View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

ECONOMIC]
OF THE PRi

Transmitted to the

less

January 196

Togftfctfef With
THE ANNIJAL REPORT
COUNCIL OF ^ O N O M I C ADVISERS




8H-1464 1M 8-61




Economic Report
of the President

Transmitted to the Congress
January 1962
TOGETHER WITH

THE ANNUAL REPORT
OF THE

COUNCIL OF ECONOMIC ADVISERS

UNITED STATES GOVERNMENT PRINTING OFFICE
WASHINGTON 1962







For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington 25, D.C. - Price $1.25

LETTER OF TRANSMITTAL
T H E WHITE HOUSE

Washington, B.C., January 20,1962
The Honorable the PRESIDENT OF THE SENATE,
The Honorable the SPEAKER OF THE HOUSE OF REPRESENTATIVES.

SIRS : I am presenting herewith my Economic Report to the Congress,
as required under the Employment Act of 1946.
In preparing this Report, I have had the advice and assistance of the
Council of Economic Advisers, who, in turn, have had the assistance of
members of the Cabinet and heads of independent agencies.
Together with this Report, I am transmitting the Annual Report of the
Council of Economic Advisers, which was prepared in accordance with
Section 4(c) (2) of the Employment Act of 1946.
Respectfully,




III




CONTENTS
ECONOMIC REPORT OF THE PRESIDENT
Page

PROGRESS IN 1961
GOALS OF ECONOMIC POLICY

Our
Our
Our
Our

Goal
Goal
Goal
Goal

of Full and Sustained Prosperity Without Inflation.
of Economic Growth
of Equal Opportunity
of Basic Balance in International Payments

POLICIES FOR 1962

Prospects for 1962
Budgetary Policy
Monetary and Credit Policies
Balance of Payments
Prices and Wages

4
7

8
9
9
10
11

11
11
13
13
16

MEASURES FOR A STRONGER ECONOMY

17

A Program for Sustained Prosperity
Strengthening the Financial System
Strengthening Our Manpower Base
Strengthening Our Tax System

17
21
24
25

ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS *
Introduction

37

CHAPTER 1. TOWARD FULL RECOVERY
PART I:
OBJECTIVES, PROGRESS, AND PROSPECTS
PART II: POLICIES FOR MAXIMUM EMPLOYMENT AND PRODUCTION
APPENDIX: PROGRAM FOR ECONOMIC RECOVERY AND GROWTH . .
CHAPTER 2. ECONOMIC GROWTH
CHAPTER 3. T H E BALANCE OF INTERNATIONAL PAYMENTS
CHAPTER 4. PRICE BEHAVIOR IN A FREE AND GROWING ECONOMY. .
APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OF
THE COUNCIL OF ECONOMIC ADVISERS DURING 1961
APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EMPLOYMENT, AND PRODUCTION

39
39

*For a detailed table of contents of the Council's Report, see page 33.




68
97
108
144
167
191
201







ECONOMIC REPORT
OF THE PRESIDENT




To the Congress of the United States:
I report to you under the provisions of the Employment Act of 1946 at
a time when
—the economy has regained its momentum;
—the economy is responding to the Federal Government's efforts,
under the Act, "to promote maximum employment, production,
and purchasing power;"
—the economy is again moving toward the central objective of the
Act—to afford "useful employment opportunities, including
self-employment, for those able, willing, and seeking to work."
My first Economic Report is an appropriate occasion to re-emphasize
my dedication to the principles of the Employment Act. As a declaration of national purpose and as a recognition of Federal responsibility, the Act has few parallels in the Nation's history. In passing the
Act by heavy bipartisan majorities, the Congress registered the consensus of the American people that this Nation will not countenance the
suffering, frustration, and injustice of unemployment, or let the vast
potential of the world's leading economy run to waste in idle manpower,
silent machinery, and empty plants.
The framers of the Employment Act were wise to choose the promotion of "maximum employment, production, and purchasing power"
as the keystone of national economic policy. They were confident that
these objectives can be effectively promoted "in a manner calculated to
foster and promote free competitive enterprise and the general welfare."
They knew that our pursuit of maximum employment and production
would be tempered with compassion, with justice, and with a concern for
the future. But they knew also that the other standards we set for our
economy are easier to meet when it is operating at capacity. A full
employment economy provides opportunities for useful and satisfying
work. It rewards enterprise with profit. It generates saving for the
future and transforms it into productive investment. It opens doors for
the unskilled and underprivileged and closes them against want and
frustration. The conquest of unemployment is not the sole end of
economic policy, but it is surely an indispensable beginning.
The record of the economy since 1946 is a vast improvement over
the prolonged mass unemployment of the 1930's. The Employment
Act itself deserves no small part of the credit. Under the mandate and




procedures of the Act, both Congress and the Executive have kept the
health of the national economy and the economic policies of the Government under constant review. And the national commitment to high
employment has enabled business firms and consumers to act and to
plan without fear of another great depression.
Though the postwar record is free of major depression, it is marred
by four recessions. In the past fifteen years, the economy has spent a
total of seven years regaining previous peaks of industrial production.
In two months out of three, 4 percent or more of those able, willing,
and seeking to work have been unable to find jobs. We must do better
in the 1960's.
To combat future recessions—to keep them short and shallow if they
occur—I urge adoption of a three-part program for sustained prosperity, which will (1) provide stand-by power, subject to congressional
veto, for temporary income tax reductions, (2) set up a stand-by program of public capital improvements, and (3) strengthen the unemployment insurance system.
These three measures will enable the Government to counter swings in
business activity more promptly and more powerfully than ever before.
They will give new and concrete meaning to the declaration of policy
made in the Employment Act. They will constitute the greatest step
forward in public policy for economic stability since the Act itself.
As the Employment Act prescribes, I shall in this Report review
"economic conditions" in the United States in 1961 and "current and
foreseeable economic trends in the levels of employment, production,
and purchasing power;" set forth "the levels of employment, production,
and purchasing power obtaining in the United States and such levels
needed to carry out the policy" of the Act; and present my economic
program and legislative recommendations for 1962.
PROGRESS IN

1961

Last January the economy was in the grip of recession. Nearly
7 percent of the labor force was unemployed. Almost one-fifth of manufacturing capacity lay idle. Actual output was running $50 billion
(annual rate) short of the economy's great potential. These figures
reflected not only the setback of 1960-61 but the incomplete recovery
from the recession of 1957-58. The task before us was to recover not
from one but from two recessions.




At the same time, gold was leaving the country at a rate of more
than $300 million a month. In the three previous years, the Nation had
run a total deficit of $10 billion in its basic international accounts.
These large and persistent deficits had weakened confidence in the dollar.
In my message to the Congress on February 2, I stated that this
Administration's "realistic aims for 1961 are to reverse the downtrend in our economy, to narrow the gap of unused potential, to abate
the waste and misery of unemployment, and at the same time to maintain reasonable stability of the price level." In a message on the balance
of payments on February 6, I added a fifth aim, to restore confidence
in the dollar and to reduce the deficit in international payments.
These five aims for 1961 have been achieved:
(1) The downtrend was reversed. Gross national product (GNP)
grew from $501 billion (annual rate) in the first quarter to a record
rate of $542 billion in the last quarter. In July, industrial production
regained its previous peak, and by the end of the year it showed a total
rise of 13 percent.
(2) These gains brought into productive use nearly half the plant
capacity which was idle at the beginning of the year. The growth of
GNP narrowed the over-all gap of unused potential from an estimated
10 percent to 5 percent.
(3) Unemployment dropped from 6.8 to 6.1 percent of the labor
force. The number of areas of substantial labor surplus declined from
101 in March to 60 in December.
(4) Price stability has been maintained during the recovery. Since
February, wholesale prices have fallen slightly, and consumer prices
have risen only one-half of 1 percent.
(5) Confidence in the dollar has been restored. Our gold losses were
cut from $1.7 billion in 1960 to less than $0.9 billion in 1961. The
deficit in 1961 in our basic international transactions was about onethird as large as in 1960.
The "Program To Restore Momentum to the American Economy"
which I proposed to the Congress on February 2 resulted in prompt
legislation to
—extend unemployment insurance benefits on a temporary basis;
—make Federal aid available, through the States, to dependent
children of the unemployed;
—liberalize social security benefits;
—promote homebuilding under the Housing Act of 1961;
—raise the minimum wage and extend it to more workers;




—provide Federal aid under the Area Redevelopment Act, to
revitalize the economies of areas with large and persistent
unemployment.
Prompt executive action was taken to accelerate Federal purchases
and procurement, highway fund distributions, tax refunds, and veterans'
life insurance dividends. The Administration raised farm price supports, expanded the food distribution program, and established eight
pilot food stamp programs.
Monetary and credit policies responded to the dual demands of economic recovery and the balance of payments. On the one hand, the
Federal Reserve System maintained general monetary ease; Federal
Reserve open market operations, complemented by Treasury management of the public debt and of government investment accounts, assured an ample supply of credit which served to counter upward
pressures on long-term interest rates; reduction of FHA ceiling rates,
supported by FNMA mortgage purchases, eased mortgage credit and
stimulated homebuilding; and the Small Business Administration made
its credit more widely available at lower cost. On the other hand, both
monetary and debt management policies countered downward pressures
on short-term rates, with a view to checking the outflow of funds to
money markets abroad.
The Federal Budget played its proper role as a powerful instrument
for promoting economic recovery. The measures to relieve distress and
restore economic momentum expanded purchasing power early in the
year. Subsequently, major increases in expenditure for national security and space programs became necessary. In a fully employed economy, these increases would have required new tax revenues to match.
But I did not recommend tax increases at this point because they would
have cut into private purchasing power and retarded recovery.
The increase of GNP—$41 billion (annual rate) from the first to the
fourth quarter—reflected increased purchases of goods and services by
consumers, business, and governments:
—Consumers accounted for nearly half. As household incomes rose,
consumer expenditure expanded by $18 billion.
—Residential construction and business expenditures for fixed investment responded promptly to the recovery and to favorable credit
conditions. By the end of the year, they had risen by $8 billion.
—Business stopped liquidating inventories and started rebuilding them.
This shift, which occurred early in the year and helped get recovery
off to a flying start, added $8 billion to the demand for goods and
services by the fourth quarter.




—Federal, State, and local government purchases rose by $8 billion.
—Although exports were somewhat higher in the fourth quarter than
in the first, the rise in imports in response to recovery lowered net
exports by $ 1 billion.
Labor, business, and farm incomes rose as the economy recovered.
Wages and salaries increased by $19 billion (annual rate) from the
first quarter to the fourth. Corporate profits after taxes recovered
sharply, receiving about 15 percent of the gains in GNP. With the
help of new programs, farm operators5 net income from farming increased from $12 billion in 1960 to $13 billion in 1961, and net income
per farm rose by $350. The after-tax incomes of American consumers
increased by $21 billion, or $92 per capita, during the year. Since consumer prices rose by only one-half of 1 percent, these gains in income
were almost entirely gains in real purchasing power.
One million jobs were added by nonagricultural establishments during the expansion. But employment did not keep pace with production
and income. Productivity rose rapidly as capacity was more fully and
efficiently utilized. And more workers on part-time jobs were able to
work full time.
The record of 1961 demonstrated again the resiliency of the U.S.
economy with well-timed support from government policy. Business
responded to the expansion of purchasing power by producing more
goods and services, not by raising prices. Indeed, the record of price
stability in three quarters of expansion was better than in the three preceding quarters of recession. The rates of advance of production and
income compared favorably with the two preceding periods of expansion. Production grew rapidly without straining capacity or encountering bottlenecks.
As 1961 ended, actual output was still $25 to $30 billion short of
potential, and unemployment was far too high. But much of the
industrial manpower, machinery, and plant that lay idle a year ago
had been drawn back into productive use. And the momentum of the
1961 recovery should carry the economy further toward full employment
and full production in 1962.
GOALS OF ECONOMIC POLICY

Though we may take satisfaction with our progress to date, we dare
not rest content. The unfinished business of economic policy includes
(1) the achievement of full employment and sustained prosperity without inflation, (2) the acceleration of economic growth, (3) the extension
of equality of opportunity, and (4) the restoration of balance of pay-




7

merits equilibrium. Economic policy thus confronts a demanding
assignment, but one which can and will be met within the framework of
a free economy.
Our Goal of Full and Sustained Prosperity Without Inflation
Recovery has carried the economy only part of the way to the goal
of "maximum production, employment, and purchasing power." The
standing challenge of the Employment Act is not merely to do better,
but to do our best—the "maximum." Attainment of that maximum
in 1963 would mean a GNP of approximately $600 billion, wages and
salaries of over $320 billion, and corporate profits of as much as $60
billion, all in 1961 prices. The material gains are themselves staggering,
but they are less important than the new sense of purpose and the new
opportunities for improvement of American life that could be realized
by "maximum" use of the productive capacity now lying idle and the
capacity yet to be created.
Involuntary unemployment is the most dramatic sign and disheartening consequence of underutilization of productive capacity. It translates into human terms what may otherwise seem merely an abstract
statistic. We cannot afford to settle for any prescribed level of unemployment. But for working purposes we view a 4 percent unemployment rate as a temporary target. It can be achieved in 1963, if
appropriate fiscal, monetary, and other policies are used. The achievable rate can be lowered still further by effective policies to help the
labor force acquire the skills and mobility appropriate to a changing
economy. We must also continue the cooperative effort, begun with
the Area Redevelopment Act of 1961, to bring industry to depressed
areas and jobs to displaced workers. Ultimately, we must reduce
unemployment to the minimum compatible with the functioning of
a free economy.
We must seek full recovery without endangering the price stability
of the last 4 years. The experience of the past year has shown that
expansion without inflation is possible. With cooperation from labor
and management, I am confident that we can go on to write a record
of full employment without inflation.
The task of economic stabilization does not end with the achievement
of full recovery. There remains the problem of keeping the economy
from straying too far above or below the path of steady high employment. One way lies inflation, and the other way lies recession. Flexible and vigilant fiscal and monetary policies will allow us to hold the
narrow middle course.




8

Our Goal of Economic Growth
While we move toward full and sustained use of today's productive
capacity, we must expand our potential for tomorrow. Our postwar
economic growth—though a step ahead of our record for the last halfcentury—has been slowing down. We have not in recent years maintained the 4 to 4 / 2 percent growth rate which characterized the early
postwar period. We should not settle for less than the achievement of
a long-term growth rate matching the early postwar record. Increasing
our growth rate to 4 */% percent a year lies within the range of our capabilities during the 1960's. It will lay the groundwork for meeting both
our domestic needs and our world responsibilities.
In November of last year we joined with our 19 fellow members of
the Organization for Economic Cooperation and Development in setting a common target for economic growth. Together we pledged ourselves to adopt national and international policies aimed at increasing
the combined output of the Atlantic Community by 50 percent between
1960 and 1970. The nations of the West are encouraged and enlivened
by America's determination to make its full contribution to this joint
effort.
We can do our share. In the mid-1960's, the children born in 1943
and after will be arriving at working age. The resulting rapid growth
in our labor force offers us an opportunity, not a burden—provided that
we deliver not only the jobs but also the research, the training, and the
capital investment to endow our new workers with high and rising productivity as they enter economic life.
Our Goal of Equal Opportunity
Increasingly in our lifetime, American prosperity has been widely
shared and it must continue so. The spread of primary, secondary, and
higher education, the wider availability of medical services, and the improved postwar performance of our economy have bettered the economic
status of the poorest families and individuals.
But prosperity has not wiped out poverty. In 1960, 7 million families
and individuals had personal incomes lower than $2,000. In part, our
failure to overcome poverty is a consequence of our failure to operate
the economy at potential. The incidence of unemployment is always
uneven, and increases in unemployment tend to inflict the greatest income loss on those least able to afford it. But there is a claim on our
conscience from others, whose poverty is barely touched by cyclical
improvements in general economic activity. To an increasing extent,




the poorest families in America are those headed by women, the elderly,
nonwhites, migratory workers, and the physically or mentally handicapped—people who are shortchanged even in time of prosperity.
Last year's increase in the minimum wage is evidence of our concern
for the welfare of our low-income fellow citizens. Other legislative
proposals now pending will be particularly effective in improving the
lot of the least fortunate. These include (1) health insurance for the
aged, financed through the social security system, (2) Federal aid for
training and retraining our unemployed and underemployed workers,
(3) the permanent strengthening of our unemployment compensation
system, and (4) substantial revision in our public welfare and assistance
program, stressing rehabilitation services which help to restore families
to independence.
Public education has been the great bulwark of equality of opportunity in our democracy for more than a century. Our schools have
been a major means of preventing early handicaps from hardening
into permanent ignorance and poverty. There can be no better investment in equity and democracy—and no better instrument for economic
growth. For this reason, I urge action by the Congress to provide
Federal aid for more adequate public school facilities, higher teachers'
salaries, and better quality in education. I urge early completion of
congressional action on the bill to authorize loans for construction
of college academic facilities and to provide scholarships for able students who need help. The talent of our youth is a resource which
must not be wasted.
Finally, I shall soon propose to the Congress an intensive program
to reduce adult illiteracy, a handicap which too many of our fellow
citizens suffer because of inadequate educational opportunities in the
past.
Our Goal of Basic Balance in International Payments
Persistent international payments deficits and gold outflows have made
the balance of payments a critical problem of economic policy. We must
attain a balance in our international transactions which permits us to
meet heavy obligations abroad for the security and development of the
free world, without continued depletion of our gold reserves or excessive
accumulation of short-term dollar liabilities to foreigners. Simultaneously, we must continue to reduce barriers to international trade and
to increase the flow of resources from developed to developing countries.
To increase our exports is a task of highest priority, and one which gives
heightened significance to the maintenance of price stability and the
rapid increase of productivity at home.




10

POLICIES FOR

1962

Prospects for 1962

The Nation will make further economic progress in 1962. Broad
advances are in prospect for the private economy. The gains already
achieved have set the stage for further new records in output, employment, personal income, and profits. Rising household incomes brighten
the outlook for further increases in consumer buying, particularly of
durable goods. Business firms will need larger inventories to support
higher sales, and improved profits and expanded markets will lead
to rising capital outlays. The outlays of Federal, State, and local governments will continue to increase as we work for peace and progress.
In the first half of 1962, we may therefore expect vigorous expansion
in production and incomes, with GNP increasing to a range of $565-570
billion in the second quarter, employment continuing to rise, and the
unemployment rate falling further.
In the second half of 1962, business investment in plant and equipment
should pick up speed and help maintain the momentum of progress
toward full employment—and toward future economic growth. Rising
output should push factory operating rates closer to capacity and raise
profits still further above previous records. To these incentives for
capital expenditures will be added Treasury liberalization of depreciation guidelines and, if the Congress acts favorably, the 8 percent tax
credit for machinery and equipment outlays.
For 1962 as a whole, GNP is expected to rise approximately $50
billion above the $521 billion level of 1961. This would be another
giant stride toward a fully employed economy. The record of past
recoveries and of the U.S. economy's enormous and growing potential
indicates that this is a gain we can achieve. In the perspective of our
commitments both to our own expanding population and to the world,
it is a gain we need to achieve.
Budgetary Policy
Prosperity shrinks budgetary deficits, as recessions create them.
Budget revenues are expected to rise 13 percent between the fiscal
years 1962 and 1963; revenues rose 14^4 percent between 1959 and
1960 in the previous upswing. Such sensitivity of budget revenues to
business activity is desirable because it moderates swings in private
purchasing power.
I have submitted to the Congress a Budget which will balance in fiscal
1963 as prosperity generates sharply rising tax revenues. The Budget
621876 O-62-2




is appropriately paced to the expected rate of economic expansion. It
will give less stimulus to business activity as private demand for goods and
services grows stronger and shoulders more of the responsibility for continued gains. But the shift will be moderate and gradual. We have
learned from the disappointing 1959-60 experience that an abrupt and
excessively large swing in the Budget can drain the vigor from the private
economy and halt its progress, especially if a restrictive monetary policy
is followed simultaneously. This will not be repeated. Budget outlays will rise by $3^2 billion from fiscal 1962 to fiscal 1963, whereas
they fell by more than that amount from fiscal 1959 to fiscal 1960.
The 1963 Budget starts from a much smaller deficit and will move
to a moderate surplus as the recovery strengthens.
With support from increased government expenditures and other
government policies, the momentum of the recovery is expected to raise
GNP to $570 billion for 1962 as a whole. Prompt enactment of the
proposed tax credit for investment would give the economy further
strength. Economic expansion at the expected pace will yield $93.0
billion in Budget revenues in fiscal 1963 to cover $92.5 billion in Budget
expenditures. If private demands for goods and services should prove
to be weaker in 1962 than now anticipated, less private purchasing power
will flow into taxes, and Budget revenues will fall short of the $93.0
billion figure. If private demands are stronger, tax receipts will rise
further and Budget revenues will exceed expectations.
A surplus of $4.4 billion in fiscal 1963 is expected in the national income accounts budget—a budget constructed to measure the direct
impact of Federal expenditures and receipts on the flow of total spending. The surplus would be several billion dollars higher if the economy
were operating steadily at a level high enough to hold unemployment
to 4 percent.
Either surplus—prospective or potential—is both a challenge and an
opportunity. A government surplus is a form of saving—an excess of
income over expenditure. Like any other form of saving, it releases
labor and other productive resources which can be used to create new investment goods—plant, equipment, or houses. If investment demand is
not strong enough to use the resources and labor, they will be wasted in
unemployment and idle capacity, and the surplus itself will not be realized.
But if the necessary investment demand is present, the surplus will make
possible the acceleration of economic growth by enlarging the future
productive power of the economy. The Government is seeking to help
American industry to meet this challenge and seize this opportunity,
through such measures as the 8 percent investment tax credit and revisions of depreciation guidelines.




12

We face 1962 with optimism but not complacency. If private demand shows unexpected strength, public policy must and will act to
avert the dangers of rising prices. If demand falls short of current
expectations, more expansionary policies will be pursued. In 1962,
vigilance and flexibility must be the guardians of economic optimism.
Monetary and Credit Policies
Monetary, credit, and debt management policies can also help to
assure that productive outlets exist for the funds that the American people save from prosperity incomes. The balance foreseen in the Budget
for fiscal year 1963, and the surplus which would arise at full employment, both indicate that fiscal policy is assuming a large share of the burden of forestalling inflationary excesses of demand. With monetary and
related policies relieved of a substantial part of this burden, they can
more effectively be used to assure a flow of investment funds which will
transform the economy's present capacity to save into future capacity
to produce.
At the same time, monetary and debt management policies must
continue to protect the balance of international payments against outflows of short-term capital. As in 1961, domestic expansion and the
balance of payments confront these policies with a dual task, requiring
continued ingenuity in technique and flexibility in emphasis.
Balance of Payments
The program launched last year to reduce our payments deficit and
maintain confidence in the dollar will, I am sure, show further results
in 1962. I am hopeful that the target of reasonable equilibrium in
our international payments can be achieved within the next two years;
but this will require a determined effort on the part of all of us— government, business and labor. This effort must proceed on a number of
fronts.
Export expansion. An increase in the U.S. trade surplus is of the
first importance. If we are to meet our international responsibilities,
we must increase exports more rapidly than the increase in imports
which accompanies our economic growth.
Our efforts to raise exports urgently require that we negotiate a reduction in the tariff of the European Common Market. I shall shortly
transmit to the Congress a special message elaborating the details of
the proposed Trade Expansion Act of 1962 and explaining why I
believe that a new trade policy initiative is imperative this year.




13

To encourage American businessmen to become more export-minded,
we have inaugurated a new export insurance program under the leadership of the Export-Import Bank, and we have stepped up our export
promotion drive by improving the commercial services abroad of the U.S.
Government, establishing trade centers abroad, planning trade fairs, improving the trade mission program, and working with business firms on
export opportunities through field offices of the Department of Commerce and the Small Business Administration. Foreign travel to the
United States, which returns dollars to our shores, is now being promoted through the first Federal agency ever created for this purpose.
Prices and productivity. Our export drive will founder if we cannot
keep our prices competitive in world markets. Though our recent price
performance has been excellent, the improving economic climate of
1962 will test anew the statesmanship of our business and labor leaders.
I believe that they will pass the test; our Nation today possesses a new
understanding of the vital link between our level of prices and our
balance of payments.
In the long run, the competitive position of U.S. industry depends
on a sustained and rapid advance in productivity. In this, the interests of economic recovery, long-run growth, and the strength of
the dollar coincide. Modernization and expansion of our industrial
plant will accelerate the advance of productivity.
Foreign investment. To place controls over the flow of private
American capital abroad would be contrary to our traditions and our
economic interests. But neither is there justification for special tax
incentives which stimulate the flow of U.S. investment to countries now
strong and economically developed, and I again urge the elimination
of these special incentives.
The new foreign trade program which I am proposing to the Congress will help to reduce another artificial incentive to U.S. firms to
invest abroad. The European Common Market has attracted American
capital, partly because American businessmen fear that they will be
unable to compete in the growing European market unless they build
plants behind the common tariff wall. We must negotiate down the
barriers to trade between the two great continental markets, so that the
exports of our industry and agriculture can have full opportunity to
compete in Europe.
Governmental expenditures abroad. Military expenditures form by
far the greater part of our governmental outlays abroad. We are
discussing with certain of our European allies the extent to which they
can increase their own military procurement from the United States
to offset our dollar expenditures there. As a result, the net cost to our




14

balance of payments is expected to be reduced during the coming year,
in spite of increased deployment of forces abroad because of the Berlin
situation.
To curtail our foreign aid programs in order to strengthen our balance
of payments would be to sacrifice more than we gain. But we can cut
back on the foreign currency costs of our aid programs, and thus reduce
the burden on our balance of payments. A large percentage of our
foreign aid is already spent for procurement in the United States; this
proportion will rise as our tightened procurement procedures become
increasingly effective.
We have sought to induce other advanced countries to undertake a
larger share of the foreign aid effort. We will continue our efforts
through the Development Assistance Committee of the Organization for
Economic Cooperation and Development to obtain a higher level of
economic assistance by other industrial nations to the less developed
countries.
Short-term capital movements. Outflows of volatile short-term funds
added to the pressures on the dollar in 1960. Our policies in 1961 have
diminished the dangers of disruptive movements of short-term capital.
For the first time in a generation, the Treasury is helping to stabilize
the dollar by operations in the international exchange markets. The
Federal Reserve and the Treasury, in administering their monetary
policy and debt management responsibilities, have sought to meet the
needs of domestic recovery in ways which would not lead to outflows
of short-term capital.
During the past year, we have consulted periodically with our principal financial partners, both bilaterally and within the framework of
the OECD. These consultations have led to close cooperation among
fiscal and monetary authorities in a common effort to prevent disruptive
currency movements.
Strengthening the international monetary system. The International
Monetary Fund is playing an increasingly important role in preserving
international monetary stability. The reserve strength behind the dollar
includes our drawing rights on the Fund, of which $1.7 billion is automatically available under current practices of the Fund. An additional
$4.1 billion could become available under Fund policies, insofar as the
Fund has available resources in gold and usable foreign currencies.
Recently, the Fund has diversified its use of currencies in meeting drawings by member countries, relying less heavily on dollars and more
heavily on the currencies of countries with payments surpluses. However, the Fund's regular holdings of the currencies of some important




l

5

industrial countries are not adequate to meet potential demands for
them.
In a message to the Congress last February, I said: "We must now, in
cooperation with other lending countries, begin to consider ways in
which international monetary institutions—especially the International
Monetary Fund—can be strengthened and more effectively utilized, both
in furnishing needed increases in reserves, and in providing the flexibility
required to support a healthy and growing world economy."
We have now taken an important step in this direction. Agreement
has been reached among ten of the major industrial countries to lend
to the Fund specified amounts of their currencies when necessary to
cope with or forestall pressures which may impair the international
monetary system. These stand-by facilities of $6 billion will be a
major defense against international monetary speculation and will
powerfully reinforce the effectiveness of the Fund. They will provide
resources to make our drawing rights in the Fund effective, should we
need to use them. Moreover, the U.S. stand-by commitment of $2
billion will augment the resources potentially available through the
Fund to other participants in the agreement, when our balance of payments and reserve positions are strong. I shall shortly submit a request
to Congress for appropriate enabling legislation.
Prices and Wages
Prices and production need not travel together. A number of foreign
countries have experienced both rapid growth and stable prices in recent
years. We ourselves, in 1961, enjoyed a stable price level during a brisk
economic recovery.
While rising prices will not necessarily accompany the expansion we
expect in 1962, neither can we rely on chance to keep our price level
stable. Creeping inflation in the years 1955-57 weakened our international competitive position. We cannot afford to allow a repetition of
that experience.
We do not foresee in 1962 a level of demand for goods and services
which will strain the economy's capacity to produce. Neither is it likely
that many industries will find themselves pressing against their capacity
ceilings. Inflationary pressures from these sources should not be a
problem.
But in those sectors where both companies and unions possess substantial market power, the interplay of price and wage decisions could set off
a movement toward a higher price level. If this were to occur, the
whole Nation would be the victim.




16

I do not believe that American business or labor will allow this to
happen. All of us have learned a great deal from the economic events
of the past 15 years. Among both businessmen and workers, there is
growing recognition that the road to higher real profits and higher real
wages is the road of increased productivity. When better plant and
equipment enable the labor force to produce more in the same number of
hours, there is more to share among all the contributors to the productive
process—and this can happen with no increase in prices. Gains
achieved in this manner endure, while gains achieved in one turn of the
price-wage spiral vanish on the next.
The Nation must rely on the good sense and public spirit of our
business and labor leaders to hold the line on the price level in 1962.
If labor leaders in our major industries will accept the productivity
benchmark as a guide to wage objectives, and if management in these
industries will practice equivalent restraint in their price decisions, the
year ahead will be a brilliant chapter in the record of the responsible
exercise of freedom.
M E A S U R E S FOR A STRONGER ECONOMY

The final section of my Report is a summary of my recommendations
for legislative action (1) to strengthen our defenses against recession,
(2) to strengthen our financial system, (3) to strengthen our manpower
base, and (4) to strengthen our tax system.
A Program for Sustained Prosperity

Recurrent recessions have thrown the postwar American economy off
stride at a time when the economies of other major industrial countries
have moved steadily ahead. To improve our future performance I
urge the Congress to join with me in erecting a defense-in-depth against
future recessions. The basic elements of this defense are (1) Presidential
stand-by authority for prompt, temporary income tax reductions,
(2) Presidential stand-by authority for capital improvements expenditures, and (3) a permanent strengthening of the unemployment compensation system. These three measures parallel important proposals of the
Commission on Money and Credit, whose further recommendations
are treated under the next heading.
In our free enterprise economy, fluctuations in business and consumer
spending will, of course, always occur. But this need not doom us to
an alternation of lean years and fat. The business cycle does not have
the inevitability of the calendar. The Government can time its fiscal
transactions to offset and to dampen fluctuations in the private economy.




Our fiscal system and budget policy already contribute to economic
stability, to a much greater degree than before the war. But the time is
ripe, and the need apparent, to equip the Government to act more
promptly, more flexibly, and more forcefully to stabilize the economy—
to carry out more effectively its charge under the Employment Act.
Stand-by tax reduction authority. First, I recommend the enactment
of stand-by authority under which the President, subject to veto by the
Congress, could make prompt temporary reductions in the rates of the
individual income tax to combat recessions, as follows:
(1) Before proposing a temporary tax reduction, the President
must make a rinding that such action is required to meet the
objectives of the Employment Act.
(2) Upon such rinding, the President would submit to Congress
a proposed temporary uniform reduction in all individual income
tax rates. The proposed temporary rates may not be more than
5 percentage points lower than the rates permanently established
by the Congress.
(3) This change would take effect 30 days after submission,
unless rejected by a joint resolution of the Congress.
(4) It would remain in effect for 6 months, subject to revision
or renewal by the same process or extension by a joint resolution of
the Congress.
(5) If the Congress were not in session, a Presidentially proposed tax adjustment would automatically take effect but would
terminate 30 days after the Congress reconvened. Extension would
require a new proposal by the President, which would be subject to
congressional veto.
A temporary reduction of individual income tax rates across the board
can be a powerful safeguard against recession. It would reduce the
annual rate of tax collections by $2 billion per percentage point, or a
maximum of $10 billion—$1 billion per point, or a $5-billion maximum,
for six months—at present levels of income. These figures should be
measured against the costs they are designed to forestall:
—the tens of billions of potential output that run to waste in
recession;
—the pain and frustration of the millions whom recessions throw
out of work;
—the Budget deficits of $12.4 billion in fiscal 1959 or $7.0 billion
this year.
The proposed partial tax suspension would launch a prompt counterattack on the cumulative forces of recession. It would be reflected




18

immediately in lower withholding deductions and higher take-home pay
for millions of Americans. Markets for consumer goods and services
would promptly feel the stimulative influence of the tax suspension.
It would offer strong support to the economy for a timely interval,
while preserving the revenue-raising powers of our tax system in
prosperity and the wise traditional procedures of the Congress
for making permanent revisions and reforms in the system. I
am not asking the Congress to delegate its power to levy taxes, but
to authorize a temporary and emergency suspension of taxes by the
President—subject to the checkrein of Congressional veto—in situations where time is of the essence.
Stand-by capital improvements authority. Second, I recommend that
the Congress provide stand-by authority to the President to accelerate
and initiate up to $2 billion of appropriately timed capital improvements when unemployment is rising, as follows:
(1) The President would be authorized to initiate the program
within two months after the seasonally adjusted unemployment
rate
(a) had risen in at least three out of four months (or in
four out of six months) and
(b) had risen to a level at least one percentage point higher
than its level four months (or six months) earlier.
(2) Before invoking this authority, the President must make a
finding that current and prospective economic developments require such action to achieve the objectives of the Employment Act.
(3) Upon such finding, the President would be authorized to
commit
(a) up to $750 million in the acceleration of direct Federal
expenditures previously authorized by the Congress,
(b) up to $750 million for grants-in-aid to State and local
governments,
(c) up to $250 million in loans to States and localities
which would otherwise be unable to meet their share
of project costs, and
(d) up to $250 million additional to be distributed
among the above three categories as he might deem
appropriate.
(4) The authority to initiate new projects under the capital
improvements program would terminate automatically within 12
months unless extended by the Congress—but the program could
be terminated at any time by the President.




19

(5) Grants-in-aid would be made under rules prescribed by the
President to assure that assisted projects (a) were of high priority,
(b) represented a net addition to existing State and local expenditures, and (c) could be started and completed quickly.
(6) Expenditures on Federal projects previously authorized by
the Congress would include resource conservation and various
Federal public works, including construction, repair, and modernization of public buildings.
(7) After the program had terminated, the authority would
not again be available to the President for six months.
The above criteria would have permitted Presidential authority to be
invoked in the early stages of each of the four postwar recessions—within
four months after the decline had begun. Furthermore, no false signals
would have been given. Were a false signal to occur—for example,
because of a strike—the authority, which is discretionary, need not be
invoked.
The first impact of the accelerated orders, contracts, and outlays under
the program would be felt within one to two months after the authority
was invoked. The major force of the program would be spent well
before private demand again pressed hard on the economy's capacity
to produce. With the indicated safeguards, this program would make
a major contribution to business activity, consumer purchasing power,
and employment in a recession by utilizing for sound public investment
resources that would otherwise have gone to waste.
Unemployment compensation. Third, I again urge the Congress to
strengthen permanently our Federal-State system of unemployment
insurance. My specific recommendations include
(1) Extension of the benefit period by as much as 13 weeks for
workers with at least three years of experience in covered
employment;
(2) Similar extension of the benefit period when unemployment
is widespread for workers with less than three years of experience
in covered employment. This provision could be put into effect
by Presidential proclamation when insured unemployment reaches
5 percent, and the number of benefit exhaustions over a threemonth period reaches 1 percent of covered employment;
(3) Incentives for the States to provide increased benefits, so
that the great majority of covered workers will be eligible for
weekly benefits equal to at least half of their average weekly wage;
(4) Extension of coverage to more than three million additional
workers;




20

(5) Improved financing of the program by an increase in the
wage base for the payroll tax from $3,000 to $4,800;
(6) Reinsurance grants to States experiencing high unemployment insurance costs;
(7) Provisions which permit claimants to attend approved training or retraining courses without adverse effect on eligibility for
benefits.
Wider coverage, extended benefit periods, and increased benefit
amounts will help society discharge its obligation to individual unemployed workers. And by maintaining more adequately their incomes
and purchasing power, these measures will also buttress the economy's
built-in defenses against recession. Temporary extensions of unemployment compensation benefits have been voted by the Congress during
the last two recessions. It is time now for permanent legislation to
bring this well-tested stabilizer more smoothly into operation when
economic activity declines.
In combination, these three measures will enable Federal fiscal
policy to respond firmly, flexibly, and swiftly to oncoming recessions.
Working together on this bold program, the Congress and the Executive
can make an unprecedented contribution to economic stability, one that
will richly reward us in fuller employment and more sustained growth,
and thus, in greater human well-being and greater national strength.
Strengthening the Financial System
Proposals of the Commission on Money and Credit. The Report of
the Commission on Money and Credit, published last year, raises important issues of public policy relating to (1) the objectives and
machinery of Government for economic stabilization and growth,
(2) Federal direct lending and credit guarantee programs, and (3) the
structure and regulation of private financial institutions and markets.
The Commission's Report represents the results of thorough analysis and
deliberation by a private group of leading citizens representative of business, labor, finance, agriculture, and the professions. The Commission's
findings and recommendations deserve careful consideration by the Congress, the Executive, and the public—consideration which should result
in legislative and executive actions to strengthen government policy under
the Employment Act and to improve the financial system of the United
States. The subjects covered by the Commission can—for the purposes
of discussion and action in the Government—usefully be divided into
four categories.




21

(1) To strengthen the instruments of policy for economic stabilization, the Commission recommends permanent improvement of unemployment compensation, flexibility in government capital expenditures, and flexibility in adjusting the basic Federal individual income
tax rate. These key proposals are reflected in the three-part antirecession program just described.
(2) In its comprehensive new look at existing financial legislation, the
Commission concludes that the following financial restrictions no longer
serve the purposes originally intended and unnecessarily complicate or
obstruct other government policies: the ceiling on the public debt, the
ceiling on permissible interest rates on U.S. Treasury bonds, and the
required gold reserve against Federal Reserve notes and deposits. I am
sure that the Congress will wish to examine carefully the Commission's
recommendations on these points.
(3) The Commission re-examines the structure of the Federal Reserve System and its relationship to other arms of the Federal Government. The desirability of proposed changes in the structure which has
evolved over the years can be determined only after extensive consideration by the Congress and by the public.
There are two reforms of clear merit on which there appears to be
sufficiently general agreement to proceed at once, and which are of
direct concern to the President in the exercise of his responsibility to
appoint the members and officers of the Board of Governors of the
Federal Reserve System.
The first is to give adequate recognition in the simple matter of salaries to the important responsibilities of the Board of Governors of the
Federal Reserve System. The United States is behind other countries
in the status accorded, by this concrete symbol, to the leadership of its
"central bank," and I urge that the Congress take corrective action.
The second is to revise the terms of the officers and members of the
Board so that a new President will be able to nominate a Chairman of
his choice for a term of four years coterminous with his own. This
change has the concurrence of the present Chairman of the Board of
Governors. The current situation—under which the four-year term of
the Chairman is not synchronized with the Presidential term—appears
to be accidental and inadvertent.
Provision should be made now for smooth transition to new arrangements to take effect in 1965. I suggest that, on the expiration of the
present term of the Chairman in April 1963, the next term expire on
January 31, 1965. In order that, starting in 1965, the President
may have a free choice when he begins his own term, it is also




22

necessary to provide that the terms of members of the Board—which
now begin and end on January 31 of even years—begin and end in odd
years. This change can be accomplished very easily by extending the
terms of present members by one year.
(4) Several of the Commission's recommendations require careful
appraisal by the affected agencies in the Executive Branch as a basis for
future legislative recommendations:
(a) Banks and other private financial institutions: The Commission proposes significant changes in the scope and nature of
government regulations concerning reserves, portfolios, interest
rates, and competition. I shall ask an interagency working group
in the Executive Branch to examine the complex issues raised by
these proposals. This interagency group will keep in close touch
with the relevant committees of the Congress, which will no doubt
wish to study these issues simultaneously.
(b) Federal lending and loan guarantee programs: It is clearly
time for a thorough review of both their general impact on the
economy and their effectiveness for the special purposes for which
they were established. Again the Commission's Report has performed a valuable service in illuminating basic problems. One
important question is the appropriate role—with account taken
of both effectiveness and budgetary cost—of direct Federal lending, loan guarantees, and interest sharing. I shall ask a second
interagency group in the Executive Branch to examine these
programs.
(c) Corporate pension funds and other private retirement programs: It is time for a reappraisal of legislation governing these
programs. They have become, in recent years, a major custodian
of individual savings and an important source of funds for capital
markets. The amendment to the Welfare and Pension Plans Disclosure Act which I recommend below will be an important step
toward insuring fidelity in the administration of these Plans. But
there is also need for a review of rules governing the investment
policies of these funds and the effects on equity and efficiency of
the tax privileges accorded them. I shall ask a third working
group of relevant Departments and agencies to recommend needed
actions in this field, taking into account the findings of the Commission as well as other studies and proposals.
A revision of silver policy. Silver—a sick metal in the 1930's—is
today an important raw material for which industrial demand is expanding steadily. It is uneconomic for the U.S. Government to lock
up large quantities of useful silver in the sterile form of currency reserves.




23

Neither is any constructive purpose served by requiring that the Treasury maintain a floor under the price of silver. Silver should eventually
be demonetized, except for its use in coins.
(1) As a first step in freeing silver from government control, the
Secretary of the Treasury at my direction suspended sales of silver on
November 29. This order amounted to the withdrawal of a price
ceiling on silver which had been maintained by Treasury sales at a
fixed price.
(2) The next step should be the withdrawal of the Treasury's price
floor under domestically produced silver. Accordingly, I recommend
repeal of the Acts relating to silver of June 19, 1934, July 6, 1939, and
July 31, 1946; this step will free the Treasury from any future obligation
to support the price of silver.
(3) I also recommend the repeal of the special 50 percent tax on
transfers of interest in silver; this step will foster orderly price movements
by encouraging the development of a futures market in silver.
(4) Finally, I recommend that the Federal Reserve System be
authorized to issue Federal Reserve notes in denominations of $1;
this will make possible the gradual withdrawal from circulation of $ 1 and
$2 silver certificates, and the use of the silver thus released for coinage
purposes.
Strengthening Our Manpower Base
The labor force of the United States is its most valuable productive resource. Measures which enhance the skills and adaptability of the
working population contribute to the over-all productivity of the economy. Several legislative proposals to serve these ends have already
been put before the Congress.
(1) I urge speedy passage of the proposed Manpower Development
and Training Act. A growing and changing economy demands a labor
force whose skills adapt readily to the requirements of new technology.
When adaptation is slow and occupational lines rigid, individuals and
society alike are the losers. Individuals take their loss in the form of
prolonged unemployment or sharply reduced earning power. Society's
loss is measured in foregone output. These are losses we need not suffer.
A few hundred dollars invested in training or retraining an unemployed
or underemployed worker can increase his productivity to society by
a multiple of that investment—quite apart from the immeasurable
return to the worker in regaining a sense of purpose and hope. Both
compassion and dollars-and-cents reasoning speak for this legislation.




24

(2) For the same reasons, I urge enactment of the Youth Employment Opportunities Act. This bill provides three types of pilot programs
to give young people employment opportunities which would enable
them to acquire much-needed skills. These programs include training,
employment in public service jobs with public and private nonprofit agencies, and the establishment of Youth Corps Conservation Camps. In
the current decade, young men and women will be entering the labor
force in rapidly growing numbers. They will expect, and they deserve,
opportunities to acquire skills and to do useful work. The price of
failure is frustration and disillusion among our youth. This price we are
resolved not to pay.
(3) I have already made my recommendations for improvement of
the Federal-State unemployment compensation system.
(4) I am asking the Congress for more funds to increase the effectiveness of the U.S. Employment Service. This important agency has
already strengthened its operations, improving its staff and placement
services particularly in the largest urban centers, and concentrating on
labor market problems of nationwide significance—especially those connected with technological displacement of adult workers and the employment of youth. But the matching of jobs and workers is especially
difficult and especially important in a rapidly changing economy, and
more can be done. When unfilled jobs and qualified unemployed
workers coexist—but do not make contact because the flow of job information is not sufficiently free—the employer, the worker, and the
country lose. I urge the Congress to reduce that loss in the most effective
way—by revitalizing further the agency charged with disseminating
information about job opportunities and willing workers.
(5) I ask for enactment of the pending proposal to amend the Welfare and Pension Plans Disclosure Act so as (a) to provide adequate
penalties for embezzlement and (b) to vest authority in a responsible
Federal agency to enforce the statute by issuing binding regulations,
prescribing uniform reporting forms, and investigating violations.
Almost 90 million people rely on some welfare and pension plan for part
or all of present or future income. These plans are a major support of
the economic security of the American people. We are derelict if we do
not provide adequate administrative and enforcement provisions to protect the tremendous financial interest of participants in these funds.
Strengthening Our Tax System
The tax system of the United States has consequences far beyond the
simple raising of revenue. The tax laws are a vital part of the economic




25

environment; their effects may be equitable or inequitable; they create
incentives which may help or handicap the national interest. We cannot safely ignore these important effects in the comforting illusion that
what already exists is perfect. We must scrutinize our tax system carefully to insure that its provisions contribute to the broad goals of full
employment, growth, and equity.
My legislative proposals in the tax field are directly related to these
goals and the corollary need for improvement in the balance of payments.
In particular, I urge the earliest possible enactment of the tax proposals
now before the House Committee on Ways and Means. The centerpiece of these proposals is the 8 percent tax credit against tax for gross
investment in depreciable machinery and equipment. The credit should
be retroactive to January 1, 1962. The tax credit increases the profitability of productive investment by reducing the net cost of acquiring
new equipment. It will stimulate investment in capacity expansion
and modernization, contribute to the growth of our productivity and
output, and increase the competitiveness of American exports in world
markets.
The tax credit for investment is in part self-financing. The stimulus
it provides to new investment will have favorable effects on the level of
economic activity during the year, and this will in turn add to Federal
revenues. My other proposals for tax reform are designed to improve
the equity and efficiency of the tax system and will offset the remaining
net revenue loss:
(1) Extension of the withholding principle to dividend and interest
income;
(2) Repeal of the $50 dividend exclusion and the 4 percent dividend credit;
(3) Revision of the tax treatment of business deductions for entertainment, gifts, and other expenses, to stop abuses of "expenseaccount living";
(4) Elimination of the special tax preference for capital gains from
the sale of depreciable property, real and personal;
(5) Removal of unwarranted preferences (a) to cooperatives, (b)
to mutual fire and casualty insurance companies, and (c) to
mutual savings banks and savings and loan associations; and
(6) Revision of the tax treatment of foreign income, to remove
defects and inequities in the law. Removal of the unwarranted incentive to the export of capital will be consistent
with the efficient distribution of capital resources in the world




26

and will aid our balance of payments position. Tax deferral
privileges should be limited to profits earned in less developed
countries, and opportunities for "tax haven" operations should
be eliminated.
In addition, I recommend that the corporate income tax and certain
excise taxes again be extended at present levels for another year beyond
June 30, 1962, except that the structure of taxes and user charges in
the transportation field be altered as proposed in my Budget Message.
In considering tax revision in the United States, we must not limit
ourselves simply to Federal taxation. Our States, counties, and municipalities collect nearly half as much tax revenue as the Federal
Government. There is great potential for equity or inequity, for incentive or disincentive, in their highly diverse tax systems. In addition,
the effectiveness of Federal tax policies can be enhanced by harmonious
coordination with State and local fiscal systems. There is wide latitude
for improvements in the coordination of tax systems and in operations
with intergovernmental implications. In this effort, the Advisory Commission on Intergovernmental Relations is performing a valuable service.
I urge careful study of its recommendations at all levels of government.
Later this year, I shall present to the Congress a major program of
tax reform. This broad program will re-examine tax rates and the
definition of the income tax base. It will be aimed at the simplification
of our tax structure, the equal treatment of equally situated persons,
and the strengthening of incentives for individual effort and for
productive investment.
The momentum of our economy has been restored. This momentum must be maintained, if the full potential of our free economy is
to be released in the service of the Nation and the world. In this
Report I have proposed a program to sustain our prosperity and accelerate our growth—in short, to realize our economic potential. In this
undertaking, I ask the support of the Congress and the American people.

~

621876 O-62-3




27




THE ANNUAL REPORT
OF THE
COUNCIL OF ECONOMIC ADVISERS







LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS,

Washington, D.C., January 12, 1962.
T H E PRESIDENT:

SIR: The Council of Economic Advisers herewith submits its Annual
Report, January 1962, in accordance with Section 4(c) (2) of the Employment Act of 1946.
Respectfully,




WALTER W. HELLER,

Chairman.

^

^

KERMIT GORDON

JAMES TOBIN

31

.




CONTENTS
Page

Introduction

37

CHAPTER 1. TOWARD FULL RECOVERY

39

PART I: OBJECTIVES, PROGRESS, AND PROSPECTS

The Objective of Maximum Employment
Reasons for Concern Over Unemployment
Full Employment as the Objective of Stabilization Policy.
Full Employment and Structural Unemployment
Full Production
Productive Potential
Plant and Equipment Capacity
Progress in 1961
The Situation at the Beginning of the Year
Recovery During the Year
Outlook for 1962
Survey of Major Categories of Expenditure
Prospects for Full Employment
PART II:
TION

39

40
40
44
48
49
49
53
56
56
57
62
63
66

POLICIES FOR MAXIMUM EMPLOYMENT AND PRODUC68

Economic Stabilization
The Postwar Record
Achieving Greater Stability
The Federal Budget and Economic Stability
The President's Recommendations
Budget Policy, 1958-63
The National Income Accounts Budget
The Full Employment Surplus
The Budget in 1958-60
Federal Fiscal Activity in 1961-62
Budget Policy for Fiscal 1963
Monetary and Credit Policies and Economic Stability
Monetary Policy and Debt Management
Federal Credit Programs
Monetary Expansion and Recovery
Improving the Mobility of Resources
Labor Market Policies
Resource Use in Agriculture
APPENDIX: PROGRAM FOR ECONOMIC RECOVERY AND GROWTH

A. Executive and Administrative Actions
B. Legislative Recommendations and Actions




33

68
69
70
70
72
77
77
78
81
82
84
84
86
91
92
92
93
95
97

97
101

Page
CHAPTER 2. ECONOMIC GROWTH

108

Growth: Problem or Opportunity
Goals for the Current Decade
Investment in Human Resources
Education
Health
Eliminating Racial Discrimination
Investment in Technological Progress
Research and Development
More Effective Use of Existing Technology
Investment in Plant and Equipment
Investment as a Source of Growth
Policies to Encourage Investment
Investment in Natural Resources
The Historical Record
Implications for Public Policy
Water Resources
Agricultural Land
Investment in Public Services
Investment in Housing
Conclusion
CHAPTER 3. THE BALANCE OF INTERNATIONAL PAYMENTS

The United States in the World Economy
Objectives of U.S. Foreign Economic Policy
The United States as Trader, Investor, and Banker
Recent Developments Affecting the U.S. Payments Position. .
Policies To Improve the U.S. Payments Position
Basic Accounts
Short-Term Capital Account
Measures To Strengthen the World Monetary System
CHAPTER 4. PRICE BEHAVIOR IN A FREE AND GROWING ECONOMY. .

The Objectives
The Present Situation
Price Developments in Perspective
Wage and Cost Developments in Perspective
The Outlook for Prices
Policies Affecting Price Behavior
The Setting
Policies To Foster Market Competition
Guideposts for Noninflationary Wage and Price Behavior

109
110
117
118
120
121
123
123
126
127
128
130
133
134
135
135
137
138
139
142
144

145
145
149
153
155
156
162
164
167

167
169
169
174
180
183
183
184
185

APPENDIXES

A. Report to the President on the Activities of the Council of
Economic Advisers During 1961
B. Statistical Tables Relating to Income, Employment, and
Production




34

191
201

LIST OF TABLES AND CHARTS
Tables

page

1. Weekly Earnings in Selected Industries, and Unemployment
Insurance Benefits, 1961
2. Allocation of Estimated $40 Billion Gap Between Potential and
Actual Gross National Product, 1961
3. Employment, Output, and Productivity, 1961 Actual and 1963
Illustrative
4. Changes in Output, Income, and Employment over the Three
Quarters of the 1960-61 Recession
5. Changes in Output, Income, and Employment over Three
Quarters of Expansion, 1961
6. Hypothetical Timing of Proposed Capital Improvements
Program in Four Postwar Business Cycles
7. Major Differences Among Three Concepts of the Federal
Budget
8. Principal Federal Reserve Monetary Actions, 1960-61
9. Funds Raised in Money and Capital Markets, by Type of Instrument, 1957-61
10. Output, Population, Labor Input, and Productivity, 1947-60. .
11. Growth of Gross National Product per Man-Year, Selected
Countries, 1913-59
12. Output, Population, Labor Input, and Productivity, 1960 Actual
and 1970 Illustrative
13. Research and Development Expenditures, 1953 and 1957-60. .
14. Funds for Industrial Research and Development, by Source and
Industry, 1960
15. Growth in Business Potential Capital-Labor and Output-Labor
Ratios, 1929-60
16. Ratios of Indexes of Raw Materials Prices to Index of Finished
Products Prices, 1900-57
17. United States Balance of International Payments, 1 9 5 1 - 6 1 . . . .
18. International Investment and Gold Position of the United
States, 1949 and 1960
19. United States Balance of International Payments, 1 9 6 0 - 6 1 . . . .
20. Changes in Compensation and Productivity in All Private
Nonagricultural Industries and in Manufacturing Industries,
1947 to 1961
21. Changes in Average Hourly Earnings and Employment of
Production Workers in Selected Industries, September 1954
to September 1961
22. Changes in Average Hourly Earnings and Hourly Compensation in Manufacturing Industries, 1955 to 1961




35

41
50
53
57
58
74
78
88
90
113
114
115
123
125
129
134
149
151
157

175

176
177

Tables

23. Median Hourly Wage Increases Negotiated or Effective
in Major Collective Bargaining Situations, 1956-61
24. Employees Affected by Major Collective Bargaining Negotiations, by Wage Change, 1959-61
25. Relation of Employee Compensation, Profits, and Capital
Consumption Allowances to Sales: All Private Corporations,
1947-61
26. Annual Rates of Growth of Output per Man-Hour, 1909 to
1960

177
178

179
186

Charts

1. Measures of Unemployment
2. Gross National Product, Actual and Potential, and Unemployment Rate
3. Capacity Utilization and Corporate Profits
4. Real Gross National Product in Four Postwar Recoveries
5. Employment, Production, and Income in Four Postwar Recoveries
6. Effect of Level of Economic Activity on Federal Surplus or
Deficit
7. Federal Surplus or Deficit: Actual and Full Employment Estimate (National Income Accounts Basis)
8. Interest Rates in Three Business Cycles
9. Output, Employment, and Productivity
10. Indexes of Business Output, Capital Stock, and Man-Hours. . .
11. Balance of Trade and Payments
12. Changes in U.S. Gold Stock and Liquid Liabilities to Foreigners
13. Price Developments
14. Indexes of Output per Man-Hour




36

43
52
55
60
61
79
82
87
112
128
152
154
173
187

INTRODUCTION
The Report of the Council of Economic Advisers is a document directed
toward economic problems and national economic policy. It is written
in keen awareness that the ultimate goals of the Nation are human goals,
and that economics is merely instrumental to the making of a better life for
all Americans. Involuntary unemployment is a sign of economic waste,
but the fundamental evil of unemployment is that it is an affront to
human dignity. Expenditures on better education and better health are
investments in future capacity to produce; but even if they were not, they
would be intrinsically desirable because ignorance and illness bar the way
to happiness and security for many of our citizens. Social security and
welfare benefits help to limit the depth of recessions, but their more important function is to protect human beings from hunger and despair. Statistical tables are to the economist what test tube and microscope are to the
scientist—the tools of the trade; but for the one as for the other, the ultimate
dedication is to the quality of human life.
The Employment Act of 1946 is a historic affirmation of the responsibility
of the Federal Government "to promote maximum employment, production, and purchasing power." The Act commits the Federal Government
to seek to create and to maintain an economic environment in which
"there will be afforded useful employment opportunities, including selfemployment, for those able, willing, and seeking to work." These goals,
as the Act recognizes, must be sought within the broad framework of U.S.
political and economic institutions—free competitive enterprise and the
Federal system of government. And they must be sought by means consistent with other national needs, obligations, and objectives.
The people of this Nation—aided by an immense and fertile land, by
rich stores of minerals and other gifts of nature, and by technologies and
tools which lighten the work of man and multiply its fruits—can produce
vast quantities of the goods and services human beings want. The Employment Act's broad goal of maximum employment, production, and
purchasing power implies, first of all, that the vast productive capacity of
the Nation should be used and not permitted to lie idle or run to waste.
And, second, it implies that this capacity itself should be raised to enable
each new generation to advance to higher standards of well-being.
The first of these objectives—maximum use of our existing productive
resources—is the topic of Chapter 1. One requirement is to maintain aggregate demand for goods and services at, but not above, levels sufficient to
buy the goods and services the economy is capable of producing. Since
inadequate demand has in recent years been a major cause of unemploy-




37

ment and excess capacity, expansion of demand has been and remains a
principal task of government policy. But expansion of demand is not the
whole answer. The functioning of markets for labor and for its products
can be improved in ways which will bring into effective use a greater proportion of the Nation's productive resources. Government policy can play
a role here too. These two aspects of the current economic situation, and
the relevance of current and proposed policies, are discussed in Chapter 1.
The second objective—to accelerate the growth of the productive powers of the United States—is the subject of Chapter 2. The United States
has joined its partners in the Organization for Economic Cooperation and
Development (OECD) in setting "as a collective target the attainment
during the decade from 1960 to 1970 of a growth in real gross national
product of 50 percent for the 20 Member countries taken together." This
growth in production in Europe and North America is intended to lead
both to an increase in standards of living in the industrial countries and
to "a significant increase in aid to less developed countries."
The OECD declaration underscores the fact that free nations must
pursue their economic objectives in concert. U.S. policy under the
Employment Act must take full account of our international economic
transactions. Chapter 3, therefore, examines the U.S. balance of payments and the external position of the dollar, particularly as they are
related to domestic economic developments and policies.
The necessity of moving toward balance in U.S. international accounts
has given price stability new and compelling importance as a requirement
of economic policy for recovery and growth. An appropriate and responsive structure of relative prices is equally important, to bring resources
into full and efficient use and to guide the growing productive capacity of
the economy to serve the Nation's changing needs. Competition and
mobility of resources, by contributing to the efficiency and flexibility of the
price structure, will at the same time weaken upward pressures on the price
level which sometimes accompany and endanger high employment. Chapter 4 is a discussion of recent, current, and prospective developments and
policies affecting the course of prices in the United States.
Full utilization of manpower and other productive resources, faster
growth in capacity to produce, balance of payments equilibrium, and price
stability—these are necessarily the tasks of U.S. economic policy today.
Significant progress has been made toward achieving all of them in 1961.
In many important respects they are complementary; especially in the long
run, measures which advance one task advance the others. But in other
respects they are difficult to reconcile; measures useful for one purpose may
be harmful for another. As perhaps never before, the complexity and the
importance of the tasks facing the U.S. economy in this decade challenge
the wisdom and vision of Government and of all sectors of the private
economy.




Chapter 1

Toward Full Recovery
PART I: OBJECTIVES, PROGRESS, AND PROSPECTS

T

HE U.S. ECONOMY made substantial advances in 1961 toward the
goals of the Employment Act: "maximum employment, production,
and purchasing power." Total production rose to a record rate of $542
billion a year in the fourth quarter, $41 billion above the level at the
beginning of the year. Unemployment, which had been close to 7 percent
of the labor force ever since December 1960, fell sharply toward the end
of 1961; the rate was 6.1 percent in December. The annual rate of income, after taxes, of the American people rose from $1,940 per capita in
the first quarter to $2,032 per capita in the last quarter of 1961. These
gains in disposable income were almost entirely real gains in purchasing
power. Prices were virtually stable during the year; the consumer index
rose only 0.6 percent between December 1960 and November 1961. As the
year ended, the economy was advancing vigorously.
Government fiscal and monetary policies contributed strongly to the favorable economic developments of the past year. Although the downswing
probably would have ended early in 1961 in any case, the impressive pace
of the economic expansion must be attributed in large measure to government actions. A summary of the Administration's program in 1961 to
promote economic recovery is given in the Appendix to this chapter.
In spite of the significant gains of 1961, the economy at the turn of the
year still fell short of the standards set forth in the Employment Act. Too
many persons "able, willing, and seeking to work" were unable to find
"useful employment opportunities." Even at record levels, national production had not yet reached its potential at full employment; and the
purchasing power of the American people—the command over goods and
services represented by their incomes—was still too low.
The prospect for 1962 is a continuation of the favorable trend of 1961.
Whether the current expansion is sufficiently strong and durable to carry
the economy to "maximum employment, production, and purchasing
power", no one can now foretell with certainty. Current and proposed
government actions will continue to give strong support to economic
expansion. If these are coupled with continued strength in the private
economy, the current expansion would reduce unemployment to 4 percent
of the labor force by mid-1963. But, given the inevitable uncertainties,
government policy must be alert and flexible, ready to promote the achieve-




39

ment of full recovery within the coming fiscal year and to counteract developments which might threaten its attainment. The President has made
important proposals to increase the effectiveness and flexibility of government fiscal policy; these are discussed at length in Part II of this chapter.
Part I of this chapter discusses, first, the current implications of the objectives of the Employment Act: "maximum employment" as a guide to
the fiscal and monetary policies of Government and to other public and private policies of equal ultimate importance; and the potential production
and purchasing power of the American economy at levels of employment
which full recovery can achieve. Next, it describes the progress of the
economy in 1961 toward these objectives and the outlook for continued advance in 1962. Part II of the chapter discusses government policies for
full recovery and maximum employment, with special emphasis on the
Administration's policies in 1961 and its programs under way or proposed
for the coming year.
T H E OBJECTIVE OF MAXIMUM EMPLOYMENT

Reasons for Concern over Unemployment
The great depression led this Nation, and most other nations of the
free world, to assume national responsibility for the human tragedy and
economic waste of involuntary unemployment. Unemployment had previously been regarded as almost solely the personal responsibility of the
individual; now it came to be acknowledged as a charge on the conscience
of the Nation. The mass unemployment of the 1930's led to new understanding: that to be unemployed is not to be unemployable; that job opportunities for individual workers depend on national economic circumstances beyond their control.
There are three principal reasons why involuntary unemployment is a
national concern: (1) the human obligation to prevent and to relieve
economic distress, (2) the basic principle of a free economy that an individual should be able to choose freely how to use his time, whether to work
for pay or not, and (3) the economic waste of leaving productive resources
idle.
Preventing economic distress. First, a wealthy nation cannot in good
conscience permit its citizens to be inadequately nourished, clothed, or
housed; its sick to be denied medical care; or its young to be deprived of
schooling. Unemployment insurance and public assistance are recognitions of this social obligation. But they are not substitutes for the opportunity to earn income from useful employment. For the breadwinner and
his family, unemployment means a reduction in living standards. Only
about three-fifths of the unemployed in 1961 were receiving unemployment
insurance benefits. Even those who were insured generally found weekly
benefits a pale shadow of their lost wages. When the unemployment insurance program was inaugurated in the late 1930's, the goal was to provide
benefits equal to about half of previous earnings. As Table 1 indicates,




40

benefits now do not meet this standard. The Administration has proposed
permanent legislation to strengthen the unemployment insurance system
in this and other respects.
T A B L E 1 . — Weekly earnings in selected industries, and unemployment insurance benefits, 7967

Item

Weekly
average,
1961

Unemployment insurance benefits, all industries !
Weekly earnings, selected industries: 2
Retail trade
Manufacturing
Telephone communication.
Wholesale trade
Bituminous coal mining
Class I railroads
Contract construction

64.01
92.34
92.75
93.32
112.10
112.41
117.66

1 For State programs only; see Table B-23.
Gross earnings for production workers or nonsupervisory employees; see Table B-27.
Source: Department of Labor.

2

For all too many, unemployment has not been simply an uncomfortable
interlude between jobs but a catastrophe of long duration; almost one-third
of those unemployed in December 1961 had been out of work for 15 or more
weeks and one-sixth had been unemployed for at least 27 weeks. Family
savings vanish when unemployment is prolonged.
Unemployment is not a perfect measure of the incidence of economic
distress. Failure to find work does not entail poverty for some unemployed
persons: women whose husbands have good jobs, young people who can
fall back on well-to-do parents, older people who have assured livelihoods
from property incomes or annuities, people who earn an adequate annual
income from work at a seasonal occupation during part of a year. On the
other hand, there are many causes of economic distress other than unemployment. Some persons, though employed, suffer from reduced and inadequate incomes resulting from failure to obtain more than part-time or
occasional work, or to earn decent returns from long hours of self-employment on the farm or in the shop. Other individuals are not regarded as
unemployed simply because, discouraged by a lack of suitable opportunities,
they have abandoned the search for jobs. Included in this group are individuals with personal disabilities who can find jobs only when labor
markets are tight.
Nevertheless, changes in unemployment are indicative of changes in the
over-all magnitude of economic distress. The same conditions, of general prosperity which lead to lower unemployment figures also lead to
lower rates of involuntary part-time idleness, to better rewards from selfemployment, and to more job opportunities for persons on the fringes of
the labor force. While effective measures to provide adequate job opportunities will not solve all problems of economic distress, they will solve a
substantial share of them. And without successful policy against general




unemployment, other attacks on poverty and insecurity stand little chance
of success.
Assuring free choice. The second reason for national concern over unemployment is the basic principle of a free economy, embodied in the Employment Act, that "useful employment opportunities" be afforded "for those
able, willing, and seeking to work." A free society abhors forced idleness as
well as forced labor. This principle does not apply a means or needs test for
job-seekers. It acknowledges that mature individuals should be able to
choose for themselves how they spend their time, as between gainful employment, housework, leisure, and education. Involuntary unemployment can
destroy morale and freedom of choice whether or not the individual is in
economic need. Americans want to work. Neither welfare programs nor
personal means can erase the frustration of the individual who is forced
to conclude that society does not need or want his contribution. The
general preference for gainful work over unemployment, however well
compensated, is demonstrated by the low levels of unemployment in areas
with buoyant labor markets, in occupations with ample job opportunities,
and in the population at large during years of prosperity.
Avoiding economic waste. Finally, excessive unemployment is a waste of
productive resources. When these resources are left idle, the useful goods
and services they could have produced are forever lost to the Nation. These
losses would be enormously wasteful at any time. They are dangerous in a
decade when the economy must not only meet compelling domestic needs but
underwrite the defense of freedom throughout the world. In coupling maximum production and purchasing power with maximum employment, the
Employment Act recognizes the losses of national output and real income
associated with unemployment. An estimate of these losses in present circumstances is attempted below. Changes in the unemployment rate are
roughly indicative of changes in the "gap" between realized and potential
production. The same measures of policy which will lower unemployment
will also raise national output closer to capacity to produce. The national
economic losses associated with unemployment are, of course, quite independent of the individual circumstances of the unemployed. If housewives,
elderly persons, and teen-agers on vacation from school are eager and able to
produce useful goods and services, it is foolish and wasteful for the Nation to
forego their contributions.
Measures of unemployment. The global measure of unemployment as a
percentage of the civilian labor force, provided monthly by the Current
Population Survey and published by the Bureau of Labor Statistics, is the
best single measure of the economic distress, the frustration of free choice,
and the economic waste associated with unemployment. But there are other
measures of independent interest. Four of these measures, along with
the global rate, are shown in Chart 1:
(1) The unemployment rate among experienced wage and salary
workers—those who have already held at least one job. This measure




42

excludes the self-employed and new entrants to the labor force. (2) The
unemployment rate among married men living with their wives. This
measure relates to individuals whose commitment to the labor force is
permanent and necessary to the support of their families. It does not
cover all individuals with such a commitment, and conceptually it is inappropriate both as a measure of economic waste and as an indicator of
involuntary unemployment among persons "able, willing, and seeking to
work." (3) A full-time equivalent measure which (a) adds to the wholly
unemployed the full-time equivalent of work lost by involuntary part-time
employment and (b) subtracts the self-employed from both the labor force
and civilian employment on the grounds that they are not subject to the
risk of unemployment. This concept has merit as a measure of economic
waste and of imbalance in markets for hired labor. (4) The number of
CHART 1

Measures of Unemployment
PERCENT UNEMPLOYED

SEASONALLY ADJUSTED

12

1955

1956

1957

1958

1959

I960

1961

J/UNEMPLOYED PLUS|FULL-TIME EQUIVALENT OF PART-TIME EMPLOYED AS PERCENT OF CIVILIAN LABOR
FORCE.EXCLUDES SELF-EMPLOYED AND UNPAID FAMILY WORKERS.
2/PERCENT OF CIVILIAN LABOR FORCE IN GROUP.
^/MARRIED MEN LIVING WITH THEIR WIVES.
i/PERSONS UNEMPLOYED 15 WEEKS OR MORE AS PERCENT OF CIVILIAN LABOR FORCE.
SOURCES: DEPARTMENT OF LABOR AND COUNCIL OF ECONOMIC ADVISERS.

621876 O-62-4



43

long-term unemployed, those who have been jobless for more than 15 weeks,
as a percentage of the labor force. This rate is an important measure of
the financial and social distress caused by the concentration of prolonged
unemployment on a small fraction of the labor force.
The differences among these measures reveal more clearly than any
single measure the anatomy of unemployment. But they show no systematic tendency to widen or narrow. If due allowance is made for volatility
in month-to-month movements all five measures tell the same story about
changes in economic conditions.
Full Employment as the Objective of Stabilization Policy
The goal of the Employment Act is "maximum employment," or—to put
it the other way round—minimum unemployment. Ideally, all persons
able, willing, and seeking to work should be continuously employed. Involuntary unemployment is an individual and social evil. No one would
prefer for its own sake a higher rate of unemployment to a lower one. But
zero unemployment is unattainable. A more meaningful figure is needed
to give content to the realistic and forceful declaration of policy in the
Employment Act. A feasible interim goal must reflect a balancing of
employment and production objectives with other considerations of national
policy, within the limits set by the existing characteristics of the economy.
Such a goal is set forth in the discussion which follows. We must not forget, however, that any practical unemployment goal is only a temporary
compromise, and its attainment must never be an occasion for relaxation,
but rather an incentive to search out ways to achieve a still lower rate.
The partial conflict which exists between minimum unemployment and
certain other national objectives—and which imposes the necessity of striking a balance between them—results mainly from the fact that these other
objectives are served by stability of the general price level. Given the
existing structure of the economy and the nature of the processes by which
prices and wages are determined, a serious attempt to push unemployment
close to zero would produce a high rate of price inflation. The result would
be a weakening of the competitive position of U.S. products in world markets, an arbitrary redistribution of real income and wealth, and a threat of
even more serious consequences if expectations of further inflation should
become dominant.
Happily, however, the conflict between the goals served by price stability
and the goal of minimum unemployment is only partial. Stabilization
policy—policy to influence the level of aggregate demand—can strike a
balance between them which largely avoids the consequences of a failure
in either direction. Furthermore, the degree of conflict can be diminished
by private and public policies which improve the functioning of labor and
product markets.
There are various possible causes of unemployment, on the one hand,
and of inflationary pressure, on the other. These causes may be grouped




44

into (1) those related to aggregate demand and (2) those related to the
structure and functioning of markets. It is necessary to distinguish carefully between these two groups of causes in setting an appropriate target
for stabilization policy.
The relation of aggregate demand and of structural causes to unemplovment may be briefly described as follows:
(1) The total effective demand for goods and services—by consumers,
businesses, and governments—may be insufficient to employ all the persons
seeking work at existing wage rates.
(2) Workers may be idle while vacancies are unfilled. This may arise
because the workers live too far away from the available jobs, are not qualified for them, or simply are unaware of their existence. In a dynamic economy, there will always be workers between jobs, some seeking new positions
out of preference, some displaced by economic and technological change.
New entrants to the labor force will similarly be unemployed while locating
jobs suitable to their qualifications and preferences. The length of "frictional" unemployment for any one worker, and the size of the pool of frictionally unemployed, depend on how smoothly the labor market functions,
how well the skills, experience, and qualifications of workers match the
specifications of available jobs, how ready workers are to change residence
and occupation, how adequate are facilities for training and retraining,
and how rapidly displacements resulting from economic change are occurring. Structural unemployment may be regarded as an extreme form of
frictional unemployment. It occurs when inability or failure to make the
necessary adjustments concentrates unemployment of long duration on displaced workers in particular areas and occupations, while elsewhere jobs
are seeking workers of quite different qualifications.
Similarly, aggregate demand and the structure of markets are related to
the price level, as follows:
(1) Inflation may result from excessive aggregate demand. Demands
for goods and services by consumers, businesses, and governments may
add to a total which exceeds the amount that the economy can supply.
Prices will be bid up in all markets, and, as business firms try to expand output in order to seize the profit opportunities presented, increases in wages
and in costs of materials will follow. The resulting rise in incomes will
reinforce and renew the process. In less extreme circumstances, aggregate
demand may press hard upon, but not exceed, the economy's productive
capacity. Increases in prices and wages may occur nevertheless, reflecting
the need to obtain additional output by using labor and capital more intensively—by making greater use of overtime labor, by attracting workers from
great distances, by making employment attractive to persons formerly not in
the labor force, and by making use of obsolescent capacity and inefficient
production techniques.
(2) Upward pressure on prices may originate in those sectors of the
economy where competitive forces are weak and large corporations and




45

unions have a considerable degree of discretion in setting prices and wages.
(This discretion, and the public interest in its responsible exercise, are
discussed in Chapter 4.) There are two ways in which wage and price
decisions in these sectors may put upward pressure on the general price level.
First, prices may be increased when demand is not strong in the aggregate
or even in the specific industries involved. Because the prices of these
industries affect costs elsewhere, increases in their prices tend to spread
throughout the economy. Second, prices in these sectors may remain constant in the face of declining demand, although they rise in times of
increasing demand. The result in the long run is an upward drift in prices
in these industries, which again tends to be transmitted to the whole
economy.
Expansion of aggregate demand is clearly the specific remedy for unemployment caused by a deficiency of aggregate demand. Excessive aggregate demand, however, is a source of inflationary pressure. Consequently, the target for stabilization policy is to eliminate the unemployment
which results from inadequate aggregate demand without creating a
demand-induced inflation. A situation in which this is achieved can
appropriately be described as one of "full employment," in the sense that
further expansion of expenditure for goods and services, and for labor to
produce them, would be met by only minor increases in employment and
output, and by major increases in prices and wages. Correspondingly, expansion of demand beyond full employment levels would involve a major
sacrifice of the objectives served by price stability, and only a minor gain
with respect to the goal of maximum employment.
The selection of a particular target for stabilization policy does not commit policy to an unchangeable definition of the rate of unemployment corresponding to full employment. Circumstances may alter the responsiveness of the unemployment rate and the price level to the volume of aggregate demand. Current experience must therefore be the guide.
In the existing economic circumstances, an unemployment rate of about
4 percent is a reasonable and prudent full employment target for stabilization
policy. If we move firmly to reduce the impact of structural unemployment, we will be able to move the unemployment target steadily from
4 percent to successively lower rates.
The recent history of the U.S. economy contains no evidence that labor
and commodity markets are in general excessively "tight" at 4 percent unemployment. Neither does it suggest that stabilization policy alone could
press unemployment significantly below 4 percent without creating substantial upward pressure on prices.
When unemployment was about 5 percent, as in 1959 before the steel
strike and in the first half of 1960, the economy showed many independent
symptoms of slack, notably the substantial underutilization of plant and
equipment capacity. The wholesale price index fell at a rate of 0.2 percent




4e

a year in the 15 months April 1959-July 1960; and at the consumer level,
prices of commodities other than food rose at a rate of only 0.6 percent.
The economy last experienced 4 percent unemployment in the period
May 1955-August 1957, when the unemployment rate fluctuated between
3.9 percent and 4.4 percent (seasonally adjusted). During this period, prices
and wages rose at a rate which impaired the competitiveness of some U.S.
products in world markets. However, there is good reason to believe
that upward pressures of this magnitude are not a permanent and systematic feature of our economy when it is operating in the neighborhood
of 4 percent unemployment. The 1955-57 boom was concentrated in
durable manufactured goods—notably automobiles (in 1955), machinery
and equipment, and primary metals. The uneven nature of the expansion
undoubtedly accentuated the wage and price pressures of those years.
Moreover, the review of the present price outlook in Chapter 4 points to a
recent strengthening in the forces making for price stability. The experience of 1955-57 is nevertheless sobering, and experience at higher levels
of activity will be needed to indicate whether stabilization policy can now
undertake a more ambitious assignment than 4 percent unemployment.
There is no precise unemployment rate at which expansion of aggregate demand suddenly ceases to affect employment and begins to affect
solely the general price level. The distinction between aggregate demand
effects and structural effects is a matter of degree, both for employment
and for the general price level. Sufficiently high levels of aggregate
demand can, and have in the past, cut deeply into frictional and structural unemployment. When vacancies are numerous, the time required
to find an attractive job is reduced. When there are vacancies everywhere, no one needs to travel far to find a job. And when no applicant
for a job meets its exact specifications, the specifications may well be
adjusted. Similarly, the degree of inflationary pressure arising from discretionary price and wage setting is not independent of the general
strength of demand. Presumably, this pressure could be entirely eliminated
by sufficient weakness in aggregate demand if that were the sole objective of
stabilization policy.
But while stabilization policy would not be an ineffective cure for
either one or the other of these economic ailments, it would be an extremely
expensive cure. On the one hand, attempting to reduce frictional and
structural unemployment by a highly inflationary expansion of demand
would court disaster in our balance of payments position. On the other
hand, an attempt to restrict aggregate demand so severely as to eliminate all
risk of an increase in the general price level might well involve keeping the
economy far below full employment. This would mean sacrifice rather than
achievement of both of the major goals that price stability serves: Equity
would be sacrificed because the economy as a whole, and the unemployed in
particular, would suffer as a result of the manner in which a few individuals




47

and groups exercise their economic power. Eventually, the balance of
payments would also be weakened: under conditions of prolonged unemployment and excess capacity, the investment needed to keep our exports
competitive in quality and cost would be unlikely to occur.
The 4 percent interim goal refers to the global measure of unemployment
as a percentage of the civilian labor force. An objective stated in terms of
any of the other measures of unemployment discussed above would have
the same implications for stabilization policy, for the various measures tell
the same story with respect to the degree of over-all tightness in the
economy. The particular numerical statement of the goal must, of course,
change with the unemployment concept used. For example, 4 percent in
terms of the global measure is roughly equivalent to a rate of 2^4 percent
among married men living with their wives; the latter figure, though lower,
is at least as serious as the former in its implications for the human consequences of unemployment. Corresponding figures for the other measures
of unemployment are 4% percent among experienced wage and salary
workers, 6*4 percent for the full-time equivalent concept, and, if the 4
percent global rate is long sustained, a two-thirds of one percent rate of
long-term unemployment.
Unemployment of 4 percent is a modest goal, but it must be emphasized
that it is a goal which should be achievable by stabilization policy alone.
Other policy measures, referred to in the next section and discussed in detail in Part II of this chapter, will help to reduce the goal attainable in the
future below the 4 percent figure. Meanwhile, the policies of business and
labor, no less than those of Government, will in large measure determine
whether the 4 percent figure can be achieved and perhaps bettered in the
current recovery, without unacceptable inflationary pressures.
Full Employment and Structural Unemployment
One way to raise the attainable level of full employment is to reduce frictional and structural unemployment by improving the mobility of labor
and the efficiency of labor markets. The amount of frictional and structural
unemployment varies from country to country and from time to time within
any one country. It has sometimes been suggested that, though a 4-percent
unemployment rate was once achievable in the United States with adequate
levels of demand, it is no longer a feasible goal because of increasing technological displacement of workers, rapid obsolescence of skills, intractable
pockets of depression, and greater numbers of young people swelling the
labor force. Careful analyses at the Council and elsewhere—notably in a
recent report by the staff of the Joint Economic Committee of the Congress—lend no support to the view that frictional and structural unemployment is a rising proportion of the labor force. It would be wholly wrong,
however, to conclude that improvement in the structure of the labor market
is not both possible and of high importance.




4s

The displacement of labor through changes in technology, consumer tastes,
and the geographic distribution of industry is an inevitable part of the
growth of a free and progressive economy. But the level of unemployment
corresponding to any given pace of progress depends on the smoothness with
which markets function. The size of the pool of unemployed workers, like
the size of a pool of water, is determined jointly by the flow into it and the
flow out of it. The flow into it depends on the rate at which workers leave
jobs or are displaced and on the rate at which new workers enter the labor
force without jobs. The flow out depends on the speed with which the
unemployed can transfer to jobs vacated by retirement, and to other skills,
other industries, and other areas where jobs are available in expanding
sectors of the economy.
Economic policy can reduce the size of the pool by providing opportunities for vocational training and retraining, by improving the flow of information about job opportunities, by facilitating the relocation of displaced
workers, by acting to reduce and eliminate discriminatory hiring practices,
and by assisting in the rehabilitation of depressed areas through the
renovation of public facilities and the attraction of viable industry. Administration policies and proposals to attain these ends are discussed in Part II
of the present chapter.
The benefits to the United States from the pursuit of such policies are
great. In their absence, many of our citizens become, in a real sense,
victims of progress; they are condemned to prolonged periods of unemployment which benefit no one and inflict an unjust penalty on an arbitrarily
selected few. In their absence, we can expect resistance to technological
progress from those who would be harmed by it without prospect of reward.
The returns from such policies do not come instantaneously. For that
reason, we should undertake them now, even while unemployment and excess
capacity are widespread. There is still time to reap the benefits of the reduction of structural unemployment during the current recovery. But
these policies are no substitute for an adequate level of demand. Experience tells us that the pull of expanding job opportunities is a vitally necessary condition for the success of policies to assure a better functioning
labor market.
FULL PRODUCTION

Productive Potential
The Economic Report is required by the Employment Act to set forth
"the levels of employment, production, and purchasing power obtaining in
the United States and such levels needed to carry out the policy" of the
Act. In accordance with the obligation to set forth the levels of production
needed to carry out the objectives of the Act, the Council has made the
following estimates: (1) In the first quarter of 1961, a gap of $51 billion
(1961 prices, annual rate) existed between actual gross national product
(GNP) and the output obtainable at full employment. (2) By the last
quarter of the year, recovery had narrowed this gap to about $28 billion.




49

(3) For 1961 as a whole, production averaged $40 billion below potential.
(4) The production potential for the year 1962 is estimated at $580 billion
(in 1961 prices).
Estimates of this kind cannot, of course, be precise. But they are essential
in order to specify, within reasonable margins of error, a current measure of
"maximum production" linked to "maximum employment." They indicate
clearly that this Nation can achieve a huge bonus of output and income by
making full use of its resources.
The level of unemployment is a barometer of economic waste. Each
percentage point of progress toward 4 percent in the unemployment
rate has meant a gain of roughly 3 percent in total output in postwar periods
of expansion.
The sources of potential gains in output accompanying full employment
are given in Table 2, which shows the gain in output that each source could
TABLE 2.—Allocation of estimated $40 billion gap between potential and actual gross nationa
product, 1961
[Billions of dollars]
Associated
increment of
output

Source

Total.

40

Lower unemployment

15

Larger labor force in response to greater demand
Longer hours of work per man associated with higher utilization
Greater productivity per man-hour associated with higher utilization..

16

Source: Council of Economic Advisers.

have contributed if aggregate demand in 1961 had been sufficient to reduce
unemployment to 4 percent of the labor force. Thefiguresincorporate evidence from postwar relationships among labor input, productivity, and output. An unemployment rate of 4.0 percent instead of 6.7 percent for 1961
would in itself have increased the number of jobs by 3 percent of actual
employment. But it would have raised production by much more, about 8
percent. The reason that improved employment conditions yield magnified
gains in output is that, in addition to putting the jobless back to work, they
have a number of other favorable effects on output.
Higher output would have accompanied lower unemployment in the
following manner:
(1) Actual unemployment in 1961 was 4.8 million persons. Given the
actual 1961 labor force of 71.6 million persons, 2 million of the unemployed
would have been at work at an unemployment rate of 4 percent.
(2) At full employment, the labor force would probably have been considerably higher in 1961 and production would have been correspondingly
increased. Participation in the labor force is encouraged by greater availability of job opportunities. In recent years of slack activity, the actual




50

labor force has been abnormally low relative to the number of persons of
working age.
(3) Furthermore, a brisker pace of economic activity is accompanied by
a higher average number of hours a week worked by those employed.
Part-time jobs are converted into full-time employment, and overtime work
increases in private nonfarm industry.
(4) Because of these three factors—less unemployment, larger labor
force, and longer hours of work—labor input at full employment in 1961
would have exceeded actual labor input by more than 4J/2 percent, the
equivalent of 7 billion man-hours. The added man-hours could have increased production by $24 billion, at existing rates of productivity.
(5) The higher productivity that accompanies fuller use of resources
would have meant still more output. In recessions, business firms cannot
cut back their labor force as fast as their output falls. Clerical help and
sales and supervisory personnel are essentially "overhead." Moreover, while
firms can and do lay off production workers, they do so only with reluctance,
preferring both to maintain morale and to avoid the expense of hiring and
training new labor when business activity recovers. Recessions thus produce
on-the-job underemployment, which is reflected in depressed levels of
productivity. In movements toward full employment, recession losses in
productivity are regained. At full employment, productivity in 1961 would,
according to past evidence, have been 2 to 4 percent higher than it actually
was. This gain is equivalent to a $10 to $20 billion increment of GNP. The
table shows a $16 billion figure, near the middle of the range, bringing the
total estimated gain from all sources to $40 billion.
These calculations receive further support from an alternative approach.
Evidence on the relationship between output and unemployment suggests
that actual GNP in mid-1955, when the unemployment rate was close to 4
percent, was equal to potential output. The trend rate of growth of GNP,
adjusted for changes in unemployment levels, has averaged about 3l/2 percent in the post-Korean period. Thus the path of potential GNP can
be represented by a 3 / 2 percent trend from actual GNP in mid-1955
(Chart 2). The 1961 value of the trend exceeds actual output by $40
billion, which is equal to the sum of the components described above.
The distance between potential and actual GNP was narrowed by $23
billion from the first to last quarter of 1961, as output increased by $37
billion (1961 prices). Among the four factors listed above, the first two,
reduction in unemployment and increase in the labor force, contributed
less to the gain in production than past experience would have suggested.
Of the other two factors, hours of work in nonfarm industries expanded
roughly in accord with past behavior; but man-hour productivity achieved
an exceptional gain, probably above 6 percent in the three quarters of
expansion. As a result, the l1/^ percent increase in total production was
achieved with a very small increase in employment: nonfarm employment
increased by about 11/2 percent, but this rise was partially offset by a decline




51

CHART 2

Gross National Product, Actual and Potential,
and Unemployment Rate
BILLIONS OF DOLLARS * (Ratio scale)
GROSS NATIONAL PRODUCT
IN 1961 PRICES

600 - ' \

'''c

550 POTENTIAL^

A

500 —

450

r

_

/

GAP

y
ACTUAL

-

-

400 -

1 1

1

1953

1 1

1

1954

i i i

i i i

i i i

111

1 ' '

i i i

i i i

i i i

!

1955

1956

1957

1958

1959

I960

1961

1962

1963

1

1

PERCENT

PERCENT

|_J GNP GAP AS PERCENT OF POTENTIAL (Left scale)
• - • UNEMPLOYMENT RATE^ARight scale)

10

-5

I,

M I M I I M I I ,
1953

1954

1955

1956

1957

1958

1959

I960

1961

1962

1963

* SEASONALLY ADJUSTED ANNUAL RATES.
J/3J4% TREND LINE THROUGH MIDDLE OF 1955.
i/UNEMPLOYMENT AS PERCENT OF CIVILIAN LABOR FORCE; SEASONALLY ADJUSTED.
NOTE: A, B, AND C REPRESENT GNP IN MIDDLE OF 1963 ASSUMING UNEMPLOYMENT RATE OF 4%, 5%,
AND 6%, RESPECTIVELY.
SOURCES: DEPARTMENT OF COMMERCE, DEPARTMENT OF LABOR, AND COUNCIL OF ECONOMIC ADVISERS.




in agricultural employment. It is primarily because latent productivity
was exploited so effectively that unemployment remained high.
The estimated gap of $28 billion, or 5 percent, between potential and
actual output in the fourth quarter of 1961 reflected principally a shortfall
in persons employed. At the end of the year, there was room for a slight
further rise in average weekly hours worked. The impressive gains in
productivity during the year brought output per man-hour at the year-end
close to the full employment level indicated by past experience. Nevertheless, further gains in productivity as a result of fuller utilization of existing capacity may still be ahead. In any case, further additions to output
during the coming year are expected to require larger increases in employment than in 1961.
The unemployment rate will fall in the coming year if, and only if, production continues to rise in relation to the economy's potential. The
prospects for 1962 are discussed later in this chapter.
A full-utilization economy in 1963 would provide nearly 72 million civilian
jobs and generate an estimated $600 billion GNP (1961 prices). These
figures—5 million more jobs and nearly $80 billion more output than 1961
levels—suggest the magnitude of the opportunity and challenge we face.
To help visualize this challenge more concretely, Table 3 presents an illustrative pattern of employment, productivity, and output for the full year
1963 consistent with 4 percent unemployment.
TABLE 3.—Employment, output, and productivity, 1961 actual and 1963 illustrative
Employment (millions
of persons)
Sector
1961
actual
Total economy 3
Agricultural
Private nonagriculturaL.General government •'
Addendum:
Civilian employment
Unemployment

1963

illustrative^

Output (billions of
dollars, 1961 prices)
1961
actual 2

1963
illustrative i

Output per employed
person (dollars)
1961
actual 2

1963

illustrative 1

69.4

74.3

521.2

600

7,500

8,100

5.5
54.2
9.7

5.2
58.8
10.3

21.0
449.4
50.8

21
525
54

3,800
8,300

4,000
8,900

66.8
4.8

71.6
3.0

1
2 Illustrative pattern projected at 4 percent unemployment;
3 Estimates by Council of Economic Advisers.

by Council of Economic Advisers.

Includes military.
Sources: Department of Commerce and Department of Labor (except as noted).

Plant and Equipment Capacity
Periods of slack and recession in economic activity lead to idle machines
as well as idle men. Only once since 1949, at the trough of the 1958
recession, was there more excess plant and equipment capacity in U.S. industry than at the start of 1961. While increases in output during the
past year have led to fuller use of capital facilities, 1962 begins with
considerable room for expanded output from existing plant and equipment,




53

enough room to permit achievement of the full employment goal. This
excess capacity is available to be tapped on demand. It is easier to expand
employment at stable prices when tools are already available for new jobholders. Otherwise, capital might act as a bottleneck, obstructing the flow
of increased demand for goods into improved employment opportunities
for labor.
While unused capital is a reserve source of supply, it dampens the vigor
of demand. Although much of investment is undertaken primarily for
replacement and modernization, investment for expansion of capacity is
important to aggregate demand as well as to economic growth. Inducements to expand plant and equipment are stronger when present facilities
are fully utilized. The rate at which existing capacity is utilized also
influences the ability of firms to finance investment out of retained earnings.
Unused tools are a drag on profits. They yield no return and they impose
overhead costs for maintenance and depreciation.
The reliability of measures of productive capacity and capital stock is
severely limited by both conceptual and statistical difficulties. But an
increasing amount of quantitative evidence is becoming available. Carefully used, it can be very helpful in arriving at the needed qualitative
judgments about productive capacity. Two series of data on capital
utilization from 1953 to date are presented in Chart 3. One measures the
ratio of actual output to capacity output for all manufacturing industry.
The other shows the output-capital ratio: the ratio of the value of total
ouput to the value of the stock of plant and equipment, both expressed in
1954 prices, covering all private domestic business except residential
housing. Although the two measures are derived by substantially different
methods, they move together very closely, offering encouraging evidence
of their general validity as measures of capital utilization.
A number of significant points are evident from the chart:
(1) Measures of capital utilization, like unemployment rates, indicate
the persistence of slack in the economy over the past five years. Even during the expansion of 1959-60, operating rates and the ratios of output to
the stock of capital remained considerably below their 1955-56 levels.
(2) Recessions are clearly marked by excess capacity in plant and equipment. Capital was most underutilized at the 1958 trough; the low point
of early 1961 lies about midway between the 1958 rates and those of the
1954 recession. Because capacity grew slowly in 1958-61, excess capacity
in early 1961 was smaller than in 1958 even though unemployment was just
as large.
(3) Output gains must match the growth of plant and equipment
capacity in order to maintain rates of capital utilization. Periods of slow
advance in production, like 1956-57 and 1959-60, lead to declining rates
of utilization.




54

CHART 3

Capacity Utilization and Corporate Profits
PERCENT
- o - o BUSINESS OUTPUT AS PERCENT OF PRIVATE STOCK OF CAPITAL (0/K)
RATE OF CAPACITY UTILIZATION, MANUFACTURING (CU)
0/K

CU

GP/GNP
-

NP/GNP

16.4

15.6

56.0 - 94

14.8- 11.2

54.5 - 9 0

14.0- 10.4

53.0 - 8 6

13.2 -

9.6

-82

12.4-

8.8

51.5

50.0 - 7 8

8.0

48.5 - 7 4

7.2
• CORPORATE PROFITS, CORPORATE INVENTORY VALUATION
ADJUSTMENT, AND CORPORATE!CAPITAL CONSUMPTION ALLOWANCES"
AS PERCENT OF GROSS NATIONAL PRODUCT (GP/GNP)

47.0

— CORPORATE PROFITS AND INVENTORY VALUATION ADJUSTMENT AS
PERCENT OF GROSS NATIONAL PRODUCT (NP/GNP)
I I I

I I I 1 I 1 1 1 1 I I 1 I 1 I 1 I II 1 I I1 1 1 1 I 11 I 1

1953

1954

1955

1956

1957

1958

1959

I960

1961

SOURCE: COUNCIL OF ECONOMIC ADVISERS (BASED ON DATA OF DEPARTMENT OF COMMERCE
AND BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM).

(4) Considerable excess capacity remains in the economy despite the
rapid rise of utilization rates during 1961. While there is no clear benchmark of full utilization of capital, the operating rates and output-capital
ratios attained in late 1955 can serve as a reasonable indication. If GNP
had been at its estimated potential level in the last quarter of 1961, capital
utilization rates would have been approximately at the levels attained in
late 1955. Existing excess capacity in plant and equipment is thus compatible with full employment of the labor force.
(5) Levels of capital utilization have a potent influence on corporate
profits. The share of corporate profits in GNP moves closely with the
measures of capital utilization, although it swings somewhat earlier. Corporate depreciation allowances have increased rapidly and "gross profits"—
net profits and inventory valuation adjustment plus capital consumption
allowances—have been maintained during the 1953-61 period. But net
profits have declined as a fraction of GNP in recent years; the combination
of unrelenting overheads and depressed levels of output can fully account




55

for this "squeeze." As corporate capacity is put to fuller use, profits benefit
from larger margins as well as expanded sales.
PROGRESS IN

1961

The Situation at the Beginning of the Year
As 1961 began, economic activity was far below its full employment
level, and production and income continued to contract through February.
By most measures of the decline in economic activity, the 1960-61 recession
was the mildest in the postwar period. But the peak reached in May 1960
had followed a year of very slow advance in output and ended the shortest
expansion in the postwar period. At the 1960 peak, unemployment and
excess capacity were higher than at any prior postwar peak. Unemployment rates were higher during the 1960-61 recession than during the
slumps of 1948-49 and 1953-54; in this respect, the recession was almost
as severe as that of 1957-58.
The rate of use of existing facilities in late 1959 and early 1960 was
not conducive to substantial further increases in business fixed investment, nor were monetary conditions encouraging. Although there was a
brief interlude in the first quarter of 1960 when investment demand rose
sharply, this buoyancy was to a large extent a temporary aftermath of the
steel strike of 1959. As orders, sales, and profits proved disappointing,
investment in both fixed capital and inventories was cut back.
During this period, government fiscal programs gave little support to
aggregate demand. Total Federal expenditures, on income-and-product
account, showed little change between mid-1959 and mid-1960 as Federal purchases of goods and services actually declined. In January 1960,
Federal social insurance taxes were increased by about $2 billion a year.
Indeed, the sharp change in the relationship between Federal Government
receipts and expenditures was perhaps the most important factor in choking
off the recovery.
The recession followed the same pattern as previous postwar downswings.
With activity weakening, purchases of goods were cut back throughout the
private economy. Inventory investment, as usual, displayed the largest
decline among major components of GNP (Table 4). The decline of inventories, as well as of other major categories of expenditure, was concentrated in durable goods. Correspondingly, a decline of 12 percent in
durable goods manufacturing accounted for most of the fall in industrial
production from May 1960 to February 1961. Unemployment, which had
been 5.1 percent (seasonally adjusted) of the civilian labor force in May,
rose to 6.8 percent in February.
Once the contraction began, it was certainly moderated, and perhaps
shortened, by a rise in outlays at all levels of government. The automatic
stabilizers in the Federal fiscal system contributed to the stability of personal
consumption expenditure during the recession, as transfer payments rose




56

T A B L E 4.—Changes in output, income, and employment over the three quarters of the 7960—67
recession
[Seasonally adjusted]
Cyclical
trough:
First
quarter
1961

Cyclical
peak:
Second
quarter
1960

Item

Change,
peak to
trough

Billions of dollars, annual rates
Output (1961 prices):
514.2

Gross national product
Personal consumption expenditures
Gross private domestic investment:
Fixed investment
Residential nonfarm construction. ._
Other construction
Producers' durable equipment

502.9

-11.3

333.9

331.7

-2.2

69.5
21.2
19.9
28.4

64.2
19.4
20.6
24.2

-5.3
-1.8
.7
-4.2

5.4

State and local

-9.4

5.3
105.7

2.3
3.4

54.9
50.8

.5
2.9

352.7
23.3

Federal

-4.0

3.0
102.3
54.4
47.9

Change in business inventories
Net exports of goods and services
Government purchases of goods and services

354.3
20.0

1.6
-3.3

Income (current prices):
Disposable personal income
Corporate profits after taxes

Millions of persons
Employment:
Total civilian employment
Employment in nonagricultural establishmentsPrivate

67.0
54.6
46.1

66.8
53.5
44.9

-0.2
-1.1
-1.2

NOTE.—Detail will not necessarily add to totals because of rounding.
See Tables B-2, B-ll, B-15, B-19, and B-24.
Sources: Department of Commerce and Department of Labor.

by $3.0 billion and personal taxes fell by $0.7 billion (annual rates) to
offset much of the fall in private wages and salaries resulting from lower
employment.
Recovery During the Year
By the end of 1961, production and income had improved markedly, and
most economic indicators had surpassed their 1960 peaks. In the final quarter of 1961, GNP, measured in constant prices, was 7*/2 percent higher
than in the first quarter, and about 5 percent above the peak attained
in the second quarter of 1960 (Tables 4 and 5). The only major category
of expenditure that was lower than in the second quarter of 1960 was expenditure for producers' durable equipment. Industrial production in
December exceeded its low point of February by 13 percent, and was 4
percent above the previous peak attained in January 1960.
The increase of $41 billion (current prices, annual rate) in GNP from
the first to last quarters of 1961 distributed substantial gains in income
widely through the economy. Personal income grew by $24 billion. Wage
and salary disbursements expanded by $19 billion and accounted for




57

T A B L E 5.—Changes in output, income, and employment over three quarters of expansion, 7967
[Seasonally adjusted]
1961
Item

First quarter
(cyclical
trough)

Fourth
quarter i

Change,
trough
to fourth
quarter

Billions of dollars, annual rates
Output (1961 prices) :

Gross national productPersonal consumption expendituresGross private domestic investment:
Fixed investment
Residential nonfarm construction.
Other construction
Producers' durable equipment
Change in business inventories..
Net exports of goods and services
Government purchases of goods and services..
Federal
State and local-

502.9

540.2

37.3

331.7

347.8

16.1

64.2
19.4
20.6
24.2

71.4
23.2
20.2
28.0

7.2
3.8
-.4
3.8

-4.0

4.5

8.5

5.3
105.7

4.0
112.5

-1.3

54.9
50.8

59.9
52.7

5.0
1.9

354.3
20.0

375.6
2 23.8

21.3
23.8

Income (current prices):
Disposable personal income..
Corporate profits after taxes..

Millions of persons

EmploymentTotal civilian employment
Employment in nonagricultural establishments..
Private
1 Preliminary estimates of output and income by Council of Economic Advisers.
Third quarter data and change from first to third quarter.
NOTE.—Detail will not necessarily add to totals because of rounding.
Sources; Department of Commerce and Department of Labor (except as noted).

2

most of the gain in personal income. Incomes from dividends and business ownership also rose. Farm operators' net income from farming
increased from $12.0 billion in 1960 to $13.1 billion in 1961, and net
income per farm rose by nearly $350. Disposable personal income (after
taxes) grew by $21 billion over the three quarters of expansion, adding $92
to average per capita spendable income.
The effect of rising output is strikingly shown in the $3.8 billion increase—nearly 20 percent—in the annual rate of corporate profits after
taxes from the first to the third quarter. By all indications, corporate
profits rose further in the fourth quarter and probably exceeded $50 billion
before taxes and $25 billion after taxes.
Higher private incomes meant larger tax liabilities: Federal receipts in
the income-and-product budget rose by about $10 billion (annual rate)
in the three quarters of expansion, and the yield of State and local taxes
grew by $3 billion.
The recovery was .paced by a prompt and sharp reversal in inventory
investment, the volatile inventories of manufacturers of durable goods ac-




counting for a major share of the movement. During recessions, output
falls below final sales as some orders are filled out of excessive stocks. The
end of inventory liquidation in itself raises production to the level of sales.
And rising sales and orders in a period of economic recovery encourage
the accumulation of stocks, creating further gains in production. In 1961,
this characteristic switch from liquidation to accumulation occurred very
promptly, only one month after the trough in over-all activity, and was a
major factor in the $15 billion expansion of GNP in the second quarter.
Incentives for restocking did not arise wholly independently; they were
provided in large part by evidence of a strengthening in final purchases,
i.e., expenditures for GNP other than for inventory accumulation.
A key element in the rise of final demand was the increase in expenditures
at all levels of government. The upward trend of State and local government purchases continued unabated. The promotion of economic recovery
was a major aim of Federal budget policy in 1961. Scheduled obligations
and expenditures were speeded up in the numerous ways listed in Part
II and the Appendix to this chapter. Additional outlays came from
new Administration programs—some to assist individuals and areas hit
by economic recession and others to meet national needs of high priority.
Furthermore, in the spring and summer of 1961 when overriding national
security requirements led to increased expenditures for defense and space
activities, the existence of unutilized manpower and capital ruled against
an increase in tax rates. A careful appraisal of the direct and indirect
effects of increased Federal activity indicates that it was a major force—
probably the principal driving force—of the recovery of 1961.
Investment in nonresidential construction and producers' durable equipment, taken together, rose at an annual rate of $3.4 billion (1961 prices)
from the first to the last quarter of 1961, both responding to and contributing to the expansion (Table 5). With improving rates of utilization
of capacity, larger corporate profits, and readily available credit, business
fixed investment began to rise in the second quarter of 1961. In contrast,
business capital outlays had continued to decline during two quarters of
rising total output in both 1954 and 1958.
Residential nonfarm construction, which had fallen since mid-1959,
picked up in the early months of 1961 and continued to rise through the
year. Although the rate of new family formation has been relatively low,
and vacancy rates have continued to rise steadily, increasing disposable
incomes and favorable financial and liquidity conditions have stimulated
home building. Through much of 1960 and well into 1961, individuals
continued to increase their volume of liquid assets. Funds for conventional,
FHA, and VA mortgages were readily available; mortgage yields declined
moderately throughout the recession and into the summer of 1961 and
remained fairly stable the rest of the year.
The favorable financial environment for business investment and residential construction reflected the monetary and credit policies of the
621876 0-62-3



59

Government. These policies have facilitated the flow of funds into investment and have contributed to a stability of interest rates unusual for a
year of recovery.
Exports in the fourth quarter were $0.8 billion (annual rate) higher than
in the first quarter. But outlays on imports, partly to rebuild inventories,
rose by $2.1 billion, reducing net exports by $1.3 billion. Net exports is the
one component of GNP which tends to fall as business activity improves
cyclically.
Consumer outlays accounted for somewhat less than half the increase in
GNP from the first to the fourth quarter. Until the closing months of the
year, consumer spending did not quite keep pace with disposable income.
The ratio of personal saving to personal disposable income rose from 6.7
percent in the first quarter to 7.3 percent in the third. In the fourth
quarter, however, consumption did keep pace with income and expanded
by $8.0 billion (current prices, annual rate). Demand for new automobiles
sparked a rise in the fourth quarter of $3.2 billion (annual rate) in outlays
for consumer durable goods, which finally surpassed the peak that had been
reached in the second quarter of 1960.
The gains in production, income, and employment during 1961, in
comparison with previous expansions, are shown in Charts 4 and 5. Chart 4
displays the rise of GNP from its lowest quarter in each recession. In
CHART 4

Real Gross National Product
in Four Postwar Recoveries
GNP TROUGH = 100-1/
I 15

I 10

-

1954-55
\
1958-59

105

-

—
^

^

1949-50

100

95
0

I

2

3

QUARTERS AFTER GNP TROUGH 1/
I/BASED ON SEASONALLY ADJUSTED DATA.
I/TROUGH QUARTERS FOR GNP WERE 1949 II, 1954 TJ, 1958 I, AND 1961 I.
SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS.




6o

<

CHART 5

Employment, Production, and Income
in Four Postwar Recoveries
PERCENT OF CIVILIAN LABOR FORCE

CYCLICAL TROUGH = 100

120

EMPLOYMENT IN
NONAGRICULTURAL ESTABLISHMENTS

UNEMPLOYMENT RATE

110
1961

1954-55

1958-59

100
1954-55

901
0

I I I
2

I I
4

I

I I
6

I
8

I I
10

x\
0

I I I
12
14

MONTHS AFTER CYCLICAL TROUGH

PERSONAL INCOME

INDUSTRIAL PRODUCTION

.-

-

v

1949-50

120

14

CYCLICAL TROUGH = 100

CYCLICAL TROUGH = 100

130

I I I I I II
I I I II
2
4
6
8
10
12
MONTHS AFTER CYCLICAL TROUGH

•*'

130

-

-

"L
*
120

-

1949-50

/

-

1954-55
110

MO
?

/

-

/

—

&<r

A

1961

-

1958-59

' 1961

-

in n

100

1

0

1 1 1 1 1 1 1 I
1 1 1
2
4
6
8
10
1
2
14
MONTHS AFTER CYCLICAL TROUGH
1

1

0

1 1 1 1 1 1 1 1 1 1 1 1
2
4
6
8
10
1
2
1
4
MONTHS AFTER CYCLICAL TROUGH
1

NOTE: INDEXES AND RATE BASED ON SEASONALLY ADJUSTED DATA.
SOURCES: DEPARTMENT OF LABOR, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, AND
DEPARTMENT OF COMMERCE.




6i

the three previous cycles, the trough quarter for GNP came before the
month of the cyclical trough. In 1961 the cyclical trough, in February,
was in the middle of the quarter of lowest GNP. In Chart 5 the reference
point for all series is the cyclical trough month. These differences in timing
must be taken into account in comparisons of recoveries. There are also
differences in the composition of output: for example, the 1958-59 upswing
was more heavily concentrated in industrial production than the current
recovery.
On the whole, increases in production and income during the present
expansion of economic activity compare favorably with the two preceding
periods of expansion. However, these gains were not matched by equal
improvements in employment and unemployment. As noted above, one of
the principal reasons was that productivity gains during 1961 exceeded those
of earlier expansions. The year ended with unemployment at 6.1 percent
of the civilian labor force (seasonally adjusted).
In summary, real output rose during the 1961 recovery at an annual
rate of 10 percent. The gap between actual output and estimated potential
has been narrowed by $23 billion in three quarters; labor and capital have
been more efficiently utilized; and widespread gains in income have been
secured. The Nation has adjusted smoothly and easily to the marked
change of pace: no evidence of strain can be found, no bottlenecks have
developed, no excessive backlogs of orders have appeared. And prices
have been exceptionally stable, as Chapter 4 makes clear. Although the
economy at the end of 1961 was still short of full employment, the experience during the/year was gratifying and reassuring on many counts. And
it demonstrated the ability of the economy to advance efficiently at a rapid
pace when the underlying strength of private demand is reinforced by
appropriate Federal fiscal and monetary policies.
OUTLOOK FOR

1962

The Employment Act of 1946 requires an estimate of "current and
foreseeable trends in the levels of employment, production, and purchasing
power." Although the difficulties and risks of economic forecasting are well
known, neither government nor private enterprise can conduct its affairs,
develop its policies, and make its decisions without economic projections—
without making the best estimates that economic and statistical tools permit
of the economic framework within which it will have to operate in the
future. For example, it would be impossible to formulate either Federal
or State budgets without projections of future levels of income and business
activity and the tax revenues they will produce. In the Budget Message,
GNP for 1962 is projected at $570 billion (current prices), a rise of nearly
$50 billion, or almost 9J/2 percent, over 1961. A somewhat higher figure
is likely if the Congress enacts promptly the Administration's proposed tax
credit for investment. This section presents, with full recognition of the




62

margins of error inherent in economic projections, the appraisal of the
economic outlook underlying the budget.
The momentum of the current recovery will carry the economy to new
records in production, income, and employment during 1962. In the
closing months of 1961, private demand was rising briskly. The resulting gains in consumer incomes, profits, business inventory requirements,
and orders for durable goods will generate further increases in spending and
business activity in the coming months. Broad advances in the private
economy will be reinforced by a continued upward trend in Federal, State
and local government outlays.
The favorable prospects for private demand, together with current
economic programs and proposals of the Administration, point to a strong
and sustained expansion. The percentage gain in GNP (current prices)
in 1962 over the 1961 level can realistically be expected to match the
increases of 8^2-9J/2 percent in 1955 and 1959. Those two years, like 1962,
were the first full years of recovery from recession.
Expansion in GNP in 1962 is expected to be somewhat more moderate
than the annual rate of 11 percent (current prices) attained over the past
three quarters. But it is anticipated that output will continue to catch up
with potential, reducing slack and unemployment. Substantial increases
are expected in all major categories of expenditure. The expected total
increase is made up, very roughly, of the following parts: one-half, consumer outlays; one-fifth each, government purchases and private fixed
investment; and one-tenth, additions to inventories.
Survey of Major Categories of Expenditure
The rationale for this appraisal of the outlook may be indicated by a
brief survey of the key components of GNP.
Consumption. The ratio of total consumer expenditure to personal disposable income, 93.0 percent in 1961, is expected to rise slightly in 1962.
The proportion of income spent on nondurable goods and services typically
declines during expansion and, this year, will probably fall below the 81.3
percent recorded in 1961. In prosperous periods, consumers devote a larger
share of their incomes to increasing their wealth. But at the same time
they show a preference for accumulating wealth in the form of consumer
durable goods. The current strong liquid position of households is likely
to moderate their desire for additional liquidity and to reinforce demands
for durable goods this year. The brisk sales of automobiles in the fourth
quarter of 1961 also point in this direction. An increase in expenditures
for durables from 11.6 percent of disposable income in 1961 to some 12J/2
percent, approaching the proportions recorded in 1959 and 1960, will probably outweigh the slight decline to be expected in the fraction devoted to
nondurables and services.
Measured absolutely, rather than as shares of disposable income, all
components of consumer expenditure seem headed upward in 1962. Per-




63

sonal disposable income is likely to grow substantially. It will probably
advance at a somewhat slower rate than GNP for the following reasons:
(1) Corporate profits rise sharply in cyclical upswings, and dividend payments lag behind. (2) Government transfer payments to individuals are
held down when unemployment declines. (3) Collections from progressive
personal income taxes rise somewhat faster than personal incomes. But
disposable income will still absorb more than half of the dollar gains in
GNP, and consumer expenditure will account for about half of the total
increment in expenditure. Consumption is now about 65 percent of GNP;
no economic expansion can go far without support from consumers, and
every expansion provides substantial income gains for households. A rise
of $50 billion in GNP for 1962 would be accompanied by an increase of
about $100 in consumption per capita, permitting significant advances in
standards of living.
Government. State and local governments can be expected to add
about $1 billion a quarter to their purchases of goods and services, continuing their steady upward trend. Federal purchases of goods and services
will rise during 1962 but more slowly than over the past year. The average increase during the course of 1962 seems likely to be $1 billion a quarter,
compared with $1.7 billion in 1961. New Federal obligations, which
have some effect on business activity before the outlays they foreshadow,
are expected to rise by $5 billion in the year starting next July 1—after a rise
of $12/2 billion in the current fiscal year.
Inventories. Inventory-sales ratios have declined markedly during this
expansion, as is usual in the first year of an upswing. The ratio of inventories to GNP fell by about 5 percent over the last three quarters of 1961.
More rapid accumulation is to be expected—and welcomed—in the near
future. Analysis supported by prior cyclical experience suggests that inventories will soon begin catching up with total output. If they were to rise
at a quarterly rate of 2 percent, inventory investment would attain an
annual rate of more than $8 billion some time in 1962.
The threat of a midyear steel strike may produce added stockpiling
this spring. In the absence of a prolonged strike, the main effect would
be on the pattern of activity during the year, with the second quarter
stronger and the third quarter correspondingly weaker. Although the yearend levels and the full year totals might not be seriously affected, this
abnormal factor in inventory behavior would increase the difficulties of
appraising the real strength of the economy. A long strike, of course, could
seriously imperil the prospects for continued vigorous expansion.
Quite apart from the steel situation, inventory investment is likely to
reach its peak before the end of 1962 and cannot be expected to be a
significant expansionary factor in the latter half of this year.
Residential construction. With the aid of continued credit ease and
increased household incomes, residential construction ended 1961 with a
rate of activity $2 billion above the average for the year. Further mod-




64

erate gains are likely, in part from additions and alterations and in part
from new housing starts. Industry and government specialists have predicted housing starts of 1.4 million in 1962. Mortgage availability will
influence housing demand considerably. If funds remain readily available,
gains in household incomes are likely to strengthen the demand for new
homes.
Business fixed investment. As Chart 3 shows, rates of capital utilization
have been more favorable to investment demand in the last year than in
1958. Business outlays for durable equipment and nonresidential construction have risen more promptly and more vigorously to date than in the
comparable stage of the preceding expansion. Incentives to invest for
modernization and replacement purposes are also favorable. Furthermore,
business fixed investment is volatile; in peacetime expansions, it usually rises
as a fraction of GNP. Even the weak expansion of 1958-60 produced
a 22 percent increase in capital outlays from their low in the third quarter
of 1958 to their peak in the second quarter of 1960. The same performance
in the current expansion would mean a rise of $6 billion from the last quarter of 1961 to the last quarter of 1962. And the major determinants of
investment—corporate liquidity and profit rates, capacity measures, conditions in financial markets—point to more strength than in the last expansion. It seems probable that capital outlays in 1962 will surpass their
1958-60 performance.
Prospects for plant and equipment investment are difficult to assess quantitatively. Recent surveys suggest that businessmen have not yet planned
any major expansion of productive facilities. But improved economic
conditions have consistently led to substantial upward revisions of plans.
Whether business fixed investment as a share of GNP, 8.9 percent in 1961,
will approach the 1956 and 1957 figure of 10.7 percent or even substantially
surpass the 1960 figure of 9.3 percent cannot be foretold. Much depends
on the extent to which excess capacity declines over the next few quarters
and on the willingness of businessmen to count on continued prosperity.
Capital outlays will also be significantly influenced by the state of financial
markets. The financing of investment will be facilitated by the rising flow
of internal funds from retained earnings and depreciation allowances. But
corporate investment is almost certain to exceed corporate saving in 1962.
Corporations as a whole have strengthened their liquidity position, in part by
long-term financing ahead of investment needs in 1961. Nevertheless, they
will probably require substantial net external financing this year, involving
an increase in the security holdings of households and financial institutions.
Monetary policy can facilitate this external financing.
An important stimulus to capital outlays would be provided by enactment
of the proposed tax credit of 8 percent on expenditures for new durable
equipment. This measure would raise significantly the after-tax return
on new investment. Enactment of the tax credit will help assure sufficient
strength in this central component of demand at the crucial stage of the
recovery.




65

Another favorable factor for the later stage of recovery is the planned
revision by the Treasury of guideline schedules of depreciation on plant
and equipment. The revision will incorporate available current information about the economic lives of capital goods and the effects of technological change on obsolescence.
In 1955—57, capital outlays amounting to more than 10 percent of potential and actual GNP led to an annual rate of growth of slightly less than 4
percent in the business capital stock. Because total output did not grow
at an equal pace after 1955, excess capacity developed and capital outlays
were sharply reduced in the 1957—58 recession. The excess capacity that
emerged is more accurately attributed to underbuying than to overbuilding.
If purchases by consumers and government had been sufficient to keep the
economy fully employed, rates of capital utilization would not have fallen.
Business firms would have had sustained incentives to enlarge their productive facilities at the rate of nearly 4 percent a year. Better performance in
maintaining full use of resources could justify business fixed investment
amounting to 10 percent or more of the Nation's output.
Prospects for Full Employment
This appraisal of the prospects for production and income implies an
unemployment rate of 5 percent or somewhat lower at the end of 1962,
but not as low as 4 percent.
The achievement of 4 percent unemployment by mid-1963 requires a
gain of about 11 percent in GNP (in constant prices) over the coming
year and a half. This pace of advance would permit smooth and efficient
adjustments, avoiding bottlenecks that might generate serious upward pressures on prices. It would also allow a gradual transition toward the rates
of expansion that must be expected when full utilization is restored and
output can no longer rise more rapidly than productive potential. A
continued upward movement for more than two years with an over-all
gain of 20 percent in real GNP would represent a very strong expansion.
But a less ambitious rate of recovery to full employment would prolong
the waste of unused resources without gaining appreciably greater assurance
of stable prices.
While this rate of expansion seems feasible in the light of the prospects for
private demand and Administration policies designed to promote expansion
at a desirable pace, any appraisal of the economic outlook must take into
account a wide range of possible outcomes. Weakening of consumer
demand or lack of investment enthusiasm by business firms could endanger
the prospective gains of 1962 and slow down the expansion. Because of the
growth in the labor force and productivity, 1962 could achieve new highs
in output and even in employment without any reduction in the currently
excessive rate of unemployment. Large and continuing gains are needed to




66

bring output up to the economy's potential and to reduce unemployment
to 4 percent of the labor force for the first time since 1957.
An expansion that slows down prematurely is less likely to be lasting. A
slowdown, or even an expected slowdown, in the growth of sales can
diminish incentives to enlarge productive capacity and inventories. A
decline in capital spending and inventory accumulation can convert a
slowdown into a downturn. For this reason, prospects for a lasting expansion rest heavily on the vigor of the upswing over the next few quarters.
The buildup of inventories that is expected in the near future will contribute substantially to household incomes and to the strength of consumer
demand. But by late 1962, continued advance will depend heavily on the
ability of fixed investment outlays to replace inventories as a key expansionary force. If the expansion is vigorous earlier in the year, utilization
rates will be favorable to investment demand in late 1962, and, therefore,
to the continuation of the expansion itself.
On the other hand, private demand can rise too fast or too far. Too
rapid an expansion may strain the adjustment mechanisms of the economy.
In a dynamic economy, patterns of output and employment change from
one cycle to the next. It takes time to re-employ the jobless and to return
efficiently to full utilization of capacity. Hence, a very rapid expansion
of demand might involve price increases, bottlenecks, and inefficiencies
that could be avoided in a more gradual rise to the same levels. The current expansion has an enviable record to date: with a 10 percent annual
rate of increase of real output, it has substantially narrowed the gap between
actual and potential output; at the same time, the movements of prices, inventories, and orders show none of the symptoms of strain that would be associated with excessive speed. If demand for consumer durable goods and
business capital formation were quickly to attain the same strength relative to
incomes as in 1955, reasonable speed limits might be violated. In that
events full employment might be achieved sooner but policy might have to
contend with excess demands and inflationary pressures.
Still another challenge to policy might come from unexpected behavior
of unemployment relative to output. Given continued growth of potential
output along the 3 / 2 percent trend discussed earlier, the achievement of
full employment in mid-1963 would be associated with GNP of $600 billion
in 1961 prices. Deviations from historical trends in the size of the labor
force, average hours of work, and man-hour productivity can alter the
relationship between output and unemployment. Full utilization of resources may correspond to a somewhat higher or somewhat lower GNP.
In particular, the effects of measures (discussed in Chapter 2) to increase the
rate of growth of productivity, while adding to investment demand during
the expansion, may raise the productive potential output of the economy
above its current trend as early as 1963.




67

Stabilization policy has contributed significantly to the gratifying progress
of 1961 and to the favorable prospects for 1962. Policy will continue to
promote progress toward full employment, remaining alert to unforeseen
developments which might throw the economy off course. The flexibility
in existing policy instruments can be used to good advantage, as it was in
1961. Furthermore, Administration proposals now before the Congress
would greatly enhance the ability of stabilization policy to counter threats
of oncoming recession with speed and vigor. The record of stabilization
policy in 1961 and its tasks for 1962 are discussed in the remaining part
of this chapter.

PART II: POLICIES FOR MAXIMUM EMPLOYMENT
AND PRODUCTION
In Part I of this chapter, the progress of the economy in 1961 and the
prospect for further progress in 1962 were reviewed in terms of the
objectives of maximum employment, production, and purchasing power.
Part II describes more fully and specifically how government policy can,
does, and will promote progress toward these goals. Two major kinds
of government policy are involved: measures for economic stabilization,
which influence the total volume of spending; and measures to reduce
structural unemployment and underemployment by better mutual adaptation between available jobs and available workers.
ECONOMIC STABILIZATION

Insufficient demand means unemployment, idle capacity, and lost production. Excessive demand means inflation—general increases in prices
and money incomes, bringing forth little or no gains in output and real
income. The objective of stabilization policies is to minimize these deviations, i.e., to keep over-all demand in step with the basic production potential
of the economy.
Stabilization does not mean a mere leveling off of peaks and troughs in
production and employment. It does not mean trying to hold overall demand for goods and services stable. It means minimizing deviations
from a rising trend, not from an unchanging average. In a growing economy, demand must grow in order to maintain full employment of labor
and full utilization of capacity at stable prices. The economy is not performing satisfactorily unless it is almost continuously setting new records
of production, income, and employment. Indeed, unless production grows
as fast as its potential, unemployment and idle capacity will also grow.
And when the economy starts from a position well below potential, output
must for a time grow even faster than potential to achieve full utilization.




68

The Postwar Record
Despite the recessions of recent years and the inflationary excesses of the
early postwar years, the postwar record of economic stabilization is incomparably better than the prewar. The economy fluctuated violently in
1919-21 and operated disastrously far below potential from 1930 to 1942.
The 1929 level of GNP, in constant prices, was not exceeded, except
briefly in 1937, until 1939. The difference between the 17 percent unemployment of 193) and the 3 percent rate 10 years earlier is a dramatic
measure of the growth of the labor force and productivity even during depression. Since the war, the economy's detours from the path of full employment growth have been shorter in both time and distance. There have
been four recessions, but none of them has gotten out of hand, as did the
decline of 1929-33. All of the declines have been reversed within 13
months, before unemployment reached 8 percent of the labor force. For
this improved performance there are several reasons.
First, the war and preceding depression left business firms and households
starved for goods. Further, wartime earnings coupled with scarcities of
civilian goods, rationing, and price control, saturated business firms and
consumers with liquid assets. For these legacies of depression and war,
the economy paid a price in the inflations of 1946-48 and 1950, with delayed
effects throughout the past decade.
Second, the structure of the economy was reformed after 1933 in ways
which substantially increased its resistance to economic fluctuations.
The manner in which government tax revenues and income maintenance
programs serve as automatic or "built-in" economic stabilizers is described
below. The New Deal strengthened and reformed the Nation's banking
and financial system with the help of new governmental credit institutions,
deposit insurance, and loan and guarantee programs. These have virtually
eliminated the possibility that economic declines will be aggravated by
bank failures, foreclosures, and epidemic illiquidity.
Third, there is a significantly improved understanding of the manner in
which government fiscal and monetary tools can be used to promote
economic stability. Under the Employment Act and the climate of opinion
which it symbolizes, the Government has been expected to assume, and has
assumed, greater responsibility for economic stabilization.
Finally, businessmen and consumers no longer regard prolonged and deep
depression as a serious possibility. They generally expect recessions to end
quickly; they anticipate a long-term upward trend in the economy; and they
spend and invest accordingly. This stability of expectations is in part the
result of stability achieved in fact, and reflects general understanding of the
structural changes which have contributed toi it. But expectations of
stability are also a cause of stability—nothing succeeds like success.




69

Achieving Greater Stability
While our postwar performance is a great advance over that of prewar
years, it is still far from satisfactory. We have had no great depression, but
we have had four recessions. Even the relatively short and mild recessions
of the postwar period have been costly. In the last decade, the Nation has
lost an estimated $175 billion of GNP (in 1961 prices) by operating the
economy below potential. Industrial production has been below its previous
peak nearly half the time since 1946.
There is general agreement that economic fluctuations in the United
States are intensified by—if not always caused by—a rhythm in inventory
investment, alternating between periods in which stocks are accumulating
at an excessively high rate and periods in which they are being liquidated.
But it is not beyond hope that stabilization measures, both automatic and.
discretionary, can be strengthened in force and improved in timing so as
to compensate for inventory swings better than has been true in the past.
If this is done the swings themselves will be dampened.
The possible gains from improved economic stabilization are impressive.
Losses of production, employment, and consumption will be cut. More
saving and investment will be realized, contributing steadily to the longrun growth of production potential. Business, consumer, and labor decisions
will allocate resources more efficiently when they respond less to cyclical
prospects and more to long-run developments. There will be less need and
less justification for restrictive practices which are now designed to provide
sheltered positions in markets periodically hit by recession.
It is true that an economy operating steadily at a high level of employment, with only limited excess plant capacity, is more subject to the risks
of price increases than an economy with heavy unemployment and large
unused capacity. However, the dampening of economic fluctuations may
itself help to counter this tendency. Cyclical fluctuations have been
exerting a "ratchet effect" on prices; costs and prices have been relatively
inflexible downward in recessions but have been responsive to increases
in demand during recoveries. Cyclical swings in total spending also tend
to be accompanied by sharp and transitory shifts in the composition of
spending. Because prices and costs respond more readily to upswings than
to downswings, these rapid changes in the composition of demand impart an
upward bias to the whole price level. These sources of upward price bias
will tend to be reduced as a more even pace of advance is achieved.
To capitalize on the potential gains of stabilization requires skillful use of
all economic policy, particularly budgetary and monetary policy.
T H E FEDERAL BUDGET AND ECONOMIC STABILITY

Federal expenditures and taxes affect total employment and production by
influencing the total volume of spending for goods and services. Direct
Federal purchases of goods and services are themselves part of total demand
for national output. In addition, the Federal Government makes "transfer




7°

payments" to individuals, for which no current services are rendered in
return. Examples are social security and unemployment insurance benefits,
and veterans compensation and pension benefits. Both purchases of goods
and services and transfer payments add to private incomes and thereby
stimulate consumption and investment. Federal taxes, on the other hand,
reduce disposable personal and business incomes, and restrain private
spending.
By increasing the flow of spending, additional Federal outlays—with tax
rates unchanged—have expansionary effects on the economy. Whether an
expansion in spending—^government or private—leads mainly to more
output or mainly to higher prices depends on the degree of slack in the
economy. Under conditions of widespread unemployment and excess
capacity, businessmen respond to higher demand by increasing production;
under conditions of full employment, prices rise instead. In the slack economy of 1961, for example, additional demand from both private and public
sources was readily converted into increased production.
Built into the Federal fiscal system are several automatic defenses against
recession and inflation. Given the tax rates, tax revenues move up and down
with economic activity, since most taxes are levied on private incomes or
sales. Indeed, tax revenues change proportionally more than GNP.
Furthermore, certain Federal expenditures, such as unemployment compensation payments, are automatically affected by the state of the economy.
Economic fluctuations, therefore, result in substantial changes in Federal
expenditures and revenues, even when basic expenditure programs and
tax rates remain unchanged. With the present system of tax rates and unemployment compensation payments, a one-dollar reduction in GNP
means a reduction in Federal tax receipts and an increase in transfer payments totaling about 30 cents. Therefore, private incomes after Federal
taxes fall by only 70 cents for each reduction of one dollar in GNP. For
this reason, any initial decline in spending and output is transmitted with
diminished force to other sectors of the economy.
These automatic or built-in stabilizers moderate the severity of cyclical
swings in the economy. If the forces causing a downturn in economic
activity are weak and transient, the automatic stabilizers cushion the severity
of the decline and give the basic recuperative powers in the private economy
a better opportunity to produce a prompt and full recovery.
But if the forces causing the downturn are strong and persistent, the
built-in stabilizers may not suffice to prevent a large and prolonged recession. Furthermore, they are blindly symmetrical in their effects. When
economic activity quickens after a slump, the rise in Federal revenues
begins immediately and slows the recovery in employment and incomes.
For these reasons, the task of economic stabilization cannot be left entirely to built-in stabilizers. Discretionary budget policy, e.g., changes in
tax rates or expenditure programs, is indispensable—sometimes to reinforce, sometimes to offset, the effects of the stabilizers.




71

To be effective, discretionary .budget policy should be flexible. In
order to promote economic stability, the Government should be able to
change quickly tax rates or expenditure programs, and equally able to reverse its actions as circumstances change. Failure to arrest quickly a downturn in income, production, and employment may shake the faith of firms
and households in prompt recovery and thereby lead to a cumulative
decline. Delay in countering inflationary pressures may permit the development of a self-propelling speculative boom, with disruptive consequences
to the domestic economy and the balance of payments. If moderate fiscal
action can be taken quickly and can be speedily reversed when circumstances
warrant, the dangers of overstimulating or overrestricting the economy are
much smaller than if fiscal responses are sluggish and difficult to reverse.
Fiscal policy can be made a more flexible and more powerful tool of
economic stabilization by means that do not change the basic structure and
level of taxation or the long-run size and composition of Federal expenditure
programs. Changes in the basic structure and level of taxation should
be made by the Congress with full deliberation in the light of the many
relevant considerations, including the long-run revenue needs of the Government, equity among individuals and groups, and the effects of various
taxes on economic efficiency and growth. Similarly, changes in the
magnitude and content of government expenditures should represent the
considered judgment of the people and the Congress on national priorities.
For purposes of economic stabilization all that is needed of tax policy is
temporary variation in the general level of tax rates within the existing structure, and all that is required of government outlays is timing of
certain expenditures so that they bolster employment and purchasing power
when the economy needs stimulus and taper off as it approaches full employment. In both cases, the form of action required for purposes of
stabilization and the procedure for taking timely action can be agreed upon
in advance.
The President's Recommendations
The President has recommended a three-part program for economic stabilization. Its enactment would be the most significant step forward in
policy for economic stabilization since the Employment Act itself. These
three measures parallel recommendations of the Commission on Money and
Credit, a private group of leading citizens representing diverse economic interests and viewpoints.
Stand-by capital improvements authority. Under the first measure, the
Congress would give the President stand-by authority to initiate at a time
of rising unemployment up to $2 billion of public investments. More specifically, the program of accelerated capital improvements could be initiated
by the President within two months after the seasonally adjusted unemployment rate (a) had risen in at least three out of four months (or in four




out of six months) and (b) had risen to a level at least one percentage
point higher than its level four months (or six months) earlier. Before
invoking this authority, the President would be required to make a rinding
that current and prospective economic developments require such action
to achieve the objectives of the Employment Act.
Under the program, the President would be authorized to commit up to
(1) $750 million for direct Federal expenditures, (2) $750 million for
grants-in-aid to State and local governments, (3) $250 million in loans to
such States and localities as would otherwise be unable to meet their share
of project costs, and (4) a further $250 million to be distributed among
the above three categories as he might deem appropriate. Once initiated,
the program could be terminated at any time by the President.
The program is designed to permit the timely initiation and execution
of capital improvement projects which are desirable in their own right.
To insure that the projects are appropriately timed, several important safeguards are incorporated in the proposal. An expanded capital improvements program initiated by the President under this authority would automatically be terminated within 12 months after initiation, unless extended
by the Congress. Once a program had been terminated, a new program
under this authorization could not be initiated by the President for 6
months. With respect to grant-in-aid expenditures, the President would
be required to prescribe rules to assure that assisted projects were of high
priority, were a net addition to existing State and local expenditures, and
were of the type which could be started quickly and carried speedily to
conclusion. Under existing legislation, Federal advances are provided to
aid State and local governments to plan projects which would meet these
specifications.
To insure that the projects are desirable on their own merits, the proposal would limit direct Federal expenditures to projects and programs
previously authorized by the Congress. Appropriate projects would include
resource conservation (e.g., reforestation, reseeding of range lands, timber
stand improvement) and various Federal public works, including construction, repair, or modernization of Federal buildings. Examples of projects for
which State and local governments could receive grants are hospitals, airports, schools, waste treatment facilities, street repairs and improvements,
water angl sewer systems, and deferred maintenance and improvement of
public buildings.
The unemployment criteria for triggering the accelerated capital
expenditures program are rigorous enough to prevent untimely or premature activation, but not so restrictive as to delay the effects of the
program until late in the recovery period. The criteria for initiation
of the program would have been met in the early stages of each of the four
postwar recessions. Furthermore, no false signals would have been given.
Even if the criteria were to give a false signal in the future—for example




73

if unemployment were to rise because of a major strike—the President
simply need not invoke the authority.
Table 6 shows the dates at which the unemployment criteria would first
have been met in each recession of the past decade, the date of the previous
peak, the date of the low point of the recession, and the date at which the
economy subsequently returned to full employment. In every case, Presidential authority could have been invoked within four months after the previous
cyclical peak and well before the trough of the recession. The first impact of
orders, contracts, and expenditures under the program would have been felt
within one or two months after the authority was invoked.
TABLE 6.—Hypothetical timing of proposed capital improvements program in four postwar business
cycles
Business cycle
peak

Unemployment criteria
met *

Business cycle trough

Subsequent achievement
of full employment 2

November 1948

March 1949

October 1949

October 1950

July 1953

November 1953

August 1954

July 1955

July 1957

November 1957

April 1958

(3)

May 1960

August 1960

February 1961

(3)

1 Criteria are met in any month in which the seasonally adjusted unemployment rate (a) had risen
in at least three out of four months (or in four out of six months) and (b) had risen to a level at least one
percentage point higher than its level four months (or six months) earlier. Program could be initiated
within two months after criteria are met.
2 The date at which the economy returned to the neighborhood of a 4 percent unemployment rate.
3
l u l l employment has not been achieved since the beginning of the 1957 recession.
Source: Council of Economic Advisers.

The major impact of the program would occur when a stimulus is
needed to arrest economic decline or support recovery. It would not be
delayed until private demands are already pressing hard on the economy's
capacity to produce. Table 6 indicates that a quick-starting, fast-moving
capital expenditures program begun in the early stages of recession could
have been terminated before the economy returned to full employment.
Stand-by tax reduction authority. The second recommendation is to
establish a procedure for making quickly a temporary across-the-board reduction in the individual income tax rate. Such a reduction would be a
speedy and powerful method of augmenting purchasing power throughout
the Nation.
Specifically, the President would be given stand-by authority, subject
to congressional veto, to reduce temporarily all individual income tax rates,
in accordance with the following procedure:
(1) Before proposing a temporary tax reduction, the President must
make a finding that such action is required to meet the stabilization objectives of the Employment Act.
(2) Upon such finding, the President would submit to Congress a
proposed temporary uniform reduction in all individual income




74

tax rates. The proposed temporary rates may not be more than
5 percentage points lower than the rates permanently established
by the Congress.
(3) This change would take effect 30 days after submission, unless
rejected by a joint resolution of the Congress.
(4) It would remain in effect for 6 months unless revised or renewed
by the same process or extended by a joint resolution of the
Congress.
(5) If the Congress were not in session, a Presidentially proposed tax
adjustment would automatically take effect but would terminate
30 days after the Congress reconvened. Extension would require
a new proposal to the Congress, which would be subject to
congressional veto.
An across-the-board variation in the basic individual income tax rate
can be a potent stabilization measure. At the current level of taxable income, a reduction of 1 percentage point in the tax schedule would add about
$2 billion, at annual rates, to disposable personal income, and a full 5 point
reduction would increase disposable income by $10 billion. Since nearly
three-quarters of the individual income tax is collected through payroll deductions, the rate reduction would have an immediate effect upon incomes
available to consumers. Payments of taxes on estimated declarations would
also be reduced, raising still further the current flow of consumer incomes.
Higher consumer incomes mean higher consumer spending. The resultant
expansion in output and employment by the consumer goods industries and
their suppliers would increase the incomes of those already employed and
create jobs for many of the unemployed.
Policy to reverse recession or speed recovery often calls for a temporary
boost in private purchasing power. Permanent reduction in tax rates
could give the economy as strong, or stronger, a stimulus but at the possible
sacrifice of tax revenues which would be most desirable after the economy
returned to full employment. Private demands are weak in periods of recession and slack, but a large part of their weakness results from recession and
slack themselves. Once full employment has been restored, with the help
of the temporary tax reduction as well as other measures, private demands
will be stronger simply because capacity operation is itself a powerful stimulus. At that time, the private economy no longer needs the fiscal stimulus
which is appropriate to reverse a decline or support a recovery. In that case
a return to permanent tax rates may be desirable in order to provide room in
a non-inflationary full employment economy for defense outlays and other
continuing government programs of high priority. Indeed, a Federal surplus, normally to be expected at full employment, will provide saving to
finance private investments stimulated by capacity operations and prosperity
profits. Under the proposal, a tax adjustment can be speedily invoked to




75
($21876 0-62-6

meet the temporary requirements of economic stabilization, without permanently sacrificing revenues needed at a later date.
Improvement of the unemployment compensation system. The third
major recommendation is to strengthen the Federal-State unemployment
compensation system. The proposed legislation will make the unemployment insurance system more effective in meeting its two objectives. Individual workers will be more secure against the risks of unemployment. The
economy will be more secure against the risks of sharp declines in purchasing power.
As pointed out in Part I of this chapter, unemployment benefits are now
generally smaller, relative to earnings, than the 50 percent envisaged when
the system was first inaugurated a generation ago. Furthermore, it has
been necessary during the last two recessions to enact temporary legislation
to extend the period of unemployment compensation for the large numbers
of workers who had exhausted their benefit rights. To insure that experienced workers who suffer long-term unemployment during periods of
prosperity will receive the same benefits as during recessions, the Administration has proposed a permanent Federal program under which the period
of unemployment compensation would be extended by as much as 13 weeks
for workers who have had at least three years' experience in insured work.
The proposal also provides, when unemployment is widespread, a Federal
program extending the period of benefits for all insured workers, including
those who do not qualify for the permanent program of extended benefits
because they have had less than three years of experience in insured work.
This extension could be put into effect upon proclamation by the President
when insured unemployment has reached 5 percent and the number of benefit exhaustions in a three-month period has reached 1 percent
of insured employment. In these periods, regular benefits are exhausted
by large numbers of workers and particularly by workers who have only
limited experience in insured employment.
To raise the percentage of wages compensated by unemployment insurance and to accomplish other needed reforms, the following recommendations' are made: (1) an additional three million workers should be
covered; (2) States should be required to meet higher standards with
respect to the amount of weekly benefits; (3) States which have experienced
heavy insured unemployment should receive reinsurance grants; (4) a State
may not deny compensation to claimants undergoing approved training.
Since the unemployment compensation system is an insurance program
designed to be self-financing, increased benefits must be matched by increased contributions. The proposal would increase the taxable wage base
from $3,000 a year to $4,800 and make permanent the temporary increase
adopted in 1961, which raised the net Federal unemployment tax from
0.4 percent to 0.8 percent.




These three recommendations together constitute a far-reaching innovation in discretionary fiscal policy. At the same time, they are moderate
proposals, carefully defining and limiting the authority which they confer.
They will go a long way toward providing the flexibility in fiscal policy which
is essential if the Nation is to make prosperity the rule and not the exception
in its economic life. In the past 7 years the Nation has undergone three
recessions. In the 4 / 2 years since 1957, full employment has not once been
attained. While some fluctuations in business and consumer spending will
always occur, nothing in our free enterprise economy condemns us to repeat
this recent experience. Prudent innovations in the tools of fiscal policy, and
careful use of both new and old tools, can greatly improve the stability of
our economy in the years ahead.
BUDGET POLICY, 1958-63

The Federal budget has influenced economic activity in recent years in
two ways: through the workings of the built-in stabilizers, and through discretionary changes in the budget program. It is not easy to separate these
two influences. In order to do so, it is necessary, first, to view Federal
fiscal transactions in the same accounting framework used to describe the
whole economy. The national income accounts budget is a way of measuring and classifying Federal transactions which accords with the national
income and product accounts for the economy. Second, it is convenient
to have a numerical measure of the expansionary or restrictive impact of
a budget program on the economy. The full employment surplus is such
a measure. This section discusses these two somewhat unfamiliar but highly
useful tools and then applies them in an analysis of recent and prospective
budget policies.
The National Income Accounts Budget
The effects of Federal receipts and expenditures on the income stream
are most accurately represented when the budget is viewed in the framework
of the national income accounts. These accounts present a consistent
record and classification of the major flows of output and income for the
entire economy, including the transactions of the Federal Government.
There are three major differences between the Federal budget as it is
conventionally presented (the so-called "administrative budget") and the
accounts of the Federal sector as they appear in the national income. The
major differences between these two budgets, and between both of them
and the consolidated cash budget, are schematically summarized in
Table 7. There are other, less significant differences among the budgets,
such as the treatment of intragovernmental transactions.
First, the national income accounts budget, like the consolidated cash
budget, includes the transactions of the trust funds, which amount currently to about $25 billion per year and have a significant impact on the
economy. Highway grants-in-aid, unemployment compensation payments,
and social security benefits are examples of trust fund transactions. Because




77

T A B L E 7.—Major differences among three concepts of the Federal budget
Budget concept
Item

Timing of receipts

Administrative

Consolidated
cash

National income accounts
Accruals

Collections.. _

Collections..

Treatment of net loans and other credit transactions

Included

Included

Excluded

Treatment of trust fund transactions

Excluded

Included

Included

+

Source: Council of Economic Advisers.

the traditional budget—or administrative budget—is primarily an instrument of management and control of those Federal activities which operate
through regular congressional appropriations, it excludes the trust funds,
which have their own legal sources of revenue.
Second, transactions between government and business are, so far as possible, recorded in the national income accounts budget when liabilities are
incurred rather than when cash changes hands. This adjustment in timing
affects both government purchases and taxes, shifting them to the point
in time at which they are likely to have their principal impact on private
spending decisions. The choice of an accrual, rather than a cash, basis for
timing is particularly important for the highly volatile corporate income
tax. Since these taxes are normally paid more than six months after the
liabilities are incurred, payments of corporate income taxes, as recorded in
the administrative budget, run substantially below accruals in a period of
rising economic activity. For fiscal year 1962, this difference is estimated
at about $3 billion.
Finally, unlike the administrative budget, the national income accounts
budget omits government transactions in financial assets and already existing
assets. The largest omission is the volume of loans extended by the Federal
Government. This volume is estimated at $4 billion net of repayments
in fiscal year 1962. While these loans have important effects on economic
activity, they are properly viewed as an aspect, not of fiscal policy, but
of monetary and credit policy, and are so discussed later in this chapter.
Borrowers from the Federal Government, like borrowers from private
financial institutions, acquire cash by incurring debts. They add thereby
to their liquidity, but not directly to their incomes.
The Full Employment Surplus
As pointed out earlier in this chapter, the magnitude of the surplus
or deficit in the budget depends both on the budget program and on the
state of the economy. The budget program fixes both tax rates and expenditure programs. The revenues actually yielded by most taxes, and the
actual expenditures under certain programs like unemployment compensation, vary automatically with economic activity, v To interpret the economic
significance of a given budget it is, therefore, essential to distinguish the




78

automatic changes in revenues and expenditures from the discretionary
changes which occur when the Government varies tax rates or changes expenditure programs. The discussion that follows runs in terms of the national income accounts budget.
In Chart 6 this twofold aspect of fiscal policy is portrayed for the
fiscal years 1960 and 1962. Since tax revenues and some expenditures depend on the level of economic activity, there is a whole range of possible
surpluses and deficits associated with a given budget program. The particular surplus or deficit in fact realized will depend on the level of economic
activity. On the horizontal scale, Chart 6 shows the ratio of actual GNP to
the economy's potential, labeled the "utilization rate." On the vertical
scale, the chart shows the Federal budget surplus or deficit as a percentage of
potential GNP.
CHART 6

Effect of Level of Economic Activity
on Federal Surplus or Deficit
HYPOTHETICAL
FULL EMPLOYMENT

ACTUAL

BUDGET
ESTIMATE

B

-I
92

94

96
UTILIZATION RATE

i / A C T U A L GNP AS PERCENT OF POTENTIAL GNP.
SOURCE: COUNCIL OF ECONOMIC ADVISERS.




79

98

100

The line labeled "fiscal 1960 program" represents a calculation of the
budget surplus or deficit which would have occurred at various levels of economic activity, given the Federal expenditure programs and the tax rates of
that year. For the reasons explained earlier, the same budget program
may yield a high surplus at full employment and a low surplus or a deficit at
low levels of economic activity. The actual budget position in fiscal year
1960, a surplus of $2.2 billion or 0.4 percent of potential GNP, is shown at
point A; this accompanied a level of GNP 5 percent below potential. Had
full employment been achieved that year, however, the same basic budget
program would have yielded a surplus of about $10 billion, or nearly 2 percent of gross national product (point F in the chart). The line labeled
"1962 program" similarly shows the relationship between economic activity
and the surplus or deficit, for the budget program of 1962; the expected
deficit is shown at point B, and the full employment surplus at point G.
It is the height of the line in Chart 6 which reflects the basic budget
program; the actual surplus or deficit depends both on the height of the
program line and the level of economic activity. In other words, discretionary fiscal policy, by changing the level of Government expenditures
or tax rates shifts the whole program line up or down. The automatic
stabilizing effects of a given budget program are reflected in the chart by
movements along a given line, accompanying changes in economic activity.
One convenient method of comparing alternative budget programs, which
separates automatic from discretionary changes in surplus and deficits, is to
calculate the surplus or deficit of each alternative program at a fixed level of
economic activity. As a convention, this calculation is made on the assumption of full employment. In Chart 6, the points F and G mark the full
employment surplus in the budget programs of fiscal years 1960 and 1962,
respectively. The statement, "the fiscal 1960 budget had a larger full
employment surplus, as a fraction of potential GNP, than the 1962 budget"
is a convenient shorthand summary of the fact that the 1962 budget line
was below the 1960 line, yielding smaller surpluses or larger deficits at
any comparable level of activity.
The full employment surplus rises through time if tax rates and expenditure programs remain unchanged. Because potential GNP grows,
the volume of tax revenues yielded by a fully employed economy rises,
when tax rates remain unchanged. Full employment revenues under existing tax laws are growing by about $6 billion a year. With unchanged discretionary expenditures, a budget line drawn on Chart 6 would shift upward
each year by about 1 percent of potential GNP.
The full employment surplus is a measure of the restrictive or expansionary impact of a budget program on over-all demand. Generally speaking, one budget program is more expansionary than another if it has a
smaller full employment surplus. One budget program might have the
smaller full employment surplus because it embodies greater Federal purchases of goods and services, in relation to potential GNP. By the same




8o

token, it leaves a smaller share of full employment output for private
purchase. This means that full employment is easier to maintain under
the budget program with the smaller surplus, because less private demand
is required.
It also means that inflation is more difficult to avoid, because there are fewer goods and services to meet private demand should
it prove strong. Alternatively, one budget program might have a smaller full
employment surplus than a second because it involves either lower tax rates
or larger transfer payment programs. In that event, private after-tax incomes are larger at full employment for the first budget program than for
the second. As a result, private demand would be stronger under the first
program.
If the full employment surplus is too large, relative to the strength of
private demand, economic activity falls short of potential. Correspondingly, the budget surplus actually realized falls short of the full employment
surplus; indeed, a deficit may occur. If the full employment surplus is too
small, total demand exceeds the capacity of economy and causes inflation.
But whether a given full employment surplus is too large or too small
depends on other government policies, as well as on economic circumstances affecting the general strength of private demand. If the full
employment surplus is too large, more expansionary monetary and credit
policies may strengthen private demand sufficiently to permit full employment to be realized. Changes in tax structure, stimulating demand while
leaving the yield of the tax system unchanged, might have the same effect.
Similarly, restrictive changes in other government policies can offset the
expansionary influence of a low full employment surplus.
A mixture of policies involving (1) a budget program with a relatively
high full employment surplus and (2) monetary ease and tax incentives
stimulating enough private investment to maintain full employment, has
favorable consequences for economic growth, discussed in Chapter 2.
The Budget in 1958-60
The analysis of the budget program in terms of the full employment
surplus points to a probable major cause of the incomplete and short-lived
nature of the 1958-60 expansion. The most restrictive fiscal program of
recent years was the program of 1960. Its full employment surplus exceeded any from 1956 to date. Estimates of the full employment surplus
by half years are shown in Chart 7. The full employment surplus declined
sharply as a result of higher expenditures during the 1957-58 recession
until it reached an estimated $3 billion in the second half of 1958. Thereafter, it rose gradually through most of 1959 but then increased sharply to
about $12^2 billion in 1960. Thus, whereas the Federal budget contributed
to stability during the contraction phase of the cycle and during the first
year of the expansion, it was altered abruptly in the direction of restraint
late in 1959 at a time when high employment had not yet been achieved.




8i

CHART 7

Federal Surplus or Deficit:
Actual and Full Employment Estimate
(Nafional Income Accounts Basis)
BILLIONS OF DOLLARS*

- FULL EMPLOYMENT ESTIMATE
- ACTUAL

l /

15

10

_

SURPLUS

III

i

7ZZ

777,

i

I

-5
DEFICIT

-10

[
1956

I

I
1957

I
1958

I

1

1

1959

I960

CALENDAR

1961

1962

I

I
1963

YEARS

* SEASONALLY ADJUSTED ANNUAL RATES; DATA ARE FOR HALF-YEARS.
J/ESTIMATED

BEGINNING SECOND HALF 1961.

SOURCES: DEPARTMENT OF COMMERCE, BUREAU OF THE BUDGET, AND COUNCIL OF ECONOMIC ADVISERS.

Federal Fiscal Activity in 1961-62
Immediately upon taking office, the new Administration moved vigorously
to use the fiscal powers of the Federal Government to help bring about
economic recovery. Federal procurement was accelerated by Presidential
directive early in February, and tax refunds were also expedited. A listing
of Administration stabilization policies during 1961 is provided in the
Appendix to this chapter. Changes in transfer programs added about $2
billion to the combined total of transfer payments for fiscal years 1961 and
1962. The Veterans Administration advanced the payment of $150 million
of veterans' life insurance dividends into the first quarter of calendar year
1961, and then made an extra dividend payment of $218 million at midyear.
The Congress promptly adopted a number of measures requested by the
President. A Temporary Extended Unemployment Compensation Act
was adopted, providing for extension of exhausted benefits and giving the
Administration time to develop a comprehensive program for permanent




improvement in unemployment compensation. Social security benefits
were increased effective in August, and aid was extended to children
dependent on unemployed persons. Transfer payments represent a major
element of flexibility in Federal expenditures. While transfer programs—
like any Federal outlays—ought to stand on their merits, the precise timing
of worthwhile new programs properly depends on economic conditions.
The objectives of economic stabilization in 1961 argued strongly for speeding
the introduction of programs like improvements in social security, scheduled
to be adopted later.
Other Federal outlays increased in 1961 to meet specific national needs.
Federal grants to States and localities for urban renewal, area redevelopment, highways, and public assistance increased. Direct payments to farmers were increased as a result of participation in the feed grains program.
The largest increases in expenditures came in the areas of defense and space
exploration. These programs were expanded for reasons of national security, not for economic stabilization. However, stabilization objectives
ruled against any increases in tax rates to finance these new expenditures.
During 1961, the estimated full employment surplus declined significantly,
from an annual rate of $12/2 billion in the second half of 1960 to $ 8 ^
billion in the second half of 1961. As shown in Chart 7, the actual surplus
or deficit has been substantially different from its full employment counterpart. Since private incomes declined during late 1960 and into 1961, the
actual budget position shifted from a surplus of $ 1 billion in the second half
of 1960 to a deficit of $5 billion in the first half of 1961. Then as the economy began to recover, the deficit, in the national income accounts, shrank to
$2 billion in the second half of the year. The rising deficit in the early part
of 1961 was due both to a shift downward in its budget program line (as
discretionary budget outlays were increased) and to a movement to the left
along the new line (as private incomes and Federal tax receipts declined).
The Federal national income accounts budget appropriately showed its
largest deficit early in 1961, when the economy was near the trough of recession. Since then, the deficit has been steadily declining in spite of rising
expenditures, and a surplus is expected in the first half of 1962. The administrative and cash deficits show a different time pattern, with deficits
rising in the 1962 fiscal year, primarily because tax collections lag behind
tax liabilities.
The fiscal actions taken during the past year reflect the Administration's
philosophy that the budget is a positive instrument for economic stabilization. According to the original January 1961 budget estimates, expenditures on national income-and-product account were expected to reach a level
of $98 billion in fiscal year 1962. Present estimates, which incorporate all
of the changes made by executive and legislative action, indicate that these
expenditures will amount to more than $106 billion. This increase in




expenditures is itself responsible for a rise in the gross national product that
can be estimated conservatively at $15 billion.
Budget Policy for Fiscal 1963
The balanced administrative budget proposed for fiscal year 1963 projects
an increase over the current fiscal year of nearly $6 billion in Federal outlays
on income-and-product account. Because of the $2 billion a year increase
in social insurance taxes effective January 1, 1963, the full employment
surplus rises in the first half of 1963. But it remains considerably below
the level of 1960 (Chart 7). Fiscal policy will be less restrictive than it was
in the late stages of the last recovery. The budgetary program, yielding a
surplus on income-and-product account of $4.4 billion reflects the reasonable expectation that 4 percent unemployment will be reached by the
end of the 1963 fiscal year. The feasibility of this objective and the outlook for the economy have been appraised in detail in Part I above. Obviously, the strength of private demand over the next 18 months cannot now
be assessed with precision. Any plans covering the uncertain future are
necessarily risky. A less expansionary budget with a larger full employment surplus would provide added assurance of price stability but only at
the cost of increased dangers of an incomplete recovery. A more expansionary budget would, on the other hand, improve the outlook for maximum
production and employment but increase the risks of rising prices.
The risks of an incomplete recovery, on the one hand, or of rising prices
on the other, are fortunately reduced by the automatic stabilizing characteristics of the budget. If private demand proves excessively bouyant, the
added revenues can be expected to enlarge the surplus in the budget, thereby moderating inflationary pressures. Conversely, any shortfall in private
demand will likewise be partially countered by a shortfall in tax revenues.
In addition, discretionary policy will remain flexible. First, monetary policy can be used flexibly. The Federal Reserve can attune its policies to
the pattern of output, employment, and prices as it unfolds during the
months ahead. Second, as the experience of 1961 demonstrated, the budget
itself is a flexible tool which can be adjusted during the course of a fiscal
year by varying the timing of outlays and by legislative action. Finally,
the President's stabilization proposals described earlier in this chapter,
would, if adopted, significantly strengthen the government's ability to act
swiftly and energetically in meeting unforeseen economic developments.
MONETARY AND CREDIT POLICIES AND ECONOMIC STABILITY

The second major instrument of the Government for economic stabilization is monetary and credit policy, interpreted in the broadest sense to
encompass all governmental actions affecting the liquidity of the economy
and the availability and cost of credit. Here the Federal Government has
broad and inescapable responsibilities, stemming basically from the sovereign
right of Congress "to coin money, regulate the value thereof. . . ." The




Government's influence is exercised in several ways—principally through
Federal Reserve control of the total volume of bank reserves, but also
through Treasury management of the public debt and through the administration of a variety of government lending and credit guarantee programs.
These powers can significantly affect the flow of funds into business investment, capital expenditures of State and local governments, residential
construction, and purchases of consumer durable goods. Monetary and
credit policies can be flexible, responding at short notice to changes in
economic circumstances and prospects.
In an important sense, the private economy of the United States contains
automatic or "built-in" monetary stabilizers. Unless the Government acts
to make compensating changes in the monetary base, expansion of general
economic activity, accompanied by increased demands for liquid balances
and for investment funds, will tend to tighten interest rates and restrict the
availability of credit. Similarly, a recession of business activity will normally lead to lower rates, easier terms, and less stringent rationing by
lenders. Like fiscal stabilizers, the. monetary stabilizers are often useful
built-in defenses against recessions or against inflationary excesses of demand. But these defenses may not be strong enough. Being automatic
stabilizers, they can only moderate unfavorable developments; they cannot
prevent or reverse them. And at other times, unless the monetary authorities offset their effects, they can operate counter to basic policy objectives,
braking expansions short of full employment. Discretionary policy is
essential, sometimes to reinforce, sometimes to mitigate or overcome, the
monetary consequences of short-run fluctuations of economic activity. In
addition, discretionary policy must provide the base for expanding liquidity
and credit in line with the growing production potential of the economy.
For these reasons, the Federal Reserve System is continuously making and
executing discretionary monetary policy.
The proper degree of general "tightness" or "easiness" of monetary
policy, and the techniques by which the various governmental authorities
can appropriately seek to achieve it, depend on the state of the domestic
economy, on the fiscal policies of the Government, and on the international
economic position. When the economy is in recession or beset by high
unemployment and excess capacity, monetary policy should clearly be
expansionary. How expansionary it should be depends very much upon
the extent of the stimulus that the government budget is, and will be, giving
to over-all demand. When demand is threatening to outrun the economy's
production potential, monetary policy should be restrictive. How restrictive it should be depends, again, upon how much of the job of containing
inflation is assumed by fiscal policy. There is, in principle, a variety of
mixtures of fiscal and monetary policies which can accomplish a given
stabilization objective. Choice among them depends upon other objectives
and constraints. The relation of this choice to economic growth was noted
above; the stabilization of demand at full employment levels by a budget




85

surplus compensated by an expansionary monetary policy is favorable to
growth. On the other hand, monetary policy may in some circumstances
be constrained by the balance of payments. If low interest rates encourage
foreign borrowing in the United States and a large outflow of funds seeking
higher yields abroad, monetary policy may have to be more restrictive
than domestic economic objectives alone would dictate. The first line
of defense is to try to adapt the techniques of monetary control, so that
policy can serve both masters at once. Even so, difficult decisions of balance
between conflicting objectives may sometimes be unavoidable.
Monetary Policy and Debt Management
At the beginning of 1960, monetary policy was restrictive and interest
rates were generally at postwar peaks. Despite bullish expectations about
the economy, interest rates soon began a slow decline that lasted seven or
eight months, aided by a gradual reversal of Federal Reserve policy
(Table 8) beginning in March and furthered by the recession starting in
May.
However, the Federal Reserve's anti-recession policy, for the first time
since the early 1930's, was constrained by a serious balance of payments
situation. Through its choice of expansionary monetary techniques, the
Federal Reserve sought to avoid adding to the already large outflow of shortterm capital. The 3-month Treasury bill rate did not fall below 2 percent.
Long-term interest rates declined from their peaks but remained considerably above their previous cyclical troughs (Chart 8). This was a matter of serious concern because of the importance of long-term interest rates
for business capital investment, residential construction, and State and local
governmental spending on public facilities. And neither the money supply
nor long-term private financing responded as promptly as in previous
periods of monetary ease.
The new Administration faced in January 1961 both economic recession
and a crisis of confidence in the dollar that threatened to limit sharply the
use of expansionary monetary policy for economic recovery and growth.
The Administration's forthright attack on the balance of payments problem
restored confidence in the dollar. The resulting reduction in the discount
on the dollar in the forward markets for foreign exchange eliminated any
significant advantage in sending short-term funds abroad and helped to
make it possible for monetary policy to support domestic expansion.
The ability of monetary policy to support economic expansion at home
without stimulating outflows of short-term funds was simultaneously enhanced by new Federal Reserve open market techniques and by Treasurey
debt management policies. In his Economic Message of February 2, the
President had emphasized the importance of "increasing the flow of credit
into the capital markets at declining long-term rates of interest to promote
. domestic recovery," while "checking declines in the short-term rates that
directly affect the balance of payments." The Federal Reserve sold short-




86

CHART 8

Interest Rates in Three Business Cycles
PERCENT PER ANNUM

YIELDS

CORPORATE Aaa BOND
(MOODY1 S)

5

1960-61
\

P

1

P ^ "

4 -

•

\

P
u tuininiiitt^
"ttUlUUlUl

3

1953-55

2

1

1

-12

1

1

I

1

- 0 -8
1

1 1

1

-6

-4

.

|

|

I

-2

1

0

1

1

2

1

1

1

4

1

1

6

8

1 1

1
0

FHA MORTGAGE YIELDS

7

-

P
.1960-61

1

6

y
1957-59

5 -P
mJ »0«««

Dntl

""«««»ui.ummIO

m
»*n«iHItIIIIHUfI
1953-55^^

4 /. 1 1 1 1

-12

1

1

1

1

1

I

I

-0 - 8 - 6 - 4 — 2
1

1 1

1

0

1

1

2

1

4

1

I

1

6

I

1 1

8

1
0

3 MONTH TREASURY BILL RATE

4 _ (NEW ISSUES)

P

3

P

-

\

\

P

'

inn

2

1960-61

\

\

1957-59 ' ^
\

1

-

' *
1
\

\

1953 -55

0

1

1

I I I 1 1 1 1 1 I 1 1 1 1
-4 -2
0
2
4
6
8 1
0
MONTHS FROM CYCLICAL TROUGH
NOTE: DATA ARE PLOTTED FROM CYCLICAL PEAK (P) TO 10 MONTHS AFTER CYCLICAL TROUGH (T).
SOURCES: MOODY'S INVESTORS SERVICE, FEDERAL HOUSING ADMINISTRATION, AND BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM.
t i l l

-12

- 0 -8
1




-6

T A B L E 8.—Principal Federal Reserve monetary actions,

Date

1960-61

Action

1960: March,

Federal Reserve open market operations modified so as to ex^rt moderately less
restraint on bank reserve positions than in earlier months. Effect was to
allow reduction in net borrowed reserves.

May...

Open market operations modified to provide reserves for moderate expansion of
bank credit and money supply.

June--.

Discount rates reduced from 4 percent to 3M percent.

July....

Margin requirements reduced from 90 percent to 70 percent.

August

Authorized member banks to count about $500 million of vault cash as required
reserves. Reduced reserve requirements against demand deposits at central
reserve city banks from 18 percent to 17V3 percent, effective September 1,
releasing about $125 million of reserves.

AugustSeptember.

October
NovemberDecember...

1961: January-early
February...
FebruaryDecember. .

December

Discount rates reduced from 314 percent to 3 percent. Open market operations
modified to suggest a positive attitude toward increasing the availability of
reserves.
Purchased short-term U.S. Government securities other than Treasury bills for
first time since 1958 to minimize downward pressure on 3-month bill rate,
thus keeping bill rate more competitive internationally.
Authorized member banks to count all vault cash in meeting reserve requirements, reduced reserve requirements against demand deposits at central
reserve city banks from 17^ percent to 16H percent, raised requirements for
country banks from 11 percent to 12 percent. Net effect of actions was to release about $1.3 billion of reserves.
Open market operations aimed at maintaining ease in member bank reserve
positions, with seasonal increases in. reserve funds about offset by gold outflow
and other factors draining reserves.
On February 20, began providing reserves through purchases of longer-term
U.S. Government securities, while selling short-term Government securities
at times.1 Expansion in money supply became more rapid later in the year,
with monetary ease being maintained throughout the year.
Board of Governors announced increase in maximum rates payable on savings
and other time deposits, effective January 1, 1962. The action was taken to
promote competition for savings and to encourage retention of foreign funds
by member banks and thus moderate pressures on this country's balance of
payments.

1
Treasury also purchased very long-term U.S. Government securities for Government investment accounts.
In his Economic Message of February 2, President Kennedy had announced that the Federal Reserve
and Treasury were developing techniques to help keep long-term rates down while holding short-term rates
at internationally competitive levels.
Source: Council of Economic Advisers.

term securities, while the Treasury further increased the outstanding supply
through new cash offerings. On February 20, the Federal Reserve announced a new policy of providing bank reserves through purchases of U.S.
Government securities of longer maturities, particularly in the 3- to 6-year
range. Its purchases of U.S. Government securities of maturity of more
than 1 year amounted to $2.6 billion in 1961. The Treasury, in administering the investment portfolios of various government investment and trust
accounts, made substantial purchases of securities of maturities of more than
10 years. Aided by these actions, long-term bond rates declined until May
and rose only moderately thereafter in the face of an economic recovery
that had begun in February.
Through substantial net purchases of U.S. Government securities, the
Federal Reserve increased member bank reserves in 1961 by about $1 billion. As a result banks steadily expanded their loans and investments; the




increase during the year was considerably more than in 1960 and about the
same as in the peacetime record year, 1958. Persistently expecting an uptrend in market interest rates, banks maintained lending rates in the face of
generally weak demands for short-term loans, and added $6 billion to their
holdings of U.S. Government securities. However, the expansion of bank
holdings of Government securities made more funds available on the open
market. And the high level of bank holdings of short-term government
securities, combined with abundant free reserves, put pressure on banks to
expand business loans and to lend directly in the capital markets. As monetary ease persisted and expectations of rising interest rates subsided, banks
stepped up purchases of State and local securities and expanded mortgage
lending. The 7 percent increase in total bank deposits and currency during
1961 fell just short of the peacetime record, although public preference for
time deposits held the increase in the money supply (demand deposits and
currency) to about 3 percent.
The liquidity of the economy was also increased by changes in the
composition and level of the Federal debt held outside the Federal Reserve
and the Treasury. Open market and debt management operations added
substantially to the supply of U.S. Government securities maturing within
1 year. The volume of less liquid securities, maturing within 1 to 5 years,
declined. The volume of outstanding securities greater than 5 years in
maturity remained the same. The average maturity of that part of the
debt held outside the Federal Reserve and U.S. Government investment
accounts declined from 58 months to 56 months. The average maturity
of the total marketable public debt changed little in 1961. Two advance
refundings, designed to have a minimal impact on over-all liquidity, helped
to offset shortening as a result of mere passage of time.
Federal Reserve and Treasury debt operations provided the basic liquidity
necessary for economic expansion. Individuals, in addition to increasing
their deposits in commercial banks, stepped up their accumulation of
claims on such financial intermediaries as savings and loan associations, mutual savings banks, and life insurance companies, while cutting
down their purchases of securities on the open market. This behavior was
in part a response to the high level of interest and dividend rates paid by
financial intermediaries relative to yields of high-grade open market securities. Liquid assets held by the public—defined to include the money
supply, savings deposits and shares, U.S. Savings bonds, and short-term
U.S. Government securities—grew by 7 percent in 1961, paralleling the
rise in GNP. Financial intermediaries used the funds which flowed into
them from the public to extend credit by acquiring mortgages, bonds, and
other loans and securities. In this way, their operations both increased
the liquidity of individuals and made more long-term credit available.
The total volume of mortgage, corporate, and State and local long-term
financing rose sharply to what appears to be a new record (Table 9).




TABLE 9.—Funds raised in money and capital markets, by type of instrument, 1957-61
[Billions of dollars]
Type of instrument

1957

1958

1959

1960

36.6

TotaL.
Federal obligations 2_.
Short-term s_.
Long-term 4_
Private.
Short-term
Business bank loans.
Consumer credit
Other
Long-term
State and local securities.
Corporate securities
Other securities 5
Mortgages

46.2

61.2

39.5

1.1

9.0

11.3

-2.2

5.5
-4.4

-1.2
10.2

5.5
5.8

-5.1
2.9

10.5
-3.9

35.6

37.3

49.9

41.6

43.5

7.4
2.3
2.8
2.3

5.3
1.3
.3
3.7

16.9
7.5
6.4
3.0

13.4
3.2
3.9
6.3

9.8
2.0
1.1
6.7

28.2
4.6
9.8
1.7
12.1

32.0
5.7
8.2
2.8
15.3

33.0
4.9
6.5
2.5
19.2

28.1
3.6
6.9
2.2
15.4

33.7
5.3
7.9
2.4
18.1

50.1

1
Preliminary estimates by Council of Economic Advisers.
2 Excludes consumer-held savings bonds and notes issued to international organizations; includes nonguaranteed securities issued by Federal agencies.
3 Direct marketable issues maturing in one year or less.
4
Includes direct Treasury issues maturing after one year and all nonguaranteed securities.
5
Investment company share issues and foreign security issues.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System (except as noted).

Corporations borrowed unusually heavily in long-term capital markets but
added in the aggregate almost as much to their financial assets, of a generally liquid character, as to their financial liabilities. Monetary ease,
in facilitating this financing, laid the financial groundwork for expanded
corporate capital spending in the future.
Because of the expansion in liquidity and in the supply of credit through
financial institutions, interest rates were relatively stable during 1961, in
sharp contrast to the previous upswing (Chart 8). The rate of 3-month
Treasury bills fluctuated within the narrow range of 2^4 and 2 }4 percent
during most of the year, rising somewhat above this range toward the close.
Most long-term rates declined through May and thereafter increased by
only a small amount. Rates on home mortgages, which are more sticky
than most other rates, continued to fall until midyear, and then remained
fairly stable. Thus, 1961 has demonstrated that interest rates do not have
to rise sharply in cyclical recoveries. Their movement is not governed by
immutable natural law. It depends upon all economic circumstances and
governmental policies affecting the supply of funds and the demand for
them.
The behavior of interest rates during the year may also have signaled
the ending of the upward trend in rates from the low levels at which they
were pegged prior to the Treasury-Federal Reserve Accord of 1951. While
this trend was in part an adjustment to the profitability of investment in
capital goods, it also reflected the spread of inflationary expectations. Recent stability in industrial and consumer prices may, however, diminish in-




flationary psychology, so that inflation premiums would gradually be shaken
out of the interest rate structure.
The climate for equity financing was also favorable during 1961. Common stock prices rose by about 25 percent, anticipating in part a recovery of
corporate profits, and the average dividend yield on stocks fell below 3
percent.
Federal Credit Programs
The Administration sought to make credit readily available at liberal
terms through programs of Federal lending and Federal insurance and
guarantee of private lending. Important steps were taken to stimulate
housing construction. Early in the year, the Federal Housing Administration (FHA) reduced the maximum permissible rate on insured mortgages
in two steps, from 5% to 5J4 percent. The Federal National Mortgage
Association (FNMA) supported these reductions by its secondary market
operations in mortgages, raising both its purchase and selling prices repeatedly. Up to midyear, sales of mortgages by FNMA exceeded purchases, but after midyear its operations added to the supply of funds available for mortgages. The Federal Home Loan Bank Board and the regional
Banks liberalized regulations and reduced interest rates on advances in order
to stimulate mortgage lending by savings and loan associations.
For the longer run, the Housing Act of 1961 expanded or liberalized
many existing credit programs and initiated hew ones. A new FHA insurance program was set up for middle-income housing, with FNMA also
prepared to purchase these mortgages under its special assistance programs.
Maturities up to 35 years, in some cases up to 40 years, were authorized for
FHA-insured mortgages and insurable loan-to-value ratios were increased.
A new FHA program for insurance of long-term home improvement loans
was instituted. FNMA made the new home improvement loans eligible
for purchase under its secondary market operations, and, when used to
finance rehabilitation of homes in urban renewal areas, the new loans are
eligible for purchase by FNMA under its special assistance program.
FNMA also was authorized to make short-term loans secured by federally
underwritten mortgages. Funds were provided for loans for public facilities, college housing, farm housing, housing for the elderly, and FNMA
special assistance. The capital grant authority for urban renewal was
increased by $2 billion.
Other Federal credit programs contributed to making credit more generally available at liberal terms in 1961. In particular, the Small Business
Administration reduced the interest rate on loans made in areas of substantial unemployment and instituted a simplified program to expand
bank participation in small business loans.
Federal credit programs will support economic expansion during the
coming fiscal year. New commitments are expected to rise to record levels.
Direct loans and mortgage purchases (including trust fund purchases) will

91
621876 O-62-7



approach $9 billion, $3 billion more than anticipated collections on outstanding loans. New commitments to guarantee or insure private loans
will for the first time reach $20 billion.
Monetary Expansion and Recovery
As the economy advances toward full employment, it will need more
liquidity. Throughout the postwar period, and particularly in the three
previous economic recoveries, the growth in liquidity has fallen considerably
short of the growth in GNP. The economy had to work off the excess
liquidity inherited from the war, interest rates were generally rising, and
expectations of higher prices were spreading. These factors worked to
reduce the liquidity requirements of the economy relative to GNP. And
the growth in nonmonetary liquid assets diminished even more the needed
growth in the money supply (bank deposits and currency). Business
firms, government units, and individuals learned, to their advantage, how
to minimize holdings of cash.
For each 1 percent rise in GNP in the three past economic recoveries,
commercial bank deposits and currency increased by only about one-third
of 1 percent, while liquid assets, more broadly measured, increased by about
two-fifths to three-fifths of 1 percent. If these relationships should hold in
the current economic recovery, and if gross national product rises to full
employment levels by the middle of 1963—an increase of more than
20 percent from the trough in the first quarter of 1961—commercial bank
deposits and currency would grow over the same period by 7-8 percent
and liquid assets by 11-12 percent.
In the current recovery, however, the factors that served to limit liquidity
requirements in the earlier recoveries may well be less important. In
particular, interest rates may appropriately be more stable, for reasons
already explained. Thus, these estimates of needed liquidity are probably
conservative. The appropriate expansion of liquidity will depend upon
the strength of private demands, on the tightness of fiscal policy, and on
the balance of payments position.
IMPROVING THE MOBILITY OF RESOURCES

Maximum employment and production depend not only on the success
of stabilization policy in maintaining demand at appropriate levels but also
on the mobility of labor and other productive resources in response to
changes in demand and cost. If frictional and structural unemployment
can be diminished, demand can be pressed further before encountering
bottlenecks and price increases. Thus, measures to improve the mobility
of resources enable stabilization policy to aim at, and to attain, higher levels
of employment and production. Such measures are a basic part of the
Administration's economic program.




92

Labor Market Policies
Changes in technology and tastes are constantly altering the pattern of
demand for labor in our economy. New industries appear and expand
while old ones decline; job opportunities multiply in one region and disappear in another; new skills are required as old ones become obsolete.
The more rapidly an economy grows and changes, the greater the flux in
its labor markets.
A high level of over-all demand is a prerequisite for the efficient allocation
of labor resources in a dynamic economy. It furnishes the most important
single incentive for economically desirable labor mobility—the magnetic
attraction of available job openings. However, a high level of demand
will not by itself ensure the best possible degree of occupational, industrial,
and geographic labor mobility, for it will not eliminate some important
impediments to the desirable response of labor to job opportunities. Certain features of seniority, pension, and other benefit rights may serve to hold
labor in industries and areas experiencing declining demand. Lack of
knowledge of job openings and lack of the skills required to fill them constitute important barriers to labor mobility, and the high cost of moving is
an insurmountable obstacle to the migration of many low-income families to
areas of expanding employment. It is in the best interest of the economy,
as well as of the individuals involved, that these impediments be reduced
and that every wage earner be in a position to select the most favorable
alternative from the widest possible range of employment opportunities.
Employment exchange. Letting employers know about available workers
and telling workers about available jobs are difficult administrative and
technical problems in a labor market as complex as ours. Yet doing this
well can significantly reduce the number and size of labor shortages and
help eliminate pockets of unemployment and underemployment.
A major effort has begun to improve the United States Employment
Service so that it can do a better job in matching job vacancies with people.
The staff has been substantially expanded, particularly in the metropolitan
areas where most workers and jobs are concentrated. This staff will need,
most importantly, to emphasize improvement in the quality of its counseling
and placement work. The flow of information about jobs should be made
nationwide through more extensive exchanges of job information among
the State agencies. Also, since the performance of the important labor
exchange function should not suffer from the tremendous administrative
problems of administering unemployment compensation, these two activities
should be separated where the volume of work permits.
As the United States Employment Service succeeds in improving its
services, more people will use it. The larger the number of employers and
workers using the Employment Service, the more complete will be the
knowledge of the labor market available to each of them. A greatly




93

strengthened United States Employment Service will facilitate an expanded
rate of economic growth and contribute to the effectiveness of such specific
government programs as Area Redevelopment, Rural Redevelopment, and
the proposed programs for Trade Assistance and Manpower Development
and Training.
Training: The economic need for facilitating labor mobility through
education and training programs is evidenced by the simultaneous existence
of very low unemployment rates in various skilled, technical and professional
occupations and relatively high unemployment among the less skilled groups.
Programs for education and training should be directed particularly toward
new entrants into the labor force and the training of adults for positions
of increased productivity and income. Racial discrimination in training,,
as well as in hiring, must be eliminated. It is wrong—that is reason
enough—and it is also an enormous waste of human talent.
The Administration is proposing a program to provide useful employment and training for young people through three pilot programs financed
in whole or in part by the Federal Government. These programs provide
for on-the-job training, public service employment and training, and
employment, training, and educational opportunities through service in a
Youth Conservation Corps. Special training programs for young people
are contemplated; such programs are urgently needed in urban slum areas.
Some of these programs for the training of youth should help, directly and
indirectly, to stimulate and guide the flow of migration from the farm; in
April 1960, 43.8 percent of the entire farm population and 59.0 percent of
the nonwhite farm population were under age 20.
Lack of education certainly does not imply lack of aptitude, and widened
educational opportunities enable individuals to improve their employment
opportunities as well as the quality of their lives. The Administration's
program for aid to States and educational institutions in extending and improving adult literacy programs is an important step toward reducing structural unemployment.
The Administration's key proposal for manpower development and
training provides for the establishment of programs for selection, placement, and on-the-job training, and for improvement of State training
facilities. Although intended primarily for the unemployed and underemployed, these programs would also be open to other qualified persons
desiring to improve their skills or to acquire new skills.
Compensation for workers participating in a training program is essential. At present, many individuals are confronted with the hard choice
between compensation without training and training without compensation; the necessity for this choice should be eliminated. Unemployed
workers in most States are still disqualified from receiving unemployment
insurance benefits if they participate in education and training programs.




94

Moreover, workers receiving benefits are required to be continuously available for job placement. Compensation for training would make it financially possible for an unemployed individual to complete a full course of
training or retraining. Under the proposed program, allowances would be
provided for certain trainees not receiving unemployment compensation
benefits. Thus a large part of the cost of trainee compensation under the
program would be offset by reductions in unemployment compensation
payments and various other public assistance expenditures.
A major feature of the proposal is the provision for government studies
on a national and local basis to determine the future requirements of the
economy for various occupations and skills, to anticipate prospective manpower shortages, and to assure that workers are trained for occupations
where opportunities will exist.
Resource Use in Agriculture
The agricultural population has long been a major source of manpower
for U.S. industry. Many more children are born and raised on farms than
will be needed to produce the Nation's food and fiber. They must be
educated, trained, and guided to nonagricultural employment. Many
adults now earn substandard incomes in farming. They are not in a technical sense structurally unemployed, but their distress is nevertheless a symptom
of structural maladjustment. Programs of the kind just discussed—to
facilitate labor mobility and training—can and should help many of these
individuals to find new employment.
During the first two decades of this century, there was serious question whether agriculture could, with the closing of the land frontier,
continue to meet the food and fiber demands of a growing national economy. The rate of growth in farm output was declining, and food and
fiber prices were rising relative to other wholesale prices. The resulting
public concern led to (1) increased emphasis on conservation and resource
investment and (2) increased allocation of public funds for research and
education designed to speed progress in agricultural technology.
By the mid-1920's, agricultural productivity was rising and farm employment declining. The full implications of rapid technological progress in
agriculture were, however, obscured by the depression and by the Second
World War and the Korean conflict. During the depression, the catastrophic decline in demand for farm products was the compelling problem,
and policy was directed to protecting farm prices and incomes from its
consequences. During the war and the Korean conflict, government programs were designed to encourage increases in output and to protect farmers
from the effects of price reductions when emergency demands disappeared.
During the 1950's, the full effects of the programs set in motion early in
the century began to be felt. The demand for farm output rose only slightly




95

faster than the population. Rapid gains in productivity put farm prices and
incomes under increasing downward pressure. Farm programs designed
for depression and war were continued, in order to hold at least part of the
social gains from increasing agricultural productivity within the agricultural
sector. Farmers also responded by leaving agriculture at the most rapid
rate in history. Use of labor declined by almost one-third while output increased by more than one-fourth between 1950 and 1961.
By 1960, it was clear that agriculture's relationship to the general economy
had undergone a fundamental change in several respects. Agriculture can,
without question, meet any foreseeable demands for food and fiber placed
upon it. In 1910, it required 13.6 million farm workers to feed a Nation
of 92.4 million people. By 1960, the population had increased to 180.7
million and farm employment had fallen to 7.1 million. The effects of
fluctuations in national economic activity on the demand for farm output
have been damped by built-in floors under consumer spending and by
continuation of the emergency farm programs. Nevertheless, the stability
and growth of the national economy are still of great importance to the
farm population. Failure to maintain full employment limits the ability
of industry to absorb farm workers displaced by advancing technology.
During periods of peak economic activity, migration has been above 5 percent of the farm population. During recessions in the last decade, the
migration rate out of agriculture has fallen considerably. Thus the problem
of agricultural labor mobility is very largely a question of the availability of
nonagricultural job opportunities. If job opportunities are available, the
general manpower policies discussed above can facilitate the necessary
migration and ease the human problems of adjustment.
Caught between the pressures of a slowly rising demand for farm products, rising productivity in agriculture, and limitations on nonfarm employment opportunities, total farm income and farm income per capita or per
farm family have lagged behind incomes in the rest of the economy. The
commodity programs have protected farm incomes from even greater declines, but at considerable budgetary expense and at some cost in delaying
adjustment of patterns of resource use in agriculture. In 1961, farm incomes
were increased and a significant start was made toward reduction of costs
of surplus accumulation, storage, and disposal.
Objectives of agricultural policy as it develops in the future should encompass both (1) continuation of agriculture's historic role as a major contributor to national economic growth and (2) equitable distribution of gains
in agricultural productivity between farmers and consumers. Achievement
of these two objectives will require continued rapid transfers of labor from
the farm to the nonfarm sector and reduction in resources devoted to the
production, storage, and disposition of surplus production.




96

Appendix
P R O G R A M FOR E C O N O M I C

RECOVERY AND

GROWTH

When the new Administration took office on January 20, 1961, it moved
with speed and vigor to deal with the recession that had begun in May
1960. At his press conference of February 1, the President announced a
series of administrative actions. He followed this with a comprehensive
"Program to Restore Momentum to the American Economy," delivered
before the Congress on February 2. Legislative requests, some of them
directed toward the immediate situation, others toward future recovery
and growth, were laid before the Congress in this speech and in a series
of messages during the year.
The following is a list of the actions taken during 1961 to foster economic
recovery and growth. Included also are measures (other than defense and
foreign aid) which, though primarily directed to other purposes, contributed significantly to growth.
A. EXECUTIVE AND ADMINISTRATIVE ACTIONS

1. Accelerated Procurement and Construction
The President directed Federal agencies to accelerate procurement and
construction planned for the rest of fiscal year 1961 under existing funds.
2. Post Office Construction
It was announced that post office construction, originally scheduled for
implementation over 18 months, would be compressed into 10 months
(March to the end of the calendar year). Although changes were
made in this directive before the end of the calendar year, there was a substantial acceleration during the first half of 1961 in the provision of new
offices. Projects for post offices were concentrated in areas of high
unemployment.
3. Federal-Aid Highways, School and Other Construction
On February 2, the President made available $718 million of Federal-aid
highway, funds scheduled for release in the fourth quarter of fiscal 1961.
Quarterly apportionments for the first and second quarters of fiscal 1962
were also released ahead of schedule, in May and August. On February
16, the President urged State Governors to speed the spending of $1.1
billion in Federal aid for highways, schools, hospitals, and waste treatment
facilities.
4. Accelerated Tax Refunds
Taxpayers who were eligible for refunds were requested to file returns
early to speed refund payments. In the first three months of 1961, individual income tax refunds totaled about $2.1 billion, 31 percent more than in
1960.




97

5. Veterans Life Insurance Dividends
On February 1, the President announced that he had directed the
Veterans Administration to advance the payment of veterans life insurance
dividends. The total payable, $258 million, over the entire calendar year
was made available in the first quarter. In addition, a special dividend
payment of $218 million was made in late June and in July.
6. Price Supports and Farm Storage Payments
Price supports were raised on corn, cotton, butterfat and milk, soybeans,
and most other price-supported commodities for the 1961 crop year.
On February 8, the President directed the Department of Agriculture
to speed payments to farmers for storage of crops under price support loans.
The payments, advanced to early March, amounted to about $25 million.
7. Food Distribution
In his first executive order, the President, on January 21, directed the
Secretary of Agriculture to expand the free food distribution program for
needy families in areas of chronic unemployment. On January 24, the
Secretary of Agriculture announced that, through additional purchases of
protein foods, the Government would increase the variety of surplus foods
being distributed. As a result of these actions, the annual rate of distribution was raised from about $60 million to more than $200 million.
8. Food Stamp Program
On February 2, the President announced the establishment of six area
projects for operation of a pilot "food stamp" distribution program. This
was subsequently expanded to eight areas.
9. Farm Loans
On February 8, the Department of Agriculture announced that, pursuant
to a White House directive, it was making available an additional $50
million for housing loans to low-income farmers. On February 13, the
Department announced that the Farmers Home Administration would release an additional $35 million for operating loans for farmers. Lending
activity of the Farmers Home Administration for rural area development
was accelerated.
10. Rural Electrification Administration
During the year, the Rural Electrification Administration intensified
its activity in the field of rural area development.
11. Monetary Policy and Debt Management
As the President announced in his February 2 message, the Federal
Reserve and the Treasury Department worked "to further the complementary effectiveness of debt management and monetary policy."
During the year, their policies were directed toward fostering domestic
economic recovery by providing the base for needed bank credit and




monetary expansion and by encouraging the flow of savings and credit
into long-term investment channels. The Federal Reserve provided bank
reserves through purchases of securities of more than 1 year. The Treasury
Department has been buying long-term U.S. Government securities for the
trust fund accounts. At the same time, both monetary and debt management policies countered downward pressure on short-term rates, with a
view to checking the outflow of funds from this country to money markets
abroad.
12. Housing Actions
On February 1, the President announced a speeding up of the initiation
of projects already approved (including the commitment of available
college housing funds ahead of schedule).
On February 2, the maximum permissible interest rate on insured home
loans of the Federal Housing Administration (FHA) was reduced from 5%
percent to 5 / 2 percent, and on May 29 to 5% percent.
The Community Facilities Administration reduced rates on new loans
and broadened the program to include certain communities and projects
previously excluded.
Purchase and sales prices for federally underwritten mortgages under
Federal National Mortgage Association (FNMA) secondary market operations were raised in a series of steps. After the middle of 1961, purchases
of mortgages by FNMA under secondary market operations exceeded
sales.
The Federal Home Loan Bank Board liberalized terms under which Federal savings and loan associations can make mortgage loans; broadened the
powers of insured associations to engage in participation loans; allowed
member associations to borrow an amount up to 17/2 percent of withdrawable accounts from Federal Home Loan Banks, in contrast to the
former 12j/s> percent (this action was taken in two steps) ; caused Federal
Home Loan Banks to reduce interest rates on advances to members; and
instituted a new program of intermediate advances by Federal Home
Loan Banks.
On February 2, the Urban Renewal Administration requested local
public agencies to accelerate urban renewal activities.
On July 17, FHA eliminated the continuing service charge formerly
permitted for home mortgages of $9,000 or less.
13. Small Business Administration Loans
On April 5, the Small Business Administration (SBA) announced a
decrease from 5 l/i percent to 4 percent in the interest rate on loans to small
businesses in areas of substantial unemployment, and a liberalization of
size standards. The Agency also reduced from 5-5J/^ percent to 4 percent
the interest rate on loans to State and local development companies in such
areas. In August, it instituted a simplified bank loan participation plan




99

designed to achieve expanded commercial bank participation in small business loans.
14. Government Procurement in Areas of Substantial Unemployment
On February 2, the President announced that he was directing the Secretary of Defense, Secretary of Labor, and the General Services Administration to take steps to improve the mechanism for channeling Federal contracts
to firms both in areas of substantial unemployment and in areas of substantial and persistent unemployment. Accordingly, the Federal Procurement Regulations have been amended (1) to provide procedures for the
setting aside of appropriate procurements for award to firms which will perform a substantial proportion of the contracts in areas of substantial unemployment and areas of substantial and persistent unemployment, (2) to
assure that concerns in such areas are afforded an equitable opportunity to
compete for subcontracts under government prime contracts, and (3) to
clarify and strengthen the preference for firms in such areas in procurements
where equal low bids are received. Similar instructions have been issued
in the Armed Services Procurement Regulation.
15. United States Employment Service (USES)
On February 2, the President directed the Secretary of Labor to expand
and improve services to jobless applicants registered with the USES. Placement services, especially in metropolitan areas, have been realigned to meet
the needs of workers and employers in all occupations. The Bureau of
Employment Security and affiliated State agencies have increased program
emphasis on job development for the unemployed, and testing, counseling,
and placement activities for young people out of school and out of work.
16. Manpower Retraining
In anticipation of passage of the proposed manpower development and
training act, the Secretary of Labor on November 27 requested all States
to develop plans for immediate implementation of the law. In addition, the
Department of Labor and the Department of Health, Education, and
Welfare have coordinated plans for effectively carrying out their responsibilities under the act.
17. Export-Import Bank
The Export-Import Bank announced two new programs which make
available export credit guarantees, insurance and financing for semifinished
and consumer durable goods, and export credit insurance for consumer
goods. The first of these makes available export credit insurance, covering
both political and credit risks on short-term and medium-term credit sales,
which will be issued through a private association of insurance companies.
The second program consists of guarantees issued to financial institutions
and Bank participation with financial institutions which finance exporters'
medium-term credit sales on a nonrecourse basis. Both programs are de-




ioo

signed to enable the exporter to apply for assistance directly to his local commercial bank or insurance broker.
B. LEGISLATIVE RECOMMENDATIONS AND ACTIONS

1. Temporary Extended Unemployment Compensation
The President requested the Congress to increase temporarily the period
during which unemployment insurance benefits might be paid. The Congress enacted this proposal. The legislation establishes, on a self-supporting
basis, a temporary program of extended unemployment compensation to
persons who have exhausted their benefits under State and Federal laws.
It provides for agreements with States to pay temporary extended unemployment benefits, for any worker who exhausts his State benefits between
June 30, 1960 and March 31, 1962, equal to 50 percent of the amount
received in State unemployment benefits or 13 times his weekly benefit
amount. The increases in benefits are being financed by an increase of 0.4
percent in the unemployment tax rate for the calendar years 1962 and 1963.
In addition, the Congress authorized a temporary self-supporting program of extended railroad unemployment insurance to workers who have
exhausted normal benefits under the Railroad Unemployment Insurance
Act.
2. Unemployment Compensation
The President, on June 13, proposed major changes in the FederalState unemployment compensation system. The Administration bill, introduced in the First Session of the 87th Congress, would extend the scope
of the system by increasing coverage to include over three million more
workers; increase benefits so that a great majority of eligible claimants
would receive a weekly benefit equal to at least one-half of their average
weekly wage; establish a permanent Federal program of additional compensation for unemployed workers who have exhausted their regular benefits;
and improve the financing of the program by increasing the wage base on
which the unemployment tax is based from $3,000 to $4,800.
In addition, the measure includes equalization grants to States with
high unemployment costs, and a provision precluding denial of unemployment compensation to claimants who are attending approved training or
retraining courses.
The Congress took no action on the Administration bill in 1961.
3. Aid to Dependent Children
The Congress was requested to extend the program of aid to dependent
children by providing benefits to children who are needy because of the
unemployment of their parents. A bill was passed by the Congress and
signed by the President on May 8. It is estimated that expenditures of
about $100 million in fiscal 1962 are being made under this program.




IOI

4. Social Security Liberalization
The President proposed legislation to improve the old age, survivors, and
disability insurance and public assistance programs. Such legislation was
passed by the Congress and approved by the President on June 30 to provide,
among other things, increased minimum social security benefits, an earlier
retirement age for men, and increased benefits for widows. To meet the
increased benefit costs the Federal Insurance Contribution Act taxes were
increased, effective January 1, 1962, by one-eighth of 1 percent each on
employers and employees.
5. Manpower Retraining
The President proposed a manpower development and training program, providing for counseling, training, relocation assistance, and vocational education. The Administration's bill provides for retraining unemployed persons who cannot reasonably be expected to secure full-time
employment without retraining and for upgrading the skills of other
members of the work force. It also provides for continuing review and
assessment of the Nation's manpower requirements, for appropriate
methods of testing, counseling, and selecting workers for training, for
determining the skills in which they should be trained, for referral of
workers for training, for placement services after completion of training,
and for financial assistance during the training period for those unemployed workers who cannot undertake a training program without it.
The Senate approved a manpower retraining bill, and a bill was reported out by the House Education and Labor Committee. The House
Rules Committee postponed giving a rule for debate on the bill until 1962.
6. Youth Employment Opportunities
The President recommended the enactment of a Youth Employment
Opportunities bill. The proposal includes on-the-job training programs
conducted in cooperation with both private and public groups, public
service employment programs established in cooperation with State and
local public and nonprofit agencies, and a Youth Conservation Corps
which would perform conservation and related work pursuant to agreements with State and Federal conservation agencies.
Both Senate and House Committees reported out bills on the subject in
1961, but no further action was taken.
7. Minimum Wage
The President signed the Fair Labor Standards Act Amendments on
May 5, extending coverage to approximately 3.6 million additional workers
and increasing the minimum wage to $1.25 an hour over a period of time.
The amendments represent the first Congressional action on extension of
coverage since the Act was passed in 1938.
8. Area Redevelopment
The Administration proposal to aid areas with substantial and persistent
unemployment was enacted and signed by the President on May 1. The




102

Area Redevelopment Act provides loans to commercial and industrial
enterprises, loans and grants for community facilities and urban renewal,
all designed to increase employment opportunities in these areas. In
addition, the Act provides for the training and retraining of unemployed
and underemployed residents of these areas and for the payment of retraining subsistence benefits while in training.
In 1961, 359 redevelopment areas and 9 Indian Reservations prepared
and submitted plans for their over-all economic development. Of these,
plans covering 247 redevelopment areas and 9 Indian Reservations had
been given provisional approval by the end of the year. Eleven projects
involving industrial loans, grants and loans for public facilities, and technical assistance contracts were approved. Sixty-six more were under active
consideration at the end of the year.
Occupational training programs for unemployed and underemployed
persons were initiated in October 1961, under the provisions of the Area
Redevelopment Act. As of January 5, 1962, training projects in 17 redevelopment areas located in 7 different States had been approved. These
projects provided for the training of 3,500 workers in 45 courses of instruction. Fifty training proposals from as many areas are under active consideration, and an additional 50 are in various stages of preparation in local
communities.
9. Housing
A Presidential message sent to the Congress on March 9 included the
following proposals: a 4-year commitment of $2.5 billion for urban renewal; long-term, low-interest loans for nonprofit limited dividend rental
and cooperative housing for moderate income families financed by special
assistance from FNMA; expanded public housing and housing for the
elderly; authority for FHA to insure long-term home improvement loans;
additional aid for urban planning, community facilities, and housing research; an extension of the FHA insurance program for middle-income
families to permit in certain cases a 40-year maximum mortgage period, to
remove the downpayment requirement, and to make other changes to ease
housing credit.
The Housing Act of 1961, incorporating the substance of these proposals,
was approved on June 30.
The veterans home loan program was extended by legislation approved
on July 6.
10. Feed Grains Program
The President signed an emergency feed grains bill on March 22. It
authorized the Secretary of Agriculture to make payments to growers on
1961 crops to reduce acreage and output, and to increase support prices
for feed grains. Advance payments were begun shortly after the bill was
signed.




103

11. Agriculture
The President sent to the Congress an omnibus farm bill on March 16.
A bill signed into law on August 8 extended and liberalized lending
programs of the Farmers Home Administration, extended the emergency
feed grains program to 1962 crops, authorized a program of payments to
producers for reducing wheat acreage in 1962, extended the special milk
program and the National Wool Act for 4 years, extended the program for
the sale of surplus commodities for foreign currency for 3 years, and authorized marketing orders for additional commodities.
12. Federal-Aid Highways
The President, in a message sent to the Congress on February 28, recommended increased taxes and a schedule of authorizations which would
permit completion of the Interstate System in 1972 and an expansion of
other Federal-aid highway programs. The Federal-Aid Highway Act of
1961, approved on June 29, provides increased authorization and revenues
required to permit completion of the Interstate System by 1972, while maintaining the pay-as-you-build principle.
13. Natural Resources
A Presidential message sent to the Congress on February 23 included a
program calling for increased aid for waste treatment facilities and air
pollution, expansion of the saline water program, accelerated forest planting, access roads to public forests, purchase of shoreline areas for park sites,
and a 10-year program of grants to the States for planning comprehensive
water development projects. On July 20, the President signed a bill almost
doubling grants for water pollution control and strengthening federal
authority to seek abatement of pollution. On September 22, an extension of
the saline water program for 6 years was approved, with an authorization of
$75 million. To carry out the President's forestry program, appropriations for the Forest Service were substantially increased with particular
emphasis on the expanded reforestation program, acceleration of recreational
facility development, and strengthening protection against forest fires.
Authorization for the Cape Cod National Seashore was signed into law
on August 7. In the Housing Act of 1961, approved on June 30, partial
grants to localities in an aggregate amount of $50 million were authorized
for the acquisition of land for permanent open space in or near urban areas.
14. Airport Aid
Administration bills authorizing construction grants of $75 million a
year for 5 years were introduced in both the Senate and the House. A
bill signed on September 20 authorized the extension of Federal construction grants to airports for 3 years. A 2-year grant of $150 million
was included in the final money bill approved on September 27.




104

15. Aid to Education
The President sent a special message on education to the Congress on
February 20. It included recommendations concerning elementary and
secondary schools and higher education.
Elementary and secondary schools: The President recommended that
the Congress authorize a 3-year program for school construction and
teachers' salaries. The total cost would be $2.3 billion. The Senate passed
a school aid program, but the House Rules Committee tabled the proposal.
Higher education: Legislation was proposed to provide more than $3
billion in assistance to higher education. The proposals included the extension and expansion of the low-interest loan program for college housing
facilities; authorization of a new 5-year program under which $300 million
would be loaned each year for the construction of academic facilities;
authorization of a program of 4-year undergraduate scholarships; expanded
student loans and fellowships through the National Defense Education Act.
The Administration supported legislation to provide matching grants for
establishment of educational television stations and for State surveys of
the need for such stations. The Senate passed a bill to authorize aid for
establishment of such stations and the House reported a bill out of Committee which was substantially the same as the program submitted.
As part of the Housing Bill signed on June 30, the college housing fund
was increased from $1.7 billion to $2.9 billion in four steps by July 1, 1964.
The National Defense Education Act was extended for two years on
October 5, continuing the previous $90 million annual authorization for
student loans.
16. Health Programs
A Presidential message sent to the Congress on February 9 included the
following proposals:
(1) Increased grants for the construction of nursing homes; grants to
States for community health programs, and project grants to develop new
methods of out-of-hospital care; increased project grants for research into
uses of medical facilities, including grants for the construction of experimental and demonstration facilities;
(2) A 10-year program of matching grants for the construction, expansion, and restoration of medical and dental schools with an authorization
of $75 million a year and an anticipated first-year appropriation of $25
million;
(3) Authorization of Federal grants to schools for scholarships for medical and dental students;
(4) Increased appropriations for existing maternal and child welfare
programs;
(5) Increased vocational rehabilitation grants;
(6) An extended and expanded program of matching grants for the
construction of research facilities and increased appropriations for the




105

medical research and training programs of the National Institutes of
Health.
The community health services and facilities bill, approved on September 20, increased from $30 million to $50 million the annual authorization
for grants to States for public health services (with particular attention to
community health service programs) ; authorized an additional $10 million
a year for project grants to develop new methods of out-of-hospital care;
raised from $10 million to $20 million the annual authorization for grants to
build public or nonprofit nursing homes; and increased from $1.2 million
to $10 million the authorization for research into uses of medical facilities
(including construction of experimental facilities).
17. Medical Care for the Aged
The President recommended a health insurance program for those of
age 65 or over who are eligible for Social Security benefits. The insurance
would be financed by an increase in Social Security payroll taxes. Hospital
and home health service benefits would begin October 1, 1962. Nursing
home service benefits would begin July 1, 1963. Action by the Congress was
postponed.
18. Tax

Recommendations

Among his tax recommendations, the President asked for the enactment of an investment tax credit as an incentive for the modernization and
expansion of private plant and equipment. He also recommended withholding taxes on interest and dividends and a series of measures to eliminate
defects and inequities. This tax program would involve no net loss in
revenue. On August 23, the House Ways and Means Committee announced
that it was postponing further action until 1962.
19. Special Insurance Dividend for Korean Conflict Veterans
On September 13, the President approved a measure authorizing a onetime special dividend on the otherwise nonparticipating insurance issued
to veterans of the Korean conflict. The dividend declaration amounted to
$56 million of which approximately $30 million was disbursed to eligible
policyholders by the end of calendar year 1961.
20. Small Business Administration

(SBA)

Legislative action during 1961 liberalized the Small Business Investment Program and expanded and strengthened the activities of the Small
Business Administration. Additional private capital was attracted into
small business investment corporations by amendment of the Small
Business Investment Act, which increased the maximum amount of Government participation in a single corporation from the previous limit of
$150,000 to $400,000. The ability of the SBA to lend to State and local




106

development corporations was also increased. Amendment of the Small
Business Act provided for the development of a program to assure small
business participation in subcontracts relating to government procurement,
and broadened the authority for research and counseling services for small
business.




107

Chapter 2

Economic Growth
pASTER ECONOMIC GROWTH in the United States requires, above
all, an expansion of demand, to take up existing slack and to match
future increases in capacity. Unless demand is adequate to buy potential
output, accelerating the growth of potential is neither an urgent problem
nor a promising possibility. Full utilization will itself contribute to growth
of capacity. Saving and investment to increase capacity and improve productivity flourish in prosperity and wane when the economy is slack.
Reduction of economic fluctuations lessens the risks associated with innovation and investment and diminishes the resistance to technological change.
A full employment economy can achieve more rapid growth than an
economy alternating between boom and recession; for that reason, effective
stabilization policy is the first step toward a policy for economic growth.
But stabilization policy is not enough. A sustained improvement in the
growth rate requires also a concerted effort, private and public, to speed
the increase of potential output. Chapter 1 has analyzed the current problem of underutilization. In this chapter the emphasis is on the growth of
potential output.
The growth of the U.S. economy results primarily from decisions taken
by individuals, families, and firms. However, all levels of government—
Federal, State and local—have a role in the promotion of economic growth.
It is no part of that role to force on unwilling households and business firms
any particular rate of growth in their own individual activities. But if,
as a Nation, we desire a higher rate of growth, there are two consequences
for government policy. First, in those areas of economic activity traditionally allotted to some level of government, public expenditures must
provide services which contribute to the growth of potential output and
which satisfy the needs that accompany increasing income and wealth.
Second, public policy—notably in the fields of taxation, education, training,
welfare, and the control of money and credit—inevitably stimulates
or retards the growth potential of the private economy, even if no such
result is consciously intended. Accelerated economic growth requires coordinated policy at all levels of government to facilitate the increase of
productivity and the expansion of capacity. No change is implied in the
historic division of responsibility between public bodies and private
citizens.




108

GROWTH:

PROBLEM OR OPPORTUNITY

The sources of growth of potential output often present themselves as
"problems." A rapidly expanding labor force provides new workers to
man factories and perform services, and opens new opportunities for investment to equip them. But it accentuates simultaneously the "problem" of
assuring useful jobs at satisfactory wages for an ever-growing number of job
seekers. Rapid technological progress increases productivity, releasing labor
and other resources for new uses. But it creates simultaneously the "problem" of displaced workers, declining industries, and depressed areas. The
problems and the opportunities are opposite sides of the same coin. A
commitment to accelerated growth is at the same time a commitment to
solve even more such problems. The challenge is to find solutions
which do not limit the economy's capacity to grow.
This is what is meant by saying that there are "growing pains" associated
with economic progress. They are not new. Nor are they insoluble if the
expansion of demand creates new opportunities for labor and capital as old
ones disappear. An adequate level of demand, though not itself the solution
to structural problems, is a necessary precondition to the solution.
The most pressing of the social problems resulting from rapid industrial
progress is the creation of islands of obsolete capacity and unwanted skills.
It is inequitable to inflict the costs of progress on an arbitrarily selected few,
when the benefits are widely shared. It is more than inequitable—it is selfdefeating—to invite resistance to progress, pools of idleness, low productivity, and poverty. The need for specific policies to restore the earning power
of displaced workers and the vitality of depressed regions has already been
emphasized in connection with the objectives of the Employment Act itself.
That need is intensified with the acceptance of accelerated economic growth
as a goal of national policy.
Faster economic growth incurs costs and imposes responsibilities. It
must—if it is worth undertaking—confer even larger benefits. Potential
output has been growing, on the average, at 2.9 percent annually since the
turn of the century and at about 4 percent since the end of the second
World War, though since 1954 the rate has slowed to 3.5 percent. Yet
there are sound reasons for wanting even faster growth in the future—
(1) unsatisfied needs at home and (2) threats to freedom abroad.
(1) Per capita disposable personal income, measured in 1961 dollars, has
been increasing since 1947 at about 2 percent a year; it surpassed $2,000 a
year in the last quarter of 1961. Nevertheless, about 30 percent of all
families and unrelated persons have less than $1,000 of money income
per person, and are now below the level that the average American achieved
a quarter-century ago.
A high rate of economic growth today will enable increasing millions to
enjoy better lives tomorrow. Only a limited imagination can fail to see
opportunities for providing more fully both such basic needs as food,




109

clothing and shelter and the amenities of civilized life—education, medical
care, travel and recreation.
In many, though not all, contexts growth in per capita production will
reduce the number of persons with low incomes. Poverty in the United
States is disproportionately concentrated among the aged, the nonwhite,
the poorly educated, marginal farmers, and families without a male breadwinner. The disadvantaged fare better in a buoyantly growing economy.
But for some, the remedy lies in welfare or insurance payments coupled
with substantially improved services and retraining to restore them to
self-sufficiency. In the longer run, the provision of good education and
adequate health services for the children of these families is essential to
break the degrading cycle of dependency.
Other unfilled needs lie in the field of public or mixed public and private
expenditures. The renewal of cities, the reconstruction of transportation
facilities, the improvement of education at all levels, the provision of new
facilities for the arts, the expansion of medical care facilities, the conservation and expansion of our national parks and forests, all these things
need more resources than we now devote to them. Economic growth will
help create those resources.
(2) The leadership of the free world imposes heavy economic burdens on
the United States. The primary responsibility for maintaining the military security of the free world falls on us. Although we hope that world
tensions will slacken, we must be prepared if they do not. If the threat
rises in intensity, we must increase our defense capabilities to meet that
threat. The future needs of defense are uncertain but imperative; the
larger and more efficient our economy, the more readily will we be able
to shoulder larger military burdens, if we must.
Our responsibility is no less in the global battle against poverty, ignorance,
and disease. The less developed nations need our capital and technique.
They also need a further demonstration of the ability of a free economy to
grow, to prosper, and to use its enhanced resources wisely.
The foreign * trade policy of the United States should be formulated
with regard for the obvious fact that a more satisfactory rate of economic
growth can be achieved here and abroad if producers are stimulated to
efficiency by active participation in international trade. A liberal trade
policy works to this end by providing increased market opportunities abroad
for U.S. products while promoting the efficient utilization of resources
through the invigorating effects of foreign competition, whether encountered in our home markets or in the markets of other countries.
GOALS FOR THE CURRENT DECADE

Goals, if they are to be useful, should be neither too easy nor too difficult.
To set a goal that would have been achieved anyway serves no useful purpose. To set a goal that is obviously impossible of achievement invites a




no

loss of confidence and perhaps failure to achieve what is possible. A good
target is one that can be met, but not without effort.
This general limitation sets only a range of growth targets for the United
States in the 1960's. It is no easy matter to say exactly how fast an economy
can grow, or to obtain consensus on how fast it should grow. Some of
the benefits of growth have already been discussed. The costs of growth
are the diversion of resources from the satisfaction of current needs to
those uses which will yield increased output in the future, and the strain
on our institutions and social fabric which this diversion might entail.
Ultimately, a democratic society achieves one rate of growth rather than
another through the freely made economic and political decisions of its
citizens. The task of economic analysis is to show what the choices are,
what alternative choices will cost, and what benefits they may yield.
The basic determinants of a society's productive capacity in any year are
as follows :
(1) The number of people available for employment, the number of hours
they wish to work, their incentives and motivations, and their health, general education, occupational desires, and vocational skills;
(2) The stock of new and old plant and equipment, and its composition
by age, type, and location;
(3) The terms on which the economy has access to natural resources,
whether through domestic production or imports;
(4) The level of technology, covering the range from managerial and
organizational competence to scientific, engineering, and mechanical understanding;
(5) The efficiency with which resources, domestic and foreign, are allocated to different economic ends, and the extent of monopolistic or other
barriers to the movement of labor and capital from low-productivity to
high-productivity uses.
These basic determinants interact in complex ways. For example, advanced machinery is of little use without skilled labor to operate it; advanced
technology often requires capital equipment to embody it.
Next year's productive capacity will exceed this year's to the extent that
the basic determinants can be expanded and improved. Success in achieving a higher rate of growth in the future depends on our willingness to
spend current resources to expand our production potential and by our
skill and luck in spending them effectively.
The record of economic growth in the United States does not suggest
that the average growth rate realized in the past is an immutable natural
constant, leaving no scope for growth-stimulating policies. The rate of
growth of output has varied from one span of years to another, depending
on specific economic circumstances (Chart 9). There was one prolonged period of stagnation—the decade of the 1930's—when potential
output grew at less than the average long-term rate, and realized
output grew more slowly still. Again, there have been periods when poten-




III

CHART

9

Output, Employment, and Productivity
BILLIONS OF DOLLARS (Ratio scale)

_

600

GROSS NATIONAL PRODUCT
IN 1961 PRICES

500
400

-

300

-

-

-

/

1

r

200

1 00

1910

f

V

15

M M

/

20

MM

-

\

1 1 1 11 i i
1
25

MM

M M

30

1 | M 1 | II

M M

35

40

45

50

M M

|

55

60

MILLIONS OF PERSONS (Ratio scale)

80

-

70

-

60

_

50

-

-

TOTAL EMPLOYMENT J /

/
/

-

40

ir

30

-

-

1 II 1 M
19*10
15

M

11
1 II 1 1 1 1 1 II 1 II 1 M
2*0
2*5
3*0
35
4*0

M

M M

4*5

M M

50

|

M M

5*5

6*0

DOLLARS (Ratio scale)

8,000

-

GROSS NATIONAL PRODUCT PER EMPLOYED PERSON
IN 1961 PRICES

7,000
6,000

-

5,000
4,000
•

3,000 V-

m

M A 1 1 L 1L J I
_ L

1910

15

20

M

1 LM HI
25

|

30

JA
35

M

M
40

_J
L

1 1 1
45

1 M i l
50

_l
55

LLX
60

J / C I V I L I A N EMPLOYMENT PLUS ARMED FORCES.
SOURCES: DEPARTMENT OF COMMERCE, DEPARTMENT OF LABOR, AND COUNCIL OF ECONOMIC ADVISERS.




112

tial output expanded more rapidly than the past average. The postwar
years have been such a period of accelerated growth. Even including the
years since 1954, during which growth was sluggish, real gross national
product (GNP) in this postwar period has increased at an average annual
rate of 3.5 percent. Had potential output been realized in I960, as it was
in 1947, the realized growth rate would have been 4.0 percent a year.
Table 10 shows, for the 1947-60 period, the increases in realized and
potential GNP, population, labor force, employment, man-hours, GNP per
person, and productivity. Approximately four-fifths of the annual increase
in potential GNP during the period is explained by increases in output per
man-hour and one-fifth by increases in total man-hours worked. The
increase in output per man-hour is, of course, the resultant of improvements
in the quality of the labor force, the quantity and quality of capital, the
level of technology, and still other factors.
TABLE 10.—Output, population, labor input, and productivity, 1947-60
Percentage change
per year
Unit

Item

1947

1954

1960 1
1947 to 1954 to 1947 to
1960
1954
1960

Output:
Gross national product- Billions of dollars, 1961
prices
Potential gross national product 2
_-doPopulation

324.9

422.0

511.1

3.2

3.5

324.9

440.5

541.8

4.4

3.5

4.0

Millions of persons

144.1

162.4

180.7

1.7

1.8

1.8

Millions of persons
do

61.8
59.4

67.8
64.2

73.1
69.2

1.3
1.1

1.3
1.3

1.3
1.2

Labor input:
Labor force 3
Employment 3
Potential employment 4
Man-hours
Potential man-hours 5_
GNP per capita

59.4

65.1

70.2

1.3

1.3

1.3

Billions of man-hours.
do

129.6
129.6

132.9
135.4

139.7
143.1

.4
.6

.8
.9

Dollars, 1961 prices

2,255

2,599

2,828

2.0

1.4

.6
.8
1.8

Dollars, 1961 prices

-do-

Productivity:
GNP per worker..
Potential GNP per
worker
GNP per man-hour
Potential GNP per
man-hour

5,470

6,573

7,386

2.7

2.0

2.3

do

5,470

6,768

7,718

3.1

2.2

2.7

do

2.51

3.18

3.66

3.4

2.4

2.9

do

2.51

3.25

3.79

3.8

2.6

3.2

1
2

Data include Alaska and Hawaii.
Same as actual in 1947; in 1954 and 1960, calculated from 3.5 percent trend line through mid-1955.
3 Includes armed forces.
4
Assumes 4 percent unemployment rate for all periods, with no adjustment for cyclical movement of
the labor force.
5
Same as actual in 1947; in 1954 and 1960, assumes 4 percent unemployment rate and corrects for decline in
hours induced by recession.
Sources: Department of Commerce, Department of Labor, and Council of Economic Advisers.

But consideration of the years 1947-60 as a unit masks significant differences within the period. There was a substantial slowing down in,the
growth of potential output between the first and the second part of this
period. From 1947 to 1954, potential GNP grew at a rate of 4.4 percent
a year, and from 1954 to 1960 at a rate of 3.5 percent. Since the labor




force grew at a rate of 1.3 percent a year in both periods and average hours
worked fell somewhat more slowly after 1954 than before, the slower rate
of growth that has taken place since 1954 is explained by a decline in the
rate of increase of productivity. This decline resulted in part from a
more slowly rising trend of productivity within nonmanufacturing industry,
and in part from a shift—usual in slack periods—from manufacturing to
nonmanufacturing in the composition of economic activity.
Further evidence that modern industrial economies are not helpless
prisoners of past long-term trends is to be found in Table 11, which shows
that the major countries of Western Europe, and Japan as well, have recently
exceeded their own long-term performances.
TABLE 11.—Growth of gross national product per man-year, selected countries, 1913—59
[Percent per year]
1913-59

Country
Japan
Italy
Germany
France

__

1950-59

2.6
1.7
1.4
1.5

Canada
Denmark
United Kingdom _

3.4
3.1
2.8
2.2

5

Netherlands
Norway
Sweden
United States. _

6.1
4.7
4.5
3.6

1.3
L.9
7
L.8

__.

2.0
1.8
1.7

?

.8

NOTE.—Gross national product at constant prices was used wherever available. See National Institute
Economic Feview, No. 16, July 1961, pp. 36 and 46-47, for data and description of sources of materials used.
Source: National Institute of Economic and Social Research.

On June 28, President Kennedy stated that a growth rate of 4.5 percent
yearly is "well within our capability." On November 17, the United States
joined with the other 19 member nations of the Organization for Economic
Cooperation and Development in setting as a target the attainment of a
50 percent (4.1 percent a year) increase in their combined national product
during the decade from 1960 to 1970. The ability of the United States to
meet, and even to exceed, this target is the best guarantee of success for the
OECD. A high rate of growth of potential output will not be reached
immediately. The policies to achieve it, even if adopted now, will not
bear fruit at once, and it will not be achieved without effort. But in the
second half of the decade, with the help of a rapidly growing labor force,
it should be possible to exceed a growth rate of 4.5 percent annually and
to achieve an average rate of growth of potential output of 4.3 percent
between 1960 and 1970.
If this growth is achieved and if, in addition, 1970 is a year of 4 percent
unemployment, actual GNP will grow at an average annual rate of 4.9
percent (Table 12). The difference between this figure and 4.3 percent
reflects the current shortfall of actual output from potential output. Such a
rate of growth of total GNP would mean an annual increase of GNP per person in the population of 3.2 percent, nearly double the rate achieved during




114

TABLE 12.—Output, population, labor input, and productivity, 1960 actual and 1970 illustrative

Item

Unit

1960 1

1970
illustrative 2

Percentage
change
per year
1960-70

Output:
Gross national product
Billions of dollars, 1961 prices..
do
Potential gross national product _
Population...

Millions of persons..

511.1
541.8

825
825

4.9
4.3

180.7

213.8

1.7

73.1
69.2
70.2

87.1
83.7
83.7

1.8
1.9
1.8

Labor input:
Labor force 3
Employment 3
Potential employment.
Man-hours
Potential man-hours.
ONP per capita.

.do.
_do..
..doBillions of man-hours.
do

139.7
143.1

162
162

1.5
1.2

Dollars, 1961 prices..

2,828

3,858

3.2

7,386
7,718

9,868
9,868

2.9
2.5

5.09
5.09

3.4
3.0

Productivity:
GNP per worker
Potential GNP per worker..

..do..
.do..

GNP per man-hour
Potential GNP per man-hour-

.do.,
.do..

3.66.
3.79

1
Potential series for 1960 based on the following assumptions: GNP, calculated from 3.5 percent trend line
through mid-1955; employment, 4 percent unemployment rate; man-hours, 4 percent unemployment rate and
correction for decline in hours induced by recession.
2 Illustrative figures for 1970 based on the following assumptions: Potential GNP growth rate of 4.3 percent
per year from 1960 to 1970, with actual and potential being the same in 1970; population, 1955-57 fertility
levels continue to 1980; labor force, participation rate of 57.8 percent of noninstitutional population 14
years of age and over; employment, 4 percent unemployment rate; man-hours, continuation of previous trend.
3 Includes armed forces.
NOTE.—Data includes Alaska and Hawaii.
Sources: Department of Commerce, Department of Labor, and Council of Economic Advisers.

the 1947-60 period. It is this figure which most nearly measures the gain
to society from accelerated economic growth. If, by 1970, we succeed
in achieving an unemployment rate below 4 percent, even further increases
in output will become possible. To a first approximation, each 1 point
decline in the 1970 unemployment rate would add about $8 billion to 1970
GNP and about 0.1 to the annual rate of growth.
Table 12 is in no sense a prediction of what will actually occur. It
shows what would be required to move up to and beyond a 4.5 percent
growth rate, giving us a rate of growth of potential for the full decade
averaging 4.3 percent a year. Demographic factors lay the foundation
for a significant acceleration of potential output. If labor force projections
are realized and if past trends in hours worked per man year continue,
available labor input will increase during the 1960's at more than one and
one-half times its rate of growth during the 1947-60 period. With this
increase in labor input, it is a matter of arithmetic that a 3 percent yearly
increase in man-hour productivity would be needed if the annual rate of
growth of potential GNP is to average 4.3 percent over the decade.
The required growth of output per man-hour was surpassed in the 194754 period, but since 1954 performance has fallen below what is required.
The vigorous growth of the early postwar period benefited from the possi-




bility of renewing a capital stock which had aged during the depression
and war years of low investment. Making good this backlog of investment
demand brought with it the quick realization of latent technological progress. Simple continuation of recent trends will not be sufficient to repeat
that performance. The rest of this chapter suggests the kind of effort
in education, technological development, capital formation, and other
areas that may be required to do so. In particular, unless technical progress brings an unexpected increase in the productivity of capital, a major
rise in capital investment will be needed.
The population upsurge which began in the 1940's, together with the
expected decline in death rates, will give us a rapid increase in the population of working age. Adult women are expected to enter the labor force
in increasing proportions; but because a larger fraction of our youth will
remain in school and because the trend toward earlier retirement among
male workers is likely to continue, over-all labor force participation rates are
expected to remain steady. The resultant of these factors should be a labor
force in 1970 of a little more than 87 million, an annual rate of increase of
1.8 percent in this decade, compared with the distinctly lower rate of 1.3
percent from 1947 to 1960. If 4 percent of the labor force is unemployed
in 1970, total employment will come to 83.7 million. A reduction in the
unemployment rate to 3 percent would add over 800,000 to employment.
The calculations of Table 12 assume that the average number of hours
worked a year will continue to decline at the same rate as in the past. This
reduction in the intensity of work has been going on for a long time. It will
continue, both because our citizens choose to enjoy some part of their
increased productivity in the form of longer vacations and perhaps a shorter
workweek, and because much of the increase in the labor force will consist
of part-time workers by preference, notably young people still in school and
women with family responsibilities. Full employment will, however, eliminate one possible cause of a decline in average hours; when unemployment rates are high, as they are at present, pressure builds up for a reduction
in the workweek. This pressure, motivated by a desire to share the limited
volume of employment, is to be sharply distinguished from the desire for
increased leisure reflected in the long-run decline in average annual hours.
The second of these is to be honored; the first should be met by expanded
employment opportunities. Variations in the number of hours worked,
like variations in participation rates, also respond to economic forces in other
ways. The lure of job opportunities in a growing and prospering economy
may attract even more than the expected number of people into the labor
force, and may induce some to abandon part-time for full-time work. On
the other hand, it is also possible that full employment at the rising wage
and salary levels permitted by rising productivity will lead some secondary
wage earners to withdraw from the labor force, and others to retire at an
earlier age.




n6

The beneficial effects of labor force growth do not occur automatically. Productivity is preserved and increased primarily through acts
of investment: investment in the improvement of human resources, in the
creation of new technical and managerial knowledge, in the development of natural resources, and in the formation of physical capital. In
the case of investment in human capital and in research and development,
the link between expenditure and yield is difficult to measure, but there can
be little doubt that the return is substantial. In regard to investment in
plant and equipment and the development of natural resources, there is
more statistical evidence available. No one of these investments can make
its full contribution to the objective of accelerated growth without the
others. Each of them is necessary; there is good reason to believe that together they can be sufficient, if vigorously pursued.
INVESTMENT IN HUMAN RESOURCES

Increased production is not an end in itself but only a means of providing
increased real income for all to share. As indicated earlier, this is one of
the reasons that more rapid growth is a desirable social goal. High levels
of education and health, equality of opportunity—these are among the valid
measures of a society's performance. They are desirable in their own right.
In addition, they have an economic dimension. They are among the foundations of growth as well as among its benefits.
Americans have long spoken of foregoing consumption today in order
to invest in their children's education and thus in a better tomorrow.
For an economy, just as for an individual, the use of the word invest in this
connection is clearly justified, since it is precisely the sacrifice of consumption
in the present to make possible a more abundant future that constitutes the
common characteristic of all forms of investment. That devoting resources
to education and health is, in part, an act of investment in human capital
explains why programs in the area of education and health are economic
growth programs. This kind of investment has a long and remarkable
history. Rough estimates, which take into account differences in the length
of the school year and in school attendance, suggest that the stock of equivalent school years in the labor force rose more than sixfold between 1900
and 1957. The annual rate of growth of the stock of education was more
than 3 percent, or about twice the rate of growth of the labor force itself.
Failure to pursue vigorous educational and health policies and programs
leads to smaller increases in output in the long run; it is also associated with
higher expenditures in the short run. If we fail to invest sufficiently
in medical research, we lose not only what stricken individuals might have
produced had they been well, but also the use of the resources and funds
currently devoted to their care. Failure to invest sufficiently in education
means that we will lose the additional output that would be possible with
a better educated labor force; it may also mean the perpetuation of social




117

problems necessitating public expenditures. Recognition of the costs of
inadequate investment in social welfare is one of the reasons for the Administration's concern to strengthen family services in the public welfare field.
It is a waste of resources to restrict health and education to those who can
afford them. Moreover, in addition to each person's interest in his own
health and education, there is a public interest in everybody's health and
education. The well-being of each citizen contributes to the well-being
of others. As a result, we have organized programs to help the population
to obtain a quality education, to require attendance in schools, to help
ourselves and others to obtain needed medical care, to require that certain
medical precautions, such as vaccinations, be taken by everyone.
Education
Estimates made by private scholars suggest that about one-half of the
growth in output in the United States in the last 50 years has resulted from
factors other than increases in physical capital and man-hours worked.
Education is one of the "other factors." Even without allowance for the
impact of education on invention and innovation, its contribution appears to
account for between one-fourth and one-half of that part of the increase of
output between 1929 and 1956 not accounted for by the increased inputs of
capital and labor. Education is of vital importance in preparing the skilled
labor force demanded by new investment and new technology.
Education's contribution to output is reflected by the well-documented
fact that income—a measure of each individual's contribution to production—tends to rise with educational attainment. Of course, not all differences in money income are the result of education. Differences in native
ability as well as parental economic and social status are also reflected.
Nevertheless, a substantial proportion of the increase in income at increasing ^
levels of education may be attributed to that education.
In 1930, $3.2 billion (3.3 percent of GNP in current prices) was spent
for all schools at all levels of education. In 1960, expenditures had risen
to about $24.6 billion (5.0 percent of GNP). In turn, in 1930, 29.0 percent of the population 17 years old graduated from high school. By 1958
this was true for 64.8 percent. Similarly, in higher education the number
of earned degrees conferred rose from 140,000 in 1930 to 490,000 in 1960.
Though significant progress has been made, substantial opportunities and
needs for investment in education still exist. There is a pressing need to
improve curricula and teaching methods, make education more readily
available to students of merit by reduction of financial barriers, expand
facilities and staff to meet rising enrollments, improve the quality and
productivity of our teaching staffs and increase their salaries, and narrow
the gap in opportunities available to students in different parts of our
country. These problems must be met—and met quickly—at all levels of
government and at all levels of education if our standards of education are
to keep abreast of our needs.




n8

The program of the Administration includes specific proposals designed
to meet urgent needs in the field of education: increased funds for scholarships; assistance to institutions of higher education for the construction of
facilities; aid to the States for assistance to public elementary and secondary
schools; and a program to improve the quality of elementary and secondary
education through curriculum research, demonstration projects, teacher
training institutes, and special project grants.
Work of this last kind has been begun, with the support of the National
Science Foundation, in supplementary training of teachers of science and
mathematics, especially in high schools, and in the development of new
courses in physics, mathematics, chemistry, and biology. Similar support
has been given by the U.S. Office of Education for improvement in courses
in English and modern foreign languages; it should be extended to the other
major academic fields.
Student opportunities. Of each 1,000 pupils who entered the fifth grade
in 1952, 900 entered high school in 1956, 600 graduated from high school
in 1960, and 300 entered college in the fall of 1960. Thus 40 percent of the original 1,000 students did not graduate from high school and
half of those graduating from high school did not enter college. Many
of these withdrawals are by children of better than average intelligence.
It is generally agreed that improvement of teaching and expansion of
guidance and counseling services will help to reduce the drop-out rate.
Efforts to eliminate this waste of human resources have already begun, but
more are needed.
Financial barriers to secondary education come chiefly from a pressing
need for immediate income for the family. At the college level, the
financial problem arises both from the direct costs of attending college and
the income foregone. The Office of Education estimates that in the 1961—
62 school year the average direct costs of attending public colleges are
about $1,700 a year, and of attending private colleges, $2,300. These costs
have risen rapidly in recent years, and they are expected to continue to rise.
They are significant obstacles for large parts of our population. The Administration proposal for assistance to higher education would authorize
4-year scholarship aid for 212,500 capable students in need of financial
assistance.
Personnel and facilities. Enrollments in elementary and secondary
schools rose from 28.2 million pupils in 1950 to 42.5 million in 1960. Enrollment in 1970 is expected to be 53.0 million. In 1950, 2.3 million students
were enrolled in institutions of higher education, and by 1960 the figure
had risen to 3.6 million. The projected 1970 enrollment is 7.0 million. Rising enrollments have necessitated substantial expansion of personnel and
facilities. Further expansion is required if quality is not to deteriorate.
Our educational system thus confronts unprecedented challenges. To
accommodate doubled enrollments by 1970, outlays for college facilities
must be more than doubled; total expenditures must rise two-to-threefold.




Needs at the below-college level, about the same in dollar terms, must also
be met, lest the foundations of the educational system be eroded. The
price of failure will be the irrevocable loss of valuable talent.
However urgent the need for additional facilities and for the rehabilitation
and replacement of existing facilities, the personnel problem is especially
acute, because of the time required to train teachers. Among beginning teachers in public elementary and secondary schools in 1956-57, 27
percent lacked a standard certificate, a bachelor's degree, or both. Demand
for new teachers and for replacement of those leaving the profession will be
very high. It can be met only by the training of new teachers, accompanied
by programs to increase the productivity and quality of experienced teachers.
Teachers' salaries at all levels must continue their recent rise if good teachers
are to be attracted into and retained in the profession of educating the
Nation's youth. Other programs for expansion of the educational system
cannot succeed unless the rewards to teaching are increased.
State differences. In a highly mobile and interdependent society, the
lack of educational opportunities is not simply a matter of concern to some
States; it is of concern to the Nation. The support that the different States
(and different areas within States) give to education varies substantially.
Such support depends not only on the commitment that the population has
to education, but also on the resources of the State and the number of children seeking a public education. As a consequence, some States with low
per student expenditures for education have educational budgets that, as a
percentage of personal income, are far above the national average. Increased Federal support for education, as outlined in the President's proposals, is essential to eliminate these imbalances as well as provide for
programs to meet the national responsibilities that transcend State and
local boundaries. Ultimately, the effectiveness of our democracy rests
on an educated and informed citizenry.
Health
U.S. economic growth in the twentieth century has been associated with
better health of the population as a whole as well as an increase in per capita
expenditures on health and medical care. Public and private expenditures on health care increased from $3.6 billion, or 3.5 percent of GNP,
in 1929 to $26.5 billion, or 5.4 percent of GNP, in 1960. This has been
accompanied by a sharp increase in life expectancy and a reduction in
death rates from communicable diseases.
At the same time that economic growth has contributed to an improvement in the health of our people, better health has contributed to economic
growth. Better health makes possible an increase in the size of the labor
force and in the effectiveness of effort on the job.
Further improvements in health would yield significant economic, as
well as human, benefits. On an average day in 1960, 1.3 million employed
persons—2 percent of civilian employment—were absent from work be-




120

cause of illness or accident. The days of work lost because of illness far
exceeded the days of work lost because of industrial disputes; in fiscal
year I960, "currently employed" persons lost a total of 371 million days
from work as a result of illness or injury, while the loss from industrial
disputes in 1960 totaled 19 million days.
The costs of ill health have traditionally been calculated as the money
spent for the prevention and treatment of accident and disease. The waste
of human resources and the consequent loss of production is an important additional cost about which not enough is known. Where facts are
available, as in the related area of vocational rehabilitation, the relationship
between costs and benefits is impressive. In 1960, at an average cost of
$900 per rehabilitant under Federal-State programs, median wages of rehabilitated persons were raised from $450 a year at acceptance to $2,350
at closure, a difference of $1,900 in the first year after rehabilitation.
Public support for medical research, the most basic of investments in
better health, has been growing. In fiscal year 1962, total expenditures
will exceed a billion dollars, of which 60 percent is supported by the Federal
Government. Further expansion of research activities, where funds can
be wisely spent and where qualified research personnel exist, is desirable
both for humanitarian and economic reasons. Much of the necessary research is carried on by doctors of medicine. More rapid expansion of the
number of physicians is required to insure that patient care needs, teaching
needs, and research needs can all be met. This will be true even if needed
improvements are made in the organization and financing of medical care.
Increased demands for medical services, stemming in part from new
discoveries and in part from growth in population and changes in age and
income structure, already mean unfilled internships and residencies in
hospitals. The full medical needs of the country are not being met in many
fields, including public health and preventive medicine. The Administration has presented a program to authorize Federal grants for the construction
of medical, dental, osteopathic, and public health teaching facilities, project
grants to plan for new facilities and improved educational programs, and
scholarship aid to students. The importance of maintaining and improving the health of the Nation makes the enactment of this program a matter
of great urgency.
Eliminating Racial Discrimination
Racial discrimination is a national disgrace. In this respect, above all
others, practice in the United States is a standing affront to professions
of democratic principle. Discrimination inflicts immeasurable human and
social costs on a large number of our citizens. In addition—and this is
why it deserves particular mention in this Report—it inflicts an economic
loss on the country.
Discriminatory practices in education, training, employment and union
membership impede the development and utilization of human resources.




121

They reduce the efficiency and slow the growth of the economy, at the same
time that they alter—and alter inequitably—the distribution of the fruits of
economic progress.
Although significant reductions in discriminatory barriers have been accomplished in recent years, important problems remain. Many nonwhite
families are trapped in a vicious circle: Job discrimination and lack of education limit their employment opportunities and result in low and unstable
incomes; low incomes, combined with direct discriminations, reduce attainable levels of health and skill and thus limit occupational choice and
income in the future; limited job opportunities result in limited availability of vocational education and apprenticeship training. Unless action
is taken, today's training practices, affecting tomorrow's employment possibilities, will help to perpetuate inequitable employment patterns.
Our economy loses when individuals who are capable of acquiring skills
are denied opportunities for training and are forced into the ranks of the
unskilled, and when individuals with education, skill, and training face discriminatory hiring practices that result in their employment in low productivity jobs.
Discrimination is reflected in the distribution of income and in disparities
in the levels of education attained by white and nonwhite groups. Nonwhite families had a median money income of $3,233 in 1960. Although
this represents a remarkable advance over the figure of $2,099 for 1947
(in 1960 prices), the magnitude of the problem still remaining is indicated
by the fact that in 1960 the median income for white families was $5,835.
In 1960, 11.0 percent of white but 31.7 percent of nonwhite families had
money incomes of less than $2,000, while 36.6 percent of white but only
13.6 percent of nonwhite families had money incomes of $7,000 and over.
In 1947, 11 percent of the nonwhite population 14 years of age and over
was illiterate; by 1959, this percentage had dropped to 7.5, with declines
registered in every age group. The figure was, however, considerably
higher than the 1.6 percent illiterate in the white population. Equally
disturbing is the fact that in the nonwhite population the percentage of
illiterates was higher for each age and sex group than the comparable
percentage for the white population. While the median school*years completed for the nonwhite population 25 years of age and over had risen from
5.8 in 1940 to 8.1 in 1959, the median for the total population was 11.0
in 1959.
The unemployment rate in December 1961 was 5.2 percent for white
males and 4.7 percent for white females, but 12.4 percent for nonwhite males
and 10.7 percent for nonwhite females. Nonwhite workers made up less
than 12 percent of the labor force, but accounted for 22 percent of the
total unemployed and 24 percent of those unemployed 15 weeks or more.
Economic growth will be furthered by the adoption of nondiscriminatory
policies and practices to insure that all Americans may develop their abilities to the fullest extent and that these abilities will be used. The Depart-




122

merit of Justice, the President's Committee on Equal Employment Opportunities, and the U.S. Commission on Civil Rights are already acting
vigorously. They should be joined in the campaign by all parts of our
population and all units of government, business, and labor.
INVESTMENT IN TECHNOLOGICAL PROGRESS

Technological knowledge sets limits on the productivity of labor and
capital. As the frontiers of technology are pushed ahead, industrial practice and productivity follow, sometimes pressing close on the best that
is known, sometimes lagging behind, with the gap varying from industry to
industry and from firm to firm. A stimulus to economic growth can come
either from increasing the rate at which the frontiers are advancing or
from bringing the technology actually in use closer to the frontiers.
Research and Development
The advance of technological knowledge depends on the amount and
effectiveness of the human and material resources devoted to research
and development. The limited data available suggest that within industries and between industries there is a positive correlation between
research effort and productivity growth. However, some of the most
important developments affecting the productivity of a firm or industry
may originate from research done by equipment and material suppliers,
or from basic research done by government and the universities. The
benefits of research activity are often widely shared.
Expenditures on research and development in 1960 totaled about $14
billion, as shown in Table 13. In 1961 the total was probably in the neighborhood of $15 billion, nearly three times the expenditures in 1953, and
almost a third as large as business expenditures on fixed capital. After
rough allowance for rising costs, the volume of research and development performed has approximately doubled since 1953. Between 1953
TABLE 13.—Research and development expenditures, 1953 and 1957-60
[Billions of dollars]
Type of research, financing, and performance

1953

Total expenditures.

1957

1958

1959

1960

5.15

10.03

11.07

12.62

14.04

.43
4.72

.83
9.20

1.02
10.05

1.15
11.47

1.30
12.74

By source of funds:
Federal Government
Industry
Universities and other nonprofit institutions..-.

2.74
2.24
.17

6.38
3.39
.26

7.17
3.62
.28

8.29
4.03
.30

9.22
4.49
.33

By performer:
Federal Government.
Industry 2.
Universities and other nonprofit institutions

.97
3.63
.56

1.44
7.66
.93

1.73
8.30
1.04

1.83
9.55
1.24

2.06
10. 53
1.48

By type of research:
Basic research
Applied research and development

•

l

2

1
2

Based on reports by performers.
Includes research centers administered by organizations in this sector under contract with Fedora
agencies.
Source: National Science Foundation.

621876 O - 6 2 - 9




123

and I960, research and development as a percentage of GNP in current
prices doubled from 1.4 percent to 2.8 percent.
Research and development cover a wide range of activities aimed at
increasing the stock of scientific and technical knowledge. As we move
from basic research to applied research and to development, the goals
become more closely defined in terms of specific practical objectives, the
predictability of the results increases, and the benefits become less diffuse.
More than 90 percent of research and development spending is for applied
research and development—most of it for development. Slightly less than
10 percent is for basic research.
Approximately three-fourths of the Nation's total research and development effort is performed by industry, and over half of this is financed by
the Federal Government. Profit considerations naturally lead private firms
to concentrate on developing and improving marketable products. Even
here, supplementary government support can pay off handsomely. Estimates suggest that hybrid corn research, of which perhaps one-third was
publicly supported, yielded a substantial return to society over and above
the returns to farmers and seed producers.
Less than one-third of all basic research is done by industry. Government, the universities, and other nonprofit institutions, although doing
only one-fourth of total research, do most of the Nation's basic research.
Such research seldom results directly or immediately in new products and
processes. But in the long run, basic research is the key to important advances in technology. Fundamental inventions like the transistor—an outgrowth of basic research in solid-state physics—may revolutionize large
sectors of industry and have a tremendous ultimate effect on productivity.
Although research and development spending is increasing rapidly in
most industries, more than 55 percent of industrial research is performed
by two industry groups, the aircraft and parts industry, and the electrical
equipment and communications industry, as shown in Table 14. This
heavy concentration of industrial research reflects primarily the concentration of defense contracts.
Industrial research is also heavily concentrated in large firms. In 1958,
firms employing more than 5,000 persons accounted for 84 percent of
total industrial research spending, significantly more than the share of
these firms in manufacturing employment.
The Federal Government plays a much larger role in financing than in
performing research. It is estimated that in 1961 the Government paid
for about two-thirds of the total national research effort including, in
addition to work done in government laboratories, almost 60 percent of
the research undertaken in industry-run laboratories and over 70 percent of
the research done by universities. About 70 percent of government
research and development spending is accounted for by the Department of
Defense. The Atomic Energy Commission and National Aeronautics and
Space Administration together account for nearly 20 percent.




124

T A B L E 14.—Funds for industrial research and development, by source and industry,
Funds for research and development, 1960

Industry

Amount (millions of
dollars)

Percentage change
from 1959

Total

Total
Food and kindred products
Paper and allied products
Chemicals and allied products
Petroleum refining and extraction
Rubber products
Stone, clay, and glass products
__.
Primary metals
Fabricated metal products
Machinery
Electrical equipment and communication..
Motor vehicles and other transportation
equipment
Aircraft and parts
Professional and scientific instruments
Other industries

Federal
Government

Company

10,497

6,125

4,372

106
66
1,047
289
115
82
164
126
993
2,405

9
1
303
25
35
4
18
54
384
1,634

97
65
744
264
80
78
146
72
609
771

19
12
10
6
4
14
19
2
5
7

849
3,482
416
358

216
3,027
211
205

633
455
205
153

-2
15
18
18

Total

Federal
Government

Company

1960
Research
and development
funds
as percent of
net
sales,
19591
4.2

7
4
-5
20
-7
-5
4
-13
16
21
19

4.3
1.0
2.0
1.4
.7
1.7
4.2
11.3
3.4
20.8
8.3

1
Data apply to all manufacturing industries and to the communication and crude petroleum and extraction nonmanufacturing industries.
2
Percent change not computed for an industry where the amount in the base period was less than $15
million.
3 Not available.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: National Science Foundation.

In addition to its direct contributions to research and development spending, the Federal Government has stimulated private research and development activity. The science information services of the National Science
Foundation, the Atomic Energy Commission, the Office of Technical Services of the Department of Commerce, and other government agencies contribute to the over-all efficiency of national research and development.
Federal tax law encourages research and development by making such
costs fully deductible in the year they are incurred. The Small Business
Act encourages spending on research and development, including cooperative research, by small companies. Moreover, the Federal Government
makes an important contribution to the training of future research scientists
and engineers through its support of education and basic research in the
universities.
Strengthening research and development. During the 1950's, the number of professional scientists and engineers in the United States increased
at an annual rate of approximately 6 percent. Total resources allocated
to research and development grew at an even faster rate because a rising
proportion of all scientists and engineers were engaged in research, and
because supporting personnel, equipment, and material per research scientist increased. During the 1960's, these trends will continue, but one limit
to growth will be the supply of scientists and engineers in certain fields.
Future investment in research will be limited largely by the quantity and
quality of earlier investment in education.




Overemphasis on current research and development activity should not
be permitted to erode the underlying educational base. Just as research is investment for the economy, education is investment for research.
The needs for educational expansion stressed earlier in this chapter include
urgent requirements for laboratories, laboratory equipment, and other
science teaching facilities.
A greater share of research and development resources and talent should
be devoted to basic research and to prototype development and experimentation in fields which promise major advances in civilian technology. Military research helped to create such important discoveries as isotope medicine,
the computer, and the jet engine. The important impact on civilian technology of these offspring of military research suggests that high returns
might be achieved if sights were set higher in nonmilitary research. Since
the risks of basic research and experimental development are very great,
and since the rewards for success are not confined to single firms or even
industries, there is a case for public support to attract additional resources
into this work.
In a number of industries, firms which are highly efficient in production
and marketing may be too small to undertake an efficient research and
development program. In others, a research tradition is lacking, or research is discouraged because the benefits tend to diffuse beyond the market
grasp of individual firms. In agriculture, all these conditions are present,
and the high returns to society from government support of research suggest that comparable programs to increase research in certain manufacturing
industries might be highly desirable.
An Administration bill to create an Assistant Secretary of Commerce for
Science and Technology has passed the Senate and is now pending before
the House. Its enactment would be an important step in fulfilling the
Government's responsibilities in this area. The competence and experience
of the National Bureau of Standards could well be used in support of a
program to fill the gaps in the national industrial research effort.
More Effective Use of Existing Technology
(1) In some industries there are legal obstacles to technical change.
The housing construction codes of many localities provide a prominent
example. In principle, these codes protect the public from shoddy construction; in practice, they often prevent the use of new materials, designs,
and techniques which are superior to the old, and a lack of uniformity
among codes in different localities discourages mass production of certain
prefabricated housing components. With respect to construction codes in
particular, the Housing and Home Finance Agency should continue to
encourage the adoption of performance standards for codes and should
strengthen its programs of testing and evaluation.




126

(2) American labor has a remarkable record of acceptance of new technology; but understandable resistance to the displacement of labor by new
equipment has occasionally developed when opportunities for retraining
and re-employment were not clearly visible. The Federal Government
can help considerably, first, by pursuing effective policies to maintain full
employment, and second, by expanding and improving its programs in job
training and retraining.
(3) The process of technological change would be smoother if society
knew better how to reap the rewards, and reduce the costs. Research in
the social, behavioral, and managerial sciences can lead to more efficient
use of resources and to quicker grasp of the opportunities afforded by
technological progress. Improved understanding may, in time, yield ways
to ease the burdens of adjustment. Strengthening of research in these auxiliary fields is needed to gain maximum benefit from research which creates
new technology.
(4) Innovation is facilitated by a flow of information about new technical developments. Since many firms, especially small ones, are not in
a position to follow new technological developments closely, the Government can play a useful role by providing business with relevant information
and analysis. These service functions of the Department of Commerce
and the Small Business Administration should be substantially strengthened.
The success of the Federal-State Extension Service in speeding the diffusion
of agricultural technology serves to illustrate how effective such programs
can be.
(5) The Panel on Civilian Technology, composed of a group of distinguished scientists, engineers, businessmen, and economists, has been
brought together under the joint auspices of the office of the President's
Special Assistant for Science and Technology, the Department of Commerce, and the Council of Economic Advisers. The panel is examining
opportunities for stimulating civilian research and development as well
as for more effective use of existing technology. It has begun to address
itself particularly to those sectors of our economy where major social and
economic benefits could be expected to accrue from technological advances.
(6) By eliminating monopolistic and collusive barriers to the entry of
new business and by maintaining the spur of competition to innovation and
the utilization of technology, antitrust enforcement tends to create conditions which encourage economic growth. (See Chapter 4.)
INVESTMENT IN PLANT AND EQUIPMENT

Between the resourcefulness of the labor force and the ideas of the
laboratory on one side and the satisfaction of consumption needs on
the other, the indissoluble link is the economy's stock of plant and machinery. Our own history and the experience of other industrial countries
alike demonstrate the connection between physical investment and growth




127

of productive capacity. Without investment in new and renewed plant
and equipment, skills and inventions remain preconditions of growth; with
it, they become ingredients.
Investment as a Source of Growth
Investment in fixed capital leads to increased capacity both by equipping
new members of the labor force with capital up to existing standards and
by providing greater amounts for all workers. Since 1929, the stock of
privately owned plant and equipment (in constant prices) has grown relative to private man-hours worked by nearly 80 percent (Chart 10) and
by nearly 50 percent relative to the private labor force. Nearly all of the
latter increase has taken place during the postwar period. Between 1929
and 1947, the rate of investment was sufficient only to provide enough
capital—although more modern capital—to keep pace with a growing labor
supply. No increase in capital per worker occurred. Since 1947, the
rate of growth in the ratio of capital stock to labor supply has been approximately 2.7 percent a year, but there is a perceptible difference between
the growth records of the first and second halves of the postwar period.
From 1947 to 1954, the amount of capital per worker increased by 3.5
percent a year; in contrast, the annual increase from 1954 to 1960 averaged only 1.9 percent.
CHART 10

Indexes of Business Output,
Capital Stock, and Man-Hours
INDEX, 1929 = 100 (Ratio scale)

300 -

-

BUSINESS OUTPUT 1 /

_

^

_ ^

w

200 -

f

BUSINESS STOCK OF
PLANT AND EQUIPMENT±1
^

H | f i n

"**

\

-

100

s

80

^

-

PRIVATE M N-HOURSWORKE D
A

60 -

40

-

I

1930

I

I

I

t

1935

i

i

i

•

1940

i l l

i

1945

i

l

i

1950

I

I

I

1955

1 / INDEXES BASED ON DATA IN CONSTANT PRICES. SEE TABLE 15 FOR DEFINITIONS.
SOURCE: COUNCIL OF ECONOMIC ADVISERS (BASED ON DATA FROM VARIOUS GOVERNMENT AND
PRIVATE SOURCES).




128

I

1

I960

The importance of investment in the growth process is suggested by the
parallel movement of the growth of potential output per man and the
growth of capital per man (Table 15). Both ratios grew more rapidly
after 1947 than before, and more rapidly between 1947 and 1954 than
subsequently. In general, the experience since 1929 supports the belief
that the more rapidly the capital stock grows relative to the labor force, the
greater will be the growth in potential output per worker, provided that
other necessary conditions are met.
TABLE 15.—Growth in business potential capital-labor and output-labor ratios, 7929-60
[Percent per year]
1929 to
1947

Item
Capital stock per worker i
Output per worker

1947 to
1969

1947 to
1954

1954 to
1960

0.0

2.7

3.5

1.9

1.5

2

2.8

3.3

2.1

1 Business capital stock is built up from private purchases of plant and equipment, with allowance for
retirements; excludes religious, educational, hospital, other institutional, and farm residential construction.
2
Business output is gross national product minus product originating in general government, government enterprises, households and institutions, the rest of the world, and services of existing houses.
NOTE.—Details of series are available upon request.
Source: Council of Economic Advisers.

Though there was no increase in capital per worker between 1929 and
1947, there was a slow increase in productivity which must be attributed
to technical progress and to improvement in the quality of both labor and
capital. When, as in subsequent years, investment was more rapid, there
was an accompanying acceleration of productivity gains. These gains were
not simply the result of the separate contributions of the advance of knowledge, the improved skills of the working population, and the rise in capital
per worker, but came in large part from the interaction of all three.
Investment in new equipment serves as a vehicle for technological improvements and is perhaps the most important way in which laboratory
discoveries become incorporated in the production process. Without their
embodiment in ne.w equipment, many new ideas would lie fallow. Conversely, the impact of a dollar's investment on the quality of the capital stock
depends on how rapidly increases in knowledge have taken place. This
interaction between investment and technological change permits each
worker to have not only more tools, but better tools as well.
The slower rate of growth of the capital stock in recent years provides
one explanation for the accompanying slower growth of labor productivity
and potential output. The proportion of output devoted to investment,
and the rate of growth of the capital stock itself, are measures of the diversion of current resources to the creation of future capacity. During the
period 1947-54, expenditures on business fixed investment averaged 11.0
percent of GNP and the stock grew at an annual rate of 4.2 percent (valued
in 1961 prices). In the period 1955-60, 9.8 percent of GNP was invested
and the capital stock grew at an annual rate of 3.2 percent. The ratio




129

of investment to potential GNP is even more relevant; in this case, the ratios
are 10.9 percent and 9.4 percent for the two periods. This difference of
1.5 percent in the fraction of potential GNP invested represents nearly $45
billion of additional capital.
Policies to Encourage Investment
(1) Adequate levels of demand. The single most important stimulant to
investment is the maintenance of full utilization of capacity. The historical
record shows that when output falls below its potential the rate of growth
of the capital stock declines. Expected profit from investment is strongly
influenced by the expected demand for the output that the new capital will
help produce, even if the investment is meant largely for cost reduction
rather than capacity expansion. Estimates of future demand are colored
by the experience of the present and the recent past. During periods of
economic slack, estimates of future demand are relatively pessimistic, and
many projects are foregone which would appear profitable under conditions
of high demand.
There is a tendency to think of profitable investment opportunities for the
whole economy as exhaustible: the more of them that are used up in any one
year, the fewer remain. There may be some validity to this view for a
single industry, which can mistakenly expand its capacity beyond the possibilities of future market demand. But for the entire economy, what appears
as unavoidable excess capacity is in fact avoidable deficiency of demand.
There are, and always will be, unsatisfied wants for a higher standard of living, though the demand for any particular product may perhaps be satiated.
The investment boom of 1955-57 did not make inevitable the excess capacity
that has ruled since then. Instead, it created an opportunity for higher
levels of production in later years, had the demand been forthcoming. The
opportunity was lost; even before the cyclical peak in the third quarter of
1957, the growth of demand slowed down and excess capacity began to
emerge.
It is true that, with any given level of technology, a higher rate of investment can occur only through the acceptance of investment opportunities of
lower profitability. But appropriate tax and monetary measures can make
even these investments sufficiently attractive. And technical progress can
have the same effect. To equip a more rapidly growing labor force also
demands a larger volume of investment relative to potential GNP. Fortunately, if actual output is held close to a rising potential output, faster
labor force growth will open opportunities for additions to plant and equipment which would be economically unattractive if the labor supply situation
were tighter. Thus a higher ratio of investment to output can be more
easily maintained. When excess capacity already exists, however, profitability is low for that reason alone, and the growing labor force appears as
a threat, instead of the stimulus to investment it really is.




130

In addition to serving as an indicator of future profits, the level of aggregate demand, through its impact on current profits, plays an important
role in providing finance for investment. The importance of the level of
economic activity in determining profits is indicated in Chart 3, which
shows that net and gross profits as a percentage of GNP fluctuate very
closely with the rate of capacity utilization. A policy that sustains nearcapacity operations goes beyond strengthening the profitability of investment; it insures an ample supply of low-cost internal funds, which itself
encourages investment.
(2) Monetary and credit policy. The open market operations of the Federal Reserve and the debt-management operations of the Treasury exert a
powerful influence on supply conditions in credit markets. If economic
growth were the only end to be served, the sole object of monetary and
credit policy would be to assure an adequate flow of funds to finance the
needed capital formation at interest rates appropriate to the basic profitability of investment. This was pointed out by the Chairman of the Board
of Governors of the Federal Reserve System in March 1961, in a statement
to the Joint Economic Committee: "As I have said many times in the past,
before this Committee and others, I am in favor of interest rates being as
low as possible without stimulating inflation, because low rates can help to
foster capital expenditures that, in turn, promote economic growth."
Use of monetary techniques for growth purposes must, of course, be
limited by the demands placed on them by other national objectives. In
the present situation, for example, monetary policy has a role to play in
the attainment of recovery from recession and in the restoration of balance
of payments equilibrium. Policies for growth and recovery are complementary, since any policy that stimulates investment will simultaneously
stimulate aggregate demand. This situation, however, will not always
prevail. When excessive demand threatens inflation, stability and growth
goals will tend to push monetary policy in opposite directions. At such
times, the importance of economic growth would suggest the major use of
other measures—principally budgetary surpluses—to achieve stability. For
when demand is strong enough to generate pressure on existing capacity,
and only then, rapid growth requires that enough resources be withheld
from other uses to make a sustained high rate of investment possible without inflation. Under these circumstances, a surplus in the Federal budget
plays the constructive role of adding to national saving and making resources available for investment. The role of a policy of monetary ease
at full employment is then to insure that the resources freed by a tight fiscal
policy are indeed used for investment and not wasted in unemployment.
The current balance of payments problem puts additional constraints #on
the use of monetary policy to promote recovery and growth. The techniques developed by the Federal Reserve to meet the new situation have
already been discussed in Chapter 1, Part II.




(3) Tax policy. Every tax system is the product of particular needs and
economic conditions; no tax system can be neutral in its effects on the ways
in which households and business firms earn and spend their incomes. If
faster economic growth is desired, revision of the tax structure is called for,
to permit a higher rate of investment once full use of resources is achieved.
The Administration's program encompasses two complementary approaches to this objective. The first is an investment tax credit equal to 8
percent of investment in eligible machinery and equipment; the second is
revision of the guidelines for the tax lives of properties subject to depreciation.
The investment credit will stimulate investment }>y reducing the net
cost of acquiring depreciable assets, thus increasing expected profitability.
The increase will vary inversely with the expected life of the asset. For
an asset with a service life of 10 years and an after-tax yield of 10 percent
before the credit, the investment credit will increase the expected rate of
return by about one-third. The increase in net yield will be greater for
less durable equipment and smaller for more durable equipment.
Investment decisions are also influenced by the availability of funds.
The investment tax credit will increase by some $1.5 billion the flow of cash
available for investment under conditions anticipated for 1962.
Since the credit applies only to newly acquired assets, the entire incentive
effect is concentrated on the profitability of new capital and no revenue is
lost in raising the profitability of assets already held by business firms. It is
an efficient way of encouraging re-equipment and modernization of productive facilities, as well as the expansion of capacity. The credit will thus
help to accelerate economic growth and improve our competitive position.
It will also increase the attractiveness of investment at home relative to
direct investment abroad. In both ways the credit will help to ease our
balance of payments problem.
Revision of tax lives for depreciable property is desirable as a matter of
equity to reflect more accurately the influence of obsolescence on economic
lives of capital assets. Present guidelines were established 20 years ago on
the basis of replacement practices of the depressed prewar years. Depreciation, designed to reflect the loss in value of plant and equipment over time,
is a function not alone of "wear and tear," but also of technological progress,
changes in the relative costs of economic inputs, competitive conditions, and
consumer tastes and demand. Through its favorable effects on cash flows,
expected rates of return, and risk, liberalized depreciation will tend to
stimulate investment.
The investment tax credit, coupled with liberalized depreciation, will
provide a strong and lasting stimulus to the high rate of investment that is a
major requirement for accelerated economic growth. Together, they will
provide incentives to invest comparable to those available in the rapidly
growing industrial nations of the free world.




132

Attention to Federal income tax adjustments to stimulate investment
must not be allowed to obscure the role of State and local tax policies and
practices in economic growth. The tax collections of these governments
are nearly half as large as Federal collections. In fiscal year I960, they
increased by more than 10 percent, or $3.7 billion.
The power to tax under this governmental system is shared by thousands
of separate jurisdictions. Improved coordination among them will improve economic efficiency. Identical tax sources are frequently utilized
by two, three, and even four layers of government without appropriate
cooperation. Taxing authorities occasionally use their powers in ways
that capriciously affect decisions concerning the location of plants and
disrupt normal competition. The result may be a misallocation of resources
and economic loss.
The Congress has recognized the need for better intergovernmental
coordination. It has provided for the creation of the Advisory Commission on Intergovernmental Relations to foster "the fullest cooperation and coordination of activities between the levels of government." The
Advisory Commission, composed of representatives of the executive and
legislative branches of all levels of government, has already made important recommendations for the coordination of local taxes by the States and
for improved tax coordination and cooperation between Federal and State
governments.
INVESTMENT IN NATURAL RESOURCES

Economic growth is not simply a matter of growth in the size and skills
of the labor force, in the quantity and quality of capital goods, and in the
productivity of the processes by which these inputs are combined. It is
equally a matter of turning more and more of the earth's endowment of
natural wealth—soil, sunlight, air, water, minerals, plant and animal life—
to the purposes of man. America's position has generally been one of
natural plenty, but we cannot complacently assume that the abundance of
the past will also characterize the future.
But neither is there any reason to suppose that resource limitations will
in the foreseeable future place serious limits on the growth of the economy.
Technological change, substitution of abundant and cheap raw materials
for scarce and expensive ones, investment in improved resource management
and conservation, and increased reliance on imports all provide important
offsets to the effects of increasing scarcity on the real cost of obtaining resource inputs. Taken together, these factors tend to keep the economy
growing along the path of least resistance so far as its resource requirements are concerned. If the various offsets to increasing scarcity are not
fully effective, resources can be obtained by digging and drilling deeper,
utilizing lower grade deposits, constructing dams and better waste treatment facilities, and other measures involving higher costs. But the necessity




133

to devote more labor and capital to these tasks would constitute a drag on the
economy, tending to cancel some of the efforts we make to stimulate growth.
Indeed, taking the economy as a whole, it is equivalent to a decline in
productivity.
The Historical Record
A rough judgment as to the probable consequences of continued depletion
of resources in the future can be derived by examining the record of the
past. The long-term trend of raw materials prices relative to the prices of
finished products is a useful, though by no means ideal, indicator of the
effectiveness of the offsets to natural scarcity.
TABLE 16.—Ratios of indexes of raw materials prices to index offinishedproducts prices, 7900-57
[1920-24=100]

Minerals
All raw
materials 12

Period

Forest
Agricultural products
products

Total 2

Metals 2

Fuels

Other
Connonstruction metallic
materials minerals

Annual average:
1900-04
1905-09
1910-14
1915-19
1920-24
1925-29.
1930-34
1935-39
1940-44
1945-49
1950-54
1955-57
1957

_.

_..

94
96
103
108

97
103
118
121

70
77
74
74

90
81
77
87

130
139
124
130

78
68
67
76

92
79
73
72

146
127
124
124

100
112
88
102

100
122
89
104

100
94
93
109

100
94
84
94

100
112
103
131

100
89
78
88

100
103
107
100

100
103
84
77

111
125
128
118

120
134
128
108

127
158
187
184

88
93
105
111

118
109
133
147

81
92
103
107

91
82
82
85

86
93
105
130

116

105

174

111

136

110

84

123

1 Excludes fishery and wildlife products, for which adequate price data are not available.
2 Excludes gold.
NOTE.—Figures for earlier years, especially prior to 1915, are less reliable than those for later years.
Annual index for each group has been divided by the over-all finished products index.
Source: Department of Commerce (based on data, including finished products price index, to be published by the Bureau of the Census in the forthcoming report, Raw Materials in the United States Economy,
1900-57, Working Paper No. 6).

Table 16 shows the movements of price indexes for all raw materials
and for broad subgroups, relative to an index of prices of finished products.
From 1900-04 to 1955-57—the last period for which data are available—
the over-all index increased by 25j/s> percent, an average rate of increase
just over 0.4 percent per year. The most striking feature of the table, however, is not this slow but visible trend toward increasing costs as our resource
endowment has been exploited more intensively but the varying patterns
of price movement shown by different commodities and by the same commodity at different times* The outstanding example of a strong upward
price trend is forest products. Even in forestry, however, there are prelim-




134

inary indications that productivity gains are beginning to offset the effects
of scarcity on prices. The index for all minerals has risen slightly less than
that for all raw materials, and the subgroups of the minerals index show
divergent movements. A considerably larger increase in the minerals index
would undoubtedly have occurred if the opportunities of international trade
had not been available. This is particularly true of the metals subgroup
where net imports accounted for 44.8 percent of apparent consumption of
metallic ores in 1957.
The index for agricultural products shows the effects of the great depression, the second World War and its aftermath, and the accelerated improvement of agricultural productivity in the 1950's. The last is largely
responsible for the decline of the over-all index from its 1950-54 peak.
It is reasonable to expect that improvements in agricultural productivity
will continue to exert a substantial downward pressure on the over-all
index in the future.
Implications for Public Policy
The lessons to be drawn from this review of past trends are these: First,
it is likely that increasing resource scarcity has had only a negligible retarding
effect on economic growth during the present century. Rising real costs
of obtaining some resources have been largely compensated by declining
costs of obtaining others. Second, the historical record does not indicate
that more rapid economic growth will simply result in our "running out
of resources" more quickly. On the contrary, past investments have permitted resources to be extracted more efficiently and used more efficiently.
Public policy has contributed to this success by limitation of economic
waste, the development and adoption of improved methods in agriculture,
forestry, and other fields, the unified development of river valleys, and a
variety of other measures. Finally, the opportunity to obtain raw materials
from abroad has been important in the past and will be increasingly important in the future.
Preventing resource scarcity from being a drag on economic growth is
by no means the only objective of policy in this field. Particularly for
water, forest, and scenic resources, an important objective is the provision
of aesthetic and recreational benefits which are not reflected in aggregate
measures of economic activity because they do not pass through the market
place. The difficulty of determining objective standards by which such
benefits can be weighed is obviously not a valid reason for neglecting them.
Water Resources
There is wide agreement that one of the most serious resource problems
facing the United States at present and in the immediate future is the
development of water resources. The use of water has been increasing
rapidly as a result of population growth, higher living standards, increasing urbanization, rapid growth of industries that are heavy users of water,




135

increases in the amount of land under irrigation, and other factors. In
the Eastern United States and the Pacific Northwest, the problem presented by these trends can be met for the next few decades by an adequate
and appropriately timed program of investment in (1) multiple purpose
water resource development which, in addition to other benefits, permits
the collection and storage of water for use as needed and (2) facilities for
treatment of industrial and municipal wastes. In some of the dry regions
of the West, however, the opportunities for further development of water
resources will be exhausted within the next two decades. Barring major
scientific breakthroughs, the continued economic development of these
regions will soon come to depend upon how effectively an almost fixed supply
of water is used to satisfy the most important of the various industrial,
agricultural, and municipal needs for water.
It is certain that additional investment to increase the quantity and to
improve the quality of the supplies of water will be a major part of any
solution to the problem. Pollution control, in particular, will require major
investment expenditures in the coming decades. The enactment last year
of the Administration's proposal for an expanded program of grants under
the Federal Water Pollution Control Act and extension of Federal authority
to seek abatement of pollution of navigable waters were important steps
forward. But the fact that water resources in some regions of the country
will soon be close to fully developed calls attention to a consideration that is
relevant to water resources policy for the country as a whole: investment in
development of existing water supplies is not a complete solution to the
problem of water scarcity, nor is it necessarily the economically desirable
solution under every particular set of circumstances. A variety of offsets
to increasing scarcity are available and each has a role to play. In particular,
additional research and development in methods of conserving and augmenting water supplies, including desalinization, weather modification, reduction of evaporation losses, cheaper and more effective waste treatment
and more efficient use of water in industry and agriculture may produce
high returns.
Since expensive investments must be undertaken to increase the quantity
and quality of water supplies, it is appropriate that the costs be reflected in
prices charged industrial and agricultural users. To treat a costly commodity as if it were free only encourages excessive use. There is evidence that
significant reductions in water withdrawals could be achieved in many important water using activities and that they can be expected to occur if
proper deterrents are provided. The burdens of scarcity on the economy
cannot be entirely eliminated by using scarce capital to augment the supply
of scarce water. But the burden can be minimized by a proper balance
between investments in increased supply on the one hand, and price
increases to eliminate inefficient use on the other.




136

Agricultural Land
The problem of agricultural land stands in sharp contrast to the problem
of water resources. Whereas in the latter the problems requiring attention
are those posed by increasing scarcity, in the former they are problems of
adjusting to abundance.
Agriculture is the major source of downward pressure on the price index
for all raw materials, and land is in ample supply. There are approximately
640 million acres of land suitable for cultivation in the United States at
present, but only about 450 million are actually used for crops or pasture.
Present indications are that only slightly more than 400 million acres of
cropland (including cropland pastured and idle) will be in use by 1980
to produce agricultural products.
The major land resource investments required during the next several
decades will, therefore, involve the conservation and protection of remaining
farmland and the transfer of land to nonagricultural use rather than
bringing more land into agricultural production. There are currently
close to 70 million acres of land used for cropland which are subject to
severe erosion hazard or otherwise not suitable for cultivation over the
long run. Much of this land could be transferred to provide products or
services, such as forestry and recreation, for which the demand is rising.
At the same time, about 17 million of the 240 million acres of good land
now in pasture or forest could be converted to cropland.
The Department of Agriculture currently has plans for a long-range land
use adjustment program. This program has three major facets: transfer
of cropland to grass; transfer of cropland to forest; and greater emphasis on
wildlife and recreational development in the small watershed programs.
As the program develops, it will be possible for supply management to place
less emphasis on temporary diversion of acreage from the production of
specific crops.
The present problems of U.S. agriculture, which reflect in part the fact
that the pace of technological progress in agriculture exceeds the rate of
growth in demand for farm products, should not blind us to the important
lessons to be drawn from the record. When strong policy measures are
taken well in advance, technological progress affords an escape from increasing scarcity. Indeed, it is technology that largely determines which portions of the environment are regarded as resources and which are not.
Research not only makes possible the more effective use of existing resources,
as in the case of agriculture, but may create important new ones. The
record of agriculture also illustrates, however, the long lag between the
decision to act and the appearance of the benefits. Careful and continuing
analysis of present and future resource needs, coupled with readiness to act
when the indications of potential difficulties become persuasive, is the best
hope for success in meeting the resource requirements of rapid economic
growth.




137

INVESTMENT IN PUBLIC SERVICES

Accelerated economic growth will require increased public investment,
just as it will require increased private investment. Without additional
plant and equipment, governments at all levels will be unable to meet the
increased demands for public services that arise both as a consequence of
measures taken to stimulate growth and as a consequence of growth itself.
If a high and rising educational level of the labor force is sought as a means
to speed economic growth, additional investment in school and college buildings, furnishings, and laboratory equipment will be required. Demands for
transportation of both people and goods will increase as a result of economic
growth; meeting these demands will require additional investment in urban
public transportation systems, airports, roads and highways.
Failure to make adequate investments in the physical basis of public
services inevitably retards economic growth. In some cases, the connection is fairly easy to trace; inadequate investment in highways will bring an
increase in congestion, with consequent declines in the productivity of trucks
and truck drivers, and rising transportation costs. In other cases, the
process by which a shortage of basic public services tends to retard the
growth of output is less obvious, but no less real; education is an important
example. As has been noted above, an inadequate effort to solve the
water pollution problem will be paid for in higher costs of obtaining water
of adequate quality—unless it is paid for by a decline in the health of the
population and decreased productivity in water-using industrial processes.
Inadequacy of public services also has effects on economic welfare that are
not reflected in aggregate economic statistics. Commuters are well aware
of the sacrifice of time that results from inadequate urban transportation
systems. The sacrifice of recreational opportunities resulting from failure
to make sufficient provisions for public parks as cities expand is another
example.
The task of meeting the transportation, recreation, education, housing,
and other needs of growing metropolitan areas poses a major challenge
to our existing forms of political organization at the State and local level.
Public facilities serving the needs of individual political jurisdictions
within an urban area are often less efficient than they would be if they
had been designed for all, or a large part, of the area. For example, lack
of effective and well coordinated land use planning and zoning regulation has resulted in locational patterns of residential, commercial, and
industrial developments that intensify transportation problems. Improved
planning and coordination can increase the efficiency of public services and
make cities better places in which to live. Progress can be achieved through
continued Federal assistance to States and local bodies for the planning of
urban area development, comprehensive urban renewal programs within
cities, public improvement programs, and specific public improvements.




138

Although the Federal Government is making an important contribution
to the solution of problems whose significance extends beyond the boundaries
of political units at lower levels, it must be remembered that civil government is basically a State and local responsibility. About 80 percent of
spending for civil government in 1960—for education, highways, water
supply, sanitation, public health, police and fire protection, etc.—actually
took place at the State and local level, with only about 15 percent of these
local expenditures financed by Federal aid. State and local governments
account for more than 70 percent of public civilian employment and for
two-thirds of nonmilitary government payrolls. Their activities are a major
factor in the economy.
As a Nation, we have surely not erred on the side of excessive public investment in recent years. Major sources of demand for public services have
expanded sharply: for example, the number of automobiles and trucks has
grown more rapidly than GNP, and the extent of urbanization has increased.
Nevertheless, new nondefense public construction as a fraction of GNP
was essentially unchanged in the 1950's from its level in the 1920's. It must
also be noted that a substantial backlog of unsatisfied needs for schools,
highways, and other public facilities was carried over into the decade of
the 1950's from the second World War—probably a much greater backlog
than was carried into the 1920Js from the first.
Although these historical comparisons throw an interesting light on the
changing role of the public sector in the U.S. economy, they do not provide
firm standards for the future division of responsibility between the public
and private sectors. That issue cannot be settled by the invocation of
historical ratios any more than it should be settled by abstract argument.
If our economy is to use its productive resources in reasonable accordance
with a consensus as to national priorities, we must face the question of
public versus private expenditures pragmatically, in terms of intrinsic merits
and costs, not in terms of fixed preconceptions.
INVESTMENT IN HOUSING

The higher standard of living made possible by economic growth results
from increased output of a wide variety of goods and services. Among
these is one item which, by virtue of its economic importance, its great
influence on the general quality of life, and the unique character of the
capital investment required to expand its supply, deserves special attention
in a discussion of economic growth. This item is housing.
The value of the current services supplied by the Nation's residential
structures—the total of rents paid plus the imputed rental value of owneroccupied dwellings—accounted for 13.1 percent of personal consumption
expenditures in 1961, or 8.5 percent of GNP. Another 4.1 percent of
GNP was accounted for by residential nonfarm construction—the total
expenditures on replacing, improving, and adding to the nonfarm portion
of the stock of residential structures. That stock itself represents roughly

621876O-62-10



139

one-fourth of our national wealth, about twice the share accounted for by
producers' durable equipment.
These figures are, in part, a statistical image of the importance of the
basic human need for shelter. To a greater extent, however, they reflect
the fact that better housing is among the most important benefits that
economic progress can confer. A dwelling that provides adequate protection against the elements may nevertheless be a serious hazard to the
mental and physical health of its occupants, if it is overcrowded, lacking in
hot and cold running water or plumbing facilities, or structurally unsound.
A better home provides a healthier, safer, and more comfortable living
environment; it affords greater opportunities for recreation, aesthetic enjoyment, and peace and quiet.
Few, if any, Americans actually lack a roof over their heads. But about
one-fifth of the Nation's housing units are classified as "dilapidated" or
else lack one or more of the basic plumbing facilities. Like the poverty
that it reflects, substandard housing is a burden borne to a disproportionate
extent by a few groups in the society; the aged, the nonwhite, the poorly
educated, and families without a male breadwinner. The burden is perhaps most regrettable when it renders ineffective the measures society takes
to promote equality of opportunity. The child who has no decent place
in which to study can hardly take full advantage of the free education
that is provided to him.
The elimination of substandard housing and the provision of a decent
home in a suitable environment for all American families is an important
objective of public policy in the housing field. The public interest has
been deemed to extend also to the promotion of home ownership. Through
the mortgage insurance and mortgage guaranty operations of the Federal
Housing Administration (FHA) and the Veterans Administration (VA)
and the secondary market operations of the Federal National Mortgage
Association (FNMA), the Government facilitates homebuilding and the
flow of private capital into home loans by providing insurance against the
risk of default and making mortgage loans a more liquid investment for
financial institutions. In addition, FNMA assists in the financing of certain
special types of home mortgages, as authorized by the Congress and directed
by the President. Public housing amounted to just over 3 percent of all
nonfarm housing starts between 1947 and 1960.
These various activities played a major role in the substantial progress
toward better housing for the Nation that was made during the 1950's.
Whereas in 1950, 55.0 percent of occupied housing units were owneroccupied, 61.9 percent were owner-occupied in 1960. Nonfarm housing
starts exceeded the increase in the number of nonfarm households by roughly
25 percent for the decade, providing a margin for replacement of housing
units demolished by public and private improvement programs, for improvement of average quality, and to accommodate housing needs arising from
migration and mobility of the American people. In recent years, about




140

30 percent of sales of new nonfarm housing units have been under the
FHA or VA programs.
A sharp rise in the rate of household formation will occur in the latter
part of this decade, reflecting the high birth rates of the middle and late
1940's. It is all the more important, therefore, that substantial progress
in improving the average quality of the Nation's housing be made in the
early part of the decade, when the need to increase its quantity will be less
urgent. The enactment in the last session of Congress of the Administration-sponsored Housing Act of 1961 was a major step toward meeting the
Nation's housing needs. In addition to extending and expanding existing
programs for public housing, housing for the elderly, college housing, and
farm housing, the Act provides for major new programs of FHA-insured
loans to finance construction and rehabilitation of housing for moderate
income families, and long-term FHA-insured home repair loans. These
new types of loans are eligible for purchase by FNMA. Other important
provisions make Federal assistance available to States and localities for
various measures in the field of urban affairs, including planning, loans,
and demonstration grants for mass transportation projects, and acquisition
of land for permanent open-space uses, such as parks. Additional funds
were authorized to finance the construction of community facilities.
Finally, a series of provisions make additional assistance available for households and businesses displaced by urban renewal programs or other government actions.
Rapid economic growth should bring the national goal of decent housing
and a suitable living environment for every American family well within
reach during the present decade. Estimates prepared for the Council of
Economic Advisers by the Housing and Home Finance Agency indicate
that no American households need occupy a dilapidated structure by 1970.
This could be achieved with about the present ratio of residential construction expenditures to GNP—provided that GNP itself grows at approximately the rate discussed earlier in this chapter. This estimate includes an
allowance for expenditures on additions and alterations based on extrapolation of the 1950-60 trend, but this allowance is probably not adequate to
make possible the elimination of housing that is deficient for reasons other
than dilapidation. It is clear, however, that the virtually complete elimination of deficient housing is by no means an unrealistic objective in a
context of rapid economic growth.
Construction costs have risen more rapidly than broad price indexes in
recent years. For example, while the all-inclusive price index for GNP rose
by 40 percent between 1947 and 1961, the subindex for nonfarm residential
construction rose by 50 percent. If this were to continue, it would mean
that the share of current-price GNP devoted to the building of houses must
rise if the proportion of real output going into housing investment is not to
fall. There is a need to identify artificial barriers to technological progress
and to efficient allocation of resources in the construction industry. Their




141

reduction or removal can make a significant contribution to growth in this
important sector of the economy.
CONCLUSION

This Chapter began with the observation that sustained long-run growth
of potential supply is both difficult to achieve and pointless of achievement
unless the growth of demand keeps pace. Capacity to produce is not an
end in itself, but an instrument for the satisfaction of needs and the discharge of responsibilities. The needs will go unfilled and the responsibilities unmet to the extent that growing productive power runs to waste
in idle machines and unemployed men.
Here the objectives of stabilization policy and growth policy coalesce.
The mandate of the Employment Act renews itself perpetually as maximum
levels of production, employment and purchasing power rise through time.
The weapons of stabilization policy—the budget, the tax system, control of
the supply of money and credit—must be aimed anew, for their target is
moving. In particular, as Part II of Chapter 1 explains, with given
expenditures and given tax rates, the Federal budget surplus at full employment grows with the economy. If it grows too rapidly, it can become an
obstacle to full employment, to healthy economic growth, indeed to its
own realization. If it grows too slowly, it can contribute to inflationary
pressure.
Some surplus at full employment may be desirable, to help to finance the
formation of capital. How large it should be depends on the size of the
investment program required by the economy, on the freely made saving
decisions of families and business firms, and on the level of government
expenditures. It is the function of monetary policy, the tax system, and
transfer payments to help to generate demand for the investment needed
for economic growth. It is the function of over-all fiscal policy to insure
that investment demand is matched, at full employment, by an equivalent
volume of private and public saving.
The course of the budget surplus at full employment depends on the
growth of the national income, the responsiveness of tax revenues to a
rising tax base, and the changing level of Federal outlays. Even if Federal
expenditures remain a constant proportion of GNP, as they have in recent
years, the surplus at full employment will grow slightly because the progressive character of the tax system causes revenues to rise relative to GNP.
If expenditures remain constant, or nearly so, the full employment surplus
will grow much more rapidly.
As the economy returns to the full employment track, the full employment surplus will need to be kept from growing indefinitely, and perhaps
to be reduced. The choice—or rather the division, for it is unlikely to be
an "either-or" matter—is between reductions in tax receipts and increases
in government expenditures, whether Federal, State or local. A pragmatic
decision will almost certainly involve both. It is unlikely that the most




142

urgent unmet needs of the population will lie all in the area of private
consumption or all in the areas traditionally allotted to public consumption
and investment. Undoubtedly much of the reduction in the full employment surplus should be channeled directly to private purchasing power,
just as most, by far, of present consumption spending is in private hands.
The choice of a balance between public and private expenditures is an
important choice for society. It should be made consciously through the
normal democratic processes. And it should be made by weighing the
urgency of alternative uses of resources, rather than by appeal to simple
slogans on one side or the other.
The concern of this chapter has been the source of rising productive
potential and the policies that can strengthen them. Granted continued
prosperity, we can have slower growth or faster growth. There is substitution between the composition of output in the present and the level of output
in the future. Just as a single individual can increase his consumption possibilities in the future by present saving, so can a whole society provide more
fully for its future by using present resources for acts of investment in the
broadest sense. No absolute reduction in current consumption need occur;
it is only necessary that consumption grow less rapidly than total output for
a time. Indeed, future levels of consumption will be higher than they could
otherwise be—the cost is primarily in postponement. Happily, for an advanced society like ours, much of what is described from this point of view
as investment can also be seen as present enjoyment of some of the delights
of civilization: widespread education, good health, and the search for
knowledge.




143

Chapter 3

The Balance of International Payments

T

HE RECOVERY AND GROWTH of the U.S. economy are not important for the United States alone. On the vigor of our economy
depend in large measure the strength and stamina of the free world and
the standing of freedom in the minds of men everywhere. Leadership in
the world requires the support of a growing and dynamic domestic economy,
using to the full its vast productive capacity. The other nations of the
free world rely heavily on the United States as a market for their products
and as a source of capital and technology for their economic growth. The
United States has taken the lead in meeting the responsibilities of the advanced countries to foster the economic development of the low-income
nations. The less developed cquntries need both public and private investment capital; they need full opportunity to sell their products in world
markets in order to earn the industrial imports that their development programs require; and they need a democratic alternative to the communist
prescription for economic development.
The U.S. balance of international payments is the outcome of countless
separate transactions by governments, private businesses, and individuals.
The obligations of world leadership entail large government outlays
abroad. U.S. business firms and consumers pay out billions of dollars for
foreign goods and services. U.S. corporations, financial institutions, and individuals acquire properties, buy securities, and lend money abroad. The
United States is one of a very few countries with a long standing policy
permitting residents and foreigners complete freedom to make payments
abroad in its currency. For many years, the United States had little reason
to be concerned whether all these payments were covered by corresponding receipts from abroad. Foreign demands for U.S. goods and services
were large; the dollar was, and still is, a ticket of entry to the world's
largest and most diversified market. In some periods, the surplus of receipts was so large that the United States took actions to moderate its
effects both at home and abroad. And if international payments happened to exceed receipts in any year, foreigners were willing to hold most
of the dollars they acquired; only a small part of the deficit had to be met
from our large gold reserves.
Recently, persistent payments deficits and gold losses have made it necessary for the U.S. Government to give greater attention to the net financial
outcome of its transactions, and those of its citizens, with the rest of the
world. Payments need not and should not be directly controlled, but the




144

balance must be under control. Many private international transactions
depend in large part on economic circumstances at home. Consequently,
domestic economic policy must be framed with an eye to the balance of
payments. Action to safeguard the international position of the dollar is
today an essential part of policy for full employment and growth.
The policies adopted in 1961 to strengthen the balance of payments
are already beginning to take effect. The deficit in the international payments of the United States, which had averaged $3.7 billion annually in
each of the three preceding years, was less than $2.5 billion in 1961,
according to preliminary estimates. Gold reserves declined by less than
$0.9 billion in 1961, compared with $1.7 billion in 1960. The full effects
of measures under way and proposed will in time restore a sustainable
balance in U.S. transactions with the rest of the world.
This chapter examines first the background for policies to improve the
balance of payments and safeguard the position of the dollar: the general
objectives which guide U.S. international economic and financial policies;
the trading, investing, and international banking functions of the United
States and their interrelations; and recent changes in the world economy
affecting the U.S. balance of payments. In the final sections of the
chapter, policies that are under way and proposed are discussed: measures
to balance the basic international accounts; measures to limit disruptive
flows of short-term capital; and measures to strengthen the international
monetary system.
T H E UNITED STATES IN THE WORLD ECONOMY

Objectives of U.S. Foreign Economic Policy
A basic objective of U.S. policy is to provide an economic environment
in which the people of the United States and of all nations can steadily
raise their standards of living. Economic growth at home will support,
and will be supported by, progress and development abroad, provided that
international cooperation and commerce distribute eauitably and efficiently
the fruits of productive specialization among all free nations. International financial arrangements and policies are means to this fundamental end. A stable and efficient system of international payments is
essential to facilitate desirable international flows of goods, services, and
capital. The dollar has become the principal international currency, and
the stability of the dollar is the foundation of the international payments
system which has evolved since the war. For this reason, the President
has declared that the present gold value of the dollar will be maintained.
To safeguard the stability of the dollar, the United States is determined
to improve its balance of international payments.
Postwar progress. U.S. foreign economic policy since the war has sought
to build an international economic environment in which goods, services, and
capital flow freely across national boundaries. This policy has been based on




145

the conviction that a free exchange of products and capital in worldwide markets will raise standards of living both in the United States and in
the rest of the world. The example of the vast continental market of
the United States attests to the economic gains afforded by geographical
specialization and exchange and by the mobilization of savings in one region
to finance productive investment opportunities in another. Without this
huge internal market, unhampered by trade restrictions between States,
American standards of living could not have risen to their present heights.
Throughout the world, similarly dramatic gains can be achieved by
international specialization and trade.
The framework of international economic cooperation in the free world
today, especially among the industrial countries, represents a notable
achievement. The great depression and the war left a legacy of national
restrictions on movements of goods and capital—exchange controls, quantitative restrictions on imports, bilateral clearing and trading arrangements,
discrimination against dollar goods. Since the war, the countries of the
free world have been engaged in clearing away this restrictive legacy. Even
before the war ended, the foundations were laid for the International
Monetary Fund, the International Bank for Reconstruction and Development, and the General Agreement on Tariffs and Trade. The United
States provided aid and leadership in European economic reconstruction and
trade liberalization through the Marshall Plan and through association
with the Organization for European Economic Cooperation. Substantial
progress has been made toward a world of currencies convertible at fixed
exchange rates and toward freedom from direct and discriminatory controls over trade and payments. Progress has also been made, though less
rapidly, toward a world of lower tariff barriers; here is an opportunity for
a major step forward.
Expanding trade: a new program. Foreign trade is not so vital to the
United States as it is to most other countries. But the contributions of trade
to our domestic welfare are nonetheless real and important. Net foreign
purchases of our products contribute to output, employment, and economic
growth in the United States. More significant, the opportunity to sell our
products abroad in exchange for foreign goods enables us to specialize the
structure of our production and to diversify the patterns of our consumption.
By specializing in the production and export of goods in which the United
States is unexcelled, Americans are enabled to import goods which would be
impossible or costly to produce at home. Foreign trade raises living
standards by widening the choice of goods available to the American
consumer and by providing him with some goods and services at lower prices.
As other countries have recovered from the devastation of war and have
rebuilt and modernized their productive capacity, they have become increasingly vigorous competitors of the United States in world markets. The
most notable new source of competition is the European Economic Community, or Common Market, which now includes France, Germany, Italy,




146

Belgium, Holland, and Luxembourg, and which shortly may include the
United Kingdom and several other European countries. Members of the
Common Market are committed to the rapid elimination of tariffs among
themselves and the establishment of a common external tariff on imports
from the rest of the world.
Still in its formative years, the Common Market has imparted amazing
vitality to the economies of its members. U.S. exports to Western Europe
have risen sharply in response to the rapid economic growth within the
Common Market countries. We cannot be sure that this rise in exports
will continue unless we can negotiate substantial reductions of the Common
Market's external tariff. The evolution and enlargement of the Common
Market inevitably increases tariff discrimination against U.S. exports; we
must compete over this tariff barrier while members of the Common Market have steadily freer access to each other's markets.
The Administration is therefore proposing to the Congress a major revision in foreign trade policy. The President's current authority to negotiate
tariff reductions has been virtually exhausted. For the first time since the
original Trade Agreements Act was passed in 1934, Congress is being asked
to equip the President with new kinds of bargaining instruments for negotiating with the Common Market. We must assure access of the products of our
farms and factories to the world's largest market outside our own. Successful
negotiations will make possible increasing specialization of production in
both Atlantic markets. It will also make it possible to offer the free nations
of other continents greater access to markets on both sides of the Atlantic.
Safeguarding the dollar. A stable and efficient system of international
payments is an integral part of the liberal international economic environment toward which the free world has been moving. Uncertainties about
the value and convertibility of the proceeds of international transactions
disrupt movements of goods, services, and capital between nations. Convertible currencies and stable exchange rates as envisaged in the Bretton
Woods agreements provide assurance of the value of international claims
acquired by trade or investment.
The United States performs a special world banking function in the present
international payments system. The dollar, alone with the pound sterling
among national currencies, has come to be used as a major international
currency by the free world. Private traders, banks, and governments have
chosen to use dollars both as a means of payment and as a store of value.
Foreign countries hold liquid dollar balances, acquired in international
transactions, in much the same way that individual depositors hold balances
in commercial banks. Foreign governments and central banks accept
dollars as a partial substitute for gold in their international reserves because
the dollar is an international currency and because the policy of the U.S.
Treasury is to sell gold on demand to foreign governments and monetary
authorities at a fixed price. The dollar became a "reserve currency"
without any conscious international decision to establish a payments system




147

based on key national currencies. Use of the dollar as a reserve currency
has met growing needs for international reserves and economized the
limited and slowly growing supply of gold.
Foreign central banks and governments hold as part of their international
reserves $11 billion of short-term dollar obligations, which can be used
to purchase gold from the United States. In addition, foreign private
short-term dollar holdings amount to $8 billion. Whenever dollars held by
foreign private banks or individuals, or dollars held by U.S. residents themselves, are sold to foreign central banks for other currencies, they become
potential claims on our gold stock.
Because of the strategic role of the dollar, maintenance of its established
gold value is essential to the stability and efficiency of the present system
of international payments. Accordingly, when the President pledged that
the gold value of the dollar would be maintained, he stated that "the full
strength of our total gold stock and other international reserves stands
behind the value of the dollar for use if needed." This reserve strength
comprises $17 billion in gold (two-fifths of the monetary gold stock of the
free world), small amounts of convertible foreign currencies, and drawing
rights on the International Monetary Fund (IMF), of which $1.7 billion
is automatically available under current practices of the Fund. An additional $4.1 billion could become available in accordance with Fund
policies, insofar as the Fund has available resources in gold and usable
foreign currencies. The recent agreement to strengthen the IMF (discussed at the end of this chapter) should do much to assure the availability
of such resources.
Reducing the deficit. Deficits in the U.S. balance of payments are
financed either by drawing down our gold reserves or by increasing
the potential foreign claims against them in the form of liquid dollar liabilities to foreigners, official and private. Large and continuing deficits
cannot be financed indefinitely. U.S. reserves, although very large, are not
inexhaustible. Foreigners have accumulated large liquid dollar balances,
but they will not be willing tot let these balances grow without limit.
Therefore, the policy of the U.S. Government, as stated by the President in his message to Congress of February 6, 1961, is to "gain control of
our balance of payments position so that we can achieve over-all equilibrium
in our international payments. This means that any sustained future
outflow of dollars into the monetary reserves of other countries should come
about only as a result of considered judgments as to the appropriate needs
for dollar reserves."
Maintaining basic objectives. These related tasks—maintaining the
external value of the dollar and bringing our international accounts into
balance—must be accomplished by means which promote the basic national
objectives from which the tasks derive. To balance our accounts by
restrictions on trade and capital movements, for example, would confuse
means and ends. Such restrictions would violate the fundamental principles




148

of international economic relations for which our policy has striven for
many years with so much success. Similarly, the foreign policy of the
United States calls for large loans and grants to foreign countries for development and for defense; and the maintenance of our military establishment
abroad entails substantial overseas expenditures. To curtail the substance
of these programs would provide no solution t > the "dollar problem."
o
Rather, the task of balance of payments policy is to find the foreign exchange
resources necessary to finance them. Finally, full recovery and economic
growth, primary national goals in themselves, are also essential elements
in the long-run capacity of the United States to meet its international commitments and responsibilities. Measures to rectify the balance of payments
must be consistent with expansion of the U.S. economy.
The United States as Trader, Investor, and Banker
The accounts. The U.S. balance of international payments over the last
decade is shown in Table 17. In the table, international transactions are
classified into four accounts: (1) current account and unilateral

transfers,

encompassing merchandise trade, earnings on U.S. foreign investments less
foreign earnings on investments in the United States, services including
tourism and ocean freight, private remittances, and government military
expenditures and development grants; (2) long-term capital account, coverTABLE 17.—United States balance of international payments, 1951-61
[Billions of dollars!
1951-55
average

Type of transaction

1958

1959

1961 i

Long-term capital account
U.S. direct investment4
Other private U.S. investment
Government loans (less repayments).
Foreign long-term investment5
Balance on "basic" accounts (entries above)

0.8

-0.1

-2.3

1.5

2.4

3.9
17.7
-13.8

3.3
16.3
-13.0

1.0
16.3
-15.3

4.7
19.4
-14.7

-2.8
2.2
-.1
-1.6
-.7

-3.1
2.2
-.2
-1.6
-.7

-2.8
2.2
-.2
-1.6
-.8

-2.7
2.3
-.3
-1.6
-.8

5.5
19.7
-14.2
-2.5
2.7
-.4
-1.9

-.9

Military expenditures, net 2
Interest and dividends, net 3
Other services, net
Government nonmilitary grants.
Pensions and remittances

-0.6

-2.1
1.6
.2
-2.1
-.6

Merchandise trade balance..
Exports
Imports

-3.0

-3.5

-2.1

-3.4

-2.5

-.7
-.2
-.2
.2

-1.6
-.9
-.8
.4

-1.1
-1.4
-1.0

-1.4
-.9
-.4
.6

-1.7
-.9
-1.1
.3

-1.7
-.6
-.7
.4

-1.4

-2.2

-3.6

-4.3

-1.9

-.1

-.2

c

-.4

.1

-1.4

-1.0

.4

.3

.4

.5

-.6

-.4

-1.2

-2.3

-3.5

-3.7

-3.9

-1.5

commercial

Errors and omissions
Over-all balance [deficit (-)]_

1 First 3 quarters at seasonally adjusted annual rate.
Net of foreign military purchases in the United States.
Excludes subsidiary earnings not repatriated.
Excludes reinvested subsidiary earnings, amounting to $1.3 billion in 1960.
Excludes reinvested subsidiary earnings, amounting to $0.2 billion in 1960.
NOTE.-—Minus signs indicate payments to foreigners.
Detail will not necessarily add to totals because of rounding.

2
3
4
5

Source: Based on Department of Commerce data.




1960

2.4
13.4
—11.0

Current account and unilateral transfers.

U.S. short-term capital and foreign
credit

1956-60

average

ing direct investments in business enterprise abroad, private purchases of
foreign securities, U.S. Government loans, and long-term investments by
foreigners in the United States; (3) short-term capital account, including
commercial credits under one year and U.S. purchases of foreign short-term
securities; (4) over-all balance, comprising net purchases of monetary
gold and convertible currencies plus decreases in U.S. liquid liabilities to
foreigners.
The accounts are, of course, far more interrelated than a simple classification of transactions suggests; foreign aid, private direct investment, and
private remittances often consist in shipment abroad of U.S. goods. Even
dollar outflows which are not so closely linked to the purchase of U.S. goods
and services frequently result in reverse payments to the United States,
either directly from the immediate recipient or indirectly through transactions involving third countries. The volume of our exports and indeed
the size of the trade surplus are thus not independent of the size of our
government outlays and private investments overseas.
The first account covers international transactions which relate to the
earning and spending of national income. A surplus in this account means
that the Nation as a whole is earning more than it is spending in its relations with the rest of the world, and this "saving" leads to an increase in the
net assets of the country. Throughout the period covered by the table, the
United States had a substantial merchandise trade surplus which, with other
current receipts, was usually enough to pay for large overseas military
expenditures and government grants for foreign reconstruction and development. In the first three quarters of 1961, the surplus on current account
and unilateral transfers was at an annual rate of $2.4 billion.
The second account summarizes the transactions of the United States as an
investing nation. In recent years the United States, as Table 17 shows, has
invested in long-term foreign assets more than its surplus on current account
and unilateral transfers. It has also lent to foreigners substantial amounts
of short-term capital, as the third account in the table shows. The excess
of our long-term investment and short-term lending over our surplus on
current account and unilateral transfers—the over-all deficit—has been
financed by increasing our liquid liabilities to foreigners and by selling gold.
The present payments problem of the United States is not one of
solvency. The Nation is not "living beyond its means"; rather, its means
are steadily increasing. At the end of 1960, the U.S. Government owned
foreign assets totaling $21 billion, in addition to its gold holdings of $18
billion; and U.S. citizens owned another $50 billion in assets abroad
(Table 18). In total, U.S. net claims on foreigners (including reinvested
subsidiary earnings on investments abroad) rose by $4 billion in 1960, and
the increase was perhaps as much in 1961. These increases substantially
exceeded our losses of gold. Our foreign assets give basic long-run strength
to the dollar; but because most of these assets are either privately owned
or long-term investments or both, they cannot be quickly mobilized.




I5O

TABLE 18.—International investment and gold position of the United States, 7949 and 1960
[Billions of dollars, end of year]
Assets and liabilities

1960 i

Assets..

89.2

Gold, I M F subscription, and short-term
Monetary gold
International Monetary Fund subscription 3_.
Short-term private

28.6
24.6
2.8
1.3

26.8
17.8
4.1
4.9

Long-term
Direct investment
Other private investment.
U.S. Government claims»

26.6
10.7
4.9
11.0

62.4
32.7
12.6
17.0

Liabilities
Liquid
Short-term, by holders:
Foreign official *
International Monetary Fund s—.
Other international organizations 4
Privates
Foreign and international holdings of U.S. Government bonds and
notes
Long-term
Direct investment
Other private investment.
Excess of assets over liabilities

16.9

44.7

9.8

26.2

2.9
1.3
.4
4.6

10.3
2.6
1.4
9.6

.6

2.3

7.1
2.9
4.2

18.4
6.9
11.5
44.5

1

Preliminary.
2 Under current practices of I M F , the United States has a virtually automatic right to draw the amount
of its subscription less the amount of U.S. liabilities to I M F as shown in the lower part of the table.
3 Includes U.S. Government claims in inconvertible currencies.
4
As reported by banks in the U.S.
5
Noninterest-bearing notes (and, in 1949, deposits).
6
Includes estimated foreign holding of U.S. currency and other liquid claims not accounted for elsewhere.
Note.—Detail will not necessarily add to totals because of rounding.
Sources: Department of Commerce and Board of Governors of the Federal Reserve System.

It is useful to distinguish net payments resulting from merchandise trade,
services, unilateral transfers, and long-term investment—the so-called basic
accounts—from net payments resulting from the more volatile, and sometimes substantial, flows of short-term capital. The balance on basic accounts and the over-all balance are shown in Table 17 and Chart 11. In
1959 the "basic" deficit was larger than the over-all deficit because of net
inflows of short-term capital, while in 1960 and again in 1961 the over-all
deficit exceeded the deficit on basic accounts as a result of net outflows of
short-term capital.
The over-all balance exerts a significant influence on the liquidity position
of the United States. The change in the U.S. position resulting from overall deficits in the past decade can be seen from the reduction in the monetary
gold stock and the increase in U.S. liquid liabilities to foreigners, shown in
Table 18 and Chart 12.
Reserves and liquid liabilities. In 1949, the United States held 70 percent of the world monetary gold stock and half of the world total of official
gold and foreign exchange reserves. Capital seeking haven from the political disruptions of the 1930's, followed by the import needs of war-torn
Europe, produced this undue concentration of world reserves. In those




CHART

11

Balance of Trade and Payments
BILLIONS OF DOLLARS
SEASONALLY ADJUSTED ANNUAL RATES

10 -

5

-

"X

/

J hA

TRADE

BALANCE

y ^

X

/

^X

X-

A

-5 -BASIC

JALANCE

~
OVER- ALL
BALA 4CE

-10

i

i

1955

i

i

i

1956

i

i

i

1957

i

i

i

i

1958

.

i

1959

i

i

i

I960

i

•

i

i

1961

NOTE: FOR DEFINITIONS OF DIFFERENT BALANCES SEE TABLE 17.
SOURCE: DEPARTMENT OF COMMERCE.

circumstances, deficits in the U.S. balance of payments served the very useful
function of rebuilding the depleted reserves of other countries.
Countries chose to replenish reserves largely by holding dollars rather
than by purchasing gold. While cumulative deficits totaled $23 billion in
the past 12 years (Chart 12), U.S. gold sales amounted to just $7 billion,
of which $5 billion represented reacquisition of gold that the United States
had obtained in the early postwar period. The rest of the deficit was
settled by an increase in foreign dollar holdings.
Despite the continuous rise in foreign dollar holdings, the liquidity position of the United States is strong. The importance of the United
States in international trade and international banking, the facilities offered
by the New York money market, and the variety and quality of goods, services, and securities which dollars command within the United States make
it advantageous for foreigners to hold large dollar balances. These working
balances will not readily be withdrawn, although they are not entirely
insensitive to yield opportunities abroad. Furthermore, as world trade
expands, the size of these working balances is likely to rise.
The present position of the United States is satisfactory as long
as foreign holders of dollars are confident that the gold value of the currency will be maintained. Loss of confidence can, however, result in a
serious "run." Indeed—as the failures of basically sound and solvent com-




mercial banks before the days of deposit insurance testify—there is no
conceivable liquidity position which can withstand general loss of confidence.
Payments deficits and gold tosses. As U.S. experience in the past 12 years
indicates, there is only a loose link between external deficits and gold losses.
Deficits occur when total payments to foreigners exceed total receipts from
foreigners; a decline in gold reserves occurs when a foreign government
or central bank converts dollars into gold at the U.S. Treasury. A deficit
in the balance of payments need not, and usually does not, coincide with
an equal decline in gold reserves. Foreigners may increase their dollar
holdings by part or all of the deficit—or, as happened in 1956, even by
more than the deficit (Chart \2). Similarly, this country may lose gold
even when it has a balance of payments surplus, if foreign official institutions
wish to convert dollars acquired in the past.
Payments deficits contribute indirectly to gold losses by adding to the
supply of dollars in foreign hands, thus increasing the likelihood that they
will be acquired by governments which may wish to convert them into
gold. Moreover, the fact that there are persistent payments deficits may
reduce foreigners' willingness to hold dollars.
Three years of large payments deficits contributed to a temporary decline in confidence in the dollar and to the large gold sales of late 1960.
An outflow of short-term funds began in mid-1960 as a normal response
to higher interest rates abroad, but it was augmented when doubts arose
about the stability of the dollar, as evidenced by substantial private purchases of gold on the London market. These doubts reflected a number
of factors: the large payments deficits of 1958 and 1959 and the loss of
gold associated with them, the outflow of funds early in 1960 associated
with differentials in interest rates, the initial rise in the London gold price,
and fears that strong action to defend the dollar would not be taken.
Confidence was restored when the new Administration declared and demonstrated its determination to defend the dollar, intensified measures taken
by the previous Administration to reduce the payments deficit, and inaugurated new measures.
Recent Developments Affecting the U.S. Payments Position
Although the United States has been running deficits in its international
accounts since 1950, these deficits were moderate in amount and did not
cause concern until 1958. Concern has arisen since then, partly because
of the unexpected persistence of large deficits and partly because the deficits
could not be attributed to temporary developments likely to be soon reversed.
Several significant new factors changed the U.S. position in the world economy : (1) The establishment of external currency convertibility by most of
the European countries at the end of 1958 removed an important barrier
to international capital flows. (2) The establishment of the European
Economic Community promised a large, rapidly growing, tariff-free market
in Europe, holding out much the same investment opportunities as the




153

CHART 1 2

Changes in U. S. Gold Stock
and Liquid Liabilities to Foreigners
(Annual and Cumulative)
BILLIONS OF DOLLARS

ANNUAL

5

CHANGE IN
GOLD STOCK ^ s .

/

\

OVER -ALL BALANCE
INCREASE IN
LIQUID LIABILITIES

i

|

1950

1952

1

I
1954

!

1

I

1

1

1

1956

1958

I960

1956

1958

I960

BILLIONS OF DOLLARS

30
CUMULATIVE DEFICIT, END O F YEAR

1950

1952

1954

FIRST 3 QUARTERS.
SOURCES: DEPARTMENT OF COMMERCE, TREASURY DEPARTMENT, AND BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM.




tariff-free internal market of the United States. (3) Intercontinental
ballistic missiles and restoration of political stability in Western Europe
reduced the special attractions of the United States as a haven for funds
and as a location for capital investment. (4) The large overseas military
expenditures and extensive foreign aid programs of the United States came
to be clearly recognized as long-term commitments. (5) The decline of the
U.S. trade surplus, from $6 billion in 1957 to a postwar low of $1 billion in
1959, focused attention on the long-run improvement in the competitive
position of Western European countries and Japan relative to the United
States—an improvement caused mainly by remarkable advances in output
and productivity in those countries. (6) In addition, a sharp rise in certain
key prices in the United States relative to those of major competitors weakened the competitiveness of some U.S. products in world markets. (This
development is described in Chapter 4.) (7) By 1958, gold and foreign
exchange reserves of many European countries had been rebuilt from their
depleted postwar levels; U.S. payments deficits were no longer needed for
this purpose.
These developments occurred within a short span of years and affected
not only the U.S. payments position itself but attitudes and expectations
about its future. The U.S. economy, which was geared to the entirely
different environment of the years of "dollar shortage," suddenly had to
adjust to a new situation. In brief, the required readjustment is that the
United States must pay for overseas military commitments, grants, and
investments to a greater extent by an export surplus earned in stiff" world
competition, and to a lesser extent by selling gold and accumulating liquid
liabilities to foreigners. For the domestic economy, this implies changes
in the structure of prices, wages, investment, and employment and a new
orientation of American enterprise to world markets. A complete
readjustment of this nature takes time.
POLICIES T O IMPROVE THE U.S. PAYMENTS POSITION

In the new environment of the 1960's, the United States cannot continue
deficits of the size of the late 1950's. The balance of payments objective
for the United States is to attain, at high employment levels, a balanced
position in its basic international accounts during the next few years. We
must move toward equilibrium at a pace which demonstrates clearly that
the balance of payments is under control.
The objective of a balanced basic position does not mean that balance
must be maintained continuously. In some years, a surplus in international
payments will be appropriate; in other years, a deficit. But the average
position over a period of years must be strong enough to maintain confidence
in the parity of the dollar.
The primary task is to improve the position of the basic accounts.
Progress toward balance in these accounts will itself diminish the likelihood
of sustained short-term capital outflows. Therefore, in a discussion of pros621876 O-62-11




155

pects and policies for improving the balance of payments position, it is convenient to discuss, first, the basic accounts, and then the short-term capital
account.
Basic Accounts
The underlying trend of the basic accounts position is not easy to discern
from current quarterly and yearly statistics. It is difficult to disentangle
movements of lasting significance from changes resulting from seasonal,
cyclical, and random factors. When, in the first half of 1961, slack in the
U.S. economy combined with boom conditions in Europe and Japan to
bring our basic accounts into temporary surplus, it would have been
clearly wrong to conclude that the problem was permanently solved. Conversely, subsequent reappearance of a deficit on basic accounts, which may
even rise temporarily as recovery proceeds in the United States, reflects a
reversal of cyclical influences rather than a deterioration in the underlying position. Long-run improvement resulting from competitive adjustments and government policies may be masked by temporary developments
here and abroad.
The dimensions of the problem facing the United States may be indicated
by the basic international accounts in the six-month period embracing the
second and third quarters of 1961—the latest 6 months for which complete
information is available—expressed in terms of annual rates (Table 19).
Overseas military expenditures, less foreign military purchases in this
country, were running at $2.4 billion in mid-1961. Government grants
and loans amounted to $3.7 billion, but $2.5 billion of these resulted
directly in the export of U.S. goods and services, leaving $1.2 billion to be
otherwise financed. Long-term private investment abroad was running at
about $2.0 billion, and pensions and remittances to foreigners cost nearly
$900 million.
The overseas commitments and investments, resulting in payments of
$6.4 billion (2.4+1.2 + 2.0 + 0.9, rounded), must somehow be financed by
net receipts from other transactions. This requirement was partially met by
debt repayments by foreign governments (excluding special prepayments in
April) and net earnings on services (excluding military transactions and
receipts associated with government aid) amounting to $2.2 billion at an
annual rate. Full balance in the basic accounts would, therefore, have required a merchandise trade surplus (excluding exports financed directly by
government grants and loans) of $4.2 billion. This contrasts with the trade
surplus of $2.8 billion actually achieved. The resulting deficit of $1.4
billion had to be financed by a sale of gold and an increase in our liquid
liabilities to foreigners.
Without temporary cyclical factors, the gap would probably somewhat
exceed the deficit of $1.4 billion on basic accounts actually experienced
during this period, since our gross national product (GNP) was still far
below full employment levels. At full employment, imports can be expected
to be higher than they were in mid-1961.




156

T A B L E 19.—United States balance of international payments,

7960-67

[Millions of dollars, seasonally adjusted]
1961

1960,
fourth
quarter

Type of transaction

Second
quarter

Third
quarter 1

1,312

1,389

1,211

617

3,656

999
543
-230

1,080
519
-210

911
521
-221

488
340
-211

2,798
1,722

-861

-870

5 -713

-819

5 -3,064

-642
-1,013

-689
-1,000

-611
-822

-605
-1,014

-2,432
-3,672

563

580

452

605

2,114

86
145

107
132

87
5 181

115
80

Current account and transfers, excluding major
Government transactions.
Merchandise trade balance 2_
Net balance on services 3
Pensions and remittances
Major Government transactions_
Military expenditures, net 4
Government grants and loans
Exports of goods financed by Government
grants and loans
Exports of services financed by Government
grants and loans
Repayments of Government loans

404
5 522

-542

-2,002

-744

5-1,410

-31

-240

-542

-409

125

Private long-term capital, net

-991

-356

Balance on "basic" accounts (entries above)

-540

163

U.S. short-term capital and foreign commercial
credit

-567

-484

Errors and omissions

-327

-25

-1,434

-346

5 -401

Over-all balance [deficit (-)]

Second
and third
quarters
(annual
rates)

First
quarter

-459
5 39

-859

5 - 2 , 520

1 Preliminary.
2 Excludes exports of goods financed by Government grants and loans.
3 Excludes military expenditures, net, and exports of services financed by Government grants and loans.
4
Includes private expenditures of foreign exchange by United States forces and their dependents; net of
foreign military purchases in the United States.
5
Excludes $649 million in receipts from foreign governments through extraordinary debt repayments.
Note.—Minus signs indicate payments to foreigners.
Source: Based on Department of Commerce data.

The payments position in the second and third quarters of 1961 reflects
to only a small extent the impact of government balance of payments
policies initiated during the year. The full effects of these measures, and
of further measures planned or proposed, will take time. So will the full
response of U.S. industry to the increased competitive challenge from abroad
and to the improvement in the U.S. competitive position achieved in the
past two years. But the gap to be narrowed and eventually closed is not
large, less than 10 percent of our exports of goods and services and less
than one-half of 1 percent of our GNP. Though it will take time to make
the needed adjustments and for their effects to outweigh unfavorable
cyclical factors, U.S. international reserves provide ample means to cover
interim deficits on the basic accounts.
Improvement in the U.S. balance of payments is more than a U.S.
problem. Our deficit is matched by corresponding surpluses elsewhere,
especially in Europe. Unless the surplus countries allow their surpluses to
decline, we cannot reduce our deficit without accentuating the payments
problems of other deficit countries. Surplus and deficit countries bear joint
responsibility for rectifying payments imbalances and for maintaining the




157

stability of the international monetary system during the period of
adjustment.
Reducing the basic deficit involves either diminishing the outflows on
government and net capital account or increasing the current account surplus. Both these approaches are being taken. Measures to reduce the payments deficit must be consistent with the primary objectives of U.S. policy:
to fulfill foreign economic and military obligations, to encourage the flow of
goods, services, and capital among nations, and to expand the U.S. economy.
There is no single dramatic cure-all for the payments problem. Accordingly, the Administration is pursuing a variety of measures on many fronts.
Military outlays. U.S. military outlays in foreign countries have averaged nearly $3 billion annually during the last six years even after foreign
purchases of military equipment in the United States are deducted. These
overseas expenditures by and for U.S. forces—for construction, logistical
support, services, and personal purchases—are an integral part of the
national defense effort. In addition, the United States provides substantial
military grants in kind, valued at $1.8 billion in 1960, to the governments
of friendly nations.
The Department of Defense has taken several measures to conserve foreign exchange, including increased procurement of its supplies from U.S.
sources even at higher cost to the federal budget.
More than half of the military outlays are in Europe. The Berlin situation is causing an increase in these outlays. The United States is currently
discussing with the Federal Republic of Germany and other NATO Allies
measures which would have the effect of offsetting these dollar outlays
for defense purposes. The Federal Republic of Germany is already making
a substantial contribution in this regard. It is the objective of the Administration to work out arrangements which would offset as much of our
overseas military expenditures as is feasible.
Government loans and grants. Government loans and grants have shifted
markedly since the early 1950's from European countries and Japan to the
less developed countries, and have risen from $2.5 billion annually in the
mid-1950's to an annual rate of $3.8 billion during the first three quarters of
1961. Repayments on past government loans rose steadily during the 1950's,
and in 1960 they exceeded $600 million.
The growing size of our aid expenditures reflects the pressing needs
of the less developed countries for capital. The recent U.S. payments
deficits, however, have necessitated policies to reduce the foreign exchange
cost of these programs. The President has instructed the aid agencies to tie
development aid directly to purchases of U.S. goods and services wherever
possible. In the first nine months of 1961, before this policy had taken full
effect, nearly 70 percent of government loans and grant disbursements
resulted directly in the export of U.S. goods and services.
Though a policy of tied aid may be unavoidable under present conditions, it has the twofold disadvantage of reducing the efficiency of a given
level of aid and of shielding some U.S. export industries from foreign com-




158

petition. When the United States achieves over-all balance in its international accounts, it will be appropriate to discuss with European countries, Japan, and Canada the possibility of putting all the development
aid of industrial countries on an untied basis.
The United States has encouraged other industrial countries to increase
their aid efforts and to provide aid on an untied basis when their payments positions permit. Recent arrangements among several industrial
countries to provide assistance for the development programs of India
and Pakistan are examples of a new cooperative approach. Increased
flows of development capital are of vital importance not only to the
developing countries but also to the industrial countries, which will be
able to sell to a vastly expanded market as the incomes and foreign
exchange earnings of the less developed countries rise.
Private long-term investment. A highly developed economy like that of
the United States today is quite naturally a source of capital for investment
beyond, as well as within, its borders. This country is the world's largest
source of savings. Since the United States is far ahead of many countries
both in applied technology and in productive facilities per worker, there are
bound to be attractive opportunities abroad for duplicating our advanced
techniques of production.
Private long-term investment averaged $2.6 billion a year in the last
five years, substantially higher than in the early 1950's. In addition, reinvested earnings of U.S. subsidiaries abroad averaged $1.1 billion annually. In 1961, U.S. private long-term investment abroad is estimated to
have been about $2.3 billion.
While outflows of U.S. capital are adding to our national wealth foreign
properties which may yield substantial return flows of earnings in the balance
of payments over future years, these outflows increase the payments deficit
in the short run.
Since 1958-59, the share of U.S. direct investment outflows going toward
Europe has increased substantially. The promise of an expanding European Common Market has enhanced the attractiveness of Europe as a
location for production. Flows of saving to develop productive opportunities abroad increase the efficiency of the world economy. However,
capital is not allocated efficiently when it moves primarily in response to
tax advantages or to restrictive or discriminatory trade barriers abroad. If
the President's trade program is enacted and the new common external
tariff in Europe is reduced through negotiations, artificial incentives to
invest behind the European tariff wall will be reduced. This is one important way in which an expansionist trade policy will improve the U.S. payments position.
The Administration has also proposed changes in the tax treatment of
foreign income which, in addition to achieving greater equity relative to
tax treatment of domestic income, will ease our balance of payments deficit.
Under the President's proposal, earnings on U.S. investments in other




159

industrial countries would be taxed on the same basis as corporate earnings
in the United States. This would be achieved by taxing U.S. corporations
each year on their current share of the undistributed profits realized in that
year by subsidiary corporations organized in economically advanced countries. Any decline in the outflow of U.S. capital resulting from a withdrawal of existing tax inducements would be consistent both with efficiency
in the allocation of capital resources in the world and with equity between
U.S. firms operating abroad and competing firms located in the United
States. Legislation has also been proposed which would curtail tax haven
privileges.
An additional proposal, discussed in earlier chapters, would provide a
tax credit to spur domestic investment.
These measures, along with rising domestic activity, would increase the
relative attractiveness of domestic, as opposed to foreign, investment.
A higher rate of domestic economic expansion would increase the attractiveness of the United States for investment by foreigners.
The United States is urging countries in Western Europe to liberalize
restrictions on the outflow of capital owned by their residents in order
to permit more foreign capital issues to be offered in their markets and to
permit more investment in the United States and in underdeveloped
countries. Many European countries still limit foreign issues in their capital
markets and control tightly purchases of foreign securities by their residents.
Services. Net exports of services, excluding military expenditures and
sales, were at an annual rate of $2.3 billion during the first three quarters of
1961. These services include travel expenditures, transportation services,
royalties, interest, and dividends. Repatriated earnings on U.S. investments abroad, which are counted as receipts for services in the balance of
payments accounts, amounted to $3.2 billion in 1960. Our expenditures
on foreign travel were $1.7 billion, and foreigners spent nearly $1.0 billion
in this country.
During 1961, an Office of Tourism was established in the Department of
Commerce to encourage foreign travel to the United States. In addition,
the duty-free tourist allowance for returning U.S. travelers was reduced from
$500 to $100 a person.
The proposed change in tax provisions regarding overseas investment
should result in an increase in the repatriation of earnings from U.S. investments abroad.
Merchandise trade. Merchandise trade has earned large net receipts in
every year since the war. The trade surplus has on average increased,
but it has not increased sufficiently to cover the combined rise in overseas
military, foreign aid, and investment outlays.
Restrictive commercial policies would be one way to try to check imports and increase the trade surplus. But raising tariffs and imposing
quotas, while perhaps improving the trade position temporarily, would be




160

inconsistent with the liberal trade objectives of the United States and would
invite retaliatory action abroad, thus reversing any temporary gains.
Imports could also be checked by restraining domestic economic activity.
But this would be an absurdly costly policy for the United States because
imports comprise only a small part of each dollar of final demand. To
obtain a $1 billion reduction in imports might require a $25-35 billion
reduction of GNP. Even this decrease in imports would not result in an
equivalent improvement in the trade balance, for, as the dollar earnings of
other countries declined, some of our best customers would curtail their
purchases in the United States. Moreover, the prospects for fundamental
balance of payments improvement would be dim in a continuously slack
economy beset by excess capacity and deficient in incentives to make investments at home which raise productivity and lower costs. Sacrificing recovery for a temporary gain in the balance of payments position would be
shortsighted and would not inspire confidence in the dollar.
Clearly, our efforts to improve the trade position must be expansive
rather than restrictive. A program has been established under the direction of the Department of Commerce to promote exports, both by increasing awareness among U.S. businessmen of sales opportunities abroad and by
increasing foreign awareness of the wide array and high quality of U.S.
products. The program includes regional conferences and a more active
field service in the United States to provide information on foreign markets,
trade exhibits and missions abroad, and an increased number of government commercial representatives to aid the U.S. businessman abroad.
In addition to improving the flow of information about export possibilities, steps have been taken to improve U.S. competitiveness in the important
dimensions of credit availability and export insurance for commercial and
political risks—steps designed to place the U.S. businessman on a par with
foreign exporters. The Export-Import Bank has established, in cooperation
with the commercial banks and a group of insurance companies, simplified and expanded opportunities for obtaining credit and export insurance.
An exporter is now able to arrange for full credit and insurance advantages
directly with his local bank.
A fundamental requirement for increasing our trade balance is a domestic
environment of full recovery and growth without inflation. We must
exploit the gains in productivity available from bringing into full use the
excess capacity now prevalent in U.S. industry, and we must speed the
advance of U.S. technology. The measures to accelerate the growth of
productivity outlined in Chapter 2 are, for these reasons, essential elements
of policy for long-run improvement in the balance of payments. In particular, the tax credit for investment proposed by the President and the
revision of depreciation guidelines underway at the Treasury will promote
investment at home and make American industry more competitive.
It is true that economic growth, by raising incomes in the United States,
will tend to increase the purchases of foreign goods by U.S. consumers and




businesses. But economic growth achieved through advances in productivity
and improvements in technology will also enable U.S. goods to compete
more effectively with foreign products both in the United States and in
foreign markets. The technological leadership and high productivity of the
United States have proved in the past to be vital sources of our comparative
advantage in world markets. And today, the most rapidly growing countries in the free world generally rank among tho:e with the strongest
international payments positions.
An accelerated advance in productivity will be of little help to the
balance of payments, however, if the improvements are eroded away by
increases in money costs and prices. The price increases of 1955-57
impaired the competitive position of several important U.S. industries in
world markets. More recently, price and wage developments in the United
States have been favorable relative to those in other countries. The
stability of U.S. prices in the last three years, and the reasons for optimism
concerning U.S. prices in the current economic recovery, are discussed in
Chapter 4. Policies to avoid cost inflation at home can be reinforced by a
liberal trade policy which expands the area of international competition
to which U.S. producers are exposed.
The future course of exports will depend not only on U.S. policies but also
on business activity, prices and wages, and commercial policy abroad. Successful international trade negotiations under the proposed Trade Expansion Act will provide increasing opportunities for U.S. exports.
In addition, the United States continues to press for the elimination
of open and concealed discrimination against U.S. goods—agricultural
products provide outstanding examples—and against the products of third
countries, many of which are good customers of the United States.
The continued expansion of the European economies is of great importance for the future of U.S. exports. And the rapid growth of all the
industrial countries is of vital concern to the primary producing countries
whose exports have been largely stagnant in recent years. As the exports
of the primary producing countries increase, their purchases from the
United States and other industrial countries will expand.
Short-Term Capital Account
Dollars are transferred to foreigners not only through deficits in the
basic accounts of the United States, but also through short-term lending
by Americans to foreigners. Much of this lending is commercially oriented
and often provides financing for American exports. During the first half
of 1961, for example, a large part of the short-term capital outflow from
the United States was used to finance an increase in exports from the United
States and other countries to Japan. An increase in such commercial credit
will be a natural consequence of policies taken during 1961 to boost U.S.
exports.




162

However, some flows of short-term capital are not linked directly to export
financing. These flows of funds, both U.S. and foreign owned, have increased markedly since the establishment of external currency convertibility
of the leading European countries in 1958, the relaxation of restrictions on
capital transactions by their own nationals, and the re-establishment of
confidence in the stability of European currencies.
Short-term capital movements are sensitive to differences in interest
rates between major financial centers. In late 1960, for example, when
yields on short-term securities were substantially higher in Canadian and
European markets than in the United States, a significant volume of U.S.
funds moved abroad. Again in the last few months of 1961 substantial
amounts of capital moved abroad to benefit from higher yields.
Liquid funds also move in hope or fear of changes in exchange rates
or regulations. For example, the revaluations of the German mark and the
Dutch guilder in March 1961 led to expectations of further revaluations
and resulted in large short-term capital flows. Movements of this kind
often reflect objective factors related to basic balance of payments positions.
But they sometimes respond to rumor and opinion unrelated to the basic
situation.
A notable feature of the U.S. balance of payments in the past two years
was the sharp swing in the balancing item, "errors and omissions," from
a net inflow through 1959 of some $500 million a year to a net outflow
of $650 million in 1960 and a further $400 million in the first half of 1961.
Preliminary estimates for late 1961 also show a large unrecorded outflow.
This change no doubt reflected a sizable transfer of U.S. capital abroad
and a withdrawal of foreign private capital, both of which moved outside
channels normally covered by our recording network.
Flows of short-term capital, although they frequently perform a useful
function, can be seriously disruptive. They can be large, sudden, erratic,
contagious, and self-reinforcing. Monetary authorities are gradually adjusting their policies and techniques to cope with these flows. During the
past two years, several steps were taken to reduce the incentive to shift
capital among financial centers. Foremost among these was increasing
cooperation among central banks to avoid large differentials in short-term
interest rates among countries. High interest rates in Europe were lowered
in late 1960 and early 1961. U.S. monetary policy and technique have
been adapted to the new international financial environment in the manner
described in Chapter 1. Although the Federal Reserve has maintained
generally easy money and credit conditions, U.S. short-term rates have been
held above levels characteristic of previous recession and recovery periods.
In December 1961, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation raised permissible
interest rates on commercial-bank time deposits. The ceiling rate for
deposits exceeding 12 months was raised from 3 percent to 4 percent a




163

year. As banks move rates up to the new ceilings, they will increase the
attractiveness of holding funds in the United States.
Finally, the U.S. Treasury has, for the first time since the mid-1930's,
engaged in foreign exchange operations in cooperation with foreign central
banks. The Treasury this year undertook transactions in German marks
and Swiss francs, both on a current basis and in the forward exchange
market. The aim was to increase the cost to traders and investors of exchange risk "cover" for movements out of dollars, diminishing the incentive to shift funds abroad and increasing the incentive to move funds
here.
Although these policies will moderate the disruptive flows of short-term
capital, they cannot eliminate them. Further measures are therefore needed
to neutralize or minimize the possible effects of such flows on the international monetary system.
MEASURES T O STRENGTHEN THE WORLD MONETARY SYSTEM

Stability of the present world monetary system depends upon confidence
in the value of the dollar. Therefore, a primary aim of the United States
and of other countries must be to correct the underlying conditions which
result in persistent U.S. deficits and persistent surpluses elsewhere. This
is fundamental, but it will take time.
While policies to achieve this fundamental adjustment are taking effect,
full confidence must be maintained in the ability of the United States to
meet foreign demands for gold. There are a number of measures which
can strengthen the "banking" or liquidity position of the United States
while the fundamental adjustment of the payments position proceeds.
Some of them apply to the dollar alone; others are general measures to
strengthen the world monetary system. All of them require a high degree
of international consultation and cooperation.
One means of strengthening the U.S. liquidity position, as well as its
payments position8 at a given time, is to obtain advance repayment of
long-term debts owed to the U.S. Government. For example, in April
the Federal Republic of Germany prepaid $587 million to the United
States. This translated a long-term U.S. asset partly into a reduction of
short-term U.S. liabilities and partly into a rise in U.S. holdings of German
marks. The United States still has outstanding about $2 billion of long-term
loans to countries that have strong payments positions.
The gross reserve position can also be strengthened by borrowing directly
in foreign currencies from other governments or central banks. This device was employed recently on a small scale when the United States borrowed from Switzerland $46 million in Swiss francs in order to support
forward exchange operations of the Treasury.
Recently, there has been increasing recognition that, even when large
movements of private short-term capital cannot be prevented, they can be




164

offset by reverse movements of official capital. In March 1961, several
central banks agreed through the so-called Basle arrangements to extend
short-term credit to the United Kingdom to offset the flight of private
funds from London.
Several countries now consider their drawing rights on the International
Monetary Fund as an integral part of their foreign exchange reserves.
In his Balance of Payments Message of February 6, 1961, President Kennedy stated that "access to the Fund's resources must be regarded as a
part of our international reserves" and that, if appropriate, the United
States would use its drawing rights. The drawing from the Fund of currencies equivalent to $1.5. billion by the United Kingdom in August, and the
prompt repayment of $420 million as British reserves rose, indicate the
flexibility with which drawing rights on the Fund can be used to supplement reserves. Furthermore, in accordance with recent IMF policy, member countries have increasingly made drawings in currencies other than the
dollar, which the Fund formerly relied on heavily for most of its operations.
This policy puts to effective use the Fund's holdings of the currencies of
surplus countries. But the Fund's holdings of some of these currencies may
not be fully adequate to meet the potential demands for them.
Improvement of the Fund's access to the currencies of the major industrial countries was discussed at the annual Fund meeting in Vienna
in September. It was announced in early January that ten industrial countries have agreed to lend amounts of their currencies totaling $6 billion,
to the Fund if these resources should be required to forestall or cope with
an impairment of the international monetary system. Availability of these
special resources should enable the Fund better to perform its function of
financing temporary payments deficits in the interests of maintaining general
exchange rate stability.
In his February Message the President said, "Increasing international
monetary reserves will be required to support the ever-growing volume
of trade, services and capital movements among the countries of the free
world. Until now the free nations have relied upon increased gold production and continued growth in holdings of dollars and pounds sterling.
In the future, it may not always be desirable or appropriate to rely entirely
on these sources. We must now, in cooperation with other lending countries,
begin to consider ways in which international monetary institutions—
especially the International Monetary Fund—can be strengthened and
more effectively utilized, both in furnishing needed increases in reserves, and
in providing the flexibility required to support a healthy and growing world
economy."
The agreement to supplement the resources of the Fund is an important step toward strengthening the international monetary system to meet
the demands which the continuing economic progress of the free world
will place upon it in the future.




165

Finally, the newly created Organization for Economic Cooperation and
Development, comprising 18 European countries, the United States, and
Canada, provides a continuing forum in which payments imbalances and
internal or international monetary problems of concern to all members—as
well as trade, development aid and other matters of common interest—can be
discussed frankly and constructively. Still another forum for international
cooperation is provided by the monthly meetings of central bankers at the
Bank for International Settlements in Basle. Although the United States
is not a member of the Bank for International Settlements, representatives
of the Federal Reserve System participate informally in the discussions.
These measures of cooperation among nations, together with the large
gold reserves of the United States, give this country the time to carry through
the necessary adjustment in its balance of payments—and to carry it through
in ways consistent with general economic expansion at home and abroad,
with promotion of a world economy in which goods, services, and capital
flow freely, and with the responsibilities of world leadership. They give
us time, but not time to waste.




166

Chapter 4

Price Behavior in a Free and
Growing Economy
T H E OBJECTIVES

P

RICE BEHAVIOR embraces both changes in the over-all level of
prices throughout the economy and changes in price structure—the
relation of particular prices to each other. Changes in either the level
or the structure of prices have far-reaching influences which can affect for
better or worse the performance of a free economy. Both aspects of price
behavior are closely related to major problems which confront the U.S.
economy today.
Our success in solving the international payments problem (discussed
in the previous chapter) will depend to a major extent on our ability to
avoid inflation. To recognize this compelling reason for price stability
is not to say that stable prices are desirable only for their contribution to
the achievement of equilibrium in our balance of payments. Even creeping inflation has effects on the distribution of income which are always
capricious and often cruel, and it may generate perverse changes in the
structure of prices. Galloping inflation is profoundly disruptive of economic efficiency and growth. But to these persisting arguments for avoiding inflation is now added the pressing and immediate need to strengthen
the competitiveness of U.S. industry in world markets.
International competitiveness is affected by many considerations, including quality, variety, service, credit facilities, and promptness in delivery.
But after full weight is given to these considerations, price remains at the
heart of the matter. The effect of price developments on our international
competitive position will not, of course, be determined by the behavior of
U.S. prices alone; what counts is the change in the ratio of U.S. prices to
the prices of those countries with which we compete in world markets.
There is independent reason to expect in the next few years a moderate
upward price trend in some competitive countries, but a decline in the ratio
of our prices to theirs is obviously more likely if our own prices remain stable
than if they rise.
Large potential gains in national economic welfare are at stake in the
course of price developments over the next year or two. Stable prices—
together with the many other measures to strengthen our payments position
discussed in Chapter 3—will move us toward equilibrium in our inter-




167

national payments. This, in turn, will remove a possible impediment to
the vigorous pursuit of full employment.
It is always possible to strengthen the balance of payments, at least for
a time, by weakening the economy. Checking and reversing the economic
expansion would reduce our demand for imports by reducing our demand
for all goods and services. Raising interest rates sharply would probably
attract some foreign capital to the United States, but it would raise the cost
and reduce the volume of domestic expenditures for new business plant and
equipment and residential construction. This road to balance of payments
equilibrium endangers the interests of the whole Nation and specifically the
interests both of labor and of business; for the former it increases unemployment, while for the latter it lowers profits. Both groups stand to gain
from price level stability, which lays the foundation for the harmonious
coexistence of balance of payments equilibrium with full employment and
rapid economic growth.
Price level stability does not, of course, require stability of all prices.
On the contrary, the structure of relative prices constitutes the central
nervous system of a decentralized economy. Changing relative prices
are the signals and stimuli which foster the efficiency and guide the growth
of such an economy.
Changing relative prices serve to ration scarce goods and services. They
encourage consumers and business firms to economize on the use of things
which have grown scarcer, and to use more freely those things which have
become more abundant. They attract resources into the production of those
things for which demand has increased, and encourage the outflow of
resources from the production of things for which demand has declined.
They provide generous rewards to innovators, and then assure that the
benefits arising from innovation are widely diffused throughout the economy.
They direct economic activity into the most productive channels. A
smoothly functioning price system, while it cannot solve all of the resourceuse problems of our economy, is nevertheless an indispensable agent for
reconciling decentralized private decision-making with national economic
objectives.
In the context of current economic policy goals, flexible relative prices
play an important role in encouraging maximum production and shaping
the pattern of growth. As the economy approaches full utilization of
productive resources, premature and stubborn bottlenecks may arise in
some sectors while labor and capital are underutilized elsewhere. This
danger is lessened if productive resources are sufficiently mobile to shift
promptly into the sectors of the economy which are coming under pressure.
Flexible price and wage relationships are not in themselves sufficient to
assure that capital and labor will flow from relatively declining to relatively expanding sectors. But flexible price and wage relationships can
smooth the process, both by signaling the directions in which resource
movements should occur, and by providing incentives to encourage such




168

shifts. Prices must fall as well as rise, however, if changing relative prices
are to play their role in guiding resource movements without forcing a steady
rise in the over-all level of prices.
T H E PRESENT SITUATION

Price Developments in Perspective
The frequent characterization of the postwar period as generally "inflationary" obscures two important facts. First, increases in wholesale
prices were concentrated in three periods: 1946-48, 1950, and 1955-57.
In the other 9 of the 16 postwar years taken together, the net movement
of wholesale prices was downward. Second, since the middle of 1958, the
wholesale price level in the United States has been stable, and there are
signs that the inflationary impulses set off by the second World War and
reinforced by the Korean conflict have been weakening.
War-induced inflation. By far the strongest burst of inflation occurred
immediately after the end of the war, and for obvious reasons. The stock
of consumers' and producers' durable goods had been depleted during the
long years of depression and war. Private debt had been reduced, and the
heavy reliance on public debt financing of the war had provided households
and firms with large supplies of liquid assets.
The result was a demand for consumer goods and plant and equipment
which far exceeded the capacity of the economy to produce them. Although the Federal Government ran a substantial cash surplus in the
1946-48 period, which had the effect of reducing total demand for goods
and services, aggregate demand nevertheless outran supply until late in
1948. From the end of the war through September 1948, the consumer
price index rose by 35.2 percent, and the wholesale price index by 54.4
percent. In the recession which followed, both consumer and wholesale
prices fell, the former by 1.9 percent between November 1948 and October
1949, the latter by 6.5 percent.
A new burst of excess-demand inflation was set off by the Korean hostilities. Between June 1950 and February 1951, consumer prices rose by 8.0
percent and wholesale prices by 16.3 percent, as consumers and businesses,
remembering the shortages of 1942-45, scrambled to build up stocks of
goods.
These two inflationary episodes account for 70 percent of the increase
in the level of consumer prices since the second World War, and more than
account for the increase in the wholesale price level. Costs rose steeply
in these periods, but the major force pulling prices upward was clearly
pressure of excessive demand for a wide range of products.
Post-Korean price stability. The scare-buying of late 1950 and early
1951 drove prices to a level from which a mild reaction set in. From mid1951 to mid-1955, except for construction costs and the index of services to
consumers, most price indexes remained stable or fell. Consumer prices for




169

food and other commodities, as well as wholesale price indexes of farm and
nonfarm commodities, were lower in mid-1955 than they had been in mid1951, despite the fact that large parts of the economy had operated at near
capacity levels from the fall of 1952 to the fall of 1953.
Construction costs failed to stabilize in the post-Korean period; while the
average of wholesale prices fell by 5.7 percent between February 1951
and May 1955, the Department of Commerce index of construction costs
rose by 8.8 percent.
Another exception to this record of stability—consumer services—is highly
important. Services have a weight of about one-third in the consumer
price index. Prices of services, taken as a group, have risen in every year
since the war, and have accounted for much of the rise in the consumer
price index.
Because of the heterogeneous character of the services category, no single
explanation can account for the behavior of the services index. Some
tentative observations may be made, however, about the forces influencing
the prices of particular services. Residential occupancy costs, with a weight
of about 42 percent within the services category, include rents, mortgage
payments and interest, real estate taxes, and property insurance. Rents and
home prices tend to be influenced in the short run by the vacancy rate, and
in the long run by changes in construction costs, interest rates, and property
taxes. Movements in all these components tended to push the index upward
in the postwar period. In addition, the retention of rent controls
in some important areas well into the postwar period tended to delay
the adjustment of rents to market forces. Medical care service
prices, with a weight of about 14 percent, have been rising steeply.
This is a sector, however, in which there has probably been a
substantial improvement in the quality of services. If it were possible to
take account of quality changes in the index, the rate of increase would have
been less. Regulated utility services (telephone, gas, electricity, and water),
with a combined weight of about 10 percent, are subject to substantial price
lags. Depreciation costs recognized for rate-making purposes have tended
to rise as the share of low-priced prewar capital goods in the rate base has
diminished and the share of higher-priced postwar goods has increased.
Public transportation services (transit fares and railroad fares), with a combined weight of about 4 percent, may have been influenced to a limited extent by the same forces mentioned in connection with regulated utility services, and to a further extent by the effects of declining demand on unit cost
in industries where overhead costs are high. Personal care services (men's
haircuts and certain beauty parlor services), with a weight of about 3 percent,
are services not readily susceptible to improvements in labor productivity,
though wages in this sector tend to move up in step with economy-wide
trends.
Inflation, 1955-58. The relative price stability which began in 1951
gave way in 1955 to renewed inflationary pressure which persisted into early




170

1958. Although prices rose far less sharply than in 1946-48 or 1950-51,
consumer prices rose by 8.0 percent from May 1955 to March 1958, and
wholesale prices increased by 8.9 percent.
In contrast to the two earlier inflationary bursts, there is still considerable
uncertainty as to the causes of rising prices during this period. A simple
explanation running in terms of over-all excess demand is not satisfactory.
If aggregate excess demand prevailed at all, it existed only briefly toward the
end of 1955. After the end of 1955, capacity utilization slackened as investment created capacity more rapidly than final demands were increasing.
Employment of production workers in manufacturing began to decline in the
latter half of 1956 and was lower in 1957 than in 1955. The average workweek in manufacturing declined over this period—from 40.7 hours in 1955
to 40.4 in 1956 to 39.8 in 1957. Unemployment as a percent of the civilian
labor force, seasonally adjusted, dipped below 4.0 percent in only three
months during the entire period.
Any explanation of the 1955-58 price experience must give special weight
to the fact that the 1955-57 boom was concentrated in durable manufactured goods. Demand strained production capacity in the machinery
and equipment industries. Except for the third quarter of 1956, in which
a strike occurred, the iron and steel industry operated at a rate above 90
percent of capacity from the second quarter of 1955 through the first quarter
of 1957. Automobile production set an all-time record in 1955.
In this sector of the economy, prices and wages rose sharply. More than
three-fourths of the 1955-58 rise in the index of wholesale industrial prices
was directly attributable to price increases in metals and metal products and
machinery and motive products (including motor vehicles). Substantial
employment cost increases were negotiated in the automobile settlement of
1955 and the steel settlement of 1956. Both were three-year agreements,
with the result that large wage commitments made in a boom environment
became effective as the economy was slowing down. Price and wage behavior in this sector initiated impulses which spread to other parts of the
economy, both via increases in materials and equipment cost and via imitative influences in wage settlements.
Elements of major importance in the 1955-58 episode were thus the existence of relatively high demand, principally in one sector of the economy;
the use of market power by management to maintain profit margins despite
rising costs; the exercise of market power by labor unions in an effort to
capture a substantial share of rising profits for their membership; and the
transmission of these developments to other sectors of the economy.
One of the striking and significant aspects of the 1955-58 inflation was
the leading part played by industries which are important exporters.
Metals, machinery, and transport equipment make up about two-thirds of
U.S. exports of manufactures. What in this context is more important,
these U.S. prices rose faster than the prices for similar goods in foreign
countries. To take but one example, between 1956 and 1958 U.S. steel
621876 O-62-12



171

prices rose nearly 20 percent more than the average price rise in five other
major steel exporting countries.
During this period the United States experienced a noteworthy decline
in its share of world exports of manufactures—from 30 percent in 1956 to
27J/2 percent in 1958. The decline was even sharper for some product
groups; the U.S. share of world exports of iron and steel products, for example, declined from 19 percent to 14 percent. The relative increase in
U.S. prices probably contributed—along with the rapid postwar growth in
capacity and output abroad—to the drop in American export shares.
Price behavior since 1958. Since mid-1958, there has been stability on
the average in the prices of commodities at wholesale and retail, with a
continuing upward trend in consumer service prices. This record of relative
price stability is in part the result of widespread excess capacity in the last
few years, but it may also reflect a weakening of lagged price responses to the
sharply inflationary episodes of 1946-48 and 1950-51.
An important element in the cessation of inflationary pressure has been
the stability shown in the prices of metals and machinery. The index
of metal and metal products, which rose by 17 percent from the beginning of
1955 to the end of 1956, and drifted irregularly upward through late 1959,
has since remained below its 1959 high. The index of machinery and
motive products, which rose by 22 percent from January 1955 to September
1959, has also been stable since then. Steel prices were raised once a year
in the period 1952-58, for a total increase of 50 percent, but have not been
raised since 1958.
Movements in construction costs are in sharp contrast to this pattern
of price stability. After increasing against the general price trend over
1951-55, they rose 10.5 percent from May 1955 through March 1958—
an increase significantly greater than the 8.9 percent rise in the wholesale
price level over the same period. From March 1958 through December
1961, the increase was 5.8 percent.
As Chart 13 shows, a period of stability in the wholesale price index
tends to be a period of slow rise in the consumer price index and in the
implicit price index for GNP. The reason for the divergent behavior of
consumer prices is primarily the service component already discussed; the
price index for GNP rises because of the methods of measurement used for
the government sector (in which no allowance is made for productivity
increase), and for plant and equipment spending (where only partial allowance is made for quality change).
The chart also calls attention to an important difference between price
behavior in the 1961 recovery and in the recovery of 1958. In 1958, stability in the wholesale price index resulted from a significant reduction in the prices of farm products and processed foods, balanced by a rise
in industrial prices. In the first 10 months of recovery in 1958-59, the
index for industrial commodities rose by 1.8 percent. By contrast, in 1961,
the index of industrial prices fell by 0.3 percent between February and




172

CHART

13

Price Developments
INDEX, 1961 = 100 (Ra/io scale)

20

GROSS NATIONAL PRODUCT
IMPLICIT PRICE DEFLATOR

100

————

•

—

.

• -

• * *

r

1 1 1

1953

1954

1955

1 1 1

1956

80

1957

1

1

1 1

1958

1 1

1959

1

1 1

1 1 1

I960

1961

I960

1961

INDEX, 1947-49 = 100 (Ratio scale)
WHOLESALE PRICES

140
INDUSTRIALS

120
ALL COMMODITIES

100

7N

FARM PRODUCTS AND PROCESSED FOODS

80
1953

1954

1955

1956

1957

1958

1959

INDEX, 1947-49 = 100 (Ratio scale)

160 - CONSUMER PRICES
-

SERVICES

140 -

ALL

————
.

- —

^ — —
*-•

120
- ^
-

100

^ ( :OMMODITIE:

ii

mill..MI

1953

1954

1955

1956

1957

1958

1959

NOTE: TOP PANEL, QUARTERLY DATA; OTHER PANELS, MONTHLY DATA.
SOURCES: DEPARTMENT OF COMMERCE, DEPARTMENT OF LABOR, AND COUNCIL OF
ECONOMIC ADVISERS.




I960

1961

December, reinforcing rather than offsetting a fall of 1.9 percent in farm
and food prices. In all of the previous postwar recoveries, by contrast,
the index of wholesale industrial prices rose over the first 10 months of
recovery.
From the recession's turning point in February, through November, consumer prices rose by 0.6 percent. While this was a greater increase than the
0.2 percent by which the index rose in the first 9 months of recovery from
the 1958 trough, the difference in performance is attributable to movements in the retail food index, which fell more sharply after the 1958
upturn than in 1961. The behavior of other major components was similar in the two recoveries, except for rents, which rose slightly more in 1958
than they did in 1961.
More than three-fourths of the rise in consumer prices during 1961 was
attributable to higher service prices, particularly advances for health insurance and other health services, movie admissions, rent, and public transportation. Moderating the rise in the service price index were lower
average mortgage interest rates and stable average prices for utilities.
Wage and Cost Developments in Perspective
Wages and salaries are at the same time the principal cost to employers,
the main source of income to employees, and the major source of demand
to the economy as a whole.
If living standards are to rise over time, real wages must increase. Stability in the general price level means, therefore, that average money wage
rates should follow a generally rising path. As output per man-hour increases, rising money wage rates can be absorbed into stable labor costs
per unit of output. So long as unit labor costs do not increase, rising wages
are fully compatible with stability in the price level.
Whatever its cause, a rising price level is characteristically accompanied
by a rate of wage increase in excess of the rate of increase in output per
man-hour. It is quite true, of course, that when employment costs per
man-hour rise more rapidly than output per man-hour, prices sooner or
later will increase. But it is equally true that, when prices are pulled up
by excess demand, competition for labor will tend to raise employment
costs per man-hour faster than output per man-hour increases. Thus wage
increases will tend to outstrip productivity increases both when the inflationary pressures arise from cost and when they arise from demand. The
mere coexistence of rising prices and wages rising faster than productivity
tells nothing about causation.
Postwar wage changes. While wages rose throughout the postwar period,
they rose more rapidly in the first part of the period than in more recent
years. The primary cause of the most rapid increases lies in the excess
demand which was the legacy of the second World War and which arose
again during the Korean mobilization. Hourly compensation in manufacturing increased at an average rate of nearly 7 percent a year between 1947




174

and 1953; the rate of increase fell to 5 percent between 1953 and 1957, and
to less than 4 percent between 1957 and 1961 (Table 20). The period
1947-53, of course, included most of the two war-induced inflationary
booms.
T A B L E 20.—Changes in compensation and productivity in all private nonagricultural
and in manufacturing industries, 7947 to 7967

industries

Percentage change per year
Item
1947
to
19611

1947
to
1953

1953
to
1957

1957
to
19611

Private nonagricultural industries, all employees:
Average hourly compensation 2
Output per man-hour..
Manufacturing industries, all employees:

5.1
2.5

6.2
2.7

4.6
2.3

4.0
2.5

Average hourly compensation 2..
Output per man-hour

5.5
2.9

6.8
3.2

5.0
1.8

3.9
3.7

4.7

61
.

4.2

3.1

4.7

5.9

4.2

3.4

Manufacturing industries, production workers:
Average gross hourly earnings
Average hourly earnings adjusted to exclude overtime and interindustry shifts

1 Preliminary.
2 Wages and salaries of all employees and supplements to wages and salaries such as employer contributions for social insurance, for private pension, health, and welfare funds, for injuries, for pay of the military
reserve, etc.
Sources: Department of Commerce and Department of Labor.

In the post-Korean years—a period which included three of the four
postwar recessions—over-all demand conditions played a less decisive role
in wage behavior. The movement of wages during this period reflected in
part the power exercised in labor markets by strong unions and the power
possessed by large companies to pass on higher wage costs in higher prices.
Although the high demand of the 1955-57 period was concentrated in the
area of durable manufactures, wages also rose by substantial increments in
some less prosperous but highly organized industries.
The post-Korean years were marked by the coincidence of relatively large
wage increases with declines in industry employment. Table 21 illustrates
these developments as they are reflected in changes in average hourly earnings and the number of production workers for selected industries. Earnings in textiles and apparel, typically lower than the average for all
manufacturing industries, fell further behind during the years 1954-61.
Workers in retail trade received percentage wage increases equal to the
average of those in manufacturing; the initial low wage level and the increase
in employment in retailing suggest that this rise in wages reflects pressure of demand. Construction worker employment increased, and wages
rose more than the average for manufacturing; indeed, over the entire
postwar period, average hourly earnings in construction have risen more
than 100 percent against a rise of 80 percent for production workers in
manufacturing. In manufacturing and mining, unionization was undoubt-




175

T A B L E 21.—Changes in average hourly earnings- and employment of production
selected industries, September 1954 to September 1961
Average hourly
earnings (dollars)

Employment
(thousands)

workers

in

Percentage change,
September 1954 to
September 1961

Industry
Septem- Septem- Septem- Septem- Average
ber 1954 ber 19611 ber 1954 ber 19611 hourly
earnings
Manufacturing 3

Employment

1.78

2.33

12,821

12,407

31

-3

Blast furnaces and basic steel products
Motor vehicles and equipment
Flat glass
...
Fabricated metals
Metal cans

2.29
2.24
2.49
1.89
1.98

3.17
2.84
3.16
2.48
2.91

537
479
26
835
55

513
470
25
839
54

38
27
27
31
47

-4
-2
-4

Petroleum refining
Tires and inner tubes.
Textile-mill products
Apparel and related products-

2.42
2.25
1.35
1.38

3.21
3.13
1.64
1.65

142
84
1,065

108
75
804
1,082

33
39
21
20

-24
-11
-16
2

2.41
2.40
1.94
1.30

3.15
3.22
2.69
1.70

201
2,489
* 1,064
5,589

128
2,603
4
723
6,096

31
34
39
31

5
-32
9

Bituminous coal mining..
Contract construction
Class I railroads
Retail trade 5

955

(*)i

-2

1
Includes data for Alaska and Hawaii.
3 Also includes industries not shown separately.
3
Increase of less than 0.5 percent.
* Data relate to all employees.
5
Excludes eating and drinking places.
Note.—Data relate to production workers or nonsupervisory employees, except as noted.
Source: Department of Labor.

edly a factor in the increase in wages during a period of declining employment; the above-average increase in wages in construction reflects both
unionization and the stimulus of strong demand.
The effect of unionization is also reflected in the contrast between earnings
and employment of salaried workers in manufacturing and those of production workers in manufacturing over the period. Although aggregate
salaries in manufacturing have risen twice as rapidly as aggregate wages,
annual disbursements per worker for salaried workers increased at an average
rate of only 3.8 percent a year during the period 1947-61, while disbursements per production worker increased at a rate of 4.9 percent. At the
same time, the number of salaried workers was increasing at a rate of 3.7
percent a year, and the number of production workers declining at a rate
of 0.5 percent.
Recent wage developments. Although wages and fringe benefits have
continued to increase throughout the economy, the rate of increase in
hourly earnings in manufacturing has declined steadily since 1957. The
decline has been not only steady but large; as Table 22 demonstrates, the
rate of increase in adjusted hourly earnings has fallen by one-half since
1955-56. These percentage movements are consistent with recent declines
in median wage increases, measured in cents per hour, under major
collective bargaining contracts. These are shown in Table 23.




176

T A B L E 22.*—Changes in average hourly earnings and hourly compensation in manufacturing
1955 to 1961

industries,

Percentage increase
Adjusted hourly earnings i

Period

Current
prices
1955 to
1956 to
1957 to
1958 to
1959 to
1960 to

1956
1957
1958. _
1959
1960
19613

Current
prices

Constant
prices 3

5.4
5.1
4.1
3.4
3.3
2.7

Average hourly2 compensation

3.8
1.7
1.3
2.5
1.8
1.6

Constant
prices 3

6.2
6.0
3.9
4.1
4.1
3.4

4.6
2.5
1.1
3.2
2.5
2.3

1 Wages of production workers adjusted to exclude overtime and interindustry shifts.
2
Wages and salaries of all employees and supplements to wages and salaries such as employer contributions for social insurance, for private pension, health, and welfare funds, for injuries, for pay of the military
reserve, etc.
3
Preliminary.
Sources: Department of Commerce and Department of Labor.

T A B L E 23.—Median hourly wage increases negotiated or effective in major
bargaining situations,
1956-61

collective

Median hourly wage
increases (cents)
Year
Negotiated
during year
1956
1957
1958
1959

Negotiated
or effective
during year

10.7
10.6
_

8.8
8.8

_

I960
1961 1

_

_

_

__

10.8
12.7
12.6
8.8

8.7
7.0

9.4
8.0

i Preliminary.
NOTE.—Data are limited to major collective bargaining situations (generally those affecting 1,000 or more
workers) in manufacturing and selected nonmanufacturing industries. The latter exclude construction,
the service trades, finance, and government.
Source: Department of Labor.

Further evidence of this decline in the magnitude of wage increases is
presented in Table 24. This table shows, for 1959-61, an increase in the
number of workers affected by zero or negative wage changes and a decline
in the number of workers receiving large percentage wage increases in
major negotiations. The percentage of employees receiving wage increases
of 3 / 2 percent or more declined from 64 percent in 1959 to 35 percent in
1961.
Smaller percentage increases in hourly wages do not necessarily imply
smaller percentage increases in real wages. In recent years, annual increases in consumer prices have tended to become smaller and thus have
offset, to some extent, lower rates of increase in adjusted hourly earnings
and total hourly compensation in manufacturing.




177

TABLE 24.—Employees affected by major collective bargaining negotiations, by wage change, 1959-61
1959

1960

1961 i

Wage change
Thousands
of employees

No wage change
Decrease in wages..
Increase in wages

_

Under 2H percent
2H and under 3
3 and under 3H
3J^ and over
Not specified or computed _.

Thousands
of employees

3,343

Total employees affected

Percent
of total
100

4,508

111
4
3,228

3
97

191
2
4,314

8
6
18
64
1

994
414
1,131
1,763
11

254
198
597
2,144
34

(2)

Percent
of total

Thousands
of employees

100

96

234
17
3,350

22
9
25
39

1,095
625
385
1,245

100

3,600

4

Percent
of total

2

()

(2)

(2)

93
30
17
11
35

1 Preliminary.
Less than 0.5 percent.
NOTE.—Data relate to changes negotiated during the year. They exclude changes negotiated in earlier
years (i.e., deferred increases) and cost-of-living escalator adjustments.
Data are limited to major collective bargaining situations (generally those affecting 1,000 or more workers)
in manufacturing and selected nonmanufacturing industries. The latter exclude construction, the service
trades, finance, and government.
Detail will not necessarily add to totals because of rounding.
2

Source: Department of Labor.

For example, in 1956-57, a 5.1 percent rise in adjusted hourly earnings
(as shown in Table 22) was translated into an increase of only 1.7 percent
in real adjusted hourly earnings because consumer prices rose by 3.4 percent. In 1959-60, on the other hand, money earnings increased by only
3.3 percent, but real earnings rose by 1.8 percent because of a slower rise
in consumer prices. Similarly, total hourly compensation in money terms
increased by 6.0 percent in 1956-57 and by only 4.1 percent in 1958-59;
however, as a result of differences in price movements, the percentage rise
in real compensation was greater in the second period than in the first.
The recent slowing down in the rates of increase of money wages may
signify a gradual weakening of some of the cost pressures in the economy.
However, the continuation of this trend is by no means certain. With longterm contracts, the industries affected by negotiations vary considerably
from year to year, and the behavior of average wage rates in any year may
be fortuitously influenced by this consideration. Thus, in 1960, negotiations were concluded in basic steel; in 1961 new long-term agreements
were negotiated in automobiles, automotive parts, meat-packing, farm
equipment, and construction. In 1962 major contracts will expire
in basic steel, aluminum, fabricated metals, construction, aircraft, airlines,
and the maritime industry. It must also be remembered that the period
1957-61 was characterized by relatively high rates of unemployment; the
test of wage behavior in a period characterized by stronger demand for
labor is still ahead.
The shares of wages and profits. Employee compensation as a percent
of corporate sales rose somewhat between the immediate postwar years and
1953-54, but since then the employee share has been below the 1953-54
high with no clear trend either up or down. This is shown in Table 25.




T A B L E 25.—Relation of employee compensation, profits, and capital consumption allowances to
sales: All private corporations, 7947—67
Percent of sales
Profits
Period

Employee
compensation

Before
taxes

Capital
consumpBefore taxes
tion allowplus invenances
tory valua- After taxes
tion adjustment

Profits after
taxes plus
capital consumption
allowances

1947
1948
1949

23.3
23.2
23.7

8.3
8.3
6.9

6.6
7.7
7.4

5.0
5.1
4.1

1.8
2.0
2.3

6.9
7.0
6.4

1950
1951
1952
1953
1954

22.6
23.2
24.3
25.3
25.3

9.2
8.4
7.1
7.1
6.3

8.0
8.1
7.3
6.9
6.3

5.0
3.8
3.2
3.2
3.0

2.2
2.3
2.5
2.7
3.1

7.2
6.0
5.7
5.9
6.0

1955
1956
1957
1958
1959

23.7
24.5
24.2
24.2
24.2

7.2
6.8
6.1
5.4
6.3

6.9
6.4
5.9
5.4
6.2

3.6
3.4
3.0
2.6
3.0

3.1
3.2
3.2
3.4
3.3

6.7
6.6
6.3
6.0
6.4

I960 1961 !

24.7
24.5

5.8
5.8

5.9
5.9

2.8
2.8

3.5
3.6

6.3
6.4

* Preliminary estimates by Council of Economic Advisers.
NOTE.—The sum of compensation of employees, profits, and capital consumption allowances is a comparatively small percentage of sales because the latter includes all sales made by firms to other firms in
successive stages of the production process, and, therefore, reflects a large amount of duplication. The
comparative relations shown here would remain unaltered, however, if they were calculated on the basis of
unduplicated sales.
Source: Department of Commerce (except as noted).

Corporate profits after taxes as a share of corporate sales were at their
highest level in the 1947-50 period, when they were between 4.1 and 5.1
percent annually. Since 1951, the profit-after-tax share has been lower,
fluctuating between 2.6 and 3.6 percent. Throughout the period, the
profits share has shown a clear tendency to dip in periods of high unemployment and unutilized capacity.
A number of forces were involved in the behavior of profits. Unusually
high inventory gains resulting from bursts of excess demand inflation swelled
the profits share in 1947-48 and 1950; this can be seen in Table 25 by
comparing corporate profits before taxes with profits before taxes plus inventory valuation adjustment. The rate of Federal corporate income taxation
was increased in two steps from a level of 38 percent in 1947 to 52 percent
in 1951, where it stands today; also, an excess profits tax was in effect from
1951 to 1953. Failure of the economy since the first half of 1957 to reach
full employment has tended to depress the profits share in recent years.
Corporate capital consumption allowances (principally depreciation
charges) have risen steadily throughout the postwar period as a share of
corporate sales. One explanation of this trend is the fact that depreciation
charges immediately after the war were based upon prewar prices of capital
goods, and were thus further out of alignment with the replacement cost of
business plant and equipment than they are today. In other words, as




179

compared with recent years, corporate profits in the earlier postwar years
were relatively overstated and depreciation charges relatively understated.
Also, the rise in depreciation charges is related to the Korean accelerated
tax amortization program, and to the more generous depreciation formula
enacted in the Revenue Act of 1954.
Corporate profits after taxes plus capital consumption allowances—"cash
flow"—have shown considerable stability in relation to sales, particularly if
allowance is made for the large inventory gains of 1947-48 and 1950. This
is shown in the last column of Table 25. Gash flow is of course not the
same as net profits; only a part of it is return on investment, and the remainder is an element of cost. But cash flow is a significant measure as an
indication of potential availability of internally generated funds for the
financing of investment.
T H E OUTLOOK FOR PRICES

Although over-all excess demand is unlikely to develop in 19G2 and costprice developments in the past year were favorable to continued price
stability, the economic future can never be predicted with certainty. Unexpected inflationary pressures could emerge from any one of several
sources: scare-buying induced by a national security crisis, the emergence
of major bottlenecks caused by shifts in the pattern of demand, price increases for imported raw materials, exercise of market power by management or labor to increase their shares of the national income, or other causes
which lie at least within the realm of possibility.
Nevertheless, a review of the relevant statistical and analytical evidence
gives some grounds for optimism on the outlook for price behavior in the
months ahead—though the evidence cannot, of course, be conclusive.
Changes in the wholesale price index are more closely related to our international competitiveness than are changes in the consumer price index or the
GNP implicit price index. The consumer price index is heavily influenced
by changes in the prices of consumer services and in wholesale and retail
margins, which do not directly affect our international trade, and it does not
encompass producers' durable equipment, which is a major component of our
foreign trade. On the other hand, the all-inclusive GNP implicit price index
includes major components which do not enter directly into international
trade, such as consumer services and government services. As noted earlier
in this chapter, stability in the wholesale price index is likely to be associated
with a slow rise in the consumer price index and a slightly greater rise in
the GNP implicit price index.
At the present time, we are on the plateau of a period of price stability. Wholesale prices have been stable for over 3 / 2 years, and wholesale
industrial prices (excluding farm and food prices) have been stable for more
than 2J/2 years. Both the wholesale price index and wholesale industrial
prices were lower in December 1961 than at the cyclical trough in February.




180

This was the first of the four postwar recoveries in which wholesale industrial prices fell during the first 10 months of recovery.
Recent wage changes have been consistent with these price developments.
As indicated earlier, annual wage increases in manufacturing have been
declining for several years. The index of wage and salary cost per unit of
output in manufacturing changed little from the cyclical peak in July 1957
to the peak in May 1960; by contrast, there were substantial peak-to-peak
increases from 1948 to 1953 and from 1953 to 1957.
Such encouragement as may be derived from these recent price and wage
trends must be tempered by the realization that they do not provide full
protection for fixed-income recipients, and relate mainly to a period
characterized by excess unemployment and productive capacity. The
U.S. economy last experienced full employment in the first half of
1957; the recovery of 1958-60 stopped well short of full employment.
While some significance can be attached to the fact that adjusted hourly
earnings in manufacturing increased slightly less in 1959, a year of recovery, than in 1958, a cyclical trough year, and from the further fact that
wholesale industrial prices fell during the 1961 recovery, the behavior of
wages and prices in a period of sustained slack is an insufficient basis for
inferences about price-wage behavior when the economy is moving up
toward full employment.
Other considerations provide somewhat firmer grounds for optimism.
As indicated in the analysis of Chapter 1, the continued recovery of the
economy in 1962 is not likely to create major supply bottlenecks or to
reach a state of over-all excess demand. The supply outlook for major imported raw materials does not suggest that an inflationary stimulus will
originate in this quarter.
Foreign competition in the last few years has injected a powerful pricerestraining force into the U.S. economy. We are now faced with
sharp competition from imports in our domestic markets and from the
exports of other industrial countries in our traditional export markets.
Competition of any kind, internal or external, provides strong discipline for
prices; the effects of foreign competition are stronger than might be suggested by the absolute size of foreign trade in our economy. The
response to import competition itself tends to limit imports, so that the
volume of realized imports is not a full measure of the force exerted by
foreign competition. Moreover, conventional views as to appropriate
shares of markets have great weight in pricing and other decisions. The
number of foreign automobiles imported never amounted to as much as 11
percent of sales in the United States, and yet they helped to bring about a
radical change in the design and marketing policy of a great industry.
The commodities component of the consumer price index, which in the
last few years has mirrored the stability in the wholesale price index, is
likely to continue to follow the course of wholesale prices in the months
ahead. The services component, which has risen steadily since the war




181

will probably continue to do so. There are some favorable signs, however,
which may indicate a slowing down in the rise of the prices of services.
The great postwar expansion in the housing supply and higher vacancy
rates seem to have slowed down the rise in rents. Also, movements in the
rates charged by public utilities subject to rate regulation should reflect
increasingly the narrowing of the gap between original cost and replacement cost of capital goods included in the rate base.
The slowing down since 1957 in the upward creep of consumer prices
has reduced the effects on wages of cost of living escalator provisions in labor
contracts, and may moderate somewhat the pressure of employees for large
wage increases. It is also worthy of note that escalator provisions have
been eliminated from, or modified in, a number of collective bargaining
agreements.
Developments in the steel industry in 1961 were propitious for the
continuation of price stability. Steel prices at the end of the year were
slightly below the level of the end of 1958. This was a striking shift in
trend for an industry in which prices had risen at the average rate of 5.8
percent a year from 1940 to 1958.
In early 1960, the steel industry, after a long strike, reached a wage
settlement with the Steelworkers Union which provided for an estimated
3.7 percent annual increase in employment cost per worker. Though still
somewhat above the over-all trend rate of productivity increase, this was a
considerably smaller settlement than the 1956 contract, the cost of which was
estimated at 8 percent a year.
Under the 1960 contract, a wage increase was scheduled to take effect
on October 1, 1961. Confronted on one side with increasing foreign competition, stronger rivalry with substitutes, and intraindustry price shading, and
on the other with an increase in wage rates, steel companies were reported
in the press to be weighing the desirability of an October 1 price increase.
In this setting, the President on September 6 addressed a letter to the heads
of the 12 largest steel companies. Urging them to preserve price stability,
the President stressed the damaging impact of a steel price increase on the
balance of payments. "Steel is a bellwether," he said, "as well as a major
element in industrial costs. A rise in steel prices would force price increases
in many industries and invite price increases in others."
The President said:
In emphasizing the vital importance of steel prices to the strength of our
economy, I do not wish to minimize the urgency of preventing inflationary
movements in steel wages. I recognize, too, that the steel industry, by absorbing increases in employment costs since 1958, has demonstrated a will to
halt the price-wage spiral in steel. If the industry were now to forego a price
increase, it would enter collective bargaining negotiations next spring with a
record of three and a half years of price stability. It would clearly then be
the turn of the labor representatives to limit wage demands to a level consistent with continued price stability. The moral position of the steel industry
next spring—and its claim to the support of public opinion—will be strengthened by the exercise of price restraint now.




182

A week later, the President addressed a letter to the President of the
United Steelworkers of America. Referring to the forthcoming collective
bargaining negotiations, the President urged "a labor settlement within the
limits of advances in productivity and price stability." The President expressed his confidence that "we can rely upon the leadership and members
of the Steelworkers Union to act responsibly in the wage negotiations next
year in the interests of all of the American people."
At the end of the year, steel prices had not been raised.
All of these considerations suggest that a resumption of inflation in the
course of the economic expansion foreseen for 1962 is not inevitable. As
the year opens, the atmosphere is favorable for reasonable price stability.
Whether this atmosphere is preserved or dissipated will depend on the wisdom of Government, business, and labor, in evolving policies affecting prices
and costs.
POLICIES AFFECTING PRICE BEHAVIOR

The Setting
The over-all stability of prices should be achieved in a manner consistent
with the flexible response of individual prices and wage rates to changes
in cost and demand within an environment of dynamic competition. Thus,
government policies to promote price stability must work to maintain and
increase the freedom of the private economy, not to limit it. In peacetime,
attempts to stabilize prices through the imposition of direct wage and price
controls or through interference with the rights of employees to organize
and bargain collectively are unacceptable. Also unacceptable are policies
which pursue price stability without regard for the effects on employment,
production, and purchasing power. Prices might be stabilized in an underemployed economy; but to accept heavy unemployment and persistent
slack as the necessary cost of price stability is to undermine the vitality and
flexibility of the economy and to reduce American strength.
Competitive behavior throughout the economy involves more than rivalry
among firms selling similar products in a single market; it also involves hard
bargaining between firms buying and selling from each other and between
firms and unions. Abridgement of competition may be evidenced as much
in permissive wage increases which are simply passed along in higher prices
as in agreements among firms to divide markets.
Public policies to encourage economy-wide competition not only contribute to the goal of price stability; they also promote efficiency and the
advance of productivity. Hence, such policies serve both the goal of
economic growth and the goal of balance of payments equilibrium. In
addition, such policies have an independent justification in that they make
the economy more responsive to the demands of consumers and thereby
improve the qualitative nature of the output generated by the economy at
rising levels of activity. Improving the range of consumer choices is an
important facet of economic progress, and one that gives ultimate meaning
to policies of full employment and economic growth.




183

Policies to Foster Market Competition
Competition in product markets is promoted by an increase in the number and diversity of market alternatives available and by the removal of
anticompetitive restrictions on business behavior. Examples of the former
are reduction of import barriers and encouragement of new and growing
businesses. Examples of the latter are attempts to halt tendencies toward
monopolization and to eliminate collusive agreements among firms through
antitrust policy.
Reduction of import barriers widens and strengthens competition in domestic markets. The experience of the European Common Market has
demonstrated clearly that a broadened scope for international competition
tends to spur cost reduction and innovation and to stimulate economic
vitality. Two factors have been of paramount importance in the success of
this experiment. First, the terms of the Common Market agreement were
such that producers understood well in advance the scope and timetable
of coming tariff reductions and thus were able to prepare for them. Second, because free trade policies were pursued in an environment of rapid
economic growth, increased foreign competition was not so much a threat
to existing markets as an incentive to respond to new profit-making opportunities. Similar advantages can be reaped for the United States through
the adoption of the new foreign trade expansion program proposed by the
President. Although imports are now, and will remain, a much smaller
proportion of sales in our market than in Europe, modest increases in imports can yield competitive benefits to the U.S. economy out of proportion
to their size.
Public policy toward small business has as its purpose the strengthening of
the small business sector of the economy and the removal of artificial and
discriminatory barriers to the profitability and growth of small firms. Although some of the limitations upon small business participation in the
economy arise from technological considerations and true cost economies
associated with large size, important limitations arise from direct discrimination and from lack of access to capital, of widespread market contact, and of information. Programs which redress these imbalances of
competitive advantage make possible the salutary competition of new and
growing enterprises throughout the economy. Small firms are often particularly well-situated to perceive changing market needs and production
possibilities, and to take the lead in adapting to them, thus contributing to
the efficiency and growth of the economy.
Antitrust policies promote market competition by halting tendencies toward monopolization and by eliminating unfair methods of competition
and illegal restraints upon trade. Antimerger actions are designed to
prevent the disappearance of independent competitors and the consequent
impairment of competition. Checking monopolistic price increases during
periods of expanded demand is facilitated both by the continuing effort
to prevent the increase of business concentration and by the detection




184

and prosecution of market conspiracies. The dissolution of such conspiracies is especially important during periods of economic expansion,
for it is during such periods that potential competitors find it easiest to
reach agreement on market divisions and price increases. An important
by-product of corrective antitrust action is the deterrent effect which successful prosecution has upon other potential offenders. To the extent that
potential anticompetitive developments are deterred and existing competitive elements in the economy preserved and strengthened, antitrust policy
contributes to the maintenance of competition and price stability far more
than a simple list of prosecutions would indicate.
GUIDEPOSTS FOR NoNINFLATIONARY WAGE AND PRICE BEHAVIOR

There are important segments of the economy where firms are large or employees well-organized, or both. In these sectors, private parties may exercise considerable discretion over the terms of wage bargains and price
decisions. Thus, at least in the short run, there is considerable room for the
exercise of private power and a parallel need for the assumption of private
responsibility.
Individual wage and price decisions assume national importance when
they involve large numbers of workers and large amounts of output directly,
or when they are regarded by large segments of the economy as setting a
pattern. Because such decisions affect the progress of the whole economy,
there is legitimate reason for public interest in their content and consequences. An informed public, aware of the significance of major wage
bargains and price decisions, and equipped to judge for itself their compatibility with the national interest, can help to create an atmosphere in which
the parties to such decisions will exercise their powers responsibly.
How is the public to judge whether a particular wage-price decision is in
the national interest? No simple test exists, and it is not possible to set out
systematically all of the many considerations which bear on such a judgment.
However, since the question is of prime importance to the strength and
progress of the American economy, it deserves widespread public discussion
and clarification of the issues. What follows is intended as a contribution to
such a discussion.
Mandatory controls in peacetime over the outcomes of wage negotiations
and over individual price decisions are neither desirable in the American
tradition nor practical in a diffuse and decentralized continental economy.
Free collective bargaining is the vehicle for the achievement of contractual
agreements on wages, fringes, and working conditions, as well as on the
"web of rules" by which a large segment of industry governs the performance of work and the distribution of rewards. Similarly, final price decisions
lie—and should continue to lie—in the hands of individual firms. It is,
however, both desirable and practical that discretionary decisions on wages
and prices recognize the national interest in the results. The guideposts




suggested here as aids to public understanding are not concerned primarily
with the relation of employers and employees to each other, but rather with
their joint relation to the rest of the economy.
Wages, prices, and productivity. If all prices remain stable, all hourly
labor costs may increase as fast as economy-wide productivity without, for
that reason alone, changing the relative share of labor and nonlabor incomes in total output. At the same time, each kind of income increases
steadily in absolute amount. If hourly labor costs increase at a slower rate
than productivity, the share of nonlabor incomes will grow or prices will
fall, or both. Conversely, if hourly labor costs increase more rapidly than
productivity, the share of labor incomes in the total product will increase
or prices will rise, or both. It is this relationship among long-run economywide productivity, wages, and prices which makes the rate of productivity
change an important benchmark for noninflationary wage and price
behavior.
Productivity is a guide rather than a rule for appraising wage and price
behavior for several reasons. First, there are a number of problems involved
in measuring productivity change, and a number of alternative measures are
available. Second, there is nothing immutable in fact or in justice about the
distribution of the total product between labor and nonlabor incomes.
Third, the pattern of wages and prices among industries is and should be
responsive to forces other than changes in productivity.
Alternative measures of productivity. If the rate of growth of productivity over time is to serve as a useful benchmark for wage and price behavior, there must be some meeting of minds about the appropriate methods
of measuring the trend rate of increase in productivity, both for industry
as a whole and for individual industries. This is a large and complex
T A B L E 26.—Annual rates of growth of output per man-hour, 7909 to 7960
[Based on establishment series]
Average annual percentage change *

Industry series

1909 to 1960 1947 to 1960 1947 to 1954 1954 to 1960
Total private economy..

2.4

3.0

3.5

2.6

Nonagriculture

2.1

2.4

2.7

2.2

Nonmanufacturing. .
Manufacturing.

2.2
2.8

2.6
2.9

1.9
2.9

Manufacturing corrected for varying rates of
capacity utilization

2.8

2.8

3.1

1 Computed from least squares trend of the logarithms of the output per man-hour indexes. See Table
B-31 for indexes for 1947-60.
2 Not available.
Sources: Department of Labor and Council of Economic Advisers.




186

subject and there is much still to be learned. The most that can be done
at present is to give some indication of orders of magnitude, and of the
range within which most plausible measures are likely to fall (Table 26).
There are a number of conceptual problems in connection with productivity measurement which can give rise to differences in estimates of its
rate of growth. Three important conceptual problems are the following:
(1) Over what time interval should productivity trends be measured?
Very short intervals may give excessive weight to business-cycle movements
in productivity, which are not the relevant standards for wage behavior.
The erratic nature of year-to-year changes in productivity is shown in
Chart 14. Very long intervals may hide significant breaks in trends; indeed in the United States—and in other countries as well—productivity
appears to have risen more rapidly since the end of the second World War
than before. It would be wholly inappropriate for wage behavior in the
1960's to be governed by events long in the past. On the other hand,
productivity in the total private economy appears to have advanced less
rapidly in the second half of the postwar period than in the first.
CHART 14

Indexes of Output per Man-Hour
INDEX, 1947-49 = 100 (Ratio scale)

I 70
ILLUSTRATIVE
GROWTH RATES

I 60

150

140

130

120
TOTAL NONAGRICULTURAL

I I0

100

90
1948

1950

1952

1954

1956

NOTE: MAN-HOURS ESTIMATES BASED PRIMARILY ON ESTABLISHMENT DATA.
SOURCE: DEPARTMENT OF LABOR.

187
621876 O-62-13



1958

I960

(2) Even for periods of intermediate length, it is desirable to segregate
the trend movements in productivity from those that reflect business-cycle
forces. Where the basic statistical materials are available, this problem
can be handled by an analytical separation of trend effects and the effects
of changes in the rate of capacity utilization.
(3) Even apart from such difficulties, there often exist alternative statistical measures of output and labor input. The alternatives may differ
conceptually or may simply be derived from different statistical sources.
A difficult problem of choice may emerge, unless the alternative measures
happen to give similar results.
Selected measures of the rate of growth of productivity in different
sectors of the economy for different time periods are shown in Table 26.
Several measures are given because none of the single figures is clearly
superior for all purposes.
The share of labor income. The proportions in which labor and nonlabor incomes share the product of industry have not been immutable
throughout American history, nor can they be expected to stand forever
where they are today. It is desirable that labor and management should
bargain explicitly about the distribution of the income of particular firms
or industries. It is, however, undesirable that they should bargain implicitly about the general price level. Excessive wage settlements which
are paid for through price increases in major industries put direct pressure
on the general price level and produce spillover and imitative effects
throughout the economy. Such settlements may fail to redistribute income
within the industry involved; rather they redistribute income between that
industry and other segments of the economy through the mechanism of
inflation.
Prices and wages in individual industries. What are the guideposts which
may be used in judging whether a particular price or wage decision may be
inflationary? The desired objective is a stable price level, within which
particular prices rise, fall, or remain stable in response to economic pressures. Hence, price stability within any particular industry is not necessarily
a correct guide to price and wage decisions in that industry. It is possible,
however, to describe in broad outline a set of guides which, if followed,
would preserve over-all price stability while still allowing sufficient flexibility
to accommodate objectives of efficiency and equity. These are not arbitrary
guides. They describe—briefly and no doubt incompletely—how prices
and wage rates would behave in a smoothly functioning competitive economy operating near full employment. Nor do they constitute a mechanical
formula for determining whether a particular price or wage decision is
inflationary. They will serve their purpose if they suggest to the interested
public a useful way of approaching the appraisal of such a decision.
If, as a point of departure, we assume no change in the relative shares of
labor and nonlabor incomes in a particular industry, then a general guide




188

may be advanced for noninflationary wage behavior, and another for noninflationary price behavior. Both guides, as will be seen, are only first
approximations.
The general guide for noninflationary wage behavior is that the rate of
increase in wage rates (including fringe benefits) in each industry be equal
to the trend rate of over-all productivity increase. General acceptance of
this guide would maintain stability of labor cost per unit of output for the
economy as a whole—though not of course for individual industries.
The general guide for noninflationary price behavior calls for price reduction if the industry's rate of productivity increase exceeds the over-all rate—
for this would mean declining unit labor costs; it calls for an appropriate
increase in price if the opposite relationship prevails; and it calls for stable
prices if the two rates of productivity increase are equal.
These are advanced as general guideposts. To reconcile them with objectives of equity and efficiency, specific modifications must be made to
adapt them to the circumstances of particular industries. If all of these
modifications are made, each in the specific circumstances to which it
applies, they are consistent with stability of the general price level. Public
judgments about the effects on the price level of particular wage or price
decisions should take into account the modifications as well as the general
guides. The most important modifications are the following:
(1) Wage rate increases would exceed the general guide rate in an
industry which would otherwise be unable to attract sufficient labor; or in
which wage rates are exceptionally low compared with the range of wages
earned elsewhere by similar labor, because the bargaining position of
workers has been weak in particular local labor markets.
(2) Wage rate increases would fall short of the general guide rate in an
industry which could not provide jobs for its entire labor force even in
times of generally full employment; or in which wage rates are exceptionally
high compared with the range of wages earned elsewhere by similar labor,
because the bargaining position of workers has been especially strong.
(3) Prices would rise more rapidly, or fall more slowly, than indicated
by the general guide rate in an industry in which the level of profits was
insufficient to attract the capital required to finance a needed expansion in
capacity; or in which costs other than labor costs had risen.
(4) Prices would rise more slowly, or fall more rapidly, than indicated by
the general guide in an industry in which the relation of productive capacity
to full employment demand shows the desirability of an outflow of capital
from the industry; or in which costs other than labor costs have fallen;
or in which excessive market power has resulted in rates of profit substantially higher than those earned elsewhere on investments of comparable risk.




189

It is a measure of the difficulty of the problem that even these complex
guideposts leave out of account several important considerations. Although
output per man-hour rises mainly in response to improvements in the
quantity and quality of capital goods with which employees are equipped,
employees are often able to improve their performance by means within
their own control. It is* obviously in the public interest that incentives be
preserved which would reward employees for such efforts.
Also, in connection with the use of measures of over-all productivity
gain as benchmarks for wage increases, it must be borne in mind that
average hourly labor costs often change through the process of up- or downgrading, shifts between wage and salaried employment, and other forces.
Such changes may either add to or subtract from the increment which is
available for wage increases under the over-all productivity guide.
Finally, it must be reiterated that collective bargaining within an industry
over the division of the proceeds between labor and nonlabor income is
not necessarily disruptive of over-all price stability. The relative shares can
change within the bounds of noninflationary price behavior. But when a
disagreement between management and labor is resolved by passing the
bill to the rest of the economy, the bill is paid in depreciated currency to
the ultimate advantage of no one.
It is no accident that productivity is the central guidepost for wage settlements. Ultimately, it is rising output per man hour which must yield the
ingredients of a rising standard of living. Growth in productivity makes it
possible for real wages and real profits to rise side by side.
Rising productivity is the foundation of the country's leadership of the
free world, enabling it to earn in world competition the means to discharge
its commitments overseas. Rapid advance of productivity is the key to
stability of the price level as money incomes rise, to fundamental improvement in the balance of international payments, and to growth in the Nation's
capacity to meet the challenges of the 1960's at home and abroad. That
is why policy to accelerate economic growth stresses investments in science
and technology, plant and equipment, education and training—the basic
sources of future gains in productivity.




190

Appendix A

REPORT TO THE PRESIDENT ON THE
ACTIVITIES OF THE COUNCIL
OF ECONOMIC ADVISERS




DURING 1961




LETTER OF TRANSMITTAL
DECEMBER 31,
The

1961.

PRESIDENT.

SIR: The Council of Economic Advisers submits this report on its
activities during the calendar year 1961 in accordance with the requirements
of Congress, as set forth in Section 4(d) of the Employment Act of 1946.
Respectfully,




WALTER W. HELLER, Chairman
KERMIT GORDON
JAMES TOBIN

X

93




Report to the President on the Activities of the
Council of Economic Advisers During 1961
The Council of Economic Advisers was established nearly 16 years ago
under the Employment Act of 1946. In 1961,, for only the second time since
the passage of the Act, a change of Administration took place, and the
membership of the Council was entirely reconstituted.
COUNCIL MEMBERSHIP

Walter W. Heller took office as Chairman of the Council on January 27,
1961. He is on leave of absence from the University of Minnesota where
he served as Professor of Economics and Chairman of the Department of
Economics in the School of Business Administration. He succeeded Raymond J. Saulnier, Professor of Economics at Barnard College, Columbia
University, who had served as a member of the Council from April 4, 1955
and as Chairman from December 3, 1956 until his resignation on January
20, 1961.
Kermit Gordon took office as a member of the Council on January 27,
1961. He is on leave of absence from Williams College where he is David
A. Wells Professor of Political Economy. James Tobin took office as a
member of the Council on January 27, 1961. He is on leave of absence
from Yale University where he is Sterling Professor of Economics. Messrs.
Gordon and Tobin succeeded Messrs. Karl Brandt and Henry C. Wallich
who resigned on January 20, 1961. Mr. Brandt resumed his duties as Professor of Economic Policy and Associate Director of the Food Research Institute at Stanford University. Mr. Wallich returned to his position as Professor of Economics at Yale University.
Following is a list of all past Council members, together with their dates
of service:
Name

Position

Edwin G. Nourse
Leon H. Keyserling
J o h n D . Clark
Roy B lough
Robert C. Turner
Arthur F. Burns
Neil H. Jacoby
Walter W. Stewart
Joseph S. Davis
Raymond J. S aulnier

_..

Paul W. McCracken..
Karl Brandt
Henry C. Wallich




Oath of office date

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

195

August 9, 1946.._
August 9, 1946
November 2, 1949
May 10, 1950
August 9, 1946
May 10, 1950
June 29, 1950
Septembers, 1952
March 19, 1953
September 15, 1953.._
December 2, 1953
May 2, 1955
April 4, 1955
December 3, 1956
December 3, 1956..
November 1, 1958
May 7, 1959

Separation date
November 1, 1949.
November 1, 1949.
May 9, 1950.
January 20, 1953.
May 9, 1950.
Februarv 11, 1953.
August 20, 1952.
January 20, 1953.
December 1, 1956.
February 9, 1955.
April 29, 1955.
October 31, 1958.
December 2, 1956.
January 20, 1961.
January 31, 1959.
January 20,1961.
January 20, 1961.

COUNCIL STAFF

The Council is currently assisted by a senior professional staff of 19
economists and statisticians. The full-time professional staff members are
Richard E. Attiyeh, Barbara R. Berman, Charles A. Cooper, Richard N.
Cooper, Rashi Fein, Catherine H. Furlong, Frances M. James, Marshall A.
Kaplan, David W. Lusher, Richard R. Nelson, Arthur M. Okun, George
L. Perry, Lee E. Preston, Vernon W. Ruttan, Robert M. Solow, Walter
F. Stettner, Lloyd Ulman, Leroy S. Wehrle, and Sidney G. Winter, Jr.
In addition, Kenneth J. Arrow, Henry W. Briefs, Martin Bronfenbrenner,
Richard E. Caves, James Duesenberry, Otto Eckstein, Dale E. Hathaway,
Peter B. Kenen, Burton H. Klein, Robert J. Lampman, John R. Meyer,
James R. Nelson, Joseph A. Pechman, William A. Salant, Paul A. Samuelson, Charles L. Schultze, Warren L. Smith, Charles A. Taff, and Robert
Triffin served the Council during 1961 as Consultants.
Bernard S. Beckler, Harold F. Breimyer, Samuel L. Brown, and Robert
C. Colwell resigned from the Council during 1961 to accept positions elsewhere in government. Special mention should be made of the retirement
of Collis Stocking on September 15, 1961. Mr. Stocking served the Council with distinction for 8 years as Administrative Officer and a Senior
Economist.
COUNCIL ACTIVITIES

The economic problems which confront the Council today are perhaps
more complex than ever before. The Council has the unique responsibility
and opportunity to view a wide variety of specific developments, policies,
and proposals in the broad perspective of their combined effects on the
national economy. Its central concern under the Employment Act is the
stability, growth, and efficiency of the U.S. economy. Especially now, this
concern compels the Council to consider the interconnections between
domestic economic developments and policies and the international economic relations of the United States.
Responding to these concerns and to the request of the President that the
Council play a broader role as an economic staff agency, the Council in
1961 added new staff members and consultants to strengthen its capabilities
in studying problems in the fields of international economics, defense and
disarmament economics, economic growth, manpower, consumer economics,
natural resources, and the economics of technology and research and
development.
By a variety of means, the Council in 1961 carried out its statutory responsibilities as a Presidential staff agency under the Employment Act.
Much of its activity took the form of assistance to the President and dayto-day contacts with members of the White House staff and officials of
other Executive Agencies. Its responsibilities were also discharged through
such formal institutional arrangements as regular attendance of the Chair-




196

man of the Council at meetings of the Cabinet, and Council participation
in the work of a number of interdepartmental committees.
The Council took an active part in the work of several new committees
set up in 1961 to deal with special economic problems. A Council member
served as chairman of an ad hoc committee on housing credit, consisting of
representatives of the Federal agencies responsible for housing and its financing. The Council was represented, on the White House Committee on
Small Business and the Panel on Civilian Technology, and it worked with
the President's Advisory Committee on Labor-Management Policy.
Of particular importance was the development of new machinery for
interagency cooperation in formulating fiscal estimates and policies. The
Chairman of the Council served with the Secretary of the Treasury and
the Director of the Bureau of the Budget on a committee charged with
coordinating the economic, budgetary, and revenue estimates for which
the three agencies have primary responsibility, and of reporting on them
to the President. The estimates are developed with the aid of working
groups representing the Council, the Treasury Department, and the Bureau
of the Budget, and, in the preparation of projections of economic activity,
several other agencies as well.
The Chairman of the Council served with the Secretary of the Treasury,
the Director of the Budget, and the Chairman of the Board of Governors
of the Federal Reserve System in an advisory group which met periodically
with the President to review monetary developments, issues, and policies.
The members and staff of the Council served on such interagency groups
as the Economic Growth Study Committee, the Advisory Committee on
U.S. National Health Survey, the Civil and Defense Mobilization Board,
the Committee on the Monthly Business Cycle Report, the Committee on
Natural Resources of the Federal Council on Science and Technology, and
the Special Advisory Committee on the Statistical Abstract.
The Advisory Board on Economic Growth and Stability, which had been
established under Reorganization Plan No. 9 of 1953 and whose Chairman
was the Chairman of the Council, was abolished on March 12, 1961 by
order of the President. On the same date, the Council on Foreign Economic Policy, established by Presidential letter of December 11, 1954, and
on which the Council members had served, was also terminated. The
functions of both these groups are now being performed elsewhere within
the Government.
In the international sphere, the Council participated in the work of the
National Advisory Council on International Monetary and Financial Problems, the National Security Council, the Interdepartmental Committee of
Under Secretaries on Foreign Economic Policy, and the Committee on
Balance-of-Payments Information.
The Council has increasingly been drawn into economic consultations
of international organizations. Mr. Heller served as Chairman of the U.S.
delegation to the Economic Policy Committee of the Organization for




197

European Economic Cooperation (beginning in Octber, the Organization
for Economic Cooperation and Development). Mr. Tobin served on the
U.S. delegation to this Committee and to its Working Party on Balance of
Payments Equilibrium, and Mr. Robert Solow of the Council staff was
Chairman of the U.S. delegation to the Committee's Working Party on
Policies for the Promotion of Economic Growth. Mr. Gordon was a member of the U.S. delegation to the first Ministerial Meeting of the Organization for Economic Cooperation and Development.
Mr. Heller and Mr. Tobin were members of the U.S. delegation to the
annual meetings of the International Monetary Fund and the International Bank for Reconstruction and Development held in Vienna in September. Mr. Gordon served on the U.S. delegation to the annual meetings
of the United Nations Economic and Social Council. Mr. Tobin was
Chairman of the U.S. delegation to the meeting of Senior Economic
Advisers at the United Nations Economic Commission for Europe.
Mr. Heller was a member of the U.S. delegation to the first meeting of the
Cabinet-level United States-Japan Committee on Economics and Trade.
CONGRESSIONAL TESTIMONY

During 1961, the Council testified before the Joint Economic Committee on three occasions. In its initial appearance on March 6 a comprehensive statement on economic conditions and policy, entitled "The
American Economy in 1961: Problems and Policies," was submitted.1 In
this document the Council also set forth the following six general principles
to govern its policy on testimony before the Committee:
" 1 . The Council has a responsibility to explain to the Congress and
to the public the general economic strategy of the President's program,
especially as it relates to the objectives of the Employment Act. This is
the same kind of responsibility that other Executive agencies assume in
regard to programs in their jurisdictions.
"2. It is not appropriate or necessary for the Council to go into the
details of legislative proposals or of administrative actions which fall
primarily in the domain of operating Executive departments or agencies,
who can and do testify before the appropriate committees. Our concern
is with the over-all pattern* of economic policy.
"3. The program of the President is, of course, the outcome of a
decision process in which advice, recommendations, and considerations of
many kinds, from many sources, inside and outside the Executive, play a
part. The professional economic advice of the Council is one element; it
is not and should not be the sole consideration in the formulation of
Presidential economic policy, or of Congressional policy.
1
Hearings Before the Joint Economic Committee, Congress of the United States
(87th Congress, First Session), January 1961 Economic Report of the President and
the Economic Situation and Outlook, pp. 310-92.




198

"4. In Congressional testimony and in other public statements, the
Council must protect its advisory relationship to the President. We assume
that the Committee does not expect the Council to indicate in what respects its advice has or has not been taken by the President, nor to what
extent particular proposals, or omissions of proposals, reflect the advice of
the Council.
"5. Subject to the limits mentioned, members of the Council are glad to
discuss, to the best of their knowledge and ability as professional economists,
the economic situation and problems of the country, and the possible
alternative means of achieving the goals of the Employment Act and other
commonly held economic objectives. In this undertaking, the Council
wishes to cooperate as fully as possible with the Committee arid the Congress
in achieving a better understanding of our economic problems and
approaches to their solutions.
"6. The Council is composed of professional economists. But economic
policy, as the Committee well knows, is not an exact science. The Council
is, and necessarily must be, in harmony with the general aims and direction
of the President and his Administration. A member of the Council who felt
otherwise would resign. This general harmony is, of course, consistent with
divergencies of views on specific issues." 2
On April 11, the Council testified on general economic matters before the
full committee; and on June 19, it testified before the Subcommittee on
International Exchange and Payments of the Joint Economic Committee.
In addition, Mr. Tobin represented the Council before a Subcommittee of
the Senate Committee on Banking and Currency in support of S. 1740—the
"Truth-in-Lending" bill.
NONGOVERNMENTAL MEETINGS AND ACTIVITIES

Section 4(e) (1) of the Employment Act directs that in carrying out its
statutory responsibilities "the Council may constitute such advisory committees and may consult with such representatives of industry, agriculture,
labor, consumers, State and local governments, and other groups as it deems
advisable." In accordance with this directive, the Council in 1961 actively
sought the counsel and views of representatives of a wide variety of interests.
In the early months of the year, many of the new Council's meetings with
nongovernmental representatives were of an informal nature. However,
more formal relations were subsequently established with a number of
groups, including the Economic Policy Committee of the AFL-CIO, and
the Committee on Domestic Economy of the Business Council. Roundtable discussions with business, financial, and academic economists were
also organized. It is expected that these activities will be continued and
expanded during the coming years.
2

Ibid. pp. 311-14.




In an effort to stimulate wider understanding and consideration of current economic policy issues, Council members participated during 1961 in
a number of public discussions, conferences, and radio and television programs. These included White House Regional Conferences held in 10
cities throughout the Nation.
PUBLICATIONS

In keeping with its responsibilities under the Employment Act, the outgoing Council assisted President Eisenhower in the preparation of the 1961
Economic Report to the Congress. Copies were distributed to members of
the Joint Economic Committee, all other members of the Congress, Departments and Agencies of the Government, representatives of the press, and
depository libraries throughout the country. The Superintendent of Documents sold 19,086 copies to the general public.
The Council prepares Economic Indicators, a monthly compendium of
current economic statistics published by the Joint Economic Committee
of the Congress. Copies are distributed to all members of the Congress
and to depository libraries. In addition, 10,000 copies of each monthly
issue are sold by the Superintendent of Documents to subscribers and
others.
INCREASE IN APPROPRIATIONS

By direction of the President, the Council during the year undertook
broadened responsibilities related to the basic directives of the Employment Act. The Council was also called upon to discharge functions performed in the previous Administration by a Special Assistant to the President
with responsibilities for economic policy, a post which has been discontinued.
To carry out these expanded duties, the Council sought amendment of
the Employment Act, to eliminate the $345,000 ceiling on salaries contained
in the original 1946 legislation, and an increase in its appropriation for
fiscal 1962. The elimination of the salary ceiling, effected by H.R. 6094,
was signed into law by the President on June 17. Subsequently, the Council received a supplemental appropriation of $170,000 for salaries and other
purposes for the fiscal year 1962, bringing its total appropriation for that
year to $584,000.




200

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




2OI




CONTENTS
income or expenditure:
Page
Gross national product or expenditure, 1929-61
207
Gross national product or expenditure, in 1961 prices, 1929-61
208
Gross national product or expenditure, in 1954 prices, 1929-61
210
Gross national product by major type of product, 1947-61
212
Gross national product by major type of product, in 1954 prices,
1947-61
213
B-6. Implicit price deflators for gross national product, 1929-61
214
B-7. Gross national product: Receipts and expenditures by major economic
groups, 1929-61
216
B-8. Gross private and government product, in current and 1961 prices,
1929-61
218
B-9. Personal consumption expenditures, 1929-61
219
B-10. Gross private domestic investment, 1929-61
220
B-ll. National income by type of income, 1929-61
221
B-12. Relation of gross national product and national income, 1929-61....
222
B-l 3. Relation of national income and personal income, 1929-61
223
B-14. Sources of personal income, 1929-61
224
B-l 5. Disposition of personal income, 1929-61
226
B-l 6. Total and per capita disposable personal income and personal consumption expenditures, in current and 1961 prices, 1929-61
227
B-l 7. Financial saving by individuals, 1939-61
228
B-18. Sources and uses of gross saving, 1929-61
229
Employment, wages, and productivity:
B-l 9. Noninstitutional population and the labor force, 1929-61
230
B-20. Employment and unemployment, by age and sex, 1942—61
232
B—21. Employed persons not at work, by reason for not working, and special
groups of unemployed persons, 1946—61
.
233
B-22. Unemployed persons, by duration of unemployment, 1946-61
234
B—23. Unemployment insurance programs, selected data, 1940-61
235
B-24. Number of wage and salary workers in nonagricultural establishments,
1929-61
236
B-25. Average weekly hours of work in selected industries, 1929-61
238
B-26. Average gross hourly earnings in selected industries, 1929-61
239
B—27. Average gross weekly earnings in selected industries, 1929-61
240
B—28. Average weekly hours and hourly earnings, gross and excluding overtime, in manufacturing industries, 1939—61
241
B—29. Average weekly earnings, gross and spendable, in manufacturing
industries, in current and 1961 prices, 1939-61
242
B—30. Labor turnover rates in manufacturing industries, 1930—61
243
B-31. Indexes of output per man-hour and related data, 1947-61
244
Production and business activity:
B—32. Industrial production indexes, market groupings, 1947—61
245
B—33. Industrial production indexes, industry groupings, 1947-61
246
B-34. Business expenditures for new plant and equipment, 1939 and 1945—62.
248
B-35. New construction activity, 1929-61
249

National
B-l.
B-2.
B-3.
B-4.
B-5.




203
621876 O-62-14

Production and business activity—Continued
Page
B-36. New public construction activity, 1929-61
250
B-37. Housing starts and applications for financing, 1929-61
251
B—38. Sales and inventories in manufacturing and trade, 1939—61
252
B-39. Manufacturers' sales, inventories, and orders, 1939—61
253
Prices:
B-40. Wholesale price indexes, 1929-61
254
B-41. Wholesale price indexes, by stage of processing, 1947-61
256
B-42. Consumer price indexes, by major groups, 1929-61
258
B-43. Consumer price indexes, by special groups, 1935-61
259
Money supply, credit, and finance:
B-44. Money supply, 1947-61
260
B-45. Loans and investments of all commercial banks, 1929-61
261
B-46. Federal Reserve Bank credit and member bank reserves, 1929-61....
262
B-47. Bond yields and interest rates, 1929-61
263
B-48. Short- and intermediate-term consumer credit outstanding, 1929—61..
265
B-49. Instalment credit extended and repaid, 1946-61
266
B-50. Mortgage debt outstanding, by type of property and of financing,
1939-61
"
267
B-51. Net public and private debt, 1929-61
268
Government finance:
B-52. U.S. Government debt, by kind of obligation, 1929-61
269
B-53. Estimated ownership of U.S. Government obligations, 1939-61
270
B—54. Average length and maturity distribution of marketable interest-bearing public debt, 1946-61
271
B-55. Federal budget receipts and expenditures and the public debt, 1929-63.
272
B-56. Federal budget receipts by source and expenditures by function, fiscal
years 1946-63
273
B-57. Government cash receipts from and payments to the public, 1946-63 .
274
B-58. Government receipts and expenditures in the national income accounts, 1929-61
275
B-59. Federal Government receipts and expenditures in the national income
accounts, 1946-61
276
B—60. Reconciliation of Federal Government receipts and expenditures in
the conventional budget and the consolidated cash statement with
receipts and expenditures in the national income accounts, fiscal
years 1959-63
277
B-61. State and local government revenues and expenditures, selected fiscal
years, 1927-60
278
Corporate profits and finance:
B-62. Profits before and after taxes, all private corporations, 1929—61
279
B—63. Relation of profits after taxes to stockholders' equity and to sales,
private manufacturing corporations, by industry group, 1958—61. . .
280
B—64. Relation of profits before and after taxes to stockholders' equity and
to sales, private manufacturing corporations, by asset size class,
1958-61
282
B-65. Sources and uses of corporate funds, 1950-61
283
B-66. Current assets and liabilities of United States corporations, 1939-61. .
284
B-67. State and municipal and corporate securities offered, 1934-61
285
B-68. Common stock prices and earnings and stock market credit, 1939-61.
286
B-69. Business population and business failures, 1929-61
287




204

Agriculture:
Page
B-70. Income from agriculture, 1929-61
288
B-71. Indexes of prices received and prices paid by farmers, and parity ratio,
1929-61
289
B-72. Farm production indexes, 1929-61
291
B-73. Selected measures of farm resources and inputs, 1929-61
292
B-74. Farm population, employment, and productivity, 1929-61
293
B-75. Comparative balance sheet of agriculture, 1929-62
294
International statistics:
B-76. United States balance of payments, 1956-61
295
B-77. Major U.S. Government foreign assistance, by type and by area,
total postwar period and fiscal years 1958-61
296
B-78. United States merchandise exports and imports, by economic category,
1949 and 1956-61
297
B-79. United States merchandise exports and imports, by area, 1949 and
1956-61
298
B-80. Estimated gold reserves and dollar holdings of foreign countries and
international organizations, 1949 and 1956-61
299
B-81. Price changes in international trade, 1954-61
300

Note.—Detail in these tables will not necessarily add to totals because of
rounding.
Data for Alaska and Hawaii are not included unless specifically noted.
Unless otherwise noted, all dollar figures are in current prices.




205




NATIONAL INCOME OR EXPENDITURE
TABLE B-l.—Gross national product or expenditure, 1929-61
[Billions of dollars]
Gross private domestic investment 2

Year or
quarter

1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961 «_—

PerTotal sonal
gross conna- sumptional tion
prod- ex- Total
uct penditures 1

104.4
91.1
76.3
58.5
56.0
65.0
72.5
82.7
90.8
85.2
91.1
100.6
125.8
159.1
192.5
211.4
213.6
210.7
234.3
259.4
258.1
284.6
329.0
347.0
365.4
363.1
397.5
419.2
442.8
444.5
482.8
504.4
521.2

79.0
71.0
61.3
49.3
46.4
51.9
56.3
62.6
67.3
64.6
67.6
71.
81.9
89.7
100.
109.8
121.7
147.1
165.4
178.3
181.
195.0
209.8
219.8
232.6
238.0
256.9
269.9
285.2
293.2
314.0
328.9
339.2

16.2
10.3
5.5

New construction

Government purchases of goods
and services

1.2

I
O

8.7
6.2
4.0
1.9
1.4
1.4
1.7
2.9
6.3
2.3
8.4
3.3
11.7
4.4
6.7
4.0
9.3
4.8
13.2
5.5
6.6
18.1
3.7
9.9
2.3
5.6
2.7
7.1
10.4
3.8
28.1 11.0
31.5 15.3
43.1 19.
33.0 18.8
50.0 24.
56.3 24.8
49.
25.5
50.3 27.6
48.9 29.
63.8 34.9
67.4 35.5
66.1 36.1
56.6 35.5
72.4 40.2
72.4 40.7
69.5 41.8

2.1
1.6
.6
.5
.6
1.0
1.6
1.9
2.0
2.7
3.0
3.5
1.7
1.1
4.8
7.5
10.1
9.6
14.1
12.5
12.8
13.8
15.4
18.
17.
17.0
18.0
22.3
21.1

5.1
4.1
2.4
1.2
1.0
1.1
1.3
1.7
2.5
2.0
2.1
2.5
3.1
2.0
1.4
1
2.7
6.3
7.7
9.3
9.2
10.1
12.3
12.7
13.8
14.3
16.2
17.8
19.0
17.4
17.9

5.8
4.5
2.8
1.6
1.6
2.3
3.1
4.2
5.1
3.6
4.2
5.5
6.9
4.3
4.0
5.4
7.7
10.7
16.7
18.9
17.2
18.9
21.3
21.3
22.3
20.8
23.1
27.2
28.5
23.1
25.9
27.5
20.5 25.

Net
exports
of
goods
and
serv- Total
ices 3

1.7
-.4
-1.3
-2.6
-1.
-1.1
1.0
2.2
-.9
.4

0.8
.7
.2
.2
.2
.4
-.1
-.1
.1
1.1
.9

2.2
1.5
4.5
1.1
1.8 - . 2
- . 8 -2.2
-1.0 -2.1
-1.1 -1.4
6.4
4.9
-.5
9.0
4.7
3.5
3.8
-3.1
6.8
.6
10.2
2.4
3.1
1.3
.4 - . 4
-1.6
1.0
5.8
1.1
4.
2.9
4.9
1.6
1.2
-2.0
4.2
2.0

4.0

9.2
9.2
8.1
8.0
9.8
10.0
11.8
11.7
12.8
13.3
14.1
24.8
59.7
88.6
96.5
82.9
30.5
28.4
34.
40.2
39.0
60.5
76.0
82.8
75.3
75.6
79.0
86.5
93.5
97.1
100.1
108.6

Federal

Total

1.3
1.4
1.5
1.5
2.0
3.0
2.9
4.8
4.6
5.3
5.2
6.2
16.9
52.0
81.2
89.0
74.8
20.6
15.6
19.3
22.2
19.3
38.8
52.9
58.0
47.5
45.3
45.7
49.7
52.6
53.5

Ii

i

State
and
local

7.2
7.8
7.7
6.6
6.0
6.8
7.1
7.0
7.2
7.5
8.2
7.9
7.8
7.7
7.4
7.5
8.1
9.9
12.7
15.2
17.9
19.7
21.7
23.2
24.9
27.7
30.3
33.2
36.8
40.8
43.6
47.2
51.4

1.3
1.4
1.5
1.5
2.0
3.0
2.9
4.8
4.6
5.3
1.3 3.9
2.2
13.8
49.6
80.4
88.6
75.9
18.8
11.4
11.6
13.6
14.3
33.9
46.4
49.3
41.2
39.1
40.4
44.4
44.8
46.2

52.9

57.2

Seasonally adjusted annual rates
472.2
488.5
482.3
488.3
501.5
506.4
505.1
504.5
1961: I
500.8
516.1
II
III.— 525.8
IV 6... 542.0

1959: I

II
Ill—IV—.
1960: I
II
III—
IV.—

305.8
313.6
316.5
320.0
323.8
329.9
329.7
332.3
330.7
336.1
341.0
349.0

70.4
79.1
68.2
71.8
78.9
74.6
70.5
65.6
59.8
68.8
73.2
76.0

39.0 21.9 17.1
41.2 23.5 17.7
41.0 22.6 18.4
39.6 21.3 18.3
40.9 21.5 19.3
40.7 21.2 19.5
40.4 21.0 19.4
40.7 20.5 20.2
39.6 19.3 20.4
41.3 20.6 20.7
42.7 22.1 20.6
43.5 23.2 20.3

24.3
7.1
26.3 11.7
.7
26.6
5.6
26.6
27.1 10.9
5.4
28.6
2.4
27.7
26.7 - 1 . 9
24.2 - 4 . 0
2.8
24.7
26.0
4 5
28.0
4! 5

-0.6
-1.7

-.5
(5)
1.8
2.3
3.0
5.1
5.3
3.9
2.6
4.0

96.7
97.5
98.1
96.5
96.9
99.6
101.9
101.6
105.0
107.3
109.0
113.0

53.2
53.9
54.1
52.9
51.8
52.9
54.0
53.0
54.7
56.6
57.4
59.9

45.9
46.5
46.3
45.9
45.5
45.5
45.4
45.7
47.2
48.8
49.0
51.6

7.7
7.9
8.3
7.5
6.9
7.9
9.1
7.9
8.0
8.3
8.9
8.9

0.5
.5
.5
.5
.6
.6
.6
.6
.5
.5
.6
.6

43.5
43.6
44.0
43.6
45.0
46.8
48.0
48.6
50.3
50.6
51.6
53.2

1 See Table B-9 for major components.
See Table B-10 for further detail and explanation of components.
For 1929-45, net exports of goods and services and net foreign investment have been equated, since foreign
net transfers by Government were negligible during that period. See Table B-7 for exports and imports
separately.
* This category corresponds closely to the national defense classification in the Budget of the United States
Government for the Fiscal Year ending June 30, 1963. See also Table B-56.
s Less than $50 million,
fi Preliminary estimates by Council of Economic Advisers.
2
3

NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




207

TABLE B-2.—Gross national product or expenditure, in 1961 prices, 1929—61

1

[Billions of dollars, 1961 prices]

Personal consumption
expenditures

Gross private domestic investment

Total
New construction
gross
Producnational
Dura- Noners'
product Total ble durable Services Total
durable
Residential Other equipgoods goods
Total nonment
farm

Year or quarter

Change
in business
inventories

1929

209.8

142.8

15.7'

70.6

56.5

42.4

25.5

1*2

15 3

13.5

34

1930
1931
1932
1933
1934

190.3
175.9
149.8
146.3
160.3

134.3
130.2
118.5
115.7
121.6

12.5
10.8
8.2
8.0
9.1

67.2
66.8
61.5
59.7
63.7

54.6
52.5
48.7
48.0
48.8

29.1
18.0
5.2
5.7
9.9

18.9
13.3
7.4
5.6
6.3

6.0

5.0
2.5
1.9
2.2

13.0
8.3
4.9
3.8
4.1

10.7
7.2
4.3
4.5
6.1

— 6
-2.5
—6 5
-4.4
-2.4

175.6
200.5
210.9
201.5
218.1

129.1
142.1
147.1
144.6
152.7

11.3
13.9
14.6
11.8
14.1

67.2
74.9
77.5
78.8
83.0

50.5
53.3
55.1
54.0
55.7

18.7
25.9
31.7
18.8
26.2

8.2
11.5
13.8
12.3
14.7

3.6
5.4
5.8
6.0
8.0

4.6
6.1
7.9
6.3
6.8

8.2
11.2
12.7
8.8
10.3

2.3
3.2
5.3
-2.3
1.1

1940
1941
1942
1943
1944

236.8
275.8
315.3
355.2
381.1

160.8
171.4
167.9
172.3
178.6

16.2
18.7
11.5
9.9
9.1

86.8
92.6
94.5
97.4
101.7

57.8
60.1
61.9
65.0
67.8

34.6 16.5
43.7 18.5
22.4
95
13. 5 5.4
5.9
15.0

8.6
9.2
4.2
2.0
1.7

79
9.3
53
3.3
4.2

13.3
15.6
9.0
8.4
11.1

49
9.6
3 9
-.3
-2.0

1945
1946
1947
1948
1949

373.8
325.4
324.9
337.5
338.3

190.9
213.8
217.4
221.6
227.3

10.4
20.5
24.6
26.0
27.8

109.7
116.4
113.9
113.7
115.0

70.9
76.9
78.9
82.0
84.4

20.8
50.8
50.8
59.4
47.4

8.2
21.1
24.2
27.5
27.1

2.2
8.6
11.3
13.4
13.2

6.0
12.5
12.9
14.1
13.9

15.5
19.6
26.4
27.6
24.1

-2.8
10.1

1950
1951
1952
1953
1954

366.5
396.5
411.7
430. 6
422.0

241.0
243.2
249.6
261.5
265.0

34.0
30.8
30.1
35.0
34.3

118.1
120.3
124.4
128.0
129.1

88.9
92.1
95.1
98.5
101.6

66.9
69.3
60.9
61.6
59.1

33.1
31.6
31.5
36.0

18.2
15.1
15.0
16.0
18.1

14 9
16.5
16.5
17.5
18.0

25.9
26.7
26.5
27.4
25.3

79
11.0
2.9
.8
-2.2

1955
1956
1957
19.58
1959

455.1
464 8
473.6
466.1
497.3

284.7
294.2
302.1
304.7
322.4

41.9
40.2
40.8
37.6
43.3

135.7
140.9
143.4
144.2
150.2

107.2
113.0
117.9
122.9
128.9

75.0
74.6
70.0
59.2
73.5

41.0
39 2
38.6
37.6
41.4

21.3
19.1
18.0
19.1
22.8

19.7
20.2
20.6
18.6
18.6

27.4
30.3
29.9
23.6
25.9

6.6
50
1.5
-2.1
6.2

I960
19616

511.1
521.2

332.7
339.2

44.2
42.3

153.4
155.6

135.1
141.2

73.0
69.5

41.1
41.8

21.1
21.3

20.0
20.5

27.5
25.7

4.4

-- .

1935
1936
1937
1938
1939

.-

.

.

go e

2
4.2

-3.8

2.0

Seasonally adjusted annual rates
1959: I

III
IV

490.3
504. 4
495.2
499.4

316.3
322.8
324.1
326.4

41.5
44.1
44.0
43.8

148.0
150.7
150.6
151.5

126.8
128.0
129.5
131.2

72.1
80.2
69.0
72.6

40.7
42.5
42.0
40.4

22.7
24.1
23.0
21.6

18.0
18.4
19.0
18.9

24.4
26.2
26.4
26.6

11.5
.6
5.5

I960: I
II
III
IV

511.5
514.2
510. 6
508.0

329.3
333.9
333.1
334.2

44.6
44.9
43.2
44.0

152.5
154.6
153. 6
152.9

132.3 80.1
134. 4 75.0
136.3 70.6
137.3 66.3

41.5
41.1
40.7
41.1

21.7
21.2
21.0
20.6

19.8
19.9
19.7
20.5

27.2
28.4
27.6
26.9

11.4
5.4
2.3
-1.7

502.9
516.9
525.0
540.2

331.7
336.7
340.6
347.8

39.8
42.1
42.3
45.2

153.2
154.3
156.3
158.8

138.7
140.4
142.0
143.8

40.0
41.4
42.5
43.4

19.4
20.6
22.0
23.2

20.6
20.7
20.5
20.2

24.2
24.7
26.0
28.0

-4.0
2.8
4.5

II

1961: I
II

III

-

See footnotes at end of table, p . 209.




208

60.2
68.9
73.0
75.9

7.0

4.5

T A B L E B—2.—Gross national product or expenditure, in 7961 prices, 1929—61 *—Continued
[Billions of dollars, 1961 prices]
Government purchases of goods and services
Year or quarter

Net
exports
of goods
and
services2

Federal
Total
Total a

1929.

1.1

National
defense 3 *

23.4

19.7

.4
.2
-.3
-.1

25.9
27.3
25.9
25.2
28.8

4.3
4.7
4.9
6.7
8.8

1935.
1936
1937
1938
1939.

-1.3
-1.5
-.9
1.6
1.0

29.2
34.0
32.9
36.5
38.2

8.5
13.1
12.3
14.6
14.0

1940
1941
1942
1943
1944

1.9
.2
-2.3
-6.0
-6.1

39.5
60.5
127.3
175.4
193. 6

16.7
39.1
107.8
157.6
176.2

3.4
6.0
31.8
102.3
154.8
173.1

1945
1946
1947
1948
1949

-4.8
5.0
9.5
3.1
3.8

166.8
55.8
47.2
53.4

149.0
35.9
24.6
29.1
32.2

1950
1951
1952
1953
1954

1.4
3.6
2.6
.4
2.3

57.2
80.4
98.7
107.1
95.6

1955
1956
1957
1958
1959

2.5
4.3
5.7
1.5

1960
1961

3.7
4.0

1930
1931
1932.
1933
1934.

State and
local
Other

(5)

21.6
22.6
21.0
18.5
20.0

8
()
()
10.6

20.6
21.0
20.7
22.0
24.2

10.7
7.3
5.5
2.9
3.1

22.8
21.4
19.5
17.7
17.4

147.0
28.1
16.1
16.7
19.4

2.1
7.8
8.5
12.4
12.8

17.8
19.9
22.5
24.3
27.7

27.5
50.0
67.8
74.8
60.5

20.1
43.3
59.2
63.2
52.0

7.4
6.7
8.6
11.6
8.5

29.7
30.4
31.0
32.3
35.0

92.9
91.8
95.8
100.6
101.6

55.4
53.0
55.0
56.6
55.8

47.4
46.4
48.7
47.7
47.6

8.0
6.6
6.3
8.9
8.2

37.5
38.7
40.8
44.0
45.8

101.8
108.6

53.8
57.2

45.7
48.6

8.1
8.5

48.0
51.4

()

Seasonally adjusted annual rates
1959: I....
II...
IIIIV..

-0.6
-1.4

102.4
102.8
102.2
99.5

56.2
56.7
56.1
54.3

48.0
48.4
47.4
46.6

8.2
8.3
8.6
7.6

46.2
46.1
46.1
45.2

1960: I....
II...
IIIIV..

2.6
3.0
3.6
5.6

99.5
102.3
103.2
101.9

53.1
54.4
54.6
53.0

46.0
46.2
45.4
45.1

7.1
8.2
9.2
7.9

46.4
47.9
48.6
48.9

1961: I-..
II...
III..
IV «.

5.3
3.8
2.6
4.0

105.7
107.5
108.8
112.5

54.9
56.9
57.2
59.9

46.8
48.5
48.3
51.0

8.0
8.4
8.9
8.9

50.8
50.6
51.6
52.7

1
These estimates represent an approximate conversion of the Department of Commerce series in 1954
prices. (See Tables B-3 and B-6.) This was done by major components, using the implicit price indexes
converted to a 1961 base. Although it would have been preferable to redeflate the series by minor components, this would not substantially change the results except possibly for the period of World War II, and
for the series on change in business inventories.
For explanation of conversion of estimates in current prices to those in 1954 prices, see U. S. Income and
Output, A Supplement to the Survey of Current Business, 1958.
3
For 1929-45, net exports of goods and services and net foreign investment have been equated, since foreign
net transfers by Government were negligible during that period.
3
Net of Government sales, which are not shown separately in this table. See Table B-l for Government
sales in current prices.
* See footnote 4, Table B-l.
8 Preliminary estimates by Council of Economic Advisers.
8
7
Not available separately.
Less than $50 million.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Sources: Department of Commerce and Council of Economic Advisers.




209

TABLE B-3.—Gross national product or expenditure, in 1954 prices, 1929-61l
[Billions of dollars, 1954 prices]

Total
gross
Year or quarter national
product

Gross private domestic investment

Personal consumption
expenditures

New construction

Total

ProChange
ducers' in busiResidurable
ness
DurNon- Serv- Total
dential
equip- invenable durable ices
Total non- Other ment
tories
goods goods
farm

1929..

181.8

128.1

14.9

65.3

48.0

35.0

20.9

8.7

12.2

11.1

3.0

1930..
1931..
1932..
1933..
1934..

164.5
153.0
130.1
126.6
138. 5

120.3
116.6
106.0
103.5
108.9

11.8
10.3
7.8
7.5
8.6

62.1
61.8
56.9
55.2
58.8

46.4
44.6
41.4
40.8
41.5

23.6
15.0
3.9
4.0
7.4

15.4
10.9
6.0
4.6
5.1

5.1
4.2
2.1
1.6
1.9

10.4
6.6
3.9
3.0
3.2

8.8
5.9
3.5
3.7
5.0

-.7
-1.8
-5.6
-4.2
-2.8

1935..
1936..
1937..
1938..
1939,.

152.9
173.3
183.5
175.1
189.3

115.8
127.7
132.1
129.9
137.3

10.7
13.1
13.8
11.2
13.3

62.1
69.2
71.6
72.8
76.7

42.9
45.3
46.8
45.9
47.2

16.1
21.0
27.0
15.5
21.6

6.7
9.4
11.3
10.1
12.2

3.1
4.6
5.0
5.1

3.6
4.9
6.3
5.0
5.4

6.7
9.2
10.5
7.3
8.5

2.6
2.4
5.2
-1.8
1.0

1940..
1941..
1942..
1943..
1944..

205. 8
238.1
266.9
296.7
317.9

144.6
154.3
150.8
154.6
160.2

15.3
17.6
10.9

80.2
85.6
87.3
90.0
94.0

49.1
51.1
52.6
55.2
57.6

29.0
36.7
18.8
10.7
12.3

13.6
15.3
7.8
4.4
4.8

7.3
7.9
3.6
1.7
1.4

6.3
7.4
4.2
2.7
3.4

10.9
12.9
7.4
6.9
9.2

4.5
8.6
3.6
-.6
-1.7

1945..
1946-.
1947..
1948..
1949..

314.0
282.5
282.3
293.1
292.7

171.4
192.3
195.6
199.3
204.3

9.8

19.4
23.3
24.6
26.3

101.4
107.6
105.3
105.1
106.3

60.2
05.3
67.0
69.6
71.7

17.0
42.4
41.5
49.8
38.5

17.3
19.9
22.7
22.3

1.8
7.3
9.6
11.4
11.2

4.8
10.0
10.3
11.2
11.1

12.7
16.1
21.7
22.8
19.8

-2.4
9.0
-.1
4.4
-3.6

1950..
1951..
1952..
1953..
1954-.

318.1
341.8
353.5

32.1
29.2
28.5
33.1
32.4

109.2
111.2
115.0
118.3
119.3

75.5
78.2
80.8
83.7
86.3

55.9
57.7
50.4
50.6

363.1

216.8
218.5
224.2
235.1
238.0

27.4
26.0
26.0
27.6
29.7

15.5
12.9
12.8
13.6
15.4

11.9
13.2
13.2
14.0
14.3

21.3
22.0
21.8
22.5
20.8

7.2
9.7
2.6
.5
-1.6

1955..
1956-.
1957.
1958..
1959..

392.7
400.9
408.6
401.3
428.4

256.0
264.3
271.2
273.2
289.3

39.6
38.0
38.5
35.5
41.0

125.4 91.0
130.3 96.0
132.6 100.1
133.3 104.4
138.8 109.5

62.5
61.7
58.1
49.0
61.1

33.9
32.3
31.8
31.1
34.3

18.2
16.2
15.3
16.2
19.4

15.7
16.1
16.5
14.8
14.8

22.5
25.0
24.6
19.4
21.3

6.1
4.5
1.6
-1.5
5.5

I960-.
1961«.

440.8
448.9

298.3
303.8

41.8
40.0

141.8 114.. 7
143.9 119.9

60.6
57.6

33.9
34.5

18.0
18.1

16.0
16.4

22.7
21.2

4.0
1.9

9.4
8.6

Seasonally adjusted annual rates
1959: I — .

II—
III..
IV..

422.1
434.4
426.6
430.7

283.8
289.7
290.8
292.8

39.2
41.7
41.6
41.4

136.8
139.3
139.2
140.0

107.7
108.8
110.0
111.4

59.9
66.9
57.3
60.4

33.7
35.2
34.7
33.4

19.3
20.5
19.6
18.3

14.4
14.7
15.1
15.1

20.1
21.6
21.7
21.9

6.2
10.1
.8
5.0

1960: I —
II—
III..
IV..

441.0
443.4
440.2
438.4

295.4
299.5
298.6
299.6

42.1
42.5
40.8
41.6

140.9
142.9
142.0
141.3

112.4
114.2
115.8
116. 6

66.6
62.3
58.6
54.9

34.3
33.9
33.6
33.9

18.4
18.1
17.9
17.5

15.9
15.9
15.7
16.4

22.4
23.4
22.7
22.1

9.9
4.9
2.3
-1.1

1961: I.—
II—
III..
IV».

433.2
445.5
451.8
465.2

297.0
301.6
305.0
311.6

37.6
39.8
39.9
42.7

141.6
142.6
144.5
146.8

117.8
119.2
120.6
122 2

49.6
57.3
60.4
62.9

32.9
34.1
35.1
35.9

16.5
17.6
J8.7
19.7

16.4
16.6
16.4
16.2

19.9
20.3
21.4
23.1

-3.2
2.9
3.9
4.0

See footnotes at end of table, p. 211.




2IO

TABLE B—3.—Gross national product or expenditure, in 1954 prices, 7929-67 J —Continued
[Billions of dollars, 1954 prices]
Net exports of goods and
services 2

Government purchases of
goods and services

Year or quarter
Net
exports

Exports

Imports

0.2

11.1

10.9

18.5

2.9

15.6

171.5

1930
1931
1932
1933
1934

.2
-.3
-.3
—.8
-.6

9.9
8.4
6.8
6.8
6.9

9.7
8.7
7.1
7.7
7.5

20.5
21.6
20.5
19.9
22.8

3.4
3.7
3.9
5.3
6.9

17.1
17.9
16.6
14.6
15.8

153.7
142.0
119.4
115.0
125.1

1935
1936
1937
1938
1939

-1.9
-2.2
-1.6
.8
.3

7.3
7.7
9.3
9.3
9.5

9.2
9.8
10.9
8.5
9.2

23.0
26.9
26.0
28.8
30.1

6.7
10.3
9.6
11.4
11.0

16.3
16.6
16.4
17.4
19.1

138.7
156 6
167.8
158.0
172.1

1.1
-.6
-2.9
-6.6
-6.7

10.5
10.6
7.6
6.7
7.4

9.4
11.3
10.5
13.2
14.1

31.1
47.7
100.1
137. 9
152.2

13.1
30.7
84.7
123.9
138.4

18.0
16.9
15.4
14.0
13.8

188.1
216.0
234.8
246.4
259.8

-5.6
8.0
2.0
2.3

9.8
15.8
19.2
14.7
15.1

15.3
12.0
11.1
12.8
12.4

131.2
43.9
37.2
42.1
47.2

117.1
28.2
19.4
22.9
25.3

14.0
15.8
17.8
19.2
21.9

257.0
252.7
259.6
270.3
268.7

.2
2.2
1.2
-.9
1.0

14.5
17.3
16.9
16.4
17.5

14.2
15.1
15.7
17.3
16.5

45.1
63.3
77.7
84.3
75.3

21.6
39.3
53.3
58.8
47.5

23.5
24.1
24.5
25.5
27.7

293.3
311.1
320.4
336.2
330.8

.9

19.2
22.4
24.4
21.4
22.2

18.3
19.8
20.621.6
24.3

73.2
72.3
75.5
79.3
80.1

43.5
41.7
43.2
44.5
43.9

29.7
30.6
32.2
34.8
36.2

360.4
368.2
375.4
367.9
394.6

25.3
25.5

23.6
23.5

80.2
85.6

42.3
45.0

38.0
40.7

406.1
413.1

1929.

._ _

1940
1941.
1942
1943
1944

...
.

1945
1946
1947.
1948
1949.

3.8
-_

1950
1951.
1952
1953.
1954
1955
1956
1957.
1958
1959

_ _.
.

-

2.5

3.8
—.2
-2.1
1.7

1960
1961 s

2.0

Total

State
Federal 3 and local

Gross
private
product

Seasonally adjusted annual rates
1959: I
II

III
IV .
1960: I
II

.

.
.

III
IV

1961: I
II
HI
IV «

-2.2
-3.2
-1.9
-.9

21.1
21.5
23.2
23.1

23.4
24.6
25.1
24.0

80.7
81.0
80.5
78.4

44.2
44.6
44.0
42.7

36.5
36.4
36.5
35.8

(6)
(6)
(6)
(6)

.6
1.0
1.6
3.5

24.5
25.4
25.4
26.1

23.9
24.4
23.7
22.6

78.4
80.6
81.3
80.3

41.7
42.7
42.9
41.6

36.7
37.8
38.4
38.7

(6)

3.3
1.9
.6
2.0

25.7
24.5
25.2
26.5

22.4
22.6
24.5
24.6

83.3
84.7
85.7
88.7

43.1
44.7
45.0
47.1

40.2
40.0
40.8
41.7

(6)

(6)
(8)
(8)

(6)
(6)

1 For explanation of conversion of estimates in current prices to those in 1954 prices, see U.S. Income and
Output, A Supplement to the Survey of Current Business, 1958. See Table B-6 for implicit price deflators.
2
For 1929-45, net exports of goods and services and net foreign investment have been equated, since foreign
net transfers by Government were negligible during that period.
3
Net of Government sales.
4
Gross national product less compensation of general government employees; i.e., gross product accruing
from domestic business, households, and institutions, and from the rest of the world.
8
Preliminary estimates by Council of Economic Advisers.
• Not available.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




211

T A B L E B-4.—Gross national product by major type of product,

1947-61

[Billions of dollars]
Goods output

Year or quarter

Total
gross
na- Final Inventory
tional sales change
product

1947.
1948.
1949.

234.3 234.8
259.4 254.7
258.1 261.1

1950
1951
1952
1953
1954

284.6
329.0
347.0
365.4
363.1

277.8
318.7
343.9
364.9
364.8

1955
1956
1957
1958
1959

397.5
419.2
442.8
444. 5
482.8

391.7
414.5
441.2
446.5
476.5

I960.
1961 i

504.4 500.2
521.2 519.2

Durable
goods

Total

Nondurable
goods

--0. 5 143. 8 144. 3 - 0 . 5 47.4 46.0 1.4 96.4
0.
-1.8 71.8 18.7
48.9
. 9 107. 2 103.4 3.8 78.1 24.3
.9
4.7 157.0 152.3 4.7 49.
- 3 . 1 149. 3 152. 4 - 3 . 1 47.9 49.9 -2.1 101.5 102.4 -1.0 83.5 25.2
.6
6. 8 163. 156.8 6.8 60.7 56.7 4. 0 102. 9 100.1 2.8 89.8
10.2 191.8 181.6 10.2 74.4 67.5 6.9 117.4 114.1 3. 3 102. 9
3.1 198.2 195.2 3.1 75.6 74.5 1. 2 122. 120. 7 1.9 112.3l
78.9
. 4 206. 9206.4
.4 79.
9 127. 0 127. 5 - . 5 119.5
'.
197.4 199.0 - 1 . 6 71.6 74.1 - 2 . 5 125. 9 125.0
.9 124.1
5.8 217.2 211.
5.8
4. 7 227. 6 223.
4.7
1. 6 238. 2 236.
1.6
- 2 . 0 229. 4 231. 4- 2 . 0
6.3 250. 3 244. 0 6.3

84.3
89.6
94.5
80.4
94.9

81.3 3.0 13?. 9 130.2
86.7 2. 8 138.1 136.2
93.4 1.0 143. 143.2
83.3 -2. 149.0 148.1
91.3 3. 6 155. 4 152.8

4. 2 258, 5 254. 3 4.2 96.7 94.3
i.
2.0 258.9 256.9 2.0 92.8 92.7

2. 7 133. 4
1. 8 143. 3
. 5 154. 5
9 164. 2
2. 6 176. 2

31.2
34.2
36.4
39.0
41. 6
46.9
48.2
50.1
50.9
56.3

2. 5 161. 8160.0 1.8 189.3 56.6
. 2 166. 0 164. 2 1.8 203.5 58.8

Seasonally adjusted annual rates
1959:
I

5. 4
245. 4 238. 3 7.1 93.5
256. 2 244. 6 11.7 L01.1 92.4 8. 8
.7 91.6 93.6 - 2 . 0
7 247. 8 247.1
.
.. 7 246.1 5.6 93.4 90.9 2.4

151 150.2
155. 152.2
156.2 153.5
158.3

II
III
IV

472.2
488.5
482.3
488.3

465.2
476.8
481.6
482.7

1960:
I
II
III
IV

501.5
506.4
505.1
504.5

490.5
501.0
502.7
506.4

10.'9 261. 8 250.9 10.9 102.5 93.1 9.4 159.3 157.8
96.3 3.
160.6
3 256. 9 5.4
5.
94.2
162.6 160.6
2 254. 8 2.4
2.
- 3 . 8 163.2 161.3
- 1 . 19 252. 8 254. - 1 . 9 ,9.5

1961:
I
II
III
IV i

500.8
516.1
525. 8
542.0

504.!
513.2
521.3
537.5

- 4 . 0 245.7 249.
2. 8 257.1 254.3
5 261. 4 256. 9
.
5 271.2 266.6

1

164.1 162.;
-4.0
- . 3 166.2 163.0
2.8 90.9
4.5 96.1 92.6 3. 5 165. 3 164.3
4. 5 102. 6 99.3 3.3 168.5 167.3

Preliminary estimates by Council of Economic Advisers.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




212

1. 7 170. 7
2.
2. 7 177. 6
3. 2 182. 2

56.2
58.1
56.9
54.4

1.5 183.8 55.8
1.5 187.7 56.4
2. 0 191.2 56.7
2.
1. 8 197.
3.
1. 0 205.
1.3 209.9

57.2
57.9
59.2
61.0

TABLE B-5.—Gross national product by major type of product, in 1954 prices, 1947-61 l
[Billions of dollars, 1954 prices]

Year or
quarter

Goods output
Total
gross
goods Serv- ConDurable goods
Total
na- Final Inventory
structional sales change
ices tion
prodInvenInvenInvenTotal Final tory
Final
Final tory
uct
goods sales change Total sales change Total sales tory
change

1947
1948
1949

282.3 282.4
293.1 288. 7
292.7 296.3

-0.1
- 0 . 1 163.3 163.4
4.4 167.7 163.4
-3.6 162.3 165.9
-3.6

-0.1
4.4
-3.6

55.8
55.4
51.9

54.3
54.
54.3

1.5 107.5 109.2
.8 112.3 108.8
-2.4 110.5 111.6

1950
1951
1952
1953
1954

318.1
341.8
353.5
369.0
363.1

310.9
332.1
350.9
368.5
364.8

177.6
191.
196.
207.
- 1 . 6 197.4

170.4
182.0
194.2
207. 2
199.0

7.2
9.7
2.6
.5
-1.6

65.3
74.6
75.1
80.8
71.6

61.0
67.4
73.9
79.8
74.1

4.3
7.1
1.2
1.0
-2.5

112.3
117.1
121.8
126.9
125.9

109.4
114.5
120.3
127.4
125.0

1955
1956
1957
1958.
1959

392.7
400 9
408.6
401.3
428.4

386.6
396.4
406.9
402.8
422.9

6.1 216.9 210.8
4.5 221.4 217.0
1.6 223.4 221.7

- 1 . 5 211.5 213.1
5.5 228.6 223.1

6.1
4.5
1.
-1.5
5.5

83.1
84.9
85.5
82.9

80.1
82.3
84.5
74.1
79.8

3.0
2.7
1.0
-2.4
3.1

133.8
136.5
137.9
139.8
145. 7

134.7
137.2
139.0
143.3

19S0
1961 2

440.8 436.8
448.9 447.1

4.0 234.6 230.6
1.9 233.6 231.

4.0
1.9

84.7
80.9

82.4
80.8

7.2
9.7
2.6
.5

71

2.3 150.0 148.3
152. 1519

-1.6

94.7
97.2
- 1 . 2 100.7
3.5

24.3
28.2
29.7

2.9 105.0
2.6 114.2
1.5 119.8

35.4
36.0
36.9
5 122. 5 38.8
.9 124.1 41.6

3.1 130.2
1.8 135.5
. 8 145.2
2.4 151.7

. 7 141.2

45.6
43.9
44.0
44.5
48.1

1.7 158.7
1.8 166.3

47.5
49.1

Seasonally adjusted annual rates
1959:
I
II
III
IV

422.1
434.4
426.6
430.7

6.2 224.9
10.1 234.0
. 8 226.0
5.0 229.4

416.0
424.3
425.8
425.6

1960:

9.9
441.0 431.1
4.9
III — - I - . 443.4 438. 5
2.3
III
440.2 437.9
IV
438.4 439.5 - 1 . 1

1961:
I
II
III
IV 2

433.2
445. 5
451.8
465.2

436.5
442.6
447.9
461.3

238.3
237.9
233.3
228.9

218.7
223.9
225.1
224.4
228.4
233.0
231.1
230.0

- 3 . 2 221.9 225. 2
2 9 232.5 229.7
3.9 235.4 231.6
4.0 244.5 240.5

6.2

10.1
.8
5.0
9.9
4.9
2.3

-1.1
-3.3
2.9
3.9
4.0

82.1
88.2
79.6
81.6

77.5
80.7
81.3
79.6

89.7
87.4
82.5
79.0

81.4
83.9
82.1
82.0

71.4
79.4
83.5
89.3

76.5
79.6
80.5
86.5

4.6 142.8
7.5 145.8
- 1 . 7 146.4
2.0 147.8

141.3
143.2
143 9
144.8

1.5
2.6
2.5
3.0

148.7
150.5
152.3
155.2

48.5
49.9
48.4
46.0

8.3 148.7 147.0
3.5 150.6 149.1
.4 150.8 148 9

- 3 . 0 149.8 148.0

1.6
1.5
1.9
1.9

155.6
158.0
159.4
161.6

47.4
47.4
47.9

- 5 . 1 150.5 148 7
_ 2 153.2 150.0
3^0 151.9 151.0
2.8 155.2 154.0

1.8
3.1
.9
1.2

163.2
164.7
167.1
170.0

48.0
48.3
49.2
50.7

47.1

1 For explanation of conversion of estimates in current prices to those in 1954 prices, see U.S. Income and
Output, A Supplement to the S'irvey of Current Business, 1958.
2 Preliminary estimates by Council of Economic Advisers.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




213

TABLE B-6.—Implicit price deflators for gross national product, 7929-67
[Index numbers, 1954=100]

Personal consumption
expenditures
Gross
national
product 1 Total

Year or quarter

Gross private domes tic
investmenti
New construction

DurNonable durable Services
goods goods
Total

Producers'
Residurable
dential Other equipnonment
farm

- . .-_

57.4

61.6

62.0

57.7

66.8

41.7

41.8

41.6

52.5

.

55.4
49.9
44.9
44.2
46.9

59.0
52.6
46.5
44.8
47.6

60.5
53.5
47.0
46.1
48.8

54.8
46.9
40.0
40.3
45.3

64.2
60.3
55.3
50.7
50.7

40.0
36.5
31.1
31.2
33.3

40 8
37.1
30.1
29.8
33.1

39 7
36.2
31.7
31.9
33.4

50 5
47.9
45.5
43.1
45.9

47.4
47.7
49.5
48.7
48.1

48.6
49.1
50.9
49.8
49.2

47.9
47.9
50.3
50.8
50.2

47.2
47.4
49.1
46.7
45.8

50.9
51.9
53.8
54.5
54.5

34 1
34.8
39.0
39.1
39.0

32 6
34.3
37.8
39.2
39.5

35 4
35.2
39.9
39.1
38.4

45 6
45.4
48.7
50.2
49.4

48.9
52.9
59.6
64.9
66.5

49.7
53.1
59.5
65.0
68.6

50.7
54.8
64.2
70.3
78.7

46.4
50.5
58.8
65.8
69.5

54.8
56.8
59.8
62.8
65.5

40.1
43 4
47.6
53.0
56.3

40.9
44 6
47.7
51.4
56.2

39.1
42 2
47.6
54.0
56.3

50.6
54 0
58.5
58.4
59.3

68.0
74.6
83.0
88.5
88.2

71.0
76.5
84.6
89.5
88.7

82.8
82.0
88.4
92.4
93.5

72.2
78.8
88.7
94.0
90.9

67.1
71.1
76.8
81.7
83.6

57.8
63.7
76.6
85 9
84.3

60 0
65 3
78.4
88 6
85.9

56 9
62 6
74.8
83 1
82.6

60 0
66 7
76.8
83 1
87.0

89.5
96.2
98.1
99.0
100.0

89.9
96.0
98.0
99.0
100.0

94.6
101.1
102.2
99.4
100.0

91.4
99.0
100.1
99.7
100.0

85.9
89.8
93.6
97.7
100.0

88.3
95.3
98.4
100.1
100.0

90.9
97.5
100.3
101 3
100.0

85.1
93 1
96.5
98 9
100 0

89.0
96 8
97.5
99 0
100 0

101.2
104.6
108.4
110.8
112.7

100.4
102.1
105.1
107.3
108.6

100.1
101.3
104.7
104.9
106.3

99.5
100.9
103.9
106.3
106.1

101.7
104.1
107.0
109.4
112.5

103.1
109.8
113.5
114.2
117.4

103.0
109.0
111.2
111.2
114.9

103. 2
110.7
115 7
117.6
120.7

102.6
109.0
115 7
118.9
121.5

114.4
116.1

110.3
111.6

106.1
105.8

107.5
108.2

115.2
117.7

119.8
121.1

117.1
117.5

122.8
125.1

121.5
121.5

1959* I

111.9
112.4
113.0
113.4

107.8
108.3
108.8
109.3

105.9
106.7
106.8
105.7

105.9
105.8
106.1
106.6

110.9
112.1
113.0
114.0

115.8
117.0
118.1
118.5

113.3
114.5
115.6
116.1

119.3
120 4
121.3
121.5

120.9
121 6
122.3
121.2

I960* I
II.
III
IV
1961* I

113.7
114.2
114.7
115.1

109.6
110.1
110.4
110.9

106.1
106.8
106.5
105. 2

106.8
107.3
107.5
108.3

114.5
114.9
115.4
116.1

119.2
119.9
120.0
120.0

116.8
117.4
117.3
116.9

122.0
122.7
123.1
123.4

121.4
121.9
121.9
120.8

115.6
115 8
116.4
116.5

111.3
111.4
111.8
112.0

104.9
105.7
105.9
106.6

108.5
108.1
108.2
108.0

116.8
117.4
118.1
118.7

120.3
121.0
121.7
121.4

116.6
117.2
118.0
117.9

124.1
125.0
125.9
125.6

121.6
121.5
121.5
121.4

1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939

- -

1940
1941
1942
1943
1944

__.

1945
1946
1947
1948
1949

• _
_

1950
1951
1952
1953
1954

.
-

--

_

1955
1956
1957
1958
1959
1960
1961

._
_-_

2

II
III
IV

II

III2

IV

. -

See footnotes at end of table, p. 215.




214

T A B L E B-6.—Implicit price deflators for gross national product,

1929—61—Continued

[Index numbers, 1954= 100]

Exports and imports of
goods and services *

Government purchases of goods
and services

Year or quarter
Exports

Imports

Total

Federal • State and
local

1929

63.1

57.3

45.8

44.5

46.1

1930 _
1931
1932 .
1933
1934

55.0
43.2
36.2
35.2
43.0

48.9
39.7
32.3
29.3
33.8

44.9
42.7
39.4
40.3
42.9

41.8
41.7
38.2
38.3
43.2

45.5
43.0
39.7
41.1
42:8

44.7
46.0
48.9
46.5
46.9

36.0
36.9
41.1
38.0
38.6

43.4
44.0
45.1
44.5
44.2

43.7
46.9
47.3
46.1
46.8

43.3
42.2
43 8
43.4
42.7

51.2
56.1
64.9
68.1
73.3

40.9
43.0
48.9
51.3
53.3

45.2
51.9
59.6
64.3
63.4

47.0
55.1
61.4
65.6
64.3

43 9
46.2
49.8
52 7
54.6

75.3
80.8
93.4
98.6
92.7

57.4
65.5
79.7
86.3
82.0

63.2
69.4
76.4
82.0
85.1

63.9
73.0
80.8
84.4
88.0

57.4
63.0
71.5
79 3
81.7

90.3
103.3
103.0
101.0
100.0

87.8
102.8
102.8
98.2
100.0

86.5
95.5
97.8
98.3
100.0

89.6
98.7
99.2
98.6
100.0

83.7
90.2
94 8
97.5
100.0

100.7
103.4
107.4
105.9
103.9

99.9
101.8
103.2
99.2
98.1

103.3
109.2
114.6
117.9
121.3

104.1
109.7
114.9
118. 3
122.0

102 2
108.6
114.2
117.3
120.3

105.2
107.3

100.0
99.4

124.8
126.8

125.2
127.2

124.2
126.5

104.7
3,03.7
103.2
104.1

97.3
96.4
97.7
100.0

119.8
120.3
121.9
123.0

120.4
120.8
122.9
124.0

119.0
119.7
120.7
122.0

104.7
105.2
105.5
105.6

100.0
100.2
100.3
99.4

123.6
123.6
125.3
126.5

124.2
123.7
125.8
127.4

122.9
123.5
124.9
125.6

107.1
107.8
107.1
107.0

99.5
99.5
99.3
99.3

126.1
126.6
127.1
127.5

127.0
126.8
127.6
127.3

125.1
126.4
126.6
127.7

1935
1936
1937
1938.
1939

_

-_
_.

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

.-

-._

-.

.

1950.
1951-.
1952
1953
1954

1955
1956
1957
1958
1959
1960
1961

. . .

_

2

1959: I .
II
III
IV
1960: I - .
II
III
IV .

_
-

1961: I
II
III
IV 2.

- - - - __-

1 Separate deflators are not available for total gross private domestic investment, change in business
inventories, and net exports of goods and services.
For explanation of conversion of estimates in current prices to those in 1954 prices, see U.S. Income and
Output, A Supplement to the Survey of Current Business, 1958.
2
Preliminary estimates by Council of Economic Advisers.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




215

T A B L E B—7.—Gross national product: Receipts and expenditures by major economic groups
1929-61
[Billions of dollars]
Business

Persons
Disposable
personal
income

Year or quarter

Personal
consumption
expenditures

Personal
saving
or dissaving

International
Excess
of receipts
or investment

For- Net exDorts of goods
eign
and services 2
net
transfers by
govNet
ExImern- exports ports ports
ment 2

Excess
of
transfers or
net exports

Gross
retained
earnings i

Gross
private
domestic
investment

11.5

16.2

-4.7

7.0

6.3

-0.8

10.3
5.5
.9
1.4

-1.5
-.3
1.8
1.2
2.0

.7
.2
.2
.2
.4

5.4
3.6
2.5
2.4
3.0

4.8
3.4
2.3
2.3
2.5

-.7
-.2
-.2
-.2
-.4

1929.

83.1

79.0

4.2

1930
1931.-..
1932..
1933
1934

74.4
63.8
48.7
45.7
52.0

71.0
61.3
49.3
46.4
51.9

3.4
2.5

1935
1936
1Q37
l r 38
1939

58.3
66.2
71.0
65.7
70.4

56.3
62.6
67.3
64.6
67.6

2.0
3.6
3.7
1.1
2.9

6.3
6.5
7.8
7.8
8.3

6.3
8.4
11.7
6.7

.1
-1.9
-4.0
1.2
-1.0

-.1
-.1
.1
1.1

3.3
3.5
4.6
4.3
4.4

3.3
3.6
4.5
3.2
3.5

.1
;1
-.1
-1.1

76.1
71.9
81.9
93.0
89.7
117.5
133 5 100.5
146.8 109.8

4.2
11.1
27.8
33.0

10.4
11.5
14.1
16.3
17.2

13.2
18.1
9.9
5.6
7.1

-2.8
-6.6
4.3
10.7
10.1

1.5
1.1
-.2
-2.2
-2.1

5.4
6.0
4.9
4.5
5.4

3.8
4.8
5.1
6.8
7.5

-1.5
-1.1
.2
2.2
2.1

.-..--.

1940.
1941....
1942
1943
1944

5.2
2.7
2.6
4.9

2.9

150.4
1P0. 6
-- 170.1
1«9.3
-.
189.7

121.7
147.1
165.4
1 7 8.3
181.2

28.7
13.5
4.7
11.0
8.5

15.6
13.1
18.9
26.6
27.6

10.4
5.2
28.1 - 1 5 . 1
31.5 - 1 2 . 6
43.1 -16.5
33.0 - 5 . 4

()
0.3
.1
1.6
3.2

-1.4
4.9
9.0
3.5

7.4
12.8
17.9
14.5
14.0

7.9
8.9
11.0
10.2

1.4
-4.6
-8.9
-1.9
-.5

1950-..1951
1952
1953
1954

207.7
227.5
23$. 7
252.5
256.9

195.0
2,09.8
219.8
232.6
238.0

12.6
17.7
18.9
19.8
18.9

27.7
31.5
33.2
34.3
35.5

50.0
56.3
49.9
£0.3
48.9

-22.3
-24.8
-16.6
-16.0
-13.4

2.8
2.1
1.5
1.6
1.4

2.4
1.3
-.4
1.0

13.1
17.9
17.4
16.6
17.5

12.5
15.5
16.1
17.0
16.5

2.2
-.2
.2
2.0
.4

1955...
1956
1957
1958
1959

274.4
292.9
308.8
317.9
337.3

256.9
269.9
285.2
293.2
314.0

17.5
23.0
23.6
24.7
23.4

42.1
43.0
45.6
44.8
50.7

63.8
67.4
66.1
56.6
72.4

-21.8
-24.3
-20.5
-11.9
-21.7

1.5
1.5
1.5
1.3
1.5

1.1
2.9
4.9
1.2
-.7

19.4
23.1
26.2
22.7
23.1

20.2
21.3
21.5

.4
-1.5
-3.5
.1
2.3

-- 351.8
364.9

328.9
339.2

22.9
25.7

51 7
»54.2

72.4 - 2 0 . 7
3
69.5

1.6
1.6

3.0
4.0

26.7
27.3

23.6
23.4

-1.5
-2.4

1945
1946
1947.--1948
1949

1960
1961*

-

---

Seasonally adjusted annual rates
1959: I . . . .
II-.
III..
IV..

329.8
338.4
338.7
342.3

305.8
313.6
316.5
320.0

23.9
24.8
22.3
22.3

49.3
52.1
49.8
51.4

70.4
79.1
68.2
71.8

-21.1
-27.0
-18.4
-20.4

1.5
1.4
1.3
1.9

-0.6
-1.7
—. 5

22.1
22.3
24.0
24.1

22.7
24.0
24.5
24.0

2.2
3.1
1.8
1.9

1960: I.—
II...
III..
IV..

345.7
352.7
354.4
354.9

323.8
329.9
329.7
332.3

21.8
22.8
24.6
22.7

52.0
51.9
51.8
51.2

78.9
74.6
70.5
65.6

-27.0
-22.7
-18.7
-14.4

1.5
1.6
1.5
1.6

1.8
2.3
3.0
5.1

25.6
26.7
26.8
27.6

23.9
24 4
23.8
22.4

-.2
-.7
-14

1961: I—.
II__.
III..
IV*

354.3
361.8
367.7
375.6

330.7
336.1
341.0
349.0

23.7
25.8
26.8
26.6

50.3
53.9
54.8

59.8 - 9 . 5
68.8 - 1 4 . 9
73 2 - 1 87. 4
76.0
()

1.6
1.5
1.7
1.5

5.3
3.9
2.6
4.0

27.6
26.4
27.0
28.4

22.3
22.5
24.3
24.4

-3.7
-2.4

See footnotes at end of table, p . 217.




2l6

(6)

-2.5

TABLE B—7.—Gross national product: Receipts and expenditures by major economic groups,
7929-61—Continued
[Billions of dollars]
Government

Surplus or Total Statisdeficit i income tical
Trans- PurTrans- (-) on or re- disfers, chases Total fers, income ceipts crepof
ancy
interex- inter- and
est, goods pendi- est, prodand and tures and
uct
sub- servsubacsidies 3 ices
sidies 3 count
Expenditures

Receipts
Year or quarter

1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959.
1960
1961 *

Tax
and
Net nonre- tax receipts ceipts
or accruals
9.5
8.9
6.4
6.4
6.7
7.4
8.0
8.9
12.3
11.2
11.2
13.3
21.0
28.3
44.4
44.6
43.1
34.6
41.6
42.8
37.0

11.3
10.8
9.5
10.5
11.4
12.9
15.4
15.0
15.4
17.7
25.0
32.6
49.2
51.2
53.2
51.1
57.1
59.2
56.4
69.3
85.5
90.6
94.9
90.0
101.4
109.5
116.3
115.1
129.3

47.2
66.6
72.2
75.7
68.5
78.4
84.2
87.5
82.0
94.9

.

102.0
5102. 4

5

1.8
3.1
2.5
2.6
3.1
3.4
4.1
3.1
3.8
4.2
4.4
4.0
4.3
4.8
6.5
10.1
16.5
15.4
16.5
19.4
22.1
18.9
18.4
19.2
21.5
23.0
25.3
28.7
33.1
34.4

139.1
143. 6

37.1
41.2

8.5
9.2
9.2
8.1
8.0
9.8
10.0
11.8
11.7
12.8
13.3
14.1
24.8
59.7
88.6
96.5
82.9
30.5
28.4
34.5
40.2
39.0
60.5
76.0
82.8
75.3
75.6
79.0
86.5
93.5
97.1
100.1
108.6

10.2
11.0
12.3
10.6
10.7
12.8
13.3
15.9
14.8
16.6
17.5
18.5
28.8
64.0
93.4
103.1
92.9
47.0
43.8
51.0
59.5
61.1
79.4
94.4
102.0
96.7
98.6
104.3
115.3
126.6
131.6
137.2
149.8

1.8
3.1
2.5
2.6
3.1
3.4
4.1
3.1
3.8
4.2
4.4
4.0
4.3
4.8
6.5
10.1
16.5
15.4
16.5
19.4
22.1
18.9
18.4
19.2
21.5
23.0
25.3
28.7
33.1
34.4
37.1
41.2

1.0
-.3
-2.8
-1.7
-1.4
-2.4
-2.0
-3.0
.6
-1.6
-2.1
-31.4
-44.2
-51.9
-39.7
4.1
13.3
8.2
-3.1
8.2
6.1
-3.9
-7.1
-6.7
2.9
5.2
1.0
-11.4
-2.2
1.9
-6.2

104.2
92.1
75.4
57.7
55.0
64.2
72.7
81.6
91.0
84.8
89.9
99.8
125.4
160.0
194.2
208.6
209.1
208.6
230.7
260.3
257.5
285.3
327.7
345.6
364.1
362.3
396.5
421.6
443.4
446.0
484.5
507.1
5 523.0

0.3
-1.0

-.2
1.1
-.2
.5
1.2

-1.7
2.8
4.5
2.1
3.5
-.8
.5
-.7
1.2
1.4
1.3
.9
1.0
-2.4
-.6
-1.5
-1.7
-2.6
s-1.7

Gross
national
product
or expenditure

104.4
91.1
76.3
58.5
56.0
65.0
72.5
82.7
90.8
85.2
91.1
100.6
125.8
159.1
192.5
211.4
213.6
210.7
234.3
259.4
258.1
284.6
329.0
347.0
365.4
363.1
397.5
419.2
442.8
444.5
482.8
504.4
521.2

Seasonally adjusted annual rates
1959: I
II
III
IV
1960: I
II
III
IV
1961: I
II
III
IV *

.

92.6
97. 4
95.3
94. 4
103. 4
103. 1
101. 4
99. 7
97. 1
100 7
103 0
(7)

126.3
131.3
129.3
130.4
139.4
140.0
138.8
138.3
136.9
141.9
145.4
(7)

33.8
33.9
34.0
36.0
36.0
36.8
37.4
38.6
39.8
41.2
42.3
41.7

96.7
97.5
98.1
96.5
96.9
99.6
101.9
101.6
105.0
107.3
109.0
113.0

130.4
131.4
132.1
132.5
132.9
136.5
139.3
140.2
144.8
148.5
151.3
154.8

33.8
33.9
34.0
36.0
36.0
36.8
37.4
38.6
39.8
41.2
42.3
41.7

-4. 1
— 1
-2*. 8
-2. 0
6.5
3. 5
—5
-L 9
-7. 9
-6.6
-6. 0
(7)

473.1
489.3
485.1
490. 1
502.5
509.3
509. 1
507.4
503.4
517.9
527.3
(7)

-0.
—
-2.
-1.
_]

-2.
-4.
-2.
-2.
-1.
-1.
(7)

9
9
8
8
1
9
0
9
6
8
5

472.2
488.5
482.3
488.3
501.5
506.4
505.1
504.5
500.8
516.1
525.8
542.0

1
Undistributed corporate profits, corporate inventory valuation adjustment, capital consumption allowances, and excess of wage accruals over disbursements.
2
For 1929-45, foreign net transfers by Governrrent were negligible; therefore, for that period, net exports
of 3goods and services and net foreign investment have been equated.
Government transfer payments to persons, foreign net transfers by Government, net interest paid by
government, and subsidies less current surplus of government enterprises.
4
5 Preliminary estimates by Council of Economic Advisers.
Data for corporate profits are approximations for the year as a whole; data for fourth quarter are not
available. All other data incorporating or derived from thesefiguresare correspondingly approximate.
« Less than $50 million.
' Not available.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




217

T A B L E B—8.—Gross private and government product, in current and 1961 prices, 1929—61
[Billions of dollars]
1961 pricej5*

Current prices
Year

Total
gross
national
product

Gross private product l

Total

Farm 2

Nonfarm

Gross
government
product3

Total
gross
national
product

Gross private product 1

Total

Farm *

Nonfarm

Gross
government
product3

1929-

104.4

100.1

9.8

90.3

4.3

209.8

195.1

15.8

179.3

14.7

19301931193219331934-

91.1
76.3
58.5
56.0
65.0

86.6
71.6
54.0
51.3
59.4

7.7
6.2
4.4
4.6
4.3

78.8
65.4
49.6
46.7
55.1

4.5
4.7
4.4
4.7
5.6

190.3
175.9
149.8
146.3
160.3

174.9
160.3
134.5
129.9
141.4

14.5
16.9
15.9
15.7
13.0

160.4
143.4
118.7
114.2
128.4

15.4
15.6
15.3
16.4
18.9

19351936193719381939..

72.5
82.7
90.8
85.2
91.1

66.6
75.5
83.9
77.6
83.5

6.9
6.3
8.1
6.7
6.5

59.6
69.2
75.8
70.9
77.0

5.9
7.3
6.9
7.6
7.6

175.6
200.5
210.9
201.5
218.1

155.4
176.8
188.6
177.3
193.7

15.8
13.5
16.9
17.1
17.1

139.6
163.2
171.6
160.2
176.6

20.2
23.7
22.3
24.2
24.4

1940..
1941194219431944-

100.6
125.8
159.1
192.5
211.4

92.8
116.4
144.0
167.0
179.2

6.8
9.4

86.0
107.0
130.6
151.7
163.5

7.8
9.4

13.4
15.3
15.7

15.1
25.6
32.2

236.8
275.8
315.3
355.2
381.1

211.6
244.5
269.8
283.8
298.6

16.8
18.0
19.6
18.0
18.5

194.9
226.5
250.2
265.8
280.1

25.1
31.3
45.5
71.4
82.5

19451946194719481949-

213.6
210.7
234.3
259.4
258.1

178.4
189.9
217.6
242.0
238.7

16.2
19.3
20.7
23.8
19.3

162.2
170.7
196.9
218.2
219.4

35.2
20.7
16.7
17.4
19.4

373.8
325.4
324.9
337.5
338.3

292.9
283.0
292.6
305.1
304.4

17.4
17.6
16.2
18.5
17.6

275.5
265.4
276.4
286. 6
286.8

80.9
42.4
32.3
32.4
34.0

19501951._
195219531954-

284.6
329.0
347.0
365.4
363.1

263.8
301.7
316.0
333.6
330.8

20.5
23.6
22.8
20.9
20.3

243.2
278.2
293.2
312.7
310.5

20.8
27.3
31.0
31.8
32.3

366.5
396.5
411.7
430.6
422.0

331.3
352.9
364.6
384.0
376.1

18.6
17.3
18.0
18.7
19.5

312.8
335.5
346.6
365.3
356.6

35.2
43.7
47.1
46.6
45.9

19551956..
195719581959-

397.5
419.2
442.8
444.5
482.8

363. 5
382.8
403.8
402.6
438.6

19.6
19.3
19.4
21.3
19.9

343.9
363.5
384.5
381.2
418.7

34.0
36.4
38.9
42.0
44.1

455.1
464.8
473.6
466.1
497.3

409.3
418.4
426.4
418.6
449.3

20.5
20.1
19.8
20.0
19.9

388.8
398.3
406.7
398.5
429.4

45.8
46.4
47.2
47.5
48.0

1960..
1961 «.

504.4
521.2

457.1
470.4

20.8
21.0

436.3
449.4

47.3
50.8

511.1
521.2

461.9
470.4

20.9
21.0

441.1
449.4

49.2
50.8

1
Gross national product less compensation of general government employees, i. e., gross product accruing
from domestic business, households, and institutions, and from the rest of the world.
2
See Survey of Current Business, October 1958, for description of series and estimates in current and constant prices and implicit deflators for 1910-57.
3 Includes compensation of general government employees and excludes compensation of employees in
government enterprises. Government enterprises are those agencies of government whose operating costs
are at least to a substantial extent covered by the sale of goods and services, in contrast to the general activities of government which are financed mainly by tax revenues and debt creation. Government enterprises, in other words, conduct operations essentially commercial in character, even though they perform
them under governmental auspices. The Post Office and public power systems are typical examples of
government enterprises. On the other hand, State universities and public parks, where the fees and admissions cover only a nominal part of operating costs, are part of general government activities.
* See footnote 1, Table B-2.
5
Preliminary estimates by Council of Economic Advisers.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Sources: Department of Commerce and Council of Economic Advisers.




2l8

TABLE B—9.—Personal consumption expenditures, 1929-61
[Billions of dollars]
Durable goods
Total
personal
consumption Total
expenditures

Year or quarter

Nondurable goods

Services

Total

1929

79.0

9.2

37. 7 19. 5

32.1 11.4 4.0 2. 6 14.0

1930
1931
1932
1933
1934

71.0
61.3
49.3
46.4
51.9

7.2
5.5
3.6
3.5
4.2

34.0 18.0
28.9 14. 7
22. 8 11. 4
22. 3 10. 9
26. 7 12.2

29. 8
26.9
22.9
20.7
21.0

11.0
10.3
9.0
7.9
7.6

1935
1936
1937
1938
1939

56.3
62.6
67.3
64.
67.6

5.1
6.3
6.9
5.7
6.7

29.3 13.6
32. 8 15, 2
35. 2 16. 4
34.0
34. 15. 6
35. 1 15.7

21.9
23.5
25.1
25.0
2. 2 10.1 25.8

7.6
7.9
8.4
8.8
9.0

1940
1941
1942
1943
1944

71.9
81.9
89.7
100.5
109.

7.8
9 7
7.0
6.6

37.2 16.7 7.4 2.3 10.8
12.3
43. 2 19. 8.8
L4
51. 3 23. 11.0
1.7
59.3 27. 8 13. 1. 3 16. 7
65. 4 30. 6 14. 6 1.4 18.7

26.9
29. 0
31. 5
34.7
37. 7

9.3
10 0
10.
1.8
11.3
11 9

4.0
4.3
4.8
5.2
5.9

1945
1946
1947
1948
1949

121.7
147.1
165.4
178.3
181.2

8.1
15.9
20.6
22.7
24.6

73. 2
84. 8
93. 4
98. 7
96. 6

40. 4 12.
46.4 13.8
51.4 15.6
56. 9 17. 6
60. 0 19. 3

6.
6.7
7.4
7.
8.4

4.1 17. 5
0
5.1 20.8
5. 5 23.0
6. 0 25. 4
6.1 6.2

195.0
209.8
219.8
232.6
238.0

13.0 14.0
29. 5 11. 6 14. 2
29.1 11.0 14.
32. 9 14.0 14. 7
32.4 13. 4 14. 8

64.9 21.2 9.3
70. 2 23. 2 10.1
75. 6 25. 4 10.8
81. 8 27. 5 11.7
86. 3 29.1 12.1

6. 3 28.1
6.1 29.
9
7. 4 32.
<
8.0 34.6
7.9 37.1

1955
1956
1957
1958.
1959

256.9
269.9
285.2
293.2
314.0

39. 6 18. 3 16. 6 4. 8 124. 8 59.2 23.4 8.8 33.4 92.5 30.7 13.5
14.8
38. 5 15. 8 17. 4 5. 3 131. 4 62. 224.5 9. 6 35. 2 100. 0 32. 7
40.4 17.1 17.4 5. 8 137. 7 65. 2 25. 410. 4 36. 7 107.1 35. 215.8
i.
37.3 13.917.4 6.0141.6 67.4 25.7 10. 5 38.0 114.3 37.7 16.9
43. 5 18.1 18.9 6.6 147.3 68.4 27.4 11.0 40. 123.2 39.9 18.1

8. 3 39.9
S. 6 43. 8
9.0 47.0
50.6
10.0 55.2

1960
1961 <

328.9 44.3 18.618.8 6.9 152.4 70.2 28.1 11.6 42.5 132.2 42.2 19.6 10.5
339.2 42.3 16. 8 18.5 7.0 155. 6 71.9 28.4 11.8 43. 6 141.2 44.5 21.1 10. 8 64.9

__.

1950
1951
1952
1953
1954

_.

1.0 4.6
8.7
6. 3 11. 0
7.4 11.9
9.8 11.5

34.1 16. 5 1. 8 20. 8
40. 7 18. 2 3.0 22. 9
45. 8 18. 8 3.6 25.2
48. 2 20.1 4. 4 26.0
46. 4 19. 3 5.0 25. 9

8 47. 4 19.6 5. 4 27. 4
3.7 110.1 53.4 21.1 6.0 29. 5
3. 9 115.1 55. 8 21. 9 6. 7 30. 7
4.1 118.0 56.6 21.9 7. 5 31. 8
4. 3 119. 3 57. 7 21. 9 8. 0 31. 7

3.9
3.5
3.0
2.8
3.0

2 12.
1.7
9 11..2
9.3
8.5
8.8

9.4
3.2
9 10.;
1.3
3.4
3 7 2.0 11.1
3.6 1. 9 10. 7
3.8 2.0 11.0
11.4
12.3
13.1
14.7
16.3

Seasonally adjusted annual rates
6.3 144. 9 68. 0 26.5 10. 7 39.7 119. 4 39.3 17. 59.5 53.2
6.5 147.3 68.5 27.810. 9 40.2121.9 39.817.8 9. 8 54. 5
140.
6. 7 147. 7 68.2 27.6 11.1 40.8 124.4 40.118.210.2 55.8
6.8149.3 68.9 27.8 11 1 41.5 127.0 40.518.9 10.2 57.3

1959: I__

II.
III
IV

305.8
313.6
316.5
320.0

41.6
44.5
44.4
43.7

1960: I..
II.
III
IV

323.8
329.
329.7
332.3

44.7 18. 8 19.1
45.3 19.3 19.0
43.4 17.8 18. 7
43.818.618.3

6. 7 150.5 69.1 28.1
7. 0 153.3 70.5 28. 3
6.9 152.7 70.0 28.3
6.8 153.1 71.127.7

1961: I..
II.
III
IV

330.7
336.1
341.0
349.0

39. 4 14.8 17.8
42.0 16.7 18.3
42.3 16.4 18.8
45.5 19.2 19.2

6.8 153.7 71.0 27.9 11.7 43.1L1137.5 43. 6 20.6 10. 5 62. 8
i. 5
7.0 154.1 71.3 27.611.7 43.5 139.9 44.2 20.9 10. 7 64.1
7. 0 156.2 72.4 28.6 11.8 43. 4 142.4 44.8 21.2 10.9 65.5
7.1 158. 5 72. 8 29. 6 11.9 44.2 145. 0 45. 5 21. 6 11. 0 (

17.2 18.0
19.018.9
18.4 19.2
17.6 19.3

1
2
3

Quarterly data are estimates by Council of Economic Advisers.
Includes standard clothing issued to military personnel.
Includes imputed rental value of owner-occupied dwellings.
* Preliminary estimates by Council of Economic Advisers.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).

621876 O - 6 2 - 1 5




219

19.
11.4 41.9 128.6 41.1] 2 10.4 57.9
11.642.91131.2 41.919.5 10.5 59.3
11. 6 42.8 133.6 42. 7 19.7 10. 5 60. 8
11.8 42.4 135.4 43.1 20.0 10.5 61.7

T A B L E B—10.—Gross private domestic investment, 1929-61
[Billions of dollars]
Change in business
inventories

Fixed investment

Year or
quarter

Total
gross
private
domestic invest- Total
ment

New construction l
Residential
Total nonfarm

Producers' durable
equipment

Other 2

Total

NonTotal farm Farm
NonTotal farm Farm

Nonfarm Farm

1929..

16.2

14.6

8.7

3.6

5.1

4.8

5.8

5.2

0.6

1.7

1930_.
1931..
1932..
1933..
1934..

10.3
5.5
.9
1.4
2.9

10.6
6.8
3.5
3.0
4.0

6.2
4.0
1.9
1.4
1.7

2.1
1.6
.6
.5
.6

4.1
2.4
1.2
1.0
1.1

3.9
2.3
1.2
.9
1.0

4.5
2.8
1.6
1.6
2.3

4.0
2.6
1.4
1.5
2.1

.5
.3
.1
.1
.3

-.4
-1.3
-2.6
-1.6
-1.1

-L6
-2.6
-1.4
.2

.3
(3)
-.3
-1.3

1935..
1936..
19371938..
1939..

6.3
8.4
11.7
6.7

5.4
7.4
9.5
7.6
8.9

2.3
3.3
4.4
4.0
4.8

1.0
1.6
1.9
2.0
2.7

1.3
1.7
2.5
2.0
2.1

1.2
1.6
2.3
1.8
1.9

3.1
4.2
5.1
3. 6
4.2

2.7
3.6
4.5
3.1
3.7

.4
.5
.6
.5
.5

1.0
2.2
-.9
.4

.4
2.1
1.7
-1.0
.3

.5
-1.1
.5
.1
.1

1940..
1941..
1942..
1943..
1944..

13.2
18.1
9.9
5.6
7.1

11.0
13.6
8.1
6.4
8.2

3.7
2.3
2.7

3.0
3.5
1.7

2.5
3.1
2.0
1.4
1.9

2.2
2.8
1.7
1.2
1.6

5.5
6.9
4.3
4.0
5.4

4.9
6.1
3.7
3.5
4.7

.7
.6
.7

2.2
4.5
1.8
-.8
-1.0

1.9
4.0
.7
-.6
-.6

.3
.5
1.2
-.2
-.4

1945.
1946.
1947.
1948.
1949_.

10.4
28.1
31.5
43.1
33.0

11.5
21.8
31.9
38.4
36.0

11.0
15.3
19.5
18.8

1.1
4.8
7.5
10.1

2.7
6.3
7.7
9.3
9.2

2.5
5.4
6.3
7.8
7.7

7.7
10.7
16.7
18.9
17.2

6.9
9.8
14.9
16.4
14.4

.7
.9
1.8
2.6
2.9

-1.1
6.4
-.5
4.7
-3.1

-.6
6.4
1.3
3.0
-2.2

-.5
(3)
-1.8
1.7

1950..
1951..
1952..
1953..
1954..

50.0
56.3
49.9
50.3
48.9

43.2
46.1
46.8
49.9
50.5

24.2
24.8
25.5
27.6
29.7

14.1
12.5
12.8
13.8
15.4

10.1
12.3
12.7
13.8
14.3

8.5
10.4
10.8
12.1
12.7

18.9
21.3
21.3
22.3
20.8

16.2
18.4
18.6
19.5
18.5

2.7
2.9
2.7
2.8
2.3

6.8
10.2
3.1
.4
-1.6

6.0
9.1
2.1
1.1
-2.1

1.2
.9
-.6
.5

1955_.
1956..
1957..
1958..
1959..

63.8
67.4
66.1
56.6
72.4

58.1
62.7
64.6
58.6
66.1

34.9
35.5
36.135.5
40.2

18.7
17.7
17.0
18.0
22.3

16.2
17.8
19.0
17.4
17.9

14.6
16.3
17.5
15.9
16.2

23.1
27.2
28.5
23.1

2.5
2.2
2.3
2.8
2.9

5.8
4.7
1.6
-2.0
6.3

5.5
5.1
.8
-2.9
6.2

.3
-.4

25.9

20.6
25.0
26.2
20.3
23.0

1960..
1961 <_.

72.4
69.5

68.2
67.5

40.7
41.8

21.1
21.3

19.6
20.5

18.0
18.6

27.5
25.7

25.1
23.4

2.4
2.4

4.2
2.0

4.0
1.7

.3

7.1

6.9

11.7

11.6

0.2
.1

10.9

10.8

5.4
2.4

5.1
2.0

0.3

1.8

-0.2

i

Seasonally adjusted annual rates
1959: I

70.4

I I . . . . 79.1
III... 68.2
IV. __ 71.8

63.3
67.5
67.6
66.2

39.0
41.2
41.0
39.6

21.9
23.5
22.6
21.3

17.1
17.7
18.4
18.3

15.6
16.0
16.7
16.6

1.5
1.6
1.7
1.7

24.3
26.3
26:6
26.6

21.4
23.3
23.6
23.8

2.9
2.9
2.9
2.8

1960: I
II....
III.

78.9
74.6
70.5
65.6

68.0
69.3
68.1
67.4

40.9
40.7
40.4
40.7

21.5
21.2
21.0
20.5

19.3
19.5
19.4
20.2

17.7
17.8
17.8
18.6

1.7
1.7
1.6
1.6

27.1
28.6
27.7
26.7

24.7
26.0
25.3
24.3

2.4
2.5
2.4
2.4

1961:

59.8
68.8
73.2
76.0

63.8
66.0
68.7
71.5

39.6
41.3
42.7
43.5

19.3
20.6
22.1
23.2

20.4
20.7
20.6
20.3

18.8
18.5
18.5
18.5

1.5
2.2
2.1
1.8

24.2
24.7
26.0
28.0

21.7
22.4
23.8
25.6

2.5
2.3
2.2
2.4

II....
III...
IV <__

.7
5.6

.7
5.5

-1.9

-2.2

-4.0

-4.3

2.8
4.5
4.5

2.4
4.1
4.3

.1
.3

.3
.4
.4
.2

1
Revisions in series on new construction shown in Table B-35 have not yet been incorporated into these
series.
2
Includes petroleum and natural gas well drilling, which are excluded from estimates in Table B-35.
3
Less than $50 million.
4
Preliminary estimates by Council of Economic Advisers.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




220

TABLE B—11.—National income by type of income, 7929—67
[Billions of dollars]

Year or quarter

1929.
1930.
1931.
1932.
1933.
1934.
1935.
1936.
1937.
1938.
1939.
1940.
1941.
1942.
1943.
1944.
1945.
1946.
1947.
1948.
1949.
19501951.
1952.
1953.
1954.
1955.
1956.
1957.
1958.
1959.
1960.
19616

ComTotal penna- sation
tional of eminploycome 1 ees 2

Business and proCorporate profits
fessional income
and inventory
and inventory
valuation
valuation
In- Rentadjustment
adjustment
come al inof
InIn- farm come
In- Net
of
ven- income ven- proCor- tory terest
pertory prieof
porate valusons
unin- valuTotal corpo- ation tors 3
Total profits ation
before adrated adtaxes 4 justenter- justment
prises ment

87.8
75.7
59.7
42.5
40.2
49.0
57.1
64.9
73.6
67.6
72.8
81.6
104.7
137.7
170.3
182.6
181.2
180.9
198.2
223.5
217.7
241.9
279.3
292.2
305.6
301.8
330.2
350.8
366.9
367.4
399.6
417.1
430.2

51.1
46.8
39.7
31.1
29.5
34.3
37.3
42.9
47.9
45.0
48.1
52.1
64.8
85.3
109.6
121.3
123.2
117.7
128.8
141.0
140.8
154.2
180.3
195.0
208.8
207.6
223.9
242.5
255.5
257.1
278.4
293.7
302.9

8.4

8.5

10.9
13.9
16.8
18.0
19.0
21.3
19.9
22.4
22.7
23.5
26.0
26.9
27.4
27.8
30.4
32.1
32.7
32.5
35.0
36.2
36.5

11.5
14.3
17.0
18.1
19.1
23.0
21.4
22.8
22.2
24.6
26.3
26.7
27.6
27.8
30.6
32.6
33.0
32.6
35.2
36.3
36.4

390.7
405.2
399.4
402.8
413. 5
419.2
419.0
416.5
412.2
426.0
434.3

270.6
280.0
280.5
282.4
290.2
294.6
296.0
294.0
292.6
300.2
306.2
312.7

34.1
35.2
35.3
35.3
35.8
36.4
36.3
36.3
36.0
36.3
36.6
37.2

8.8
7.4
5.6
3.4
3.2
4.6
5.4
6.5
7.1
6.8
7.3

8.6
6.7
5.0
3.1
3.7
4.6
5.4
6.6
7.1
6.6
7.5

0.1
.8
.6
.3
-.5
-.1

6.0
4.1
3.2
1.9
2.4
2.4

(5)

5.0
4.0
5.6
4.3
4.3
4.6
6.5

.2
_ 2

-.6
-.4
-.2
-.1
-.1
-1.7
-1.5
-.4
.5
-1.1
-.3
.2
2
-.2
-.5
-.3
-.1
-.1
-.1
.1

10.0
11.4
11.5
11.8
15.3
15.5
17.8
12.9
14.0
16.3
15.3
13.3
12.7
11.8
11.6
11.8
13.5
11.3
12.0
13.1

5.4 10.1
6.6
4.8
1.6
3.8
2.7 - 2 . 0
2.0 - 2 . 0
1.1
1.7
2.9
1.7
5.0
1.8
6.2
2.1
4.3
2.6
5.7
2.7
9.1
2.9
3.5 14.5
4.5 19.7
5.1 23.8
5.4 23.0
5.6
6.2
6.5
7.3
8.3
9.0
9.4

10.2
10.5
10.9
10.7
10.9
11.9
12.2
11.9
11.7
11.5

18.4
17.3
23.6
30.8
28.2
35.7
41.0
37.7
37.3
33.7
43.1
42.0
41.7
37.2
46.4
45.1
M6.2

9.6
3.3
-.8

0.5
3.3
2.4
-3.0
1.0
. 2 -2.1
1.7 - . 6
3.1 - . 2
5.7
- .67
6.2
()
3.3
1.0
6.4
-.7
9.3 - . 2
17.0 -2.5
20.9 -1.2
24.6 - . 8
23.3
19.0
22.6 -5.3
29.5 -5.9
33.0 -2.2
1.9
26.4
40.6 -5.0
-1.2
42.2
1.0
36.7
38.3 -1.0
34.1 - . 3
44.9 -1.7
44.7 -2.7
43.2 -1.5
37.4 - . 3
46.8 - . 5
45.0
M6.1

6.4
6.0
5.8
5.4
5.0
4.9
4.8
4.7
4.7
4.6
4.6
4.5
4.5
4.3
3.7
3.3
3.2
3.1
3.8
4.2
4.8
5.5
6.3
7.1
8.2
9.1
10.4
11.7
13.4
14.8
16.6
18.4
20.0

46.1 - 0 . 9
51.5 - 1 . 3
44.8 - . 4
.7
44.9
48.1 - . 7
46.3 - . 4
.9
43.2
.3
42.6
.4
39.6
.3
45.2
47.2 - . 2

16.2
16.4
16.7
17.0
17.8
18.3
18.6
18.9
19.2
19.6
20.2
20.7

Seasonally adjusted annual rates
1959: I

II—
III—
IV—
1960: I
II—
III—
IV—
1961: I
II—
III...
IV 6..

34.2 - 0 . 1
35.6 - . 4
35.5 - . 2
.1
35.2
36.1 - . 3
36.3
(5)
.2
36.1
36.5 - . 2
35.9
(5)
.3
36.0
36.7 - . 1
37.2
(5)

1

12.5
11.5
10.6
10.8
10.5
12.3
12.4
12.7
12.9
12.9
12.8
13.6

12.0
11.9
11.8
11.7
11.7
11.7
11.7
11.7
11.5
11.5
11.5
11.5

45.3
50.2
44.4
45.5
47.4
45.9
44.1
42.9
40.0
45.5
47.0
(8)

(8)

(5)

National incomj is the total net income earned in production. It differs from gross national product
mainly in that it excludes depreciation charges and other allowances for business and institutional consumption of durable capital goods, and indirect business taxes. See Table B-12.
2
Wages and salaries and supplements to wages and salaries (employer contributions for social insurance;
employer contributions to private pension, health, and welfare funds; compensation for injuries; directors'
fees; pay of the military reserve; and a few other minor items).
3 Excludes income resulting from net reductions of farm inventories and gives credit in computing
income to net additions to farm inventories during the period. Data for 1929-45 differ from those shown in
Table B-70 because of revisions by the Department of Agriculture not yet incorporated into the national
income accounts.
4
See Table B-62 for corporate tax liability (Federal and State income and excess profits taxes) and
corporate profits after taxes.
s Less than $50 million.
e Preliminary estimates by Council of Economic Advisers.
7
Data for corporate profits are approximations for the year as a whole; data for fourth quarter are not
available. All other data incorporating or derived from these figures are correspondingly approximate.
8
Not available.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




221

TABLE B-l 2.—Relation of gross national product and national income, 7929-67
[Billions of dollars]
Plus:
Less:
SubEquals: sidies
less
Gross
Net
nacurrent Indirect business Busina- surplus
;ional
taxes
ness
tional of govprodDepretransprodfer
uct Total ciation Other*
ernuct
ment
charges
Fed- State payand ments
enter- Total eral
local
prises
Less: Capital consumption allowances

Year or quarter

Equals:
NaStatisti- tional
cal income
discrepancy

1929..

104.4

8.6

7.7

0.9

95.8

-0.1

7.0

1.2

5.8

0.6

0.3

87.8

1930..
1931..
1932..
1933..
1934..

91.1
76.3
58.5
56.0
65.0

8.5
8.2
7.6
7.2
7.1

7.7
7.6
7.0
6.7
6.6

.8
.6
.6
.5
.5

82.6
68.1
50.9
48.8
57.9

-.1
(2)
(2)
(2)
.3

7.2
6.9
6.8
7.1
7.8

1.0
.9
.9
1.6
2.2

6.1
6.0
5.8
6.4
5.6

.5
.6
.7
.7
.6

-1.0
.8
.8
.9
.7

75.7
59.7
42.5
40.2
49.0

1935..
1936..
1937..
1938..
1939..

72.5
82.7
90.8
85.2
91.1

7.2
7.5
7.7
7.8
7.8

6.7
6.7
6.9
6.9
7.1

.6
.8
.8
.8

.4

.7

65.3
75.2
83.0
77.4
83.3

.1
.2
.5

8.2
8.7
9.2
9.2
9.4

2.2
2.3
2.4
2.2
2.3

6.0
6.4
6.8
6.9
7.0

.6
.6
.6
.4
.5

-.2
1.1
-.2
5
L2

57.1
64.9
73.6
67.6
72.8

1940..
1941..
1942..
1943..
1944..

100.6 8.1
125.8 9.0
159.1 10.2
192.5 10.9
211.4 12.0

7.3
8.1
9.2
9.9

.8
1.0
1.0
1.0
1.2

92.5
116.8
149.0
181.6
199.4

.4
.1
.2
.2
.7

10.0
11.3
11.8
12.7
14.1

2.6
3.6
4.0
4.9
6.2

7.4
7.7
7.7
7.8
8.0

.4
.5
.5
.5
.5

.8
.4
-.8
2.8

SI. 6
104.7
137.7
170.3
182.6

1945..
1946 .
1947..
1948..
1949..

213.6
210.7
234.3
259.4
258.1

12.5
10.7
13.0
15.5
17.3

11.2

201.0
200.0
221.3
244.0
240.8

.8
.9
-.2
-.2
-.2

15.5
17.3
18.6
20.4
21.6

7.1
7.9
7.9
8.1
8.2

8.4
9.4

11.1
13.1
15.1

1.3
1.7
2.0
2.4
2.2

10.8
12.3
13.5

.5
.6
.7
.7
.8

4.5
2.1
3.5
-.8
.5

181.2
180.9
198.2
223.5
217.7

1950..
1951..
1952..
1953..
1954..

284.6
329.0
347.0
365.4
363.1

19.1
22.0
24.0
26.5
28.8

16.5
18.8
20.9
23.1
25.2

2.6
3.2
3.1
3.5
3.6

265.5
307.0
323.0
338.9
334.3

.2
.2
-.2
-.4
-.2

23.7
25.6
28.1
30.2
30.2

14.7
16.1
17.6
19.0
20.1

.8

10.5
11.2
10.1

L.O
L.2
L. 4
]L.3

-.7
1.2
1.4
1.3
.9

241.9
279.3
292.2
305.6
301.8

1955..
1956..
1957..
1958..
1959..

397.5
419.2
442.8
444.5
482.8

32.0
34.4
37.4
38.6
40.8

27.9
30.5
33.4
35.2
37.2

4.0
3.9
4.0
3.4
3.7

365.5
384.8
405.3
405.9
442.0

(2)

32.9 11.0
35.7 11.6
38.2 12.2
39.3 11.9
42.7 13.0

21.8
24.1
26.0
27.4
29.6

L.5
L.6
L.8
1.8
1.8

1.0

.9
1.0
1.1
.4

-1.5
-1.7

330.2
350.8
366.9
367.4
399.6

I960..
1961 a.

504.4 43.1
521.2 45.2

39.3
41.5

3.8
3.7

461.4
476.0

.5
1.3

45.6
47.1

14.0
13.8

31.6
33.3

1.8 - 2 . 6
1.8 «-1.7

< 430.2

10.8
9.0

(2)

9.0
9.5

-1.7

-2.4
-.6

417.1

Seasonally adjusted annual rates

II...
III..
IV..

472.2
488.5
482.3
488.3

39.8
40.6
41.1
41.8

(s)
(5)
(5)
(5)

(5)
(8)
(5)
(e)

432.5
447.8
441.2
446.5

0.7
.5
.3
.3

41.5
42.1
43.1
43.9

12.6
12.7
13.3
13.6

28.9
29.4
29.8
30.3

1.8
1.8
1.8
1.8

-0.9
-2.8
-1.8

390.7
405.2
399.4
402.8

1960: I . . . .
II...
III..
IV..

501.5
506.4
505.1
504.5

42.5
43.0
43.2
43.7

(8)
(5)
(5)
(4)

(«)
(5)
(*)
(5)

459.0
463.4
461.9
460.9

.5
.6
.5
.5

45.3
45.9
45.5
45.9

14.1
14.2
13.8
13.8

31.2
31.7
31.7
32.1

1.8
1.8
1.8
1.8

-1.1
-2.9
-4.0
-2.9

413.5
419.2
419.0
416.5

1961: I . . . .
II...
III..
IV 3

500.8
516.1
525.8
542.0

44.2
45.0
45.5
46.1

(5)
(5)
(5)
(5)

(5)
(s)
(5)
(5)

456.6
471.1
480.3
496.0

.5
1.4
1.8
1.5

45.7
46.4
47.5
48.9

13.3
13.6
14.0
14.5

32.4
32.9
33.5
34.4

1.8
1.8
1.8
1.8

-2.6
-1.8
-1.5
0)

412.2
426.0
434.3

1959: I . . . .

1
2

-.9

Accidental damage to fixed capital and capital outlays charged to current account.
Less than $50 million.
3 Preliminary estimates by Council of Economic Advisers.
* Data for corporate profits are appoximations for the year as a whole; data for fourth quarter are not
available. All other data incorporating or derived from these figures are correspondingly approximate.
a Not available.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




222

TABLE B—13.—Relation of national income and personal income, 1929—61
[Billions of dollars]
Less:

Plus:

CorpoExcess
rate
of
profits ContriNational and in- butions wage
income
acfor
vensocial cruals
tory
over
valu- insurdisance
ation
burseadjustments
ment

Year or quarter

Equals:

Government
transfer
payments
to
persons

Net
interest
paid
by
government

Dividends

Business
transfer
payments

Personal
income

1929

87.8

10.1

0.2

0.9

1.0

5.8

0.6

85.8

1930
1931
1932
1933
1934

75.7
59.7
42.5
40.2
49.0

6.6

.3

1.0

5.5

.5

1.6
-2.0
-2.0
1.1

.3
.3
.3
.3

1.0

2.1
1.4
1.5
1.6

J-i
1

76.9
65.7
50.1
47.2
53.6

2.9
5.0
6.2

.3
.6
1.8

1.8
2.9
1.9

1935
1936
1937
1938
1939

_ .

_

.

4.1
2.6
2.1
2.6

.6
.7
.7
.6

2.9
4.5
4.7

.6
.6
.6

L 2
?

3.2

.4

3.8

.5

4.0

.4

L.2

:L.2

57.1
64.9
73.6
67.6
72.8

4.3

2.0

2.4

5.7

2.1

2.5

81.6
104.7
137.7
170.3
182.6

9.1
14.5
19.7
23.8
23.0

2.3

2.7

2.8

2.6

1.3
1.3

4.5

3.5
4.5
5.2

.5

2.6
2.5
3.1

1.5
2.1
2.8

4.3
4.5
4.7

.5
.5
.5

1945
1946
1947
1948
1949

181.2
180.9
198.2
223.5
217.7

18.4
17.3
23.6
30.8
28.2

6.1

5.6
10.9
11.1
10.5
11.6

3.7

4.7

.5

4.5
4.4

5.8
6.5

4.5
4.7

7.2
7.5

.6
.7

1950
1951
1952
1953
1954

241.9
279.3
292.2
305.6
301.8

35.7
41.0
37.7
37.3
33.7

6.9
8.2
8.6
8.7

4.8
5.0
5.0
5.2

9.2
9.0
9.0
9.2

.8
1.0
1.2
1.4

9.7

14.3
11.6
12.0
12.9
15.0

5.4

9.8

1.3

228.5
256.7
273.1
288.3
289.8

1955
1956
1957
1958
1959

330.2
350.8
366.9
367.4
399.6

43.1
42.0
41.7
37.2
46.4

11.0
12.6
14.5
14.8
17.6

16.0
17.2
20.1
24.5
25.4

5.4
5.7
6.2
6.2
7.1

11.2
12.1
12.6
12.4
13.4

1.5
1.6
1.8
1.8
1.8

310.2
332.9
351.4
360.3
383.3

417.1
2 430. 2

45.1
2 46.2

20.7
21.9

27.3
31.0

7.8
7.3

14.1
14.4

1.8
1.8

402.2
416.7

1.8

1.8
1.8
1.8

374.7
384. 6
385.1
388.9

1.8
L.8
L.8
L.8

395.5
403.1
405.1
405.4

L.8
L.8
8

404.7
413.2
420.3
428.6

-

1940
1941
1942
1943
1944

-

- -

I960
1961 i

-__

0.2
-.2

6.0
5.7

5.2
5.7
.1
-.1

1

.1

.7
.8

60.2
68.5
73 9
68.6
72.9
78 7
96.3
123.5
151.4
165.7
171.2
179 3
191.6
210.4
208.3

Seasonally adjusted annual rat(JS

II
HI
IV

390.7
405.2
399.4
402.8

45.3
50.2
44.4
45.5

17.1
17.6
17.7
17.8

24.9
25.1
25.2
26.3

6.6

6.9
7.2
7.5

13.0
13.3
13.7
13.8

I960: I
II
III
IV

413.5
419.2
419.0
416.5

47.4
45.9
44.1
42.9

20.4
20.7
21.1
20.8

26.3
26.8
27.5
28.8

7.7
7.8
7.8
7.7

14.0
14.0
14.1
14.3

412.2
426.0
434.3

40.0
45.5
47.0

21.2
21.7
22.0
22.6

30.1
31.0
31.6
31.4

7.5
7.3
7.2
7.2

14.2
14.2
14.3
15.0

1959* I

1961: I
II
Ill
IV

—
.. .
_ ._

1
2

:

L.8

Preliminary estimates by Council of Economic Advisers.
Data for corporate profits are approximations for the year as a whole; data for fourth quarter are not
available. All other data incorporating or derived from these figures are correspondingly approximate.
3 Not available.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




223

TABLE R-14.—Sources of personal income, 1929-61
[Billions of dollars]

Proprietors'
income 2

Wage and salary disbursements *

Year or quarter

Total
personal
income Total

Commodityproducing
industries

Other
Distrib- Service Gov- labor Busiutive indus- ern- income ness
indus- tries ment
and Farms
profesManu- tries
factursional
Total
ing

1929.

85.8

50.4

21.5

16.1

15.6

8.4

4.9

1930.
1931.
1932.
1933.
1934.

76.9
65.7
50.1
47.2

46.2
39.1
30.5
29.0
33.7

18.5
14.3
9.9
9.8
12.1

13.8
10.8
7.7
7.8
9.6

14.5
12.5
9.8
8.8

8.0
7.1
5.8
5.2
5.7

5.2
5.3
5.0
5.1
6.1

7.4
5.6
3.4
3.2
4.6

4.1
3.2
1.9
2.4
2.4

1935.
1936.
1937.
1938.
1939.

60.2
68.5
73.9
68.6
72.9

36.7
41.9
46.1
43.0
45.9

13.5
15.8
18.4
15.3
17.4

10.8
12.4
14.6
11.8
13.6

10.7
11.8
13.2
12.6
13.3

5.9
6.5
7.1
6.8
7.1

6.5
7.9
7.5
8.2
8.2

5.4
6.5
7.1
6.8
7.3

5.0
4.0
5.6
4.3
4.3

194019411942.
1943.
1944-

78.7
96.3
123.5
151.4
165.7

49.8
62.1
82.1
105.6
117.0

19.7
27.5
39.2
49.0
50.4

15.6
21.7
30.9
40.9
42.9

14.2
16.3
18.0
20.1
22.7

7.5
8.1
9.0
9.9
10.9

8.4
10.2
16.0
26.6
33.0

.7
.7
.9
1.1
1.5

8.4
10.9
13.9
16.8
18.0

4.6
6.5
10.0
11.4
11.5

1945.
1946.
1947.
1948.
1949.

171.2
179.3
191.6
210.4
208.3

117.6
111.9
122.8
135.2
134.4

45.9
46.0
54.3
60.3
56.9

38.2
36.5
42.5
46.5
43.9

24.8
30.9
35.2
38.8
39.0

12.0
14.3
16.0
17.3
17.9

34.9
20.6
17.3
18.8
20.5

1.8
1.9
2.3
2.7
3.0

19.0
21.3
19.9
22.4
22.7

11.8
15.3
15.5
17.8
12.9

19501951.
1952.
1953.
1954.

228.5
256.7
273.1
288.3
289.8

146.4
170.7
184.9
198.1
196.3

63.5
74.9
80.5
88.1
84.1

49.4
58.3
63.0
69.9
66.1

41.3
46.0
48.7
51.8
52.3

19.3
21.1
22.6
24.3
25.5

22.3
28.8
32.9
33.9
34.4

3.8
4.8
5.3
6.0
6.2

23.5
26.0
26.9
27.4
27.8

14.0
16.3
15.3
13.3
12.7

195519561957.
1958.
1959.

310.2
332.9
351.4
360.3
383.3

210.9
227.6
238.5
239.8
258.5

91.4
98.7
102.2
97.9
107.2

72.3
77.7
80.6
76.7
84.7

55.8
60.3
63.4
63.8
68.2

27.8
30.5
32.8
34.8
37.7

36.0
38.0
40.2
43.2
45.3

7.1
8.1
9.1
9.4
10.3

30.4
32.1
32.7
32.5
35.0

11.8
11.6
11.8
13.5
11.3

1960.
1961 <

402.2
416.7

271.3
279.7

110.4
111.2

87.4
87.8

71.8
73.4

40.7
43.1

48.4
51.9

10.9
11.1

36.2
36.5

12.0
13.1

9.9

0.6

6.0

Seasonally adjusted annual rates
1959: I....
II...
III..
IV_.

374.7
384.6
385.1
388.9

251.4
260.1
260.3
261.9

104.3
109.5
107.5
107.8

82.2
86.6
85.0
85.1

66.3
68.1
69.1
69.2

36.2
37.4
38.2
39.1

44.7
45.1
45.5
45.9

10.2
10.5
10.7

34.1
35.2
35.3
35.3

12.5
11.5
10.6
10.8

1960: I....
II...
III..
IV..

395.5
403.1
405.1
405.4

268.3
272.4
273.2
271.3

111.4
111.8
110.5
108.0

88.6
88.5
87.2
85.2

70.4
72.3
72.5
72.1

39.6
40.5
41.2
41.5

46.9
47.8
49.0
49.7

10.6
10.8
10.9
11.2

35.8
36.4
36.3
36.3

10.5
12.3
12.4
12.7

1961: I.._.
II. _
III.
IV«.

404.7
413.2
420.3
428.6

270.1
277.3
282.7
288.7

106.1
110.7
112.8
115.2

83.8
87.5
88.9
90.8

71.8
72.8
74.3
74.8

41.8
42.5
43.6
44.7

50.4
51.3
52.1
54.0

10.8
10.8
11.2
11.5

36.0
36.3
36.6
37.2

12.9
12.9
12.8
13.6

See footnotes at end of table, p. 225.




224

TABLE B-14.—Sources of personal income,

1929-61—Continued

[Billions of dollars]

Transfer payments
Year or
quarter

Rental
income Divi- Personal
of per- dends interest
income Total
sons

Old-age
State
and sur- unemvivors
ployinsurment inance
surance
benefits benefits

Veterans'
benefits

Less:
Personal
contributions
Other for social
insurance

Nonagricultural
personal
income *

1929..

5.4

5.8

7.4

1.5

0.6

0.9

0.1

77.7

1930..
1931..
1932..
1933..
1934..

4.8
3.8
2.7
2.0
1.7

5.5
4.1
2.6
2.1
2.6

6.9
6.9
6.6
6.2
6.1

1.5
2.7
2.2
2.1
2.2

.6
1.6
.8
.5
.4

.9
1.1
1.4
1.6
1.8

.1
.2
.2
.2
.2

70.8
60.9
46.9
43.6
49.8

1935..
1936..
1937..
1938..
1939..

1.7
1.8
2.1
2.6
2.7

2.9
4.5
4.7
3.2
3.8

5.9
5.8
5.9
5.8
5.8

2.4
3.5
2.4
2.8
3.0

(5)
(5)
(5)

0.4
.4

.5
1.9
.6
.5
.5

1.9
1.6
1.8
1.9
2.0

.2
.2
.6
.6
.6

53.9
63.2
67.0
62.8
67.1

1940..
1941..
1942..
1943..
1944..

2.9
3.5
4.5
5.1
5.4

4.0
4.5
4.3
4.5
4.7

5.8
5.8
5.8
5.8
6.2

3.1
3.1
3.1
3.0
3.6

(5)
0.1
.1
.2
.2

.5
.3
.3
.1
.1

.5
.5
.5
.5
.9

2.0
2.2
2.2
2.2
2.4

.7
.8
1.2
1.8
2.2

72.6
88.0
111.5
137.6
151.6

1945..
1946..
1947..
1948..
1949..

5.6,

4.7
5.8
6.5
7.2
7.5

6.9
7.6
8.2
8.7
9.4

6.2

11.4
11.8
11.3
12.4

.3
.4
.5
.6
.7

.4
1.1
.8
.8
1.7

2.8
6.8
6.7
5.8
5.1

2.7
3.2
3.8
4.2
4.9

2.3
2.0
2.1
2.2
2.2

156.8
161.2
172.8
189.2
192.1

6.2
6.5
7.3
8.3

(5)

1950..
1951..
1952-.
1953..
1954..

10.2
10.5
10.9

9.2
9.0
9.0
9.2
9.8

10.3
11.2
12.1
13.4
14.6

15.1
12.6
13.2
14.3
16.2

1.0
1.9
2.2
3.0
3.6

1.4
.8
1.0
1.0
2.0

4.9
3.9
3.9
3.7
3.8

7.9
6.0
6.2
6.6
6.7

2.9
3.4
3.8
3.9
4.6

211.3
237.0
254.3
271.5
273.8

1955.
1956.
1957..
1958..
1959..

10.7
10.9
11.9
12.2
11.9

11.2
12.1
12.6
12.4
13.4

15.8
17.5
19.6
21.0
23.6

17.5
18.8
21.9
26.3
27.2

4.9
5.7
7.3
8.5

4.2
4.2
4.4
4.6
4.5

7.0
7.5
8.4
9.4

10.2

1.4
1.4
1.8
3.9
2.5

10.0

5.2
5.8
6.7
6.9
7.9

295.0
317.9
336.1
343.0
368.1

I960..
1961 6.

11.7
11.5

14.1
14.4

26.2
27.3

29.1
32.8

11.1
12.6

2.8
4.0

4.6
4.8

10.6
11.5

9.3
9.7

386.2
399.4

9.8
9.9

358.2
369.1
370.8
374.1

9.0
9.4

Seasonally adjusted annual rates
12.0
11.9
11.8
11.7

13.0
13.3
13.7
13.8

22.8
23.4
23.9
24.4

26.8
26.9
27.0
28.2

10.3
10.4
10.5

2.9
2.2
2.1
2.8

4.6
4.6
4.4
4.5

10.2
10.3

7.8
7.9
8.0
8.0

1960: I

11.7
11.7
11.7
11.7

14.0
14.0
14.1
14.3

25.5
26.1
26.4
26. 7

28.1
28.6
29.3
30.6

10.7
11.2
11.3
11.4

2.4
2.4
2.9
3.8

4.6
4.5
4.5
4.6

10.5
10.5
10.6
10.8

9.2
9.2
9.3
9.3

381.0
386.6
388.7
388.7

1961: I

11.5
11.5
11.5
11.5

14.2
14.2
14.3
15.0

26.8
27.0
27.4
28.0

32.0
32.9
33.5
33.2

11.8
12.5
12.7
13.4

3.8
4.5
4.0
3.8

4.7
4.8
4.8
4.8

11.7
11.1
11.9
11.3

9.5
9.7
9.8

387.8
396.3
403.2
410.4

1959: I

II—
III—
IV—
II—
III—

II—
III—
IV 6

9.5

1

10.0

The total of wage and salary disbursements and other labor income differs from compensation of employees in Table B-ll in that it excludes employer contributions for social insurance and excludes the excess
of 2wage accruals over wage disbursements.
Excludes income resulting from net reductions of inventories and gives credit in computing income to
net additions to inventories during the period.
3 Data for 1929-45 differ from those in Table B-70 because of revisions by the Department of A griculture
not yet incorporated into the national income accounts.
4
Nonagricultural income is personal income exclusive of net income of unincorporated farm enterprises,
farm wages, agricultural net interest, and net dividends paid by agricultural corporations.
5
Less than $50 million.
6
Preliminary estimates by Council of Economic Advisers.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




225

TABLE B—15.—Disposition of personal income, 7929-67

Year or quarter

Personal Personal
income
taxesi

Less:
Equals: Personal
DisposEquals:
conable sumption Personal

personal
income

expenditures

saving

Billions of dollars
1929..

85.8

2.6

83.1

79.0

4.2

1930..
1931..
1932..
1933..
1934..

76.9
65.7
50.1
47.2
53.6

2.5
1.9
1.5
1.5
1.6

74.4
63.8
48.7
45.7
52.0

71.0
61.3
49.3
46.4
51.9

3.4
2.5

1935..
1936..
1937..
1938..
1939..

60.2
68.5
73.9
68.6
72.9

1.9
2.3
2.9
2.9
2.4

58.3
66.2
71.0
65.7
70.4

56.3
62.6
67.3
64.6
67.6

2.0
3.6
3.7
1.1
2.9

1940..
1941..
1942..
1943..
1944..

78.7
96.3
123.5
151.4
165.7

2.6
3.3
6.0

17.8
18.9

76.1
93.0
117.5
133.5
146.8

71.9
81.9
89.7
100.5
109.8

4.2
11.1
27.8
33.0
36.9

1945..
1946..
1947..
1948..
1949..

171.2
179.3
191.6
210.4
208.3

20.9
18.7
21.5
21.1
18.7

150.4
160.6
170.1
189.3
189.7

121.7
147.1
165.4
178.3
181.2

28.7
13.5
4.7
11.0
8.5

1950..
1951..
1952..
1953..
1954..

228.5
256.7
273.1
288.3
289.8

20.8
29.2
34.4
35.8
32.9

207.7
227.5
238.7
252.5
256.9

195.0
209.8
219.8
232.6
238.0

12.6
17.7
18.9
19.8
18.9

1955..
1956..
1957..
1958..
1959..

310.2
332.9
351.4
360.3
383.3

35.7
40.0
42.6
42.3
46.0

274.4
292.9
308.8
317.9
337.3

256.9
269.9
285.2
293.2
314.0

17.5
23.0
23.6
24.7
23.4

I960..
1961 2.

402.2
416.7

50.4
51.8

351.8
364.9

328.9
339.2

22.9
25.7

Seasonally adjusted annual rates
1959: I . . .

II..
III.
IV..

374.7
384.6
385.1
388.9

44.9
46.1
46.4
46.6

329.8
338.4
338.7
342.3

305.8
313.6
316. 5
320.0

23.9
24.8
22.3
22.3

1960: I . . . .
II..
III..
IV..

395.5
403.1
405.1
405.4

49.9
50.5
50.8
50.5

345.7
352.7
354.4
354.9

323.8
329.9
329.7
332.3

21.8
22.8
24.6
22.7

1961: I . . .
II..
III.
IV 2

404.7
413.2
420.3
428.6

50.3
51.4
52.5
53.1

354.3
361.8
367.7
375.6

330.7
336.1
341.0
349.0

23.7
25.8
26.8
26.6

1
2

Includes also such items as fines and penalties.
Preliminary estimates by Council of Economic Advisers.

NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




226

Saving as
percent
of" disposable
personal
income
(percent)

T A B L E B—16.— Total and per capita disposable personal income and personal consumption
expenditures, in current and 1961 prices, 1929—61

Per capita disposable personal
income (dollars)

1961
Current
prices prices ]

Year or quarter

Total disposable
personal income
(billions of
dollars)

Current
prices

Total personal
consumption
expenditures
(billions of
dollars)

1961
prices

Current
prices

1961
prices 2

Per capita personal consumption expenditures (dollars)

Population
(thousands) 4

1961
Current
prices prices 3
1,172

121,875

410

1,090
1,049
948
921
961

123,188
124,1.49
124,949
125, 690
126, 485

442
488
522
497
516

,014
,109
,141
,113
,165

127, 362
128,181
128,961
129,969
131,028

160.8
171.4
167.9
172.3
178.6

544
614
665
735
793

,217
,285
,245
,260
,290

132,122
133,402
134, 860
136, 739
138,397

121.7
147.1
165.4
178.3
181.2

190.9
213.8
217.4
221.6
227.3

870
1,040
1,148
1,216
1,215

,364
,512
,508
,511
,524

139, 928
141, 389
144,126
146, 631
149,188

1,692
1,708
1,725
1,780
1,762

195.0
209.8
219.8
232.6
238.0

241.0
243.2
249.6
261.5
265.0

1,286
1,359
1,400
1,457
1,465

,589
,576
,590
1,638
1,632

151, 683
154, 360
157,028
159,636
162, 417

1,660
1,742
1,804
1,826
1,905

1,840
1,900
1,911
1,898
1,956

256.9
269.9
285.2
293.2
314.0

284.7
294.2
302.1
304.7
322.4

1,554
1,605
1,666
1,684
1,773

1,723
1,749
1,765
1,751
1,821

165,270
168,176
171,198
174,060
177,076

1,947
1,987

1,969
3,987

328.9
339.2

332.7
339.2

1,820
1,847

1,841
1,847

180,670
183i650

1929..

83.1

150.3

1,233

79.0

142.8

1930..
1931..
1932..
1933..
1934-

74.4
63.8
48.7
45.7
52.0

140.6
135.5
117.1
114.0
121.8

604
514
390
364
411

1,142
1,091
938
908
963

71.0
61.3
49.3
46.4
51.9

134.3
130.2
118.5
115.7
121.6

576
494

1935..
1936..
1937..
1938-.
1939..

58.3
66.2
71.0
65.7
70.4

133.7
150.1
155.0
147.0
158.9

458
516
551
506
537

1,050
1,170
1,203
1,132
1,212

56.3
62.6
67.3
64.6
67.6

129.1
142.1
147.1
144.6
152.7

1940..
1941..
1942..
1943..
1944..

76.1
93.0
117.5
133.5
146.8

170.2
194.6
220.0
229.0
238.7

576
697
871
976
1,061

1,289
1,458
1,631
1,674
1,725

71.9
81.9
89.7
100.5
109.8

1945..
1946..
1947..
1948..
1949-

150.4
160.6
170.1
189.3
189.7

235.7
233.4
223.5
235.2
238.0

1,075
1,136
1,180
1,291
1,272

1,685
1,651
1,551
1,604
1,596

19501951..
1952..
1953..
1954-

207.7
227.5
238.7
252.5
256.9

256.7
263.6
270.9
284.0
286.1

1,369
1,474
1,520
1,582
1,582

195519561957..
1958..
1959-

274.4
292.9
317.9
337.3

304.2
319.4
327.1
330.5
346.3

1960..
1961«.

351.8
364.9

355.7
364.9

Seasonally adjusted annual rates
1959: I...
II..
III.
IV..

329.8
338.4
338.7
342.3

341.1
348.5
346.7
349.3

1,874
1,915
1,908
1,920

1,938
1,972
1,953
1,959

305.8
313.6
316.5
320.0

316.3
322.8
324.1
326.4

1,737
1,775
1,783
1,795

1,797
1,827
1,826
1,831

176,012
176,714
177, 493
178, 291

1960: I...
II..
III.
IV..

345.7
352.7
354.4
354.9

351.7
357.0
358.0
357.0

1,924
1,956
1,957
1,951

1,957
1,980
1,977
1,963

323.8
329.9
329.7
332.3

329.3
333.9
333.1
334.2

1,802
1,829
1,821
1,827

1,833
1,852
1,839
1,837

179, 690
180, 328
181,084
181, 898

1961: I...
II..
III.
IV*

354.3
361.8
367.7
375.6

355.4
362.5
367.3
374.5

1,940
1,974
1,998
2,032

1,946
1,978
1,996
2,026

330.7
336.1
341.0
349.0

331.7
336.7
340.6
347.8

1,811
1,834
1,853
1,888

1,817
1,837
1,851
1,882

182, 601
183,292
184,054
184,851

1 Estimates in current prices divided by the implicit price deflator for personal consumption expenditures on a 1961 base.
2 See Table B-2 for explanation.
3
Total expenditures in 1961 prices divided by population.
* Population of the United States including armed forces abroad. Annual data are for July 1; quarterly
data are for middle of period.
6
Preliminary estimates by Council of Economic Advisers.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Sources: Department of Commerce and Council of Economic Advisers.




227

TABLE B—17.—Financial saving by individuals, 1939—61l
[Billions of dollars!
Securities
Currency Savand
ings
Total bank shares
U.S. Other
de(2) Total sav- govposits
ines ernbonds ment 3

Year or quarter

1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961 10
1959: I

4.2
42
10.5
29.3
38.7
41.4
S7.3
14.1
6.5
2.8
2.2
.8

11.1
13.1
10.9
9.5
7.1

14.1
15.5
16.9
13.6
10 4
17.9
4.1

1960: I

II
III
IV
1961- I I
I
III
IV i°.

--

Less: Increase in

debt

Mort- Con- Secugage sumer rities
debt« debt* loans 8

0.1 - 0 . 8
.3 - . 4

1.7
1.8

0.1
.1

1.3
1 3

0.5
8

.4
2.8
.4
2.6
-.5
.3
8.0
2.3 (9)
10.3
.6
3.2
14.1 11.1
-.3
.8
4.6
-.7
15.7 11.8
6.8
4.2 - 1 . 2
9.9
1.1
1.0 - 2 . 4
1.2 - 1 . 4
(9)
2.4
2.0
-.3
1.3
.7
1.6
.4
1.3
3.1
1.1
2.4
1.5
.2
1.6
.7
.2
-.1
1.7
.9
.7
-.4
2.3
.5
-.5
1.4
.1
3.3
3.5
1.3
2.2
3.4
.2
2.0
4.0
1.2
.4
.6
4.8
-.9
.7
6.4
5.2
.3
3.9
2.2
5.4
5.2
-.1
3.3
2.0
5.2
4.6 - 1 . 9
3.8
2.8
1.3
6.3
-.7
2.6

2.1
2.5
2.8
3.2
3.5
3.4
3.6
3.8
3.7
3.9
4.1
4.8
5.0
5.2
5.5
5.5
5.1
5.3

1.9
2.6
3.9
5.0
5.1
3.6
3.5
3.6
2.3
1.1
4.2
4.4
3.2
2.6
3.1
3.6

.8
.1
-.4

11.1 - 1 . 8 12.0
1.4 — 2
1.1
.8 - 1 . 0
2.6
2.7 - . 2
2.4
— .4 2.7
3.1
3.3
30 — 6 35
2.6
2.7
j
-.2
—. 2

.9
12
1.3
.3
.1
.3
1
.1
.2

5.5
55
5.7
1.3

.1
.1
.2
.6
.9
.3
.3
.4
.6
.9
1.4
1.5
1.8
1.9
2.1
2.4
2.9
3.1

1.4

9

.4
()

1.7
1.3
1.3
1.4
1.6

.9
10
.9
.9
1.0

10.9
16.2
17.5
19.0
10.6
2.0

-1.8
— 1.4
3.5
5.9
7.0
4.7
5.4
3.3
4.7
4.9

3.2

1.4

1.4
4.8
82
6.3
3.5

2.9
1.6
17
3.8
3.5

2.7 - 1 . 5
2.0 - 1 . 1
q
27
1.4
1.3
1.1
3.1

4.3

Government
insurance
and
pension
reserves'

4.8

10.2
3.5
39
10.5
.1
.3
2.7
4
-2.1
—. 2

3.5

0.7 - 0 . 9 - 0 . 6
.9 - . 8 — 4

Noninsured
pension
funds

3.0
2.9

4.6
14
3.2
1.6

II
III
IV

Private
insurCor- ance
Dorate reand serves
4
other ( )

7.3
8 1
9.2
1.4
2.4

1.2
23
1.6
2.4

.6

(")

.1
.1 -2.0
. 2 -1.3
.1 - 1 . 8

1.1
.9

9

1.4

1.4

1.2
1 6
1.2
1.3

3.4
37
3.9
.9
.8

.8
9
1.0
.9

—.1
.2
3.6
4.6
4.7
4.1
7.3
6.6
6.5
7.3
9.0

0.8 - 0 . 2
2
10
—. 1
.7
3
-3 0
6
-1.0
.1
14
.5
15
2.3 - 2 . 3
2.8 — 8
2.4
2.6
3.6

.4
3
.2

10

—3

4.4

36
1.0
6.1
3.1

32

11.8
10.3
79

25

.6

9.3

.2

.6
4
9
.6

— 8
_ i
4

2.3 13.0
6.3
.2
3
3 3 11 6 3 7
12.4
1.0
.9
1.9
.1
3.3 - . 3 - . 6
1
2.2
1 5 29
3.4
.9
1,9
— 2 34
24 ( \
.3
3.1 - . 5 - 1 . 3
2. 1 2.6
2.0
.1
.7
1.0
27
.8
3.2
-.1
.6
1.5
- 2
2 7 - 1 7 —1 0
9
1.5
.6
3.0
.1
.7
.1
3.1
-.1
2.0
3.7
.9

1 Individuals' saving, in addition to personal holdings, covers saving of unincorporated business, trust
funds, and nonprofit institutions in the forms specified.
2
Includes shares in savings and loan associations and shares and deposits in credit unions.
3
"Other government" includes U.S. Government issues (except savings tonds), State and local government securities, and beginning 1951, nonguaranteed Federal agency issues, which are included in "corporate
and other" for years prior to 1951.
4
Includes insured pension reserves.
«Includes Social Security funds, State and local retirement systems, etc.
9
Mortgage debt to institutions on one- to four-family nohfarm dwellings.
7
Consumer debt owed to corporations, largely attributable to purchases of automobiles and other durable consumer goods, although including some debt arising from purchases of consumption goods. Policy
loans on Government and private life insurance have been deducted from those items of saving.
8
Change in bank loans to brokers and dealers and others for the purpose of purchasing cr carrying securities.
B Less than $50 million.
io Preliminary.
NOTE.—Figures beginning 1957 have been revised since the Economic Report of the President, January
1961.
In addition to the concept of saving shown above, there are other concepts of individuals' saving, with
varying degrees of coverage, currently in use. The personal saving estimates of the Department of Commerce are derived as the difference between disposable personal income and expenditures. Conceptually,
Commerce saving includes the following items not included in Securities and Exchange Commission
saving: Housing, farm and unincorporated business investment in inventories and plant and equipment,
net of depreciation, and increase in debt. Government insurance is excluded from the Commerce saving
series. For a reconciliation of the two series, see Securities and Exchange Commission Statistical Bulletin,
July 1961, and Survey of Current Business, July 1961.
The flow-of-funds system of accounts of the Board of Governors of the Federal Reserve System includes
capital investments as well as financial components of saving and covers saving of Federal, State, and local
governments, businesses, financial institutions, and consumers. While the Federal Reserve's estimates of
consumer saving in financial form are similar to the Securities and Exchange Commission estimates of
individuals' saving, there are some statistical and conceptual differences in the two sets of data.
Revisions for 1955-61 in the consumer credit statistics of the Board of Governors of the Federal Reserve
System have not yet been incorporated into these estimates.
Data for Alaska and Hawaii included for all periods.
Source: Securities and Exchange Commission.




228

TABLE B-18.—Sources and uses of gross saving, 1929—61
[Billions of dollars]
Gross private saving and government surplus or
deficit on income and product transactions
Government surplus
or deficit (-)

Private saving

Year or quarter
Total

Total

Personal
saving

1929.

16.7

15.7

4.2

1930.
1931.
1932.
1933.
1934.

11.9

3.4
2.5

2.6

12.2
7.7
2.0
1.9
5.0

1935.
1936.
1937.
1938_
1939.

6.4
7.2
12.1
7.3
9.0

8.4
10.1
11.5
8.9
11.2

2.0
3.6
3.7
1.1
2.9

1940.
1941.
1942.
1943.
1944.

13.9
18.8
10.5
5.1
2.3

14.6
22.6
41.9
49.3
54.2

1945..
1946.
1947.
1948
1949.

4.5
30.6
36.8
45.9
33.0

19501951.
1952..
19531954..
1955..
1956..
1957..
1958..
1959..

Gross
business Total
saving
11.5

1.0

State
and
local

1.2

=-0.1

17.0

16.2

0.8

0.3

-.5
-.7
-.2

11.0

10.3

5.7
1.1
1.5
3.3

5.5
.9
1.4
2.9

.7
.2
.2
.2
.4

-1.0
.8
.8
.9
.7

-2.8
-1.7
-1.4
-2.4

-2.1
-1.5
-1.3
-2.9

6.3
6.5
7.8
7.8
8.3

-2.0
-3.0
.6
-1.6
-2.1

-2.6
-3.5
-.2
-2.0
-2.2

.5
.7
.4
.1

4.2
11.1
27.8
33.0
36.9

10.4
- . 7 -1.4
11.5 - 3 . 8 - 5 . 1
14.1 -31.4 -33.2
16.3 -44.2 -46.7
17.2 -51.9 -54.6

.7
1.3
1.8
2.5
2.7

44.3
26.5
23.6
37.6
36.1

28.7
13.5
4.7
11.0
8.5

15.6 -39.7 -42.3
2.2
13.1
4.1
18.9
13.3
12.2
26.6
8.2
8.0
27.6 - 3 . 1 - 2 . 5

2.6
1.9
1.1
.3
-.6

48.5
55.3
48.3
47.0
47.6

40.3
49.2
52.2
54.1
54.4

12.6
17.7
18.9
19.8
18.9

27.7
31.5
33.2
34.3
35.5

8.2
6.1
-3.9
-7.1
-6.7

9.2
6.4
—7! 4
-5.8

62.4
71.3
70.2
58.0
71.8

59.6
66.1
69.2
69.5
74.0

17.5
23.0
23.6
24.7
23.4

42.1
2.9
43.0
5.2
45.6
1.0
44.8 - 1 1 . 4
-2.2
50.7

3.8
5.7
2.0
-9.4
-1.8

76.5
74.6
4 73.6 *79.9

I960..
19613

22.9
25.7

4

51.7
54.2

1.9

Statistical
Gross
disprivate Net for- crepTotal domes- eign in- ancy
tic in- vestvest- ment '
ment

Federal

5.2
2.7
2.6
4.9

4.9
.3
.6

Gross investment

6.2
8.3

6.3
8.4

11.8

11.7

10.2

6.7
9.3

-.1
-.1
.1
1.1
.9

-.2
1.1
-.2
.5
1.2

14.7
19.2

13.2
18.1

1.5
1.1
-.2

.8
.4
-.8
-1.7
2.8

7.8

9.7
3.4
5.0

9.9
5.6
7.1

-2.2
-2.1

10.4
28.1
31.5
43.1
33.0

-1.4

32.7
40.4
45.0
33.5

-1.0
-.3
.1
.3

47.8
56.6
49.7
48.3
48.5

50.0
56.3
49.9
50.3
48.9

-2.2

-1.0
-.5
-1.0
-2.1
-.4

63.4
68.8
69.6
56.6
70.1

63.8
67.4
66.1
56.6
72.4

-.4
1.5
3.5
-.1

-2.3

1.0
-2.4
-.6
-1.5
-1.7

3.3
-1.4
- 3 . 6 ±-2.7

73.9
71.9

72.4
69.5

1.5
2.4

-2.6
•-1.7

68.2
76.0
66.4
69.9

70.4
79.1
68.2
71.8

-2.2
-3.1
-1.8
-1.9

79.2
75.3
71.9
69.1

78.9
74.6
70.5
65.6

.2
.7
1.4
3.6

-1.1
-2.9
-4.0
-2.9

63.5
71.3
74.1
78.6

59.8
68.8
73.2
76.0

3.7
2.4
.9
2.5

-2.6
-1.8
-1.5

g g

9.0

4.6
8.9
1.9
.5
.2
-.2

-2.0

4.5
2.1
3.5
-.8
.5
-.7
1.2
1.4
1.3

-.4

Seasonally adjusted annua 1 rates
II...
III..
IV..

69.1
76.8
69.3
71.7

73.2
76.9
72.1
73.7

23.9
24.8
22.3
22.3

49.3
52.1
49.7
51.4

1960: I — .
II...
III..
IV..

80.3
78.2
75.9
72.0

73.8
74.7
76.4
73.9

21.8
22.8
24.6
22.7

52.0
51.9
51.7
51.2

1961: I — .
IT...
III..
IV 3.

66.1
73.1
75.6

74.0
79.7
81.6

23.7
25.8
26 8
26.6

50.4
53.9
54.8

1959: I — .

(5)

(5)

(5)

-4.1 -2.7
.5
—. 1
-2.8 -2.5
-2.0 -2.4
6.5
3.5
-.5

-1.4
-.6
-.4
.4
(2)

-1.9

6.5
4.5
1.4
.4

-1.0
-1.9
-2.3

-7.9
-6.6
-6.0

-5.5
-4.3
-3.1

-2.4
-2.3
-2.9

(5)

(5)

(5)

-0.9
— 9
-2.8
-1.8

1 Net exports of goods and services less foreign net transfers by Government. For 1929-45, net foreign
investment and net exports of goods and services have been equated, since foreign net transfers by Government were negligible during that period.
2
Less than $50 million.
3
Preliminary estimates by Council of Economic Advisers.
4
Data for corporate profits are approximations for the year as a whole; data for fourth quarter are not
available. All other data incorporating or derived from these figures are correspondingly approximate.
5
Not available.
NOTE.—Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




229

EMPLOYMENT, WAGES, AND PRODUCTIVITY
TABLE B-19.—Noninstitutional population and the labor force, 1929-61
Civilian labor force
Total
NTonin- labor
stitu- force Armed
tional (includ- forces i
ing i
popuTotal
lation i armed |
forces) i

Year or month

Total
labor
force as
percent
Unem- of nonNon- ploy-2 Institutional
agri- ment
popucullation
tural

Employment 2

Total

Agricultural

Thousands of persons 14 years of age and over
Old definitions:
1929
-

Unemployment
as percent of
civilian
labor
force

Percent

(3)

49,440

260 49,180 47, 630 10,450 37,180

1,550

3.2

1930.
1931 _
1932.
1933.
1934.

(3)
(3)
(3)
3
(3)
()

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

260
260
250
250
260

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

45,480
42,400
38.940
38,760
40,890

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

8.7
15.9
23.6
24.9
21.7

1935.
1936.
1937.
1938.
1939.

(3)
(3)
(3)
(3)
(3)

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

270
300
320
340
370

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

42,260 10,110 32,150 10,610
44,410 10,000 34, 410 9,030
46,300 9,820 36,480 7,700
44,220 9,690 34, 530 10,390
45,750 9,610 36,140 9,480

20.1
16.9
14.3
19.0
17.2

1940_
1941.
1942.
1943.
1944.

100,380
101, 520
102,610
103,660
104,630

56,180
57, 530
60,380
64,560
66,040

540
1,620
3,970
9,020
11,410

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

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

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

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

56.0
56.7
58.8
62.3
63.1

14.6
9.9
4.7
1.9
1.2

105, 520 65,290 11, 430 53, 860 52, 820 8,580 44,240 1,040
106, 520 60,970 3,450 57, 520 55,250 8,320 46, 930 2,270
107,608 61,758 1,590 60,168 58,027 8,266 49, 761 2,142

1945
1946
1947
New definitions: 2
1947.
1948.
1949.

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

61.9
57.2
57.4

1.9
3.9
3.6

1,590 60,168 57, 812 8,256 49, 557 2,356
1,456 61,442 59,117 7,960 51,156 2,325
1,616 62,105 58,423 8,017 50, 406 3,682

57.4
57.9
58.0

3.9
3.8
5.9

107, 608 61,758
108,632 62,898
109, 773 63,721

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

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

1950.
1951.
1952.
1953.
1954.

110, 929
112,075
113, 270
115,094
116, 219

64,749
65,983
66, 560
67, 362
67, 818

1,650
3,097
3,594
3,547
3,350

63,099
62, 884
62, 966
63, 815
64, 468

59, 748
60,784
61, 035
61,945
60,890

7,497
7,048
6,792
6,555
6,495

52,251
53,736
54, 243
55, 390
54,395

3,351
2,099
1,932
1,870
3,578

58.4
58.9
58.8
58.5
58.4

5.3
3.3
3.1
2.9
5.6

1955.
1956.
19571958.
1959.

117,388
118, 734
120,445
121, 950
123,366

68, 896
70, 387
70, 744
71,284
71, 946

3,048
2,857
2,797
2,637
2,552

65, 848
67, 530
67, 946
68,647
69, 394

62,944
64,708
65, 011
63,966
65, 581

6,718
6,572
6,222
5,844
5,836

56, 225
58,135
58, 789
58,122
59, 745

2,904
2,822
2,936
4,"
3,813

58.
59.
58.7
58.5
58.

4.4
4.2
4.3
6.8
5.5

58.3

5.6

58.
58.0

5.6
6.7

56.7
56.9
56.9
57.9
58.5
60.3

6.1
5.7
6.1
5.2
4.9
6.1

4,01
3,788
3,388
3,579
4,031
4,540

60.0
59.
58.6
58.4
58.4
57.8

5.5
5.3
4.8
5.0
5.7
6.4

124, 878 72, 820 2,514 70,306 66, 392 5,696 60, 697 3,913

1960

Including
Hawaii
1960
1961

Alaska

1960: January...
February .
March
April
May
June
_
July
August
September..
October
November.
December-.

and

124,606
124,716
124,839
124,917
125,033
125,162

70,689
70,970
70,993
72,331
73,171
75,499

2,514 70, 612 66, 681 5,723 60, 958 3,93
2,572 71, 603 66, 796 5,463 61,333 4,806
2,521 68,168 64,020 4,611 59,409 4,149
2,521 68,449 64,520 4,619 59,901 3,931
2,520 68,473 64,267 4,565 59,702 4,206
2,512 69,819 66,159 5,393 60, 765 3,660
2,504 70,667 67,208 5,837 61,371 3,459
2,497 73,002 68,579 6,856 61, 722 4,423

125,288
125,499
125,717
125,936
126,222
126,482

75,215
74,551
73,672
73,592
73, 746
73,079

2,509
2,481
2,517
2,523
2,533
2,530

125, 368 73,126
127,852 74,175

72, 706
72,070
71,155
71,069
71,213
70,549

See footnotes at end of table, p. 231.




230

68,689
68,282
67, 767
67,490
67,182
66,009

6,885
6,454
6,588
6,247
5,666
4,950

61, 805
61,828
61,179
61,244
61,516
61,059

TABLE B—19.—Noninstitutional population and the labor force, 1929-61—Continued
Civilian labor force

Noninstitutional
population i

Year or month

Total
labor
force Armed
(includ- forces
ing
Total
armed
forces)

Total
labor
force as
Employment
percent
of nonUnem- instituployAgri- Non- ment 2 tional
agripopuTotal culcultural tural
lation
2

Thousands of persons 14 years of age and over
Including Alaska
Hawaii
1961: January
February
March
April
May
June
July
August
September
October
November
December

Unemployment
as percent of
civilian
labor
force

Percent

and
126,725
126,918
127,115
127,337
127, 558
127,768

72,361
72,894
73, 540
73,216
74,059
76, 790

2,524
2, 534
2,529
2, 520
2,513
2,504

69,837
70,360
71,011
70,696
71, 546
74,286

64,452
64,655
65, 516
65,734
66, 778
68, 706

59,818
59,947
60.539
60,734
61,234
62,035

5,385
5, 7O.e
5,495
4,962
4, 768
5,580

57.1
57.4
57.9
57.5
58.1
60.1

7.7
8.1
7.7
7.0
67
.
7.5

127,986
128,183
128, 372
128, 570
128,756
_. 128,941

76,153
75,610
73,670
74,345
74,096
73,372

2,514
2,529
2,547
2,586
2, 757
2,813

73,639
73,081
71,123
71,759
71,339
70, 559

68,499 6,453 62,046
68, 539 6,325 62,215
67,038 5,666 61,372
67,824 5.964 61,860
67,349 5,199 62,149
66,467 4,418 62,049

5,140
4,541
4,085
3,934
3,99(1
4,091

59.5
59.0
57.4
57.9
57.5
56.9

7.0
62
.
5.7
55
5.6
5.8

4,634
4,708
4,977
5,000
5,544
6,671

Seasonally adjusted *
1960: January...
February.
March
April
May
_
June
July
August
September..
October
November..
December..
1961: January. _
February.
March
April
May
_
June
July
August
September..
October
November..
December..

69,773
69,989
69,586
70, 524
70, 526
71,152

66.136
66,653
65, 780
66,963
67,0O7
67,168

5,693
5,738
5,296
5,677
5,470
5,737

60,253
60,813
60,366
61,255
61,617
61, 599

3,664
3,388
3,812
3,620
3, 567
3,842

5.3
4.8
5.5
5.1
5.1
5.4

70, 726
70, 796
71,013
70,575
71,356
71,118

66,948
66, 747
67,030
66,362
67,048
66,407

5,855
5, 799
6,05f
5,659
5,799
5,824

61,193
61,035
60,996
60,697
61,210
60,454

3 !
\\ 132
4,037
4,414

i 819

5.5
5.8
5.7
6.3
6.2
6.8

71.481
71,943
72,166
71,410
71.403
72.404
71,633
71, 789
70,981
71,260
71.482
71,128

66. 583
66, 792
67,058
66, 532
66, 578
67,293

5,721
5,848
5,774
5,263
5,196
5,582

60,667
60,860
61,212
61,224
61,480
61, 911

4,736
4,891
4,970
4,'"
4,923
4,946

6.8
6.9
6.8
6.9
6.8

66,763
66,998
66,309
66,690
67,215

5,487
5,683
5,208
5,402
5.321
5,198

61,432
61,417
61,188
61,308
61,840
61, 435

4,938
4,957
4,843
4,831
4,345
4,344

6.9
6.8
6.1
6.1

i Data for 1940-52 revised to include about 150,000 members of the armed forces who were outside the
United States in 1940 and who were, therefore, not enumerated in the 1940 Census and were excluded from
the 1940-52 estimates.
a See Note.
3 Not available.
* Seasonally Adjusted totals may differ from the sum of components because totals and components have
been seasonally adjusted separately.
NOTE.—Civilian labor force data beginning with March 1960 are based on a 333-area sample. For May
1956-February 1960 they are based on a 330-area sample; for January 1954-April 1956 they are based on a
230-area sample; for 1946-53 on a 68-area sample; for 1940-45 on a smaller sample; and for 1929-39 on sources
other than direct enumeration.
Effective January 1957, persons on layoff with definite instructions to return to work within 30 days
of layoff and persons waiting to start new wage and salary jobs within the following 30 days are classified
as unemployed. Such persons had previously been classified as employed (with a job but not at work).
The combined total of the groups changing classification has averaged about 200,000 to 300,000 a month in
recent years. The small number of persons in school during the survey week and waiting to start new
jobs are classified as not in the labor force instead of employed, as formerly. Persons waiting to open-new
businesses or start new farms within 30 days continued to be classified as employed.
Beginning July 1955, monthly data are for the calendar week ending nearest the 15th of the month; previously, for week containing the 8th. Annual data are averages of monthly figures.
For the years 1940-52, estimating procedures made use of 1940 Census data; for subsequent years, 1950
Census data were used. For the effects of this change on the historical comparability of the data, see
Annual Report on the Labor Force, 1954, Series P-50, No. 59, April 1955, p. 12.
Source: Department of Labor.




231

TABLE B-20.—Employment and unemployment, by age and sex, 1942-61
[Thousands of persons 14 years of age and over]
Employed

Year or month

Unemployed

Total
45 years
civil45 years
20-44 years
20-44 years
and over
ian Total
and over
Total
labor em- 14-19
u n e m - 14-19
force ployed
years
FeFe- ployed
Male male Male male
Male Fe- Male Female
male

Old definitions: 1
1942.
1943.
1944.

56,410 53, 750 5, 770 20, 790 9,400 14,160 3,630
350 17,55011,05015,160 4,360
55, 540 54,470
54,630 53,960 6,05016,38011,28015,480 4,770

1945.
1946.
1947.
1948.
1949.

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

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

5,48015,83011,14015,520
4,550:21,170 9,870 15,280
4,717 23,409 9,82815,474
,
4,841 23, 842 10,098 15, 677
4,512 23,483 10,087 15,491

1950.
1951.
1952.
1953.
1954.

63,099
62,884
62,966
63, 815
64,468

59, 957
61,005
61,293
62*213
61,238

4, 564 23, 833 10, 376 15,666
4,614 23, 594 10,833 16,144
,833
4,530 23, 372 10,917 16,345
4,514 23, 715 10; 953 16, 725
4,285 23,178 10, 730 16, 649

1955.
1956.

2,660
1,070
670

510
290
200

670
180
140

520
260
170

770
240
110

190
100
50

4,850
4,380
4,600
4,924
5,138

1,040
2,270
2.142
2,064
3,395

190
330
290 1,200
425
920
415
757
595 1,329

270
280
303
353
559

200
410
396
414
719

50
90
99
127
194

5,517
5,819
6,130
6,306
6,395

3,142
1,879
1,673
1,602
3,230

543 1,119
356
515
362
495
312
512
515 1,158

552
419
344
300
617

697
402
345
363
684

232
190
127
116
256

65, 848 63,193 4,446 23,76811,00016,878 7,101
67, 530 64,979 4,764 24,051 11,271 17,294 7,598

2,654
2,551

471
510

854
784

502
491

606
530

222
239

1957.
1958.
1959.

67,946 65,011 4,719 23,99211,247 17,247 7,
68, 647 63,966 4,51123,374 11,02817,036 8,015
69, 394 65, 581 4,789 23,952 11,080 17,316 8,443

2,936
4,681
3,813

574
936
757 1,715
727 1,233

566
850
708

605
965
789

254
392
356

1960 K.
1961...

70, 612 66, 681 5,033 24,064 11,282 17,478 8,823
71, 603 66, 796 5,158 23,894 11,318 17,449 8,978

3,931
4,806

792 1,276
921 1,549

730
911

782
969

348
455

1960:
January-.February.
March
April
May
June

68,168
68,449
68,473
69, 819
70, 667
73,002

64,020
64,520
64,267
66,159
67, 208
68,579

',124 8,350
4,064 23, 659 10, 82117,
4,187.23,73* 10,944 17,159 8,499
988
4,104 23, 606 10, 17,108 8,463
3,
3,957 11,420 17,482 8,775
4,' 808 24^ 721 11, 582 17, 625 8,968
6,224 24, 410 11, 438 17,654 8,854

4,149
635
3,931
607
4,206
698
3,660
658
3,459
76£
4,423 1,569

1,484
1,402
1,531
1,267
1,059
1,133

723
708
675
633
656
751

934
904
923
755
680
653

373
308
380
346
299
316

July
August
September
October
November
December

72,706
72,070
71,155
71,069
71,213
70, 549

68,282
67, 767
67,490
67,182
66,009

6,827 24,38011,23917,,567
6,439 24,439 11,14817,,529
5,015 24,37611,49917,,687
4, 96124,25011
,684
4, 729 24! 07011,47917,
4,, 522 23! 679 11, 30317, 420

8,676
8,730
9,191
9,053
9,221
9,

4,017 1,020 1,193
3,788
805 1,179
3,388
665 1,035
3, 579
663 1,077
4,031
68" 1,310
4, 540
728 1,648

784
747
734
737
850
772

670
710
668
727
777
989

348
345
285
373
412
403

1961:
January- -February..
March
April
May
June

69,837
70,360
71,011
70,
71,546
74,286

64,452
64,655
65,510
65, 734
66, 778
68,706

4,13' 23,
,011 17,184
4,237 23,187 11,167 17,152
',340
4,371 23,329 11,42217,
4,415 23,663 11,355 17,377
4,761
823 11,540 17, 520
6,373
243 11, 438 17, 621

8,816
8,914
9,055
8,921
9,134
9,030

5,385
784
5,705
809
5,495
827
4,962
778
4,768
876
5,580 1,763

2,011
919 1,200
2,103 1,040 1,260
1,997
980 1,193
1,713
931 1,060
1,546
901
977
1,499
965
831

472
491
499
480
469
521

July
August
September
October...
November
December

73,639
73,081
71,123
71,759
71,339
70,559

68,499
68,539
G7,038
67, 824
67,349
66,467

92124,28011,050 17,446
327 11,106 17, 495
6,877
4,"" ' 24,325 11,273 17,527
984
5,038
293 11,649 17, 682
4, 953 24,13611,502 17, 629
4, 829 23, 816 11, 303 17, 400

8,799
8,736

5,140 1,304 1,466
4,542
958 1,410
4,085
797 1,166
3,934
736 1,127
3,990
750 1,180
4,091
669 1,375

New definitions: 1

1

9.160
9,130
9, i r

931
888
892
907
819
739

See Note, Table B-19 for explanation of differences between the old and new definitions.
Beginning January I960, data for Alaska and Hawaii are included.
NOTE.—Data are not available prior to 1942 for all the age/sex groups above.
See Note, Table B-19 for information on area sample used and reporting periods.

2

Source: Department of Labor.




232

917
866
808
751
827
934

521
420
424
411
383
372

TABLE B-21.—Employed persons not at work, by reason for not working, and special groups of
unemployed persons, 7946—61
[Thousands of persons 14 years of age and over]
Employed persons not at work,
by reason for not working
Year or month
Total

Bad
weather

Industrial
dispute

Vacation

Special groups of unemployed persons 2

Illness

All
other
reasons

Tempo- New wage
rary
and salary
layoff 3
job <

New definitions: 5
1946
1947
1948
1949

2,103
2,269
2,490
2,243

)
211
197
110

95
97
79

662
834
1,044
1,044

819
847
844
719

()
273
308
291

97
123
141
185

58
92
121
101

1950
1951
1952
1953
1954

2,440
2,459
2,555
2.529
2,688

151
111
68
96
73

85
57
164
73
53

1,137
1,073
1,130
1,171
1,361

718
782
775
827
776

349
436
418
362
425

92
117
142
167
221

116
103
117
101
127

1955
1956
1957
1958
1959

2,683
3,017
3,076
3.161

103
109
139
182
115

61
76
45
59
160

1,268
1,346
1,447
1,479
1,494

835
901
962
882
907

416
456
425
474
484

133
124
150
166
128

117
147
110
120
134

1960 7
1961

3,231
"3,146

168
143

40
56

1,576
1,492

505
556

147
149

119
129

1960: January
February...
March
April
May
June

2,343
2,730
2,791
2,243
2,086
3,772

351
302
826
32
88
19

47
50
57
39
48
58

334
398
324
868
645
2,293

1,144
1,466
1,121
856
873
767

466
514
464
448
431
634

133
130
112
140
146
126

85
95
76
120
79
272

July
August
September.
October
November .
December..

7,291
6,924
2,630
2,063
1,913
1,989

23
29
30
26
38
253

38
26
34
64
12

5,692
5,293
1,339
815
543
374

783
842
817
810

756
736
410
348
431
420

185
200
140
150
114
188

134
154
123

1961: January
February..
March
April
May
June

2,045
2,173
2,044
2,020
2,026
3,839

194
260
213
189
56
75

337
430
407
394
641
2,178

979
997
942
945
902
807

515
474
471
460
399
761

206
260
210
120
137
127

54
71
101
135
96
311

July
August
SeptemberOctober
NovemberDecember..

7,357
6,604
2,928
2,354
2,189
2,170

5,568
4,805
1,336
815
585
409

833
831
849
927
910
858

814
928
427
441
480
505

102
186
113
101
99
130

157
177
160
102
99
83

172
372

53
40
229
166
43
24

' Beginning 1957, includes persons waiting to open new businesses or start new farms within 30 days.
2
Under the old definitions of employment and unemployment, these groups were included in the
"employed but not at work" category.
3
Persons on layoff with definite instructions to return to work within 30 days of the layoff.
4
Persons scheduled to start new wage and salary jobs within 30 days. Under the old definitions, the
"new job or business" group included these persons as well as persons waiting to open new businesses or
start new farms within 30 days (see "all other" category in this table) and persons in school during the
survey week and waiting to start new jobs (these are now classified as "not in the labor force").
5
See Note, Table B-19 for explanation.
6
Not available.
7
Beginning January 1960, data for Alaska and Hawaii are included.
NOTE.—See Note, Table B-19 for information on area sample used and reporting periods.
Source: Department of Labor.




233

r
TABLE B-22.—Unemployed persons, by durationof unemployment, 1946-61
Duration of unemployment
Total unemployed

Year or quarter

4 weeks
and under

5-14
weeks

15-26
weeks

Over 26
weeks

Average
duration
of unemployment
(weeks)

Thousands of persons 14 years of age and over
Old definitions: i
1946
1947
1948
1949

2,270
2,142
2,064
3,395

1,041
1,087
1,517

704
669
1,195

193
427

141
164
116
256

1950
1951
1952
1953
1954

3,142
1,879
1,673
1,602
3,230

1,307
1,003
925
910
1,303

1,055
574
517
482
1,115

425
166
148
132
495

357
137
84
79
317

12.1
9.7
8.3
8.1
11.7

_.

2,654
2,551

1,138
1,214

815
805

367
301

336
232

13.2
11.3

1957
1958
1959

. -

2,936
4,681
3,813

1,485
1,833
1,658

890
1,397
1,113

321
785
469

239
667
571

10.4
13.8
14.5

I960*
1961

—

—

3,931
4,806

1,799
1,897

1,176
1,375

502
728

454
804

12.8
15.5

-

4,612
3,666
3,467
3,506

1,609
1,687
1,626
1,712

1,542
831
1,062
1,021

684
526
311
357

777
623
468
417

15.9
15.2
13.6
12.8

4,095
3,847
3,731
4,050

1,634
1,957
1,741
1,861

1,432
910
1,171
1,190

563
545
403
499

467
435
416
499

13.3
12.3
12.3
13.0

5,528
5,103
4,589
4,005

1,997
2,043
1,831
1,724

1,922
1,188
1,314
1,079

903
953

705
919

544
512

900
691

14.0
16.0
16.4
16.0

1955
1956

.

(3)

9.8
8.6
10.0

N e w definitions: *

1959- I
II
HI
IV
I960: I *
II
III
IV
1961" I
II
III
IV

—

i See Note, Table B-19 for explanation of differences between the old and new definitions.
» For duration of less than 6 months, data are available only for under 3 months (1,568,000) and 3 to 6
months (564,000).
3 Not available.
* Beginning January 1960, data for Alaska and Hawaii are included.
NOTE.—See Note, Table B-19 for information on area sample used and reporting periods.
Source: Department of Labor.




234

TABLE B-23.—Unemployment insurance programs, selected data, 1940-61
All programs

Year or month

State programs

Insured Total
Cov- unem- benefits
ered
ploypaid [nsured
ment
em(mil- unem- Initial
ploy- claims
ploy- (weekly lions
3
ment 1 aver- of dol- ment
lee} 2 3 lars) 2

Exhaustions 4

Weekly average,
thousands

Thousands

Insured unemployment as percent of covered
employment

Benefits paid

AverTotal
age
(mil- weekly
Season- lions of check
Unad- ally ad- dollars) (doljusted justed
(5)
lars) «

Percent

19411942..
1943-.
1944..

24,291
28,136
30,819
32,419
31,714

1,331
842
661
149
111

534.7
358.8
350.4
80.5
67.2

1,282
814
649
147
105

214
164
122
36
29

5.6
3.0
2.2
.5
.4

518.7
344.3
344.1
79.6
62.4

10.56
11.06
12.66
13.84
15.90

1945-.
1946..
1947_.
1948..
1949..

30, 087
31, 856
33, 876
34,646
33,098

720
2,804
1,805
1,468
2, 479

574.9
2,878. 5
1,785.0
1,328.7
2,269. 8

589
1,295
1,009
1,002
1,979

116
189
187
210
322

2.1
4.3
3.1
3.0
6.2

445.9
1,094.9
775.1
789.9
1.736.0

18.77
18.50
17.83
19.03
20.48

1950..
1951 ..
1952..
1953.
1954..

34,308
36,334
37,006
38,072
36, 617

1,605
1,000
1,069
1,065
2,048

1,467.6
862.9
1,043. 5
1,050.6
2,291. 8

1,503
969
1,024
995
1,865

236
208
215
218
303

16
18
15
34

4.6
2.8
2.9
2.8
5.2

1.373.1
840.4
998.2
962.2
2,026. 9

20.76
21.09
22.79
23.58
24.93

19551956195719581959-

1,395
1,318
1,567
3,269
2,099

1, 569.2
1, 540. 6
1,913.0
4, 209. 2
2,803.0

1,254
1,212
1,450
2,509
1,682

226
226
268
370
281

25
20
23
50
33

3.5
3.2
3.6
6.4
4.4

1,350.3
1,380. 7
1, 733. 9
3, 512. 7
2, 279.0

25.04
27.02
28.17
30.58
30.41

1960—
1961 7..

40,014
42, 758
43,447
44, 501
45, 727
46,334
(8)

2,067 3, 022. 7
2,996 4,358.0

1,906
2,290

331
350

4.8
5.6

45,446
45,409
45,389
46,240
46, 473
46,963

2,359
2,326
2,370
2,078
1,801
1,700

264.4
274.6
314.6
259.6
223.0
216.8

2,180
2,157
2,209
1,939
1,682
1,588

386
301
301
293
264
272

5.6
5.5
5.7
4.9
4.3
4.0

4.8
4.2
4.5
4.8
4.2
4-4

2, 726.7
3, 422. 7
235.2
247.8
287.1
237.4
204.9
198.9

32.87
33.80

1960: January
February
March
April
May
June

31
46
29
30
33
35
31
31

46,900
47, 017
47,012
46, 602
46,270
46,282

1,826
1,804
1,781
1,839
2,225
2,847

198.7
229.7
230.8
214.9
258.6
332.4

1,686
1,657
1,598
1,678
2,039
2,639

339
306
274
332
396
494

29
28
27
29
31
36

4.3
4.2
4.0
4.2
5.1

17
5.1
5.4
5.7
6.8
6.4

183.8
206.3
201.8
189.9
231.1
300.2

32.37
32.99
33.54
33.73
34.01
34.18

44,756
44,467
44,873
(8)

3,515
3,638
3,403
3,626
3,290
2,877

436.4
435.5
500.9
419.4
457.2
403.9

3,266
3,394
3,168
2,779
2,328
1,991

541
480
372
367
297
279

44
49
53
58
54
53

8.1
8.4
7.8
6.8
5.7
4.9

6.1
6.8
6.8
5.9
5.6
5.8

397.6
399.3
461.5
362.5
320.1
264.4

34.34
34.45
34.37
34.18
33.46
32.92

2,678
2,357
2,122
2,018
2,172
2,533

321.9
333.5
263.4
255.3
261.4
286.1

1,958
1,744
1,558
1,502
1,662
2,017

357
271
257
277
320
395

50
44
38
35
34
35

4.8
4.3
3.8
3.7
4.1
5.0

5.8
5.2
6.1
5.1
5.1
4.8

224.0
237.2
185.0
180.9
190.9
218.5

32.91
33.36
33.12
33.30
33.67
34.11

July
August
September
October. _.
November
December
1961: January
February
March
April
May
June
July
August
September
October
November
December ?_—

31.90
32.26
32.39
32.50
32.24
32.33

1
Includes persons under the State, U C F E (Federal employee, effective January 1955), and R R B (Railroad Retirement Board) programs. Beginning October 1958, also includes the UCX program (unemployment compensation for ex-servicemen).
2
Includes State, UCFE, RR, UCX, UCV (unemployment compensation for veterans, October 1952January 1960), and SRA (Servicemen's Readjustment Act, September 1944-September 1951) programs.
Also includes Federal and State programs for temporary extension of benefits beginning June 1958.
3 Covered workers who have completed at least 1 week of unemployment. ^
4
Individuals receiving final payments in benefit year.
8 Includes benefits paid under extended duration provisions of State laws, beginning June 1958.
• For total unemployment only.
* Preliminary.
s March 1961 is latest month for which data are available for all programs combined; workers covered by
State programs account for about 87 percent of the total.
NOTE.—Data for Alaska and Hawaii included for all periods and for Puerto Rico since January 1961.
Source: Department of Labor.

235
621876 O - 6 2 - 1 6




T A B L E B-24.—Number of wage and salary workers in nonagr{cultural establishments•, 1929-61l
[Thousands of employees]

Year or month

Total
wage
and
salary
workers

Manufacturing

Total

Durable
goods

Nondurable
goods

Mining

TransCon- porta- Wholetract tion
sale
conand
and
struc- public retail
tion utili- trade
ties

GovFi
ernnance, ice
ment
insur- and (Fedance, miscel- eral,
and lane- State,
real
and
estate ous local)

1929..

31,339

10,702

1,087

1,497

3,916

6,123

1,509

3,440

3,065

1930..
1931..
1932..
1933..
1934..

29,424
26,649
23,628
23,711
25,953

9,562
8,170
6,931
7,397
8,501

1,009
873
731
744
883

1,372
1,214
970
809
862

3,685
3,254
2,816
2,672
2,750

5,797
5,284
4,683
4,755
5,281

1,475
1,407
,341
,295
,319

3,376
3,183
2,931
2,873
3,058

3,148
3,264
3,225
3,166
3,299

1935..
1936..
1937..
1938..
1939..

27,053
29,082
31,026
29,209
30,618

9,827
10, 794
9,440
10,278

()
4,715

5,564

897
946
1,015
891
854

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

2,786
2,973
3,134
2,863
2,936

5,431
5,809
6,265
6,179
6,426

,335
,388
,432
,425
,462

3,142
3,326
3,518
3,473
3,517

3,481
3,668
3,756
3,883
3,995

1940..
1941..
1942..
1943..
1944..

32,376
36, 554
40,125
42,452
41,883

10,985
13,192
15,280
17,602
17,328

5,363
6,968
8,823
11,084
10,856

5,622
6,225
6,458
6,518
6,472

925
957
992
925
892

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

3,038
3,274
3,460
3,647
3,829

6,750
7,210
7,118
7,058

,502
,549
,538
,502
,476

3,681
3,921
4,084
4,148
4,163

4,202
4,660
5,483
6,080
6,043

1945..
1946..
1947..
1948..
1949..

40,394
41,674
43,881
44,891
43,778

15, 524
14,703
15,545
15,582
14,441

9,074
7,742
8,385
8,326
7,489

6,450
6,962
7,159
7,256
6,953

955
994
930

1,132
1,661
1,982
2,169
2,165

3,906
4,061
4,166
4,189
4,001

7,314
8,376
8,955
9,272
9,264

,497
,697
,754
,829
1,857

4,241
4,719
5,050
5,206
5,264

5,944
5,595
5,474
5,650
5,856

1950..
1951..
1952..
1953..
1954..

45, 222
47,849
48,825
50,232
49, 022

15,241 8,094 7,147
16,393 9,089 7,304
16, 632 9,349 7,284
17, 549 10,110 7,438
16, 314 9,129 7,185

901
929
791

2,333
2,603
2,634
2,623
2,612

4,034
4,226
4,248
4,290
4,084

9,386
9,742
10, 004
10,247
10,235

1,919
1,991
2,069
2,146
2,234

5,382
5,576
5,730
5,867
6,002

6,026
6,389
6,609
6,645
6,751

1955..
1956..
1957..
1958..
1959..

50, 675
52, 408
52, 904
51, 423
53,380

16,882
17, 243
17,174
15,945
16, 667

9,541
9,834
9,856
8,830
9,369

7,340
7,409
7,319
7,116
7,298

792
822
828
751
731

2,802
2,999
2,923
2,778
2,955

4,141
4,244
4,241
3,976
4,010

10, 535
10,858
10,886
10, 750
11,125

2,335
2,429
2,477
2,519
2,597

6,274
6,536
6,749
6,811
7,105

6,914
7,277
7,626
7,893
8,190

I960..
1961 3.

54,347
54,076

16, 762
16,268

9,441
9,044

7,321
7,224

709
667

2,882
2,760

4,017
3,923

11,412
11,365

2,684
2,748

7,361
7,514

8,520
8,831

()

Seasonally adjusted

January
February..
March
April
May
June

52,446
52,612
52, 843
53,328
53, 606
53, 779

16,294
16,400
16, 601
16, 744
16,891
16,996

9,097 7,197
9,184 7,216
9,345 7,256
9,482 7,262
9,601 7,290
9,667 7,329

751
744
747
749
758
756

2,914
2,896
2,911
2,988
2,981
2,992

3,990
3,997
4,007
4,013
4,032
4,035

10,895
10,941
10,877
11, 068
11,127
11,152

2,554
2,557
2,569
2,578
2,586
2,593

6,962
6,994
7,023
7,065
7,088
7,104

8,108
8,123
8,143
8,151

July
-.
August
SeptemberOctober...November December.

1959:

53,879
53,357
53,413
53,353
53, 622
54,116

17,036
16, 534
16,556
16,444
16, 600
16,907

9,696 7,340
9,182 7,352
9,208 7,348
9,126 7,318
9,268 7,332
9,569 7,338

766
693
677
682
722
726

2,982
2,989
2,954
2,930
2,920
2,982

4,034
4,007
4,005
3,989
3,997
4,015

11,173
11,222
11,198
11,216
11,228
11,259

2,604
2,606
2,618
2,625
2,628
2,636

7,113
7,132
7,153
7,178
7,201
7,232

8,171
8,174
8,252
8,289
8,326
8,359

See footnotes at end of table, p. 237.




236

TABLE B-24.—Number of wage and salary workers in nonagricultural establishments, 1929-67 !—

Continued
[Thousands of employees]

Year or month

Total
wage
and
salary
workers

Manufacturing

Total

Durable
goods

Nondurable
goods

Mining

GovFiTransernCon- porta- Whole- nance, Serv- ment
ice
tract
tion
insur- and
sale
(Fedconand
and
ance, miscel- eral,
struc- public retail
and
lane- State,
tion utili- trade
real
and
ties
estate ous
local)

Seasonally adjusted
1960: January
February...
March
April
May
June

54,211
54,445
54,427
54,702
54, 584
54, 538

16, 988
17, 063
17, 054
17, 037
16, 985
16, 901

9,659
9,719
9,683
9,652
9,608
9,526

7,329
7,344
7,371
7,385
7,377
7,375

716
723
722
729
725
717

2,922
2,974
2,759
2,901
2,921
2,912

4,022
4,034
4,039
4,054
4,040
4,039

11,315
11, 355
11, 356
11,439
11,442
11, 436

2,641
2,655
2,661
2,666
2,670
2,679

7,256
7,287
7,287
7,307
7,326
7,357

8,351
8,354
8,549
8,569
8,475
8,497

July
August
September..
October
November..
December. _

54, 514
54,403
54,301
54,190
53, 995
53, 707

16, 813
16, 701
16,619
16,489
16,351
16,174

9,451
9,377
9, 322
9,208
9,111
8,988

7,362
7,324
7,297
7,281
7,240
7,186

698
706
700
698
693
679

2,928
2,902
2,879
2,877
2,832
2,757

4,031
4,022
4,008
3,991
3,976
3,950

11,465
11,455
11,422
11,423
11. 371
11,334

2,685
2,696
2,704
2,707
2,719
2,723

7,398
7,402
7,400
7,415
7,431
7,447

8,496
8,519
8,569
8,590
8,622
8,643

1961 January
February
March
April
May
June
-.

53, 581
53, 485
53, 561
53,663
53,894
54,182

16, 021
15, 962
16, 023
16, 275
16, 373

8,863
8,797
8,820
8,904
9,058
9,114

7,158
7,165
7,203
7,215
7,217
7,259

672
667
668
666
670
669

2,773
2,765
2,792
2,766
2,742
2,795

3,931
3,922
3,919
3,901
3,903
3,914

11,347
11,296
11,252
11, 320
11,355
11, 392

2,727
2,731
2,732
2,732
2,739
2,747

7,439
7,460
7,463
7,425
7,436
7,471

8,671
8,682
8,712
8,734
8,774
8,821

July
August
September..
October 3
November .
December 3.

54,335
54, 333
54,304
54, 385
54, 517
54, 491

16, 392
16, 381
16, 323
16. 361
16, 469
16, 521

9,138
9,131
9,105
9,112
9,221
9,265

7,254
7,250
7,218
7,249
7,248
7,256

672
665
666
661
666
660

2,776 3,942
2,770 3,939
2,754 3,939
2,758 3,929
2,720 3,926
2,703 3,908

11, 437
11,410
11,363
11,365
11,368
11,339

2,748
2,757
2,756
2,764
2,770
2,772

7, 533
7,546
7,567
7,580
7,603
7,621

8,835
8,865
8,936
8,967
8,995
8,967

16,119

1
Includes all full- and part-time wage and salary workers in nonagricultural establishments who worked
during, or received pay for, any part of t v e pay period ending nearest tbe 15th of the month. Excludes
proprietors, self-employed persons, domestic servants, and unpaid family workers. Not comparable with
estimates of nonagricultural employment of the civilian labor force (Table B-19) which include proprietors,
self-employed persons, domestic servants, and unpaid family workers; which count persons as employed
when they are not at work because of industrial disputes, bad weather, etc.; and which are based on a
sample survey of households, whereas the estimates in this table are based on reports from employing
establishments.
2 Not available.
3 Preliminary.
NOTE.—Series revised to conform to 1957 Standard Industrial Classification and March 1959 benchmark
data. For further details, see Employment and Earnings, Annual Supplement Issue, November 1961.
Data for Alaska and Hawaii included beginning January 1959.
Source: Department of Labor.




237

TABLE B-25.—Average weekly hours of work in selected industries, 1929-61
Retail
trade
Con- (except
Teletract eating Whole- Bitumi- Class I phone
nous
consale
comrailNon
coal
and
muniTotal Durable durable struc- drink- trade mining roads * cation3
goods goods tion
ing
Manufacturing

Year or month

places)

1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961 s

42.1
40.5
38.3
38.1
34.6
36.6
39.2
38.6
35.6
37.7
38.1
40.6
43.1
45.0
45.2
43.5
40.3
40.4
40.0
39.1
40.5
40.6
40.7
40.5
39.6
40.7
40.4
39.8
39.2
40.3
39.7

1960: January
February...
March
April
„.
May
—
June
July.
August
September-.
October
November..
December...
1961: January
February...
March.
April
._.
May
June
July
August
September..
October 5
November 5 .
December .

40.4
40.1
39.9
39.8
40.1
39.9
39.9
39.6
39.4
39.5
39.3
38.5
39.0
39.3
39.3
39.7
39.8
39.9
40.0
40.0
39.6
40.2
40.6
40.3

44.2

()
32.5
34.7
33.8
37.2
40.9
39.9
34.9
37.9
39.2
42.0
45.0
46.5
46.5
44.0
40.4
40.5
40.4
39.4
41.1
41.5
41.5
41.2
40.1
41.3
41.0
40.3
39.5
40.7
40.1
40.2

()
41.9
40.0
35.1
36.1
37.7
37.4
36.1
37.4
37.0
38.9
40.3
42.5
43.1
42.3
40.5
40.2
39.6
38.9
39.7
39.5
39.7
39.6
39.0
39.9
39.6
39.2
38.8
39.7
39.2
39.3

()
43.4

()
38.2
38.1
37.7
37.4
38.1
38.9
37.9
37.2
37.1
37.5
37.0
36.8
37.0
36.7
37.0

43.2
42.8
41.8
40.9
41.0
40.9
41.3
41.0
40.9
41.0
41.1
40.9
40.5
39.8
39.7
39.6
39.1
38.7
38.7
38.7
38.5
38.1

41.6
42.9
43.1
42.3
41.8
41.3
41.1
41.4
42.3
43.0
42.8
41.6
41.1
41.0
40.8
40.7
40.8
40.7
40.6
40.5
40.7
40.5
40.3
40.2
40.6
40.5
40.4

Seasonally adjusted
40.9
40.6
40.4
40.2
40.4
40.2
40.2
40.0
39.8
39.9
39.7
39.0
39.3
39.6
39.7
40.0
40.2
40.4
40.5
40.5
39.8
40.6
41.2
41.0

39.6
39.4
39.3
39.3
39.7
39.5
39.5
39.1
38.9
38.9
38.7
38.1
38.7
38.8
39.1
39.3
39.3
39.5
39.5
39.3
39.2
39.6
39.7
39.7

36.4
36.9
35.9
37.0
36.5
36.7
37.2
36.8
37.0
37.2
36.8
34.8
37.5
38.1
36.9
35.7
36.3
36.8
36.9
37.1
36.7
37.2
37.5
3
()

38.1
33.3
28.1
27.0
29.3
26.8
26.2
28.5
27.7
23.3
26.8
27.8
30.7
32.4
36.3
43.0

42.0
41.3
40.3
37.7
32.3
34.7
34.9
33.8
34.1
32.3
37.3
37.5
36.3
33.3
35.8
35.8
35.7

()
()
43.7

44.3
45.8
47.0
48.7
48.9
48.5
46.0
46.4
46.2
43.7
40.8
41.0
40.6
40.6
40.8
41.9
41.7
41.7
41.6
41.9
41.7
42.1

38.8
38.9
39.1
39.5
40.1
40.5
41.9
42.3
*41.7
39.4
37.4
39.2
38.5
38.9
39.1
38.5
38.7
38.9
39.6
39.5
39.0
38.4
39.2
39.6
39.3

Unadjusted
38.5
38.5
38.4
38.7
38.5
38.5
38.4
38.5
38.4
38.4
38.5
38.2
38.3
38.4
38.2
38.2
38.3
38.1
38.2
37.9
38.0
38.0
37.9

40.4
40.1
40.2
40.3
40.4
40.6
40.8
40.6
40.6
40.6
40.5
40.4
40.3
40.1
40.2
40.3
40.3
40.6
40.7
40.6
40.5
40.6
40.6
)

37.7
36.2
37.8
36.2
35.5
36.6
36.5
34.9
34.1
34.9
33.4
34.8
35.3
34.7
31.4
32.9
34.7
37.0
38.0
36.8
36.8
37.9
37.7

41.0
42.7
42.9
41.6
41.7
42.8
41.0
42.6
40.6
40.9
40.5
41.9
41.1
42.6
42.2
40.4
43.0
43.0
41.6
43.2
41.9
42.1

39.2
39.1
38.9
39.2
39.4
39.8
39.5
40.8
40.0
40.4
39.5
39.0
39.1
38.8
38.7
38.9
39.2
39.6
39.5
40.3
40.1
39.4

1 Based upon data summarized in the M-300 report by the Interstate Commerce Commission. Hours
and earnings data relate to all employees who received pay during the month, except executives, officials,
and staff assistants.
2
Prior to April 1945, data relate to all employees except executives.
3
Not available.
4
Nine-month average, April through December, because of new series started in April 1945.
6
Preliminary.
NOTE.—Series revised; see Note, Table B-24.
Data are for production workers in manufacturing and mining, construction workers in contract
construction, and for nonsupervisory employees in other industries (except as noted). Data are for pay
period ending nearest the 15th of the month.
The annual figures for 1961 are simple arithmetic averages of the monthly figures shown and are not
strictly comparable with the averages for earlier years, which have been weighted by data on employment.
See Table B-28 for unadjusted average weekly hours in manufacturing.
Data for Alaska and Hawaii included beginning January 1959.
Source: Department of Labor.




238

T A B L E B-26.—Average gross hourly earnings in selected industries, 1929-61
Manufacturing
Year or month
Total

1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940_.
1941
1942
1943—
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961 *
1960: January
February
March.
April
May
June
July
August
SeptemberOctober
NovemberDecember--.
1961: January
February
March
April
May
June
__.
July
August
SeptemberOctober
November 66December _.

$0.560
.546
.509
.441
.437
.526
.544
.550
.617
.620
.627
.655
.726
.851
.957
1.011
.016
.075
.217
.328
378
.440
.56
.65
1.74
1.78
1.86
1.95
2.05
2.11
2.19
2.26
2.32

2.26
2.26
2.26
2.25
2.26
2.26
2.26
2.25
2.27
2.27
2.27
2.29
2.29
2.29
2.29
2.31
2.32
2.32
2.33
2.31
2.33
2.34
2.36
2.37

Durable
goods

()
$0.492
.467
.550
.571
.580
.667
.679
.691

.716
.799
.937
1.048
1.105
1.099
1.144
1.278
1.395
1.453

1.519
1.65
1.75
1.86
1.90
1.99
2.08
2.19
2.26
2.36
2.43
2.49
2.43
2.43
2.43
2.41
2.42
2.42
2.42
2.41
2.44
2.43
2.43
2.46
2.45
2.45
2.46
2.47
2.48
2.49
2.49
2.48
2.50
2.51
2.53
2.54

Nondurable
goods

(4)
$0.412
.419
.505
.520
.519
.566
.572
.571
.590
.627
.709
.787
.844

.886
.995
1.145
1.250
1.295
1.347
1.44
1.51
1.68
1.62
1.67
1.77
1.85
1.91
1.98
2.05
2.11
2.02
2.03
2.03
2.04
2.04
2.05

2.06
2.04
2.06
2.06
2.07
2.09
2.09
2.09
2.09
2.10
2.11
2.11
2.12
2.10
2.12
2.13
2.13
2.14

Retail
Contrade
TeleBitutract (except Whole- minous Class I phone Agriculconsale
eating
rail- 1 comcoal
structrade mining roads munica- ture 3
and
tion 2
tion drinking
places)
$0.659
.662
.626
()
.503
(4)
.485
( )
.651
$0.610
.720
.628
.768
.828
.658
.849
.674
()
.858
$0. 484
.688
.854
.494
.711
.960
.518
.763
1.030
.559
.828
1.101
.606
.898
1.147
.653
.948
.990
1.199
.699
107
1.357
.797
()
,220
1.582
.901
$1. 541
308
1.835
.972
1.713
1.877
1.015
.360
1.792
1.944
1.050
.427
1.863
2.14
.52
1.13
2.02
2.22
1.61
2.13
1.18
1.70
2.40
1.25
2.28
1.76
2.40
1.29
2.39
2.47
1.34
1.83
2.45
2.72
1.40
1.94
2.57
2.92
1.47
2.02
2.71
2.93
1.52
2.09
2.82
3.12
1.57
2.19
2.93
1.62
3.15
2.25
3.07
3.14
2.31
1.68
3.18
2.22
3.17
1.61
3.03
2.22
3.15
1.61
3.04
2.24
3.15
1.61
3.10
2.24
3.16
1.62
3.01
2.25
3.17
1.63
3.02
2.26
3.19
1.63
3.02
2.26
3.14
3.06
1.63
2.24
3.16
3.07
1.63
2.25
3.13
3.10
1.64
2.25
3.14
3.12
1.64
2.25
3.11
3.10
1.64
2.26
3.12
3.16
1.61
3.14
1.66
2.28
3.17
3.12
1.65
2.28
3.16
3.10
1.65
2.28
3.14
3.12
1.67
2.30
3.15
3.12
1.68
2.30
3.16
3.17
1.69
2.32
3.16
2.32
3.17
3.16
1.69
1.69
2.31
3.14
3.17
1.70
2.34
3.15
3.22
1.71
2.33
3.13
3.22
1.71
2.33
3.13
3.24

(0
(4)

4

1
2

$0. 774
.816
.822

.142
.152
.172
.166
.166

.827
.820
.843
.870
.911
s.962
1.124
1.197
1.248
1.345

.169
.206
.268
.353
.423
.472
.515
.547
.580
.559

1.398
1.49
1.59
1.68
1.76
1.82
1.86
1.95
2.05
2.18

.561
.625
.661
.672
.661

2.26
2.36

.818

()
$0. 730
.733
.743
.837
.852
.948
.955
.087
.186
.301
,427
,572
3
,83
1.88
1.93
1.96
2.12
2.26
2.44
2.54
2.61
2.67
2.60
2.61
2.56
2.58
2.58
2.58
2.62
2.59
2.64
2.65
2.64
2.65
2.65
2.70
2.64
2.68
2.65
2.66
2.68
2.65
2.69
2.67

$0.241
.226
.172
.129
.115
.129

2.22
2.23
2.24
2.22
2.24
2.24

2.26
2.26
2.34
2.30
2.30
2.32
2.32
2.32
2.32
2.33
2.34
2.35
2.36
2.37
2.42
2.41
2.42

.675
.705
.728
.757
.798

.751

.812
."§20

.909
."757

.825

."§43

For coverage of series, see footnote 1, Table B-25.
Prior to April 1945, data relate to all employees except executives; for April 1945-May 1949, mainly to
employees subject to the Fair Labor Standards Act; and beginning June 1949, to nonsupervisory employees
only.
3
Weighted average of all farm wage rates on a per hour basis.
4
Not available.
8
Nine-month average, April through December, because of new series started in April 1945.
6
Preliminary.
NOTE.—Series revised; see Note, Table B-24.
Data are for production workers in manufacturing and mining, construction workers in contract construction, and for all nonsupervisory employees in other industries (except as noted). Data are for pay
period ending nearest the 15th of the month.
The annual figures for 1961 are simple arithmetic averages of the monthly figures shown and are not
strictly comparable with the averages for earlier years, which have been weighted by data on man-hours.
Data for Alaska and Hawaii included beginning January 1959.
Sources: Department of Labor and Department of Agriculture.




239

TABLE B—27.—Average gross weekly earnings in selected industries, 7929-67
Retail

Manufacturing
Year or month
Total

trade
TeleCon- (except
tract eatin? Whole- Bitumi- Class T phone
nous
consale
rail- 1 comDura- Non- struccoal
and
muble
durable tion
drink- trade mining roads
nication2
goods goods
ing
places)

1929....
-..
1930....
1931....
1932....
1933
1934
1935
1936....
1937
1938....
1939
1940....
1941
1942
1943
1944
1945
1946
1947
1948
1949...1950.....
1951
-1952
1953
1954
1955
1956
1957
1958
1959
--1960
1961 5
1960: January
February
March
April
May
June
July
August
September...
October
November...
December
1961: January
February
March
April.
May
June...
July
August
September..
October 5
November 5 _
December

$24. 76 $26. 84 $22. 47
23.00
21.40
24.42
20.64
20.09
20.98
16.89
17.26
15.99
16.65
16.76
16.20
18.20
17.73
18.59
19.91
18.77
21.24
21.56
19.57
23.72
23.82
21.17
26.61
22.07
20.65
23.70
23.64
21.36
26.19
24.96
21.83
28.07
29.48
24.39
33.56
36.68
28.57
42.17
43.07
33.45
48.73
45.70
36.38
51. 38
44.20
37.48
48.36
43.32
40.30
46.22
49.17
46.03
51.76
53.12
49.50
56.36
53.88
50.38
57.25
58.32
53.48
62.43
63.34
56.88
68.48
67.16
59.95
72.63
70.47
62.57
76.63
70.49
63.18
76.19
75.70
66.63
82.19
78.78
70.09
85.28
81.59
72.52
88.26
82.71
74.11
89.27
88.26
78.61
96.05
89.72
80.36
97.44
92.34 100.10
82.92
91.08
79.59
99.39
89.95
79.37
97.93
89.72
78.97
97.69
88.65
78.95
96.40
90.40
80.38
97.77
90.63
81.18
97.77
90.17
81.78
96.80
89.55
80.78
96.40
89.89
80.75
97.60
90.12
80. 55
97.69
89.21
80.52
96.23
88.62
79.84
96.19
89.08
80.47
P6.29
89.31
80.47
96.29
89.54
80.88
97.17
90.78
81.27
98.31
92.10
82.29
99.70
93.03 101. 09
83.56
93.20 100.
84.16
92.86 100. 44
83. 58
92.73 100.00
83.74
94.54 102.66
84.77
95.82 103.98
84.99
95.99 104. 39
85.1

()

()

$58. 87
65.27
67.56
69.68
76.96
82.86
86.41
88.91
90.90
96.38
100. 27
103. 78
108. 41
112. 67
117.66
106.96
106. 40
107. 88
111.67
111.74
113. 55
116.89
117.27
116.87
119.18
110.98
108.07
115. 39
114.08

112. 41
112. 77
116. 29
119.13
119. 76
122.05

120. 43
123.00
118. 26

()
$21. 01
21.34
22.17
23.37
24.79
26.77
28.59
32.92
36.94
39.75
41.62
43.16
46.22
47.79
49.75
51.21
53.06
54.74
56.89
58.82
60.76
62.37
64.01

$26. 75
25.19
25.44
25.38
26.96
28.36
28.51
28.76
29.36
31.36
34.28
37.99
40.76
42.37
46.05
50.14
53.63
55.49
58.08
62.02
65.53
69.02
71.28
74.48
78.57
81.41
84.02
88.91
91.13
93.32

61.66
61.50
61.50
62.37
62.27
63.24
63.73
63.90
62.98
62.65
62.48
61.82
63.25
62.8^
62.70
63.46
63.84
64.90
65.57
65.23
64.60
64.64
64.13

89.69
89.02
90.05
90.27
90.90
91.76
92.21
90.94
91.35
91.35
91.13
91.30
91.88
91.43
91.66
92.69
92.69
94.19
94.42
93.79
94.77
94.60
94.60

$25.11
22.04
17. 39
13.58
14.21
17.45
18.86
21.89
22.94
19.78
22.99
23.74
29.47
33.37
39.97
49.32
50.36
56.04
63.75
69.18
60.63
67.46
74.69
75.04
81.84
77.52
92.13
102. 00
106. 00
97.57
111. 70
112. 77
112.10

119. 51
114. 03
119. 07
114. 39
112. 54
116. 75
114.61
110.28

106. 73
109. 59
103. 87
108. 58
110. 84
108. 26
97.34
102. 65
108. 26
117. 29
120. 46
115. 5,
115. 92
118. 63
118. 00

$31. 90
32.47
34.03
39.34
41.49
46.36
46.32
50.00
55.03
60.11
62.36
64.14
70.93
74.30
76.33
78.74
82.12
88.40
94.24
101. 50
106. 43
108. 84
112. 41
106.60
111.45
109. 82
107. 33
107. 59
110.42
107. 42
110. 33
107.18
108.39
106.92
111.04
108. 92
115.02
111.41
108. 27
113.95
114.38
111.49
114. 48
112. 71
112.41

$30.03
31.74
32.14
32.67
32.88
34.14
36.45
38.54
4
40.12
44.29
44.77
48.92
51.78
54.38
58.26
61.22
65.02
68.46
72.07
73.47
76.05
78.72
85.46
89.50
92.75
86.14
87.42
87.58
86.36
87.81
88.26
89.95
89.27
95.47
92.00
92.92
91.64
90.48
90.71
90.02
90.17
91.03
92.12
93.46
93.62
97.53
96.64
95.35

1 For coverage of series, see footnote 1, Table B-25.
2
Prior to April 1945, data relate to all employees except executives; for April 1945-May 1949, mainly to
employees subject to the Fair Labor Standards Act; and beginning June 1949, to nonsupervisory employees
only.
3 Not available.
* Nine-month average, April through December, because of new series started in April 1945.
8
Preliminary.
NOTE.—Series revised; see Note, Table B-24.
Data are for production workers in manufacturing and mining, construction workers in contract construction, and for nonsupervisory employees in other industries (except as noted). Data are for pay period
ending nearest the 15th of the month.
The annual figures for 1961 are simple arithmetic averages of the monthly figures shown and are not
strictly comparable with the averages for earlier years, which have been weighted by data on man-hours.
Data for Alaska and Hawaii included beginning January 1959.
Source: Department of Labor.




24O

T A B L E B-28.—Average

weekly hours and hourly earnings, gross and excluding overtime, in
manufacturing industries, 1939-67
Durable goods manufac- Nondurable goods manuturing industries
facturing industries

All manufacturing industries

Average
weekly

hours
Year or month

1939..
1940
1941
1942
1943
1944
1945
1946
-1947
1948
1949
1950
1951.
1952
1953
1954
1955
1956
1957
195*8...
1959
1960
1961 *
1960: January
February. __
March
April
May
June
July
August
September..
October
November..
December..
1961: January
February.._
March
April
May
June

July
August
SeptemberOctober
November 4 .
December *.

37.7
38.1
40.6
43.1
45.0
45.2
43.5
40.3
40.4
40.0
39.1
40.5
40.6
40.
40.5
39.6
40.
40.4
39.8
39.2
40.3
39.7
39.8
40.3
39.8
39.7
39.
40.0
40.1
39.
39.8
39.6
39.
39.3
38.
38.9
39.0
39.
39.3
39.7
40.
40.
40.
39.
40.
40. €
40.

overtime

0)
0)
0)
0)
0)
0)
0)
0)
0)
0)
0)
0)
(0
0)
0)
0)
(0
37.6
37.5
37.2
37.6
37.3
37.
37.5
37.2
37.2
37.2
37.5
37.6

Average
hourly
earnings

hours

Average
weekly

Average
hourly
earnings

hours

Excluding
overExExExExExtime
cludcludclud;ludcludand
ing Gross ing Gross ing Gross ing
Gross
ing
interoveroveroveroverover- industime
time
time
time
time try shift
(194749=100)

Ex;ludGross

Average
weekly

Average hourly
earnings

$0. 627 0)
.655 0)
. 726 $0.
).691
.851 .793
.957 .881
1.011 .933
1.016 3.949
1.075 1.035
1.21 1.18
1.328 1.29
1.378 1.34

2 72.9
2 80.8
92.7
101.3
106.0

37.9
39.2
42.0
45.0
46.5
46.5
44.0
40.4
40.5
40.4
39.4

51.6

0)
2
2
2
2

53.5
60.2
65.5
70.1

1.440
1.56
1.65
1.74
1.78
1.86
1.95
2.05
2.11
2.19

1.39
1.51
1.59
1.68
1.73

109.3
118.0
124.1
130.
135.2

41.1
41.5
41.5
41.2
40.1

1.79
1.89
1.99
2.05
2.12

2.26
2.32
2.26
2.26
2.26
2.25
2.26
2.26

139.3
146.8
154.3
160.
166.
171.6
176.2

41.3
41.0
40.3
39.
40.7
40.1
40.2

37.
37.2
37.
36.6

2.25
2.27
2.27
2.27
2.29

2.20
2.25
2.19
2.19
2.19
2.19
2.19
2.19
2.19
2.18
2.20
2.20
2.21
2.23

37.
37.
37.
37.
37.
37.

2.29
2.29
2.29
2.31
2.32
2.32

2.24
2.23
2.24
2.25
2.25
2.25

37.
37.
37.
37.
37.
37.

2.33
2.31
2.33
2.34
2.36
2.37

2.26
2.24
2.25
2.26
2.28
2.29

169.8
170.0
170.
170.
171.0
171.7
171.7
171.
172.0
172.5
173.1
174.3
175.0
174.9
175.3
175.8
176.3
176.2
176.4
175.9
176.4
177.3
178.2

0)

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

$0. 691
.716
. 799 $0. 762
.937 .872
1.048 .966
1.105 1.019
1.099 1.031
1.144 1.111
1.278 1.24
1.395 1.35
1.453 1.42

(0

38.0
37.
37.6
38.0
37.7
37.9
40.9 38.0
40.3 37.6
40.
37.7
40.0 37.9
40.4 38.0
40.4 38.0
40.0 37.
40.0 37.6
40.0 37.5
40.
37.7
39.
37.5
39.
37.1
39.
37.5
39.
37.5
39.
37.
39.
37.8
40.
38.1
40.
38.3
40.
38.0
40.
38.0
40.
37.3
38.2
40.
41.1 38.2
41.1 38.2

1.519
1.65
1.75
1.86
1.90
1.99
2.08
2.19
2.26
2.36
2.43
2.49
2.43
2.43
2.43
2.41
2.42
2.42
2.42
2.41
2.44
2.43
2.43
2.46
2.45
2.45
2.46
2.49
2.49
2.48
2.50
2.51
2.53
2.54

1.46
1.59
1.68
1.79
1.84

37.4
37.0
38.9
40.3
42.
43.1
42.3
40.5
40.2
39.6
38.9

2.39
2.39
2.40
2.41
2.42
2.42

39.7
39.5
39.
39.6
39.0
39.9
39.6
39.2
38.8
39.
39.
39.3
39.4
39.1
38.9
38.
39.4
39.6
39.
39.6
39.2
39.1
38.9
38.2
38.5
38.5
38.7
38.7
39.0
39.6

2.42
2.41
2.41
2.43
2.45
2.46

39.7
39.8
39.5
39.8
39.9
39.8

1.91
2.01
2.12
2.21
2.28
2.36
2.42
2.35
2.35
2.36
2.35
2.35
2.35
2.35
2.34
2.36
2.36
2.37
2.40

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

$0. 571
.590
627 $0. 613
.709 .684
.787 .748
.844 .798
3.841
.962
1.145 1.11
1.250 1.21
1.295 1.26

37.2
37.0
36.6
37.0
36.7
36.8
36.8
36.6
36.4
36.4
36.9
37.0
37.1
37.0
36.6
36.6
36.6
36.0
36.4
36.
36.5
36.5
36.7
37.0
37.1
37.0
36.6
36.9
37.1
37.1

1.34:
1.44
1.51
1.58
1.62

1.31
1.40
1.46
1.53
1.58
1.67 1.62
1.77 1.72
1.85 1.80
1.91 1.86
1.91
2.05 1.99
2.05
2.02 1.96
2.03 1.96
2.03 1.97
2.04 1.98
2.04 1.98
2.05 1.98
1.99
2.04 1.98
2.06 1.99
2.06 2.00
2.07 2.01
2.09 2.03
2.09 2.04
2 09 2.03
2 09 2.04
2.10 2.05
2.11 2.05
2.11 2.04
2.12 2.05
2.10 2.03
2.12 2.05
2.13 2.06
2.13 2.06
2.14 2.07

1 Not available.

2

April used. Annual average not available.
a Eleven-month average; August 1945 excluded because of VJ Day holiday period.
«Preliminary.
NOTE.—Series revised; see Note, Table B-24.
Data relate to production workers and are for pay period ending nearest the 15th of the month.
The annual figures for 1961 are simple arithmetic averages of the monthly figures shown and are not
strictly comparable with the averages for earlier years, which have been weighted by data on employment
(in the case of hours) and man-hours (in the case of earnings).
See Table B-25 for seasonally adjusted average gross weekly hours.
Data for Alaska and Hawaii included beginning January 1959.
Source: Department of Labor.




241

T A B L E B—29.—Average weekly earnings, gross and spendable, in manufacturing industries,
in current and 7967 prices, 7939-67
Average spendable weekly earnings 2

Average gross weekly
earnings
Year or month
Current
prices

1961

prices l

Worker with no
dependents
Current
prices

1961

prices 1

Worker with three
dependents
Current
prices

1961

prices *

1939

$23.64

$50.84

$23.37

$50.26

$23.40

$50.32

1940
1941
1942
1943
1944

24.96
29.48
36.68
43.07
45.70

53.22
59.92
67.30
74.39
77.72

24.46
27.96
31.80
35.95
37.99

52.15
56.83
58.35
62.09
64. 61

24.71
29.19
36.31
41.33
43.76

52.69
59.33
66 62
71.38
74.42

44.20
43.32
49.17
53.12
53.88

73.42
66.34
65.82
66.07
67.60

36.82
37.31
42.10
46.57
47.21

61.16
57.14
56.36
57.92
59.23

42.59
42.79
47.58
52.31
52.95

70.75
65 53
63.69
65 06
66 44

1950
1951
1952
1953. . .
1954

58.32
63.34
67.16
70.47
70.49

72.54
72.89
75.63
78.74
78.50

50.26
52.97
55.04
57.59
58.45

62. 51
60.96
61.98
64.35
65.09

56.36
60.18
62. 98
65.60
65.65

70 10
69.25
70 92
73.30
73.11

1955
1956
1957
1958
1959

75.70
78.78
81.59
82.71
88.26

84.49
86.67
86.71
85.62
90.52

62.51
64.92
66.93
67.82
71.89

69.77
71.42
71.13
70.21
73.73

69.79
72.25
74.31
75.23
79.40

77.89
79 48
78 97
77.88
81.44

89.72
92.34

90.63
92.34

72.57
74.60

73.30
74.60

80.11
82.18

80.92
82.18

91.08
89. 95
89.72
88.65
90.40
90.63

92.84
91.51
91.18
89.82
91.50
91.55

73.62
72.75
72.57
71.75
73.10
73.28

75.05
74.01
73.75
72.70
73.99
74.02

81.18
80.29
80.11
79.26
80.65
80.83

82.75
81.68
81.41
80.30
81.63
81.65

90.17
89.55
89.89
90.12
89.21
88.62

90.99
90.36
90.61
90.48
89.48
88.80

72.92
72.44
72.71
72.88
72.18
71.72

73.58
73.10
73.30
73.17
72.40
71.86

80.46
79.97
80.24
80.42
79.71
79.24

81.19
80.70
80.89
80.74
79.95
79.40

89.08
89.31
89.54
90.78
92.10
93.03

89.35
89.49
89.72
90.96
92.38
93.22

72.08
72.26
72.43
73.39
74.41
75.15

72.30
72.40
72.58
73.54
74.63
75.30

79.60
79.78
79.97
80.95
81.99
82.74

79.84
79.94
80.13
81.11
82.24
82.91

93.20
92.86
92.73
94.54
95.82
95.99

93.01
92.67
92.36
94.07
95.44

75.29
75.01
74.91
76.36
77.39
77.52

75.14
74.86
74.61
75.98
77.08

82.88
82.61
82.50
83.98
85.03
85.17

82.71
82.45
82.17
83.56
84.69

-

- -

1945
1946
1947
1948
]949

_..

_.

__

I960
1961 3
I960' J a n u a r y
February
March
April
May

June
July
August
September .
October
November
December
1961: January
February
March
April
May,
June
July
August
September
October
November33
December

--

.

_ _
~.

r

-

-

1
2

Estimates in current prices divided by the consumer price index on a 1961 base (using 11-month average).
Average gross weekly earnings less social security and income taxes.
3 Preliminary.
* Not available.
NOTE.—Series revised; see Note, Table B-24.
Data relate to production workers and are for pay period ending nearest the 15th of the month.
The annual figures for 1961 are simple arithmetic averages of the monthly figures shown and are not
strictly comparable with the averages for earlier years, which have been weighted by data on man-hours.
Data for Alaska and Hawaii included beginning January 1959.
Source: Department of Labor.




242

T A B L E B—30.—Labor turnover rates in manufacturing
[Rates per 100 employees]
Accession rates

Year or month

Total i
1930
1931
1932
1933
1934

1950
1951
1952
1953
1954

_

Layoffs

5.9
4.8
5.2
4.5
4.9

19

1
9
1
1

3.6
3.5
4.2
3.2
3.7

(3)
(3)
(3)
(3)

4.3
4.0
5.2
4.8
3.7

1
3
5
8
10

30
2.4
3.5
3.9
2.6

.

(3)
(3)

4.0
4.7
7.8
8.6
8.1

1.1
2.4
4.6
6.3
6.2

2.6
1.6
1.3
.7
.7

9.6
7.2
5.7
5.4
5.0

6.1
5.2
4.1
3.4
1.9

2.6
1.4
1.1
1.6
2.9

4.1
4.1
3 6
1.9

4.1
5.3
4.9
5 1
4.1

2.3
2.9
2.8
28
1.4

1.3
1.4
1.4
1 6
2.3

3.0
2.8
2.2
1.7
2.6

3.9
4.2
4.2
4.1
4.1

1.9
1.9
1.6
1.1
1.5

1.5
1.7
2.1
2.6
2.0

2.2
2.2

4.3
4.0

1.3
1.2

2.4
2.2

1.5
1.6
1.5
1.4

5.1
5.3
4.3
4.7
5.0
5.4
6.5
9.3
9.1
7.4

_-

--

_

7.7
8.1
6.2
5.4
4.3
5.3
5.3
5.4
4 8
3.6

m

1955
1956
1957
1958
1959

_..

I960
1961*

Quits

3.8
4.2

.

1945
1946
1947
1948
1949

-

New hires

4.5
4.2
3.6
3.6
4.2

_ .

1940
1941....
1942
1943
1944

Separation rates
Total 2

3.8
3.7
4.1
6.5
5.7

-

1935...
1936
1937
1938
1939

industries, 1930—61

---

(3)
(3)

(3)

(3)
(3)
(3)

(3)

Seasonally adjusted

July

3.6
4.1
4.3
4.3

3.7

2.6
2.6
2.4
2.2
2.4
2.2

4.5

1.4
1.4

1.6
1.9
2.2
2.2
2.2
2.6

3.6
3.8
3.7
3.6
3.5
3.3

2.1
2.2
2.1
1.9
1.9
1.8

4.6
4.4
4.3
4.2
4.3
4.9

1.3
1.3
1.3
1.2
1.
1.

2.6
2.7
2.6
2.3
2.6
2.9

4.0
3.8
4.6
4.4
4.2
3.9

1.8
1.7
1.9
2.0
2.1
2.1

4.7
4.5
4.2
3.5
3.8
4.0

1.
1.
1.
1.0

1.2
1.2

2.9
2.9
2.3
1.9
2.0
2.2

4.0
4.1
3.7
4.4
4.0

2.2
2.3
2.2
2.5
2.4

4.3
3.8
4.1
3.6
3.8

1.1
1.2
1.3
1.3
1.3

2.5
1.9
2.2
1.7
1.8

4.3
4.1
3.8
3.7

I960' January
February...
March
April
- May
June

3.9

.

September.
October
November

- -

1961* January
February.
March.
April- .*
May
June

__
..

July
August...
October
-_ _
November 8.— -_

__

-

4.2

1 Includes rehires and other accessions, not published separately.
2 Includes discharges and miscellaneous separations, not published separately. (Prior to 1940 quits
include miscellaneous separations.)
3 Not available.
* January-November average.
5
Preliminary.
NOTE.—Series revised; see Note, Table B-24.
Beginning January 1943, data relate to all employees; previously to production workers only.
Beginning January 1959, transfers between establishments of the same firm are included in total accessions
and total separations, therefore rates for these items are not strictly comparable with prior data.
Data for Alaska and Hawaii included beginning January 1959.
Source: Department of Labor.




243

TABLE B-31.—Indexes of output per man-hour and related data, 1947-61
[1947-49 = 100]

Output

Output per man-hour

Year

Nonagricultural
industries
Total Agripri- culvate ture

Man-hours

I

Nongigricultural
industries

Total AgriManMan- Non- pri- culufacufac- man- vate ture
Total turTotal tur- ufacing
ing turing

Nonagricultural
industries

Total AgriNon- pri- culManman- vate ture
ufacufacTotal turing
turing

Nonmanufacturing

Establishment , basis 2
1947
1948
1949

96.7 90.5 97.5 97.5 97.2 97.5 92.9 97.9 100.9 96.2 100.8 102.7 100.4 103. 5 99.0
100.2 107.1 99.4 100. 2 98 9 101.5 106.0 101.2 103.0 100.2 101.3 99.0 101.8 102.8 101.3
103.1 102. 2 103.2 102.5 103.8 100.9 100.5 101.0 96.0 103. 6 97.9 98.3 97.9 93.7 99.8

1950
1951
1952
1953
1954

110.4
113.1
115.5
120.2
122.3

116.2
114.5
124.5
138.6
148.3

108.7
110.5
111.9
114.9
116.7

109.2
111.2
112.8
118.1
117.1

108.4
109.9
111.3
112.7
116.5

110.2
116.9
120.4
126.3
124.3

106.0
99.5
103.3
107.1
111.5

110.5
118.1
121.6
127.7
125.2

111.1
121.8
125.5
138.1
125.1

110.2
116.2
119.6
122.2
125.2

99.8
103.4
104.2
105.1
101.6

91.2
86.9
83.0
77.3
75.2

101.7
106.9
108.7
111.1
107.3

101.7
109.5
111.3
116.9
106.8

101.7
105.7
107.5
108.4
107.5

1955
1936
1957
1958
1959

127.6
127 9
132. 4
135. 5
140.3

153.5
156.4
166.7
181.6
181.1

121.6
121.1
124.7
126.8
131.4

125.3
126.5
126.8
129.1
138.7

119.7
118.4
123.7
126.3
128.1

135.4
138.3
141.0
138.2
148.2

117.6
114.8
113.2
114.8
114.3

136.7
140.0
143.1
139 9
150.7

141.3
145.0
143.0
133.7
153.0

134.3
137. 4
143.1
143.2
149.5

106.1
108.1
106.5
102.0
105. 6

76.6
73.4
67.9
63.2
63.1

112.4
115.6
114.8
110.3
114.7

112.8
114.6
112.8
103. 6
110.3

112.2
116.0
115.7
113.4
116.7

143.3 191.3 133.7 141.9 130.2 152.6 119.2 155.0 156.0 154.5 106.5
1910
19J1 3____ 148. 2 205.6 137.6 146.5 137.6 155.2 120.3 157.7 156.6 162.5 104.7

62.3 115.9 109 9 118.7
58.5 114.6 106.9 118.1

Labor force basis i
(5)
(5)
5

97. 5 92.9 97.9
101.5 106.0 101.2
100.9 100.5 101.0

(5)
(5)
(5)
(5)

(5)

(5)

(5)

110.2
116. 9
120.4
126.3
124. 3

106.0
99.5
103. 3
107.1
111.5

127.5
127.2
130.3
131.4
136. 9

(5)

5

()

(5)

135.4
138. 3
141.0
138.2
148.2

117.6
114.8
113.2
114.8
114.3

148.3 191.9 138. 6
1960
1961 3____ 152.3 206.7 141.3

(5)

(5)

(•)

<•>

1947
1948
1949

97.4 90.6 98.4
100.3 107.5 99.4
102.2 101.6 102.4

(5)

1950
1951
1952
1953
1954

110.3
115.2
118.9
123.9
127.0

108.5
112.8
115.5
119.0
121.8

1955
1956
1957
1958
1959

133.1
133.6
138. 0
140.0
145. 9

116.1
114.1
124.0
138.0
147.9
152.9
155.8
167.0
182.2
181.4

(5)
(5)

0)
( 5)

()
(5)
(5)
(5)

( )
(5)
(5)
(5)

(5 )

(5)

(5)

(5)

(5)

(5)

110.5
118.1
121.6
127.7
125.2

(5)
(5)
(5)

(5)
(5)
(5)

(5)

(5)

(5)

(5)

136.7
140.0
143.1
139.9
150.7

(5)
(5)

152.6 119.2 155.0
155.2 120.3 157.7

5

( )
(5)

5

( )

(5)
(o)

(5)

(5)
(5)

(»)

(5)

100.1 102. £ 99. f
101.5i 98. e 101. g
98.' 7 98. £ 98.6
99.1)
101. t
101. C
101. £
97. £

91.2
87.2
83.3
77.6
75.4

101.8
104.7
105. 3
107.3
102.8

101.7 76.9 107.2
103. £ 73.7 110.1
102.2 67.8 109.8
98.7 63.0 106.5
101. 6 63.0 110.1
102.fi
101. 6

62.1 111.8
58.2 111.6

(5)

(8)
(5)

(5)

(5)

(5)
(5)

(5)
(5)
(5)
(5)

(5)

(5)

(5)
(5)

(5)

(5)

(5)

(5)

(S)

(5)

(5)
(')

1 Output refers to gross national product in 1954 prices.
2 Man-hour estimates based primarily on establishment data.
3
Preliminary.
4
Man-hour estimates based primarily on labor force data.
s Not available.
NOTE.—For information on sources and methodology, see Bureau of Labor Statistics (Department of

Labor) Bulletin No. 1249, Trends in Output per Man-hour in the Private Economy, 1909-58.

Source: Department of Labor.




244

PRODUCTION AND BUSINESS ACTIVITY
TABLE B-32.—Industrial production indexes, market groupings, 7947-67
11957=100]

Final products
Consumer goods 2
Year or month

Total

Materials
Equipment,
including
defense
Total

AutoTotal motive Home
prod- goods

Total

Busi-

Dur- Nonable durable
goods goods

1947..
1948..
1949..

618
67.3
65.1

69.6
71.8
71.4

66.0
69.0
68.4

71.2
74.2
68.7

53.0
55.7
49.7

66.4
69.0
60.3

65.8
68.9
63.6

65.1
67.7
61.2

65.6
69.0
64.9

19501951 _
1952..
1953..
1954..

73.5
79.3
85.2
90.7
86.5

81.5
80.6
82.5
88.1
87.2

86.1
76.2
68.6

94.6
81.5
81.6
93.4
89.1

53.9
75.0
90.0
96.1
85.0

78.9
89.4
91.8
80.8

75.4
82.2
82.7
90.8
84.4

75.8
83.8
84.8
96.1
84.4

74.1
79.7
79.9
85.1
84.3

1055..
1956-.
19571958..
1959..

94.6
S8.9
100.0
95. 1
106. 5

96.5
98.7
100.0
99.0
110.0

112.5
93.0
100.0
82.5
102.8

100.7
104.5
100.0
96.2
115.0

90.9
99. 1
100.0
87.3
99.5

87.2
99.4
100.0
85.2
99.6

97.1
99.7
100.0
91.0
103.5

99.9
100.5
100.0
85.9
100.3

94.1
98.8
100.0
96.5
106.9

I960-.
19613.

110.6
111.9

114.4
116.1

117.2
106.2

115.2
116.8

102.9
103.6

104.7
104.7

105.7
106.4

101.7
100.0

109.9
113.4

Seasonally adjusted
I960: January
February
March
April
May
June
July
August
September
October
November
December
1961: January
February
March
April
May
June
July
August
September
October
November3
December

111.1
109.6
109.1
108.7
109.7
109.4

115.9
113.3
113.2
115.0
116.4
116.6

127.3
122.2
114.0
117.2
120.4
121.2

123.3
116.9
114.8
117.9
121.7
120.2

103.3
103.2
103.5
102. 1
104. 1
103.2

105.6
105. 1
105.1
103.8
105.8
105.3

110 4
109 6
108 3
107. 5
107 3
106. 4

110.3
109.2
106.9
105.2
104.8
101.9

110.6
110.0
109.9
110. 1
110.2
111.3

109.4
108.3
106.7
106. 1
104.5
103.0

111.9
111.0
110.2
110.4
109.0
108.0

115.8
115.0
113.7
114.3
112.7
111.7

113.7
115.4
116.0
120. 0

104.3
103.1
103. 1
102.7
101.7
100.6

106.3
105.1
104.8
104.5
102.9
101.8

106 1
105. 1
103. 7
102. 8
101. 1
99. 0

101.1
99.7
98.7
97.3

105.7

117.0
114.3
112.1
110.2
109.9
110.0

93.9
90.5

111.7
111.0
109.1
108.9
109.0
108.2

102.3
102. 1
102.6
105.6
108.3
110.4

_
_

111.7
109.9
109.9
110.7
112.3
112.1

106.6
106.6
106.7
109.2
110.8
112.7

110.2
110.2
110.6
113.7
115.4
117.8

93.8
89.9
88.0
103.2
107.8
113.3

108.3
109.0
109.7
113.6
116.9
122.3

99.5
99.5
99.0
100. 1
101.6
102.4

100.8
100.7
99.8
101.6
102.6
103.9

98. 1
98. 2
99. 1
102.9
106. 2
108. 7

89.8
89.4
90.4
95.5
100.6
103.5

107.2
107.8
108. 6
111.0
112.3
114.3

112.0
113.0
111.0
112.8
114.2
115.2

114.3
114.7
112.9
115.5
117.1
118.2

119.5
119.8
116.4
119.5
120.8
122.2

115.4
116.5
95.9
110.4
121.2

123.5
119.9
121.1
121.2
122.1

103.9
104.7
105.9
107.4
109.8
110.5

105.1
105.7
106.7
108.3
110.6
112

109. 5
111. 2
109. 2
110. 6
111. 3
111. 8

104.1
105.9
103.7
105.2
105.8

115.4
117.1
115.2
116.5
117.3
118

112.6

128

106

1 Annual indexes for 1929-46 are, respectively: 38.2, 31.8, 26.3, 20.6, 24.3, 26.4, 30.5, 36.1, 39.5, 31.2, 38.1,
43.6, 56.1, 68.9, 82.4, 81.1, 70.0, and 59.2.
2 Also includes apparel and consumer staples, not shown separately.
3
Preliminary.
i
Not available.
Source: Board of Governors of the Federal Reserve System.




245

TABLE B—33.—Industrial production indexes, industry groupings, 1947—61
[1957=100]

Manufacturing

Year or month

Durable manufactures

Total

FabriTransPri- cated Ma- portamary metal chinery tion
metals prodequipucts
ment

Instruments Clay, Furniture
and re- glass,
and
lated
and
miscelprod- lumber laneous
ucts

65.3
68.0
64.3
_.

_

- -

I960
1961 x

61.8
64.4
58.5

80.8
84.1
70.8

74.9
76.2
68.8

62.6
63.8
56.7

40.3
44.0
44.2

54.8
56.4
50. 3

77.7
81.8
74.1

75.3
79.3
73.4

75. 5
81.5
84.8
92.1
85.8

71.3
80.3
85.1
96.0
85.0

89.1
96.9
88.5
100. 3
SI. 3

84.2
90.0
87.8
98.8
88.8

69.7
79.6
88.4
96.4
84.3

52.9
59.0
68.6
86.2
78.7

58.5
67.1
79.7
87.0
817

89.9
94.3
91.6
95.1
92.0

85.8
82.1
84.4
91.9
89.0

96.0
99.3
100.0
92.9
104.9

96.7
99.5
100.0
92.4
105.3

97.9
100.0
100.0
86.8
101.5

105.5
103.7
100.0
78.0
89.5

96.9
97.4
100.0
91.6
103.9

92.6
102.8
100.0
85.2
102.8

95.9
91.5
100.0
84.2
97.8

90.5
97.3
100.0
94.1
112.2

103.3
104.7
100.0
96.5
111.3

100.3
103. 5
100.0
95.6
111.7

108.0
109.0

1950
1951 _
1952
1953
1954

66.1
68.6
64.8

74.5
80.8
83.8
90.8
85.4

1947
1948
1949

1955
1956
1957
1958
1959

Total
industrial
produc- Total
tion

108.2
108.8

104.3
102.9

90.3
88.3

106.0
104.8

106.4
106.1

101.7
97.3

118.9
118.2

108.5
107.2

116.1
116.7

Seasonally adjusted
I960* January
February
March
April

May
June.
July
August

September
October
November

December
1961: January
February
March
April
May
June.
July
AugustSeptember
October
November
December L._

111.1
109.6
109.1
108.7
109.7
109.4

111.9
110.3
109.5
109.0
110.2
109.7

110.9
109.4
107.8
105.9
107.0
105.3

115.4
109.7
105.7
99.0
93.6
87.5

108.6
108.1
106.6
103.8
107.9
108.4

109.7
108.0
108.4
106.8
108.5
108.6

107.0
106.7
103.7
102.3
106.1
101.4

118.4
117.3
118.6
117.0
119.5
120.6

111.7
111.6
107.6
111.3
110.8
112.9

116.3
115.7
115.8
117.2
119.3
120.1

109.4
108.3
106.7
106.1
104.5
103.0

109.7
108.3
106.6
106.0
104.1
102.4

105.4
103.6
101.8
100.6
98.0
95.8

85.1
82.8
79.8
78.3
73.6
69.3

108.7
107.7
105.8
105.4
101.0
100.7

110.0
107.2
105.3
101.8
102.1
101.2

101.3
100.8
101.2
101.8
96.7
93.3

121.4
122.0
118.2
118.6
118.7
116.4

112.6
108.6
106.6
105.6
102.8
100.2

119.1
118.0
114.0
114.9
113.4
110.4

102.3
102.1
102.6
105.6
108.3
110.4

101.4
101.3
101.9
105.2
108.2
110.5

94.6
94.3
94.7
98.7
102.7
105.3

71.2
72.6
73.5
82.0
89.9
92.3

96.5
95.7
96.3
98.6
104. 8
107.3

101.3
100.8
100.5
102.9
104.3
107.3

88.9
87.6
88.1
94.0
99.0
100.6

116.0
113.1
113.0
112.8
115.9
118.6

100.4
99.7
101.9
105.1
107.1
111.8

108.7
109.2
109.8
112.3
115.3
118.7

112.0
113.0
111.0
112.8
114.2
115.2

112.2
113.1
111.0
112.8
114.2
115.3

107.3
107.9
105)1
106.8
109.1
110.3

94.6
98.2
98.7
96.0
96.9
100

108.1
111.0
105.3
109.8
111.9
112

110.2
108.5
107.8
108.6
110.3
112

102.2
102.7
94.5
100.5
105.9
109

119.4
121.9
121.0
121.2
122.9
123

113.0
112.2
110.5
108.2
108.2
107

118.5
119.5
119.7
121.4
124.3
123

See footnotes at end of table, p. 247.




246

TABLE B-33.—Industrial production indexes, industry groupings, 7947-67—Continued
[1957=100]

M anufacturing
Nondurable manufactures
Year or month
Total

Textile,
apparel, Paper
atad
and
leather printing
products

ChemFoods,
ical,
beverpetroages,
leum,
and
and
rubber tobacco
products

Mining

Utilities

1947
1948
1949

70.0
72.3
71.1

83.5
87.1
83.1

68.1
70.9
70.8

50.6
54.1
52.7

83.4
82.7
83.6

76.4
80.3
71.2

38.9
43.4
46.3

1950
1951
1952
1953
1954

79.1
81.7
83.3
86.9
86.9

91.9
90.1
92.2
93.6
89.6

78.4
81.1
79.4
84.5

64.7
71.8
74.5
80.2
79.3

86.5
88.3
90.2
91.2
92.8

79.5
87.3
86.5
88.8
86.2

52.7
60.1
65.2
71.1
76.5

1955
1956
1957
1958
1959

95.0
98.9
100.0
99.9
110.3

98.4
101.1
100.0
99.2
115.2

94.6
99.3
100.0
99.2
107.6

91.8
96.3
100.0
98.8
112.7

96.2
99.8
100.0
102.1
106.5

94.8
100.1
100.0
91.4
95.3

85.4
93.6
100.0
104.5
115.0

1960
1961

113.4
116.7

114.8
115.0

111.5
115.1

117.7
122.4

109.4
113.3

97.1
97.9

123.1
131.2

Seasonally adjusted

1960: January
February.
March
April
May
June
July
August
September
October
November
December.
1961: January
February..
March
April
May
June
July
August
September
October
November.
December

113.1
111.6
112.0
113.2
114.6
115.7

116.4
114.3
115.0
116.0
118.3
118.8

111.3
110.4
109.6
110.3
112.1
112.0

116.4
114.9
115.6
117.9
119.2
122.2

108.8
107.2
107.9
108.4
109.2
109.6

98.0
96.4
96.0
97.9
97.0
97.2

120.2
120.9
123.5
122.9
121.9
123.4

115.5
114.8
113.0
113.3
112.3
111.2

118.6
117.0
112.2
112.1
111.1
107.5

112.3
112.2
112.3
112.8
111.9
110.8

121.7
120.3
117.5
116.8
116.0
114.6

109.3
109.6
109.6
110.8
109.5
110.4

97.5
98.0
96.3
96.9
98.0
97.8

124.0
125.2
125.5
124.0
122.9
122.9

110.5
110.8
111.6
113.9
115.5
117.4

105.0
107.4
110.2
111.8
113.3
115.7

111.1
111.4
111.2
113.1
113.6
114.9

114.0
113.4
113.3
118.0
121.7
124.6

110.2
110.1
111.2
111.9
112.1
113.1

97.6
96.3
96.3
97.4
97.1
97.6

124.6
125.1
124.9
127.1
130.4
131.5

119.0
120.2
118.9
121.0
121.2
122.0

118.2
120.3
118.1
121.7
120.9

114.8
117.8
117.1
117.4
118.3

127.4
127.3
125.7
128.0
128.1

113.9
114.2
113.8
116.1
116.2

97.8
98.7
97.1
99.5
100.6
100.5

131.7
134.6
135.4
135.8
136.0
137.0

121

121

i Preliminary.
Source: Board of Governors of the Federal Reserve System.




247

130

116

TABLE B—34.—Business expenditures for new plant and equipment, 1939 and 1945-62
[Billions of dollars]
Manufacturing
Year or quarter

Total i

Total

Durable
goods

Transportation

Non- , Mining
durable
goods

Railroad

Other

Public
utilities

Commercial
and
other 2

1939

5.51

1.94

0.76

1.19

0.33

0.28

0.36

0.52

2.08

1945
1946
1947
1948
1949

8.69
14.85
20.61
22.06
19.28

3.98
6.79
8.70
9.13
7.15

1.59
3.11
3.41
3.48
2.59

2.39
3.68
5.30
5.65
4.56

.38
.43
.69
.88
.79

.55
.58
.89
1.32
1.35

.57
.92
1.30
1.28
.89

.50
.79
1.54
2.54
3.12

2.70
5.33
7.49
6.90
5.98

1950—
1951
1952
1953
1954

20.60
25.64
26.49
28.32
26.83

7.49
10.85
11.63
11.91
11.04

3.14
5.17
5.61
5.65
5.09

4.36
5.68
6.02
6.26
5.95

.71
.93
.98
.99
.98

1.11
1.47
1.40
1.31
.85

1.21
1.49
1.50
1.56
1.51

3.31
3.66
3.89
4.55
4.22

6.78
7.24
7.09
8.00
8.23

1955
1956
1957_
1958
1959

28.70
35.08
36.96
30.53
32.54

11.44
14.95
15.96
11.43
12.07

5.44
7.62
8.02
5.47
5.77

6.00
7.3B
7.94
5.96
6.29

.96
1.24
1.24
.94
.99

.92
1.23
1.40
.75
.92

1.60
1.71
1.77
1.50
2.02

4.31
4.90
6.20
6.09
5.67

9.47
11.05
10.40
9.82
10.88

35.68
34.50

14.48
13.72

7.18
6.27

7.30
7.45

.99
.99

1.03
.67

1.94
1.84

5.68
5.56

11.57
11.71

. -_

I960.-1961 3

Seasonally adjusted annual rates
1959: I
II
III
IV

30.60
32.50
33.35
33.60

11.20
11.80
12.25
12.85

5.25
5.75
5.85
6.15

5.95
6.05
6.40
6.70

0.95
.95
1.00
1.05

0.65
1.00
1.30
.85

1.70
2.10
2.15
2.15

5.80
5.80
5.60
5.50

10.35
10. 85
11.05
11.20

1960: I

35.15
36.30
35.90
35.50

14.10
14.70
14.65
14.40

7.15
7.40
7.35
6.85

6.95
7.30
7.30
7.55

1.00
1.05
1.00
.90

1.00
1.10
1.00
1.00

2.00
2.15
1.90
1.80

5.75
5.70
5.60
5.70

11.35
11.60
11.75
11.65

- - - -

33.85
33.50
34.70
35.90

13.75
13.50
13.65
14.00

6.50
6.20
6.10
6.35

7.25
7.30
7.55
7.65

.95
1.00
1.00
1.00

.70
.70
.65
.60

1.75
1.80
1.90
1.90

5.35
5.50
5.65
5.70

11.30
11.05
11.85
12.65

.--

36.50

14.55

6.70

7.85

1.00

.70

1.80

5.50

12.90

II
III

IV
1961: I - -

II

III

IV3
1962: I 3

1 Excludes agriculture.
2 Commercial and other includes trade, service, finance, communications, and construction.
3 Estimates for fourth quarter 1961 and first quarter 1962 based on anticipated capital expenditures reported by business in late October and November 1961. The quarterly anticipations include adjustments,
when necessary, for systematic tendencies in anticipatory data.
NOTE.—Thesefiguresdo not agree precisely with the plant and equipment expenditures included in the
gross national product estimates of the Department of Commerce. The main difference lies in the inclusion
in the gross national product of investment by farmers, professionals, and institutions, and of certain outlays charged to current account.
This series is not available for years prior to 1939 and for 1940 to 1944.
Sources: Securities and Exchange Commission and Department of Commerce.




248

TABLE B-35.—New construction activity, 1929-61
[Value put in place, millions of dollars]
Private construction
Year or month

1929 . _.
1930
1931
...
1932
1933 . . . . . .
1934
1935
1936
1937
. . -.
1938
1939
1940
1941
'.
1942
1943
1944
1945
1946 . __
1947
1948
1949
1950
1951 . . .
1952
1953
1954
1955
1956
1957
1958
1959
_New series: 4
1959
1960
19615

Total
new
construction

Resi- Nonresidential building and other construction
dential
Total i building
Com(nonTotal mercial 2 Indus- Public Other *
farm)
trial
utility

10, 793
8.741
6,427
3,538
2,879
3,720
4,232
6,497
6,999
6,980
8,198
8,682
11,957
14, 075
8,301
5,259
5,809
12, 627
17,901
23, 243
24,183
29, 947
32, 700
34, 670
37, 019
39,234
44,164
45, 815
47, 845
48, 950
54,109

8,307
5,883
3,768
1,676
1,231
1,509
1,999
2,981
3,903
3, 560
4,389
5,054
6,206
3,415
1,979
2,186
3,411
10, 396
14, 582
18, 539
17, 914
23, 081
23, 447
23, 889
25, 783
27, 556
32, 440
33,067
33, 766
33, 493
38,002

3,625
2,075
1,565
630
470
625
1,010
1,565
1,875
1,990
2,680
2,985
3,510
1,715
885
815
1,276
4,752
7,535
10,122
9,642
14,100
12, 529
12, 842
13, 777
15,379
18, 705
17, 677
17,019
18,047
22, 331

4,682
3, 808
2,203
1,046
761
884
989
1,416
2,028
1,570
1,709
2,069
2,696
1,700
1,094
1,371
2,135
5,644
7,047
8,417
8,272
8,981
10, 918
11,047
12, 006
12,177
13, 735
15,390
16, 747
15, 446
15, 671

56,555
55, 556
57, 492

40, 344
39, 603
40, 439

24,962
22, 546
22, 566

15,382
17,057
17,873

1,135
893
454
223
130
173
211
290
387
285
292
348
409
155
33
56
203
1,153

Public
construction

1,397
1,182
1,415
1,498
1.137
1,791
2,212
3,218
3,631
3,564
3,589
3,914

949
532
221
74
176
191
158
266
492
232
254
442
801
346
156
208
642
1,689
1,702
1,397
972
1,062
2,117
2,320
2,229
2,030
2,399
3,084
3,557
2,382
2,098

1,578
1,527
946
467
261
326
363
518
705
605
683
771
872
786
570
725
827
1,374
2,338
3,043
3,323
3,330
3,729
4,043
4,475
4,161
4,363
4,893
5,414
5,087
4,990

1,020
856
582
282
194
194
257
342
444
448
450
508
614
413
335
382
463
1,428
2,050
2,580
2,795
3,174
3,574
3,547
3,511
3,774
3,755
3,782
4,212
4,388
4,669

2,486
2,858
2,659
1,862
1,648
2,211
2,233
3,516
3,096
3,420
3,809
3,628
5,751
10, 660
6 322
3,073
2,398
2,231
3 319
4,704
6,269
6,866
9,253
10, 781
11,236
11,678
11, 724
12, 748
14,079
15, 457
16,107

3,930
4,180
4,663

2,106
2,851
2,759

5,008
5,323
5,392

4,338
4,703
5,059

16,211
15,953
17, 053

957

Seasonally adjusted annual rates (New series *)
1960:
January
February
March. _ . . .
April
May
June...
July
August
September . . . October . . .
November
December __ _ _
1961:
January
February
March
April
May
June..July
August
September... . . .
October
November 5
__
•
December s

54, 820
55,220
54,998
54, 657
55,243
55,514
55, 750
55, 837
55, 599
55, 552
56,079
56, 650

40,299
40,095
39,846
39. 414
39, 383
39, 765
39,487
39, 474
39, 316
39, 200
39,624
39, 639

23, 799
23,153
22, 908
22,526
22, 608
22, 870
22, 748
22, 448
22,102
21, 834
22,016
21,916

16,500
16,942
16,938
16, 888
16, 775
16. 895
16, 739
17,026
17,214
17, 366
17, 608
17, 723

4,158
4,323
4,203
4,158
4,066
3,995
3,976
4,033
4,134
4,262
4,378
4,519

2,596
2,722
2,760
2,785
2,786
2,796
2,839
2,880
2,958
3,010
3,025
3,025

5,088
5,216
5,281
5,244
5,214
5,413
5,252
5,410
5,418
5,361
5,452
5,458

4,658
4,681
4,694
4,701
4,709
4,691
4,672
4,703
4,704
4,733
4,753
4,721

14,521
15,125
15,152
15,243
15, 860
15, 749
16,263
16,363
16, 283
16, 352
16, 455
17,011

56,018
55, 717
55, 794
55, 504
55, 518
57,206
57,039
57, 983
58, 910
58,905
61,180
59, 953

38, 575
37, 962
38,511
38, 986
39,232
40,328
41,176
41,281
41, 709
41, 767
42,172
42, 696

20, 649
20,016
20, 508
21,042
21,257
22,271
23,118
23, 306
23, 782
24,026
24, 625
25,191

17,926
17, 946
18, 003
17, 944
17, 975
18,057
18,058
17, 975
17,927
17, 741
17, 547
17,505

4,848
4,821
4,743
4,636
4,515
4,510
4,578
4,646
4,718
4,681
4,608
4,641

3,053
2,992
2,957
2,921
2,849
2,750
2,672
2,588
2,610
2,608
2,554
2,537

5,308
5,384
5,398
5,323
5,383
5,382
5,457
5,470
5,422
5,404
5,377
5,368

4,717
4,749
4,905
5,064
5,228
5,415
5,351
5,271
5,177
5,048
5, 008
4,959

17, 443
17, 755
17,283
16, 518
16,286
16,878
15, 863
16, 702
17,201
17,138
19,008
17, 257

1 Data in this table do not agree with the new construction expenditures included in the gross national
product. The latter data include expenditures for crude petroleum and natural gas well drilling, and do
not reflect revisions in the "new series" presented above. (See Table B-l.)
2 Office buildings, warehouses, stores, restaurants, and garages.
3 Farm, institutional, and all other.
* New series beginning January 1959 not comparable with prior data. In addition to major differences
between old and new series, data for Alaska and Hawaii are included beginning January 1059. For details,
see Construction Activity, C 30-13, August 1960, and C 30-25 (Supplement), July 1961, Bureau of the
Census.
* Preliminary.
Source: Department of Commerce.




249

TABLE B-36.—New public construction activity, 7929-67
[Value put in place, millions of dollars]
Total new public construction x

Major types of new public construction

Federal
Year

All
public
sources

Direct

Federal
aid

State
and
local

Highway

Educational

Hospital
and
institutional

Sewer
and
water
and
miscellaneous
public
service

Conservation
and
development

Military
facilities

other
public2

All

1929

2,486

155

80

2,251

1,266

389

101

404

115

19

192

1930
1931
1932
1933
1934

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

209
271
333
516
626

104
235
111
286
721

2,545
2,153
1,418
846
864

1,516
1,355
958
847
1,000

364
285
130
52
148

118
110
83
49
51

500
479
291
160
228

137
156
150
359
518

29
40
34
36
47

194
234
216
145
219

1935
1936
1937
1938
1939

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

814
797
776
717
759

567
1,566
1,117
1,320
1,377

852
1,153
1,203
1,383
1,673

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

153
366
253
311
468

38
74
73
97
127

246
509
445
492
507

700
658
605
551
570

37
29
37
62
125

214
518
457
486
631

1940
1941
1942
1943
1944

3,628
5,751
10,660
6,322
3,073

1,182
3,751
9,313
5,609
2,505

946
697
475
268
126

1,500
1,303
872
445
442

1,302
1,066
734
446
362

156
158
128
63
41

54
42
35
44
58

469
393
254
156
125

528
500
357
285
163

385
1,620
5,016
2,550
837

734
1,972
4,136
2,778
1,487

1945
1946
1947
1948
1949

2,398
2,231
3,319
4,704
6,269

1,737
865
840
1,177
1,488

99
244
409
417
461

562
1,122
2,070
3,110
4,320

398
764
1,344
1,661
2,015

59
101
287
618
934

85
85
77
213
458

152
278
492
699
803

130
260
424
670
852

690
188
204
158
137

884
555
491
685
1,070

1950
1951
1952
1953
1954

6,866
9,253
10, 781
11,236
11,678

1,625
2,981
4,185
4,134
3,418

462
481
626
687
728

4,779
5,791
5,970
6,415
7,532

2,134
2,353
2,679
3,015
3,680

1,133
1,513
1,619
1,714
2,134

499
527
495
369
333

819
959
958
1,050
1,171

942
912
900
892
773

177
887
1,387
1,290
1,003

1,162
2,102
2,743
2,906
2,584

11, 724
1955
1956 __ ___ 12, 748
14,079
1957 .
15,457
1958
1959 3
16,211

2,777
2,742
2,993
3,388
3,755

790
896
1,314
2,130
2,790

8,157
9,110
9,772
9,939
9,666

3,861
4,431
4,954
5,545
5,870

2,442
2,556
2,825
2,875
2,656

300
300
354
390
428

1,318
1,659
1,737
1,838
2,018

701
826
971
1,019
1,130

1,287
1,360
1,287
1,402
1,488

1,815
1,616
1,951
2,388
2,621

15,953
17,053

3,665
3,830

2,453
2,484

9,835
10,739

5,464
5,800

2,818
3,053

400
370

2,136
2,166

1,221
1,361

1,386
1,386

2,528
2,917

1960
1961 *

1 For expenditures classified by ownership, combine "Federal aid" and "State and local" columns to
obtain State and local ownership. "Direct" column stands as it is for Federal ownership.
2 Includes nonresidential building other than educational and hospital and institutional (industrial,
commercial, public administration, social and recreational, and miscellaneous), public residential buildings,
and publicly owned parks and playgrounds, memorials, etc.
3 Beginning with 1959, data include estimates for Alaska and Hawaii. Comparability with earlier data
is not seriously affected since these two States accounted for less than two-thirds of one percent of total new
public construction in 1959.
* Preliminary.
Source: Department of Commerce.




250

TABLE B-37.—Housing starts and applications for financing, 1929-61
[Thousands of units]
Total housing
starts (farm and
nonfarm)
Year or month

Total
Total
private Private private
and
and 1
public 1
public
509.0
330.0
254.0
134.0
93.0
126.0
221.0
319.0
336.0
406.0
515.0
602.6
706.1
356.0
191.0
141.8
209.3
670.5
849.0
931.6
., 025.1
396.0
091.3
327.0
103.8
220.4

1929..
1930..
19311932..
19331934..
19351936193719381939..
194019411942..
194319441945..
19461947..
1948..
194919501951..
1952..
1953-.
1954..
195519561957..
19581959..
1959
1960
196U
1960: January
February
March
April
May
June
July
August
September
October
November
December
1961: January
February
March
April.
May
June
July
August
September
October 7
November 7
December 7

1, 553.5
1,296.0
1,354.6
87.4
93.3
__
93.9
124.8
133.8
128.2
118.3
135.1
102.6
113.2
94.5
70.9
72.5
81.0
109.7
115.3
130.7
138.3
128.5
130.1
128.2
128.9
104.8
86.6

118.1
041.9
209.4
378.5
New series 6
1,516.8 1, 531.3
1,252.1 1,274.0
1,303.5 1,326.3
83.4
86.0
92.3
90.7
92.8
90.5
123.0
123.0
131.7
130.2
126.6
122.8
116.6
114.3
133.0
130.3
100.6
96.9
110.1
110.4
93 5
92.8
70^4
64.2
71.0
69.8
75.8
77.7
104.6
107.3
111.0
113.0
126.6
128.3
132.4
135.3
125.2
126.0
127.0
127.3
122.4
126.5
124.0
126.4
101.9
103.1
82.8
84.4

Private housing starts,

Proposed
home conadjusted an- struction 2
nual rates
Total
VA
Private
farm
FHA apGovernment and Non- appli- praisal
programs
non- farm cations reTotal
farm
quests
FHA VA

Nonfarm housing starts

509.0
330.0
254.0
134.0
93.0

126.0
215.7
304.2
332.4

14.0
49.4
60.0
399.3 118.7
458.4 158.1
529.6 180.1
619.5 220.4
301.2 165.7
183.7 146.2
138.7
93.3
208.1
41.2
662.5
69.0
845.6 229.0
913.5 294.1
988.8 363.8
1,352. 2 486.7
1,020.1 263.5
1,068.5 279.9
1,068.3 252.0
1,201.7 276.3
1,309.5 276.7
1,093.9 189.3
992.8 168.4
1,141.5 295.4
1,342.8 332.5

*8.8
91.8
160.3
71.1
90.8
191.2
148.6
141.3
156.5
307.0
392.9
270.7
128.3
102.1
109.3

1, 494. 6 332.5
1,230.1 260.9
1,275.3 244.4
82.0
15.9
89.7
17.6
89.4
21.9
121.2
25.4
128.1
25.2
121.2
26.5
112.6
23.6
128.2
26.3
94.9
21.9
107.3
22.6
91.8
20.2
63.7
13.8
68.3
14.0
72.5
13.0
102.2
20.1
108.7
20.1
124.2
23.7
129. 5 22.1
122.7
21.3
124.2
25.5
120.7
20.9
121.5
23.4
100.2
22.9
80.6
17.4

109.3
74.6
83.3
4.1
4.8
5.2
7.3
6.9
7.7
7.4
8.2
6.8
5.9
5.5
4.8
4.9
4.9
6.4
6.1
8.0
7.8
7.3
8.4
7.3
9.2
7.3
5.7

3 20.6
47.8
49.8
131.1
179.8
231.2
288.5
238.5
144.4
62.9
56.6
121.7
286.4
293.2
327.0
397.7
192.8
267.9
253.7
338.6
306.2
197.7
198.8
341.7
369.7

()
164.4
226.3
251.4
535. 4
620.8
401.5
159.4
234.2
234.0

369.7
242.4
243.8
16.3
21.1
27.4
22.5
22.4
23.7
19.6
22.9
20.1
18.3
14.8
13.2
14.3
16.9
24.0
20.8
23.9
23.4
20.6
24.4
19.6
22.1
17.4
16.4

234.0
142.9
177.8
11.2
12.9
12.9
13.7
14.4
15.2
8.5
12.4
11.6
10.0
10.3
10.0
9.4
12.0
17.7
17.5
14.7
17.6
15.1
17.4
15.7
16.1
13.5
11.0

New series 6

1,382
1,383
1,104
1,298
1,331
1,279
1,227
1,355
1,089
1,273
1,220
996
1,127
1,169
1,296
1,166
1,291
1,381
1,343
1,326
1,383
1,434
1,342
1,306

1,302
1,366
1,089
1,275
1,809
1,264
1,209
1,335
1,067
1,237
1,206
1,115
1,262
1,143
1,268
1,351
1,318
1,301
1,365
1,404
1,319
U264

8
8

1
Military housing starts, including thosefinancedwith mortgages insured by FHA under Section 803 of
the National Housing Act, are included in total private and public starts but excluded from total private
starts and from FHA starts.
2
3 Units in mortgage applications for new home construction.
4 FHA program approved in June 1934; all 1934 activity included in 1935.
6 Monthly estimates for September 1945-May 1950 were prepared by Housing and Home Finance Agency.
Not available.
6
In addition to major differences between old and new series arising from revisions in sources and methods,
new series include data for Alaska and Hawaii. For details, see Housing Starts, C20-11 (Supplement),
Bureau of the Census, May 1960.
7
Preliminary; December and year 1961 estimated by Council of Economic Advisers.
NOTE.—Data for VA programs include Alaska and Hawaii; FHA programs include Alaska, Hawaii
and Puerto Rico.
Sources: Department of Commerce, Federal Housing Administration (FHA), Veterans Administration
(VA), and Housing and Home Finance Agency (except as noted).

621876 O-62-17



25 1

TABLE B-38.—Sales and inventories in manufacturing and trade, 1939-61
[Amounts in billions of dollars]
Total manufacturing and trade i

Manufacturing

Wholesale trade i

Retail trade i

Year or month
InvenInvenInvenSales2 tories 3 Ratio Sales2 Inven- Ratio Sales 2 tories3 Ratio Sales 2 tories £ Ratio 4
tories s
1939

10.8

20.1

1.77

5.1

11.5

2.11

1940
1941
1942
1943
1944

12.1
15.8
18.6
21.9
23.8

22.2
28.8
31.1
31.3
31.1

1.72
1.58
1.66
1.40
1.33

5.9
8.2
10.4
12.8
13.8

12.8
17.0
19.3
20.1
19.5

2.06
1.78
1.77
1.51
1.45

2.4
3.0
3.4
3.8
4.2

3.2
4.0
3.8
3.7
3.9

1.30
1.20
1.19
.97

1945
1946
1947
1948
1949

23.9
27.0
33.0
36.3
34.8

30.9
42.7
50.2
55.6
51.9

1.30
1.33
1.41
1.47
1.55

12.9
12.6
15.9
17.6
16.4

18.4
24.5
28.9
31.7
28.9

1.48
1.66
1.71
1.72
1.86

4.5
5.7
6.9
7.5
7.2

4.6
6.2
7.1
7.9
7.6

1950
1951
1952
1953
1954

40.0
44.7
45.9
48.4
47.4

62.9
73.6
74.8
77.4
74.3

1.38
1.58
1.60
1.59
1.59

19.3
22.3
22.8
24.5
23.5

34.3
42.8
43.8
45.4
43.0

1.57
1.77
1.90
1.84
1.86

8.4
9.4

1955
1956
1957
1958
1959

52.3
54.8
56.3
54.0
60.0

80.6
88.7
90.8
85.5
90.6

1.47
1.55
1.60
1.61
1.48

26.3
27.7
28.4
26.2
29.7

46.4
52.3
53.5
49.2
52.4

1.68
1.79
1.89
1.93
1.72

1960
1961

61.0
61.7

94.1
95.0

1.54
1.52

30.4
30.8

53.7
55.0

1.78
1.75

1.34

1.53

3.5

.94

4.6
4.8
5.3
5.9

6.1
7.8
8.0
7.6
7.6

1.49
1.48
1.76
1.43
1.31

.91
.91
1.00
1.01
1.07

6.5
8.7
10.2
11.1
11.1

7.9
12.1
14.2
16.0
15.5

1.21
1.15
1.26
1.39
1.41

9.7

9.1
9.7
10.0
10.5
10.4

.96
1.05
1.01
1.06
1.07

12.3
13.0
13.5
14.1
14.1

19.5
21.0
21.0
21.5
20.9

1.38
1.63
1.52
1.53
1.51

10.6
11.3
11.3
11.1
12.3

11.4
13.0
12.7
12.0
12.6

1.02
1.08
1.13
1.10
1.00

15.3
15.8
16.7
16.7
18.0

22.8
23.4
24.6
24.3
25.5

1.43
1.47
1.44
1.43
1.39

12.3
12.6

13.2
'13.3

1.05 M8.3
1.06 18.3

7 27.2
26.8

1.45
1.45

7 25.6
26.0
26.4
26.3
26.6
26.6

1.42
1.43
1.45
1.39
1.44
1.44

Seasonally adjusted
1960: January
February...
March
April
May
June

61.6
62.3
61.3
62.5
61.9
61.8

91.7
92.6
93.6
93.9
94.6
94.8

1.49
1.49
1.53
1.50
1.53
1.53

31.1
31.6
30.8
31.0
31.0
30.8

53.3
53.9
54.3
54.7
55.0
55.1

1.71
1.71
1.76
1.76
1.77
1.79

12.4
12.5
12.2
12.6
12.4
12.5

12.7
12.7
12.8
12.9
13.1
13.0

1.02 718.1
1.02 18.2
1.05 18.2
1.02 18.9
1.05 18.4
1.04 18.5

July
August
September
October
November.
December..

60.9
60.7
60.4
60.3
59.9
59.4

94.6
94.7
94.6
94.8
94.6
94.1

1.55
1.56
1.57
1.57
1.58
1.59

30.4
30.1
30.1
29.6
29.3
29.1

54.9
55.0
54.7
54.4
54.0
53.7

1.80
1.82
1.82
1.84
1.85
1.84

12.3
12.3
12.2
12.2
12.2
12.3

13.0
13.1
13.1
13.2
13.3
13.2

1.06
1.06
1.08
1.09
1.08
1.07

18.1
18.2
18.1
18.5
18.4
17.9

26.7
26.6
26.8
27.2
27.4
27.2

1.47
1.46
1.48
1.47
1.49
1.52

1961: January
February..
March
April
May
June

58.7
59.3
60.2
60.1
61.6
61.9

93.6
93.4
92.7
93.0
93.1
93.1

1.60
1.58
1.54
1.55
1.51
1.50

28.7
29.0
29.6
30.1
30.8
30.9

53.7
53.6
53.3
53.4
53.4
53.4

1.87 812.2
1.85 12.4
1.80 12.5
1.77 12.1
1.73 12.8
1.73 12.8

813.1
13.2
13.3
13.4
13.5
13.5

1.08
1.06
1.06
1.11
1.05
1.06

17.8
17.8
18.1
17.9
18.0
18.2

26.8
26.6
26.1
26.2
26.2
26.2

1.51
1.49
1.44
1.47
1.46
1.44

July
August
September.
October
November
December '

61.7
62.4
61.6
63.2
64.5

93.5
93.6
94.3
94.6
95.0

1.52
1.50
1.53
1.50
1.47

31.2
31.4
31.4
31.8
32.2

53.5
54.0
54.4
54.8
55.0

1.72
1.72
1.73
1.72
1.71

13.6
13.6
13.5
13.5
13.3

1.09
1.06
1.09
1.07
1.02

18.0
18.2
18.1
18.6
19.2
19 0

26.3
26.0
26.3
26.4
26.8

1.46
1.43
1.45
1.42
1.40

12.5
12.8
12.1
12.8
13.1

1
The series beginning in 1946 for wholesale trade and for retail trade are not comparable with previous
years because of changes in definitions.
2
Monthly average shown for year and total for month.
3
Seasonally adjusted, end of period.
4
Inventory/sales ratio. For annual periods, ratio of weighted average inventories to average monthly
sales; for monthly data, ratio of inventories at end of month to sales for month.
5
Where December data not available, data for year calculated on basis of no change from November.
6
Preliminary.
7
Beginnine January 1960, retail sales and inventories include data for Alaska and Hawaii.
8
Beginning January 1961, wholesale sales and inventories include data for Alaska and Hawaii.
NOTE.—For a description of the series and their comparability, see Survey of Current Business, September
and November 1952, June 1957, and December 1961 for retail, and August 1957 for manufacturing and
wholesale.
The inventory figures in this table do not agree with the estimates of change in business inventories
included in the gross national product since these figures cover only manufacturing and trade rather
than all business, and show inventories in terms of current book value without adjustment for revaluation.

Source: Department of Commerce.




252

TABLE B—39.—Manufacturers'

sales, inventories, and orders, 1939—61

[Billions of dollars]

Year or
month

New orders 1

Inventories 2

Sales *

Unfilled
Nondurable goods
Durable goods
NonDura- Non- orders
industries
industries
ble durable
ble durable (unadgoods goods
Total goods goods just-3
indus- indus- ed)
indus- indus- Pur- Goods Fin- Pur- Goods Fintries
tries
tries
tries chased
ished
ished chased
in
mate- process goods mate- process goods
rials
rials
Dura-

1939—

1.9

3.2

1.8

1.5

2.1

2.4

0.8

2.9

5.4

2.2

3.2

7.0

1940—
1941 —
1942—.
1943—
1944—.

2.5
3.8
5.2
6.9

3.4
4.4
5.3
6.0

2.1
3.1
3.7
3.9

7.3

6.4

2.0
3.2
4.6
5.2
5.0

2.2
2.3
2.2
2.1
2.1

2.6
4.0
4.3
4.5
4.7

.9
1.2
1.2
1.4
1.4

3.0
3.2
3.3
3.0
3.0

6.8
9.8
13.3
12.7
11.9

3.4
5.3
8.0
6.8
5.5

3.4
4.5
5.3
5.9
6.4

18.4
37.9
72.9
71.5
49.0

1945—.
1946—.
1947—.
1948—.
1949....

6.3
5.0

3.5
4.6
5.2
5.4
4.7

2.1
2.9
4.0
4.7
4.7

4.9
6.5
7.2
7.3
6.5

1.5
1.8
2.2
2.2
2.1

3.2
4.2
5.2
6.5

10.5
13.7
15.6
17.4
15.9

3.9
5.9
6.4
7.5

9.3

3.2
4.5
5.1
5.6
4.6

6.6
7.8
9.3
9.9
9.3

20.9
33.8
30.3
26.9
20.8

1950—
1951....
1952....
1953—.
1954—.

8.8

10.4
10.9
12.4
11.2

10.5
11.9
11.9
12.1
12.3

6.1
7.4
7.3
7.4
6.5

6.0
8.6
10.2
10.7

4.7
6.8
6.9
8.1
7.7

8.4
9.1
8.6
8.1
7.9

2.5
2.7
2.7
2.7
2.6

6.6
8.2
8.1
8.4
8.4

21.0
24.5
23.6
23.1
22.5

10.3
12.7
11.7
11.0
10.2

10.7
11.8
11.9
12.1
12.3

41.1
67.6
76.3
59.5
40.9

1955—.
1956—.
1957—.
1958....
1959....

13.1
13.8
14.2
12.4
14.5

13.3
13.9
14.2
13.8
15.2

7.4
8.7
8.3
7.5
8.3

11.1
12 8
12.7
11.3
12.1

8.2
9.2
10.1
9.0
9.7

8.1
8.5
8.8
8.6
8.9

2.8
3.0
3.1
3.0
3.0

8.8
10.1
10.5
9.8
10.4

27.2
28.3
27.3
25.9
30.1

13.9
14.4
13.1
12.0
14.9

13.3
13.9
14.2
13.9
15.3

56.9
64.2
50.7
46.8
51.5

I960—
1961 ««.

14.7
14.6

15.7
16.3

8.0
8.2

12.1
12.8

10.8
10.6

8.7

3.1
3.3

11.1
11.2

29.9
31.1

14.2
14.8

15.7
16.3

45.4
47.7

6.7
7.6

7.1

6.6
7.6
9.2

10.0

Seasonally adjusted
1960:
January
February--.

March
April
May..
June

15.4
15.7
15.2
15.0
15.1
14.9

15.7
15.9
15.7
16.0
15.9
15.9

8.6
8.7
8.8
8.8
8.8
8.7

12.3
12.5
12.7
12.6
12.7
12.8

9.9
10.1
10.4
10.5
10.6
10.7

9.0
9.1
9.1
9.1
9.1
9.1

3.0
3.0
3.0
3.1
3.1
3.1

10.5
10.5
10.5
10.5
10.6
10.6

29.8
30.6
30.3
30.4
30.5
30.1

14.2
14.8
14.6
14.5
14.7
14.3

15.6
15.8
15.7
15.9
15.8
15.8

50.9
50.2
49.5
48.4
47.8
47.7

July
August
September-.
October
November-.
December..

14.7
14.4
14.4
14.1
13.8
13.6

15.7
15.7
15.7
15.5
15 4
15.5

8.4
8.3
8.1
8.0

12.6
12.6
12.4
12.2
12.1
12.1

10.8
10.9
11.0
10.9
10.9
10.8

9.1
9.0
8.9
8.9
8.8
8.7

3.2
3.2
3.1
3.1
3.1
3.1

10.6
10.7
10.9
11.0
11.0
11.1

29.2
30.0
30.4
29.2
29.0
28.7

13.8
14.4
14.6
13.7
13.6
13.2

15.4
15.6
15.8
15.5
15.4
15.5

47.7
47.5
47.5
46.4
45.8
45.4

1961:
January
February. _.
March
April
May
June

13.2
13.3
13.7
14.1
14.6
14.7

15.5
15.7
15.9
16.0
16.2
16.2

8.0
8.0
7.9
7.8
7.8
7.6

12.1
12.1
11.9
11.9
11.9
12.0

10.7
10.6
10.5
10.5
10.5
10.6

8.7
8.7
8.8
8.9
9.0
9.0

3.1
3.0
3.0
3.1
3.2
3.3

11.1
11.2
11.2
11.2
11.0
10.9

28.5
29.1
29.9
30.4
31.1
31.1

12.9
13.4
13.8
14.4
14.8
14.9

15.6
15.8
16.0
16.1
16.3
16.2

45.3
45.5
45.6
45,8
45.8
45.9

July
August
September-.
October 5
November6
December .

14.8
15.1
15.0
15.3
15.7
15.8

16.4
16.4
16.4
16.5
16.6

7.7
7.7
8.0
8.1
8.2

12.1
12.3
12.4
12.6
12.8

10.6
10.8
10.7
10.7
10.6

9.0
8.9
9.0
8.9
8.9

3.3
3.3
3.3
3.3
3.3

10.9
11.0
11.1
11.1
11.2

31.3
32.1
32.3
32.7
32.7

15.0
15.6
15.8
16.1
16.2
lb. 4

16.3
16.5
16.5
16.6
16.5

46.8
47.2
47.4
47.5
47.7

1
2
3
4

Monthly average for year and total for month.
Book value, seasonally adjusted, end of period.
End of period.
Based on data through November.
5
Preliminary.
NOTE.—See Table B-38 for total sales and inventories of manufacturers.
Source: Department of Commerce.




253

PRICES
TABLE B-40.— Wholesale price indexes, 1929-61
[1947-49=100] i

All commodities other than farm products
and foods (industrials)
All
commodities

Farm
products

Processed
foods

1929.

61.9

58.6

58.5

65.5

64.2

83.5

1930.
1931.
1932.
1933.
1934.

56.1
47.4
42.1
42.8
48.7

49.3
36.2
26.9
28.7
36.5

53.3
44.8
36.5
36.3
42.6

60.9
53.6
50.2
50.9
56.0.

57.1
47.1
39.0
46.0
51.8

73.0
62.0
53.8
56.8
65.8

1935.
1936.
1937.
1938.
1939.

52.0
52.5
56.1
51.1
50.1

44.0
45.2
48.3
38.3
36.5

52.1
50.1
52.4
45.6
43.3

55.7
56.9
61.0
58.4
58.1

50.4
50.8
54.2
47.4
49.5

66.4
71.7
84.4
82.7

1940.
1941.
1942.
1943.
1944.

51.1
56.8
64.2
67.0
67.6

37.8
46.0
59.2
68.5
68.9

43.6
50.5
59.1
61.6
60.4

59.4
63.7
68.3
69.3
70.4

52.4
60.3
68.9
69.2

80.2
86.5
100.6
103.3
102.0

1945.
1946.
1947.
1948.
1949.

68.8
78.7
96.4
104.4
99.2

71.6
83.2
100.0
107.3
92.8

60.8
77.6
98.2
106.1
95.7

71.3
78.3
95.3
103.4
101.3

71.1
82.6
100.1
104.4
95.5

99.4
99.0
102.1
98.9

1950.
1951.
1952.
1953.
1954.

103.1
114.8
111.6
110.1
110.3

97.5
113.4
107.0
97.0
95.6

111.4
108.8
104.6
105.3

105.0
115.9
113.2
114.0
114.5

99.2
110.6
99.8
97.3
95.2

120.5
148.0
134.0
125.0
126.9

1955-.
1956.
1957-.
1958..
1959-.

110.7
114.3
117.6
119.2
119.5

89.6
88.4
90.9
94.9
89.1

101.7
101.7
105.6
110.9
107.0

117.0
122.2
125.6
126.0
128.2

95.3
95.3
95.4
93.5
95.0

143.8
145.8
145.2
145.0
144.5

1960-.
1961 «.

119.6
119.1

88.8
88.0

107.7
108.5

128.3
127.7

96.1
94.4

144.7
139.3

1960: January..
February.
March
April
May
June

119.3
119. 3
120.0
120.0
119.7
119.5

86.5
87.0
90.4
91.1
90.4
89.0

105.6
105.7
107.3
106.8
107.3
107.6

128.8
128.7
128.6
128.7
128.2
128.2

96.6
96.5
96.3
96.3
96.3
96.3

143.1
144.6
144.7
144.7
146.3
146. 7

July
August
September
October
November
December

119.7
119.2
119.2
119.6
119.6
119.5

88.9
86.6
87.7
89.5
89.9
88.7

108.9
107.8
108.1
109.0
109.1
109.2

128.2
128.2
127.9
128.0
127.9
127.9

96.3
- 96.1
95.9
95.8
95.4
95.2

146.9
145.3
144.9
144.7
143.6
141.2

1961: January. _
February.
March
April
May
June

119.9
120.0
119.9
119.4
118.7
118.2

89.7
90.0
89.9
88.5
86.8
85.1

109.9
110.5
109.6
108.7
107.5
106.7

128.1
128.1
128.2
128.0
127.6
127.4

94.8
94.7
94.4
94.1
94.0
93.7

139.7
139.6
139.9
140.1
140.2
139.6

118.6
118.9
118.8
118.7
118.8
119.2

87.1
88.6
87.2
87.1
87.6
87.9

107.5
108.1
108.1
108.3
107.9
108.8

127.4
127.4
127.5
127.3
127.5
127.7

94.2
94.4
94.7
94.8
94.8

139.0
139.4
139.6
139.4
138.4
137.0

Year or month

July
August
September - _
October
November. _.
December«..

Total

See footnotes at end of table, p. 255.




254

Textile Chemi- Rubber Lumber
cals
and
prodand
and
ucts
allied rubber wood
prodprodand
products
ucts
apparel ucts

TABLE B-40.— Wholesale price indexes,

1929-61—Continued

[1947-49=100] i
All commodities other than farm products and foods (industrials)—continued

Year or month

Hides,
skins,
leather,
and

leather
products

Fuel
and
related
prodducts,
and
power 2

Pulp,
paper,
and
allied
products

Metals
and
metal
products

Machin^
ery and
motive
products

Furniture
and
other
household
durables

Tobacco
Nonme- manu- Miscelfactures laneous
tallic
and
mineral
prodbottled
products
beveructs 3

1929..

59.3

70.2

67.0

69.3

72.6

1930..
1931..
1932..
1933..
1934..

54.4
46.8
39.7
44.0
47.1

66.5
57.2
59.5
56.1
62.0

60.3
54.1
49.9
50.9
56.2

68.2
62.8
55.4
55.5
60.2

72.4
67.6
63.4
66.9
71.6

87.1
84.6
81.4
72.8
76.0

1935..
1936..
1937..
1938.
1939-

48.7
51.9
56.9
50.5
52.0

62.2
64.5
65.7
64.7
61.8

56.2
57.3
65.6
63.1
62.6

()
65.3

59.8
60.6
67.2
65.6
65.4

71.6
71.7
73.4
71.1
69.5

75.9
75.8
76.5
76.4
76.4

1940..
1941..
1942..
1943..
1944..

54.8
58.9
64.0
63.9
63.4

60.7
64.5
66.4
68.4
70.3

62.8
64.0
64.9
64.8
64.8

66.2
68.6
71.2
71.0
71.0

71.2
76.8
76.4
78.4

69.7
71.3
74.1
74.5
75.9

77.3
78.1
79.1
83.0
83.4

194519461947..
1948..
1949..

64.2
74.6
101.0
102.1
96.9

71.1
76.2
90.9
107.1
101.9

()
98.6
102.9
98.5

65.9
73.9
91.3
103.9
104.8

71.6
80.3
92.5
100.9
106.6

78.6
83.0
95.6
101.4
103.1

79.1
84.2
93.9
101.7
104.4

85.8
89.7
97.2
100.5
102.3

(*)
(4)
100.8
103.1
96.1

19501951..
1952..
1953..
1954..

104.6
120.3
97.2
98.5
94.2

103.0
106.7
106.6
109.5
108.1

100. 9
119. 6
116.5
116.1
116.3

110.3
122.8
123.0
126.9
128.0

108.6
119.0
121.5
123.0
124.6

105.3
114.1
112.0
114.2
115.4

106.9
113.6
113.6
118.2
120.9

103.5
109.4
111.8
115.4
120.6

96.6
104.9
108.3
97.8
102.5

19551956 .
195719581959-

99.3
99.4
100.6
114.3

107.9
111.2
117.2
112.7
112.7

119.3
127.2
129.6
131.0
132.2

136.6
148.4
151.2
150.4
153.6

128.4
137.8
146.1
149.8
153.0

115.9
119.1
122.2
123.2
123.4

124.2
129.6
134.6
136.0
137.7

121.6
122.3
126.1
128.2
131.4

92.0
91.0
89.6
94.2
94.5

1960
19615
1960: January
February. _.
March
April
May
June
July
August
September-October
November. December. __
1961: January
February
March
April
May
June
July
...
August
September..
October
November..
December 5_

110.3
111.3
112. 7
112.0
111.8
112.1
111.2
110.3
110.1
108.7
108.1
108.5
108.5
108.8
108.3
108.0
109.5
109.9
110.7
110.1
111.1
113.1
113. 5
114.1
113.8
113.4

113.8
115.0
111.9
112.0
112.3
112.2
110.8
112.3
113.8
115.3
116.1
116.2
116.1
116.2
117.2
117.7
117.5
115.2
113.6
114.3

133.2
129.4
133.7
133.2
133.1
133.1
133.4
133.5
133.5
133.0
133.0
133.4
133.1
132.3
132.2
132.2
131.5
131.0
126.1
126.5
126.4
126.3
129.5
130.4
129.9
130.4

153.8
152.9
155.5
155.3
154.5
154.5
154.2
153.8
153.4
153.6
153.5
152.8
152.3
152.2
152.2
152.3
152.4
152.7
153.0
153.1
153.2
153.6
153.7
153.2
152.4
152.7

153.2
153.1
153. 8
153.9
153.9
153.7
153.3
153.2
153.3
153.3
151.4
152.9
153.0
153.1
153.5
153.4
153.4
153.1
153.1
153.2

123.1
122.3
123.4
123.5
123.7
123.5
123.2
123.0
123.1
122.9
122.8
122.7
122.6
122.6
122.3
122.2
122.2
122.5
122.4
122.4
122.3
122.1
122.2
122.2
122.3
122.2

138.0
138.5
138.4
138.2
138.2
138.3
137.9
137.8
137.8
137.8
138.0
138.1
137.9
137.9

131.8
132.6
131.7
131.7
131.7
131. 7
131.7
131.7
131.8
132.0
132.0
132.0
132.0
132.1
132.1
132.1
132.1
132.0
132.1
132.1

92.1
96.4
95.3
93.4
94.0
95.4
91.1
90.9
90.8
89.9
91.1
90.3
90.6
92.4
95.6
95.2
96.8
97.7
99.5
95.9

132.6
132.8
133.4
133.4
133.5
133.4

95.6
95.6
95.6
93.4
97.5

114.6
114.4
113.7
113.0
114.0
114.9

153.0
152.7
152.7
152.8
152.9
153.1

138.5
138.4
138.6
138.6
138.5
138.3
138.4
138.5
138.5
138.9
138.6
138.5

1 This does not replace the former index (1926=100) as the official index prior to January 1952. D a t a
beginning January 1947 represent the revised sample and weighting pattern. Prior to January 1947 they
are based on the month-to-month movement of the former index.
2 Formerly titled " F u e l , power, and lighting materials."
3
Formerly titled "Nonmetallic minerals—structural."
4
Not available.
5
Preliminary.

Source: Department of Labor.




255

TABLE B-41.—Wholesale price indexes', by stage of processing, 1947-61
[1947-49=100]

Intermediate materials, supplies, and components i
Crude materials
All

Year or
month

modi-

ties

Foodstuffs
Total and
feedstuffs

Materials and components for
manufacturing

MaMa- terials Ma- ComNonterials for terials poTotal
food
for
for
non- du- nents
ma- Fuel
Total food du- rable for
terials,
manu- rable manu- manuexcept
factur- manu- factur- facturfuel
ing factur- ing
ing
ing

Materials
and
components
for
construction

96.4
98.6
104. 4 108.0
99.2
93.4

100.7
108.8
90.5

96.0
106.8
97.2

89.4
105.6
105.0

96.2
104.0

96.4
104.0

102.8
106.0
91.2

99.2
105.0
95.8

91.2
103.0
105.8

94.4
101.9
103.8

93.3
103.2
103.5

103.1
114.8
111 6
110 1
110.3

101.8
116.9
107.4
99.2
98.3

97.0
112.3
105.7
94.6
94.7

111.0
128.1
110.9
106.2
104.2

104.6
106.5
107.2
111.0
106.0

104.3
116.9
113.5
114.1
114.8

104.5
118.4
113.4,
115.2
115.4

94.9
105.7
101.5
101.8
100.9

100.5
116.5
104.8
104.0
102.3

111.9
124.3
124.6
130.1
133.1

107.6
122.2
122.5
124.7
125.3

108.9
119.1
118.3
120.2
120.9

110.7
114 3
117.6
119.2
119.5

94.5
95.0
97.2
99.4
96.7

85.7
84.0
87.7
92.8
86.8

110.1
114.2
112.5
108.4
112.2

105.8
113.3
119.7
121.2
123.4

117.0
122.1
125.1
125.3
127.0

118.2
123.7
126.9
127.2
129.0

97.7
98.0
99.9
102.2
98.5

102.7
104.3
105.7
104.7
106.4

139.7
148.5
153.2
154.3
157.9

130.9
142.9
148.3
149.5
151.5

125.6
132.0
132.9
132.9
136.5

_. 119.1

119.6

94.5
93.9

85.7
84.6

107.5
108.7

124.4
124.2

127.0
126.1

128.9
127.4

99.3
102.3

106.5
104.1

158.1
155.9

150.7
149.1

135.5
133.6

January
February.._
March
April
May
June

119.3
119.3
120.0
120.0
119 7
119.5

94.6
94.8
96.4
96.3
96.0
95.3

83.7
84.7
88.0
88.0
87.5
86.8

111.7
110.5
108.8
108.8
108.9
108.2

126.0
125.5
125. 7
122.0
120.7
121.5

127.5
127.4
127.5
127.6
127.1
127.0

129.5
129.5
129.4
129.5
129.2
129.1

97.4
97.2
97.9
98.3
98.6
99.0

106.9
106.9
106.8
106.9
106.8
106.8

159.0
159.0
158.9
159.0
158.8
158.4

152.1
152.4
152.0
152.0
150.8
150.3

137.2
137.1
136.9
136.7
136.4
135.8

July

119 7
119.2
119.2
119.6
119.6
119.5

94.8
92.7
92.9
93.3
93.0
93.3

86.1
83.8
83.9
85.1
85.1
85.5

107.7
105.9
106.1
104.8
104.1
104.1

122.7
124.1
126.1
126.0
126.2
126.3

127.0
126.8
126.8
126.6
126.5
126.4

129.0
128.7
128.5
128.4
128.1
127.9

100.1
99.8
100.0
100.7
101.7
101.3

106.9
106.5
106.2
105.9
105.5
105.2

158.1
157.8
157.7
157.2
156.7
156.6

150.1
150.0
149.8
149.8
149.5
149.3

135.3
134.8
134.6
134.2
133.9
133.7

119.9
120.0
119.9
119.4
118.7
118.2

94.7
95.1
95.2
94.6
93.2
91.6

87.3
87.5
86.9
85.7
83.6
81.5

104.4
105.4
107.2
108.6
108.7
108.5

126.9
127.4
126.8
123.3
122.3
121.2

126.7
126.7
126.9
126.9
126.3
125.8

127.8
127.8
127.9
127.9
127.8
127.4

102.4
103.6
103.9
103.7
103.0
102.0

104.9
104.8
104.8
104.8
104.5
104.1

155.5
155.4
155.4
155.6
156.0
156.0

150.0
150.1
150.0
149.3
149.2
149.1

133.7
133.5
133.5
134.3
134.1
134.1

118.6
118.9
118.8
118.7
118.8
119.2

92.7
94.8
93.8
93.7
93.3
94.3

82.8
85.1
83.4
83.1
83.5
84.7

109.2
110.6
111.3
111. 5
109.3
109.7

121.9
122.6
123.2
124.7
124.9
124.7

125.6
125.5
125.7
125.4
125.8
126.1

127.1
127.1
127.0
127.0
126.9
127.0

101.6
101.4
101.3
101.7
101.4
101.8

103.6
103.7
103.5
103.6
103.6
103.6

156.2
156.4
156.4
156.0
155.8
155.9

149.1
148.5
148.4
148.5
148.5
148.8

134.0
133.6
133.5
133.2
133.1
133.1

1947 .
1948
1949
1950
1951
1952
1953
1954

-.-

.

1935
1956
1957
1958
1959
1960
.
19614
1960:

August
September..
October
November..
December...

1961:

January
February
March
April
May
June
July
August
SeptemberOctober
NovemberDecember *.

See footnotes at end of table, p. 257.




256

T A B L E B - 4 1 . — Wholesale price indexes, by stage of processing,

1947-61—Continued

[1947-49=100]
Special groups of industrial
products

Finished goods
Consumer finished goods

Year or month
Total
Total

Producer
Other
finished
Dunongoods
Foods durable rable
goods goods

Crude
materials 2

InterConmediate
sumer
materials, finished
supplies, goods exand com- cluding
ponents » foods

95.9
103.5
100.6

104.1
99.2

97.0
105.8
97.2

97.4
103.5
99.2

94.8
101.3
104.0

92.8
101.1
106.1

92.9
108.5

95.3
103.7
101.0

96.6
102.8
100.6

1950
1951
1952
1953
1954

102.4
112.1
111.5
110.4
110.7

100.9
110.3
109.0
107.1
107.1

99.2
111. 3
110.4
104.6
103.8

100.8
108.5
105.9
106.9
107.2

105.0
112.1
113.0
113.8
114.7

108.7
119.3
121.3
123.1
124.7

109.9
120.8
109.3
108.5
103.3

105.7
118.5
114.7
116.2
116.7

102.1
109.6
108.0
108.9
109.4

1955_._
1956
1957
1958
1959

110.9
114.0
118.1
120.8
120.6

106. 4
108.0
111.1
113.5
112.5

101.1
101.0
104.5
110.5
105.5

107.8
109.9
112.4
111.7
113.4

115.9
119.7
123.3
125.0
126.5

128.5
138.1
146.7
150.3
153.2

113.4
120.0
118 3
113.7
120.0

120.1
126.0
129.3
129.1
131.2

110.2
112.8
115.7
115.8
117.3

1960
1961*

121.5
121.5

113.6
113.4

107.7
107.2

114.1
114.2

126.0
125.5

153.5
153.9

115.3
114.1

131.7
130.0

117.8
117.6

1960: January
February..
March
April
May
June

120.6
120.5
121.4
121.4
121.2
121.1

112.4
112.3
113.4
113.4
113.2
113.1

104.8
104.7
107.4
107.5
107.5
106.9

113.9
113. 8
113.8
113.7
113.2
113.6

126.4
126.4
126.5
126.5
126.3
126.2

153.8
153.8
153.9
153.6
153.3
153.4

121.4
119.2
116.8
116.2
116.0
115.2

132.1
132.2
132.2
132.2
131.9
131.8

117.7
117.6
117.6
117.6
117.2
117.4

July
August
September
October
November.
December.

121.8
121.5
121.5
122. 4
122.7
122.2

113.9
113.6
113.7
114.7
114.9
114.4

108.4
107.1
108.2
110.1
110.4
109.0

114.1
114.6
114.8
114.8
114.7
114.7

126.3
126.2
123.6
125.7
125.8
125.8

153.6
153.7
152. 5
153.4
153.6
153.8

114.8
114.4
114.2
112.7
111.8
111.0

131.7
131.6
131.5
131.3
131.0
130.9

117.8
118.1
117.4
118.1
118.0
118.0

1961: January
February..
March
April
May
June

122.4
122.6
122.2
121.3
120.7
120.6

114.5
114.8
114.3
113.3
112.5
112.4

109.1
109.5
108.6
106.8
105.7
105.0

114.9
115.2
115.0
114.2
113.5
113.8

125.8
125.6
125.5
125.5
125.5
125.6

154.0
153.9
153.8
153.7
153.7
153.9

111.3
112.1
113.3
113.3
113.3
113.6

130.8
130.7
130.7
130.6
129.9
129.8

118.2
118.3
118.1
117.6
117.1
117.3

July
August
SeptemberOctober
November4
December

121.2
121.4
121.3
121.3
121.4
121.6

113.1
113.3
113.2
113.2
113.2
113.5

106.8
107.2
106.9
107.1
106.8
107.1

113.9
114.0
113.9
113.8
114.1
114.5

125.6
125.5
125.5
125.3
125.4
125.4

153.8
153.8
153.8
154.0
154.1
154.3

114.4
115. 8
116.4
117.0
114.1
114.2

129.6
129.5
129.8
129.6
129.7
129.8

117.4
117.4
117.4
117.3
117.5
117.7

1947
1948
1949

-..

1
2

Includes, in addition to subgroups shown, processed fuels and lubricants, containers, and supplies.
Excludes crude foodstuffs and feedstuffs, plant and animal fibers, oilseeds, and leaf tobacco.
3 Excludes intermediate materials for food manufacturing: and manufactured animal feeds.
Preliminary.
NOTE.—For a listing of the commodities included in each sector and their relative importance, see Monthly
Labor Review, December 1955 and Wholesale Prices and Price Indexes, 1958 (BLS Bulletin No. 1257).
Source: Department of Labor.
4




257

TABLE B—42.—Consumer price indexes, by major groups, 1929-61
For city wage-earner and clerical-worker families
[1947-49=1001

Year or month

All
items

Housing
Food

Total Rent

Apparel

ReadTrans- Medi- Per- ing and Other
porta- cal sonal recrea- goods
and
tion care care
tion services

1929

73.3

65.6

60.3

0)

0)

71.4
65.0
58.4
55.3
57.2

62.4
51.4
42.8
41.6
46.4

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

117.4

1930
1931
1932
1933
1934

114.2
108.2
97T1
83.6
78.4

58.9
53.6
47.5
45.9
50.2

(0
0)
0)
(0
0)

0)
(0
0)
0)
0)

0)
0)
0)
0)
0)
0)

(0
0)
0)
(0
0)

1935.
1936
1937
1938
1939

58.7
59.3
61.4
60.3
59.4

49.7
50.1
52.1
48.4
47.1

71.8
72.8
75.4
76.6
76.1

78.2
80.1
83.8
86.5
86.6

50.6
51.0
53.7
53.4
52.5

69.6
70.2
71.3
71.9
70.2

71.4
71.6
72.3
72.5
72.6

54.6
55.3
58.5
59.8
59.6

58.1
59.1
60.8
62.9
63.0

59.9
62.9
69.7
74.0
75.2

47.8
52.2
61.3
68.3
67.4

76.4
78.3
81.8
82.8
84.7

86.9
88.4
90.4
90.3
90.6

53.2
55.6
64.9
67.8
72.6

69.8
72.2
78.5
78.2
78.2

72.7
73.1
75.1
78.7
81.2

59.5
61.0
66.9
73.8
79.0

64.1
66.4
69.5
75.3
83.4

1945..
1946
1947
1948
1949

76.9
83.4
95.5
102.8
101.8

68.9
79.0
95.9
104.1
100.0

86.1
88.3
95.0
101.7
103.3

90.9
91.4
94.4
100.7
105.0

76.3
83.7
97.1
103.5
99.4

78.1
82.1
90.6
100.9
108.5

83.1
87.7
94.9
100.9
104.1

81.5
87.4
97.6
101.3
101.1

86.8
89.7
95.5
100.4
104.1

1950
1951
1952
1953
1954

102.8
111.0
113.5
114.4
114.8

101.2
112.6
114.6
112.8
112.6

106.1
112.4
114.6
117.7
119.1

108.8
113.1
117.9
124.1
128.5

98.1
106.9
105.8
104.8
104.3

111.3
118.4
126.2
129.7
128.0

106.0
111.1
117.2
121.3
125.2

101.1
110.5
111.8
112.8
113.4

103.4
106.5
107.0
108.0
107.0

1955
1956._
1957
1958
1959

114.5
116.2
120.2
123.5
124.6

110.9
111.7
115.4
120.3
118.3

120.0
121.7
125.6
127.7
129.2

130.3
132.7
135.2
137.7
139.7

103.7
105.5
106.9
107.0
107.9

126.4
128.7
136.0
140.5
146.3

128.0
132.6
138.0
144.6
150.8

115.3
120.0
124.4
128.6
131.2

106.6
108.1
112.2
116.7
118.6

I9601961 2_
1960: January. __
February..
March
April
May
June

126.5
127.8

119.7
121.1

131.5
132.5

141.8
143.5

109.4
110.1

146.2
147.8

156.2
160.7

133.3
134.0

121.5
124.0

125.4
125.6
125.7
126.2
126.3
126.5

117.6
117.4
117.7
119.5
119.7
120.3

130.7
131.2
131.3
131.4
131.2
131.3

140.9
141.0
141.2
141.4
141.4
141.6

107.9
108.4
108.8
108.9
108.9
108.9

147.6
147.5
146.5
146.1
145.6
145.8

153.5
154.7
155.0
155.5
155.9
156.1

132.7
132.6
132.7
132.9
133.2
133.2

120.3
120.6
120.9
121.1
121.4
121.1

July
August
September.
October.. November.
December.
1961: January.._
February..
March
April
May
June

126.6
126.6
126.8
127.3
127.4
127.5

120.6
120.1
120.2
120.9
121.1
121.4

131.3
131.5
132.0
132.2
132.1
132.3

141.8
141.9
142.1
142.5
142.7
142.8

109.1
109.3
110.6
111.0
110.7
110.6

145.9
146.2
144.7
146.1
146.5
146.5

156.4
156.7
156.9
157.3
157.9
158.0

133.4
133.8
133.9
134.0
133.9
133.7

121.6
121.9
122.1
121.9
122.5
122.3

127.4
127.5
127.5
127.5
127.4
127.6

121.3
121.4
121.2
121.2
120.7
120.9

132.3
132.4
132.5
132.3
132.2
132.4

142.9
143.1
143.1
143.3
143.4
143.5

109.4
109.6
109.8
109.5
109.6
109.6

146.2
146.2
145.7
145.8
146.6
147.7

158.5
159.4
159.6
159.9
160.4
160.9

133.7
133.8
133.6
133.8
133.8
133.9

122.2
122.7
123.4
124.1
123.9
123.5

July

128.1
128.0
128.3
128.4
128.3

122.0
121.2
121.1
120.9
120.3

132.4
132.3
132.6
132.7
132.9

143.6
143.6
143.9
144.1
144.2

109.9
109.9
111.1
111.4
111.2

148.3
149.3
149.4
153. Z
150.5

161.2
161.4
161.7
162.3
162.4

134.3
134.2
134.3
134.0
134.3

124.1
124.4
125.0
125.4
125.2

._

1940
1941
1942
1943
1944

J

August.
September
October...
November

1 Not available.
2 January-November average.
Source: Department of Labor.




258

(0

TABLE B-43.—Consumer price indexes, by special groups, 1935-61
For city wage-earner and clerical-worker families
[1947-49=100]
Services

Commodities

Yew or month

All
All
All items items
less
All
items less
shel- comfood
ter
modities

All
serv-

Commodities less food
Food
All

NonDura- durables
bles

All
services

Rent

less
rent

58.7
59.3
61.4
60.3
59.4

65.8
66.5
68.9
69.6
69.1

55.5
56.2
58.0
56.4
55.4

52.0
52.7
54.7
52.7
51.6

49.7
50.1
52.1
48.4
47.1

57.3
57.9
60.4
60.4
59.4

53.3
54.1
57.5
58.5
57.3

57.1
57.6
59.9
59.6
58.7

75.6
76.4
78.7
80.3
80.4

78.2
80.1
83.8
86.5
86.6

72.6
72.2
72.9
73.5
73.5

59.9
62.9
69.7
74.0
75.2

69.4
71.4
76.4
78.5
81.5

55.8
59.1
66.6
71.6
72.9

52.1
55.7
63.8
69.4
70.2

47.8
52.2
61.3
68.3
67.4

59.8
62.7
69.8
72.7
76.7

56.8
60.7
68.9
71.2
77.8

59.3
61.8
68.4
71.3
74.9

80.6
81.6
84.2
85.8
87.9

86.9
88.4
90.4
90.3
90.6

73.6
74.5
77.8
81.3
85.2

76.9
83.4
95.5
102.8
101.8

83.4
87.0
95.1
101.9
103.0

74.8
82.3
95.6
103.1
101.3

72.3
80.1
96.3
103.2
100.6

79.0
95.9
104.1
100.0

79.7
84.7
95.7
102.9
101.5

83.7
87.5
94.9
101.8
103.3

77.6
83.3
95.7
103.1
101.1

89.0
90.8
94.5
100.4
105.1

90.9
91.4
94.4
100.7
105.0

87.0
90.2
94.7
100.1
105.2

1950
1951
1952
1953
1954

102.8
111.0
113.5
114.4
114.8

104.2
110.8
113.5
115.7
116.4

102.0
110.5
112.7
113.1
113.0

101.2
110.3
111.7
111.3
110.2

101.2
112.6
114.6
112.8
112.6

101.3
108.9
109.8
110.0
108.6

104.4
112.4
113.8
112.6
108.3

100.9
108.5
109.1
110.1
110.6

108.5
114.1
119.3
124.2
127.5

108.8
113.1
117.9
124.1
128.5

108.1
114.6
120.1
124.6
127.7

1955-.19561957
1958
1959

114.5
116.2
120.2
123.5
124.6

116.7
118.8
122.8
125.5
127.9

112.4
114.0
117.8
121.2
122.2

109.0
110.1
113.6
116.3
116.6

110.9
111.7
115.4
120.3
118.3

107.5
108.9
112.3
113.4
115.1

105.1
105.1
108.8
110.5
113.0

110.6
113.0
116.1
116.9
118.3

129.8
132.6
137.7
142.4
145.8

130.3
132.7
135.2
137.7
139.7

130.1
133.0
138.6
143.8
147.5

126.5
127.8

130.0
131.4

124.0
125.3

117.5
118.3

119.7
121.1

115.7
115.9

111.6
111.2

120.1
120.7

150.0
152.7

141.8
143.5

152.1
155.0

125.4
125.6
125.7
126.2
126.3
126.5

129.4
129.7
129.7
129.8
129.7
129.7

122.9
123.0
123.1
123.7
123.8
124.0

116.7
116.7
116.7
117.4
117.3
117.6

117.6
117.4
117.7
119.5
119.7
120.3

115.9
116.0
115. 7
115.6
115.3
115.3

113.3
113.3
112.5
112.1
111.9
111.5

119.2
119.4
119.6
119.7
119.4
119.6

148.2
148.9
149.2
149.4
149.6
149.7

140.9
141.0
141.2
141.4
141.4
141.6

150.1
150.9
151.3
151.5
151.7
151.8

126.6
126.6
126.8
127.3
127.4
127.5

129.9
130.1
130.3
130.7
130.8
130.8

124.2
124.1
124.3
124.8
125.0
125.0

117.7
117.6
117.7
118.2
118.3
118.4

120.6
120.1
120.2
120.9

115.4
115.5
115.6
115.9
115.9
115.9

111.1
111.0
110.0
110.9
110.7
110.8

119.9
120.1
120.9
120.9
121.1
121.0

150.0
150.3
150.8
151.2
151.3
151.4

141.8
141.9
142.1
142.5
142.7
142.8

152.1
152.5
153.0
153.4
153.6
153.6

127.4
127.5
127.5
127.5
127.4
127.6

130.6
130.8
130.9
130.8
131.0
131.2

124.8
125.0
125.0
125.0
124.9
125.2

118.0
118.1
118.0
117.9
117.7
118.0

121.3
121.4
121.2
121.2
120.7
120.9

115.4
115.5
115.4
115.2
115.3
115.6

110.2
110.3
109.9
110.7
110.8
111.2

120.5
120.6
120.7
120.0
120.0
120.3

151.7
151. 9
152.2
152.3
152. 5
152.7

142.9
143.1
143.1
143.3
143.4
143.5

154.0
154.2
154.6
154.7
154. 9
155.0

128.1
128.0
128.3
128.4
128.3

131.4
131.6
132.0
132.3
132.4

125.7
125.6
125.8
126.0
125.8

118.7
118.4
118.7
118.8
118.5

122.0
121.2
121.1
120.9
120.3

116.0
116.1
116.6
117.0
116.9

111.5
111.9
111.9
112.7
112.6

120.6
120.7
121.5
121.5
121.5

152.8
153.0
153.2
153.4
153.7

143.6
143.6
143.9
144.1
144.2

155.2
155.4
155.6
155.8
156.1

1935
1936
1937
1938..
1939.
1940...
1941
1942...
1943
1944-.

_

1945
1946
1947
1948-..
1949

-._

-

1960
1961 L —
1960: January
February
March
April
May
June
JulyAugustSeptember
October
November
December
1961: January
February
March
April
May
June
July
.._.
August
—
September
October
November

i January-November average.
Source: Department of Labor.




259

MONEY SUPPLY, CREDIT, AND FINANCE
TABLE B-44.—Money supply, 1947-61
[Averages of daily figures, billions of dollars]

Money supply
Year and month

Seasonally adjusted
Total

Currency Demand
outside deposits i
banks

Related deposits
(unadjusted)

Unadjusted
Total

Currency Demand
outside deposits1
banks

Gross
time

Government

U.S.

1947: December..
1948: December..
1949: December..

112.3
110.7
110.1

26.4
25.8
25.2

85.8
84.9
85.0

115.0
113.3
112.7

26.8
26.1
25.5

88. 2
87.2
87.3

35.3
35.9
36.3

1.0
1.8
2.8

1950: December.,.
1951: December. _
1952: December..
1953: December..
1954: December..

115.3
122.0
126.5
128.1
131.8

25.0
26.2
27.4
27.7
27.4

90.3
95.8
99.1
100.4
104.4

118.1
125.1
129.8
131.4
135.0

25.4
26.6
27.8
28.2
27.9

92.7
98.6
102.0
103.3
107.1

36.6
38.3
41.3
44.7
48.5

2.4
2.7
4.9
3.8
5.0

1955:
1956:
1957:
1958:
1959:

December. .
December..
December.December..
December..

134.6
136.5
135.5
140.8
141.5

27.8
28.2
28.3
28.6
28.9

106. 8
108.3
107.2
112.2
112.6

137.9
139.7
138.8
144.3
144.9

28.3
28.7
28.9
29.2
29.5

109.6
111.0
109.9
115.1
115.5

50.0
51.8
57.1
65.1
67.0

3.4
3.4
3.5
3.9
4.9

1960: December..
1961: December 2_

140.4
144.9

29.0
29.5

111.4
115.4

143.8
148.5

29.5
30.1

114.3
118.4

72.5
82.3

4.7
4.9

1960: January _
February.
March
April
May
June

141.3
141.0
140.6
140.5
139.9
139.4

29.0
29.0
29.0
29.1
29.0
28.9

112.3
112.1
111.6
111.4
110.9
110.5

144.4
140.8
139.3
140.1
138.0
138.0

28.8
28.6
28.7
28.8
28.8
28.9

115.6
112.2
110.6
111.4
109.2
109.1

67.0
66.8
67.3
67.9
68.2
68.6

4.1
4.1
4.3
3.7
6.3
6.3

139.6
139.7
140.4
140.6
140.2
140.4
140.6
141.2
141.5
142.0
142.0
142.1

28.9
28.9
29.0
29.0
29.0
29.0

110.7
110.8
111.5
111.6
111.2
111.4

29.1
29.0
29.1
29.1
29.2
29.5

109.6
109.8
110.7
111.5
112.2
114.3

69.5
70.3
71.2
71.8
72.0
72.5

6.7
6.1
5.4
5.7
5.8
4.7

28.9
28.9
29.0
29.0
29.0
28.9

111.7
112.3
112.6
113.0
113.0
113.2

138.7
138.9
139.7
140.6
141.4
143.8
143.7
140.9
140.1
141.7
140.0
140.7

28.8
28.6
28.6
28.7
28.7
28.9

114.9
112.3
111.4
113.0
111.3
111.8

73.7
75.1
75.9
76.9
78.1
79.0

4.1
4.8
4.7
2.9
4.6
4.5

142.0
141.8
143.0
143.7
144.1
144.9

29.0
29.0
29.2
29.3
29.4
29.5

113.0
112.8
113.8
114.4
114.6
115.4

141.1
141.1
142.4
143.6
145.3
148.5

29.2
29.2
29.3
29.4
29.7
30. 1

111.9
111.9
113.1
114.2
115.6
118.4

79.9
80.7
81.3
82.0
82.0
82.3

4.3
5.5
5.2
6.5
5.8
4.9

July
August
SeptemberOctober
November..
December..
1961: January..
February.
March
April
May
June
July
August
September. _
October
November..
December 2.
1

Demand deposits at all commercial banks (member and nonmember).
Preliminary.
NOTE.—Between January and August 1959, the series were expanded to include data for all banks in
Alaska and Hawaii.
Source: Board of Governors of the Federal Reserve System.
2




260

TABLE R-45.—Loans and investments of all commercial banks, 1929—61
[Billions of dollars, end of period]

Year or month 1

Total
loans
and
investments

Investments

Loans
Total 2

Business
loans 3

Total

1929—June 5_.
1930—June 5_.
1931—June »..
1932—June «..
1933—June «..
1934—June «..

U.S. GovOther
ernment
obligations • securities

49.4
35.7
13.7
4.9
8.7
48.9
14.4
34.5
5.0
9.4
44.9
15.7
6.0
29.2
9.7
36.1
6.2
14.3
21.8
8.1
7.5
30.4
14.0
16.3
6.5
10.3
32.7
17.0
15.7
6.7
15.2
1935..
36.1
20.9
13.8
7.1
16.4
1936..
39.6
23.1
15.3
7.9
17.2
1937..
38.4
21.2
14.2
7.0
16.4
1938..
38.7
22.3
15.1
7.2
5.7
17.2
40.7
23.4
16.3
6.4
7.1
43.9
1940
18.8
7.3
25.1
17.8
7.4
50.7
1941
21.7
9.3
29.0
21.8
7.2
67.4
1942
19.2
7.9
48.2
41.4
6.8
85.1
1943
19.1
7.9
66.0
59.8
6.1
105.5
1944
21.6
8.0
83.9
77.6
6.3
9.6
97.9
1945
124.0
90.6
7.3
26.1
14.2
82.9
114.0
74.8
8.1
1946
31.1
18.2
78.2
116.3
69.2
9.0
1947—
38.1
18.9
71.8
114.3
62.6
9.2
1948
42.5
17.1
77.2
120.2
67.0
10.2
1949
43.0
52.2
21.9
74.4
126.7
12.4
1950
62.0
57.7
25.9
74.9
132.6
13.3
1951
61.5
64.2
27.9
77.5
141.6
14.1
1952
63.3
67.6
27.2
78.1
145.7
14.7
63.4
1953
70.6
26.9
85.3
155.9
16.3
69.0
1954
16.7
160.9
33.2
78.3
1955
82.6
61.6
16.3
165.1
38.7
74.8
1956
90.3
58.6
17.9
170.1
40.5
76.2
93.9
58.2
1957...
20.6
185.2
40.4
87.0
98.2
66.4
1958
20.5
190.3
40.2
79.4
110.8
58.9
1959
20.9
43.1
199.5
117.6
81.9
61.0
1960
125.2
44.4
90.4
66.5
23.9
215.6
196U
20.3
39.4
78.2
1960: January.._
187.8
109.6
58.0
20.1
39.8
76.3
February _
186.5
56.2
110.3
20.1
40.9
74.3
54.2
March
185.7
111.4
55.8
20.0
40.9
75.9
188.8
April
113.0
55.1
19.8
41.3
75.0
188.6
May
113.6
54.2
19.9
41.9
74.1
188.9
114.8
June
114.2
41.2
76.7
56.7
20.0
190.9
^ y
114.7
41.2
76.6
56.6
20.0
191.2
August
115.4
41.8
77.8
57.7
20.2
193.3
September..
114.8
41.8
80.8
60.4
20.4
195.6
October
115.0
42.3
80.5
60.2
20.3
195.5
November..
117.6
43.1
81.9
61.0
20.9
199.5
December..
20.9
61.9
1961: January B
114.2
41.5
82.8
197.0
21.3
61.3
February .
116.7
41.8
82.6
199.3
21.7
59.7
March
116.6
42.8
81.4
198.0
21.8
60.7
117.2
42.4
82.5
April
199.7
21.9
61.5
117.9
42.3
83.3
201.2
May
22.1
61.9
118.6
42.8
84.0
202. 5
June
22.3
42.3
July
205.1
87.0
64.7
118.1
22.5
42.5
August
205.1
86.7
64.2
118.5
23.2
42.9
September...
210.0
89.2
66.0
120.8
23.2
43.1
October 8 8
210.3
89.8
66.6
120.5
23.4
43.5
211.3
89.6
66.2
November 8 _.
121.7
23.9
44.4
215.6
90.4
66.5
December . .
125.2
1 End-of-year figures (except 1961) are for call dates. Other data (including those for December 1961)
are for the last Wednesday of the month.
2
Data are shown net, i.e., after deduction of valuation reserves. Includes commercial and industrial,
agricultural, security, real estate, bank, consumer, and other loans.
3 Beginning with 1948, data are shown gross of valuation reserves, instead of net as for previous years.
Prior to June 1947 and for months other than June and December, data are estimated on the basis of reported
data for all insured commercial banks and for weekly reporting member banks.
4
Figures in this table are based on book values and relate only to banks within the United States.
Therefore, they do not agree with figures in Table B-53, which are on the basis of par values and include
holdings of banks in United States Territories and possessions.
5
June data are used because complete end-of-year data are not available prior to 1935 for U.S. Government obligations and other securities.
6
Not available.
7
Beginning June 1959, business loans exclude loans to financial institutions.
8
Preliminary; December estimates by Council of Economic Advisers.
9
Data for March 1, 1961 used instead of last Wednesday of February.
NOTE.—Between January and August 1959, this series was expanded to include data for all banks in
Alaska and Hawaii.
Source: Board of Governors of the Federal Reserve System (except as noted).




26l

T A B L E B-46.—Federal Reserve Bank credit and member bank reserves, 1'920-67
[Averages of daily figures, millions of dollars]
Reserve Bank credit outstanding
Year and month
Total

U.S.
Member
Governbank
ment se- borrowcurities
ings

Member bank reserves

All
other,
mainly
float

Total

Required

Excess

Member
b a n k free
reserves
(excess
reserves
less borrowings)

1929: December

1,643

446

801

396

2,395

2,347

48

-753

1930:
1931:
1932:
1933:
1934:

December
December
December
December
December

1,273
1,950
2,192
2,669
2,472

644
777
1,854
2,432
2,430

337
763
281
95
10

292
410
57
142
32

2,415
2,069
2,435
2,588
4,037

2,342
2,010
1,909
i 1,822
2,290

73
60
526
1766
1,748

-264
-703
245
671
1,738

1935:
1936:
1937:
1938:
1939:

December
December
December
December
December

2,494
2,498
2,628
2,618
2,612

2,430
2,434
2,565
2,564
2,510

6
7
16
7
3

58
57
47
47
99

5,716
6,665
6,879
8,745
11, 473

2,733
4,619
5,808
5,520
6,462

2,983
2,046
1,071
3,226
5,011

2,977
2,039
1,055
3,219
5,008

1940:
1941:
1942:
1943:
1944:

December
December
December
December
December

2,305
2,404
6,035
11,914
19, 612

2,188
2,219
5,549
11,166
18, 693

3
5
4
90
265

114
180
483
659
654

14,049
12,812
13,152
12, 749
14,168

7,403
9,422
10, 776
11, 701
12, 884

6,646
3,390
2,376
1,048
1,284

6,643
3,385
2,372
958
1,019

1945:
1946:
1947:
1948:
1949:

December
December
December
December
December

24, 744
24, 746
22, 858
23,978
19, 012

23, 708
23, 767
21, 905
23,002
18, 287

334
157
224
134
118

702
821
729
842
607

16,027
16, 517
17, 261
19, 990
16, 291

14, 536
15, 617
16,275
19,193
15,488

1,491
900
986
797
803

1,157
743
762
663
685

1950:
1951:
1952:
1953:
1954:

December
December
December
December
December

21, 606
25,446
27,299
27,107
26, 317

20, 345
23, 409
24,400
25, 639
24, 917

142
657
1,593
441
246

1,119
1,380
1,306
1,027
1,154

17, 391
20,310
21,180
19, 920
19, 279

16, 364
19,484
20,457
19, 227
18, 576

1,027
826
723
693
703

885
169
-870
252
457

1955:
1956:
1957:
1958:
1959:

December
December
December
December
December

26,853
27,156
26,186
28, 412
29,435

24,602
24,765
23,982
26, 312
27, 036

839
688
710
557
906

1,412
1,703
1,494
1,543
1,493

19,240
19. 535
19,420
18, 899
218,932

18,646
18, 883
18,843
18, 383
18, 450

594
652
577
516
482

-245
-36
-133
-41
-424

1960: December
1961: December

29,060
31,217

27.248
29,098

87
149

1,725
1,970

19,283
3 20,118

18, 527
319, 545

756
3 572

669
3 423

I960* January
February
March
April
May
June

28, 234
27,210
27, 047
27,181
27, 378
27, 737

25, 934
25, 322
25, 310
25, 488
25, 818
26,124

905
816
635
602
502
425

1,395
1,072
1,102
1,091
1,058
1,188

18, 878
18,213
18,027
18,104
18,239
18,294

18,348
17, 762
17, 611
17,696
17, 770
17, 832

530
451
416
408
469
462

-375
-365
-219
-194
-33
37

28,176
28,206
28, 088
28, 490
29,241
29, 060

26, 619
26, 983
26, 653
27,056
27,871
27, 248

388
293
225
149
142
87

1,169
930
1,210
1,285
1,228
1,725

18, 518
18, 501
18, 570
18, 733
19, 004
19,283

18,010
17,961
17, 931
18,104
18, 248
18, 527

508
540
639
629
756
756

120
247
414
480
614
669

28,484
28,145
28.030
27,925
28,007
28,304

26.942
26 829
26,831
26,676
26. 747
26, 935

49

1,493
1,179
1,129
1,193
1,164
1,306

19 315
18.964
18,809
18,884
18,856
19,042

18,570
18, 310
18,263
18, 266
18, 307
18, 430

745
654
546
618
549
612

696

137
70
56
96
63

28,498
28, 661
29,080
29,504
30,142
31,217

27 024
27,415
27, 563
28. 044
28, 616
29, 098

1,423
1,179
1,480
1,396
1,420
1,970

19,063
19,223
19, 372
19, 660
19, 832
3 20,118

18,482
18,619
18, 783
19,153
19,218
319,545

581
604
589
507
614
3
572

530
537

July
August
September
October
November
December
1961* January
February
March
April..May
June
July
August.
September
October
___
November
December

51
67

37
65
105
149

517
476
562
453
549

552
442
509
3 423

1 Data from March 1933 through April 1934 are for licensed banks only.
2 Beginning December 1959, total reserves held include vault cash allowed.
3
Preliminary.
NOTE.—Data for member banks in Alaska and Hawaii included beginning 1954 and 1959, respectively.
Source: Board of Governors of the Federal Reserve System.




262

TABLE B-47.—Bond yields and interest rates, 1929-61
[Percent per annum]
Corporate
' bonds
(Moody's) Common
stock
yields,
3-month 9-12
200
Treas- month Taxable
stocks
ury- issues 2 bonds 3 Aaa Baa (Moody's)
bills i
U.S. Government
securities

Year or month

1929

Highgrade
municipal
bonds
(Standard &
Poor's)

Average
rate on Prime Fedshort- comeral
vcrm
Remerbank
serve
cial
loans paper, Bank
to busi- 4-6
disnesscount
selected months rate
cities

4.73

5.90

3.41

4.27

5.85

5.16

4.55
4.58
5.01
4.49
4.00

5.90
7.62
9.30
7.76
6.32

4.54
6.17
7.36
4.42
4.11

4.07
4.01
4.65
4.71
4.03

3.59
2.64
2.73
1.73
1.02

3.04
2.11
2.82
2.56
1.54

.137
.143
.447
.053
.023

3.60
3.24
3.26
3.19
3.01

5.75
4.77
5.03
5.80
4.96

4.06
3.50
4.77
4.38
4.15

3.40
3.07
3.10
2.91
2.76

1.50
1.50
1.33
1.00
1.00

.014
.103
.326
.373
.375

()
0.75
.79

4.75
4.33
4.28
3.91
3.61

5.31
6.25
6.67
4.89
4.81

2.50
2.10
2.36
2.06
1.86

.56
.53

2.46
2.47
2.48

2.84
2.77
2.83
2.73
2.72

2.1
2.1
2.0
2.2
2.6
2.4

.75
.75
.94
.81
.59

1.00
1.00
i 1.00
U.00
7 1.00

.375
.375
.594
1.040
1.102

.81
.82
.88
1.14
1.14

2.37
2.19
2.25
2.44
2.31

2.62
2.53
2.61
2.82
2.66

3.29
3.05
3.24
3.47
3.42

4.19
3.97
5.13
5.78
6.63

1.67
1.64
2.01
2.40
2.21

2.2
2.1
2.1
2.5
2.7

.75
.81
1.03
1.44
1.49

n.oo
u.oo

1.218
1.552
1.766
1.931
.953

1.26
1.73
1.81
2.07
.92

2.32
2.57
2.68
2.94
2.55

2.62
2.86
2.96
3.20
2.90

3.24
3.41
3.52
3.74
3.51

6.27
6.12
5.50
5.49
4.78

1.98
2.00
2.19
2.72
2.37

2.7
3.1
3.5
3.7
3.6

1.45
2.16
2.33
2.52
1.58

1.59
1.75
1.75
1.99
1.60

1955..
1956
1957
1958,
1959

1.753
2.658
3.267
1.839
3.405

1.89
2.83
3.53
2.09
4.11

2.84
3.08
3.47
3.43
4.08

3.06
3.36
3.89
3.79
4.38

3.53
3.88
4.71
4.73
5.05

4.06
4.07
4.33
4.05
3.31

2.53
2 93
3^60
3.56
3.95

3.7
4.2
4.6
4.3
8 5.0

2.18
3.31
3.81
2.46
3,97

1.89
2.77
3.12
2.16
3 36

1960
1961
1959: January
February
March. _
April
May
June

2.928
2.378

3.55
2.91

4.02
3.90

4.41
4.35

5.19
5.08

3.60
3.07

3.73
3.46

5.2
5.0

3.85
2.97

3.53
3.00

2.837
2.712
2.852
2.960
2.851
3.247

3.26
3.38
3.56
3.66
3.92
3.97

3.91
3.92
3.92
4.01
4.08
4.09

4.12
4.14
4.13
4.23
4.37
4.46

4.87
4.89
4.85
4.86
4.96
5.04

3.36
3.41
3.43
3.29
3.25
3.28

3.87
3.85
3.76
3.84
3.97
4.04

4.51

3.30
3.26
3.35
3.42
3.56
3.83

2.50
2.50
2.92
3.00
3.05
3.50

3.243
3.358
3.998
4.117
4.209
4.572

4.30
4.32
4.80
4.65
4.70
4.98

4.11
4.10
4.26
4.11
4.12
4.27

4.47
4.43
4.52
4.57
4.56
4.58

5.08
5.09
5.18
5.28
5.26
5.28

3.18
3.19
3.34
3.36
3.38
3.28

4.04
3.96
4.13
3.99
3.94
4.05

3.98
3.97
4.63
4.73
4.67
4.88

3.50
3.50
3.83
4.00
4.00
4.00

1930
1931
1932
1933._.
1934

-

1935
1936
1937
1938
1939

—

1940
1941
1942
1943
1944
1945
1946
1947
1948
1949...
1950
1951
1952
1953
1954

f

July
August
__
September
October
November
December

)
1.402
.879
.515
.256

00
(5)

See footnotes at end of table, p. 264.




263

()

'I'sY
8 5.27

~5.~36"

.73

1.00
1.34
1.50

TABLE B-47.—Bondyields and interest rates, 7929-61

Continued

[Percent per annum]
Corporate
bonds
(Moody's) Common
stock
yields,
200
3-month 9-12
stocks
Treas- month Taxable
bonds 3 Aaa Baa (Moody's)
ury
bills i issues'
U.S. Government
securities

Year or month

Highgrade
municipal
bonds
(Standard &
Poor's)

1960: January...
February-.
March
April
May
June

4.436
3.954
3.439
3.244
3.392
2.641

4.93
4.58
3.93
3.99
4.19
3.35

4.37
4.22
4.08
4.18
4.16

4.61
4.56
4.49
4.45
4.46
4.45

5.34
5.34
5.25
5.20
5.28
5.26

3.56
3.53
3.59
3.68
3.60
3.52

4.13
3.97
3.87
3.84
3.85
3.78

July
August
September
October
November.
December .

2.396
2.286
2.489
2.426
2.384
2.272

3.13
2.89
2.99
3.01
2.99
2.79

3.86
3.79
3.84
3.91
3.93
3.88

4.41
4.28
4.25
4.30
4.31
4.35

5.22
5.08
5.01
5.11
5.08
5.10

3.60
3.50
3.73
3.74
3.60
3.49

3.72
3.53
3.53
3.59
3.46
3.45

1961: J a n u a r y . . .
FebruaryMarch
April.
May
June

2.302
2.408
2.420
2.327
2.288
2.359

2.70
2.84
2.86
2 83
2.82
3.02

3.89
3.81
3.78
3.80
3.73
3.88

4.32
4.27
4.22
4.25
4.27
4.33

5.10
5.07
5.02
5.01
5.01
5.03

3.28
3.22
3.15
3.15
3.09
3.16

3 44
3.33
3.38
3.44
3.38
3.53

July
August
September
October...
November.
December.

2.268
2.402
2.304
2.350
2.458
2.617

2.87
3.03
3.03
2.97
2.95
3.03

3.90
4.00
4.02
3.98
3.98
4.06

4.41
4.45
4.45
4.42
4.39
4.42

5.09
5.11
5.12
5.13
5.11
5.10

3.05
3.00
3.03
2.95
2.93
2.90

3.53
3.55
3.54
3.46
3.44
3.49

Average
rate on Prime
shortcomterm
merbank
cial
loans paper
to busi- 4-6
nessselected months
cities

5.34
~5.~35~

4.97
~4.~99'

4.97
~4.~97'

4.99

Federal
Reserve
Bank
discount
rate

4.91
4.66
4.49
4.16
4.25
3.81

4.00
4.00
4.00
4.00
4.00
3.65

3.39
3.34
3.39
3.30
3.28
3.23

3.50
3.18
3.00
3.00
3.00
3.00

2 98
3.03
3.03
2.91
2.76
2.91

3.00
3 00
3.00
3.00
3.00
3.00

2.72
2.92
3.05
3.00
2.98
3.19

3.00
3.00
3.00
3.00
3.00
3.00

1 Rate on new issues within period. Issues were tax exempt prior to March 1, 1941, and fully taxable
thereafter. For the period 1934-37, series includes issues with maturities of more than 3 months.
2 Includes certificates of indebtedness and selected note and bond issues (fully taxable).
3 First issued in 1941. Series includes bonds which are neither due nor callable before a given number of
years as follows: April 1953 to date, 10 years; April 1952-March 1953, 12 years; October 1941-March 1952,
15 years.
* Treasury bills were first issued in December 1929 and were issued irregularly in 1930.
5
Not available before August 1942.
« Not available on same basis as for 1939 and subsequent years.
i From October 30, 1942, to April 24, 1946, a preferential rate of 0.50 percent was in effect for advances
secured by Government securities maturing or callable in 1 year or less.
8
Series revised to exclude loans to nonbank financial institutions.
NOTE.—Yields and rates computed for New York City, except for short-term bank loans.
Sources: Treasury Department, Board of Governors of the Federal Reserve System, Moody's Investors
Service, and Standard & Poor's Corporation.




264

T A B L E B—48.—Short- and intermediate-term consumer credit outstanding, 7929—61
[Millions of dollars]

Instalment credit

End of year or month

Noninstalment credit

Other Repair
and
AutoPercontodern- sonal
mobile sumer
paper 1 goodsl zation loans
loans 2
paper

Charge
Other 3
accounts

Total

Total

1929..

6,444

3,151

3,293

1,602

1,691

1930..
1931..
1932..
1933..
1934..

5,767
4,760
3, 567
3,482
3,904

2,687
2,207
1,521
1,588
1,871

3,080
2,553
2,046
1,894
2,033

1,476
1,265
1,020
990
1,102

1,604
1,288
1,026
904
931

1935..
1936..
1937..
1938..
1939..

4,911
6,135
6,689
6,338
7,222

2,694
3,623
4,015
3,691
4,503

1,497

1,620

298

1,088

2,217
2,512
2,674
2,647
2,719

1,183
1,300
1,336
1,362
1,414

1,034
1,212
1,338
1,285
1,305

1940..
1941..
1942..
1943..
1944..

8,338
9,172
5,983
4,901
5,111

5,514
6,085
3,166
2,136
2,176

2,071
2,458
742
355
397

1,827
1,929
1,195
819
791

371
376
255
130
119

1,245
1,322
974
832
869

2,824
3,087
2,817
2,765
2,935

1,471
1,645
1,444
1,440
1,517

1,353
1,442
1,373
1,325
1,418

1945..
1946..
1947..
1948..
1949..

5,665
8,384
11,598
14, 447
17,364

2,462
4,172
6,695
8,996
11, 590

455
981
1,924
3,018
4,555

816
1,290
2,143
2,901
3,706

182
405
718
853
898

1,009
1,496
1,910
2,224
2,431

3,203
4,212
4,903
5,451
5,774

1,612
2,076
2,381
2,722
2,854

1,591
2,136
2,522
2,729
2,920

1950..
1951..
1952..
1953..
1954..

21,471
22, 712
27, 520
31,393
32,464

14, 703
15,294
19,403
23,005
23,568

6,074
5,972
7,733
9,835
9,809

4,799
4,880
6,174
6,779
6,751

1,016
1,085
1,385
1,610
1,616

2,814
3,357
4,111
4,781
5,392

6,768
7,418
8,117
8,388
8,896

3,367
3,700
4,130
4,274
4,485

3,401
3,718
3,987
4,114
4,411

1955..
1956..
1957..
1958..
1959..

38, 807
42, 262
44, 848
44, 984
51, 331

28,883
31, 648
33,745
33,497
39, 034

1,693
1,905
2,101
2,346
2,809

6,112
6,789
7,582
8,116
9,386

9,924
10, 614
11,103
11,487
12,297

4,795
4,995
5,146
5,060
5,104

5,129
5,619
5,957
6,427
7,193

1960...
1961 5 -

55, 757
56, 850

7,641
13,437
14, 348 8,606
15, 218 8,844
9,028
14, 007 10, 630
16,209
42, 588 17, 444 11, 525
43,100 16,950 11,700

3,139
3,200

10,480
11, 250

13,169
13, 750

5,329
5,550

7,840
8,200

1960: J a n u a r y . . .
February.
March
April
May
June

50, 728
50, 494
50, 634
51, 672
52,332
53,026

38,921
38,962
39,189
39, 783
40, 246
40,859

16,176
16, 273
16, 462
16, 794
17,039
17,348

10, 547
10,423
10,365
10, 437
10, 501
10,634

2,800
2,812
2,831
2,871
2,935
2,984

9,398
9,454
9,531
9,681
9,771
9,893

11, 807
11, 532
11, 445
11,889
12, 086
12,167

4,625
4,180
4,016
4,328
4,435
4,529

7,182
7,352
7,429
7,561
7,651
7,638

53, 231
53, 594
53, 852
53,979
54, 298
55, 757

41,201
41, 580
41, 774
41,859
41,996
42,588

17, 476
17, 598
17, 595
17, 553
17, 544
17, 444

10,668
10, 731
10,820
10, 909
11,003
11, 525

3,020
3,074
3,109
3,129
3,144
3,139

10,037
10,177
10, 250
10,268
10,305
10,480

12,030
12, 014
12,078
12,120
12,302
13,169

4,413
4,390
4,411
4,504
4,605
5,329

7,617
7,624
7,667
7,616
7,697
7,840

54, 726
53,843
53, 641
53, 756
54,196
54,602

42,122
41,662
41, 465
41, 423
41, 584
41, 888

17, 220
17, 017
16, 922
16,877
16,933
17, 061

11,365
11,136
11, 007
10, 915
10, 929
10,966

3,100
3,075
3,066
3,073
3,100
3,122

10,437
10,434
10,470
10, 558
10,622
10, 739

12,604

12, 714

4,721
4,132
4,096
4,203
4,380
4,474

7,883
8,049
8,080
8,130
8,232
8,240

54, 505
54, 739
54, 757
54,902
55, 451
56,850

41,909 17, 063
42, 090 17, 061
42,039 16,902
42,181 16,913
42, 419 16, 960
43,100 16,950

10,934
10, 966
11,006
11,085
11,215
11, 700

3,133
3,165
3,180
3,183
3,192
3,200

10,779
10, 898
10,951
11,000
11,052
11, 250

12, 596
12,649
12,718
12, 721
13,032
13, 750

4,397
4,409
4,423
4,517
4,684
5,550

8,199
8,240
8,295
8,204
8,348
8,200

July
August
September.
October
November.
December..
1961: January...
February.
March
April
May
June
July
August
September..
October
November...
December 5_

Total

12,181
12,176
12,333
12,612

1 Includes all consumer credit extended for the purpose of purchasing automobiles and other consumer
goods.
2
Includes only such loans held by financial institutions; those held by retail outlets are included in "other
consumer goods paper."
3
Single-payment loans and service credit.
* Not available.
5
Preliminary estimates by Council of Economic Advisers.
NOTE.—Series revised beginning 1955. For details, see Federal Reserve Bulletin, December 1961.
Data for Alaska and Hawaii included beginning January and August 1959, respectively.
Source: Board of Governors of the Federal Reserve System (except as noted).




265

TABLE B-49.—Instalment credit extended and repaid, 1946-61
[Millions of dollars]
Total

Repair and
Other consumer modernization
goods paper
loans

Automobile
paper

Period
Extended

Repaid

Extended

Repaid

Extended

Repaid

8,495
12,713
15, 585
18,108
21, 558
23, 576
29, 514
31, 558
31, 051
38, 944
39, 775
41,871
39,962
47,818
49,313
48,025

6,785
10,190
13, 284
15, 514
18.445
22, 985
25,405
27, 956
30,488
33,629
37,009
39, 775
40,211
42,435
45, 759
47, 525

1,969
3,692
5,217
6,967
8,530
8,956
11, 764
12, 981
11,807
16, 706
15,421
16,321
14,069
17,544
17,408
15,800

1,443
2,749
4,123
5,430
7,011
9,058
10,003
10,879
11, 833
13,077
14,510
15,451
15,281
15,411
16.172
16,300

3,077
4,498
5,383
5,865
7,150
7,485
9,186
9,227
9,117
10,642
11, 721
11,807
11, 747
13,982
14,470
14,450

2,603
3,645
4,625
5,060
6,057
7,404
7,892
8,622
9,145
9,752
10, 756
11,569
11,563
12,402
13,574
14,275

1960:

January
February
March
April
-.
May__
June
July
August
September
October
November
December
1961 J a n u a r y
February
March
April
May
June
July.
August
September....
October
November
December1...

3,511
3,669
4,139
4,392
4,269
4,494
4.075
4,304
3,975
3,941
3,998
4,547
3,426
3,183
3,907
3,721
4,203
4,347
3,905
4,234
3, 789
4,244
4,275
4,800

3,624
3,631
3,915
3,795
3,802
3,882
3,731
3,927
3,779
3,855
3,867
3,952
3,895
3,643
4,104
3,764
4,043
4,042
3,885
4,053
3,839
4,102
4,037
4,100

1,242
1,387
1,591
1,654
1,616
1,685
1,434
1,534
1,336
1,365
1,344
1,220
1,130
1,049
1,323
1,243
1,449
1,515
1,365
1,395
1,168
1,452
1,402
1,325

1,275
1,291
1,403
1,322
1,369
1,378
1,306
1,414
1,339
1,405
1,354
1,319
1,354
1,252
1,418
1,290
1,394
1,387
1,362
1,396
1,327
1,441
1,355
1,325

1,042
976
1,107
1,207
1,193
1,281
1.118
1,201
1,207
1,229
1,236
1,676
1,031
888
1,111
1,073
1,221
1,236
1,113
1,229
1,200
1,300
1,327
1,700

1960:

4,112
4,155
4,140
4,350
4,127
4,121
4,141
4,048
4,089
4,034
4,018
3,984
3,866
3,812
3,894
3,800
3,907
3,-962
3,909
4,038
3,942
4,209
4,317
4,275

3,749
3,686
3,733
3,820
3,822
3,822
3,873
3,822
3,863
3,862
3,856
3,866
3, 875
3,889
3,907
3,907
3,895
3,962
3,937
3,994
3,956
4,028
4,017
4,075

1,461
1,523
1,527
1,582
1,488
1,457

1,337
1,321
1,337
1,344
1,368
1,355
1,343
1,353
1,355
1,365
1,358
1,348
1,356
1,353
1,348
1,356
1,336
1,354
1,364
1,362
1,350
1,372
1,359
1,375

194619471948
1949
1950
1951
1952
1953
1954
19551956
1957
1958
1959
I960
1961 i

Extended

Personal
loans

Repaid

Extended

423
704
714
734
835
841
1,217
1,344
1,261
1,393
1,582
1,674
1,871
2,222
2,212
2,050

200
391
579
689
717
772
917
1,119
1,255
1,316
1,370
1,477
1,626
1,765
1,883
2,000

3,026
3,819
4,271
4,542
5,043
6,294
7,347
8,006
8,866
10,203
11,051
12.069
12,275
14.070
15,223
15,725

2,539
3,405
3,957
4,335
4,660
5,751
6,593
7,336
8,255
9,484
10,373
11,278
11,741
12,857
14,130
14,950

135
159
177
191
218
213
193
219
192
185
176
154
127
127
161
166
200
196
175
206
184
186
177
150

144
148
159
151
153
163
157
166
156
165
163
158
167
152
169
159
173
174
165
174
169
183
168
150

1,092
1,147
1,264
1340
1,242
1,315
1,330
1,350
1,240
1,162
1,242
1,497
1,138
1,119
1,312
1,239
1,333
1,400
1,252
1,404
1,237
1,306
1,369
1,625

1,081
1,091
1,188
1,188
1,152
1,193
1,186
1,211
1,166
1,145
1,206
1,323
1,181
1,123
1,275
1,151
1,269
1,282
1.213
1,285
1,184
1,257
1,317
1,425

170
190
189
189
203
194
187
196
181
175
174
166
155
157
172
167
181
177
167
186
175
173
174
175

149
150
155
153
154
160
160
161
155
163
162
162
167
160
164
165
169
171
165
170
170
178
166
175

1,246
1,234
1,236
1,303
1,248
1,243
1,365
1,277
1,288
1,256
1,262
1,260
1,246
1,274
1,279
1,246
1,283
1,314
1,258
1,338
1,297
1,377
1,383
1,400

1,141
1,130
1,140
1,195
1,160
1,166
1,229
1,176
1,210
1,183
1,198
1,203
1,189
1,225
1,219
1,197
1,224
1,249
1,225
1,265
1,246
1,268
1,304
1,325

Repaid

Unadjusted
1,124
1,101
1,165
1,134
1,128
1,148
1,082
1,136
1,118
1,140
1,144
1,152
1,193
1,116
1,242
1,164
1,207
1,199
1,145
1,198
1,159
1,221
1,197
1,200

Seasonally adjusted
January...
February
March
April
May
Juiie
July
August
September
October
November
December
1961: J a n u a r y .
February
March
April
May
June

July.
August
September
October
November
December L —
1

1,390
1,404
1,417
1,399
1,408
1,351
1.286
1,216
1,255
1,225
1,270
1,296
1,300
1,302
1,271
1,405
1,511
1,450

1,235
1,208
1,188
1,276
1,188
1,227
1,199
1,171
1,203
1,204
1,174
1,207
1,179
1,165
1,188
1,162
1,173
1,175
1,184
1,212
1,199
1,254
1,249
1,250

1,122
1,085
1,101
1,128
1,140
1,141
1,141
1,132
1,143
1,151
1,138
1,153
1,163
1,151
1,176
1,189
1,166
1,188
1,183
1,197
1,190
1,210
1,188
1,200

Preliminary; December b y Council of Economic Advisers.

N O T E . — S e e also Table B-48.
Series revised beginning 1955. For details, see Federal Reserve Bulletin, December 1961.
D a t a for Alaska a n d Hawaii included beginning J a n u a r y and August 1959, respectively. Therefore, t h e
difference between extensions and repayments for J a n u a r y and August 1959 and for the year 1959 does n o t
equal the net change in credit outstanding.
Source: Board of Governors of the Federal Reserve System (except as noted).




266

TABLE B—50.—Mortgage debt outstanding, by type of property and offinancing,1939—61
[Billions of dollars]
Nonfarm properties
1- to 4-family houses
End of year or quarter

All
properties

Government underwritten

Total

Total

FHA
insured

ConvenVA
tional 1
guaranteed

Total

Multifamily Farm
and
propcomerties
mercial
properties a

1939

35.5

28.9

16.3

1.8

1.8

14.5

12.5

6.6

1940
1941
1942
1943
1944

36.5
37.6
36.7
35.3
34.7

30.0
31.2
30.8
29.9
29.7

17.4
18.4
18.2
17.8
17.9

2.3
3.0
3.7
4.1
4.2

2.3
3.0
3.7
4.1
4.2

15.1
15.4
14.5
13.7
13.7

12.6
12.9
12.5
12.1
11.8

6.5
6.4
6.0
5.4
4.9

35.5
41.8
48.9
56.2
62.7

30.8
36.9
43.9
50.9
57.1

18.6
23.0
28.2
33.3
37.6

4.3
6.1
9.3
12.5
15.0

4.1
3.7
3.8
5.3
6.9

0.2
2.4
5.5
7.2
8.1

14.3
16.9
18.9
20.8
22.6

12.2
13.8
15.7
17.6
19.5

4.8
4.9
5.1
5.3
5.6

1950
1951
1952
1953
1954

72.8
82.3
91.4
101.3
113.7

66.7
75.6
84.2
93.6
105.4

45.2
51.7
58.5
66.1
75.7

18.9
22.9
25.4
28.1
32.1

8.6
9.7
10.8
12.0
12.8

10.3
13.2
14.6
16.1
19.3

26.3
28.8
33.1
38.0
43.6

21.6
23.9
25.7
27.5
29.7

6.1
6.7
7.3
7.8
8.3

1955
1956
1957
1958
1959

129.9
144.5
156.6
171.9
190.9

120.9
134.6
146.1
160.7
178.8

88.2
99.0
107.6
117.7
130.9

38.9
43.9
47.2
50.1
53.8

14.3
15.5
16.5
19.7
23.8

24.6
28.4
30.7
30.4
30.0

49.3
55.1
60.4
67.6
77.0

32.6
35.6
38.5
43.0
47.9

9.1
9.9
10.5
11.3
12.2

1960
19613

206.2
223.1

193.1
208.9

141.3
152.9

56.4
59.6

26.7
29.6

29.7
30.0

84.8
93.3

51.8
56.0

13.1
14.3

III..
IV..

176.0
181.5
186.6
190.9

164.6
169.7
174.6
178.8

120.5
124.3
128.0
130.9

51.3
52.1
53.1
53.8

20.9
21.8
22.9
23.8

30.4
30.3
30.2
30.0

69.2
72.2
74.9
77.0

44.0
45.4
46.6
47.9

11.5
11.9
12.1
12.2

1960: I . . . .
II—
III_.
IV..

194.5
198.5
202.6
206.2

181.9
185.7
189.6
193.1

133.1
135.9
138.8
141.3

54.5
55.0
55.7
56.4

24.6
25.2
26.0
26.7

29.9
29.8
29.7
29.7

78.6
80.9
83.2
84.8

48.8
49.8
50.8
51.8

12.5
12.8
13.0
13.1

1961: 13...
113..
III 3.
IV 3.

209.3
214.0
219.0
223.1

196.0
200.3
205.0
208.9

143.2
146.5
149.9
152.9

57.1
57.8
58.7
59.6

27.4
28.0
28.8
29.6

29.7
29.8
29.9
30.0

86.1
88.7
91.2
93.3

52.8
53.9
55.1
56.0

13.3
13.7
14.0
14.3

1945
1946
1947
1948
1949

.

1959: I . . . .
II—

1
2
3

Derived figures.
Includes negligible amount of farm loans held by savings and loan associations.
Preliminary.
Source: Board of Governors of the Federal Reserve System, estimated and compiled from data supplied
by various Government and private organizations.

267
621876 O - 6 2 - 1 8




TABLE B-51.—Net public and private debt, 1929-61 *
[Billions of dollars]

Private

End of
year2

1929

Corporate
Individual and noncorporate
Fed- State
eral and
Nonfarm
Total Gov- local
ern- gov- Total
ernment ment 2
ComTotal Long- Short- Total Farm 3
merterm term
cial ConTotal Mort- and sumer
gage
financial4
190.9

16.5

13.2 161.2

88.9

47.3

41.6

72.3

12.2

60.1

31.2

22.4

6.4

160.4
147.9
136.7
127.5
125.1

89.3
83.5
80.0
76.9
75.5

51.1
50.3
49.2
47.9
44.6

38.2
33.2
30.8
29.1
30.9

71.1
64.4
56.7
50.6
49.6

11.8
11.1
10.1
9.1
8.9

59.4
53.3
46.6
41.5
40.7

32.0
30.9
29.0
26.3
25.5

21.6
17.6
14.0
11.7
11.2

5.8
4.8
3.6
3.5
3.9

1930
1931
1932
1933
1934

191.0
181.9
174.6
168.5
171.4

16.5
18.5
21.3
24.3
30.4

14.1
15.5
16.6
16.7
15.9

1935
1936
1937
1938.
1939

174.7
180.3
182.0
179.6
183.2

34.4
37.7
39.2
40.5
42.6

16.0
16.2
16.1
16.0
16.3

124.2
126.4
126.7
123.1
124.3

74.8
76.1
75.8
73.3
73.5

43.6
42.5
43.5
44.8
44.4

31.2
33.5
32.3
28.4
29.2

49.4
50.3
50.9
49.8
50.8

9.0
8.6
8.6
9.0
8.8

40.4
41.7
42.3
40.9
42.0

24.7
24.4
24.3
24.5
25.0

10.8
11.2
11.3
10.1
9.8

4.9
6.1
6.7
6.3
7.2

1940
1941
1942
1943
1944

189.9
211.6
259.0
313.6
370.8

44.8
56.3
101.7
154.4
211.9

16.5
16.3
15.8
14.9
14.1

128.6
139.0
141.5
144.3
144.8

75.6
83.4
91.6
95.5
94.1

43.7
43.6
42.7
41.0
39.8

31.9
39.8
49.0
54.5
54.3

53.0
55.6
49.9
48.8
50.7

9.1
9.2
8.9
8.2
7.7

43.9
46.4
41.0
40.5
43.0

26.0
27.2
26.8
26.2
26.1

9.5
10.0
8.1
9.5
11.8

8.3
9.2
6.0
4.9
5.1

1945
1946
1947
1948.
1949

406.3
397.4
417.4
433.6
448.4

252.7
229.7
223.3
216.5
218.6

13.7
13.6
14.4
16.2
18.1

139.9 85.3
154.1 93.5
179.7 108.9
200.9 117.8
211.7 118.0

38.3
41.3
46.1
52.5
56.5

47.0
52.2
62.8
65.3
61.5

54.6
60.6
70.8
83.1
93.7

7.2
7.6
8.6
10.8
11.9

47.4
53.0
62.2
72.3
81.8

27.0
32.5
38.7
45.1
50.6

14.8
12.1
11.9
12.9
13.9

5.7
8.4
11.6
14.4
17.3

1950
1951
1952
1953
1954

490.3
524.0
555.2
586.5
612.0

218.7
218.5
222.9
228.1
230.2

20.7
23.3
25.8
28.6
33.4

250.9
282.2
306.5
329.8
348.4

142.1
162.5
171.0
179.5
182.8

60.1
66.6
73.3
78.3
82.9

81.9
95.9
97.7
101.2
100.0

108.8
119.7
135.5
150.4
165.5

12.2
13.6
15.1
16.9
17.6

96.6
106.1
120.3
133.5
147.9

59.4
67.4
75.2
83.8
94.6

15.8
16.1
17.8
18.3
20.8

21.4
22.6
27.4
31.4
82.5

1955
1956
1957
1958
1959

672.3
707.5
739.4
783.5
846.3

231.5
225.4
224.4
232.7
243.2

38.4
42.7
46.7
50.9
55.6

402.5
439.4
468.2
499.9
547.5

212.1
231.7
246.7
259.5
281. 6

90.0
100.1
112.2
121.2
128.9

122.2
131.7
134.6
138.4
152.7

190.4
207.7
221.5
240.4
265.9

18.8
19.5
20.3
23.3
24.0

171.6
188.1
201.2
217.0
241.9

108.7
121.2
131.6
144.6
160.9

23.9
24.4
24.3
26.9
28.8

38.9
42.5
45.3
45.5
52.1

882.9
1960
1961 » . . „ . 932.6

241.0
248.1

60.0 581.9 295.0
65.0 619.5 312.5

137.5
146.5

157.6
166.0

286.9
307.0

25.4
27.2

261.5
279.8

173.9
188.0

31.5
35.0

56.0
56.8

1
Net public and private debt outstanding is a comprehensive aggregate of the indebtedness of borrowers
after elimination of certain types of duplicating governmental and corporate debt. For a further explanation of the concept, see Survey of Current Business, October 1950.
2
Data for State and local government debt are for June 30.
3 Farm mortgages and farm production loans. Farmers' financial and consumer debt is included in the
nonfarm categories.
< Financial debt is debt owed to banks for purchasing or carrying securities, customers' debt to brokers,
and debt owed to life insurance companies by policyholders.
* Preliminary estimates by Council of Economic Advisers.
NOTE.—Revisions beginning 1955 in the consumer credit data of the Board of Governors of the Federal
Reserve System have not yet been incorporated into this series.

Sources: Department of Agriculture, Department of Commerce, Treasury Department, Board of Governors of the Federal Reserve System, Federal Savings and Loan Insurance Corporation, and Interstate
Commerce Commission (except as noted).




268

GOVERNMENT FINANCE
TABLE B-52.—U.S. Government debt, by kind of obligation, 1929-61
[Billions of dollars]
Interest-bearing public debt

End of year or month

1929...
—
1930
1931
1932__
1933
1934
1935
1936
1937
1938
1939...—
1940
1941
1942
1943
1944..
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1960: J a n u a r y . . .
February..
March
April
May
June
_
July
August
September.
October. _.
November.
December.
1961: J a n u a r y . . .
February. .
March
April
May
June
July..
August
September
October...
November.
December.

Gross
public
debt and
guaranteed
issues 1

16.3
16.0
17.8
20.8
24.0
31.5
35.1
39.1
41.9
44.4
47.6
50.9
64.3
112.5
170.1
232.1
278.7
259.5
257.0
252.9
257.2
256.7
259.5
267.4
275.2
278.8
280.8
276.7
275.0
283.0
290.9
290.4
296.5
291.2
290.7
287.0
288.9
289.5
286.5
288.5
288.8
288.6
290.6
290.6
290.4
290.2
290.7
287.7
288.2
290.4
289.2
292.6
294.0
294.0
296.0
297.3
296.5

Marketable public
issues

Nonmarketable public issues

Shortterm
issuesa

United
States
savings
bonds

Treasury
bonds

3.3
2.9
2.8
5.9
7.5
11.1
14.2
12.5
12.5
9.8
7.7
7.5
8.0
27.0
47.1
69.9
78.2
57.1
47.7
45.9
50.2
58.3
65.6
68.7
77.3
76.0
81.3
79.5
82.1
92.2
103.5
109.2
120.5
105.1
104.6
100.7
103.0
102.5
102.5
105.6
103.9
104.0
107.0
109.1
109.2
109.5
110.1
105.8
107.2
108.0
106.3
110.5
111.5
112.6
116.0
120.4
120.5

11.3
11.3
13.5
13.4
14.7
15.4
14.3
19.5
20.5
24.0
26.9
28.0
33.4
49.3
67.9
91.6
120.4
119.3
117.9
111.4
104.8
94.0
76.9
79.8
77.2
81.8
81.9
80.8
82.1
83.4
84.8
79.8
75.5
84.7
84.7
84.7
85.1
85.1
81.2
81.2
82.3
82.3
82.3
79.7
79.8
79.8
79.8
80.6
80.9
80.8
80.8
80.8
79.7
79.3
79.3
75.2
75.5

0.2
.5
1.0
1.4
2.2
3.2
6.1
15.0
27.4
40.4
48.2
49.8
52.1
55.1
56.7
58.0
57.6
57.9
57.7
57.7
57.9
56.3
52.5
51.2
48.2
47.2
47.5
47.9
47.8
47.8
47.6
47.6
47.5
47.4
47.3
47.3
47.4
47.4
47.2

47.2
47.3
47.4
47.4
47.5
47.5
47.6
47.6
47.7
47.7
47.8
47.5

Treasury
tax and
savings
notes

2.5
6.4
8.6
9.8
8.2
5.7
5.4
4.6
7.6
8.6
7.5
5.8
6.0
4.5

8
CO
(e)

Investment
bonds *

1.0
1.0
1.0
1.0
13.0
13.4
12.9
12.7
12.3
11.6
10.3
9.0
7.6
6.2
5.1
7.5
7.4
7.2
7.0
6.9
6.8
6.7
6.6
6.5
6.3
6.2
6.2
6.1
6.1
6.0
5.9
5.8
5.8
5.8
5.7
5.6
5.2
5.1
5.1

Special
issues*

0.6
.8
.4
.4
.4
.6
.7
.6
2.2
3.2
4.2
5.4
7.0
9.0
12.7
16.3
20.0
24.6
29.0
31.7
33.9
33.7
35.9
39.2
41.2
42.6
43.9
45.6
45.8
44.8
43.5
44.3
43.5

42.6
42.8
43.3
42.8
43.9
44.9
44.2
45.2
45.0
44.3
44.6
44.3
43.8
43.7
44.0
43.0
44.5
45.0
44.2
45.6
45.0
43.9
44.2
43.5

1
Total includes non-interest-bearing debt, fully guaranteed securities (except those held by the Treasury), Postal Savings bonds, prewar bonds, adjusted service bonds, depositary bonds, and armed forces
leave bonds, not shown separately. Not all of total shown is subject to statutory debt limitation.
2
Bills, certificates of indebtedness, and notes.
3
Series A bonds and, beginning April 1951, Series B convertible bonds.
4
Issued to U. S. Government investment accounts. These accounts also held $11.0 billion of public
marketable and nonmarketable issues on December 31, 1961.
s Less than $50 million.
6
The last series of Treasury savings notes matured in April 1956.
Source: Treasury Department.




269

TABLE B-53.—Estimated ownership of U.S. Government obligations, 1939-61
[Par values,i billions of dollars]

Gross public debt and guaranteed issues 2

End of year or
month

1939
19401941_
1942
1943
_.
1944
1945.
1946
1947
1948
1949
1950
1951
1952
1953..
1954...
1955...
..__
1956..._
1957
1958
._
1959
1960.
._
1961 8
1960: January
February
March
April
May
_
June
_.
July
August
September
October
_
November
December
1961:: January
February
March
April
May
June
July
August
September
October
November
December 8_._

Held by others
Held
by U.S.
GovMutual
ernsavings
ment
Federal Com- banks Other
Total investment Total Reserve mercial and in- corporabanks banks surance tions 4
accomcounts
panies
47.6
50.9
64.3
112.5
170.1
232.1
278.7
259.5
257.0
252.9
257.2
256.7
259.5
267.4
275.2
278.8
280.8
276. 7
275.0
283.0
290.9

6.5
7.6
9.5
12.2
16.9
21.7
27.0
30.9
34.4
37.3
39.4
39.2
42.3
45.9
48.3
49.6
51.7
54.0
55.2
54.4
53.7

41.1
43.3
54.7
100.2
153.2
210.5
251.6
228.6
222.6
215.5
217.8
217.5
217.2
221.6
226.9
229.2
229.1
222.7
219.8
228.6
237.3

2.5
2.2
2.3
6.2
11.5
18.8
24.3
23.3
22.6
23.3
18.9
20.8
23.8
24.7
25.9
24.9
24.8
24.9
24.2
26.3
26.6

15.9
17.3
21.4
41.1
59.9
77.7
90.8
74.5
68.7
62.5
66.8
61.8
61.6
63.4
63.7
69.2
62.0
59.5
59.5
67.5
60.3

9.4
10.1
11.9
15.8
21.2
28.0
34.7
36.7
35.9
32.7
31.5
29.6
26.3
25.5
25.1
24.1
23.1
21.3
20.2
19.9
19.5

2.2
2.0
4.0
10.1
16.4
21.4
22.2
15.3
14.1
14.8
16.8
19.7
20.7
19.9
21.5
19.2
23.5
19.1
18.6
18.8
22.6

290.4
296.5
291.2
290.7
?87.0
288.9
289.5
286.5
288.5
288.8
288.6
290.6
290.6
290.4
290.2
290.7
287.7
288.2
290.4
289.2
292.6
294.0
294.0
296.0
297.3
296.5

55.1
54.5
53.2
53.2
53.7
53.2
54.4
55.3
54.8
55.9
55.5
55.0
55.4
55.1
54.6
54.5
54.9
54.0
55.5
56.1
55.2
56.5
55.9
55.0
55.4
54.5

235.3
242.0

27.4
28.9

238.0
237.5
233.3
235.7
235.1
231.1
233.6
232.9
233.0
235.6
235.2
235.3
235.6
236.3
232.8
234.2
234.9
233.1
237.4
237.5
238.1
241.0
241.9
242.0

25.5
25.2
25.3
25.6
26.0
26.5
26.9
26.8
27.0
27.4
27.5
27.4
26.6
26.7
26.7
26.8
26.9
27.3
27.4
27.7
27.8
28.3
29.2

62.1
67.3
59.0
57.0
54.7
56.8
56.0
55.3
57.4
57.5
58.6
61.4
61.2
62.1
62.7
61.9
59.7
61.7
62.1
62.5
65.5
65.1
66.6
67.3
66.9
67.3

18.1
17.6
19.6
19.5
19.3
19.1
18.9
18.6
18.6
18.6
18.5
18.3
18.2
18.1
18.3
18.2
18.3
17.9
17.9
17.7
17.8
17.8
17.8
17.8
17.7
17.6

19.7
19.4
24.4
25.2
22.4
23.1
23.7
20.7
21.1
20.4
19.3
20.1
20.6
19.7
20.1
21.2
19.5
20.5
21.2
19.4
19.5
19.8
18.4
19.4
20.3
19.4

1
2

State
Misceland
local individ- laneous
uals 6 invesgoverntors?
ments fi
0.4
.5
.7
1.0
2.1
4.3
6.5
6.3
7.3
7.9
S.I
11.1
12.7
14.4
15.4
16.3
16.6
16.5
18.0
18.2
18.5
18.2
18.4
18.6
18.5
18.6
18.8
18.7
18.5
18.3
18.3
18.3
18.2
18.3
18.5
18.7
18.5
18.5
18.7
18.7
18.6
18.5
18.4
18.4
18.5

10.1
10.6
13.6
23.7
37.6
53.3
64.1
64.2
65.7
65.5
66.3
66.3
64.6
65.2
64.8
63.4
64.7
65. 5
64.0
63.0
68.2
65.6
65.5
69.0
69.3
70.1
69.4
69.0
68.4
68.1
67.7
67.8
66.6
66.5
65.6
65.7
65.8
65.9
64.9
64.7
64.3
64.8
65.2
65.3
65.3
65.3

65.5

0.7
.7
.9
2.3
4.4
7.0
9.1
8.1
8.4
8.9
9.4
10.5
10.6
11.7
13.2
13.9
15.6
16.1
16.6
16.6
22.1
24.2
24.8
22.3
22.9
22.9
23.3
22.9
22.7
23.0
23.4
23.5
23.6
22.8
24.2
24.0
23.9
24.1
23.9
23.5
23.2
23.7
23.2
23.7
24.5
24.1
24.8

United States savings bonds, series A-F and J, are included at current redemption value.
Excludes guaranteed securities held by the Treasury. Not all of total shown is subject to statutory
debt limitation.
3
Includes commercial banks, trust companies, and stock savings banks in the United States and Territories and possessions; figures exclude securities held in trust departments. Since the estimates in this
table are on the basis of par values and include holdings of banks in United States Territories and possessions,
they do not agree with the estimates in Table B- 45, which are based on book values and relate only to banks
within the United States.
4
5 Exclusive of banks and insurance companies.
Includes trust, sinking, and investment funds of State and local governments and their agencies, and
of 6Territories and possessions.
Includes partnerships and personal trust accounts.
7
Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, dealers
and brokers, and investments of foreign balances and international accounts in this country. Beginning
with December 1946, the international accounts include investments by the International Bank for Reconstruction and Development, the International Monetary Fund, and the International Development Asso ciation in special non-interest-bearing notes issued by the U.S. Government. Beginning with June 30,
1947, includes holdings of Federal land banks.
8
Preliminary estimates by Council of Economic Advisers.
Source: Treasury Department (except as noted).




270

TABLE B—54.—Average length and maturity distribution of marketable interest-bearing
public debt, 1946-61
Maturity class
End of year or month

Amount
outstanding Within
lyear

1 to 5
years

years Average length
5 to 10 10 to 20 20and
years
years
over

Millions of dollars

Years Months

Fiscal year:
1946
1947
1948
1949

189,606
168,702
160,346
155,147

61,974
51,211
48,742
48,130

24,763
21,851
21,630
32,562

41,807
35,562
32,264
16,746

17,461
18,597
16,229
22,821

43,599
41,481
41,481
34,888

1950
1951
1952
1953
1954

155,310
137,917
140,407
147,335
150,354

42,338
43,908
46,367
65,270
62,734

51,292
46,526
47,814
36,161
29,866

7,792
8,707
13,933
15,651
27,515

28,035
29,979
25,700
28,662
28,634

25,853
8,797
6,594
1,592
1,606

1955
1956
1957
1958
1959

155,206 49,703 39,107
154,953 58,714 34,401
155,705 71,952 40,669
166,675 67,782 42,557
178,027 72,958 58,304

34,253
28,908
12,328
21,476
17,052

28,613
28,578
26,407
27,652
21,625

3,530
4,351
4,349
7,208

1960
1961

183,845
187,148

70,467
81,120

72,844 20,246 12,630
58, 400 26, 435 10,233

7,658
10,960

1960: January....
February..
March
April
May
June

189,856
189,384
185,437
188,147
187,735
183,845

81,455 61,691
76,735 72,849
72,721 72,934
72,807 75,133
74,335 73,184
70,467 72,844

22,138
15,240
19,931
19,930
19,928
20,246

16,489
17,365
12,659
12,649
12,641
12,630

8,084
7,194
7,193
7,629
7,648
7,658

July
August
September
October...
November.
December.
1961: January...
February..
March
April
May
June

186,915
186,294
186,366
189,358
188,840
189,015

73.479'
73,892
76,148
79,203
75,324
75,315

72,911
70,819
68,646
68*595
70,755
70,812

20,245
21,314
21,312
17,332
18, 544
18,684

12,625
12,617
12,610
12,601
13,235
13,224

7,655
7,653
7,650
11,627
10,982
10,979

189,320
189, 919
186, 520
188,147
188, 893
187,148

75, 613
80,054
76, 622
78,731
78, 896
81,120

70,836
67,007
61, 007
60, 541
62, 349
58, 400

18, 684
18. 683
27, 658
27. 654
26, 438
26,435

13, 211
13, 203
10, 262
10. 254
10, 245
10, 233

10, 976
10, 973
10, 970
10, 968
10,965
10,960

July
August
September.
October...
November.
December.

191, 275
191,138
191,925
105, 234
195, 643
195,965

85, 224
80, 675
81,334
82, 578
83,641
85,913

58, 437
63, 607
63, 747
65, 828
67,105
64, 874

26, 433
25, 693
21, 934
21, 930
19, 487
19, 782

10,225
10, 212
11, 479
11, 469
11,982
11,976

10, 956
10,952
13, 431
13, 428
13,428
13,419

10
4

NOTE.—All issues classified to final maturity except partially tax-exempt bonds, which are classified to
earliest call date.
Source: Treasury Department.




271

TABLE B-55.—Federal budget receipts and expenditures and the public debt, 1929-63
{Millions of dollars]
Net
budget
receipts 1

Fiscal or calendar year
Fiscal year:
1929

Budget
expenditures

Surplus
or
deficit (-)

Public debt
at end of
year 2

3,861

3,127

734

16,931

1930...
1931...
1932...
1933...
1934...

4,058
3,116
1,924
1,997
3,015

3,320
3,577
4,659
4,598
6,645

738
-462
-2,735
-2,602
- 3 , 630

16,185
16,801
19,487
22,539
27,053

1935...
1936...
1937...
1938...
1939...

3,706
3,997
4,956
5,588
4,979

6,497
8,422
7, 733
6,765
8,841

-2,791
- 4 , 425
-2,777
-1,177
-3,862

28,701
33,779
36,425
37,165
40,440

1940...
1941...
1942...
1943...
1944...

5,137
7,096
12, 547
21,947
43, 563

9,055
13,255
34,037
79,368
94,986

-3,918
-6,159
-21,490
-57, 420
-51,423

42,968
48, 961
72, 422
136,696
201,003

1945...
1946...
1947...
1948...
1949...

44,362
39,650
39,677
41,375
37,663

98,303
60,326
38,923
32,955
39,474

-53, 941
-20,676
754
8,419
-1,811

258, 682
269,422
258,286
252,292
252,770

1950...
1951...
1952...
1953...
1954...

36,422
47,480
61,287
64,671
64,420

39, 544
43,970
65,303
74,120
67,537

-3,122
3,510
-4,017
-9,449
-3,117

257,357
255,222
259,105
266,071
271,260

1955...
1956...
1957...
1958...
1959...

60,209
67,850
70,562
68f550
67,915

64,389
66,224
71,369
80,342

-4,180
1,626
1,596
- 2 , 819
-12,427

274,374
272,751
270,527
276,343
284,706

1960...
1961...
1962 3.
1963 3.

77,763
77,659
82,100
93, 000

76,539
81,515
89, 075
92,537

1,224
- 3 , 856
—6,975
463

286,331
288, 971
295,370
294,920

C a l e n d a r year:
1948
1949

40,800
37,464

35,559
41,056

5,241
-3,592

252,800
257,130

1950-.
1951..
1952..
1953..
1954..

37, 235
52,877
64, 705
63, 654
60,938

37,657
56,236
70, 547
72,811
64,622

-422
-3,358
-5,842
-9,157
-3,683

256,708
259,419
267,391
275.168
278,750

1955..
1956..
1957..
1958..
1959..

63,119
70,616
71, 749
68, 262
72,738

65,891
66,838
71,157
75, 349
79,778

-2,771
3,779
592
-7,088
-7,040

280,769
276,628
274,898
282,922
290,798

1960-.
1961 *.

79,518
78,200

77,565
84, 500

1,953
—6,300

290, 217
296.169

1 Gross receipts less refunds of receipts and transfers of tax receipts to the old-age and survivors insurance
trust fund, the disability insurance trust fund, the railroad retirement account, the unemployment trust
fund, and the highway trust fund.
2 Excludes guaranteed obligations; therefore, differs from total shown in Tables B-52 and B-53. The
change in the public debt from year to year reflects not only the budget surplus or deficit but also changes
in the Government's cash on hand, and the use of corporate debt and investment transactions by certain
Government enterprises.
3
4 Estimate.
Preliminary.
NOTE.—Certain interfund transactions are excluded from budpet receipts and expenditures beginning
fiscal year 1932. For years prior to 1932, the amounts of such transactions are not significant.
Sources: Treasury Department and Bureau of the Budget.




272

TABLE B-56.—Federal budget receipts by source and expenditures by function, fiscal years 7946—63
[Millions of dollars]
Budget expenditures by functiorL

Budget receipts by source

Fiscal
year
Total

Indi- CorpoAll
vidual ration Excise other
income taxes
income
receipts 1
taxes
taxes

Total

National
defense

Veterans'
services
and
benefits

Agriculture
and
agricultural resources

Inter-

All
other
expenditures 2

est

Budget
surplus
or deficit ( - )

1946-.
1947_1948..
1949..

39,650
39,677
41,375
37,663

16,157
17,835
19,305
15, 548

11,833
8,569
9,678
11,195

6,999
7,207
7,356
7,502

4,661
6,066
5,037
3,418

60,326
38,923
32, 955
39, 474

43,176
14,368
11,771
12,908

4,415
7,381
6,653
6,725

747
1,243
575
2,512

4,816
5,012
5,248
5,445

7,173
10,917
8,708
11,884

-20,676
754
8,419
-1,811

1950._
1951__
1952__
1953._
1954--

36,422
47, 480
61,287
64,671
64,420

15,745
21,643
27,913
30,108
29, 542

10,448
14,106
21,225
21,238
21,101

7,549
8,648
8,851
9,868
9,945

2,679
3,083
3,298
3,456
3,833

39, 544
43,970
65,303
74,120
67, 537

13,009
22, 444
43,976
50, 442
46,986

6,646
5,342
4,863
4,368
4,341

2,783
650
1,045
2,955
2,573

5,817
5,714
5,934
6,578
6,470

11,288
9,819
9,486
9,777
7,167

-3,122
3,510
-4,017
-9,449
-3,117

1955._
1956_.
1957-_
1958._
1959.-

60,209
67, 850
70, 562
68, 550
67, 915

28, 747
32,188
35, 620
34, 724
36, 719

17, 861
20,880
21,167
20,074
17,309

9,131
9,929
9,055
8,612
8,504

4,469
4,854
4,721
5,141
5,384

64,389
66,224
68,966
71,369
80,342

40,695
40,723
43,360
44, 234
46,491

4,522
4.810
4,870
5,184
5,287

4,388
4,868
4,546
4,419
6,590

6,438
6,846
7,307
7,689
7,671

8,346
8,977
8,883
9,843
14,303

-4,180
1,626
1,596
-2,819
-12,427

I960._
1961_.
1962 3.
1963 3.

77, 763
77,659
82,100
93,000

40,715
41,338
45,000
49,300

21,494
20,954
21,300
26,600

9,137
9,063
9,627
9,956

6,418
6,304
6,173
7,144

76, 539
81, 515
89,075
92,537

45,691
47, 494
51,212
52,690

5,266
5,414
5,575
5,298

4,882
5,173
6,343
5,836

9,266
9,050
8,998
9,398

11.434
14,384
16,947
19, 315

1,224
-3,856
-6,975
463

1 Includes employment taxes, estate and gift taxes, customs revenues, and miscellaneous receipts. See
also Note below.
2 Includes expenditures for international affairs and finance; space research and technology; natural
resources; commerce and transportation; housing and community development; health, labor, and welfare;
education; and general government. Also includes adjustment to daily Treasury statement (for actuals)
and allowance for contingencies (for estimates). See also Note below.
3 Estimate.
NOTE.—Total budget receipts and total budget expenditures and the "all other" categories exclude certain interfund transactions.
Sources: Treasury Department and Bureau of the Budget.




273

TABLE B—57.—Government cash receipts from and payments to the public, 1946—63
[Billions of dollars]
Total

State and local 2

Federal i

Cash
receipts

Cash
payments

Excess
of receipts
or of
payments
)

Cash
receipts

Cash
payments

Excess
of receipts
or of
payments

Cash
receipts

Cash
payments

1946
1947
1948
1949

54.2
55.6
59.6
57.6

70.2
47.5
50.2
56.3

-16.0
8.1
9.4
1.3

43.5
43.5
45.4
41.6

61.7
36.9
36.5
40.6

-18.2
6.6
8.9
1.0

10.7
12.1
14.2
16.0

8.5
10.6
13.7
15.7

2.2
1.5
.5
.3

1950..
1951..
1952..
1953..
1954..

58.2
72.5
88.7
93.9
95.6

61.5
65.2
88.9
99.1
96.1

-3.3
7.3
-.2
-5.2
-.4

40.9
53.4
68.0
71.5
71.6

43.1
45.8
68.0
76.8
71.9

-2.2
7.6
-5.3
-.2

17.3
19.1
20.7
22.4
24.0

18.4
19.4
20.9
22.3
24.2

-1.1
-.3
-.2
.1
-.2

1955..
1956..
1957..
1958..
1959..

93.5
105.8
113.5
115.0
117.2

97.5
101.6
111.8
118.2
132.2

-4.0
4.2
1.7
-3.2
-15.0

67.8
77.1
82.1
81.9
81.7

70.5
72.6
80.0
83.4
94.8

-2.7
4.5
2.1
-1.5
-13.1

25.7
28.7
31.4
33.1
35.5

27.0
29*. 0

31.8
34.8
37.4

-1.3
-.3
-.4
-1.7
-1.9

I960...
1961 —
1962 4.
1963 *.

134.1
138.2

133.2
142.4

.9
-4.1

95.1
97.2
102.6
116.6

94.3
99.5
111.1
114.8

-2.3
-8.5
1.8

39.0
41.1

38.9
43.1

.1
-2.0

1946
1947....
1948.—
1949

52.9
57.4
60.0
57.9

50.9
50.7
51.8
59.8

2.0
6.7
8.2
-1.8

41.4
44.3
44.9
41.3

41.4
38.6
36.9
42.6

5.7
8.0
-1.3

11.4
13.1
15.1
16.6

9.5
12.1
14.9
17.1

1.9
1.0
.2
-.5

195019511952..
19531954-

60.4
79.1
93.0
93.5
93.3

61.1
78.3
93.6
100.4
95.3

.9
-.6
-6.9
-2.0

42.4
59.3
71.3
70.2
68.6

42.0
58.0
72.0
77.4
69.7

.5
1.2
-.6
-7.2
-1.1

18.0
19.9
21.7
23.2
24.7

19.1
20.2
21.6
23.0
25.6

-1.1
-.4
.1
.3
-.9

1955..
1956195719581959-

98.4
110.2
116.8
115.9
124.7

100.2
105.2
116.6
125.2
133.2

-1.8
5.0
.2
-9.3
-8.5

71.4
80.3
84.5
81.7
87.6

72.2
74.8
83.3
89.0
95.6

-.7
5.5
1.2
-7.3
-8.0

26.9
29.9
32.3
34.1
37.1

28.0
30.4
33.3
36.2
37.6

-1.1
-.5
-1.0
-2.1
-.5

1960—
1961 «_

138.3

136.1

2.3

98.3
97.2

94.7
103.8

3.6

40.1

41.4

-1.3

Fiscal or calendar year

Fiscal year:

Calendar year:

Excess
of receipts
or of
payments

1
For derivation of Federal cash receipts and payments, see Budget of the United States Government for the
Fiscal Year ending June 30, 196S, and Table B-60.
2 Estimated by Council of Economic Advisers from receipts and expenditures in the national income
accounts. Cash receipts consist of personal tax and nontax receipts, indirect business tax and nontax
accruals, and corporate tax accruals adjusted to a collection basis. Cash payments are total expenditures
less Federal grants-in-aid and less contributions for social insurance. (Federal grants-in-aid are therefore
excluded from State and local receipts and payments and included only in Federal payments.) See
also Table B-58.
3 Less than $50 million.
4
Estimate.
5
Preliminary.
Sources: Treasury Department, Bureau of the Budget, Department of Commerce, and Council of Economic Advisers.




274

TABLE B-58.—Government receipts and expenditures in the national income accounts, 1929-61
[Billions of dollars]

Total government

Calendar year or quarter

State and local
government

Federal Government i

Surplus or
deficit
Ex(-) on ReReceipts pendi- income ceipts
and
tures
product account

SurSurplus or
plus or
deficit
deficit
Ex- (-)on ReEx- (-) on
pendi- income ceipts pendi- income
tures
tures
and
and
prodproduct acuct account
count

1929..

11.3

10.2

1.0

3.8

2.6

1.2

7.7

-0.1

19301931..
19321933..
1934..

10.8
9.5
9.3
10.5

11.0
12.3
10.6
10.7
12.8

-.3
-2.8
-1.7
-1.4
-2.4

3.0
2.0
1.7
2.7
3.5

2.8
4.2
3.2
4.0
6.4

.3
-2.1
-1.5
-1.3
-2.9

7.8
7.7
7.3
7.2
8.6

8.4
8.4
7.6
7.2
8.1

-.5
-.7
-.2
2
()
.5

1935..
1936..
1937..
1938..
1939..

11.4
12.9
15.4
15.0
15.4

13.3
15.9
14.8
16.6
17.5

-2.0
-3.0
.6
-1.6
-2.1

4.0
5.0
7.0
6.5
6.7

6.5
8.5
7.2
8.5
9.0

-2.6
-3.5
-.2
-2.0
-2.2

9.1
8.6
9.1
9.3
9.6

8.5
8.1
8.4
8.9
9.6

.5
.7
.4
.1

1940 .
1941..
1942..
1943..
1944..

17.7
25.0
32.6
49.2
51.2

18.5
28.8
64.0
93.4
103.1

-.7
-3.8
-31.4
-44.2
-51.9

8.6
15.4
22.9
39.3
41.0

10.1
20.5
56.1
86.0
95.6

-1.4
-5.1
-33.2
-46.7
-54.6

10.0
10.4
10.6
10.9
11.1

9.2
9.0
8.8
8.4
8.4

.7
1.3
1.8
2.5
2.7

1945..
1946_.
1947..
1948 .
1949..

53.2
51.1
57.1
59.2
56.4

92.9
47.0
43.8
51.0
59.5

-39.7
4.1
13.3
8.2
-3.1

42.5
39.2
43.3
43.4
39.1

84.8
37.0
31.1
35.4
41.6

-42.3
2.2
12.2
8.0
-2.5

11.6
13.0
15.5
17.8
19.6

9.0
11.1
14.4
17.6
20.2

2.6
1.9
1.1
.3

1950..
1951..
1952..
1953..
1954..

69.3
85.5
90.6
94.9
90.0

61.1
79.4
94.4
102.0
96.7

8.2
6.1
-3.9
-7.1
-6.7

50.2
64.5
67.7
70.3
63.8

41.0
58.0
71.6
77.7

-3.9
-7.4
-5.8

9.2
6.4

21.4
23.5
25.5
27.4
29.1

22.4
23.8
25.4
27.1
30.1

-1.0
-.3
.1
.3

1955..
1956..
1957..
1958..
1959..

101.4
109.5
116.3
115.1
129.3

98.6
104.3
115.3
126.6
131.6

2.9
5.2
1.0
-11.4
-2.2

72.8
77.5
81.7
78.5
89.4

68.9
71.8
79.7
87.9
91.2

5.7
2.0
-9.4
-1.8

31.7
35.2
38.6
42.0
46.5

32.7
35.7
39.6
44.1
46.9

-1.0
-.5
-1.0
-2.1
-.4

1960...
1961 3.

139.1
143.6

137.2
149.8

1.9
—6.2

96.0
97.9

92.8
101.4

3.3
—3.6

49.2
52.3

50.6
55.0

-1.4
—2.7

Seasonally adjusted annual rates
1959: I—
IIIII.
IV.
1960: :

126. 3
131.3
129.3
130. 4

130.4
131.4
132.1
132.5

-4.1
-.1
-2.8
-2.0

87.4
91.6
89.1
89.6

90.1
91.1
91.6
92.0

-2.7
.5
-2.5
-2.4

45.5
46.3
46.9
47.3

46.9
46.9
47.2
47.0

-.4
.4

139.4
140.0
138.8
138.3

132.9
136.5
139.3
140.2

6.5
3.5
-.5
-1.9

97.0
96.9
95.6
94.6

90.5
92.5
94.2
94.2

6.5
4.5
1.4
.4

48.6
49.2
49.4
49.7

48.6
50.1
51.3
52.0

()
-1.0
-1.9
-2.3

1961: I
II....
IIIIV 3.

136.9
141.9
145.4
(4)

144.8
148.5
151. 3
154.8

-7.9
-6.6
-6.0
(4)

92.5
96.8
99.3
(4)

98.0
101.1
102.4
104.3

-5.5
-4.3
-3.1
(4)

51.4
51.9
52.4
(4)

53.8
54.2
55.3
56.8

-2.4
-2.3
-2.9

IIIII.
IV.

1 See Note, Table B-59.
2
Less than $50 million.
3 Preliminary estimates by Council of Economic Advisers.
* Not available.
NOTE.—Federal grants-in-aid to State and local governments are reflected in Federal expenditures and
State and local receipts and expenditures. Total government receipts and expend itures have been adjusted
to eliminate this duplication.
Data for Alaska and Hawaii included beginning 1960.
Source: Department of Commerce (except as noted).




275

TABLE B-59.-—Federal Government receipts and expenditures in the national income accounts,
1946-61
[Billions of dollars]
Receipts

Personal Corpotax rate
Year or quarter
and profits
Total nontax
tax
acre- cruals
ceipts

Fiscal year:
1946
1947..
1948
1949....

1950
1951
1952
1953
1954
1955
1956i
1957
1958
1959
1960
1961
1962 2
1963 2

38.3
42.9
43.7
40.1
42.0
61.7
65.5
69.9
65.9
67.0
76.3
80.9

77.8
85.4
94.1
94.8
105. 6
116.3

Calendar year:
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961 3

17.8
18.8
20.0
16.3
16.5
23.5
29.0
31.5
30.4
29.9
33.5
36.7
36.3
38.1
42.0
42.9

46.7
51.7

7.3
10.7
11.2
10.9
11.7
21.8
19.3
19.8
17.1
18.4
21.0
20.4
17.3
21.2
21.6
20.1
24.6
27.5

Expenditures

Indirect
busi- ConPurtribuchases
tax tions
of
for Total goods
and
social
and
servinsurices
ance
cruals

7.5
7.9
8.0
8.1
8.3
11.0
10.7
10.4
11.2
12.1
12.0
12.3
13.8
13.6
14.5
15.3

39.2
43.3
43.4
39.1
50.2
64.5
67.7
70.3
63.8
72.8
77.5
81.7
78.5
89.4
96.0
97.9

17.2
19.6
19.0
16.2
18.2
26.3
31.2
32.4
29.2
31.5
35.2
37.3
36.6
39.6
43.2
43.9

8.6
10.7
11.8
9.8
17.1
21.6
18.6
19.4
16.5

7.9
7.9
8.1
8.2
9.0
9.5
10.5
11.2
10.1

20.9
20.2
19.9
17.7
21.9
21.2
21.6

11.0
11.6
12.2
11.9
13.0
14.0
13.8

87.4
91.6
89.1
89.6
97.0
96.9
95.6
94.6
92.5
96.8
99.3

38.7
39.8
39.9
40.0
42.7
43.3
43.5
43.1
42.6
43.6
44.5
44.8

21.6
24.1
21.0
21.0
22.6
21.8
20.3
20.0
18.6
21.2
22.1

12.6
12.7
13.3
13.6
14.1
14.2'
13.8
13.8
13.3
13.6
14.0
14.5

5.8
5.5
4.6
4.8
5.5
6.6
7.3
7.6
7.7
8.3
10.5
11.7
12.3
13.8
16.7
18.1
19.8
21.8
5.5
5.1
4.5
4.9
5.9
7.1
7.4
7.4
8.1
9.3
10.6
12.2
12.4
14.9
17.7
18.6

56.3
31.7
32.3
40.0
42.2
45.3
66.6
76.2
74.5

68.1
69.5
76.5
82.8
90.2
91.9
97.0
106.1
111.9
37.0
31.1
35.4
41.6
41.0
58.0
71.6
77.7
71.8
79.7
87.9
91.2
92.8
101.4

Surplus
Subsi- or
dies defiless
cit
cur- (-)
Grantson
in-aid Net rent
surinto State inand
ter- plus come
and
For- local
est
of
eign govern- paid gov- prod(net) ments
ern- uct
ment acenter- count
prises

Transfer
payments

To

2.1 -18.0
.7
11.2
.4
11.4
.8
.2
-.2
1.0
16.3
1.3
1.1 - 1 . 1
.9 - 6 . 3
1.0 - 8 . 6
1.4 - 1 . 1
1.9
6.8
4.4
3.1
-4.9
2.7
2.8 - 4 . 8
2.2
2.8
3.3 - 2 . 2
-.5
4.5
4.4
3.7

41.3
16.9
16.6
21.8
20.0
26.5
47.7
56.8
53.9
45.0
45.2
48.3
50.5
53.8
52.9
54.6
60.2
64.2

0)
8.3
0.2
8.7
.6
8.1
2.9
11.3
3.1
8.2
2.3
8.7
1.8
9.4
1.7
10.6
1.3
12.2
1.6
12.9
1.3
14.6
1.5
1.3
18.1
1.4
20.3
21.2
1.6
24.2
1.5
27.8
29.4

0.9
1.5
1.8
2.1
2.4
2.4
2.5
2.8
2.8
2.9
3.1
3. 6
4.5
6.0
6.6
6.4
7.0
7.7

3.9
4.2
4.2
4.3
4.4
4.6
4.8
4.8
4.9
4.9
5.0
5.5
5.6
5.9

20.6
15.6
19.3
22.2
19.3
38.8
52.9
58.0
47.5
45.3
45.7
49.7
52.6
53.5
52. 9
57.2

9.2
8.9
7.7
8.8
10.9
8.7
8.9
9.7
11.6
12.5
13.5
16.0
20.0
2Q.6
/22.2
25.6

1.1
1.7
2.0
2.2
2.3
2.5
2.6
2.8
2.9
3.0
3.3
4.1
5.4
6.6
6.1
6.6

4.2
4.2
4.3
4.4
4.5
4.7
4.7
4.8
5.0
4.9
5.2
5.7
5.6
6.4
7.0
6.5

1.6
.6
.6
.7
1.2
1.3
1.0
.8
1.2
1.6
2.7
2.8
3.0
2.6
2.9

2.2
12.2
8.0
-2.5
9.2
6.4
-3.9
-7.4
-5.8
3.8
5.7
2.0
-9.4
-1.8
3.3
-3.6

1.5
1.4
1.3
1.9

6.6
6.6
6.7
6.5

6.0
6.2
6.5
6.8

2.7
2.6
2.5
2.5

1.5
1.6
1.5
1.6

6.1
6.1
6.2
6.0

7.0
7.1
7.1
7.0

2.8
2.9
2.9
2.9

1.6
1.5
1.7
1.5

7.1
6.8
6.4
6.3

6.8
6.6
6.4
6.5

3.0
4.0
4.5
4.2

-2.7
.5
-2.5
-2.4
6.5
4.5
1.4
.4
-5.5
-4.3
-3.1
0)

0)

.3
.1
1.6
3.2
2.8
2.1
1.5
1.5
1.5
1.5
1.3
1.5
1.6
1.6

6.9

Seasonally adjusted annual rates
Calendar quarter:

1959: I

II
III
IV
1960: I
II....
III...
IV
1961: I
II....
Ill
IV3

0)

0)

14.5
15.0
15.0
1/5.0

At 5

17.7
18.0
17.6
18.0
18.4
18.7
19.3

90.1
91.1
91.6
92.0
90.5
92.5
94.2
94.2
98.0
101.1
102.4
104.3

1
2
3

53.2
53.9
54.1
52.9
51.8
52.9
54.0
53.0
54.7
56.6
57.4
59.9

20.2
20.4
20.5
21.4
21.2
21.8
22.4
23.7
24.8
25.7
26.1
25.9

Not available.
Estimate
Preliminary estimates by Council of Economic Advisers.
NOTE.—These accounts, like the cash budget, include the transactions of the trust accounts. Unlike
both the conventional budget and the cash statement, they exclude certain capital and lending transactions.
In general, they do not use the cash basis for transactions with business. Instead, corporate profits taxes
are included in receipts on an accrual instead of a cash basis; expenditures are timed with the delivery instead of the payment for goods and services; and CCC guaranteed price-support crop loans financed by
banks are counted as expenditures when the loans are made, not when CCC redeems them.
Data for Alaska and Hawaii included beginning 1960.
Sources: Department of Commerce and Bureau of the Budget (except as noted).




276

T A B L E B—60.—Reconciliation of Federal Government receipts and expenditures in the conventional
budget and the consolidated cash statement with receipts and expenditures in the national income
accounts, fiscal years 1959-63
[Billions of dollars!
Fiscal years

Receipts or expenditures
1959
RECEIPTS
Budget receipts .
Intragovernmental transactions
Less:
Receipts from exercise of monetary authority
Plus:
Trust fund receipts
Equals: Federal receipts from the public (consolidated cash
receipts)
Adjustments for agency coverage:
Less:
District of Columbia revenues
Adjustments for netting and consolidation:
Less:
Interest, dividends, and other earnings
Plus:
Contributions to Federal employees' retirement
funds, etc
Adjustments for timing:
Plus:
Excess of corporate tax accruals over collections;
personal taxes, social insurance contributions,
etc
Adjustments for capital transactions: 2
Less:
Realization upon loans and investments, sale of
Government property, etc
Equals: Receipts—National income accounts
EXPENDITURES
Budget expenditures.
Intragovernmental transactions
Less:
Accrued interest and other non-cash expenditures
(net)
Trust fund expenditures
Plus:
Government-sponsored enterprise expenditures
(net)
Equals: Federal payments to the public (consolidated cash
expenditures)
Adjustments for agency coverage:
Less:
District of Columbia expenditures
Adjustments for netting and consolidation:
Less:
Interest received and proceeds of Government sales.
Plus:
Contributions to Federal employees' retirement
funds, etc
Adjustments for timing:
Plus:
Excess of interest accruals over payments on
savings bonds and Treasury bills
Excess of deliveries over expenditures and miscellaneous items 3
Less:
Commodity Credit Corporation foreign currency
exchanges
Adjustments for capital transactions 2
Less:
Loans—Federal National Mortgage Association
secondary market mortgage purchases, redemption of International Monetary Fund notes,
etc
Trust and deposit fund items
Purchase of land and existing assets
Other*
Equals: Expenditures—National income accounts.
1
2

1960 1961 1962

1963

67.9
3.3
0)
17.1

77.8
4.4
.1
21.8

4.2
.1
23.8

4.0
.1
24.5

93.0
3.9
0)
27.5

81.7

95.1

97.2

102.6

116.6

77.7

.2

.2

.3

.4

.8

1.4

1.1

1.0

1.1

1.5

1.5

1.7

1.7

1.7

-1.3

3.5

4.3

1.2
85.4

94.1

1.5
94.8

.9
105.6

1.3
116.3

80.3
3.3

76.5
4.4

81.5
4.2

89.1
4.0

92.5
3.9

2.1
18.6

.4
22.2

.1
25.6

.8
26.7

1.3

.5

.8
23.2
o

.5

.3

94.3

99.5

111.1

114.8

.3

.3

.3

.4

.4

.6

1.0

.6

1.0

1.0

1.5

1.5

1.7

1.7

1.7

.6

.2

.5

-.6

.5

.1

.9

1.0

1.1

1.0

1.3
.4
.1
1.3

3.7
1.0
.1

2.5
1.0
.1

97.0

106.1

3.8
1.5
90.2

91. S

Less than $50 million.
Consist of transactions in financial assets and liabilities, land and secondhand assets. Acquisition of
newly produced tangible assets are included in expenditures for goods and services as defined in the national
income and product accounts.
3
Includes net change in Commodity Credit Corporation guaranteed non-recourse loans and increase in
bearing account.
4
Commodity Credit Corporation inventory valuation adjustment.
Sources: Bureau of the Budget and Department of Commerce.
nprtTTin QnH n r n H n o f

Qr>r>nnnfo




277

TABLE B-61.—State and local government revenues and expenditures, selectedfiscalyears, 1927-60
[Millions of dollars]
Revenues by source 2

Expenditures by function

ReveFiscal year

]

Total

Property
taxes

Sales
nue
Corpo- from
and
Indiration Fedgross vidual
net
reincorre income eral
Govceipts taxes
taxes erntaxes

All

other
revenue 3

Total

Education

Highways

Public
All
welfare other*

ment
1927..

7,271

4,730

470

70

92

116

1,793

7,210

2,235

1,809

151

3,015

19321934..
1936..
1938..

7,267
7,678
8,395
9,228

4,487
4,076
4,093
4,440

752
1.008
1,484
1,794

74
80
153
218

79
49
113
165

232
1,016
948
800

1,643
1,449
1,604
1,811

7,765
7,181
7,644
8,757

2,311
1,831
2,177
2,491

1,741
1,509
1,425
1,650

444
889
827
1,069

3,269
2,952
3,215
3,547

1940..
1942..
19441946..
1948-

9,609
10,418
10,908
12,356
17,250

4,430
4,537
4,604
4,986
6,126

1,982
2,351
2,289
2,986
4,442

224
276
342
422
543

156
272
451
447
592

945
858
954
855
1,861

1,872
9,229
2,123 9,190
2,269 8,863
2,661 11, 028
3,685 17,684

2,638
2,586
2,793
3,356
5,379

1,573
1,490
1,200
1,672
3,036

1,156
1,225
1,133
1,409
2,099

3,862
3.889
3,737
4,591
7,170

1950..
1952..
19531954..

20,911
25,181
27,307
29, 012

7,349
8,652
9,375
9,967

5,154
6,357
6,927
7,276

788
998
1,065
1,127

593
846
817
778

2,486
2,566
2,870
2,966

4,541
5,763
6,252
6,897

22,787 7,177
26,098 8,318
27,910 9,390
30, 701 10,557

3,803
4,650
4,987
5,527

2,940 8,867
2,788 10,342
2,914 10,619
3,060 11,557

1955..
1956..
1957..
1958..
1959 5

31, 073
34, 667
38, 310
41,219
45,306

10, 735 7,643
11, 749 8,691
13, 097 9,461
14, 047 9,829
14,983 10, 437

1,237
1,538
1,767
1,759
1,994

744
890
984
1,018
1,001

3,131 7,584
3,335 8,465
3,838 9,163
4,865 9,699
6,377 10, 516

33, 724
36, 711
40, 438
44, 851
48,887

11,907
13, 220
14, 501
15, 919
17,283

6,452
6,953
7,762
8,567
9,592

3,168
3,139
3,411
3,729
4, 19

1960 •

50,505 16, 405 11, 849

2,463

1,180

6,974 11,634 51, 876 18, 719

9,428

4,404 19, 325

12,197
13,399
14, 764
16,635
17,994

1 Fiscal years not the same for all governments.
a
Excludes revenues or expenditures of publicly owned utilities and liquor stores, and of insurance-trust
activities. Intergovernmental receipts and payments between governments in these categories are also
excluded.
3 Includes licenses and other taxes and charges and miscellaneous revenues.
• Includes expenditures for health, hospitals, police, local fire protection, natural resources, sanitation,
housing and community redevelopment, local recreation, general control, interest on general debt, and
other and unallocable expenditures.
5
Includes data for Alaska.
9
Includes data for Alaska and Hawaii
NOTE.—Data are not available for intervening years.
See Table B-51 for net debt of State and local governments.
Source: Department of Commerce (Bureau of the Census).




278

CORPORATE PROFITS AND FINANCE
TABLE B-62.—Profits before and after taxes, all private corporations, 1929-61
[Billions of dollars]

Corporate profits
after taxes

Corporate profits (before taxes) and
inventory valuation adjustment

Year or quarter

Manufacturing
All

industries

Dura- Nonble durable

Total goods goods

indus- industries
tries

1929..

10.1

5.1

2.6

2.5

1930..
1931..
1932..
1933..
1934..

6.6
1.6
-2.0
-2.0
1.1

3.9
1.3
-.6
-.5

1.5
(2)
-1.1
-.5
.2

2.4
1.3
.4
(2)
.7

1935..
1936..
1937..
1938..
1939..

2.9
5.0
6.2
4.3
5.7

2.0
3.1
3.6
2.2
3.2

1.7
1.7
.7
1.6

1.1
1.4
2.0
1.4
1.5

1940..
1941..
1942..
1943..
1944..

9.1
14.5
19.7
23.8
23.0

5.4
9.3
11.7
13.7
13.0

3.0
6.3
7.1
8.0
7.3

2.3
3.0
4.5
5.6
5.7

1945..
1946..
1947..
1948..
1949..

18.4
17.3
23.6
30.8
28.2

9.5
8.4
12.8
16.8
15.3

4.5
2.1
5.3
7.4
7.9

1950..
1951..
1952..
1953._
1954..

35.7
41.0
37.7
37.3
33.7

20.4
24.4
21.1
21.4
18.4

1955..
1956..
1957..
1958..
1959..

43.1
42.0
41.7
37.2
46.4

1960..
19613 «

45.1
46.2

Corpo- CorpoTransporrate
rate
tation,
profits tax
All
Divi- Undiscommu- other before liabilnication, indus- taxes ity i Total dend tributed
payand
tries
ments profits
public
utilities
3.0

1.4

8.3

5.8

2.4

1.2
1.5
.6 - . 2
.2 - 1 . 5
.1 - 1 . 5
.4 - . 2

3.3
-.8
-3.0
.2
1.7

.5
.4
.5
.7

2.5
-1.3
-3.4
-.4
1.0

5.5
4.1
2.6
2.1
2.6

-3.0
-5.4
-6.0
-2.4
-1.6

1.0

.5
1.2
1.8
1.5
1.5

3.1
5.7
6.2
3.3
6.4

1.0
1.4
1.5
1.0
1.4

2.2
4.3
4.7
2.3
5.0

2.9
4.5
4.7
3.2
3.8

-.7
-.2
(2)
-.9
1.2

1.3
2.0
3.5
4.4
3.9

2.4
3.2
4.5
5.7
6.1

9.3
17.0
20.9
24.6
23.3

2.8
7.6
11.4
14.1
12.9

6.5
9.4
9.5
10.5
10.4

4.0
4.5
4.3
4.5
4.7

2.4
4.9
5.2
6.0
5.7

5.0
6.3
7.4
9.4
7.4

2.8
1.8
2.1
2.9
2.9

6.1
7.1
8.7
11.2
10.1

19.0
22.6
29.5
33.0
26.4

10.7
9.1
11.3
12.5
10.4

8.3
13.4
18.2
20.5
16.0

4.7
5.8
6.5
7.2
7.5

3.6
7.7
11.7
13.3
8.5

12.0
13.5
11.8
12.1
10.1

8.4
10.9
9.3
9.3
8.3

4.0
4.5
4.8
4.9
4.4

11.3
12.0
11.8
11.0
11.0

40.6
42.2
36.7
38.3
34.1

17.9
22.4
19.5
20.2
17.2

22.8
19.7
17.2
18.1
16.8

9.2
9.0
9.0
9.2

13.6
10.7
8.3
8.9
7.0

25.0
23.5
22.9
18.3
24.8

14.2
12.6
13.1
9.0
13.2

10.8
10.9
9.8
9.3
11.6

5.4
5.6
5.5
5.6
6.4

12.8
12.9
13.3
13.3
15.2

44.9
44.7
43.2
37.4
46.8

21.8
21.2
20.9
18.6
23.1

23.0
23.5
22.3
18.8
23.7

11.2
12.1
12.6
12.4
13.4

11.8
11.3
9.7
6.4
10.3

23.3
23.0

12.0
11.6

11.3
11.4

6.8
7.1

15.0
16.0

45.0
46.1

22.3
22.8

22.7
23.3

14.1
14.4

8.8

2.0

.5
.7

Seasonally adjusted annual rates

II...
III..
IV_.

45.3
50.2
44.4
45.5

23.9
27.7
24.1
23.4

12.8
15.8
12.2
11.9

11.1
12.0
11.9
11.5

6.3
6.8
6.0
6.4

15.1
15.7
14.3
15.8

46.1
51.5
44.8
44.9

22.8
25.4
22.1
22.1

23.4
26.1
22.7
22.7

13.0
13.3
13.7
13.8

10.4
12. 8
9.0

1960: I—.
IIIII..
IV..

47.4
45.9
44.1
42.9

25.5
23.4
22.6
21.6

13.9
12.0
11.4
10.7

11.5
11.4
11.3
10.9

6.7
6.9
6.6
6.8

15.2
15.5
14.9
14.6

48.1
46.3
43.2
42.6

23.9
23.0
21.4
21. 1

24.2
23.3
21.7
21.4

14.0
14.0
14.1
14.3

10.2
9.3
7.6
7.2

1961: I . . . .
II...
III..
IV 3.

40.0
45.5
47.0

18.8
22.3
23.6

8.5

11.2
12.1

10.4
11.2
11.5

6.5
7.1
7.3
(5)

14.6
16.1
16.1

39.6
45.2
47.2

19.6 20.0
22.4 22,8
23 3 23.8
5

14.2
14.2
14.3
15.0

5.8
8.6
9.5

1959: I . . . _

(5)

(5)

(5)

(5)

1
2
3
4

(5)

(5)

()

(5)

()

Federal and State corporate income and excess profits taxes.
Less than $50 million.
Preliminary estimates by Council of Economic Advisers.
Data for corporate profits are approximations for the year as a whole; data for fourth quarter are not
available. All other data incorporating or derived from these figures are correspondingly approximate.
5
Not available.
Source: Department of Commerce (except as noted).




279

TABLE B-63.—Relation of profits after taxes to stockholders' equity and to sales, private
facturing corporations, by industry group, 1958-61
Durable goods industries
All
private
manufacturing
corporations

Year or quarter

Lumber
and Furwood niture
prod- and
ucts fix(except tures
furniture)

Stone,
clay,
and
products

Primary
iron
and
steel
industries

Primary
nonferrous
metal
industries

MisEleccellatrical MoIn- neous
MaFab- chin- ma- tor Other stru- manritrans- ments ufacery chincated (ex- ery, vehi- porta- and turcles
metal cept equip- and tion reing
prod- elec- ment, equip- equip- lated (inucts trical) and ment ment prod- cludsupucts ing
plies
ordnance)

Ratio of profits after Federal taxes (annual rate) to stockholders' equity—percent
BASED ON 19S7 SIC

0.2
31
.

6.8
7.8
9.0

1958: I

II
Ill
IV

11.0

2.
3.
8.
11.

3.4
1.0
4.7
1.4
8.0

10.7

8.4

1959: I
II
Ill
IV

10.0
12.4

61
.
7.0

6
.
9
.
11.
83
.

1960: I
II
Ill
IV
1961: I
II
Ill

9.8
99
.
8.7
8.4

3.3
6.2
4.6
.3

5.5
5.8
8.2
65
.

68
.
9.2
8.8

-.6 -1.1
6 2 4.0
.
6 8 7.0
.

10.9
11.7

9.6
9.6

-

11.3
12.9

5.3
6.5
65
.
10.4

11.7
17.4 16.7
15.7 -2.7

5.7
4.6
5.6
79
.

5.0
7.3
8.8
79
.

5.6
7.7
71
.
7.0

8.2

5.9
9.7

71
.

13.4

16.9

10.7
12.7
12.1
14.3

19.1
20.5

18.5
16.1

10.9

12.5
10.7

5.6

8.5

5.3
69
.
7.2
3.0

8 1 10.4
.
9.7 10.0
69 91
.
.
5.6 8.6

2.5
7.3
7.7

5.7
91
.
7.8

63
.

6.7

12.1

13.1
11.9

8.0
4.0
4.6

8.0
8.2
6.8
5.5

3.2
7.0
64
.

61
.
8.0
61
.

2.9

8.3
5.9
1.5

6.7
6.7

10.3

9.8

7.8

8.3
91
.
99
.

7.3
8.2
81
.

8.0
10.8

61
.
13.2

8.0
13.2

63
.

11.6
10.3
10.3
10.6

12.2
13.6

3.6
5.7
13.7
9.2

7.8
9.6
66
.
6.7

10.8
12.0
14.5
14.8

7.2
7.1
12.4
10.2

6.7
7.8
5.3
3.6

11.6
12.1
11.9
10.8

6.4
8.3
8.2

11.6

5.7
7.9
11.5
11.6
5.9
7.2
12.6

7.0
9.6

7.1
9.9

Profits after taxes per dollar of sales—cents
BASED ON 1957 SIC '
1958: I
III
IV..

3.4
3.8
4.4
4.9

01
.
1.6
5.0
3.8

0.7
1.2
2.8
3.2

2.7
7.2
8.8
7.3

4.2
4.9
5.0
71
.

4.7
3.8
4.4
5.8

2.3
3.2
3.6
3.2

3.0
3.9
3.9
3.7

3.2
3.5
3.9
4.7

3.7
2.9
1.0
6.8

2.7
2.3
2.4
2.5

3.8
5.0
63
.
6.3

1959: I
II
Ill
IV

4.7
5.5
4.6
4.5

3.0
4.7
5.4
3.2

2.0
2.8
3.4
2.4

5.7 7 1
.
9.8 8 1
.
9 1 -3.1
.
6.4 4.8

6.0
7.0
51
.
5.0

2.6
3.8
4.1
2.3

3.8
5.8
5.3
4.3

4.0
4.5
4.4
4.8

7.4
7.8
4.2
5.0

2.0
2.2
1.5
1.5

5.7
6.0
7.3
6.8

4.7
4.6
4.3
4.0

1.7
2.7
2.1
.1

1.9
1.9
2.6
2.1

5.0
8.2
7.4
5.4

7.0
5.3
3.2
3.9

5.9
6.0
5.2
4.3

2.4
2.9
3.0
13
.

41
.
4.5
3.6
3.0

3.9
3.6
3.5
3.2

69
.
6.6
3.5
5.8

1.6
1.8
1.3
.8

6.0
6.2
6.2
5.3

1.5
2.2
4.8
3.3
2.9
2.6
4.6
3.7
2.4
3.1
4.1
4.1

3.5
4.4
4.3

-.3
2.9
3.0

-.4
13
.
2.1

2.4
68
.
7.0

2.7
5.0
4.6

4.8
5.9
4.8

1.2
3.0
3.1

3.2
4.6
4.2

2.9
3.2
3.3

4.1
5.8
3.8

15
.
1.8
19
.

4.0
5.3
60
.

2.5
2.8
4.2

II

1960: I
II
Ill
IV..

. .-.
_
_
- -.
-

1961: I

II

III

_

See footnotes at end of table, p. 281.




280

TABLE B-63.—Relation of profits after taxes to stockholders'equity and to sales, private manufacturing corporations, by industry group, 1958-67—Continued
Nondurable goods industries

Year or quarter

Printing
and
Food
ApTo- Tex- parel Paper puband
tile
and
lishkin- bacco mill
and
ing
dred man- prod- related allied
ufacprod(exprod- tures ucts prod- ucts cept
ucts
ucts
newspapers)

Chemicals
and
allied
products

Products of
petroleum
Petro- and Rub- Leather
and
leum coal ber leather
refin- (ex- prod- proding cept ucts
ucts
petroleum
refining)

Ratio of profits after Federal taxes (annual rate) to stockholders' equity—percent
BASED O 19S7 SIC
N
1958: I.
II.
Ill
IV

6.8
8.5
9.8
9.7

11.8
13.3
14.5
14.3

0.6
2.5
5.1
5.8

7.8
9.5
9.4

12.0
14.2
14.4
12.8

5.9
8.1
7.6
8.6

1960: I
II
III
IV

7.6
8.8
9.8
8.7

12.0
13.6
13.7
14.2

6.6
6.1
5.7
5.0

1961: I
II
III

7.2
9.2

12.0
14.1
14.3

2.6
4.3
6.0

1959: I
II
III..
IV

-

10.4

10.0

8.4
9.4

3.3
1.5
9.4
5.5

7.0
7.9
7.9
9.3

8.6
7.5

8.5

9.8

10.2

12.0
14.9

9.6
9.6

10.1
8.1

11.5
6.6

8.8

9.8

11.0
11.8
12.8
13.0
15.6
14.1
11.9

8.9
8.2

-2.4

10.4
12.3

12.4

11.5
10.8

10.1

4.0

9.4
9.7

13.6
19.3

10.0
13.1
11.1

10.5

8.3
6.2

7.2

10.1

5.3
8.7

9.9

4.1
3.2
8.3

8.9
8.7
9.2

8.5
9.3
8.2
8.1

5.2
6.9

11.9
6.8

2.1
2.6

11.2

11.3
10.2
11.8

12.5
13.6
12.1
10.6

9.8
8.8

.9
8.3

10.3
11.5

22.1

8.2
7.9

6.6
8.3
7.3

7.5
6.8

9.8

10.6

13.2
11.8

9.6
9.6

-6.6
14.4
20.6

10.6
9.2

3.3
2.6
4.7

2.2
3.3
4.4
3.9

1.3
1.0
2.4
1.9

9.0

11.2

8.8

9.8

6.7

10.4
6.2
3.6
5.0

Profits after taxes per dollar of sales—cents
BASED O 1957 SIC i
N
1958: I —
II-

-1.5

IV..

1.8
2.2
2.5
2.4

5.1
5.2
5.5
5.6

0.3
1.2
2.3
2.4

0.7
.3
1.7
1.0

4.3
4.8
4.6
5.3

2.9
3.4
4.1
2.3

6.4
6.7
7.1
7.6

11.3

3.5
4.2
2.9

1959: I —
II—
III..
IV-

2.1
2.5
2.7
2.5

5.2
5.5
5.6
5.2

2.5
3.2
3.0
3.3

1.6
1.4
1.8
1.4

5.0
5.5
5.2
5.2

3.6
4.2
5.1
2.9

7.7
8.5
8.1
7.2

9.3
9.4
9.5
9.9

1.9
5.7
7.1
3.3

3.9
4.4
4.1
3.7

1.9
2.4
2.2
2.4

1960: :
II..
III.
IV..

2.1
2.4
2.6
2.2

5.2
5.4
5.5
5.8

2.8
2.5
2.5
2.1

1.0
1.3
2.0
1.1

4.9
5.4
4.8
4.8

4.0
3.6
3.9
2.9

7.6
7.8
7.4
6.9

9.4
8.9

10.2
11.0

.5
3.2
6.4
3.1

3.8
3.9
3.3
3.2

2.7
1.6
.9
1.4

1961 I - . .
II..
III.

1.9
2.4
2.6

5.3
5.7
5.9

1.2
1.8
2.5

.4
.5
1.8

4.1
4.8
4.3

2.6
2.3
3.7

6.5
7.8
7.4

10.4

-3.0

•9.9
9.8

4.9
6.0

2.9
4.2
3.8

.7
1.2

1

8.2
8.2
9.9

Standard Industrial Classification.
NOTE.—Data on a comparable basis are not available for earlier periods. For explanatory notes concerning compilation of the series, see Quarterly Financial Reports for U.S. Manufacturing Corporations,
Federal Trade Commission arid Securities and Exchange Commission.
Data for Alaska and Hawaii included for all periods.
Sources: Federal Trade Commission and Securities and Exchange Commission.




281

TABLE B-64.—Relation of profits before and after taxes to stockholders* equity and to sales,
private manufacturing corporations, by asset size class, 1958-61
Asset size class (millions of dollars)
Year or quarter

All asset
sizes

Under 1

1 to 10

10 to 100

100 to 1,000

1,000 and
over

Ratio of profits {annual rate) to stockholders equity—percent

Before After Before After Before After Before After Before After Before After
taxes taxes taxes taxes taxes taxes taxes taxes taxes taxes taxes taxes
BASED ON 1957 SIC *
1958: I
^ .

II

IV
1959: I
II

III
IV
I960: I
II

III
IV
1961- I

.

..

II

III-

12.9 6.8
13.9 7.8
15.9 9.0
18.8 10.7
18.7 10.0
23.1 12.4
17.1 9.6
16.8 9.6
18.4 9.8
18.0 9.9
15.4 8.7
14.8 8.4
12.6 6.8
16.8 9.2
15.8 8.8

5.5 0.4
11.4 5.4
16.5 9.3
7.8 2.5
12.5 5.7
20.4 11.7
21.1 12.4
8.8 3.3
11.7 5.0
15.2 8.0
16.7 9.0
5.0
.5
6.3
.9
13.7 6.8
15.8 8.4

9.8 3.5
13.3 6.0
17.1 8.3
14.9 7.3
15.1 6.9
20.2 10.1
19.8 9.9
14.6 7.0
14.1 6.3
16.4 7.6
14.6 6.9
9.2 3.6
8.3 2.6
14.7 6.9
16.8 8.2

13.0 6.3
14.4 7.2
16.9 8.5
18.5 9.7
17.5 8.7
22.4 11.4
20.7 10.5
19.0 10.0
17.1 8.4
17.9 9.0
16.3 8.2
14.5 7.4
11.8
16.3
16.3

5.6
8.3
8.1

14.2 7.4
15.7 8.3
17.8 9.4
20.2 11.2
19.2
23.8
17.6
18.4
18.5
18.3
16.9
16.2
13.9
17.1
17.1

10.1
12.5
9.4
10.4
9.8
10.1
9.1

9.2
7.5

9.1
9.2

14.3
12.3
12.3
21.4
21.7
24.5
12.1
15.9
21.9
19.0
13.3
17.4
14.4
18.0
13.6

9.5
8.8
9.1
14.2
12.9
14.3
8.6
10.7
13.0
11.5
9.1

11.4
9.5
11.2
9.2

Profits per dollar of sales—cents

Before After Before After Before After Before After Before After Before After
taxes taxes taxes taxes taxes taxes taxes taxes taxes taxes taxes taxes
BASED ON 1957 SIC >
1958: I _
II
H I __ _.
IV.
1959: I .
II

III
IV

I960: I

II

-

III
IV

1961- I
II

Ill

.

.._

6.4
6.8
7.7
8.6
8.9
10.2
8.2
7.9
8.7
8.4
7.6
7.1
6.5
8.0
7.7

3.4
3.8
4.4
4.9
4.7
5.5
4.6
4.5
4.7
4.6
4.3
4.0
3.5
4.4
4.3

1.3
2.5
3.6
1.6
2.8
4.2
4.3
1.8
2.6
3.2
3.5
1.1
1.4
2.9
3.4

0.1
1.2
2.1
.5
1.3
2.4
2.5
.7
1.1
1.6
1.9
.1

3.8
5.0
6.1
5.3
5.4
6.6
6.7
4.9
5.0
5.6
5.1
3.2

1.4
2.3
2.9
2.6
2.5
3.3
3.4
2.4
2.2
2.6
2.4
1.3

.2
1.5
1.8

3.0
4.8
5.5

.9
2.3
2.7

6.5
7.0
8.1
8.5
8.4
9.9
9.5
8.7
8.1
8.2
7.7
6.9
6.0
7.6
7.7

3.1
3.5
4.0
4.5
4.2
5.0
4.8
4.5
4.0
4.1
3.9
3.5
2.8
3.9
3.8

7.5
8.0
8.9
9.7
9.6
10.9
8.8
9.1
9.3
9.0
8.7
8.3
7.4
8.4
8.5

3.9
4.2
4.7
5.4
5.0
5.7
4.7
5.1
4.9
5.0
4.7
4.7
4.0
4.5
4.6

10.6
9.7
10.4
14.9
15.2
16.4
10.2
12.2
14.5
13.2
10.6
12.7
11.6
13.6
11.4

7.0
6.9
7.7
9.9
9.0
9,6
7.3
8.2
8.6
8.0
7.3
8.3
7.7
8.5
7.7

i Standard Industrial Classification.
NOTE.—Data on a comparable basis are not available for earlier periods. For explanatory notes concerning compilation of the series, see Quarterly Financial Reports for U.S. Manufacturing Corporations, Federal
Trade Commission and Securities and Exchange Commission.
Data for Alaska and Hawaii included for all periods.
Sources: Federal Trade Commission and Securities and Exchange Commission.




282

TABLE B-65.—Sources and uses of corporate funds, 1950-61J
[Billions of dollars]

Source or use of funds

Total uses.
Plant and equipment outlays
Inventories (book value) 3
Customer net receivables
Cash and U.S. Government securities
_
Other assets

1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961»

36.5 36.8 27.3 28.2 24.0 45.1 39.5 37.8 31.5 45.2

42.1

16.9 21.6 22.4 23.9 22.4 24.2 29.9 32.7 26.4 27.7 30.8
9.8 9.8 1.3 1.8 - 1 . 6 6.7 7.6 2.1 - 2 . 4 5.7 3.0
5.0 2.0 3.1
.7 2.4 6.4 3.3 2.1 2.9 5.5 5.5

30.4
2.2
4.8

4.5
.3

2.8
.6

.1
.4

1.8
)

5.0 -4.3 - . 3 2.6
()
.8 2.8 3.0 1.3 1.9

3.6 - 3 . 1
2.7 2.9

1.5
3.2

35.4 36.9 28.1 30.0 22.4 44.8 42.4 40.1 35.7 48.0 41.4

44.4

20.8 19.0 17.8 19.7 19.8 26.6 27.8 28.0 26.0 30.6 30.3

32.1

Retained profits and deple13.0 10.0 7.4 7.9 6.3 10.9 10.5 8.9 5.7 9.1 7.4
tion allowances
Depreciation and amortization allowances..
_.. 7.8 9.0 10.4 11.8 13.5 15.7 17.3 19.1 20.3 21.5 22.9

»7.7

Total sourcesInternal sources-

External sources.
Federal income tax liability _.
Other liabilities
Bank loans and mortgage
loans
Net new issues
Discrepancy (uses less sources)

14.6 17.9 10.3 10.3

2.6 18.2 14.6 12.2

24.4

9.8 17.4 11.1

12.3
()
1.2
1.7
3.1
9.4
8.0

7.3
1.0

4.3 - 3 . 1
1.9 2.4

.6 - 3 . 1
.4
2.2

3.8 - 1 . 7 - 2 . 2 - 2 . 5
2.1 3.0 2.1 1.8

2.4 - 1 . 5
2.0 1.5

2.6
3.

5.4
6.3

.4 - . 6
7.1 5.9

5.4
6.9

5.2
7.8

3.1
7.9

1.1 - . 1 - . 8 - 1 . 8

1.6

5.4 1.7
7.9 10.6

1.1
9.4

.3 -2.9 -2.3 -4.2 - 2 . 8 -2.3 -2.2

1
3

Excludes banks and insurance companies.
Preliminary estimates.
» Receivables are net of payables, which are therefore not shown separately.
4
Less than $50 million.
8
Preliminary estimate b y Council of Economic Advisers.

Source: Department of Commerce based on Securities and Exchange Commission and other financial
data (except as noted).

621876 O - 6 2 - 1 9




283

TABLE B-66.—Current assets and liabilities of United States corporations, 1939-61l
[Billions of dollars]
Current assets

Current liabilities
Net
working
capital

Year or quarter

54.5

10.8

2.2

1940—
1941—
1942—
1943—
1944—

60.3
72.9
83.6
93.8
97.2

13.1
13.9
17.6
21.6
21.6

2.0
4.0
10.1
16.4
20.9

1945—
1946—

97.4
108.1

21.7
22.8

21.1
15.3

19471948—
1949—

123.6
133.0
133.1

25.0
25.3
26.5

14.1
14.8
16.8

1950195119521953..
1954-

161.5
179.1
186.2
190.6
194.6

28.1
30.0
30.8
31.1
33.4

19.7
20.7
19.9
21.5
19.2

1.1
2.7
2.8
2.6
2.4

19551956195719581959..

224.0
237.9
244.7
255.3
278.7

34.6
34.8
34.9
37.4
37.2

I960-

287.4

1959: I...
IIIII.
IV.

259.3
267.5
272.3
278.7

1960:
IIIII.
IV.
1961: I - .
IIIII.

22.1

18.0

1.4

30.0

23.9
27.4
23.3
21.9
21.8

19.8
25.6
27.3
27.6
26.8

1.5
1.4
1.3
1.3
1.4

32.8
40.7
47.3
51.6
51.7

26.3
37.6

2.4
1.7

45.8
51.9

44.6
48.9
45.3

1.6
1.6
1.4

61.5
64.4
60.7

55.7
58.8
64.6
65.9
71.2

55.1
64.9
65.8
67.2
65.3

1.7
2.1
2.4
2.4
3.1

79.8
92.6
96.1

23.5
19.1
18.6
18.8
22.6

2.3
2.6 95.1
2.8 99.4
2.8 106.9
2.9 119.0

72.8
80.4
82.2
81.9
88.2

4.2
5.9
6.7
7.5
8.8

37.0

19.7

3.1 126.5

34.6
35.9
35.6
37.2

20.2
20.7
21.9
22.6

2.8
2.7
2.7
2.9

109.0
113.3
116.5
119.0

281.3
283.0
285.8
287.4

33.8
34.6
35.0
37.0

22.4
20.7
19.3
19.7

2.9
2.9
2.9
3.1

291.4
296.2

34.8
36.1
36.8

19.5
19.4
18.4

0.1
.6
4.0
5.0
4.7

38.3
42.4
43.0

21.9

1.2

6.9

24.5

22.6
25.6
24.0
24.1
25.0

2.5
7.1
12.6
16.6
15.5

7.1
7.2
8.7
8.7
9.4

27.5
32.3
36.3
42.1
45.6

24.8
31.5

0.6
.8
2.0
2.2
1.8

10.4
8.5

9.7
11.8

51.6
56.2

10.7
11.5
9.3

13.2
13.5
14.0

62.1
68.6
72.4

37.6
39.3
37.5
1.3
2.3
2.2
2.4

47.9
53.6
57.0
57.3
59.3

16.7
21.3
18.1
18.7
15.5

14.9
16.5
18.7
20.7
22.5

81.6
86.5
90.1
91.8
94.9

121.0
130.5
133.1
136.6
151.2

2.3
2.4
2.3
1.7
1.7

73.8
81.5
84.3
88.7
99.0

19.3
17.6
15.4
12.9
15.3

25.7
29.0
31.1
33.3
35.2

103.0
107.4
111.6
118.7
127.5

91.3

154.9

1.8 102.6

13.8

36.8

132.5

84.5
86.3
86.7
88.2

8.3 137.8
8.7 143.1
8.9 146.4
151.2

1.7
1.7
1.7
1.7

89.5
92.8
94.9
99.0

12.5
13.4
14.3
15.3

34.2
35.2
35.6
35.2

121.5
124.4
125.9
127.5

120.3
122.8
125.8
126.5

91.9
92.1
92.6
91.3

151.6
10.0 152.9
10.1 154.2
154.9

1.8 99.6
1.8 101.3
1.8 101.9
1.8 102.6

13.9
12.9
13.4
13.8

36.2
36.9
37.2
36.8

129.7
130.2
131.6
132.5

3.2 125.5
3.1 129.2
3.2 132.9

92.9
92.3
93.2

10.7 152.3
11.3 153.5
11.7 156.9

1.8 100.9
1.7 102.4
1.8 104.0

12.1
11.7
12.7

37.5
37.7
38.4

134.3
137.9
139.3

1
All United States corporations, excluding banks, savings and loan associations, and insurance companies.
Year-end data through 1958 are based on Statistics of Income (Treasury Department), covering virtually all
corporations in the United States. Statistics of Income data may not be strictly comparable from year to
year because of changes in the tax laws, basis for filing returns, and processing of data for compilation purposes. All other figures shown are estimates based on data compiled from many different sources, including
data on corporations registered with the Securities and Exchange Commission. As more complete information becomes available, estimates are revised.
* Receivables from and payables to U.S. Government do not include amounts offset against each other
on the corporation's books or amounts arising from subcontracting which are not directly due from or to
the U.S. Government. Wherever possible, adjustments have been made to include U.S. Government
advances offset against inventories on the corporation's books.
3 Includes marketable securities other than U.S. Government.
Source: Securities and Exchange Commission.




284

TABLE B-67.—State and municipal and corporate securities offered, 1934-611
[Millions of dollars]

Year or quarter

Corporate securities offered for cash '
State
and
Gross proceeds»
Proposed uses of net proceeds «
municipal securities
New money
offered
for cash
Retire- Other
Com- Pre- Bonds
(prinTotal mon ferred and
Total
Plant Work- ment purcipal
of sestock stock notes
ing
and
amounts)
Total equip- capi- curities
tal
ment
397

19

371

384

57

32

26

231

95

1935.
1936.
1937.
1938.

1,232
1,121
908
1,108
1,128

2,332
4,572
2,310
2,155
2,164

22
272
285
25
87

271
406
86
98

2,225
4,029
1,618
2,044
1,980

2,266
4,431
2,239
2,110
2,115

208
858
991
681
325

111
380
574
504
170

96
478
417
177
155

1,865
3,368
1,100
1,206
1,695

193
204
148
222
95

1940-.
1941._
1942..
1943-.
1944._

1,238
956
524
435
661

2,677
2,667
1,062
1,170
3,202

108
110
34
56
163

183
167
112
124

2,386
2,390
917
990
2,669

2,615
2,623
1,043
1,147
3,142

474
308
657

424
661
287
141
252

145
207
187
167
405

1,854
1,583
396
739
2,389

192
172
173
100
96

19451946,
1947.
1948.
1949.

795
1,157
2,324
2,690
2,907

6,011
6,900
6,577
7,078
6,052

758
397
891 1,127
762
779
492
614
425
736

4,855
4,882
5,036
5,973
4,890

5,902
6,757
6,466
6,959
5,959

1,080
3,279
4,591
5,929
4,606

638
2,115
3,409
4,221
3,724

442
1,164
1,182
1,708
882

4,555
2,868
1,352
307
401

267
610
524
722
952

1950.
19511952.
1953.
1954-

3,532
3,189
4,401
5,558

6,361
7,741
9, 534
8,898
9,516

811
1,212
1,369
1,326
1,213

631
838
564
489
816

4,920
5,691
7,601
7,083
7,488

6,261
7,607
9,380
8, 755
9,365

4,006
6,531
8,180
7,960
6,780

2,966
5,110
6,312
5,647
5,110

1,041
1,421
1,868
2,313
1,670

1,271
486
664
260
1,875

984
589
537
535
709

1955.
1956195719581959-

5,977
5,446
6,958
7,449
7,681

10,240
10,939
12,884
11,558
9,748

2,185
2,301
2,516
1,334
2,027

635
636
411
571
531

7,420
8,002
9,957
9,653
7,190

10,019 7,957
10, 749 9,663
12,661 11,784
11,372 9,907
9,527 8,578

5,333
6,709
9,040
7,792
6,084

2,624
2,954
2,744
2,115
2,494

1,227
364
214
549
135

864
721
663
915
814

1960.
1961 »

7,230 10,154 1,664
8,330 12,894 3,281

409
447

8,081 9,924 8,758
9,167 12, 619 10, 635

5,662
7,354

3,097
3,281

271
885

895
1,099

1959: I —
II-.
III..
IV-

2,157
2,504
1,500
1,520

2,282
2,665
2,062
2,739

518
639
333
537

142
173
63
154

1,622
1,854
1,666
2,048

2,232
2,603
2,016
2,675

1,899
2,414
1,817
2,448

1,367
1,712
1,096
1,909

531
- 702
721
539

28
36
37
33

306
153
162
195

1960: I....
IIIII.
IV..

1,885
2,252
1,764
1,329

2,265
2,537
2,520
2,832

435
582
337
310

100
110
92
106

1,729
1,845
2,091
2,417

2,214
2,465
2,467
2,778

1,972
2,181
2,222
2, 384

1,180
1,412
1,480
1,589

791
768
742
795

69
83
39
80

174
201
205
315

1961 I
II.. _
III..
IV*.

2,122
2, 370
1,766
2,072

1,992
354
5.352 1,582
2,566
571
2,984
774

192
82
77

1,543
3,578
1,913
2,133

1,951
5,261
2.501
2,906

1,648
4,272
2,120
2, 596

952
3,373
1,396
1,633

695
899
723
963

142
566
63
113

161
423
318
198

1934.

1
These data cover substantially all new issues of State, municipal, and corporate securities offered for
cash sale in the United States in amounts over $100,000 and with terms to maturity of more than 1 year.
2
Excludes notes issued exclusively to commercial banks, intercorporate transactions, sales of investment company issues, and issues to be sold over an extended period, such as offerings under employeepurchase plans.
3
Number of units multiplied by offering price.
4
Net proceeds represents the amount received by the issuer after payment of compensation to distributors
and other costs of flotation.
* Preliminary.

NOTE.—Data for Alaska and Hawaii included for all periods.
Sources: Securities and Exchange Commission, The Commercial and Financial Chronicle, and The Bond
Buyer.




285

TABLE B-68.—Common stock prices and earnings and stock market credit, 1939-61

Year or month

Common
Common
stock
stock
price/
prices
earnings
index,
ratio—
1957-59= 100 industrials
(SEC) i
(Standard 2
& Poor's)

Stock market credit
Customer credit (excluding U.S.
Government securities)

Total

Net debit
balances 3

Bank loans
to brokers
and
Bank loans dealers 5
to
"others" *

Millions of dollars
1939..

19501951..
1952..
19531954..

26.8
25.3
23.0
20.1
26.6
29.0
35.2
40.1
35.1
35.6
34.3
41.4
49.6
52.3
51.9
61.7

1955..
1956..
1957..
1958..
1959..

81.8
92.6
89.8
93.2
116.7

I960..
1961..

113.9
134.2
117.6
114.1
112.1
113.5
113.2
117.0
114.5
115.6
112.1
109.1
112.6
115.2

19401941..
1942..
1943..
1944..
1945..
1946..
194719481949..

1960: January...
February March
April
May
June
July
August
SeptemberOctober
November.
December..
1961: January . . .
February .
March
April
May
June
July
August
September.
October
November .
December..

120.9
125.4
129.8
133.0
134.9
132.8
132.7
137.4
136.2
138.0
144.0
145.8

12.17
11.03
9.65
10.14
17.58
16.95

715

353

584
535
850
1,328
2,137

22.99
11.01
9.14
5.86
6.76

1,374
976
1,032
968
1,249

942
473
517
499
821

432
503
515
469
428

2,782
1,471
784
1,331
1,608

7.51
9.62
10.22
9.68
12.17
12.65
13.54
12.91
17.71
19.79

1,798
1,826
1,980
2,445
3,436

561
573
648
780
1,048

1,742
1,419
2,002
2,248
2,688
2,852
2,214
2,190
2,569
2,584

18.92

4,415
5,602

1,237
1,253
1,332
1,665
2,388
2,791
2,823
2,482
3,285
3,280
3,222
4,259
3,198
3,129
3,028
3,037
3,021
3,082
3,004
3,109
3,137
3,133
3,141
3,222

15.87

~l7~80
17.29
18.92

23.88
21.65

18.58

()

4,030
3,984
3,576
4,537
4,461

4,372
4,281
4,165
4,161
4,142
4,221
4,143
4,252
4,292
4,303
4,303
4,415
4,424
4,532
4,787
5,190
5,386
5,367
5,355
5,349
5,311
5,333
5,460
5,602

1,239
1,161
1,094
1,252
1,181
1,193
1,343
1,174
1,152
1,137
1,124
1,121
1,139
1,139
1,143
1,155
1,170
1,162
1,193

3,253
3,358
3,601
3,936
4,060
4,024

1,171
1,174
1,186
1,254
1,326
1,343

3,991
3,972
3,991
4,029
4,141
4,259

1,364
1,377
1,320
1,304
1,319
1,343

2,614
3,418
1,921
1,816
1,487
1,817
1,591
1,670
1,665
1,871
2,071
1,961
1,855
2,614
1,969
2,001
1,805
2,397
2,439
2,441
2,732
2,136
2,637
2,743
2,583
3,418

1 Based on 300 stocks.
2
Based on 50 stocks for 1939-56 and 425 stocks beginning 1957. Ratio is obtained by dividing the stock
price index as of the end of the period by the seasonally adjusted annual rate of earnings for the quarter
then ending.
3 As reported by member firms of the New York Stock Exchange carrying margin accounts. Includes
net debit balances of all customers (other than general partners in the reporting firm and member firms of
national exchanges) whose combined accounts net to a debit. Balances secured by U.S. Government
obligations are excluded. Data are for end of period.
* Loans by weekly reporting member banks to others than brokers and dealers for purchasing or carrying
securities except U.S. Government obligations. From 1953 through June 1959, loans for purchasing or
carrying U.S. Government securities were reported separately only by New York and Chicago banks.
Accordingly, for that period any loans for purchasing or carrying such securities at other reporting banks
are included. Series also revised beginning July 1946, March 1953, and July 1958. Data are for last Wednesday of period. For details, see Federal Reserve Bulletin, August 1959.
* Loans by weekly reporting member banks for purchasing or carrying securities, including U.S. Government obligations. Series revised beginning July 1946, January 1952, July 1958, and July 1959. Data are
for last Wednesday of period. For details, see Federal Reserve Bulletin, August 1959.
* Not available.
Sources: Securities and Exchange Commission, Board of Governors of the Federal Reserve System,
Standard & Poor's Corporation, and New York Stock Exchange.




286

TABLE B-69.—Business population and business failures, 7929-67

Year or month

Operating businesses and business
turnover (thousands offirms)>
DisOper- New conating busi- tinbusi- ness- ued
ness- es 3 busies 2
nesses 3

Business failures 3 4
Newbusiness
incorporations
(number) 3

Amount of current
liabilities
(millions
of dollars)
Liability size
class
Liability size
class
Under $100,000 Total Under $100,000
and
5100,000
and
5100,000 over

Number of failures
Business
failure
rate 5

Total

22,909
26,355
28,285
31,822
19,859
12,091
12,244
9,607
9,490
12,836
14,768
13,619
11,848
9,405
3,221
1,222
809
1,129
3,474
5,250
9,246
9,162
8,058
7,611

22;165
744 483.3
261.5
221.8
25,408
947 668.3
303.5
364.8
27,230
1,055 736.3
354.2
382.2
30,197
1,625 928.3
432.6
495.7
18,880
7 979 457.5 7 215. 5 7 242.0
195.4
11, 421
138.5
670 334.0
6
11,691
553 310.6
135.5
175.1
()
9,285
322 203.2
102.8
100.4
9,203
287 183.3
101.9
81.4
12,553
283 246.5
140.1
106.4
()
14,541
"227 182.5 7 132. 9 7 49.7
CO
219 166.7
13,400
119.9
46.8
318
275
163 136.1
11,685
100.7
35.4
271
290
123 100.8
9,282
80.3
20.5
386
121
66
45.3
3,155
30. 2
15.1
337
146
46
31.7
1,176
14.5
17.1
175
331
30.2
759
11.4
18.8
50
423
176
()
67.3
1,002
15.7
51.6
127
617
209
3,103
63.7
140.9
371 204.6
461
239 132,916
4,853
93.9
140.7
397 234.6
393
282 112,638
96,101
8,708
161.4
146.7
538 308.1
331
306
85,491
8,746
416 248.3
151.2
97.1
348
290
92,925
128.0
7,626
432 259.5
131.6
276
327
83,649
151.4
276
7,081
530 283.3
131.9
346
92,819
226.6
299 102,545
8,075
787 394.2
167.5
352
251.2
319 117,164
462.6
211.4
366
11,086 10,226
206.4
243.0
314 139,651
856 449.4
10,969 10,113
408
322.9
239.8
342 140,775
12,686 11,615 1,071 562.7
431
348.2
267.1
335 136,697
13,739 12, 547 1,192 615.3
398
430.7
297.6
347 150,280
1,465 728.3
14,964 13,499
397
413.9
278.9
347 193,067
1,346 692.8
14,053 12,707
423
611.4
327.2
386 182,713
15,445 13,650 1,795 938.6
443
57.0
720.0
2,069 1,090.1
370.1
64.4 17,075 15,006
181, 538
18,202
29.0
1,055
126
24.6
53.7
51.0
1,181
14,681
36.6
February
1,091
123
60.9
24.4
50.7
1,214
17, 173
43.2
March.._
70.2
1,172
163
27.0
51.1
1,335
15, 484
40.3
69.2
1,235
135
28.9
April
54.9
1,370
4,6
45.5
73.3
1,153
120
27.8
54.1
1,273
May
15, 571
100.0
1,157
177 126.4
26.5
67.2
1,334
June
16, 710
38.6
23.1
138
61.7
1,008
July..
4,710
14,709
64.8
1,146
70.2
27.4
178
97.6
1,137
August
15,028
1,315
59.6
52.0
28.6
151
80.6
September
1,118
14,043
1,269
65.2
52.9
28.6
152
81.5
October
1,192
13, 783
1,344
~4~7~U
63.3
55.6
28.9
185
84.5
1,126
12,435
1,311
November.
62.0
47.5
31.5
147
79.0
1,206
1,353
14, 594
December _
63.4
48.6
33.0
1,241
163
81.5
1,404
1961: January. _ 4,730
16, 350 61.1
64-2
56.4
31.7
1,274
175
88.1
February.
1,449
13,281
93.3
33.3
1,369
241 126.6
1,610
March
16, 783 62.9
54.0
32.1
1,271
170
86.1
1,441
14, 815
April
4,740
45.7
34.8
1,370
175
80.5
1,545
16,371
May
55.0
28.9
1,206
197
83.8
1,403
16,418 60.7
June
40.2
28.9
142
69.2
1,133
14, 483 62.6
1,275
4,755
July
68.6
34.1
1,412
192 102.7
15,079
1,604
August.. _
89.1
27.5
1,143
142 116.7
1,285
September.
13, 616 6t'.5
39.0
31.2
1,301
1,446
145
70.3
October... 4,770
15, 492 69.5
92.0
27.3
190 119.2
November
14,045
63. 8 1, 335 1,145
38.2
27.3
1,141
1,278
December
137
65.5
14. 805 63.6
1 Excludes firms in the fields of agriculture and professional services. Includes self-employed person
only if he has either an established place of business or at least one paid employee. Series revised beginning
1951.
2
Data through 1939 are averages of end-of-quarter estimates centered at June 30. Beginning 1940, data
are for beginning of period. Quarterly data shown here are seasonally adjusted.
3 Total for period.
< Commercial and industrial failures only. Excludes failures of banks and railroads and, beginning 1933,
of real estate, insurance, holding, and financial companies, steamship lines, travel agencies, etc.
5 Failure rate per 10,000 listed enterprises. Monthly data are seasonally adjusted.
6
Not available.
7
Series revised; not strictly comparable with earlier data.
s Includes data for Hawaii beginning 1959 and Alaska beginning 1960. (Data for 1958 comparable to 1959
are 150,781; data for 1960 comparable to 1959 are 182,374.)
Sources: Department of Commerce and Dun & Bradstreet, Inc.

1929..
1930..
1931..
1932..
1933..
1934..
1935..
1936..
1937..
1938..
1939..
1940..
1941..
1942..
1943..
1944..
1945..
1946..
1947..
1948..
1949..
1950..
1951.
1952.
1953.
1954.
1955.
1956.
1957.
1958.
1959.
1960.
1961.
1960 January

3,029
2,994
2,916
2,828
2,782
2,884
2,992
3,070
3,136
3,074
3,222
3,319
3,276
3,295
3,030
2,839
2,995
3,242
3,651
3,873
3,984
4,009
4,067
4,118
4,188
4,240
4,287
4,381
4,471
4,533
4,583
4,660
4,717
4,670




0)

8
(6)

103.9
121.6
133.4
154.1
100.3
61.1
61.7
47.8
45.9
61.1
7
69. 6
63.0
54.4
44.6
16.4
6.5
4.2
5.2
14.3
20.4
34.4
34.3
30.7
28.7
33.2
42.0
41.6
48.0
51.7
55.9
51.8

287

AGRICULTURE
TABLE B-70.—Income from agriculture, 1929-61

Year or quarter

Income received by total
farm population from
agricultural
sources
Farm
Total 1 wages 2

Income received by farm operators from farming
Net

Realized gross
Cash receipts
from
Total 3
marketings

Production expenses

Excluding net
inventory
change

Including net
inventory
change*

Billions of dollars

Net income per
farm including
net inventory
change«
Current

1961
prices •

Dollars

1929

7.0

0.9

13.9

11.3

7.6

6.3

6.1

943

1,779

1930
1931
1932
1933
1934

5.1
4.0
2.5
3.0
3.4

.8
.6
.5
.4
.5

11.4

9.1
6.4
4.7
5.3
6.4

6.9
5.5
4.4
4.3
4.7

4.5
2.9
1.9
2.8
3.9

4.3
3.3
2.0
2.6
2.9

650
506
305
382
434

1,327
1,177
847
1,032
1,033

1935
1936
1937
1938
1939

5.9
5.0
6.8
5.1
5.2

.6
.6
.7
.7
.7

10.7
11.3
10.1
10.6

7.1
8.4
8.9
7.7
7.9

5.1
5.6
6.1
5.8
6.2

4.6
5.1
5.2
4.3
4.4

5.3
4.3
6.0
4.4
4.5

778
643
911
675
697

1,809
1,495
2,070
1,607
1,700

1940
1941
1942
1943
1944

5.3
7.5

.7
.9
1.2
1.4
1.5

11.0
13.8
18.8
23.4
24.4

8.4

11.1
13.2
13.4

11.1
15.6
19.6
20.5

6.7
7.7
9.9

4.3
6.2
8.8

11.5
12.2

11.9
12.2

4.6
6.6
9.9
11.8
11.8

720
1,044
1,600
1,942
1,967

1,714
2,320
3,137
3,407
3,278

1945
1946
1947
1948
1949

14.0
17.0
17.5
19.8
14.7

1.6
1.8
1.9
2.0
1.8

25.8
29.7
34.4
34.9
31.8

21.7
24.8
29.6
30.2
27.8

12.9
14.5
17.0
18.9
18.0

12.8
15.2
17.3
16.1
13.8

12.4
15.3
15.5
17.8
12.9

2,080
2,574
2,648
3,065
2,259

3,302
3,730
3,269
3,564
2,689

1950
1951
1952
1953
1954

15.7
18.1
17.3
15.1
14.4

1.7
1.8
1.9
1.8
1.8

32.5
37.3
37.0
35.3
33.9

28.5
33.0
32.6
31.1
30.0

19.3
22.2
22.6
21.4
21.7

13.2
15.2
14.4
13.9
12.2

14.0
16.3
15.3
13.3
12.7

2,479
2,951
2,829
2,502
7 2,700

2,916
3,208
3,042
2,720
2,903

1955
1956
1957
1958
1959

13.5
13.4
13.6
15.4
13.1

1.7
1.7
1.8
1.8
1.8

33.3
34.6
34.4
37.9
37.5

29.6
30.6
29.8
33.4
33.5

21.9
22.6
23.4
25.3
26.3

11.5
12.0
11.0
12.6
11.2

11.8
11.6
11.8
13.5
11.3

7 2,572
i 2,611
7 2,724
7 3,226
7 2,760

2,766
2,778
2,808
3,259
2,788

1960
1961

13.7
14.8

1.8
1.8

38.1
39.6

34.0
34.8

26.4
26.9

11.7
12.7

12.0
13.0

7 2,990
7 3,333

2,990
3,333

8.4
6.4
7.1
8.5
9.7

Seasonally adjusted annual rates
1960: I.__.
II...
III..
IV..

(9)
(9)
(9)
(9)

36.8
38.5
38.3
38.7

32.7
34.4
34.2
34.7

26.4
26.5
26.3
26.3

10.4
12.0
12.0
12.4

10.5
12.3
12.4
12.7

2,620
3,080
3,100
3,180

2,650
3,080
3,100
3,180

1961: I*...
118.
Ill».
IV s.

(9)
(9)
(9)
(9)

39.3
39.2
39.3
40.6

35.3
34.0
34.4
35.5

26.7
26.7
26.9
27.2

12.6
12.5
12.4
13.4

12.9
12.9
12.8
13.6

3,310
3,310
3,280
3,490

3,310
3,310
3,280
3,490

1
2
3

Net income of farm operators from farming (including net inventory change) and farm wages as shown.
Farm wages received by farm resident workers.
Cash receipts from marketings, Government payments, and nonmoney income furnished by farms.
* Includes net change in inventory of crops and livestock valued at the average price for the year. Data
prior to 1946 differ from farm proprietors' income shown in Tables B - l l and B-14 because of revisions by
the Department of Agriculture not yet incorporated into the national income accounts of the Department
of Commerce.
« Based on estimated number of farms as reported by the Department of Agriculture according to 1954
Census of Agriculture definition, except as noted in footnote 7.
8
Income in current prices divided by the index of prices paid by farmers for family living items on a
1961 base.
7
Per farm figures for 1954-61 based on interim approximations of number of farms consistent with the
1959 Census of Agriculture definition of a farm.
8
Preliminary.
»Not available.
Source: Department of Agriculture.




288

T A B L E B—71.—Indexes of prices received and prices paid by Jarmers, and parity ratio,

7929-67

[1910-14=100]
Prices received by farmers
Livestock and products

Crops
Year or month

All
farm
prodAll Food
ucts l crops 1 grains

Feed grains
and hay
Feed
Total grains

OilCot- To- bearton bacco ing
crops

All
livestock
and
products l

Meat Dairy Poulani- p r o d - try
mals ucts and

1929

148

135

116

118

124

150

171

143

159

155

166

161

1930
1931
1932
1933
1934

125
87
65
70
90

116
75
57
71

93
69
44
66
90

106
74
48
57
96

109
71
44
67
97

104
64
49
68
101

140
98
84
107
156

111
73
44
57
103

134
98
72
70
81

133
91
63
59
68

142
111
86
87
101

128

109
114
122
97
95

103
108
118
80
82

97
108
120
76
72

107
103
125
71
72

112
110
135
73
72

99
94
70
74

171
163
200
173
152

127
120
129
95
96

114
119
126
112
107

115
118
130
113
110

114
125
131
115
110

116
115
111
110

1940
1941
1942
1943
1944

100
124
159
«193
•197

90
108
145
187
199

84
97
120
148
166

85
92
115
152
172

86
94
117
156
175

83
111
156
167
172

134
157
247
319
348

103
138
183
202
222

109
138
171
198
196

108 120
143 140
186 163
203 «198
190 8222

122
152
191
177

1945
194C
1947
1948
1949

•207
•236
276
287
250

202
228
263
255
224

172
201
271
250
218

167
202
256
258
177

168
212
275
273
176

179
238
274
272
246

360
376
374
380

228
351
242

211
242
288
315
272

•207 •229
«248 «268
329 273
361 301
311 252

198
201
223
242
221

1950
1951
1952
1953...
1954.

258
302
288
255
246

265
267
240
242

224
243
244
234

103
226
234
206
203

198
237
242
212
209

282
336
310
268
274

402
436
432
433
443

276
339
296
279
304

280
336
306
268
249

340
409
353
288

249
286
303
267
246

186
228
206
221
178

1955—
1956..
1957
1958
1959

235
250
240

231
235
225
223
221

224
225
208
202

183
182
166
154
156

187
186
169
156
157

272
268
263
253
267

437
452
466
482
506

249
255
244
225
219

234
226
244
273
256

246
235
275
335
313

247
255
259
254
257

191
176
162
170
143

238
240

221
226

203
209

151
151

150
151

254
259

500
524

214
257

253
251

296
299

259
259

160
146

233
234
241
242
240
235

220
218
221
224
225
221

206
208
210
209
209
199

151
153
153
158
158
158

148
150
150
155
158
159

253
240
240
244
247
250

485
495
495
494
495
494

216
216
213
216
218
216

243
247
257
257
252
248

280
289
309
311
309
303

266
261
256
244
237
235

146
145
155
163
154
149

234
238
241
241
242

222
219
222
222
219
217

194
196
197
200
204
204

156
152
152
147
136
141

158
153
153
146
132
137

265
273
272
267
254
243

491
488
510
513
517
517

213
211
208
209
213
217

249
247
251
257
260
263

300
290
285

244
254
269
277
282
278

149
154
163
176
182
178

241
244
243
239
236
234

218
221
224
226
230
231

207
209
208
202
203
200

146
150
150
145
151
152

143
148
149
143
151
153

508
517
516
516
517
516

231
250
264
286
285
261

261
263
259
251
241
236

304

227
240
249
250
261

305
292
286

271
263
256
247
241
240

165
169
160
145
139
131

237
241
242
240
238
240

229
229
226
223
224

201
209
214
217
218
219

156
154
156
154
149
150

158
155
157
154
147
149

265
276
277
286
280

516
523
542
537
530
544

261
259
242
242
248
250

241
251
252
252
250
255

288
302
303
297
291
299

248
257
266
274
275
273

138
142
138
141
140
146

1935
1936
1937
1938
1939

...

1960
_
1961 7.-1960:
January
February
March
April
May.
_._
June
July
August
September
October
November
December
1961:
January
February
March
April
May
June
July
August
September
October
November
December

___.

-

See footnotes at end of table, p. 290.




289

298

81
74

TABLE B-71.-—Indexes of prices received and prices paid by farmers, and parity ratio, 1929-61—

Continued
[1910-14= 100]
Prices paid b y farmers

Year or m o n t h

All
Commodities and services
items,
inProduction items
terest,
Famtaxes,
and
iy
l
All
All
wage items living producM o t o r Farm Fermarates
titerns tion Feed ve(parity
hicles chin- lizer
items 1
ery
index)

1929 -.
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961 7
1960:
January
February
March
April
May
June
July
August
September
October
November
December _ _
1961:
January
February
March _.
April
May
Tune
July .
August... ... September
October _
November
D e cember
-

160
151
130
112
109
120
124
124
131
124
123
124
133
152
171
182
190
208
240
260
251
256
282
287
277
277
276
278
286
293
297
299
301

150
140
119
102
104
118
123
123
130
122
121
122
130
149
165
174
179
197
230
250
240
246
271
273
261
262
259
260
267
273
275
275
276

154
144
124
106
108
122
124
124
128
122
120
121
130
149
165
175
182
202
237
251
243
246
268
271
269
270
270
274
282
287
288
290
291

146
135
113
99
99
114
122
122
132
122
121
123
130
148
164
173
176
191
224
250
238
246
273
274
256
255
251
250
257
264
266
265
266

136
122
86
64
73
103
106
109
124
93
93
100
108
132
156
173
172
200
236
250
206
210
236
251
227
226
211
206
201
198
199
194
196

148
144
143
141
140
148
150
157
162
172
165
163
172
186
195
211
218
224
260
291
320
320
342
358
355
355
358
367
395
412
425
420
416

299
299
300
302
301
299
298
298
298
296
297
298

275
275
276
277
277
275
274
274
274
273
274
275

289
289
289
291
291
290
290
290
289
290
291
291

265
266
267
268
267
265
263
262
263
262
262
265

197
197
197
199
198
196
195
193
193
191
188
189

432

301
302
302
302
302
300
300
301
301
301
301
302

276
277
277
277
277
275
275
276
276
276
276
277

291
291
290
290
291
290
290
290
291
291
291
292

267
267
268
267
266
265
264
265
266
265
265
267

194
196
197
195
199
198
198
197
197
194
194
197

153
152
150
142
138
144
148
150
153
158
155
153
155
164
170
174
176
182
206
240
270
277
298
308
311
312
312
326
342
357
372
382
390

427

379

420
420

381

414
403

385

417

130
126
114
100
93
105
104
98
103
102
101
98
98
109
116
118
120
121
134
146
150
144
152
156
157
158
155
152
153
153
152
152
154

385

152

153

417
417

388

416
416

389

415
414

393

153

154

1
2 Includes items not shown separately.
3 Interest payable per acre on farm real estate debt.
4 Farm real estate taxes payable per acre (levied in preceding year).
8 Monthly data are seasonally adjusted.
8 Percentage ratio of prices received for all farm products to parity index.

Includes wartime subsidy payments.
7 Preliminary.
Source: Department of Agriculture.




290

Parity
In3 W a g e atio*
ter- Taxes
ates*
est 2

213
206
197
185
164
147
135
125
117
110
106
102
98
94
84
79
75
74
76
78
82
89
98
108
117
126
136
150
163
176
194
213
228

279
281
277
254
220
188
178
180
181
187
185
189
187
189
185
185
192
213
237
276
298
320
335
350
365
381
394
421
440
470
496
534
578

186
177
139
104
88
99
107
114
129
130
127
129
151
197
262
318
359
387
419
442
430
425
470
503
513
510
516
536
558
574
612
631
641

92
83
67
58
64
75
88
92
93
78
77
81
93
10S
113
108
1C
0
112

213
213
213
213
213
213
213
213
213
213
213
213

536
536
534
534
534
534
534
534
534
534
534
534

632
6SB
63t
649
649
649
631
631
631
613
613
613

7
1
7
1
8
(
8
(
8
4
7
7
7
8
4
8
8
8

228
228
228
228
228
228
228
228
228
228
228
228

578
578
578
578
578
578
578
578
578
578
578
578

636
636
636
647
647
647
648
648
648
635
636
636

8
8
8
7
7
7
7
8
8
8
7
7

IK

1C
1
10(
11
0
10'
1(
0
9
5
8
*
&
8
1
8
5
8
»
8]
8
(
8
1

TABLE B-72.—Farm production indexes, 1929-61
[1947-49=100]
Crops

Livestock and products

Farm
Year

Oil
outPoulFruits
Hay
Cot- To- bear- Totals Meat Dairy try
put i Total 2 Feed and Food Vege- and
ani- prodgrains forage grains tables nuts ton bacco ing
mals ucts and
crops
eggs

1929...

74

79

83

88

66

78

76

104

75

21

77

77

82

63

1930...
1931...
1932...
1933__.
1934...

72
79
76
70
60

76
84
80
71
58

73
84
95
73
48

75
79
86
79
67

72
76
62
45
44

79
80
80
77
84

75
94
76
77
72

98
119
91
91
68

81
76
49
68
54

23
23
21
18
21

78
80
81
82
75

78
82
83
86
73

84
86
86
87
85

65
63
63
62
59

1935...
1936...
1937...
1938...
1939___

72
65
82
79
79

76
64
88
83
82

80
53
87
84
83

96
74
87
98
93

53
52
72
75
61

85
80
86
86
85

91
72
95
85
101

75
87
133
84
83

65
58
78
69
93

34
27
30
36
47

72
77
76
79
85

66
74
71
77
88

86
87
86
89
90

59
63
63
65
70

1940...
1941...
1942...
1943...
1944-__

82
85
96
94
97

85
87
97
91
96

85
91
104
96
100

105
106
115
109
108

67
76
80
69
85

88
89
95
103
98

96
102
101
87
101

88
75
90
80
86

72
63
70
69
96

56
61
92
98
82

87
92
102
110
105

89
94
108
120
108

92
96
100
99
101

^70
77
89
102
102

1945...
1946___
1947._.
1948.__
1949.__

95
98
95
104
101

93
98
93
106
101

97
106
81
116
103

112
104
102
99
99

89
92
108
103
89

100
111
97
103
100

92
110
104
95
101

63
61
83
105
112

98
114
104
98
98

88
84
91
109
100

104
101
100
97
103

103
101
100
97
103

103
102
101
98
101

106
99
98
96
106

1950...
1951...
1952...
1953___
1954. „

101
104
108
109
109

97
99
104
103
101

104
97
103
101
106

106
110
106
109
108

83
82
105
96
85

102
95
96
101
98

101
103
100
101
102

70
106
106
115
96

101
116
112
102
111

115
106
104
103
116

107
112
112
114
117

109
117
117
116
121

101
100
100
105
107

111
116
117
120
125

1955.._
1956._.
1957__.
1958. „
1959...

113
114
114
124
125

105
106
106
118
117

112
112
122
135
140

115
109
122
122
115

80
84
79
117
93

102
109
104
108
106

102
107
103
109
111

103
93
77
80
102

109
108
83
86
89

128
152
147
180
158

120
122
121
124
128

127
123
119
124
130

108
110
111
111
109

123
136
137
145
152

I960...
1961 *__

128
128

121
119

143
130

119
117

111
102

108
114

108
119

100
101

96
100

170
200

126
132

125
130

110
112

151
164

1
Farm output measures the annual volume of farm production available for eventual human use through
sales from farms or consumption in farm households. Total excludes production of feed for horses and mules.
2
Includes production of feed for horses and mules and certain items not shown separately.
1
Includes certain items not shown separately.
4
Preliminary.
Source: Department of Agriculture.




291

T A B L E R-73.—Selected measures of farm resources and inputs,
Cropland
harvested
(millions
of acres)1

Year

Livestock
breeding
Exclu- units
sive of (1947use for
Total feed for 49=
)
horses
and
mules

1929-61

Index numbers of Inputs (1947-49=100)
Manhours
of
farm
work
(billions)

Total

Farm
labor

MeFeed,
chani- Ferti- seed,
Farm
cal
and
real power lizer
live- Misceland
estate' and
stock laneous
lime
mapurchinery
chases*

365

298

23.2

98

138

98

53

36

38

1930
1931
1932
1933
1934

365
371
340
304

304
303
311
281
247

22.9
23.4
22.6
22.6
20.2

97
96
93
91
86

137
140
135
135
121

96
94
91
92
91

55
52
48
44
44

36
28
19
21
25

37
32
34
34
33

96
99
100
97

1935
1936
1937
1938
1939

345
323
347
349
330

289
269
295
301
285

21.1
20.4
22.1
20.6
20.7

88
89
94
91
94

126
122
132
123
123

93
94
95
96
97

45
48
52
55
55

29
35
41
39
41

32
43
40
42
52

84
87

1940
1941
1942
1943
1944....

342
346
356
361

296
302
307
319
325

94
104
117
114

20.5
20.0
20.6
20.3
20.2

97
97
101
101
101

122
120
123
121
120

98
98
96
94
93

58
61
66
69
70

48
52
58
66
75

63
65
80
88
90

94
95
97
97

1945
1946
1947
1948
1949

354
351
354
356

322
322
328

108
107
103

18.8
18.1
17.2
16.8
16.2

99
99
99
100
101

113
108
103
100
97

93
96
98
101
101

74
80
89
100
111

78
92
97
98
105

101
97
102
101
97

97
98
99
97
104

1950
1951
1952
1953....
1954

345
344
349
348
346

326
326
334
335
335

102
103
102
100
104

15.1
15.2
14.4
13.9
13.1

101
104
104
103
102

90
91
86
83
78

103
104
105
105
106

118
127
133
134
135

118
126
139
143
152

101
112
113
112
115

108
112
112
115
115

1955
1956.-1957
1958
1959

340
326
326
328

330
317
318
321
324

106
104
102
100
100

12.8
12.1
11.4
11.1
10.8

102
102
100
101
102

76
68
66
64

106
105
105
106
106

136
137
138
137
139

156
158
163
167
189

120
128
130
141
149

120
124
122
127
133

1960
1961 «

323
303

317
297

97

10.3
10.1

102
101

62
61

106
106

140
139

189
193

152
155

135
136

1929

72

i Acreage harvested (excluding duplication) plus acreages in fruits, tree nuts, and farm gardens.
* Animal units of breeding livestock, excluding horses and mules.
* Includes buildings and improvements on land.
* Nonfarm inputs associated with farmers' purchases.
»Preliminary.
Source: Department of Agriculture.




292

92

T A B L E B—74.—Farm population, employment, and productivity, 1929—61
Farm population
(April 1) i

yflar
i ear

Net
migration to
and
As per- from
Num- cent of farms
ber
total (thou(thou- popu- sands) 8
sands) lation 2

Farm employment
(thousands)*

Farm output

Per
Family Hired unit
Total workers workers of
total
input

LiveCrop stock
proproduc- duction
per
Per man-hour
tion
per
breedacre 6
ing
Liveunit
Total Crops stock
Index, 1947-49=100

1929— 30,580

25.1

-477

12,763

9,360

3,403

76

54

51

76

79

84

1930—
1931—
1932....
1933—
1934—

30,529
30,845
31,388
32,393
32,305

24.8
24.9
25.1
25.8
25.6

-61
156
607
-463
-527

12,497
12,745
12,816
12,739
12,627

9,307
9,642
9,922
9,874
9,765

3,190
3,103
2,894
2,865
2,862

74
82
82
77
70

53
56
56
52
50

50
54
55
50
48

76
75
75
73
69

75
83
79
71
59

85
86
85
84
77

1935—
1936—
1937—
1938—
1939....

32,161
31, 737
31, 266
30,980
30,840

25.3
24.8
24.3
23.9
23.6

-799
-834
-661
-545
-703

12,733
12,331
11,978
11,622
11,338

9,855
9,350
9,054
8,815
8,611

2,878
2,981
2,924
2,807
2,727

82
73
87
87
84

57
53
62
64
64

57
50
60
63
63

70
73
73
76
79

76
65
88
85
85

84
86
87
91
91

1940—
1941....
1942—
1943—
1944—

30, 547
30, 273
29,234
26,681
25,495

23.1
-633
22.7 - 1 , 4 2 4
21.7 - 2 , 9 7 5
19.5 - 1 , 5 6 3
-564
18.4

10,979
10,669
10,504
10,446
10,219

8,300
8,017
7,949
8,010
7,988

2,679
2,652
2,555
2,436
2,231

85
88
95
93
96

67
71
78
78
81

67
71
78
76
79

80
82
88
92
90

88
90
99
92
96

92
98
98
94
92

1945—
1946—
1947—
1948—
1949—

25,295
26, 483
27,124
25,903
25,954

18.1
864
151
18.7
18.8 - 1 , 6 8 6
-371
17.7
17.4 - 1 , 3 1 4

10,000
10,295
10,382
10,363
9,964

7,881
8,106
8,115
8,026
7,712

2,119
2,189
2,267
2,337
2,252

96
99
96
104
100

84
91
92
104
104

85
92
91
104
105

91
94
97
99
104

95
101
95
106
99

96
94
97
99
104

1950—
1951
1952
1953
1954....

25,058
24,160
24,283
22,679
22,099

16.5 - 1 , 3 0 2
-271
15.7
15.5 - 1 , 9 9 6
-962
14.2
-25
13.6

9,926
9.546
9,149
8,864
8.639

7,597
7,310
7,005
6,775
6,579

2,329
2,236
2,144
2,089
2,060

100
100
104
106
107

112
114
126
131
140

114
112
125
129
138

107
114
117
120
124

97
98
104
103
101

105
109
110
114
112

1955—
1956—
1957—
1958.—
1959....

22,438
22,362
21,606
21,388
21,172

13.6
-435
13.3 - 1 , 1 3 4
-576
12.6
-548
12.3
12.0
(«)

8,364
7,820
7,577
7,525
7,384

6,347
5,899
5,682
5,570
5,459

2,017
,921
,895
,955
,925

111
112
114
123
123

149
158
168
188
195

148
161
180
203
202

130
136
138
144
156

106
109
112
126
123

113
117
119
124
128

7,118
6,990

5,249
5,104

L, 869
L, 886

125
127

206
210

220
225

159
167

130
134

130
135

I960— _ 7 20,541
19618..
(»)

7 11.4
(«)

C
O
(«)

i Farm population as denned by Department of Agriculture and Department of Commerce, i.e., civilian
population living on farms, both urban and rural, regardless of occupation, according to concept in use
prior to 1960.
» Total population of United States as of July 1, excluding Alaska and Hawaii; includes armed forces
abroad.
s Net change for year beginning in April, estimated by Department of Agriculture. For 1940 and subsequent years, includes inductions and enlistments into the armed forces, and persons returning from the
armed forces. For all years, includes persons who have not moved but who are in and out of the farm popu lation because agricultural operations have begun or have ceased on the place where they are living.
* Includes persons doing farm work on all farms. These data, published by the Department of Agriculture, Statistical Reporting Service, differ from those on agricultural employment by the Department
of Labor (see Table B-19) because of differences in the method of approach, in concepts of employment,
and in time of month for which the data are collected. For further explanation, see monthly report on
Farm Labor, September 10,1958.
» Computed from variable weights for individual crops produced each year.
• Not available.
* On the basis of i960 Census definitions, farm population for 1960 is 15,635,000, or 8.7 percent of total population. Comparable figures for earlier years are not yet available.
• Preliminary.
Sources: Department of Agriculture and Department of Commerce.




293

TABLE R-75.—Comparative balance sheet of agriculture, 7929-€2
[Billions of dollars]
Claims

Assets
Other physical assets
Beginning
of year

HouseProMahold DeposReal
chinReal
Invest- Total estate Other priefurtors'
Total estate
ery
its
U.S.
ment
Live- and Crops nishdebt debt equiand savings in coings
stock motor
ties
curand rency bonds operavehitives
iquipcles
ment 8

53.0
55.1
62.5
73.3
83.8

6.6

3.2

47.9
43.7
37.2
30.8
32.2

6.5
4.9
3.6
3.0
3.2

3.3
3.2
2.9
2.5
2.2

33.3
34.3
35.2
35.2
34.1

68.4

1935..
1936..
1937..
1938-.
1939..
1940._
1941..
1942..
1943..
1944..

(3)

48.0

1929..
1930..
1931..
1932..
1933..
1934..

Financial assets

3.5
5.2
5.1
5.0
5.1

2.2
2.4
2.6
3.0
3.0

33.6
34.4
37.5
41.6
48.2

5.1
5.3
7.1
9.6
9.7

3.1
3.3
4.0
4.9
5.3

2.7
3.0
3.8
5.1
6.1

2.5

4.0

0.6

9.8
68.4

8
8

9.6
9.4
9.1
8.5
7.7

3.8

7.6
7.4
7.2
7.0
6.8

V /

8

<*>

4.3
4.3
4.5
4.6
4.6

53.0
55.1
62.5
73.3
83.8

6.6
6.5
6.4
6.0
5.4

43.0
44.7
52.0
63.3
74.9

93.1
102.0
113.9
125.2
132.1

4.9
4.8
4.9
5.1
5.3

84.8
94.0
105.4
115.9
120.7

1945
1946
1947
1948
1949

93.1
102.
113.9
125.2
132.1

53.9 9.0
61.0 9.7
68.5 11.9
73.7 13.3
76.6 14.4

6.3
5.2
5.1
7.0
9.4

6.7
6.3
7.1
9.0
8.6

4.7
4.8
5.4
6.2
7.0

1950.
1951.
1952.
1953.
1954.

130.8
149.6
165.6
162.9
159.7

75.3
86.8
96.0
96.6
94.7

12.9
17.1
19.5
14.8
11.7

11.3
13.0
15.2
15.6
16.3

7.6
7.9
8.8
9.0
9.2

7.8
8.7
9.5
10.2
10.8

2.1
2.3
2.5
2.7
2.9

130.8
149.6
165.6
162.9
159.

5.6
6.1
6.7
7.3
7.8

118.3
136.5
151.0
146.8
142.6

1955
1956
1957
1958
1959

164.7
168.0
176.2
185.8
201.9

98.8
102.7
109. 5
116.3
125.1

11.2
10.6
11.0
13.9
17.7

16.2
16.5
17.1
17 0
17.7

8.3
8.3
7.6
9.3

11.4
11.9
12.4
12.8
13.1

3.1
3.3
3.4
3.6
3.8

164.
8.3
168.0 9.1
9.9
176.
185.8 10.5
201.9 11.3

146.9
149.1
156.7
165.6
178.6

I960..
1961.

202. S 129.1 15.5
204. 130.6 15.5

18.6
18.1

7.9
8.1

13.5
13.7

4.1
4.3

202.9 12.3
204.1 13.1

178.8
178.7

New basis *
1960
1961
1962 5

>
?04 8 134.8 15 f
?06 1 136.5 15
3
211 3 140.6 ()

18 6
18 1

7q
81

10 1
10 3

91
.
8.7

4.7
4.6

1
4 1 ?04 8 1? 3 1 8 180 7
4 3 ?06 1 13 1 1? 3 180 7
211. 3 14.0 13.2 184. 1

1
Includes all crops held on farms for whatever purpose and crops held off farms as security for Commodity
Credit Corporation loans. The latter on January 1,1961, totaled $648 million.
2
Estimated valuation for 1940, plus purchases minus depreciation since then.
3
Not available.
4
Tentative estimates based on revisions in process as a result of the 1959 Census of Agriculture.
5
Preliminary.
Source: Department of Agriculture.




294

INTERNATIONAL STATISTICS
TABLE B-76.—United States balance of payments, 1956-61 l
[Millions of dollars]

Type of transaction

JanuarySeptember
1957

1956

1958

1959

1960
1960

1961

Recorded transactions other than changes
in monetary gold stock and in liquid
liabilities:
United States payments: Total
Imports of goods and services: Total..
Merchandise, adjusted
Transportation
Travel
Miscellaneous services
Military expenditures
Income on investments:
Private
Government
Unilateral transfers, net: Total
Government grants
_____
Remittances and pensions
United States capital, net: Total....
Private, net: Total
Direct investments, net
New issues
_
_
Redemptions
0 ther long-term, net
Short-term, net
Government, net* Total
Long-term capital, outflow..
Repayments
Short-term, net
United States receipts* Total

22,121

25,846

27,374

27,206

28,689

30,781

22,788

19,829

20,923

21,053

23,537

23,327

17,900

17,102

12,804
1,408
1,275
807
2,955

13,291
1,569
1,372
873
3,165

12,951
1,636
1,460
918
3,412

15,294
1,759
1,610
935
3,109

14,722
1,942
1,744
942
3,048

11,237
1,516
1,416
708
2,321

10,550
1,455
1,441
776
2,245

426
154

452
201

537
139

549
281

597
332

438
264

436
199

2,398

2,318

2,338

2,424

2,489

1,828

2,087

1,733
665

1,616
702

1,616
722

1,633
791

1,641
848

1,210
618

1,445
642

3,619

4,133

3,815

a 2,728

4,965

3,060

2,932

2,990

3,175

2,844

2,375

3,856

2,299

2,494

1,859
453
— 174
324
528

2,058
597
-179
441
258

1,094
955
-85
574
306

1,372
624
-95
397
77

1,694
573
-100
377
1,312

961
472
-69
233
702

1,194
388
-61
141
832

629

958

971

545
-479
563

993
-659
624

24,281

27,161

Exports of goods and services: Total.. 23,705
Merchandise, adjusted
17,379
1,642
Transportation
705
Travel
Miscellaneous services
_. 1,210
158
Military transactions
Income on investments:
2,120
Direct investments
297
Other private
194
Government
Foreign investments in the United
576
States, other than liquid funds, netBalance on recorded transactions [net
-1,565
receipts or net payments (—)]
Unrecorded transactions—errors and omis643
sions [net receipts or net payments (—)]...

26,733

Increase in liquid liabilities to foreign countries and international institutions

1,109

761

438

1,213
-631
527

825
-450
386

1,231
-1,006
213

23,298

24,418

27,500

20,265

21,134

23,325

23,709

27,300

19,974

20,662

19,390
1,999
785
1,306
372

16,263
1,672
825
1,347
296

16,282
1,646
902
1,534
302

19,409
1,816
968
1,567
335

14,277
1,374
752
1,139
250

14,591
1,321
737
1,197
340

2,313
363
205

2,198
417
307

2,228
466
349

2,338
518
349

1,602
376
204

1,801
460
215

428

-27

709

200

291

472

-4,271 -3,281

- 2 , 523

-987

1,228

United States gold sales or purchases (—)

»353

1,176 2 1,051
-544 -1,054
339
356

-306

-213 -3,908
380

528

-648

-196

-184

263

1,253

2 3,012

2,227

1,938

886

-798

2,275

2 731

1,702

781

285

748

* Excludes transfers of goods and services under military grant programs.
» Excludes $1,375 million for increase in United States subscription to the International Monetary Fund,
of which $344 million was paid in gold and $1,031 million in non-interest-bearing notes.
Source: Department of Commerce.




295

T A B L E R-77.—Major

U.S. Government foreign assistance, by type and by area, total
period and fiscal years 1958-61

postwar

[Fiscal years, billions of dollars]

Fiscal year

Total, net
Total postwar 1
1958
1959
I960
,
1961

Total

--

Investment in five international financial institutions 4
Total postwar 1___
1958--1959
_
I960-1961

84.7
4.8
6.0
4.2
4.0

Western
Europe
(excluding
Greece
and
Turkey)

Near East
(including
Greece
and
Turkey)
and South
Asia

39.5
1.1
.7
.4
-.1

12.6
1.3
1.5
1.5
1.6

Other
Africa

0.8
.1
.1
.2
.2

International orFar East American ganizaand
Repub- tions and
unspeciPacific
lics
fied areas

20.0
1.7
1.5
1.5
1.5

3.4
.4
.6
.3
.4

8.4
.2
1.6
.4

4.9

4.9

1.4
.1
1

1.4
.1
.1

Under assistance programs, net
Total postwar *
1958
1959
I960
1961

79.8
4.8
4.7
4.1
3.9

39.5
1.1
.7
.4
-.1

12.6
1.3
1.5
1.5
1.6

.8
,1
.1
.2
.2

20.0
1.7
1.5
1.5
1.5

3.4
.4
.6
.3
.4

Net grants of military supplies
and services
Total postwar 1
1958
1959
.
1960
1961

28.8
2.3
2.2
2.0
1.7

14.7
.8
.7
.8
.6

4.5
.6
.5
.4
.3

.1

8.6
.8
.8
.7
.7

.6
.1
.1
.1
.1

Other aid, net
Total postwar l
1958
1959
I9601961
_ __

51.0
2.5
2.4
2.1
2.2

24.8
.4
-!6

8.1
.7
.9
1.1
1.3

.7
.1
.1
.2
.2

11.4
.9
.7
.7
.8

2.8
.3
.6
.2
.3

3.1
.2
.2
.2
.3

35.9
1.5
1.6
1.6
1.8

17.0
.2
.1
.2
.1

4.8
.3
.5
.4
.6

.4

10.3
.8
.7
.7
.7

.9
.1
.1
.1
.1

2.4
.1
.1
.1
.2

12.2
.6
.7
.1

7.1
.2
-.1
-.4
-.7

1.8
.1
.2
.3
.4

.3

.9
.1

1.8
.2
.5
.1
.2

_ _

Net grants (less conversions)
Total postwar l 1958
1959
I960
1961
Net credits (including conversions)
Total postwar *
1958
1959
I960
1961
Other assistance (through
net accumulation of foreign currency claims) 4
Total postwar i_.
1958
1959
1960
1961

(J)

.2

(3)

(3)'

1

3.4
.2
.2
.2
.3

.3
(3)

(3)

(3)

3.0
.3
.2
.4
.4

.6
( }

3

-.1

1.5
.2
.2
.3
.3

1?

.2

.3

s 1

(3)
(3)
(3)'

1 Fiscal years 1946-61.
2 Inter-American Development Bank, International Bank for Reconstruction and Development, International Development Association, International Finance Corporation, and International Monetary
Fund.
3
Less than $50 million.
« Other assistance (net) represents the transfer of United States farm products in exchange for foreign
currencies, less the U.S. Government's disbursements of the currencies as grants, credit, or for purchases.
Source: Department of Commerce.




296

TABLE B—78.—United States merchandise export and imports, by economic category, 1949 and
1956-61
[Millions of dollars]

Category

1949

1956

1957

1958

1959

1960

JanuarySeptember
1960

Domestic exports: Total *
Agricultural
NonagriculturaL.
Food and beverages
Agricultural foodstuffs
Nonagricultural foodstuffs.
Industrial supplies and materials
Cotton, tobacco, and other agricultural
Nonagricultural industrial materials
Materials used in farmingCapital equipment.
Machinery and related items
Commercial transportation
equipment
Special category equipment2—._
Consumer goods, nonfood
Government military sales and unclassified
General imports: Total
Industrial supplies and materials
Petroleum and products
Newsprint and paper base stocks.
Materials associated with nondurable goods output
Selected building materials (excluding metals)
All other industrial supplies and
materials (associated mainly
with durable goods output)
Food and beverages
Materials used in farmingConsumer goods, nonfoodCapital equipment (including agricultural machinery)
All other and unclassified.

1961

11,789

17,183

19,316

16,202

16,211

19,351

14,241

14,526

3,578
8,211

4,170
13,013

4,506
14,810

3,854
12,348

3,955
12,256

4,824
14, 527

3,392
10,849

10,957

2,302
2,254
48

2,744
2,702
42

2,738
2,696
42

2,549
2,511

2,796
2,751
45

3,096
3,053
43

2,224
2,196

4,870

7,281

6,110

7,797

1,088

1,653

5,022

6,144

300

331

38
1,720

6,404

28
5,753

2,341
2,315
26
5,654

1,273

1,360

3,597

5,921

167

297

303

3,378
2,296

5,271
3,568

5,931
4,028

5,328
8,667

5,363
3,706

6,356
4,109

241
4,737
3,026

4,935
3,323

918
164

1,454
249

1,626
277

1,423
238

1,369
288

1,789
458

1,371
340

1,148
464

913

1,314

1,333

1,271

1,274.

950

1,006

428

387

1,262

159

276

6,622

12,615

3,727
485
670

7,299
1,282
1,093

7,201
1,534
1,032

991

1,321

1,301

143

487

1,438

3,116

5,142

12,982 312,834

407

1,115
4,638

1,170
4,484
251

339

448
15,207

14,654

11,179

10,535

6,585
1,610
988

8,021
1,536
1,089

7,593
1,547
1,099

5,843
1,141

5,417
1,254

1,161

1,556

1,489

813

435

603

540

2,927

2,391

3,237

2,004

3,175

3,354

286

380

366

808

1,158

1,067

424

400

2,918

2,307

1,888

3,364

3,211

2,416

2,405

366

353

271

294

410

1,260

1,524

1,710

2,424

2,453

1,860

1,555

107

368

412

481

618

605

466

527

237

290

371

414

439

323

337

i Excludes military aid shipments of supplies and equipment under the Mutual Security Program,
1956-61; in 1949, excludes military shipments under the Greek-Turkey and the China military aid programs.
3
Excludes Government military cash sales.
1
Total adjusted to exclude $33 million of the value reported b y economic category.
Source: Department of Commerce.




297

TABLE B-79.—United States merchandise exports and imports, by area, 1949 and 1956-61
[Millions of dollars]
January-October
Area

1949

1956

1957

1958

1959

1960
1960

Exports (Including reexports):
Total i

11, 560

17, 015

18,990

Canada
Other Western HemisphereWestern Europe
Other Europe
Asia..
Oceania
Africa

1,928
2,820
3,980
65
1,997
175
594

4,035
4,008
5,216
18
2,801
249
688

3,935
4,848
5,748
91
3,391
282
695

General imports: Total
Canada
_.
Other Western HemisphereWestern Europe
Otjher Europe
Asia
Oceania
Africa

6,622
U 512

2,483
909
72
1,184
125
338

15, 919 15, 915 18, 834

15, 485

15, 772

3,438
4,334
4,509
118
2,658
245
618

3,743
3,777
4,530
96
2,755
323
691

3,707
3,755
6,299
207
3,627
475
765

3,123
3,141
5,128
153
2,922
386
632

3,033
3,042
5,173
133
3,387
338
667

12, 615 12, 982 »12, 834

15, 207

14, 654

12, 336

11, 874

3,042
4,029
4,523
85
2,603
338
589

2,902
3,964
4,184
83
2,721
266
535

2,430
3,326
3,514
71
2,302
237
456

2,543
3,086
3,288
69
2,112
268
506

2,894
3,962
2,890
73
1,996
203
597

2,907
4,141
3,077
69
1,985
216
587

2,684
4,049
3,297
68
1,997
209
561

1 Excludes special category items.
2
Total adjusted to exclude $33 million of the value reported by area.
Source: Department of Commerce.




1961

298

T A B L E B—80.—Estimated gold reserves and dollar holdings of foreign countries and international
organizations, 1949 and 1956-61
[Millions of dollars; end of period]
1961
Area and country

1949

1956

1957

1958

1959

1960
September l

Total

18,677

32, 489 32, 565 36, 543 42,237

46, 371

'48,267

6,101 14,008 14, 683 17,244 19, 254 21,058
92
377
460
612
630
539
820 1,054
1,053
1,391
1,279
1,314
713 1,557
944 1,294
1,980
2,165
149 3,343 4,113
4,407
4,640 6,450
564 1,270
1,533
2,209
3,119
3,080
370
983
957 1,399
1,634
1,783

23,071
527
1,479
3,019
6,403
3,376
1,807

Continental Western Europe
Austria
Belgium
France
Germany
Italy
Netherlands
Scandinavian countries (Sweden,
Norway, Denmark, and Finland)..
Switzerland
Other

394
2,067
932

882
2,643
1,899

United Kingdom

2,027

3,015

1,516

2,986

3,078
418
510
101
138
463
270
82
236
517
343

4,314
370
550
138
210
514
604
119
260
1,061
488

2,008
356
1,652

3,400
1,149
2,251

Canada
Latin America
Argentina
Brazil
Chile
Colombia
Cuba
Mexico
Peru
Uruguay
Venezuela
Other
Asia
Japan
Other
All other countries
International

..

_.

1,121
2,853
1,958

1,113
2,991
1,868

941
2,957
1,829

1,145
3,263
2,052

3,080

3,917

3,813

4,887

5,302

3,180

3,438

3,610

3,770

4,040

4,544
263
457
116
215
525
569
88
236
1,556
519

4,123
210
464
140
241
452
565
96
262
1,215
478

4,014
393
479
228
288
296
587
111
242
932
458

3,645
420
483
180
237
79
541
114
232
797
562

3,698
446
552
178
223
46
536
124
230
847
516

2,937
716
2,221

3,251
1,095
2,156

4,008
1,566
2,442

4,444
2,169
2,275

4,247
1,956
2,291

980
2,813
1,830

679

1,231

1,222

1,199

1,313

1,273

1,302

3,268

3,535

2,919

3,371

6,225

7,294

6,607

1
Preliminary.
NOTE.—Includes gold reserves and dollar holdings of all foreign countries (with the exception of gold
reserves of U.S.S.R., other Eastern European countries, and Communist China), and of international organizations (International Bank for Reconstruction and Development, International Monetary Fund,
United Nations and others). Holdings of the Bank for International Settlements and the European
Payments Union/European Fund and the Tripartite Commission for the Restitution of Monetary Gold
are included under "other" Continental Western Europe.
Source: Board of Governors of the Federal Reserve System.




299

T A B L E B-81.—Price changes in international trade,

1954-61

[1953=100]
1961
Area or commodity class

1954

1955

1956

1957

1958

1959

1960

Third
quarter
Area:
Developed areas:
Exports
Terms of trade

98
98

98
98

101
99

104
98

101
102

99
104

100
105

101
107

Underdeveloped areas:
Exports
Terms of trade i

102
106

102
105

101
102

101
98

97
98

93
96

94
96

92
95

Latin America:
Exports.
Terms of trade *

106
111

99
102

98
99

96
94

89
89

83
84

85
85

>85
»87

105
110

97
100

96
96

93
91

84
84

78
78

80
.1
8

>80
>82

Manufactured goods
Nonferrous base metals...

98
99

99
119

103
123

106
100

106
90

106
99

109
102

110
102

Primary commodities: Total
Excluding crude petroleum

103
103

100
99

101
100

102
101

96
94

94
93

93
93

91
90

Foodstuffs
Coffee, tea, cocoa
Cereals

107
136
89

96
103
87

97
100
86

98
97
83

94
94
82

89
80
80

88
76
79

85
69
81

Other agricultural commodities
Fats, oils, oilseeds
Textiles
Wool

100
98
101
95

102
92
95
86

101
99
92
87

101
95
97
98

90
94
69

94
98
75
73

96
92
80
74

92
88
82
75

99
96

102
103

109
110

114
107

108
100

103
99

101
101

100
102

1

Latin America excluding petroleum:
Exports
Terms of trade !
Commodity class: 3

Minerals
Metal ores

78

1
Terms of trade indexes are unit value indexes of exports divided by unit value indexes of imports.
2 Data are for second quarter.
Manufactured goods indexes are for exports. Primary commodities indexes are for exports and imports
combined.
NOTE.—Data shown for area groups and for manufactured goods are unit value indexes,
All others
are price indexes.
Data exclude trade of Soviet area and Communist China.
Source: United Nations.
3




3OO
U.S. GOVERNMENT PRINTING OFFICE: 1962

O—621876










!

N

1

]

1 I'

:

1\

l

'1

I

i

! I

1

1

!l
,
||

•

>'

i

!

:"'

' ' .•j
1
; ' i^

? .

i

f

-

1 i 1 i '' s i , ' i

\ j

!

'

1

(

• !

,

1

' ''

in '

'

II"

;

iij

!

1

! I1 'I ::;'! i!

1'

3 8888 0000 0606 8

!

! '

11

$

FRB of St. Louis Research Librai
!

1
!

'!

1

[' ' i !

tj

1
| :; , I

hi

ii

'

:

M '' i

J
i
1
ij

j

'

•ji ••'• !•

1 :

I

4

1

| M i l !

[: r .
!

1 • M" ' ::
'
'

|; | j- j;
- r

S i| '

'

ii

I

i

•• i i

Pi I:

i' ' : i
; !

' i !'" 1

: ;jj
!

i

i !

! j

<
j

i




j 1 !
\

j