Full text of Economic Report of the President : 1992
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Transmitted to the Congress February 1992 Economic Report of the President Transmitted to the Congress February 1992 TOGETHER WITH THE ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1992 For sale by the U.S. Government Printing Office Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328 ISBN 0-16-036052-8 C O N T E N T S Page ECONOMIC REPORT OF THE PRESIDENT 1 ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS* 7 FOREWORD 11 CHAPTER 1. THE AMERICAN ECONOMY: RESPONDING TO CHALLENGES 21 CHAPTER 2. RECENT DEVELOPMENTS AND THE ECONOMIC OUTLOOK 35 CHAPTER 3. THE AMERICAN LABOR MARKET 81 CHAPTER 4. GOVERNMENT AND THE LEVEL AND DISTRIBUTION OF INCOME 115 CHAPTER 5. COMPETITIVE FORCES AND REGULATION 155 CHAPTER 6. OPEN INTERNATIONAL MARKETS AND PROSPERITY ... 193 CHAPTER 7. ECONOMIC STATISTICS: MEASURING ECONOMIC PERFORMANCE 239 APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THE COUNCIL OF ECONOMIC ADVISERS DURING 1991 279 APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EMPLOYMENT, AND PRODUCTION 291 *For a detailed table of contents of the Council's Report, see page 13. (iii) ECONOMIC REPORT OF THE PRESIDENT ECONOMIC REPORT OF THE PRESIDENT To the Congress of the United States: 1991 was a challenging year for the American economy. Output was stagnant and unemployment rose. The recession, which began in the third quarter of 1990, following the longest peacetime expansion in the Nation's history, continued into 1991. The high oil prices and the uncertainty occasioned by events in the Persian Gulf were quickly resolved with the successful completion of Operation Desert Storm early in the year. Most analysts expected a sustained recovery to follow. Indeed, signs of a moderate expansion began to appear in the spring. Industrial production and consumer spending rose for several months. By the late summer, however, the economy flattened out and was sluggish through the rest of the year. Our recent economic problems are a reminder that even a wellfunctioning economy faces the risk of temporary setbacks from external shocks or other disturbances. Market economies, such as the United States, are continually restructuring in response to technological changes and external events. Occasionally, structural imbalances develop that can interrupt economic growth. The American economy experienced an unusual confluence of such imbalances in recent years, for example in the financial and real estate sectors, and in household, corporate, and governmental debt. At the same time, a major reallocation of resources from defense to other sectors has been under way. Not least, the lagged effects of a relatively tight monetary policy coupled with problems in the availability of credit, especially for small and medium-sized businesses, dampened economic growth. The U.S. economy, however, remains the largest and strongest in the world. The American people enjoy the highest standard of living on earth. American productivity is second to none. With less than 5 percent of the world's population, America produces a quarter of the world's output. As we move into 1992, the fundamental conditions to generate economic growth are falling into place. Interest rates are at their lowest levels in decades and should help boost investment and consumer spending. Inflation is down and expected to remain relatively low. Generally lean inventories imply that increases in demand will be met mainly from new production, which will generate gains in employment and income. America's international competitive position has improved, as evidenced by record levels of exports. Nevertheless, the United States faces serious economic challenges: to speed, strengthen, and sustain economic recovery; and, simultaneously, to provide a firmer basis for long-term growth in productivity, income, and employment opportunities. In both my State of the Union address and my fiscal 1993 Budget, I presented a comprehensive program to encourage short-term recovery and long-term growth. I have already taken steps to accelerate job-creating Federal spending, to adjust income tax withholding that will add about $25 billion to the economy over the next year, and to renew the attack on excessive regulation and red tape that hamper business formation and expansion and job creation. I will also continue to support a monetary policy that keeps inflation and interest rates low while providing adequate growth of money and credit to support a healthy economic expansion. Most of my program will require congressional action. In addition to the executive actions I have already announced, my immediate agenda includes: • Investment incentives to promote economic growth: a reduction in capital gains tax rates; a 15-percent investment tax allowance; and an improved alternative minimum tax. • Incentives to help revive real estate: a $5,000 tax credit for first-time homebuyers; penalty-free withdrawals from individual retirement accounts for first-time homebuyers; low-income housing credits; tax preferences for mortgage revenue bonds; a modified passive loss tax rule; and a tax deduction for losses on the sale of a personal residence. My intermediate and longer term agenda includes: • Investment in the future: record levels of spending for Head Start and for anti-crime and drug abuse programs; a comprehensive Job Training 2000 initiative, which will enhance the skills and flexibility of our work force; record levels of spending for research and development and infrastructure; record spending on math and science education; and Enterprise Zones. • Pro-family initiatives: an increase in the personal tax exemption for families with children; new flexible individual retirement accounts for health, education, and first home purchases; and tax deductibility of interest paid on student loans. • Comprehensive health reform: vital cost containment measures and tax credits for the purchase of health insurance. Also before the Congress is an urgent unfinished agenda that I proposed earlier, including financial sector reform to make our banking system safer, sounder, and more internationally competitive; the America 2000 education reforms necessary to meet the national education goals, produce a new generation of American schools, and provide the choice and competition that will promote better performance and strengthen accountability; the National Energy Strategy to meet our Nation's energy needs through a combination of enhanced production, diversification of sources, and conservation, thereby enhancing our energy security; and legal reforms to reduce the litigiousness that unnecessarily adds to costs and stifles innovation and productivity. Successful completion of the Uruguay Round of the General Agreement on Tariffs and Trade and a North American free-trade agreement remain major priorities. I also urge congressional action on the Enterprise for the Americas Initiative. These market-opening initiatives will spur growth and create jobs. My program can be accommodated within the limits established in the budget agreement of 1990. I am also asking the Congress for budget process reforms: a line-item veto and caps on so-called mandatory programs to control the growth of government spending. Maintaining fiscal discipline is essential to reallocating resources toward investment in the future. These proposals are described in detail in the fiscal 1993 Budget, and in legislative proposals I am forwarding to the Congress. The Annual Report of the Council of Economic Advisers, which accompanies this Report, discusses the strengths of the U.S. economy and the challenges it faces in the short run and the long run. It also explains how my comprehensive economic growth proposals are designed to move us toward a more prosperous America. THE WHITE HOUSE FEBRUARY 6, 1992 (/ THE ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS LETTER OF TRANSMITTAL COUNCIL OF ECONOMIC ADVISERS, Washington, D.C., January 31, 1992 MR. PRESIDENT: The Council of Economic Advisers herewith submits its 1992 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 David F. Bradford* Member Paul Wonnacott Member FOREWORD In this Annual Report of the Council of Economic Advisers—the third by the Council during this Administration—we repeat a theme that has been emphasized in Annual Reports since the statutory establishment of the Council 46 years ago: the primary goal of economic policy is to achieve the highest possible rate of sustainable economic growth. 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. Although America's economic growth was interrupted at the beginning of the 1990s, that does not signal a decline in the basic long-term vitality of the U.S. economy. Still, the Nation faces serious short- and long-run economic challenges— among them, accelerating, strengthening, and ensuring recovery; raising long-run productivity growth to increase the growth of real wages; and improving programs to lift the disadvantaged into the mainstream of American life. The United States cannot take economic growth for granted. In the following pages, we describe these challenges as well as the policy prescriptions that must be adhered to if the Nation is to meet them successfully. By tradition, in conjunction with a discussion of recent economic trends and the economic outlook, much of the Council's Annual Report is composed of topical chapters, the subject matter of which changes from year to year. The Council selects the topics of these chapters from the vast array of significant economic issues and does not necessarily attempt to provide a comprehensive analysis of every issue. Successive Annual Reports written during a single Administration should be viewed as an interrelated whole. In this regard, the 1990 Annual Report—the first in this Administration— focused on explaining the policy principles necessary for achieving the maximum rate of sustainable economic growth, as well as on such issues as the environment, investment in technology and human capital, education, and improving economic opportunities of low-income households. The 1991 Annual Report highlighted such issues as financial market reform, the economy's flexibility to respond to change, and nations in transition from central planning to market economies all around the world. This year's Annual Report focuses on the labor market, the distribution of income, regulation, international trade and investment, and economic statistics. 11 CONTENTS FOREWORD CHAPTER 1. THE AMERICAN ECONOMY: RESPONDING TO CHALLENGES Adjusting to Imbalances Adjusting to Cyclical Factors Adjusting to Structural Factors Foundations for Renewed Growth Policies Focused on Growth Productivity—The Key to Sustainable Growth The Administration's Agenda to Meet the Challenges : Conclusion CHAPTER 2. RECENT DEVELOPMENTS AND THE ECONOMIC OUTLOOK An Overview of the Economy in 1991 Signs of a Recovery The Economy Flattens Out Summary Reasons for the Sluggish Economy Structural Adjustments Monetary Policy and Interest Rate Developments Summary Recent Economic Performance in Historical Context Cyclical Comparisons Performance of GDP Components in 1991 Industrial Production and Capacity Utilization Sectoral and Regional Diversity During the Recession Summary The Inflation Record Summary Fiscal Policy Summary Developments Outside the United States Business Cycle Developments Abroad Inflation, Monetary Policy, and Interest Rates Abroad External Accounts 13 Page 11 21 23 24 25 27 29 29 30 34 35 37 37 39 40 41 42 47 53 54 54 56 60 61 66 67 69 69 71 72 72 73 74 Page Summary The Economic Outlook The President's Policies or Business as Usual Accounting for Growth in the Longer Term Summary Conclusion CHAPTER 3. THE AMERICAN LABOR MARKET Employment Growth Changes in Labor Demand Changes in Labor Supply Summary Productivity Trends The Historical Record of Productivity Growth Causes of the Slowdown in Productivity Growth Summary Real Wage Growth Aggregate Real Wage Growth Worker Characteristics and Wage Levels Summary Wage Dispersion and Market Forces Wage Premium for Education Wages of Women Wages of Black Workers Summary Unemployment Unemployment Insurance Extended Benefit Programs Summary Enhancing Worker Skills Summary Conclusion CHAPTER 4. GOVERNMENT AND THE LEVEL AND DISTRIBUTION OF INCOME The Level and Distribution of Income Level of Income Distribution of Annual Income The Distribution of Long-Term Income and Wealth... Summary Trends in Taxes and Transfers Transfers Taxation Summary Effects of Taxes and Transfers on the Distribution of Income Combined Effects of Taxes and Transfers Redistribution in the Federal Tax System 14 75 74 76 77 79 79 81 82 82 84 89 90 91 92 94 95 95 97 99 100 100 101 102 103 103 106 107 109 109 112 112 115 117 117 129 124 126 126 126 129 134 134 135 138 Page Social Security Summkry Poverty and the Social Safety Net The Social Safety Net Incentive Effects of Means-Tested Transfers.... Issues Requiring Special Attention Summary Conclusion CHAPTER 5. COMPETITIVE FORCES AND REGULATION Competition and the Role of Government The Legal System Why and How Governments Regulate The Regulatory Process Summary The Benefits of Economic Deregulation Natural Gas Electric Power Cable Television Summary Reforming Regulation of the Environment, Health, and Safety Improving the Environment Health and Safety Regulation Summary Conclusion 141 143 143 147 147 149 153 153 155 157 159 161 170 173 173 175 178 180 182 182 183 188 191 191 CHAPTER 6. OPEN INTERNATIONAL MARKETS AND PROSPERITY.. 193 Mutual Gains from Trade Distributional Effects of Trade Liberalization The Need for Strong Trading Rules Summary International Investment The Close Ties Between Trade and Foreign Direct Investment The Benefits of Foreign Investment Foreign Investment in the United States in Perspective Policy Toward Foreign Investment Summary Multilateral and Regional Approaches to Liberalization .. The Most-Favored-Nation Principle and GATT Exceptions: Free-Trade Associations and Customs Unions Summary The Uruguay Round Agriculture Textiles 195 199 199 201 201 15 202 204 205 207 208 208 208 209 210 210 212 213 Page Services, Investment, and Intellectual Property Market Opening Trade Remedies Dispute Settlement Procedures Summary '. The North American Free-Trade Agreement Market Access , Trade in Services and Investment Intellectual Property Rights Trade Rules Labor and the Environment Summary EC 92 and European Economic and Monetary Union Summary Achieving Market-Oriented Policies and Growth in Economies in Transition Political Change and Reforms Causes of the Market Revolution Principles of Reform in Economies in Transition Progress and Policy Challenges The Role for Industrial Countries The Role for Assistance Summary Conclusion CHAPTER 7. ECONOMIC STATISTICS: MEASURING ECONOMIC PERFORMANCE.. Using the Most Appropriate Data How Much Data? Problems with Inaccurate Data Why the Government Is in the Data Business Summary GNPandGDP Measuring the Standard of Living Summary Employment and Unemployment The Household Survey The Establishment Survey State Unemployment Insurance System When to Use the Different Labor Market Data Other Sources of Labor Market Data Summary Prices and Inflation Changes in Quality Rebasing Real GDP Summary Money 16 214 216 216 219 220 221 221 222 222 222 223 223 224 226 227 227 228 229 230 232 234 235 236 239 240 242 243 245 245 246 247 248 249 249 250 251 251 253 253 253 253 256 257 257 Page Definitions of Money Changes in the Velocity of Money Summary Business Accounting Market Value and Book Value Accrual Versus Cash Accounting Summary Fixed Investment Gross Versus Net Investment Measuring Depreciation Summary Saving Cash-Flow Measures of Saving Human Capital Summary Federal Government Finance Concepts and Measures of the Budget Deficit Accounting for Government Assets and Liabilities Accounting for Intergenerational Redistribution of Wealth Alternatives to Direct Expenditures and Taxes Summary International Statistics Where Do International Data Come From? Difficulties in International Comparisons International Competitiveness Discrepancies in International Accounts Summary Conclusion 258 258 260 260 260 261 262 262 262 263 265 265 266 267 267 267 268 270 271 271 273 273 274 274 276 277 277 278 APPENDIXES A. Report to the President on the Activities of the Council of Economic Advisers During 1991 B. Statistical Tables Relating to Income, Employment, and Production 279 291 LIST OF TABLES, CHARTS, AND BOXES Tables 2-1 2-2 2-3 2-4 3-1 4-1 Cyclical Comparisons Accounting for the Decline in Payroll Employment Administration Forecasts Accounting for Growth in Real GDP, 1960-97 Female-Male Income Ratios Expenditures on Selected Means-Tested Government Assistance Programs, Fiscal 1990 4-2 Effects of Taxes and Transfer Payments on Household Income by Income Quintile, 1990 17 54 62 76 78 102 132 136 LIST OF TABLES, CHARTS, AND BOXES—CONTINUED Tables 4-3 CBO Estimates of All Federal Taxes 4-4 CBO Estimates of Shares of All Federal Tax Payments 7-1 Reconciliation Between Deficits in Fiscal 1990 141 141 268 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 3-6 3-7 3-8 3-9 4-1 4-2 4-3 4-4 4-5 4-6 4-7 4-8 4-9 4-10 Civilian Unemployment Rate Real GDP Growth, 1980-1991 Quarterly Real GDP Growth, 1989-1991 Commercial and Industrial Loans M2 Money Stock and Federal Reserve Target Ranges... Federal Funds Rate Consumer Confidence Mortgage Rates Unemployment Rates by State, Year Ending November 1982 Unemployment Rates by State, Year Ending November 1991 Unemployment Rates by Occupation Inflation and Core Inflation Employment-to-Population Ratio and Hours Worked per Worker Unemployment Rates by Gender Percentage of Civilian Labor Force with 4 or More Years of College Historical Growth in Labor Productivity Real Hourly Compensation, 1959-1990 Earnings Growth Early in Male Workers' Careers Earnings of Cohorts of Young Men, 1975-1990 Ratio of Median Incomes of College- and High-SchoolEducationed Workers Unemployment Rate by Educational Attainment, 1990 Real Median Income Distribution of Families by Income Class Real Household Income Relative to 1967 Income for Selected Quintiles Gini Ratios for Family Income Federal Social Insurance and Means-Tested Transfers Relative to GDP Effects of Taxes and Transfers on Income, 1990 Average Federal Individual Income Tax Rates Shares of Federal Individual Income Tax Payments by Income Class Alternative Measures of the Poverty Rate of Persons... Demographics and the Poverty Rate of Persons 18 38 39 41 45 49 50 58 59 65 65 66 68 85 87 89 91 96 98 99 101 105 118 121 122 123 131 137 139 140 144 146 Charts 4-11 Real Federal and State Means-Tested Transfer Spending per Poor Person 5-1 Administrative Costs of Federal Regulation 5-2 Consumption of Natural Gas 5-3 Cost per Premature Death Averted of Federal Health and Safety Regulations 6-1 GDP and Export Growth Trends, 1720-1990 6-2 Foreign Direct Investment Outflows and Exports of G-7 Countries 6-3 Foreign Direct Investment, 1990 6-4 Net International Investment Position 7-1 Velocities of Ml and M2 7-2 Investment Shares of Output 7-3 National Saving 7-4 Measures of U.S. Competitiveness 148 172 176 190 194 203 205 207 259 263 266 274 Boxes 2-1 Credit Crunches 2-2 Interpreting the Money Statistics in the Second Half of 1991 2-3 Emphasizing GDP and the NIPA Benchmark Revision 3-1 Total and Insured Unemployment Rate 3-2 Job Training 2000 4-1 Means-Tested Cash Transfers 4-2 Means-Tested Noncash Transfers 4-3 Social Insurance Programs 4-4 Subsidies to the Well-Off. 4-5 Behavioral Responses to Taxes and Transfers 4-6 The Poverty Rate 5-1 The President's Regulatory Reform Initiative 5-2 Civil Justice Reform Proposals 5-3 Ronald Coase, the Role of Transaction Costs, and the Definition of Property Rights 5-4 Agricultural Marketing Orders 5-5 Writing the Rules: The Clean Air Act 5-6 Are Emission Allowances Licenses to Pollute? 6-1 Economies of Scale and Trade Policy 6-2 A Lack of Discipline: The Case of Agriculture 6-3 Measuring International Investment 6-4 The Role of Regional Free-Trade Initiatives 6-5 The Cost of Weak Multilateral Rules 6-6 Strengthening GATT Antidumping Rules 6-7 Economic Performance in the Two Germanys 6-8 Enterprise Funds 6-9 International Institutions 19 46 52 55 108 Ill 127 128 129 130 135 145 158 162 166 169 171 184 198 200 206 211 218 219 228 233 235 Boxes 7-1 The Economic Statistics Initiative: Improving the Quality of Economic Statistics 7-2 Measuring the Quality of Statistics 7-3 System of National Accounts 7-4 Error and Revision Properties of Labor Market Surveys 7-5 Price Indexes 7-6 Measuring Economies in Transition 20 241 243 248 252 254 275 CHAPTER 1 The American Economy: Responding to Challenges THE UNITED STATES IS THE most prosperous and productive Nation on earth. With less than 5 percent of the world's population, America produces a quarter of the world's total output. The longest peacetime economic expansion in the Nation's history, 1982 to 1990, produced 30 percent more output, 21 million jobs, and 5 million new corporations. However, no economic system is immune to disruption. Even well-functioning market economies face the risk of temporary setbacks from external shocks, policy mistakes, or other disturbances. This was starkly demonstrated in the first 2 years of the 1990s. The American economy, which already was experiencing slow growth, fell into recession in the second half of 1990. Between the third quarter of 1990 and the first quarter of 1991, output fell 1.6 percent and 1.7 million jobs were lost. The unemployment rate, which had averaged 5V* percent for the 18 months prior to the recession, rose to 7.1 percent in December 1991. Sluggish growth and recession reflect the serious difficulties that the U.S. economy has faced in correcting structural imbalances while adjusting to previous monetary tightening, the credit crunch, and the August 1990 oil shock. Over the past few years, structural imbalances had developed in the financial and real estate sectors, in household and corporate debt positions, and in governments' fiscal positions. A major reallocation of resources from defense to other sectors is under way, reversing the trend of the 1980s. The economy also has had to deal with changing national demographics, and a productivity growth slowdown that began two decades ago. The monetary policy initiated in the late 1980s to ease incipient inflationary pressure slowed growth by the early 1990s. The anticipated increase in demand for world capital resulting from the historic changes in the former Soviet bloc increased interest rates substantially in early 1990. Problems in financial markets have limited the availability of credit. Oil prices surged following Iraq's invasion of Kuwait and consumer and business confidence plummeted as the immediate outlook for growth weakened and uncertainty increased about the worldwide consequences of the crisis. The U.S. economy was not re- 21 silient enough to continue to grow in the face of the combination of the oil shock, structural adjustments, monetary restraint, and problems of credit availability. The Nation entered 1991 in the midst of the ninth recession since the end of World War II. The other industrial countries also were buffeted by many of the same problems that hit the United States—the oil shock, sinking consumer and business confidence, and high interest rates. Several of these countries also were experiencing structural problems related to government budget positions and serious difficulties in their financial and real estate markets. Recessions began in Canada and the United Kingdom earlier in 1990, and with jobless rates at or exceeding 10 percent in late 1991, the recessions have been deeper than in the United States. Growth in other industrial countries, including France and Italy, slowed in 1991, and the unemployment rate for the European Community as a whole was about 9 percent in 1991. Growth in Japan and Germany slowed considerably in the second half of 1991. The current economic difficulties in the United States and other industrial countries should not obscure the fundamental strengths of market economies. The United States is the world's best example of the interrelated strengths of democratic pluralism and market-oriented economies. Americans have the highest standard of living in the world. U.S. gross domestic product (GDP) per capita of $22,056 in 1990, the latest year for which comparable data are available, places the United States more than 35 percent above Germany and more than 25 percent above Japan, when calculated using purchasing power equivalents (Chapter 7). The United States has the highest level of productivity of any country in the world, with output per worker about 20 percent above the average of the other major industrial countries. As of 1990, the last year for which comparable data are available, the United States produced a larger share of the industrial output of the Organization for Economic Cooperation and Development—24 of the largest industrial economies—than it did in 1970. U.S. firms are competitive internationally, and America is unsurpassed in basic research. Nor should we ignore the remarkable sweep of countries around the world seeking to emulate our economic and political system. The collapse of central planning and, communism—the most important economic and political event of the postwar era—was, in large part, a consequence of these command systems' inability to provide their populations with adequate standards of living and personal freedoms. Change in the former Soviet bloc is only the most conspicuous; countries in Latin America, Asia, and Africa are discarding their centrally controlled economies and privatizing stateowned enterprises. All are embracing market principles conscious that the transition to the market economy can be difficult. On the 22 political side as well, institutional transformations leading to democratic freedoms are in ascendancy. Market reliance and democracy are mutually reinforcing principles and practices; they lead to the highest standards of living and the greatest personal freedoms. ADJUSTING TO IMBALANCES Modern market economies such as the United States are constantly restructuring in response to changes in the goods and services that consumers desire, innovations in productive technologies, and external events that affect the ability of the economy to produce goods and services. In the last decade, for example, computer technology has transformed the workplace and greatly increased the demand for skilled workers. In responding to structural change, however, even a fundamentally sound market economy can occasionally develop imbalances. Or external shocks or policy mistakes can knock it off track. A flexible and productive economy generally can adapt to such events with a minimal amount of disruption to the economy as a whole, although the costs of adjustment usually are concentrated in specific groups of the population or regions of the country. But if an unusual confluence of imbalances, mistakes, and shocks occurs, then the self-adjusting mechanisms may be inadequate to sustain overall economic growth. And if productivity growth is slow, the economy has less of a cushion to absorb the adjustment that markets undertake naturally without sliding into recession. The American economy is struggling today with such a confluence of events. For the year and a half prior to the recession that began in the third quarter of 1990, the U.S. economy was growing at only a 1XApercent annual rate as it adjusted to policies and worked to correct its imbalances. When the recession began, the Administration and most private analysts believed that it would not be as severe as the last recession, or even the average of postwar recessions. Partly as a consequence of expecting a less severe recession, the subsequent recovery also was expected to be more moderate than those following other postwar recessions. Moreover, many, including the Administration, believed that the continuing resolution of structural imbalances would inhibit the recovery. The recession appeared to end in the spring of 1991, and signs of a moderate recovery began to emerge. The index of leading indicators, industrial production, real income, and retail sales all bottomed out in the first quarter and showed upward trends into the second quarter. Other key data also pointed to a recovery. Housing starts, new orders for durable goods manufactured in the United States, and manufacturers' shipments reached their recession 23 troughs in the first quarter and then climbed through midsummer. Real GDP grew modestly in the second and third quarters of 1991. Rather than continuing its modest rebound, the economy flattened from the late summer to the end of 1991. Payroll employment, industrial production, and retail sales all turned down. Real GDP was essentially flat in the fourth quarter. On the positive side, exports continued to rise and housing starts continued their slow upward progress. The Administration, along with most private analysts, expect the economy to be sluggish early in 1992 but then to pick up in the second half of the year. Some indicators of future economic activity reinforce this view. ADJUSTING TO CYCLICAL FACTORS The economy had been slowing even before the oil shock in August 1990. In 1988 and the first half of 1989, the Federal Reserve and central banks around the world had adopted tighter monetary policies in an effort to temper growing inflationary pressure by slowing the rate of growth of their economies. In the presence of structural imbalances and combined with the oil shock, these policies proved too contractionary in most countries, including the United States. Interest rates around the world, which had been relatively flat in 1989, rose sharply in early 1990. This rise in interest rates in part reflected an increased demand for capital originating from the anticipated unification of Germany, a reemergent Latin America, and prospective developments in Eastern and Central Europe and the former Soviet Union. At the same time, the supply of capital to the rest of the world from the two largest capital exporting countries, Germany and Japan, declined abruptly. The higher long-term interest rates that resulted dampened U.S. growth. In the United States, governments at all levels have encountered budget problems. The sluggish economy and structural problems created deficits at the State and local level. As the economy weakened, tax revenues declined and pressure on spending mounted. To reduce their deficits, many State and local governments have raised taxes, and more are likely to do so in 1992. The tax increases dampen private spending, further impeding economic recovery. At the Federal level, the 1990 budget agreement established a program to restrain spending and reduce the structural deficit— that is, the deficit excluding the cyclical component of expenditures and revenues. (Chapter 7 discusses budget concepts.) As an economy dips into recession, income tax receipts fall and outlays for the cyclical components rise, even without any legislated changes in programs. Such automatic stabilizers are an important element of systematic fiscal policy because they cushion the fall in the economy, preventing further contraction. On balance, for example, the 24 automatic stabilizers were larger than other fiscal factors in 1991; the overall stance of Federal fiscal policy was slightly stimulative. Usually late in a recession or early in a recovery, tax cuts or increases in discretionary fiscal spending increase the structural budget deficit, providing notably more stimulus than the automatic stabilizers alone. In contrast, between fiscal 1990 and 1991, the structural budget deficit, excluding outlays for deposit insurance, changed little. The structural deficit is expected to increase considerably in 1992, however, adding a discretionary stimulus to the automatic stabilizers (Chapter 2). The initial fiscal position inherited from the past and expectations concerning future fiscal policy can restrict the use and effectiveness of discretionary fiscal stimulus. Obviously, in the current fiscal situation, an attempted stimulus that abandoned, or was perceived to abandon, serious discipline on the growth of future spending or on the reduction in the multiyear structural deficit probably would produce a substantial rise in interest rates. That would offset a large portion of the direct stimulus in the short run and would leave the economy thereafter with a higher cost of capital, which would be detrimental to investment necessary for long-run growth. Finally, it is important to note that the deficit has been boosted by a temporary bulge in deposit insurance outlays, which exceeded 1 percent of GDP in fiscal 1991 and are expected to be larger in fiscal 1992. It is widely accepted that the actual timing of outlays and borrowing to protect insured depositors has little impact on credit markets, interest rates, and the economy. So the component of the deficit due to deposit insurance (about $66 billion, or roughly one-quarter of the deficit in fiscal 1991) does not represent fiscal stimulus. ADJUSTING TO STRUCTURAL FACTORS The unusual confluence of the cyclical factors, structural imbalances, and long-run trends in the U.S. economy has hindered adjustment and slowed the pace of recovery. The Financial Sector The financial sector has been buffeted by disturbances of both an external and policy nature, as well as by problems of its own making. The high inflation and interest rates of the 1970s wiped out a large fraction of the value of the assets held by savings and loans (S&Ls), primarily long-run, fixed-rate mortgages. The debt crisis in the developing countries shocked commercial bank portfolios in the 1980s. The expansion of deposit insurance that did not account for the riskiness of an institution's investments enabled weak banks and S&Ls to stay open and to overinvest in risky assets without losing depositor confidence. Many financial institu 25 tions already were in poor financial condition when the downturn in real estate markets hit in the late 1980s. Real estate normally is a cyclical part of the economy; but changing tax laws boosted the upturn in real estate activity in the early and mid-1980s, and a reversal in the laws accentuated the downturn that began in some regions of the country in the late 1980s. The downturn has been most pronounced in commercial real estate and has been particularly deep in certain regions of the country. While prudent supervision of financial institutions is extremely important, it is widely thought that examiners have been discouraging banks and S&Ls from engaging in some sound lending opportunities. In addition, banks have changed the composition of their lending portfolios and have increased their equity in response to the financial markets' demands for more capital as well as to meet domestic capital requirements and to accommodate the new international agreement on bank capital standards. Once monetary policy shifted actively toward the objective of bolstering economic growth, its effectiveness was dampened by these problems. Indeed, growth of commercial and industrial bank loans slowed during 1990 and fell dramatically in 1991. Taken together, these unexpectedly tight credit conditions created a credit crunch. Some businesses, particularly small and medium-sized firms that traditionally depend on banks for financing and that normally would help stimulate an upturn in economic activity, have been hit hard by the credit crunch. Such businesses generally account for a large percentage of job growth. Demographics Some of the slower growth in recent years is a direct consequence of demographic shifts. As the baby-boom generation matured in the late 1970s and early 1980s, the rate of household formation increased. That contributed to higher demand for big-ticket items such as houses, cars, and appliances, and with it higher levels of mortgage and installment debt. The boost to demand for these items coming from demographic factors has diminished as the baby boomers have grown older and the rate of household formation has slowed. This has reinforced problems in the auto and real estate markets. As the baby-boom generation was forming new households in the 1970s and early 1980s, it also was entering the work force in record numbers. Female participation in the labor force was rising particularly quickly. However, growth of the working-age population has slowed in the late 1980s and early 1990s. Hence, the contribution to economic growth from an expanding labor force has declined. 26 Private Debt Private debt increased substantially during the expansion. From 1982 to 1988, household borrowing almost doubled, growing nearly twice as fast as personal income, and corporate borrowing surged. By the end of the expansion, consumers and businesses faced relatively high levels of debt. Although the value of assets grew as well—a point often ignored when the growth of debt is discussed— the high ratios of household debt to income and corporate debt to profits probably were not sustainable. A period of slower consumption and investment naturally results as households and corporations restructure their balance sheets. The largest asset for most households is the equity in their homes. After rising rapidly in the 1970s and 1980s, residential real estate values flattened and even fell in many areas. When consumers' expectations for a continued increase in wealth were dampened, growth of consumer spending tapered off. Defense Spending Increases in defense spending were an important contributor to growth in the 1980s. By the end of the decade, fiscal constraints and shifting spending priorities led to cuts in defense spending; real defense purchases of goods and services surged between 1979 and 1987, but fell somewhat from 1987 to 1990. A much larger defense downsizing has already begun to affect employment in defense industries as firms adjust to expected changes. The United States has accommodated reductions in defense spending before. But the transition is never easy and, in fact, is costly in the short run, as people retrain and industrial resources are retooled for other purposes. Moreover, local economies where defense industries are a primary source of employment can experience significant disruption. Despite these difficulties the long-run potential dividends to the United States that come from turning military capacity to civilian endeavors is large. Obviously, the benefits to the world of the end of the Cold War transcend these economic factors. FOUNDATIONS FOR RENEWED GROWTH Fundamentals that promote growth are beginning to fall into place. Declining real and nominal interest rates should help boost interest-sensitive spending. Inflation, too, is expected to remain near its current, relatively low levels. Imbalances in international accounts have been substantially reduced, and exports should continue to grow as the Nation's international competitive position strengthens. Some structural imbalances are being righted: Households and corporations are reducing their credit burdens, and 27 banks are improving their capital positions. It will take time to correct all the imbalances, but a start has been made. With the exception of a few industries, there does not appear to be a widespread inventory imbalance that would foreshadow furtheif cuts in production. Increases in domestic and foreign demand will therefore be met mainly from new production and not from drawing down existing stocks. New production will generate income, increase consumption, and lead to further gains in production, employment, and income. The international competitive position of the United States has improved. After adjusting for exchange rates, the pattern of unit labor costs in manufacturing has been favorable relative to that of the Nation's major trading partners. As foreign economic growth rebounds, U.S. exports should increase. A particularly positive factor is the reduced inflation rate. Although special factors in agriculture, energy, and excise taxes may cause an occasional temporary blip in, for example, the consumer price index, underlying inflation is widely believed to be down. The economy currently is operating well below full capacity. Thus, during a moderate recovery, resource constraints that could rekindle inflationary pressures are unlikely to emerge. Furthermore, a credible and systematic monetary policy that is designed to reduce inflation gradually has ample room to accommodate a healthy expansion. Nominal interest rates generally are at their lowest levels in two decades. Real rates may not be as low as they have been around the trough in some other cycles. But the lagged effects of lower interest rates already in the pipeline should help the economy in 1992. The lowest mortgage rates in almost 20 years should spur housing starts and sales. Low rates also allow households to refinance mortgages, improving their balance sheets and providing a foundation for consumption growth. For many businesses, lower interest rates reduce the cost of borrowing to finance new investment. They also increase corporate cash-flow. Some corporations are using the strong stock market to issue equity and repay debt, thus improving their financial position and freeing funds for investment. There is some offset to the expansionary effect of these factors because lower interest rates reduce interest income and the consumption based on it. Because their capital positions have improved greatly, banks should be in a better position to lend than they have been for some time. Furthermore, the Administration, under the leadership of the Treasury Department and in conjunction with banking and thrift regulators, has been working to ensure that lenders make prudent loans and that examiners perform their reviews in a balanced, sensible manner. Still, bank lending remains tight; many banks are in 28 vesting in Treasury securities rather than making loans. A combination of slack demand, due to the soft economy and the need to rebuild balance sheets still further, and skittishness, in response to regulatory overreaction, is preventing the banking system from playing its normal role in financing economic expansion. POLICIES FOCUSED ON GROWTH Economic growth is not just an abstract concept; it is the key to ensuring America's future. Growth will raise our standard of living; it will create a legacy of prosperity for our children; it will enable us to afford nontraditional goods and services, such as a better environment. It will provide new employment opportunities for those seeking upward economic and social mobility, and it will allow the United States to maintain its leadership role in the world. The Nation must choose between sound policies that promote long-term growth and those that stifle the flexibility of the economy, stunt incentives to work, save, invest, and innovate, and place our economic future at risk. If the proper choices are made today, the Nation's long-run growth potential will improve and a crucial step will be taken toward improving the current performance of the economy. Policies that promote short-term growth can and should be made consistent with medium- and long-term goals. This is one of the fundamental principles of the President's growth agenda. PRODUCTIVITY—THE KEY TO SUSTAINABLE GROWTH The major long-run challenge confronting the American economy is to increase the Nation's rate of productivity growth—that is, growth in output per worker. The United States still has the highest level of productivity, but other countries have had higher productivity growth in recent decades. After a quarter of a century of rapid advance following World War II, U.S. productivity growth collapsed between 1973 and 1981. It has only partially rebounded since then, although productivity growth in the manufacturing sector has improved much more than in the rest of the economy. Higher saving rates have helped Europe and Japan maintain higher productivity growth rates. Productivity depends on capital formation, workers' skills, and new technology. The Nation cannot be complacent about the fundamentals of economic growth and productivity. Quite simply, without adequate productivity growth, America's standard of living will neither keep pace with the expectations of our citizens, nor remain the highest in the world. http://fraser.stlouisfed.org/ 305-592 0—92 Federal Reserve Bank of St. Louis 2 29 The Nation must increase its rate of saving to ensure that funds are available to finance job-creating investment and research and development leading to new technologies. Raising America's saving and investment rates to enhance future productivity growth is a key goal of the Administration's policies. The United States cannot remain the world's leading economy without the world's leading labor force. Competing in a rapidly changing international economy requires a skilled and flexible work force able to adapt to changes unforeseen today. Effective job training programs to retrain workers are a key to increasing productivity and remaining internationally competitive. The most important step the Nation can take to confront these long-term challenges is to restructure our elementary and secondary education system. By some measures, the United States spends more per pupil than any country in the world except Switzerland, but test scores reflect less than world-class performance. Another urgent priority for the Nation is to eliminate the scourge of crime and drugs. Not only is it costly to address the consequences of these problems, but the Nation is losing the potential contribution these people can make to economic growth. A key source of the U.S. economy's dynamism and resiliency is the flexibility it derives from reliance on markets. Of course, some markets are not perfect, and achieving certain desirable social goals such as a cleaner environment may require rules and regulation. Long-run productivity is enhanced if regulation does not unnecessarily hamper the efficient allocation of resources and reduce the economy's flexibility. Incentive regulation, which encourages firms to operate more efficiently while at the same time achieving the social objective, is an important innovation in this regard. In particular, regulation must not inhibit competition by discouraging technological innovation that would enable new firms to compete with those that are currently regulated. Just as improper regulation harms the economy, protection from foreign competition retards innovation, raises production costs, and decreases choices for consumers. Long-term productivity growth, therefore, depends on opening, rather than closing or segmenting, markets. THE ADMINISTRATION'S AGENDA TO MEET THE CHALLENGES The President has presented a comprehensive and coordinated growth agenda for the Nation. The agenda includes fiscal and other measures that will stimulate the economy in the short run, address the structural imbalances, and promote the Nation's long-term growth. 30 The Administration's policies for raising long-run productivity growth and thus the standard of living are based on five principles: a pro-growth fiscal policy that enhances incentives for entrepreneurship, saving, and investment, and that continues to reduce the multiyear structural budget deficit; a trade policy that promotes growth through opening markets worldwide; a regulatory policy that avoids unnecessary burdens on business and consumers; a human capital investment policy that focuses on education, training, and preventive health care; and strong support of a monetary policy that keeps inflation and interest rates low, while providing adequate growth of money and credit to support solid real growth. The agenda focuses directly on increasing economic growth. The short-term agenda includes executive actions and proposed legislation that will stimulate economic growth immediately. Executive actions with immediate impact include a reduction in excessive personal income tax withholding and acceleration of previously appropriated Federal spending. Reinvigorated action to reduce the burden of unnecessary regulation and prudent measures to reduce the credit crunch will improve the environment for growth now. Proposed legislation focuses on spurring job-creating investment. The proposed 15-percent investment tax allowance and simplified and liberalized treatment of depreciation under the alternative tax, as well as the reduction in the capital gains tax rate, will stimulate business investment. The reduction in the capital gains tax rate will quickly raise asset values, improving confidence and encouraging spending. A $5,000 tax credit and penalty-free withdrawal from individual retirement accounts for first-time homebuyers, along with other incentives, will increase housing construction and sales. Bolstering the short-term agenda are proposals for the long term that invest in the Nation's future by increasing the productivity of people and business. Record Federal investment in research and development and infrastructure, and the extension of the research and development tax credit will help increase business productivity. Record Federal investment in Head Start, children, and education, as well as proposals that strengthen the war on drugs and improve the implementation of job training through Job Training 2000 will help increase labor productivity. The long-term growth agenda also includes continued efforts to expand international markets through multilateral, regional, and bilateral negotiations. Fiscal discipline has been a centerpiece of all of this Administration's budgets. Fiscal policy is designed to foster long-term growth by encouraging saving and investment as outlined in the Omnibus Budget Reconciliation Act of 1990. Controlling the growth of government spending and deficits so that resources are freed up for investment is but part of a more comprehensive fiscal program that, within proposed spending categories, shifts spending from current 31 consumption to investment, such as expenditures for research and development and investments in public infrastructure that pass cost-benefit tests. Some of the President's reform proposals are awaiting congressional action. Education reform through America 2000 will revolutionize education, strengthen accountability, and improve performance. Financial sector reform will strengthen the financial system, improve its ability to contribute to business growth, and sustain its international competitiveness. Civil justice reform will curb wasteful litigation and enhance productive activity. And the National Energy Strategy will increase energy security and conservation. The President has repeatedly proposed reducing the tax rate on capital gains. This will encourage entrepreneurial activity, create new products, new methods of production, and new businesses. These, in turn, will generate new jobs. A capital gains differential will reduce the tax bias against equity financing and the overall cost of capital, thereby increasing investment and growth. Moreover, the Administration has supported a zero capital gains tax for areas designated as Enterprise Zones to spur investment and encourage entrepreneurial activity in inner cities and rural areas. Innovation increases productivity growth and the standard of living. The Administration has advocated making the research and experimentation tax credit a permanent part of the tax code and has proposed large increases in both basic and applied research and development spending in the Federal budget. There are also proposals to assist families. These policies include an increase in the tax exemption for each child, a new flexible individual retirement account, and deductibility of interest paid on student loans. Comprehensive health reform will increase the affordability and security of health insurance at a cost that is economically sustainable. The incentives for first-time homebuyers, mentioned earlier will encourage homeownership—one of the most important ingredients to family financial and social well-being. The homeownership and opportunities for people everywhere (HOPE) program helps low-income residents of public and assisted housing to manage and eventually own their own homes. Fundamental banking reform is critical to ensuring efficient operation of credit markets. The recent bill passed by the Congress is at best only a start. Important provisions in the Administration's proposal that would remove many unnecessary and antiquated restrictions on the banking industry are missing from the legislation. These reforms are needed to rebuild the soundness of the banking industry and enable it to be internationally competitive. The Administration believes a well-functioning legal and regulatory system should increase, not impede, economic activity. Through its Agenda for Civil Justice Reform in America, the Ad 32 ministration has proposed a comprehensive set of reforms to the civil justice system that will improve the efficiency of the legal system and reduce unnecessary and costly litigation. This would free up resources and enhance productivity. (These reforms are explained in detail in Chapter 5.) The Administration believes that investments in the Nation's human capital increase its productivity and living standards at home and increase its competitiveness abroad. The National Education Goals, America 2000 Excellence in Education Act, and Job Training 2000 all are directed at improving the quality of our most important resource—our people. The America 2000 Excellence in Education Act focuses on setting world-class educational standards, measuring performance against those standards, and increasing the educational choices available to American families so as to generate the competition that will improve performance and accountability of schools. The Administration's Job Training 2000 system is designed to train millions of workers in the skills needed in the evolving labor market. (This initiative is described more fully in Chapter 3.) Moreover, the President has initiated a variety of measures to expand opportunities and improve the well-being of individuals and families. Although not often thought of as economic policy, expanded tax relief for child care, Head Start, Healthy Start, protecting the civil rights of all Americans, the strategy to eliminate substance abuse, and measures against violent crime all serve to improve U.S. productivity in the long term. Starting our children on the right path, providing our children the finest education, and continuing to provide programs that ensure public safety are sound economic policies. The President's economic and domestic agenda also includes investing in America's future by improving the Nation's infrastructure, enhancing energy efficiency and security, and improving the quality of the environment and life. The Administration continues to promote an energy policy that relies on the flexibility of market forces to ensute that the Nation's resources are used most efficiently. Implementation of the Administration's National Energy Strategy would enhance competition in the generation of electric power and in the delivery of natural gas and would reduce vulnerability to oil disruptions abroad. (Chapter 5 addresses these items.) This Administration is committed to free and fair trade. Because trade enhances long-term growth, the Administration is following a multipronged effort to open markets, expand trade, and spur growth. (The rationale underlying this policy is described fully in Chapter 6.) The Administration is committed to achieving a successful conclusion of the Uruguay Round of multilateral trade negotiations, under the auspices of the General Agreement on Tariffs 33 and Trade. These ambitious talks, which were initiated in 1986 involve 108 countries and cover topics ranging from the elimination or reduction of tariffs, to the strengthening of international rules for trade in textiles and agriculture, to the extension of rules to cover trade in services and intellectual property. A successful Uruguay Round would expand market opportunities globally for our exporters, increase jobs, and provide lasting gains for both the United States and the world. The Administration also has important proposals to expand trade in this hemisphere—notably the Enterprise for the Americas Initiative and the historic North American free-trade area—and is continuing to achieve market access through bilateral negotiations. Taken together, the President's proposals constitute a comprehensive agenda to stimulate short-term economic growth and support long-term productivity growth. These policies will expand opportunities for workers and families, increase living standards, and support the global competitiveness of the U.S. economy. CONCLUSION The United States confronts serious economic challenges in the 1990s. The flexibility and resilience of the U.S. economy and the resourcefulness of our people provide America the ability to meet these challenges. But as the Council noted when the United States was in the midst of the longest peacetime expansion in American history and the unemployment rate had hit a 15-year low, the Nation cannot take economic growth for granted. The U.S. economy remains the largest and most productive in the world. Sound policies are essential to guarantee that American living standards will continue to rise substantially from one generation to the next and that the United States will remain the world's leading economy. The President's agenda, based on sound economic policy principles, seeks to achieve the maximum possible rate of sustainable economic growth. If enacted, the President's policies will not only make near-term recovery faster, stronger, and more certain, but also will solidify the foundation for long-term growth and help ensure that the United States remains the world's leading economy in the 1990s and beyond. 34 CHAPTER 2 Recent Developments and the Economic Outlook THE U.S. ECONOMY ENTERED 1991 in the midst of the ninth recession since the end of World War II. The recession began in the second half of 1990, following the longest peacetime expansion in the Nation's history. A recovery appeared to begin in the spring of 1991 and continue into the summer, as production, employment, and spending all rose. Total output grew in the second and third quarters of 1991, recovering about one-half of the decline that occurred during the recession. In midsummer, however, the economy began to flatten out, and then production, employment, and spending faltered late in the year. Even during the initial months of recovery, many key economic indicators did not improve much. Only about one-fifth of the jobs lost from July 1990 to April 1991 were regained by October 1991, and employment declined toward the end of the year. The unemployment rate hovered around the 6.9-percent level reached in June, before rising to 7.1 percent in December. By June personal income, adjusted for inflation and taxes, recovered about four-fifths of its 1.5-percent decline but then flattened out for most of the second half of the year. Although many indicators were sluggish or fell back at the end of the year, others continued to improve. For example, growth in exports contributed to a further reduction of the Nation's trade deficit and residential investment showed a strong gain. The economy is expected to be sluggish in early 1992, but growth is expected to pick up in the middle part of the year. With adoption of the Administration's pro-growth policies, real, or inflation-adjusted, growth, as measured by the change in gross domestic product (GDP) in 1987 dollars, is forecast to be 2.2 percent in 1992, and to average 3 percent in the mid-1990s. The unemployment rate is expected to plateau, or perhaps rise slightly, in early 1992 but should begin to decline by midyear. As the economy picks up, inflation and interest rates are expected to rise slightly over the next year from their recent lows, and then stabilize, before gradually falling. Although the economy is expected to improve in 1992, the magnitude of the improvement is still uncertain. In addition to uncer- 35 tainties about the economy's short-term cyclical performance, there also are various structural imbalances in the economy that are being worked through. Beyond the short term, the economy faces the serious challenge of improving productivity; slow productivity growth has plagued the economy for two decades. One of the major cyclical concerns is whether growth of money and credit—which has been quite sluggish—will be sufficient to promote near-term recovery. Also, consumer confidence, which has fallen significantly, likely will be restored only when prospects for employment and income improve and household balance sheets reflect stable or rising asset values. Higher levels of consumer confidence are essential for growth in consumer spending. Because consumer spending accounts for two-thirds of total spending, its growth is a key ingredient for a durable economic recovery. While exports are expected to continue to promote growth in the domestic economy, the export sector faces risks from the possibility that growth abroad will be slower than expected. Underlying these cyclical issues are structural imbalances and adjustments that also pose potential difficulties. Although the economy is flexible and continuously restructuring, the number of major structural adjustments currently occurring is abnormally large. Changes in world capital markets in recent years have affected the cost of capital in the United States. In early 1990, for example, long-term interests rates were pushed up significantly by expectations of increased demand for capital—associated with German unification, a reemergent Latin America, and the opening up of Eastern Europe—and an abrupt decline in the supply of capital to the rest of the world from Germany and Japan. The availability of credit also has been restricted as financial institutions have moved to shore up their capital positions and as they have faced more stringent regulation. Sufficient credit is necessary to finance expansion. High levels of public and private debt, high vacancy rates in commercial and residential buildings, and failing financial institutions also could limit prospects for spending. Budget problems of State and local governments have resulted in higher taxes and spending constraints, adding a fiscal drag on the recovery. Impediments to free and fair trade must be removed or avoided to bolster international trade and growth of U.S. exports. Nonetheless, fundamentals are in place to promote growth in the economy. Nominal interest rates are generally at their lowest levels in two decades, and recent declines should help boost interest-sensitive spending. Lower interest rates also are allowing many homeowners to refinance their mortgages, thereby reducing monthly payments and increasing income available for purchases of goods and services. Inflation is relatively low, and is expected to remain low in the near term. Low and stable inflation reduces the uncer 36 tainty confronting businesses and consumers about prices and the purchasing power of money and income, and thus provides a better environment for investment, production, and growth. Imbalances in international accounts have been substantially reduced, and the Nation's trade position should improve further over time as exports continue to grow and the Nation's international competitive position strengthens. As has been stated in previous Economic Reports of this Administration, the Nation faces serious challenges and cannot take economic growth for granted. The Administration's policies are designed to support sustained increases in the Nation's standard of living by raising long-run productivity growth. Such policies include a pro-growth fiscal policy that enhances incentives for entrepreneurship, saving, and investment and reduces the multiyear structural budget deficit over time; a trade policy that promotes growth through opening markets worldwide; and a regulatory policy that avoids unnecessary burdens on business and consumers. The Administration also supports a monetary policy that promotes solid real growth while gradually reducing inflation pressures. The adoption of the Administration's pro-growth policies would not only boost the expected rate of growth in the near term and beyond but also would reduce uncertainty and the risk that the economy's performance will be worse than expected. AN OVERVIEW OF THE ECONOMY IN 1991 The major economic indicators reflected the effects of the recession in the second half of 1990 and the first half of 1991. Payroll employment, industrial production, real sales, and real personal income fell during this period. The unemployment rate rose to 6.9 percent in June 1991, up from 5.2 percent in June 1990—the approximate level for most of the previous 2 years (Chart 2-1). The unemployment rate then fell slightly and flattened out for several months before rising at the end of the year Real GDP—the value of all goods and services produced in the United States—rose 0.2 percent during 1991 (on a fourth-quarter-to-fourth-quarter basis), following a 0.1-percent decline in 1990 (Chart 2-2). SIGNS OF A RECOVERY In the spring of 1991 signs of a recovery began to emerge. The index of leading indicators reached its low in January and then rose sharply through July. Production, sales, and income all bottomed out between February and April and then rose into the summer. By July industrial production had recovered about 3 percentage points of the 5-percent decline that occurred from September 1990 to March 1991. Nonfarm payroll employment did not re 37 Chart 2-1 Civilian Unemployment Rate The unemployment rate fell to its lowest level in a decade and a half in 1989 but then rose during the 1990-91 recession to hover around 7 percent. Percent 10.8 percent Nov., Dec. 1982 10 7.1 percent December 1991 5.0 percent March 1989 j 1980 | 1981 i 1982 | 1983 i 1984 i 1985 i 1986 1987 1988 1989 1990 1991 Source: Department of Labor. spond very much, however, and after increasing significantly in May, trended up only slightly through October. Total output and spending also rose; following the 1.6-percent decline registered over the fourth quarter of 1990 and the first quarter of 1991, real GDP increased in the second and third quarters, recovering about 0.8 percent, or about half, of the earlier loss. Other key data also pointed to recovery. Total retail sales and sales of cars and light trucks hit lows in January 1991 and rose into the early summer. Housing starts, which bottomed out in January, rose 25 percent by August. New orders and shipments for manufacturers' durable goods reached lows in March and rose through July; the 11.7-percent increase in new orders in July was the largest monthly increase on record. Initial claims for unemployment insurance reached a peak in March and then fell for 4 consecutive months through July. Various conditions had emerged in early 1991 that helped set the stage for the pickup in the economy. Oil prices, which had shot up after Iraq invaded Kuwait in August 1990, fell back to their preinvasion levels within hours of the successful launch of the air-war phase of Operation Desert Storm in January. Prospects for growth in the international economy—and continued growth in U.S. ex- 38 Chart 2-2 Real GDP Growth, 1980-1991 Real gross domestic product grew strongly during the first 6 years of the expansion but slowed in 1989 and fell in 1990. Growth resumed in 1991, but at a very slight pace. Percent change (Q4/Q4) 8 4 - o _ -2 1980 1981 1982 1983 1984 1985 1990 1991 Source: Department of Commerce. ports—improved as the threat to oil supplies was eliminated. With the successful end of the ground war, consumer and business confidence rebounded in March. Declining interest rates in late 1990 and early 1991—both short and long term—supported an upturn in residential construction and other interest-sensitive sectors. Furthermore, household net worth recovered somewhat in the first half of 1991; the value of owner-occupied housing and land stopped declining, the runup in the stock market boosted the value of financial assets, and the increase in household liabilities was quite modest. THE ECONOMY FLATTENS OUT By late summer the recovery lost momentum. A self-reinforcing process of growth—in which increases in spending, production, and employment tend to bolster one another—typically occurs in recoveries. In 1991, however, the spending and production gains and the positive feedback between them were not sufficient to sustain a solid recovery. The leading index flattened out in the late summer and early fall and even declined slightly at the end of the year. After rising through the summer from its trough in April, payroll employment fell significantly in November before rising slightly in 39 December. Industrial production rose slightly from July through September arid then fell slightly in each of the final 3 months of the year. Real income was sluggish from August through October and fell in November, before rising in December. Other indicators pointed to a lackluster economy at the end of the year. Retail sales were relatively flat from late summer into the fall but declined at the end of the year. Motor vehicle sales slipped in July and August and then remained weak in the fall and early winter. Initial claims for unemployment insurance were higher at the end of the year than at midyear. Manufacturers' shipments of durable and nondurable goods showed gains throughout most of the second half of the year, but fell significantly in December. On the positive side, merchandise exports continued to rise, and housing starts continued on an upward trend through the end of the year. Stock prices rose strongly at year-end, with various market indexes hitting record highs. And, according to a government survey, businesses plan to increase spending for plant and equipment by 5.4 percent in 1992, following a 0.5-percent decrease in 1991. Thus, by the end of 1991, the economy was sluggish at best, but some forward-looking indicators were pointing to improvement in mid-1992. The fundamental causes underlying the faltering recovery likely will be a source of continuing debate. Most forecasts—including the Administration forecast of a year ago—had foreseen a relatively modest rebound from a relatively shallow downturn. Until the last few months, this scenario seemed to be on track. It now appears that the structural imbalances in the economy were larger—and were taking longer to work off—than expected; it soon became evident that the oil shock and the war were not the economy's only problems. Credit remained tight and money growth was slow. Relatively high levels of household debt incurred earlier constrained consumer spending. The weaker outlook for the economy created greater uncertainty about employment and income prospects as businesses became more cautious in hiring and spending plans; several major corporations announced plans for further downsizing in efforts to reduce costs and become more competitive. These factors contributed to lower consumer confidence and restrained consumer spending. The State and local fiscal drag continued. SUMMARY • The economy entered 1991 in a recession that began in the second half of 1990. In the spring, various indicators pointed to the beginning of a recovery. • Late in the summer, however, the recovery lost momentum and the economy was sluggish in the second half of the year. 40 REASONS FOR THE SLUGGISH ECONOMY The recession of 1990-91 followed the longest peacetime expansion in the Nation's history. During the expansion of 1982-90, real output increased by more than 30 percent, more than 21 million jobs were created, and 5 million businesses were incorporated. The unemployment rate fell from a peak of almost 11 percent in late 1982 to 5 percent in March 1989—a level not experienced since 1973. Employment as a percentage of working-age population reached a peacetime high of more than 63 percent in early 1990. Consumer price inflation remained relatively low and stable throughout the expansion, averaging about 4 percent a year. For a year and a half before the recession, however, real GDP grew at an annual rate of only about 1 lA percent (Chart 2-3). (All real figures are measured in constant 1987 dollars.) Chart 2-3 Quarterly Real GDP Growth, 1989-1991 Real GDP had been growing slowly for a year and a half before the recession. Slow growth resumed in the final 3 quarters of 1991. Percent change, annual rate 4 1.8 0.2 1989 1990 1991 Source: Department of Commerce. Economic expansions do not end on their own; they end as a result of external shocks to the economy, economic imbalances that must be worked off, or inappropriate economic policies. Hopes that the expansion would continue were dashed in August 1990, when the economy was hit with an external shock—the rise in oil prices resulting from the Iraqi invasion of Kuwait. Oil prices rose sharply, from less than $19 a barrel in July to more than $30 in late 41 August, and peaked at about $40 in early October. It is natural to point to the oil shock—coupled with the resulting declines in consumer and business confidence—as the event that pushed the economy into recession. However, a number of structural imbalances and the lagged effect of tight monetary policy in 1988 and 1989 also slowed the economy. While the oil shock significantly aggravated weakness in the economy, it is a matter of debate whether these other factors on their own eventually would have pushed the economy into recession, or, alternatively, whether the economy would have experienced a prolonged period of sluggish growth. STRUCTURAL ADJUSTMENTS By the end of the 1980s, economic growth was constrained by various imbalances that had accumulated over the past two decades. Although some of these imbalances were concentrated in specific sectors and regions of the country, their effects generally were felt nationwide. The economy also has had to deal with a reallocation from defense to other sectors and changing national demographic trends. Demographic Trends The baby-boom generation matured in the 1970s and early 1980s, boosting the rate of household formation. As household formation rises, so does the demand for houses and big-ticket durable items such as cars and appliances. The assumption of higher levels of mortgage and installment debt in the process of acquiring better housing and durable goods is a natural result of these demographic trends. The more recent shift to lower growth in residential housing and in the demand for cars and other durable goods also in part reflects demographic trends. The average annual rate of household formation was 1.8 percent during the 1960s, 2.5 percent during the 1970s, and 1.7 percent from 1983 to 1989. The rate then fell to about 0.8 percent from 1989 to 1991. According to middle-path projections by the Department of Commerce, the rate of household formation is expected to be about 1.3 percent from 1990 to 2000, higher than in recent years but lower than the average rate of the past several decades. While household formation varies cyclically, the declines from the 1970s to 1980s and prospective declines in the rate of household formation reflect an underlying trend to an older population. Buildup in Private Debt Private debt relative to income rose significantly during the expansion. From 1982 to 1988 household borrowing increased at a 12percent annual rate, while personal income measured in current 42 dollars increased at the much lower rate of 7 percent. Similarly, corporate borrowing surged, rising at an annual rate of 11 percent. Borrowing to finance real estate purchases grew substantially. From 1982 to 1989 home mortgage borrowing increased at a 12-percent annual rate and commercial mortgage borrowing at a 10-percent rate. During this period, national income increased about 67 percent, but nonfarm mortgage debt more than doubled. The borrowing financed a surge in construction, which began to outstrip demand. By the late 1980s, both commercial and residential real estate showed signs of overbuilding; the problem was particularly acute in commercial real estate. Vacancy rates in rental housing rose from just above 5 percent in 1982 to about 8 percent at the end of 1987. Commercial office vacancy rates in downtown areas increased from less than 8 percent in 1982 to more than 16 percent in 1988, according to the Coldwell Banker Office Vacancy Index. Favorable provisions in the 1981 tax laws had boosted building and contributed to the upswing in the early to mid-1980s, but the changes in 1986 reversed many of those provisions, hitting commercial real estate and building hard. By the end of the expansion, many consumers had accumulated relatively high levels of debt. At the same time, the value of their largest asset—their homes—was flat or declining. Householders' expectations of continued increases in the equity in their homes were not being realized. After rising at an average annual rate of 7.5 percent—about twice the rate of inflation—from the end of 1984 through 1989, the value of owner-occupied housing and land fell 1.6 percent in 1990. In addition, the value of other household assets, such as durable goods, stocks, bonds, pensions, and other financial assets, grew only slowly in 1990. Total household net worth—the difference between the household sector's assets and liabilities as measured by the Federal Reserve's flow of funds accounts—fell 1 percent in 1990. Financial Sector Imbalances The real estate situation brought about a further erosion of confidence by exacerbating problems in the already troubled financial sector. Also, a shifting financial regulatory environment—from being too lax during the good times of the expansion to being too tight more recently—further aggravated financial sector difficulties and constrained lending activity and economic growth. Those troubles had begun in the 1970s, when an increase in inflation and interest rates had produced large and widespread losses on mortgage portfolios—the predominant assets on the balance sheets of savings and loans (S&Ls). These assets consisted primarily of fixed-rate, 20- to 30-year mortgages, but deposit liabilities were primarily short term. When interest rates rose, S&Ls had to increase deposit interest rates to retain deposits—the source of their 43 funds. Hence, the cost of funds to S&Ls increased, even though revenues from outstanding mortgages remained fixed. Moreover, because the market value of a fixed-rate asset falls as interest rates rise, the increase in interest rates in the 1970s slashed the market value of the outstanding mortgages held by S&Ls. By 1980 the thrift industry as a whole was already heavily insolvent. In the 1980s, an extension of deposit insurance that did not account for the riskiness of the institution's investments and a loosening of lending restrictions—both of which came about mainly in response to the problems in the industry—allowed weak S&Ls to stay open and to pursue risky investment strategies without losing the confidence of their depositors. Government insurance meant that shaky S&Ls could continue to attract deposits because depositors knew they were protected. Many of the risky investments were real estate projects that eventually failed as a result of overbuilding and declining real estate prices. The risk ultimately was borne by the insurer—in the end, the Federal Government and the taxpayers. In fact, in 1984, a task force headed by then Vice President Bush proposed risk-based deposit insurance, which would have sharply curtailed the excessive risk-taking by requiring depository institutions to pay higher deposit insurance premiums if they pursued risky investment strategies. Besides S&Ls, other financial institutions also experienced balance sheet difficulties as the value of commercial real estate assets declined, and many large banks continued to carry problem loans to Third World countries on their balance sheets. As a result of these factors, bankers grew more cautious about extending loans. Their caution also reflected hesitancy over the profitability of lending projects as a result of the slowing economy. Tighter lending standards cannot be attributed entirely to caution resulting from a weak economy. Banks' balance sheets had deteriorated with the increase in loan losses taken during the 1980s, and banks moved to rebuild equity and shift their portfolios away from business loans and toward assets with lower default risk. Much of this shift in bank portfolios was a response to financial market demands for increased equity. But bank regulatory policies played a significant role as well. Although tighter supervision clearly was warranted, it appears that examiners overcompensated and discouraged financial institutions from engaging in some viable lending opportunities. Moreover, the phase-in of capital standards established in the 1988 Basle Accords—an agreement among banking regulators in the major industrialized countries that set capital adequacy standards—also caused some banks to reduce business loans and move into assets deemed safer by the accords, such as Treasury notes and securities issued by U.S. Government agencies. All of these factors likely 44 have contributed to overly restrictive credit supplies, or a "credit crunch" (Box 2-1). Indeed, growth of commercial and industrial loans by banks slowed during 1990 and fell in 1991 (Chart 2-4); the 4.8-percent decline in commercial and industrial loans during 1991 was the first annual decline since the 3.8-percent fall in 1975. For many small and medium-sized businesses, bank loans represent their only source of external finance, and the fall in commercial and industrial lending likely has stifled activity for a large number of potentially prosperous businesses. Furthermore, borrowing on the high yield, below-investment-grade bond market—the junk bond market—contracted precipitously in 1990. This market had provided an alternative source of funds for many businesses that otherwise could not tap the commercial paper market. Chart 2-4 Commercial and Industrial Loans Commercial and industrial loans by commercial banks fell in 1991, the largest decline in a decade and a half. Billions of dollars 700 600 - 500 - 400 - 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 Source: Board of Governors of the Federal Reserve System. Financial sector problems have had a significant effect on the current economic situation because of the integral role the financial sector plays in ensuring a growing, healthy, and flexible economy. When functioning properly, financial institutions help allocate capital efficiently and thus promote economic growth. Structural problems—like the recent constraints on credit—that impair the 45 Box 2~L—Credit Crunches A credit crunch occurs when the supply of credit is restricted below the range usually identified with prevailing market interest rates and the profitability of investment projects. Credit crunches often involve a reduction in the funds that depositoiy institutions, such as commercial banks and savings and loans, channel from savers to investor. Credit crunches affect economic activity because most small and medium-sked businesses depend on banks when financing investment projects or current operations. Thus, unusual circumstances that force depositories to reduce business loans can restrict the activity of these firms regardless of market interest rates. Households, however, have been relatively unaffected by the recent credit crunch because innovations such as home equity lines of credit and the secondary market in repackaged home mortgages have supported lending to households. Credit crunches used to occur from time to time because regulations fixed an upper limit on the interest rates that could be paid on deposits. When market rates rose above those limits, depositors withdrew funds from tonka and thrifts and put them in assets paying higher rates of return. Depository institutions had difficulty attracting deposits and had to cut back on loans. Eliminating the interest rate caps on deposit accounts removed this source of credit cm&chm* As discussed in this chapter, restructuring of depositories' balance sheete—in part market driven and in ptei te meet new international capital standards—as well as the overreaction of examiners to the earlier excesses of banks and s&viiip and loans have contributed to a credit crunch over the past 2 years* This experience reminds us that a tension exists between the short- and long-run consequences of policies overseeing financial markets. When the economy is sluggish, it is important that depository institutions do not deny credit to worthy borrowers: Undue restrictions on credit would depress spending even more and hamper the recovery. In the long run, however, a well-capitalised banking system is less vulnerable to risky excesses in lending. ability of financial institutions to function efficiently also reduce growth. Defense At the end of the 1980s and into the 1990s, public-sector budgets came under increasing pressure and tax increases put a drag on the economy. Also, Federal spending priorities shifted. The defense 46 buildup in the mid-1980s gave way to a period of moderate cutbacks in the late 1980s and then to planned significant cuts from the early to mid-1990s. This shifted the defense sector from being a stimulus to the economy to being a contractionary force. While increases in defense spending contributed to growth in the economy for much of the 1980s, by the end of the decade, international developments, fiscal constraints, and shifting spending priorities led to cuts in defense spending, and the effects of these cuts were felt throughout the economy. Real defense purchases of goods and services in the national income and product accounts (NIPAs) rose nearly 60 percent from 1979 to 1987 but fell 4 percent from 1987 to 1990. As a share of Federal spending, national defense rose from 23 percent in fiscal 1979 to 28 percent in fiscal 1987 but then fell back to about 21 percent in fiscal 1991. The defense downsizing is projected to continue and has already begun to affect both direct Defense Department employment (military and civilian) and employment in defense industries as firms adjust to expected changes. The economy has adjusted to defense downsizing in the past and is flexible enough to do so now. Such adjustment is neither instantaneous nor without costs, however; significant disruptions can occur in local economies where defense industries are a primary source of employment. MONETARY POLICY AND INTEREST RATE DEVELOPMENTS The Federal Reserve has stated a policy goal of achieving, over time, "price stability/' Price stability need not literally mean a zero change in the price level, but a change that is low enough so that inflation no longer is an important factor in the economic decisions of consumers and businesses. Over the past few years, the Federal Reserve generally has maintained a relatively tight monetary policy in an attempt to achieve this goal. These efforts have prevented inflation from being higher than it otherwise would have been, but they also have been one of the important factors contributing to slower growth over the past 3 years. The Nation's long-term growth prospects were enhanced by the reduction of inflation from the double-digit rates experienced in the 1970s. High inflation causes households and businesses to divert effort from productive activities toward preventing the value of their assets from eroding with inflation. High and variable inflation often is associated with increased uncertainty about the future course of the economy; such uncertainty can add a risk premium to interest rates and reduce investment. Variable inflation makes it difficult to judge the change in the prices of items relative to one another; in market economies, relative prices signal suppliers to devote more resources to products that consumers value more. 47 Thus, low and stable inflation is an important ingredient in achieving maximum sustainable long-term growth. But just as high and variable inflation can be costly, lowering inflation sometimes has costly consequences in the short run for economic growth and employment, which also must be considered when implementing monetary policy. Monetary Policy, Nominal GDP, and Inflation The growth in nominal GDP is composed of growth in real GDP and changes in prices—or inflation. Over the long run, there has been a fairly stable relationship between the growth in money as measured by the M2 aggregate—the primary definition of money monitored by the Fed (Chapter 7)—and the rate of growth of nominal GDP. Over the past several years, the Federal Reserve has aimed to lower the growth of money gradually in order to lower inflation without a recession. When money growth slows for an extended period of time, it is likely that nominal GDP growth will fall. However, there are lags—which cannot be predicted with certainty—between the time money growth slows and the effect on nominal GDP. And determining how much of the slower nominal GDP growth will be reflected in lower inflation and how much in lower real GDP growth is difficult. Each February, the Fed sets a target range for growth of the money supply over the coming year. (The target ranges for the growth in money define the cones, pictured in Chart 2-5, within which the Fed attempts to keep the quantity of money. The new targets are set from where the money supply ends the year, not the midpoint of the previous target range.) The midpoint of the target range for M2 was lowered from 7 percent in 1987 to 4.5 percent in 1991. In addition, actual M2 growth has tended to be in the lower part of the target range. It has taken some time, however, for inflation to begin to moderate, and much of the monetary restraint apparently has shown up in terms of lower output in the last 3 years. Indeed, the growth in real GDP was lower than the Federal Reserve, the Administration, and most private analysts had expected. While the long-run relationships between money and nominal GDP are relatively stable, the short-run relationships are not. Furthermore, particularly in the short and medium terms, the Fed is able only to influence, not control, the quantity of money. The Federal Reserve is, however, able to directly affect the Federal funds rate, the interest rate on overnight borrowing among banks. Consequently, in its short-run implementation of monetary policy the Fed focuses mainly on managing the Federal funds rate. The Fed generally increases the Federal funds rate when inflation pressures appear to be rising and lowers the rate when inflation appears to be waning and the economy is sluggish. Changes in the Federal funds rate, however, do not necessarily signal a fundamental shift 48 Chart 2-5 M2 Money Stock and Federal Reserve Target Ranges In recent years, the Federal Reserve has gradually lowered the target range for M2 growth. M2 generally has been below the middle of the target cones. Billions of dollars 3,600 6.5% / 7% 3,400 2.5% 7% s y y ^ ^ 3,200 - 3,000 - 2,800 3% 8% 1 1 1988 1 1989 1990 1991 Note: Weekly data. Percentage growth lines mark out growth ranges set by the Federal Reserve for that year. Source: Board of Governors of the Federal Reserve System. in policy toward loosening or tightening because of the natural tendency for market interest rates to decline when the demand for credit falls during a period of sluggishness or to rise when demand for credit increases in a strong economy. The Attempt to Engineer a Soft Landing in 1988 and 1989 Solid economic growth in 1987 and 1988 pushed capacity utilization up, and unemployment rates fell to their lowest levels in a decade and a half. These developments spurred concerns that the economy might be outstripping its productive capacity, increasing the possibility of rising inflation. Monetary policy moved toward engineering a "soft landing"—slower growth with low inflation but no recession. Beginning in early 1988, the Federal Reserve gradually increased the Federal funds rate (Chart 2-6) and in 1988 and in 1989 it lowered the midpoint of the target range for the growth of M2 a full percentage point from the previous year. This tight monetary policy removed some of the incipient inflationary pressure from the economy. However, tighter monetary policy also put substantial downward pressure on output and employment growth. 49 Chart 2-6 Federal Funds Rate The federal funds rate rose in 1988 and early 1989 and then fell as the economy weakened. Percent per annum 11 10 1988 1990 1989 1991 Source: Board of Governors of the Federal Reserve System. Monetary Policy and Credit Conditions in Late 1989 and 1990 As growth slowed in 1989 and inflation pressures waned, market interest rates began to fall. The Federal Reserve began to reduce the Federal funds rate in the middle of 1989; over the remainder of the year the rate fell from roughly 9% percent to about 8V4 percent. Despite declining short-term rates, by early 1990 long-term interest rates were rising. Yields on long-term Treasury bonds rose from below 8 percent at the end of 1989 to more than 9 percent in September 1990, and high-grade corporate bond yields rose to more than 9.5 percent. The rise partly reflected the increase in long-term interest rates throughout the world, discussed earlier. Because interest rates in the United States are influenced by developments in world markets, these events put upward pressure on U.S. long-term rates. Furthermore, tighter credit conditions—the credit crunch described in the previous section—held lending by banks and S&Ls to levels below those normally associated with the prevailing market interest rates and the profitability of investment projects. Higher world interest rates and the credit crunch resulted in tighter credit conditions than otherwise would have been associated with the level of the Federal funds rate. 50 Monetary Policy and Interest Rates From Late 1990 Market interest rates fell in late 1990 and much of 1991, reflecting lower demand for borrowed funds in the weakened economy, and, after early 1991, declining inflation rates. Furthermore, the prospect of reducing the long-term Federal structural budget deficit led many people to expect that improved coordination between monetary and fiscal policy could result in lower interest rates. The Federal Reserve proceeded cautiously with a small reduction in the Federal funds rate following passage of the Omnibus Budget Reconciliation Act in late October 1990. In late 1990 and early 1991, as weakness in the economy became more evident and shortterm market rates continued to move downward, the Federal funds rate was lowered by 2 percentage points to 5% percent by late April 1991 (Chart 2-6). In the late spring and early summer, when the economy appeared to be entering a recovery, there was little movement in the Federal funds rate. M2 growth was somewhat erratic during much of this period (Chart 2-5). Through most of the first half of 1991, M2 stayed near the middle of its target cone. M2 then fell for several weeks, reaching the lower bound of the cone in early September. Broader measures of credit also were weak, particularly bank loans to businesses. The implications of these developments were not clear; as mentioned above, in the short run the relationship between M2 and nominal GDP can be quite unpredictable, and money supply data can be quite difficult to interpret (Box 2-2). Nonetheless, the weak money growth raised concerns that the growth in credit would be insufficient to support a healthy expansion. In the late summer and the fall, employment, sales, and other indicators flattened or fell. As the recovery wavered and money growth remained weak, a series of cuts brought the Federal funds rate to 4.5 percent by early December. In mid-December, the Fed responded to growing concerns about the faltering recovery by lowering the Federal funds rate one-half percentage point to around 4 percent and cutting the discount rate—the rate the Federal Reserve charges on its loans to banks—a full percentage point to 3.5 percent, the lowest nominal discount rate since 1964. This aggressive move by the Fed contributed to a downward movement in market interest rates around the end of the year. In retrospect, it appears that monetary policy should have been geared to lowering interest rates faster and earlier. It is likely that sluggish demand for credit in a weaker-than-expected economy and continued fallout from the problems in the banking industry prevented the quantity of credit from expanding as the Fed thought it would when it lowered interest rates. Indeed, M2 growth did not react as the Fed expected when it lowered the Federal funds rate in the second half of 1991. 51 Box 2-2.—Interpreting the Money Statistics in the Second Half of 1991 Interpreting the money statistics during the second half of 1991 was not a straightforward matter* Although M2 growth was weak, Ml—a narrower measure of money composed solely of components used in transactions—grew at nearly a 9-percent annual rate in the second half of 1991, compared to an average annual rate of 7.6 percent from the end of 1982 to the end of 1989, when the economy was expanding rapidly. The weakness in M2 and credit growth likely reflected a variety of demand and supply factors. On the demand side, weak credit growth in part was caused by sluggish loan demand; businesses saw fewer profitable borrowing opportunities than during a period of rapid expansion. Households also appear to have moved out of M2 assets such as money market accounts to seek higher returns in longer maturity bond and equity mutual funds. Declining yields on M2 assets relative to consumer debt also may have caused consumers to move away from financing purchases with debt or to use M2 assets to pay down existing debt. Such shuffling of assets by households likely had little effect on the overall availability of credit in the economy. On the supply side, banks apparently were not actively seeking deposits; they likely felt that they could satisfy loan demand with their current deposit base. Furthermore, loan supply may have been restricted by a continuation of some of the factors underlying the credit crunch. At the end of 1991 and into early 1992, interest rates generally were at their lowest levels in 2 decades or more. Three-month Treasury bill rates fell from 7.2 percent in October 1990 to about 3.8 percent in early 1992, the lowest level of nominal Treasury bill rates since 1972. Near troughs of recessions, however, short-term real interest rates—that is, interest rates adjusted for expected inflation—often are quite low, sometimes negative. Currently, real short-term rates are higher than they have been during many comparable periods in the past. By mid-January 1992, nominal long-term interest rates also were relatively low. Yields on 10-year Treasury notes were about 6.8 percent, the lowest level of nominal interest rates since 1977. Rates on 30-year fixed mortgages fell from a little more than 10 percent in late 1990 to about 8V4 percent in mid-January 1992. The decline in mortgage rates has substantially enhanced the affordability of housing. In addition, interest rates on adjustable rate mortgages 52 have come down, many homeowners have refinanced mortgages at lower rates, and interest rates on consumer installment credit also have fallen. These factors have freed up income for other purposes, allowing households to reduce their debt burdens and to enhance their purchasing power. Of course, these effects are offset somewhat by the lower income earned by holders of interest-bearing assets. Yields on publicly traded short-term commercial paper and longer term corporate bonds also fell between late 1990 and early 1992. Although some rates lagged a bit late, the overall decline in yields on corporate debt was roughly in line with the fall in interest rates on Treasury issues of comparable maturity. As with households, the decline in borrowing costs has improved the cashflow positions of businesses, enhancing profitability and freeing funds for productive purposes. In contrast, the prime rate—the rate banks charge their best business borrowers—generally did not fall as quickly or as much as other short-term interest rates. This rising spread reflected an attempt by banks to increase profitability and rebuild their balance sheets as well as some reluctance to lend to small and medium-size businesses because of the unfavorable effects such loans might have on their capital positions. In December, however, following the 1-percentage-point cut in the Federal Reserve's discount rate, the prime rate fell 1 percentage point to 6.5 percent, its lowest level since 1977. SUMMARY • A number of structural imbalances that had evolved over a number of years—including high public and private debt, overbuilding in commercial real estate, and financial sector difficulties—constrained growth in the economy in the late 1980s and early 1990s. Constraints on State and local budgets along with defense downsizing also put a drag on the economy. The large Federal fiscal stimulus usually present during a recession did not occur. • In the late 1980s, the Federal Reserve tightened monetary policy in an effort to restrain incipient inflation pressures. However, the tighter monetary policy also was one of the factors contributing to the sluggish performance of output and employment over the past 3 years. 53 RECENT ECONOMIC PERFORMANCE IN HISTORICAL CONTEXT CYCLICAL COMPARISONS Table 2-1 compares the 1990-91 recession with previous recessions since World War II. GDP data consistent with the December 1991 revisions are not yet available for the years before 1959 (Box 2-3). Comparisons between a given recession and the average of the experiences over a number of cycles are informative, but one should keep in mind that there is no such thing as a typical or average recession. Because of differences in the events causing recessions, the state of the economy when those events occur, and the responses of markets, individuals, and the government to the downturn in activity, the range of cyclical experiences is quite broad. TABLE 2-1.—Cyclical Comparisons Duration1 Real GDP Recession Percent Change Months Unemployment rate Payroll employment Percent change Change High Percentage points Percent 1948-49 11 (2) -5.2 4.2 7.9 1953-54 10 (2) -3.5 3.6 6.1 1957-58 8 (2) -4.3 3.8 7.5 1960-61 10 -0.6 -2.2 2.3 7.1 1969-70 11 1.0 1.5 2.6 6.1 1973-75 16 4.1 2.9 4.4 9.0 -2.6 -1.4 1.9 7.8 -2.8 -3.1 3.6 10.8 1980 6 1981-82 16 Recession Average 11 1990-91 (3) 1.6 4 -1.5 7.8 3.3 -3.0 -2.2 4 4 1.9 4 7.1 1 Duration based on National Bureau of Economic Research dating of business cycle peaks and troughs. Data for GDP in 1987 dollars is not vet available Drior to 1959. The trough of the recession has not yet been determined, although a majority of the Blue Chip forecasters surveyed in January 1992 placed it in the second quarter of 1991. 2 3 4 The values for the recession that began in 1990 may differ depending on the course of the economy and data revisions. Note.—Changes determined from series-specific peaks and troughs in neighborhood of recession. Source: Department of Commerce, Department of Labor, and National Bureau of Economic Research. Gross Domestic Product In terms of the direct effect on output—assuming that output does not fall significantly in 1992 (the Administration forecasts an increase)—the 1990-91 recession was somewhat milder than the average for recessions since 1959. As the Administration predicted last year, real GDP fell for two consecutive quarters—the fourth quarter of 1990 and the first quarter of 1991—and then rose in the second and third quarters. However, real GDP was essentially flat in the fourth quarter. The decline in real GDP from the third quarter of 1990 through the first quarter of 1991 was 1.6 percent, compared with the 2.2-percent average for recessions since 1959. 54 Box accounts (NIPAs) the value nf . Benchmark eS ng cycle; the last ««rt month of each £»» ©EA) publishes T «» «he Preceding q u a r t e r fe d*« become a S b ^ mates are published. M a n ^ stooctwg the mPAs, but ar l u n a t e . Some of t h W < ^ sions each July. Otheri iarly; some T nesses and ^ howe^r,^ T h e ^ ^ 55 in or &al phase of the NIPA I™ December 1985, In n Economic Analf" NIPA estimate I months, as more ' *&d "final0 estiare useful for conwen for the final ~& annual revi* available even less regu* censuses of busi- .f** ch ^«^ at t h e ^ Employment and Unemployment Based on data available through the end of 1991, the effect of the 1990-91 recession on labor markets also was less severe than average. The 1.5-percent decline in nonfarm payroll employment from June 1990 to April 1991 was about half the average for all postwar recessions, and the 1.9-percentage point increase in the unemployment rate from June 1990 to December 1991 was about 40 percent less than the postwar average. Similarly, through the fourth quarter, the number of discouraged workers—those who are no longer actively seeking work because they think they cannot find a job— increased about 270,000, less than half the 680,000 increase that resulted from the more severe recession of 1981-82. Although the unemployment rate is expected to improve in the middle of 1992, both it and the number of discouraged workers could rise in early 1992, depending on the course of the economy. Other labor market indicators suggest greater severity of the recession. During recessions, for example, businesses often lay off workers temporarily, planning to rehire them when demand picks back up. Over the past several years, however, there has been a trend toward laying off workers permanently. During the second half of 1991, more than 40 percent of the unemployed did not expect to be recalled to their old jobs. Duration The National Bureau of Economic Research, the private organization that officially dates the beginning and end of recessions, has not yet decided on the trough of the most recent recession. There is uncertainty about whether the trough of the recession occurred in the spring of 1991 or whether the recession continued, with a trough at a later date. Thus, at this time, the length of the recession cannot be compared with those of other recessions since World War II, which varied between the 6-month recession in 1980 and the 16month downturns in 1973-75 and 1981-82. PERFORMANCE OF GDP COMPONENTS IN 1991 The decline in real economic activity during the recession from the third quarter of 1990 through the first quarter of 1991 was spread across the various sectors of the economy, but much of the decline occurred in investment, with a less severe fall in consumption. In fact, the decline in investment exceeded the total decline in GDP but was offset by an improved net export position and by government spending, which rose slightly. In the second and third quarters of 1991, the performance of GDP components was largely consistent with what would be expected in the early stages of recovery. However, in the fourth quarter the economy flattened out, with declines in consumption and government spending being 56 offset by a small increase in investment and a significant improvement in net exports. Consumption and Saving Consumer spending in real terms fell by about IVi percent during the recession, compared with a slight increase, on average, in previous recessions. During 1991, real consumer spending rose 0.3 percent. Real disposable personal income, a key determinant of consumer spending, rose 0.4 percent during 1991. In terms of current dollars, consumer spending and other outlays rose less than disposable income so that personal saving rose to 5.3 percent in 1991 from 5.1 percent in 1990. Real purchases of durable goods fell 2.8 percent during 1991, falling in the first and second quarters, before picking up in the third quarter and then falling again in the fourth quarter. Expenditures for nondurable goods fell 1.1 percent during 1991, declining slightly in the first quarter, rising slightly in the second quarter before being unchanged in the third quarter. In the fourth quarter, however, expenditures on nondurable goods fell significantly. Spending on services rose in each quarter of 1991, increasing 1.9 percent from the end of 1990 through the end of 1991. The fundamentals underlying consumer spending were volatile but generally weak for much of the year. Real disposable personal income was essentially flat. Consumer confidence was on a roller coaster, falling in the second half after a strong post-Operation Desert Storm rebound (Chart 2-7). In fact, consumer confidence by year-end was very low, which suggests that consumer spending in early 1992 will be sluggish. Residential Investment Real residential investment fell by about 10 V2 percent during the recession, just over half of the average decline in previous recessions since 1959. Residential investment fell 1.3 percent during 1991. However, residential investment climbed steadily in the last three quarters of the year, after falling significantly in the first quarter. Economic fundamentals—the most important being low mortgage rates (Chart 2-8)—supported the pickup in residential investment. By the end of 1991 mortgage rates were at their lowest levels in nearly two decades. Business Fixed Investment The decline in nonresidential fixed investment during the recession was on a par with the average for previous recessions—just above 6 percent. The 9-percent decline in investment in structures, however, was three times as large as the recession average of about 3 percent. That disproportionately large decline reflects the imbalances described earlier, particularly the high vacancy rates for commercial office space. Investment in durable equipment fell 57 Chart 2-7 Consumer Confidence Consumer confidence plummeted during the Persian Gulf crisis, rebounded in early 1991, but then fell back at the end of the year. Index, 1985=100 140 120 - 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 Source: The Conference Board. about 5 percent during the recession, about two-thirds the decline in the average recession. During 1991, nonresidential fixed investment fell 6.9 percent, with investment in structures falling 15 percent and expenditures for durable equipment falling by more than 3 percent. Inventories As the economy entered the recession, many analysts cited the lean inventory position of businesses as one reason the recession would be relatively mild. However, early in the recession, businesses began cutting inventories almost as soon as demand began to fall. Inventories fell at an annual rate of $31 billion (1987 dollars) in the fourth quarter of 1990, and businesses continued to liquidate inventories through the second quarter of 1991. The shift in inventory investment of about $47 billion (1987 dollars)—from an accumulation of about $14 billion in the third quarter of 1990 to a liquidation of about $32 billion in the first quarter of 1991—represented nearly 1 percent of real GDP. Hence, a significant part of the fall in real output during the recession can be attributed directly to the inventory cutback, which occurred earlier than has typically been the case in previous recessions. By the end of 1991, inventory liqui- 58 Chart 2-8 Mortgage Rates At the end of 1991, mortgage rates were at their lowest level in nearly a decade and a half and were much lower than their peak in 1981. Percent per annum 20 18.45 \ October 1981 ^V 18 16 12 10 8.50 December 1991 i 1972 1974 i 1976 i i i 1978 i i 1980 i i 1982 i i 1984 i 1986 i I 1988 1990 Note: Contract interest rates on commitments for fixed-rate first mortgages. Source: Federal Home Loan Mortgage Corporation. dation had ceased, and some accumulation of inventories began in the fourth quarter. Government Spending Real government purchases of goods and services fell 1.7 percent during 1991. On average, Federal defense purchases fell by about $13 billion, or 4.6 percent. Federal nondefense purchases rose only slightly during 1991. On average, Federal purchases increased by about 1 percent in previous recessions and by about \XA percent during the first year of expansions. State and local government purchases were somewhat more constrained than the average for other recessions, falling about 0.6 percent during 1991. The fall in 1991 followed a 3.8-percent rise during 1990. The decline in 1991 reflected the tight State and local government budget situation. In earlier recessions, State and local government purchases were countercyclical, increasing 2 percent on average during recessions. During the first year of recoveries since 1959, State and local government spending increased 2.7 percent on average. 59 Exports and Imports The improvement in the Nation's international trade position helped keep the recession from being more severe. Real exports continued to grow in 1991 and by the end of the year reached 11.6 percent of real GDP. In fact, over the past 4 years, real exports have gone up by nearly 1 percentage point of GDP each year. Over the same period, real imports as a percent of GDP remained relatively stable, usually between 11 and 12 percent. The rising share of exports coupled with the stable share of imports has resulted in significant reductions in the Nation's trade deficit. Real net exports as measured in the national income and product accounts rose from —$155 billion (1987 dollars) in 1986 to — $27 billion in 1991. During the recession, real net exports were one bright spot, increasing by $47 billion, or nearly 1 percent of GDP—from the third quarter of 1990 through the first quarter of 1991. The importance of the improving trade position becomes more obvious when compared with the recession of 1981-82, when real net exports fell by nearly $40 billion, or approximately 1 percent of GDP. During 1991 real net exports improved from —$31 billion at the end of 1990 to -$8 billion at the end of 1991. The recent improvement in the trade balance and its contribution to economic growth help to reinforce the importance of maintaining open international markets in which free and fair trade can flourish. The above discussion focuses on real imports and exports in the national income and product accounts and their contribution to real GDP growth. Other measures of U.S. international transactions in current-dollar terms also showed marked improvement in 1991. Through November, with exports reaching a record high, the merchandise trade deficit in 1991 was running at an annual rate of $65 billion, down from $102 billion in 1990. The current account balance—which includes trade of goods and services, flows of income payments, and unilateral transfers—showed a surplus of about $4 billion at an annual rate through the third quarter, a significant change from the $92 billion deficit of 1990. A major part of the improvement, however, resulted from the cash contributions of coalition partners in Operation Desert Storm. INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION Industrial production—the output of the Nation's factories, mines, and utilities—peaked in September 1990. From its trough after the 1981-82 recession in December 1982, industrial production increased by nearly 40 percent during the expansion—representing an average growth of about 4.4 percent a year. From September 1990 through March 1991, industrial production fell 5 percent, giving up the equivalent of slightly more than a year's worth of 60 growth during the expansion. The average decline in industrial production during previous recessions in the postwar era was about 9 percent, nearly twice as large as the decline from September 1990 to March 1991. Capacity utilization—the percentage of available equipment and structures used in production—also fell as industrial production declined. Capacity utilization peaked at 83.8 percent in June and July 1990. By March 1991 it had fallen to 78.4 percent. The initial pickup in economic activity that occurred in the spring boosted industrial production and capacity utilization. Industrial production rose about 3 percent from March to July, and capacity utilization rose to 80 percent in July. Industrial production then flattened out in the second half of the year and even declined at the end of the year. Capacity utilization fell from 80 percent in July to 79 percent in December. SECTORAL AND REGIONAL DIVERSITY DURING THE RECESSION Developments in demand and technology vary significantly among industries; as a result, not all sectors of the economy expand or contract at the same rate. The efficient allocation of economic resources requires industries experiencing increases in demand or rapid technological advances to grow faster than industries not experiencing those advantages. Differences in relative demands and technological change mean that during a recession some industries still experience growth while others contract; conversely, an industry with outdated technology or falling demand may still decline during an expansion. Because of differences in natural resources, composition of the labor force, and historical development, a wide variety of industrial concentrations exists across the country. Regions experience fluctuations in growth commensurate with activity in their industrial concentration. Industrial and regional diversity enhances the cyclical resiliency of the economy as a whole. The flow of labor and capital among regions and sectors permits more rapid adjustment to shocks, a more efficient allocation of scarce resources, and a larger national product. Indeed, subsidizing declining industries inhibits the efficient flow of resources from those industries to the expanding sectors of the economy. In contrast, policies aimed at aiding the flow of workers and capital among sectors can improve efficiency and enhance growth. Sectoral Diversity in Employment Table 2-2 presents the proportion of the decline in total nonfarm payroll employment attributable to each of the major industrial groupings during postwar recessions. These declines are compared 61 to behavior of employment between its peak in June 1990 and its 1991 low in April. TABLE 2-2.—Accounting for the Decline in Payroll Employment [Decline in sector divided by total decline, percent] Recession Manufacturing Construction Service Producing Mining 1948-49 72.4 0.9 8.8 17.9 1953-54 102.5 -.6 -6.8 4.9 3.9 1957-58 . 76.4 11.5 8.2 1960-61 .. 81.6 11.4 2.2 4.7 1969-70 . 131.3 5.6 -36.7 _2 1973-75 . . 81.4 19.1 .3 .8 1980 81.2 15.8 3.7 .8 1981-82 82.2 12.5 -.4 5.7 Recession Average.. 88.6 9.5 2.6 4.4 M6.9 ^9.1 ... June 1990 to April 1991 1 The values for the recession that began in 1990 may differ depending on subsequent changes in payroll employment and data revisions. Note.—Changes determined from the peaks and troughs in total payroll employment in the neighborhood of the recession. Mining includes oil and gas extraction. A minus sign indicates an increase in employment in the sector. Source: Department of Labor and National Bureau of Economic Research. The manufacturing sector accounted for about 47 percent of the decline in total employment between June 1990 and April 1991, roughly half the average of previous postwar recessions. (Manufacturing employment, however, had fallen somewhat during 1989 and early 1990.) Before 1990-91, manufacturing had never accounted for less than 72 percent of the jobs lost during a recession. The smaller negative effect of manufacturing on the economy as a whole is not simply a result of its lower share of total employment; in percentage terms, the decline in manufacturing employment also was about half its cyclical average. In the late 1970s and early 1980s, the cost-competitiveness of U.S. manufacturing declined relative to that of the Nation's major trading partners, in large part because of the rising exchange value of the dollar. The decline in competitiveness forced manufacturing to scale back operations. The restructuring caused painful dislocations—particularly in Midwestern States with a high dependence on traditional heavy manufacturing industries such as steel and autos—that lasted longer than the recessions in the national economy. But by the end of the 1980s, the competitive footing of U.S. manufacturing was much improved, a result both of cost-cutting steps and the decline in the exchange value of the dollar between 1985 and 1987. Indeed, over the past year and a half, the manufacturing sector has received a welcome boost from export demand. As a result of these factors, manufacturing did not display the same 62 degree of cyclical sensitivity in 1990 and 1991 that it had during earlier recessions. In contrast, construction accounted for 29 percent of the jobs lost between June 1990 and April 1991, about three times its cyclical average. The surge in building activity during the 1980s resulted in an excess supply of office space, commercial property, and apartments. Many of these buildings are vacant. And over the past 3 years, there has been a notable rise in vacancies in the Northeast—where the number of vacant residential rental units rose from 4.9 percent of the rental stock in the fourth quarter of 1988 to 6.3 percent in the fourth quarter of 1991. Because it could take some time for renewed demand to work off existing vacancies, construction is not likely to be robust even after the recovery gains momentum. The service sector accounted for almost one-quarter of the overall decline in employment between June 1990 and April 1991, by far its largest share during any postwar recession. This sector covers a large number of diverse industries, such as wholesale trade, retailing, real estate, banking, insurance, health care, business services, and government. Many of these industries are undergoing longer term structural changes that have caused their cyclical behavior to differ noticeably from earlier experiences. Furthermore, there has been a trend toward manufacturers contracting out activities to workers that are counted in the services category, thereby increasing the cyclical sensitivity of the service-producing sector. Wholesale and retail trade accounted for nearly one-third of the decline in total payroll employment between June and April; this share was about three times its cyclical average. Retail trade in particular has undergone significant structural changes over the past several years. The 1980s witnessed a large expansion in retailing. According to estimates by the Department of Energy, in 1983 there were 44 square feet of floorspace at mercantile and service establishments for every person in the Nation; by 1986, this figure had risen to 53 square feet per person. Such increases apparently reflected building beyond the demand for retail services. More recently, many traditional department store chains have scaled back operations as they face intense competition, much of it coming from expanding discount outlets. Employment in the finance, insurance, and real estate industries typically has grown during recessions. In 1990-91, however, the number of jobs in these industries fell, accounting for about \xk percent of the total decline in payroll employment. The problems with the financial industries noted earlier—as well as changes in the way that financial services are provided to households and businesses—have resulted in a restructuring that likely will leave 63 the Nation with fewer banks and savings and loans. Job opportunities in real estate were adversely affected by the slump in the construction industry. One industry that did not contract during this recession was health care services. This industry continued to expand during the recession despite the weakness in the aggregate economy. All told, the services subgrouping, which includes health and business services as well as a miscellany of other service industries, added more than 300,000 jobs between June 1990 and April 1991. Regional Disparity Before this latest cycle, some people argued that the East and West coasts were "recession proof." This claim seems to have been based on the experience of the early 1980s. Chart 2-9 plots the average unemployment rate in each State during the 12 months ending at the cyclical trough in November 1982. The figure highlights that unemployment rates generally were much lower on the East Coast than in the Midwestern industrial States and some portions of the South, which were hard hit by the problems in manufacturing. Despite the claims, unemployment on the West Coast was higher than in the country as a whole. Chart 2-10, which plots average unemployment rates from December 1990 to November 1991, indicates that many of the coastal States—namely, Maine, New Hampshire, Massachusetts, Rhode Island, Florida, and California—fared worse than the Nation as a whole during the latest recession. The unemployment rate through much of the industrial parts of the Midwest has been closer to the national average. Both charts highlight, however, that there has been significant diversity in the economic performance of different regions of the country. (Data for State-level unemployment rates in December 1991 were not available at the time this Report was published; for the Nation as a whole, the unemployment rate rose 0.2 percentage point in December.) One exception in the Midwest has been Michigan, where the weakness in the automobile industry has caused high unemployment. Indeed, in 1991 the "big three" domestic automakers sold roughly 8V2 million cars and trucks in the United States, only about 14 percent above sales in 1982 during that severe recession. In addition to cyclical developments, motor vehicle sales have been adversely affected by the decline in the rate of household formation, which is one of the key determinants of longer run trends in demand for big-ticket durable items such as automobiles. Was This a White-Collar Recession? Because of the job losses in banking, insurance, real estate, and other industries with a high proportion of white-collar workers, some have argued that the 1990-91 recession was a "white-collar 64 Chart 2-9 Unemployment Rates by State, Year Ending November 1982 Twelve months ending November 1982 (United States = 9.5%) • 10.00% or over • 8.50 - 9.99% O 7.00 - 8.49% Q 5.50 - 6.99% • Under 5.50% Note: Average of the rates for the twelve months ending November 1982. Source: Department of Labor. Chart 2-10 Unemployment Rates by State, Year Ending November 1991 Twelve months ending November 1991 (United States = 6.7%) • 10.00% or over • 8.50 - 9.99% E3 7.00 - 8.49% C3 5.50 - 6.99% • Under 5.50% Note: Average of the rates for the twelve months ending November 1991. Source: Department of Labor. recession." Chart 2-11 illustrates that the unemployment rate for white-collar workers is lower than in other occupations, and also is 65 below its recent peak in 1983. Because of the trend toward more employment in the typically white-collar jobs, however, these workers now account for a larger proportion of total unemployment than they have in previous recessions. Nonetheless, they still account for a smaller proportion of total unemployment than the blue-collar or sales, services, and support categories. Chart 2-11 Unemployment Rates by Occupation White-collar unemployment rates are below those of other broad occupational categories. Percent 16 14 12 . . . \ Blue Collar Sales, Services, and Support White Collar 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82* 83 84 85 86 87 88 89 90 91 WHITE COLLAR: Managerial, Professional, Technical, and Administrative. SALES, SERVICES, AND SUPPORT: Sales, Clerical and Kindred, and Services. BLUE COLLAR: Precision Production, Operators, Fabricators, Laborers, Farming, Forestry, and Fishing. * The occupational classifications used to construct these series are not strictly comparable before and after 1982. Source: Department of Labor. Blue-collar unemployment rates on average run higher, and recently have risen more, than the rates for white-collar and service workers. However, the less severe cycle in manufacturing has meant that the blue-collar unemployment rate is substantially below the peaks experienced in the mid-1970s and early 1980s. SUMMARY • While a majority of the private Blue Chip forecasters surveyed in January 1992 placed the end of the recession in the second quarter of 1991, as noted above the trough of the recession has not yet been officially determined. Thus, the statements in this section are consistent with the majority Blue Chip view, but it should be borne in mind that the future course of the economy may affect the values for the recession that began in the third quarter of 1990. 66 • The decline in output from the third quarter of 1990 through the first quarter of 1991 and the number of jobs lost between June 1990 and April 1991 was somewhat less severe than the average for post-World War II recessions. Much of the decline in output occurred in investment, particularly in inventories. There was a smaller decline in consumption, and an improvement in net exports helped to keep the recession from being more severe. • Sectoral comparisons show that, relative to previous recessions, manufacturing accounted for a smaller proportion of jobs lost; the construction and service-producing sectors accounted for a much larger proportion. • The rise in white-collar unemployment represented a larger proportion of total unemployment compared to previous recessions. However, blue-collar unemployment still accounted for a larger share of total unemployment than white-collar unemployment did. THE INFLATION RECORD Falling energy prices and the weak economy held inflation in 1991 at relatively low levels in comparison to the past two decades. Price inflation, measured by the annual rate of change in the consumer price index (CPI), averaged 9.3 percent from the end of 1973 through 1981, peaked at over 13 percent in 1979 (December-to-December), but fell to 3.9 percent from the end of 1982 through 1991 (Chart 2-12). Core or underlying inflation—as measured by the CPI excluding food and energy—peaked in 1980 at more than 12 percent and averaged 9 percent from the end of 1973 through 1981 but declined to 4.5 percent from the end of 1982 through 1991. During 1991 consumer price inflation was only 3.1 percent, down from 6.1 percent in 1990 and the second lowest rate since 1967. Core inflation was 4.4 percent, down from 5.2 percent in 1990. Commodity prices declined significantly over the past year and a half, signaling continued low inflation. Crude oil prices were down nearly 50 percent from their peak in the fall of 1990, and nonenergy commodity prices also fell. Producer prices for sensitive crude and intermediate materials (which do not include energy commodities) declined about 4 percent during 1991, and the Commodity Research Bureau's index of spot market prices for raw industrial materials was down more than 10 percent. Many view gold as a hedge against inflation; its price fell by about 12 percent from the beginning of 1990 to the end of 1991. The labor cost situation in 1991 also was quite favorable for reducing inflation pressures. Unit labor costs, which influence inflation by affecting the cost of producing goods and services, are de 67 Chart 2-12 Inflation and Core Inflation Overall consumer price inflation fell significantly in 1991. Core inflation, a measure that excludes food and energy prices, also fell. Percent 16 14 12 10 All Items Excluding Food and Energy 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 Note: Percent change in CPI from 12 months earlier. Source: Department of Labor. termined by dividing hourly compensation by output per hour. Effects of increases in wages and salaries and other labor compensation are thus offset by any increases in the productivity of workers. Although real compensation tends to follow productivity gains (Chapter 3), nominal compensation typically increases at a higher rate than productivity, raising unit labor costs and contributing to inflation. Unit labor costs continued to rise in 1991, but at a much slower rate than in recent years. Through the first three quarters of 1991, unit labor costs increased at an annual rate of only 2.3 percent, as labor compensation rose at a 3.4-percent rate and productivity increased at about a 1-percent rate. This compares favorably to the 6-percent rise in unit labor costs in 1990, and the 4% percent average annual increase during the 1980s. Price changes during 1991 were affected primarily by the declines in energy prices from their peak in the fall of 1990; the slowdown in labor markets, money growth, and the economy in general also helped keep inflation pressures low. Still, some longer run trends continued in 1991 as prices for consumer services rose faster than those for consumer goods. During 1991 services prices rose 4.6 percent, compared with a 1.2-percent rise for consumer goods. In 68 particular, the cost of medical care services continued to soar, rising 7.9 percent. SUMMARY • Inflation in 1991 was relatively low, partly as a result of lower oil prices, but also as a result of several years of slow money growth, slack labor markets, and excess capacity in many industries. • Inflation is expected to remain relatively low in the coming years. FISCAL POLICY Fiscal policy comprises the spending, tax, borrowing, and credit activities of the Federal Government. The Administration supports a responsible growth-oriented fiscal policy. The Omnibus Budget Reconciliation Act of 1990 established spending constraints that will help reduce the medium-term structural budget deficit—that is, the deficit excluding the cyclical component of expenditures and revenues. (Chapter 7 discusses budget concepts.) In fiscal 1991 total Federal outlays were $1,323 trillion and Federal receipts were $1,054 trillion, yielding a Federal budget deficit of $269 billion. As a percent of GDP, receipts were 18.7 percent, outlays were 23.5 percent, and the deficit was 4.8 percent. In comparison, in fiscal 1990 the deficit was $220 billion, or 4 percent of GDP. The rise in the deficit reflects a number of factors. As an economy dips into recession, income tax receipts fall and outlays for some programs rise, even without any legislated changes in the programs. Such automatic stabilizers are an important element of systematic fiscal policy since they cushion the fall in the economy, preventing further contraction. On balance, for example, the automatic stabilizers offset other factors in fiscal 1991, leaving the overall stance of Federal fiscal policy slightly stimulative. Usually late in a recession or early in a recovery, tax cuts or an increase in discretionary fiscal spending increases the structural budget deficit, providing notably more stimulus than the automatic stabilizers alone. In contrast, between fiscal 1990 and fiscal 1991, the structural budget deficit, excluding outlays for deposit insurance, changed little. It is important to note that the deficit has been boosted by a temporary bulge in deposit insurance outlays, which exceeded 1 percent of GDP in fiscal 1991. It is widely accepted that the actual timing of outlays and borrowing to protect insured depositors has little impact on credit markets, interest rates, and the economy. So the component of the deficit due to deposit insurance—about $66 69 billion, or roughly one-quarter of the deficit in fiscal 1991—does not represent fiscal stimulus. For fiscal 1992, outlays are projected to be $1,475 trillion, receipts $1,076 trillion, and the deficit $399 billion, or 6.8 percent of GDP. Excluding deposit insurance outlays, projected to be about $80 billion, the projected deficit would be 5.5 percent of GDP. The projected increase in the deficit from fiscal 1991 reflects both the effect of automatic stabilizers and discretionary stimulus from an increase in the short-term structural deficit. Growth Agenda The President has presented a comprehensive and coordinated growth agenda for the Nation. The agenda includes fiscal and other measures that will stimulate the economy in the short run, address the structural imbalances, and promote the Nation's long-term growth. The agenda focuses directly on increasing economic growth. The short-term agenda includes executive actions and proposed legislation that will stimulate economic growth immediately. Executive actions with immediate impact include the reduction in excessive personal income tax withholding and acceleration of previously appropriated Federal spending. Reinvigorated action to reduce the burden of unnecessary regulation and prudent measures to reduce the credit crunch will improve the environment for growth now. Proposed legislation for a 15-percent tax allowance and simplified and liberalized treatment of depreciation under the alternative minimum tax will spur job-creating investment. Penalty-free withdrawal from individual retirement accounts and a $5,000 tax credit for first-time homebuyers along with other incentives will boost real estate. The President has repeatedly proposed reducing the tax rate on capital gains; the first effect of such a reduction would be to raise asset values, bolstering confidence and spending. There also are proposals to assist families. These include an increase in the tax exemption for each child, a new flexible individual retirement account, and student loan interest deductions. The incentives for first-time homebuyers mentioned above will encourage homeownership—one of the most important ingredients to family financial and social well-being. Comprehensive health reform will increase the affordability and security of health insurance. Bolstering the short-term agenda are proposals for the long term that invest in the Nation's future by increasing the productivity of people and business. Record Federal investment in research and development and infrastructure, and the extension of the research and experimentation tax credit will help generate new technologies that enhance productivity and employment growth. The Administration also has advocated making the research and experimentation 70 tax credit a permanent part of the tax code. Record Federal investment in Head Start will prepare all eligible disadvantaged 4-yearolds for effective learning when they start school. Record Federal investment in programs for children and education will improve the opportunities for today's youth when they enter the labor market in the future. Record Federal investment in programs designed to deal directly with the crime and drug problems will, in combination with other programs, move many of those from this subculture into socially productive activity. The comprehensive job-training program will help millions of Americans to acquire the skills necessary to succeed in the changing labor market. A number of Administration proposals aimed at improving economic performance await congressional action. Education reform through America 2000 will revolutionize education, strengthen accountability, and improve performance. Financial sector reform will strengthen the financial system, improve its ability to contribute to business growth, and sustain international competitiveness. Civil justice reform will curb wasteful litigation and enhance productive activity. The National Energy Strategy will increase energy security and conservation. The long-term growth agenda also includes continued efforts to expand international markets through multilateral, regional, and bilateral negotiations. The proposed cut in the capital gains tax rate is an important element of the long-term growth agenda. The capital gains tax rate cut would encourage entrepreneurial activity, create new products, new methods of production, and new businesses. These, in turn, would generate new jobs. A capital gains differential would reduce the tax bias against equity financing and the overall cost of capital, thereby increasing investment and growth. The Administration also has supported a zero capital gains tax rate for areas designated as Enterprise Zones to spur investment and encourage entrepreneurial activity in inner cities and rural areas. Fiscal discipline has been a centerpiece of all of this Administration's budgets. The Administration's proposals are designed to foster long-term growth by encouraging saving, investment, and entrepreneurship. Controlling the growth of government spending and deficits frees resources for private investment. This is but one part of a more comprehensive fiscal program that, within proposed spending categories, also shifts spending from current consumption to investment (such as expenditures for research and development and investments in public infrastructure that pass cost-benefit tests). SUMMARY • Federal fiscal policy typically provides a significant stimulus to the economy during recessions and early recovery periods. 71 From 1990 to 1991, automatic stabilizers offset other factors, leaving fiscal policy slightly stimulative. Federal fiscal stimulus is projected to be stronger in fiscal 1992, but still within the constraints of the Omnibus Budget Reconciliation Act. • The prompt enactment of the Administration's pro-growth policy proposals will boost the economy in the short run and will enhance productivity, investment, and economic growth in the long run. DEVELOPMENTS OUTSIDE THE UNITED STATES The increase in U.S. exports, noted above, was one of the important factors that kept the recession from being more severe. Exports have been aided by the exchange value of the dollar, which has fluctuated within a fairly narrow range since the significant depreciation between 1985 and 1987. During 1990 and 1991, however, several of our major trading partners were in recession—among them Canada and the United Kingdom—or, more recently, periods of slower growth—such as Germany and Japan. These developments have reduced growth in demand for U.S. exports. BUSINESS CYCLE DEVELOPMENTS ABROAD In Canada, the United States' largest trading partner, GDP began to fall in the second quarter of 1990, two quarters before the decline in output in the United States. The recession in Canada was more severe than in the United States, with GDP falling 2.8 percent from the first quarter of 1990 through the first quarter of 1991. Growth rebounded to a 5.7-percent annual rate in the second quarter of 1991, but activity has fallen back to a more sluggish pace in recent months. The United Kingdom also fell into recession before the United States and experienced a more severe downturn. Real GDP in the United Kingdom fell 1.2 percent in 1990 and remained on a downward course during the first half of 1991. Activity picked up around midyear, but the economy still was sluggish. French GDP fell a bit late in 1990, and recovery was subdued during 1991. The cyclical experiences of Japan and Germany were quite different. While most of the industrial world experienced slow growth in 1989 and early 1990, Japan and Germany registered rather robust growth, which continued into early 1991. More recently, however, activity has begun to slow in Germany. The costs of unification, the pent-up demand for consumer goods by citizens who live in the former East Germany, and the one-for-one conversion of the East German mark all contributed to inflationary pressures. In response, the Bundesbank tightened monetary policy and growth slowed; this tightening has had repercussions for the other econo 72 mies in Western Europe. Japan's gross national product grew solidly in 1990 and the first quarter of 1991 but has slowed since. The reduced pace of activity in Japan largely reflects the lagged effects of a tightening of monetary policy in 1989 and 1990. About one-quarter of U.S. merchandise exports go to Latin America and the newly industrialized countries of Asia. The economic reform programs in Mexico and in a number of other Latin American countries have started to result in solid growth for them as well as expanded exports for the United States. The newly industrialized countries of Asia continue to register strong growth, and the share of U.S. exports going to these countries increased from less than 8 percent in 1985 to more than 10 percent in 1990. INFLATION, MONETARY POLICY, AND INTEREST RATES ABROAD Like the United States, other major industrial countries have sought to reduce inflation in recent years by following tight monetary policies. These policies have had substantial effects on output and employment. During 1991, the combination of slack demand for funds, lower expectations regarding inflation, and an easing of monetary policy led to declines in interest rates in a number of countries, including Japan, Canada, and the United Kingdom. The experience of Germany has been different. The strains of unification have led to budget deficits, higher consumer price inflation, and increased wage pressures. After substantial upward movement in 1989-90, interest rates in Germany remained on a high plateau through most of 1991, with long-term government bonds yielding above 8 percent and short-term securities more than 9 percent. Continued wage and price pressures induced the Bundesbank to raise key official short-term rates again in December 1991, and the Lombard rate—the interest rate the Bundesbank charges banks for short-term borrowing—hit a historical peak. The operation of the exchange-rate mechanism—an agreement among European countries aimed at keeping exchange rates among European currencies relatively stable—combined with the high degree of capital mobility within the European Monetary System required central banks in some other European countries to limit monetary easing (particularly in the United Kingdom, and also in France). In other countries, central banks raised their rates in line with Germany (most notably the Netherlands and Belgium). This linkage of monetary policies has been a major reason why many countries in Europe are in recession or growing slowly. The dollar appreciated about 15 percent (on a trade-weighted basis) in the first half of 1991 but returned back to beginning-ofyear levels over the last half of the year. During 1991 as a whole, the dollar appreciated moderately against most European curren 73 cies, while it depreciated about 7% percent against the Japanese yen. The dollar was appreciating against European currencies at the beginning of 1992. Developments in the major foreign stock markets mirrored those in the United States early in 1991; stock indexes surged from midJanuary to April with the resolution of the Middle East crisis. After April, most foreign stock markets experienced little movement, on balance. The major exception was Japan, where the Nikkei index fell about 15 percent between March and December after falling even more sharply in 1990. EXTERNAL ACCOUNTS While economic activity in both Japan and Germany was slowing, their external accounts were behaving quite differently. Following declines in 1989 and 1990, Japan's external surplus rose in 1991; these movements largely reflected developments in the exchange value of the yen and changes in the prices of exports relative to imports. In contrast, Germany's external balance moved sharply into deficit. Most of the movements in the German accounts can be traced to unification, which resulted in a shift in resources from exports to internal reconstruction and a spillover of higher domestic demands onto imports. Indeed, the shift in the external balance from surplus to deficit in Germany was on the same order of magnitude as the large and rapid shift that occurred in the United States in the early to mid-1980s. Such a change in the external balance of one of the world's traditional surplus nations provided stimulus for Germany's trading partners and was a factor elevating world longterm interest rates higher than they otherwise would have been. SUMMARY • Many of the Nation's trading partners recently experienced slower growth or recessions. • Tighter monetary policies in many major industrialized countries have helped to reduce inflation pressures, but also have contributed to lower real growth. THE ECONOMIC OUTLOOK The Administration projects that the economy is likely to remain sluggish in the early part of 1992 but that a renewed pickup is likely to begin by the middle of the year. With the adoption of the President's policy proposals, the economy is then expected to return to solid real GDP growth of about 3 percent a year through the mid-1990s, and the unemployment rate is expected to decline from around 7 percent to less than 5 V2 percent. 74 The sluggish performance of the economy and the declines in consumer and business confidence at the end of 1991 all point to a continued slow economy in the early part of 1992. Various recent developments, however, indicate a resumption of stronger growth in the middle of the year. The cuts in interest rates in the second half of 1991 are expected to support gains in consumer and business spending by the middle of 1992. Relatively low interest rates also should help households and businesses reduce debt-servicing costs and improve their financial positions. The improvement in personal finances would help boost consumer confidence and encourage growth in consumer spending. Declines in long-term interest rates should continue to have positive effects on investment spending; low mortgage rates, in particular, should help to boost residential investment. Business inventories remain relatively lean. As a result, production likely will respond quickly to meet increases in demand, and a sustained increase in demand would encourage businesses to rebuild inventories. The relatively low exchange value of the dollar and growth in the world economy should help to promote continued export growth. Economic forecasting is an imprecise science, however. Unexpected events and policy changes can cause actual events to be substantially different from the forecast. Forecasts are based largely on predictions about human behavior, usually taking 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. Hence, uncertainty remains about the outlook for the economy. If the problems the economy has been facing are resolved relatively quickly and confidence is restored, growth could rise faster than is expected. The relatively low rate of inflation combined with the large degree of slack in the economy is particularly noteworthy, for it could allow the Federal Reserve to keep interest rates low—or cut them further, if necessary—to help boost growth with little immediate concern about reintroducing inflation pressures. A quick shift to a significant rebuilding of inventories alone could add as much as a percentage point to the rate of growth over the next year. Alternatively, if the problems are resolved slowly, the economy could perform worse than expected. Tight credit and slow money growth, along with the continuing structural adjustments described earlier could continue to hinder the economy. Under those conditions confidence could remain low, and the rate of growth likely would be lower than expected. 75 THE PRESIDENT'S POLICIES OR BUSINESS AS USUAL With the adoption of the President's pro-growth proposals as outlined in the State of the Union address and presented in detail in the budget, the prospects for renewed solid growth improve markedly. The policy forecast in Table 2-3 shows the expected course of the economy given the adoption of the pro-growth policies. The President's proposals will inspire confidence and provide a stimulus to the economy in the short run, boosting output, income, and employment. The productivity-enhancing nature of the proposals will also improve the economic outlook in future years. If the President's policy proposals are not adopted relatively promptly, however, and a "business-as-usual" situation persists in determining Federal spending and tax policies, the economy is expected to perform worse than projected, as indicated by the business-as-usual forecast. TABLE 2-3.—Administration Forecasts 1991 Item 1994 1993 1992 1995 1997 1996 Percent change, fourth quarter to fourth quarter POLICY FORECAST Real GDP 0.2 2.2 3.0 3.0 3.0 2.9 2.8 GDP deflator, 1 9 8 7 - 1 0 0 3.2 3.2 3.4 3.3 3.3 3.2 3.2 Consumer price index 2.9 3.1 3.3 3.2 3.2 3.2 3.1 Calendar year average, percent Unemployment rate Interest bills rate, 91-day Treasury Interest rate, notes 10-year Treasury Civilian employment 6.7 6.9 6.5 6.1 5.8 5.4 5.3 5.4 4.1 4.9 5.3 5.3 5.2 5.1 7.9 7.0 6.9 6.7 6.6 6.6 6.6 116.8 117.4 119.6 121.7 123.7 125.8 127.8 Percent change, fourth quarter to fourth quarter BUSINESS AS USUAL FORECAST Real GDP 2.4 2.5 2.4 6.3 5.8 5.6 5.5 5.5 5.4 5.3 7.1 7.0 7.0 6.9 0.2 1.6 6.7 7.1 6.9 6.7 5.4 4.2 5.1 7.9 7.2 7.3 2.5 2.6 Calendar year average, percent Unemployment rate Interest bills rate, 91-day Treasury Interest rate, notes 10-year Treasury Sources: Council of Economic Advisers, Department of Commerce, Department of Labor, Department of the Treasury, and Office of Management and Budget. With the President's pro-growth policies, the Administration expects real GDP to increase 2.2 percent from the fourth quarter of 1991 to the fourth quarter of 1992. This represents a significant improvement from the 0.2-percent growth during 1991 and the 0.1-percent decline during 1990. Inflation in 1992 should be only slightly higher than in 1991. The relatively low inflation pressures in 1991 partly were a result of the fall in oil prices from their peak in 76 late 1990. But several years of slow money growth and a slow economy, which eased tightness in labor markets and created excess capacity in many industries, also kept inflation pressures down. In 1993 real growth is expected to be even stronger than in 1992—at about a 3-percent rate—as the economy continues to rebound from the recession and the sluggish growth over the 1989-91 period. The President's policies will also improve the outlook in labor markets, and the unemployment rate is expected to fall from about 6.9 percent in 1992 to 6.1 percent in 1994. Interest rates are expected to fall in 1992 from 1991, reflecting the sluggish economy and the low level of interest rates at the end of 1991. As the expansion becomes more robust, however, short-term interest rates are expected to rise somewhat through 1995 before declining slightly in 1996 and 1997. Long-term interest rates are expected to fall gradually through 1995 and then flatten out, reflecting continued, relatively low inflation and lower uncertainty about fiscal policy and the economic outlook. Under the business-as-usual projection, real growth in 1992 would likely be around 1.6 percent, well below the rate that would be achieved with the adoption of the President's policy proposals. The period of slow growth that has existed since early 1989 would likely continue in 1992. By 1993 business-as-usual growth picks up some, but remains more than a half percentage point below policy growth. The differences in real growth in the policy and business-as-usual forecasts persist beyond the short-term outlook because of the productivity-enhancing nature of the President's proposals. In the policy forecast, real growth in the 3-percent range continues through the mid-1990s. With business-as-usual, growth averages only in the 2.5-percent range. ACCOUNTING FOR GROWTH IN THE LONGER TERM In the longer term the main determinants 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 GDP growth into four components: (1) labor force growth, that is, 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, or the growth in the amount of goods and services that can be produced with an hour of labor. Table 2-4 shows the contribution of these various factors in average real GDP growth for various periods. The first three columns provide historical comparisons for periods from business-cycle peak to business-cycle peak. The final column shows the contributions 77 for the period incorporating the historical performance since the recent business cycle peak (in the third quarter of 1990) along with the policy forecast period. Economic growth is projected to average 2.2 percent a year from the business cycle peak in 1990 through the end of the forecast in 1997. TABLE 2-4.—Accounting for Growth in Real GDP, 1960-97 [Average annual percent change] 1960 II to 1981 III Item 1973 IV to 1981 III 1981 I to 1990 I GROWTH IN: 1) Civilian noninstitutional population aged 16 and over 2) PLUS: Civilian labor force participation rate... 1990 III to 1997 IV 0.9 .2 2.1 -.1 2.4 -.4 1.1 .0 2.0 .1 2.0 .1 1.2 -.0 EQUALS: Nonfarm business employment PLUS: Average weekly hours (nonfarm business sector) EQUALS: Hours of all persons (nonfarm business) PLUS: Output per hour (productivity, nonfarm business) 2.1 -.6 2.1 -.7 11) EQUALS: Nonfarm business output 12) LESS: Nonfarm business output as a share of real GDP2 13) EQUALS: Real GDP 3.3 .1 3.2 3) EQUALS: Civilian labor force 4) PLUS: Civilian employment rate 5) EQUALS: Civilian employment 6) PLUS: Nonfarm business employment as a share of civilian employment1 7) 8) 9) 10) 2.1 .0 1.2 .0 2.1 1.2 1.4 1.9 _ 2 2.9 .2 2.6 .4 2.1 2.7 2.2 1 2 Line six translates the civilian employment growth rate into the nonfarm business employment growth rate. Line 12 translates nonfarm business output back into output for all sectors, or GDP, which includes the output of farms and general government. Note.—Data may not add due to rounding. Time periods 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. This projection assumes an average rise of 1.1 percent a year in the labor force over the 1990-97 period, a lower growth rate than during the 1980s. Slower labor force growth results from smaller increases in projected labor force participation rates and from slower growth in the working-age population. Although the labor force is assumed to grow 1.3 percent a year in the forecast, the low growth of the labor force that occurred in late 1990 and in 1991 pulls down the average for the entire period. Decreases in the unemployment rate from the third quarter of 1990 through the end of the forecast are expected to contribute only slightly, on average, each year to real GDP growth. The largest contribution from a falling unemployment rate occurs in the 1992-94 period. As the economy nears full employment, increases in employment make smaller contributions. A key assumption underlying the average 2.2-percent growth rate is that labor productivity growth will average 1.4 percent a year. After 1992, assuming the Administration's pro-growth initiatives are adopted, underlying economic growth is expected to approach 3 percent and labor productivity growth is projected to be about 1.6 percent. That is very close to the average rate of produc 78 tivity growth since 1959. It is below the 2.4-percent rate from 1959 to 1969, but above the average rate for the 1980s. This rise in labor productivity will be facilitated by the higher level of capital accumulation that results from lower real interest rates, lower Federal borrowing as a percent of GDP, and the productivity-enhancing components of the President's proposals. SUMMARY • The economy is expected to remain sluggish in early 1992, but a renewed pickup should occur by midyear. The prompt enactment of the President's proposals would boost the economy in the short run and promote higher growth in the long run. • However, if the President's proposals are not adopted promptly and a "business-as-usual" environment prevails, growth in the economy will be lower in both the short and long run. • In the long run, the President's proposals will promote higher private capital accumulation and faster productivity growth. The economy's underlying medium-term growth potential is expected to be about 3 percent a year. Inflation and nominal interest rates are projected to rise slightly in the short run, but then fall gradually thereafter. CONCLUSION Following a year and a half of slow growth, the Nation's economy entered a recession in the second half of 1990. In the late spring of 1991, the economy began to recover. However, the recovery lost momentum in mid-summer, and by the end of the year the economy was sluggish at best. It is natural to point to the oil shock and the resulting decline in confidence as the reason the economy fell into recession. However, growth in the economy already had been slowed by a number of structural imbalances and the lagged effects of tight monetary policy in earlier years. The flat economy at the end of 1991 was evidence that the structural imbalances in the economy were larger and taking longer to work off than had been expected. Growth is expected to remain sluggish in the early part of 1992. By midyear, however, the economy is expected to improve. The prompt enactment of the President's pro-growth proposals announced in the State of the Union address will spur economic recovery and promote long-term investment and growth, as well as improve the Nation's competitive position in global markets. Over the longer term, the Omnibus Budget Reconciliation Act establishes discipline to lower the multiyear structural Federal deficit and therefore, Federal borrowing requirements. Combined with a monetary policy aimed at maintaining solid economic growth 79 while gradually reducing the underlying inflation rate, both nominal and real interest rates are likely to remain relatively low. Credible monetary policy and growth-oriented fiscal policy will facilitate higher levels of capital accumulation, raise labor productivity and thereby real wages, and enhance the economy's growth potential. 80 CHAPTER 3 The American Labor Market A SLUGGISH ECONOMY GENERALLY draws attention to short-run labor market conditions that affect the economic wellbeing of American workers and their families. Concern is naturally focused on the decline in job prospects and the increase in unemployment brought about by recession. Yet, longer run trends that underlie these shorter run events have profound importance as well. Although a temporary spell of unemployment disrupts a worker's earnings for weeks or months, the creation of job opportunities and the growth in real wages over a person's career determine the standard of living over his or her lifetime. Chapter 2 discussed the current cyclical situation. This chapter reviews the longer run developments. Despite the temporary setbacks of several recessions, employment increased by 38 million, from 71 million in 1971 to 109 million in 1991. This 53-percent growth far surpassed that of most other major industrialized countries. Employment in Japan increased only half as fast; employment in France, Germany, and the United Kingdom grew at less than one-fifth the U.S. rate. The U.S. economy not only provided employment for an extra 38 million workers, it also delivered improved opportunities in the labor market. The average wage level, adjusted for inflation, rose by 18 percent from 1971 to 1990 (the most recent year for which statistics are available). To put this performance of the U.S. economy in expanding labor market opportunities in perspective, consider an extreme example of a rapid increase in the supply of workers. Imagine that suddenly tomorrow, with each 100 workers, 53 companions showed up at the factory, office, or farm. It is obvious that the economy would be hard pressed to employ those workers and that such an abrupt enlargement in the supply of workers would exert a strong downward pressure on wages. In the course of the actual process of adjustment to the changing market, a gradual but significant shift toward high-skilled jobs has taken place. The evolutionary shift toward service sector employment and the restructuring within all industries in response to technological change has favored workers with more years of schooling. This trend is most evident in the real wage increase of 81 better educated and more experienced workers, despite the sizable increase in the supply of workers with these attributes. Women have benefited from changes in the workplace. Since the late 1940s women have been entering the labor market in increasing numbers and now account for 46 percent of civilian employment. Women's job prospects have improved as they have attained more years of schooling and more work experience. As a result, their unemployment rates fell to the same levels as men's, they moved into traditionally male-dominated occupations, and their wages grew faster than men's wages. Accompanying these long-term positive trends in the labor market were some troubling developments. Perhaps reflecting the magnitude of the task of absorbing such a large number of new workers, average real wages have grown, on average, less than 1 percent a year since 1973. Real wages of successive age cohorts of low-skilled workers—particularly young men with a high school education or less—have actually declined. The slower rate of growth in average real wages is tied to the slower growth of labor productivity. Many factors have contributed to the productivity slowdown, in particular the reduced growth rate of capital per worker. Unless productivity increases at a faster rate, real wage growth will remain modest, and the rate of advance in living standards will fall below the robust pace that Americans enjoyed in the quarter century after World War II. EMPLOYMENT GROWTH Over the long-term, despite the temporary setbacks of several recessions, the U.S. economy has demonstrated great capacity to provide jobs to an increasing percentage of the population. Significant shifts in demand and supply accompanied this growth in jobs. Technology and product changes increased demand for more educated workers, while the strong demographic forces of the babyboom generation and changing preferences of workers regarding work and schooling drove much of the change in supply. CHANGES IN LABOR DEMAND The steady increase in the demand for more educated and more skilled workers has been a dominant force in the U.S. labor market during the last two decades. The increase in the supply of collegeeducated men and women kept pace with demand throughout most of the 1970s. During the 1980s, though, demand outstripped the rising supply, as evidenced by the increasingly higher wage premium for college-educated workers. Two structural changes account for most of the demand for more educated workers. First, changing preferences and demography, as 82 well as increased international trade, led to relative changes in the demand for different products and services. Second, and more importantly in recent years, changes in technology within industries favored people who could master complex technologies and learn new methods quickly. Changes in Product Demand Changes in product demand have been reflected in the expansion of industries that employ a higher-than-average proportion of college-educated workers and a contraction in industries that tend to hire a proportionally higher number of high-school-educated workers. Contraction in the share of the Nation's output of mining, an industry in which the percentage of workers without college education is high, has diminished the demand for workers with less formal schooling. Manufacturing is another industrial sector that has traditionally employed less educated workers. Manufacturing employment has been declining as a share of total employment at least since World War II. In contrast with mining, however, the share of manufacturing in total U.S. output has been virtually constant. Thus, the decline in manufacturing employment does not portend the deindustrialization of the U.S. economy. It reflects rather the productivity gains that have been achieved in this industrial sector. The most significant expansions in demand for college-educated workers have occurred in finance, various government sectors, and professional services. The health care sector, which employs a high proportion of college-educated workers, provides a striking example. The aging of the population, advances in medical technology, and a general increase in demand commensurate with rising incomes have increased the health care sector's share of output from 7 percent to 12 percent between 1970 and 1989. Its share in employment doubled from 4 percent to 8 percent. Occupations in health care and similar sectors place a high value on cognitive and interpersonal skills. These skills are acquired primarily through formal education, and recent studies show that they are highly correlated with years of schooling. Therefore, as employment shifts to the service-producing sectors, demand for workers with more formal education increases. Occupations with high concentrations of college-educated workers have typically grown faster than occupations with less educated workers. Managerial and professional specialty occupations, which are found primarily in the professional services sectors, have the highest average level of education of the major occupation groups. Sixty-one percent of the people holding these jobs had 4 or more years of college—more than twice the average for all occupations. Between 1983 and 1991, the number of these jobs grew nearly twice 83 as fast as total employment. In contrast, jobs in the occupational classification of operators, fabricators, and laborers, which are typically filled by workers with low educational attainment and located primarily in manufacturing, grew about half as fast as total employment. Technological Change Technological changes that have brought about internal restructuring within industries and firms have also increased the demand for workers with greater educational attainment, particularly in the 1980s. The most extensive restructuring in favor of more educated workers occurred in retail trade, government, and professional and financial services. Manufacturing, which 20 years ago had the least educated work force among industrial sectors, has hired increasing proportions of college-educated workers. In 1988, for example, 45 percent of all workers in high-skill manufacturing industries had a college education, up from 28 percent in 1968. Lowskill manufacturing firms have nearly doubled the percentage of such workers in their work forces, from 9 percent to 17 percent. Computer technology has extensively changed the nature of the workplace and the operations of firms. In 1984, 8 percent of businesses reported using personal computers. By 1989 that figure had climbed to 36 percent. Proficiency in operating computers has become a requisite for an increasing number of jobs, from secretaries to production-line workers. This proficiency is linked to increased years of schooling; college-educated workers are twice as likely to use computers as are workers with only high school degrees. Another development has been the shift away from material handling to information handling. Within manufacturing, the input of knowledge, rather than the input of material, accounts for an increasing share of the value added in the production process. The cost of the material content, such as the steel and plastic used in the manufacture of an automobile, for example, has steadily declined relative to the price of the automobile. Instead, the price increasingly incorporates the cost of knowledge embedded in features of the automobile and the production process: the car's advanced design, including the use of computer-aided engineering, the substitution of computer-controlled devices for mechanically controlled devices used in the operation of the vehicle, and the use of robotics in the assembly of the automobile. Consequently, the demand for people with the ability to work with and process knowledge and information, rather than with physical inputs, has increased. CHANGES IN LABOR SUPPLY Changes in labor supply have been propelled by demographic changes, as the post-World War II baby-boom generation has 84 moved through the labor force, and by changes in people's choices regarding work and school. During the 1970s a large portion of the baby-boom generation began entering the labor force. By the 1980s, most of this generation had reached working age, and many had moved toward the midpoints of their careers. Consequently, the growth of the working-age population slowed considerably, and the labor force gradually aged and gained more work experience. At the same time, the percentage of the working-age population employed increased sharply. Chart 3-1 shows this rising ratio of employment to working-age population during the 1980s. Also displayed is a decline in the average number of hours worked. Between 1965 and 1982, average annual hours worked fell by about 10 percent, from 1,977 hours to 1,772 hours. This trend occurred even though the length of the average work week of full-time employees remained constant at roughly 43 hours. Chart 3-1 Employment-to-Population Ratio and Hours Worked per Worker Since the early 1980s, the percentage of the working-age population employed has grown. Hours worked per worker fell from 1965 to 1982 but have remained roughly constant since. Hours Ratio 0.68 2,050 Annual Hours Worked Per Worker 2,000 Employment-toPopulation Ratio (left scale) 0.66 (right scale) 1,950 0.64 1,900 0.62 1,850 0.60 1,800 1,750 I I I I I I I 0.58 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 Note: Population refers to people 16 years and older. Sources: Council of Economic Advisers and Department of Labor. Most of the decline in average hours worked is explained by an increase in part-time workers. The fraction of the labor force that worked part time rose from 18 percent in 1965 to 25 percent in 1982, and then declined to 21 percent by 1990. The majority of workers holding part-time, rather than full-time, jobs do so by choice. Many people choose this work option to maintain flexible 85 work schedules. Nonetheless, in recent years about 40 percent of part-time workers surveyed say they would prefer full-time jobs. Women in the Work Force The increasing participation of women in the work force accounts for the upward trend in the employment-to-working-age population ratio. Since the late 1940s, when about 31 percent of working-age women were employed, women have accounted for 60 percent of the increase in employment. In 1991, 54 percent of all working-age women and 70 percent of all working-age men were employed. The fraction of men in the labor market has been steady in recent years. Women's increased presence in the work force is related to changes in social norms and behavior, which gained momentum during the 1960s and continued throughout the 1980s. Women found increasingly greater acceptance in jobs that were more career oriented and higher paying than the jobs they typically filled during the 1950s and 1960s. Even in the relatively short period between 1983 and 1989, for example, the proportion of working women holding traditionally male-dominated managerial and professional specialty jobs increased from 22 percent to 26 percent. Roughly the same percentage of working women now hold these jobs as do working men. The increase in the number of working women is also associated with changes in American families. Women are marrying at an older age, divorce rates are up, and a greater percentage of married women are working outside the home. The proportion of families maintained by women increased from 11 percent in 1970 to about 17 percent in 1990. As women's attachment to the labor force has increased and they have acquired more years of schooling, their labor market performance has increasingly resembled that of men's. One noticeable change in recent years has been the convergence of men's and women's unemployment rates. Throughout most of the post-World War II period, women had higher unemployment rates than men, as shown in Chart 3-2. In 1980, however, women's unemployment rates began to match those of men, and they have remained virtually the same since that time. As discussed in a subsequent section, women's wages have increased relative to men's during the last decade, even as the relative supply of working women has increased. Married women have been steadily increasing their participation in the labor market since at least 1970, when data first became available. The proportion of married women in the paid work force rose from 39 percent in 1970 to 50 percent in 1980 and 58 percent in 1990. The increase in both the number and percentage of married women working was larger in the 1970s than in the 1980s. The 86 Chart 3-2 Unemployment Rates By Gender After exceeding the unemployment rate of men for most of the post-World War II era, the unemployment rate of women has converged with that of men. Percent 12 10 Women I 1948 1952 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 1956 1960 1964 1968 1972 1976 1980 1984 1988 Source: Department of Labor. common thread through this period is the sizable increase in real wages earned by wives in most income brackets. As the real wages available to them increased, the cost (in the form of wages forgone) of working on an unpaid basis in the home increased. Diversity in Worker Characteristics Like the U.S. population as a whole, the U.S. labor market is a melting pot of different races, nationalities, and ethnic groups. Categorizing the rich diversity of the work force into simple groups is very difficult, and possibly misleading, but it is useful to focus in particular on the progress of black, white, and Hispanic men and women. Each group has increased its participation in the labor market during the last several decades, but some groups have fared better than others, as market conditions and educational and employment opportunities have changed. In 1990 blacks accounted for 11 percent of the civilian labor force, Hispanics accounted for 8 percent, and whites accounted for 86 percent. (These percentages add to more than 100, because the Census Bureau also identifies people of Hispanic origin by race.) Since 1980 the labor force shares of both blacks and Hispanics have increased, from 10 percent to 11 percent for blacks and from 6 percent to 8 percent for Hispanics. 87 In 1990, 64 percent of the white population was employed, compared with 56 percent of the black population and 62 percent of the Hispanic population. These rates were higher in 1990 than in 1980 for all these groups. Unemployment rates also varied, with whites experiencing the lowest rate at 6.3 percent, as of December 1991. The rate for Hispanics stood at 9.7 percent, and the rate for blacks was 12.7 percent. Although the rates have changed over the course of business cycles, the ordering has typically remained the same. The flow of immigrants into the United States continues to add to the size and diversity of the labor force. More than 6 million people were admitted into the country in the 1980s, more than in any other decade since the early 1900s. Nearly a million immigrants from Mexico were admitted, and more than 2V2 million from Asian countries, principally, Vietnam, China, India, Korea, and the Philippines. More than a third of the immigrants were the spouses or children of U.S. citizens or alien residents. Immigrants typically have had less schooling than the average U.S. citizen and thus have added disproportionately to the supply of less educated workers. Recent immigration laws have favored admitting a greater number of highly skilled people into the country. Although the entry of immigrants raises the supply of labor, particularly that of lower skilled workers, studies provide no conclusive evidence of whether and by how much immigration has affected employment or earnings of other U.S. workers. One recent careful study concluded that immigration had a negligible effect on the employment status of less-skilled native workers and reduced their wage rates by only a fraction of 1 percent. Moreover, numerous studies suggest that the long-run benefits of immigration greatly exceed any short-run costs. The unskilled jobs taken by immigrants in years past have often complemented the skilled jobs typically filled by the native-born population, increasing employment and income for the population as a whole. Educational Attainment The labor force has become more educated over the last 20 years. Chart 3-3 shows that the proportion of workers in the labor force with 4 or more years of college has more than doubled since 1970. That means that the number of workers with college education has grown by more than 18 million since 1970. The growth in educational attainment for women has exceeded that of men. The proportion of women who have completed 4 or more years of college grew from 4 percent in 1970 to 11 percent in 1991, while the proportion of college-educated men increased from 10 percent to 15 percent. The rate of increase for men slowed during the latter half of the 1980s, while the rate for women grew at about the same pace throughout the entire period. Although a greater proportion of male workers have college educations than female workers, the difference fell by more than half from 1980 to 1990. Chart 3-3 Percentage of Civilian Labor Force With 4 or More Years of College The educational attainment of both men and women in the labor force has increased over the last two decades. Percentage 30 25 Total with 4 or More Years of College 20 Men with 4 or More Years of College 15 10 Women with 4 or More Years of College i I i I i I I I I I I I i 1970 1972 1974 1976 1978 1980 1982 Note: Data unavailable for 1988, percentages extrapolated. Sources: Council of Economic Advisers and Department of Labor. I I 1984 i I 1986 i I 1988 I 1990 The proportion of black workers who had completed 4 or more years of college rose from 11 percent in 1980 to 16 percent in 1989. The proportion of white workers with college educations increased from 23 percent to 27 percent. Educational attainment of Hispanic workers has also risen. The proportion of Hispanic workers who had completed high school increased from 33 percent in 1970 to 51 percent in 1989. The proportion having completed 4 or more years of college climbed from 5 percent to 10 percent during the same period. These proportions are lower than for blacks or whites: In 1989, 65 percent of black workers and 78 percent of white workers had completed 4 years of high school. SUMMARY • Employment grew during the last two decades at rates that far surpassed those of other major industrialized countries. • The proportion of whites, blacks, and Hispanics working in the paid labor force increased during the last decade. • Employment increasingly favored workers with high levels of skills. The work force, in general, became more educated, as 89 the percentage of black, white, and Hispanic workers who had completed college increased. • Women have entered the work force at a faster rate than men as a result of changing social norms and improving job prospects. Through greater educational attainment and work experience, women made considerable gains, both in absolute terms and relative to men. PRODUCTIVITY TRENDS The key to each worker's well-being and the Nation's prosperity is productivity growth. An increase in the Nation's standard of living, commonly measured as output per person, depends upon three factors: a greater percentage of the population employed, an increase in average hours worked, and greater labor productivity— output per hour worked. The historical trend in the United States has been toward a rising rate of participation in the labor market and lower hours per worker. Labor productivity has also grown historically, although its low rate of advance in the last two decades is a matter of great concern. Long-term advances in labor productivity and employment have provided the United States with the highest standard of living in the world. Based on the commonly used measure of gross domestic product (GDP), the U.S. economy produced, on average, $45,918 worth of goods and services per worker in 1990, or $22,056 per capita. GDP per person in the United States was 25 percent above Japan and 35 percent above Germany. Another way to measure the relative prosperity of U.S. workers is to compare their purchasing power—the amount of goods and services that workers can purchase per hour worked. American workers have greater purchasing power than workers in most other major industrialized countries, although the leadership gap has narrowed. The variation in hours worked per worker and in the fraction of the labor force in paid employment is limited. Therefore, long-run advances in living standards depend upon continuing improvements in productivity. Even a modest annual growth rate in productivity, compounded over a long time, can make a very large difference. Growth of 2 percent maintained over 50 years would generate an increase in annual output per worker from the current level of $45,918 to $123,592 in today's dollars. A seemingly small increase in growth rates, similarly maintained over years, can have large consequences. A growth rate of 2.5 percent, instead of 2 percent, would raise output per worker to almost $160,000 after 50 years. 90 THE HISTORICAL RECORD OF PRODUCTIVITY GROWTH Chart 3-4 pieces together a century-long path of average U.S. labor productivity in the private business sector. The vertical axis of this graph uses a "ratio scale," which means that equal vertical distances correspond to equal percentage changes in labor productivity. The slope of the line, therefore, corresponds to the percentage growth rate of productivity; a constant upward slope implies a constant annual percentage rate of growth of productivity. Chart 3-4 Historical Growth in Labor Productivity Labor productivity has increased steadily over the past century. Productivity growth has slowed in recent years. Index, 1929=100 (ratio scale) 500 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 Note: Labor productivity is private business sector GDP per hour. Percentages are average annual rates of change for periods indicated. Sources: Council of Economic Advisers, Department of Labor, and National Bureau of Economic Research. The long-term upward trend in labor productivity is clearly visible. Other, more subtle patterns are also seen: the downtick associated with the depression of the 1930s, the upward spurt in measured productivity during World War II, and the downturn of the postwar recession. Laying a ruler on the graph, though, one is tempted to see three historical epochs: from 1889 to 1937, when productivity growth averaged 1.9 percent a year; from 1937 to 1973, when productivity grew 3.0 percent a year; and the period since 1973, when productivity growth averaged 0.9 percent a year. A qualitatively similar picture to this one characterizes the record for most other industrialized countries as well—long-term growth, with middle-level growth before the 1930s Depression, rela 91 tively high growth coming out of the Depression and World War II, and relatively low growth starting in the early 1970s. This suggests that factors common to all countries, rather than factors specific to any one country, underlie these trends. Looking at labor productivity over the last century, some economists contend that the slowdown in recent years should not necessarily be viewed as an historical aberration. Rather, the high growth rates from the late 1930s to the early 1970s may well be the exception, not only for the United States, but for all countries. Proponents of this view attribute the historically high average growth rate between 1937 and 1973 to a backlog of ideas and technology that went unused and investment projects that were postponed during the depression and World War II. In addition, new wartime technologies were developed that were eventually adopted for peacetime use. When the war ended, many products incorporating these new technologies were developed and produced. Pent-up consumer demand and the rebuilding of the economies of Europe and Japan also created a tremendous demand for investment in new factories and equipment. According to this view, as the surge in new investment slowed and the backlog of new ideas was depleted, growth rates in these countries slowed. CAUSES OF THE SLOWDOWN IN PRODUCTIVITY GROWTH Although many factors have contributed to the recent slowdown in productivity growth, most researchers look to three broad classes of explanations: a reduced rate of capital accumulation, a change in the rate of technological advance, and a reduced rate of improvement in the skill levels of the labor force. Government policies can have important effects on these determinants and hence on productivity growth. Capital Accumulation The notion of capital represents an attempt to capture the productive facilities with which an economy is equipped. These facilities are of a great variety—examples range from the storage tanks and pumps at the local gas station to a highly sophisticated complex for manufacturing microprocessing chips for personal computers. In a private enterprise economy, most capital is put in place by people who bear the risk of success or failure of the investments. Growth in capital per worker is, over long periods of time, closely associated with productivity growth. From 1959 to 1973, for example, capital per worker grew by 2.4 percent a year in the private business sector, while productivity in that sector grew by 2.8 percent. From 1973 to 1989, capital per worker grew at 0.8 percent annually and annual productivity growth was 0.9 percent. 92 According to generally accepted economic analysis, a higher level of capital per worker should support a higher level of output per worker. A rough rule of thumb is that a 1-percentage-point higher level of capital per worker should lead to between a quarter and a third of a percentage point higher level of productivity. Such a static view of capital may well understate the effect of the process of increasing the amount of capital per worker. The new investment required for such "capital deepening" is often the method for introducing new technology that contributes to the productivity of existing facilities. New investment may also foster learning by doing; in putting new equipment in place, companies discover new ways of doing things that make their further investments more productive. These hypotheses are consistent with studies that find a high correlation between investment rates and rates of productivity growth in different countries. Among major industrialized countries, the United States had the lowest investment rate and the lowest rate of productivity growth in recent decades. According to a recent OECD survey, U.S. gross investment as a fraction of gross national product averaged 19 percent in 1971-80, and 18 percent in 1981-89; the corresponding figure for Japan was 29 percent. Between 1950 and 1979, the United States had the lowest rate of growth of capital per worker among the "group of seven" industrial countries (the others being Canada, France, Germany, Italy, Japan, and the United Kingdom). In 1979 the U.S. capital stock was estimated to be 73 percent older than Japan's. A major suspect in the slowdown of U.S. productivity growth is thus to be found not in the labor markets but in the capital markets. To raise the rate of productivity growth, the national rate of investment should be increased. The Administration has stressed the need to encourage investment through numerous avenues of policy, including measures to reduce the tax bias against saving and investment. Capital formation is also a principal reason the Administration insists on maintaining budgetary discipline. Expanded government borrowing diverts saving from private investment that leads to higher productivity growth. Innovation The pace of innovation, or technological change, is also an important determinant of productivity growth. No number of barns or buggies could support today's standard of living. New methods of production, new products, new modes of organization, and new possibilities for communication have been essential to increased growth and have been forthcoming in remarkable degree. The rate of technological advance is difficult to measure quantitatively, other than by reference to productivity change that cannot be ex 93 plained by measurable changes in inputs such as physical capital and labor. Innovation requires the commitment of resources to development of new products and processes and to institutional change (for example, the intricately coordinated overnight delivery systems that have become part of everyday business life in the United States). Government can help make the most of opportunities to innovate in a wide variety of ways, from supporting basic scientific research to ensuring that tax laws do not discourage innovation. Government has a particular role in encouraging innovation in areas where private investors find it difficult to capture the full benefits of new knowledge. The patent protection afforded an invention permits an inventor to require payments from users and hence to capture some of the benefits. But the innovation may convey an idea to another inventor, who is thereby able to create further benefits, an effect not captured by the original patent. For this reason, the Administration has favored tax policies that encourage innovation broadly. It has also proposed increased government support for basic and applied civilian research that has widespread benefits exceeding costs and from which the returns are not fully appropriable by the private firms that might undertake the research. Labor Force Quality Improvement in the "quality" of the labor force, that is, in the productive abilities of individual workers, is the third major contributor to advances in productivity. The term "human capital" refers to the stock of knowledge and skills possessed by workers and is sometimes used to express the analogy with the stock of facilities discussed above. Economists generally agree that the stock of human capital is an immensely important source of an economy's productive power. All else being equal, higher levels of schooling in the population would be expected to lead to higher levels of output per worker. Productive skills are not perfectly correlated with years of classroom education, however. The quality and relevance of instruction are significant factors. Moreover, one of the concerns in recent years is how well the educational system prepares students for the demands of the workplace. The Administration has made improvements in the Nation's educational system a high priority, as described in the last section of this chapter. SUMMARY • Advances in labor productivity and employment have provided the United States with the highest standard of living in the world. 94 • In the United States, as in many other industrialized countries, labor productivity growth during the last 20 years has slowed. • A slowdown in the rate of capital accumulation is one of several factors contributing to the slower productivity advance. REAL WAGE GROWTH Workers' earnings are closely linked to their productivity: In a competitive market economy, a worker will tend to be paid an amount equal to the contribution he or she makes to the value of the employer's output. For the economy as a whole, therefore, real wage growth is related to the growth of productivity. For individual workers, real wages differ according to worker characteristics and are affected by shifts in overall supply of and demand for these characteristics. AGGREGATE REAL WAGE GROWTH Various statistical measures of payments to workers are available, all of which track productivity trends closely. A comprehensive measure would include wages and fringe benefits and cover all workers in the economy. One of the measures that comes closest to meeting these criteria is compiled by the Bureau of Labor Statistics and includes payroll employees and the self-employed. Aggregate real hourly compensation is derived by dividing total compensation by hours worked by all employed people and adjusting for inflation using an improved version of the consumer price index, CPI-U-X1 (Chapter 7). Chart 3-5 shows that although the year-to-year changes are sometimes small or negative, long-term wage growth has been significant. The average real hourly compensation of workers in the U.S. economy has increased 69 percent since 1959 and 11 percent since 1973. The slowdown in real wage growth since 1973 primarily reflects the sharp reduction in productivity growth, which collapsed between 1973 and 1981, and rebounded only modestly between 1981 and 1990. The relationship between labor productivity and aggregate real hourly compensation in the private business sector is seen by comparing their growth rates over time. From 1959 to 1973, labor productivity grew at an average annual rate of 2.8 percent, while real hourly compensation grew 2.9 percent. After 1973 labor productivity grew at an annual average rate of 0.9 percent, while real hourly compensation grew at 0.7 percent. Similar patterns occurred in U.S. manufacturing. Most other major industrialized countries displayed similar relationships. In Japan's manufacturing sector, for example, productiv 95 Chart 3-5 Real Hourly Compensation, 1959-1990 Total compensation per hour has increased since 1959. Its rate of growth has slowed since 1973. 14.00 - 12.00 - 10.00 - 8.00 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 Note: Compensation deflated by CPI-U-X1. Source: Council of Economic Advisers and Department of Labor. ity grew at an average annual rate of 10.6 percent and real hourly compensation grew by 8.2 percent a year from 1959 to 1973. After 1973 annual productivity growth averaged 4.4 percent and real hourly compensation growth averaged 2.1 percent. Changes in the attributes—particularly educational attainment and experience—of the work force have a significant effect on the change in aggregate wage measures. To demonstrate the effect of an increase in both schooling and experience (approximated by age) on real earnings growth, consider what would have happened to the average level of real earnings if the composition of the work force had remained the same in 1990 as it was in 1975. If yearround, full-time workers had maintained the same gender, age, and schooling structure in 1990 as in 1975, and the gender-, age- and educational-specific earnings levels were those prevailing in 1990, average real earnings would have been 8 percent lower than they actually were. Thus, changes in the composition of the work force can have a sizable effect on the growth of average real wages over time. 96 WORKER CHARACTERISTICS AND WAGE LEVELS While aggregate real wage measures reveal the progress of the nation's work force as a whole, they do not identify the progress of any one group of workers, and they do not show how successive age cohorts of workers have fared. An age cohort refers to all workers born in the same period. Earnings Growth Over a Worker's Career The typical relationship between real earnings and age is that earnings rise steeply during the first part of a worker's career, level off in the middle years, and decline in the last years before retirement. Earnings generally increase faster in the earlier stages of a person's career—in part because training is usually concentrated in the first few years of a person's career, and, consequently, skills and knowledge accumulate at a faster rate for younger workers. The average pattern of earnings growth over a person's career can be approximated by following workers of the same cohort over time. Consider, for example, the group of men who in 1980 were between the ages of 25 and 34, who had completed 4 years of college, and who worked full time year round. To see how their earnings changed in 10 years, one looks at the group of workers in 1990 with the same characteristics, except that they are 35 to 44 years old. As shown in Chart 3-6, average annual real earnings of these men increased 42 percent, from $33,370 in 1980 to $47,401 in 1990. These numbers refer only to earnings and thus omit other forms of compensation. Including only year-round, full-time workers implicitly adjusts for much of the variation in the number of hours worked between these groups or within groups over time. These real wage increases not only reflect the long expansion of the 1980s, but also the generally rapid increase in wages that workers typically obtain during the early years of their careers. The same relatively large increase is observed for college-educated men who were 25 to 34 years old in 1975. Average real earnings for this cohort of men were 36 percent higher in 1985 than in 1975. As expected from the typical age-earnings profile, real earnings growth was slower for older men than for younger men. Average real earnings grew 11 percent between 1980 and 1990 for the group of men with 4 years of college aged 35 to 44 in 1980. Men in these age groups typically have at least 10 years more experience than workers who have embarked on their careers around the age of 25. Thus, even though general economic conditions were the same for all workers, real earnings growth for the various age cohorts differed because they were moving through different stages of their lifetime careers. 97 Chart 3-6 Earnings Growth Early in Male Workers' Careers Average real earnings for male workers grew between 1980 and 1990. Earnings growth was larger for those with higher educational attainment. 1990 dollars /u,uuu 60,000 | 1980, 25-34 Year Old Workers H 1990, 35-44 Year Old Workers 58,542 50,000 - 47,401 I 40,000 1 37,333 33,370 30,000 - 20,000 28,9 Us - \ 10,000 n High School Dropout 4 Years of High School 4 Years of College 1 J 5+ Years of College Note: Data based on year-round, full-time workers. Dollar values deflated by CPI-U-X1. Sources: Council of Economic Advisers and Department of Commerce. Studies indicate that the proportionate rise in earnings in the first 20-25 years of workers7 careers is similar for all education groups. The actual earnings growth of a particular group of workers results from the combined effect of more work experience, more training, developments in the labor market, and capital formation. The demand shift favoring more highly educated workers is evident in relatively higher wage growth from 1980 to 1990 for workers with more years of schooling (Chart 3-6). The chart also shows that the cohort of young men with low levels of education achieved low real earnings growth between 1980 and 1990. For less educated workers, developments in the labor market counterbalanced the wage-increasing effect of experience, resulting in a more modest rise in earnings. Young and middle-aged women with each level of educational attainment achieved even more marked relative increases, although women's average annual earnings were lower than men's. As was the case for men, increased earnings were most marked for the highly educated women. 98 Earnings Growth from One Cohort to the Next Chart 3-7 shows how the experience of successive cohorts has varied. Growth in average earnings by successive age cohorts of young men has varied by educational attainment. The chart shows a general, but uneven, rise from 1975 to 1990 in average earnings of successive cohorts of men with at least 4 years of college. The chart also shows a deterioration of average earnings of successive cohorts of less educated young men. For older men the pattern is less pronounced. Chart 3-7 Earnings of Cohorts of Young Men, 1975-1990 Average real earnings for 25-34 year old men grew only for workers with higher educational attainment. 20,000 - 10,000 High School Dropout 4 Years of High School 4 Years of College 5+ Years of College Note: Data based on year-round, full-time workers. Dollar values deflated by CPI-U-X1. Sources: Council of Economic Advisers and Department of Commerce. A similar pattern holds for successive cohorts of women, in all age categories. Average earnings levels rise little or decline for the less educated. Average earnings levels rise for the more educated. The common element for all cohort-education groups is the general increase in productivity. The relatively better wage growth experienced by the more highly educated groups is consistent with the previously discussed shift in demand for high-skill jobs. SUMMARY • Aggregate real wages have grown by 69 percent since 1959 and by about 11 percent since 1973. Slower labor productivity 99 growth during the last two decades slowed the growth in average real wages. • Tracking workers within specific age cohorts over time reveals that most cohorts of young and middle-aged workers, men and women at all education levels, experienced increases in average real wages during the 1980s. • The increase in average wages achieved in the early years of their careers was higher for workers with greater years of schooling. • The average real wage of successive age cohorts of better educated men and women generally increased between 1975 and 1990, while wages of less educated workers declined. WAGE DISPERSION AND MARKET FORCES The shifting pattern of earnings growth for workers with different attributes has been one of the notable labor market developments in recent decades. Studies have shown that, for workers as a whole, the result has been some tendency toward equality in wage levels in the lower half of the earnings distribution, and a widening of the spread of earnings in the upper half of the distribution. When the earnings of men are considered separately, a tendency to greater dispersion is observed for the entire distribution. A growing spread between the earnings of those with college degrees and those with high-school or lesser levels of education is particularly noticeable. Even within groups of workers with similar years of schooling and experience, however, the wage dispersion increased, suggesting an increasing role of differences in work skills not attributable to the broad measures of years of experience or schooling. WAGE PREMIUMS FOR EDUCATION Educational attainment is one of the primary characteristics that distinguishes high-income from low-income workers. The wage gap between workers with a college education and those with only a high school education began to widen at about the same time that the general increase in wage dispersion began during the late 1970s. As shown in Chart 3-8, the income (which consists predominately of labor earnings) of men with 4 years of college rose after 1979 relative to the income of men with only 4 years of high school. Before then, the income premium for college-educated workers actually had declined slightly. The income premium for women, based on the same differences in schooling, has followed the same trend since 1979 and is noticeably higher than for men. The earnings premium for college-educated workers over the last two decades is consistent with a steadily increasing demand in the 100 Chart 3-8 Ratio of Median Incomes of College- to High-School-Educated Workers The premium for an advanced education has increased for both men and women since 1979. 1.60 - 1.40 - 1.20 - 1.00 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 Note: Ratio of median income of people who have completed 4 or more years of college to median income of people who have completed 4 years of high school. Source: Department of Commerce. market for their skills. The proportion of the labor force with college educations increased from 14 percent to 22 percent between 1970 and 1980. As shown in Chart 3-8, the college premium was nearly constant this period. By 1990 the proportion of the labor force with college education had risen to 27 percent. The college premium rose significantly in the 1980s. The current wage premium paid to college-educated workers should serve as an incentive for high school students to go to college. A recent study indicated that young people base decisions about college enrollment in part on their expectations of higher future earnings. This study also suggested that the increased wage gap between college and high school graduates has induced a significant number of students to enter or continue with college. WAGES OF WOMEN After remaining constant for most of the 1960s and 1970s, the difference between women's and men's earnings narrowed during the 1980s. Between 1980 and 1990, the median earnings for yearround, full-time female workers rose from 60 percent to 72 percent of the corresponding figure for men. The increase is particularly notable in light of the increased supply of female workers. In 101 creased education was an important factor in the narrowing of the wage differential. The female-to-male earnings ratio for college-educated workers is higher than that of high-school-educated workers. In 1990 the ratio was 84 percent for college-educated workers between the ages of 25-34, compared with a ratio of 73 percent for highschool-educated workers. Increase in labor force experience was also a key factor in narrowing the wage gap. Over their careers, many women enter and leave employment as they assume family or other responsibilities. As a result, women have tended to acquire fewer years of experience than men over a fixed period of time. In recent years, however, women have spent longer sustained periods employed and have accumulated more training and job experience. This increased experience has paid off as women have entered traditionally male-dominated, higher-paying occupations in increasing numbers. Consequently, the income growth over women's careers during the 1980s appears to be much closer to that of men in the same cohort than was true for earlier cohorts of workers. This trend can be seen by examining the change over time in the ratio of male worker income to female worker income for different cohorts of workers. Table 3-1 shows that the income ratio fell over 10 years for workers who were between the ages of 25 and 34 in 1970. The ratio for workers in this age cohort was 65 percent in 1970 and 56 percent in 1980—when the group was 10 years older. That means that women did not maintain their earnings position relative to men as they grew older. TABLE 3-1.—Ratio of Women's Income to Men's Income (Percent) Year Age Groups 1970 25-34 65 35-44 ... 1990 1980 69 56 69 Note.— Data are median annual income of year-round, full-time workers. Source: Department of Commerce. The age cohort that was between the ages of 25 and 34 in 1980 started out with an income ratio (69 percent) that was slightly higher than the rate for the previous cohort in 1970 (65 percent). But unlike the earlier cohort, the ratio stayed the same (69 percent) in 1990. Thus, women's age-earnings paths were comparable to men's during the 1980s. WAGES OF BLACK WORKERS In 1990 the median annual earnings of black men 25 years or older working year round, full time were 72 percent of the median annual 102 earnings of comparable white workers. For women 25 years or older working year round, full time, the ratio was 91 percent. A recent study has shown that these ratios have remained relatively constant through the 1980s. From 1963 to 1980, the earnings of black male and black female workers rose relative to comparable white workers. The black-white wage differential is affected by several factors. One factor is the relative reduction in employment in industries that have traditionally employed a proportionately higher number of black workers receiving relatively high wages. Another factor has been the diminished employment opportunities in some central cities and regions of the country with a high concentration of the black population. Furthermore, the shift in demand to high-skill jobs disproportionately affected blacks, whose educational attainment, while improving, still lags behind that of whites. Many studies document that discrimination in the labor market also contributes to wage and employment differentials. The Administration strongly opposes discrimination. SUMMARY • Median income of college-educated workers, both men and women, rose relative to high-school-educated workers in the 1980s. • As women gained greater work experience and more schooling and made inroads into traditionally higher paying, male-dominated occupations, the difference in wages between men and women narrowed during the last decade. • The difference in wages between white and black workers stayed roughly the same during the 1980s. While educational attainment improved for both black and white workers, there was still an educational gap, which contributed to the earnings differential. UNEMPLOYMENT Workers voluntarily leaving their jobs to find other jobs or people entering or reentering the labor force sometimes experience spells of unemployment. Involuntary unemployment occurs when a worker is laid off or dismissed. During the last business cycle, the proportion of the unemployed who lost their jobs involuntarily fluctuated between 45 and 60 percent, depending upon economic conditions. During the latter half of 1991, for example, when the economy was sluggish, about half of the unemployed had involuntarily lost their jobs. For statistical purposes, everyone over 16 years of age who is either employed, actively searching for employment, or awaiting recall from a lay-off is considered part of the labor force. Estimates 103 of the number of people in each of these categories are obtained by surveying a random sample of the population each month. Those interviewed are asked whether they worked in the week prior to the survey, and if not, whether they were on layoff or were searching for work. The unemployment rate is defined as the number of people in the labor force who are not working divided by the number of people in the labor force. Analysts sometimes extend the category of the unemployed to include "discouraged workers." Discouraged workers are those people who say they want a job but have stopped looking because they do not think they can find one. Because such people are not actively searching for employment, they are not technically defined as being in the labor force and therefore are not included in the standard unemployment measure. In the fourth quarter of 1991, just over 1 million people were counted as discouraged workers, about one-eighth the number of people who were officially recorded as unemployed. Manufacturing employment is very sensitive to swings in aggregate demand. Mass production techniques, standardized products, and the durable nature of most goods produced in the manufacturing sector permit companies to stockpile items to ensure a ready supply for customers. At times, manufacturing companies respond to rising inventories by cutting back production. The usual practice is for companies to reduce their employment for short periods of time until inventories are drawn down to the desired level. Service jobs, on the other hand, are more oriented toward performing tasks on demand. By their nature, services cannot be stored. They usually are performed at the time the customer requests assistance. Although people may postpone some services when the economy softens, service sector employment does not exhibit the wide swings that characterize the manufacturing sector. Service workers are less likely than manufacturing workers to become unemployed during an economic downturn. To speak of "economic downturn" may give a misleading impression of the nature of much unemployment. Although many workers can reasonably expect to be recalled when general business conditions improve, many others are permanently laid off and their jobs abolished. Such dislocations can occur in good times as well as bad, and they may affect entire regions. A commonly cited example is the historical movement of the shoe and textile industries from New England to the South. These industrial shifts can affect skilled as well as unskilled workers. Nor are the changes necessarily wholly unexpected. Present projections of Federal Government defense expenditure imply substantial job dislocation over the coming years for many highly trained engineers and others em- 104 ployed in the defense industries, as well as for those entering the civilian labor force from the armed services. Dislocated workers face special problems, particularly if they have been employed in a job that has involved developing knowledge and skills specific to a particular employer. Their reemployment may require moving to another geographical location and acquiring new training. As discussed in a later section, government programs can play a role in facilitating such transitions. Workers with more classroom education often possess knowledge that is more general and can be applied to a variety of jobs, and thus they may find it easier to switch employers. The significantly lower unemployment rate for people with college education is consistent with this point (Chart 3-9). The unemployment rate for college graduates is typically one-quarter the rate for people with less than a high school degree. Chart 3-9 Unemployment Rate By Educational Attainment, 1990 Unemployment rates are lower among people with higher levels of education. Percent 12 10 8 6 4 2 ;• 12.4 12.1 ^ -- O• H 2.3 n MEN I High School Dropout | 4 Years of High School 2.5 WOMEN 4 or more Years of College Source: Department of Labor. The 1990-91 slump hit white-collar, highly educated workers harder than past downturns had. Particularly affected were workers in the financial and retail sectors. In contrast, during the 198082 recessionary period, employment in these sectors, as well as in the service industries, continued to climb, despite a substantial fall in the economy-wide number of jobs. Unemployment rose among white-collar workers in 1990-91, but lower skilled production work 105 ers suffered not only higher unemployment rates, but also larger increases in unemployment. Educational attainment and job security still go together. UNEMPLOYMENT INSURANCE Since 1935 States have administered an unemployment insurance (UI) program that provides financial assistance for workers who have lost their jobs through no fault of their own. Virtually all workers who receive wages or salaries are included in the program. The UI system is financed by Federal and State taxes placed on employers based on the size of their payroll. Each State also establishes its own tax base that funds regular unemployment insurance benefits, as well as 50 percent of extended benefits (described in the next section). The magnitude of the State tax varies across States and across firms. The Federal tax funds the administration of the UI program, the other half of the permanent extended benefits programs, and a loan account. Most States base the amount of weekly benefit on a formula that compensates the unemployed worker for some percentage of his or her full-time weekly wage. Benefit levels vary among States but average roughly 35 percent of the unemployed worker's earnings. Eligibility criteria also differ across States. In general, a worker must have lost the job through no fault of his or her own, have sufficient job tenure, and be free from disqualification for any of a variety of reasons spelled out by State law. A worker can continue to receive benefits for a specified time period as long as he or she is looking for a job, is available and able to work, and has not refused to accept a "suitable" job. Unwillingness to accept available suitable work can lead to disqualification from benefits for a specified period of time, determined by each State's codes. The financing structure of the unemployment insurance program levies higher tax rates on companies with histories of sizable layoffs. This tax system, known as experience rating, places much of the cost of the system on those firms (and indirectly on their employees through lower wages, their customers through higher prices, and their suppliers through reduced demand). Every State institutes a maximum and minimum rate that can be levied on a firm. The ceiling may prevent a firm with a history of extensive layoffs from being taxed the full cost of the benefits to its laid-off employees. In that case, the firm is subsidized by other firms whose relatively low layoff experience warrants a tax rate below the minimum allowed by law. Studies have shown that this arrangement provides firms in volatile industries with an incentive to hire more workers than they otherwise would, while expecting each worker to spend more time on temporary layoff because their UI benefits are subsidized by firms in more stable sectors. 106 EXTENDED BENEFIT PROGRAMS The UI program provides benefits to eligible workers for up to 26 weeks in most States, which is usually sufficient time for the majority of unemployed workers to find new jobs. Median duration of unemployment has typically been between 5 and 8 weeks since 1968, when records began to be kept. Even during the depths of the 1980-82 recessionary period, the median duration never rose above 13 weeks. In December 1991 it stood at 8 weeks. Some people, of course, have much more difficulty finding reemployment than others. During economic slowdowns or recessions, more jobs are eliminated than created, making jobs harder to find. Immediately following the 1981-82 recession, 25 percent of the unemployed had been without work for more than 27 weeks. In December 1991, 17 percent of the unemployed had been without work for more than 27 weeks. Workers who do not find jobs within the regular 26-week benefit period are currently covered by two extended benefits programs. A permanent program, established in 1970, provides up to 13 additional weeks of benefits to those workers in States that have particularly high unemployment rates. Workers are eligible for extended benefits under the permanent program if their State's insured unemployment rate is higher than a statutorily specified level. The insured unemployment rate is different from the commonly publicized total unemployment rate and is almost always lower (Box 3-1). Few States qualified for extended benefits under the permanent program in 1991, even though labor market conditions worsened in most of them. An emergency unemployment compensation program was enacted in the fall of 1991, which provided additional benefits to many of those who had exhausted regular UI benefits during the recession but had not found work. Extended benefits are designed to assist people financially during particularly arduous times. Economists have observed, however, that extending benefits also tends to delay reemployment. Estimates from recent studies, which examined the job search experience during the 1980-82 recessionary period, suggest that an additional week of extended benefits will increase the expected duration of the unemployment spell up to half a week. Evidence also shows that extending benefits reduces the likelihood that workers will make a switch to industries other than the one in which they were previously employed. Further evidence of the effects of extended benefits comes from those countries with relatively high unemployment experience. The United States has the shortest period of benefits and one of the lowest long-term unemployment rates, defined as the percentage of people who remain jobless for more than 12 months. Belgium has both the longest period of extended benefits and the highest long 107 Box 3-1.—Total and Insured Unemployment Rates Recent discussion regarding extended unemployment benefits has drawn attention to the difference between two measures of a State's unemployment conditions: the total unemployment rate and the insured unemployment rate. The total rate, the standard measure of unemployment, is defined as the total number of unemployed divided by the total labor force. The insured rate is defined as the number of people who are receiving unemployment insurance (UI) divided by the number of workers covered by the program. Until the fall of 1991, the sole criterion for a State qualifying for extended benefits was the level of the State's insured rate. The emergency unemployment compensation program enacted in November 1991 uses either the insured rate, adjusted for those who have exhausted regular UI benefits, or the total rate to determine which States are eligible for various periods of extended benefits. More than 90 percent of those employed are covered by UI. Excluded from covered employment are primarily the self-employed and some agricultural and household workers. Insured unemployment tends to be around 40 percent of total unemployment. Most of the disparity between the two rates stems from those who are not eligible for UI benefits but are considered unemployed: new entrants into the labor force, reentrants, those who quit voluntarily, and those who have exhausted regular UI benefits. A secondary source of difference is those who are unemployed and eligible to draw UI benefits but do not apply to do so. As a result, the insured rate and the total rate may give two different pictures of the economic conditions in a State. In August 1991, for example, Michigan's insured rate was 3.2 percent, while its total unemployment rate stood at 8.7 percent. West Virginia's total rate of 10.5 percent was the highest in the nation, but its insured rate was only 3.8 percent. term unemployment rate among the major industrial countriesits rate is nearly eight times that of the United States. The correlation between long-term unemployment rates and long benefit periods holds when comparing many other countries. Extending unemployment insurance benefits can be a critical addition to the Nation's social safety net. Ways should be sought, however, to mitigate any associated disincentives to either accept employment or take advantage of reemployment services. These serv- 108 ices include job training, job search assistance, and relocation assistance. Some economists have proposed that training be linked directly to the UI program. Another option to get people back to work, currently being tested and developed in two states, offers UI recipients the opportunity to receive their benefit entitlement in a lump-sum payment as seed capital after they have started their own businesses. The program also provides training and assigns a business development counselor to each participant. This program puts people back to work and creates businesses at a time the economy needs such a stimulus. Although these projects have not been under way long enough to measure their success, experience with similar programs in Europe shows that they can provide the opportunity for some unemployed to become self-employed. SUMMARY • The unemployment insurance program provides financial assistance for workers who have lost their jobs through no fault of their own. • The Emergency Unemployment Compensation program was enacted in November 1991 to extend benefits to those workers who have exhausted their regular UI benefits. ENHANCING WORKER SKILLS The wage gap between high-skilled and low-skilled workers has been growing. Low-skilled workers are more likely to work only part time and are more frequently unemployed. Workers at every level must possess skills that match the challenges of new technologies and more complex work environments. Even skilled workers must be prepared to move into other jobs as changing market conditions favor some industries at the expense of others. How best to train people to meet the changing needs of the workplace is not easily resolved. Some firms provide extensive training, but most formal teaching of basic cognitive skills is left to institutions outside the workplace. Formal education can provide people with a stock of skills applicable to many different jobs. The increasing divergence in wages among people with various levels of educational attainment and the greater job security that comes with more schooling conveys a clear signal to America's youth that employers value education. Greater involvement of the private sector, both employers and employees, in the educational system would help students transfer their skills and knowledge from school to the workplace. Businesses have the most immediate knowledge concerning the skills that people need to be productive workers. Cooperation between busi 109 nesses and schools would help close the gap between the education schools provide and the skills businesses need in their employees. Demand often outstrips supply for high-skilled workers. Even during the present sluggish state of the economy, manufacturers have reported shortages in skilled positions, such as technicians and technical professionals. One response to persistent shortages and high wages of skilled workers is to structure the workplace to accommodate the low-skill worker, for example, by developing routine procedures or using computers to simplify calculations workers might have to make. Such arrangements provide useful employment to presently low-skilled workers. To raise those workers' long-term prospects more significantly, their skills must be enhanced through education and training. Defining jobs narrowly and making each job relatively easy to learn served the U.S. economy well when mass production was so prevalent and successful. In that system, a small group of technical and sales specialists did the thinking and planning, while the workers followed orders and carried out routine tasks quickly and efficiently. Today's workplace is increasingly one in which workers at all levels share responsibilities for day-to-day decisions. Work becomes technically more complex, and more cognitive skills and interpersonal skills are required. Retraining displaced workers poses particularly difficult problems. Many of these workers have considerable work experience; returning to the classroom and taking several years to complete a course of training is difficult at that stage in their careers. The present institutional structure of the educational system, in which most substantive training is performed away from the job, precludes such workers from pursuing this route. The current Economic Dislocation and Worker Adjustment Assistance program, enacted in 1988, is more successful than previous job-training programs for displaced workers precisely because it is more flexible and geared to early intervention. Another major Federal program designed to improve the economic well-being of workers is the job opportunities and basic skills training program (JOBS). Under the JOBS program, families receiving assistance from the aid to families with dependent children program can also obtain education, training, and employment needed to help them avoid long-term welfare dependency. The Administration has recently announced a major program, Job Training 2000, to reform the Nation's job-training and vocational education system so that workers are better prepared for the future demands of the global marketplace. These initiatives target three groups: new labor force entrants who need basic education and job training, people who currently rely on public assistance, and displaced workers who seek jobs and placement assistance. The 110 reform proposal simplifies and better coordinates more than 60 existing Federal programs and services, encourages greater and more effective private sector involvement in training and placement programs, and creates a flexible training system that provides the skills needed in local labor markets (Box 3-2). Box 3-2.—Job uses market-based The Job system* Hie approaches to initiative eoixstste reforming vocational training, fact welfare to work, to work. The nucleus and improving the more than 600 busiof the vocational tr lished by the Congress ness-led private industry J business and publicly in the late 1970s to supported job-training would run skills cenUnder the new progr ters, which would function ag the primary points of entry into federally funded job^rainitjg aiid vocational education programs. These centers would provide skills assessment and testing, referral services, labor market information, job-training placement assistance, m\4 "0^0^$ programs. Hie councils would also administer training vouchers and incentive grants to help ensure that vocational sdKKrfs and training centers are offering the most relevant skills to students. Job Training 2000 calls for private sector welfare-to-work demonstration projects that allow States to use private and nonprofit firms to provide baaic training and job placement for welfare recipients. These firms would function in a manner similar to a temporary employment agency but would not receive full payment for their services until after the worker has been permanently placed and hM a Job for some period of time. The reform proposal also establishes a youth apprenticeship program in which students in the 11th and 12th grades may choose a structured combination of academic instruction, class* room training, paid on-the-job training and work experience, and mentoring. Successful apprentices would receive a high school diploma or associate degree, a certificate attesting to their skill competencies and qualifications, and employment. The effort to ensure that America's future workers have the skills they need must begin even before formal schooling. The Administration has recently proposed increased funding for the Head Start program, which helps prepare preschool children from low Ill income families for elementary school. The main responsibility for schooling resides with the States and localities, where the funds and decisions about education originate and where the solutions are best found. The Administration's America 2000, discussed in last year's Report, lays out a long-range educational reform strategy for the Nation. Its goals have already been adopted by more than half the States and put in place in more than 1,000 communities across the country. The Administration encourages communities to adopt programs that will allow parents and students the greatest latitude in choosing the school and curriculum that best meets their needs and preferences. Opening the educational system to choice will stimulate institutions to seek innovative ways to educate the workers of tomorrow. SUMMARY • The changing nature of the workplace has put greater demands on the U.S. educational system. Skills that were once sufficient to command high wages are no longer adequate, as occupational restructuring within U.S. industries favors highskill workers. • The Administration's Job Training 2000 initiative to reform job training and vocational education is designed to encourage greater and more effective involvement of business in training a highly skilled work force. • The Administration's education reform initiative, America 2000, strives to provide every American with the basic skills necessary to be a productive worker. CONCLUSION Over the past two decades, despite the temporary setback of several recessions, the U.S. labor market has been flexible, dynamic, and resilient enough to provide nearly 40 million additional jobs, a percentage increase far surpassing that of most other major industrialized countries. Over the same period, average real wages rose 18 percent. Although the earning power of workers in this country has improved over the last two decades, it has done so at a slower pace than during the first 25 years after World War II. The primary reason for the slower wage growth has been the slower growth of productivity. While many factors contributed to the slower growth of productivity, and hence real wages, a major factor has been the slower growth in capital per worker. This reflects developments in both capital and labor markets. 112 Ample evidence supports the view that investment in technology development and in the skills and knowledge of workers also raises productivity growth. In recent years, the worker characteristic most conducive to higher earnings has been higher levels of education. The Administration is committed to the goal of increased economic well-being for all Americans. The fundamental key is raising the earning power of American workers. This in turn will require greater capital formation, enhanced technology, and more and better job training and education. While much of this is the responsibility of the private sector and of State and local governments, the Federal Government has an important role to play as well. The Administration's entire domestic policy agenda should be understood as addressing the objective of economic progress. Initiatives designed to modernize the financial system, ensure energy security, improve the civil justice system, and reduce the scourge of crime and drugs, each in its own way, will contribute to the future earning power of American workers. More directly, the Administration has taken the lead in developing a school reform strategy that will improve the quality of education and an improved job training program that will give millions of American workers the skills necessary for success in the labor market. A variety of fiscal and other initiatives designed to increase private investment and saving, spur entrepreneurship and innovation, and expand federal investment in technology development and infrastructure will ensure that American workers are equipped with the best possible capital to enhance their productivity. 113 CHAPTER 4 Government and the Level and Distribution of Income INCOME FOR THE TYPICAL family has risen substantially over the past several decades. Rapid productivity growth and other factors fueled strong income growth from the late 1940s through the late 1960s. Since then, slower productivity growth and shifting demographic patterns have reduced the rate of income growth. Nevertheless, the typical family in 1990 received about $4,100 more in income after adjusting for inflation than the typical family did in 1970. Average incomes for families in each fifth, or quintile, of the income distribution have increased. Income growth, however, has been uneven for different segments of the population, and the distribution of income has gradually grown more dispersed since the mid-1960s. Trends in the level and distribution of income are closely related and are affected by a variety of factors. The primary source of income for most families is labor earnings. Thus, the primary causes of the continued long-run increase in family income are the long-term increase in productivity, and hence in wages, the historic growth in employment, and related labor market factors. Changes in the distribution of wages and in employment patterns have also had important effects on the distribution of income. The level of overall economic activity affects the incomes of families in each part of the income distribution. Sustained long-term economic growth has been the most effective and durable way to raise the income of families. Demographic patterns also have substantial effects on the level and distribution of income. The average number of people per family has fallen significantly over the past three decades, and single-parent families are much more prevalent now than they were in the 1960s. The level and structure of government taxes and transfers have important effects on the level, structure, and growth rate of overall economic activity. Many tax and transfer programs contain features that discourage people from working, saving, or investing. Some programs, like the earned income tax credit, can encourage work effort. 115 Many Federal, State, and local government programs and policies redistribute a substantial amount of income, wealth, and opportunities for economic advancement across the population. In 1990 according to estimates by the Census Bureau, the net effects of Federal and State taxes and transfers raised the income of households in the bottom fifth of the income distribution by an average of more than $8,800, from about $2,100 to about $10,900. Households in the top fifth paid $22,000 more in taxes, on average, than they received in transfers, reducing their average income from about $94,000 to under $72,000. Most of this redistribution occurs through transfer programs. A network of means-tested programs transfers cash and specific goods, such as food, housing, health care, and job training to the Nation's neediest citizens. Other government programs redistribute in ways that are not means-tested. Social insurance programs protect individuals against a variety of contingencies. Recent decades have seen significant growth in spending on means-tested and social insurance programs and a shift in the composition of meanstested assistance toward the provision of specific goods and services rather than cash. Despite long-term increases in income and transfer payments, poverty remains a serious problem in the United States. Society can and should provide a minimum level of support for those who are unable to provide for themselves. The most effective antidote to general conditions of poverty in the long run is sustained economic growth. Some poor people are unable to benefit from such growth, however, and require targeted programs. The Administration is firmly committed to the goal of alleviating poverty. The Federal tax system also redistributes income toward lower income households. Major income tax reforms since the late 1970s reduced marginal tax rates, eliminated many tax shelters, broadened the tax base, and removed many low-income households from the income tax rolls. In addition, Social Security tax rate increases, enacted in the 1970s, were accelerated in 1983 to address short- and long-run financing problems in the Social Security trust fund. Amid these sweeping changes, redistribution of income within the Federal tax system has remained about the same as it was in the 1970s before the reforms took place. Government tax and spending programs also transfer large amounts of wealth across generations. These transfers are sometimes clearly visible, as in the case of the Social Security program, where current workers make payments and current retirees receive benefits. As explained below, however, other policies embody intergenerational transfers that are much less obvious. In both cases, transfers across generations may be larger than transfers across income classes in a particular year. 116 THE LEVEL AND DISTRIBUTION OF INCOME The most commonly used measure of income, and the one used in this section, is "money income" as defined by the Bureau of the Census. This measure includes all periodic earned and unearned monetary income except capital gains. Money income includes government cash transfers but does not count noncash government transfers, such as medicaid and food stamps, or fringe benefits, such as employer-provided health insurance, and it does not deduct taxes paid. While wages are earned by individuals, income is typically shared among members of a family or household. Thus, analyses of income typically focus on these groups rather than on individuals. The Census Bureau defines a family as a group of two or more people related by birth, marriage, or adoption who live together. A household is defined as all related family members and all unrelated people living in a given housing unit. A family, a person living alone, or a group of unrelated people living together in a single housing unit each counts as a single household. To measure the evolution of income over time, adjustments need to be made for the changing cost of living. Estimates of the cost of living are measured in the consumer price index (CPI) published by the Bureau of Labor Statistics. As discussed in Chapter 7, the CPI was modified in 1983 to incorporate an improved measure of the cost of shelter for homeowners. The modified price index used below, the CPI-U-X1, incorporates the improved measure of costs on a consistent basis back to 1967. Most analysts believe this index is the more appropriate measure of changes in the cost of living. LEVEL OF INCOME Median income adjusted for inflation is used to track the history of typical families and households. The median represents the midpoint of the income distribution; there are as many families (or households) with income above the median as there are with income below. Chart 4-1 traces the evolution of real median family and household income since 1967. Although the year-to-year changes are sometimes small, median family income grew by a substantial amount, from $28,563 in 1967 to $35,353 in 1990. This represents an increase of about $6,800, or 23.8 percent. Median household income was $29,943 in 1990, an increase of about $4,200, or 16.4 percent, since 1967. Medians of both family and household income reached alltime highs in 1989. Effects of the Level of Economic Activity Fluctuations and trends in aggregate economic activity produce similar fluctuations and trends in median family and household 117 Chart 4 1 Real Median Income Real median income of families and households has grown substantially since 1967. 32,000 - 30,000 - 28,000 - 26,000 - 24,000 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 Note: CPI-U-X1 used as deflator. Sources: Department of Commerce and Department of Labor. income. Long economic expansions in the 1960s and the 1980s led to strong advances in income. Inflation and three recessions between 1973 and 1982 resulted in fluctuating levels of income. Chart 4-1 shows that real median family income rose sharply in 1967-69, was stagnant in the 1969-70 recession, and then rose during the expansion in 1971-73. After falling in 1974-75 in the recession following the first oil crisis, income rose again until 1979. However, the high inflation of the late 1970s and the subsequent back-to-back recessions in 1980 and in 1981-82 brought real wages and income down sharply. Real median family income in 1982 was lower than it was in 1973. From 1982 to 1990, median family income increased by about $3,300, or 10.4 percent. Since 1973, an earlier business cycle peak, median family income has increased by about $2,000, or 5.9 percent. Similar cyclical patterns occurred for median household income and for black, Hispanic, and white families and households. These patterns indicate that the most effective and durable way to raise the income of typical families and households has been through sustained, long-term economic growth. 118 The Role of Demographics Substantial income growth between 1967 and 1990 is particularly noteworthy in light of several long-term demographic trends. During this period, average family size fell by 14 percent, and average household size fell by 19 percent. Income growth rates for families and households thus understate the growth rate of income per person. Between 1967 and 1990, average, or mean, real money income rose by 62 percent per person, as opposed to 35 percent per family. Large shifts in the composition of households have also influenced income growth. Between 1969 and 1989, the proportion of household heads living alone or with unrelated individuals rose from 18.5 percent to 29.1 percent, and the proportion of families with children that have a female householder rose from 11.3 percent to 21.7 percent. In 1990, more than two-thirds of household heads living alone or with unrelated individuals and one-third of female heads of families were under 35 years old. At this age, many workers are still acquiring skills and training and may also have had short job tenure or little overall labor market experience. Female heads of families also often face child care responsibilities that make full-time participation in the labor force difficult. The means-tested transfer system creates incentives for some women to reduce or eliminate work outside the home. For these and other reasons, female-headed families and people living alone or with unrelated individuals have median incomes well below the overall median. One study found that in the absence of these demographic trends, real median household income between 1969 and 1989 would have grown another $3,200, more than doubling its actual rate of growth. Two-Earner Families A related issue is the extent to which sustained income growth is due to the increased proportion of married women that work outside the home. In 1970, 39 percent of married women worked outside the home. That figure rose to 50 percent in 1980 and 58 percent in 1990. The number of working married women rose more in absolute and percentage terms in the 1970s than in the 1980s. Determining the effect of this trend on median income is difficult. Determining the contribution of new second earners to overall income growth is much more straightforward. Average income for married couple families rose by $4,232 (in 1990 dollars) between 1970 and 1980, and $6,035 between 1980 and 1990. The role of the increased number of second earners can be calculated using data on the number and average income of married couple families and second earners. The increased number of married women in the labor force accounts for only about 18 percent of the real increase in 119 income of married couple families between 1980 and 1990. The corresponding figure for the 1970s is 19 percent. For all families, about 14 percent of the increase in income in the 1980s and 16 percent in the 1970s is due to the increase of two-earner families. The small role of the rising number of two-earner families in income growth can be attributed to two factors. First, average earnings of second earners are lower than average earnings for all earners, in part because a high proportion of second earners work part-time. Second, the recent increase in two-earner families is small relative to the total number of families. From 1980 to 1990, the number of married women in the labor force rose by 5.5 million; the total number of families in 1990 was 66.3 million. DISTRIBUTION OF ANNUAL INCOME The long-term and cyclical factors that affect income levels also affect the distribution of income. Incomes in any year can differ across households for many reasons. Because the primary source of income for most people is labor earnings, the determinants of the wage distribution discussed in Chapter 3, including workers' education and changes in labor supply and demand, also help determine the distribution of annual income. Because families and households in the United States experience a significant amount of mobility across income classes, the distribution of long-term income differs from the distribution of annual income. The distribution of income and its evolution over time can be measured in several ways. Perhaps the simplest approach is to choose particular income thresholds and examine what percentage of families exceed these thresholds. Although there is no official definition of the middle class, the range of $15,000 to $50,000 (in 1990 dollars) in money income is used in Chart 4-2 to demarcate middle-income families. The chart shows the often-noted declining proportion of families in the middle-income range. The proportion of families with middle incomes fell from 64.8 percent in 1967 to 52.7 percent in 1990. Many middle-income families have moved into higher income categories; the proportion of families with real income above $50,000 showed a sustained increase, from 14-9 percent in 1967 to an alltime high of 31.6 percent in 1989, before it declined slightly in 1990. The proportion of families with real money income below $15,000 fell from 20.3 percent in 1967 to 16.9 percent in 1990. Using alternative definitions of middle income (for example, $25,000 to $75,000, or $25,000 to $50,000) preserves the basic results that the proportion of high-income families has increased and the proportion of low-income families has fallen. Similar patterns hold for households as well. These trends indicate that substantial num 120 Chart 4-2 Distribution of Families by Income Class The proportion of high-income families has more than doubled since 1967, while the proportion of low- and middle-income families has fallen. Percent of all families 70 60 Middle Income ($15,000-$50,000) 50 40 30 High Income (over $50,000) 20 i 10 1967 1969 , i • 1971 i 1973 . i 1975 • i , 1977 i. , 1979 i 1981 , i 1983 . i 1985 , i 1987 • i 1989 Note: All income is in 1990 dollars; CPI-U-X1 used as deflator. Sources: Department of Commerce and Department of Labor. bers of families and households have moved into higher income categories over time. Income Growth by Quintile Chart 4-3 displays mean, or average, money income for the highest, middle, and lowest fifth, or quintile, for households from 1967 to 1990, as a percentage of 1967 income. (The major points below also hold for families.) Average money income in each quintile has increased since 1967. Thus, long-term trends have raised money income in each part of the income distribution. Changes in average money income in every quintile reflect changes in the level of macroeconomic activity, just as the measures of median income did. The real money incomes of households along all parts of the income distribution have improved the most during periods of economic growth. In particular, the economic expansion between 1982 and 1989 produced strong growth in each quintile. Money income grew faster in the highest quintile than in the other quintiles. From 1967 to 1990, real money income grew by 35 percent in the highest quintile, 25 percent in the lowest quintile, and 17 percent in the middle quintile. The relative magnitudes of growth rates for the highest and lowest quintiles shifted between 1979 and 1982. This shift coincided with a shift in real wage pat 121 Chart 4-3 Real Household Income Relative to 1967 Income for Selected Quinttles Real income of low-, middle-, and high-income households generaWy rose from 1967 to 1979, fell from 1979 to 1982, and rose after 1982. Percent of 1967 income 150 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 Note: CPI-U-X1 used as deflator. Sources: Department of Commerce and Department of Labor. terns: wages for high-wage workers were roughly the same level in 1979 and in 1982, while wages for low-wage workers fell. Chart 4-3 understates the improvement in income for the lowest group because, among other reasons, money income omits noncash transfers. Real Federal and State spending on means-tested medical assistance, the vast majority of which is medicaid, grew by $67 billion (in 1990 dollars) from 1967 to 1990, while spending on other means-tested noncash transfers grew by $46 billion. Real payments for medicare, which is not means-tested, grew by $96 billion. In 1990, households in the lowest income quintile received about 10 percent of medicare payments, 17 percent of medicaid payments, and 59 percent of other means-tested noncash transfers. Maintaining these allocations over time and using the Census Bureau's best estimates of the value of these transfers to recipients provides estimates of noncash transfers per household. For households in the lowest quintile, money income plus the estimated value of noncash transfers, adjusted for inflation, increased by 48 percent between 1967 and 1990, nearly double the 25-percent growth rate for money income alone. 122 Gini Ratios The Gini ratio is a measure of the dispersion of income that ranges between 0 and L A lower value indicates less dispersion in the income distribution; a Gini of 0 would occur if every family had the exact same amount of income. A higher value indicates more dispersion; a Gini of 1 would occur if all income accrued to only one family. Chart 4-4 shows that from 1947 to 1968, despite some fluctuations, the dispersion of money income for families fell gradually. Since then, dispersion has risen slowly but steadily, by about 14 percent. Almost one-third of the increase occurred between 1979 and 1982, when wage and income patterns diverged sharply at the high and low ends of the spectrum. Slightly more than a third of the increase occurred between 1968 and 1979, with the increase from 1982 to 1990 accounting for the remaining third. Chart 4-4 Gini Ratios for Family Income The dispersion of money income followed a downward trend from 1947 to 1968 and increased gradually after that. 0.40 - 0.35 - 0.30 1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 Source: Department of Commerce. The Gini for households followed similar trends. One study found that shifting household composition accounted for almost half of the increase in dispersion between 1969 and 1989. The Gini ratio is a measure of relative income rather than of the absolute level of income. Thus, changes in the Gini do not provide any information about the level of income for various groups in the population. In the 1980s, increasing dispersion of income did not 123 mean that the rich became richer while the poor became poorer. Incomes grew in all quintiles, but income in the top quintile grew fastest. Trends in the share of income received by families in each quintile mirror those of the Gini coefficient. The share received by the lowest quintile rose from 5.0 percent in 1947 to 5.7 percent in 1968, and then fell to 4.6 percent in 1990. The share for the highest quintile fell from 43.0 percent in 1947 to 40.5 percent in 1968, before rising to 44.3 percent by 1990. Similar trends apply to income shares received by households. Like the Gini, however, measures of income shares do not show how the level of income has evolved for each group, and thus give an incomplete picture of income patterns. Similar trends in income distribution appear in other countries as well. One study found that in the early 1980s, the distribution of earnings for prime-age males who headed households and worked full time became more unequal in all five countries studied: Canada, Sweden, Australia, West Germany, and the United States. The widening distribution in many countries indicates that the causes of the shift are more likely to be due to factors common to all of the countries rather than to any factor specific to only one of the countries. THE DISTRIBUTION OF LONG-TERM INCOME AND WEALTH Families and households display a substantial amount of mobility across income classes in the United States. For this reason, analyses of income distribution that focus only on annual income tend to overstate the degree of income inequality. One reason annual income data are misleading is that earnings of individual workers tend to rise as they acquire training and experience and then to fall when they retire. A 20-year-old worker just starting out and a 45-year-old worker who is in his or her peak earning years could have equal incomes over their careers, but very different wages in the same calendar year. Data on annual income can also prove misleading because of transitory income, that is, income gains or losses that are thought to be temporary. A person who owns a small business, for example, may face greater year-to-year fluctuations in income than someone who works at a steady wage. There is substantial mobility across income classes from year to year. One study found that in the mid-1980s, about one-third of all families were in a different income quintile than they had been in the previous year. In each of the lowest three quintiles, about 18 percent of the families moved to a higher quintile the following year. In each of the highest three quintiles, more than 20 percent 124 of the families moved to lower quintiles the following year. Another study found that more than half of families in the highest quintile in 1971 had fallen into lower quintiles by 1978. Similarly, almost half of those in the lowest quintile had risen to a higher quintile. Over longer periods, the extent of mobility increases. One study, using data from the 1970s and 1980s, found that more than 75 percent of households are in a different decile when ranked by lifetime income than when ranked by current income. A decile includes onetenth of the households. About 44 percent had current income two or more deciles away from their lifetime income. More than half of households in each of the lowest three deciles for annual income had lifetime income in a higher decile. More than half of households in the top three deciles for annual income had lifetime income in a lower decile. A recent study, using tax return data from the 1960s, 1970s, and 1980s, estimates that the Gini coefficients for income over 4-year or 7-year periods are between 5.0 percent and 7.7 percent less than the average of the Gini coefficients for the individual years. Another study, using data from 1969 to 1981, found that the Gini for lifetime income in the United States was 19 percent lower than the Gini for annual income, indicating less dispersion in lifetime income. These findings underscore the importance of income mobility for a large number of families. Nevertheless, even after removing temporary income changes and the effects of the life-cycle on income, part of the population still faces very low long-term income prospects. Because the distribution of long-term income is less dispersed than are annual incomes, trends in the distribution of annual income may not accurately reflect trends in the distribution of long-term income. For example, an increase in income mobility or in the importance of transitory income can increase inequality of annual income but have no effect on the distribution of long-term income. Nevertheless, one study found that, like annual incomes, incomes averaged over 4- and 7-year periods became more dispersed between 1967-73 and 1979-85. A related issue is the distribution of wealth. A family's wealth holdings consist of financial assets, such as saving accounts; property, such as a house or family business; pensions and future Social Security benefits; and human capital, the value of future labor earnings. For most households, housing, public and private pensions, and human capital constitute the vast bulk of wealth. One study found that between 1983 and 1989 the median value of households' real financial net worth and property rose 11 percent and that holdings of these assets became more concentrated. http://fraser.stlouisfed.org/ Federal Reserve Bank of St.O—92 Louis 5 305-592 125 SUMMARY • Median levels of family and household money income have shown sustained long-term growth since the mid-1960s. Median income is influenced by cyclical and long-term economic activity and demographic patterns. • Since the mid-1960s and in particular since the early 1980s, income growth has occurred in all quintiles and the distribution of annual money income has become more dispersed in the United States. Earnings distributions have also become more dispersed in several other countries in recent years. • Because money income omits in-kind transfers, data on money income understate both the level of and improvement in income for the lowest income groups. • Families and households display significant mobility across income classes. The distribution of long-term income is more equal than the distribution of annual income. TRENDS IN TAXES AND TRANSFERS Tax and transfer policies in the United States have undergone major changes in level and composition in the last 30 years. These changes are among the principal ways that government influences the distribution of resources and the level and structure of economic activity. TRANSFERS The two main categories of transfers are means-tested programs and social insurance. Means-tested programs provide benefits or services to people and families whose financial resources have fallen below a certain level. Distributed by Federal, State, or local governments, means-tested transfers can be cash grants, such as aid to families with dependent children, or goods and services, such as food and health care. Transfers of goods and services ensure that assistance is used for the purposes intended. Means-tested service programs also provide education and job training. (Brief descriptions are in Boxes 4-1 and 4-2; fiscal 1990 spending totals are in Table 4-1.) Social insurance programs compensate people for income loss due to retirement, disability, and unemployment, and provide health insurance for the elderly. The three major Federal social insurance programs are Social Security, medicare, and unemployment insurance (Box 4-3). These programs are financed primarily by payroll taxes. Because they are predominantly not means-tested, social insurance programs can sometimes make large direct payments to the well-off (Box 4-4). 126 Box 4-1.—Means-Tested Cash Transfers The principal means-tested cash transfer programs: • Aid to families with dependent children (AFDC) provides income to low-income, single-parent families with dependent children and to low-income couples with children in which the primary breadwinner is unemployed or incapacitated. Benefit levels are set by the States. Recipients are eligible for Federal job training programs and for health care assistance through medicaid. In 1990 AFDC assisted a monthly average of 11,4 million people. • Supplemental security income (SSI) began providing payments in 1974 to needy aged, disabled, and blind people meeting nationwide eligibility requirements. SSI provided benefits to nearly 5 million recipients each month in 1990. • The earned income tax credit (EITC), a refundable tax credit for low-income working families with children, was established in 1975. The maximum credit has more than doubled since 1975. The credit was claimed on 11.9 million tax returns for 1989. Federal spending on means-tested and social insurance programs has grown dramatically since 1967. Chart 4-5 shows that these expenditures more than doubled relative to gross domestic product (GDP), from 4.3 percent in fiscal 1967 to 9.2 percent in fiscal 1990. That represents an annualized growth rate of 6.3 percent in real expenditures. Real spending on social insurance programs grew at an annual rate of 5.8 percent from fiscal 1967 to 1990. In 1990, Federal outlays for social insurance were $388 billion, 31 percent of total Federal outlays. Social Security and medicare accounted for more than 90 percent of the total. Federal expenditures on unemployment insurance were approximately $17 billion. Real means-tested spending grew at an annual rate of 8.3 percent from fiscal 1967 to 1990, and accounted for approximately $121 billion, or 9.6 percent, of total Federal outlays in 1990. Most of the long-term increase occurred through noncash programs (Chart 4-5). From 1967 to 1990, real Federal outlays on medicaid grew by $37 billion (in 1990 dollars), while food stamp outlays rose by almost $15 billion. Real expenditures on the special supplemental food program for women, infants, and children and on Head Start rose about 90 percent and 33 percent, respectively, from 1980 to 1990. Real means-tested cash expenditures grew at 4.7 percent per year from 1967 to 1990. 127 Box 4-2.—Means-Tested Noncash Transfers The principal means-tested noncash transfer programs: • Medicaid, enacted in 1965, covers a broad range of health services including hospital care, physicians' services, and long-term care- In 1990, 25J million people who were disadvantage^ or faced high medical expenses received benefits, • The food stomp program* formally established in 1964, distributes coupons for food, based on household size and income. In 1990, 21 million people received benefits in an average month, The special supplemental food program for women, infants and children (WIC) provides food vouchers to pregnant women, infants, and children through age 4 considered to be at nutritional risk The child nutrition program subsidizes meals for needy children in school. • Head Start provides education and medical, nutritional and social services to economically disadvantaged 8- and 4year-olds, In 1990, 541,000 children participated. • Morning assistance* enacted in the 1930s, provides rental subsidies and aid for construction or rehabilitation of housing for low-income families. • The Job Tmining Partnership Act, passed in 1982, flmds education, training, and related services for economically disadvantaged adults and youths. Job Corps and the Summer Youth Employment Program provide education, training, and jobs to youths. Job Opportunities and j&me Skills (JOBS) programs provide educational, training, and placement services for AFDC adult recipients. « fidl Grants provided assistance to 3.4 million needy undergraduate students enrolled at least half-time in 1990, • Emrgy ttssistance is provided to low-income households through cash, vouchers, and vendor and tax credits* Many means-tested programs are funded jointly by the Federal and State governments and administered at the State level. Real expenditures by State and local governments on these programs rose from $22 billion (in 1990 dollars) in 1970 to $36 billion in 1977, fluctuated between 1977 and 1982, and have increased by about 50 percent since then. The largest State programs are medicaid, AFDC, and general assistance, which consists of programs that provide funds to low-income households who are ineligible for AFDC and SSI. 128 Box 4-3.—Social Insurance Programs The three major social insurance programs: • Social Security* introduced in 1985, provides monthly payments to workers who retire or face long-term disability and their dependents and to survivors of deceased workers. Benefits are based on a worker's earnings history, age, marital status, and other factors. Social Security covers more than 9© percent of the worik force. • Medicare, enacted in 1965, covers inpatient care at hospitals and limited acute care at nursing homes. An optional part pays for physicians, supplies, and other services outside hospitals. In 1987 medicare covered 45 per* cent of the health costs of the elderly. • Unemployment insurance, established in 1935, replaces income loss due to temporary unemployment for workers with recent work histories who tost their jobs through no fault of their own. Virtually all wage and salary workers are covered. (Details are in Chapter 3.) Other social insurance programs include Workers' Compensation, Veterans' Disability Compensation, Railroad Retirement, and Black Lung. Federal expenditures for many programs take the form of grants to State governments. Over time, Federal regulations have given the States increased flexibility to make the best use of funds and authority to experiment with programs. The Administration has encouraged innovation at the State level in the design of assistance programs. Total real Federal grants to States grew steadily between 1967 and 1978, rising from $57 billion (in 1990 dollars) to $150 billion. In 1981 eligibility requirements were tightened for means-tested programs. Federal grants fell to $113 billion in 1983. Since then, some of the eligibility requirements have been relaxed, and Federal grants increased to $131 billion in 1990. Federal grants were about 20 percent of State and local governments' own revenues in the late 1960s. The ratio rose to 31 percent in 1978 before falling to about 19 percent in 1987-90. TAXATION Federal tax revenues were 18.9 percent of GDP in 1990. Between 1960 and 1990, Federal tax revenues ranged between 17.5 percent and 20.2 percent of GDP. 129 Box 4-4.—Subsidies to the Weil-Off Although a large portion of government spending is targeted toward lower income persons, some transfers directly benefit high-income groups as well as others. Data from the Census Bureau show that in 1990 about $30 billion in transfers were received by households with pretax, pretransfer income in the top fifth for all households. For example, supplementary medical insurance (SMI), part B of medicare, pays for physicians, supplies, and other items and is highly subsidized. For a 65-year-old in 1991, premium payments covered only about 17 percent of the costs. The remaining portion was financed from general revenues. More than 90 percent of the elderly are enrolled in medicare, and more than 95 percent of medicare enrollees choose to participate in SMI. Thus* a large proportion of high-income elderly households receive very highly subsidized medical insurance through SMI. The average lifetime subsidy for men who were 65 years old in 1991 is estimated to be more than $25,000. For women of the same age, the estimated lifetime subsidy is $39,000. The difference in subsidies reflects differences in life expectancies, and other factors. While subsidies for low-income people are generally supported by many people, most people are unaware that high-income households receive subsidies of this magnitude* The composition of Federal tax revenues has changed since 1960. Social insurance taxes (mostly Social Security) rose from 16 percent to 37 percent of revenues between 1960 and 1990. The rise was due initially to the increase in contributors into the Social Security system and higher benefit levels. Since the late 1970s, Social Security tax rates have been increased in order to ensure the future solvency of the system. Revenues from corporate income taxes fell from 23 percent of revenues in 1960 to about 9 percent in 1990, primarily because of declining corporate profits relative to national income. The individual income tax constituted 45 percent of revenues in 1990, and between 41 and 48 percent of revenues annually since 1960. Income Tax Reforms Several major tax reforms since the late 1970s have substantially changed the nature of the tax system, beyond the shift in the composition of revenues described above. Many of these reforms developed as a response to events in the 1960s and 1970s. 130 Chart 4-5 Federal Social Insurance and Means-Tested Transfers Relative to GDP Federal social insurance and means-tested transfers have more than doubled relative to GDP since 1967. Means-tested spending has shifted toward noncash benefits. Percent of GDP 12 10 Total Noncash Means-Tested _ — "^ Cash Means-Tested -.*m.**.wm.m.Tr.~' r , i 1967 . 1969 i i 1971 , i 1973 , i 1975 i i 1977 i i 1979 , i 1981 , i 1983 , i 1985 i i 1987 , i 1989 Fiscal years Sources: Department of Commerce and Office of Management and Budget. Bracket creep, a process in which sustained inflation pushes many people's income into higher income tax brackets, raises people's marginal and average income tax rates even in the absence of any explicit tax policy changes. Between 1964 and 1980, when annual inflation averaged more than 6 percent, bracket creep and other factors had significant effects on tax rates. The proportion of adjusted gross income that was taxed at a rate of 35 percent or higher quadrupled, from 7.7 percent in 1964 to 31.2 percent in 1980. The proportion of tax filers who faced a marginal Federal income tax rate of 35 percent or higher increased tenfold. High marginal tax rates can have strong, negative effects on the level and growth of GDP by reducing the return to working, saving, investing, and innovating. High marginal tax rates also increase incentives for tax avoidance and evasion and thus do not always translate into higher average tax rates or higher tax revenues. Tax avoidance occurs when taxpayers make investment and consumption decisions that are influenced by the desire to reduce tax liabilities. Tax evasion is the failure to comply with the tax laws. Reform of the U.S. income tax system to address these concerns began with the Revenue Act of 1978, which reduced income tax rates and raised the exclusion for capital gains income. The Eco 131 TABLE 4-1.—Expenditures on Selected Means-Tested Government Assistance Programs, Fiscal 1990 [Outlays in millions of dollars] Federal expenditures Program State/ local expenditures Total expenditures Medicaid 41,103 31,033 72,136 AFDC 10,147 9,691 19,838 Food stamps 14,992 1,185 16,177 Housing assistance 15,901 2 15,901 SSI 11,493 3,626 15,119 0 7,784 7,784 Child nutrition 4,996 2 4,996 Pell grants 4,484 0 4,484 Earned income tax credit1 4,354 0 4,354 Job Training Partnership Act 3,784 0 3,784 WIC 2,196 2 2,196 Head Start 1,552 388 1,940 Energy assistance 1,314 122 1,436 463 184 647 116,779 54,013 170,792 General assistance JOBS , ". Total 1 Expenditures include refunded portion of the credit only. Not available. Note.—State/local expenditures include administrative expenses. Sources: Office of Management and Budget and Congressional Research Service. 2 nomic Recovery Tax Act of 1981 created sweeping across-the-board reductions in marginal tax rates. The top marginal tax rate was reduced from 70 percent to 50 percent. The act also indexed tax brackets and personal exemptions in the individual income tax for inflation starting in 1985, and provided incentives to save by allowing near-universal eligibility for tax-preferred individual retirement accounts (IRAs). A variety of changes in depreciation and leasing rules provided new incentives for investment. Tax reforms in 1982 and 1984 scaled back some of these provisions. The Tax Reform Act of 1986 reduced the top statutory individual tax rate from 50 percent to 28 percent, with an effective rate of 33 percent for some high-income taxpayers. The corporate income tax rate was reduced to 34 percent from 46 percent. The income tax base was broadened substantially by changing several features of the tax code that affect saving and investment. Depreciation deductions were reduced. The investment tax credit was repealed, as was the tax exclusion for capital gains income. Passive loss restrictions were imposed. Eligibility for tax-deductible IRAs was restricted. Interest deductions for consumer borrowing were phased out. The earned income tax credit (EITC) was expanded, and along with increased personal exemptions and standard deductions, exempted 132 more than 4 million low-income taxpayers from having to pay Federal income taxes. The Omnibus Budget Reconciliation Act of 1990 installed a variety of tax policy changes, in addition to the spending and deficit limitations discussed in last year's Economic Report of the President. The EITC was expanded, with supplemental credits added for families with young children and for health care expenses. Statutory marginal tax rates for the highest levels of income were equalized at 31 percent. A phase-out of personal exemptions, limitations on itemized deductions, and new excise taxes levied on furs, jewelry, and expensive cars effectively raised taxes for the affluent. On the whole, the changes in the tax code since 1981 have reduced the role of the income tax in economic decisionmaking. Statutory rates on the highest levels of income fell from 70 percent in 1980 to 31 percent in 1990. Differentials in the tax treatment of investment in most kinds of assets were reduced, and the tax base was broadened. Despite these generally desirable reforms, the income tax continues to discourage saving and investment. This concern is especially timely in light of the low rates of saving and investment in the United States relative to other countries and the critical role of such activity in spurring long-term economic growth. Limited loss offset provisions and the taxation of nominal rather than real incomes create a wedge between statutory tax rates and effective tax rates. Capital gains tax payments can exceed 100 percent of capital gains adjusted for inflation. To increase incentives to save and invest, the Administration's fiscal 1993 budget calls for the restoration of the capital gains tax exclusion, a new flexible IRA, penaltyfree IRA withdrawals for first-time homebuyers, a tax credit for first-time homebuyers, an investment tax allowance for machinery and capital equipment, improvements in the corporate alternative minimum tax, and other items. Social Security Reforms A second development in the 1970s and early 1980s concerned the financial status of the Social Security system. The system narrowly averted cash-flow crises in 1977 and 1983, and faced long-run financing problems in meeting the retirement needs of the babyboom generation. To put the Social Security system on sounder footing, a schedule of tax rate increases was passed in 1977. In 1983 further reforms incorporating some of the recommendations of the bipartisan National Commission on Social Security Reform were enacted. These recommendations accelerated the dates of previously legislated tax increases, raised tax rates for the self-employed, imposed income taxes on half of all Social Security benefits for people with income above certain amounts, required a small and gradual increase in 133 the retirement age in the 21st century, delayed annual cost-ofliving adjustments by 6 months, and extended mandatory coverage to new Federal workers. These changes reduced substantially the long-run deficit in the Social Security trust fund and eliminated the trust fund's short-run cash-flow problems. SUMMARY • Federal and State spending on means-tested and social insurance programs has grown significantly since the mid-1960s. Means-tested spending has shifted dramatically toward noncash programs. • A series of major income tax reforms since 1978 has broadened the tax base, closed loopholes, and reduced marginal tax rates substantially. The income tax, however, continues to discourage saving, investment, and entrepreneurship. • Social Security reforms have averted financial crises and initiated the buildup of funds necessary to finance the retirement of the baby-boom generation. EFFECTS OF TAXES AND TRANSFERS ON THE DISTRIBUTION OF INCOME Government tax and transfer policies can have large effects on the distribution of income. The effects of taxes and transfers can occur directly, through receipt of transfers from, or payments of taxes to, the government, or indirectly, when the government program changes a person's behavior. The people who are actually affected by a tax or transfer are not necessarily the same people who send the money directly to, or receive the transfer from, the government. Making the distinction between the two is sometimes difficult (Box 4-5). There are many ways to measure and describe the redistribution that occurs within an economic system. One common measure uses the relationship between average ("effective") tax rates—the ratio of taxes to income—and income level. If the average tax rate increases with income, then the tax system is said to be progressive. If the average tax rate falls as income rises, the system is termed regressive. In a proportional tax system, average tax rates are constant across income classes. This measure can easily be expanded to consider both taxes and transfers by examining the ratio of taxes minus transfers to income as income rises. Thus, a progressive system, for example, would show higher average rates of taxes net of transfers as income rises. 134 Box 4-5.—Behavioral Responses to Taxes and Transfers Economic theory draws a key distinction between those who are legally obligated to make tax payments to the government and those who ultimately bear the burden of the tax. Firms, for example, may pass along tax increases to consumers or workers. Although the firms send the money to the government, consumers may bear the burden of the tax by paying higher prices, or workers may bear the burden by receiving lower wages or other compensation; Just as the costs of a tax can sometimes be shifted, the benefits of a transfer are sometimes shifted as well. Shifting can occur over periods of time as well as among people* Expected future Federal farm payments raise the price that buyers are willing to pay for farmland now. People who buy land this year and receive the expected Federal benefits in the future rrJA have paid for the benefits by paying a higher purchase price for the land. Current landowners who sell their land now will be the beneficiaries of expected future policy. The extent of shifting depends on how people respond to the tax or spending program and on the timeframe considered. Analyzing the behavioral response can be quite complicated. If a tax is anticipated, the behavioral response can come before the actual implementation of the tax. A temporary tax or spending change may induce a very different response and thus a different pattern of tax shifting than a permanent change. The response to any policy, temporary or permanent, may be different in the short run, when people have little time to adjust, than in the long run* when full adjustments can take place. Behavioral responses are crucial ingredients in understanding the effects of government policy. For example, Social Security benefits constitute a large portion of income for many elderly people. Social Security thus appears to raise incomes of elderly people by a substantial amount However, Social Security provides disincentives for the elderly to work. Determining the net effects of Social Security on the recipient's income requires knowing how the program affects the work patterns of the elderly. COMBINED EFFECTS OF TAXES AND TRANSFERS The most comprehensive, and thus potentially the most informative, measures of redistribution examine the combined effects of taxes and transfers. Data prepared by the Bureau of the Census 135 and presented in Table 4-2 show in the second column the distri bution of annual income for households ordered into quintiles b> their income before taxes and transfers (including private income, capital gains, and the cash value of employers' contribution for health insurance). The third and fourth columns show the effects of Federal and State income and payroll taxes and cash and noncash transfers, keeping the assignment of households to quintiles the same as in the second column. Table 4-2 uses the Census Bureau's best estimates of the value of noncash transfers. Like virtually all of the available estimates, the data in Table 4-2 do not include adjustments for people's behavioral responses to taxes and transfers. The combined effects of Federal and State taxation reduce the Gini by 5.5 percent, thus making the distribution of income more equal. Most redistribution, however, occurs through transfer programs. When income from cash and noncash transfers is added, the Gini falls by an additional 17 percent. Table 4-2 shows that the tax and transfer system in 1990 raised the share of income for households in the lowest quintile from 1.1 percent to 6.5 percent, and reduced the share going to the highest quintile to 43.0 percent from 50.7 percent. TABLE 4-2.—Effects of Taxes and Transfer Payments on Household Income by Income Quintile, 1990 ncome before taxes and transfers Income quintile 0.490 Gini... Income after taxes before transfers 0.463 Income after taxes and transfers 0.384 Lowest 1.1 1.4 6.5 Second 7.9 9.0 11.2 Third 15.5 16.4 16.1 Fourth 24.7 25.2 23.2 Highest 50.7 48.0 43.0 10,904 Average Income (dollars) Lowest 2,096 2,045 Second 14,664 13,126 18,676 Third 28,836 24,102 27,017 Fourth 45,836 36,991 38,780 Highest 93,966 70,338 71,944 Source: Department of Commerce. Chart 4-6 shows that in 1990, households in the top 20 percent of the pretax, pretransfer income distribution paid an average of about $22,000 in taxes net of transfers to Federal and State governments. Households in the lowest income quintile received an average of about $8,800. Average income in the lowest quintile rose from about $2,100 before accounting for taxes and transfers to about 136 $10,900 afterwards. Average income in the highest quintile fell from about $94,000 to about $72,000. Thus, the combined effects of Federal and State taxes and transfers are highly progressive. Chart 4-6 Effects of Taxes and Transfers on Income, 1990 The combined effects of government taxes and transfers are to redistribute a substantial amount of income from higher income households to lower income households. Average net dollars received 20,000 10,000 8,808 4,012 mmmm -1,819 tiiitt -7,056 -10,000 -20,000 -22,022 I -30,000 Lowest Second Source: Department of Commerce. I Third Income Quintiles Fourth Highest Redistributive Effects of Other Policies While taxes and transfers represent a broad range of government activities, other government policies redistribute resources as well. For example, the tax deduction for private contributions to charitable organizations raises these contributions. The private contribution does not appear as a government transfer but is nonetheless influenced by the favorable tax treatment. Direct government purchases of goods and services and government programs that improve the environment, maintain the infrastructure, and provide education, national defense, or other items can also have important distributional effects. These effects, however, are difficult to measure. Long-Term Redistribution The impact of government policies on the distribution of longterm income can differ significantly from the effects on the distribution of annual income. Low-skilled workers in their high-earning years may pay a relatively high amount of taxes compared with other taxpayers, even though income over their entire careers may be relatively low. In contrast, medical students pay relatively low 137 amounts of taxes even though their long-term income is relatively high. A tax increase on the older, low-skilled workers combined with a tax cut for the medical students would reduce inequality of annual incomes but raise inequality of long-term incomes. One study, using data from 1969 to 1981, found that Federal taxes and cash transfers reduced the Gini for lifetime incomes by 19 percent and reduced the Gini ratio for annual incomes by 13 percent. Therefore, the combined effects of taxes and transfers may reduce inequality in long-term incomes by more than they reduce inequality in annual incomes. Some government policies have the effect, intended or unintended, of redistributing wealth across generations. A well-known example is Social Security, which makes direct payments to the elderly, financed by payments from current workers. Intergenerational transfers can occur in less obvious forms as well. For example, most wealth in the United States is held by people who are older than 40, and most people over the age of 65 are retired. Therefore, a policy that raised tax rates on capital income and reduced rates on labor income would constitute an implicit transfer of wealth from older to younger generations. These transfers can be large. Government policies can also transfer resources between currently living generations and generations yet to be born. Financing government through debt rather than through current taxes, for example, can push the burden of paying for current obligations onto future generations. Intergenerational issues concerning the deficit are discussed in Chapter 7. REDISTRIBUTION IN THE FEDERAL TAX SYSTEM By any of a variety of measures, the income tax and Social Security reforms beginning in the late 1970s have not significantly changed the redistributional effect of the tax system. The Individual Income Tax Chart 4-7 shows estimates from the Department of the Treasury of average Federal individual income tax rates for hypothetical four-member families with the median, half the median, and double the median income level, as reported by the Bureau of the Census. Median income for 1991 was estimated on the assumption that the real level of median income would not change from its 1990 level. Families are assumed to have only wage and salary income earned by one person. Comparisons made for the same type of family over time help to isolate the effect of changes in the tax system from changes in the sources and distribution of income and in demographics. The chart shows that the Federal individual income tax is progressive in each of the years because the average tax rate rises with income. In 1991, for example, the average estimated income tax 138 Chart 4-7 Average Federal Individual Income Tax Rates The Federal individual income tax system is progressive because average tax rates rise with income. The degree of progressivity has not changed substantially since 1980. Percent 20 1980 ^ 1985 Half of median income ^ 1988 Median income Q 1991 Twice median income Note: Data are for four-person families with one wage earner. Source: Department of the Treasury. rate rises from 5.1 for families with half the median income to 15.1 for families with twice the median income. The average Federal income tax rate has fallen since 1980 for all three groups. The percentage change in average tax rates between 1980 and 1991 was virtually the same at all three relative income levels. Chart 4-8 shows that the share of individual income taxes paid by the highest income groups has increased since 1980, while the share paid by the lowest income groups has declined. The share of taxes paid by households in the highest income quintiles has increased because their overall share of income has increased and because they pay higher average tax rates than all other households. All Federal Taxes Although it is the single largest revenue source for the Federal Government, the individual income tax accounts for less than half of all Federal revenues. Estimates by the Congressional Budget Office (CBO) of tax rates for all Federal taxes are reproduced in Table 4-3. CBO's definition of the demographic unit, measure of income, and basis for ordering units into quintiles differ substantially from those employed in the data developed by the Census Bureau and the Treasury Department and presented above. De- 139 Chart 4-8 Shares of Federal Individual Income Tax Payments by Income Class The share of Federal individual income taxes paid by high-income groups has increased since 1980, while the share paid by low-income groups has fallen. Percent 80 72.3 67.2 68.5 1980 1985 60 40 20 Bottom 40 percent Top 20 percent 1989 Top 5 percent Source: Department of the Treasury. spite these differences and the issues they raise, the implications of CBO's analysis are similar to those presented above. The CBO data indicate that the overall Federal tax system is progressive in each year. The system appeared to have become less progressive between 1977 and 1985. Part of this change, however, is due to the 1977 and 1983 Social Security tax increases. As discussed below, examining Social Security taxes and ignoring Social Security benefits makes that particular program appear regressive. Taken as a whole, however, the Social Security system is progressive. The tax system became more progressive between 1985 and 1988, when the Tax Reform Act of 1986 led to sizable tax increases in the higher income quintiles and a sizable tax reduction in the lowest quintile. The tax system is forecast to become even more progressive between 1988 and 1992, according to CBO's estimates. Tax reductions for the lowest four income quintiles and another tax increase for the highest quintile are expected to occur as a result of policies introduced in the 1990 budget accord. CBO estimates in Table 4-4 indicate that the share of all Federal taxes paid by the highest income groups has increased since 1977, while the share paid by middle and lower income families has fallen. 140 TABLE 4-3.—CBO Estimates of All Federal Taxes [As a percent of income] 1977 Income quintile Lowest . . Second 1980 1992 1988 1985 93 8.1 10.3 9.3 8.6 15.4 15.6 15.8 15.9 15.6 Th'rd 19.5 19.8 19.1 19.8 19.7 Fourth 21.8 22.9 21.7 22.4 22.2 Highest 27.2 27.5 24.1 26.0 26.8 Note.—The individual income tax burden is allocated to families who directly pay the tax. Both the employer and employee portions of social insurance taxes are allocated to labor income. Excise tax burdens are allocated to the consumers who pay them. The corporate tax burden is divided equally between capital and labor income. Source: U.S. House of Representatives, Committee on Ways and Means, 1991 Green Book. TABLE 4-4.—CBO Estimates of Shares of All Federal Tax Payments [Percent] 1977 Income quintile 1980 1985 1988 1992 Lowest 2.0 1.6 1.8 1.5 1.3 Second 7.2 6.9 6.8 6.2 6.0 Third 13.4 13.2 13.0 12.5 12.1 Fourth 21.6 22.1 22.0 20.8 20.0 Highest 55.7 56.1 56.1 58.9 60.5 27.7 27.4 27.5 30.9 33.3 Addendum Top 5 percent.., Source: U.S. House of Representatives, Committee on Ways and Means, 1991 Green Book. Thus, data developed separately by the Treasury Department and the Congressional Budget Office indicate that the Federal individual income tax and the overall Federal tax system redistribute income from high-income households to low-income households and thus are progressive. The degree of progressivity of, and the amount of redistribution within, the tax system has not changed significantly since the mid-1970s. SOCIAL SECURITY In 1990, $296 billion in Social Security taxes were paid to the Social Security trust fund by or on behalf of 134 million workers. At the same time, Social Security benefits totaling $248 billion were paid to more than 39 million people. Most people pay Social Security taxes during their working lives and receive benefits during retirement. On average, Social Security redistributes resources from higher income households to lower income households. Redistribution within the Social Security program has long been a controversial topic, however, because the program transfers resources across people and over time and involves both taxes and benefits. 141 Social Security transfers resources across generations, from current workers to current retirees. Over the long term, the cumulative effects of long-term productivity growth imply that current workers will, on average, have higher wages and incomes over their lifetime than current retirees did. Thus, on average, the Social Security system to date has transferred resources from people in generations with higher overall resources to people in generations with lower resources. Social Security also redistributes resources among people within a generation. For example, the payroll tax used to finance Social Security benefits is proportional up to an income threshold, above which the marginal rate falls to zero. Thus, examining only the tax structure would suggest (incorrectly) that the Social Security program is regressive. If one adds in benefit payments, but focuses only on a 1-year period, Social Security appears highly progressive. Households in the lowest income quintile received 20 percent of Social Security benefits (net of taxes paid on those benefits) and paid less than 2 percent of Social Security taxes in 1990. Households in the top quintile paid 47 percent of the taxes and received 11 percent of the benefits. However, because Social Security transfers resources over people's lifetimes, the program is best understood through analyses of longer periods. Among households of the same generation, Social Security has redistributed resources from higher income households to lower income households through a combination of three factors. First, the formula that determines benefits replaces a higher percentage of wages of lower income workers than of higher income workers. This aspect of Social Security is progressive in that the ratio of benefits received to taxes paid falls as income rises. A recent study showed that a married worker who retires at age 65 after working since age 21 at the Federal minimum wage will recover all Social Security taxes paid, including the employer and employee shares, in 4.1 years. A married worker earning the maximum taxable amount each year will recover contributions in 7.2 years. This effect is offset to some extent because heads of lower income households face higher mortality rates than heads of high-income households and thus, on average, collect Social Security benefits for a shorter period of time. After accounting for these factors, one study found that the rate of return earned on Social Security retirement contributions was roughly equal across wealth classes. The study, however, omitted the third effect, namely the influence of survivors, dependents, and disability payments. Lower income households are likely to receive more of these payments precisely because of their higher mortality and disability rates. 142 When all three factors are considered, the Social Security program redistributes resources within a generation from households with higher lifetime income to those with lower lifetime income. SUMMARY • Federal and State tax and transfer programs shift a substantial amount of resources to lower income households from higher income households. Most redistribution occurs through the transfer system. • The overall Federal tax system and the individual income tax are progressive. By several alternative measures, the extent of redistribution within the Federal tax system has not changed substantially since at least the mid-1970s. • The Social Security system transfers resources both across generations and within generations. In each case, the program redistributes income, on average, from higher income households to lower income households. • The impact of government policies on the distribution of wealth across generations can be larger than the impact on the distribution of annual incomes. POVERTY AND THE SOCIAL SAFETY NET Despite long-term increases in income and government transfer spending, poverty remains a serious problem in the United States. Integration of more low-income households into the economic mainstream will not only help those families gain economic independence, but will also increase the productive resources of the Nation and help maintain economic growth. The Poverty Rate The poverty rate measures the percentage of people with incomes below a level associated with a minimally adequate standard of living (Box 4-6). The official poverty rate for persons fell from 22.4 percent in 1959 to a low of 11.1 percent in 1973, fluctuated throughout the remainder of the 1970s, and rose sharply from 11.4 percent in 1978 to 15.2 percent in 1983. The rate fell to 12.8 percent in 1989, and then rose to 13.5 percent in 1990 (Chart 4-9). The official poverty rate, however, is somewhat misleading in several respects. The Census Bureau publishes several alternative poverty rates that adjust for some of these factors. For example, the official poverty measure omits noncash transfers. Including estimates of the value of noncash transfers reduces the poverty rate in 1990 to 11.0 percent (Chart 4-9). The poverty threshold is adjusted annually for inflation using the CPI-U price index. For reasons discussed in Chapter 7, the CPIU-Xl provides a more accurate and consistent measure of trends in 143 Chart 4-9 Alternative Measures of the Poverty Rate of Persons Adjusting for government noncash benefits and measuring the cost of living on a consistent basis reduces the level of the poverty rate, but does not alter the trends. Poverty rate of persons 24 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 * Includes noncash benefits. Sources: Department of Commerce and Department of Labor. the cost of living since the mid-1960s. Using the CPI-U-X1 to adjust the poverty thresholds since 1967 yields a 1990 poverty rate of 12.1 percent, excluding noncash transfers, and a rate of 9.5 percent when noncash transfers are included (Chart 4-9). By any measure, however, poverty is clearly a problem that requires serious attention. Duration of Poverty While most people in poverty remain impoverished for only a short time, most poverty in any extended period is accounted for by people who remain poor for a long time. Long spells of poverty have been associated with low educational attainment, low attachment to the work force, and early child bearing out of wedlock. Concern exists that the structure of means-tested transfer programs contributes as well. Studies have also shown that children of government-dependent parents are more likely to become dependent on government themselves. Demographics and Poverty Poverty rates and trends vary across age groups. For people 65 years and older, the poverty rate fell from 28 percent in 1966 to about 16 percent in 1980 and to about 12 percent in 1990. In con 144 Box 4-6.—The Poverty Rate The poverty rate measures the percentage of people or families with money income below the poverty threshold. The threshold was developed in 1964 by the Social Security Administration. The threshold was based on a 1955 survey that showed average families spent about one-third of their income (net of income and payroll taxes) on food. To estimate a minimally adequate total family income level* the Agriculture Department's economy food budget plan was multiplied by the same factor of three. For smaller families and people living alone, the cost of the economy food plan was multiplied by slightly higher factors to compensate for the relatively larger fixed expenses. Standards of living have grown considerably since the mid1950s and average families do not have to spend as much of their income now on food or other basics as they previously did. However, a higher multiplier reflecting the amount an average family now spends on food would introduce a relative measure of poverty not in the original poverty definition. The official poverty estimates maintain the same absolute standard of living by adjusting the threshold for inflation each year. Income calculations for determining the poverty rate omit in-kind transfers and fringe benefits. The poverty measure also omits consideration of forms of wealth, such as homes, automobiles and savings accounts, and does not take into account regional variations in the cost of living. trast, as discussed below, the poverty rate for children has increased over the last 25 years. Shifts in household composition also affect poverty rates, primarily through their effects on earnings and income. The most common reason why people fall into or escape poverty concerns changes in their own or their family's earnings. Thus, for example, the long-term increase in the proportion of families with children headed by females has led to an increase in the overall poverty rate. Female heads of families tend to be younger than heads of other families and those in the labor force may have had shorter job tenure or less overall labor market experience. Female heads of households also often face child care responsibilities that severely limit their ability to take on jobs outside the home. Means-tested transfer programs provide incentives for female heads of households to reduce or eliminate work outside the home. About onefourth of all female householders with children do not work outside the home; of these, nine in ten are poor. Due to these and other 145 factors, median income for all female householders was 60 percent of median income for all households in 1990 and the poverty rate for female-headed families with children was 44.5 percent. Between 1973 and 1990, the increase in the number of poor female-headed families was 69 percent of the increase in the number of all poor families, and the proportion of poor families headed by a female grew from 45.4 percent to 53.1 percent. Chart 4-10 shows that, if the mix of population classified by householder status (married, female householder, or unrelated individual) were held constant at the 1973 proportions, the poverty rate in 1989 would have been 11.1 percent, the same as in 1973. As a purely statistical matter, shifting demographic patterns, through their effects on household earnings and income, can account for the entire increase in poverty between 1973 and 1989, while other effects on the poverty rate netted to zero. Chart 4-10 Demographics and the Poverty Rate of Persons If the mix of population classified by householder status were held constant at 1973 proportions, the official poverty rate in 1989 would have been the same as the rate in 1973. Poverty rate of persons 16 1973 1975 1977 1979 1981 1983 1985 1987 1989 Source: Department of Commerce. This point should not be misunderstood. Families are not destined to have lower income simply because they have a particular demographic characteristic. However, family income is largely determined by the earnings capacity of its members—the number of workers, and their skills, job tenure, experience and availability to work outside the home. Some of the recent demographic changes, the growth in the number of female-headed households in particu 146 lar, has made it harder for a larger number of families to develop earnings capacity. THE SOCIAL SAFETY NET Although there is no official definition, the social safety net refers generally to government programs and policies whose purpose is to ensure a minimum standard of living for individuals and families unable to provide for themselves. Means-tested programs (Boxes 4-1 and 4-2) are thus the centerpiece of the social safety net. Social insurance programs (Box 4-3) make payments to persons and families who experience income losses and thus provide protection against several important causes of poverty. Other programs, such as child support enforcement measures, are also important elements of the safety net. Safety net spending has a significant effect on the official poverty rate. In 1990 cash and noncash transfers cut the poverty rate by more than half, from 19.3 percent to 9.5 percent, using the CPI-UXI. One measure of the safety net is Federal and State means-tested expenditures per poor person. Although not every dollar of meanstested spending goes to people in poverty, this measure provides a useful approximation of the extent of, and trends in, government spending on the poor. Chart 4-11 shows that despite a sharp drop between 1978 and 1982, real Federal and State means-tested spending per poor person (using the official definition of poverty) increased by more than 300 percent from 1967 to 1990. Means-tested expenditures were $5,160 per poor person in 1990. Much of the long-term increase occurred through medicaid spending. Spending per poor person on other means-tested programs has increased 230 percent since 1967 and totaled $3,015 in 1990. INCENTIVE EFFECTS OF MEANS-TESTED TRANSFERS One of the major concerns about means-tested transfer programs is their effects on the labor supply, saving, and family structure of recipients. These effects are examples of the behavioral responses to tax and transfer programs discussed in Box 4-5. Labor Supply Recipients of means-tested transfers typically have very low levels of earnings, and the structure of these transfer programs is suspected to be at least partially at fault. Most means-tested programs provide guaranteed benefits to a target population with zero earnings. As earnings are increased, benefits are reduced and eventually eliminated. This reduction in benefits acts like a tax on earnings. 147 Chart 4-11 Real Federal and State Means-Tested Transfer Spending Per Poor Person Real government means-tested spending per poor person grew rapidly between 1967 and 1978, fell between 1978 and 1982, and grew substantially again after that. 1990 dollars 6,000 5)000 r Total Means-Tested 4,000 3,000 / ** / * Excluding Medicaid .-•*" 2,000 1,000 i 1967 1969 1971 1973 1975 1977 1979 1981 , - i 1983 i i 1985 i i 1987 , i 1989 Fiscal years : Note: CPI U-X1 used as deflator. Sources: Department of Commerce, Department of Labor, Office of Management and Budget, and Congressional Research Service. For example, when AFDC recipients accept jobs, their AFDC and food stamp benefits may fall. If they earn sufficiently high amounts, they can eventually lose eligibility for medicaid and child care benefits as well. Studies have shown that effective tax rates on people leaving AFDC to work can be very high and can even exceed 100 percent. High effective tax rates such as these obviously reduce the incentive for people to work outside the home. The actual effect of these provisions on labor supply is the subject of much research. The policy issues posed here have been well recognized for decades. Given the current structure of the system, reducing the high benefit reduction rate requires either allowing families to remain on AFDC at higher income levels than are currently allowed, with attendant higher government spending, or providing a lower amount of assistance to families with no earnings. To reduce the disincentives created by AFDC, the Administration has proposed, as a demonstration project, setting up "escrow" saving accounts for long-term AFDC recipients, working their way off the rolls. The project would set aside the amount by which a long-term AFDC family's benefits are reduced when the family head takes a job, and would pay that amount in a lump-sum to the family if they succeed in working their way off the rolls. 148 Saving Means-tested transfer programs have asset limits as well as income tests. To remain eligible for AFDC, a family may not have more than $1,000 in wealth, excluding a home, one automobile, and, at the State's option, items of personal property deemed essential for daily living. Although asset limits ensure that families use their own resources before depending on the government for assistance, asset restrictions mean that people already receiving benefits cannot save much if they want to retain their eligibility for public benefits. People who are currently ineligible for benefits as a result of asset restrictions have an incentive to diminish their assets so they can qualify for benefits. But without the economic cushion that assets provide, people will be less likely to take steps to leave transfer programs and begin attaining economic self-sufficiency. For this reason, the 1993 budget calls for giving States the option to raise the AFDC asset limit to $10,000 for families already receiving AFDC benefits. Family Structure Because AFDC targets primarily single-parent families with children, many analysts think that the program has contributed to the increase in the number of female-headed families over the past 20 years. While the evidence concerning its effects on out-of-wedlock childbirth and divorce patterns is mixed, AFDC clearly penalizes marriage. The average transfer income (including medicaid) in 1990 for a single parent with two children and no earnings was $9,196. Income net of work expenses and taxes from a minimum wage job was approximately $6,370. If an AFDC recipient married a minimum wage worker in 1990, combined family income would be only $10,887 because welfare benefits are reduced due to the spouse's labor earnings. The combined income before marriage was $15,566. As a result of marrying, the couple would lose $4,679 in income. Despite this apparent disincentive, marriage is a primary reason for leaving AFDC. The existing system of means-tested transfers thus provides lowincome families with incentives not to work, not to save, and not to keep families intact. ISSUES REQUIRING SPECIAL ATTENTION Over the past century, economic growth has done more to reduce general conditions of poverty and economic need than any specifically designed antipoverty policy. While a healthy economy is important in fighting poverty, by itself it is insufficient because not all low-income households benefit from economic expansion. Some 149 analysts have concluded that the ability of macroeconomic growth to reduce poverty may have diminished in recent years for either of two reasons. First, earning opportunities were less attractive for low-skilled workers in the 1980s. Second, due to child care responsibilities and other factors, income of poor female heads of families tend to be less responsive than income of other poor households to macroeconomic expansion. The proportion of such households among the poor has increased in the past 20 years. Thus, general policies to enhance growth need to be supplemented with programs that assist particular groups. Administration policy for low-income households aims to give people choice and opportunity. Only with the ability to make crucial decisions regarding themselves and their families will people be able to participate fully in the mainstream economy. Policies that promote opportunity, choice, and responsibility foster the values that are central to attaining economic self-sufficiency. Children Children now have a higher poverty rate than any other age group. In 1990, about 20 percent of all children and 45 percent of black children in the United States lived in poor families. One explanation for the high child poverty rate is the increase in the proportion of families headed by single females. The proportion of children living in female-headed families doubled, from 11 percent in 1970 to 22 percent in 1990. In 1990, children living in femaleheaded families were more than five times as likely to live in poverty as children living in married-couple families. More than half of all poor children in 1990 were living in female-headed families. Children need special consideration for several reasons. The economic position of a child depends on the economic position of his or her family. A child is therefore limited in the ability to make decisions or take actions to improve his or her economic situation. Poverty and economic insecurity have negative effects on children. Children born into poor families suffer from higher infant mortality rates and lower average birth weights and are at greater risk of developing learning and health problems. Today's youth represent the future. Social investment in children is economically vital not only for their own sake but also in preparing America for the 21st century. Over time, the benefits of assistance to poor children can be expected to accrue to all members of society. The Administration continues to place a high priority on programs serving children. Government-wide funding for programs relating to children is projected to rise from $60 billion in fiscal 1989 to over $100 billion in fiscal 1993, representing a 66-percent increase in funding over the 4-year period. 150 The social safety net, in many cases, is unable to assist children directly. Rather, aid often must come through the child's parents. One direct way to assist children is through education. America 2000, the President's strategy for moving the Nation toward the national educational goals, seeks to focus attention on the needs of children by helping all children start school ready to learn. Head Start is designed to do just that, by providing a wide range of services to low-income 3- and 4-year olds. Head Start provides cognitive and language development, medical, dental, and mental health services, and nutritional and social services. Analysis of Head Start has shown it to be effective in providing learning skills for disadvantaged children. The Administration's fiscal 1993 budget proposes a $600 million increase in Head Start funding, the largest ever. If the increase is approved by the Congress, Head Start funding will have more than doubled in this Administration. The Administration also supports educational choice and flexibility. Choice is critical because it enables parents to make decisions about what is best for their children's education. The fiscal 1993 budget includes proposals to increase educational choice for lowand middle-income families, for educationally disadvantaged children, and for students pursuing higher education. The Working Poor The vast majority of families with workers are not poor. In 1990, the poverty rate for families with any employment was 7.5 percent, while the rate for families with full-time, year-round workers was 3.1 percent. Nevertheless, work is not always an immediate way out of poverty. In 1990 about 60 percent of all poor families had at least one employed worker and 20 percent had a full-time, yearround worker. Typically, these are larger families. The tax and transfer system provides assistance to working families with low wages through food stamps, medicaid, child care assistance, and the earned income tax credit (EITC). The EITC reduces the income tax liability of low-income working taxpayers with children. The credit is refundable, so that families with no other tax liabilities receive a payment in the value of the credit. The basic credit rate was expanded from 14 percent in 1990 to 23 percent for families with one child and 25 percent for families with two or more children by 1994. The maximum credit will rise from $953 in 1990 to about $1,300 in 1992 and more than $1,900 in 1995. The EITC supplemental young child credit, enacted as part of the 1990 budget agreement, provides an additional 5-percent tax credit to eligible families with children less than a year old. A health insurance credit, also part of the 1990 budget agreement, allows a 6percent tax credit to families to help defray the cost of health insurance policies that cover children. In 1992 the maximum health credit will be about $450. 151 Homelessness and Affordable Housing One of the most visible problems of the last decade has been homelessness. The exact number of homeless people in the United States is uncertain, but one extensive study placed the number between 500,000 and 600,000 over a given week in 1987, with twice that number homeless at some point during the year. Changes in urban housing markets are often cited as an important cause of homelessness. Rising rents and land prices and the rejuvenation of downtown areas have displaced low-income populations. The availability of boarding houses and rooms, typically used by poor single adults, has diminished in many cities. In some areas, rent control, restrictive building codes, and zoning regulations have also decreased the stock of low-income housing. Other factors in homelessness include deinstitutionalization of the mentally disabled, drug abuse, and spouse abuse. The McKinney Act, passed in 1987, was the first bill to authorize major direct Federal expenditures on emergency food, shelter, and counseling for the homeless. In fiscal 1992, $1,008 million was authorized for homeless assistance. The fiscal 1993 budget calls for a 5.5-percent increase in funding. Legislation signed into law in November 1990, homeownership and opportunity for people everywhere (HOPE), established a new, comprehensive strategy to address homelessness called shelter plus care. Shelter plus care is the first program to combine rental assistance with the necessary supportive services to assist the homeless in becoming self-sufficient. Housing affordability is also a critical concern. A large portion of the poor pay more than half of their income for housing. The Administration continues to emphasize housing vouchers and other tenant subsidies to address low-income housing needs. The 1993 budget also contains proposals to make housing more affordable for many middle-income families. The HOPE program also provides opportunities for low-income residents of public and assisted housing to manage and eventually own their own homes. The fiscal 1993 budget proposes that Federal funding for HOPE homeownership grants be raised by 185 percent to $1 billion. Health Insurance Health costs are increasing far more rapidly than the general price level and many Americans are without adequate access to health insurance. In 1988, roughly 13 percent of the population was medically uninsured. About 30 percent of the uninsured was in poverty. As part of a comprehensive health-care reform proposal, the Administration proposes to establish tax credits and deductions for 152 low- and moderate-income people who are not covered by other federally subsidized health programs. The maximum credit for the purchase of health insurance would be $3,750 for families of three or more. SUMMARY • Since the mid-1960s, Federal and State means-tested expenditures per poor person have grown significantly. • Administration antipoverty initiatives focus on providing people with the opportunity, incentives, choices, and responsibilities that help develop economic self-sufficiency. • Demographic changes have influenced the poverty rate in recent years. Disincentives in means-tested transfer programs to work in the labor force, save, and marry exacerbate these effects. • Although sustained economic growth remains the best way to improve economic welfare, special attention must be paid to children, the working poor, homelessness, affordable housing, and health insurance. CONCLUSION Over the long term, incomes for families and households in each part of the income distribution have increased substantially. Over the past 25 years, the distribution of money income has become more dispersed in the United States. Similar trends are evident in other countries as well. Trends in the level and distribution of income are determined by a complex interplay of aggregate economic activity, demographic changes, labor market changes, and government policy. Government taxes and transfers redistribute a substantial amount of resources from higher income households to lower income households and across generations. Most of this redistribution occurs through transfer payments. Government spending on transfer programs has increased significantly, starting in the 1960s and continuing to the present. Redistribution within the Federal tax system has not changed substantially since at least the mid-1970s. The status of low-income households remains an important concern. A combination of continued economic growth and targeted programs is the best strategy for alleviating poverty. 153 CHAPTER 5 Competitive Forces and Regulation GOVERNMENT AT ALL LEVELS affects economic activity through such mechanisms as taxes, law enforcement, and the construction of roads and highways. Regulation, however, generally refers to legal rules that alter the way private companies and others conduct their operations or that mandate government provision of goods and services. "Economic" regulation takes many different forms. It includes regulating prices and limiting the extent of competition in an industry, by establishing, for example, a single local telephone company with rates set by a government body. The government also attempts to protect the environment, health, and safety through "social" regulation. Much of this regulation has been enacted in response to concern about exposure to risk. Economic and social regulation, the main focus of this chapter, are part of a broader class of regulatory activities that affect businesses and consumers. Governments require schools to provide special services for certain groups of students, require places of business to be accessible to the handicapped, and require firms to provide certain benefits to their employees. The government sometimes provides services directly, such as mail services through the U.S. Postal Service, and prohibits others from competing to perform many of these services, including first-class mail. While the intentions of many regulations are laudable, they can have unintended adverse impacts on the general public. For example, oil price controls and allocation schemes, begun in 1971 and abandoned in 1981, exacerbated the effects of the two energy crises of the 1970s by creating gasoline lines and spot shortages of gasoline. In contrast, during the Persian Gulf crisis, the short-lived price spike reflected the potential scarcity of oil created by Iraq's invasion of Kuwait. The higher prices encouraged consumers to reduce their gasoline use, avoiding the need for government allocations. Once it became apparent that future supply disruptions were unlikely to occur, prices receded. Why are regulations that have an adverse impact on the general public instituted in the first place? One reason is that proponents of increased government regulation fail to consider the costs associated with new regulations relative to the benefits they are intended to achieve. This failure is particularly common when regula 155 tions are developed to reduce exposure to risk. Similarly, regulation to prevent monopoly pricing by public utilities, although intended to benefit consumers, can be costly if it discourages innovation by the utility. Also, new regulation results from efforts by interest groups to influence legislators and regulatory agencies. As a result, regulations are adopted that sometimes benefit a particular interest group to the detriment of overall societal goals. Appropriate regulation is based on a balancing of costs and benefits to society in general, taking into account hidden costs such as reductions in the incentives for firms to innovate. Once in place, regulations often are difficult to eliminate or to alter. A regulation is a legal rule that can be changed only by legislation or the further actions of a government agency. Moreover, special interests that would lose from the removal of a regulation that diminishes the well-being of consumers often resist proposed rule changes. Continued restrictions on price cutting on international air routes, for example, benefit the owners of some air carriers because they are protected from competition, but consumers in general suffer because they are forced to pay higher fares. Foreign governments that regulate or control air carriers that would be forced to become more efficient in a more competitive market resist the change to a deregulated environment. Deregulation, however, is appropriate when there is reason to believe that, without government intervention, a market would be competitive. Even when some regulation is required, reduced or modified regulation is warranted when the market outcome will be more competitive with less restrictive regulation. The Administration remains committed to the continued process of deregulating or reducing regulation in markets that are or can be competitive and to advocating regulation only when there is a strong presumption that the benefits to society exceed the costs. Energy, for example, is an important input into production and is also consumed directly. Increased reliance on the competitive market has improved the ability of the economy to respond to shocks in energy supply. The Administration's National Energy Strategy has proposed regulatory changes that would allow energy markets to function even more effectively. Further reductions in regulation would increase the availability of natural gas. They would also increase competition in the generation of electric power by encouraging the entry of lower cost, more innovative producers. Reforming the regulation of financial institution^ while ensuring the integrity of the financial sector is another major goal of this Administration. In early 1991 the Administration proposed legislation to address the fundamental problems of the banking industry—the need to recapitalize the bank insurance fund; the need to make banks safer, stronger, and better able to compete; the need to 156 attract private capital into the industry; and the need to protect the taxpayer from a costly deposit insurance bailout. The legislation produced by the Congress provided critical funding for the bank insurance fund but little more. Further legislation is needed to make banks stronger and to improve the competitiveness of the industry. The regulation of financial markets was analyzed in detail in the 1991 Report. Where regulation remains necessary, the movement toward "incentive regulation/' which encourages firms to operate more efficiently, has been a positive regulatory innovation. As a transition to complete deregulation, the Federal Communications Commission (FCC) is now regulating the rates AT&T (American Telephone and Telegraph) charges for long-distance telephone services in a way that encourages the company to produce more efficiently. The Environmental Protection Agency (EPA) has pioneered the use of a regulatory mechanism that allows the market to determine the most efficient way to achieve air quality levels. While the burden of clean air legislation will be high, this Administration initiative will save several billion dollars over the next two decades. Poorly designed regulations can impose burdens on firms and their workers that in the long run will hurt economic growth. As part of the Administration's agenda to enhance economic growth, the President has announced a regulatory reform initiative designed to reduce the economic burden of regulation (Box 5-1). When it is determined that the government should intervene directly, regulatory approaches that use or replicate market forces, rather than impose direct bureaucratic control on output and prices, will allow markets to retain their flexibility and encourage the most productive use of the economy's resources. COMPETITION AND THE ROLE OF GOVERNMENT The competitive market system has three important advantages. First, the discipline of competition encourages efficient production. In a competitive market, a firm that does not produce efficiently will have to charge a higher price to make a profit and will lose customers to its more efficient competitors. Ultimately the firm will be driven out of business. Second, a competitive market ensures that the economy's productive resources are put to their best use. Automobile manufacturers, for example, decide what kind of cars to build based on the relative prices of different parts needed for the car and on what they think consumers will pay for different kinds of cars. As economists since Adam Smith have emphasized, in competitive markets, consumers and producers will be led to an outcome in which the value con http://fraser.stlouisfed.org/ 305-592 0—92 6 Federal Reserve Bank of St. Louis 157 Box 5-1.—The President's Regulatory Reform Initiative There is increasing concern that the high cost of regulation has become a barrier to economic growth* On January 28, 1992, the President announced a regulatory reform initiative as part of the Administration's agenda to enhance economic growth. The central theme of the regulatory reform initiative is to have Federal regulator? agencies review existing regulations and to accelerate action on initiatives that eliminate unnecessary regulations or otherwise promote economic growth, as allowed by law. The goals of the review are to: • revise (or repeal where appropriate) those regulations that clearly impose costs that exceed their benefits; • ensure that regulatory goals are being achieved at the lowest possible cost; • ensure that existing rules rely on market forces rather than command-and-control requirements to the extent feasible; and • ensure that regulations provide clarity and certainty to the regulated community and do not promote needless litigation. To achieve these goals the agencies have been asked to refrain from issuing any new rules for 90 days (except for those regulations that have statutory deadlines* that would promote economic growth, or that are needed for health and safety emergencies) in order to focus their efforts on evaluating exist* ing regulations* As a first step, the President announced actions to begin the regulatory reform initiative. The goals of these specific actions are to increase the amount of credit and capital available to businesses and consumers, and to reduce the costs of regulation to small businesses. As the review of existing regulations proceeds further actions will be taken as well. sumers place on the last unit of output of a good (or service) produced just equals the value that society forgoes in producing it. Third, competition accommodates changes in consumer demand. If consumers demand more washing machines, store owners will quickly begin to run out of inventories. The price will increase to reflect the increased demand for the existing stock of washing machines. In turn, manufacturers will respond by producing more of them. One of the roles of government is to establish an institutional framework that is conducive to competition and, when markets are 158 not performing well, to introduce regulation that accomplishes the goal of approximating competitive outcomes. THE LEGAL SYSTEM The law determines the ground rules under which market transactions take place. All legal rules, including regulations, impose costs and bestow benefits on different participants in a transaction and therefore alter their incentives. If an inventor knew that another person could copy an innovation and sell it to others, there would be very little incentive to invent in the first place. The legal system protects the inventor by creating specified rights to exclude others from the use of the invention for a fixed period of time, and therefore conveys the right to require compensation for its use. Besides defining and protecting a person's property rights, the legal system provides a method for enforcing contracts and for compensating people when they are victims of accident or injury. Among its many benefits, the legal system provides a forum for resolving disputes and establishes the ground rules upon which market transactions take place. But resolving conflicts within the legal system also entails costs. A legal system can constrain economic activity if dispute resolution is slow, if the outcome is uncertain, or if the costs of litigation are high. Reform of the legal system, like regulatory reform, involves setting rules that achieve their aims in the most cost-effective way possible. The goal is to create rules and a system of adjudication that provides a fair and efficient system for settling disputes. Property Rights, Contracts, and the Tort System Ownership of a piece of land gives the owner the right either to exclude others from it or to give them access to the benefits or use of a resource on that property. The deed to a piece of land defines a property right, and the law protects that right by giving the owner access to the courts if someone tries to use the property without the owner's permission. Property rights are not defined in the abstract, however. Private property rights are determined by overall societal goals. In the case of land, local zoning laws limit property rights by restricting the types of buildings that can be constructed in a particular neighborhood. Some regulations have been challenged as violating the Fifth Amendment prohibition against taking private property without just compensation (referred to as "takings"). In several recent cases, landowners discovered that newly enacted regulations intended to protect wetlands or endangered species prevented them from building on their property. They argued that although the public interest may be served by restricting land use, the landowners should be compensated for their loss. They also argue that the traditional justification for an uncompensated appropriation of pri- 159 vate property—the elimination of a "nuisance"—does not apply in these cases. If a court determines that a "taking" has occurred, it will consider the economic impact of the regulation on the value of the property and the extent to which the regulation has unreasonably interfered with investment expectations in determining compensation. The Lucas case, now pending before the Supreme Court, presents these issues in the context of a claim that local restrictions on beachfront development, on a lot otherwise suitable for construction, deprived a property owner of all meaningful use of his land. The United States filed a brief in this case, emphasizing the narrow scope of the government's power to regulate nuisances without paying compensation. The Court's decision in the case will affect the value of land subject to regulation, the incentives of landowners to develop such land, and the incentives of political bodies to take such regulatory actions. Property rights may also be granted in a form less tangible than a deed to a piece of land. A patent that allows an inventor to receive the profits from his work or a license from the FCC that gives the owner sole rights to use a part of the radio spectrum are also property rights. The licensee of a particular portion of the spectrum would have little incentive to invest in the frequency if any other person could broadcast on the same frequency. By defining what the license is and providing a forum to enforce that right, the legal system allows the license owner to capture the returns from the investment. The rules of contract law provide for enforcement of agreements and establish remedies when contracts are breached. Even if a person could specify all outcomes when writing a contract, legal enforcement would still be necessary to ensure that people will honor the agreement. If a tire manufacturer, for example, has contracted to deliver tires to an auto manufacturer and then does not deliver them, the auto manufacturer can go to the courts to have the contract enforced. Without enforcement, people would have to depend exclusively on the good will of others to ensure that the agreement is carried out. The auto manufacturer can more easily plan production of new cars when the contract for tire delivery is clearly enforceable. The legal system also includes a system of tort law, whose major goal is to provide victims of accidents and injury the opportunity to seek compensation for their losses. By awarding damages to victims, the tort law creates an incentive for individuals to behave responsibly. Because of the potential for being sued, people put more effort into preventing accidents and reducing the potential loss from accidents. 160 Proposed Reforms for the Legal System Certain aspects of the process of enforcing civil law have been criticized for being costly, arbitrary, and unpredictable and for using unscientific standards. Because of the way the rules for resolving legal disputes are currently written, parties to a legal case do not consider all of the costs of resolving a lawsuit. For example, both sides to a legal dispute have almost unlimited ability to take sworn depositions of witnesses, request documents, and submit written questions to each other within the pretrial process called "discovery." Discovery is provided without payment from the requesting party, so there is virtually no incentive to limit the size of the request. As a result, more information than necessary is often gathered,, adding substantially to the cost of litigation but providing little offsetting benefit. Under the leadership of the Vice President, the President's Council on Competitiveness has proposed a comprehensive set of reforms to the civil justice system in its "Agenda for Civil Justice Reform in America." Many of the reforms are designed to accelerate the resolution of disputes and to discourage waste in litigation. The proposed civil justice reforms would establish rules to set quantitative limits on the amount of discovery provided without cost to the requesting party, encourage alternative methods of dispute resolution, place caps on punitive damages, and promote appropriate use of expert testimony (Box 5-2). In Executive Order 12778 the President directed all Federal agencies to implement several of these reforms, including changes in discovery procedures and in the use of expert witnesses, in civil proceedings in Federal courts to which the Federal Government is a party, to the extent feasible. WHY AND HOW GOVERNMENTS REGULATE Regulation, it is commonly argued, is intended to correct market imperfections, or "market failures." Imperfections in competition among firms are one type of market failure. For example, in an industry that is a "natural monopoly," where a single supplier can most efficiently meet consumer needs, regulation of prices and the number of competitors may be desirable. In a broader set of markets, no economic regulation is generally necessary. In those cases the antitrust laws exist as a check against the possibility of anticompetitive behavior. A second justification given for regulation is the presence of "externalities," or third-party effects. An externality occurs when people do not account for all the effects of their actions on others. A manufacturer who dumps pollutants into a river, for example, does not consider the effects of those pollutants on fishermen who 161 Box 5-2.—Civil Justice Reform Proposals In August 1991 the President's Council on Competitiveness recommended SO specific changes to the civil litigation system. The m^jor reforms include: Loser Pays, The Council has proposed adoption of a modified version of the English rule in which the "loser pays.1* Under this proposal the person who loses a case would pay the winner's attorney fees. The amount of the payment would be capped at a level equal to the amount the loser spends on attorney fees. Knowing that the law establishes a penalty for losing would discourage a frivolous suit. The use of this modified English rule would be limited to cases involving State law brought under the Federal courts' diversity jurisdiction. Punitive Damages. A victim may receive punitive damages over and above actual damages, but those awards are often distributed in a random and capricious manner* The Council proposes that the amount of the punitive damages not exceed an amount equal to the plaintiffs actual damages. Expert Evidence. Often, "expert" testimony is unsupported by accepted professional practice or scientific knowledge* A principal recommendation would require experts to base their testimony on theories "widely accepted" by others in the field. Voluntary Dispute Resolution, Most disputes are resolved through litigation, either at trial or in out-of-court settlements. The Council on Competitiveness recommends greater access to alternative mechanisms such as private mediation or arbitration to resolve matters without resort to the legal system. also use the river. The presence of this type of harmful externality has been the rationale underlying most environmental regulation. An externality can benefit rather than harm third parties. Information is one important example. Private organizations acquire information about product characteristics, such as the nutritional value of foods, which they then sell to consumers. However, it may be difficult for those organizations to capture all the benefits of supplying the information. Once the information is disclosed, consumers can benefit from the use of the information without compensating the provider for its use. In that event, the incentives to invest in supplying the information are diminished. In principle, when the benefits to consumers of having the information outweigh the costs of requiring that it be provided, the government may want to supplement the role of the private market in supplying information. The government can provide information directly or require firms to provide it. People can then make more 162 informed choices about which products to buy. Examples of government-required information include food and drug labeling and energy-efficiency labels for household appliances. Both the absence of competition and the presence of externalities represent imperfections in the market system. If government regulators were acting primarily to correct these imperfections, one would expect that the chief characteristic of regulation would be to simulate the features of the market by encouraging regulated businesses to produce efficiently. In practice, however, the United States and other nations have too often relied on command-and-control mechanisms, which set a particular level of profits or require use of a specific technology, rather than on mechanisms that encourage firms to reduce their costs or to improve services. For example, EPA's 1979 rules for new electric power plants required costly limestone "scrubbers" to reduce sulfur emissions at virtually all new coal-fired plants. A better alternative would have been to set emissions targets and then allow firms to meet the targets by the most cost-effective means, such as by switching to lower sulfur coal. Other examples of command-and-control regulation include restricting price competition among ocean carriers, limiting the number of firms that can provide cable television service, and using administrative hearings to determine who gets the rights to new frequencies on the radio spectrum. One reason that command-and-control regulations remain in place is that the decision to introduce regulatory reform or to deregulate an industry affects the distribution of wealth among consumers and regulated companies. The outcome of the regulatory process may be determined by the strength of interest groups rather than by an assessment of whether the proposed regulatory action maximizes net benefits to society. A regulated company that is producing inefficiently, for example, knows that competition will force the company either to go out of business or to invest in a more efficient production process. Such a company is highly likely to resist regulatory reform. The Inefficiency of Monopoly Sometimes an industry may not be competitive—either because a producer has a monopoly over production or because the industry consists only of a few large firms that can make decisions collusively. In these situations, producers tend to reduce the amount of production below what a competitive market would produce, causing prices and profits to rise at the expense of consumers. The desirable characteristics of markets are attenuated when competition is absent. In particular, the outcome is inefficient because some consumers would be willing to pay more for additional quantities of the good than the additional cost of its production. If competition were greater, producers' profits would decline, but by less than the 163 value of increased output, and all consumers would enjoy lower prices. One way that the government discourages anticompetitive behavior is through antitrust enforcement. The antitrust laws are part of the institutional framework within which most businesses in the United States operate. The Federal Government enforces the antitrust laws through the Antitrust Division of the Department of Justice and the Federal Trade Commission. The primary focus of these agencies is to challenge mergers that significantly reduce competition and to prosecute businesses that collude to raise prices. The Regulation of Prices and Competition Economic regulation generally involves control over the prices a business can charge and limitations on the number of businesses that can provide a good or service. One goal of price regulation is to place a check on companies that have a monopoly in the market that they serve. Yet, price regulation has been imposed on competitive industries as well. Price regulation of initial natural gas sales was instituted in 1954, even though approximately 2,300 independent producers of natural gas were operating as of 1947. Because regulated prices were set too low in an industry that was already competitive, shortages of gas developed in the 1970s. Another motivation for economic regulation is to protect existing companies from new competition. Regulation of interstate trucking by the Interstate Commerce Commission (ICC) in 1935 was partially stimulated by railroads' concern that unregulated trucking companies would be able to undercut rail prices in areas where regulated railroad rates were high relative to trucking costs. The ICC restricted the ability of trucking companies to offer discounts, and regulators were hostile to companies that wanted to extend service into new geographic regions and to the development of completely new firms. In fact, existing firms were allowed to protest proposed service by a new carrier. The Motor Carrier Act of 1980 changed all of that by limiting the ICC's regulatory authority. By 1990 the total number of licensed interstate carriers exceeded 40,000, compared with 17,000 in 1980. During fiscal 1987 truckers filed 1.2 million new rate schedules, compared with 394,000 in 1979. Because trucking services represent 75 percent of all expenditures on transporting goods, reduced regulation contributes to economic growth by cutting a major cost of production. Price regulation and limitations on competition are generally justified in industries that are natural monopolies. These are industries where a single firm can produce all of a product at lower cost than several different firms can. Within a particular geographic area, electric utilities, local telephone companies, local distributors of natural gas, and similar industries have been considered natural monopolies. 164 If several electric utilities attempted to compete with each other to distribute electricity to customers in the same geographic area, each company, realizing that cost reductions in distribution come from having more local customers, would begin to lower prices to capture those customers. Eventually if it were less costly for one firm to provide all the service, only one local distribution company would survive this battle. Exactly this type of competition occurred in the late 19th century when several companies provided electric service in Chicago, with one company eventually emerging to serve the entire city. The expenditure on the overlapping electric lines was wasteful, since competing firms could not survive. The usual policy response is to carve out a monopoly for an electric utility over a fixed geographic area and then to regulate its prices. This regulatory approach eliminates wasteful duplication while constraining the pricing of the monopolist, but it can also have drawbacks. As discussed below, the way prices are regulated can diminish the incentive for the regulated company to minimize its costs. Government protection of a monopoly may also prevent new competitors from implementing technologies that do not have the cost characteristics of a natural monopoly. The Environment, Health, and Safety Since World War II, the government has assumed an ever-increasing role in regulating the environment, health, and safety. Spurred by increasing public concern over risks, government agencies, for example, now regulate discharges of air pollutants, set safety standards for cars, and oversee the food that Americans eat. A major goal of regulating the environment, health, and safety is to correct the problem of externalities. Externalities may take the form of something people want less of—like air pollution—or something they want more of—like information on safety. If one man's clothes are soiled by his rural neighbor's furnace, he may be able to reach an accommodation with his neighbor—for example, by offering to share the cost of switching to a cleaner fuel. In this way, the neighbor is led to take into account the external cost of his decision about which fuel to burn. But if the man's clothes are soiled by air pollution from a thousand furnaces and cars, then it is not practical to reach similar arrangements with, or even identify, all those who caused the harm. In this case, one person can pollute another's air without confronting the cost, and the result is too much air pollution. A regulatory approach can provide a corrective in such cases. Ronald Coase, the winner of the 1991 Nobel Memorial Prize in Economics, has emphasized the role of the cost of reaching agreements in determining the appropriate policy response to problems created by externalities (Box 5-3). Besides protecting the environment, the government protects consumers by providing product information on health and safety 165 Box 5-3.—Ronald Coase, the Role of Transaction Costs, and the Definition of Property Eights Professor Ronald Coase of the University of Chicago, the Nobel Laureate in Economies for 1991, is particularly known for his penetrating analysis of the role of transaction costs— the cost of effecting an exchange—in determining the characteristics of social institutions, Coase pointed out that, for exampie, whether an auto manufacturing company makes or purchases the seat belts it installs in the cars it produces depends upon the cost of making a product for which it may not be particularly well set up (the seat belts) compared with the cost of reaching a satisfactory supply arrangement with an external seat belt firm. In competitive markets, Coase noted, organisational forms that economise on transaction costs will tend to prosper and survive. Changes in the relative costs of such transactions, owing in part to the development of computers, are leading to major changes in the organizational structure of firms in market economies. In a celebrated paper, Coase explored the role of transaction costs in determining how property rights ought to be defined. Should, for example, the property rights of an owner of a piece of land include the freedom to emit smoke that soils a neighbor's laundry, or, alteratively, should the neighbor's property rights include the option to ask a court to enforce a claim for damages against the emitter of smoke? Coase's answer is that how property rights in such cases should be defined depends on transaction costs. If, for example, it is easy to measure smoke emissions but hard to tell whether people are taking due precautions to do their laundry on smoke-free days, the better result may obtain if the property right includes the option to emit smoke! Launderers would then have an incentive to negotiate a satisfactory schedule with smoke-emitters (for example, smokeless Tuesdays), A similar line of reasoning offers insights into the traditional legal doctrine that denies comjmnsation for a "regulatory taking1' to eliminate a "nuisance" and into the choices faced in several recent court cases that deal with new questions of regulatory taking. The Coase analysis emphasizes that in addition to the issues of equity, the courts should consider whether the net effect of a more or less stringent protection against taking in the definition of property rights wilt lead to the best use of land in the long run. 166 or requiring businesses to do so. To encourage disclosure, the President signed the Nutrition Labeling and Education Act of 1990, requiring the Food and Drug Administration (FDA) to establish rules that would make it easier for consumers to understand the nutritional content of foods. Among the proposals the FDA made in November 1991 is a requirement that food companies use standardized measures of a "serving" for more than 100 different foods, which would allow consumers to compare products easily. The FDA is also expected to rule on which specific health claims will be permitted on labels. Although increased nutritional information benefits consumers, it is important to consider its cost when writing regulatory rules that implement legislation. Businesses will incur costs to develop the new information and to alter the food labels. Some of these costs will be borne by consumers in the form of higher food prices. Also, any restrictions on health claims should be balanced against the possibility that potentially useful information will not be disseminated. Furthermore, the presence of an externality does not mean that information on nutrition will be provided only when it is required by the government. Some information will still be supplied by other means, such as through consumer magazines. For certain risks, the government goes beyond requiring that information be provided. In the case of automobiles, workplace safety, or a doctor's services, it may be costly for each person to invest in assessing the relative quality or safety of the goods provided. The government can play the role of gathering the information and then regulating the risks directly. Thus, all automobiles sold in the United States must satisfy safety regulations established by the National Highway Traffic and Safety Administration (NHTSA). Some products, such as certain pesticides, are banned entirely. The government, however, is not the only entity that can assist the consumer in evaluating product performance. Product manufacturers may be able to assure quality by providing product warranties. Industry-established standards and companies' investments in their own brand names also demonstrate that the private market plays an important role in ensuring safety and quality without help from the government. Many actions have some external or third-party effects that could justify government intervention. But government action itself has third-party effects, and government intervention to correct the market failure of an externality carries with it the risk of unintended outcomes because of "government failure." Government failure in regulation may occur for at least three reasons. First, it can be difficult to determine who is affected by an externality and to what extent. This is particularly true where the scientific consensus about an externality is still evolving. For ex 167 ample, the scientific consensus on air pollutants and toxic substances has changed often enough to impede sound regulatory decisions, as the scientific debates surrounding asbestos, dioxin, and global climate change all illustrate. Government failure in regulation may also occur when regulatory solutions impose large unintended costs on innocent third parties. Thus, long delays in the approval of new drugs harms those forced to use the older, often less effective, substances. The Administration has proposed using outside review organizations to complement the FDA's function of evaluating the safety and effectiveness of new drugs. The goal of contracting out some of the approval function is to reduce the time needed to approve new drugs, especially those that have the prospect of extraordinary benefits in reducing morbidity or mortality. Third, as explained in the next section, government failure may occur when regulation becomes the mechanism that allows one group of people to take advantage of another. Interest Groups and Regulation Regulation creates winners and losers. Firms know this and spend considerable time and money trying to capture the benefits of regulation. New regulations rarely affect all firms equally. New firms may face higher costs than existing firms; large firms may be able to finance costly changes demanded by new regulations; some firms may be able to gain exemptions from the existing rules. In each case the effect of a new regulation is to transfer income from one group to another. The government, for example, does this by creating or protecting a firm's position as a monopolist or by restricting a market to a small number of firms. Protected firms enjoy higher profits than competitive firms; these higher profits become the prize sought by others. Thus, as explained above, truckers used the ICC to block entry of new competitors. But gaining a protected position from the government can involve large expenditures. Firms hire lobbyists and lawyers and even alter their business plans in order to acquire a protected position. Because all interest groups must make similar expenditures to seek government favor, the regulatory process tends to favor those groups or businesses that can capture the greatest benefits from a protected position. Once achieved, a protected position must be defended against competitors trying to dislodge the incumbent firm. Before deregulation in 1978, for example, the Civil Aeronautics Board (CAB) granted effective monopolies to airlines on many routes. The CAB held hearings in which the airlines attempted to persuade the board members to award them exclusive franchises and to keep out competitors. Although the deregulated domestic airline industry continues to use lobbyists to gain a favorable hear 168 ing for its views, the industry no longer has protected domestic monopolies to spend time and money defending. The U.S. Department of Agriculture's agricultural marketing orders are another illustration of protection from competition. These orders restrict supply in markets for lemons, oranges, and other crops (Box 5-4). For decades farmers have made investments in the belief that the orders would protect their profitable position. Although in the long run, expansion by farmers dissipates these profits, some farmers resist proposals that would eliminate these orders because doing so would reduce the value of their investment. Box 5-4.—Agricultural Marketing Orders The current Federal marketing order for California-Arizona navel oranges has been in effect since 1953. Under the present order, the maximum quantity each handler (first buyer) may ship to the domestic fresh market is set weekly* Harvested oranges not sold in the domestic market are sold abroad or to the domestic processing industry. By limiting the quantity of oranges that may be sold in the high-valued fresh market, domestic fresh orange prices are raised and total revenue to growers may be increased. Although farmers may gain in any one year from the higher farm income, such gains are dissipated as growers plant additional trees to earn some of the increased revenues brought about by regulation. The marketing order also penalizes growers who produce oranges at lower cost by limiting the volume of fresh oranges they may sell. Consumers of fresh oranges lose as well because of higher prices. What are the costs and benefits of such regulation? A recent study by the Department of Agriculture suggests that eliminating the marketing order would cost producers about $13 million annually, while saving consumers about $30 million. On a per capita basis, however, each consumer would gain about $.12, while each grower would lose about $3,150. Not only firms, but other interest groups as well, benefit from protected positions. The Advisory Commission on Regulatory Barriers to Affordable Housing found that many local land use controls (including zoning laws and building codes) are designed to restrict the availability of housing for families with incomes somewhat lower than current residents. By limiting the supply of affordable housing, local regulations drive up the cost of housing, particularly for moderate and lower income families. 169 The problem of entrenched protected interests can be avoided by arrangements that discourage expenditures solely to defend the special position. Auctioning public property, for example, not only gives the auction winners control of the property but also an incentive to make the best use of it. Currently, the FCC uses a lengthy process of hearings or a purely random lottery system to assign new licenses to the radio spectrum. The Administration has proposed legislation to permit competitive bidding for newly available portions of the radio spectrum to ensure that licenses will be assigned to those parties who value them most. Competitive bidding would also simplify the application process and bring in revenue to the government. THE REGULATORY PROCESS Regulation has become pervasive at the local, State, and Federal levels. Local regulation typically involves such matters as setting zoning restrictions and building codes, regulating sewer and water prices, and granting cable television franchises. In some cases local municipalities own the local electric utility, buying the needed power from generators of electricity. States regulate utilities through regulatory commissions, which set retail rates for local telephone calls, electric power, and natural gas. States also issue regulations in a broad range of areas including insurance, energy, transportation, health, safety, and the environment. Federal regulation is concerned primarily with goods and services that are sold in interstate commerce. The Congress has responded to economic and social problems by creating regulatory agencies or by expanding the role of an existing Cabinet department. In health and safety, for example, 9 separate Federal agencies write regulations under the authority of 26 major statutes. In a process called a "rulemaking," agencies propose rules to conform with the requirements of the legislation (Box 5-5 describes the rulemaking mechanism). They are then published in the Federal Register and finalized only after a period for public comment. As shown in Chart 5-1, researchers estimate that the administrative costs of enforcing and writing Federal regulations have increased almost threefold since 1970. The administrative costs shown in Chart 5-1, however, do not include additional costs imposed on firms from regulation—costs that are ultimately borne by consumers. These additional costs result when regulation raises production costs and product prices, makes products unprofitable to provide, or retards product innovation. Recent estimates put these costs in the hundreds of billions of dollars. To make regulations more cost effective and to create some consistency in the way regulations are formulated in each agency, a system of regulatory oversight has been established within the Ex 170 Box 5-&r-Writing the Rules: The Clean Air Act The Coi*gres& legislates regulation broadly but leaves to the regulatiary agencies the task of filling in the details. Each agency i$ chared with implementing certain laws. As an illustration, the dean Air Act Amendments of 1990 contain 9 major titles running to 300 pages and require the Environmental Protection Agency (EPA) to issue at least 55 separate regulations in the first 2 years alone* Consultation and Publk Comment On November 15, 1990, the President signed the Clean Air Act Amendments. In late 1990 the EPA began work on the first set of rules to be drafted, meeting formally and informally with affected industries, environmental groups, and other outside organizations. In early 1991 the EPA published in the Federal Register the first of a series of notices of proposed rulemaking, soliciting public comment* At several stages of the rule-writing process, the EPA must solicit public comments to be considered as the regulations are finalized. Reg-neg. Beceiitly, some rules have been formulated through negotiated regulation or "reg^negs," which are designed to bring all parties affected by the regulation together to reach a consensus on its design. The regulation is then drafted by the responsible agency in a way that balances the welfare of the affected parties, including that of the general public. When successful, reg-negs are able to reduce the time and resources (including litigation) that might be expanded under the conventional rulemaking process. Agency Review. The Office of Management and Budget (OMB) and other agencies have the opportunity, and in some cases the statutory obligation, to review proposed rules, generally for 30 to 60 days. Mnal Rule. After a last round of public comments, and clearance from OMB, th& EPA Adiministrator signs the final rule, which is promulgated in the Federal Register. ecutive Office of the President. In 1981 President Reagan issued Executive Order 12291, which authorizes the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) to work with the various regulatory agencies to develop more effective and less costly regulations. The Executive order directs all agencies proposing new regulations, reviewing old ones, or developing legislation to estimate costs and benefits and to demonstrate that the potential benefits outweigh the potential costs to society. OIRA reviewed more than 2,100 rules in 1990 to 171 Chart 5-1 Administrative Costs of Federal Regulation The administrative costs of Federal regulation have increased greatly since 1970. Millions of 1982 dollars 10,000 8,000 - 6,000 - 4,000 - 2,000 1970 1975 1980 1985 1990 1991 1992 Economic Regulation Social Regulation Note: 1991 and 1992 figures are projected. Source: Center for the Study of American Business, Washington University. ensure that the principles of Executive Order 12291 were applied. In addition, some major issues are reviewed by the President's Council on Competitiveness. Federal vs. State Regulation One barrier to increasing the overall effectiveness of regulation is the dual system of Federal and local regulation. Local governments often can respond more effectively to problems that arise in their communities. Federal involvement in local zoning laws, for example, would require knowledge of local conditions that would be very costly to accumulate. Overlapping jurisdictions can sometimes create problems. For example, State regulations that impose food labeling laws distinct from FDA rules force businesses to develop differently labeled products for these States. The inevitable increase in production costs is likely to lead to higher food prices for all consumers. In cases where local regulation interferes with economies of production, a uniform system of Federal regulations could reduce the burdens on firms and their workers and lower prices for consumers. 172 SUMMARY • A system of competitive markets creates the discipline that encourages firms to produce efficiently and directs resources to their best use. • A well-functioning legal system increases the efficiency of economic activity by appropriately defining and protecting property rights, ensuring that the terms of contracts are fulfilled, and facilitating compensation for the victims of injury. The Council on Competitiveness has proposed reforms that would improve the efficiency of the legal system and reduce unnecessary litigation. • Government intervention to correct the market failure of an externality carries with it the risk of creating other unintended market failures. • Once a regulatory goal is established, policies that incorporate market incentives are superior to command-and-control solutions. THE BENEFITS OF ECONOMIC DEREGULATION The primary purposes of deregulation are to allow competition to determine the amount of goods and services that are produced and the prices consumers are charged for those goods and services. Competition would also encourage innovation and the development of new products. For example, before deregulation, the CAB determined the number of airlines that could serve each air route and the air fares they could offer. Since deregulation in 1978, fares have decreased on long-distance routes and increased on short-distance routes, but average air fares overall have declined 20 percent in real terms. Half of all passenger trips are now in markets served by three or more carriers, double the percentage before deregulation. Also, once freed from regulation, airlines developed "hub-andspoke" systems, an innovation that has given passengers a much greater range of flight choices. New technologies mean that some industries may no longer be natural monopolies, but regulation can mask that fact by keeping the new technologies out of the marketplace. Instead of perpetuating the monopoly, deregulation would allow new firms to enter. The market would then determine how the service should be provided and at what price. This is especially true in telecommunications where technology is changing rapidly. For many years most supporters of regulation considered long-distance telephone service to be a natural monopoly. Now firms have set up fiber optic and microwave networks that compete directly with AT&T in long-distance service. The Administration proposed in November 1991 to permit competition with the 173 International Telecommunications Satellite Organization (INTELSAT), the consortium that provides international long-distance telephone service by satellite. Under the new policy, international satellite companies would immediately be permitted to provide additional services, with the goal of opening the market to full competition by 1997. Even when unfettered market competition is not feasible, there are better and worse ways to regulate. Under recently developed approaches, prices can be set in a manner that gives regulated firms greater incentives to reduce costs and to innovate. Currently, monopolies, such as local electricity distributors, are often regulated using traditional "cost-of-service regulation/' The regulator tries to determine the cost of providing the service, and sets prices to cover those estimated costs, including a return on the capital that is invested in the regulated company. This method is used to ensure that the company will not lose money and that it will not be able to charge prices above its costs. The problem with cost-of-service regulation is that it does not give the regulated firm the incentive to reduce its costs or provide better service. An attempt to reduce costs will eventually be followed by a reduction in allowed revenues, leaving the firm no better off. If new services lead to increases in profit, prices will eventually be reduced to bring revenues in line with costs. The incentive for firms to develop the new services are thereby diminished. New regulatory approaches, commonly labeled "incentive regulation," are being tried as alternatives to cost-of-service regulation. In the transition from regulation to unregulated competition in long-distance telephone service, the FCC has tied some of AT&T's rates to an index that is adjusted for inflation minus a correction for expected productivity improvements. If AT&T reduces its costs or improves its products, it is allowed to keep some of the profits. The FCC and many States have also instituted this incentive regulation for local telephone companies. And in its National Energy Strategy, the Administration has proposed instituting incentive regulation for natural gas pipelines. In this way regulators limit monopoly profits while giving the regulated company incentives to produce efficiently and to innovate. The following sections analyze proposals for further reductions in regulation that are now being considered to improve performance in the natural gas, electric power, and cable television industries. Regulatory reform will bring more competition to natural gas delivery and the generation of electric power. The benefits of deregulating cable television will be fully realized only when entry barriers to new competitors, possibly using alternative technologies, are removed. The goal of deregulation is to promote general prosper- 174 ity by creating a more efficient allocation of resources. That goal can be achieved by eliminating price regulation and barriers to entry where markets can be competitive. NATURAL GAS Regulation in the natural gas industry provides a good example of the problems that can arise when regulators set prices incorrectly. Before 1978 the price paid for the natural gas extracted from the ground, often called the '"wellhead" price, was regulated by the Federal Energy Regulatory Commission (FERC). Unfortunately, the regulated prices were set too low, reducing the incentive to extract more natural gas. Because demand at the regulated price was greater than the amount being produced, Federal regulators were forced to ration the use of natural gas. To alleviate this problem, the Natural Gas Policy Act of 1978 began the process of decontrolling prices. The Natural Gas Wellhead Decontrol Act of 1989 set a timetable for completing wellhead deregulation. By January 1, 1993, all Federal regulatory control over wellhead prices will be eliminated. The Current Status of Natural Gas Regulation The process of transporting natural gas to a residence or a commercial user remains regulated by FERC and the States, however. Once natural gas is extracted from the ground, it is transported by pipeline, often over long distances and across State lines, and then sold to local distribution companies, electric utilities, and industrial users. FERC regulates the prices charged for interstate transportation of natural gas and the prices that pipelines charge for the gas they sell to local distributors and others. Pipeline companies must provide FERC with information on the costs they incur. These include the prices paid to producers for gas and the cost of building pipeline facilities to transport natural gas. FERC then sets rates to cover those costs. The local distribution segment of the industry, which distributes the gas to residential, commercial, and industrial users, remains largely a regulated monopoly. Generally, the least costly method of distribution is for a single company to deliver the gas to all homes within a market, although a small number of areas have competing distributors for nonresidential customers. Because distribution has natural monopoly characteristics, local distributors generally have franchised service areas in which they are the monopoly provider of service for most or all customers. States regulate the rates distributors may charge. Despite the fact that most wellhead prices have been deregulated, the electric generation and industrial sectors have actually reduced their use of natural gas over the last two decades. Although natural gas is a relatively clean fuel with abundant domestic sup plies, total domestic consumption has declined more than 10 percent since 1973 (Chart 5-2). One primary barrier to increased use is the process of granting permits for construction of new natural gas pipe- lines. FERC approval must be obtained before any new interstate pipeline can be constructed. Often, an administrative hearing is held in which outside parties, including competitors, can object to the application. Several years may elapse before a construction permit is granted, sometimes prompting consumers to turn to alternative, more expensive fuels. Legislation based on the Administration's National Energy Strategy would streamline the process of reviewing applications for pipeline construction. Chart 5-2 Consumption of Natural Gas Domestic consumption of natural gas has declined from 1973 levels. Billion cubic feet 23,000 22,000 - 21,000 - 20,000 - 19,000 - 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Source: Department of Energy. Consumption may also have declined because local distribution companies, electric utilities, and industrial users were limited in their ability to negotiate directly with natural gas producers. Before 1985, when FERC initiated open access to natural gas pipelines, almost all natural gas was actually purchased by pipeline companies and then resold to distributors, utilities, and industrial users. In 1982, for example, only 3 percent of the natural gas transported by the pipelines was owned by others. Consequently, for most users the only source for natural gas was the monopoly pipeline that served their plant. With a monopoly over gas transporta- 176 tion, a pipeline company may not offer the lowest priced natural gas, prompting the user to consider other fuels. Open Access to Natural Gas Pipelines The FERC initiatives have significantly changed the position of pipeline companies by creating incentives for them to transport gas that is owned by other companies. Pipelines that market their own gas, as well as provide transportation services for gas owned by others are called "open access" pipelines. These pipelines are required to provide gas transportation services to owners of natural gas not affiliated with the pipeline that are comparable to those it provides for its own gas sales. Because of this policy, gas owned by firms other than pipelines now accounts for about 80 percent of the interstate sales of natural gas transported by pipelines. The effect of the open access policy is that electric utilities, industrial users, and local distribution companies can now contract to purchase gas directly from gas producers and marketers as well as from pipeline companies. Although open access has dramatically expanded, the extent to which competition can be fully realized in the market for gas delivered by pipelines has been questioned. When a pipeline sells its own gas, it is actually selling a bundled commodity consisting of the gas and various transportation, storage, and other services. Other gas sellers pay for the transportation services separately, but the price they pay and the quality of service they receive may not be comparable to the rate and service implicitly provided for the pipeline's own gas sales. If there is no other competing pipeline through which the natural gas can be delivered to a particular customer, the nonpipeline seller will be at a disadvantage relative to the pipeline's own gas sales. Discrimination of this type could reduce the benefits of competition. One of the goals of the Administration's National Energy Strategy is to eliminate that potential for discrimination. In July 1991 FERC proposed that pipelines be required to separate their business of selling gas from their business of transporting gas for others. After this restructuring, gas would be sold unbundled from the various transportation services, as on an "a la carte" menu, making the comparability of transportation rates and services much easier to monitor. FERC has proposed to relax regulation of pipeline gas sales once this unbundling occurs. This relaxation would mean that the competitive natural gas sales market will determine which transactions take place and at what price. Because local distributors and other gas consumers may still be captive to a single pipeline, the rate the pipeline charges for transporting the natural gas would remain regulated. 177 Mandatory unbundling may not always be necessary, however. If a customer has access to competing pipelines, then the likelihood of discrimination is reduced. In that case a competitive gas sales market could flourish without unbundling. Mandatory unbundling can also impose costs on producers. With unbundling, pipelines may lose the ability to coordinate and manage gas shipments. Mandating unbundling would deny pipelines the benefit of these "economies of scope." These economies of scope cannot be recaptured by simply allowing buyers to purchase the services together. The potential loss of productive efficiency needs to be considered before unbundling is mandated on a blanket basis. ELECTRIC POWER Similar to the natural gas industry, the electric power industry consists of three different segments: the generation of power, the transmission of power from generators to local utilities, and the distribution of electricity to homes and businesses by the local utility company. Unlike the natural gas industry, however, the same firm frequently performs all three functions: it produces and transmits its own power and then distributes that power to retail customers. A small but growing number of firms specialize in one particular segment, such as generating electric power that is sold wholesale to utilities. Currently, all three segments of the industry are subject to State and Federal regulation to some extent. Competition in the distribution of electricity has generally been considered infeasible because of the natural monopoly characteristics of these services. Instead, local utilities are granted monopolies over the markets they service, and States or local municipalities regulate the rates they can charge customers. FERC regulates the prices charged for use of interstate transmission facilities, which also have natural monopoly characteristics, and the price of interstate sales of wholesale power. But competition has emerged among firms that generate wholesale power. Regulators now face the problem of determining when to step aside and allow the market to determine the price at which that power is sold. Promoting Competition in Electricity Generation The ability to buy and sell electric power allows utilities to make more efficient use of existing capacity. By buying power from other companies, for example, a local utility can satisfy an extraordinary demand for electricity, such as that which occurs on an unusually hot day, without having to build the additional capacity itself. When utilities purchase power, however, the Federal Power Act of 1935 requires FERC to ensure that prices charged for any interstate sales are "just and reasonable." The seller must provide cost information to FERC, and significant delays in determining the 178 rates can occur. With the emergence of a more competitive generation market, however, the need to regulate all sales on a cost-ofservice basis has been questioned. One major step in developing competition in the sale of electric power was the Public Utilities Regulatory Policies Act of 1978 (PURPA). PURPA exempts "qualifying facilities," such as cogenerators of steam and electricity, from FERC rate control and relieves them of other financial requirements. PURPA has been successful in encouraging the development of nontraditional sources of power. In the 1980s qualifying facilities that sell power to utilities added 13,000 to 15,000 megawatts of capacity to the national market, while utilities that produce their own power ordered only about 9,500 megawatts of new capacity. Other independent power producers that do not qualify under PURPA have also begun to emerge. The availability of alternative power sources has encouraged 13 States to use competitive procurement, rather than cost-of-service regulation, when a utility needs generating capacity. FERC has also adopted, for some power sales, the use of rates arrived at through competitive bidding. A major barrier to the further development of a wholesale electricity market is the Public Utility Holding Company Act of 1935 (PUHCA). The original intent of the 1935 law was to curb financial abuses by electric utility holding companies. Its effect today, however, is to restrict the development of independent generating sources. For example, certain holding companies are barred from owning more than 10 percent of a power producer whose sole purpose is to sell power in the wholesale market. Legislation supported by the Administration as part of the National Energy Strategy would amend PUHCA to eliminate obstacles to entry by new independent power producers and barriers to the development of new sources of wholesale power affiliated with utilities. Transmission Access The control of access to transmission services by firms that sell wholesale power raises the possibility that power sales will not take place at competitive prices. A utility may be captive to a single provider of transmission who also sells power. The owner of the transmission capacity could deny other power producers access to the lines, allowing it to charge prices above competitive levels for its own power. The presence of a monopoly provider of transmission forces FERC to keep a close watch over the prices charged for wholesale power. A seller of power who also controls transmission cannot always set rates above the competitive level, however. A purchaser may have several alternative sources of supply. It could generate power itself, it could purchase power produced by others in its own service area, or it could purchase power produced outside of its service 179 area by firms that have access to the necessary transmission. When the purchaser of power has a number of alternative sources, a competitive market can develop. Prices that arise from competitive markets can take the place of prices based on cost-ofservice regulation. When there are no alternative sources of power, denial of access to transmission would leave the utility captive of a single supplier. In that case a requirement that the transmission owner give a buyer access to alternative sellers, while being compensated for the opportunity costs of transmitting that power, would increase competition in wholesale markets and ensure that power can be purchased at competitive rates. At present, FERC has limited legal authority to require owners of transmission to provide access. Legislation may be needed to expand FERC's authority to order a transmission owner to provide access to a power supplier when such access would enhance competition in the wholesale power market. CABLE TELEVISION Cable television is now available to more than 90 percent of all homes with television, and more than 60 percent of these households subscribe to cable service. Cable television normally includes television stations that are broadcast over the air, as well as services such as CNN and ESPN, that are delivered by satellite to the cable operator. Consumers in most communities can obtain these services only by subscribing to the local cable television service. The operator typically charges subscribers a monthly fee for delivering these services. The problem now facing policymakers is how to encourage competition that will restrain local cable systems from setting fees too high. The Effects of Cable Deregulation By virtue of their control over permits to string cable along and across public rights-of-way, local communities established the right to regulate cable television. Many communities decided that having more than one cable system was inefficient. Multiple systems would have meant duplicating all of the cable connected to each household and business. Most cable television companies were thus granted a monopoly franchise over the market they serve. A local authority regulated the rates of "basic service/' a package that usually includes both broadcast channels and satellite-delivered programs. By the early 1980s the availability of alternatives to cable brought into question the necessity of continued regulation. Possible alternatives included purchasing satellite dishes, using videocassette recorders (VCRs), or simply opting to limit viewing to channels available via broadcast antennas. The Cable Communications Policy Act of 1984 (Cable Act) barred regulation in communities where there was "effective competition/' which the FCC de 180 fined as communities that receive at least three over-the-air broadcast channels. The effect of this rule was to leave only 3 percent of all cable franchises regulated by the end of 1989, down from 63 percent before deregulation. Cable television rates increased substantially between the end of 1986, when the Cable Act took effect, and the end of 1990. Over that period, the average rate for the lowest priced basic service increased 32 percent in constant dollars. Cable operators explain the increase by arguing that they now include more channels and a greater variety of programs in the basic service. But others blame deregulation, noting that the alternatives of watching broadcast television or renting video tapes do not provide enough competition to restrict the prices charged by cable operators. Introducing Competition for Cable Responding to that criticism, the FCC changed its effective competition standard in 1991. Now local communities may regulate rates in those areas that receive fewer than six over-the-air broadcast channels. Although there have been calls to increase the scope of rate regulation even further, the Administration has supported a policy whose ultimate goal is to introduce new competition for cable operators, encouraging both price competition and alternative sources of television programming. Although cable television has been traditionally perceived as a natural monopoly that requires limitations on competition and regulated prices, new transmission technologies such as satellite-delivered services are emerging. Reliance on rate regulation and restriction on entry prevents those technologies from being fully implemented. Rather than perpetuating the existing monopolies, competition among video providers will determine how the services should be provided and at what price. The emergence of competition will depend on whether a second company finds it profitable to install the necessary wires and other equipment or to use a different technology to compete with the incumbent cable operator. One possible competitor that has already invested in some of the fixed equipment is the local telephone company, although it would have to install fiber optic cable to provide a service comparable to that provided by existing cable companies. Currently, however, FCC regulations and the Cable Act prevent direct competition from the local telephone company. Under one reform proposal, local telephone companies would be permitted to transmit television or other video signals provided by both the telephone company and other companies. Critics of this plan worry that because telephone rates in some States are still determined by cost-of-service regulation, the telephone companies might seek to transfer the costs of their video operations to the regulated telephone sector, thereby inflating the costs of telephone 181 service and putting competing video program providers at a disadvantage. This practice is commonly called "cross-subsidization." There are also concerns that telephone companies might use their control over the telephone lines to discriminate against competing programmers simply by designing the network to favor their own product. The problems of discrimination and cross-subsidization are legitimate concerns. The FCC has developed rules that could be used to minimize the risk of cross-subsidization and discrimination in video services. If problems arise, these rules can be strengthened further. Even with the proper rules in place, full participation by telephone companies in providing video content cannot occur until the Cable Act is changed. As an interim step, competition for existing cable operators could be enhanced by permitting local telephone companies to carry television and other video services that are controlled by independent companies. The FCC began to ask for comment on such a policy in November 1991. The alternative policy would be to continue banning the most likely competitor for incumbent cable operators. Such a policy is untenable in the face of unregulated rates and monopoly franchises. SUMMARY • Implementation of the National Energy Strategy would enhance competition in the generation of electric power and the delivery of natural gas. • In the long run, removal of the barriers to competition for existing cable operators, rather than price regulation, will benefit consumers by lowering rates and providing alternative services. • By limiting competition, economic regulation may be inhibiting the introduction of innovations that would benefit consumers. • The economies of producing in both a regulated and unregulated market should not automatically be sacrificed to eliminate problems of discrimination and cross-subsidization. REFORMING REGULATION OF THE ENVIRONMENT, HEALTH, AND SAFETY Environmental, health, and safety regulation is directed in part toward remedying externalities or third-party effects. During the past two decades, the Federal Government has significantly widened the scope of regulatory activity in these areas, generally using a command-and-control approach. As a result, costs to the economy have increased substantially, because legislation in these areas has rarely required regulators to balance the costs and benefits of their actions. Recent initiatives have attempted to improve on tradition- 182 al regulation by allowing more flexibility and by balancing benefits and costs. These initiatives offer significant cost savings compared with traditional command-and-control regulation. IMPROVING THE ENVIRONMENT By requiring firms to account for the costs they impose on others through pollution, the Clean Air Act, the Clean Water Act, and the Resource Conservation and Recovery Act have dampened the incentives for the excessive use of environmental resources. At the same time, their costs have been significant. Just one new initiative, the Clean Air Act Amendments of 1990, when fully implemented in 2005, will cost an estimated $25 billion to $30 billion per year or more. The EPA estimates that expenditures to reduce pollution were at least $115 billion in 1990, more than in any other major industrialized country, and one of the highest as a percentage of gross national product (GNP). Between 1972 and 1990, pollution control costs tripled (in constant dollars), rising from 0.9 percent to 2.1 percent of GNP; the EPA expects this total to rise to 2.6 percent by 2000. By some estimates, indirect costs of compliance add significantly to this total; to comply with a regulation, for example, firms may turn to higher cost inputs as substitutes or produce lower quality finished goods. Acid Rain Significant uncertainties surround many environmental issues. This was seen in the scientific controversy that resulted in the National Acid Precipitation Assessment Program (NAPAP), a 10-year, $550 million effort authorized by the Congress because of concern that acid rain might be harming the environment. When the NAPAP study began in 1980, the consensus view held that acid rain caused acidic lakes; the study demonstrated, however, that soil and other conditions had a far greater influence than acid rain on the acidity of lakes. Other studies have also suggested that simple mitigation strategies would be far more cost effective than the technology-based command-and-control regulation usually favored by the Congress. In the recent past, scientific consensus has shifted abruptly on several other important issues as well, including the risks associated with dioxin, asbestos, and radon. These examples should serve as reminders not to rush into expensive new regulatory regimes on the basis of incomplete evidence. But once a policy decision has been made to correct an externality associated with the environment, then market-based incentive programs usually can accomplish their objectives at a lower cost than traditional commandand-control approaches. The Clean Air Act Amendments of 1990 institute the first largescale emissions trading regime for a pollutant. This program sets a 183 maximum national level of sulfur dioxide that can be emitted annually from coal-fired power plants. Firms must possess an emission allowance for each unit of SO2 they emit or face heavy fines (Box 5-6). To comply, firms are allowed to buy and sell allowances; the maximum level of emissions will be attained efficiently because firms self-select, purchasing or selling allowances to minimize costs. The same level of emissions could be achieved under command-and-control regulation, but the cost of compliance, which falls ultimately on the consumer through increased electricity prices, would be greater, in some cases much greater. Box 5-6,~~Are Emission Allowances Licenses to Pollute? Some have opposed the implementation of emission allowance trading systems on the ground that the allowances give their holder a license to pollute. By that standard, however, any environmental regulation that does not hold pollution to zero also constitutes a license to pollute. The costs of pollution abatement become prohibitive compared with benefits as emissions are reduced toward zero, making some tradeoffs inevitable. Consequently, regulatory regimes should be chosen that protect the environment to some desired level while minimizing losses in economic growth. An allowance trading system is merely a method of allocation; it does not confer new licenses to pollute. Under com* mand-and-control regulation, firms pay nothing for residual emissions after they install the required equipment. An allowance trading system, on the other hand, requires firms to pay for each unit of pollution they emit. Economic incentives decrease firms' compliance costs by offering them the flexibility to make the best use of information regarding their production process. In contrast, efficient command-and-control regulation requires the regulating agency to collect detailed, firmspecific information on pollution control costs, alternative production processes, and the value of capital stock in place—an impossible task. With economic incentives, regulators merely lay down ground rules and allow firms to make their own production choices; the government—and the Nation—benefits from the firm's internal information without having to discover it. Fuel Economy Standards The transportation sector accounts for two-thirds of U.S. petroleum consumption, with more than half going to gasoline for cars, trucks, and buses. Gasoline consumption imposes at least two kinds of externalities on society: vulnerability to oil shocks and pollution. Reducing oil consumption, and in turn the demand for imported 184 oil, was the original justification for corporate average fuel economy (CAFE) standards in 1975. Proponents also claim that the standards improve air quality, particularly in cities, by reducing ground-level ozone. Current CAFE standards require each auto manufacturer to meet a target of 27.5 miles per gallon for both its domestic and imported fleet. Recent proposals would increase CAFE standards by varying amounts. Proponents argue that higher standards would reduce both oil imports and consumption. Government can correct the externalities associated with gasoline consumption by several means. The Clean Air Act Amendments of 1990 address those pollution externalities in provisions covering new car tailpipe emissions, reformulated gasoline, and enhanced inspection and maintenance programs. Fuel and vehicle taxes also correct these externalities. The most direct solution would be for regulators to determine the damage caused by gasoline consumption and then set a fee on its use equal to that damage. (State and Federal gasoline taxes, which now average 32 cents per gallon, already correct 32 cents worth of externalities in this way.) Higher CAFE standards would be a poor substitute for the use of fees, because they fail to address the externalities directly. First, higher CAFE standards might reduce pollution, because drivers would burn less gasoline per mile. However, because higher mileage cars generally cost less to drive per mile, motorists would drive more, offsetting a portion of the gain from the higher standards. (More driving makes road congestion worse, meaning that CAFE standards are themselves responsible for a negative externality.) Second, although higher CAFE standards would indeed reduce oil imports, they may not reduce U.S. vulnerability to oil shocks, which depends not only on the level of imports, but also on the flexibility provided by alternative energy sources and on economic responses to the shock. Much of the CAFE debate has centered on engineering feasibility, on what mileage targets the automakers could achieve. But consumers, who are the ultimate decisionmakers, do not base vehicle purchase decisions on engineering feasibility or on fuel efficiency alone. Size, options, and performance are also important. Indeed, engineering feasibility does not itself establish value to society; it does so only in conjunction with economic feasibility. Manufacturers can produce cars with high fuel economy ratings, but if consumers will not buy them, then such cars should not be produced. Proponents of higher CAFE standards generally overlook the indirect effects of their proposals, which would tend to offset many of the purported benefits. First, to comply with higher CAFE standards, firms would probably produce fewer large cars and more 185 small cars. This would raise the price of large cars and likely cause consumers to respond by holding onto their older, less fuel-efficient vehicles. Second, because small cars, all else being equal, are less safe than large cars, higher CAFE standards could significantly increase deaths and injuries on the Nation's highways. Higher CAFE standards pose other problems as well. The requirement that manufacturers divide production into a "domestic" and an "import" fleet ignores the realities of a globalized auto industry and forces them to make less-than-efficient input choices to meet the standard in each category. Moreover, current proposals would penalize firms whose technology gives them a comparative advantage in the production of larger cars. They could be forced to abandon these competitive technologies in order to comply. Finally, as with other forms of regulation, CAFE standards could be coopted by political forces and used by some firms to gain an advantage over others. The shortcomings of the CAFE program serve as a reminder of the dangers of an ill-designed regulatory program. A successful regulatory program must first define the externality it intends to address, then design incentives to address these externalities without introducing any new ones. Global Climate Change Global climate change is another example of an environmental externality. The presence of "greenhouse gases" such as carbon dioxide, methane, and water vapor in the atmosphere helps to maintain surface temperatures at historic levels. If these gases were wholly absent, the temperature of the earth would be about 33° C lower. These gases retain and reflect some of the heat given off by the earth back to its surface, providing a sort of blanket over the planet. Some production processes such as the burning of fossil fuels result in the emission of greenhouse gases. These additions to the earth's natural supply of such gases have raised concerns over possible effects on global climate. Those who emit greenhouse gases do not account in their production decision for the climatic effects they may cause. A negative externality is present if these emissions cause harmful ecological or economic effects. As with many global environmental issues, much of the research regarding the effects of greenhouse gas emissions is in its preliminary stage. Indeed, the Intergovernmental Panel on Climate Change (IPCC), under the aegis of the United Nations, estimated that it may take a decade or more to ascertain whether human-induced climate change has indeed occurred. In part, this uncertainty is caused by growing evidence that certain factors counteract a potential increase in global temperature. The 1992 IPCC Supplemental Science Assessment states that the cooling effect of sulfur emissions may have offset a significant part of greenhouse warming in the northern hemisphere. 186 Most scientists agree that additions to the earth's natural supply of greenhouse gases through fossil fuel burning, deforestation, and other human activities have a warming effect on the climate. By most estimates, the concentration of CO2 in the atmosphere will have doubled worldwide from preindustrial levels by the middle of the next century. Concentrations of most other greenhouse gases are also projected to increase. At issue is the timing and magnitude of the potential warming caused by such increases. As stated above, coincident offsetting factors could mitigate the effects of greenhouse gas emissions. Additionally, other recent work cited by the IPCC indicates that most warming is likely to occur at night rather than during the day, and in winter rather than summer. These and other recent studies generally discount the severe effects (such as dramatic sea level increases, major changes in precipitation patterns, and significant threats to certain species) predicted in some preliminary work a few years ago. From an economic perspective, the following questions must be addressed: First, do greenhouse gas emissions from human activities constitute a significant externality? Second, if so, is it negative (such as an increase in sea level), positive (such as a longer growing season in Canada and the former Soviet Union), or both (a mix of effects that benefits some regions and harms others)? The scientific consensus is by no means clear on this point. If a negative externality is determined to exist, the next step is to identify the major sources, from natural as well as human activities, of all greenhouse gases and to determine their relative contributions to potential warming. At the same time, materials that absorb greenhouse gases ("sinks"), such as forests, should also be identified. One must then determine if it is better to reduce emissions now, perhaps using economic incentives, or to wait and respond later to the observed effects. In choosing among alternative courses of action, the scientific uncertainty surrounding climate change should be considered along with estimated costs and benefits of action. Although immediate large-scale actions in anticipation of global warming have been suggested, a prudent course would include taking those actions that would be desirable on their own merits, while deferring costly steps that should properly await resolution of key scientific uncertainties. Rational policy requires balancing the costs of delay with the benefits of information that will be available later. The potential effects of climate change are generally long term, and the initial costs of proposed remedies may be high. One proposal aims to stabilize global greenhouse gas emissions at 80 percent of 1985 totals by 2010. Studies put the eventual cost of achieving this goal at 1 to 5 percent of world gross domestic product per year, 187 with most of the cost attributed to the reduction in output needed to achieve the emission reduction. In today's world economy, this would be $200 billion to $1 trillion per year ($1 trillion is considerably more than the GNP of China and India combined). Hasty attempts to remedy the externality imposed by greenhouse gas emissions could have small benefits relative to these very large costs. A better understanding of the science of global climate change is needed before agreeing to policies with potentially large costs. The Administration has taken the view that a successful climate change strategy must be comprehensive, incorporating all relevant greenhouse gases, their sources and sinks. It must be flexible, built on many diverse actions, and readily adjustable as knowledge improves; and it must be integrated, designed to involve all nations. Integral to the U.S. climate change strategy is the world's largest program of research. For fiscal 1993 the President's budget contains $1.4 billion for global change research, including $17 million for research in the economics of global change. HEALTH AND SAFETY REGULATION Decisions to wear a seat belt, to take a job as a telephone lineman, or to fly a small plane all involve balancing exposure to risk against other objectives. In the United States, government addresses risk indirectly, by providing the legal framework for the market and the tort system, and directly, by an extensive and growing program of safety regulation. A 1967 NHTSA rule sets safety standards for automobile steering columns, for example, a 1979 EPA rule regulates chemicals used to treat drinking water, a 1985 Federal Aviation Administration rule sets fire protection standards for aircraft cabins, and a 1990 EPA decision lists certain wood-preserving chemicals as hazardous wastes. Proponents of a larger government role in health and safety assert that in these areas, people are not able to make proper decisions about risk bearing. Some also argue for intervention on equity grounds. If a certain risk is exceptionally high or prohibitively expensive for an individual to bear, society will sometimes assume the burden through regulatory intervention or public funding, as it does for neonatal intensive care, and burn and trauma centers. The Congress has expanded budgets, staffs, and the regulatory scope of the agencies regulating these areas, almost tripling administrative costs of health, safety, and environment regulation between 1970 and the present. The Federal Register chronicles official actions of the regulatory agencies, including those that regulate health and safety. Its size gives an idea of the regulatory burden on the economy. The Register occupied 26 inches of shelf space for 188 1956, 36 inches for 1966, and more than 10 feet at its apogee in 1978; in more recent years it has been somewhat thinner. Public perceptions have fueled this regulatory growth. The public believes, according to surveys, that life is becoming more risky. In fact, life is becoming safer, as demonstrated by the steady increase in life expectancy, from 70.8 years in 1970 to 74.9 years in 1988; by the steady decrease in age-adjusted death rates from most diseases; and by the steady decrease in death rates on highways and in the workplace. Public concern over risk has sometimes given rise to legislation requiring that all risk be eliminated. The Delaney Clause of the Food, Drug, and Cosmetics Act prohibits the use in food of any ' 'substance shown to cause cancer in animals or humans." Courts have interpreted this clause to mean that such substances are automatically prohibited at any dose no matter how small. Further, a ban may be based on animal studies showing carcinogenicity in any amount, even if the animals were fed unrealistically large doses. In the Clean Air Act, the Congress set a slightly more flexible standard when it instructed the EPA to fix primary air quality standards that "protected the most sensitive group in the population with an adequate margin of safety." Similarly, the Congress charged the Occupational Safety and Health Administration with ensuring that "insofar as possible, no employee will suffer diminished health, functional capacity, or life expectancy as a result of his work." Just as individuals must balance risks and benefits in making their individual decisions, so must government regulators. Commercial air travel, for example, is relatively safe; at some cost, though, it could be made still safer. Yet each extra safety-related increase in ticket prices makes some travelers decide to drive instead, which is up to 20 times more dangerous per mile traveled. As Chart 5-3 indicates, regulations issued during the 1980s were, on average, far more costly per unit of safety achieved than earlier ones had been. (The vertical axis is logarithmic; each grid line represents 100 times more cost per unit of safety than the one below it.) In part, this cost increase is due to congressional mandates placed on agencies. Before 1985 only two regulations exceeded a cost of $100 million per death averted. Eight such regulations have been enacted since that time. EPA's rule regulating wood-preserving chemicals, while not large in total costs, is estimated to avert only one case of cancer every 2.9 million years, and cost at least $5 trillion dollars per death averted; that is 10 million times more costly per unit of safety than a number of earlier rules. In this example and elsewhere, regulation often targets expensive risks and passes over those where greater reductions are possible at the same cost. 189 Chart 5-3 Cost per Premature Death Averted of Federal Health and Safety Regulations Federal regulation of risk has become less cost-effective. Millions of 1990 dollars 100,000,000 1,000,000 10,000 100 t 0.01 I 1967 I 1969 I • I 1971 I I 1973 I 1975 i I I 1977 1979 I 1981 I I 1983 I I 1985 1987 I I 1989 I 1991 Note: Dots represent Federal regulations. Source: Office of Management and Budget. Recent initiatives often impose high total costs as well as high per-unit costs. For example, several laws including Superfund, which are designed to reduce damage from hazardous wastes, were formulated when little was known about the environmental benefits or economic costs of the requirements. Recent evidence indicates that these laws will cost $500 billion to $1 trillion (in 1991 dollars) over the life of the programs. While no definitive estimate yet exists, benefits to public health and the environment from these programs are not likely to approach the magnitude of the costs. Market failure may justify government intervention only if the government can improve on the market. Cost-benefit analysis can be a useful tool for setting appropriate goals when regulating risk, even though precise estimates of costs and benefits may not exist. Several regulatory agencies, including EPA, have recently attempted to establish risk regulation priorities as part of the Federal Government's larger initiative to develop a risk-based regulatory agenda. In regulating risk, as in regulating other areas, government policies should strive to maximize net benefits, enacting only those regulations in which benefits to society outweigh costs. To do otherwise di- 190 verts resources from more important risks and impedes economic growth. SUMMARY • Market-based solutions are the most efficient means of allocating a given level of pollution. • Increased CAFE standards are potentially costly, would encourage consumers to maintain their older, less fuel-efficient automobiles, and could decrease highway safety. • In addressing the possibility of global climate change, the economic effects of proposed policies must be carefully evaluated before deciding which policies to implement. • In regulating health and safety risks, government policies should maximize net benefits, promulgating only those regulations whose benefits to society outweigh their costs. CONCLUSION The government plays a crucial role in facilitating competition through the establishment of a legal system that governs contracts, defines and protects property rights, and compensates people who have been injured. The Administration's proposed reforms to the legal system would lift the burden of litigation on economic productivity, while maintaining a fair system for settling disputes. Regulation can also play a direct role in improving the performance of the market system. Any proposal to regulate the market, however, should be tempered by an understanding that regulation can be at least as imperfect as the market it is trying to improve. The goal of the Administration's regulatory reform initiative is to have all regulatory agencies, to the maximum extent allowed by law, reexamine existing regulations, eliminate or revise those that clearly impose costs that exceed their benefits, and ensure that other regulations are implemented in a cost-effective manner. The government must constantly reevaluate the need to intervene in markets. The necessity of continuing to regulate industries should be reconsidered whenever innovations or technical changes allow a natural monopoly to be replaced by competition. The National Energy Strategy would accelerate deregulation in the markets for pipeline sales of natural gas and in the generation and sales of electric power, benefiting consumers with lower energy prices. Environmental protection is also an important goal of this Administration, but measures should reflect the costs of shifting resources away from other uses to meet this challenge. Tradable allowances are an efficient tool for meeting strict pollution standards at minimum cost. Current regulations to reduce risk sometimes fail to strike the proper balance between costs imposed and benefits re 191 alized. To improve on this performance, the effectiveness of resources spent to reduce one type of risk must be weighed against the effectiveness of using those same resources to reduce other risks. 192 CHAPTER 6 Open International Markets and Prosperity INTERNATIONAL TRADE AND INVESTMENT make important contributions to U.S. and world prosperity. In the broad sweep of history, rising prosperity and rising international trade have gone hand in hand. Indeed, international trade has grown much more rapidly than domestic production in all major periods of the past 300 years, with one notable exception—the period that includes the Great Depression of the 1930s and the two World Wars (Chart 6-1). Domestic economic growth contributes to the rapid growth of international trade; as people have more income to spend, they spend part of it on foreign goods and services. At the same time, increases in trade and investment are powerful engines contributing to efficiency and growth. Several major developments are under way that could open international markets further and boost worldwide prosperity. These developments come as many countries of the world face the prospect of temporarily slower economic growth. Although such periods often lead to renewed calls for protection, now is not the time for the United States or its trading partners to turn inward: There is simply too much at stake. Retreating from a focus on open international markets now would undermine opportunities to promote a growing and efficient world economy. Foremost among these opportunities is the Uruguay Round of multilateral negotiations under the General Agreement on Tariffs and Trade (GATT). These negotiations, which were initiated at Punta del Este, Uruguay, in 1986, involve more than 100 countries and address a wide array of issues from the reduction of tariffs to the safeguarding of intellectual property rights. The gain to the United States and to the world from a successful Uruguay Round would be large, but the costs of a failed round are potentially enormous: The prospect of a successful round has kept many trade frictions from becoming full-blown trade disputes. The alternative to a successful Uruguay Round is therefore the possibility of an increase in trade disputes and a proliferation of retaliatory tariffs, voluntary restraint arrangements, and other restrictions on trade, which could lead to a period of contracted world trade and slower world economic growth. 193 Chart 6-1 GDP and Export Growth Trends, 1720-1990 Historically, GDP growth and export growth have reinforced each other. Trade has generally grown more rapidly than output. Average annual growth (percent) 12 1720-1820 1820-1870 1870-1913 1913-1950 1950-1973 1973-1990 Note: The figure for first period GDP uses 1700-1820 data. Data are for France, Germany, Italy, Japan, the United Kingdom, and the United States. Not all countries are represented in the first two periods. Sources: Department of Labor, International Monetary Fund, the World Bank, and Maddison, Phases of Capitatist Development. Regional initiatives to further liberalize trade and investment are also under way. The United States has entered into negotiations with Mexico and Canada to form a North American freetrade area, which will build on the U.S.-Canada Free-Trade Agreement of 1988 and provide for freer trade and investment throughout the North American continent. These negotiations offer a historic opportunity to create a market with 360 million consumers and a total annual output of more than $6 trillion. Further market openings could come from the hemisphere-wide system of freer trade and investment envisioned in the Administration's Enterprise for the Americas Initiative. The economies in transition also present new opportunities for trade and investment. The collapse of communism and central planning in Central and Eastern Europe and the former Soviet Union is only the most obvious and recent event in a ground swell of changes to political and economic systems around the world. The reorientation of economic systems toward greater dependence on market forces has become more apparent in other parts of the world as well. Providing open international markets is perhaps the most important single thing that the West can do to help the economies in transition, particularly the countries of the old Soviet bloc, in their efforts to build democratic and market-oriented soci 194 eties. While aid—particularly technical assistance—can play a constructive role during the transition, trade, not aid, is the most important force for integrating these economies into the world market. MUTUAL GAINS FROM TRADE The case for an open trading system is even stronger today than in 1817, when the English economist David Ricardo first argued for the benefits of free trade on the basis of comparative advantage. Ricardo argued that countries could gain from specialization and trade by taking advantage of their differences. He showed that whenever the same products sold at different prices in different locations, the possibility of mutually beneficial trade between countries arose. For example, as long as wine was relatively more expensive in England and cloth in Portugal, each country could gain by exporting some of the product that was inexpensive at home in exchange for imports of the product that it found relatively expensive to produce. Through the process of free international trade, the world's resources would be directed to their most efficient uses and the standard of living of each country would be enhanced. With this insight, the basic case for free trade had been established. Today, as in Ricardo's time, people engage in trade to improve their standards of living. This is true whether the trade is among individuals, among States, or among nations. States or countries often specialize to take advantage of their distinctive climate or natural resources. Thus, it is the fertile land and plentiful rain that leads Iowa farmers to produce corn; it is the warm climate that induces farmers in Florida to grow oranges. If Iowans sell corn to Floridians in exchange for oranges, both sides gain. Similarly, if the United States sells wheat to Brazil in exchange for coffee, both countries gain. Special skills or technology can likewise lead to specialization; advanced technology enables U.S. companies to manufacture many sophisticated goods more cheaply than foreign countries and to pay high wages while doing so. Economies of large-scale production provide an additional reason for specialization, even among regions that are broadly similar. It would be enormously inefficient for each American State to attempt to become self-sufficient in every variety of manufactured good and specialized service. For many products, research and development (R&D) costs are significant; their production may also require complex and costly machinery. By extending their production runs, firms can spread their overhead costs and lower the cqst of producing each unit. 195 Thus, in the United States, airplane production is concentrated in the Northwest, automobiles in the Midwest, and motion pictures on the West Coast. Each industry produces for a larger market than any single State could sustain, and exports to other States. Similarly, by exporting to other countries, American aircraft companies can lengthen their production runs, lower their costs, and increase their profit margins; this, in turn, can increase the return to innovation and lead to greater investment in R&D, higher growth, and greater choice for domestic consumers. For many other countries with much smaller domestic markets than that of the United States—which, after all, is the largest economy in the world—economies of scale provide an even greater incentive to engage in international trade. The Swiss pharmaceutical industry, for example, is dependent upon export markets for its prosperity. In addition to the gains from trade associated with economies of scale and specialization, reducing barriers to imports of goods and services may produce important investment-enhancing and procompetitive effects, especially in countries with high tariffs and relatively closed markets. The doubling of foreign direct investment in Mexico in the past 5 years, for instance, came largely in response to Mexico's unilateral trade and investment liberalization beginning in the mid-1980s. Moreover, although the lower cost of imports that comes with an open trading system can eliminate some import-competing jobs, an open trading system promotes exports and creates export-related jobs. Export growth accounted for 25 percent of the growth in private industry jobs in the United States between 1986 and 1990. Just as open international markets permit countries to enjoy the mutual gains from trade, protectionism interferes with the ability to realize these gains. Trade barriers not only raise the price of imported goods to consumers but also the price of domestically produced goods that compete with those imports. Such barriers may help import-competing producers, but they do so by hurting other domestic industries. By encouraging domestic production of importcompeting goods, protection acts to discourage a nation's resources from reorienting toward exporting sectors. And where scale Economies are important, import barriers can fragment the market in ways that diminish the ability of firms to achieve the benefits of large-scale production. In practice, the costs of protection can be substantial. Between 1981 and 1985, for example, U.S. imports of Japanese automobiles were restricted by a voluntary restraint agreement (VRA), under which Japan agreed to reduce its exports of automobiles to the United States. According to one study, the higher prices brought about by this VRA cost U.S. consumers $5.8 billion in 1984, while 196 U.S. automakers gained only $2.6 billion. VRAs on imports of steel into the United States, which will expire on March 31, 1992, have also been costly to the U.S. economy. One study estimates that the elimination of VRAs and tariffs on U.S. steel imports would have saved U.S. consumers more than $800 million in 1988; maintaining this protection provided less than $300 million in benefits to U.S. steel producers. In agriculture, import quotas for commodities such as peanuts and sugar keep domestic prices high at the expense of U.S. consumers. The sugar import quota, for example, maintains domestic prices that are often two to three times the world price. Losses to U.S. consumers were estimated at $1.9 billion in 1987. The current peanut quota is set at 1.7 million pounds, less than one-tenth of 1 percent of total U.S. peanut production. A recent study estimates that the effects of the peanut quota is equivalent to as much as a 90-percent tariff on peanut imports. Another study estimates that the losses to U.S. consumers because of the peanut import quota totaled over $400 million in 1987. These losses are disproportionately shared by lower income groups who spend a larger share of their income on peanut butter. Higher peanut butter costs affect government domestic feeding and child nutrition programs such as the Temporary Emergency Food Assistance Program. Losses to U.S. consumers from the sugar and peanut quotas are partially offset by the gains to U.S. producers, through higher prices. Sugar and peanut producers are estimated to have gained $1 billion and $370 million, respectively, from import quotas in 1987. Over time, however, these benefits become capitalized into higher land prices. Thus, farmers who lease land and new entrants into farming pay for much of the "benefit" of import quotas through high rental rates and higher land prices. While the costs of protection can be substantial, new justifications for protection continue to emerge. The recent focus on industries with scale economies, for example, has raised new questions about the possibility of gains from government intervention designed to "create" comparative advantage in such industries. Academic research on this question, however, has generally reinforced the basic case for free trade and the arguments against government intervention (Box 6-1). If trade barriers are reduced and market forces allowed to act, countries will export the goods for which they are the relatively efficient, low-cost producers and will import other goods in exchange. As the world economy changes, so too will efficient patterns of international specialization and trade, but gains from specialization and trade remain. Such international specialization promotes low-cost, efficient production and contributes to the economic well-being of all trading nations. 197 Box 6-L—TEconomies of Scale and Trade Policy As discussions of trade policy have broadened to include industries where scale economies are prevalent and a small number of firms dominate the market, one school of thought has argued that government should intervene to ^create" a comparative advantage in such industries, in the expectation that they will provide attractive rates of return* Far from providing a strong case for government intervention, studies of so-called strategic trade policy generally illustrate more than anything else the pitfalls associated with such a policy. The form of intervention cannot be prescribed without detailed knowledge of industry information, such as the nature of competition among firms, the nature of the research and development process, details of the production technology, and entry conditions in the industry, Thorn information requirements make successful government intervention on a case-bycase basis virtually impossible* Moreover, targeting one favored, "winning" industry to help it achieve large-scale production would typically mean shifting resources away from other industries* Thus, successful intervention in one case k not enough: Anything less than a comprehensive program that correctly identifies and implement® the prescribed intervention for a wide range of industries is likely to do more harm than good. That makes successful intervention even less likely. In practice, evidence suggests the futility of a government attempting to "pick winners/' The case of Japanese steel has been widely cited as the classic example of successful Japanese industrial policy in the 1960s and early 1970s, yet the veiy low returns on Japanese investment in steel suggest that this government policy was anything but successful. Economies of scale are often suggested as a reason for government intervention, including trade barriers to keep out imports that will spoil the home market But there is a fundamental paradox here* When economies of scale are present* the gains to the world as a whole from open international trade are particularly great: Open world markets permit firms to extend their production runs and lower their costs,Rather than suggesting that governments should attempt to create comparative advantage in selected industries, eamomtes of scale underline the importance of multilateral commitments to refrain from such attempts and the t f ^ that accompany them* 198 DISTRIBUTIONAL EFFECTS OF TRADE LIBERALIZATION Even though each country as a whole enjoys lasting gains from the general reduction of trade barriers, some individuals and firms may nevertheless lose, particularly in the short run. As the tariff on a good comes down, the domestic price of the good generally falls, to the benefit of the consumer. The owners of the firms in this industry generally lose in the short run as the value of their investment declines, and workers may face wage reductions and temporary job dislocations. Protecting the industry in an attempt to avoid this dislocation, however, typically imposes a large ongoing cost on domestic consumers. The annual consumer cost per job saved by U.S. protection against imports of specialty steel in 1988, for example, was estimated to be more than $340,000. Those who lose in the short run from tariff reductions are relatively easily identified, but the permanent impact of trade liberalization on the distribution of income is difficult to predict. As affected workers and firms find new opportunities in other sectors, their relocation can affect the structure of wages and returns to investment throughout the economy in ways that are complex and indirect. Finally, a tariff reduction creates lasting gains, but the gainers are often diffuse or hidden. They are the large group of consumers—who often are unaware of the price decrease that lower tariffs cause—and the workers and owners in export industries, who gain as trade barriers fall and export markets increase. Because the reduction of trade barriers leads to increased efficiency and improved standards of living for the population as a whole, the possibility that some individuals may lose from trade liberalization is therefore not a reason for a country to resist movement toward more open markets. Rather, it is a reason to allow a gradual phase-in of trade liberalization, to give those who will be adversely affected a better chance to adjust. In fact, gradual phase-ins are a standard feature of international trade agreements. Adjustment programs, which in the United States include programs such as Economic Dislocation and Worker Adjustment Assistance, are also available to reduce the burdens and speed the relocation of workers and firms in trade-impacted industries. Finally, the ability to reimpose temporary protection, which is also a standard feature of international trade agreements, provides an important avenue to prevent or remedy serious injury due to increased imports. THE NEED FOR STRONG TRADING RULES While each country has much to gain from trade, the temptation to deviate from open trade policies can be very strong. The readily identifiable distributional effects of trade liberalization in the short 199 run can create strong lobbying interests who resist the removal of trade barriers even when their removal benefits the nation as a whole. And in times of increasing unemployment, the temptation to use protection to stimulate domestic employment at the expense of foreigners may be especially strong. The presence of such temptations, which all countries are likely to face, does not justify going ahead with that protection, however. Rather, these temptations signal the need for strong international rules to avoid the reciprocal trade wars that would result if all countries shortsightedly pursued such policies (Box 6-2). Box 6-2.—A Lack of Discipline: The Case of Agriculture Agriculture has effectively been beyond the discipline of the General Agreement on Tariffs and Trade. This has allowed a web of national policies to evolve that has distorted production patterns and trade. For example, the agricultural export subsidy war being waged by the United States and the European Community (EC) cost EC taxpayers over $11 billion in direct export subsidies in 1988. In the United States, export subsidies totaled more than $1 billion in 1988. The export subsidies are a direct consequence of agricultural support programs within the EC and the United States. The EC supports high internal prices by subsidizing the export of surplus production. In response to deteriorating market share, some of which was caused by its own high support prices, the United States began subsidizing exports in 1985. Since then, U.S. support prices have been lowered substantially, and new U.S. export subsidies are focused on combating EC subsidies. The clear winners of the EC-U.S. trade wars have been consumers in the importing countries. At times, U.S. subsidies have been as high as 30 to 40 percent of the world price to counter EC export subsidies, which have been as high as twice the world price. The losers are consumers and taxpayers within the EC and the United States, and producers in nonsubsidizing exporting countries who cannot easily compete with subsidized exports. In practice, protectionist actions have evoked similar reactions from trading partners. The most notorious episode of "beggar-thyneighbor" trade policy is the well-known tariff war that erupted with the onset of the Great Depression. Driven by the misguided view that the short-term imposition of tariffs could alleviate the growing unemployment experienced in the U.S. manufacturing and agriculture sectors by "switching" expenditure from foreign to domestic products, the Smoot-Hawley Act of 1930 raised the average 200 tariff rate on dutiable imports in the United States to 60 percent. Rather than benefiting the U.S. manufacturing and agriculture sectors, the Smoot-Hawley tariffs had the opposite effect by provoking foreign trade partners to adopt retaliatory tariffs. More than 60 nations responded with tariffs of their own within 2 years. A breakdown in world trade followed, contributing to the global depression. SUMMARY • The case for an open trading system is even stronger today than when David Ricardo first argued for the benefits of free trade on the basis of comparative advantage. Comparative advantage provides a reason for countries to gain from specialization and trade by exploiting their differences, while economies of large-scale production provide an additional reason to specialize, even among regions that are broadly similar. • By exporting to the world, American companies can lengthen their production runs, lower their costs, and increase their profit margins. This, in turn, can increase the return to innovation and lead to greater investment in research and development, higher growth, and a greater variety of goods and services for consumers. • Even though each country as a whole enjoys lasting gains from the general reduction of trade barriers, some individuals and firms may nevertheless lose, particularly in the short run. Rather than serve as a reason to maintain trade barriers, however, this is a reason to provide for a gradual phase-in of trade liberalization and to have effective adjustment programs. • While each country has much to gain from trade, the temptation to deviate from open trade policies can sometimes be strong. Such temptations signal the need for strong international trading rules. INTERNATIONAL INVESTMENT Along with the flow of trade, greater international investment over the past four decades has increased the global integration of markets. International investment takes two forms. Some is direct investment, where the investing foreign party exercises control over the management of a business; this is judged to occur when foreign ownership reaches at least 10 percent of the voting equity of the business. The remainder is portfolio investment, passive foreign ownership of financial instruments, including corporate stocks or bonds, government securities, or bank deposits. Worldwide, foreign direct investment flows, which are manifested in the operations of multinational corporations, have grown 201 since 1983 at an unprecedented rate of 29 percent a year, roughly four times that of the growth of output (with output and investment both being measured at current prices). For the United States, in recent years foreign direct investment has become more significant relative to foreign portfolio investment. Foreign direct investment's share of total foreign investment flows into the United States increased from 13 percent in the 1970s to 23 percent in the 1980s; by 1990, direct investment accounted for 43 percent of total foreign investment flows into the United States. Today, the United States is the world's largest recipient of foreign direct investment. In the other direction, 58 percent of U.S. investment flows abroad during 1990 was direct investment. THE CLOSE TIES BETWEEN TRADE AND FOREIGN DIRECT INVESTMENT Although foreign direct investment flows are not a new development—the advent of the multinational enterprise dates back several centuries—they are far less extensive than international trade. As Chart 6-2 shows, however, foreign direct investment has grown faster than trade in recent years. By integrating national markets, the recent dramatic increase in foreign direct investment could foster greater trade flows, setting the stage for a new era of global economic growth. Direct investment stimulates companies to be more competitive internationally, which can generate exports. Also, plants established abroad often rely on inputs exported from the home country. In general, trade and investment do not substitute for one another; direct investment is not likely to displace exports. In many cases, if a firm does not establish an affiliate abroad to produce for a local market, it is likely to be too distant for an export strategy to give it an effective, sustainable presence in that market in the long run. Moreover, in these circumstances, it is likely that companies from other countries would ultimately attempt to establish production facilities in the market. Thus, in general it is a mistake to presume that if direct investment abroad did not take place, production would be maintained at home and exports to the foreign market would continue. Still, there are similarities between trade and investment. As with trade, both "home" and "host" countries gain from foreign direct investment. Indeed, the mutual gains from trade tend to be reinforced by flows of foreign direct investment. The benefits of foreign direct investment also stem from comparative advantage, and many of the factors that determine the flow of trade are similar to those that influence investment. Through their international production networks, multinational corporations move inputs and out 202 Chart 6-2 Foreign Direct Investment Outflows and Exports of G-7 Countries Since 1985 foreign direct investment outflows have grown much more rapidly than exports, measured in nominal dollars. Index, 1980=100 400 Foreign Direct Investment Outflows 300 200 Exports of Goods and Services 100 j i i i i i i 1980 1981 1982 1983 1984 1985 1986 1987 1988 Note: The G-7 countries are Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. Source: Organization for Economic Cooperation and Development. 1989 1990 puts among geographically dispersed plants, providing for crosscountry specialization, economies of scale, and greater competition. On a global basis, multinational corporations play a significant role in trade. For example, 28 percent of all U.S. exports go to, and 20 percent of U.S. imports come from, U.S. firms abroad. Generally, in the countries where they operate, foreign-owned multinationals engage in trade more extensively than do their local counterparts. The rapid growth of worldwide foreign direct investment has been accompanied by a change in its composition. During the 1950s foreign direct investment was concentrated in raw materials and natural resource-based manufacturing; today, it is increasingly in technology-intensive manufacturing and in services, such as banking, insurance, and telecommunications. The shift toward services has been particularly pronounced. Services accounted for 16 percent of cumulative U.S. direct investment abroad in 1982 and for 31 percent in 1990. « The growing importance of the high-technology and service sectors enhances global economic integration. Downsized, high valueadded, sophisticated products made from multifaceted, interchange- 203 able components can be shipped easily for processing. Today, more trade takes place in computer chips and less in heavy machinery. Openness in trade and openness in investment work hand in hand to enhance prosperity and competitiveness. Both increase the efficiency of resource allocation and raise living standards. There is an important synergy between open trade and open investment flows: Cross-border corporate linkages increase pressure to keep open markets for goods and services as well as for capital. Continued progress toward an open international investment regime can contribute to strong worldwide growth in the 1990s. THE BENEFITS OF FOREIGN INVESTMENT International flows of capital through foreign direct and portfolio investment affect growth and the standard of living in several ways. They have kept U.S. interest rates lower than they would have been, thereby helping to sustain private investment and growth despite the Nation's low saving rate. Moreover, they have reduced the interest cost of financing the U.S. Federal budget deficit. Of course, capital inflows mean that the United States will have to make interest and dividend payments to foreigners in future years. Raising domestic saving is essential to achieving the high levels of investment on which long-run economic growth depends. A goal of Administration policy is to increase national saving to support a higher level of domestic investment that is sustainable over the long run—a level that can be achieved regardless of future flows of international capital. International capital flows in the form of direct investment are also important avenues for transferring technology. Early in this century, such investment emerged as a major conduit for technological know-how, especially between the United States and Europe. More recently, capital flows to developing countries—ranging from Hong Kong to Mexico to Thailand—have increased the diffusion of technology. Foreign direct investment involves the investment not only of financial and physical resources, but also of entrepreneurial and managerial skills. Indeed, the presence of foreign companies results in "spillover" improvements in the efficiency of local firms through the diffusion of state-of-the-art, productivity-enhancing activities. These transfers are no longer viewed as flowing predominantly in one direction—with a net transfer of American expertise to other nations; there is much that the United States has learned, and will continue to learn, from other nations. 204 FOREIGN INVESTMENT IN THE UNITED STATES IN PERSPECTIVE The increase in total foreign investment in the United States reflects both the worldwide trend toward greater economic integration and the American economy's underlying dynamism and attractiveness. Although flows of foreign direct investment into the United States decreased in 1990 and 1991—due, in part, to the U.S. recession and competing investment opportunities abroad—cumulative foreign direct investment in the United States, as measured by market value, reached $530 billion at the end of 1990, having increased at an average annual rate of 18 percent since 1985. Still, on a comparative basis, foreign direct investment in the United States remains modest (Chart 6-3). Indeed, foreign multinationals account for only about 5 percent of U.S. jobs and U.S. gross domestic product. Chart 6-3 Foreign Direct Investment, 1990 \n most industrialized countries, U.S. holdings of direct investment represent a substantially larger share ol host country GDP than the respective foreign country's holdings in the United States. Percent of host-country GDP 14 United Kingdom Japan Netherlands Canada Germany Foreign Holdings in the United States France Switzerland Australia Italy U.S. Holdings in the Foreign Country Note: Japan data based on GNP. German output is for former West Germany. Source: Department of Commerce and Organization for Economic Cooperation and Development. As discussed in detail in last year's Economic Report, foreign multinationals in the United States generally appear to operate in a manner similar to U.S.-owned companies. On average, however, foreign multinationals do spend more than U.S. firms on wages and on plant and equipment per worker. Available evidence also indicates that R&D spending per dollar of gross product by foreign 205 manufacturing multinationals in the United States appears to be significantly higher than that by all U.S. manufacturing firms. Until recently, statistics on stocks of foreign direct investment were quite misleading, primarily because they were based on historical purchase prices, not current market values. Much of U.S. direct investment abroad was made decades ago, while the bulk of foreign direct investment in the United States was made more recently. Because prices have risen over time, historical valuation understates the current value of U.S. holdings abroad relative to that of foreign direct investment in the United States. New valuation measures have rectified this problem (Box 6-3 and Chart 64). Box 6-3.—Measuring International Investment IJntil last year, data on U-S. direct investment abroad were valued at historical cost, that is, at the original price paid for the investment. These data greatly understated the value of U.S. investments abroad. As a result, the negative U.S. net international investment position was overstated. In 1991 data were revised to count UJ6L direct investments abroad and foreign direct investments in the United States at current cost, or what they would cost to replace. Since much of UJSL direct investment overseas occurred between the 1950s and 1970s, while most foreign direct investment in the United States has taken place in the last two decades, the adjustment from historical cost to current cost increased the value of U.Sinvestments abroad more than the value of foreign investments in the United States, With the revised method, these international data are now consistent with other fixed investment data, such as the Bureau of Economic Analysis's fixed re* producible tangible wealth and the Federal Reserve Board's estimates of U.S. domestic wealth. Chart 6-4 shows the net international investment position using historical cost and current cost. It also shows a third estimate for the net position that uses stock market prices to value direct investments. The net position—subtracting foreign direct and portfolio investment in the United States from U.S. direct and portfolio investment abroad—remains negative re* gardless of how assets are measured. Nevertheless, total income received by the United States on foreign investment is still somewhat larger than total income earned by foreigners on their U*S- holdings. 206 Chart 6-4 Net International Investment Position On a current cost or market value basis, the negative U.S. net international investment position is significantly smaller than on a historical cost basis. Billions of dollars 600 Current Cost 400 - y% \ -200 - ***• \ Historical Cost Market Value \ \ ***• • - -600 \ i i i i i i i I I I I I I l i i I I 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Source: Department of Commerce. POLICY TOWARD FOREIGN INVESTMENT Official U.S. policy toward foreign investment, as reaffirmed in a statement by the President in December 1991, recognizes that unhindered international flows of capital are beneficial to home and host countries alike. The basic principle underlying this open investment policy is that all countries should provide "national treatment" for foreign investment, so that foreign investors are able to make the same kinds of investments, under the same conditions, as local investors. Exceptions to this principle should be few and generally related to national security. The United States has limited foreign investment restrictions in certain sectors as a result of such considerations. These sectors include aviation, nuclear energy, telecommunications, broadcast communications, shipping, and defense. The interagency Committee on Foreign Investment in the United States is authorized to investigate foreign investments to determine their effects on national security and, under certain circumstances, recommend that the President suspend or prevent acquisitions by foreigners. Despite the growing worldwide recognition that flows of foreign direct investment produce benefits for all countries, national foreign investment policies differ significantly, particularly with respect to rights of establishment, local content restrictions, export 207 performance requirements, regulations on profit remittance, and protection of intellectual property. The increased globalization of both markets and corporate production networks is forging an international consensus on the need for multilateral rules governing national policies toward foreign direct investment. This issue will be considered in more detail below, in the discussion of the Uruguay Round negotiations. SUMMARY • The internationalization of companies through increased foreign direct investment complements the global integration of markets through the expansion of trade. • All countries—both sources and recipients—benefit from investment flows, in terms of greater economic growth, increased competitiveness, and enhanced technology development. • The increase in foreign investment in the United States reflects not only the worldwide trend toward greater economic integration, but also the attractiveness of the American economy. The volume of foreign direct investment in the United States is modest by international standards. • The United States' open investment policy is based on the principle of national treatment: Foreign investors should not be treated differently from domestic investors. This policy promotes growth and prosperity. MULTILATERAL AND REGIONAL APPROACHES TO LIBERALIZATION The world is currently witnessing a number of major initiatives to reduce barriers to international trade and investment. The United States and 107 other countries are working toward the completion of the Uruguay Round, the eighth round of multilateral negotiations under GATT. At the same time, there are a number of important regional initiatives to reduce barriers to trade and investment below the level that would currently be possible on a multilateral worldwide basis. An important issue is how multilateral and regional approaches to liberalization fit together. THE MOST-FAVORED-NATION PRINCIPLE AND GATT Nondiscrimination, or the most-favored-nation (MFN) principle, is the cornerstone of the GATT system. Under MFN, a GATT member undertakes to apply its trade policies in a uniform and like manner to all of its GATT trading partners; it applies the same tariff to imports of a specific product, regardless of which GATT member exported it. 208 There are two major reasons for abiding by the MFN principle. First, it promotes worldwide efficiency. Under an MFN regime, a country will import from the lowest cost foreign source. In contrast, if tariffs are applied in a discriminatory manner, low tariffs in themselves may be enough to induce importers to choose a lessefficient, higher cost source of supply. Second, MFN greatly facilitates international negotiations to reduce trade barriers. Indeed, the MFN principle was partially based on U.S. experience with the Reciprocal Trade Agreements Act of 1934. Under this act, the United States negotiated 20 bilateral trade agreements between 1934 and 1939. The negotiated tariff reductions in each of the agreements were relatively small, but all the agreements provided for MFN treatment. Such treatment was deemed necessary to move the bilateral negotiations along, since it ensured that each individual negotiating country would receive the benefits of any further tariff reductions that might later be negotiated between the United States and other countries. EXCEPTIONS: FREE-TRADE ASSOCIATIONS AND CUSTOMS UNIONS GATT, however, recognizes several exceptions to the MFN rule. First, GATT allows industrialized countries to extend preferential tariff treatment to less developed countries under the Generalized System of Preferences. Second, GATT permits the creation of freetrade areas (a set of countries that eliminate internal tariffs but maintain their independent external trade barriers) and customs unions (which also eliminate internal tariffs but adopt a set of common external tariffs) but only under certain conditions. The two principal conditions are (1) that the formation of a free-trade area or customs union must not result in barriers that are more restrictive to outside exporters than preexisting barriers, and (2) that trade barriers must be eliminated on substantially all trade within the region. If these two conditions are met, the predominant effect of the preferential trading area is likely to be the creation of new, efficiency-enhancing trade among the members. Such trade creation is likely to exceed trade diversion—the redirection of trade from a low-cost supplier outside the region to a higher cost, lessefficient source of supply within the region, simply because the inside supplier escapes the tariff that is applied to the more efficient outside producer. Such trade diversion reduces worldwide efficiency and is particularly harmful to outside countries who lose their markets within the customs union or free-trade area. It is to avoid the harmful trade-diverting effects of preferential trading arrangements that GATT places conditions on free-trade associations and customs unions. 209 The view embraced in the GATT articles and shared by the Administration is that bilateral and multilateral initiatives can both contribute to international economic efficiency. Free-trade associations that are predominately trade-creating stimulate efficient trade within the region. By demonstrating the prosperity that comes with the elimination of trade barriers, they can also stimulate further steps toward multilateral liberalization. Although regional free-trade areas can enhance the prosperity that comes from more open international markets, continued multilateral cooperation on trade and investment issues becomes even more crucial in their presence. The absence of such cooperation could lead to increased rivalry and friction among the free-trade areas, to greater barriers to trade and investment among regions, and to reduced prosperity worldwide (Box 6-4). U.S. trade policy is guided by a primary emphasis on multilateral initiatives but sees a beneficial role for bilateral and regional initiatives that are consistent with GATT. SUMMARY • There are two major reasons for abiding by the principle of MFN: It promotes worldwide efficiency, and it facilitates international negotiations to reduce trade barriers. • GATT, however, recognizes an exception to the MFN rule by permitting the creation of free-trade areas and customs unions under certain conditions aimed at ensuring continued access for imports from countries that do not participate in regional trade agreements. • The view embraced in the GATT and shared by the Administration is that bilateral initiatives can complement multilateral initiatives, by stimulating efficient trade within the region and by stimulating further steps toward multilateral liberalization as well. THE URUGUAY ROUND Since its inception in 1947, GATT has proved remarkably successful in orchestrating the reduction of world tariff rates. Through successive negotiating rounds, world tariffs have fallen from an average of 40 percent in 1947 to 4 percent today. However, the expected completion of the Uruguay Round, by far the most ambitious of the eight rounds of GATT negotiations to date, comes at a time when GATT faces great challenges. A number of developments that have become increasingly clear since the mid-1970s have defined the scope of the round. First, the inadequacy of established GATT rules covering agriculture and textiles has become apparent. Second, several new areas not previous 210 Box 6-4.—The Role of Regional Free-Trade Initiatives Although the benefits of the most-favored-nation (MFN) principle are generally acknowledged, economists disagree about the advisability of allowing exceptions from MFN in the case of customs unions and regional free-trade agreements. One point of disagreement concerns how the existence of such regional free-trade areas might alter the cost of a trade war. The answer to this question depends in part on which kind of trade—trade based on traditional comparative advantage or trade based on the exploitation of scale economies—is dominant Regional integration may lead to greater similarity among the resulting free-trade regions—in terms of natural resource availability and overall level of development—than existed among the individual countries. If this occurs, and if trade stems primarily from differences between trading partners as in Ricardo's world of comparative advantage, then free trade among countries within each free-trade area could diminish the need for trade between regions, and the cost of any subsequent trade wars between regions could be small. Where scale economies are important, however, the formation of regional free-trade areas and the creation of large unified markets can increase the potential gains from trading between regions and increase the damage that would result if these regions were to engage in trade wars. Because specialization and trade based on economies of scale are clearly important in today's economy, even free-trade regions that are broadly similar have much to gain from trading with each other, and therefore have much to lose from the outbreak of a trade war* Avoiding trade frictions through strengthened multilateral trade relations is therefore essential to assure that the formation of regional free-trade areas contributes to greater world welfare. ly covered in detail by GATT rules have grown in importance and are increasingly in need of international rules—trade in services, international investment flows, and intellectual property rights as they relate to trade in goods and services. Third, the previous success in tariff reduction has increased both the relative importance of nontariff barriers, and the need for better GATT dispute settlement mechanisms. Fourth, the rise in antidumping and countervailing duty actions and the increasing use of trade actions that fall outside GATT restrictions have led many countries to question the efficacy of GATT rules governing the use of so-called trade remedy laws. 211 In the Uruguay Round, negotiators are attempting to respond to these new challenges, and are also pursuing the more traditional goal of market opening, by seeking agreements in a broad range of areas. Significant progress has been made in clarifying the issues and moving toward possible agreement in a number of the areas. That progress has been slow, however, and considerable disagreement remains. To move the process along, GATT Director General Arthur Dunkel in late 1991 produced a draft agreement that built upon the negotiations over the past 5 years; this draft agreement has become the working text for continuing the negotiations and finalizing the agreement. Although the draft text covers many of the topics, several important areas not covered by the text were left to be negotiated in the coming months, most notably, specific market access commitments in goods and services. Important areas of the working text are discussed below. AGRICULTURE Agricultural reforms in the Uruguay Round would mark a historic departure from the costly protectionist measures that have flourished in that sector, largely outside GATT disciplines. These reforms would have significant consequences for farmers, taxpayers, and consumers in the United States and the rest of the world. Agreements on agricultural reforms fall into four categories: market access, internal supports, export subsidies, and sanitary and phytosanitary measures. First, countries would agree to reduce agricultural tariffs by an average 36 percent from 1986 levels over the 6 years beginning in 1993. Nontariff barriers such as quotas and licenses would be converted to tariff equivalents. Also under the agreement, countries would guarantee a minimum access equal to 3 percent of consumption over the period 1986-88. Second, countries would agree to reduce internal supports (such as deficiency payments or price supports) by 20 percent over 6 years starting in 1993. Internal supports would be measured using 1986-88 world reference prices and 1986 policies as a base. Government assistance would be permitted under categories of internal support agreed upon as non-trade-distorting. These permitted, or "green box," policies would include, for example, conservation measures, crop insurance and disaster assistance, extension programs, and income payments that are not based on current production levels. Third, under the export subsidies reforms, countries would agree to reduce the volume of subsidized exports by 24 percent and budgetary expenditures by 36 percent from 1986-90 levels over the 6 years beginning in 1993. Last, the rights of countries to protect human, animal, and plant life and health through sanitary and phytosanitary measures would be recognized. Countries would be prevented, however, from 212 erecting protectionist trade barriers under the guise of health and safety measures. These reforms would allow the United States to export more grains to replace subsidized exports of the European Community and allow U.S. consumers to enjoy lower prices for some dairy products and peanuts. Japan and other highly protectionist agricultural markets would begin to open their doors to commodities such as rice. With lower internal supports, disposal of surplus stocks on world markets would be less likely. This, coupled with the gradual reduction of export subsidies, would begin to halt the costly and distortive trade subsidy wars between the United States and the EC. TEXTILES Since 1961 world trade in textiles has, like agriculture, effectively taken place outside the discipline of GATT through a series of negotiated side-agreements. These agreements established a special regime of quotas to limit exports of textile and apparel products from developing to developed countries. The accords were ultimately put together to form the Multi-Fiber Arrangement (MFA). At the same time, many developing countries placed exceptionally high tariffs on textile and apparel imports or banned them altogether. A major objective of the Uruguay Round has been to open world textile and apparel markets and reintegrate these products into the normal GATT regime. Under the working text, this would be done via two channels during a 10-year transition period, which would begin in 1993. First, an increasing percentage of textile and apparel products would no longer be subject to quotas; by the end of the transition period, 51 percent of the volume of those products currently covered by the MFA would have been freed of quotas. Second, during the transition period, the products still subject to quotas would have their quota levels expanded at an accelerated rate. Finally, at the end of 10 years, MFA coverage on the remaining 49 percent of textile and apparel products currently covered by the MFA would be terminated, and all textile and apparel trade would once again be subject to normal GATT rules. In addition, all countries would promote improved access to markets for textiles and clothing through such measures as tariff reductions, reduction or elimination of nontariff barriers, and facilitation of customs, administrative, and licensing formalities. Consumers worldwide would gain billions of dollars annually. 213 SERVICES, INVESTMENT, AND INTELLECTUAL PROPERTY Several changes in the global trading environment have combined to place on the table a number of important issues that have never before been the subject of explicit and systematic GATT negotiations. In recent years the importance of services in world trade has become increasingly recognized. Trade in services is now about one-quarter as large as trade in goods. At the same time, the globalization of modern companies and the accompanying intrafirm trade mean that barriers to foreign direct investment act increasingly as barriers to trade. The trend toward globalization has also brought to the forefront the degree to which inadequate protection of intellectual property can serve as a barrier to trade. For example, the inadequacy of a country's patent or copyright protection can permit "pirated" versions to replace exports of legitimate products and can deter foreign direct investment. Together, these changes underlie the efforts of negotiators to formulate international rules governing trade in services, trade-related investment measures and trade-related intellectual property rights. Services The General Agreement on Trade in Services (GATS) contained in the working text rests on three pillars. The first is the Articles of the Agreement, which provide legally enforceable rules governing trade and investment in services covered by country commitments. The second pillar consists of several annexes that elaborate the principles as they apply to various sectors such as telecommunications and financial services. The third pillar of the GATS agreement will set out the initial commitments made by each country concerning market access and national treatment. The creation of GATS would provide the framework for further beneficial liberalization of services in the future, much as the creation of GATT did for goods 45 years ago. Moreover, the initial commitments to liberalization, which will be negotiated in the coming months, should translate into immediate benefits for the United States. Investment Companies that invest 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 therefore directly affect the flow of trade. The Uruguay Round has included negotiations on new rules that would discipline 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 firms use specific amounts 214 of locally produced goods in their products (local content requirements), that foreign multinationals export a certain share of their output (export performance requirements), and that foreign investors use only a limited amount of the foreign exchange they earn to purchase inputs (foreign exchange restrictions). Current GATT rules indirectly cover a few of these measures, but the rules are neither comprehensive nor clear. The U.S. position, shared by most industrialized countries, is that GATT should explicitly prohibit all TRIMs that inherently restrict or distort trade and develop a timeline to phase out prohibited TRIMs already in existence. Deep differences of opinion between developed and developing countries have hindered these negotiations, however. Many developing nations, which are largely host countries for foreign direct investment, insist that control of such investment through TRIMs is crucial to achieving their development objectives. The proposed Uruguay Round text embodies systematic, explicit prohibitions of some TRIMS. Importantly, however, it does not cover export performance requirements, which are not currently treated even indirectly in the GATT articles. In the long run, given the increasing links between investment and trade, it is desirable to have strong 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 GATTs rules on goods trade would exist for investment. Establishing common, multilateral rules for investment throughout the world continues to be 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. Intellectual Property The current system for protecting international property rights consists of a number of conventions and agreements. Its inadequacy stems from a number of factors. First, not all countries adhere to the existing conventions and agreements. Second, the coverage of the rules themselves is incomplete, permitting, in some cases, exceptions from patent coverage for foods, drugs, and chemicals. Third, these conventions and agreements rely on the principle of national treatment: Each country must afford to others the same intellectual property protection it provides its own citizens. The weak standards of protection within many countries, however, make national treatment an inadequate standard for protection. Fourth, existing conventions and agreements contain no enforcement and dispute settlement mechanisms. The working text addresses many of these deficiencies by providing a comprehensive set of rules governing trade-related intellectual 215 property rights. The draft agreement sets new and higher standards for the protection of a full range of intellectual property rights, including patents, copyrights, trademarks, and trade secrets. It also provides for strengthened enforcement of those standards both within countries and at the border. It would subject these standards and enforcement obligations to effective multilateral dispute settlement. The draft agreement would provide substantial benefits to the computer software, pharmaceutical, sound recording, semiconductor, and equipment manufacturing industries. MARKET OPENING The working text does not include specific market access commitments, which are to be negotiated in the coming months. If the round is successful, however, participants in the round are likely to reduce their average tariffs by about one-third. This includes a U.S. initiative to create 10 free-trade sectors, where tariffs would be eliminated altogether: Sectors covered by this initiative include electronics, steel, construction equipment, and Pharmaceuticals, among others. Under the Zero-for-Zero Initiative, the United States has offered to cut its tariffs to zero in particular sectors provided that other countries agree to cut their tariffs to zero in the same sectors. To place the importance of the round's market access negotiations in perspective, the 10 free-trade sectors would reduce tariffs to zero on a greater value of U.S. exports than that covered by the U.S.-Canada Free-Trade Agreement and by more than three times the value of U.S. exports to Mexico covered by the North American free-trade negotiations. TRADE REMEDIES The case for open trade does not deny a potentially legitimate role for the use of various trade remedies that allow limited, temporary deviations from open trade. When used appropriately, such trade remedies can actually enhance the benefits of trade and strengthen the international trading system by encouraging countries to reduce their trade barriers and other trade-distorting measures. When used for protectionist purposes, however, these remedies can undo open trade policies and threaten the international trading system. A major focus of the Uruguay Round has been to make changes in the GATT rules governing the use of safeguards, antidumping actions, and countervailing duty actions to ensure that these trade remedies serve their intended purposes. Safeguards By allowing countries to impose temporary import restrictions when increased imports cause or threaten to cause serious injury to an industry, safeguards act as an escape clause in trade agreements. An important part of any agreement to which countries 216 accede voluntarily, safeguards provide some degree of flexibility in what might otherwise be a rigid commitment to liberalization. With appropriate design, the existence of such a safety valve can encourage countries to enter into liberalizing agreements that they might not otherwise. Once countries have entered into such agreements, safeguards can provide them with an agreed-upon avenue to respond to protectionist pressures that might otherwise lead to a breakdown of international cooperation and the outbreak of a trade war. Finally, safeguards can allow for some flexibility while staying within the existing rules, so that extraordinary actions can be taken without sacrificing all the restraining effects that the international rules place on protectionist pressures at home. The challenge is to design safeguards that are neither inadequate nor too readily available. Safeguard provisions that err on the side of stringency risk the possibility that fissures will develop in the workings of the trade agreement that lead either to trade wars or to "solutions" that in effect operate outside the rules of the agreement. Provisions that err on the side of permissiveness risk the possibility that liberalization embodied in the trade agreement will be undone by frequent safeguard actions. The changes to GATT safeguard provisions that are contained in the working text represent a balance between these conflicting considerations. One crucial change would eliminate the loophole that allowed so-called greyarea measures—such as voluntary export restraints, orderly marketing arrangements, and other similar measures—to be applied outside GATT rules (Box 6-5). In addition, the existing requirement that compensation be provided to trading partners when a safeguard action is taken would be waived, provided that the safeguard action lasts 3 years or less. This change would increase the incentive to use safeguard actions only as short-term, temporary measures. Antidumping and Countervailing Duty Laws Whereas safeguard actions are designed to remedy a kind of "nofault" injury claim, antidumping and countervailing duty laws are intended to address unfair trading practices of foreign exporters and their governments, respectively. Under antidumping laws, duties may be imposed on a firm's imports when that firm is found to be "dumping," that is, exporting its product at a price that is below either the selling price in its home market or the cost of production. Countervailing duty law allows the imposition of duties on imports to offset government subsidies. From the viewpoint of economic efficiency, the circumstances that warrant the imposition of antidumping or countervailing duties are quite narrow. Dumped or subsidized imports have their clearest detrimental effect on economic efficiency if they allow foreign firms to drive out domestic suppliers and monopolize the 217 Box 6-5.—The Cost of Weak Multilateral Butes A major objective of the Uruguay Round has been to reinforce General Agreement on Tariffs and Trade (GATT) principles and to strengthen GATT rules that delimit the use of extraordinary measures of protection. The stronger rules would help prevent such aberrations as the Multi-Fiber Arrangement (MFA), which operates under GATT but has deviated from some of GATTs most important principles* The MFA is the latest in a string of "temporary" textile arrangements that began in the early 1960s* Under the MFAf participants negotiate bilateral quotas that exporters promise to respect. The bilateral nature of the negotiations undermines GATTs fundamental most-favored-nation principle* This has allowed some high-cost countries to continue exporting textiles and apparel while the trade of competitive countries is limited. The negotiation of quotas contravenes GATT Article XI, which states that quantitative restrictions should be avoided. The quantitative restrictions have prompted some countries to export more expensive products, thereby further distorting trade flows. The cost to U-S. consumers of protection in the textile and apparel sector has been high, while the gains to U.S. producers have been much smaller. One estimate put the cost to UJS. consumers at about $11 billion in 1987, while U-S, producers gained slightly more than $4 billion. The MFA itself would be phased out under the proposed Uruguay Round text. Stronger GATT rules governing the use of safeguards would help to prevent the development of any successor agreements. market, or if they are sporadic and interfere with the ability of the domestic industry to undertake investment in capital equipment and R&D, and thereby lead to higher prices or lower quality for consumers. However, antidumping and countervailing duty laws are primarily motivated not by economic efficiency concerns, but by concern for fairness to the import-competing industry. This concern is embodied in the criterion under which dumping is actionable under GATT: A finding that dumped products have injured the domestic industry is both necessary and sufficient to permit the imposition of antidumping duties, regardless of the effect on consumers. An analogous criterion applies for subsidized imports under GATT countervailing duty rules. A concern for fairness to the import-competing industry is appropriate; however, the abuse of antidumping or countervailing duty 218 laws for protectionist purposes by any country is unfair to consumers and to exporting firms. The challenge to negotiators in the Uruguay Round has been to strengthen the GATT antidumping and countervailing duty rules, particularly in the area of effective anticircumvention provisions, while at the same time ensuring that such trade remedies are not misused for protectionist purposes (Box 6-6). Box 6-6.—Strengthening GATT Antidumping Rules Important changes in the GATT rales governing antidumping procedures are under consideration in the Uruguay Bound* These changes could strengthen the ability of the law to prevent injury to import-competing industries from dumped imports at the same time that they could reduce the likelihood that antidumping actions would be used for protectionist purposes* Several changes under negotiation that have been proposed by the United States are aimed at including provisions against the circumvention of legitimate antidumping orders, Negotiators are attempting to ensure that exporting firms that face antidumping duties may not easily circumvent those duties by, for example, setting up "screwdriver" operations in the importing country* Such operations could allow an exporting firm to circumvent an antidumping duty by exporting the parts and components for final assembly rather than exporting the final product on which an existing antidumping duty has been imposed. Among numerous changes to methodology offered by other countries and included in the proposed text is the addition of new rules governing the use of exchange rates in the calculation of dumping margins. This change would reduce the chance that normal business practices—specifically, the use of forward exchange contracts tied directly to export transactions—might lead to a mistaken finding of dumping. DISPUTE SETTLEMENT PROCEDURES An essential element of any effective trade agreement is the threat of retaliation, or other penalty, if a country does not live up to its end of the agreement. The enforcement mechanism is typically contained in the dispute settlement procedures of the agreement. Without a workable enforcement mechanism, international trade agreements, like any other agreement, would become meaningless. Section 301 of the Trade Act of 1974 also provides the authority and procedures for the President unilaterally to enforce U.S. rights 219 under international trade agreements and to respond to certain unfair foreign practices where no trade agreement exists. The inclusion of section 301 in the 1974 Trade Act and subsequent amendments reflects a growing concern that GATT's existing dispute settlement mechanisms are not sufficient and that its inadequate coverage has left policies in important areas of trade and investment undisciplined. This raises a quandary for U.S. trade policy, as it does for all countries that take up unilateral enforcement. On the one hand, negotiating trade agreements without the ability to enforce them is meaningless. On the other hand, unilateral enforcement can weaken the international trading system. The difficulty lies in ensuring that unilateral action is used in a constructive manner. Outside of GATT, there is a risk that conflicts can degenerate into either escalating protection, or "resolutions" that diverge from market principles. The challenge negotiators face has been to make the GATT dispute settlement mechanism prompt, reliable, effective, and fair. The working text would provide for tight procedural time limits on the formation and operation of dispute settlement panels, automatic adoption of panel reports, and broad provisions for retaliation should the panel recommendations not be implemented (or compensation not be paid). With these changes, the new dispute settlement mechanism contained in the working text should become the central means of enforcing trade agreements under GATT. At the same time, by extending comprehensive GATT coverage to include areas such as services and intellectual property, the working text should obviate the need for unilateral actions in those areas. SUMMARY • GATT has proved remarkably successful in orchestrating the reduction in world tariff rates over the past 45 years. The expected completion of the Uruguay Round, however, comes at a time when GATT faces great challenges. • A number of developments have defined the scope of the round, including the increasing inadequacy of GATT rules covering agriculture and textiles; the growing need to extend international rules to trade in services, international investment flows, and intellectual property rights as they relate to trade in goods and services; the need for better GATT dispute settlement mechanisms; and the desire for better GATT disciplines on the use of so-called trade remedy laws. • When completed, the Uruguay Round has the potential to have a profound effect on the integration of global trade and investment for many years to come, and to provide substantial and lasting benefits to the United States and the world. 220 THE NORTH AMERICAN FREE-TRADE AGREEMENT The Administration is in the midst of negotiating an agreement with Mexico and Canada that will build on the U.S.-Canada FreeTrade Agreement of 1988 and provide for freer trade and investment throughout North America. By the end of 1991, the negotiations had made considerable progress in laying out points of convergence and in identifying the main problems that must be solved to reach agreement. The talks are divided into several negotiating groups. The Administration has important objectives in the areas of market access, services, investment, intellectual property rights, and trade rules. Both within the negotiations on the North American freetrade agreement (NAFTA) and through parallel discussions, the Administration is also addressing concerns regarding the areas of labor and the environment. MARKET ACCESS Market access negotiations cover trade in goods among the United States, Canada, and Mexico. The fundamental goal of the United States is the removal of all tariffs and the removal or reduction of nontariff trade barriers (the latter include, for example, quotas and import licenses). When necessary, this liberalization should take place over a transition period to ease the adjustment pressures in sensitive sectors. Because Mexico's tariffs are, on average, significantly higher than those of the United States, U.S. exporters have a great deal to gain from these talks. Areas such as automobiles, agriculture, textiles and apparel, and energy and petrochemicals are complicated enough to merit their own negotiating groups. A number of restrictions specific to the automobile sector have distorted automotive assembly and component manufacture investments in North America. These distortions include a web of local content provisions, export performance requirements, and restrictions on foreign ownership. Integrating the North American automobile market offers great opportunities for U.S. products that have been subject to such restrictions. The sensitive textiles and apparel sector has its own intricate system of protection. Finally, Mexico's constitution limits that country's ability to liberalize the energy sector; for example, it prohibits foreign ownership of domestic oil resources. The United States will respect Mexico's constitutional provision on energy, but there are other areas in which progress could be made to enhance cooperation in this sector. Duty-free trade in North American goods among the three countries raises the question of what constitutes a North American 221 good. Because all three participants in the negotiations import raw materials and intermediate goods that are often included in final products, a rule must be formulated to distinguish between products that qualify for duty-free treatment and those that do not. U.S. negotiators are building on the rule from the U.S.-Canada Free-Trade Agreement, which uses changes in tariff classification as the principal criterion for qualifying for duty-free treatment. TRADE IN SERVICES AND INVESTMENT In services, the United States seeks additional market openings in Mexico in such areas as banking, securities, insurance, telecommunications, and land transportation. In these areas in particular, market entry is restricted and in some sectors U.S. firms are denied access to the Mexican market. The negotiations can be used to build upon the existing free-trade agreement with Canada to create greater services opportunities in all three countries. The United States wants to guarantee all NAFTA investors nondiscriminatory treatment when they invest in another NAFTA country. The United States also wants access to arbitrations for the settlement of disputes, guarantees against expropriation, and the right for U.S. firms to repatriate profits from investments in Mexico. INTELLECTUAL PROPERTY RIGHTS The United States seeks the achievement of adequate and effective legal protection for the rights of owners of such intellectual property as patents, trademarks, copyrights, and trade secrets. U.S. negotiators are pressing for acceptance among NAFTA parties of the principle of according national and MFN treatment to holders of intellectual property rights. The establishment of measures to ensure timely and effective enforcement of laws governing intellectual property rights is another area of attention. TRADE RULES Issues concerning the rules of the trading system are dealt with in the groups on safeguards; antidumping, subsidies, and countervailing duties; standards; and dispute resolution. As in the Uruguay Round, safeguard provisions are an important element of the NAFTA negotiations. In NAFTA, the United States is seeking a transitional, bilateral safeguard with Mexico similar to its bilateral safeguards with Canada in the U.S.-Canada Free-Trade Agreement. The United States also wants to retain the ability to limit NAFTA imports temporarily as part of a global safeguard action if they contribute to serious injury of a U.S. industry. The United States is trying to ensure that remedies to unfair trade operate transparently and without unduly burdening busi 222 ness in North America. In the area of product standards, U.S. negotiators are insisting on maintaining the right to impose standards more stringent than international standards, where there is a scientific justification for doing so. The agreement, however, will contain provisions to prevent the use of product standards and technological regulations as trade barriers. Finally, the NAFTA parties hope to establish an efficient dispute settlement mechanism to resolve conflicts arising from the NAFTA accord. LABOR AND THE ENVIRONMENT When NAFTA was proposed, concerns were raised about its potential effect on the environment and about the treatment of labor in Mexico. These are not among the primary subjects under discussion in the negotiations themselves, since the purpose of the agreement is to liberalize trade and investment. The Administration, however, has addressed and continues to address these concerns in parallel discussions. Government experts in environmental matters and in labor affairs from the United States and Mexico are consulting and cooperating on a broad range of issues. Where it is possible and appropriate, the United States and Mexico are consulting and sharing information with regard to the enforcement of labor and environmental regulations. A successful conclusion of the NAFTA talks should enhance the level of cooperation in these important areas. At the same time, the Administration is committed to working with the Congress to ensure that an effective, adequately funded worker adjustment program is in place when NAFTA takes effect. SUMMARY • The Administration is in the midst of negotiating an agreement with Mexico and Canada that will provide for freer trade and investment throughout North America. • Major goals of the United States in NAFTA negotiations include the removal of all tariffs and the removal or reduction of nontariff barriers to trade in goods among NAFTA countries; nondiscriminatory treatment among NAFTA countries for a broad range of service providers; nondiscriminatory treatment for all NAFTA investors when they invest in another NAFTA country; and the achievement of adequate and effective legal protection among NAFTA countries for the rights of owners of such intellectual property as patents, trademarks, copyrights, and trade secrets. 223 EC 92 AND EUROPEAN ECONOMIC AND MONETARY UNION In 1985 the 12 member states of the European Community proposed abolishing nearly all internal impediments to the free movement of goods, capital, services, and people by the end of 1992. At the Maastricht Summit in December 1991, the EC agreed to establish an economic and monetary union (EMU) with a single currency by the end of the decade. The EC also defined a new social charter and forged a closer political union, with common foreign and defense policies the primary goals. Most of the rules for EC 92 are now in place, and the outline of a European economic and monetary union is taking shape. The resulting integration of the European marketplace, the culmination of the 1957 Treaty of Rome, is intended to overcome historical, cultural, and political barriers that have separated these countries for centuries. Since the late 1960s the EC has operated as a customs union with a common external tariff but no internal tariffs. Yet various nontariff barriers have remained, including differences among the member states in safety, health, and environmental standards; rules governing the operations of financial institutions; internal export and import licensing restrictions; border shipping taxes and customs procedures; intra-EC immigration policies; and public procurement practices. The 1992 reforms are intended to eliminate or substantially reduce barriers by liberalizing financial sector regulations, harmonizing technical standards and aspects of tax systems, and enforcing intra-European competitive bidding in public procurement. Substantial gains could come from the 1992 reforms. Benefits will come from lower production costs, economies of scale, and reduced transportation costs. Efficiency is likely to increase from more competitive bidding in government procurement and from tax harmonization. Integration of financial services and markets is expected to lower the cost of capital to firms. EC consumers stand to enjoy greater product variety. For both U.S. exporters and investors, EC 92 offers potential benefits, partly because it creates an integrated market, and partly because the process of integration could promote growth. As a trading partner, the United States (as well as other non-European countries) could gain through increased EC demand for imported products. The realization of these benefits, however, depends on the EC market's openness to external trade and how much more competitive European companies become. As investors, U.S. firms could gain even more than their European counterparts from EC 92 because American multinationals frequently operate in more than one European country already and 224 therefore are particularly likely to gain from uniform standards and a reduction in nontariff barriers. Based on decades of foreign direct investment, American firms (in contrast to Japanese firms, other foreign companies, and even some European firms) are accustomed to serving a pan-European market. However, these gains depend on American firms located in Europe enjoying national treatment, that is, the same rights of market access as European firms. Moreover, the advantage some U.S. firms have will not last forever; Japanese automobile and electronics multinationals, for example, will be building up European production facilities, and native European firms will also establish operations in more efficient configurations. Overall, while the market integration initiatives embodied in EC 92 should foster greater long-term economic growth, they by no means guarantee such an outcome. And, of course, it will not prevent short-term cyclical fluctuations. Europe's prosperity will depend on, among other things, guarding against establishing additional layers of bureaucracy associated with implementation of EC 92. European monetary union with a single currency and a single central bank would complement the internal market. Monetary union would advance market integration by eliminating the nuisance and cost of switching from one currency to another as borders are crossed, and it would reduce business uncertainties associated with exchange rate variability and divergent monetary and fiscal policies in EC member countries. Monetary union, however, would also eliminate independent monetary policies, and thus limit the policy instruments available to respond to country-specific economic fluctuations. At Maastricht, EC members determined the timetable and conditions needed to move from the current system of limited exchange-rate flexibility to "irrevocably fixed" exchange rates and then to a single currency. Europe should have a single currency by the end of the decade. Although monetary union is some years away, members of the Community have used the exchange rate mechanism of the European Monetary System to bring about some of the necessary discipline that is a prerequisite to monetary union. The exchange rate mechanism requires exchange rates among the member countries to be kept within a narrow band, which has encouraged a convergence of inflation rates and interest rates. Fiscal stance still differs markedly among the member countries, however, and will have to converge to support an EC currency. A single currency would prevent exchange-rate adjustments among European countries from absorbing external economic shocks or differences in domestic economic policies; adjustment would have to take place instead through changes in domestic wages and prices. 225 Therefore, for monetary union to be sustainable, wages and prices in each country need to be flexible. If domestic performance in the member countries "converges" sufficiently, there will be less differentiation among regional wages and prices and therefore less pressure for change. In preparation for monetary union, the EC Council is monitoring the macroeconomic policies of member countries to encourage a convergence of both monetary and fiscal policies. Policies to encourage labor market flexibility in individual member states, as well as policies which may stem from Maastricht's social charter, should further reduce interregion tensions. The dollar remains the most widely used currency for international transactions and reserves, although in recent years financial innovation and increased international capital mobility have reduced its relative importance. The single currency resulting from the EMU will likely be used along with the dollar in international transactions and world capital markets. It will be an important reserve and transactions asset in non-European countries that trade with Europe. Within Europe, the need to hold dollar reserves will decline as countries consolidate reserve holdings. Where there is agreement on policy objectives, an EMU may facilitate greater cooperation among the Federal Reserve, the proposed European central bank, and other major central banks in setting their respective monetary policies. This, along with better coordination of fiscal policies, will likely enhance overall world growth. Moreover, because a successful move to the EMU requires flexible labor and product markets, countries have been undertaking structural reforms directed toward greater flexibility. These policies by themselves promote growth. SUMMARY • EC 1992 and an Economic and Monetary Union represent successive steps toward integrating the national markets of Europe. Liberalization of trade in goods is scheduled to be completed this year. Economic and monetary union, including £ single currency and central bank, is scheduled to be completed before the end of the decade. • As long as EC integration proceeds in an open manner, U.S. producers in Europe and U.S. exporters are likely to benefit from EC 92 and the EMU. Growth of the European market should be enhanced by efficiencies gained through reduction of barriers and harmonization of standards, by convergence of fiscal and monetary policies associated with the EMU, and by structural changes to labor and goods markets that increase their flexibility. 226 ACHIEVING MARKET-ORIENTED POLICIES AND GROWTH IN ECONOMIES IN TRANSITION Around the globe, previously repressive political systems are turning toward democratic pluralism, and heavily controlled economic systems are being restructured to allow market forces to flourish. Democratic pluralism and market-oriented economies do not guarantee wealth, but they do establish an environment that promotes growth and prosperity. Economies in transition—both developing economies with market structures in place and economies emerging from the command system—need comprehensive reforms and balanced policies, both macroeconomic and structural, to create the foundations for longrun prosperity. The industrial economies can aid the transition with robust, noninflationary growth in their own economies and by opening their markets to encourage international trade. In turn, growth and development of economies in transition will benefit the industrial countries. POLITICAL CHANGE AND REFORMS The sovereignty of the Baltic nations and free elections in some of the former Soviet republics made 1991 a watershed year for political change and economic reform. These countries are only the most obvious and recent participants in a surge of change around the world. In other countries as well, new political beginnings portend new economic eras. Zambia held its first multiparty elections in about two decades. Cambodia achieved peace and scheduled elections after nearly a generation of war. The new Colombian Constitution embraces all peoples in Colombia. The nations in the Middle East are talking instead of fighting. To no small degree, these political changes are responses to the clear economic advantages of an open and peaceful society. These worldwide changes promise to settle intellectual debates that have persisted for decades. The "convergence hypothesis" that emerged in the 1950s held that the capitalist and communist systems would eventually evolve toward each other, with the final result a hybrid of the two systems. It is now unmistakably clear that this hypothesis has been rejected. The developed market economies have reversed their leanings toward socialism, and the leaders in the former Soviet Union, Eastern and Central Europe and the other countries with command-style economies in transition are turning away from these approaches. These leaders instead push market-oriented economics with individual choice and private property rights as the foundations of progress and prosperi 227 ty. The failure of economic socialism and central planning have brought about a fundamental rethinking by their proponents. In many respects the model of central planning is no longer even a hypothetical ideal. CAUSES OF THE MARKET REVOLUTION Although pressure for market-oriented change had been increasing in many countries for a decade or more, it erupted first in the developments in Eastern and Central Europe during 1989 and 1990 and subsequently in the former Soviet Union in 1991. The fall of the Berlin Wall and the events that followed raised hopes and expectations around the world. Indeed, the unification of East and West Germany is a case study of how poor economic performance has been a major impetus for shifting centrally planned economies toward market economies (Box 6-7). Box 6-7.—Economic Performance in the Two Germanys East and West Germany were unified on October 3, 1990, less than a year after the fall of the Berlin Wail in November 1989. At the time of unification, the contrast between the two systems in Germany could scarcely have been more stark. Starting from a similar economic base 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. Several contrasting examples make the point. Only 7 percent of East German households had telephones in 1988; in West Germany virtually every one (98 percent) did. Moreover, only a few hundred East German phone lines stretched outside the country. In East Germany, the percentage of households with cars and color televisions was about half that in West Germany* A recent study estimated that productivity in East Germany was, at best, half that in West Germany. Another recent assessment found that, as of 1989, output per capita in East Germany was $9,670, while in West Germany, it was $15,250, almost 60 percent higher. A fundamental motivation for change—not just in East Germany, but in the other countries dominated by central planning as well—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. 228 The impact of these economic regimes on living standards has been devastating. The repercussions are epitomized in the case of the former Soviet Union. By the time of the attempted coup in August 1991, the Soviet Union had most, if not all, of the generic difficulties inherent in central planning. Other inefficiencies associated with a command-and-control economy were also pervasive. For example, although estimates are imprecise, perhaps as much as a fifth of the Soviet Union's output had been allocated to the defense sector in recent years. Also, because many goods and services had been unavailable for years, Soviet citizens had stored up massive amounts of rubles. The information technology revolution made the success of market-oriented economies and the weakness of the centrally planned countries more apparent. Ideas flowing easily across national borders spurred momentum for fundamental change. Most East Germans, for example, could receive West German television broadcasts before the Berlin Wall fell. The pressure for change that was created ultimately overwhelmed governments. PRINCIPLES OF REFORM IN ECONOMIES IN TRANSITION Regardless of the stage of transition, sound economic foundations and flexible markets create an environment in which individuals succeed and the economy prospers. Institution building, human resource development, and political will are always important for policy success but are especially critical in some economies in transition. Economic policy builds on these foundations to unlock the key engines of growth: productivity increases and private investment. Three economic fundamentals underpin the market-oriented system: a stable macroeconomic environment, market-determined prices, and private sector entrepreneur ship. Key complementary reforms to the legal framework, the financial sector, labor markets, and fiscal systems are necessary to unleash growth. Economies in transition around the world face challenges in each of these economic policy areas. A stable macroeconomic environment assures people of the value of money. Because goods and services are exchanged for money in a market system, the value of money needs to be reasonably stable for the system to work well. A stable macroeconomic environment also allows savers and investors to look to the long term, by assuring them that a successful investment made today will reap a positive benefit in the future. Many of the most profitable investments take a long time to mature. Market-determined prices encourage resources to move to sectors with the highest return. Freeing prices allows consumers, produc 229 ers, and investors to read the signals of supply and demand, choose products and services that yield the most benefits for the money, maximize returns, and increase well-being. Price liberalization is complete only when the domestic economy is open to international market forces. That requires currency convertibility and liberalizing trade. Markets where prices are flexible adjust more easily to changes in the domestic and international environments. Entrepreneurship is particularly important. Because restructuring and privatization are slow processes, and because incentives and behavior in large organizations are hard to alter, new private firms and small and medium-sized privatized enterprises are likely to be the major sources of growth and dynamism in economies in transition. Complementary policies bring together these fundamentals. A solid legal foundation ensures that private property rights are established and respected, which is a prerequisite for entrepreneurship and innovation. A functioning financial sector channels savings to investment opportunities and is the conduit for monetary policy signals to affect the economy. A flexible labor market enables workers to build skills, find the best jobs, and reap the benefits of greater productivity. A fiscal system that raises revenues in a relatively nondistortionary way and undertakes the appropriate level of social expenditures is an integral part of the transition process. A procompetition policy fosters the small and medium-size enterprise sector. A liberal trade regime encourages competition and creates new opportunities for industry and entrepreneurs. The success of a market economy depends on people who take opportunities that the market creates. In some transitional economies, removing government regulation will help redirect entrepreneurship toward productive activity and away from wasted efforts of jumping through bureaucratic hoops. In other economies with little experience with competition, market-responsive behavior may take time to develop. PROGRESS AND POLICY CHALLENGES Economies in transition in Latin America, Africa, Asia, Central and Eastern Europe, and the former Soviet Union have some of the underpinnings of a market economy, have undertaken many of these reforms, and have achieved successes in many areas, although to varying degrees. Policymakers face different challenges in the various countries to sustain the momentum of development and promote growth. In recent years several Latin American countries have improved fiscal and monetary policy control and have made a commitment to trade liberalization and private ownership. Popular support and understanding of economic reforms appears stronger. They have 230 emerged from nearly a decade of poor performance into a new environment of lower inflation, higher investment, voluntary capital flows, and improved growth. As the transition to an industrial market economy proceeds, policymakers in each country are focusing on particular challenges that will move the process ahead. In Mexico, for example, privatization of banks, telecommunications, and airlines is widening the private sector's role in the economy. Along with trade liberalization, this privatization will lead to increased competition and greater efficiency in domestic markets. Argentina's Decree 2284, a sweeping deregulation of domestic and international trade and liberalization of labor markets, is strengthening the market mechanism and, combined with renewed vigor in macroeconomic discipline, should create a more flexible environment for further growth. In Chile, policy attention is focused on raising the quality of life by improving education, health, infrastructure, and the environment. Encouraging the private sector and increasing market opportunities through trade and investment are key elements of U.S. policies for Latin America. Policies include the NAFTA, Enterprise for the Americas Initiative, and the Andean Trade Preference Initiative, the latter two discussed in more detail in last year's Economic Report. Several African countries have undertaken important reforms to improve the investment climate. Zambia rewrote its investment codes to protect investors against expropriation and to allow profit repatriation. Tanzania, only recently a Marxist regime, opened the private Investment Promotion Center. Policy reforms in many African countries need to be geared to the challenges of achieving sustained growth within the context of low and stable inflation, expanding opportunities for the private sector, and diversifying exports according to comparative advantage. Many East Asian countries have applied the principles of market economics with great success. Real per capita output growth in the four Asian newly industrializing economies (Hong Kong, Singapore, South Korea, and Taiwan) averaged 7.5 percent annually between 1983 and 1990. Policy challenges remain for these Asian success stories, in particular to reduce government guidance in the financial sector and with respect to investment choice and direction of trade. Transforming the economies of Eastern and Central Europe into market economies is a difficult, complex, and lengthy process. Progress has been made in economic reform. In less than two years, many of the countries have liberalized prices, and some have approached macroeconomic stability. Most have written new laws and defined property rights. Financial systems are being created, 231 and privatization is moving forward. While essential regulatory and institutional underpinnings are in place and the spirit of the marketplace is beginning to take hold, expectations for a quick transformation are unrealistic. It will take time for institutions to serve the objective of growth efficiently. All the countries face massive dislocation and restructuring of industry. Finally, a critical mass of citizens must seize their new economic empowerment. Private sector development is a key element of reform in Central and Eastern Europe. The Administration has encouraged the development of small and medium-size enterprises through the Enterprise Funds (Box 6-8). The Trade Enhancement Initiative has lowered barriers to Central and Eastern European exports of agricultural, steel, and textile products to the United States and has focused on reducing these countries' impediments to exports, both of which should create new opportunities for the emerging private sector. A range of domestic policy challenges face reformers in Central and Eastern Europe. Hungary's impressive pace of foreign and domestic investment can be sustained only if it quickly revamps its antiquated banking and telecommunications systems. Labor retraining and creation of a housing market would help Poland restructure and privatize its industries, which would also reduce pressure on fiscal balance. In the former Soviet republics, as in Eastern and Central Europe, a credible and comprehensive economic reform program is a prerequisite for real change. Economic reformers in the former Soviet republics face some unique problems, making their challenges even greater. Clarifying economic relations among the republics would assist the reform efforts. Continuing trade ties would significantly reduce adjustment costs and aid the overall reform process since a high degree of specialization and interrepublic trade existed in the former Soviet Union. In Eastern and Central European countries, the collapse in intraregional trade has made adjustment much more difficult. Decisions on whether to have one currency, a currency union, or multiple currencies will affect other reforms, such as the responsibilities of the central bank and other financial institutions. Clarifying responsibility for Soviet debt, dividing up Soviet assets, and property right laws are a prerequisite for new investment. Moreover, the allocation of economic decisionmaking responsibilities between republic and local authorities must be determined. THE ROLE FOR INDUSTRIAL COUNTRIES Economic development and the transition to pluralistic, marketoriented economies is taking place in the broader context of an interdependent global economy. The industrial countries can con 232 Box 6-8.—Enterprise Funds Creating a private sector from scratch is a daunting task. One innovative approach to help accelerate this process has been the creation of Enterprise Funds, private investment firms that channel U.S. Government grants to the fledgling private sectors in economies in transition. Four Enterprise Funds, one each for Poland, Czechoslovakia, Hungary, and Bulgaria, have been created. All but the Bulgarian-American Fund are currently in operation. Using more than $400 million authorized by the Congress under the Support for East European Democracy Act of 1989 (the SEED Act), these private, nonprofit corporations help promote small businesses, agricultural projects, and joint ventures between the United States and host country firms. The funds typically make loans, grants, and equity investments, undertake feasibility studies, and offer technical assistance, training, insurance, and loan guarantees. Enterprise Funds are particularly attractive because they allow private sector participants to select investments that will maximize returns. By raising additional capital from private sources and by reinvesting profits, the financial impact of the initial grant will be multiplied many times over. About 750 serious business proposals were submitted to the Hungarian-American Enterprise Fund between July 1989, when the President announced its creation, and December 1991. Initial interest among potential entrepreneurs has been substantial. The fund has made investments and loans totaling about $27 million in a variety of projects including a music recording company, a computer and office automation equipment distributor, and a firm engaged in capital equipment leasing. tribute to the success of the transition process through sustained, noninflationary economic growth and open international markets— actions that will also enhance the performance of their own economies. A renewed commitment to open markets and policies that encourage competitive and undistorted markets and greater productivity are keys to growth—for both industrial countries and economies in transition. In particular, the benefits of an open trading regime accrue gradually and build over time. A long-term commitment to free trade based on market principles guides investment at home and abroad to the sectors of greatest productivity. Although the Uruguay Round offers the most comprehensive, nondiscriminatory approach to opening markets, the Administration has pursued bilateral market opening measures that comple 233 ment the multilateral negotiations. These include the Trade Enhancement Initiative for Central and Eastern Europe, and the Enterprise for the Americas Initiative and the Andean Trade Preference Initiative in the Western Hemisphere. These multilateral and bilateral arrangements have two-way benefits. By encouraging growth abroad, they increase exports and growth in the United States. THE ROLE FOR ASSISTANCE Aid of several types—humanitarian, financial, and technical— can complement active policy reforms. An infusion of humanitarian and financial aid early in the adjustment process can be particularly important to prevent catastrophic declines in consumption and maintain support for reforms. As the reform process proceeds, properly designed, coordinated, and balanced financial and technical assistance programs from the international institutions and bilateral donors can support and complement private sector development. Financial aid should be viewed as a transitional mechanism. Over the longer term, sustained growth depends on greater integration into the international trading system and increased access to private capital, both of which depend on comprehensive reforms. Financial aid is not a panacea and can, at times, reduce the momentum of reform. Financial aid that supports an unsustainable exchange rate or an unsustainable level of consumption only delays adjustments that will, in the end, be more difficult. If policies are sound, economies can prosper without extraordinary official support; if policies are faulty, economies can fail even with abundant external finance. Technical assistance is an especially important form of aid that focuses on improving the environment for investment and growth. The Administration's technical assistance program has emphasized the development of the private sector through support for privatization, restructuring, and the development of labor markets and of legal, financial, and business infrastructure, to name only a few areas. The U.S. Agency for International Development provides staff and technical assistance to help design economic policies. The Trade and Development Program in the Department of Commerce finances feasibility and project planning studies to aid industrial development. Developing a partnership between the U.S. Government and the U.S. private sector to further economic development is an objective of U.S. assistance efforts. The International Monetary Fund, the World Bank, and other multilateral institutions can play a key role, both by themselves and in conjunction with donor nations (Box 6-9). In helping to design adjustment programs for transitional economies, these insti 234 tutions can draw on their experiences in other countries. Their presence helps commit governments to market-oriented reforms that will elicit private investment. They can also coordinate and participate with industrial economies in the overall effort through financial and technical assistance and training. Bat 6-9.—International Institutions Chief among the several multilateral institutions that provide pivotal support to economies in transition are the World Bank and the International Monetary Fund (IMF). The twin financial institutions were created in 1944 to aid in reconstruction after World War II and to stabilize the world financial system. The World Bank is an investment bank. Its historical mission has been to finance specific projects, such as roads, dams, power stations, agriculture, and education, that aid in the development of the world's poorer countries. The IMF is more like a credit union where members pay fees into a pool of resources that supplements members' own foreign exchange reserves when they face problems of external adjustment. In recent years, it has become clear that coordinated assistance reinforces reform. Development projects are more effective when countries pursue sound macroeconomic policies. Consequently, the two institutions have increasingly focused on medium* and long-term structural reform. Continued lending has been conditioned on policy variables such as money growth, tariff structure, and government deficit levels. The Organization for Economic Cooperation and Development, the Paris Club, the European Bank for Reconstruction and Development, the Bank for International Settlements, the European Investment Bank, and the International Labor Organization are also cooperating to ensure coordinated and effective assistance. The G-24 (a group of industrial market economies) has been coordinating bilateral financial and technical assistance from its members to Eastern and Central Europe to complement that from multilateral institutions. SUMMARY • The dissolution of the Soviet Union is the most recent and spectacular example of the collapse of communism, the failure of central economic planning, and the move toward market principles. A fundamental motivator of change was inadequate economic performance. • Economies in transition, both developing market economies and economies emerging from the command system, face the 235 economic policy challenges of establishing and maintaining a stable macroeconomic environment, encouraging competition and market-determined prices, and, perhaps most important, fostering creativity, innovation, and entrepreneurship. These policies will unleash the key drivers of growth and prosperity: productivity increases and private investment. • The most important contribution the industrial countries can make to economies in transition is to assure robust, noninflationary world growth with open international markets. That will enable economies in transition to grow, and to develop industrial structures based on comparative advantage. • Financial aid can play an important role at key points, but it is not a panacea. Overall programs of assistance must be properly designed and implemented to ensure that they support rather than undermine reforms. In many economies in transition, technical assistance will be the most beneficial form of aid. CONCLUSION International trade and investment are increasing U.S. and world prosperity. Domestic economic growth, together with the decline in transportation costs and improvements in communications, contributes to the rapid growth of international trade. At the same time, increases in trade and investment are powerful engines contributing to efficiency and growth. An unprecedented number of major multilateral and regional initiatives designed to reduce barriers to international trade and investment are under way that could have dramatic effects on global trade and investment for many years to come. Foremost among these is the Uruguay Round of multilateral negotiations under GATT. When completed, the Uruguay Round has the potential to have a profound effect on the integration of global trade and investment, and to provide substantial and lasting benefits to the United States and the world. The United States has also entered into negotiations with Mexico and Canada to form a North American free-trade area. NAFTA will eliminate trade and investment barriers with the first- and third-largest U.S. trading partners. Additional market openings could come from the hemisphere-wide system of freer trade and investment envisioned in the Enterprise for the Americas Initiative. At the same time, the nations of the European Community are integrating their economies more closely. The 12 member states are in the process of abolishing, by the end of 1992, remaining internal impediments to the free movement of goods, capital, services, and people. 236 Along with the collapse of communism and central planning in Central and Eastern Europe and the former Soviet Union, the reorientation of economic systems toward greater reliance on market forces has become more apparent in other parts of the world as well. Providing open international markets is perhaps the single most important thing that the West can do to help the economies in transition, particularly the countries of the old Soviet bloc, build democratic and market-oriented societies. The Administration is committed to achieving and maintaining open international markets for both trade and investment. 237 CHAPTER 7 Economic Statistics: Measuring Economic Performance EVERY DAY, NEWSPAPER, radio, and television reports offer the American public a wealth of information about the U.S. economy. They may tell us how many new jobs ha^e been created, how many cars have been sold, or how much the prices for goods and services have changed. We may learn that interest rates have gone up or down, that exports have increased, or that personal saving has remained flat. Economic data provide snapshots of the economy that answer a great variety of questions. How much is the Nation producing? How does the U.S. standard of living compare with Germany's or Japan's? How much of the Nation's income does the government collect in taxes? Without good data, these questions cannot be answered. Many questions require that snapshots be compared over time. How much has the standard of living increased over the past 30 years? How much more productive are today's factories than those that existed 10 years ago? And because the economy is continually changing, data that provided a focused picture 10 years ago may no longer adequately measure today's economy. To maintain an accurate picture, statistical measures—and the ways they are interpreted—need to account for the changing structure of the economy. Individuals, corporate managers, and public policymakers all rely on economic data to make informed decisions that affect economic well-being and to judge whether they are achieving their goals. A consumer might use information about changing interest rates in deciding when to buy a new home. An automobile manufacturer is likely to use a wide range of data to determine how many cars to produce in the coming months. Sales data give useful information about the current demand for cars, while data on the number of people employed, changes in household income, and the level of consumer confidence are useful in assessing future sales. Laws and contracts often depend on economic data for their operation. Some labor contracts, for example, include cost-of-living allowances that adjust wages in response to inflation. A measure of inflation is therefore needed to make such adjustments. Similar cost-of-living adjustments are made to Social Security benefits. 239 Because data are critical for charting the course of the economy, a large number of statistical tables have been included in every Economic Report of the President since 1947. This chapter is intended to help readers understand many of these commonly used economic statistics. Care is needed in interpreting statistics. It is important that people who use data understand the concepts that lie behind the measurements, the activity actually measured by the published numbers, and the statistical accuracy of the data. Practical limitations often prevent economic statistics from corresponding exactly to the concepts the user is interested in. Some economic statistics— particularly early estimates based on incomplete data—inevitably contain a great deal of error. Changes in definitions or reporting conventions can be a source of confusion and in some cases may affect the consistency of the data over time. Furthermore, substantial changes in the economy—for example, new technologies, demographic shifts, and changes in the nature and volume of international transactions—require statistical agencies to revise periodically the types of data they collect, the ways they collect the data, and the concepts they use to measure the economy. In November 1989 the President signed the Economic Statistics Initiative to upgrade the Federal statistical system. Its aim is to help the major producers of economic data develop new techniques to measure economic concepts, improve the accuracy of statistics, and provide a more complete framework for understanding the economy (Box 7-1). USING THE MOST APPROPRIATE DATA There are many sources of economic data. Any one set of statistics, however, is limited in the questions it can answer; the features that make numbers appropriate for certain uses may make them inappropriate for others. Unfortunately, sometimes data that can give a definitive—or even a very good—answer to an important question simply do not exist. Decisionmakers must be careful, first, to choose the most appropriate data to analyze issues and, second, to recognize the shortcomings of the measures they use. Consider, for example, the number of people employed in the United States. According to the survey of households, published by the Bureau of Labor Statistics (BLS), 117,555,000 civilians were employed in October 1991. According to the BLS survey of businesses and government, known as the establishment survey, 109,796,000 people were on the Nation's payrolls in October 1991. Why are these numbers different, and is one better than the other? The numbers are different because the two surveys measure employment differently and have different coverage. The household survey measures the number of people who are working, while the 240 Box 7-1*—The Economic Statistics Initiative: Improving the Quality of Economic Statistics The U.S. statistical system is among the finest in the world, staffed by dedicated and highly competent professionals* The rapid pace of change in today's economy, however, strains the statistical agencies. Keeping abreast of these changes requires both the development of new measurement techniques and the timely improvement of the existing statistical system* In 1989 a working group, which included representatives of many of the major producers and users of economic statistics in the Federal Government, developed a package of high-priority projects designed to improve the quality of statistics. The President approved this package on November 25,1989. The programs are aimed at addressing many of the measurement problems discussed in this chapter. They include 1) improving and modernizing our national and international economic accounts, and making U.S. data more internationally comparable; 2) improving coverage and measures of service sector output; 8) extending existing methods and developing new techniques to incorporate quality adjustment in price indexes; 4) improving the establishment and household labor market surveys; 5) tracking changes across industries; 6) establishing a university center for graduate-level training in statistics for current and prospective staff of the Federal statistical agencies; and 7) sharing data among statistical agencies. Work began on these programs in fiscal 1991. The President's fiscal 1992 budget proposed spending $30 million on these programs; $18 million was appropriated. The initiative envisions spending more than $150 million during fiscal 199397. The funds are included in the budgets of the Census Bureau, the Bureau of Economic Analysis, the Bureau of Labor Statistics, the National Agricultural Statistics Service, and the National Science Foundation. establishment survey measures the number of jobs on the payrolls of business and government. The establishment survey does not cover jobs in agriculture, the self-employed, proprietors, unpaid family workers, or household domestic workers; but the household survey counts these people as employed. Consequently, one might think that the household number is a better measure of total employment. But it samples only about 60,000 households each month, while the establishment survey samples almost 370,000 establishments. Because the establishment survey counts a much larger number of workers than the house- 241 hold survey, it is less likely to suffer a random miss in its estimate of the true value for the entire country. On the other hand, a number of issues concerning the construction of the establishment survey make these data susceptible to certain nonrandom errors (those issues are discussed later). Thus, neither employment measure is clearly "better." The user must judge which is better-suited to answering the question at hand. Many economists believe that on a month-to-month basis, the establishment survey probably gives a more accurate reading of job developments for the nonfarm economy as a whole because of its large sample. But if one is concerned with employment among teenagers or women, for example, then the household survey data are appropriate because the establishment survey does not collect comprehensive information on the demographic characteristics of the work force. HOW MUCH DATA? One of the most important principles of economics is that people are better off expanding an activity as long as the additional, or "marginal," benefit exceeds the marginal cost. This principle also applies to the collection of data—additional resources should be committed as long as the marginal benefit from additional data is greater than the marginal cost of collection. Costs and benefits often cannot be measured precisely, but expected costs and benefits should nonetheless be compared when deciding the amount of resources to devote to collecting data. Clearly, it is too costly to measure all the household, business, and government activities in the economy every day, week, or month. Consequently, most economic data are based on only a portion, or sample, of individuals or establishments. The larger the sample, the smaller the probable error in estimating the true number. One basic question, therefore, is whether it is worth increasing the size of the sample to reduce the size of errors (Box 72). A tradeoff also exists between the accuracy of data and the timeliness of their publication. For example, the first estimate of gross domestic product (GDP) for a given quarter is released during the month following the end of the quarter. To produce this "advance" estimate, the Bureau of Economic Analysis (BEA) of the Commerce Department estimates some important data that are not yet available. Other data are available only in a preliminary form and are subject to substantial revision. If the BEA were to wait several weeks until better data became available, it could publish more accurate GDP estimates. On the other hand, many private and public decisionmakers eagerly await the GDP data; they want a comprehensive summary of the Nation's economy as quickly as possible. 242 As more and better data become available, the advance estimate of GDP is revised in a "preliminary" and then a "final" estimate. These revisions are useful for judging the quality of the advance and preliminary estimates. Between 1977 and 1988, the final estimate of real GDP growth (at an annual rate) was within —1.0 to + 1.6 percentage points of the advance estimate 90 percent of the time. Between the preliminary and final estimates, 90 percent of the revisions fell in the range of —0.6 to +0.7 percentage point. Box 7-2.—Measuring the Quality of Statistics A sample covers only a fraction of the firms or individuals in the economy. Because not everyone is counted, sample-based estimates do not give the actual numbers for the entire economy. The differences are called sampling errors. The larger the sample, the smaller is the error* For example, the second estimate of monthly retail sales, published by the Census Bureau, is based on a much larger; sample of businesses than the advance estimate, and has a sampling error only one-third the size. Other statistical errors, called nonsampling errors, occur because respondents misunderstand questions or provide incorrect information, because there are errors in data processing, or because systematic problems arise in sampling procedures. Such errors, however, often cannot be quantified. Statistical errors can be reduced in several ways. Sample sizes can be increased. Procedures can be improved to avoid nonsampling errors. Surveys can be revised to account for structural changes in the economy. Some surveys suffer from poor response rates and imprecise answers; better survey methods can reduce the burdens on participants, making it easier for the public to play its part in providing high-quality data. Further automation for some surveys could improve the speed and quality of data collection and processing. PROBLEMS WITH INACCURATE DATA Data that are inaccurate can be misleading. From time to time, inaccurate preliminary estimates of key data, conceptual measurement difficulties, or other data problems have made it more difficult to implement sensible economic policy. Two examples follow. Example: Business Inventories in 1973 and 1974 Early in the 1973-75 recession, businesses appeared to be controlling inventories fairly well. According to data available in April 1974, increases in inventories in constant dollars were not that large; inventory investment was estimated at 1.5 percent of total 243 gross national product (GNP) in the fourth quarter of 1973 and 0.6 percent of GNP in the first quarter of 1974. These figures suggested that firms probably would not have to cut production to work off excessive inventories and thus led policymakers to believe it was not necessary to stimulate the economy. Revised data, however, showed that serious inventory excesses actually had developed. Data available by July 1974 indicated that inventory investment actually had been 2.4 percent of GNP in the fourth quarter of 1973, and 1.3 percent in the first quarter of 1974. The subsequent liquidation of inventories placed a severe drag on GNP growth in 1975. Example: Mismeasurement of Consumer Price Changes Before 1983 A principal measure of inflation is the change in the consumer price index (CPI), which includes the prices of a wide variety of household goods and services—food, clothing, medical care, and so on. One of the largest household expenditures is for shelter. For those who rent their homes, statisticians have a relatively straightforward task—to find out how much rent actually is paid for an apartment or house. But how should owner-occupied housing be treated statistically? Before 1983 the CPI did not capture the monthly cost of shelter associated with living in an owner-occupied house. Instead, the CPI measured the costs—in terms of purchase prices and mortgage rates—experienced by those people who purchased and financed a home. Furthermore, some analysts believe the weights on house prices and mortgage rates were overstated in the index. When housing prices and interest rates soared in the late 1970s and early 1980s, the CPI rose out of proportion to the actual costs of housing, because unrealized capital gains of homeowners were inappropriately treated as increasing the monthly cost of shelter. Because many wage, benefit, and transfer payments are tied by contract or mandate to the CPI, this overstatement of inflation caused unwarranted increases in wages and government transfers. In 1983 the BLS acted to correct this problem in the CPI-U (CPI for all urban consumers); in 1985 the correction was made in the CPI-W (CPI for urban wage earners and clerical workers). Instead of looking at current purchase prices and interest rates, the BLS began to estimate the cost of the shelter provided by owner-occupied houses by looking at rents paid on houses and apartments that are comparable to the stock of owner-occupied housing. To have a series that is consistent before and after 1983, the BLS has constructed another index, the CPI-U-X1, that extends estimates of housing costs consistent with the new methodology back from 1983 to 1967. Although those revisions were a major improvement, problems may still exist because many communities have very few rental 244 properties with attributes typical of the owner-occupied housing stock. Owner-occupied housing makes up almost 20 percent in the total CPI; therefore, a large component of the index could suffer from a sampling problem. The BLS has addressed this problem by screening areas with high concentrations of owner-occupied housing for suitable rental units and plans to study the cost-effectiveness of increasing the rental sample. Because of these and other sampling issues, the BLS suggests that users look beyond month-tomonth variations in the data and consider changes over longer time periods when trying to discern trends in owner-occupied housing costs. WHY THE GOVERNMENT IS IN THE DATA BUSINESS The entire Nation benefits from having access to unbiased, highquality economic data. It is unlikely, however, that the potential profits would be high enough to induce the private sector to produce the quantity, quality, and types of data that would balance society's marginal benefits and costs. It may be difficult, for example, for private data collectors to avoid unauthorized reproduction that would cost them sales. Furthermore, it often is less costly for the government to obtain data as a by-product of other activities than it is for private firms to collect statistics from scratch. Information on personal income and corporate profits, for example, are gathered in conjunction with tax collection. Survey participants also naturally prefer that their answers remain anonymous, and because of strong legal protection, government statistical agencies are able to ensure confidentiality more easily than private collectors can. Finally, the government may legally require people to respond, as in the case of the census. Although it is appropriate for the government to gather economic data, there also is a role for the private sector in the Nation's statistical system. Some private businesses have found it profitable to collect some types of economic information. For example, private firms compile a large amount of balance sheet information for publicly traded corporations and sell it to investors and researchers. Other private businesses gather, organize, and interpret data for clients, adding value to data originally published by the government or other sources. SUMMARY • Individuals, business managers, and public policymakers all rely on economic data to make informed decisions that affect the economic well-being of the Nation. • Users of economic data should be aware of the activity measured by published data, the statistical accuracy of the data, 245 and the effect that changes in the structure of the economy can have on their interpretation of economic statistics. • Any set of economic statistics is limited in the questions that it can answer. The features that make numbers appropriate for certain uses may make them inappropriate for others. Even when used properly, however, imprecise data can mislead decisionmakers. GNP AND GDP GNP, or gross national product, is one of the most common measures of the overall performance of the economy. It is defined as the market value of all goods and services produced during a particular time period by U.S. residents, that is, U.S. individuals, business, and government. GNP includes income earned by U.S.-owned corporations overseas and U.S. residents working abroad; it excludes income earned in the United States by residents of the rest of the world. A closely related measure, gross domestic product (GDP), is the value of output produced by people, government, and firms in the United States, whether they are U.S. or foreign citizens, or American- or foreign-owned firms. Profits earned by foreign-owned businesses in the United States are included in U.S. GDP, but not in U.S. GNP. In contrast, profits earned by U.S. firms abroad are included in U.S. GNP (because the firms are owned by Americans), but they are not included in U.S. GDP (because they are not earned in the United States). GDP is measured quarterly and annually. Data on GDP and its components are found in Tables B-l through B-26 of Appendix B to this Report. The distinction between GDP and GNP is not very great for the United States. Relatively few U.S. residents work abroad, and U.S. earnings on foreign investments are about the same as foreign earnings on investments in the United States. For other countries, such as Pakistan and Portugal that have many workers in foreign countries or Brazil and Canada that have more foreign investment in their country than they have abroad, the difference between GNP and GDP can be large. GDP corresponds more closely than GNP does to other indicators used to analyze short-term movements in the U.S. economy, such as employment and industrial production. This past December, the national income and product accounts (NIPAs) shifted emphasis from GNP to GDP. GNP and GDP measure output at market prices. Because prices change over time, a distinction must be made between a change in the quantity of goods and services produced and a change in the prices paid for those products. Real GNP or GDP adjusts for inflation and measures the quantity of goods and services produced; 246 they are therefore better measures of output than nominal GNP or GDP. MEASURING THE STANDARD OF LIVING Growth in real GNP or GDP does not ensure an increase in the standard of living. If real GDP grew less rapidly than the population, for example, real GDP per person would fall. But even real GDP per person is not a perfect measure of economic well-being because some transactions are not recorded in GDP. GDP measures principally the production of those goods and services that are sold through a marketplace. It also includes a few imputed items, such as the value of living in owner-occupied housing. Many nonmarket activities are, however, omitted from GDP even though they affect economic well-being. If a person mows his or her own lawn, for example, there is no entry in the GDP accounts, but if he or she hires a lawn service, the costs of the service are included in GDP. Similarly, GDP does not include volunteer work. Were the volunteers to work for a wage, GDP would rise, although economic well-being might not. Changes in the condition of the environment affect well-being, but they are hard to quantify in the GDP accounting framework. An increase in pollution makes life less pleasant, but it is not subtracted from GDP. Indeed, if increased pollution leads to more expenditures for health care, it actually increases GDP. On the other hand, GDP does include the *value of production of goods and services to improve the environment, such as catalytic converters or toxic waste consultants. The United States is examining how satellite accounts to the United Nations' system of national accounts would better measure the influence of natural resources and environmental factors on economic well-being (Box 7-3). Leisure time affects economic well-being but is not counted in GDP. In the last two decades, real GDP per person rose almost 40 percent, while leisure—that is, time spent outside the workplace— increased by 7 percent (if it is measured by a decrease in the average hours worked per week). Did economic well-being rise by more than the 40-percent increase in output because working people also had more leisure time? Or did economic well-being rise by less than 40 percent because some of the increase in output came from an increase in the number of two-earner families for whom "family leisure" time declined. Vacation spending is another leisure-related issue. Money spent on airfares, hotels, and recreation increases GDP, while relaxing at home does not. Yet both types of vacations increase economic well-being. 247 Box 7-3.—System of National Accounts Gross domestic product (GDP) is the primary measure of aggregate activity presented in the U.S. national income and product accounts, GDP measures the value of production in a given time period. But other indicators such as national wealth are valuable to gauge economic well-being. Saving links these two major concepts of economic well-being because saving out of GDP augments national wealth- But real wealth also is affected when the prices of the Nation's existing assets and liabilities change at different rates or when there is net lending or borrowing from other countries. The United Nations* system of national accounts (SNAs) is an integrated presentation of an economy's stocks of assets and liabilities and its flows of income, production, consumption, and saving. The system of national accounts integrates the factors that affect national wealth with the GDP data, providing a more complete framework for analysing the economy than do the national income and product accounts. As part of the President's Statistical Initiative, the U.S. national accounts will adopt the SNAs' framework in the mid1990s. The Federal Reserve Board already prepares much of the additional asset and liability information needed to fill in theframework*Because many countries already use the SNAs, developing these accounts for the United States will facilitate international comparisons of GDP, its components, and supporting financial data. SUMMARY • The United States recently shifted emphasis from GNP to GDP. In contrast to GNP, GDP includes income of foreign corporations and foreign residents working in the United States, but excludes the income of U.S. residents and corporations overseas. GDP corresponds more closely to other indicators of domestic short-term economic performance. • Adjusting GDP and GNP for inflation and for population growth makes them better measures of the standard of living, but some factors that affect economic well-being, such as nonmarket activities and pollution, are not recorded in either measure. 248 EMPLOYMENT AND UNEMPLOYMENT How many people lost their jobs during 1991? How many people found employment? What are the demographic characteristics of the unemployed? To answer such questions, one can turn to several sources of labor market data. The most common data describing labor markets come from three sources: a survey of the Nation's households, a survey of the Nation's businesses and governments (the establishment survey), and the unemployment insurance systems of the States. No one of these sources records all labor market indicators, and the three sources sometimes give different readings of apparently similar labor market indicators. For example, nonfarm wage and salary employment fell 0.3 percent between April and November 1991 in the household survey, while jobs rose 0.1 percent in the establishment survey. To prevent confusion about these figures, it is important to understand how these labor market data are generated. THE HOUSEHOLD SURVEY The most familiar labor market statistic is the unemployment rate, which is based on information the Census Bureau collects for the BLS through the Current Population Survey. Many series from this survey are found in Appendix Tables B-31 through B-39. About 60,000 households are on the interview list; in any given month, on average, 4-5 percent of these are not interviewed for a variety of reasons. The population estimates underlying the survey are benchmarked every 10 years to the decennial census—that is, they are adjusted to make them consistent with the census. Surveyors ask respondents about the major activity of each member of their household 16 years and older. Those who are working, including the self-employed and unpaid workers in a family enterprise, are counted as employed. Those who are reported to be not working but who have actively sought work in the last 4 weeks or who were waiting to be recalled from layoff or report to a new job within 30 days are counted as unemployed. Those who are not looking for a job or who are unavailable for work are not considered part of the labor force. The unemployment rate is the number of unemployed people divided by the civilian labor force, which is the sum of the employed and unemployed. As discussed in Chapter 3, the unemployment rate does not count people who are not looking for work because they feel no work is available. Current Population Survey data on these "discouraged workers" are published once a quarter. The household survey also includes a comprehensive set of questions concerning the household members' age, sex, race, occupation, industry of employment, number of hours worked, duration of any 249 unemployment, and whether the unemployed workers quit or involuntarily left their last jobs. People working fewer than 35 hours a week are classified as part-time workers. Data are published at both the national and State levels. Except for 11 large States, however, the State-level samples are small and monthly estimates cannot be obtained directly from the household survey. The monthly labor force and unemployment data published for these smaller States are based on estimating equations that use information from more than just the household survey. On an annual basis, however, the household survey does provide enough data for State-level estimates. THE ESTABLISHMENT SURVEY Every month, the BLS surveys almost 370,000 establishments that, combined, employ more than 40 million workers. For purposes of the survey, an establishment is a business or government operation that, in general, is at a single location and engages in one type of activity. The agricultural sector is not included. Private firms and State and local governments report information concerning workers who receive pay for any part of the payroll period that includes the 12th day of the month. Federal Government employment, which is counted on the last day of the month, covers only civilians. Some of the results from the survey are presented in Tables B-41 and B-42 in the Appendix. The survey collects information by industry on the number of workers, the number of production and nonsupervisory workers, average weekly hours paid, overtime hours, and average hourly earnings. The survey does not distinguish between full-time and part-time workers in its count of jobs. The only demographic information published is gender. State and metropolitan area breakdowns also are published. When a sample of establishments is surveyed, the question arises as to how employment in the sample is related to the total number of jobs. To shed light on this relationship and make appropriate adjustments in the survey results, the BLS each year conducts a more comprehensive study, or benchmark, of civilian nonfarm jobs, relying primarily on information that firms and government agencies are required by law to report to the State unemployment insurance systems. The benchmark indicates that the coverage of the monthly establishment survey is quite large; the establishments in the monthly sample employ 39 percent of the workers enumerated in the 1991 annual benchmark. Indeed, the BLS reports that the "sample of establishment employment and payrolls is the largest monthly statistical sampling operation in social statistics/' Some issues have been raised regarding the survey, however. Its sample may overrepresent large establishments relative to their share of 250 employment. And, particularly in the short term, the survey probably has difficulty accounting for the emergence of new establishments and for firms that go out of business. The establishment and household surveys measure different concepts. The establishment survey counts the number of jobs, not the number of employed people. Thus, a person holding more than one job is counted more than once in the establishment survey but only once in the household survey. The establishment survey counts hours paid, which includes, for example, paid vacations. In contrast, the household survey asks respondents the number of hours worked. STATE UNEMPLOYMENT INSURANCE SYSTEM Every week data are published showing the number of people who filed new claims for unemployment insurance—the "initial claims*' figure—and the number of people covered by unemployment insurance who were unemployed for any part of the week— the "insured unemployment" number. These data, found in Table B-40, are compiled by the Employment and Training Administration of the Department of Labor, using information collected from the State unemployment insurance systems. The insured unemployment count does not include workers whose unemployment insurance coverage has lapsed, initial claimants who do not qualify for benefits, workers who qualify but do not apply, or individuals not covered by unemployment insurance. This final category includes new entrants or reentrants into the work force who have not yet found jobs. These persons would be counted in the household survey if they met that survey's tests for unemployment. Once a quarter, employers are required to report the number of persons on their payrolls each month and the total wages that they paid. Because virtually all businesses are required to belong to the State systems, these reports provide very accurate readings of employment. Indeed, the data are used to benchmark the establishment survey's estimates once a year. The State data are not very timely, however; the reports are not available until about 6 months after the end of the quarter. WHEN TO USE THE DIFFERENT LABOR MARKET DATA Each of the labor market data sources has its strengths and weaknesses (Box 7-4). The lag between the collection and publication of the initial claims numbers is less than 2 weeks; these data provide the most up-to-date, but quite incomplete, reading on unemployment conditions. Although the State unemployment system provides information about those persons seeking unemployment benefits, it does not provide timely information on jobs gained or 251 the industrial structure of employment, or offer any data on the number of hours people worked. The establishment survey does provide timely information on these questions. And despite some problems with the establishment survey, many economists believe that because of its large sample coverage, it generally provides a relatively accurate reading of month-to-month changes in the number of nonfarm jobs. It also provides useful industry detail. Over long periods of time, the establishment survey and the nonagricultural component of the household survey generally yield similar trends. The establishment survey, however, does not contain any information about people who are without jobs. The household survey provides details of the demographic composition of the population with and without jobs, information on the duration of unemployment, and reasons why people may be working part time or have dropped out of the labor force. Box 7-4.—Error and Revision Properties of Labor Market Surveys Comprehensive work has been done to determine the statistical accuracy of the household and establishment surveys. The estimate of the civilian unemployment rate in the household survey has a standard error of 0,11 percentage point. This means that because of sampling error, there is a one-in-three chance that the true unemployment rate will be more than 0.11 percentage point higher or lower than the published number. Thus, for most analyses, one should not consider movements in the unemployment rate that are less than 0.2 percentage point as significant changes in the labor market One useful measure of the statistical accuracy of the establishment survey is how well the monthly survey forecasts the annual benchmark. For the past 10 years, the difference between the final monthly estimate of total nonfarm employment from the establishment survey and the benchmark has averaged 0.2 percent. The first estimate of payroll employment for each month is revised in subsequent months as late reports are received and processed. Between the first and final estimates, there is approximately a one-in-three chance that the first reading of total nonfarm employment will be revised up or down by 78,000 jobs. One program in the President's Statistical Initiative will upgrade automated data collection techniques to improve the quality of the establishment survey's first estimate of employment. 252 OTHER SOURCES OF LABOR MARKET DATA In addition to these three sources, several other important labor market surveys are published less frequently. These include the quarterly employment cost index, the survey of income and program participation, the national longitudinal survey, and the public use micro data sample from the decennial census. The employment cost index provides comprehensive information on wages and benefits at the industry level. The last three surveys record a variety of demographic, employment, income, and wealth information on an individual-by-individual basis. SUMMARY • Three sources of labor market data—the household survey, the establishment survey, and the State unemployment insurance system—give complementary, but sometimes differing readings of the labor market. • The weekly data on initial claims for unemployment insurance are the most timely, if quite incomplete, report on unemployment. The establishment survey provides useful information on month-to-month changes in nonfarm employment. The household survey reports detailed information on the demographic and economic characteristics of the employed, the unemployed, and those people out of the labor force. PRICES AND INFLATION Inflation is an increase in the average level of prices. As discussed in Chapter 2, high and variable inflation inhibits the efficient allocation of resources in the economy, and if unanticipated, redistributes income and wealth capriciously. To achieve strong and sustainable economic growth over the long run, the Nation must maintain low and stable inflation rates. Good measures of prices and inflation are necessary to help gauge progress toward achieving this goal. Appendix Tables B-56 through B-64 provide a variety of price indexes that commonly are used to measure inflation (Box 7-5). CHANGES IN QUALITY Some price changes reflect changes in quality. For example, suppose the purchase price of a car increases solely because antilock brakes are added as standard equipment. Because the higher price reflects an increase in quality, it should not be included in a calculation of inflation. If such a price change were included in a price index, then inflation would be overstated. To avoid this problem, price indexes are adjusted for quality where possible. 253 Box 7-5.—Price Indexes Inflation is measured using indexes that record price changes for a market basket of items representing the purchases or sales of some portion of the economy. Some price indexes, called fixed-weight or Laspeyeres indexes, weight items by their shares in the market basket during a base period. Examples are the producer price index, the consumer price index, and the fixed-weight price index for gross domestic purchases. (The BEA has shifted emphasis from the GDP fixed-weight index—which measures prices of everything produced in the Nation—to the gross domestic purchases index, which measures the price of everything purchased in the Nation, including imports.) In other price indexes, the weights change with every observation to reflect the current period's market basket. The most common example of such an index is the GDP deflator. On a month-tcwnonth or quarter-to-quarter basis, economists generally prefer measuring inflation using fixed-weight indexes* Because the weights do not change, movements in these price indexes reflect changes only in prices. In contrast, movements in deflators reflect changes both in prices and in the composition of the market basket. Indeed, even over long periods of time, point-to-point comparisons of deflators can be affected by unusual shifts in the composition of spending. Over time, consumers and producers tend to shift purchases away from higher priced items, and advances in technology tend to reduce relative prices in many fast-growing sectors. Because of such substitutions and other changes in the economy, the composition of a fixed-weight index may become quite different from the market basket currently purchased by consumers and businesses. Consequently, fixed-weight indexes are updated periodically to keep pace with changes in the economy. In addition, price indexes constructed from various alternative weighting formulas are being used more frequently in economic analyses. Some items are adjusted by "direct quality adjustments." Autos are an example. The average transaction price of autos sampled in the CPI for the 1992 model year was $917.30 higher than for the 1991 model year. BLS analysts determined that $259.79 of this change represented higher quality from better warranties, the inclusion of passive restraints, and other improvements. Thus, the BLS used a price increase of only $657.51 ($917.30 - $259.79) to calculate the change in the auto component of the CPI. 254 Other items are adjusted for quality by "price-linking" methods. For example, when a new item replaces an old one in the marketplace, the BLS also must make this substitution in the CPFs market basket. If the characteristics of the original and substitute items differ substantially, then the difference between their prices is assumed to reflect a change in quality and is not counted as a price change. The link is made when the price of the new item, adjusted for the amount attributable to the quality change, replaces the price of the old item in the index. Sometimes a new item is so different from the old one that the prices are not immediately comparable. Here, the quality adjustment is estimated as the difference between the price of the new item and a value imputed from the prices of a collection of items in the broader class, or stratum, of the CPI that includes the new item. In a few cases, quality adjustment is made by statistically estimating the value of certain attributes that have changed over time. Such statistical estimates have been termed "hedonic quality adjustments." Two of the main areas that use hedonic quality adjustment are housing and computer equipment. Technological advances have significantly increased the processing speed and storage capacity of computers. Suppose a computer purchased today performs twice as many operations as a computer purchased 5 years ago for the same price. Because two 5-year old computers would be needed to perform the same tasks as one of today's machines, it is clear that the true price of computers has fallen substantially. With the aid of private industry, the BEA has constructed statistical estimates of how the market valuation of various attributes of information-processing equipment has changed with technology over time. Such hedonic quality-adjusted prices for informationprocessing units fell at an annual rate of 23 percent between 1977 and 1984. In contrast, a price index constructed from a method similar to price linking fell at only a 12-percent annual rate over the same period. For many items, particularly for services, adjusting prices for changes in quality is very difficult. Medical care services in the CPI, for example, are estimated in part from the prices paid for a set of common medical procedures. The prices have risen significantly over time. But some of the increases reflect advances in medical science that have resulted in better diagnoses, higher cure rates, and lower postprocedure complications. Ideally, the value of these improvements would be measured and prices adjusted accordingly. While such measurement is impossible in some areas, there clearly is room for improvement in others. As part of the President's efforts to upgrade the quality of economic statistics, the BLS 255 is undertaking research to improve quality adjustment in the service sector. Because all changes in quality cannot be accounted for accurately, and because no explicit quality adjustments are made for some items, inflation may not be measured accurately in the United States or in other countries. Whether the measure is too high or too low is not known. Many economists believe that the scales tip toward inflation being overstated in the United States, perhaps by as much as a percentage point. Furthermore, because price indexes are used in the construction of some components of real GDP, longrun real GDP growth may be understated. The allocation of real GDP between sectors with and without adequate quality adjustment may be misstated as well. For example, real medical services likely have grown faster than shown in the national accounts because some real gains in services have been mistaken for inflation. REBASING REAL GDP Real GDP measures the value, at base-period prices, of all the goods and services produced in the Nation. Because all prices do not change at the same rate, the price of one item relative to another varies over time. Periodically, the BEA updates the base period so that real GDP reflects more recent relative values of goods and services. The base year was moved, from 1982 to 1987, in the benchmark revisions published in December 1991. Rebasing can change the size, composition, and rate of growth of real GDP. The recent rebasing significantly reduced computers' share of real GDP because their relative prices had been falling so rapidly. Between 1982 and 1987, the deflator for information-processing equipment (which is much broader than simply computers) fell 4.4 percent while the deflator for total GDP rose 19.4 percent. Moving the base from 1982 to 1987 therefore substantially lowered the relative importance of computers in GDP. Because computers are a rapidly growing sector of the economy, reducing their weight in this way reduced the growth rate of real GDP. As the computer example illustrates, rebasing often can lower measured real GDP growth because it reduces the influence of fast-growing sectors with declining relative prices. When measured in 1982 dollars, real GDP growth from 1982 to 1987 averaged 4.1 percent per year; when measured in 1987 dollars, growth over this period averaged 3.8 percent per year. Measuring real GDP at base-period prices has the virtue of being simple and easy to interpret. For some purposes, however, alternative formulas that do not restrict valuations to a single period may be better. The BEA plans to introduce such alternative measures for GDP and its components. Although somewhat more complex than the traditional formula, these measures of output and related 256 prices indexes are more flexible and will be useful for certain economic analyses. SUMMARY • Inflation is the increase in the average level of prices. Inflation is measured using price indexes, which calculate the change in prices for a market basket of items. • Price indexes are adjusted so that price changes reflecting changes in quality are not counted in inflation. For many items, it is difficult to adjust completely for quality changes, particularly services. Consequently, inflation may not be measured accurately. • Real GDP values items at prices in a base year. Because of changes in relative prices, it is necessary to change the base year periodically to reflect more current relative prices. Rebasing often lowers the growth rate of real GDP. MONEY Money greatly facilitates the efficiency of transactions by allowing producers to sell their goods and services for money instead of searching for someone willing to barter. Sometimes—during the early 1920s in Germany, for example, or recently in Russia—the government issues too much money, and as money loses its value, people resort to inefficient barter. But even in less extreme cases, monetary disturbances can create economic problems. The collapse of the U.S. banking system and the decline in the quantity of money in the early 1930s propelled the economy more deeply into depression. Changes in the rate of growth of money also have played a role in the more moderate fluctuations of recent decades—sometimes stabilizing and sometimes accentuating the business cycle. By exercising influence over the quantity of money, the Federal Reserve can affect interest rates, prices, the availability of credit, and short-term movements in overall economic activity. To underline the Federal Reserve's responsibilities, the Congress has mandated that the Fed announce target ranges for money growth and report twice a year on the conduct of monetary policy with respect to those targets. Timely and accurate measures of the quantity of money are important in developing and monitoring monetary policies. Because money supply data are available with only about a 10-day lag, the Federal Reserve is able to observe almost continuously how well money growth targets are being met. There are many ways to define money, however, and it has not always been clear which definition better serves as an intermediate target of monetary policy. 257 DEFINITIONS OF MONEY Traditionally, economists considered assets to be money if they served as a medium of exchange, a unit of account, and a store of value. Given the large number of financial assets in today's world, however, the once well-defined boundaries between money and other financial assets have become increasingly fuzzy. Because it is difficult to pinpoint exactly which assets should be considered money, several definitions of money have been devised, each composed of a specific set of assets. One narrow definition of the money stock is Ml, which consists of items that are most commonly used to buy goods and services— specifically currency, travelers' checks, and checkable deposits. A broader definition of money, M2, includes all of the items in Ml plus savings and small time deposits, as well as some more sophisticated financial instruments such as money market deposit accounts, money market mutual funds, overnight repurchase agreements, and overnight Eurodollar accounts. Many of the components of M2 that are not in Ml can be used for transactions, but their primary use is as a store of savings. An even broader measure of money is M3, which includes the components of M2 plus larger, investment-type accounts that generally are held by businesses. The Federal Reserve Board collects and publishes money statistics on a weekly basis. A number of these series are found in Appendix Tables B-65 and B-66. A primary source of these data is the balance sheet items that large banks and thrifts are required by law to report to the Federal Reserve each week in conjunction with required reserve regulations. These reports cover nearly 9,000 institutions that hold more than 90 percent of the deposit components of the monetary aggregates. Several additional surveys collect data from small banks and information on nondeposit components of the monetary aggregates. CHANGES IN THE VELOCITY OF MONEY The velocity of money—the ratio of nominal GDP to the money stock—is a commonly used statistic for summarizing the relationship between money and nominal output. The more stable and predictable the velocity of money, the greater the ability of the Federal Reserve to anticipate the effects of monetary policy on nominal GDP. Until the mid-1970s, the velocity of Ml appeared to be on a fairly stable and predictable upward trend, as seen in Chart 7-1. This steady relationship stemmed largely from the use of Ml to facilitate transactions and from a fairly regular association between nominal GDP and the number of transactions occurring in the economy. Because Ml velocity was fairly stable, many economists 258 focused on Ml when discussing the effects of money on the economy, although some prominent economists advocated concentrating on broader measures of money. Chart 7-1 Velocities of M1 and M2 As defined currently, the velocity of M2 is more stable than the velocity of M1 and the velocities of previous definitions of M1 and M2. Index, 1958Q1 =1.0 3.5 Pre-1978 definition, M1 3.0 2.5 Present M1 2.0 1.5 1.0 Present M2 0.5 I I I I I I I I I I i l i 1960 1965 1970 1975 1980 1985 Note: Pre-1978 definitions are reconstructions from other Federal Reserve data. Pre-1978 M2 is a proxy which excludes all large time deposits. Sources: Department of Commerce and Board of Governors of the Federal Reserve System. 1990 Until the late 1970s, the definition of Ml included only currency and checking accounts, neither of which paid interest. During the 1970s and early 1980s, increases in market interest rates caused households and businesses to move their funds toward interestbearing assets. New types of interest-bearing deposit accounts began to be offered as savings and loans (S&Ls), banks, and other institutions competed to attract funds. Many of these instruments carried check-writing privileges; in effect, they were interest-bearing checking accounts. As seen in Chart 7-1 the emergence of new financial instruments that could play the traditional roles of money coincided with a large increase in the volatility of the velocities of Ml and of M2. The Federal Reserve responded by redefining the money aggregates in the late 1970s and early 1980s. Certain interest-bearing checkable deposits and travelers checks were added to Ml because they clearly were used for transactions purposes. Even with these changes, however, Ml velocity remained quite volatile, as consumers and businesses continually reshuffled their funds between assets included in Ml and those not included. 259 In addition to the assets added to Ml, the Fed added certain savings-type deposits, overnight repurchase agreements, overnight Eurodollar accounts, and money market mutual fund accounts to M2 in the late 1970s and early 1980s. The relationship between redefined M2 and nominal GDP has been much more stable than the velocity of Ml. Because of that stability and the relative trendlessness of M2 velocity, many economists have switched their primary focus from Ml to M2. Indeed, the Federal Reserve no longer announces Ml growth targets in its biannual reports to the Congress. SUMMARY • Accurate measures of money are important for managing monetary policy. But money is difficult to define because of the large number of financial assets that can play the roles of money. • The more stable and predictable the velocity of money, the better the ability of the Federal Reserve to anticipate the effects of monetary policy on nominal GDP. The velocity of Ml became much more volatile following the financial innovations in the 1970s and 1980s; the relationship between redefined M2 and nominal GDP has been much more stable. BUSINESS ACCOUNTING Aggregate economic data, such as GDP and employment, are measures of how the overall economy is performing. However, the aggregate economy is composed of the productive activities of thousands of firms and millions of individuals. Measures of individual firm performances are sometimes used in the construction of aggregate measures of the economy, and they are also of particular interest to investors, suppliers, customers, and employees. The Financial Accounting Standards Board, an independent rulemaking body in the private sector, sets accounting standards for firms. The Securities and Exchange Commission also rules on the acceptability of various accounting procedures. Even so, accounting practices do not always constitute good economic measurements. MARKET VALUE AND BOOK VALUE One of the most important pieces of information about a firm is its net worth. Net worth, sometimes referred to as shareholders' equity, is the excess of the assets of the firm over its liabilities. An enterprise is solvent when its net worth is positive. In addition to physical assets, a firm has intangible assets, such as the value created by the firm in coordinating, developing, and deploying its physical assets. Intangible assets are often not included in the firm's balance sheet. 260 Tangible assets are typically registered on a firm's accounts at "book" value, which is their historical cost less depreciation. Assets can also be valued at market, the current prices that would be received if the assets were sold. The book value of an asset need not correspond closely with its market value. A liability, likewise, can be valued at market. For example, the market value of a firm's pension liabilities could be measured by the price required to compensate someone for assuming the present and future financial obligations of the firm's pension plan. In practice, however, the balance sheets of firms do not measure the market value of all assets and liabilities. Often, market values cannot be determined because of the absence of active markets in particular assets and liabilities. An example of the importance of the difference between book and market value is presented in Box 6-3 on measuring international investment. Data in the box show that the difference between book and market value of U.S. direct investment abroad amounts to hundreds of billions of dollars. The difference between market value and book value is important for the government. It has an interest in the market value of assets and liabilities of private businesses, especially when it insures those liabilities, as it does for banks and savings and loan institutions. Deposit insurance represents taxpayers' commitment to reimburse depositors in the event the institution is closed because the market value of a bank's or S&L's assets (loans, for example) are less than the value of its insured liabilities (deposits). Regulators of financial institutions are increasingly using tools such as stress tests to capture principles of market valuation in assessing net worth. Stress tests apply adverse scenarios to an economic model of an institution's balance sheet to determine the sensitivity of asset and liability values to changes in interest rates and other relevant economic variables. Regulators now routinely apply stress tests in the banking industry. Recent legislation would require some of the government-sponsored enterprises, such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, to use stress tests to evaluate the soundness of their balance sheets. ACCRUAL VERSUS CASH ACCOUNTING Standard accounting practice registers assets and liabilities as they accrue rather than as cash is received or disbursed. A pension liability, for example, accrues as workers earn additional claims on their pension plan. Until recently, firms were permitted to register nonpension benefits for retired workers, such as medical benefits, on a cash basis. As employers' commitments to provide these benefits increased, so 261 did concern that financial reporting did not adequately track the assumed liabilities. The Financial Accounting Standards Board statement, FAS No. 106 of 1990, requires firms to recognize postretirement benefit costs as the liabilities accrue rather than waiting until the benefits are actually paid out. To minimize disruptions to their balance sheets, firms can elect either to recognize these obligations immediately or to phase in recognition over 20 years. SUMMARY • Net worth measures the excess of a firm's assets over its liabilities. Book value measures assets at historical costs less depreciation and often excludes intangible assets. Market value is the current price that would be received or paid for an asset or liability. • Under a recent ruling, firms are required to register their nonpension employee benefits as they accrue, rather than when the benefits are actually paid. FIXED INVESTMENT One of the important policy questions facing the Nation is whether Americans are investing enough to boost productivity and increase the standard of living. Business fixed investment represents the purchases of new structures and equipment. Data on investment are found in Appendix Tables B-l, B-2, B-14, and B-15. There are large fluctuations in business fixed investment, as Chart 7-2 shows; but the trend in investment over the past 30 years is not clear. As measured by the NIP As, the ratio of real gross business fixed investment to real GDP appears to have a small upward trend, whereas the ratio of real net business fixed investment to real net domestic product has trended down since the mid-1960s. The difference between the two ratios in Chart 7-2 is depreciation: Gross investment refers to total outlays for capital items, while net investment is gross investment less depreciation. Thus, net investment represents the net addition to the Nation's capital stock. (The NIPA measure of depreciation is called the consumption of fixed capital.) GROSS VERSUS NET INVESTMENT Both the gross and net figures provide useful measures of investment trends. Real gross investment measures the flow of new capital into the capital stock. Real net investment essentially measures the change in the quantity of the capital stock. Many economists believe that the price indexes and depreciation allowances used to convert nominal investment to real investment do not completely adjust for changes in the quality of some capital. The prob 262 Chart 7-2 Investment Shares of Output Increased NIPA depreciation accounts for the rising gap between the shares of output accounted for by real gross investment and real net investment. Percent 14 12 10 Real Gross Business Fixed Investment as a Share of Real GDP Real Net Business Fixed Investment as a Share of Real Net Domestic Product I 1960 i i i i i 1965 i i i I i 1970 i i i i i I I 1975 i i i 1980 i i 1985 1990 Note: Investment and domestic product are measured in 1987 prices. Source: Department of Commerce. lem is most notable for high-technology items that are adjusted for quality by price-linking methods. Because technology is continually improving, the real value of newly produced additions to the capital stock may be undervalued compared with the depreciated older capital stock. Thus, net investment may understate the value of the technological advances more than gross investment does. MEASURING DEPRECIATION The Department of Commerce defines NIPA depreciation as "the decline in value due to wear and tear, obsolescence, accidental damage, and aging." The construction of the NIPAs assume all capital items follow straight-line depreciation. Private capital items are classified into various categories of equipment or structures; items in each category are depreciated according to the estimated retirement experiences of items in that category. Special estimates of depreciation are made when unusual circumstances such as hurricanes or earthquakes damage large quantities of capital. Nominal NIPA depreciation measures the cost of replacing the capital item in the current time period. Constant-dollar NIPA depreciation measures the cost of replacing the item at base-period prices. A number of questions have been raised concerning the concepts and 263 statistical methods used to construct NIPA depreciation, however, and the BEA currently is reviewing its procedures to improve the estimates of depreciation. The widening gap between the gross and net investment ratios in Chart 7-2 represents increases in NIPA depreciation: real depreciation rose from 66 percent of real gross business fixed investment in 1979 to 79 percent in 1990. In turn, the larger share of NIPA depreciation reflects a rise in the share of real gross business fixed investment accounted for by equipment; it increased from 64 percent in 1979 to 68 percent in 1990. Equipment has a much shorter service life than structures do, so it depreciates at a much faster rate. The tax code provides another method for depreciation accounting. The tax law divides capital items into various categories of equipment and structures and specifies what percentage of the historical cost of the item may count as a tax deduction in each year following its purchase. There are two principal differences between NIPA and tax depreciation. First, NIPA depreciation is measured at replacement cost, while tax depreciation is measured at historical costs of acquisition. Second, the service lives and depreciation patterns for the NIPA differ from those for tax depreciation. This difference was larger when the tax laws allowed more-pronounced accelerated depreciation of certain capital items. Because of these differences, tax records are not used to estimate NIPA depreciation. Depreciation and Changes in the Market Value of Capital Under NIPA depreciation, service lives attempt to capture "normal" obsolescence, but not obsolescence due to irregular changes in prices or technology. In contrast, the market value of capital changes in response to irregular obsolescence. For example, even if an older, fuel-inefficient airplane were perfectly maintained, a sharp rise in the price of oil could drive down its market value. There is some disagreement on whether such changes in the value of capital should be considered as depreciation. Some economists would say no; they prefer that depreciation measure only the decline in the physical productivity of capital. Other economists would say yes; they prefer that depreciation measure the change in the contribution of the capital stock to national wealth. Because the market price of a capital item reflects the present value of the flow of services from the item, the best way to measure this latter concept of depreciation would be as a decline in the market price of existing equipment and structures. (An increase in the value of the existing capital stock would be an appreciation.) Difficulties occur, however, in making a market-based measure of depreciation operational. There is a relatively active market for some used capital, such as trucks and aircraft, but for many types 264 of capital, there are no active second-hand markets to provide price information. In addition, the value of some capital currently owned by a particular firm might be quite different if it were acquired by another company; the "market" value of such capital is difficult to determine. SUMMARY • There is a small upward trend in real gross investment relative to real GNP, while there is a small downward trend in real net investment relative to net national product. • The difference between the two series is the depreciation in the capital stock as measured by the NIPAs. Both gross and net investment are important for measuring the effect of changes in the capital stock on productivity. SAVING Saving is the primary source of funds for investment and therefore is necessary to increase productivity, enhance growth, and improve the Nation's standard of living. Saving is also the vehicle by which households transfer consumption through time by building up funds for retirement, college expenses, hard economic times— "saving for a rainy day"—or other purposes. Because saving is so important, there has been much concern that U.S. saving rates have fallen over time and in relation to rates in other countries. Saving, however, is difficult to measure. Alternative yardsticks can provide very different estimates of both short-term fluctuations and longer term trends in saving. Saving can be defined two ways. First, cash-flow saving measures the excess of income or revenue over expenditures. Specifically, in the NIPAs, personal saving is disposable (after-tax) income less expenditures for consumption and net interest. For businesses saving is retained earnings; that is, net after-tax profit less dividends paid. For government, saving is revenue less expenditures, as explained later. Such saving data are presented in Appendix Tables B-24, B26, and B-27. Second, saving may be defined as the change in real wealth as reported in the Federal Reserve Board's national balance sheets. These data are presented in Appendix Tables B-109 and B110. In principle, the two definitions should provide the same answer: The excess of income over outlays should equal the increase in wealth. In practice, however, the two methods produce substantially different measures of saving because they implicitly define income, outlays, and wealth differently. Chart 7-3 compares the cash-flow based national saving rate from the NIPAs with a measure of the change in wealth, specifically, the change in real household net worth (including ownership of 265 corporate stock) and in real government financial wealth taken from the Federal Reserve Board's national balance sheets. Because the saving rate from the national balance sheets is calculated using market prices for some assets, it fluctuates far more than the measure based on income and outlays. For example, the national balance sheets assume that a fall in the price of corporate common stocks represents "dissaving." And while a downward trend in the NIPA measure of saving is evident over the past decade, any trend in the national balance sheets saving is masked by its wide swings as asset prices fluctuate. Chart 7-3 National Saving Cash flow and change in wealth measures of saving provide very different estimates of saving patterns. Percent of GDP 30 _^ ~ 20 Cash Flow (Income less Consumption) 10 -10 Change in Wealth -20 -30 i 1960 i i i i i 1965 i i i i i i i i 1970 National Balance Sheets i i 1975 i i i i i 1980 1985 1990 National Income and Product Accounts Sources: Department of Commerce and Board of Governors of the Federal Reserve System. CASH-FLOW MEASURES OF SAVING The NIPAs measure personal expenditures on consumer items. Because these include purchases of consumer durables, they are not necessarily the same as personal current-period consumption. Only part of expenditures on durables represents current-period consumption: The car, refrigerator, or other durable good purchased in January still has value at the end of December. Logically, this value (less depreciation of durables acquired in previous years) might be considered as part of this year's saving, but instead the entire purchase is counted as consumption in the NIP As. On the income side, the NIP As do not include capital gains or losses. 266 Excluding net capital gains leads to an understatement of income and therefore to an understatement of saving; the opposite would be the case in a year with net capital losses. An alternative measure of personal saving, available from the flow of funds accounts produced by the Federal Reserve, does count consumer durable expenditures (net of depreciation) as saving. It also treats certain government insurance credits and realized capital gains as personal income. These additions make this personal saving measure higher than the NIPA measure. Because cash-flow saving is measured as the difference between income and consumption, substantial measurement error may occur. An error in measuring consumption or income translates dollar for dollar into an error in saving. Because saving is much smaller than either consumption or income, the proportional effect of the error on saving is much larger than on consumption or income. HUMAN CAPITAL A significant omission from all the standard measures of saving is human capital, the productive skills people acquire through education, job training, and on-the-job experience. Like investment in physical plant and equipment, investment in human capital boosts productivity and increases the standard of living. Like other forms of capital, human capital depreciates over time; skills, like machinery, may become obsolete, and skilled people retire. Some studies have shown that investment in human capital is of approximately the same order of magnitude as investment in physical assets. SUMMARY • Saving is the source of funds for investment and a vehicle to transfer consumption through time. Different measures of saving can vary by large amounts, and each measure has errors. • There are two basic ways to measure saving. The cash-flow approach measures saving as income less consumption. The change-in-wealth measure of saving is based on changes in market values and is highly volatile. FEDERAL GOVERNMENT FINANCE Economic measures of Federal Government activity encompass all of its spending, taxing, borrowing, and financing policies. Government expenditure and taxation data frequently are used to argue that government is too big or too small, that it is overly intrusive or insufficiently involved in various sectors of the economy, or that it neglects a particular constituency or concentrates too 267 many resources on it. A variety of statistics measuring government activity are found in Appendix Tables B-74 through B-84. In fiscal 1991 total Federal outlays were about $1.32 trillion, Federal revenues were about $1.05 trillion, and the resulting deficit was $269 billion. These broad aggregates, however, do not fully measure the extent of the Federal Government's involvement in the economy. Through a variety of special tax rules, credit subsidies, mandates, and quotas, the government affects the economy in ways similar to many tax and spending programs. CONCEPTS AND MEASURES OF THE BUDGET DEFICIT Several measures of the Federal budget deficit are shown in Table 7-1. TABLE 7-1.—Reconciliation Between Deficits in Fiscal 1990 Item Billions of dollars On-budget-to-consolidated reconciliation On-budget deficit Plus: Off-budget deficit Equals: Consolidated deficit., 277.1 -56.6 220.5 Consolidated-to-primary reconciliation Consolidated deficit Minus: Net interest Minus: Deposit insurance Equals: Primary deficit (net of deposit insurance) Consolidated-to-real reconciliation Consolidated deficit Minus: Decline in value of outstanding debt.. Equals: Real deficit Consolidated-to-cyclically adjusted reconciliation Consolidated deficit Minus: Deposit insurance Minus: Other NIPA adjustments1 Equals: NIPA deficit Minus: Cyclical adjustment Equals: Cyclically adjusted NIPA deficit.. 220.5 184.2 56.7 -20.4 220.5 97.8 122.7 220.5 56.7 6.3 157.5 -18.2 175.7 1 These adjustments include changing the timing of outlays and receipts to NIPA conventions, NIPA geographic exclusion, and other miscellaneous factors. Sources: Department of Commerce and Office of Management and Budget. The on-budget deficit is the difference during a fiscal year between the revenues and outlays that by law are classified as "on the budget." Currently, the only government operations treated as "off budget" are Social Security and the Postal Service. The consolidated deficit is the sum of the on-budget deficit and the deficit of the off-budget activities, that is, Social Security and the Postal Service. If the off-budget activities run a surplus, as is currently the case, the consolidated deficit is lower than the onbudget deficit by the amount of the surplus. Because any surplus from off-budget programs must be invested in Treasury bonds, the consolidated deficit measures the borrowing that must be met from nongovernment sources. The primary deficit, net of deposit insurance, measures the deficit net of spending on inherited liabilities, such as interest pay 268 ments on the government debt and payments to cover losses in previous years of insured depository institutions. Large current deficits do not imply that the Nation is creating large new burdens for future generations. Table 7-1 shows that in fiscal 1990 the entire current consolidated deficit was attributable to deposit insurance expenditures and net interest payments, which are most properly viewed as borrowing to finance the continuing costs of previously incurred liabilities. Inflation reduces the value of outstanding government debt; it acts as a tax on holders of debt. The consolidated deficit adjusted for the reduction in value of government debt due to inflation provides a measure of the real deficit. Table 7-1 shows that this adjustment can be large. In fiscal 1990 the inflation adjustment was almost half as large as Federal borrowing from nongovernment sources. The NIPA deficit measures the difference between government expenditures and revenues in a manner consistent with national income accounting. For certain receipts and expenditures, NIPA conventions involve somewhat different classification and timing than the on-budget and consolidated budgets. For example, asset sales and other financial transactions are excluded from the NIPA deficit. For this reason, outlays for deposit insurance are not included in the current year's NIPA deficit. Business cycle fluctuations cause changes in the deficit. When the economy contracts, the government's deficit increases even if there is no change in tax rates or spending programs. As incomes fall, tax revenues fall and government expenditures for unemployment and welfare benefits increase. Likewise, when the economy expands, income tax receipts rise and unemployment and welfare benefits typically fall. These changes in tax collections and expenditures automatically dampen the impact of economic fluctuations. That is, they act as automatic stabilizers. It is informative to separate changes in the deficit that occur automatically, as a result of cyclical swings in the economy, from those that result from explicit policy changes, such as changes in tax rates. This is the purpose of the structural or cyclically adjusted deficit. This measure shows what the NIPA deficit would be, with existing tax rates and existing programs, if the economy had no cyclical fluctuations and maintained a constant unemployment rate of 6 percent. Table 7-1 shows that the unadjusted NIPA deficit was lower than the cyclically adjusted deficit in fiscal 1990. This occurred because the unemployment rate was below 6 percent during fiscal 1990. Because it eliminates the automatic cyclical changes in tax collections and expenditures, changes in the cyclically adjusted deficit are a better measure of discretionary fiscal policy than are changes in the unadjusted NIPA deficit. 269 ACCOUNTING FOR GOVERNMENT ASSETS AND LIABILITIES Like private businesses, governments have assets and liabilities. These can be tangible or intangible, and physical or financial. A government purchase of assets at market value without an accompanying increase in taxes increases measures of the deficit discussed in Table 7-1, even though it increases government assets and government liabilities by the same amount. To measure changes in government assets and liabilities in the Federal budget, a separate capital account would have to be established. The Federal Government would, of course, continue to maintain a current account, which measures revenues arising from and expenses for current operations. With separate current and capital accounts, depreciation on government capital would appear as an expenditure in the current account. Because the Federal budget treats all borrowing the same, it imposes a bias in favor of current-account spending relative to spending for long-term infrastructure and productivity-enhancing programs. Furthermore, financing that lowers front-end costs of an acquisition (such as leasing) might be preferred to an economically superior decision that has higher front-end costs (such as buying). The budget agreement of 1990 sought to eliminate some of these biases toward leasing. Moving to a system of capital accounting would require resolving some conceptual issues surrounding the definition of capital. First, valuing intangible capital, such as investment in human capital or research and development, is problematic. Second, government capital accounting, like private sector capital accounting, would require estimating the depreciation of capital, but how is an aircraft carrier to be depreciated? Despite these difficulties, however, many countries and State governments have incorporated aspects of capital accounting. Separating the Federal budget into a current and capital account could dramatically alter the way the public views fiscal policy, as well as the way the public views particular components of government spending. The spending devoted to building the interstate highway system during the Eisenhower Administration, or the spending on infrastructure in the Intermodal Surface Transportation Efficiency Act signed by the President in 1991, would be considered investment and thus an addition to government assets. The value of these assets would decline over time due to depreciation unless offsetting maintenance or improvement expenditures were made in the current account. The United States will adopt the United Nation's system of national accounts (SNAs) in the mid-1990s. The SNA framework will 270 provide more information on government assets and liabilities. (Box 7-3). ACCOUNTING FOR INTERGENERATIONAL REDISTRIBUTION OF WEALTH The government's assets and liabilities are owned and owed collectively by all of the Nation's citizens. By reducing government assets or increasing government liabilities, the current generation can increase its consumption at the expense of future generations. Many factors affecting intergenerational burdens are not captured in cash-flow measures of the deficit. For example, a pay-as-you-go Social Security system would have no impact on the deficit in any year, but it would redistribute wealth from generations with few people in the labor force to generations with a large number of Social Security recipients. Government expenditure on scientific research that is paid for by current taxes does not affect the deficit but redistributes wealth to future generations who will reap the benefits of the research. As discussed in the fiscal 1993 budget, generational accounting is a new method for comparing the fiscal treatment of different generations. It is still being developed, and a number of the assumptions used are controversial. Generational accounts measure, from a particular base year, the present value of the future taxes that the average person of each age is estimated to pay to the government minus the present value of the future transfers that the average person of that age is expected to receive. The difference is the net payment to government. ALTERNATIVES TO DIRECT EXPENDITURES AND TAXES Government programs frequently are structured in ways that produce a similar allocation of costs and benefits to society, but have different effects on measured government spending and taxes. Direct spending, for example, can be replaced with a tax expenditure, provision of credit guarantees, or a mandate for private action. Direct taxation can be replaced with a quota or restriction. These alternatives are not scored in the budget even though the government influences the economy through their use. Tax Rules as an Alternative to Expenditures Many alternatives to direct Federal spending can be found in the tax code. An example is the deduction for State and local income and property taxes. This deduction has the same economic effect as a grant to the individuals paying those taxes. If the deduction were converted to an actual grant, both reported taxes and reported Federal spending would be higher. 271 Such special tax rules are sometimes known as tax expenditures. The Congressional Budget Act of 1974 defines tax expenditures as "revenue losses attributable to provisions of the ... tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of liability." This concept, however, is controversial because of disagreement over how to define a neutral, or "baseline," tax system—that is, one that is free of special exclusions, exemptions, or deductions. Direct and Guaranteed Loans The government often makes loans to finance agriculture, housing, education, medical facilities, purchases of arms by foreign governments, rural development, railroads, and other activities. These loans can be financed with either taxes or Federal borrowing. Sometimes, the Federal Government guarantees loans issued by others. Government loans and guarantees affect the availability of credit, most notably to homebuyers, students, and small business owners. Before the Omnibus Budget Reconciliation Act of 1990, the budget treated the two kinds of loans very differently. Direct loans were treated as an expenditure at the time the loan was issued and as a negative expenditure when the loan was repaid. A loan guarantee was treated as an expenditure only when a default occurred. Because a direct loan is only costly to the government when a default occurs, the expected cost of a direct loan is the same as that of a guarantee of a loan made to the same borrower at the same terms. As a result of the 1990 budget act, the budget accounts for direct loans and guaranteed loans in the same manner. The President's fiscal 1993 budget proposes that these credit reform principles be extended to deposit insurance and pension guarantees. Budget outlays for banks and thrifts would be calculated in terms of a measure of accrued costs instead of cash disbursements starting in fiscal 1992. Accrued costs can be measured from financial information provided quarterly to regulators by each institution. An aggregate measure of accrued costs would constitute an estimate of what it would cost the insurance fund to recognize all current insolvencies. Mandates As a substitute for direct spending, governments can require individuals or businesses to perform certain actions. The Federal Government even imposes mandates on State and local governments. Requiring owners of public buildings to install access facilities for handicapped persons, for example, is equivalent to the government installing those facilities with revenues from a tax on 272 building owners. If the latter program were counted in the budget, it would increase both spending and revenue figures. Quotas The Federal Government may also limit certain economic activities through direct prohibition or quotas. This alternative is an important issue in international trade, where both quotas and taxes (that is, tariffs) commonly are used to restrict imports. A tariff causes the quantity of imports to fall by increasing their price. A quota sets specific limits on the quantity of imports. Either a tariff or a quota on a particular good restricts markets and shifts income away from consumers of the good toward domestic producers of the good. Under a tariff, the government collects revenues. Under a quota, the revenue goes instead to the fortunate businesses who are granted the right to import the limited quantity. SUMMARY • Different measures of the budget deficit are used to gauge the stimulus to the economy from current policies and the government's borrowing requirements. A new measure is being developed to assess the intergenerational burden of government programs. • Large current deficits do not in themselves mean that the Nation is currently generating new large burdens on future generations. Today, virtually all of the consolidated deficit is accounted for by deposit insurance and net interest outlays, which represent borrowing to finance previously incurred liabilities. • Cash-flow measures of the deficit do not reflect changes in government assets and liabilities. Issuing debt to finance government investment projects represents an increase in both assets and liabilities, although under current budgetary practices it is scored as an increase in the deficit. • The size and effects of government are reflected through a variety of policies such as mandates, quotas, and tax expenditures, as well as through the more obvious channels of spending and taxation. INTERNATIONAL STATISTICS As the United States becomes more integrated into the world economy through trade and financial flows, international forces exert a greater influence on the Nation's economic performance and affect the transmission of domestic economic policies to the national economy. International statistics help us better understand these influences. Data that are comparable across countries can lead to a better understanding of the interactions among nations' 273 economies and therefore can improve policy coordination and facilitate international negotiations. It is, moreover, natural to want to compare U.S. economic performance with other countries. Data on transactions between the United States and the rest of the world, exchange rates, and a number of measures of economic activity in other major industrial nations can be found in Appendix Tables B99 through B-108. WHERE DO INTERNATIONAL DATA COME FROM? International statistics as they relate to the domestic economy come from many of the U.S. statistical agencies discussed earlier in this chapter. For internationally comparable data, the international institutions are the most important source. The Organization for Economic Cooperation and Development prepares extensive internationally comparable data for the industrial market economies, including measures of economic activity, labor market structures, consumption and saving, and financial flows. The International Monetary Fund compiles data from member countries on a variety of macroeconomic measures, including monetary and fiscal data, price indexes, exchange rates, and balance of payments data. The World Bank publishes development indicators, such as life expectancy and literacy, and measures of the structure of production, exports and outstanding debt, among other data. The United Nations and the Secretariat of the General Agreement on Tariffs and Trade prepare disaggregated trade data and compile information on trade barriers. A host of other organizations keep internationally comparable data on specific topics. DIFFICULTIES IN INTERNATIONAL COMPARISONS Each country's data system focuses on and is influenced by the characteristics of its domestic economy. Because these characteristics vary from country to country, the statistical methodology, sector detail, and degree of economic aggregation also differ among countries. Thus, constructing comparable data requires detailed knowledge of the individual national data sources. Of course, comparable data are only as good as the underlying national data. Quality and availability of data remain a problem in some countries (Box 7-6). In the developing countries, the funding for statistical systems is particularly tight as governments balance the value of statistics for policymaking against social needs. International comparisons often require converting data from valuation in national currencies to a common unit of account. Standards of living, for example, are commonly compared by converting per capita GDP into dollars. But how should foreign currencies be converted into dollars? To compare income or living standards, the exchange-rate conversion should take into account 274 the goods and services that a currency actually can buy within a country. When calculated using these "purchasing power parity" exchange rates, U.S. GDP per person in 1990 ranked first in the world, about 8 percent above the next highest country, Canada; 25 percent above Japan; and 35 percent above Germany. Box 7-6.—Measuring Economies in Transition Unique data problems occurred in centrally planned economies where the planning agency that set targets for output was also the agency that collected statistics- When reporting data, factory managers had an obvious incentive to tell their overseer in the planning agency that they had fulfilled their assigned tasks. The resulting statistics were often poor indicators of what was actually happening in the economy• Those countries moving toward a market economy and private ownerri»p have generally eliminated centralked pricing and production quotas, but the statistical framework for measuring market-based transactions is not yet in place. Some privately owned factories in Central and Eastern Europe* for example, are not reporting data to any statistical authority. As the private sector has grown, "a larger fraction of output has gone unrecorded. This accounts, in part, for the dramatic decline in measured GDP* Without adequate date, changes in production and income in these economies, and ultimately the success of their economic reform programs, are very difficult to assess. These issues are manifest in Eastern and Central Europe, and in the new nations of the former Soviet Union. A common mistake in comparing living standards across countries is the use of market exchange rates to convert GDP from national currencies into dollar terms. Market exchange rates affect what people can buy from foreign countries, and therefore are an appropriate measure of the purchasing power of income only if people spend all of their income on foreign goods or services. Americans, for example, spent only about 14 percent of their income on imports between 1988 and 1990. To see how misleading market exchange rates can be, consider an example. In 1985 German per capita income calculated using market exchange rates was 63 percent below the United States. Real income per capita grew about 5 percent more in Germany than in the United States over the next 5 years. Yet, when compared at the market exchange rate, income per person in Germany had vaulted 9 percent ahead of the United States by 1990. This anomaly is explained by the sharp real depreciation of the dollar against the German mark; as noted above, using the prices of products actually purchased in each country, in 275 1990 real GDP per capita was 34 percent higher in the United States than in Germany. INTERNATIONAL COMPETITIVENESS Global integration has heightened interest in U.S. international competitiveness, another difficult concept to define and measure. Chart 7-4 shows movements in three measures of international competitiveness. Relative unit labor costs measure changes in the relative cost competitiveness of goods produced with U.S. labor. Relative average unit value of manufactured exports indicates changes in the relative price competitiveness of U.S. exports. The real exchange rate is the nominal exchange rate adjusted for changes in the relative consumer price indexes at home and abroad and therefore broadly indicates changes in the real purchasing power of money in terms of foreign goods and services. Chart 7-4 Measures of U.S. Competitiveness All measures of U.S. competitiveness have improved, but the competitiveness of U.S. labor has improved the most. Index, 1985 = 100 120 Declining relative costs and increasing competitiveness 110 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Real Effective Relative Unit Labor Relative Unit Value of Exchange Rate Costs in Manufacturing Manufactured Exports Source: International Monetary Fund. All three series show the same trend because the nominal exchange rate is a common factor in all three measures. Nonetheless, these indexes do differ significantly. From 1985 to 1990, U.S. international competitiveness based on relative unit labor costs improved 60 percent more than the measure based on relative unit value of exports of manufactured goods. The difference occurs because unit labor costs measure only one input into the production 276 process for exports, because the unit value of manufactured exports can move differently from labor costs due to changes in exporters' price-cost margins, and because real exchange rates are affected by differences across countries in the composition of consumer market baskets that include nontraded goods and services. DISCREPANCIES IN INTERNATIONAL ACCOUNTS Because international data systems vary and statistical systems sometimes are limited, international flows of goods, services, and capital may be mismeasured, and worldwide aggregates may deviate from accounting identities. In theory, for example, the sum of all of the world's current account balances should equal zero—one country's exports of goods and services and investment income are another country's imports of goods and services and investment payments. Likewise, the global capital account should sum to zero—one country's capital outflows are another country's investment from abroad. After carefully accounting for flows of goods, services, and investment income, the global current account has been calculated at close to zero. Several statistical agencies have tried to account for all international flows of capital, but without complete success; the calculated global capital account in 1989 was about $80 billion. That implies that all the countries of the world combined were a net importer of capital—an obvious impossibility. The U.S. international accounts show a discrepancy between current account and capital account transactions of $18 billion in 1989 and $64 billion—more than 1 percent of GDP—in 1990. The discrepancy, which is both large and volatile, arises from imperfect recording of many items in both the capital and current accounts. An important source of the discrepancy is the underreporting of investment income that is based on estimates of U.S. portfolio investment abroad. The last benchmark of these data occurred during World War II; it has been proposed that a new benchmark be made. In addition, financial innovation and the globalization of financial markets have made capital flows more difficult to track accurately. Direct transactions between U.S. and foreign residents bypass the recording system altogether. Moreover, increased foreign holdings of U.S. currency abroad is omitted entirely from the accounts and was an important source of the U.S. statistical discrepancy in 1990. SUMMARY • Internationally comparable data lead to a better understanding of the interactions among nations' economies. Yet, accurate comparisons are often difficult because each country's data system focuses on and is influenced by characteristics of the domestic economy. 277 • Exchange rates are often required to compare data recorded in different currencies. The choice of exchange rate has an important effect on the comparison and must be made with care. • The difficulty of generating internationally comparable data is illustrated by the discrepancy between recorded current and capital accounts, both for the United States and for the world. CONCLUSION Economic data are essential tools for describing the state of the economy, investigating how the economic well-being of the Nation has changed over time, and comparing the economic performance of the United States with that of other countries. Economic data are valuable inputs to the decisionmaking processes of individuals, businesses, and public policymakers. Users of economic data should be aware of a number of factors that can complicate their analyses. The available economic data may not correspond well to the concept the analyst wants to measure. Changes in the structure of the economy can alter the relationships among various economic statistics and may render certain measures obsolete. It takes time to become familiar with new definitions, refined methodologies, and improved reporting conventions. Some economic statistics—particularly early estimates based on incomplete data—contain measurement error and must be used with caution. The economy is made up of complex interactions among individuals, businesses, and government, and these relationships change rapidly. By continually developing new measurement techniques and improving the accuracy and collection of statistics, the Nation's statistical system can reflect these changes and provide a more complete framework for understanding the economy. 278 Appendix A REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THE COUNCIL OF ECONOMIC ADVISERS DURING 1991 LETTER OF TRANSMITTAL COUNCIL OF ECONOMIC ADVISERS Washington, D.C., December 31, 1991 MR. PRESIDENT: The Council of Economic Advisers submits this report on its activities during the calendar year 1991 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 David F. Bradford, Member Paul Wonnacott, Member 281 Council Members and their Dates of Service Name Edwin G. Nourse Leon H. Keyserling John D. Clark Roy Blough Robert C. Turner Arthur F. Burns Neil H. Jacoby Walter W. Stewart Raymond J. Saulnier.. Joseph S. Davis Paul W. McCracken.. Karl Brandt Henry C. Wallich Walter W. Heller James Tobin Kermit Gordon Gardner Ackley John P. Lewis Otto Eckstein Arthur M. Okun James S. Duesenberry.... 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... David F. Bradford Paul Wonnacott Oath of office date Position Chairman Vice Chairman Acting Chairman.. Chairman Member Vice Chairman Member Member Chairman Member Member Member Chairman...... Member Member MemberMember Chairman... Member Member Member Chairman.. Member Member Member Chairman.., Member Member Member ChairmanMember Member Chairman.. Member.... Member Member Member Chairman.. Member.... Member.... Chairman.. Member.. Member.. Member.... Member.... Chairman.. Member.... Member.... Chairman.. Member.... Chairman.. Member.... Member.... Chairman.. Member.... Member.... Member.... Member.... 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 3 1 , 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 November 13, 1991.. November 13, 1991.. 282 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 3 1 , 1958. January 3 1 , 1959. January 20, 1961. January 20, 1961. November 15, 1964. July 3 1 , 1962. December 27, 1962. February 15, 1968. August 3 1 , 1964. February 1, 1966. January 20, 1969. June 30, 1968. January 20, 1969. January 20, 1969. December 3 1 , 1971. July 15, 1971. August 3 1 , 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 3 1 , 1982. July 10, 1984. January 20, 1985. January 20, 1989. May 1, 1989. September 19, 1988. August 2, 1991 June 2 1 , 1991 Report to the President on the Activities of the Council of Economic Advisers During 1991 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 continued to serve as Chairman in 1991. Dr. Boskin is on a leave of absence from Stanford University, where he is the Burnet C. and Mildred Finley Wohlford Professor of Economics. The President nominated David F. Bradford and Paul Wonnacott as the two other Members of the Council on September 6, 1991. After Senate confirmation, Dr. Bradford and Dr. Wonnacott were sworn in on November 13, 1991. Dr. Bradford is on a leave of absence from Princeton University, where he is a Professor of Economics and Public Affairs. Dr. Wonnacott came to the Council from the University of Maryland, where he was a Professor of Economics. Richard L. Schmalensee resigned as a Member on June 21, 1991, to return to the Massachusetts Institute of Technology, where he is the Gordon Y Billard Professor of Economics and Management and Director of the Center for Energy and Environmental Policy Research. John B. Taylor resigned as a Member on August 2, 1991, and returned to Stanford University, where he is a Professor of Economics. As in previous years, the Council in 1991 continued to stress the importance of maximizing sustainable economic growth to raise American living standards, setting ambitious but realistic longterm 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 Economic Report follows the previous two Economic Reports of this Administration in outlining these princi 283 pies and indicating how they contribute to strong economic growth and improved standards of living. The recession that began in the second half of 1990, following the longest peacetime expansion in the Nation's history, continued as the U.S. economy entered 1991. The recession appeared to end in the spring, with the beginning of a very modest recovery boosting production, employment, and spending into the summer. Total output grew in the second and third quarters and recovered about one-half of the decline that occurred during the recession. In midsummer, however, the economy flattened out, and production, employment, and spending faltered late in the year. The first years of the 1990s served as a reminder that the economy faces the risk of setbacks from external shocks and other disturbances. Economic expansions do not end on their own; they end as a result of the working-off of economic imbalances, inappropriate economic policies, or external shocks to the economy. The 199091 recession was associated with all three: Attempts by households, corporations, and the Federal Government to work off imbalances and reduce debt created structural adjustment problems for the economy. The lagged effects of a restrictive monetary policy initiated in 1988 to contain inflationary pressures, along with a credit crunch, engendered a slowdown in growth beginning in 1989. The Iraqi invasion of Kuwait in August 1990 produced a sharp rise in world oil prices, followed by a plummeting in business and consumer confidence. In the Council's view, the Nation faces serious challenges and cannot take economic growth for granted. Abiding by sound economic policy principles is therefore all the more important. The Administration's policies are designed to support sustained increases in the standard of living by raising the Nation's long-run productivity growth. Such policies include a pro-growth fiscal policy that enhances incentives for entrepreneurship, saving, and investment and continues to reduce the multiyear structural budget deficit; a trade policy that promotes growth through opening markets worldwide; and a regulatory policy that avoids unnecessary burdens on business and consumers. The Administration also supports a monetary policy that promotes real growth while maintaining low and stable inflation. Implementing these policies would greatly improve the prospects for growth in the U.S. economy in 1992 and beyond. MACROECONOMIC POLICIES Throughout the year, the Council emphasized the importance of credible, systematic fiscal and monetary policies as a key to mitigating the recession and ultimately sustaining maximum economic growth. The Council briefed the President and participated in regu 284 lar 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, Treasury, and OMB—the "Troika"—continued to produce the Administration's economic forecasts and projections. 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 budget review in July. The Council chairs the Troika's forecasting group. In preparing its forecasts, the Troika continued the practice, initiated in the first year of the Administration, of indicating 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 executives. The Chairman and the other Council Members appeared before numerous other organizations to explain the Administration's economic 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 1991 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 economic 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 lowering the structural Federal budget deficit, shifting the composition of Federal spending toward investment in productive infrastructure and research and development, and maintaining and improving the structure of incentives in the tax system to work, save, invest, and innovate. INTERNATIONAL ECONOMIC POLICIES International economic issues again occupied a substantial part of the Council's time during 1991. The Chairman and Council Members stressed the benefits of free trade and open markets for goods, services, and investment, and they emphasized the risk to http://fraser.stlouisfed.org/ 305-592 0—92 Federal Reserve Bank of St. Louis 285 10 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, the proposed North American free-trade agreement, the Enterprise for the Americas Initiative, and many other issues pertaining to international trade policy. The Council also participated in formulating Administration positions on legislation in the international area. The Council's involvement in economic reform in Eastern Europe and the former Soviet Union increased during 1991. Dr. Boskin was one of the three coordinators of U.S. assistance to Eastern Europe. He also chaired a working group on economic reform in the former Soviet Union and held numerous discussions in Washington with officials from the former Soviet bloc. 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 served as Chairman of the OECD Economic Policy Committee. Dr. Wonnacott led 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. Bradford headed the U.S. delegation to the OECD Working Party 1 meetings on microeconomic and structural 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 London. 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, as well as to provide incentives to meet social goals in the least costly manner. The Council worked with other agencies to ensure that the rules implementing the newly enacted amendments to the Clean Air Act balance costs and benefits in protecting the environment and minimize the costs of regulation to the maxi 286 mum extent possible. The Council was also instrumental in ensuring that other legislative initiatives were designed to achieve reforms in a more cost-effective manner. The Council emphasized the principles of promoting flexibility, enhancing incentives, and placing maximum reliance on the private sector in a wide range of policy areas. As a member of the Environmental Policy Review Group, Dr. Bradford dealt with a wide range of environmental issues, including analysis of the emissions allowance trading system under the Clean Air Act, global change, and reauthorization of the Resource Recovery and Conservation Act and the Comprehensive Environmental Response, Compensation, and Liability Act. He also participated in a variety of working groups on health care policy, income distribution, financial institution reform and regulation, public debt auctions, tax policy, telecommunications, energy markets, job training reform, automobile insurance, science and technology policy, drug policy, and empowerment. PUBLIC INFORMATION The Chairman and Council Members regularly testify before the Congress, make public speeches, and hold news briefings. 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 Economic 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. 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 is ultimately responsible 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 287 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. Bradford is primarily responsible for microeconomic and sectoral analysis, including analyses of regulatory issues. Dr. Wonnacott is primarily responsible for international issues 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 extraordinarily capable staff during 1991. The professional staff currently consists of the Special Assistant to the Chairman and Senior Staff Economist, a Staff Assistant to the Chairman, a Senior Statistician, 10 Senior Staff Economists, 7 Junior Staff Economists, and a Research Assistant. The professional staff and their respective areas of concentration at the end of 1991 were: Special Assistant to the Chairman and Senior Staff Economist Harry G. Broadman International Trade and Investment, Science and Technology, and Regulation Staff Assistant to the Chairman Shelley A. Slomowitz Senior Staff Economists David S. Bizer Randall W. Eberts William G. Gale Joseph W. Glauber Andrew S. Joskow John H. Kitchen Spencer D. Krane Raymond L. Squitieri Financial Markets, Banking, and Insurance Labor Markets and Education Public Finance Agriculture and International Trade Regulation and Energy Macroeconomics and Forecasting Macroeconomics, Monetary Policy, and Quality of Statistics International Macroeconomics and the former Soviet Bloc Energy and Environment Robert W. Staiger International Trade Catherine L. Mann Senior Statistician Catherine H. Furlong 288. Junior Staff Economists Jeffrey S. Gray John A. Higgins Thomas N. Hubbard Philip I. Levy Nancy L. Maritato Derek H. Utter Michael G. Williams Labor Markets, Education, and Public Finance Macroeconomics Regulation and Natural Resources International Trade Public Finance and Labor Markets International Macroeconomics and Finance Public Finance and Financial Markets Research Assistant Kimberly J. O'Neill Forecasting, Macn>economics, and Public Finance David G. Fernandez (Princeton University) served as a Junior Staff Economist during the summer of 1991. K. C. Fung (University of California, Santa Cruz) joined the Council as a Senior Staff Economist in January 1992. Mrs. Furlong is assisted in the operation of the Statistical Office by Susan P. Clements, 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 1992 Economic 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 1991 were Alice H. Williams and Sandra F. Daigle (Secretaries to the Chairman), Lisa D. Branch (Secretary to Dr. Wonnacott), and Francine P. Obermiller (Secretary to Dr. Bradford). The Secretaries for the Council's staff were Mary E. Jones, Rosalind V. Rasin, Mary A. Thomas, and Janet J. Twyman. Brian Amorosi, H. Brill Bundy, David J. Kogut, Ian B. Goldberg, and Lissa J. Rideout served as Student Assistants during 1991. Dorothy Bagovich served as a Statistical Assistant during the preparation of the 1992 Economic Report. DEPARTURES 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 289 tenure with the Council is usually limited to 1 or 2 years. Most of the Senior Staff Economists who resigned during the year returned to their previous affiliations. They are Nicole S. Ballenger (U.S. Department of Agriculture), Michael W. Horrigan (Bureau of Labor Statistics), Charles J. Jacklin (Stanford University), Adam B. Jaffe (Harvard University), Robert B. Kahn (Board of Governors of the Federal Reserve System), Ralph M. Monaco (U.S. Department of Agriculture), and John K. Scholz (University of Wisconsin). Others went on to new positions: They are Richard E. Baldwin (Graduate Institute of International Studies in Geneva), Howard K. Gruenspecht (U.S. Department of Energy), Peter F. Kostiuk (KPMG Peat Marwick), and James A. Wilcox (Board of Governors of the Federal Reserve System). Junior Staff Economists generally are graduate students who spend 1 year with the Council and then return to complete their doctoral programs. Those who returned to their graduate studies in 1991 are Eric D. Craft (University of Chicago), Alison F. Del Rossi (University of Pennsylvania), Brian J. Hall (Harvard University), and Arik M. Levinson (Columbia University). Mark A. Condon (Urban Institute) and Naomi S. Smith went on to new positions. Natalie V. Rentfro, Statistical Assistant, retired in 1991 after having served the Council for 20 years; she returned in 1992 to assist in the preparation of this Economic Report. Stefanie J. Reiser, Staff Assistant to the Chairman, resigned to join the Washington staff of the Governor of California. 290 Appendix B STATISTICAL TABLES RELATING TO INCOME, EMPLOYMENT, AND PRODUCTION CONTENTS NATIONAL INCOME OR EXPENDITURE: Page 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. Gross domestic product, 1959-91 Gross domestic product in 1987 dollars, 1959-91 Implicit price deflators for gross domestic product, 1959-91 Changes in gross domestic product and personal consumption expenditures, and related implicit price deflators and fixedweighted price indexes, 1960-91 Selected per capita product and income series in current and 1987 dollars, 1959-91 Gross domestic product by major type of product, 1959-91 Gross domestic product by major type of product in 1987 dollars, 1959-91 Gross domestic product by sector, 1959-91 , Gross domestic product by sector in 1987 dollars, 1959-91 Gross domestic product of nonflnancial corporate business, 195991 Output, costs, and profits of nonfinancial corporate business, 1959-91 Personal consumption expenditures, 1959-91 Personal consumption expenditures in 1987 dollars, 1959-91 Gross and net private domestic investment, 1959-91 Gross and net private domestic investment in 1987 dollars, 195991 Inventories and final sales of domestic business, 1959-91 Inventories and final sales of domestic business in 1987 dollars, 1959-91 -. Foreign transactions in the national income and product accounts, 1959-91 Exports and imports of goods and services and receipts and payments of factor income in 1987 dollars, 1959-91 Relation of gross domestic product, gross national product, net national product, and national income, 1959-91 Relation of national income and personal income, 1959-91 National income by type of income, 1959-91 Sources of personal income, 1959-91 Disposition of personal income, 1959-91 Total and per capita disposable personal income and personal consumption expenditures in current and 1987 dollars, 1959-91 Gross saving and investment, 1959-91 Personal saving, flow of funds accounts, 1946-91 Median income (in 1990 dollars) and poverty status of families and persons, by race, selected years, 1971-90 293 298 300 302 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 324 326 327 328 329 330 POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY: B-29. Population by age groups, 1929-90 B-30. Population and the labor force, 1929-91 B-31. Civilian employment and unemployment by sex and age, 1947-91 B-32. Civilian employment by demographic characteristic, 1954-91 B-33. Unemployment by demographic characteristic, 1954-91 B-34. Labor force participation rate and employment/population ratio, 1948-91 B-35. Civilian labor force participation rate by demographic characteristic, 1954-91 B-36. Civilian employment/population ratio by demographic characteristic, 1954-91 B-37. Unemployment rate, 1948-91 B-38. Civilian unemployment rate by demographic characteristic, 1948-91. B-39. Unemployment by duration and reason, 1947-91 B-40. Unemployment insurance programs, selected data, 1960-91 B-41. Employees on nonagricultural payrolls, by major industry, 194691 B-42. Average weekly hours and hourly and weekly earnings in private nonagricultural industries, 1955-91 B-43. Employment cost index, private industry, 1979-91..... B-44. Productivity and related data, business sector, 1959-91 B-45. Changes in productivity and related data, business sector, 196091 PRODUCTION AND BUSINESS ACTIVITY: B-46. Industrial production indexes, major industry divisions, 1947-91.. B-47. Industrial production indexes, market groupings, 1947-91 B-48. Industrial production indexes, selected manufacturers, 1947-91.... B-49. Capacity utilization rates, 1948-91 B-50. New construction activity, 1929-91 B-51. New housing units started and authorized, 1959-91 B-52. Business expenditures for new plant and equipment, 1947-92 B-53. Manufacturing and trade sales and inventories, 1950-91 B-54. Manufacturers' shipments and inventories, 1950-91 B-55. Manufacturers' new and unfilled orders, 1950-91 PRICES: B-56. B-57. B-58. B-59. B-60. B-61. B-62. B-63. B-64. Consumer price indexes, major expenditure classes, 1950-91 Consumer price indexes, selected expenditure classes, 1950-91 Consumer price indexes, commodities, services, and special groups, 1950-91 Changes in special consumer price indexes, 1958-91 Changes in consumer price indexes, commodities and services, 1929-91 Producer price indexes by stage of processing, 1947-91 Producer price indexes by stage of processing, special groups, 1974-91 Producer price indexes for major commodity groups, 1950-91 Changes in producer price indexes for finished goods, 1955-91 294 Page 331 332 334 335 336 337 338 339 340 341 342 343 344 346 347 348 349 350 351 352 353 354 356 357 358 359 360 361 362 364 365 366 367 369 370 372 MONEY STOCK, CREDIT, AND FINANCE: B-65. Money stock, liquid assets, and debt measures, 1959-91 B-66. Components of money stock measures and liquid assets, 1959-91.. B-67. Aggregate reserves of depository institutions and monetary base, 1959-91 B-68. Commercial bank loans and securities, 1972-91 B-69. Bond yields and interest rates, 1929-91 B-70. Total funds raised in credit markets by nonfinancial sectors, 1982-90 B-71. Mortgage debt outstanding by type of property and of financing, 1940-91 B-72. Mortgage debt outstanding by holder, 1940-91 B-73. Consumer credit outstanding, 1950-91 GOVERNMENT FINANCE: B-74. Federal receipts, outlays, surplus or deficit, and debt, selected fiscal years, 1929-93 , B-75. Federal receipts, outlays, and debt, fiscal years 1981-93 B-76. Relation of Federal Government receipts and expenditures in the national income and product accounts to the budget, fiscal years 1989-91 B-77. Federal and State and local government receipts and expenditures, national income and product accounts, 1959-91 B-78. Federal and State and local government receipts and expenditures, national income and product accounts, by major type, 1959-91 B-79. Federal Government receipts and expenditures, national income and product accounts, 1975-91 B-80. State and local government receipts and expenditures, national income and product accounts, 1959-91 B-81. State and local government revenues and expenditures, selected fiscal years, 1927-90 B-82. Interest-bearing public debt securities by kind of obligation, 1967-91 B-83. Maturity distribution and average length of marketable interestbearing public debt securities held by private investors, 196791 B-84. Estimated ownership of public debt securities by private investors, 1976-91 CORPORATE PROFITS AND FINANCE: B-85. Corporate profits with inventory valuation and capital consumption adjustments, 1959-91 B-86. Corporate profits by industry, 1959-91 B-87. Corporate profits of manufacturing industries, 1959-91 B-88. Sales, profits, and stockholders' equity, all manufacturing corporations, 1950-91 B-89. Relation of profits after taxes to stockholders' equity and to sales, all manufacturing corporations, 1947-91 B-90. Sources and uses of funds, nonfarm nonfinancial corporate business, 1947-91 B-91. Common stock prices and yields, 1952-91 B-92. Business formation and business failures, 1950-91 295 Page 373 374 376 377 378 380 382 383 384 385 386 388 389 390 391 392 393 394 395 396 397 398 399 400 401 402 403 404 AGRICULTURE: B-93. Farm income, 1940-91 B-94. Farm output and productivity indexes, 1947-91 B-95. Farm input use, selected inputs, 1947-90 B-96. Indexes of prices received and prices paid by farmers, 1950-91 B-97. U.S. exports and imports of agricultural commodities, 1940-91 B-98. Balance sheet of the farm sector, 1939-91 INTERNATIONAL STATISTICS: B-99. International investment position of the United States at yearend, 1982-90 B-100. U.S. international transactions, 1946-91 B-101. U.S. merchandise exports and imports by principal end-use category, 1965-91 B-102. U.S. merchandise exports and imports by area, 1982-91 B-103. U.S. merchandise exports, imports, and trade balance, 1972-91 B-104. International reserves, selected years, 1952-91 B-105. Industrial production and consumer prices, major industrial countries, 1967-91 B-106. Civilian unemployment rate, and hourly compensation, major industrial countries, 1965-91 B-107. Foreign exchange rates, 1967-91 : B-108. Growth rates in real gross national product/gross domestic product, 1971-91 NATIONAL WEALTH: B-109. National wealth, 1945-90 B-110. National wealth in 1982 dollars, 1945-90 296 Page 405 406 407 408 409 410 411 412 414 415 416 417 418 419 420 421 422 423 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: ^Preliminary. Not available (also, not applicable). Data in these tables reflect revisions made by the source agencies from January 1901 through January 1902. In particular, tables containing data from the national income and product accounts reflect the recent comprehensive (benchmark) revision* 297 NATIONAL INCOME OR EXPENDITURE TABLE B-l.—Gross domestic product, 1959-91 [Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates] Personal consumption expenditures Gross private domestic investment Fixed investment Year or quarter 1959 1960 1961 1962. 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 " 1982: IV... 1983: IV... 1984: IV... 1985: IV... 1986: IV... 1987: IV... 1988:1 II.... III... IV... 1989:1 1990:1 II .... III... IV... II.... III... IV... 1991:1 II.... III ... IV. Gross domestic product 494.2 513.4 531.8 571.6 603.1 648.0 702.7 769.8 814.3 889.3 959.5 1,010.7 1,097.2 1,207.0 1,349.6 1,458.6 1,585.9 1,768.4 1,974.1 2,232.7 2,488.6 2,708.0 3,030.6 3,149.6 3,405.0 3,777.2 4,038.7 4,268.6 4,539.9 4,900.4 5,244.0 5,513.8 5,671.8 3,195.1 3,547.3 3,869.1 4,140.5 4,336.6 4,683.0 4,752.4 4,857.2 4,947.3 5,044.6 5,139.9 5,218.5 5,277.3 5,340.4 5,422.4 5,504.7 5,570.5 5,557.5 5,589.0 5,652.6 5,709.2 5,736.6 Total 318.1 332.4 343.5 364.4 384.2 412.5 444.6 481.6 509.3 559.1 603.7 646.5 700.3 767.8 848.1 927.7 1,024.9 1,143.1 1,271.5 1,421.2 1,583.7 1,748.1 1,926.2 2,059.2 2,257.5 2,460.3 2,667.4 2,850.6 3,052.2 3,296.1 3,517.9 3,742.6 3,886.8 2,128.7 2,346.8 2,526.4 2,739.8 2,923.1 3,124.6 3,199.1 3,260.5 3,326.6 3,398.2 3,436.5 3,490.6 3,551.7 3,592.8 3,667.3 3,706.0 3,785.2 3,812.0 3,827.7 3,868.5 3,916.4 3,934.4 NonDurable durable goods goods Services 42.8 43.5 41.9 47.0 51.8 56.8 63.5 68.5 70.6 81.0 86.2 85.3 97.2 110.7 124.1 123.0 134.3 160.0 182.6 202.3 214.2 212.5 228.5 236.5 275.0 317.9 352.9 389.6 403.7 437.1 459.8 465.9 445.2 246.9 297.7 328.2 354.4 406.8 408.8 428.8 433.1 433.5 452.9 449.4 457.2 474.5 458.0 479.9 464.6 467.1 451.9 440.7 440.0 452.9 447.2 148.5 153.1 157.4 163.8 169.4 179.7 191.9 208.5 216.9 235.0 252.2 270.4 283.3 305.2 339.6 380.8 416.0 451.8 490.4 541.5 613.3 682.9 744.2 772.3 817.8 873.0 919.4 952.2 1,011.1 1,073.8 1,146.9 1,217.7 1,251.0 787.3 839.8 887.8 939.5 963.7 1,029.4 1,041.5 1,062.0 1,085.8 1,105.8 1,120.0 1,142.5 1,155.3 1,169.8 1,194.9 1,200.9 1,228.4 1,246.4 1,246.3 1,252.9 1,257.4 1,247.6 126.8 135.9 144.1 153.6 163.1 175.9 189.2 2C4.6 221.7 243.1 265.3 290.8 319.8 351.9 384.5 423.9 474.5 531.2 598.4 677.4 756.2 852.7 953.5 1,050.4 1,164.7 1,269.4 1,395.1 1,508.8 1,637.4 1,785.2 1,911.2 2,059.0 2,190.5 1,094.6 1,209.3 1,310.4 1,446.0 1,552.6 1,686.4 1,728.8 1,765.4 1,807.3 1,839.5 1,867.1 1,891.0 1,921.9 1,965.0 1,992.5 2,040.4 2,089.6 2,113.6 2,140.7 2,175.6 2,206.1 2,239.6 See next page for continuation of table. 298 Nonresidential Total 78.8 78.7 77.9 87.9 93.4 101.7 118.0 130.4 128.0 139.9 155.2 150.3 175.5 205.6 243.1 245.8 226.0 286.4 358.3 434.0 480.2 467.6 558.0 503.4 546.7 718.9 714.5 717.6 749.3 793.6 837.6 802.6 725.3 464.2 614.8 722.8 737.0 697.1 800.2 770.6 788.4 800.7 814.8 844.7 844.3 826.8 834.4 812.0 825.9 821.8 750.9 709.3 708.8 740.9 742.3 Total 74.6 75.5 75.0 81.8 87.7 96.7 108.3 116.7 117.6 130.8 145.5 148.1 167.5 195.7 225.4 231.5 231.7 269.6 333.5 406.1 467.5 477.1 532.5 519.3 552.2 647.8 689.9 709.0 723.0 777.4 801.6 802.7 745.6 510.5 594.6 671.8 704.4 715.9 740.9 753.8 774.6 783.6 797.5 801.6 802.0 803.5 799.4 815.3 800.2 807.7 787.4 748.4 745.8 744.5 743.4 Total 46.5 49.2 48.6 52.8 55.6 62.4 74.1 84.4 85.2 92.1 102.9 106.7 111.7 126.1 150.0 165.6 169.0 187.2 223.2 274.5 326.4 353.8 410.0 413.7 400.2 468.9 504.0 492.4 497.8 545.4 570.7 587.0 550.4 397.7 426.9 491.5 511.3 491.7 514.3 526.8 544.1 550.3 560.2 565.1 570.2 574.2 573.4 586.3 580.0 596.3 585.2 560.0 554.6 546.8 540.3 Structures 18.1 19.6 19.7 20.8 21.2 23.7 28.3 31.3 31.5 33.6 37.7 40.3 42.7 47.2 55.0 61.2 61.4 65.9 74.6 93.9 118.4 137.5 169.1 178.8 153.1 175.6 193.4 174.0 171.3 182.0 193.1 198.7 174.5 168.9 154.6 184.1 195.4 168.4 180.0 176.6 181.4 183.1 186.8 191.1 190.0 194.9 196.5 202.4 199.5 201.7 191.2 184.0 180.0 169.0 164.8 Producers' durable equipment 28.3 29.7 28.9 32.1 34.4 38.7 45.8 53.0 53.7 58.5 65.2 66.4 69.1 78.9 95.1 104.3 107.6 121.2 148.7 180.6 208.1 216.4 240.9 234.9 247.1 293.3 310.6 318.4 326.5 363.4 377.6 388.3 376.0 228.8 272.3 307.3 315.9 323.3 334.3 350.2 362.6 367.3 373.4 374.0 380.2 379.3 376.8 384.0 380.5 394.7 394.0 375.9 374.7 377.8 375.6 Residential 28.1 26.3 26.4 29.0 32.1 34.3 34.2 32.3 32.4 38.7 42.6 41.4 55.8 69.7 75.3 66.0 62.7 82.5 110.3 131.6 141.0 123.3 122.5 105.7 152.0 178.9 185.9 216.6 225.2 232.0 230.9 215.7 195.1 112.8 167.7 180.4 193.1 224.2 226.5 227.0 230.5 233.3 237.3 236.5 231.8 229.2 226.0 229.0 220.3 211.4 202.2 188.4 191.2 197.7 203.1 Change in business inventories 4.2 3.2 2.9 6.1 5.7 5.0 9.7 13.8 10.5 9.1 9.7 2.3 8.0 9.9 17.7 14.3 -5.7 16.7 24.7 27.9 12.8 -9.5 25.4 -15.9 -5.5 71.1 24.6 8.6 26.3 16.2 36.0 .0 -20.2 -46.3 20.2 51.0 32.6 -18.8 59.3 16.8 13.8 17.1 17.3 43.2 42.3 23.3 35.1 -3.3 25.6 14.1 -36.5 -39.2 -37.1 -3.6 -1.1 TABLE B-l.—Gross domestic product, 1959-91—Continued [Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates] Net exports of goods and services * Year or quarter Government purchases Federal Net Total exports Exports Imports -1.7 1959 24 1960 1961 3.4 2.4 1962 1963 3.3 5.5 1964 3.9 1965 1.9 1966 1.4 1967 1968 -1.3 -1.2 1969 1.2 1970 1971 -3.0 -8.0 1972 1973 .6 -3.1 1974 1975 13.6 1976 -2.3 -23.7 1977.... -26.1 1978 1979 -23.8 1980 -14.7 -14.7 1981 1982 -20.6 -51.4 1983 1984 -102.7 1985 -115.6 -132.5 1986 -143.1 1987 1988 -108.0 -82.9 1989 1990 -74.4 -27.1 1991" 1982: IV -29.5 -71.8 1983: IV -107.1 1984: IV -135.5 1985: IV -133.2 1986: IV 1987: IV - 1 4 3 . 2 1988:1 -122.0 -105.6 II -98.5 Ill IV - 1 0 6 . 0 1989:1 -88.9 -83.0 II -82.1 Ill -77.5 IV -78.0 1990:1 -60.4 || -82.5 III -76.6 IV 1991:1 -36.8 -17.2 II -37.3 Ill IV "... - 1 7 . 3 20.6 25 3 26.0 27.4 29.4 33.6 35.4 38.9 41.4 45.3 49.3 57.0 59.3 66 2 91.8 124.3 136 3 148.9 158 8 186.1 228.9 279.2 303.0 282.6 276.7 302.4 302.1 319.2 364 0 444.2 504.9 5504 593.3 265.6 286.2 308.7 304.7 333.9 392.4 418.5 438.8 452.4 467.0 486.1 506.2 506.2 521.3 534.6 545.9 548.7 572.6 565.9 589.8 597.0 620.4 22.3 22 8 22.7 25.0 26.1 28.1 31.5 37.1 39.9 46.6 50.5 55.8 62.3 74 2 91.2 127.5 122 7 151.1 182 4 212.3 252.7 293.9 317.7 303.2 3281 405.1 417.6 451.7 5071 552.2 587.8 624 8 620.4 295.1 358.0 415.7 440.2 467.1 535.6 540.5 544.3 550.9 573.1 575.0 589.2 588.3 598.8 612.6 606.3 631.2 649.2 602.7 6O7.0 634.3 637.7 99.0 99 8 107.0 116.8 122.3 128.3 136.3 155.9 175.6 191.5 201.8 212.7 224.3 241.5 257.7 288.3 321.4 341.3 368.0 403.6 448.5 507.1 561.1 607.6 652.3 700.8 772.3 833.0 8815 918.7 971.4 1042 9 1,086.9 631.6 657.6 727.0 799.2 849.7 901.4 904.7 913.8 918.5 937.6 947.5 966.6 980.9 990.7 1,021.2 1,033.2 1,046.0 1,071.2 1,088.8 1,092.5 1,089.1 1,077.0 Total 57.1 55 3 58 6 65.4 66.4 67.5 69.5 81.3 92.8 99.2 100.5 100.1 100.0 106 9 108.5 117.6 129 4 135.8 147 9 162.2 179.3 209.1 240 8 266.6 292 0 310.9 344.3 367.8 384 9 387.0 401.4 424 9 445.1 281.4 289.7 324.7 356.9 373.1 392.5 386.6 386.0 383.5 392.0 392.6 401.9 407.6 403.7 417.2 423.3 424.7 434.5 451.5 452.1 444.9 431.9 Nation- Nonal dedefense fense 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 4 233.1 258.6 276.7 2921 295.6 300.0 313 4 323.4 205.5 222.8 242.9 268.6 278.6 295.8 296.7 294.8 294.0 296.8 293.9 298.5 305.8 301.6 309.3 312.7 311.1 320.6 332.3 328.4 322.3 310.7 10.8 10 0 10.6 13.3 14.9 17.0 18.5 19.3 19.4 20.0 21.6 23.3 25.9 294 31.1 35.0 39 8 42.4 47 0 53.3 57.5 66.4 73 3 72.7 77 5 77.8 85.7 91.1 92 9 91.4 101.5 1115 1217 75.9 66.9 81.9 88.3 94.5 96.7 89.9 91.2 89.5 95.2 98.7 103.3 101.8 102.1 107.9 110.7 113.6 113.9 119.2 123.7 122.6 121.3 1 State and local 41.8 445 48 4 51.4 55.8 60.9 66.8 74.6 82.7 92.3 101.3 112.6 124.3 134 7 149.2 170.7 192 0 205.5 2201 241.4 269.2 298.0 320 3 341.1 360 3 389.9 428.1 465.3 496 6 531.7 570.0 6180 641.8 350.3 367.9 402.2 442.4 476.6 509.0 518.1 527.8 535.1 545.7 554.9 564.7 573.3 587.0 604.0 609.9 621.4 636.7 637.3 640.4 644.2 645.1 Final sales of domestic product 490.0 5101 528 9 565.5 597.5 643.0 693.0 756.0 803.8 880.2 949.8 1,008.4 1,089.2 1,197 1 1,331.9 1,444.4 15915 1,751.7 1,949 4 2,204.8 2,475.9 2,717.5 3,005 2 3,165.5 3410 6 3,706.1 4,014.1 4,260.0 4 513 7 4,884.2 5,208.1 5 513 8 5,692.0 3,241.4 3,527.1 3,818.1 4,107.9 4,355.4 4,623.7 4,735.6 4,843.4 4,930.2 5,027.3 5,096.7 5,176.2 5,254.0 5,305.3 5,425.7 5,479.1 5,556.5 5,594.0 5,628.2 5,689.6 5,712.8 5,737.6 Gross domestic purchases 2 495.8 510 9 528.4 569.2 599.8 642.5 698.8 767.9 812.9 890.6 960.7 1,009.5 1,100.2 1215 0 1,349.0 1,461.8 1572 3 1,770.7 1997 8 2 258 8 2,512.5 2,722.8 3 045 3 3,170.2 3 456 5 3,879.9 4,154.3 4,401.2 4 683 0 5,008.4 5,326.9 5 588 1 5',699.0 3,224.6 3,619.1 3,976.2 4,276.0 4,469.8 4,826.2 4,874.4 4,962.7 5,045.8 5,150.7 5,228.8 5,301.5 5,359.4 5,417.9 5,500.5 5,565.1 5,653.0 5,634.0 5,625.8 5,669.8 5,746.5 5,753.8 New definition: Excludes receipts and payments of factor income from or to rest of the world. Gross domestic product (GDP) less exports of goods and services plus imports of goods and services. GDP plus net receipts of factor income from rest of the world. Source: Department of Commerce, Bureau of Economic Analysis. 2 3 299 Addendum: Gross national product 3 497.0 516 6 535 4 575.8 607.7 653.0 708.1 774.9 819 8 895.5 965.6 10171 1,104.9 1215 7 1,362.3 1,474.3 15991 1,785.5 1994 6 2 254 5 2,520.8 2,742.1 3 063 8 3,179.8 3 434 4 3,801.5 4,053.6 4,277.7 45445 4,908.2 5,248.2 5,524.5 3,222.6 3,578.4 3,890.2 4,156.2 4,340.5 4,690.5 4,764.3 4,862.7 4,951.6 5,054.3 5,144.3 5,217.7 5,279.8 5,350.9 5,432.7 5,505.5 5,576.8 5,583.2 5,611.7 5,660.6 5,720.1 Percent change from preceding period Gross Gross domes- domestic tic purproduct chases 2 39 36 7.5 5.5 7.4 8.4 9.5 5.8 9.2 7.9 5.3 8.6 30 3.4 7.7 5.4 7.1 8.8 9.9 5.9 9.6 7.9 5.1 9.0 10 0 11.8 10.4 11.0 8.1 87 8.4 76 11.5 12.6 12 8 13.1 11.2 116 13.1 11.5 8.8 11.9 3.9 81 8.4 Hi 4.1 90 10.9 12.2 6.9 5.7 64 7.9 7.0 51 2.9 4.0 7.1 5.9 64 6.9 6.4 49 2.0 3.8 11.7 12.2 5.4 6.4 4.4 9.9 6.1 9.1 7.6 8.1 7.8 6.3 4.6 4.9 6.3 6.2 4.9 -.9 2.3 4.6 4.1 1.9 5.6 7.9 3.7 9.6 4.1 7.4 6.9 8.6 6.2 5.7 4.4 4.4 6.2 4.8 6.5 -1.3 -.6 3.2 5.5 .5 TABLE B-2.—Gross domestic product in 1987 dollars, 1959-91 [Billions of 1987 dollars, except as noted; quarterly data at seasonally adjusted annual rates] Personal consumption expenditures Gross private domestic investment Fixed investment Year or quarter Gross domestic product Change Nonresidential Total Durable goods Nondurable goods Services Total Total Total Structures in Producers' durable equipment dential business inventories 1959 1,931.3 1,178.9 114.4 518.5 546.0 296.4 282.8 165.2 74.4 90.8 117.6 13.6 1960 1961 1962 1963 1964 1,973.2 2,025.6 2,129.8 2,218.0 2,343.3 1,210.8 1,238.4 1,293.3 1,341.9 1,417.2 115.4 109.4 120.2 130.3 140.7 526.9 537.7 553.0 563.6 588.2 568.5 591.3 620.0 648.0 688.3 290.8 289.4 321.2 343.3 371.8 282.7 282.2 305.6 327.3 356.2 173.3 172.1 185.0 192.3 214.0 80.8 82.3 86.1 86.9 95.9 92.5 89.8 98.9 105.4 118.1 109.4 110.1 120.6 135.0 142.1 8.1 7.2 15.6 16.0 15.7 1965 1966 1967 1968 1969 2,473.5 2,622.3 2,690.3 2,801.0 2,877.1 1,497.0 1,573.8 1,622.4 1,707.5 1,771.2 156.2 166.0 167.2 184.5 190.8 616.7 647.6 659.0 686.0 703.2 724.1 760.2 796.2 837.0 877.2 413.0 438.0 418.6 440.1 461.3 387.9 401.3 391.0 416.5 436.5 250.6 276.7 270.8 280.1 296.4 111.5 119.1 116.0 117.4 123.5 139.1 157.6 154.8 162.7 172.9 137.3 124.5 120.2 136.4 140.1 25.1 36.7 27.6 23.6 24.8 1970 1971 1972 1973 1974 2,875.8 2,965.1 3,107.1 3,268.6 3,248.1 1,813.5 1,873.7 1,978.4 2,066.7 2,053.8 183.7 201.4 225.2 246.6 227.2 717.2 725.6 755.8 777.9 759.8 912.5 946.7 997.4 1,042.2 1,066.8 429.7 481.5 532.2 591.7 543.0 423.8 460.7 509.6 554.0 512.0 292.0 292.6 311.6 357.4 356.5 123.3 121.2 124.8 134.9 132.3 168.7 171.4 186.8 222.4 224.2 131.8 168.1 198.0 196.6 155.6 5.9 20.8 22.5 37.7 30.9 1975 1976 1977 1978 1979 3,221.7 3,380.8 3,533.2 3,703.5 3,796.8 2,097.5 2,207.3 2,296.6 2,391.8 2,448.4 226.8 256.4 280.0 292.9 289.0 767.1 801.3 819.8 844.8 862.8 1,103.6 1,149.5 1,196.8 1,254.1 1,296.5 437.6 520.6 600.4 664.6 669.7 451.5 495.1 566.2 627.4 656.1 316.8 328.7 364.3 412.9 448.8 118.0 120.5 126.1 144.1 163.3 198.8 208.2 238.2 268.8 285.5 134.7 166.4 201.9 214.5 207.4 -13.9 25.5 34.3 37.2 13.6 1980 1981 1982 1983 1984 3,776.3 3,843.1 3,760.3 3,906.6 4,148.5 2,447.1 2,476.9 2,503.7 2,619.4 2,746.1 262.7 264.6 262.5 297.7 338.5 860.5 867.9 872.2 900.3 934.6 1,323.9 1,344.4 1,368.9 1,421.4 1,473.0 594.4 631.1 540.5 599.5 757.5 602.7 606.5 558.0 595.1 689.6 437.8 455.0 433.9 420.8 490.2 170.2 182.9 181.3 160.3 182.8 267.6 272.0 252.6 260.5 307.4 164.8 151.6 124.1 174.2 199.3 -8.3 24.6 -17.5 4.4 67.9 1985 1986 1987 1988 1989 4,279.8 4,404.5 4,540.0 4,718.6 4,836.9 2,865.8 2,969.1 3,052.2 3,162.4 3,223.1 370.1 402.0 403.7 428.7 440.8 958.7 991.0 1,011.1 1,035.1 1,049.3 1,537.0 1,576.1 1,637.4 1,698.5 1,732.9 745.9 735.1 749.3 773.4 789.2 723.8 726.5 723.0 753.4 756.6 521.8 500.3 497.8 530.8 542.4 197.4 176.6 171.3 174.0 177.4 324.4 323.7 326.5 356.8 365.0 202.0 226.2 225.2 222.7 214.2 22.1 8.5 26.3 19.9 32.6 1990 1991 ". 4,884.9 4,848.4 3,262.6 3,256.7 438.9 412.5 1,050.8 1,042.3 1,773.0 1,801.9 744.5 672.6 744.2 687.7 548.8 512.7 177.9 153.9 370.8 358.8 195.5 175.1 .2 -15.1 1982: 1983: 1984: 1985: 1986: 1987: IV... IV... IV... IV... IV... IV... 3,759.6 4,012.1 4,194.2 4,333.5 4,427.1 4,625.5 2,539.3 2,678.2 2,784.8 2,895.3 3,012.5 3,074.7 272.3 319.1 347.7 369.6 415.7 404.7 880.7 915.2 942.9 503.5 669.5 756.4 763.1 705.9 793.8 548.4 640.2 708.4 732.9 725.9 733.9 417.2 449.6 509.6 525.5 495.5 510.6 173.2 162.6 189.5 198.3 170.4 177.9 244.0 287.0 320.1 327.2 325.0 332.7 131.2 190.6 198.8 207.4 230.5 223.3 -44.9 29.3 47.9 30.2 1,000.9 1,014.6 1,386.2 1,443.9 1,494.2 1,557.1 1,595.8 1,655.5 1988: I II.... III... IV... 4,655.3 4,704.8 4,734.5 4,779.7 3,128.2 3,147.8 3,170.6 3,202.9 425.1 426.9 423.8 439.2 1,023.5 1,031.0 1,039.3 1,046.8 1,679.6 1,690.0 1,707.5 1,716.9 756.9 769.4 782.2 785.0 737.7 753.3 758.6 764.1 517.7 531.4 535.2 538.8 171.6 174.4 174.1 175.7 346.1 356.9 361.0 363.1 220.0 222.0 223.5 225.3 19.2 16.1 23.5 20.9 1989: I II... III.. IV.. 4,832.4 4,845.6 4,859.7 3,200.9 3,208.6 3,241.1 3,241.6 433.6 439.9 454.3 435.6 1,047.1 1,043.3 1,051.4 1,055.3 1,720.3 1,725.4 1,735.4 1,750.7 803.2 797.4 776.8 779.2 761.9 758.5 756.6 749.2 540.0 543.6 544.7 541.3 177.8 175.0 178.4 178.6 362.2 368.6 366.3 362.7 221.9 215.0 211.9 207.9 41.2 38.9 20.2 30.0 1990: I II... III.. IV.. 4,900.3 4,903.3 4,855.1 3,258.8 3,258.6 3,281.2 3,251.8 452.7 438.7 440.3 424.0 1,054.4 1,050.3 1,053.7 1,044.7 1,751.8 1,769.6 1,787.3 1,783.1 754.9 766.0 760.3 696.6 758.9 743.8 746.4 727.8 550.7 544.3 555.5 544.5 182.3 178.9 180.0 170.4 368.4 365.4 375.5 374.0 208.2 199.5 190.9 183.3 -4.0 22.1 13.9 -31.2 4,824.0 4,840.7 4,862.7 4,866.3 3,241.1 3,252.4 3,271.2 3,262.2 410.8 408.9 418.3 412.1 1,043.9 1,046.2 1,046.1 1,033.0 1,786.3 1,797.2 1,806.8 1,817.1 657.0 656.3 686.5 690.6 689.8 686.8 686.5 687.9 519.1 514.8 510.0 506.9 163.3 158.9 148.4 144.8 355.8 355.8 361.6 362.1 170.7 172.0 176.5 181.0 -32.8 -30.4 .1 2.7 1991: I IV.. 968.7 300 -20.1 59.9 TABLE B-2.—Gross domestic product in 1987 dollars, 1959-91—Continued [Billions of 1987 dollars, except as noted; quarterly data at seasonally adjusted annual rates] Net exports of goods and services» Government purchases Federal Year or quarter Net exports Exports Imports Total Total National defense Nondefense State and local Final sales of domestic product Gross domestic pur-2 chases Addendum: Gross national prod-3 uct Percent change from preceding period Gross Gross domes- domestic tic purprod- chases 2 uct 1959 -21.8 73.8 95.6 477.8 268.2 209.6 1,917.8 1,953.1 1,942.1 1960 1961 1962 1963 1964 -7.6 -5.5 -10.5 -5.8 2.5 89.9 95.0 101.8 115.4 96.1 95.3 105.5 107.7 112.9 479.2 503.3 525.9 538.7 551.7 261.3 271.9 289.0 288.1 284.5 217.9 231.4 236.9 250.6 267.3 1,965.0 2,018.4 2,114.2 2,202.0 2,327.6 1,980.8 2,031.1 2,140.3 2,223.8 2,340.7 1,985.1 2,039.0 2,145.0 2,234.2 2,360.8 2.2 2.7 5.1 4.1 5.6 1965 1966 1967 1968 1969 -6.4 -18.0 -23.7 -37.5 -41.5 118.1 125.7 130.0 140.2 147.8 124.5 143.7 153.7 177.7 189.2 569.9 628.5 673.0 691.0 686.1 285.1 325.4 356.1 357.2 344.2 284.8 303.1 317.0 333.7 341.9 2,448.3 2,585.6 2,662.7 2,777.4 2,852.3 2,479.9 2,640.3 2,714.0 2,838.5 2,918.6 2,491.9 2,639.4 2,707.8 2,819.8 2,895.0 5.6 6.0 2.6 4.1 2.7 1970 1971 1972 1973 1974 -35.2 -45.9 -56.5 -34.1 -4.1 161.3 161.9 173.7 210.3 234.4 196.4 207.8 230.2 244.4 238.4 667.8 655.8 653.0 644.2 655.4 316.9 294.2 284.4 265.3 262.6 209.6 191.3 185.8 74.8 74.1 76.8 350.9 361.6 368.6 378.9 392.9 2,869.9 2,944.3 3,084.5 3,230.9 3,217.2 2,911.0 3,011.0 3,163.6 3,302.7 3,252.2 2,893.5 2,985.2 3,128.8 3,298.6 3,282.4 -.0 3.1 4.8 5.2 -.6 1975 1976 1977 1978 1979 23.1 -6.4 -27.8 -29.9 -10.6 232.9 243.4 246.9 270.2 293.5 209.8 249.7 274.7 300.1 304.1 663.5 659.2 664.1 677.0 689.3 262.7 258.2 263.0 268.6 271.7 184.9 179.9 181.6 182.1 185.1 77.8 78.3 81.4 86.5 86.6 400.8 401.1 401.0 408.4 417.6 3,235.6 3,355.3 3,499.0 3,666.3 3,783.2 3,198.6 3,387.1 3,561.1 3,733.3 3,807.4 3,247.6 3,412.2 3,568.9 3,739.0 3,845.3 4.9 4.5 4.8 2.5 1980 1981 1982 1983 1984 30.7 22.0 -7.4 -56.1 -122.0 320.5 326.1 296.7 285.9 305.7 289.9 304.1 304.1 342.1 427.7 704.2 713.2 723.6 743.8 766.9 284.8 295.8 306.0 320.8 331.0 194.2 206.4 221.4 234.2 245.8 90.6 89.4 84.7 86.6 85.1 419.4 417.4 417.6 423.0 436.0 3,784.6 3,818.6 3,777.8 3,902.2 4,080.6 3,745.7 3,821.2 3,767.7 3,962.8 4,270.5 3,823.4 3,884.4 3,796.1 3,939.6 4,174.5 -2.2 3.9 6.2 1985 1986 1987 1988 1989 -145.3 -155.1 -143.0 -104.0 -75.7 309.2 329.6 364.0 421.6 469.2 454.6 484.7 507.1 525.7 544.9 813.4 855.4 881.5 886.8 900.4 355.2 373.0 384.9 377.3 375.0 265.6 280.6 292.1 287.0 280.7 89.5 92.4 92.9 90.2 94.4 458.2 482.4 496.6 509.6 525.3 4,257.6 4,395.9 4,513.7 4,698.6 4,804.3 4,425.1 4,559.6 4,683.0 4,822.6 4,912.6 4,295.0 4,413.5 4,544.6 4,726.3 4,840.7 3.2 2.9 3.1 3.9 2.5 1990 1991 ". -51.3 -17.6 505.7 539.6 557.0 557.2 929.1 936.7 380.9 384.8 281.3 281.4 99.6 103.4 548.2 551.9 4,884.7 4,863.6 4,936.2 4,894.6 4,866.0 1.0 1982: 1983: 1984: 1985: 1986: 1987: IV IV IV IV IV IV -19.0 -83.7 -131.4 -155.4 -156.0 -136.0 280.4 291.5 312.8 312.0 342.9 386.1 299.4 375.1 444.2 467.4 498.9 522.1 735.9 748.1 784.3 830.5 864.8 893.0 316.0 322.2 341.7 363.7 377.5 391.6 229.4 242.9 254.3 272.1 282.2 295.0 86.6 79.3 87.4 91.6 95.3 96.6 419.9 425.9 442.6 466.7 487.3 501.4 3,804.5 3,982.8 4,146.2 4,303.3 4,447.2 4,565.6 3,778.6 4,095.8 4,325.5 4,488.9 4,583.1 4,761.5 3,791.7 4,046.6 4,216.4 4,349.5 4,430.8 4,633.0 .6 7.0 2.7 2.3 1.3 5.9 1988:I II Ill IV -113.4 -98.1 -101.9 -102.7 407.1 417.2 424.1 438.2 520.5 515.2 526.1 540.9 883.7 885.6 883.7 894.5 379.7 377.2 373.7 378.4 290.8 287.1 284.6 285.7 88.9 90.1 89.1 92.7 503.9 508.3 510.0 516.1 4,636.2 4,688.7 4,710.9 4,758.7 4,768.7 4,802.8 4,836.4 4,882.4 4,667.1 4,710.3 4,738.7 4,789.0 2.6 4.3 2.5 3.9 1989: I II Ill IV -81.2 -71.9 -79.8 -70.0 451.2 469.5 470.5 485.8 532.4 541.3 550.3 555.7 886.9 898.3 907.4 908.9 369.1 376.2 380.9 373.9 276.1 279.9 286.7 279.9 93.0 96.3 94.2 94.0 517.8 522.1 526.4 534.9 4,768.5 4,793.5 4,825.4 4,829.7 4,891.0 4,904.3 4,925.4 4,929.7 4,813.9 4,831.6 4,847.9 4,869.3 2.5 1.9 1.1 1.2 1990: I II Ill IV -56.0 -52.5 -65.7 -31.2 496.2 502.1 501.6 522.5 552.2 554.5 567.4 553.7 923.0 928.1 927.5 937.9 379.3 383.3 378.4 382.6 281.5 283.8 278.0 282.0 97.7 99.5 100.4 100.6 543.7 544.8 549.1 555.3 4,884.8 4,878.1 4,889.4 4,886.3 4,936.8 4,952.7 4,969.1 4,886.3 4,890.2 4,901.2 4,909.2 4,877.7 1.7 1.6 .2 -3.9 1991: I II Ill IV ".. -18.6 -12.3 -31.1 -8.3 512.5 535.7 545.2 565.1 531.1 548.0 576.3 573.4 944.5 944.3 936.1 921.9 391.7 392.7 384.5 370.2 289.4 287.0 280.4 268.9 102.3 105.7 104.1 101.3 552.7 551.7 551.6 551.7 4,856.8 4,871.2 4,862.6 4,863.7 4,842.6 4,843.7 4,853.1 4,847.8 4,893.8 4,872.0 4,874.6 -2.5 1.4 1.8 .3 1 New definition: Excludes receipts and payments of factor income from or to rest of the world. Gross domestic product (GDP) less exports of goods and services plus imports of goods and services. GOP plus net receipts of factor income from rest of the world. Source: Department of Commerce, Bureau of Economic Analysis. 2 3 301 1.8 TABLE B-3.—Implicit price deflators for gross domestic product, 1959-91 [Index numbers, 1987 = 100, except as noted; quarterly data seasonally adjusted] Personal consumption Fixed investment Nonresidential Year or quarter Gross domestic product Total Durable goods Nondurable goods Services Total Total Structures Producers' durable equipment Residential 1959 25.6 27.0 37.4 28.6 23.2 26.4 28.1 24.4 31.2 23.9 1960 1961 1962 1963 1964 26.0 26.3 26.8 27.2 27.7 27.5 27.7 28.2 28.6 29.1 37.7 38.3 39.1 39.7 40.4 29.1 29.3 29.6 30.1 30.5 23.9 24.4 24.8 25.2 25.6 26.7 26.6 26.8 26.8 27.1 28.4 28.2 28.6 28.9 29.2 24.2 24.0 24.1 24.4 24.7 32.1 32.2 32.4 32.6 32.8 24.0 24.0 24.0 23.8 24.1 1965 1966 1967 1968 1969 28.4 29.4 30.3 31.7 33.3 29.7 30.6 31.4 32.7 34.1 40.6 41.3 42.3 43.9 45.2 31.1 32.2 32.9 34.3 35.9 26.1 26.9 27.8 29.0 30.2 27.9 29.1 30.1 31.4 33.3 29.6 30.5 31.5 32.9 34.7 25.4 26.3 27.2 28.6 30.5 32.9 33.6 34.7 36.0 37.7 24.9 25.9 26.9 28.4 30.4 1970 1971 1972 1973 1974 35.1 37.0 38.8 41.3 44.9 35.6 37.4 38.8 41.0 45.2 46.4 48.3 49.2 50.3 54.1 37.7 39.0 40.4 43.7 50.1 31.9 33.8 35.3 36.9 39.7 34.9 36.4 38.4 40.7 45.2 36.5 38.2 40.5 42.0 46.4 32.7 35.2 37.8 40.7 46.3 39.4 40.3 42.2 42.7 46.5 31.4 33.2 35.2 38.3 42.4 1975 1976 1977 1978 1979 49.2 52.3 55.9 60.3 65.5 48.9 51.8 55.4 59.4 64.7 59.2 62.4 65.2 69.1 74.1 54.2 56.4 59.8 64.1 71.1 43.0 46.2 50.0 54.0 58.3 51.3 54.5 58.9 64.7 71.2 53.3 56.9 61.3 66.5 72.7 52.0 54.7 59.2 65.2 72.5 54.1 58.2 62.4 67.2 72.9 46.6 49.6 54.6 61.3 68.0 1980 1981 1982 1983 1984 71.7 78.9 83.8 87.2 91.0 71.4 77.8 82.2 86.2 89.6 80.9 86.4 90.1 92.4 93.9 79.4 85.7 88.6 90.8 93.4 64.4 70.9 76.7 81.9 86.2 79.2 87.8 93.1 92.8 93.9 80.8 90.1 95.3 95.1 95.6 80.8 92.5 98.6 95.5 96.1 80.9 88.5 93.0 94.8 95.4 74.8 80.9 85.2 87.3 89.7 1985 1986 1987 1988 1989 94.4 96.9 100.0 103.9 108.4 93.1 96.0 100.0 104.2 109.1 95.4 96.9 100.0 102.0 104.3 95.9 96.1 100.0 103.7 109.3 90.8 95.7 100.0 105.1 110.3 95.3 97.6 100.0 103.2 106.0 96.6 98.4 100.0 102.8 105.2 98.0 98.5 100.0 104.6 108.8 95.7 98.4 100.0 101.9 103.5 92.0 95.8 100.0 104.2 107.8 1990 1991 " 112.9 117.0 114.7 119.3 106.1 107.9 115.9 120.0 116.1 121.6 107.9 108.4 107.0 107.4 111.7 113.4 104.7 104.8 110.4 111.5 1982: 1983: 1984: 1985: 1986: 1987: IV IV IV IV IV IV 85.0 88.4 92.2 95.5 98.0 101.2 83.8 87.6 90.7 94.6 97.0 101.6 90.6 93.3 94.4 95.9 97.8 101.0 89.4 91.8 94.1 97.0 96.3 101.5 79.0 83.7 87.7 92.9 97.3 101.9 93.1 92.9 94.8 96.1 98.6 101.0 95.3 95.0 96.4 97.3 99.2 100.7 97.5 95.1 97.2 98.5 98.8 101.2 93.8 94.9 96.0 96.5 99.5 100.5 86.0 88.0 90.7 93.1 97.3 101.5 1988:1 II Ill IV 102.1 103.2 104.5 105.5 102.3 103.6 104.9 106.1 100.9 101.5 102.3 103.1 101.8 103.0 104.5 105.6 102.9 104.5 105.8 107.1 102.2 102.8 103.3 104.4 101.8 102.4 102.8 104.0 102.9 104.0 105.1 106.3 101.2 101.6 101.7 102.8 103.2 103.8 104.4 105.3 1989:1 II Ill IV 106.9 108.0 108.9 109.9 107.4 108.8 109.6 110.8 103.6 103.9 104.4 105.2 107.0 109.5 109.9 110.8 108.5 109.6 110.7 112.2 105.2 105.7 106.2 106.7 104.6 104.9 105.4 105.9 107.5 108.6 109.3 110.1 103.3 103.2 103.6 103.9 106.6 107.8 108.2 108.7 1990:1 II Ill IV 111.1 112.3 113.6 114.5 112.5 113.7 115.4 117.2 106.0 105.9 106.1 106.6 113.3 114.3 116.6 119.3 113.7 115.3 116.9 118.5 107.4 107.6 108.2 108.2 106.5 106.5 107.4 107.5 111.0 111.5 112.0 112.2 104.2 104.1 105.1 105.3 110.0 110.4 110.7 110.3 1991:1 II Ill IV P.... 115.9 116.8 117.4 117.9 118.1 118.9 119.7 120.6 107.3 107.6 108.3 108.5 119.4 119.8 120.2 120.8 119.8 121.1 122.1 123.3 108.5 108.6 108.5 108.1 107.9 107.7 107.2 106.6 112.7 113.2 113.9 113.8 105.7 105.3 104.5 103.7 110.4 111.2 112.0 112.2 302 TABLE B-3.—Implicit price deflators for gross domestic product, 1959-91—Continued [Index numbers, 1987=100, except as noted; quarterly data seasonally adjusted] Government purchases Exports and imports of goods and services l Year or quarter 1959 Exports Imports 28.0 23.4 Federal Total Total National Nondefense defense State and local Final sales of domestic product Gross domestic purchases 2 20.7 21.3 19.9 25.5 25.4 20.4 20.9 21.7 22.3 22.8 26.0 26.2 26.7 27.1 27.6 25.8 26.0 26.6 27.0 27.5 23.5 24.6 26.1 27.7 29.6 28.3 29.2 30.2 31.7 33.3 28.2 29.1 30.0 31.4 32.9 1960 1961 1962 1963 1964 28.6 29.0 28.9 28.9 29.1 23.8 23.8 23.7 24.3 24.9 20.8 21.3 22.2 22.7 23.3 21.2 21.5 22.6 23.1 23.7 1965 1966 1967 1968 1969 30.0 31.0 31.8 32.3 33.3 25.3 25.8 26.0 26.2 26.7 23.9 24.8 26.1 27.7 29.4 24.4 25.0 26.127.8 29.2 1970 1971 1972 1973 1974 35.3 36.6 38.1 43.6 53.0 28.4 30.0 32.2 37.3 53.5 31.8 34.2 37.0 40.0 44.0 31.6 34.0 37.6 40.9 44.8 36.9 40.5 44.5 39.3 41.9 45.5 32.1 34.4 36.5 39.4 43.5 35.1 37.0 38.8 41.2 44.9 34.7 36.5 38.4 40.8 44.9 1975 1976 1977 1978 1979 58.5 61.2 64.3 68.9 78.0 58.5 60.5 66.4 70.7 83.1 48.4 51.8 55.4 59.6 65.1 49.3 52.6 56.2 60.4 66.0 48.5 51.9 55.6 59.8 65.8 51.2 54.1 57.7 61.7 66.4 47.9 51.2 54.9 59.1 64.5 49.2 52.2 55.7 60.1 65.4 49.2 52.3 56.1 60.5 66.0 1980 1981 1982 1983 1984 87.1 92.9 95.2 96.8 98.9 101.4 104.5 99.7 95.9 94.7 72.0 78.7 84.0 87.7 91.4 73.4 81.4 87.1 91.0 93.9 73.5 81.1 87.6 91.6 94.8 73.3 82.1 85.9 89.5 91.3 71.1 76.7 81.7 85.2 89.4 71.8 78.7 83.8 87.4 90.8 72.7 79.7 84.1 87.2 90.9 1985 1986 1987 1988 1989 97.7 96.9 100.0 105.3 107.6 91.9 93.2 100.0 105.1 107.9 95.0 97.4 100.0 103.6 107.9 96.9 98.6 100.0 102.6 107.0 97.3 98.6 100.0 103.0 106.9 95.7 98.6 100.0 101.4 107.5 93.4 96.4 100.0 104.3 108.5 94.3 96.9 100.0 103.9 108.4 93.9 96.5 100.0 103.9 108.4 1990 1991" 108.9 109.9 112.2 111.3 112.2 116.0 111.6 115.7 111.4 114.9 112.0 117.8 112.7 116.3 112.9 117.0 113.2 117.1 1982: IV 1983: IV 1984: IV 1985:1V 1986: IV 1987: IV 94.7 98.2 98.7 97.7 97.4 101.6 98.5 95.4 93.6 94.2 93.6 102.6 85.8 87.9 92.7 96.2 98.3 100.9 89.0 89.9 95.0 98.1 98.8 100.2 89.6 91.7 95.5 98.7 98.7 100.3 87.7 84.3 93.7 96.4 99.2 100.1 83.4 86.4 90.9 94.8 97.8 101.5 85.2 88.6 92.1 95.5 97.9 101.3 85.3 88.4 91.9 95.3 97.5 101.4 1988:1 II Ill IV 102.8 105.2 106.7 106.6 103.9 105.7 104.7 106.0 102.4 103.2 103.9 104.8 101.8 102.3 102.6 103.6 102.0 102.7 103.3 103.9 101.2 101.2 100.4 102.6 102.8 103.8 104.9 105.7 102.1 103.3 104.7 105.6 102.2 103.3 104.3 105.5 1989:1 || III IV 107.7 107.8 107.6 107.3 108.0 108.8 106.9 107.7 106.8 107.6 108.1 109.0 106.4 106.8 107.0 108.0 106.5 106.6 106.7 107.8 106.1 107.4 108.1 108.6 107.2 108.2 108.9 109.7 106.9 108.0 108.9 109.8 106.9 108.1 108.8 109.9 1990:1 || Ill . IV 107.7 108.7 109.4 109.6 110.9 109.3 111.2 117.2 110.6 111.3 112.8 114.2 110.0 110.4 112.2 113.6 109.9 110.2 111.9 113.7 110.4 111.2 113.1 113.2 111.1 111.9 113.2 114.7 111.1 112.3 113.6 114.5 111.4 112.4 113.8 115.3 1991:1 || 110.4 110.1 109.5 109.8 113.5 110.8 110.1 111.2 115.3 115.7 116.4 116.8 115.3 115.1 115.7 116.7 114.8 114.4 114.9 115.5 116.5 117.1 117.9 119.6 115.3 116.1 116.8 116.9 115.9 116.8 117.5 118.0 116.2 116.8 117.4 118.0 Ill IV". 1 New definition: 2 Gross domestic 3 Percent change from preceding period, GDP implicit price deflator 3 Excludes receipts and payments of factor income from or to rest of the world. product (GOP) less exports of goods and services plus imports of goods and services. Quarterly changes are at annual rates. Note.—Separate deflators are not calculated for gross private domestic investment, change in business inventories, and net exports of goods and services. Source: Department of Commerce, Bureau of Economic Analysis. 303 TABLE B-4.—Changes in gross domestic product and personal consumption expenditures, and related implicit price deflators and fixed-weighted price indexes, 1960-91 [Percent change from preceding period; quarterly data at seasonally adjusted annual rates] Personal consumption expenditures Gross domestic produc Year or quarter Current dollars Constant (1987) dollars Implicit price deflator Fixedweighted price index (1987 weights) Current dollars Constant (1987) dollars Implicit price deflator I960 1961 1962... 1963 1964 3.9 3.6 7.5 5.5 74 2.2 2.7 5.1 4.1 5.6 1.6 1.2 1.9 1.5 1.8 4.5 3.3 6.1 5.4 7.4 2.7 2.3 4.4 3.8 5.6 1.9 .7 1.8 1.4 17 1965 1966 1967 1968 1969 84 9.5 5.8 9.2 7.9 5.6 6.0 2.6 4.1 2.7 2.5 3.5 3.1 4.6 5.0 7.8 8.3 5.8 9.8 8.0 5.6 5.1 3.1 5.2 3.7 21 3.0 2.6 4.1 4.3 1970 1971 1972 1973 1974 5.3 86 10.0 11.8 8.1 0 3.1 4.8 5.2 -.6 5.4 54 4.9 6.4 8.7 7.1 83 9.6 10.5 9.4 2.4 33 5.6 4.5 -.6 4.4 51 3.7 5.7 10.2 1975... 1976 1977 1978 ". 1979 8.7 11.5 11.6 131 11.5 -.8 4.9 4.5 48 2.5 9.6 6.3 6.9 79 8.6 10.5 11.5 11.2 11.8 11.4 2.1 5.2 4.0 4.1 2.4 8.2 5.9 6.9 7.2 8.9 1980 1981 1982 1983 1984 88 11.9 39 8.1 10.9 _ 5 1.8 22 3.9 6.2 95 10.0 62 4.1 4.4 10.4 10.2 6.9 9.6 9.0 _.l 1.2 1.1 4.6 4.8 10.4 9.0 5.7 4.9 3.9 . 69 5.7 6.4 79 7.0 32 2.9 3.1 39 2.5 37 2.6 3.2 39 4.3 84 6.9 7.1 8.0 6.7 44 3.6 2.8 3.6 1.9 39 3.1 4.2 4.2 4.7 5.1 2.9 1.0 -.7 4.2 3.6 6.4 3.9 1.2 -.2 5.1 4.0 40 11.7 54 64 4.4 9.9 61 9.1 7.6 8.1 78 6.3 46 4.9 6.3 6.2 49 -.9 2.3 4.6 41 1.9 6 7.0 27 23 1.3 5.9 26 4.3 2.5 3.9 25 1.9 11 1.2 1.7 1.6 2 -3.9 25 1.4 18 .3 34 4.2 26 39 3.3 3.6 36 4.4 5.1 3.9 54 4.2 34 3.7 4.4 4.4 47 3.2 5.0 3.1 21 1.7 112 10.5 8.1 54 5.8 4.4 99 7.9 8.4 8.9 4.6 6.4 7.2 4.7 8.6 4.3 88 2.9 1.7 4.3 50 1.9 60 6.1 4.5 3 2.5 -.1 71 2.5 2.9 4.1 -.2 1.0 4.1 .1 2.1 -.0 2.8 35 -1.3 1.4 23 -1.1 4.9 4.2 3.1 48 2.9 4.5 2.8 5.2 5.1 4.7 5.0 5.3 3.0 4.5 6.3 4.3 6.1 6.4 3.1 2.7 2.7 3.0 1985 1986 1987 1988 1989 : 1990...p 1991 1982: IV 1983- IV 1984: IV 1985- IV 1986- IV 1987: IV 1988: I . .. || III IV 1989:1 II III IV 1990:1 || III IV 1991:1. || III . IV P Note.—Data are not yet available for fixed-weighted price indexes (1987 weights). Source: Department of Commerce, Bureau of Economic Analysis. 304 Fixedweighted price index (1987 weights) TABLE B-5.—Selected per capita product and income series in current and 1987 dollars, 1959-91 [Quarterly data at seasonally adjusted annual rates, except as noted] Constant (1987) dollars Current dollars Year or quarter DisposGross domes- Person- able persontic al al prod- income income uct Personal consumption expenditures Total Gross Disposdomes- able tic Dura- Non- Serv- prodpersonble durable uct income goods goods 987 1,060 1,091 1,171 1,244 974 1,041 1,116 1,211 1,308 12,727 13,338 13,536 13,953 14,191 7,256 6,658 646 2,928 3,083 7,264 638 2,915 3,145 7,382 6,740 595 2,926 3,218 7,583 6,931 -644 2,964 3,323 7,718 7,089 688 2,977 3,423 8,140 7,384 733 3,065 3,586 8,508 7,703 803 3,173 3,726 8,822 8,005 844 3,294 3,867 9,114 8,163 841 3,316 4,006 9,399 8,506 919 3,417 4,169 9,606 8,737 941 3,469 4,327 416 468 528 585 575 1,318 1,364 1,454 1,602 1,780 1,418 1,540 1,676 1,814 1,982 14,022 14,276 14,801 15,422 15,185 9,875 10,111 10,414 11,013 10,832 1,796 1,839 1,869 1,953 2,030 2,149 242 240 228 252 273 296 838 1,994 2,048 2,137 2,210 2,369 1965... 1966... 1967... 1968... 1969... 3,616 3,915 4,097 4,430 4,733 2,845 3,061 3,253 3,536 3,816 2,527 2,699 2,861 3,077 3,274 2,287 2,450 2,562 2,785 2,978 327 348 355 404 425 1970... 1971... 1972... 1973... 1974... 4,928 4,052 5,283 4,302 5,750 4,671 6,368 5,184 6,819 5,637 3,521 3,779 4,042 4,521 4,893 3,152 3,372 3,658 4,002 4,337 1988:1.. II... III.. IV.. 1990:1.... II... III.. IV.. 1991:1.. Ill IV ». Dura- Non- Servble durable goods goods ices 10,916 11,024 11,414 11,717 12,209 2,209 2,264 2,321 2,430 2,516 2,661 1975... 1976... 1977... 1978... 1979... 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 "... 1982: IV 1983: IV 1984: IV 1985: IV 1986: IV 1987: IV 10,907 Total 716 752 784 823 861 917 2,791 2,840 2,894 3,063 3,186 3,376 1,958 1960... 1961... 1962... 1963... 1964... 1959... Personal consumption expenditures 847 857 878 895 936 7,343 8,109 8,961 10,029 11,055 11,892 13,177 13,564 14,531 15,978 6,053 6,632 7,269 8,121 9,032 5,329 5,796 6,316 7,042 7,787 4,745 5,241 5,772 6,384 7,035 622 734 829 909 952 1,926 2,072 2,226 2,432 2,725 2,197 2,436 2,717 3,043 3,359 14,917 15,502 16,039 16,635 16,867 10,906 11,192 11,406 11,851 12,039 8,842 896 9,022 970 9,425 1,073 9,752 1,164 9,602 1,062 9,711 1,050 10,121 1,176 10,425 1,271 10,744 1,316 10,876 1,284 9,948 11,021 11,589 12,216 13,345 8,576 9,455 9,989 10,642 11,673 7,677 8,375 8,868 9,634 10,408 2,999 3,236 3,326 3,490 3,693 3,745 4,146 4,523 4,971 5,370 16,584 16,710 16,194 16,672 17,549 12,005 12,156 12,146 12,349 13,029 10,746 10,770 10,782 11,179 11,617 16,933 17,735 18,694 19,994 21,196 14,170 14,917 15,655 16,630 17,705 12,339 11,184 13,010 11,843 13,545 12,568 14,477 13,448 15,313 14,219 933 994 1,018 1,173 1,345 1,480 1,619 1,662 1,783 1,858 3,855 3,956 4,163 4,381 4,636 5,849 6,269 6,742 7,284 7,725 17,944 18,299 18,694 19,252 19,550 12,015 12,336 12,568 12,903 13,027 22,056 22,448 13,709 15,085 16,310 17,296 17,953 19,213 19,458 19,846 20,161 20,506 20,852 21,125 21,304 21,500 21,781 22,055 22,251 22,135 22,206 22,406 22,567 22,611 18,720 19,131 11,786 12,613 13,668 14,440 15,102 16,076 16,245 16,499 16,720 17,053 17,460 17,616 17,726 18,014 16,236 16,693 14,971 15,383 1,864 1,762 4,871 4,951 10,189 11,033 11,925 12,565 13,121 13,907 14,154 14,332 14,570 14,850 15,131 15,197 15,337 15,586 15,963 16,154 16,344 16,479 16,492 16,678 16,752 16,849 9,134 9,980 10,649 11,445 12,101 12,819 1,059 1,266 1,383 1,480 1,684 1,677 3,378 3,572 3,742 3,924 3,990 4,223 8,236 19,540 8,670 19,189 4,696 16,132 5,143 17,062 5,524 17,680 6,040 18,102 6,428 18,328 6,919 18,977 13,258 13,552 13,545 13,890 14,030 14,154 13,987 12,154 12,591 13,145 13,278 13,522 13,685 13,099 13,322 13,556 13,814 13,942 14,130 14,338 14,464 1,756 1,770 1,767 1,841 4,264 4,339 4,425 4,495 7,078 7,213 7,365 7,477 1,823 1,851 1,916 1,844 4,544 4,625 4,664 4,710 7,575 7,655 7,759 7,911 14,731 14,848 15,120 15,183 15,208 15,334 15,481 15,508 1,928 1,862 1,866 1,800 4,800 4,812 4,907 4,964 8,004 8,175 8,347 8,418 19,061 19,223 19,294 19,429 19,513 19,562 19,561 19,565 19,606 19,633 19,586 19,337 1,751 1,744 1,790 1,763 4,952 4,966 4,970 4,918 8,505 8,624 8,720 8,828 19,166 19,188 19,221 19,181 18,400 18,649 18,851 18,977 18,944 19,110 19,184 19,286 13,840 13,836 13,886 13,996 14,093 13,969 13,996 14,063 14,185 14,204 14,168 14,058 13,965 14,022 13,992 13,970 3,497 3,494 3,601 3,670 3,552 4,449 4,558 4,751 4,917 4,988 3,552 3,674 3,722 3,795 3,833 5,110 5,271 5,433 5,633 5,760 1,154 1,150 1,131 1,270 1,432 3,779 3,774 3,756 3,842 3,953 5,814 5,845 5,895 6,066 6,231 1,552 1,670 1,662 1,749 1,782 13,051 1,756 12,889 1,633 10,895 1,169 11,390 1,357 11,739 1,466 12,095 1,544 12,472 1,721 12,615 1,660 12,808 1,740 12,862 1,744 12,921 1,727 13,020 1,785 12,986 1,759 12,989 1,781 13,084 1,834 13,051 1,754 13,090 1,818 13,056 1,758 13,107 1,759 12,952 1,689 4,019 4,118 4,163 4,223 4,241 6,444 6,548 6,742 6,930 7,004 12,877 12,892 12,930 12,858 1,632 1,621 1,653 1,624 4,203 7,092 4,125 7,131 3,779 3,892 3,975 4,046 4,144 4,162 5,948 6,141 6,298 6,505 6,607 6,792 4,190 4,213 4,235 4,255 6,877 6,905 6,958 6,979 4,248 4,223 4,245 4,249 6,979 6,984 7,006 7,048 4,235 4,208 4,209 4,161 7,037 7,090 7,139 7,102 4,148 4,147 4,135 4,071 7,097 7,124 7,142 7,162 1 Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning 1960. Annual data are averages of quarterly data. Quarterly data are averages for the period. Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census). 305 TABLE 3-6.—Gross domestic product by major type of product, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Goods l Year or quarter Final Gross sales of Invendomestic domes- tory product tic change product Total Total Final sales Durable goods Inventory change Final sales Inventory change Nondurable goods Final sales Inventory change Services 1 Structures Auto output 1959 494.2 490.0 4.2 249.3 245.1 4.2 91.1 3.1 153.9 1.1 180.7 61.7 19.4 1960 . 1961 1962 1963 1964 513.4 531.8 571.6 603.1 648.0 510.1 528.9 565.5 597.5 643.0 32 2.9 6.1 5.7 5.0 257.3 260.9 281.5 293.0 313.1 254 0 258.0 275.4 287.4 308.1 3.2 2.9 6.1 5.7 5.0 93 8 93.1 103.4 110.0 119.6 1.6 -.1 3.4 2.7 4.0 160.2 164.8 172.0 177.4 188.5 16 3.0 2.7 3.0 1.0 194.2 207.7 222.3 237.5 256.2 61.1 62.8 67.0 71.9 77.6 213 17.8 22.4 25.1 25.9 1965 1966 1967 1968 1969 702.7 769.8 814.3 889.3 959.5 693 0 756.0 803 8 880 2 949.8 9.7 13.8 10 5 9.1 9.7 342 7 379.7 395 4 428 7 456.5 333 0 365.9 384 9 419 5 446.8 9.7 13.8 10 5 9.1 9.7 132 4 147.9 154 5 1691 180.1 67 10.2 55 47 6.4 200 6 218.1 230 4 250 4 266.7 30 3.6 50 44 3.3 275 4 302.3 330 4 362 8 395.4 83 8 86.9 88 5 98*9 107.1 311 30 2 27 8 35 0 34.7 1970... 1971 1972 1973 1974 1,010.7 1,097.2 1,207.0 1 349.6 1,458.6 1,008.4 1,089.2 1,197.1 13319 1,444.4 2.3 8.0 9.9 17 7 14.3 467.0 493.3 537.4 616 6 662.8 464.7 485.2 527.5 598 9 648.5 2.3 8.0 9.9 17 7 14.3 182.1 189.4 209.7 242 0 257.1 -.1 2.8 7.2 15 0 11.2 282.6 295.8 317.8 356 9 391.4 2.3 5.2 2.7 28 3!l 433.8 476.6 523.6 5710 63L3 108.6 127.2 145.9 1619 164^5 28.5 38.9 41.4 45 9 38.8 1975... 1976 1977 1978 1979 1,585.9 1 591.5 1,768.4 1,751.7 1,974.1 1,949.4 2,232.7 2,204.8 2,488.6 2,475.9 -5.7 16.7 24.7 27.9 12.8 7151 720 8 798.8 782.0 880.4 855.7 989.1 961.2 1,100.2 1,087.5 -5.7 16.7 24.7 27.9 12.8 288 8 323 6 368.3 416.9 474.5 70 10 3 9.7 20.3 9.6 432 0 458 4 487.4 544.3 613.0 13 64 15.0 7.6 3.1 706 9 782 2 870.4 975.5 1,079.6 163 8 187 5 223.3 268.1 308.8 40 3 55.1 64.2 67.9 66.2 1980 1981 1982 1983 1984 2,708.0 3,030.6 3,149.6 3,405.0 3,777.2 1,176.2 1,324.6 1315 0 1,407.3 1,591.9 1,185.7 1,299.2 1330 9 1,412.8 1,520.8 -9.5 25.4 159 -5.5 71.1 502.1 - 2 . 6 544.2 6.2 5416 - 1 6 0 579.4 5.5 647.0 44.9 683.6 755.0 789 3 833.4 873.8 -6.8 19.2 1 -11.0 26.2 1,215.4 1,357.4 1494 2 1,636.3 1,770.7 316.4 348.6 340 4 361.5 414.7 59.2 68.3 65.3 88.3 104.2 1985 1986 1987 1988 1989 4,038.7 4,014.1 4 268 6 4 260 0 4,539.9 4'5137 4,900.4 4,884.2 5,244.0 5,208.1 1,652 6 1,705.3 17945 1,942.0 2,098.1 1628 0 1^696.7 17682 1,925.7 2,062.1 24.6 86 263 16.2 36.0 8.6 16 216 24.3 26.9 923 2 966 5 1,014 7 1,090.1 1,169.2 16.0 7i 4.7 -8.1 9.1 1,939.0 2 097 3 2,267.2 2,460.9 2,634.7 447.1 466 0 478.2 497.5 511.3 115.8 120.4 118.9 129.1 133.9 1990 1991 p o 2 167 6 2 167 6 5 513 8 5 513 8 5,671.8 5i692!o _20!2 2[l92!8 2,213^0 -202 69 2 834 0 4.3 3,012.7 512 2 466.4 130.3 117.9 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 1991:1 II Ill IV " 3,195.1 3,547.3 3,869.1 4,140.5 4,336.6 4,683.0 4,752.4 4,857.2 4,947.3 5,044.6 5,139.9 5,218.5 5,277.3 5,340.4 5,422.4 5,504.7 5,570.5 5,557.5 5,589.0 5,652.6 5,709.2 5,736.6 1,553.3 1,686.1 1,824.7 2,008.9 2,154.1 2,327.6 2,391.0 2,436.7 2,487.5 2,528.5 2,568.8 2,608.1 2,651.8 2,709.9 2,753.0 2,812.6 2,864.8 2,905.5 2,951.7 2,999.0 3,035.1 3,065.0 339.5 378.2 426.9 457.9 468.1 490.1 485.7 495.9 499.2 509.1 512.1 507.5 511.5 514.0 529.2 515.6 510.1 494.0 467.9 467.4 463.5 466.6 63.2 101.9 110.4 115.1 122.5 120.9 116.4 133.4 130.6 136.1 135.3 133.9 136.2 130.1 121.8 133.2 147.6 118.5 109.8 115.5 125.2 121.0 2,717.5 - 9 . 5 3,005.2 25.4 3,165.5 - 1 5 . 9 3,410.6 - 5 . 5 3,706.1 71.1 3,241.4 3,527.1 3,818.1 4,107.9 4,355.4 4,623.7 4,735.6 4,843.4 4,930.2 5,027.3 5,096.7 5,176.2 5,254.0 5,305.3 5,425.7 5,479.1 5,556.5 5,594.0 5,628.2 5,689.6 5,712.8 5,737.6 24.6 86 263 16.2 36.0 -46.3 20.2 51.0 32.6 -18.8 59.3 16.8 13.8 17.1 17.3 43.2 42.3 23.3 35.1 -3.3 25.6 14.1 -36.5 -39.2 -37.1 -3.6 -1.1 1,302.2 1,483.0 1,617.5 1,673.7 1,714.5 1,865.4 1,875.7 1,924.5 1,960.7 2,007.0 2,058.9 2,102.9 2,114.1 2,116.4 2,140.2 2,176.5 2,195.6 2,158.0 2,169.4 2,186.1 2,210.5 2,205.0 1,348.5 1,462.8 1,566.5 1,641.1 1,733.3 1,806.1 1,859.0 1,910.8 1,943.6 1,989.7 2,015.7 2,060.6 2,090.8 2,081.4 2,143.5 2,150.9 2,181.6 2,194.5 2,208.6 2,223.2 2,214.1 2,206.1 o -46.3 20.2 51.0 32.6 -18.8 59.3 16.8 13.8 17.1 17.3 43.2 42.3 23.3 35.1 -3.3 25.6 14.1 -36.5 -39.2 -37.1 -3.6 -1.1 704 8 730.2 7535 835.6 892.9 934 6 —70 1233 0 929!o -24^5 1,284.0 550.6 620.5 676.3 705.7 751.5 769.3 809.0 833.7 838.8 861.0 866.9 894.0 916.5 894.2 941.0 931.1 939.3 927.2 916.4 939.5 929.4 930.8 -41.1 25.5 38.5 10.9 -11.9 37.1 11.0 14.3 36.6 35.3 39.2 17.7 12.6 37.9 -14.4 1.4 14.5 -29.4 -43.5 -33.5 -9.2 -12.0 798.0 842.3 890.2 935.4 981.8 1,036.9 1,049.9 1,077.0 1,104.8 1,128.7 1,148.9 1,166.6 1,174.3 1,187.1 1,202.5 1,219.8 1,242.3 1,267.3 1,292.1 1,283.7 1,284.7 1,275.3 -5.2 -5.3 12.5 21.7 -7.0 22.2 5.7 -.5 -19.5 -18.0 4.0 24.6 10.7 -2.9 11.0 24.3 -.4 -7.1 4.3 -3.6 5.6 10.9 1 Exports and imports of certain goods, primarily military equipment purchased and sold by the Federal Government, are included in services. Source: Department of Commerce, Bureau of Economic Analysis. 306 TABLE B-7.—Gross domestic product by major type of product in 1987 dollars, 1959-91 [Billions of 1987 dollars; quarterly data at seasonally adjusted annual rates] Goods * Final Gross sales of Invendomestic domestory product tic change product Year or quarter Durable goods Total Total Final Inventory change Final Inventory change Nondurable goods Final sales Inventory change Services' Strucoutput 1959 1,931.3 1,917.8 13.6 825.2 811.6 13.6 273.8 8.6 537.8 5.0 846.2 259.9 1960 1961 1962 1963 1964 1,973.2 2,025.6 2,129.8 2,218.0 2,343.3 1,965.0 2,018.4 2,114.2 2,202.0 2,327.6 8.1 7.2 15.6 16.0 15.7 835.3 840.9 889.6 914.9 967.6 827.1 833.7 874.0 898.9 952.0 8.1 7.2 15.6 16.0 15.7 277.8 273.5 296.5 310.4 334.3 4.6 -.3 8.6 7.5 11.3 549.3 560.2 577.5 588.5 617.6 3.5 7.5 7.0 8.6 4.4 879.7 918.6 958.5 1,002.3 1,055.3 258.2 266.1 281.7 300.8 320.4 1965 1966 1967 1968 1969 2,473.5 2,622.3 2,690.3 2,801.0 2,877.1 2,448.3 2,585.6 2,662.7 2,777.4 2,852.3 25.1 36.7 27.6 23.6 24.8 1,033.0 1,113.3 1,129.4 1,168.9 1,193.9 1,007.9 1,076.6 1,101.7 1,145.3 1,169.1 25.1 36.7 27.6 23.6 24.8 364.1 399.4 413.7 430.4 438.4 18.3 27.1 14.5 12.8 15.7 643.8 677.2 688.0 714.9 730.7 6.9 9.6 13.1 10.9 9.1 1,105.0 1,174.5 1,231.7 1,282.0 1,328.7 335.4 334.5 329.3 350.1 354.5 1970 1971 1972 1973 1974 2,875.8 2,965.1 3,107.1 3,268.6 3,248.1 2,869.9 2,944.3 3,084.5 3,230.9 3,217.2 5.9 20.8 22.5 37.7 30.9 1,173.0 1,187.8 1,251.0 1,349.8 1,328.2 1,167.1 1,167.0 1,228.4 1,312.1 1,297.3 5.9 20.8 22.5 37.7 30.9 428.0 424.9 458.4 528.0 524.6 _ g 8i9 16.2 31.2 19.6 739.1 742.1 770.0 784.1 772.7 6.9 11.9 6.4 6.5 11.3 1,364.0 1,405.2 1,454.1 1,508.3 1,553.9 338.9 372.1 401.9 410.4 366.1 1975 1976 1977 1978 1979 3,221.7 3,380.8 3,533.2 3,703.5 3,796.8 3,235.6 -13.9 3,355.3 25.5 3,499.0 34.3 3,666.3 37.2 3,783.2 13.6 1,291.8 1,372.7 1,436.9 1,507.3 1,537.1 1,305.7 -13.9 1,347.2 25.5 1,402.6 34.3 1,470.1 37.2 1,523.5 13.6 521.6 -11.5 540.6 17.0 583.6 15.6 623.7 28.7 654.1 11.7 784.1 806.6 819.0 846.4 869.3 -2.5 8.5 18.7 8.5 1.9 1,602.2 1,649.1 1,701.2 1,770.6 1,821.7 327.7 359.0 395.2 425.6 438.0 1980 1981 1982 1983 1984 3,776.3 3,843.1 3,760.3 3,906.6 4,148.5 3,784.6 - 8 . 3 3,818.6 24.6 3,777.8 -17.5 3,902.2 4.4 4,080.6 67.9 1,509.5 1,547.4 1,468.7 1,531.7 1,667.7 1,517.7 - 8 . 3 1,522.9 24.6 1,486.2 -17.5 1,527.3 4.4 1,599.8 67.9 626.4 - 4 . 3 619.4 6.3 578.9 -16.0 601.5 6.3 655.1 45.7 891.4 903.4 907.3 925.8 944.7 -4.0 18.3 -1.5 -1.8 22.3 1,864.3 1,895.7 1,922.8 1,976.8 2,033.1 402.5 400.0 368.8 398.1 447.7 1985 1986 1987 1989 4,279.8 4,404.5 4,540.0 4,718.6 4,836.9 4,257.6 4,395.9 4,513.7 4,698.6 4,804.3 22.1 8.5 26.3 19.9 32.6 1,695.0 1,740.1 1,794.5 1,892.5 1,962.0 1,672.9 1,731.6 1,768.2 1,872.6 1,929.4 703.4 731.5 753.5 833.1 868.2 969.5 1,000.1 1,014.7 1,039.5 1,061.3 12.9 6.7 4.7 -3.4 7.4 2,115.3 2,185.0 2,267.3 2,349.7 2,402.7 469.4 479.3 478.2 476.4 472.1 1990 1991" 4,884.9 4,848.4 4,884.7 4,863.6 15!l 1,958.0 1,957.8 1,929.2 1,944.3 -15.1 892.9 - 6 . 7 875.9 - 2 2 . 2 1,065.0 1,068.4 6.9 7.0 2,464.8 2,504.5 462.0 414.8 1982: 1983: 1984: 1985: 1986: 1987: 3,759.6 4,012.1 4,194.2 4,333.5 4,427.1 4,625.5 3,804.5 -44.9 3,982.8 29.3 4,146.2 47.9 4,303.3 30.2 4,447.2 -20.1 4,565.6 59.9 1,447.7 1,597.8 1,680.9 1,708.1 1,741.8 1,850.8 1,492.6 -44.9 1,568.5 29.3 1,633.0 47.9 1,677.9 30.2 1,761.8 -20.1 1,790.9 59.9 580.9 -41.9 26.7 639.4 677.6 39.7 703.1 11.9 750.4 -11.9 769.4 36.9 911.6 929.1 955.3 974.9 1,011.4 1,021.5 -3.0 2.6 8.3 18.3 -8.2 23.0 1,942.1 1,998.3 2,058.1 2,148.8 2,208.2 2,290.9 369.8 416.0 455.1 476.5 477.2 483.8 1988:1 II Ill IV 4,655.3 4,704.8 4,734.5 4,779.7 4,636.2 4,688.7 4,710.9 4,758.7 19.2 16.1 23.5 20.9 1,858.2 1,887.4 1,898.6 1,926.0 1,839.0 1,871.3 1,875.0 1,905.0 19.2 16.1 23.5 20.9 811.3 835.3 832.7 852.9 10.6 14.1 35.0 33.5 1,027.7 1,036.0 1,042.4 1,052.2 8.6 2.0 -11.5 -12.5 2,326.2 2,340.2 2,359.9 2,372.4 470.9 477.2 476.0 481.3 1989:1 II Ill IV 4,809.8 4,832.4 4,845.6 4,859.7 4,768.5 4,793.5 4,825.4 4,829.7 41.2 38.9 20.2 30.0 1,953.8 1,971.6 1,966.6 1,956.1 1,912.5 1,932.8 1,946.4 1,926.1 41.2 38.9 20.2 30.0 851.6 873.4 886.8 860.9 37.5 16.5 11.2 35.6 1,060.9 1,059.4 1,059.6 1,065.2 3.7 22.4 9.1 -5.6 2,377.9 2,391.5 2,408.4 2,433.2 478.1 469.3 470.6 470.5 1990:1 II Ill IV 4,880.8 4,900.3 4,903.3 4,855.1 4,884.8 - 4 . 0 4,878.1 22.1 4,889.4 13.9 4,886.3 -31.2 1,961.1 1,973.8 1,968.5 1,928.6 1,965.1 - 4 . 0 1,951.6 22.1 1,954.6 13.9 1,959.8 -31.2 902.3 -13.6 891.8 1.2 892.3 13.1 884.8 -27.3 1,062.8 1,059.8 1,062.3 1,075.0 9.7 20.9 .8 -3.9 2,440.1 2,461.2 2,476.3 2,481.8 479.6 465.3 458.5 444.6 1991:1 II Ill IV * 4,824.0 4,840.7 4,862.7 4,866.3 4,856.8 -32.8 4,871.2 -30.4 4,862.6 4,863.7 2.1 1,917.0 1,922.0 1,940.5 1,937.2 1,949.8 - 3 2 . 8 1,952.4 - 3 0 . 4 1,940.4 .1 1,934.5 2.7 866.4 - 3 9 . 4 883.3 -30.5 873.9 - 8 . 4 879.9 - 1 0 . 4 1,083.4 1,069.1 1,066.5 1,054.6 6.6 2,487.6 2,502.7 2,511.8 2,516.0 419.4 416.1 410.4 413.2 .... IV.. IV... IV... IV... IV... IV... 22.1 8.5 26.3 19.9 32.6 9.3 1.9 21.6 23.3 25.2 8A 13.0 1 Exports and imports of certain goods, primarily military equipment purchased and sold by the Federal Government, are included in services. Source: Department of Commerce, Bureau of Economic Analysis. 307 TABLE B-8.—Gross domestic product by sector, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Busines Year or quarter Gross domestic product Nonf arm 1 Total l Farm Statistical discrepancy Households and institutions General government2 Total Federal State and local 1959 494.2 436.9 419.8 18.9 -1.8 12.4 44.9 21.7 23.1 1960 1961 1962 1963 1964 513.4 531.8 571.6 603.1 648.0 451.4 465.7 500.5 527.1 565.8 434.7 447.9 481.4 508.7 547.2 19.8 20.1 20.2 20.4 19.3 -3.1 -2.2 -1.0 -2.0 -.7 13.9 14.5 15.6 16.7 17.9 48.1 51.6 55.5 59.3 64.4 22.6 23.7 25.2 26.5 28.5 25.5 27.9 30.2 32.9 35.9 1965 1966 1967 1968 1969 702.7 769.8 814.3 889.3 959.5 614.1 670.1 703.5 765.4 822.5 592.9 644.4 680.5 742.8 799.9 21.9 22.9 22.2 22.7 25.2 -.7 2.8 .8 -.1 -2.6 19.3 21.3 23.4 26.1 29.5 69.3 78.4 87.4 97.8 107.5 30.0 34.3 37.9 41.9 44.9 39.3 44.1 49.5 55.9 62.6 1970 1971 1972 1973 1974 1,010.7 1,097.2 1,207.0 1,349.6 1,458.6 858.7 931.2 1,025.3 1,151.5 1,242.7 832.5 900.0 991.7 1,102.2 1,193.9 26.2 28.1 32.6 49.8 47.4 .0 3.1 1.1 -.5 1.4 32.4 35.6 39.0 43.0 47.2 119.5 130.4 142.6 155.1 168.8 48.5 51.1 54.9 57.2 61.1 71.1 79.3 87.7 97.9 107.6 1975 1976 1977 1978 1979 1,585.9 1,768.4 1,974.1 2,232.7 2,488.6 1,346.1 1,507.4 1,691.1 1,921.1 2,147.9 1,291.4 1,450.6 1,633.0 1,858.7 2,069.7 48.8 46.4 47.2 54.7 64.5 6.0 10.4 10.9 7.6 13.8 52.0 57.1 62.4 71.0 78.9 187.7 203.9 220.6 240.7 261.9 66.6 71.0 75.6 81.8 87.1 121.1 132.9 145.0 158.9 174.8 1980 1981 1982 1983 1984 2,708.0 3,030.6 3,149.6 3,405.0 3,777.2 2,328.9 2,611.7 2,692.1 2,914.8 3,251.1 2,259.2 2,530.9 2,634.4 2,855.5 3,191.6 56.1 69.9 65.1 49.2 68.5 13.6 10.9 -7.4 10.2 -9.0 89.3 100.5 111.6 121.3 132.0 289.8 318.4 345.8 368.9 394.1 96.3 107.7 117.3 125.0 132.2 193.5 210.7 228.5 243.9 261.9 1985 1986 1987 1988 1989 4,038.7 4,268.6 4,539.9 4,900.4 5,244.0 3,473.5 3,665.7 3,890.8 4,201.0 4,490.7 3,420.3 3,601.5 3,849.5 4,161.8 4,411.3 67.1 62.9 66.0 67.6 82.1 -13.9 1.2 -24.8 -28.4 -2.7 141.7 153.3 170.5 187.6 205.0 423.6 449.6 478.7 511.7 548.3 140.3 143.7 151.4 159.8 169.2 283.2 305.9 327.3 351.9 379.1 1990 1991 ". 5,513.8 5,671.8 4,699.4 4,802.9 4,605.6 4,702.7 85.7 80.5 8.1 19.6 225.1 246.4 589.2 622.6 179.4 188.8 409.8 433.7 1982: IV 1983: IV 1984: IV 1985: IV 1986: IV 1987: IV 3,195.1 3,547.3 3,869.1 4,140.5 4,336.6 4,683.0 2,724.0 3,046.6 3,330.3 3.561.2 3,718.3 4,016.6 2,674.1 2,986.9 3,283.2 3,501.5 3,656.0 3,970.9 60.0 45.8 67.5 65.7 64.3 70.6 -10.1 13.8 -20.5 -5.9 -2.0 -24.9 115.5 125.1 135.6 145.6 157.8 177.6 355.6 375.6 403.2 433.6 460.5 488.8 121.1 126.2 134.1 142.4 144.9 153.2 234.5 249.4 269.2 291.2 315.6 335.6 1988:1 II Ill IV 4,752.4 4,857.2 4,947.3 5,044.6 4,070.6 4,164.0 4,242.2 4.327.3 4,034.0 4,124.9 4,196.4 4.291.9 70.9 67.2 71.6 60.8 -34.4 -28.1 -25.8 -25.4 180.8 185.3 190.1 194.3 501.1 507.8 515.0 523.0 158.5 159.4 160.2 161.3 342.6 348.5 354.9 361.7 1989:1 II Ill IV 5,139.9 5,218.5 5,277.3 5,340.4 4,404.6 4,471.7 4,518.3 4,568.0 4,348.2 4,393.5 4.436.2 4,467.6 82.5 83.5 79.6 82.6 -26.0 -5.2 2.5 17.9 198.6 202.8 207.1 211.7 536.7 544.0 551.9 560.6 168.1 168.7 169.4 170.4 368.6 375.3 382.5 390.2 1990:1 II Ill IV 5,422.4 5,504.7 5,570.5 5,557.5 4,630.6 4,696.2 4,748.7 4,722.3 4,538.3 4,608.9 4,634.8 4,640.4 87.8 89.6 85.7 79.8 4.4 -2.4 28.2 2.1 216.1 222.2 228.9 233.3 575.7 586.4 592.9 601.9 177.5 180.1 179.1 181.0 398.2 406.2 413.8 420.9 1991:1 II Ill IV "... 5,589.0 5,652.6 5,709.2 5,736.6 4,734.7 4,786.8 4,835.0 4,855.0 4,640.1 4,687.2 4,730.1 4,753.5 76.6 83.1 82.9 79.5 18.0 16.5 22.0 22.0 237.5 243.7 249.9 254.4 616.8 622.0 624.3 627.2 189.4 188.7 188.4 188.8 427.4 433.2 435.9 438.3 1 Includes compensation of employees in government enterprises. Compensation of government employees. Source: Department of Commerce, Bureau of Economic Analysis. 2 308 TABLE B-9.—Gross domestic product by sector in 1987 dollars, 1959-91 [Billions of 1987 dollars; quarterly data at seasonally adjusted annual rates] Business1 Year or quarter Gross domestic product Total 1 Nonf arm 1 Farm Statistical discrepancy Households and institutions General government 2 Total Federal State and local 1959 1,931.3 1,584.7 1,546.0 45.2 -6.5 80.1 266.5 130.5 136.0 1960 1961 1962 1963 1964 1,973.2 2,025.6 2,129.8 2,218.0 2,343.3 1,611.9 1,652.6 1,742.5 1,821.2 1,933.1 1,576.7 1,613.5 1,699.8 1,781.0 1,889.4 46.4 46.9 46.3 47.1 46.0 -11.2 -7.8 -3.6 -6.9 -2.4 86.5 87.5 91.1 93.6 96.5 274.8 285.6 296.2 303.2 313.7 132.1 135.3 141.6 140.9 141.7 142.7 150.3 154.7 162.3 172.0 1965 1966 1967 1968 1969 2,473.5 2,622.3 2,690.3 2,801.0 2,877.1 2,048.2 2,168.7 2,213.2 2,307.1 2,370.3 2,004.6 2,115.2 2,164.0 2,262.1 2,330.8 46.1 44.5 46.5 45.1 46.8 -2.5 9.1 2.6 -.1 -7.3 100.4 104.7 108.3 111.8 115.5 324.8 348.9 368.9 382.1 391.3 142.3 155.4 168.1 170.7 171.2 182.5 193.5 200.8 211.4 220.1 1970 1971 1972 1973 1974 2,875.8 2,965.1 3,107.1 3,268.6 3,248.1 2,370.3 2,456.6 2,594.8 2,749.7 2,719.6 2,320.8 2,397.7 2,541.3 2,702.0 2,666.0 49.5 50.5 50.7 48.6 50.7 .0 8.3 2.8 -1.0 3.0 114.1 116.7 120.0 123.2 124.3 391.4 391.8 392.2 395.7 404.1 161.6 152.4 143.7 138.0 137.9 229.8 239.5 248.6 257.7 266.2 3,221.7 3,380.8 3,533.2 3,703.5 3,796.8 2,684.6 2,840.1 2,987.9 3,144.2 3,226.0 2,619.6 2,768.1 2,914.6 3,083.8 3,155.0 53.1 52.5 53.8 48.2 50.4 11.9 19.5 19.4 12.2 20.6 128.0 128.6 129.8 135.1 138.3 409.1 412.0 415.6 424.2 432.5 137.1 137.0 137.0 138.4 137.5 272.0 275.0 278.6 285.8 295.0 1980 1981 1982 1983 1984 3,776.3 3,843.1 3,760.3 3,906.6 4,148.5 3,193.4 3,253.6 3,167.3 3,308.2 3,541.7 3,123.4 3,179.2 3,115.8 3,243.1 3,496.4 51.0 60.8 60.2 53.7 55.1 19.0 13.6 -8.7 11.5 -9.8 142.6 145.6 148.9 151.0 154.9 440.3 443.9 444.2 447.4 451.9 139.2 140.9 142.4 144.8 146.4 301.1 303.0 301.8 302.6 305.4 1985 1986 1987 1988 1989 4,279.8 4,404.5 4,540.0 4,718.6 4,836.9 3,658.1 3,768.3 3,890.8 4,050.6 4,150.4 3,608.6 3,702.8 3,849.6 4,014.8 4,085.9 64.2 64.3 66.0 63.2 67.2 -14.7 1.3 -24.8 -27.4 -2.7 159.9 166.3 170.5 180.6 189.7 461.8 469.9 478.7 487.4 496.8 148.6 149.0 151.4 153.5 154.1 313.2 320.8 327.3 333.9 342.7 1990 1991 ". 1982: IV 1983: IV 1984: IV 1985: IV 1986: IV 1987: IV 4,884.9 4,848.4 4,180.4 4,134.1 4,101.9 4,044.0 71.4 73.2 7.2 16.9 195.7 202.2 508.8 512.1 155.7 155.2 353.1 356.9 3,759.6 4,012.1 4,194.2 4,333.5 4,427.1 4,625.5 3,166.3 3,411.5 3,583.0 3,706.1 3,786.7 3,969.9 3,116.9 3,349.0 3,548.9 3,646.8 3,724.4 3,925.5 61.1 47.0 56.1 65.5 64.4 69.0 -11.7 15.5 -22.0 -6.2 -2.1 -24.6 149.6 151.7 156.8 162.3 166.9 173.2 443.8 448.9 454.4 465.1 473.5 482.3 143.2 145.2 147.1 148.7 149.8 152.8 300.6 303.7 307.3 316.5 323.7 329.5 1988:1 II Ill IV 4,655.3 4,704.8 4,734.5 4,779.7 3,994.7 4,039.7 4,063.6 4,104.2 3,956.8 4,001.2 4,026.8 4,074.5 71.7 65.8 61.6 53.8 -33.8 -27.2 -24.7 -24.1 176.2 179.0 182.4 184.7 484.4 486.1 488.4 490.7 153.3 153.2 153.6 154.0 331.2 332.8 334.8 336.7 1989:1 II Ill IV 4,809.8 4,832.4 4,845.6 4,859.7 4,129.9 4,148.0 4,157.0 4,166.6 4,088.4 4,084.0 4,087.9 4,083.2 65.9 68.9 66.7 67.1 -24.4 -4.8 2.3 16.3 187.2 189.3 190.6 191.8 492.7 495.1 498.1 501.3 153.8 153.8 154.2 154.5 338.9 341.2 343.8 346.7 1990:1 II Ill IV 4,880.8 4,900.3 4,903.3 4,855.1 4,183.3 4,196.7 4,196.4 4,145.1 4,109.4 4,126.9 4,099.9 4,071.2 69.9 72.0 71.7 72.0 4.0 -2.1 24.9 1.9 192.8 194.8 197.2 197.9 504.7 508.7 509.6 512.1 155.0 156.4 155.3 156.2 349.7 352.3 354.4 356.0 1991:1 II Ill IV 4,824.0 4,840.7 4,862.7 4,866.3 4,111.4 4,126.4 4,148.6 4,150.1 4,024.6 4,040.1 4,055.6 4,055.9 71.1 72.1 74.1 75.5 15.7 14.3 18.9 18.8 198.8 201.1 203.1 205.7 513.9 513.2 511.0 510.5 157.0 155.5 154.4 153.8 356.9 357.7 356.6 356.6 1975 1976 1977 1978 1979 _. 1 Includes compensation of employees in government enterprises. Compensation of government employees. Source: Department of Commerce, Bureau of Economic Analysis. 2 309 TABLE B-10.—Gross domestic product of nonfinancial corporate business, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Net domestic product Year or quarter Gross domestic product of noninancial corporate business Domestic income Consumption of fixed capital Total Indirect business taxes i Corporate profits with inventory valuation and capital consumption adjustments Total Compensation of employ- Profits Inventory valuation Divi- Undis- adjustdends tributed ment profits Profits after tax Total Profits Profits before tax tax liability Total Capital Net conintersump- est tion adjustment 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 267.5 278.1 285.5 311.7 331.7 358.1 24.2 243.2 26.0 217.2 171.5 42.6 43.6 20.7 22.9 10.0 12.9 -0.3 -0.7 3.1 25.2 26.0 26.9 28.1 29.5 252.8 259.6 284.8 303.7 328.6 28.3 29.5 32.0 34.0 36.6 224.6 230.1 252.8 269.7 292.0 181.2 185.3 200.1 211.1 226.7 40.0 40.8 48.2 53.8 60.0 40.3 40.1 45.0 49.8 56.0 19.2 19.5 20.6 22.8 24.0 21.1 20.7 24.3 27.0 32.1 10.6 10.6 11.4 12.6 13.7 10.6 10.1 13.0 14.4 18.4 —.2 -.2 .0 .1 -.5 Z.2 3.9 4.5 3.5 4.0 4.5 4.8 5.3 393.5 431.0 453.5 500.5 543.2 31.5 34.3 37.5 41.4 45.3 362.0 396.7 415.9 459.1 497.9 39.2 40.4 43.2 49.8 54.7 322.8 356.2 372.8 409.3 443.3 246.5 274.0 292.3 323.2 358.8 70.3 74.9 71.8 76.0 71.3 66.2 71.4 67.5 74.0 70.8 27.2 29.5 27.8 33.6 33.3 39.0 41.9 39.7 40.4 37.5 15.6 16.8 17.5 19.1 19.1 23.4 25.1 22.2 21.3 18.4 -1.2 -2.1 -1.6 -3.7 -5.9 5.3 5.6 5.8 5.6 6.3 6.1 7.4 8.8 10.1 13.2 1970 1971 1972 1973 1974 561.3 606.2 673.2 754.5 814.8 49.7 54.6 61.0 66.2 77.5 511.6 551.6 612.3 688.3 737.2 58.8 64.4 69.1 76.3 81.5 452.8 487.3 543.2 612.0 655.7 378.7 402.0 447.1 505.9 556.8 57.1 67.2 77.0 83.6 70.6 58.1 67.1 78.6 98.6 109.2 27.2 29.9 33.8 40.2 42.2 31.0 37.1 44.8 58.4 67.0 18.5 18.5 20.1 21.1 21.7 12.5 - 6 . 6 18.7 - 4 . 6 24.7 - 6 . 6 37.3 - 2 0 . 0 45.2 - 3 9 . 5 5.5 4.7 5.0 5.0 17.1 18.1 19.2 22.5 28.3 881.1 994.4 1,124.3 1,279.2 1,423.6 93.3 700.6 787.8 87.2 103.8 795.7 890.6 94.9 116.2 1,008.1 103.9 904.2 132.3 1,146.9 113.6 1,033.3 153.0 1,270.6 121.9 1,148.7 580.3 656.7 741.6 850.9 965.5 91.5 111.5 132.0 146.1 138.1 109.9 137.3 158.6 183.5 195.5 41.5 53.0 59.9 67.1 69.6 68.4 84.4 98.7 116.4 125.9 24.8 27.8 32.0 37.2 39.3 43.6 56.6 66.8 79.1 86.7 -11.0 -14.9 -16.6 -25.0 -41.6 -7.4 -10.9 -10.0 -12.3 -15.9 28.7 27.5 30.6 36.3 45.1 1,546.8 1,749.1 1,803.5 1,937.1 2,167.3 174.8 207.0 229.4 242.1 248.1 1,372.1 1,542.1 1,574.1 1,695.0 1,919.1 137.8 165.8 166.9 182.6 202.5 1,234.3 1,376.3 1,407.2 1,512.3 1,716.6 1,055.4 1,167.4 1,213.2 1,275.7 1,414.4 120.7 136.9 111.5 159.9 214.3 181.6 181.0 132.9 155.9 189.0 67.0 63.9 46.3 59.4 73.7 114.6 117.1 86.7 96.4 115.4 45.5 53.4 56.4 66.5 69.5 69.1 - 4 3 . 0 - 1 7 . 8 63.7 - 2 5 . 7 - 1 8 . 4 30.2 - 9 . 9 - 1 1 . 5 12.5 29.9 - 8 . 5 29.4 45.9 - 4 . 1 58.2 71.9 82.5 76.7 87.9 2,295.5 2,391.3 2,544.6 2,762.1 2,910.8 258.0 271.4 281.4 297.5 316.2 2,037.5 2,119.9 2,263.2 2,464.6 2,594.7 216.4 230.0 237.1 254.3 268.8 1,821.0 1,889.9 2,026.1 2,210.3 2,325.9 1,509.0 1,587.8 1,676.1 1,814.4 1,922.9 221.4 203.8 244.2 274.4 261.0 165.5 149.1 212.0 256.6 251.5 69.9 75.6 93.5 101.7 99.2 95.6 73.5 118.5 154.9 152.3 74.5 76.3 77.9 82.0 104.4 3,008.9 327.3 2,681.6 285.5 2,396.1 2,023.3 3,052.3 343.3 2,709.0 307.7 2,401.3 2,052.6 224.3 203.3 232.5 202.4 96.1 83.0 136.4 119.4 112.2 116.5 5.9 148.5 24.2 - 1 4 . 2 2.9 3.8 - 2 . 9 145.4 1,807.1 2,038.1 2,230.0 2,341.3 2,428.4 2,625.9 238.8 261.5 258.9 263.4 275.8 286.1 1,568.3 1,776.6 1,971.1 2,077.9 2,152.7 2,339.8 169.9 190.4 208.7 220.3 232.7 242.2 1,398.4 1,586.2 1,762.5 1,857.6 1,920.0 2,097.6 1,217.4 1,332.2 1,455.2 1,546.1 1,618.0 1,731.6 101.5 175.2 211.4 221.4 198.6 256.8 116.5 168.1 169.0 168.4 168.5 224.8 40.6 64.4 62.6 71.1 86.5 99.6 75.9 103.7 106.4 97.2 82.0 125.1 59.0 67.4 68.7 74.7 75.2 84.0 16.9 - 8 . 6 - 6 . 4 79.6 14.7 78.9 36.3 - 7 . 6 3.5 38.9 95.8 37.7 56.9 90.0 22.5 - 3 . 8 40.8 103.5 6.8 - 1 0 . 7 49.8 109.2 41.2 - 1 7 . 8 2,685.3 2,740.9 2,782.2 2,840.1 291.3 295.4 298.7 304.5 2,393.9 2,445.5 2,483.5 2,535.6 247.8 251.8 256.7 260.9 2,146.1 2,193.7 2,226.8 2,274.7 1,758.1 1,798.7 1,832.9 1,867.8 273.3 275.7 270.0 278.5 243.3 254.3 257.5 271.4 95.9 101.1 102.0 107.9 147.4 153.2 155.5 163.5 70.9 79.9 92.8 84.3 76.5 73.3 62.7 79.2 2,870.3 2,901.1 2,928.7 2,943.3 308.6 311.7 320.1 324.4 2,561.7 2,589.5 2,608.6 2,618.8 262.6 267.3 272.4 272.8 2,299.1 2,322.2 2,336.2 2,346.1 1,896.7 1,910.2 1,928.9 1,955.7 267.6 269.9 261.9 244.5 270.5 254.8 241.2 239.5 108.0 100.7 94.8 93.4 162.5 154.1 146.5 146.0 2,974.7 3,025.6 3,021.2 3,014.2 322.5 324.9 328.9 333.1 2,652.2 2,700.7 2,692.4 2,681.1 279.8 281.1 288.0 293.2 2,372.4 2,419.7 2,404.3 2,387.9 1,982.0 2,021.4 2,046.0 2,043.8 244.7 249.7 209.4 193.3 237.1 236.9 239.1 216.9 98.2 98.1 99.1 89.0 3,011.8 339.6 2,672.2 301.3 2,370.9 2,028.0 3,043.9 342.5 2,701.4 303.0 2,398.5 2,046.1 3,070.1 343.8 2,726.3 312.2 2,414.1 2,063.5 314.4 347.1 2,072.8 194.4 206.4 205.5 194.4 202.4 211.7 79.9 83.6 87.2 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 * 1982: IV.. 1983: IV.. 1984: IV.. 1985: IV.. 1986: IV.. 1987: IV.. 1988:1 IV.. 1989:1 IV 1990:1 II Ill IV 1991:1 II Ill IV "... 310 55.6 90.7 44.9 98.3 46.7 105.8 45.0 121.6 27.0 142.0 -18.8 -26.1 -32.6 -31.7 48.8 47.5 45.1 38.8 114.7 119.3 123.9 128.4 108.4 103.0 104.7 101.4 54.1 - 3 7 . 6 51.1 - 1 5 . 7 41.8 - 3 . 3 44.6 - 1 3 . 5 34.7 30.8 24.0 18.6 134.8 142.1 145.4 145.9 138.9 138.8 140.0 127.9 111.6 107.7 109.5 119.9 14.2 27.2 - 6 . 6 9.0 3.8 31.1 2.9 30.5 - 3 2 . 6 8.0 - 2 1 . 2 - 2 . 4 145.7 148.5 149.0 150.9 114.5 118.9 124.5 114.1 115.3 117.3 119.3 6.7 - 6 . 6 9.9 - 5 . 9 -4.8 -1.4 2.3 3.3 148.4 145.9 145.1 142.3 1 Indirect business tax and nontax liability plus business transfer payments less subsidies. Source: Department of Commerce, Bureau of Economic Analysis. .2 21.1 9.7 -2.8 40.6 - 1 4 . 5 72.9 - 2 7 . 3 47.9 - 1 7 . 5 .4 3.6 7.2 TABLE B-ll.—Output, costs, and profits of nonfinancial corporate business, 1959-91 [Quarterly data at seasonally adjusted annual rates] Year or quarter Gross domestic product of nonfinancial corporate business (billions of dollars) Current dollars 1987 dollars Current-dollar cost and profit per unit of output (dollars) 1 Total cost and profit 2 Corporate profits with inventory valuation and capital consumption adjustments ConComsump- Indipention rect sation of busiof ness fixed cap- taxes 3 employees ital Total Profits tax liability Profits after4 tax Net interest Output Compenper hour sation of all per hour of all employees employ(1987 ees dollars) (dollars) 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 * 1982: IV 1983: IV 1984: IV 1985: IV 1986: IV 1987: IV 928.7 955.5 978.2 1,047.5 1,104.6 1,179.1 1,262.1 431.0 1,335.9 453.5 1,367.6 500.5 1,444.5 543.2 1,492.4 561.3 1,473.2 606.2 1,525.5 673.2 1,629.3 754.5 1,706.9 814.8 1,669.9 881.1 1,625.3 994.4 1,748.2 1,124.3 1,866.1 1,279.2 1,966.8 1,423.6 1,995.5 1,981.4 1,546.8 1,749.1 2,035.8 1,803.5 2,002.1 1,937.1 2,113.3 2,167.3 2,285.0 2,366.3 2,295.5 2,444.3 2,391.3 2,544.6 2,544.6 2,762.1 2,682.2 2,910.8 2,715.3 2,717.4 3,008.9 2,690.5 3,052.3 2,000.5 1,807.1 2,205.2 2,038.1 2,330.3 2,230.0 2,399.5 2,341.3 2,469.0 2,428.4 2,602.4 2,625.9 0.288 .291 .292 .298 .300 .304 .312 .323 .332 .347 .364 .381 .397 .413 .442 .488 .542 .569 .603 .650 .713 .781 .859 .901 .917 .949 .970 .978 1.000 1.030 1.072 1.107 1.134 .903 .924 .957 976 .984 1.009 0.026 .026 .027 .026 .025 .025 .025 .026 .027 .029 .030 .034 .036 .037 .039 .046 .057 .059 .062 .067 .077 .088 .102 .115 .115 .109 .109 .111 .111 .111 .116 .120 .128 .119 .119 .111 .110 .112 .110 0.028 .030 .030 .031 .031 .031 .031 .030 .032 .034 .037 .040 .042 .042 .045 .049 .054 .054 .056 .058 .061 .070 .081 .083 .086 .089 .091 .094 .093 .095 .099 .105 .114 .085 .086 .090 .092 .094 .093 0.185 .190 .189 .191 .191 .192 .195 .205 .214 .224 .240 .257 .264 .274 .296 .333 .357 .376 .397 .433 .484 .533 .573 .606 .604 .619 .638 .650 .659 .676 .708 .745 .763 .609 .604 .624 .644 .655 .665 0.046 .042 .042 .046 .049 .051 .056 .056 .052 .053 .048 .039 .044 .047 .049 .042 .056 .064 .071 .074 .069 .061 .067 .056 .076 .094 .094 .083 .096 .102 .096 .083 .076 .051 .079 .091 .092 .080 .099 0.022 .020 .020 .020 .021 .020 .022 .022 .020 .023 .022 .018 .020 .021 .024 .025 .026 .030 032 !034 .035 .034 .031 .023 .028 .032 .030 .031 .037 .038 .037 .035 .031 .020 .029 .027 .030 .035 .038 0.024 .022 .022 .026 .028 .031 .034 .034 .032 .029 .025 .020 .024 .027 .025 .017 .031 .033 .039 .040 .034 .027 .036 .033 .048 .062 .064 .052 .059 .064 .060 .047 .045 .030 .050 .064 .063 .045 .060 0.003 .004 .004 .004 .004 .005 .005 .006 .006 .007 .009 .012 .012 .012 .013 .017 .018 .016 .016 .018 .023 .029 .035 .041 .036 .038 .038 .040 .042 .045 .052 .055 .054 .040 .036 .041 .038 .042 .042 15.442 15.657 16.167 16.661 17.190 17.841 18.061 18.145 18.356 18.856 18.742 18.759 19.467 19.762 19.741 19.226 19.729 20.324 20.745 20.693 20.214 20.276 20.560 20.827 21.597 21.905 22.144 22.737 23.047 23.472 23.059 23.062 2.851 2.968 3.063 3.183 3.284 3.430 3.527 3.721 3.923 4.219 4.506 4.825 5.133 5.425 5.855 6.416 7.053 7.644 8.244 8.952 9.780 10.800 11.790 12.620 13.037 13.559 14.121 14.770 15.181 15.782 16.330 17.171 21.103 21.905 22.050 22.340 22.891 23.268 12.842 13.233 13.770 14.395 15.001 15.483 1988:1 II III IV 1989:1 II Ill IV 2,685.3 2,740.9 2,782.2 2,840.1 2,648.6 2,677.5 2,685.6 2,717.1 1.014 1.024 1.036 1.045 .110 .110 .111 .112 .094 .094 .096 .096 .664 .672 .682 .687 .103 .103 .101 .102 .036 .038 .038 .040 .067 .065 .063 .063 .043 .045 .046 .047 23.518 23.512 23.411 23.423 15.517 15.700 15.882 16.005 2,870.3 2,901.1 2,928.7 2,943.3 2,714.9 2,712.7 2,718.5 2,715.3 1.057 1.069 1.077 1.084 .114 .115 .118 .119 .097 .099 .100 .100 .699 .704 .710 .720 .099 .096 .090 .040 .037 .035 .034 .059 .062 .061 .056 .050 .052 .053 .054 23.159 .23.039 23.007 22.967 16.180 16.223 16.325 16.542 1990:1 || III IV 1991:1 II . Ill 2,974.7 3,025.6 3,021.2 3,014.2 2,720.0 2,741.6 2,710.4 2,697.6 1.094 1.104 1.115 1.117 .119 .119 .121 .123 .103 .103 .106 .109 .729 .737 .755 .758 .090 .091 .077 072 .036 .036 .037 033 .054 .055 .041 .039 .054 .054 .055 .056 22.973 23.181 22.952 23.110 16.740 17.092 17.325 17.509 3,011.8 3,043.9 3.070.1 2,668.1 2,682.1 2,699.0 1.129 1.135 1.138 .127 .128 .127 .113 .113 .116 .760 .763 .765 .073 .077 .076 .030 .031 .032 .043 .046 .044 .056 .054 .054 23.188 23.355 23.456 17.625 17.818 17.933 267.5 278.1 285.5 311.7 331.7 358.1 393.5 1 2 Output is measured by gross domestic product of nonfinancial corporate business in 1987 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). 311 TABLE B-12.—Personal consumption expenditures, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Durable goods Year or quarter 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 " 1982: IV.... 1983: IV.... 1984: IV.... 1985: IV.... 1986: IV.... 1987: IV.... 1988:1 II III.... IV.... 1989:1 II III.... IV.... 1990:1 II III.... IV.... 1991:1 IV "... Nondurable goods FurniPersonal Motor ture convehiand sumption expendi- Total 1 cles louse- Total' and hold tures parts equip- 318.1 332.4 343.5 364.4 384.2 412.5 444.6 481.6 509.3 559.1 603.7 646.5 700.3 767.8 848.1 927.7 1,024.9 1,143.1 1,271.5 1,421.2 1,583.7 1,748.1 1,926.2 2,059.2 2,257.5 2,460.3 2,667.4 2,850.6 3,052.2 3,296.1 3,517.9 3,742.6 3,886.8 2,128.7 2,346.8 2,526.4 2,739.8 2,923.1 3,124.6 3,199.1 3,260.5 3,326.6 3,398.2 3,436.5 3,490.6 3,551.7 3,592.8 3,667.3 3,706.0 3,785.2 3,812.0 3,827.7 3,868.5 3,916.4 3,934.4 42.8 43.5 41.9 47.0 51.8 56.8 63.5 68.5 70.6 81.0 86.2 85.3 97.2 110.7 124.1 123.0 134.3 160.0 182.6 202.3 214.2 212.5 228.5 236.5 275.0 317.9 352.9 389.6 403.7 437.1 459.8 465.9 445.2 246.9 297.7 328.2 354.4 406.8 408.8 428.8 433.1 433.5 452.9 449.4 457.2 474.5 458.0 479.9 464.6 467.1 451.9 440.7 440.0 452.9 447.2 18.9 19.7 17.8 21.5 24.4 26.0 29.9 30.3 30.0 36.1 38.4 35.5 44.5 51.1 56.1 49.5 54.8 71.3 83.5 92.2 91.5 84.0 91.6 97.7 120.6 144.6 167.4 184.9 183.5 197.8 205.6 203.7 183.8 105.1 134.8 149.3 162.9 188.2 186.3 198.2 196.4 193.3 203.4 201.4 204.3 218.1 198.7 213.9 203.6 204.7 192.5 180.7 179.3 188.4 186.6 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 74.0 82.3 86.0 91.3 92.5 104.4 115.3 123.4 135.5 144.0 156.7 168.1 173.2 171.9 95.6 109.7 118.7 128.1 140.6 145.9 150.8 155.7 158.0 162.5 165.3 167.5 169.2 170.5 176.1 173.4 173.1 170.4 171.1 172.8 173.9 169.8 148.5 153.1 157.4 163.8 169.4 179.7 191.9 208.5 216.9 235.0 252.2 270.4 283.3 305.2 339.6 380.8 416.0 451.8 490.4 541.5 613.3 682.9 744.2 772.3 817.8 873.0 919.4 952.2 1,011.1 1,073.8 1,146.9 1,217.7 1,251.0 787.3 839.8 887.8 939.5 963.7 1,029.4 1,041.5 1,062.0 1,085.8 1,105.8 1,120.0 1,142.5 1,155.3 1,169.8 1,194.9 1,200.9 1,228.4 1,246.4 1,246.3 1,252.9 1,257.4 1,247.6 ClothFood and shoes 26.4 11.3 27.0 12.0 12.0 27.6 12.6 29.0 13.0 29.8 13.6 32.4 14.8 34.1 16.0 37.4 17.1 39.2 18.6 43.2 20.5 46.5 21.9 47.8 23.2 51.7 24.4 56.4 28.1 62.5 36.1 66.0 39.7 70.8 43.0 76.6 46.9 84.1 50.1 94.3 66.2 101.2 86.7 107.3 117.2 97.9 94.1 120.5 93.3 130.8 94.5 142.5 96.9 152.2 79.7 163.2 84.7 174.5 86.9 186.4 95.5 200.5 106.8 208.7 102.9 210.9 93.0 122.7 949 136.7 94.9 145.7 97.6 156.2 73.0 165.8 87.8 177.6 85.2 180.1 86.3 183.2 87.6 188.1 88.5 194.4 89.0 195.1 97.9 199.7 97.1 202.7 97.9 204.7 100.4 208.5 97.3 208.3 106.4 211.0 123.2 206.8 105.0 208.2 102.0 212.8 101.7 214.6 102.9 207.9 80.7 82.6 84.8 87.1 89.5 94.6 101.0 109.0 112.3 121.6 130.5 142.1 147.5 158.5 176.1 198.1 218.5 236.0 255.9 280.6 313.0 341.8 367.3 386.0 406.2 430.2 451.1 476.8 500.7 533.6 563.3 595.8 618.7 394.9 413.9 436.8 460.7 486.7 507.4 515.8 528.0 541.1 549.5 556.6 560.3 565.3 571.0 585.2 592.3 601.1 604.8 616.3 620.5 620.4 617.7 1 Includes other items not shown separately. Includes imputed rental value of owner-occupied housing. Source: Department of Commerce, Bureau of Economic Analysis. 2 Gasoline and oil 312 Services Fuel oil and coal 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 11.5 14.4 15.4 15.8 14.5 13.8 14.2 14.1 12.0 12.0 12.1 12.0 12.5 11.6 14.0 14.1 13.8 14.3 11.3 12.2 12.3 12.1 12.1 11.7 11.1 11.8 11.7 13.4 11.9 11.7 13.3 13.1 12.2 11.4 11.7 11.1 Household operation Totall Housing2 Total 126.8 135.9 ' 144.1 153.6 163.1 175.9 189.2 204.6 221.7 243.1 265.3 290.8 319.8 351.9 384.5 423.9 474.5 531.2 598.4 677.4 756.2 852.7 953.5 1,050.4 1,164.7 1,269.4 1,395.1 1,508.8 1,637.4 1,785.2 1.911.2 2,059.0 2,190.5 1,094.6 1,209.3 1,310.4 1,446.0 1,552.6 1,686.4 1,728.8 1,765.4 1,807.3 1,839.5 1,867.1 1,891.0 1,921.9 1,965.0 1,992.5 2,040.4 2,089.6 2,113.6 2,140.7 2,175.6 2,206.1 2,239.6 45.0 48.2 51.2 54.7 58.0 61.4 65.4 69.5 74.1 79.7 86.8 94.0 102.7 112.1 122.7 134.1 147.0 161.5 179.5 201.7 226.6 255.2 287.1 311.1 334.6 362.3 392.5 421.8 452.5 484.2 514.3 547.1 574.6 320.2 344.6 373.8 404.6 432.7 466.6 473.5 479.5 487.8 496.0 502.2 508.8 518.2 527.9 534.1 541.5 553.6 559.3 565.7 571.7 577.0 583.8 1 Trans- Medical Elec- portacare tricity tion and 18.7 7.6 20.3 8.3 21.2 8.8 22.4 9.4 23.6 9.9 25.0 10.4 26.5 10.9 28.2 11.5 30.2 12.2 32.3 13.0 35.1 14.0 37.8 15.2 41.0 16.6 45.3 18.4 49.8 20.0 55.5 23.5 63.7 28.5 72.4 32.5 81.9 37.6 91.2 42.1 100.0 46.8 113.0 56.3 126.0 63.4 141.4 72.6 153.6 80.7 165.5 84.6 176.2 88.7 181.1 87.1 187.8 88.4 199.5 93.4 208.4 97.6 212.7 97.2 224.8 102.5 145.8 74.9 159.3 84.8 168.8 85.9 180.7 90.1 182.5 86.8 189.7 88.6 194.9 92.2 196.8 91.7 202.4 94.5 203.8 95.3 206.0 96.4 204.8 94.7 207.2 96.1 215.5 103.1 205.2 91.7 213.4 98.3 215.8 99.1 216.5 99.6 218.6 99.8 225.4 103.7 226.5 102.4 228.8 104.0 10.5 11.2 11.7 12.2 12.7 13.4 14.5 15.9 17.3 18.9 20.9 23.7 27.1 29.8 31.2 33.3 35.7 41.3 49.2 53.6 59.4 65.1 69.4 71.6 78.9 89.1 99.0 105.8 116.6 128.5 138.0 147.6 155.9 73.6 82.9 92.5 101.5 109.0 121.3 122.7 127.5 130.9 132.7 135.7 136.1 138.6 141.5 144.1 146.2 148.5 151.7 152.2 153.9 157.4 160.2 16.3 17.4 18.6 20.7 22.4 25.7 27.7 30.5 33.7 39.0 44.4 50.1 56.5 63.5 71.2 80.1 93.0 106.2 122.4 139.7 157.8 181.3 213.6 240.5 265.7 290.6 319.3 346.4 384.7 427.7 472.2 523.1 576.8 250.9 274.8 299.9 333.0 358.4 398.5 409.9 421.4 435.1 444.4 457.4 466.4 475.7 489.3 501.8 515.8 531.3 543.4 555.9 570.0 583.5 597.7 TABLE B-13-—Personal consumption expenditures in 1987 dollars, 1939-91 [Billions of 1987 dollars; quarterly data at seasonally adjusted annual rates] Durable goods Year or quarter Personal consumption expendi- Total 1 tures Nondurable goods FurniMotor ture vehiand cles house- Total * and hold parts equipment Cloth- Food and shoes Gasoline and oil Services Fuel oil and coal Household operation Total! Housing 2 Total' Electricity and gas Transportation 1959 1960 1961 1962 1963 1964 1,178.9 114.4 59.7 38.2 518.5 301.9 58.2 38.1 22.6 546.0 159.8 75.0 34.5 45.4 1,210.8 1,238.4 1,293.3 1,341.9 1,417.2 115.4 109.4 120.2 130.3 140.7 61.3 54.9 62.2 68.4 71.2 37.7 38.1 40.4 43.1 48.3 526.9 537.7 553.0 563.6 588.2 305.8 312.1 316.3 319.2 331.0 58.7 59.8 62.4 63.6 68.5 39.4 39.8 41.5 42.8 45.1 21.7 20.6 20.6 21.6 22.5 568.5 168.1 591.3 176.0 620.0 185.8 648.0 194.4 688.3 203.5 78.5 81.2 85.2 88.4 92.6 36.3 38.3 40.9 42.8 45.1 46.7 47.0 48.7 50.5 53.0 1965 1966 1967 1968 1969 1,497.0 1,573.8 1,622.4 1,707.5 1,771.2 156.2 166.0 167.2 184.5 190.8 81.2 81.8 80.3 91.8 95.1 52.1 57.6 59.5 62.9 64.3 616.7 647.6 659.0 686.0 703.2 346.5 359.1 364.5 380.7 389.7 71.5 76.3 76.9 80.2 81.9 47.3 50.2 51.8 55.5 59.2 23.5 24.2 24.2 23.0 21.8 724.1 760.2 796.2 837.0 877.2 214.6 224.4 234.5 246.0 259.1 96.8 101.4 106.2 110.1 115.3 47.2 49.7 52.4 55.0 58.0 55.4 58.6 62.0 65.4 68.9 1970 1971 1972 1973 1974 1,813.5 1,873.7 1,978.4 2,066.7 2,053.8 183.7 201.4 225.2 246.6 227.2 85.6 100.8 114.3 123.4 102.2 64.4 66.8 73.6 81.5 81.9 717.2 725.6 755.8 777.9 759.8 397.5 399.2 411.9 412.6 404.7 81.0 84.6 90.4 96.9 95.4 62.9 65.9 68.6 72.1 68.6 20.2 912.5 269.3 19.5 946.7 280.9 21.5 997.4 295.9 23.3 1,042.2 310.8 18.4 1,066.8 326.9 118.9 120.8 126.8 132.0 132.5 60.4 61.8 64.9 66.5 66.9 71.0 73.6 77.8 79.6 79.9 1975 1976 1977 1978 1979 2,097.5 2,207.3 2,296.6 2,391.8 2,448.4 226.8 256.4 280.0 292.9 289.0 102.9 124.6 137.3 141.5 130.5 79.1 84.2 91.4 96.6 101.3 767.1 801.3 819.8 844.8 862.8 413.2 431.9 441.5 442.8 448.0 98.5 103.2 108.7 119.0 124.1 70.6 73.4 75.7 77.4 76.4 18.1 20.3 19.6 19.5 18.1 1,103.6 1,149.5 1,196.8 1,254.1 1,296.5 336.5 346.7 355.4 372.9 387.9 138.1 143.9 151.0 158.0 162.9 70.4 72.9 76.0 78.8 79.3 81.4 84.4 90.2 92.9 96.1 1980 1981 1982 1983 1984 2,447.1 2,476.9 2,503.7 2,619.4 2,746.1 262.7 264.6 262.5 297.7 338.5 111.4 113.5 115.6 138.1 160.3 98.5 97.7 94.2 104.3 115.3 860.5 867.9 872.2 900.3 934.6 448.8 446.6 451.4 463.4 472.3 126.0 132.8 133.7 142.4 153.1 72.0 73.2 73.9 75.7 77.9 14.0 11.8 10.9 11.1 11.2 1,323.9 1,344.4 1,368.9 1,421.4 1,473.0 399.4 407.3 409.6 415.5 426.8 167.1 165.6 166.7 169.4 173.7 81.6 80.3 81.2 83.7 84.3 91.3 88.9 87.4 91.6 100.0 1985 1986 1987 1988 1989 2,865.8 2,969.1 3,052.2 3,162.4 3,223.1 370.1 402.0 403.7 428.7 440.8 180.2 193.3 183.5 194.8 196.2 123.8 958.7 483.0 136.3 991.0 494.1 144.0 1,011.1 500.7 155.4 1,035.1 513.4 166.1 1,049.3 513.3 158.8 170.3 174.5 178.9 187.9 79.2 82.9 84.7 86.1 86.7 11.5 12.1 12.0 12.0 11.5 1,537.0 1,576.1 1,637.4 1,698.5 1,732.9 435.9 442.1 452.5 461.8 469.0 179.1 180.8 187.8 196.9 201.5 86.6 85.6 88.4 92.7 94.2 109.2 112.6 116.6 122.5 126.0 1990 1991 ". 1982: IV 1983: IV 1984: IV 1985: IV 1986: IV 1987: IV 3,262.6 3,256.7 438.9 412.5 191.4 167.6 170.6 1,050.8 515.8 170.5 1,042.3 516.6 187.4 182.9 85.0 83.1 10.0 1,773.0 474.5 9.6 1,801.9 478.8 202.1 206.2 92.2 94.2 129.0 128.3 2,539.3 2,678.2 2,784.8 2,895.3 3,012.5 3,074.7 272.3 319.1 347.7 369.6 415.7 404.7 123.7 151.6 164.3 173.9 193.6 183.6 96.4 880.7 458.3 109.3 915.2 467.1 118.7 942.9 475.1 128.6 968.7 488.2 141.4 1,000.9 496.9 145.9 1,014.6 502.4 135.7 147.7 154.7 161.7 171.9 174.5 73.4 76.9 79.0 79.5 84.6 85.4 10.5 11.4 11.1 11.4 12.4 11.9 1,386.2 1,443.9 1,494.2 1,557.1 1,595.8 1,655.5 411.0 419.7 431.3 438.1 444.8 457.0 166.2 173.3 174.8 182.6 182.8 189.3 80.2 86.8 84.5 88.5 86.8 88.6 88.2 94.2 103.5 111.2 113.4 117.9 1988:1 II Ill IV 3,128.2 425.1 3,147.8 426.9 3,170.6 423.8 3,202.9 439.2 197.1 195.0 189.6 197.7 150.5 154.3 156.3 160.3 1,023.5 1,031.0 1,039.3 1,046.8 506.8 513.1 515.8 518.0 176.5 176.0 180.2 182.8 85.1 86.1 85.8 87.5 12.1 11.9 12.1 12.0 1,679.6 1,690.0 1,707.5 1,716.9 458.4 460.3 462.8 465.6 194.8 194.7 199.5 198.6 92.4 91.4 93.9 93.0 120.3 122.1 123.5 124.2 1989:1 II Ill IV 3,200.9 3,208.6 3,241.1 3,241.6 433.6 193.6 439.9 195.0 454.3 208.4 435.6 187.8 163.5 166.4 166.9 167.7 1,047.1 1,043.3 1,051.4 1,055.3 517.6 512.5 511.3 511.7 183.4 186.8 191.2 190.1 86.6 83.2 86.6 90.2 10.8 11.5 11.3 12.3 1,720.3 1,725.4 1,735.4 1,750.7 466.1 467.2 470.2 472.8 200.2 198.3 200.7 206.7 94.0 91.4 92.8 98.4 124.6 125.0 126.3 128.0 1990:1 II Ill IV 3,258.8 3,258.6 3,281.2 3,251.8 452.7 438.7 440.3 424.0 200.7 192.0 192.9 179.8 173.1 170.9 170.5 168.0 1,054.4 1,050.3 1,053.7 1,044.7 513.9 516.3 517.1 515.9 190.1 187.2 188.2 184.1 87.2 84.5 84.4 84.0 9.5 10.5 11.0 8.9 1,751.8 1,769.6 1,787.3 1,783.1 472.8 473.0 475.4 476.9 195.6 202.8 206.3 203.7 87.0 93.2 94.9 93.5 128.7 128.9 129.6 128.7 1991:1 II Ill 3,241.1 410.8 3,252.4 408.9 3,271.2 418.3 3,262.2 412.1 166.7 164.2 170.9 168.5 168.9 171.1 172.5 169.3 1,043.9 1,046.2 1,046.1 1,033.0 518.7 517.0 517.4 513.5 181.7 186.1 184.7 178.9 81.8 83.0 83.6 83.9 9.3 9.8 10.1 9.2 1,786.3 1,797.2 1,806.8 1,817.1 477.3 478.3 479.4 480.4 201.7 207.1 208.0 207.9 91.7 95.6 95.2 94.4 127.0 127.9 128.9 129.4 1 Includes other items not shown separately. 2 Includes imputed rental value of owner-occupied housing. Source: Department of Commerce, Bureau of Economic Analysis. 313 TABLE B-14.—Gross and net private domestic investment, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Equals: Net private domestic investment Net fixed investment Year or quarter Gross private domestic investment Less: Consumption of fixed capital Nonresidentia Total Total Total Structures Producers' durable equipment Residential Change in business inventories 1959 78.8 44.6 34.2 30.1 12.3 6.6 5.7 17.8 4.2 1960 1961. 1962 1963 1964 78.7 77 9 87.9 93.4 101.7 46.3 47 7 49.3 51.3 53.9 32.4 30 3 38.6 42.0 47.8 29.2 27 3 32.5 36.4 42.8 13.8 12 2 15.3 16.4 21.3 7.7 76 8.3 8.3 10.3 6.1 46 7.0 8.1 11.0 15.4 151 17.2 20.0 21.5 3.2 29 6.1 5.7 5.0 1965 1966 1967 1968 1969 118.0 130.4 128 0 139.9 155.2 57.3 62.1 67.4 73.9 81.5 60.7 68.3 60.6 66.0 73.7 51.0 54.5 501 56.9 64.0 30.3 36.7 33 2 35.0 40.5 14.1 16.0 151 15.8 17.9 16.2 20.7 181 19.2 22.6 20.7 17.8 16 9 21.9 23.5 9.7 13.8 10 5 9.1 9.7 1970 1971 1972 1973 1974 150.3 175.5 205.6 243.1 245.8 88.8 97.6 109.9 120.4 140.2 61.5 78.0 95.7 122.7 105.5 59.2 69.9 85.8 105.0 91.3 38.4 36.8 42.5 59.0 58.9 18.4 18.4 18.7 23.8 24.5 20.0 18.4 23.8 35.2 34.5 20.8 33.1 43.2 46.0 32.3 2.3 8.0 9.9 17.7 14.3 1975 1976 1977 1978 1979 226.0 286 4 358.3 434 0 480.2 165.2 182 8 205.2 234 8 272.4 60.9 103 6 153.1 199 3 207.8 66.5 86 8 128.3 1713 195.1 41.5 45 6 64.9 941 117.3 18.8 19 9 23.4 35 5 49.9 22.7 25 6 41.5 58 6 67.4 25.1 41.2 63.4 77.3 77.8 5.7 16.7 24.7 27.9 12.8 1980 1981.. 1982 1983 1984 467.6 558.0 503.4 546.7 718.9 311.9 362.4 399.1 418.4 433.2 155.7 195.6 104.3 128.2 285.6 165.2 170.2 120.3 133.8 214.6 113.8 127.1 99.1 69.1 126.6 59.1 75.5 72.4 46.2 65.1 54.7 51.6 26.7 22.9 61.5 51.4 43.1 21.2 64.6 87.9 -9.5 25.4 -15.9 -5.5 71.1 1985 1986 1987 1988 1989 714 5 717.6 749.3 793.6 837.6 454 5 478.6 502.2 534.0 574.5 260 0 239.1 247.1 259.6 263.1 235 4 230.4 220.9 243.4 227.1 146 1 114.4 103.0 125.8 122.1 75 2 51.8 46.7 47.9 48.5 70 9 62.6 56.3 77.9 73.6 89 3 116.0 117.9 117.6 105.0 24.6 8.6 26.3 16.2 36.0 1990 p 1991 . 1982- IV 1983: IV 1984- IV 1985- IV 1986: IV 1987- IV 1988-1 802.6 725.3 464.2 614 8 722 8 737.0 697 1 800.2 770.6 788.4 800.7 814.8 844.7 844.3 826.8 834.4 812.0 825.9 821.8 750.9 709.3 708 8 740.9 742.3 594.8 623.5 412.5 439 7 448 0 465.6 488.2 512.1 522.4 529.9 536.5 547.2 556.0 563.6 586.7 591.7 585.3 590.1 598.3 605.4 615.4 620 0 623.7 635.1 207.9 101.8 51.7 1751 274 8 271.4 208.9 288.1 248.2 258.4 264.2 267.6 288.7 280.7 240.1 242.8 226.8 235.8 223.5 145.5 93.9 88 8 117.2 107.2 207.9 122.0 98.0 154 9 223 8 238.8 227.8 228.8 231.4 244.6 247.1 250.3 245.5 238.4 216.8 207.7 230.1 210.1 209.4 182.1 133.1 125 8 120.8 108.3 120.4 50.3 70.1 87.5 .0 -20.2 46.3 20.2 51.0 32.6 -18.8 59.3 16.8 13.8 17.1 17.3 43.2 42.3 23.3 35.1 -3.3 25.6 14.1 -36.5 -39.2 -37.1 -3.6 -1.1 II III IV 1989:I II III . IV 1990-1 II Ill IV 1991-1 II... Ill IV P Source: Department of Commerce, Bureau of Economic Analysis. 314 TABLE B-15.—Gross and net private domestic investment in 1987 dollars, 1959-91 [Billions of 1987 dollars; quarterly data at seasonally adjusted annual rates] Equals: Net private domestic investment Year or quarter Gross private domestic investment Less: Consumption of fixed capital Net fixed investment Nonresidential Total Total Total Structures Producers' durable equipment dential Change in business inventories 1959 1960 1961 1962 1963 1964 296.4 168.8 127.5 114.0 39.2 25.4 13.8 74.8 13.6 290.8 289.4 321.2 343.3 371.8 173.7 178.6 183.6 189.6 196.4 117.1 110.8 137.6 153.7 175.4 109.0 103.6 122.0 137.7 159.7 44.1 39.9 49.5 52.8 69.7 30.5 30.6 32.9 32.1 39.5 13.7 9.4 16.6 20.7 30.2 64.8 63.7 72.5 84.9 90.0 8.1 7.2 15.6 16.0 15.7 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". 1982: IV... 1983: IV... 1984-.IV... 1985: IV... 1986: IV... 1987: IV... 413.0 438.0 418.6 440.1 461.3 205.0 214.9 225.2 235.3 246.7 208.1 223.0 193.4 204.7 214.6 182.9 186.3 165.8 181.1 189.8 99.9 118.1 103.9 105.1 112.2 53.0 58.3 53.0 52.2 56.0 46.9 59.8 50.9 52.9 56.2 83.0 68.2 61.9 76.0 77.6 25.1 36.7 27.6 23.6 24.8 429.7 481.5 532.2 591.7 543.0 258.0 269.1 285.0 296.4 310.3 171.7 212.3 247.2 295.3 232.6 165.8 191.6 224.6 257.6 201.7 98.7 90.8 98.9 134.6 122.3 53.5 49.0 49.2 57.9 53.4 45.2 41.7 49.7 76.7 68.9 67.1 100.8 125.7 123.0 79.4 5.9 20.8 22.5 37.7 30.9 437.6 520.6 600.4 664.6 669.7 322.8 334.6 348.4 364.5 384.5 114.8 186.1 252.1 300.0 285.2 128.7 160.6 217.8 262.8 271.6 72.0 74.5 99.0 134.4 154.1 36.7 36.8 39.8 55.2 70.1 35.3 37.7 59.2 79.2 84.0 56.8 86.1 118.8 128.4 117.5 -13.9 25.5 34.3 37.2 13.6 594.4 631.1 540.5 599.5 757.5 400.7 417.8 429.5 447.4 455.5 193.7 213.2 111.0 152.1 302.0 201.9 188.7 128.5 147.7 234.0 129.5 131.6 101.0 71.6 134.3 73.3 82.0 75.3 50.3 69.3 56.1 49.6 25.7 21.4 65.0 72.5 57.1 27.5 76.0 99.8 -8.3 24.6 -17.5 4.4 67.9 745.9 735.1 749.3 773.4 789.2 471.5 486.7 502.2 518.5 542.1 274.4 248.4 247.1 254.9 247.1 252.3 239.9 220.9 235.0 214.5 154.0 118.3 103.0 122.6 117.4 79.4 54.9 46.7 46.7 45.8 74.6 63.3 56.3 75.9 71.7 98.3 121.6 117.9 112.4 97.0 22.1 8.5 26.3 19.9 32.6 744.5 672.6 550.5 568.4 194.0 104.2 193.8 119.3 114.5 46.0 68.6 79.2 .2 -15.1 503.5 669.5 756.4 763.1 705.9 793.8 439.2 468.5 467.4 480.1 492.5 508.1 64.3 201.0 289.0 283.0 213.3 285.7 109.2 171.7 241.1 252.8 233.4 225.8 -44.9 29.3 47.9 30.2 -20.1 59.9 1988:1 II.... III... IV... 756.9 769.4 782.2 785.0 512.2 516.4 520.6 524.7 244.7 253.1 261.6 260.3 225.5 237.0 238.1 239.3 19.2 16.1 23.5 20.9 1989:1 II.... III... IV... 803.2 797.4 776.8 779.2 528.9 532.9 552.3 554.3 274.3 264.6 224.5 224.9 233.1 225.7 204.3 194.9 41.2 38.9 20.2 30.0 1990:1 II.... III... IV... 754.9 766.0 760.3 696.6 544.4 548.3 552.4 556.7 210.6 217.7 207.9 139.9 214.5 195.5 193.9 171.1 -4.0 22.1 13.9 -31.2 1991:1 II.... III... IV P 657.0 656.3 686.5 690.6 561.9 565.3 569.0 577.5 95.1 91.0 117.5 113.1 127.9 121.4 117.5 110.4 -32.8 -30.4 .1 2.7 Source: Department of Commerce, Bureau of Economic Analysis. 315 TABLE B-16.—Inventories and final sales of domestic business, 1959-91 [Billions of dollars, except as noted; seasonally adjusted] Inventories1 Quarter Fourth quarter: 1959 Nonfarm Total 2 Farm Total 2 Manu- Wholesale facturing trade Retail trade Other Final sales of domestic business3 Ratio of inventories to final sales of domestic business Total Nonfarm 141.2 31.6 109.6 55.2 21.0 26.2 7.2 36.2 3.90 3.03 I960.. 1961.. 1962.. 1963.. 1964.. 145.2 147.0 153.4 158.7 164.2 33.0 33.7 34.8 34.9 33.3 112.2 113.4 118.6 123.8 130.9 56.2 57.2 60.3 62.2 65.9 21.3 21.8 22.4 23.9 25.2 27.5 27.0 28.3 29.6 31.0 7.2 7.4 7.5 8.0 37.4 39.3 41.5 44.2 47.1 3.88 3.74 3.69 3.59 3.49 3.00 2.88 2.86 2.80 2.78 1965 1966 1967 1968 1969 178.4 194.0 206.0 221.4 242.5 37.4 36.3 36.5 38.7 41.9 141.0 157.8 169.5 182.6 200.6 70.7 80.9 87.5 94.0 103.4 26.9 30.3 32.7 34.6 37.9 33.7 36.2 36.9 40.7 44.5 9.8 10.4 12.4 13.3 14.9 52.1 55.1 58.7 64.5 68.5 3.43 3.52 3.51 3.43 3.54 2.71 2.86 2.89 2.83 2.93 1970.. 1971.. 1972.. 1973.. 1974.. 249.4 267.4 296.6 365.1 435.2 40.1 45.0 55.3 78.0 74.3 209.2 222.4 241.3 287.1 360.9 105.8 107.3 113.6 136.1 177.0 41.7 45.2 50.0 59.4 75.6 45.8 52.3 57.7 66.4 74.6 16.0 17.6 19.9 25.2 33.7 72.3 78.6 87.5 96.0 104.0 3.45 3.40 3.39 3.80 4.18 2.90 2.83 2.76 2.99 3.47 1975 1976 1977 1978 1979 440.1 475.3 521.6 605.3 702.6 75.5 72.2 75.2 92.1 97.9 364.5 403.1 446.4 513.2 604.7 177.8 194.9 210.6 238.0 280.6 76.2 86.1 96.2 111.7 141.2 74.7 82.7 93.3 107.5 118.9 35.8 39.4 46.3 55.9 64.1 116.2 127.6 142.7 164.5 182.3 3.79 3.72 3.65 3.68 3.85 3.14 3.16 3.13 3.12 3.32 1980.... 1981.... 1982.... 1983.... 1984.... 784.1 836.2 817.0 827.5 898.9 104.9 101.4 103.6 103.2 100.9 679.3 734.7 713.5 724.4 797.9 309.8 331.9 318.5 319.2 349.0 174.2 184.8 174.7 168.9 187.2 125.0 137.0 139.5 153.7 173.5 70.3 81.1 80.7 82.5 88.3 201.2 217.2 228.6 249.6 271.5 3.90 3.85 3.57 3.32 3.31 3.38 3.38 3.12 2.90 2.94 1985.... 1986.... 1987.... 1988.... 1989.... 904.3 887.9 950.6 1,025.1 1,084.6 96.6 90.5 90.9 95.4 95.6 807.7 797.3 859.7 929.6 989.0 339.9 328.1 349.3 383.2 409.7 184.9 183.4 196.3 215.3 224.8 188.6 193.4 216.1 229.9 250.2 94.3 92.4 98.0 101.2 104.4 292.7 311.1 329.2 358.4 376.9 3.09 2.85 2.89 2.86 2.88 2.76 2.56 2.61 2.59 2.62 1990.... 1991". 1,103.4 1,070.5 93.1 91.9 1,010.3 978.5 416.6 396.8 234.3 231.8 248.8 244.3 110.7 105.7 394.4 404.2 2.80 2.65 2.56 2.42 1988:1 II.... III... IV... 1989:1 II.... III... IV... 1990:1 H.... 963.8 986.8 1.006.6 1,025.1 1,048.3 1,061.9 1,068.7 1,084.6 1,084.6 1,092.9 1,114.8 1,103.4 90.2 94.2 95.9 95.4 97.4 98.2 95.0 95.6 95.8 98.4 96.8 93.1 95.6 98.0 96.2 91.9 873.6 892.6 910.8 929.6 950.9 963.7 973.8 989.0 988.9 356.4 365.2 372.7 383.2 393.1 400.6 407.4 409.7 409.9 410.6 423.1 416.6 410.3 404.8 403.7 396.8 202.8 208.6 213.2 215.3 216.9 220.7 222.1 224.8 216.3 220.4 225.4 229.9 238.5 239.3 240.1 250.2 244.5 246.9 249.8 248.8 241.5 242.1 243.9 244.3 98.2 98.4 99.5 101.2 102.3 103.0 104.1 104.4 107.9 108.6 111.3 110.7 336.8 345.4 351.7 358.4 363.1 369.2 374.4 376.9 385.3 389.1 394.0 394.4 2.86 2.86 2.86 2.86 2.89 2.88 2.85 2.88 2.81 2.81 2.83 2.80 106.9 107.0 106.1 105.7 395.9 401.3 402.3 404.2 2.75 2.69 2.68 2.65 2.59 2.58 2.59 2.59 2.62 2.61 2.60 2.62 2.57 2.56 2.58 2.56 2.51 2.45 2.44 2.42 IV... 1991:1 IV "... 1,087.8 1,081.0 1,079.0 1,070.5 994.5 1,018.0 1,010.3 992.1 983.1 982.8 978.5 1 226.6 228.5 233.7 234.3 233.3 229.1 229.1 231.8 Inventories at end of quarter. Quarter-to-quarter change calculated from this table is not the current-dollar change in business inventories (CBI) component of GDP. The former is the difference between two inventory stocks, each valued at their respective end-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 Inventories of construction establishments are included in "other" nonfarm inventories. 3 Quarterly totals at monthly rates. Final sales of domestic business equals final sales of domestic product less gross product of households and institutions and general government and 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 1987 Standard Industrial Classification (SIC) beginning 1987 and on the 1972 SIC for earlier years shown. Source: Department of Commerce, Bureau of Economic Analysis. 316 TABLE B-17.—Inventories and final sales of domestic business in 1987 dollars, 1959-91 [Billions of 1987 dollars, except as noted; seasonally adjusted] Inventories * Quarter Fourth quarter: 1959 Nonfarm Total 2 Farm Total 2 Manu- Wholesale facturing trade Retail trade Other Final sales of domestic business3 Ratio of inventories to final sales of domestic business Total Nonfarm 388.6 79.6 308.9 152.4 61.2 67.6 27.8 130.6 2.98 2.37 1960 1961 1962 1963 1964 396.7 403.9 419.5 435.6 451.2 80.5 82.1 83.9 85.4 83.4 316.2 321.8 335.7 350.2 367.8 153.9 157.9 166.1 171.6 179.6 62.4 63.7 65.9 69.6 73.4 71.4 70.2 73.8 76.9 80.3 28.5 30.0 29.9 32.0 34.5 133.6 138.8 144.0 152.3 159.8 2.97 2.91 2.91 2.86 2.82 2.37 2.32 2.33 2.30 2.30 1965 1966 1967 1968 1969 476.4 513.1 540.7 564.3 589.2 84.6 83.5 84.5 86.9 86.9 391.7 429.6 456.3 477.5 502.3 190.2 212.1 227.6 237.4 246.7 77.6 86.5 92.0 94.7 100.3 86.8 92.5 92.1 99.3 105.9 37.2 38.4 44.6 46.1 49.4 173.5 176.3 182.8 191.3 194.5 2.75 2.91 2.96 2.95 3.03 2.26 2.44 2.50 2.50 2.58 1970 1971 1972 1973 1974 595.1 615.8 638.4 676.1 707.0 86.3 89.2 90.6 92.9 92.5 508.8 526.7 547.7 583.3 614.5 246.1 243.9 249.6 264.9 283.7 106.9 112.3 116.3 121.1 130.8 105.8 117.8 125.3 134.5 133.6 50.0 52.6 56.5 62.7 66.4 196.4 204.2 218.4 223.2 218.5 3.03 3.02 2.92 3.03 3.24 2.59 2.58 2.51 2.61 2.81 1975 1976 1977 1978 1979 693.1 718.6 752.9 790.1 803.7 92.9 90.8 93.6 93.0 95.7 600.2 627.8 659.2 697.1 708.0 277.2 289.6 297.1 309.2 320.1 127.3 135.3 144.4 155.8 157.3 127.6 134.8 144.5 153.7 153.5 68.0 68.1 73.3 78.3 77.1 226.5 235.6 246.8 261.3 265.7 3.06 3.05 3.05 3.02 3.02 2.65 2.66 2.67 2.67 2.66 1980 1981., 1982 1983 1984 795.4 820.0 802.5 806.9 874.8 92.3 98.3 101.4 93.1 94.8 703.1 721.7 701.0 713.8 780.0 319.9 324.0 311.3 311.9 339.4 161.9 164.8 159.9 159.3 174.7 146.7 152.9 151.7 162.8 181.4 74.6 80.0 78.1 79.8 84.5 265.4 262.7 264.9 279.0 292.7 3.00 3.12 3.03 2.89 2.99 2.65 2.75 2.65 2.56 2.66 1985 1986 1987 1988 1989 896.9 905.5 931.8 951.7 984.3 97.2 95.1 88.7 81.7 81.0 799.8 810.4 843.1 870.0 903.3 335.7 333.6 340.2 355.3 373.8 178.7 185.7 192.7 199.1 202.5 194.1 196.7 213.6 219.7 231.0 91.3 94.4 96.6 95.9 96.0 305.0 316.9 325.2 339.5 343.9 2.94 2.86 2.87 2.80 2.86 2.62 2.56 2.59 2.56 2.63 1990 1991 * 1988:1 II Ill IV 984.5 969.4 82.7 82.8 901.9 886.6 372.5 367.5 205.6 204.3 224.2 217.7 99.5 97.0 346.1 345.2 2.84 2.81 2.61 2.57 936.6 940.6 946.5 951.7 87.6 85.6 84.1 81.7 849.0 855.0 862.4 870.0 343.4 346.3 349.3 355.3 196.9 198.2 199.7 199.1 212.2 214.1 217.1 219.7 96.5 96.3 96.3 95.9 330.3 334.8 336.3 339.5 2.84 2.81 2.81 2.80 2.57 2.55 2.56 2.56 1989:1 II Ill IV 962.0 971.7 976.8 984.3 83.1 84.5 83.0 81.0 879.0 887.3 893.8 903.3 359.5 365.9 372.3 373.8 198.6 201.7 201.7 202.5 225.2 224.3 223.9 231.0 95.7 95.5 95.9 96.0 340.4 342.5 344.5 343.9 2.83 2.84 2.84 2.86 2.58 2.59 2.59 2.63 1990:1 II Ill IV 983.3 988.8 992.3 984.5 81.4 83.0 84.1 82.7 901.9 905.8 908.3 901.9 374.5 374.6 375.9 372.5 203.5 204.7 205.4 205.6 224.3 226.0 226.4 224.2 99.6 100.5 100.5 99.5 348.2 347.8 348.1 346.1 2.82 2.84 2.85 2.84 2.59 2.60 2.61 2.61 1991:1 II Ill IV " 976.3 968.7 968.7 969.4 82.2 82.3 83.1 82.8 894.1 886.4 885.7 886.6 372.6 369.1 368.0 367.5 206.1 202.6 202.3 204.3 217.2 216.4 217.9 217.7 98.2 98.3 97.4 97.0 343.7 345.8 344.9 345.2 2.84 2.80 2.81 2.81 2.60 2.56 2.57 2.57 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 GDP is stated at annual rates. 2 Inventories of construction establishments are included in "other" nonfarm inventories. 3 Quarterly totals at monthly rates. Final sales of domestic business equals final sales of domestic product less gross product of households and institutions and general government and 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 1987 Standard Industrial Classification (SIC) beginning 1987 and on the 1972 SIC for earlier years shown. Source: Department of Commerce, Bureau of Economic Analysis. http://fraser.stlouisfed.org/ 305-592of 0St. - 9 Louis 2Federal Reserve Bank 317 TABLE B-18.—Foreign transactions in the national income and product accounts, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Payments to rest of the world Receipts from rest of the world Exports of goods and Year or quarter Total Total Merchandise 2 Receipts of factor Serv-2 income 3 ices Total * Transfer payments (net) Imports of goods and Total Merchan-2 dise Payments of Serv-2 factor inices come 4 1.5 Total 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 p 1982: IV.... 1983: IV.... 1984: IV.... 1985: IV.... 1986: IV.... 1987: IV.... 1988:1 II III.... IV.... 25.0 30.2 31.4 33 5 36.1 41.0 43.5 47.2 50 2 55.6 61.2 70.8 74.2 83.4 115.6 152.6 164.4 181.6 196.5 233.3 299.7 360.9 398 2 379.9 372 5 410.5 399.3 415.2 469.0 572.9 650.3 698.2 20.6 25.3 26.0 27 4 29.4 33.6 35 4 38.9 414 45.3 49.3 57.0 59.3 66.2 91.8 124.3 136.3 148.9 158.8 186.1 228.9 279.2 303 0 282.6 276 7 302.4 302.1 319.2 364.0 444.2 504.9 550.4 593.3 16.5 20 5 20.9 217 23.3 26.7 27 8 30.7 32 2 35.3 38.3 44.5 45.6 51.8 73.9 101.0 109.6 117.8 123.7 145.4 184.2 226.0 239 3 215.2 207 5 225^8 222.4 226.2 257.7 325.8 371.4 398.2 428.1 4.2 4.8 5.1 5.7 6.1 6.9 7.6 8.2 92 10.0 11.0 12.4 13.8 14.4 17.8 23.3 26.7 31.1 35.1 40.7 44.7 53.2 63 7 67.4 69 2 76.6 79.7 93.0 106.2 118.4 133.5 152.2 165.2 4.3 50 5.4 61 6.6 7.4 81 8.3 89 10.3 11.9 13.0 14.1 16.4 23.8 30.3 28.2 32.8 37.7 47.1 69.7 80.6 941 97.3 95 8 108.1 97.3 96.0 105.1 128.7 145.4 147.7 25.0 30 2 31.4 33 5 36.1 41.0 43.5 47.2 50 2 55.6 61.2 70.8 74.2 83.4 115.6 152.6 164.4 181.6 196.5 233.3 299.7 360.9 398 2 379.9 372 5 410.5 399.3 415.2 469.0 572.9 650.3 698.2 22.3 22.8 22.7 25 0 26.1 28.1 31.5 37.1 39 9 46.6 50.5 55.8 62.3 74.2 91.2 127.5 122.7 151.1 182.4 212.3 252.7 293.9 317 7 303.2 3281 405.1 417.6 451.7 507.1 552.2 587.8 624.8 620.4 15.3 15.2 15.1 16.9 17.7 19.4 22.2 26.3 27 8 33.9 36.8 40.9 46.6 56.9 71.8 104.5 99.0 124.6 152.6 177.4 212.8 248.6 267 7 250.6 272 7 336.3 343.3 370.0 414.8 452.1 484.6 507.4 499.4 7.0 7.6 7.6 81 8.4 8.7 9.3 10.7 12 2 12.6 13.7 14.9 15.8 17.3 19.3 22.9 23.7 26.5 29.8 34.8 39.9 45.3 49 9 52.6 55 4 68.8 74.3 81.7 92.3 100.1 103.3 117.4 121.1 1.8 1.8 18 2.1 2.4 2.7 3.1 34 4.1 5.8 6.6 6.4 7.7 11.1 14.6 14.9 15.7 17.2 25.3 37.5 46.5 60 9 67.1 66 5 83.8 82.4 86.9 100.5 120.8 141.2 137.0 2.3 2.4 2.7 2.8 2.8 2.9 3.0 3.1 33 3.1 3.1 3.5 4.0 4.2 4.5 5.3 5.2 5.8 5.8 6.0 7.1 8.5 95 11.6 12 5 15.2 16.9 17.9 16.0 17.3 17.3 19.2 -26.7 357.5 388.3 415.2 402.9 426.7 506.8 541.8 562.1 580.7 606.9 265.6 286.2 308.7 304.7 333.9 392.4 418.5 438.8 452.4 467.0 198.2 218.2 231.4 222.6 235.8 283.3 304.7 321.5 331.6 345.4 67.4 67.9 77.3 82.1 98.1 109.2 113.8 117.3 120.7 121.6 91.9 102.1 106.6 98.1 92.8 114.4 123.3 123.3 128.3 139.9 357.5 388.3 415.2 402.9 426.7 506.8 541.8 562.1 580.7 606.9 295.1 358.0 415.7 440.2 467.1 535.6 540.5 544.3 550.9 573.1 241.6 53.4 300.0 58.0 344.1 71.6 363.0 77.2 382.4 84.7 437.6 98.0 441.6 99.0 445.7 98.6 451.1 99.8 470.1 103.0 64.4 71.0 85.5 82.4 88.9 106.9 111.4 117.7 124.1 130.2 13.3 17.4 20.0 18.9 19.2 20.7 16.2 14.4 15.3 23.2 1989:1 II III.... IV.... 627.2 653.5 649.6 671.1 486.1 506.2 506.2 521.3 358.6 376.5 370.3 380.4 127.5 129.7 135.9 140.9 141.1 147.3 143.4 149.8 627.2 653.5 649.6 671.1 575.0 589.2 588.3 598.8 473.6 487.9 485.1 491.8 101.5 101.3 103.2 107.0 136.7 148.2 140.9 139.2 1990:1 II III.... IV ... 679.6 688.1 694.1 730.9 534.6 545.9 548.7 572.6 390.3 397.5 395.0 410.0 144.2 148.4 153.7 162.6 145.0 142.2 145.4 158.3 679.6 688.1 694.1 730.9 612.6 606.3 631.2 649.2 500.2 492.8 511.8 525.0 112.4 113.5 119.4 124.1 134.8 141.5 139.1 132.6 1991:1 713.8 565.9 412.3 153.5 II .... 721.4 589.8 426.7 163.1 Ill ... 728.9 597.0 427.3 169.7 IV P.. 620.4 445.9 174.5 147.9 131.6 132.0 713.8 602.7 485.4 117.3 125.2 - 7 0 . 6 721.4 607.0 488.3 118.7 123.5 - 3 0 . 8 728.9 634.3 511.1 123.2 121.0 - 5 . 5 637.7 512.7 125.0 1 2 From From From persons government business (net) (net) Net foreign investment -1.2 3.2 4.3 3.9 5.0 7.6 6.3 3.9 36 1.8 1.8 5.0 1.4 -2.8 8.9 5.3 21.6 9.0 -9.0 -10.3 2.4 11.9 10.1 -1.9 -34.6 -93.6 -117.6 -141.4 -154.5 -117.5 -96.0 -82.8 0.4 1.8 .4 1.9 2.1 .5 5 2.1 2.1 .6 .7 2.1 .7 2.1 .7 2.2 9 2.1 1.9 .9 1.0 1.8 1.2 2.0 1.2 2.4 1.2 2.5 1.3 2.5 1.1 3.2 1.0 3.5 1.0 3.7 .9 3.4 .9 3.8 1.0 4.1 5.0 1.2 50 13 6.4 1.6 7.3 14 9.4 1.9 11.4 2.2 2.1 12.3 2.4 10.4 2.1 10.4 2.1 10.8 12.6 2.1 2.2 - 3 3 . 8 0.1 .1 .1 1 .1 .2 .2 .2 .2 1.5 1.6 2.1 2.0 2.4 2.4 2.3 1.9 2.1 2.2 8.2 11.0 13.9 13.5 12.8 14.6 9.1 7.8 9.4 15.1 3.7 4.8 4.0 3.4 4.0 3.8 4.8 4.7 3.8 5.9 16.3 14.6 16.7 21.7 1.9 2.2 2.0 2.2 9.8 7.8 10.7 14.8 4.6 -100.8 4.6 - 9 8 . 4 4.0 - 9 6 . 3 4.6 - 8 8 . 6 17.2 20.8 19.1 19.6 2.1 1.7 2.5 2.1 10.9 14.5 12.3 12.7 4.2 4.6 4.3 4.9 -85.0 -80.4 -95.3 -70.4 2.3 - 7 7 . 8 2.2 - 3 7 . 9 2.1 - 1 2 . 5 2.1 - 7 . 1 4.9 4.9 4.9 4.9 56.5 21.7 -20.9 .3 .4 .4 .5 .7 1.0 .7 1.1 1.4 1.4 2.0 2.4 32 3.6 3.8 3.9 3.2 3.5 3.2 4.8 4.4 4.5 4.9 -15.3 -58.2 -105.9 -138.7 -148.6 -156.4 -126.3 -114.4 -109.6 -119.5 Includes capital grants received by the United States (net), not shown separately. See Table B-26 for data. Exports and imports of certain goods, primarily military equipment purchased and sold by the Federal Government, are included in services. 3 Consists largely of receipts by U.S. residents of interest and dividends and reinvested earnings of foreign affiliates of U.S. corporations. 4 Consists largely of payments to foreign residents of interest and dividends and reinvested earnings of U.S. affiliates of foreign corporations. Source: Department of Commerce, Bureau of Economic Analysis. 318 TABLE B-19.—Exports and imports of goods and services and receipts and payments of factor income in 1987 dollars, 1959-91 [Billions of 1987 dollars; quarterly data at seasonally adjusted annual rates] Exports of goods and services Merchandise Year or quarter Total Total Durable goods Imports of goods and services 1 Nondurable goods Services 1 ceipts of factor in- 2 come Merchandise 1 Total Total Durable goods Nondura ble goods Services 1 Payments of factor in- 3 come 73.8 58.0 31.5 26.5 15.8 17.0 95.6 60.2 26.0 34.2 35.4 6.2 1960 1961 1962 1963 1964... 88.4 89.9 95.0 101.8 115.4 71.2 71.5 74.8 80.3 91.4 39.2 39.4 41.2 43.6 50.2 32.0 32.1 33.5 36.7 41.2 17.2 18.4 20.3 21.5 24.0 19.1 20.6 22.6 24.4 26.7 96.1 95.3 105.5 107.7 112.9 59.1 59.2 68.0 70.9 75.6 24.7 23.7 28.0 29.6 32.8 34.4 35.5 40.0 41.2 42.8 37.0 36.1 37.5 36.8 37.3 7.2 7.2 7.3 8.2 9.1 1965 1966 1967 1968 1969 118.1 125.7 130.0 140.2 147.8 92.1 98.4 100.1 108.8 114.4 52.2 56.1 63.8 70.0 75.2 39.9 42.3 36.3 38.7 39.2 25.9 27.3 29.9 31.5 33.3 28.3 28.1 29.2 32.3 35.8 124.5 143.7 153.7 177.7 189.2 86.5 100.2 105.2 128.1 137.0 40.5 50.6 53.1 68.7 74.1 46.0 49.6 52.1 59.4 62.8 37.9 43.5 48.6 49.6 52.3 9.9 11.0 11.8 13.6 17.8 1970 1971 1972 1973 1974 161.3 161.9 173.7 210.3 234.4 125.2 124.1 136.5 166.9 183.4 80.4 79.3 87.1 108.0 123.5 44.7 44.9 49.5 58.9 59.9 36.1 37.8 37.2 43.4 51.0 36.8 38.1 42.2 57.6 67.5 196.4 207.8 230.2 244.4 238.4 142.1 156.1 177.5 194.7 189.3 75.4 84.4 95.7 100.9 101.3 66.7 71.7 81.7 93.9 87.9 54.4 51.7 52.8 49.7 49.2 19.2 18.0 20.5 27.6 33.2 1975 1976 1977 1978 1979 232.9 243.4 246.9 270.2 293.5 178.5 183.9 183.9 203.0 225.7 121.3 121.8 119.5 132.1 148.1 57.2 62.1 64.4 70.9 77.6 54.4 59.5 63.0 67.2 67.8 57.4 63.0 67.9 78.7 107.1 209.8 249.7 274.7 300.1 304.1 163.3 200.4 223.2 245.2 248.7 82.1 100.9 112.9 130.0 132.1 81.2 99.5 110.3 115.3 116.7 46.5 49.3 51.5 54.8 55.3 31.6 31.5 32.2 43.2 58.6 1980 1981 1982 1983 1984 320.5 326.1 296.7 285.9 305.7 248.2 244.0 217.7 208.3 221.3 161.0 154.2 130.5 124.6 133.8 87.3 89.7 87.2 83.8 87.5 72.3 82.2 79.0 77.6 84.4 113.7 120.7 117.9 111.0 119.4 289.9 304.1 304.1 342.1 427.7 235.6 246.1 243.1 276.5 346.1 133.6 143.4 143.0 167.6 219.9 102.0 102.7 100.1 108.9 126.2 54.2 58.0 61.1 65.6 81.6 66.6 79.4 82.1 78.0 93.5 1985 1986 1987 1988 1989 309.2 329.6 364.0 421.6 469.2 224.8 234.3 257.7 307.4 343.8 139.3 144.8 163.0 202.8 230.6 85.6 89.6 94.7 104.6 113.2 84.4 95.3 106.3 114.2 125.4 103.4 99.2 105.0 123.8 133.7 454.6 484.7 507.1 525.7 544.9 366.5 398.0 414.8 431.3 450.4 237.2 254.6 264.2 274.7 287.0 129.3 143.4 150.6 156.7 163.4 88.1 86.7 92.3 94.3 94.5 88.2 90.2 100.4 116.1 129.9 1990 1991 * 505.7 539.6 369.4 398.3 249.3 269.9 120.1 128.5 136.2 141.3 130.2 557.0 557.2 458.5 458.7 290.0 291.9 168.4 166.7 98.5 98.5 120.4 1982: 1983: 1984: 1985: 1986: 1987: IV IV IV IV IV IV 280.4 291.5 312.8 312.0 342.9 386.1 202.8 215.5 229.0 226.4 243.5 278.0 119.0 131.0 138.5 139.6 150.0 180.1 83.7 84.5 90.5 86.8 93.5 97.8 77.6 75.9 83.8 85.5 99.4 108.1 109.7 116.5 116.1 102.9 94.8 112.9 299.4 375.1 444.2 467.4 498.9 522.1 236.3 306.6 357.9 380.0 409.1 427.4 134.6 191.1 229.3 243.5 259.8 273.8 101.7 115.5 128.6 136.5 149.3 153.7 63.1 68.6 86.3 87.4 89.8 94.6 77.6 82.0 93.9 86.8 91.2 105.4 1988:1 II Ill IV 407.1 417.2 424.1 438.2 296.0 303.6 308.1 322.0 192.7 201.2 202.7 214.7 103.3 102.4 105.4 107.2 111.2 113.6 116.0 116.2 120.8 119.3 122.6 132.3 520.5 515.2 526.1 540.9 426.5 422.8 431.3 444.8 271.1 269.3 274.4 284.0 155.4 153.4 156.9 160.8 94.0 92.5 94.8 96.1 109.0 113.8 118.4 123.0 1989:1 II Ill IV 451.2 469.5 470.5 485.8 330.3 347.0 343.1 354.8 220.8 232.8 230.9 237.7 109.5 114.1 112.2 117.1 120.9 122.5 127.4 131.0 131.7 136.1 131.2 135.8 532.4 541.3 550.3 555.7 439.9 447.5 455.4 458.9 282.4 286.0 288.8 290.8 157.4 161.5 166.6 168.2 92.5 93.8 94.9 96.8 127.6 136.9 129.0 126.1 1990:1 II Ill IV 496.2 502.1 501.6 522.5 364.9 368.0 365.1 379.4 243.9 249.9 248.6 254.5 121.0 118.1 116.5 124.9 131.3 134.1 136.5 143.1 130.0 125.9 127.2 137.4 552.2 554.5 567.4 553.7 455.9 457.2 467.9 453.0 283.7 287.1 296.4 293.0 172.3 170.1 171.5 160.0 96.3 97.4 99.5 100.7 120.6 125.0 121.4 114.7 1991:1 II Ill IV ".... 512.5 535.7 545.2 565.1 379.9 395.8 400.3 417.3 251.2 271.0 272.8 284.5 128.7 124.8 127.6 132.8 132.6 139.9 144.8 147.8 126.8 111.8 111.4 531.1 548.0 576.3 573.4 435.9 451.2 475.7 472.0 278.9 283.2 304.8 300.9 156.9 168.0 170.9 171.1 95.3 96.8 100.6 101.5 107.0 104.7 102.2 1959 1 Exports and imports of certain goods, primarily military equipment purchased and sold by the Federal Government, are included in services. 2 Consists largely of receipts by U.S. residents of interest and dividends and reinvested earnings of foreign affiliates of U.S. corporations. 3 Consists largely of payments to foreign residents of interest and dividends and reinvested earnings of U.S. affiliates of foreign corporations. Source: Department of Commerce, Bureau of Economic Analysis. 319 TABLE B-20.—Relation of gross domestic product, gross national product, net national product, and national income, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Year or quarter Less: Less: Plus: Equals: Gross Receipts Payments Equals: Net Indirect Gross Condomes- of factor of factor nationsumption nationbusiness Business tic income income to al al fixed prodtax and transfer prod- from rest rest of prod- ofcapital the 2 nontax payments uct of the uct uct liability world » world of government enterprises Equals: National income 3,222.6 3,578.4 3,890.2 4,156.2 4,340.5 4,690.5 44.6 46.3 47.7 49.3 51.3 53.9 57.3 62.1 67.4 73.9 81.5 88.8 97.6 109.9 120.4 140.2 165.2 182.8 205.2 234.8 272.4 311.9 362.4 399.1 418.4 433.2 454.5 478.6 502.2 534.0 574.5 594.8 623.5 412.5 439.7 448.0 465.6 488.2 512.1 452.5 470.2 487.7 526.5 556.4 599.2 650.7 712.8 752.4 821.5 884.2 928.3 1,007.3 1,105.7 1,241.9 1,334.1 1,433.9 1,602.7 1,789.4 2,019.8 2,248.4 2,430.2 2,701.4 2,780.8 3,016.0 3,368.3 3,599.1 3,799.2 4,042.4 4,374.2 4,673.7 4,929.8 5,060.3 2,810.1 3,138.7 3,442.2 3,690.7 3,852.3 4,178.5 41.9 45.5 48.1 51.7 54.7 58.8 62.7 65.4 70.4 79.0 86.6 94.3 103.6 111.4 121.0 129.3 140.0 151.6 165.5 177.8 188.7 212.0 249.3 256.4 280.1 309.5 329.9 345.5 365.0 385.3 411.0 439.2 470.7 262.3 291.7 317.7 335.1 351.6 372.3 1.4 1.4 1.5 1.6 1.8 2.0 2.2 2.3 2.5 2.8 3.1 3.2 3.4 3.9 4.5 5.0 5.2 6.5 7.3 8.2 9.9 11.2 13.4 15.4 16.6 19.0 21.0 24.2 24.0 25.6 26.8 27.7 31.2 16.0 18.1 20.2 22.2 24.9 24.2 111.4 117.7 124.1 130.2 4,764.3 4,862.7 4,951.6 5,054.3 522.4 529.9 536.5 547.2 4,241.9 4,332.8 4,415.1 4,507.2 376.8 382.0 388.3 394.2 25.2 25.3 24.6 27.2 -34.4 -28.1 -25.8 -25.4 L4 1.2 1.2 1.5 2.6 2.4 3.4 2.6 .4 2.6 1.4 3.3 3.6 2.9 4.8 4.7 6.2 11.7 9.5 6.4 9.7 14.1 10.9 6.1 4.8 .6 9.6 19.2 9.7 2.6 8.2 22.0 14.6 12.8 -.3 16.5 141.1 147.3 143.4 149.8 136.7 148.2 140.9 139.2 5,144.3 5,217.7 5,279.8 5,350.9 556.0 563.6 586.7 591.7 4,588.2 4,654.1 4,693.2 4,759.2 399.9 408.1 416.7 419.2 27.2 26.9 26.3 27.0 -26.0 -5.2 2.5 17.9 15.4 6.5 -3.0 5.3 4,202.6 4,230.9 4,244.7 4,300.5 5,422.4 5,504.7 5,570.5 5,557.5 145.0 142.2 145.4 158.3 134.8 141.5 139.1 132.6 5,432.7 5,505.5 5,576.8 5,583.2 585.3 590.1 598.3 605.4 4,847.4 4,915.4 4,978.5 4,977.8 430.8 432.3 442.3 451.2 26.8 27.7 27.6 28.5 4.4 -2.4 28.2 2.1 10.2 3.3 -5.2 10.8 4,395.5 4,461.0 4,475.2 4,506.8 5,589.0 5,652.6 5,709.2 5,736.6 147.9 131.6 132.0 125.2 5,611.7 123.5 5,660.6 121.0 5,720.1 615.4 620.0 623.7 635.1 4,996.3 5,040.6 5,096.4 5,107.7 461.6 464.5 475.6 481.0 29.6 30.7 31.8 32.8 18.0 16.5 22.0 2.7 1.9 -7.1 4.8 4,489.8 4,530.8 4,559.8 1981 .. 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991" 1982: IV... 1983: IV... 1984: IV... 1985: IV... 1986: IV... 1987: IV... 494.2 513.4 531.8 571.6 603.1 648.0 702.7 769.8 814.3 889.3 959.5 1,010.7 1,097.2 1,207.0 1,349.6 1,458.6 1,585.9 1,768.4 1,974.1 2,232.7 2,488.6 2,708.0 3,030.6 3,149.6 3,405.0 3,777.2 4,038.7 4,268.6 4,539.9 4,900.4 5,244.0 5,513.8 5,671.8 3,195.1 3,547.3 3,869.1 4,140.5 4,336.6 4,683.0 4.3 5.0 5.4 6.1 6.6 7.4 8.1 8.3 8.9 10.3 11.9 13.0 14.1 16.4 23.8 30.3 28.2 32.8 37.7 47.1 69.7 80.6 94.1 97.3 95.8 108.1 97.3 96.0 105.1 128.7 145.4 147.7 1.5 1.8 1.8 1.8 2.1 2.4 2.7 3.1 3.4 4.1 5.8 6.6 6.4 7.7 11.1 14.6 14.9 15.7 17.2 25.3 37.5 46.5 60.9 67.1 66.5 83.8 82.4 86.9 100.5 120.8 141.2 137.0 497.0 516.6 535.4 575.8 607.7 653.p 708.1 774.9 819.8 895.5 965.6 1,017.1 1,104.9 1,215.7 1,362.3 1,474.3 1,599.1 1,785.5 1,994.6 2,254.5 2,520.8 2,742.1 3,063.8 3,179.8 3,434.4 3,801.5 4,053.6 4,277.7 4,544.5 4,908.2 5,248.2 5,524.5 91.9 102.1 106.6 98.1 92.8 114.4 64.4 71.0 85.5 82.4 88.9 106.9 1988:1 II.... III... IV... 4,752.4 4,857.2 4,947.3 5,044.6 123.3 123.3 128.3 139.9 1989:1.. IV... 5,139.9 5,218.5 5,277.3 5,340.4 1990:1 II III... IV... 1991:1 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Statistical discrepancy Plus: Subsidies less current surplus -1.8 -3.1 -2.2 -1.0 -2.0 -0.9 -.8 ".3 ~!l -.7 2.8 .8 -l!6 .0 3.1 1.1 ~L4 6.0 10.4 10.9 7.6 13.8 13.6 10.9 -7.4 10.2 -9.0 -13.9 1.2 -24.8 -28.4 -2.7 8.1 -10.1 13.8 -20.5 -5.9 -2.0 -24.9 410.1 425.7 440.5 474.5 501.5 539.1 586.9 643.7 679.9 741.0 798.6 833.5 899.5 992.9 1,119.5 1,198.8 1,285.3 1,435.5 1,609.1 1,829.8 2,038.9 2,198.2 2,432.5 2,522.5 2,720.8 3,058.3 3,268.4 3,437.9 3,692.3 4,002.6 4,244.7 4,459.6 2,551.5 2,834.3 3,134.4 3,341.9 3,486.0 3,828.8 3,888.8 3,966.3 4,027.6 4,127.6 1 Consists largely of receipts by U.S. residents of interest and dividends and reinvested earnings of foreign affiliates of U.S. corporations. 2 Consists largely of payments to foreign residents of interest and dividends and reinvested earnings of U.S. affiliates of foreign corporations. Source: Department of Commerce, Bureau of Economic Analysis. 320 TABLE B-21.—Relation of national income and personal income, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Less: Year or quarter National income Corporate profits with inventory valuation and capital consumption adjustments Equals: Plus: Net interest Contributions for social insurance 18.8 21.9 22.9 25.4 28.5 30.1 31.6 40.6 45.5 50.4 57.9 62.2 68.9 79.0 97.6 110.5 118.5 134.5 149.8 171.8 197.8 216.6 251.3 269.6 290.2 325.0 353.8 379.8 400.7 442.3 473.4 501.7 527.3 272.8 298.3 332.2 362.3 388.7 409.6 431.3 438.7 445.6 453.5 Wage accruals less disbursements Government transfer payments to persons Business transfer payments to persons Personal income 12.7 13.4 14.0 15.0 16.1 18.0 20.2 20.9 22.1 24.5 25.1 23.5 23.5 25.5 27.7 29.6 29.2 34.7 39.4 44.2 50.4 57.1 66.9 67.1 77.8 78.8 87.9 104.7 100.4 108.4 119.8 124.8 128.5 69.4 80.6 79.3 92.7 105.6 100.1 103.1 106.4 110.5 113.8 25.7 27.5 31.5 32.6 34.5 36.0 39.1 43.6 52.3 60.6 67.5 81.8 97.0 108.4 124.1 147.4 185.7 202.8 217.5 234.8 262.8 312.6 355.7 396.3 426.1 437.8 468.1 497.1 521.3 555.9 602.0 661.7 732.8 419.9 428.0 442.3 474.8 505.8 528.1 548.9 553.2 557.9 563.5 1.3 1.3 1.4 1.5 1.7 1.8 2.0 2.1 2.3 2.5 2.8 2.8 3.0 3.4 3.8 4.0 4.5 5.5 5.9 6.8 7.9 8.8 10.2 11.8 12.8 15.1 17.8 20.7 20.8 20.8 22.4 23.2 26.3 12.3 13.2 16.2 18.8 20.9 20.4 20.5 20.7 20.8 21.3 391.2 409.2 426.5 453.4 476.4 510.7 552.9 601.7 646.5 709.9 773.7 831.0 893.5 980.5 1,098.7 1,205.7 1,307.3 1,446.3 1,601.3 1,807.9 2,033.1 2,265.4 2,534.7 2,690.9 2,862.5 3,154.6 3,379.8 3,590.4 3,802.0 4,075.9 4,380.2 4,679.8 4,833.9 2,746.8 2,965.8 3,242.5 3,456.7 3,647.8 3,918.5 3,967.7 4,037.9 4,102.9 4,195.2 Personal interest income Personal dividend income 22.7 25.0 26.9 29.3 32.4 36.1 40.3 44.9 49.5 54.6 60.8 69.2 75.7 81.8 94.1 112.4 123.0 134.6 155.7 184.5 223.2 274,0 336.1 376.8 397.5 461.9 498.1 531.7 548.1 583.2 669.0 721.3 719.4 373.6 418.7 485.4 507.5 532.6 562.3 564.8 570.8 588.1 608.9 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1982: 1983: IV.... 1984: IV.... 1985: IV.... IV.... 1986: IV.... 1987: IV.... 1988: I II III.... IV.... 410.1 425.7 440.5 474.5 501.5 539.1 586.9 643.7 679.9 741.0 798.6 833.5 899.5 992.9 1,119.5 1,198.8 1,285.3 1,435.5 1,609.1 1,829.8 2,038.9 2,198.2 2,432.5 2,522.5 2,720.8 3,058.3 3,268.4 3,437.9 3,692.3 4,002.6 4,244.7 4,459.6 52.3 50.7 51.6 59.6 65.1 72.1 82.9 88.6 86.0 92.6 89.6 77.5 90.3 103.2 116.4 104.5 121.9 147.1 175.7 199.7 202.5 177.7 182.0 151.5 212.7 264.2 280.8 271.6 319.8 365.0 351.7 319.0 2,551.5 2,834.2 3,134.4 3,341.9 3,486.0 3,828.8 3,888.8 3,966.3 4,027.6 4,127.6 150.3 229.1 261.3 284.9 264.6 343.3 352.1 364.2 365.3 378.3 10.2 11.2 13.1 14.6 16.1 18.2 21.1 24.3 28.1 30.4 33.6 40.0 45.4 49.3 56.5 71.8 80.0 85.1 100.7 120.5 149.9 191.2 233.4 262.4 270.0 307.9 326.2 350.2 360.4 387.7 452.6 490.1 481.3 256.8 281.8 321.1 331.9 349.7 368.6 374.9 376.5 391.1 408.1 1989:1 II... III.. IV. 4,202.6 4,230.9 4,244.7 4,300.5 366.2 361.0 345.0 334.7 429.9 448.4 462.4 469.6 466.8 471.3 475.4 480.2 639.4 665.6 679.1 691.9 117.0 119.1 120.8 122.2 585.0 594.6 606.8 621.8 22.6 22.3 22.3 22.4 4,303.8 4,351.7 4,390.9 4,474.4 1990:1 II... III.. IV.. 4,395.5 4,461.0 4,475.2 4,506.8 340.2 339.8 299.8 296.1 477.5 484.5 491.8 506.4 493.0 498.6 505.8 509.3 703.0 716.2 729.1 736.9 123.7 123.5 124.8 127.0 646.6 653.7 664.4 682.2 22.6 23.1 23.2 23.6 4,580.6 4,654.7 4,719.3 4,764.7 1991:1 II Ill IV "..... 4,489.8 4,530.8 4,559.8 302.1 303.5 306.1 492.6 481.6 480.1 470.8 522.9 525.7 529.5 531.3 730.1 721.8 716.7 709.1 128.7 127.4 128.7 129.4 712.5 725.7 736.8 756.2 24.7 25.8 26.9 27.8 4,768.0 4,821.1 4,853.3 4,893.1 Source: Department of Commerce, Bureau of Economic Analysis. 321 0.0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .6 .0 -.1 .1 .1 .1 .3 -.2 -.4 .2 -.2 .1 -.1 -.2 — .4 TABLE B-22.—National income by type of income, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Compensation of employees Year or quarter 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 * 1982: IV... 1983: IV... 1984: IV... 1985: IV... 1986: IV... 1987: IV... 1988:1 II.... III.. IV... 1989:1 IV... 1990:1... 1991: I.. National incomex 410.1 425.7 440.5 474.5 5C1.5 539.1 586.9 643.7 679.9 741.0 798.6 833.5 899.5 992.9 1,119.5 1,198.8 1,285.3 1,435.5 1,609.1 1,829.8 2,038.9 2,198.2 2,432.5 2,522.5 2,720.8 3,058.3 3,268.4 3,437.9 3,692.3 4,002.6 4,244.7 4,459.6 2,551.5 2,834.3 3,134.4 3,341.9 3,486.0 3,828.8 3,888.8 3,966.3 4,027.6 4,127.6 4,202.6 4,230.9 4,244.7 4,300.5 4,395.5 4,461.0 4,475.2 4,506.8 4,489.8 4,530.8 4,559.8 IV "... Total Wages and salaries 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 1,058.3 1,177.3 1,333.0 1,496.4 1,644.4 1,815.5 1,916.0 2,029.4 2,226.9 2,382.8 2,523.8 2,698.7 2,921.3 3,101.3 3,290.3 3,387.7 1,940.4 2,101.2 2,288.1 2,442.5 2,582.5 2,785.1 2,834.6 2,895.4 2,950.2 3,004.9 3,051.8 3,081.0 3,114.9 3,157.4 3,216.1 3,279.9 3,325.3 3,340.0 3,342.9 3,377.4 3,405.3 3,425.1 259.8 272.8 280.5 299.3 314.8 337.7 363.7 400.3 428.9 471.9 518.3 551.5 584.5 638.7 708.6 772.2 814.7 899.6 994.0 1,120.9 1,255.3 1,376.6 1,515.6 1,593.3 1,684.2 1,850.0 1,986.3 2,105.4 2,261.2 2,443.0 2,585.8 2,738.9 2,807.7 1,611.8 1,747.3 1,903.9 2,039.1 2,153.9 2,336.7 2,371.5 2,422.9 2,467.0 2,510.6 2,547.8 2.569.4 2,595.8 2,630.2 2.675.9 2,731.6 2,769.9 2,778.3 2,771.1 2,800.2 2,822.4 2,837.2 Proprietors' income with inventory valuation and capital consumption adjustments Supplements to wages and salaries 2 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 87.6 104.2 119.1 134.0 158.7 183.3 212.1 241.1 267.8 299.8 322.7 345.2 376.9 396.5 418.4 437.4 478.3 515.5 551.4 580.0 328.6 353.9 384.2 403.3 428.6 448.4 463.1 472.5 483.2 494.3 503.9 511.6 519.1 527.2 540.1 548.3 555.4 561.6 571.8 577.2 582.9 587.9 Farm Total 51.7 51.9 54.3 56.4 57.7 60.5 65.0 69.4 70.9 75.1 78.9 79.9 86.2 97.4 116.5 115.3 121.2 132.9 146.4 167.7 181.8 171.8 180.8 170.7 186.7 236.0 259.9 283.7 310.2 324.3 347.0 373.2 379.6 179.9 200.1 239.6 268.7 284.4 325.0 320.9 326.1 316.8 333.4 357.0 347.0 332.7 351.3 375.8 374.2 368.8 373.9 364.2 380.0 382.5 391.9 1 Total 10.7 11.2 11.9 11.9 11.8 10.6 12.9 14.0 12.7 12.7 14.4 14.6 15.2 19.1 32.2 25.5 23.7 18.3 17.1 21.5 24.7 11.5 21.2 13.5 2.4 21.3 21.5 22.3 31.3 30.9 41.4 42.5 35.2 10.2 6.3 21.9 17.8 23.6 42.4 35.4 34.1 23.1 30.9 51.5 43.8 29.6 41.0 50.9 45.3 32.4 41.2 32.8 39.6 32.0 36.3 Proprietors' income 3 11.6 12.1 12.7 12.7 12.5 11.3 13.7 14.8 13.5 13.6 15.6 15.9 16.6 20.9 34.3 28.2 27.5 22.5 21.8 27.0 31.2 19.4 30.2 23.1 12.1 30.8 30.5 31.0 39.6 38.8 49.6 50.3 42.8 20.0 15.8 31.2 26.7 32.1 50.6 43.6 42.1 30.9 38.8 59.5 51.8 38.0 49.0 58.9 53.2 40.2 49.0 40.5 47.1 39.6 43.9 Nonfarm Capital consumption adjustment -0.9 -.8 -.8 -.8 -7 -.7 -.9 -1.1 -1.3 -1.4 -1.8 -2.0 -2.8 -3.8 -4.2 -4.8 -5.5 -6.4 -7.9 -9.0 -9.7 -9.7 -9.4 -9.0 -8.7 -8.3 -8.0 -8.1 -7.9 -7.6 -9.8 -9.5 -9.3 -8.9 -8.6 -8.2 -8.2 -8.0 -7.8 -7.9 -8.0 -8.0 -8.4 -8.0 -8.0 -7.8 -7.8 -7.8 -7.7 -7.6 -7.6 -7.6 Total 41.1 40.6 42.4 44.5 45.9 49.8 52.1 55.3 58.2 62.4 64.5 65.3 70.9 78.3 84.3 89.8 97.5 114.6 129.4 146.2 157.0 160.3 159.6 157.3 184.3 214.7 238.4 261.5 279.0 293.4 305.5 330.7 344.5 169.6 193.8 217.7 250.9 260.9 282.6 285.5 292.0 293.8 302.5 305.5 303.2 303.2 310.2 324.9 328.8 336.5 332.7 331.4 340.4 350.5 355.6 Proprietors' income 40.2 39.8 41.8 43.9 45.2 49.2 51.9 55.4 58.3 63.0 65.0 66.0 72.0 79.3 86.5 94.2 100.2 117.6 132.5 150.2 161.8 165.8 160.9 157.8 176.1 197.1 212.4 230.6 252.4 266.8 278.6 308.9 325.4 168.0 182.5 196.6 223.2 230.0 254.2 257.7 265.5 269.0 274.9 279.8 275.3 275.1 284.4 300.6 306.1 315.7 313.0 312.5 321.6 331.5 336.0 Inven- Capital contory valua- sumption tion adjust- adjustment ment 0.0 .0 .0 .0 .0 -.1 -.2 -.2 -.2 -.4 -.5 -.5 -.6 -.7 -2.0 -3.8 -1.2 -1.3 -1.3 -2.1 -2.9 -3.0 -1.4 -.6 -.6 -.2 -.1 -.8 -1.5 -1.2 -.8 -.3 .6 -1.6 .1 -1.4 17 .8 -1.3 -4.0 -1.4 -3.3 -1.0 .2 -1.0 -.9 -.9 -.5 -.3 -.3 -.1 0.9 .8 .6 .6 7 .4 .2 .1 -.2 .0 -.1 -2 -.2 -.6 -1.4 -1.7 -1.8 -2.0 -1.9 -2.5 .2 .0 8.7 18.1 26.1 30.9 27.4 28.1 28.1 227 19.4 1.1 12.9 21.0 29.1 30.1 26.7 26.9 27.8 28.7 29.0 29.1 28.9 27.9 26.6 25.3 23.6 21.6 20.2 19.1 19.2 19.4 19.7 National income is the total net income earned in production. It differs from gross domestic product mainly in that it excludes depreciation charges and other allowances for business and institutional consumption of durable capital goods and indirect business taxes. See Table B-20. See next page for continuation of table. 322 TABLE B-22.—National income by type of income, 1959-91—Continued [Billions of dollars; quarterly data at seasonally adjusted annual rates] Rental income of persons with capital consumption adjustment Year or quarter Total 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 P 1982: IV 1983: IV 1984: IV 1985: IV 1986: IV 1987: IV 1988:1 II III IV 1989:1 II. III IV 1990:1 II III IV 1991:1 II. III IV 2 3 14.7 15.3 15.8 16.5 17.1 17.3 18.0 18.5 19.4 18.2 18.0 17.8 18.2 16.8 17.3 15.8 13.5 12.1 9.0 8.9 8.4 13.2 20.8 21.9 22.1 23.3 18.7 8.7 3.2 4.3 -7.9 -12.9 -13.2 24.1 22.2 24.3 14.0 4.7 6.8 6.2 4.1 4.2 2.8 -2.2 -6.5 -10.3 -12.5 -14.2 -17.3 -10.4 -9.5 -11.9 -11.7 -14.2 -15.2 Capital Rental conincome sumption of adjustpersons ment 18.0 18.7 19.2 19.8 20.3 20.5 21.3 22.1 23.4 22.8 23.9 24.2 25.6 26.1 28.2 29.3 29.5 29.9 30.0 34.4 39.1 49.0 61.1 64.4 64.8 66.5 63.4 53.4 50.0 53.4 46.9 40.6 42.0 66.5 64.5 67.6 60.0 50.2 54.2 54.9 53.0 53.2 52.6 48.5 45.3 49.0 44.8 39.0 35.8 43.5 44.0 41.9 42.6 40.9 42.8 Corporate profits with inventory valuation and capital consumption adjustments Profits with inventory valuation adjustment and without capital consumption adjustment Profits Total -3.4 52.3 -3.4 -3.3 -3.3 -3.2 -3.2 50.7 51.6 59.6 65.1 72.1 -3.3 -3.6 -3.9 -4.6 -5.9 82.9 88.6 86.0 92.6 89.6 -6.4 -7.4 -9.3 -10.9 -13.5 77.5 90.3 103.2 116.4 104.5 -15.9 -17.8 -21.0 -25.5 -30.8 121.9 147.1 175.7 199.7 202.5 -35.8 -40.2 -42.4 -42.8 -43.2 177.7 182.0 151.5 212.7 264.2 -44.6 -44.7 -46.8 -49.1 -54.8 280.8 271.6 319.8 365.0 351.7 -53.4 -55.3 -42.3 -42.4 -43.4 -46.0 -45.5 -47.4 -48.6 -48.9 -49.0 -49.7 -50.7 -51.8 -59.4 -57.3 -53.2 -53.2 -53.9 -53.5 -53.8 -54.2 -55.1 -58.0 Profits after tax Total Profits before tax Profits tax liability Total 319.0 53.1 51.0 51.3 56.4 61.2 67.5 77.6 83.0 80.3 86.9 83.2 71.8 85.5 97.9 110.9 103.4 129.4 158.8 186.7 212.8 219.8 197.8 203.2 166.4 202.2 236.4 225.3 227.6 273.4 320.3 327.0 318.2 53.4 51.1 51.0 56.4 61.2 68.0 78.8 85.1 81.8 90.6 89.0 78.4 90.1 104.5 130.9 142.8 140.4 173.7 203.3 237.9 261.4 240.9 228.9 176.3 210.7 240.5 225.0 217.8 287.9 347.5 344.5 332.3 23.6 22.7 22.8 24.0 26.2 28.0 30.9 33.7 32.7 39.4 39.7 34.4 37.7 41.9 49.3 51.8 50.9 64.2 73.0 83.5 88.0 84.8 81.1 63.1 77.2 94.0 96.5 106.5 127.1 137.0 138.0 135.3 29.7 28.4 28.2 32.4 34.9 40.0 47.9 51.4 49.2 51.2 49.4 44.0 52.4 62.6 81.6 91.0 89.5 109.5 130.3 154.4 173.4 156.1 147.8 113.2 133.5 146.4 128.5 111.3 160.8 210.5 206.6 197.0 150.3 229.1 261.3 284.9 264.6 343.3 352.1 364.2 365.3 378.3 366.2 361.0 345.0 334.7 340.2 339.8 299.8 296.1 302.1 303.5 306.1 160.0 216.2 223.6 228.0 225.0 293.4 303.3 316.8 320.4 340.5 332.9 332.2 323.6 319.2 330.0 335.4 302.4 304.9 315.7 316.1 313.4 168.6 223.8 220.1 231.8 235.7 311.2 322.1 342.9 353.0 372.2 370.5 347.9 326.9 332.8 336.6 331.6 335.1 326.1 309.1 306.2 318.2 58.7 82.2 83.8 97.6 116.6 135.2 126.6 135.7 139.6 146.2 149.2 141.7 131.2 129.8 137.6 137.9 138.8 127.1 119.4 123.5 128.6 109.9 141.6 136.3 134.2 119.2 176.0 195.5 207.2 213.4 226.0 221.3 206.2 195.7 203.0 199.1 193.7 196.3 199.0 189.7 182.7 189.6 UndisDivitributed dends profits 12.7 13.4 14.0 15.0 16.1 18.0 20.2 20.9 22.1 24.6 25.2 23.7 23.7 25.8 28.1 30.4 30.1 35.6 40.7 45.9 52.4 59.0 69.2 70.0 81.2 82.7 92.4 109.8 106.2 115.3 127.9 133.7 137.8 72.5 84.2 83.4 97.4 111.0 106.3 109.6 113.3 117.5 121.0 124.6 127.1 129.1 130.7 132.3 132.5 133.8 136.2 137.8 136.7 138.1 138.5 17.0 15.0 14.3 17.4 18.8 22.0 27.8 30.5 27.1 26.6 24.1 20.3 28.6 36.9 53.5 60.6 59.4 73.9 89.5 108.5 121.0 97.1 78.6 43.2 52.3 63.8 36.1 1.6 54.6 95.2 78.7 63.3 37.5 57.4 52.9 36.9 8.2 69.7 86.0 93.9 95.8 105.0 96.6 79.2 66.7 72.3 66.7 61.2 62.5 62.8 51.9 46.1 51.5 Inventory valuation adjustment -0.3 _ 2 -.3 -.0 -.1 -.5 -1.2 -2.1 -1.6 -3.7 -5.9 -0.8 -6.6 -4.6 -6.6 -20.0 -39.5 5.6 4.8 5.3 5.5 1.2 -11.0 -14.9 -16.6 -25.0 -41.6 -7.6 -11.7 -11.0 -13.1 -17.3 -43.0 -25.7 -9.9 -8.5 -4.1 -20.2 -21.2 -14.9 10.4 27.8 .2 9.7 -14.5 -27.3 -17.5 55.5 44.1 46.4 44.7 24.7 -14.2 3.8 -8.6 -7.6 3.5 -3.8 -10.7 -17.8 -18.8 -26.1 -32.6 -31.7 -37.6 -15.7 -3.3 -13.5 -6.6 3.8 -32.6 -21.2 6.7 9.9 -4.8 3.3 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. 323 Capital Net coninterest sumption adjustment -.3 .3 3.2 3.9 4.6 5.3 5.6 5.7 5.6 6.4 -9.1 -9.6 12.9 37.7 56.9 39.6 49.9 48.8 47.4 44.8 37.9 33.2 28.7 21.4 15.4 10.2 4.4 -2.7 -8.8 -13.6 -12.6 -7.3 -2.9 TABLE B-23.—Sources of personal income, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Wage and salary disbursementsl Year or quarter Personal income Commodityproducing industries Total Total 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 P 1982: IV.. 1983: IV.. 1984: IV.. 1985: IV.. 1986: IV.. 1987: IV.. 1988:1 II... III.. IV.. 1989:1.... II... III.. IV.. 1990:1.... II... III.. IV.. 1991:1.... Ill IV P. ... 391.2 409.2 426.5 453.4 476.4 510.7 552.9 601.7 646.5 709.9 773.7 831.0 893.5 980.5 1,098.7 1,205.7 1,307.3 1,446.3 1,601.3 1,807.9 2,033.1 2,265.4 2,534.7 2,690.9 2,862.5 3,154.6 3,379.8 3,590.4 3,802.0 4,075.9 4,380.2 4,679.8 4,833.9 2,746.8 2,965.8 3,242.5 3,456.7 3,647.8 3,918.5 3,967.7 4,037.9 4,102.9 4,195.2 4,303.8 4,351.7 4,390.9 4,474.4 4,580.6 4,654.7 4,719.3 4,764.7 4,768.0 4,821.1 4,853.3 4,893.1 259.8 272.8 280.5 299.3 314.8 337.7 363.7 400.3 428.9 471.9 518.3 551.5 583.9 638.7 708.7 772.6 814.6 899.5 993.9 1,120.7 1,255.4 1,376.6 1,515.6 1,593.3 1,684.7 1,849.8 1,986.5 2,105.4 2,261.2 2,443.0 2,585.8 2,738.9 2,807.8 1.611.7 1.747.3 1.903.3 2,039.1 2,153.9 2,337.0 2,371.5 2,422.9 2,467.0 2,510.6 2,547.8 2,569.4 2,595.8 2,630.2 2,675.9 2,731.6 2,769.8 2,778.2 2,770.9 2,800.6 2,822.4 2,837.2 109.9 113.4 114.0 122.2 127.4 136.0 146.6 161.6 169.0 184.1 200.4 203.7 209.1 228.2 255.9 276.5 277.1 309.7 346.1 392.6 442.1 471.9 513.7 513.5 525.1 580.8 612.2 628.5 651.8 699.1 723.8 745.4 738.7 503.9 547.6 594.5 622.6 635.3 668.4 682.1 694.8 703.9 715.3 720.8 719.7 724.2 730.7 737.4 747.7 751.2 745.2 733.4 735.2 742.3 744.0 Manufacturing 86.9 89.8 89.9 96.8 100.7 107.3 115.7 128.2 134.3 146.0 157.7 158.4 160.5 175.6 196.6 211.8 211.6 238.0 266.7 300.1 334.9 355.7 386.9 384.3 397.7 439.8 461.3 473.8 490.1 524.5 542.1 555.8 556.5 378.0 415.7 450.5 469.1 478.5 501.6 512.6 520.6 527.3 537.5 542.1 539.6 541.8 544.7 548.0 557.5 560.4 557.3 549.3 552.3 559.9 564.4 1 Distributive industries Service industries Government Other labor income 1 Proprietors' income with inventory valuation and capital consumption adjustments Farm 65.1 68.6 69.6 73.3 76.8 82.0 87.9 95.1 101.6 110.8 121.7 131.2 140.4 153.3 170.3 186.8 198.1 219.5 242.7 274.9 308.4 336.4 368.1 385.8 406.2 445.4 475.9 501.7 536.9 575.3 607.5 634.6 641.2 391.2 422.4 458.4 487.6 512.5 551.9 559.6 571.0 580.8 589.9 599.9 605.1 608.8 616.0 624.6 634.5 640.4 639.0 635.1 642.0 644.0 643.8 38.8 41.7 44.4 47.6 50.7 54.9 59.4 65.3 72.0 80.4 90.6 99.4 107.9 119.7 133.9 148.6 163.4 181.6 202.8 233.7 267.7 306.9 348.1 386.5 427.4 475.8 524.5 579.5 650.7 719.6 775.9 845.0 887.6 400.9 445.8 494.4 546.8 602.1 685.0 690.2 711.4 730.1 746.8 758.7 770.0 781.1 793.9 812.4 838.0 860.6 868.8 866.5 883.0 894.4 906.6 46.0 49.2 52.4 56.3 60.0 64.9 69.9 78.3 86.4 96.6 105.5 117.1 126.5 137.4 148.7 160.9 176.0 188.6 202.3 219.4 237.3 261.4 285.7 307.5 325.9 347.8 373.9 395.7 421.8 449.0 478.6 514.0 540.2 315.6 331.5 356.1 382.2 404.0 431.7 439.7 445.7 452.1 458.5 468.4 474.7 481.8 489.7 501.5 511.4 517.7 525.2 535.8 540.5 541.8 542.8 10.6 11.2 11.8 13.0 14.0 15.7 17.8 19.9 21.7 25.2 28.5 32.5 36.7 43.0 49.2 56.5 65.9 79.7 94.7 110.1 124.3 139.8 153.0 165.4 174.6 184.7 191.8 200.7 210.4 230.5 253.7 274.0 290.6 169.2 179.0 187.7 193.9 205.3 216.5 221.4 226.6 233.6 240.3 245.8 251.0 256.4 261.7 267.8 272.1 276.3 279.9 284.2 288.5 292.8 297.0 10.7 11.2 11.9 11.9 11.8 10.6 12.9 14.0 12.7 12.7 14.4 14.6 15.2 19.1 32.2 25.5 23.7 18.3 17.1 21.5 24.7 11.5 21.2 13.5 2.4 21.3 21.5 22.3 31.3 30.9 41.4 42.5 35.2 10.2 6.3 21.9 17.8 23.6 42.4 35.4 34.1 23.1 30.9 51.5 43.8 29.6 41.0 50.9 45.3 32.4 41.2 32.8 39.6 32.0 36.3 Nonfarm 41.1 40.6 42.4 44.5 45.9 49.8 52.1 55.3 58.2 62.4 64.5 65.3 70.9 78.3 84.3 89.8 97.5 114.6 129.4 146.2 157.0 160.3 159.6 157.3 184.3 214.7 238.4 261.5 279.0 293.4 305.5 330.7 344.5 169.6 193.8 217.7 250.9 260.9 282.6 285.5 292.0 293.8 302.5 305.5 303.2 303.2 310.2 324.9 328.8 336.5 332.7 331.4 340.4 350.5 355.6 The total of wage and salary disbursements and other labor income differs from compensation of employees in Table B-22 in that it excludes employer contributions for social insurance and the excess of wage accruals over wage disbursements. 324 TABLE B-23.—Sources of personal income, 1959-91— Continued [Billions of dollars; quarterly data at seasonally adjusted annual rates] Rental income of Year or quarter with Personal Personal interest capital dividend income income consumption adjustment Transfer payments to persons Total Old-age, Govern- Aid to survivors, Government ment families unememploywith and Veterans ees dependployment Other health benefits retireinsurent insurance ment children ance benefits benefits (AFDC) benefits Less: Personal contribu- Nonfarm tions for personal income2 social insurance 14.7 12.7 22.7 27.0 2.8 4.6 1959 10.2 2.8 0.9 5.7 7.9 376.2 15.3 13.4 25.0 28.8 3.0 4.6 393.7 1960 3.1 9.3 11.1 1.0 6.1 15.8 14.0 26.9 32.8 4.3 5.0 410.4 9.7 1961 3.4 1.1 6.5 12.6 16.5 15.0 29.3 34.1 3.1 4.7 437.0 1962 3.7 7.0 10.3 14.3 1.3 17.1 16.1 32.4 36.2 3.0 4.8 460.0 1963 11.8 15.2 4.2 7.6 1.4 17.3 18.0 36.1 37.9 2.7 4.7 1964 12.6 495.3 4.7 8.2 16.0 1.5 18.0 20.2 40.3 41.1 2.3 4.9 534.9 1965 18.1 5.2 9.0 13.3 1.7 18.5 20.9 44.9 45.7 1.9 4.9 582.4 1966 6.1 17.8 20.8 1.9 10.3 19.4 22.1 49.5 54.6 2.2 5.6 1967 20.6 628.3 25.5 6.9 2.3 12.2 18.2 24.5 54.6 63.2 2.1 5.9 1968 22.9 691.4 30.2 7.6 2.8 14.5 18.0 25.1 60.8 70.3 2.2 6.7 1969 26.2 753.1 32.9 8.7 3.5 16.2 17.8 23.5 69.2 84.6 4.0 7.7 1970 27.9 809.8 38.5 10.2 4.8 19.4 18.2 23.5 75.7 100.1 5.8 8.8 1971 30.7 871.5 6.2 23.0 44.5 11.8 16.8 25.5 81.8 111.8 5.7 9.7 954.2 1972 34.5 6.9 26.1 49.6 13.8 17.3 27.7 94.1 127.9 4.4 10.4 42.6 1,058.1 1973 60.4 7.2 29.5 16.0 15.8 29.6 112.4 151.3 6.8 11.8 1974 47.9 1,170.2 70.1 7.9 35.7 19.0 13.5 29.2 123.0 190.2 17.6 14.5 50.4 1,272.5 1975 81.4 22.7 9.2 44.7 12.1 34.7 134.6 208.3 15.8 14.4 1976 55.5 1,415.1 92.9 26.1 10.1 49.1 9.0 39.4 155.7 223.3 12.7 13.8 1977 61.2 1,569.9 10.6 52.4 104.9 29.0 8.9 44.2 184.5 241.6 9.7 13.9 69.8 1,770.3 1978 10.7 58.4 116.2 32.7 8.4 50.4 223.2 270.7 9.8 14.4 81.0 1,989.3 1979 11.0 66.8 131.8 36.9 57.1 274.0 321.5 16.1 15.0 88.6 2,231.6 1980 13.2 12.4 80.8 154.2 43.0 66.9 336.1 365.9 15.9 16.1 104.5 2,488.5 1981 20.8 13.0 89.7 49.4 182.0 67.1 376.8 408.1 25.2 16.4 1982 112.3 2,649.8 21.9 94.1 13.3 204.5 54.6 77.8 397.5 438.9 26.3 16.6 119.7 2,832.6 1983 22.1 14.2 102.1 221.7 58.0 78.8 461.9 452.9 15.8 16.4 132.8 3,106.1 1984 23.3 14.8 109.2 235.7 60.9 87.9 498.1 485.9 15.7 16.7 18.7 104.7 149.1 3,333.2 1985 15.4 118.1 253.4 66.6 517.8 16.3 16.7 162.1 3,545.6 1986 8.7 100.4 531.7 16.4 128.5 70.7 269.2 548.1 542.2 14.5 16.6 1987 173.6 3,749.4 16.7 135.5 3.2 108.4 583.2 76.0 282.9 13.4 16.9 194.5 4,023.9 1988 146.5 4.3 119.8 669.0 576.7 17.3 82.2 300.4 14.4 17.3 211.7 4,316.6 1989 162.4 -7.9 124.8 721.3 624.4 18.0 87.2 325.1 17.9 17.8 4,614.5 1990 184.2 224.3 -12.9 128.5 719.4 684.9 19.8 93.1 352.0 759.1 26.7 18.3 69.4 373.6 432.2 31.8 16.6 1991' 238.0 4,775.0 -13.2 21.8 212t9 99.7 379.7 80.6 418.7 441.3 19.9 16.5 113.3 2,708.5 24.1 1982: IV.... 13.6 97.6 56.1 216.4 79.3 485.4 458.5 15.6 16.4 123.4 2,932.0 22 2 14.5 104.2 59.5 1983: IV.... 226.7 92.7 507.5 493.6 15.3 16.5 135.6 3,193.8 24.3 14.8 112.5 58.0 241.3 1984: IV.... 152.8 3,414.9 14.0 105.6 532.6 526.6 15.7 121.3 68.0 256.7 16.7 16.4 1985: IV.... 131.1 165.4 3,602.3 4.7 16.7 72.4 273.3 100.1 562.3 548.5 13.4 16.5 1986: IV.... 177.7 3,854.9 6.8 103.1 564.8 569.4 16.7 138.3 77.7 285.8 1987: IV.... 14.0 16.9 142.7 6.2 189.6 3,911.2 81.0 17.0 297.8 1988:1 106.4 570.8 573.8 13.4 16.9 4.1 110.5 588.1 578.7 17.1 145.1 192.9 3,982.8 82.5 298.9 II 13.3 16.9 4.2 196.0 4,058.7 82.3 17.3 147.6 301.2 III.... 608.9 584.8 13.0 16.8 2.8 113.8 83.0 199.5 4,142.9 303.8 17.5 150.6 117.0 639.4 607.7 13.5 17.5 IV.... -2.2 119.1 665.6 616.9 208.6 4,230.7 316.7 85.8 17.6 156.7 13.8 17.3 1989:1 -6.5 120.8 679.1 629.1 4,286.0 321.7 86.7 159.5 210.8 17.8 14.6 17.3 II -10.3 122.2 691.9 644.2 328.2 212.7 4,339.0 87.5 18.1 163.4 15.6 17.2 4,410.9 -12.5 170.2 214.8 334.0 88.8 18.4 123.7 703.0 669.2 16.1 17.9 II!.... 220.7 4,507.2 -14.2 123.5 716.2 676.8 347.7 19.2 175.9 92.5 17.1 17.8 IV.... -17.3 124.8 729.1 687.7 222.3 4,586.5 348.9 19.5 181.1 92.4 18.0 17.7 -10.4 127.0 736.9 705.8 226.7 4,664.1 185.8 19.9 1990:1 353.0 93.1 20.5 17.9 227.5 4,700.4 -9.5 193.9 20.5 358.4 94.6 II 128.7 730.1 737.2 23.6 18.0 235.4 4,711.9 201.2 -11.9 20.9 373.1 127.4 721.8 751.5 27.0 187 100.3 III.... 237.0 4,757.9 -11.7 128.7 716.7 763.7 21.7 208.0 98.9 377.2 26.5 18.4 4,797.4 215.7 239.3 -14.2 22.1 99.3 381.7 IV.... 129.4 709.1 784.1 29.6 18.2 240.4 4,832.6 -15.2 100.2 22.5 226.7 386.8 1991:1 II 2 Personal III.... income exclusive of the farm component of wages and salaries, other labor income, proprietors' income, and net interest. IV. industry classification of wage and salary disbursements and proprietors' income is on an establishment basis and is Note.—The based on the 1987 Standard Industrial Classification (SIC) beginning 1987 and on the 1972 SIC for earlier years shown. Source: Department of Commerce, Bureau of Economic Analysis. 325 TABLE B-24.—Disposition of personal income, 1959-91 [Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates] Percent of disposable personal income» Less: Personal outlays Year or quarter Personal income Less: Personal tax and nontax payments Equals: Disposable personal income Total Personal Personal transfer conpayInterest sumption paid by ments expendi- persons to rest tures of the world (net) Personal outlays Equals: Personal saving Total Personal consumption expenditures 1959 1960 1961 1962 1963 1964 391.2 409.2 426.5 453.4 476.4 510.7 44.5 48.7 50.3 54.8 58.0 56.0 346.7 360.5 376.2 398.7 418.4 454.7 324.7 339.9 351.3 372.8 393.7 423.1 318.1 332.4 343.5 364.4 384.2 412.5 6.1 7.0 7.3 7.8 8.9 10.0 0.4 .4 .5 .5 .6 .7 22.0 20.6 24.9 25.9 24.6 31.6 93.6 94.3 93.4 93.5 94.1 93.1 91.8 92.2 91.3 91.4 91.8 90.7 1965 1966 1967 1968 1969 552.9 601.7 646.5 709.9 773.7 61.9 71.0 77.9 92.1 109.9 491.0 530.7 568.6 617.8 663.8 456.4 494.3 522.8 573.9 620.4 444.6 481.6 509.3 559.1 603.7 11.1 12.0 12.5 13.8 15.7 .7 .7 .9 .9 1.0 34.6 36.4 45.9 43.9 43.4 93.0 93.1 91.9 92.9 93.5 90.5 90.7 89.6 90.5 90.9 1970 1971 1972 1973 1974 831.0 893.5 980.5 1,098.7 1,205.7 109.0 108.7 132.0 140.6 159.1 722.0 784.9 848.5 958.1 1,046.5 664.4 719.3 788.6 871.9 953.0 646.5 700.3 767.8 848.1 927.7 16.8 17.8 19.6 22.4 24.2 1.2 1.2 1.2 1.3 1.1 57.6 65.5 59.9 86.2 93.5 92.0 91.7 92.9 91.0 91.1 89.5 89.2 90.5 88.5 88.6 1975 1976 1977 1978 1979 1,307.3 1,446.3 1,601.3 1,807.9 2,033.1 156.4 182.3 210.0 240.1 280.2 1,150.9 1,264.0 1,391.3 1,567.8 1,753.0 1,050.4 1,170.7 1,303.1 1,459.6 1,629.3 1,024.9 1,143.1 1,271.5 1,421.2 1,583.7 24.5 26.7 30.7 37.5 44.5 1.0 1.0 .9 .9 1.0 100.4 93.2 88.1 108.1 123.7 91.3 92.6 93.7 93.1 92.9 89.1 90.4 91.4 90.7 90.3 1980 1981 1982 1983 1984 2,265.4 2,534.7 2,690.9 2,862.5 3,154.6 312.4 360.2 371.4 368.8 395.1 1,952.9 2,174.5 2,319.6 2,493.7 2,759.5 1,798.6 1,982.1 2,119.6 2,324.7 2,537.2 1,748.1 1,926.2 2,059.2 2,257.5 2,460.3 49.4 54.6 58.8 65.7 75.0 1.2 1.3 1.6 1.4 1.9 154.3 192.4 200.0 169.1 222.3 92.1 91.2 91.4 93.2 91.9 89.5 88.6 88.8 90.5 89.2 1985 1986 1987 1988 1989 3,379.8 3,590.4 3,802.0 4,075.9 4,380.2 436.8 459.0 512.5 527.7 591.7 2,943.0 3,131.5 3,289.5 3,548.2 3,788.6 2,753.2 2,943.6 3,146.9 3,392.0 3,621.6 2,667.4 2,850.6 3,052.2 3,296.1 3,517.9 83.6 90.9 92.3 93.7 101.6 2.2 2.1 2.4 2.1 2.1 189.8 187.8 142.6 156.2 166.9 93.6 94.0 95.7 95.6 95.6 90.6 91.0 92.8 92.9 92.9 1990 1991" 4,679.8 4,833.9 621.0 616.0 4,058.8 4,217.8 3,852.2 3,995.8 3,742.6 3,886.8 107.5 106.8 2.1 2.2 206.6 222.1 94.9 94.7 92.2 92.2 IV IV IV IV IV IV 2,746.8 2,965.8 3,242.5 3,456.7 3,647.8 3,918.5 372.1 371.6 413.4 448.8 478.5 528.6 2,374.7 2,594.3 2,829.1 3,007.9 3,169.3 3,389.9 2,190.4 2,417.6 2,606.1 2,828.2 3,017.8 3,219.4 2,128.7 2,346.8 2,526.4 2,739.8 2,923.1 3,124.6 60.2 69.2 77.6 86.4 92.3 92.4 1.5 1.6 2.1 2.0 2.4 2.4 184.2 176.7 223.0 179.7 151.5 170.5 92.2 93.2 92.1 94.0 95.2 95.0 89.6 90.5 89.3 91.1 92.2 92.2 1988:1 || III IV 1989:1 II Ill IV 3,967.7 4,037.9 4,102.9 4,195.2 4,303.8 4,351.7 4,390.9 4,474.4 510.8 530.4 527.7 542.0 574.3 597.6 591.8 602.9 3,456.8 3,507.6 3,575.2 3,653.2 3,729.5 3,754.2 3,799.1 3,871.4 3,294.2 3,355.2 3,422.3 3,496.2 3,535.9 3,593.4 3,656.8 3,700.4 3,199.1 3,260.5 3,326.6 3,398.2 3,436.5 3,490.6 3,551.7 3,592.8 92.8 92.7 93.6 95.8 97.4 100.6 103.1 105.4 2.3 1.9 2.1 2.2 1.9 2.2 2.0 2.2 162.6 152.3 152.9 157.0 193.7 160.8 142.2 171.0 95.3 95.7 95.7 95.7 94.8 95.7 96.3 95.6 92.5 93.0 93.0 93.0 92.1 93.0 93.5 92.8 1990:1 II. Ill IV 1991:1 || III IV ". 4,580.6 4,654.7 4,719.3 4,764.7 4,768.0 4,821.1 4,853.3 4,893.1 606.6 622.7 627.5 627.2 617.1 613.6 615.1 618.3 3,974.0 4,032.0 4,091.8 4,137.5 4,151.0 4,207.5 4,238.2 4,274.7 3,776.6 3,815.3 3,895.3 3,921.7 3,937.5 3,977.9 4,024.9 4,042.8 3,667.3 3,706.0 3,785.2 3,812.0 3,827.7 3,868.5 3,916.4 3,934.4 107.2 107.6 107.7 107.6 107.5 107.1 106.3 106.2 2.1 1.7 2.5 2.1 2.3 2.2 2.1 2.1 197.5 216.7 196.5 215.8 213.4 229.6 213.3 232.0 95.0 94.6 95.2 94.8 94.9 94.5 95.0 94.6 92.3 91.9 92.5 92.1 92.2 91.9 92.4 92.0 1982: 1983: 1984: 1985: 1986: 1987: 1 Percents based on data in millions of dollars. Source: Department of Commerce, Bureau of Economic Analysis. 326 TABLE B-25.—Total and per capita disposable personal income and personal consumption expenditures in current and 1987 dollars, 1959-91 [Quarterly data at seasonally adjusted annual rates, except as noted] Personal consumption expenditures Disposable personal income Year or quarter 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991' 1982: IV 1983: IV 1984: IV 1985: IV 1986: IV 1987: IV 1988: I II Ill IV 1989:1 II Ill IV 1990:1 II Ill IV 1991: I II Ill IV "... Total (billions of dollars) Per capita (dollars) Total (billions of dollars) Current dollars 1987 dollars Current dollars 1987 dollars Current dollars 1987 dollars 346.7 360.5 376.2 398.7 418.4 454.7 491.0 530.7 568.6 617.8 663.8 722.0 784.9 848.5 958.1 1,046.5 1,150.9 1,264.0 1,391.3 1,567.8 1,753.0 1,952.9 2,174.5 2,319.6 2,493.7 2,759.5 2,943.0 3,131.5 3,289.5 3,548.2 3,788.6 4,058.8 4,217.8 2,374.7 2,594.3 2,829.1 3,007.9 3,169.3 3,389.9 3,456.8 3,507.6 3,575.2 3,653.2 3,729.5 3,754.2 3,799.1 3,871.4 3,974.0 4,032.0 4,091.8 4,137.5 4,151.0 4,207.5 4,238.2 4,274.7 1,284.9 1,313.0 1,356.4 1,414.8 1,461.1 1,562.2 1,653.5 1,734.3 1,811.4 1,886.8 1,947.4 2,025.3 2,099.9 2,186.2 2,334.1 2,317.0 2,355.4 2,440.9 2,512.6 2,638.4 2,710.1 2,733.6 2,795.8 2,820.4 2,893.6 3,080.1 3,162.1 3,261.9 3,289.6 3,404.3 3,471.2 3,538.3 3,534.1 2,832.6 2,960.6 3,118.5 3,178.7 3,266.2 3,335.8 3,380.1 3,386.3 3,407.5 3,443.1 3,473.9 3,450.9 3,466.9 3,493.0 3,531.4 3,545.3 3,547.0 3,529.5 3,514.8 3,537.4 3,539.9 3,544.3 1,958 1,994 2,048 2,137 2,210 2,369 2,527 2,699 2,861 3,077 3,274 3,521 3,779 4,042 4,521 4,893 5,329 5,796 6,316 7,042 7,787 8,576 9,455 9,989 10,642 11,673 12,339 13,010 13,545 14,477 15,313 16,236 16,693 10,189 11,033 11,925 12,565 13,121 13,907 14,154 14,332 14,570 14,850 15,131 15,197 15,337 15,586 15,963 16,154 16,344 16,479 16,492 16,678 16,752 16,849 7,256 7,264 7,382 7,583 7,718 8,140 8,508 8,822 9,114 9,399 9,606 9,875 10,111 10,414 11,013 10,832 10,906 11,192 11,406 11,851 12,039 12,005 12,156 12,146 12,349 13,029 13,258 13,552 13,545 13,890 14,030 14,154 13,987 12,154 12,591 13,145 13,278 13,522 13,685 13,840 13,836 13,886 13,996 14,093 13,969 13,996 14,063 14,185 14,204 14,168 14,058 13,965 14,022 13,992 13,970 318.1 332.4 343.5 364.4 384.2 412.5 444.6 481.6 509.3 559.1 603.7 646.5 700.3 767.8 848.1 927.7 1,024.9 1,143.1 1,271.5 1,421.2 1,583.7 1,748.1 1,926.2 2,059.2 2,257.5 2,460.3 2,667.4 2,850.6 3,052.2 3,296.1 3,517.9 3,742.6 3,886.8 2,128.7 2,346.8 2,526.4 2,739.8 2,923.1 3,124.6 3,199.1 3,260.5 3,326.6 3,398.2 3,436.5 3,490.6 3,551.7 3,592.8 3,667.3 3,706.0 3,785.2 3,812.0 3,827.7 3,868.5 3,916.4 3,934.4 1,178.9 1,210.8 1,238.4 1,293.3 1,341.9 1,417.2 1,497.0 1,573.8 1,622.4 1,707.5 1,771.2 1,813.5 1,873.7 1,978.4 2,066.7 2,053.8 2,097.5 2,207.3 2,296.6 2,391 8 2,448.4 2,447.1 2,476.9 2,503.7 2,619.4 2,746.1 2,865.8 2,969.1 3,052.2 3,162.4 3,223.1 3,262.6 3,256.7 2,539.3 2,678.2 2,784.8 2,895.3 3,012.5 3,074.7 3,128.2 3,147.8 3,170.6 3,202.9 3,200.9 3,208.6 3,241.1 3,241.6 3,258.8 3,258.6 3,281.2 3,251.8 3,241.1 3,252.4 3,271.2 3,262.2 Per capita (dollars) Current dollars 1,796 1,839 1,869 1,953 2,030 2,149 2,287 2,450 2,562 2,785 2,978 3,152 3,372 3,658 4,002 4,337 4,745 5,241 5,772 6,384 7,035 7,677 8,375 8,868 9,634 10,408 11,184 11,843 12,568 13,448 14,219 14,971 15,383 9,134 9,980 10,649 11,445 12,101 12,819 13,099 13,322 13,556 13,814 13,942 14,130 14,338 14,464 14,731 14,848 15,120 15,183 15,208 15,334 15,481 15,508 1987 dollars 6,658 6,698 6,740 6,931 7,089 7,384 7,703 8,005 8,163 8,506 8,737 8,842 9,022 9,425 9,752 9,602 9,711 10,121 10,425 10,744 10,876 10,746 10,770 10,782 11,179 11,617 12,015 12,336 12,568 12,903 13,027 13,051 12,889 10,895 11,390 11,739 12,095 12,472 12,615 12,808 12,862 12,921 13,020 12,986 12,989 13,084 13,051 13,090 13,056 13,107 12,952 12,877 12,892 12,930 12,858 Population (thousands) l 177,073 180,760 183,742 186,590 189,300 191,927 194,347 196,599 198,752 200,745 202,736 205,089 207,692 209,924 211,939 213,898 215,981 218,086 220,289 222,629 225,106 227.715 229,989 232,201 234,326 236,393 238,510 240,691 242,860 245,093 247,405 249,992 252,666 233,060 235,146 237,231 239,387 241,550 243,745 244,235 244,744 245,387 246,004 246,491 247,032 247,711 248,387 248,950 249,594 250,349 251,074 251,689 252,281 252,990 253,705 1 Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning 1960. Annual data are averages of quarterly data. Quarterly data are averages for the period. Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census). 327 TABLE B-26.—Gross saving and investment, 1959-91 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Gross saving Gross private saving Year or quarter Total Total 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 " 1982: IV 1983: IV 1984: IV 1985: IV 1986: IV 1987: IV 1988:1 III.. IV.. 1989:1.... II... III.. IV.. 1990:1.... II... III.. III IV.. IV ".. 1991:1.... 79.4 85.1 84.4 92.8 100.4 110.0 125.0 131.6 130.8 141.8 159.6 155.3 173.8 201.8 252.4 249.6 241.6 285.0 338.4 416.1 468.8 465.9 557.2 508.9 501.9 634.3 610.9 575.0 619.6 704.5 744.2 711.8 82.5 81.5 87.4 95.8 98.8 111.6 123.8 132.5 144.5 146.4 149.6 165.9 192.3 205.0 245.6 256.1 306.5 323.3 355.2 413.2 458.3 500.1 586.4 617.5 641.7 743.1 736.1 721.8 731.3 802.8 827.3 851.3 459.0 542.8 637.4 604.3 550.5 668.6 678.6 702.0 717.0 720.6 770.0 751.1 727.9 727.9 722.6 747.9 698.3 678.3 747.7 713.9 698.0 615.9 679.1 765.1 735.2 676.7 784.4 801.0 797.5 797.5 815.3 842.0 816.6 813.7 836.9 853.1 876.2 821.9 853.9 873.8 893.0 876.4 Personal saving Gross business saving* 22.0 20.6 24.9 25.9 24.6 31.6 34.6 36.4 45.9 43.9 43.4 57.6 65.5 59.9 86.2 93.5 100.4 93.2 88.1 108.1 123.7 154.3 192.4 200.0 169.1 222.3 189.8 187.8 142.6 156.2 166.9 206.6 222.1 184.2 176.7 223.0 179.7 151.5 170.5 162.6 152.3 152.9 157.0 193.7 160.8 142.2 171.0 197.5 216.7 196.5 215.8 213.4 229.6 213.3 232.0 60.5 60.9 62.5 69.9 74.1 80.0 89.2 96.1 98.7 102.5 106.2 108.2 126.8 145.1 159.3 162.6 206.0 230.0 267.1 305.0 334.5 345.7 394.1 417.5 472.7 520.7 546.4 533.9 588.7 646.6 660.3 644.7 431.6 502.4 542.1 555.5 525.3 613.9 638.4 645.1 644.6 658.3 648.3 655.8 671.4 665.8 655.6 659.5 625.5 638.1 660.4 663.4 663.1 Gross investment Government surplus or deficit Capital grants — ) , national income and received product accounts by the United State States and Total Federal (net)« local -3.1 3.6 -3.0 -2.9 1.6 -1.6 1.2 -1.0 -13.7 -4.6 10.0 -11.5 -19.2 -3.9 6.9 -4.5 -64.8 -38.3 -16.8 2.9 9.4 -35.3 -30.3 -108.6 -139.8 -108.8 -125.3 -146.8 -111.7 -98.3 -83.0 -139.5 -171.2 -156.9 -136.3 -127.8 -130.9 -126.2 -115.8 -122.4 -95.5 -80.5 -94.7 -72.1 -65.4 -85.7 -108.9 -130.5 -128.4 -123.6 -175.6 -126.1 -179.1 -178.4 -2.6 3.5 -2.6 -3.4 1.1 -2.6 1.3 -1.4 -12.7 -4.7 8.5 -13.3 -21.7 -17.3 -6.6 -11.6 -69.4 -52.9 -42.4 -28.1 -15.7 -60.1 -58.8 -135.5 -180.1 -166.9 -181.4 -201.0 -151.8 -136.6 -124.2 -165.3 -200.7 -183.4 -184.6 -186.8 -187.2 -177.5 -152.7 -157.5 -134.6 -119.5 -134.9 -114.5 -110.5 -128.4 -143.3 -160.8 -156.9 -149.7 -193.6 -146.4 -206.7 -210.2 -0.5 .0 -.4 .5 .4 1.0 .0 .5 -1.1 1.5 1.8 2.5 13.4 13.4 7.1 4.6 14.6 25.6 31.1 25.1 24.8 28.5 26.9 40.3 58.1 56.1 54.3 40.1 38.4 41.1 25.7 29.6 26.5 48.3 59.0 56.3 51.2 37.0 35.1 39.1 39.0 40.2 42.4 45.1 42.6 34.4 30.3 28.5 26.1 18.0 20.4 27.6 31.8 0.9 .7 .7 0 *-2.0 0 0 0 0 1.1 1.2 1.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Total 77.6 82.0 82.2 91.8 98.4 109.3 124.3 134.4 131.6 141.7 157.0 155.3 176.9 202.8 252.0 251.1 247.6 295.4 349.3 423.7 482.6 479.5 568.1 501.5 512.1 625.2 597.0 576.3 594.8 676.1 741.5 719.9 736.9 448.9 556.6 616.9 598.3 548.5 643.7 644.2 673.9 691.1 695.2 743.9 745.9 730.5 745.8 727.0 745.5 726.5 680.4 765.8 730.4 720.0 731.3 Gross private domestic investment 78.8 78.7 77.9 87.9 93.4 101.7 118.0 130.4 128.0 139.9 155.2 150.3 175.5 205.6 243.1 245.8 226.0 286.4 358.3 434.0 480.2 467.6 558.0 503.4 546.7 718.9 714.5 717.6 749.3 793.6 837.6 802.6 725.3 464.2 614.8 722.8 737.0 697.1 800.2 770.6 788.4 800.7 814.8 844.7 844.3 826.8 834.4 812.0 825.9 821.8 750.9 709.3 708.8 740.9 742.3 Net foreign investment 3 -1.2 3.2 4.3 3.9 5.0 7.6 6.3 3.9 3.6 1.8 1.8 5.0 1.4 -2.8 8.9 5.3 21.6 9.0 -9.0 -10.3 2.4 11.9 10.1 -1.9 -34.6 -93.6 -117.6 -141.4 -154.5 -117.5 -96.0 -82.8 11.5 -15.3 -58.2 -105.9 -138.7 -148.6 -156.4 -126.3 -114.4 -109.6 -119.5 -100.8 -98.4 -96.3 -88.6 -85.0 -80.4 -95.3 -70.4 56.5 21.7 -20.9 -11.0 Statistical discrepancy -1.8 -3.1 -2.2 -1.0 -2.0 -.7 2.8 .8 -7.6 .0 3.1 1.1 -.5 1.4 6.0 10.4 10.9 7.6 13.8 13.6 10.9 -7.4 10.2 -9.0 -13.9 1.2 -24.8 -28.4 -2.7 8.1 -10.1 13.8 -20.5 -5.9 -2.0 -24.9 -34.4 -28.1 -25.8 -25.4 -26.0 -5.2 2.5 17.9 4.4 -2.4 28.2 2.1 18.0 16.5 22.0 1 Undistributed corporate profits with inventory valuation and capital consumption adjustments, corporate and noncorporate consumption of fixed capital, and private wage accruals less disbursements. 2 Consists mainly of allocations of special drawing rights (SDRs). 3 Net exports of goods and services plus net receipts of factor income from rest of the world less net transfers plus net capital grants received by the United States. See also Table B-18. • 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. 328 TABLE B-27.—Personal saving, flow of funds accounts, 1946-91 1 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Increase in financial assets Net investment in langtuie ass BIS ' Securities Year or quarter Personal saving InsurCheckTime ance able Money and depos- and market GovernCorpoOther pension Total its and savings fund ment rate recurren- depos- shares securi- equi- securiits ties* serves 5 cy ties 2 ties' 5.6 .0 1.2 - 0 . 7 7 11 .2 1.0 2 .7 .7 - . 6 .6 1.8 .2 1.5 .3 11 11 7 11 1.0 1.1 2.0 .9 1.5 -2.3 1.3 1.8 .4 .6 8.6 .1 1.6 2.5 7 12 10 -.3 1.2 - 1 . 3 1.4 -.9 -1.5 .5 -.2 38 .9 3.8 - 1 . 5 3.5 .0 13.6 -2.6 -3.1 6.2 7.4 61 12 6.3 35 £3 2.6 2.4 4.8 7.8 82 92 86 9.4 5.1 54 5.3 5.6 6.1 6.3 7.7 7.9 78 8.5 9.5 9.5 NonOther corfinan- Owner- Con- porate cial occu- sumer busipied dura- ness assets 6 homes bles assets 8 3.7 27 2.2 1.6 2.9 2.0 2.4 2.4 20 1.7 3.4 1.9 4.3 1.9 3.7 44 2.5 2.1 3.2 3.2 4.2 6.8 57 3.9 4.1 6.5 9.4 8.1 9.5 4.2 79 6.7 94 1.7 64 5.6 5.6 4.5 3.1 1.2 .0 8 2.1 .1 1.0 1.2 .8 1.4 19 2.9 2.9 2.5 6.7 5.4 5.6 37 2.2 .6 4.9 5.1 6.5 Less: Net increase in ueui Mort- SR Consumer Other 8 on credit debt * nonfarm homes 4.0 49 4.8 4.4 7.1 6.6 6.4 76 90 3.1 37 3.2 3.2 4.6 3.3 3.3 4.1 13 7.0 3.6 2.6 .3 7.7 4.0 22 5.9 8.5 9.5 2.2 28 2.8 2.4 5.5 3.8 3.4 2.4 50 5.8 4.7 3.3 6.7 6.0 6.1 67 6.6 9.4 1946 1947 1948 1949 22.8 25 0 24.8 25.9 1950.. 1951 1952 1953 1954 1955 1956 1957 1958 1959 32.0 33.7 37.8 34 5 27 6 36.5 38.3 38.4 36.1 36.7 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 38.0 37 7 44.5 47.9 60.0 67.4 80.6 83.0 79 7 78.1 35 4 40.1 45.5 55 9 57.9 62.1 71.7 68.6 69.6 — 10 -1.2 -1.1 8.9 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 88.3 101.5 118.3 153.4 118.7 154.6 166.7 192.5 199.1 208.1 80.1 106.7 134.2 145.8 147.8 174.6 207.5 253.4 284.5 325.8 7.4 43.5 67.7 74.0 63.5 56.2 77.6 107.1 106.6 99.6 74.4 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 210.9 237.9 265.6 307.9 371.0 352.1 429.0 337.1 390.8 448.8 327.1 321.6 386.3 495.0 552.5 572.4 576.5 461.4 537.2 575.3 1990 389.5 474.7 21.1 11.9 59.3 127.3 -.6 - 2 5 . 3 86.7 - 2 9 . 2 206.4 14.3 60.0 1989:1 II III.... IV.... 370.7 590.7 439.5 394.2 477.5 707.8 560.4 555.4 30.0 -3.0 86.8 124.8 100.1 92.6 71.9 89.9 111.8 51.2 243.6 154.9 219.9 127.0 -181.9 -55.6 -33.2 -15.9 -97.7 36.9 -50.7 -58.2 220.9 61.7 305.2 85.1 174.7 9.1 218.0 114.2 173.1 110.6 - 2 5 . 6 172.6 113.8 - 2 9 . 9 167.7 117.0 - 5 3 . 1 162.6 97.4 - 5 2 . 9 213.1 208.8 224.5 227.9 46.9 39.9 45.8 39.7 105.0 124.7 82.0 100.8 1990:1 II III.... IV.... 424.1 554.7 268.6 310.7 579.2 639.6 319.3 360.6 35.4 73.8 38.9 1.2 15.5 - 2 0 . 8 -5.3 -6.4 106.5 -23.3 109.5 44.4 202.4 - 2 7 . 4 - 1 3 . 2 234.1 16.4 46.4 116.7 25.9 - 1 2 4 . 0 -44.1 -17.2 -10.6 160.2 41.6 265.7 60.3 143.0 53.6 292.3 107.5 147.0 106.7 - 2 5 . 1 146.8 88.4 - 2 3 . 8 135.6 85.6 - 2 5 . 8 122.4 65.9 - 4 1 . 9 256.3 33.6 221.2 14.2 186.0 13.4 162.1 - 4 . 2 93.8 60.9 46.7 38.4 1991:1 II III.... 474.7 275.9 389.3 571.3 399.7 449.4 71.3 35.1 17.8 - 4 6 . 0 86.2 - 1 5 4 . 5 167.5 -61.4 -3.3 -24.4 156.3 30.7 35.3 - 4 8 . 7 144.5 - 2 1 . 2 31.6 - 4 5 . 1 161.3 - 7 . 0 42.0 - 4 1 . 8 141.2 - 2 6 . 3 69.4 56.2 42.7 19.6 12.6 8^9 —2^0 2.7 4.6 1.6 9 21 210 1.2 28.6 31.7 1.9 29.1 -.4 33.2 3.7 .9 35.3 32.6 .9 15.0 19.5 28.5 24.6 4.2 6.1 6.7 2.4 10.3 95 13.4 13.4 13.1 6.3 6.0 15.6 19.7 22.0 35.8 7.8 7.3 23.5 5.6 61.5 5 1.0 .5 .9 -.6 7.4 3.7 2 64 4.5 3.9 11.9 13.9 11.0 12.2 18 3 26.1 26.2 26.3 27.9 19.1 35.4 30 9 9.2 124.9 36.2 24.6 33.6 20.8 34.1 99.2 -1.5 72.0 122.6 203.3 218.6 129.9 98.3 118.1 152.6 101.1 27.5 -2.1 10.7 -5.6 -11.1 -.5 7.0 6.5 2.4 1.3 .0 -.2 6.0 30.6 24.5 90.7 32.8 -31.1 44.0 8.7 39.6 28.1 23.5 81.2 121 13.0 13.9 16.4 17.0 19.3 18.8 19.9 21.8 14.9 13.4 12.5 13.7 14 2 18.2 17.1 15.1 14.6 19.6 14.9 11.4 18.4 171 26.3 27.3 22.4 50.6 81.8 95.8 111.4 102.9 112.6 109.7 -10.5 -9.0 -36.9 -9.7 -15.5 -20.1 -2.3 18.3 -56.0 3.5 -45.7 41.5 6.6 59.1 -27.8 8.0 -120.1 9.4 -90.9 -23.2 118.5 117.9 153.5 142.4 172.9 223.3 231.3 118.7 210.1 229.7 37.5 10.5 23.4 30.6 36.6 67.6 85.1 47.9 77.9 67.5 89.6 83.0 57.8 96.1 129.0 132.1 156.8 164.9 171.0 169.0 215.3 65.8 137.9 2.5 13.8 - 7 . 7 29.9 - 1 2 . 8 65.5 - 2 5 . 4 16.8 43.7 - 7 1 . 0 97.1 - 5 0 . 3 120.4 - 1 0 2 . 8 316.0 245.8 411.9 8.8 7.9 3.7 7.7 7.2 45 8.6 19.6 25.4 34.3 40.6 29.1 27.4 41.5 51.5 56.8 50.4 9.8 4.0 -.6 8.4 14.0 -4.9 70 12.7 11.9 15.1 20.2 23.2 21.3 26 9 26.2 10.3 17.2 25.8 35.0 39.1 9.0 -1.2 8.7 10.3 19.5 22.0 23.8 23.1 22.0 19.4 26 3 29.8 27.3 37.8 50.1 57.4 47.0 36.9 50.7 73.9 95.3 109.6 17.2 17.8 18.8 32.0 40.8 65.1 100.1 112.1 113.0 -42.7 160.5 176.5 186.3 11.5 10.2 10.9 24.2 28.0 48.5 39.9 43.7 71.9 56.6 78.6 95.0 101.8 -4.4 -9.0 -4.4 -2.0 -6.5 -.7 10.4 11.9 10.9 10.4 33.2 109.4 40.4 100.2 60.7 97.3 12.3 11.0 8.8 9.6 12.9 11.4 12 3 14.1 16.4 17.2 17.1 13.5 12.9 17.2 18.3 10.1 5.9 5.1 10.8 9.9 4.6 -1.5 13.6 26.2 38.8 44.1 34.7 38.9 60.7 91.4 109.3 117.2 22.9 36.7 45.1 40.5 -22.5 -2.9 -18.5 -40.3 -11.6 -11.9 -23.3 -29.9 -37.0 -40.4 96.5 73.9 52.8 117.1 136.4 156.3 216.8 234.0 230.7 218.6 16.9 16.4 48.9 81.7 82.5 58.0 33.5 50.4 43.1 -4.4 -3.3 -3.7 5.9 5.2 14.0 19.0 22.7 9.4 8.0 2.6 10.6 13.3 12.6 17.0 17.8 21.6 21.2 33.0 47.6 30.1 56.7 34.1 45.6 64.0 88.3 118.4 110.4 100.3 113.2 127.5 162.7 197.6 117.5 94.8 111.9 103.1 1 Saving by households, personal trust funds, nonprofit institutions, farms, and other noncorporate business. 2 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. 329 TABLE B-28.—Median income (in 1990 dollars) and poverty status of families and persons, by race, selected years, 1971-90 Families 1 Persons below poverty level 1Jelow poverty level Year ALL RACES 1971 1973 1975 3 1977 1978 1979 * 1980 1981 1982 3 1983 1984 1985 1986 3 1987 1988 1989 1990 WHITE 1971 1973 1975 3 1977 1978 1979 * 1980 1981 1982 1983 3 1984 1985 1986 3 1987 1988 1989 1990 BLACK 1971 1973 3 1975 1977 1978 1979 * 1980 1981 1982 1983 3 1984 1985 1986 3 1987 1988 1989 1990 Number (millions) Median income (in /in 1990 dollars) T/>+ lOltii Female nousenoioer Number Per(milcent lions) LAI , . A U A | f l A P Number (millions) Percent Median income (in 1990 dollars) of person.> i a yeaii uiu 2dim uver wiui income Males Number (millions) Percent Females All persons Yearround full-time workers All persons Yearround full-time workers 53.3 55.1 56.2 57.2 57.8 59.6 60.3 61.0 61.4 62.0 62.7 63.6 64.5 65.2 65.8 66.1 66.3 $33,191 35,474 33,329 34,528 35,361 35,262 33,346 32,190 31,738 32,378 33,251 33,689 35,129 35,632 35,565 36,062 35,353 5.3 4.8 5.5 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 7.1 10.0 8.8 9.7 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 10.7 2.1 2.2 2.4 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 3.8 33.9 32.2 32.5 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 33.4 25.6 23.0 25.9 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 33.6 12.5 11.1 12.3 11.6 11.4 11.7 13.0 14.0 15.0 15.2 14.4 14.0 13.6 13.4 13.0 12.8 13.5 $22,277 23,714 21,507 21,833 21,920 21,205 19,875 19,372 18,894 19,239 19,624 19,813 20,409 20,463 20,890 20,968 20,293 $31,081 33,758 31,932 32,502 32,198 31,467 30,412 29,752 29,330 29,533 30,196 30,366 30,879 30,697 30,208 30,151 29,172 47.6 48.9 49.9 50.5 50.9 52.2 52.7 53.3 53.4 53.9 54.4 55.0 55.7 56.1 56.5 56.6 56.8 34,440 37,076 34,662 36,104 36,821 36,796 34,743 33,814 33,322 33,905 34,827 35,410 36,740 37,260 37,470 37,919 36,915 3.8 3.2 3.8 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 4.6 7.9 6.6 7.7 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 8.1 1.2 1.2 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 2.0 26.5 24.5 25.9 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 26.8 17.8 15.1 17.8 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 22.3 9.9 8.4 9.7 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 10.7 23,355 24,883 22,593 22,868 22,959 22,152 21,140 20,555 19,975 20,240 20,715 20,784 21,537 21,751 22,051 21,990 21,170 31,955 34,736 32,697 33,167 32,795 32,376 31,279 30,451 30,111 30,322 31,230 31,209 31,741 31,413 31,224 31,459 30,186 7,900 8,310 8,308 8,629 8,253 7,909 7,847 7,935 8,082 8,552 8,741 8,936 9,254 9,788 10,057 10,342 10,317 18,611 19,422 18,796 19,131 19,509 19,124 18,563 18,210 18,754 19,266 19,592 20,020 20,393 20,582 20,796 20,947 20,840 5.2 5.4 5.6 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 7.5 20,783 21,398 21,327 20,625 21,808 20,836 20,103 19,074 18,417 19,108 19,411 20,390 20,993 21,177 21,355 21,301 21,423 1.5 1.5 1.5 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 2.2 28.8 28.1 27.1 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 29.3 .9 1.0 1.0 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 1.6 53.5 52.7 50.1 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 48.1 7.4 32.5 7.4 31.4 7.5 31.3 7.7 31.3 7.6 30.6 8.1 31.0 8.6 32.5 9.2 34.2 9.7 35.6 9.9 35.7 9.5 33.8 8.9 31.3 9.0 31.1 9.5 32.4 9.4 31.3 9.3 30.7 9.8 31.9 13,928 15,051 13,507 13,570 13,754 13,713 12,704 12,223 11,970 11,836 11,885 13,080 12,905 12,903 13,306 13,290 12,868 21,851 23,411 23,924 22,866 25,118 23,333 22,008 21,545 21,386 21,619 21,313 21,829 22,379 22,461 22,887 21,825 21,540 6,922 7,501 7,548 7,452 7,431 7,198 7,265 7,050 7,128 7,308 7,754 7,625 7,830 7,995 8,119 8,301 8,328 16,433 16,470 17,958 17,880 18,082 17,524 17,313 16,446 16,762 17,103 17,656 17,722 17,845 18,383 18,635 18,876 18,518 $7,771 $18,398 8,231 19,099 8,223 18,752 8,500 19,010 8,155 19,326 7,835 18,959 7,804 18,385 7,848 17,911 7,973 18,505 8,405 19,012 8,640 19,400 8,766 19,741 9,075 20,086 9,544 20,208 9,815 20,489 10,144 20,704 10,070 20,586 x The term "family" refers to a croup 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. 2 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. 174. Source: Department of Commerce, Bureau of the Census. 330 POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY T A B L E B-29.—Population by age groups, 1929-90 [Thousands of persons] Age (years) July 1 Total Under 5 5-15 16-19 20-24 25-44 45-64 65 and over 6,474 1929 121,767 11,734 26,800 9,127 10,694 35,862 21,076 1933 125,579 10,612 26,897 9,302 11,152 37,319 22,933 7,363 1939 130,880 10,418 25,179 9,822 11,519 39,354 25,823 8,764 1940 1941 1942 1943 1944 132,122 133,402 134,860 136,739 138,397 10,579 10,850 11,301 12,016 12,524 24,811 24,516 24,231 24,093 23,949 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 1945 1946 1947 1948 1949 139,928 141,389 144,126 146,631 149,188 12,979 13,244 14,406 14,919 15,607 23,907 24,103 24,468 25,209 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 152,271 154,878 157,553 160,184 163,026 16,410 17,333 17,312 17,638 18,057 26,721 27,279 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 18,566 19,003 19,494 19,887 20,175 32,682 33,994 35,272 36,445 37,368 8,744 8,916 9,195 9,543 10,215 10,714 10,616 10,603 10,756 10,969 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 20,341 20,522 20,469 20,342 20,165 38,494 39,765 41,205 41,626 42,297 10,683 11,025 11,180 12,007 12,736 11,134 11,483 11,959 12,714 13,269 47,140 47,084 47,013 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 19,824 19,208 18,563 17,913 17,376 42,938 43,702 44,244 44,622 44,840 13,516 14,311 14,200 14,452 14,800 13,746 14,050 15,248 15,786 16,480 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 205,052 207,661 209,896 211,909 213,854 17,166 17,244 17,101 16,851 16,487 44,816 44,591 44,203 43,582 42,989 15,289 15,688 16,039 16,446 16,769 17,202 18,159 18,153 18,521 18,975 48,473 48,936 50,482 51,749 53,051 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 16,121 15,617 15,564 15,735 16,063 42,508 42,099 41,298 40,428 39,552 17,017 17,194 17,276 17,288 17,242 19,527 19,986 20,499 20,946 21,297 54,302 55,852 57,561 59,400 61,379 43,801 44,008 44,150 44,286 44,390 22,696 23,278 23,892 24,502 25,134 1980 1981 1982 1983 1984 1 1 1 1 1 227,757 230,138 232,520 234,799 237,001 16,458 16,931 17,298 17,651 17,830 38,843 38,190 37,876 37,669 37,656 17,160 16,771 16,255 15,704 15,141 21,584 21,821 21,807 21,700 21,536 63,494 65,620 67,856 69,971 72,048 44,515 44,570 44,602 44,679 44,818 25,704 26,235 26,825 27,426 27,971 1985 1986 1987 1988 1989 1 1 1 1 1 239,279 241,625 243,942 246,328 248,781 18,004 18,154 18,267 18,437 18,759 37,692 37,706 37,687 38,008 38,441 14,819 14,802 14,958 14,894 14,570 21,214 20,608 19,982 19,372 18,885 74,077 76,124 77,897 79,225 80,635 44,934 45,058 45,310 46,007 46,503 28,540 29,174 29,841 30,384 30,988 1990 1 251,523 19,155 39,083 14,097 18,673 81,942 46,980 31,592 1 Based on 1980 census of population. Total populations for July 1 based on 1990 census for 1980-1991 are: 227,722; 229,958; 232,192; 234,321; 236,370; 238,492; 240,680; 242,836; 245,057; 247,343; 249,975; and 252,626, respectively. Data for age groups consistent with these figures are not yet available. Note.—Includes Armed Forces overseas beginning 1940. Includes Alaska and Hawaii beginning 1950. Source: Department of Commerce, Bureau of the Census. 331 TABLE B-30.—Population and the labor force, 1929-91 [Monthly data seasonally adjusted, except as noted] Year or month Labor EmployCivilian ment force noninsti- Resiinclud- includdent tutional Armed ing populaForcesx resident tion 1 Armed Armed Forces Forces Unemployment rate Civilian labor force Employment Total Total Agricultural Nonlulfural UnemPloyment All ian work-2 workticiers ers 8 pation4 rate Thousands of persons 14 years of age and over 1929 1933 1939 1940 1941 1942 1943 1944 1945 1946 1947 Civil- Civilian labor force Percent 49,180 51,590 55,230 47,630 10,450 38,760 10,090 45,750 9,610 37,180 1,550 28,670 12,830 36,140 9,480 3.2 24.9 99,840 99,900 98,640 94,640 93,220 55,640 55,910 56,410 55,540 54,630 47,520 50,350 53,750 54,470 53,960 9,540 9,100 9,250 9,080 8,950 37,980 41,250 44,500 45,390 45,010 8,120 5,560 2,660 1,070 670 14.6 9.9 4.7 1.9 1.2 55.7 56.0 57.2 58.7 58.6 94,090 103,070 106,018 53,860 57,520 60,168 52,820 55,250 57,812 8,580 8,320 8,256 44,240 46,930 49,557 1,040 2,270 2,356 1.9 3.9 3.9 57.2 55.8 56.8 49,148 50,714 49,993 2,311 2,276 3,637 3.9 3.8 5.9 51,758 53,235 53,749 54,919 53,904 55,722 57,514 58,123 57,450 59,065 3,288 2,055 1,883 1,834 3,532 2,852 2,750 2,859 4,602 3,740 5.2 3.2 2.9 2.8 5.4 4.3 4.0 4.2 6.6 5.3 5.3 3.3 3.0 2.9 5.5 4.4 4.1 4.3 6.8 5.5 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 60,318 60,546 61,759 63,076 64,782 66,726 68,915 70,527 72,103 74,296 3,852 4,714 3,911 4,070 3,786 3,366 2,875 2,975 2,817 2,832 5.5 6.7 5.5 5.7 5.2 4.5 3.8 3.8 3.6 3.5 59.4 59.3 58.8 58.7 58.7 58.9 59.2 59.6 59.6 60.1 75,215 75,972 78,669 81,594 83,279 82,438 85,421 88,734 92,661 95,477 4,093 5,016 4,882 4,365 5,156 7,929 7,406 6,991 6,202 6,137 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 4.9 5.9 5.6 4.9 5.6 8.5 7.7 7.1 6.1 5.8 60.4 60.2 60.4 60.8 61.3 61.2 61.6 62.3 63.2 63.7 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 7.0 7.5 9.5 9.5 7.4 7.1 6.9 6.1 5.4 5.2 7.1 7.6 9.7 9.6 7.5 7.2 7.0 6.2 5.5 5.3 63.8 63.9 64.0 64.0 64.4 64.8 65.3 65.6 65.9 66.5 6,874 8,426 5.4 6.6 5.5 6.7 66.4 66.0 17.2 Thousands of persons 16 years of age and over 1947 1948 1949 1950 1951 1952 1953 6 1954 1955 1956 1957 1958 1959 I960 6 1961 1962 6 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 6 1973° 1974 1975 1976 1977 1978• 1979 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 59,350 60,621 61,286 62,208 62,017 62,138 63,015 63,643 65,023 66,552 66,929 67,639 68,369 69,628 70,459 70,614 71,833 73,091 74,455 75,770 77,347 78,737 80,734 82,771 84,382 87,034 89,429 91,949 93,775 96,158 99,009 102,251 104,962 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 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 3,347 100,907 102,042 101,194 102,510 106,702 108,856 111,303 114,177 116,677 119,030 119,550 118,440 106,940 108,670 110,204 111,550 113,544 115,461 117,834 119,865 121,669 123,869 124,787 125,303 99,303 100,397 99,526 100,834 105,005 107,150 109,597 112,440 114,968 117,342 117,914 116,877 3,364 3,368 3,401 3,383 3,321 3,179 3,163 3,208 3,169 3,199 101,827 103,068 103,994 104,995 104,621 105,231 107,056 108,321 109,683 110,954 112,265 113,727 115,329 1,169 2,143 2,386 2,231 2,142 2,064 1,965 1,948 1,847 1,788 117,245 118,771 120,153 122,416 124,485 126,513 128,058 129,874 132,028 134,335 1,861 1,900 2,061 2,006 2,018 1,946 2,122 2,218 2,253 2,238 137,085 140,216 144,126 147,096 150,120 153,153 156,150 159,033 161,910 164,863 2,118 1,973 1,813 1,774 1,721 1,678 1,668 1,656 1,631 1,597 1980 1981 1982 1983 1984 1985 1986 6 1987 1988 1989 167,745 170,130 172,271 174,215 176,383 178,206 180,587 182,753 184,613 186,393 1,604 1,645 1,668 1,676 1,697 1,706 1,706 1,737 1,709 1,688 1990 1991 188,049 189,765 1,637 1,564 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 97,826 100,665 103,882 106,559 108,544 110,315 111,872 113,226 115,241 117,167 119,540 121,602 123,378 125,557 126,424 126,867 1 2 3 4 5 Not seasonally adjusted. Unemployed as percent of labor force including resident Armed Forces. Unemployed as percent of civilian labor force. Civilian labor force as percent of civilian noninstitutional population. Civilian employment as percent of civilian noninstitutional population. See next page for continuation of table. 332 3,186 114,728 3,233 113,644 TABLE B-30.—Population and the labor force, 1929-91—Continued [Monthly data seasonally adjusted, except as noted] Year or month Labor EmployCivilian force ment noninsti- Resiincluddent including tutional Armed resident populaForces1 resident tion 1 Armed Armed Forces Forces Unemployment rate Civilian labor force Employment Total Total Agricultural Noncultural Unemployment All Civilian work-2 workers ers 3 pation rate* Thousands of persons 16 years of age and over 1988:Jan Feb Mar... Apr.... May... June.. July... Aug... Sept.. Oct Nov... Dec... 1989:Jan Feb Mar... June... July.... Aug.... Sept... Oct Nov.... Dec... 1990:Jan Feb Mar.... Apr May.... June... July..., Aug..., Sept.. Oct Nov.... Dec.... 1991:Jan Feb Mar... Apr May... June.. July... Aug... Sept.. Oct Nov... Dec... 183,822 183,969 184,111 184,232 184,374 184,562 184,729 184,830 184,962 185,114 185,244 185,402 185,644 185,777 185,897 186,024 186,181 186,329 186,483 186,598 186,726 186,871 187,017 187,165 187,293 187,412 187,529 187,669 187,828 187,977 188,136 188,261 188,401 188,525 188,697 188,866 188,977 189,115 189,243 189,380 189,522 189,668 189,839 189,973 190,122 190,289 190,452 190,605 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 1,615 1,602 1,460 1,456 1,458 1,505 1,604 1,616 1,624 1,614 1,605 1,604 122,749 122,894 122,656 122,989 122,801 123,197 123,356 123,812 123,672 123,871 124,236 124,304 125,100 124,830 124,916 125,239 125,180 125,710 125,674 125,838 125,651 125,893 126,244 126,204 126,283 126,325 126,441 126,432 126,602 126,371 126,350 126,469 126,504 126,423 126,358 126,761 126,355 126,669 126,710 127,100 126,717 127,029 126,808 126,620 127,214 127,122 126,979 127,223 115,798 115,980 115,789 116,391 116,014 116,637 116,735 116,967 117,060 117,305 117,703 117,797 118,429 118,485 118,727 118,777 118,809 119,105 119,140 119,323 119,041 119,252 119,534 119,563 119,704 119,758 119,975 119,747 120,013 119,897 119,575 119,425 119,364 119,201 118,888 119,093 118,592 118,539 118,294 118,844 118,188 118,414 118,333 118,100 118,713 118,481 118,377 118,332 121,000 121,158 120,920 121,257 121,087 121,512 121,683 122,120 121,968 122,184 122,531 122,608 123,404 123,146 123,232 123,555 123,507 124,044 124,008 124,150 123,949 124,184 124,540 124,504 124,586 124,647 124,772 124,775 124,963 124,741 124,723 124,829 124,903 124,853 124,743 125,144 124,740 125,067 125,250 125,644 125,259 125,524 125,204 125,004 125,590 125,508 125,374 125,619 114,049 114,244 114,053 114,659 114,300 114,952 115,062 115,275 115,356 115,618 115,998 116,101 116,733 116,801 117,043 117,093 117,136 117,439 117,474 117,635 117,339 117,543 117,830 117,863 118,007 118,080 118,306 118,090 118,374 118,267 117,948 117,785 117,763 117,631 117,273 117,476 116,977 116,937 116,834 117,388 116,730 116,909 116,729 116,484 117,089 116,867 116,772 116,728 3,251 3,207 3,173 3,227 3,120 3,111 3,059 3,116 3,163 3,225 3,239 3,198 3,299 3,239 3,200 3,162 3,122 3,075 3,221 3,272 3,219 3,206 3,139 3,209 3,169 3,128 3,222 3,166 3,279 3,263 3,100 3,136 3,175 3,182 3,159 3,284 3,194 3,237 3,124 3,187 3,256 3,286 3,244 3,254 3,283 3,204 3,272 3,183 Civilian labor force Percent 110,798 111,037 110,880 111,432 111,180 111,841 112,003 112,159 112,193 112,393 112,759 112,903 113,434 113,562 113,843 113,931 114,014 114,364 114,253 114,363 114,120 114,337 114,691 114,654 114,838 114,952 115,084 114,924 115,095 115,004 114,848 114,649 114,588 114,449 114,114 114,192 113,783 113,700 113,710 114,201 113,474 113,623 113,485 113,230 113,806 113,663 113,500 113,545 6,951 6,914 6,867 6,598 6,787 6,560 6,621 6,845 6,612 6,566 6,533 6,507 6,671 6,345 6,189 6,462 6,371 6,605 6,534 6,515 6,610 6,641 6,710 6,641 6,579 6,567 6,466 6,685 6,589 6,474 6,775 7,044 7,140 7,222 7,470 7,668 7,763 8,130 8,416 8,256 8,529 8,615 8,475 8,520 8,501 8,641 8,602 8,891 5.7 5.6 5.6 5.4 5.5 5.3 5.4 5.5 5.3 5.3 5.3 5.2 5.3 5.1 5.0 5.2 5.1 5.3 5.2 5.2 5.3 5.3 5.3 5.3 5.2 5.2 5.1 5.3 5.2 5.1 5.4 5.6 5.6 5.7 5.9 6.0 6.1 6.4 6.6 6.5 6.7 6.8 6.7 6.7 6.7 6.8 6.8 7.0 5.7 5.7 5.7 5.4 5.6 5.4 5.4 5.6 5.4 5.4 5.3 5.3 5.4 5.2 5.0 5.2 5.2 5.3 5.3 5.2 5.3 5.3 5.4 5.3 5.3 5.3 5.2 5.4 5.3 5.2 5.4 5.6 5.7 5.8 6.0 6.1 6.2 6.5 6.7 6.6 6.8 6.9 6.8 6.8 6.8 6.9 6.9 7.1 65.8 65.9 65.7 65.8 65.7 65.8 65.9 66.1 65.9 66.0 66.1 66.1 66.5 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 66.3 66.3 66.2 66.1 66.3 66.0 66.1 66.2 66.3 66.1 66.2 66.0 65.8 66.1 66.0 65.8 65.9 6 Not strictly comparable with earlier data due to population adjustments as follows: Beginning 1953, introduction of 1950 census data added about 600,000 to population and 350,000 to labor force, total employment, and agricultural employment. Beginning 1960, inclusion of Alaska and Hawaii added about 500,000 to population, 300,000 to labor force, and 240,000 to nonagricultural employment. Beginning 1962, introduction of 1960 census data reduced population by about 50,000 and labor force and employment by 200,000. Beginning 1972, introduction of 1970 census data added about 800,000 to civilian noninstitutional population and 333,000 to labor force and employment. A subsequent adjustment based on 1970 census in March 1973 added 60,000 to labor force and to employment. Beginning 1978, changes in sampling and estimation procedures introduced into the household survey added about 250,000 to labor force and to employment. Unemployment levels and rates were not significantly affected. Beginning 1986, the introduction of revised population controls added about 400,000 to the civilian population and labor force and 350,000 to civilian employment. Unemployment levels and rates were not significantly affected. Note.—Labor force data in Tables B-30 through B-39 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. 333 TABLE B-31.—Civilian employment and unemployment by sex and age, 1947-91 [Thousands of persons 16 years of age and over; monthly data seasonally adjusted] Civilian employment Unemployment Males Year or month Total Total 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1990: Jan... Feb... Mar.. Apr... May.. June. July.. Aug.. Sept. Oct... Nov.. Dec. 1991: Jan.. Feb... Mar.. Apr... May.. 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 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 99,303 100,397 99,526 100,834 105,005 107,150 109,597 112,440 114,968 117,342 117,914 116,877 118,007 118,080 118,306 118,090 118,374 118,267 117,948 117,785 117,763 117,631 117,273 117,476 116,977 116,937 116,834 117,388 116,730 116,909 116,729 116,484 117,089 116,867 116,772 116,728 57,186 57,397 56,271 56,787 59,091 59,891 60,892 62,107 63,273 64,315 64,435 63,593 64,525 64,600 64,653 64,573 64,648 64,573 64,337 64,265 64,333 64,305 64,192 64,222 63,819 63,611 63,563 63,836 63,528 63,514 63,427 63,378 63,767 63,597 63,572 63,426 16-19 2,218 2,344 2,124 2,186 2,156 2,107 2,136 1,985 2,095 2,164 2,115 2,012 2,198 2,361 2,315 2,362 2,406 2,587 2,918 3,253 3,186 3,255 3,430 3,409 3,478 3,765 4,039 4,103 3,839 3,947 4,174 4,336 4,300 4,085 3,815 3,379 3,300 3,322 3,328 3,323 3,381 3,492 3,477 3,237 2,879 3,421 3,395 3,393 3,376 3,320 3,240 3,153 3,068 3,160 3,134 3,094 3,126 3,051 3,038 2,966 2,889 2,890 2,823 2,756 2,773 2,924 2,851 2,808 2,754 Females 20 years and over Total 38,776 39,382 38,803 39,394 39,626 39,578 40,296 39,634 40,526 41,216 41,239 40,411 41,267 41,543 41,342 41,815 42,251 42,886 43,422 43,668 44,294 44,859 45,388 45,581 45,912 47,130 48,310 48,922 48,018 49,190 50,555 52,143 53,308 53,101 53,582 52,891 53,487 55,769 56,562 57,569 58,726 59,781 60,837 61,198 60,714 61,104 61,205 61,260 61,197 61,328 61,333 61,184 61,197 61,173 61,171 61,098 61,096 60,768 60,573 60,597 60,947 60,638 60,691 60,671 60,605 60,843 60,746 60,764 60,672 16,045 16,617 16,723 17,340 18,181 18,568 18,749 18,490 19,551 20,419 20,714 20,613 21,164 21,874 22,090 22,525 23,105 23,831 24,748 25,976 26,893 27,807 29,084 29,688 29,976 31,257 32,715 33,769 33,989 35,615 37,289 39,569 41,217 42,117 43,000 43,256 44,047 45,915 47,259 48,706 50,334 51,696 53,027 53,479 53,284 53,482 53,480 53,653 53,517 53,726 53,694 53,611 53,520 53,430 53,326 53,081 53,254 53,158 53,326 53,271 53.552 53,202 53,395 53,302 53,106 53,322 53,270 53,200 53,302 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 2,749 3,192 3,136 3,233 3,100 3,068 3,063 3,021 2,895 2,985 2,906 2,846 2,858 2,830 2,888 2,863 2,863 2,778 2,756 2,621 2,564 2,683 2,706 2,726 2,689 Note.—See footnote 6 and Note, Table B-30. Source: Department of Labor, Bureau of Labor Statistics. 334 Males 20 years and over Total Females 20 years 16-19 Total 16-19 years and Total years 14,354 2,311 1,692 270 1,422 619 14,936 2,276 1,559 256 1,305 717 15,137 3,637 2,572 353 2,219 1,065 15,824 3,288 2,239 318 1,922 1,049 16,570 2,055 1,221 191 1,029 834 16,958 1,883 1,185 205 980 698 17,164 1,834 1,202 184 1,019 632 17,000 3,532 2,344 310 2,035 1,188 18,002 2,852 1,854 274 1,580 998 18,767 2,750 1,711 269 1,442 1,039 19,052 2,859 1,841 300 1,541 1,018 19,043 4,602 3,098 416 2,681 1,504 19,524 3,740 2,420 398 2,022 1,320 20,105 3,852 2,486 426 2,060 1,366 20,296 4,714 2,997 479 2,518 1,717 20,693 3,911 2,423 408 2,016 1,488 21,257 4,070 2,472 501 1,971 1,598 21,903 3,786 2,205 487 1,718 1,581 22,630 3,366 1,914 479 1,435 1,452 23,510 2,875 1,551 432 1,120 1,324 24,397 2,975 1,508 448 1,060 1,468 25,281 2,817 1,419 426 993 1,397 26,397 2,832 1,403 440 963 1,429 26,952 4,093 2,238 599 1,638 1,855 27,246 5,016 2,789 693 2,097 2,227 28,276 4,882 2,659 711 1,948 2,222 29,484 4,365 2,275 653 1,624 2,089 30,424 5,156 2,714 757 1,957 2,441 30,726 7,929 4,442 966 3,476 3,486 32,226 7,406 4,036 939 3,098 3,369 33,775 6,991 3,667 874 2,794 3,324 35,836 6,202 3,142 813 2,328 3,061 37,434 6,137 3,120 811 2,308 3,018 38,492 7,637 4,267 913 3,353 3,370 39,590 8,273 4,577 962 3,615 3,696 40,086 10,678 6,179 1,090 5,089 4,499 41,004 10,717 6,260 1,003 5,257 4,457 42,793 8,539 4,744 812 3,932 3,794 44,154 8,312 4,521 806 3,715 3,791 45,556 8,237 4,530 779 3,751 3,707 47,074 7,425 4,101 732 3,369 3,324 48,383 6,701 3,655 667 2,987 3,046 49,745 6,528 3,525 658 2,867 3,003 50,455 6,874 3,799 629 3,170 3,075 50,535 8,426 4,817 709 4,109 3,609 50,290 6,579 3,630 632 2,998 2,949 50,344 6,567 3,553 620 2,933 3,014 50,420 6,466 3,497 588 2,909 2,969 50,417 6,685 3,657 631 3,026 3,028 50,658 6,589 3,627 613 3,014 2,962 50,631 6,474 3,594 581 3,013 2,880 50,590 6,775 3,752 610 3,142 3,023 50,625 7,044 3,904 656 3,248 3,140 50,445 7,140 3,956 641 3,315 3,184 50,420 7,222 4,041 650 3,391 3,181 50,235 7,470 4,206 654 3,552 3,264 50,396 7,668 4,346 674 3,672 3,322 50,328 7,763 4,337 689 3,648 3,426 50,438 8,130 4,684 674 4,010 3,446 50,408 8,416 4,858 752 4,106 3,558 50,689 8,256 4,730 695 4,035 3,526 50,424 8,529 4,895 752 4,143 3,634 50,639 8,615 4,966 751 4,215 3,649 50,681 8,475 4,952 727 4,225 3,523 50,542 8,520 4,891 680 4,211 3,629 50,639 8,501 4,955 712 4,243 3,546 50,564 8,641 4,894 679 4,215 3,747 50,474 8,602 4,845 695 4,150 3,757 50,613 8,891 4,990 700 4,290 3,901 144 153 223 195 145 140 123 191 176 209 197 262 256 286 349 313 383 385 395 405 391 412 413 506 568 598 583 665 802 780 789 769 743 755 800 886 825 687 661 675 616 558 536 519 581 502 531 528 503 532 498 503 526 510 532 539 530 616 566 570 585 566 560 605 570 535 615 576 605 TABLE B-32.—Civilian employment by demographic characteristic, 1954-91 [Thousands of persons 16 years of age and over; monthly data seasonally adjusted] Black and other White Year or month All civilian workers Total Males Females Both sexes 16-19 Black Total Males Females Both sexes 16-19 Total Males Females 1954 1955 1956 1957 1958 1959 60,109 62,170 63,799 64,071 63,036 64,630 53,957 55,833 57,269 57,465 56,613 58,006 37,846 38,719 39,368 39,349 38,591 39,494 16,111 17,114 17,901 18,116 18,022 18,512 3,078 3,225 3,389 3,374 3,216 3,475 6,152 6,341 6,534 6,604 6,423 6,623 3,773 3,904 4,013 4,006 3,833 3,971 2,379 2,437 2,521 2,598 2,590 2,652 396 418 430 407 365 362 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 65,778 65,746 66,702 67,762 69,305 71,088 72,895 74,372 75,920 77,902 58,850 58,913 59,698 60,622 61,922 63,446 65,021 66,361 67,750 69,518 39,755 39,588 40,016 40,428 41,115 41,844 42,331 42,833 43,411 44,048 19,095 19,325 19,682 20,194 20,807 21,602 22,690 23,528 24,339 25,470 3,700 3,693 3,774 3,851 4,076 4,562 5,176 5,114 5,195 5,508 6,928 6,833 7,003 7,140 7,383 7,643 7,877 8,011 8,169 8,384 4,149 4,068 4,160 4,229 4,359 4,496 4,588 4,646 4,702 4,770 2,779 2,765 2,843 2,911 3,024 3,147 3,289 3,365 3,467 3,614 430 414 420 404 440 474 545 568 584 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 78,678 79,367 82,153 85,064 86,794 85,846 88,752 92,017 96,048 98,824 70,217 70,878 73,370 75,708 77,184 76,411 78,853 81,700 84,936 87,259 44,178 44,595 45,944 47,085 47,674 46,697 47,775 49,150 50,544 51,452 26,039 26,283 27,426 28,623 29,511 29,714 31,078 32,550 34,392 35,807 5,571 5,670 6,173 6,623 6,796 6,487 6,724 7,068 7,367 7,356 8,464 8,488 8,783 9,356 9,610 9,435 9,899 10,317 11,112 11,565 4,813 4,796 4,952 5,265 5,352 5,161 5,363 5,579 5,936 6,156 3,650 3,692 3,832 4,092 4,258 4,275 4,536 4,739 5,177 5,409 574 538 573 647 652 615 611 619 703 727 7,802 8,128 8,203 7,894 8,227 8,540 9,102 9,359 4,368 4,527 4,527 4,275 4,404 4,565 4,796 4,923 3,433 3,601 3,677 3,618 3,823 3,975 4,307 4,436 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 99,303 87,715 100,397 88,709 99,526 87,903 100,834 88,893 105,005 92,120 107,150 93,736 109,597 95,660 112,440 97,789 114,968 99,812 117,342 101,584 51,127 51,315 50,287 50,621 52,462 53,046 53,785 54,647 55,550 56,352 36,587 37,394 37,615 38,272 39,659 40,690 41,876 43,142 44,262 45,232 7,021 6,588 5,984 5,799 5,836 5,768 5,792 5,898 6,030 5,946 11,588 11,688 11,624 11,941 12,885 13,414 13,937 14,652 15,156 15,757 6,059 6,083 5,983 6,166 6,629 6,845 7,107 7,459 7,722 7,963 5,529 5,606 5,641 5,775 6,256 6,569 6,830 7,192 7,434 7,795 689 637 565 543 607 666 681 742 774 813 9,313 9,355 9,189 9,375 10,119 10,501 10,814 11,309 11,658 11,953 4,798 4,794 4,637 4,753 5,124 5,270 5,428 5,661 5,824 5,928 4,515 4,561 4,552 4,622 4,995 5,231 5,386 5,648 5,834 6,025 1990 1991 117,914 102,087 116,877 101,039 56,432 55,557 45,654 45,482 5,518 4,989 15,827 15,838 8,003 8,036 7,825 7,802 743 639 11,966 11,863 5,915 5,880 6,051 5,983 1990: Jan Feb Mar Apr May June 118,007 118,080 118,306 118,090 118,374 118,267 102,191 102,163 102,333 102,108 102,368 102,352 56,608 56,590 56,644 56,494 56,537 56,506 45,583 45,573 45,689 45,614 45,831 45,846 5,768 5,720 5,785 5,678 5,625 5,565 15,824 15,931 15,976 15,988 16,001 15,877 7,916 8,016 8,032 8,070 8,094 8,022 7,908 7,915 7,944 7,918 7,907 7,855 855 806 813 807 755 737 11,980 12,034 12,075 12,095 12,152 12,056 5,861 5,922 5,928 5,948 5,970 5,970 6,119 6,112 6,147 6,147 6,182 6,086 July Aug Sept Oct Nov Dec 117,948 117,785 117,763 117,631 117,273 117,476 102,215 102,099 102,082 101,877 101,517 101,704 56,395 56,344 56,368 56,310 56,200 56,151 45,820 45,755 45,714 45,567 45,317 45,553 5,449 5,299 5,404 5,335 5,269 5,317 15,667 15,720 15,634 15,782 15,773 15,764 7,958 7,945 7,900 7,998 8,026 8,052 7,709 7,775 7,734 7,784 7,747 7,712 691 685 707 704 689 668 11,880 11,853 11,845 11,921 11,897 11,821 5,894 5,870 5,872 5,910 5,916 5,911 5,986 5,983 5,973 6,011 5,981 5,910 1991: Jan Feb Mar Apr May June 116,977 116,937 116,834 117,388 116,730 116,909 101,204 101,184 101,027 101,504 101,033 101,050 55,800 55,595 55,533 55,793 55,616 55,470 45,404 45,589 45,494 45,711 45,417 45,580 5,230 5,265 5,131 5,102 4,997 4,921 15,783 15,767 15,828 15,888 15,681 15,832 8,026 8,021 8,063 8,038 7,892 8,015 7,757 7,746 7,765 7,850 7,789 7,817 678 662 677 661 661 659 11,868 11,845 11,909 11,939 11,748 11,851 5,869 5,886 5,912 5,892 5,742 5,857 5,999 5,959 5,997 6,047 6,006 5,994 July Aug Sept Oct Nov Dec 116,729 116,484 117,089 116,867 116,772 116,728 100,792 100,716 101,053 101,067 100,977 100,828 55,407 55,403 55,612 55,530 55,530 55,364 45,385 45,313 45,441 45,537 45,447 45,464 4,712 4,785 4,973 4,959 4,928 4,856 15,902 15,823 16,004 15,836 15,813 15,909 8,053 8,015 8,092 8,080 8,073 8,066 7,849 7,808 7,912 7,756 7,740 7,843 649 588 606 604 629 604 11,903 11,814 12,043 11,834 11,779 11,841 5,880 5,837 5,953 5,916 5,906 5,906 6,023 5,977 6,090 5,918 5,873 5,935 Note.—See footnote 6 and Note, Table B-30. Source: Department of Labor, Bureau of Labor Statistics. 335 TABLE B-33.—Unemployment by demographic characteristic, 1954-91 [Thousands of persons 16 years of age and over; monthly data seasonally adjusted] Black and other White All Year or month AM civilian workers Total Males Fo re- males Both sexes 16-19 946 774 793 812 1954 1955 1956 1957 1958 1959 3,532 2,852 2,750 2,859 4,602 3,740 2,859 2,252 2,159 2,289 3,680 2,946 1,913 1,478 1,366 1,477 2,489 1,903 1,191 1,043 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 3,852 4,714 3,911 4 070 3,786 3,366 2,875 2,975 2 817 2,832 3,065 3,743 3,052 3 208 2,999 2,691 2 255 2,338 2,226 2,260 1,988 2,398 1,915 1,976 1,779 1,556 1,241 1,208 1,142 1,137 1,077 1,345 1,137 1232 1,220 1,135 1,014 1,130 1084 1,123 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 4,093 5,016 4,882 4,365 5,156 7,929 7,406 6,991 6,202 6,137 3,339 4,085 3,906 3,442 4,097 6,421 5,914 5,441 4,698 4,664 1,857 2,309 2,173 1,836 2,169 3,627 3,258 2,883 2,411 2,405 1,482 1,777 1,733 1,606 1,927 2,794 2,656 2,558 2,287 2,260 1980 1981 1982 1983 1984. 1985 1986 1987 1988 1989 7,637 8,273 10,678 10,717 8,539 8,312 8,237 7,425 6,701 6,528 5,884 6,343 8,241 8,128 6,372 6,191 6,140 5,501 4,944 4,770 3,345 3,580 4,846 4,859 3,600 3,426 3,433 3,132 2,766 2,636 2,540 2,762 3,395 3,270 2,772 2,765 2,708 2,369 2,177 2,135 1990 1991 6,874 8,426 5,091 6,447 2,866 3,775 2,225 2,672 1990: Jan... Feb.. Mar.. May" June. 6,579 6,567 6,466 6,685 6,589 6,474 4,871 4,905 4,825 5,005 4,891 4,794 2,720 2,709 2,671 2,797 2,751 2,684 2,151 2,196 2,154 2,208 2,140 2,110 July.. Aug.. Sept. Oct.. Nov.. Dec. 6,775 7,044 7,140 7,222 7,470 7,668 4,964 5,191 5,254 5,344 5,489 5,694 2,791 2,936 2,943 3,030 3,144 3,315 2,173 2,255 2,311 2,314 2,345 2,379 1991: Jan... Feb.. Mar.. Apr.. May. June. 7,763 8,130 8,416 8,256 8,529 8,615 5,909 6,215 6,497 6,222 6,486 6,608 3,391 3,665 3,852 3,645 3,786 3,860 2,518 2,550 2,645 2,577 2,700 2,748 July.. Aug.. Sept. Oct.. Nov.. Dec. 8,475 8,520 8,501 8,641 8,602 8,891 6,590 6,504 6,540 6,565 6,622 6,818 3,932 3,818 3,940 3,845 3,833 3,890 2,658 2,686 2,600 2,720 2,789 2,928 Total 423 373 382 401 541 525 575 669 580 708 708 705 651 635 644 660 871 1,011 1,021 955 1,104 1,413 1,364 1,284 1,189 1,193 1,291 1,374 1,534 1,387 1,116 1,074 1,070 995 910 863 856 977 852 873 854 854 851 772 829 880 890 885 864 879 988 914 984 950 1,022 1,013 1,035 926 923 969 987 1,016 673 601 591 570 923 793 788 971 861 863 787 678 622 638 590 571 431 376 345 364 610 517 498 599 509 496 426 360 310 300 277 267 754 930 977 924 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 1,979 1,764 1,655 1,672 1,637 1,668 1,671 1,806 1,832 1,905 1,866 1,964 1,964 1,915 1,895 1,961 1,987 2,007 2,002 1,890 1,985 1,995 2,065 1,962 2,068 380 481 486 440 544 815 779 784 731 714 922 997 1,334 1,401 1,144 1,095 1,097 969 888 889 933 1,043 963 846 866 840 849 886 958 944 1,028 988 1,047 1,014 1,007 1,020 1,049 1,062 1,076 1,079 1,022 1,049 1,045 1,023 Note.—See footnote 6 and Note, Table B-30. Source: Department of Labor, Bureau of Labor Statistics. Males 336 Fo remales 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 1,026 999 955 869 868 850 936 801 809 806 797 819 785 848 888 877 878 917 950 908 875 912 925 931 923 868 936 950 1,042 994 968 1,080 988 Black Both sexes 16-19 Total Males Fo remales Both sexes 16-19 79 77 95 96 138 128 138 159 142 176 165 171 186 203 194 193 235 249 288 280 318 355 355 379 394 362 377 388 443 441 384 394 383 353 316 331 292 313 283 272 272 269 289 291 288 302 272 302 332 325 319 323 343 319 293 283 303 319 335 331 288 291 906 448 458 846 395 451 965 494 470 1,369 741 629 1,334 698 637 1,393 698 695 1,330 641 690 1,319 636 683 1,553 815 738 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 1,547 771 776 1,544 773 772 734 1,527 793 1,679 874 805 832 704 1,536 1,449 725 724 1,448 740 708 1,422 723 699 1,428 718 710 1,412 728 684 807 716 1,523 1,568 813 755 1,634 876 758 1,588 849 739 1,661 879 782 1,665 851 814 1,634 855 779 1,599 858 741 1,676 883 793 1,705 908 797 1,721 912 809 1,725 926 799 863 748 1,611 1,674 871 803 1,688 884 804 1,736 841 895 1,647 814 833 1,718 871 847 279 262 297 330 330 354 360 333 343 357 396 392 353 357 347 312 288 30C 258 270 250 247 242 235 256 257 251 274 24C 26C 297 287 283 273 303 283 257 250 252 265 292 284 247 251 TABLE B-34.—Labor force participation rate and employment/population ratio, 1948-91 [Percent; monthly data seasonally adjusted] Employment/population ratio Labor force participation rate Civilian2 Year or month Total1 En- Total Males males 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970... 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981... 1982 1983 1984 1985 1986 1987.... 1988 1989 1990 1991... 1990: Jan Feb Mar 59 7 60.1 600 59.7 596 60.0 60 7 60.3 601 59.9 60 0 60.0 59.5 59.3 59.4 59.5 59.8 60 2 60.3 60 8 610 60.7 60.9 61.3 61.7 61.6 62.0 62.6 63 5 64.0 641 64.2 64.3 644 64.7 651 65 6 65 9 66 2 66 8 66.6 66 3 66.8 66.8 66.8 66.8 May";;;;;; 66.8 June 66.6 July 66.6 Aug 66.6 Sept 66.6 Oct 66.5 Nov 66.4 Dec 66.5 1991: Jan 66.3 Feb 66.4 Mar 66.4 66.6 &:::::::. 66.4 June 66.4 July 66.2 Aug 66.1 Sept 66.3 Oct 66.2 Nov 66.1 Dec 66.2 Civilian 4 Qnth 58 8 58 9 59? 59? 59 f) S8 9 *>R8 593 60 0 19 6 59 5 59 3 59 4 59.3 58 8 58 7 58 7 58 9 59? 59 6 59 6 601 60 4 60? 60.4 60 8 61.3 fil ? 61.6 6? 3 63? 63 7 63 8 63.9 64.0 640 64.4 648 65 3 65 6 65 9 66 5 66 4 66 0 66.5 66.5 66.5 66.5 66.5 66.4 66.3 66.3 66.3 66.2 66.1 66.3 66.0 66.1 66.2 66.3 66.1 66.2 66.0 65.8 66.1 66.0 65.8 65.9 866 86.4 864 86.3 863 860 85 5 85.4 85 5 848 84 2 83 7 83 3 82.9 82.0 814 81.0 80 7 80.4 804 801 79 8 79 7 791 78.9 78 8 78.7 77 9 77.5 77 7 77 9 77 8 77 4 77.0 76 6 764 764 76 3 76 3 76 2 76 2 76 4 761 75 5 76.4 76.3 76.3 76.3 76.2 76.1 75.9 75.9 76.0 76.0 76.0 76.1 75.6 75.7 75.8 75.9 75.7 75.7 75.5 75.3 75.7 75.4 75.2 75.2 32 7 33.1 33 9 34.6 347 34.4 346 35.7 36 9 369 371 371 37 7 38.1 37.9 38.3 38.7 39.3 40.3 411 416 42 7 43 3 434 43.9 447 45.7 46 3 47.3 48 4 500 50 9 515 52.1 52 6 52 9 53 6 545 55 3 56 0 56 6 57 4 57 5 57 3 57.6 57.6 57.7 57.6 57.7 57.5 57.5 57.5 57.4 57.3 57.1 57.3 57.2 57.4 57.4 57.6 57.3 57.5 57.3 57.1 57.2 57.3 57.2 57.4 Black and Black 16-19 White other years 52 5 52.2 518 52.2 513 50.2 48 3 48.9 509 49.6 47 4 46 7 47 5 46.9 46.1 45.2 44.5 45.7 48.2 484 483 494 499 49 7 51.9 53 7 54.8 540 54.5 56 0 57 8 57 9 56 7 55.4 541 53 5 53 9 545 547 547 55 3 55 9 53 7 517 55.2 54.8 55.6 54.9 54.5 53.5 52.9 52.1 53.3 52.9 52.3 52.8 53.0 53.0 53.0 52.3 52.0 51.5 50.4 49.5 51.5 51.7 51.4 51.1 58 2 58.7 594 59.1 58 9 58.7 58 8 58.8 58.3 58? 58.2 58 4 58.7 59 2 59 3 59 9 60 2 601 60.4 60 8 61.4 615 61.8 62 5 63 3 63 9 641 64.3 643 64 3 64 6 65 0 65 5 65 8 66 2 66 7 66 8 66 6 66.9 66.9 66.9 66.9 66.9 66.8 66.8 66.8 66.8 66.7 66.5 66.7 66.5 66.7 66.7 66.8 66.6 66.7 66.5 66.3 66.5 66.5 66.4 66.4 640 642 649 644 64 8 643 645 64.1 63.2 63 0 631 6? 9 63 0 62 8 62 2 62 1 618 609 60.2 60 5 60.3 59 6 59.8 604 62 2 622 617 61.3 616 621 62 6 63 3 63 7 643 640 647 63 7 63 1 64 3 64.2 64.3 641 64.1 63.6 63.? 63 3 63.2 63.5 63.7 63.5 63.3 63.0 63.4 63.6 6?.8 63.2 6?.9 62.9 63.4 62.9 62.4 62.9 59.9 60 2 59.8 58 8 59.0 59 8 615 614 610 60.8 610 615 62 2 62 9 63 3 63 8 63 8 642 63 3 62 6 63.9 63.6 63.8 63.7 63.9 63.3 62.9 62.9 63.1 63.2 63.3 62.9 62.9 62.5 63.1 63.3 62.4 62.9 62.5 62.3 63.3 62.5 61.7 62.3 1 2 3 Rnth Total8 Total 566 58.2 58 2 580 564 57.5 58 2 57.8 561 567 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 5 611 619 62 6 63 3 63 0 619 63.3 63.3 63.4 63.2 63.3 63.2 63.0 62.9 62.8 62.7 62.5 62.5 62.2 62.2 62.0 62.3 61.9 61.9 61.8 61.6 61.9 61.7 61.6 61.6 566 55.4 561 57.3 57 3 57.1 55 5 56.7 57 5 57.1 554 560 561 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 57.8 561 56.8 57 9 59 3 59 9 59 2 59.0 57 8 57 9 59 5 601 60 7 615 62 3 63 0 62 7 616 63.0 63.0 63.1 6?.9 63.0 62.9 62.7 6?.6 62.5 62.4 6?.l 62.2 61.9 61.8 61.7 62.0 61.6 61.6 61.5 61.3 61.6 61.4 61.3 61.2 Mates 83 5 81.3 82 0 84.0 839 83 6 810 81.8 82 3 813 78 5 79 3 789 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 74.9 717 72.0 72 8 73 8 73 8 72 0 71.3 69 0 68 8 70 7 70 9 710 715 72 0 72 5 719 70 2 72.3 72.3 7?.3 72.2 72.2 72.1 71.7 71.6 71.6 71.5 71.3 71.3 70.8 70.5 70.4 70.7 70.3 70.2 70.0 69.9 70.3 70.0 69.9 69.7 Co. males 313 31.2 32 0 33.1 33 4 33.3 32 5 34.0 351 351 345 35 0 35 5 35.4 35.6 35.8 36 3 37.1 38 3 39 0 39 6 40 7 40 8 404 41.0 42 0 42.6 42 0 43.2 445 46 4 47 5 47 7 48.0 47 7 48 0 49 5 50 4 514 52 5 53 4 54 3 543 53 7 54.5 54.5 54.7 54.5 54.7 54.6 54.5 54.3 54.2 54.1 53.8 53.9 53.8 53.9 53.8 54.1 53.7 53.8 53.7 53.5 53.7 53.6 53.5 53.5 16-19 years 47 7 45.2 45 5 47.9 469 46.4 42 3 43.5 453 43.9 39 9 399 40 5 39.1 39.4 37.4 37.3 38.9 421 42 2 42 2 43 4 42 3 413 43.5 459 46.0 43 3 44.2 461 48 3 48 5 46 6 44.6 415 415 43 7 444 44 6 45 5 46 8 47 5 45 4 42 1 47.1 46.6 47.6 46.8 46.2 45.7 44.9 43.5 44.9 44.2 43.5 43.9 43.3 43.8 43.2 42.7 42.2 41.7 40.4 40.1 42.2 41.9 41.8 41.2 White 552 56.5 57 3 56.8 553 55.9 559 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 5 610 615 62 3 63 1 63 8 63 6 62 6 63.9 63.8 63.9 63.7 63.9 63.8 63.7 63.6 63.5 63.4 63.1 63.2 62.9 62.8 62.7 62.9 62.6 62.6 62.4 62.3 62.5 62.4 62.4 62.2 Black and other 58 0 58.7 59 5 59.3 567 57 5 57 9 56.2 56.3 56.2 57.0 57.8 58 4 582 58 0 581 56 8 54.9 54.1 55 0 54.3 514 52.0 52 5 547 55 2 53 6 52.6 509 510 53 6 547 55 4 56 8 57 4 582 57 3 561 57.8 58.1 58.2 58.1 58.1 57.5 56.6 56.7 56.3 56.8 56.6 56.5 56.4 56.3 56.4 56.5 55.7 56.1 56.2 55.9 56.4 55.7 55.5 55.7 Black 53.7 54.5 53.5 501 50.8 514 53 6 53 8 52 3 51.3 49.4 49 5 52.3 53 4 541 55 6 56 3 56 9 56 2 549 56.6 56.8 56.9 57.C 57.2 56.6 55.7 55.6 55.5 55.7 55.5 55.1 55.3 55.1 55.3 55.4 54.5 54.9 55.0 54.6 55.5 54.5 54.2 54.4 Labor force including resident Armed Forces as percent of noninstitutional population including resident Armed Forces. Civilian labor force as percent of civilian noninstitutional population in group specified. Empjoyment including resident Armed Forces as percent of noninstitutional population including resident Armed Forces. 4 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-30. Source: Department of Labor, Bureau of Labor Statistics. 337 TABLE B-35.—Civilian labor force participation rate by demographic characteristic, 1954-91 [Percent;1 monthly data seasonally adjusted] White Year or month All civilian work- Total ers Total Black and other or black Males 16-19 years Females 20 years Total and over 16-19 Females 20 years Total Total and over 16-19 years 20 years Total and over 16-19 years Black and other 1954.. 1955.. 1956.. 1957.. 1958.. 1959.. I960.. 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 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 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 66.0 66.5 66.5 66.5 66.5 66.5 66.4 66.3 66.3 66.3 66.2 66.1 66.3 66.0 66.1 66.2 66.3 66.1 66.2 66.0 65.8 66.1 66.0 65.8 65.9 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 66.6 66.9 66.9 66.9 66.9 66.9 66.8 66.8 66.8 66.8 66.7 66.5 66.7 66.5 66.7 66.7 66.8 66.6 66.7 66.5 66.3 66.5 66.5 66.4 66.4 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 76.4 77.2 77.2 77.1 77.1 77.0 76.8 76.7 76.8 76.8 76.8 76.8 76.9 76.5 76.5 76.6 76.6 76.5 76.4 76.4 76.2 76.5 76.2 76.2 76.0 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 57.2 60.6 60.3 60.3 61.1 59.9 58.9 58.6 57.9 59.0 59.0 58.4 59.2 59.1 58.9 58.7 56.6 57.9 56.8 56.0 55.3 57.6 56.9 56.9 56.2 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 77.8 78.6 78.5 78.5 78.3 78.3 78.2 78.2 78.3 78.2 78.2 78.2 78.2 77.8 77.8 78.0 78.2 78.0 77.9 77.9 77.7 77.9 77.7 77.6 77.4 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 57.4 57.4 57.4 57.5 57.5 57.6 57.6 57.6 57.6 57.6 57.4 57.1 57.4 57.3 57.6 57.5 57.7 57.4 57.7 57.3 57.2 57.2 57.5 57.4 57.6 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 54.3 56.5 56.7 57.9 55.8 56.2 55.2 54.8 54.0 55.4 54.5 53.7 54.4 55.3 55.4 54.7 56.1 54.4 54.3 51.8 52.0 53.3 54.8 54.7 54.8 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 57.7 57.5 57.5 57.5 57.6 57.7 57.7 57.8 57.8 57.7 57.6 57.3 57.6 57.5 57.7 57.7 57.8 57.7 57.9 57.7 57.6 57.5 57.6 57.6 57.8 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 62.6 63.9 63.6 63.8 63.7 63.9 63.3 62.9 62.9 63.1 63.2 63.3 62.9 62.9 62.5 63.1 63.3 62.4 62.9 62.5 62.3 63.3 62.5 61.7 62.3 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 69.5 70.4 69.9 70.0 70.0 70.0 70.0 70.0 69.7 70.3 70.4 70.6 70.2 69.7 69.8 70.3 70.3 68.6 69.9 69.3 68.9 70.1 69.2 68.7 69.2 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 37.4 45.3 41.8 43.1 42.1 41.1 38.5 38.8 38.6 39.1 39.6 40.7 38.5 37.7 36.9 39.7 38.6 36.4 38.7 35.4 36.5 40.9 36.8 35.1 36.3 87.1 87.8 87.8 87.0 87.1 86.7 86.2 85.5 84.2 83.9 84.1 83.7 83.3 82.9 82.2 81.4 81.4 80.0 78.6 46.1 46.1 47.3 47.1 48.0 47.7 48.2 48.3 48.0 48.1 48.6 48.6 49.4 49.5 49.3 49.8 49.5 49.2 48.8 31.0 32.7 36.3 33.2 31.9 28.2 32.9 32.8 33.1 32.6 31.7 29.5 33.5 35.2 34.8 34.6 34.1 31.2 32.3 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 57.0 58.5 58.6 58.7 58.5 58.9 57.7 57.1 57.3 57.2 57.3 57.3 56.9 57.3 56.6 57.3 57.7 57.4 57.1 56.9 56.9 57.8 57.0 56,1 56.6 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 33.5 39.2 36.4 38.0 38.0 37.1 37.5 34.3 35.8 35.1 36.8 37.0 35.5 37.8 36.1 37.1 35.1 34.2 31.2 33.8 28.8 31.7 33.2 32.4 30.7 Black 1990:Jan Feb Mar.... May!!!: June.., July... Aug... Sept.. Oct Nov... Dec... 1991: Jan Feb Mar... fc 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-30. Source: Department of Labor, Bureau of Labor Statistics. 338 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 73.4 73.6 73.5 73.4 73.5 73.7 74.0 73.8 73.6 74.2 74.2 74.4 74.1 73.6 73.8 74.0 74.1 72.6 73.7 73.4 72.8 73.6 73.0 72.7 73.0 TABLE B-36.—Civilian employment/population ratio by demographic characteristic, 1954-91 [Percent;1 monthly data seasonally adjusted] White Year or month All civilian work- Total ers Total Black and other or black Males 16-19 years Females 20 years Total and over 16-19 years Females Males 20 years Total Total and over 16-19 years 20 years Total and over 16-19 years Black and other 1954 1955 1956 1957 1958 1959 1960 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 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 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 61.6 63.0 63.0 63.1 62.9 63.0 62.9 62.7 62.6 62.5 62.4 62.1 62.2 61.9 61.8 61.7 62.0 61.6 61.6 61.5 61.3 61.6 61.4 61.3 61.2 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 62.6 63.9 63.8 63.9 63.7 63.9 63.8 63.7 63.6 63.5 63.4 63.1 63.2 62.9 62.8 62.7 62.9 62.6 62.6 62.4 62.3 62.5 62.4 62.4 62.2 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 71.5 73.7 73.6 73.7 73.4 73.4 73.3 73.1 73.0 73.0 72.9 72.7 72.6 72.1 71.8 71.7 71.9 71.7 71.4 71.3 71.2 71.5 71.3 71.2 71.0 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 47.2 52.4 52.3 52.5 52.7 51.8 51.4 50.2 49.0 49.9 50.0 49.5 50.1 49.5 49.5 48.1 47.1 47.1 46.0 45.1 45.9 47.9 47.3 47.0 46.1 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 73.3 75.4 75.3 75.4 75.1 75.1 75.0 74.9 74.9 74.8 74.7 74.5 74.3 73.8 73.5 73.4 73.8 73.5 73.3 73.2 73.1 73.2 73.1 73.0 72.8 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 54.3 54.8 54.8 54.9 54.8 55.0 55.0 55.0 54.9 54.8 54.6 54.3 54.5 54.3 54.5 54.4 54.6 54.2 54.4 54.1 54.0 54.1 54.2 54.1 54.1 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 46.1 49.6 49.3 50.6 49.0 49.1 48.7 48.2 46.9 48.3 47.3 46.8 47.4 46.7 47.9 47.1 47.9 46.1 46.1 43.3 44.0 45.7 46.1 46.0 45.7 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 54.8 55.2 55.2 55.2 55.2 55.5 55.5 55.5 55.4 55.2 55.1 54.8 55.0 54.8 55.0 54.9 55.1 54.8 55.0 54.9 54.7 54.7 54.8 54.6 54.6 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 54.9 56.6 56.8 56.9 57.0 57.2 56.6 55.7 55.6 55.5 55.7 55.5 55.1 55.3 55.1 55.3 55.4 54.5 54.9 55.0 54.6 55.5 54.5 54.2 54.4 66.8 67.5 65.8 60.6 60.6 61.4 63.3 63.4 60.4 59.1 56.0 56.3 59.2 60.0 60.6 62.0 62.7 62.8 61.8 60.5 61.7 62.2 62.2 62.4 62.5 62.4 61.5 61.2 61.2 61.5 61.5 61.3 60.8 61.0 61.2 60.9 59.2 60.3 60.5 59.9 61.1 60.6 60.4 60.3 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 23.8 31.9 29.5 30.3 30.1 28.2 25.2 25.8 24.6 26.9 27.0 27.0 24.2 24.4 23.7 24.8 24.0 23.1 24.6 23.9 23.1 24.3 23.5 22.4 23.4 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 43.0 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 50.3 52.5 52.4 52.6 52.5 52.8 51.9 51.0 50.9 50.8 51.0 50.7 50.0 50.7 50.3 50.6 51.0 50.6 50.4 50.6 50.2 51.0 49.5 49.1 49.6 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 21.4 29.6 26.2 28.2 28.1 26.2 26.8 23.8 24.2 24.8 25.0 23.1 22.8 24.4 23.5 23.2 22.7 23.4 21.6 21.3 16.9 20.3 19.2 21.4 19.5 Black 1988 1989 1990 1991 1990: Jan... Feb... Mar.. fe June. July.. Aug.. Sept. Oct... Nov.. Dec. 1991: Jan.. Feb.. Mar. fe June July. Aug. Sept. Oct.., Nov. 1 Dec. 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-30. Source: Department of Labor, Bureau of Labor Statistics. 339 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 64.9 65.5 66.5 66.2 66.5 66.8 67.1 66.0 65.8 65.4 65.8 65.8 65.9 65.3 65.5 65.5 65.3 63.7 64.7 64.8 64.3 65.4 65.0 64.9 64.6 TABLE B-37.—Unemployment rate, 1948-91 [Percent; 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 1990 1991 1990:Jan Feb Mar May!!!!! June.... July Aug Sept.... Oct Nov Dec 1991: Jan Feb Mar May!!!!! June.... July Aug Sept.... Oct Nov Dec Unemployment UnemployFemales Males ment All rate, civil20 20 all ian 1616workwork- Total 19 years Total 19 years 1 and and ers ers years over years over 52 3.2 29 2.8 5.4 4.3 40 4.2 6.6 5.3 5.4 6.5 5.4 55 5.0 44 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 71 69 6.1 54 5.2 5.4 6.6 5.2 5.2 5.1 5.3 5.2 5.1 5.4 5.6 5.6 5.7 5.9 6.0 6.1 6.4 6.6 6.5 6.7 6.8 6.7 6.7 6.7 6.8 6.8 7.0 38 5.9 53 3.3 30 2.9 5.5 4.4 41 4.3 6.8 5.5 5.5 6.7 5.5 57 5.2 45 38 3.8 3.6 3.5 4.9 5.9 5.6 49 5.6 85 7.7 7.1 6.1 5.8 71 7.6 9.7 9.6 75 7.2 70 6.2 5.5 5.3 5.5 6.7 5.3 5.3 5.2 5.4 5.3 5.2 5.4 5.6 5.7 5.8 6.0 6.1 6.2 6.5 6.7 6.6 6.8 6.9 6.8 6.8 6.8 6.9 6.9 7.1 36 5.9 5.1 2.8 28 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 69 6.2 5.5 5.2 5.6 7.0 5.3 5.2 5.1 5.4 5.3 5.3 5.5 5.7 5.8 5.9 6.1 6.3 6.4 6.9 7.1 6.9 7.2 7.3 7.2 7.2 7.2 7.1 7.1 7.3 98 14.3 12.7 8.1 89 7.9 13.5 11.6 11.1 12.4 17.1 15.3 15.3 17.1 14.7 17.2 15.8 141 11.7 12.3 11.6 11.4 15.0 16.6 15.9 13.9 15.6 201 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 19.8 15.6 15.4 14.8 15.7 15.6 15.2 16.2 17.6 16.9 17.2 17.4 17.7 18.4 18.2 20.2 19.4 20.6 21.0 20.9 19.7 19.6 19.2 19.8 20.3 32 5.4 47 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 32 2.5 2.3 22 2.1 3.5 4.4 4.0 33 3.8 68 5.9 52 4.3 4.2 59 6.3 8.8 8.9 66 6.2 61 54 4.8 4.5 49 6.3 4.7 4.6 4.5 4.7 4.7 4.7 4.9 5.0 5.1 5.3 5.5 5.7 5.7 6.2 6.3 6.2 6.4 6.5 6.5 6.5 6.5 6.5 6.4 6.6 41 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 55 4.8 5.2 4.8 4.7 5.9 6.9 6.6 60 6.7 93 8.6 82 72 6.8 74 7.9 9.4 9.2 7.6 7.4 7i 6*2 5.6 5.4 5.4 6.3 5.2 5.3 5.2 5.4 5.2 5.1 5.3 5.5 5.6 5.6 5.8 5.9 6.1 6.1 6.3 6.2 6.4 6.4 6.2 6.4 6.2 6.6 6.6 6.8 83 12.3 114 8.3 80 7.2 11.4 10.2 112 10.6 14.3 13.5 13.9 16.3 14.6 17.2 16.6 15 7 141 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 17.4 13.6 14.5 14.0 14.0 14.8 14.0 14.3 15.4 14.6 15.5 15.9 15.6 17.9 16.4 16.6 17.0 16.9 16.9 18.8 18.2 16.6 18.5 17.4 18.4 36 5.3 51 4.0 32 2.9 5.5 4.4 42 41 6.1 5.2 5.1 6.3 5.4 54 52 45 3.8 4.2 3.8 3.7 4.8 5.7 5.4 49 5.5 80 7.4 70 6.0 5.7 64 6.8 8.3 8.1 6.8 6.6 62 5!4 4.9 4.7 4.8 5.7 4.6 4.7 4.6 4.8 4.6 4.5 4.7 4.9 5.0 5.0 5.1 5.2 5.3 5.4 5.6 5.5 5.7 5.7 5.4 5.7 5.6 5.8 5.9 6.1 1 resident Armed Forces. r._, r Unemployed 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-30. Source: Department of Labor, Bureau of Labor Statistics. 2 3 340 rate, civilian workers2 Both sexes 1619 years 92 13.4 12 2 8.2 85 7.6 12.6 11.0 111 116 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 18.6 14.6 15.0 14.4 14.9 15.2 14.6 15.3 16.5 15.8 16.4 16.7 16.8 18.2 17.3 18.5 18.2 18.9 19.0 19.9 19.0 18.2 18.9 18.7 19.3 Black White and Black other 35 5.6 4.9 3.1 28 2.7 5.0 3.9 36 3.8 6.1 4.8 5.0 6.0 49 50 4.6 41 3.4 3.4 3.2 3.1 4.5 5.4 5.1 43 5.0 78 7.0 62 5.2 5.1 63 6.7 8.6 8.4 6.5 6.2 60 5!3 4.7 4.5 4.7 6.0 4.5 4.6 4.5 4.7 4.6 4.5 4.6 4.8 4.9 5.0 5.1 5.3 5.5 5.8 6.0 5.8 6.0 6.1 6.1 6.1 6.1 6.1 6.2 6.3 59 8.9 9.0 5.3 54 4.5 9.9 87 83 79 12.6 10.7 10 2 12.4 10 9 10 8 96 81 7.3 7.4 6.7 6.4 8.2 9.9 10.0 "ib'.4" 90 94 9.9 10.5 13 8 14 8 13.1 14.0 131 14 0 11.9 12 8 11.3 12.3 131 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 ll!6 13 0 10.4 11.7 10.0 11.4 10.1 11.3 11.1 12.4 10.0 11.4 9.4 10.7 9.5 10.7 9.3 10.5 9.4 10.5 9.5 10.5 10.3 11.4 10.4 11.7 10.9 12.1 10.6 11.8 11.1 12.3 11.1 12.3 10.8 12.1 10.7 11.9 11.0 12.3 11.1 12.5 11.3 12.8 11.2 12.7 10.6 11.9 11.1 12.4 11.1 12.3 11.5 12.8 11.0 12.3 11.5 12.7 Experienced wage and salary workers 43 6.8 60 3.7 34 32 6.2 4.8 44 4*6 7.3 5.7 5.7 6.8 5.6 56 5.0 43 35 3.6 3.4 3.3 4.8 5.7 5.3 45 5.3 82 7.3 66 5.6 5.5 6.9 7.3 9.3 9.2 71 6.8 66 5.8 5.2 5.0 5.3 6.5 5.1 5.0 5.0 5.1 5.0 5.0 5.2 5.3 5.5 5.5 5.8 5.9 6.0 6.3 6.6 6.3 6.5 6.6 6.4 6.5 6.5 6.6 6.7 6.8 Mar- Women who ried mainmen, tain spouse famipres-3 lies ent 3.5 46 1.5 14 17 4.0 !!!!!!!!!!!!! 2.6 23 2*8 5.1 3.6 3.7 4.6 3.6 34 2.8 24 19 4.9 1.8 4.4 1.6 4.4 1.5 5.4 2.6 7.3 3.2 7.2 2.8 7.1 23 7.0 2.7 10.0 51 10.1 4.2 9.4 36 8.5 2.8 8.3 2.8 9.2 4.2 10.4 4.3 11.7 6.5 12.2 6.5 10.3 4.6 10.4 4.3 98 44 9.2 3.9 8.1 33 8.1 3.0 8.2 3.4 9.1 4.4 7.6 3.4 7.6 3.1 8.4 3.1 7.5 3.2 7.6 3.2 8.0 3.1 3.4 8.4 8.3 3.5 8.8 3.5 8.5 3.6 8.8 3.8 8.8 3.8 9.0 4.0 4.2 9.1 4.4 9.1 4.3 9.6 4.4 9.2 4.6 9.1 8.5 4.4 4.4 9.4 4.5 9.0 4.2 9.4 4.5 9.1 4.7 9.1 TABLE B-38.—Civilian unemployment rate by demographic characteristic, 1948-91 [Percent;l monthly data seasonally adjusted] Year or month White Black and other or black All Males Females Males Females civilian 20 20 Total 20 work- Total 16-19 years 16-19 years ers Total 16-19 years Total 16-19 and Total years and years and Total years over over over Black and other 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 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 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 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 10.3 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 9.9 8.4 7.4 7.6 12.7 10.5 9.6 11.7 10.0 9.2 7.7 6.0 4.9 4.3 3.9 3.7 5.6 7.3 6.9 6.1 7.9 8.4 6.1 5.7 4.1 9.2 8.5 8.9 7.3 10.8 9.4 9.4 11.9 11.0 11.2 10.7 9.2 8.7 9.1 8.3 7.8 9.3 10.9 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 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 11.9 10.3 10.6 10.3 10.2 10.3 10.1 10.7 11.2 11.3 10.9 41.6 12.1 11.5 11.1 11.7 11.6 11.9 11.8 11.0 11.8 11.7 13.1 12.4 12.5 40.5 36.1 37.4 41.0 41.6 43.4 40.8 39.1 39.8 42.2 47.1 48.2 42.6 39.2 39.2 34.9 32.0 33.0 30.0 36.1 24.7 28.1 25.8 26.1 29.5 28.5 30.6 32.5 29.3 32.0 37.4 35.7 35.4 35.0 37.5 35.4 31.7 30.9 37.0 41.4 35.9 42.1 33.8 36.3 Black 1972 1973 1974 1975.... 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1990: Jan... Feb.... Mar... Apr..., Jay... June.. July.. Aug.. Sept. Oct.... Nov... Dec, 1991: Jan... Feb... Mar.. t: June. Nov.. Dec. 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 17.5 13.5 13.4 13.0 13.8 13.6 12.6 14.3 15.3 15.4 15.2 15.3 15.3 16.1 15.9 18.2 16.8 18.7 19.0 19.4 16.9 16.9 16.9 17.4 18.0 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 15.2 12.2 13.1 12.8 12.2 12.7 11.7 12.0 13.1 12.8 13.1 12.7 12.9 15.6 13.6 13.8 14.5 15.2 15.1 16.5 15.5 14.3 15.8 15.9 16.6 1 Unemployed as percent of civilian labor force in group specified. Note.—See Note, Table B-37. Source: Department of Labor, Bureau of Labor Statistics. 341 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 12.4 11.4 10.7 10.7 10.5 10.5 10.5 11.4 11.7 12.1 11.8 12.3 12.3 12.1 11.9 12.3 12.5 12.8 12.7 11.9 12.4 12.3 12.8 12.3 12.7 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 12.9 12.4 10.9 11.1 10.8 10.7 10.9 12.0 12.2 13.0 12.6 12.9 12.6 12.7 12.7 13.0 13.4 13.7 13.7 12.8 13.0 12.9 12.4 12.1 12.9 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 36.5 29.5 29.5 29.5 28.3 31.4 34.6 33.4 36.3 31.2 31.9 33.7 37.0 35.3 35.8 37.5 37.7 36.5 36.5 32.5 36.7 40.7 36.1 36.4 35.7 7.0 6.0 7.4 12.5 11.4 10.7 9.3 9.3 12.4 13.5 17.8 18.1 14.3 13.2 12.9 11.1 10.1 10.0 10.4 11.5 11.1 9.5 9.7 9.6 9.3 9.3 10.7 10.6 11.8 11.3 11.5 11.0 11.3 11.3 11.4 11.8 12.3 12.2 11.7 11.6 11.1 11.0 10.7 11.5 TABLE B-39.—Unemployment by duration and reason, 1947-91 [Thousands of persons, except as noted; monthly data seasonally adjusted1] Duration of 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 1988T. 1989 1990 1991 1990: Jan... Feb... Mar... iJay"" June. July... Aug... Sept.. Oct... Nov... Dec... 1991: Jan... Feb... Mar... fc: June. July... Aug.., Sept.. Oct... Nov... Dec... Unemployment 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 8,426 6,579 6,567 6,466 6,685 6,589 6,474 6,775 7,044 7,140 7,222 7,470 7,668 7,763 8,130 8,416 8,256 8,529 8,615 8,475 8,520 8,501 8,641 8,602 8,891 Less than 5 weeks 1,210 1300 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 1573 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 3,380 3,120 3,114 3,147 3,181 3,038 3,090 3,142 3,305 3,114 3,177 3,316 3,316 3,392 3,417 3,458 3,285 3,596 3,413 3,370 3,386 3,344 3,300 3,289 3,307 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 1585 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 2,724 2,032 2,049 2,015 2,123 2,192 2,054 2,167 2,128 2,444 2,401 2,379 2,562 2,527 2,694 2,803 2,708 2,711 2,816 2,737 2,686 2,798 2,774 2,721 2,764 15-26 weeks 27 weeks and over 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 1,225 773 745 712 716 768 758 800 833 872 898 965 966 1,007 1,066 1,199 1,185 1,188 1,372 1,234 1,258 1,260 1,415 1,300 1,372 164 116 256 357 137 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 1,098 650 636 638 671 626 639 692 731 759 711 805 808 862 919 945 995 1,025 1,116 1,121 1,159 1,162 1,155 1,323 1,471 Reason for unemployment Average (mean) duration (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 13.8 12.0 11.8 11.9 11.8 11.8 11.8 12.0 12.3 12.4 12.1 12.5 12.5 12.5 12.9 13.0 13.4 13.1 14.0 13.9 14.1 14.2 14.6 14.9 15.3 Median duration (weeks) 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 6.9 5.1 5.3 5.0 5.0 5.3 5.2 5.3 5.3 6.0 5.9 5.8 5.9 5.9 6.3 6.5 6.9 6.6 6.9 6.8 7.2 7.4 7.4 7.7 7.8 Job losers 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 4,608 3,127 3,078 3.017 3,101 3,122 3,139 3,168 3,407 3,543 3,636 3,852 3,880 4,080 4,474 4,587 4,456 4,571 4,748 4,659 4,690 4,805 4,782 4,696 4,990 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 1,014 979 1,027 1,015 1,000 1,169 1,000 986 1,016 994 966 979 989 1,044 914 993 1,055 993 1,029 1,072 987 892 946 986 987 913 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 2,087 1,765 1,826 1,844 1,795 1,801 1,825 1,945 1,865 1,976 1,919 1,937 2,112 2.036 2.010 2,076 2.059 2,159 2,120 2,065 2,107 2,036 2,100 2,108 2,164 1 Because of independent seasonal adjustment of the various series, detail will not add to totals. 2 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-30. Source: Department of Labor, Bureau of Labor Statistics. 342 TABLE B-40.—Unemployment insurance programs, selected data, 1960-91 All programs Year or month 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991"... Covered employ-1 ment State programs Total Insured unemploy- benefits ment paid (weekly (millions averof a g e ) * ' dollars) 2 4 Insured unemployment 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 13,694.4 14,957.0 19,640.2 1,908 2,290 1,783 7 l,806 1,605 1,328 1,061 1,205 1,111 1,101 1,805 2,150 1,848 1,632 2,262 3,986 2,991 2,655 2,359 2,434 3,350 3,047 4,061 3,396 2,476 2,611 2,650 2,332 2,081 2,158 2,522 3,344 ** 3,120 2,989 2,822 2,593 2,320 2,209 2,435 2,287 2,188 2,285 2,510 3,040 4,015 4,090 4,060 3,864 3,262 3,177 3,270 2,999 2,795 2,795 2,846 3,596 1,883.5 1,676.1 1,759.6 1,540.3 1,502.3 1,297.1 1,427.9 1,462.4 1,207.2 1,439.8 1,524.9 1,782.8 2,585.9 2,430.7 2,575.3 2,586.3 2,329.1 1,939.2 2,196.7 1,959.7 1,727.0 1,884.5 1,729.5 2,298.7 2,400 2,386 2,396 2,384 2,377 2,419 2,489 2,520 2,573 2,704 2,851 2,977 3,136 3,303 3,467 3,490 3,475 3,406 3,336 3,283 3,267 3,273 3,313 3,317 fc June.. July... Aug... Sept.. Oct.... Nov.... Dec... 1991: Jan.... Feb.... Mar.. May June.... July Aug Sept.... Oct Nov Dec "... Exhaustions 5 Weekly average; thousands Thousands 46,334 2,071 46,266 2,994 47,776 1,946 48,434 M.973 49,637 1>53 51,580 1,450 54,739 1,129 56,342 1,270 57,977 1,187 59,999 1,177 59,526 2,070 59,375 2,608 66,458 2,192 69,897 1,793 72,451 2,558 71,037 4,937 73,459 3,846 76,419 3,308 88,804 2,645 92,062 2,592 92,659 3,837 93,300 3,410 91,628 4,594 91,898 3,775 96,474 2,561 99,186 2,693 101,099 2,746 103,933 2,401 107,157 2,135 109,926 2,205 1 111,494 2,575 3,408 1990: Jan.... Feb.... Mar... Initial claims Insured Benefits paid unemployment as Average percent Total weekfy (millions of check of 4 covered employ- dollars) (dollars)• ment 331 350 302 '298 268 232 203 226 201 200 296 295 261 247 363 478 386 375 346 388 488 460 583 438 377 396 378 328 310 330 388 449 ** 376 365 354 350 348 355 368 374 387 419 454 470 460 498 511 460 433 421 418 415 415 418 448 462 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 2.0 2.1 2.4 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 13,760.3 18,249.5 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 98.95 106.70 119.37 123.59 123.47 128.23 135.72 139.90 144.97 151.73 161.56 170.08 2.3 2.3 2.3 2.3 2.3 2.3 2.4 2.4 2.5 2.6 2.7 2.8 3.0 3.1 3.3 3.3 3.3 3.2 3.1 3.1 3.1 3.1 3.1 3.1 1,843.6 1,636.7 1,716.1 1,502.5 1,466.7 1,265.4 1,397.2 1,430.0 1,178.0 1,401.9 1,482.4 1,736.8 2,529.5 2,382.2 2,525.6 2,485.7 2,242.0 1,867.4 2,134.6 1,911.0 1,681.4 1,831.1 1,681.0 2,232.9 158.53 160.44 159.60 162.02 162.02 161.91 159.91 160.46 162.11 163.83 163.56 165.25 166.83 169.51 170.45 170.01 170.47 170.49 169.16 169.02 170.70 171.27 170.79 173.29 "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 July 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. 343 TABLE B-41.—Employees on nonagricultural payrolls, by major industry, 1946-91 [Thousands of persons; monthly data seasonally adjusted] Goods-producing industries Year or month Manufacturing Total Total 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 p 1990: Jan... Feb.. Mar.. May June.... July Aug Sept.... Oct Nov Dec 1991:Jan Feb Mar as- June.... July Aug Sept.... 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 99,525 102,200 105,536 108,329 109,971 108,975 109,416 109,792 109,933 109,934 110,304 110,435 110,269 110,160 110,113 109,982 109,761 109,621 109,418 109,160 108,902 108,736 108,887 108,885 108,859 108,971 109,066 109,073 108,808 108,839 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 25,322 24,958 23,820 25,190 25,339 25,255 25,165 25,141 25,093 25,027 24,937 24,842 24,705 24,481 24,375 24,181 24,039 23,877 23,794 23,847 23,792 23,798 23,826 23,797 23,727 23,595 23,572 Mining 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 1,128 952 966 927 777 717 713 693 711 697 704 706 706 709 713 718 717 713 711 710 712 715 713 715 714 710 706 704 701 693 684 679 674 670 Construction 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 5,187 5,136 4,696 5,271 5,322 5,262 5,202 5,203 5,182 5,145 5,111 5,088 5,022 4,962 4,911 4,797 4,792 4,720 4,688 4,715 4,710 4,695 4,691 4,699 4,671 4,583 4,596 Total 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 19,442 19,111 18,427 19,215 19,311 19,287 19,254 19,225 19,193 19,165 19,113 19,043 18,973 18,807 18,749 18,671 18,532 18,443 18,396 18,426 18,378 18,402 18,442 18,414 18,377 18,338 18,306 Durable goods Nondurable goods 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 11,420 11,115 10,557 11,185 11,289 11,270 11,230 11,212 11,189 11,160 11,111 11,049 11,000 10,867 10,828 10,770 10,652 10,584 10,560 10,575 10,534 10,546 10,553 10,531 10,493 10,459 10,425 Note.—Data in Tables B-41 and B-42 are based on reports from employing establishments and relate to full- and part-time wage and salary workers in nonagricultural establishments who received pav for any part of the pay period which includes the 12th of the month. Not comparable with labor force data (Tables B-30 through B-39), which include proprietors, self-employed persons, domestic servants, See next page for continuation of table. 344 TABLE B-41.—Employees on nonagricultural payrolls, by major industry, 1946-91—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 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 * 1990: Jan.. Feb.. Mar.. June.. y Aug Sept Oct Nov Dec 1991: Jan Feb Mar tz 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 83,007 85,014 85,154 84,226 84,453 84,678 84,769 85,163 85,342 85,242 85,223 85,271 85,277 85,280 85,246 85,237 85,121 85,025 84,942 85,040 85,093 85,061 85,145 85,269 85,346 85,213 85,267 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 5,644 5,826 5,823 5,776 5,790 5,794 5,798 5,820 5,831 5,832 5,839 5,854 5,855 5,852 5,867 5,866 5,834 5,824 5,814 5,819 5,809 5,809 5,820 5,829 5,828 5,819 5,796 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 4J23 4,985 5,221 5,292 5,376 5,296 5,286 5,574 5,736 5,774 5,865 6,055 6,221 6,205 6,072 6,227 6,215 6,210 6,206 6,212 6,220 6,215 6,211 6,204 6,190 6,180 6,166 6,138 6,119 6,105 6,086 6,085 6,068 6,064 6,050 6,049 6,047 6,032 6,017 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 19,549 19,683 19,340 19,691 19,718 19,702 19,689 19,701 19,714 19,710 19,714 19,698 19,663 19,628 19,579 19,542 19,464 19,378 19,324 19,339 19,345 19,347 19,343 19,338 19,288 19,196 19,180 Finance, insurance, and real estate 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 3,512 3,645 3,772 3,908 4,046 4,148 4,165 4,271 4,467 4,724 4,975 5,160 5,298 5 341 5,468 5,689 5,955 6,283 6,547 6,649 6,695 6,739 6,707 6,717 6,732 6,730 6,732 6,739 6,746 6,745 6,750 6,750 6,746 6,740 6,733 6,736 6,732 6,735 6,718 6,712 6,703 6,688 6,687 6,692 6,697 6,692 6,696 Government Services 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 27,120 28,240 28,778 27,778 27,916 28,036 28,045 28,151 28,254 28,310 28,388 28,437 28,479 28,525 28,548 28,590 28,583 28,576 28,576 28,645 28,712 28,733 28,831 28,937 29,019 29,009 29,047 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 17,779 18,322 18,434 18,037 18,082 18,206 18,299 18,540 18,577 18,430 18,321 18,328 18,344 18,355 18,353 18,365 18,389 18,407 18,424 18,440 18,456 18,420 18,414 18,424 18,467 18,465 18,531 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 3,085 2,965 3,002 3,007 3,092 3,153 3,347 3,337 3,162 3,038 2,994 2,980 2,964 2,948 2,952 2,951 2,951 2,953 2,952 2,971 2,963 2,967 2,979 2,983 2,979 2,980 State and local 3,341 3,582 3,787 3,948 4,098 4,087 4,188 4,340 4,563 4,727 5,069 5,399 5,648 5,850 6,083 6,315 6,550 6,868 7,248 7,696 8,220 8,672 9,102 9,437 9,823 10,185 10,649 11,068 11,446 11,937 12,138 12,399 12,919 13,174 13,375 13,259 13,098 13,096 13,216 13,519 13,794 14,067 14,415 14,791 15,237 15,469 15,035 15,075 15,114 15,146 15,193 15,240 15,268 15,283 15,334 15,364 15,391 15,405 15,413 15,438 15,456 15,471 15,488 15,485 15,457 15,447 15,445 15,484 15,486 15,551 June... July Aug Sept Oct Nov "... Dec ".. Note (cont'd).—and unpaid family workers; which count persons as employed when they are not at work because of industrial disputes, bad weather, etc., even if they are not paid for the time off; and which are based on a sample of the working-age population. For description and details of the various establishment data, see "Employment and Earnings." Source: Department of Labor, Bureau of Labor Statistics. 345 TABLE B-42.—Average weekly hours and hourly and weekly earnings in private nonagricultural industries, 1955-91 [For production or nonsupervisory workers; monthly data seasonally adjusted, except as noted] Average weekly hours Manufacturing Year or month 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 *>. 1990: Jan.... Feb.... Mar... fc June.. July... Aug... Sept.. Oct.... Nov... Dec... 1991: Jan.... Feb.... Mar... fc JuneJuly... Aug... Sept.. Oct.... Nov. Dec. Total private 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 34.3 34.5 34.5 34.5 34.5 34.5 34.6 34.5 34.5 34.6 34.2 34.4 34.6 34.1 34.3 34.2 34.0 34.3 34.6 34.1 34.3 34.5 34.3 34.4 34.5 Average weekly earnings Average hourly earnings Total private l OverTotal time Current dollars 40.7 40.4 39.8 39.2 40.3 39.7 39.8 40.4 40.5 40.7 41.2 41.4 40.6 40.7 40.6 39.8 39.9 40.5 40.7 40.0 39.5 40.1 40.3 40.4 40.2 39.7 39.8 38.9 40.1 40.7 40.5 40.7 41.0 41.1 41.0 40.8 40.7 40.7 40.8 40.9 40.7 40.9 40.9 40.9 40.9 40.9 40.7 40.6 40.7 40.4 40.3 40.3 40.2 40.4 40.8 40.7 41.0 41.0 40.9 41.0 41.1 $1.71 $6.15 1.80 6.38 1.89 6.47 1.95 6.50 2.02 6.69 2.09 6.79 2.14 6.88 2.22 7.07 2.28 7.17 2.36 7.33 2.46 7.52 2.56 7.62 2.68 7.72 2.85 7.89 3.04 7.98 3.23 8.03 3.45 8.21 3.70 8.53 3.94 8.55 4.24 8.28 4.53 8.12 4.86 8.24 5.25 8.36 5.69 8.40 6.16 8.17 6.66 7.78 7.25 7.69 7.68 7.68 8.02 7.79 8.32 7.80 8.57 7.77 8.76 7.81 8.98 7.73 9.28 7.69 9.66 7.64 10.02 7.53 10.34 7.46 9.82 7.55 9.88 7.56 9.92 7.56 9.95 7.57 9.98 7.58 10.02 7.57 10.05 7.57 10.07 7.51 10.10 7.48 10.10 7.43 10.13 7.43 10.17 7.44 10.18 7.42 10.20 7.43 10.24 7.46 10.28 7.47 10.32 7.47 10.37 7.49 10.36 7.47 10.40 7.49 10.41 7.47 10.40 7.46 10.43 7.44 10.50 7.48 1982 dollars 2 Total private l Manufacturing Current dollars 1982 dollars 2 $67.72 70.74 73.33 75.08 78.78 80.67 82.60 85.91 88.46 91.33 95.45 98.82 101.84 107.73 114.61 119.83 127.31 136.90 145.39 154.76 163.53 175.45 189.00 203.70 219.91 235.10 255.20 267.26 280.70 292.86 299.09 304.85 312.50 322.02 334.24 345.69 354.66 338.79 340.86 342.24 343.28 344.31 346.69 346.73 347.42 349.46 345.42 348.47 351.88 347.14 349.86 350.21 349.52 353.98 358.80 353.28 356.72 359.15 356.72 358.79 362.25 $243.60 250.85 251.13 250.27 260.86 261.92 265.59 273.60 278.18 283.63 291.90 294.11 293.49 298.42 300.81 298.08 303.12 315.44 315.38 302.27 293.06 297.37 300.96 300.89 291.66 274.65 270.63 267.26 272.52 274.73 271.16 271.94 269.16 266.79 264.22 259.72 255.89 260.41 260.80 260.85 261.25 261.44 261.85 261.09 259.27 258.67 254.17 255.66 257.41 253.02 254.81 255.07 253.83 256.32 259.25 254.89 257.00 257.82 255.90 256.10 258.01 $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 10.48 10.83 11.18 10.56 10.67 10.73 10.75 10.80 10.84 10.87 10.89 10.91 10.96 10.96 10.99 11.02 11.03 11.05 11.12 11.15 11.19 11.22 11.25 11.25 11.26 11.30 11.32 1 Manufacturing (current dollars) Construction (current dollars) $75.30 78.78 81.19 82.32 88.26 89.72 92.34 96.56 99.23 102.97 107.53 112.19 114.49 122.51 129.51 133.33 142.44 154.71 166.46 176.80 190.79 209.32 228.90 249.27 269.34 288.62 318.00 330.26 354.08 374.03 386.37 396.01 406.31 418.81 429.68 441.86 455.03 429.79 435.34 438.86 437.53 441.72 443.36 444.58 445.40 446.22 446.07 444.98 447.29 445.21 444.51 445.32 447.02 450.46 456.55 456.65 461.25 461.25 460.53 463.30 465.25 $90.90 $48.75 96.38 50.18 100.27 52.20 103.78 54.10 108.41 56.15 112.67 57.76 118.08 58.66 122.47 60.96 127.19 62.66 132.06 64.81 138.38 66.65 146.26 68.50 154.95 70.86 164.49 74.93 181.54 78.67 195.45 82.31 211.67 87.51 221.19 92.03 235.89 96.45 249.25 102.55 266.08 108.63 283.73 114.56 295.65 121.54 318.69 130.14 342.99 138.83 367.78 147.24 399.26 157.99 426.82 163.83 442.97 171.13 458.51 174.47 464.46 174.81 466.75 175.80 480.44 178.80 495.73 183.62 513.17 188.72 526.40 194.69 533.78 200.20 527.87 192.10 526.30 192.38 527.23 193.92 511.63 194.21 526.01 194.11 530.53 195.65 522.02 195.94 528.31 195.16 532.22 196.81 515.59 193.69 530.46 196.02 536.77 196.31 523.13 194.14 533.65 196.48 526.67 197.34 532,50 197.95 533.40 200.33 532.64 202.59 532.38 199.65 533.25 201.34 537.73 203.04 536.97 200.50 524.90 204.19 537.35 202.92 Retail trade (current dollars) Percent change from a year earlier, total private 3 Current dollars 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 3.4 2.6 2.6 3.8 3.6 2.4 4.0 4.4 3.4 3.6 4.5 2.2 3.3 4.0 2.4 2.4 2.3 2.5 2.9 3.1 1.9 3.0 2.8 3.3 3.0 3.1 Also includes other private industry groups shown in Table B-41. Current dollars divided by the consumer price 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-41. Source: Department of Labor, Bureau of Labor Statistics. 2 3 346 TABLE B-43.—Employment cost index, private industry, 1979-91 Service-producing Goods-producing Total privatf Year and month Total Wages Total and compen- sala- Benefits 1 compensation sation ries salaries Bne1 fits Manufacturing Total Wages and Bene-1 compen- salafits sation ries Total compensation 1 "sala-S Nontnanufacturing ries Total Bene-1 fits compensation salaries 63 0 68.9 74 9 79.1 82 5 86.1 89.2 921 95.2 981 101.9 106 2 110.3 103.3 104.5 105.4 106.2 107.4 108.4 109.3 110.3 542 59.9 67 5 72.4 77 5 82.7 85.0 87 5 89.8 96 6 102.3 109 5 116.1 105.5 106.9 108.4 109.5 111.2 113.3 115.3 116.1 58 5 64.2 70 4 75.1 79 6 83.4 87.0 89.7 92.9 97 5 102.3 106.9 111.5 103.8 105.1 106.2 106.9 108.5 109.7 110.9 111.5 60 8 66.2 721 76.8 810 84.2 88.0 90 6 93.7 97 8 102.2 1061 109.8 103.2 104.5 105.4 106.1 107.3 108.4 109.3 109.8 52 5 59.1 661 70.6 76 2 81.1 84.4 87 5 91.0 96 8 102.8 109 3 116,2 105.4 106.9 108.2 109.3 111.9 113.5 115.1 116.2 103.9 103.3 105.1 103.8 103.4 105.0 105.0 104.5 106.4 105.2 104.5 106.7 106.1 105.5 107.9 106.4 105.4 108.4 107.2 106.5 109.5 107.5 106.2 110.1 108.5 107.6 111.1 108.5 107.4 110.8 109.7 108.6 112.8 109.9 108.4 113.1 110.8 109.5 114.7 111.2 109.3 115.2 111.9 110.4 116.4 112.4 110.3 116.7 12 months earlier, not seasonally adjusted 103.8 105.0 106.1 107.1 108.5 109.6 110.8 111.8 103.2 104.5 105.3 106.2 107.4 108.4 109.2 109.9 105.1 106.7 108.2 109.8 111.5 113.3 115.1 116.8 9.8 9.4 10.5 8.8 12.5 9.7 9.8 8.7 12.7 8.9 11.5 9.8 6.1 5.6 7.3 6.8 6.9 6.6 5.1 4.3 7.0 5.7 8.0 6.5 5.2 4.4 6.7 4.4 6.9 5.1 33 36 28 48 40 45 3.3 2.9 3.3 3.0 3.B 3il 3.9 3.0 3.4 2.6 3.7 3.4 6.5 4.5 3.0 7.6 5.1 4.7 6.8 4.5 3.9 5.9 5.1 4.5 6.2 5.1 4.2 7.0 4.6 4.0 6.1 4.7 3.9 6.0 4.3 3.7 5.2 6.8 7.2 4.3 4.2 5.1 5.3 6.9 5.2 4.6 6.6 4.5 5.2 6.7 4.8 4.2 6.4 4.5 5.1 7.0 4.6 4.0 6.2 4.2 4.4 5.4 4.5 4.1 5.8 4.0 4.5 6.0 4.4 3.9 6.0 3.7 4.5 6.4 4.5 3.8 6.2 3.7 4.7 6.0 4.3 3.7 6.1 3.9 3 months earlier, seasonally adjusted 9.7 9.7 6.7 6.0 4.8 43 3.1 3.6 5.0 4.9 4.5 4.3 5.1 5.1 4.8 4.5 4.5 4.4 4.4 4.3 8.9 8.9 6.5 5.5 4.0 45 3.0 3.4 4.4 4.5 3.8 3.5 4.1 4.5 3.9 3.8 4.0 3.7 3.7 3.5 12.6 11.8 6.8 7.9 6.4 41 3.7 4.0 6.4 6.2 6.3 6.3 7.3 6.9 6.7 6.3 6.2 6.2 6.4 6.3 2.2 1.5 1.6 1.6 .6 2.1 1.9 1.3 1.3 1.2 1.0 .9 1.3 1.0 1.1 .9 0.9 1.3 .8 .9 1.1 .9 .7 .6 1.7 1.5 1.4 1.5 1.5 1.6 1.6 1.5 Bene-1 fits Index, June 1989=100; not seasonally adjusted December: 1979 . 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1990: Mar June Sept Dec 1991: Mar June Sept Dec 591 64.8 712 75.8 801 84.0 87.3 901 93.1 97 6 102.3 107 0 111.7 103.9 105.2 106.2 107.0 108.5 109.8 111.0 111.7 615 67.1 73 0 77.6 814 84.8 88.3 911 94.1 98 0 102.0 1061 110.0 103.2 104.5 105.4 106.1 107.3 108.4 109.3 110.0 53 2 59.4 66 6 7L4 76 7 81.7 84.6 87 5 90.5 96 7 102.6 109 4 116.2 105.5 106.9 108.3 109.4 111.6 113.5 115.2 116.2 60 7 667 73 3 ll'.B 816 85.4 88.2 910 93.8 97 9 102.1 107 0 111.9 103.9 105.2 106.2 107.0 108.5 109.8 111.0 111.9 1990: Mar June Sept Dec 1991: Mar June Sept Dec 103.8 105.0 106.2 107.2 108.5 109.7 110.8 111.9 103.3 104.4 105.4 106.2 107.3 108.4 109.2 110.1 105.2 106.7 108.3 109.9 111.4 113.2 115.1 116.7 103.8 103.1 105.4 105.1 104.2 107.0 106.2 105.1 108.7 107.2 105.8 110.3 108.4 107.0 111.6 109.7 108.0 113.7 110.8 108.7 115.8 112.0 109.7 117.2 Percent change from December: 1980 1981. 1982. 1983. 1984. 1985 1986. 1987. 1988. 1989. 1990 1991. 1990: Mar June Sept Dec 1991: Mar June Sept Dec 9.6 9.9 6.5 5.7 4.9 39 3.2 3.3 4.8 4.8 4.6 4.4 5.2 5.2 4.9 4.6 4.4 4.4 4.5 4.4 9.1 8.8 6.3 4.9 4.2 41 3.2 3.3 4.1 4.1 4.0 3.7 4.2 4.5 4.2 4.0 4.0 3.7 3.7 3.7 11.7 12.1 7.2 7.4 6.5 35 3.4 3.4 6.9 6.1 6.6 6.2 7.2 6.9 6.8 6.6 5.8 6.2 6.4 6.2 1990: Mar June Sept Dec 1991: Mar June Sept Dec 1.4 1.2 1.1 .9 1.2 1.1 1.0 1.0 1.1 1.1 1.0 .8 1.0 1.0 .7 .8 2.1 1.4 1.5 1.5 1.4 1.6 1.7 1.4 63 7 54 6 69.7 60.5 75 7 68 2 80.0 73.2 83 2 78 3 86.4 83.2 89.4 85.7 92 3 88 3 95.2 90.9 98 2 97 3 102.0 102.6 105 8 109 9 109.7 116.7 103.1 105.7 104.2 107.2 105.1 108.7 105.8 109.9 107.0 111.9 108.0 113.9 108.7 115.8 109.7 116.7 Index, June 57 7 60 0 519 601 66.0 63.3 65.3 58.4 69 5 711 651 72 5 74.1 75.9 69.6 76.9 78 9 80 2 75 2 80 8 85.0 82.9 83.7 80.4 86.6 87.7 83.6 87.8 90 7 89 3 90 3 86 8 93.4 92.6 93.4 90.2 97 6 97 3 97 8 961 102.0 102.3 102.2 102.6 107 2 107 0 106 3 109 0 112.2 111.6 110.2 115.7 104.0 103.8 103.3 105.3 105.3 105.2 104.6 106.6 106.4 106.2 105.7 107.9 107.2 107.0 106.3 109.0 108.6 108.5 107.5 111.4 110.0 109.8 108.7 113.0 111.2 111.0 109.7 114.6 112.2 111.6 110.2 115.7 1989=100; seasonally adjusted 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 33 35 30 3.2 3i2 3^0 2.9 3.1 3.1 7.0 4.4 3.2 5.4 4.3 3.9 7.1 4.8 3.7 6.2 4.6 3.7 7.1 4.0 5.1 5.2 4.2 7.2 5.0 4.1 7.1 4.8 3.7 7.1 4.4 3.8 5.9 4.4 3.6 6.3 4.5 3.4 6.5 4.6 3.7 6.2 Percent change from 1.5 1.3 1.0 .9 1.1 1.2 1.0 1.1 1.1 1.1 .9 .7 1.1 .9 .6 .9 2.3 1.5 1.6 1.5 1.2 1.9 1.8 1.2 1.3 1.2 1.0 1.0 1.2 1.1 1.0 1.0 1.0 1.1 1.0 .9 1.0 .9 .8 .8 1.9 1.3 1.4 1.5 1.5 1.5 1.7 1.5 1.6 1.3 1.1 1.0 .9 1.3 1.2 1.1 1.4 1.2 .9 .8 1.1 .9 .8 .9 1 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. 347 TABLE B-44.—Productivity and related data, business sector, 1959-91 [1982=100; quarterly data seasonally adjusted] 1 Output per hour of all persons Year or quarter 1959 1960 1961.... 1962.... 1963.... 1964.... 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1982: IV 1983: IV 1984: IV 1985: IV 1986: IV 1987: IV 1988: IV 1989:1 II Ill IV 1990:1 II Ill IV 1991:1 II Ill Output Hours of all persons2 Compensation pert our 3 Real compensation per hour4 Unit labor costs Business sector Business sector Nonfarm business sector Business sector Nonfarm business sector Business sector Nonfarm business sector Business sector Nonfarm business sector Business sector Nonfarm business sector 64.6 65.6 68.1 70.4 73.3 76.5 78.6 81.0 83.0 85.4 85.9 87.0 90.2 92.6 95.0 93.3 95.5 98.3 99.8 100.4 99.3 98.6 99.9 100.0 102.2 104.6 106.1 108.3 109 4 110 4 109.5 109.7 101.1 103.0 105.2 106.9 108.0 110.3 110.4 110.0 109.7 109.2 109.1 109.6 110.3 109.6 109.4 109.4 109.9 110.2 69.2 70.0 72.2 74.4 77.1 80.0 81.9 83.6 85.4 87.8 87.8 88.6 91.6 94.1 96.4 94.5 96.7 99.2 100.6 101.3 99.9 99.0 99.9 100.0 102.4 104.5 105.4 107.5 108 3 109.2 108.2 108.1 101.0 103.2 105.1 105.8 107.1 109.1 109.6 108.8 108.2 107.9 107.8 108.1 108.6 107.9 107.9 107.9 108.4 108.6 51.5 52.3 53.4 56.1 58.8 62.3 66.0 69.5 71.0 74.1 76.3 75.9 78.3 83.0 88.2 86.7 85.0 90.0 94.9 100.1 102.1 100.5 102.4 100 0 104.1 112.6 116.7 119.9 124 8 130.1 132.4 132.9 100.0 107.5 114.4 118.0 120.6 127.4 131.7 132.6 132.5 132.4 132.2 133.2 133.9 132.9 131.8 130.2 130.7 131.3 51.1 51.9 53.0 55.8 58.4 62.0 65.8 69.5 70.9 74.2 76.3 75.8 78.3 83.0 88.4 86.8 85.0 90.1 95.0 100.5 102.5 100.8 102.4 100 0 104.4 113.0 116.8 120.1 125 0 130*6 132.8 133.2 100.0 108.1 114.8 118.2 120.8 127.6 132.5 133.0 132.8 132.8 132.6 133.5 134.1 133.1 132.0 130.4 130.9 131.4 79.6 79.7 78.5 79.7 80.1 81.4 83.9 85.8 85.6 86.8 88.9 87.2 86.9 89.6 92.8 92.9 89.1 91.5 95.1 99.7 102.8 101.9 102.5 100 0 101.8 107.6 109.9 110.7 114 1 117*9 120.9 121.2 98.9 104.3 108.7 110.4 111.6 115.5 119.3 120.5 120.7 121.3 121.2 121.6 121.4 121.2 120.5 119.1 119.0 119.2 73.8 74.2 73.4 74.9 75.8 77.5 80.4 83.1 83.1 84.5 87.0 85.6 85.4 88.3 91.7 91.8 88.0 90.8 94.5 99.3 102.7 101.8 102.5 100.0 102.0 108.1 110.8 111.8 1154 119.5 122.7 123.1 98.9 104.7 109.2 111.7 112.8 117.0 121.0 122.2 122.7 123.1 123.0 123.5 123.4 123.3 122.4 120.9 120.8 121.0 20.2 21.1 21.9 22.9 23.8 25.0 26.0 27.8 29.4 31.8 34.1 36.7 39.0 41.5 45.1 49.5 54.5 59.4 64.2 69.9 76.7 85.0 93.0 100.0 103.7 108.1 113.0 118.6 122 7 1280 132.5 139.6 102.1 105.2 109.7 115.4 120.6 125.3 130.1 131.3 131.9 132.6 134.1 136.2 139.0 140.9 142.3 143.2 144.8 145.8 21.3 22.2 22.9 23.9 24.7 25.8 26.7 28.3 29.9 32.3 34.5 37.0 39.4 41.9 45.4 49.9 54.8 59.5 64.3 70.0 76.7 84.9 93.0 100.0 103.9 108.1 112.6 118.1 122 1 127*2 131.5 138.3 102.1 105.1 109.7 114.8 120.1 124.6 129.3 130.4 130.7 131.5 133.0 134.9 137.6 139.5 141.0 142.0 143.6 144.5 67.0 68.7 70.7 73.2 75.0 77.9 79.6 82.9 84.9 88.2 89.7 91.2 93.0 95.8 98.0 97.0 97.7 100.8 102.3 103.4 102.0 99.5 98.7 100.0 100.5 100.4 101.3 104.4 104 3 104.4 103.1 103.1 100.6 100.4 100.6 102.2 105.3 104.8 104.3 103.9 102.9 102.7 102.8 102.6 103.6 103.3 102.6 102.4 103.0 103.0 70.5 72.3 74.0 76.2 77.9 80.4 81.8 84.2 86.5 89.5 90.7 92.0 93.8 96.7 98.6 97.6 98.3 101.0 102.4 103.6 101.9 99.4 98.8 100.0 100.7 100.4 101.0 104.0 103 7 103 8 102.3 102.1 100.6 100.3 100.5 101.6 104.9 104.2 103.6 103.2 102.0 101.8 101.9 101.6 102.6 102.3 101.7 101.5 102.1 102.1 1 2 31.3 32.1 32.2 32.5 32.4 32.7 33.1 34.4 35.4 37.2 39.7 42.2 43.3 44.8 47.5 53.1 57.1 60.5 64.3 69.6 77.2 86.2 93.1 100.0 101.5 103.3 106.5 109.5 112 2 116.0 121.0 127.2 101.0 102.1 104.3 108.0 111.6 113.7 117.8 119.3 120.2 121.5 122.8 124.3 126.1 128.5 130.1 131.0 131.8 132.4 Implicit price deflator5 Nonfarm business sector Business sector Nonfarm business sector 30.7 31.7 31.7 32.0 32.0 32.3 32.6 33.8 35.1 36.8 39.3 41.7 42.9 44.5 47.1 52.8 56.7 60.0 63.9 69.1 76.8 85.7 93.1 100.0 101.5 103.4 106.8 109.9 112 8 116.4 121.5 127.9 101.1 101.8 104.4 108.4 112.1 114.3 118.0 119.8 120.8 121.9 123.4 124.9 126.7 129.2 130.7 131.6 132.5 133.1 32.1 32.6 32.8 33.4 33.7 34.0 34.9 36.0 37.1 38.7 40.5 42.3 44.3 46.2 49.0 53.7 59.0 62.4 66.5 71.8 78.3 85.9 94.5 100.0 103.4 107.7 111.2 113.6 116.6 120.8 126.0 130.8 101.1 104.8 109.0 112.4 114.6 117.9 122.8 124.2 125.6 126.4 127.6 128.8 130.2 131.6 132.5 134.0 135.0 135.6 31.7 32.2 32.4 33.1 33.4 33.8 34.6 35.7 36.9 38.5 40.3 42.1 44.1 45.8 47.9 52.8 58.3 61.9 66.1 71.2 77.5 85.6 94.2 100.0 104.0 107.6 111.6 114.2 117.2 121.4 126.4 131.3 101.4 105.2 109.0 112.9 115.2 118.5 123.4 124.5 126.0 126.9 128.0 129.2 130.6 132.2 133.3 134.9 135.7 136.4 Output refers to cross domestic product originating in the sector in 1987 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. 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. Note.—Data reflect the recent comprehensive (benchmark) revision of the national income and product accounts by the Department of Commerce, Bureau of Economic Analysis (BEA). BEA data for output and compensation for the first three quarters of 1991 incorporate benchmarking to unemployment insurance (Ul) records. However, the detailed Ul information needed by the Bureau of Labor Statistics to measure employment and hours for 1990 and 1991 is not yet available. Therefore, movements in measures based on hours of labor input should be interpreted with caution for 1990 and 1991. Source: Department of Labor, Bureau of Labor Statistics. 348 TABLE B-45.—Changes in productivity and related data, business sector, 1960-91 [Percent change from preceding period; quarterly data at seasonally adjusted annual rates] Output per hour of ail persons Year or quarter Output 1 Hours of ail persons2 Compensation per hour 8 Real compensation per hour 4 Unit labor costs Implicit price deflator5 Business sector Nonfarm business sector Business sector Nonfarm business sector Business sector Nonfarm business sector Business sector Nonfarm business sector 4.3 3.9 4.7 3.8 5.2 4.4 3.3 4.1 3.5 4.6 2.6 2.8 3.6 2.4 3.9 2.6 2.2 3.0 2.2 3.3 2.7 .2 1.2 -.3 1.6 .6 2.0 .7 1.1 1.5 .6 2.1 .9 .9 3.3 0 1.0 -.1 .8 Business sector Nonfarm business sector Business sector Nonfarm business sector Business sector 1960 1961 1962 1963 1964 1.6 3.7 3.5 4.1 4.3 1.0 3.2 3.1 3.6 3.8 1.7 2.1 5.1 4.7 6.0 1.6 2.1 5.3 4.7 6.2 0.1 -1.6 1.6 L6 0.6 -1.1 2.1 1.1 2.3 1965 1966 1967 1968 1969 2.7 3.0 2.5 3.0 2.3 2.1 2.1 2.9 -.0 6.0 5.3 2.2 4.4 2.9 6.1 5.5 2.1 4.6 2.9 3.2 2.3 -.3 1.4 2.4 3.8 3.4 -.0 1.7 2.9 3.8 7.0 5.7 8.2 7.3 3.3 6.0 5.8 7.9 6.8 2.2 4.1 2.5 3.8 1.7 1.7 3.0 2.6 3.6 1.3 1.1 3.9 3.1 5.1 6.7 1.0 3.8 3.6 4.9 6.9 2.5 3.2 2.9 4.5 4.7 2.2 3.1 3.3 4.6 4.6 1970 1971 1972 1973 1974 1.3 3.6 2.7 2.6 -1.8 .9 3.5 2.7 2.5 -2.0 -.5 3.2 6.0 6.2 -1.8 3.2 6.1 6.5 -1.9 -1.9 -.4 3.2 3.6 .1 -1.6 -.3 3.3 .1 7.6 6.4 6.3 8.7 9.9 7.2 6.4 6.4 8.3 9.9 1.7 1.9 3.0 2.3 -1.0 1.4 2.0 3.1 1.9 -1.0 6.1 2.7 3.5 5.9 11.9 6.2 2.9 3.7 5.7 12.1 4.4 4.6 4.3 6.1 9.5 4.6 4.6 4.0 4.5 10.2 1975 1976 1977 1978 1979 2.3 3.0 1.6 .6 2.3 2.7 1.4 -1.9 5.8 5.5 5.5 2.0 -2.0 6.0 5.5 5.8 2.0 -4.1 2.8 3.8 4.9 3.1 -4.2 3.2 4.1 5.0 3.4 10.0 9.1 8.0 8.8 9.8 9.9 8.6 8.0 8.9 9.5 3.2 1.4 1.2 -1.4 .7 2.7 1.4 1.2 -1.6 7.4 6.0 6.4 8.2 11.0 7.5 5.8 6.5 8.1 11.1 10.0 5.8 6.5 8.0 9.1 10.4 6.3 6.8 7.6 8.9 -1.1 -U sector 3.9 1.4 -.7 1.3 .1 2.2 2.3 -.9 .9 .1 2.4 2.1 -1.6 1.9 -2.3 4.1 8.2 -1.7 1.6 -.9 .6 -2.4 4.4 8.2 -2.5 1.8 5.7 .7 -2.4 2.0 6.0 10.7 9.4 7.6 3.7 4.2 10.7 9.6 7.5 3.9 4.0 -2.4 -.8 1.3 .5 -.1 -2.4 -.7 1.2 .7 -.3 11.5 8.0 7.4 1.5 1.9 11.7 8.6 7.4 1.5 1.9 9.7 10.1 5.8 3.4 4.1 10.4 10.1 6.1 4.0 3.5 1.4 2.0 1.0 .9 -.7 1.9 .8 .9 -.9 3.6 2.8 4.1 4.3 1.8 3.4 2.8 4.1 4.4 1.7 2.1 .7 3.1 3.3 2.6 2.5 .9 3.3 3.5 2.7 4.5 4.9 3.5 4.3 3.5 4.2 4.9 3.4 4.1 3.4 .9 3.0 -.1 .1 -1.2 .6 3.0 _ 2 0 -1.4 3.0 2.8 2.5 3.3 4.3 3.3 2.9 2.6 3.2 4.3 3.3 2.2 2.6 3.6 4.3 3.7 2.4 2.6 3.6 4.1 -.1 .4 5.4 5.2 -.0 -.2 5.2 5.3 3.8 3.9 -1.5 -1.0 -2.0 -.2 -2.8 -2.0 -1.3 -.3 2.6 4.2 -.1 -.6 1.4 -.6 .1 4.3 1.4 1.4 _ 4 3.5 2.0 2.1 4.4 3.4 1.1 2.5 4.5 -1.3 -3.9 -1.0 .4 -1.5 -4.7 -.7 .5 5.1 3.1 4.2 4.6 6.4 3.2 3.8 4.8 4.7 4.4 2.7 3.7 3.9 4.7 3.0 3.5 1.0 2.1 -2.5 -.3 3.0 2.0 -3.0 -3.0 2.7 1.8 -3.0 -3.1 1.2 IV 1.7 2.4 -2.2 -.9 1.8 -.3 -.5 -2.8 6.6 8.4 5.7 4.1 6.0 8.1 5.6 4.4 -1.3 4.1 -1.2 -2.4 4.8 5.8 8.1 5.0 5.0 5.9 8.4 4.7 4.0 4.3 4.4 2.8 3.8 4.5 4.8 3.4 1991:1 II Ill -.1 1.9 1.1 L9 .9 -4.9 1.7 1.8 -4.9 1.6 1.6 -4.9 — 3 7 2.6 4.6 2.8 2.7 4.6 2.7 2.5 -.2 2.7 2.6 1.7 2.7 2.6 1.9 4.5 2.9 1.8 4.8 2.5 2.1 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1989:1 II Ill IV 1990:1 II. Ill -.8 -2.2 -4.7 _ 3 .7 2.4 -.2 ....... s domestic product originating in the sector in 1987 dollars. 2 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, ana supplemental payments for the self-employed. * Hourly compensation divided by the consumer price index for all urban consumers. 5 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 See also Note, Table B-44. Source: Department of Labor, Bureau of Labor Statistics. 349 PRODUCTION AND BUSINESS ACTIVITY TABLE B-46.—Industrial production indexes, major industry divisions, 1947-91 [1987=100; monthly data seasonally adjusted] Year or month Total industrial production 100.0 22.7 23.6 22.3 258 28.8 291 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 73.8 111 66.3 72 4 78.2 82 6 85 7 84.1 85 7 819 84.9 92 8 94 4 95.3 100 0 105 4 108.1 109.2 1071 107.5 108 5 108 9 108 8 109.4 1101 110.4 110 5 110.6 109 9 108.3 107.2 106 6 105 7 105.0 105 5 106.4 107.3 108.1 108 0 108.4 108 2 108.0 107.8 I960 Bfwwfan 1948 1949 1966 1961 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" 1990- Jan Feb Mar Apr May June July Aue Sept Oct Nov Dec 1991:Jan Feb Mar Apr May June July Aug Sept Oct Nov" Dec " , Source: Board of Governors of the Federal Reserve System. 350 Manufacturing Utilities Total 85.0 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 80.9 893 916 94.3 100 0 105 8 108.9 109.9 107 5 108.1 109.6 109 8 109.5 110.3 110 8 111.1 1111 111.2 110 7 108.9 107.5 107 0 1061 105.2 105 9 106.6 107.5 108.3 108.4 108.9 108 9 108.6 108.7 Durable 48.3 19.9 218 18.9 23.8 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 53.3 531 59.3 66.2 64.8 56.7 62.6 68.7 73 9 78.3 75.7 77.4 72 7 76.8 88.4 918 93.9 100.0 107 6 110.9 111.6 107.1 108.6 110.7 1119 111.1 112.6 113 4 113.4 113 5 113.8 112 5 109.9 107.5 107.2 1061 105.0 106 0 106.7 107.3 108.1 107.8 108.4 1081 107.7 107.5 able M7 22.6 23.4 23J 25 6 26.4 2€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 90.8 915 94.9 100.0 103 6 106.4 107.8 108.0 107.5 108.3 107 2 107.5 107.4 107.6 108.1 1081 108.0 108.4 107.7 107.4 106.8 106 0 105.4 105 9 106.5 107.6 108.6 109.0 109.6 110.0 109.8 110.3 7.4 55.5 58.3 51.7 57 7 63.4 62 8 64.5 §3.2 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 98.9 101.5 104.6 106.6 110.0 114.3 109.3 104.8 111.9 109.0 101.0 100.0 101.8 100.5 102.6 101.0 101.7 101.0 1011 102.9 102.2 102.2 104.0 102.4 103.9 102.6 103.3 103.4 101.7 102 9 101.5 100.9 100.2 102.1 102.7 101.3 101.4 100.6 99.2 98.9 7.5 11.7 13.8 13.9 15 8 1-8.1 19 6 21.3 22.9 25.6 28.1 3©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 96.3 100.0 104.4 107.1 108.0 108.7 106.8 104.0 106.2 106.7 107.1 109.7 109.7 111.4 110.3 109.2 106.9 108.8 107.6 104.6 106.4 105.9 111.4 111.5 110.9 110.7 109.7 108.6 110.0 106.7 TABLE B-47.—Industrial production indexes, market groupings, 1947-91 [1987=100; monthly data seasonally adjusted] Materials Final products Year or month Total industrial production Consumer goods Total Total 1990 proportion 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962. 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 ". 1990: Jan Feb Mar June.... July Aug Sept.... Oct Nov Dec 1991: Jan Feb Mar May"!!!'. June.... July Aug Sept.... Oct Nov "... Dec "... 1 Automotive products Equipment Other Nonduradurable Total ble goods goods Busi- Defense and space Intermediate products Total Durable Nondurable 8.7 100.0 22.7 23.6 22.3 46.8 20.8 21.5 20.9 25.6 25.4 26.2 26.1 2.3 21.7 22.6 22.5 3.1 22.8 23.8 22.0 20.1 27.0 27.7 27.9 21.2 15.0 15.8 14.1 15.7 14.7 15.3 13.4 4.8 7.5 8.8 9.2 14.5 22.4 23.6 22.4 38.7 25.1 26.2 23.9 19.8 21.5 22.1 19.8 25.8 28.0 29.1 31.6 29.9 33.7 35.1 35.6 33.3 37.3 23.5 25.4 27.3 29.1 27.6 29.8 31.6 32.5 31.0 34.0 29.7 29.4 30.1 31.9 31.7 35.4 36.7 37.6 37.2 40.9 28.3 25.0 22.5 28.4 26.5 35.2 28.9 30.3 24.1 30.2 30.4 26.2 26.2 29.6 27.3 32.2 33.9 33.2 31.3 36.0 30.3 31.3 32.6 33.5 33.9 36.5 38.8 40.1 41.3 44.1 15.3 21.2 25.5 27.6 24.2 24.7 27.1 28.2 25.2 27.7 14.3 17.5 19.8 20.6 18.1 19.6 22.7 23.6 19.9 22.4 10.8 26.5 37.2 44.6 39.3 35.9 35.1 36.7 36.8 38.8 26.1 27.4 27.2 29.1 29.0 32.9 34.4 34.4 33.6 37.1 28.6 31.6 32.1 35.6 32.9 38.9 39.9 39.9 35.9 41.4 24.9 28.3 28.9 33.8 29.2 35.7 35.8 35.8 30.1 35.9 25.2 28.9 30.2 30.1 29.9 34.2 38.1 38.4 41.6 44.0 47.0 51.7 56.3 57.5 60.7 63.5 35.1 35.4 38.4 40.6 42.9 47.1 51.6 53.7 56.3 58.1 42.4 43.3 46.2 48.8 51.5 55.5 58.4 59.8 63.4 65.8 34.6 31.6 38.3 4L9 43.9 54.1 53.9 47.4 56.4 56.7 36.2 37.3 40.5 43.7 47.7 54.1 59.6 60.4 64.7 69.0 45.5 47.0 49.2 51.4 54.0 56.3 59.0 62.0 64.5 66.7 28.5 28.1 31.3 33.1 35.0 39.6 46.1 49.0 50.4 51.8 23.0 22.3 24.3 25.5 28.5 32.6 37.8 38.6 40.3 42.9 39.9 40.6 46.9 50.6 49.0 54.3 63.7 72.7 72.9 69.4 37.4 38.1 40.4 42.7 45.5 48.4 51.4 53.5 56.6 59.6 42.0 42.0 45.8 48.7 52.6 58.7 63.9 63.3 67.5 71.5 36.3 35.5 39.4 42.1 45.9 52.6 57.9 55.9 59.2 62.3 34.8 36.2 39.2 41.6 45.2 49.6 53.6 54.5 59.9 64.9 61.4 62.2 68.3 73.8 72.7 66.3 72.4 78.2 82.6 85.7 56.0 56.5 61.3 65.9 65.7 61.8 66.2 71.6 76.1 79.0 65.0 68.8 74.3 77.6 75.2 72.3 79.4 85.1 88.4 87.3 47.7 60.8 65.6 72.4 62.6 59.0 73.2 84.0 86.3 78.5 66.9 70.8 810 85.7 79.3 69.8 78.2 87.4 91.2 89.8 678 69.7 74.2 76.5 76.5 74.9 80.4 84.4 87.8 87.7 48.1 45.0 49.3 55.0 56.8 52.0 53.8 58.8 64.2 71.0 41.3 39.3 44.8 52.4 54.7 48.8 50.6 56.7 63.1 71.5 58.7 52.8 51.3 50.1 49.4 48.5 49.2 49.2 49.5 51.5 58.7 60.5 67.6 71.91 69.0 70.01 77 O 77.2 84.51 56.5 56.8 65.2 68.0 74.9 80.4 80.8 71.9 81.4 86.7 89.7 92.9 84.1 85.7 81.9 84.9 92,8 94.4 95.3 100.0 105.4 108.1 80.0 82.1 80.8 83.0 91.0 94.2 95.7 100.0 105.6 109.1 85.3 85.8 84.5 88.8 92.8 93.7 96.8 100.0 104.0 106.7 59.5 59.2 57.5 71.9 86.6 92.7 95.2 100.0 105.9 106.9 85.1 86.3 78.1 86.2 94.6 90.6 93.9 100.0 104.1 108.7 89.1 89.6 89.7 91.9 93.4 94.4 97.6 100.0 103.7 106.4 74.6 78.2 77.0 76.8 89.2 94.8 94.5 100.0 107.6 112.3 73.5 76.1 72.9 71.9 85.4 91.1 93.2 100.0 111.8 119.1 57.4 58.5 65.7 71.8 78.9 89.4 96.0 100.0 98.0 97.4 109.2 107.1 110.9 109.5 107.3 107.5 102.3 98.0 107.6 108.9 115.5 112.2 123.1 121.5 107.5 108.5 108.9 108.8 109.4 110.1 108.5 109.7 110.7 110.4 111.2 111.7 106.0 107.0 107.5 107.2 107.4 107.8 85.2 99.3 109.3 102.4 107.0 112.2 109.4 105.8 110.6 111.6 112.0 111.2 111.1 112.0 107.8 107.2 106.6 107.1 106.9 106.6 111.8 113.3 114.9 114.7 116.2 116.8 110.4 110.5 110.6 109.9 108.3 107.2 111.7 111.9 112.6 112.3 110.2 109.2 107.5 107.8 108.7 108.6 106.5 105.7 108.7 104.6 111.8 107.1 93.5 86.7 109.5 109.6 109.3 106.8 104.1 103.4 107.3 107.9 108.2 109.1 108.5 108.4 106.6 105.7 105.0 105.5 106.4 107.3 109.1 108.3 108.1 108.7 109.3 110.1 105.6 104.7 104.7 105.5 106.6 108.0 90.6 88.1 88.9 94.2 97.4 100.4 103.2 100.7 101.4 103.4 104.1 107.3 108.1 108.0 108.4 108.2 108.0 107.8 110.2 109.8 110.4 110.6 110.4 110.0 108.3 108.4 109.4 109.7 109.8 109.4 102.3 98.6 106.5 106.7 104.1 102.5 108.1 108.3 108.7 108.2 108.2 107.4 CA O 64.2 73.3 71.2 59.3 68.4 75.3 81.4 85.3 69.41 82.8 62.6 69.0 74.9 79.1 81.2 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 97.3 90.9 77.0 77.0 75.1 80.3 86.2 88.3 92.0 100.0 104.4 106.8 107.7 103.3 107.8 105.6 93.7 100.0 109.0 111.6 111.8 107.1 118.0 120.1 122.2 121.6 123.5 124.4 97,5 97.6 97.5 97.3 97.6 97.6 108.0 108.4 108.2 108.0 108.3 108.3 106.2 107.1 107.1 107.3 107.7 108.8 109.4 110.8 110.9 110.9 112.5 113.8 106.0 106.1 105.4 105.8 105.2 106.1 105.2 106.1 117.2 117.2 117.8 117.0 115.1 113.6 125.0 1254 126.4 125.4 122.9 121.2 97.8 97.7 97.3 97.3 96.2 95.8 108.4 107.9 107.4 107.0 106.2 106.0 109.6 109.7 109.4 108.3 106.8 105.3 114.0 114.9 114.1 112.5 110.4 107.5 107.8 106.8 106.9 106.5 105.6 104.9 107.8 107.3 107.1 107.2 108.1 109.0 113.6 112.9 112.5 112.8 112.7 112.8 121.6 120.6 120.3 121.3 121.7 121.9 94.4 94.5 93.9 92.5 91.5 91.0 103.8 102.6 101.3 101.2 102.7 104.0 104.8 103.9 102.6 103.4 104.5 105.4 106.8 105.5 103.3 104.9 106.2 106.7 104.9 103.6 102.8 103.1 103.7 104.9 109.0 109.6 109.8 110.3 110.7 110.5 112.8 111.6 111.8 111.7 111.3 110.9 122.5 121.3 122.2 122.2 121.8 121.8 90.0 89.8 89.1 88.9 88.4 87.1 104.0 104.4 104.3 103.5 103.8 103.9 107.0 107.2 107.5 107.3 106.6 106.6 108.2 109.1 109.3 108.7 108.4 108.6 108.1 107.8 108.3 109.4 108.1 109.0 79.3 82.1 73.4 79.2 92.1 92.9 88.7 90.5 82.1 89.2 93.0 91.7 94.4 100.0 103.0 105.3 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. 351 TABLE B-48.—Industrial production indexes, selected manufactures, 1947-91 [1987=100; monthly data seasonally adjusted] Durable manufactures Primary metals Year or month 1990 proportion. 1947:.r. 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 " 1990:Jan Feb Mar = June July...... Aug Sept Oct Nov Dec 1991:Jan Feb Mar May June July Aug Sept Oct Nov... Dec "... Total Iron and steel 3.3 70.2 73.0 61.4 77.3 84.1 76.8 87.0 70.4 91.5 90.9 87.1 69.0 80.7 80.4 78.9 84.6 91.2 102.9 113.2 120.2 111.1 115.1 123.8 115.2 109.2 122.4 138.9 134.5 107.2 119.9 121.5 130.7 133.0 110.8 117.5 83.2 91.0 102.4 101.8 93.8 100.0 110.3 109.2 108.4 99.6 105.0 107.9 105.4 106.4 106.2 109.5 110.3 114.6 111.6 108.6 109.1 104.2 99.7 99.5 94.7 94.5 96.9 96.4 101.2 102.6 102.3 102.6 103.5 103.4 102.1 106.8 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 1592 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 90.8 100.0 113.8 109.3 109.9 98.3 104.6 110.6 106.1 106.7 105.5 110.3 110.6 118.3 113.9 110.3 112.6 107.3 99.0 98.0 92.0 91.6 94.0 92.9 99.5 100.6 100.8 102.4 105.6 105.6 Nondurable manufactures Transportation equipment FabriNonElectricated eleccal metal trical machinprod- machinery ucts ery Total 5.2 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 93.8 100.0 106.2 107.2 105.9 100.4 105.1 105.6 105.5 105.0 107.1 106.7 107.7 107.9 106.8 106.4 104.3 101.9 101.7 99.1 97.8 98.0 99.1 99.8 100.9 101.4 101.9 101.7 101.5 101.9 9.5 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 96.9 100.0 105.0 107.2 105.5 98.6 94.7 103.5 107.9 105.1 109.0 111.0 109.3 107.9 111.1 109.2 100.1 96.6 97.6 95.5 95.0 97.2 98.2 99.7 101.3 99.0 102.2 102.4 99.7 98.0 9.9 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 90.4 100.0 113.8 121.8 126.5 123.6 123.7 124.2 125.2 125.7 126.9 127.5 128.3 128.8 128.5 128.1 126.3 124.7 125.5 124.5 123.1 123.5 123.6 123.4 123.9 123.3 123.1 123.3 122.6 122.7 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 ' 106.5 109.5 111.4 110.1 110.1 111.0 112.3 111.3 112.4 112.8 112.2 112.5 112.5 110.8 110.4 108.7 107.6 108.2 108.6 109.7 110.6 111.5 111.0 111.5 111.0 109.9 110.9 110.7 Source: Board of Governors of the Federal Reserve System. 352 Motor vehicles and parts 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 90.4 76.8 94.1 103.5 95.8 104.0 108.0 102.7 101.0 107.5 103.8 85.8 78.5 83.0 79.4 79.8 86.2 89.8 92.5 96.7 91.6 99.5 100.4 95.8 94.8 Lumber Apparel Textile Printing Chemicals and and mill prod- prodand Foods prodpublish- products ucts 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 95.1 100.0 104.6 103.0 101.6 94.0 106.0 104.3 105.0 103.3 101.7 102.0 103.6 100.5 100.3 98.2 95.5 93.5 94.2 91.5 91.2 92.7 92.5 96.7 94.8 95.3 952 92.4 94.9 95.5 2.1 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 98.8 96.3 102.4 102.1 99.8 98.7 99.2 99.3 99.2 98.8 98.4 97.2 95.5 94.9 92.9 93.1 92.5 93.2 95.2 96.2 97.8 98.3 98.1 98.7 992 99.5 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 99.8 101.9 100.8 100.6 100.6 103.0 99.8 100.9 102.7 103.6 102.9 100.4 100.7 101.2 97.4 96.1 94.0 94.3 95.4 97.2 99.2 101.7 104.2 104.7 103.2 105.4 104.0 104.1 6.5 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 90.7 100.0 103.6 108.5 111.9 112.4 110.7 112.1 111.4 112.0 112.8 112.0 111.4 110.9 111.6 112.9 112.4 112.8 112.1 110.9 101.4 110.7 110.6 111.2 111.9 112.3 113.3 114.3 114.8 115.4 8.7 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 94.6 100.0 105.4 108.5 110.3 111.2 109.9 110.5 109.5 110.3 109.2 110.3 110.4 111.1 110.9 110.7 110.0 109.9 110.1 109.1 108.2 109.0 109.2 109.6 111.5 112.3 112.6 113.9 114.1 114.8 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 97.4 100.0 102.8 105.5 107.6 108.6 106.8 107.4 107.1 107.0 106.8 106.1 107.1 107.7 107.6 108.8 109.6 109.1 108.3 107.6 107.4 107.6 107.8 108.6 108.3 108.7 109.5 109.8 11O.0 110.0 TABLE B-49.—Capacity utilization rates, 1948-91 [Percent 1 ; monthly data seasonally adjusted] Manufacturing Year or month 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976. 1977 1978 1979 1980 1981 1982 1983 1984 1985.... 1986 1987 1988 1989 1990 1991 P 1990:Jan Feb Mar Apr May:::::::::::::::::::::::::": June July Aug Sept Oct Nov Dec 1991:Jan Feb Mar Apr May June July Aug Sept. .. Oct p Nov . Dec Total industry 864 86.8 86.9 80.8 79 2 84 3 884 84.2 74.6 79 3 83.3 85 5 86.2 82.1 809 75.0 75 8 81.1 80 3 79.2 81.4 84.0 84.2 83.0 79.4 82.7 83.3 83 4 83.2 83.4 83.8 83.8 83.7 83 6 83 0 81.6 80.6 80 0 79.1 78 4 78.6 791 79.6 80 0 79.8 79 9 79.6 79 3 79.0 Total Durable goods 82 5 74 2 82.8 85 8 85.4 89 3 801 87 0 861 83 6 75.0 81.6 801 77.3 814 83.5 85.6 89 5 911 87 2 87.2 86.8 79.7 78 2 83 7 881 83.8 73.2 78 5 82.8 851 85.4 80.2 78 8 72.8 74 9 80.4 79 5 79.0 81.4 83.9 83.9 82.3 78.2 82.0 83.0 83 0 82.5 82.9 83.1 83.1 82.9 82 8 82 2 80.7 79.4 78 9 78.0 77 2 77.5 77 8 78.3 78 7 78.6 78 8 78.6 78 2 78.1 871 86.8 86.3 76.7 74 3 80 9 87 5 82.7 70.2 75 4 80.3 83 5 84.9 78.6 76 6 69.0 70 5 78.3 77 8 76.1 78.6 82.5 82.8 81.1 75.8 79.9 81.3 82 0 81.2 82.2 82.5 82.3 82.3 82 2 81 2 79.1 77.2 76 8 75.8 74 9 75.4 75 7 76.0 76 4 76.0 76 2 75.8 75 4 75.1 1 Output as percent of capacity. Source: Board of Governors of the Federal Reserve System. 353 Nondurable goods 86.3 86.6 86.6 82.9 82 8 86 6 87 5 84.0 76.4 818 85.2 86 2 85.1 81.4 810 78.0 811 83.1 819 83.0 85.4 86.0 85.5 83.9 81.6 84.9 85.3 843 84.3 84.0 83.9 84.1 83.8 83 6 83 6 82.9 82.4 818 81.0 80 3 80.5 80 7 81.4 82 0 82.1 82 3 82.4 821 82.2 Primary processing 87 3 76.2 88.5 90.2 84.9 89.4 806 92 0 89.4 847 75.4 83.0 79 8 77.9 815 83.8 87.8 91.0 914 85.4 86.3 86.9 80.4 79 3 86.4 915 86.0 72.9 801 84.0 86 3 86.4 78.0 78 0 69.0 74 8 80.4 79 8 80.8 84.9 87.8 87.0 84.9 80.1 85.7 86.1 85 3 85.0 85.0 85.6 86.1 86.1 851 84 3 83.2 81.5 80 6 79.5 77 9 78.2 79 0 79.9 81 1 81.2 813 81.2 80 7 80.9 Advanced processing 80.0 73.2 79.8 83.4 85.9 89.3 80 0 84.2 84.4 83.1 74.9 81.1 80.5 77.2 816 83,4 84.6 88.8 911 88.0 87.4 86.5 79.1 77.4 82.5 86 5 82.8 73.5 77 8 81.9 84 3 84.8 81.3 79.1 74.6 74.9 80.3 79 4 78.2 79.9 82.3 82.7 81.2 77.4 80.5 81.7 82 0 81.5 82.1 82.0 81.8 81.6 818 813 79.6 78.5 78 2 77.4 76 8 77.3 77.3 77.6 77 8 77.5 77 7 77.6 77 2 77.0 Mining 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 89.4 88.4 87.8 87.4 87.6 89.3 88.9 89.0 90.7 89.4 90.9 89 9 90.6 90.8 89.5 90.4 89.0 88.3 87.6 89.2 89.6 88.5 88.5 87.8 86.5 86.2 Utilities 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 85.2 84.5 84.8 82.5 84.1 84.4 84.6 86.6 86.4 87.6 86.7 85.6 83.8 85.1 84.1 81.6 83.0 82.6 86.7 86.7 86.2 85.9 85.1 84.1 85.2 82.5 TABLE B-50.—New construction activity, 1929-91 [Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates] Public construction Private construction Year or month Total new construction Nonresidential buildingsl and other construction Residential1 buildings Total Total* New housing units Total Commercial 3 Indus- Other* trial Total and Federal State local* 1929 1933 1939 10.8 29 8.2 8.3 12 4.4 3.6 .5 2.7 3.0 3 2.3 4.7 8 1.7 1.1 .1 0.9 .2 2.6 5 1.2 2.5 1.6 3.8 0.2 .5 .8 2.3 1.1 3.1 1940 1941 . 1942 1943 1944 8.7 12 0 14.1 83 5.3 5.1 62 3.4 20 2.2 3.0 35 1.7 .9 .8 2.6 30 1.4 7 .6 2.1 27 1.7 11 1.4 .3 .4 .2 .0 .1 .4 .8 1.3 15 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 1945 1946 5.8 14.3 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 New series 1947 1948 1949... 20 0 26.1 26.7 16 7 21.4 20.5 9.9 13.1 12.4 78 10.5 10.0 69 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 29.7 181 15.9 15.8 16.6 18.2 15 6 13.2 12.9 13.4 14.9 86 10.3 10.2 11.3 11.5 14 1.5 1.1 1.8 2.2 11 2.1 2.3 2.2 2.0 61 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 18.2 161 14.7 15.4 19.2 12.9 14 7 16.1 14.8 15.1 3.2 36 3.6 3.6 3.9 2.4 31 3.6 2.4 2.1 7.3 80 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 1960 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 99.8 561 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 81 8.1 8.0 90 10.8 51 6.6 6.0 60 6.8 12 6 14.1 14.9 15 8 17.2 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 7 117.3 133.3 146 8 147.5 72 8 87.6 103.3 114 5 109.3 35 9 48.5 60.7 651 56.0 27 1 38.7 50.1 54 6 43.4 37 0 39.1 42.6 49 4 53.4 112 13.1 15.7 181 18.1 66 5.5 4.8 64 8.1 19 2 20.5 22.1 24 9 27.2 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 145.6 165 4 193.1 230 2 259.8 102.3 1215 150.0 180 0 203.2 51.6 68 3 92.0 109 8 116.4 36.3 50 8 72.2 85 6 89.3 50.7 53 2 58.0 70 2 86.8 14.3 141 16.4 20 6 28.3 8.3 74 8.0 115 15.6 28.2 316 33.7 38 2 42.8 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 259.7 272 0 260.6 294.9 348.8 196.1 207 3 197.5 231.5 278.6 100.4 99 2 84.7 125.5 153.8 69.6 69 4 57.0 94.6 113.8 95.7 108 0 112.9 106.0 124.8 34.6 40.2 44.1 43.9 59.1 14.6 18.0 18.5 13.8 14.8 46.6 49.8 50.2 48.2 50.8 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 377.4 407.7 419 3 432.2 443.7 299.5 323.1 328 6 337.4 345.4 158.5 187.1 194 7 198.1 196.6 114.7 133.2 139 9 138.9 139.2 141.1 136.0 134 0 139.3 148.9 72.6 69.5 68 9 71.5 73.9 17.1 14.9 15 0 16.5 20.4 51.3 51.6 50 0 51.4 54.6 77.8 84.6 90.6 94.8 98.3 12.0 12.4 14.1 12.3 12.4 65.8 72.2 76.6 82.5 85.9 1990 446.4 337.8 182.9 128.0 154.9 72.5 23.8 58.5 108.7 12.4 96.3 .2 New series .. See next page for continuation of table. 354 TABLE B-50.—New construction activity, 1929-91—Continued [Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates] Private construction Year or month Total new construction Residential buildings' Total Total 1990: Jan.... Feb.... Mar... fc June.. July... Aug... Sept.. Oct.... Nov... Dec... 1991: Jan.... Feb.... Mar... Apr.... MayJune. July... Aug.., Sept.. Oct.... Nov. 2 Public construction Nonresidential buildings1 and other construction New housing units Total Commercial 3 Indus- Other4 trial Total Federal State and local 5 457.3 466.1 464.4 454.7 451.1 450.4 349.8 356.3 356.8 350.3 344.4 342.0 195.2 197.8 198.6 193.9 188.8 185.2 137.7 141.6 142.0 137.4 133.1 129.7 154.6 158.5 158.2 156.4 155.6 156.9 74.5 76.6 75.7 74.6 73.8 74.2 23.1 25.3 24.7 24.2 24.4 24.1 57.0 56.6 57.8 57.7 57.5 58.5 107.5 109.8 107.6 104.3 106.7 108.4 12.3 12.0 13.1 13.0 12.0 13.0 95.2 97.8 94.5 91.3 94.7 95.4 453.1 449.7 437.2 434.6 431.4 421.3 345.2 336.9 330.3 324.1 317.2 311.3 183.1 180.6 175.4 172.1 168.0 165.0 127.8 125.8 121.6 119.0 115.1 113.0 162.2 156.3 154.9 151.9 149.2 146.3 75.4 73.5 72.3 69.1 66.8 65.6 27.3 22.9 22.5 22.8 22.5 23.0 59.5 59.9 60.0 59.9 59.9 57.7 107.9 112.8 106.8 110.5 114.2 110.0 13.4 13.4 12.1 10.7 12.4 11.7 94.5 99.4 94.7 99.8 101.8 98.3 406.5 410.1 401.9 407.1 399.0 398.2 303.9 300.5 293.3 299.0 291.0 290.9 161.8 155.6 152.4 151.8 154.6 158.3 107.9 103.5 100.8 100.6 103.2 106.7 142.1 144.9 140.8 147.2 136.5 132.6 62.7 62.9 60.1 62.7 57.5 53.0 22.4 23.2 23.1 24.3 20.7 20.9 57.0 58.7 57.6 60.2 58.3 58.8 102.6 109.6 108.6 108.0 108.0 107.3 12.7 11.2 11.2 14.3 12.6 13.8 89.9 98.3 97.4 93.7 95.4 93.5 398.4 403.2 407.0 409.4 406.3 290.3 293.4 296.6 296.7 293.6 158.0 162.8 166.6 167.5 167.3 109.9 114.4 118.0 118.6 119.0 132.3 130.6 130.0 129.2 126.2 52.5 51.6 50.9 48.9 45.7 20.9 20.4 20.3 21.4 21.6 58.9 58.6 58.8 58.8 58.9 108.1 109.7 110.4 112.8 112.8 13.1 13.2 13.4 14.2 15.3 95.0 96.5 96.9 98.6 97.5 1 Beginning 1960, farm residential buildings included in residential buildings; prior to 1960, included in nonresidential buildings and other construction. 2 Includes residential improvements, not shown separately. Prior to 1964, also includes nonhousckeeping units (hotels, motels, etc.). 3 Office buildings, warehouses, stores, restaurants, garages, etc., and, beginning 1964, hotels and motels; prior to 1964 hotels and motels are included in total residential. 4 Religious, educational, hospital and institutional, miscellaneous nonresidential, farm (see also footnote 1), public utilities, telecommunications, and all other private. 5 Includes Federal grants-in-aid for State and local projects. Source: Department of Commerce, Bureau of the Census. 355 TABLE B-51.—New housing units started and authorized, 1959^91 [Thousands of units] New private housing units authorized 2 New housing units started Year or month 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991"... Private and public1 Private (farm and nonfarm) * Total (farm and Nonfarm nonfarm) Type of structure 1,553.7 1,296.1 1,365.0 1,492.5 1,634.9 1,561.0 1,509.7 1,195.8 1,321.9 1,545.4 1,499.5 1,469.0 2,084.5 2,378.5 2,057.5 1,352.5 1,171.4 1,547.6 2,001.7 2,036.1 1,760.0 1,312.6 1,100.3 1,072.1 1,712.5 1,755.8 1,745.0 1,807.1 1,622.7 1,531.3 1,274.0 1,336.8 1,468.7 1,614.8 1,534.0 1,487.5 1,172.8 1,298.8 1,521.4 1,482.3 Total 1 unit 1,517.0 1,252.2 1,313.0 1,462.9 1,603.2 1,528.8 1,472.8 1,164.9 1,291.6 1,507.6 1,466.8 1,433.6 2,052.2 2,356.6 2,045.3 1,337.7 1,160.4 1,537.5 1,987.1 2,020.3 1,745.1 1,292.2 1,084.2 1,062.2 1,703.0 1,749.5 1,741.8 1,805.4 1,620.5 1,488.1 1,376.1 1,192.7 1,014.7 1,234.0 994.7 974.3 991.4 1,012.4 970.5 963.7 778.6 843.9 899.4 810.6 812.9 1,151.0 1,309.2 1,132.0 888.1 892.2 1,162.4 1,450.9 1,433.3 1,194.1 852.2 705.4 662.6 1,067.6 1,084.2 1,072.4 1,179.4 1,146.4 1,081.3 1,003.3 894.8 841.6 1,543 1,459 1,298 1,217 1,208 1,187 1,155 1,131 1,106 1,026 1,130 971 847 992 907 977 983 1,034 1,049 1,056 1,017 1,090 1,075 1,103 1,078 1,127 988 901 897 890 876 835 858 839 769 751 648 788 742 801 831 869 879 883 861 889 910 948 2 to 4 units Type of structure Total 1 unit 5 units or more 283.0 257.4 338.7 471.5 590.8 108.4 450.0 86.6 422.5 61.1 325.1 71.6 376.1 80.9 527.3 85.0 571.2 84.8 535.9 120.3 780.9 141.3 906.2 118.3 795.0 68.1 381.6 64.0 204.3 85.9 289.2 121.7 414.4 125.0 462.0 122.0 429.0 109.5 330.5 91.1 287.7 80.0 319.6 113.5 522.0 121.4 544.0 93.4 576.1 84.0 542.0 65.3 408.7 58.8 348.0 55.2 317.6 37.5 260.4 36.3 136.8 1,208.3 998.0 1,064.2 1,186.6 1,334.7 1,285.8 1,239.8 971.9 1,141.0 1,353.4 1,323.7 1,351.5 1,924.6 2,218.9 1,819.5 1,074.4 939.2 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 1,110.8 960.8 938.3 746.1 722.8 716.2 750.2 720.1 709.9 563.2 650.6 694.7 625.9 646.8 906.1 1,033.1 882.1 643.8 675.5 893.6 1,126.1 1,182.6 981.5 710.4 564.3 546.4 901.5 922.4 956.6 1,077.6 1,024.4 993.8 931.7 793.9 758.5 2to4 units 5 units 77.1 192.9 64.6 187.4 67.6 273.8 87.1 383.3 118.9 465.6 100.8 464.9 84.8 445.1 61.0 347.7 73.0 417.5 84.3 574.4 85.2 612.7 88.1 616.7 132.9 885.7 148.6 1,037.2 117.0 820.5 64.3 366.2 63.9 199.8 93.1 309.5 121.3 442.7 130.6 487.3 125.4 444.8 114.5 365.7 101.8 319.4 88.3 365.8 133.6 570.1 142.6 616.8 120.1 656.6 108.4 583.5 89.3 421.1 75.7 386.1 67.0 339.8 54.3 262.6 45.7 156.6 Seasonally adjusted annual rates 1990:Jan Feb.... Mar.... Ma v lay June July Aug Sept Oct Nov Dec 1991: Jan Feb Mar June July Aug Sept...... Oct Nov.... Dec".... 53 41 35 51 38 41 31 30 35 22 54 17 29 37 28 32 36 24 46 42 28 51 33 56 412 291 275 265 273 256 248 266 213 165 307 203 170 167 137 144 116 141 124 131 128 150 132 99 1,758 1,343 1,205 1,123 1,088 1,123 1,086 1,055 989 925 916 854 802 876 892 913 966 999 1,005 953 982 1,028 993 1,055 998 978 884 816 808 801 781 756 730 703 668 645 611 695 689 742 760 780 794 769 782 796 787 851 84 62 55 57 51 49 58 61 48 44 42 44 40 44 45 45 41 54 42 46 48 50 58 43 676 303 266 250 229 273 247 238 211 178 206 165 151 137 158 126 165 165 169 138 152 182 148 161 1 Units in structures built by private developers for sale upon completion to local public housing authorities under the Department of Housing and Urban Development "Turnkey" program are classified as private housing. Military housing starts, including those financed with mortgages insured by FHA under Section 803 of the National Housing Act, are included in publicly owned starts and excluded from total private starts. 2 Authorized by issuance of local building permit: in 17,000 permit-issuing places beginning 1984; in 16,000 places for 1978-83; in 14,000 places for 1972-77; in 13,000 places for 1967-71; in 12,000 pfaces for 1963-66; and in 10,000 places prior to 1963. 3 Not available separately beginning January 1970. 4 Series discontinued December 1988. Source: Department of Commerce, Bureau of the Census. 356 TABLE B-52.—Business expenditures for new plant and equipment, 1947-92 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Industries surveyed quarterly Manufacturing Year or quarter All industries Total Addenda Nonmanufacturing NonDurable durable Total * goods goods Min- ComTrans- Public mercial porta- utiliand tion ties other Total nonfarm busi-2 ness Manufacturing Nonmanufacturing Total Surveyed quarterly 1947 1948 1949 20.11 22.78 20.28 8.73 9.25 7.32 3.39 3.54 2.67 5.34 5.71 4.64 11.38 13.53 12.96 0.69 .93 2.69 3.17 2.80 1.64 2.67 3.28 6.38 6,77 6.01 22.27 25.97 24.03 1950 1951 1952 1953 1954 21.56 26.81 28.16 29.96 28.86 7.73 11.07 12.12 12.43 12.00 3.22 5.12 5.75 5.71 5.49 4.51 5.95 6.37 6.72 6.51 13.83 15.74 16.04 17.53 16.85 .84 1.11 1.21 1.25 1.29 2.87 3.60 3.56 3.58 2.91 3.42 3.75 3.96 4.61 4.23 6.70 7.29 7.31 8.09 8.42 1955 1956 1957 1958 1959 30.94 37.90 40.54 33.84 35.88 12.50 16.33 17.50 12.98 13.76 5.87 8.19 8.59 6.21 6.72 6.62 8.15 8.91 6.77 7.04 18.44 21.57 23.04 20.86 22.12 1.31 1.64 1.69 1.43 1.35 3.10 3.56 3.84 2.72 3.47 4.26 4.78 5.95 5.74 5.46 39.44 38.34 40.86 43.67 51.26 16.36 15.53 16.03 17.27 21.23 8.28 7.43 7.81 8.64 10.98 8.08 8.10 8.22 8.63 10.25 23.08 22.80 24.83 26.40 30.04 1.29 1.26 1.41 1.26 1.33 3.54 3.14 3.59 3.64 4.71 1965 1966 1967 1968 1969 59.52 70.40 72.75 76.42 85.74 25.41 31.37 32.25 32.34 36.27 13.49 17.23 17.83 17.93 19.97 11.92 14.15 14.42 14.40 16.31 34.12 39.03 40.50 44.08 49.47 1970 1971 1972 1973 1974 91.91 92.91 103.40 120.03 139.67 36.99 33.60 35.42 42.35 52.48 19.80 16.78 18.22 22.63 26.77 17.19 16.82 17.20 19.72 25.71 54.92 59.31 67.98 77.67 87.19 1975 1976 1977 1978 1979 142.42 158.44 184.82 216.81 255.26 53.66 58.53 67.48 78.13 95.13 1980 1981 1982 1983 1984 286.40 324.73 326.19 321.16 373.83 1985 1987 1988 1989 410.12 399.36 410.52 455.49 507.40 1990 1991 *. 1992 *. 532.61 192.61 529.97 184.31 558.60 184.06 82.58 110.04 339.99 9.88 21.47 67.21 241.43 77.04 107.27 345.66 10.06 22.18 65.98 247.44 79.38 104.68 374.54 9.50 26.24 71.44 267.35 1990: I II Ill IV 532.50 534.55 534.11 530.13 192.16 195.02 194.05 189.72 86.03 84.15 82.48 79.03 106.14 110.87 111.57 110.69 340.33 9.62 339.53 9.77 340.06 9.97 340.41 10.12 65.41 64.64 67.68 70.24 243.46 243.18 241.32 238.87 192.16 195.02 194.05 189.72 340.33 339.53 340.06 340.41 1991: I 535,50 524.57 527.86 531.96 191.13 187.35 177.05 181.72 81.24 79.69 74.51 72.74 109.90 107.66 102.54 108.98 344.37 23.25 67.04 337.22 10.09 23.05 64.58 350.81 10.09 22.83 66.47 350.24 10.15 19.61 65.82 244.19 239.50 251.42 254.66 191.13 187.35 177.05 181.72 344.37 337.22 350.81 350.24 80.58 107.52 375.20 10.58 24.82 71.52 268.28 84.87 112.61 383.03 10.01 27.68 74.47 270.88 188.11 197.49 375.20 383.03 1960 1961 1962 1963 1964 , Ill IV*... 1992:1 13.54 16.73 16.72 11.38 13.53 12.96 25.81 31.38 32.16 34.20 33.62 7.73 18.08 11.07 20.31 12.12 20.04 12.431 21.77 12.001 21.62 13.83 15.74 16.04 17.53 16.85 9.77 11.59 11.56 10.97 11.84 37.08 45.25 48.62 42.55 45.17 12.50 16.33 17.50 12.98 13.76 24.58 28.91 31.11 29.57 31.41 18.44 21.57 23.04 20.86 22.12 5.40 5.20 5.12 5.33 5.80 12.86 13.21 14.71 16.17 18.20 48.99 48.14 51.61 53.59 62.02 16.36 15.53 16.03 17.27 21.23 32.63 32.60 35.58 36.33 40.80 23.08 22.80 24.83 26.40 30.04 1.36 1.42 1.38 1.44 1.77 5.66 6.49 6.68 7.82 6.57 9.33 6.91 10.52 7.23 11.70 20.60 23.11 23.22 25.22 28.77 70.79 82.62 83.82 88.92 100.02 25.41 31.37 32.25 32.34 36.27 45.39 51.25 51.57 56.58 63.74 34.12 39.03 40.50 44.08 49.47 2.02 2.67 2.88 3.30 4.58 7.17 6.42 7.14 8.00 9.16 13.03 14.70 16.26 17.99 19.96 32.71 35.52 41.69 48.39 53.49 106.15 109.18 120.91 139.26 159.83 36.99 69.16 33.60 75.58 35.42 85.49 42.35 96.91 52.48 107.35 54.92 59.31 67.98 77.67 87.19 25.37 27.50 32.77 39.02 47.72 28.28 88.76 6.12 9.95 31.03 99.91 7.63 11.10 34.71 117.34 9.81 12.20 39.10 138.69 10.55 12.07 47.41 160.13 11.05 13.91 20.23 22.90 27.83 32.10 37.53 52.47 58.29 67.51 83.96 97.64 162.60 179.91 208.15 244.40 285.24 53.66 58.53 67.48 78.13 95.13 112.60 128.68 123.97 117.35 139.61 54.82 58.93 54.58 51.61 64.57 57.77 69.75 69.39 65.74 75.04 41.32 47.17 53.58 52.95 57.53 106.21 120.41 122.79 129.41 151.39 318.08 358.77 363.08 359.73 418.38 112.60 128.68 123.97 117.35 139.61 205.48 230.09 239.11 242.38 278.77 173.80 196.06 202.22 203.82 234.22 152.88 137.95 141.06 163.45 183.80 70.87 82.01 65.68 72.28 68.03 73.03 77.04 86.41 82.56 101.24 257.24 12.00 14.57 59.58 171.09 261.40 8.15 15.05 56.61 181.59 269.46 8.28 15.07 56.26 189.84 292.04 9.29 16.63 60.37 205.76 323.60 9.21 18.84 66.28 229.28 454.93 447.11 461.51 508.22 563.93 152.88 137.95 141.06 163.45 183.80 302.05 309.16 320.45 344.77 380.13 257.24 261.40 269.46 292.04 323.60 563.31 188.11 580.52 197.49 173.80 196.06 202.22 203.82 234.22 12.71 15.81 14.11 10.64 11.86 13.56 12.67 11.75 10.81 13.44 21.84 21.94 21.08 21.18 8.73 9.25 7.32 108.95 88.76 121.38 99.91 140.67 117.34 166.27 138.69 190.11 160.13 591.96 192.61 399.34 339.99 345.66 184.31 374.54 184.06 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 real estate. 4 Planned capital expenditures as reported by business in October and November 1991, corrected for biases. Source: Department of Commerce, Bureau of the Census. 357 TABLE B-53.—Manufacturing and trade sales and inventories, 1950-91 [Amounts in millions of dollars; monthly data seasonally adjusted] Total manufacturing and trade Year or month Sales1 1950 1951 1952 1953 1954 19SS 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 1990: Jan.. Feb.. Mar... 38,596 43,356 44,846 47,987 46,443 51,694 54,063 55,879 5431 59,729 66,827 61,159 65,662 68,995 73,682 80,283 87,187 90,765 98,607 135,585 108,106 116,769 130,931 153,762 177,946 182,402 264,381 229,773 260,592 298,144 327,874 356,700 348,755 370,441 411,391 423,806 431,668 459,088 496,330 525,839 542,917 531,420 537,551 540,938 535,418 540,387 544,643 541,799 554,180 549,804 554,628 546,533 534,760 527,074 527,915 523,117 530,872 535,926 536,977 541,023 539,578 540,898 542,982 542,761 fc: June July Aug Sept Oct Nov Dec 1991: Jan Feb Mar June Aug Sept Oct Nov " Inventories 2 70,242 72,377 76,122 73,17§ 79,516 87,3t4 88,652 87,815 §2,087 94,719 95,516 101,949 105,463 111,564 128,929 136,824 144,853 155,713 169,362 177,439 187,633 201,74« 233,044 285,716 288,190 318,088 350,328 400,397 452,216 509,256 546,363 574,518 650,789 665,066 664,031 711,515 767,706 810,257 826,941 810,742 810,024 810,830 812,976 816,667 813,118 818,689 822,683 825,964 829,140 830,857 826,941 831,445 828,201 819,615 816,893 811,713 807,105 806,802 806,648 809,793 813,024 814,340 Ratio3 1.36 1.55 1.58 1.98 1.60 1.47 1.S5 1.S9 1.61 1.54 1.56 1.56 1.54 1.53 1.51 1.51 1.57 1.60 1.58 1.60 1.64 1.61 1.54 1.52 1.61 1.58 1.56 1.52 1.54 1.52 1.55 1.53 1.67 1.55 1.53 155 1.55 1.50 1.49 1.51 1.51 1.53 1.51 1.50 1.52 1.51 1.49 1.51 1.48 1.50 1.49 1.52 1.55 1.58 1,57 1.57 1.54 1.51 1.50 1.49 1.49 1.50 1.50 1.50 Manufacturing Sales 1 18,634 21,714 22,529 24,843 23,355 26,469 27,746 28,736 27,248 36,2t6 33,878 36,922 33,358 35,058 37,331 46,995 44,870 46,4§6 56,229 53,501 52,865 55,966 63,027 72,931 84,790 86,589 98,797 113,201 126,905 143,936 154,391 168,129 163,351 172,547 196,682 194,538 194,657 206,326 223,541 236,689 243,122 232,180 238,812 241,975 238,663 243,214 244,602 242,754 251,502 247,916 251,953 245,827 236,575 234,548 233,215 228,715 234,886 238,289 239,118 240,193 241,894 242,240 245,134 245,586 Merchant wholesalers 3 1 Inventories* Ratio Sales 31,878 39,366 41,136 43,948 41,612 45,089 56,642 51,871 56,263 52,913 53,766 54,871 58,172 66,029 63,416 68,267 77,986 84,646 90,566 98,145 101,599 162,567 108,121 124,499 157,625 159,768 174,636 188,378 211,686 242,150 265,210 283,395 311,829 312,350 339,484 334,863 322,731 338,212 367,596 383,825 386,811 386,547 386,273 384,947 385,652 386,235 384,373 387,104 387,986 390,992 391,460 392,370 388,811 388,381 388,459 385,982 385,145 381,877 379,968 378,002 377,388 378,837 378,064 378,034 1 2 1.46 1.66 1.78 1.76 1.81 1.62 1.73 1.86 1.64 1.75 1.74 1.77 1.74 1.71 1.76 1.66 1.74 1.82 1.86 1.83 1.92 1.83 1.72 1.71 1.86 1.84 1.77 1.66 1.67 1.68 1.72 1.69 1.95 1.78 1.73 1.73 1.68 1.59 1.58 1.61 1.60 1.66 1.62 1.59 1.62 1.59 1.57 1.59 1.54 1.58 1.55 1.60 1.64 1.66 1.67 1.69 1.64 1.60 1.59 1.57 1.56 1.56 1.54 1.54 7,695 8,587 8,782 9,052 8,993 9,993 16,513 16,475 1S.257 11,461 11,656 11,968 12,674 13,382 14,529 15,611 16,987 19,520 26,926 22,694 24,031 26,356 29,695 38,173 47,989 46,803 50,885 56,364 66,669 79,472 93,704 102,013 96,296 106,324 113,393 114,626 116,151 124,254 135,176 144,005 149,193 148,326 148,351 149,113 147,568 148,430 149,885 148,547 151,694 149,918 150,588 148,037 148,036 144,723 143,608 142,935 145,019 144,927 145,217 147,635 145,524 146,000 145,365 145,444 Retail trade 3 tories 2 Ratio Sales 1 Inven3 tories2 Ratio 9,284 9,666 16,216 16,686 16,637 11,676 13,266 12,736 12,736 13,871 14,126 14,466 14,93* 16,048 17,606 18,317 26,765 24,955 26,268 28,762 32,199 35,210 38,816 45,556 57,239 56,972 64,365 72,801 86,405 99,262 122,979 130,275 128,196 130,906 143,557 148,484 154,713 165,271 180,313 188,273 195,567 188,470 188,653 189,580 190,968 192,557 191,042 192.042 192,641 193,077 194,080 194,984 195,567 198,993 198,563 196,733 195,052 193,632 192,039 192,806 192,503 191,211 193,005 194,148 12,268 13,64$ 13,529 14,991 14,66§ 15,321 15,811 16,6*7 K666 , 17,951 18,294 16,241 19,636 26,556 21,823 23,677 25,330 24,758 27,453 29,396 31,264 34,513 38,269 42,658 45,167 49,010 54,699 60,207 67,018 74,737 79,779 86,558 89,114 97,570 107,316 114,642 120,860 128,509 137,613 145,146 150,602 150,914 150,388 149,850 149,187 148,743 150,156 150,498 150,984 151,970 152,087 152,669 150,149 147,803 151,092 151,467 150,967 152,710 152,642 153,195 152,160 152,658 152,483 151,731 21,050 21,331 21,468 26,936 22,761 23,462 24,451 24,113 2S,36§ 26,813 26,221 27,941 29,366 31,094 34,405 38,073 35,249 38,885 42,455 43,641 49,856 54,869 62,989 70,852 71,510 79,087 89,149 102,306 110,804 121,067 132,693 134,493 147,712 167,748 181,773 186,587 208,112 219,791 238,159 242,563 235,725 235,098 236,303 236,356 237,875 237,703 239,543 242,056 241,895 243,600 243,503 242,563 244,071 241,179 236,900 236,696 236,204 235,098 235,994 236,757 239,745 241,955 242,158 1.07 1.16 1.12 1.17 1.14 1.13 1.19 1.23 1.24 1.21 1.21 1.21 1.16 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 1.28 1.35 1.27 1.22 1.28 1.31 1.28 1.30 1.28 1.29 1.27 1.27 1.27 1.29 1.30 1.27 1.29 1.27 1.29 1.29 1.32 1.32 1.37 1.38 1.38 1.35 1.34 1.32 1.31 1.32 1.31 1.33 1.33 Monthly average for year and total for month. Seasonally adjusted, end of period. Inventories beginning January 1982 for manufacturing and December 1980 for wholesale and retail trade are not comparable with earlier periods. 3 Inventory/sales ratio. Annual data are: beginning 1982, averages of monthly ratios; for 1958-81, ratio of December inventories to monthly average sales for the year,- and for earlier years, weighted averages. Monthly data are ratio of inventories at end of month to sales for month. Note.—Earlier data are not strictly comparable with data.beginning 1958 for manufacturing and beginning 1967 for wholesale and retail trade. Source: Department of Commerce, Bureau of the Census. 358 TABLE B-54.—Manufacturers' shipments and inventories, 1950-91 [Millions of dollars; monthly data seasonally adjusted] Inventories2 Shipments * Year or month 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 ,.... 1973 1974 1975 1976... 1977..., 1978 1979 1980 1981 1982... 1983.. 1984 1985 1986 1987 1988 1989 1990 1990: Jan... Feb... Mar.. Total 18,634 21r714 22,529 24,843 23,355 26,480 27,740 28,736 27,248 30,286 30,878 30,922 33,358 35,058 37,331 40,995 44,870 46,486 50,229 53,501 52,805 55,906 63,027 72,931 84,790 86,589 98,797 113,201 126,905 143,936 154,391 168,129 163,351 172,547 190,682 194,538 194,657 206,326 223,541 236,689 243,122 232,180 238,812 241,975 238,663 243,214 244,602 242.754 251,502 247,916 251,953 245,827 236,575 234,548 233,215 228,715 234,886 238,289 239,118 240,193 241,894 242,240 245,134 245,586 fe June. July.. Aug.. Sept. Oct... Nov.. Dec. 1991: Jan... Feb.. Mar. ivlay' June July. Aug. Sept Oct.. Nov Durable goods industries Nondurable 8,845 10,493 11,313 13,349 11,828 14,071 14,715 15,237 13,553 15,597 15,870 15,601 17,247 18,255 19,611 22,193 24,617 25,233 27,624 29,403 28,156 29,924 33,987 39,635 44,173 43,598 50,623 59,168 67,731 75,927 77,419 83,727 79,212 85,481 97,940 101,279 103,238 108,128 117,993 124,532 125,388 118,699 125,092 126,769 123,885 127,891 129,167 126,531 130,441 125,783 127,692 122,693 118,578 117.648 117,432 114,487 119,721 121,024 122,240 122,994 124,459 124,965 126,404 126,545 9,789 11,221 11,216 11,494 11,527 12,409 13,025 13,499 13,695 14,689 15,008 15,321 16,111 16,803 17,720 18,802 20,253 21,253 22,605 24,098 24,649 25,982 29,040 33,2% 40,617 42,991 48,174 54,033 59,174 68,009 76,972 84,402 84,139 87,066 92,742 93,259 91,419 98,198 105,549 112,156 117,735 113,481 113,720 115,206 114,778 115,323 115,435 116,223 121,061 122,133 124,261 123,134 117,997 116,900 115,783 114,228 115,165 117,265 116,878 117,199 117,435 117,275 118,730 119,041 Nondurable goods industries Durable goods industries Total Total tries 31,078 39,306 41,136 43,948 41,612 45,069 50,642 51,871 50,203 52,913 53,786 54,871 58,172 60,029 63,410 68,207 77,986 84,646 90,560 98,145 101,599 102,567 108,121 124,499 157,625 159,708 174,636 188,378 211,686 242,150 265,210 283,395 311,829 312,350 339.484 334,803 322,731 338,212 367,596 383,825 388,811 386,547 386,273 384,947 385,652 386,235 384,373 387,104 387,986 390,992 391,460 392,370 388,811 388,381 388,459 385,982 385,145 381,877 379,968 378,002 377,388 378,837 378,064 378,034 15,539 20,991 23,731 25,878 23,710 26,405 30,447 31,728 30,194 32,012 32,337 32,496 34,565 35,776 38,421 42,189 49,852 54,8% 58,732 64,598 66,651 66,136 70,067 81,192 101,493 102,590 111,988 120,877 138,174 160,725 174,779 186,420 200,409 199,814 221,284 218,182 212,010 220,790 241,389 253,261 252,836 255,068 254,499 252,994 254,328 254,564 252,877 254,521 254,721 255,278 255,113 256,387 252,836 252,170 252,256 250,405 249,546 246,964 245,642 244,467 243,616 244,310 242,816 242,451 Materials and supplies 8,966 7,894 9,194 10,417 10,608 9,970 10,709 10,306 10,246 10,794 11,053 11,946 13,298 15,464 16,423 17,344 18,636 19,149 19,679 20.807 25,944 35,070 33,903 37,457 40,186 45,202 52,675 55,179 57,999 59,131 60,322 66,027 64,020 61,445 63,685 69,488 71,295 71,191 71,423 70,916 70,282 70,390 70,599 70,107 70,637 70,044 70,268 70,741 71,041 71,191 71,208 70,980 70,101 69,274 68,425 67,387 66,936 66,951 67,027 66,823 66,565 Work in process 10,720 9,721 10,756 12,317 12,837 12,408 13,086 12,809 13,211 14,124 14,835 16,158 18,055 21,908 24,932 27,213 30,282 29,745 28,550 30,713 35,490 42,530 43,227 46,074 50,226 58,841 69,317 76,937 80,987 86,693 86,884 98,234 98,065 96,923 102,324 112,360 120,890 119,169 122,536 121,590 120,881 121,720 121,617 120,546 121,509 121,956 122,352 121,692 122,487 119,169 119,015 119,010 118,646 118,041 117,308 117,748 117,350 116,308 116,762 115,492 115,472 Finished goods Total 15,539 18,315 17,405 6,206 18,070 6,040 17,902 6,348 18,664 7,565 20,195 8,125 I 20,143 7,816 I 20,009 8,217 I 20,901 9.222 j 21,449 S,039 I 22,375 9,647 ! 23,607 9,888 24,253 10.317 24,989 10,836 26,018 12,480 28,134 13,541 29,750 14,175 31,828 15,680 33,547 17,757 34,948 17,907 36,431 18,547 38,054 19,758 43,307 23,893 j 56,132 25,460 i 57,118 28,457 62,648 30,465 67,501 34,13! 73,512 38,733 81,425 42,663 ! 90,431 47,434 ! 96,975 54,585 1111,420 52,608 1112,536 57,023 118,200 56,097 116,621 53,642 110,721 54.781 U7.422 59;541 1126,207 61,076 130,564 62,476 135,975 61,109 131,479 61,993 131,774 61,831 131,953 62,218 131,324 62,348 131,671 62,224 131,496 62,375 132,583 62,721 133,265 62,658 135,714 62,680 138,347 62,859 135,983 62,476 135,975 61,947 136,211 62,266 136,203 61,658 135,577 62,231 135,599 61,231 134,913 60,507 134,326 60,181 133,535 60,357 133,772 60,521 134,527 60,501 135,248 60,414 135,583 1 Monthly average for year and total for month. 2 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. 359 Materials and supplies 8,317 8,167 8,556 8,971 8,775 8,676 9,094 9,097 9,505 9,838 10,009 10,167 10,487 11,197 11,760 12,328 12,753 13,163 13,686 14,677 18,147 23,744 23,565 25,847 27,387 29,606 32,803 36,593 38.159 44,035 44,810 45,689 44,094 42,334 45,350 49,158 48,456 49,710 48,316 48.359 48,731 48.461 48,405 48,275 48 *54 49,003 49,407 49,845 49,98i 49,710 50,034 49,706 49,661 49,523 49,342 49,305 49,409 49,237 49,284 49,556 49,286 Work in process 2,472 2,440 2,571 2,721 2,864 2,827 2,942 2,947 3,108 3,304 3,420 3,531 3,825 4,226 4,431 4,852 5,120 5,271 5,678 5,998 6,729 8,189 8,834 9,929 10,961 12,083 13,906 15,882 16,195 18,609 18,698 19,344 19,470 18,153 19,321 20,489 22,424 22,906 22,479 22,387 22,360 22,308 22,476 22,171 22,286 22,683 23,149 23,155 22,950 22,906 22,426 22,369 21,998 22,296 22,224 22,395 22,228 22,339 22,786 22,820 22,496 Finished goods 7,409 7,415 7,666 8,622 8,624 8,506 8,865 9,405 9,762 10,467 10,824 11,291 11,706 12,711 13,559 14,648 15,674 16,509 17,067 17,379 18,431 24,199 24,719 26,872 29.153 31,823 34,716 37,956 42,621 48,776 49,028 53,167 53,057 50,234 52,751 56,560 59,684 63,359 60,684 61,028 60,862 60,555 60,790 61,050 61.643 61,579 63,158 63,347 63,052 63,359 63,751 64,128 63,918 63,780 63,347 62,626 61,898 62,196 62,457 62,872 63,801 TABLE B-55.—Manufacturers' new and unfilled orders, 1950-91 [Amounts in millions of dollars; monthly data seasonally adjusted] Unfilled orders2 New orders1 Durable goods industries Year or month Capital Total Total 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 1990: Jan.... Feb Mar.... fc: June... July.... Aug.... Sept... Oct..... Nov.... Dec... 1991: Jan.... Feb Mar Apr..'!!! May.... June.. July... Aug... Sept.. Oct Nov* 20,110 23,907 23,204 23,586 22,335 27,465 28,368 27,559 27,193 30,711 30,232 31,112 33,440 35,511 38,240 42,137 46,420 47,067 50,657 53,990 52,022 55,921 64,182 76,003 87,327 85,139 99,513 115,109 131,629 147,604 156,359 168,025 162,140 175,451 192,879 195,706 195,204 209,389 227,025 240,758 243,643 234,819 236,016 246,422 240,333 245,318 242,396 245,039 250,592 248,987 254,976 239,237 238,196 234,462 233,132 226,431 231,229 236,540 233,725 248,090 243,160 237,624 242,230 242,991 10,165 12,841 12,061 12,147 10,768 14,996 15,365 14,111 13,387 15,979 15,288 15,753 17,363 18,671 20,507 23,286 26,163 25,803 28,051 29,876 27,340 29,905 35,038 42,627 46,862 41,957 51,307 61,035 72,278 79,483 79,392 83,654 78,064 88,140 100,164 102,356 103,647 110,809 121,444 128,651 125,958 121,419 122,468 131,030 125,603 129,936 127,057 129,387 129,020 126,893 130,875 116,193 120,221 117,789 117,547 112,116 116,139 118,434 117,128 130,827 125,482 120,092 123,325 123,859 tries, nondefense 6,314 7,046 6,072 6,682 7,745 9,926 11,594 9,886 11,490 13,681 17,588 21,154 21,135 21,806 19,213 19,624 23,669 24,545 23,983 26,096 30,727 34,816 34,032 34,784 31,949 36,385 32,556 31,890 32,501 35,274 31,607 34,419 37,223 30,884 38,560 33,957 33,756 31,940 28,748 28,038 29,282 36,689 30,993 30,078 31,098 34,884 Nondurable goods industriries 9,945 11,066 11,143 11,439 11,566 12,469 13,003 13,448 13,805 14,732 14,944 15,359 16,078 16,840 17,732 18,851 20,258 21,265 22,606 24,114 24,682 26,016 29,144 33,376 40,465 43,181 48,206 54,073 59,351 68,121 76,967 84,371 84,077 87,311 92,715 93,351 91,557 98,579 105,581 112,107 117,685 113,400 113,548 115,392 114,730 115,382 115,339 115,652 121,572 122,094 124,101 123,044 117,975 116,673 115,585 114,315 115,090 118,106 116,597 117,263 117,678 117,532 118,905 119,132 1 2 3 Total 41,456 67,266 75,857 61,178 48,266 60,004 67,375 53,183 46,609 51,717 44,213 46,624 47,798 53,417 64,518 78,249 96,846 103.711 108,377 114,341 105,008 105.247 119,349 156,561 187,043 169,546 178,128 202,022 259,168 303,595 327,421 326,553 311,893 347,310 373,607 387,241 393.629 430.589 472,223 520,837 527,195 523,476 520,680 525,127 526.797 528,901 526,695 528,980 528,070 529,141 532,164 525,574 527,195 527,109 527,026 524,742 521,085 519,336 513,943 521,840 523,106 518,490 515,586 512,990 Durable goods industries 35,435 63,394 72,680 58,637 45,250 56,241 63,880 50,352 43,807 48,369 41,650 43,582 45,170 50,346 61,315 74,459 93,002 99,735 104,393 110,161 100,412 100,225 113,034 149,204 181,519 161,664 169,857 193,321 248,282 291,324 315,209 314,718 300,810 333,159 359,734 372,175 376,839 408,894 450,258 499,494 506,375 502,214 499,590 503,851 505,569 507,614 505,504 508,360 506,939 508,049 511,232 504,732 506,375 506,516 506,631 504,260 500,678 498,088 492,976 500,809 501,832 496,959 493,880 491,193 Unfilled orders—shipments ratio3 Nondurable Total Ties 6,021 3,872 3,177 2,541 3,016 3,763 3,495 2,831 2,802 3,348 2,563 3,042 2,628 3,071 3,203 3,790 3,844 3,976 3,984 4,180 4,596 5,022 6,315 7,357 5,524 7,882 8,271 8,701 10,886 12,271 12,212 11,835 11,083 14,151 13,873 15,066 16,790 21,695 21,965 21,343 20,820 21,262 21,090 21,276 21,228 21,287 21,191 20,620 21,131 21,092 20,932 20,842 20,820 20,593 20,395 20,482 20.407 21,248 20,967 21,031 21,274 21,531 21,706 21,797 3.42 3.63 3.87 3.35 3.02 2.94 2.71 2.58 2.64 2.74 2.99 3.25 3.74 3.66 3.83 3.74 3.64 3.36 3.27 3.83 4.12 3.72 3.26 3.25 3.57 3.89 3.85 3.87 3.84 3.53 3.60 3.67 3.59 3.64 3.62 3.95 4.04 4.03 3.90 3.89 3.96 3.90 3.85 3.91 3.83 3.93 3.92 3.94 4.04 4.08 4.08 4.14 4.03 3.99 3.91 3.% 3.92 3.88 3.82 3.79 NonDurable durable goods goods industries industries 4.12 4.27 4.55 4.00 3.62 3.47 3.29 3.08 3.18 3.31 3.59 3.86 4.48 4.37 4.64 4.50 4.40 4.06 3.88 4.55 4.97 4.50 3.90 3.87 4.20 4.62 4.58 4.68 4.74 4.29 4.37 4.47 4.40 4.44 4.42 4.80 4.97 4.96 4.78 4.77 4.88 4.78 4.71 4.80 4.68 4.83 4.80 4.86 4.97 5.03 5.04 5.13 4.94 4.89 4.77 4.86 4.80 4.74 4.67 4.62 0.96 1.12 1.04 .85 .85 .92 .71 .78 .68 .72 .71 .79 .75 .73 .76 .76 .86 .91 .62 .82 .74 .71 .81 .82 .75 .69 .62 .69 .64 .68 .70 .83 .77 .77 .73 .74 .73 .72 .72 .72 .72 .70 .71 .71 .71 .71 .73 .72 .71 .72 .73 .75 .74 .73 .74 .75 .75 .75 Monthly average for year and total for month. . Seasonally adjusted, end of period. Ratio of unfilled orders at end of period to shipments for period; excludes industries with no unfilled orders. Annual figures relate to seasonally adjusted data for December. Note.—Data beginning 1958 are not strictly comparable with earlier data. Source: Department of Commerce, Bureau of the Census. 360 PRICES TABLE B-56.—Consumer price indexes, major expenditure classes, 1950-91 [1982-84=100] Housing Food and ii Year or month 1950 1951 1952 1953 1954 1955 1956 1957. 1958 1959 I960 1961 1962.. 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1990: Jan Feb Mar Apr May.... June... July Aug Sept.... Oct Nov Dec 1991: Jan Feb Mar tz June... July Aug Sept.... Oct Nov Dec All items 241 260 26 5 26.7 269 26 8 27 2 281 289 291 29.6 299 302 30 6 310 315 32 4 33.4 348 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 0 130.7 136.2 127.4 128.0 128.7 128.9 129.2 129.9 130.4 131.6 132.7 133.5 133.8 133.8 134.6 134.8 135.0 135.2 135.6 136.0 136.2 136.6 137.2 137.4 137.8 137.9 1 Total 35.0 36 2 381 40.1 414 43.1 48.8 55.5 602 62.1 65.8 72.2 79 9 86.7 93.5 97.3 995 103.2 105 6 109.1 113.5 118.2 124 9 1321 136.8 130.0 130.9 131.2 131.0 131.1 131.7 132.4 132.7 133.0 133.4 133.7 133.9 135.9 136.0 136.3 137.2 137.3 137.7 137.1 136.6 136.7 136.5 136.9 137.3 Food 2 254 28 2 28 7 28.3 28 2 27 8 28 0 289 302 297 30.0 304 30 6 311 31.5 32 2 33.8 34.1 353 37.1 39.2 404 42.1 48.2 55.1 59 8 61.6 65.5 72.0 79 9 86.8 93.6 97.4 994 103.2 105 6 109.0 113.5 118.2 1251 132.4 136.3 130.4 131.3 131.5 131.3 131.3 132.0 132.7 132.9 133.2 133.6 134.0 134.2 135.8 135.5 135.8 136.7 136.8 137.2 136.5 136.0 136.0 135.8 136.2 136.7 Total 30.8 32 0 34.0 36.4 380 39.4 41.2 45.8 507 53.8 57.4 62.4 701 81.1 90.4 96.9 99 5 103.6 107 7 110.9 114 2 118.5 123 0 128 5 133.6 125.9 126.1 126.8 126.8 127.1 128.3 129.2 130.2 130.5 130.6 130.4 130.5 131.8 132.4 132.6 132.5 132.8 133.4 134.2 134.5 134.7 134.7 134.7 135.0 Shel-2 ter 220 22 5 22 7 231 24 0 245 24 7 25.2 254 25 8 261 26.5 27 0 27 8 28.8 301 32 6 35.5 37 0 387 40.5 444 488 51.5 54.9 605 689 81.0 90.5 96.9 991 104.0 109 8 115.8 1213 127.1 132 8 140 0 146.3 136.3 136.6 137.8 138.0 138.3 139.5 141.1 142.4 142.3 142.4 142.4 142.7 144.0 144.6 145.2 145.2 145.2 145.8 146.8 147.3 147.4 147.7 147.9 148.2 Other hold Apparel Trans- Medical Enter- goods 2 Fuel and furnish- and portation care 2 tainment and other 2 ings upkeep services and utilities operation 22.5 22 6 230 23 6 24.3 24 8 254 26.0 263 263 26 6 26.6 266 26.7 27.1 27 4 28.0 29.1 311 32.5 34.3 40.7 45 4 49.4 54.7 585 64 8 75.4 86.4 94.9 1002 104.8 106 5 104.1 103 0 104.4 107 8 1116 115.3 110.8 110.2 109.9 109.4 109.9 112.2 111.3 112.7 114.0 113.4 112.9 112.7 114.8 114.7 114.1 113.1 114.2 115.8 116.4 116.2 116.8 115.7 115.3 116.0 1 2 3 42.0 43 6 45.2 46.8 48 6 49.7 51.1 56.8 634 67.3 70.4 74 7 799 86.3 93.0 98.0 100 2 101.9 103 8 105.2 1071 109.4 1112 113 3 116.0 112.1 112.8 112.8 112.8 113.2 113.1 113.6 113.3 113.8 114.2 113.8 113.7 114.1 115.6 115.7 115.9 116.3 115.9 116.3 116.2 116.4 116.4 116.5 116.3 40 3 43 9 43 5 43.1 431 42 9 43 7 445 446 45 0 45.7 461 46.3 469 47.3 47 8 49 0 51.0 53 7 568 59.2 611 62.3 64.6 69.4 72 5 75.2 78.6 814 849 90.9 95.3 97.8 100 2 102.1 105 0 105.9 110 6 115.4 118 6 128.7 116.7 120.4 125.4 126.7 125.5 123.3 120.8 122.2 126.8 128.4 127.5 125.3 123.8 126.2 128.8 130.1 129.4 126.9 125.2 127.6 131.3 132.7 132.9 129.6 22 7 241 25 7 26.5 261 25 8 26 2 27 7 28 6 298 29.8 301 30 8 30 9 31.4 319 32 3 33 3 34 3 35.7 37.5 39 5 39.9 41.2 45.8 50 1 55.1 59.0 617 70 5 83.1 93.2 97.0 99 3 103.7 106 4 102.3 105 4 108.7 114 1 120 5 123.8 117.2 117.1 116.8 117.3 1177 118.2 118.4 120.6 123.0 125.8 126 9 127.2 125.5 123.7 122.3 122.2 123.3 1237 123.4 123.8 123.8 124.0 125.0 125.3 151 15 9 16 7 17.3 17 8 18 2 18 9 19.7 20 6 215 22.3 22 9 23 5 241 24.6 25 2 26 3 28.2 29 9 31.9 34.0 361 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 8 177.0 155.9 157.5 158.7 159.8 160.8 161.9 163.5 165.0 165.8 167.1 168.4 169.2 171.0 172.5 173.7 174.4 175.2 176.2 177.5 178.9 179.7 180.7 181.8 182.6 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 1001 103.8 107 9 111.6 115.3 120.3 126 5 132.4 138.4 129.9 130.4 130.9 131.4 131.7 131.9 132.7 133.0 134.1 134.3 134.4 134.6 135.5 136.2 136.7 137.7 137.8 138.1 138.6 139.2 140.2 140.5 140.4 139.9 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 1011 107.9 114 5 121.4 128.5 137.0 147 7 159.0 171.6 154.0 154.7 155.2 155.8 156.6 157.8 159.2 160.4 162.6 163.2 163.6 164.5 166.5 167.4 167.9 168.8 169.1 170.0 170.8 172.2 175.8 176.2 176.9 177.6 Energy 3 21.5 215 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.S 100.9 1016 88.2 88.6 89.3 94.3 102.1 102.5 97.6 96.4 95.5 95.7 96.7 99.5 98.9 103.6 108.8 111.4 110.9 110.1 107.1 102.8 99.7 99.5 102.1 103.5 102.7 102.9 103.6 101.8 101.8 101.9 Includes alcoholic beverages, not shown separately. See table B- 57 for components. See tables 6-58 for definition and B-57 for components. Note.—Data beginning 1978 are for ail 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. 361 TABLE B-57.—Consumer price indexes, selected expenditure classes, 1950-91 [1982-84=100, except as noted] Food and beverages Year or month 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1990: Jan... Feb... Mar... June... July.... Aug.... Sept... Oct Nov.... Dec... 1991: Jan.... Feb.... Mar.... Jay"" 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 99.5 103.2 105.6 109.1 113.5 118.2 124.9 132.1 136.8 130.0 130.9 131.2 131.0 131.1 131.7 132.4 132.7 133.0 133.4 133.7 133.9 135.9 136.0 136.3 137.2 137.3 137.7 137.1 136.6 136.7 136.5 136.9 137.3 Fuels Fuel oil Other and (Piped) utilities Home- Mainteother nance and and Away Total Rent, owners'2 and Total houseelec2 public from Total Total resi- costs repairs tricity hold home dential (energy services fuel servcommodities ices) Total 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 99.4 103.2 105.6 109.0 113.5 118.2 125.1 132.4 136.3 130.4 131.3 131.5 131.3 131.3 132.0 132.7 132.9 133.2 133.6 134.0 134.2 135.8 135.5 135.8 136.7 136.8 137.2 136.5 136.0 136.0 135.8 136.2 136.7 Fuel and other utilities Shelter Renters' costs Food 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 99.1 102.8 104.3 107,3 111.9 116.6 124.2 132.3 135.8 131.0 132.1 131.9 131.1 130.9 131.7 132.5 132.7 132.9 133.4 133.8 133.8 136.4 135.7 136.0 137.0 136.9 137.4 136.0 134.9 134.9 134.4 135.0 135.5 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 95.8 100.0 104.2 108.3 112.5 117.0 121.8 127.4 133.4 137.9 130.3 131.0 131.8 132.5 133.0 133.4 133.9 134.3 134.6 135.0 135.4 135.7 135.8 136.2 136.5 137.1 137.5 137.9 138.4 138.7 138.9 139.1 139.3 139.6 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 99.1 104.0 109.8 115.8 121.3 127.1 132.8 140.0 146.3 136.3 136.6 137.8 138.0 138.3 139.5 141.1 142.4 142.3 142.4 142.4 142.7 144.0 144.6 145.2 145.2 145.2 145.8 146.8 147.3 147.4 147.7 147.9 148.2 103.0 108.6 115.4 121.9 128.1 133.6 138.9 146.7 155.6 142.0 143.5 144.8 144.7 144.4 145.3 148.7 150.7 148.9 148.9 149.0 149.5 153.2 154.4 156.1 155.1 154.2 155.1 157.4 158.1 156.2 156.1 155.4 155.8 29.7 30.9 32.2 33.9 35.1 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 46.5 48.7 50.4 52.5 55.2 58.0 61.1 64.8 69.3 74.3 80.9 87.9 94.6 100.1 105.3 111.8 118.3 123.1 127.8 132.8 138.4 143.3 135.8 136.0 136.5 137.0 137.3 137.9 138.7 139.4 140.0 140.5 140.7 141.1 141.2 141.5 142.0 142.5 142.8 143.0 143.7 143.7 144.6 144.6 145.0 145.2 1 Includes alcoholic beverages, not shown separately. December 1982 = 100. See next page for continuation of table. 2 362 102.5 107.3 113.1 119.4 124.8 131.1 137.3 144.6 150.2 141.1 141.0 142.2 142.5 143.1 144.4 145.4 146.5 147.0 147.2 147.3 147.5 147.9 148.2 148.4 148.8 149.2 149.7 150.2 150.7 151.6 152.1 152.6 153.0 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 99.9 103.7 106.5 107.9 111.8 114.7 118.0 122.2 126.3 120.4 120.8 121.2 121.2 122.2 121.8 122.1 121.2 124.6 123.4 123.9 123.8 124.1 125.1 124.2 126.1 126.9 126.2 126.9 127.2 126.8 126.6 127.6 128.1 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 94.9 100.2 104.8 106.5 104.1 103.0 104.4 107.8 111.6 115.3 110.8 110.2 109.9 109.4 109.9 112.2 111.3 112.7 114.0 113.4 112.9 112.7 114.8 114.7 114.1 113.1 114.2 115.8 116.4 116.2 116.8 115.7 115.3 116.0 21.4 21.7 22.1 23.1 24.7 25.7 27.5 34.4 39.4 43.3 49.0 53.0 61.3 74.8 87.2 95.6 100.5 104.0 104.5 99.2 97.3 98.0 100.9 104.5 106.7 104.5 103.1 102.3 101.2 101.9 105.4 104.5 105.6 107.6 106.4 105.4 105.6 107.7 107.1 105.7 104.0 105.4 107.6 108.2 107.7 108.5 106.5 105.5 106.5 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 94.6 113.1 95.4 91.5 89.6 88.0 84.9 82.7 91.8 104.4 118.5 117.0 114.1 111.2 105.7 99.3 94.4 90.9 89.3 87.8 87.8 88.9 90.9 94.8 94.7 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 93.2 101.5 105.4 107.1 105.7 103.8 104.6 107.5 109.3 112.6 107.5 108.3 107.9 106.8 107.8 112.4 111.7 111.6 112.4 109.0 108.0 108.6 111.5 111.5 110.8 109.4 111.5 114.4 115.4 114.7 115.5 112.9 111.2 112.4 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 99.5 107.2 112.1 117.9 120.1 122.9 127.1 131.7 137.9 129.3 130.0 130.7 130.9 131.2 131.8 130.8 132.8 132.9 133.4 133.7 132.7 135.0 135.7 136.3 136.5 137.3 137.9 138.5 138.9 139.2 139.6 140.1 140.2 TABLE B-57.—Consumer price indexes, selected expenditure classes, 1950-91—Continued [1982-84=100, except as noted] Transportation Medical care Private transportation Year or month 1950. 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969... 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985, 1986 1987 1988 1989 19S0 1991 1990: Jan Feb.... Mar... June.. July... Aug... Sept.. Oct.... Nov... Dec... 1991: Jan.... Feb.... Mar... Ma y Jay... June.. July... Aug... Sept.. Oct.... Nov... Dec... Total 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 99.3 103.7 106.4 102.3 105.4 108.7 114.1 120.5 123.8 117.2 117.1 116.8 117.3 117.7 118.2 118.4 120.6 123.0 125.8 126.9 127.2 125.5 123.7 122.3 122.2 123.3 123.7 123.4 123.8 123.8 124.0 125.0 125.3 Total 3 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 97.1 99.3 103.6 106.2 101.2 104.2 107.6 112.9 118.8 121.9 115.9 115.8 115.1 115.5 115.9 116.4 116.6 119.0 121.4 124.2 125.1 125.1 123.2 121.2 119.9 120.2 121.5 121.9 121.7 122.0 122.1 122.4 123.4 123.4 New cars Motor4 fuel Used cars 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.S 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 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 98.7 112.5 113.7 108.8 113.1 118.0 120.4 121.0 125.3 122.3 121.9 121.3 120.7 120.7 120.3 119.8 119.5 119.0 120.5 122.1 123.5 124.6 125.3 125.4 125.3 125.4 125.3 124.9 124.4 124.1 125.0 126.6 127.6 117.6 118.1 118.9 117.4 116.6 116.2 116.9 117.6 118.2 118.3 118.3 118.1 117.2 117.1 116.1 115.1 114.4 115.0 117.0 118.8 120.4 120.0 119.8 120.2 120.6 120.1 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 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 99.4 91.4 90.6 89.3 91.2 92.5 94.6 94.3 103.2 112.0 118.9 119.0 117.1 108.3 99.7 94.6 96.1 100.2 100.5 98.2 99.3 99.8 98.3 99.4 98.4 Automobile maintenance and repair 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 32.1 34.1 36.6 39.3 41.1 43.2 47.6 53.7 57.6 61.9 67.0 73.7 81.5 89.2 96.0 100.3 103.8 106.8 110.3 114.8 119.7 124.9 130.1 136.0 127.3 127.6 128.8 129.4 129.4 129.6 130.2 130.4 131.5 132.1 132.5 132.5 133.1 133.5 134.1 134.4 134.7 135.6 136.4 136.9 137.8 138.4 138.5 138.4 Other 37.9 39.2 41.6 45.2 48.6 48.9 48.4 50.2 53.5 61.8 67.2 69.9 75.2 84.3 91.4 97.7 98.8 103.5 109.0 115.1 120.8 127.9 135.8 142.5 149.1 140.3 140.8 140.7 140.8 140.8 141.0 142.1 142.4 143.0 144.8 146.2 146.7 147.3 147.8 147.7 147.5 147.7 148.3 149.0 149.7 149.7 150.9 151.8 152.0 Public transportation 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 99.5 105.7 110.5 117.0 121.1 123.3 129.5 142.6 148.9 134.2 136.7 139.1 140.3 140.9 141.5 141.6 141.9 144.0 146.6 150.3 154.4 155.4 156.2 153.3 147.1 146.0 146.6 146.7 147.6 146.6 144.9 147.0 149.8 Total 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 92.5 100.6 106.8 113.5 122.0 130.1 138.6 149.3 162.8 177.0 155.9 157.5 158.7 159.3 160.8 161.9 163.5 165.0 165.8 167.1 168.4 169.2 171.0 172.5 173.7 174.4 175.2 176.2 177.5 178.9 179.7 180.7 181.8 182.6 Medical care commodities Medical care services 39.7 40.8 41.2 41.5 42.0 42.5 43.4 44.6 46.1 46.8 46.9 46.3 45.6 45.2 45.1 45.0 45.1 44.9 45.0 45.4 46.5 47.3 47.4 47.5 49.2 53.3 56.5 60.2 64.4 69.0 75.4 83.7 92.3 100.2 107.5 115.2 122.8 131.0 139.9 150.8 163.4 176.8 156.9 158.6 159.9 161.3 162.2 163.3 164.1 164.8 166.0 166.8 167.8 169.1 170.4 171.6 173.2 174.3 175.4 176.5 177.7 178.9 180.0 180.3 181.1 181.7 3 Includes other new vehicles, not shown separately. Includes direct pricing of new trucks and motorcycles beginning September 1982. 4 Includes direct pricing of diesel fuel and gasohot beginning September 1981. Not available. Note.--Data beginning 1978 are for ail urban consumers; earlier data are for urban wage earners and clerical workers. See also Note, fable £ 56. Source: Department of labor, Bureau of Labor Statistics. 363 TABLE B-58.—Consumer price indexes, commodities, services, and special groups, 1950-91 [1982-84=100] Commodities Year or month All items 241 1950 1951 1952 1953 1954 1955 1956 1957,. 1958 1959 26.0 26.5 26 7 269 26 8 27 2 28.1 289 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972, 1973 1974 1975 1976 .... 1977 1978 .. 1979. 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1990:Jan Feb Mar.... fc June... July... Aug... Sept.. Oct.... Nov... Dec... 1991: Jan.... Feb.... Mar... fe June.. July... Aug... Sept.. Oct.... Nov... Dec... 29.1 29.6 29.9 30.2 30.6 31.0 315 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 7 136.2 127.4 128.0 128.7 128.9 129.2 129.9 130.4 131.6 132.7 133.5 133.8 133.8 134.6 134.8 135.0 135.2 135.6 136.0 136.2 136.6 137.2 137.4 137.8 137.9 Medi- All All commodities Food 29 0 31.6 32.0 319 316 313 316 32.6 33 3 33.3 33.6 33.8 34.1 34.4 34.8 35 2 36.1 36.8 381 39.9 41.7 43.2 44.5 47.8 53.5 58.2 60 7 64.2 688 76.6 86.0 93.2 97.0 99.8 103 2 1054 104 4 107.7 1115 116.7 122 8 126.6 119.9 120.6 121.1 121.4 121.4 121.6 121.6 122.8 124.6 126.1 126.3 126.0 126.0 125.7 125.7 126.4 126.8 126.7 126.2 126.4 127.1 127.2 127.8 127.5 25 4 28.2 28.7 283 282 27.8 28 0 28.9 30 2 29.7 30.0 30 4 30.6 311 31.5 32 2 33.8 34.1 35 3 37.1 39.2 40.4 42.1 48.2 55.1 59.8 616 65.5 72 0 79.9 86.8 93.6 97 4 99.4 103 2 1056 109 0 113.5 118 2 125.1 132 4 136.3 130.4 131.3 131.5 131.3 131.3 132.0 132.7 132.9 133.2 133.8 134.0 134.2 135.8 135.5 135.8 136.7 136.8 137.2 136.5 136.0 136.0 135.8 136.2 136.7 All All Durable 31.4 33.8 34.1 34 2 33 8 33.6 349 339 361 34.9 353 35.8 36.0 36.1 36.3 36.6 36.9 37 2 37.7 38.6 40.0 41.7 43.4 45.1 46.1 47.7 52.8 57.6 60.5 63.8 67 5 75.3 85.7 93.1 969 100.0 1031 105.2 1017 104.3 107.7 112.0 117 4 121.3 114.1 114.6 115.4 115.9 115.9 115.8 115.5 117.2 119.8 121.8 121.8 121.4 120.6 120.3 120.1 120.7 121.3 120.9 120.5 121.1 122.1 122.4 123.0 122.4 Special indexes Services Commodities less food 37.5 38 0 37 7 36 8 36.1 37.2 37.8 38.4 38.1 38.1 38.5 38.6 39.0 38.8 38.9 39.4 40.7 42.2 44.1 46.0 46.9 48.1 51.5 57.4 609 64.4 686 75.4 83.0 89.6 95.1 99.8 1051 10&8 106 6 108.2 1104 112.2 1134 116.0 113.8 113.7 113.4 113.1 113.2 112.9 113.0 112.9 112.8 113.6 114.1 114.5 115.0 115.5 115.5 115.5 115.9 116.0 116.3 115.9 115.9 116.3 117.0 117.2 Nonservices durable 28 6 30.8 31.0 312 314 31.4 32 0 32.9 331 33.5 34.1 34.3 34.5 34.8 35.1 35 6 36.4 37.6 39.1 40.9 42.5 44.0 45.0 46.9 52.9 57.0 59 5 62 5 65 5 74.6 88.4 96.7 98.3 100.0 1017 1041 98 5 101.8 105 8 111.7 119 9 124.5 114.2 115.0 116.5 117.4 117.5 117.6 117.0 119.9 124.1 126.8 126.6 125.7 124.0 123.2 122.9 123.9 124.6 123.9 123.0 124.3 125.9 126.1 126.7 125.5 16.9 17.8 18.6 19 4 20.0 20.4 20.9 21.8 22 6 23.3 24.1 24.5 25.0 25.5 26.0 26.6 27.6 28.8 30.3 32.4 35.0 37.0 38.4 40.1 43.8 48.0 52 0 56.0 60 8 67.5 77.9 88.1 96.0 99.4 104 6 109.9 115 4 120.2 125 7 131.9 139 2 146.3 135.4 136.0 136.9 137.1 137.6 138.8 139.9 140.9 141.4 141.7 142.0 142.3 143.8 144.5 144.8 144.7 145.0 145.8 146.8 147.3 147.9 148.1 148.3 148.8 ..i cai care services 12 8 13.4 14 3 14 8 15.3 15.7 16 3 17.0 17.9 18.7 19.5 20.2 20.9 21.5 22.0 22 7 23.9 26.0 27.9 30.2 32.3 34.7 35.9 37.5 41.4 46.6 513 56.4 612 67.2 74.8 82.8 92.6 100.7 106 7 113 2 1219 130.0 138 3 148.9 162 7 177.1 155.7 157.2 158.5 159.4 160.5 161.5 163.4 165.0 165.8 167.2 168.6 169.3 171.1 172.8 173.8 174.5 175.1 176.1 177.5 178.9 179.7 180.8 181.9 182.8 Services less medical care services All All All items less food items less energy items Incc less food and energy Energy1 23 8 25.3 25 9 264 22.8 23 6 24.2 25.0 25.4 25.9 26.3 26.8 27 4 28.3 29.3 30.8 32.9 35.6 37.5 38.9 40.6 44.3 48.3 52.2 55.9 60 7 67.5 78.2 88.7 964 99.2 104 4 109.6 114 6 119.1 124.3 130.1 136 8 143.3 133.4 133.9 134.7 134.9 135.3 136.5 137.5 138.5 139.0 139.1 139.4 139.7 141.1 141.7 142.0 141.8 142.1 142.9 143.8 144.3 144.8 145.0 145.1 145.5 26 6 26.6 27.1 28.0 28 6 29.2 29.7 30.0 30.3 30.7 31.1 31.6 32.3 33.4 34.9 36.8 39.0 40.8 42.0 43.7 48.0 52.5 560 59.6 63 9 71.2 81.5 90.4 96,3 99.7 104 0 108.0 109 8 113.6 118.3 123.7 130 3 136.1 126.7 127.3 128.1 128.4 128.7 129.4 130.0 131.3 132.6 133.5 133.7 133.7 134.3 134.6 134.8 134.9 135.4 135.7 136.1 136.7 137.4 137.7 138.0 138.1 28.9 29.7 29.9 30.4 30.7 31.1 31.5 32.0 32.5 33.5 34.4 35.9 38.0 40.3 42.0 43.4 46.1 50.6 55.1 582 61.9 66.7 73.4 81.9 90.1 961 99.6 104.3 108.4 112.6 117.2 122.3 128.1 134 7 140.9 131.5 132.3 133.3 133.5 133.7 134.2 134.8 135.6 136.3 136.9 137.2 137.4 138.6 139.3 139.8 140.2 140.3 140.5 140.9 141.3 141.9 142.3 142.7 142.8 28.9 29 6 30.2 30.6 31.0 31.4 31.8 32.3 32 7 33.5 34.7 36.3 38.4 40.8 42.7 44.0 45.6 49.4 53.9 57.4 61.0 65 5 71.9 80.8 89.2 95 8 99.6 104.6 109.1 113 5 118.2 123.4 129.0 135 5 142.1 132.0 132.8 133.9 134.2 134.4 134.8 135.5 136.4 137.2 137.8 138.2 138.3 139.4 140.3 140.9 141.1 141.3 141.5 142.0 142.7 143.4 143.9 144.4 144.4 21.5 215 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 1009 101.6 88.2 88.6 89.3 94.3 102.1 102.5 97.6 96.4 95.5 95.7 96.7 99.5 98.9 103.6 108.8 111.4 110.9 110.1 107.1 102.8 99.7 99.5 102.1 103.5 102.7 102.9 103.6 101.8 101.8 101.9 1 Household fuels—gas (piped), electricity, fuel oil, etc.—and motor fuel. Motor oil, coolant, etc. also included through 1982. Note.—Data beginning 1978 are for all urban consumers; earlier data are for urban wage earners and clerical workers. See also Note, Table B-56. Source: Department of Labor, Bureau of Labor Statistics. 364 TABLE B-59.—Changes in special consumer price indexes, 1958-91 [Percent change] All items less food All items Year or month Dec. to Dec.1 Year to year All items less energy Year to year Dec. to Dec.1 All items less food and energy Year to year Dec. to Dec.1 Dec. to Dec.1 All items less food, shelter, and energy Year to year Year to year Dec. to Dec* 1.8 1.7 2.8 .7 1.8 2.1 2.1 2.1 2.1 1.3 2.8 .7 1.7 2.0 2.4 2.0 . 1.4 .7 1.3 1.6 1.0 1.7 1.0 1.0 1.3 1.3 1.0 1.3 1.0 1.6 1.0 1.7 1.0 1.0 1.3 1.3 1.3 .7 1.3 1.9 1.3 1.7 1.0 1.3 1.3 1.6 1.0 1.3 1.3 1.6 1.2 1.3 1.3 1.3 1.3 1.6 .. 1.9 3.5 3.0 4.7 6.2 1.6 2.9 3.1 4.2 5.5 1.6 3.5 3.3 5.0 5.6 1.6 2.2 3.4 4.5 5.4 1.9 3.4 3.2 4.9 6.5 1.6 3.1 2.7 4.4 5.8 1.5 3.3 3.8 5.1 6.2 1.2 2.4 3.6 4.6 5.8 4.6 5.1 4.7 4.7 1970 1971 1972 1973 1974 5.6 3.3 3.4 8.7 12.3 5.7 4.4 3.2 6.2 11.0 6.6 3.0 2.9 5.6 12.2 6.0 4.6 2.9 4.0 9.8 5.4 3.4 3.5 8.2 11.7 6.1 4.2 3.3 6.2 9.8 6.6 3.1 3.0 4.7 11.1 6.3 4.7 3.0 3.6 8.3 5.8 3.1 2.7 3.5 11.3 5.2 4.9 2.4 2.9 7.7 1975 1976 1977 1978 1979 6.9 4.9 6.7 9.0 13.3 9.1 5.8 6.5 7.6 11.3 7.3 6.1 6.4 8.3 14.0 9.4 6.7 6.4 7.2 11.4 6.6 4.8 6.7 9.1 11.1 8.9 5.6 6.4 7.8 10.0 6.7 6.1 6.5 8.5 11.3 9.1 6.5 6.3 7.4 9.8 6.4 6.9 5.3 6.4 7.3 8.9 7.1 6.0 5.6 6.9 1980 1981 1982 1983 1984 12.5 8.9 3.8 3.8 3.9 13.5 10.3 6.2 3.2 4.3 13.0 9.8 4.1 4.1 3.9 14.5 10.9 6.5 3.5 4.3 11.7 8.5 4.2 4.5 4.4 11.6 10.0 6.7 3.6 4.7 12.2 9.5 4.5 4.8 4.7 12.4 10.4 7.4 4.0 5.0 9.8 9.4 6.1 5.0 4.3 8.8 9.6 7.7 5.2 5.0 1985 1986 1987 1988 1989 3.8 1.1 4.4 4.4 4.6 3.6 1.9 3.6 4.1 4.8 4.1 .5 4.6 4.2 4.5 3.8 1.7 3.5 4.1 4.6 4.0 3.8 4.1 4.7 4.6 3.9 3.9 4.1 4.4 4.7 4.3 3.8 4.2 4.7 4.4 4.3 4.0 4.1 4.4 4.5 3.7 3.3 3.8 4.7 4.1 3.8 3.4 3.8 4.2 4.4 1990 1991 6.1 3.1 5.4 4.2 6.3 3.3 5.3 4.5 5.2 3.9 5.2 4.6 5.2 4.4 5.0 4.9 5.2 4.6 4.9 5.2 1958 1959 1960 1961 1962. 1963 1964 1965 1966 1967 1968 1969 . Change from preceding period Seasonally adjusted Unadjusted 1990:Jan Feb Seasonally adjusted Unadjusted Seasonally adjusted Unadjusted Seasonally adjusted Unadjusted Seasonally adjusted Unadjusted 1.0 .5 .5 .2 .2 .5 0.9 .5 .4 .2 .2 .6 0.7 .5 .6 .2 .2 .5 0.8 .6 .4 .3 .2 .5 0.7 .6 .8 .2 .1 .4 0.6 .7 .5 .2 .2 .5 0.4 .6 .8 .2 .1 0.5 .6 .5 .4 .2 .5 0.3 .8 .8 .3 .2 0 0.5 .8 .5 .3 .3 .3 .4 .9 .8 .6 .2 .4 .8 .8 .6 .3 .3 .5 1.0 1.0 .7 .1 0 .5 .8 .8 .7 .3 .3 .4 .6 .5 .4 .2 .1 .5 .5 .4 .3 .4 .3 .5 .7 .6 .4 .3 .1 .5 .5 .4 .3 .3 .4 .2 l'.O .7 .3 .1 .5 .4 .4 .4 .4 .4 %June .6 .1 .1 .1 .3 .3 .4 .2 .1 .2 .3 .2 .4 .2 .1 .1 .4 .2 .4 .3 .1 .1 .4 .1 .9 .5 A .3 .1 .1 .8 .5 .2 .3 .1 .4 .8 .6 .4 .1 .1 .1 .8 .7 .1 .2 .2 .4 .6 .9 .5 .1 .2 -.1 .8 .9 .1 .1 .4 .3 July Aug Sept Oct Nov Dec .1 A .1 .3 .1 .2 .2 .4 .1 .4 .3 .3 .4 .5 .2 .2 .1 .4 .3 .4 .1 .4 .3 .3 .3 .4 .3 .3 .1 .2 .3 .3 .1 .4 .3 .4 .5 .5 .3 .3 .4 .4 .4 .1 .3 .3 .2 .6 .8 .4 .4 -.1 .6 .3 .1 .4 .2 Mar SEf June July Aug Sept Oct Nov Dec 1991: Jan Feb Mar 0 1 0 Changes from December to December are based on unadjusted indexes. Note.—Data beginning 1978 are for all urban consumers; earlier data are for urban wage earners and clerical workers. See also Note, Table B-56. Source: Department of Labor, Bureau of Labor Statistics. 365 TABLE B-60.—Changes in consumer price indexes, commodities and services, 1929-91 [Percent change] Commodities All items Total Year Dec. to Dec.1 1929... Year to year Dec. to Dec 1 Year to year 0.6 -5.1 1933... Dec. to Dec. 1 Year to Dec. to Dec.1 2.5 1.2 6.9 -2.8 Energy2 Services Commodities less food Food Total Year to year Dec. to Dec. 1 Medical care services Year to year Dec. to Dec. 1 Year to year Dec. to Dec. 1 Year to year -1.4 -0.7 -2.0 -2.5 -2.5 0.5 -1.6 1.2 1.2 1940... 1941... 1942... 1943... 1944... .7 9.9 9.0 3.0 2.3 .7 5.0 10.9 6.1 1.7 1.4 13.3 12.9 4.2 2.0 .7 6.7 14.5 9.3 1.0 2.5 15.7 17.9 3.0 0 1.7 9.2 17.6 11.0 -1.2 .5 10.7 63 5.5 4.7 .5 5.4 10.8 4.6 5.3 2.4 2.3 2.3 2.2 3.1 2.3 2.2 0 1.2 3.5 5.6 3.2 0 0 3.5 4.5 4.3 1945... 1946... 1947... 1948... 1949... 2.2 18.1 8.8 3.0 -2.1 2.3 8.3 14.4 8.1 -1.2 2.9 24.8 10.3 1.7 -4.1 3.0 10.6 20.5 7.2 -2.7 3.5 31.3 11.3 -.8 -3.9 2.4 14.5 21.7 8.3 -4.2 3.3 12.7 9.2 5.2 -4.6 4.2 6.0 12.9 7.4 -1.3 .7 3.6 5.6 5.9 3.7 1.5 14 4.3 6.1 5.1 3.1 9.0 6.4 6.9 1.6 3.1 5.1 8.7 7.1 3.3 1950... 1951... 1952... 1953... 1954... 5.9 6.0 .8 .7 _ 7 1.3 7.9 1.9 .8 .7 7.8 5.9 -.9 -.3 -1.6 .7 9.0 1.3 9.8 7.1 -1.0 — 11 -L8 1.6 11.0 1.8 -1.4 5.5 4.9 -.6 .3 -.3 7.6 .9 -1.5 -L2 3.6 5.2 4.4 4.2 2.0 3.0 5.3 4.5 4.3 3.1 4.0 5.3 5.8 3.4 2.6 2.4 4.7 6.7 3.5 3.4 1955... 1956... 1957... 1958... 1959... .4 3.0 2.9 1.8 1.7 -.4 1.5 3.3 2.8 .7 -.3 2.6 2.8 1.2 .6 -.7 2.9 2.8 2.4 -1.0 -1.4 .7 3.2 4.5 -1.7 0 2.7 2.0 .8 1.4 -.6 .9 2.9 1.1 1.4 2.0 3.4 4.2 2.7 3.9 2.0 2.5 4.3 3.7 3.1 3.2 3.8 4.8 4.6 4.9 2.6 3.8 4.3 5.3 4.5 -0.9 4.7 0 1.9 1960... 1961... 1962... 1963... 1964.. 1.4 .7 1.3 1.6 1.0 1.7 1.0 1.0 1.3 1.3 1.2 0 .9 1.5 .9 .9 .6 .9 .9 1.2 | 3.1 -.7 1.3 2.0 1.3 1.0 1.3 -.3 .8 .6 1.4 .6 .3 .6 2.5 2.1 1.6 2.4 1.6 3.4 1.7 2.0 2.0 2.0 3.7 3.5 2.9 2.8 2.3 4.3 3.6 3.5 2.9 2.3 1.3 -1.3 2.2 -.9 0 2.3 .4 .4 0 -.4 1965.. 1966.. 1967.. 1968.. 1969.. 1.9 3.5 3.0 4.7 6.2 1.6 2.9 3.1 4.2 5.5 1.4 2.5 2.5 4.0 5.4 1.1 2.6 1.9 3.5 4.7 3.5 4.0 1.2 4.4 /.0 2.2 5.0 .9 3.5 5.1 .8 1.9 3.1 3.6 4.7 .8 1.3 2.4 3.6 4.3 2.7 4.8 4.3 5.8 7.7 2.3 3.8 4.3 5.2 6.9 3.6 8.3 8.0 7.1 7.3 3.2 5.3 8.8 7.3 8.2 1.8 1.7 1.7 1.7 2.9 1.8 1.7 2.1 1.7 2.5 1970.. 1971.. 1972.. 1973.. 1974.. 5.6 3.3 3.4 8.7 12.3 5.7 4.4 3.2 6.2 11.0 3.9 2.3 3.4 10.4 12.8 4.5 3.6 3.0 7.4 11.9 2.3 4.3 4.6 20.3 12.0 5.7 3.1 4.2 14.5 14.3 4.7 2.2 2.6 4.9 13.2 4.1 3.9 2.2 3.5 10.7 8.1 4.1 3.4 6.2 11.4 8.0 5.7 3.8 4.4 9.2 8.1 5.4 3.7 6.0 13.2 7.0 7.4 3.5 4.5 10.4 3.1 2.6 17.0 21.6 2.8 3.9 2.6 8.1 29.6 1975.. 1976.. 1977.. 1978.. 1979.. 6.9 4.9 6.7 9.0 13.3 9.1 5.8 6.5 7.6 11.3 6.2 3.3 6.1 8.8 13.0 8.8 4.3 5.3 7.2 11.3 6.6 .5 8.1 11.8 10.2 8.5 3.0 6.3 9.9 11.0 6.1 5.1 4.8 7.7 14.3 9.1 5.0 5.5 5.8 11.6 8.2 7.2 8.G 9.3 13.6 9.6 8.3 7.7 8.6 11.0 10.3 10.8 9.0 9.3 10.5 12.6 10.1 9.9 8.5 9.8 11.4 7.1 7.2 7.9 37.5 10.5 7.1 9.5 6.3 25.1 1980.. 1981.. 1982.. 1983.. 1984.. 12.5 8.9 3.8 3.8 3.9 13.5 10.3 6.2 3.2 4.3 11.0 6.0 3.6 2.9 2.7 12.3 8.4 4.1 2.9 3.4 10.2 4.3 3.1 2.7 3.8 8.6 7.8 4.1 2.1 3.3 11.5 6.7 3.8 3.1 2.1 13.8 8.6 4.1 3.2 3.1 14.2 13.0 4.3 4.8 5.4 15.4 13.1 9.0 3.5 5.2 10.1 12.6 11.2 6.2 5.8 11.3 10.7 11.8 8.7 6.0 18.0 11.9 1.3 _ 5 .2 30.9 13.6 1.5 .7 1.0 1985.. 1986.. 1987.. 1988.. 1989.. 3.8 1.1 4.4 4.4 4.6 3.6 1.9 3.6 4.1 4.8 2.5 -2.0 4.6 3.8 4.1 2.1 -.9 3.2 3.5 4.7 2.6 3.3 3.5 5.2 5.5 2.3 3.2 4.1 4.1 5.8 2.4 -5.3 5.1 3.2 3.3 2.0 -3.3 2.6 3.3 4.0 5.1 4.5 4.3 4.8 5.1 5.1 5.0 4.2 4.6 4.9 6.8 7.9 5.6 6.9 8.6 6.1 7.7 6.6 6.4 7.7 1990.. 1991.. 6.1 3.1 5.4 4.2 6.6 1.2 5.2 3.1 5.3 1.9 5.8 2.9 7.4 .8 4.8 3.3 5.7 4.6 5.5 5.1 9.9 8.0 9.3 8.9 1939... 1 8 -.9 _g L0 3.2 2.1 0 L6 1.3 .7 1.8 -19.7 -13.2 8.2 ".8 5.6 5.1 18.1 -7.4 8.3 .4 Changes from December to December are based on unadjusted indexes. Household fuels-gas (piped) electricity, fuel oil, e t c - a n d motor fuel. Motor oil, coolant, etc. also included through 1982. Note.—Data beginning 1978 are for all urban consumers; earlier data are for urban wage earners and clerical workers. See also Note, Table B-56. Source: Department of Labor, Bureau of Labor Statistics. 366 TABLE B-61.—Producer price indexes by stage of processing, 1947-91 [1982=100] Finished goods Finished goods excluding consumer foods Consumer foods Year or month Total finished goods 264 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991» ... 1990:Jan 28 5 27.7 282 30 8 30 6 303 30 4 305 313 32 5 33 2 331 33 4 33 4 33 5 334 33 5 341 35.2 35 6 36 6 38.0 39.3 40 5 418 Feb Mar Apr May.::::::::::::::::::: June July Aug.. Sept:.::::. :::::::..:: Oct Nov... Dec 1991: Jan Feb Mar Apr May June. July Aug l Sept oc?..: Nov : Dec 45 6 52.6 58 2 60 8 64.7 69.8 77.6 88 0 96.1 100 0 1016 103 7 104.7 103 2 105.4 108.0 113.6 119.2 121.7 117.6 117 4 117 2 117 2 117.7 117.8 118.2 119 3 120.4 122 3 122 9 122.0 122.3 121.4 120 9 121.1 121.8 121.9 1216 121.7 1213 122 3 122 3 121.9 Consumer goods Total Crude Processed 319 349 393 424 311 340 32.1 32 7 36 7 36 4 34 5 34 2 40.1 36 5 334 391 391 31.1 32 4 36 2 35.4 33 6 34 0 32.7 32.7 34.1 36.1 34.7 35 2 35 3 35.6 35.2 35.2 36.8 39.2 38 8 40 0 42.3 43.9 44 7 47 2 55 8 63.9 70 3 69 0 111 79.4 86.8 92 3 97.2 100 0 100 9 104 9 104.8 107 4 109.6 112.7 118.6 124.4 124.4 122.0 122 5 123 3 123 5 125.3 125.3 125.7 125 8 125.2 1251 124 8 124.6 124.7 124.9 1251 1251 124.9 124.8 124 7 124.1 123 5 124 2 123.5 123.4 33 3 34 4 36 5 34 8 35 5 354 35 7 35 3 35 4 36.8 39.2 38 5 40 0 42.4 43.8 445 46 9 56 5 64.4 69 8 69 6 73.3 79.9 87.3 92 4 97.8 100 0 1010 105 4 104.6 107 3 109.5 112.6 118.7 124.4 124.2 123.9 124 6 124 4 123 2 124.5 124.2 124.9 124 9 124.2 124 6 125 0 124.2 124 8 124.6 125 2 125 3 125.8 125.3 124 5 123.3 122 7 123 0 1231 122.2 419 446 416 37 5 38 5 41.0 37 3 39 8 38.0 38.4 37 8 38 9 39.0 41.5 39 6 42 5 45.9 46.0 45 8 48 0 63 6 71.6 71 7 76 7 79.5 85.8 92.3 93 9 104.4 100 0 102 4 1114 102.9 105 6 107.1 109.8 119.6 123.0 119.7 148.8 152 7 138 6 118 7 112.9 108.6 113.4 1121 109.1 117 4 126 3 117.9 124 3 118.8 125 0 128 2 137.8 130.3 1218 112.1 1101 105 7 116.0 106.1 Total Total 35 0 35.9 36.9 38.2 39 6 40 4 42.0 48.8 54 7 581 62.2 66.7 74.6 86 7 95.6 100 0 1018 103.2 104.6 1019 104.0 106.5 111.8 117.4 120.9 115.5 115 1 114 8 115 2 115.5 115.7 116.0 117 4 119.1 1215 1221 121.3 121.4 120.4 119 5 119.7 120.5 120.8 120.7 121.1 120 8 122 0 122.0 121.7 27.4 29.2 28.6 29.0 31.1 30.7 31.0 31.1 31.3 32.1 32.9 32.9 33.3 33.5 33.4 33.4 33.4 33.3 33.6 34.1 34 7 35.5 36.3 37.4 38 7 39.4 41.2 48.2 53 2 56 5 60.6 64.9 73.5 871 96.1 100 0 1012 102.2 103.3 98 5 100.7 103.1 108.9 115.3 118.7 113.2 112 4 1118 112 2 112.7 112.9 113.2 1151 117.7 120 6 1214 120.0 119.8 118.2 117 0 117.2 118.2 118.6 118.4 119.0 118 8 119.7 119.7 119.3 Durable 32.9 35.2 36.1 36.5 38.9 39.2 39.5 39.8 40.2 41.6 42.8 43.4 43.9 43.8 43.6 43.4 43.1 43.3 43.2 43.4 44.1 45.1 45.9 47.2 48.9 50.0 50.9 55.5 61.0 63.7 67.4 73.6 80.8 91.0 96.4 100 0 102.8 104.5 106.5 108 9 111.5 113.8 117.6 120.4 123.9 119.1 119 4 119.2 119 3 119.4 120.3 120.4 119 9 119.9 122 7 122.8 122.9 123.5 123.9 124.0 123.7 123.2 123.1 123.1 122.9 121.8 126.0 126.0 125.6 Nondurable 24.2 25.7 24.7 25.1 27.0 26.3 26.6 26.7 26.8 27.3 27.9 27.8 28.2 28.4 28.4 28.4 28.5 28.4 28.8 29.3 30.0 30.6 31.5 32.5 33.5 34.1 36.1 44.0 48.9 52.4 56.8 60.0 69.3 85.1 95.8 100.0 100.5 101.1 101.7 93 3 94.9 97.3 103.8 111.5 115.0 109.2 107 9 107.1 107 7 108.3 108.3 108.6 111.5 115.1 118.0 119.0 117.2 116.7 114.4 112.8 113.2 114.6 115.2 115.0 115.8 115.9 115.7 115.7 115.2 Capital equipment 19.8 21.6 22.7 23.2 25.5 25.9 26.3 26.7 27.4 29.5 31.3 32.1 32.7 32.8 32.9 33.0 33.1 33.4 33.8 34.6 35.8 37.D 38.3 40.1 41.7 42.8 44.2 50.5 58.2 62.1 66.1 71.3 77.5 85.8 94.6 100.0 102.8 105.2 107.5 109.7 111.7 114.3 118.8 122.9 126.7 121.2 121.6 121.9 122.2 122.2 122.5 122.8 123.1 122.9 124.5 124.7 124.9 125.9 126.1 126.2 126.2 126.5 126.5 126.6 126.5 126.1 127.9 127.9 128.0 Tntal finished consumer goods 28.6 30.8 29.4 29.9 32.7 32.3 31.7 31.7 31.5 32.0 32.9 33.6 33.3 33.6 33.6 33.7 33.5 33.6 34.2 35.4 35.6 36.5 37.9 39.1 40.2 41.5 46.0 53.1 58.2 60.4 64.3 69.4 77.5 88.6 96.6 100.0 101.3 103.3 103.8 101.4 103.6 106.2 112.1 118.2 120.4 116.7 116.4 115.9 115.8 116.5 116.6 117.0 118.3 119.8 121.9 122.6 121.4 121.4 120.3 119.6 119.8 120.6 120.7 120.4 120.4 120.1 120.8 120.9 120.3 1 Data have been revised through August 1991 to reflect the availability of late reports and corrections by respondents. All data are subject to revision 4 months after original publication. See next page for continuation of table. 367 TABLE B-61.—Producer price indexes by stage of processing, 1947-91—Continued [1982=100] Intermediate materials, supplies, and components Year or month Total 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 , 1980 1981 1982 1983 1984 1985 1986 '. 1987 1988. 1989 1990 1991 ».. 1990: Jan Feb Mar May" June July Aug . Sept Oct Nov Dec 1991:Jan Feb Mar 23.3 25.2 24.2 25.3 28.4 27.5 27.7 27.9 28 4 29.6 30.3 30.4 30.8 30.8 30.6 30.6 30.7 30.8 32 0 32 2 33.0 341 Other tainers 22.2 24.1 23.5 24.6 27.6 26.7 27.0 27.2 24.9 26.8 25.7 26.9 30.5 29.3 29.7 29.8 22.5 24.9 24.9 26.2 28.7 28.5 29.0 29.1 14.4 16.4 14.9 15.2 15.9 15.7 15.8 15.8 23.4 24.4 24.5 25.2 29.6 28.0 28.0 28.5 28.5 29.8 28.0 29.0 32.6 32.6 31.0 31.7 31.7 34.7 30.1 32.7 37.6 34.5 31.9 31.6 29 3 30.1 30.1 30.5 30.7 30 3 30.2 32 0 32.7 32 8 33.3 33.3 16.3 17.2 16.2 16.2 16.6 16.8 16.7 16.6 16.2 16 5 16 8 31.0 32.4 32.0 32.3 33.1 33.5 33.3 33 7 34.5 35 0 34.7 35 0 30.6 31.2 31.9 31.1 30.4 30.2 30.5 29.9 29.6 313 317 32.5 33 6 348 36 2 37 7 406 836 816 50 5 56 6 60 0 77 4 79 6 848 94.5 105.5 104 6 100 0 103.6 105 7 97 3 96.2 99 2 109 5 113 8 113 3 111 1 113.2 111.0 1114 112.5 1159 115.5 116.0 114 9 113.9 113 0 111.2 1115 110.4 110.7 111.6 111.5 110.8 110.8 110.0 111.5 111.4 111.8 111.4 111.4 Total and lubricants 30.3 30 7 41.5 42 9 45 6 46 7 49 5 70 3 Supplies For construction 301 418 fualc For manufacturing 280 312 35.4 36 8 38.2 42 4 52.5 58 0 60.9 64 9 69 5 78.4 90.3 98 6 100 0 100.6 1031 102 7 99.1 101.5 1071 112 0 114 5 114 4 113.4 112.5 112 4 112.8 1131 113.1 113.1 114 4 116.3 117 9 117.9 116.7 116.4 115.5 114.2 113.9 114.0 June 114.3 July 114.0 Aug» 114.2 Sept 114.5 Oct 114.1 Nov 114.1 Dec....... ... 113.7 fcz Foods and feeds' Crude materials for further processing Proc- Materials and 641 68 6 77.4 89.4 98 2 1000 100 5 103 0 103 0 99.3 1017 106 9 1119 114 5 114 6 113 4 112.5 112 5 112.8 112 9 113.0 113 0 114 4 116.4 1181 118.2 117 0 116.8 115.7 114.4 114.1 114.2 114.5 114.2 114.4 114.7 114.2 114.3 113.8 305 329 32.7 32 7 33.1 33 6 343 345 353 36 5 380 389 404 441 560 617 640 67 4 72 0 809 917 98 7 100 0 1012 1041 103 3 102 2 105 3 113 2 1181 118 7 118 1 117 6 117.5 117 9 118.2 118 4 118.3 118.5 118 7 119.3 120 0 1201 119 8 119.9 119.6 118.9 118.5 118.1 117.8 117.4 117.3 117.4 117.5 117.4 117.3 158 303 318 32.0 320 32.9 32.7 32.2 32.1 32 2 32.5 32 8 33 6 340 169 35.7 37 7 38 3 16.5 16 6 43 0 201 55 0 22 2 33 6 111 408 19 5 465 601 641 394 42 3 Ml 69 3 765 49 9 84 2 616 913 85 0 100 6 100 0 95 4 95 7 92 8 72 7 73 3 97 9 100 0 102 8 105 6 107 3 1081 109 8 1161 1213 1229 124 5 1218 121.9 122 5 123.0 123 2 122.8 123 0 123 0 123.3 123 4 123 4 123 5 124.0 123.9 124.0 124.3 124.5 125.2 125.3 124.7 124.7 124.5 124.4 124.5 712 76 4 859 852 842 79.4 77 8 78.0 78 4 79.4 78.7 85 7 94.1 1006 100.0 94 0 91.7 87.5 82.8 81.8 83.4 85.0 84.6 86.0 86.9 84.8 84.9 83.2 2 Intermediate materials for food manufacturing and feeds. Source: Department of Labor, Bureau of Labor Statistics. 368 Foodstuffs and feed- Other Total Fuel Other etirffc 289 332 33.0 33.4 33 2 33.6 33 2 32.9 335 345 35 0 35.9 37 2 39 0 312 365 368 37.1 37 8 39 7 408 408 42 7 45 2 53 3 42 5 600 631 659 710 794 891 967 1000 1004 105 9 109 0 110 3 114 5 1201 125 4 127 7 128 2 127 3 127.4 127 4 127.8 127 7 127.6 127 5 127 5 127.5 127 8 128 3 128 2 129.0 128.S 128.7 128.3 128.1 127.7 127.9 127.4 127.9 127.9 128.3 128.1 517 568 618 65 8 69 3 72 9 80 2 89 9 969 100 0 1018 1041 104 4 105 6 107 7 113 7 1181 119 4 1214 118 8 118.5 118 7 118.9 119 4 119.2 119.5 119 4 119.7 1201 120.2 120 4 120.9 121.1 121.3 121.4 121.3 121.4 121.1 121.5 121.6 121.7 121.8 121.8 304 311 331 313 31.8 339 416 38.8 38.4 37 9 38.6 37 5 36.6 39 2 42 7 40 3 40.9 441 35 2 45 2 36 0 ' 46 1 399 545 614 616 63 4 65 5 73 4 85.9 95.3 103 0 100 0 101.3 103 5 95 8 87.7 93 7 96 0 103 1 108 9 1012 106.5 106.8 105 6 103.0 104 7 101.2 101.4 110 2 115.3 124 8 116.7 110 5 112.8 104.1 101.2 100.8 102.1 99.8 99.5 99.1 98.0 99.6 99.7 97.7 7.5 8.9 8.8 8.8 9.0 9.0 9.3 8.9 89 9.5 45.1 48.8 40.5 43.4 50.2 47.3 42.3 42.3 38 4 37.6 39.2 515 72 6 76 4 11A 76 8 77 5 87 3 100.0 104 6 103 9 100 0 1018 104 7 94 8 93 2 96 2 106 1 1112 1131 105 5 113 5 113.9 115 3 115.1 117 0 115.6 115.4 113 2 110.8 110 5 108.5 107 9 107.2 107.3 109.9 109.0 108.7 107.4 105.1 102.7 102.9 102.5 101.6 101,9 211 21.6 22 5 23 8 24 7 27.0 34 3 441 43 7 48.2 517 57 5 69.6 84.6 1018 100 0 100.7 102 2 96 9 81.6 87 9 85 5 93 4 101 5 94 6 97.5 97.6 94 9 91.0 92 5 88.0 88.3 103 4 112.9 127 8 116.4 107.1 110.8 97.9 92.3 92.2 94.2 91.5 92.3 93.0 91.3 93.8 94.3 91.3 10.1 10.2 10.4 10.5 10.5 10.4 10.5 10.5 10 6 10 9 11.3 11.5 12 0 13.8 15 7 16.8 18 6 24 8 30 6 34.5 42 0 48.2 57.3 69.4 848 100 0 105.1 1051 102 7 92.2 841 821 85 3 84 8 82 8 86.8 87.3 86 0 84.7 84 8 83.0 86.8 80.4 81.7 81.2 85.2 89.8 88.5 85.6 84.8 81.7 84.0 82.5 81.4 81.8 78.0 77.7 82.0 85.4 24.0 26.7 24.3 27.8 32.0 27.8 26.6 26.1 27 5 28.6 28.2 271 28.1 26.9 27 2 27.1 26 7 27.2 27 7 28 3 26.5 27.1 28 4 291 294 32 3 42 9 545 500 54.9 56 3 619 75.5 91.8 109 8 100 0 98.8 1010 94 3 76.0 88.5 85 9 95 8 107 3 97 5 101.0 100.8 97 6 92.7 94 6 89.0 87.8 112 0 124.8 146.3 128.3 113.2 120.4 101.C 92.2 94.2 95.9 92.4 94.8 95.6 95.4 99i 97.6 90.1 TABLE B-62.—Producer price indexes by stage of processing, special groups, 1974-91 [1982=100] Finished goods Intermediate materials, supplies, and components Crude materials for further processing Excluding foods and energy Year or month Total Foods Energy Total Consumer Capital excludequiping ment and energy Total Foods and feeds* Energy Other Total Foodstuffs and feedstuffs Energy Other 1974 52.6 64.4 26.2 53.6 50.5 55.5 52.5 83.6 33.1 54.0 61.4 76.4 27.8 83.3 1975 1976 1977 1978 1979 58.2 60.8 64.7 69.8 77.6 69.8 69.6 73.3 79.9 87.3 30.7 34.3 39.7 42.3 57.1 59.7 63.1 66.9 71.9 78.3 58.2 62.1 66.1 71.3 77.5 60.6 63.7 67.3 72.2 78.8 58.0 60.9 64.9 69.5 78.4 81.6 77.4 79.6 84.8 94.5 38.7 41.5 46.8 49.1 61.1 60.2 63.8 67.6 72.5 80.7 61.6 63.4 65.5 73.4 85.9 77.4 76.8 77.5 87.3 100.0 33.3 35.3 40.4 45.2 54.9 69.3 80.2 79.8 87.8 106.2 1980 1981 1982 1983 1984 96.1 100.0 101.6 103.7 92.4 97.8 100.0 101.0 105.4 85.2 101.5 100.0 95.2 91.2 87.1 94.6 100.0 103.0 105.5 85.8 94.6 100.0 102.8 105.2 87.8 94.6 100.0 103.1 105.7 90.3 98.6 100.0 100.6 103.1 105.5 104.6 100.0 103.6 105.7 84.9 100.5 100.0 95.3 95.5 90.3 97.7 100.0 101.6 104.7 95.3 103.0 100.0 101.3 103.5 104.6 103.9 100.0 101.8 104.7 73.1 97.7 100.0 98.7 98.0 113.1 111.7 100.0 105.3 111.7 1985 1986 1987 1988 1989 104.7 103.2 105.4 108.0 113.6 104.6 107.3 109.5 112.6 118.7 87.6 63.0 61.8 59.8 65.7 108.1 110.6 113.3 117.0 122.1 107.5 109.7 111.7 114.3 118.8 108.4 111.1 114.2 118.5 124.0 102.7 99.1 101.5 107.1 112.0 97.3 96.2 99.2 109.5 113.8 92.6 72.6 73.0 70.9 76.1 105.2 104.9 107.8 115.2 120.2 95.8 87.7 93.7 96.0 103.1 94.8 93.2 96.2 106.1 111.2 93.3 71.8 75.0 67.7 75.9 104.9 103.1 115.7 133.0 137.9 1990 1991 2 119.2 121.7 124.4 124.2 75.0 78.1 126.6 131.0 122.9 126.7 128.8 133.7 114.5 114.4 113.3 111.1 85.5 85.0 120.9 121.4 108.9 101.2 113.1 105.5 85.9 80.4 136.3 128.1 1990:Jan Feb Mar 117.6 117.4 117.2 117.2 117.7 117.8 123.9 124.6 124.4 123.2 124.5 124.2 72.7 69.2 67.0 68.0 68.5 67.6 124.8 125.2 125.4 125.6 125.9 126.4 121.2 121.6 121.9 122.2 122.2 122.5 127.0 127.4 127.5 127.7 128.1 128.8 113.4 112.5 112.4 112.8 113.1 113.1 113.2 111.0 111.4 112.5 115.9 115.5 83.7 79.0 77.4 77.7 78.0 79.0 120.0 120.0 120.3 120.6 120.7 120.5 106.5 106.8 105.6 103.0 104.7 101.2 113.5 113.9 115.3 115.1 117.0 115.6 82.3 82.6 78.6 73.1 74.5 69.4 132.1 131.3 134.2 137.8 138.8 137.8 118.2 119.3 120.4 122.3 122.9 122.0 124.9 124.9 124.2 124.6 125.0 124.2 68.1 74.2 82.0 88.1 89.5 84.7 126.7 126.7 126.7 128.2 128.5 128.8 122.8 123.1 122.9 124.5 124.7 124.9 129.0 128.9 129.0 130.3 130.8 131.2 113.1 114.4 116.3 117.9 117.9 116.7 116.0 114.9 113.9 113.0 111.2 111.5 101.4 115.4 110.2 113.2 115.3 110.8 124.8 110.5 116.7 ,108.5 110.5 107.9 69.7 87.2 98.5 117.0 104.1 93.5 138.2 140.4 140.1 137.8 134.6 132.8 122.3 121.4 120.9 121.1 121.8 121.9 124.8 124.6 125.2 125.3 125.8 125.3 82.6 78.4 75.5 75.7 78.0 78.4 129.9 130.2 130.3 130.5 130.5 130.8 125.9 126.1 126.2 126.2 126.5 126.5 132.3 132.7 132.8 133.1 132.9 133.3 116.4 115.5 114.2 113.9 114.0 114.3 110.4 110.7 111.6 111.5 110.8 110.8 91.5 87.4 82.7 81.7 83.2 84.8 122.4 122.2 121.8 121.6 121.4 121.4 112.8 104.1 101.2 100.8 102.1 99.8 107.2 107.3 109.9 109.0 108.7 107.4 97.6 83.1 77.0 76.7 79.2 77.1 133.5 133.4 132.2 132.7 131.4 126.8 121.6 121.7 121.3 122.3 122.3 121.9 124.5 123.3 122.7 123.0 123.1 122.2 77.5 78.8 79.1 78.3 78.2 76.6 131.0 131.0 130.5 132.4 132.5 132.8 126.6 126.5 126.1 127.9 127.9 128.0 133.7 133.7 133.2 135.2 135.3 135.7 114.0 114.2 114.5 114.1 114.1 113.7 110.0 111.5 111.4 111.8 111.4 111.4 84.4 85.7 86.6 84.6 84.6 82.8 121.1 120.9 121.0 121.1 121.1 121.0 99.5 99.1 98.0 99.6 99.7 97.7 105.1 102.7 102.9 102.5 101.6 101.9 78.3 79.0 77.1 80.1 81.1 77.9 125.9 126.0 125.8 125.0 122.8 122.2 B July Aug Sept.. Oct Nov Dec 1991: Jan.... Feb.... Mar... June.. July 2 Aug Sept. Oct Nov Dec 1 2 120.6 78.4 120.8 85.3 93.6 121.4 122.0 100.1 122.2 99.7 93.7 122.08 Intermediate materials for food manufacturing and feeds. Data have been revised through August 1991 to reflect the availability of late reports and corrections by respondents. All data are subject to revision 4 months after original publication. Source: Department of Labor, Bureau of Labor Statistics. 369 TABLE B-63.—Producer price indexes for major commodity groups, 1950-91 [1982=100] Farm products and processed foods and feeds Year or month Total 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982.... 1983 1984 1985 1986.... 1987 1988 1989 1990 1991 2 1990- Jan Feb Mar . . . . . Apr itfay::..:::::::::::::::::::::::::::::: June... . July Aug Sept Oct Nov. Dec 1991- J