT rules. Foreign direct investment by corporations is also an increasingly important aspect of the world
trading system, yet GATT rules do not explicitly address such investment.
The nature of today's trade barriers poses new challenges to the
GATT system. Since tariff barriers are quite low on average—at
least in developed nations—continued market opening requires
that nontariff barriers be reduced. While tariffs are easy to quantify and relatively easy to negotiate, many of the nontariff barriers
to trade discussed in the Uruguay Round, such as government subsidies and import quotas, have proved more difficult to negotiate
and reduce. Additionally, in the past decade the number of managed trade arrangements has increased. Agriculture, automobiles,
consumer electronics, semiconductors, steel, textiles, and other sectors have been subjected to governmental management of exports,
market shares, and prices in various parts of the world. Finally, in
today's highly interdependent world, what appear to be domestic
policies may have international trade implications. In fact, a
number of recent trade disputes have their roots in national poli-




243

cies that are not related to international trade in an obvious way
(Box 7-2).

banned all ii||p>rte of
growth promotants following a Cfemmunity-wide ban on nontherapeutic hormones used in
The Umted States believed the di^ iiot based on sdeiitifite evidence Mid that it
constituted an unjustifiable restriction on trade. Bilateral consultations were eventually able to resolve a
number of points of contention, but not the underlying
issue of how to deal with food standards that are not
based on scientific evidence*
The government of Thailand instituted a ban on cigarette advertising in addition to a bsn on imported cigarettes and other restrictive practices. In response to a
complaint from the United States, GATT found the
import ban illegal but ruled that Thailand can prohibit
tobacco advertising for health reasons.
In accordance with a U.S, law prohibiting residues in
foods of chemicals not registered with the Environmen*
tal Protection Agency, the United States recently imposed a temporary ban on EC wine imports containing a
fungicide caEed procymidone until the health risk can
be adequately determined. The EC and the United
States are engaged in consultations on the temporary
import ban.
A possible EC ban on certain furs caught in countries
that permit the use of steel leghold traps would restrict
U.S. fur trade. There is widespread support in the
United States as well as in Europe for the development
of more humane traps. However, the U.S. Government
opposes the imposition of an arbitrary deadline to meet
standards that have not yet been developed and argues
that trapping serves the desirable environmental goal of
managing the population of fur-bearing animals.
PROCESS AND TIMING OF THE NEGOTIATIONS
The Uruguay Round negotiations are an ambitious attempt to
open markets as well as to meet the challenges posed by the greatly increased complexity of trade, trade barriers, and the firms in-




244

volved in trade. Successful completion of the Uruguay Round
would encourage growth and raise living standards in the United
States and around the world. Success would also help defuse trade
tensions and conflicts that might otherwise escalate. The use of
costly agricultural export subsidies, for example, might increase if
the Uruguay Round fails. Moreover, complaints from U.S. industries about unfair trade practices might rise, possibly increasing
the use of retaliatory actions under U.S. trade law. For these reasons, the Administration has encouraged all nations to make the
commitments necessary to bring the Uruguay Round to a successful conclusion.
The Uruguay Round talks were scheduled for completion in early
December 1990 at a meeting in Brussels. Due to an impasse in the
part of the talks dealing with agriculture, the Brussels meeting
broke down, and the Uruguay Round talks were suspended with no
formal agreements in any of the many areas of negotiation. The
impasse occurred when countries could not agree on a basis for detailed negotiations concerning agricultural export subsidies, domestic farm policies that affect trade, and agricultural import barriers.
Trade negotiations are based on what is referred to as an "exchange of concessions." That is, negotiators talk about mutual
policy reforms as if they were exchanging concessions, even though
the reforms would benefit countries on all sides of the bargaining
table. For instance, as discussed above, U.S. import restrictions on
clothing cost American consumers billions of dollars a year. Yet,
developing countries ask the United States to make concessions on
clothing—that is, to open further the U.S. market to clothing imports—before they will make market-opening concessions that are
likely to save their consumers billions. The word "concession" is
used because domestic producers who compete with imports tend to
resist such market opening. This exchange-of-concessions approach
has been quite successful in previous GATT rounds, primarily because it allows governments to counter national groups opposed to
opening the domestic market with the political influence of domestic exporters who seek market openings in other countries.

AREAS OF NEGOTIATION
The Uruguay Round talks have addressed three goals: reducing
barriers to trade, extending GATT rules to new sectors, and improving GATT rules by strengthening and updating them to match
modern commercial realities. In pursuit of these goals, the negotiations have proceeded on a wide range of areas, several of which are
discussed below.

Tariff Reduction and Elimination
A very important part of the negotiations is the reduction of tariffs. Participants in the Uruguay Round have already agreed to




245

reduce the average of their tariff rates by about one-third. They
have not, however, agreed upon the specific products on which tariffs will be cut. A vast number of products may be affected. The
United States, for instance, has requested foreign tariff cuts on
thousands of specific products and has offered to cut U.S. tariffs on
thousands of products.
The United States has also put forth a novel tariff-cutting proposal called the Zero for Zero Initiative. Under this initiative the
United States offers to cut U.S. tariffs to zero in particular sectors—such as steel, electronics, construction equipment, and pharmaceuticals—if other countries agree to cut their tariffs to zero in
the same sectors. When fully implemented, the initiative would
result in free-trade sectors (FTSs) involving thousands of products
made in scores of countries, thereby improving export opportunities
for a large number of companies. The volume of U.S. exports that
would be covered by the proposed FTSs is larger than the volume
of U.S. exports to Canada, the Nation's largest trading partner.

Agriculture
The strongest advocates of reducing protection of agriculture in
the Uruguay Round have been the United States and a coalition of
14 food exporting nations known as the Cairns Group, which includes Australia, Canada, and New Zealand, as well as Argentina
and several other developing nations. Indeed, the importance of an
agriculture agreement to some nations has had broad implications
for the entire Uruguay Round. Key trading countries from the developing world, including Brazil, Indonesia, Malaysia, Thailand,
and several others, have expressed a reluctance to forge agreements unless agricultural reform is also negotiated and other
issues of great interest to them are addressed. The Cairns Group
has threatened to reject agreements on all other issues unless comprehensive agricultural policy reform is achieved.
Agricultural trade makes up about one-tenth of world trade, yet
it has never been seriously subject to GATT discipline. Indeed, virtually every government intervenes in its agricultural sector. Particularly in industrial economies, agricultural policies often promote producers' interests through trade barriers or subsidization.
The EC maintains high domestic food prices with a maze of import
barriers and export subsidies that largely insulates its 8 million
farmers from world market forces. Japan and South Korea maintain even higher barriers against most food imports. Canada, the
United States, and many other nations also protect their agricultural sectors to some degree in a variety of ways.
The EC provides a prime example of government protection of
agriculture. The EC was once a major food importer. Now government-controlled prices are set so high that European farmers
produce much more than European consumers wish to buy. To dis-




246

pose of these surpluses, the EC must subsidize exporters to buy EC
products at the high internal prices and sell them on the world
market at much lower prices. Other countries may have to match
the EC's subsidized export prices if they are to compete in the
world market. The net result of these and other similar practices is
that world prices of many agricultural products are significantly
depressed and resources are inefficiently allocated. In 1987, the
first full year of the Uruguay Round negotiations, the EC spent
about $10 billion on export subsidies and the United States spent
about $1 billion (Box 7-3).
An agreement to reduce agricultural trade barriers and subsidies
would bring significant efficiency gains to the global economy. By
allowing market forces to determine agricultural production and
prices, such reductions would increase the amount of trade in most
agricultural commodities and, according to one study, would add
$35 billion annually, in real terms, to the combined income of developed market economies. The largest efficiency gains would
accrue to the economies of the EC, the United States, and Japan.
In Europe manufacturing output and total employment would increase, while in Japan land and food prices would fall. Despite
these beneficial effects, Europe and Japan have strongly resisted
reform, partly because of the high levels of protection that existing
barriers give to their politically powerful farm groups.
The United States, which exported about $40 billion worth of agricultural products in 1990, has a large stake in achieving comprehensive agricultural policy reform. It has been estimated that the
net effect of global agricultural protection lowers the U.S. agricultural trade balance by $3 billion. While U.S. exports are a key concern, the U.S. interest in an agriculture agreement has other dimensions too. For example, reducing domestic farm subsidies could
help reduce the U.S. budget deficit. Resistance to reducing domestic farm programs unilaterally is strong, however, partly because
the programs help offset the price-reducing effects of other countries' farm subsidies.
The United States could increase the efficiency of its economy by
unilaterally reducing the degree of protection in agriculture.
Indeed, as described in Chapter 4, the United States has already
taken important steps toward farm policy reform. However, if the
United States reformed its agricultural policies in concert with
others, U.S. farmers would face more open export markets and
more favorable market prices. One study estimates that world
market prices would have been roughly 20 percent higher in 198687 in the absence of subsidies and trade barriers worldwide.

Textiles
Trade in textiles and clothing accounts for about one-tenth of all
manufactured exports. This trade is particularly important to de-




247

Box 7-3.—Export Subsidies: Who Gains and Who Loses?
If the Uruguay Round fails, an increase in the subsidization
of agricultural exports, especially by the European Community
(EC) and the United States, is a distinct possibility. Indeed, the
Congress has already authorized an additional $1 billion for
U,S. export assistance, to be used to offset EC subsidies, should
the round fail.
Who gains and who loses when a country imposes export
subsidies? Its domestic farmers gain, since they secure higher
prices and greater exports. Its taxpayers lose, since they pay
for the subsidies. Its consumers can also lose because the subsidies typically raise domestic food prices. That is because export
subsidies encourage farmers to sell more to foreign markets,
making less available at home. Adding up the gains and losses
to farmers, taxpayers, and consumers, the subsidizing country
as a whole is usually worse off.
Other nations that export agricultural products may have to
counter with expensive export subsidies of their own or risk
being squeezed out of world markets. Consumers in countries
that import the subsidized exports may welcome the lower food
prices that result, but farmers in those countries would be
harmed. Many food importers are developing countries with
relatively large shares of their populations working on farms.
By depressing food prices in importing countries, subsidized exports can create an artificial disincentive to agricultural investment.
Despite their high domestic costs, countries may be willing
to bear the burden of export subsidies in the short run. If U.S.
subsidies, for example, counter EC subsidies effectively by displacing EC sales in export markets, the European Community
may agree to reduce its subsidies and return trade to a freer
basis. The risk of this strategy is that a "subsidy war** may
occur, which can send food prices in international markets
down and taxpayer costs at home up.
veloping nations, since it accounts for almost a quarter of their
manufactured exports. The continued existence and increasing restrictiveness of the global management of textile trade has eroded
the confidence of many developing nations in the GATT system.
One of the goals of the United States and other nations in the
Uruguay Round is to phase out the policies that currently control
textile and clothing trade. The negotiations are aimed at establishing a mechanism to return trade in this sector to the regular rules
of GATT over a certain period of time. The transition mechanism




248

being considered in the negotiations would use the basic structure
of the Multi-Fiber Arrangement for those textile and apparel products currently under quota. During the transition the growth rates
of these quotas would be increased, and certain products would be
progressively integrated into GATT. Furthermore, a special procedure would allow new quotas to be placed on uncovered products
and suppliers to keep these imports from disrupting domestic production. If the Uruguay Round talks succeed in phasing out textile
and clothing protection, U.S. consumers would save billions of dollars annually.

Services
In 1989 American companies exported over $100 billion of services, making the United States the world's largest exporter of services. International trade in services, such as insurance, banking,
and tourism, accounts for about one-fifth of world export earnings.
One important aim of the Uruguay Round is to include in the
GATT system a multilateral agreement on principles and rules for
trade in services, as well as to eliminate progressively impediments
to trade in services. The talks have focused on obtaining a services
agreement consisting of three parts: a broad framework agreement—called the General Agreement on Trade in Services—that
would lay out principles and rules governing services trade; a set of
annexes that would discuss particular service sectors in detail; and
a list of commitments by countries to open their services markets
to foreign firms.
Negotiations in this area are so new that even the definition of
trade in services had to be addressed. The proposed agreement defines services trade as the supply of a service by a firm from one
country to a consumer from another country. This definition covers
cases in which the firm is located in the consumer's market (such
as in banking), the consumer travels to another country to purchase services (such as in tourism), or the firm and consumer are
located in different countries (such as telecommunications). The
proposed agreement also had to define what constitutes a barrier to
trade in services. The proposed definition states that countries
should not discriminate among foreign service companies and
should treat foreign service firms no less favorably than domestic
firms. Any deviation from this standard would constitute a trade
barrier. An example of a barrier to trade in services under this definition would be a law that makes it difficult for an insurance firm
from one country to set up in another country. One other important principle that would be established by the proposed trade-inservices agreement involves "transparency." This principle would
require countries to publish all laws and regulations that affect
trade in services.




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Intellectual Property Rights
In 1989 U.S. export earnings from royalties and licensing fees
amounted to $12 billion. In the United States and most other industrialized nations, the rights of knowledge creators to earn profits on their creations are protected by laws that make it illegal to
pirate patents, software, books, records or tapes, or to sell counterfeit goods. In many countries, particularly in the developing world,
laws to protect these rights, known as intellectual property rights,
do not exist or are not well enforced. As a result, piracy and counterfeiting of trademark goods and services are widespread. The U.S.
International Trade Commission estimated that U.S. industry loses
many billions of dollars a year to piracy and counterfeiting. The
aim of the United States in the Uruguay Round has been to negotiate a set of international rules governing trade-related intellectual
property rights and to erect an effective system to ensure that obligations under GATT and other agreements to protect these rights
are enforced.
Investment
The globalization of modern companies means that barriers to
foreign investment act as barriers to trade. Because companies investing in foreign countries tend to import many of the inputs they
use in production and to export a significant portion of their
output, restrictions on investment directly affect the flow of trade.
The Uruguay Round has included negotiations on new rules that
would restrict the use of investment policies that inhibit or distort
trade.
There is no generally accepted definition of what constitutes
such a trade-related investment measure (TRIM). Examples include
government requirements that foreign multinational corporations
use specific amounts of locally produced goods in their products,
that foreign corporations export a certain share of their output,
and that foreign investors may only use a limited amount of the
foreign exchange they earn to purchase inputs. Current GATT
rules indirectly cover a few of these measures, but the rules are
neither comprehensive nor clear, and their application to developing countries has never been tested.
The U.S. position, shared by most industrialized countries, is that
GATT should prohibit TRIMs that inherently restrict or distort
trade, establish a test to discipline those nonprohibited TRIMs that
can have adverse trade effects, and develop a timeline to phase out
existing prohibited TRIMs. The negotiations have been hindered,
however, by deep differences of opinion between developed and developing countries. Many developing countries, which are largely
host countries for foreign direct investment, insist that control of




250

such investment through TRIMs is crucial to achieving their development objectives.
In the long run, given the increasing overlap between investment
and trade activity, it is desirable to have strong GATT rules covering all aspects of foreign investment—not merely trade-related foreign investment—analogous to those that cover trade. Even if the
Uruguay Round adopts rules regarding trade-related investment
measures, nothing comparable to GATT's rules on goods trade
would exist for investment. Establishing common, multilateral
rules for investment throughout the world is a high priority for the
United States because differences in foreign investment policies
across countries reduce the benefits that stem from the global production networks of multinational corporations.

Dispute Settlement
An effective and reliable dispute settlement mechanism is an important component of the GATT system. One of the most significant ways in which the Uruguay Round may strengthen the rulesbased international trading system is by improving the GATT
mechanism that is used to settle many trade disputes among nations. The current procedure establishes a panel of experts that decides the merits of the dispute and announces its findings. While
this system has performed reasonably well in many cases, in recent
years some nations have complained that the process is too slow
and unreliable. These shortcomings reduce the credibility of the
multilateral dispute settlement procedure and erode confidence in
the GATT system as a whole. Procedural changes that have resulted from the ongoing negotiations have already improved the process. The final goal is a dispute settlement procedure that is swift,
reliable, and effective.

Safeguards
GATT recognizes that countries may need to impose new import
restrictions to allow import-sensitive industries time to adjust to
shifts in competitiveness. Temporary import restrictions for this
purpose, so-called safeguard measures, can be imposed if increased
imports cause, or threaten to cause, serious injury to an industry.
As a general principle, GATT indicates that import restrictions
should be tariffs, rather than quotas or other quantity restrictions,
and that these measures should be applied equally to all trading
partners. GATT also allows all countries affected by the safeguard
measures to retaliate or request compensation from the country
that imposes them.
These conditions have discouraged the use of GATT's safeguard
provisions. As a consequence, countries often rely on bilateral arrangements, such as voluntary export agreements, to limit imports.
The EC is by far the leading user of these arrangements, but the




251

United States, Japan, Canada, Sweden, Switzerland, Norway, and
Finland have also used them. These arrangements are not subject
to GATT rules of any kind. Their use allows political pressures,
rather than market forces, to influence trade flows. These arrangements also tend to favor old suppliers over new suppliers, and to
exclude third countries (which may be indirectly affected) from discussion of the design, implementation, and removal of the restrictions. Uruguay Round negotiators are seeking new rules to clarify
the conditions under which safeguard measures may be taken and
to discourage the use of voluntary export agreements.

Antidumping
The term "dumping" can describe selling a product at lower
prices in some countries than in others or selling a product below
cost. GATT allows a country whose industries are injured by the
dumping of imports to impose a special tariff called an antidumping duty. In the Uruguay Round the United States and other nations seek to update GATTs antidumping rules to match modern
commercial realities and to standardize and clarify procedures for
investigations of alleged dumping.

SUMMARY
• The United States and other nations are endeavoring to
strengthen, extend, and modernize GATTs rules governing
international trade, as well as to reduce trade barriers worldwide.
• Long-run U.S. goals of multilateral trade liberalization are embodied in the positions taken by the United States in the Uruguay Round. These include extending GATT discipline to trade
in agriculture, textiles, services, and intellectual property; ensuring that developing countries take on the full obligations of
GATT; establishing explicit international rules for foreign investment; and making the GATT dispute settlement mechanism swift, fair, and effective.
• Successful completion of the Uruguay Round is important to
the future growth and prosperity of the United States and the
world.

U.S. PRO-TRADE INITIATIVES IN THE AMERICAS
AND ELSEWHERE
The primary thrust of U.S. trade policy is to use multilateral discussions and fora such as GATT and the Organization for Economic Cooperation and Development to promote free, rules-based trade.
Indeed, the multilateral Uruguay Round negotiations are the President's top trade priority. The Administration, however, has made




252

substantial progress toward promoting trade via other channels.
This progress is evident in a number of regional and bilateral protrade initiatives, as well as in the avoidance of increased protection
and a reduction of the overall level of tension in our trade relationships.
U.S.-MEXICO FREE-TRADE AREA
In June 1990 the Presidents of the United States and Mexico
strongly endorsed the goal of a comprehensive free-trade agreement between the United States and Mexico (Box 7-4 and Chart 72). Such an agreement would progressively eliminate impediments
to trade in goods and services and to investment, as well as protect
intellectual property rights. The United States already has freetrade agreements with Canada (signed in 1988) and Israel (signed
in 1985). In addition, the United States, Mexico, and Canada have
been consulting on the possibility of a trilateral negotiation.
Mexico has reduced its trade barriers as part of its across-theboard market reform effort (described in Chapter 6). Since 1985
Mexico has reduced by roughly 70 percent the product coverage of a
form of import restriction known as import licensing. Mexico has
also lowered its tariffs from an average of roughly 30 percent in
1985 to about 10 percent in 1989. However, this 10-percent average
is still much higher than the 4-percent average tariff that the
United States has on imports from Mexico. A free-trade agreement
would eventually bring both numbers to zero on U.S.-Mexico trade
and would eliminate many nontariff measures.
A free-trade agreement would boost the international competitiveness of both U.S. and Mexican firms. To reduce costs, companies often allocate phases of a manufacturing process among a
number of nations. A free-trade agreement with Mexico would further encourage this natural international division of labor. By lowering the overall costs of U.S. manufacturing firms, a free-trade
agreement would make U.S. firms more competitive against imports in the United States and against other countries' exports in
the world market. This gain in manufacturing competitiveness encourages productivity and higher wages. The proposed free-trade
agreement would similarly boost the competitiveness of Mexican
firms. Additionally, the two-way reduction in trade barriers would
benefit Mexico by supporting its market reforms and encouraging
economic growth.
INITIATIVES FOR THE AMERICAS
In June 1990 the President unveiled his Enterprise for the Americas Initiative, which will, among other things, pave the way to free
trade throughout the Western Hemisphere. The proposed legislation addresses three issues: trade, investment, and debt. Chapter 6




253

Box 7-C—The Composition of U»S*-Mexieo Trade

Mexico is the third largest trading partner of the United
States, after Canada and Japan. About 6 percent of UJSl exports went to Mexico in 1989, while about 5 percent of U.S, imports came from Mexico* The composition of trade with Mexico
is quite similar to the U,S,~Canada trade pattern, as can be
seen in Chart 7-2, Most U.S.-Mexico trade is two-way trade in
manufactured goods, A closer look at the manufactures category reveals that much of this trade is two-way trade in similar
products. The four largest U.S. exports to Mexico in 1989 were
auto parts, processed food, electronic components, and electrical switchgear. The four largest imports from Mexico were
autos and auto parts, electrical distributing equipment, telecommunications equipment, and electrical switchgear. Trade
between the United States and Mexico in the manufacturing
sector is almost balanced, due largely to Mexico's maquiladom
program, Maquiladoras are export-oriented plants, most often
located close to the U*S,~Mexico border, that are exempt from
paying import duties on raw materials and parts that are used
in making final products. In 1988 about 45 percent of UJS. mer*
ehandfee imports from Mexico originated in the maguiladoras*

Chart 7-2 U.S. Trade with Mexico and Canada, 1989
Two-way trade in manufactured goods dominates U.S. bilateral trade with both Mexico and Canada.
U.S. - Canada Trade

U.S. - Mexico Trade
Imports from Mexico

Exports to Mexico

Imports from Canada

19.6 ] 20.5

Exports to Canada

68.3 | 72.2

Manufactures

• • •
• • •

Agriculture

Services
1.7

Other

80

40

0
40
Billions of Dollars

80

80

Source: Department of Commerce.




254

40

0
40
Billions of Dollars

80

discusses the investment and debt aspects of the Enterprise for the
Americas Initiative. On the trade side, the Enterprise for the Americas Initiative would establish a process that would eventually lead
to a hemisphere-wide system of free trade. As a first step in this direction, the United States would sign bilateral framework agreements with any interested country or group of countries in the
region. These agreements facilitate discussion of means to eliminate impediments to trade and investment. The United States has
entered into these agreements with Bolivia, Colombia, Chile, Ecuador, Honduras, and Costa Rica. Negotiations have begun bilaterally
with Venezuela, Peru, and Nicaragua, as well as with Argentina,
Brazil, Uruguay, and Paraguay as a group. Framework agreements
are also a possibility in the near future with El Salvador, Guatemala, Panama, Jamaica, and several other Caribbean countries. The
next step is to negotiate free-trade agreements with individual
countries and groups of countries. Chile, which has a history of
open markets, has expressed strong interest in pursuing a freetrade agreement with the United States.
In October 1990 the President sent the Andean Trade Preference
Act to the Congress. This proposal would eliminate U.S. import
duties on many products imported from Bolivia, Colombia, Ecuador, and Peru. A major goal of this unilateral market-opening initiative is to help these countries battle the production, processing,
and shipment of illegal drugs by offering them opportunities to
expand production and trade of products that are legal. Passage of
this legislation early in 1991 is an important priority for the President. It will help in the fight against drugs and also help promote
trade and prosperity in the hemisphere.
STRUCTURAL IMPEDIMENTS INITIATIVE
One of the most significant developments in U.S. international
economic policy in recent years is the U.S.-Japan Structural Impediments Initiative. This initiative is a new, cooperative approach
to opening markets. Instead of focusing on specific sectoral trade
barriers, the initiative is aimed at identifying and removing more
basic impediments to trade, market competition, and balance of
payments adjustment. The initiative produced a joint report in
June 1990. On the Japanese side, the joint report focused on a
number of areas, including the aggregate saving and investment
balance; laws regarding land use; the structure of the Japanese distribution system, which restricts the establishment and operation
of large retail stores in Japan; the organizational behavior of Japanese conglomerates known as keiretsu; enforcement of Japan's antimonopoly laws; improved financial disclosure by Japanese firms;
and improved procedures for awarding patents. In the joint report,
the United States recognized that priority issues for U.S. policy in-




255

elude reducing the Federal budget deficit, stimulating private
saving, and improving education and training of U.S. workers.

SUMMARY
• In addition to pursuing market opening through multilateral
fora, the United States has undertaken several regional and bilateral pro-trade initiatives such as the proposed U.S.-Mexico
free-trade agreement, the Enterprise for the Americas Initiative, and the Structural Impediments Initiative.
• The proposed U.S.-Mexico free-trade agreement would boost
the international competitiveness of both U.S. and Mexican
firms, as well as increase efficiency, flexibility, and growth in
both economies.
• The ultimate goal of the trade liberalization components of the
Enterprise for the Americas Initiative is a hemispheric system
of free trade.

MULTINATIONAL CORPORATIONS AND THE
TRADE-INVESTMENT LINKAGE
The 1990s are likely to be marked by the increased globalization
of companies, a trend that began in the early post-World War II
years and continued throughout the 1980s. The greater global integration of the operations of multinational corporations is the result
of increasing foreign direct investment—defined as the development of a new business or acquisition of an established business in
a foreign market. It complements the globalization of markets engendered by the expansion of trade.
Indeed, the globalization of companies results in a close connection between trade and investment. This connection can be seen
quite clearly in the remarkable extent to which border-spanning
companies are involved in trade. About 25 percent of all U.S. exports and 15 percent of all U.S. imports, for example, are actually
transfers between parents of multinational corporations and their
affiliates abroad; that is, the goods are transferred within the same
company, even though they cross international boundaries. The
internationalization of operations underlying such "intrafirm"
trade often means that a new product marketed globally is the
fruit of research and development performed in one country, engineering carried out in a second, and production performed in a
third.
The globalization of companies is a two-way street; many countries in which U.S. multinationals are most active are also the ones
that are the most active investors in the United States (Box 7-5
and Chart 7-3). The global nature of companies has so progressed
that sometimes it is difficult to decide which firms are foreign.




256

Honda, for example, sells more cars in the United States than it
does in Japan. In fact, some Hondas sold in Japan are actually
made in Ohio. Whirlpool, while headquartered in Michigan, employs about 39,000 people, most of whom are non-American, in 45
different countries.
Box 7-5*—Fdreigii Blreet Investment: Wh0 Invests and
Where?
For most of the period immediately following World War H,
only companies based in the United States and in a few other
countries developed or acquired businesses in other countries.
Such foreign direct investment was mostly in one direction*
Countries that did the investing were rarely the recipients of
foreign direct investment. Today* the United States not only
continues to be the leading source of foreign direct investment,
with $873,4 billion held abroad in 1989, but, as Chart 7-3
shows, it is also the largest recipient of foreign direct investment*

Chart 7-3

World Stocks of Foreign Direct Investment, 1988

Many countries that provide large amounts of foreign direct investment are also large recipients. Indeed, the
United States is both the largest source and the largest recipient.

Recipients

Sources

Other
LDCs
Developed 2.8%
7.4%

Japan
9.8%

Other
Developed

Other
Europe
24.3%

14.4%
Japan
Germany

0.9%

Germany

Other Europe
19.8%

9.1%

Note: Data are based on world stocks of direct investment.
Source: Department of Commerce.




257

6.8%

Statistics on foreign direct investment reflect historical purchase
prices, not current market values. Thus, comparisons of stocks of
foreign direct investment can be quite misleading. For instance,
the reported stock of foreign direct investment in the United States
reached $400.8 billion at the end of 1989 and exceeded the reported
stock of U.S. direct investment abroad by $27.4 billion. But much of
U.S. direct investment abroad was made in the 1950s and 1960s,
while the bulk of foreign direct investment in the United States
was made more recently. Because prices have risen considerably
since the 1960s, it is likely that the current value of U.S. holdings
abroad exceeds the current value of foreign direct investment in
the United States.

THE BENEFITS OF FOREIGN DIRECT INVESTMENT
Foreign direct investment in the United States is a sign of
strength in the economy, not of weakness. It is also a sign of the
increasing internationalization of the economy through which U.S.
firms will be strengthened and made more competitive. This investment and the global orientation of companies benefit the United
States. The unhindered flow of foreign direct investment leads to
additional productive resources in the United States and facilitates
the realization of cost-efficient scales of business by consolidating
under one corporate roof separate, but related, operations. These
boost the productivity and international competitiveness of the
United States, create jobs, and promote innovation and productivity. The inflow of foreign capital helps to sustain U.S. investment,
despite the current low U.S. national saving rate, and thus contributes to economic growth.
When U.S. multinationals first set up in Europe during the 1950s
and 1960s, many Europeans feared that Europe was being bought
out by Americans and that their economies were being Americanized. In retrospect, these concerns were unfounded. U.S. direct investment has benefited the European economies. The recent increase in foreign direct investment in the United States will similarly benefit the U.S. economy.
U.S. direct investment abroad also benefits the United States.
Extensive production networks of U.S. multinational corporations
confer several advantages. One is the ability of such companies to
compete more effectively in foreign markets by locating production
facilities there, rather than by exporting to those markets. Profits
generated by such activities can flow back to the United States,
and U.S. affiliates abroad often create demand for exports of U.S.
production inputs, services, and technology. Foreign direct investment also provides insurance against the risk of new "host" country restrictions on trade. Finally, U.S. direct investment abroad




258

contributes to the economic health of our trading partners, which,
in turn, fosters greater U.S. economic growth.
U.S. multinational corporations—from computer and electronics
companies to pharmaceutical companies—are often at the cutting
edge of technology creation. Moreover, they perform the vast majority of their research and development activities in the United
States. U.S. multinationals are also major employers of American
workers. The ratio of manufacturing jobs to service and wholesaling jobs was about one-fifth higher in U.S. multinationals' parent
operations than in their foreign operations in 1988. In general, U.S.
multinational corporations today orient their operations toward the
U.S. market. Indeed, according to the most recent figures, about
three-fourths of total worldwide assets of U.S. multinationals are
located in the United States. This share has increased from a
decade earlier despite the growth of U.S. direct investment abroad.
It has been claimed that overseas production by U.S. multinational corporations displaces U.S. exports and, in effect, American
jobs. A related concern is that U.S. multinationals produce goods
abroad and import them into the United States, rather than producing them domestically. Underlying these claims is the mistaken
presumption that if U.S. direct investment abroad did not take
place, production would have been maintained at home and U.S.
exports to foreign markets would have continued. In most cases, if
U.S. multinationals did not establish affiliates abroad to produce
for the local market, they would be too distant to have an effective
presence in that market. In addition, companies from other countries would either establish such facilities or increase exports to
that market. In effect, it is not really possible to sustain exports to
such markets in the long run. On a net basis, it is highly doubtful
that U.S. direct investment abroad reduces U.S. exports or displaces
U.S. jobs. Indeed, U.S. direct investment abroad stimulates U.S.
companies to be more competitive internationally, which can generate U.S. exports and jobs. Equally important, U.S. direct investment abroad allows U.S. firms to allocate their resources more efficiently, thus creating healthier domestic operations, which, in turn,
tend to create jobs.
Another issue raised about multinational corporations is that the
exports and imports they trade internally do not adjust as completely in the short run to exchange-rate changes as do goods that
are traded between unrelated firms. Because of the long-run cost
efficiencies associated with maintaining extensive global production networks and because some percentage of a multinational's
plant and equipment may not be completely salvageable if facilities
are moved, some intrafirm trade flows may well not adjust rapidly
to shifts in exchange rates.




259

Of course, like all trade flows, intrafirm exports and imports do
adjust to changes in exchange rates over time. Even in the absence
of multinational enterprise, however, the open market for many of
the types of products traded internally by multinationals is likely
to be dominated by long-term contracts. That is because international business investments typically are economically risky and involve large commitments of capital and highly specialized assets.
Thus, any apparent temporary rigidities in multinational corporate
trade behavior reflect the fact that these firms have established efficient configurations of operations in the global marketplace.
Nonetheless, relatively slow responses of internal exports and imports of multinational corporations to changes in exchange rates
may subject U.S. economic policymakers to significant pressure to
place restrictions on the way these firms build and maintain their
networks of operations. Imposing such investment-restricting measures will result not only in corporate efficiency losses, and thus potentially lower employment and a decline in profits, but also in a
decrease in U.S. competitiveness.
Foreign multinationals operating in the United States act in
ways that are similar to U.S. multinationals in America. Table 7-1
shows that in terms of paying their employees and the value added
per employee, these two types of multinationals are roughly the
same.
TABLE l-l.—Parents of U.S. Multinational Corporations vs. U.S. Affiliates of Foreign
Multinational Corporations: U.S. Operations in 1988
[Dollars]
Parents of U.S.
multinationals

U.S. affiliates
of foreign
multinationals

Average compensation per employee

33154

30517

Gross product per employee1

54229

47117

U.S. intrafirm exports per employee

4491

6,637

U.S. intrafirm imports per employee

3,777

31,045

1
Data are for 1987.
Sources: Department of Commerce and Council of Economic Advisers.

In the area of intrafirm trade, however, there are pronounced
differences. U.S. affiliates of foreign multinationals export and
import more per employee than U.S. multinationals operating in
America. While the difference in export behavior is appreciable—
exports per employee are 48 percent higher for U.S. affiliates of
foreign multinationals than for parents of U.S. multinationals—the
more than eightfold difference in import behavior is particularly
striking. The difference in import behavior is explained in part by
the fact that a significant number of the U.S. affiliates of foreign
multinationals act primarily as wholesale marketing offices for
their parent companies. The higher import propensity is also a nat-




260

ural outcome of the relative newness of foreign multinationals in
the United States. When U.S. multinationals first set up in Europe
during the 1950s and 1960s, they also tended to import more than
local companies.
Judging from history, it seems likely that foreign multinationals
operating in America will tend to become more "local" with time.
As Table 7-2 shows, the importance of imports in the input purchases of U.S. affiliates of foreign multinationals has been decreasing. Correspondingly, foreign multinationals are increasing the
extent of vertical integration in their American operations, producing in the United States more of the inputs they use. Moreover, the
local content of products made in the United States by foreign multinationals is quite high and has been rising.
TABLE 1-2—Parents of U.S. Multinational Corporations and U.S. Affiliates of
Foreign Multinational Corporations: Input Supply Choices, 1977 vs. 1987
[Percent]
1977

1987

Vertical integration (ratio of gross product to sales)
Parents of U S multinationals.
U.S. Affiliates of foreign multinationals

37
18

37
?1

Import propensity in input purchases (ratio of imports to total purchase of inputs)
Parents of u S. multinationals
U S Affiliates of foreign multinationals

9
27

8
24

Local content (ratio of local inputs to sales)
Parents of U.S. multinationals
U.S Affiliates of foreign multinationals

95
79

W
81

Sources: Department of Commerce and Council of Economic Advisers.

Although foreign direct investment in the United States has increased greatly in recent years, the involvement of foreign firms in
America is low by international standards. Indeed, foreign multinationals account for only about 4 percent of U.S. jobs and business
output. Moreover, the recent rise in foreign direct investment is
not unique to the United States but part of the worldwide trend
toward the international integration of markets and companies.
Another visible manifestation of this trend is the rise in joint ventures, technology- and production-sharing arrangements, and other
forms of international alliances. Such partnerships are found in
many industries, such as medical equipment and computer chips.
U.S. FOREIGN DIRECT INVESTMENT POLICY
The complex linkages between trade flows and production operations of multinational corporations underscore the importance of
not creating barriers to the free flow of foreign direct investment
into the United States. Such barriers would subvert the natural
forces of the global marketplace and reduce efficiency and growth.
The benefits engendered by the global production and trade networks of modern multinational corporations point to the undesirability of devising policies aimed at restricting foreign investment.




261

Questions raised about what differentiates a "domestic" firm
from a "foreign" firm, while conceptually interesting and important, distract from policy questions about how to maintain the
strength and flexibility of the U.S. economy. The Administration
supports maintaining an open foreign investment policy, with limited exceptions related to national security. This policy produces
the greatest possible national benefits from all investments made
in the U.S. economy. The United States has long recognized that
unhindered international investment is beneficial to all nations,
that it is a "positive sum game."
The growing importance of foreign direct investment in the
United States has raised concerns about the adequacy and quality
of the Federal Government's statistics on foreign direct investment
in the United States. The Foreign Direct Investment and International Financial Data Improvements Act, signed by the President in
1990, significantly upgrades government information on this score.
Among other things, the new legislation provides for greater coordination among Federal statistical agencies in the collection,
sharing, and assessment of data on foreign direct investment in the
United States; permits analysis of such data at a more disaggregated level than was previously feasible; and requires the Secretary of
Commerce to report annually on the role and significance of foreign direct investment in the United States. These improvements
will be accomplished with no additional reporting requirements on
businesses and by preserving the principle of nondisclosure of confidential information.

SUMMARY
• The 1990s are likely to be marked by greater global integration
of the operations of multinational corporations as a result of
increasing foreign direct investment. Concomitantly, the flow
of international trade carried out by multinational corporations, especially intrafirm trade, is growing.
• Foreign direct investment in the United States benefits the
Nation by providing additional productive resources, thus helping to create jobs and increase productivity. U.S. direct investment abroad benefits the United States by enhancing the competitiveness of U.S. companies, by generating exports, and by
contributing to the economic health of our trading partners.
• U.S. affiliates of foreign multinational corporations operate
very similarly to U.S.-based multinationals, except that they
tend to export and import more. However, this pattern is typical of businesses of such young vintage, and over time this difference is expected to diminish.
• Maintaining an open U.S. and multilateral foreign investment
policy, one that results in the greatest possible benefits of in-




262

vestment without regard to the nationality of investors, remains an important U.S. economic policy objective.

CONCLUSION
International trade and investment have promoted growth and
prosperity not only in the United States, but throughout the world.
Although largely the product of natural economic forces, trade
growth has also been encouraged by the reduction of trade barriers
brought about by multilateral, bilateral, and regional market-opening initiatives. Multilateral market-opening talks organized by
GATT have been instrumental in reducing trade barriers. Markets
in the Western Hemisphere have also been opened by the U.S.Canada Free-Trade Agreement, and will be opened further if the
proposed U.S.-Mexico free-trade agreement and the hemispherewide free-trade system envisioned in the President's Enterprise for
the Americas Initiative are realized.
In the Uruguay Round, the United States and other countries
are seeking to extend, modernize, and reinforce GATT rules, and to
reduce trade barriers further. Successful completion of the round
and the continued openness of markets worldwide are important. A
failure of the Uruguay Round might encourage protectionist pressures that could lead to rising trade barriers around the world.
Just as falling trade and investment barriers stimulated growth in
trade and incomes, a retreat away from open markets could decrease growth and prosperity. Indeed, if the resulting closing of
markets were abrupt and severe enough, it could contribute to a
worldwide recession.
The expansion of trade is complemented by the greater globalization of corporations. Indeed, imports and exports between the parents of multinational corporations and their affiliates abroad now
account for a significant portion of international trade flows. As a
result, today's highly integrated world marketplace is one in which
the benefits of trade are generated worldwide by rapid diffusion of
new technologies, lower production costs, and greater product
choice for consumers. The presence in the U.S. economy of multinational corporations—both U.S.-owned and foreign-owned—is in
the Nation's interest. An important U.S. economic policy objective
is to maintain open markets for both trade and foreign investment.




263




Appendix A
REPORT TO THE PRESIDENT ON THE ACTIVITIES
OF THE
COUNCIL OF ECONOMIC ADVISERS DURING 1990







LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS
Washington, D.C., December 31, 1990
MR. PRESIDENT:
The Council of Economic Advisers submits this report on its
activities during the calendar year 1990 in accordance with the
requirements of the Congress, as set forth in section 10(d) of the
Employment Act of 1946 as amended by the Full Employment and
Balanced Growth Act of 1978.
Sincerely,




Michael J. Boskin, Chairman
Richard L. Schmalensee, Member
John B. Taylor, Member

267

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




Oath of office date

Position

August 9, 1946
August 9, 1946
November 2 1949
May 10, 1950
August 9 1946
May 10, 1950
June 29, 1950
September 8, 1952
March 19, 1953
September 15, 1953
December 2, 1953
April 4, 1955
December 3 1956
May 2, 1955
December 3 1956
November 1, 1958
May 7 1959
January 29 1961
January 29, 1961
January 29 1961
August 3, 1962
November 16 1964
May 17, 1963
September 2, 1964
November 16, 1964
February 15 1968
February 2, 1966
February 15 1968
July 1, 1968
February 4, 1969
February 4 1969
February 4 1969
January 1 1972
September 9 1971
March 13, 1972
July 23 1973
October 31 1973
September 4, 1974
June 13 1975
July 22 1975
January 22 1977
March 18 1977
March 18 1977
June 6 1979
August 20, 1980
February 27 1981
June 12 1981
July 14 1981
October 14 1982
December 10 1982
April 18, 1985
July 1, 1985
August 18 1986
February 2 1989
June 9 1989
October 3 1989

Chairman
Vice Chairman
Acting Chairman
Chairman
Vice Chairman
Member
Member
Chairman
Member
. ... Member
Member
Chairman
Member
Member
Member
Member
Chairman
Member
Member
Member
Chairman
Member
Member
Chairman
Member
Member
Member
Chairman
Member
Member
Chairman
Member
Member
Member
Member
Chairman
Member
Member
Chairman
Member
Member ..
Member
Member
Chairman
Member
Member
Chairman
Member
Chairman
Member
Chairman ..
.. Member
Member

268

Separation date
November 1, 1949.
January 20, 1953.
February 11, 1953.
August 20, 1952.
January 20, 1953.
December 1, 1956.
February 9, 1955.
April 29, 1955.
January 20 1961
October 31, 1958.
January 31 1959
January 20, 1961.
January 20, 1961
November 15 1964
July 31, 1962.
December 27 1962
..

.

February 15 1968
August 31, 1964.
February 1 1966
January 20, 1969.
June 30, 1968.
January 20, 1969.
January 20, 1969.
December 31, 1971.
July 15 1971
August 31 1974
March 26, 1973.
August 15, 1973.
April 15 1975.
February 25 1975
January 20, 1977.
November 15 1976.
January 20 1977
January 20, 1981.
February 4 1979
May 27 1980
January 20 1981
January 20, 1981.
August 25, 1982.
March 30 1985
July 31 1982
July 10 1984
January 20 1985
January 20, 1989.
May 1, 1989
September 19 1988.

Report to the President on the Activities of the
Council of Economic Advisers During 1990
The mission of the President's Council of Economic Advisers,
which was established by the Employment Act of 1946, is to provide the President with the best possible economic advice, to develop and recommend economic policies to the President, and to appraise programs and activities of the Federal Government as they
pertain to the health of the Nation's economy. In addition to the
Council's role in directly advising the President, the Council is represented, usually by the Chairman, at Cabinet meetings, meetings
of the Economic Policy Council, the Domestic Policy Council, and
the Council on Competitiveness, and at National Security Council
meetings on issues of economic importance.
Michael J. Boskin, Richard L. Schmalensee, and John B. Taylor,
who comprised the Council at the end of 1989, continued to serve
as Council Members in 1990, with Dr. Boskin continuing to serve as
Chairman. Dr. Boskin is on a leave of absence from Stanford University, where he is the Burnet C. and Mildred Finley Wohlford
Professor of Economics. Dr. Schmalensee is on a leave of absence
from the Massachusetts Institute of Technology, where he is the
Gordon Y Billard Professor of Economics and Management. Dr.
Taylor is on a leave of absence from Stanford University, where he
is Professor of Economics.
As it did in 1989, the Council continued to stress the importance
of maximizing sustainable economic growth to raise American
living standards, setting ambitious but realistic long-term economic
goals, and removing barriers to market forces. In its interactions
with various outside groups—the Congress, the business community, international organizations, the press—as well as within the
Administration, the Council continued to emphasize the Administration's fiscal, monetary, regulatory, and trade policy principles.
This year's Report follows last year's Report in outlining these
principles and showing how they are essential for maintaining
strong economic growth and improved standards of living.
MACROECONOMIC POLICIES

The Council closely followed macroeconomic developments
throughout the year, and emphasized the importance of credible,
systematic fiscal and monetary policies as a key to mitigating the
recession and ultimately sustaining maximum economic




269

growth.The Council briefed the President and participated in regular discussions on macroeconomic policy issues with the Department of the Treasury, the Office of Management and Budget
(OMB), and other members of the President's economic team. The
Council also regularly exchanged information and met with the
Federal Reserve Board on monetary policy issues and the economic
outlook.
The Council and the other members of the "Troika"—Treasury
and OMB—continued to produce the Administration's economic
forecasts and projections. Usually two official forecasts are published each year: one at the start of the year, which is used as part
of the President's budget, and one as part of the Mid-Session
Review in July. The Troika's forecasting group is chaired by the
Council. Dr. Boskin and Dr. Taylor testified on the forecasts before
the Joint Economic Committee. In preparing its forecasts, the
Troika continued the practice, initiated in 1989, of developing and
publishing alternative sets of economic assumptions to indicate
that the forecasts and resulting budget calculations have a considerable degree of uncertainty.
The Council continued to work to improve the general understanding of economics and the quality of economic information
through a comprehensive series of memoranda and briefing papers
on economic events for the President and the White House Senior
Staff, regular briefings for the White House press on major economic news, and meetings with outside economists, forecasters, financial analysts, and business people. The Chairman and the other
Council Members appeared before numerous other organizations to
explain the Administration's economic achievements, principles,
policies, and outlook.
Dr. Boskin continued to chair the Working Group on the Quality
of Economic Statistics. Based on the report of the working group,
the President approved a list of 25 recommendations for improving
economic statistics. During 1990 the Council worked closely with
the major Federal statistical agencies to implement these recommendations.
The Council was one of the leading participants in the formulation of the Administration's saving and investment policies
through various Cabinet and sub-Cabinet working groups. In testimony to the Congress and in talks to business and other groups,
the Chairman and Council Members stressed the importance of
raising national saving—by lowering the Federal budget deficit and
removing barriers to private saving—to reduce the cost of capital
to American firms, stimulate investment, foster research and development, and improve U.S. competitiveness, productivity growth,
and standards of living. The Chairman and Council Members also




270

worked through various fora to educate the public and the Congress on the economic benefits of a lower capital gains tax rate.
The Council was also active on a range of budget issues in 1990.
As a member of the President's budget review group, the Chairman
testified before a number of congressional committees on the economic assumptions used in the budget and on the importance to
the economy of lowering the Federal budget deficit, altering the
composition of spending more toward investment and research and
development (R&D), and maintaining and improving the structure
of incentives to work, save, invest, and innovate in the tax system.
INTERNATIONAL ECONOMIC POLICIES

International economic issues again occupied a substantial part
of the Council's time during 1990. The Chairman and Council
Members stressed the benefits of free trade and open markets for
goods, services, and investment and the risk to world economic
growth posed by rising protectionism. The Council participated in
formulating Administration policy on the Uruguay Round of the
General Agreement on Tariffs and Trade (GATT), the proposed
U.S.-Mexico free-trade agreement, the Enterprise for the Americas
Initiative, and many other issues. The Council also participated in
formulating Administration positions on legislation in the international area.
The Council's involvement in forging the Administration's economic policy responses to the Iraqi invasion of Kuwait included
participating in interagency studies on the economic effects of the
oil shock and the Iraqi embargo on Eastern Europe and the "frontline" states, as well as consideration of Strategic Petroleum Reserve drawdown policy.
During 1990 the Council's involvement in economic reform in
Eastern Europe and the Soviet Union increased. Dr. Boskin was
one of the three coordinators of U.S. Assistance to Eastern Europe,
after serving as one of the leaders of the President's Mission to
Poland when economic reforms were put in place in December
1989. The Chairman traveled to the Soviet Union, where he met
with a broad range of high-level Soviet economic policymakers and
advisers. He also chaired a working group on Soviet economic
reform. Dr. Taylor followed up a trip to Poland in 1989 with two
additional trips to Eastern Europe in 1990 to meet with and advise
senior government officials in several newly democratic countries.
Dr. Schmalensee also traveled to several countries in Eastern
Europe as part of a Coordinators' Mission to discuss assistance
needs with senior government officials. All three held numerous
discussions in Washington with officials from Soviet and Eastern
European governments.




271

Dr. Boskin traveled to Paris as part of the U.S. delegation to the
Organization for Economic Cooperation and Development (OECD)
Ministerial Meeting. He also chaired meetings of the OECD Economic Policy Committee. Dr. Taylor headed the U.S. delegation to
the Economic and Development Review Committee at the OECD to
assess U.S. economic policy. He was also a member of the U.S. delegation to the OECD Working Party 3 on macroeconomic policy coordination. Dr. Schmalensee headed the U.S. delegation to the
OECD Working Party 1 meetings on microeconomic and structural
issues and participated in an OECD meeting on integrating economic and environmental issues in preparation for the 1991 OECD
Environment Ministerial Meeting.
Dr. Taylor was a member of the U.S. negotiating team for the
Structural Impediments Initiative with Japan, attending talks in
Tokyo, Bern, Honolulu, Boston, and Washington. He testified
before the Trade Subcommittee of the Senate Finance Committee
and the International Economic Policy and Trade Subcommittee of
the House Foreign Affairs Committee on U.S. trade policy. As part
of the Uruguay Round, he co-chaired the GATT market access negotiations and was a Senior Adviser with the U.S. delegation
during the week of talks in Brussels. Dr. Schmalensee traveled to
Japan to meet with government officials and business leaders for
discussions on a variety of economic issues.
The Council provided the President and the White House Senior
Staff with regular briefings and analytical materials on international developments, and participated in preparations for the Economic Summit in Houston.
The Council also participated in discussions on a wide range of
issues—including developing country debt, economic reform in
Eastern Europe, and macroeconomic policy coordination—with
other members of the Administration, the Federal Reserve, the
World Bank, the International Monetary Fund, and representatives of other countries. The Council Members and the Council
Senior Staff conducted numerous briefings on the U.S. economy for
visiting officials and scholars.
MICROECONOMIC POLICIES

The Administration considered and proposed action this year on
a wide range of microeconomic issues. In its work in this area, the
Council repeatedly stressed that government regulation must pass
careful cost-benefit tests and that where regulation is appropriate,
it should be formulated to allow workers and firms maximum flexibility and to provide incentives to meet social goals in the least
costly manner. The Council worked with other agencies to ensure
that the newly enacted Clean Air Act to the maximum extent possible both balanced costs and benefits in protecting the environ-




272

ment and minimized the costs of regulation. The Council was also
instrumental in ensuring that the Immigration Act, the Americans
with Disabilities Act, and the Food, Agriculture, Conservation, and
Trade Act were designed to achieve reforms in a more cost-effective
manner. The Council emphasized these principles of promoting
flexibility, enhancing incentives, balancing costs and benefits, and
placing maximum reliance on the private sector in a wide range of
policy areas, including the forthcoming National Energy Strategy,
global climate change, cable television, telecommunications, antitrust, product liability, medical malpractice, and the regulatory
oversight process led by OMB and the Council on Competitiveness.
Dr. Schmalensee dealt with a wide range of environmental issues
as a member of the Environmental Policy Review Group. He served
on the Clean Air Strategy Group and participated in negotiations
with the Senate leadership on the Clean Air Act. He was a member
of the Global Change Strategy Group and the Task Force on Economic Costs. Dr. Schmalensee testified on energy and environmental matters before the Senate Committee on Energy and Natural
Resources and its Subcommittee on Energy Research and Development. He served as Co-Chairman (with the Secretary of Energy) at
a Department of Energy hearing on energy pricing in the forthcoming National Energy Strategy. Dr. Boskin co-chaired the White
House Conference on Science and Economics Research Related to
Global Change, and Dr. Schmalensee was a member of the U.S. delegation to the conference.
The Council also participated in various interagency working
groups to develop policies to aid the disadvantaged without destroying incentives and job opportunities. Dr. Schmalensee was a
member of the Low Income Opportunity Board and the Economic
Empowerment Task Force.
PUBLIC INFORMATION

The Chairman and Council Members regularly testify before the
Congress, make public speeches, and hold briefings for the press. In
addition, the Council produces two publications a year for the
public.
The Economic Report of the President is the principal medium
through which the Council informs the public of its work and its
views. It is an important vehicle for presenting the Administration's domestic and international economic policies. Annual distribution of the Report in recent years has averaged about 45,000
copies. The Council assumes primary responsibility for the monthly
Economic Indicators, which is issued by the Joint Economic Committee of the Congress and has a distribution of approximately
10,000.




273

THE COUNCIL AND THE STAFF
The Chairman is responsible for communicating the Council's
views on economic developments to the President through personal
discussions and written reports. The Chairman also represents the
Council at daily White House Senior Staff meetings; at budget
review group meetings with the President; and at many other
formal and informal meetings with the President and White House
Senior Staff, as well as with other senior government officials. The
Chairman guides the work of the Council and exercises ultimate responsibility for directing the work of the professional staff.
Members of the Council are responsible for the full range of
issues within the Council's purview and for the direct supervision
of the work of the professional staff. Members represent the Council at a wide variety of interagency and international meetings and
assume major responsibility for selecting issues for Council attention.
The small size of the Council permits the Chairman and the
Members to work as a team on most policy issues. There is, however, an informal division of subject matter. Dr. Schmalensee is primarily responsible for microeconomic and sectoral analysis, including analyses of regulatory issues and foreign economies undergoing
market restructuring. Dr. Taylor is primarily responsible for international trade, financial markets, and macroeconomic analysis, including economic projections.
PROFESSIONAL STAFF

The Council's advice to the President depends on the analytical
and empirical studies of its professional staff. The Council has benefited from an exceptionally capable staff during 1990. The professional staff currently consists of a Special Assistant to the Chairman and Senior Staff Economist, a Staff Assistant to the Chairman, a Senior Statistician, 11 Senior Staff Economists, 6 Junior
Staff Economists, and a Research Assistant. The professional staff
and their respective areas of concentration at the end of 1990 were:




274

Special Assistant to the Chairman and Senior Staff Economist
Harry G. Broadman

International Trade and Investment, R&D,
and Regulation

Staff Assistant to the Chairman
Stefanie J. Reiser
Senior Staff Economists
Richard E. Baldwin
Nicole S. Ballenger
Howard K. Gruenspecht
Michael W. Horrigan
Charles J. Jacklin
Adam B. Jaffe
Robert B. Kahn
Peter F. Kostiuk
Ralph M. Monaco
John Karl Scholz
James A. Wilcox

International Trade
Agriculture and International Trade
Environment and Regulation
Labor Markets and Quality of Statistics
Financial Markets and Banking
Regulation, Energy, and R&D
International Finance, Eastern Europe, and
the Soviet Union
Labor Markets, Energy, and Health
Macroeconomics and Forecasting
Public Finance
Monetary Policy and Macroeconomics

Senior Statistician
Catherine H. Furlong

Junior Staff Economists
Mark A. Condon
Erik D. Craft
Alison F. Del Rossi
Brian J. Hall
Arik M. Levinson
Naomi S. Smith

International Trade and Macroeconomics
Banking, Public Finance, and Regulation
Labor Markets, Environment, and
Regulation
Monetary Policy, Public Finance, and
Macroeconomics
Public Finance and Energy
International Trade and Finance, Eastern
Europe, and the Soviet Union
Research Assistant

Derek H. Utter




Forecasting, Macroeconomics, and Energy

275

Philip J. Deutch (Stanford University) served as an intern during
the fall of 1990. Andrew T. Levin (University of California, San
Diego) served as a consultant during the fall of 1990. James G.
Sununu (Stanford University) served as a Research Assistant
during the summer of 1990. Omar N. Toulan, who served as a Research Assistant through the spring of 1990, accepted a position
with McKinsey & Company, Inc.
Mrs. Furlong is assisted in the operation of the Statistical Office
by Natalie V. Rentfro, Linda A. Reilly, and Margaret L. Snyder.
The Statistical Office maintains and updates the Council's statistical information system and is responsible for overseeing the publication of the Economic Indicators and the statistical appendix to
the Economic Report of the President, as well as for the verification
of statistics in memoranda, testimony, and speeches.
Martha V. Gottron provided editorial assistance in the preparation of the 1991 Report.
SUPPORTING STAFF
The Administrative Office, which provides general support for
the Council's activities, consists of Elizabeth A. Kaminski, Administrative Officer, and Catherine Fibich, Administrative Assistant.
The Secretaries for the Council during 1990 were Alice H. Williams and Sandra F. Daigle (Secretaries to the Chairman), Lisa D.
Branch (Secretary to Dr. Taylor), and Francine P. Obermiller (Secretary to Dr. Schmalensee). The Secretaries for the Council's staff
were Mary E. Jones, Rosalind V. Rasin, Mary A. Thomas, and
Janet J. Twyman.
Lissa J. Rideout and David J. Kogut served as Student Assistants
during the summer and winter of 1990. Dorothy Bagovich, Statistical Assistant, and Rebecca J. Hopkins, Student Assistant, assisted
in the preparation of the 1991 Report.
DEPARTURES

J. Steven Landefeld, who served as Special Assistant to the
Chairman, resigned in the summer of 1990 to accept a position with
the Department of Commerce. Margot E. Machol, who served as
Staff Assistant to the Chairman in the summer and fall of 1990,
became a Member of the National Commission for Employment
Policy.
The Council's Senior Staff Economists, in most cases, are on
leave of absence from faculty positions at academic institutions or
from other government agencies or research institutions. Their
tenure with the Council is usually limited to one or two years.
Most of the Senior Staff Economists who resigned during 1990 returned to their previous affiliations. They are John M. Antle (Montana State University), Randi M. Boorstein (International Trade




276

Commission), Susan M. Collins (Harvard University), Brian F. Madigan (Board of Governors of the Federal Reserve System), Marc S.
Robinson (General Motors), and William L. Wascher (Board of Governors of the Federal Reserve System). Others went on to new positions. They are Jeremy C. Stein (Massachusetts Institute of Technology), Rebecca M. Blank (Northwestern University), Douglas J.
Holtz-Eakin (Syracuse University), and Peter M. Taylor (Senate
Budget Committee).
Staff Economists usually have just completed their dissertations
and spend one year at the Council as additional preparation for
their professional careers. Staff Economists in 1990 were S. Lael
Brainard (Massachusetts Institute of Technology) and Barbara A.
Claffey (Department of Agriculture). Junior Staff Economists generally are graduate students who spend one year with the Council
and then return to school to complete their dissertations. Those
who returned to their graduate studies in 1990 are: Janice C.
Eberly (Massachusetts Institute of Technology), Elizabeth T.
Powers (The Brookings Institution and the University of Pennsylvania), and David E. Weinstein (University of Michigan). Beth
Anne Wilson, who served as a Research Assistant in 1990, began
graduate studies at the Massachusetts Institute of Technology.
Suzanne M. Tudor, Secretary to Dr. Taylor, resigned in 1990.




277




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







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

Gross national product, 1929-90
Gross national product in 1982 dollars, 1929-90
Implicit price deflators for gross national product, 1929-90
Fixed-weighted price indexes for gross national product, 1982
weights, 1959-90
Changes in gross national product, personal consumption expenditures, and related price measures, 1933-90
Gross national product by major type of product, 1929-90
Gross national product by major type of product in 1982 dollars,
1929-90
Gross national product by sector, 1929-90
Gross national product by sector in 1982 dollars, 1929-90
Gross national product by industry, 1947-88
Gross national product by industry in 1982 dollars, 1947-88
Gross domestic product of nonfinancial corporate business, 194090
Output, costs, and profits of nonfinancial corporate business,
1948-90
Personal consumption expenditures, 1940-90
Personal consumption expenditures in 1982 dollars, 1940-90
Gross and net private domestic investment, 1929-90
Gross and net private domestic investment in 1982 dollars, 192990
Inventories and final sales of business, 1946-90
Inventories and final sales of business in 1982 dollars, 1947-90
Foreign transactions in the national income and product accounts, 1929-90
Exports and imports of goods and services in 1982 dollars, 192990
Relation of gross national product, net national product, and national income, 1929-90
Relation of national income and personal income, 1929-90
National income by type of income, 1929-90
Sources of personal income, 1929-90
Disposition of personal income, 1929-90
Total and per capita disposable personal income and personal
consumption expenditures in current and 1982 dollars, 1929-90
Gross saving and investment, 1929-90
Saving by individuals, 1946-90
Number and median income (in 1989 dollars) of families and persons, and poverty status, by race, 1970-89




281

286
288
290
292
293
294
295
296
297
298
299
300

301
302
303
304
305
306
307

308
309

310
311
312
314
316
317
318
319
320

POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY:
B-31.
B-32.
B-33.
B-34.
B-35.
B-36.
B-37.
B-38.
B-39.
B-40.
B-41.
B-42.
B-43.
B-44.
B-45.
B-46.
B-47.

Population by age groups, 1929-90
Population and the labor force, 1929-90
Civilian employment and unemployment by sex and age, 1947-90
Civilian employment by demographic characteristic, 1954-90
Unemployment by demographic characteristic, 1954-90
Labor force participation rate and employment/population ratio,
1948-90
Civilian labor force participation rate by demographic characteristic, 1954-90
Civilian employment/population ratio by demographic characteristic, 1954-90
Unemployment rate, 1948-90
Civilian unemployment rate by demographic characteristic,
1948-90
Unemployment by duration and reason, 1947-90
Unemployment insurance programs, selected data, 1955-90
Employees on nonagricultural payrolls, by major industry, 194690
Average weekly hours and hourly and weekly earnings in private nonagricultural industries, 1947-90
Employment cost index, private industry, 1975-90
Productivity and related data, business sector, 1947-90
Changes in productivity and related data, business sector, 194890

321
322
324
325
326
327
328
329
330
331
332
333
334

336
337
338
339

PRODUCTION AND BUSINESS ACTIVITY:
B-48.
B-49.
B-50.
B-51.
B-52.
B-53.
B-54.
B-55.
B-56.
B-57.

Industrial production indexes, major industry divisions, 1939-90..
Industrial production indexes, market groupings, 1947-90
Industrial production indexes, selected manufactures, 1947-90
Capacity utilization rates, 1948-90
New construction activity, 1929-90
New housing units started and authorized, 1959-90
Business expenditures for new plant and equipment, 1947-91
Manufacturing and trade sales and inventories, 1948-90
Manufacturers' shipments and inventories, 1947-90
Manufacturers' new and unfilled orders, 1947-90

340
341
342
343
344
346
347
348
349
350

Consumer price indexes, major expenditure classes, 1946-90
Consumer price indexes, selected expenditure classes, 1946-90
Consumer price indexes, commodities, services, and special
groups, 1946-90
Changes in special consumer price indexes, 1958-90
Changes in consumer price indexes, commodities and services,
1929-90
Producer price indexes by stage of processing, 1947-90
Producer price indexes by stage of processing, special groups,
1974-90
Producer price indexes for major commodity groups, 1947-90
Changes in producer price indexes for finished goods, 1955-90

351
352

PRICES:
B-58.
B-59.
B-60.
B-61.
B-62.
B-63.
B-64.
B-65.
B-66.




282

354
355
356
357
359
360
362

MONEY STOCK, CREDIT, AND FINANCE:
B-67.
B-68.
B-69.
B-70.
B-71.
B-72.
B-73.
B-74.
B-75.

Money stock, liquid assets, and debt measures, 1959-90
Components of money stock measures and liquid assets, 1959-90..
Aggregate reserves of depository institutions and monetary base,
1959-90
Commercial bank loans and securities, 1972-90
Bond yields and interest rates, 1929-90
Total funds raised in credit markets by nonfinancial sectors,
1981-90
Mortgage debt outstanding by type of property and of financing,
1939-90
Mortgage debt outstanding by holder, 1939-90
Consumer credit outstanding, 1950-90

363
364
366
367
368
370
372
373
374

GOVERNMENT FINANCE:
B-76.
B-77.
B-78.

B-79.
B-80.

B-81.
B-82.
B-83.
B-84.
B-85.
B-86.

Federal receipts, outlays, surplus or deficit, and debt, selected
fiscal years, 1929-92
Federal receipts, outlays, and debt, fiscal years 1981-92
Relation of Federal Government receipts and expenditures in the
national income and product accounts to the budget, fiscal
years 1990-92
Federal and State and local government receipts and expenditures, national income and product accounts, 1929-90
Federal and State and local government receipts and expenditures, national income and product accounts, by major type,
1940-90
Federal Government receipts and expenditures, national income
and product accounts, 1969-92
State and local government receipts and expenditures, national
income and product accounts, 1946-90
State and local government revenues and expenditures, selected
fiscal years, 1927-89
Interest-bearing public debt securities by kind of obligation,
1967-90
Maturity distribution and average length of marketable interestbearing public debt securities held by private investors, 196790
Estimated ownership of public debt securities by private investors, 1976-90

375
376

378
379

380
381
382
383
384
385

386

CORPORATE PROFITS AND FINANCE:
B-87.
B-88.
B-89.
B-90.
B-91.
B-92.
B-93.
B-94.

Corporate profits with inventory valuation and capital consumption adjustments, 1929-90
Corporate profits by industry, 1929-90
Corporate profits of manufacturing industries, 1929-90
Sales, profits, and stockholders' equity, all manufacturing corporations, 1950-90
Relation of profits after taxes to stockholders' equity and to
sales, all manufacturing corporations, 1947-90
Sources and uses of funds, nonfarm nonfinancial corporate business, 1946-90
Common stock prices and yields, 1949-90
Business formation and business failures, 1946-90




283

387
388
389
390
391
392
393
394

AGRICULTURE:
B-95.
B-96.
B-97.
B-98.
B-99.
B-100.

Farm income, 1929-90
Farm output and productivity indexes, 1947-90
Farm input use, selected inputs, 1947-89
Indexes of prices received and prices paid by farmers, 1948-90
U.S. exports and imports of agricultural commodities, 1940-90
Balance sheet of the farm sector, 1939-90

395
396
397
398
399
400

INTERNATIONAL STATISTICS:
B-101. International investment position of the United States at yearend, 1982-89
B-102. U.S. international transactions, 1946-90
B-103. U.S. merchandise exports and imports by principal end-use category, 1965-90
B-104. U.S. merchandise exports and imports by area, 1981-90
B-105. U.S. merchandise exports, imports, and trade balance, 1970-90
B-106. International reserves, selected years, 1952-90
B-107. Industrial production and consumer prices, major industrial
countries, 1962-90
B-108. Civilian unemployment rate, and hourly compensation, major industrial countries, 1962-90
B-109. Foreign exchange rates, 1967-90
B-110. Growth rates in real gross national product, 1961-90




284

401
402
404
405
406
407
408
409
410
411

General Notes
Detail in these tables may not add to totals because of rounding.
Unless otherwise noted, all dollar figures are in current dollars.
Symbols used:
p
Preliminary.
Not available (also, not applicable).
Data in these tables reflect revisions made by the source agencies from
January 1990 through February 4,1991.




285

NATIONAL INCOME OR EXPENDITURE
TABLE B-l.—Gross national product, 1929-90
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Gross private domestic investment

Personal consumption expenditures

Fixed investment
Year or quarter

1929
1933. ..
1939
1940...
1941
1942.
1943
1944
1945
1946...
1947
1948
1949
1950....
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965..
1966
1967...
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977....
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 p
1982- IV
1983: IV
1984- IV
1985: IV
1986- IV
1987: IV
1988: 1
||
III
IV
1989: 1
||
III
IV
1990: 1
||
III
IV ".

Gross
national
product

103.9
56.0
91.3
100.4
125.5
159.0
192.7
211.4
213.4
212.4
235.2
261.6
260.4
288.3
333.4
351.6
371.6
372.5
405.9
428.2
451.0
456.8
495.8
515.3
533.8
574.6
606.9
649.8
705.1
772.0
816.4
892.7
963.9
1,015.5
1,102.7
1,212.8
1,359.3
1,472.8
1,598.4
1,782.8
1,990.5
2,249.7
2,508.2
2,732.0
3,052.6
3,166.0
3,405.7
3,772.2
4,014.9
4,231.6
4,515.6
4,873.7
5,200.8
5,463.0
3,212.5
3,545.8
3,851.8
4,107.9
4,297.3
4,647.6
4,735.8
4,831.4
4,917.9
5,009.8
5,101.3
5,174.0
5,238.6
5,289.3
5,375.4
5,443.3
5,514.6
5,518.9




Total

77.3
45.8
67.0
71.0
80.8
88.6
99.5
108.2
119.6
143.9
161.9
174.9
178.3
192.1
208.1
219.1
232.6
239.8
257.9
270.6
285.3
294.6
316.3
330.7
341.1
361.9
381.7
409.3
440.7
477.3
503.6
552.5
597.9
640.0
691.6
757.6
837.2
916.5
1,012.8
1,129.3
1,257.2
1,403.5
1,566.8
1,732.6
1,915.1
2,050.7
2,234.5
2,430.5
2,629.0
2,797.4
3,009.4
3,238.2
3,450.1
3,658.1
2,117.0
2,315.8
2,493.4
2,700.4
2,868.5
3,079.1
3,147.7
3,204.3
3,268.2
3,332.6
3,371.7
3,425.9
3,484.3
3,518.5
3,588.1
3,622.7
3,693.4
3,728.1

NonDurable durable Services
goods goods

9.2
3.5
6.7
7.8
9.7
6.9
6.5
6.7
8.0
15.8
20.4
22.9
25.0
30.8
29.9
29.3
32.7
32.1
38.9
38.2
39.7
37.2
42.8
43.5
41.9
47.0
51.8
56.8
63.5
68.5
70.6
81.0
86.2
85.7
97.6
111.2
124.7
123.8
135.4
161.5
184.5
205.6
219.0
219.3
239.9
252.7
289.1
335.5
372.2
406.0
423.4
457.5
474.6
481.6
263.8
310.0
346.7
373.2
422.0
427.4
448.9
453.7
454.2
473.1
466.4
473.6
487.1
471.2
492.1
478.4
482.3
473.5

37.7
22.3
35.1
37.0
42.9
50.8
58.6
64.3
71.9
82.7
90.9
96.6
94.9
98.2
109.2
114.7
117.8
119.7
124.7
130.8
137.1
141.7
148.5
153.2
157.4
163.8
169.4
179.7
191.9
208.5
216.9
235.0
252.2
270.3
283.3
305.1
339.6
380.9
416.2
452.0
490.4
541.8
613.2
681.4
740.6
771.0
816.7
867.3
911.2
942.0
1,001.3
1,060.0
1,130.0
1,194.2
786.6
837.9
879.6
932.7
952.1
1,019.9
1,029.8
1,049.1
1,073.2
1,088.0
1,106.7
1,127.1
1,137.3
1,148.8
1,174.7
1,179.0
1205.0
1,218.3

30.4
20.1
25.2
26.2
28.3
31.0
34.3
37.2
39.7
45.4
50.6
55.5
58.4
63.2
69.0
75.1
82.1
88.0
94.3
101.6
108.5
115.7
125.0
134.0
141.8
151.1
160.6
172.8
185.4
200.3
216.0
236.4
259.4
284.0
310.7
341.3
373.0
411.9
461.2
515.9
582.3
656.1
734.6
831.9
934.7
1,027.0
1,128.7
1,227.6
1,345.6
1,449.5
1,584.7
1,720.7
1,845.5
1,982.3
1,066.5
1,167.9
1,267.1
1,394.5
1,494.4
1,631.8
1,668.9
1,701.5
1,740.7
1,771.5
1,798.6
1,825.1
1,859.8
1,898.5
1,921.3
1,965.3
2,006.2
2,036.3

286

Nonresidential
Total

16.7
1.6
9.5
13.4
18.3
10.3
6.2
7.7
11.3
31.5
35.0
47.1
36.5
55.1
60.5
53.5
54.9
54.1
69.7
72.7
71.1
63.6
80.2
78.2
77.1
87.6
93.1
99.6
116.2
128.6
125.7
137.0
153.2
148.8
172.5
202.0
238.8
240.8
219.6
277.7
344.1
416.8
454.8
437.0
515.5
447.3
502.3
664.8
643.1
659.4
699.5
747.1
771.2
745.0
409.6
579.8
661.8
654.1
648.8
741.4
729.2
746.0
765.6
747.5
769.7
776.7
775.8
762.7
747.2
759.0
759.7
714.0

Total

14.9
3.1
9.1
11.2
13.8
8.5
6.9
8.7
12.3
25.1
35.5
42.4
39.5
48.3
50.2
50.5
54.5
55.7
64.0
68.0
69.7
65.1
74.4
75.1
74.7
81.5
87.3
94.2
106.2
114.4
115.4
129.1
143.4
145.7
164.7
191.5
219.2
225.4
225.2
261.7
322.8
388.2
441.9
445.3
491.5
471.8
509.4
597.1
631.8
652.5
671.2
720.8
742.9
747.2
469.5
548.8
616.8
646.8
660.9
685.7
700.8
723.8
727.4
731.3
743.1
744.0
746.9
737.7
758.9
745.6
750.7
733.6

Total

11.0
2.5
6.1
7.7
9.7
6.3
5.4
7.4
10.6
17.3
23.5
26.8
24.9
27.8
31.8
31.9
35.1
34.7
39.0
44.5
47.5
42.4
46.3
48.8
48.3
52.5
55.2
61.4
73.1
83.5
84.4
91.4
102.3
105.2
109.6
123.0
145.9
160.6
162.9
180.0
214.2
259.0
302.8
322.8
369.2
366.7
356.9
416.0
442.9
435.2
444.9
488.4
511.9
524.3
354.9
383.9
435.0
451.3
435.8
457.5
473.1
491.3
493.8
495.3
506.5
511.4
518.1
511.8
523.1
516.5
532.8
525.0

Structures
5.5
1.1
2.2
2.6
3.3
2.2
1.8
2.4
3.3
7.4
8.1
9.5
9.2
10.0
11.9
12.2
13.6
13.9
15.2
18.2
18.9
17.5
18.0
19.2
19.4
20.5
20.8
22.7
27.4
30.5
30.7
32.9
37.1
39.2
40.9
44.5
51.4
57.0
56.3
60.1
66.7
81.0
99.5
113.9
138.5
143.3
124.0
141.1
153.2
139.0
133.7
139.9
146.2
147.2
137.6
127.4
146.6
155.9
133.7
137.2
135.5
140.8
142.2
141.2
146.5
144.2
147.0
147.1
148.8
147.2
149.8
142.8

Producers' Residurable dential
equipment
5.5
1.4
3.9
5.2
6.4
4.1
3.7
5.0
7.3
9.9
15.3
17.3
15.7
17.8
19.9
19.7
21.5
20.8
23.9
26.3
28.6
24.9
28.3
29.7
28.9
32.1
34.4
38.7
45.8
53.0
53.7
58.5
65.2
66.1
68.7
78.5
94.5
103.6
106.6
119.9
147.4
178.0
203.3
208.9
230.7
223.4
232.8
274.9
289.7
296.2
311.2
348.4
365.7
377.2
217.3
256.5
288.4
295.5
302.2
320.4
337.6
350.5
351.6
354.0
360.0
367.2
371.0
364.7
374.3
369.3
383.0
382.2

4.0
.6
3.0
3.5
4.1
2.2
1.4
1.4
1.7
7.8
12.1
15.6
14.6
20.5
18.4
18.6
19.4
21.1
25.0
23.5
22.2
22.7
28.1
26.3
26.4
29.0
32.1
32.8
33.1
30.9
31.1
37.7
41.2
40.5
55.1
68.6
73.3
64.8
62.3
81.7
108.6
129.2
139.1
122.5
122.3
105.1
152.5
181.1
188.8
217.3
226.3
232.5
231.0
222.9
114.7
164.9
181.8
195.5
225.1
228.1
227.7
232.6
233.6
236.0
236.6
232.7
228.9
225.9
235.9
229.1
217.9
208.6

Change
in
business
inventories
1.7
-1.6
2.2
4.5
1.8

-~LO
-1.0
6.4
~4J
-3.1
6.8
10.2
3.1
.4
-1.6
5.7
4.6
1.4
-1.5
5.8
3.1
2.4
6.1
5.8
5.4
9.9
14.2
10.3
7.9
9.8
3.1
7.8
10.5
19.6
15.4
-5.6
16.0
21.3
28.6
13.0
-8.3
24.0
-24.5
-7.1
67.7
11.3
6.9
28.3
26.2
28.3
-2.2
-59.9
31.0
45.0
7.2
-12.2
55.7
28.3
22.2
38.2
16.2
26.6
32.7
28.9
25.0
-11.8
13.4
9.0
-19.5

TABLE B-l.—Gross national product, 1929-90—Continued
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Net exports of goods and
services
Year or
quarter

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971 ...
1972
1973 ...
1974
1975
1976
1977
1978
1979
1980
1981
1982 .
1983
1984
1985
1986 ....
1987
1988
1989
1990 '
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988: 1
II
Ill
IV
1989: 1
II
Ill
IV
1990: 1
II
Ill
IV "

Government purchases of goods and
services
Federal

Net
exports Exports Imports

1.1
.4
1.2
1.8
1.5
.2
-1.9
-1.7
7.8
11.9
7.0
6.5
2.2
4.5
3.2
1.3
2.6
3.0
5.3
7.3
3.3
1.5
5.9
7.2
6.9
8.2
10.9
9.7
7.5
7.4
5.5
5.6
8.5
6.3
3.2
16.8
16.3
31.1
18.8
1.9
4.1
18.8
32.1
33.9
26.3
-6.1
-58.9
-78.0
-97.4
-114.7
-74.1
-46.1
-38.0
14.1
-25.8
-67.9
-103.2
-108.9
-115.0
-82.0
-74.3
-69.6
-70.3
-48.5
-51.3
-49.3
-35.3
-30.0
-24.9
-41.3
-55.9

7.1
2.4
4.6
5.4
6.1
5.0
4.6
5.5
7.4
15.2
20.3
17.5
16.4
14.5
19.8
19.2
18.1
18.8
21.1
25.2
28.2
24.4
25.0
29.9
31.1
33.1
35.7
40.5
42.9
46.6
49.5
54.8
60.4
68.9
72.4
81.4
114.1
151.5
161.3
177.7
191.6
227.5
291.2
351.0
382.8
361.9
352.5
383.5
370.9
396.5
449.6
552.0
626.2
670.4
335.9
364.7
385.7
369.2
402.4
485.8
525.7
540.4
558.7
583.1
609.7
628.8
623.7
642.8
661.3
659.7
672.7
687.7

5.9
2.1
3.4
3.7
4.7
4.8
6.5
7.2
7.9
7.3
8.3
10.6
9.8
12.3
15.3
16.0
16.8
16.3
18.1
19.9
20.9
21.1
23.5
24.0
23.9
26.2
27.5
29.6
33.2
39.1
42.1
49.3
54.7
60.5
66.1
78.2
97.3
135.2
130.3
158.9
189.7
223.4
272.5
318.9
348.9
335.6
358.7
442.4
448.9
493.8
564.3
626.1
672.3
708.4
321.9
390.5
453.6
472.4
511.3
600.7
607.8
614.7
628.3
653.5
658.2
680.0
673.0
678.1
691.3
684.6
714.1
743.7

Total

8.9
8.3
13.6
14.2
25.0
59.9
88.9
97.1
83.0
29.1
26.4
32.6
39.0
38.8
60.4
75.8
82.8
76.0
75.3
79.7
87.3
95.4
97.9
100.6
108.4
118.2
123.8
130.0
138.6
158.6
179.7
197.7
207.3
218.2
232.4
250.0
266.5
299.1
335.0
356.9
387.3
425.2
467.8
530.3
588.1
641.7
675.0
735.9
820.8
872.2
921.4
962.5
1,025.6
1,098.0
671.8
676.1
764.5
856.7
888.9
942.0
940.9
955.4
953.8
1,000.0
1,008.5
1,022.7
1,027.8
1,043.3
1,070.1
1,086.4
1,102.8
1,132.7

Total
1.5
2.2
5.2
6.1
17.0
52.0
81.4
89.4
74.8
19.2
13.6
17.3
21.1
19.1
38.6
52.7
57.9
48.4
44.9
46.4
50.5
54.5
54.6
54.4
58.2
64.6
65.7
66.4
68.7
80.4
92.7
100.1
100.0
98.8
99.8
105.8
106.4
116.2
129.2
136.3
151.1
161.8
178.0
208.1
242.2
272.7
283.5
310.5
355.2
366.5
381.3
380.3
400.0
424.2
293.2
276.1
326.0
376.6
368.8
388.2
374.8
377.7
367.4
401.1
398.3
402.5
399.2
399.9
410.6
421.9
425.8
438.5

Nation- Nonal
dedefense fense

1.3
2.3
13.8
49.4
79.8
87.5
73.7
16.4
10.0
11.3
13.9
14.3
33.8
46.2
49.0
41.6
39.0
40.7
44.6
46.3
46.4
45.3
47.9
52.1
51.5
50.4
51.0
62.0
73.4
79.1
78.9
76.8
74.1
77.4
77.5
82.6
89.6
93.4
100.9
108.9
121.9
142.7
167.5
193.8
214.4
234.3
259.1
277.8
294.6
297.2
301.1
314.0
205.4
221.5
244.1
268.6
280.7
296.0
296.6
297.1
295.5
299.6
298.2
300.6
306.3
299.2
307.2
309.6
312.6
326.5

3.9
3.9
3.2
2.6
1.6
2.0
1.1
2.8
3.6
6.0
7.2
4.7
4.8
6.5
8.9
6.8
6.0
5.7
5.9
8.3
8.2
9.2
10.2
12.6
14.2
16.0
17.7
18.3
19.3
21.0
21.1
22.0
25.8
28.4
28.9
33.6
39.6
42.9
50.3
52.9
56.1
65.4
74.8
78.9
69.1
76.2
96.0
88.7
86.7
83.1
98.9
110.2
87.7
54.6
81.9
108.0
88.1
92.2
78.3
80.6
71.9
101.6
100.1
101.9
93.0
100.7
103.4
112.3
113.2
112.0

State
and
local
7.4
6.1
8.3
8.1
8.0
7.8
7.5
7.6
8.2
9.9
12.8
15.3
18.0
19.8
21.8
23.1
24.8
27.7
30.3
33.3
36.9
40.8
43.3
46.1
50.2
53.5
58.1
63.5
69.9
78.2
87.0
97.6
107.2
119.4
132.5
144.2
160.1
182.9
205.9
220.6
236.2
263.4
289.9
322.2
345.9
369.0
391.5
425.3
465.6
505.7
540.2
582.3
625.6
673.8
378.7
400.0
438.5
480.1
520.1
553.9
566.1
577.7
586.4
598.9
610.2
620.2
628.6
643.4
659.6
664.6
677.0
694.2

Final
sales

102.2
57.6
90.9
98.3
121.0
157.2
193.4
212.3
214.4
206.0
235.7
256.9
263.4
281.4
323.2
348.6
371.1
374.1
400.2
423.6
449.6
458.3
490.0
512.3
531.4
568.5
601.1
644.4
695.2
757.8
806.1
884.8
954.1
1,012.3
1,094.9
1,202.3
1,339.7
1,457.4
1,604.1
1,766.8
1,969.2
2,221.0
2,495.2
2,740.3
3,028.6
3,190.5
3,412.8
3,704.5
4,003.6
4,224.8
4,487.3
4,847.5
5,172.5
5,465.3
3,272.4
3,514.8
3,806.8
4,100.7
4,309.4
4,591.9
4,707.4
4,809.2
4,879.7
4,993.6
5,074.7
5,141.3
5,209.7
5,264.3
5,387.2
5,429.9
5,505.6
5,538.4

Gross
domestic
purchases 1

102.8
55.7
90.1
98.7
124.1
158.8
194.6
213.0
213.9
204.5
223.3
254.7
253.8
286.0
329.0
348.4
370.3
370.0
402.9
422.9
443.7
453.5
494.3
509.4
526.6
567.7
598.7
638.9
695.4
764.5
809.0
887.2
958.3
1,007.0
1,096.4
1,209.6
1,342.5
1,456.5
1,567.4
1,764.0
1,988.6
2,245.6
2,489.4
2,699.8
3,018.7
3,139.7
3,411.8
3,831.1
4,092.8
4,329.0
4,630.3
4,947.8
5,246.9
5,501.1
3,198.5
3,571.6
3,919.7
4,211.2
4,406.2
4,762.6
4,817.8
4,905.7
4,987.5
5,080.1
5,149.8
5,225.3
5,287.9
5,324.6
5,405.3
5,468.2
5,555.9
5,574.8

1
Gross national product (GNP) less exports of goods and services plus imports of goods and services.
Source: Department of Commerce, Bureau of Economic Analysis.




287

Percent change from
preceding period
Gross
national
product
-4.2
7.0
10.0
25.0
26.6
21.2
9.7
.9
-.5
10.8
11.2
10.7
15.7
5.5
5.7
.2
9.0
5.5
5.3
1.3
8.5
3.9
3.6
7.6
5.6
7.1
8.5
9.5
5.8
9.3
8.0
5.4
8.6
10.0
12.1
8.3
8.5
11.5
11.7
13.0
11.5
8.9
11.7
3.7
7.6
10.8
6.4
5.4
6.7
7.9
6.7
5.0
4.2
12.4
4.7
6.2
4.2
8.7
7.8
8.3
7.4
7.7
7.5
5.8
5.1
3.9
6.7
5.1
5.3
.3

Final
sales

-5.5
5.4
8.1
23.2
29.9
23.0
9.8
1.0
-3.9
14.4
9.0
2.5
6.8
14.8
7.9
6.5
.8
7.0
5.8
6.1
1.9
6.9
4.6
3.7
7.0
5.7
7.2
7.9
9.0
6.4
9.8
7.8
6.1
8.2
9.8
11.4
8.8
10.1
10.1
11.5
12.8
12.3
9.8
10.5
5.3
7.0
8.5
8.1
5.5
6.2
8.0
6.7
5.7
11.0
7.8
7.0
5.5
4.7
4.5
10.4
8.9
6.0
9.7
6.7
5.4
5.4
4.3
9.7
3.2
5.7
2.4

Gross
domestic
.P«r- l
chases f

-4.2
7.3
9.5
25.7
28.0
22.6
9.5
.4
-4.4
9.2
14.0
12.7
15.0
5.9
6.3
l!9
5.0
4.9
2.2
9.0
3.1
3.4
7.8
5.5
6.7
8.8
9.9
5.8
9.7
8.0
5.1
8.9
10.3
11.0
8.5
7.6
12.5
12.7
12.9
10.9
8.5
11.8
4.0
8.7
12.3
6.8
5.8
7.0
6.9
6.0
4.8
4.3
13.1
5.5
8.3
4.9
8.1
4.7
7.5
6.8
7.6
5.6
6.0
4.9
2.8
6.2
4.7
6.6
1.4

TABLE B-2.—Gross national product in 1982 dollars, 1929-90
[Billions of 1982 dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Personal consumption
expenditures

Gross private domestic investment
Fixed investment

Year or
quarter

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950.
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 *
1982- IV
1983: IV
1984: IV
1985: IV
1986- IV
1987: IV
1988: 1
II
Ill
IV
1989: 1
II
Ill
IV
1990: 1
II
Ill
IV *

Gross
national
product

709.6
498.5
716.6
772.9
909.4
1,080.3
1,276.2
1,380.6
1,354.8
1,096.9
1,066.7
1,108.7
1,109.0
1,203.7
1,328.2
1,380.0
1,435.3
1,416.2
1,494.9
1,525.6
1,551.1
1,539.2
1,629.1
1,665.3
1,708.7
1,799.4
1,873.3
1,973.3
2,087.6
2,208.3
2,271.4
2,365.6
2,423.3
2,416.2
2,484.8
2,608.5
! 2,744.1
2,729.3
2,695.0
2,826.7
2,958.6
3,115.2
3,192.4
3,187.1
3,248.8
3,166.0
3,279.1
3,501.4
3,618.7
3,717.9
3,845.3
4,016.9
4,117.7
4,155.8
3,159.3
3,365.1
3,535.2
3,662.4
3,733.6
3,920.7
3,970.2
4,005.8
4,032.1
4,059.3
4,095.7
4,112.2
4,129.7
4,133.2
4,150.6
4,155.1
4,170.0
4,147.6

Change
in
busiProResiness
ducers' dential invendurable
tories
equipment

Nonresidential
Total

471.4
378.7
480.5
502.6
531.1
527.6
539.9
557.1
592.7
655.0
666.6
681.8
695.4
733.2
748.7
771.4
802.5
822.7
873.8
899.8
919.7
932.9
979.4
1,005.1
1,025.2
1,069.0
1,108.4
1,170.6
1,236.4
1,298.9
1,337.7
1,405.9
1,456.7
1,492.0
1,538.8
1,621.9
1,689.6
1,674.0
1,711.9
1,803.9
1,883.8
1,961.0
2,004.4
2,000.4
2,024.2
2,050.7
2,146.0
2,249.3
2,354.8
2,446.4
2,515.8
2,606.5
2,656.8
2,682,2
2,078.7
2,191.9
2,281.1
2,386.9
2478
,7.
2,534.2
2,576.8
2,594.1
2,616.4
2,638.8
2,636.7
2,645.3
2,675.3
2,669.9
2,677.3
2,678.8
2,696.8
2,675.8

NonDurable durable Services
goods goods

40.3
20.7
35.7
40.6
46.2
31.3
28.1
26.3
28.7
47.8
56.5
61.7
67.8
80.7
74.7
73.0
80.2
81.5
96.9
92.8
92.4
86.9
96.9
98.0
93.6
103.0
111.8
120.8
134.6
144.4
146.2
161.6
167.8
162.5
178.3
200.4
220.3
204.9
205.6
232.3
253.9
267.4
266.5
245.9
250.8
252.7
283.1
323.1
355.1
384.4
391.4
418.2
428.0
428.4
262.0
300.5
333.1
356.4
397.5
392.6
412.4
416.2
415.1
429.0
422.4
428.2
438.1
423.1
437.6
426.8
429.5
419.9

211.4
181.8
248.0
259.4
275.6
279.1
284.7
297.9
323.5
344.2
337.4
338.7
342.3
352.8
362.9
376.6
388.2
393.8
413.2
426.9
434.7
439.9
455.8
463.3
470.1
484.2
494.3
517.5
543.2
569.3
579.2
602.4
617.2
632.5
640.3
665.5
683.2
666.1
676.5
708.8
731.4
753.7
766.6
762.6
764.4
771.0
800.2
825.9
847.4
878.1
892.7
909.4
919.9
911.5
778.6
812.7
831.2
858.3
883.5
895.2
900.9
905.3
914.4
917.1
918.5
914.6
923.4
923.0
915.6
911.2
916.4
902.8

Total

219.7
176.2
196.7
202.7
209.3
217.2
227.2
232.9
240.5
262.9
272.6
281.4
285.3
299.8
311.1
321.9
334.1
347.4
363.6
380.1
392.6
406.1
426.7
443.9
461.4
481.8
502.3
532.3
558.5
585.3
612.3
641.8
671.7
697.0
720.2
756.0
786.1
803.1
829.8
862.8
898.5
939.8
971.2
991.9
1,009.0
1,027.0
1,062.7
1,100.3
1,152.3
1,183.8
1,231.6
1,278.9
1,309.0
1,342.2
1,038.1
1,078.6
1,116.8
1,172.2
1,196.8
1,246.4
1,263.5
1,272.6
1,286.8
1,292.8
1,295.8
1,302.5
1,313.8
1,323.8
1,324.2
i.340.8
1,350.8
1,353.1

See next page for continuation of table.




288

Total
Total

139.2
22.7
86.0
111.8
138.8
76.7
50.4
56.4
76.5
178.1
177.9
208.2
168.8
234.9
235.2
211.8
216.6
212.6
259.8
257.8
243.4
221.4
270.3
260.5
259.1
288.6
307.1
325.9
367.0
390.5
374.4
391.8
410.3
381.5
419.3
465.4
520.8
481.3
383.3
453.5
521.3
576.9
575.2
509.3
545.5
447.3
504.0
658.4
637.0
639.6
669.0
705.7
716.9
690.3
408.8
577.2
655.7
648.0
615.2
706.6
698.4
705.1
723.0
696.2
717.0
719.1
722.3
709.1
700.7
700.7
697.0
662.8

128.4
33.5
82.1
97.4
111.1
64.7
49.7
61.6
84.9
150.2
178.9
196.0
178.4
210.8
204.3
201.8
213.8
217.3
243.5
244.9
240.4
224.8
253.8
252.7
251.8
272.4
290.5
310.2
341.8
353.7
345.6
370.7
385.1
373.3
399.7
443.7
480.8
448.0
396.1
431.4
492.2
540.2
560.2
516.2
521.7
471.8
510.4
596.1
627.9
634.1
646.2
682.1
693.1
691.4
468.1
550.3
614.0
640.4
636.0
658.1
667.4
688.3
690.4
682.2
690.9
693.6
697.7
690.2
702.9
691.2
692.3
679.1

93.0
25.8
53.2
65.0
76.6
47.4
39.4
52.6
74.2
105.5
121.7
127.4
114.8
124.0
131.7
130.6
140.1
137.5
151.0
160.4
161.1
143.9
153.6
159.4
158.2
170.2
176.6
194.9
227.6
250.4
245.0
254.5
269.7
264.0
258.4
277.0
317.3
317.8
281.2
290.6
324.0
362.1
389.4
379.2
395.2
366.7
361.2
425.2
453.5
438.4
449.8
487.2
506.1
513.9
352.3
390.4
444
4.
460.9
435.7
462.3
475.0
492.6
494.6
486.6
497.1
505.5
513.3
508.4
514.6
508.4
519.3
513.2

Structures

54.7
14.3
25.2
28.5
33.4
20.9
15.6
20.4
27.0
50.9
47.5
50.5
49.3
52.8
56.5
57.3
62.3
64.9
69.4
75.5
75.2
70.6
71.9
76.1
77.7
81.3
81.6
87.9
101.8
108.0
105.4
108.0
112.9
111.1
107.3
109.5
117.7
115.2
102.8
104.4
108.3
119.3
130.6
136.2
148.8
143.3
127.2
143.8
149.5
130.1
122.8
122.4
122.4
121.0
138.3
131.6
147.1
149.9
123.4
124.4
121.0
123.9
123.8
121.0
123.2
120.6
122.7
123.1
123.8
120.9
122.4
117.0

38.4
11.5
28.0
36.5
43.2
26.5
23.8
32.1
47.2
54.7
74.2
76.9
65.5
71.2
75.2
73.3
77.7
72.7
81.7
84.9
85.9
73.3
81.7
83.3
80.5
88.9
95.1
107.0
125.8
142.4
139.6
146.5
156.8
152.9
151.0
167.5
199.6
202.7
178.4
186.2
215.7
242.8
258.8
243.0
246.4
223.4
233.9
281.4
304.0
308.3
327.0
364.8
383.7
392.9
214.1
258.8
297.3
311.1
312.3
337.9
353.9
368.8
370.8
365.6
374.0
384.9
390.6
385.4
390.8
387.5
397.0
396.3

35.4
7.7
28.9
32.5
34.4
17.3
10.4
9.0
10.7
44.7
57.2
68.6
63.6
86.7
72.6
71.2
73.8
79.8
92.4
84.4
79.3
81.0
100.2
93.3
93.6
102.2
113.9
115.3
114.2
103.2
100.6
116.2
115.4
109.3
141.3
166.6
163.4
130.2
114.9
140.8
168.1
178.0
170.8
137.0
126.5
105.1
149.3
170.9
174.4
195.7
196.4
194.9
187.0
177.5
115.8
159.9
169.6
179.4
200.3
195.8
192.4
195.6
195.8
195.6
193.8
188.1
184.4
181.8
188.3
182.8
173.0
165.9

10.8
-10.7
3.9
14.4
27.8
12.0
.7
-5.2
-8.4
27.9
-1.0
12.3
-9.7
24.2
30.8
10.0
2.8
-4.8
16.3
12.9
3.0
34
16.5
7.7
7.3
16.2
16.6
15.7
25.2
36.9
28.8
21.0
25.1
8.2
19.6
21.8
40.0
33.3
-12.8
22.1
29.1
36.8
15.0
-6.9
23.9
-24.5
-6.4
62.3
9.1
5.6
22.8
23.6
23.8
-1.1
593
27.0
41.7
7.7
208
48.4
31.0
16.9
32.6
14.0
26.1
25.5
24.6
18.9
-2.2
9.5
4.7
-16.3

TABLE B-2.—Gross national product in 1982 dollars, 1929-90—Continued
[Billions of 1982 dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Net exports of goods and
services
Year or
quarter

Federal

Net
exports Exports Imports Total

4.7
1929
14
1933
1939
6.1
1940
8.2
1941
3.9
-7.7
1942
1943
-23.0
1944
-23.8
1945
-18.9
1946
27.0
1947
42.4
1948
19.2
1949
18.8
4.7
1950
1951
14.6
1952
6.9
1953
-2.7
2.5
1954
1955
.0
1956
,.
4.3
1957
7.0
103
1958
1959
-18.2
1960
-4.0
1961
-2.7
1962
-7.5
1963
-1.9
1964
5.9
1965
-2.7
1966
137
1967
-16.9
1968
297
1969
-34.9
1970
-30.0
1971
-39.8
1972
-49.4
1973
-31,5
1974
.8
1975
18.9
1976
-11.0
1977
-35.5
1978
-26.8
1979
3.6
1980
57.0
49.4
1981
1982
26.3
1983
-19.9
1984
-84.0
1985
-104.3
1986
-129.7
1987
-118.5
1988
-75.9
1989
-54.1
1990 ".
-37.5
1982: IV
11.7
1983: IV
-46.2
1984: IV
-94.8
1985: IV
-125.3
1986: IV
-135.4
1987: IV
-111.3
1988:1
-77.3
II .
-72.2
Ill
-78.5
IV
-75.7
1989:1
-51.1
II
-53.3
Ill
-64.1
IV
-47.9
1990-1 ..
-35.4
II
-44.6
Ill
-46.5
IV"
-23.6

42.1
22.7
36.2
40.0
42.0
29.1
25.1
27.3
35.2
69.0
82.3
66.2
65.0
59.2
72.0
70.1
66.9
70.0
76.9
87.9
94.9
82.4
83.7
98.4
100.7
106.9
114.7
128.8
132.0
138.4
143.6
155.7
165.0
178.3
179.2
195.2
242.3
269.1
259.7
274.4
281.6
312.6
356.8
388.9
392.7
361.9
348.1
371.8
367.2
397.1
451.8
534.7
593.3
630.3
336.0
355.5
376.6
367.4
406.5
487.0
521.7
527.3
534.3
555.3
576.1
593.2
592.5
611.6
628.1
620.1
630.5
642.4

37.4
24.2
30.1
31.7
38.2
36.9
48.0
51.1
54.1
42.0
39.9
47.1
46.2
54.6
57.4
63.3
69.7
67.5
76.9
83.6
87.9
92.8
101.9
102.4
103.3
114.4
116.6
122.8
134.7
152.1
160.5
185.3
199.9
208.3
218.9
244.6
273.8
268.4
240.8
285.4
317.1
339.4
353.2
332.0
343.4
335.6
368.1
455.8
471.4
526.9
570.3
610.6
647.4
667.8
324.3
401.6
471.4
492.6
541.9
598.3
599.0
599.5
612.8
631.0
627.3
646.5
656.6
659.4
663.5
664.7
677.0
666.0

94.2
98.5
144.1
150.2
235.6
483.7
708.9
790.8
704.5
236.9
179.8
199.5
226.0
230.8
329.7
389.9
419.0
378.4
361.3
363.7
381.1
395.3
397.7
403.7
427.1
449.4
459.8
470.8
487.0
532.6
576.2
597.6
591.2
572.6
566.5
570.7
565.3
573.2
580.9
580.3
589.1
604.1
609.1
620.5
629.7
641.7
649.0
677.7
731.2
761.6
779.1
780.5
798.1
820.8
660.1
642.2
693.2
752.7
776.0
791.3
772.4
778.7
771.2
799.9
793.2
801.0
796.2
802.2
807.9
820.2
822.7
832.5

Total

18.3
27.0
53.8
63.6
153.0
407.1
638.1
722.5
634.0
159.3
91.9
106.1
119.5
116.7
214.4
272.7
295.9
245.0
217.9
215.4
224.1
224.9
221.5
220.6
232.9
249.3
247.8
244.2
244.4
273.8
304.4
309.6
295.6
268.3
250.6
246.0
230.0
226.4
226.3
224.2
231.8
233.7
236.2
246.9
259.6
272.7
275.1
290.8
326.0
334.1
339.6
328.1
334.9
344.0
289.5
266.0
300.5
340.6
342.4
347.7
324.5
327.3
318.4
342.3
334.2
339.9
333.0
332.7
333.0
345.9
346.0
351.1

Nation- Nonal
dedefense fense

185.3
171.0
163.3
161.1
157.5
159.2
160.7
164.3
171.2
180.3
193.8
206.9
218.5
237.2
252.1
265.1
260.7
256.3
259.1
201.4
211.6
225.3
241.4
255.8
266.0
262.2
261.3
258.0
261.1
253.7
255.7
260.2
255.5
254.4
256.5
258.2
267.4

60.7
59.1
63.1
65.2
66.8
72.7
73.0
71.9
75.7
79.3
78.9
68.2
72.3
88.8
82.0
74.5
67.5
78.7
84.9
88.2
54.4
75.2
99.2
86.6
81.7
62.3
66.0
60.4
81.2
80.4
84.2
72.8
77.2
78.6
89.4
87.8
83.6

State
and
local

75.9
71.5
90.3
86.6
82.6
76.7
70.8
68.3
70.5
77.6
87.9
93.4
106.5
114.2
115.4
117.3
123.1
133.4
143.4
148.3
157.0
170.4
176.2
183.1
194.2
200.1
212.0
226.6
242.5
258.8
271.8
288.0
295.6
304.3
315.9
324.7
335.3
346.8
354.6
356.0
357.2
370.4
373.0
373.6
370.1
369.0
373.9
387.0
405.2
427.5
439.5
452.4
463.2
476.8
370.6
376.2
392.7
412.1
433.6
443.6
447.9
451.4
452.7
457.5
459.0
461.1
463.2
469.5
475.0
474.3
476.7
481.4

1
GNP less exports of goods and services plus imports of goods and services.
Source: Department of Commerce, Bureau of Economic Analysis.




Percent change from
preceding period

Government purchases of goods and
services

289

Final
sales

698.7
509.2
712.7
758.5
881.6
1,068.3
1,275.5
1,385.7
1,363.3
1,069.0
1,067.7
1,096.4
1,118.7
1,179.5
1,297.4
1,370.0
1,432.5
1,421.0
1,478.6
1,512.7
1,548.1
1,542.6
1,612.6
1,657.5
1,701.4
1,783.3
1,856.7
1,957.6
2,062.4
2,171.5
2,242.6
2,344.6
2,398.1
2,407.9
2,465.2
2,586.8
2,704.1
2,696.0
2,707.8
2,804.6
2,929.5
3,078.4
3,177.4
3,194.0
3,225.0
3,190.5
3,285.5
3,439.1
3,609.6
3,712.4
3,822.5
3,993.2
4,094.0
4,156.9
3,218.6
3,338.1
3,493.5
3,654.7
3,754.4
3,872.3
3,939.2
3,988.9
3,999.5
4,045.2
4,069.6
4,086.6
4,105.1
4,114.4
4,152.8
4,145.6
4,165.3
4,163.9

Gross
domestic
purchases 1

Gross
national
product

704.9
21
499.9
710.5
7.9
764.6
7.8
905.5
17.7
1,088.0
18.8
1,299.2
18.1
1,404.3
8.2
1,373.7
-1.9
1,069.9 -19.0
1,024.3
-2.8
1,089.5
3.9
1,090.2
.0
1,199.0
8.5
10.3
1,313.6
1,373.1
3.9
4.0
1,438.0
1,413.7
13
1,494.9
5.6
1,521.3
2.1
1.7
1,544.2
1,549.6
-.8
1,647.3
5.8
2.2
1,669.3
2.6
1,711.3
1,807.0
5.3
4.1
1,875.3
1,967.3
5.3
2,090.3
5.8
2,222.1
5.8
2.9
2,288.3
4.1
2,395.3
2.4
2,458.1
2,446.2
-.3
2,524.6
2.8
5.0
2,658.0
2,775.7
5.2
2,728.5
-.5
-1.3
2,676.1
2,837.7
4.9
2,994.1
4.7
3,142.0
5.3
2.5
3,188.8
-.2
3,130.1
3,199.4
1.9
3,139.7
-2.5
3,299.1
3.6
3,585.4
6.8
3.4
3,723.0
2.7
3,847.6
3.4
3,963.8
4.5
4,092.8
2.5
4,171.8
4,193.3
.9
.6
3,147.6
3,411.3
7.3
1.7
3,630.0
3,787.6
3.0
3,869.0
2.3
4,032.0
6.6
4,047.6
5.1
3.6
4,077.9
2.7
4,110.6
2.7
4,134.9
4,146.8
3.6
4,165.4
1.6
1.7
4,193.9
.3
4,181.1
1.7
4,185.9
.4
4,199.7
1.4
4,216.5
4,171.1
-2.1

Final
sales

31
6.3
6.4
16.2
21.2
19.4
8.6
-1.6
216
-.1
2.7
2.0
5.4
10.0
5.6
4.6
-.8
4.1
2.3
2.3
-.4
4.5
2.8
2.6
4.8
4.1
5.4
5.4
5.3
3.3
4.5
2.3
.4
2.4
4.9
4.5

A
3.6
4.5
5.1
3.2
.5
1.0
-1.1
3.0
4.7
5.0
2.8
3.0
4.5
2.5
1.5
7.1
3.8
4.0
1.6
3.9
2.3
7.1
5.1
1.1
4.6
2.4
1.7
1.8
.9
3.8
-.7
1.9

Gross
domestic
purchases 1

19
7.9
7.6
18.4
20.1
19.4
8.1
-2.2
-22.1
-4.3
6.4
.1
10.0
9.6
4.5
4.7
-1.7
5.7
1.8
1.5
.4
6.3
1.3
2.5
5.6
3.8
4.9
6.3
6.3
3.0
4.7
2.6
-.5
3.2
5.3
4.4
17
-1.9
6.0
5.5
4.9
1.5
-1.8
2.2
-1.9
5.1
8.7
3.8
3.3
3.0
3.3
1.9
.5
.6
8.6
2.7
4.8
1.5
5.1
1.6
3.0
3.2
2.4
1.2
1.8
2.8
-1.2
.5
1.3
1.6
-4.2

TABLE B-3.—Implicit price deflators for gross national product, 7929-90
[Index numbers, 1982=100, except as noted; quarterly data seasonally adjusted]
Gross private domestic investment1

Personal consumption
expenditures

Fixed investment

Year or quarter

1929
1933
1939
1940
1941
1942
1943 ..
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973..
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987.
1988
1989
1990 '
1982- IV
1983: IV
1984: IV
1985: IV
1986: IV
1987- IV
1988: 1
||
III
IV
1989:1
II.
Ill
IV
1990:1
II
Ill
IV "

Gross
national
product

14.6
11.2
12.7
13.0
13.8
14.7
15.1
15.3
15.7
19.4
22.1
23.6
23.5
23.9
25.1
25.5
25.9
26.3
27.2
28.1
29.1
29.7
30.4
30.9
31.2
31.9
32.4
32.9
33.8
35.0
35.9
37.7
39.8
42.0
44.4
46.5
49.5
54.0
59.3
63.1
67.3
72.2
78.6
85.7
94.0
100.0
103.9
107.7
110.9
113.8
117.4
121.3
126.3
131.5
101.7
105.4
109.0
112.2
115.1
118.5
119.3
120.6
122.0
123.4
124.6
125.8
126.8
128.0
129.5
131.0
132.2
133.1

Nonresidential

Total

16.4
12.1
13.9
14.1
15.2
16.8
18.4
19.4
20.2
22.0
24.3
25.7
25.6
26.2
27.8
28.4
29.0
29.1
29.5
30.1
31.0
31.6
32.3
32.9
33.3
33.9
34.4
35.0
35.6
36.7
37.6
39.3
41.0
42.9
44.9
46.7
49.6
54.8
59.2
62.6
66.7
71.6
78.2
86.6
94.6
100.0
104.1
108.1
111.6
114.3
119.6
124.2
129.9
136.4
101.8
105.7
109.3
113.1
115.8
121.5
122.2
123.5
124.9
126.3
127.9
129.5
130.2
131.8
134.0
135.2
137.0
139.3

Durable
goods

22.9
16.8
18.7
19.2
20.9
22.0
23.3
25.4
27.7
33.0
36.1
37.1
36.9
38.1
40.0
40.1
40.8
39.4
40.1
41.2
42.9
42.8
44.2
44.4
44.8
45.7
46.3
47.0
47.1
47.5
48.3
50.1
51.4
52.7
54.7
55.5
56.6
60.4
65.9
69.5
72.7
76.9
82.1
89.2
95.7
100.0
102.1
103.8
104.8
105.6
108.2
109.4
110.9
112.4
100.7
103.1
104.1
104.7
106.2
108.9
108.9
109.0
109.4
110.3
110.4
110.6
111.2
111.4
112.5
112.1
112.3
112.7

Nondurable Services
goods

17.8
12.2
14.2
14.3
15.5
18.2
20.6
21.6
22.2
24.0
26.9
28.5
27.7
27.8
30.1
30.5
30.4
30.4
30.2
30.6
31.5
32.2
32.6
33.1
33.5
33.8
34.3
34.7
35.3
36.6
37.5
39.0
40.9
42.7
44.2
45.8
49.7
57.2
61.5
63.8
67.1
71.9
80.0
89.4
96.9
100.0
102.1
105.0
107.5
107.3
112.2
116.6
122.8
131.0
101.0
103.1
105.8
108.7
107.8
113.9
114.3
115.9
117.4
118.6
120.5
123.2
123.2
124.5
128.3
129.4
131.5
134.9

13.8
11.4
12.8
12.9
13.5
14.3
15.1
16.0
16.5
17.3
18.6
19.7
20.5
21.1
22.2
23.3
24.6
25.3
25.9
26.7
27.6
28.5
29.3
30.2
30.7
31.4
32.0
32.5
33.2
34.2
35.3
36.8
38.6
40.7
43.1
45.1
47.4
51.3
55.6
59.8
64.8
69.8
75.6
83.9
92.6
100.0
106.2
111.6
116.8
122.4
128.7
134.5
141.0
147.7
102.7
108.3
113.5
119.0
124.9
130.9
132.1
133.7
135.3
137.0
138.8
140.1
141.6
143.4
145.1
146.6
148.5
150.5

Total
Total

11.6
9.4
11.1
11.5
12.4
13.2
13.8
14.2
14.5
16.7
19.8
21.7
22.2
22.9
24.6
25.0
25.5
25.6
26.3
27.8
29.0
28.9
29.3
29.7
29.7
29.9
30.1
30.4
31.1
32.4
33.4
34.8
37.2
39.0
41.2
43.2
45.6
50.3
56.9
60.7
65.6
71.9
78.9
86.3
94.2
100.0
99.8
100.2
100.6
102.9
103.9
105.7
107.2
108.1
100.3
99.7
100.5
101.0
103.9
104.2
105.0
105.2
105.4
107.2
107.6
107.3
107.1
106.9
108.0
107.9
108.4
108.0

11.8
9.8
11.5
11.9
12.7
13.3
13.8
14.0
14.3
16.4
19.3
21.0
21.7
22.4
24.2
24.4
25.1
25.2
25.8
27.7
29.5
29.5
30.2
30.6
30.5
30.9
31.3
31.5
32.1
33.3
34.4
35.9
37.9
39.9
42.4
44.4
46.0
50.5
57.9
61.9
66.1
71.5
77.8
85.1
93.4
100.0
98.8
97.9
97.7
99.3
98.9
100.2
101.2
102.0
100.7
98.3
97.9
97.9
100.0
99.0
99.6
99.7
99.8
101.8
101.9
101.2
100.9
100.7
101.6
101.6
102.6
102.3

Structures

10.0
7.6
8.8
9.0
9.7
10.7
11.4
11.6
12.3
14.5
17.1
18.9
18.6
18.8
21.1
21.3
21.8
21.4
21.8
24.1
25.2
24.8
25.0
25.2
25.0
25.2
25.5
25.9
26.9
28.2
29.1
30.4
32.9
35.2
38.1
40.6
43.7
49.5
54.7
57.6
61.6
67.9
76.2
83.6
93.1
100.0
97.5
98.2
102.5
106.9
108.9
114.3
119.5
121.6
99.5
96.8
99.6
104.0
108.3
110.2
111.9
113.7
114.8
116.7
118.9
119.5
119.8
119.5
120.2
121.8
122.4
122.1

Producers'
durable
equipment
14.3
12.5
13.9
14.2
14.9
15.3
15.4
15.6
15.4
18.2
20.7
22.5
24.0
25.0
26.4
26.9
27.7
28.6
29.3
31.0
33.3
34.0
34.7
35.6
35.9
36.1
36.2
36.2
36.4
37.2
38.4
39.9
41.5
43.2
45.5
46.8
47.3
51.1
59.7
64.4
68.3
73.3
78.6
86.0
93.7
100.0
99.5
97.7
95.3
96.1
95.2
95.5
95.3
96.0
101.5
99.1
97.0
95.0
96.8
94.8
95.4
95.0
94.8
96.8
96.3
95.4
95.0
94.6
95.8
95.3
96.5
96.4

Residential

11.2
8.1
10.5
10.9
11.9
12.8
13.8
14.9
15.8
17.5
21.1
22.8
23.0
23.7
25.4
26.1
26.3
26.4
27.0
27.9
28.0
28.0
28.0
28.2
28.2
28.3
28.2
28.5
29.0
29.9
30.9
32.5
35.6
37.0
39.0
41.2
44.8
49.8
54.2
58.0
64.6
72.6
81.4
89.4
96.6
100.0
102.2
106.0
108.3
111.1
115.2
119.3
123.5
125.6
99.1
103.1
107.2
109.0
112.4
116.5
118.4
118.9
119.3
120.6
122.1
123.7
124.2
124.3
125.3
125.3
126.0
125.7

1
Separate deflators are not calculated for gross private domestic investment, change in business inventories, and net exports of
goods and services.




290

TABLE B-3.—Implicit price deflators for gross national product, 1929-90—Continued
[Index numbers, 1982=100, except as noted; quarterly data seasonally adjusted]
Exports and
imports of goods
and servicesl
Year or quarter
Exports

1929
1933 .. ..
1939
1940 ..
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963 .
1964
1965.
1966
1967 . ...
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978.
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989 . . .
1990 p
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988: 1 ..
II
Ill
IV
1989: 1
||
III
IV
1990: 1
II...
Ill
IV f
2
3

16.8
10.7
12.7
13.6
14.6
17.2
18.5
20.2
21.1
22.0
24.6
26.5
25.2
24.4
27.4
27.4
27.0
26.9
27.5
28.6
29.7
29.6
29.9
30.4
30.9
31.0
31.1
31.4
32.5
33.7
34.5
35.2
36.6
38.7
40.4
41.7
47.1
56.3
62.1
64.8
68.0
72.8
81.6
90.2
97.5
100.0
101.3
103.2
101.0
99.8
99.5
103.2
105.5
106.4
100.0
102.6
102.4
100.5
99.0
99.7
100.8
102.5
104.6
105.0
105.8
106.0
105.3
105.1
105.3
106.4
106.7
107.1

Imports

15.9
8.6
11.3
11.6
12.3
13.1
13.6
14.1
14.6
17.4
20.9
22.4
21.2
22.5
26.7
25.3
24.1
24.1
23.5
23.8
23.8
22.7
23.1
23.4
23.1
22.9
23.6
24.1
24.7
25.7
26.2
26.6
27.4
29.0
30.2
32.0
35.5
50.4
54.1
55.7
59.8
65.8
77.1
96.0
101.6
100.0
97.4
97.1
95.2
93.7
99.0
102.5
103.8
106.1
99.3
97.2
96.2
95.9
94.4
100.4
101.5
102.5
102.5
103.6
104.9
105.2
102.5
102.8
104.2
103.0
105.5
111.7

Government purchases of goods and services
Federal
Total

9.4
8.4
9.4
9.5
10.6
12.4
12.5
12.3
11.8
12.3
14.7
16.3
17.3
16.8
18.3
19.4
19.8
20.1
20.8
21.9
22.9
24.1
24.6
24.9
25.4
26.3
26.9
27.6
28.5
29.8
31.2
33.1
35.1
38.1
41.0
43.8
47.1
52.2
57.7
61.5
65.8
70.4
76.8
85.5
93.4
100.0
104.0
108.6
112.3
114.5
118.3
123.3
128.5
133.8
101.8
105.3
110.3
113.8
114.5
119.1
121.8
122.7
123.7
125.0
127.1
127.7
129.1
130.1
132.5
132.5
134.0
136.1

Total

8.1
8.0
9.7
9.7
11.1
12.8
12.8
12.4
11.8
12.0
14.8
16.3
17.6
16.3
18.0
19.3
19.6
19.7
20.6
21.5
22.5
24.2
24.6
24.7
25.0
25.9
26.5
27.2
28.1
29.4
30.5
32.3
33.8
36.8
39.8
43.0
46.2
51.3
57.1
60.8
65.2
69.2
75.4
84.3
93.3
100.0
103.1
106.8
109.0
109.7
112.3
115.9
119.4
123.3
101.3
103.8
108.5
110.6
107.7
111.7
115.5
115.4
115.4
117.2
119.2
118.4
119.9
120.2
123.3
122.0
123.0
124.9

National Nondefense defense

41.8
45.3
50.6
55.6
59.3
63.4
67.8
74.2
83.4
92.9
100.0
103.6
107.2
109.2
110.2
111.1
114.0
117.5
121.2
102.0
104.7
108.3
111.3
109.7
111.3
113.1
113.7
114.5
114.7
117.5
117.6
117.7
117.1
120.8
120.7
121.1
122.1

GNP less exports of goods and services plus imports of goods and services.
Quarterly changes are at annual rates.
Source: Department of Commerce, Bureau of Economic Analysis.




291

46.8
48.9
53.3
60.6
64.3
69.1
72.4
78.0
86.4
94.3
100.0
101.4
105.5
108.2
108.1
116.3
123.2
125.8
129.9
99.5
100.3
108.9
108.8
101.7
112.8
125.7
122.0
119.1
125.1
124.4
121.0
127.8
130.4
131.5
125.6
128.9
133.9

State
and
local

9.7
8.6
9.2
9.3
9.7
10.2
10.6
11.2
11.6
12.8
14.5
16.3
16.9
17.3
18.9
19.7
20.2
20.7
21.2
22.4
23.5
24.0
24.6
25.2
25.9
26.7
27.4
28.0
28.8
30.2
32.0
33.9
36.3
39.2
41.9
44.4
47.8
52.8
58.1
62.0
66.1
71.1
77.7
86.2
93.4
100.0
104.7
109.9
114.9
118.3
122.9
128.7
135.1
141.3
102.2
106.3
111.7
116.5
120.0
124.9
126.4
128.0
129.5
130.9
132.9
134.5
135.7
137.1
138.9
140.1
142.0
144.2

Final
sales

14.6
11.3
12.8
13.0
13.7
14.7
15.2
15.3
15.7
19.3
22.1
23.4
23.5
23.9
24.9
25.4
25.9
26.3
27.1
28.0
29.0
29.7
30.4
30.9
31.2
31.9
32.4
32.9
33.7
34.9
35.9
37.7
39.8
42.0
44.4
46.5
49.5
54.1
59.2
63.0
67.2
72.1
78.5
85.8
93.9
100.0
103.9
107.7
110.9
113.8
117.4
121.4
126.3
131.5
101.7
105.3
109.0
112.2
114.8
118.6
119.5
120.6
122.0
123.4
124.7
125.8
126.9
127.9
129.7
131.0
132.2
133.0

Gross
domestic
purchases a

14.6
11.1
12.7
12.9
13.7
14.6
15.0
15.2
15.6
19.1
21.8
23.4
23.3
23.9
25.0
25.4
25.8
26.2
27.0
27.8
28.7
29.3
30.0
30.5
30.8
31.4
31.9
32.5
33.3
34.4
35.4
37.0
39.0
41.2
43.4
45.5
48.4
53.4
58.6
62.2
66.4
71.5
78.1
86.3
94.4
100.0
103.4
106.9
109.9
112.5
116.8
120.9
125.8
131.2
101.6
104.7
108.0
111.2
113.9
118.1
119.0
120.3
121.3
122.9
124.2
125.4
126.1
127.3
129.1
130.2
131.8
133.7

Percent
change
from
preced-

"31'

implicit
price
deflator8
"-22
-.8
2.0
6.2
6.6
2.6
1.4
2.9
22.9
13.9
7.0
-.5
2.0
4.8
1.5
1.6
1.6
3.2
3.4
3.6
2.1
2.4
1.6
1.0
2.2
1.6
1.5
2.7
3.6
2.6
5.0
5.6
5.5
5.7
4.7
6.5
9.1
9.8
6.4
6.7
7.3
8.9
9.0
9.7
6.4
3.9
3.7
3.0
2.6
3.2
3.3
4.1
4.1
3.6
4.7
3.0
3.3
1.8
1.7
2.7
4.4
4.7
4.7
3.9
3.9
3.2
3.8
4.8
4.7
3.7
2.8

TABLE B-4.—Fixed-weighted price indexes for gross national product, 1982 weights, 1959-90
[Index numbers, 1982=100, except as noted; quarterly data seasonally adjusted]
Gross private domestic
investment1
Year or quarter

1959.. .
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982 ..
1983
1984
1985
1986
1987
1988
1989
1990 "
1982: IV
1983- IV
1984: IV
1985: IV
1986: IV
1987: IV
1988: 1
II
Ill
IV
1989: 1
II...
Ill
IV
1990: 1
II
III...
IV »

Personal
Gross
connational sumption
product expenditures

37.6
38.1
38.4
38.7
39.1
39.6
40.1
41.1
42.1
43.7
45.6
47.2
48.8
50.3
53.1
57.2
61.8
65.1
68.4
72.7
78.8
86.1
94.1
100.0
104.1
108.3
111.9
114.9
118.9
123.9
129.5
135.3
101.7
105.7
109.6
113.2
116.1
120.5
121.6
123.0
124.7
126.1
127.6
129.0
130.0
131.2
133.3
134.6
136.0
137.4

35.2
35.7
36.1
36.4
36.8
37.2
37.7
38.5
39.5
41.0
42.8
44.7
46.6
48.3
51.0
55.8
60.1
63.5
67.5
72.2
78.6
86.8
94.6
100.0
104.2
108.4
112.2
115.3
120.6
125.6
131.6
138.4
101.8
105.8
109.7
113.8
116.7
122.6
123.3
124.8
126.3
127.9
129.5
131.3
132.1
133.7
136.1
137.1
139.1
141.4

Rxed investment
Total

58.0
58.1
58.0
58.0
58.0
58.2
58.5
59.3
60.2
61.4
63.2
61.5
60.6
59.8
61.8
64.4
69.0
71.4
72.6
74.5
80.3
86.9
94.5
100.0
100.4
101.5
103.3
105.7
107.4
111.2
115.0
118.1
100.2
100.5
102.3
104.2
106.4
108.2
109.7
110.9
111.6
112.7
113.9
114.8
115.3
116.1
117.3
117.6
118.4
119.2

Nonresi- Residen- Exports Imports
dential
tial

65.9
66.1
66.0
66.1
66.2
66.4
66.7
67.4
68.4
69.5
71.0
68.4
66.6
65.0
66.6
68.5
73.1
75.2
74.9
75.0
80.1
86.1
93.9
100.0
99.9
100.2
101.9
104.2
105.2
109.0
112.6
116.0
100.5
99.6
100.9
102.8
104.8
105.9
107.4
108.6
109.4
110.6
111.7
112.3
112.9
113.8
115.0
115.5
116.2
117.3

30.2
30.3
30.2
29.9
29.5
29.6
30.0
30.8
31.6
33.1
36.0
37.4
39.5
41.6
45.1
50.1
54.6
58.4
64.8
72.5
81.2
89.4
96.6
100.0
102.2
106.0
108.3
110.9
115.0
119.1
123.3
125.5
99.1
103.3
107.2
109.0
112.1
116.3
118.0
118.7
119.1
120.4
121.8
123.5
123.9
124.1
125.1
125.2
126.0
125.8

Government purchases of
goods and services

Exports and
imports of goods
and services1

32.8
33.5
34.0
34.1
34.4
34.8
35.9
37.1
38.2
39.3
40.9
43.3
45.3
46.5
50.8
59.8
65.4
67.4
70.3
74.5
82.9
90.5
97.7
100.0
101.6
104.3
103.7
103.6
105.7
111.3
114.4
117.2
100.0
103.2
104.0
103.4
103.5
106.7
108.4
110.3
112.9
113.5
113.9
114.5
114.5
114.4
115.9
116.7
117.6
118.2

27.0
27.3
27.0
26.7
27.1
27.7
28.1
29.1
29.5
30.1
31.2
33.4
35.6
37.8
42.4
54.5
59.7
61.3
66.1
71.3
80.9
96.3
101.5
100.0
97.7
97.5
95.7
94.0
100.6
105.8
109.5
114.1
99.3
97.6
96.8
96.8
94.7
102.9
104.1
105.9
106.1
107.2
109.1
110.5
108.8
109.9
112.3
110.0
113.6
120.9

Federal
Total

25.8
26.4
27.0
27.8
28.5
29.3
30.0
31.3
32.7
34.5
36.6
39.6
42.3
45.2
48.8
53.5
58.6
62.2
66.0
70.9
77.3
86.3
94.1
100.0
104.5
109.2
113.2
115.5
119.3
124.7
130.6
136.5
102.0
106.0
110.7
114.4
116.6
120.9
122.6
124.1
125.5
126.7
129.1
130.2
131.0
132.1
134.4
135.5
137.0
139.1

Total

26.9
27.3
27.8
28.4
29.3
30.1
30.8
32.0
32.8
34.5
36.4
39.5
42.4
46.0
50.1
54.8
59.4
62.4
65.8
70.6
76.8
86.4
94.9
100.0
104.1
108.0
110.4
110.6
112.9
117.4
122.4
127.3
101.7
105.4
109.0
111.0
110.7
113.8
115.8
116.9
118.2
118.8
121.9
122.2
122.5
123.0
125.8
126.5
127.5
129.3

National Nondefense defense

44.3
47.4
51.4
56.5
59.7
63.5
68.6
75.1
84.7
93.8
100.0
103.7
107.6
110.5
111.1
113.5
117.4
121.8
127.1
101.8
104.7
109.0
111.4
111.6
114.3
116.1
117.2
117.8
118.4
121.3
121.8
121.8
122.3
125.6
126.0
127.2
129.6

50.5
56.9
63.3
66.6
69.0
71.5
75.5
81.0
90.6
97.4
100.0
105.1
108.9
110.0
109.4
111.6
117.6
123.9
127.6
101.4
107.0
109.1
110.1
108.7
112.8
114.9
116.2
119.2
120.0
123.2
123.4
124.1
124.9
126.6
127.6
128.0
128.5

State
and
local

24.9
25.7
26.4
27.3
27.9
28.5
29.3
30.6
32.5
34.4
36.7
39.6
42.2
44.6
47.8
52.6
57.9
62.0
66.2
71.2
77.7
86.2
93.5
100.0
104.8
110.1
115.3
119.2
124.0
130.1
136.7
143.3
102.2
106.4
111.9
117.0
121.0
126.0
127.7
129.4
131.0
132.5
134.5
136.1
137.3
138.9
140.8
142.1
144.0
146.3

Percent
change
from
preceding
period,
GNP
fixedweighted
price
index 2

1.4
.7
.8
1.0
1.2
1.4
2.5
2.6
3.7
4.4
3.6
3.5
2.9
5.5
7.8
8.0
5.3
5.1
6.2
8.5
9.3
9.3
6.2
4.1
4.0
3.4
2.7
3.5
4.2
4.5
4.5
4.0
4.0
3.2
3.3
3.1
3.7
3.9
4.7
5.5
4.4
4.9
4.6
3.1
3.8
6.6
3.9
4.2
4.1

1
Separate price indexes are not calculated for gross private domestic investment, change in business inventories, and net exports of
goods and services.
2
Quarterly changes are at annual rates.
Source: Department of Commerce, Bureau of Economic Analysis.




292

TABLE B-5.—Changes in gross national product, personal consumption expenditures, and related price
measures, 1933-90
[Percent change from preceding period; quarterly data at seasonally adjusted annual rates]
Personal consumption expenditures

Gross national product
Year or quarter

1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969.
1970
1971.
1972
1973..
1974
1975...
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987.
1988
1989
1990 *.
1986: I

II
Ill
IV

1987:1

||
III
IV

1988:1

II.. .
Ill
IV .
1989- 1
||
HI
IV.. ..
1990:1

II.. ..
Ill
IV

Current
dollars

-4.2
7.0
10.0
25.0
26.6
21.2
9.7
.9

io'.s

11.2
-.5
10.7
15.7
5.5
5.7

. ...

9'.0
5.5
5.3
1.3
8.5
3.9
3.6
7.6
5.6
7.1
8.5
9.5
5.8
9.3
8.0
5.4
8.6
10.0
12.1
8.3
8.5
11.5
11.7
13.0
11.5
8.9
11.7
3.7
7.6
10.8
6.4
5.4
6.7
7.9
6.7
5.0
7.3
1.3
5.7
4.2
9.1
7.5
7.4
8.7
7.8
8.3
7.4
7.7
7.5
5.8
5.1
3.9
6.7
5.1
5.3

Constant
(1982)
dollars
-2.1
7.9
7.8
17.7
18.8
18.1
8.2
-1.9
-19.0
-2.8
3.9
.0
8.5
10.3
3.9
4.0
1.3
5.6
2.1
1.7
-.8
5.8
2.2
2.6
5.3
4.1
5.3
5.8
5.8
2.9
4.1
2.4
3
2.8
5.0
5.2
-l!3
4.9
4.7
5.3
2.5
-.2
1.9
-2.5
3.6
6.8
3.4
2.7
3.4
4.5
2.5
.9
6.6
18
.8
2.3
5.2
4.2
4.1
6.6
5.1
3.6
2.7
2.7
3.6
1.6
1.7
1.7
.4
1.4
-2.1

Implicit
price
deflator

Chain
price
index

Fixedweighted price
index

Constant
(1982)
dollars

Implicit
price
deflator

Chain
price
index

weights)
-2.2
-.8
2.0
6.2
6.6
2.6
1.4
2.9
22.9
13.9
7.0
2.0
4.8
1.5
1.6
1.6
3.2
3.4
3.6
2.1
2.4
1.6
1.0
2.2
1.6
1.5
2.7
3.6
2.6
5.0
5.6
5.5
5.7
4.7
6.5
9.1
9.8
6.4
6.7
7.3
8.9
9.0
9.7
6.4
3.9
3.7
3.0
2.6
3.2
3.3
4.1
4.1
.7
2.9
5.0
1.8
3.5
3.1
3.5
1.7
2.7
4.4
4.7
4.7
3.9
3.9
3.2
3.8
4.8
4.7
3.7
2.8

1.5
1.0
1.2
1.3
1.5
1.8
3.0
2.8
4.3
5.0
5.2
4.8
4.2
5.9
8.9
9.2
5.9
6.1
7.2
8.7
9.0
9.4
6.3
4.1
3.9
3.3
2.5
3.3
3.7
4.3
4.2
1.7
1.7
3.1
2.7
4.3
3.1
3.3
3.1
3.3
4.2
4.8
4.4
4.7
4.4
3.1
3.7
6.1
4.1
3.7
3.0

Source: Department of Commerce, Bureau of Economic Analysis.




(1982

Current
dollars

293

1.4
.7
.8
1.0
1.2
1.4
2.5
2.6
3.7
4.4
3.6
3.5
2.9
5.5
7.8
8.0
5.3
5.1
6.2
8.5
9.3
9.3
6.2
4.1
4.0
3.4
2.7
3.5
4.2
4.5
4.5
2.2
2.1
2.9
3.1
4.4
3.5
3.5
3.7
3.9
4.7
5.5
4.4
4.9
4.6
3.1
3.8
6.6
3.9
4.2
4.1

-5.7
4.6
6.0
13.8
9.7
12.2
8.8
10.5
20.4
12.5
8.0
1.9
7.7
8.3
5.3
6.2
3.1
7.5
4.9
5.4
3.3
7.4
4.6
3.1
6.1
5.5
7.2
7.7
8.3
5.5
9.7
8.2
7.0
8.1
9.5
10.5
9.5
10.5
11.5
11.3
11.6
11.6
10.6
10.5
7.1
9.0
8.8
8.2
6.4
7.6
7.6
6.5
6.0
5.1
4.0
9.8
6.2
7.3
9.6
8.9
3.7
9.2
7.4
8.2
8.1
4.8
6.6
7.0
4.0
8.2
3.9
8.0
3.8

-1.6
5.1
4.6
5.7

~2i3
3.2
6.4
10.5
1.8
2.3
2.0
5.4
2.1
3.0
4.0
2.5
6.2
3.0
2.2
1.4
5.0
2.6
2.0
4.3
3.7
5.6
5.6
5.1
3.0
5.1
3.6
2.4
3.1
5.4
4.2
9
2.3
5.4
4.4
4.1
2.2
-.2
1.2
1.3
4.6
4.8
4.7
3.9
2.8
3.6
1.9
1.0
4.1
3.6
5.4
2.2
.7
4.5
4.3
-.4
6.9
2.7
3.5
3.5
3
1.3
4.6
-.8
1.1
.2
2.7
-3.1

-4.2
-.5
1.3
7.7
10.4
9.6
5.4
3.9
8.9
10.6
5.6
-.1
2.2
6.1
2.2
2.1
.6
1.3
1.9
3.2
1.8
2.2
1.9
1.2
1.8
1.5
1.7
1.7
3.1
2.5
4.5
4.3
4.6
4.7
4.0
6.2
10.5
8.0
5.7
6.5
7.3
9.2
10.7
9.2
5.7
4.1
3.8
3.2
2.4
4.6
3.8
4.6
5.0
1.1
.4
4.3
3.9
6.4
4.8
4.4
4.1
2.3
4.3
4.6
4.6
5.2
5.1
2.2
5.0
6.8
3.6
5.4
6.9

1.7
1.1
1.1
1.4
1.2
1.5
2.7
2.5
4.0
4.4
4.7
4.3
3.6
6.0
10.3
8.0
5.7
6.4
7.2
9.2
10.9
9.2
5.7
4.2
3.9
3.5
2.7
4.6
4.0
4.7
4.9
1.6
.6
4.4
3.9
6.2
4.9
4.3
4.0
2.5
4.7
4.8
4.8
5.0
5.3
2.6
4.9
6.8
3.4
5.2
6.5

Fixedweighted price
index
(1982
weights)

1.5
.9
.9
1.1
1.2
1.2
2.2
2.5
3.8
4.3
4.6
4.2
3.5
5.7
9.4
7.7
5.6
6.3
7.0
8.8
10.5
9.0
5.6
4.2
4.0
3.5
2.7
4.6
4.1
4.8
5.2
1.6
.5
4.2
3.9
6.3
5.1
4.3
4.3
2.6
4.8
5.1
4.9
5.0
5.7
2.7
4.7
7.4
3.1
5.7
7.1

TABLE B-6.—Gross national product by major type of product, 1929-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Goods
Year or
quarter

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982.
1983
1984
1985
1986
1987
1988
1989.
1990 "
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988:1
II
Ill
IV
1989:1
II
Ill
IV
1990:1
II
Ill
IV '.

Gross
national
product

103.9
56.0
91.3
100.4
125.5
159.0
192.7
211.4
213.4
212.4
235.2
261.6
260.4
288.3
333.4
351.6
371.6
372.5
405.9
428.2
451.0
456.8
495.8
515.3
533.8
574.6
606.9
649.8
705.1
772.0
816.4
892.7
963.9
1,015.5
1,102.7
1,212.8
1,359.3
1,472.8
1,598.4
1,782.8
1,990.5
2,249.7
2,508.2
2,732.0
3,052.6
3,166.0
3,405.7
3,772.2
4,014.9
4,231.6
4,515.6
4,873.7
5,200.8
5,463.0
3,212.5
3,545.8
3,851.8
4,107.9
4,297.3
4,647.6
4,735.8
4,831.4
4,917.9
5,009.8
5,101.3
5,174.0
5,238.6
5,289.3
5,375.4
5,443.3
5,514.6
5,518.9

Final
sales

102.2
57.6
90.9
98.3
121.0
157.2
193.4
212.3
214.4
206.0
235.7
256.9
263.4
281.4
323.2
348.6
371.1
374.1
400.2
423.6
449.6
458.3
490.0
512.3
531.4
568.5
601.1
644.4
695.2
757.8
806.1
884.8
954.1
1,012.3
1,094.9
1,202.3
1,339.7
1,457.4
1,604.1
1,766.8
1,969.2
2,221.0
2,495.2
2,740.3
3,028.6
3,190.5
3,412.8
3,704.5
4,003.6
4,224.8
4,487.3
4,847.5
5,172.5
5,465.3
3,272.4
3,514.8
3,806.8
4,100.7
4,309.4
4,591.9
4,707.4
4,809.2
4,879.7
4,993.6
5,074.7
5,141.3
5,209.7
5,264.3
5,387.2
5,429.9
5,505.6
5,538.4

Inventory
change

1.7
-1.6
.4
2.2
4.5
1.8
-.6
-1.0
-1.0
6.4
47
31
6.8
10.2
3.1
.4
-1.6
5.7
4.6
1.4
-1.5
5.8
3.1
2.4
6.1
5.8
5.4
9.9
14.2
10.3
7.9
9.8
3.1
7.8
10.5
19.6
15.4
56
16.0
21.3
28.6
13.0
-8.3
24.0
-24.5
-7.1
67.7
11.3
6.9
28.3
26.2
28.3
-2.2
-59.9
31.0
45.0
7.2
-12.2
55.7
28.3
22.2
38.2
16.2
26.6
32.7
28.9
25.0
-11.8
13.4
9.0
-19.5

Total
Total
56.1
27.0
49.0
56.0
72.5
93.7
120.4
132.3
128.9
125.3
139.8
154.4
147.7
162.4
189.9
195.5
204.6
198.0
216.3
225.4
234.7
230.5
250.8
257.2
260.4
281.5
293.2
313.5
342.9
380.1
395.1
427.4
456.6
467.8
493.0
537.4
616.4
663.1
714.7
798.9
882.0
991.4
1,099.1
1,174.9
1,322.9
1,319.1
1,396.1
1,581.4
1,641.2
1,686.7
1,788.4
1,935.1
2,072.7
2,144.4
1,309.8
1,473.7
1,599.9
1,657.4
1,694.5
1,850.8
1,875.4
1,918.5
1,952.8
1,993.8
2,035.1
2,079.4
2,090.2
2,085.9
2,111.0
2,146.6
2,170.4
2,149.4

Durable goods

Final Inven- Final Inventory
tory
sales change sales change
54.4
28.6
48.6
53.8
68.0
91.9
121.0
133.3
129.9
118.9
140.3
149.7
150.8
155.6
179.6
192.4
204.2
199.6
210.6
220.7
233.3
232.0
245.1
254.1
258.0
275.4
287.4
308.1
333.0
365.9
384.9
419.5
446.8
464.7
485.2
526.9
596.8
647.7
720.3
782.9
860.7
962.8
1,086.1
1,183.2
1,298.9
1,343.7
1,403.2
1,513.7
1,629.9
1,679.8
1,760.1
1,908.9
2,044,4
2,146.6
1,369.7
1,442.7
1,554.9
1,650.2
1,706.6
1,795.1
1,847.1
1,896.3
1,914.6
1,977.7
2,008.5
2,046.8
2,061.3
2,060.9
2,122.8
2,133.1
2,161.4
2,168.9

1.7
-1.6
2.2
4.5
1.8
-.6
-1.0
-1.0
6.4
_5
47
-3.1
6.8
10.2
3.1
.4
-1.6
5.7
4.6
1.4
-1.5
5.8
3.1
2.4
6.1
5.8
5.4
9.9
14.2
10.3
7.9
9.8
3.1
7.8
10.5
19.6
15.4
-5.6
16.0
21.3
28.6
13.0
-8.3
24.0
-24.5
-7.1
67.7
11.3
6.9
28.3
26.2
28.3
-2.2
-59.9
31.0
45.0
7.2
-12.2
55.7
28.3
22.2
38.2
16.2
26.6
32./
28.9
25.0
-11.8
13.4
9.0
-19.5

16.1
5.4
12.4
15.4
23.8
34.5
54.2
58.5
50.1
31.8
44.4
48.0
50.0
56.2
66.4
72.6
78.0
74.1
81.7
86.2
91.7
84.8
91.1
93.8
93.1
103.4
110.0
119.6
132.4
147.9
154.5
169.1
180.1
182.1
189.4
209.7
241.9
257.2
288.2
323.6
369.4
416.9
473.1
499.4
541.1
542.9
575.3
641.3
700.1
723.0
757.5
840.3
894.7
938.2
551.8
611.9
667.6
697.9
740.7
771.1
818.3
841.9
839.7
861.3
873.1
896.2
915.4
894.2
941.4
930.1
943.4
937.9

Source: Department of Commerce, Bureau of Economic Analysis.




294

1.4
~!3
1.2
3.1
1.0
.0
-.6
-1.3
5.3
1.4
1.0
-1.8
3.6
6.1
1.2
1.5
-2.5
3.4
2.1

-2^8
3.1
1.6
3.4
2.7
4.0
6.7
10.2
5.5
4.7
6.4

~2.S
7.2
15.0
11.2
70
10.3
9.7
20.1
10.3
-2.9
6.8
-16.8
-1.0
40.2
6.5
1.2
23.0
19.9
11.9
-5.5
-42.7
16.7
33.0
8.6
-9.6
43.3
8.9
9.9
32.8
27.8
19.4
8.4
6.6
13.2
-21.6
.0
9.8
-10.4

Nondurable goods
Final
sales
38.3
23.2
36.2
38.4
44.2
57.4
66.8
74.8
79.8
87.1
95.9
101.7
100.9
99.4
113.2
119.8
126.2
125.5
128.9
134.5
141.6
147.2
154.0
160.3
164.8
172.0
177.4
188.5
200.6
218.1
230.4
250.4
266.7
282.6
295.8
317.2
354.9
390.4
432.2
459.3
491.3
545.9
613.0
683.8
757.8
800.8
827.9
872.4
929.8
956.8
1,002.6
1,068.6
1,149.6
1,208.3
817.9
830.9
887.3
952.3
965.9
1,024.0
1,028.8
1,054.3
1,074.8
1,116.4
1,135.5
1,150.5
1,145.9
1,166.7
1,181.4
1,203.0
1,218.0
1,231.0

Inventory
change
0.3
-1.1
.1
1.0
1.4
.7
-.6
-.3
.2
1.1
-1.9
3.7
-1.3
3.2
4.2
1.9
-1.1
.9
2.3
2.5
.9
1.3
2.6
1.4
2.5
2.7
3.1
1.4
3.2
4.0
4.8
3.2
3.4
3.2
4.9
3.3
4.6
4.3
1.3
5.7
11.6
8.6
2.7
-5.4
17.2
-7.7
-6.1
27.5
4.9
5.7
5.4
6.4
16.4
3.3
-17.2
14.3
12.0
-1.4
-2.6
12.4
19.4
12.3
5.4
-11.6
7.1
24.3
22.2
11.9
9.8
13.4
-.8
-9.1

Services Structures

35.9
25.9
34.5
35.8
40.9
50.9
63.2
72.4
77.3
70.5
72.7
78.0
83.0
89.0
104.4
115.2
123.4
128.5
138.5
148.9
161.6
170.9
183.5
197.4
210.9
226.4
242.2
261.1
280.5
307.2
334.9
368.0
402.3
441.1
484.9
533.2
586.6
650.6
725.2
803.5
895.9
1,003.0
1,121.9
1,265.0
1,415.4
1,547.5
1,682.5
1,813.9
1,968.3
2,119.3
2,292.4
2,488.6
2,671.2
2,860.5
1,598.9
1,730.1
1,866.5
2,035.7
2,174.2
2,354.9
2,421.2
2,461.5
2,512.3
2,559.4
2,604.8
2,639.2
2,693.3
2,747.5
2,791.3
2,834.2
2,889.6
2,926.8

11.9
3.1
7.8
8.6
12.1
14.4
9.2
6.6
7.2
16.6
22.8
29.2
29.6
36.9
39.1
40.9
43.6
46.0
51.1
53.9
54.8
55.5
61.5
60.7
62.5
66.7
71.5
75.2
81.7
84.6
86.4
97.2
105.1
106.5
124.8
142.1
156.3
159.1
158.5
180.4
212.6
255.3
287.1
292.0
314.4
299.4
327.1
377.0
405.4
425.6
434.8
450.0
456.9
458.2
303.9
342.0
385.4
414.8
428.6
441.9
439.2
451.4
452.8
456.5
461.4
455.3
455.0
455.9
473.0
462.5
454.6
442.7

Auto
output

;=
7.2
8.8
11.9
15.4
13.3
12.0
16.1
14.7
21.2
16.9
19.4
14.5
19.4
21.3
17.8
22.4
25.1
25.9
31.1
30.2
27.8
35.0
34.7
28.5
38.9
41.4
46.0
38.8
40.3
55.2
64.3
68.3
66.9
60.1
69.4
66.5
88.6
105.1
116.5
120.6
119.3
127.6
131.3
127.8
64.5
102.1
111.5
115.5
122.5
120.9
118.1
132.1
126.1
134.0
133.7
130.7
132.5
128.2
120.3
128.9
141.3
120.8

TABLE B-7.—Gross national product by major type of product in 1982 dollars, 1929-90
[Billions of 1982 dollars; quarterly data at seasonally adjusted annual rates]
Goods
Year or
quarter

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988.
1989
1990 "
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988:1
II
Ill
IV
1989:1
II
Ill
IV
1990:1
II
Ill
IV *.

Gross
national
product

Final
sales

709.6
498.5
716.6
772.9
909.4
1,080.3
1,276.2
1,380.6
1,354.S
1,096.9
1,066.7
1,108.7
1,109.0
1,203.7
1,328.2
1,380.0
1,435.3
1,416.2
1,494.9
1,525.6
1,551.1
1,539.2
1,629.1
1,665.3
1,708.7
1,799.4
1,873.3
1,973.3
2,087.6
2,208.3
2,271.4
2,365.6
2,423.3
2,416.2
2,484.8
2,608.5
2,744.1
2,729.3
2,695.0
2,826.7
2,958.6
3,115.2
3,192.4
3,187.1
3,248.8
3,166.0
3,279.1
3,501.4
3,618.7
3,717.9
3,845.3
4,016.9
4,117.7
4,155.8
3,159.3
3,365.1
3,535.2
3,662.4
3,733.6
3,920.7
3,970.2
4,005.8
4,032.1
4,059.3
4,095.7
4,112.2
4,129.7
4,133.2
4,150.6
4,155.1
4,170.0
4,147.6

698.7
509.2
712.7
758.5
881.6
1,068.3
1,275.5
1,385.7
1,363.3
1,069.0
1,067.7
1,096.4
1,118.7
1,179.5
1,297.4
1,370.0
1,432.5
1,421.0
1,478.6
1,512.7
1,548.1
1,542.6
1,612.6
1,657.5
1,701.4
1,783.3
1,856.7
1,957.6
2,062.4
2,171.5
2,242.6
2,344.6
2,398.1
2,407.9
2,465.2
2,586.8
2,704.1
2,696.0
2,707.8
2,804.6
2,929.5
3,078.4
3,177.4
3,194.0
3,225.0
3,190.5
3,285.5
3,439.1
3,609.6
3,712.4
3,822.5
3,993.2
4,094.0
4,156.9
3,218.6
3,338.1
3,493.5
3,654.7
3,754.4
3,872.3
3,939.2
3,988.9
3,999.5
4,045.2
4,069.6
4,086.6
4,105.1
4,114.4
4,152.8
4,145.6
4,165.3
4,163.9

Inventory
change

10.8
107
3.9
14.4
27.8
12.0
.7
-5.2
-8.4
27.9
-1.0
12.3
-9.7
24.2
30.8
10.0
2.8
-4.8
16.3
12.9
3.0
-3.4
16.5
7.7
7.3
16.2
16.6
15.7
25.2
36.9
28.8
21.0
25.1
8.2
19.6
21.8
40.0
33.3
-12.8
22.1
29.1
36.8
15.0
-6.9
23.9
-24.5
-6.4
62.3
9.1
5.6
22.8
23.6
23.8
-1.1
-59.3
27.0
41.7
7.7
-20.8
48.4
31.0
16.9
32.6
14.0
26.1
25.5
24.6
18.9
-2.2
9.5
4.7
-16.3

Durable goods Nondurable goods

Total
Total
308.1
210.0
331.7
370.3
431.9
504.1
608.6
664.6
639.1
521.0
517.1
531.7
517.9
561.4
623.0
641.3
676.6
643.5
683.9
697.1
699.3
674.2
716.6
726.8
730.2
773.5
797.5
845.2
904.0
974.7
993.1
1,024.8
1,048.5
1,030.0
1,037.6
1,093.8
1,175.0
1,159.2
1,125.0
1,194.7
1,256.2
1,329.1
1,354.6
1,344.2
1,386.0
1,319.1
1,367.0
1,509.2
1,553.6
1,592.6
1,663.4
1,765.2
1,829.5
1,830.3
1,297.9
1,423.8
1,520.2
1,564.7
1,595.7
1,716.4
1,742.0
1,761.4
1,770.8
1,786.8
1,819.7
1,838.5
1,836.5
1,823.1
1,825.4
1,831.3
1,839.7
1,824.9

Final Inven- Final Inventory
tory
sales change sales change
297.3
220.7
327.8
355.9
404.2
492.1
607.9
669.8
647.5
493.1
518.1
519.4
527.6
537.2
592.2
631.3
673.8
648.2
667.6
684.1
696.3
677.6
700.1
719.1
723.0
757.3
780.8
829.5
878.8
937.8
964.3
1,003.7
1,023.3
1,021.7
1,017.9
1,072.1
1,135.0
1,125.9
1,137.8
1,172.5
1,227.1
1,292.4
1,339.6
1,351.1
1,362.2
1,343.7
1,373.4
1,446.9
1,544.5
1,587.1
1,640.6
1,741.6
1,805.7
1,831.4
1,357.1
1,396.8
1,478.5
1,557.0
1,616.5
1,667.9
1,711.0
1,744.5
1,738.1
1,772.7
1,793.7
1,813.0
1,811.9
1,804.3
1,827.6
1,821.8
1,835.0
1,841.2

10.8
-10.7
3.9
14.4
27.8
12.0
.7
-5.2
-8.4
27.9
-1.0
12.3
-9.7
24.2
30.8
10.0
2.8
-4.8
16.3
12.9
3.0
-3.4
16.5
7.7
7.3
16.2
16.6
15.7
25.2
36.9
28.8
21.0
25.1
8.2
19.6
21.8
40.0
33.3
-12.8
22.1
29.1
36.8
15.0
-6.9
23.9
-24.5
-6.4
62.3
9.1
5.6
22.8
23.6
23.8
-1.1
-59.3
27.0
41.7
7.7
-20.8
48.4
31.0
16.9
32.6
14.0
26.1
25.5
24.6
18.9
-2.2
9.5
4.7
-16.3

Source: Department of Commerce, Bureau of Economic Analysis.




295

85.8
34.9
74.8
91.9
122.9
163.3
254.4
292.4
263.1
129.6
164.7
166.5
166.8
180.0
208.8
229.8
245.4
230.6
245.2
248.3
251.3
229.1
236.8
242.2
239.2
260.2
273.4
295.4
322.2
354.2
363.6
378.5
389.7
381.7
375.5
409.4
474.9
476.0
471.1
490.9
534.0
572.5
604.6
584.0
578.5
542.9
566.3
623.5
686.1
718.6
765.0
856.7
897.7
928.7
543.8
598.0
647.8
687.7
738.6
784.6
836.1
861.0
856.1
873.5
880.8
901.6
914.1
894.2
932.1
919.5
932.9
930.6

7.5
-4.5
1.6
7.2
17.4
7.5
1.4
-3.8
-7.8
23.1
2.8
3.4
-6.1
11.4
19.1
3.6
4.7
-7.7
9.5
6.3
1.9
-7.1
8.2
4.0
-.1
8.4
7.1
11.2
17.4
26.3
14.4
11.8
15.2

"?!l
15.4
30.8
20.0
-11.4
15.9
14.2
27.5
13.3
-3.2
6.9
-16.8
-1.2
38.2
5.6
.9
20.7
17.8
9.8
47
-42.4
16.1
31.1
7.3
-9.0
39.0
8.9
8.8
29.5
24.1
16.5
7.2
5.4
10.2
-17.7
-.3
8.3
-9.0

Final
sales
211.5
185.7
253.1
264.0
281.2
328.8
353.5
377.4
384.4
363.5
353.4
353.0
360.8
357.1
383.4
401.5
428.4
417.7
422.3
435.8
445.0
448.6
463.4
476.9
483.7
497.1
507.4
534.1
556.5
583.6
600.7
625.3
633.6
640.1
642.4
662.7
660.1
649.9
666.7
681.7
693.1
719.9
735.1
767.1
783.7
800.8
807.0
823.3
858.4
868.5
875.5
884.9
908.0
902.7
813.4
798.8
830.7
869.4
877.9
883.3
874.8
883.6
882.0
899.3
912.9
911.4
897.7
910.1
895.5
902.4
902.1
910.6

Inventory
change
3.3
-6.2
2.3
7.2
10.3
4.5
-.7
-1.4
-.6
4.8
-3.8
8.8
-3.6
12.8
11.7
6.4
-2.0
2.9
6.8
6.7
1.1
3.7
8.3
3.7
7.3
7.7
9.5
4.5
7.8
10.6
14.4
9.3
9.9
8.8
12.5
6.4
9.2
13.3
-1.4
6.3
14.9
9.3
1.7
-3.7
16.9
-7.7
-5.2
24.2
3.5
4.7
2.2
5.8
13.9
3.6
-16.9
10.9
10.6
.4
-11.8
9.4
22.1
8.1
3.2
-10.1
9.6
18.4
19.2
8.6
15.5
9.8
-3.6
-7.3

Services Structures

Auto
output

290.0 111.4
36.5
252.1
306.4
78.5
84.5
318.1
367.1 110.3
460.4 115.8 • • •68.7
598.9
665.0 50.9
662.3 53.5
472.0 104.0
24.1
431.0 118.6
27.6
438.1 138.9
35.5
450.1 141.0
470.4 171.9
44.9
38.3
537.7 167.5
34.9
567.3 171.4
44.8
577.6 181.2
579.5 193.2
43.3
58.2
601.0 210.0
45.8
619.7 208.9
48.3
645.4 206.5
37.4
654.7 210.3
45.7
681.5 231.0
49.6
709.9 228.5
41.1
743.0 235.4
49.8
777.0 248.9
54.6
811.5 264.4
55.3
852.8 275.3
66.9
891.6 292.0
64.8
942.7 291.0
58.3
990.6 287.6
70.5
1,032.0 308.8
67.6
1,066.9 307.9
53.1
1,092.4 293.8
69.8
1,126.1 321.2
73.9
1,169.4 345.4
82.0
1,218.7 350.4
65.4
1,256.4 313.7
1,286.4 283.6
61.8
80.1
1,324.4 307.6
88.7
1,368.7 333.7
87.3
1,426.9 359.1
80.2
1,478.6 359.2
67.1
1,511.1 331.8
73.3
1,533.4 329.4
66.5
1,547.5 299.4
85.9
1,585.5 326.6
98.5
1,625.2 367.1
1,684.3 380.8 106.5
1,738.9 386.4 106.4
1,798.1 383.8 102.3
109.9
1,870.5 381.1
1,915.6 372.7 110.4
1,958.0 367.5 105.6
63.3
1,555.5 305.9
96.4
1,600.7 340.6
1,644.7 370.3 104.2
1,712.5 385.2 104.8
1,753.1 384.8 106.7
1,818.8 385.6 104.1
1,850.9 377.3 100.9
1,860.3 384.1 113.9
1,878.9 382.4 108.5
1,891.9 380.6 116.2
1,896.6 379.4 113.5
110.3
1,902.5 371.1
1,923.5 369.8 111.4
1,939.7 370.4 106.3
99.0
1,943.7 381.5
107.3
1,952.5 371.2
117.2
1,967.3 363.1
99.1
1,968.6 354.1

TABLE B-8.—Gross national product by sector, 1929-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Gross domestic product
Year or quarter

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946 .
1947
1948
1949
1950
1951
1952
1953
1954...
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973.
1974
1975
1976 . .
1977
1978
1979
1980... .
1981
1982
1983
1984.
1985
1986
1987
1988
1989
1990 "
1982: IV
1983- IV
1984- IV
1985- IV
1986: IV
1987- IV
1988: 1
||
III
IV
1989: 1
||
III
IV
1990: 1
||
III
IV P

Gross
national
product

103.9
56.0
91.3
100.4
125.5
159.0
192.7
211.4
213.4
212.4
235.2
261.6
260.4
288.3
333.4
351.6
371.6
372.5
405.9
428.2
451.0
456.8
495.8
515.3
533.8
574.6
606.9
649.8
705.1
772.0
816.4
892.7
963.9
1,015.5
1,102.7
1,212.8
1,359.3
1,472.8
1,598.4
1,782.8
1,990.5
2,249.7
2,508.2
2,732.0
3,052.6
3,166.0
3,405.7
3,772.2
4,014.9
4,231.6
4,515.6
4,873.7
5,200.8
5,463.0
3,212.5
3,545.8
3,851.8
4,107.9
4,297.3
4,647.6
4,735.8
4,831.4
4,917.9
5,009.8
5,101.3
5,174.0
5,238.6
5,289.3
5,375.4
5,443.3
5,514.6
5,518.9

Businessl
Total

103.2
55.7
90.9
100.1
125.0
158.5
192.3
210.9
213.0
211.6
234.1
260.1
259.0
286.7
331.4
349.4
369.5
370.3
403.3
425.2
447.7
453.9
492.7
511.8
530.0
570.1
602.0
644.4
699.3
766.3
810.4
885.9
957.1
1,008.2
1,093.4
1,201.6
1,343.1
1,453.3
1,580.9
1,761.7
1,965.1
2,219.1
2,464.4
2,684.4
3,000.5
3,114.8
3,355.9
3,724.8
3,974.1
4,197.2
4,486.7
4,840.2
5,163.2
5,424.4
3,163.8
3,494.6
3,805.9
4,065.9
4,267.9
4,617.4
4,699.0
4,801.3
4,886.5
4,974.0
5,063.5
5,141.4
5,201.4
5,246.5
5,333.8
5,411.7
5,471.7
5,480.6

Total1

96.0
49.3
81.0
89.8
113.0
140.4
163.4
174.9
173.5
184.8
211.3
236.4
232.9
259.0
296.7
310.7
329.3
329.1
359.4
378.1
397.3
399.5
435.5
449.9
463.9
499.1
526.0
562.1
610.7
666.7
699.7
762.0
820.1
856.3
927.4
1,020.0
1,145.0
1,237.5
1,341.2
1,500.7
1,682.1
1,908.4
2,125.3
2,306.8
2,582.8
2,658.2
2,866.6
3,201.5
3,412.8
3,599.9
3,844.9
4,147.8
4,418.1
4,620.3
2,693.6
2,994.8
3,270.6
3,490.7
3,655.6
3,958.3
4,023.7
4,115.0
4,188.0
4,264.4
4,336.7
4,402.8
4,449.8
4,483.1
4,551.8
4,613.5
4,659.6
4,656.2

Nonfarm l

Farm

84.8
43.6
73.0
82.0
103.4
128.0
149.8
156.9
153.5
165.2
189.3
214.4
213.3
238.3
271.1
286.7
306.3
306.7
338.8
361.4
380.1
378.9
417.9
432.5
445.0
478.6
506.2
544.3
590.0
641.7
677.8
740.4
798.8
831.2
897.5
988.8
1,098.3
1,190.0
1,288.4
1,448.7
1,631.7
1,850.0
2,054.5
2,236.4
2,498.9
2,581.3
2,802.1
3,118.5
3,342.2
3,525.9
3,776.7
4,095.3
4,346.6
4,530.2
2,607.7
2,932.7
3,198.7
3,422.4
3,587.1
3,895.0
3,965.1
4,056.1
4,131.9
4,228.2
4,272.7
4,334.7
4,379.4
4,399.5
4,455.8
4,522.1
4,571.4
4,571.4

1
2

Includes compensation of employees in government enterprises.
Compensation of government employees.
Source: Department of Commerce, Bureau of Economic Analysis.




296

9.7
4.6
6.3
6.4
8.9
13.0
15.3
15.3
16.0
18.8
20.2
23.3
18.8
20.0
22.9
22.2
20.3
19.7
18.8
18.6
18.4
20.7
19.0
20.2
20.2
20.4
20.5
19.3
21.9
22.8
22.2
22.7
25.2
26.3
28.1
32.8
51.0
49.2
50.3
48.5
50.4
60.3
71.8
65.5
79.8
77.0
59.3
77.6
75.4
75.8
78.8
80.7
88.6
93.2
79.0
59.6
74.0
76.2
78.1
82.1
83.3
82.7
90.0
66.7
92.6
88.4
86.7
86.7
95.3
94.6
93.1
89.7

Households
Statisand
tical
instidiscrep- tutions
ancy

1.5
1.2
1.7
1.4
.7
-.7
-1.7
2.7
4.0
.7
1.8
-1.3
.8
.8
2.7
1.8
2.6
2.7
1.8
-1.9
12
-.1
15
-2.8
-1.2
.0
6
-1.4
12
2.1

-1.1
-3.9
-1.1
1.8
-1.6
43
-1.7
2.5
3.6
.0
-1.9
-1.0
4.9
4.1
~5.2
5.4
-4.8
-1.8
-10.6
-28.2
-17.0
-3.1
6.8
2.5
21
-7.9
-9.6
-18.8
-24.7
-23.9
-33.9
-30.5
-28.6
-20.3
-16.2
30
.7
-3.2
-4.9
49

2.9
1.7
2.3
2.4
2.5
2.9
3.2
3.7
4.1
4.5
5.1
5.6
5.9
6.5
6.9
7.2
7.8
8.1
9.1
9.9
10.6
11.5
12.4
13.9
14.5
15.6
16.7
17.9
19.3
21.3
23.4
26.1
29.5
32.4
35.6
39.0
43.0
47.2
52.0
57.1
62.4
70.2
78.6
89.3
101.0
112.7
122.9
132.7
142.3
153.5
169.9
187.3
203.6
224.8
116.9
126.6
136.1
146.6
157.9
177.1
180.9
185.1
190.0
193.3
196.6
200.8
206.5
210.3
215.0
221.4
229.3
233.5

Government2
Total

4.4
4.7
7.6
7.8
9.5
15.2
25.6
32.3
35.3
22.4
17.6
18.1
20.1
21.2
27.7
31.5
32.4
33.0
34.8
37.2
39.8
42.9
44.8
48.1
51.6
55.4
59.3
64.4
69.3
78.4
87.4
97.8
107.5
119.5
130.3
142.6
155.0
168.7
187.7
203.8
220.5
240.5
260.4
288.3
316.7
343.9
366.4
390.6
419.0
443.8
471.9
505.1
541.6
579.4
353.4
373.1
399.1
428.6
454.4
482.0
494.4
501.2
508.6
516.4
530.3
537.8
545.1
553.0
567.0
576.7
582.8
590.9

Federal

0.9
1.2
3.5
3.5
5.1
10.7
21.0
27.3
30.0
16.2
10.3
9.6
10.7
11.1
16.6
19.3
19.1
18.3
19.0
19.6
20.2
21.3
21.7
22.6
23.6
25.2
26.5
28.5
30.0
34.3
37.8
41.9
44.9
48.4
51.1
54.9
57.1
61.1
66.5
70.9
75.5
81.7
86.9
96.1
107.4
117.0
124.7
132.1
140.2
143.5
150.8
159.3
168.6
178.5
120.7
126.0
134.0
142.4
144.6
152.7
158.1
158.9
159.7
160.7
167.5
168.2
168.7
169.7
176.6
179.2
178.3
179.7

State

and

Rest
of the
world

local

3.5
3.5
4.2
4.3
4.4
4.5
4.7
4.9
5.4
6.2
7.3
8.5
9.4
10.1
11.2
12.3
13.3
14.7
15.8
17.6
19.6
21.6
23.1
25.5
27.9
30.2
32.9
35.9
39.3
44.1
49.5
55.9
62.6
71.1
79.3
87.7
97.9
107.6
121.1
132.9
145.0
158.9
173.5
192.2
209.3
226.9
241.7
258.5
278.8
300.3
321.1
345.8
373.0
400.9
232.6
247.2
265.1
286.2
309.8
329.3
336.3
342.4
348.9
355.7
362.8
369.6
376.4
383.3
390.4
397.5
404.5
411.2

0.8

'A
A
.5
.5
.4
.5
.4
L2
1.5
1.4
1.5
2.0
2.2
2.1
2.2
2.6
3.0
3.4
2.9
3.1
3.5
3.8
4.5
4.9
5.4
5.8
5.6
6.0
6.8
6.8
7.3
9.3
11.2
16.2
19.5
17.5
21.1
25.4
30.5
43.8
47.6
52.1
51.2
49.9
47.4
40.7
34.4
29.0
33.5
37.6
38.6
48.7
51.3
46.0
42.0
29.4
30.2
36.8
30.1
31.4
35.7
37.8
32.6
37.2
42.8
41.6
31.6
42.9
38.3

TABLE B-9.—Gross national product by sector in 1982 dollars, 1929-90
[Billions of 1982 dollars; quarterly data at seasonally adjusted annual rates]
Gross domestic product
Year or quarter

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 "
1982- IV
1983: IV
1984- IV .
1985: IV
1986- IV
1987: IV
1988- 1
II
Ill
IV
1989- 1 . ...
II
Ill
IV
1990: 1
II .
Ill
IV f

Gross
national
product

709.6
498.5
716.6
772.9
909.4
1,080.3
1,276.2
1,380.6
1,354.8
1,096.9
1,066.7
1,108.7
1,109.0
1,203.7
1,328.2
1,380.0
1,435.3
1,416.2
1,494.9
1,525.6
1,551.1
1,539.2
1,629.1
1,665.3
1,708.7
1,799.4
1,873.3
1,973.3
2,087.6
2,208.3
2,271.4
2,365.6
2,423.3
2,416.2
2,484.8
2,608.5
2,744.1
2,729.3
2,695.0
2,826.7
2,958.6
3,115.2
3,192.4
3,187.1
3,248.8
3,166.0
3,279.1
3,501.4
3,618.7
3,717.9
3,845.3
4,016.9
4,117.7
4,155.8
3,159.3
3,365.1
3,535.2
3,662.4
3,733.6
3,920.7
3,970.2
4,005.8
4,032.1
4,059.3
4,095.7
4,112.2
4,129.7
4,133.2
4,150.6
4,155.1
4,170.0
4,147.6

Business *
Total

704.6
496.1
713.5
770.3
906.0
1,077.1
1,273.4
1,377.7
1,352.6
1,093.3
1,061.6
1,102.5
1,103.4
1,197.4
1,320.3
1,371.7
1,427.4
1,407.8
1,485.5
1,515.0
1,539=7
1,529.7
1,619.1
1,654.1
1,696.6
1,785.6
1,858.5
1,957.1
2,070.6
2,192.5
2,255.0
2,347.9
2,406.2
2,399.1
2,464.1
2,584.9
2,711.8
2,693.5
2,665.7
2,793.7
2,921.2
3,073.0
3,136.6
3,131.7X
3,193.6
3,114.8
3,231.2
3,457.5
3,581.9
3,687.4
3,820.0
3,988.6
4,087.6
4,126.2
3,111.3
3,316.6
3,493.1
3,624.7
3,707.7
3,894.6
3,938.7
3,980.1
4,005.7
4,029.7
4,064.8
4,085.8
4,100.1
4,099.5
4,118.2
4,130.6
4,137.5
4,118.6

Total

1

611.6
404.9
586.8
635.5
738.7
832.9
891.6
934.3
914.3
866.3
886.1
925.4
916.7
1,002.8
1,080.5
1,114.7
1,170.0
1,154.6
1,229.7
1,254.1
1,274.0
1,260.4
1,345.8
1,369.7
1,403.2
1,480.9
1,546.7
1,635.2
1,737.4
1,837.1
1,880.9
1,961.1
2,009.8
2,004.4
2,068.0
2,186.6
2,309.1
2,283.9
2,249.6
2,374.8
2,497.2
2,639.2
2,696.4
2,683.2
2,739.8
2,658.2
2,770.1
2,990.1
3,103.3
3,198.2
3,320.1
3,473.9
3,557.9
3,581.9
2,654.1
2,853.2
3,022.2
3,141.7
3,215.1
3,389.1
3,429.4
3,467.6
3,488.7
3,509.7
3,541.5
3,557.9
3,567.9
3,564.4
3,580.0
3,587.2
3,590.8
3,569.9

Nonfarm

J

Farm

547.8
338.7
518.3
571.2
675.8
774.4
841.6
862.5
839.3
809.0
828.6
875.1
858.5
941.4
1,014.9
1,050.9
1,101.3
1,084.2
1,161.5
1,199.6
1,219.0
1,199.7
1,291.6
1,317.2
1,346.7
1,421.1
1,488.7
1,581.6
1,681.8
1,776.5
1,824.2
1,908.3
1,962.1
1,946.4
2,001.4
2,128.0
2,256.6
2,226.5
2,180.6
2,306.6
2,434.9
2,581.0
2,633.2
2,613.1
2,659.6
2,581.3
2,703.7
2,916.6
3,028.1
3,115.7
3,245.4
3,422.2
3,492.9
3,504.4
2,567.1
2,795.3
2,953.0
3,066.2
3,137.2
3,318.8
3,365.1
3,408.8
3,442.4
3,472.4
3,484.1
3,496.4
3,503.5
3,487.5
3,500.3
3,510.3
3,514.3
3,492.7

1
2

Includes compensation of employees in government enterprises.
Compensation of government employees.
Source: Department of Commerce, Bureau of Economic Analysis.




297

54.1
56.6
56.4
54.6
58.1
62.4
59.2
57.2
53.7
54.0
49.9
55.2
55.0
58.3
56.0
57.2
59.3
60.9
62.0
60.7
58.8
61.2
58.8
61.1
60.2
59.8
59.8
57.7
59.0
54.7
57.7
55.7
57.2
60.7
62.3
62.0
61.1
60.7
64.8
62.5
62.2
61.0
64.6
64.2
75.7
77.0
61.3
68.5
79.4
84.1
83.8
75.3
78.8
79.9
80.3
55.6
71.1
82.5
86.4
86.4
85.4
78.9
74.5
62.3
80.8
77.9
77.4
79.3
79.1
79.4
80.2
80.9

Statistical
discrepancy

9.7
9.6
12.1
9.7
4.8
-4.0
-9.2
14.6
21.3
3.3
7.6
-4.9
3.2
3.1
9.7
6.5
9.4
9.5
6.2
6.2
-3.8

-4.6
-8.7
-3.7
.1
-1.8
-4.1
34
5.9
10
-2.8
95
-2.7
4.2
-3.4
-8.6
-3.3
4.2
5.6
-2.B
14
5.9
4.4
-.1
5.0
5.0
-4.3
16
-9.1
-23.6
-13.8
24
6.7
2.3
19
-7.1
-8.5
-16.1
211
-20.1
282
-25.1
-23.3
-16.4
-13.0
-2.4
.6
-2.5
-3.7
37

Households
and
institutions

34.4
27.1
33.3
35.8
35.8
36.9
34.3
34.3
34.4
35.4
37.9
41.2
42.4
45.0
46.1
46.2
47.7
48.4
53.2
56.1
57.7
60.7
62.7
67.4
68.0
70.7
72.5
74.6
77.4
80.4
83.1
85.6
88.2
87.0
88.8
91.2
93.4
93.9
96.4
97.0
98.0
101.0
103.7
107.3
109.9
112.7
114.9
117.6
121.3
125.7
129.5
137.5
146.2
154.6
113.8
115.8
119.0
123.2
126.3
132.1
134.2
136.3
139.0
140.4
142.3
145.2
148.0
149.2
150.8
153.6
156.7
157.2

Government2
Total

58.6
64.0
93.4
99.0
131.5
207.4
347.6
409.1
403.8
191.6
137.7
135.8
144.2
149.6
193.7
210.7
209.7
204.8
202.6
204.8
208.0
208.6
210.6
217.1
225.4
233.9
239.2
247.3
255.8
275.0
291.0
301.2
308.2
307.7
307.4
307.1
309.3
315.7
319.6
321.9
326.0
332.8
336.5
341.2
343.9
343.9
346.3
349.8
357.4
363.5
370.4
377.2
383.5
389.7
343.5
347.5
351.9
359.9
366.3
373.4
375.1
376.2
378.0
379.6
381.1
382.7
384.2
385.9
387.4
389.9
390.0
391.5

Federal

13.2
16.2
38.9
44.1
76.2
152.9
294.6
357.5
350.7
135.0
76.7
73.2
77.1
80.3
122.8
137.5
133.2
125.0
119.2
116.1
114.5
109.5
107.5
108.9
111.5
116.7
116.1
116.8
117.3
128.1
138.5
140.7
141.0
133.2
125.5
118.3
113.6
113.5
112.8
112.7
112.7
113.9
113.0
114.4
115.8
117.0
119.0
120.5
122.3
122.6
124.3
126.1
126.5
127.6
117.6
119.4
121.2
122.5
123.2
125.5
126.0
125.8
126.2
126.4
126.2
126.4
126.5
126.8
127.0
128.2
127.4
127.8

State
and
local

45.3
47.9
54.6
55.0
55.3
54.4
52.9
51.7
53.2
56.6
61.0
62.6
67.1
69.3
71.0
73.3
76.5
79.8
83.4
88.7
93.5
99.2
103.1
108.2
113.9
117.3
123.1
130.5
138.5
146.9
152.4
160.5
167.2
174.5
181.9
188.8
195.7
202.1
206.8
209.2
213.3
219.0
223.5
226.8
228.1
226.9
227.3
229.3
235.0
240.8
246.1
251.1
257.0
262.1
225.9
228.1
230.7
237.4
243.1
247.9
249.1
250.4
251.8
253.3
254.9
256.3
257.7
259.2
260.4
261.7
262.7
263.6

Rest
of the
world

4.9
2.4
3.1
2.6
3.4
3.1
2.7
2.9
2.3
3.6
5.1
6.2
5.6
6.2
7.9
8.3
7.9
8.4
9.4
10.7
11.5
9.5
10.0
11.1
12.1
13.9
14.9
16.1
17.0
15.9
16.3
17.7
17.0
17.1
20.7
23.7
32.2
35.9
29.3
33.0
37.4
42.1
55.7
55.5
55.2
51.2
47.9
43.9
36.9
30.5
25.3
28.3
30.2
29.6
48.0
48.5
42.1
37.6
25.9
26.2
31.5
25.7
26.4
29.5
30.9
26.4
29.6
33.7
32.4
24.5
32.6
29.0

TABLE B-10.—Gross national product by industry, 1947-88
[Billions of dollars]
Gross domestic product

FiGovern- StaTrans- Whole- nance,
ment
Rest
tis- of the
portation sale insur- Servand
and
and ance, ices govern- tical world
Dura- Nondisment
ble durable public retail and
enter- crepgoods goods utilities trade real
ancy
estate
prises

Manufacturing

Year

Gross
Agrinational culture,
Conproduct forestry, Mining strucand
tion Total
fisheries

66.2
74.7
72.2

33.5
38.2
37.1

32.7
36.6
35.0

21.0
23.7
23.9

44.2
48.4
48.0

23.8
26.9
29.2

20.2
21.9
22.6

20.2
1.8
20.8 -1.3
23.2
.8

1.2
1.5
1.4

9.3
10.2
10.2
10.7
11.0

13.2 84.0
15.6 99.0
16.9 103.3
17.5 112.5
17.7 106.7

45.9
55.5
59.0
66.1
61.0

38.1
43.4
44.3
46.4
45.7

26.6
30.2
32.2
34.2
33.8

51.5
56.8
59.0
60.4
61.6

32.2
35.5
39.1
43.3
47.0

24.2
26.4
28.1
30.2
31.6

24.2
31.2
35.7
36.8
37.4

.8
2.7
1.8
2.6
2.7

1.5
2.0
2.2
2.1
2.2

20.0
19.8
19.6
22.1
20.4

12.5
13.6
13.7
12.6
12.5

19.1
21.3
22.2
21.8
23.7

121.3
127.2
131.8
124.3
141.8

70.8
73.9
78.0
70.0
81.6

50.4
53.3
53.9
54.3
60.3

36.8
39.6
41.7
41.9
45.1

67.0
71.3
75.0
76.4
83.3

50.7
54.3
58.5
63.1
68.2

35.1
38.7
41.7
44.0
48.3

39.0
1.8
41.2
19
44.5 -1.2
47.8 -.1
50.8 -1.5

2.6
3.0
3.4
2.9
3.1

515.3
533.8
574.6
606.9
649.8

21.7
21.8
22.3
22.3
21.4

12.8
12.9
13.1
13.4
13.8

24.3
25.3
27.1
28.9
31.6

144.4
145.0
158.6
168.1
180.2

82.5
81.6
91.9
98.0
105.7

61.9
63.3
66.8
70.1
74.5

47.3
48.9
51.9
54.8
58.3

85.7
88.0
94.1
98.2
107.1

72.8
76.9
81.7
86.5
92.0

51.4
54.9
59.2
63.3
69.0

54.2 -2.8
12
57.6
62.1
.0
6
67.0
72.5 -1.4

3.5
3.8
4.5
4.9
5.4

1965
1966
1967
1968
1969

705.1
772.0
816.4
892.7
963.9

24.2
25.3
24.9
25.7
28.6

14.0
14.6
15.2
16.2
17.1

34.7
37.9
39.7
43.5
48.7

198.4
217.4
222.9
243.6
257.1

118.4
130.8
133.7
146.1
154.2

80.0
86.6
89.2
97.5
102.9

62.6
67.4
70.7
76.4
82.6

115.0
124.1
132.9
146.8
159.2

98.9 74.6
106.9 82.5
115.6 90.6
125.1 99.1
136.3 110.5

5.8
5.6
6.0
6.8
6.8

1970
1971
1972
1973
1974

1,015.5
1,102.7
1,212.8
1,359.3
1,472.8

29.9
32.2
37.4
56.2
55.0

18.7
18.8
20.2
23.4
36.9

51.4
56.5
63.0
70.4
74.5

252.3
265.7
292.5
326.4
338.5

145.9
153.8
172.6
195.4
201.7

106.3
111.9
119.9
131.0
136.7

88.4
97.1
108.0
118.7
129.1

168.7
183.7
202.6
225.6
246.0

145.8
161.4
174.8
190.5
206.7

120.2
130.2
144.6
163.2
179.4

78.2 -1.2
88.1
2.1
98.4 -.4
110.5 -1.1
121.0 -3.9
11
134.0
145.9
1.8
160.1 -1.6
173.1 -4.3
17
189.0

7.3
9.3
11.2
16.2
19.5

1975 . . . .
1976
1977
1978
1979

1,598.4
1,782.8
1,990.5
2,249.7
2,508.2

56.3
55.7
58.9
70.1
83.1

41.3 76.5 357.3
46.0 86.2 409.3
50.2 97.9 465.3
56.5 115.6 518.8
72.7 131.4 561.8

206.3
239.7
277.7
217.4
345.2

151.0
169.7
187.7
201.4
216.5

141.7
160.4
178.9
201.0
216.1

273.7
299.7
332.8
373.4
415.8

221.7
246.1
280.3
326.3
363.3

199.8
224.9
253.4
289.1
328.7

210.1
2.5
229.7
3.6
247.4
.0
270.3 -1.9
292.4
10

17.5
21.1
25.4
30.5
43.8

1980
1981
1982
1983
1984

2,732.0
3,052.6
3,166.0
3,405.7
3,772.2

77.2
92.0
89.6
74.3
92.9

107.3
143.7
132.1
118.4
119.4

137.7
138.4
140.9
149.6
171.5

581.0
643.1
634.6
683.2
771.9

351.8
385.8
362.5
385.6
451.1

229.2
257.3
272.1
297.6
320.8

240.8
269.6
288.4
320.0
354.4

438.9
483.1
506.5
542.9
613.9

400.6
449.3
475.1
536.4
572.8

374.0
422.6
463.6
515.5
580.2

322.1
354.7
383.9
410.5
442.5

4.9
4.1
1
5.2
5.4

47.6
52.1
51.2
49.9
47.4

1985
1986
1987
1988

4,014.9
4,231.6
4,524.3
4,880.6

92.0
93.6
98.3
99.8

114.2
74.3
77.0
80.4

186.6
203.8
216.9
232.6

789.5
832.4
872.1
948.6

458.8
478.1
495.4
530.3

330.8
354.3
376.6
418.3

374.1
394.9
415.9
441.4

658.2
682.5
724.8
780.8

639.5
696.3
764.9
830.3

648.1
717.6
792.7
872.5

476.7
48
503.5
18
535.9 -4.7
570.6 -9.6

40.7
34.4
30.5
33.3

1947
1948
1949

235.2
261.6
260.4

20.8
24.0
19.5

6.8
9.4
8.1

1950
1951
1952
1953
1954

288.3
333.4
351.6
371.6
372.5

20.8
23.9
23.2
21.4
20.8

1955
1956
1957
1958 .
1959

405.9
428.2
451.0
456.8
495.8

1960
1961
1962
1963
1964

9.1
11.5
11.5

Note.—The industry classification is on an establishment basis and is based on the 1972 Standard Industrial Classification.
Data in this table reflect the annual revisions of the national income and product accounts (NIPA) published in July 1989. Later this
year, estimates will be published for 1987-89 consistent with the NIPA revisions of July 1990.
Source: Department of Commerce, Bureau of Economic Analysis.




298

TABLE B-ll.—Gross national product by industry in 1982 dollars, 1947-88
[Billions of 1982 dollars]
Gross domestic product

FiGovern- StaTransRest
ment
por- Whole- nance,
Gross
tisof the
tation sale insur- Servand
Connational culture,
forest- Mining struc2
and ance, ices govern- tical Resid- world
Dura- Nonand
product ry, and
disment crep- ual
tion Total ble durable public retail and
fisherenter- ancy 1
goods goods util- trade real
ies
estate
prises
ities
Manufacturing

Year

76.7 226.1 138.1
90.0 238.5 145.0
89.4 226.3 133.2

7.6 -13.6
156.2
155.5 -4.9 -7.5
3.2 -4.2
164.0

5.1
6.2
5.6

133.8
136.9
139.4
142.7
145.9

169.2
214.0
231.9
230.9
225.4

6.2
7.9
8.3
7.9
8.4

160.2
168.8
178.3
184.5
195.9

153.0
161.1
168.6
174.3
183.5

6.2 -6.6
223.4
225.6 -6.2 -11.1
229.2 -3.8 -14.7
-8.1
230.1
232.8 -"ie -11.0

9.4
10.7
11.5
9.5
10.0

245.4
247.8
263.9
273.9
290.7

206.5
215.0
226.5
235.9
245.8

190.2
197.7
•207.7
217.4
230.7

240.3
249.2
258.4
264.5
274.0

-8.7
-3.7
.1
-1.8
-4.1

11.1
12.1
13.9
14.9
16.1

161.5
174.2
178.1
189.5
200.3

309.8
326.5
335.4
354.8
361.7

259.8
271.1
282.4
296.0
314.0

240.4
253.9
265.2
274.7
287.8

284.3
305.5
322.3
332.6
340.2

-3.4 -14.0
5.9 -14.5
-1.0
-2.8
~2.B
-9.5 -2.7

17.0
15.9
16.3
17.7
17.0

203.9
209.8
223.8
243.0
248.8

367.6
385.7
414.8
437.0
426.2

320.7
335.9
350.9
367.7
381.6

295.7
302.4
320.0
340.2
347.5

339.6
340.0
340.5
343.4
350.6

-2.7 -3.9
4.2
4.8
-3.4
5.1
-8.6 -6.2
-3.3 -11.8

17.1
20.7
23.7
32.2
35.9

125.6 149.4 547.5 325.2
124.4 158.1 600.6 357.4

2222 246.4 433.1 387.6 352.4
243.2 257.1 454.4 403.1 367.7

355.0
357.7

4.2 -8.7
5.6 -6.6

29.3
33.0

145.5 157.1 664.8 403.3
148.3 166.9 694.7 423.3
142.2 167.4 712.2 433.1

261.5 271.2 433.7 417.9 399.6
271.4 284.0 466.6 442.8 421.5
279.0 291.3 488.0 461.1 436.9

.1 -4.9
363.0
6.3
371.6 -2.8
376.5 -1.4 -14.5

37.4
42.1
55.7

76.4
87.4
89.6
76.7
84.2

143.5
145.7
132.1
129.9
137.9

153.3
150.3
140.9
146.1
159.4

673.9
678.6
634.6
674.2
752.4

408.5
408.6
362.5
383.8
448.6

265.5
269.9
272.1
290.4
303.8

294.0
293.9
288.4
307.7
326.0

481.8
499.1
506.5
530.0
588.9

468.9
476.1
475.1
492.9
509.8

450.9
463.0
463.6
480.4
509.7

382.8
385.4
383.9
387.3
391.9

5.9
.0
4.4
9.9
-.1
.0
.9
5.0
5.0 -7.8

55.5
55.2
51.2
47.9
43.9

95.8
103.6
104.4
94.5

139.0
128.3
125.5
127.3

166.3
174.6
175.4
176.9

779.2
803.2
849.7
927.5

471.5
482.7
517.4
583.2

307.7
320.5
332.2
344.3

331.4
342.4
373.6
392.0

621.5
662.2
659.4
693.9

528.3
535.6
564.7
583.7

538.6
565.8
591.4
613.9

400.5
407.9
414.8
422.2

-14.4
-34.5
-27.4
-27.7

36J
30.5
26.6
28.1

88.0 100.0 157.8 103.0 124.7
93.5 98.7 161.9 107.7 128.9
93.1 90.7 166.1 112.2 129.0

1947
1948
1949

1,066.7
1,108.7
1,109.0

55.6
61.3
61.0

67.6
72.4
65.7

1950
1951
1952
1953
1954

1,203.7
1,328.2
1,380.0
1,435.3
1,416.2

64.3
62.6
64.2
66.3
68.2

72.8
80.8
81.5
84.3
83.3

100.0
110.9
115.9
119.9
124.8

257.7
288.4
298.2
319.9
296.6

156.7
181.4
190.6
208.4
185.8

101.0
107.0
107.6
111.5
110.8

95.3
104.9
104.5
106.7
104.1

182.1
183.7
189.5
195.6
197.1

119.7
126.4
134.7
142.2
149.5

1955
1956
1957
1958
1959

1,494.9
1,525.6
1,551.1
1,539.2
1,629.1

69.1
67.8
65.9
68.3
65.8

92.0
96.5
96.2
89.1
94.1

133.3
142.7
142.4
147.5
160.4

327.7
330.6
332.5
303.5
338.0

208.5
207.3
208.7
180.1
203.0

119.2
123.3
123.8
123.4
135.0

112.3
117.7
119.9
116.1
123.5

215.0
221.5
225.1
225.0
240.7

1960
1961
1962
1963
1964

1,665.3
1,708.7
1,799.4
1,873.3
1,973.3

68.3
67.5
67.1
67.2
65.2

94.2
95.6
98.1
102.2
105.7

163.1
165.1
172.5
177.5
185.9

338.7
339.4
368.3
397.4
425.4

202.4
199.9
220.5
238.9
259.3

136.3
139.5
147.8
158.5
166.2

127.8
130.0
136.3
143.8
150.4

1965
1966
1967
1968
1969

2,087.6
2,208.3
2,271.4
2,365.6
2,423.3

66.7
62.4
65.5
63.6
65.3

109.4
115.0
120.2
124.7
128.9

193.7
194.4
190.7
190.2
183.6

462.5
497.9
496.6
522.0
536.7

286.9
312.3
311.9
326.2
334.1

175.6
185.6
184.7
195.8
202.6

1970
1971
1972
1973
1974

2,416.2
2,484.8
2,608.5
2,744.1
2,729.3

68.8
70.6
70.9
70.3
69.7

134.5
132.4
134.4
133.4
130.3

168.0
162.7
166.7
170.4
162.3

506.8
515.5
561.2
621.3
591.6

304.8
305.5
336.5
377.0
363.5

202.0
210.0
224.8
244.3
228.1

1975
1976

2,695.0
2,826.7

73.1
71.5

1977«
1978
1979

2,958.6 ; 73.3
3,115.2
73.0
3,192.4
77.0

1980
1981
1982
1983
1984

3,187.1
3,248.8
3,166.0
3,279.1
3,501.4

1985
1986
1987
1988

3,618.7
3,717.9
3,853.7
4,024.4

3.1
9.7
6.5
9.4
9.5

-4.3
-1.6
-4.1
-8.0

-.6
2.0
5.3
9.4
3.5

-11.6
-6.9
-13.3
-19.7
-12.6

1
Equals the statistical discrepancy in current dollars divided by the implicit price deflator for gross domestic business product.
2
Equals GNP in constant dollars measured as the sum of expenditures less the statistical discrepancy in constant dollars less GNP in
constant dollars measured as the sum of gross product originating by industry.
3
Data for gross domestic product by industry beginning 1977 are based on a revised methodology and are not comparable with data
for earlier years. For details, see Survey of Current Business, January 1991.
Note.—The industry classification is on an establishment basis and is based on the 1972 Standard Industrial Classification.
Data in this table reflect the annual revisions of the national income and product accounts (NIPA) published in July 1989. Later this
year, estimates will be published for 1987-89 consistent with the NIPA revisions of July 1990.
Source: Department of Commerce, Bureau of Economic Analysis.




299

TABLE B-12.—Gross domestic product of nonfinancial corporate business, 1940-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year or
quarter

1940
1941
1942
1943
1944
1945
1946
1947
1948
1949 ....
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969 .
1970
1971
1972
1973 ....
1974
1975
1976
1977
1978
1979
1980 ..
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 "
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988- 1
II
Ill
IV
1989: I

II
Ill
IV
1990: 1
II
Ill
IV "

Gross
domestic
product
of
noninancial
corporate
business

50.6
65.9
83.3
99.1
102.6
95.8
99.8
121.2
138.9
135.2
153.6
176.3
184.0
196.6
193.5
218.5
233.6
244.1
238.0
267.1
277.6
285.2
311.1
331.1
357.7
392.7
430.2
452.6
499.7
542.2
560.4
605.1
671.8
753.0
812.8
881.5
995.5
1,126.1
1,274.1
1,417.4
1,540.8
1,738.4
1,782.2
1,914.2
2,146.7
2,267.1
2,367.1
2,524.8
2,720.7
2,854.5
2,954.6
1,779.4
2,012.5
2,201.8
2,309.4
2,408.7
2,597.4
2,645.1
2,700.5
2,739.9
2,797.3
2,812.8
2,847.5
2,879.1
2,878.5
2,907.5
2,960.0
2,979.1

Capital
consumption
allowances
with
capital Total
consumption
adjustment

5.0
5.4
6.0
6.1
6.2
6.3
7.4
9.0
10.5
11.2
12.1
13.9
14.9
15.9
16.8
17.9
20.1
22.1
23.2
24.3
25.3
26.0
27.0
28.2
29.6
31.6
34.5
37.8
41.7
45.7
50.2
55.1
60.5
65.6
76.8
92.5
103.0
115.1
130.8
150.7
172.5
200.2
223.0
229.8
240.1
252.6
267.4
281.9
297.6
317.8
331.6
229.7
232.2
245.0
257.4
273.6
286.5
291.4
295.2
299.0
304.9
309.4
313.0
322.3
326.4
326.1
329.1
333.4
337.9

45.6
60.5
77.3
93.0
96.4
89.5
92.4
112.2
128.4
123.9
141.5
162.4
169.1
180.7
176.7
200.7
213.5
221.9
214.8
242.8
252.4
259.1
284.2
303.0
328.0
361.1
395.7
414.8
458.0
496.6
510.2
550.0
611.3
687.4
736.0
789.0
892.5
1,010.9
1,143.3
1,266.7
1,368.2
1,538.1
1,559.3
1,684.4
1,906.6
2,014.5
2,099.7
2,243.0
2,423.1
2,536.7
2,623.0
1,549.7
1,780.3
1,956.7
2,051.9
2,135.2
2,310.9
2,353.7
2,405.3
2,440.9
2,492.4
2,503.4
2,534.6
2,556.7
2,552.2
2,581.3
2,630.9
2,645.7

Net domestic product
Domestic income
Indirect
business
tax,
etc.1

5.5
6.4
6.8
7.3
8.1
8.9
10.1
11.9
13.2
13.9
15.3
16.5
18.0
19.2
18.6
20.6
22.4
23.7
24.1
26.2
28.5
29.8
32.2
34.2
36.8
39.4
40.7
43.3
49.9
54.9
59.0
64.7
69.4
76.5
81.5
88.3
95.4
104.4
114.1
122.1
138.5
165.9
166.9
182.9
204.2
218.4
230.2
240.2
257.5
272.9
289.8
169.7
189.6
210.6
221.5
232.7
245.8
250.9
255.1
260.8
263.3
266.2
271.1
277.4
277.1
283.9
284.2
293.6
297.4

Corporate profits with inventory valuation and capital
consumption adjustments
Total

40.2
54.1
70.5
85.7
88.3
80.6
82.3
100.3
115.2
110.1
126.2
146.0
151.1
161.5
158.1
180.0
191.1
198.2
190.7
216.7
223.9
229.4
252.0
268.7
291.2
321.7
355.0
371.5
408.1
441.6
451.2
485.3
541.9
610.8
654.5
700.7
797.1
906.5
1,029.2
1,144.7
1,229.7
1,372.3
1,392.4
1,501.5
1,702.5
1,796.1
1,869.5
2,002.8
2,165.6
2,263.8
2,333.2
1,379.9
1,590.7
1,746.1
1,830.4
1,902.5
2,065.1
2,102.9
2,150.2
2,180.1
2,229.1
2,237.2
2,263.5
2,279.4
2,275.1
2,297.4
2,346.8
2,352.1

ComProfits
pensation of
Profits after tax
employ- Total Profits Profits
ees
before tax
Divi- Undistax iability Total dends tributed
profits
31.2
39.8
51.0
62.2
65.1
61.9
67.2
79.1
87.7
85.2
94.7
110.2
118.2
128.6
126.4
138.4
151.3
159.0
155.8
171.5
181.2
185.3
200.1
211.1
226.7
246.5
274.0
292.3
323.2
358.8
378.7
402.0
447.1
505.9
556.8
580.4
656.3
741.0
847.4
962.0
1,051.1
1,160.5
1,203.9
1,266.1
1,399.8
1,489.8
1,567.1
1,663.6
1,801.6
1,902.3
1,983.3
1,206.5
1,319.7
1,436.8
1,524.0
1,597.9
1,716.1
1,744.8
1,786.2
1,822.0
1,853.4
1,879.3
1,895.3
1,910.0
1,924.4
1,946.2
1,982.1
2,004.7
2,000.4

7.6
13.0
18.2
22.4
22.2
17.7
14.4
20.4
26.6
23.9
30.6
34.7
31.7
31.5
30.1
40.0
38.1
37.0
32.2
42.1
39.2
40.1
47.3
52.8
59.3
69.1
73.7
70.5
74.8
69.6
55.4
65.2
75.7
82.4
69.4
91.6
113.3
134.9
146.0
139.1
123.1
144.2
111.9
165.6
222.4
225.3
214.0
246.0
266.0
241.0
221.4
100.1
199.5
222.1
226.3
211.7
255.6
263.1
268.1
259.6
273.0
247.3
248.6
244.4
223.8
224.5
235.8
218.8

8.8
16.4
20.1
23.6
22.2
17.8
22.0
29.1
31.8
24.9
38.5
39.1
33.8
34.9
32.1
42.0
41.8
39.8
33.7
43.1
39.7
39.5
44.2
48.9
55.4
65.2
70.3
66.5
73.1
69.6
57.0
65.6
76.8
96.9
107.2
109.2
138.3
160.5
182.1
195.8
181.8
181.5
129.7
159.3
196.0
170.2
156.4
217.2
251.1
241.5
232.8
116.3
183.2
181.9
174.2
172.9
227.5
238.2
254.1
251.8
260.3
260.4
246.4
233.0
226.0
227.9
232.2
239.1

2.7
7.5
11.2
13.8
12.6
10.2
8.6
10.8
11.8
9.3
16.9
21.2
17.8
18.5
15.6
20.2
20.1
19.1
16.2
20.7
19.2
19.5
20.6
22.8
24.0
27.2
29.5
27.8
33.6
33.3
27.2
29.9
33.8
40.2
42.2
41.5
53.0
59.9
67.1
69.6
67.0
63.9
46.3
59.4
73.5
69.9
75.4
93.3
102.2
101.4
97.6
41.0
70.6
66.4
71.6
84.4
98.5
97.4
104.4
101.3
105.5
107.7
101.6
99.6
96.6
95.3
97.5
100.3

6.1
9.0
8.9
9.8
9.6
7.6
13.4
18.3
20.0
15.6
21.6
17.9
16.0
16.4
16.4
21.8
21.8
20.7
17.5
22.4
20.5
20.1
23.5
26.2
31.4
38.0
40.8
38.6
39.5
36.2
29.8
35.6
43.0
56.7
65.0
67.7
85.4
100.6
115.0
126.2
114.8
117.6
83.4
99.9
122.5
100.4
81.0
123.9
148.9
140.1
135.2
75.4
112.7
115.5
102.6
88.5
129.0
140.8
149.7
150.4
154.8
152.7
144.9
133.4
129.3
132.6
134.7
138.8

1
Indirect business tax and nontax liability plus business transfer payments less subsidies.
Source: Department of Commerce, Bureau of Economic Analysis.




300

3.5
3.9
3.7
3.9
4.1
4.1
4.8
5.5
6.0
6.0
7.5
7.1
7.1
7.3
7.4
8.5
9.0
9.3
9.3
10.0
10.6
10.6
11.4
12.6
13.7
15.6
16.8
17.5
19.1
19.1
18.5
18.5
20.1
21.1
21.7
24.8
27.8
32.0
37.2
39.3
45.5
53.4
59.7
66.5
69.5
72.2
74.4
81.8
80.8
104.8
115.3
62.2
68.8
68.6
72.3
75.2
88.0
72.8
77.3
90.4
82.8
107.3
101.3
106.6
104.1
118.5
112.3
115.5
114.9

2.6
5.0
5.2
5.8
5.6
3.5
8.6
12.8
14.0
9.6
14.1
10.8
8.8
9.1
9.0
13.4
12.7
11.4
8.2
12.4
9.9
9.5
12.2
13.5
17.7
22.4
24.0
21.2
20.4
17.1
11.3
17.1
22.9
35.6
43.3
42.9
57.6
68.6
77.8
86.9
69.3
64.2
23.7
33.4
53.0
28.2
6.6
42.1
68.1
35.2
19.8
13.2
43.9
46.9
30.3
13.3
41.0
68.0
72.4
60.0
72.0
45.3
43.6
26.8
25.2
14.1
22.4
23.3

Inventory
valuation
adjustment

-.2
-2.5
-1.2
-.8
-.3
-.6
-5.3
-5.9
22
1.9
-5.0
12
1.0
-1.0

-~L7
-2.7
-1.5
-'.3
-.2
.3
.0
.1
-L2
-2.1
-1.6
-3.7
-5.9
6.6
-4.6
-6.6
-20.0
-39.5
-11.0
-14.9
-16.6
-25.3
-43.2
431
-24.2
-10.4
-10.9
-5.8
-1.7
6.7
-19.4
-27.0
-21.7
-13.2
-13.4
-8.1
-1.6
-6.6
-8.0
-21.1
-21.8
-30.3
-33.3
-22.5
-43.0
-23.1
-6.1
-14.5
-11.4

-19^8
-21.2

Capital Net
con- intersump- est
tion
adjustment

-1.0
-1.0
-.7
-.4
.3
.5
-2.3
-2.8
-3.0
-2.9
-2.9
-3.2
-3.0
-2.4
-1.6
-.3
-1.1
-1.2
-1.2
-.8
-.2
.3
3.1
3.9
4.4
5.2
5.5
5.5
5.3
5.9
5.0
4.2
5.5
5.6
1.7
-6.6
-10.2
-9.0
-10.9
-13.5
-15.5
131
-7.5
17.1
32.1
56.7
50.9
48.2
41.8
21.2
1.8
-2.8
24.4
41.8
58.7
46.8
49.1
46.7
44.3
41.1
35.1
29.9
25.3
17.5
12.3
8.1
4.1
-.6
-4.3

1.4
1.3
1.3
1.1
1.0
1.0
.7
.8
.9
1.0
.9
1.1
1.2
1.3
1.6
1.6
1.8
2.2
2.7
3.1
3.5
4.0
4.5
4.8
5.3
6.1
7.4
8.8
10.1
13.2
17.1
18.1
19.2
22.5
28.3
28.7
27.5
30.6
35.9
43.5
55.5
67.5
76.6
69.8
80.3
81.1
88.4
93.2
98.0
120.5
128.5
73.4
71.5
87.2
80.1
93.0
93.4
94.9
95.9
98.5
102.7
110.5
119.6
125.0
126.9
126.6
128.9
128.6
129.8

TABLE B-13.—Output, costs, and profits of nonfinancial corporate business, 1948-90
[Quarterly data at seasonally adjusted annual rates]

Year or
quarter

Gross domestic
product of
nonfinancial
corporate
business
(billions of
dollars)
Current
dollars

1948
1949
1950...
1951
1952 ...
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969 ...
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983 .
1984
1985
1986
1987 ...
1988
1989
1990 ".
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988: I ..

II
III
IV
1989:1
||
III
IV
1990:1
|
|
Ill

1982
dollars

138.9
135.2
153.6
176.3
184.0
196.6
193.5
218.5
233.6
244.1
238.0
267.1
277.6
285.2
311.1
331.1
357.7
392.7
430.2
452.6
499.7
542.2
560.4
605.1
671.8
753.0
812.8
881.5
995.5
1,126.1
1,274.1
1,417.4
1,540.8
1,738.4
1,782.2
1,914.2
2,146.7
2,267.1
2,367.1
2,524.8
2,720.7
2,854.5
2,954.6
1,779.4
2,012.5
2,201.8
2,309.4
2,408.7
2,597.4
2,645.1
2,700.5
2,739.9
2,797.3
2,812.8
2,847.5
2,879.1
2,878.5
2,907.5
2,960.0
2,979.1

538.9
515.7
570.4
622.4
637.3
668.4
650.8
719.3
747.0
758.1
725.2
798.5
820.8
839.1
904.8
964.4
1,029.0
1,111.7
1,189.5
1,217.0
1,286.5
1,339.6
1,325.2
1,360.6
1,461.1
1,569.7
1,533.4
1,488.1
1,583.5
1,686.6
1,789.8
1,840.4
1,807.9
1,837.2
1,782.2
1,886.0
2,036.5
2,117.4
2,173.9
2,290.2
2,403.7
2,431.2
2,429.5
1,760.2
1,940.5
2,069.5
2,137.7
2,198.5
2,339.4
2,373.9
2,398.9
2,413.2
2,428.6
2,427.8
2,431.3
2,443.9
2,421.8
2,423.1
2,440.1
2,435.1

Current-dollar cost and profit per unit of output (dollars) 1

Total
cost
and
profit 2

0.258
.262
.269
.283
.289
.294
.297
.304
.313
.322
.328
.335
.338
.340
.344
.343
.348
.353
.362
.372
.388
.405
.423
.445
.460
.480
.530
.592
.629
.668
.712
.770
.852
.946
1.000
1.026
1.054
1.071
1.089
1.102
1.132
1.174
1.216
1.011
1.037
1.064
1.080
1.096
1.110
1.114
1.126
1.135
1.152
1.159
1.171
1.178
1.189
1.200
1.213
1.223

Capital
consumption
allowances
with
capital
consumption
adjustment

Indirect
business
tax,
etc.3

0.019 0.025
.022
.027
.021 .027
.022
.026
.023
.028
.024
.029
.026
.029
.025
.029
.027
.030
.029
.031
.032 .033
.030
.033
.031 .035
.031 .035
.030 .036
.029
.035
.029
.036
.028
.035
.034
.029
.031 .036
.032
.039
.034
.041
.038 .045
.040
.048
.041 .048
.042
.049
.050
.053
.062
.059
.065 .060
.068 .062
.064
.073
.082
.066
.077
.095
.109 .090
.125 .094
.123 .098
.118 .100
.119
.103
.123 .106
.123 .105
.124
.107
.131 .112
.137 .119
.131 .096
.120
.098
.118 .102
.120
.104
.124
.106
.122
.105
.123 .106
.123 .106
.124
.108
.126 .108
.127
.110
.129 .111
.132 .113
.135 .114
.135 .117
.135 .116
.137 .121

Compensation
of
employees

0.163
.165
.166
.177
.185
.192
.194
.192
.203
.210
.215
.215
.221
.221
.221
.219
.220
.222
.230
.240
.251
.268
.286
.295
.306
.322
.363
.390
.414
.439
.473
.523
.581
.632
.676
.679
.687
.704
.721
.726
.750
.782
.816
.685
.680
.694
.713
.727
.734
.735
.745
.755
.763
.774
.780
.782
.795
.803
.812
.823

1
Output
2

Corporate profits with
inventory valuation and
capital consumption
adjustments

Total

0.049
.046
.054
.056
.050
.047
.046
.056
.051
.049
.044
.053
.048
.048
.052
.055
.058
.062
.062
.058
.058
.052
.042
.048
.052
.053
.045
.062
.072
.080
.082
.076
.068
.078
.063
.089
.109
.106
.098
.107
.111
.099
.091
.057
.103
.107
.106
.096
.109
.111
.112
.108
.112
.102
.102
.100
.092
.093
.097
.090

Profits
tax
liability

0.022
.018
.030
.034
.028
.028
.024
.028
.027
.025
.022
.026
.023
.023
.023
.024
.023
.024
.025
.023
.026
.025
.021
.022
.023
.026
.028
.028
.033
.036
.037
.038
.037
.035
.026
.032
.036
.033
.035
.041
.043
.042
.040
.023
.036
.032
.033
.038
.042
.041
.044
.042
.043
.044
.042
.041
.040
.039
.040
.041

Profits
after
tax 4

0.027
.028
.024
.022
.022
.020
.022
.028
.024
.024
.022
.027
.024
.025
.029
.031
.034
.038
.037
.035
.032
.027
.021
.026
.029
.027
.018
.034
.038
.044
.044
.038
.031
.044
.037
.057
.073
.073
.064
.067
.068
.057
.051
.034
.066
.075
.072
.058
.067
.070
.068
.066
.069
.058
.060
.059
.052
.053
.057
.049

Net
interest

0.002
.002
.002
.002
.002
.002
.002
.002
.002
.003
.004
.004
.004
.005
.005
.005
.005
.005
.006
.007
.008
.010
.013
.013
.013
.014
.018
.019
.017
.018
.020
.024
.031
.037
.043
.037
.039
.038
.041
.041
.041
.050
.053
.042
.037
.042
.037
.042
.040
.040
.040
.041
.042
.046
.049
.051
.052
.052
.053
.053

Output Compenper hour sation
of all per hour
of all
employemployees
(1982
dollars) collars)

12.771
13.248
13.422
13.837
14.349
14.966
15.519
15.863
16.116
16.307
16.753
16.777
16.828
17.296
17.662
18.101
17.620
18.035
18.372
18.700
18.831
18.697
18.591
18.703
18.774
19.284
19.744
20.057
20.522
21.014
21.306
20.955

2.743
2.845
2.962
3.056
3.174
3.275
3.419
3.517
3.712
3.916
4.209
4.494
4.808
5.110
5.404
5.834
6.398
7.034
7.615
8.215
8.916
9.774
10.809
11.815
12.682
13.085
13.571
14.112
14.793
15.265
15.874
16.396

18.793
19.442
19.792
20.129
20.662
21.139
21.333
21.323
21.283
21.208
21.016
20.961
20.989
20.743
20.663
20.760
20.707

12.881
13.221
13.741
14.350
15.017
15.507
15.585
15.781
15.972
16.088
16.268
16.339
16.404
16.483
16.597
16.863
17.048

is measured by gross domestic product of nonfinancial corporate business in 1982 dollars.
This is equal to the deflator for gross domestic product of nonfinancial corporate business with the decimal point shifted two
places to the left.
3
Indirect business tax and nontax liability plus business transfer payments less subsidies.
4
With inventory valuation and capital consumption adjustments.
Sources: Department of Commerce (Bureau of Economic Analysis) and Department of Labor (Bureau of Labor Statistics).




301

TABLE B-14.—Personal consumption expenditures, 1940-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year or
quarter

1940
1941
1942
1943
1944. .
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968.. ..
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983 . .
1984
1985
1986
1987
1988
1989
1990 p
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988:1
II
Ill
IV
1989:1
II
Ill
IV
1990:1
II
Ill
IV ».

71.0
80.8
88.6
99.5
108.2
119.6
143.9
161.9
174.9
178.3
192.1
208.1
219.1
232.6
239.8
257.9
270.6
285.3
294.6
316.3
330.7
341.1
361.9
381.7
409.3
440.7
477.3
503.6
552.5
597.9
640.0
691.6
757.6
837.2
916.5
1,012.8
1,129.3
1,257.2
1,403.5
1,566.8
1,732.6
1,915.1
2,050.7
2,234.5
2,430.5
2,629.0
2,797.4
3,009.4
3,238.2
3,450.1
3,658.1
2,117.0
2,315.8
2,493.4
2,700.4
2,868.5
3,079.1
3,147.7
3,204.3
3,268.2
3,332.6
3,371.7
3,425.9
3,484.3
3,518.5
3,588.1
3,622.7
3,693.4
3,728.1

7.8
9.7
6.9
6.5
6.7
8.0
15.8
20.4
22.9
25.0
30.8
29.9
29.3
32.7
32.1
38.9
38.2
39.7
37.2
42.8
43.5
41.9
47.0
51.8
56.8
63.5
68.5
70.6
81.0
86.2
85.7
97.6
111.2
124.7
123.8
135.4
161.5
184.5
205.6
219.0
219.3
239.9
252.7
289.1
335.5
372.2
406.0
423.4
457.5
474.6
481.6
263.8
310.0
346.7
373.2
422.0
427.4
448.9
453.7
454.2
473.1
466.4
473.6
487.1
471.2
492.1
478.4
482.3
473.5

2.8
3.5
.7
.8
.8
1.0
4.1
6.6
8.0
10.6
13.7
12.2
11.3
13.9
13.0
17.8
15.8
17.3
14.8
18.9
19.7
17.8
21.5
24.4
26.0
29.9
30.3
30.0
36.1
38.4
35.9
44.9
51.5
56.7
50.3
55.8
72.7
85.4
95.1
96.9
90.3
100.5
108.9
130.4
157.4
179.1
196.2
197.9
212.2
215.5
213.2
115.7
144.4
162.3
173.8
201.1
198.9
212.2
211.0
207.8
217.8
211.3
216.2
226.9
207.5
221.1
212.4
214.7
204.7

3.8
4.8
4.6
3.9
3.8
4.5
8.4
10.6
11.5
11.3
13.7
14.1
14.0
14.7
14.8
16.4
17.3
17.2
16.9
18.1
18.0
18.3
19.3
20.7
23.2
25.1
28.2
30.0
32.9
34.7
35.7
37.8
42.4
47.9
51.5
54.5
60.2
67.1
73.9
82.1
86.2
92.7
95.7
107.1
118.8
129.9
139.7
148.8
161.8
171.4
176.8
99.1
112.4
122.7
134.7
143.8
151.1
156.2
161.2
163.0
166.8
170.2
170.7
171.5
173.0
178.9
176.8
176.4
175.1

37.0
42.9
50.8
58.6
64.3
71.9
82.7
90.9
96.6
94.9
98.2
109.2
114.7
117.8
119.7
124.7
130.8
137.1
141.7
148.5
153.2
157.4
163.8
169.4
179.7
191.9
208.5
216.9
235.0
252.2
270.3
283.3
305.1
339.6
380.9
416.2
452.0
490.4
541.8
613.2
681.4
740.6
771.0
816.7
867.3
911.2
942.0
1,001.3
1,060.0
1,130.0
1,194.2
786.6
837.9
879.6
932.7
952.1
1,019.9
1,029.8
1,049.1
1,073.2
1,088.0
1,106.7
1,127.1
1,137.3
1,148.8
1,174.7
1,179.0
1,205.0
1,218.3

Food

Cloth- Gasoline
ing
and and
shoes oil

20.2
23.4
28.4
33.2
36.7
40.6
47.4
52.3
54.2
52.5
53.9
60.7
64.1
65.4
66.8
68.6
71.4
75.1
77.9
80.7
82.7
84.8
87.1
89.5
94.6
101.0
109.0
112.3
121.6
130.5
142.1
147.5
158.5
176.1
198.2
218.7
236.2
255.9
282.2
317.3
349.1
376.5
398.8
421.9
448.5
471.6
500.0
530.7
562.6
595.3
624.9
407.0
430.8
456.1
482.5
511.9
539.0
545.7
557.4
570.4
577.1
588.8
592.5
597.6
602.2
616.4
623.3
629.8
629.9

2.3
7.5
2.6
8.8
2.1
11.0
1.3
13.4
1.4
14.6
1.8
16.5
3.4
18.2
4.0
18.8
4.8
20.1
5.3
19.3
5.5
19.6
6.1
21.3
6.8
22.0
7.4
22.2
7.8
22.3
8.6
23.3
9.4
24.4
24.5 10.2
24.9 10.6
26.4 11.3
27.0 12.0
27.6 12.0
29.0 12.6
29.8 13.0
32.4 13.6
34.1 14.8
37.4 16.0
39.2 17.1
43.2 18.6
46.5 20.5
47.8 21.9
51.7 23.2
56.4 24.4
62.5 28.1
66.0 36.1
70.8 39.7
76.6 43.0
84.1 46.9
94.8 51.3
102.2 66.1
109.0 83.7
119.9 92.7
124.4 89.1
135.1 90.2
146.7 90.0
156.4 90.6
166.8 73.5
178.4 75.3
191.1 77.3
204.6 83.8
213.3 93.7
126.5 89.8
141.1 91.9
149.8 89.0
160.6 91.0
168.7 66.0
182.2 77.3
184.2 75.6
187.8 76.6
193.6 78.4
198.6 78.5
199.3 79.0
203.4 88.2
206.9 84.5
208.7 83.5
212.9 87.1
212.6 84.5
215.8 94.0
212.0 109.1

1
2

Includes other items not shown separately.
Includes imputed rental value of owner-occupied housing.
Source: Department of Commerce, Bureau of Economic Analysis.




Services

Nondurable goods

Durable goods
Personal
FurniconMotor ture
sumption
vehi- and
expendi- Total » cles house- Total »
and hold
tures
parts equipment

302

Fuel
oil
and
coal

1.5
1.7
1.9
2.0
2.0
2.2
2.5
3.0
3.4
3.1
3.4
3.5
3.5
3.4
3.5
3.8
3.9
4.1
4.2
4.0
3.8
3.8
3.8
4.0
4.1
4.4
4.7
4.8
4.7
4.6
4.4
4.6
5.1
6.3
7.8
8.4
10.1
11.1
12.0
15.8
18.0
19.4
18.6
17.5
17.8
18.5
16.6
17.2
17.2
17.7
18.6
18.2
18.1
16.8
19.7
16.0
17.6
17.7
17.1
17.2
16.9
16.1
17.0
17.4
20.1
17.7
17.4
19.6
19.5

Household
operation

Total l

Housing*

Trans- MediElec- porta- cal
tricity tion care
Total » and
gas

26.2
28.3
31.0
34.3
37.2
39.7
45.4
50.6
55.5
58.4
63.2
69.0
75.1
82.1
88.0
94.3
101.6
108.5
115.7
125.0
134.0
141.8
151.1
160.6
172.8
185.4
200.3
216.0
236.4
259.4
284.0
310.7
341.3
373.0
411.9
461.2
515.9
582.3
656.1
734.6
831.9
934.7
1,027.0
1,128.7
1,227.6
1,345.6
1,449.5
1,584.7
1,720.7
1,845.5
1,982.3
1,066.5
1,167.9
1,267.1
1,394.5
1,494.4
1,631.8
1,668.9
1,701.5
1,740.7
1,771.5
1,798.6
1,825.1
1,859.8
1,898.5
1,921.3
1,965.3
2,006.2
2,036.3

9.7
10.4
11.2
11.8
12.3
12.8
14.2
16.0
17.9
19.6
21.7
24.3
27.0
29.9
32.3
34.4
36.7
39.3
42.0
45.0
48.2
51.2
54.7
58.0
61.4
65.4
69.5
74.1
79.7
86.8
94.0
102.7
112.1
123.1
135.1
148.4
163.5
182.4
205.2
231.1
261.5
295.6
321.1
344.1
371.3
403.0
434.2
468.9
502.3
533.9
569.5
330.3
353.8
382.2
416.2
446.1
483.4
491.9
497.8
505.9
513.8
520.3
527.8
538.2
549.5
556.3
563.6
575.8
582.1

2.1 2.2
1.5
4.0
2.4
1.5
2.4
4.3
2.7
2.7
1.6
4.8
3.4
1.7
5.2
2.9
3.7
1.8
5.9
3.3
6.4
4.0
1.9
3.6
5.0
2.1
6.8
4.6
2.3
5.6
5.3
7.5
5.8
8.1 2.6
6.3
5.9
2.9
8.5
6.5
6.2
9.5 3.3
6.9
3.7
10.4
7.4
6.8
4.1
11.2
7.3 8.3
4.5
9.3
8.0
12.1
8.2 10.2
5.0
12.7
8.5 10.8
5.5
14.2
15.4
8.9 11.7
6.1
9.4 12.8
6.5
16.3
9.7 14.0
7.1
17.4
7.6 10.5 15.3
18.7
8.3 11.2 16.4
20.3
8.8 11.7 17.5
21.2
9.4 12.2 19.4
22.4
9.9 12.7 21.0
23.6
25.0 10.4 13.4 24.1
26.5 10.9 14.5 25.9
28.2 11.5 15.9 28.3
30.1 12.2 17.3 31.1
32.3 13.0 18.9 35.7
35.0 14.0 20.9 40.9
37.7 15.2 23.7 46.1
40.9 16.6 27.1 51.8
45.2 18.4 29.8 57.8
49.6 20.0 31.2 64.4
55.4 23.5 33.3 72.4
63.5 28.5 35.7 84.2
72.3 32.5 41.3 95.9
81.7 37.6 49.2 111.5
90.9 42.1 53.5 125.1
100.3 46.8 59.0 141.4
113.9 56.4 64.5 164.2
127.5 63.5 68.3 193.5
143.4 72.8 69.7 217.8
156.0 80.0 74.8 238.3
166.9 84.8 82.0 265.3
175.3 88.9 89.8 291.5
179.6 87.3 96.6 318.4
185.9 88.6 106.5 357.3
197.4 93.6 118.0 398.4
206.3 97.7 126.4 434.3
210.6 95.6 136.7 483.4
148.0 74.8 71.1 226.9
161.4 84.1 77.6 246.9
169.3 86.3 84.5 275.3
179.0 90.2 92.1 304.3
180.9 87.0 99.8 330.9
187.8 88.8 111.1 370.7
192.6 92.0 112.7 381.2
195.3 92.5 117.6 392.4
200.3 94.7 120.1 405.6
201.5 95.2 121.6 414.6
202.8 95.6 124.3 422.4
202.6 95.1 125.2 428.7
205.7 97.2 127.4 435.6
214.2 103.0 128.8 450.6
205.2 92.5 132.3 462.6
211.9 97.5 135.2 475.8
212.7 96.4 137.4 491.5
212.6 96.1 142.1 503.8

TABLE B-15.—Personal consumption expenditures in 1982 dollars, 1940-90
[Billions of 1982 dollars; quarterly data at seasonally adjusted annual rates]
Nondurable goods

Durable goods
Personal

Year or
quarter

conMotor
vehisumption
expendi- Total1 cles
tures
and
parts

Furniture
and
house- Total1
hold
equipment

1940
502.6 40.6 18.6 17.6
1941
531.1 46.2 20.6 20.4
1942
527.6 31.3
8.4 17.4
1943
7.7 14.0
539.9 28.1
1944
7.1 12.4
557.1 26.3
1945
592.7 28.7
7.4 13.7
1946
655.0 47.8 15.2 22.9
1947
666.6 56.5 21.8 25.7
1948
681.8 61.7 25.5 27.1
1949 .
695.4 67.8 32.7 26.4
1950
733.2 80.7 41.3 30.1
1951 ... . 748.7 74.7 36.3 28.9
771.4 73.0 34.1 28.9
1952
1953
802.5 80.2 39.9 29.9
1954
822.7 81.5 40.6 30.1
1955 .
873.8 96.9 51.5 33.7
1956
899.8 92.8 45.3 34.9
1957
919.7 92.4 45.8 33.7
1958
932.9 86.9 40.8 33.2
1959
979.4 96.9 47.4 35.5
1960
1,005.1 98.0 49.2 34.9
1961
1,025.2 93.6 44.6 35.3
1962
1,069.0 103.0 51.0 37.4
1963
1,108.4 111.8 56.4 39.9
1964
1,170.6 120.8 59.0 44.7
1965
1,236.4 134.6 67.5 48.5
1966
1,298.9 144.4 68.5 53.8
1967
1,337.7 146.2 67.4 55.8
1968
1,405.9 161.6 77.3 59.2
1969
1,456.7 167.8 80.4 60.9
1970
1,492.0 162.5 73.5 61.1
1971
1,538.8 178.3 86.4 63.5
1972
1,621.9 200.4 98.3 70.2
1973
1,689.6 220.3 106.7 77.9
1974
1,674.0 204.9 90.3 78.2
1975
1,711.9 205.6 91.1 75.9
1976
1,803.9 232.3 109.6 80.6
1977
1,883.9 253.9 121.2 87.3
1978
1,961.0 267.4 125.9 92.3
1979 ..
2,004.4 266.5 119.4 97.1
1980
2,000.4 245.9 103.8 95.4
1981
2,024.2 250.8 106.3 96.5
1982
2,050.7 252.7 108.9 95.7
1983
2,146.0 283.1 126.8 106.1
1984
2,249.3 323.1 148.0 118.4
1985
2,354.8 355.1 164.4 131.0
1986
2,446.4 384.4 176.2 142.9
1987
2,515.8 391.4 171.1 151.6
1988
2,606.5 418.2 182.1 165.0
1989
2,656.8 428.0 181.4 175.0
1990 ".
2,682.2 428.4 177.8 179.8
1982: IV
2,078.7 262.0 115.0 98.4
1983: IV
2,191.9 300.5 138.1 111.1
1984: IV
2,281.1 333.1 151.6 122.7
1985: IV
2,386.9 356.4 158.9 136.6
1986: IV
2,477.8 397.5 178.4 147.7
1987: IV
2,534.2 392.6 170.3 154.2
1988:1
2,576.8 412.4 182.7 159.8
II
2,594.1 416.2 182.0 164.4
Ill
2,616.4 415.1 178.2 166.2
IV
2,638.8 429.0 185.5 169.7
1989:1
2,636.7 422.4 178.6 173.7
II
2,645.3 428.2 181.8 175.5
Ill
2,675.3 438.1 191.1 175.0
IV
2,669.9 423.1 174.1 175.7
1990:1
2,677.3 437.6 183.9 181.4
II
2,678.8 426.8 177.8 180.0
Ill
2,696.8 429.5 179.6 179.7
IV
2,675.8 419.9 170.0 178.1

259.4
275.6
279.1
284.7
297.9
323.5
344.2
337.4
338.7
342.3
352.8
362.9
376.6
388.2
393.8
413.2
426.9
434.7
439.9
455.8
463.3
470.1
484.2
494.3
517.5
543.2
569.3
579.2
602.4
617.2
632.5
640.3
665.5
683.2
666.1
676.5
708.8
731.4
753.7
766.6
762.6
764.4
771.0
800.2
825.9
847.4
878.1
892.7
909.4
919.9
911.5
778.6
812.7
831.2
858.3
883.5
895.2
900.9
905.3
914.4
917.1
918.5
914.6
923.4
923.0
915.6
911.2
916.4
902.8

Food

Cloth- Gasoline

S!

and
shoes oil

Fuel
oil
and
coal

Total * Housing*

150.6
158.3
161.8
166.3
178.5
193.0
202.2
193.9
191.5
193.6
196.6
202.5
209.8
217.7
222.0
231.3
238.8
243.5
243.5
252.1
255.5
259.7
263.7
266.5
277.2
290.4
299.4
304.0
317.0
324.3
334.5
335.9
344.2
340.8
336.6
346.4
363.6
377.1
379.6
387.5
394.9
392.5
398.8
414.0
422.8
435.5
447.1
454.0
462.2
462.9
457.5
404.6
418.2
426.2
441.0
448.7
455.8
458.4
462.2
464.0
464.2
466.4
461.9
463.0
460.3
457.4
459.3
459.4
454.0

36.3 17.2
38.9 19.2
40.3 14.5
43.0
9.2
41.7
9.5
43.4 12.5
44.7 22.7
42.5 24.1
42.7 25.7
43.0 27.9
44.3 29.0
43.7 31.5
45.8 34.1
46.2 36.0
46.2 37.1
48.6 40.3
49.7 42.8
49.3 44.4
49.9 46.5
52.3 48.9
52.7 50.7
53.7 51.0
56.0 53.2
56.9 54.7
61.5 57.4
64.0 60.2
68.3 63.9
68.8 66.0
71.7 70.6
73.0 75.2
72.0 79.9
75.3 83.6
80.3 87.0
86.0 91.7
84.9 87.2
88.1 89.8
92.2 93.4
97.4 96.4
107.1 100.9
112.1 97.1
114.8 88.4
122.2 87.8
124.4 89.1
132.6 93.2
142.2 94.5
147.2 94.4
157.4 97.5
160.7 95.8
165.0 97.4
172.7 96.7
172.7 94.7
126.2 89.7
137.4 94.4
143.5 94.7
149.9 94.5
158.0 97.7
161.2 95.2
162.2 96.2
161.7 97.5
167.6 97.2
168.5 98.4
168.2 97.9
170.8 95.7
176.6 95.5
175.1 97.5
174.2 96.2
171.3 93.9
174.4 94.4
171.0 94.3

23.8
24.6
25.3
25.7
25.5
27.2
29.2
30.8
31.0
27.3
29.4
29.3
28.5
27.6
28.1
29.9
29.9
29.7
30.8
29.4
28.5
26.7
26.7
28.0
29.5
31.0
31.8
31.8
30.1
28.6
26.7
25.9
28.6
30.9
24.3
24.2
27.0
26.1
26.9
26.2
21.6
19.2
18.6
18.6
18.5
19.6
22.0
22.4
22.4
21.9
19.2
17.6
19.4
18.0
20.5
23.3
22.2
22.9
21.9
22.3
22.6
20.8
21.4
21.8
23.8
18.6
20.4
21.0
16.8

202.7
209.3
217.2
227.2
232.9
240.5
262.9
272.6
281.4
285.3
299.8
311.1
321.9
334.1
347.4
363.6
380.1
392.6
406.1
426.7
443.9
461.4
481.8
502.3
532.3
558.5
585.3
612.3
641.8
671.7
697.0
720.2
756.0
786.1
803.1
829.8
862.8
898.5
939.8
971.2
991.9
1,009.0
1,027.0
1,062.7
1,100.3
1,152.3
1,183.8
1,231.6
1,278.9
1,309.0
1,342.2
1,038.1
1,078.6
1,116.8
1,172.2
1,196.8
1,246.4
1,263.5
1,272.6
1,286.8
1,292.8
1,295.8
1,302.5
1,313.8
1,323.8
1,324.2
1,340.8
1,350.8
1,353.1

1
2

Includes other items not shown separately.
Includes imputed rental value of owner-occupied housing.
Source: Department of Commerce, Bureau of Economic Analysis.




Services
Household
operation

303

53.6
56.0
58.1
59.8
61.9
62.6
67.2
72.8
76.5
80.9
86.1
91.9
97.5
102.5
107.1
112.1
117.1
122.6
127.7
133.6
139.8
145.7
153.0
159.4
166.1
174.4
181.7
189.3
197.9
207.6
216.1
224.5
235.5
246.5
258.6
265.7
273.2
279.6
292.8
304.1
312.5
318.9
321.1
325.4
333.0
341.7
348.2
358.2
366.0
372.1
377.1
322.1
328.2
335.8
344.4
351.0
361.5
363.8
365.5
366.8
367.8
369.1
371.1
373.0
375.2
376.3
376.9
377.2
378.1

ElecTotal » tricity
and
gas

32.4
32.0
33.4
31.2
31.5
32.4
35.1
37.6
39.0
40.1
43.8
46.2
47.0
48.9
50.5
55.5
59.3
61.2
63.3
65.7
68.7
70.9
74.4
77.0
80.5
83.9
87.7
91.9
95.1
99.3
102.2
103.6
108.6
112.6
112.8
117.5
122.3
128.2
134.0
138.3
142.6
142.0
143.4
146.2
148.8
151.6
151.9
156.8
164.1
167.6
167.1
143.1
149.4
148.9
153.9
153.3
157.9
162.0
162.7
166.4
165.2
165.2
164.7
167.7
172.7
162.8
168.5
170.1
167.1

7.1
7.3
7.9
8.2
8.6
9.2
10.3
11.7
12.8
13.7
15.6
17.6
19.0
20.4
22.4
24.2
26.4
28.0
29.5
31.2
32.9
34.6
37.1
38.8
40.8
42.7
44.9
47.4
49.7
52.4
54.4
55.8
58.5
59.8
60.2
63.3
65.5
68.1
70.7
71.1
73.1
72.0
72.8
74.2
75.4
77.5
76.5
78.9
82.8
84.1
80.8
71.6
76.9
75.7
79.1
77.6
79.2
82.1
82.2
84.1
82.9
82.7
81.9
84.3
87.7
77.7
82.4
82.7
80.2

Transportation

17.7
19.7
21.9
26.9
29.2
31.0
35.9
35.3
35.1
33.2
32.4
33.2
33.4
34.2
33.3
34.2
35.6
36.2
35.4
36.8
37.9
38.2
39.6
41.2
43.4
45.5
48.3
51.4
54.7
58.1
59.8
62.1
66.0
67.8
68.4
69.4
72.6
77.8
80.2
82.9
77.4
73.3
69.7
71.4
75.9
82.1
86.2
89.5
94.3
96.9
100.3
69.1
72.6
78.0
83.8
87.4
90.5
92.4
94.0
95.0
95.8
95.5
96.2
97.5
98.4
98.8
99.7
100.9
102.0

Medi-

cal

care

21.6
22.4
23.7
24.1
25.9
26.5
31.1
33.8
36.7
37.8
40.1
42.0
44.2
46.6
49.5
51.0
53.9
56.8
60.5
64.0
66.5
69.1
74.3
79.1
88.0
91.4
95.2
98.3
105.2
113.6
120.4
128.2
136.0
145.4
151.3
159.9
167.8
177.8
184.8
192.2
200.6
212.0
217.8
222.3
232.0
240.9
251.5
266.9
279.3
286.1
301.7
220.7
224.6
235.7
245.2
256.5
271.8
274.9
277.3
281.3
283.6
284.6
284.7
285.7
289.3
294.7
299.3
304.6
308.1

TABLE B-16.—Gross and net private domestic investment, 1929-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Gross
private
domestic
investment

Year or quarter

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950 .
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967 .
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990".
1982- IV
1983: IV
1984: IV
1985: IV
1986: IV
1987- IV
1988-1
II
III..
IV
1989:1
||
III
IV
1990:1
II
Ill
IV P

... .

16.7
1.6
9.5
13.4
18.3
10.3
6.2
7.7
11.3
31.5
35.0
47.1
36.5
55.1
60.5
53.5
54.9
54.1
69.7
72.7
71.1
63.6
80.2
78.2
77.1
87.6
93.1
99.6
116.2
128.6
125.7
137.0
153.2
148.8
172.5
202.0
238.8
240.8
219.6
277.7
344.1
416.8
454.8
437.0
515.5
447.3
502.3
664.8
643.1
659.4
699.5
747.1
771.2
745.0
409.6
579.8
661.8
654.1
648.8
741.4
729.2
746.0
765.6
747.5
769.7
776.7
775.8
762.7
747.2
759.0
759.7
714.0

LessCapital
consumption
allowances
with
capital
consumption
adjustment

9.9
7.6
9.0
9.4
10.3
11.3
11.6
12.0
12.4
14.2
17.6
20.4
22.0
23.6
27.2
29.2
30.9
32.5
34.4
38.1
41.1
42.8
44.6
46.4
47.8
49.4
51.4
53.9
57.4
62.1
67.4
73.9
81.4
88.8
97.5
107.9
118.1
137.5
161.8
179.2
201.5
229.9
265.8
303.8
347.8
383.2
396.6
415.5
437.2
460.1
487.0
514.3
554.4
575.7
393.2
400.8
423.5
446.9
470.8
496.7
504.8
510.5
516.3
525.7
534.7
543.0
567.5
572.5
567.0
571.1
579.3
585.2

Equals: Net private domestic investment
Net fixed investment
Nonresidential
Total

6.7
61
.5
4.1
8.0
10
-5.3
42
-1.1
17.3
17.5
26.7
14.5
31.5
33.3
24.4
24.0
21.6
35.3
34.6
29.9
20.8
35.5
31.8
29.4
38.2
41.8
45.7
58.8
66.5
58.3
63.1
71.8
60.0
74.9
94.1
120.7
103.4
57.8
98.4
142.5
186.9
189.1
133.1
167.7
64.1
105.7
249.4
205.9
199.3
212.6
232.7
216.8
169.3
16.4
179.0
238.3
207.1
178.0
244.7
224.4
235.5
249.3
221.8
235.0
233.7
208.3
190.2
180.2
187.9
180.4
128.8

Total

5.0
-4.5
.1
1.9
3.5
-2.7
-4.7
-3.2

ioig

17.9
22.0
17.6
24.6
23.1
21.3
23.6
23.3
29.6
29.9
28.5
22.3
29.8
28.7
27.0
32.1
35.9
40.3
48.9
52.3
48.0
55.2
62.0
56.9
67.2
83.6
101.1
87.9
63.4
82.4
121.3
158.3
176.1
141.5
143.7
88.7
112.8
181.7
194.5
192.4
184.3
206.5
188.5
171.5
76.3
148.0
193.3
199.9
190.2
189.0
196.1
213.3
211.1
205.6
208.4
201.0
179.4
165.2
192.0
174.5
171.4
148.4

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




304

Total

3.3
-3.5
-.7
.7
2.0
-2.1
-3.1
-1.3
1.7
6.9
10.7
11.8
8.7
10.3
11.6
10.1
11.9
10.2
13.2
15.6
15.9
9.6
12.1
13.4
11.9
14.9
16.0
20.3
29.3
35.8
32.3
34.2
39.8
36.8
34.5
40.5
56.2
55.8
37.5
40.9
58.6
82.2
98.9
88.9
98.6
65.5
45.8
91.1
102.1
75.3
65.8
88.6
84.0

Structures

1.8
-1.7
-1.1
-.8
-.3
-1.7
-2.4
-1.9
-1.0
2.4
1.9
2.5
2.2
2.8
3.9
3.8
4.8
5.0
5.9
7.9
7.9
6.3
6.4
7.3
7.3
8.0
7.9
9.4
13.2
15.2
14.4
15.1
17.4
17.4
16.8
17.4
21.7
22.0
15.6
16.0
17.6
25.0
34.5
39.4
51.7
45.9
25.9
39.3
45.8
27.5
16.8
18.1
16.8

Producers'
durable
equipment
1.4
-1.8
.4
1.5
2.3
-.5
-.7
.5
2.8
4.5
8.7
9.3
6.5
7.5
7.7
6.4
7.1
5.2
7.3
7.7
8.1
3.2
5.7
6.1
4.6
6.9
8.1
10.9
16.1
20.7
18.0
19.0
22.4
19.4
17.7
23.1
34.4
33.7
21.9
24.8
41.0
57.2
64.5
49.5
46.9
19.6
19.9
51.8
56.3
47.8
49.0
70.4
67.2

Residential

1.7
-1.0
.8
1.2
1.5
-.6
-1.6
-1.9
-1.8
4.0
7.3
10.2
8.9
14.4
11.5
11.2
11.7
13.0
16.4
14.4
12.6
12.7
17.7
15.4
15.1
17.2
19.9
20.0
19.6
16.5
15.7
21.0
22.2
20.1
32.7
43.1
45.0
32.2
25.9
41.6
62.6
76.1
77.2
52.6
45.0
23.2
67.0
90.6
92.4
117.1
118.4
118.0
104.5

Change in
business
inventories

1.7
-1.6
.42
2.2
4.5
1.8
-.6
-1.0
10
6.4
5
4.7
31
6.8
10.2
3.1
-L6
5.7
4.6
1.4
15
5.8
3.1
2.4
6.1
5.8
5.4
9.9
14.2
10.3
7.9
9.8
3.1
7.8
10.5
19.6
15.4
-5.6
16.0
21.3
28.6
13.0
83
24.0
-24.5
-7.1
67.7
11.3
6.9
28.3
26.2
28.3
-2.2
599
31.0
45.0
7.2
-12.2
55.7
28.3
22.2
38.2
16.2
26.6
32.7
28.9
25.0
-11.8
13.4
9.0
-19.5

TABLE B-17.—Gross and net private domestic investment in 1982 dollars, 1929-90
[Billions of 1982 dollars; quarterly data at seasonally adjusted annual rates]

Year or quarter

Less:
Capital
consumption
Gross
allowprivate
ances
domestic
with
investcapital
ment
consumption
adjustment

1929
1933
1939
1940
1941
1942
1943
1944
1945 .
1946
1947
1948
1949 ...
1950
1951 .
1952
1953 .
1954
1955 .. .
1956
1957
1958
1959
I960
1961 ..
1962
1963
1964
1965 ...
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975 ...
1976 ...
1977
1978 ...
1979
1980
1981 ...
1982 .
1983
1984
1985
1986
1987 .,
1988
1989
1990 "...
1982: IV
1983- IV
1984: IV
1985- IV
1986: IV
1987- IV ..
1988:1
II
Ill
IV
1989- 1
II
Ill
IV
1990:1
II
Ill
IV P....

139.2
22.7
86.0
111.8
138.8
76.7
50.4
56.4
76.5
178.1
177.9
208.2
168.8
234.9
235.2
211.8
216.6
212.6
259.8
257.8
243.4
221.4
270.3
260.5
259.1
288.6
307.1
325.9
367.0
390.5
374.4
391.8
410.3
381.5
419.3
465.4
520.8
481.3
383.3
453.5
521.3
576.9
575.2
509.3
545.5
447.3
504.0
658.4
637.0
639.6
669.0
705.7
716.9
690.3
408.8
577.2
655.7
648.0
615.2
706.6
698.4
705.1
723.0
696.2
717.0
719.1
722.3
709.1
700.7
700.7
697.0
662.8

86.8
86.5
84.4
84.9
86.3
86.9
85.7
84.8
85.4
88.0
91.8
96.8
101.7
106.5
111.8
117.0
122.1
127.4
132.6
138.3
143.5
147.7
151.9
156.3
160.6
165.1
170.3
176.3
183.7
192.2
201.1
209.8
219.8
229.8
239.5
253.4
263.6
276.1
287.0
297.3
309.6
323.7
341.3
356.1
369.7
383.2
394.4
407.2
426.7
443.4
460.8
479.7
506.0
519.7
390.0
397.9
413.5
435.3
450.0
467.6
472.4
477.3
482.1
486.9
491.8
496.9
515.6
519.8
512.5
516.5
522.5
527.2

Equals: Net private domestic investment
Net fixed investment
Presidential
Total

52.4
-63.8
1.6
26.9
52.5
-10.2
-35.3
-28.4
-8.9
90.1
86.1
111.4
67.1
128.4
123.3
94.8
94.4
85.2
127.2
119.5
99.9
73.7
118.4
104.1
98.4
123.5
136.8
149.6
183.4
198.3
173.4
181.9
190.5
151.8
179.8
212.1
257.1
205.3
96.3
156.2
211.7
253.3
234.0
153.2
175.8
64.1
109.6
251.2
210.3
196.2
208.2
226.0
210.8
170.6
18.8
179.3
242.2
212.7
165.2
239.0
226.0
227.8
240.9
209.3
225.2
222.2
206.7
189.3
188.2
184.2
174.5
135.7

Total

41.6
-53.0
-2.3
12.5
24.7
-22.1
-36.0
-23.3
-.5
62.2
87.1
99.1
76.7
104.2
92.5
84.8
91.7
90.0
110.9
106.5
96.9
77.1
101.9
96.4
91.2
107.3
120.1
133.9
158.1
161.4
144.6
160.9
165.3
143.6
160.2
190.3
217.1
172.0
109.1
134.1
182.6
216.5
218.9
160.1
152.0
88.7
116.0
188.9
201.2
190.7
185.4
202.4
187.1
171.7
78.0
152.3
200.5
205.0
186.0
190.6
195.0
210.9
208.3
195.3
199.1
196.7
182.1
170.4
190.4
174.7
169.8
151.9

Source: Department of Commerce, Bureau of Economic Analysis.




305

Total

26.2
-40.2
-10.1
1.5
12.0
-17.5
-24.4
10.5
10.5
39.5
52.6
54.3
37.9
43.3
46.9
41.7
47.0
40.4
49.9
54.9
51.7
31.5
38.5
41.4
37.3
46.4
49.2
63.3
90.4
106.3
93.6
96.1
103.1
89.3
76.1
85.3
116.5
106.9
60.8
61.8
85.2
111.6
124.3
101.3
105.5
65.5
50.4
103.3
116.1
85.6
82.4
103.8
102.1

Structures

16.8
-24.3
-12.0
-8.5
-3.5
-15.9
-20.7
15.2
-8.3
15.4
11.7
14.3
12.7
15.7
18.8
18.8
22.9
24.4
27.7
32.5
30.7
24.8
25.0
27.9
28.1
30.3
29.1
34.0
46.2
50.4
45.9
46.7
49.7
46.1
40.4
39.8
46.8
42.5
27.9
27.3
28.7
37.2
44.8
47.2
56.0
45.9
26.2
39.8
41.9
20.0
11.4
10.2
8.1

Producers'
durable
equipment
9.4
-16.0
1.9
10.0
15.6
-1.6
-3.8
4.7
18.8
24.1
40.9
40.0
25.2
27.6
28.1
22.9
24.1
16.0
22.2
22.4
20.9
6.6
13.6
13.6
9.3
16.0
20.1
29.2
44.2
55.8
47.7
49.3
53.4
43.3
35.7
45.5
69.8
64.4
32.9
34.6
56.5
74.3
79.5
54.1
49.4
19.6
24.1
63.5
74.2
65.6
71.1
93.6
94.0

Residential

15.4
-12.8
7.8
11.1
12.7
-4.6
-11.5
-12.8
-11.0
22.7
34.5
44.8
38.9
60.9
45.6
43.2
44.7
49.6
60.9
51.6
45.2
45.6
63.4
55.0
53.8
61.0
70.9
70.6
67.7
55.1
50.9
64.8
62.2
54.2
84.1
105.0
100.6
65.1
48.3
72.2
97.4
104.9
94.6
58.7
46.5
23.2
65.6
85.6
85.1
105.1
103.0
98.6
84.9

Change in
business
inventories

10.8
-10.7
3.9
14.4
27.8
12.0
-5l2
-8.4
27.9
-1.0
12.3
-9.7
24.2
30.8
10.0
2.8
-4.8
16.3
12.9
3.0
-3.4
16.5
7.7
7.3
16.2
16.6
15.7
25.2
36.9
28.8
21.0
25.1
8.2
19.6
21.8
40.0
33.3
12.8
22.1
29.1
36.8
15.0
-6.9
23.9
-24.5
-6.4
62.3
9.1
5.6
22.8
23.6
23.8
-1.1
59.3
27.0
41.7
7.7
-20.8
48.4
31.0
16.9
32.6
14.0
26.1
25.5
24.6
18.9
-2.2
9.5
4.7
-16.3

TABLE B-18.—Inventories and final sales of business, 1946-90
[Billions of dollars, except as noted; seasonally adjusted]
Inventories1

Inventory-final
sales ratio
Nonfarm

Quarter

Fourth quarter:
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960 . .
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979 ..
1980
1981
1982
1983 ..
1984
1985
1986
1987
1988
1989
1990"
1988: 1
II
Ill ...
IV
1989:1
II
Ill
IV
1990:1. ...
II
III..

IV

Total2

71.0
80.3
85.6
77.5
96.7
109.4
108.6
109.6
107.3
114.6
123.4
127.0
126.2
131.7
135.5
137.2
143.8
149.6
155.3
169.1
185.2
197.4
211.8
232.4
240.3
257.8
285.6
352.6
423.3
428.8
463.3
505.7
588.2
674.8
739.3
789.0
771.5
787.2
858.2
863.5
853.3
918.9
996.5
1,050.8
1,063.7
933.9
956.4
978.4
996.5
1,018.1
1,028.1
1,036.5
1,050.8
1,049.4
1,049.3
1,070.1
1,063.7

Farm

19.6
21.0
19.3
16.7
22.5
24.9
23.3
22.0
21.2
19.9
19.9
21.2
22.6
22.1
23.3
23.8
25.2
25.7
24.5
28.0
27.4
27.9
29.1
31.8
31.1
35.4
44.3
65.5
62.4
64.3
60.2
59.3
73.7
80.7
84.5
81.6
79.2
79.4
80.9
71.5
66.3
65.5 71.4
77.9
76.7
66.4
70.4
73.3
71.4
74.5
74.9
74.5
77.9
79.4
79.1
77.3
76.7

Total2

51.4
59.3
66.3
60.8
74.2
84.5
85.3
87.6
86.1
94.7
103.5
105.8
103.7
109.6
112.2
113.4
118.6
123.8
130.9
141.0
157.8
169.5
182.6
200.6
209.2
222.4
241.3
287.1
360.9
364.5
403.1
464
4.
514.5
594.1
654.8
707.4
692.2
707.8
777.3
792.1
787.0
853.4
925.1
972.9
969
8.
867.5
886.0
905.1
925.1
943.6
953.2
962.0
972.9
970.0
970.2
992.8
986.9

Manu- Wholesale
facturing trade

24.6
29.0
32.2
28.6
34.9
43.1
44.0
46.0
43.9
48.3
54.0
54.3
52.7
55.2
56.2
57.2
60.3
62.2
65.9
70.7
80.9
87.5
94.0
103.4
105.8
107.3
113.6
136.1
177.0
177.8
194.9
210.6
238.4
281.1
310.7
330.2
316.1
315.9
343.4
333.5
321.1
343.8
370.2
382.7
383.8
349.5
356.6
362.5
370.2
377.2
379.3
383.1
382.7
382.5
377.8
390.2
383.8

1

10.4
11.1
12.5
12.5
14.7
15.6
15.6
15.8
16.1
17.6
18.9
19.2
19.3
21.0
21.3
21.8
22.4
23.9
25.2
26.9
30.3
32.7
34.6
37.9
41.7
45.2
50.0
59.4
75.6
76.2
86.1
96.2
113.8
133.7
154.8
164.7
162.2
163.8
177.5
181.0
184.1
199.1
217.9
226.6
234.1
205.4
210.0
215.3
217.9
219.7
222.5
223.8
226.6
227.3
228.2
233.2
234.1

Final
sales3
Retail
trade

12.8
14.5
16.6
15.4
19.2
19.7
19.4
20.0
20.2
22.8
23.7
25.0
25.1
26.2
27.5
27.0
28.3
29.6
31.0
33.7
36.2
36.9
40.7
44.5
45.8
52.3
57.7
66.4
74.6
74.7
82.7
93.3
107.8
117.0
122.7
134.0
134.7
148.2
166.7
180.9
185.5
208.2
222,3
238.0
236.3
207.9
212.2
217.1
222.3
228.5
231.1
232.0
238.0
231.6
234.5
237.0
236.3

Other

3.2
4.1
4.5
3.9
4.9
5.5
5.6
5.2
5.3
5.4
6.2
6.6
6.6
7.2
7.2
7.4
7.5
8.0
8.8
9.8
10.4
12.4
13.3
14.9
16.0
17.6
19.9
25.2
33.7
35.8
39.4
46.3
54.5
62.3
66.7
78.5
79.2
79.9
89.6
96.6
96.3
102.3
114.7
125.6
132.6
104.6
107.1
110.2
114.7
118.2
120.3
123.1
125.6
128.6
129.6
132.5
132.6

Total

15.8
18.4
19.8
19.7
21.8
24.9
26.4
27.5
28.0
30.2
31.9
33.3
34.3
36.2
37.5
39.5
41.8
44.5
47.1
52.1
55.3
58.8
64.8
68.8
72.4
78.9
87.7
96.8
104.6
117.1
128.5
143.9
165.1
183.2
201.1
217.8
229.5
247.0
268.8
290.3
305.6
325.2
354.0
371.5
389.6
332.9
341.1
345.8
354.0
359.2
364.2
368.4
371.5
380.3
383.3
387.5
389.6

4.48
4.36
4.33
3.94
4.44
4.40
4.11
3.98
3.84
3.80
3.87
3.82
3.68
3.64
3.61
3.47
3.44
3.36
3.30
3.24
3.35
3.36
3.27
3.38
3.32
3.27
3.26
3.64
4.05
3.66
3.60
3.51
3.56
3.68
3.68
3.62
3.36
3.19
3.19
2.97
2.79
2.83
2.81
2.83
2.73
2.80
2.80
2.83
2.81
2.83
2.82
2.81
2.83
2.76
2.74
2.76
2.73

Nonfarm4

3.24
3.22
3.35
3.09
3.41
3.40
3.23
3.18
3.08
3.14
3.24
3.18
3.02
3.03
2.99
2.87
2.84
2.78
2.78
2.70
2.85
2.88
2.82
2.91
2.89
2.82
2.75
2.97
3.45
3.11
3.14
3.10
3.12
3.24
3.26
3.25
3.02
2.87
2.89
2.73
2.57
2.62
2.61
2.62
2.53
2.61
2.60
2.62
2.61
2.63
2.62
2.61
2.62
2.55
2.53
2.56
2.53

Inventories at end of quarter. Quarter-to-quarter change calculated from this table is not the current-dollar change in business
inventories (CBI) component of GNP. The former is the difference between two inventory stocks, each valued at their respective end-ofquarter prices. The latter is the change in the physical volume of inventories valued at average prices of the quarter. In addition,
changes calculated from this table are at quarterly rates, whereas CBI is stated at annual rates.
2
Beginning 1959, inventories of construction establishments are included in "other" nonfarm inventories. Prior to 1959, they are
included in total and total nonfarm inventories, but not in the detailed categories shown.
3
Quarterly totals at monthly rates. Business final sales equals final sales less gross product of households and institutions,
government, and rest of the world, and includes a small amount of final sales by farms.
4
Ratio based on total business final sales, which includes a small amount of final sales by farms.
Note.—The industry classification of inventories is on an establishment basis and is based on the 1972 Standard Industrial
Classification (SIC) beginning 1948 and on the 1942 SIC prior to 1948.
Source: Department of Commerce, Bureau of Economic Analysis.




306

TABLE B-19.—Inventories and final sales of business in 1982 dollars, 1947-90
[Billions of 1982 dollars, except as noted; seasonally adjusted]
Inventories1
Nonfarm
Quarter

Total *

Fourth quarter:
1947
1948
1949
1950
1951.
1952
1953
1954
1955
1956
1957
1958
1959.
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978.
1979
1980.
1981
1982
1983
1984
1985
1986
1987
1988
1989 . ..
1990 *
1988- 1
II
Ill
IV
1989: 1
II
Ill
IV
1990- 1
II
Ill
IV " ..

251.3
263.5
253.9
278.1
308.9
318.9
321.6
316.9
333.2
346.1
349.1
345.7
362.2
370.0
377.2
393.4
410.1
425.8
451.0
487.9
516.6
537.7
562.8
571.1
590.7
612.4
652.5
657
8.
673.0
695.1
724.2
761.0
776.0
769.1
793.0
768.4
762.0
824.2
833.3
838.9
861.7
854
8.
909.1
908.1
869.5
873.7
881.9
885.4
891.9
898.3
944
0.
909.1
986
0.
911.0
912.1
908.1

Farm

43.3
45.4
4.
44
47.7
51.5
54.6
54.3
55.9
56.0
53.7
54.9
57.3
58.1
59.4
6.
08
63.5
65.8
64.0
66.3
66.1
67.7
68.2
69.0
69.8
73.4
75.9
81.4
81.3
82.6
79.1
77.2
77.8
82.4
77.8
82.6
81.2
74.9
79.4
75.2
72.8
6.
69
63.9
69.0
70.9
67.4
66.8
67.2
63.9
6.
64
67.4
68.1
6.
90
70.5
70.0
7.
00
70.9

Total2

208.0
218.1
209.5
204
3.
257.4
264.3
267.4
209
6.
277.1
292.4
294.2
284
8.
304.2
310.5
316.5
329.9
342
4.
361.8
384.7
421.7
490
4.
494
6.
493.8
501.2
517.3
536.6
571.0
645
0.
590.3
616.1
670
4.
683.2
693.6
691.4
710.3
687.2
687.2
748
4.
758.2
766.1
749
9.
821.4
802
4.
837.2
802.1
869
0.
814.6
821.4
825.5
809
3.
836.3
802
4.
838.1
841.0
822
4.
837.2

Manu- Wholesale
facturing trade

105.1
108.6
102.9
109.8
133.2
139.0
142.7
135.0
142.5
153.2
152.1
146.8
153.5
154.7
158.8
167.2
172.6
180.9
191.6
213.6
229.2
239.0
248.5
248.3
246.1
251.7
267.9
285
8.
281.9
294.0
301.9
314.1
324.7
326.8
330.3
315.2
309.3
330.0
320.6
315.5
322.7
329.8
333.6
331.2
325.4
326.2
327.3
329.8
330.3
332.1
335.0
333.6
334.0
333.4
334.3
331.2

39.9
42.7
42.8
47.6
49.0
50.0
50.4
51.1
54.8
56.6
56.0
56.0
60.7
61.8
63.1
65.0
68.9
72.6
76.5
85.1
90.7
93.5
98.9
105.8
110.7
114.0
118.4
128.4
124.0
131.2
140.5
151.6
156.1
161.6
165.0
161.5
157.9
171.0
174.3
180.6
185.8
192.4
193.7
195.5
190.2
190.6
192.7
192.4
191.1
192.7
193.2
193.7
194.2
194.9
195.3
195.5

Retail
trade
39.6
43.7
42.8
49.5
49.6
49.6
50.8
51.2
57.1
57.8
59.8
59.4
61.9
65.2
64.2
67.5
70.3
73.4
79.2
84.3
84.2
90.5
96.4
96.6
107.2
114.0
122.1
121.1
115.9
122.3
130.9
139.1
136.7
130.4
135.5
132.9
142.4
157.8
169.1
171.2
186.4
192.4
199.3
193.4
185.0
187.0
189.6
192.4
195.4
196.3
196.2
199.3
192.9
194.8
195.0
193.4

Final
sales3

Total

Other

23.5
23.1
21.1
23.4
25.6
25.8
23.5
23.6
22.7
24.8
26.3
26.3
28.1
28.8
30.3
30.1
32.4
34.9
37.4
38.7
45.0
46.5
50.0
50.5
53.2
56.9
62.6
66.4
68.6
68.5
73.7
78.4
76.1
72.7
79.5
77.6
77.5
86.0
94.1
98.8
99.9
106.8
113.6
117.1
101.5
103.1
105.0
106.8
108.8
109.7
111.9
113.6
117.0
117.9
117.6
117.1

Inventory-final
sales ratio

74.8
77.1
77.3
82.6
90.4
93.9
98.0
97.7
102.5
104.7
105.9
107.7
111.4
114.1
118.7
123.4
130.4
136.3
147.7
150.2
156.4
163.7
165.4
166.8
172.6
185.4
188.9
184.3
191.5
199.3
209.0
221.5
225.6
225.3
224.6
226.1
235.5
248.4
261.2
269.7
278.4
291.3
295.5
298.9
283.2
287.6
288.0
291.3
293.0
294.4
295.3
295.5
298.5
298.1
298.8
298.9

3.36
3.42
3.28
3.37
3.42
3.40
3.28
3.24
3.25
3.31
3.30
3.21
3.25
3.24
3.18
3.19
3.14
3.12
3.05
3.25
3.30
3.28
3.40
3.42
3.42
3.30
3.45
3.72
3.51
3.49
3.47
3.44
3.44
3.41
3.53
3.40
3.24
3.32
3.19
3.11
3.10
3.04
3.08
3.04
3.07
3.04
3.06
3.04
3.04
3.05
3.06
3.08
3.04
3.06
3.05
3.04

Nonfarm4
2.78
2.83
2.71
2.79
2.85
2.81
2.73
2.67
2.70
' 2.79
2.78
2.68
2.73
2.72
2.67
2.67
2.64
2.65
2.60
2.81
2.87
2.87
2.98
3.00
3.00
2.89
3.02
3.28
3.08
3.09
3.10
3.08
3.08
3.07
3.16
3.04
2.92
3.00
2.90
2.84
2.86
2.82
2.84
2.80
2.83
2.81
2.83
2.82
2.82
2.82
2.83
2.84
2.81
2.82
2.82
2.80

1
Inventories at end of quarter. Quarter-to-quarter changes calculated from this table are at quarterly rates, whereas the constantdollar change in business inventories component of GNP is stated at annual rates.
2
Beginning 1959, inventories of construction establishments are included in "other" nonfarm inventories. Prior to 1959, they are
included in total and total nonfarm inventories, but not in the detailed categories shown.
3
Quarterly totals at monthly rates. Business final sales equals final sales less gross product of households and institutions,
government, and rest of world, and includes a small amount of final sales by farms.
4
Ratio based on total business final sales, which includes a small amount of final sales by farms.
Note.—The industry classification of inventories is on an establishment basis and is based on the 1972 Standard Industrial
Classification (SIC) beginning 1948 and on the 1942 SIC prior to 1948.
Source: Department of Commerce, Bureau of Economic Analysis.




307

TABLE B-20.—Foreign transactions in the national income and product accounts, 1929-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Receipts from foreigners
Year or quarter

Exports of goods and
services
Total
Total

1929
1933."..!.'".!!!."".'!
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956. .. .
1957
1958
1959
1960 .. . .
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978 . .
1979
1980
1981
1982
1983
1984
1985 . . .
1986
1987
1988
1989
1990"
1982: IV
1983- IV
1984: IV
1985: IV
1986: IV
1987: IV
1988:1
||
III
IV
1989-1
II
Ill
IV
1990: 1 .
||
III

IV

7.1
2.4
4.6
5.4
6.1
5.0
4.6
5.5
7.4
15.2
20.3
17.5
16.4
14.5
19.8
19.2
18.1
18.8
21.1
25.2
28.2
24.4
25.0
29.9
31.1
33.1
35.7
40.5
42.9
46.6
49.5
54.8
60.4
69.8
73.1
82.1
114.1
149.5
161.3
177.7
191.6
227.5
292.4
352.1
383.9
361.9
352.5
383.5
370.9
396.5
449.6
552.0
626.2
670.4
335.9
364.7
385.7
369.2
402.4
485.8
525.7
540.4
558.7
583.1
609.7
628.8
623.7
642.8
661.3
659.7
672.7
687.7

Merchandise

7.1
2.4
4.6
5.4
6.1
5.0
4.6
5.5
7.4
15.2
20.3
17.5
16.4
14.5
19.8
19.2
18.1
18.8
21.1
25.2
28.2
24.4
25.0
29.9
31.1
33.1
35.7
40.5
42.9
46.6
49.5
54.8
60.4
68.9
72.4
81.4
114.1
151.5
161.3
177.7
191.6
227.5
291.2
351.0
382.8
361.9
352.5
383.5
370.9
396.5
449.6
552.0
626.2
670.4
335.9
364.7
385.7
369.2
402.4
485.8
525.7
540.4
558.7
583.1
609.7
628.8
623.7
642.8
661.3
659.7
672.7
687.7

5.3
1.7
3.3
4.1
4.5
3.4
2.9
3.6
5.4
11.8
16.1
13.3
12.2
10.2
14.2
13.4
12.4
12.9
14.4
17.6
19.6
16.4
16.5
20.5
20.9
21.7
23.3
26.7
27.8
30.7
32.2
35.3
38.3
44.5
45.6
51.7
73.9
101.0
109.6
117.5
123.1
144.7
183.3
225.1
238.3
214.0
206.1
224.1
220.8
224.4
256.0
324.2
369.9
397.9
196.3
215.6
228.0
217.7
230.4
281.3
306.7
319.2
327.9
342.8
360.6
373.2
367.3
378.7
394.2
395.0
393.5
408.8

Services

ss

received
by the
United
States
(net)

1.7
l!3
1.3
1.6
1.6
1.7
1.9
2.1
3.4
4.2
4.3
4.1
4.3
5.5
5.8
5.7
5.9
6.7
7.6
8.7
8.0
8.5
9.4
10.1
11.4
12.3
13.8
15.1
15.8
17.3
19.5
22.1
24.4
26.8
29.6
40.2
50.5
51.7
60.2
68.6
82.8
107.9
125.9
144.5
148.0
146.4
159.4
150.1
172.0
193.6
227.8
256.3
272.5
139.6
149.1
157.7
151.5
172.0
204.4
219.1
221.2
230.7
240.3
249.1
255.5
256.5
264.1
267.1
264.7
279.3
279.0

Payments to foreigners

0.9
.7
.7
0
20
0
0
0
0
1.1
1.2
1.1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Imports of goods and
services
Total
Total
7.1
2.4
4.6
5.4
6.1
5.0
4.6
5.5
7.4
15.2
20.3
17.5
16.4
14.5
19.8
19.2
18.1
18.8
21.1
25.2
28.2
24.4
25.0
29.9
31.1
33.1
35.7
40.5
42.9
46.6
49.5
54.8
60.4
69.8
73.1
82.1
114.1
149.5
161.3
177.7
191.6
227.5
292.4
352.1
383.9
361.9
352.5
383.5
370.9
396.5
449.6
552.0
626.2
670.4
335.9
364.7
385.7
369.2
402.4
485.8
525.7
540.4
558.7
583.1
609.7
628.8
623.7
642.8
661.3
659.7
672.7
687.7

Merchandise

Services

5.9
2.1
3.4
3.7
4.7
4.8
6.5
7.2
7.9
7.3
8.3
10.6
9.8
12.3
15.3
16.0
16.8
16.3
18.1
19.9
20.9
21.1
23.5
24.0
23.9
26.2
27.5
29.6
33.2
39.1
42.1
49.3
54.7
60.5
66.1
78.2
97.3
135.2
130.3
158.9
189.7
223.4
272.5
318.9
348.9
335.6
358.7
442.4
448.9
493.8
564.3
626.1
672.3
708.4
321.9
390.5
453.6
472.4
511.3
600.7
607.8
614.7
628.3
653.5
658.2
680.0
673.0
678.1
691.3
684.6
714.1
743.7

4.5
1.5
2.4
2.7
3.4
2.7
3.4
3.8
3.9
5.1
6.0
7.6
6.9
9.1
11.2
10.8
11.0
10.4
11.5
12.8
13.3
13.0
15.3
15.2
15.1
16.9
17.7
19.4
22.2
26.3
27.8
33.9
36.8
40.9
46.6
56.9
71.8
104.5
99.0
124.3
151.9
176.5
211.9
247.5
266.5
249.5
271.3
334.3
340.9
367.8
412.6
450.1
480.9
505.4
239.9
298.3
342.7
361.4
381.8
437.3
439.7
442.2
450.4
468.2
470.3
482.1
483.2
488.0
497.8
484.1
508.1
531.8

1.5
.6
1.0
1.0
1.3
2.1
3.1
3.4
4.0
2.3
2.4
3.0
2.9
3.2
4.1
5.2
5.8
5.9
6.6
7.1
7.6
8.1
8.2
8.8
8.8
9.3
9.7
10.2
11.0
12.7
14.4
15.4
17.9
19.6
19.5
21.3
25.5
30.7
31.3
34.6
37.9
46.9
60.5
71.4
82.4
86.1
87.3
108.2
108.0
126.1
151.8
175.9
191.4
203.0
82.0
92.2
110.9
111.0
129.5
163.4
168.0
172.6
177.9
185.3
187.9
198.0
189.8
190.1
193.5
200.5
206.0
211.9

Source: Department of Commerce, Bureau of Economic Analysis.




308

Transfer payments
(net)
Total

0.4
.2
.2
.2
!2
.2
'.8
2.9
2.6
4.5
5.6
4.0
3.5
2.5
2.5
2.3
2.5
2.4
2.3
2.3
2.3
2.4
2.7
2.8
2.9
3.0
3.0
3.1
3.3
3.2
3.2
3.5
3.9
4.1
4.1
4.6
4.9
5.4
5.1
5.6
6.2
7.7
7.5
9.0
9.5
12.3
15.1
15.9
14.6
15.0
14.8
13.4
10.6
13.4
17.0
16.9
16.6
18.9
13.8
12.3
13.9
20.0
14.3
12.1
14.2
18.5
14.0
19.4
18.3
2.1

Interest
paid by
From governFrom govern- ment to
persons ment foreigners
(net)
(net)
0.3
.2
.2
.2
.1
!4
.5
.7
.7
.7
.5
.4
.4
.4
.5
.5
.4
.5
.5
.4
.4
.4
!5
.6
.7
.7
.7
.9
.9
1.0
1.2
1.2
1.1
1.3
1.0
1.0
1.0
.9
.9
1.0
1.1
1.0
1.3
1.0
1.5
1.7
1.9
2.2
1.9
1.4
.9
1.1
1.2
1.6
1.4
2.1
2.1
2.1
1.8
1.6
1.9
1.7
1.6
1.2
1.2
.9
.4
1.3
1.1

0.0
.0
.0
.0
.0
.1
-!l

2.3
2.0
3.9
5.1
3.6
3.1
2.1
2.0
1.8
2.1
1.9
1.8
1.8
1.9
1.9
2.2
2.3
2.3
2.3
2.3
2.4
2.4
2.3
2.2
2.3
2.7
2.9
2.9
3.6
4.0
4.4
4.2
4.7
5.2
6.5
6.5
7.8
8.5
10.7
13.4
13.9
12.4
13.1
13.4
12.5
9.5
12.2
15.5
15.5
14.5
16.8
11.7
10.5
12.3
18.1
12.6
10.5
13.0
17.3
13.1
18.9
17.0
1.0

0.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.1
.1
.1
!2
.1
.3
.3
'.3
.4
.5
.5
.5
.6
.7
.8
1.0
1.8
2.7
3.8
4.3
4.5
4.5
5.5
8.7
11.1
12.6
16.9
18.3
17.8
19.8
21.3
22.6
25.3
30.2
36.0
38.7
18.9
18.3
21.2
21.5
22.9
25.8
27.7
29.5
31.3
32.2
34.8
35.7
36.2
37.1
37.6
38.7
39.0
39.3

Net

ment
0.8
.2
1.0
1.5
1.3
-.1
-2.1
-2.0
-1.3
4.9
9.3
2.4
.9
-1.8
.9
.6
-1.3
.2
.4
2.8
4.8
.9
12
3.2
4.2
3.8
4.9
7.5
6.2
3.8
3.5
1.6
1.7
4.8
1.3
-2.9
8.8
5.4
21.6
9.0
-8.7
-10.1
2.6
13.0
10.6
-1.0
335
909
-114.4
-135.8
-154.6
-119.2
-96.8
-90.1
-15.4
-57.4
-106.1
-141.6
-148.5
-159.7
-123.5
-116.1
-114.8
-122.5
-97.6
-99.1
-99.7
-90.9
-81.6
-82.9
987
-97.3

TABLE B-21.—Exports and imports of goods and services in 1982 dollars, 1929-90
[Billions of 1982 dollars; quarterly data at seasonally adjusted annual rates]
Exports of goods and services
Year or
quarter

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951 ..
1952
1953....
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966....
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 '.
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988:1
II
Ill
IV
1989:1
II
Ill
IV
1990:1
II
Ill
IV...

Total

42.1
22.7
36.2
40.0
42.0
29.1
25.1
27.3
35.2
69.0
82.3
66.2
65.0
59.2
72.0
70.1
66.9
70.0
76.9
87.9
94.9
82.4
83.7
98.4
100.7
106.9
114.7
128.8
132.0
138.4
143.6
155.7
165.0
178.3
179.2
195.2
242.3
269.1
259.7
274.4
281.6
312.6
356.8
388.9
392.7
361.9
348.1
371.8
367.2
397.1
451.8
534.7
593.3
630.3
336.0
355.5
376.6
367.4
406.5
487.0
521.7
527.3
534.3
555.3
576.1
593.2
592.5
611.6
628.1
620.1
630.5
642.4

Imports of goods and services

Merchandise

Merchandise

Total

29.7
15.9
26.5
30.5
31.7
19.5
15.2
16.4
24.0
54.1
65.5
49.1
48.4
42.2
51.1
49.0
46.4
48.8
53.2
61.8
66.6
56.6
56.1
68.8
69.1
72.2
77.6
87.7
88.2
94.0
96.5
104.9
110.0
120.6
119.3
131.3
160.6
175.8
171.5
177.5
178.1
196.2
218.2
241.8
238.5
214.0
207.6
223.8
231.6
245.9
286.5
347.3
390.8
424.4
199.1
214.4
231.9
231.9
257.2
314.0
338.1
344.4
345.6
361.2
376.9
390.7
390.3
405.2
422.4
418.4
421.0
435.8

Durable
goods

12.3
4.5
13.3
18.9
20.2
13.4
10.5
11.0
12.6
23.1
34.4
24.5
24.1
21.0
23.8
25.3
25.8
26.9
30.3
34.4
37.2
31.0
30.5
37.9
38.0
39.8
42.1
48.2
50.0
53.6
58.8
64.8
69.5
74.3
72.9
80.0
99.3
113.9
112.1
112.9
111.2
121.9
136.6
150.0
143.8
121.9
119.6
132.3
143.7
157.6
186.2
236.1
268.9
296.3
110.8
126.3
138.2
143.8
163.8
208.7
227.1
232.9
234.6
249.7
257.9
267.6
271.0
279.0
292.8
293.4
296.3
302.7

Services

Nondurable
goods
17.5
11.4
13.1
11.6
11.6
6.1
4.8
5.4
11.3
31.0
31.1
24.6
24.2
21.3
27.3
23.7
20.6
21.9
22.9
27.4
29.4
25.6
25.6
30.9
31.1
32.4
35.5
39.5
38.2
40.4
37.7
40.1
40.5
46.3
46.4
51.3
61.3
62.0
59.5
64.7
66.9
74.3
81.6
91.9
94.6
92.1
88.0
91.5
87.9
88.3
100.3
111.2
121.9
128.1
88.3
88.1
93.7
88.2
93.3
105.3
111.0
111.4
110.9
111.5
119.0
123.1
119.3
126.2
129.6
125.0
124.6
133.1

Total

12.3
6.8
9.8
9.4
10.3
9.6
9.8
10.9
11.2
14.9
16.9
17.1
16.7
17.0
20.9
21.2
20.5
21.2
23.7
26.1
28.3
25.8
27.6
29.6
31.6
34.7
37.1
41.1
43.8
44.4
47.1
50.8
55.0
57.6
59.9
64.0
81.7
93.3
88.2
96.8
103.6
116.4
138.6
147.1
154.3
148.0
140.5
148.0
135.6
151.2
165.2
187.4
202.6
205.9
136.9
141.1
144.7
135.4
149.3
173.0
183.6
183.0
188.8
194.1
199.2
202.5
202.2
206.4
205.7
201.7
209.5
206.6

Factor
inOther
come *
7.6
3.7
5.2
4.6
5.2
4.8
4.6
4.9
4.8
5.6
7.2
8.5
8.2
9.1
10.9
11.3
11.0
11.6
13.0
14.1
14.8
13.2
14.0
15.7
16.9
18.5
20.0
21.8
23.2
22.8
23.8
26.3
29.0
29.6
30.5
33.9
46.2
53.5
45.6
49.7
53.5
63.2
86.6
91.4
96.3
91.6
85.0
92.6
80.0
75.6
81.1
96.3
105.1
100.9
83.0
88.2
89.5
79.5
71.6
87.7
94.1
92.5
96.2
102.4
104.3
107.1
103.6
105.4
101.9
97.4
103.2
101.3

4.8
3.1
4.5
4.8
5.1
4.9
5.2
6.0
6.5
9.4
9.7
8.6
8.5
7.9
10.0
9.9
9.5
9.6
10.7
12.0
13.5
12.6
13.5
13.9
14.7
16.2
17.2
19.3
20.6
21.6
23.3
24.5
26.0
28.0
29.4
30.1
35.4
39.8
42.6
47.1
50.1
53.2
52.0
55.7
57.9
56.3
55.5
55.4
55.6
75.6
84.2
91.1
97.5
105.0
53.8
52.9
55.2
55.9
77.7
85.3
89.6
90.5
92.6
91.7
94.9
95.4
98.5
101.0
103.9
104.3
106.4
105.3

Total

37.4
24.2
30.1
31.7
38.2
36.9
48.0
51.1
54.1
42.0
39.9
47.1
46.2
54.6
57.4
63.3
69.7
67.5
76.9
83.6
87.9
92.8
101.9
102.4
103.3
114.4
116.6
122.8
134.7
152.1
160.5
185.3
199.9
208.3
218.9
244.6
273.8
268.4
240.8
285.4
317.1
339.4
353.2
332.0
343.4
335.6
368.1
455.8
471.4
526.9
570.3
610.6
647.4
667.8
324.3
401.6
471.4
492.6
541.9
598.3
599.0
599.5
612.8
631.0
627.3
646.5
656.6
659.4
663.5
664.7
677.0
666.0

Total

29.3
19.2
24.0
25.6
29.4
21.0
25.0
26.5
26.0
30.0
29.3
33.9
33.3
40.9
40.4
41.9
44.6
42.1
48.3
53.6
56.1
58.1
68.0
67.5
69.0
78.9
81.2
86.3
97.0
109.1
113.0
135.7
144.6
150.9
166.2
190.7
218.2
211.8
187.9
229.3
259.4
274.1
277.9
253.6
258.7
249.5
282.2
351.1
367.9
413.7
440.9
469.4
499.3
518.5
242.7
311.6
364.2
387.8
428.7
461.2
460.6
459.8
471.3
486.0
480.6
492.4
509.8
514.3
517.8
515.2
526.5
514.5

1
Factor income exports less factor income imports equals rest-of-the-world product.
Source: Department of Commerce, Bureau of Economic Analysis.




309

Durable
goods
7.4
4.0
6.9
8.8
11.0
6.7
6.5
6.7
6.9
7.8
7.8
9.4
8.9
11.5
11.5
13.0
13.7
11.9
14.7
16.8
17.1
16.9
22.8
21.7
21.1
24.8
26.2
29.0
35.6
44.0
48.0
61.7
65.6
66.8
74.4
84.4
88.9
89.2
72.4
88.5
99.3
113.7
115.7
116.1
126.1
125.3
150.4
201.6
218.7
242.6
262.1
282.3
302.9
313.8
117.1
172.5
211.4
226.8
250.0
277.5
276.2
276.9
283.7
292.2
292.7
299.0
307.7
312.4
308.5
310.2
317.5
318.9

Services

Nondurable
goods
22.0
15.2
17.0
16.8
18.4
14.3
18.5
19.7
19.1
22.2
21.5
24.5
24.4
29.5
28.9
28.9
30.9
30.3
33.5
36.8
39.0
41.3
45.3
45.8
47.9
54.0
55.0
57.4
61.4
65.2
65.0
74.0
79.0
84.1
91.8
106.4
129.4
122.5
115.5
140.8
160.1
160.4
162.2
137.5
132.6
124.2
131.9
149.5
149.3
171.1
178.8
187.2
196.4
204.7
125.6
139.1
152.8
161.0
178.8
183.7
184.4
182.9
187.6
193.8
187.9
193.4
202.2
201.9
209.3
205.0
209.0
195.6

Total
8.0
4.9
6.1
6.2
8.8
15.8
23.0
24.6
28.2
12.0
10.6
13.1
13.0
13.6
17.1
21.4
25.1
25.4
28.6
30.0
31.8
34.6
33.8
34.9
34.3
35.5
35.4
36.5
37.7
43.0
47.5
49.6
55.2
57.4
52.7
53.9
55.6
56.6
52.9
56.1
57.7
65.3
75.3
78.4
84.7
86.1
85.8
104.7
103.5
113.2
129.4
141.2
148.2
149.3
81.6
90.1
107.2
104.8
113.2
137.1
138.4
139.7
141.5
145.0
146.7
154.1
146.7
145.1
145.6
149.4
150.5
151.5

Factor
inOther
come *
2.6
1.3
2.2
2.0
1.9
1.7
1.9
2.1
2.5
1.9
2.1
2.3
2.6
2.8
3.1
2.9
3.1
3.3
3.6
3.4
3.4
3.7
4.0
4.6
4.8
4.6
5.1
5.6
6.2
7.0
7.5
8.6
12.0
12.5
9.8
10.2
13.9
17.7
16.3
16.7
16.1
21.1
30.8
35.9
41.1
40.5
37.1
48.7
43.1
45.1
55.8
68.0
74.9
71.3
35.1
39.7
47.4
41.9
45.7
61.5
62.5
66.8
69.8
72.9
73.4
80.7
74.0
71.6
69.5
72.9
70.6
72.4

5.4
3.6
4.0
4.1
6.9
14.2
21.2
22.5
25.7
10.1
8.5
10.8
10.4
10.8
14.0
18.4
21.9
22.1
25.0
26.6
28.4
30.9
29.8
30.3
29.6
30.9
30.3
30.9
31.6
36.0
40.0
41.0
43.2
45.0
42.9
43.7
41.7
38.9
36.6
39.3
41.6
44.2
44.5
42.4
43.6
45.7
48.7
56.0
60.4
68.1
73.6
73.2
73.2
77.9
46.5
50.3
59.8
62.9
67.4
75.6
75.9
72.9
71.8
72.1
73.3
73.3
72.8
73.5
76.1
76.5
79.9
79.1

TABLE B-22.—Relation of gross national product, net national product, and national income, 1929-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Gross
national
product

Year or quarter

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949.
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969.
1970
1971
1972
1973
1974
1975
1976
1977..
1978
1979
1980
1981
1982
1983
1984..
1985
1986
1987
1988
1989
1990 *
1982- IV
1983: IV
1984: IV
1985: IV
1986: IV
1987- IV
1988: 1

. .

. . . .

||

III

IV
1989: 1
II

Ill
IV
1990- 1
II

Ill
IV

1039
56.0
91.3
100.4
125.5
159.0
192.7
211.4
213.4
212.4
235.2
2616
260.4
2883
333.4
3516
371.6
3725
405.9
4282
451.0
4568
495.8
5153
533.8
5746
606.9
649.8
7051
7720
8164
892.7
9639
1,015.5
1,102.7
12128
13593
14728
1,598.4
17828
19905
22497
2,508.2
27320
30526
3,166.0
34057
3'772 2
40149
42316
45156
4 873.7
52008
54630
32125
35458
3,851.8
41079
42973
46476
47358
48314
4'917'9
50098
51013
51740
52386
S'289'3
53754
5'443'3
55146
55189

9.9
7.6
9.0
9.4
10.3
11.3
11.6
12.0
12.4
14.2
17.6
20.4
22.0

236
27.2
29.2
30.9
32.5
34.4

381
41.1
42.8
44.6

464
47.8
49.4
51.4
53.9

574
62.1

674
73.9

814
88.8
97.5
1079
1181
1375
161.8
1792
2015
2299
265.8
3038
3478
383.2
396.6
4155
4372
4601
4870
514.3
5544
5757
3932
4008
423.5
4469
4708
4967
5048
5105
5163
5257
5347
5430
5675
5725
5670
5711
5793
5852

Equals:
Net
national
product

94.0
48.4
82.3
91.1
115.3
147.7
181.1
199.4
201.0
198.2
217.6
241.2
238.4
264.6
306.2
322.5
340.7
340.0
371.5
390.1
409.9
414.0
451.2
468.9
486.1
525.2
555.5
595.9
647.7
709.9
749.0
818.7
882.5
926.6
1,005.1
1104.8
1 241.2
1*335 4
1*,436.6
1 603.6
17890
2*019 8
2,242.4
24281
2*7048
2,782.8
3009.1
3356.8
3*577 6
3 771.5
40286
4 359.4
46464
4 887.4
28193
3 145.0
3,428.3
3 661.0
38265
41509
42310
43209
4 401.6
4*4840
45666
4*631 1
4671 1
4*716 8
48084
4*872'2
49353
4*933 7

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




Plus:

Less:

Less:
consumption
allowances
with
capital
consumption
adjustment

310

CiihciHioc

Indirect
business
tax and
nontax
liability

Business
transfer
payments

Statistical
discrepancy

7.1
7.1
9.4

0.6

1.5
1.2
1.7
1.4
.7

10.1
11.3
11.8
12.8
14.2
15.5
17.1
18.4
20.1
21.3
23.4
25.3
27.7
29.7
29.6
32.2
35.0
37.4
38.6
41.7
45.3
48.0
51.5
54.6
58.7
62.5
65.2
70.1
78.7
86.3
94.0
103.4
111.1
120.8
1290
140.0
151.7
165.7
1781
189.4
213.3
2515
258.8
282.6
313.9
333.6
348.9
3678
388.7
414.0
440.4
2645
294.1
322.7
338.3
353.1
3753
380.2
3853
391.6
3976
403.5
4111
4199
4215
4317
4330
4449
4519

.5
.4
.5
.5
.5
.5
.5
.5
.6
.8
.8
.9
1.0
1.2
1.1
1.2
1.4
1.5
1.6
1.8
2.0
2.0
2.1
2.4
2.7
2.8
3.0
3.1
3.4
3.9
4.1
4.4
4.9
5.5
5.8
7.4
7.9
8.6
9.3
10.3
12.1
12.4
14.3
16.0
18.7
22.0
24.6
28.5
30.3
32.4
35.0

152
16.5
20.0
23.0
25.5

296

-1.7

2.7
4.0
1.8
1.3
.8
.8
2.7
1.8
2.6
2.7
1.8

-1.9
-1.2
_ i
-1.5

2.8
-1.2

.0
-.6
-1.4
-1.2

2.1
.4

-1.1

3.9

-1.1

1.8
-1.6

4.3

-1.7

2.5
3.6
.0

-1.9
-1.0

4.9
4.1
-.1
5.2
5.4
-4.8

1.8

-10.6
-28.2
-17.0

3.1
6.8
2.5

327

188

162
7

341
34.7

354
360

-.3
.0
.7
.7
1.1
.1
.4
1.7
1.8
1.1
1.7
1.6
2.5
1.6
1.4
1.9
2.9
2.6
3.7
3.5
1.2
2.4
1.0
3.0
3.9
3.5
5.7
6.7
8.7
14.1

9.9
7.2

12.8
17.4
16.2

6.3
2.5

15.4
19.6

-9.6

-3.0

308

.1
-.1
-.3

8.4
5.3

33.4

30.4

.0
.4
.4
.1
.1
.1
.6
.7
.9
-.2
-.1

15.6
26.7
18.7
19.5

7.9

31.4
32.1

301

-0.2

-2.1

-24.7
-239
-33.9
-30.5
-28.6
-20.3

29.8

less
current
surplus
of
government
enterprises

-3.2
-4.9

8.8

17.9
17.0

8.5

-2.6

2.2
8.4
3.6

-7.5

5.3

Equals:
National
income

84.7
39.4
71.2
79.6
102.8
136.2
169.7
182.6
181.6
180.7
196.6
221.5
215.2
239.8
277.3
291.6
306.6
306.3
336.3
356.3
372.8
375.0
409.2
424.9
439.0
473.3
500.3
537.6
585.2
642.0
677.7
739.1
798.1
832.6
898.1
994.1
1,122.7
1,203.5
1,289.1
1,441.4
1,617.8
1,838.2
2,047.3
2,203.5
2,443.5
2,518.4
2,719.5
3,028.6
3,234.0
3,412.6
3,660.3
3,984.9
4,223.3
4,417.5
2,548.2
2,851.5
3,096.1
3,312.8
3,473.1
3,791.5
3,864.3
3,948.9
4,022.3
4,104.1
4,177.3
4,216.8
4,232.1
4,267.1
4,350.3
4,411.3
4,452.4

TABLE B-23.—Relation of national income and personal income, 1929-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year or quarter

National
income

and

capital

"ET
adjust-

Equals:

Plu S:

LeSS:
Corporate
profits
with
inventory
valuation

GovernWage
ment
Contribu- accruals
transfer Personal Personal Business
tions for
Net
transfer
less
social disburse- payments interest dividend payments
interest
income income
to
insurance ments
persons

Personal
income

ments

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959 ..
1960
1961
1962
1963 . . .
1964
1965
1966
1967
1968 .
1969
1970
1971
1972
1973
1974
1975
1976
1977 .
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 "
1982- IV
1983: IV
1984- IV
1985: IV
1986- IV
1987: IV
1988- 1
II
Ill
IV
1989- 1
II
Ill
IV
1990: 1
II.
Ill
IV ".

847
39.4
712
79.6
1028
136.2
1697
1826
1816
180.7
1966
221.5
215.2
239.8
2773
291.6
3066
306.3
3363
356.3
3728
375.0
4092
424.9
4390
4733
5003
5376
5852
6420
677.7
7391
798.1
8326
898.1
9941
1 1227
12035
12891
14414
16178
18382
2047.3
22035
24435
25184
2 719.5
30286
32340
34126
36603
39849
42233
44175
25482
28515
30961
3 312.8
34731
3,791.5
38643
3,948.9
40223
4,104.1
41773
4 216.8
42321
4,267.1
43503
44113
44524

96
-1.5
5.5
8.8
143
19.7
240
242
19.7
17.2
22.9
30.3
28.0
34.9
399
37.5
377
36.6
471
45.7
453
40.3
514
49.5
503
583
636
707
813
866
841
907
874
747
871
1007
1133
1017
1176
1452
1748
1972
2001
1772
1880
1500
213*7
2669
2823
2821
3083
3376
3116
2971
1461
2485
2669
2914
2752
3231
3305
335.8
3344
349.6
3273
3214
3067
2909
2968
3066
3007

47
4.1
36
3.3
33
3.1
27
23
22
1.8
23
2.4
26
3.0
35
3.9
44
5.2
58
65
78
9.5
102
113
129
146
163
182
209
243
274
298
346
412
463
510
596
755
838
888
1053
1263
158*3
2009
2481
2723
2810
3048
3190
3255
3286
3718
4451
4671
2669
2902
313 1
3227
3240
3382
3514
3619
3798
3941
4192
4434
4562
4617
4636
4662
4683
4702

0.3
2.2
2.4
2.8
3.5
4.6
52
6.3
7.7
6.7
6.0
6.6
7.4
8.8
9.3
9.6
10.6
12.0
13.5
155
15.9
188
21.9
229
254
285
301
316
406
455
504
57.9
622
68.9
790
976
1105
1185
1345
1498
1717
1978
2165
2512
2696
291.0
3249
3541
3792
4001
4426
4768
5069
2730
2992
3315
3621
3877
408.7
4316
438.8
4460
453.8
4691
474.6
4791
484.2
4989
5039
5113
5136

Source: Department of Commerce, Bureau of Economic Analysis.




311

0.0
.0
.0
.0
.0
.0
.2
2
.0
.0
0
.0
.0
.0
1
.0
_l
.0
0
.0

o

.0
0
.0
0

o
o
o
o
o
o
o
o
o

6
0
1
5
1
1
1
3
_2

o
1
o

_4
2
2

o
o
0
o
o
o
o
6
0

o
-.2
o
.0
o
.0
o
0
o

0
0

o
o
o

0.9
1.5
2.5
2.7
2.6
2.7
2.5
31
5.6
10.8
11.2
10.6
11.7
14.4
11.6
12.2
13.1
15.3
164
17.5
203
24.7
25.7
27.5
315
326
345
360
391
436
523
606
67.5
818
97.0
1084
1241
1474
1857
2028
2175
2348
2628
3126
3557
3962
4266
4379
4678
4968
5213
5574
6045
6595
4202
4290
4430
474.5
5057
527.7
5492
554.4
5599
566.1
5881
5981
6091
622.5
6468
6520
6610
6783

6.9
5.5
5.3
5.3
5.3
5.2
5.1
5.2
5.8
6.6
7.5
8.0
8.7
9.6
10.4
11.2
12.4
13.7
14.9
16.6
18.7
20.3
22.3
24.9
26.3
289
32.2
355
39.6
442
48.2
53.2
60.9
693
74.7
80.8
933
111.9
1225
134.1
1554
1825
221.5
2719
3354
3697
393.1
444.7
4780
4932
5013
547.9
6432
680.9
3662
411.6
4644
485.9
4927
516.3
5235
536.3
5562
575.6
6104
642.1
6552
664.9
6705
6780
6853
690.1

5.8
2.0
3.8
4.0
4.4
4.3
4.4
46
4.6
5.6
6.3
7.0
7.2
8.8
8.5
8.5
8.8
9.1
10.3
11.1
11.5
11.3
12.2
12.9
13.3
144
15.5
173
19.1
194
20.2
219
22.4
222
22.6
24.1
266
28.9
287
33.8
382
430
48.1
529
613
639
68.7
75.5
787
858
918
102.2
1144
123.8
654
71.0
768
79.0
877
95.5
979
100.2
1038
107.1
1106
113.2
1157
118.2
120.5
122.9
1249
126.7

0.6
.7
.5
.4
.5
.5
.5
.5
.6
.7
.8
.8
.9
1.0
1.2
1.1
1.2
1.4
1.5
1.6
1.8
2.0
2.0
2.1
2.4
2.7
2.8
3.0
3.1
3.4
3.9
4.1
4.4
4.9
5.5
5.8
7.4
7.9
8.6
93
10.3
12.1
12.4
143
16.0
18.7
22.0
246
285
30.3
32.4
35.0
15.2
16.5
20.0
23.0
25.5
29.6
298
30.1
30.4
30.8
31.4
32.1
32.7
33.4
34.1
34.7
354
36.0

84.3
46.3
72.1
77.6
95.2
122.4
150.7
164.5
170.0
177.6
190.2
209.2
206.4
228.1
256.5
273.8
290.5
293.0
314.2
337.2
356.3
367.1
390.7
409.4
426.0
453.2
476.3
510.2
552.0
600.8
644.5
707.2
772.9
831.8
894.0
981.6
1,101.7
1,210.1
1,313.4
1,451.4
1,607.5
1,812.4
2,034.0
2,258.5
2,520.9
2,670.8
2,838.6
3,108.7
3,325.3
3,526.2
3,766.4
4,070.8
4,384.3
4,645.6
2,729.2
2,941.8
3,188.3
3,399.1
3,597.8
3,890.9
3,951.3
4,033.4
4,112.3
4,186.2
4,302.2
4,362.9
4,402.8
4,469.2
4,562.8
4,622.2
4,678.5
4,719.0

TABLE B-24.—National income by type of income, 1929-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Proprietors' income with inventory valuation and
capital consumption adjustments

Compensation
of employees
Year or quarter

1929
1933
1939
1940
1941
1942
1943... .
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953... .
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964... .
1965
1966
1967
1968
1969
1970 . .
1971
1972
1973
1974
1975 ...
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986.
1987
1988.
1989
1990 p
1982: IV.
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988: 1...

II
Ill
IV
1989:1
II
Ill
IV.
1990: 1
II...
Ill
IV P

National
income 1

84.7
39.4
71.2
79.6
102.8
136.2
169.7
182.6
181.6
180.7
196.6
221.5
215.2
239.8
277.3
291.6
-306.6
306.3
336.3
356.3
-372.8
375.0
409.2
-424.9
439.0
473.3
500.3
537.6
585.2
642.0
677.7
739.1
^-798.1
832.6
898.1
994.1
-1,122.7
1,203.5
1,289.1
1,441.4
1,617.8
1,838.2
"-2,047.3
2,203.5
2,443.5
2,518.4
2,719.5
3,028.6
3,234.0
3,412.6
3,660.3
3,984.9
4,223.3
4,417.5
2,548.2
2,851.5
3,096.1
3,312.8
3,473.1
3,791.5
3,864.3
3,948.9
4,022.3
4,104.1
4,177.3
4,216.8
4,232.1
4,267.1
4,350.3
4,411.3
4,452.4

Total

51.1
29.6
48.2
52.2
64.8
85.3
109.6
121.3
123.3
119.6
130.1
142.1
142.0
155.4
181.6
196.3
210.4
209.4
225.9
244.7
257.8
259.8
281.2
296.7
305.6
327.4
345.5
371.0
399.8
443.0
475.5
524.7
578.4
618.3
659.4
726.2
812.8
891.3
948.7
1,057.9
1,176.6
1,329.2
1,491.4
1,638.2
1,807.4
1,907.0
2,020.7
2,213.9
2,367.5
2,511.4
2,686.4
2,905.1
3,079.0
3,244.2
1,931.1
2,092.7
2,272.7
2,426.7
2,571.2
2,770.3
2,820.0
2,879.0
2,934.6
2,986.7
3,029.7
3,062.6
3,095.2
3,128.6
3,180.4
3,232.5
3,276.9
3,286.9

Wages
and
salaries

50.5
29.0
46.0
49.9
62.1
82.1
105.8
116.7
117.5
112.0
123.1
135.5
134.7
147.2
171.6
185.6
199.0
197.2
212.1
229.0
239.9
241.3
259.8
272.8
280.5
299.3
314.8
337.7
363.7
400.3
428.9
471.9
518.3
551.5
584.5
638.7
708.6
772.2
814.7
899.6
994.0
1,119.6
1,251.9
1,372.0
1,510.4
1,586.1
1,676.2
1,838.8
1,975.2
2,094.8
2,249.7
2,431.1
2,573.2
2,705.3
1,603.7
1,739.4
1,891.1
2,027.4
2,143.1
2,323.6
2,359.3
2,409.9
2,456.1
2,499.0
2,533.7
2,560.0
2,586.6
2,612.7
2,651.6
2,696.3
2,734.2
2,739.1

Supplements
to
wages
and
salaries2

0.7
.6
2.2
2.3
2.8
3.2
3.8
4.5
5.8
7.6
7.0
6.5
7.3
8.2
10.0
10.7
11.5
12.1
13.8
15.7
17.8
18.5
21.4
23.8
25.1
28.1
30.7
33.2
36.1
42.7
46.6
52.8
60.1
66.8
74.9
87.6
104.2
119.1
134.0
158.3
182.6
209.7
239.5
266.3
297.1
320.9
344.5
375.1
392.4
416.6
436.6
474.0
505.8
538.9
327.4
353.4
381.7
399.3
428.1
446.7
460.7
469.1
478.5
487.7
496.0
502.6
508.6
515.9
528.8
536.1
542.7
547.8

Nonfarm

Farm
Total

14.4
5.4
11.4
12.6
17.1
23.9
28.8
30.0
31.5
36.3
35.5
40.4
35.9
38.8
44.0
44.4
43.4
43.5
45.4
46.9
48.8
51.5
51.7
52.1
54.3
56.6
57.7
60.5
65.1
69.6
71.1
75.4
79.3
80.2
86.8
98.3
119.0
118.8
125.4
137.7
152.9
176.2
191.9
180.7
186.8
175.5
190.9
234.5
255.9
282.0
323.4
354.2
379.3
402.4
188.3
207.8
237.8
264.2
289.2
345.2
346.3
356.8
356.5
357.0
387.8
379.6
368.1
381.7
404.0
401.7
397.9
406.1

Total

6.1
2.5
4.4
4.4
6.4
10.1
12.0
11.9
12.4
14.8
15.1
17.5
12.8
13.6
16.0
15.0
13.0
12.4
11.3
11.1
11.0
13.1
10.8
11.6
12.0
12.1
11.9
10.7
13.0
14.0
12.7
12.8
14.6
14.7
15.5
19.4
33.7
27.5
25.4
20.6
20.5
27.0
31.7
20.5
30.7
24.6
12.4
30.5
30.2
34.7
42.8
43.7
48.6
49.9
28.5
19.3
28.1
29.2
37.2
52.3
47.1
48.8
43.4
35.5
59.6
50.5
38.7
45.7
57.4
51.0
42.4
48.9

Proprietors'
income3

6.3
2.5
4.5
4.5
6.5
10.3
12.2
12.2
12.6
15.2
15.6
18.2
13.5
14.3
16.8
15.9
13.9
13.2
12.1
12.0
11.9
14.0
11.7
12.4
12.8
12.9
12.6
11.4
13.7
14.8
13.6
13.7
15.8
16.0
16.8
21.1
35.6
30.1
29.0
24.6
25.1
32.4
38.0
28.1
39.4
33.9
21.8
39.6
38.9
43.1
50.8
51.2
56.3
57.5
38.0
28.5
37.5
37.8
45.3
60.2
54.9
56.4
50.7
42.9
67.1
58.1
46.7
53.4
65.1
58.5
49.9
56.4

Capital
consumption
adjustment

-0.2
.0
-.1
-.1
-.2
-.2

-'.3
-.4
-.5
-J
-.7
-.8
-.9
_9
-'.8
8
-.9
-.9
-.9
-.9
-.8
-.8
-.8
-.7
-.7
-.7
-.8
-.8
-.9
-1.1
-1.3
-1.3
-1.7
-1.9
-2.6
-3.6
-4.0
-4.6
-5.3
-6.3
-7.6
-8.7
-9.3
-9.4
-9.2
-8.7
-8.4
-8.0
-7.5
77
-7.6
-9.4
-9.3
-9.3
-8.6
-8.1
-7.9
-7.8
-7.6
74
-7.4
-7.5
-7.6
-8.0
-7.7
-7.7
76
-7.6
-7.5

Total

8.3
2.9
7.1
8.2
10.8
13.8
16.8
18.1
19.1
21.5
20.4
22.9
23.1
25.2
28.0
29.4
30.4
31.1
34.0
35.8
37.8
38.5
40.9
40.5
42.3
44.4
45.7
49.8
52.1
55.5
58.4
62.6
64.7
65.4
71.4
79.0
85.3
91.3
100.0
117.1
132.4
149.2
160.1
160.1
156.1
150.9
178.4
204.0
225.6
247.2
280.6
310.5
330.7
352.5
159.8
188.6
209.7
235.0
252.0
293.0
299.2
308.1
313.2
321.5
328.2
329.1
329.5
336.0
346.6
350.8
355.6
357.2

Proprietors'
income

8.8
3.9
7.6
8.6
11.7
14.4
17.1
18.3
19.3
23.3
21.8
23.1
22.2
25.7
27.7
28.5
29.8
30.4
33.5
35.4
37.2
37.7
40.1
39.7
41.7
43.8
45.1
49.1
51.8
55.5
58.4
63.1
65.1
66.0
72.3
79.6
87.2
95.3
102.2
119.6
135.1
152.8
164.0
164.3
155.2
148.5
167.3
182.4
194.6
210.0
247.1
274.7
298.9
323.9
156.9
172.7
182.5
201.1
215.5
260.4
264.5
271.8
276.5
286.0
293.8
296.1
298.9
306.7
317.1
320.7
329.3
328.4

Inven- Capital
tory
convalua- sumption
tion
adjust- adjustment
ment

0.1
-.5
-.2
.0
-.6
-.4
-.2
-.1
-.1
-1.7
15
-.4
.5
-1.1
.2
.0
-.2
-!3
-.1
.0
.0
.0
.0
.0
_i
-2

-'.2
-.5

-!e
1
-2.0
-3.8
12
-1.3
-1.3
-2.3
-2.9
-2.9
-1.4
-.5
-.8
-.4
-.2
-.2
-1.0
-1.4
-1.0
-1.3
6
-.7
.3
-.3
3
-2.4
15
-1.3
13
-1.5
-.9
-.5
-1.3
-1.1
-.9
-.2
35
-.7

-0.6
~'.A
-.3
-.3
-.3
-.2
-.1
-.1
-.1
.1
.2
.5
.6
.6
.7
.7
.8
.7
.9
.9
.9
.9
.8
.6
.6
.7
.7
.4
.3
.2
-.1
.1
.0
-.3
'.1

-To

13
-1.4
-1.4
-1.0
12
2.3
2.9
12.0
22.0
31.2
37.4
34.5
37.2
32.8
30.0
3.5
16.5
26.9
34.2
36.8
35.0
36.3
37.6
38.0
37.1
35.3
33.6
31.9
30.4
30.3
30.2
29.8
29.5

1
National income is the total net income earned in production. It differs from gross national product mainly in that it excludes
depreciation charges and other allowances for business and institutional consumption of durable capital goods and indirect business
taxes. See Table B-22.




312

TABLE B-24.—National income by type of income, 1929-90—Continued
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Rental income of persons
with capital consumption
adjustment
Year or quarter
Total

1929 ....
1933
1939 ....
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954 ...
1955
1956
1957
t.~.
1958
1959
I960
1961 ....
1962
1963 ....
1964
1965 ....
1966
1967
1968
1969
1970
1971
1972
1973
1974 ..
1975
1976
1977
1978
1979
1980
1981
1982
1983 ..
1984
1985
1986
1987
1988
1989
1990 P
1982: IV
1983- IV
1984: IV
1985: IV
1986- IV
1987: IV
1988- 1
II
Ill
IV
1989- 1
II
III
IV
1990- 1
II
Ill
IV ".

4.9
2.0
2.6
2.7
3.2
4.1
4.6
4.8
5.0
5.8
5.8
6.4
6.7
7.7
8.3
9.4
10.7
11.6
12.0
12.4
13.1
13.9
14.6
15.3
15.8
16.5
17.1
17.3
18.1
18.6
19.6
18.4
18.4
18.2
18.6
17.9
18.0
16.1
13.5
11.9
8.2
9.3
5.6
6.6
13.3
13.6
13.2
8.5
9.2
11.6
13.7
16.3
8.2
6.7
15.8
12.4
5.6
7.8
13.5
14.6
16.1
15.3
17.0
16.8
13.3
9.7
5.8
4.1
5.5
4.3
8.4
8.5

Rental Capital
conincome sumption
of
adjustpersons ment

5.6
2.1
3.2
3.3
4.0
5.1
5.7
6.1
6.5
7.5
8.2
9.1
9.4
10.5
11.5
12.7
13.9
14.9
15.3
15.9
16.5
17.3
18.0
18.7
19.1
19.8
20.3
20.5
21.3
22.2
23.5
22.9
24.2
24.6
25.9
26.5
28.1
28.9
28.6
28.9
28.8
34.2
35.7
41.4
52.2
54.4
55.0
51.9
54.2
56.5
61.6
66.1
64.1
61.4
56.5
54.3
49.6
54.5
59.1
64.3
66.2
65.1
66.4
66.6
64.3
62.3
66.6
63.0
60.2
58.8
63.5
63.2

Corporate profits with inventory valuation and capital consumption adjustments
Profits with inventory valuation adjustment and without
capital consumption adjustment
Profits
Total
Total

-0.7
-.1

9.6
-1.5
5.5

-.6
-.8
-.9
-1.1
-1.3
-1.5
-1.7
-2.4
-2.7
-2.7
-2.8
-3.2
-3.3
-3.3
-3.2
-3.3
-3.5
-3.5
-3.4
-3.4
-3.4
-3.3
-3.3
-3.2
-3.2
-3.3
-3.6
-3.9
-4.5
-5.8
-6.4
-7.4
-8.6
-10.1
-12.7
-15.0
-17.0
206
-24i9
-30.1
-34.8
389
-40.8
-41.8
-43.3
-45.0
-45.0
-47.9
-49.8
-55.8
-54.8
-40.7
-41.9
-44.0
-46.7
-45.6
-49.6
-50.0
-49.7
-49.5
-49.8
-51.0
-52.6
-60.8
-58.9
-54.6
-54.5
-55.1
-54.7

8.8
14.3
19.7
24.0
24.2
19.7
17.2
22.9
30.3
28.0
34.9
39.9
37.5
37.7
36.6
47.1
45.7
45.3
40.3
51.4
49.5
50.3
58.3
63.6
70.7
81.3
86.6
84.1
90.7
87.4
74.7
87.1
100.7
113.3
101.7
117.6
145.2
174.8
197.2
200.1
177.2
188.0
150.0
213.7
266.9
282.3
282.1
308.3
337.6
311.6
297.1
146.1
248.5
266.9
291.4
275.2
323.1
330.5
335.8
334.4
349.6
327.3
321.4
306.7
290.9
296.8
306.6
300.7

10.5
-1.2
6.5
9.8
15.4
20.5
24.5
24.0
19.3
19.6
25.9
33.4
31.1
37.9
43.3
40.6
40.2
38.4
47.5
46.9
46.6
41.6
52.3
49.8
50.1
55.2
59.8
66.2
76.2
81.2
78.6
85.4
81.4
69.5
82.7
94.9
107.1
99.4
123.9
155.3
183.8
208.2
214.1
194.0
202.3
159.2
196.7
234.2
222.6
228.3
255.9
289.8
286.1
292.1
150.7
223.4
224.6
228.4
226.1
268.6
278.0
285.3
287.1
308.7
292.1
291.5
285.3
275.3
285.5
298.8
298.7

Profits after tax
Profits Profits
tax
before
Divi- Undistax liability Total dends tributed
profits

10.0
1.0
7.2
10.0
17.9
21.7
25.3
24.2
19.8
24.8
31.8
35.6
29.2
42.9
44.5
39.6
41.2
38.7
49.2
49.6
48.1
41.9
52.6
49.9
49.8
55.1
59.8
66.7
77.4
83.3
80.1
89.1
87.2
76.0
87.3
101.5
127.2
138.9
134.8
170.3
200.4
233.5
257.2
237.1
226.5
169.6
207.6
240.0
224.3
221.6
275.3
316.7
307.7
305.4
164.1
231.5
226.1
235.0
234.1
289.7
299.8
315.6
320.4
331.1
335.1
314.6
291.4
289.8
296.9
299.3
318.5

2
3

1.4
.5
1.4
2.8
7.6
11.4
14.1
12.9
10.7
9.1
11.3
12.4
10.2
17.9
22.6
19.4
20.3
17.6
22.0
22.0
21.4
19.0
23.6
22.7
22.8
24.0
26.2
28.0
30.9
33.7
32.7
39.4
39.7
34.4
37.7
41.9
49.3
51.8
50.9
64.2
73.0
83.5
88.0
84.8
81.1
63.1
77.2
93.9
96.4
106.3
126.9
136.2
135.1
134.1
59.8
88.1
87.0
99.8
113.1
132.1
128.2
136.7
137.9
142.1
148.3
140.8
127.8
123.5
129.9
133.1
139.1

8.6
.4
5.7
7.2
10.3
10.3
11.2
11.3
9.1
15.7
20.5
23.2
19.0
25.0
21.9
20.2
20.9
21.1
27.2
27.6
26.7
22.9
28.9
27.2
27.1
31.2
33.5
38.7
46.5
49.6
47.5
49.7
47.5
41.7
49.6
59.6
77.9
87.1
83.9
106.0
127.4
150.0
169.2
152.3
145.4
106.5
130.4
146.1
127.8
115.3
148.4
180.5
172.6
171.3
104.3
143.4
139.2
135.2
121.0
157.6
171.6
178.9
182.5
189.1
186.7
173.8
163.6
166.3
167.1
166.1
179.4

5.8
2.0
3.8
4.0
4.4
4.3
4.4
4.6
4.6
5.6
6.3
7.0
7.2
8.8
8.5
8.5
8.8
9.1
10.3
11.1
11.5
11.3
12.2
12.9
13.3
14.4
15.5
17.3
19.1
19.4
20.2
22.0
22.5
22.5
22.9
24.4
27.0
29.7
29.6
34.6
39.5
44.7
50.1
54.7
63.6
66.9
71.5
79.0
83.3
91.3
98.2
110.0
123.5
133.9
68.5
73.9
80.8
84.0
93.6
102.2
105.0
107.9
111.8
115.3
119.1
122.1
125.0
127.7
130.3
133.0
135.1
1372

2.8
-1.6
2.0
3.2
5.8
6.0
6.7
6.7
4.5
10.2
14.2
16.2
11.8
16.2
13.4
11.8
12.1
11.9
16.9
16.6
15.2
11.6
16.7
14.3
13.7
16.8
18.0
21.4
27.4
30.2
27.3
27.7
25.0
19.2
26.6
35.2
50.8
57.3
54.3
71.4
87.9
105.2
119.1
97.6
81.8
39.6
58.9
67.0
44.6
24.0
50.2
70.5
49.1
37.4
35.8
69.5
58.4
51.2
27.4
55.4
66.6
71.0
70.8
73.8
67.6
51.7
38.6
38.6
36.8
33.2
44.3

Capital
Net
conInventory sumption interest
adjustvaluation
ment
adjustment

0.5
-2.1
-.7
-.2
-2.5
-1.2
-.8
-.3
-.6
-5.3
-5.9
-2.2
1.9
-5.0
-1.2
1.0
-1.0

-7.7
-2.7
-1.5
-.3
3
-.2

!o

.1
-.5
-1.2
-2.1
-1.6
-3.7
-5.9
-6.6
-4.6
-6.6
-20.0
-39.5
-11.0
-14.9
166
-25.3
-43.2
-43.1
-24.2
-10.4
-10.9
-5.8
-1.7
6.7
-19.4
-27.0
21 7
-13.2
-13.4
-8.1
-1.6
-6.6
-8.0
-21.1
218
-30.3
-33.3
-22.5
430
-23.1
-6.1
-14.5
-11.4

-19.B
-21.2

Consists mainly of employer contributions for social insurance and to private pension, health, and welfare funds.
With inventory valuation adjustment.
Source: Department of Commerce, Bureau of Economic Analysis.




313

09

-l!o
-1.1
-1.1
-.8
~!2
.4
-2.4
-2.9
-3.2
-3.0
-3.0
-3.4
-3.2
-2.5
-1.8
-.4
-1.2
-1.3
-1.3
-.8
-.3

3.1
3.8
4.5
5.2
5.4
5.5
5.3
6.1
5.2
4.3
5.8
6.2
2.3
-6.2
-10.1
90
-10.9
-14.0
-16.8
-14.4
-9.2
17.0
32.7
59.7
53.8
52.4
47.8
25.5
4.9
-4.5
25.1
42.3
63.0
49.1
54.5
52.5
50.5
47.3
40.9
35.2
29.9
21.4
15.6
11.3
7.7
2.0
-1.4

4.7
4.1
3.6
3.3
3.3
3.1
2.7
2.3
2.2
1.8
2.3
2.4
2.6
3.0
3.5
3.9
4.4
5.2
5.8
6.5
7.8
9.5
10.2
11.3
12.9
14.6
16.3
18.2
20.9
24.3
27.4
29.8
34.6
41.2
46.3
51.0
59.6
75.5
83.8
88.8
105.3
126.3
158.3
200.9
248.1
272.3
281.0
304.8
319.0
325.5
328.6
371.8
445.1
467.1
266.9
290.2
313.1
322.7
324.0
338.2
351.4
361.9
379.8
394.1
419.2
443.4
456.2
461.7
463.6
466.2
468.3
470.2

TABLE B-25.—Sources of personal income, 1929^90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Wage and salary disbursementsl

Year or quarter

Personal
income

Commodityproducing
industries
Total
Total

1929
1933
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950 .
1951
1952 . .. .
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 p
1982- IV
1983: IV
1984: IV
1985- IV
1986: IV
1987- IV
1988: 1 ..
II
III.. .
IV
1989:1 ...
||
III
IV
1990:1
||
III
IV P

84.3
46.3
72.1
77.6
95.2
122.4
150.7
164.5
170.0
177.6
190.2
209.2
206.4
228.1
256.5
273.8
290.5
293.0
314.2
337.2
356.3
367.1
390.7
409.4
426.0
453.2
476.3
510.2
552.0
600.8
644.5
707.2
772.9
831.8
894.0
981.6
1,101.7
1,210.1
1,313.4
1,451.4
1,607.5
1,812.4
2,034.0
2,258.5
2,520.9
2,670.8
2,838.6
3,108.7
3,325.3
3,526.2
3,766.4
4,070.8
4,384.3
4,645.6
2,729.2
2,941.8
3,188.3
3,399.1
3,597.8
3,890.9
3,951.3
4,033,4
4,112.3
4,186.2
4,302.2
4,362.9
4,402.8
4,469.2
4,562.8
4,622.2
4,678.5
4,719.0

50.5
29.0
46.0
49.9
62.1
82.1
105.6
116.9
117.5
112.0
123.1
135.5
134.8
147.2
171.5
185.6
199.0
197.2
212.1
229.0
239.9
241.3
259.8
272.8
280.5
299.3
314.8
337.7
363.7
400.3
428.9
471.9
518.3
551.5
583.9
638.7
708.7
772.6
814.6
899.5
993.9
1,119.3
1,252.1
1,372.0
1,510.3
1,586.1
1,676.6
1,838.6
1,975.4
2,094.8
2,249.7
2,431.1
2,573.2
2,705.3
1,603.6
1,739.4
1,890.5
2,027.4
2,143.1
2,323.8
2,359.3
2,409.9
2,456,1
2,499.0
2,533.7
2,560.0
2,586.6
2,612.7
2,651.6
2,696.3
2,734.2
2,739.1

21.5
9.8
17.4
19.7
27.5
39.1
49.0
50.4
45.9
46.0
54.2
61.1
57.8
64.8
76.4
82.1
89.8
85.8
93.3
100.8
104.4
100.3
109.9
113.4
114.0
122.2
127.4
136.0
146.6
161.6
169.0
184.1
200.4
203.7
209.1
228.2
255.9
276.5
277.1
309.7
346.1
392.3
441.4
470.7
512.2
511.7
523.1
577.6
608.9
625.6
649.9
696.4
720.6
729.2
501.8
545.4
591.6
619.2
632.3
666.7
679.6
691.8
701.8
712.3
719.2
719.3
722.3
721.4
724.6
731.1
735.3
725.6

GovernOther
Distrib- Service ment
and
labor
utive indus- govern- income l
indus- tries
ment
Manutries
enterfacturing
prises

16.1
7.8
13.6
15.6
21.7
30.9
40.9
42.9
38.2
36.5
42.5
47.1
44.6
50.3
59.4
64.2
71.3
67.6
73.9
79.5
82.5
78.7
86.9
89.8
89.9
96.8
100.7
107.3
115.7
128.2
134.3
146.0
157.7
158.4
160.5
175.6
196.6
211.8
211.6
238.0
266.7
300.1
334.8
355.6
386.7
384.0
397.4
439.1
460.9
473.2
490.3
524.0
541.8
546.7
377.4
415.5
449.5
468.3
477.7
502.1
512.0
519.7
527.5
536.8
541.8
541.4
543.2
540.9
541.2
548.1
551.8
545.6

15.6
8.8
13.3
14.2
16.3
18.0
20.1
22.7
24.8
31.0
35.2
37.5
37.7
39.9
44.4
47.0
49.9
50.3
53.6
58.0
60.7
61.1
65.1
68.6
69.6
73.3
76.8
82.0
87.9
95.1
101.6
110.8
121.7
131.2
140.4
153.3
170.3
186.8
198.1
219.5
242.7
274.6
307.8
335.5
366.8
384.2
404.2
442.8
473.2
498.8
531.8
572.0
604.7
637.1
389.3
420.8
455.1
484.6
509.7
545.3
554.6
567.9
578.6
586.7
594.6
602.6
607.1
614.6
627.0
637.3
642.7
641.5

8.4
5.2
7.1
7.5
8.1
9.0
9.9
10.9
11.9
14.3
16.1
17.9
18.5
19.9
21.6
23.2
25.0
26.2
28.7
31.5
33.8
35.9
38.8
41.7
44.4
47.6
50.7
54.9
59.4
65.3
72.0
80.4
90.6
99.4
107.9
119.7
133.9
148.6
163.4
181.6
202.8
232.9
266.8
305.6
346.9
384.4
425.1
472.1
521.3
576.7
648.5
716.2
771.4
831.0
398.5
443.2
489.6
543.4
599.3
682.6
687.9
707.1
726.0
743.8
753.2
764.9
777.4
790.0
802.9
822.2
844.9
853.9

5.0
5.2
8.2
8.5
10.2
16.0
26.6
33.0
34.9
20.7
17.5
19.0
20.8
22.6
29.2
33.3
34.4
34.9
36.6
38.8
41.0
44.1
46.0
49.2
52.4
56.3
60.0
64.9
69.9
78.3
86.4
96.6
105.5
117.1
126.5
137.4
148.7
160.9
176.0
188.6
202.3
219.4
236.1
260.2
284.4
305.9
324.3
346.1
372.0
393.7
419.4
446.6
476.6
508.0
314.0
330.0
354.3
380.3
401.9
429.2
437.2
443.2
449.7
456.3
466.6
473.2
479.9
486.7
497.1
505.7
511.3
518.1

0.5
.4
.6
.6
!9
1.1
1.5
1.8
2.0
2.4
2.7
2.9
3.7
4.6
5.2
5.9
6.1
7.0
8.0
9.0
9.4
10.6
11.2
11.8
13.0
14.0
15.7
17.8
19.9
21.7
25.2
28.5
32.5
36.7
43.0
49.2
56.5
65.9
79.3
94.1
107.7
122.7
138.4
150.3
163.6
173.6
182.9
187.6
199.3
209.4
225.5
241.9
258.1
168.0
177.8
185.4
189.7
205.0
214.4
218.6
222.8
228.0
232.7
236.5
239.9
243.5
247.5
252.8
256.4
260.0
263.2

Proprietors' income
with inventory
valuation and
capital
consumption
adjustments
Farm

6.1
2.5
4.4
4.4
6.4
10.1
12.0
11.9
12.4
14.8
15.1
17.5
12.8
13.6
16.0
15.0
13.0
12.4
11.3
11.1
11.0
13.1
10.8
11.6
12.0
12.1
11.9
10.7
13.0
14.0
12.7
12.8
14.6
14.7
15.5
19.4
33.7
27.5
25.4
20.6
20.5
27.0
31.7
20.5
30.7
24.6
12.4
30.5
30.2
34.7
42.8
43.7
48.6
49.9
28.5
19.3
28.1
29.2
37.2
52.3
47.1
48.8
43.4
35.5
59.6
50.5
38.7
45.7
57.4
51.0
42.4
48.9

Nonfarm

8.3
2.9
7.1
8.2
10.8
13.8
16.8
18.1
19.1
21.5
20.4
22.9
23.1
25.2
28.0
29.4
30.4
31.1
34.0
35.8
37.8
38.5
40.9
40.5
42.3
44.4
45.7
49.8
52.1
55.5
58.4
62.6
64.7
65.4
71.4
79.0
85.3
91.3
100.0
117.1
132.4
149.2
160.1
160.1
156.1
150.9
178.4
204.0
225.6
247.2
280.6
310.5
330.7
352.5
159.8
188.6
209.7
235.0
252.0
293.0
299.2
308.1
313.2
321.5
328.2
329.1
329.5
336.0
346.6
350.8
355.6
357.2

1
The total of wage and salary disbursements and other labor income differs from compensation of employees in Table B-24 in that it
excludes employer contributions for social insurance and the excess of wage accruals over wage disbursements.




314

TABLE B-25.—Sources of personal income, 1929-90—Continued
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Transfer payments

Rental
income

of

persons Personal Personal
with
Year or quarter capital dividend interest
con- income income
sumption
adjustment

1929
1933
1939
1940

1941...

1942
1943
1944

1945...

1946
1947
1948
1949.
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960

1961

1962...

1963

1964...

1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975.
1976
1977
1978
1979
1980

1981...

1982
1983
1984

1985...

1986
1987
1988

1989...

1990 "
1982: IV
1983: IV
1984: IV
1985: IV
1986- IV
1987: IV
1988- 1
III
IV
1989: I

II
Ill
IV
1990: 1
||

ni ' ;..";.;
IV

4.9
2.0
2.6
2.7
3.2
4.1
4.6
4.8
5.0
5.8
5.8
6.4
6.7
7.7
8.3
9.4
10.7
11.6
12.0
12.4
13.1
13.9
14.6
15.3
15.8
16.5
17.1
17.3
18.1
18.6
19.6
18.4
18.4
18.2
18.6
17.9
18.0
16.1
13.5
11.9
8.2
9.3
5.6
6.6
13.3
13.6
13.2
8.5
9.2
11.6
13.7
16.3
8.2
6.7
15.8
12.4
5.6
7.8
13.5
14.6
16.1
15.3
17.0
16.8
13.3
9.7
5.8
4.1
5.5
4.3
8.4
8.5

5.8
2.0
3.8
4.0
4.4
4.3
4.4
4.6
4.6
5.6
6.3
7.0
7.2
8.8
8.5
8.5
8.8
9.1
10.3
11.1
11.5
11.3
12.2
12.9
13.3
14.4
15.5
17.3
19.1
19.4
20.2
21.9
22.4
22.2
22.6
24.1
26.6
28.9
28.7
33.8
38.2
43.0
48.1
52.9
61.3
63.9
68.7
75.5
78.7
85.8
91.8
102.2
114.4
123.8
65.4
71.0
76.8
79.0
87.7
95.5
97.9
100.2
103.8
107.1
110.6
113.2
115.7
118.2
120.5
122.9
124.9
126.7

6.9
5.5
5.3
5.3
5.3
5.2
5.1
5.2
5.8
6.6
7.5
8.0
8.7
9.6
10.4
11.2
12.4
13.7
14.9
16.6
18.7
20.3
22.3
24.9
26.3
28.9
32.2
35.5
39.6
44.2
48.2
53.2
60.9
69.3
74.7
80.8
93.3
111.9
122.5
134.1
155.4
182.5
221.5
271.9
335.4
369.7
393.1
444.7
478.0
493.2
501.3
547.9
643.2
680.9
366.2
411.6
464.4
485.9
492.7
516.3
523.5
536.3
556.2
575.6
610.4
642.1
655.2
664.9
670.5
678.0
685.3
690.1

Total

1.5
2.1
3.0
3.1
3.1
3.1
3.0
3.6
6.2
11.3
11.7
11.3
12.5
15.2
12.6
13.3
14.3
16.3
17.7
18.9
21.8
26.3
27.4
29.5
33.5
34.7
36.9
38.7
41.9
46.6
55.5
64.0
71.4
85.9
101.5
113.3
129.6
153.2
193.1
210.7
226.1
244.0
273.1
324.7
368.1
410.6
442.6
456.6
489.8
521.5
549.9
587.7
636.9
694.6
435.4
445.5
463.0
497.5
531.2
557.4
579.0
584.5
590.2
596.9
619.5
630.2
641.8
655.9
680.9
686.7
696.4
714.3

Old-age,
Governsurvivors, Government
ment
disability, unememployand
ployment Veterans
ees
health
insur- benefits retireinsurment
ance
ance
benefits
benefits benefits

0.0
.0
!l

'.2
.3
.4
.5
.6
LO
1.9
2.2
3.0
3.6
4.9
5.7
7.3
8.5
10.2
11.1
12.6
14.3
15.2
16.0
18.1
20.8
25.5
30.2
32.9
38.5
44.5
49.6
60.4
70.1
81.4
92.9
104.9
116.2
131.8
154.2
182.0
204.5
221.7
235.7
253.4
269.2
282.9
300.5
325.3
350.7
216.6
227.0
241.7
257.0
273.3
285.8
297.8
299.0
301.3
303.9
316.7
321.9
328.3
334.1
347.2
347.6
351.1
356.8

0.4
.5
.4
.4
.1
.1
.4
1.1
.8
.9
1.9
1.5
.9
1.1
1.0
2.2
1.5
1.5
1.9
4.1
2.8
3.0
4.3
3.1
3.0
2.7
2.3
1.9
2.2
2.1
2.2
4.0
5.8
5.7
4.4
6.8
17.6
15.8
12.7
9.7
9.8
16.1
15.9
25.2
26.3
15.8
15.7
16.3
14.5
13.4
14.7
18.1
31.8
20.0
15.6
15.2
16.7
13.4
13.9
13.5
13.4
13.0
13.9
14.3
14.9
15.5
16.3
17.3
18.2
20.7

0.6
.6
.5
.5
.5

0.1

'.5
1.0
3.0
7.0
7.0
5.9
5.3
7.7
4.6
4.3
4.1
4.2
4.4
4.4
4.5
4.7
4.6
4.6
5.0
4.7
4.8
4.7
4.9
4.9
5.6
5.9
6.7
7.7
8.8
9.7
10.4
11.8
14.5
14.4
13.8
13.9
14.4
15.0
16.1
16.4
16.6
16.4
16.7
16.7
16.6
16.9
17.3
17.9
16.6
16.5
16.3
16.5
16.4
16.6
16.9
16.9
16.9
16.8
17.4
17.3
17.3
17.3
17.9
17.9
17.9
18.0

Aid to
families
with
depend- Other
ent
children
(AFDC)

'A

'.3
.3
.3
.3
.5
.7
.7
.7
.9
1.0
1.1
1.2
1.4
1.5
1.7
1.9
2.2
2.5
2.8
3.1
3.4
3.7
4.2
4.7
5.2
6.1
6.9
7.6
8.7
10.2
11.8
13.8
16.0
19.0
22.7
26.1
29.0
32.7
36.9
43.0
49.4
54.6
58.7
61.4
66.8
70.9
76.2
84.0
90.1
96.9
56.1
60.2
58.5
67.9
72.6
78.1
82.0
84.1
84.3
85.6
88.6
89.5
90.4
92.0
96.1
96.0
96.9
98.4

0.3
.4
.5
.6
.6

Is

.6
.6
.6
.7
.8
.9
1.0
1.1
1.3
1.4
1.5
1.7
1.9
2.3
2.8
3.5
4.8
6.2
6.9
7.2
7.9
9.2
10.1
10.6
10.7
11.0
12.4
13.0
13.3
14.2
14.8
15.4
16.4
16.7
17.3
18.0
19.7
13.6
14.5
14.8
15.8
16.7
16.7
17.0
17.1
17.3
17.6
17.6
17.7
18.0
18.5
19.1
19.6
19.9
20.3

0.8
1.4
1.7
1.7
1.8
1.8
1.8
2.0
2.0
2.1
2.5
2.9
3.3
3.5
3.6
3.9
4.2
4.2
4.5
4.8
5.2
5.7
6.2
6.7
7.1
7.6
8.3
9.1
9.8
11.2
13.0
15.3
17.3
20.7
24.5
27.6
31.2
37.5
47.6
51.5
55.1
60.9
69.1
84.0
91.8
96.5
105.1
112.6
121.9
131.9
143.0
155.6
171.6
191.3
100.6
107.3
116.1
125.0
135.4
146.8
151.4
153.9
157.0
160.1
165.4
169.5
172.8
178.6
184.2
188.2
192.4
200.1

Less:
Personal
contribu- Nonfarm
personal
tions for income2
social
insurance

0.1

!e
.7
.8
1.2
1.8
2.2
2.3
2.0
2.1
2.2
2.2
2.9
3.4
3.8
4.0
4.6
5.2
5.8
6.7
6.9
7.9
9.3
9.7
10.3
11.8
12.6
13.3
17.8
20.6
22.9
26.2
27.9
30.7
34.5
42.6
47.9
50.4
55.5
61.2
69.8
81.0
88.6
104.5
112.3
120.1
132.7
149.3
161.9
172.9
194.1
212.8
226.2
113.5
123.6
135.2
152.6
164.6
176.3
189.4
192.5
195.5
198.9
209.6
212.0
214.0
215.8
222.9
224.1
228.6
229.0

159.9
172.0
188.3
190.6
211.2
237.1
255.4
274.2
277.5
299.6
322.8
341.9
350.4
376.2
393.9
409.9
436.7
460.0
494.9
534.0
581.5
626.3
688.7
752.1
810.4
871.8
955.0
1,059.7
1,172.6
1,276.9
1,417.9
1,572.6
1,769.3
1,983.2
2,215.8
2,465.6
2,618.7
2,799.0
3,052.1
3,271.3
3,469.4
3,702.2
4,006.0
4,314.6
4,574.4
2,672.8
2,895.6
3,134.7
3,346.9
3,538.9
3,817.3
3,883.0
3,963.5
4,047.9
4,129.7
4,221.6
4,291.4
4,343.1
4,402.4
4,484.3
4,549.9
4,614.7
4,648.6

2
Personal income exclusive of the farm component of wages and salaries, other labor income, proprietors' income, and net interest.
Note.—The industry classification of wage and salary disbursements and proprietors' income is on an establishment basis and is
based on the 1972 Standard Industrial Classification (SIC) beginning 1948 and on the 1942 SIC prior to 1948.
Source: Department of Commerce, Bureau of Economic Analysis.




315

TABLE B-26.—Disposition of personal income, 1929-90
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Percent of disposable

Less: Personal outlays

Year or quarter

1929
1933
1939
1940 ...
1941
1942 .
1943..!
1944

!!
!!

1945...! !.!!!!..!!!!
1946
1947
1948 .
1949
1950
1951
1952
1953 ..
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967

1968

1969
1970
1971
1972
1973 ....
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984 .
1985
1986
1987
1988
1989
1990 "
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988: 1
II.
Ill
IV
1989: 1
II

Ill
IV
1990- 1 .
II
Ill
IV*

!!!".!!!!"

Personal
income

Less:
Personal
tax and
nontax personal
payments income

84.3
46.3
72.1
77.6
95.2
122.4
150.7
164.5
170.0
177.6
190.2
209.2
206.4
228.1
256.5
273.8
290.5
293.0
314.2
337.2
356.3
367.1
390.7
409.4
426.0
453.2
476.3
510.2
552.0
600.8
644.5
707.2
772.9
831.8
894.0
981.6
1,101.7
1,210.1
1,313.4
1,451.4
1,607.5
1,812.4
2,034.0
2,258.5
2,520.9
2,670.8
2,838.6
3,108.7
3,325.3
3,526.2
3,766.4
4,070.8
4,384.3
4,645.6
2,729.2
2,941.8
3,188.3
3,399.1
3,597.8
3,890.9
3,951.3
4,033.4
4,112.3
4,186.2
4,302.2
4,362.9
4,402.8
4,469.2
4,562.8
4,622.2
4,678.5
4,719.0

2.6
1.4
2.4
2.6
3.3
5.9
17.8
18.9
20.8
18.7
21.4
21.0
18.5
20.6
28.9
34.0
35.5
32.5
35.4
39.7
42.4
42.2
46.1
50.5
52.2
57.0
60.5
58.8
65.2
74.9
82.4
97.7
116.3
116.2
117.3
142.0
152.0
171.8
170.6
198.7
228.1
261.1
304.7
340.5
393.3
409.3
410.5
440.2
486.6
512.9
571.6
591.6
658.8
699.8
411.1
413.9
459.7
499.6
534.4
588.6
572.7
594.0
592.2
607.3
640.5
665.5
659.5
669.6
675.1
696.5
709.5
718.1

81.7
44.9
69.7
75.0
91.9
116.4
132.9
145.6
149.2
158.9
168.8
188.1
187.9
207.5
227.6
239.8
255.1
260.5
278.8
297.5
313.9
324.9
344.6
358.9
373.8
396.2
415.8
451.4
486.8
525.9
562.1
609.6
656.7
715.6
776.8
839.6
949.8
1,038.4
1,142.8
1,252.6
1,379.3
1,551.2
1,729.3
1,918.0
2,127.6
2,261.4
2,428.1
2,668.6
2,838.7
3,013.3
3,194.7
3,479.2
3,725.5
3,945.8
2,318.1
2,527.9
2,728.6
2,899.5
3,063.4
3,302.3
3,378.6
3,439.4
3,520.1
3,578.9
3,661.7
3,697.3
3,743.4
3,799.6
3,887.7
3,925.7
3,969.1
4,000.9

Total

Personal
consumption
expenditures

Interest
paid by
consumers to
business

77.3
45.8
67.0
71.0
80.8
88.6
99.5
108.2
119.6
143.9
161.9
174.9
178.3
192.1
208.1
219.1
232.6
239.8
257.9
270.6
285.3
294.6
316.3
-330.7
341.1
361.9
381.7
409.3
440.7
477.3
503.6
552.5
597.9
640.0
691.6
757.6
837.2
916.5
1,012.8
1,129.3
1,257.2
1,403.5
1,566.8
1,732.6
1,915.1
2,050.7
2,234.5
2,430.5
2,629.0
2,797.4
3,009.4
3,238.2
3,450.1
3,658.1
2,117.0
2,315.8
2,493.4
2,700.4
2,868.5
3,079.1
3,147.7
3,204.3
3,268.2
3,332.6
3,371.7
3,425.9
3,484.3
3,518.5
3,588.1
3,622.7
3,693.4
3,728.1

1.5
.5

79.2
46.5
67.9
72.0
81.9
89.5
100.2
109.0
120.5
145.3
163.6
177.0
180.6
194.8
211.0
222.4
236.7
244.1
262.8
276.2
291.2
300.6
322.8
338.1
348.9
370.2
391.2
419.9
452.5
489.9
516.9
567.1
614.5
657.9
710.5
778.2
860.8
941.7
1,038.2
1,156.9
1,288.6
1,441.1
1,611.3
1,781.1
1,968.1
2,107.5
2,297.4
2,504.5
2,713.3
2,888.5
3,102.2
3,333.6
3,553.7
3,766.8
2,174.9
2,382.5
2,571.3
2,787.7
2,961.4
3,172.6
3,242.2
3,298.6
3,363.2
3,430.4
3,472.0
3,528.5
3,588.8
3,625.5
3,696.4
3,730.6
3,802.6
3,837.4

Source: Department of Commerce, Bureau of Economic Analysis.




316

!9

!s

.5
J
1.0
1.4
1.7
2.3
2.5
2.9
3.6
3.8
4.4
5.1
5.5
5.6
6.1
7.0
7.3
7.8
8.8
9.9
11.1
12.0
12.5
13.8
15.6
16.7
17.7
19.5
22.3
24.1
24.4
26.6
30.5
36.7
43.5
47.4
52.0
55.5
61.9
72.5
82.6
89.1
90.7
93.6
102.2
107.8
56.8
65.5
76.3
85.9
90.9
91.3
92.4
92.6
93.4
95.9
98.6
101.0
103.4
105.7
107.4
107.5
107.9
108.3

Personal
transfer Equals:
pay- Personal
ments saving
to
foreigners
(net)
0.3
!2
.2
!l
!4
.5
.7
.7
.7
.5
.4
.4
.4
.5
!4
.5
!4
.4
.4
.5
!6
.7
.7
'.9
.9
1.0
1.2
1.2
1.1
1.3
1.0
1.0
1.0
.9
.9
1.0
1.1
1.0
1.3
1.0
1.5
1.7
1.9
2.2
1.9
1.4
.9
1.1
1.2
1.6
1.4
2.1
2.1
2.1
1.8
1.6
1.9
1.7
1.6
1.2
1.2
.9
.4
1.3
1.1

2.6
-1.6
1.8
3.0
10.0
27.0
32.7
36.5
28.7
13.6
5.2
11.1
7.4
12.6
16.6
17.4
18.4
16.4
16.0
21.3
22.7
24.3
21.8
20.8
24.9
25.9
24.6
31.5
34.3
36.0
45.1
42.5
42.2
57.7
66.3
61.4
89.0
96.7
104.6
95.8
90.7
110.2
118.1
136.9
159.4
153.9
130.6
164.1
125.4
124.9
92.5
145.6
171.8
179.1
143.1
145.4
157.3
111.7
102.0
129.7
136.4
140.7
156.9
148.5
189.8
168.9
154.5
174.1
191.3
195.1
166.5
163.5

Personal outlays

Total

96.8
103.6
97.4
96.0
89.1
76.8
75.4
74.9
80.8
91.4
96.9
94.1
96.1
93.9
92.7
92.7
92.8
93.7
94.2
92.8
92.8
92.5
93.7
94.2
93.4
93.5
94.1
93.0
93.0
93.2
92.0
93.0
93.6
91.9
91.5
92.7
90.6
90.7
90.8
92.4
93.4
92.9
93.2
92.9
92.5
93.2
94.6
93.9
95.6
95.9
97.1
95.8
95.4
95.5
93.8
94.2
94.2
96.1
96.7
96.1
96.0
95.9
95.5
95.9
94.8
95.4
95.9
95.4
95.1
95.0
95.8
95.9

Personal
consump- Personal
saving
tion
expenditures

94.5
102.1
96.2
94.7
87.9
76.1
74.8
74.4
80.2
90.6
95.9
93.0
94.9
92.6
91.4
91.4
91.2
92.0
92.5
90.9
90.9
90.7
91.8
92.1
91.3
91.4
91.8
90.7
90.5
90.8
89.6
90.6
91.0
89.4
89.0
90.2
88.2
88.3
88.6
90.2
91.1
90.5
90.6
90.3
90.0
90.7
92.0
91.1
92.6
92.8
94.2
93.1
92.6
92.7
91.3
91.6
91.4
93.1
93.6
93.2
93.2
93.2
92.8
93.1
92.1
92.7
93.1
92.6
92.3
92.3
93.1
93.2

3.2
-3.6
2.6
4.0
10.9
23.2
24.6
25.1
19.2
8.6
3.1
5.9
3.9
6.1
7.3
7.3
7.2
6.3
5.8
7.2
7.2
7.5
6.3
5.8
6.6
6.5
5.9
7.0
7.0
6.8
8.0
7.0
6.4
8.1
8.5
7.3
9.4
9.3
9.2
7.6
6.6
7.1
6.8
7.1
7.5
6.8
5.4
6.1
4.4
4.1
2.9
4.2
4.6
4.5
6.2
5.8
5.8
3.9
3.3
3.9
4.0
4.1
4.5
4.1
5.2
4.6
4.1
4.6
4.9
5.0
4.2
4.1

TABLE B-27.—Total and per capita disposable personal income and personal consumption expenditures in
current and 1982 dollars, 1929-90
[Quarterly data at seasonally adjusted annual rates, except as noted]

Year or quarter

1929
1933
1939
1940
1941
1942
1943
1944 .
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955.
1956
1957
1958
1959..
1960
1961
1962
1963.
1964
1965...
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981..
1982
1983
1984
1985
1986
1987
1988
1989
1990 "
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988: I

II
Ill
IV
1989: 1
II
III
IV
1990: 1
II..
Ill

IV

Disposable personal income
Total (billions of
Per capita
dollars)
(dollars)
Current
1982
Current
1982
dollars dollars dollars dollars

Personal consumption expenditures
Per capita
Total (billions of
(dollars)
dollars)
Current
1982
1982
Current
dollars dollars dollars dollars

81.7
44.9
69.7
75.0
91.9
116.4
132.9
145.6
149.2
158.9
168.8
188.1
187.9
207.5
227.6
239.8
255.1
260.5
278.8
297.5
313.9
324.9
344.6
358.9
373.8
396.2
415.8
451.4
486.8
525.9
562.1
609.6
656.7
715.6
776.8
839.6
949.8
1,038.4
1,142.8
1,252.6
1,379.3
1,551.2
1,729.3
1,918.0
2,127.6
2,261.4
2,428.1
2,668.6
2,838.7
3,013.3
3,194.7
3,479.2
3,725.5
3,945.8
2,318.1
2,527.9
2,728.6
2,899.5
3,063.4
3,302.3
3,378.6
3,439.4
3,520.1
3,578.9
3,661.7
3,697.3
3,743.4
3,799.6
3,887.7
3,925.7
3,969.1
4,000.9

77.3
45.8
67.0
71.0
80.8
88.6
99.5
108.2
119.6
143.9
161.9
174.9
178.3
192.1
208.1
219.1
232.6
239.8
257.9
270.6
285.3
294.6
316.3
330.7
341.1
361.9
381.7
409.3
440.7
477.3
503.6
552.5
597.9
640.0
691.6
757.6
837.2
916.5
1,012.8
1,129.3
1,257.2
1,403.5
1,566.8
1,732.6
1,915.1
2,050.7
2,234.5
2,430.5
2,629.0
2,797.4
3,009.4
3,238.2
3,450.1
3,658.1
2,117.0
2,315.8
2,493.4
2,700.4
2,868.5
3,079.1
3,147.7
3,204.3
3,268.2
3,332.6
3,371.7
3,425.9
3,484.3
3,518.5
3,588.1
3,622.7
3,693.4
3,728.1

486
9.
370.8
499.5
530.7
604.1
693.0
721.4
749.3
739.5
723.3
694.8
733.1
733.2
791.8
819.0
844.3
880.0
894.0
944.5
989.4
1,012.1
1,028.8
1,067.2
1,091.1
1,123.2
1,170.2
1,207.3
1,291.0
1,365.7
1,431.3
1,493.2
1,551.3
1,599.8
1,668.1
1,728.4
1,797.4
1,916.3
1,896.6
1,931.7
2,001.0
2,066.6
2,167.4
2,212.6
2,214.3
2,248.6
2,261.5
2,331.9
2,469.8
2,542.8
2,635.3
2,670.7
2,800.5
2,869.0
2,893.3
2,276.1
2,392.7
2,496.3
2,562.8
2,646.2
2,717.9
2,765.9
2,784.4
2,818.0
2,833.9
2,863.5
2,854.9
2,874.3
2,883.2
2,900.9
2,902.8
2,898.0
2,871.6

671
357
532
568
689
863
972
1,052
1,066
1,124
1,171
1,283
1,260
1,368
1,475
1,528
1,599
1,604
1,687
1,769
1,833
1,865
1,946
1,986
2,034
2,123
2,197
2,352
2,505
2,675
2,828
3,037
3,239
3,489
3,740
4,000
4,481
4,855
5,291
5,744
6,262
6,968
7,682
8,421
9,243
9,724
10,340
11,257
11,861
12,469
13,094
14,123
14,973
15,695
9,929
10,725
11,467
12,068
12,629
13,483
13,765
13,982
14,271
14,470
14,773
14,883
15.026
15,210
15,527
15,639
15,765
15,847

4,091
2,950
3,812
4,017
4,528
5,138
5,276
5,414
5,285
5,115
4,820
5,000
4,915
5,220
5,308
5,379
5,515
5,505
5,714
5,881
5,909
5,908
6,027
6,036
6,113
6,271
6,378
6,727
7,027
7,280
7,513
7,728
7,891
8,134
8,322
8,562
9,042
8,867
8,944
9,175
9,381
9,735
9,8299,722
9,769
9,725
9,930
10,419
10,625
10,905
10,946
11,368
11,531
11,508
9,749
10,151
10,491
10,667
10,909
11,097
11,268
11,320
11,424
11,458
11,553
11,492
11,538
11,541
11,586
11,564
11,511
11,374

1

471.4
378.7
480.5
502.6
531.1
527.6
539.9
557.1
592.7
655.0
666.6
681.8
695.4
733.2
748.7
771.4
802.5
822.7
873.8
899.8
919.7
932.9
979.4
1,005.1
1,025.2
1,069.0
1,108.4
1,170.6
1,236.4
1,298.9
1,337.7
1,405.9
1,456.7
1,492.0
1,538.8
1,621.9
1,689.6
1,674.0
1,711.9
1,803.9
1,883.8
1,961.0
2,004.4
2,000.4
2,024.2
2,050.7
2,146.0
2,249.3
2,354.8
2,446.4
2,515.8
2,606.5
2,656.8
2,682.2
2,078.7
2,191.9
2,281.1
2,386.9
2,477.8
2,534.2
2,576.8
2,594.1
2,616.4
2,638.8
2,636.7
2,645.3
2,675.3
2,669.9
2,677.3
2,678.8
2,696.8
2,675.8

634
365
511
538
606
657
727
782
855
1,018
1,123
1,193
1,195
1,267
1,349
1,396
1,458
1,477
1,560
1,608
1,666
1,692
1,786
1,829
1,857
1,940
2,017
2,133
2,268
2,428
2,534
2,752
2,949
3,121
3,330
3,609
3,950
4,285
4,689
5,178
5,707
6,304
6,960
7,607
8,320
8,818
9,516
10,253
10,985
11,576
12,334
13,144
13,866
14,550
9,068
9,825
10,479
11,240
11,825
12,572
12,824
13,027
13,249
13,474
13,603
13,790
13,986
14,084
14,330
14,432
14,670
14,767

3,868
3,013
3,667
3,804
3,981
3,912
3,949
4,026
4,236
4,632
4,625
4,650
4,661
4,834
4,853
4,915
5,029
5,066
5,287
5,349
5,370
5,357
5,531
5,561
5,579
5,729
5,855
6,099
6,362
6,607
6,730
7,003
7,185
7,275
7,409
7,726
7,972
7,826
7,926
8,272
8,551
8,808
8,904
8,783
8,794
8,818
9,139
9,489
9,840
10,123
10,311
10,580
10,678
10,668
8,904
9,299
9,587
9,935
10,214
10,347
10,498
10,546
10,607
10,669
10,638
10,648
10,739
10,687
10,693
10,671
10,711
10,599

Population
(thousands) '

121,878
125,690
131,028
132,122
133,402
134,860
136,739
138,397
139,928
141,389
144,126
146,631
149,188
151,684
154,287
156,954
159,565
162,391
165,275
168,221
171,274
174,141
177,073
180,760
183,742
186,590
189,300
191,927
194,347
196,599
198,752
200,745
202,736
205,089
207,692
209,924
211,939
213,898
215,981
218,086
220,289
222,629
225,106
227,754
230,182
232,549
234,829
237,051
239,322
241,660
243,982
246,358
248,810
251,413
233,466
235,707
237,946
240,257
242,579
244,925
245,453
245.981
246,667
247,329
247,863
248,431
249,127
249,818
250,392
251,026
251,767
252,467

Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning 1960. Annual data are for
July 1 through 1958 and are averages of quarterly data beginning 1959. Quarterly data are averages for the period.
Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).




317

TABLE B-28.—Gross saving and investment, 1929-90
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Gross saving

Gross investment

Governmer t surplus or deficit Capital
1 \ no tional income and
grants
( ). na
received
Gross
prod uct accounts
by the
busiUnited
State
ness
Total
Federal
States
savand
(net)*
ing i
local

Gross private saving
Year or
quarter

1929 ....
1933
1939
1940
1941 ...
1942
1943 ...
1944
1945
1946
1947
1948
1949
1950.
1951
1952 . .
1953
1954 .
1955
1956 ... .
1957
1958
1959
I960
1961
1962
1963
1964
1965 ...
1966
1967 ... .
1968
1969
1970
1971
1972
1973 .
1974
1975
1976
1977 ...
1978
1979
1980
1981 ...
1982
1983
1984
1985 ...
1986
1987
1988 ...
1989
1990"..
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988: 1
II
Ill
IV
1989: 1
II
Ill
IV
1990:1
II
III
IV*

Total

15.9
.6
8.9
13.6
18.8
10.9
5.8
3.0
5.9
35.7
42.5
50.8
36.5
52.5
58.7
52.3
51.0
51.6
68.4
77.3
77.1
64.5
80.5
84.2
82.6
91.4
98.7
108.5
123.5
130.3
129.5
139.7
158.8
154.7
171.9
200.7
251.9
247.9
238.7
283.0
335.4
408.6
458.4
445.0
522.0
446.4
463.6
568.5
533.5
525.3
555.5
656.1
691.5
657.9
387.4
519.9
557.8
520.3
510.0
600.5
630.4
653.8
684.7
655.4
700.6
697.9
692.4
674.8
664.8
679.3
665.9

Total

Personal
saving

14.9
1.9
11.1
14.3
22.6
42.3
50.0
54.9
45.4
30.3
28.1
42.4
39.9
44.5
52.6
56.1
58.0
58.8
65.2
72.1
76.1
77.1
82.1
81.1
86.8
95.2
97.9
110.8
123.0
131.6
143.8
145.7
148.9
164.5
190.6
203.4
244.0
254.3
303.6
321.4
354.5
409.0
445.8
478.4
550.5
557.1
592.2
673.5
665.3
669.5
662.6
751.3
779.3
783.9
554.2
632.8
679.9
666.3
641.2
715.2
738.5
742.4
758.0
766.4
784.4
770.3
776.0
786.4
795.0
806.7
772.2

2.6
-1.6
1.8
3.0
10.0
27.0
32.7
36.5
28.7
13.6
5.2
11.1
7.4
12.6
16.6
17.4
18.4
16.4
16.0
21.3
22.7
24.3
21.8
20.8
24.9
25.9
24.6
31.5
34.3
36.0
45.1
42.5
42.2
57.7
66.3
61.4
89.0
96.7
104.6
95.8
90.7
110.2
118.1
136.9
159.4
153.9
130.6
164.1
125.4
124.9
92.5
145.6
171.8
179.1
143.1
145.4
157.3
111.7
102.0
129.7
136.4
140.7
156.9
148.5
189.8
168.9
154.5
174.1
191.3
195.1
166.5
163.5

12.3
3.6
9.3
11.3
12.6
15.3
17.3
18.4
16.8
16.7
23.0
31.3
32.5
31.8
36.0
38.7
39.6
42.3
49.2
50.8
53.5
52.9
60.3
60.3
62.0
69.3
73.3
79.3
88.7
95.6
98.6
103.3
106.7
106.7
124.3
142.0
155.0
157.6
198.9
225.6
263.8
298.9
327.7
341.5
391.1
403.2
461.6
509.5
539.9
544.6
570.2
605.7
607.5
604.8
411.1
487.3
522.6
554.5
539.2
585.5
602.1
601.6
601.1
617.9
594.6
601.5
621.4
612.3
603.7
611.6
605.8

1.0
-1.4
2.2
-.7
-3.8
-31.4
442
-51.8
-39.5
5.4
14.4
8.4
-3.4
8.0
6.1
-3.8
-7.0
-7.1
3.1
5.2
.9
-12.6
-1.6
3.1
-4.3
38

-2.3

1.2
-1.3
-2.2
-1.3
-5.1
-33.1
-46.6
-54.5
-42.1
3.5
13.4
8.3
-2.6
9.2
6.5
-3.7
-7.1
-6.0
4.4
6.1
2.3
-10.3
-I.}3.0
-3.9
-4.2
.3
-3.3

-i!s
13
-14.2 -13.2
-6.0
-6.0
8.4
9.9
-12.4
-10.6
-22.0
-19.5
34 -16.8
-5.6
7.9
-11.6
-4.3
-69.4
-64.9
-38.4
-53.5
-46.0
-19.1
-.4 -29.3
11.5
-16.1
-34.5 -61.3
-29.7
-63.8
-110.8 -145.9
-128.6 -176.0
-105.0 -169.6
-131.8 -196.9
-144.1 -206.9
-107.1 -158.2
-95.3 -141.7
-87.8 -134.3
-126.0 -161.3
-166.8 -202.6
-112.9 -169.2
-122.1 -187.5
-145.9 -212.2
1313 -189.0
-114.7 -161.7
-108.2 -153.7
-88.6 -136.9
-73.3 -120.1
-111.0 -156.3
-83.7 -132.6
-72.4 -122.7
-83.6 -131.7
-111.6 -150.1
-130.2 -168.3
-127.3 -166.0
-106.4 -145.7

-0.2
-.1
.0
.6
1.3
1.8
2.4
2.7
2.6
1.9
1.0
~\2
-A
.0
-U
-1.3
-.9
-1.4
-2.4
-.4
.1
-.4

'.5
1.0
.0
-U
L5
1.8
2.6
13.5
13.5
7.2
4.5
15.2
26.9
28.9
27.6
26.8
34.1
35.1
47.5
64.6
65.1
62.8
51.0
46.5
46.4
35.4
35.8
56.4
65.4
66.3
57.8
46.9
45.5
48.3
46.8
45.2
48.9
50.3
48.1
38.5
38.1
38.6
39.3

0.9
.7
.7
0
4
-2.0
0
0
0
0
1.1
1.2
1.1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Total

17.4
1.7
10.6
15.0
19.5
10.2
4.1
5.8
10.0
36.4
44.3
49.6
37.3
53.2
61.4
54.2
53.6
54.3
70.2
75.4
75.9
64.5
79.0
81.4
81.3
91.5
98.1
107.1
122.3
132.4
129.2
138.6
154.9
153.6
173.7
199.1
247.6
246.2
241.2
286.6
335.3
406.7
457.4
450.0
526.1
446.3
468.8
573.9
528.7
523.6
544.9
627.8
674.4
654.8
394.2
522.4
555.7
512.4
500.3
581.7
605.7
629.9
650.8
624.9
672.1
677.6
676.1
671.8
665.6
676.1
661.0
616.7

StatisGross
tical
private
Net
domes- foreign discrepancy
tic
investinvest- ment »
ment

16.7
1.6
9.5
13.4
18.3
10.3
6.2
7.7
11.3
31.5
35.0
47.1
36.5
55.1
60.5
53.5
54.9
54.1
69.7
72.7
71.1
63.6
80.2
78.2
77.1
87.6
93.1
99.6
116.2
128.6
125.7
137.0
153.2
148.8
172.5
202.0
238.8
240.8
219.6
277.7
344.1
416.8
454.8
437.0
515.5
447.3
502.3
664.8
643.1
659.4
699.5
747.1
771.2
745.0
409.6
579.8
661.8
654.1
648.8
741.4
729.2
746.0
765.6
747.5
769.7
776.7
775.8
762.7
747.2
759.0
759.7
714.0

0.8
.2
1.0
1.5
1.3
-.1
-2.1
-2.0
-1.3
4.9
9.3
2.4
.9
-1.8
.9
.6
-1.3
.2
.4
2.8
4.8
.9
-1.2
3.2
4.2
3.8
4.9
7.5
6.2
3.8
3.5
1.6
1.7
4.8
1.3
-2.9
8.8
5.4
21.6
9.0
-8.7
-10.1
2.6
13.0
10.6
-1.0
-33.5
-90.9
-114.4
-135.8
-154.6
-119.2
-96.8
-90.1
-15.4
-57.4
-106.1
-141.6
-148.5
-159.7
-123.5
-116.1
-114.8
-122.5
-97.6
-99.1
-99.7
-90.9
-81.6
-82.9
-98.7
-97.3

1.5
1.2
1.7
1.4
.7
-.7
-1.7
2.7
4.0

i!s

-1.3
.8
.8
2.7
1.8
2.6
2.7
1.8
-1.9
-1.2

-l!s

-2.8
-1.2
.0
-.6
-1.4
-1.2
2.1
-.4
-1.1
-3.9
-1.1
1.8
-1.6
-4.3
-1.7
2.5
3.6
.0
-1.9
-1.0
4.9
4.1
~5.2
5.4
-4.8
-1.8
-10.6
-28.2
-17.0
-3.1
6.8
2.5
-2.1
-7.9
-9.6
-18.8
-24.7
-23.9
-33.9
-30.5
-28.6
-20.3
-16.2
-3.0
-12
-4.9

1
Undistributed corporate profits with inventory valuation and capital consumption adjustments, corporate and noncorporate capital
consumption allowances with capital consumption adjustment, and private wage accruals less disbursements.
2
Consists mainly of allocations of special drawing rights (SDRs).
3
Net exports of goods and services less net transfers to foreigners and interest paid by government to foreigners plus capital grants
received by the United States, net.
4
Consists of a U.S. payment to India under the Agricultural Trade Development and Assistance Act. This payment is included in
capital grants received by the United States, net.
Source: Department of Commerce, Bureau of Economic Analysis.




318

TABLE B-29-—Saving by individuals, 1946-901
[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Net investment in Less: Net increase in
debt
tangible assets 7

Increase in financial assets
Securities

Year or
quarter

Total

Insur- Other
Non- MortCheck- Time
ance
able
Money
Con- cor- gage
and
depos- savings market Govern- Corpo- Other and finan- Owner- sumer porate debt Con- Other
Total its and
pension cial occu- dura- busi- on sumer debt 89
ment
rate
fund
asnoncurren- depos- shares securi- equi- securi- re- 5 sets8
2
its
3
bles ness farm credit
ties4 serves
asties
cy
ties
sets8 homes

.,£

1946
1947
1948
1949

24.9
19.5
25.0
20.7

19.5
12.5
8.9
8.8

5.6
.0
-2.9
-2.0

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959

31.8
35.0
35.9
34.3
27.4
36.1
38.5
38.0
35.1
36.8

14.9
18.9
28.7
24.7
21.2
28.6
31.8
28.8
32.5
34.5

2.7
4.6
1.6
.9
2.1
1.2
1.9
-.4
3.7
.9

1960
1961
1962
1963
1964
1965
1966
1967
1968
1969

37.4
36.9
43.2
46.7
56.6
65.7
76.5
79.0
79.5
73.9

32.7
35.5
39.7
45.4
54.9
58.7
60.9
70.1
71.6
67.0

1970
1971
1972
1973
1974
1975
1976
1977
1978
1979

89.6
99.6
118.9
157.4
120.0
159.1
'.'.'. 164.0
190.3
198.8
204.3

1980...
1981
1982
1983
1984
1985
1986
1987
1988
1989

-1.5
.5
1.0
.5

6.3
3.5
2.3
2.6

1.2
1.1
1.0
.7

-0.8
-.7
.1
-.2

5.1
5.4
5.3
5.6

3.7
2.6
2.1
1.6

3.8
7.0
9.5
8.7

6.7
9.4
10.2
10.9

2.0
1.3
6.9
2.0

4.0
4.9
4.8
4.4

2.9
3.5
3.1
3.1

0.2
2.4
2.6
2.3

-.7
.3
.0

6.1
6.3
7.7
7.9
7.8
8.5
9.5
9.5
10.4
11.9

2.9
1.6
2.8
2.4
2.0
1.7
3.4
1.9
4.3
1.9

12.1
12.1
11.7
12.7
13.1
17.3
16.2
13.8
12.8
17.0

14.9
11.4
8.7
10.3
7.0
12.7
8.8
7.9
3.7
7.7

7.2
4.4
1.9
.8
1.7
2.9
1.0
2.1
2.9
4.3

7.1
6.6
6.4
7.6
9.0
12.3
11.0
8.8
9.6
12.9

4.6
1.4
5.2
4.1
1.4
7.0
3.6
2.6

11.5
12.1
13.0
13.9
16.4
17.0
19.3
18.8
19.9
21.8

3.7
4.3
2.5
2.1
3.1
3.1
4.1
6.7
5.7
3.9

15.7
13.5
14.0
15.5
15.7
15.3
14.5
12.6
17.0
17.2

7.3
4.5
8.6
11.9
15.1
20.2
23.2
21.3
26.9
26.2

3.2
4.9
7.0
9.2
8.8
12.4
9.9
10.7
10.0
13.3

24.2 3.9
6.2
28.0
48.5
9.2
8.4
39.9
43.7
9.3
71.9 10.1
56.6 16.6
78.6 25.4
95.0 34.9
101.8 38.8

14.6
22.3
29.2
33.1
27.9
27.5
41.9
61.0
77.8
86.7

19.9
25.7
34.8
41.2
29.9
28.4
42.9
53.3
58.8
54.0

13.1
19.5
26.6
31.9
14.9
7.5
2.7
15.2
18.9
12.4

7>

5.7
3.8
3.5
2.5
5.3
6.1
4.6
3.2
6.9
6.1

11.4 4.0
2.2
12.3
5.9
13.9
8.5
16.6
17.4
9.5
17.1 10.1
13.4
5.9
5.1
12.9
17.2 10.8
18.3 10.1

6.1
7.0
6.4
10.1
11.1
13.7
12.5
17.6
18.1
21.5

4.6
14.1
19.0
23.0
9.0
8.0
22.9
36.7
45.1
40.5

20.6
33.2
48.4
30.0
56.2
33.9
45.9
64.4
87.9
118.2

31.9 -6.2
37.4 19.5
37.2 -4.0
62.7 -11.6
98.8 14.4
1.0
117.6
125.4
3.2
118.0 -17.8
133.8 -26.8
133.9 -40.9

2.6
96.4
73.8 16.9
52.9 16.4
120.4 48.9
136.7 81.7
157.0 82.5
216.8 58.0
234.0 33.5
230.9 50.2
219.8 39.1

110.2
100.8
115.4
129.8
163.0
198.0
120.2
104.9
112.8
97.5

131.6 -19.8
132.2 -22.2
128.4 -20.9
143.0 -44.6

194.3
287.3
231.7
210.5

57.1
50.3
42.3
51.2

126.4
97.6
137.3
89.8

279.5 -165.5 21.9
134.6 -37.3
10.8
240.6 -82.4 20.1
39.5 -66.8 -44.2

185.9 64.6 159.3 132.1 -21.6
135.4 74.2 160.0 135.0 -34.9
109.7 39.7 164.0 144.3 -51.1
267.9 67.3 164.4 124.1 -56.2

225.2
211.8
224.3
217.9

38.2
36.9
37.1
44.1

126.4
95.9
80.2
87.3

255.9 -57.2 62.8
52.9
222.5 -43.8
262.5 -39.8 -46.1

194.6 43.8 168.9 140.8 -38.3 238.3 14.6
268.9 43.7 163.1 122.8 -54.8 226.0 9.8
213.5 44.6 155.7 122.1 -62.2 208.0 27.7

127.2
54.3
99.6

2.4
4.8
7.8
8.2
9.2
8.6
9.4
11.9
13.9 "•'"•""•"•
11.0

.9
-.6
7.4
3.7

L8
1.5
1.0

6i4
4.6
3.7
-2.6
8.4

U
2.0
1.5
1.8
.6

.9
-1.0
-1.2
4.2
5.2
7.6
2.4
9.9
11.2
-2.4

12.2
18.3
26.1
26.2
26.3
27.9
19.1
35.4
30.9
8.9

2.1
.8
1.1
-.8
3.9
3.9
13.7
-2.5
2.3
27.0

.0
1.1
-1.4
-1.6
-.3
-1.6

80.7
105.5
134.6
148.4
147.1
176.4
206.1
253.4
285.7
326.9

8.7
12.2
13.4
13.1
6.3
6.0
15.6
19.7
22.0
35.8

43.5
67.7
74.0
63.5
56.2
77.6
107.1
106.6
99.6
74.4

-5.7
-11.0

-.7
-4.3
-8.8
-4.3
-2.1
-6.2

203.3
246.8
258.5
322.2
381.8
344.2
405.5
346.4
443.4
444.9

320.2
321.7
374.4
494.0
554.4
566.0
557.3
484.5
578.9
546.4

9.2
36.2
24.1
32.9
21.4
32.5
97.4
7.3
9.7
24.3

124.9
72.0
119.7
201.8
229.6
133.0
114.8
108.4
167.3
117.0

33.8 -11.2 -14.9
24.5
90.7
42.6 -37.7 -9.0
70.0 -15.8 -25.8
32.8
-31.1
100.9 -3.0
4.5
-.6
44.0 123.5 -57.9
54.9
8.7 120.9 -37.7
15.0 67.2
39.6 -34.5
33.4
28.1 131.7 -34.1
23.5 186.5 -118.1 36.6
2.2
81.2 173.5 -88.0

118.5
117.9
148.0
159.2
157.7
186.7
169.7
163.9
206.3
174.7

35.4
8.8
21.3
28.9
36.6
67.0
88.2
45.9
67.1
61.4

66.6
59.7
35.6
76.2
95.4
97.1
114.6
134.0
151.4
161.9

1988:1
II
III....
IV....

430.8
409.7
544.6
388.4

549.9 39.0
585.0 -4.3
694.2 -18.8
486.5 22.9

187.3
170.1
198.0
113.7

54.7
-25.7
1.6
63.6

137.8 -77.8 -40.2
163.5 -128.2 118.8
281.5 -76.7 54.1
163.3 -189.8 13.7

186.7
203.3
179.2
256.0

62.4
87.5
75.4
43.1

146.9
150.0
154.2
154.9

1989:1
II
III,..
IV....

416.6
476.2
498.4
388.2

536.6
16.3
560.7 -25.0
582.8 13.0
505.3 93.0

98.9
152.5
131.1
85.4

35.0
115.4
111.1
63.2

1990:1

566.6
503.5
452.1

675.2
562.6
571.9

9.8 99.2
22.0 -10.9
60.7 -43.0

66.3
7.3
119.5

HI"!!!

2.4
1.3
.0

l!o

30.6

-Is

1.0
1.1
.8
1.0

2.3
-A
1.3
.3
.8
2.4
5.2
7.8
10.0

-l!s
-6.2
-2.2

1&6
17.8
17.6
8.6
13.4 -7.3
32.1 -12.5
66.0 -25.5

6.9
6.7
-1.0
9.1
13.5
-2.1
2.2
17.2
8.7
4.8

1
Saving
2

13.5
26.2
38.8
44.2
34.6
38.8
60.8
91.5
109.4
117.1

by households, personal trust funds, nonprofit institutions, farms, and other noncorporate business.
Consists of U.S. savings bonds, other U.S. Treasury securities, U.S. Government agency securities and sponsored agency securities,
mortgage pool securities, and State and local obligations.
3
Includes mutual fund shares.
4
Corporate and foreign bonds and open-market paper.
5
Private life insurance reserves, private insured and noninsured pension reserves, and government insurance and pension reserves.
6
Consists of security credit, mortgages, accident and health insurance reserves, and nonlife insurance claims for households and of
consumer credit, equity in sponsored agencies, and nonlife insurance claims for noncorporate business.
7
Purchases of physical assets less depreciation.
8
Includes data for corporate farms.
9
Other debt consists of security credit, U.S. Government and policy loans, and noncorporate business debt.
Source: Board of Governors of the Federal Reserve System.




319

TABLE B-30.—Number and median income (in 1989 dollars) of families and persons, and poverty status,
by race, 1970-89
Familiesl

Persons
below
poverty level

Below poverty level
Year

Num.
ber
(mil-

lions)

All RACES
1970
1971
1972
1973 s
1974
1975
1976
1977
1978
1979*
1980 . . ..
1981
1982
19838
1984 .
1985
1986s
1987
1988
1989
WHITE
1970
1971
1972
1973 s
1974 .. ..
1975
".!.".'"
!.".'..
1976 . . .
1977
19784
1979
1"."
.!.!
1980
1981
1982 s
1983 .
1984
1985
1986s
1987
1988
1989
BLACK
1970
1971
1972
1973 s
1974
1975
1976
1977
1978
1979* .
1980
1981
1982
1983
1984
1985
1986 s
1987
1988
1989

Median
income

Female
householder

Total

Number
(mil* Rate
lions)

Number
(millions)

Rate

Median income of persons 152years old
and over with income
Females

Males

Num.
YearYearber
round
All
All
round
(mil- Rate persons full-time persons full-time
lions)
workers
workers

52.2 $31,534
53.3 31490
54.4 32,976
55.1 33,656
55.7 32,451
56.2 31,620
56.7 32,597
57.2 32,758
57.8 33,548
59.6 33,454
60.3 31,637
61.0 30,540
61.4 30,111
62.0 30,719
62.7 31,547
63.6 31,962
64.5 33,328
65.2 33,805
65.8 33,742
66.1 34,213

5.3
5.3
5.1
4.8
4.9
5.5
5.3
5.3
5.3
5.5
6.2
6.9
7.5
7.6
7.3
7.2
7.0
7.0
6.9
6.8

10.1
10.0
9.3
8.8
8.8
9.7
9.4
9.3
9.1
9.2
10.3
11.2
12.2
12.3
11.6
11.4
10.9
10.7
10.4
10.3

2.0
2.1
2.2
2.2
2.3
2.4
2.5
2.6
2.7
2.6
3.0
3.3
3.4
3.6
3.5
3.5
3.6
3.7
3.6
3.5

32.5
33.9
32.7
32.2
32.1
32.5
33.0
31.7
31.4
30.4
32.7
34.6
36.3
36.0
34.5
34.0
34.6
34.2
33.4
32.2

25.4
25.6
24.5
23.0
23.4
25.9
25.0
24.7
24.5
26.1
29.3
31.8
34.4
35.3
33.7
33.1
32.4
32.2
31.7
31.5

12.6 $21,316 $29,351
12.5 21,135 29,488
11.9 22,100 31,261
11.1
22,499 32,028
11.2 21,259 30,590
12.3 20,405 29,811
11.8 20,542 30,202
11.6 20,714 30,836
11.4 20,797 30,547
11.7 20,118 29,854
13.0 18,856 28,853
14.0 18,379 28,227
15.0 17,925 27,826
15.2 18,253 28,020
14.4 18,618 28,648
14.0 18,797 28,809
13.6 19,363 29,2%
13.4 19,414 29,124
13.0 19,819 28,659
12.8 19,893 28,605

46.5
47.6
48.5
48.9
49.4
49.9
50.1
50.5
50.9
52.2
52.7
53.3
53.4
53.9
54.4
55.0
55.7
56.1
56.5
56.5

32,713
32,675
34,260
35,175
33,724
32,885
33,859
34,253
34,933
34,910
32,962
32,080
31,614
32,167
33,042
33,595
34,857
35,350
35,549
35,975

3.7
3.8
3.4
3.2
3.4
3.8
3.6
3.5
3.5
3.6
4.2
4.7
5.1
5.2
4.9
5.0
4.8
4.6
4.5
4.4

8.0
7.9
7.1
6.6
6.8
7.7
7.1
7.0
6.9
6.9
8.0
8.8
9.6
9.7
9.1
9.1
8.6
8.1
7.9
7.8

1.1
1.2
1.1
1.2
1.3
1.4
1.4
1.4
1.3
1.4
1.6
1.8
1.8
1.9
1.9
2.0
2.0
2.0
1.9
1.9

25.0
26.5
24.3
24.5
24.8
25.9
25.2
24.0
23.5
22.3
25.7
27.4
27.9
28.3
27.1
27.4
28.2
26.9
26.5
25.4

17.5
17.8
16.2
15.1
15.7
17.8
16.7
16.4
16.3
17.2
19.7
21.6
23.5
24.0
23.0
22.9
22.2
21.2
20.7
20.8

9.9
9.9
9.0
8.4
8.6
9.7
9.1
8.9
8.7
9.0
10.2
11.1
12.0
12.1
11.5
11.4
11.0
10.4
10.1
10.0

22,406
22,158
23,180
23,607
22,270
21,435
21,655
21,696
21,782
21,017
20,057
19,502
18,951
19,203
19,653
19,179
20,433
20,636
20,921
20,863

30,191
30,317
32,388
32,955
31,186
30,500
31,102
31,467
31,114
30,716
29,676
28,890
28,568
28,768
29,629
29,609
30,114
29,803
29,624
29,846

7,242
7,495
7,760
7,884
7,840
7,883
7,858
8,187
7,830
7,503
7,445
7,529
7,667
8,114
8,293
8,478
8,780
9,286
9,542
9,812

17,692
17,657
18,309
18,427
18,198
17,832
18,253
18,150
18,509
18,144
17,611
17,277
17,793
18,279
18,588
18,994
19,348
19,527
19,730
19,873

4.9
5.2
5.3
5.4
5.5
5.6
5.8
5.8
5.9
6.2
6.3
6.4
6.5
6.7
6.8
6.9
7.1
7.2
7.4
7.5

20,067
19,718
20,362
20,301
20,137
20,234
20,141
19,568
20,690
19,768
19,073
18,097
17,473
18,128
18,416
19,344
19,917
20,091
20,260
20,209

1.5
1.5
1.5
1.5
1.5
1.5
1.6
1.6
1.6
1.7
1.8
2.0
2.2
2.2
2.1
2.0
2.0
2.1
2.1
2.1

29.5
28.8
29.0
28.1
26.9
27.1
27.9
28.2
27.5
27.8
28.9
30.8
33.0
32.3
30.9
28.7
28.0
29.4
28.2
27.8

.8
.9
1.0
1.0
1.0
1.0
1.1
1.2
1.2
1.2
1.3
1.4
1.5
1.5
1.5
1.5
1.5
1.6
1.6
1.5

54.3
53.5
53.3
52.7
52.2
50.1
52.2
51.0
50.6
49.4
49.4
52.9
56.2
53.7
51.7
50.5
50.1
51.1
49.0
46.5

7.5
7.4
7.7
7.4
7.2
7.5
7.6
7.7
7.6
8.1
8.6
9.2
9.7
9.9
9.5
8.9
9.0
9.5
9.4
9.3

33.5
32.5
33.3
31.4
30.3
31.3
31.1
31.3
30.6
31.0
32.5
34.2
35.6
35.7
33.8
31.3
31.1
32.4
31.3
30.7

13,285
13,214
14,040
14,280
13,798
12,815
13,039
12,875
13,049
13,010
12,052
11,597
11,357
11,230
11,276
12,409
12,244
12,242
12,624
12,609

20,565
20,731
21,872
22,211
22,343
22,698
22,276
21,694
23,830
22,137
20,880
20,440
20,290
20,430
20,221
20,710
21,232
21,309
21,714
20,706

6,593
6,567
7250
7,116
7,078
7,161
7,405
7,070
7,050
6,829
6,892
6,688
6,763
6,933
7,356
7,234
7,429
7,585
7,703
7,875

14,496
15,590
15,663
15,626
16,794
17,037
17,066
16,963
17,155
16,626
16,425
15,603
15,903
16,185
16,751
16,814
16,930
17,441
17,680
17,908

$7,149 $17,386
7,373 17^55
17,956
7,710
7,890 18,120
7,752 18,044
7,802 17,791
7,793 18,114
8,064 18,035
7,737 18,336
7,433 17,987
7,404 17,443
7,445 16,993
7,565 17,557
7,974 18,037
18,405
8,197
8,317
18,729
19,056
8,610
9,054 19,172
9,312 19,439
9,624 19,643

'The term "family" refers to a group of two or more persons related by blood, marriage, or adoption and residing together; all such
persons are considered members of the same family. Beginning 1979, based on householder concept and restricted to primary families.
* Prior to 1979, data are for persons 14 years and over.
3
Based on revised methodology; comparable with succeeding years.
4
Based on 1980 census population controls; comparable with succeeding years.
Note.—The poverty level is based on the poverty index adopted by a Federal interagency committee in 1969. That index reflected
different consumption requirements for families based on size and composition, sex and age of family householder, and farm-nonfarm
residence. Minor revisions implemented in 1981 eliminated variations in the poverty thresholds based on two of these variables, farmnonfarm residence and sex of householder. The poverty thresholds are updated every year to reflect changes in the consumer price
index. For further details, see "Current Population Reports," Series P-60, No. 168.
Source: Department of Commerce, Bureau of the Census.




320

POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY
TABLE B-31.—Population by age groups, 1929-90
[Thousands of persons]
Age (years)
July 1

Total
Under 5

1929

121,767

5-15

16-19

20-24

25-44

45-64

65 and
over

11,734

26,800

9,127

10,694

35,862

21,076

6,474

26,897

9,302

11,152

37,319

22,933

7,363

1933

125,579

10,612

1939

130,880

10,418

25,179

9,822

11,519

39,354

25,823

8,764

9,895
9,840
9,730
9,607
9,561

11,690
11,807
11,955
12,064
12,062

39,868
40,383
40,861
41,420
42,016

26,249
26,718
27,196
27,671
28,138

9,031
9,288
9,584
9,867
10,147

1940
1941
1942
1943
1944

132,122
133 402
134,860
136 739
138,397

10,579
10,850
11,301
12016
12,524

24,811
24,516
24,231
24,093
23,949

1945
1946
1947
1948
1949

139,928
141 389
144,126
146 631
149,188

12,979
13244
14,406
14919
15,607

23,907
24103
24,468
25209
25,852

9,361
9,119
9,097
8,952
8,788

12,036
12,004
11,814
11,794
11,700

42,521
43,027
43,657
44,288
44,916

28,630
29,064
29,498
29,931
30,405

10,494
10,828
11,185
11,538
11,921

1950
1951
1952
1953
1954

152,271
154878
157 553
160,184
163 026

16,410
17333
17312
17,638
18057

26,721
27279
28,894
30,227
31,480

8,542
8,446
8,414
8,460
8,637

11,680
11,552
11,350
11,062
10,832

45,672
46,103
46,495
46,786
47,001

30,849
31,362
31,884
32,394
32,942

12,397
12,803
13,203
13,617
14,076

1955
1956
1957
1958
1959

165 931
168,903
171 984
174,882
177 830

18566
19,003
19494
19,887
20175

32,682
33,994
35272
36,445
37368

8,744
8,916
9195
9,543
10215

10,714
10,616
10,603
10,756
10969

47,194
47,379
47,440
47,337
47,192

33,506
34,057
34,591
35,109
35,663

14,525
14,938
15,388
15,806
16,248

1960
1961
1962
1963
1964

180 671
183 691
186 538
189 242
191,889

20341
20522
20469
20342
20,165

38494
39765
41205
41626
42,297

10683
11025
11 180
12'007
12,736

11 134
11,483
11959
12,714
13,269

47,140
47,084
47013
46,994
46,958

36,203
36,722
37,255
37,782
38,338

16,675
17,089
17,457
17,778
18,127

1965
1966
1967
1968
1969

194 303
196 560
198 712
200,706
202 677

19824
19208
18563
17,913
17376

42938
43,702
44244
44,622
44840

13516
14,311
14200
14,452
14800

13746
14,050
15248
15,786
16480

46,912
47,001
47,194
47,721
48,064

38,916
39,534
40,193
40,846
41,437

18,451
18,755
19,071
19,365
19,680

1970
1971
1972
1973
1974

205 052
207,661
209,896
211 909
213854

17 166
17244
17,101
16851
16487

44816
44591
44,203
43582
42989

15289
15,688
16,039
16446
16769

17202
18159
18,153
18521
18*975

48,473
48,936
50,482
51749
53051

41,999
42,482
42,898
43,235
43,522

20,107
20,561
21,020
21,525
22,061

1975
1976
1977
1978
1979

215 973
218 035
220 239
222,585
225 055

16121
15617
15564
15735
16063

42508
42099
41298
40,428
39552

17017
17194
17276
17,288
17242

19527
19986
20499
20,946
21297

54,302
55,852
57561
59,400
61,379

43,801
4,0
408
44,150
44,286
44,390

22,696
23,278
23,892
24,502
25,134

1980
1981
1982
1983
1984

227 757
230,138
232,520
234 799
237 001

16458
16,931
17,298
17651
17830

38844
38,190
37,877
37668
37657

17160
16,771
16,255
15704
15141

21584
21,821
21,807
21,700
21536

63494
65,619
67,856
69,971
72049

44,515
44,569
44,602
44,680
44,818

25,704
26,235
26,825
27,426
27,971

1985
1986
1987
1988
1989

239 279
241 625
243 942
246,307
248 762

18004
18154
18267
18,432
18752

37691
37706
37'687
38,007
38440

14819
14802
14*958
14,894
14569

21214
20608
19982
19,371
18886

74,077
76124
77897
79,224
80633

44,934
45058
45,310
4,0
604
46,498

28,540
29,174
29,841
30,374
30,984

1990

251,394

Note.—Includes Armed Forces overseas beginning 1940. Includes Alaska and Hawaii beginning 1950.
Population estimates in this series do not reflect the results of the 1990 census; according to the census, the total population on
April 1, 1990 was 249,632,692.
Source: Department of Commerce, Bureau of the Census.




321

TABLE B-32.—Population and the labor force, 1929-90
[Monthly data seasonally adjusted, except as noted]

Year or month

Labor EmployCivilian
force
ment
noninsti- Resi- includ- includdent
tutional Armed
popula- Forces * resirfent resirfent
tion1
Armed Armed
Forces Forces

Civilian labor force

Unemployment rate

Employment
Total
Total

Agricultural

Nonagricultural

Unemployment

All Civilian
work- workers2 ers8

49,180
51,590
55,230
55,640
55,910
56,410
55,540
54,630
53,860
57,520
60,168

99,840
99,900
98,640
94,640
93,220
94,090
103,070
106,018

47,630 10,450
38,760 10,090
45,750 9,610
47,520 9,540
50,350 9,100
53,750 9,250
54,470 9,080
53,960 8,950
52,820 8,580
55,250 8,320
57,812 8,256

Civilian
employment/
population
ratio8

Percent

Thousands of persons 14 years of age and over
1929
1933
1939
1940
1941
1942
1943
1944
1945
1946 ..
1947

Civilian
labor
force
participation
rate4

37,180 1,550
28,670 12,830
36,140 9,480
37,980 8,120
41,250 5,560
44,500 2,660
45,390 1,070
45,010
670
44,240 1,040
46,930 2,270
49,557 2,356

32
24.9
17.2
14.6
9.9
4.7
1.9
1.2
1.9
3.9
3.9

49,148 2,311
50,714 2,276
49,993 3,637
51,758 3,288
53,235 2,055
53,749 1,883
54,919 1,834
53,904 3,532
55,722 2,852
57,514 2,750
58,123 2,859
57,450 4,602
59,065 3,740
60,318 3,852
60,546 4,714
61,759 3,911
63,076 4,070
64,782 3,786
66,726 3,366
68,915 2,875
70,527 2,975
72,103 2,817
74,296 2,832
75,215 4,093
75,972 5,016
78,669 4,882
81,594 4,365
83,279 5,156
82,438 7,929
85,421 7,406
88,734 6,991
92,661 6,202
95,477 6,137
95,938 7,637
97,030 8,273
96,125 10,678
97,450 10,717
101,685 8,539
103,971 8,312
106,434 8,237
109,232 7,425
111,800 6,701
114,142 6,528
114,728 6,874
105,600 7,795
105,397 8,402
105,637 8,383
105,799 8,364
105,939 8,439
106,383 ,8,508
106,669 8,319
106,933 8,135
106,914 8,310
107,145 8,243
107,255 8,159
107,580 7,883

3.9
3.8
5.9
5.3
3.3
3.0
2.9
5.5
4.4
4.1
4.3
6.8
5.5
5.5
6.7
5.5
5.7
5.2
4.5
3.8
3.8
3.6
3.5
4.9
5.9
5.6
4.9
5.6
8.5
7.7
7.1
6.1
5.8
7.1
7.6
9.7
9.6
7.5
7.2
7.0
6.2
5.5
5.3
5.5
6.7
7.2
7.2
7.1
7.2
7.2
7.0
6.9
7.0
7.0
6.9
6.6

55.7 47.6
56.0 50.4
57.2 54.5
58.7 57.6
58.6 57.9
57.2
55.8
56.8

56.1
53.6
54.5

58.3
58.8
58.9
59.2
59.2
59.0
58.9
58.8
59.3
60.0
59.6
59.5
59.3
59.4
59.3
58.8
58.7
58.7
58.9
59.2
59.6
59.6
60.1
60.4
60.2
60.4
60.8
61.3
61.2
61.6
62.3
63.2
63.7
63.8
63.9
64.0
64.0
64.4
64.8
65.3
65.6
65.9
66.5
66.4
64.9
65.0
65.1
65.1
65.2
65.4
65.4
65.3
65.4
65.4
65.4
65.3

56.0
56.6
55.4
56.1
57.3
57.3
57.1
55.5
56.7
57.5
57.1
55.4
56.0
56.1
55.4
55.5
55.4
55.7
56.2
56.9
57.3
57.5
58.0
57.4
56.6
57.0
57.8
57.8
56.1
56.8
57.9
59.3
59.9
59.2
59.0
57.8
57.9
59.5
60.1
60.7
61.5
62.3
63.0
62.7
60.6
60.3
60.5
60.5
60.5
60.7
60.8
60.8
60.8
60.9
60.9
61.0

Thousands of persons 16 years of age and over
1947
1948
1949
1950
1951
1952
1953 •
1954
1955
1956
1957
1958
1959
I9606
1961 6
1962
1963
1964
1965
1966
1967
1968
1969
1970
19716
1972 6
1973
1974
1975
1976
1977
19788
1979
1980
1981
1982
1983
1984
1985
19866
1987
1988 ..
1989
1990
1986: Jan
Feb
Mar

fci
June
July
Aug
Sept
Oct
Nov
Dec

101,827
103,068
103,994
104,995
104,621
105,231
107,056
108,321
109,683
110,954
112,265
113,727
115,329
117,245
118,771
120,153
122,416
124,485
126,513
128,058
129,874
132,028
134,335
137,085
140,216
144,126
147,096
150,120
153,153
156,150
159,033
161,910
164,863
167,745
170,130
172,271
174,215
176,383
178,206
180,587
182,753
184,613
186,393
188,049
179,670
179,821
179,985
180,148
180,311
180,503
180,682
180,828
180,997
181,186
181,363
181,547

1,169
2,143
2,386
2,231
2,142
2,064
1,965
1,948
1,847
1,788
1,861
1,900
2,061
2,006
2,018
1,946
2,122
2,218
2,253
2,238
2,118
1,973
1,813
1,774
1,721
1,678
1,668
1,656
1,631
1,597
1,604
1,645
1,668
1,676
1,697
1,706
1,706
1,737
1,709
1,688
1,637
1,691
1,691
1,693
1,695
1,687
1,680
1,672
1,697
1,716
1,749
1,751
1,750

63,377
64,160
64,524
65,246
65,785
67,087
68,517
68,877
69,486
70,157
71,489
72,359
72,675
73,839
75,109
76,401
77,892
79,565
80,990
82,972
84,889
86,355
88,847
91,203
93,670
95,453
97,826
100,665
103,882
106,559
108,544
110,315
111,872
113,226
115,241
117,167
119,540
121,602
123,378
125,557
126,424
118,373
118,573
118,913
119,011
119,215
119,764
119,801
119,847
120,111
120,265
120,385
120,361




60,087
62,104
62,636
63,410
62,251
64,234
65,764
66,019
64,883
66,418
67,639
67,646
68,763
69,768
71,323
73,034
75,017
76,590
78,173
80,140
80,796
81,340
83,966
86,838
88,515
87,524
90,420
93,673
97,679
100,421
100,907
102,042
101,194
102,510
106,702
108,856
111,303
114,177
116,677
119,030
119,550
110,578
110,171
110,530
110,647
110,776
111,256
111,482
111,712
111,801
112,022
112,226
112,478

59,350
60,621
61,286
62,208
62,017
62,138
63,015
63,643
65,023
66,552
66,929
67,639
68,369
69,628
70,459
70,614
71,833
73,091
74,455
75,770
77,347
78,737
80,734
82,771
84,382
87,034
89,429
91,949
93,775
96,158
9,0
909
102,251
104,962
106,940
108,670
110,204
111,550
113,544
115,461
117,834
119,865
121,669
123,869
124,787
116,682
116,882
117,220
117,316
117,528
118,084
118,129
118,150
118,395
118,516
118,634
118,611

57,038
58,343
57,651
58,918
59,961
60,250
61,179
60,109
62,170
63,799
64,071
63,036
64,630
65,778
65,746
66,702
67,762
69,305
71,088
72,895
74,372
75,920
77,902
78,678
79,367
82,153
85,064
86,794
85,846
88,752
92,017
96,048
98,824
99,303
100,397
99,526
100,834
105,005
107,150
109,597
112,440
114,968
117,342
117,914
108,887
108,480
108,837
108,952
109,089
109,576
109,810
110,015
110,085
110,273
110,475
110,728

322

7,890
7,629
7,658
7,160
6,726
6,500
6,260
6,205
6,450
6,283
5,947
5,586
5,565
5,458
5,200
4,944
4,687
4,523
4,361
3,979
3,844
3,817
3,606
3,463
3,394
3,484
3,470
3,515
3,408
3,331
3,283
3,387
3,347
3,364
3,368
3,401
3,383
3,321
3,179
3,163
3,208
3,169
3,199
3,186
3,287
3,083
3,200
3,153
3,150
3,193
3,141
3,082
3,171
3,128
3,220
3,148

5.2
3.2
2.9
2.8
5.4
4.3
4.0
4.2
6.6
5.3
5.4
6.5
5.4
5.5
5.0
4.4
3.7
3.7
3.5
3.4
4.8
5.8
5.5
4.8
5.5
8.3
7.6
6.9
6.0
5.8
7.0
7.5
9.5
9.5
7.4
7.1
6.9
6.1
5.4
5.2
5.4
6.6
7.1
7.0
7.0
7.1
7.1
6.9
6.8
6.9
6.9
6.8
6.5

TABLE B-32.—Population and the labor force, 1929-90—Continued
[Monthly data seasonally adjusted, except as noted]

Year or month

Labor EmployCivilian
force
ment
noninsti- Resi- includ- including
dent
tutional Armed
resident
popula- Forcesl resident Armed
tion1
Armed Forces
Forces

Unemployment rate

Civilian labor force
Employment
Total

Total

Agricultural

Nonculfural

UnemPloyment

Civilian
labor
Civil- force
All
ian parwork- work- ticiers2 ers8 pation
rate4

Percent

Thousands of persons 16 years of age and over

1987: Jan
Feb
Mar
Apr
May
June

July
AUB

. ..
Sept
Oct
Nov
Dec
1988: Jan
Feb
Mar
Apr . ..
"ay :...
June
Aug
Sept
Oct
Nov
Dec. .
1989: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
1990: Jan
Feb
Mar

fci
June
July
Aug
Sept
Oct
Nov
Dec

181,827
181,998
182,179
182,344
182,533
182,703
182,885
183,002
183,161
183,311
183,470
183,620
183,822
183,969
184,111
184,232
184,374
184,562
184,729
184,830
184,962
185,114
185,244
185,402
185,644
185,777
185,897
186,024
186,181
186,329
186,483
186,598
186,726
186,871
187,017
187,165
187,293
187,412
187,529
187,669
187,828
187,977
188,136
188,261
188,401
188,525
188,697
188,866

1,748
1,740
1,736
1,735
1,726
1,718
1,720
1,736
1,743
1,741
1,755
1,750
1,749
1,736
1,736
1,732
1,714
1,685
1,673
1,692
1,704
1,687
1,705
1,696
1,696
1,684
1,684
1,684
1,673
1,666
1,666
1,688
1,702
1,709
1,704
1,700
1,697
1,678
1,669
1,657
1,639
1,630
1,627
1,640
1,601
1,570
1,615
1,617

120,588
120,854
121,021
121,069
121,720
121,335
121,618
122,041
121,758
122,259
122,304
122,514
122,724
122,894
122,677
122,985
122,783
123,189
123,348
123,769
123,695
123,889
124,250
124,342
125,047
124,831
124,938
125,238
125,157
125,728
125,659
125,757
125,698
125,915
126,252
126,242
126,186
126,331
126,467
126,438
126,578
126,427
126,336
126,345
126,571
126,445
126,338
126,791

112,716
112,996
113,146
113,525
114,140
113,927
114,316
114,768
114,662
115,052
115,295
115,607
115,796
115,984
115,774
116,385
115,971
116,597
116,685
116,923
117,098
117,358
117,768
117,877
118,404
118,484
118,686
118,773
118,738
119,066
119,079
119,253
119,119
119,328
119,624
119,657
119,642
119,752
119,904
119,747
119,916
119,867
119,509
119,330
119,484
119,303
119,001
119,191

118,840
119,114
119,285
119,334
119,994
119,617
119,898
120,305
120,015
120,518
120,549
120,764
120,975
121,158
120,941
121,253
121,069
121,504
121,675
122,077
121,991
122,202
122,545
122,646
123,351
123,147
123,254
123,554
123,484
124,062
123,993
124,069
123,996
124,206
124,548
124,542
124,489
124,653
124,798
124,781
124,939
124,797
124,709
124,705
124,970
124,875
124,723
125,174

110,968
111,256
111,410
111,790
112,414
112,209
112,596
113,032
112,919
113,311
113,540
113,857
114,047
114,248
114,038
114,653
114,257
114,912
115,012
115,231
115,394
115,671
116,063
116,181
116,708
116,800
117,002
117,089
117,065
117,400
117,413
117,565
117,417
117,619
117,920
117,957
117,945
118,074
118,235
118,090
118,277
118,237
117,882
117,690
117,883
117,733
117,386
117,574

1
Not seasonally adjusted.
2
Unemployed as percent of labor force including resident Armed Forces.
3
Unemployed as percent of civilian labor force.
4
Civilian labor force as percent of civilian noninstitutional population.
5
Civilian employment as percent of civilian noninstitutional population.
6

3,143
3,204
3,212
3,242
3,346
3,216
3,236
3,116
3,189
3,221
3,150
3,206
3,245
3,203
3,166
3,218
3,121
3,114
3,061
3,125
3,168
3,226
3,252
3,186
3,286
3,232
3,186
3,146
3,124
3,083
3,225
3,285
3,231
3,204
3,158
3,183
3,145
3,119
3,197
3,140
3,286
3,279
3,108
3,152
3,194
3,175
3,185
3,253

Civilian
employment/
population
ratio5

107,825
108,052
108,198
108,543
109,068
108,993
109,360
109,916
109,730
110,090
110,390
110,651
110,802
111,045
110,872
111,435
111,136
111,798
111,951
112,106
112,226
112,445
112,811
112,995
113,422
113,568
113,816
113,943
113,941
114,317
114,188
114,280
114,186
114,415
114,762
114,774
114,800
114,955
115,038
114,950
114,991
114,958
114,774
114,538
114,689
114,558
114,201
114,321

7,872
7,858
7,875
7,544
7,580
7,408
7,302
7,273
7,096
7,207
7,009
6,907
6,928
6,910
6,903
6,600
6,812
6,592
6,663
6,846
6,597
6,531
6,482
6,465
6,643
6,347
6,252
6,465
6,419
6,662
6,580
6,504
6,579
6,587
6,628
6,585
6,544
6,579
6,563
6,691
6,662
6,560
6,827
7,015
7,087
7,142
7,337
7,600

6.5
6.5
6.5
6.2
6.2
6.1
6.0
6.0
5.8
5.9
5.7
5.6
5.6
5.6
5.6
5.4
5.5
5.4
5.4
5.5
5.3
5.3
5.2
5.2
5.3
5.1
5.0
5.2
5.1
5.3
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.3
5.3
5.2
5.4
5.6
5.6
5.6
5.8
6.0

6.6
6.6
6.6
6.3
6.3
6.2
6.1
6.0
5.9
6.0
5.8
5.7
5.7
5.7
5.7
5.4
5.6
5.4
5.5
5.6
5.4
5.3
5.3
5.3
5.4
5.2
5.1
5.2
5.2
5.4
5.3
5.2
5.3
5.3
5.3
5.3
5.3
5.3
5.3
5.4
5.3
5.3
5.5
5.6
5.7
5.7
5.9
6.1

65.4
65.4
65.5
65.4
65.7
65.5
65.6
65.7
65.5
65.7
65.7
65.8
65.8
65.9
65.7
65.8
65.7
65.8
65.9
66.0
66.0
66.0
66.2
66.2
66.4
66.3
66.3
66.4
66.3
66.6
66.5
66.5
66.4
66.5
66.6
66.5
66.5
66.5
66.5
66.5
66.5
66.4
66.3
66.2
66.3
66.2
66.1
66.3

61.0
61.1
61.2
61.3
61.6
61.4
61.6
61.8
61.7
61.8
61.9
62.0
62.0
62.1
61.9
62.2
62.0
62.3
62.3
62.3
62.4
62.5
62.7
62.7
62.9
62.9
62.9
62.9
62.9
63.0
63.0
63.0
62.9
62.9
63.1
63.0
63.0
63.0
63.0
62.9
63.0
62.9
62.7
62.5
62.6
62.4
62.2
62.3

Not strictly comparable with earlier data due to population adjustments as follows: Beginning 1953, introduction of 1950 census
data added about 600,000 to population and 350,000 to labor force, total employment, and agricultural employment. Beginning 1960,
inclusion of Alaska and Hawaii added about 500,000 to population, 300,000 to labor force, and 240,000 to nonagricultural employment.
Beginning 1962, introduction of 1960 census data reduced population by about 50,000 and labor force and employment by 200,000.
,
,
1972,, introduction of 1970 census data added about 800,000 to civilian noninstitutional population and 333,000 to labor
force and employment. A subsequent adjustment based on 1970 census in March 1973 added 60,000 to labo force and to employment.
o labor
Beginning 1978, changes in sampling and estimation procedures introduced into the household survey added about 250,000 to labor
force and to employment. Unemployment levels and rates were not significantly affected. Beginning 1986, the introduction of revised
population controls added about 400,000 to the civilian population and labor force and 350,000 to civilian employment. Unemployment
levels and rates were not significantly affected.
Note.— Labor force data in Tables B-32 through B-41 are based on household interviews and relate to the calendar week including
the 12th of the month. For definitions of terms, area samples used, historical comparability of the data, comparability with other series,
etc., see "Employment and Earnings."
Source: Department of Labor, Bureau of Labor Statistics.




323

TABLE B-33.—Civilian employment and unemployment by sex and age, 1947-90
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]
Civilian employment

Year or month
Total
Total

1947
1948
1949
1950
1951
1952 x
1953
1954
1955
1956
1957
1958
1959
I9601
1961
1962 !
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972 *
1973 !
1974
1975
1976
1977
1978 »
1979
1980
1981
1982
1983
1984
1985
1986 x
1987
1988
1989
1990
1989: Jan
Feb
Mar

Apr
May
June

July
Aug
Sept
Oct
Nov
Dec
1990: Jan
Feb
Mar

fc=
June
July
Aug
Sept
Oct
Nov
Dec

57,038
58,343
57,651
58,918
59,961
60,250
61,179
60,109
62,170
63,799
64,071
63,036
64,630
65,778
65,746
66,702
67,762
69,305
71,088
72,895
74,372
75,920
77,902
78,678
79,367
82,153
85,064
86,794
85,846
88,752
92,017
96,048
98,824
99,303
100,397
99,526
100,834
105,005
107,150
109,597
112,440
114,968
117,342
117,914
116,708
116,800
117,002
117,089
117,065
117,400
117,413
117,565
117,417
117,619
117,920
117,957
117,945
118,074
118,235
118,090
118,277
118,237
117,882
117,690
117,883
117,733
117,386
117,574

40,995
41,725
40,925
41,578
41,780
41,682
42,430
41,619
42,621
43,379
43,357
42,423
43,466
43,904
43,656
44,177
44,657
45,474
46,340
46,919
47,479
48,114
48,818
48,990
49,390
50,896
52,349
53,024
51,857
53,138
54,728
56,479
57,607
57,186
57,397
56,271
56,787
59,091
59,891
60,892
62,107
63,273
64,315
64,435
63,798
63,998
64,235
64,213
64,192
64,549
64,483
64,456
64,136
64,506
64,479
64,605
64,490
64,580
64,607
64,536
64,589
6,9
449
64,266
64,188
64,412
64,408
64,337
64,327

16-19
years

2,218
2,344
2,124
2,186
2,156
2,107
2!l36
1,985
2,095
2,164
2,115
2,012
2,198
2,361
2,315
2,362
2,406
2,587
2,918
3,253
3,186
3,255
3,430
3,409
3,478
3,765
4,039
4,103
3,839
3,947
4,174
4,336
4,300
4,085
3,815
3,379
3,300
3,322
3,328
3,323
3,381
3,492
3,477
3,237
3,355
3,432
3,481
3,475
3,421
3,518
3,553
3,566
3,426
3,492
3,444
3,456
3,431
3,420
3,405
3,384
3,313
3,205
3,104
3,014
3,164
3,163
3,120
3,139

Unemployment
Females

Males

20
years
and
over

Total

38,776 16,045
39,382 16,617
38,803 16,723
39,394 17,340
39,626 18,181
39,578 18,568
40,296 18,749
39,634 18,490
40,526 19,551
41,216 20,419
41,239 20,714
40,411 20,613
41,267 21,164
41,543 21,874
41,342 22,090
41,815 22,525
42,251 23,105
42,886 23,831
43,422 24,748
43,668 25,976
44,294 26,893
4 , 5 27,807
489
45,388 29,084
45,581 29,688
45,912 29,976
47,130 31,257
48,310 32,715
48,922 33,769
48,018 33,989
49,190 35,615
50,555 37,289
52,143 39,569
53,308 41,217
53,101 42,117
53,582 43,000
52,891 43,256
53,487 4 , 4
407
55,769 45,915
56,562 47,259
57,569 48,706
58,726 50,334
59,781 51,696
60,837 53,027
61,198 53,479
60,443 52,910
60,566 52,802
60,754 52,767
60,738 52,876
60,771 52,873
61,031 52,851
60,930 52,930
60,890 53,109
60,710 53,281
61,014 53,113
61,035 53,441
61,149 53,352
61,059 53,455
61,160 53,494
61,202 53,628
61,152 53,554
61,276' 53,688
61,294 53,738
61,162 53,616
61,174 53,502
61,248 53,471
61,245 53,325
61,217 53,049
61,188 53,247

16-19
years

1,691
1,682
1,588
1,517
1,611
1,612
1,584
1,490
1,547
1,654
1,663
1,570
1,640
1,768
1,793
1,833
1,849
1,929
2,118
2,468
2,496
2,526
2,687
2,735
2,730
2,980
3,231
3,345
3,263
3,389
3,514
3,734
3,783
3,625
3,411
3,170
3,043
3,122
3,105
3,149
3,260
3,313
3,282
3,024
3,364
3,300
3,274
3,308
3,301
3,261
3,189
3,291
3,269
3,277
3,319
3,220
3,190
3,154
3,260
3,130
3,075
3,063
2,979
2,853
2,967
2,902
2,853
2,858

1
See footnote 6, Table B-32.
Note.-See Note, Table B-32.
Source: Department of Labor, Bureau of Labor Statistics.




324

Males

Females

20
years
and
over

Total

20
20
Total 16-19 years Total 16-19 years
years and
years and
over
over

14,354
14,936
15,137
15,824
16,570
16,958
17,164
17,000
18,002
18,767
19,052
19,043
19,524
20,105
20,296
20,693
21,257
21,903
22,630
23,510
24,397
25,281
26,397
26,952
27,246
28,276
29,484
30,424
30,726
32,226
33,775
35,836
37,434
38,492
39,590
40,086
41,004
42,793
44,154
45,556
47,074
48,383
49,745
50,455
49,546
49,502
49,493
49,568
49,572
49,590
49,741
49,818
50,012
49,836
50,122
50,132
50,265
50,340
50,368
50,424
50,613
50,675
50,637
50,649
50,504
50,423
50,196
50,389

2,311
2,276
3,637
3,288
2,055
1,883
1,834
3,532
2,852
2,750
2,859
4,602
3,740
3,852
4,714
3,911
4,070
3,786
3,366
2,875
2,975
2,817
2,832
4,093
5,016
4,882
4,365
5,156
7,929
7,406
6,991
6,202
6,137
7,637
8,273
10,678
10,717
8,539
8,312
8,237
7,425
6,701
6,528
6,874
6,643
6,347
6,252
6,465
6,419
6,662
6,580
6,504
6,579
6,587
6,628
6,585
6,544
6,579
6,563
6,691
6,662
6,560
6,827
7,015
7,087
7442
7,337
7,600

1,692 270 1,422 619
1,559
256 1,305 717
2,572 353 2,219 1,065
2,239 318 1,922 1,049
834
1,221
191 1,029
1,185 205 980 698
1,202
184 1,019 632
2,344 310 2,035 1,188
1,854
274 1,580 998
1,711 269 1,442 1,039
1,841
300 1,541 1,018
3,098 416 2,681 1,504
2,420 398 2,022 1,320
2,486 426 2,060 1,366
2,997 479 2,518 1J17
2,423 408 2,016 1,488
2,472 501 1,971 1,598
2,205 487 1,718 1,581
1,914 479 1,435 1,452
1,551 432 1,120 1,324
448 1,060 1,468
1,508
1,419
426 993 1,397
1,403
440 963 1,429
2,238 599 1,638 1,855
2,789 693 2,097 2,227
2,659 711 1,948 2,222
2,275 653 1,624 2,089
2,714
757 1,957 2,441
4,442 966 3,476 3,486
4,036 939 3,098 3,369
3,667 874 2,794 3,324
3,142
813 2,328 3,061
3,120 811 2,308 3,018
4,267 913 3,353 3,370
4,577 962 3,615 3,696
6,179 1,090 5,089 4,499
6,260 1,003 5,257 4,457
4,744 812 3,932 3,794
4,521
806 3,715 3,791
4,530 779 3,751 3,707
732 3,369 3,324
4,101
3,655 667 2,987 3,046
3,525 658 2,867 3,003
3,799 629 3,170 3,075
3,647 762 2,885 2,996
3,535 686 2,849 2,812
3,330 615 2,715 2,922
3,507 647 2,860 2,958
667 2,746 3,006
3,413
3,496 678 2,818 3,166
3,409 580 2,829 3,171
3!485 625 2,860 3,019
3,659 635 3,024 2,920
3,574 660 2,914 3,013
3,614
681 2,933 3,014
3,555 651 2,904 3,030
3,595 623 2,972 2,949
3,562 611 2,951 3,017
3,563 611 2,952 3,000
3,662 626 3,036 3,029
3,668 631 3,037 2,994
3,645 597 3,048 2,915
3,795 626 3,169 3,032
3,889 644 3,245 3,126
637 3,324 3,126
3,961
3,982 633 3,349 3,160
644 3,465 3,228
4,109
4,277 662 3,615 3,323

144
153
223
195
145
140
123
191
176
209
197
262
256
286
349
313
383
385
395
405
391
412
413
506
568
598
583
665
802
780
789
769
743
755
800
886
825
687
661
675
616
558
536
519
544
492
501
515
514
602
582
545
554
518
528
533
511
535
531
510
532
483
514
520
501
536
528
530

475
564
841
854
689
559
510
997
823
832
821
1,242
1,063
1,080
1,368
1,175
1,216
1,195
1,056
921
1,078
985
1,015
1,349
1,658
1,625
1,507
1,777
2,684
2,588
2,535
2,292
2,276
2,615
2,895
3,613
3,632
3,107
3,129
3,032
2,709
2,487
2,467
2,555
2,452
2,320
2,421
2,443
2,492
2,564
2,589
2,474
2,366
2,495
2>86
2,497
2,438
2,482
2,469
2,519
2,462
2,432
2,518
2,606
2,625
2,624
2,700
2,793

TABLE B-34.—Civilian employment by demographic characteristic, 1954-90
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]
Black and other

Wh te

Year or
month

Total

civilian
workers

Males

Females

Both
sexes
16-19

37,846
38,719
39,368
39349
38,591
39,494
39,755
39588
40,016
40,428
41115
41,844
42331
42833
43,411
44048

16,111
17,114
17901
18116
18,022
18512

3,078
3,225
3389
3374
3,216
3475

6,152
6,341
6,534
6604
6,423
6623

3,773
3,904
4,013
4006
3,833
3971

19095
19325
19,682
20194
20807
21,602
22690
23528
24,339
25470

3700
3693
3,774
3,851
4076
4,562
5176
5114
5,195
5508

44178
44595
45,944
47,085
47674
46,697
47,775
49150
50,544
51452

26039
26283
27,426
28,623
29511
29714
31,078
32550
34392
35807

5571
5670
6,173
6,623
6796
6,487
6,724
7068
7367
7356

6928
6833
7,003
7,140
7383
7,643
7877
8011
8,169
8384
8464
8488
8,783
9,356
9610
9435
9,899
10317
11112
11565

51,127
51315
50287
50,621
52462
53046
53785
54647
55550
56352

36587
37394
37615
38272
39659
40690
41876
43142
44262
45232

7021
6588
5984
5799
5836
5768
5792
5898
6030
5946

11588
11688
ll'624
11941
12885
13414
13937
14652
15156
15757

1954
1955
1956
1957
1958
1959

60,109
62,170
63799
64071
63,036
64630

53,957
55,833
57269
57465
56,613
58006

I960
1961
1962
1963
1964
1965
1966
1967
1968
1969

65778
65746
66,702
67762
69305
71,088
72895
74372
75,920
77902

1970
1971
1972
1973
1974
1975
1976
1977
1978
1979

78678
79367
82,153
85,064
86794
85846
88,752
92017
96,048
98824

58850
58913
59,698
60,622
61922
63,446
65021
66361
67750
69518
70217
70878
73,370
75,708
77 184
76411
78,853
81700
84,936
87259

1980
1981....
1982
1983
1984
1985
1986
1987
1988
1989

99,303
100 397
99526
100,834
105 005
107 150
109 597
112440
114968
117 342

87715
88709
87903
88893
92120
93736
95660
97789
99812
101 584

1990

117914 102 087
116,708 101,193
116,800 101,202
117,002 101,394
117,089 101,480
117,065 101,374
117,400 101,595
117,413 101,486
117,565 101,689
117,417 101,522
117,619 101,852
117,920 102,060
117,957 102,108
117,945 102,112
118,074 102,145
118,235 102,208
118,090 102,088
118,277 102,293
118,237 102,332
117,882 102,189
117,690 101,996
117,883 102,192
117,733 102,017
117,386 101,648
117,574 101,843

1989: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
1990: Jan
Feb
Mar
Apr
May
June

July
Aug
Sept
Oct
Nov
Dec

56432 45654
56,015 45,178
56,117 45,085
56,364 45,030
56,338 45,142
56,253 45,121
56,494 45,101
56,429 45,057
56,457 45,232
56,127 45,395
56,516 45,336
56,507 45,553
56,596 45,512
56,578 45,534
56,554 45,591
56,564 45,644
56,444 45,644
56,496 45,797
56,457 45,875
56,337 45,852
56,278 45,718
56,461 45,731
56,410 45,607
56,332 45,316
56,282 45,561

Total

FeMales males

15,502
15,560
15,588
15,614
15,670
15,757
15,924
15,907
15,883
15,805
15,894
15,889
15,841
15,912
15,995
15,998
15,963
15,870
15,677
15,702
15,674
15,755
15,771
15,774

Note.-See footnote 6 and Note, Table B-32.
Source: Department of Labor, Bureau of Labor Statistics.




325

Total

FeMales males

Both
sexes
16-19

396
418
430
407
365
362

4,149
4068
4,160
4,229
4359
4,496
4588
4646
4,702
4770

2,379
2,437
2,521
2598
2,590
2652
2,779
2765
2,843
2,911
3024
3,147
3289
3365
3,467
3614

4813
4796
4,952
5,265
5352
5,161
5,363
5579
5936
6156

3650
3692
3,832
4,092
4258
4,275
4,536
4739
5,177
5409

574
538
573
647
652
615
611
619
703
727

7,802
8,128
8203
7894
8,227
8540
9102
9359

4,368
4,527
4527
4,275
4,404
4565
4,796
4,923

3,433
3,601
3677
3,618
3,823
3975
4,307
4436

509
570
554
507
508
508
571
579

6059
6083
5983
6166
6629
6845
7 107
7459
7722
7963

5529
5606
5641
5775
6256
6569
6830
7 192
7434
7795

689
637
565
543
607
666
681
742
774
813

9313
9355
9189
9375
10119
10501
10814
11309
11658
11953

4,798
4794
4637
4,753
5124
5270
5428
5661
5824
5928

4,515
4561
4552
4,622
4995
5231
5386
5648
5834
6025

547
505
428
416
474
532
536
587
601
625

743 11966 5915 6051

573

5,885
5,896
5,926
5,835
5,883
5,969
6,013
5,949
5,915
5,925
5,932
5,930
5,855
5,925
5,942
5,948
5,948
5,957

5,978
5,984
5,982
5,988
6,040
5,982
6,068
6,056
6,052
6,018
6,049
6,026
6,125
6,101
6,150
6,150
6,180
6,087

583
628
592
591
612
630

5,887
5,848
5,888
5,922
5,930
5,926

5,997
5,990
5,981
5,991
5,967
5,910

528
511
556
550
542
504

5518 15827 8003 7825

5,980
5,919
5,976
5,983
5,939
5,972
5,865
6,040
5,902
5,944
5,946
5,795
5,788
5,765
5,801
5,682
5,614
5,521
5,394
5,201
5,416
5,370
5,316
5,345

Black

Both
sexes
16-19

7,814
7,865
7,889
7,861
7,895
8,017

8,073
8,034
7,986
7,993
8,015
8,027
7,932
8,012
8,053
8,075
8,051
8,009
7,946
7,918
7,927
8,003
8,037
8,067

430
414
420
404
440
474
545
568
584
609

7,688
7,695
7,699
7,753
7,775
7,740
7,851
7,873
7,897
7,812
7,879
7,862
7,909
7,900
7,942
7,923
7,912
7,861

757
809
755
783
775
800

856
797
824
813
766
742

11,863
11,880
11,908
11,823
11,923
11,951
12,081
12,005
11,967
11,943
11,981
11,956
11,980
12,026
12,092
12,098
12,128
12,044

7,731
7,784
7,747
7,752
7,734
7,707

687
675
704
696
688
662

11,884
11,838
11,869
11,913
11,897
11,836

878
829
785
832
856
879

703
645
581
623
642
675
671
608
629
627
587
559

TABLE B-35.—Unemployment by demographic characteristic, 1954-90
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]

Year or
month
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974...
1975
1976
1977
1978
1979
1980. .
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1989: Jan
Feb
Mar

&:::
:::
June
July
Aug
Sept
Oct
Nov
Dec
1990: Jan
Feb
Mar

fc
June
July
Aug
Sept
Oct
Nov
Dec

All
civilian
workers

3,532
2,852
2,750
2,859
4,602
3,740
3,852
4,714
3,911
4,070
3,786
3,366
2,875
2,975
2,817
2,832
4,093
5,016
4,882
4,365
5,156
7,929
7,406
6,991
6,202
6,137
7,637
8,273
10,678
10,717
8,539
8,312
8,237
7,425
6,701
6,528
6,874
6,643
6,347
6,252
6,465
6,419
6,662
6,580
6,504
6,579
6,587
6,628
6,585
6,544
6,579
6,563
6,691
6,662
6,560
6,827
7,015
7,087
7,142
7,337
7,600

Black and other

White
Total

Males

2,859
2,252
2,159
2,289
3,680
2,946
3,065
3,743
3,052
3,208
2,999
2,691
2,255
2,338
2,226
2,260
3,339
4,085
3,906
3,442
4,097
6,421
5,914
5,441
4,698
4,664
5,884
6,343
8,241
8,128
6,372
6,191
6,140
5,501
4,944
4,770
5,091
4,892
4,562
4,543
4,723
4,677
4,826
4,860
4,787
4,810
4,792
4,855
4,857
4,840
4,945
4,895
5,002
4,930
4,852
5,007
5,170
5,199
5,260
5,400
5,674

1,913
1,478
1,366
1,477
2,489
1,903
1,988
2,398
1,915
1,976
1,779
1,556
1,241
1,208
1,142
1,137
1,857
2,309
2,173
1,836
2,169
3,627
3,258
2,883
2,411
2,405
3,345
3,580
4,846
4,859
3,600
3,426
3,433
3,132
2,766
2,636
2,866
2,763
2,613
2,494
2,583
2,509
2,598
2,582
2,596
2,777
2,658
2,708
2,667
2,690
2,722
2,712
2,795
2,755
2,719
2,827
2,925
2,937
2,989
3,093
3,298

Females
946
774
793
812
1,191
1,043
1,077
1,345
1,137
1,232
1,220
1,135
1,014
1,130
1,084
1,123
1,482
1,777
1,733
1,606
1,927
2,794
2,656
2,558
2,287
2,260
2,540
2,762
3,395
3,270
2,772
2,765
2,708
2,369
2,177
2,135
2,225
2,129
1,949
2,049
2,140
2,168
2,228
2,278
2,191
2,033
2,134
2,147
2,190
2,150
2,223
2,183
2,207
2,175
2,133
2,180
2,245
2,262
2,271
2,307
2,376

Total

FeMales males

Both
sexes
16-19

423
373
382
401
541
525
575
669
580
708
708
705
651
635
644
660
871
1,011
1,021
955
1,104
1,413
1,364
1,284
1,189
1,193
1,291
1,374
1,534
1,387
1,116
1,074
1,070
995
910
863
856
970
834
812
843
862
908
855
865
816
841
875
868
849
861
866
859
876
791
854
865
872
866
847
870

673
601
591
570
923
793
788
971
861
863
787
678
622
638
590
571
754
930
977
924
1,058
1,507
1,492
1,550
1,505
1,473
1,752
1,930
2,437
2,588
2,167
2,121
2,097
1,924
1,757
1,757
1,783
1,796
1,808
1,719
1,702
1,704
1,828
1,704
1,696
1,780
1,786
1,780
1,760
1,753
1,650
1,684
1,650
1,680
1,690
1,802
1,825
1,894
1,866
1,947
1,964

431
376
345
364
610
517
498
599
509
496
426
360
310
300
277
267
380
481
486
440
544
815
779
784
731
714
922
997
1,334
1,401
1,144
1,095
1,097
969
888
889
933
924
925
867
908
862
879
818
869
881
910
912
915
949
842
880
853
860
901
953
948
1,017
978
1,026
1,015

242
225
246
206
313
276
290
372
352
367
361
318
312
338
313
304
374
450
491
484
514
692
713
766
774
759
830
933
1,104
1,187
1,022
1,026
999
955
869
868
850
872
883
852
794
842
949
886
827
899
876
868
845
804
808
804
797
820
789
849
877
877
888
921
949

79
77
95
96
138
128
138
159
142
176
165
171
186
203
194
193
235
249
288
280
318
355
355
379
394
362
377
388
443
441
384
394
383
353
316
331
292
344
334
314
312
316
368
299
312
382
335
337
314
288
275
287
271
282
284
284
305
275
301
327
322

Note.-See footnote 6 and Note, Table B-32.
Source: Department of Labor, Bureau of Labor Statistics.




Black

Both
sexes
16-19

326

FeMales males

Both
sexes
16-19

906 448 458
846 395 451
965 494 470
629
1,369 741
1,334
698 637
698 695
1,393
641 690
1,330
636 683
1,319
815 738
1,553
1,731
891 840
2,142 1,167
975
2,272 1,213 1,059
1,914 1,003
911
1,864
951 913
1,840 946 894
1,684 826 858
771 776
1,547
1,544
773 772
1,527 793 734
791 797
1,588
1,584 811 773
1,487 744 743
1,487 788 699
769 749
1,518
1,632 783 849
707 789
1,496
1,496 759 737
764 791
1,555
778 779
1,557
1,584 792 792
1,544 802 742
1,537
825 712
1,438 722 716
742 706
1,448
1,436 735 701
1,442 730 712
1,444
756 688
807 715
1,522
813 750
1,563
1,607 860 747
1,580 835 745
855 798
1,653
1,650 845 805

279
262
297
330
330
354
360
333
343
357
396
392
353
357
347
312
288
300
258
308
304
281
294
297
341
272
277
340
305
297
280
254
247
256
240
250
254
250
272
234
259
295
284

Total

TABLE B-36.—Labor force participation rate and employment/population ratio, 1948-90
[Percent; monthly data seasonally adjusted]
Employment/population ratio

Labor force participation rate
Civilian2
Year or month

1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963.
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977

Total*

59.7
60.1
60.0
59.7
59.6
60.0
60.7
60.3
60.1
59.9
60.0
60.0
!
59.5
59.3
59.4
59.5
'.'.
59.8
60.2
60.3
60.8
61.0
60.7
60.9
61.3
61.7
61.6
62.0
62.6
1978..!!!!!!!!!!"!!! 63.5
1979
64.0
1980
64.1
1981
64.2
1982 ".".'....".. 64.3
1983
64.4
1984
64.7
1985
65.1
65.6
1986
1987
65.9
1988
66.2
1989 !'.'....'.'..'. 66.8
1990
66.6
1989: Jan
66.7
Feb
66.6
Mar
66.6
66.7
66.6
June
66.9
July
66.8
Aug
66.8
Sept
66.7
Oct
66.8
Nov
66.9
Dec
66.8
1990: Jan
66.8
Feb
66.8
Mar
66.8
66.8
66.8
June
66.7
66.6
July
Aug
66.5
Sept
66.6
Oct
66.5
Nov
66.4
Dec
66.6

jfc

&:::::::

1

FeTotal Mates males

58.8
58.9
59.2
59.2
59.0
58.9
58.8
59.3
60.0
59.6
59.5
59.3
59.4
59.3
58.8
58.7
58.7
58.9
59.2
59.6
59.6
60.1
60.4
60.2
60.4
60.8
61.3
61.2
61.6
62.3
63.2
63.7
63.8
63.9
64.0
64.0
64.4
64.8
65.3
65.6
65.9
66.5
66.4
66.4
66.3
66.3
66.4
66.3
66.6
66.5
66.5
66.4
66.5
66.6
66.5
66.5
66.5
66.5
66.5
66.5
66.4
66.3
66.2
66.3
66.2
66.1
66.3

86.6
86.4
86.4
86.3
86.3
86.0
85.5
85.4
85.5
84.8
84.2
83.7
83.3
82.9
82.0
81.4
81.0
80.7
80.4
80.4
80.1
79.8
79.7
79.1
78.9
78.8
78.7
77.9
77.5
77.7
77.9
77.8
77.4
77.0
76.6
76.4
76.4
76.3
76.3
76.2
76.2
76.4
76.1
76.3
76.3
76.3
76.5
76.3
76.7
76.4
76.5
76.2
76.5
76.4
76.5
76.3
76.3
76.3
76.2
76.2
76.0
75.9
75.8
76.1
76.1
76.1
76,2

32.7
33.1
33.9
34.6
34.7
34.4
34.6
35.7
36.9
36.9
37.1
37.1
37.7
38.1
37.9
38.3
38.7
39.3
40.3
41.1
41.6
42.7
43.3
43.4
43.9
44.7
45.7
46.3
47.3
48.4
50.0
50.9
51.5
52.1
52.6
52.9
53.6
54.5
55.3
56.0
56.6
57.4
57.5
57.5
57.1
57.2
57.3
57.3
57.4
57.4
57.4
57.5
57.3
57.6
57.5
57.5
57.6
57.7
57.6
57.7
57.6
57.6
57.5
57.4
57.3
57.0
57.3

Both
sexes
16-19
years

52.5
52.2
51.8
52.2
51.3
50.2
48.3
48.9
50.9
49.6
47.4
46.7
47.5
46.9
46.1
45.2
44.5
45.7
48.2
48.4
48.3
49.4
49.9
49.7
51.9
53.7
54.8
54.0
54.5
56.0
57.8
57.9
56.7
55.4
54.1
53.5
53.9
54.5
54.7
54.7
55.3
55.9
53.7
55.7
55.1
55.0
55.6
55.6
56.7
55.7
56.7
55.7
56.3
56.6
55.9
55.3
55.1
56.1
55.2
54.6
53.2
52.5
51.3
53.1
53.0
52.4
52.8

Civilian «
Black
White and Black
other

58.2
58.7
59.4
59.1
58.9
58.7
58.8
58.8
58.3
58.2
58.2
58.4
58.7
59.2
59.3
59.9
60.2
60.1
60.4
60.8
61.4
61.5
61.8
62.5
63.3
63.9
64.1
64.3
64.3
64.3
64.6
65.0
65.5
65.8
66.2
66.7
66.8
66.8
66.5
66.6
66.8
66.6
66.8
66.7
66.8
66.6
66.8
66.9
66.9
66.9
66.9
66.9
66.9
66.9
66.8
66.8
66.7
66.9
66.7
66.6
66.8

64.0
64.2
64.9
64.4
64.8
64.3
64.5
64.1
63.2
63.0
63.1
62.9
63.0
62.8
62.2
62.1
61.8
60.9
60.2 ""J&9
60.5 60.2
60.3 59.8
59.6 58.8
59.8 59.0
60.4 59.8
62.2 61.5
62.2 61.4
61.7 61.0
61.3 60.8
61.6 61.0
62.1 61.5
62.6 62.2
63.3 62.9
63.7 63.3
64.3 63.8
64.0 63.8
64.7 64.2
63.7 63.3
64.6 64.4
64.7 64.4
64.4 64.0
64.3 63.5
64.4 64.0
65.1 64.6
65.1 64.5
64.9 64.1
65.0 64.1
64.6 64.0
64.8 64.2
64.6 63.8
64.3 63.9
64.1 63.5
64.4 63.8
64.2 63.8
64.0 63.8
63.6 63.4
63.2 62.9
63.2 62.8
63.3 63.1
63.4 63.1
63.6 63.3
63.5 62.9

;E

Total*

56.6
58.2
58.2
58.0
56.4
57.5
58.2
57.8
56.1
56.7
56.8
56.1
56.3
56.1
56.4
56.9
57.6
58.0
58.2
58.7
58.0
57.2
57.5
58.3
58.3
56.5
57.3
58.3
59.7
60.3
59.6
59.4
58.2
58.3
59.9
60.5
61.1
61.9
62.6
63.3
63.0
63.2
63.2
63.3
63.3
63.2
63.3
63.3
63.3
63.2
63.3
63.4
63.4
63.3
63.3
63.4
63.2
63.3
63.2
63.0
62.8
62.9
62.8
62.5
62.6

Total

56.6
55.4
56.1
57.3
57.3
57.1
55.5
56.7
57.5
57.1
55.4
56.0
56.1
55.4
55.5
55.4
55.7
56.2
56.9
57.3
57.5
58.0
57.4
56.6
57.0
57.8
57.8
56.1
56.8
57.9
59.3
59.9
59.2
59.0
57.8
57.9
59.5
60.1
60.7
61.5
62.3
63.0
62.7
62.9
62.9
62.9
62.9
62.9
63.0
63.0
63.0
62.9
62.9
63.1
63.0
63.0
63.0
63.0
62.9
63.0
62.9
62.7
62.5
62.6
62.4
62.2
62.3

Mates

83.5
81.3
82.0
84.0
83.9
83.6
81.0
81.8
82.3
81.3
78.5
79.3
78.9
77.6
77.7
77.1
77.3
77.5
77.9
78.0
77.8
77.6
76.2
74.9
75.0
75.5
74.9
71.7
72.0
72.8
73.8
73.8
72.0
71.3
69.0
68.8
70.7
70.9
71.0
71.5
72.0
72.5
71.9
72.2
72.4
72.6
72.5
72.4
72.7
72.6
72.5
72.1
72.5
72.4
72.5
72.3
72.3
72.3
72.2
72.1
72.0
71.6
71.5
71.7
71.7
71.5
71.4

Females

31.3
31.2
32.0
33.1
33.4
33.3
32.5
34.0
35.1
35.1
34.5
35.0
35.5
35.4
35.6
35.8
36.3
37.1
38.3
39.0
39.6
40.7
40.8
40.4
41.0
42.0
42.6
42.0
43.2
44.5
46.4
47.5
47.7
48.0
47.7
48.0
49.5
50.4
51.4
52.5
53.4
54.3
54.3
54.4
54.3
54.2
54.3
54.2
54.2
54.2
54.3
54.6
54.3
54.6
54.4
54.5
54.5
54.6
54.5
54.6
54.6
54.5
54.3
54.2
54.1
53.7
53.9

Both
sexes
16-19
years

47.7
45.2
45.5
47.9
46.9
46.4
42.3
43.5
45.3
43.9
39.9
39.9
40.5
39.1
39.4
37.4
37.3
38.9
42.1
42.2
42.2
43.4
42.3
41.3
43.5
45.9
46.0
43.3
44.2
46.1
48.3
48.5
46.6
44.6
41.5
41.5
43.7
44.4
44.6
45.5
46.8
47.5
45.4
46.6
46.9
47.2
47.5
47.3
47.7
47.5
48.4
47.3
48.0
48.0
47.5
47.2
46.9
47.9
47.0
46.2
45.4
44.2
42.8
44.8
44.4
43.8
44.0

White

55.2
56.5
57.3
56.8
55.3
55.9
55.9
55.3
55.4
55.3
55.5
56.0
56.8
57.2
57.4
58.0
57.5
56.8
57.4
58.2
58.3
56.7
57.5
58.6
60.0
60.6
60.0
60.0
58.8
58.9
60.5
61.0
61.5
62.3
63.1
63.8
63.6
63.7
63.7
63.8
63.8
63.7
63.8
63.7
63.8
63.6
63.8
63.9
63.9
63.8
63.8
63.8
63.7
63.8
63.8
63.7
63.5
63.6
63.5
63.2
63.3

Black
and
other

Black

58.0
58.7
59.5
59.3
56.7 • ••••• • •
57.5
57.9
56.2
56.3
56.2
57.0
57.8
58.4
58.2
58.0
58.1
56.8
54.9 .._
54.1
55.0 54.5
54.3 53.5
51.4 50.1
52.0 50.8
52.5 51.4
54.7 53.6
55.2 53.8
53.6 52.3
52.6 51.3
50.9 49.4
51.0 49.5
53.6 52.3
54.7 53.4
55.4 54.1
56.8 55.6
57.4 56.3
58.2 56.9
57.3 56.2
57.9 56.8
58.0 56.8
58.0 56.9
58.0 56.4
58.1 56.8
58.3 56.9
58.3 57.4
58.6 57.0
58.4 56.8
58.0 56.6
58.3 56.7
58.1 56.5
57.9 56.6
58.1 56.8
58.3 57.0
58.2 57.0
57.9 57.0
57.5 56.6
56.7 55.7
56.7 55.5
56.5 55.6
56.7 55.7
56.6 55.5
56.5 55.2

Labor force including resident Armed Forces as percent of noninstitutional population including resident Armed Forces.

* Civilian lahnr fnrr» a« narront nf riuilian nnninotitiitinnal n/miilotinn in nrnnn cnaoifia/4

population including resident Armed Forces.
Civilian employment as percent of civilian noninstitutional population in group specified.
Note.—Data relate to persons 16 years of age and over.
See footnote 6 and Note, Table B-32.
Source: Department of Labor, Bureau of Labor Statistics.
4




327

TABLE B-37.—Civilian labor force participation rate by demographic characteristic, 1954-90
[Percent;1 monthly data seasonally adjusted]
Black and other or black

White
Year or month

All
civilian
work- Total
Total
ers

Males

16-19
years

Males

Females

20
years Total
and
over

20
16-19 years Total Total
and
years
over

Females

20
years Total
and
over

16-19
years

20
16-19 years
years
and
over

Black and other

1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972

58.8
59.3
60.0
59.6
59.5
59.3
59.4
59.3
58.8
58.7
58.7
58.9
59.2
59.6
59.6
60.1
60.4
60.2
60.4

58.2
58.7
59.4
59.1
58.9
58.7
58.8
58.8
58.3
58.2
58.2
58.4
58.7
59.2
59.3
59.9
60.2
60.1
60.4

85.6
85.4
85.6
84.8
84.3
83.8
83.4
83.0
82.1
81.5
81.1
80.8
80.6
80.6
80.4
80.2
80.0
79.6
79.6

57.6
58.6
60.4
59.2
56.5
55.9
55.9
54.5
53.8
53.1
52.7
54.1
55.9
56.3
55.9
56.8
57.5
57.9
60.1

87.8
87.5
87.6
86.9
86.6
86.3
86.0
85.7
84.9
84.4
84.2
83.9
83.6
83.5
83.2
83.0
82.8
82.3
82.0

33.3
34.5
35.7
35.7
35.8
36.0
36.5
36.9
36.7
37.2
37.5
38.1
39.2
40.1
40.7
41.8
42.6
42.6
43.2

40.6
40.7
43.1
42.2
40.1
39.6
40.3
40.6
39.8
38.7
37.8
39.2
42.6
42.5
43.0
44.6
45.6
45.4
48.1

32.7
34.0
35.1
35.2
35.5
35.6
36.2
36.6
36.5
37.0
37.5
38.0
38.8
39.8
40.4
41.5
42.2
42.3
42.7

64.0
64.2
64.9
64.4
64.8
64.3
64.5
64.1
63.2
63.0
63.1
62.9
63.0
62.8
62.2
62.1
61.8
60.9
60.2

85.2
85.1
85.1
84.2
84.1
83.4
83.0
82.2
80.8
80.2
80.1
79.6
79.0
78.5
77.7
76.9
76.5
74.9
73.9

61.2
60.8
61.5
58.8
57.3
55.5
57.6
55.8
53.5
51.5
49.9
51.3
51.4
51.1
49.7
49.6
47.4
44.7
46.0

87.1
87.8
87.8
87.0
87.1
86.7
86.2
85.5
84.2
83.9
84.1
83.7
83.3
82.9
82.2
81.4
81.4
80.0
78.6

1972
1973
1974
1975
1976
1977
. .
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1989: Jan
Feb
Mar

60.4
60.8
61.3
61.2
61.6
62.3
63.2
63.7
63.8
63.9
64.0
64.0
64.4
64.8
65.3
65.6
65.9
66.5
66.4
66.4
66.3
66.3
66.4
66.3
66.6
66.5
66.5
66.4
66.5
66.6
66.5
66.5
66.5
66.5
66.5
66.5
66.4
66.3
66.2
66.3
66.2
66.1
66.3

60.4
60.8
61.4
61.5
61.8
62.5
63.3
63.9
64.1
64.3
64.3
64.3
64.6
65.0
65.5
65.8
66.2
66.7
66.8
66.8
66.5
66.6
66.8
66.6
66.8
66.7
66.8
66.6
66.8
66.9
66.9
66.9
66.9
66.9
66.9
66.9
66.8
66.8
66.7
66.9
66.7
66.6
66.8

79.6
79.4
79.4
78.7
78.4
78.5
78.6
78.6
78.2
77.9
77.4
77.1
77.1
77.0
76.9
76.8
76.9
77.1
76.9
77.1
77.0
77.1
77.2
76.9
77.3
77.1
77.2
76.9
77.2
77.2
77.2
77.2
77.1
77.1
77.0
76.9
76.8
76.7
76.7
76.9
76.9
76.9
77.0

60.1
62.0
62.9
61.9
62.3
64.0
65.0
64.8
63.7
62.4
60.0
59.4
59.0
59.7
59.3
59.0
60.0
61.0
59.4
60.9
59.6
60.6
60.7
60.7
61.2
60.8
62.3
60.2
61.5
61.4
60.5
60.9
60.6
60.6
60.9
60.1
58.6
58.3
56.7
59.0
59.2
58.8
59.4

82.0
81.6
81.4
80.7
80.3
80.2
80.1
80.1
79.8
79.5
79.2
78.9
78.7
78.5
78.5
78.4
78.3
78.5
78.3
78.5
78.5
78.5
78.6
78.3
78.6
78.5
78.4
78.3
78.5
78.5
78.6
78.5
78.4
78.4
78.3
78.3
78.2
78.2
78.3
78.3
78.3
78.3
78.3

43.2
44.1
45.2
45.9
46.9
48.0
49.4
50.5
51.2
51.9
52.4
52.7
53.3
54.1
55.0
55.7
56.4
57.2
57.5
57.2
56.9
56.9
57.1
57.1
57.1
57.1
57.2
57.2
57.2
57.4
57.4
57.4
57.5
57.5
57.5
57.6
57.6
57.6
57.5
57.5
57.4
57.0
57.4

48.1
50.1
51.7
51.5
52.8
54.5
56.7
57.4
56.2
55.4
55.0
54.5
55.4
55.2
56.3
56.5
57.2
57.1
55.4
58.1
56.2
56.1
57.0
56.8
57.8
55.7
57.8
57.0
57.3
58.4
56.9
56.5
57.0
58.1
56.3
56.3
55.0
54.6
53.1
55.2
54.5
53.8
54.5

42.7
43.5
44.4
45.3
46.2
47.3
48.7
49.8
50.6
51.5
52.2
52.5
53.1
54.0
54.9
55.6
56.3
57.2
57.6
57.2
56.9
57.0
57.1
57.1
57.1
57.2
57.1
57.2
57.2
57.4
57.4
57.4
57.5
57.5
57.6
57.7
57.8
57.8
57.8
57.7
57.6
57.2
57.6

59.9
60.2
59.8
58.8
59.0
59.8
61.5
61.4
61.0
60.8
61.0
61.5
62.2
62.9
63.3
63.8
63.8
64.2
63.3
64.4
64.4
64.0
63.5
64.0
64.6
64.5
64.1
64.1
64.0
64.2
63.8
63.9
63.5
63.8
63.8
63.8
63.4
62.9
62.8
63.1
63.1
63.3
62.9

73.6
73.4
72.9
70.9
70.0
70.6
71.5
71.3
70.3
70.0
70.1
70.6
70.8
70.8
71.2
71.1
71.0
71.0
70.1
71.2
71.5
71.0
70.4
70.6
71.6
71.1
70.9
70.6
70.7
70.8
70.8
70.3
69.9
70.2
70.1
69.9
70.2
69.9
69.5
70.3
70.4
70.5
70.3

46.3
45.7
46.7
42.6
41.3
43.2
44.9
43.6
43.2
41.6
39.8
39.9
41.7
44.6
43.7
43.6
43.8
44.6
40.6
43.5
46.5
42.5
41.3
41.0
50.4
47.8
46.3
40.7
44.6
45.7
47.1
45.0
41.2
43.6
42.3
40.5
39.2
38.0
37.9
40.2
39.7
40.5
38.9

78.5
78.4
77.6
76.0
75.4
75.6
76.2
76.3
75.1
74.5
74.7
75.2
74.8
74.4
74.8
74.7
74.6
74.4
73.8
74.8
74.7
74.7
74.1
74.4
74.3
74.1
74.1
74.5
74.1
74.1
73.8
73.5
73.6
73.5
73.6
73.6
74.1
73.9
73.4
74.1
74.1
74.3
74.1

46.1
46.1
47.3
47.1
48.0
47.7
48.2
48.3
48.0
48.1
48.6
48.6
49.4
49.5
49.3
49.8
49.5
49.2
48.8

31.0
32.7
36.3
33.2
31.9
28.2
32.9
32.8
33.1
32.6
31.7
29.5
33.5
35.2
34.8
34.6
34.1
31.2
32.3

47.7
47.5
48.4
48.6
49.8
49.8
49.9
50.1
49.6
49.9
50.7
51.1
51.6
51.6
51.4
52.0
51.8
51.8
51.2

48.7
49.3
49.0
48.8
49.8
50.8
53.1
53.1
53.1
53.5
53.7
54.2
55.2
56.5
56.9
58.0
58.0
58.7
57.8
58.9
58.7
58.3
57.9
58.7
59.0
59.2
58.5
58.9
58.4
58.8
58.0
58.6
58.4
58.7
58.6
58.9
57.8
57.2
57.3
57.2
57.2
57.4
56.9

32.2
34.2
33.4
34.2
32.9
32.9
37.3
36.8
34.9
34.0
33.5
33.0
35.0
37.9
39.1
39.6
37.9
40.4
36.7
38.5
39.3
37.9
40.2
42.6
39.0
42.0
38.6
43.1
40.6
40.9
41.2
40.3
36.9
38.7
38.3
37.3
36.6
34.7
35.3
33.9
36.3
37.2
35.0

51.2
51.6
51.4
51.1
52.5
53.6
55.5
55.4
55.6
56.0
56.2
56.8
57.6
58.6
58.9
60.0
60.1
60.6
60.0
61.0
60.7
60.5
59.8
60.4
61.1
61.0
60.6
60.5
60.3
60.6
59.8
60.5
60.6
60.7
60.6
61.1
59.9
59.5
59.6
59.5
59.3
59.4
59.0

Black

fi=
June
July

AUB

sept:.::::::::

Oct
Nov
Dec
1990: Jan
Feb
Mar

fci
June
July
Aug
Sept
Oct
Nov
Dec

1
Civilian labor force as percent of civilian noninstitutional population in group specified.
Note.—Data relate to persons 16 years of age and over.
See footnote 6 and Note, Table B-32.
Source: Department of Labor, Bureau of Labor Statistics.




328

TABLE B-38.—Civilian employment/population ratio by demographic characteristic, 1954-90
[Percent;1 monthly data seasonally adjusted]
White
Year or month

All
civilian
work- Total
ers

Black and other or black

Males
Total

Females

20
16-19 years
years and
over

Total

Females

Males

20
16-19 years Total Total
years and
over

20
16-19 years Total
years and
over

20
16-19 years
years and
over

Black and other

1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972

55.5
56.7
57.5
57.1
55.4
56.0
56.1
55.4
55.5
55.4
55.7
56.2
56.9
57.3
57.5
58.0
57.4
56.6
57.0

55.2
56.5
57.3
56.8
55.3
55.9
55.9
55.3
55.4
55.3
55.5
56.0
56.8
57.2
57.4
58.0
57.5
56.8
57.4

81.5
82.2
82.7
81.8
79.2
79.9
79.4
78.2
78.4
77.7
77.8
77.9
78.3
78.4
78.3
78.2
76.8
75.7
76.0

49.9
52.0
54.1
52.4
47.6
48.1
48.1
45.9
46.4
44.7
45.0
47.1
50.1
50.2
50.3
51.1
49.6
49.2
51.5

84.0
84.7
85.0
84.1
81.8
82.8
82.4
81.4
81.5
81.1
81.3
81.5
81.7
81.7
81.6
81.4
80.1
79.0
79.0

31.4
33.0
34.2
34.2
33.6
34.0
34.6
34.5
34.7
35.0
35.5
36.2
37.5
38.3
38.9
40.1
40.3
39.9
40.7

36.4
37.0
38.9
38.2
35.0
34.8
35.1
34.6
34.8
32.9
32.2
33.7
37.5
37.7
37.8
39.5
39.5
38.6
41.3

31.1
32.7
33.8
33.9
33.5
34.0
34.5
34.5
34.7
35.2
35.8
36.5
37.5
38.3
39.1
40.1
40.4
40.1
40.6

58.0
58.7
59.5
59.3
56.7
57.5
57.9
56.2
56.3
56.2
57.0
57.8
58.4
58.2
58.0
58.1
56.8
54.9
54.1

76.5
77.6
78.4
77.2
72.5
73.8
74.1
71.7
72.0
71.8
72.9
73.7
74.0
73.8
73.3
72.8
70.9
68.1
67.3

52.4
52.7
52.2
48.0
42.0
41.4
43.8
41.0
41.7
37.4
37.8
39.4
40.5
38.8
38.7
39.0
35.5
31.8
32.4

79.2
80.4
81.3
80.5
76.0
77.6
77.9
75.5
75.7
76.2
77.7
78.7
79.2
79.4
78.9
78.4
76.8
74.2
73.2

41.9
42.2
43.0
43.7
42.8
43.2
43.6
42.6
42.7
42.7
43.4
44.1
45.1
45.0
45.2
45.9
44.9
43.9
43.3

24.7
26.4
28.0
26.5
22.8
20.3
24.8
23.2
23.1
21.3
21.8
20.2
23.1
24.8
24.7
25.1
22.4
20.2
19.9

43.7
43.9
44.7
45.5
45.0
45.7
45.8
44.8
44.9
45.2
46.1
47.3
48.2
47.9
48.2
48.9
48.2
47.3
46.7

43.0
43.8
43.5
41.6
42.8
43.3
45.8
46.0
45.7
45.1
44.2
44.1
46.7
48.1
48.8
50.3
51.2
52.0
51.6
52.0
51.9
51.9
51.9
52.2
51.7
52.4
52.2
52.1
51.7
51.9
51.7
52.5
52.3
52.6
52.6
52.8
51.9
51.1
51.0
50.8
50.9
50.6
50.0

19.2
22.0
20.9
20.2
19.2
18.5
22.1
22.4
21.0
19.7
17.7
17.0
20.1
23.1
23.8
25.8
25.8
27.1
25.7
25.6
26.6
24.5
28.1
29.9
24.0
28.2
26.6
26.3
27.0
28.1
29.0
29.9
26.4
28.1
28.2
26.8
26.7
23.9
23.7
24.5
24.4
23.2
22.6

46.5
47.2
46.9
44.9
46.4
47.0
49.3
49.3
49.1
48.5
47.5
47.4
49.8
50.9
51.6
53.0
53.9
54.6
54.2
54.7
54.6
54.8
54.4
54.6
54.6
54.9
54.9
54.8
54.3
54.4
54.0
54.9
54.9
55.2
55.1
55.4
54.5
53.9
53.7
53.5
53.5
53.3
52.8

Black

1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988.
1989
1990
1989: Jan
Feb
Mar

&:::::::::
June
July
Aug

Sept
Oct
Nov
Dec
1990: Jan
Feb ....
Mar

fe=

June
July
Aug
Sept
Oct
Nov
Dec

57.0
57.8
57.8
56.1
56.8
57.9
59.3
59.9
59.2
59.0
57.8
57.9
59.5
60.1
60.7
61.5
62.3
63.0
62.7
62.9
62.9
62.9
62.9
62.9
63.0
63.0
63.0
62.9
62.9
63.1
63.0
63.0
63.0
63.0
62.9
63.0
62.9
62.7
62.5
62.6
62.4
62.2
62.3

57.4
58.2
58.3
56.7
57.5
58.6
60.0
60.6
60.0
60.0
58.8
58.9
60.5
61.0
61.5
62.3
63.1
63.8
63.6
63.7
63.7
63.8
63.8
63.7
63.8
63.7
63.8
63.6
63.8
63.9
63.9
63.8
63.8
63.8
63.7
63.8
63.8
63.7
63.5
63.6
63.5
63.2
63.3

76.0
76.5
75.9
73.0
73.4
74.1
75.0
75.1
73.4
72.8
70.6
70.4
72.1
72.3
72.3
72.7
73.2
73.7
73.2
73.5
73.6
73.9
73.8
73.6
73.9
73.8
73.8
73.3
73.8
73.7
73.8
73.7
73.6
73.6
73.4
73.4
73.3
73.1
72.9
73.1
73.0
72.9
72.7

51.5
54.3
54.4
50.6
51.5
54.4
56.3
55.7
53.4
51.3
47.0
47.4
49.1
49.9
49.6
49.9
51.7
52.6
51.0
51.0
51.2
52.6
52.7
52.2
52.7
53.1
54.2
52.3
53.0
52.8
52.1
52.9
52.7
52.5
52.4
51.6
50.8
49.6
48.0
50.2
50.5
50.1
50.6

79.0
79.2
78.6
75.7
76.0
76.5
77.2
77.3
75.6
75.1
73.0
72.6
74.3
74.3
74.3
74.7
75.1
75.4
75.0
75.4
75.4
75.6
75.6
75.4
75.6
75.5
75.4
75.0
75.4
75.4
75.5
75.3
75.3
75.2
75.0
75.1
75.0
74.9
74.9
74.9
74.8
74.6
74.4

40.7
41.8
42.4
42.0
43.2
44.5
46.3
47.5
47.8
48.3
48.1
48.5
49.8
50.7
51.7
52.8
53.8
54.6
54.8
54.7
54.5
54.4
54.5
54.5
54.4
54.4
54.5
54.7
54.6
54.8
54.8
54.8
54.8
54.9
54.8
55.0
55.1
55.0
54.8
54.8
54.6
54.3
54.5

41.3
43.6
44.3
42.5
44.2
45.9
48.5
49.4
47.9
46.2
44.6
44.5
47.0
47.1
47.9
49.0
50.2
50.5
48.5
51.3
50.3
50.2
50.5
50.4
50.6
48.5
50.8
50.7
51.0
51.6
50.0
49.5
49.6
50.8
49.3
49.1
48.6
47.8
46.2
48.3
47.4
47.1
47.5

40.6
41.6
42.2
41.9
43.1
44.4
46.1
47.3
47.8
48.5
48.4
48.9
50.0
51.0
52.0
53.1
54.0
54.9
55.2
54.9
54.8
54.8
54.8
54.8
54.7
54.8
54.8
55.0
54.9
55.1
55.1
55.2
55.2
55.2
55.2
55.4
55.5
55.5
55.4
55.3
55.1
54.8
55.0

53.7
54.5
53.5
50.1
50.8
51.4
53.6
53.8
52.3
51.3
49.4
49.5
52.3
53.4
54.1
55.6
56.3
56.9
56.2
56.8
56.8
56.9
56.4
56.8
56.9
57.4
57.0
56.8
56.6
56.7
56.5
56.6
56.8
57.0
57.0
57.0
56.6
55.7
55.5
55.6
55.7
55.5
55.2

66.8
67.5
65.8
60.6
60.6
61.4
63.3
63.4
60.4
59.1
56.0
56.3
59.2
60.0
60.6
62.0
62.7
62.8
61.8
62.8
62.8
63.1
62.0
62.4
63.3
63.6
62.9
62.5
62.5
62.5
62.4
61.6
62.3
62.4
62.4
62.3
62.3
61.5
61.0
61.4
61.7
61.6
61.5

1
Civilian employment as percent of civilian noninstitutional population in group specified.
Note.—Data relate to persons 16 years of age and over.
See footnote 6 and Note, Table B-32.
Source: Department of Labor, Bureau of Labor Statistics.




329

31.6
32.8
31.4
26.3
25.8
26.4
28.5
28.7
27.0
24.6
20.3
20.4
23.9
26.3
26.5
28.5
29.4
30.4
27.6
28.0
31.2
30.1
26.2
26.3
34.0
36.6
32.8
26.6
30.2
31.1
33.3
31.9
29.2
30.3
30.0
27.8
25.4
25.4
24.0
27.6
27.3
27.1
24.7

73.0
73.7
71.9
66.5
66.8
67.5
69.1
69.1
65.8
64.5
61.4
61.6
64.1
64.6
65.1
66.4
67.1
67.0
66.1
67.3
66.9
67.3
66.6
67.1
67.0
67.1
66.8
67.2
66.7
66.5
66.1
65.4
66.6
66.4
66.5
66.6
66.9
65.9
65.6
65.5
65.9
66.0
66.0

TABLE ^-^.—Unemployment rate, 1948-90
[Percent; monthly data seasonally adjusted]

Year or
month

Unemployment
rate,

all

work1

ers

1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
..
1989
1990
1989: Jan
Feb
Mar

fez
June....
July

Aug

Sept....

Oct
Nov
Dec
1990: Jan
Feb
Mar

May"!!!!
June....
July

Aug

Sept....

Oct
Nov
Dec

5.2
3.2
2.9
2.8
5.4
4.3
4.0
4.2
6.6
5.3
5.4
6.5
5.4
5.5
5.0
4.4
3.7
3.7
3.5
3.4
4.8
5.8
5.5
4.8
5.5
8.3
7.6
6.9
6.0
5.8
7.0
7.5
9.5
9.5
7.4
7.1
6.9
6.1
5.4
5.2
5.4
5.3
5.1
5.0
5.2
5.1
5.3
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.3
5.3
5.2
5.4
5.6
5.6
5.6
5.8
6.0

Unemployment rate, civilian workers 2
All
civilian
work- Total
ers
3.8
5.9
5.3
3.3
3.0
2.9
5.5
4.4
4.1
4.3
6.8
5.5
5.5
6.7
5.5
5.7
5.2
4.5
3.8
3.8
3.6
3.5
4.9
5.9
5.6
4.9
5.6
8.5
7.7
7.1
6.1
5.8
7.1
7.6
9.7
9.6
7.5
7.2
7.0
6.2
5.5
5.3
5.5
5.4
5.2
5.1
5.2
5.2
5.4
5.3
5.2
5.3
5.3
5.3
5.3
5.3
5.3
5.3
5.4
5.3
5.3
5.5
5.6
5.7
5.7
5.9
6.1

3.6
5.9
5.1
2.8
2.8
2.8
5.3
4.2
3.8
4.1
6.8
5.2
5.4
6.4
5.2
5.2
4.6
4.0
3.2
3.1
2.9
2.8
4.4
5.3
5.0
4.2
4.9
7.9
7.1
6.3
5.3
5.1
6.9
7.4
9.9
9.9
7.4
7.0
6.9
6.2
5.5
5.2
5.6
5.4
5.2
4.9
5.2
5.0
5.1
5.0
5.1
5.4
5.2
5.3
5.2
5.3
5.2
5.2
5.4
5.4
5.3
5.6
5.7
5.8
5.8
6.0
6.2

Males

Females

20
16- years
19
and Total
years over
9.8
14.3
12.7
8.1
8.9
7.9
13.5
11.6
11.1
12.4
17.1
15.3
15.3
17.1
14.7
17.2
15.8
14.1
11.7
12.3
11.6
11.4
15.0
16.6
15.9
13.9
15.6
20.1
19.2
17.3
15.8
15.9
18.3
20.1
24.4
23.3
19.6
19.5
19.0
17.8
16.0
15.9
16.3
18.5
16.7
15.0
15.7
16.3
16.2
14.0
14.9
15.6
15.9
16.5
15.9
15.4
15.2
15.2
15.6
16.0
15.7
16.8
17.6
16.8
16.7
17.1
17.4

3.2
5.4
4.7
2.5
2.4
2.5
4.9
3.8
3.4
3.6
6.2
4.7
4.7
5.7
4.6
4.5
3.9
3.2
2.5
2.3
2.2
2.1
3.5
4.4
4.0
3.3
3.8
6.8
5.9
5.2
4.3
4.2
5.9
6.3
8.8
8.9
6.6
6.2
6.1
5.4
4.8
4.5
4.9
4.6
4.5
4.3
4.5
4.3
4.4
4.4
4.5
4.7
4.6
4.6
4.5
4.6
4.6
4.6
4.7
4.7
4.7
4.9
5.0
5.1
5.2
5.4
5.6

4.1
6.0
5.7
4.4
3.6
3.3
6.0
4.9
4.8
4.7
6.8
5.9
5.9
7.2
6.2
6.5
6.2
5.5
4.8
5.2
4.8
4.7
5.9
6.9
6.6
6.0
6.7
9.3
8.6
8.2
7.2
6.8
7.4
7.9
9.4
9.2
7.6
7.4
7.1
6.2
5.6
5.4
5.4
5.4
5.1
5.2
5.3
5.4
5.7
5.7
5.4
5.2
5.4
5.3
5.4
5.2
5.3
5.3
5.4
5.3
5.1
5.4
5.5
5.5
5.6
5.7
5.9

20
16- years
19
and
years over
8.3
12.3
11.4
8.3
8.0
7.2
11.4
10.2
11.2
10.6
14.3
13.5
13.9
16.3
14.6
17.2
16.6
15.7
14.1
13.5
14.0
13.3
15.6
17.2
16.7
15.3
16.6
19.7
18.7
18.3
17.1
16.4
17.2
19.0
21.9
21.3
18.0
17.6
17.6
15.9
14.4
14.0
14.7
13.9
13.0
13.3
13.5
13.5
15.6
15.4
14.2
14.5
13.6
13.7
14.2
13.8
14.5
14.0
14.0
14.7
13.6
14.7
15.4
14.4
15.6
15.6
15.6

3.6
5.3
5.1
4.0
3.2
2.9
5.5
4.4
4.2
4.1
6.1
5.2
5.1
6.3
5.4
5.4
5.2
4.5
3.8
4.2
3.8
3.7
4.8
5.7
5.4
4.9
5.5
8.0
7.4
7.0
6.0
5.7
6.4
6.8
8.3
8.1
6.8
6.6
6.2
5.4
4.9
4.7
4.8
4.7
4.5
4.7
4.7
4.8
4.9
4.9
4.7
4.5
4.8
4.7
4.7
4.6
4.7
4.7
4.8
4.6
4.6
4.7
4.9
4.9
4.9
5.1
5.3

1
Unemployed
2
Unemployed
3

as percent of labor force including resident Armed Forces.
as percent of civilian labor force in group specified.
Data for 1949 and 1951-54 are for April; 1950, for March.
Note.—Data relate to persons 16 years of age and over.
See footnote 6 and Note, Table B-32.
Source: Department of Labor, Bureau of Labor Statistics.




330

Both
sexes
1619
years
9.2
13.4
12.2
8.2
8.5
7.6
12.6
11.0
11.1
11.6
15.9
14.6
14.7
16.8
14.7
17.2
16.2
14.8
12.8
12.9
12.7
12.2
15.3
16.9
16.2
14.5
16.0
19.9
19.0
17.8
16.4
16.1
17.8
19.6
23.2
22.4
18.9
18.6
18.3
16.9
15.3
15.0
15.5
16.3
14.9
14.2
14.6
14.9
15.9
14.7
14.6
15.1
14.8
15.2
15.1
14.6
14.8
14.6
14.8
15.4
14.7
15.8
16.6
15.7
16.2
16.4
16.6

Black
White and Black
other

3.5
5.6
4.9
3.1
2.8
2.7
5.0
3.9
3.6
3.8
6.1
4.8
5.0
6.0
4.9
5.0
4.6
4.1
3.4
3.4
3.2
3.1
4.5
5.4
5.1
4.3
5.0
7.8
7.0
6.2
5.2
5.1
6.3
6.7
8.6
8.4
6.5
6.2
6.0
5.3
4.7
4.5
4.7
4.6
4.3
4.3
4.4
4.4
4.5
4.6
4.5
4.5
4.5
4.5
4.5
4.5
4.6
4.6
4.7
4.6
4.5
4.7
4.8
4.8
4.9
5.0
5.3

5.9
8.9
9.0
5.3
5.4
4.5
9.9
8.7
8.3
7.9
12.6
10.7
10.2
12.4
10.9
10.8
9.6
8.1
7.3
7.4
6.7
6.4
8.2
9.9
10.0 '"10.4"'
9.4
9.0
9.9 10.5
13.8
14.8
13.1
14.0
13.1
14.0
11.9
12.8
12.3
11.3
13.1
14.3
14.2
15.6
17.3
18.9
17.8
19.5
14.4
15.9
13.7
15.1
13.1
14.5
11.6
13.0
10.4
11.7
11.4
10.0
11.3
10.1
10.4
11.8
10.4
11.8
9.9 11.1
9.8 11.2
9.8 11.3
10.4
12.0
9.7 11.0
9.6 11.1
10.1
11.5
10.2
11.5
11.7
10.1
11.4
10.0
11.4
10.0
9.4 10.7
9.5 10.7
9.3 10.6
9.5 10.6
9.6 10.7
10.3
11.4
10.4
11.7
11.9
10.8
11.7
10.6
12.2
11.0
11.1
12.2

Experienced
wage
and
salary
workers

43

6.8
6.0
3.7
34
3.2
62
4.8
44
4.6
7.3
5.7
5.7
6.8
5.6
5.6
5.0
4.3
3.5
3.6
3.4
3.3
4.8
5.7
5.3
4.5
5.3
8.2
7.3
6.6
5.6
5.5
6.9
7.3
9.3
9.2
7.1
6.8
6.6
5.8
5.2
5.0
5.3
5.1
4.9
4.8
5.0
5.0
5.1
5.1
5.0
5.0
5.0
5.1
5.0
5.0
5.0
5.1
5.1
5.1
5.1
5.2
5.3
5.4
5.4
5.7
5.8

Married
men,

spouse
present 8

Women

who

maintain
families

3.5
4.6
1.5
14

1.7
40
2.6
23
2.8
5.1
3.6
3.7
4.6
3.6
3.4
2.8
2.4
1.9
1.8
1.6
1.5
2.6
3.2
2.8
2.3
2.7
5.1
4.2
3.6
2.8
2.8
4.2
4.3
6.5
6.5
4.6
4.3
4.4
3.9
3.3
3.0
3.4
3.1
3.1
2.9
3.1
2.9
2.9
3.0
3.1
3.3
3.0
3.0
3.1
3.4
3.1
3.2
3.2
3.3
3.2
3.3
3.5
3.5
3.5
3.7
3.8

4.9
4.4
4.4
5.4
7.3
7.2
7.1
7.0
10.0
10.1
9.4
8.5
8.3
9.2
10.4
11.7
12.2
10.3
10.4
9.8
9.2
8.1
8.1
8.2
8.1
8.1
7.9
8.0
8.3
8.0
8.3
8.0
7.5
7.7
8.2
7.9
7.6
7.6
8.3
7.8
7.5
8.0
8.3
8.4
8.7
8.5
8.7
8.7

TABLE B-40.—Civilian unemployment rate by demographic characteristic, 1948-90
[Percent; * monthly data seasonally adjusted]

Year or month

White
Black and other or black
All
Females
Females
Males
Males
civilian
20
20
20
20 Total
work- Total
ers
Total 16-19
Total 16-19 years
Total 16-19 years Total 16-19 years
years and
years
years and
years and
over
over
over
ovef

W

Black and other

1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972

. ..

3.8
5.9
5.3
3.3
3.0
2.9
5.5
4.4
4.1
4.3
6.8
5.5
5.5
6.7
5.5
5.7
5.2
4.5
3.8
3.8
3.6
3.5
4.9
5.9
5.6

3.5
5.6
4.9
3.1
2.8
2.7
5.0
3.9
3.6
3.8
6.1
4.8
5.0
6.0
4.9
5.0
4.6
4.1
3.4
3.4
3.2
3.1
4.5
5.4
5.1

3.4
5.6
4.7
2.6
2.5
2.5
4.8
3.7
3.4
3.6
6.1
4.6
4.8
5.7
4.6
4.7
4.1
3.6
2.8
2.7
2.6
2.5
4.0
4.9
4.5

13.4
11.3
10.5
11.5
15.7
14.0
14.0
15.7
13.7
15.9
14.7
12.9
10.5
10.7
10.1
10.0
13.7
15.1
14.2

4.4
3.3
3.0
3.2
5.5
4.1
4.2
5.1
4.0
3.9
3.4
2.9
2.2
2.1
2.0
1.9
3.2
4.0
3.6

38
5.7
5.3
42
3.3
31
5.5
4.3
4.2
4.3
6.2
5.3
5.3
6.5
5.5
5.8
5.5
5.0
4.3
4.6
4.3
4.2
5.4
6.3
5.9

10.4
9.1
9.7
9.5
12.7
12.0
12.7
14.8
12.8
15.1
14.9
14.0
12.1
11.5
12.1
11.5
13.4
15.1
14.2

5.9
8.9
9.0
5.3
5.4
4.5
5.1 9.9
3.9 8.7
3.7 8.3
3.8 7.9
5.6 12.6
4.7 10.7
4.6 10.2
5.7 12.4
4.7 10.9
4.8 10.8
4.6 9.6
4.0 8.1
3.3 7.3
3.8 7.4
3.4 6.7
3.4 6.4
4.4 8.2
5.3 9.9
4.9 10.0

5.8
9.6
9.4
4.9
5.2
4.8
10.3
8.8
7.9
8.3
13.7
11.5
10.7
12.8
10.9
10.5
8.9
7.4
6.3
6.0
5.6
5.3
7.3
9.1
8.9

14.4
13.4
15.0
18.4
26.8
25.2
24.0
26.8
22.0
27.3
24.3
23.3
21.3
23.9
22.1
21.4
25.0
28.8
29.7

61
7.9
8.4
61
5.7
41
9.9 9.2
8.4 8.5
7.4 8.9
7.6 7.3
12.7 10.8
10.5 9.4
9.6 9.4
11.7 11.9
10.0 11.0
9.2 11.2
7.7 10.7
6.0 9.2
4.9 8.7
4.3 9.1
3.9 8.3
3.7 7.8
5.6 9.3
7.3 10.9
6.9 11.4

20.6
19.2
22.8
20.2
28.4
27.7
24.8
29.2
30.2
34.7
31.6
31.7
31.3
29.6
28.7
27.6
34.5
35.4
38.4

8.4
7.7
7.8
6.4
9.5
8.3
8.3
10.6
9.6
9.4
9.0
7.5
6.6
7.1
6.3
5.8
6.9
8.7
8.8

Black

1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987 .
1988
1989
1990
1989: Jan
Feb
Mar
Apr
May

June: :..::::::::

July
Aug
Sept
Oct
Nov
Dec
1990: Jan
Feb . .
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec

5.6
4.9
5.6
8.5
7.7
7.1
6.1
5.8
7.1
7.6
9.7
9.6
7.5
7.2
7.0
6.2
5.5
5.3
5.5
5.4
5.2
5.1
5.2
5.2
5.4
5.3
5.2
5.3
5.3
5.3
5.3
5.3
5.3
5.3
5.4
5.3
5.3
5.5
5.6
5.7
5.7
5.9
6.1

5.1
4.3
5.0
7.8
7.0
6.2
5.2
5.1
6.3
6.7
8.6
8.4
6.5
6.2
6.0
5.3
4.7
4.5
4.7
4.6
4.3
4.3
4.4
4.4
4.5
4.6
4.5
4.5
4.5
4.5
4.5
4.5
4.6
4.6
4.7
4.6
4.5
4.7
4.8
4.8
4.9
5.0
5.3

4.5
3.8
4.4
7.2
6.4
5.5
4.6
4.5
6.1
6.5
8.8
8.8
6.4
6.1
6.0
5.4
4.7
4.5
4.8
4.7
4.4
4.2
4.4
4.3
4.4
4.4
4.4
4.7
4.5
4.6
4.5
4.5
4.6
4.6
4.7
4.6
4.6
4.8
4.9
4.9
5.0
5.2
5.5

14.2
12.3
13.5
18.3
17.3
15.0
13.5
13.9
16.2
17.9
21.7
20.2
16.8
16.5
16.3
15.5
13.9
13.7
14.2
16.2
14.1
13.2
13.2
14.1
13.9
12.7
12.9
13.1
13.7
14.0
13.9
13.2
13.1
13.3
13.8
14.1
13.4
14.9
15.4
15.0
14.7
14.9
14.9

3.6
3.0
3.5
6.2
5.4
4.7
3.7
3.6
5.3
5.6
7.8
7.9
5.7
5.4
5.3
4.8
4.1
3.9
4.3
4.0
3.8
3.7
3.8
3.6
3.8
3.8
3.8
4.2
3.9
4.0
3.9
4.0
4.1
4.0
4.2
4.1
4.1
4.2
4.4
4.4
4.5
4.6
5.0

5.9
5.3
6.1
8.6
7.9
7.3
6.2
5.9
6.5
6.9
8.3
7.9
6.5
6.4
6.1
5.2
4.7
4.5
4.6
4.5
4.1
4.4
4.5
4.6
4.7
4.8
4.6
4.3
4.5
4.5
4.6
4.5
4.6
4.6
4.6
4.5
4.4
4.5
4.7
4.7
4.7
4.8
5.0

14.2
13.0
14.5
17.4
16.4
15.9
14.4
14.0
14.8
16.6
19.0
18.3
15.2
14.8
14.9
13.4
12.3
11.5
12.6
11.6
10.5
10.6
11.4
11.2
12.5
12.8
12.1
11.1
11.0
11.6
12.1
12.3
12.9
12.6
12.3
12.9
11.6
12.4
13.1
12.6
13.0
12.5
13.0

1
Unemployed as percent of civilian labor force in group specified.
Note.-See Note, Table B-39.
Source: Department of Labor, Bureau of Labor Statistics.




331

4.9
4.3
5.1
7.5
6.8
6.2
5.2
5.0
5.6
5.9
7.3
6.9
5.8
5.7
5.4
4.6
4.1
4.0
4.1
4.0
3.7
3.9
4.0
4.1
4.1
4.2
4.1
3.8
4.0
4.0
4.0
4.0
4.1
4.0
4.1
4.0
4.0
4.0
4.1
4.2
4.2
4.3
4.4

10.4
9.4
10.5
14.8
14.0
14.0
12.8
12.3
14.3
15.6
18.9
19.5
15.9
15.1
14.5
13.0
11.7
11.4
11.3
11.8
11.8
11.1
11.2
11.3
12.0
11.0
11.1
11.5
11.5
11.7
11.4
11.4
10.7
10.7
10.6
10.6
10.7
11.4
11.7
11.9
11.7
12.2
12.2

9.3
8.0
9.8
14.8
13.7
13.3
11.8
11.4
14.5
15.7
20.1
20.3
16.4
15.3
14.8
12.7
11.7
11.5
11.8
11.8
12.1
11.2
11.9
11.6
11.6
10.5
11.3
11.4
11.6
11.8
11.9
12.4
10.9
11.1
11.0
10.9
11.3
12.1
12.2
12.7
12.4
12.6
12.5

31.7
27.8
33.1
38.1
37.5
39.2
36.7
34.2
37.5
40.7
48.9
48.8
42.7
41.0
39.3
34.4
32.7
31.9
32.1
35.6
32.9
29.2
36.4
35.8
32.5
23.4
29.2
34.7
32.3
32.0
29.2
29.1
29.2
30.5
28.9
31.6
35.2
33.1
36.7
31.4
31.3
33.2
36.4

7.0
6.0
7.4
12.5
11.4
10.7
9.3
9.3
12.4
13.5
17.8
18.1
14.3
13.2
12.9
11.1
10.1
10.0
10.4
10.1
10.4
9.8
10.1
9.9
9.8
9.5
9.9
9.8
10.0
10.2
10.5
11.0
9.5
9.7
9.7
9.5
9.7
10.7
10.6
11.5
11.1
11.2
10.9

11.8
11.1
11.3
14.8
14.3
14.9
13.8
13.3
14.0
15.6
17.6
18.6
15.4
14.9
14.2
13.2
11.7
11.4
10.8
11.8
11.4
11.0
10.5
11.0
12.4
11.5
10.8
11.6
11.5
11.6
11.0
10.4
10.5
10.3
10.2
10.3
10.2
10.7
11.1
11.1
11.1
11.8
12.0

9.0
40.5
36.1 8.6
8.8
37.4
41.0 12.2
41.6 11.7
43.4 12.3
40.8 11.2
39.1 10.9
39.8 11.9
42.2 13.4
47.1 15.4
48.2 16.5
42.6 13.5
39.2 13.1
39.2 12.4
34.9 11.6
32.0 10.4
9.8
33.0
9.6
30.0
33.4 10.3
32.3 10.0
9.4
35.4
9.1
30.0
9.6
29.8
38.4 10.7
32.9 10.0
31.1 9.5
9.5
39.0
9.9
33.5
31.2 10.2
9.6
29.5
9.4
25.7
9.4
28.5
27.3
9.2
9.2
26.4
9.2
28.1
9.1
27.1
31.1 9.4
32.7
9.8
27.6 10.2
9.7
32.7
37.5 10.2
35.6 10.6

TABLE B-41.—Unemployment by duration and reason, 1947-90
[Thousands of persons, except as noted; monthly data seasonally adjusted1]

Reason for unemployment

Duration of unemployment
Unemployment

Year or month

1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966 2
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986..
1987
1988
1989
1990
1989- Jan
Feb ..
Mar
Apr ..

May
Aug
Sept

:::..:
::::..

June ....
July
Oct
Nov
Dec
1990- Jan
Feb ....
Mar
Apr
May .
June
July
Aug":::::
Oct
Nov
Dec

sept

:

2,311
2,276
3,637
3,288
2,055
1,883
1,834
3,532
2,852
2,750
2,859
4,602
3,740
3,852
4,714
3,911
4,070
3,786
3,366
2,875
2,975
2,817
2,832
4,093
5,016
4,882
4,365
5,156
7,929
7,406
6,991
6,202
6,137
7,637
8,273
10,678
10,717
8,539
8,312
8,237
7,425
6,701
6,528
6,874
6,643
6,347
6,252
6,465
6,419
6,662
6,580
6,504
6,579
6,587
6,628
6,585
6,544
6,579
6,563
6,691
6,662
6,560
6,827
7,015
7,087
7,142
7,337
7,600

Less
than 5
weeks

1,210
1,300
1,756
1,450
1,177
1,135
1,142
1,605
1,335
1,412
1,408
1,753
1,585
1,719
1,806
1,663
1,751
1,697
1,628
1,573
1,634
1,594
1,629
2,139
2,245
2,242
2,224
2,604
2,940
2,844
2,919
2,865
2,950
3,295
3,449
3,883
3,570
3,350
3,498
3,448
3,246
3,084
3,174
3,169
3,151
3,213
3,060
3,075
3,110
3,331
3,181
3,075
3,198
3,187
3,208
3,219
3,131
3,157
3,183
3,185
3,078
3,100
3,142
3,275
3,087
3,139
3,277
3,280

5-14
weeks
704
669
1,194
1,055
574
516
482
1,116
815
805
891
1,396
1,114
1,176
1,376
1,134
1,231
1,117
983
779
893
810
827
1,290
1,585
1,472
1,314
1,597
2,484
2,196
2,132
1,923
1,946
2,470
2,539
3,311
2,937
2,451
2,509
2,557
2,196
2,007
1,978
2,201
1,998
1,887
1,869
1,990
1,961
2,038
1,974
2,024
2,023
1,993
2,022
1,961
2,010
2,070
2,074
2,146
2,194
2,085
2,166
2,077
2,452
2,391
2,334
2,518

27
weeks
and
over

15-26
weeks
234
193
428
425
166
148
132
495
366
301
321
785
469
503
728
534
535
491
404
287
271
256
242
428
668
601
483
574
1,303
1,018
913
766
706
1,052
1,122
1,708
1,652
1,104
1,025
1,045
943
801
730
809
742
664
696
705
720
694
824
738
755
730
745
721
754
737
732
742
776
777
807
822
861
893
938
940

164
116
256
357
137
84
78
317
336
232
239
667
571
454
804
585
553
482
351
239
177
156
133
235
519
566
343
381
1,203
1,348
1,028
648
535
820
1,162
1,776
2,559
1,634
1,280
1,187
1,040
809
646
695
729
638
669
715
633
623
627
570
590
647
641
627
642
637
638
675
628
659
701
746
744
698
789
799

1
Because
2

(mean) Median
duraJob
duration
losers
tion
(weeks)
(weeks)
8.6
10.0
12.1
9.7
8.4
8.0
11.8
13.0
11.3
10.5
13.9
14.4
12.8
15.6
14.7
14.0
13.3
11.8
10.4
8.7
8.4
7.8
8.6
11.3
12.0
10.0
9.8
14.2
15.8
14.3
11.9
10.8
11.9
13.7
15.6
20.0
18.2
15.6
15.0
14.5
13.5
11.9
12.1
12.5
12.3
12.3
12.6
11.9
11.2
11.9
11.4
11.5
11.8
11.6
11.5
11.9
11.7
11.9
12.1
11.6
12.0
12.1
12.3
12.4
12.0
12.4
12.4

4.5
4.4
4.9
6.3
6.2
5.2
5.2
8.4
8.2
7.0
5.9
5.4
6.5
6.9
8.7
10.1
7.9
6.8
6.9
6.5
5.9
4.8
5.4
5.6
5.3
5.5
5.5
5.3
5.5
5.5
5.0
5.0
4.9
4.8
4.9
5.0
5.2
5.0
5.0
5.3
5.2
5.2
5.3
6.1
5.9
5.9
5.9

1,229
1,070
1,017
1,811
2,323
2,108
1,694
2,242
4,386
3,679
3,166
2,585
2,635
3,947
4,267
6,268
6,258
4,421
4,139
4,033
3,566
3,092
2,983
3,322
3,038
2,874
2,876
2,930
2,797
2,854
2,954
2,984
2,935
3,000
3,053
3,063
3,116
3,095
3,073
3,145
3,173
3,203
3,145
3,388
3,519
3,563
3,756
3,797

Job
leavers

438
431
436
550
590
641
683
768
827
903
909
874
880
891
923
840
830
823
877
1,015
965
983
1,024
1,014
969
984
906
973
1,110
1,024
1,011
1,033
1,047
999
1,044
1,036
1,015
1,012
1,019
1,159
1,017
999
1,020
989
954
981
996
1,024

Reentrants

945
909
965
1,228
1,472
1,456
1,340
1,463
1,892
1,928
1,963
1,857
1,806
1,927
2,102
2,384
2,412
2,184
2,256
2,160
1,974
1,809
1,843
1,883
1,864
1,770
1,766
1,896
1,859
2,047
1,869
1,753
1,891
1,883
1,842
1,824
1,775
1,815
1,850
1,794
1,828
1,839
1,920
1,872
1,952
1,911
1,926
2,128

entrants

396
407
413
504
630
677
649
681
823
895
953
885
817
872
981
1,185
1,216
1,110
1,039
1,029
920
816
677
654
774
752
718
710
691
738
713
637
652
673
691
680
647
672
651
637
677
549
677
669
663
684
655
662

of independent seasonal adjustment of the various series, detail will not add to totals.
Data for 1967 by reason for unemployment are not strictly comparable with those for later years and the total by reason is not
equal to total unemployment.
Note.—Data relate to persons 16 years of age and over.
See footnote 6 and Note, Table B-32.
Source: Department of Labor, Bureau of Labor Statistics.




332

TABLE B-42.—Unemployment insurance programs, selected data, 1955-90
State programs

All programs

Year or month

Covered
employment 1

Insured
Total
unemploy- benefits
Insured
paid
ment
unem(weekly
(millions ployment
of 24
average)" dollars)

Thousands

1955
1956.
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989 p
1990

40,018
42,751
43,436
44,411
45,728
46,334
46,266
47,776
48,434
49,637
51,580
54,739
56,342
57,977
59,999
59,526
59,375
66,458
69,897
72,451
71,037
73,459
76,419
88,804
92,062
92,659
93,300
91,628
91,898
96,474
99,186
101,099
98,757
101,987
8
103,537

1989: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
1990- Jan
Feb
Mar
Apr
May
June'
July

Aug : : : :.: : : : :
Sept
Oct.. :::: : : :
Nov
Dec »

1,399
1,323
1,571
2,773
1,860
2,071
2,994
1,946
7
1,973
1,753
1,450
1,129
1,270
1,187
1,177
2,070
2,608
2,192
1,793
2,558
4,937
3,846
3,308
2,645
2,592
3,837
3,410
4,594
3,775
2,561
2,693
2,746
2,401
2,248
2,324
2,715

1,560.2
1,540.6
1,913.0
4,290.6
2,854.3
3,022.8
4,358.1
3,145.1
3,025.9
2,749.2
2,360.4
1,890.9
2,221.5
2,191.0
2,298.6
4,209.3
6,154.0
5,491.1
4,517.3
6,933.9
16,802.4
12,344.8
10,998.9
9,006.9
9,401.3
16,175.4
15,287.1
23,774.8
20,206.2
13,109.6
15,056.3
16,292.5
14,501.0
13,280.0
14,498.4

2,684
2,695
2,571
2,225
1,958
1,935
2,169
2,009
1,862
1,910
2,141
2,509
3,064
2,998
2,846
2,531
2,270
2,212
2,442
2,295
2,193
2,294
2,722

1,450.5
1,370.9
1,563.1
1,190.0
1,165.1
1,102.1
1,086.8
1,228.4
983.3
1,071.9
1,174.2
1,278.1
1,883.2
1,673.1
1,755.1
1,536.3
1,498.7
1,293.5
1,426.5
1,463.8
1,207.6
1,439.9
1,440.8
1,607.0

Initial
claims

Exhaustions8

Weekly average; thousands
1,265
226
227
1,215
1,446
270
2,510
369
1,684
277
331
1,908
2,290
350
302
1,783
7
7
1,806
298
1,605
268
232
1,328
1,061
203
226
1,205
1,111
201
1,101
200
1,805
296
2,150
295
261
1,848
247
1,632
2,262
363
3,986
478
2,991
386
2,655
375
2,359
346
2,434
388
3,350
488
3,047
460
4,061
583
3,396
438
377
2,476
396
2,611
2,650
378
2,332
328
2,081
310
330
2,158
387
2,514
**
2,071
293
305
2,091
318
2,120
308
2,106
2,068
316
331
2,133
334
2,194
323
2,169
2,208
331
2,295
366
2,305
348
367
2,373
2,367
359
357
2,334
347
2,349
2,381
360
2,400
351
357
2,442
354
2,470
371
2,492
2,602
393
2,748
431
2,908
460
467
3,002

25
20
23
50
33
31
46
32
30
26
21
15
17
16
16
25
39
35
29
37
81
63
55
39
39
59
57
80
80
50
50
52
46
38
37
44
38
38
38
42
38
37
38
38
35
34
36
37
44
42
43
47
45
44
47
44
42
43
42
45

Benefits paid
Insured
unemployment as
Total
percent
(millions
of
covered
employ- dollars) 4 (dollars) 6
ment

3.5
3.2
3.6
6.4
4.4
4.8
5.6
4.4
4.3
3.8
3.0
2.3
2.5
2.2
2.1
3.4
4.1
3.5
2.7
3.5
6.0
4.6
3.9
3.3
2.9
3.9
3.5
4.6
3.9
2.8
2.9
2.8
2.4
2.1
2.1

1,350.3
1,380.7
1,733.9
3,512.7
2,279.0
2,726.7
3,422.7
2,675.4
2,774.7
2,522.1
2,166.0
1,771.3
2,092.3
2,031.6
2,127.9
3,848.5
4,957.0
4,471.0
4,007.6
5,974.9
11,754.7
8,974.5
8,357.2
7,717.2
8,612.9
13,761.1
13,262.1
20,649.5
17,762.8
12,594.7
14,130.8
15,329.3
13,606.8
12,564.7
13,752.3

25.04
27.02
28.17
30.58
30.41
32.87
33.80
34.56
35.27
35.92
37.19
39.75
41.25
43.43
46.17
50.34
54.02
56.76
59.00
64.25
70.23
75.16
78.79
83.67
89.67
98.95
106.70
119.37
123.59
123.47
128.23
135.72
139.90
144.97
151.63
161.13

2.1
2.1
2.1
2.1
2.0
2.1
2.2
2.1
2.2
2.2
2.2
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.4
2.4
2.5
2.6
2.8
2.9

1,413.2
1,336.2
1,522.1
1,162.4
1,137.6
1,076.2
1,061.9
1,198.2
957.8
1.044.8
1,144.1
1,248.3
1,843.6
1,636.7
1,716.1
1,502.5
1,466.7
1,265.4
1,397.3
1,431.5
1,178.4
1,402.4
1,482.5
1,567.5

148.39
150.37
150.92
150.21
151.28
151.27
150.68
150.50
152.51
155.90
154.71
155.78
158.53
160.44
159.60
162.02
162.02
161.91
159.93
160.53
162.23
164.01
160.84
162.88

**

"Monthly data are seasonally adjusted.
1
Includes persons under the State, UCFE (Federal employee, effective January 1955), and RRB (Railroad Retirement Board) programs.
Beginning October 1958, also includes the UCX program (unemployment compensation for ex-servicemen).
"Includes State, UCFE, RR, UCX, UCV (unemployment compensation for veterans, October 1952-January 1960), and SRA
(Servicemen's Readjustment Act, September 1944-September 1951) programs. Also includes Federal and State extended benefit
programs. Does not include FSB (Federal supplemental benefits), SUA (special unemployment assistance), and Federal Supplemental
Compensation programs.
3
Covered workers who have completed at least 1 week of unemployment.
4
Annual data are net amounts and monthly data are gross amounts.
5
Individuals receiving final payments in benefit year.
6
For total unemployment only.
7
Programs include Puerto Rican sugarcane workers for initial claims and insured unemployment beginning Julv 1963.
8
Latest data available for all programs combined. Workers covered by State programs account for about 97 percent of wage and
salary earners.
Source: Department of Labor, Employment and Training Administration.




333

TABLE B-43.—Employees on nonagricultural payrolls, by major industry, 1946-90
[Thousands of persons; monthly data seasonally adjusted]

Year or month

1946
1947 . ..
1948
1949 . ..
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 '
1989- Jan
Feb
Mar
Apr
May
June
July
Sept
Oct.. .
Nov
Dec. ..
1990: Jan
Feb
Mar
Apr
May

Total

...

. .

. ..

Aug..::::."".:; :

June
July
Aug
Sept

:..::.::: ::.:::.
:.."ri:.zz
:..z'::..:

Oct
Nov. ...
Dec*.

41,652
43,857
44,866
43,754
45,197
47,819
48,793
50,202
48,990
50,641
52,369
52,853
51,324
53,268
54,189
53,999
55,549
56,653
58,283
60,765
63,901
65,803
67,897
70,384
70,880
71,214
73,675
76,790
78,265
76,945
79,382
82,471
86,697
89,823
90,406
91,156
89,566
90,200
94,496
97,519
99,525
102,200
105,536
108,413
110,323
107,430
107,648
107,811
107,988
108,135
108,364
108,490
108,628
108,868
108,980
109,245
109,383
109,654
109,958
110,122
110,177
110,617
110,829
110,740
110,613
110,612
110,432
110,165
110,017

See next page for continuation of table.




334

Total
17,248
18,509
18,774
17,565
18,506
19,959
20,198
21,074
19,751
20,513
21,104
20,964
19,513
20,411
20,434
19,857
20,451
20,640
21,005
21,926
23,158
23,308
23,737
24,361
23,578
22,935
23,668
24,893
24,794
22,600
23,352
24,346
25,585
26,461
25,658
25,497
23,813
23,334
24,727
24,859
24,558
24,708
25,173
25,326
25,002
25,399
25,357
25,331
25,361
25,363
25,335
25,328
25,356
25,304
25,283
25,280
25,218
25,188
25,339
25,259
25,180
25,191
25,162
25,105
25,013
24,931
24,777
24,511
24,426

M

Goods-producing industries
Manufacturing
Construction Total Durable Nonduragoods ble goods

862
955
994
930
901
929
898
866
791
792
822
828
751
732
712
672
650
635
634
632
627
613
606
619
623
609
628
642
697
752
779
813
851
958
1,027
1,139
1,128
952
966
927
777
717
713
700
735
692
688
691
695
697
692
682
706
709
710
716
718
723
727
729
734
738
744
745
735
736
733
738
740

1,683
2,009
2,198
2,194
2,364
2,637
2,668
2,659
2,646
2,839
3,039
2,962
2,817
3,004
2,926
2,859
2,948
3,010
3,097
3,232
3,317
3,248
3,350
3,575
3,588
3,704
3,889
4,097
4,020
3,525
3,576
3,851
4,229
4,463
4,346
4,188
3,905
3,948
4,383
4,673
4,816
4,967
5,110
5,200
5,204
5,170
5,166
5,137
5,177
5,187
5,190
5,207
5,220
5,225
5,239
5,258
5,216
5,294
5,368
5,313
5,256
5,286
5,270
5,229
5,194
5,176
5,093
5,029
4,987

14,703
15,545
15,582
14,441
15,241
16,393
16,632
17,549
16,314
16,882
17,243
17,174
15,945
16,675
16,796
16,326
16,853
16,995
17,274
18,062
19,214
19,447
19,781
20,167
19,367
18,623
19,151
20,154
20,077
18,323
18,997
19,682
20,505
21,040
20,285
20,170
18,781
18,434
19,378
19,260
18,965
19,024
19.350
19,426
19,063
19,537
19,503
19,503
19,489
19,479
19,453
19,439
19,430
19,370
19,334
19,306
19,284
19,171
19,244
19,217
19,190
19,167
19,148
19,131
19,084
19,019
18,951
18,744
18,699

7,785
8,358
8,298
7,462
8,066
9,059
9,320
10,080
9,101
9,511
9,802
9,825
8,801
9,342
9,429
9,041
9,450
9,586
9,785
10,374
11,250
11,408
11,594
11,862
11,176
10,604
11,022
11,863
11,897
10,662
11,051
11,570
12,245
12,730
12,159
12,082
11,014
10,707
11,479
11,464
11,203
11,167
11,381
11,422
11,122
11,533
11,497
11,487
11,481
11,471
11,444
11,427
11,416
11,369
11,337
11,314
11,296
11,192
11,278
11,261
11,229
11,217
11,201
11,179
11,129
11,068
11,026
10,865
10,832

6,918
7,187
7,285
6,979
7,175
7,334
7,313
7,468
7,213
7,370
7,442
7,351
7,144
7,333
7,367
7,285
7,403
7,410
7,489
7,688
7,963
8,039
8,187
8,304
8,190
8,019
8,129
8,291
8,181
7,661
7,946
8,112
8,259
8,310
8,127
8,089
7,767
7,726
7,899
7>96
7,761
7,858
7,969
8,004
7,941
8,004
8,006
8,016
8,008
8,008
8,009
8,012
8,014
8,001
7,997
7,992
7,988
7,979
7,966
7,956
7,961
7,950
7,947
7,952
7,955
7,951
7,925
7,879
7,867

TABLE B-43.—Employees on nonagricultural payrolls, by major industry, 1946-90—Continued
[Thousands of persons; monthly data seasonally adjusted]
Service-producing industries
Year or month

1946
.
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
. ..
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 "
1989: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept .
Oct
Nov
Dec
1990- Jan
Feb
Mar
Apr
May
June
July

. .

Aug:: : : : : : : : : : : : : : ":": ;::
Sept
Nov
Dec "

Total

24,404
25,348
26,092
26,189
26,691
27,860
28,595
29,128
29,239
30,128
31,266
31,889
31,811
32,857
33,755
34,142
35,098
36,013
37,278
38,839
40,743
42,495
44,160
46,023
47,302
48,278
50,007
51,897
53,471
54,345
56,030
58,125
61,113
63,363
64,748
65,659
65,753
66,866
69,769
72,660
74,967
77,492
80,363
83,087
85,320
82,031
82,291
82,480
82,627
82,772
83,029
83,162
83,272
83,564
83,697
83,965
84,165
84,466
84,619
84,863
84,997
85,426
85,667
85,635
85,600
85,681
85,655
85,654
85,591

Transportation

and

public
utilities

4,061
4,166
4,189
4,001
4,034
4,226
4,248
4,290
4,084
4,141
4,244
4,241
3,976
4,011
4,004
3,903
3,906
3,903
3,951
4,036
4,158
4,268
4,318
4,442
4,515
4,476
4,541
4,656
4,725
4,542
4,582
4,713
4,923
5,136
5,146
5,165
5,082
4,954
5,159
5,238
5,255
5,372
5,527
5,648
5,839
5,605
5,620
5,604
5,621
5,641
5,656
5,671
5,561
5,656
5,671
5,693
5,776
5,790
5,804
5,808
5,809
5,833
5,846
5,841
5,846
5,870
5,870
5,866
5,881

Wholesale
trade
2,298
2,478
2,612
2,610
2,643
2,735
2,821
2,862
2,875
2,934
3,027
3,037
2,989
3,092
3,153
3,142
3,207
3,258
3,347
3,477
3,608
3,700
3,791
3,919
4,006
4,014
4,127
4,291
4,447
4,430
4,562
4,723
4,985
5,221
5,292
5,376
5,296
5,286
5,574
5,736
5,774
5,865
6,055
6,271
6,361
6,184
6,211
6,231
6,242
6,254
6,267
6,277
6,294
6,303
6,313
6,335
6,344
6,356
6,357
6,361
6,363
6,369
6,383
6,374
6,376
6,370
6,355
6,343
6,328

Retail
trade

6,077
6,477
6,659
6,654
6,743
7,007
7,184
7,385
7,360
7,601
7,831
7,848
7,761
8,035
8,238
8,195
8,359
8,520
8,812
9,239
9,637
9,906
10,308
10,785
11,034
11,338
11,822
12,315
12,539
12,630
13,193
13,792
14,556
14,972
15,018
15,172
15,161
15,595
16,526
17,336
17,909
18,462
19,077
19,580
19,789
19,447
19,476
19,519
19,506
19,533
19,556
19,577
19,620
19,634
19,665
19,714
19,710
19,807
19,758
19,764
19,778
19,795
19,822
19,851
19,846
19,844
19,792
19,739
19,683

Government

Finance,
insurance,
and real
estate

Services

1,675
1,728
1,800
1,828
1,888
1,956
2,035
2,111
2,200
2,298
2,389
2,438
2,481
2,549
2,628
2,688
2,754
2,830
2,911
2,977
3,058
3,185
3,337
3^12
3,645
3,772
3,908
4,046
4,148
4,165
4,271
4,467
4,724
4,975
5,160
5,298
5,341
5,468
5,689
5,955
6,283
6,547
6,649
6,724
6,832
6,673
6,684
6,686
6,691
6,703
6,715
6,724
6,740
6,753
6,756
6,774
6,785
6,794
6,817
6,821
6,823
6,838
6,844
6,842
6,852
6,851
6,843
6,833
6,831

4,697
5,025
5,181
5,239
5,356
5,547
5,699
5,835
5,969
6,240
6,497
6,708
6,765
7,087
7,378
7,619
7,982
8,277
8,660
9,036
9,498
10,045
10,567
11,169
11,548
11,797
12,276
12,857
13,441
13,892
14,551
15,302
16,252
17,112
17,890
18,619
19,036
19,694
20,797
21,999
23,053
24,235
25,669
27,096
28,208
26,533
26,669
26,790
26,893
26,919
27,073
27,127
27,226
27,335
27,408
27,548
27,623
27,721
27,842
27,950
27,969
28,094
28,225
28,287
28,387
28,440
28,475
28,548
28,556

Total
5,595
5,474
5,650
5,856
6,026
6,389
6,609
6,645
6,751
6,914
7,278
7,616
7,839
8,083
8,353
8,594
8,890
9,225
9,596
10,074
10,784
11,391
11,839
12,195
12,554
12,881
13,334
13,732
14,170
14,686
14,871
15,127
15,672
15,947
16,241
16,031
15,837
15,869
16,024
16,394
16,693
17,010
17,386
17,769
18,291
17,589
17,631
17,650
17,674
17,722
17,762
17,786
17,831
17,883
17,884
17,901
17,927
17,998
18,041
18,159
18,255
18,497
18,547
18,440
18,293
18,306
18,320
18,325
18,312

Federal
2,254
1,892
1,863
1,908
1,928
2,302
2,420
2,305
2,188
2,187
2,209
2,217
2,191
2,233
2,270
2,279
2,340
2,358
2,348
2,378
2,564
2,719
2,737
2,758
2,731
2,696
2,684
2,663
2,724
2,748
2,733
2,727
2,753
2,773
2,866
2,772
2,739
2,774
2,807
2,875
2,899
2,943
2,971
2,988
3,086
2,980
2,983
2,987
2,983
2,997
2,997
2,996
2,996
2,992
2,986
2,982
2,977
3,000
3,005
3,089
3,151
3,346
3,338
3,164
3,045
2,999
2,983
2,961
2,948

State
and
local

3,341
3,582
3,787
3,948
4,098
4,087
4,188
4,340
4,563
4727
5,069
5,399
5,648
5,850
6,083
6,315
6,550
6,868
7,248
7,696
8,220
8,672
9,102
9,437
9,823
10,185
10,649
11,068
11,446
11,937
12,138
12,399
12,919
13,174
13,375
13,259
13,098
13,096
13,216
13,519
13,794
14,067
14,415
14,781
15,206
14,609
14,648
14,663
14,691
14,725
14,765
14,790
14,835
14,891
14,898
14,919
14,950
14,998
15,036
15,070
15,104
15,151
15,209
15,276
15,248
15,307
15,337
15,364
15,364

Note.— Data in Tables B-43 and B-44 are based on reports from employing establishments and relate to full- and part-time wage and
salary workers in nonagricultural establishments who received pay for any part of the pay period which includes the 12th of the month.
Not comparable with labor force data (Tables B-32 through B-41) which include proprietors, self-employed persons, domestic servants,
;
,
,
etc., even if they are not paid for the time off; and which are based on a sample of the working-age population. For description and
details of the various establishment data, see "Employment and Earnings."
Source: Department of Labor, Bureau of Labor Statistics.




335

TABLE B-44.—Average weekly hours and hourly and weekly earnings in private nonagricultural industries,
1947-90
[For production or nonsupervisory workers; monthly data seasonally adjusted, except as noted]
Average weekly
hours
ManufacturYear or
month

Average hourly earnings
Total private l

Average weekly earnings
Total private >

ing

Total
priCurrent
vate 1 Total Over- dollars
time

1982
dollars 2

Manufacturing Current
dollars

1982
dol-2

lars

Confactoring struction
(current (current
dollars) dollars)

Retail
trade

(current
dollars)

Percent change
from a year
earlier, total
private 3

Current

dollars

1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962.. .
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973..
1974
1975
1976
1977
1978. .
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
!..
1990 '
1989: Jan....
Feb....
Mar....

fc
June...
July....
Aug....
Sept...
Oct...
Nov...
Dec....
1990: Jan...
Feb...
Mar...

fc:
June..
July...
Aug...
Sept..
Oct...
Nov...
Dec"

40.3
40.0
39.4
39.8
39.9
39.9
39.6
39.1
39.6
39.3
38.8
38.5
39.0
38.6
38.6
38.7
38.8
38.7
38.8
38.6
38.0
37.8
37.7
37.1
36.9
37.0
36.9
36.5
36.1
36.1
36.0
35.8
35.7
35.3
35.2
34.8
35.0
35.2
34.9
34.8
34.8
34.7
34.6
34.5
34.7
34.6
34.6
34.7
34.5
34.5
34.6
34.5
34.6
34.6
34.5
34.4
34.4
34.6
34.6
34.5
34.5
34.7
34.5
34.5
34.7
34.2
34.4
34.6

40.4
$1.131 $4.875
1.225
40.0
4.900
1.275 5.141
39.1
1.335 5.340
40.5
1.45
40.6
5.39
40.7
1.52
5.51
40.5
1.61
5.79
39.6
1.65
5.91
1.71
40.7 ...„..„.
6.15
40.4
1.80
6.38
6.47
39.8 2.3
1.89
39.2
2.0
1.95
6.50
2.7
2.02
40.3
6.69
39.7 2.5
2.09
6.79
2.14
39.8 2.4
6.88
40.4
2.8
2.22
7.07
2.8
40.5
2.28
7.17
40.7
3.1
2.36
7.33
3.6
2.46
41.2
7.52
41.4
3.9
2.56
7.62
3.4
40.6
2.68
7.72
40.7
3.6
2.85
7.89
3.6
40.6
3.04
7.98
3.0
39.8
3.23
8.03
39.9
2.9
3.45
8.21
40.5 3.5
3.70
8.53
40.7
3.8
3.94
8.55
40.0
3.3
4.24
8.28
39.5
2.6
4.53
8.12
3.1
40.1
4.86
8.24
40.3
3.5
5.25
8.36
40.4
3.6
5.69
8.40
3.3
40.2
6.16
8.17
39.7
2.8
6.66
7.78
39.8 2.8
7.25
7.69
38.9
2.3
7.68
7.68
40.1 3.0
8.02
7.79
3.4
40.7
8.32
7.80
40.5
3.3
8.57
7.77
40.7
3.4
8.76
7.81
3.7
41.0
8.98
7.73
41.1 3.9
9.28
7.69
7.64
41.0 3.8
9.66
3.6 10.03
7.54
40.8
41.1 3.8
9.49
7.67
41.1 4.0
9.51
7.65
3.9
41.0
9.54
7.63
41.1 3.9
9.60
7.63
3.8
41.0
9.60
7.59
3.8
41.0
9.63
7.60
7.64
41.0 3.8
9.70
3.8
41.0
7.64
9.70
3.8
7.64
40.9
9.73
3.7
40.8
9.78
7.65
3.7
40.7
9.78
7.62
3.7
40.6
9.83
7.63
40.7
3.6
9.82
7.54
3.6
40.8
9.88
7.55
3.7
40.8
9.93
7.56
40.7
3.5
7.57
9.96
40.9
3.8
9.98
7.58
3.8 10.03
41.0
7.58
3.7 10.07
40.9
7.58
3.8 10.09
7.54
41.0
3.7 10.13
41.0
7.50
40.7
3.6 10.12
7.45
3.5 10.14
7.44
40.5
40.7
3.6 10.19
7.46

$1.216
1.327
1.376
1.439
1.56
1.64
1.74
1.78
1.85
1.95
2.04
2.10
2.19
2.26
2.32
2.39
2.45
2.53
2.61
2.71
2.82
3.01
3.19
3.35
3.57
3.82
4.09
4.42
4.83
5.22
5.68
6.17
6.70
7.27
7.99
8.49
8.83
9.19
9.54
9.73
9.91
10.19
10.49
10.84
10.36
10.39
10.40
10.42
10.43
10.47
10.50
10.53
10.55
10.57
10.58
10.62
10.57
10.67
10.73
10.75
10.81
10.86
10.89
10.90
10.93
10.97
10.97
11.01

$45.58 $196.47
49.00 196.00
50.24 202.58
53.13 212.52
57.86 215.09
60.65 219.75
63.76 229.35
64.52 231.25
67.72 243.60
70.74 250.85
73.33 251.13
75.08 250.27
78.78 260.86
80.67
261.92
82.60
265.59
85.91 273.60
278.18
88.46
91.33 283.63
95.45 291.90
98.82 294.11
101.84 293.49
107.73 298.42
114.61 300.81
119.83 298.08
127.31 303.12
136.90 315.44
315.38
145.39
302.27
154.76
163.53 293.06
175.45 297.37
189.00
300.96
203.70 300.89
219.91
291.66
274.65
235.10
255.20 270.63
267.26 267.26
280.70
272.52
292.86 274.73
299.09 271.16
304.85 271.94
312.50
269.16
322.02 266.79
334.24 264.22
346.04 259.98
329.30
265.99
329.05 264.72
264.06
330.08
333.12 264.59
262.03
331.20
332.24 262.23
264.27
335.62
263.71
334.65
336.66
264.25
338.39 264.57
337.41
262.99
338.15 262.54
337.81 259.45
341.85 261.35
343.58 261.48
261.31
343.62
344.31 261.63
348.04
262.87
347.42 261.61
348.11 259.98
351.51 260.38
254.67
346.10
348.82
256.11
352.57 258.10

1
Also includes other private industry groups shown
2
Current dollars divided by the consumer price
3

$49.13
53.08
53.80
58.28
63.34
66.75
70.47
70.49
75.30
78.78
81.19
82.32
88.26
89.72
92.34
96.56
99.23
102.97
107.53
112.19
114.49
122.51
129.51
133.33
142.44
154.71
166.46
176.80
190.79
209.32
228.90
249.27
269.34
288.62
318.00
330.26
354.08
374.03
386.37
396.01
406.31
418.81
430.09
442.27
425.80
427.03
426.40
428.26
427.63
429.27
430.50
431.73
431.50
431.26
430.61
431.17
430.20
435.34
437.78
437.53
442.13
445.26
445.40
446.90
448.13
446.48
444.29
448.11

$58.83
65.23
67.56
69.68
76.96
82.86
86.41
88.54
90.90
96.38
100.27
103.78
108.41
112.67
118.08
122.47
127.19
132.06
138.38
146.26
154.95
164.49
181.54
195.45
211.67
221.19
235.89
249.25
266.08
283.73
295.65
318.69
342.99
367.78
399.26
426.82
442.97
458.51
464.46
466.75
480.44
495.73
512.41
524.49
498.17
499.66
506.90
510.89
504.38
505.50
516.26
516.26
515.28
519.90
524.54
516.00
523.03
527.48
523.18
508.03
520.98
531.35
516.00
526.40
530.69
511.34
530.92
536.43

$33.77
36.22
38.42
39.71
42.82
43.38
45.36
47.04
48.75
50.18
52.20
54.10
56.15
57.76
58.66
60.96
62.66
64.81
66.65
68.50
70.86
74.93
78.67
82.31
87.51
92.03
96.45
102.55
108.63
114.56
121.54
130.14
138.83
147.24
157.99
163.83
171.13
174.47
174.81
175.80
178.80
183.62
188.72
195.26
187.46
186.12
187.34
188.50
187.56
188.14
189.37
189.58
189.87
190.74
190.37
191.23
192.38
193.34
195.17
195.46
196.04
196.62
196.23
195.73
197.39
194.26
197.17
196.60

7.5
2.5
5.8
8.9
4.8
5.1
1.2
5.0
4.5
3.7
2.4
4.9
2.4
2.4
4.0
3.0
3.2
4.5
3.5
3.1
5.8
6.4
4.6
6.2
7.5
6.2
6.4
5.7
7.3
7.7
7.8
8.0
6.9
8.5
4.7
5.0
4.3
2.1
1.9
2.5
3.0
3.8
3.5
4.2
3.5
4.3
4.3
3.2
3.3
4.0
4.1
4.0
3.6
3.5
3.5
2.7
3.9
3.7
2.8
4.0
4.5
3.4
3.8
4.3
2.1
3.1
4.0

1982
dol-

lars 2

-0.2
3.4
4.9
1.2
2.2
4.4
.8
5.3
3.0
.1
7.2
.4
1.4
3.0
1.7
2.0
2.9
.8
~U
.8
-.9
1.7
4.1
-.0
-4.2
-3.0
1.5
1.2
-.0
-3.1
-5.8
-1.5
-1.2
2.0
.8
-1.3
.3
-1.0
-.9
-1.0
-1.6
-.2
-1.1
-.7
-.9
-2.1
-1.8
-1.0
-.5
-.3
-.8
-1.0
-1.0
-2.4
-1.2
-1.5
-1.6
-.1
-.0
-1.0
-1.7
-1.6
-3.8
-3.0
-2.0

in Table B-43.
index for urban wage earners and clerical workers on a 1982=100 base.
Monthly percent changes are based on data not seasonally adjusted.
Note.-See Note, Table B-43.
Source: Department of Labor, Bureau of Labor Statistics.




336

TABLE B-45.—Employment cost index, private industry, 1975-90
Total private

•x "ST

Year and month

Total

salaries

December:
1975
1976
1977
1978 .
1979
1980
1981
1982

Benefits >

::::::::::
si
64.8

98.8
100.0
101.3
102.4
103.8
105.1
106.2
107.2

99.1
100.0
101.1
102.2
103.3
104.4
105.4
106.2

98.1
99.8
101.5
103.1
105.1
106.7
108.4
109.9

December*
1976...'.
1977.
IZZ
1978
1979
1980
9.6
1981
9.9
1982
6.5
1983
5.7
1984.
4.9
1985
3.9
1986
3.2
1987
3.3
1988. .
4.8
1989
4.8
4.6
1990 .ZZ
1989: Mar
4.6
June
4.5
Sept
4.8
Dec
4.8
1990: Mar
5.2
June
5.2
Sept
4.9
Dec
4.6

7.2
6.9
7.6
8.7
9.1
8.8
6.3
4.9
4.2
4.1
3.2
3.3
4.1
4.1
4.0
4.2
4.1
4.3
4.1
4.2
4.5
4.2
4.0

11.7
12.1
7.2
7.4
6.5
3.5
3.4
3.4
6.9
6.1
6.6
5.4
5.6
6.0
6.1
7.2
6.9
6.8
6.6

1989: Mar
June
Sept
Dec
1990: Mar
June
Sept
Dec

1.1
.9
1.1
1.1
1.1
1.1
1.0
.8

1.0
1.7
1.7
1.6
1.9
1.5
1.6
1.4

Total Wages Bene- Total Wages BeneTotal Wages Beneand
and
1 compen1
1
°X sala- fits sate sala- fits °X sala- fits
ries
ries
ries
index, June 1989=100; not seasonally adjusted

* Benefits

Total
sa5on~ salaries

C

1983. .: : :
1984

1985
1986
1987
1988

1989. . ::::.

1990
1989: Mar
June
Sept
Dec
1990: Mar
June
Sept
Dec
1989: Mar
June
Sept
Dec
1990: Mar
June

St:

1.0
1.2
1.3
1.1
1.4
1.3
1.0
.9

""512
59.4
66.6
71.4
76.7
81.7
84.6
87.5
90.5
96.7
102.6
109.4
98.4
100.0
101.4
102.6
105.5
106.9
108.3
109.4

1

::::::

58i5
64.2
70.4
75.1
79.6
83.4
87.0
89.7
92.9
97.5
102.3
106.9
98.8
100.0
101.3
102.3
103.8
105.1
106.2
106.9

45.7
48.9
52.1
55.9
60.8
66.2
72.1
76.8
81.0
84.2
88.0
90.6
93.7
97.8
102.2
106.1
99.1
100.0
101.4
102.2
103.2
104.5
105.4
106.1

98.8
99.9
101.2
102.5
103.8
105.0
106.1
107.2

99.2
100.0
101.2
102.3
103.3
104.5
105.2
106.2

97.9
99.9
101.4
103.1
105.1
106.8
108.2
109.7

7.5
7.7
8.3
8.3
9.9 9.4 10.8
9.9
8.6 12.7
6.1 5.7
7.3
4.9 4.0
7.0
4.7
3.8 6.3
3.3 3.5 3.0
3.2
3.2
3.0
3.1 3.1 2.9
4.4
3.2
7.0
4.3 3.9
5.4
4.8 3.7
7.1
3.6 3.1 4.6
3.6 3.2
4.5
4.1 3.6
5.2
4.3 3.9 5.4
7.1
5.1 4.0
5.2 4.2
7.2
5.0 4.1 7.1
7.1
3.7
4.8
Percent change from

7.3
6.9
6.6 •""••••••' ZZI 7.8 •"""••••• •"•••••••••"
8.4
7.2
8.4
8.9
9.7
9.7
9.8 9.4 10.5
8.8 12.5
9.7
8.7 12.7
9.8
9.8 8.9 11.5
6.7
7.3
6.6
6.1 5.6
6.8 6.9
6.0
6.5 5.7
5.1 4.3 7.0
8.0
6.7
4.8
5.2 4.4
5.1 4.4
6.9
4.3
2.8
4.5 4.8 4.0
3.3 3.6
3.1
3.1 3.0
3.3 3.3 2.9
3.8
3.6
3.4
2.6
3.4
3.7
3.0
3.9
5.0
7.6
5.1 4.7
4.5 3.0
6.5
4.9
5.9
5.1 4.5 6.8
4.5 3.9
4.5
7.0
6.2
4.0
4.6
5.1 4.2
5.0
5.3 5.1 6.2
3.8 3.1 5.4
4.8
5.2
3.3 5.4
4.7
6.6
4.0
5.0
6.1
6.8
5.3 4.9
4.3 3.7
4.9
5.9
5.1 4.5 6.8
4.5 3.9
5.1
4.3 6.8
5.1 4.2
7.2
5.2
5.1
5.2
6.6
5.3 4.5 6.9
4.6
4.8
4.5 6.7
6.4
5.2
4.8 4.2
4.5
7.0
6.2
5.1 4.2
4.0
4.6
3 months earlier, seasonally adjusted

7.0
6.5
7.3
8.8
8.9
8.9
6.5
5.5
4.0
4.5
3.0
3.4
4.4
4.5
3.8
4.9
4.4
4.6
4.5
4.1
4.5
3.9
3.8

12.6
11.8
6.8
7.9
6.4
4.1
3.7
4.0
6.4
6.2
6.3
5.4
5.8
6.2
6.2
7.3
6.9
6.7
6.3

0.8
1.1
1.2
1.1
1.5
1.3
1.0
.9

1.2
1.1
1.4
1.2
1.3
1.3
1.0
.9

::::::::

71.2
75.8
80.1
84.0
87.3
90.1
93.1
97.6
102.3
107.0
98.8
100.0
101.2
102.3
103.9
105.2
106.2
107.0

45.9
49.2
52.6
56.6
61.5
67.1
73.0
77.6
81.4
84.8
88.3
91.1
94.1
98.0
102.0
106.1
99.0
100.0
101.2
102.0
103.2
104.5
105.4
106.1

Nonmanufacturing

Manufacturing

Service-producing

Goods-producing

45.1
46.9
48.2
50.4
54.3
= 51.4
55.1
58.8
57J 60.0 ""5L9
63.7 ""Sis
63.3 65.3 58.4
69.7 60.5
69.5 71.1 65.1
75.7 68.2
74.1 75.9 69.6
80.0 73.2
78.9 80.2 75.2
83.2 78.3
82.9 83.7 80.4
86.4 83.2
86.6 87.7 83.6
89.4 85.7
89.3 90.3 86.8
92.3 88.3
92.6 93.4 90.2
95.2 90.9
97.3 97.8 96.1
98.2 97.3
102.3 102.2 102.6
102.0 102.6
105.8 109.9 107.0 106.3 109.0
98.8 99.1 98.2
99.1 98.7
100.0 100.0 100.0 100.0 100.0
101.0 101.5 101.3 101.4 101.4
102.0 102.6 102.3 102.2 102.6
103.1 105.7 103.8 103.3 105.3
104.2 107.2 105.2 104.6 106.6
105.1 108.7 106.2 105.7 107.9
105.8 109.9 107.0 106.3 109.0
Index, June 1989=100; seasonally

:::::: :::
:::

607
66.7
73.3
77.8
81.6
85.4
88.2
91.0
93.8
97.9
102.1
107.0
98.9
100.0
101.1
102.1
103.9
105.2
106.2
107.0

98.9 99.1 98.4
100.0 100.0 99.8
101.2 101.0 101.6
102.3 102.0 103.0
103.8 103.1 105.3
105.1 104.2 107.0
106.2 105.1 108.8
107.2 105.8 110.4
Percent change from

60l
66.0
72.5
76.9
80.8
85.0
87.8
90.7
93.4
97.6
102.0
107.2
98.9
100.0
101.1
102.0
104.0
105.3
106.4
107.2
adjusted

46.3
49.7
53.6
58.1 ....„...„.
63.0
68.9 59.9
74.9 67.5
79.1 72.4
82.5 77.5
86.1 82.7
89.2 85.0
92.1 87.5
95.2 89.8
98.1 96.6
1019 102.3
106.2 109.5
99.0 98.8
100.0 100.0
100.9 101.6
101.9 102.3
103.3 105.5
104.5 106.9
105.4 108.4
106.2 109.5

:::::::::z:=:

98.7 99.0 98.2
98.8 99.1 97.9
99.9 100.0 99.9
99.9 100.0 99.8
101.3 101.2 101.4 101.2 100.9 101.7
102.5 102.3 103.0
102.3 101.9 103.0
103.8 103.4 105.0
103.8 103.3 104.9
105.1 104.6 106.5 105.2 104.5 106.7
106.2 105.5 108.0 106.5 105.4 108.5
107.2 106.4 109.5 107.5 106.2 110.2
12 months earlier, not seasonally adjusted

z:z:zzi

0.9
.9
1.0
1.0
1.1
1.1
.9
.7

0.7
1.4
1.8
1.4
2.2
1.6
1.7
1.5

1

1.2
.9
1.2
1.1
1.1
1.2
.9
.9

1.5
2.0
1.5
1.6
1.9
1.4
1.4
1.4

0.9
1.2
1.3
1.1
1.5
1.3
1.2
.9

0.9
1.0
.9
1.0
1.4
1.2
.9
.8

1.0
1.6
1.9
1.3
1.8
1.7
1.7
1.6

1.1
1.1
1.3
1.3
1.3
1.2
1.0
1.0

1.3
1.2
1.1
1.0
1.2

i!o

"'Mis
59.1
66.1
70.6
76.2
81.1
84.4
87.5
91.0
96.8
102.8
109.3
98.2
100.0
101.4
102.8
105.4
106.9
108.2
109.3

0.8
2.0
1.5
1.7
1.9
1.6
1.3
1.4

Employer costs for employee benefits.
Note.—The employment cost index is a measure of the change in the cost of labor, free from the influence of employment shifts
among occupations and industries.
Data exclude farm and household workers.
Through December 1981, percent changes are based on unrounded data; thereafter changes are based on indexes as published.
Source: Department of Labor, Bureau of Labor Statistics.




337

TABLE B-46.—Productivity and related data, business sector, 1947-90
[1982=100; quarterly data seasonally adjusted]

Year or
quarter

1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983....
1984 ..
1985
'...'.
1986
1987
1988
1989
1990:'
1982: IV
1983: IV
1984: IV
1985: IV
1986: IV
1987: IV
1988:1
II
Ill
IV
1989:1
II
Ill
IV
1990:1
II
Ill
IV...

Output per hour
of all persons

Output

Business
sector

Nonfarm
business
sector

Business
sector

43.6
45.8
46.3
50.2
52.2
53.9
559
56.8
585
59.3
609
62.7
64.8
65.9
68.2
70.7
73.5
76.8
79.1
81.4
83.8
86.3
86.5
87.3
90.1
92.8
95.0
93.2
95.1
97.9
99.7
100.6
99.5
99.2
100.7
100.0
102.3
104.9
107.1
109.5
110.7
113.2
112.6
111.9
100.6
103.2
105.3
108.0
109.4
112.0
113.2
112.9
113.6
113.1
113.0
113.0
112.6
111.9
111.7
111.9
112.1
112.0

50.7
52.6
53.5
56.9
58.6
60.0
613
62.2
640
64.4
656
67.1
69.3
70.0
72.3
74.6
77.3
80.4
82.4
84.3
86.4
89.0
88.7
89.1
91.8
94.6
96.6
94.8
96.5
99.1
100.9
101.8
100.2
99.9
100.9
100.0
102.9
105.1
106.5
108.7
109.8
112.5
111.7
110.8
100.4
103.8
105.4
107.1
108.4
110.9
112.2
112.0
112.8
112.9
112.1
112.0
111.7
111.0
110.7
110.7
110.9
110.9

34.3
36.3
35.5
38.9
41.6
42.9
449
441
471
48.5
490
48.1
51.6
52.5
53.5
56.3
58.9
62.4
66.4
69.8
71.7
74.8
76.8
76.1
78.2
83.1
88.1
86.5
84.7
89.6
94.8
100.3
102.3
101.1
103.2
100.0
104.2
113.0
117.7
121.3
126.4
1330
135.8
136.1
99.5
107.6
114.5
119.3
122.2
129.4
131.2
132.6
133.8
134.5
135.6
135.9
136.1
135.5
136.0
136.4
136.5
135.7

1

Nonfarm
business
sector

Hours of 2
2*1
persons
Business
sector

78.7
33.6
35.5
793
34.7
76.7
38.0
77.5
40.9 79.6
42.3 79.7
442 803
433 777
464 805
47.9 81.7
485 805
47.5 76.7
51.2
79.7
52.0
79.7
53.1
78.5
56.0
79.7
58.6
80.1
62.3 81.4
66.3
83.9
70.0 85.8
71.8
85.5
86.7
75.1
77.1
88.8
76.3 87.2
78.4
86.8
83.4
89.6
88.5
92.8
86.9
92.9
84.9
89.1
90.0
91.6
95.3
95.1
99.7
101.0
102.9 102.8
101.7 101.9
103.4 102.5
100.0 100.0
105.0 101.8
113.7 107.6
118.1 109.9
121.6 110.8
126.8 114.1
1340 1175
136.7 120.5
137.0 121.6
99.3
98.9
108.7 104.3
115.1 108.7
119.6 110.5
122.4 111.7
129.7 115.6
131.6 115.8
133.4 117.5
134.8 117.8
136.0 118.8
136.4 120.0
136.8 120.2
137.1 120.9
136.3 121.0
136.8 121.7
137.2 121.9
137.4 121.8
136.4 121.1

Nonfarm
business
sector

66.2
67.4
64.8
66.8
69.8
70.5
722
69.7
725
74.3
739
70.8
73.8
74.3
73.4
75.0
75.8
77.5
80.4
83.1
83.1
84.4
86.9
85.6
85.4
88.2
91.6
91.7
88.0
90.8
94.5
99.3
102.6
101.8
102.5
100.0
102.0
108.1
110.9
111.9
115.5
1191
122.3
123.6
98.9
104.7
109.2
111.7
112.9
117.0
117.3
119.1
119.5
120.5
121.7
122.2
122.7
122.8
123.7
123.9
123.9
123.0

Compensation
per hour3
Business
sector

10.4
11.3
11.5
12.4
13.6
14.5
154
159
163
17.4
186
19.5
20.3
21.2
22.0
23.0
23.9
25.2
26.1
28.0
29.6
32.0
34.3
36.9
39.3
41.8
45.4
49.9
54.8
59.7
64.5
70.1
77.0
85.1
93.0
100.0
103.8
108.0
112.8
118.7
123.1
1286
132.9
137.7
102.1
105.3
109.5
115.2
120.8
125.5
126.3
127.9
129.7
130.8
131.8
132.7
133.1
133.8
135.3
137.0
138.6
139.8

Nonfarm
business
sector

Real compensation
per hour*

Unit labor costs

Business
sector

Nonfarm
business
sector

Business
sector

Nonfarm
business

49.3
49.5
51.7
54.1
54.6
56.5
594
60.8
633
66.2
677
68.5
70.8
72.7
74.4
76.6
78.3
80.9
82.3
84.8
87.0
90.1
91.3
92.5
94.3
97.3
99.2
98.2
98.9
101.5
102.9
103.9
102.2
99.6
98.8
100.0
100.7
100.4
100.9
104.1
104.0
1043
102.7
100.8
100.6
100.4
100.4
101.5
105.1
104.4
104.1
104.3
104.4
104.2
103.7
102.6
102.3
101.9
100.9
101.2
100.8
100.1

24.0
24.7
24.9
24.7
26.0
26.8
276
281
279
29.4
305
31.0
31.3
32.2
32.3
32.6
32.5
32.8
33.1
34.4
35.3
37.1
39.7
42.3
43.6
45.0
47.8
53.5
57.6
61.0
64.7
69.7
77.4
85.8
92.4
100.0
101.4
102.9
105.4
108.4
111.2
1137
117.9
123.0
101.5
102.0
104.0
106.7
110.4
112.1
111.5
113.3
114.2
115.6
116.7
117.4
118.2
119.5
121.1
122.5
123.6
124.8

22.5
235
23.8
23.8
25.1
25.9
268
27.3
274
29.0
301
30.6
30.8
31.8
31.9
32.1
32.1
32.3
32.6
33.8
34.9
36.5
39.1
41.7
43.2
44.6
47.3
53.0
57.1
60.4
64.1
69.0
76.7
85.2
92.3
100.0
101.0
102.8
105.6
108.8
111.6
1137
118.1
123.2
101.7
101.3
104.0
107.1
111.0
112.6
111.9
113.5
114.2
115.2
116.9
117.5
118.3
119.7
121.3
122.7
123.9
125.0

45.2
11.4
12.4 45.4
12.7 46.7
49.5
13.5
14.7
50.5
15.5
52.6
164 558
170 57.2
176 589
61.9
18.6
197 639
20.5 64.9
21.4 67.3
22.3 69.1
23.0
71.0
24.0
73.6
24.8 75.4
26.0 78.3
80.1
26.9
83.4
28.5
85.5
30.1
88.7
32.5
34.7
90.3
37.2 91.8
93.5
39.6
42.2 96.4
98.6
45.7
50.2
97.6
98.3
55.1
59.9 101.3
64.6 102.7
70.2 103.7
76.9 102.3
99.7
85.1
93.1
98.8
100.0 100.0
104.0 100.6
108.1 100.4
112.5 101.2
118.2 104.5
122.4 104.5
1278 1049
131.9 103.4
136.5 101.7
102.1 100.6
105.2 100.5
109.6 100.4
114.6 102.0
120.3 105.5
124.8 105.0
125.5 104.7
127.1 104.9
128.8 105.1
130.0 104.9
131.0 104.3
131.6 103.5
132.1 103.1
132.9 102.6
134.2 101.7
135.8 102.1
137.4 101.7
138.7 100.9

Implicit price
deflator6
Business
sector

24.0
257
25.5
25.9
27.6
27.9
281
2&5
292
30.1
312
31.7
32.3
32.8
32.9
33.6
33.9
34.2
35.0
36.2
37.1
38.8
40.8
42.7
44.8
46.6
49.6
54.3
59.9
63.4
67.5
72.5
79.0
86.2
94.4
100.0
103.3
106.8
109.5
111.8
114.8
1182
122.8
127.5
101.4
104.8
107.9
110.5
112.8
115.7
116.2
117.5
118.9
120.3
121.2
122.5
123.3
124.3
125.8
127.2
128.2
128.8

Nonfarm
business
sector

22.8
244
24.7
25.2
26.6
27.1
276
28'0
289
29.8
309
31.3
32.1
32.5
32.7
33.3
337
34.1
34.8
35.8
36.9
38.6
40.5
42.5
44.6
46.3
48.4
53.4
59.2
629
67io
71.7
78.1
85.7
94.0
100.0
103.5
106.6
109.8
112.3
115.3
118.4
123.0
127.7
101.5
104.7
107.9
111.0
113.4
116.2
116.6
117.8
118.8
120.5
121.4
122.7
123.5
124.7
125.8
127.3
128.4
129.2

1
Output refers to gross domestic product originating in the sector in 1982 dollars.
8
Hours at work of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based
primarily on establishment data.
3
Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also includes an
estimate of wages, salaries, and supplemental payments for the self-employed.
4
Hourly compensation divided by the consumer price index for all urban consumers.
6
Current dollar gross domestic product divided by constant dollar gross domestic product.
Source: Department of Labor, Bureau of Labor Statistics.




338

TABLE B-47.—Changes in productivity and related data, business sector, 1948-90
[Percent change from preceding period; quarterly data at seasonally adjusted annual rates]

Year or
quarter

1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960 .
1961
1962

1963.. .: : : .

1964
1965
1966 . .
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979

1980...
1981
1982

1983...:.:

1984
1985
1986
1987
1988
1989
1990 P.
1988:1

II
III
IV

1989:1

II
Ill
IV

1990:1
II
Ill
IV ' . .
..

Output per hour
of all persons
Business
sector

5.1
1.0
8.5
4.1
3.2
3.8
1.5
3.1
1.4
2.7
2.9
3.3
1.7
3.6
3.6
4.0
4.4
3.0
2.9
2.9
3.0
.3
.9
3.2
3.0
2.3
-1.9
2.1
2.9
1.9
.9
-1.1
-.2
1.5
-.7
2.3
2.5
2.0
2.3
1.1
2.2
-.6
4.6
-1.1
2.5
-1.6
-.5
.1
-1.6
-2.3
-.9
.6
.9
-.5

Nonfarm
business
sector

Output1
Business
sector

Nonfarm
business
sector

5.9
3.8
1.6 -2.3
6.5
9.5
7.1
3.0
2.3
3.2
2.2
4.6

5.6
-2.3
9.7
7.7
3.2
4.6
-2.0
7.1
3.1
1.3
-2.0
7.7
1.7
20
5.5
4.7
6.3
6.4
5.6
2.5
4.7
2.7
-1.1
2.7
6.4
6.2
-1.8
-2.3
6.0
5.9
6.0
1.9
-1.2
1.7
-3.3
5.0
8.3
3.9
3.0
4.2
57
2.0
.2
5.9
5.6
4.1
3.6
1.2
1.3
.6
-2.1
1.4
1.2
.4
-2.7

1.4
3.0
.6
1.9
2.3
3.2
1.1
3.2
3.3
3.6
3.9
2.6
2.2
2.5
2.9
-.3
.5
3.0
3.0
2.2
-1.9
1.9
2.7
1.7
.9
-1.5
-.3
1.0
-.9
2.9
2.1
1.3
2.0
1.0
25
-.7
-.8
4.7
-.5
2.8
.2
-2.7
-.3
-1.0
-2.5
-1.3
.3
.6
.1

-1.8
6.9
2.8
1.1
-1.8
7.3
1.8
1.9
5.2
4.6
6.0
6.3
5.2
2.7
4.4
2.7
-.9
2.7
6.3
6.0
-1.8
-2.1
5.8
5.8
5.8
2.0
-1.1
2.1
-3.1
4.2
8.4
4.2
3.1
4.1
53
2.1
.3
5.7
4.6
3.5
2.0
3.5
.9
.6
-1.8
1.4
1.2
.5
-2.5

Hours of 1
all
persons
Business
sector

0.8
-3.3
1.0
2.8
.0
.8
-3.3
3.7
1.5
-1.5
-4.6
3.8
.1
-1.6
1.6
.5
1.5
3.1
2.2
-.3
1.4
2.4
-1.8
-.4
3.2
3.6
.1
-4.1
2.8
3.8
4.8
3.1
-.9
.6
-2.5
1.8
5.7
2.1
.8
3.0
30
2.6
.9
1.0
5.8
1.0
3.6
4.0
.8
2.2
.4
2.3
.5
-.4
-2.1

Nonfarm
business
sector

1.8
-3.8
3.0
4.6
1.0
2.4
-3.4
4.0
2.5
-.6
-4.2
4.3
.6
-1.1
2.1
1.1
2.3
3.7
3.3
-.0
1.7
2.9
-1.5
-.3
3.3
3.9
.1
-4.1
3.2
4.1
5.0
3.4
-.8
.7
-2.4
2.0
6.0
2.5
.9
3.2
31
27
1.1
1.1
6.1
1.3
3.4
4.0
1.6
1.6
.5
2.8
.9
-.2
-2.7

Compensation per
hour8

Real compensation
per hour4

Business
sector

Business
sector

8.5
1.7
7.4
9.9
6.3
6.8
3.2
2.5
6.7
6.6
4.6
4.4
4.3
3.9
4.7
3.8
5.3
3.9
7.1
5.7
8.2
7.3
7.5
6.4
6.4
8.7
9.9
9.9
9.0
8.0
8.6
9.8
10.6
9.3
7.5
3.8
4.1
4.4
5.2
3.7
45
3.3
3.6
2.5
5.3
5.6
3.4
3.3
2.6
1.1
2.2
4.5
5.4
4.6
3.4

1

Nonfarm
business
sector

0.4
8.5
2.9
3.0
6.1
6.1
8.7
1.8
4.3
5.6
6.0
5.8
2.4
3.2
2.9
3.6
6.1
5.1
3.2
5.8
1.7
4.0
4.1
3.7
4.4
2.6
2.9
3.3
4.1
3.5
2.4
3.5
3.9
4.6
2.2
3.4
4.1
6.0
2.5
5.8
3.8
7.9
1.7
6.8
1.7
7.2
1.9
6.4
3.1
6.5
2.3
8.3
9.9 -1.1
.7
9.8
3.1
8.6
1.4
7.9
1.0
8.7
9.6 -1.4
10.6 -2.5
9.4 -1.0
7.4
1.3
.6
4.0
3.9 -.2
4.1
.8
3.2
5.1
.1
3.6
4
44
3.2 -1.5
3.5 -1.7
2.4 -.9
.8
5.1
.6
5.3
3.8 -.9
3.3 -2.0
1.7 -3.2
1.6 -1.7
2.3 -1.8
3.9 -3.3
5.0
1.6
4.7 -1.9
3.8 -3.1

Nonfarm
business
sector

Unit labor costs
Business
sector

0.4
3.3
4.3
.7
4.8 -1.0
.8
5.5
3.6
3.0
5.0
3.0
1.7
2.5
4.0 -.5
4.6
5.3
2.4
3.8
1.1
1.6
3.4
1.0
2.6
2.6
2.3
.3
3.1
1.0
2.2
-.2
3.3
.8
8
1.7
3.1
4.0
2.6
2.6
3.6
5.1
1.3
6.9
1.4
6.5
2.0
3.1
3.2
3.2
2.0
6.2
-1.0
12.0
.7
7.7
2.7
5.9
6.0
1.4
1.0
7.7
-1.6
11.1
10.9
-2.5
7.7
-.8
8.3
1.2
1.4
.7
-.4
1.5
.5
2.3
3.2
2.8
2.6
"'3
22
-1.5
3.8
4.3
-1.8
-1.0 -2.0
.7
6.5
.4
3.1
5.0
-.5
3.8
-2.0
-4.1
2.5
2.8
-1.2
4.6
-1.6
5.4
-3.8
4.7
1.2
3.7
-1.8
-2.7
3.9

Nonfarm
business
sector

4.6
1.3
-.3
5.5
3.3
3.5
1.8
.6
5.5
3.8
1.7
.9
3.3
.1
.8
-.1
.7
.8
3.7
3.2
4.8
7.1
6.7
3.4
3.3
6.0
12.1
7.8
5.7
6.1
7.7
11.2
11.0
8.3
8.4
1.0
1.8
2.8
3.0
2.5
19
3.9
4.3
-2.2
5.7
2.5
3.6
6.1
2.0
2.6
5.0
5.3
4.7
4.1
3.7

Implicit price
deflator"
Business
sector

7.2
-.6
1.5
6.3
1.3
.7
1.2
2.6
3.2
3.5
1.6
2.0
1.4
.5
1.9
.9
1.0
2.3
3.3
2.5
4.6
5.1
4.7
4.9
4.0
6.4
9.6
10.3
5.9
6.4
7.3
9.0
9.0
9.6
5.9
3.3
3.3
2.5
2.1
2.7
30
3.9
3.8
1.7
4.8
4.7
4.9
3.1
4.3
2.5
3.5
4.6
4.6
3.2
2.0

Nonfarm
sector

7.2
1.3
1.8
5.6
2.0
1.8
1.5
3.2
3.3
3.6
1.2
2.5
1.4
.6
2.0
.9
1.2
2.0
3.1
2.9
4.6
5.0
4.9
5.0
3.6
4.8
10.2
10.8
6.3
6.6
7.0
8.9
9.7
9.7
6.3
3.5
3.0
3.0
2.3
2.7
27
3.9
3.8
1.4
4.1
3.4
5.9
2.8
4.4
2.6
3.9
3.8
4.8
3.6
2.4

Output refers to gross domestic product originating in the sector in 1982 dollars.
* Hours at work of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based
primarily on establishment data.
8
Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also includes an
estimate of wages, salaries, and supplemental payments for the self-employed.
4
Hourly compensation divided by the consumer price index for all urban consumers.
8
Current dollar gross domestic product divided by constant dollar gross domestic product.
Note.— Percent changes are based on original data and therefore may differ slightly from percent changes based on indexes in Table
B-46.
Source: Department of Labor, Bureau of Labor Statistics.




339

PRODUCTION AND BUSINESS ACTIVITY
TABLE B-48.—Industrial production indexes, major industry divisions, 1939-90
[1987=100; monthly data seasonally adjusted]
Total
industrial
production

Year or month
1989 proportion
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990"
1989: Jan ..
Feb

Mar...

Apr
May..

June : : : : : : : : : : :
July....
Sept

Nov
Dec
1990: Jan
Feb
Mar
Apr

May

June
July
Aug
Sept

"

:::

'

r. : z

zzzzzz zzz : r

Oct
Nov"
Dec".

Source: Board of Governors of the Federal Reserve System.



340

100.0
12.5
14.4
18.2
20.9
25.3
27.3
23.4
20.2
22.7
23.6
22.3
25.8
28.0
29.1
31.6
29.9
33.7
35.1
35.6
33.3
37.3
38.1
38.4
41.6
44.0
47.0
51.7
56.3
57.5
60.7
63.5
61.4
62.2
68.3
73.8
72.7
66.3
72.4
78.2
82.6
85.7
84.1
85.7
81.9
84.9
92.8
94.4
95.3
100.0
105.4
108.1
109.1
107.7
107.6
107.7
108.6
108.3
108.4
107.8
108.2
108.2
107.7
108.1
108.6
107.5
108.5
108.9
108.8
109.4
110.1
110.4
110.5
110.6
109.8
107.8
107.1

Manufacturing
Total
85.1
11.6
13.6
17.4
20.3
25.3
27.3
22.9
19.0
21.2
22.0
20.8
24.2
26.1
27.2
29.6
27.7
31.3
32.5
32.9
30.6
34.5
35.2
35.3
38.4
40.7
43.5
48.2
52.6
53.6
56.6
59.1
56.4
57.3
63.3
68.9
67.9
61.1
67.4
73.3
77.8
80.9
78.8
80.3
76.6
80.9
89.3
91.6
94.3
100.0
105.8
108.9
109.8
108.9
108.3
108.7
109.4
109.2
109.3
108.6
109.1
109.1
108.4
108.9
108.8
108.1
109.6
109.8
109.5
110.3
110.8
111.1
111.1
111.2
110.5
108.5
107.5

Durable
48.5
9.4
12.5
16.6
21.1
28.7
31.7
24.0
16.7
19.9
20.8
18.9
23.0
25.9
27.5
31.1
27.4
31.3
32.4
32.6
28.5
32.8
33.3
32.7
36.3
38.7
41.4
47.1
52.3
52.9
55.5
57.7
53.3
53.1
59.3
66.2
64.8
56.7
62.6
68.7
73.9
78.3
75.7
77.4
72.7
76.8
88.4
91.8
93.9
100.0
107.6
110.9
111.6
111.1
110.5
110.9
111.6
111.4
111.8
110.6
111.3
111.5
109.4
110.1
110.4
108.6
110.7
111.9
111.1
112.6
113.4
113.4
113.5
113.8
112.4
109.6
107.9

Nondurable
36.6
14.3
15.1
18.2
18.9
20.3
21.1
21.1
21.7
22.6
23.4
23.0
25.6
26.4
26.9
28.0
28.2
31.3
32.9
33.5
33.7
37.1
38.0
39.1
41.5
43.8
46.6
49.8
52.9
54.6
58.1
61.1
61.1
63.6
69.3
72.7
72.3
67.7
74.6
80.1
83.5
84.6
83.1
84.5
82.5
87.0
90.8
91.5
94.9
100.0
103.6
106.4
107.7
106.2
105.6
105.9
106.5
106.4
106.2
106.1
106.2
106.0
107.2
107.3
106.7
107.5
108.3
107.2
107.5
107.4
107.6
108.1
108.1
108.0
108.2
107.1
106.9

Mining
7.4
38.2
42.4
45.0
46.4
47.5
50.9
49.9
49.0
55.5
58.3
51.7
57.7
63.4
62.8
64.5
63.2
70.5
74.2
74.3
68.1
71.3
72.7
73.1
75.2
78.2
81.4
84.4
88.9
90.6
94.1
97.8
100.4
97.8
99.9
100.8
100.3
98.0
98.9
101.5
104.6
106.6
110.0
114.3
109.3
104.8
111.9
109.0
101.0
100.0
101.8
100.5
102.4
100.8
98.9
98.3
101.7
101.1
100.4
100.0
100.7
101.6
100.7
101.2
100.1
101.7
101.0
101.1
102.9
102.2
102.2
104.0
102.4
103.9
102.4
102.1
102.8

Utilities
7.6
6.2
6.9
7.7
8.7
9.6
10.2
10.4
10.8
11.7
13.0
13.9
15.8
18.1
19.6
21.3
22.9
25.6
28.1
30.0
31.4
34.5
36.9
39.0
41.9
44.8
48.7
51.7
55.6
58.4
63.1
68.7
72.9
76.4
81.3
84.5
83.5
84.3
87.6
89.9
92.7
95.3
95.9
94.3
91.8
93.6
97.0
99.5
96.3
100.0
104.4
107.1
107.6
102.8
105.8
107.2
106.4
106.3
106.3
106.6
106.2
105.9
107.4
108.3
116.1
106.8
104.0
106.2
106.7
107.1
109.7
109.7
111.4
110.3
109.0
105.1
107.1

TABLE B-49.—Industrial production indexes, market groupings, 1947-90
[1987=100; monthly data seasonally adjusted]

Year or month

Total
industrial
production Total

1989 pnportion
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963
1964
1965
1966
1967
1968.
1969
1970
1971 . .
1972
1973
1974
1975
1976
1977
1978. .
1979
1980
1981
1982....
1983
1984
1985..
1986
1987
1988
1989
1990"
1989: Jan
Feb
Mar
Apr

&::::::
::::::
July
Aug
sept"..:.::::::::::
Oct

Nov
Dec
1990: Jan
Feb
Mar

t
June
July
Aug
Sept
Oct
Nov"
Dec"

100.0
22.7
23.6
22.3
25.8
28.0
29.1
31.6
29.9
33.7
35.1
35.6
33.3
37.3
38.1
38.4
41.6
44.0
47.0
51.7
56.3
57.5
60.7
63.5
61.4
62.2
68.3
73.8
72.7
66.3
72.4
78.2
82.6
85.7
84.1
85.7
81.9
84.9
92.8
94.4
95.3
100.0
105.4
108.1
109.1
107.7
107.6
107.7
108.6
108.3
108.4
107.8
108.2
108.2
107.7
108.1
108.6
107.5
108.5
108.9
108.8
109.4
110.1
110.4
110.5
110.6
109.8
107.8
107.1

46.5
20.8
21.5
20.9
23.5
25.4
27.3
29.1
27.6
29.8
31.6
32.5
31.0
34.0
35.1
35.4
38.4
40.6
42.9
47.1
51.6
53.7
56.3
58.1
56.0
56.5
61.3
65.9
65.7
61.8
66.2
71.6
76.1
79.0
80.0
82.1
80.8
83.0
91.0
94.2
95.7
100.0
105.6
109.1
110.9
108.0
108.1
108.7
109.5
109.6
109.8
108.7
109.1
109.6
108.5
109.4
110.3
108.5
109.7
110.7
110.4
111.2
111.7
111.7
111.9
112.6
112.1
109.9
109.6

Materials
Final products
InterConsumer goods
Equipment
mediate
Dura- Non- EnerAuto- Other NonDe- prodmotive dura- durable Total » Busi- fense ucts Total ble durable gy
Total prod- ble
ness and
goods
ucts goods
space
25.7
25.4
26.2
26.1
29.7
29.4
30.1
31.9
31.7
35.4
36.7
37.6
37.2
40.9
42.4
43.3
46.2
48.8
51.5
55.5
58.4
59.8
63.4
65.8
65.0
68.8
74.3
77.6
75.2
72.3
79.4
85.1
88.4
87.3
85.3
85.8
84.5
88.8
92.8
93.7
96.8
100.0
104.0
106.7
107.3
106.2
106.3
106.9
107.0
106.8
106.3
105.2
105.6
106.3
107.3
107.4
108.3
106.0
107.0
107.5
107.2
107.4
107.8
107.5
107.8
108.7
108.4
106.1
106.1

2.4
21.7
22.6
22.5
28.3
25.0
22.5
28.4
26.5
35.2
28.9
30.3
24.1
30.2
34.6
31.6
38.3
41.9
43.9
54.1
53.9
47.4
56.4
56.7
47.7
60.8
65.6
72.4
62.6
59.0
73.2
84.0
86.3
78.5
59.5
59.2
57.5
71.9
86.6
92.7
95.2
100.0
105.9
106.9
102.3
112.5
111.3
110.4
110.2
109.2
106.7
101.1
103.2
104.9
102.9
102.4
104.5
85.2
99.3
109.3
102.4
107.0
112.2
106.7
104.6
111.8
106.9
93.7
87.4

3.1
22.8
23.8
22.0
30.4
26.2
26.2
29.6
27.3
32.2
33.9
33.2
31.3
36.0
36.2
37.3
40.5
43.7
47.7
54.1
59.6
60.4
64.7
69.0
66.9
70.8
81.0
85.7
79.3
69.8
78.2
87.4
91.2
89.8
85.1
86.3
78.1
86.2
94.6
90.6
93.9
100.0
104.1
108.7
109.5
107.5
107.7
108.0
110.0
109.3
109.8
109.2
107.9
109.8
109.8
108.4
108.6
110.6
111.6
112.0
111.2
111.1
112.0
109.5
109.6
109.3
106.9
104.4
104.3

20.1
27.0
27.7
27.9
30.3
31.3
32.6
33.5
33.9
36.5
38.8
40.1
41.3
44.1
45.5
47.0
49.2
51.4
54.0
56.3
59.0
62.0
64.5
66.7
67.8
69.7
74.2
76.5
76.5
74.9
80.4
84.4
87.8
87.7
89.1
89.6
89.7
91.9
93.4
94.4
97.6
100.0
103.7
106.4
107.6
105.3
105.6
106.3
106.2
106.2
105.8
105.1
105.6
106.0
107.4
107.8
108.7
107.8
107.2
106.6
107.1
106.9
106.6
107.3
107.9
108.2
108.8
107.8
108.6

20.8
15.0
15.8
14.1
15.3
21.2
25.5
27.6
24.2
24.7
27.1
28.2
25.2
27.7
28.5
28.1
31.3
33.1
35.0
39.6
46.1
49.0
50.4
51.8
48.1
45.0
49.3
55.0
56.8
52.0
53.8
58.8
64.2
71.0
74.6
78.2
77.0
76.8
89.2
94.8
94.5
100.0
107.6
112.3
115.5
110.3
110.4
110.9
112.6
113.1
114.3
113.2
113.6
113.8
110.1
112.0
112.9
111.8
113.3
114.9
114.7
116.2
116.8
117.2
117.2
117.8
117.0
114.8
114.2

15.3
4.8
14.7
7.5
15.3
8.8
13.4
9.2
14.3 10.8
17.5 26.5
19.8 37.2
20.6 44.6
18.1 39.3
19.6 35.9
22.7 35.1
23.6 36.7
19.9 36.8
22.4 38.8
23.0 39.9
22.3 40.6
24.3 46.9
25.5 50.6
28.5 49.0
32.6 54.3
37.8 63.7
38.6 72.7
40.3 72.9
42.9 69.4
41.3 58.7
39.3 52.8
44.8 51.3
52.4 50.1
54.7 49.4
48.8 48.5
50.6 49.2
56.7 49.2
63.1 49.5
71.5 51.5
73.5 57.4
76.1 58.5
72.9 65.7
71.9 71.8
85.4 78.9
91.1 89.4
93.2 96.0
100.0 100.0
111.8 98.0
119.1 97.4
123.0 97.4
116.6 96.9
117.1 96.6
117.9 96.1
119.6 97.1
120.2 97.6
121.4 98.3
119.9 98.7
120.4 98.9
120.7 98.9
116.0 96.6
118.7 96.7
119.9 96.6
118.0 97.5
120.1 97.6
122.2 97.5
121.6 97.3
123.5 97.6
124.4 97.6
125.0 97.8
125.4 97.7
126.4 97.3
125.3 97.3
122.5 96.4
121.4 96.9

14.6
22.4
23.6
22.4
26.1
27.4
27.2
29.1
29.0
32.9
34.4
34.4
33.6
37.1
37.4
38.1
40.4
42.7
45.5
48.4
51.4
53.5
56.6
59.6
58.7
60.5
67.6
71.9
69.4
62.6
69.0
74.9
79.1
81.2
77.0
77.0
75.1
80.3
86.2
88.3
92.0
100.0
104.4
106.8
107.6
107.0
106.5
107.2
107.2
106.6
106.7
106.7
106.4
106.3
106.9
107.3
107.9
108.0
108.4
108.2
108.0
108.3
108.3
108.4
107.9
107.4
106.8
105.8
105.1

38.9
25.1
26.2
23.9
28.6
31.6
32.1
35.6
32.9
38.9
39.9
39.9
35.9
41.4
42.0
42.0
45.8
48.7
52.6
58.7
63.9
63.3
67.5
71.5
69.0
70.0
77.2
84.5
82.8
72.6
81.2
87.3
91.8
95.4
91.3
92.8
85.1
88.3
96.6
96.6
95.9
100.0
105.6
107.4
107.7
107.6
107.3
106.9
108.0
107.3
107.6
107.3
107.8
107.4
107.1
107.0
106.9
106.2
107.1
107.1
107.3
107.7
108.8
109.6
109.7
109.4
108.2
106.0
104.9

20.0
21.5
22.1
19.8
24.9
28.3
28.9
33.8
29.2
35.7
35.8
35.8
30.1
35.9
36.3
35.5
39.4
42.1
45.9
52.6
57.9
55.9
59.2
62.3
56.5
56.8
64.2
73.3
71.2
59.3
68.4
75.3
81.4
85.3
79.3
82.1
73.4
79.2
92.1
92.9
93.7
100.0
109.0
111.6
111.7
112.6
112.1
111.1
112.3
111.5
112.1
111.5
112.0
112.0
110.8
110.8
110.4
109.4
110.8
110.9
110.9
112.5
113.8
114.0
114.9
114.1
112.4
109.7
107.2

8.8

10.2

25.2
28.9
30.2
30.1
29.9
34.2
34.8
36.2
39.2
41.6
45.2
49.6
53.6
54.5
59.9
64.9
65.2
68.0
74.9
80.4
8C.8
71.9
81.4
86.7
89.7
92.9
88.7
90.5
82.1
89.2
93.0
91.7
94.4
100.0
103.0
105.3
105.9
105-3
104.3
104.9
106.0
105.4
105.5
106.7
105.7
104.2
106.1
104.9
104.3
105.4
105.8
105.2
106.1
105.2
106.1
107.8
106.8
106.9
106.2
105.0
104.4

52.7
59.3
62.7
63.4
58.8
62.3
63.1
63.6
65.8
69.7
72.5
75.8
80.6
83.4
87.2
91.7
96.2
97.1
100.8
101.5
98.8
96.7
99.0
101.1
102.2
105.0
106.2
104.3
100.7
98.9
103.8
103.4
99.4
100.0
101.8
101.4
101.9
100.6
101.3
100.8
101.9
101.2
101.0
100.1
101.7
101.6
101.3
101.9
102.7
101.2
101.7
102.0
101.8
101.1
102.1
103.3
103.0
103.0
102.2
100.2
101.3

1
Two components—oil and gas well drilling and manufactured homes—are included in total equipment, but not in detail shown.
Source: Board of Governors of the Federal Reserve System.




341

TABLE B-50.—Industrial production indexes, selected manufactures, 1947-90
[1987=100; monthly data seasonally adjusted]
Durable manufactures
Year or month

Primary
metals
Total

3.4
1989 proportion
1947 ^
70.2
1948
'.'..'. 73.0
1949
61.4
1950
77.3
1951
84.1
1952
".'.'.'. 76.8
1953
87.0
70.4
1954
1955
91.5
1956
90.9
1957
87.1
69.0
1958
1959 ..
80.7
80.4
I960
1961
78.9
1962
84.6
1963
91.2
1964
102.9
1965
113.2
1966
120.2
1967
111.1
1968
115.1
123.8
1969
115.2
1970 .. .
1971
109.2
122.4
1972
1973
138.9
1974
134.5
1975
107.2
1976
119.9
1977
121.5
1978
130.7
1979
133.0
1980
110.8
1981
117.5
1982
83.2
1983
91.0
1984
102.4
1985
101.8
1986
93.8
1987
100.0
1988
110.3
1989
109.2
1990 "
108.2
1989: Jan
114.7
Feb
112.0
Mar
108.8
Apr
112.7
May
107.0
June
108.7
108.8
July
Aug
111.7
Sept
109.9
Oct
108.6
Nov
104.8
Dec
102.6
1990: Jan
105.0
Feb
107.9
Mar...
105.4
Apr
106.4
May
106.2
June
109.5
July
110.3
Aug
114.6
Sept
111.6
Oct
108.3
Nov"
108.6
Dec"
102.5

Nondurable manufactures
Transportation
equipment

Iron
and
steel

NonFabriElectricated
eleccal
metal trical machinprod- machinery
ucts
ery

Total

2.0
102.1
106.8
91.2
112.4
125.7
110.6
127.5
99.1
131.8
129.3
124.6
93.9
108.1
109.9
104.9
109.3
119.1
135.5
148.7
153.1
141.5
146.1
159.2
148.2
135.5
150.6
171.5
166.1
133.5
147.1
145.1
155.3
156.5
126.0
135.1
86.2
96.1
105.9
104.5
90.8
100.0
113.8
109.3
109.6
118.9
114.7
109.3
115.4
104.8
107.1
107.5
109.8
109.7
109.2
104.1
100.3
104.6
110.6
106.1
106.7
105.5
110.3
110.6
118.3
113.9
109.8
112.5
103.1

5.3
37.5
38.2
34.4
42.2
45.1
44.0
49.6
44.7
51.0
51.8
53.1
47.6
53.4
53.4
52.1
56.7
58.5
62.1
68.3
73.1
76.5
80.6
81.9
75.9
75.6
82.9
92.1
88.4
76.7
84.9
92.7
96.2
99.5
92.5
91.1
83.2
85.5
93.3
94.5
93.8
100.0
106.2
107.2
105.9
109.0
107.7
107.4
106.9
107.9
108.3
107.6
106.5
106.0
105.9
106.9
106.3
105.1
105.6
105.5
105.0
107.1
106.7
107.7
107.9
106.8
105.9
103.9
102.7

9.6
12.0
12.1
10.3
11.6
14.7
16.0
16.7
14.2
15.6
17.9
17.9
15.0
17.5
17.6
17.1
19.2
20.5
23.3
26.2
30.5
31.1
31.3
33.9
32.8
30.5
35.4
41.4
44.1
38.1
40.0
45.1
50.2
56.9
60.6
65.9
63.9
64.3
80.8
86.8
90.4
100.0
113.8
121.8
126.8
119.5
120.5
121.9
121.6
121.8
123.4
121.6
121.8
123.4
119.0
122.9
123.8
123.7
124.2
125.2
125.7
126.9
127.5
128.3
128.8
128.5
127.8
125.7
123.9

9.7
19.6
21.4
21.5
25.7
28.7
33.3
41.8
36.4
41.9
40.6
43.5
34.3
38.9
40.3
37.8
43.7
48.0
49.2
58.5
62.7
61.3
66.6
66.1
55.5
60.1
64.1
73.0
66.4
59.7
68.0
73.7
79.5
81.0
72.3
68.7
64.8
72.7
83.1
91.8
96.9
100.0
105.0
107.2
105.4
108.1
108.3
108.7
109.4
109.6
109.0
106.6
107.8
108.0
102.1
102.8
104.4
94.7
103.5
107.9
105.1
109.0
111.0
109.3
107.9
111.1
109.1
99.9
95.7

8.7
8.5
8.8
8.3
11.3
11.4
13.0
14.9
13.3
15.3
16.5
16.4
15.0
18.2
19.8
21.0
24.1
24.8
26.2
31.3
37.5
37.7
39.8
42.3
40.5
40.7
46.5
53.0
52.4
45.1
50.7
58.4
64.0
71.3
73.3
75.4
75.9
80.3
94.1
93.1
94.3
100.0
106.5
109.5
111.6
108.3
108.4
109.2
110.1
108.8
109.1
108.6
110.6
110.8
110.2
110.1
110.1
110.1
111.0
112.3
111.3
112.4
112.8
112.2
112.5
112.5
110.8
110.6
110.9

Source: Board of Governors of the Federal Reserve System.




342

Motor
vehicles
and
parts

4.5
27.3
29.6
30.4
39.0
35.8
30.7
38.7
33.3
44.6
36.2
38.0
28.0
36.4
41.1
36.0
43.9
48.6
49.9
63.7
62.6
55.1
66.0
66.3
53.3
66.9
73.0
85.0
73.4
62.2
81.9
94.7
99.2
91.0
67.0
64.4
58.8
74.5
90.6
99.0
98.5
100.0
105.5
104.9
96.8
111.4
110.6
108.9
108.6
107.8
105.0
99.6
102.7
103.2
99.7
99.0
98.7
76.8
94.1
103.5
95.8
104.0
108.0
102.7
101.0
107.5
103.7
85.9
77.6

Lumber Apparel Textile Printing Chemicals
and
mill
and
prod- prod- publish- and Foods
products
products
ucts
ing
ucts

1.9
38.8
40.4
35.7
43.4
43.2
42.7
45.1
44.8
50.1
49.5
45.4
46.1
52.3
49.3
51.6
54.4
56.9
61.1
63.5
65.9
65.3
67.2
67.1
66.7
68.5
78.4
78.7
71.4
66.5
75.6
82.3
83.6
82.4
76.9
74.7
67.3
79.9
86.0
88.0
95.1
100.0
104.6
103.0
101.7
105.6
99.9
100.8
102.7
102.3
103.5
102.8
102.4
102.6
103.2
104.8
106.4
106.0
104.3
105.0
103.3
101.7
102.0
103.6
100.5
100.3
97.5
96.0
96.0

2.3
43.1
45.0
44.5
47.9
47.0
49.5
50.1
49.5
54.7
56.0
55.8
54.3
59.7
60.9
61.3
63.8
66.4
68.7
72.6
74.5
74.1
76.0
78.4
75.3
76.2
80.9
81.5
77.9
71.1
83.9
91.6
93.9
89.0
89.2
91.0
90.1
93.8
95.7
92.6
96.3
100.0
102.2
104.3
98.9
103.6
104.2
104.4
105.1
104.9
105.2
104.4
104.7
104.5
103.9
103.7
102.6
102.4
102.1
99.8
98.7
99.2
99.3
99.2
98.8
98.4
97.2
95.9
95.8

1.7
35.2
37.7
34.8
39.6
39.2
38.9
39.9
37.3
42.5
43.7
41.6
41.1
46.4
45.6
46.9
50.1
51.9
56.0
61.0
64.7
64.8
72.3
76.0
74.4
78.5
86.0
89.6
81.5
77.7
86.3
91.6
92.0
95.0
92.1
89.4
83.0
93.2
93.7
89.7
93.9
100.0
99.8
101.9
100.8
102.2
100.8
101.7
104.1
103.2
102.4
104.2
101.5
101.5
101.9
99.3
99.8
100.6
103.0
99.8
100.9
102.7
103.6
102.9
100.4
100.7
100.1
97.3
96.4

6.4
22.1
23.2
23.8
24.9
25.4
25.3
26.5
27.6
30.3
32.3
33.4
32.6
34.8
36.2
36.4
37.7
39.7
42.1
44.8
48.3
50.9
51.7
54.2
52.7
53.2
56.7
58.3
57.4
53.7
58.7
64.3
68.1
69.9
70.3
72.1
75.2
79.0
84.5
87.6
90.7
100.0
103.6
108.5
111.9
107.6
108.2
108.9
108.6
108.4
108.6
106.6
107.8
109.4
109.3
109.6
109.6
110.7
112.1
111.4
112.0
112.8
112.0
111.4
110.9
111.6
112.6
112.5
112.5

8.6
8.7
9.4
9.3
11.6
13.1
13.7
14.8
15.0
17.6
18.9
19.9
20.6
24.0
24.9
26.1
29.0
31.7
34.8
38.7
42.2
44.2
49.6
53.7
55.9
59.5
66.9
73.1
75.8
69.1
77.3
83.3
88.0
91.3
87.8
89.2
81.8
87.5
91.4
91.4
94.6
100.0
105.4
108.5
110.1
108.0
107.7
107.5
107.5
108.4
109.1
109.7
109.6
107.5
109.4
109.8
107.6
109.9
110.5
109.5
110.3
109.2
110.3
110.4
111.1
110.9
110.6
109.2
108.8

8.6
33.1
32.8
33.1
34.3
35.0
35.7
36.4
37.2
39.3
41.5
42.2
43.2
45.4
46.6
47.9
49.5
51.2
53.6
54.8
56.9
59.4
61.0
63.0
64.0
66.0
69.5
70.9
71.9
71.4
75.5
79.0
81.8
82.6
84.6
86.5
87.7
90.1
92.1
94.9
97.4
100.0
102.8
105.5
107.6
105.1
104.0
104.5
106.2
105.5
104.2
104.0
104.8
105.4
106.8
107.4
108.0
106.8
107.4
107.1
107.0
106.8
106.1
107.1
107.7
107.6
108.5
109.2
109.9

TABLE B-51.—Capacity utilization rates, 1948-90
[Percent; monthly data seasonally adjusted]
Manufacturing
Year or month

Total
industry

Total

Durable
goods

93.4
94.1
95.8
95.4
93.9
94.6
92.9
86.8
84.0
84.8
84.6
84.8
85.9
85.5
82.8
79.5
80.3
82.5
83.5
80.2
82.5
84.2
85.4
85.1

839
833
83.4
83.8
834
836

867
859
86.0
86.2
859
855

89.0
876
87.3
87.8
87.0
870

83.4
831
83.4
83.6
83.4
83.2

85.5
84.0
83.6
86.6
86.3
85.8

82.2
84.6
85.6
84.9
84.8
84.8

836
838
836
829
830
828

825
828
828
81 1
814
814

85.2
851
847
854
852
845

87.2
869
861
866
861
852

82.2
82.4
82.5
814
81.7
81.8

85.6
86.4
87.2
86.5
87.1
86.3

85.0
84.7
84.3
85.5
86.2
92.3

827
83.2
834
83.1
834
83.7

820
830
829
825
828
830

799
813
819
812
821
82.4

849
85.3
842
84.2
839
83.8

857
86.1
85.2
85.0
84.9
85.5

80.5
81.7
82.0
81.5
82.0
81.9

87.8
87.3
87.5
89.2
88.7
88.8

84.8
82.5
84.2
84.5
84.7
86.8

83.8
836
835
82.7
810
804

83.0
828
827
819
802
793

82.2
821
820
80.8
787
773

84.0
83.7
835
83.4
823
820

86.0
85.9
849
83.9
82.3
809

81.7
81.4
817
81.1
79.3
786

90.5
89.2
90.6
89.4
89.2
89.9

86.6
87.9
87.0
85.8
82.7
84.2

1989: Jan
Feb
Mar
Apr
May
June.
July
Aug
Sept
Oct
Nov
Dec

848
846
84.5
85.0
846
846

851
844
84.5
848
845
844

839
840
839
833
835
837

1990- Jan...
Feb
Mar
Apr
May .
June

octl:::::::::::::::::::::";::
Nov .
p

Dec"

Source: Board of Governors of the Federal Reserve System.




Utilities

81.2
83.5
86.6
88.9
87.4
90.4
92.5
92.5
89.9
90.0
90.9
91.3
91.9
94.0
94.6
86.5
79.9
84.4
82.9
78.2
80.0
84.6
85.9
89.0

87.1
868
86.3
76.7
743
809
87.5
827
702
754
803
835
849
786
766
690
705
783
778
761
786
825
828
810

July
Aug
Sept

Mining

86.3
866
86.6
82.9
828
866
87.5
840
764
818
85.2
862
85.1
814
810
780
81 1
831
819
830
854
860
855
838

864
868
869
808
792
843
88.4
842
746
793
833
855
862
821
809
750
758
811
803
792
814
840
842
829

1990P

Advanced
processing

80.0
73.2
79.8
83.4
859
89.3
80.0
84.2
84.4
83.1
74.9
81.1
80.5
77.2
81.6
83.4
84.6
88.8
91.1
88.0
87.4
86.5
79.1
77.4
82.5
86.5
82.8
73.5
778
81.9
84.3
84.8
813
79.1
746
74.9
803
79.4
782
79.9
82.3
82.7
811

.

1975
1976
1977
1978 ..
1979
1980
1981
1982
1983
1984 ..
1985
1986 ..
1987
1988
1989

Primary
processing

87.3
76.2
88.5
90.2
849
89.4
80.6
92.0
89.4
84.7
75.4
83.0
798
77.9
815
83.8
87.8
91.0
914
85.4
863
86.9
80.4
793
86.4
91.5
86.0
72.9
801
84.0
863
86.4
780
780
690
74.8
804
798
808
84.9
878
87.0
847

82.5
742
82.8
858
854
893
80.1
87.0
861
83.6
750
81.6
801
773
814
835
85.6
89.5
911
872
872
868
79.7
782
837
88.1
838
732
785
828
851
854
802
788
728
749
804
795
790
814
839
839
822

1948
1949
1950
1951
1952
1953
1954 .
1955 ..
1956
1957
1958
1959 .
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972....
1973
1974

Non-

durable
goods

343

TABLE B-52.—New construction activity, 1929-90
[Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]
Private construction

Public construction

Tntal

Year or month

new
construction

Residential1
buildings
Total
Total8

Nonresidential buildings and other
construction *

New
housing
units

Total

Commercial *

Indus- Other4
trial

Total

Federal State and
local8

3.0
.3
2.3

4.7
.8
1.7

1.1
.1
.3

0.9
.2

2.6
.5
1.2

2.5
1.6
3.8

0.2

'.B

2.3
1.1
3.1

3.0
3.5
1.7
.9

2.6
3.0
1.4
.7
.6

2.1
2.7
1.7
1.1
1.4

.3
.4
.2
.0

.4
.8
.3
.2

1.3
1.5
1.2
.9
1.1

3.6
5.8
10.7
6.3
3.1

1.2
3.8
9.3
5.6
2.5

2.4
2.0
1.3
.7
.6

3.4
12.1

1.3
6.2

.7
4.8

2.1
5.8

.2
1.2

.6
1.7

1.3
3.0

2.4
2.2

1.7
.9

.7
1.4

20.0
26.1
26.7

16.7
21.4
20.5

9.9
13.1
12.4

7.8
10.5
10.0

6.9
8.2
8.0

1.0
1.4
1.2

1.7
1.4
1.0

4.2
5.5
5.9

3.3
4.7
6.3

.8
1.2
1.5

2.5
3.5
4.8

1950
1951
1952
1953
1954

33.6
35.4
36.8
39.1
41.4

26.7
26.2
26.0
27.9
29.7

18.1
15.9
15.8
16.6
18.2

15.6
13.2
12.9
13.4
14.9

8.6
10.3
10.2
11.3
11.5

1.4
1.5
1.1
1.8
2.2

1.1
2.1
2.3
2.2
2.0

6.1
6.7
6.8
7.3
7.2

6.9
9.3
10.8
11.2
11.7

1.6
3.0
4.2
4.1
3.4

5.2
6.3
6.6
7.1
8.3

1955
1956
1957
1958
1959

46.5
47.6
49.1
50.0
55.4

34.8
34.9
35.1
34.6
39.3

21.9
20.2
19.0
19.8
24.3

18.2
16.1
14.7
15.4
19.2

12.9
14.7
16.1
14.8
15.1

3.2
3.6
3.6
3.6
3.9

2.4
3.1
3.6
2.4
2.1

7.3
8.0
9.0
8.8
9.0

11.7
12.7
14.1
15.5
16.1

2.8
2.7
3.0
3.4
3.7

8.9
10.0
11.1
12.1
12.3

I960
1961 ....
1962
1963

54.7
56.4
60.2
64.8

38.9
39.3
42.3
45.5

23.0
23.1
25.2
27.9

17.3
17.1
19.4
21.7

15.9
16.2
17.2
17.6

4.2
4.7
5.1
5.0

2.9
2.8
2.8
2.9

8.9
8.7
9.2
9.7

15.9
17.1
17.9
19.4

3.6
3.9
3.9
4.0

12.2
13.3
14.0
15.4

1964

72.1

51.9

30.5

24.1

21.4

6.8

3.6

11.0

20.2

3.7

16.5

1965
1966
1967 ....
1968
1969

78.0
81.2
83.0
92.4
99.8

56.1
57.4
57.6
65.0
72.0

30.2
28.6
28.7
34.2
37.2

23.8
21.8
21.5
26.7
29.2

25.8
28.8
28.8
30.8
34.8

8.1
8.1
8.0
9.0
10.7

5.1
6.6
6.0
6.0
6.8

12.6
14.1
14.9
15.9
17.3

21.9
23.8
25.4
27.4
27.8

3.9
3.8
3.3
3.2
3.2

18.0
20.0
22.1
24.2
24.6

1970 ... .
1971
1972
1973
1974

100.7
117.3
133.2
146.6
147.0

72.8
87.6
103.2
114.3
108.9

35.9
48.5
60.7
65.1
56.0

27.1
38.7
50.1
54.6
43.4

36.9
39.1
42.5
49.2
52.9

11.1
13.0
15.4
17.7
17.6

6.5
5.4
4.7
6.2
7.9

19.3
20.7
22.4
25.3
27.5

27.9
29.7
30.0
32.3
38.1

3.1
3.8
4.2
4.7
5.1

24.8
25.9
25.8
27.6
33.0

1975 ..
1976
1977
1978
1979

145.5
165.6
191.2
227.9
256.9

102.2
121.6
148.1
177.8
200.3

51.6
68.3
92.0
109.8
116.4

36.3
50.8
72.2
85.6
89.3

50.6
53.4
56.1
67.9
83.8

13.9
13.7
15.7
19.7
27.1

8.0
7.2
7.7
11.0
15.0

28.7
32.5
32.7
37.2
41.8

43.3
44.0
43.1
50.1
56.6

6.1
6.8
7.1
8.1
8.6

37.2
37.2
36.0
42.0
48.1

1980
1981
1982
1983
1984

256.5
267.7
255.7
290.9
340.7

192.8
203.0
192.6
227.5
270.5

100.4
99.2
84.7
125.5
153.8

69.6
69.4
57.0
94.6
113.8

92.4
103.7
108.0
102.0
116.6

32.9
38.0
41.4
41.0
54.9

13.8
17.0
17.3
12.9
13.7

45.7
48.7
49.2
48.1
48.0

63.6
64.7
63.1
63.5
70.2

9.6
10.4
10.0
10.6
11.2

54.0
54.3
53.1
52.9
59.0

1985
1986
1987
1988
1989

368.7
398.2
410.2
422.1
432.1

290.9
313.6
319.6
327.1
333.5

158.5
187.1
194.7
198.1
196.6

114.7
133.2
139.9
138.9
139.2

132.4
126.5
125.0
129.0
137.0

66.9
64.2
62.8
64.9
67.0

15.8
13.7
13.7
14.9
18.5

49.7
48.5
48.5
49.2
51.5

77.8
84.6
90.6
95.0
98.6

12.0
12.4
14.1
12.3
12.3

65.8
72.2
76.5
82.7
86.3

1990".

434.9

325.1

187.4

129.8

137.7

63.1

20.6

54.0

109.8

14.0

95.9

1929
1933
1939 .

10.8
2.9
8.2

8.3
1.2
4.4

1940
1941
1942
1943
1944

8.7
12.0
14.1
8.3
5.3

5.1
6.2
3.4
2.0
2.2

1945
1946

5.8
14.3

New series
1947
1948
1949

3.6

2.7

SBC next page fof continuation of table.




344

TABLE &-52.—New construction activity, 1929-90—Continued
[Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]
Private construction
Total
Year or month

new

construction

Residential
buildings1
Total

New

Total2

1989: Jan
Feb
Mar
Apr

Hay..:.":.. .:: ":: : :":

June
July

Aug
"":::
Sept
Oct.. :::::.. ::::::.. :
Nov
Dec

1990: Jan
Feb
Mar
Apr

Hay..: .: : .: ".:.
June
Aug::::::::::::: : : :.: : :
sept .
Oct

July

Nov"

Dec"

438.7
432.6
432.7

431.5
431.6

434.7

340.9
335.6
339.8
335.8
333.8
333.8

429.0
433.9
433.4
429.3
433.4
432.0

333.3
335.0

446.0
455.6
457.3
444.7
443.8

338.1
343.1

441.1

347.4
338.8
334.0
329.6

437.0
436.3
423.9
423.3

331.3
323.5
317.5
311.4

417.1
415.1

332.1
332.1

329.8
325.0

303.2
300.0

housing
units

203.2

144.4
144.9
143.2
143.1
140.7
139.6
139.6
138.2
135.8
134.8
135.2
135.3
140.0
144.6
145.3
140.0
136.6
130.5
129.2
127.0
123.3
121.4
117.3
114.2

201.0

202.4
202.3

199.4
197.1
196.8
195.6
193.0
192.1
190.9
189.6
200.1

203.0
206.9
200.2

196.1
189.5
187.1
184.4
179.7
176.8
171.5
167.5

Public construction

Nonresidential buildings and other
construction l
Total

Commer- 8
cial

Indus- Other*
trial

137.7
134.5
137.3
133.5
134.4
136.8
136.5
139.4
139.1
140.0
139.0
135.4

68.4
66.9
69.0
64.6
65.3
67.0
66.7
67.9
67.3
69.5
67.7
64.5

137.9
140.1
140.5
138.5
137.9
140.1

65.3
67.1
66.1
64.5
63.7
65.4

17.6
16.4
17.1
18.4
17.9
18.8
18.5
19.4
20.0
19.2
19.1
18.9
19.7
21.1
21.1
21.0
20.8
20.4

144.2
139.1
137.8
134.6
131.8
132.4

65.8
63.9
62.2
60.0
57.2
57.8

23.6
20.2
19.9
19.6
19.5
20.9

51.7
51.2
51.3
50.5
51.2
51.0
51.3
52.1
51.9
51.4
52.2
52.0
52.9
51.9
53.3
53.0
53.4
54.3
54.7
55.0
55.8
55.0
55.0
53.7

Total

97.7
97.0
93.0
95.7
100.9
97.8
95.7
99.0
101.3
97.1
103.5
107.0
107.9
112.5
109.9
106.0
109.8
111.5
105.7
112.8
106.4
111.9
113.9
115.2

Federal State and
locals

9.9
11.1
12.5
10.7
14.7
13.7
11.7
13.0
14.9
10.3
12.2
12.9

87.8
85.9
80.4
85.0
86.2
84.1
84.0
86.0
86.5
86.9
91.4
94.1

13.6
14.0
15.6
16.2
15.7
16.7

94.3
98.4
94.3
89.8
94.1
94.8
92.2
99.3
94.1
100.0
101.2
102.4

13.5
13.5
12.3
12.0
12.7
12.8

1
Beginning 1960, farm residential buildings included in residential buildings; prior to I960, included in nonresidential buildings and
other construction.
2
Includes residential improvements, not shown separately. Prior to 1964, also includes nonhousekeeping units (hotels, motels, etc.).
'Office buildings, warehouses, stores, restaurants, garages, etc., and, beginning 1964, hotels and motels; prior to 1964 hotels and
motels are included in total resioWial.
. • • . . . « * • .
«Religious, educational, hospital and institutional, miscellaneous nonresidential, farm (see also footnote 1), public utilities,
telecommunications, and all other private.
»Includes Federal grants-in-aid for State and local projects.
Source: Department of Commerce, Bureau of the Census.




345

TABLE B-53.—New bousing units started and authorized, 1959-90
[Thousands of units]
New private housing units authorized 2

New housing units started
Private and public1
Year or month

Private (farm and nonfarm) 1

Total
(farm and Nonfarm
nonfarm)

Type of structure
Total

lunit

2to4
units

Type of structure
Total

5 units
or more

lunit

2 to 4
units

5 units
or more

1959 .. .

1,55 3.7

1.53 1.3

1,517.0

1,234.0

28 3.0

1,208.3

938.3

77.1

192.9

I960
1961
1962
1963
1964

1,296.1
1,36 5.0
1,492.5
1,63 4.9
1,56 1.0

1,274.0
1.336.8
1.46 8.7
1.614.8
1.53 4.0

1,252.2
1,313.0
1,462.9
1,603.2
1.528.8

994.7
974.3
991.4
1.012.4
970.5

25 7.4
33 3.7
47 1.5
59 ).8
108.4 450.0

998.0
1,064.2
1,186.6
1334.7
1,285.8

746.1
722.8
716.2
750.2
720.1

64.6
67.6
87.1
118.9
100.8

187.4
273.8
383.3
465.6
464.9

1965
1966
1967
1968
1969

1,50 9.7
1,19 5.8
1,32 1.9
1,545.4
1,499.5

1.487.5
1,17 2.8
1,298.8
1,52 1.4
1,4823

1,472.8
1.164.9
1,291.6
1.507.6
1.466.8

963.7
778.6
843.9
899.4
810.6

86.6
61.1
71.6
80.9
85.0

422.5
325.1
376.1
527.3
571.2

1,239.8
971.9
1,141.0
1353.4
1323.7

709.9
563.2
650.6
694.7
625.9

84.8
61.0
73.0
84.3
85.2

445.1
347.7
417.5
574.4
612.7

1970
1971
1972
1973
1974

1,469.0
2,<M 4.5
2,37 8.5
2,057.5
1,352.5

1.433.6
2,052.2
2.356.6
2,045.3
1337.7

812.9
1,151.0
1,309.2
1,132.0
888.1

84.8
120.3
141.3
118.3
68.1

535.9
780.9
906.2
795.0
381.6

1,351.5
1,924.6
2,218.9
1,819.5
1,074.4

646.8
906.1
1,033.1
882.1
643.8

88.1 616.7
132.9 885.7
148.6 1,037.2
117.0 820.5
64.3 366.2

1975
1976
1977
1978
1979
1980
1981
1982
1983
1984. . .
1985
1986
1987
1988
1989

1,17 1.4
1,547.6
2,00 1.7
2,036.1
1J60.0
1,31 2.6
1,1C 0.3
1,072.1
1.71 2.5
1,755.8
1,74 5.0
1,80 7.1
2.7

1.160.4
1,537.5
1.987.1
2,020.3
1,745.1
1.292.2
1,084.2
1.0622
1.703.0
1.74S.5
1,741.8
1.805.4
1.620.5
1.488.1
1376.1

892.2
1,162.4
1,450.9
1,433.3
1,194.1
852.2
705.4
662.6
1,067.6
1,084.2
1,072.4
1.179.4
1,146.4
1,081.3
1,003.3

64.0
85.9
121.7
125.0
122.0
109.5
91.1
80.0
113.5
121.4
93.4
84.0
65.3
58.8
55.2

204.3
289.2
414.4
462.0
429.0
330.5
287.7
319.6
522.0
544.0
576.1
542.0
408.7
348.0
317.6

939.2
1,296.2
1,690.0
1,800.5
1,551.8
1,190.6
985.5
1,000.5
1,605.2
1,681.8
1,733.3
1,769.4
1,534.8
1,455.6
1,338.4

675.5
893.6
1,126.1
1,182.6
981.5
710.4
564.3
546.4
901.5
922.4
956.6
1,077.6
1,024.4
993.8
931.7

63.9
93.1
121.3
130.6
125.4
114.5
101.8
88.3
133.6
142.6
120.1
108.4
89.3
75.7
67.0

199.8
309.5
442.7
487.3
444.8
365.7
319.4
365.8
570.1
616.8
656.6
583.5
421.1
386.1
339.8

1.192.8

894.5

37.0

261.3

1,104.4

798.9

53.4

252.2

1990 '

'1 !
{

)

{ )

Seasonally adjusted annual rates
1989: Jan
Feb
Mar
Apr
May

\

June:: : : : : : : : : : : : :

July
AuJ

sept: : : : : : : : : : : : :
Oc?

Nov .
Dec
1990: Jan
Feb
Mar
Apr
May
June

July
Aug .
Sept
Oct ..
Nov
Dec"..

1

1,659
1.454
1.405
1341
1308
1,414

1,188
1,026
979
1,028
977
971

66
60
51
62
43
55

405
368
375
251
288
388

1,455
1,388
1,256
1,355
1352
1,323

1,026
966
884
937
900
877

69
84
66
68
70
63

360
338
306
350
382
383

1,424
1325
l2b
1,423
1347
1.273
1,568
M88
1307
1,216
1,206
1,189

1.029
987
969
1,023
1,010
931
1.099
1,154
996
898
897
889

58
54
56
60
47
53
53
42
35
53
36
42

337
284
238
340
290
289
416
292
276
265
273
258

1,281
1,334
1,310
1,362
1364
1,416
1,739
1,297
1,232
1,108
1,065
1,108

910
933
946
959
984
984
985
974
912
813
802
796

68
70
63
61
62
65
91
67
57
57
51
48

303
331
301
342
318
367
663
256
263
238
212
264

1,153
1,131
1.106
1,026
1,127
987

875
836
859
839
768
755

29
30
34
22
44
19

249
265
213
165
315
213

1,082
1,050
992
920
906
844

780
762
737
708
671
645

58
56
49
43
42
43

244
232
206
169
193
156

1
Units in structures built by private developers for sale upon completion to local public housing authorities under the Department of
Housing and Urban Development "Turnkey" program are classified as private housing. Military housing starts, including those financed
with mortgages insured by FHA tinder Section 803 of the National Housing Act, are included in publicly owned starts and excluded from
total private starts.
2
1984; in 16,000 places for 1978-83; in
Authorized by issuance of local building permit in 17.000 permit-issuing places bee
and in 10,000 places prior to 1963.
14,000 places for 1972-77; in 13.000 places for 1967-71; in 12,000 places for l\
•Not available separately beginning January 1970.
4
Series discontinued December 1988.
Source: Department of Commerce, Bureau of the Census.




346

TABLE B-54.—Business expenditures for new plant and equipment, 1947-91
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Industries surveyed quarterly
Nonmanufacturing
Manufacturing
Year or quarter

1947
1948
1949
1950
1951
1952
1953 .
1954
1955
1956
1957
1958
1959
I960
1961
1962
1963 .'. '.
1964
1965
1966
1967
1968
1969
1970 . ..
1971
1972
1973
"!..
...!
1974
1975
1976
1977
1978
1979
1980
1981
1982.
1983
1984
1985
1986
1987
1988 . .. .
1989
1990*
1991 *
1989: 1
II
III
IV
1990: |
II
HI
IV*
1991: 14
II*

All
industries

Total

20.11
22.78
20.28
21.56
26.81
28.16
29.96
28.86
30.94
37.90
40.54
33.84
35.88
39.44
38.34
40.86
43.67
51.26
59.52
70.40
72.75
76.42
85.74
91.91
92.91
103.40
120.03
139.67
142.42
158.44
184.82
216.81
255.26
286.40
324.73
326.19
321.16
373.83
410.12
399.36
410.52
455.49
507.40
533.91
546.67
487.43
502.05
514.95
519.58
532.45
535.49
534.86
532.84
557.92
561.85

8.73
9.25
7.32
7.73
11.07
12.12
12.43
12.00
12.50
16.33
17.50
12.98
13.76
16.36
15.53
16.03
17.27
21.23
25.41
31.37
32.25
32.34
36.27
36.99
33.60
35.42
42.35
52.48
53.66
58.53
67.48
78.13
95.13
112.60
128.68
123.97
117.35
139.61
152.88
137.95
141.06
163.45
183.80
192.29
193.58
172.73
180.91
185.99
191.88
191.36
195.16
194.48
188.16
191.08
198.76

Total
nonComfarm
Dura- NonMin- Trans- Public mercial busible durable Total » ing porta- utili- and
tion ties other ness2
goods goods
3.39
3.54
2.67
3.22
5.12
5.75
5.71
5.49
5.87
8.19
8.59
6.21
6.72
8.28
7.43
7.81
8.64
10.98
13.49
17.23
17.83
17.93
19.97
19.80
16.78
18.22
22.63
26.77
25.37
27.50
32.77
39.02
47.72
54.82
58.93
54.58
51.61
64.57
70.87
65.68
68.03
77.04
82.56
83.70
83.01
80.20
82.44
83.60
83.41
86.35
84.34
82.67
81.42
82.79
85.09

5.34
5.71
4.64
4.51
5.95
6.37
6.72
6.51
6.62
8.15
8.91
6.77
7.04
8.08
8.10
8.22
8.63
10.25
11.92
14.15
14.42
14.40
16.31
17.19
16.82
17.20
19.72
25.71
28.28
31.03
34.71
39.10
47.41
57.77
69.75
69.39
65.74
75.04
82.01
72.28
73.03
86.41
101.24
108.60
110.57
92.53
98.47
102.40
108.47
105.02
110.82
111.81
106.74
108.28
113.67

11.38
13.53
12.96
13.83
15.74
16.04
17.53
16.85
18.44
21.57
23.04
20.86
22.12
23.08
22.80
24.83
26.40
30.04
34.12
39.03
40.50
44.08
49.47
54.92
59.31
67.98
77.67
87.19
88.76
99.91
117.34
138.69
160.13
173.80
196.06
202.22
203.82
234.22
257.24
261.40
294
6.6
292.04
323.60
341.62
353.09
314.70
321.14
328.96
327.70
341.09
340.33
340.39
344.67
366.84
363.09

0.69
.93
.88
.84
1.11
1.21
1.25
1.29
1.31
1.64
1.69
1.43
1.35
1.29
1.26
1.41
1.26
1.33
1.36
1.42
1.38
1.44
1.77
2.02
2.67
2.88
3.30
4.58
6.12
7.63
9.81
10.55
11.05
12.71
15.81
14.11
10.64
11.86
12.00
8.15
8.28
9.29
9.21
9.81
9.38
8.94
9.24
9.24
9.38
9.58
9.84
9.98
9.84
10.24
9.78

2.69
3.17
2.80
2.87
3.60
3.56
3.58
2.91
3.10
3.56
3.84
2.72
3.47
3.54
3.14
3.59
3.64
4.71
5.66
6.68
6.57
6.91
7.23
7.17
6.42
7.14
8.00
9.16
9.95
11.10
12.20
12.07
13.91
13.56
12.67
11.75
10.81
13.44
14.57
15.05
15.07
16.63
18.84
21.46
23.79
17.84
18.42
21.03
18.25
22.13
21.86
21.41
20.42
23.75
23.99

1.64
2.67
3.28
3.42
3.75
3.96
4.61
4.23
4.26
4.78
5.95
5.74
5.46
5.40
5.20
5.12
5.33
5.80
6.49
7.82
9.33
10.52
11.70
13.03
14.70
16.26
17.99
19.96
20.23
22.90
27.83
32.10
37.53
41.32
47.17
53.58
52.95
57.53
59.58
56.61
56.26
60.37
66.28
66.97
67.88
66.09
68.09
65.19
65.82
65.72
64.27
67.48
70.40
71.76
70.21

6.38
6.77
6.01
6.70
7.29
7.31
8.09
8.42
9.77
11.59
11.56
10.97
11.84
12.86
13.21
14.71
16.17
18.20
20.60
23.11
23.22
25.22
28.77
32.71
35.52
41.69
48.39
53.49
52.47
58.29
67.51
83.96
97.64
106.21
120.41
122.79
129.41
151.39
171.09
181.59
189.84
205.76
229.28
243.39
252.04
221.82
225.39
233.50
234.25
243.66
244.37
241.51
244.02
261.08
259.12

22.27
25.97
24.03
25.81
31.38
32.16
34.20
33.62
37.08
45.25
48.62
42.55
45.17
48.99
48.14
51.61
53.59
62.02
70.79
82.62
83.82
88.92
100.02
106.15
109.18
120.91
139.26
159.83
162.60
179.91
208.15
244.40
285.24
318.08
358.77
363.08
359.73
418.38
454.93
447.11
461.51
508.22
563.93

Addenda
Nonmanufacturing
ManufacSur- Surtur- Total veyed veyed
ing
quar- annuterly ally8
8.73 13.54
9.25 16.73
7.32 16.72
7.73 18.08
11.07 20.31
12.12 20.04
12.43 21.77
12.00 21.62
12.50 24.58
16.33 28.91
17.50 31.11
12.98 29.57
13.76 31.41
16.36 32.63
15.53 32.60
16.03 35.58
17.27 36.33
21.23 40.80
25.41 45.39
31.37 51.25
32.25 51.57
32.34 56.58
36.27 63.74
36.99 69.16
33.60 75.58
35.42 85.49
42.35 96.91
52.48 107.35
53.66 108.95
58.53 121.38
67.48 140.67
78.13 166.27
95.13 190.11
112.60 205.48
128.68 230.09
123.97 239.11
117.35 242.38
139.61 278.77
152.88 302.05
137.95 309.16
141.06 320.45
163.45 344.77
183.80 380.13
192.29
193.58
172.73
180.91
185.99
191.88
191.36
195.16 "•"•"•••'"
194.48
188.16
191.08
198.76

11.38
13.53
12.96
13.83
15.74
16.04
17.53
16.85
18.44
21.57
23.04
20.86
22.12
23.08
22.80
24.83
26.40
30.04
34.12
39.03
40.50
44.08
49.47
54.92
59.31
67.98
77.67
87.19
88.76
99.91
117.34
138.69
160.13
173.80
196.06
202.22
203.82
234.22
257.24
261.40
269.46
292.04
323.60
341.62
353.09
314.70
321.14
328.96
327.70
341.09
340.33
340.39
344.67
366.84
363.09

2.16
3.19
3.76
4.25
4.57
4.00
4.23
4.76
6.14
7.35
8.08
8.72
9.29
9.55
9.80
10.75
9.93
10.76
11.27
12.22
11.07
12.50
14.27
14.24
16.26
17.51
19.24
20.16
20.19
21.47
23.33
27.58
29.98
31.68
34.04
36.89
38.56
44.55
44.81
47.75
50.99
52.73
56.53

:::"::

1
Excludes forestry, fisheries, and agricultural services; professional services; social services and membership organizations; and real
estate, which, effective with the April-May 1984 survey, are no longer surveyed quarterly. See last column ("nonmanufacturing surveyed
annually") for data for these industries.
2
"All industries" plus the part of nonmanufacturing that is surveyed annually.
3
Consists of forestry, fisheries, and agricultural services; professional services; social services and membership organizations,- and

* Planned capital expenditures as reported by business in October and November 1990, corrected for biases.
Source: Department of Commerce, Bureau of the Census.




347

TABLE B-55.—Manufacturing and trade sales and inventories, 1948-90
[Amounts in millions of dollars; monthly data seasonally adjusted]
Year or month

1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973.
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1989: Jan
Feb
Mar
ft
June
Julv
Aug
Sept
Oct
Nov
Dec
1990: Jan
Feb

Mar

Apr
SfaV:::.:::.:::
June
July
Aug
Sept.
Nov "

oct :..:

1

Retail trade
Merchant wholesalers
Manufacturing
Total manufacturing and
trade
1
8
1
Inven- Ratio* Sales1 Inven- Ratio*
InvenInventones'*
tories* Ratio Sales tories*
Sales1 tories* Ratio' Safes
35,260
33,788
38,596
43,356
44,840
47,987
46,443
51,694
54,063
55,879
54,201
59,729
60,827
61,159
65,662
68,995
73,682
80,283
87,187
90,765
98,607
105,585
108,100
116,769
130,931
153,762
177,946
182,402
204,381
229,773
260,592
298,144
327,874
356,700
348,754
369,136
408,578
419,283
425,371
451,933
490,309
521,934
516,956
512,331
512,810
523,494
523,520
520,510
516,154
531,579
527,785
526,075
528,186
526,435
528,549
535,996
538,984
533,603
538,946
542,441
540,368
551,473
547,215
551,570
544,939

52,507
4,9
947
59.822
70,242
72377
76,122
73,175
79,516
87,304
89,052
87,132
92,166
94,756
95,628
101.091
105.515
111,534
1097
2.4
136.838
144.866
155.770
169.419
177.492
187,724
201,865
233.175
285,884
288,414
318,647
351.164
399,220
451,166
508,327
545,613
574,516
591,265
646,072
657,753
657,482
704,515
754,267
795,415
761,320
765,010
767,304
772,908
779,084
782,637
788,618
791,363
789,416
794,019
797.611
795,415
797.202
794,016
7369
9.6
796,050
800399
7649
9.6
802,151
807,491
8088
1.4
814322
816320

1.42
1.53
1.36
1.55
1.58
1.58
16
.0
1.47
1.55
1.59
1.61
1.54
1.56
1.56
1.54
1.53
1.51
1.51
1.57
1.60
1.58
16
.0
1.64
1.61
1.54
1.52
1.61
1.58
1.56
1.53
1.53
1.51
1.55
1.49
1.67
1.56
1.53
1.56
1.55
1.51
1.49
1.50
1.47
1.49
1.50
1.48
1.49
1.50
1.53
1.49
1.50
1.51
1.51
1.51
1.51
1.48
1.47
1.49
1.49
1.47
1.48
1.46
1.48
1.48
1.50

17316
16.126
18.634
21.714
22.529
2.4
483
23355
2.8
640
27,740
28,736
27,247
30,286
3.7
089
30923
33357
35.058
37.331
40^95
4.7
480
4.8
647
50,228
53,501
52,805
55.906
63.027
72.931
84,790
86,589
9.9
877
113,202
126.905
143.936
154,391
168,129
163350
171.242
187,869
190.016
188360
199,170
217,632
231,780
231,485
228,353
228,048
234,042
233.071
231,236
225,922
238,150
233,562
231.995
232.826
231,003
226,704
234,472
237.299
234,259
238,863
239,460
237334
245,646
243,291
246,995
241,332

28,543
26321
31,078
39306
41,136
43,948
41,612
45,069
50,642
51,871
50,280
52,982
53,823
54,919
58,214
60,081
63,440
68,225
78,000
84,662
90,617
98,202
101,652
102,658
108,240
124,630
157,793
159,932
175,195
189,214
210,509
241,100
264,281
282,645
311,827
312,647
334,767
327,496
316,182
331,132
354,163
371,082
357,458
359,056
361,130
363,458
365,055
366,492
370,803
371,489
370,890
371,712
372,813
371,082
374,126
373,169
371,746
372,300
372,384
370,693
373,285
374,298
376,981
377,451
378,199

1.57
1.75
1.48
1.66
1.78
1.76
1.81
1.62
1.73
1.80
1.85
1.75
1.74
1.78
1.75
1.71
1.70
1.66
1.74
1.82
1.80
1.84
1.93
1.84
1.72
1.71
1.86
1.85
1.77
1.67
1.66
1.68
1.71
1.65
1.95
1.80
1.74
1.74
1.70
1.62
1.58
1.58
1.54
1.57
1.58
1.55
1.57
1.58
1.64
1.56
1.59
1.60
1.60
1.61
1.65
1.59
1.57
1.59
1.56
1.55
1.57
1.52
1.55
1.53
1.57

6,808
6,514
7,695
8,597
8,782
9,052
8,993
9,893
10,513
10,475
10,257
11,491
11,656
11,988
12,674
13382
14,529
15,611
16,987
19,520
20,926
22,694
24,031
26,350
29,695
38,173
47,989
46,803
50,885
56,364
66,669
79,472
93,704
102,013
96,290
100,324
113,393
114,626
116,151
124,254
135,176
145,683
143,378
142,799
143,548
145,708
145,823
145,064
145,062
146,698
147,066
148,784
148,893
149,584
151,968
151,620
152,383
151,458
152,302
153,549
152,333
155,586
152,365
152,824
151,972

7,957
7,706
9,284
9,886
10,210
10,686
10,637
11,678
13,260
12,730
12,739
13,879
14,120
14,488
14,936
16,048
17,000
18,317
20,765
24,955
26,268
28,762
32,199
35,210
38,816
45,556
57,239
56,972
64,365
72,801
86,405
99,262
122,979
130,275
128,196
130,906
143,557
148,484
154,713
165,271
180,313
188,819
181,869
181,935
181,615
182,832
184,224
185,146
186.024
185,944
185,003
187,945
188,904
188,819
189,375
188,847
189,361
190,903
193,201
191,259
192,466
193,002
193,314
194,505
196,091

1.13
1.19
1.07
1.16
1.12
1.17
1.18
1.13
1.19
1.23
1.24
1.21
1.21
1.21
1.18
1.20
1.17
1.17
1.22
1.28
1.26
1.27
1.34
1.34
1.31
1.19
1.19
1.22
1.26
1.29
1.30
1.25
1.31
1.25
1.35
1.27
1.22
1.28
1.31
1.28
1.30
1.27
1.27
1.27
1.27
1.25
1.26
1.28
1.28
1.27
1.26
1.26
1.27
1.26
1.25
1.25
1.24
1.26
1.27
1.25
1.26
1.24
1.27
1.27
1.29

11,135
11,149
12,268
13,046
13,529
14,091
14,095
15,321
15,811
16,667
16,696
17,951
18,294
18,249
19,630
20,556
21,823
23,677
25,330
24,758
27,453
29,390
31,264
34,513
38,209
42,658
45,167
49,010
54,699
60,207
67,018
74,737
79,779
86,558
89,114
97,570
107,316
114,642
120,860
128,509
137,500
144,471
142,093
141,179
141,214
143,744
144,626
144,210
145,170
146,731
147,157
145,296
146,467
145,848
149,877
149,904
149,302
147,886
147,781
149,432
150,201
150,241
151,559
151,751
151,635

16,007
15,470
19,460
21,050
21,031
21,488
20,926
22,769
23,402
24,451
24,113
25,305
26,813
26,221
27,941
29,386
31,094
34,405
38,073
35,249
38,885
42,455
43,641
49,856
54,809
62,989
70,852
71,510
79,087
89,149
102,306
110,804
121,067
132,693
134,493
147,712
167,748
181,773
186,587
208,112
219,791
235,514
221,993
224,019
224,559
226,618
229,805
230,999
231,791
233,930
233,523
234,362
235,894
235,514
233,701
232,000
232,562
232,847
234,814
234,517
236,400
240,191
240,553
242,366
242,030

1.39
1.41
1.38
1.64
1.52
1.53
1.51
1.43
1.47
1.44
1.44
1.41
1.47
1.44
1.42
1.43
1.42
1.45
1.50
1.42
1.42
1.44
1.40
1.44
1.43
1.48
1.57
1.46
1.45
1.48
1.53
1.48
1.52
1.48
1.49
1.44
1.49
1.52
1.56
1.55
1.55
1.59
1.56
1.59
1.59
1.58
1.59
1.60
1.60
1.59
1.59
1.61
1.61
1.61
1.56
1.55
1.56
1.57
1.59
1.57
1.57
1.60
1.59
1.60
1.60

Monthly average for year and total for month.

retail trade are not comparable with earlier periods.
3
Inventory/sales ratio. Annual data are: beginning 1981,
monthly average sales for the year; and for earlier years,
sales for month.
Note.—Earlier data are not strictly comparable with data
retail trade.
Source: Department of Commerce, Bureau of the Census.




„ of monthly ratios; for 1958-80, ratio of December inventories to
averages. Monthly data are ratio of inventories at end of month to
1958 for manufacturing and beginning 1967 for wholesale and

348

TABLE B-56.—Manufacturers' shipments and inventories, 1947-90
[Millions of dollars; monthly data seasonally adjusted]
Shipments1
Year or
month

Total

1947
15,513
17,316
1948 .. ..
16,126
1949
18,634
1950
21,714
1951
22,529
1952 .
24,843
1953!
23,355
1954
26,480
1955
27,740
1956
28,736
1957
27,247
1958
30,286
1959
30,879
1960
30,923
1961
33,357
1962
35,058
1963
1964
37,331
1965
40,995
44,870
1966
46,487
1967
1968
50,228
53,501
1969
1970
52,805
1971 .
55,906
63,027
1972
1973
72,931
1974
84,790
86,589
1975
98,797
1976
1977
113,202
126,905
1978
143,936
1979
154,391
1980 .
168,129
1981
1982 .. . 163,350
171,242
1983
1984
187,869
1985
190,016
1986
188,360
1987
199,170
1988
217,632
1989
231,780
1989: Jan
231,485
Feb
228,353
Mar
228,048
234,042
Jay"" ! 233,071
June... 231,236
July.... 225,922
Aug.... 238,150
Sept... 233,562
Oct
231,995
Nov
232,826
Dec
231,003
1990: Jan
226,704
Feb
234,472
Mar
237,299
234,259
Jay'"".' 238,863
June.... 239,460
July 237,834
Aug
245,646
Sept.... 243,291
Oct
246,995
Nov "... 241,332

Dura- Nonble durable
goods goods
indus- industries
tries
6,694
7,579
7,191
8,845
10,493
11,313
13,349
11,828
14,071
14,715
15,237
13,563
15,609
15,883
15,616
17,262
18,280
19,637
22,221
24,649
25,267
27,659
29,437
28,188
29,954
34,027
39,681
44,230
43,659
50,700
59,267
67,848
76,060
77,550
83,872
79,352
84,956
96,623
99,019
99,989
105,291
115,684
122,668
123,578
120,924
120,432
123,331
122,962
121,720
117,114
128,347
124,393
121,840
123,209
121,998
116,716
123,224
125,089
122,031
126,507
127,283
125,090
128,619
124,315
126,196
121,487

8,819
9,738
8,935
9,789
11,221
11,216
11,494
11,527
12,409
13,025
13,499
13,684
14,677
14,996
15,307
16,095
16,778
17,694
18,774
20,220
21,220
22,570
24,064
24,617
25,952
29,000
33,250
40,560
42,931
48,097
53,935
59,057
67,876
76,841
84,257
83,998
86,286
91,246
90,996
88,371
93,879
101,948
109,112
107,907
107,429
107,616
110,711
110,109
109,516
108,808
109,803
109,169
110,155
109,617
109,005
109,988
111,248
112,210
112,228
112,356
112,177
112,744
117,027
118,976
120,799
119,845

Total

25,897
28,543
26,321
31,078
39,306
41,136
43,948
41,612
45,069
50,642
51,871
50,280
52,982
53,823
54,919
58,214
60,081
63,440
68,225
78,000
84,662
90,617
98,202
101,652
102,658
108,240
124,630
157,793
159,932
175,195
189,214
210,509
241,100
264,281
282,645
311,827
312,647
334,767
327,496
316,182
331,132
354,163
371,082
357,458
359,056
361,130
363,458
365,055
366,492
370,803
371,489
370,890
371,712
372,813
371,082
374,126
373,169
371,746
372,300
372,384
370,693
373,285
374,298
376,981
377,451
378,199

Inventories2
Durable goods industries
Nondurable goods industries
MateMateWork
Work
Finished
rials
Finished
in
rials
in
Total
and
proc- goods Total
and
proc- goods
supplies ess
supplies ess
13,061
14,662
13,060
15,539
20,991
23,731
25,878
23,710
26,405
30,447
31,728
30,282
32,099
32,399
32,563
34,647
35,889
38,528
42,286
49,950
55,005
58,876
64,738
66,781
66,289
70,250
81,399
101,741
102,871
112,584
121,601
137,891
160,533
174,620
186,347
200,825
200,406
218,771
214,066
208,313
216,598
233,666
246,222
236,810
238,165
239,330
240,486
241,689
242,295
245,813
246,378
245,621
246,427
247,610
246,222
248,273
247,095
245,435
246,609
246,530
244,902
246,456
246,653
246,926
246,818
247,785

8,966
7,894
9,194
10,417
10,608
10,043
10,783
10,361
10,290
10,824
11,080
11,981
13,341
15,503
16,455
17,376
18,693
19,182
19,759
20,860
26,029
35,151
33,920
37,548
40,251
45,252
52,687
55,121
57,927
58,960
60,203
64,881
62,229
60,218
61,255
65,252
67,375
66,273
66,852
67,278
66,887
66,748
66,681
67,565
67,746
67,611
68,010
68,058
67,375
68,092
67,402
66,744
66,689
66,814
66,424
66,924
66,444
66,564
67,001
67,375

1
Monthly
2

10,720 6,206
6,040
9,721
10,756 6,348
12,317 7,565
12,837 8,125
12,392 7,847
13,070 8,246
12,783 9,255
13,204 9,069
14,156 9,667
14,874 9,935
16,192 10,355
18,077 10,868
21,939 12,508
25,004 13,546
27,335 14,165
30,408 15,637
29,848 17,751
28,650 17,880
30,788 18,602
35,546 19,824
42,603 23,987
43,369 25,582
46,344 28,692
50,620 30,730
58,634 34,005
69,254 38,592
76,997 42,502
81,105 47,315
87,223 54,642
87,643 52,560
97,750 56,140
97,253 54,584
94,466 53,629
99,952 55,391
108,392 60,022
117,303 61,544
109,309 61,228
110,118 61,195
111,555 60,497
113,381 60,218
114,291 60,650
114,668 60,946
116,487 61,761
116,560 62,072
115,477 62,533
115,756 62,661
117,051 62,501
117,303 61,544
118,854 61,327
117,691 62,002
116,921 61,770
117,810 62,110
117,482 62,234
116,326 62,152
117,202 62,330
117,530 62,679
117,924 62,438
117,414 62,403
117,743 62,667

12,836
13,881
13,261
15,539
18,315
17,405
18,070
17,902
18,664
20,195
20,143
19,998
20,883
21,424
22,356
23,567
24,192
24,912
25,939
28,050
29,657
31,741
33,464
34,871
36,369
37,990
43,231
56,052
57,061
62,611
67,613
72,618
80,567
89,661
96,298
111,002
112,241
115,996
113,430
107,869
114,534
120,497
124,860
120,648
120,891
121,800
122,972
123,366
124,197
124,990
125,111
125,269
125,285
125,203
124,860
125,853
126,074
126,311
125,691
125,854
125,791
126,829
127,645
130,055
130,633
130,414

average for year and total for month.
Seasonally adjusted, end of period. Data beginning 1982 are not comparable with data for prior periods.
Note.—Data beginning 1958 are not strictly comparable with earlier data.
Source: Department of Commerce, Bureau of the Census.




349

8,317
8,167
8,556
8,971
8,775
8,669
9,083
9,088
9,502
9,819
9,984
10,134
10,453
11,159
11,714
12,290
12,725
13,150
13,683
14,676
18,132
23,700
23,542
25,832
27,398
29,317
32,451
36,206
37,758
43,915
44,643
44,917
42,964
41,540
44,354
47,294
46,789
46,963
46,900
46,858
46,780
46,679
46,773
46,891
47,073
46,643
46,769
47,069
46,789
46,721
46,743
47,063
46,876
46,738
46,622
47,036
47,357
47,694
48,102
48,334

2,472
2,440
2,571
2,721
2,864
2,832
2,947
2,950
3,109
3,298
3,407
3,517
3,811
4,207
4,421
4,848
5,122
5,274
5,665
5,982
6,707
8,175
8,837
9,933
11,003
11,907
13,741
15,732
16,074
18,585
18,842
18,978
18,926
17,360
18,752
19,291
20,925
19,532
19,522
20,075
20,493
20,290
20,524
20,837
20,919
20,985
21,405
21,146
20,925
20,993
20,897
20,880
20,760
20,905
20,588
20,706
21,148
21,700
21,730
21,468

7,409
7,415
7,666
8,622
8,624
8,497
8,853
9,386
9,745
10,450
10,801
11,261
11,675
12,684
13,522
14,603
15,617
16,447
17,021
17,332
18,392
24,177
24,682
26,846
29,212
31,394
34,375
37,723
42,466
48,502
48,756
52,101
51,540
48,969
51,428
53,912
57,146
54,153
54,469
54,867
55,699
56,397
56,900
57,262
57,119
57,641
57,111
56,988
57,146
58,139
58,434
58,368
58,055
58,211
58,581
59,087
59,140
60,661
60,801
60,612

TABLE B-57.—Manufacturers' new and unfilled orders, 1947-90
[Amounts in millions of dollars; monthly data seasonally adjusted]

Year or month

1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978...
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1989: Jan
Feb
Mar
May
June
July
Aug
Sept
Oct
Nov
Dec
1990: Jan
Feb
Mar

June
July
Aug
Sept
Oct
Nov ".....

Total

15,256
17,693
15,614
20,110
23,907
23,204
23,586
22,335
27,465
28,368
27,559
27,191
30,731
30,240
31,106
33,432
35,536
38,339
42,111
46,402
47,056
50,687
53,950
52,038
55,984
64,173
76,056
87,245
85,220
99,532
115,103
131,650
147,574
156,318
167,883
162,273
174,122
189,791
190,918
188,663
201,966
221,627
235,614
236,075
231,306
233,011
239,907
233,753
235,157
230,447
236,793
234,354
234,067
239,710
240,752
227,572
231,759
241,071
236,026
241,102
236,578
240,238
244,355
243,903
250,117
236,114

New orders1
Durable goods
industries
NonCapital durable
goods
goods
indus- industries
Total
tries,
nondefense
6,388
8,126
6,633
10,165
12,841
12,061
12,147
10,768
14,996
15,365
14,111
13,397
16,010
15,308
15,761
17,370
18,721
20,633
23,288
26,176
25,825
28,116
29,871
27,388
29,998
35,069
42,726
46,836
42,099
51,404
61,128
72,416
79,586
79,482
83,657
78,338
87,600
98,581
99,843
100,166
107,770
119,634
126,557
128,479
124,107
125,377
129,372
123,524
125,137
122,031
126,766
125,227
124,262
130,175
131,719
117,909
120,782
128,872
123,609
128,737
124,692
128,094
126,979
124,972
129,458
116,427

8,868
9,566
8,981
9,945
11,066
11,143
11,439
11,566
12,469
13,003
13,448
13,795
14,721
14,932
15,345
16,062
16,815
17,706
18,824
20,225
....... 21,231
22,571
7,660
24,080
24,650
6,738
7,444
25,986
8,622
29,104
10,971
33,330
12,673
40,409
11,011
43,122
12,791
48,129
15,242
53,975
59,234
19,420
23,221
67,987
23,242
76,836
24,012
84,226
21,661
83,935
86,522
22,098
26,243
91,209
27,067
91,075
88,497
26,551
29,707
94,197
35,028 101,993
38,821 109,057
40,352 107,596
37,189 107,199
38,137 107,634
40,389 110,535
37,290 110,229
39,146 110,020
41,445 108,416
37,130 110,027
35,341 109,127
35,975 109,805
38,901 109,535
44,389 109,033
38,347 109,663
36,094 110,977
40,889 112,199
36,573 112,417
35,928 112,365
36,192 111,886
39,840 112,144
35,871 117,376
38,293 118,931
41,633 120,659
35,812 119,687

Unfilled orders *

Total

34,473
30,736
24,045
41,456
67,266
75,857
61,178
48,266
60,004
67,375
53,183
46,806
52,242
44,666
47,016
48,124
54,019
66,347
79,685
97,991
104,548
109,923
115,424
106,156
107,145
121,060
158,885
188,468
172,037
180,564
204,946
262,415
306,540
329,884
327,356
314,270
349,419
372,586
383,181
387,065
421,243
468,860
514,499
473,450
476,403
481,366
487,231
487,913
491,834
496,359
495,002
495,794
497,866
504,750
514,499
515,367
512,654
516,426
518,193
520,432
517,550
519,954
518,663
519,275
522,397
517,179

1
Monthly average for
2
Seasonally adjusted,
3

Unfilled orders—shipments
ratio3

NonDurable durable
goods
goods
industries industries

28,579
26,619
19,622
35,435
63,394
72,680
58,637
45,250
56,241
63,880
50,352
43,991
48,878
42,097
43,979
45,509
50,956
63,152
75,906
94,160
100,578
105,947
111,253
101,565
102,118
114,724
151,506
182,926
164,139
172,274
196,244
251,525
294,272
317,677
315,529
303,187
335,367
358,899
388,427
370,700
400,720
447,868
494,196
452,769
455,952
460,897
466,938
467,500
470,917
475,834
474,253
475,087
477,509
484,475
494,196
495,389
492,947
496,730
498,308
500,538
497,947
500,951
499,311
499,968
503,230
498,170

5,894
4,117
4,423
6,021
3,872
3,177
2,541
3,016
3,763
3,495
2,831
2,815
3,364
2,569
3,037
2,615
3,063
3,195
3,779
3,831
3,970
3,976
4,171
4,591
5,027
6,336
7,379
5,542
7,898
8,290
8,702
10,890
12,268
12,207
11,827
11,083
14,052
13,687
14,754
16,365
20,523
20,992
20,303
20,681
20,451
20,469
20,293
20,413
20,917
20,525
20,749
20,707
20,357
20,275
20,303
19,978
19,707
19,696
19,885
19,894
19,603
19,003
19,352
19,307
19,167
19,009

Total

3.42
3.63
3.87
3.35
3.05
2.98
2.75
2.61
2.66
2.78
3.08
3.31
3.79
3.70
3.85
3.75
3.65
3.38
3.31
3.86
4.13
3.76
3.30
3.29
3.62
3.93
3.88
3.87
3.88
3.59
3.64
3.72
3.63
3.65
3.66
3.99
3.71
3.78
3.83
3.79
3.80
3.84
3.95
3.74
3.79
3.87
3.91
3.99
4.06
3.90
3.90
3.96
3.90
3.85
3.91
3.83
3.91
3.91
3.95

NonDurable durable
goods goods
industries industries

4.12
4.27
4.55
4.00
3.64
3.50
3.33
3.10
3.20
3.35
3.69
3.93
4.53
4.40
4.65
4.50
4.39
4.06
3.90
4.56
4.96
4.52
3.94
3.90
4.25
4.66
4.62
4.67
4.78
4.34
4.41
4.51
4.43
4.41
4.43
4.81
4.51
4.61
4.65
4.61
4.62
4.66
4.83
4.52
4.59
4.71
4.76
.4.81
4.97
4.77
4.77
4.87
4.76
4.68
4.78
4.66
4.80
4.77
4.85

0.96
1.12
1.04
.85
.86
.94
.72
.79
.68
.73
.72
.80
.76
.73
.69
.69
.77
.77
.88
.93
.64
.84
.76
.72
.83
.83
.76
.69
.63
.70
.65
.69
.71
.83
.78
.77
.77
.75
.77
.74
.75
.77
.76
.76
.76
.74
.74
.77
.73
.70
.70
.70
.70
.70
.67
.68
.68
.68
.67

year and total for month.
end of period.
Ratio of unfilled orders at end of period to shipments for period; excludes industries with no unfilled orders. Annual figures relate
to seasonally adjusted data for December.
Note.—Data beginning 1958 are not strictly comparable with earlier data.
Source: Department of Commerce, Bureau of the Census.




350

PRICES
TABLE B-58.—Consumer price indexes, major expenditure classes, 1946-90
[1982-84=100]
Food and
beverages
Year or
month

All
items

1946
1947
1948
1949
1950
1951
1952
1953
'.'..'.
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
'.'.'.'.
1977.. .
1978
1979
1980
1981
1982
1983
1984
1985
'.'".'.
1986
1987
1988
1989
1990
1989: Jan
Feb
Mar

fc:
June
July
Aug
Sept
Oct
Nov
Dec
1990: Jan
Feb
Mar

fc
June
July

Aug
Sept
Nov
Dec

oct ::

195
22.3
24.1
23.8
24.1
26.0
26.5
26.7
26.9
26.8
27.2
28.1
28.9
29.1
29.6
29.9
30.2
30.6
31.0
31.5
32.4
33.4
34.8
36.7
38.8
40.5
41.8
44.4
49.3
53.8
56.9
60.6
65.2
72.6
82.4
90.9
96.5
99.6
103.9
107.6
109.6
113.6
118.3
124.0
130.7
121.1
121.6
122.3
123.1
123.8
124.1
124.4
124.6
125.0
125.6
125.9
126.1
127.4
128.0
128.7
128.9
129.2
129.9
130.4
131.6
132.7
133.5
133.8
133.8

Total »

35.0
36.2
38.1
40.1
41.4
43.1
48.8
55.5
60.2
62.1
65.8
72.2
79.9
86.7
93.5
97.3
99.5
103.2
105.6
109.1
113.5
118.2
124.9
132.1
122.0
122.7
123.3
124.0
124.7
124.9
125.4
125.6
125.9
126.3
126.7
127.2
130.0
130.9
131.2
131.0
131.1
131.7
132.4
132.7
133.0
133.4
133.7
133.9

Housing

Food

19.8
24.1
26.1
25.0
25.4
28.2
28.7
28.3
28.2
27.8
28.0
28.9
30.2
29.7
30.0
30.4
30.6
311
31.5
322
33.8
34.1
35.3
37.1
39.2
40.4
42.1
48.2
55.1
59.8
61.6
65.5
72.0
79.9
86.8
93.6
97.4
99.4
103.2
105.6
109.0
113.5
118.2
125.1
132.4
122.2
122.9
123.5
124.2
124.9
125.0
125.5
125.8
126.1
126.5
126.9
127.4
130.4
131.3
131.5
131.3
131.3
132.0
132.7
132.9
133.2
133.6
134.0
134.2

1
Includes alcoholic beverages, not
2
See table B-59 for components.
8

HouseOther
hold Apparel TransEnterFuel and furnish- and portation Medical tainment goods
care
and
Total Shelter other 2 ings upkeep
services
utilities and
operation

363'

32.0
34.0
36.4
38.0
39.4
41.2
45.8
50.7
53.8
57.4
62.4
70.1
81.1
90.4
96.9
99.5
103.6
107.7
110.9
114.2
118.5
123.0
128.5
120.7
121.1
121.5
121.6
122.1
122.9
123.9
124.2
124.3
124.4
124.5
124.9
125.9
126.1
126.8
126.8
127.1
128.3
129.2
130.2
130.5
130.6
130.4
130.5

22.0
22.5
22.7
23.1
24.0
24.5
24.7
25.2
25.4
25.8
26.1
26.5
27.0
27.8
28.8
30.1
32.6
35.5
37.0
38.7
40.5
44.4
48.8
51.5
54.9
60.5
68.9
81.0
90.5
96.9
99.1
104.0
109.8
115.8
121.3
127.1
132.8
140.0
129.8
130.3
131.2
131.2
131.8
132.3
133.6
134.1
134.1
134.8
135.2
135.6
136.3
136.6
137.8
138.0
138.3
139.5
141.1
142.4
142.3
142.4
142.4
142.7

22.5
22.6
23.0
23.6
24.3
24.8
25.4
26.0
26.3
26.3
26.6
26.6
26.6
26.7
27.1
27.4
28.0
29.1
31.1
32.5
34.3
40.7
45.4
49.4
54.7
58.5
64.8
75.4
86.4
94.9
100.2
104.8
106.5
104.1
103.0
104.4
107.8
111.6
106.0
105.9
105.9
106.2
107.0
109.2
109.7
109.7
109.7
108.0
107.5
108.4
110.8
110.2
109.9
109.4
109.9
112.2
111.3
112.7
114.0
113.4
112.9
112.7

42.0
43.6
45.2
46.8
48.6
49.7
51.1
56.8
63.4
67.3
70.4
74.7
79.9
86.3
93.0
98.0
100.2
101.9
103.8
105.2
107.1
109.4
111.2
113.3
110.9
110.9
110.5
110.7
110.8
111.1
111.4
111.4
111.7
111.9
111.9
111.7
112.1
112.8
112.8
112.8
113.2
113.1
113.6
113.3
113.8
114.2
113.8
113.7

34.4
39.9
42.5
40.8
40.3
43.9
43.5
43.1
43.1
42.9
43.7
44.5
44.6
45.0
45.7
46.1
46.3
46.9
47.3
47.8
49.0
51.0
53.7
56.8
59.2
61.1
62.3
64.6
69.4
72.5
75.2
78.6
81.4
84.9
90.9
95.3
97.8
100.2
102.1
105.0
105.9
110.6
115.4
118.6
124.1
115.3
115.3
119.3
120.9
120.4
117.8
115.0
115.0
120.0
122.7
122.1
119.2
116.7
120.4
125.4
126.7
125.5
123.3
120.8
122.2
126.8
128.4
127.5
125.3

16.7
18.5
20.6
22.1
22.7
24.1
25.7
26.5
26.1
25.8
26.2
27.7
28.6
29.8
29.8
30.1
30.8
30.9
31.4
31.9
32.3
33.3
34.3
35.7
37.5
39.5
39.9
41.2
45.8
50.1
55.1
59.0
61.7
70.5
83.1
93.2
97.0
99.3
103.7
106.4
102.3
105.4
108.7
114.1
120.5
111.1
111.6
111.9
114.6
116.0
115.9
115.4
114.3
113.7
114.5
115.0
115.2
117.2
117.1
116.8
117.3
117.7
118.2
118.4
120.6
123.0
125.8
126.9
127.2

12.5
13.5
14.4
14.8
15.1
15.9
16.7
17.3
17.8
18.2
18.9
19.7
20.6
21.5
22.3
22.9
23.5
24.1
24.6
25.2
26.3
28.2
29.9
31.9
34.0
36.1
37.3
38.8
42.4
47.5
52.0
57.0
61.8
67.5
74.9
82.9
92.5
100.6
106.8
113.5
122.0
130.1
138.6
149.3
162.8
143.8
145.2
146.1
146.8
147.5
148.5
149.7
150.7
151.7
152.7
153.9
154.4
155.9
157.5
158.7
159.8
160.8
161.9
163.5
165.0
165.8
167.1
168.4
169.2

40.7
43.0
45.2
47.5
50.0
51.5
52.9
56.9
62.0
65.1
68.3
71.9
76.7
83.6
90.1
96.0
100.1
103.8
107.9
111.6
115.3
120.3
126.5
132.4
123.8
124.3
124.7
125.4
125.5
126.2
126.9
127.3
127.8
128.4
128.6
129.1
129.9
130.4
130.9
131.4
131.7
131.9
132.7
133.0
134.1
134.3
134.4
134.6

35.1
36.9
38.7
40.9
42.9
44.7
46.4
49.8
53.9
57.0
60.4
64.3
68.9
75.2
82.6
91.1
101.1
107.9
114.5
121.4
128.5
137.0
147.7
159.0
143.4
144.1
144.4
144.7
145.4
146.3
147.3
148.7
151.2
151.8
151.9
152.9
154.0
154.7
155.2
155.8
156.6
157.8
159.2
160.4
162.6
163.2
163.6
164.5

Energy3

21.5
21.5
21.9
22.4
22.5
22.6
22.6
22.5
22.9
23.3
23.8
24.2
24.8
25.5
26.5
27.2
29.4
38.1
42.1
45.1
49.4
52.5
65.7
86.0
97.7
99.2
99.9
100.9
101.6
88.2
88.6
89.3
94.3
102.1
89.0
89.3
89.8
94.9
97.4
99.0
98.5
97.0
95.9
94.6
93.2
93.2
97.6
96.4
95.5
95.7
96.7
99.5
98.9
103.6
108.8
111.4
110.9
110.1

shown separately.

See tables B-60 for definition and B-59 for components.
Note.—Data beginning 1978 are for all urban consumers; earlier data are for urban wage earners and clerical workers.
Data beginning 1983 incorporate a rental equivalence measure for homeowners' costs and therefore are not strictly comparable with
earlier figures.
Source: Department of Labor, Bureau of Labor Statistics.
OP1




ool

TABLE B-59.—Consumer price indexes, selected expenditure classes, 1946-90
[1982-84=100, except as noted]
Shelter

Food and beverages

Year or month

1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1989: Jan
Feb
Mar

Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
1990: Jan
Feb
Mar

fcn
June
July
Aug
Sept
Oct
Nov
Dec

Total »

35.0
36.2
38.1
40.1
41.4
43.1
48.8
55.5
60.2
62.1
65.8
72.2
79.9
86.7
93.5
97.3
99.5
103.2
105.6
109.1
113.5
118.2
124.9
132.1
122.0
122.7
123.3
124.0
124.7
124.9
125.4
125.6
125.9
126.3
126.7
127.2
130.0
130.9
131.2
131.0
131.1
131.7
132.4
132.7
133.0
133.4
133.7
133.9

At Away Total Total 2
Total home from
home

19.8
24.1
26.1
25.0
25.4
28.2
28.7
28.3
28.2
27.8
28.0
28.9
30.2
29.7
30.0
30.4
30.6
31.1
31.5
32.2
33.8
34.1
35.3
37.1
39.2
40.4
42.1
48.2
55.1
59.8
61.6
65.5
72.0
79.9
86.8
93.6
97.4
99.4
103.2
105.6
109.0
113.5
118.2
125.1
132.4
122.2
122.9
123.5
124.2
124.9
125.0
125.5
125.8
126.1
126.5
126.9
127.4
130.4
131.3
131.5
131.3
131.3
132.0
132.7
132.9
133.2
133.6
134.0
134.2

25.8
28.0
26.9
27.3
30.3
30.8
30.3
30.1
29.5
29.6
30.6
32.0
31.2
31.5
31.8
32.0
32.4
32.7
33.5
35.2
35.1
36.3
38.0
39.9
40.9
42.7
49.7
57.1
61.8
63.1
66.8
73.8
81.8
88.4
94.8
98.1
99.1
102.8
104.3
107.3
111.9
116.6
124.2
132.3
121.2
122.0
122.7
123.5
124.4
124.3
124.8
124.9
125.0
125.4
125.8
126.5
131.0
132.1
131.9
131.1
130.9
131.7
132.5
132.7
132.9
133.4
133.8
133.8

Household fuels

21.5
21.9
22.1
22.6
23.4
24.1
24.8
25.4
26.0
26.7
27.3
27.8
28.4
29.7
31.3
32.9
34.9
37.5
39.4
41.0
44.2
49.8
54.5
58.2
62.6
68.3
75.9
83.4
90.9
95.8
100.0
104.2
108.3
112.5
117.0
121.8
127.4
133.4
124.7
125.2
125.7
126.2
126.7
127.1
127.8
128.1
128.8
129.1
129.5
129.8
130.3
131.0
131.8
132.5
133.0
133.4
133.9
134.3
134.6
135.0
135.4
135.7

22.0
22.5
22.7
23.1
24.0
24.5
24.7
25.2
25.4
25.8
26.1
26.5
27.0
27.8
28.8
30.1
32.6
35.5
37.0
38.7
40.5
44.4
48.8
51.5
54.9
60.5
68.9
81.0
90.5
96.9
99.1 '"iosio
104.0 108.6
109.8 115.4
115.8 121.9
121.3 128.1
127.1 133.6
132.8 138.9
140.0 146.7
129.8 135.2
130.3 136.3
131.2 138.6
131.2 137.9
131.8 137.8
132.3 138.7
133.6 141.5
134.1 141.5
134.1 139.4
134.8 140.0
135.2 140.1
135.6 140.1
136.3 142.0
136.6 143.5
137.8 144.8
138.0 144.7
138.3 144.4
139.5 145.3
141.1 148.7
142.4 150.7
142.3 148.9
142.4 148.9
142.4 149.0
142.7 149.5

zri

Fuel oil
Other
Home
and
Gas
Home- mainteutilities
other
and
Rent, owners' nance Total
2
house- (Piped) public
Total hold
and
resi- costs
and
elec- services
repairs
dential
fuel
tricity
commodities
250
25.8
275
28.7
29.7
30.9
322
33.9
351
35.6
36.3
37.0
37.6
38.2
38.7
39.2
39.7
40.1
40.5
40.9
41.5
42.2
43.3
44.7
465
48.7
50.4 •••"•'""••'
52.5
55.2
58.0
61.1
64.8
69.3
74.3
80.9
87.9
94.6
100.1 ""i'02!5
105.3 107.3
111.8 113.1
118.3 119.4
123.1 124.8
127.8 131.1
132.8 137.3
138.4 144.6
130.5 134.4
130.9 134.7
131.1 135.0
131.4 135.4
131.7 136.2
132.3 136.5
133.0 137.3
133.5 138.1
133.9 138.9
134.7 139.7
135.2 140.3
135.5 140.9
135.8 141.1
136.0 141.0
136.5 142.2
137.0 142.5
137.3 143.1
137.9 144.4
138.7 145.4
139.4 146.5
140.0 147.0
140.5 147.2
140.7 147.3
141.1 147.5

EE

1
2 Includes

alcoholic beverages, not shown separately.
December 1982=100.




Fuel and other utilities

Renters' costs

Food

352

20.5
20.9
21.4
22.3
23.2
23.6
24.0
24.4
24.8
25.0
25.3
25.8
26.3
27.5
28.9
30.6
33.2
35.8
38.6
40.6
43.6
49.5
54.1
57.6
62.0
67.2
74.0
82.4
90.7
96.4
99.9
103.7
106.5
107.9
111.8
114.7
118.0
122.2
116.1
117.1
117.1
117.3
117.4
118.3
118.4
118.5
118.6
118.6
119.3
119.5
120.4
120.8
121.2
121.2
122.2
121.8
122.1
121.2
124.6
123.4
123.9
123.8

22.5
22.6
23.0
23.6
24.3
24.8
25.4
26.0
26.3
26.3
26.6
26.6
26.6
26.7
27.1 ""2L4
27.4 21.7
28.0 22.1
29.1 23.1
31.1 24.7
32.5 25.7
34.3 27.5
40.7 34.4
45.4 39.4
49.4 43.3
54.7 49.0
58.5 53.0
64.8 61.3
75.4 74.8
86.4 87.2
94.9 95.6
100.2 100.5
104.8 104.0
106.5 104.5
104.1 99.2
103.0 97.3
104.4 98.0
107.8 100.9
111.6 104.5
106.0 98.7
105.9 98.6
105.9 98.5
106.2 98.8
107.0 99.6
109.2 103.2
109.7 103.7
109.7 103.7
109.7 103.5
108.0 101.0
107.5 99.9
108.4 101.2
110.8 104.5
110.2 103.1
109.9 102.3
109.4 101.2
109.9 101.9
112.2 105.4
111.3 104.5
112.7 105.6
114.0 107.6
113.4 106.4
112.9 105.4
112.7 105.6

7.9
9.0
10.6
10.9
11.3
11.8
12.1
12.6
12.6
12.7
13.3
14.0
13.7
13.9
13.8
14.1
14.2
14.4
14.4
14.6
15.0
15.5
16.0
16.3
17.0
18.2
18.3
21.1
33.2
36.4
38.8
43.9
46.2
62.4
86.1
104.6
103.4
97.2
99.4
95.9
77.6
77.9
78.1
81.7
99.3
80.5
81.4
81.5
82.5
81.5
80.2
79.7
78.9
79.3
82.0
83.9
88.7
113.1
95.4
91.5
89.6
88.0
84.9
82.7
91.8
104.4
118.5
117.0
114.1

18.3
18.2
18.7
19.2
19.2
19.3
19.5
19.9
20.2
20.7
20.9
21.1
21.9
22.4
23.3
23.5
23.5
23.5
23.5
23.5
23.6
23.7
23.9
24.3
25.4
27.1
28.5
29.9
34.5
40.1
44.7
50.5
55.0
61.0
71.4
81.9
93.2
101.5
105.4
107.1
105.7
103.8
104.6
107.5
109.3
105.1
104.9
104.8
105.0
106.1
110.5
111.1
111.3
111.0
107.6
106.1
107.0
107.5
108.3
107.9
106.8
107.8
112.4
111.7
111.6
112.4
109.0
108.0
108.6

46"6
47.1
48.4
50.0
53.4
56.2
57.8
60.7
63.9
67.7
70.8
73.7
74.3
77.0
84.3
93.3
99.5
107.2
112.1
117.9
120.1
122.9
127.1
131.7
125.9
126.0
125.9
126.2
127.0
127.1
127.7
127.8
128.1
127.6
127.9
128.2
129.3
130.0
130.7
130.9
131.2
131.8
130.8
132.8
132.9
133.4
133.7
132.7

TABLE B-59.—Consumer price indexes, selected expenditure classes, 1946-90—Continued
[1982-84=100, except as noted]
Transportation

Medical care

Private transportation
Year or month

1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1989- Jan
Feb
Mar....
Apr
May
June
July
Aug....
Sept
Oct
Nov
Dec
1990: Jan
Feb
Mar
Apr
May.--'™
June
July
Aug...

sept
Oct

Total

:.: : : :

Nov
Dec

16.7
18.5
20.6
22.1
22.7
24.1
25.7
26.5
26.1
25.8
26.2
27.7
28.6
29.8
29.8
30.1
30.8
30.9
31.4
31.9
32.3
33.3
34.3
35.7
37.5
39.5
39.9
41.2
45.8
50.1
55.1
59.0
61.7
70.5
83.1
93.2
97.0
99.3
103.7
106.4
102.3
105.4
108.7
114.1
120.5
111.1
111.6
111.9
114.6
116.0
115.9
115.4
114.3
113.7
114.5
115.0
115.2
117.2
117.1
116.8
117.3
117.7
118.2
118.4
120.6
123.0
125.8
126.9
127.2

Total 8

18.3
20.8
23.0
24.4
24.5
25.6
27.3
27.8
27.1
26.7
27.1
28.6
29.5
30.8
30.6
30.8
31.4
31.6
32.0
32.5
32.9
33.8
34.8
36.0
37.5
39.4
39.7
41.0
46.2
50.6
55.6
59.7
62.5
71.7
84.2
93.8
97.1
99.3
103.6
106.2
101.2
104.2
107.6
112.9
118.8
109.8
110.3
110.7
113.6
115.0
114.9
114.3
113.1
112.4
113.3
113.7
113.9
115.9
115.6
115.1
115.5
115.9
116.4
116.6
119.0
121.4
124.2
125.1
125.1

New
cars

34.1
37.3
40.8
41.1
43.1
46.8
47.2
46.5
44.8
46.1
48.5
50.0
52.2
51.5
51.5
51.3
51.0
50.9
49.7
48.8
49.3
50.7
51.5
53.0
55.2
54.7
54.8
57.9
62.9
66.9
70.4
75.8
81.8
88.4
93.7
97.4
99.9
102.8
106.1
110.6
114.6
116.9
119.2
121.0
119.5
119.6
119.6
119.4
119.5
119.1
118.6
117.7
117.0
118.6
120.5
121.8
122.3
121.9
121.3
120.7
120.7
120.3
119.8
119.5
119.0
120.5
122.1
123.5

Motor
fuel*

Used
cars

26.7
22.7
21.5
20.7
23.2
24.0
26.8
25.0
26.0
28.4
28.7
30.0
29.8
29.0
29.9
&
31.2
33.0
33.1
35.2
36.7
43.8
50.3
54.7
55.8
60.2
62.3
76.9
88.8
98.7
112.5
113.7
108.8
113.1
118.0
120.4
117.6
120.5
120.5
120.5
120.7
121.0
121.3
121.1
120.3
119.8
119.7
120.1
119.7
118.9
117.4
116.6
116.2
116.9
117.6
118.2
118.3
118.3
118.1
117.2
117.1

14.5
16.4
18.6
19.1
19.0
19.5
20.0
21.2
21.8
22.1
22.8
23.8
23.4
23.7
24.4
24.1
24.3
24.2
24.1
25.1
25.6
26.4
26.8
27.6
27.9
28.1
28.4
31.2
42.2
45.1
47.0
49.7
51.8
70.1
97.4
108.5
102.8
99.4
97.9
98.7
77.1
80.2
80.9
88.5
101.2
79.6
80.3
81.5
92.1
96.6
96.0
94.4
91.0
88.8
88.9
87.2
85.8
91.4
90.6
89.3
91.2
92.5
94.6
94.3
103.2
112.0
118.9
119.0
117.1

3
4
5

Automobile
maintenance
and
repairs

Other

15.8
17.1
18.1
18.6
18.9
20.4
20.8
22.0
22.7
23.2
24.2 •"••""'•""
25.0
25.4
26.0
26.5
27.1
27.5
27.8
28.2
28.7
29.2
30.4
37.9
39.2
32.1
34.1
41.6
45.2
36.6
48.6
39.3
41.1
48.9
48.4
43.2
50.2
47.6
53.5
53.7
61.8
57.6
67.2
61.9
69.9
67.0
75.2
73.7
84.3
81.5
91.4
89.2
97.7
96.0
98.8
100.3
103.8 103.5
106.8 109.0
110.3 115.1
114.8 120.8
119.7 127.9
135.8
124.9
130.1 142.5
122.4
133.5
123.3 134.3
123.5 134.5
134.7
123.8
135.6
124.3
135.9
124.5
135.6
124.8
135.7
125.4
135.7
126.2
137.1
126.7
126.7
138.2
139.0
126.9
127.3
140.3
140.8
127.6
140.7
128.8
129.4
140.8
129.4
140.8
129.6
141.0
142.1
130.2
142.4
130.4
131.5 143.0
132.1 144.8
132.5
146.2
146.7
132.5

Public
transportation

9.4
9.9
11.2
12.4
13.4
14.8
15.8
16.8
18.0
18.5
19.2
19.9
20.9
21.5
22.2
23.2
24.0
24.3
24.7
25.2
26.1
27.4
28.7
30.9
35.2
37.8
39.3
39.7
40.6
43.5
47.8
50.0
51.5
54.9
69.0
85.6
94.9
99.5
105.7
110.5
117.0
121.1
123.3
129.5
142.6
127.5
128.1
128.2
128.4
128.9
129.6
129.7
130.1
130.1
130.6
131.3
131.7
134.2
136.7
139.1
140.3
140.9
141.5
141.6
141.9
144.0
146.0
150.3
154.4

Total

12.5
13.5
14.4
14.8
15.1
15.9
16.7
17.3
17.8
18.2
18.9
19.7
20.6
21.5
22.3
22.9
23.5
24.1
24.6
25.2
26.3
28.2
29.9
31.9
34.0
36.1
37.3
38.8
42.4
47.5
52.0
57.0
61.8
67.5
74.9
82.9
92.5
100.6
106.8
113.5
122.0
130.1
138.6
149.3
162.8
143.8
145.2
146.1
146.8
147.5
148.5
149.7
150.7
151.7
152.7
153.9
154.4
155.9
157.5
158.7
159.8
160.8
161.9
163.5
165.0
165.8
167.1
168.4
169.2

Medical
care
commodities

Medical
care
services

34.2
36.7
38.6
39.2
39.7
40.8
41.2
41.5
42.0