Full text of Economic Report of the President : 1978
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ECONOMIC
TRANSMITTED TO
THE CONGRESS
JANUARY 1378
TOGETHER WITH
THE ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS
Economic Report
of the President
Transmitted to the Congress
January 1978
TOGETHER WITH
THE ANNUAL REPORT
OF THE
COUNCIL OF ECONOMIC ADVISERS
UNITED STATES GOVERNMENT
WASHINGTON
:
1978
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington,D.C. 20402
Stock Number 040-000-00389-4
CONTENTS
Page
ECONOMIC REPORT OF THE PRESIDENT
1
ANNUAL REPORT OF THE COUNCIL OF ECONOMIC
ADVISERS*
CHAPTER
1.
PROGRESS
DURING
1977—THE
THIRD
25
YEAR OF
RECOVERY
35
CHAPTER 2. ECONOMIC OUTLOOK AND POLICY
73
CHAPTER 3. T H E WORLD ECONOMY—A HESITANT RECOVERY
96
CHAPTER 4. INFLATION AND UNEMPLOYMENT
138
CHAPTER 5. MAJOR ECONOMIC POLICY ISSUES OF 1977
179
APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OF
THE COUNCIL OF ECONOMIC ADVISERS DURING 1977
APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EMPLOYMENT, AND PRODUCTION
* For a detailed table of contents of the Council's Report, see page 29.
Ill
239
251
ECONOMIC REPORT
OF THE PRESIDENT
ECONOMIC REPORT OF THE PRESIDENT
To the Congress of the United States:
I will be working closely with the Congress in 1978 to enact a program
addressed to the immediate and the long-term needs of our economy. I am
proposing tax reductions and reforms to continue our strong economic
recovery, to encourage increased investment by American businesses, and
to create a simpler and fairer tax system. I am seeking legislation to address the special problems of the disadvantaged and the unemployed.
And I am taking new steps to combat inflation.
This report to the Congress on the condition of the economy sets
forth the overall framework within which my economic proposals were
formulated. It outlines, for you and for the Nation, my economic priorities
for the years ahead and my strategies for achieving them.
I have begun from the premise that our economy is basically healthy,
but that well-chosen Government policies will assure continued progress
toward our economic goals.
Last year more than four million new jobs were created in our country—an all-time record—and unemployment was reduced by more than
one million persons. Output rose by almost 6 percent, and the benefits of
this large increase were widely shared. The after-tax income of consumers,
adjusted for inflation, rose substantially during 1977. Wages of the typical American worker increased by more than the rise of prices, and business profits also advanced.
The American economy is completing three years of recovery from the
severe recession of 1974—75. Recovery in most other nations has lagged
far behind our own. In the economies of our six major trading partners,
seven million persons were unemployed at year's end—more than at the
depths of the 1974-75 recession. Our inflation rate is also lower than in
most other nations around the world. We have a great many accomplishments. But much progress remains to be made, and there are problems
to be dealt with along the way.
The recession of 1974-75 was the worst in 40 years, and the substantial increase in output over the past three years still leaves the economy
operating below its productive potential. We cannot be content when
almost 6/ 2 million people actively seeking jobs cannot find work, when
3% million workers take part-time jobs because they cannot find fulltime employment, and when one million people have stopped looking
for a job because they have lost hope of finding one. We cannot be content when a substantial portion of our industrial plant stands idle, as it
does today.
We cannot be satisfied with an economic recovery that bypasses significant segments of the American people. Unemployment among minorities is more than twice as high as that among whites—and unemployment
among minority teenagers is tragically high. Women have fewer satisfying job opportunities than men, and older Americans often find their
access to the job market blocked. Farm incomes have dropped
precipitously.
We must also address other problems if we are to assure full restoration of prosperity. Inflation is a serious economic concern for all Americans. The inflation rate is too high and must be brought down.
Moreover, a residue of unease and caution about the future still pervades
the thinking of some of our people. Businesses are still hesitant in their
long-term investment planning, and the stock market remains depressed
despite the substantial increase in business profits.
The economic difficulties that we face in the United States also confront most nations around the world. Our mutual problems are the legacy of the trauma suffered by the world economy during the early 1970s.
The massive escalation of oil prices since 1973 continues to impose great
burdens on the world economy. Oil imports drain away the purchasing
power of oil-importing nations and upset the international balance of
payments.
Many foreign governments have been reluctant to adopt policies
needed to stimulate economic growth because they are concerned that
inflationary pressures might be renewed or that their balance of international payments might be worsened. Abroad, as well as at home, concerns
about the future have deterred business investment in new plants and
equipment. As a consequence, economic growth has stagnated in many
countries, and the rise in the capital stock needed to increase productivity,
raise standards of living, and avoid future inflationary bottlenecks is not
occurring.
The problems we face today are more complex and difficult than those
of an earlier era. We cannot concentrate just on inflation, or just on
unemployment, or just on deficits in the Federal budget or our international payments. Nor can we act in isolation from other countries. We
must deal with all of these problems simultaneously and on a worldwide
basis.
Our problems cannot be solved overnight. But we can resolve them
if we fix our sights on long-term objectives, adopt programs that will
help us to realize our goals, and remain prepared to make adjustments as
basic circumstances change.
In making my decisions on tax and budget policies for fiscal 1979, and
in planning more generally for our Nation's future, I have been guided
by four objectives for our economy that I believe our Nation should
pursue.
We must continue to move steadily toward a high-employment economy in which the benefits of prosperity are widely shared. Progress in
reducing unemployment of our labor and capital resources must be sure
and sustainable. Over the next several years I believe we can increase
our real output by 4 / 2 to 5 percent per year, and reduce unemployment
by about one-half of a percentage point each year. An especially high
priority is to increase job opportunities for the disadvantaged, particularly for black and Spanish-speaking Americans, and to deal more effectively with local pockets of unemployment, such as those in urban areas.
We should eliminate unfair advantages through reform of the tax system, and restructure our welfare system to assure that the fruits of economic growth are enjoyed by all Americans.
We should rely principally on the private sector to lead the economic
expansion and to create new jobs for a growing labor force. Five out of
every six new jobs in the economy are created in the private sector. There
are good reasons for continuing to rely mainly on the private sector in the
years ahead. By emphasizing the creation of private jobs, our resources
will be used more efficiently, our future capacity to produce will expand
more rapidly, and the standard of living for our people will rise faster.
Reliance upon the private sector does not mean neglecting the tasks that
government can and must perform. The Federal Government can be
an active partner to help achieve progress toward meeting national needs
and, through competent management, still absorb a declining portion of
the Nation's output.
We must contain and reduce the rate of inflation as we move toward
a more fully employed economy. Inflation extracts a heavy toll from
all Americans, and particularly from the poor and those on fixed incomes.
Reducing inflation would benefit us all. A more stable price environment would make it easier for business firms and consumers to plan
for the future. Thus, reduced inflation would substantially enhance our
chances to maintain a strong economic expansion and return to a high-
employment economy. In the years ahead we must seek to unwind the
inflation we have inherited from the past and take the steps necessary
to prevent new inflationary pressures as we approach high employment.
We must act in ways that contribute to the health of the world economy. As the strongest economy in the world, the United States has unique
responsibilities to improve the international economic climate. The wellbeing of the United States depends on the condition of other nations
around the world. Their economic destiny is, in turn, shaped by ours.
The United States can retain its stature in the world only by pursuing
policies that measure up to its role as a leader in international economic
affairs.
These four economic objectives are sufficiently ambitious to constitute
a serious challenge, but sufficiently realistic to be within our reach. A
well-designed program will permit us to achieve them. The principal
elements of my economic strategy are:
• Adopting promptly an effective national energy program;
• Managing Federal budget expenditures carefully and prudently,
so that we can meet national needs while gradually reducing the
share of our national output devoted to Federal spending;
• Using tax reductions to ensure steady growth of the private economy
and reforming the tax system to make it fairer, simpler, and more
progressive;
• Working to reduce the Federal deficit and balance the budget as
rapidly as the developing strength of the economy allows;
• Improving existing programs and developing new ones to attack the
problem of structural unemployment among the disadvantaged;
• Promoting greater business capital formation in order to enhance
productivity gains, increase standards of living, and reduce the
chances that capacity shortages would inhibit expansion later on;
• Adopting more effective programs to reduce the current rate of inflation and prevent a re acceleration of inflation as we approach
high employment; and
• Pursuing international economic policies that promote economic
recovery throughout the world, encourage an expansion of world
trade, and maintain a strong international monetary system.
Prompt Adoption of the National Energy Plan
It has now been over four years since our economy was buffeted by the
oil embargo and its aftermath of sharply increased oil prices. The massive
oil price increase in 1973-74 contributed to the double-digit inflation of
1974 and to the worst recession in 40 years. It is a primary factor today
behind the large deficit in our international balance of payments. Yet the
United States still has not enacted a comprehensive and effective energy
policy.
Our dependence on imported oil is sapping the strength of the American economy. Last year our imports of oil reached a total of about $45
billion, compared with $8/ 2 billion in 1973. The increased expenditures
on those imports have been like a sudden and massive tax imposed on the
American people. Only part of the revenues have been returned to the
United States in the form of higher exports of American goods to oilproducing countries. As a consequence, that "tax" has become a major
obstacle to economic growth.
The huge deficit in foreign trade arising from our oil imports has contributed to the fall in the value of the dollar abroad. The dollar's decline
has raised the cost of the goods we import and contributed to inflation.
Our deficit also has unsettled international monetary markets, with adverse consequences for our international trading partners. Our response
to the energy crisis is therefore a central element in our international and
domestic economic policy. The energy program will not solve our problems at once, but it will pave the way for a balanced foreign trade
position and a strong and sound dollar.
Our energy problems will worsen in the years to come unless we curb
our appetite for oil and gas. Without decisive action, we will put additional pressure on the world oil market, aggravate inflationary pressures
at home, and increase our vulnerability to the threat of oil supply disruptions. Together, these forces could severely limit the potential for continued economic progress over the coming decade.
The United States has no choice but to adjust to the new era of expensive energy. We can only choose when and how. If we act today, we
have time to make a gradual transition to more efficient energy use—
by conserving energy, increasing domestic energy production, and developing alternative sources of energy. If we delay, adjustment later will
be harsh and painful, requiring draconian measures to accomplish what
can now be done gradually and with far less anguish.
The energy problem we face is enormously complex. Finding an acceptable and effective solution has not been easy for me or for the Congress. I look forward to working closely with the Congress early this year
to assure a speedy resolution. An acceptable bill must satisfy the following
principles:
• First, the program must effectively reduce our consumption of
limited energy supplies—oil and gas—while encouraging energy
production and promoting a transition to the use of resources that
are more abundant.
• Second, the program must be fair. No segment of the population
should bear a disproportionate share of the cost or burden of adjustment, and no industry should reap unnecessary and undeserved
windfall gains.
• Third, the program must be consistent with our overall economic
strategy. It must neither undermine our efforts to continue the recovery nor obstruct achievement of our long-term budgetary goals.
Dealing with the energy problem is a difficult test for our Nation. It
is a test of our economic and political maturity. Our people would
surely react if there were an immediate crisis. But I am asking them to
undertake sacrifices to prevent a crisis. If we fail to act today, we will
bring a crisis upon ourselves and our children in years to come.
Careful Management of Federal Budget Expenditures
My Administration has given high priority to making more effective
use of limited Federal resources. In fiscal 1976, Federal outlays amounted
to 22/ 2 percent of the Nation's gross national product. This is considerably higher than the share devoted to government spending that prevailed for many years. To some degree, the recent higher share reflects
the fact that the economy is still performing below its capacity, and
that Federal programs to support the unemployed and the needy are
larger than they would be in a high-employment economy. But it also
stems from very rapid growth in a number of Federal programs instituted
over the past 10 to 15 years.
Most of our Federal expenditure programs are designed to achieve important national goals that the private sector of the economy cannot accomplish. Only the government can provide for the national defense,
and government resources are essential to cushion the hardships created
by economic recession, to preserve our national resources, to protect the
environment, and to meet other critical needs.
The Federal Government has a particular obligation to provide assistance to those who remain in need even during good times. Last year I
presented to the Congress a program to reform the welfare system—the
Better Jobs and Income Act of 1977—that is a concrete example of our
commitment to devote resources to the most pressing national needs. My
program will cost money. But it also will establish a more easily understood welfare system that is less costly to administer, less subject to abuse,
and more responsive to the true needs of those who receive a helping hand
from government. This program will create up to 1.4 million jobs for
those able to work, and it will replace the patchwork of Federal, State,
and local programs with a consistent income-support system that will
relieve much of the enormous burden now placed on State and local
governments.
In the management of a business enterprise, efficiency is enforced by
the discipline of the market place. The collective judgments of millions of
consumers establish an environment in which waste and efficiency are
eventually penalized. The government, however, is not subject to that
discipline. We in government must therefore impose stringent controls on
ourselves to ensure greater efficiency and to make better choices among
the possible uses of the taxpayers' money.
To assist us in this endeavor, I have adopted methods of budgetary
control that have been tested in the business community. Early last year
I asked the Office of Management and Budget to inaugurate a system of
zero-based budgeting throughout the Federal Government. Within this
budgetary system, every Federal program is given careful scrutiny—no
matter how large or how small it may be, no matter how long it has been
in existence or how recently established. This new system of budgetary
planning helped to hold down less essential outlays in the budget for fiscal
1979 and focus our resources on our important national needs. It will
produce even greater savings in subsequent years. A process of multiyear budgeting also has been inaugurated within the Federal Government that will require tentative budget plans to be developed and reviewed for three years ahead. With this system we can more effectively
control future expenditures—by avoiding commitments now to endeavors
that would grow in the future beyond the proportions we desire.
In formulating my recommendations for the 1979 budget, I have exercised very strict controls over spending. Adjusted for inflation, the increase in outlays has been held to less than 2 percent and the share of
Federal expenditures in GNP will fall to 22.0 percent. I intend to
continue prudent expenditure controls in the future. With good management we can, I believe, achieve our Nation's important social goals
and still reduce over time the share of gross national product committed
to Federal expenditures to about 21 percent.
Using Tax Reductions to Promote Steady Economic Expansion
I propose to rely principally upon growth in the private sector of the
economy to reduce unemployment and raise incomes. Special Federal
efforts will, of course, be necessary to deal with such problems as structural unemployment, but tax reductions will be the primary means by
which Federal budget policy will promote growth. Careful mange-
ment of budget outlays and a growing economy should permit substantial
reductions in the years ahead. Tax reductions will be needed to strengthen
consumer purchasing power and expand consumer markets. Stable
growth in markets, together with added tax incentives for business, will
lead to rising business investment and growing productivity.
As inflation and real economic growth raise the incomes of most
Americans, they are pushed into higher income tax brackets. The tax
burden on individuals is raised just as if higher rates had been enacted.
The payroll taxes levied on workers and business firms for social security
and unemployment insurance will also increase substantially over the
years ahead. These are very large increases, but they are needed to keep
our social security and unemployment insurance systems soundly financed.
Between 1977 and 1979, taxes on businesses and individuals will rise
very sharply as a result of these several factors. Even though our economy
is basically healthy, this increasingly heavy tax burden would exert a
mounting drag on economic growth. It must, therefore, be counteracted
by tax reductions. The magnitude and timing of the reductions should be
designed to maintain economic growth at a steady pace, taking into
account the effects both of the growing tax burden and of other factors
at work in the economy.
Consistent with this strategy, I am proposing a $25 billion program of
net tax reductions accompanied by substantial tax reforms.
Individual income taxes will be reduced primarily through across-theboard reductions in personal tax rates, with special emphasis on low- and
middle-income taxpayers. Personal taxes also will be simplified by my
proposal to replace the existing personal exemption and credit with a tax
credit of $240 for each person in the taxpayer's family.
There also will be important reforms that will improve the individual
income tax system and raise substantial revenues, enabling me to recommend larger personal tax reductions.
Overall, I am proposing personal tax reductions of $24 billion, offset
by $7 billion in tax reforms. These tax cuts, which will take effect next
October 1, will significantly improve the progressivity of the tax system.
The typical four-person family with $15,000 in income will receive a tax
cut of $258—or more than 19 percent. As a result of the changes I
am recommending, filling out tax returns will be simpler for many people.
Individuals also will benefit from reductions I have proposed in the
Federal excise tax on telephone bills, and in the Federal payroll tax for
unemployment insurance. These two proposals will add about $2 billion
to consumers' purchasing power that will be realized principally through
lower prices.
10
Business taxes will be reduced by more than $8 billion in 1979 under
my tax program, offset partially by more than $2 billion in business tax
reforms for a net tax reduction of nearly $6 billion. I have recommended
that the overall corporate tax rate be reduced on October 1 from the
current 48 percent to 45 percent, and be cut further to 44 percent in
1980. I also recommend that the existing 10-percent investment tax
credit be made permanent, and that the benefits of this credit be extended
to investments in industrial and utility structures. My proposal will
enable businesses to use the investment tax credit to offset up to 90 percent
of their Federal tax liability, compared with the 50-percent limit now
imposed.
Important new tax reforms also will affect businesses. I am, for example, proposing to reduce the deductibility of a large class of business entertainment expenses. I have also proposed changes in the tax status of
international business transactions that are of significant cost to taxpayers
but that benefit the public insufficiently.
Because tax reform measures will raise $9 billion in revenue, it has
been possible for me to recommend $34 billion in overall tax reductions
while keeping the net loss in revenues to $25 billion, the level I believe is
appropriate given the state of our economy and the size of the budget
deficit.
These proposals do not include any adjustment to take account of
congressional action on my energy proposals. I proposed last April that
the Congress pass a wellhead tax and rebate the proceeds of that tax
directly to the American people. This is the best course to follow because
it protects the real incomes of consumers and avoids a new source of fiscal
drag. If the final energy bill includes a full rebate of the net proceeds of
the wellhead tax, no further action on my part will be necessary. However, if the final bill allows for a rebate only for 1978—as provided in the
House version—I will send a supplemental message to the Congress recommending that the individual tax reduction I am now proposing be
increased by the amount of the net proceeds of the wellhead tax.
These tax reductions are essential to healthy economic recovery during
1978 and 1979. Prospects for continuation of that recovery in the near
term are favorable. Consumers have been spending freely, and many
other economic indicators recently have been moving up strongly. Without the tax reductions I have proposed, however, the longer-term prospects for economic growth would become increasingly poor. Because of
the fiscal drag imposed by rising payroll taxes and inflation, economic
growth would slow substantially in late 1978, and fall to about ?>l/2 percent in 1979. The unemployment rate would stop declining and might
11
begin to rise again, and the growth of investment outlays for new plant
and equipment would slow significantly.
With the reductions in taxes I have proposed, on the other hand,
the economy should grow by 4 / 2 to 5 percent in both 1978 and 1979.
Nearly one million new jobs would be created. Unemployment would
.therefore continue to fall and by late 1979 should be down to around
5 / 2 to 6 percent. Capacity utilization and after-tax business profits would
both improve, and thus the rate of investment in new plants and equipment should increase significantly.
Success in keeping a firm rein on spending will permit further tax reductions in years to come. Our ability to foresee the future course of the
economy is not good enough, however, to enable us to know when additional reductions will be needed or how large they should be. It would
therefore be imprudent to plan specific policy measures now for more
than the current and the next fiscal year. But I will make recommendations for budget and tax policies for 1980 and beyond that are in keeping
with our objectives of steady growth in the economy, more stable prices,
and principal reliance on the private sector to achieve economic
expansion.
Working to Reduce the Federal Deficit and Balance the Budget as Soon
as the Strength of the Economy Allows
Federal budgetary policy can play a constructive role in maintaining
the health of the economy. There are times when large deficits in the
Federal budget must be tolerated because they are needed to bolster
the purchasing power of consumers and businesses. A budget deficit
that persisted during a period of high employment and strong further
growth of private demand, however, would put upward pressures on
prices and would aggravate our inflationary problem. Under those circumstances, a budget deficit would also absorb savings that would be
better used by the private sector to build new factories and offices and
to purchase new machines. In order to assure that our economic progress
remains on a solid footing and is not undermined by inflation, we must
reduce the Federal budget deficit and achieve a balanced budget as soon
as the developing strength in the economy allows.
The first requisite is careful management and control of Federal spending. The second is a prudent weighing of the need for tax reductions
against the goal of budget balance.
This year I have proposed budgets that call for a deficit of $62 billion
in 1978, and one only slightly smaller in 1979. Had I decided not to
recommend a tax cut to put additional purchasing power in the hands of
12
consumers and businesses, the deficit in 1979 could have been $15 to $20
billion smaller. But I believe that tax reduction is essential to continued
progress in an economy still characterized by substantial unemployment
and idle plant capacity.
How rapidly we can restore budget balance depends on the strength
of the private economy. Over the next few years, two factors will be of
particular importance.
The first is the financial condition of State and local governments. In
the past, the aggregate budget of these governments tended to be approximately in balance. Today the State and local sector as a whole is in
surplus. In 1977, for example, aggregate State and local receipts from all
sources exceeded expenditures by nearly $30 billion. This overall surplus
does not mean that every State and local government is in good financial
condition. Many are hard pressed. Moreover, a large part of the aggregate
surplus represents accumulations of pension funds for the 13 million
employees of State and local governments.
Substantial surpluses in the State and local sector are likely to continue in the future. They absorb the incomes of consumers and business,
and so act as a drag on the economy.
The second factor affecting the pace at which we can expect to move
toward budget balance is the large deficit in America's foreign trade
in goods and services. Imports into the United States have been swollen by
the enormous quantity of oil we buy abroad to drive our cars, heat our
homes, and fuel our industry. Our exports have grown only slowly, in
large measure because economic growth abroad has been much slower
than in the United States. As a result, the United States last year recorded
a deficit of close to $18 billion in our current international accounts. This
deficit has the same general effect on economic activity as a multibillion
dollar increase in taxes.
Enactment of an effective energy program ultimately will reverse our
growing dependence on oil imports. Moreover, economic growth in other
countries should be improving over the next few years. But we may expect
a current account deficit of some size to continue in the near future.
If strong economic expansion is to be maintained in the face of these
major drains on the economy, additional tax reductions may be necessary beyond those I have proposed for 1979. But we will be better able to
judge this question in a year or two, and we should not prejudge it now.
In formulating my budgetary decisions thus far, I have been careful
to avoid commitments that would make it impossible for us to balance
the budget by 1981. With unusually strong growth in the private economy, we would need a balanced Federal budget. In an economy growing
less strongly, however, balancing the budget by 1981 would be possible
248-947 O - 78
13
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only by forgoing tax reductions needed to reach our goal of high employment. In those circumstances, the date for reaching the goal of budget
balance would have to be deferred.
What is important is that the planning and execution of Federal fiscal
policies proceed in a prudent manner. Every decision on spending and
taxes during my Administration has been, and will continue to be,
made in the context of long-run budgetary planning that avoids the creation of excess demand during periods of high employment. That is an
essential ingredient of responsible budgetary policy.
Programs to Attack the Problem of Structural Unemployment
Meaningful job opportunities ought to be available for all Americans
who wish to work. But overall fiscal and monetary policy alone will not
provide employment to many in our Nation. If we are to reduce unemployment satisfactorily, we must do more.
Eleven percent of adult American workers from minority groups are
now jobless—close to the rate a year ago, and over twice as high as the unemployment rate for white adults. About 17 percent of our teenagers are
unemployed today; among black teenagers the unemployment rate is
nearly 40 percent. These intolerably high rates of unemployment must
be brought down. This is an important goal, but achieving it will be a
difficult task.
A generally healthy and growing economy is a prerequisite for dealing
effectively with structural unemployment, but it is not enough. Even in
good times some groups suffer from very high unemployment, which
adds to the difficulty of achieving low unemployment and low inflation
simultaneously. As the economy moves toward high employment, employers try to fill job vacancies from those groups of workers with substantial training and experience. Wage rates are bid up and prices follow,
while large numbers from other groups are still looking unsuccessfully
for work. Efforts to reduce unemployment among the unskilled and
otherwise disadvantaged can be frustrated by inflationary pressures set
off in those sectors of the labor market already fully employed.
To reach high levels of employment while maintaining reasonable price
stability, we must take effective and adequate measures now to increase
the employment opportunities of the disadvantaged. This principle is a
key element of the Humphrey-Hawkins Bill—The Full Employment and
Balanced Growth Act. I support this legislation and hope the Congress
will enact it.
We have already taken several significant steps in this direction. Last
year I proposed and the Congress appropriated $8.4 billion to expand the
Public Service Employment Program to 725,000 jobs. These jobs are
14
more sharply targeted on the long-term unemployed and the poor than
previous programs under the Comprehensive Employment and Training
Act. Direct opportunities for youth also have been expanded. The Youth
Employment and Demonstration Projects Act of 1977, which is providing job experience and training in skills to unemployed youths, also was
proposed by my Administration and enacted in 1977, providing 166,000
work and training positions for unemployed youths.
Several further measures are proposed in my 1979 budget. I have
recommended that Public Service Employment be continued at the
725,000 job level throughout 1979, and that the number of jobs be
phased down gradually in subsequent years as progress is made in reducing the overall level of unemployment. I have also recommended an
expansion to $1.2 billion of the Youth Employment and Demonstration
Projects Act to provide work opportunities and skill training for the
unemployed youth who most need help. The Better Jobs and Income Program that I sent to the Congress in mid-1977 will create up to 1.4 million
jobs, supplemented by cash allowances, for poor people who are able to
work. An initial demonstration project for this program that will create
50,000 jobs is proposed in my 1979 budget, and more jobs will be phased
in gradually once the welfare reform program is enacted.
Government programs can provide valuable assistance to the unemployed. In the end, however, we must turn to the private sector for the
bulk of permanent job opportunities for the disadvantaged. It is in private industry that most productive jobs with opportunity for advancement are found. For this reason, I am requesting $400 million in my
1979 budget to begin a major new initiative for private sector hiring of
the disadvantaged. Details of this proposal will be submitted to the Congress shortly. I am requesting the fullest cooperation of the business community in this initiative and have been assured by business leaders that it
will be forthcoming.
Greater Emphasis on Promoting Business Capital Formation
Over a broad expanse of years, improvement of the standard of living
in this Nation depends primarily on growth in the productivity of the
American work force. During the first two decades of the postwar period,
the productivity of American labor increased at an average annual rate
of about 3 percent. Over the past ten years, however, productivity growth
has slowed markedly—to about 2 percent or less a year.
The reasons for this break with past trends are complex, but one
factor that clearly stands out is the relatively slow growth in the stock of
business plant and equipment. Historically, improvements in productivity have been linked closely to investment in plant and equipment. In-
15
vestment in new facilities has embodied new and more productive
technology and has provided our work force with more and better tools.
Business investment has lagged during the recovery for several reasons.
Some of the fears engendered by the steep recession and severe inflation
of 1973-75 have remained and have reduced the incentive for businesses
to invest. Uncertainties about energy supplies and energy prices have
also been a deterrent to investment, and so have concerns about governmental regulations in a variety of areas. Finally, high costs of capital
goods and a depressed stock market have diminished the incentives
and raised the costs to businesses of investment in new plant and
equipment.
Industrial capacity is ample now. But without a substantial increase in
investment over the next few years, problems would build for the future.
Rapid growth of capacity is needed to assure that shortages of particular
products do not emerge before we regain high employment. If capacity
is not sufficient, bottlenecks may develop in some sectors, forcing up prices
of industrial commodities. Inadequate rates of capital formation will also
hold back the gains in productivity needed to improve standards of living
and to avoid further aggravation of our inflation problem.
My tax and other economic proposals will encourage a greater rate
of business investment in several ways. By promoting a sustainable rate
of economic recovery, they will assure businesses of an expanding market
for the output from new factories and equipment. The specific tax reductions for business I have proposed will increase after-tax profits and
so directly provide additional incentives for investment.
We must also have conditions in financial markets that permit businesses to raise the funds they need for investment. Prudent Federal
budgetary policies will contribute significantly to that end, as will policies
that deal effectively with inflation. Both will ease the Federal Reserve's
task of pursuing monetary policies that support full recovery.
More Effective Programs to Reduce the Rate of Inflation
We cannot achieve full prosperity unless we deal effectively with inflation. We must take steps to reduce the high rate of inflation inherited
from the past and to guard against a renewed outbreak of inflation as we
regain a high-employment economy.
Our economy is not suffering at present from excess demand. Monetary growth in recent years has not been excessive, and Federal budget
deficits have occurred in an economy with high unemployment and excess capacity. Yet prices continue to rise as a result of an inflationary
process that has been under way for a decade.
16
Our present inflation began back in the late 1960s and accelerated
sharply in the early years of the 1970s. Since 1974 the rate of consumer
price inflation has declined substantially—from 12 percent to between
6 and 6/ 2 percent at present. But that improvement is due largely to the
termination of special influences affecting prices during 1974—the sharp
rise of food and fuel prices, and the bulge in prices following the removal
of wage and price controls.
Recent experience has demonstrated that the inflation we have inherited from the past cannot be cured by policies that slow growth and
keep unemployment high. Since 1975, inflation has persisted stubbornly
at a 6 to 6l/2 percent rate—even though unemployment went as high as
9 percent and still stands above 6 percent, and even though a substantial
proportion of our industrial capacity has been idle. The human tragedy
and waste of resources associated with policies of slow growth are intolerable, and the impact of such policies on the current inflation is very
small. Moreover, by discouraging investment in new capacity, slow
growth sows the seeds of future inflationary problems when the economy
does return to high employment. Economic stagnation is not the answer
to inflation.
Our first task in combating inflation is to guard against a renewed
outbreak of higher price increases in the future. Firm discipline over
the Federal budget and a prudent monetary policy are the most important steps that can be taken. Programs to attack structural pockets of
unemployment among our people will make it possible to achieve higher
levels of employment without exerting pressures on prices. Greater investment also will make a major contribution toward assuring that the capacity of our industry will be adequate to meet the needs of a highemployment economy.
Enactment of an energy program will eventually reduce the demand
for oil imports—contributing to market conditions that discourage substantial oil price increases, and combating the inflation that results from
a decline in the exchange value of the dollar. The programs I have inaugurated to build a 30- to 3 5-million metric ton grain reserve will provide a. buffer against sudden upward movements in food prices in the
event of bad weather.
Our second task—reducing the current rate of inflation—will be
harder. Yet we must tackle the problem. Unless the inflation rate is
brought down, the rate of price increase may well rise as unemployment
falls to lower levels in later years, with consequences that would thwart
our efforts to bring about full recovery.
The government has an obligation to set an example for the private
sector, and we can play an important role in moderating inflation by
17
reducing the effects of our own actions on prices. By adopting tax incentives and other policies to improve the growth of investment and productivity, we will help reduce the rise in costs and hence in prices.
The excise tax reductions I have proposed in my 1979 budget also will
contribute moderately to lower costs and prices.
Government regulations also add to costs and raise prices. To some
extent, this is the inevitable cost of much needed improvements in the
environment and in the health and safety of workers and consumers. But
there is no question that the scope of regulation has become excessive and
that too little attention is given to its economic costs. We should not, and
will not, give up our efforts to achieve cleaner air and water and a safer
workplace. But, wherever possible, the extent of regulation should be
reduced. We have eliminated hundreds of unneeded regulations already and will continue to pare down the remainder.
I also intend to put a high priority on minimizing the adverse effects
of governmental regulations on the economy. To this end, I have established a high-level interagency committee that—together with the relevant regulatory agency—will review the economic effects of major regulations. This committee will seek to assure that the costs of each regulation
have been fully considered, and that all alternatives have been explored,
so that we may find and apply the least costly means of achieving our
regulatory objectives. I have also directed my advisers to explore ways
in which we can undertake an assessment of the impact of regulation on
the economy as a whole and within each major sector. We need to find a
way to set priorities among regulatory objectives and understand more
fully the combined effects of our regulatory actions on the private
economy.
Where regulation of economic activity has become outmoded and substantial overhaul is called for, I will pursue effective legislation. For example, I have supported actively congressional efforts to reform regulation of the airline industry, and I am considering proposals to reform
the regulation of other industries.
I have given special attention to reducing the runaway cost of health
care. The cost of a day in the hospital has more than doubled since 1970.
Continuing escalation in the charges for hospital care can no longer be
tolerated. I have submitted legislation, the Hospital Cost Containment
Act of 1977, that would limit sharply the rate of growth in hospital spending, and I urge the Congress to enact this legislation in 1978.
The States can also play a role in moderating the current inflation. In
1976, State governments collected $50 billion in sales taxes. For the most
part, these taxes enter directly into the cost of goods we buy and thus
increase the price level. Today, State governments with significant sur-
18
pluses are considering tax reductions. I urge those in a position to do so
to consider the advantages to the national economy of reducing sales
taxes, thereby helping to slow inflation.
Government alone cannot unwind the current inflation, however.
Today's inflationary process is largely the consequence of self-fulfilling
expectations. Businessmen, expecting inflation to continue, are less resistant to cost increases than they might be, since they have come to
believe that, with all prices rising, their own increased costs can be passed
on to consumers through higher prices. Wage increases are based on the
expectation that prices will continue to rise. Wage gains in one sector spur
similar demands in others.
There are gainers and losers in this process, since some groups in the
economy are more successful than others at defending themselves against
inflation. On the whole, however, the main result is continued inflation.
No one group—neither business, nor labor, nor government—can stop
this spiral on its own. What is needed is a joint efTort.
Since the current inflation has developed strong momentum, it cannot
be brought to a sudden halt. But we can achieve a gradual but sustained
deceleration—having each succeeding year's inflation lower than the
previous one. The benefits of slower growth of prices and wages would
be broadly shared. Everyone would be better off. A conscious efTort
should be made by those who make wage and price decisions to take the
individual actions necessary to bring about an economy-wide deceleration of inflation.
I am therefore asking the business community and American workers
to participate in a voluntary program to decelerate the rate of price and
wage increase. This program is based on the initial presumption that
prices and wages in each industry should rise significantly less in 1978
than they did on average during the past two years.
I recognize that not all wages and prices can be expected to decelerate
at the same pace. For example, where profit margins have been particularly squeezed, or where wages are lagging seriously, deceleration in
1978 would be less than for other firms or groups of workers. In exceptional cases deceleration may not be possible at all. Conversely, firms or
groups that have done exceptionally well in the recent past may be expected to do more.
To enhance the prospects for success of this deceleration program, I
have asked that major firms and unions respond to requests from members of my Administration to discuss with them on an informal basis steps
that can be taken during the coming year to achieve deceleration in their
industries. In reviewing the economic situation prior to making my recommendations to the Congress on the size of the pay raise for Federal
19
workers, due to take effect next October, I will keep this objective of
deceleration in mind.
This program does not establish a uniform set of numerical standards
against which each price or wage action is to be measured. The past inflation has introduced too many distortions into the economy to make that
possible or desirable. But it does establish a standard of behavior for each
industry for the coming year: every effort should be made to reduce the
rate of wage and price increase in 1978 to below the average rate of the
past two years.
I have chosen this approach after reviewing extensively all of the
available options. There is no guarantee that establishing a voluntary deceleration standard will unwind the current inflation. I believe, however,
that with the cooperation of business and labor, this proposal will work.
Deceleration is a feasible standard of behavior, for it seeks restraint in
wage and price actions in exchange for a general reduction in inflation.
It is also a fair standard. Industries and workers with far different histories and current situations will not be asked to fit within the constraint
of a single numerical guideline.
The inflation problem will not be easy to overcome. It will take time and
patience. But the importance of these efforts cannot be overestimated.
Unless we gain better control over the inflation rate, the prospects
for regaining a fully employed economy will be seriously reduced. My
Administration cannot and will not pursue policies in the future that
threaten to trigger a new and more virulent round of inflation in this
country. To do so would be the surest way of destroying the hopes of our
citizens for a long-lasting prosperity.
International Economic Policies that Promote Economic Recovery
Throughout the World
Outside the United States, the world economy has seen a hesitant
recovery from the deep recession of 1974-75. The rapid pace of economic
growth that was widespread over most of the postwar years has all but
disappeared. Unemployment is high, and in most industrial countries
except the United States it is rising. Inflation is at high levels and
declining only very slowly.
The imbalances in the international economic system continue to
strain the world economy. Because of the surpluses of oil-exporting countries, many countries have sizable deficits, including the United States.
Some industrial nations are also running large and persistent surpluses—
thus increasing the pressures on countries in deficit. These imbalances
have been a major factor contributing to disorder in exchange markets
in recent months.
20
The condition of the world economy requires above all that nations
work together to develop mutually beneficial solutions to global problems. If we fail to work together, we will lose the gains in living standards arising from the expansion of world commerce over the past three
decades. If the world economy becomes a collection of isolated and
weak nations, we will all lose.
The first priority in our international economic policy is continued
economic recovery throughout the industrial world. Growth of the
U.S. economy—the largest and strongest in the world—is of vital
importance. The economic program that I have proposed will ensure
that America remains a leader and a source of strength in the world economy. It is important that other strong nations join with us to take direct
actions to spur demand within their own economies. World recovery
cannot proceed if nations rely upon exports as the principal source of
economic expansion.
At the same time all countries must continue the battle against inflation. This will require prudent fiscal and monetary policies. Such policies
must be supplemented by steps to reduce structural unemployment,
measures to avoid bottlenecks by encouraging investment, and cooperation in the accumulation of commodity reserves to insulate the world from
unforeseen shocks.
Reducing the widespread imbalances in international payments will require several parallel steps. To begin with, each individual country must
ensure that its own policies help relieve the strains. The United States will
do its part. In 1977 we had a current account deficit of about $18 billion.
While not a cause for alarm, this is a matter of concern. We can take a
most constructive step toward correcting this deficit by moving quickly
to enact the National Energy Plan.
Countries in surplus should also do their part. Balance of payments
surpluses in some countries have contributed to the economic stagnation
among their trading partners. Where their own economies have slack,
it is appropriate for nations in surplus to stimulate the growth of domestic
demand—thereby increasing their imports and improving the prospects
for growth in deficit countries. In some countries, lifting restraints on
imports from abroad and reducing excessive government efforts to promote exports would be useful. After consultations with the United States,
the Japanese have indicated they will take a series of steps toward
reducing their large surplus.
The system of flexible exchange rates for currencies also can be helpful in correcting unsustainable imbalances in payments among countries.
Since its inception in 1973, this system has operated well under unprecedented strains.
21
During 1977 the U.S. dollar has fallen in value against several key
currencies. The decline in the dollar's value has occurred primarily
against the currencies of those nations that.have large trade and payments surpluses, and was not surprising in view of our large payments
deficit and their surpluses. Late in 1977, however, movements in our
exchange rate became both disorderly and excessively rapid. The United
States reaffirmed its intention to step in when conditions in exchange
markets become disorderly and to work in close cooperation with our
friends abroad in this effort.
Under the flexible exchange rate system basic economic forces must
continue to be the fundamental determinant of the value of currencies.
However, we will not permit speculative activities in currency markets
to disrupt our economy or those of our trading partners. We recognize
fully our obligation in this regard, and we have taken steps to fulfill it.
Although substantial progress can be made toward a balanced world
economy, some imbalances will persist for a substantial period of time.
Financing requirements will remain large while adustments occur. The
private markets can and will continue to channel the bulk of the financing from surplus to deficit countries. But it is essential that adequate
official financing also be available, in case of need, to encourage countries
with severe payments problems to adopt orderly and responsible corrective measures. To meet this critical need the United States has strongly
supported a proposal to strengthen the International Monetary Fund by
the establishment of a new Supplementary Financing Facility.
The United States also will continue to contribute resources to promote
growth in the economies of the developing nations. International assistance efforts—through bilateral aid and multilateral institutions—must
continue to expand. We must also keep our doors open to imports from
developing countries, so that their economies can grow and prosper
through expanded trade.
A keystone of our international economic policy is to work with our
trading partners to protect a free and open trading system. The American
economy benefits by exporting those products that we make efficiently,
and by importing those that we produce least efficiently. An open trading
system increases our real incomes, strengthens competition in our markets,
and contributes to combating inflation.
The United States will firmly resist the demands for protection that
inevitably develop when the world economy suffers from high unemployment. The ensuing decline in world trade would worsen our problem
of inflation, create inefficiencies in American enterprise, and lead to fewer
jobs for American workers. But international competition must be fair.
We have already taken and we will, when necessary, continue to take
22
steps to ensure that our businesses and workers do not suffer from unfair
trade practices.
I place great importance on the Multilateral Trade Negotiations
now under way in Geneva. I believe our negotiators will bring home
agreements that are fair and balanced and that will benefit our economy
immensely over the years to come. The importance of these discussions
can hardly be overemphasized. The trading system that emerges from
the negotiations will set the tone for international commerce well into
the 1980s. Our commitment to a successful conclusion to these talks
underscores our long-term emphasis on the retention and expansion of
open and fair trade among nations.
The Challenge Before Us
In this message I have outlined my fundamental economic goals and
the strategy for attaining them. It is an ambitious, but I believe a realistic,
agenda for the future. It calls for a broad range of actions to improve the
health and fairness of the American economy. And it calls upon the
American people to participate actively in many of these efforts.
I ask the Congress and the American people to join with me in a sustained effort to achieve a lasting prosperity. We all share the same fundamental goals. We can work together to reach them.
January 20, 1978.
23
THE ANNUAL REPORT
OF THE
COUNCIL OF ECONOMIC ADVISERS
25
LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS,
Washington, D.C., January 27, 1978.
MR. PRESIDENT:
The Council of Economic Advisers herewith submits its 1978 Annual
Report in accordance with the provisions of the Employment Act of 1946.
Cordially,
(<? ^&ea*<ut. ^ \
CHARLES L. SCHULTZE
Chairman.
f
LYLE E. GRAMLEY
USU4***»
WILLIAM NORDHAUS
27
CONTENTS
CHAPTER
1. PROGRESS DURING
1977—THE THIRD YEAR OF
RECOVERY
age
35
Developments During the Year
The Roles of the Major Sectors of Demand
Personal Consumption
Housing
Inventories
Net Exports
Business Fixed Investment
Government Spending
Employment and Unemployment
Prices and Wages in 1977
Wages, Productivity, and Unit Labor Costs
Food Prices in 1977
Other Price Developments
The Federal Budget and Fiscal Policy
The President's Stimulus Package
The Stimulus Program Actually Enacted
Federal Expenditures in 1977
Federal Receipts and the Deficit in 1977
The High-Employment Budget
Monetary Policy.
Interest Rates and Security Yields
Savings Flows, Credit Availability, and Uses of F u n d s . . . .
The State of the Economy at Year-End
Special Issues
Money Growth and Velocity
Federal Spending Shortfalls
Business Fixed Investment
CHAPTER 2. ECONOMIC OUTLOOK AND POLICY
Economic Policy in the Near Term
The Need for Tax Reduction
The Administration's Tax Proposals
Monetary Policy
248-947 O - 78
p
29
:
36
39
39
40
41
42
42
43
44
46
46
48
49
50
50
51
52
53
54
56
57
58
60
61
61
64
66
73
73
73
74
75
CHAPTER 2. ECONOMIC OUTLOOK AND POLICY—Continued
The Outlook for 1978.
Business Fixed Investment
Government Demand
Personal Consumption
Housing
Inventories
Net Exports
Labor Force and Employment
Inflation
Income and Saving Flows
The Outlook for 1979
Policy Requirements for the Longer Term
Achieving the U.S. Economy's Potential
Long-Run Budgetary Strategy
The Budget and the Economy Over the Longer Run
The Role of Money and Credit in Reaching High Employment
Economic Goals Beyond 1981
CHAPTER 3. T H E WORLD ECONOMY—A HESITANT RECOVERY
Origins of the Current World Economic Disorders
Inflation
Current Account Imbalances
Recession
The World Economy in 1977
Aggregate Real Growth
Inflation in 1977
Current Account Positions in 1977
Foreign Exchange Markets
Unfinished Business
To Restore Health to the International Economy
To Deal With External Imbalances
To Achieve Greater Stability cf Commodity Prices
To Maintain the Growth of World Trade
CHAPTER 4. INFLATION AND UNEMPLOYMENT
A Review of the Past 10 Years
Episode I: Excess Demand in the Late 1960s
Episode II: The Acceleration of Inflation in 1973-74
The Current Situation
The Momentum of Inflation
Other Factors Affecting the Current Inflation
30
page
75
76
77
77
78
78
79
79
80
81
81
83
83
85
88
91
93
96
96
97
101
102
103
106
108
110
Ill
Ill
112
115
129
133
138
139
139
140
141
142
146
4. INFLATION AND UNEMPLOYMENT—Continued
Growth and Inflation
Using the Tax System to Reduce the Momentum of Inflation
A Deceleration Strategy
Capacity Utilization
Past Trends in the Utilization of Capital
Capacity Utilization Through 1981
The Labor Market
The Structure of Unemployment
Unemployment and Inflation
Policies to Reduce Structural Unemployment
CHAPTER
CHAPTER 5. MAJOR ECONOMIC POLICY ISSUES OF 1977
Energy Developments and Policy
Energy Before 1973. . .
The 1973-74 Price Shock
Developments After the Price Shock
The National Energy Plan
Other Energy Policies
Food and Agricultural Policy
The Policy Problem
Incomes in Agriculture
Instability of Prices and Incomes
Price and Income Measures
Policy Developments in 1977
Regulatory Reform
Economic Regulation
Social Regulation
Tax Reduction and Reform
Major Individual Income Tax Changes
Major Business Tax Changes
Tax Treatment of Municipal Bonds
Distributional Aspects of Income and Social Security
Tax Changes
Income Maintenance
The Federal Welfare System
Problems With the Present Welfare System
Changes in the Food Stamp Program
The Program for Better Jobs and Income
The Social Security System
page
149
150
152
157
158
161
161
162
168
172
179
179
180
181
182
188
194
195
195
196
199
201
203
206
207
209
216
216
218
219
219
221
221
224
228
228
232
APPENDIXES:
A. Report to the President on the Activities of the Council of
Economic Advisers During 1977
B. Statistical Tables Relating to Income, Employment, and
Production
31
239
251
List of Tables and Charts
Tables
1. Growth of Real GNP and Final Sales in 1977
2. Changes in Retail Food Prices, 1976-77
3. Budgetary Impact of the Economic Stimulus Program, National
Income and Product Accounts, Calendar Years 1977-78 . . . .
4. Federal Government Receipts and Expenditures, National
Income and Product Accounts, Calendar Years 1976-77: . . .
5. Actual and High-Employment Federal Receipts and Expenditures, National Income and Product Accounts, Calendar
Years 1970-77
6. Mortgage and Consumer Debt Outstanding as Percent of
Disposable Personal Income, 1974-77
7. Comparison of Projected and Actual Federal Expenditures,
National Income and Product Accounts, Fiscal Years
1970-77
8. Determinants of Business Fixed Investment, 1955-77
9. Key Economic Measures, 1977-78
10. Potential Gross National Product and Benchmark Unemployment Rate, 1952-77
11. Projected Effects on Federal Receipts of Selected Tax Changes,
National Income and Product Accounts, Calendar Years
1978-81
12. Projected High-Employment Federal Receipts and Expenditures, National Income and Product Accounts, Calendar
Years 1977-81
13. Net Saving by Sector, National Income and Product Accounts,
Selected Calendar Years, 1955-77
14. World Current Account Patterns, 1973-77
15. Real GNP Growth in Major Industrial Countries, 1976-77. . . .
16. National Forecasts and Realized Real GNP Growth for 1977. .
17. Inflation in Major Industrial Countries, 1976-77
18. OECD Current Account Estimates for 1977
19. Changes in Consumer Prices, All Items and Selected Components, 1970-77
20. Wage and Price Changes and Unemployment Rates Over the
Business Cycle
.T.
21. Annual Rate of Change in Selected Components of the Consumer Price Index and Employment Costs, 1960-77
22. Capacity Utilization in Manufacturing and Materials Industries, Selected Periods, 1955-77
23. Unemployment Rates by Race, Sex, and Age, Selected Periods,
1956-77
iT
24. Unemployment Rates by Reasons for Unemployment, 1977. .
25. Unemployment Rates of Black and White Men by Age, 1977. .
26. Alternative Unemployment Rates, Selected Years, 1956-77. .
32
Page
36
48
52
53
55
60
64
68
76
84
87
87
89
102
106
107
109
117
140
145
155
158
162
163
168
170
List of Tables and Charts—Continued
Tables
27. Estimated Federal Outlays and Participation in Training and
Employment Programs During Fiscal Year 1978
28. Federal Minimum Wage and Average Hourly Earnings in
Manufacturing, Selected Years, 1938-81
29. Trends in Energy Consumption and Deflated Energy Prices. .
30. Growth of GNP, Energy Consumption, and Oil Imports in
Major Industrial Countries, 1967-76
31. Real Income and Returns to Agriculture, 1970-77
32. Real Income Per Farm and Per Capita Disposable Personal
Income of Farm Population as Percent of Nonfarm, 1961-76.
33. Trends and Variability in Real National Income Components,
1961-77
34. Income Tax Liability for One-Earner Four-Person Families. . .
35. Estimated Tax Changes Resulting From Tax Reform Proposals
and Social Security Amendments
36. Government Income Maintenance Programs
37. Families Below the Poverty Level Before and After the Effects
of Income Maintenance Programs and Taxes, Fiscal Year
1976
38. Compaiiscn of Public Assistance Benefit Levels With Alternative Income Standards, Family of Four, 1976
39. Social Security Benefit Payments and Beneficiaries, 1977
40. Tax Rates for Social Security Trust Funds, Old and New Laws,
Calendar Years 1977-2011
41. Social Security Contribution and Benefit Base, Old and New
Laws, Calendar Years 1977-83
Charts
1. Velocity and Interest Rates Over the Business Cycle
2. Investment and Capacity Utilization Over the Business Cycle. .
3. Actual and Potential Gross National Product
4. High-Employment Federal Surplus as Percent of HighEmployment GNP
5. Rates of Interest or Return and the Rate of Inflation
6. Consumer Prices and Hourly Earnings in Major Industrial
Countries:
7. Unemployment Rates in Major Industrial Countries
8. Relative Wholesale Prices Unadjusted and Adjusted for Exchange Rates
9. Price and Wage Trends
10. Productivity in the Private Nonfarm Business Economy
11. Relationship Between Capital and Labor Utilization
12. New Crude Oil Prices and Drilling Activity
33
page
173
177
181
187
197
198
199
220
220
222
225
226
233
235
236
62
67
85
88
92
98
104
122
143
146
160
183
List of Tables and Charts—Continued
Charts
13. Oil Consumption and Imports Relative to Real GNP
14. Cross-Country Comparison of Motor Gasoline Demand in
1975
15. World Wheat and Coarse Grains: Export Prices and Ratio of
Stocks to Consumption
34
Page
185
189
200
CHAPTER 1
Progress During 1977—The Third
Year of Recovery
S THE NEW ADMINISTRATION took office at the beginning of
L 1977, the economy was turning up strongly from a period of very slow
real growth during the latter part of 1976. With the unemployment rate
hovering near 8 percent and with inflation still a serious problem, however,
the Nation was far from the goals of "maximum employment, production,
and purchasing power" established in the Employment Act of 1946. Progress toward these goals was essential to the achievement of rising living
standards and greater equality of income and of opportunity. Strong and
steady growth in the U.S. economy was also needed to help sustain the pace
of economic expansion among the nations of the Western world. An economic stimulus program was therefore designed by the new Administration
to keep the economy on a path of recovery at a pace sufficient to reduce
the unemployment of labor and capital resources significantly.
In the course of the year, continuing progress was made in closing the
substantial gap between actual and potential real output that existed at
the beginning of 1977. Real gross national product (GNP) expanded in
each quarter at a pace above its long-term potential growth, and the gain
in 1977 as a whole amounted to 4.9 percent. By the fourth quarter, real
GNP was 5.7 percent higher than it had been a year earlier.
This increase in real output made possible a 4.1-million increase in
employment between the end of 1976 and the end of 1977. A temporary
slackening in the rate of expansion around midyear limited the midyear
reduction in unemployment, but unemployment fell significantly early in
the year and again in the later months. The unemployment rate fell to 7.0
percent for 1977 as a whole and reached 6.4 percent at year-end.
The expansion in total output was large enough to permit a substantial
improvement in living standards. Real per capita disposable income rose
by 4.9 percent during the year. At the same time, the increase in industrial
production of 5.6 percent lifted capacity utilization in manufacturing from
81 percent at the end of 1976 to 83 percent at the end of 1977. This increase
played an important role in the 9.5-percent advance of corporate profits for
the year as a whole.
A
35
DEVELOPMENTS DURING THE YEAR
The pace of economic expansion was exceptionally strong during the early
part of 1977. As the year opened, businesses were increasing their production
schedules in an effort to rebuild stocks depleted by the unexpectedly sharp rise
of consumer spending in the latter months of 1976. The rate of nonfarm inventory investment rose from near zero in the fourth quarter of 1976 to 1 percent of real GNP by the second quarter of 1977, accounting for almost 30
percent of the expansion in real output during the first half of the year. The
rise in consumer spending that began in late 1976 continued in the opening
months of 1977. With final sales and inventory accumulation both moving
up briskly, real GNP in the first quarter increased at an annual rate of 7 l/i
percent (Table 1).
The pace of advance in economic activity early in the year was so rapid
that an abnormally cold winter had only a mild transitory effect on overall
economic performance. January temperatures were as much as 20 percent
below normal in some parts of the country, causing shortages of natural gas
and numerous plant shutdowns. Plant closings typically lasted only one to
a few days, however, and most of the loss in output was made up before the
end of the first quarter.
Construction activity was significantly depressed by the winter weather
but rebounded in the second quarter. Government spending also rose
sharply. The strength of these two sectors offset a developing weakness in
consumer spending, and growth of real GNP in the second quarter remained
at a relatively rapid 6-percent annual rate.
During these 2 quarters of large gains in real output substantial progress
was made in reducing unemployment. From December to April total civilian employment rose by almost 1 l/z million, and the unemployment rate fell
by 0.7 percentage point. Job gains were widespread among manufacturing,
TABLE 1.—Growth of real GNP and final sales in 1977
[Percent change, seasonally adjusted annual rate]
1977
Component
II
1
GNP..
Final sales:
Total 2
Domestic3
Private domestic4.
_
Change in inventory accumulation (billions of
1972 dollars)
IV i
III
1976 IV
to
1977 IV i
7.5
6.2
5.1
4.2
4.9
5.7
3.8
4.9
6.7
5.1
5.5
4.2
4.4
3.6
2.9
6.8
7.3
8.2
4.7
5.2
5.9
5.0
11.5
3.5
2.5
-8.0
3.1
9.5
1
Preliminary.
GNP other than inventory accumulation.
GNP other than inventory accumulation and net exports.
* Personal consumption expenditures, business fixed investment, and residential construction.
2
3
Note.—Percent changes based on data in 1972 dollars.
Source: Department of Commerce, Bureau of Economic Analysis.
Year*
36
5.3
5.5
construction, retail trade, services, and other industries. The length of the
workweek in manufacturing also increased.
The rapid pace of expansion in the first half could not have been expected
to continue since it was based, in part, on a rebuilding of stocks and a restoration of inventory investment to a more normal relationship with GNP.
The slowdown in the rate of expansion during the middle of the year was
more widespread and prolonged, however, than could be accounted for
solely by patterns of inventory accumulation.
The rise of consumer spending slowed abruptly in the second quarter
when the personal saving rate rose substantially. During the first 2 years
of the recovery, consumers' purchases of goods and services had risen much
faster than their after-tax incomes, so that by early 1977 the fraction
of disposable income devoted to saving had fallen to the lowest level in
25 years. Restoration of a more normal allocation of consumer incomes between consumption and saving was inevitable, and the major part of the adjustment took place in the second quarter.
As retail sales faltered, manufacturers adjusted their production schedules promptly to avoid an undesired buildup of inventories—as they had
in 1976, when consumer spending also slowed temporarily. As a consequence, demands for labor moderated, and the unemployment rate stopped
declining. Total hours worked in nonfarm establishments, which had been
rising strongly in the first 4 months of the year, topped out and remained
essentially unchanged from May through September; the rise of industrial
output during this period slowed to about half the pace recorded in the first
5 months of the year.
The caution exhibited by businesses in their inventory policies was even
more evident in their willingness to make longer-term investment commitments. Plans for business capital outlays normally gain increasing strength
as rates of capacity utilization and profits rise during the course of an economic recovery. For a time in late 1976 and early 1977 it appeared that the
usual cyclical processes were occurring: the real value of contracts and
orders for plant and equipment was improving vigorously. Around the middle of the year, however, the rise of this indicator of business fixed investment slowed, and production of business equipment, though continuing
to advance, increased at a more moderate pace than earlier in the year.
The hesitancy of business capital spending (which is examined later in
this chapter) was singularly disappointing. These outlays, in real terms,
have yet to recover their peak levels reached in late 1973 and early
1974. Industrial capacity has therefore been expanding at a very sluggish
pace—and at a time when the labor force is increasing rapidly. Over the
long run, continuing growth of real output and a stronger rise of productivity will depend heavily on restoring a more vigorous rate of expansion
in business outlays for new plant and equipment.
37
Developments in the foreign sector also restrained the rate of economic
expansion. Imports of oil rose substantially early in the year, partly as a consequence of the effects of the cold winter on fuel consumption; and other
imports increased more than would have been anticipated on the basis of
historical relationships between growth of real output and these imports.
U.S. exports meanwhile increased scarcely at all in real terms because of
the very slow rate of economic expansion among most of our major trading
partners.
The midyear slowdown of economic expansion would have been more
serious had it not been for the effects of the Administration's stimulus programs. These programs began to increase government spending and disposable personal incomes by midyear, and their stimulative effects continued to build over the remainder of 1977. Fiscal policy was thus instrumental in the quickening tempo of activity late in 1977.
Signs of an emergence from the pause of 1977 first became evident late
in the fall, when new retail sales figures indicated that consumers had
begun to increase their purchases of goods in the third quarter. A combination of factors led to a further strengthening of consumer spending during
the fourth quarter. Growth in personal income was sustained by rising
output and employment in other sectors and was further bolstered by the
Federal pay raise in October and by the growing effects of the stimulus
programs. With consumer prices increasing at a relatively moderate rate
during this period, gains in nominal income were translated into greater purchasing power and rising consumer spending. In the fourth quarter, consumer outlays for durable and nondurable goods, adjusted for inflation,
rose at an annual rate of over 10 percent.
This surge of consumer buying—coupled as it was with some improvement in the pace of fixed investment—was not fully anticipated by businesses, whose production schedules were still geared to the slower pace of
retail sales that had prevailed earlier. The rate of inventory accumulation
therefore declined steeply in the fourth quarter, holding down overall GNP
growth to an annual rate of 4.2 percent. It is clear, however, that activity
was strengthening as the year came to a close. Employment in the final 2
months rose rapidly, and the unemployment rate fell to 6.4 percent in
December.
Failure to make any significant progress on the inflation front in 1977
was a disappointment. (A more detailed analysis of this difficult problem is
presented in Chapter 4.) Consumer prices of goods and services other than
food and energy, a measure of the underlying rate of inflation, increased by
6.4 percent in the 12 months ending in December 1977, about the same rate
as in 1976.
An underlying inflation rate of 6 to 6/ 2 percent has persisted since mid1975 and is deeply embedded in the wage-cost-price structure. In the nonfarm business sector, compensation per hour-—which includes both
wages and fringes—in the fourth quarter of 1977 was about 8/ 2 percent
38
more than a year earlier. This increase in labor cost exceeded productivity
gains by about 6 percent and therefore put strong upward pressures on
prices. These price increases, in turn, wiped out most of the rise in workers'
nominal earnings.
Changes in food and fuel prices during 1977 caused substantial variation in the overall rate of price change from the underlying rate of inflation.
In the first half, both food and energy prices were rising rapidly, reflecting
the cold winter and the increasing prices of imported foods (particularly coffee, tea, and cocoa). Overall consumer prices increased during this period
at an annual rate of 9 percent. As food supplies improved, the rise of consumer prices slowed materially to an annual rate of around 4/2 percent in
the second half of 1977.
THE ROLES OF THE MAJOR SECTORS OF DEMAND
The sources of economic expansion shifted somewhat during 1977. During
the first 2 years of the current economic recovery, household spending for
personal consumption and new housing were the principal dynamic elements.
In turn, the increase in final demand stemming from these sources prompted
a pronounced swing from decumulation to rebuilding of inventories during
the first year of the upturn. As the rise of consumer spending moderated
last year, growth in business fixed investment and particularly accelerated
government spending assumed more important roles in determining the
pace of expansion.
PERSONAL CONSUMPTION
The saving rate during 1977 rose considerably, marking a reversal of the
pattern of the preceding 3 years. This reversal and the pronounced midyear
weakness of consumer spending were due to a number of causes. Some
of them have their roots in the forces that had disturbed the economy generally, and the household sector in particular, earlier in the 1970s. High
inflation rates eroded the real value of household wealth held in savings at
depository institutions and in other nominally denominated forms. Employment growth in the early 1970s was also less steady than during most of the
1960s. These two developments may well have prompted somewhat more
cautious consumer behavior and caused higher saving rates. The saving rate
reached an exceptionally high level in 1973—the cyclical peak year, which
was marked by accelerating inflation and a sharp and largely unanticipated
rise in farm income. In the following year of recession, households held the
real value of consumption of nondurables and services level while the real
value of both durable purchases and saving declined in the face of falling
real incomes.
By late 1975 the economy was moving up again, the pace of inflation
had abated somewhat from double-digit rates, and household income had
been bolstered by tax cuts. As confidence was renewed, consumers were
39
apparently attempting to regain previously planned consumption levels and
to rebuild their stocks of durable goods. Although spending for durable
goods rose somewhat erratically during 1976, the overall gain was strong,
and the saving rate dropped sharply further from its recession level, reaching a 25-year low in the first quarter of 1977. By then, real per capita consumption was almost 8 percent higher than its cyclical peak in the third
quarter of 1973. Once consumption levels had been brought more closely
into balance with individuals' plans and anticipated earnings, it became
natural for households to resume a historically more normal balance between
current consumption and saving for future needs.
A number of nonrecurring factors contributed to the final phase of decline
in the saving rate in the first quarter of last year: deferred automobile purchases because of the strike at the Ford Motor Company late in 1976, unusually large estate and gift tax payments, and exceptionally large home
heating expenses. The extent of the decline during 1976 and in the first
quarter of 1977 was underestimated, however, in preliminary data. More
complete data becoming available later in the year made it more apparent
that the slowing in consumption growth, which began in the spring, was
an inevitable result of the restoration of more customary spending and saving patterns.
The saving rate rose abruptly in the second quarter and more gradually
in the following quarters. Surveys of consumers' attitudes showed only a
small reduction in consumer confidence in this period. The pattern of consumer expenditures last year also implies sustained confidence. Households
continued to invest in durable goods and houses, committing future income
to repayments of consumer and mortgage credit. Automobile sales increased
to an 11.7-million unit annual rate in the second quarter, just 6 percent
short of the rate at the all-time quarterly peak in 1973. New private home
sales through the middle quarters of the year were virtually unchanged
from the very strong 800,000 annual rate of late 1976 and early 1977, and
sales of existing houses also rose substantially during the year. The strength
of home purchases and increases in mortgage credit undoubtedly contributed to increased outlays for household durables.
The slower rise in the saving rate in the fourth quarter was coupled with
resumption of strong growth in disposable income. These forces led to a
vigorous increase in consumption.
HOUSING
The pace of single-family homebuilding was at a record level last year,
although the rate of increase of aggregate residential construction expenditures slowed to 15 percent from 22 percent in 1976. Housing starts for the
year came to almost 2 million units. Single-family starts totaled a record
V/2 million—150,000 more than in any previous year—and the rate was
higher at year-end. The demographic determinants of housing demand are
40
increasingly favoring a high rate of single-family home construction as the
post-World War II baby boom population is reaching the childbearing age.
Furthermore the demand for single-family homes, which are predominantly
owner-occupied, appears to reflect the belief that homeownership is valuable
as an investment. The rate of increase of new home prices, exclusive of
changes due to quality or size differences, is currently about 11 percent
annually, or about 5 percentage points greater than the average increase of
other prices. Although part of this price pattern is a temporary response of
the prices of new construction materials to strong demand, land prices have
also been rising substantially.
In California particularly, and to a lesser extent elsewhere in the country,
there was an element of speculation in the housing markets in the early
part of the year. An increasing number of homes were being bought by individuals who could not indefinitely carry the mortgages, but who anticipated
a speculative profit from a near-term resale. In some areas of Southern
California the inflation in new home prices reached a 25-percent annual
rate. At first, lenders' willingness to grant mortgages in such cases fueled
the speculative surge of construction that was evident early in 1977. The
Federal Home Loan Bank of San Francisco, however, took effective steps to
dampen the expansion of mortgage credit, and lenders were encouraged to
require a commitment from home purchasers to occupy the homes they
bought. By midyear both price increases for new homes and new housing
starts had slowed in the West.
New starts of multifamily units last year came to 535,000, up 43 percent
from 1976 but still well below the 1972 peak of 1 million units. The lower level
of unsubsidized multiunit building in recent years results, in part, from the
overbuilding that occurred in some regions of the country from 1971 to
1973. Since 1976, multifamily construction has turned up in most of the
country as vacancy rates have declined. The Northeast was an exception as
outmigration and the prevalence of rent controls have curbed expansion.
INVENTORIES
Inventory accumulation contributed substantially to growth of real GNP
in the first quarter of 1977. The rate of accumulation in nonfarm inventories, in 1972 dollars, rose from near zero in the last quarter of 1976 to
about $10 billion. Thereafter the rate of nonfarm inventory accumulation
rose only moderately further in the second and third quarters and then declined sharply at year-end.
Businesses continued in 1977 to follow the very cautious inventory policies
that have typified this expansion. Book values of inventories of nondurable
goods rose slightly more rapidly than sales in the second quarter as consumption of nondurable goods slackened. In the summer months, new orders and
the growth of production slowed sharply, preventing substantial undesired
accumulation of stocks during a period of sluggish sales. The book value
41
of business stocks therefore rose only two-thirds as much in the third quarter
as in the second. Part of this slowdown, however, was due to a reduced rate
of increase in prices, particularly for farm products and foods.
NET EXPORTS
The foreign sector has acted as a drag on the speed of expansion in the
U.S. economy throughout the past 2 years. In constant dollar terms, U.S.
imports in the GNP accounts rose 9 percent last year while exports rose less
than 2/2 percent. The rise in U.S. real income was, of course, an important
factor. Automobile imports rose especially rapidly, reflecting near-record
total car sales in the United States. The slow pace of recovery in other
countries led foreign producers to compete more aggressively in external
markets given their weak demand at home. This also contributed to the
strength of U.S. imports and to the weakness of U.S. exports. Hesitant
investment abroad lowered demand for capital goods, particularly affecting
U.S. export volume, which is heavily dependent on sales of capital goods.
In nominal terms the deterioration of net exports last year was even
more dramatic than it was in real terms because of the very high growth of
imported oil, whose price has moved up more since the 1972 base date than
the average price of other imports or exports. The combination of cold winter weather, petroleum inventory building during much of the year, flat domestic energy output, and rising demand generated a 20-percent increase
in oil imports. The cost to the United States for imported oil rose about $10
billion from 1976 to 1977. This increase accounted for approximately 60
percent of the deterioration in the nominal net export position, which
swung $9 billion into deficit last year. In addition, price increases in late
1976 and early 1977 raised the cost of commodity imports, particularly
coffee, tea, and cocoa.
BUSINESS FIXED INVESTMENT
Business investment in plant and equipment played an important role in
the 1977 pattern of expansion. It moved up strongly in the first quarter, rebounding from the effects of strikes at automotive and equipment
firms in the fourth quarter of 1976. In the third quarter, the pace slackened,
contributing to the midyear pause, but it quickened again in the final quarter
of the year. Abstracting from erratic quarter-to-quarter movements, business
fixed investment rose, in real terms, by close to 8 percent during the year
as a whole—about the same as in 1976.
This component of demand did not begin to recover from the 1974 recession until the final quarter of 1975—one-half year after the upturn in total
output. Although investment continued to grow more rapidly than total
output during 1977, it had regained by the end of the year only about threefourths of the ground lost during the recession. This is a weaker performance
than in the typical postwar cyclical upswing. The shortfall is discussed in a
separate section later in this chapter.
42
GOVERNMENT SPENDING
Spending by both the Federal and State and local governments was a
particularly important source of economic expansion in mid-1977 when
the contribution of other sectors to continued growth of output was moderating. The real value of Federal Government purchases had been essentially
unchanged during 1976, and in the fourth quarter of that year was only 1
percent above its level at the cyclical trough 7 quarters earlier. In contrast, the real value of Federal purchases rose by 7.2 percent in 1977; the
most significant increases occurred in the second and third quarters.
Both the defense and nondefense components of Federal purchases accelerated sharply. The upswing in real defense purchases marked the end
of the decline that began in 1969. While defense procurement rose strongly,
however, the number of military personnel remained about constant.
The increase of nondefense Federal purchases at midyear was significantly
affected by Commodity Credit Corporation (CCC) transactions. Steep declines of farm crop prices led to a large increase from a year earlier in CCC
purchases for crops under loan agreements. CCC purchases added about
$4j/2 billion, at an annual rate, to the value of Federal purchases by the
third quarter; the pace leveled off in the fourth quarter. These acquisitions
represent a transfer from private inventory accumulation to government
purchases and do not contribute directly to expanded output. Other Federal nondefense purchases from the private sector, however, also rose in
real terms during 1977.
State and local government purchases grew at an annual rate of only 1.4
percent, in real terms, from the recession trough through the end of 1976;
but these purchases increased by 3.2 percent during 1977. Earlier in the current cyclical upswing. States and localities were recovering from substantial operating account deficits that had accumulated during the previous
downturn. Fiscal positions improved as the recovery proceeded, reflecting
increased revenues generated by rising incomes and adjustments in both tax
rates and spending patterns. These lagged adjustments moved budgets into
substantial surplus by mid-1976.
Beginning in 1977, real purchases by State and local governments rose
more notably as a result of their stronger fiscal positions. Their fiscal situations were further improved during the year by significant increases in Federal grants as part of the Administration's stimulus package. This package
included an expansion of public service jobs from about 310,000 in the
spring to 615,000 positions at the end of the year. About 80 percent of these
jobs were with State and local government units. At the same time there
were indications that State and local capital formation, which dropped off
sharply in 1975 and 1976, was reviving. Construction of educational facilities continued to decline, as children born in the late stages of the baby
boom reached adulthood and left school, but housing and redevelopment
building, and sewer and water supply construction rose vigorously during
43
the second half of last year. Many of these projects were assisted by an
increase in Federal grants for local public works.
EMPLOYMENT AND UNEMPLOYMENT
Growth in economic activity over the 4 quarters of 1977 was sufficient to
generate over 4 million new jobs. Employment increased rapidly in the
first half of the year as a result of the strong growth in total output; but as
the pace of expansion moderated in the third quarter, employment growth
slackened. The midyear slowdown wras also evident in total hours of work
at nonagricultural establishments in the private goods-producing business
sector, which declined during the third quarter when manufacturing production and employment flattened out temporarily. Strong expansion of
employment resumed again late in the year.
Gains in employment in the first half of the year lowered the unemployment rate from 7.9 percent in the last quarter of 1976 to 7.1 percent in the
second quarter of 1977. Only moderate further progress was made until
the fourth quarter, when unemployment began declining again, reaching
a 3-year low of 6.4 percent in December.
A major disappointment with respect to our economic performance in
1977 was the unemployment situation of black Americans. Total black employment increased by 4.8 percent from the fourth quarter of 1976 to the
fourth quarter of 1977, exceeding the 4.4-percent increase in white employment, but the black unemployment rate remained unchanged at 13.4 percent as the labor force grew rapidly. The unemployment rate for black
teenagers rose, however, from 36.6 percent to 38.3 percent. Although labor
force growth explains the failure of these unemployment rates to fall, it
does not dispel the problem of high unemployment among minorities. Furthermore, the problem for teenagers in particular is unlikely to be corrected
merely by expansion of the total economy. Effective structural measures are
needed as the recovery continues. This problem is discussed more extensively in Chapter 4.
The distribution of employment gains among sectors was in many respects typical for periods of fairly balanced cyclical recovery. During the
year employment in manufacturing establishments grew 4.0 percent, an
increase of 762,000 jobs. Contract construction employment grew at a rapid
10.0-percent pace, providing an increase of 359,000 jobs as expansion in that
sector remained strong throughout the year. The 3.6-percent rise in employment in the private service-producing industries was slightly slower than
the growth in manufacturing, but secular growth in this sector provided an
increase of 2 million jobs.
Employment in the government sector grew 2.6 percent during 1977,
considerably less rapidly than in the private sector. Federal employment has
accounted for a dwindling share of total employment in the past decade and
44
was virtually unchanged during the year. State and local employment,
on the other hand, has been the fastest growing major sector of the
economy for the past two decades. From 1953 to 1973 the average annual
rate of growth was 4.8 percent. This growth rate declined to 3.3 percent
from 1973 to 1976, when the expansion of State and local expenditures was
relatively slow. State and local employment grew by 3.1 percent, or 392,000
jobs, in 1977; much of the increase was in the second half of the year. Over
200,000 of the additional jobs on State and local payrolls were financed
under the expansion of Comprehensive Employment and Training Act
(CETA) jobs that was part of the Administration's stimulus package.
An unusual aspect of employment growth in the past year was a sudden
spurt in the number of self-employed workers. After growing at a fairly
steady 1.1 percent per year from 1967 to 1976, the number of self-employed
workers in the nonagricultural sector increased by 5.6 percent in 1977, accounting for over 10 percent of the net employment growth for the year.
Improvement in the employment situation is also apparent in indicators
other than the overall unemployment rate. As jobs became more available,
the number of workers who had been unemployed for 27 weeks or more fell
from 1.3 million, or 1.4 percent of the civilian labor force, in the final quarter
of 1976 to 920,000, or 0.9 percent of the labor force at the end of 1977. The
average duration of unemployment fell gradually from 15.5 to 13.9 weeks.
Similarly, improvement in labor market conditions resulted in a decline in
the fraction of the labor force that were unemployed because they lost their
jobs—rather than being unemployed because they were entering or reentering the labor force or had left their jobs voluntarily. The unemployment rate
attributable to job loss fell from 3.8 percent at the end of 1976 to 3.0 percent
in the fourth quarter of 1977.
The labor force grew very rapidly during 1977, rising by 3.1 percent or
3 million persons between the fourth quarter of 1976 and the fourth quarter
of 1977. The number of adult men in the labor force increased 1.9 percent,
closely in line with the long-term trend. Unemployment for this group fell
from 6.0 percent to 4.8 percent. Employment developments for adult women
were sharply different. As their number in the labor force increased by
4.5 percent, the unemployment rate of adult women fell by only 0.7 percentage point to 6.8 percent in the fourth quarter. The teenage labor force
grew by 4.6 percent; the unemployment rate of teenagers fell during 1977,
but remained a distressingly high 16.7 percent in the fourth quarter.
The role of high labor force participation in rapid labor force growth and
slower decline in aggregate unemployment is shown by the rising ratio of employment to the total civilian noninstitutional population of working age—•
up 1.7 percentage points during 1977 to 58 percent in December. This is a
post-World War II record. At the cyclical peak in the fourth quarter of
1973, this ratio was 57.3 percent, when unemployment was 4.8 percent. In
1968, when the unemployment rate was 3.6 percent, the employment to
population ratio was considerably lower than in either 1977 or 1973. Hence,
http://fraser.stlouisfed.org/248-947 O Federal Reserve Bank of St. Louis
45
78 - 4
given the income and career aspirations of broad segments of the population,
the economy is confronted with a challenge not only to create jobs but to
match workers to employment opportunities.
PRICES AND WAGES IN 1977
The pace of inflation last year was essentially unchanged from 1976,
excluding the effects of a few especially volatile factors. The rise in the
consumer price index accelerated to 9 percent in the first half of the year,
from a 4.8-percent rate during 1976, in response to short supplies of food
and strong demands for energy caused by the harsh winter weather. In the
second half, however, these forces were absent. Indeed, as the new springcrops came in, wholesale prices of food and farm products declined sharply.
As the benefits were passed on to consumers, the rise in consumer prices
slowed to an annual rate of 4 / 2 percent in the second half.
Farm supplies are subject to disturbances from weather and these show
up in volatile price movements because of relatively inelastic demand for
food products. Other prices may also be subjected to shocks that have little
to do with the overall balance of supply and demand in the economy.
Energy prices are a current example of this phenomenon. For this reason,
it is important to look at the movements of price indexes after these special
factors have been removed—that is, to look at the "underlying rate" of inflation. This underlying rate, measured by the consumer price index exclusive
of food and energy prices, has remained relatively steady in the range of
6 to 6/ 2 percent during almost the entire 3 years of expansion.
The stability of the underlying inflation rate reflects, on the one hand,
the continued high levels of unemployment and excess capacity, which have
forestalled the acceleration of inflation that has often occurred in the course
of extended cyclical expansion. On the other hand, inflationary expectations
and institutional characteristics of modern economies have kept the inflation
rate from declining. These characteristics are discussed more extensively in
Chapter 4.
WAGES, PRODUCTIVITY, AND UNIT LABOR COSTS
During the first year of the recovery, productivity rose faster than its
long-run trend, as it typically does in such periods. Since businesses tend to
calculate costs on the basis of secular trends in productivity and set their
prices accordingly, the rise in prices exceeded that of unit labor costs, and
profits per unit of output improved markedly. Since then, the growth of
productivity has slowed, and the movements of prices and unit labor costs
have been more nearly parallel.
On a year-over-year basis, the rate of change in hourly compensation was
essentially the same last year as in 1976. Compensation per hour in the private nonfarm sector showed an 8.5 percent increase, about 0.2 percent less
46
than in 1976. The rate of growth of private nonfarm productivity, however,
slowed substantially to 2 percent. The rise in labor cost per unit of output
therefore increased to about 6/2 percent.
Hourly compensation increased about 1 percentage point faster than the
index of average hourly earnings during the year. The latter measure shows
the change in wages exclusive of the effects of shifts of employment among
industries and changes in manufacturing overtime; it is often used as a
measure of the basic rate of wage increases, though it is only an approximation. About one-half of the difference in 1977 between hourly compensation and average hourly earnings was accounted for by the shift of employment toward high-wage industries. The remaining difference was primarily
due to the increase of fringe benefits, included in compensation but not
counted in the earnings index. Fringe benefits per hour have risen more
rapidly than wages but rose at about the same rate last year as in 1976.
Data on collective bargaining agreements show about 1 percent greater
effective wage-rate adjustments than the data for all nonfarm hourly earnings, but also show a rate of increase that was approximately stable between
1976 and 1977. (Effective wage-rate adjustments include wage changes resulting from current settlements, prior settlements, and cost-of-living clauses.)
In the 12 months ending in September of last year, the latest span for which
data are available, the average effective wage increase for workers included
in major agreements covering 1,000 or more employees was 8.3 percent,
compared with 8.1 percent in all of 1976.
New collective bargaining agreements concluded last year generally provided for wage increases greater than the 1977 rate of increase of average
hourly earnings. Those that were concluded in the first 9 months of last
year and included cost-of-living adjustment clauses provided an average
annual basic wage increase of 5.0 percent, plus the augmentation from the
escalators. If inflation continues at a 6-percent rate, the total annual wage
increase would be about 8 percent. Wage increases in contracts without
escalator clauses averaged 6.9 percent annually over the life of the contract.
These data, however, omit increases in fringe benefits. The data on combined changes in wages and fringe benefits, which are limited to agreements covering 5,000 or more workers, suggest that total labor compensation
under collective bargaining agreements probably continued to rise more
rapidly than compensation for all nonfarm employees. First-year negotiated
adjustments of wages and benefits averaged 9.6 percent last year.
The productivity increase of 2 percent in the private nonfarm economy
in 1977, on a year-over-year basis, is approximately in line with the long-run
trend. This rate is down from 4 percent in 1976 and during the first stage
of recovery in 1975. The growth of productivity is typically greatest in the
early quarters of expansion, when overhead labor becomes more fully utilized and the cyclically sensitive and high-productivity industries recover
faster than the rest of the economy. The progressive decline in recent produc-
47
tivity growth was therefore consistent with the usual cyclical pattern. An
analysis of long-term trends in productivity growth is presented in Chapter 4.
FOOD PRICES IN 1977
Movements of food prices exerted a major effect on the overall rate of
price change during the past year. Between the fourth quarter of 1976 and
the fourth quarter of 1977 the consumer price index for food increased
7.7 percent.
The severe freeze in July 1975 that reduced the 1976-77 Brazilian coffee
crop by 60 percent was reflected in U.S. food prices in early 1977. Reduced
supplies from Brazil, normally the world's largest coffee producer, caused
wrorld supplies to decline 17 percent and average retail coffee prices in
the United States to increase 54 percent during the first 6 months of last
year.
During the middle of last January temperatures in Florida were below
freezing for several days, reducing the fruit crop and heavily damaging the
vegetable crop. Prices of these commodities escalated rapidly until supplies
became available from other areas. Fruit and vegetable prices increased at
an annual rate of 24 percent in the first quarter but declined in the third
quarter (Table 2).
Abundant supplies of all other food products helped to restrain price
changes over the year. Food grain prices declined throughout the year as
U.S. farmers harvested a third consecutive large crop. The lower food grain
prices wrere reflected in the modest 4-percent increase from the fourth
quarter of 1976 to the fourth quarter of 1977 in the cereal and bakery component of the consumer price index.
Declining feed grain prices prompted significantly increased cattle feeding
in the latter months of the year. Total beef and veal production nonetheless
declined 4 percent in 1977. The decline would have been larger if the
drought conditions in the West and Southwest had not encouraged more
rapid slaughtering. Last year marked the third consecutive year of a cyclical reduction in the U.S. cattle herd that has been the deepest in history.
TABLE 2.—Changes in retail food prices, 1976—77
[Percent change, seasonally adjusted annual rate)
1977
Consumer price component
All food
Food away from home.
Food at home
Meats
Cereals and bakery products
Fruits and vegetables
Beverages (nonalcoholic)1
1
1976
IV
1
II
0.4
3.4
-.4
-16.7
-6.2
22.3
32.0
10.0
9.2
10.4
6.6
-1.3
23.7
71.0
13.8
12.1
14.4
11.9
6.9
3.8
119.0
Not seasonally adjusted.
Source: Department of Labor, Bureau of Labor Statistics.
48
III
4.2
7.4
3.2
-6.4
8.1
-12.8
20.3
IV
2.9
3.8
2.7
6.4
3.3
19.0
-10.0
1976 IV
to
1977 IV
7.7
8.0
7.5
4.4
4.1
7.5
41.9
Total meat production, however, was unchanged from 1976, as production of competing meat and poultry products rose to offset declines in beef
output. Consumers substituted more abundant pork and poultry for beef
products during 1977; as a result there were only modest increases in prices
for meat products in general. From the fourth quarter of 1976 to the final
quarter of 1977, beef prices rose only 4 percent, pork prices rose 6 percent,
and poultry prices increased by 7 percent. Retail prices of dairy products
increased 5 percent, largely reflecting the March increase in the support
price of milk.
Consumer expenditures on food, exclusive of alcoholic beverages, totaled
$218 billion in 1977, of which $180 billion was for domestically produced
food products. The value at the farm of the domestically produced foods
was $56 billion, unchanged from 1976. The marketing bill—the cost of
processing, transporting, wholesaling, and retailing—was $124 billion, more
than double the farm value.
The largest expense component of food marketing firms is labor; hourly
compensation in this sector increased 8 percent in 1977. Total labor costs
($58.8 billion) exceeded the farm value of domestically produced foods for
the first time last year. Costs for packaging materials, transportation, energy,
and all other inputs increased over the levels of a year earlier.
OTHER PRICE DEVELOPMENTS
Prices in 1977 for most goods and services other than food and agricultural products moved in a fairly homogeneous fashion. A few exceptions
should be mentioned.
At the retail level, energy prices again posed a special problem early in the
year, as noted above, although the pace of increase in energy prices slowed
slightly later in the year. Prices of houses, both new and old, rose sharply.
On the other hand, prices of apparel and household appliances lagged behind
the aggregate indexes.
Medical costs, led by physicians' fees and hospital charges, continued to
rise at rates substantially above those of other items, and insurance costs
have also risen rapidly. This Administration has proposed to try to reduce
inflation in hospital costs by negotiation between representatives of hospitals
and physicians, insurers, and the government, which now pays more than
half of all hospital charges. The initial goal is to reduce cost increases per
admission to 9 percent in fiscal 1978.
At the wholesale level, costs of construction materials rose rapidly during
most of the year as prices of lumber and other building materials, especially
insulation, moved up sharply. These, of course, contributed to the rise in the
price of houses. The rise in lumber prices seem clearly associated with the
strength in single-family construction activity, which is particularly lumber
intensive. Wholesale and retail fuel prices rose significantly early in the
year. Paralleling the moderate rise in retail prices of apparel, textile prices
rose less rapidly than the overall average, possibly as a consequence of weak
49
consumer demand and strong worldwide competition as w7ell as of good
cotton crops. The pace of inflation has also been relatively moderate for
nonpetroleum chemicals, rubber, scrap metals, and most internationally
traded commodities. Although many raw industrial commodity prices rose
early in the year, possibly as a result of speculation occasioned by fears that
inflation would accelerate, increases tapered off and some prices fell in the
latter half of 1977. Excess world capacity undoubtedly helped to keep these
prices in check.
THE FEDERAL BUDGET AND FISCAL POLICY
Soon after the new Administration came into office, it proposed a series
of measures intended to raise the rate of growth in real output in 1977 and
1978 to a pace that would lead to significant reductions in the unemployment rate. The package of stimulative measures that was proposed would
have had a 2-year budgetary impact of $31 billion.
Given the lags inherent in the implementation of fiscal policy, however,
the new measures did not have an effect until early summer. Indeed, in the
first quarter of 1977, fiscal policy was actually contractionary by almost any
measure because of the unusually slow growth in Federal spending in
combination with a sharp upturn in receipts. For the rest of 1977, however,
fiscal policy was more expansive, as expenditures resumed their normal
growth and the initiatives in the stimulus package began to take effect.
THE PRESIDENT'S STIMULUS PACKAGE
The Administration's stimulus program had seven components:
1. A one-time $50 rebate on 1976 taxes and $50 payments to social
security, supplemental security income, and railroad retirement beneficiaries. The proposed rebates and payments totaled $11.4 billion
and were to be payable in the spring of 19*7*7.
2. A simplification and a permanent increase in the personal standard
deduction. The existing percentage standard deduction was to be converted to a flat deduction of $2,800 for couples filing jointly and $2,400
for single individuals. This change would have reduced personal taxes
by $4 billion a year once it was fully in effect.
3. A choice for business firms between a 2-percentage point increase in
the investment tax credit and a new 4-percent credit against employerpaid social security taxes. The business tax cut would have been worth
$2J/2 billion annually when fully implemented.
4. An increase in the number of public service jobs funded under Titles
II and VI of the Comprehensive Employment and Training Act
from the existing 310,000 to 725,000 by mid-1978.
5. An additional 346,000 positions to be added to the various specialized
employment, training, and youth programs under other titles of CETA.
50
6. A $4-billion increase in the authorization for emergency public works
spending beyond the $2 billion already authorized in 1976 by the Local
Public Works Capital Development and Investment Act.
7. An increase in the amount of Federal grants made available to States
and localities in periods of high employment under the countercyclical
revenue sharing program.
These various components of the President's proposal were designed to
provide stimulus in both 1977 and 1978. A 2-year program wras needed for
a continuing improvement in sales and income. Yet it was necessary to
preserve sufficient policy flexibility so that the program could be adjusted
up or down as circumstances required. The rebate would add immediately
to consumer income and therefore allow the stimulus to take effect quickly.
The other tax cuts, together with the expansion of CETA jobs, State and
local fiscal assistance, and public works, would take effect more gradually,
spreading across the last half of 1977 and into 1978. The increases in spending were designed to phase down as unemployment declined; and permanent tax reductions were held to a minimum to allow more time to consider longer-run budget priorities and the desirability of additional tax cuts
in conjunction with tax reform.
THE STIMULUS PROGRAM ACTUALLY ENACTED
Review of the economic situation and the stimulus measures by both the
Congress and the Administration in the late winter and early spring led to
some revisions in the original proposal. In view of the substantial improvement in the rate of expansion of total output and consumer spending in the
early part of the year, it was felt that the one-time rebate, which had been
designed to give a quick boost to spending, was no longer necessary. The
Administration withdrew the proposal in April. In the absence of the rebate
for individuals, it was felt that the optional business tax credits were no
longer appropriate. The removal of these two items reduced the total size of
the Administration's proposed stimulus package by $14 billion.
The tax reduction components of the stimulus program that was enacted
were incorporated in the Tax Reduction and Simplification Act of 1977.
This bill, which became law in late May, included the following items:
1. A permanent increase in the personal standard deduction to a flat
$2,200 for single individuals and heads of households and a flat $3,200
for married couples filing jointly.
2. A nonrefundable employment tax credit for 1977 and 1978 equal to
the lesser of one-half the wage or $2,100 for each new employee hired
after growth in the firm's wage bill, as specified in the act, exceeds
2 percent. (The wage bill is total wages paid up to $4,200 per employee.) The total credit available for any one year cannot exceed
either $100,000 or 25 percent of the firm's Federal unemployment
tax base. Unused credits are subject to carry-back and carry-forward
rules in effect for the investment tax credit. The employer's normal
51
tax deduction for wage costs is reduced by the amount of the employment credit.
3. Extension through the end of 1978 of several tax reduction measures
enacted in 1975 and 1976: the general personal income tax credit,
the 10-percent earned income tax credit for low-income families with
dependents, and the reduction in the corporate tax rate from 22 to
20 percent on the first $25,000 of corporate income and from 48 to
22 percent on the second $25,000 (the rate remains at 48 percent for
earnings above $50,000).
4. An increase in funds for countercyclical revenue sharing in 1977 and
1978, and an adjustment of the formula under which the funds are
distributed to State and local governments to emphasize local unemployment rates.
5. Several miscellaneous changes in the tax code and modifications of
provisions in the Tax Reform Act of 1976.
The remaining parts of the stimulus program—the expansion of public
works, public service employment, and other employment and training programs—were generally approved as requested in authorizing legislation
enacted during the spring of 1977 and funded by the Economic Stimulus
Appropriations Act. Table 3 shows the budgetary impact of the program
passed by the Congress, on a basis consistent with the Federal budget document submitted in January 1978.
TABLE 3.—Budgetary impact of the economic stimulus program, national income
and product accounts, calendar years 1977—78
[Billions of dollars)
Program
1977
1978
6.1
16.9
Tax programs:
Change in standard deduction and other.
Business tax incentives
4.9
3.3
1.6
9.9
7.4
2.6
Expenditure programs:
Grants-in-aid to State and local governments.
Training and youth programs
Public service employment
Countercyclical assistance
Local public works
1.2
.0
.7
.5
.0
7.<f
TotaL
1.3
3.5
.6
1.6
Sources: Department of Commerce (Bureau of Economic Analysis) and Office of Management and Budget.
FEDERAL EXPENDITURES IN 1977
Total Federal Government expenditures rose by 9J/2 percent in 1977
(Table 4), up slightly from the growth in 1976.* As noted earlier, beginning
in the second quarter, growth in real Federal defense and nondefense purchases was the most rapid since the mid-1960s and was an important factor
in sustaining real growth in the economy during the year.
^Unless otherwise noted, reference is to calendar years and to the Federal sector
in the national income and product accounts (NIPA).
52
Grants to State and local governments grew somewhat less rapidly than
purchases. Most of the growth in grants occurred in the second half of the
year, in part as a result of the expenditure components of the President's
stimulus program. The growth in Federal transfer payments in 1977 was
slowed by declining outlays for unemployment insurance; other social insurance expenditures rose enough for benefits to keep pace with the increase in
the general price level.
TABLE 4.—Federal Government receipts and expenditures, national income and
product accounts, calendar years 1976-77
[Billions of dollars]
Receipt or expenditure category
Federal Government receipts.
Personal tax and nontax receipts
Corporate tax accruals _
Indirect business tax and nontax accruals..
Contributions for social insurance..
Federal Government expenditures
Purchases of goods and servicesNational defense.
Nondefense
1976
19771
332.3
373.9
147.3
55.9
23.4
105.7
170.7
59.5
24.8
118.9
386.3
423.5
130.1
145.4
86.8
43.3
94.3
51.1
Transfer payments..
162.0
173.1
To persons
To foreigners..
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of government enterprises.
158.8
3.2
169.8
3.2
61.0
27.2
5.9
67.6
29.5
7.9
-54.0
-49.6
Surplus or deficit ( - ) .
1
Preliminary.
Note.—Detail may not add to totals because of rounding.
Source: Department of Commerce (Bureau of Economic Analysis).
FEDERAL RECEIPTS AND THE DEFICIT IN 1977
Federal receipts rose by $41.6 billion in 1977, a somewhat smaller increase
than occurred in 1976. The growth was unevenly distributed over the
year, with a very large increase in the first quarter and much smaller ones
in subsequent quarters. The abnormally large $20.4-billion (annual rate)
increase in the first quarter was due to an extra $4 billion in payroll tax
increases and a nonrecurring $5.5-billion increase in estate and gift taxes.
The additional payroll taxes were the result of the temporary 0.2 percentage point increase in the Federal unemployment insurance (UI) tax
rate mandated by the Unemployment Compensation Amendments of 1976,
increases in State unemployment insurance taxes—which are counted in
the Federal sector—to meet the higher costs of unemployment benefits paid
during the recession, and an automatic rise in the taxable wage base for social
security. The increase in estate and gift tax collections occurred in response
to the revisions made in the Tax Reform Act of 1976. Since gifts were treated
more liberally under the old law, there was an incentive to cluster gifts at
53
the very end of 1976, before the new law came into effect. The receipts were
collected in early 1977.
The reduction in the rate of increase in receipts during the remainder of
the year reflected the personal and corporate tax cuts enacted as part of
the stimulus package. For the year as a whole personal taxes and contributions for social insurance grew the most rapidly. Together they now account
for 77 percent of total Federal receipts, compared with 60 percent in 1957.
Most of this increase results from legislated increases in social insurance
taxes. Periodic tax reductions have maintained the share of personal taxes
in total Federal receipts at a fairly constant 45 percent over the past 20
years, offsetting the rise that would have resulted otherwise because of the
progressivity of this tax. The total Federal tax share of GNP rose from 19.5
percent in 1976 to 19.8 percent in 1977.
The Federal deficit on a national income and product accounts (NIPA)
basis declined in 1977 for the second year in a row, falling to $49.6 billion for
the year. This was $9.5 billion smaller than the deficit projected in February, even after adjusting for withdrawal of portions of the stimulus
package.
Several tax changes became effective on January 1, 1978, as a result of
previously enacted legislation. The wage base subject to unemployment insurance taxes increased from $4,200 to $6,000 per worker. This change is
necessary to keep receipts rising in line with the higher unemployment insurance expenditures. The maximum amount of wages subject to social security
taxes was also raised from $16,500 to $17,700 and the total tax rate increased
from 11.7 to 12.1 percent. The Social Security Amendments of 1977 provide
for major increases in social security taxes, but they are not to take effect
until 1979 and subsequent years. Finally, the Federal excise tax on telephone
service was reduced from 5 to 4 percent.
THE HIGH-EMPLOYMENT BUDGET
Table 5 shows the high-employment Federal budget for recent years. This
budget shows the difference between total receipts and expenditures under
the assumption that the economy is operating at a constant high-employment level. The use of high-employment GNP as the level of activity underlying this hypothetical budget is a convenient but arbitrary convention. The
purpose is to adjust the budget for cyclical changes in the economy, and
this could as well be accomplished using any other trend path of GNP. The
high-employment budget eliminates changes in receipts that occur automatically in response to the cyclical behavior of output and employment
leaving only those changes due to discretionary fiscal policy and to the
secular growth of output and prices. Automatic changes in unemployment
compensation payments are excluded from high-employment expenditures;
expenditures resulting from new programs, including those explicitly for
countercyclical purposes, are included.
54
TABLE 5.—Actual and high-employment Federal receipts and expenditures, national
income and product accounts, calendar years 1970-77
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Actual
Calendar year
Receipts
Expenditures
High-employment
Surplus or deficit (—)
Amount
Percent
ofGNP
Receipts
Expenditures
Surplus or deficit (—)
Amount
Percent
of GNP2
1970—
1971
1972 .
1973
1974
1975....
1976
19771
192.1
198.6
227.5
258.3
288.6
286.9
332.3
373.9
204.2
220.6
244.7
265.0
299.3
357.1
386.3
423.5
-12.1
-22 0
-17.3
-6.7
-10.7
-70.2
-54.0
-49.6
-1.2
-2.1
-1.5
-.5
-.8
-4.6
-3.2
-2.6
201.1
209.5
232.1
256.6
306.1
326.0
363.8
401.9
203.8
219.4
243.9
264.9
298.3
350.3
381.1
419.8
-2.7
-9.9
-11.8
-8.3
7.8
-24.2
-17.3
-17.9
-0.3
-.9
-1.0
-.6
.5
-1.4
-1.0
-.9
1977: 1
II
III
364.9
371.2
373.2
403.7
411.5
432.1
-38.8
-40.3
-58.9
-2.1
-2.2
-3.1
397.1
398.8
399.3
399.2
407.8
428.4
-2.1
-9.0
-29.1
-.1
-.5
-1.4
1
Preliminary.
2 High-employment surplus or deficit as percent of high-employment GNP.
Note.—Detail may not add to totals because of rounding.
Sources: Department of Commerce (Bureau of Economic Analysis), Office of Management and Budget, and Council of
Economic Advisers.
The restrictive shift of fiscal policy in the first quarter of 1977 and the
subsequent expansionary swing are reflected in the high-employment budget.
Even excluding the nonrecurring increase in gift taxes, the high-employment deficit fell by $8.4 billion to $2.1 billion in the first quarter. Thereafter
it rose to $29.1 billion in the third quarter. From the end of 1976 to the third
quarter of 1977 the high-employment deficit rose by $13.0 billion, while the
actual deficit rose by only $3.0 billion. The difference is a measure of the
extra increase in receipts and reduction in expenditures generated by the
cyclical increase in GNP toward its high-employment path.
The change in the high-employment surplus is a convenient measure of
whether fiscal policy is moving in a contractionary or expansionary direction.
A shift in fiscal policy may result either explicitly from discretionary changes
in taxes or expenditures, or implicitly from normal growth in real output
and prices, which automatically lifts revenues by more than expenditures.
Hence, if fiscal policy is to remain unchanged in its effects on the private
economy, regular discretionary reductions in taxes or increases in expenditures are necessary to neutralize this fiscal drag.
The level of the high-employment surplus or deficit consistent with maintaining high-employment output depends on the balance between nonFederal saving and investment that would occur at that level of economic
activity. An imbalance must be accommodated by the Federal surplus or
deficit, or be corrected by the effects of monetary policy or other measures.
There is no given level of the high-employment surplus that is suitable in
all situations. In particular, just as a balanced actual budget is often not
a desirable objective of fiscal policy, a balanced high-employment budget
55
will only on occasion be appropriate. As discussed in more detail in Chapter 2, the appropriate level of the high-employment surplus or deficit in the
Federal budget depends on the spending decisions of the private sector and
of State and local governments, and on the factors affecting the foreign
trade balance.
The appropriate path of the high-employment surplus must take into
account the movements of actual output relative to the high-employment
trend. When the economy is recovering from recession, investment tends to
be restrained by both current and past levels of excess capacity, and a more
stimulative fiscal policy is necessary to raise capacity utilization. As private
demand gains momentum and the economy approaches high employment,
the high-employment Federal budget should move closer toward, or into,
balance to make room for accelerating private investment. The desirable
level and rate of change of the high-employment budget also depend, of
course, on the stance of monetary policy and other circumstances specific to
any given period.
The high-employment budget should not be interpreted as a precise measure of the Federal sector's impact on the economy. In the first place, different
types of taxes and expenditures have widely differing impacts on income and
output. For example, an increase in Federal purchases yields larger gains in
output than an increase in transfer payments or a reduction in taxes. Similarly, some kinds of tax reductions tend to have a larger stimulative effect
than others. Secondly, the effects on aggregate demand of a given tax change
will depend on the stage of the business cycle because of the cyclical variability of income shares. Nevertheless, the high-employment budget is a useful simple indicator of the direction of fiscal thrust.
MONETARY POLICY
Short-term interest rates rose fairly sharply from April through October
of last year, following an unusual period of downward drift during the
first 2 years of the current expansion. Nonetheless, financial markets showed
few signs of stress during 1977. Deposit flows to thrift institutions remained
fairly high, although some slowing was apparent late in the year. Mortgage
credit rose rapidly and there were few signs of tightening of mortgage terms.
The volume of new corporate bond issues was down slightly from the preceding year as businesses shifted somewhat toward mortgages and shorterterm borrowing. The yields on new corporate bonds and on long-term
Treasury issues rose in the first quarter but then remained stable until
late in the year, when a further increase occurred. State and local bond
yields drifted slightly lower in 1977, despite a considerable increase in
offerings. On balance, the strong liquidity positions and ample cash flow
of major lending institutions early in the year limited the upward movement of long-term rates and accommodated substantial credit flows, though
at rising costs to many borrowers.
56
The sharp increase of almost 2 percentage points in the Federal funds
rate between April and October was unsettling, however, both because of its
speed and because of uncertainties about its implications for the future of
interest rates. From March through October the narrowly defined money
supply ( M b the sum of demand deposits and currency) grew erratically but
rapidly, averaging a 10-percent annual rate. This was substantially faster
than the 6 l/i -percent upper limit of the target growth range announced by
the Federal Reserve at the end of 1976 for the year ahead. Consequently, the
Federal Reserve moved to tighten the availability of bank reserves, which
led to increases in the Federal funds rate and other short-term interest rates.
The unusually rapid growth of Mi in 1977 was sharply at variance with
the pattern of growth during the first 2 years of the current expansion.
During that earlier period money growth had been unusually slow relative
to nominal GNP. The resulting rapid rise in velocity (the ratio of GNP
to Mi) was accompanied by stable or slightly declining interest rates, indicating that the private sector was developing new means for economizing
on cash balances (see discussion later in this chapter). Questions arose during the year concerning the possibility that the unusual velocity pattern
would not continue. If velocity growth were returning to a historically more
normal pattern, further increases in interest rates would be required to hold
growth of the monetary aggregates within the Federal Reserve's target
ranges.
INTEREST RATES AND SECURITY YIELDS
Movements of virtually all short-term interest rates tended to follow the
Federal funds rate during the year, rising from late spring through early
fall and then leveling out through December. During the year as a whole
the rate on 3-month Treasury bills rose from 4.5 to 6.1 percent. The prime
rate charged by banks on short-term business loans followed, rising from
6*4 percent to 7% percent. There were, however, reports of shading of
the prime rate, as banks sought to expand their business loans.
Long-term interest rates were relatively stable during the year, after
declining rapidly in the preceding 2 years. The yield on newly issued Aaarated utility bonds averaged 8.2 percent, compared with an average 8.5 percent during 1976. The yield for 20-year Treasury securities rose unevenly
from a January low of 7.5 to 7.9 percent in December, but averaged 7.7
percent for the year, compared with 7.9 percent in 1976.
Corporations had no apparent difficulties in marketing new debt issues,
for there was ample demand from both financial institutions and individuals
wary of common stocks. Although the yield curve became substantially
flatter, as short rates rose relative to long, the curve remained positively
sloped particularly within the 1-year range. This resulted in part from the
fact that bond market participants expected some further rise in short rates.
Interest rates on municipal bonds were an exception to the general pattern
of interest rates: yields on lower-rated tax exempt bonds continued to fall.
Yields on Baa-rated municipal bonds fell from 6.7 percent in December 1976
57
to 5.8 percent in December 1977. as investors' fears of municipal bankruptcies abated. Inflation also pushed more incomes into the range where
the tax exemption is valuable, and the growth of tax exempt mutual funds
offered individuals greater access to the municipal bond market. This downward movement of yields was not shared by the more highly rated municipals: the yield on Aaa bonds fluctuated in a narrow band of 5.1 to 5.3
percent.
Despite relatively stable long-term interest rates and rising profits, many
stock prices fell in 1977. The widely quoted Dow-Jones average of selected
industrial stock prices fell from 1005 at the end of 1976 to a 1977 low of
801 in early November. The broader New York Stock Exchange composite
index fell by 14 percent over the same period. Stocks with low price-earnings
ratios and high dividend yields generally did better than others. The securities dealers' index (NASDAQ) rose during 1977 by over 7 percent. There
have been a number of reasons for the decline in many stock prices in the
face of rising corporate earnings. Fears of unfavorable changes in tax laws,
particularly with respect to capital gains taxes, and uncertainties about the
final form of other policy measures, such as the energy bill, undoubtedly
played a part. The dominant factors affecting stock prices, however, were
probably rising interest rates and fears of an economic slowdown.
The condition of the stock market is both a symptom of economic uncertainties and a source of economic problems. A lower value of corporate
shares makes it expensive for corporations to raise new equity to finance
new plant. It also creates an incentive to use internal funds to buy debt or
equity investments, rather than make new investment in real assets. The
reduction in wealth may also reduce other components of aggregate demand,
and this in turn further reduces the incentive for investing in new plant.
SAVINGS FLOWS, CREDIT AVAILABILITY, AND USES OF FUNDS
Business credit availability remained ample at commercial banks, insurance companies, and pension funds. The latter two classes of institutions
have been active lenders in the new issues markets, as the funds available to
them rose during 1977.
Although new corporate long-term bond issues were down slightly from
1976, the rise in new commercial mortgages offset this decline. Short-term
corporate borrowing from commercial banks and finance companies rose
more rapidly in 1977 than earlier in the recovery. Nevertheless, total business borrowing needs remained moderate.
While M1 growth rates rose during the course of 1977, the growth rate
of time and savings deposits at commercial banks (other than negotiable
certificates of deposit at large commercial banks) fell. For the 6 months
ending in March 1977, the growth rate of these deposits was 15.8 percent,
at an annual rate. For the 9 months ending in December the growth rate
slowed to 9.3 percent. There was some outflow from State and local savings
accounts and growth in personal savings accounts slowed. The rate of sav-
58
ings flows at thrift institutions slowed late in the year, falling from a 14.8
percent anual rate through October to about 11 percent in the final 2
months of the year. It might have slowed earlier but for the success of the
thrift institutions in capturing funds previously held at banks in the "wild
card" certificates that were issued in 1973 and matured last summer. As a
consequence of continued inflows during the major part of the year, mortgage credit remained readily available.
The continuation of strong savings flows at thrift institutions during
most of the year was attributable to several causes. Short-term rates remained below the levels of the previous business cycle peak in November
1973 and were generally below the regulatory ceilings on deposits until late
in the year. The response of the public to changes in relative interest rates is
likely to be gradual at first and then to gain momentum when interest
rates approach or surpass previous peaks.
It is also important that the deposit and liability structure of financial
intermediaries has changed substantially since 1973, the last period of credit
market tightness. On the deposit side, the institutions rely less on passbook accounts, and more on long-term certificates of deposit. At savings
and loan associations, for example, passbook accounts fell from over 50
percent of deposits in late 1972 to under 40 percent in 1977. At the other
end of the maturity range, long-term certificates have become more
important.
This movement to longer maturities has created a more stable deposit
structure. Most obviously, certificate deposits are virtually locked in until
the certificate matures, since the penalties for early withdrawal are severe.
In addition, the yield curve embodied in the interest rate ceilings imposed
by the Federal Reserve (Regulation Q ) , the Federal Deposit Insurance Corporation, and the Federal Home Loan Bank Board is somewhat steeper
than the current yield curve on market securities. As a result, although
market rates were above effective ceilings at the shorter end of the maturity
range late in the year, ceilings on the long maturity certificates were still
above market yields on comparable-maturity government securities.
In previous periods of credit stringency, thrift institutions were also in a
poor position to pay rates high enough to attract funds. The average mortgage held by savings and loan associations yielded only 7 percent at the end
of 1972. By mid-1977 this had risen to over 8 percent. As a result thrift institutions are better positioned to attract high-cost funds than they were
previously.
Reflecting the ready availability of mortgage credit, mortgage borrowings
rose sharply in 1977. The substantial excess of mortgage borrowings over
the value of new residential construction may indicate that some funds were
pulled out of the housing market and used to support consumption expenditures or buy financial assets. By mid-1977, mortgages outstanding had
reached 45 percent of personal income, above the historic peak of 44.3
percent reached in 1965 (Table 6). Consumer credit outstanding reached
59
TABLE 6.—Mortgage
and consumer debt outstanding as percent of disposable
personal income, 1974—77
[PercentJ
Debt
Period
Total
Mortgage
Consumer
1974
62.4
43.5
18.9
1975
60.3
42.6
17.7
1976
61.3
43.4
17.8
1977: First 3 quarters.
63.5
45.1
18.4
Sources: Department of Commerce (Bureau of Economic Analysis) and Board of Governors of the Federal Reserve
System.
I8J/2 percent of disposable income in mid-1977, up substantially from 1976
but still below the 1973-74 peak.
Although the total Federal deficit of $45 billion in fiscal 1977, on a
unified budget basis, was down from the $61 billion of fiscal 1976, the
Federal Government remained a large borrowing sector. This large Federal
deficit was substantially offset, however, by the $27-billion surplus of State
and local governments (including both operating and social insurance
funds) during the same 4 quarters. The total government deficit (on a
NIPA basis) was $18 billion for fiscal 1977. In addition, about $25 billion
of Federal debt was purchased for foreign official accounts.
State and local government issues continued to grow as marketing became
easier. These governments, however, bought more financial assets, primarily
Treasury securities, than they sold. Some of the securities purchased were
special issues, as State and local governments utilized the limited legal opportunities to issue new tax exempt securities of their own, in advance of
maturing issues, investing the proceeds in special taxable Treasury issues.
THE STATE OF THE ECONOMY AT YEAR-END
Prospects for continued expansion were favorable as 1977 came to a close.
The sectors of the economy were in good balance, inventories were relatively
lean, and the balance sheets of businesses and financial institutions were
strong. Nevertheless much remains to be accomplished to achieve the
Nation's economic goals. The great resources of the U.S. economy are still
incompletely utilized. Since the cyclical peak in the fourth quarter of 1973,
growth in real output has averaged 2.3 percent per year. This is an abnormally slow rate of growth for a 4-year period. Capacity utilization in
manufacturing still hovers 4 to 5 percentage points below levels that, in the
past, have been consistent with high employment, and its low level is contributing significantly to lagging profit growth and a rate of investment that
is too low to meet long-run needs.
60
The unemployment problem remains one of the most critical facing
the Nation. Not only is the aggregate rate too high, but the composition of
unemployment implies that recovery is bypassing some segments of society.
Young people and minorities, in particular, continue to account for a disproportionate share of the unemployed, and continued rapid growth of
demand may make only small inroads into this problem. It is important to
identify and correct the imperfections in labor markets that limit the employment opportunities of these groups if prosperity is to be equitably shared.
Progress in curbing inflation has also been painfully slow because it has
proved difficult to reverse the momentum that develops when past inflation
comes to be expected. Stabilizing the rate of inflation is an important first
step. Reducing the rate further remains a challenging goal.
Continued and accelerated growth in productivity is also required both
as a major contributor to the reduction of inflation, and in order to sustain or
enhance the U.S. position in international trade. Stronger growth of investment will be required to achieve this objective, as well as to avoid capacity
bottlenecks at future levels of high employment, to accommodate needs for
environmental control equipment, and to adapt to changing technological
and cost conditions affecting particular areas and industries.
A critical challenge remaining at the end of 1977 is a successful shift
toward greater energy self-sufficiency. This must entail both conservation of
existing resources of oil and gas and conversion to more abundant alternative
energy sources. Passage of the Administration's National Energy Plan and
the help of all sectors of our economy in its implementation are the first steps
in laying the foundation for secure economic growth over the coming
decades.
SPECIAL ISSUES
A number of special issues occupied the attention of economic policy
makers and observers during the past year. These issues require separate
consideration not only because of their importance for interpreting the
events of 1977 but also because of their significance for the entire recovery
and for its continuation. These issues include developments in financial markets that affect the uses of money balances and their implications for monetary policy, the ability accurately to control and forecast Federal Government expenditures, and the underlying strength of investment propensities
in the U.S. economy.
MONEY GROWTH AND VELOCITY
Velocity, the ratio of GNP to Mi, rose by 8.3 percent in the first year of
recovery, and by 3.5 percent in the second year, which ended with the
first quarter of 1977. These are exceptional increases for a period when
interest rates were not increasing. Customarily the increases in velocity during cyclical expansions are in part the result of rising interest rates that lead
248-947 O
61
78 - 5
to economizing of money balances. Velocity increases during the first 2 years
of the current expansion occurred despite declines in short-term interest
rates. Thus the behavior of velocity in the current recovery stands in sharp
contrast to previous cyclical patterns. This contrast is shown in Chart 1.
Shifts in velocity, or the relation of money demand to income and interest
rates, complicate the implementation of monetary policy. For example, a
decline in interest rates could indicate a reduction in the public's preferences
for money holdings or a weakening in the pace of economic activity. The
appropriate response to the former shift might be slower growth in the money
supply, while the response to the latter might be more stimulative monetary
policy. Developments influencing the relation of money balances to the
usual determinants of money demand consequently have significant policy
implications.
Chart 1
Velocity and Interest Rates Over
the Business Cycle
CYCLICAL PEAK=100
AVERAGE OF 4
PRECEDING CYCLES^/
90
J
PEAK
L
l
4
I
I
J
I
L
12
8
16
CHANGE FROM CYCLICAL PEAK (PERCENTAGE POINTS)
4
TREASURY BILL RATE^
2
CURRENT CYCLE
-2
AVERAGE OF 4
PRECEDING CYCLES-2^
I
-4
PEAK
4
l
I
8
J_
I
12
QUARTERS AFTER PEAK
U RATIO OF GNP TO Mi (DEMAND DEPOSITS PLUS CURRENCY); SEASONALLY ADJUSTED.
U SINCE THE SHORTEST PEAK-TO-PEAK PERIOD IS FROM 1957 III TO 1960 II, THE AVERAGE OF THE
PRECEDING CYCLES IS CUT OFF ELEVEN QUARTERS AFTER THE PEAK.
1/ MARKET YIELD ON 3-MONTH BILLS.
SOURCES: DEPARTMENT OF COMMERCE AND BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM.
62
16
The behavior of velocity in the current recovery cannot be completely
explained by the behavior of the factors that usually determine money
demand. Most statistical analyses that served to explain money demand in
the 1950s and 1960s overpredict money demand for the period from late
1974 through early 1977. Many reasons have been suggested for the apparent
downward shift in money demand relative to GNP. The principal cause
appears to be changes in cash management techniques of businesses and
individuals. Some of the more frequently suggested factors are summarized
below:
1. The high interest rates of 1973-74 encouraged the public to institute
programs to conserve on money balances. When rates fell, these programs were not dismantled. As a result the amount of money demanded did not return to its earlier relation to GNP.
2. The growth of cash management services offered by banks has reduced
corporations' demand for cash. These services allow corporations to
keep demand deposits at minimal levels. For example, some banks
automatically invest any excess funds in overnight repurchase agreements for some large corporate customers.
3. The growth of negotiable order of withdrawal (NOW) accounts,
money market mutual funds, and credit union share drafts has absorbed funds that would otherwise have gone into demand deposits.
4. The growth of corporate and State and local government savings accounts may have absorbed funds from demand deposits.
5. The growing availability and use of overdraft accounts and credit cards
have reduced individuals' needs to keep large demand deposit balances. Growing use of telephonic transfers of funds from savings
accounts to demand balances and third-party transfer arrangements
have worked in the same direction.
The size of these influences is difficult to determine. The volume of new
deposit instruments (NOW accounts, money market funds, credit union
share drafts, and corporate and State and local government savings accounts)
is between 5 and 10 percent of M1? but some portion of these funds was
certainly drawn from sources other than demand deposits. The size of the
impact of the other potential causes is largely conjectural.
The broader definitions of the money supply, ML> and M3, have shown
much less evidence of a shift in money demand. M2 includes, in addition to
Mi, time and savings deposits at commercial banks, other than large negotiable certificates of deposit at large banks. M 3 includes, in addition to M^,
deposits at thrift institutions (mutual savings banks, savings and loan associations, and credit unions).
The growth rates of the more broadly defined money stocks have generally
been closer than Mi to the target ranges set by the Federal Reserve for 1977
From the fourth quarter of 1976 to the fourth quarter of 1977, M 2 grew by
9.6 percent, at the high end of the target range of 7 to 10 percent, and M 3 by
11.6 percent, slightly above its range of 8^2 to 11 l/i percent.
63
Since April, the behavior of velocity of Mi has been more generally in
line with the trend from the early post-World War II years to 1974. Following the sharp growth of Mi in the second and third quarters, money
growth in the fourth quarter slowed to a 7-percent annual rate. Given the
increase of about three-fourths percentage point in short-term interest rates,
and the 10.7-percent rate of growth of nominal GNP, this growth in M3
appears consistent with the relationship between money demand and GNP
that prevailed prior to 1974. The pattern of velocity in the last 3 quarters
of 1977 may indicate that the effects of structural changes in financial
markets are no longer growing, though it is too early to be certain.
FEDERAL SPENDING SHORTFALLS
Federal spending in 1977 fell short of the levels projected in the new
Administration's budget. This is consistent with a tendency for the Federal
budget in January of each year to overestimate the level of expenditures
for the current year. In 6 of the last 8 years, actual spending, as measured in
the NIPA accounts, has fallen below the level projected in the January
budget by amounts ranging from $0.4 billion to $7.6 billion (Table 7).
In fiscal 1977 the shortfall was $13.7 billion, measured from the new Administration's projections sent to the Congress in February. This was 3.3 percent
of actual spending.
Although it is desirable to increase efficiency and minimize costs in the
provision of Federal Government services, unanticipated shortfalls in expenditures can undermine effective implementation of fiscal policy. Shortfalls may have adverse effects on real economic activity because fiscal policy
becomes less expansionary, or more restrictive, than was intended when the
budget was planned. A number of steps are involved in the formulation and
implementation of fiscal policy. Projections are made of the likely course of
private demand and nondiscretionary government spending. These are balanced against the economy's supply capabilities. The discretionary changes
TABLE 7.-—Comparison of projected and actual Federal expenditures, national
income and product accounts, fiscal years 1970-77
[Billions of dollars, except as noted]
Actual less projection
Fiscal year
Projection *
Actual
Amount
1970
1971
1972
1973
1974
1975
1976
1977
.
196.0
212.4
238.2
259.7
286.4
324.3
378.7
425.5
. . . .
195.6
212.7
232.9
256.2
278.8
328.7
372.3
411.8
-0.4
.3
-5.3
-3.5
-7.6
4.4
-6.4
-13.7
Percent of
actual
-0.2
. l
-2.3
-1.4
-2.7
1.3
-1.7
-3.3
1
Projections made in the Budget of the United States Government published in January of the current fiscal year,
(February Budget used for 1977), adjusted for revisions by applying projected percent changes to revised data.
Sources: Department of Commerce (Bureau of Economic Analysis), Office of Management and Budget, and Council of
Economic Advisers.
64
in taxes or spending required to achieve the desired fiscal stance must be
determined in light of these projections. Adjustments are, of course, made
in the fiscal program by both the Congress and the Administration between
presentation of the budget in January and the period to which it applies,
which begins 9 months later and ends 21 months later. Nevertheless the
process of changing taxes and expenditures is not sufficiently flexible to
allow rapid adjustments to unanticipated fluctuations in Federal outlays
for basic activities. Reliable expenditure projections are necessary if fiscal
measures are to be controllable and effective policy tools.
The magnitude of the effects of shortfalls on the real economy depends on
which categories of spending are affected. A shortfall in purchases will have
the strongest negative impact because they directly affect economic activity.
Underspending in transfers and grants will have a smaller effect, since they
are received by individuals and State and local governments, who spend only
a part of their receipts. Shortfalls in financial transactions and other asset
transfers—which are included in the unified budget, but not in the Federal
sector in the national income and product accounts shown in Table 7—have
only an indirect effect on aggregate demand. Nevertheless shortfalls in
financial transactions do directly affect the size of the total Federal deficit
that must be financed by the Treasury. Uncertainties about borrowing
requirements resulting from inaccurate estimates of the Federal deficit may
be unsettling to financial markets.
The existence of periodic shortfalls may be explained partly by difficulties
in forecasting with precision certain key economic and demographic variables that determine spending levels—for example, the rate of inflation and
the numbers eligible for various transfer programs. In addition, the timing
of legislation necessary to implement parts of the budget may be hard to
forecast. In principle, however, there should be no reason why these problems should cause a systematic bias in expenditure estimates.
Nonetheless, there is an apparent upward bias in Federal spending projections. There are several possible explanations for this phenomenon. First,
agencies naturally tend to be overly optimistic about their current-year
spending estimates, because authorizations for the following year often
depend on actual outlays for the current year. Second, there is also a tendency to overestimate the spend-out rates for new program initiatives, both
because of the lack of experience with the new programs and because of
optimism about their likely success. For example, it was originally estimated
that $0.6 billion would be spent on public works in 1977 under the increased authorization contained in the stimulus package. In fact, spending
was negligible, although commitments by the Federal Government for specific
local projects were completed on schedule. Finally, there are no formal
penalties in the Federal budget system for errors in estimating outlays. The
spending ceilings in the Congressional Budget Resolutions are a constraint
on legislative appropriations but they do not constrain Administration estimates of outlays.
65
Since these institutional forces are largely beyond effective control, it is
likely that administrative agencies will always tend to overestimate outlays.
Nevertheless steps are being taken to mitigate this problem. First, there must
be regular monitoring and scrutiny of agency budgets by the Office of Management and Budget (OMB) to ensure that their outlay projections reflect
the best information available. Revised outlay estimates for fiscal 1978 published last November identified $11 billion in reductions from estimates
made the previous July. Second, to the extent that a regular pattern remains
in the difference between actual and predicted levels of Federal spending,
adjustments can be made to reflect this in fiscal policy decisions. Continuing
efforts by OMB, in cooperation with Federal agencies, can result in more
reliable estimates and will improve fiscal management.
BUSINESS FIXED INVESTMENT
Real business fixed investment has grown very slowly over the past 4
years in comparison with its performance in earlier business cycles in the
post-World War II period. In the final quarter of last year, real investment
outlays were 2 percent below their level at the business cycle peak in the
final quarter of 1973. At the comparable stage in four previous cyclical
recoveries (excluding the 1957-60 cycle, which is too short for comparison),
real business fixed investment averaged 14 percent above its level at the
previous cyclical peak.
In large measure, the lag of business capital outlays results from the depth
of the last recession—the most severe in the post-World War II period—
and its effects on many of the determinants of investment. Investment in
structures, however, has been significantly below expectations and has pulled
down the investment total. Furthermore, surveys of plans for investment
in 1978 do not at the present time suggest the strength that would normally
have developed after a sustained period of increases in capacity utilization
and in profits.
The investment performance in the current expansion is disturbing for
two reasons. First, strong investment is needed to sustain economic expansion and keep the economy moving toward high employment. Higher levels
of investment spending during the expansion to date would have made a
welcome contribution to total demand. Second, sluggish investment implies
slow growth of capacity. Although measurement of capacity is necessarily
imprecise, estimates of the growth of capacity in manufacturing industries
indicate that growth has slowed in recent years. This growth averaged 4.0
percent from 1968 to 1973 and has fallen to 2.9 percent from 1973 to 1977.
In view of the large growth of employment needed in the years ahead to
reach unemployment targets in the face of rapid labor force growth, a faster
expansion of capacity than the 1973-77 pace will be required to avoid
capacity bottlenecks at high employment. Investment must rise as a share of
total GNP in coming years in order to achieve adequate growth of capacity.
66
Chart 2 compares the ratio of real business fixed investment to real
GNP with its average over four previous recoveries. There has been a sharp
decline in this ratio from the unusually high 1973-74 peak. This peak
occurred when capacity shortages were providing a strong incentive for
investment spending. Investment spending declined more slowly relative
to real GNP in the 1974-75 recession than in previous downturns, but its
ultimate decline was greater. The recovery of investment relative to GNP
was also slower than normal through the end of 1976, 12 quarters after the
cyclical peak. The ratio at the end of 1977, however, was 9.6 percent, or
0.1 percentage point above the average of this ratio at a comparable stage
of four previous cycles. This comparison overstates the amount of investChart 2
Investment and Capacity Utilization
Over the Business Cycle
PERCENT
12
REAL BUSINESS FIXED INVESTMENT AS
PERCENT OF REAL GNP
10
S
AVERAGE OF 4
PREVIOUS CYCLES
0 I
I
PEAK
PERCENT
90
i
i
i
I
I
I
I
I
I
I
I
12
i
16
MANUFACTURING CAPACITY UTILIZATION
80
CURRENT CYCLE
AVERAGE OF 4
PREVIOUS CYCLES
I
PEAK
I
4
I
I
I
I
I
8
QUARTERS AFTER PEAK
J
I
12
I
I
I
i
16
NOTE: SEASONALLY ADJUSTED. AVERAGE OF 4 PREVIOUS CYCLES INCLUDES THOSE EXTENDING FROM
PEAKS OF 1948 IV, 1953 II, 1960 II, AND 1969 IV.
SOURCES: DEPARTMENT OF COMMERCE AND BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM.
67
merit that added to capacity, however, because purchases of mandated
pollution abatement equipment comprise a larger share of investment than
in the past. The ratio of real busines fixed investment, excluding pollution
control equipment, to real GNP was about 9.2 percent in 1977.
The bottom panel of Chart 2 suggests that the effect of the recession
on capacity utilization is important in explaining the sluggishness in investment. Capacity utilization fell dramatically in 1974-75, to the lowest level
for any recession in the postwar period, and it remained at depressed levels
longer than in previous cycles. An improvement began in 1975, and the
1976-77 upturn in investment was clearly associated with the further rise
in capacity utilization, although the utilization rate remained slightly below
its 1955-70 average (Table 8).
Many other determinants of investment also remain below their 1955-70
averages, although they have improved considerably during the expansion.
Corporate cash flow fell markedly in 1974 but recovered quite quickly and
strongly. Its ratio to GNP in 1976 and 1977 was very close to the pre-1970s
TABLE 8.—Determinants of businessfixedinvestment, 1955—77
[Percent]
Nonfinancial corporations
Ratio of real
investment to
real GNP
Capacity utilization rate in
manufacturing i
1955
1956
1957
1958
1959
9.4
9,8
9.7
8.7
8.7
87.0
86.2
83.6
75.0
81.7
9.3
8.9
8.9
8.7
9.2
15.0
13.3
11.7
9.5
12.3
6.5
5.8
4.9
3.8
4.9
0.931
.923
.857
.873
1.047
1960
1961
1962
1963
1964
9.0
8.7
8.9
8.9
9.3
80.1
77.3
81.4
83.5
85.7
8.9
8.8
9.4
9.6
10.0
11.2
11.1
12.7
13.6
14.7
4.4
4.3
5.6
6.1
7.1
1.022
1.151
1.092
1.205
1.292
1965
1966
1967
1968
1969
10.3
10.8
10.3
10.3
10.6
89.6
91.1
86.9
87.0
86.2
10.4
10.3
9.9
9.4
8.6
16.2
16.1
14.0
14.2
12.8
8.1
8.8
7.7
7.0
6.3
1.356
1.203
1.214
1.259
1.127
1970
1971
1972..
1973
1974
10.2
9.7
10.0
10.6
10.7
79.2
78.1
83.1
87.6
84.2
7.9
8.2
8.6
8.0
6.9
9.9
10.4
11.5
12.3
11.3
5.0
4.5
6.2
5.8
9.9
.911
1.006
1.089
1.026
.762
1975
1976
1977«
9.4
9.2
9.5
73.6
80.2
82.3
8.8
9.1
9.0
9.5
10.8
10.6
6.1
5.8
5.9
.750
.838
.788
1955-70 average
9.6
83.8
9.3
13.0
6.0
1.091
Year
Cash flow as
percent of
GNP2
Net rate of
return on
depreciable
assets 2
Rate of return
on stockholders'
equity *
Ratio of
market value
to replacement cost of
net a s s e t s '
1 Federal Reserve Board index.
2 Cash flow calculated as after-tax profits plus capital consumption allowance plus inventory valuation adjustment.
3 Profits before taxes plus capital consumption adjustment plus net interest paid divided by the stock of depreciable
assets valued at current replacement cost.
* After-tax profits corrected for inflation effects divided by net worth (physical capital component valued at current
replacement cost).
5
Equity plus interest-bearing debt divided by current replacement cost of net assets.
6
Preliminary.
Sources: Department of Commerce (Bureau of Economic Analysis), Board of Governors of the Federal Reserve System,
and Council of Economic Advisers.
68
average. This enlarged cash flow was not devoted to increased investment
early in the expansion, however, but was used instead to reduce debt that
had risen because of heavy external financing in 1972-73 and the drop in
earnings in 1974. By 1977, short-term corporate debt was much lower and
liquidity was much improved.
Despite the strong rise in cash flow, the rate of return on depreciable assets
shown in the fourth column of the table did not rise correspondingly. An
important factor in the early growth of cash flow was a strong increase in
depreciation allowances, which contribute to internal funds but are not
part of net return. The rate of return on depreciable assets is also lower
relative to cash flow in 1975-77 because depreciation allowable for tax
purposes falls below replacement cost in periods of inflation. There is a gap
of about 2*/<2 percentage points between current levels of the net rate of
return on nonfinancial corporate capital and the 1955—70 average of 13
percent. Much of the gap exists, however, because recovery is still
incomplete.
Cyclical adjustments can only approximate the effect of differing capacity
utilization rates on the rate of return. They suggest, however, that if the rate
of capacity utilization in 1977 had been at a high-employment level, the rate
of return would also have been improved, though still below highemployment levels prior to 1970. The rate of return has fallen from the
high level attained during the mid-1960s, but it appears to be recovering
from the depressed periods of the early 1970s, when profits may have been
affected not only by slack capacity but also by price controls. Thus, stronger
overall performance of the economy holds the promise of raising the return
to capital.
Corporation taxes and interest payments are subtracted from the rate of
return on depreciable assets to obtain profits earned on stockholders' equity,
shown in Table 8. This measure of profits differs from "book value" profits
reported by corporations, by excluding inventory profits and measuring depreciation on a replacement-cost basis. In periods of rising prices, profits
must also be adjusted to reflect the reduction in the real value of corporate
debt that is induced by inflation. This reduction in the real value offsets
the part of nominal interest costs that is a premium to compensate lenders
for anticipated continuation of inflation. Although these adjustments involve
a number of statistical problems, reasonable approximations can be made.
As shown in the table, the after-tax return on corporate equity in 1977
approximately matched the 1955-70 average. On a cyclically adjusted
basis this profit rate appears to be slightly above the 1955-70 average.
The ratio of the market valuation of the assets of nonfinancial corporations to their replacement cost is a way of formulating the joint roles of
financial and nonfinancial influences on investment decisions. The recurrent weakness of stock market values during the recovery, despite rising
corporate profits, has strongly influenced this ratio and may indicate unfavorable expectations shared by business managers and investors in
69
equities. A great variety of factors influence the stock market—including,
of course, anticipations of economic growth and profitability and the prospects for all the policies that will influence them. Monetary policy may have
an additional, more direct, effect through its influence on the rate of return
on alternatives to equity investment.
The ratio of market values to replacement cost has remained considerably
below 1 throughout this recovery. This may be an indication that it is more
profitable, on average, to buy existing financial assets than to invest in new
plant and equipment. At the margin, of course, the ratio of market value
to replacement cost may be greater than the average in particular industries or for particular types of equipment. For example, this is likely to
be true now for energy-intensive production processes. Old capital may
have lost considerable value as energy prices rose, but new energy-conserving
equipment could have a much higher value. Thus, enactment by the
Congress of a national energy policy that clarifies the long-range relation
between fuel prices and the prices of other inputs to production could lead
to substantially greater investment than the current average ratio of market
value to replacement cost would indicate. Other economic policy measures
being proposed, tax measures in particular, may also create more favorable
attitudes toward investment in both real and equity assets.
Interest rates on short- and long-term corporate debt and the earnings-toprice ratio on equities both influence the cost of funds to business, and both
are likely to influence investment decisions. In the case of interest rates,
however, it is the real rate, exclusive of inflation premiums, that is relevant.
On an annual average basis the interest rate on long-term bonds less the
rate of inflation (an approximation of the real rate of interest) and the
earnings-to-price ratio on equities were both higher in 1977 than in 1973.
(See Chart 5 in Chapter 2.) They moved in divergent directions between
1976 and 1977—the real interest rate declined slightly while the earningsto-price ratio rose—but parallel upward movements occurred in the course
ot 1977.
Studies of investment behavior conducted by the Council in the past year
have explored the relation of investment to a number of its measurable
determinants—growth of output, capacity utilization, cash flow, the rental
price of capital services, and the ratio of the market value of assets to their
replacement cost. In order to test whether the relationship of investment to
these determinants has changed in the recent period, statistical relationships
were estimated by econometric methods for the 1957-73 period. Projections
for the period from 1974 through 1977 were generated from many of these
earlier relationships. (Not all could be extended through 1977 because of lags
in data availability.) These projections produce a wide range of estimates,
and all the alternative formulations involve a substantial margin of error.
Conclusions about the performance of investment therefore remain uncertain.
It appears, however, that total investment outlays during the expansion
have fallen somewhat short of those implied by historical relationships of
70
investment to its determinants. Investment expenditures fell much more
sharply in 1975 than would have been expected and remained depressed for
a longer time. Once the upturn occurred, late in 1975, the rate of growth
of investment was for a time approximately in line with econometric projections. An unusually rapid acceleration would have been required, however, to make up for the 1975 shortfall and this did not occur. Indeed, the
rate of growth appears to have drifted below the projections in the latter
part of last year, and surveys taken late last year of the investment planned
for 1978 suggest a widening gap.
The components of business fixed investment have differed widely in
their behavior during the expansion, The level of investment in equipment was largely consistent with the econometric projections through early
1977. Excluding the effects of strikes in the fourth quarter of 1976, the
divergence between actual and projected growth rates was probably well
within the margin of error for these projections. Later in 1977, however, the
increase in equipment investment appeared to be a bit slower than most
of the econometric projections would suggest.
The investment level for structures during the past few years, however,
has fallen consistently and substantially below what would have been expected on the basis of all of the econometric projections. Not only was the
decline extraordinarily sharp in 1975 but the subsequent recovery was slower
than might have been expected. The result has been a widening gap between
the actual level of investment in structures and the level that would have been
projected on the basis of historical patterns. Since investment in structures
accounts for approximately one-third of business fixed investment, its slow
growth has had an important impact on the total. In the fourth quarter of
last year, real outlays for private nonresidential construction were 13 percent
below their level at the end of 1973, while outlays for producers' durable
equipment were about 4 / 2 percent higher than at the end of 1973.
A number of possible reasons exist for the lagging investment performance. The perceived risk of investment may have increased in the 1970s as a
result of higher inflation rates and larger cyclical fluctuations in output.
Although a steady and fully anticipated inflation rate of 6 percent is not
inherently riskier than price stability, high inflation rates have historically
been associated with larger variations in the rate of price increase, both
here and abroad. For this reason, measures to control inflation are
important.
Uncertainties about future rates of change of specific output prices and
costs are even more likely to affect investment behavior adversely. Changes
in energy costs are an obvious example. At least during a period of adjustment, flexibility of foreign exchange rates may also have caused increased
uncertainties. Apart from these examples, it is unlikely that other relative
prices and costs have become substantially more volatile in recent years.
Uncertainties about future expansion of sales were undoubtedly increased
by the depth of the last recession, but they should be abating as the expan-
71
sion in the United States continues. Excess capacity and slow growth in
other industrial countries, together with deep import penetration into a few
key industries, may, however, be continuing to restrain business optimism.
Environmental and safety regulations have also been assuming a larger
role in decisions regarding investment. The effect is hard to quantify, but
there is direct evidence that environmental regulations are more stringent
for new installations and may have a particularly inhibiting effect on investment in structures. On the other hand, mandated antipollution investments
may actually have raised investment levels from what they would otherwise
have been in some industries; this increases aggregate demand but does not
enlarge productive capacity.
Finally, it should be noted that during a substantial part of the 1950s
and 1960s heavy investments were made in fuel and power facilities that
are long lived. Demand for electricity was growing extremely rapidly, stimulating continuous expansion in generating capacity, and the network of
natural gas pipelines was also considerably extended. Investment in structures from 1973 to 1976 included outlays for the Alaska pipeline that
have now ended. Increased investment by energy-producing industries can
be expected in the future; but the timing is uncertain, and in the case of
electricity higher energy prices may limit the growth in demand and capacity
expansion.
At a time when strong growth in the capital stock is needed to meet
future goals, investment appears to be drifting below normal trends. This
drift must be reversed. A stable financial environment and tax measures
specifically directed to enhancing investment incentives are particularly important. The situation should also be especially helped by progress in the
fields of energy and regulation. These measures will be most effective in
the context of a steady continuation of overall expansion.
72
CHAPTER 2
Economic Outlook and Policy
HP 1 HE ECONOMY is entering its fourth consecutive year of sustained
-*- growth, and the prospects for continuation of the recovery in the near
term are quite favorable. Final sales were up strongly at the end of 1977,
and the effects of last year's stimulus package continue to build, setting the
stage for a resumption of healthy production gains in the early part of 1978.
Over the longer term, however, without additional fiscal measures, economic growth would slow below the rate necessary to maintain satisfactory
progress toward our goal of returning to high employment. The non-Federal
sectors of the economy do not appear to possess sufficient strength on their
own to support a sustained high rate of real output growth throughout 1979.
In addition, Federal fiscal policy would itself gradually become more restrictive as the spending increases contained in the 1977—78 stimulus package
gradually diminish, and as Federal receipts show rapid gains because of
income growth and payroll tax increases. While it is difficult to determine
precisely when economic growth would slow, the underlying trends in the
economy—together with the effects of fiscal policy—point clearly to a reduction in the pace of expansion later this year or early in 1979. Therefore, to
ensure that the economy continues to grow at a satisfactory rate in 1979 and
beyond, the Administration is proposing a $25-billion tax cut for individuals
and businesses to take effect in the fourth quarter of 1978.
ECONOMIC POLICY IN THE NEAR TERM
THE NEED FOR TAX REDUCTION
Personal consumption and housing have been the key sectors leading the
economic recovery since 1975. In 1976 and early 1977 the personal saving
rate fell well below its average over the past 20 years, and housing starts rose
to more than 2 million units at an annual rate by the middle of last year.
However, the saving rate has now returned to just under 6 percent and is
expected to remain in this vicinity during 1978 and 1979. The boom in
residential construction may also be reaching a peak, as interest rates are
likely to be somewhat higher in 1978 than in 1977. Hence, these sectors
cannot be counted on to sustain above-trend growth in total demand.
73
Both the foreign and the State and local sectors are currently withdrawing
much more from the spending stream than they are returning to it. Our
international current account balance is likely to remain in substantial
deficit in the near term. Oil imports will continue at high levels over the next
several years, and the economies of our major trading partners are expected
to show only moderate improvement. In the State and local sector, budgetary surpluses have been rising as receipts have grown more rapidly than
expenditures, particularly during the last 2 years. These surpluses are expected to decline gradually, but they will remain high—partly because a
significant proportion is the result of secular growth in State and local employee pension funds.
The Federal sector would also have a restraining influence on the economy if there were no further adjustments in fiscal policy. Federal outlays
are rising strongly in fiscal 1978, but the increase in fiscal 1979 will be small—
less than 2 percent in real terms. Moreover, the combination of higher payroll taxes and rising effective personal tax rates due to inflation and real
growth will increase Federal receipts substantially in 1978 and 1979. Hence
significant tax reductions are needed just to neutralize the fiscal restraint
built into the Federal budget.
Finally, a major uncertainty in the near-term outlook concerns the behavior of business fixed investment. Strong and steady growth of capital
spending is essential to continuation of satisfactory growth in aggregate
demand and new productive capacity. But the performance of investment
has been disappointing thus far in the recovery and plans for increased
spending remain modest. In the absence of tax reductions, the usual strengthening of investment plans that takes place during an economic upswing
might not occur.
THE ADMINISTRATION'S TAX PROPOSALS
There are three main components of the Administration's proposed tax
reduction.
1. A $17-billion net reduction in individual income taxes, effective
October 1, 1978. Tax reduction is achieved by substituting a $240 per
capita credit for the existing $750 personal exemption and the general tax credit, and by reducing personal tax rates.
2. A $6-billion net tax reduction for businesses in the form of permanent
rate cuts on corporate profits and a liberalization of the investment
tax credit. The corporate tax rate would be lowered from 20 percent
to 18 percent on the first $25,000 of profits, from 22 percent to 20
percent on the next $25,000, and from 48 percent to 45 percent on
profits above $50,000. These changes would take effect on October 1,
1978. There would be a further 1-percentage point reduction in the tax
rate on corporate profits above $50,000 on January 1, 1980, thereby
lowering this rate to 44 percent. In addition, the 10-percent investment tax credit on investment in equipment would be made perma-
74
nent and extended to industrial and utility structures; the full 10-percent credit would be available for investment in specified pollution
abatement facilities that also qualify for accelerated depreciation;
and the investment credit could be used to offset 90 percent of tax
liability in any one year. Except for the last proposal, these changes in
the investment credit would become effective January 1, 1978.
3. A $2-billion cut in payroll and excise taxes. The 4-percent telephone
excise tax, already being phased out, would be repealed on October 1,
1978. In addition, the Federal unemployment insurance tax rate would
be lowered from 0.7 percent to 0.5 percent on January 1, 1979.
The $25 billion in tax reductions proposed by the Administration is net
of $9 billion in revenue-increasing reforms of the tax structure. The reform
elements of the program are discussed in detail in Chapter 5 of this Report.
The proposed tax reductions, together with the projected increases
in Federal expenditures and the effects of the 1977 tax cut, will result in
a $5-billion net increase in the high-employment Federal budget deficit between calendar years 1977 and 1979. The personal tax reduction will augment after-tax incomes of individuals and increase the demand for consumer
goods. The strengthening of these markets will in turn improve the prospects for business investment spending. Moreover, the cut in corporate tax
rates will increase cash flow of business enterprises, and the changes in the
investment credit will directly lower the cost of new capital investment. The
reduction in excise and payroll taxes will lead to a modest lowering of price
levels, as well as providing fiscal stimulus.
MONETARY POLICY
Under current economic conditions, monetary and fiscal policy can reinforce each other in fostering stable economic growth and the increased rate
of investment needed to avoid the emergence of capacity limitations in the
future. Interest rates moved up early in 1978; a level of short-term interest
rates moderately higher than in 1977 would be consistent with a normal
cyclical expansion of demands for money and credit relative to supplies. If
the rise in short-term interest rates is limited, long-term interest rates may
change very little. The prospects for relatively stable long-term rates are
greatly enhanced by the fact that supplies of both labor and capital are sufficiently ample to permit rising aggregate demand to be translated into real
growth in output rather than a higher rate of inflation. The growth in
monetary aggregates that will be consistent with this favorable interest rate
environment will depend significantly on factors affecting velocity, which
were discussed in Chapter 1.
THE OUTLOOK FOR 1978
Growth of real output during 1978 is expected to be in the 4x/2- to 5percent range if the proposed tax cut is approved by the Congress (Table
9). Expansion in the first half of the year will be sustained by higher spend-
75
ing for public service employment and public works programs and by larger
than normal tax refunds. By midyear the effects of the jobs programs will
have reached their peak, but consumer spending and business investment
are expected to accelerate in the second half in response to the tax
reduction.*
TABLE 9.—Key economic measures, 1977—78
[Seasonally adjusted, except as noted]
Measure
Unit
RealGNP
Billions of 1972 dollars 2 . . . .
Real personal consumption
.—_do
1977 IV i
Forecast range
1978 IV
1,361
1, 422 to 1, 429
876
914 to 918
Percent change
4H to 5
Real business fixed investment-
.do..
130
139 to 141
7 to 8
Real residential construction. _
.do.
60
59 to 61
- 1 to \H
do
111
287 to 289
ZH to4H
Real government purchases
Unemployment rate
Percent
6.6
6 to 6M
Consumer price index4
1967 = 100.
185
196 to 197
(3)
53/4 to VA
1 Preliminary.
2 Annual rates.
Not applicable.
4
Not seasonally adjusted.
3
Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor (Bureau of Labor Statistics),
and Council of Economic Advisers.
The rate of inflation is expected to be close to 6 percent in 1978.
Food and fuel prices, which rose sharply in the first half of last year because of the severe winter weather, will contribute much less to the
increase in prices this year. Continued slack in labor markets and the
absence of a large number of significant collective bargaining settlements
will help moderate the rate of increase in workers' average hourly earnings.
On the other hand, federally mandated increases in labor costs will add
about one-half percentage point to the price level during the year. Widespread cooperation with the President's program of deceleration would make
it possible to reduce inflation to the lower end of the range shown in
Table 9.
The projected growth of output this year should expand the number
of jobs by about 2 $4 million. The extent to which this increase in employment is translated into a reduction in the unemployment rate will, of course,
depend on how rapidly the labor force "grows. It is expected that labor
force growth will remain relatively high, at a rate between 2 54 and 2/2 percent in 1978. The unemployment rate should decline by about one-half percentage point over the year.
BUSINESS FIXED INVESTMENT
Business fixed investment is expected to become a stronger force in the
expansion of output during the course of 1978 as a consequence of the
* Unless otherwise noted, growth rates in this chapter are measured from fourth
quarter to fourth quarter.
76
stimulative effects of the proposed liberalization of the investment tax
credit, and the reductions in personal and corporate income taxes. An
increase of 7 to 8 percent in real terms is anticipated over the course of
the year. The most recent Department of Commerce survey of plans for new
plant and equipment expenditures indicates that investment spending in
nominal terms will rise only 10 percent in 1978, year over year. However, if
allowances are made for increases in capital goods prices of about bl/i percent and for underestimates in the last two surveys, this survey would imply
a real increase in spending for plant and equipment of 6 to 7 percent. The
recent behavior of some important leading indicators of investment activity
suggests a stronger investment performance than the plant and equipment
survey does. Data on the value of new orders for nondefense capital goods,
new plant and equipment projects started by manufacturers, and their new
capital appropriations all show increases of 20 percent or more (annual
rate) over the last half year.
As the dimensions of the energy program become more certain and the
new tax proposals increasingly influence business expectations, it is anticipated that plans for plant and equipment outlays will be raised above their
current levels.
GOVERNMENT DEMAND
Government purchases will be an important source of support to the
expansion this year. In real terms, they are expected to rise about 4 percent.
Though defense purchases in real terms were up last year and may rise
further, the principal sources of strength this year will be in the Federal nondefense and State and local government areas. Nondefense Federal purchases (excluding Strategic Petroleum Reserve and Commodity Credit
Corporation expenditures) are projected to rise 16 percent in current dollars. The real increase in these expenditures should also be large, though it
may fall short of the level implied by the nominal projection.
State and local purchases will continue to rise rapidly in the first half of
1978, as Federal grants for local public works and employment programs in
the 1977-78 stimulus package increase to their peak levels. Some slowing
in the rate of expenditure growth may occur in the second half of 1978; but
State and local operating surpluses are large, and these governmental units
are therefore likely either to increase purchases or reduce taxes.
PERSONAL CONSUMPTION
Real disposable income will rise more than 5 percent during 1978, after
allowing for the impact in the last quarter of the proposed reductions in
personal taxes. However, since personal consumption does not fully reflect
the impact of tax reductions for several quarters, the saving rate is likely
to increase considerably in the fourth quarter. Consumption during the
year should therefore grow somewhat more slowly than disposable income—
increasing about 4*/2 percent in real terms; but a strong upswing at year-end
248-947 O - 78 - 6
77
will continue into the first half of 1979. Real growth of demand for durable
goods in 1978 will slow somewhat from the 7%-percent rate of last year, and
then strengthen again after the tax cuts.
Smaller projected food price increases in this year, together with generous
worldwide supplies of natural and manmade fibers, suggest that price increases for nondurable goods will be modest in 1978. These developments
will help stimulate an increase in demand for nondurable goods above the
3J/2 percent of last year. The demand for heating services is expected to
return to more normal levels this winter, a change that could also contribute
to the growth of sales of both durable and nondurable goods.
HOUSING
Residential investment is expected to be relatively flat during the year
at a level about 5 percent higher in real terms than the average of 1977.
New housing units are currently being started at an annual rate of 2/4
million, including a record 1.6 million single-family units. Housing starts
should remain at relatively high levels early in the year, but some reduction
in single-family starts is expected by year-end. However, favorable demographic factors and relatively moderate changes in the availability of mortgage credit should limit the extent of any decline. Multifamily starts are
expected to continue growing throughout the year, as the problems that
have recently plagued this sector—low profitability caused in part by rent
controls in some areas of the Northeast, and the legacy of overbuilding in
other areas, particularly the South—are gradually overcome.
Two other components of residential investment are likely to rise significantly this year: additions and alterations to existing structures, and sales
of mobile homes. Additions and alterations represent 14 percent of total
residential investment and are responsive to sales of new and existing homes,
which have risen about 50 percent since 1975. Mobile home shipments,
which peaked at 575,900 in 1972 and declined to 212,700 in 1975, have
recently been growing more strongly, reaching a rate of over 300,000 per
year at the end of 1977. Further increases above this level are expected in
1978.
INVENTORIES
Production has responded promptly to changes in final sales in this expansion. Hence, except for moderate, unintended increases in nondurable
goods inventories in each of the past two summers, the ratio of stocks to
final sales in 1976 and 1977 was maintained at a fairly constant level, just
under the historical average. Improved inventory monitoring techniques
and short delivery lags due to excess capacity will be conducive to stable
rates of inventory investment this year. However, accelerated final sales
and a downturn in the rate of stockbuilding in the last quarter of 1977
will lead to an upswing of inventory investment in the first half of the year.
This will be temporary, and the resulting stimulus is unlikely to be
as large as that attributable to the restocking that occurred early in 1977.
78
The rate of accumulation for all of 1978 is anticipated to average about 1
percent of real gross national product, or just sufficient to expand stocks in
line with the growth of sales.
NET EXPORTS
The foreign sector is not expected to contribute significantly to the
growth of output in 1978, but neither should it detract from the expansion
as it has done in the past 2 years. Since approximately one-third of U.S. exports are capital goods, the generally weak performance of investment in
other industrial economies has restrained the demand for U.S. exports.
Though real growth in the economies of our major trading partners was disappointing in 1977, it should pick up somewhat this year and improve the
prospects for U.S. exports. Growth outside the OECD area is also expected
to show some acceleration this year, which should have a beneficial effect on
our exports. In addition, there should be a resumption of growth in demand
from countries such as Brazil and Mexico, where restrictive actions were
taken in the last 2 years to reduce large trade deficits caused by the recession
and oil price increases. Given these modest improvements in the world economy, U.S. merchandise exports, after adjustment for inflation, are expected
to rise 4 to 5 percent in 1978.
Growth of imports should slow in 1978. Imports other than fuel rose more
in 1977 than would have been forecast on the basis of historical relationships
between imports and GNP, but this phenomenon is not expected to continue
in 1978. The volume of U.S. oil imports should be unchanged this year,
compared with a rise of 20 percent last year. Cold weather in the early
months of 1977 and a buildup of petroleum inventories last summer contributed to the sharp rise of fuel imports in 1977, but these developments
are unlikely to recur this year. Production of North Slope oil averaging
about 1 million barrels a day, four times the output available last year, will
also restrain the growth of petroleum imports in 1978. The decision of the
oil-exporting countries to freeze prices will mean that the value of oil imports will show little change this year. The high level of oil imports will
nevertheless continue to be an important factor in the United States' persistent foreign trade deficit.
LABOR FORCE AND EMPLOYMENT
The 4^2- to 5-percent expansion of output should increase employment during the year by nearly 3 percent. Given the projected increase
in the labor force of 2^4 to 2/2 percent, the unemployment rate should fall
to a range of 6 to 65/4 percent by year-end. The projections for labor force
participation rates of women and teenagers assume continued increases
that are above previous historical trends, but somewhat below the unusually
large increases of the past 2 years.
It should be noted that projections of labor force growth have not been
very reliable in recent years. For example, the 3.1-percent increase in the
79
labor force in 1977 was substantially larger than most estimates of a year
ago. Consequently, unemployment rate forecasts can prove inaccurate even
when projections for the growth of output and employment are correct.
INFLATION
Before allowing for the Administration's program for the deceleration of
inflation^ prices would be expected to rise this year at a rate of 6 percent or
somewhat above—the underlying rate for the past 2/ 2 years. The underlying
rate is measured by consumer prices excluding food and energy, and it
parallels the difference between the rates of increase of productivity and
compensation per hour worked. Average hourly earnings and productivity
would rise this year by about 7J/4 and 2 percent respectively. However, total
unit labor costs would rise by more than the 5T/4 percent that these figures
suggest, partly because privately negotiated fringe benefits are increasing
more rapidly than basic wages, and partly because of government-mandated
additions to payroll costs. The 15-percent step-up of the minimum wage to
$2.65 an hour, and the $6 billion in higher payroll taxes for employers in
1978, will add about 1 percent to labor costs of the private sector. Total
compensation per hour including fringes and employer payroll taxes would
therefore rise about 8 ^ percent in 1978, and unit labor costs by 6 to 6l/^
percent.
A number of special factors will also influence the actual rise of prices
in 1978. Implementation of the first stage of the crude oil equalization tax
will add 0.2 percent to the aggregate price level at year-end. The recent
decline in the value of the dollar in foreign exchange markets will also
add to pressures on prices. On the other hand, highly competitive markets
for many goods, caused by the weakness of economic recovery abroad and
by generally low capacity utilization rates at home, will work against any
acceleration of inflation. The food price outlook should also lead to moderation in the rate of inflation this year. Retail food prices rose by 7% percent
last year, but are expected to increase in 1978 by less than the rise in prices
of nonfood commodities and services. This deceleration will help to moderate the increase in the general price level, offsetting the effects of the mandated cost and price increases.
Ample grain stocks and depressed crop prices are currently stimulating pork and poultry production and hence will restrain retail price increases for these items. Large harvests of fruits and vegetables in the second
half of last year should assure abundant supplies of these commodities
through mid-1978. On the other hand, because cattle herds have been cut
drastically and the cost of feed grains is extremely low, increased cattle
feeding is likely. This should be reflected in reduced marketing of cattle and
more rapid increases in retail prices for red meat in the second half of 1978.
The action of the oil-producing countries in not increasing the price of
crude oil will provide modest additional restraint on inflation this year.
Repeal of the Federal excise tax on telephone service in the last quarter
80
of 1978 and the 0.2-percentage point reduction in the Federal unemployment insurance tax in January 1979 will also ease the pressure on
prices next year.
The President's request to business and labor to cooperate in a voluntary
program to decelerate wage and price increases, discussed in Chapter 4,
is expected to help moderate the rate of inflation in 1978. With success of the
program, the rate of price increase in 1978 could fall below the level of 6
percent or more that would otherwise occur.
INCOME AND SAVING FLOWS
The combination of 4J4- to 5-percent real growth and about 6 percent
inflation will cause nominal GNP to grow approximately 11 percent in
1978. Both personal income and corporate profits are expected to rise at
about the same rate as GNP.
In the year ahead, the household sector will contribute an increased
volume of saving to credit markets, while the growth of household credit
demands should moderate. Personal saving will expand by approximately
one-third as a result of the projected increase in after-tax income and an
increase in the saving rate. Though part of this increased saving will be
absorbed by home mortgage and consumer credit, growth in these uses of
funds will be less than in 1977. Business credit needs will expand in 1978,
but an adequate growth of profits should sustain the flow of internal funds.
In the past 2 years gross internal funds have amounted to more than 75
percent of capital expenditures of nonfinancial corporate businesses.
Apart from the usual seasonal fluctuations, the Federal Government's
net new issues of securities are likely to change very little between the
latter half of 1977 and the first half of this year. Toward the end of 1978,
however, new funds raised by the Federal Government will increase, since
the decline in receipts resulting from the proposed tax reduction will
be only partially offset by the growth of revenues that normally occurs in an
expanding economy.
A greater volume of funds will flow through credit markets this year,
primarily because the higher net household saving must be channeled to
the debtor sectors to meet growing financial needs. As noted earlier, these
increased credit flows are likely to be accompanied by a somewhat higher
level of interest rates than in 1977, particularly on short-term securities.
Given current economic prospects, however, there need not be large or
unsettling changes in interest rates during 1978.
THE OUTLOOK FOR 1979
Forecasting more than a year ahead is a hazardous exercise, since
uncertainties about probable economic developments grow with the passage of time. Nevertheless some general comments can be made about the
81
likely state of the economy in 1979 and its response to the Administration's tax proposal.
The $25-billion tax cut effective in October 1978 will provide the
necessary impetus to extend the recovery into its fifth successive year.
Business investment should be particularly strong in 1979, since capacity
utilization rates will have risen further, and the effects of the tax cuts
will have been incorporated into plans for plant and equipment expenditures. Consumer spending will be supported by the $17-billion reduction
in personal taxes. And there is likely to be a further reduction of State and
local surpluses.
If the recovery proceeds along these lines, and there are no severe
unexpected shocks, real output in 1979 should increase at about the same
rate as in 1978—that is, by 4l/2 to 5 percent. Moreover the unemployment
rate should continue to decline to a range of 5/2 to 6 percent by year-end
as a result of another 2%-million increase in the number of jobs.
Price forecasting beyond a year is even more difficult than projecting
output. Before taking into account any effects of the Administration's
deceleration program, the underlying rate of inflation would be close to 6
percent or slightly above in 1979. Government-mandated cost and price
increases will be smaller than in 1978. The proposed repeal of the telephone
excise tax and the reduction in the Federal unemployment insurance tax
would also help restrain price increases.
On the negative side, there are other factors that could lead to stronger
pressures on wages and prices in 1979. First, labor markets may tighten
somewhat as a result of continued economic expansion, and this could
increase the upward momentum of wages. Moreover, 1979 will also be
a heavier year of collective bargaining: agreements covering 3 5/2 million
workers will expire or will be open to negotiation in 1979, compared with
agreements covering 1% million workers in 1978. Second, healthy domestic demand could push the manufacturing capacity utilization rate to
higher levels by late 1979 and encourage firms to increase their profit
margins by raising prices. The stronger growth of investment projected for
late 1978 and 1979 should moderate the rise in utilization rates, however,
and the availability of ample capacity abroad for production of most major
materials should also act as a restraint on price increases above general cost
trends.
Most important to the long-run improvement of inflation will be the
cooperation of business and labor in the program of gradual deceleration
of prices and wages. There must be a well-coordinated, good-faith effort on
the part of both sides if progress is to be made in unwinding the inflationary
pressures inherited from the past. Next year will pose a critical test for
the new program because of the heavy calendar of collective bargaining and
the fact that utilization rates for both labor and capital will have risen
substantially.
82
POLICY REQUIREMENTS FOR THE LONGER TERM
Upon taking office in early 1977, this Administration set out specific
objectives for economic growth and the reduction of unemployment. Putting these goals explicitly on the record serves the important purposes of
informing the Congress and the public of the Administration's policy objectives and identifying the means by which they will be pursued. Setting
explicit goals also disciplines the formulation and execution of policies, and
creates a system of early warning signals for midcourse policy adjustments.
The Administration's longer-term goals for the domestic economy can
be simply stated: steady progress toward the achievement of a high-employment economy, with the benefits shared widely by all major groups in
society; principal reliance on growth in the private sector to promote economic expansion; and a gradual reduction in the rate of inflation. The
President's budget for fiscal 1979 sets out annual projections for real gross
national product, the unemployment rate, and the rate of inflation through
1983. For 1978 and 1979 these numbers represent the Administration's
"best-guess" forecast and are consistent with the tax and spending policies
proposed in the budget. Beyond 1979 they are not a forecast, but projections
of the path of real output necessary to achieve steady reductions in the unemployment rate of about one-half percentage point per year.
Projections in the budget show real GNP reaching its potential by
late 1981 and the unemployment rate dropping below 5 percent. If the
economy is to achieve high employment by 1981, a sustained expansion of
real output of nearly 5 percent a year will be required.
ACHIEVING THE U.S. ECONOMY'S POTENTIAL
Potential output is an estimate of what the economy could produce at
high rates of utilization of the factors of production—labor, capital, and
natural resources. The historical series for potential GNP was completely
revised in the 1977 Economic Report by the previous Council of Economic
Advisers, and the level in 1976 was lowered by 4 percent. There were two
principal reasons for this downward revision. First, the rate of secular productivity growth implicit in the earlier estimates was substantially reduced.
This change reflects the deceleration of productivity since the late
1960s. Second, the high-employment unemployment rate was adjusted for
changes in the age-sex composition of the labor force. This benchmark
unemployment rate is calculated to be 4.9 percent in 1977, compared with
4.0 percent in 1955 (Table 10). The present Council has reviewed the new
estimates and concluded that they are a major improvement. Through additional research, the quality of our potential GNP estimates should continue
to improve in the future.
For the next 4 years, real potential GNP is projected to grow at a rate
between 3.3 percent and 3.8 percent per year, and to rise to between $1561O
billion and $1,640 billion in 1981 (Chart 3). The benchmark unemploy-
83
TABLE 10.—Potential gross national product and benchmark unemployment rate, 1952—77
[Billions of 1972 dollars, except as noted]
Potential
GNP
Year
1960
1961
1962
1963 .
1964
1965
1966
1967
1968
1969
1970
1971 .
1972
1973 .
1974
584.9
608.2
629.7
598.5
621.8
613.7
-13.6
-13.6
16.0
651.4
673.9
697.2
721.3
746.2
654.8
668.8
680.9
679.5
720.4
-3.4
5.1
16.3
41.8
25.8
4.1
771.9
798.6
826.4
857.1
890.3
736.8
755.3
799.1
830.7
874.4
35.1
43.3
27.3
26.4
15.9
4.1
4.1
4.1
4.2
4.3
925 0
960.8
996.3
1,031.7
1,068.3
925.9
981.0
1,007.7
1,051.8
1,078. 8
-.9
-20.2
-11.4
-20.1
-10.5
U.4
1,106.2
1,145.5
1,186.1
1,228.2
1,271.7
1,075.3
1,107.5
1,171.1
1,235.0
1,217.8
30.9
38.0
15.0
-6.8
53.9
4.5
4.6
4.7
4.8
4.8
1,316.9
1,363.6
1,412.0
1,202.1
1,274.7
2 1,337.6
114.8
88.9
2 74.4
4.8
4.9
4.9
.
.
....
_
.. _
„ .
.. .
__ .
1975
1976
1977
_..
_
.
Benchmark
unemployment
rate (percent)
oooo
1955
1956
1957
1958 .
1959
.
GNP gap
(potential
less actual)
ooo
1952
1953
1954
Actual
GNP
4.4
4.5
4.4
4.4
1
Shift in benchmark unemployment rate from 1966 to 1967 because of 1967 change in sampling procedure in the Current
Population
Survey.
2
Preliminary.
Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers.
ment rate associated with this range of potential GNP estimates would
fall slightly from its current level to about 4.8 percent.
In addition to the usual uncertainties about the future, forecasts of potential GNP under current conditions are subject to a wide margin of error.
The principal source of uncertainty in projecting potential output lies in
estimates of productivity. The abrupt decline in the level of productivity in
1973-74, which is much larger than can be explained by cyclical factors,
has not been reversed. Improvements in productivity since the recovery
began early in 1975 have followed normal cyclical patterns: gains have exceeded long-term trend rates of growth, but have not been large enough to
close the gap opened up by the 1973-74 recession. Future productivity
growth will be strongly influenced by additions to the capital stock. Unless
investment shows a marked acceleration in the next few years, the trend
rate of productivity growth is unlikely to regain the pace of the 1950s and
1960s. If the recent modest increases in output per hour persist over the
next 4 years, potential GNP growth will probably be nearer the low end of
the projected range. On the other hand, if labor force participation should
continue to rise at unusually rapid rates, as it did in 1977, or if productivity
growth should resume its earlier pace, the rate of potential GNP growth
would be closer to the upper end of the range.
84
Chart 3
Actual and Potential Gross
National Product
BILLIONS OF 1972 DOLLARS (RATIO SCALE)
1,700
•
1,600
PROJECTED POTENTIAL
GNP RANGE-
' f
"
- / , ' /
1,500 -
1,400
POTENTIAL GNP
\
V
1,300 -
,
PROJECTED
ACTUAL GNP
T
\
ACTUAL GNP
1,100 -
1,000
I I I I I I I I I i i I I i I I I I i I i i I I i i i I i i i 11 I 1 1 1 l I ! I ! 1 ! ! 1 1 1 1 1 ! 1 1 1 1
1968
1970
1972
1974
1976
1978
1980
SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS.
LONG-RUN BUDGETARY STRATEGY
The Administration has frequently indicated its determination to maintain
control over the growth of Federal expenditures, and to rely principally upon
growth in the private sector as the major source of economic expansion in
the years ahead. The share of Federal outlays in GNP during the past 3
years has been between 22 and 23 percent—well above the 18- to 21-percent
share that characterized the previous two decades. In part, the higher share
in recent years reflects the fact that GNP is still well below its potential
level. But the increase is also a result of rapid growth in Federal transfer
payments and grants to State and local governments during the last 10 years.
Decisions about the level and composition of Federal expenditures are
particularly difficult. Many essential national goals—such as national defense, equal opportunities, a fair distribution of income, support for basic
research, and preservation of natural resources—can only be reached
85
through Federal programs. Government expenditures, however, are not
subject to the discipline of the market place. Private markets are imperfect,
but they do tend to encourage efficiency in the use of resources by rewarding
firms that are most efficient and eventually weeding out those that cannot
perform effectively. These market functions must be accomplished in government by budgetary planning that stresses careful choice of priorities and
efficiency in the use of our Nation's scarce resources. Placing limits on the
overall growth of Federal expenditures is an effective tool for maintaining
such control.
This Administration, after careful review of national priorities, has concluded that the Federal Government can respond effectively and compassionately to the needs of the country within a carefully managed and closely
controlled budget. The path of expenditures projected in the fiscal 1979
budget reflects this judgment. Budget outlays are projected to increase by
less than 2 percent in real terms between fiscal 1978 and 1979. This restraint
on expenditures is also carried into the future; over time, outlays will be
steadily reduced to about 21 percent of GNP.
Managing the Federal budget to meet national needs, while gradually
reducing the share of Federal outlays in GNP, has important implications
for economic policy. If the course of Federal spending is determined by these
principles, tax reductions then become an important device for maintaining
a stable rate of growth in the private sector. Tax reductions work
quickly to stimulate spending, and the effects tend to spread quite broadly
over the various sectors of the economy. Moreover, they can be designed to
emphasize either stimulus to consumer spending or growth of business investment, depending on the particular circumstances that prevail. Tax
reductions are thus a powerful and flexible instrument of economic
stabilization policy.
Over the course of the next several years, the amount of reduction in income taxes needed to keep the economy moving ahead steadily will depend
on a variety of factors, including the course of monetary policy, the degree
of drag from the foreign and State and local sectors, and the willingness of
consumers and business to spend. It will also depend on other aspects of the
Federal budget. Higher payroll taxes for social security and unemployment
insurance are scheduled to take effect in 1978 and 1979, as shown in Table
11. In addition, inflation and economic growth will push individual taxpayers into higher tax brackets, raising the effective tax rate on personal
income. The Administration's proposed reduction in personal income
taxes would approximately offset the effects of these increases on individual
tax payments. In 1977 the share of personal income absorbed by Federal
personal taxes and the contributions of employees and the self-employed to
the social security system was 14.3 percent. This share will show a small
decline by 1979 if the Administration's tax proposals are enacted. Total
Federal revenues as a percentage of GNP, on the other hand, will rise
slightly over this period. The size of the new tax package, however, was not
86
T A B L E 11.—Projected effects on Federal receipts of selected tax changes, national income and
product accounts, calendar years 1978—81 l
[Billions of dollars]
Tax increases or reductions2
1978
Payroll tax increases.
Social security and unemployment insurance 3
Social Security Amendments of 1977
Proposed U.x reductions.
Individuals *
Business 5
Unemployment insuranceTelephone excise
1979
1980
1981
7.0
14.9
15 0
29.6
6.9
.1
7.5
7.4
5.0
10.0
8.9
20.7
6.9
27.4
27.9
29.2
4.1
2.4
0
.4
19.7
5.7
.8
1.2
18.9
7.2
.9
.9
21.0
6.7
1.0
.5
1
All projections based on the path of GNP, incomes, and unemployment assumed in the Budget of the United States
Government, Fiscal Year 1979.
2
Entries are cumulative differences in tax levels above those that would prevail under 1977 tax rates.
3
Social security rate increases of 0.4 percent in 1978 and 0.5 percent in 1981. Increases due to automatic socicl security
base changes are not included. Changes in unemployment insurance (Ul) taxes are due to 1978 increase in the Federal
taxable wage base, expanded coverage of the Ul system, and estimated adjustments in effective State Ul tax rates.
4 The amount of tax reduction for individuals shown here differs from the amount estimated by the Treasury on a liability
basis. The principal reason for this is that the tax reduction provisions of the proposal would take effect on October 1, 1978,
while the reform provisions would not take effect until January 1,1979. Since withholding schedules would be adjusted in
October 1978 to reflect the amount of net tax reduction, refunds would be required in 1979 to compensate for overwithholding in 1978. Refunds are treated in the national income and product accounts on a collections rather than a liability
basis.
5
1 ncludes tax reductions for individuals due to changes in the investment tax credit.
Sources: Department of Health, Education, and Welfare, Department of Labor, Department of the Treasury, Office of
Management and Budget, and Council of Economic Advisers.
designed to achieve a particular ratio of tax revenue to income, but to
ensure satisfactory progress toward our economic goals. This requires taking
into account a number of factors, including developments on the expenditure side of the Federal budget.
As noted in Chapter 1, the simplest measure of the total fiscal impact of
the Federal sector on the economy is the change in the high-employment
budget. As shown by the $9-billion increase in the high-employment deficit in
calendar 1978 (Table 12), the Administration's enacted and proposed tax
TABLE 12.—Projected high-employment Federal receipts and expenditures,
national income and product accounts, calendar years 1977—81
[Billions of dollars]
Item
1977
1978
1979
1980
1981
Receipts
401.9
447.0
488.5
547.7
619.9
Expenditures. __
419.8
473.9
511.1
557.3
594.8
-17.9
-26.9
-22.6
-9.6
25.1
Surplus or deficit (—)
Sources: Department of Commerce (Bureau of Economic Analysis), Office of Management and Budget, and Council of
Economic Advisers.
reductions, together with the expenditure path projected in the budget, result in a substantial net increase in fiscal stimulus. In 1979 the high-employment deficit declines slightly, indicating a moderately less expansive fiscal
stance as the economy improves. Over the 2-year period 1977—79, the
Federal budget provides $5 billion of net fiscal stimulus. Beyond 1979, total
87
tax revenues would rise more rapidly than expenditures; and in the absence
of additional tax reductions or changes in expenditure programs, a highemployment surplus of $25.1 billion would exist by 1981 (Table 12 and
Chart 4). The actual path of the high-employment budget after 1979 will,
of course, depend on fiscal policy decisions yet to be made.
THE BUDGET AND THE ECONOMY OVER THE LONGER RUN
Whether the economy can actually achieve high employment in 1981
with a balanced Federal budget depends upon the strength of the nonFederal sectors of the economy. Our ability to forecast economic developments over a period of 4 years is, however, extremely limited. One alternative to developing an explicit economic forecast for 1981 is to
examine the distribution of saving and investment by sector in past periods
of high employment. For the economy as a whole, the net saving (excess of
receipts over expenditures) in one or more sectors must be offset by net investment (excess of expenditures over receipts) in the remaining sectors.
What one economic unit saves, another unit must invest. An analysis of
how saving and investment might be distributed at high employment provides some insights about the prospects for balancing the budget over the
next several years.
Chart 4
High-Employment Federal Surplus
as Percent of High-Employment GNP
PERCENT
4
SURPLUS
PROJECTED
-2
DEFICIT
i I l 1 i 1 i 1 I 1I I i I I I i I i 1 I I I 1l I i 1
-4
1955
1960
1965
1 1 1 1 1 1 l 1I i I I i i I l I l I
1970
1975
1980
NOTE: HALF-YEARLY DATA ON NATIONAL INCOME AND PRODUCT ACCOUNTS BASIS,
SEASONALLY ADJUSTED.
SOURCES: DEPARTMENT OF COMMERCE, OFFICE OF MANAGEMENT AND BUDGET. AND
COUNCIL OF ECONOMIC ADVISERS.
88
Table 13 shows net saving by major sectors of the economy in three
past periods of relatively high employment and in 1977. Some interesting
patterns emerge from these data.
First, net private saving in a high-employment economy has typically
been rather small. Investment in plant, equipment, and inventories by businesses, together with investment in new residences, is generally about equal to
total saving by individuals and business enterprises.
TABLE 13.—Net saving by sector, national income and product accounts, selected
calendar years, 1955-77
[Billions of dollars]
Sector
1955-56
average
1965-66
average
1972-73
average
1977 i
Non-Federal sectors.
-5.2
0.6
12.0
Private sector...
-3.5
3.3
-6.6
1.4
Personal...
Business 2 .
17.3
-20.7
31.6
-28.3
59.8
-66.4
67.8
-66.4
-1.8
-2.7
18.5
48.3
-1.1
-.7
.2
-2.9
13.4
5.2
29.2
19.1
5.2
-0.6
-12.0
-49.6
Other sectors.
State and
local governmentForeign 3
Federal sector..
49.6
1
Preliminary.
2
Corporate and
3
noncorporate business saving, plus the statistical discrepancy, less gross private domestic investment.
Net capital grants received by the United States less net foreign investment.
Source: Department of Commerce, (Bureau of Economic Analysis).
Second, in 1955-56 and again in 1965-66, the total net saving attributable to State and local governments and the foreign sector wras also near
zero. As a result, in these periods a Federal budget that was approximately
in balance was consistent with a high-employment economy. Indeed, 1965—
66 was a period in which real GNP was above its potential level and pressures
on prices were mounting. In this situation a surplus in the Federal budget
would have been appropriate.
Third, in recent years the aggregate net saving by State and local governments and the foreign sector has become very large. In 1977, net private saving was again near zero, but a Federal deficit of nearly $50 billion was
required to counterbalance the aggregate surpluses of State and local governments and the excess of receipts over expenditures stemming from our
international trade and payments. Since economic activity in 1977 was well
below its potential, an even larger Federal deficit would have existed
in a high-employment economy last year, given the substantial volume of net
saving in the non-Federal sectors.
The trend toward significant positive net saving by State and local governments developed in the early 1970s, when the secularly rising surpluses
in their employee retirement accounts began to dominate their aggregate
budget positions. In addition, surpluses in their operating accounts (exclusive of the social insurance trust funds) have risen sharply in the last 2
89
years as a result of rapid increases in Federal grants, growth in tax receipts
from economic recovery, and slow growth in expenditures. Economic and
demographic factors are such that continued growth of the trust fund surpluses in the foreseeable future may be expected. Moreover, a sudden reversal of the conservative budgetary policies in evidence since the last
recession is unlikely, so that operating surpluses of State and local governments will decline slowly. Hence, the restraint on the economy resulting
from net saving in this sector will persist, though it will probably diminish
somewhat over the next few years.
The excess of receipts over expenditures in the foreign sector stems principally from two sources: the continuing heavy dependence of the United
States on foreign sources of energy, and differences in the pace of economic
expansion at home and abroad that have resulted in a much more rapid increase in nonfuel imports than exports. The National Energy Plan, discussed
in Chapter 5, is designed in part to reduce the outflow of dollars, but the
reduction will require a period of years. The growth rate differentials
between the United States and its major trading partners have persisted
since the last recession, and they became especially pronounced last year.
These differentials are expected to narrow in 1978 as recovery abroad improves. Recent alignments of exchange rates and the steps announced by
Japan to reduce its current account surplus should also help reduce our
deficit. However, while some improvement in our external balance may be
forthcoming, the foreign sector is very likely to continue to act as a net drain
on U.S. income for some years.
Whether we can reduce the Federal deficit to zero by 1981 and still
achieve a high-employment economy will depend on how sectoral savinginvestment balances change over the next few years—something that cannot
be known with certainty at present. Developments in a variety of areas—
including monetary policy, fiscal behavior of State and local governments,
oil prices, growth rates of the economies of our major trading partners, and
foreign trade policies of other countries—will influence the outcome. As the
figures in Table 13 indicate, rather marked shifts in net saving by the nonFederal sectors would be required to reach high employment with a balanced
budget in 1981. Recognizing that fact means that we must stand ready to
provide additional tax reductions if they are needed to keep the pace of
economic activity advancing strongly. Should further cuts of significant
size prove necessary, the return to a balanced budget would have to be
postponed until after 1981.
These fiscal policy decisions for the longer term should not be made
at this time. If developments are favorable—if business capital spending
grows fast enough to generate significant net investment in the private sector,
if State and local surpluses diminish substantially, if the foreign sector deficit
improves materially—the need for further tax reductions to sustain continued economic expansion would be greatly reduced. Developments in these
90
areas would be difficult to predict. Responsible budgetary policy must retain the flexibility to cope with a range of outcomes.
THE ROLE OF MONEY AND CREDIT IN REACHING HIGH EMPLOYMENT
As noted above, the amount of fiscal stimulus required over the next few
years will be significantly influenced by the pace of investment in business
plant and equipment and in housing.
Investment in business plant and equipment will only be undertaken if
rates of return on these assets are favorable in relation to the cost of financing
and the returns from alternative financial investments. Among the determinants of business fixed investment discussed in Chapter 1, the rental price
of capital services and the ratio of market valuation to the replacement
cost of capital assets are the most directly affected by monetary policy,
and they are a principal channel through which monetary developments
are linked to the real sector of the economy. Monetary policy directly affects the interest rates on short-term and highly liquid obligations, such as
Federal funds, Treasury bills, and commercial paper. The rates of return on
longer-term debt instruments and equities vary in relation to each other
and to short-term interest rates, depending on cyclical developments, inflation, and expectations about the future. Nevertheless these rates tend to influence each other because of the opportunities for both lenders and borrowers to shift their holdings among different types and maturities of financial
instruments (Chart 5). Monetary policy, through its direct impact on interest
rates for short-term obligations, can influence, but not determine, the cost
of financing business investment and hence affect its growth in the years to
come.
Monetary policy is also important for the housing sector. Residential
construction is highly sensitive to financial conditions—both on the demand
side through the mortgage market and on the supply side through construction loans to builders. For the average buyer of a single-family home,
the purchase price is about 2 times income. For such a family, an increase of
1 percentage point in mortgage rates would raise the share of income committed to interest payments by about 1 / 2 percent. Hence the state of financial markets will significantly influence the demand for housing and the pace
of residential construction.
Maintenance of a financial environment conducive to significant increases
in investment during a prolonged period of economic expansion is a difficult task, and will require an appropriate balance between monetary and
fiscal policy; but it is not without precedent. Between 1960 and 1965, real
output grew at a fairly steady rate from a level about 5 percent below potential to a level that was approximately equal to potential. Fiscal policy was
stimulative throughout this period, and monetary policy was supportive.
The inflation rate was very moderate—1.3 percent per year during the
period—and interest rates were quite stable; the short-term Treasury bill
91
rate rose only 1.02 percentage points during the entire period, while rates
on long-term Treasury bonds rose only 0.1 percentage point. This pattern of interest rates was associated with growth in the money supply
(Mi) at an average annual rate of 3.5 percent, so that velocity grew about
3 / 2 percent per year, a rate slightly above postwar trends.
Careful management of economic policy will be necessary to reach and
maintain high employment in the years ahead. At the present time there
are still ample supplies of idle labor and capital resources available. In the
period immediatey ahead, growth in real output can therefore proceed at a
rate above its long-term trend without risking a resurgence of demand-induced inflation. But fiscal and monetary policies should not attempt to
close the remaining output gap at an excessively rapid pace, since this
could lead to an unbalanced and unsustainable pattern of recovery. And
Chart 5
Rates of Interest or Return
and the Rate of Inflation
PERCENT PER ANNUM
12
&
EARNINGS/PRICE / / ^
RATION
//
\
»'
10
V
\\
\
CORPORATE Aaa
BOND YIELDS
8 --
\
..
V
fi
\ VV7
A
/
^y
v
— *
I
1960
I
I
I
-
v
TREASURY BILL
RATE^
2 -
CHANGE IN
CONSUMER PRICE
INDEX */
>
/
I
I . I
I
1965
lii.
1970
-
1
i
1975
1/ STANDARD & POOR'S SERIES FOR 500 COMMON STOCKS.
i / MOODY'S.
£/ RATE ON 3-MONTH NEW ISSUES.
t/ CHANGE FROM YEAR AVERAGE TO YEAR AVERAGE.
SOURCES: DEPARTMENT OF LABOR, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM,
MOODY'S INVESTORS SERVICE, AND STANDARD & POOR'S CORPORATION.
/ _
92
i
as the economy approaches its potential, macroeconomic policies must adjust in order to avoid the creation of excess aggregate demand.
The inflation problem for the immediate future does not stem from excess aggregate demand, but from the momentum of inflation inherited from
the past. An inflation rate in the 6- to 65/2 -percent range is a serious problem and it needs to be lowered while slack remains in the economy. When
higher rates of inflation become built into the expectations of the public,
however, the process of unwinding the inflationary momentum is a slow
and arduous task and one that is only partially amenable to the tools of demand management. If the anti-inflation proposal by the President is widely
supported and succeeds in lowering inflation rates, gradually slower growth
of the monetary aggregates will be consistent with a strong and healthy economic expansion. Efforts to hasten the process of reducing this inherited inflation rate through restrictive fiscal and monetary policies would, however,
be unproductive. Such measures would result mainly in a slowing of real
growth rather than a reduction in the rate of price increase.
ECONOMIC GOALS BEYOND 1981
The projections in the budget show the unemployment rate continuing
to decline to 4 percent in 1983, in line with the targets embodied in the
proposed Full Employment and Balanced Growth Act. A primary objective
of this legislative proposal (popularly called the Humphrey-Hawkins bill)
is to modify and extend the general principles enunciated in the Employment Act of 1946. That act, which also established the Council of Economic
Advisers and requires the President to submit an annual Economic Report,
gave the Federal Government the responsibility for promoting high levels
of employment and output. It established broad economic objectives that
have served as useful guidelines for the formulation of macroeconomic
policy during the past 30 years. However, the economy has changed in many
respects since 1946; the task of making economic policy has become more
complex; and the standards for acceptable economic performance have
been raised. The Administration therefore believes that an updating of the
Employment Act of 1946 is appropriate to deal with the changing economic
environment and a new set of policy requirements.
The Full Employment and Balanced Growth Act would require the
President to enunciate explicit short-term (2-year) goals and to recommend
the fiscal policies necessary to achieve them. It would also require the
President to set forth intermediate-term (5-year) goals each year and to
present projections of Federal receipts and outlays consistent with them.
The target for the overall unemployment rate in 1983, assuming the
bill is enacted in 1978, would be 4 percent.
The bill would for the first time explicitly establish the goal of reasonable
price stability as a high priority objective of national policy. Moreover it
248-947 O - 78
93
-7
directs the President to pursue this goal by a variety of measures: an earlywarning system to detect emerging capacity problems, stockpiling of agricultural commodities and other critical raw materials to dampen price fluctuations, regulatory reform, vigorous enforcement of the antitrust laws, and the
promotion of labor-management cooperation in efforts to boost productivity.
Though the bill sets ambitious economic goals, it is designed to achieve a
careful balance among various competing objectives. The potential conflict
between low rates of unemployment and inflation is implicitly recognized,
and flexibility is retained to adjust the economic strategy. In the third Economic Report after passage of the bill, and in any subsequent ones, the President may modify the numerical unemployment goal contained in the bill, or
the timetable for achieving it, if he finds such changes necessary.
In recognition of the fact that macroeconomic policies alone are not able
to reduce unemployment to acceptable levels, the President is directed to
develop, as appropriate, supplementary employment programs to help
achieve the long-run unemployment target. There is no requirement that
any specific programs be introduced, but those recommended to the President for his consideration include the following: countercyclical employment
programs, including public works projects, countercyclical public service
employment, and countercyclical revenue sharing; regional and structural
employment policies designed to reduce unemployment among specific demographic groups and within depressed geographic areas; youth employment
programs; job training and counseling programs to prepare persons for employment in the private sector; and finally, establishment of such additional
public or private nonprofit employment projects as are needed to meet the
long-term target for the unemployment rate. These additional projects may
be created only after an official finding by the President that all other means
of reducing unemployment are insufficient. Any new programs would require
authorization and funding by the Congress.
The bill requires the Congress to evaluate the President's economic strategy
and adopt its own set of goals and policies, which may or may not coincide
with those of the President. The Federal Reserve would be required to submit
its own plan for monetary policy to the Congress and to explain the relationship between its intended policies and the President's short-term goals. These
procedures for establishing and reviewing goals and policies are designed to
achieve a better coordination of the actions of the President, the Congress,
and the Federal Reserve, and to produce a more coherent set of macroeconomic policies.
The procedures established by the Full Employment and Balanced Growth
Act are an important advance beyond the Employment Act of 1946. The bill
does not authorize massive new Federal programs. Nor does it impose controls on the economy or create additional governmental institutions. On the
contrary, it reaffirms the critical importance of a healthy and dynamic private sector in achieving our long-term goals, and it relies on existing institu-
94
tions to improve the formulation and coordination of economic policy.
While this new framework cannot guarantee a return to full employment
and price stability, it should help identify the most serious obstacles and
point the way toward rational solutions.
A 4-percent rate of unemployment in 1983 is a very ambitious objective,
for it would imply that actual GNP would exceed our present estimates of
potential GNP. The major unanswered question regarding this target is
whether it can be achieved without creating pressures in labor and product
markets that would touch off a new round of inflation. Given the present
structure of these markets, it is unlikely that a 4-percent unemployment rate
could be achieved through aggregate demand policies alone without at the
same time causing a significant increase in the rate of inflation. Responsible
policy, however, requires not that we abandon efforts to reach the 1983 unemployment goal, but that we work steadily to reduce the conflict between
low unemployment and inflation by developing structural measures to improve the functioning of markets. Chapter 4 discusses in some detail the
role of such policies in improving the efficiency of labor markets.
95
CHAPTER 3
The World Economy—a Hesitant Recovery
T
HE WORLD ECONOMY in 1977 continued to feel the aftershocks
of the 1972-75 period: output remained well below productive
potential while unemployment reached new peaks in many countries, inflation continued at high levels, and unusually large imbalances in current
accounts persisted. These are problems that are likely to continue to command the attention of policy makers in the coming year. Economic growth
in the United States was stronger than that in industrial countries abroad.
This difference in growth rates and strongly rising oil imports contributed to
the emergence of an unprecedented U.S. deficit on current account transactions. Concern over the U.S. deficit was a major factor leading to a substantial depreciation of the dollar against many foreign currencies, which
was especially rapid toward the end of the year.
This chapter focuses on the causes of the hesitant recovery of the world
economy from the 1974—75 recession, and on the challenge to the conduct
of national economic policies that it represents. Developments in the world
economy over the past 5 years are assessed. Then a closer look is taken at
developments in 1977—concentrating on the largest foreign industrial countries, which along with the United States set the pace for the world
economy as a whole. Finally, the major continuing problems in the world
economy that grew out of the disturbances in the first half of the 1970s are
assessed, and the Administration's approach to these problems is set forth.
Thus the discussion is not a complete catalog of world economic problems
or of U.S. international economic policies. One important omission is the
long-standing challenge to raise incomes in the poorer countries. U.S.
programs specifically directed toward this goal are not examined. Nevertheless, solutions to the problems that are examined—hesitant world recovery, imbalanced international payments, volatile commodity prices, and
slow growth of world trade—are crucial to the success of development
programs.
ORIGINS OF THE CURRENT WORLD ECONOMIC DISORDER
Although individual countries have from time to time faced conditions
similar to today's, the combination of prolonged inflation along with unemployment in many countries and large current account imbalances is a
new experience. A first step toward developing policies to deal with the
96
present constellation of problems is to study how they arose and to sort out
what has changed in the world economy and what has not.
The period from the late 1940s to the late 1960s counts as one of the
most successful periods of modern world economic history. Successive steps
were taken to liberalize world trade. Real incomes in Western Europe
grew at an average rate of 4.6 percent between 1955 and 1970. The economy
of Japan grew an average of 9.5 percent per year as that economy
joined the front ranks of the industrial economies. Major economic gains
were also made in many developing countries, and growth in this group
averaged 5.1 percent per year. Problems with inflation and with international
payments tended to be isolated in individual countries and were tractable.
Consumer price increases in the group of developed countries making up
the Organization for Economic Cooperation and Development (OECD)
were brought under increasingly better control and averaged only 2.6 percent
per year from 1961 to 1966.
During the late 1960s problems began to appear. Inflationary tendencies
gradually developed as labor and product markets tightened in some countries and wage pressures increased even in economies that appeared to have
some slack. The mild recessions that occurred in various countries seemed
less able to eliminate the inflationary momentum that had built up in the
preceding expansions. In addition, the mechanisms of the Bretton Woods
system of par value exchange rates were increasingly unsuited to deal with the
imbalances that arose in countries' payments positions. Although these developments posed serious puzzles for policy makers in the late 1960s and
early 1970s, the problems seemed manageable. In retrospect, they were
dwarfed by later events.
INFLATION
The slow upward drift of inflation rates in the late 1960s quickened after
1971, carrying inflation in most industrial countries above 10 percent per
year in 1974 and more than twice that high in some countries. Although
inflation rates have since receded, they remain well above those previously
experienced, and further declines are now coming only slowly in most countries (Chart 6).
The upward movement of inflation rates was the consequence of a series
of events that culminated with the oil embargo and oil price increases of
late 1973. Economic policies in virtually all industrial countries were oriented
toward expansion in 1972. As a result, growth was strong virtually
everywhere that year and the next year. Although aggregate capacity utilization and unemployment data indicate that demand had been pushed beyond
potential output in only a few national economies, the nearly simultaneous
expansions outran available supplies of many raw materials and strained
worldwide capacity in a number of basic industries. Industrial commodity
prices climbed rapidly. The nonfood component of The Economist index of
97
Chart 6
Consumer Prices and Hourly Earnings
in Major Industrial Countries
PERCENT CHANGE FROM YEAR EARLIER
20
UNITED STATES
15
HOURLY
EARNINGS
LI C
10
CONSUMER PRICES
5
I IIIIIIIII1 III1 II11 III1II11 IIIIIII 1
1966
67
68
69
70
71
72
73
74
I I [ I I I
75
76 77
20
CANADA
Ib
10
HOURLY EARNINGS
*y
5
0
I I I I I I I I I
1966
67
111111 M i rTi 111 M
68 69
70
71
72
CONSUMER PRICES
till
76 77
I i i i I i i i ! i i i I i I
73
74
75
25
FRANCE
20
r
J
15
10
f
5
0
HOURLY EARNINGS
/ "
\
\
CONSUMER PRICES
i
h i i I i 11 i i I I I I
1966 67
68 69
70
I
II
71
I I I I I
72
I
73
I I I I I
74
75
II
I I I
76
77
20
WEST GERMANY
HOURLY EARNINGS
f
10
5
0
1 1 1 i I 1 11
iiilTT>viIi
1966
67
68
u—
~
*
\
CONSUMER
PRICES
69
70
71
1 1 I
72
^*~
1 1 1 11 1 1
73
1111 1 1 1 1 1 1 1 1 1
74
SOURCE: ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT.
98
75
76 77
Chart 6—Continued
Consumer Prices and Hourly Earnings
in Major Industrial Countries
PERCENT CHANGE FROM YEAR EARLIER
CONSUMER PRICES
I I I I I I I I M^iH'^T I I 1 I I I 1 I I I I I I I 1 I I I I I I I 1 I I I 1 I I I I I I I
67 68 69 70 71
1966
72 73 74 75 76 77
35
JAPAN
-
A
30
25 -
HOURLY EARNINGS
A
/
-
\A
20
15
10
yv/\
5
^
I
0
\
^
j
I I I I I I I I I I
1966
A
V
^
/
v
N
^ - - y
K
\
CONSUMER PRICES
I I I I I I I I I I I I I I I I I I I I I I M I I l I I I I I I II I
67 68 69 70 71
72 73 74 75 76
77
3b
UNITED KINGDOM
30
25 -
/
20
15
HOURLY EARNINGS
/
/
A
J^
5
-
V
-
10
0
-
J
CONSUMER PRICES
i i i rfi"
i i I i i i
M i l
M l
I I I
1966 67 68 69 70 71
I I I
I
I
SOURCE: ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT.
99
I
I I
I I I I I
72 73 74 75 76
77
commodity prices (measured in dollars and excluding petroleum) rose 158.5
percent from December 1971 to December 1973. Less than one-twentieth of
this increase can be attributed directly to the depreciation of the dollar in
the early 1970s.
Grain prices also began to rise following declines in world harvests of
wheat, corn, and rice in 1972 from year-earlier levels. World grain stocks
(held mainly in the United States) had been whittled down from mid1960s levels, so that poor harvests had a greater effect on prices than earlier.
The food component of The Economist index rose 142.5 percent from
December 1971 to December 1973.
Prices of manufactures also began to move up at a faster clip in 1973,
reflecting higher input costs and strong demand. Consumer price increases
in the large countries ranged from 7.3 percent in Germany to 15.0 percent
in Japan over the 4 quarters ending in the fourth quarter of 1973. Wage
pressures built up steadily in most countries. Trends in consumer prices and
hourly earnings for the seven largest industrial countries are shown in
Chart 6.
Although inflation rose in all countries during this period, there was considerable divergence of inflationary experience across countries. This divergence partly reflected differences in demand pressure and the extent and
speed of wage responses to increases in the cost of living. The exchange rate
realignments that began in 1971 also contributed to widening differences in
inflation rates. Countries that had recorded above average inflation in the
years up to 1971 and consequently experienced declines in their currencies
faced additional inflationary pressure from rising import prices. Countries
whose prices had been more stable, and whose currencies therefore tended
to appreciate, received a dividend from slower import price increases. The
shift to flexible rates among major currencies over the 1971-73 period also
provided countries with more freedom to pursue policies with different
consequences for inflation.
Inflation was already recognized as a serious problem in late 1973, when
the world was surprised by the Arab oil embargo and a series of oil price
increases that more than quadrupled the 1972 world price of crude oil.
Of all the shocks of the early 1970s, the oil price increases have had
the most profound and persistent effects. The direct effect alone added
about 1^2 percent to the price level in developed countries in 1974. Prices
of substitute fuels were also bid up, thus further increasing price levels.
Coming at a time when upward price pressures were already intensifying,
the oil price increases touched off an inflationary chain reaction. Fears that
those who controlled supplies of other raw materials might succeed in emulating the Organization of Petroleum Exporting Countries (OPEC), speculation fed by fluctuations in exchange rates for major currencies, and a
very tight supply situation led to another burst of industrial commodity
100
price increases. With stocks of grains having already reached very low
levels, a second poor world harvest in 1974 contributed to further large
increases in food prices.
The rise in oil, food, and other commodity prices reduced real incomes
from wages and profits in manufacturing and service sectors. Attempts by
workers and firms to restore previous positions put added upward pressure
on wages and prices. The extent of these secondary wage-price forces varied
with conditions in individual economies. Where automatic wage adjustments to compensate for consumer price rises were widespread, as in
Italy or the United Kingdom, or where wages were adjusted annually, as
in Japan, the pressures were greatest. Average increases in hourly earnings
over 12-month periods reached 30 percent or more in these countries. Even
in Germany, where wage pressures were more moderate, increases in hourly
earnings approached 12 percent over a 12-month period.
The direct upward pressures from commodity prices abated as the world
moved into recession in late 1974 and early 1975. Indeed, most non-oil
commodity prices moved sharply downward. As a result, inflation rates receded, but the wage-price momentum that had been built into economies
sustained rates of consumer price increase that continued to be roughly
double what they had been in the late 1960s. In some countries such as Italy,
the upward shift in the ongoing rate of price increase was substantially
greater. The persistent high unemployment and low capacity utilization in
the world since 1975 has had a relatively small effect in dissipating the
momentum of the wage-price spiral.
CURRENT ACCOUNT IMBALANCES
The oil price increases of 1973 led to huge surpluses in the current
accounts of most OPEC countries, and to their mirror image—large
deficits—elsewhere. The OPEC countries could not immediately increase
their imports to match their higher revenues. Hence their combined current account surplus, which measures the amount by which export receipts
(including investment earnings) exceed payments for imports and net transfer payments, climbed from less than $10 billion in 1973 to over $60 billion
in 1974. A large part of the corresponding shift in the position of the rest
of the world was seen in the emergence of a combined deficit of more than
$30 billion in the OECD countries, including the United States, after surpluses averaging $4.3 billion for 1971-73. The deficit of the non-OPEC
developing countries widened to about $25 billion, from an average of $8
billion in 1971-73 (Table 14).
After being compressed by reduced oil consumption during the recession
of 1975, the combined OPEC surplus expanded to the neighborhood of $40
billion in 1976 and 1977 as demand for oil picked up again. This surplus
has become concentrated in the Persian Gulf states, whose revenues continue to outstrip their ability to absorb goods and services. The deficit of
the non-OPEC developing countries has receded from a peak of $40 billion
101
in 1975 to less than $25 billion in 1977, while the deficit in the OECD
countries has risen to more than $30 billion again.
TABLE 14.—World current account patterns, 1973-77 *
[Billions of U.S. dollars]
Area and country
1973
OECD
United States
Canada
Japan.. .
.
European Community
West Germany
.
.
.
1974
1975
1976
1977 2
2.8
-32.8
-6.3
-26.5
-32
-.4
0
-.1
1.7
4.3
3 -2.3
-1 5
-4.7
-11.3
9.7
11.6
-4 7
-.7
.7
3.8
-1.4
-4.2
3.7
-7.8
3.4
-18
-4
10
0
2
9.0
-8.0
61.8
-24.5
30.8
-40.0
42.3
-26.3
40
-23
-5.5
-9.8
-18.0
-13.3
-11
1.7
5.3
33.5
23.8
26
Developing countries:
OPEC
Non-OPEC
Other <
Residuals
1
Data are on the OECD basis.
2
Preliminary estimates.
3
Excludes cancellation of Indian debt (—$2.0 billion) and extraordinary grants (—$0.7 billion).
« Includes the Communist countries, South Africa, and non-OECD Europe.
• Residual arises from timing differences and inconsistencies in nationally collected data.
Source: Organization for Economic Cooperation and Development (OECD).
RECESSION
The massive increase in commodity prices—especially oil—led directly
and indirectly to the worst recession since the 1930s. The direct effects were
the result of a transfer from consumer incomes in the industrial countries to
the revenues of oil-exporting countries. Spending generally declined in
importing countries in response to the change in real incomes, while the
OPEC countries increased their spending only slowly at first. Even after
the OPEC countries made the initial adjustment of their spending to their
increased wealth, their saving remained high. The result was a massive
change in world saving patterns, as is dramatically shown in Table 14
by the pattern of current accounts in 1974. The change became increasingly
evident as the total real gross national product (GNP) of the seven largest
OECD countries fell at an increasingly rapid rate starting in the first half
of 1974.
Two less direct responses added to the contractionary impetus of the price
increases. First, consumers and business became progressively more pessimistic as 1974 wore on. There were extraordinary rises in saving rates in all
major foreign countries, while sharp declines in real investment occurred
in most areas.
A second depressing effect came in the reactions of policy makers. Virtually every country was faced with the dilemma of how to respond to the
simultaneously inflationary and contractionary effects of the oil price rise. On
the one hand, there was widespread reluctance to accommodate the inflationary effects by allowing nominal demand to grow at a sufficient pace to
keep unemployment from rising. Many felt that such an accommodative
policy would allow the new wage-price spiral to continue unchecked. On
102
the other hand, most analysts perceived that a continuation of restrictive
policies—initiated to counter the tight markets in 1973—would lead to a
sharp decline in real incomes and to a serious contraction.
Faced with this dilemma, countries chose different routes. The predominant response was to continue the restrictive policies initiated in 1973 into
1974. When the full contractionary force of the oil price increase was not
felt immediately, monetary policy in some countries was made even .more
restrictive. Fiscal policy automatically became more restrictive when
inflation raised tax liabilities by pushing individuals into higher personal
income tax brackets and caused real corporate profits to be overstated.
By late 1974 the cumulative effects of the oil price increases and contractionary monetary and fiscal policies began to be felt more strongly. Rising
saving rates added to contractionary forces as consumers became more cautious. Real investment fell with firms' growing concerns about the outlook
for sales, high interest rates, and the structure of their balance sheets. Firms
also moved to reduce inventories of materials that had been built up as a
hedge against further commodity price increases. The combination of these
forces produced the deepest recessions of the postwar period. Those few
countries that were less affected by the oil price increase, like Canada, or that
moved to counter its contractionary effects, like Sweden, had milder recessions. They were seriously affected by the subsequent prolonged period of
weak demand in other industrial countries, however. Governments in these
countries also ultimately adopted more restrictive policies to control inflation.
In 1975 authorities in most countries moved to counter their deepening
recessions with expansionary fiscal policies. The view that increased rates
of monetary expansion would raise inflationary expectations even under
depressed conditions inhibited most countries from taking similar steps on
the monetary side. The expansionary fiscal measures and the completion of
inventory adjustments provided an initial burst of growth in most countries
after the trough was passed. Since then real private spending has been relatively sluggish in most countries, and fiscal policies have become more restrictive. Hence output growth in industrial countries has slowed markedly outside the United States. Unemployment rates in most foreign countries now
stand at or above the levels reached in 1975 and are rising (Chart 7).
THE WORLD ECONOMY IN 1977
Outside the United States, the major industrial countries virtually stagnated after the first quarter of 1977 (Table 15). Growth in the smaller industrial countries averaged even less than in the larger ones. Unemployment
reached new highs in many countries. Commodity prices surged upward at
the beginning of 1977, but the rise was short lived. Wage increases were
smaller than a year earlier, and the momentum of inflation edged slowly
downward. Sharply declining prices for food and many industrial commodities helped to bring inflation rates below underlying rates for most of the
second half of the year.
103
Chart 7
Unemployment Rates in
Major Industrial Countries
PERCENT; ADJUSTED TO U.S. CONCEPTS
2 -
1960
1965
1975
1970
10
CANADA
8
6
4
2 -
-
0
I
I
I
i
I
i
i
i !
1965
1960
i
i
i
i
I
i
1975
1970
6
FRANCE
4 ,
•
—
2
'
0
•
I
1960
I
I
I
i
i
i
i
SOURCE: DEPARTMENT OF LABOR.
I
1970
1965
104
I
l
i
I
I
1975
i
Chart
7—Continued
Unemployment Rates in
Major Industrial Countries
PERCENT; ADJUSTED TO U.S. CONCEPTS
WEST GERMANY
I
I
I
1965
1960
I
I
I
I
I
1970
I
I
I
1975
2 —
I
1960
i
i
i
i
i
1965
i
i
i
I
i
i
i
i
i
i
i
i
I
I
i
1975
1970
1965
1960
I
i
i
i
i
1970
i
i
1975
8
UNITED KINGDOM^
6 -
4 -
2
0
I
I
I
I
I
I I
I
I
1970
1960
1965
1/ EXCLUDES NORTHERN IRELAND.
SOURCE: DEPARTMENT OF LABOR.
105
I
I
I
1975
I
TABLE 15.—Real GNP growth in major industrial countries, 1976-77
[Percent change at seasonally adjusted annual rate]
1976
1977
Country
United States
Canada
.France2
West Germany
Italy s
Japan
United Kingdom 3
1
2
3
.
8.8
13.3
7.4
8.9
10.0
12.0
10.8
II
III
5.1
3.6
4.9
4.0
5.5
6.0
-2.2
3.9
-1.3
1.6
1.0
1.0
1.6
.7
IV
1.2
-.8
1.6
5.8
7.6
3.4
3.7
1
II
7.5
7.8
8.8
3.9
7.5
8 8
-3.6
6.2
-1.2
-5.1
-.8
-9.9
6 8
.4
III i
5.1
5.3
.9
4
-2.4
18
-.4
Preliminary.
Gross domestic product excluding nonmarket activity such as compensation of employees in the government sector.
Gross domestic product.
Source: Department of Commerce (Bureau of Economic Analysis), Organization for Economic Cooperation and Development, and national sources.
As inflationary fears receded, current account imbalances became the
most serious constraint on expansion in many economies. Persian Gulf oil
producers and several industrial countries continued to have large surpluses.
Other governments were inhibited from adopting the more stimulative
economic policies that were needed to restore the momentum of economic
expansion, in part because of concerns that they would be unable to finance
the larger current account deficits that would result. The emergence of a
large current account deficit in the United States in 1977 was associated with
some improvement in the positions of industrial and developing countries that
had been hard pressed in 1976, but more than one-third of the U.S. deficit
was offset by a jump in the surplus of Japan.
AGGREGATE REAL GROWTH
The growth of real economic activity in 1977 was disappointing—
especially in Western Europe. Real output in OECD Europe increased only
an estimated 2 percent. By the third quarter, the number of unemployed
in these countries excluding Portugal and Turkey stood at about 7 million,
or 900,000 above the figure a year earlier. This performance was, in part,
the consequence of the restrictive policies adopted by a number of countries
as a means of slowing inflation and reducing current account deficits. Italy
and the United Kingdom accepted restrictions on their economic policies
as part of the establishment of standby credits with the International Monetary Fund (IMF). Other countries—France, many smaller industrial countries, and many developing nations—also assigned high priority to reducing
inflation and current account deficits, and maintained or adopted restrictive
monetary and fiscal policies in 1977.
Because of the constraints on policies felt by many governments, hopes for
sustaining a global recovery in 1977 were pinned to a group of "strong
countries," those with relatively moderate inflation rates and favorable
balance of payments positions. The United States, Germany, and Japan
were the major states in this group, but Switzerland and the Netherlands
106
also fit the description. The United States was in a somewhat different position from the others in that it had moved to approximate current account
balance in 1976. A deficit was seen as an acceptable position for the United
States and, given the continuing OPEC surplus, even a desirable one from
a global standpoint. It was expected that the other strong countries would
also move toward and into current account deficit.
For world growth to be maintained at a satisfactory rate, it was necessary that growth in domestic demand in these strong countries be vigorous, thereby counteracting the restrictive measures taken in the "policyconstrained" countries. Reduction of current account deficits in the policyconstrained countries would be facilitated by such a strategy, and these countries would soon be able to move back to quicker recoveries.
A comparison of major countries' publicly announced forecasts for 1977
with what now appears the likely outcome (Table 16) shows that, except
for the United States, countries have fallen below their governments' growth
expectations. Germany has probably fallen 2 to 2 ^ percentage points short
of the 4*4 to 5 percent growth rate discussed early in the year. German
authorities had counted on strong private demand at home and growing
exports to achieve satisfactory growth. Investment and exports did not rise
as much as expected, however, and the government budget deficit was
smaller than projected. As a result, output growth stalled after the first
quarter. The government responded by postponing measures intended to
reduce the public sector deficit and by adopting a small fiscal stimulus
package in November. However, the package came too late to affect the
outcome for 1977.
The Japanese announced a growth target of 6.7 percent for the fiscal year
ending in March 1978. Although the Japanese economy fell well behind
the pace needed to achieve this, stimulative measures adopted in September
and a second set of measures taken at the end of the calendar year will
make the gap less than it would have been. Japanese GNP growth was
supported mainly by strong exports. Domestic demand expanded at an
average rate of less than 4 percent for the first 3 quarters of calendar year
1977. Thus the pattern of Japanese growth in 1977, and the resulting inTABLE 16.—National forecasts and realized real GNP growth for 1977
[Percent]
Country
United States....
Canada
France
West Germany...
Italy
Japan
United Kingdom.
Change from
Fourth quarter to fourth quarter.
Year to year
.do.
.do.,
.do..
Fiscal year to fiscal year.
Year to year
Early 1977
forecast
3-4
4.6
Realized 1
V/i
2%
2.6
6.7
1.2
i Preliminary estimates.
Sources: Forecasts from public statements of government officials and other official sources; estimates of realized
growth from Department of Commerce, Organization for Economic Cooperation and Development, and Council of Economic Advisers.
107
crease in the current account surplus by nearly $7 billion, served to tighten
current account constraints on other countries.
Economic growth in all other major foreign countries also fell short of
expectations. The pervasively weak element in the growth of demand
in 1977 was business fixed investment. Among the seven largest countries, only in Canada was real business fixed investment above 1972-73
levels. Business fixed investment has slowed in most countries since 1976,
and virtually no growth appears to have occurred in the second half of 1977
in any of the large foreign countries.
Real private consumption expenditures rose only moderately in most
countries in 1977. Consumption declined in the United Kingdom, where
falling real wages depressed disposable income and hence real consumption, and was virtually unchanged in Italy because of sharply increased personal tax collections. In Germany and France, taxes net of government
transfer payments also took an increased share of household income in
1977. Saving rates in the large foreign countries were lower than in 1976,
except for Japan, but the declines since the recovery began were generally
less than in the United States.
Government spending made only a modest contribution to demand growth
in most countries. Authorities in Italy and the United Kingdom followed
strongly restrictive demand management policies. Limiting the government
share of total spending over the medium term is an independent policy objective in these and other countries. Authorities have therefore been reluctant to increase spending in the short run as an aggregate demand measure.
Japan, where the government sector is still substantially smaller than in
other countries, was an exception to the general pattern of slow growth in
real government spending.
Despite the slower growth of world trade in 1977, the growth of real
exports was relatively strong in Japan, Canada, Italy, and the United
Kingdom. Except for Japan, these are countries whose exports benefited
from substantial exchange rate depreciations, although in Canada the growth
of the U.S. market was undoubtedly more important for exports, and
petroleum exports played a role for the United Kingdom. In Germany and
France exports grew more slowly, and in the smaller OECD countries they
contracted, on average. Thus the smaller countries were most adversely
affected by external developments, and these countries were the ones registering the slowest real growth—with output declining in many of them.
INFLATION IN 1977
While inflation rates in most countries remained high in 1977 (Table
17), they did come down somewhat—particularly in those countries where
inflation had been highest. A surge in world commodity prices in late 1976
and early 1977 pushed up consumer prices in the first half of the year. However, these prices turned around by midyear. In some countries—the United
Kingdom, Italy, France, and a number of smaller countries—price pressures
108
continued to be exacerbated in the first half of 1977 by large exchange rate
depreciations that had occurred in 1976. These currencies were stable, even
rising somewhat in 1977, and this source of price pressure abated or was
reversed as 1977 progressed.
TABLE 17.—Inflation in major industrial countries, 1976—77
[Percent change in the consumer price i ndex; seasonally adjusted annual rate]
1977
1976
Country
1
United States ._
Canada
France
West Germany
Italy
Japan
United Kingdom
5.2
6.2
10.2
4.4
15.1
7.9
14.6
II
III
4.9
6.0
8.7
4.5
26.9
10.8
8.8
5.7
4.4
10.4
3.3
14.6
9.6
15.1
IV
4.4
7.0
10.5
3.1
28.2
8.9
21.7
1
8 4
9.9
6.5
5.2
20.8
7.8
21.0
II
8.8
9.4
12.2
3.8
16.4
8.9
12.4
III
5.3
7.3
10.4
3.7
14.5
6.1
11.6
Sources: Department of Labor (Bureau of Labor Statistics) and Council of Economic Advisers.
A significant decline in inflation was achieved in 1977 in the United Kingdom, where a wage restraint program prevented import price increases from
being reflected in wage settlements. Although no wrage norm was agreed to
following the end of the second year of wage restraint in August 1977, the
government has been largely successful in preventing contracts from being
reopened until 12 months after the previous settlement. Increases since
August have not averaged substantially more than the 10-percent figure that
the government views as consistent with controlling inflation.
Inflation also declined in 1977 in Italy. Italian wages, which are indexed
to the cost of living, did respond to import prices and rose sharply through
the first half of 1977. With the stabilization of the lira and the turnaround
in commodity prices, cost-of-living increases in wages are now declining
rapidly. The declining trend has been reinforced by some shrinkage of wage
increases granted in addition to cost-of-living increases.
Thus inflation has been moderating in the two large countries where it
had been most rapid. Elsewhere, however, wrages and prices appear to be
locked in a stable pattern of increases. Price increases in Japan have been
held down by the appreciation of the yen in 1977; and other countries whose
currencies appreciated substantially late in the year should post lower price
increases in early 1978. It remains to be seen, however, to what extent these
smaller price increases will lower inflation rates over the longer term by holding down money wage increases. In other countries there appears to be little
risk that inflation will accelerate markedly, but also little hope that it can be
brought down quickly from current levels. Wage settlements and prices of
manufactured goods have proved to be relatively insensitive to the high unemployment and low capacity utilization now prevailing. Wage and price
controls have been effective only when combined with very restrictive demand management policies and only for limited periods of time. The Cana109
248-947 O - 78 - i
dian government is in the process of phasing out one of the few remaining
general programs of wage and price controls. In addition, there have been
tentative experiments with the use of taxes as measures to slow inflation. In
one approach, governments have proposed general tax reductions in return
for agreements by labor unions to accept lower money wage settlements.
When tax relief is warranted on other grounds and labor negotiations are
highly centralized, something may be gained through such a bargaining
process. An alternative set of approaches, discussed in Chapter 4, would use
decentralized tax incentives for reducing inflation. These approaches are
novel and raise important substantive questions that must be answered
before they could be responsibly proposed.
CURRENT ACCOUNT POSITIONS IN 1977
Four industrial countries that have had persistent surpluses—Japan, Germany, Switzerland, and the Netherlands—had a combined surplus of about
$16 billion in 1977. The United Kingdom and Italy moved from deficit
into surplus.
Efforts by other OECD countries to reduce their sizable deficits in 1976
met with little success because of slow growth in their export markets. Some
countries within this group—Portugal and Turkey, for example—have
encountered difficulties in continuing to finance deficits. The non-OPEG
developing countries appear to have reduced slightly their combined current
account deficit in 1977. Their export earnings were boosted by commodity
price increases early in the year, and some of them had sharply curtailed
imports as well. Brazil and Mexico achieved substantial reductions in their
deficits and a number of Asian countries appear to have realized smaller
shifts.
The $l7-billion rise in the U.S. current account deficit from $1 billion in
1976 to about $18 billion in 1977 reflected a $20-billion increase in our trade
deficit. Although an increase in the deficit was widely expected, the magnitude of the shift proved to be much greater than anticipated, since growth
abroad failed to develop as strongly as expected and U.S. oil imports
were pushed up by a series of unforeseen developments. Rising payments for
oil accounted for more than one-half of the increase in our trade deficit in
1977. The weak U.S. export performance and rise in the trade deficit in
1977 does not appear to stem from trends in relative domestic prices. U.S.
and foreign prices measured in dollars held about the same relationship
in early 1977 as in mid-1974, although there have been fluctuations in the
interim. There has been some shift in relative export prices for manufactured goods, however, suggesting a greater willingness on the part of exporters in some foreign economies to compete on the basis of price. Nevertheless
the depreciation of the dollar in late 1977 should result in a noticeable improvement in U.S. competitiveness, with the trade volume response occurring
after a lag of 1 or 2 years.
110
FOREIGN EXCHANGE MARKETS
The most notable development in foreign exchange markets in the first half
of 1977 was the strength of the U.K. pound and the Italian lira after these
countries completed standby financing agreements with the IMF. As the
year progressed, exchange market attention focused increasingly on the
dollar.
Concern over the large U.S. current account deficit generated downward
pressure on the dollar—particularly vis-a-vis the currencies of countries with
large surpluses. As market uncertainties grew over what measures would
be enacted by the United States to control the rise in oil imports, and as
demand in foreign economies showed few signs of strengthening, the
pressures intensified. The decline of the dollar from December 1976 to
December 1977 against a weighted average of the currencies of ten major
foreign countries (Belgium, Canada, France, Germany, Italy, Japan, the
Netherlands, Sweden, Switzerland, and the United Kingdom) was 5.5 percent, weighting currencies by countries' shares of the total trade of the group.
Weighting the same currencies by countries' trade with the United States
gives a depreciation of only 2.4 percent during 1977. The difference is
mainly due to the much larger weight of the weak Canadian dollar in the
latter index. Indexes including more currencies also tend to show smaller
depreciations of the dollar, since currencies excluded from the index of ten
currencies were virtually all weaker than the average of those included.
The yen appreciated against the dollar by 22.3 percent from December
1976 to December 1977, the largest appreciation of any currency. Increases in the dollar value of several other currencies were also sizable:
German mark, 10.8 percent; Swiss franc, 18.0 percent; and U.K. pound,
10.5 percent. On the other side, the Canadian dollar fell 7.2 percent.
The magnitude of these movements was not unusual for the floating
rate period. In the period since the dollar floated, it has twice depreciated
by more than 7 percent on a weighted average basis in 12 months or less.
Three times the dollar appreciated by 7 percent or more, with the appreciation exceeding 13 percent in two cases. Individual rate changes of
10 percent have been common, and even the change in the yen rate this
year has been matched several times by movements of other currencies.
Rapid movements at the end of the year occurred under disturbed market
conditions, however, with wide spreads between bid and ask quotations and
large intraday gyrations in rates. Thus the efficiency of the current system of
rate determination was called into question—a topic pursued below.
UNFINISHED BUSINESS
At the beginning of 1978, the world economy faces the same problems
that have confronted policy makers since 1975—unemployment is high,
margins of unused productive capacity are substantial, inflation continues
at excessive rates, protectionist forces are strong, and current accounts are
111
extremely unbalanced. On the brighter side, the virulence of underlying
contractionary and inflationary forces has abated as governments have taken
cautious, and for the most part cooperative, steps to improve economic performance. The international financial system has adapted to the need to
channel the large accumulation of savings in OPEC countries to countries
in deficit.
The serious problems that have beset the world economy have led some
to argue that we must permanently set more limited economic objectives.
In some respects this is true—we must plan for a world of less secure and
more expensive energy. Nevertheless, higher employment and output are
achievable virtually everywhere without creating new inflationary pressures. The problems are global and the pursuit of appropriate domestic
policies is constrained in many countries by international payments imbalances. Achieving the potential of the world economy will require bold
policies and close international economic cooperation.
Four major economic challenges are discussed below. International cooperation is essential to meeting each one of them. If, instead of working
together to sustain economic recovery and solve our other problems, governments accept a continuation of the poor performance of 1977 as inevitable,
the world may well face a darkening economic future. Unilateral protectionist trade policies will flourish. Pressures for international arrangements to
allocate markets in especially depressed sectors will grow stronger. The result
will be a more rigid world economy, no longer capable of generating the
rapid growth of trade and incomes that has characterized the post-World
War II period. The developing countries, which are looking for opportunities
to participate more broadly in world trade, will be particularly hurt by
such an outcome.
TO RESTORE HEALTH TO THE INTERNATIONAL ECONOMY
Foreign industrial economies as a group have shown only scattered signs
of renewed strength following their extreme weakness in mid-1977. The
Japanese economy is experiencing very slow growth. Even with the stimulative measures announced at the end of 1977, the appreciation of the yen,
together with a high personal saving rate and depressed investment, raises
questions whether growth in 1978 will exceed 1977. In Europe, the economic outlook with existing policies is for rising unemployment of labor and
falling capacity utilization. For the OECD as a whole, GNP growth is
likely to average 3*/2 to 4 percent in 1978, unless there are major policy
changes in addition to those announced for Japan and those proposed for the
United States in this Report.
At the same time, most forecasts indicate that the rate of increase of
consumer prices in the OECD should slow somewhat from about 8 percent in 1977 to around 7 percent in 1978. There continues to be sufficient
slack in most economies to permit growth at rates moderately higher than
112
current forecasts without forgoing a gradual reduction in average inflation
rates.
Governments recognize the need for stronger expansion. In November 1977
the member countries submitted their preliminary objectives for 1978 to
the OECD. In the aggregate these goals would lead to 4^2 percent real GNP
growth for the OECD as a whole. Such an outcome would be the minimum
that could be expected to arrest the rise of unemployment abroad.
The generally sluggish behavior of business fixed investment has been a
major factor keeping countries from achieving their goals. Stronger investment is important in the short run to provide stimulus for sustained recovery.
Over the longer run, some are concerned that capacity constraints may have
become relatively more important limitations on noninflationary expansion.
Thus when capacity limits are reached, unemployment may still be above
levels that would be inflationary on the wage side. Greater business fixed
investment during the recovery period would reduce the potential for capacity constraints and make possible a further reduction in unemployment.
A number of explanations have been offered for the weakness of investment. No single explanation will suffice for all countries. Nevertheless a
substantial portion of the current weakness of investment in every country
is accounted for by the low current and prospective rates of capacity utilization and the effects of low levels of output on profits. In addition, the persistence of inflation has undoubtedly added to concerns that recoveries may
not be sustained. Much investment that has occurred has been for modernization projects that promise to save more in labor, energy, and other
inputs than their capital costs; projects that would add to capacity have
in many instances been deferred.
Considerable attention has been focused, as well, on lowr after-tax returns
on capital and the poor outlook for improvement as explanations for sluggish
investment. Measures of profits and the total return on capital must be treated
with some reservations, but there is substantial evidence that over the past
15 to 20 years they have declined relative to GNP and relative to capital stocks
in many foreign countries. Moreover it appears—in contrast to the U.S.
experience—that the fall in the return on capital has been too large and too
prolonged to be entirely attributable to the recent recessions, at least in Germany, the United Kingdom, and Italy.
Investment is not being held back by insufficient savings. Given the savings
represented by the OPEC current account surplus and with consumer saving
rates in most foreign economies high by historical standards, there is no
shortage of savings in the world today. Thus a higher return on capital is
not required today to assure an adequate supply of funds for investment.
Rather, to encourage firms to make use of the available pool of savings for
productive investment, what is needed is a sufficient margin of the expected
return on capital over the cost of capital.
One way to increase this margin and call forth more investment is to raise
expectations and reduce uncertainties concerning after-tax returns on capital.
113
Many government actions can have an effect on these expectations by achieving continued economic recovery, reducing tax liabilities associated with new
investment, and reducing uncertainties and inefficiencies that result from the
government regulatory process. A second way to increase the margin is to
maintain an expansionary monetary policy, which reduces the cost of capital.
Monetary policy is more flexible than policies that work by raising the rate
of return on capital, but there is a role for both kinds of policies. Each generates higher expected incomes for those who are willing to accept the risk
of new investment. But the two kinds of policies do, of course, have different
effects on the distribution of income, and these must be taken into account.
To some extent, views concerning the indicators of macroeconomic management threaten to prevent some countries from reaching their goals. As
discussed below, the significance of current account positions has changed
in view of the OPEC surplus. In addition, attitudes about budget deficits
and the growth of monetary aggregates should be formulated in the light
of current economic conditions. As noted in Chapter 2, it is difficult to hold
down deficits in government budgets when the drag on industrial economies
from external deficits is as high as it is now, and especially so when investment is weak as well. Similarly, rates of monetary expansion must make
realistic allowance for the inherited momentum of price and wage increases
and the rate at which this momentum can be dissipated. It is important to
avoid such a progressive tightening of monetary conditions that investment
objectives are thwarted.
In recent years, the appropriate use of monetary and fiscal policies has
sometimes been constrained by views on their significance and impact. The
principal tools of macroeconomic policy are not themselves the ultimate
objectives of policy. In reality, monetary growth rates and budget deficits
are strategic variables, and they must adapt to economic conditions. The
significance of these strategic variables lies in their effects on output, unemployment, and inflation.
Sometimes it has been suggested that monetary growth or budget deficits
affect inflation rates directly through expectations, aside from their effect
through actual or expected demand. Expectations of inflation are indeed
important determinants of economic behavior, but these expectations are
linked to actual price pressures that are expected to develop in markets.
It is difficult to see how inflation (or the expectation thereof) would be
raised significantly more by monetary or fiscal policy measures that moved
an economy toward full utilization of its productive potential, compared
with a fortuitous shift in exports or in saving behavior that had the same
effect on demand. A more carefully articulated view is that monetary and
fiscal policy affect the level and composition of economic activity—and thus
affect inflation through this linkage.
A program for achieving full recovery in the industrial economies must
begin with measures to raise domestic demand and capacity utilization. Only
then is sufficient investment likely to be forthcoming to achieve structural
114
objectives such as reducing dependence on export demand and forestalling
potential imbalances between capital stocks and labor forces. Both monetary and fiscal policy can make a contribution. With excess capacity everywhere, world recovery can proceed without undue concern that reasonable
expansionary policies will trigger a new round of inflation. As recovery continues and utilization of capacity reaches high levels, unemployment may
still remain unacceptably high in some countries. A more cautious approach
to further reductions in unemployment would then have to be taken. It may
be necessary to move progressively toward fiscal restraint to keep demand
within the productive potential of the economy, and meanwhile continue to
promote investment with continued stimulative monetary policy and special
incentives for investment.
Improved cooperation in economic policy making will be essential if countries are to succeed in carrying out such a program. The consequences of
insufficient attention to the global implications of national policies are seen
in the inflationary pressures generated by the simultaneous expansion of 1973
and in the poor performance resulting from too great a reliance on exportled growth in 1977. The mechanisms for international cooperation have improved in recent years.
The heads of state of the largest industrial countries have met three times
since 1974 to address economic problems. At the London Summit last May
the heads of state discussed their domestic economic goals and agreed to
monitor progress toward them.
While not all of the specific goals for 1977 that were laid down at the
London Summit have been achieved, the exercise has proved a useful tool in
improving international economic cooperation. When the German and Japanese economies proved to be weaker than officials in those countries had
expected, the Summit commitments reinforced domestic considerations that
led both governments to implement stimulative measures in the fall. Summit
commitments also supported the efforts of other governments to maintain
policies directed primarily at reducing inflation and current account deficits.
The process of setting economic objectives and examining their consistency and desirability is being extended in the Economic Policy Committee
(EPC) of the OECD. The EPG will continue to monitor economic activity in 1978 relative to countries' own internal goals and to the overall
balance of demand and supply in the world economy. The international
discussion of goals and the means to achieve them is necessary to assess the
consistency of individual countries' aims, to guide the formation of policies
that have good promise of achieving them, and to respond to developments
that push economies off their desired courses.
TO DEAL WITH EXTERNAL IMBALANCES
A country's current account balance measures its net receipts from trade in
goods and services (including investment income) plus net transfers from
the rest of the world. It is closely related to the level of economic activity.
115
Higher demand at home generally leads to more imports and thereby to a
smaller surplus or larger deficit. Moreover, a decline in the balance generated
by external forces must be offset by stronger domestic demand if GNP growth
is to remain unchanged. Thus a country's current account position is an
important indicator for setting demand management policies.
A country's current account balance is a useful economic indicator for a
second reason. A current account surplus must by definition be matched by
a net outflow of private and official investment to the rest of the -world, while
a deficit must be matched by a net inflow of investment. Policy makers must
consider the sustainability of a current account deficit—whether the willingness of foreign investors to acquire claims on a country or the willingness
of domestic investors to reduce claims on foreigners will remain strong
enough to finance a given deficit. Changes in a country's current account
position may require exchange rate changes to reconcile domestic objectives
with a current account position that can be sustained. But neither the current account nor the exchange rate should be viewed as an ultimate objective of policy in the same sense that real income and the rate of unemployment are. These external variables do not directly affect the welfare of
citizens, although they have important effects on variables that do.
The presumption in the past has been that a mature industrial country
like the United States would normally be in current account surplus, thus
supporting a private capital outflow to capital-poor developing countries
where the productivity of capital was thought to be relatively high. The
emergence of the OPEC countries as major capital exporters and the
troubled state of the world economy have altered this presumption, at least
for the present. Although developing countries continue to welcome small
current account deficits—that is, an inflow of capital—large deficits are not
welcome, since these countries' export earnings are insufficient to meet the
resulting increase in debt service. Thus industrial countries following appropriate policies are more likely to have current account deficits under
today's conditions. Surpluses most often occur when domestic demand is
particularly weak, when the currency is undervalued, or when there are
barriers to imports or inducements to exports which are disruptive to world
trade.
Over the last 4 years, there has been an extraordinary divergence in
countries' current account positions. Surpluses have been common among
those countries best able to finance a deficit—including the United States
in 1975. As a result, borrowing by many weaker countries with large deficits
strained the limits of international lenders' willingness to extend credits to
them, and the fabric of the international financial system was stretched thin.
The movement of the United States into deficit has relieved these strains
somewhat but has led to new strains in exchange markets.
Some perspective on the relative current account positions of the OECD
countries in 1977 is given in Table 18. The current account positions of
116
the OECD countries in 1977 (as projected by the OECD) are shown, as
well as the size of the surpluses or deficits relative to gross domestic product (GDP). The scaling by GDP is intended to facilitate comparisons of
countries of different size, not to suggest a norm for current account positions. As can be seen in the table, the relative size of the estimated deficit is
somewhat larger for the United States than for the OECD countries as a
whole. Several major countries and many smaller countries have relative
deficits substantially larger than the U.S. deficit, however. The table also
shows clearly the extreme positions of many small countries.
In time, as the United States and others finally accept the need to take
effective measures to limit oil consumption, the OPEC surplus will dwindle
and the corresponding deficits will shrink. But in the interim only action
by OPEC members to reduce oil prices or dramatically raise imports, or a
repetition of the 1975 world recession, would significantly reduce the OPEC
surplus. The latter would be an extraordinarily costly way to reduce oil
imports. Hence, for some time to come, appropriate national policies and
international cooperation will be particularly important to ensure that the
international financial system remains adequate to the demands that will
be made on it and to reduce the large imbalances that exist aside from the
OPEC surplus.
TABLE 18.—OECD current account estimates for 1977
Percent of
1976 gross
domestic
product
Country
Switzerland
Japan
Belgium-Luxembourg
Italy
Netherlands
5H
IX
West Germany
United Kingdom
Iceland
TOTAL OECD
-H
France
Finland
United States
Canada
Spain
-2X
Australia
Sweden »
Denmark
Greece
New Zealand
-VA
Ireland
Austria
Turkey
Portugal
Norway
1
Estimates not comparable with those shown in national sources because of an OECD correction for a
once-and-for-all negative impact of $V* billion on the current account balance due to a change in Sweden's
method of statistical reporting.
- Calculated using 1975 gross domestic product.
Sources: Organization for Economic Cooperation and Development (OECD) and Council of Economic Advisers.
117
When current account imbalances arise for a given country, there are several alternative courses of action. If a deficit appears temporary—from, say, a
bout of cold weather or a sharp cyclical movement—one would expect
extraordinary deficits to be financed by private and official capital flows. For
large and unsustainable surpluses or deficits, which are likely to persist and
reflect underlying trends, adjustment must come either through adjustment
of macroeconomic variables, such as a change in interest rates or economic
activity, or through changes in the exchange rates. Finally, there are a number of "microeconomic measures" that can be pursued, such as trade
policy, protective actions, changes in the tax structure, or export promotion.
By and large these latter measures are not appropriate to promoting adjustment between regions: they greatly distort the underlying priorities of an
economy with little payoff in adjusting imbalances. The roles of exchange
rate adjustment, macroeconomic measures, and financing are explored further in the following sections.
Exchange Rates and Current Account Adjustments
During the first half of the 1970s, the industrial world moved from the
Bretton Woods system of predominantly par value exchange rates to one
in which the exchange rates between major currencies are determined
primarily by market forces. The role of the exchange rate in the adjustment
of countries' current account positions is potentially a powerful one. Exchange rate changes can help to eliminate persistent current account imbalances, and they can forestall imbalances that otherwise would arise in a
world where inflation rates and real growth rates differ widely. Now that
we have several years of experience operating with more flexible exchange
rates, it is useful to review events and ask how, and how well, the system has
functioned.
The present system of flexible exchange rates is not a pure floating rate
system. Many smaller countries have continued to maintain the exchange
rates of their currencies within specified limits with respect to one or more
major currencies. The European Joint Float (the so-called "Snake," currently consisting of the currencies of Belgium, Denmark, Germany, the
Netherlands, and Norway) is a significant regional arrangement for keeping
exchange rate movements among members within fixed limits. The existing
exchange rate system is also distinguishable from a pure floating rate system
in that governments and central banks buy or sell foreign currencies in
intervention operations to counter disorderly market conditions, to slow
movements in rates, and occasionally to prevent rates from moving.
In the period since the dollar floated in March 1973 exchange markets
have gradually adjusted to the new regime. Although there have been large
rate movements during this period, these movements have generally reflected fundamental developments. The historical record indicates, however,
118
that exchange market attention has focused on different factors at different
times.
Soon after it was allowed to float in March 1973, the dollar came under
downward pressure once again, and by July it had fallen to levels that with
hindsight appear too depressed. To a certain degree, the further decline was
caused by those forces that had generated pressure under the par value
system—at the old exchange rate the United States was not competitive.
Also important, however, was the desire of foreign holders of dollars to
diversify their foreign exchange positions, given the initial uncertainty in
the market about how the new system would function and the likelihood of
larger, more frequent, and less predictable changes in exchange rates. One
piece of evidence for this diversification is the substantial decline in the
dollar share of gross Eurocurrency assets that occurred in 1973. Evidence
that central banks stood willing to enter the market forcefully to counter
disorderly market conditions helped to dispel some of the uncertainties and
contributed to a stabilization of the dollar in July 1973.
Following the Arab oil embargo and the announcement of higher OPEC
oil prices in late 1973, exchange markets focused on individual countries'
dependence on foreign oil. In view of the United States' relatively high
degree of self-sufficiency in energy, as well as the central role of the dollar
as an investment vehicle for OPEC surpluses, the dollar appreciated by
12.7 percent on a weighted-average basis from October 1973 to January 1974.
During the recession and early recovery period from mid-1974 through
the end of 1975, exchange rate movements were dominated by differences
in interest rates. U.S. short-term interest rates fell relative to rates in other
major countries during the U.S. recession. The decline in interest yields on
dollar assets relative to yields available in other currencies caused investors
to attempt to shift out of dollars, and the dollar depreciated over a 6-month
period by 8.1 percent against a multilateral weighted average of ten currencies. Short-term dollar interest rates turned around as the U.S. recession
bottomed out in the second quarter of 19753 while rates in other countries
continued to fall. As a result, the dollar rose, wiping out the earlier depreciation by September. It is interesting to note that neither the swing in the
U.S. current account from a deficit in 1974 to a surplus at an annual rate
of $16 billion in the second quarter of 1975, nor the subsequent turnaround
in the current account—developments that were largely the result of the
depth and timing of the recession in the United States and in major foreign
economies—had a major impact on the value of the dollar during this
period.
In 1976, exchange market participants seemed most influenced by differential rates of inflation. Market commentary, at least, was preoccupied
by these differences although countries whose currencies depreciated also
had current account deficits. The dollar appreciated by a small amount
during the year, in line with the better-than-average U.S. price performance.
119
The currencies of the two major countries with the highest inflation rates—
the United Kingdom and Italy—depreciated against the dollar by 17.0 percent and 21.3 percent respectively.
Most accounts of exchange rate movements in 1977 relate these movements to trade and current account developments. Indeed the initial pressures on the dollar developed in the wake of a string of record monthly trade
deficits—reflecting a major increase in oil imports and differences in growth
rates between the United States and other OECD countries. As it became
clear that these deficits were unlikely to shrink over a reasonable period
of time, the pressure on the dollar intensified. The countries with the largest
appreciations, Japan, Germany, and Switzerland, were those with the largest
and most persistent current account surpluses. The turnaround in the pound
sterling also coincided with the turnaround in the U.K. current account.
Although Germany and Switzerland had somewhat lower inflation than
the United States, only a small fraction of the appreciation of these currencies could be attributed to actual differences in inflation rates. Moreover, developments during the year did not warrant a shift in expectations of
future inflation large enough to account for a substantial part of the movement in exchange rates.
The dollar depreciation in 1977 ran counter to a strong rise in U.S. interest
rates and declines in most foreign interest rates. During the year, U.S. shortterm interest rates rose about 350 basis points relative to those in major
European countries. In the past, interest rate movements of this magnitude
generated substantial private capital inflows or exchange rate changes.
The size and timing of the exchange rate changes in the episodes recounted
above illustrate some implications of the fact that trade and price developments affect exchange rates through their effects on the supply and demand
for assets denominated in different currencies. Among the most important
determinants of the price of any asset are portfolio risk, current return—for
example, interest—and expectations concerning its own future value. Interest
rates and perceptions of risk have been major determinants of exchange rates,
as seen in the 1973 and 1975 episodes. Moreover, relative price and current
account developments have strongly affected exchange markets, primarily
by altering expectations concerning future exchange rates. Thus exchange
rates have responded to inflation and current account developments as
market participants have concluded they would persist. Rate changes have
sometimes led to actual changes in underlying variables and often followed
them. When nonfinancial developments have been viewed as temporary,
such as the U.S. current account surplus in 1975, they have had little effect
on expectations and therefore on exchange rates.
While exchange rate movements during the flexible rate period have
broadly reflected underlying developments, sustained large movements in
one direction, followed by reversals, have occurred surprisingly often. These
120
movements have often not corresponded to discounts or premia on forward
exchange rates. They have been of sufficient regularity and magnitude to cast
doubt on whether large exchange rate changes have always reflected the
workings of a market in which new information is efficiently incorporated
into currency prices. Markets have also been characterized from time to time
by very thin trading, much wider than normal bid-ask spreads, and large
intraday rate movements in the absence of significant fundamental developments. When these disorderly conditions prevail in the market, there is
a question whether the longer-run prospects for currencies may be lost
from sight. Critics of floating exchange rates have pointed to these features
of the current regime to underscore the need for more active intervention by
central banks and governments.
Responding in part to these concerns, as well as to domestic policy needs,,
foreign central banks in 1977 made heavy purchases of dollars to smooth,
and in some cases to limit, the appreciations of their currencies against the
dollar. These activities are crudely indicated by reserve movements over the
year. British official reserves rose $16.2 billion through October, when largescale intervention was suspended. Japanese reserves rose $6.6 billion and
German reserves $5.3 billion for the full year.
It is unlikely that intervention had a major lasting impact on exchange
rates. The large volume of liquid funds in international financial markets and
the one-sided risks that arise when central banks come into the market heavily
on one side have meant that a large and continuing flow of intervention
would be needed to keep rates from moving in response to changing expectations among managers of private foreign exchange positions. Thus the
volume of intervention required to keep a rate from moving is not a reliable
indicator of how far the rate would go if it were permitted to adjust freely.
When the Bank of England suspended its massive intervention on October 31,
1977, the pound moved to a level only 1.8 percent higher against a weighted
average of foreign currencies than the level at which it had been held. Even
with the later weakness in the dollar the weighted average pound was only
5.0 percent above its October level in mid-January. While intervention can
be a useful tool in restoring order to exchange markets, substantially larger
intervention than seen in 1977 would be necessary to have a large effect on
rates for any time.
Eliminating most cumulative rate movements would not be desirable even
if it were easier. Flexible exchange rates have been beneficial because they
have helped to reduce the large changes in countries' relative price levels that
would have occurred as a consequence of differential price movements
among trading partners (Chart 8). Some significant and lasting changes in
relative price levels have resulted from exchange rate changes, however.
These changes have generally helped to reduce unsustainable current account
surpluses or deficits.
It is not an indictment of flexible exchange rates that current account
imbalances have continued to occur and in some cases have proved to be
121
Chart 8
Relative Wholesale Prices Unadjusted
and Adjusted for Exchange Rates
INDEX, MARCH 1973=100 (RATIO SCALE)
110
- UNITED STATES
-
ADJUSTED RELATIVE WPI
_
-.^-""-^
/
100
90
RELATIVE WPI
I
I
I
I
I
1973
I
.
1974
i
I
I
I
I
I
1975
I
I
I
I
I
1977
1976
120
110
100
RELATIVE WPI
90
I
1974
1973
I
I
I
1975
I
I
1977
1976
120
FRANCE
ADJUSTED RELATIVE WPI
110
100
90
RELATIVE WPI
80
I
1973
I
I
I
I
1974
I
I
1
1976
1975
I
I
1977
I2U
WEST GERMANY
ADJUSTED RELATIVE WPI
110
^.
x
-\ /
100
^ ^ —
QH
-vx
/
—
\
^
"*~
/
X
^
*-
RELATIVE W P I
„
80
.
i
1973
i
i
I
I
I
1974
I
l
I
1975
,
,
,
1976
1977
NOTE: RELATIVE WPIs ARE DOMESTIC WPIs DIVIDED BY AVERAGE OF WPIs IN TEN OTHER COUNTRIES.
ADJUSTED RELATIVE WPIs ARE RELATIVE WPIs MULTIPLIED BY WEIGHTED AVERAGE EXCHANGE RATE
OF DOMESTIC CURRENCY.
SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
122
Chart 8—Continued
Relative Wholesale Prices Unadjusted
and Adjusted for Exchange Rates
INDEX, MARCH 1973=100 (RATIO SCALE)
170
160
ITALY
~ * *
150
_
140
-
130
_
~
•• *""
RELATIVE WPI
^'
\
<'"
V
/
120
/
/
ADJUSTED RELATIVE WPI
/
110
,
—
,
\
100
90
I
I
I
I
I
I
I
1974
1973
I
I
I
1975
I
I
I
I
I
1976
1977
1977
I
120
RELATIVE W P I
JAPAN
110
100
ADJUSTED RELATIVE W P I
90
I
I
I
I
1973
I
I
1974
1975
1976
1974
1975
1976
160
UNITED KINGDOM
1973
I I
1977
NOTE: RELATIVE WPIs ARE DOMESTIC WPIs DIVIDED BY AVERAGE OF WPIs IN TEN OTHER COUNTRIES.
ADJUSTED RELATIVE WPIs ARE RELATIVE WPIs MULTIPLIED BY WEIGHTED AVERAGE EXCHANGE RATE
OF DOMESTIC CURRENCY.
SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
123
persistent. Not all imbalances can or should be dealt with through exchange
rate adjustment. As noted above, it is normal and sustainable for some
countries that have especially attractive investment opportunities to be
capital importers, and therefore to have a deficit while others have surpluses.
In addition, the aggregate deficit that is the counterpart of the OPEC surplus
cannot be eliminated by exchange rate changes, although exchange rates
can play a role in allocating this deficit among countries.
Finally, while exchange rate changes can have a significant impact on
current account balances after 1 to 2 years, their effect initially may be
perverse, since the strongest immediate effect of an exchange rate change is to
raise many import prices and thereby increase the size of the deficit. This fact
has two important implications. First, if imbalances seem to be temporary—owing to demand conditions that are likely to be reversed or to supply
disruptions such as droughts—expectations will not be changed, and such
imbalances normally will be financed by private capital flows. Exchange
rates need not change. Second, when exchange markets are orderly and
functioning efficiently, exchange rates will respond quickly, even abruptly,
whenever it becomes clear that a country's underlying position has moved
away from what is sustainable over the longer term. Once exchange markets
have moved to reflect the new assessment, a return to exchange rate stability
is possible even though the adjustment in trade flows may take considerable
time. Capital flows can be expected to finance imbalances during the period
of transition without the need for significant changes in interest rates.
The Administration's policy toward dollar exchange rates has been to
let market forces determine them but to intervene when necessary to
counter disorderly market conditions. This approach is based on the view
that it is better to give market forces continuous influence on rates, rather
than to have a period of officially determined rates followed by a sharp and
disruptive adjustment. The historical experience with attempts to fix
exchange rates is not an enviable one. Such policies more often than not
sustained inappropriate exchange rates rather than correcting the underlying
values of currencies; more often than not they generated large private capital
flows that led to serious dislocations in financial markets and spilled over
to afTect other policy objectives.
While the Administration does not believe it is appropriate to maintain anyparticular value for the dollar, it recognizes its responsibility to act forcefully when market conditions become disorderly. Many managers of private
foreign exchange positions normally help to stabilize the market by adjusting
their positions on the basis of careful assessments of factors affecting currency
values over the medium term. These managers tend to cover more of their
foreign exchange exposure in the face of the increasing risks associated with
market disorder. Rates are buffeted by the flow of commercial transactions
and the buy and sell orders of traders whose time horizon is measured in days
or at most weeks. Under these circumstances, intervention can help to restore
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markets to their normal functioning. It is not the objective of such intervention to maintain a particular rate. To fix a rate would endanger the leeway
that a flexible exchange rate system has provided for countries to pursue
domestic objectives.
In summary, while exchange rate fluctuations sometimes have been undesirably large and are often unpleasant reminders about unsatisfactory
aspects of underlying economic conditions, the evolution of the system of
market-determined exchange rates has been a major achievement of this
decade.
Macroeconomic Policy and Current Account Adjustment
In setting policies to achieve domestic objectives, authorities must consider
the strong two-way interactions between domestic growth and inflation on
the one hand, and the current account balance and exchange rate on the
other. Going one way, stronger domestic demand tends to result in a larger
current account deficit within a short time. Going the other way, an increase
in the current account balance resulting from an exchange rate change or
external factors will raise domestic output and employment.
In considering policies to achieve domestic goals, authorities sometimes
find that policies appropriate for achieving domestic objectives also move
the current account toward a more sustainable position. At other times, they
face a dilemma. Two easy cases present no dilemma. One of these occurs
when a country is falling short of its domestic goals and has a current account
balance that is in surplus. Authorities should then view the current account
position as an additional signal to adopt expansionary measures. The second
easy case occurs when demand threatens to strain the potential of the
economy. A current account deficit then reinforces the need to adopt restrictive measures. In both cases current account adjustment may take place
without sacrificing domestic objectives and with policy actions reducing the
need for exchange rate adjustment.
The dilemma arises when there is conflict between domestic goals and
the requirement for the current account to be maintained in a sustainable
range. This may occur when an economy with inflationary demand pressures
has a surplus. In the world economy today, however, nations more often face
the dilemma of a sluggish economy with an unsustainable current account
deficit. In this case, the appropriate response is to use domestic fiscal and
monetary policy to attain domestic objectives, while allowing exchange rate
adjustment to restore sustainable external positions. Especially for large
countries like the United States, where the economic cost of changing domestic growth is large relative to the improvement in the current account that
would result, it is not appropriate to modify domestic objectives for economic
growth in order to reduce the current account deficit.
A second way in which macroeconomic policy can affect the external
balance is through a shift in the mix of policies. Thus a country might shift
to a tighter monetary policy and a more expansionary fiscal policy when
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faced with a large current account deficit and a weak currency. In principle,
such a change in the policy mix could be made with an unchanged GNP
growth target. If investment were undesirably strong, and if it were thought
that the current account deficit would soon improve, such a change in the
mix of policies might be appropriate. In practice, however, differences in the
lags with which each policy works and the uncertainties surrounding their
effects make a shift of this kind difficult to achieve. Such policies also have
effects on the composition of demand and output. First, to the extent that
they strengthen the currency they reduce exports and increase imports with
a significant time lag. Second, they tend to shift demand away from private
investment and toward other forms of spending, thus reducing the rate of
capacity growth.
It should be noted that allowing exchange rates to adjust when a country's
domestic objectives and external positions are inconsistent has effects on the
domestic economy that must be taken into account in setting domestic objectives and policies. Appreciation of a country's exchange rate tends to
depress demand. Depreciation tends to add to inflationary pressures by
raising import prices, and to reduce real incomes as imports become more
expensive.
Thus, when exchange rate changes do occur, they must be supported
with monetary and fiscal policy if an unchanged domestic growth target
is to be met and if the full adjustment of the current account is to be realized.
Countries with appreciating currencies will face a slowing of demand growth
as exports are reduced and imports rise. If these effects are not offset by
stimulative policies, the economy will slow and some of the potential
adjustment will not be realized, since import growth will be retarded
along with the slowing of domestic demand. Countries with depreciating
currencies will experience a stimulus to demand that may also have to be
offset. Whether the adjustment of policies should be greater in countries
with appreciating or with depreciating currencies should depend on whether
the countries are undershooting or overshooting their internal goals for output and employment.
It should also be noted that adjustment through exchange rate movements
succeeds only if the improvement in competitiveness of countries with
depreciating currencies is not undone by higher wage and price increases
to maintain workers' purchasing power or to obtain higher profit rates.
In those economies where such wage and price adjustments are rapid
and nearly proportional to exchange rate changes, gains in competitiveness
from exchange rate depreciation evaporate quickly. Adjustment through
exchange rate change is much more difficult and costly in terms of inflation.
Such countries may be forced to accept depressed demand as the only
effective way of reducing a deficit. Hence structural measures by authorities
that retard the pass-through of import price increases into domestic prices
and wages have a high payoff in allowing less costly external adjustment.
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Strengthening International Financial Institutions
Private financial institutions have been the main source of financing for
the large current account deficits since the oil crisis—accounting for roughly
three-fourths of the total flows from 1974 to 1976. During this period,
current account deficits totaled $225 billion, and countries in deficit borrowed
over $300 billion. Some inflows, particularly in industrial countries, have
been a private response to market incentives. A large share of the financing
for many countries, however, has been raised by governments or by
government-controlled corporations from private international banks. Private
and official net borrowing from international banks by countries in deficit
totaled an estimated $160 billion over the 1974 to 1976 period. These banks
in turn received funds directly or indirectly from countries in surplus. Funds
raised by countries in deficit from other private sources, including international bond issues and direct investment inflows, totaled about $100 billion.
About one-fourth of all current account financing, or more than $50 billion, was financed through official credits. These credits have played a crucial role in the overall financing process by providing assistance to countries with limited access to financial markets. Without official financing a
number of countries would have been forced to take overly drastic measures
and reduce their current account deficits at an excessively rapid pace. Such
measures would have been disruptive to their own economies and to the
world trading system. Moreover, in the absence of official financing, deficits
would become concentrated in fewer countries. Some countries that have
been able to meet their needs from private markets would find their access
to private credit jeopardized by larger deficits. Thus the availability of a
continuing flow of official financing to countries has been essential to the
stability of the world financing system and to the continued flow of financing
through private financial institutions.
Two long-established sets of multilateral institutions have played a major
role in providing financing during the recent period: the international development banks and the International Monetary Fund. The international development banks—the World Bank group and regional development banks—provide financing for sound development projects and assist
developing countries to formulate appropriate development strategies. In
doing so they help meet countries' overall financing needs while fostering
investment in productive activities that will generate the funds needed to
service the debts. Their new credits totaled $9.2 billion in the year ending
June 30, 1977. These institutions had more than $60 billion in loans outstanding then.
Part of the resources of these institutions are provided by governments in
the form of capital subscriptions and direct contributions. For their nonconcessionary activities, however, the development banks rely heavily on
securities issued in international markets and this reliance on debt has been
increasing. In order to preserve their well-deserved reputation for prudent and sound financial management and their key role as a source of
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capital to developing countries for productive long-term investment, an
increase in resources contributed by governments is needed.
Strong U.S. support for the development banks is essential to their continued ability to assist developing countries. Through such support, the
United States can both enhance the stability of the international financial system and respond to the needs of the developing countries. Moreover,
U.S. resources devoted to these institutions are multiplied by contributions
from other countries and by funds raised from markets. In 1977, legislation
was enacted authorizing over $5 billion for increased U.S. participation in
these institutions. Appropriations in support of the development banks for
fiscal 1978 were $1.9 billion, an increase of 70 percent over the year before.
This demonstrates strong U.S. commitment to these institutions, but further
large sums will be needed in the years ahead to maintain their strength.
The International Monetary Fund was established at the end of World
War II specifically to augment the resources available to finance temporary
payments imbalances in a par value system of exchange rates. While the
nature and circumstances of countries' needs have been altered by the introduction of more flexible exchange rates, the need for official financing of
deficits has continued. A country that draws on Fund resources must satisfy
conditions laid down by the Fund to assure that policies are consistent with
adjustment of the country's external position. The goals are a current
account that is sustainable without continued official support and repayment
of the drawing. Thus the operations of the Fund not only finance deficits
but also constructively influence policies.
The large current account imbalances since 1974 have resulted in heavy
demands on the Fund. It provided about $15 billion of financing in the
1974—76 period. The IMF has also found it necessary to broaden its view of
appropriate adjustment. Whereas the previous expectation had been that
adjustment could take place and drawings could be repaid within 3 to 5
years, it has not been possible to eradicate the aggregate oil deficit so quickly.
The IMF membership has responded to the new circumstances by increasing
the resources of the Fund's general account and raising the limitations on
countries' drawings. In addition, a temporary "oil facility" was set up in 1974
to help countries meet their larger oil bills. The resources for this facility,
which concluded its lending program in 1976, were provided primarily by
oil-exporting countries, but several industrial countries also contributed
substantially.
As OPEC countries have continued to pile up assets, a continuous flow
of new financing has been needed. The IMF's usable resources have fallen
to about $5 billion, with another $3 billion available from larger countries
only for lending to other large countries under the General Arrangements
to Borrow. These resources will be increased by another $6 to $7 billion
when the sixth quota review has been ratified by enough member governments. Even with these additions, however, the Fund's resources will be in-
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adequate to assure available financing for those countries that need it. Moreover, there is a particular need for long-term funds.
To meet this need the decision was made to seek to establish the Supplementary Financing Facility, which initially would have about $10 billion
provided by seven industrial countries and seven OPEC members. These
funds would be available over the next 2 to 3 years to countries whose
balance of payments needs exceed the amount available under the IMF's
regular policies and require a longer period of adjustment than provided
for under regular IMF policies. Borrowing countries must undertake to
adopt corrective economic policy measures to deal with their balance of
payments problems. When established, the Supplementary Financing Facility can make an important contribution to the stability of the international
financial system for the next several years.
There will be a continuing need for growth in IMF resources, however,
even if the Supplementary Financing Facility is established. Discussions are
now under way in a seventh review of quotas. A further increase in quotas
wall be required to ensure that the IMF has sufficient resources to meet the
legitimate demands on it over the longer term.
TO ACHIEVE GREATER STABILITY OF COMMODITY PRICES
The central role of food, fuel, and other raw materials in the domestic
and world economies in recent years has been noted in every chapter of
this Report. Although price fluctuations are always the norm, commodity
prices have shown more than normal volatility over the last 5 years. The 56.4percent rise in The Economist index during 1973 was the largest rise in the
last 80 years. Nonfuel commodity prices have leveled off since 1974, but the
economic aftershock and fears of renewed bursts continue to be of concern
today.
The increased volatility of commodity prices has caused serious economic
dislocations in virtually all countries. In consuming countries, rising commodity prices in 1973 and 1974 were reflected in final product prices, fueling an inflationary wage-price spiral. Yet because of asymmetries in response,
the subsequent decline in several key commodity prices did not evoke a
comparable downward movement of wages and prices. Periodic declines
in the prices of certain commodities over the past few years placed severe
external constraints on developing countries that derive a substantial fraction of export earnings from sales of those commodities. Consequently, these
countries have borrowed heavily on world markets and have been forced to
curtail their purchases of goods from industrial countries in an effort to
conserve their foreign exchange reserves.
The Need to Reduce Volatility
Random variations in weather, cyclical movements in demand, and political disturbances, along with the relative insensitivity of supply and demand
to price changes, have made sharp price movements the rule rather than the
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exception for primary commodities. Private precautionary and speculative
stockpiles and the development of organized commodity markets have in
general allowed these fluctuations to be partially buffered. Private participants in these markets who sell their stocks when prices are relatively high
and accumulate stocks when prices are relatively low exert a price stabilizing
influence. The importance of these stocks is illustrated in the case of grains,
where prices are more closely related to stock levels than to production flows
(Chart 15, Chapter 5).
A reduction in the volatility of commodity prices would serve a number
of useful purposes. Aside from the relatively modest advantage to consumers
of having more predictable price movements, moderation of price fluctuations lowers inflation by reducing the impact of the asymmetries in the relationship between commodity prices and general inflation. Producers also
benefit, as countries in which price movements in a single commodity have
a major impact on national income can achieve more stable economies.
Furthermore, a lower level of price volatility would reduce producers' risks
and remove an important deterrent to the development of greater supplies.
Finally, major price movements sometimes induce governments to introduce rigid price and income support programs, with the kinds of problems
discussed in Chapter 5. Once introduced, these programs develop their own
momentum and can engender a new set of inefficient and price-raising side
effects.
Unfortunately commodity price stabilization is neither politically easy nor
economically costless. The economic costs of stabilization schemes are often
paid through direct government outlays. Alternatively, the costs of stabilization may be paid directly by consumers through higher average prices. Some
types of programs require capital outlays that could otherwise be used for
investment in productive equipment. The benefits of any proposed program
to reduce volatility must be weighed against these costs.
One price stabilizing technique is to encourage large stockholdings by the
private sector. In the United States this is done for grains by subsidizing interest and storage costs, as in the Administration's farmer-held reserve discussed in Chapter 5. The costs are direct budgetary outlays that can be
compared to the benefits of holding larger stocks. Outside of agriculture the
United States has no major programs to encourage stockholding; but some
European countries have instituted tax preferences for inventories, thereby
encouraging larger commodity stocks and smaller price fluctuations.
Publicly held buffer stocks are another widely recognized stabilization
tool. These usually require purchases and sales of the commodity to defend
predetermined floor and ceiling prices within the limits of available financial
resources or commodity stocks on hand. The effectiveness of such programs
depends largely on the financial resources available for the programs, and
on the rules governing the prices at which buffer stocks are bought or sold.
In international discussions the United States has therefore favored pure
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buffer stock programs, which, if properly designed, would not raise the
average of the price over time.
Commodity stabilization programs may include production and export
controls to defend established price floors. While direct budget outlays are
thereby avoided, systems involving production controls are likely to involve
serious economic inefficiencies. While the ability of a buffer stock to affect
prices is limited by its financial resources, production and export controls can
indefinitely hold prices higher than they would be without them. Because
the productive potential is unused rather than used to build buffer stocks,
such programs can prevent prices from falling, but they cannot be used
effectively to keep prices from rising.
Producers' vulnerability to sharp changes in income because of commodity
price and quantity fluctuations can also be reduced through international
efforts providing loans or grants to producer nations. Such transfers do not
affect the price of commodities in the market place, but they can ameliorate
the adverse impact of sharp price declines on producing countries. Compared to actions that raise the level of commodity prices, these compensatory measures are a more efficient and less inflationary way to transfer resources between countries. The Compensatory Financing and Buffer Stock
facilities of the IMF and the STABEX system of the European Economic
Community are operating at present to mitigate the impact of commodity
price instability.
Recent Policy Developments
Since 1972, increased attention has focused on arrangements to stabilize
commodity prices through internationally managed stockpile programs. International discussions under the auspices of the United Nations Conference
on Trade and Development (UNCTAD) led in 1976 to enunciation of the
UNCTAD Integrated Commodities Program. This program has provided
the framework for discussions on a number of commodities of interest to the
developing countries and on a "common fund" for international commodity agreements.
In 1976, and again in 1977, the idea of a common fund to provide
additional financial support for international commodity agreements was a
focal point of the North-South economic dialogue. As envisioned by the
developed countries, the common fund would pool the resources of individual commodity agreements (ICAs) and enable those ICAs needing additional funds for stock accumulation to borrow through the common facility
from other ICAs and from the private market. By pooling resources in a
common fund, overall financial contributions by member nations to individual stockpiling agreements could be reduced because all ICAs would
generally not be accumulating stocks at the same time. Moreover, because it
would have broader-based financial backing, a common fund would probably
find more ready acceptance in world credit markets than individual com-
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modity agreements. The United States is prepared to participate in a common fund that is structured along these lines.
At the London Economic Summit in May 1977, the seven heads of state
noted that it was their goal "to secure productive results from negotiations
about the stabilization of commodity prices and the creation of a common
fund for individual buffer stock agreements."
Developing countries envision a broader common fund financed by direct
government contributions. Such a fund would serve as a source of finance for
commodity agreements and would also supplement the functions of existing
international financial institutions. Negotiations during 1977 were unable
to bridge the conceptual gap between alternative versions of the common
fund. However, negotiations will continue in 1978.
The United States attaches great importance to talks on individual commodities. While discussions on a common fund proceed, the United States
is participating in talks involving several individual commodities. The United
States joined the International Tin Agreement in 1976. Discussions on a
commodity agreement for natural rubber, in which the United States has
taken part, have made progress, and preliminary discussions on other
commodities are getting under way.
Discussions on a system of nationally held wheat reserves, begun in June
1975 under the auspices of the International Wheat Council, are continuing
in 1978. The United States favors a new International Wheat Agreement
with a reserve system to replace the expiring agreement, which has no such
provisions. In the U.S. proposal, each participating country would release
or acquire reserve stocks at specified target price levels. Member consultations on additional measures would also be required in the event of extreme
oversupply or shortage situations.
There were several major policy developments for sugar in 1977. In March
the U.S. International Trade Commission (ITC) found, upon petition,
that the domestic sugar industry was being threatened with serious injury by
increased imports. It recommended a 5-year annual quota on sugar imports
of 4.275 million tons. The President rejected the recommendation, however,
and established an interim program of direct payments to U.S. producers.
Congress-later mandated a program to support the price of sugar in the U.S.
market at a minimum of 13.5 cents per pound, but stipulated that it could
be terminated if an international sugar agreement would achieve the same
objective.
The Sugar Conference sponsored by the United Nations concluded an
agreement in October 1977, which comes before the U.S. Congress for ratification early in 1978. The agreement sets minimum and maximum price targets of 11 and 21 cents, respectively. These targets will be defended through a
system of export quotas and reserve stocks held by exporting countries. The
carrying costs of the stocks will be financed through a fee levied against all
sugar traded by member countries. Export quotas will remain in effect until
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the world market price rises above 15 cents, a feature that may lead to
production cutbacks after exporting countries have accumulated their
mandated stockpiles.
This review of the analytical aspects of commodity price stabilization,
alongside the reality of actual agreements, highlights critical issues of their
design. On the one hand, policies to increase the size of private stockpiles
or to develop public buffer stocks can help reduce long-run inflationary pressures. The history of the last 5 years has shown that drastic
commodity price movements can hinder economic growth. Yet these commodity programs prevent prices from falling as stocks are acquired, and
they absorb scarce capital in stocks that are essentially sterile outlets for a
nation's savings. In addition, an agreement that restricts output will raise
the long-run average price of a commodity and should be avoided. Higher
long-run prices impose costs on commodity-importing developing countries
that rank among the world's poorest nations. Alteration of the long-run
price trend would also impair the ability of the price system to allocate
resources efficiently. For these reasons, the United States will continue to
give priority to pure buffer stocks as a price stabilizing technique. Each
prospective commodity agreement must be examined in great detail to
determine whether it contributes to or detracts from economic performance.
TO MAINTAIN THE GROWTH OF WORLD TRADE
Over the past 25 years world trade has grown more rapidly than world
output, playing a key role in economic expansion by widening available markets for raw materials, industrial products, and agricultural goods. During
this period the volume of world trade showed a fivefold increase—an average
growth of 6.6 percent per year. This growth was facilitated by a major
movement to reduce tariffs and other trade restrictions under the auspices
of the General Agreement on Tariffs and Trade (GATT). The Kennedy
Round of tariff negotiations, which was completed in 1967, resulted in an
average reduction of one-third in the tariffs set by industrial countries on industrial products. The growth of world trade was also supported by the reduction of trade barriers on a regional basis, such as the elimination of tariffs
within the European Common Market. In 1970 agreement was also reached
on a generalized system of preferences for industrial countries' imports from
developing countries.
The growth of world trade has slowed since 1974; trade volume was estimated to have expanded only 4 percent in 1977. The slower growth of
trade is mainly attributable to the general weakness in the world economy.
However, there has been a disturbing reversal of the trend toward trade
liberalization; this development has also contributed to the slowing growth
of trade. The GATT Secretariat has estimated that new restrictive trade
measures have been imposed on 3 to 5 percent of world trade since 1974.
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The worldwide pressure for protection from imports was also evident in
the United States. In 1977 the ITC investigated petitions for import relief
by over 20 industries, covering imports of nearly $5 billion. The ITG recommended increased protection in the form of tariffs or quantitative restrictions on $3 billion of trade, including shoes, color television receivers,
mushrooms, and above-ground swimming pools.
The Benefits of an Open Trading System
Despite rising domestic pressures for protection from imports at home
and abroad, the Administration remains committed to a policy of open
markets for both U.S. exports and imports. The case for open markets and
against import restrictions is strong. In an open trading system a country
will export those goods it can produce at relatively lower cost than other
countries and import goods that other countries can produce at lower cost.
Countries thereby realize gains from trade that make possible higher levels
of consumption and investment. Import restrictions reduce these gains.
Through an open trading system the United States can obtain larger quantities of goods for consumption and investment than it could by restricting
imports and diverting resources from export industries to import-competing
industries.
In addition to reducing the gains from trade, the imposition of import restrictions has an immediate inflationary impact. Consumers pay higher
import prices and usually higher prices for domestic substitutes as well. Competition from imports not only helps to keep prices down but fosters efficiency and responsiveness among domestic producers. For example, production of attractively priced American small cars has obviously been hastened by the availability of small, low-priced, fuel-efficient imports.
Import restrictions do not increase employment, even if potential retaliation against exports is ignored. As a result of decreased imports and higher
domestic prices, there may be an increase in domestic output and employment in the industry that is granted protection from imports. But the higher
prices associated with reduced import competition reduce real consumer
incomes and hence tend to reduce real consumption and output. In the
absence of changes in overall economic policy, the net effect of these opposing tendencies in the protected industry and in the rest of the economy
is usually a reduction of real output and employment. Only in the rare instances when import protection results in very small price increases and very
large import reductions will protective measures increase employment.
Responses to import restrictions will make the net employment reduction
larger. Unilateral imposition of new tariffs or quotas invites retaliation
through higher barriers for our exports. Indeed GATT rules allow tariffs
to be raised on imports from a country that imposes unilateral trade restrictions. Induced upward exchange rate adjustment also decreases the demand
for exports. Thus, in most cases, import protection has the effect of shifting
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employment from dynamic export industries to contracting import-competing industries, while reducing aggregate employment.
Recent restrictions have primarily taken the form of quotas, import licensing requirements, and other nontariff barriers to trade. Quantitative restrictions are more damaging than equivalent tariffs to an open system of
world trade. During recessions they provide less protection from imports at
a time when business and labor are in a weaker position; during expansions
they do not permit imports to play their role as safety valves, limiting sharp
price increases when supplies are tight.
Dealing with Trade Problems
Although the advantages of an open trading system are widely understood,
two conditions give rise to demands for protection. First, as markets evolve,
countries lose comparative advantage in some products and gain comparative advantage in others. For example, as developing countries have entered
markets for products that rely primarily on well-established technologies,
the more advanced industrial countries have found their comparative advantage shifting to products using more skilled labor and more sophisticated
technology. However, firms in industries that have lost markets to new
competitors have capital in place, and their workers have specialized skills
that make shifting to new industries costly for them. Their demands for
protection from imports are often more effectively voiced than the demands
of consumers for lower prices, even though the gains to consumers from an
open trading system outweigh the costs to domestic firms and workers.
Second, excess capacity and high unemployment increase domestic sensitivity to competition from imports. Under these conditions, displaced labor
and capital are less likely to be absorbed in industries where the United
States has a comparative advantage. Moreover, imports that might have
been considered a welcome supplement to limited domestic production in
some industries during periods of high employment are blamed for domestic
unemployment during periods of low utilization. Economic slack abroad
also adds to trade tensions because it provides an incentive for some foreign
producers to increase exports by cutting prices in the U.S. market. Selling
abroad at less than home market prices constitutes grounds for assessing
countervailing duties under GATT rules if the domestic industry is injured.
Adjustment assistance. The Federal trade adjustment assistance programs
are designed to facilitate the adjustment of workers, firms, and communities injured by import competition. They provide readjustment allowances,
training, and relocation payments for workers displaced by import competition. Technical and financial assistance is provided to affected firms, and public works money is allocated to trade-impacted communities. The Administration reviewed these programs in 1977 and is implementing a number of
administrative improvements. A major effort has been undertaken to speed
up and improve the delivery of assistance, and efforts have also been made
to tailor assistance to the needs of particular industries.
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Import relief. Problems created by rapid growth of imports in several industries were so acute that the Administration established temporary import
restrictions. These restrictions were intended to provide an opportunity for
the affected domestic industries to stabilize, to permit firms to take measures
to restore competitive positions, and to allow for more orderly adjustment. In two major cases—footwear and color television receivers—
where the International Trade Commission had found that increased imports were a substantial cause of serious injury to the domestic industry, the
Administration decided to provide temporary import relief. Temporary orderly marketing agreements (OMAs), which are negotiated quotas, were
established with major exporting countries. These OMAs will halt the
rapid rise of imports and give domestic producers an opportunity to adjust
to import competition over the longer term.
Steel trigger prices. Developments in the carbon steel industry presented
the Administration with a particularly difficult trade policy problem. Steel
industries throughout the world have been especially hard hit by the protracted weakness of economic activity in the industrial countries. Even under
moderately optimistic assumptions about the growth of demand, excess steelmaking capacity is likely to persist through 1980.
The cost of production of steel in the United States rose by 89 percent
over the past 5 years, according to a study by the Council on Wage and
Price Stability (CWPS). The increase in costs was to a significant extent
the result of developments within the industry itself. In part, they were
the reflection of broader economic forces. Steel wages have risen 27 percent
faster than the average manufacturing wage from 1972 to 1977. Raw material and energy costs—particularly coal—have shown very sharp price increases, while pollution abatement costs have risen sharply and will be an
increasingly important component of costs in the future. According to
CWPS, however, costs have also risen rapidly abroad and the domestic cost
of production is not significantly above that of efficient foreign producers
plus transportation and tariffs.
Poor domestic sales, reflecting sluggish demand and an increase in the import share, led to a drop in steel production in 1977. This development and
other factors led to a series of layoffs and plant closings in 1977. These were
concentrated in older steel plants in Ohio, Pennsylvania, and New York.
This pattern was dictated by the desire of domestic firms to consolidate their
operations in their most efficient installations. The timing and allocation of
the layoffs were also affected by provisions in the new labor contract that
will increase the cost of layoffs after 1977. The cost of meeting environmental
standards at older facilities also played an important role. Thus, the layoffs
reflected efforts by the industry to reduce costs over the long term, as well as
to respond to the immediate problem of weak demand and import competition. Although several factors contributed to the layoffs, public attention
focused on the problem of imports.
The industry filed a series of dumping cases in 1977, some of which led
to findings that foreign steel was being sold in the United States below full
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costs of production. In light of evidence that significant volumes of foreign
steel may have been dumped, the Administration developed a program
designed to respond to the problems of the steel industry. The centerpiece
of the program is a system of trigger prices for steel imports, based on
the cost of production in the most efficient foreign country—currently
Japan. If imported steel is sold in the United States below the trigger price
for that product, an antidumping investigation will be initiated immediately
by the Department of the Treasury. The industry maintains the right to file
petitions under the regular procedure. Nevertheless, it is hoped that the
system will eliminate the necessity for anti-dumping actions.
The trigger price concept has significant advantages over alternative
measures. Although in a static and certain world of perfect competition a
trigger price, a quota, and a tariff that gave the same protection would have
the same effects on prices, their effects differ in practice. A tariff that assured
the same protection would have directly increased steel prices by more than
the trigger prices will. A quota would have resulted ultimately in an even
larger rise in the price of imported steel and reduced competition in steel
markets; it would also have undermined incentives for domestic producers
to control costs and prices. Under the trigger price system, domestic producers will continue to face foreign competition at prices that reflect the
costs of effiicent foreign producers. If domestic steel prices are set to meet
this competition, domestic producers should be able to regain the market
share they lost in 1977.
Progress in Multilateral Trade Negotiations
The Administration has been working with foreign governments to reverse the worldwide slip toward more restrictions on imports and restore the
trend toward trade liberalization. These efforts are centered in the round
of multilateral trade negotiations now being held in Geneva. After
being stalled for some time, the negotiations made significant progress in
1977 with agreement among the major participants on key procedures
that will guide the negotiations during 1978. A working hypothesis was
developed calling for an average reduction of tariffs on industrial products
of about 40 percent. Procedures were established for participants to exchange requests for the reduction of agricultural tariffs and of specific
industrial and agricultural nontariff barriers to trade. Draft texts aimed
at improving international trading rules were prepared for use as the basis
for further negotiation. In January 1978 countries are exchanging specific
offers for reductions of tariff and nontariff barriers. This exchange marks
the beginning of the final phase of the negotiations.
The trade negotiations are being conducted under difficult conditions in
the world economy. These same conditions make it essential that agreement
on significant liberalization be reached, however, so that further steps toward protection can be averted, the dynamism of world trade can be
restored, and the potential contribution of trade expansion to overall economic growth can be realized.
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CHAPTER 4
Inflation and Unemployment
T
HE HISTORY OF INFLATION during the past 10 years has been
dominated by two major episodes. In each of them a series of events set
off a burst of inflation, followed by a period of economic slack during which
the rate of price increase subsided only partially. The end result in both instances was a persistently higher rate of inflation. For the last 3 years, the
underlying rate of inflation has remained in the 6- to 6^-percent range
despite very high rates of unemployment.
Since 1970 similar developments have characterized the economies of
other industrial nations. Throughout the industrial world, economic policy
is now confronted with the simultaneous existence of substantial unemployment and strong inflationary momentum.
It is not difficult to identify the sources of the two inflationary episodes
during the past decade, nor is it surprising that the resulting inflations were
serious, given the magnitude of the initiating forces. What does pose major
problems for both economic theory and policy is the persistence of inflation:
why it keeps its momentum long after the initial shocks have disappeared
and in the face of idle plant and unemployed workers.
Over the next several years, even as recovery proceeds, some slack will
remain in our economy. The central task in dealing with inflation in the
period immediately ahead will be to find ways to reduce the persistence
of the inflation inherited from earlier years. Looking further ahead, a second major task will be to avoid a renewal of inflationary pressures or shocks
as we regain a high-employment economy.
The two tasks are related. Unless we succeed in reducing the current rate
of inherited inflation over the next several years—while some slack remains
in the economy—any tendency for price and wage increases to accelerate
in later years will raise the inflation rate from an already high base. If that
should occur, prospects for maintaining a stable rate of economic growth
with high employment would be endangered.
The problem of inflation amidst unemployment is dealt with here in three
parts. The first reviews the two inflationary episodes of the past 10 years
and emphasizes the distinction between the initiation and the perpetuation
of inflation. The second addresses the particular problem of the present and
138
the immediate future: the momentum of inflation inherited from the past.
In doing so, it discusses the forces producing that momentum in the face of
economic slack, reviews alternative ways of reducing the inflation rate,
points up the advantages and disadvantages associated with each alternative, and outlines a "deceleration standard" for reducing inflation. The
third part of the chapter looks farther ahead to the task of preventing the
recurrence of renewed inflationary pressures as high employment is approached, focusing on the role of structural employment policies to improve
the operation of the labor market and thus to reduce the inflationary pressures associated with an economy near capacity. This section also discusses
the need for rapid investment growth to avoid inflationary bottlenecks and
scarcities as industrial capacity utilization increases.
A REVIEW OF THE PAST 10 YEARS
EPISODE I: EXCESS DEMAND IN THE LATE 1960s
The current inflation had its roots in the late 1960s. During this period
the economy reached very high levels of employment and resource utilization. The unemployment rate was less than 4 percent in every year
from 1966 through 1969, when it reached 3.5 percent, the lowest rate
since the Korean war. The major factor initiating inflation was the traditional one of excess demand. The economic stimulus from expenditures for
the Vietnam war was added to an economy already approaching high
employment. The rate of inflation in consumer prices rose from less than
2 percent in 1965 to over 6 percent in 1969.
If the Vietnam war had been financed out of increased taxes, the economic consequences of the added war expenditures would have been less
serious. But the temporary increase in taxes in 1968 came well after strong
demand pressures had already triggered a significant acceleration in price
and wage inflation. Moreover when taxes were raised, monetary policy became more expansive for a brief period, offsetting some of the contractionary
impact of the tax increase.
The 1970 Recession
The recession which began in late 1969 undid much of the reduction in
unemployment that had been achieved over the prior decade, as the unemployment rate rose to 6 percent by the end of 1970. Yet inflation continued
at a rapid pace. The advance of consumer prices did slow, but much of this
reduction was due to the impact of declining mortgage interest rates on the
consumer price index (CPI). If mortgage interest is excluded, the consumer
price index showed little deceleration—from 5.7 percent in 1969 to slightly
over 5 percent in 1970 and the first half of 1971 (Table 19). The increase in
average hourly earnings in the private nonfarm sector actually accelerated
during this period.
139
TABLE 19.—Changes in consumer prices} all items and selected components, 1970—77
[Percent change 1]
Component
All items
Food
Energy 3
Mortgage interest.
Other items
Medical care
Relative
importance,
December
1977
(percent) 2
1970
1971
1972
1973
1974
1975
1976
1977
100 0
5.5
3 4
3 4
8 8
12 2
7.0
4.8
6.8
24 0
7.4
4.3
64.3
2.2
4 7
2.8
-.9
3.1
20.1
16.8
14.7
3.8
12 2
21.6
10.5
10.7
6.5
.6
8.0
4.5
6.9
6.0
4 3
3.1
-11.0
3.8
11.6
-3.1
6.7
6.9
-4.8
6.6
7.2
1.9
5.9
6.9
7.3
4.8
3.3
5.2
12.4
9.9
10.1
8.8
1
Change from December to December, not seasonally adjusted.
2 Detail may not add to total due to rounding.
3
Gas and electricity, fuel oil and coal, and gasoline and motor oil.
Source: Department of Labor, Bureau of Labor Statistics.
The inflation would not have persisted during the 1970 recession if wages
and prices were very sensitive to economic slack. On the basis of the experience of that period, and the similar one more recently, estimates of the size
and duration of the demand restraint and output loss that it takes to slow
inflation have been revised sharply upward.
Wage and Price Controls
In reaction to the failure of inflation to abate, a wage and price freeze
was announced on August 15, 1971, and was followed by wage and price
controls. The initial price freeze and the subsequent Phase II of controls did
reduce the rate of inflation during the final months of 1971 and throughout
1972. The rise in consumer prices moderated substantially, to about 3
percent in the last half of 1971 and throughout 1972. But the controls had
no lasting effect on the rate of inflation. Their relaxation in 1973 coincided
with the beginning of a series of developments that inaugurated a new round
of inflation. And the increase in business profit margins, which had been
squeezed during the control period, contributed to the renewed upsurge in
prices.
EPISODE II: THE ACCELERATION OF INFLATION IN 1973-74
The second inflationary episode stemmed in part from excess demand.
Between the fourth quarter of 1971 and the first quarter of 1973 the economy grew very rapidly—real gross national product (GNP) increased at an
annual rate of 7% percent. Among other reasons for this growth was the
expansive economic policy pursued. The high-employment budget moved
from a $2.7-billion deficit in 1970 to an $11.8-billion deficit in 1972;
monetary policy was also eased significantly and remained easy through
1972. Unemployment dropped sharply in 1972, and capacity utilization
reached high levels, especially in the materials sector. The phased dismantling of controls during 1973 coincided with and contributed to the opening
of a new episode of inflationary events.
140
The major inflationary pressures in 1973 and 1974, however, were not
caused by domestic monetary and fiscal policy. The fall of over 20 percent in
the value of the U.S. dollar from mid-1971 to mid-1973 helped to cause a
rapid rise in exports. Demand for U.S. goods was also increased by the simultaneous economic expansion in all industrial countries. The high operating
rates in the rest of the world accentuated the problem of tight domestic
capacity, as imports were not available to augment domestic supplies. The
most obvious result of this expansion was a rapid rise in prices of industrial
commodities. On world markets, prices of basic industrial commodities other
than oil more than doubled between mid-1972 and mid-1974. Prices of intermediate products such as primary metals and chemicals also rose sharply
in response to worldwide demand.
Other special factors were also at work. Food prices surged in 1973
and 1974 as a consequence of conditions that had been evolving slowly,
but were brought into prominence by a series of poor world harvests beginning in 1972. The steep increase in oil prices put into effect by the Organization of Petroleum Exporting Countries (OPEC) in late 1973 caused
the energy component of the CPI to rise by nearly 22 percent in 1974 alone;
from the end of 1972 through 1975 it rose by nearly 60 percent.
Although each of these special events was sufficiently important to exert a
marked impact on the overall price level, the dominant influence was the
rise in fuel and food prices. Its force was not limited to direct effects. The
pass-through of cost increases into other prices broadened the inflation, and
the rise in consumer prices led to efforts by wage earners to recover lost real
incomes. The inflation in prices for consumer items other than food, energy,
and mortgage interest accelerated from 3.1 percent in 1972 to 3.8 percent in
1973 and to 10.7 percent in 1974. The rate of increase in hourly earnings
remained relatively stable at around 6 to 7 percent until controls were removed in April 1974, but then rose sharply to .an annual rate of about 10 percent during the remainder of the year. While the rise played a part in spreading the initial shocks through the rest of the economy, it was less than the
increase in prices and represented a loss in real wages for workers.
The 1973-74 experience provided vivid evidence of the potential inflationary effects of factors other than aggregate demand pressures. It was, as
well, an example of the effects of the downward insensitivity of prices and
wages. Price increases in one sector exerted upward pressures in others,
rather than leading to a readjustment of relative prices around a stable
overall rate of inflation.
THE CURRENT SITUATION
Inflation has moderated substantially from the 12-percent rate of 1974.
Improved weather and agricultural production reduced prices of agricultural products at the farm. Despite higher processing costs, the rise in retail
food prices during 1976 was limited to less than 1 percent. Energy prices are
no longer rising at the extreme rates of earlier years. The rapid growth in
prices of other materials has also moderated.
141
248-947 O - 78 - 10
The slowing or reversal of price increases in these sectors, together with
the severity of the 1974—75 recession, did result in a significant moderation
of other price increases and wage gains. In 1973 and 1974 compensation
per hour rose less than prices, but still climbed sharply. The rate of increase
subsequently declined from an annual rate of almost 11 percent in 1974 to
about 8 percent in 1975, but has not receded further.
After initial moderation in 1975, the rate of inflation remains high and
relatively stable. The rate of increase of consumer prices fell from 1975
to 1976, but then rose again in 1977. These fluctuations were principally
due to erratic variations in food and energy prices. Excluding those two
categories, consumer prices rose at almost the same 6- to 6 J/i-percent rate in
each year from 1975 through 1977 (Chart 9).
Even allowing for delays in the response of wages and prices to underlying changes in demand, the failure of prices and wages to decelerate over
the past several years starkly illustrates the strength of the forces that support
inflation in the face of substantial economic slack.
THE MOMENTUM OF INFLATION
An inflationary momentum becomes built into the structure of the economy in several ways. Expectations of inflation and workers' desires to maintain their real wages lead to indexing of wage rates to price increases in both
a formal and an informal fashion. Workers as well as their employers are
concerned with their wages relative to other workers'. As a result, a wage
increase won in one sector of the economy can generate demands for equivalent increases elsewhere, even though economic conditions in individual labor
markets may vary significantly. Since an acceleration of inflation is usually
uneven in its initial stages, the wage structure becomes distorted, intensifying
the conflict over relative wages. The normal reaction is larger wage gains
in lagging sectors rather than smaller increases in leading sectors. This
process of adjustment makes it difficult to stop the inflation, even after the
initiating forces have disappeared.
Widespread belief that inflation will continue also leads businesses to accede to cost increases in the expectation of being able to pass the costs forward into higher prices. These price increases become the basis for still
further rounds of wage increases.
In this process of ongoing wage and price increases, it is fruitless to try
to identify a villain. While there are winners and losers—some groups do
a little better and some a little worse in defending their standard of living—
the actual changes in the distribution of income between profits and wages
have been relatively small lately. The poor performance of real wages in
recent years has been the result of poor productivity gains and the higher
price of imported oil, not of a shift in income away from workers to other
Americans. Poor profits have stemmed principally from low capacity utiliza-
142
Chart 9
Price and Wage Trends
PERCENT CHANGE, END OF YEAR TO END OF YEAR
_ CONSUMER PRICES-ALL ITEMSJ/
1968
1966
1974
1972
1970
1976
CONSUMER PRICES-ALL ITEMS LESS FOOD AND ENERGY^/
5 -
1968
1966
1972
1970
1974
1976
20 - COMPENSATION PER HOUR^
(PRIVATE NONFARM BUSINESS)
15 -
10 -
m
I
H
1
1966
1968
1970
1972
1974
J/CHANGE FROM DECEMBER TO DECEMBER, NOT SEASONALLY ADJUSTED.
-^CHANGE FROM FOURTH QUARTER TO FOURTH QUARTER, SEASONALLY ADJUSTED.
SOURCE: DEPARTMENT OF LABOR.
143
1976
tion and higher energy costs rather than from the pressure of wages on
prices. The principal result of the struggle to defend living standards has
been continued inflation.
Some of the factors that explain the inflexibility of prices and wages in the
face of slack demand can be identified. Complex technology, specialization, and economies of scale have limited price competition in many
individual markets. Price reductions are not seen as a means of sustaining
revenues and profits during periods of decline in the total market, since each
firm perceives that its competitors will match any price cuts. Competition
tends to concentrate on other strategies than pricing: quality adjustment, for
example, and the introduction of new products. The responsiveness of supply
to changing demands is also reduced by the importance of fixed costs in
many industries; decisions to expand capacity or enter into new markets must
be based on long-term considerations rather than on more immediate
changes in market conditions. The cost of entry into many major industries
by new firms is often great enough to allow some pricing discretion by those
already there.
The existence of formal escalator clauses tends both to increase the speed
with which an inflation spreads through the economy and to perpetuate the
inflation when it becomes established. In 1970 only one-fourth of workers
covered by major collective bargaining agreements were protected by
cost-of-living clauses; today 60 percent are (although virtually none of these
clauses provide an automatic full escalation of wages to prior inflation).
Many employers whose unions have escalator clauses extend the same protection to their nonunion employees. And employers without such escalators
face strong pressures to grant wage rate increases that protect workers
against inflation to maintain morale and productivity.
The structure of labor markets in modern industrial societies differs
significantly from simple models of competitive behavior. Workers do not
compete freely for all jobs. Some are denied the most attractive opportunities because of discrimination. Unemployment rates show a wide dispersion among different subgroups of the population, and the search for jobs by
some workers does not fully restrain wage increases of others. Entry into the
most attractive job markets is also sometimes limited by rules and practices
that have often been successful in preventing increases in overall unemployment from putting downward pressures on rates of increase of wages or
professional fees. Many firms, because of their interest in maintaining a
stable, high-quality labor force, base wage policy on longer-term considerations. Wage rates are often determined by what is considered equitable,
and prices are often set on the basis of traditional markups over cost,
rather than being based on short-run demand and supply conditions in
individual labor and product markets.
These characteristics of wage and price determination have been with
us for a long time. Several recent developments, however, may have made the
setting of wages and prices even less flexible. The cost of doing business has
144
been steadily increased, in good times and bad, by regulations designed to
meet objectives such as clean air and water and improved health and safety
of consumers and workers. Another factor may have been the substantial
growth of the noncompetitive sector of the economy. This sector (government and nonprofit establishments) represents about 26 percent of total
employment today as against less than 20 percent in 1960. Although employment in the regulated industries whose prices are sheltered to a large degree
from competitive forces—electric and gas utilities, communications, and most
forms of commercial transportation—has not grown as rapidly, wage and
price behavior in this sector also differs importantly from the competitive
model. By 1977 the government, regulated, and nonprofit sectors together
accounted for 31 percent of total employment.
Although we cannot measure the extent to which most of these factors
impede the downward flexibility of wages and prices, that flexibility does
appear to have been reduced during the postwar period, especially in the
case of wages. As Table 20 shows, deceleration in wages has been less and
less evident with each succeeding contraction. The table exaggerates the
problem, since there were strong exogenous forces driving price and wage
increases up in the year preceding the cyclical peak in 1948, and even
stronger forces driving them up in the recent recession. Nevertheless, some
longer-term decrease in downward flexibility, especially of wages, seems
evident.
TABLE 20—Wage and price changes and unemployment rates over the business cycle
[Percent!
Average hourly earnings index,
manufacturing1
Unemployment rate, wage and
salary workers in manufacturing
Consumer price index
Cycle
At cyclical
peak
2 quarters after
trough
Change
At cyclical
peak
2 quarters after
trough
Change
9.1
5.8
5.0
3.1
6.0
6.6
1.9
2.4
3.6
2.6
6.8
9.5
-7.2
-3.4
-1.4
-.5
.8
2.9
4.5
.9
3.5
1.8
5.8
8.4
2 quarters after
trough
Change
4-quarter average
Change from 4 quarters earlier
1948-49....
1953-54....
1957-58....
1960-61 — .
1969-70....
1973-75....
At cyclical
peak
-0.6
-.6
1.9
1.2
4.4
8.7
-5.1
-1.5
-1.6
-.6
-1.4
.3
4.2
2.8
4.6
5.8
3.3
4.3
8.2
7.1
9.3
8.0
6.7
10.4
4.0
4.2
4.7
2.2
3.4
6.1
I
1
Adjusted for ov ertime and interindustry shifts.
Source: Department of Labor, Bureau of Labor Statistics.
At the same time, the acceleration of the inflation rate during the past
10 years cannot chiefly be blamed upon an increasing downward rigidity
of wages and prices. Rather it appears to result from the relatively greater
magnitude and frequency of the inflationary shocks that have occurred
during the recent period, impinging upon an institutional structure of wage
and price setting which, for some time, has allowed only very limited downward flexibility, especially in wage determination.
145
OTHER FACTORS AFFECTING THE CURRENT INFLATION
Among the factors contributing to the high inflation rates of the last decade
are changes in the behavior of labor productivity, basic material costs, and
price-cost margins.
Productivity
There has been only a small improvement in real incomes throughout the
economy in recent years. This can be attributed to the slow growth in
productivity (and the large increase in imported oil prices) rather than to a
failure to gain large increases in nominal income. From 1950 through 1968
private nonfarm productivity expanded by about 2.6 percent annually (Chart
10). From 1968 through 1977 it rose by about 1.4 percent per year. Part of
this difference in performance is caused by the incomplete recovery from the
recession: productivity tends to grow faster than its longer-run trend when
the economy is on the upswing of a cycle and slower during the downswing.
But correcting for cyclical factors still leaves a difference: 2.5 percent in the
Chart 10
Productivity in the Private
Nonfarm Business Economy
INDEX, 1967=100 (RATIO SCALE)
130
y
y
y
120
TREND
/
y
110
100
130
/
90
/
/
CYCLICALLY
ADJUSTED^
80
\
<
70 -
i
1950
i
i
i
I
1955
I
I
!
I
I
I
I
1960
- 120
/
/ /
/\ff
///^
ACTUAL
-*
60
/
/
I
I
1965
I
I
I
I
i
1970
I
I
I
- 110
I
1975
2 / T H E CYCLICAL ADJUSTMENT IS BASED ON A REGRESSION OF PRODUCTIVITY ON THE CURRENT
A N D LAGGED UNEMPLOYMENT RATE FROM 1950 TO 1968.
SOURCES: DEPARTMENT OF LABOR AND COUNCIL OF ECONOMIC ADVISERS.
146
I
100
earlier period against 1.6 percent in recent years. This slowdown is one of
the most significant economic problems of recent years. Gains in real living
standards must come primarily from improved productivity. Without gains
in productivity, improvement in real incomes for some Americans can come
only at the expense of others.
In the short run, rapid productivity growth also helps to contain inflation.
To the extent that nominal wage gains are determined by the inertia and
expectations discussed earlier, productivity growth provides a margin
between rising money wages and unit labor costs and thus contributes to
lower inflation rates. The substantial growth in productivity was a major
factor in the stable price environment of the 1950s and 1960s. A continuation
of the slower growth in productivity that has prevailed since 1968 would
imply a very stringent limitation on real income growth. It would also
increase the difficulty of achieving moderation in the inflation rate.
The causes of the apparent decline in the rate of productivity growth are
varied and their effects hard to quantify. Some of the decline may result
from the gradual adjustment of the economy to higher energy prices, as
more costly resources are substituted for previously cheap energy inputs.
But this explanation cannot account for the slower growth before 1974.
There is, of course, no reason why productivity should follow a constant
upward trend. Since its growth represents the combined effects of technological innovations, changes in skills and education of the work force, improvements in organizational techniques, and a host of other factors,
changing patterns should be expected.
The change in the demographic composition of the labor force has also
been proposed as an explanation of the slow growth of productivity in recent
years. The rise in the proportion of women and younger workers has been
a factor in the rise of the unemployment rate, and it might be natural to
attribute some slowing of productivity growth to the same phenomenon. But
the facts do not support this conclusion. What is important for the growth
of productivity is not the share of a particular group in employment, but the
growth of that share. Although the percentages of younger workers and of
women in total employment have been growing since 1968, the percentages
were also growing before 1968. The percentage of younger workers (aged
16 to 24) grew by 0.4 percent a year from 1955 to 1968, and at the same
rate since 1968. The growth of the percentage of women in total employment has also remained virtually unchanged, at 0.4 percent. Since these
increases have been stable, they cannot have accounted for any significant
reduction in the growth rate of productivity.
A more promising explanation may be the behavior of the capital stock.
From 1947 to 1968 the capital-labor force ratio grew at .an annual rate of
about 3 percent. Since then it appears to have grown more slowly, by about
1 percent a year. If one adjusts for the proportion of capital required to meet
pollution abatement and safety regulations, the capital-labor ratio would
147
show even less growth. This apparently explains at least some of the slower
growth in productivity since 1968.
The accelerated introduction of governmental regulations dealing with
environment, health, and safety may also have been responsible for some of
the slowdown in official measures of productivity growth. To the extent that
additional resources are devoted to specific identifiable activities required to
meet environmental, safety, and other social regulations, the effects on productivity are, at least conceptually, measurable. But much of the effect may
have come indirectly, through increased limitations on the choice of sites
and raw materials, delays in construction, and constraints on production
processes. The effect of these is virtually impossible to quantify. Increased
regulation has undoubtedly had an impact, but its magnitude remains a
matter of conjecture. Insofar as these programs result in improvements in
public well-being, we may simply have taken part of our productivity gains
in forms that are not measured in GNP.
Much of the low recent growth in productivity may come from the
effect the extreme instability of the economy since 1968 has had on investment. Sustained balanced growth may make a substantial contribution
toward restoring a more rapid growth of investment, and thus of productivity.
Profit Margins
Firms seemed to absorb part of their cost increases during the late 1960s
and the early 1970s, rather than passing them on fully to purchasers. Consequently profit margins declined substantially. Profit margins, adjusted for
the effects of inflation, have improved since 1974, however, and appear to be
close to their post-World War II average when allowance is made for capacity
utilization. (See Chapter 1.) This situation does not characterize all industries, of course, and some movements in prices relative to costs will take place.
But as far as the economy as a whole is concerned, attempts to increase profit
margins by increases in prices relative to costs should not seriously affect
inflation in the near future.
Costs of Materials
From the end of the Korean war until the late 1960s the prices of raw
materials declined relative to the general price level. This was an important
factor in moderating inflation during this period. The decline was due to a
variety of factors, including a large overhang of excess processing and mining
capacity, the discovery of large low-cost oil fields abroad, expansion of capacity in foreign countries, major technological improvements in agriculture and
mining, ,a more extensive global search for raw materials, and a major reduction in overseas transport charges. For example, yields per acre of corn in the
United States increased by 125 percent from 1950 to 1969, largely because
of improved hybrid seeds, better fertilization and pest control, and improved
cultural practices.
148
This downward trend in relative prices of materials came to an abrupt
end in 1973. In that year alone raw materials prices rose 40 percent. This
explosive rise can be attributed to lagging growth of capacity during prior
years, a series of crop failures in several areas of the world, the enormous
growth in demand created by the simultaneous economic expansion in the
industrial countries, the development of speculation and a "shortage mentality," and above all the actions of OPEC. This explosion appears to have
ended. Although there is no reason to believe that prices of raw materials
will climb as abruptly in the near future as they did in 1972-74, neither
should one expect them to decline relative to other prices, as they did prior
to 1970.
Government Policies
Government policies directly affect the price level. The most obvious
examples are increases in sales or payroll taxes, since they add to prices and
costs. A rise of 1 percentage point in the sales tax rate shows up fairly directly
in prices. Changes in payroll taxes have a similar effect by raising labor costs,
which are then passed on in higher prices. The employer's share of social
insurance contributions (including social security and unemployment insurance) has risen from only 2.7 percent of total employee compensation in
1950 to over 6.8 percent in 1977, and to over 7 percent in 1978, when higher
unemployment insurance and social security taxes take effect.
The government may also add to prices through other forms of legislation or through regulation. A change in the minimum wage law is an example. Mandating an increase in the wage paid by the employer raises the
cost of production and increases prices. Expenditures that are required to
meet environmental and safety regulations add to costs. The environmental
benefits or added safety may be well worth the resources devoted to them,
but the rate of inflation is affected. Government regulations may also have
an unfavorable effect on prices by restricting competition. When international competition is restricted through tariffs or quotas, domestic producers
are able to raise their prices. Domestic competition is also restricted by
various regulatory agencies that set uniform rates and hamper the entry
of new firms. Some of these issues are discussed further in Chapter 5.
GROWTH AND INFLATION
In the traditional view, the cure for inflation is a dose of fiscal and monetary restraint designed to reduce aggregate demand and thereby eliminate
the conditions generating the inflation. When inflation is being fed by excess
demand—tight labor markets and intensive use of industrial capacity—
elimination of that excess is indeed a prerequisite to controlling inflation and
preventing it from accelerating further. Moreover, if the rate of increase in
wages and prices responded readily to excess supply, a reduction in demand
sufficient to produce a modest and short-lived amount of economic slack
149
would eliminate the inflation quickly. As we have seen, however, the essence
of the present inflation problem is that the rate of wage and price increase
reacts very slowly to idle resources and excess supply. Given this fact, an
attempt to purge inflation from the system by sharp restrictions on demand
would require a long period of very high unemployment and low utilization of capacity.
Most current estimates of the reaction of inflation to economic conditions
indicate that a continuation of the current degree of slack (an unemployment rate near 6^2 percent) would reduce inflation by amounts that at the
upper end of the range are no more than one-half percentage point a year. In
the absence of future inflationary shocks (for example, a rise in world
materials prices), it would take at least 6 years of the current degree of
economic slack to cut the inflation rate from 6 to 3 percent. To achieve the
same results in less time would require even higher unemployment rates.
Not only would this policy entail a prolonged effort, it would also be extremely expensive in terms of lost output. Maintaining the current level of
economic slack means producing approximately $100 billion a year less
than the potential output of the economy.
To cut the current inflation rate in half, the lost output would amount to
at least $600 billion (at 1977 prices). Moreover, to the extent that such
a policy kept the rate of investment low, any attempt to restore high
employment promptly, after the slack had disappeared, would probably
soon encounter inflationary shortages of plant capacity.
USING THE TAX SYSTEM TO REDUCE THE MOMENTUM OF INFLATION
Various proposals have been offered in recent years to utilize changes
in taxes to influence wage and price behavior directly. One set of proposals
involves an attempt to break the momentum of the current inflation through
one-time reductions in sales taxes or employer payroll taxes. Since the
persistence of inflation during periods of economic slack stems partly from
the sequence in which price increases induce wage increases that induce
still further price increases, even a one-shot slowdown in the rate of price
increase might halt the momentum and start unwinding the spiral.
The Federal Government has no general sales tax. It does have a series
of specific excise taxes. Eliminating those on alcohol and tobacco hardly
seems an appropriate measure to combat inflation, if only because the initial
impact would be so unevenly distributed across the population. Most of the
other excise taxes are earmarked for particular purposes, such as the highway and airport trust funds. The only sizable excise that remains, the tax
on telephone service, is marked for elimination in fiscal 1979 under the
President's proposed tax program.
State governments are the principal units that levy general sales taxes.
Conceivably, the Federal Government could make grants to the States
conditioned on their using the funds to reduce sales taxes. Serious prob-
150
lems of equity and administration must be solved before such an approach
could be made to work. Five States have no sales tax. The taxable base
varies widely among the States—some, for example, include food while
others do not. Unless the grants were permanent, their cutoff could lead to
a sudden return of sales tax rates to higher levels with the consequent addition to inflation. And even if the grants were continued indefinitely, the States
could hardly be asked never to raise sales taxes once they had been lowered.
Payroll taxes are levied by the Federal Government, and the receipts
flow into several trust funds to pay for various social insurance programs.
That part of the taxes that is levied on employers is a direct addition
to payroll costs and tends to be passed on in the form of higher prices.
Reducing employer payroll taxes would lead to a one-time reduction
in costs and prices. The President has proposed, as a modest step in this
direction, reducing the Federal portion of the unemployment insurance tax
from 0.7 to 0.5 percent of covered payrolls. This reduction would lower tax
liability by $800 million per year. But a cut large enough to produce a significant reduction in costs and prices would require a substantial change in
national policy with respect to large-scale general revenue financing of the
social insurance trust funds. While such a change in national policy might
indeed be worth considering, it cannot be made without lengthy debate and
appraisal encompassing far more than its merits as an anti-inflation tool.
One-time reductions in sales or payroll taxes to combat inflation need
careful evaluation with respect not only to their administrative and related
aspects, but also to their efficacy as anti-inflation measures. Roughly speaking, a $15- to $18-billion permanent reduction in sales taxes or payroll taxes
would be needed to reduce the level of costs and prices by 1 percent. Would
such a one-time reduction be enough to turn the momentum of inflation
downward? That is, would the secondary effects—the effect of lower prices
in slowing wage increases that in turn lead to still smaller price increases—
be sufficient to affect the rate of inflation during subsequent periods? In
part the answer would depend on what happened to expectations about
future price and wage increases. No answer can be made with confidence,
however, so long as we cannot quantify the strength of the various mechanisms that perpetuate inflation.
Another quite different set of proposals would use taxes as an incentive
for workers and business firms to moderate wrage and price increases. In
one variant the government would levy a special tax upon wage increases
in excess of some standard, and—in some versions—upon increases in pricecost margins of business firms. In another variant, instead of levying a tax
increase, the government would offer a tax reduction to firms and groups
of workers whose wage increases were held at or below the standard.
Given the recent history of inflation, the chosen standard would not be
expected to result in an immediate return to price stability, but would be
sufficiently far below recent increases in wages to produce a significant decel-
151
eration in inflation. To continue the deceleration the tax (or subsidy) could
be repeated, at least for a few years, with a lower standard each year.
Significant administrative problems are obviously entailed in any such
proposal. How are wage rates (and fringe benefits) to be measured? What
about multiyear union contracts, with low increases in the first year to avoid
the tax or reap the subsidy, followed by large increases in the second year?
Important economic questions also arise. Would a tax on the wage increases
that are considered excessive simply be passed along by firms with substantial
market power and strong unions and thus actually increase inflation? (The
tax reduction variant would not suffer from this particular problem.) If
carried on for a number of years, such measures could place a penalty on
needed changes in relative wages and prices and could impede the
restoration of equitable wage relationships for those who had been lagging
in the adjustment to inflation. If imposed for only 1 year, they might not be
sufficiently effective to break the momentum of inflation. And from the
standpoint of labor and management, such measures might be viewed as
giving the Internal Revenue Service some of the characteristics of a separate
wage and price control agency.
It is not difficult to find administrative and equity problems and to raise
unanswered questions about all these proposals. They are relatively novel
and have not been fully evaluated or widely discussed. It would be imprudent to propose introducing any of them on a major scale before subjecting them to a much more complete evaluation and wider discussion with
respect to their economic effectiveness, administrative feasibility, and social
equity. On the other hand, the momentum of inflation is so strong,
and the consequences of either allowing it to continue or trying to
wring it out with excessively slow economic growth are so serious, that they
should not be dismissed out of hand. Further economic evaluation and a
much broader public debate would be very healthy, whatever its outcome.
A DECELERATION STRATEGY
While the forces at work in the economy are not likely to produce an
acceleration of inflation in the next year or two, neither are they likely to
lead to a deceleration. Supplies of labor and industrial capacity will be
ample, but unemployment and excess capacity will be less than in the past
2 years, during which the underlying inflation rate did not diminish
significantly. Bringing inflation down gradually in the next several years
will clearly require a special effort.
If inflation is to decelerate, reliance cannot be placed on sharply lower
price increases in one or two markets. The acceleration of inflation has been
pervasive across all major sectors of the economy. Significant variations in
rates of price increase have occurred among the various sectors—reflecting
differences in productivity growth rates and underlying cost trends. But all
152
of the major components of the consumer price index have experienced a
large rise in the rate of increase since the early 1960s.
Progress in moderating overall inflation must involve deceleration of
wages and prices simultaneously. To bring this process about the President
has asked business and labor to undertake voluntarily a program of price
and wage deceleration.
This new program starts from the presumption that significant deceleration should be achieved in each market. Individual industries are asked to
aim in 1978 at smaller price and wage increases than the average for the
past 2 years. The amount of deceleration that can be achieved will vary
from situation to situation, however, because individual industries face
different circumstances. The accumulated experience of the recent past—
high unemployment and sharp inflation—has distorted the structure of
wages, prices, and profits compared to what they would have been in a
period of price stability. Deceleration must be widespread, but allowances
must be made for variations in the degree of moderation.
On the wage side, there has been a wide dispersion of wage rate increases
in recent years. In those sectors of the economy characterized by large enterprises and union organizations, rates of increase in wages and private fringes
typically have been in the range of 8 to 9 percent annually, with little
change since 1975. On the other hand, the high level of unemployment has
had a moderating influence on wage settlements in more fragmented labor
markets composed of smaller firms, smaller unions, and unorganized labor.
As a consequence, there has been a significant widening of wage rate differentials among groups in the labor force.
These wage differentials would under normal circumstances result in
larger wage increases in the more competitive labor markets and a gradual
narrowing of these wage differences. But such an outcome would imply a
higher overall rate of wage inflation. Thus, an equitable effort to moderate
the average rate of wage increase must be based on a greater degree of deceleration by those who have received the largest increases in recent years.
There may be very special situations in which wage gains have lagged so
far behind the rest of the economy that deceleration is not possible.
Some guidance in analyzing recent shifts in the wage structure can be
obtained from an examination of historical trends in relative wages. But
variations in the wage structure should be expected in response to evolving
market conditions. Such changes in the structure will be associated with
skill changes, locational shifts of firms, changes in productivity trends, and
other factors that affect the competitive position of a specific industry.
Deceleration in the rate of price inflation will contribute to moderation of the
increase in employment costs directly through cost-of-living adjustments in
wage contracts and indirectly through its effect on wrage bargains. However,
more than a passive response is needed to achieve significant deceleration of
wage increases.
153
On the price side, there are similar reasons why a uniform degree of price
deceleration is not feasible. Firms that previously had lowered their pricecost margins in response to slack demand must restore them to more normal
levels as the economic recovery continues. But in those cases where profits
have declined primarily in response to a low level of sales and capacity
utilization, improvements in profits should come from higher volume rather
than increased prices. The degree of price deceleration that is achievable in
individual situations also will be affected by variations in raw material prices,
by costs mandated by government—for example, changes in payroll taxes,
minimum wages, or regulatory programs—and by the magnitude of cost increases incurred under labor and material contracts signed in prior years.
Adherence to the goal of price deceleration can contribute to improved
productivity by intensifying efforts to reduce costs.
If a program for deceleration of inflation is to succeed, it will require
strong efforts and cooperation at the level of individual industries. Thus,
early discussion between government and individual industry and labor
groups with respect to specific inflation problems would be an important
part of the deceleration effort. On the price side, the staff of the Council
on Wage and Price Stability will undertake an analysis of the outlook for
market conditions and cost trends in those specific situations where difficulties can be anticipated in achieving the deceleration objective over the
course of the year. Members of the Administration will participate in informal private discussions with firms or industry groups based upon staff
review of the price-cost outlook and major problems of the industry. The
discussions would seek to identify problem areas in such matters as costs,
capacity, productivity, regulatory measures, and government policies, and
would examine specific actions the parties could take to help in the moderation of price and cost increases. Implicit criteria for selecting industries for
such study and discussions would include their broad impact on costs, their
potential for setting wage or price patterns, and the occurrence of other
major developments affecting prices or costs.
Similar informal discussions with union leaders should occur well before
the beginning of bargaining. They would focus on a review of past trends in
relative wages, effects of the previous settlement, productivity, and other
economic conditions. These discussions would provide an opportunity to
emphasize the importance of deceleration and improvements in productivity,
and to review potential barriers to achieving deceleration.
Developments with regard to food prices are likely to be helpful
to the deceleration process. As noted in Chapter 2, the rise of food prices is
likely to be considerably smaller in 1978 than it was in 1977. Also, if present
indications of no change in world petroleum prices during 1978 are borne
out, the prices paid by consumers for energy will continue to reflect a gradual
adjustment of domestic prices to world levels. If a one-half percentage point
annual deceleration could be achieved in the rate of price increase for
154
consumer prices excluding food and fuel, then the reduction in the inflation rate for the consumer price index as a whole would be larger if food
and fuel prices move as expected.
Table 21 traces the history of changes in broad categories of the consumer
price index, and in the major components of unit labor costs since 1960.
The table shows separately the rate of increase in consumer prices for all
items other than food and energy since short-run changes in the volatile
farm component of the retail food basket and in energy prices are not an
indication of longer-term trends.
TABLE 21.—Annual rate of change in selected components of the consumer price
index and employment costs, 1960—77
[Percent]
Relative
importance,
December
1977
(percent) 1
Item
1960
to
1965
1965
to
1970
1970
to
1975
1976
1977 2
Consumer prices
All items
Food
Energy
All items less food and energy _
Commodities
Services
. _ - _ __
100.0
1.3
4.5
6.9
4.8
6.8
24.0
7.4
68.6
1.5
.4
1.4
3.7
2.5
5.0
9.4
10.9
5.7
.6
6.9
6.1
8.0
7.2
6.4
33.7
35.0
.8
2.2
3.7
6.4
5.1
6.4
5.3
6.9
4.7
7.9
4.0
6.5
7.9
9.2
8.6
3.8
.2
6.0
.5
7.1
.8
8.5
.7
8.1
.5
Private nonfarm business
Compensationper hour
Contribution of:
Wages and private fringes
Employment taxes
. . .
Productivity
Unit labor costs
4.0
1.2
1.4
3.2
2.7
.0
5.2
6.4
5.8
5.7
1 Detail may not add to total due to rounding.
2 Preliminary.
Note.—Changes are measured from December to December for prices and frcm fourth quarter to fourth quarter for
employment costs.
Sources: Department of Labor (Bureau of Labor Statistics) and Council of Economic Advisers.
For all items except food and energy, the inflation rate was stable at just
over 6 percent during 1976 and 1977. If an average deceleration of one-half
a percentage point could be achieved in 1978 for this broad category of
consumer prices, the decline in the rate of inflation for the CPI as a whole
could be somewhat larger because of developments in food and energy
prices. Food prices in 1978 should rise by significantly less than in 1977, more
than offsetting a possible faster rise in energy prices. Excluding used cars,
whose prices fell sharply in 1977, the degree of achievable deceleration for
the consumer commodity group should be roughly similar to that of services.
Actual rates of price increase would, of course, vary among major categories,
155
as they normally do. Prices of consumer commodities should rise by less
than prices of services because of the larger productivity gains.
Since the degree of deceleration will not be the same in all cases, the
achievement of one-half percentage point deceleration for the underlying
rate of inflation will require that a larger deceleration occur in most situations. Unless that is done, the end result will be a deceleration substantially less than the one-half percentage point.
Determining the degree of deceleration in costs consistent with the
assumed deceleration of prices requires consideration of what has happened to profit margins. Profit margins, adjusted for capacity utilization,
are close to the postwar average. Without that adjustment, profits are
below average. Cyclical deviations in productivity from the long-run trend—
which are closely related to rates of capacity utilization—are typically reflected in variations in profits rather than in prices, actual unit labor costs
rising relative to prices in recession and falling in recovery. On average,
standard unit labor costs should decelerate at about the same rate as the
underlying rate of inflation, since a greater deceleration of prices than costs
would reduce profit margins below long-run average levels.
Payroll taxes for social security and unemployment insurance will increase
sharply in 1978 and 1979. Achieving a one-half percentage point deceleration
in unit labor costs will therefore require a larger moderation of increases
in wages and private fringe benefits. At the same time, however, because
of the larger than average deceleration in food prices, the rise in the overall
consumer price index would slow down more than the underlying rate of
inflation. As a consequence, significant gains in real wages and fringes would
be achieved.
A focus upon the objective of decelerating inflation at the level of individual markets has several advantages. First, it is an explicit and easily understood standard for individual price and w7age situations, set forth well in advance of any specific decision. It recognizes that basic rates of price increase
must vary among markets because of differences in productivity growth and
material cost trends. Yet virtually all should be able to achieve some deceleration. This objective does not interfere unduly with normal market functions.
Individual firms continue to be responsible for their own cost increases
rather than being subjected to some vague concept of cost pass-through.
Finally, it provides a conceptual basis as a guide in identifying the specific
sectors where efforts to reduce inflation should focus. For regulated industries and governmental operations, it would provide a framework for evaluating and coordinating a wide range of government policies that affect
prices and costs. On the wage side, it recognizes that recent increases have
varied substantially among different groups of workers, but it seeks to moderate distortions in the wage structure principally by different degrees of
deceleration rather than by a speeding up of wage increases in lagging
sectors.
156
CAPACITY UTILIZATION
Reduction of the ongoing rate of inflation during the expected economic
slack in the next few years would do much to prolong the recovery. But we
must also deal with another challenge—ensuring that we do not incur a
new round of inflationary pressures as we return to high employment and
capacity utilization.
In 1973, shortages of capacity, principally in materials-producing industries, contributed to the acceleration of inflation. At present, capacity relative to output is ample in virtually every industry; but as unemployment
declines between now and 1981, output and employment will rise faster than
trend. And since 1973 the labor force has grown more rapidly than the
stock of fixed business capital. Will industrial capacity be sufficient to
prevent shortages from setting off a new round of inflation as the economy
approaches high employment?
The capacity shortages in 1973 developed at the end of a period in which
industrial capacity had increased fairly rapidly. Between 1965 and 1973 the
net real stock of fixed business capital excluding pollution abatement equipment grew at 4.4 percent per year. During the same period, the labor force
(minus employment in the government sector) grew at a 1.9-percent annual
rate. Even with this difference between the growth rates of labor and capital in the private sector, a number of industries experienced shortages in
capacity in 1973. By contrast, in the 1973-76 period the annual growth
rate of fixed capital stock, excluding that part devoted to pollution abatement, decreased substantially to 1.9 percent, while the private labor supply
grew at 2.3 percent annually. This comparison of growth rates of labor and
capital and the observed capacity shortages in 1973 are in themselves enough
to arouse concern about capacity constraints in 1981 or even sooner.
The capacity shortages in 1973 were made more critical, however, by two
factors that are not likely to recur in the next 4 years. First, output in
virtually all industrial countries reached a peak simultaneously in 1973. This
meant that substantial pressure was placed on world markets for many
different industrial products and raw materials. Shortages in the United
States could not be relieved by imports at existing or only slightly increased
prices. Second, the price rise associated with the simultaneous surge in demand generated speculative building of inventories across a wide range of
commodities both here and abroad. This inventory accumulation remained
a profitable activity as long as prices rose faster than the sum of storage
costs plus the nominal rate of interest. Economic growth is now below trend
in all industrial countries. This slow growth and the worldwide persistence
of excess capacity in most major industries make a recurrence of worldwide
capacity problems unlikely. In steel, for example, the capacity utilization
rate in 1973 was 97 percent in the United States, 92 percent in Japan, and
85 percent in Europe. Currently the average of these rates is less than 75
percent, and there is little chance that levels similar to those in 1973 will be
248-947 O - 78
157
11
reached by 1981, even under optimistic assumptions about the growth of
demand in Europe and Japan. The availability of many basic commodities
from foreign sources to supplement domestic output when it approaches
capacity reduces the probability of price-raising shortages and speculative
inventory accumulation.
PAST TRENDS IN THE UTILIZATION OF CAPITAL
Table 22 summarizes capacity utilization estimates prepared by the Federal Reserve Board for manufacturing and major industrial groupings. In
general the current capacity utilization measures indicate sufficient industrial
capacity to accommodate above-trend growth in output for at least 2 years.
TABLE 22.—Capacity utilization in manufacturing and materials industries, selected
periods, 1955-77
(Percent; seasonally adjusted]
Manufacturing
Period
Total
Industrial materials
Advanced
processing
Primary
processing
Total
Durable
materials
Nondurable
materials
Energy
materials
1955: 1
II
III
IV
84.5
87.4
87 5
88.6
82 4
84.6
84 3
85 6
88.3
92.4
93 4
93.9
1966: 1 . . .
II
III
IV..
91.1
91.6
91.2
90.6
91 0
91.5
91 0
90.9
91.8
92.0
91.9
90.1
1969: 1 . . .
II
III
IV
87.2
86.5
86.4
84.8
86 3
85.4
85.2
82.9
88.9
88.4
88.6
88.4
89.4
89.6
90.4
89.6
87.9
87.7
89.4
88.2
91.0
91.2
90.7
89.8
91.1
92.4
92.2
93.2
1973: 1 . .
II
IIL
IV
87.1
87 6
87.8
87.7
84.5
85 2
85.0
85 0
91.8
92.1
92.7
93.0
92.1
92 5
92.9
92.1
90.6
91 6
92.3
91.4
93.9
93.6
93.4
93.7
93.8
93.4
94.1
92.0
1976: 1
II
III.
IV
79.1
80.3
80.8
80.6
78.0
79.1
79.5
79.7
81.0
82.5
83.1
82.2
79.3
80.7
81.2
80.3
73.8
76.7
78.4
76.5
85.6
86.0
84.8
84.4
85.6
84.1
83.8
84.8
1977: 1 . . .
II
III..
IV
81.2
82.7
83.0
82.8
80.5
81.4
81.9
81.8
82.3
85.1
84.9
84.8
80.4
82.6
82.3
82.3
76.5
79.4
79.2
79.6
85.1
87.2
86.3
86.3
84.5
84.8
85.0
0)
i Not available.
Source: Board of Governors of the Federal Reserve System.
Capacity utilization for all manufacturing industries was 82.8 percent in the
fourth quarter of 1977, 5 percentage points below the level attained in 1973
and nearly 9 percentage points below the 1966 peak. Capacity utilization in
materials, a category that contains mining and utilities as well as unfinished
manufacturers, was almost 11 percentage points below its previous peak in
1973.
The interpretation of capacity utilization statistics is complicated, however, by a number of factors. First, no measure of the utilization of capital
covers the entire economy. The broadest-based measure obtainable is for the
158
manufacturing sector, which in 1977 accounted for only about 25 percent of
private GNP and 20 percent of the fixed private nonresidential capital stock.
While it is reasonable to assume that capacity utilization outside of manufacturing is strongly correlated with the manufacturing capacity utilization rate,
substantial variation between disaggregated measures of capacity utilization
does exist. For example, between 1962 and 1966 capacity utilization rose
more rapidly than might have been expected because the share of manufacturing output in the total increased. Between 1966 and 1968 the manufacturing share fell and capacity utilization declined, even though GNP
remained high relative to potential. Only tentative conclusions about the
adequacy of aggregate capital formation can be reached from relatively
narrow measures of capacity utilization.
In industries except those with continuous processes (like chemicals, paper,
and steel), the possibility of adding a second or third shift to increase output
without adding to the physical capital stock creates additional ambiguity.
In many sectors of the economy, particularly ones producing finished goods,
production is relatively labor-intensive; in a given plant, output can be increased by adding employment with very little deterioration in productivity.
In these sectors, measured capacity utilization may rise very slowly in relation
to output when output is high.
Advanced-processing Versus Materials-producing Industries
The data in Table 22 show a sharp difference between the advancedprocessing industries and the primary-processing and materials industries.
During the fourth quarter of 1977 capacity utilization rates in advancedprocessing industries were only 3 percentage points below those reached in
1973. But in 1973 capacity shortages were not apparent in such industries,
nor did price pressures originate in those areas; indeed, utilization rates
were substantially lower, by about 6 percentage points, than they had been
in 1966. Capacity utilization in primary-processing and materials industries,
however, which was quite high in 1973, was well below those levels in late
1977, by about 8 points for primary-processing industries and 11 points
for materials. Many of these industries created additional capacity in
response to the high utilization rates of 1973. The 4/2-point difference in
capacity utilization for manufacturing as a whole between 1973 and late
1977 thus understates the extent that capacity is available to accommodate
above-trend gains in output in the next several years without generating
inflationary shortages. Most advanced-processing industries should be able
to add extra shifts to expand capacity without extraordinary price increases.
Labor Utilization Versus Capital Utilization
While the growth in domestic output now in prospect for 1978 and 1979
and projections of excess capacity in other industrial nations make widespread capacity bottlenecks unlikely in the next 2 years, a longer-run imbalance between capital and labor resources remains a question. The relation
159
of unused labor services to unused capital services is illustrated in Chart 11.
The capacity gap is the difference between the Federal Reserve Board
capacity utilization index and 87.5 percent, the level attained at times
when the unemployment rate was close to high employment. The employment gap is the difference between the overall unemployment rate and
the high-employment benchmark. During the 1960s very large investment
expenditures increased the capital stock substantially. As a consequence, in
1967-69, when the labor market became very tight, with a negative employment gap, the capacity utilization rate remained at or below 87 percent.
Since then, however, the employment gap has drifted upward relative to
the capacity gap; for any given unemployment rate the observed capacity
utilization rate has increased.
A related measure of this capital-labor imbalance is the high-employment
capacity utilization rate shown in Chart 11. By estimating the average relation between changes in the unemployment rate and changes in the
capacity utilization rate, one can obtain the capacity utilization that would
be achieved in any period if unemployment were at its high-employment
Chart 11
Relationship Between Capital
and Labor Utilization
PERCENTAGE POINTS
PERCENTAGE POINTS
24
UNUSED CAPITAL AND LABOR
CAPACITY GAP
(Right scale)
J EMPLOYMENT GAP
~~~
(Left scale)
i 11 1 I I I I l l I 1 i I l 1 1 I l I i l i 1 i I l I l 1 l I I I i I l I I 1 i I i I l i 11 i I I I i I i I i l I I i I I I I i i I I i l
-2
1960
62
64
66
68
70
72
74
76
PERCENT
HIGH-EMPLOYMENT CAPACITY UTILIZATION
100
MATERIALS
90
^
\
^ - \
/
Vi
^
v
\
MANUFACTURING
80
I
ll
1960
ll ml
62
I I I I I I II I I ! I I II l l
64
66
SOURCE: COUNCIL OF ECONOMIC ADVISERS.
Ini
ll I
68
160
70
Il I I I I I I l I I I I
72
74
III!
76
I
-8
benchmark. The concept of high-employment capacity utilization is
an attempt to provide a cyclically adjusted measure of the balance between
capital and labor resources. As Chart 11 indicates, high-employment capacity utilization for manufacturing, currently at 90 percent, is significantly
higher than it has been in the past; the postwar average is 86 percent.
For materials, data prior to 1967 are not available. The high-employment
capacity utilization rate did move up between then and 1973. After some
fluctuations, the rate in the fourth quarter of 1977 was at about the 1973
level. In general, the rise in the high-employment capacity utilization rate
suggests that there could be pressures on capacity as the economy returns
to high employment if business fixed investment does not increase
substantially.
The estimates in Chart 11 also provide some comfort. In the early 1960s
the high-employment capacity utilization rate was also high. The prior period
of slack demand and underutilized resources had resulted in poor investment
performance and the slowing of growth in the capital stock relative to the
labor force. But the subsequent period of high investment did succeed in
increasing the availability of capacity, so that by the second half of the decade
the high-employment capacity utilization rate had fallen significantly.
CAPACITY UTILIZATION THROUGH 1981
The fact that measures of existing capacity utilization cover only part of
the capital stock, and the conceptual problems noted earlier, mean that only
tentative conclusions about the adequacy of the capital stock can be drawn
from available utilization statistics. A rough indication of the rise in manufacturing capacity utilization that may accompany the projected real GNP
growth of 4.8 percent per year between 1977 and 1981 can be obtained by
observing the capacity utilization growth experienced in 1962-68, when real
output grew steadily at above-trend rates, and real investment grew more
rapidly than real output. If the relation between real GNP growth and
capacity utilization in 1962-68 is matched in 1977-81, an annual 4.8 percent growth in real GNP would raise the manufacturing capacity utilization rate by 1.5 percentage points a year. By 1981 the utilization
rate would reach 89 percent, slightly above 1973 but less than the 1966
level. In view of the current capacity utilization differences among industries and particularly the current large unused capacity in materials industries, such an outcome should be consistent wTith the avoidance of inflation
stemming from capacity shortages. If, on the other hand, investment and
capacity growth proceed at a significantly lower rate, capacity utilization
would rise to levels previously associated with inflation.
THE LABOR MARKET
Monetary and fiscal policies can provide the conditions under which economic growth proceeds fast enough to reduce the overall unemployment
161
rate. Such policies alone, however, cannot reduce unemployment to acceptable levels without a significant risk of accelerating inflation.
The incidence of unemployment differs widely throughout the population. In both good and bad times, youth, minorities, women, and those with
less education face a much greater likelihood of being unemployed than
white male adults with good education. As a consequence, when the overall
unemployment rate declines to low levels, unemployment among the more
favored groups becomes very small, labor shortages occur, and the rate of
wage and price increase accelerates. Yet less favored groups continue to
suffer high though diminished unemployment.
The uneven incidence of unemployment requires that monetary and fiscal
policies to deal with aggregate unemployment be accompanied by structural
policies to deal directly with the labor market problems of groups with persistently high unemployment.
THE STRUCTURE OF UNEMPLOYMENT
Although unemployment rates have recovered to a great extent from the
1975 recession, they have not yet reached the levels normally associated with
high employment. As is seen in Table 23, all of the unemployment rates
by age, race, and sex were higher in 1977 than in 1956, 1965, and 1973—
years of low overall unemployment in which labor markets were apparently
close to balance. It would thus be wrong to conclude that all of the
current high rate of unemployment is frictional or structural (i.e.,
that the present unemployment rate could not be lowered through an increase in aggregate demand without increasing the rate of inflation).
There are, however, a number of structural problems revealed in Table
23, and it is useful to examine each of them in detail.
Unemployment differentials have been persistently observed in our economy. They exist between blacks and whites, teenagers and adults, and
women and men. Part of the explanation of such differentials has to do
with different patterns of turnover, skill level, labor market attachment,
TABLE 23.—Unemployment rates by race, sex, and age, selected periods, 1956-77
[Percent*]
Total
White:
Males 20 years and over
Females 20 years and over . . . Teenagers
Black and other: 3
Males 20 years and over
Females 20 years and over
Teenagers. ..
.
1
2
s
1965 2
1956 2
Group
__
1968
III
4.2
4.6
3.6
4.8
2.7
3.9
9.1
2.6
4.2
12.3
2.0
3.4
11.0
4.4
12.2
6.7
9.4
16.6
5.4
9.0
24.6
3.9
6.3
25.0
6.0
8.1
31.5
Percent of civilian labor force in group specified; quarterly data seasonally adjusted.
Data adjusted for change in definitions in 1967.
Blacks comprise about 89 percent of total black and other in the labor force.
Source: Department of Labor, Bureau of Labor Statistics.
1973
162
2.8
1975
II
1977
IV
8.9
6.6
8.0
18.3
6.5
4.2
6.0
14.1
12.0
11.8
36.7
10.1
11.8
38.3
location, and other factors that may be quantified. Differentials may also
be due to factors, such as discrimination, that are less quantifiable but
also important in understanding the structure of unemployment.
Youth Unemployment
Teenagers comprised only 10 percent of the labor force in the fourth
quarter of 1977, but they accounted for 24 percent of all unemployment.
This problem is better understood by examining two separate questions:
Why is teenage unemployment different from adult unemployment? And
why is black teenage unemployment much higher than white teenage
unemployment ?
White teenagers, like other groups, still suffer from cyclical unemployment, but there is less structural unemployment than would appear simply
from a comparison of white teenage unemployment rates with those of white
adults. During periods of general economic prosperity much of the unemployment of white teenagers results from decisions to leave and reenter
the labor force. For most younger teenagers—those 16 to 17 years old—employment is a secondary (or tertiary) activity, and jobs are considered only as
temporary. For older teenagers there also is much turnover in the trial and
error process of finding a long-term career job. A recent study has shown
that between 1967 and 1973 the average number of teenagers who left employment and withdrew from the labor force in any given month ranged for
different race-sex groups from 12 to 20 percent of total teenage employment.
The corresponding figure for males aged 25 to 59 was 0.4 to 1.1 percent.
The higher labor force turnover rates for teenagers are shown in Table
24, where unemployment rates of teenagers and adult males and females
are classified according to the reason for unemployment. The proportion of
the total teenage labor force that is unemployed because they lost their last
job is not much higher than for adults, but the fraction unemployed as a
result of either leaving their last job or entering or reentering the labor force
is a great deal higher than for adults. The data in Table 24 may to some
extent understate the relative importance of unemployment among adult
females and teenagers associated with job loss. Some of those in the reentrant category may have been discouraged workers who previously dropped
out of the labor force after losing their last job.
TABLE 24.—Unemployment rates by reasons for unemployment, 1977
[Percent]
Total *
Group
Total
Job losers
Job leavers
New entrants to the labor force
Reentrants
.
.
7.0
3.2
.9
1.0
2.0
_..
1
Percent of civilian labor force.
Percent of civilian labor force in sex/age group specified.
Source: Department of Labor, Bureau of Labor Statistics.
2
163
Vlales 20 years
and
over2
5.2
3.4
.6
.2
1.0
Females 20
years and
over2
7.0
2.8
1.2
.4
2.6
Teenagers 2
17.7
3.4
1.7
7.6
5.1
If labor markets were tighter, as in the late 1960s and 1973, the duration
of job search, and therefore the unemployment rate of teenagers, would
fall. The instability of the teenage labor force, however, would prevent the
rate from falling to a level comparable to that of adults. Thus, the white
teenage unemployment rate was 12.2 percent during the 1973 boom and
averaged 11.0 percent in the midst of the Vietnam war boom of 1966-69.
This is not to say that such search is a necessary characteristic of the
teenage labor market. Improved labor market information and job counseling programs for teenagers might reduce search time as well as job turnover.
The evidence does not rule out the existence of some structural unemployment among white teenagers. But a large part of the differential between
white teenagers and adults clearly reflects a high rate of voluntary job
mobility prior to settling on a stable career.
The differential between unemployment rates of black and white teenagers cannot, however, be explained by turnover behavior. The proportion
of black teenagers who quit jobs and leave the labor force is only slightly
higher than for whites. Instead, the evidence suggests that black teenagers
(as well as black adults of both sexes) have a much more difficult time
finding jobs than their white counterparts do. Moreover, this relative difficulty in finding employment has apparently increased during the past 4
years.
Large numbers of black teenagers are very likely not to be in the labor
force because they were unable to find jobs within a reasonable period of
time. As evidence of that fact, the civilian labor force participation rate of
black teenagers (the "black" category refers throughout this chapter to the
"black and other" grouping in Bureau of Labor Statistics data) was only
40.8 percent in the fourth quarter of 1977, compared with 60.0 percent for
white teenagers. A "discouraged wrorker" effect may explain a large part of
this difference. Black teenagers have slightly higher school attendance rates
than white teenagers, a fact that would tend to reduce their labor force participation rate, while the much lower average family income for blacks than
for whites should increase participation rates among black youth. If these two
factors balance each other, then the percentage of black teenagers who are
actually available for work would equal that of white teenagers, and the true
rate of black teenage unemployment might approach 57 percent instead of
the reported 38 percent. This would represent an additional 500,000 unemployed persons, or an increase in the overall unemployment rate of
0.5 percentage point.
An alternative index of the economy's success in providing jobs for teenagers is the ratio of employment to the teenage population. At the peak of
the 1973 boom the employment-population ratio was 49.0 percent for white
teenagers and 28.2 percent for black teenagers. These ratios fell to 46.2 and
25.1 percent, respectively, in the trough of the 1975 recession. From 1975 to
the fourth quarter of 1977 the employment-population ratio for white teenagers increased to 51.5 percent, but for black teenagers it continued to fall
164
in 1976 and did not increase until 1977, returning to 25.1 percent in the
fourth quarter. Thus, by this measure white teenagers are doing better than
at the peak of the last business cycle, but black teenagers are doing no better
than before the current upswing began.
The gaps between black and white teenage unemployment rates and
employment-population ratios have been increasing steadily for the past
30 years. Even in 1968, at the height of the boom induced by the Vietnam
war, the black teenage unemployment rate was 25 percent, compared with
11 percent for whites. This worsening coincides with what was until 1975 a
general improvement in adult black unemployment rates relative to those of
whites—especially for males—as well as a general increase in the relative
incomes and skill levels of adult blacks.
Several plausible explanations of why black youth have fared so badly in
the labor market during the current upswing have been advanced by economists. A popular hypothesis is that blacks reside in central cities in proportionately greater numbers than whites and that central cities have not
shared in the recovery. This, however, cannot explain very much of the
failure of the employment-population ratio of black teenagers to increase
during the recovery. From 1975 to 1977 the proportion of black teenagers
living in central cities held constant at 55 percent; for whites the proportion fell from 23 to 22 percent. The employment-population ratio of
black teenagers residing in central cities fell by 0.9 percentage point, but for
white teenagers in central cities it increased by 3.0 points. Moreover, whereas
the employment-population ratio of white teenagers residing in suburbs
increased by 3.8 percentage points, the ratio for black teenagers in suburbs
fell by 0.8 point. In nonmetropolitan areas the white teenage employmentpopulation ratio rose by 3.9 percentage points while the ratio for blacks
decreased 1.5 points. Thus, the worsening situation for black teenagers does
not appear to be urban-specific. The black unemployment problem is an
urban problem, but principally because so many blacks live in cities.
Another explanation of why the black teenage labor market has been
deteriorating both relatively and absolutely is the large increase in the potential labor force of black teenage labor relative to other kinds of labor.
From 1964 to 1976 the black teenage population grew at an annual rate of
4.3 percent compared with 2.3 percent for white teenagers and 1.7 percent
for all adults. To the extent that the wages of teenagers relative to those of
adults are fixed through institutional arrangements such as legal minimum
wages, collective bargaining agreements, custom, or a tailoring of jobs to a
particular mix of worker skills and characteristics, an increase in the relative supply of teenagers will lead to an increase in their relative unemployment. Black teenagers would be especially affected because black adults have
generally been attached to low-paying, low-skill occupations in which they
are more likely to compete with teenagers than is the case with white adults.
This explanation also rests on the proposition that the labor markets for
165
black and white youth are to a large extent separated, perhaps because of a
geographical separation within particular areas or because of labor market
discrimination against black youth.
The recent worsening of the black teenage labor market, both absolutely
and relative to the labor market situation of white teenagers, is consistent
with this explanation. From 1972 to 1976 the annual rate of growth of the
white teenage population was 1.3 percent, while the black teenage population grew at the rate of 3.2 percent annually. The combination of a slow
growth in demand and a rapid growth of supply caused a rise in the unemployment rate and a decline in the employment-population ratio.
Some economists suggest that the black teenage unemployment rate is
high because the unemployed are reluctant to accept available jobs at the
relevant prevailing wage levels. According to this view, a large increase in
the number of teenage jobs at approximately the minimum wage in black
communities would have little impact on either employment or unemployment among black teenagers. There is no evidence to warrant acceptance
of this hypothesis.
We can identify some of the reasons for the high and worsening unemployment rates for black youth, but we know these reasons do not constitute
a full explanation. It is clear, however, that most of the differential unemployment between black and white youth does not reflect different search
and turnover patterns. It is a major structural problem.
Unemployment of Women
One of the more positive facts about the performance of the labor market
is that it continues to accommodate the rapid increase in the female labor
force that has occurred over the past two decades. In 1956, women comprised 31.5 percent of the adult labor force and 31.3 percent of adult
employment, but by the third quarter of 1973 these percentages had risen
to 38.4 and 37.9, respectively. From the third quarter of 1973 (the peak of
the previous cycle) to the fourth quarter of 1977, employment of adult
women increased by 15 percent compared with a 5-percent increase for men.
While more women have entered the labor force, unemployment differentials between men and women persist. One reason for the sex differential in unemployment rates is that married women with children, a significant part of the female labor force, have historically been less attached than
men to a career outside the home. (Single women's labor market behavior
and attachment are not markedly different from the record for single men.)
Whether their children are old or young, mothers whose husbands are
present tend to have much lower participation rates than those without
husbands present. But attachment to the labor force is not the sole explanation for the sex differential in unemployment rates. Inflexibility in labor
market arrangements, that is, the relative scarcity of part-time work, may
also be a factor. So may skill differentials between men and women. Finally,
166
the "statistical discrimination" that once associated women with secondary
labor market habits, while possibly a factor, is no longer as important as it
once was.
From 1967 to 1973 the proportion of women aged 25 to 59 who left the
labor force from a job averaged between 4.3 and 4.8 percent per month.
This is much less than the corresponding figures for teenagers, mentioned
above, but much higher than the labor force turnover rates for men, 0.4 to
1.1 percent. In 1977, as shown in Table 24, of the 7.0 percent of adult
women in the civilian labor force who were unemployed, three-fifths were
unemployed because they had either left their jobs or were entering the labor
force; only a third of the adult male unemployed were in the same category.
Subject to the qualification made earlier about the nature of unemployment
among reentrants, the difference in turnover appears to account for most
of the difference in total unemployment rates between the sexes.
Part of the reason why women are less attached to the labor market
than men is that husbands commonly have been regarded as the "principal" earners in husband-wife families, and wives as the "secondary" earners. In 1977, 21 percent of all unemployed persons were wives with husbands
present, and 79 percent of these were in family units where at least one person was employed full time. For unemployed husbands the figure was only
37 percent. The proportion of unemployed wives in families with at least
one full-time earner was 81 percent for whites, compared with 73 percent for
blacks. The burden of a given level of unemployment is thus greater for black
than for white women. The unemployment burden is also made heavier for
black females than for whites because black women have historically had
significantly higher labor force participation rates than white women.
(The gap has been narrowed somewhat since the late 1960s with the rise
in white women's participation.) Despite this stronger attachment to the
labor force, black women experience unemployment rates that are over
one and one-half times those of white women.
In general, a significant part of the unemployment differential between
adult women and men is explained by high labor force turnover, as is the
case for teenagers. Institutions seem to be changing, however, in a manner
that should reduce this differential in the future. The large increase in
the labor force participation rates of younger married women implies that
women will have a greater average degree of labor force attachment in the
future, and this should lower their unemployment rate over time as their
turnover rate decreases.
Unemployment of Adult Males
The unemployment rate of adult black men has clearly not recovered
from the 1975 recession as much as w7ould be expected. Between 1954 and
1973 their unemployment rate, when adjusted for definitional changes,
averaged 7.2 percent, compared with 3.3 percent for adult white males, a
ratio of 2.2 to 1. After adjustment for cyclical factors (the black rate is more
167
cyclically sensitive than the white rate), this ratio declined steadily over
time, by approximately 0.4 percentage point from 1954 to 1973. In the
fourth quarter of 1977, however, the black-white adult male unemployment ratio was 2.4 instead of the 1.8 that would be predicted on the basis
of trend and cycle. Had this earlier trend continued, the adult black male
unemployment rate would have been 7.6 percent in the fourth quarter
of 1977 instead of its actual value of 10.1 percent. Not only did the unemployment rate of adult black males increase sharply over the past 4 years,
but also their civilian labor force participation rate fell by 2.8 percentage
points, compared with a drop of only 1.3 points for white males. This drop
itself may have been caused by the increase in relative unemployment
rates for black males.
It is possible that part of the cause of the high unemployment rates
of adult blacks is related to the black youth unemployment problem. The
fact that black youth face such enormous difficulties in obtaining steady
employment may establish a pattern that is difficult to break. Table 25
TABLE 25.—Unemployment rates of black and white men by age, 1977
[Percent *]
White
men
Age
18-19 years,
20-21 years..
13.0
10.7
22-24 years.
25-34 years.
8.3
5.0
35-44 years.
45-54 years.
3.1
3.0
55-64 years
65 years and over.
3.3
4.9
i Percent of civilian labor force in group specified.
Source: Department of Labor, Bureau of Labor Statistics.
shows the pattern of average unemployment for black and white men by
age in 1977. The extremely large differential in unemployment rates between
blacks and whites in the 18 to 24 age range implies that whites are able to
find secure jobs much more easily than blacks. As they get older, black males
are more likely than whites to be in jobs that are subject to termination.
UNEMPLOYMENT AND INFLATION
How well wre deal with structural aspects of unemployment has important
implications for the equity with which the benefits of prosperity are distributed. In addition, it will play an important part in determining how far
we can go in reducing unemployment without risking a new episode of
inflation. Large increases in aggregate demand and production cause a rise
in the demand for labor. Initially the resultant job vacancies are filled from
the ranks of the unemployed. But as unemployment falls below some point
the number of job vacancies begins to exceed the number of qualified
job seekers. Firms increasingly try to meet their labor force needs by large
168
wage increases, a process that causes the overall rate of wage advance to
rise and thus leads to a rise in the rate of inflation.
The precise details of this process are not fully understood, partly because
it does not always work the same way. For example, the responsiveness of
wages to changes in the degree of labor market tightness depends upon
how long the inflationary process has been under way, and how expectations
about future inflation have been affected. There is considerable controversy
about how important unions are in initiating and perpetuating wage increases. Some evidence suggests that in the early stages of a new inflationary
process union wage increases lag those in the nonunion sector. Despite our
ignorance about many specific parts of the process, there is no question but
that low unemployment rates imply a high degree of labor market tightness
and that this eventually results in a strong upward pressure on wages and
prices.
From the point of view of dealing with the relationship between inflation
and unemployment there are two major questions:
1. What is the overall rate of unemployment at which wage increases
accelerate?
2. Is this level changing over time?
These questions are difficult because there are several "submarkets" for
labor rather than a single market. Job seekers in one market are only partly
competitive for vacancies in another. The boundaries of these individual
markets are determined by a number of factors: geographic, demographic,
occupational, and those arising from discrimination. If some groups have
very high unemployment rates but cannot be drawn upon to fill certain jobs,
wage pressures and inflationary problems can begin to arise even when there
is high unemployment.
Three alternative measures of labor market tightness for selected years
from 1956 to 1957 are shown in Table 26 and illustrate the major issues
associated with these questions.
The overall rate of unemployment receives the most public attention
because it is often interpreted as a major index of the economy's performance. The problem with its use as an index of labor market tightness is that
during the past 20 years the composition of the labor force has shifted
toward those demographic groups that experience the highest labor force
turnover and unemployment. For example, because of the turnover behavior
discussed above, a 10- to 12-percent rate of unemployment among teenagers
may be roughly equivalent, in terms of labor market tightness, to a 3-percent
rate for adult males. Thus, if the share of young persons in the labor force
increased, the overall unemployment rate associated with a given degree of
labor market tightness would also increase. In fact, from 1956 to 1977, the
proportion of the civilian labor force under age 25 did increase from 15 to
24 percent. This implies that the overall rate of unemployment corresponding
to any degree of labor market tightness is higher now than it was two decades
ago.
169
TABLE 26.—Alternative unemployment rates, selected years, 1956—77
Period
Overall rate
Fixed-weight
rate
Percent
19562
Prime-age
male rate
l
Overall less
fixed-weight
Overall less
prime-age male
Percentage points
4.0
4.0
2.6
0.0
1.4
1965 2..
4.4
4.1
2.3
.3
2.1
1968
3 6
3 3
1 7
.3
1.9
4.9
5.9
5.6
4 9
5.6
4.4
5.2
4.8
4. 1
4.8
2.8
3.5
3.1
2.5
3.1
.5
.7
.8
.8
.8
2.1
2.4
2.5
2.4
2.5
8.5
77
6.6
7.4
6 7
5.8
5.7
4.9
3.9
1.1
1.0
.8
2.8
2.8
2.7
1970
1971
1972
1973
1974
1975
1976
1977: Fourth quarters
1
2
3
. .
_ .
Percent of civilian labor force.
Data adjusted for change in definitions in 1967.
Seasonally adjusted.
Source: Department of Labor, Bureau of Labor Statistics.
One way to adjust the overall unemployment rate for changes in the
demographic composition of the labor force is to use the same set of weights
for each group over time. This is reported in Table 26 as the fixed-weight
unemployment rate, for which it is assumed that the composition of the
labor force with respect to seven demographic groups (teenagers, and males
and females aged 20-24, 25-54, and 55 4-) remained identical to the composition in 1956. Because of the long-term increase in the relative number
of young persons and adult women in the labor force, the fixed-weight unemployment rate has fallen relative to the overall rate. Thus, if in the fourth
quarter of 1977 the composition of the labor force were the same as it was
in 1956, and each group had its unemployment rate of the fourth quarter
of 1977, the overall unemployment rate would have been 5.8 rather than
6.6 percent.
Adjusting the unemployment rate for changes in the demographic composition of the labor force implies that the value of the overall unemployment rate at which wage changes tend to accelerate has increased by
1 percentage point during the past two decades. On the other hand, the shift
in the demographic composition of the labor force toward high unemployment groups has slowed and is expected to turn in the other direction in the
mid-1980s.
Another way to adjust the overall unemployment rate is based on the
hypothesis that the wage rates of some demographic groups are relatively
insensitive to their own unemployment rates. According to this view in its
most extreme form, unemployment rates of experienced workers with a
history of continuous labor market attachment are likely to offer the best
explanation of the rates of change of all wage rates. For example, because of
union bargaining or for reasons of equity, firms might adjust wage rates by a
uniform percentage for all skill levels even though some of these are in excess
170
supply. Another source of relative wage rigidity is legal minimum wages.
Because the high-skill, short-supply jobs in the economy have historically
been held by men between the ages of 25 and 54, the (so-called) primeage male unemployment rate has often been used as an index of labor market tightness. As seen in Table 26, however, the prime-age male rate is
closely correlated with the fixed-weight rate with respect to cyclical changes,
so it is next to impossible to discern which is the better index of short-run
changes in labor market tightness through aggregate analysis.
Quantifying the inflationary effect of changes in the unemployment
rates of various demographic groups is nevertheless extremely important for
policy purposes. If prime-age males were the only group that mattered in
determining wage inflation, programs could be directed toward increasing
the employment of other groups without any inflationary consequences.
Recent research, however, has shown that over long periods of time the
relative wages of different demographic groups have moved in the direction that would be expected on the basis of changes in relative supplies.
This finding implies that the unemployment of groups other than prime-age
males does contribute to overall wage changes, but it does not tell us much
about the magnitude of the relationship.
While the prime-age male unemployment rate is closely correlated with
the fixed-weight measure for short-run cyclical movements, it has behaved
differently over the past two decades taken as a whole. Since 1956 it has
fallen by almost I/2 percentage points relative to the overall unemployment rate, while the fixed-weight index has fallen by only about 1 percentage
point (Table 26). Use of the prime-age male rate as an index of labor
market tightness therefore implies that the overall unemployment rate at
which inflation is likely to accelerate has risen by 1J/2 percentage points rather
than 1 percentage point over the past 20 years.
The unemployment rates of some or all demographic groups associated
with any given degree of labor market tightness may have increased to some
extent because of the growth of income transfer programs. In particular,
many economists have argued that the more liberal provision of unemployment insurance, food stamps, and other such programs, while achieving
the desirable end of mitigating the hardship of unemployment, may also
have allowed people to search more carefully for the jobs they will accept.
This would cause vacancies to rise relative to the number of unemployed
persons, causing greater inflationary pressures at a given rate of overall
unemployment. The evidence on the quantitative importance of these programs is mixed and controversial. But the direction of their effect on the
unemployment rate at which inflationary pressures emerge is clear.
A number of forces have been at work over the past several decades to
raise the overall unemployment rate at which inflationary pressures begin
to appear above the neighborhood of 4 percent that seemed to prevail
during the mid-1950s. Because of the complexity of the problem, there
are no precise answers to the question of where the zone now lies. Demo-
171
graphic changes that reduce the proportion of teenagers in the labor force
should begin lowering the inflationary threshold during the early 1980s.
For institutional reasons, the speed with which inflationary problems
develop as the threshold is crossed is relatively sluggish. Nevertheless, it is
clear that achievement of the Administration's long-run goals for unemployment in 1981 and later years cannot rely solely upon monetary and
fiscal policies. These policies, which affect aggregate demand, will have to
be supplemented by effective employment and training policies targeted to
reduce structural unemployment if socially desirable levels of overall unemployment rates are to be reached without the appearance of inflationary
pressures in the labor market.
Measures that are successful in improving the operation of the labor market
can reduce the overall unemployment rate at which inflationary pressures
arise. The general object of such policies should be to provide a better
matching of the unemployed with available job vacancies. In principle,
this can be accomplished by three major types of actions: training; finding jobs for groups with very high unemployment; and improving information and career choices for new entrants into the labor force.
POLICIES TO REDUCE STRUCTURAL UNEMPLOYMENT
Reaching a low rate of unemployment without initiating increases in
the rate of inflation will require effective structural programs as well as overall monetary and fiscal policy. Programs that increase access to jobs for
groups with high unemployment not only serve the interests of economic
justice, but help us avoid the excessively tight labor markets and inflationary
pressures that might otherwise arise in a period of high unemployment.
Policies designed to alleviate structural unemployment include the following: (1) Manpower training; (2) public service employment (PSE) ;
(3) labor market information; (4) incentives for private industry to hire
the disadvantaged; and (5) elimination of restrictive practices in the labor
market. The primary focus of labor market policy in the United States
over the past several years has been on the first two. We also spend about
$700 million per year on the U.S. Employment Service, an example
of the third approach, and we have made some limited attempts to institute
policies of the fourth kind. Equal employment opportunity programs, which
are currently in the process of being strengthened and improved, are an
example of the fifth policy.
Since the achievement of our long-term economic objectives depends
partly on the success of these structural policies, it is useful to review the
major Federal programs that are in operation, the changes that have recently been made in them, and the effect that these policies are likely to
have.
Manpower Training Programs
A wide range of programs designed to increase the labor market skills of
persons who have chronic difficulties in finding or holding jobs has been
172
offered since the early 1960s. During 1978 approximately $1.9 billion will
be spent on classroom and on-the-job training programs (Table 27). To
the extent that training programs can raise the skills of the unemployed so
that they correspond more closely to those needed in vacant jobs they should
lower the unemployment rate at which excessive labor market tightness
begins to appear. Since the benefits of these programs accrue for some time
after the training period, it is difficult to find out whether they are having
their intended impact until the work experience and earnings of trainees
have been observed for many years. Scattered evidence based on the programs of the 1960s, however, suggests that the return on classroom training
programs is approximately comparable to returns on other types of investment in our economy. Moreover, the training programs do appear to be
moderately well targeted to the least skilled participants in the labor force.
TABLE 27.—Estimated Federal outlays and participation in training and
employment programs during fiscal year 1978
Outlays
(millions of
dollars)
Program
Total training and employment.
10,317.0
Training
Institutional.
On-the-job. .
Public service employment (PSE).
Regular PSE
Work experience (principally youth).
Summer youth
Older Americans...
Personyears
(thousands)
1, 865. 3
1, 890. 7
487.8
1, 345. 7
545.0
350.2
137.6
8, 426. 3
1, 377. 5
5, 809.1
1, 794.9
672.0
150.3
681.4
403.5
255.0
37.6
Source: Office of Management and Budget.
The extent to which these programs do in fact improve the inflationunemployment tradeoff is not known. The observed increases in the earnings
of participants in these programs arise from a combination of reduced
unemployment and increased productivity, but the evidence necessary to
determine the importance of each factor is lacking. Under the assumption
that half of the benefits to training come in the form of increased employment and the other half from increased productivity, an additional $1 billion
spent each year on training would, ignoring population growth, lower the
unemployment rate, for a given degree of labor market tightness, by about
0.05 percentage point after 5 years and slightly more thereafter. Accordingly,
the scale of training programs would need to be many times greater than
it now is before it would have a significant impact on the unemployment rate.
Moreover, it is likely that the average effectiveness of these programs in
terms of reducing unemployment would decline as they were expanded to
reach a much wider portion of the population.
Training programs are a good investment, but on the basis of present
evidence their potential role is modest in relation to the total unemployment problem.
http://fraser.stlouisfed.org/
248-947 O - 78 Federal Reserve Bank of St. Louis
173
12
Public Service Employment
Since 1971 the principal emphasis of manpower policy has shifted from
training toward the direct provision of federally funded employment through
State and local government. This shift resulted partly from the slack labor
markets of most of the 1970s and partly from the lack of definitive evidence
concerning the impact of training programs.
This Administration's first major economic action on taking office was to
propose legislation, which the Congress enacted by mid-1977, calling for a
substantial expansion of PSE. During fiscal 1978 approximately $8.4 billion
will be spent on various forms of PSE. Under the enlarged programs an
average of 1.4 million people will be employed over the year, a 60-percent
increase over the previous year. These jobs are supposedly targeted primarily
toward the low-income, long-term unemployed and unemployed youth.
The stated goals of PSE programs have been quite varied: countercyclical
stimulus, reduction of structural unemployment, and fiscal relief for hardpressed local governments. For the present purposes, however, the second
of these objectives is of major interest. Can PSE programs help improve the
inflation-unemployment tradeoff?
Two factors are involved in answering this question. First, in order to
be an effective instrument for mitigating structural unemployment, PSE
programs must concentrate on individuals who would have special difficulty obtaining employment in the private sector. If, for example, a city
hired accountants or registered nurses with its PSE funds, it would only
be bidding them away from other jobs. Prior to the recent program expansion, adult participants in PSE programs came from approximately the
middle of the skill distribution. Relatively few of the structurally unemployed were reached.
Under the new programs for adults, eligibility is being progressively restricted to individuals who have been out of work for 15 of the last 20 weeks,
and to those with low incomes prior to participating in the program. Taken
in combination with the special projects requirement, these new eligibility
conditions are changing the PSE programs in such a way that they should
now serve more of the disadvantaged than formerly. Ignoring loopholes in the law (for example, a local government can hire recent college
graduates whom it would have hired anyway and still be within the program regulations), these eligibility requirements should also help to reduce
substitution of PSE funds for regular government revenues.
In periods of generally high employment, PSE programs for youth
can more easily be directed toward increasing public employment without
tightening the labor market for private employment. This is certainly true
for minority youth, who suffer extremely high unemployment rates. It may
be less true of programs for youth administered in largely white communities, for the labor market for most white teenagers appears to work reason-
174
ably well. The proportion of participants in the PSE youth programs who
are black or belong to other minority groups is close to 50 percent, a showing that favors a positive judgment of these programs.
A second requirement if PSE programs are to reduce longer-term structural unemployment is that they provide a work experience that prepares
participants for subsequent transfer to regular jobs. Programs that satisfy
this condition can instill good working habits in their participants and
possibly lower structural problems in the long run. PSE jobs must be real
tasks rather than make-work activities, for it would be difficult to maintain discipline in a particular project if the work had little intrinsic
value. This requires that PSE jobs be characterized by adequate supervision
and on-the-job training. At present there is little evidence on this point for
either adult PSE or for youth wrork experience. As the total number of
PSE slots increases during 1978, much can be learned about the absorptive
capacity of the State and local sector with respect to the provision of meaningful jobs to disadvantaged persons.
Do PSE programs have a significant effect on the inflation-unemployment
tradeoff? This question is difficult to answer because the various PSE
programs in existence have different effects on the rate of unemployment
as well as on wage rates.
Suppose, for example, that participants in PSE programs w^ould otherwise
have been in the labor force but unemployed, and that the projects would
not have been financed from regular State and local sources—that is, there
is no "fiscal substitution." Unemployment would then be reduced by the
number of persons working in PSE jobs. To the extent that those workers
come from among the structurally unemployed, tightness in the labor
market and inflationary pressures would not increase, and the improvement
in the unemployment-inflation tradeoff would be substantial. If, on the other
hand, the wage on PSE jobs is relatively attractive and the skills required to
perform PSE jobs are about average for the work force in general, the programs are likely to attract persons who are not structurally unemployed or
others who are not in the labor force.
In general, therefore, the effect on the unemployment-inflation tradeoff
will be favorable if PSE programs are targeted toward persons whose skills
are below those of the average person in the labor force, and if the wage
rates on PSE jobs are not strongly competitive with those paid in the
private sector.
The youth programs, especially those in which minorities participate significantly, probably offer more possibility of lowering the overall unemployment rate for a given amount of general labor market tightness than those
geared toward adults. PSE can be an efficient method of introducing individuals into a structured work environment who would otherwise be passed
over by the private sector.
175
Recognizing particularly this last potential of PSE, the Administration has
proposed that a jobs program be made an integral part of the reformed
welfare system under the Program for Better Jobs and Income (PBJI).
The Administration proposal calls for 1.2 to 1.4 million PSE jobs designed
to provide an alternative to total reliance on cash assistance. Eligibility
for these new PSE jobs would be restricted to principal earners in families
with children, who cannot be placed in private sector jobs. The jobs would
last for no more than 1 year. The rate of compensation for the jobs under
PBJI would generally be no more than 10 percent above the Federal minimum wage, but families without sufficient additional income could receive
a cash supplement, and hence their total income could significantly exceed
that which they would receive solely with the cash assistance they might
qualify for without a PSE job.
The PSE component of this new program can do much toward reducing
the cycle of poverty by introducing welfare recipients and other poor people
into a structured work environment from which they can subsequently
advance to steady private sector jobs. One key element in the program is
that it proposes to pay wages at or slightly above the Federal minimum.
If such a program offered higher wages (as does the current countercyclical PSE program, which pays an average wage about 60 percent
above the minimum), the jobs would be attractive to persons with higher
skills and greater ability to find private jobs. Many, perhaps most, participants would come from outside the welfare system, and the jobs component of PBJI would lose much of its ability to mitigate poverty.
Side Effects of Other Programs
In addition to these programs that are intended to lower the unemployment rate for a given amount of labor market tightness, the government
runs several programs that are designed to accomplish other social objectives
but have the additional, unintended consequence of increasing the unemployment rate. While the other objectives may be desirable, it is useful to be
aware of their potential effects on unemployment.
As seen in Table 28, the Federal minimum wage relative to average
hourly earnings has fluctuated widely over time, but at the points at which
the Fair Labor Standards Act (FLSA) has been amended the minimum
wage has in recent years averaged approximately 45 percent of the average
manufacturing wage. The 1977 changes in the minimum wage through 1981
would roughly maintain this ratio if the average manufacturing wage
grew by 7 percent annually. However, FLSA coverage has increased substantially, especially beginning in the mid-1960s. The major impact of
minimum wages is on the employment of teenagers, for the market wages
of most adults are considerably above the legislated minimum. There is,
however, no conclusive evidence on how much of the youth unemployment
problem is directly attributable to FLSA. As pointed out earlier in the chap-
176
TABLE 28.—Federal minimum wage and average hourly earnings in manufacturing,
selected years, 1938-81
Minimum
wage
Year
Average
hourly
earnings in
manufacturing l
Minimum
wage as
percent of
manufacturing
average
hourly
earnings
1938
1939
$0.25
.30
$0.62
.63
40.3
47.6
1945
.40
1.02
39.2
1950
1956
.75
1.00
1 44
1.95
52 1
51.3
1961
1963
1967
1968
1.15
1 25
1.40
1.60
2.32
2 46
2.83
3.01
49.6
50 8
49.5
53.2
1974
1975
1976
2.00
2 10
2.30
4.41
4.81
5.19
45.4
43 7
44.3
1978
1979
1980
1981..
2.65
2.90
3 10
3.35
5.94
6.36
6.80
7.28
44.6
45.6
45.6
46.0
1
2
2
2
2
2
Relates to production workers.
Assumes a 7 percent growth rate.
Source: Department of Labor, Bureau of Labor Statistics.
ter, most of the unemployment of white teenagers during periods of prosperity is caused by their high rates of labor force turnover. But it is quite
possible that minimum wages are a contributing cause of the black youth
unemployment problem.
The unemployment insurance (UI) system has both a real effect and a
measured effect on the overall unemployment rate. The real effect occurs
because the reduced cost of job search leads to an increase in both the
duration and frequency of spells of unemployment. The measured effect
occurs because some workers report themselves as unemployed in order
to obtain UI benefits when, without the benefits, they would have dropped
out of the labor force. Some form of unemployment insurance is, on equity
grounds, absolutely necessary to mitigate the hardship of involuntary
unemployment. Moreover, UI increases economic efficiency by making it
possible for the unemployed to search for jobs for which they are well
suited rather than being forced to take the first job that becomes available.
But it does tend to increase the overall unemployment rate. In the past
two decades, liberalizations in coverage, benefits, and benefit durations have
caused the officially measured unemployment rate to increase, although an
accurate estimate of the magnitude is uncertain. Some of the most notable
changes in benefit duration and coverage have occurred in the 1970s.
Directions for Improvements
To reach substantially lower unemployment rates without initiating a
new round of inflation, structural programs will have to be continually
177
improved. The first priority is better targeting of the programs so
that they more effectively improve long-term job opportunities for those
groups with the most severe structural unemployment problems. Although
the record is far from perfect, the training and employment programs for
youth have been fairly successful in this regard. Until recently, however,
regular PSE programs for adults have not focused significantly on the structurally unemployed to the extent that they should. As the overall unemployment rate declines, employment and training programs should be carefully directed demographically and geographically toward this goal.
Some demographic groups have high unemployment rates, even in periods
of generally tight labor markets, because many employers seek to hire new
employees only from among those applicants with prior experience and a
history of job stability. The high cost of labor turnover to business firms
and the existence of wage floors or other barriers to hiring the inexperienced are major factors behind this tendency. Accordingly, one approach
to reducing unemployment is to provide incentives for private employers
to hire from among those groups with the most severe incidence of structural
unemployment. This approach is sometimes criticized because it would
cause a substitution of low-skilled youths for highly skilled adults and thus
raise the unemployment rates of adult males. This criticism, however,
ignores the fact that such a program, if successful, could induce a greater
increase in aggregate demand and thus lower the overall unemployment
rate. Moreover most occupations composed primarily of highly skilled adults
have very low unemployment rates in the first place and tend to adjust
very quickly to excess supply.
This country's experience with incentive schemes to hire the structurally
unemployed is not very extensive—although similar programs are quite
common in Western Europe. Since five out of every six jobs in the economy
are in the private sector, a successful labor market policy must rely principally on the private sector to enlarge job opportunities for the structurally
unemployed. To this end the Administration is currently designing a set of
options for programs under which employers will have incentives to hire
persons with severe unemployment difficulties.
A third priority for the improvement of labor market policy is the collection of better data that will permit an assessment of the extent to which
its component programs are actually having a beneficial impact. At present
our ability to lower unemployment without adding to inflation is severely
hampered by uncertainty about the effectiveness of various approaches.
Evaluative research is not easy, but without such information it is difficult
to justify major expansions of incumbent programs. A principal goal of
new labor market programs, like those provided under the Youth Employment and Demonstration Projects Act of 1977, is to find out which
approaches are successful. This emphasis should be extended to other
programs.
178
CHAPTER 5
Major Economic Policy Issues of 1977
T N 1977, THE NEW ADMINISTRATION INTRODUCED a number
•*• of legislative initiatives whose economic impacts will be far reaching—
energy, agriculture, social security, and welfare reform. The Administration
is now proposing that the Congress consider a series of fundamental tax
reforms. In addition, there have been a number of proposed reforms to
improve the efficiency of our regulatory programs. The present chapter
analyzes these programs. Although the details differ, the central theme that
runs through these programs is the same—enhancing the effectiveness of
Federal programs and reducing their costs, while improving the fairness
of our economic system.
ENERGY DEVELOPMENTS AND POLICY
The economic consequences of the 1973 oil embargo and the quadrupling
of world oil prices by the Organization of Petroleum Exporting Countries
(OPEC) have dramatically demonstrated the importance of energy to the
U.S. and world economies. In the United States, higher prices of imported
crude oil prompted major increases in the prices of all domestic fuels,
aggravated inflationary pressures, and contributed to the deepest recession,
since the Depression. Moreover, mounting oil import payments have constituted an enormous drain on domestic incomes, causing a severe imbalance
in our external deficit.
Nonetheless, U.S. dependence on foreign sources of energy has continued
to grow. Oil imports in 1977 nearly doubled those of 1972 and supplied
almost half of domestic petroleum demand. Unless we adopt effective policies to reverse underlying forces, still further growth in oil imports is likely
over the coming decades.
How did this situation arise? Although the answer is by no means simple,
an important element is that the current economic infrastructure—buildings, factories, machines, and automobiles—was largely designed for an era
of low-cost oil and natural gas. Significant changes in patterns of energy use
will occur only when more energy-efficient capital has been installed and
as the existing capital stock is replaced. This is a time-consuming process,
and only modest progress has been made in the last 4 years.
179
Of equal importance are Federal tax and regulatory policies that have
encouraged low energy prices throughout the postwar era. Apart from the
imposition of import quotas, energy consumption has been subsidized by tax
incentives for energy production that have lowered consumer prices and,
over different periods, by price controls on crude oil and natural gas. Though
the various controls have generally mitigated the inflationary impact of the
rise in the price of imported oil and prevented domestic producers from
realizing additional gains on oil already discovered, they have contributed
to imbalances between the supply and demand for major sources of energy.
The disequilibrium has been evidenced in the natural gas market by growing
curtailments, and in the case of oil, by rapidly rising imports.
Unless these imbalances are soon curbed, the United States may face
serious economic risks. Though world oil prices have recently been stable—
because of weak recoveries in most industrial nations and large discoveries in
non-OPEC countries—growing world demand for oil and gas could strain
world productive capacity, creating the danger of substantially higher oil
prices in the years ahead. The United States can avoid the consequences of
higher prices, however, by gradually converting from oil and gas to more
abundant domestic sources of energy—nuclear fuel, coal, solar, and perhaps
other energy sources. Because, long leadtimes are required, an early transition would be less costly and would lead to less risk from higher oil prices
or sudden supply interruptions in the future.
ENERGY BEFORE 1973
The principal sources of primary energy in the postwar period have been
oil and natural gas. In 1950, they accounted for 58 percent of total energy
consumption, while by mid-1973 the fraction had grown to 77 percent.
After an earlier period of dominance before World War II, coal production
fell during the postwar period. Electricity produced by these primary fuels
grew rapidly owing to economies of scale and advances in technology.
Both economic growth and the declining relative prices of energy products
heightened the demand for energy (Table 29). From 1950 to 1970, for
example, the wholesale price of energy fell by 13 percent relative to all
finished goods (though it advanced in the latter part of the period). Consumers responded by purchasing homes, automobiles, and appliances that
required substantial inputs of energy; firms substituted energy and capital
for labor in constructing buildings and factories and in manufacturing their
goods. The entire American way of life, from the spread of the suburbs to
the popularity of large automobiles, has been conditioned by low-cost energy.
Aside from the imposition of oil import quotas, Federal Government policies stimulated energy demands. Percentage depletion allowances in excess
of cost reduced all energy prices by lowering producer tax liabilities. Price
controls on natural gas sold to interstate pipelines have long held prices below
the energy equivalent prices of substitute fuels. In addition, government
regulation of the motor carrier and air transportation industries promoted
180
TABLE 29.—Trends in energy consumption and deflated energy prices
Average annual percent change
Item
1958 to 1973
1973 to 1976
1976 to 1977
Energy consumption:
Total.
Petroleum and natural gas liquids..
Natural gas
Coal
Net electric power generated
4.0
4.1
4.9
2.0
7.3
-0.1
.2
-3.4
1.1
3.2
4.3
6.1
1.1
8.4
6.1
-.4
1.9
1.7
16.5
26.3
19.6
2.0
26.7
-1.7
.2
-.1
1.6
3.4
-.4
14.1
17.3
18.6
8.3
6.4
7.9
4.8
38.0
.6
6.9
-.8
.0
-1.0
-.4
-1.2
6.2
12.9
5.1
7.1
3.5
2.9
6.1
g
ll! 6
.1
Average producer prices:2
Crude oil
Natural gas..
Coal
Wholesale prices: 2
AH energy
Petroleum products.
Natural gas
__
Coal
Electric power
Consumer prices: 3
All energy
Fuel oil and coal
Gasoline and motor oil..
Natural gas
Electricity
* Changes for energy consumption and wholesale prices computed from third quarter 1976 to third quarter 1977.
Other changes are from year to year.
2
Prices deflated by the wholesale price index for all finished goods.
3 Prices deflated by the consumer price index for all items.
Sources: Department of Energy, Department of Labor, Federal Power Commission, and Edison Electric Institute.
energy consumption by encouraging excess transportation mileage through
artificial route restrictions and prohibitions on price competition. Finally,
government support favoring highways over mass transit contributed to
increased gasoline consumption.
The absence until recently of significant environmental legislation also
encouraged energy consumption. Energy industries tend to produce relatively large environmental side effects whose costs are not reflected in energy
prices. Not until the late 1960s did the U.S. Congress begin to take major
steps to deal with this problem.
At the close of 1972, therefore, the United States found itself locked into
a capital stock tailored to low-cost oil and natural gas. Oil demand, which
had grown at an average annual rate of 4.4 percent since World War II,
had outstripped production growth, requiring oil imports of nearly 5 million
barrels a day. A significant portion of our low-cost oil and natural gas resources had been depleted, portending higher costs of discovery and production. The market, however, provided no signs of a reversal: Americans
were accustomed to cheap energy and expected it in the future.
THE 1973-74 PRICE SHOCK
Events during 1973 and 1974 dramatically altered prior energy price
patterns. In November 1973 the Arab members of OPEC placed an em-
181
bargo on oil exports to a number of other countries, including the United
States. Following previous substantial price increases, OPEC quadrupled the
world oil price to levels far in excess of its costs and cut back production to
support the action.
In the events that followed, it is important to distinguish between the
effects of the embargo and those produced by the rise in oil import prices.
The embargo itself lasted only 5 months and generated shortages within
the United States, in part because petroleum product prices were controlled.
Gold weather and previous curtailments of natural gas supplies exacerbated
the problem. Shortages would have been mitigated without price controls,
but the resulting high prices would have created substantial windfall profits
and added to inflation.
Whereas the economic consequences of the embargo were limited and
confined to a relatively short period, the economic costs of adjusting to higher
prices of imported oil were enormous and persist to this day. The adjustment
has been accompanied by significant advances in the prices of other fuels
(Table 29). Both the embargo and the price rise have taught a common lesson, however: vulnerability to supply interruptions and price increases can
only be reduced through a fundamental reorientation in patterns of energy
use.
DEVELOPMENTS AFTER THE PRICE SHOCK
Though the price shock has had important effects around the world, the
impacts have differed between countries.
Domestic
Prices of all fuels in the United States increased sharply following the
rise in oil import prices (Table 29). Except for natural gas prices, however,
rates of price increase generally slowed, or in some cases, fell in 1976 and
1977.
Though consumers have had only a short time to adapt, energy consumption patterns have already evidenced some response to the higher prices.
The ratio of total energy consumption to real gross national product, GNP,
for example, stood 5 percent lower in mid-1977 than in 1973. More significantly, the ratio dropped as the economy pulled out of its 1973-75
recession, an important sign that higher prices had discouraged consumption.
Nevertheless, after falling in 1974 and 1975, total energy consumption resumed its upward climb in 1976 and 1977 as real GNP advanced. Consumption of petroleum products, in particular, rose rapidly in 1977, as a result of
several factors that outweighed the dampening effects of higher prices. The
cold winter in 1977 increased heating demands generally and oil demand
specifically because many users of natural gas switched to oil when gas supplies were curtailed. Demand for distillate and residual fuel oils in the first
2 months of the year, for example, was up by 1.6 million barrels per day
compared with the same period in 1976. The West Coast drought added
182
especially to residual oil demands by inducing many utilities to turn from
hydroelectric power to oil-based generation.
In contrast, energy production has declined since 1973, although the
responses to higher producer prices have varied between fuels. For example, after falling in 1973, coal production rose, largely because the sharp
rise in oil prices encouraged some oil users to switch to coal and because
of the rapid growth in electricity production. Environmental restrictions
on coal burning under the Clean Air Act, however, restrained both coal
demand and production. Electricity production, too, continued to advance,
although at rates below those experienced prior to 1973. Sharply increased
primary fuel prices raised final electricity prices to consumers, and therefore
discouraged consumption.
Production of crude oil and of natural gas, on the other hand, has fallen
from 1973 levels. In the case of crude oil, though drilling activity responded
to a sharp rise between 1973 and 1976 in the new wellhead price (Chart 12),
the average depth of wells drilled fell. Declining output from existing wells
more than offset the rise in new discoveries, producing a decline in total
crude oil production in the lower 48 States between 1970 and 1977.
Chart 12
New Crude Oil Prices and Drilling Activity
NUMBER
40,000
1972 DOLLARS PER BARREL
8.00
700
OIL A N D DRY
WELLS DRILLED
(Right scale)
6.00
35,000
REAL
NEW CRUDE
OIL PRICED
(Left scale)
5.00
30,000
4.00
25,000
3.00
20,000
2.00
1960
1965
1970
1975
1/ NOMINAL PRICE DEFLATED BY WHOLESALE PRICE INDEX FOR FINISHED GOODS.
SOURCES: DEPARTMENT OF ENERGY, DEPARTMENT OF LABOR, AND AMERICAN
PETROLEUM INSTITUTE.
183
In 1977 the declining trend in national crude oil production was reversed
by the September opening of the Trans-Alaska Pipeline System (TAPS).
Alaskan production was slowed, however, by a fire at a major pump station
in July and by difficulties with others, which reduced present TAPS capacity
from 1.2 to approximately 0.7 million barrels per day. The lack of a pipeline
linking the West Coast to the Midwest threatened to force shipment of additional volumes of Alaskan oil through the Panama Canal. Such an outcome
would raise transportation costs substantially and possibly discourage future
increases in deliveries or expansion of TAPS capacity.
Production of natural gas has followed a similar course, declining gradually between 1973 and 1976 and leveling off through the third quarter of
1977. Like oil production, gas drilling activity responded to recent price
increases in both the interstate and intrastate markets; declining output of
existing wells, however, had until 1977 more than offset new production. The
production trend since 1973 represents a particularly dramatic reversal:
from 1950 to 1973 natural gas was the fastest growing domestic source of
primary energy.
With energy consumption registering a small increase between 1973 and
1977, the decline in energy production has created a growing imbalance
between production and demand, particularly for oil and natural gas. In the
case of natural gas, the excess of demand over production has remained
largely unsatisfied. Until the quadrupling of oil prices, the importation of
significant quantities of liquefied natural gas (LNG) was not economic, limiting the import market to contiguous nations, Canada and Mexico. As a
result, natural gas imports have remained less than 5 percent of domestic
consumption.
The inability of domestic and imported natural gas to satisfy demands
has resulted in curtailments of natural gas supplies. Since 1971, despite a
decline in total consumption of natural gas, the volume of gas curtailed to
users with firm supply contracts has increased by a factor of over 10. The
shortage reached a peak owing to the cold weather in the first quarter of
1977, when net curtailments to firm users rose to nearly 1 trillion cubic feet,
or almost 16 percent of total gas consumption.
Curtailments have grown largely because of the way in which natural gas
prices have been controlled. Since 1954, prices of natural gas sold to interstate pipelines, have been subject to Federal regulation. Natural gas sold to
intrastate pipelines, however, has remained unregulated. During the 1960s,
when intrastate prices were generally below interstate prices, new commitments to interstate pipelines exceeded those to the intrastate market. During
the 1970s, however, intrastate prices increased at a much faster rate despite
several increases allowed in the price for new interstate commitments. For example, although the 1977 interstate price ceiling of $1.47 per thousand cubic
feet (mcf) for new contracts stood nearly triple its level of 1975, new longterm intrastate contract prices ranged between $1.41 and $2.19 per mcf in
the major gas-producing States, according to a survey made by the Federal
184
Energy Regulatory Commission. The higher intrastate prices have encouraged producers to commit most new gas to the intrastate market, creating growing shortages in net consuming regions, such as the Northeast.
At the end user level, pricing policies by state regulatory commissions have
exacerbated the shortage by encouraging consumption. Faced with gas
contracts at a wide range of prices, commissions have allowed distribution
companies to charge their customers the average of all wellhead contract
prices. New, higher-cost gas has consequently been "rolled-in" with the
average cost of all previously discovered gas. Although rolled-in pricing
caused only minor problems when average and marginal gas prices were
relatively close, today it introduces major distortions in energy pricing.
Consumers are faced with low average historical costs when new supplies
are often substantially more expensive. This distortion could worsen if
high-cost gas (such as LNG or synthetic gas) is also priced on a rolled-in
basis.
With crude oil, unlike gas, the excess of demand over domestic supply has
been met by a mounting volume of imports. Between 1972 and 1977, oil import levels rose 92 percent. Import costs increased from nearly $5 billion in
1972 to about $45 billion in 1977. Most significantly perhaps, oil imports
climbed relative to GNP, although total oil consumption as a fraction of
GNP has remained nearly constant during the last 20 years (Chart 13).
Chart 13
Oil Consumption and Imports
Relative to Real GNP
CONSUMPTION INDEX, 1960=100^
140
/— TOTAL CONSUMPTION
DOMESTIC PRODUCTION
120 -
IMPORTS
100 -
80
60
40
20
1960
1965
1973
1970
1974
2/INDEX OF BARRELS/REAL GNP (1972 DOLLARS).
SOURCES: DEPARTMENT OF COMMERCE AND DEPARTMENT OF ENERGY.
185
1975 1976
As with the natural gas shortage. Federal policies have also encouraged
the growth of oil consumption and consequently of oil imports. Controls on
the prices of crude oil, in particular, have played instrumental roles in this
process. Created in 1971 to soften the macroeconomic and distributional
impacts of oil price increases, the system of oil price controls has evolved
over time so that it now covers three categories of oil: (1) "old oil," defined
as 1972 base period production, (2) "new oil," defined as oil production above 1972 base period levels or oil discovered after May 15, 1973,
and (3) oil recovered through tertiary production methods. Higher prices
have been allowed for the latter two categories to encourage domestic
exploration and production. Price controls do not apply to "stripper wells"
(those producing less than 10 barrels per day) for the same reason.
The control system has been administered to meet statutory requirements
that the average price of all domestic crude not exceed a "composite" (or
weighted-average) price. For the first half of 1977 the prices of old, new, and
stripper oil averaged $5.16, $11.12, and $13.29 per barrel respectively, producing an imputed domestic average of $8.22 per barrel. This average was
well below the composite price ceiling of $8.47 and the average landed oil
import price of $14.21.
By creating different prices for oil of different vintages and sources,
the control system, in the absence of other measures, would have placed
oil refiners having access to predominantly high-priced crude at a disvantage compared to other refiners. Since November 1974, however, refiners
have generally been placed on the same footing through an entitlements
procedure ensuring that each refiner effectively pays only the average cost
of both imported and domestic crude. Separate allowances have been made
to enable small refiners to remain competitive. Nevertheless, by confronting
consumers with prices below those the United States must pay for additional
oil, the control and entitlements system has subsidized oil consumption. With
domestic crude production at or near capacity, the added consumption has
increased the demand for oil imports.
Federal price regulation of natural gas and environmental restrictions on
the burning of coal have also done much to stimulate the growth of oil
imports. Specifically, rising gas supply curtailments resulting from the way
natural gas prices have been regulated have prompted many industrial and
utility users to look to alternative fuels. Because of limitations placed on coal
burning by many State air quality implementation plans, however, users
who have wished to convert their existing facilities have been restricted to
oil. Air quality regulations have also dictated the use of either oil or gas
for many new facilities as well.
The only major policy initiative passed after the embargo that should
reduce petroleum consumption was contained in the Energy Policy and Conservation Act (EPCA). Passed in 1975, EPCA established fuel efficiency
standards for automobiles and trucks, beginning with 1978 models. The act
186
will have a gradual impact on oil consumption, as the current generation of
automobiles and trucks is replaced by more energy-efficient vehicles.
International
The oil price rise in 1973-74 had major effects on all oil-importing nations, some of which are discussed in Chapter 3. As in the United States,
economic growth slowed considerably or even declined in the major industrial countries (Table 30). Total energy consumption, however, fell much
less rapidly in the United States between 1973 and 1976 than in any of the
listed countries except Japan. Correspondingly, though crude oil imports
fell elsewhere, they rose more than 60 percent in the United States during
the period.
TABLE 30.—Growth of GNP, energy consumption, and oil imports in major
industrial countries, 1967-76
[Average annual percent change]
1973 to 1976
1967 to 1973
Country
PIMP
Ulir
United States...
Canada
France
West Germany..
Japan
United Kingdom
3.7
5.3
5.8
5.5
10.2
2.9
Energy
consumption
Crude oil
imports .
4.2
8.1
6.4
6.2
9.6
3.1
19.4
12.1
10.8
7.4
14.5
7.4
PIMP
0.8
2.7
2.5
.9
2.4
.0
Energy
consumption
-0.1
-3.5
-.7
-1.3
.5
-2.8
Crude oil
imports
22.7
-7.2
-3.5
-3.5
-2.2
-8.6
Sources: Department of Commerce, Organization for Economic Cooperation and Development, and British Petroleum
Company, Limited.
Throughout the postwar period many of these countries have used various
taxes that have discouraged consumption. For example, prior to 1973-74,
gasoline excise taxes in Japan, France, the United Kingdom, and Italy
stood between 32 cents per gallon (United Kingdom) and 65 cents per
gallon (France), well above the average excise tax of 12 cents per gallon on
gasoline in the United States. Since 1973 each of these countries has again
raised its gasoline tax. By 1977, although the average tax had remained unchanged in the United States, it ranged between $.55 and $1.48 in the countries just indicated.
Two countries that have taken particularly far-ranging actions since
1973 have been Sweden and France. In Sweden, where foreign sources of
energy supply 80 percent of fuel demands, a substantial gasoline tax has
since been supplemented by a fee on automobiles based on gasoline mileage
efficiency. Excise taxes levied on coal, heavy and light fuel oil, and electricity have been changed. New or expanded government subsidies, loans,
and taxes also provide incentives for uncovering new energy sources as well
as innovative energy-efficient processes.
In France, higher prices and increased taxes have been combined with
mandatory measures to lower the use of oil from 1973 pre-embargo levels,
187
in sharp contrast to the rapid growth in such use that France experienced
between 1967 and 1973. In the residential sector these measures have been
supplemented by metering requirements for central heating and hot water
and by tax credits for installing insulation.
The policy initiatives and oil import trends in these industrial countries
contrast sharply with energy developments in the United States since 1973.
To some degree, differences in economic and cultural conditions have
accounted for the variations in both energy policies and oil imports; policy
actions taken in one country are not necessarily appropriate for others.
Nevertheless it is significant that the steps taken by several major industrial nations have emphasized measures discouraging consumption by
allowing prices to reflect social costs. Until the National Energy Plan (NEP)
efforts in the United States have tended to do just the opposite.
THE NATIONAL ENERGY PLAN
Upon assuming office, the new Administration faced the dual concerns
of rapidly rising oil imports and growing natural gas shortages. Both
posed risks of future supply interruptions. The high level of oil imports also
threatened the independence of U.S. foreign policy and imposed a substantial drain on the U.S. economy. Over the longer run the Nation faced
the need to begin the transition from oil and gas toward more abundant
energy resources. The new Administration recognized the critical importance
of a comprehensive energy policy that would address these concerns and in
April proposed to the Congress a National Energy Plan.
Economic Principles
To achieve both its short- and long-run energy objectives, the energy plan
relies principally on mechanisms that bring prices and social costs of energy
together. Social costs represent the sum of private costs (energy production costs and the cost of oil imports) and the costs of important side effects
(environmental damage and the risks to national security and to future economic activity posed by energy imports). Although the high price of oil
imports exceeds the costs of production in the OPEC countries, it nevertheless represents the social cost to the United States of acquiring additional
supplies. At the same time, each component of the plan balances the important principle of efficient use of energy with the goals of fairness, sustained economic growth, reduced inflation, and a clean environment.
Raising energy prices to reflect costs more closely should have significant effects, and these will grow over time. In the short run, energy consumption is largely determined by the utilization of existing energy-using
devices—machines, vehicles, and buildings. Short-run movements in
energy prices are therefore likely to have only limited effects on energy
consumption. After a short lapse of time, the effects grow as users respond
to higher prices by adjusting the current capital stock—installing, for exam-
188
pie, insulation or electrical management devices. As the existing capital
stock is gradually redesigned and replaced and as the higher prices induce
changes in consumption patterns and lifestyles, even greater changes should
be seen in energy usage patterns.
Since the policies proposed in the NEP are designed to affect energy
use over an extended period, the long-run response of energy consumption
to higher prices is of particular interest. There is now a large body of econometric and engineering evidence indicating very substantial responses of
energy demand to changes in price over time. An oversimplified but revealing way of demonstrating the long-run response is to show for a single year
consumption differences across countries that have had wide and long-standing differences in the levels of energy prices. If differences in the energy price
levels have persisted for some time, the consumption variations (controlling
for variations in incomes) should reveal long-run responses.
Availability of data allowed such an experiment for petroleum use in
transportation in 1975 (Chart 14).
Chart 14
Cross-Country Comparison
of Motor Gasoline Demand in 1975
220
200
LEGEND
180
160
A
Au
B
C
D
Australia
Austria
Belgium-Luxembourg
Canada
Denmark
F
Fr
I
It
Finland
France
Greece
Ireland
Italy
J
N
No
P
S
Japan
Netherlands
Norway
Portugal
Spain
Sw
Swi
T
UK
US
Sweden
Switzerland
Turkey
United Kingdom
United States
WG
West Germany
G
rr
s
#WG
w 140
•UK
2
UJ
(J
uL 120
s 100
• i
80
• A
60
40
20
40
60
RATIO OF TRANSPORTATION MOTOR GASOLINE D E M A N D
TO REAL GDP ( T H O U S A N D BTU/1975 US $)
SOURCE: ORGANIZATION FOR ECONOMIC COOPERATION A N D DEVELOPMENT.
189
248-947 O - 78 - 13
80
100
Recent studies have shown that the greatest international difference in
ratios of energy to total output is due to variations in transportation use.
Though the cross-country comparison here cannot reflect differences in
highway and mass transit availabilities between countries, in cultural factors, or in other tax policies, the marked variations in transportation patterns are particularly striking. Countries that charged their consumers the
highest prices for motor gasoline showed the lowest transportation petroleum use relative to their national income. In the United States and Canada,
on the other hand, where gasoline prices were less than 50 percent of levels
elsewhere, the intensity of oil consumption was approximately double that
of the other countries. These results are particularly significant because the
variation in prices between these countries is largely due to differences in
gasoline tax levels, thereby indicating that differences in consumption primarily reflect demand rather than supply responses. Finally, though uncorrected for other salient differences between countries, these responses of
transportation petroleum demand to price changes are indicative of the
potential long-run effects of more rational energy prices.
The NEP also recognizes the role played by prices in producers' decisions.
Under current law, domestic oil and natural gas prices are controlled at levels
well below the prices of either imported oil or intrastate gas. While the
plan recognizes the importance of encouraging exploration, it also recognizes the central importance of raising prices only for new production. Increasing prices for existing production to levels artificially inflated by a
cartel would primarily transfer very large sums from consumers to resource
owners without generating significant additional supplies.
Specific Proposals
The NEP contains seven principal elements:
1. Crude oil pricing. To eliminate both the subsidy of imported oil and
the administrative difficulties of the entitlements system, the NEP calls for a
wellhead or a crude oil equalization tax (COET) to be phased in over 3
years. By 1980 each barrel of controlled oil would be taxed at the difference
between the import price and its controlled price. Domestic and import
prices would be equalized, and the need for the cumbersome entitlements
system would vanish.
In addition, through administrative actions certain categories of oil would
receive higher prices to encourage exploration and development. "Brand
new oil" (that is, oil discovered after April 20, 1977, in wells meeting
certain geographical and depth criteria) would receive the 1977 world
price, adjusted thereafter for increases in the general price level. This
represents a 20-percent increase over the present new oil price. Oil recovered
through new tertiary recovery would be decontrolled as is now the case for
stripper well production.
Coupled with the wellhead tax, these new incentives raise purchase
prices of all domestic oil to world levels—that is, to the cost to the Nation
190
of meeting added oil demands. The receipts from the COET, estimated to
range between $11 billion and $14 billion by 1980, would be rebated to
consumers on a per capita basis. Rebates would restore the loss in consumer
purchasing power caused by the tax.
At the user level, the plan adds a tax on industrial and utility use of oil,
beginning in 1979 for industrial users and in 1983 for utilities. Over a
5-year period, the tax would increase petroleum costs by up to $3.00 per
barrel for industrial and $1.50 for utility use. The user tax is designed to
increase the user price of oil to reflect the social costs posed by the risk of
continued high levels of imports, and is targeted to the users most easily
able to conserve and convert to other fuels.
2. Natural gas pricing. Because the market is so far from equilibrium, the
problems of natural gas have been among the most difficult to solve. One
commonly suggested solution would decontrol the prices of all new gas.
Though such a step would eventually clear the natural gas market, it would
make available relatively small quantities of additional gas—at the cost
of substantial inflation and inequity. The inflationary impact of decontrol
could be especially severe under the current system of rolled-in pricing.
The decontrolled prices of new gas would be averaged with much lower
cost production, allowing the prices of unregulated gas to rise well above
the oil price equivalent.
The natural gas pricing provisions of the NEP address the major problems—geographic supply imbalances, insufficient producer incentives, and
excessive natural gas consumption—without imposing severe inflationary
consequences or generating inequitable transfers of income. Thus the plan
proposes an increase in the current price allowed for new interstate commitments, and replacement of the present system of "vintaging" new contracts with a single price for all new gas discovered after April 20, 1977.
Regional imbalances between gas supply and demand would be corrected
by a price ceiling applicable to both the interstate and intrastate markets.
Two proposals at the user level would further improve the efficiency of
natural gas pricing. First, the present rolled-in pricing structure would be
replaced by a system designed to economize on natural gas use. Specifically,
all utilities distributing natural gas would be required to pass on the costs of
more expensive replacement gas to low priority (largely industrial) users,
many of whom currently face the lowest tariffs. Over time, this would
encourage conversions from gas by those most able to respond to the price
change.
The end user pricing reforms would be supplemented by a tax on the industrial and utility use of natural gas. Like the user tax on oil, the gas user
tax would be implemented in 1979 for industrial users and in 1983 for
utilities, and phased in gradually. The price of gas to industrial users would
eventually be raised to the equivalent price of oil. Together with the other
natural gas proposals, the gas user tax would, over the long run, substantially
191
reduce curtailments by raising prices of natural gas to levels that reflect the
opportunity costs of gas use.
3. Coal conversion. Provisions in the NEP that increase the prices of oil
and gas will encourage a search for alternative fuels. Though the low cost
and relative abundance of coal make it a particularly attractive alternative,
the continued vulnerability of the United States to oil price increases and
supply interruptions suggests that further acceleration of the coal conversion process would be in the national interest.
Toward that end the NEP proposes two important measures. To supplement the taxes on oil and gas use, the plan proposes that firms be eligible
for either an additional 10-percent investment tax credit for conversion
expenditures or a rebate of any user taxes paid, up to the amount of any
expenditures incurred for conversion to coal or other fuels. Under proposed
regulations, the burning of oil and gas in all major new utility and industrial
boilers would be prohibited, with some environmental exceptions. Authority
would also exist to prohibit the burning of oil or gas in non-boiler facilities
or in existing facilities with coal-burning capabilities. The plan proposes
Federal monitoring of the coal transportation system to ensure that it will
accommodate the expected growth in coal production and use.
4. Conservation. A major feature of the plan is its fuel conservation package, which includes a blend of taxes, tax incentives, and regulatory requirements. The principal tax measure, in addition to those discussed above,
proposes a graduated "gas guzzler" tax on new automobiles with fuel efficiencies below the fleet average levels required under EPCA. Significant
tax incentives include tax credits for home and building insulation and a
large credit for solar heating and cooling equipment. Finally, the plan encourages cogeneration and district heating and proposes the establishment
of mandatory minimum energy efficiency standards for major appliances.
5. Utility rate reform. The NEP proposes a series of initiatives to confront
electricity users with prices that reflect incremental costs of production more
closely than has been true under current modes of regulation. For example,
promotional declining block rates and other rates that do not reflect marginal costs could be phased out. Such rates are particularly inappropriate
now that electricity in many areas is no longer produced under conditions of
declining costs.
Under the NEP, utilities would be required either to offer daily off-peak
rates to customers willing to pay metering costs or to provide a direct load
management system. In addition, they would be required to offer lower rates
for interruptible service. Finally, master metering, which removes incentives to conserve, would be prohibited in new structures.
6. Nuclear power policy. Though the plan envisions growing reliance on
nuclear power, advanced nuclear technologies that are uneconomic or pose
significant risks of nuclear proliferation are deemphasized. In particular, the
Administration in 1977 proposed to cancel the commitment to the construction of the Clinch River Breeder Reactor Demonstration Project and indef-
192
initely defer the reprocessing of nuclear fuel, a necessary part of a commercial breeder system. In part, these decisions were based on the revised
economic outlook—slower growth of electricity demand and higher expected capital costs for the breeder. In addition, the Administration was
determined to push forward with plans to develop a second-generation
power reactor that would have a smaller risk of proliferation.
Common to all nuclear technologies are the problems of safe long-term
waste disposal. The plan emphasizes the importance of safe waste disposal,
which is receiving more top management attention and larger budgets than
previously.
7. Oil supply interruption insurance. To the extent that the above elements of the NEP successfully discourage oil consumption, the United States
will be less vulnerable to possible future oil supply interruptions. Nevertheless, even under the most favorable circumstances, the United States is expected to continue importing oil. To provide added insurance, therefore, the
plan proposes the creation of a Strategic Petroleum Reserve (SPR), which
received its first oil shipments in July 1977. Current policy calls for storage
of 500 million barrels by the end of 1980—enough oil to cover a 4-month
interruption of 4 million barrels a day.
By the end of the year the House-Senate Energy Conference Committee
reached compromise agreements on three of the principal elements of the
plan. The agreements included coal conversion regulations much like those
proposed in the NEP but with a greater number of exemptions, utility reforms that State regulatory commissions would be required to consider but
not to adopt, and requirements that utilities "audit" buildings to determine
their energy conservation potential (but not to finance the installation of
insulation as the NEP had proposed). Also approved was a system of grants
and loans for energy conservation and solar energy.
The other elements of the plan, including the oil and natural gas pricing
provisions and the proposed energy taxes, await further consideration
and final action by the committee. Passage of this legislation is critically
important if the United States is to lay the foundation for secure economic
growth over the coming years.
Projected Impact of the NEP
Though long-run projections are difficult to make, the Department of
Energy (DOE) projects that 1978 passage of the NEP, as originally proposed, would reduce oil imports by approximately 4.5 million barrels per
day by 1985, compared to the effects of current policy. Natural gas pricing
provisions are projected to reallocate natural gas to high priority uses and to
stimulate additional production through higher prices. The incentives for
conversion to coal and the equalization of intrastate and interstate prices are
expected over the long run to reduce curtailments substantially.
In addition the coal conversion program and rationalization of pricing in
alternative fuel markets are projected to increase the use of coal by 1985 by
193
approximately 200 million tons over projected levels without the plan (the
equivalent of over 2.4 million barrels of oil per day).
The short-run effect of the plan on the aggregate demand for goods and
services is expected to be quite small because it has been designed to change
the prices of energy relative to other products, without changing the overall
level of demand for goods and services. Energy taxes, for example, are
largely offset by both tax rebates and new expenditures to prevent reductions of consumer purchasing power. As a result the plan is expected to
change aggregate demand in the short run by no more than a few tenths of a
percent in either direction. Over the long run, because the plan will
improve economic efficiency by rationalizing patterns of use in the energy
sector, it should produce a more rapid growth in potential output.
The major foreseeable economic consequences of the program will follow
from the effect of the increased prices for petroleum and petroleum products
and for natural gas. The annual rate of inflation in 1978 and 1979 is expected to be 0.3 to 0.4 percent higher with the program than without it.
In the subsequent 2 years, the inflationary impact of the program is projected to subside to between 0.1 and 0.3 percent.
OTHER ENERGY POLICIES
Policies aside from the NEP concentrated principally on supply measures.
Long-term prospects for gas supply were substantially improved by Presidential and congressional approval of the Alaska Natural Gas Pipeline.
Expected to be operational in 1983, the pipeline will cross both Alaska and
Canada (following the "Alcan" route) before connecting with the interstate pipeline system in the United States. At capacity, it will transport 0.8
trillion cubic feet per year and supply approximately 5 percent of total U.S.
gas consumption.
Though imports of natural gas are now relatively small, substantial additions could be made by Mexican imports and new liquefied natural gas
projects. Pending before the Economic Regulatory Administration (ERA)
of the Department of Energy at the close of the year were several proposals
that, if eventually approved, could permit importation of over 4 billion cubic
feet per day by 1985. ERA must decide on a multitude of issues—reliability,
independence, siting safety, accident liability, and pricing—'before giving its
final approval.
The pricing issue, in particular, raises the important question whether the
present method of rolling-in new gas prices will continue or whether another
method will be found of moving to a system where users face more realistic
prices for higher-cost gas. Because continuation of rolled-in pricing would
confront consumers with prices below the costs of replacing the gas they
consume, policy makers face a challenge in arriving at feasible and economically efficient policies for pricing LNG in the future.
194
FOOD AND AGRICULTURAL POLICY
Since the end of the 1920s the United States has undertaken a variety
of programs directed at mitigating problems in agriculture. For much of
this time the major problem has been chronically low returns to the
resources employed in agriculture. The problem was evident in declining
relative prices and in the lower incomes of farm people compared with
those of nonfarm people. The pattern of low returns was recently interrupted for a brief period from 1973 to 1975, during which prices and incomes
were substantially higher. Since then, however, prices and rates of return
have declined sharply, and the policy concerns of earlier years returned in
1977.
THE POLICY PROBLEM
From the mid-1950s until 1973 the agricultural sector was plagued with
chronic surpluses. During that period, productive potential substantially
exceeded consumption. The adoption of new technology and the substitution of machinery, fertilizer, pesticides, and energy for human labor produced major increases in farm productivity, yet prices were not allowed to
fall to clear markets. The exodus from farming, the increasing size of farms,
and the net population outflow from rural areas that had begun much
earlier accelerated. Only in recent years have these forces subsided.
The government has employed a variety of policy instruments in efforts
to maintain farm incomes at socially acceptable levels. Such instruments
have included supply control through production restrictions (such as
acreage set-asides), direct income transfers, and a government-provided
market of last resort to support commodity prices.
Beginning in 1972 the situation in agriculture began to change. A number of forces were gradually evolving in the world economy and acting to
create a better balance between demand and supply for the output of
American farms. Rapid growth in worldwide population and income, together with a growing sensitivity to hunger and malnutrition in many parts
of the world, were leading to increased demands for U.S. agricultural output.
The shift of some centrally planned economies from being food exporters to
being net food importers worked in the same direction. The supply of U.S.
farm output, meanwhile, was rising less rapidly. Yield increases fell behind
the impressive gains of the 1960s. Accompanying these long-run developments were several events of the early 1970s that also resulted in abrupt
changes in the supply-demand balance for food. These included major realignments of foreign exchange rates, poor crop harvests due to adverse
weather, and changes in the policies of major countries, especially the Soviet
Union, toward responding to food shortages.
195
As a result, from 1973 to 1975 the agricultural sector enjoyed nearly
unparalleled prosperity, with record volumes of exports pushing commodity
prices to new highs. But this economic boom was not without side effects.
Domestic food costs increased sharply, and such concerns led to the imposition of export embargoes that strained long-standing trading relations. The
domestic livestock industry endured one of the most unprofitable periods in
its history, land prices were bid up substantially, and debt for farmland
purchases was incurred on the basis of unsustainable conditions.
By the end of 1977, however, conditions in the farm sector had again
become similar to those of the pre-1972 era. U.S. farmers had harvested
their third consecutive bumper crop, and grain stocks were rebuilt significantly from the low levels reached in 1974-75. Production expenses continued to increase while commodity prices were falling, and the volume of
farm debt soared. The crop commodity price index had declined 27 percent
from the peak in 1974, and large government price support activity was in
prospect. Aggregate real net farm income was approaching the levels of the
1960s. The unrest among producers was manifest in the widely publicized
farmers' strike that started in late 1977.
With the apparent return of the farm income problem, the deeper question remains whether there has been a fundamental shift in the patterns of
price and utilization in agriculture. There is no doubt that with only a
few successive years of favorable weather, the U.S. agricultural machine
has the capacity to create again the "surpluses" with which agriculture
has so long been associated. It is not clear whether the current period is only
a short-term reaction to low worldwide incomes and abnormally good
weather, or evidence of a return to chronic conditions of oversupply. As
noted below, some signs indicate serious global risks of a return to high
prices, given the margin of stocks over consumption.
Thus, while the familiar problem of low incomes in agriculture had
returned in 1977 and its end was not in sight, the context was new and still
unfamiliar. American farmers are now increasingly dependent on volatile
world markets, while both producers and consumers are more vulnerable
to wide price fluctuations and renewed inflationary pressures.
INCOMES IN AGRICULTURE
It is no longer possible to generalize meaningfully about the economic
status of the agricultural sector. Farms are not uniform; a wide diversity of
types and sizes of farms exists in every region of the country. Furthermore,
the economic health of the farm sector must be distinguished from the
economic well-being of the farm people. The commercialization of farming
and the emergence of dependence on both farm and nonfarm sources of
income have altered the meaning of comparisons based on aggregate measures of agricultural income.
196
Real net farm income in 1973 reached the highest level since World War
II. Though down sharply from that peak in 1974-75, it remained well above
the average of the previous decade. Gross income has since declined further with recent large crops and falling prices. Combined with escalating
production expenses, this reduced the real net income from farming in 1977
to the lowest level of this decade (Table 31).
TABLE 31.— Real income and returns to agriculture, 1970—77
Rate of return on equity
capital
Year
Total net
farm income *
2
Capital gains
With capital
gains included
Billions of 967 dollars
With capital
gains excluded
Off-farm
income
(billions of
1967
dollars)»3
Percent
1970
1971
1972
1973
1974
1975
1976
1977 4
12.2
12.0
14.9
25.0
17.7
15.1
1L7
11.5
-3 5
7.6
24.3
58 6
8.7
10 0
18.9
3.5
7.7
14.3
25.4
7.9
7.4
8.7
4 9
4.7
5.4
7.6
5.3
4.4
3.3
12.4
12.6
14.0
14.7
14.6
14.1
14.2
14.3
1970-76 average
15.5
17.8
10.7
5.1
13.8
1 Deflated by the consumer price index.
2
Calculated as the change in physical asset value less net investment plus the change in net financial liability, where
each component is first deflated by the consumer price index.
3
Off-farm income includes all income received by farm residents from nonfarm sources such as wages and salaries
from nonfarm employment, nonfarm business and professional income, rents from nonfarm real estate, dividends, interest,
royalties, unemployment compensation, and social security payments.
« Preliminary.
Sources: Department of Agriculture and Department of Commerce.
The level of aggregate real income must be viewed in a historical context.
Claimants to farm income have become fewer each year. Today the number
of Americans who earn their living from farming is about half the figure
two decades ago, and they no longer perform many of the production services
once carried out on the farm. Moreover the distribution of total earnings is
heavily skewed to the largest farms. In 1976, 63 percent of realized net farm
income was earned by 17 percent of the farms.
An aspect of the returns to farming that is often overlooked is capital
gains. Asset values in real terms were relatively stable during the 1960s, but
they increased markedly in 1972-73 with buoyant expectations of future
earnings. Though the pace has slowed since 1973, the increase in real capital
gains has continued, averaging $18 billion annually in this decade. However,
these gains accrued largely to owner-operators and landlords, not to the
tenants who utilize almost half of the total farm land.
If the expectations generated during 1973-74 are discounted, resource
earnings to equity capital through 1976 do not appear abnormally low relative to historical experience in agriculture (Table 31). The real rate of
return to farmers' equity capital from 1970 to 1976 averaged 10.7 percent
197
annually before income taxes but including capital gains. Excluding capital
gains, the rate of return averaged 5.1 percent. The farm sector rates of
return for the 1970s are not far from rates in the nonfarm economy. For
example, the average annual rate of return to nonfinancial corporate
capital for 1970-76 was 6.9 percent. Slight definitional differences preclude
strict comparison, however. It should be recognized that the aggregate data
conceal a wide variation among farm operators; extreme hardship is being
experienced in many individual cases, particularly in 1977.
Another component of the economic well-being of the farm population is
off-farm income. The real income of farm people from nonfarm sources
continues to increase over time and accounts for an increasing proportion of
the total income of the farm population (Table 32). Nonfarm income
accounted for three-fifths of total income to the sector in 1976.
TABLE 32.—Real income per farm and per capita disposable personal income of
farm population as percent of nonfarm, 1961—76
Total
income
per farm
(1967
dollars) i
Period
1961-65 average
1966-70 average .
Income from
farming as
percent of
farm
operators'
total
income
Per capita
disposable
personal
income,
farm population as
percent of
nonfarm
population
6 820
8,852
51.2
45.9
61.7
72.0
1971
1972
9 078
10, 669
41.3
46.4
74.7
83.4
1973
1974
14 176
12^951
55.8
51.2
109.3
92.4
1975
1976
10, 889
11,178
42.2
41.4
88.0
81.4
1
Net farm income excluding inventory change plus off-farm income of farm households, deflated by the consumer
price index.
Sources: Department of Agriculture and Department of Labor.
Income estimates per farm provide a rough measure of the relative economic well-being of farm households compared with their nonfarm counterparts (Table 32). The comparison is not completely apt, however, because of differences in the cost of living and in the number of persons per
household, as well as differences in amenities between farm and nonfarm
living. Although the per capita disposable income of farm households has
long been below that of nonfarm households, there has been a slow but
steady convergence of incomes in farming to those of the rest of the work
force. In 1973 income of farm households actually reached and temporarily
exceeded that of nonfarm households, but since then the ratio of farm
to nonfarm incomes has fallen sharply.
Because they are so numerous, agricultural producers are "price takers/5
and are especially vulnerable to the adverse impacts of uneven rates of
change in prices. During a period of inflation led by food prices, producers
198
initially benefit from large runups in prices of raw farm products, but the
increased earnings are generally capitalized into land prices. The owners
of such assets enjoy a gain in real wealth, but total rates of return fall back to
historical levels. Moreover the return of more nearly balanced supply and
demand conditions brings commodity prices down again, and farm incomes
fall, while debt incurred during the boom remains.
INSTABILITY OF PRICES AND INCOMES
The average annual export volume of U.S. agricultural products for
1971-76 was one and one-half times greater than the annual average for the
1960s. Average export earnings in the same period reflected a nearly threefold increase over the annual average for a decade earlier. This increased
access to world markets has been beneficial not only to agriculture but also
to the Nation's economy. The increased export earnings have contributed to
a more favorable trade balance, helping to offset the large external deficit.
However, this increasing reliance on foreign markets poses new problems
for U.S. farmers and consumers as well as for the domestic economy more
generally.
Markets for agricultural products have long been subject to variability in
domestic production and consumption. In recent years, however, they have
become increasingly vulnerable to the random fluctuations of weather
throughout the world and to changes in consumption or in the policies of
other trading nations. Moreover, many nations attempt to insulate their
internal food prices from world supply and demand fluctuations. To the
extent that they are successful, a disproportionate share of the short-run
TABLE 33.—Trends and variability in real national income components, 1961—77rl
1971-77
1961-70
Component
Average
annual
change
Index
of variability
Average
annual
change
Index
of variability
Percent
National income
.
4.5
3 4
2.0
3.6
Compensation of employees
Nonfarm proprietors' income
Rental income of persons
Corporate profits
Net interest
5.2
1.6
.4
2.4
10.3
1 8
5.3
6.9
16.0
2.8
2.1
-1.7
-4.1
1.5
8.0
3.1
5.6
4.5
12.8
3.2
-.7
-2.9
7.4
8.5
-4.4
-1.0
29.4
34.7
3.5
6.1
3.4
1.6
3.3
4.5
1.6
1.8
-1.3
2.4
13.6
25.0
Farm income:
With Government payments
Without Government payments
Per capita personal income:
Total population
Farm population
From farm sources.
1
These estimates were calculated from regressions of the natural logarithms of the various deflated components of national
income on a linear time trend. The deflator was the consumer price index. The average annual change refers to the
coefficients of time and the index of variability refers to the standard errors of the regressions. Data for 1977 are preliminary.
Source: Council of Economic Advisers, based on data from Department of Agriculture, Department of Commerce,
and Department of Labor.
199
adjustment to changing market conditions is forced upon market-oriented
countries such as the United States and on developing countries with food
deficits.
These sources of instability are reflected in the increased variability of
farm income in recent years. Variability in farm income during the 1970s
was about four times greater than in the 1960s (Table 33). In fact,
during 1971-76 income from farming was by far the most volatile of
the major components of national income. This increased variability is also
manifested in the per capita incomes of the farm population. Although the
variability is considerably reduced when one includes income of the farm
population from nonfarm sources, the total is still much more volatile than
the per capita income for the population as a whole. On the other hand, the
average rate of growth of per capita farm income from all sources has outpaced the growth of per capita personal income during both periods.
Instability in agricultural product prices has a significant impact on the
entire domestic economy. Sharply increasing prices of raw farm products
Chart 15
World Wheat and Coarse Grains:
Export Prices and Ratio of Stocks
to Consumption
I
-
160
E
t
• 1975
B 120
-
• 1974
• 1976
o
• 1977
I
80 -
1966/1967
• 1973
• 1968
• 1971
• 1972
1970*
#1969
2
X
ULJ
40 I
i
I
|
.12
.14
.16
.18
I
.20
I
.22
.24
RATIO OF ENDING STOCKS TO CONSUMPTION
NOTE: DATA RELATE TO MARKETING YEAR ENDING IN YEAR SHOWN AND EXCLUDE THE U.S.S.R.
SOURCE: DEPARTMENT OF AGRICULTURE.
200
soon lead to increases in food prices that affect all consumers—but most
severely those near the bottom of the income distribution.
The instability of food prices was clear during the last few years, when
low worldwide stocks of grain and poor harvests led to sharp increases
in domestic food prices. From 1972 to 1976 the ratio of world stocks to
world consumption, excluding the U.S.S.R., fell from 19 percent to the
12- to 14-percent range. Prices more than doubled (Chart 15). World stocks
were increasing by 1977 as the second consecutive large global crop was
harvested.
World stocks of grain will have to increase along with continued growth
of world population and income to provide a cushion against another food
crisis. The stocks-consumption ratio in 1977 was ,at a level of 17 percent. A
third successive large crop for the world would result in a ratio in the more
comfortable 18- to 20-percent range, and an average crop would provide
some buildup in stocks. On the other hand, a very poor world crop, which
has .about a 1 in 12 probability of occurring, or two consecutive moderately
poor crops, could again reduce the ratio of ending stocks to consumption to
the 13- to 14-percent range and cause sharp price increases. The recent large
fluctuations demonstrate the importance of developing ample world food
reserves.
PRICE AND INCOME MEASURES
It is generally recognized that farm commodity programs through the
years have impaired economic efficiency by regulations preventing the
production, resource use, pricing, and trade that could flow from unbuffered
markets. Once inaugurated, programs have seldom achieved the intended
result; and it has often been politically difficult to reform or terminate them,
even when their economic inefficiencies are recognized.
From their beginnings and for three decades afterward, farm programs
tended to be inflexible, restrictive, oriented toward individual commodities,
and poorly adapted to prevailing market conditions. Beginning in the
mid-sixties, some reform was introduced, and the 1977 legislation continued
this recent trend in agricultural and food legislation. It is a further step
in the process of bringing policies and programs in closer accord with
the economic realities of a modern farm sector operating in a worldwide
context.
The most heavily used policy tool for improving farm income has
been market price support for individual commodities. This has been accomplished primarily through Commodity Credit Corporation (CCC) nonrecourse loans under which the commodity is pledged as collateral. Historically the support level, known as the loan rate, was generally inflexible
and pegged to "parity" prices. Because of rapid technological change in
farming, parity and therefore support prices were generally above marketclearing levels, encouraging uneconomic output, discouraging consumption,
and thereby aggravating the surplus problem. This situation, in turn, gen-
201
erated political pressures from the farm sector to curtail output. Quotas,
allotments, and other measures for production control were then applied to
individual commodities. With no coordination across commodities, supplydemand imbalances soon arose in other commodities.
Because of slow but significant changes in farming, these policies became
increasingly inappropriate. It became uneconomic for a major exporting
country to strengthen farm income by high support prices because the demand for U.S. exports was more price sensitive than domestic consumption. With inflexible U.S. price supports above market-clearing levels,
competitors could gain an increasing share of the world market, and as a
consequence the United States became the residual supplier in world markets. In addition to the economic losses of inefficient resource allocation, the
large transfer payments to the farm sector had become burdensome, and
political pressures to reduce the transfers became greater.
The first steps toward reform—to make farm programs more responsive
to market conditions—were taken in the mid-sixties. As a supplement to the
CCC price support loans, small "price support payments" were also provided for certain commodities produced under allotments or quotas. This
represented the first move toward divorcing price support from income support and toward the use of different measures to attain these dual goals.
More significant changes in the traditional tools were later effected. The
individual commodity approach to production control was discarded in
favor of restraining production capacity generally. Price support eligibility
was contingent only upon producers' idling a specified proportion of their
cropland. Except for quota crops (rice, sugar, peanuts, tobacco, and extra
long staple cotton), producers were free to plant whatever they wished on
the remaining acres.
Farm program subsidies have traditionally been based on volume of production. As a result the relatively few large producers with greater volume
tended to receive a greater share of total program benefits than the more
numerous smaller farmers. To the extent that this occurred, the programs
implicitly contributed to a widening disparity of income distribution in agriculture. Partly in recognition of this fact, a $55,000 limit on the amount of
payments which a producer could receive under the major commodity
programs was imposed for the first time in 1971.
Legislation in 1973 continued the movement toward fewer program
restrictions and greater reliance on market signals to guide producers'
decision making. An important step was taken in the Agriculture and Consumer Protection Act of 1973 when, by including a target price-deficiency
payment system, income support was fully separated from price support.
Following the concept first proposed in the late 1940s as the Brannan Plan,
income transfers were provided to producers in addition to the price support
loans. These income transfers vary inversely with the market price. No payments are made if the market price is at or above the target price; but if
the market price is below the target price, support payments are based upon
202
the differential. The payment limitation was reduced to $20,000 in the
1973 act.
Economic conditions after 1972, when increased world demand caused
prices to be well above the price and income support levels, allowed the
commodity programs legislated in the 1973 act to be essentially inoperative.
No production restrictions on the major commodities were employed during
1974-77. However, as U.S. and world stocks returned to more normal levels,
prices declined and there were growing political pressures in this country
for increased government price and income support.
POLICY DEVELOPMENTS IN 1977
When the Carter Administration took office in 1977, it faced the
reemerging farm income problem, the potential instability problem, and
the expiration of major legislation affecting agriculture and food. In addition, other policy proposals—including establishment of grain reserves and
examination of the organization and funding for agricultural research—were advanced. The challenge thus facing the new Administration was
to work with the Congress in developing legislation that would meet the
incomes objective but reduce economic efficiency as little as possible. For
the first time in over a decade, the Administration authored a comprehensive food and agricultural bill and presented it for consideration by the Congress. The congressional action resulted in passage of the omnibus Food
and Agricultural Act of 1977 (Public Law 95-113).
The 1977 act further modifies and extends the available policy tools—
providing for flexible price-support levels, increased reliance on direct income
support, abolition of allotments, and a managed grain reserve.
Price Support
The act contains price supports at levels that afford price protection to
farmers, yet are low enough not to interfere with markets except in years of
excessive stocks. The price support programs therefore provide an interim
financing arrangement whereby producers may even out their cash flow but
eventually return their products to the market. One important change in
the act, included largely in recognition of the increased importance of world
markets, is downward flexibility in the support prices for the major commodities. Whenever season average prices are within 5 percent of the loan level
and the price support interferes with the competitiveness of U.S. products
in world markets, the loan level may be reduced by amounts up to 10 percent
per year (with absolute minimum loan levels specified).
Income Support
*
Divorcing price support from income support in farm commodity programs allows income distribution objectives to be pursued with less economic
distortion than if price supports alone are used as a means of bolstering
farm income. If minimal supports do not interfere substantially with the
functioning of the market, then production and use may be largely unaf-
203
fee ted. In this case the only noteworthy cost of the programs to society would
be direct income transfers.
Parity, the long-used concept for determining needed income support
for agriculture, was discarded for the major crops in the 1973 act because
technical flaws—failure to account for productivity changes is a major one—
made it inappropriate for modern conditions. Instead, the 1973 act adopted
a "cost of production" concept for target price escalation. Lack of adequate
cost data at that time forced the use of a broad-based index of prices for
agricultural inputs, but individual commodity cost estimates have been
developed in the intervening years.
The 1977 act completed the move to cost of production, using individual
commodity cost as the basis for the target prices. However, just as with
parity, this approach also has serious limitations. One is that the average
cost of production is not a measure of equilibrium price, since it reflects
only supply and not product demand conditions. Further, an inherent
potential for an artificial target price spiral exists in the cost of production
approach if fixed asset (primarily land) costs are included. Producers
earning high returns at a given target price level will bid up the price of
land. Since the land price increase is reflected in the cost of production, the
target prices are raised accordingly, and the spiral continues. The 1977
act bases the initial (1978) target prices on a proportion of total cost.
Adjustment of the target prices in the next 3 years will reflect only variable,
machinery, and overhead costs—the land and management components are
excluded—thus largely avoiding the price spiral problem.
Acreage Allotments
As has been noted, prior to the 1977 act the criterion for determining
the compliance required of producers and for disbursing benefits was the
acreage allotment. In principle the allotments reflected each producer's
historical share of national production of the crop, the shares being assigned
on the basis of production patterns prevailing in a particular historical
period, which for some crops was as long as 25 years ago. The rights to produce and market the crops became valuable assets, in effect representing a
financial grant from government to the owner merely because in the past a
particular crop happened to have been grown on the farm. Program benefits
over the years were thus largely capitalized into land values. Because payments were conditioned on existing use patterns, these acreage allotments
impeded a rapid geographic shift in production patterns. During the 1974—
76 period, when the allotment system lay fallow, production shifted significantly to those farms and regions of the country where the particular crops
could be produced most efficiently.
During development of the 1977 act, the Administration proposed abolishing the antiquated allotment system. Compliance and benefits based on
the old allotment system would have been inequitable and would have
drastically lessened the efficiency of the programs in achieving their objec-
204
tives. Overall economic losses would have been substantial if farmers had
returned to the old production patterns in order to receive program benefits, rather than planting those crops that they could produce most efficiently.
The Congress adopted the Administration's proposal to abolish allotments
and base the programs upon a "current plantings" concept. Under this
approach, farmers can make decisions regarding current year production on
the basis of costs and anticipated market prices. Any compliance requirement (such as the acreage set-asides for the 1978 wheat and feed grain crops)
and price and income support are then based on decisions that are reflected
in current year plantings. While still not a perfect program tool, the current plantings concept offers hope of avoiding rigidities in production patterns, and in the associated losses of economic efficiency, and it removes much
of the inequity of the allotment system.
The concept may, however, create a new source of resource misallocation
if producers respond to the target prices in those years when they are substantially above market prices. Basing income support on current plantings
could lead to production distortions, an uneconomic product mix, rapidly
increasing support levels, and a need for stringent production controls to
avoid unacceptably large Treasury outlays for the support programs. The
1977 act thus improves the efficiency of farm programs but does not fully
resolve the fundamental dilemma: how to provide income protection to
farmers in a way that is equitable yet does not lead to uneconomic production
decisions.
Stabilization Measures—Domestic Grain Reserves
The establishment of a domestic grain reserve began to receive serious
consideration soon after the 1972-73 experience with sudden shortages.
Numerous proposals for reserves entailing various forms, sizes, and operating
rules had been advanced, but support for reserve schemes was mixed. Farmers who associated the large government-held stocks of past years with low
commodity prices were at first opposed; but as grain prices continued to
decline, the opposition from many gradually diminished. Consumer advocates, on the other hand, remembering the post-1972 increases in food prices,
generally favored a reserve system.
The Administration announced in April the formation of a small food
grain reserve of 8 million metric tons of wheat and rice from the 1976-77
crop. The 1977 act then mandated such a reserve specifying minimum and
maximum quantities and also authorized a feed grain reserve. In late August
the Administration announced its intentions to enlarge the reserve to 30 to
35 million metric tons of food and feed grains.
This reserve system is to be owned and held to a large extent by farmers.
Rules for its operation are explicit, thus precluding stock releases not motivated by economic considerations. A set of release prices has been established and grain enters the reserve at the loan level. The government will
share the cost of holding the reserve.
205
248-947 O - 78 - 14
The reserve of 30 to 35 million metric tons has three major components: 9
million metric tons of wheat and rice; 17 to 19 million metric tons of feed
grains; and an international emergency wheat reserve of 6 million metric tons.
The exact size of the reserve within the range given will depend upon the
amount of grain acquired by CCC through the nonrecourse loan program.
The first two components, totaling 26 to 28 million metric tons (the producer-held portion of the reserve), are being established through extended loans by the C C C Upon expiration of the regular price support loan,
producers may enter into a contract with the government to hold the grain
for 3 to 5 years. Storage payments are provided until the first price trigger
(140 percent of the loan level for wheat and 125 percent for corn) is reached.
If the second price release point (175 percent for wheat, 140 percent for
corn) is reached, repayment of the loans may then be required.
The Administration is submitting proposed legislation to the Congress in
1978 to authorize establishment of the government-owned International
Emergency Wheat Reserve of 6 million metric tons. The legislation stipulates
that the reserve is to be used for humanitarian purposes in meeting contingency food needs or as part of any U.S. commitment to an international
reserves scheme that may be negotiated.
A domestic grain reserve can be operated in accord with a price-support
program. Stocks will be insulated from the market when prices are low
and released back into the market when supplies are short. The planned
reserve should: (1) provide a beneficial price effect to farmers when the
reserve is established; (2) not "overhang" the market at low price levels
as in past years by virtue of the contract release prices and CCC release
prices; (3) provide buffer stock protection against severe market disruption; and (4) provide a reasonably wide price corridor—containing the
long-run price comfortably away from either ceiling or floor—which allows
price to perform its allocative function.
REGULATORY REFORM
In a mixed market economy like that of the United States, government
regulations of the marketplace sometimes play a vital role in meeting social
goals, curbing abuses, or mitigating the hardships that would flow from the
unconstrained play of economic forces. Economic regulatory programs, for
example, control entry of firms into particular lines of business, set prices
they may charge, and sometimes specify the standards of service the firms
can offer. Under certain circumstances the regulations can be useful in regulating natural monopolies or providing income support. Social regulatory
programs, on the other hand, are designed to correct a variety of undesirable side effects in our economy that relate to safety, health, and the environment—effects that markets, left to themselves, often ignore. Whereas
economic regulatory programs typically govern the conditions of doing business in one or more industries, social regulations frequently dictate some of
the operating conditions required of a wide range of industries.
206
The scope of economic activity covered by Federal regulation has widened
as programs have grown and the number of explicitly recognized social goals
has increased. Today the economic significance of regulatory activities of the
Federal Government approaches that of direct tax and expenditure decisions. But while detailed and critical attention is given to budgetary action,
regulatory efforts are poorly coordinated with other economic or social
objectives. Moreover difficulties in the design of many programs frustrate
attempts to attain the very goals for which the programs were formed.
ECONOMIC REGULATION
Regulatory programs that govern entry and pricing in individual lines of
business were primarily designed to supplement or replace market mechanisms. As new areas were observed where the market outcome was judged
unsatisfactory, the scope of Federal economic regulation expanded. Major
industries that are now regulated include agriculture, airline and surface
transportation, banking, communications, and energy.
At the same time, growth of the economy and technological progress have
eroded many former natural monopolies, converted infant industries into
mature ones, and created conditions conducive to reliable competitive services. Though economic conditions in some industries may continue to require
some degree of regulation, rapid changes in others suggest that a greater
role for market forces may be desirable.
Current Problems
An important reason for reexamining the rationale for economic regulation is that, in many industries, the rules are ill suited to present economic
conditions. In some instances early goals that prompted regulatory action
have been rendered obsolete by new economic conditions, but the regulations that promoted those early goals continue in force. In other cases the
original goals were contradictory and at least one of them has been abandoned. Pursuit of almost all the goals has required that a growing number
of activities be subject to regulation.
The history of airline regulation illustrates the growth of a regulatory
structure from origins bearing little resemblance to current institutions.
Federal regulation of passenger fares under the Air Mail Act of 1934 was
introduced chiefly to prevent airlines from lowering passenger fares and
receiving larger subsidy payments for airmail carriage. Economic regulations mandated by this act were expanded under later legislation that still
governs the airline industry, despite the fact that airmail charges provide
minimal subsidies to airlines and constitute a very small proportion of total
airline revenues.
Surface transportation demonstrates how pursuit of a goal has
expanded the scope of regulation. Early regulation of railroads had the
dual aim of providing services at fair prices and stabilizing railroad profits.
207
When oil pipelines, trucks, and water traffic threatened the solvency of
railroads, these competitors were made subject to regulation in an attempt
to maintain the railroads' profitability. Today all these, and intercity bus
transportation as well, are regulated.
The continuation of regulation in markets that would otherwise be
competitive has only deflected competition, not prevented it. In the airline
industry, for example, service competition—particularly frequency of service but also such in-flight amenities as food, drinks, leather seats, and
movies—has replaced the price competition that regulation preempted.
The prohibition on the payment of interest on demand deposits has
induced individuals and businesses to limit the amount of funds held
in this form. From the standpoint of society as a whole, this is an unproductive activity. It has also spawned the development of new business
practices (some of which are discussed in Chapter 1) that are imperfect
substitutes for interest-bearing demand deposits. These include telephone
transfer systems that allow funds held for transactions purposes to be kept
in interest-bearing deposits until the last possible moment, and the introduction of interest-bearing negotiable orders of withdrawal, or NOW, accounts,
usable in virtually the same ways as checking accounts, by both banks and
nonbank financial institutions in a number of states. The prohibition on
interest payments on demand deposits has, therefore, largely been circumvented in indirect ways that are often inefficient.
Continued regulation has also imposed costs by delaying the introduction
of new technology and services. Examples include the slow rate at which
cable TV and railroad-truck piggybacking services have been introduced,
the slow rate of expansion of radio services in particular markets because
of licensing requirements, and the years of delay in the Civil Aeronautics
Board's (CAB) approval of low-fare international standby service.
Movement away from regulation in any industry imposes costs on some
who were previously protected. For example, though expanded competition
in the trucking industry may increase economic efficiency and bring lower
prices, it also would impose capital losses on truckers who purchased
operating certificates from other truckers.
Administration Effort
The problems inherent in the present regulatory structure, the uncertainties posed by the complexities of many of the regulated industries, and
the importance of avoiding unnecessary hardships prompted the Administration to take an active role in 1977 in promoting regulatory reforms
to improve the present system.
The Administration strongly supported domestic airline reform initiatives,
currently before the Congress, that promise a smooth transition to a less
regulated environment. At the center of the initiatives is relaxation of controls over entry and pricing, although control of entry would be phased
208
out over several years to allow existing firms to adjust. In the unlikely event
that a community would lose service entirely under the new regulations, a
transitional subsidy for such service could be provided.
Increased competition in the domestic airlines industry should benefit
consumers by a lowering of fares similar to the dramatic declines in international air fares. The Civil Aeronautics Board and foreign governments
have authorized a much wider range of services that involve fewer amenities
before and during flights in exchange for appreciably lower fares. These
actions have made foreign travel available to many people who were
formerly unable to afford it. For example, the lowest available individual
fare from New York to London was $350. Under newly authorized standby
plans, the same trip can be made for $236, about two-thirds of the former cost.
At home the results of easing entry in the intrastate airline markets in
Texas and California have shown that significantly lower prices can be
obtained without service disruptions.
The Administration also proposed changes rationalizing regulatory programs governing agriculture and energy, as discussed earlier in this chapter.
Allowing expanded competition in other regulated industries where there
are no significant scale economies, or where the original rationale for
regulation no longer prevails, should offer similar consumer benefits and
help to control inflation. The Administration has begun to examine intensively the current regulatory controls over the motor carrier industry,
and other economic regulatory programs are slated for future study.
SOCIAL REGULATION
Social regulation of the market place has arisen in response to pervasive
problems that have affected nearly all Americans at work and at home.
In 1976 one of every 11 workers in private industry suffered from an
accident or illness related to the job; 4,500 workers lost their lives from
such causes. The Bureau of Labor Statistics estimated that over 39 million
workdays were lost in the private sector in 1976 because of nonfatal occupational illness or accidents; and in the mining and construction trades, workers
on the average lost more than one workday per year because of accidents and
illness occasioned by the job. Because of the uncertain links between occupational hazards and illness, data that are readily available may well understate the problems.
Environmental problems are even more pervasive. Air pollution,
produced by numerous industrial processes and the operation of transportation vehicles, has been clearly linked to many different illnesses. Adverse
water quality has also proved to be dangerous. A recent study made by the
Environmental Protection Agency (EPA) found the water of 80 cities to
contain chemicals that are known to cause cancer in animals. To these
known problems must be added the rapid growth in the use of pesticides and
possibly toxic chemicals, which continues to outstrip current knowledge about
their long-run effects.
209
Markets do not respond well to these problems, primarily because only a
very small fraction of any benefits from abatement efforts accrues to those
who produce side effects—air or water pollution, for example. Incentives
to take actions or collect information leading to environmental or safety
improvements are therefore lacking. Until more positive steps are taken,
environmental, safety, or health risks will be needlessly high.
If society wishes to mitigate this situation, government actions are
required. The government has focused on many of the problems for only
a very short time. Although the Food and Drug Administration was
formed in 1931, and pesticides have been regulated since 1910, the Environmental Protection Agency (EPA) was formed in 1970, the Occupational
Safety and Health Administration (OSHA) in 1970, and the Consumer
Product Safety Commission (CPSC) in 1972. In addition, many of the substantive laws that these agencies administer have been in effect only as long
as the agencies, or for an even shorter time.
Despite their newness these regulatory programs are likely to expand with
our growing knowledge of the social problems involved, as has happened
with the older social regulatory programs. One example of this growth
can be seen in Federal pesticide regulation, which was begun to protect
farmers from fraudulent claims by salesmen. In 1947 Congress passed the
Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) to meet new
concern about direct poisoning by requiring the registration of such products. FIFRA was amended in 1967 and 1972 after the discovery of environmental dangers in DDT and other pesticides that were developed in the 1940s
and 1950s. The new amendments provided new authority to license users of
pesticides.
The same growing awareness of problems and expanded scope of programs have occurred in many other areas. As production techniques and
products have become more complex, society has demanded protection
against whatever hazards to health, safety, and the environment may accompany the benefits from the changes.
During the short time since their inception the social regulations have
improved the conditions affecting the environment, health, and safety of
Americans. For example, while the Nation's efforts to control water pollution are behind schedule and face some difficult problems, numerous bodies
of water have been demonstrably improved. Because of mandated municipal and industrial waste treatment, aquatic life and recreational amenities
have reappeared, and foul odors and visibly dirty water have disappeared in
a number of the Nation's waterways.
Similarly marked progress has been achieved in reducing air pollution.
Data collected by EPA and the Council on Environmental Quality (GEQ)
at 280 locations around the country show significant improvements in
ambient air quality between 1970 and 1976. The number of these locations
that failed to meet national ambient air quality standards for sulfur
210
dioxide fell by 27 percent, for carbon monoxide levels by 20 percent, and
for particulates by 12 percent. Nevertheless in all areas progress is often
slower than expected because the social regulatory process has difficulty
keeping pace with the rapidly expanding number of products and processes
that pose possible hazards to society.
The social regulatory programs have produced clear benefits to society
in the short time they have existed. But their costs have also been substantial—larger than were originally anticipated. The national interest requires
not only that we achieve the goals of social regulation, but that we do so at
minimum cost. Two broad sets of factors are important in determining the
cost of our social regulations: the level of our ultimate goals and the pace at
which we try to achieve them; and the design of the regulatory mechanism.
The Pace of Regulation
The level at which society sets its goals is an important factor in determining the cost of achieving those goals. Over the next few years, however, costs
will be largely determined by the pace at which we pursue our goals. There
is a major tradeoff to be faced between the pace at which the goals are attained and the costs of their attainment. Ideally we should set the pace of
moving toward our objectives at the point where any step-up would add
more to costs than to the social benefits. In practice we have only limited
and imprecise information on the benefits of many social programs, although
we know considerably more about how changes in pace affect costs. In many
cases more rapid implementation is quite costly. For example, the Council
on Wage and Price Stability studied the water pollution effluent guidelines for
the iron and steel industry, proposed by EPA in 1976. It found that a relaxation of the 1977 standard for water pollution control in this industry with no
change in the more stringent 1983 standard would permit savings in capital
costs of $200 million. We cannot measure the dollar value of the gains from
earlier achievement and compare them with those costs. But in making
regulatory decisions on the speed of attaining standards, we should explicitly make a qualitative judgment about whether the gains from earlier
attainment are worth the costs.
The pace at which regulatory goals must be met may also indirectly
affect costs. Deadlines that are excessively short, combined with detailed
prescriptions of technological solutions, can discourage firms from searching for less well-proved but ultimately more efficient approaches. Alterations in initial technological solutions become costly and meet with resistance. On the other hand, regulatory authorities must cope with the natural
inclination of those who are regulated to overemphasize the costs entailed
in rapid progress toward meeting the standards. No mechanical formula
can guide decisions in this area. A constant awareness of the relation
between pace and costs in decisions about individual cases should nevertheless help to reduce the overall costs of regulation.
211
The Design of the Regulations
The degree of detail with which regulations are specified is one of the
most important elements affecting costs. Excessively detailed and inflexible
specifications can increase costs by making it impossible for producers to
adopt the least expensive route to meet regulatory goals. The study by
the Council on Wage and Price Stability of the proposed guidelines to reduce
effluents in the iron and steel industry, for example, found that the incremental costs the 1983 standard imposed for removing one unit of pollutant differed widely for each of a number of processes in a single plant. One
process for making integrated seamless piping and tubing required annual
incremental expenditures of $18,000 to remove the last ton of total suspended
solids; in hot forming processes with scarfing, the last ton to be removed
had an incremental annual cost of only $2,000. Applying the guidelines
throughout the plant instead of process by process would allow pollution
reductions to be concentrated on processes having lower incremental abatement costs. The same level of abatement could thus be reached at much
lower costs.
A difficult problem of regulatory design concerns the extent to which
old and new sources of pollution should be governed by different standards.
Some differentials are appropriate, since the incremental costs of meeting
a given standard for emissions tend to be lower when the necessary measures
are being incorporated in new rather than old facilities. But regulations can
inadvertently add to the economic costs of an industry by applying excessively
large differentials to new processes compared with existing ones. If the
differential is too large, firms deciding between continuing production in
older facilities or converting to new ones may be biased against the new
ones. Since investment in new and expanded facilities strongly affects the
rate at which productivity grows, overly large differences in standards can
slow productivity gains and raise costs.
Costs can also be appreciably affected by whether the regulatory agency
adopts technical or performance standards. A technical standard specifies
the equipment or process that producers must adopt, such as a particular
engineering approach to reduce coke oven emissions or a specific treatment
to remove industrial wastes from discharged water. A performance
standard sets the expected outcome—in terms of such things as allowable
emissions or quality of discharges—but leaves the choice of method up to
the firm. Technical standards give producers little flexibility or incentive to
search for less costly approaches; instead they must rely on the technological
decisions of the regulatory agency. Performance standards provide greater
freedom for firms to serve their own interest in increasing their profits by
finding less costly approaches. The efficacy of performance standards, how.ever, is sometimes limited by shortcomings in monitoring techniques. Such
standards are only feasible if performance can be monitored with reasonable
reliability and costs.
212
Regulations and Incentives
Running through the earlier discussion of regulatory design was the theme
of flexibility. To the extent that firms can satisfy requirements by meeting
environmental, health, and safety standards—the choice of techniques being
left to them—the national costs of regulation will tend to be reduced, since
each firm wishes to reduce its own costs.
An even broader application of this concept lies in the use of market
incentives as a substitute for or supplement to particular regulatory structures. Regulations are commands to firms and individuals from government,
enforced by civil or in some cases criminal penalties, to undertake particular
actions: meeting a specific performance or technical standard related to
environment, health, or safety by a particular date. An alternative approach
would modify the monetary incentives of the market place to give each
firm an interest in achieving specified standards. Various incentives can be
considered: a fee system that imposed a charge on each pound of pollutant
discharge or on the rate of injuries to workers in industrial plants, for example, or government auctioning of permits to emit a fixed quantity of pollutants within a locality or along a river.
Basically, market incentives impose prices upon unwanted outcomes.
Firms find that creating such outcomes is costly and will seek ways to reduce
them. In the process, decisions on how to correct unwanted side effects and
the pace of corrections are decentralized.
Both the advantages and the problems associated with various incentiveoriented approaches have been extensively discussed elsewhere. For many
reasons these approaches are now used only to a very limited extent. Our Nation has approached the problems of environment, health, and safety
chiefly through reliance on detailed regulation. A body of law and precedent
has thus been established, and administrative mechanisms created on the
basis of this approach.
The advantages of incentive-oriented approaches seem in this light to
lie in supplementing and gradually modifying the regulatory approach,
rather than seeking a wholesale substitution of one system for the other. An
example of a supplemental use of the incentive-oriented approach is the
structure of penalties for violating the automobile fuel efficiency standards.
These penalties follow the principle that the size of the fine should correspond to the costs imposed on society when a firm violates a standard. In
this case, the fine on fuel-inefficient automobiles is related to the social costs
of the extra gasoline that will be required to operate them.
New Directions in Social Regulation
The Administration is now exploring ways to achieve a better mix of
economic and regulatory incentives in several different areas.
In occupational health and safety, the Administration has formed an interagency task force to search for better means of achieving goals of the
213
Occupational Safety and Health Act. The task force has been asked to examine the use of economic incentives, particularly to promote worker safety.
The interagency Resource Conservation Committee is currently studying
the feasibility and desirability of mandatory deposits on beverage containers
to reduce litter. It also is investigating whether fee systems could cut down
the amount of solid waste.
The major use of economic incentives in our current regulatory framework is to enforce standards set by legislative or regulatory bodies. Incentives take the form of fines or penalties for violations of regulations. The
most effective are those in which the size of the fine and the frequency of
inspection are such that firms will comply before the inspector arrives.
The present penalty structures do not always have this result. Fines for
violations of air and water quality standards have generally been small
compared with the costs that the violations impose on society. Under these
conditions the penalties can serve their purpose only with frequent enforcement. Yet the number of inspectors cannot keep pace with the growth in
the regulations. With generally low penalties and infrequent monitoring,
regulatory agencies have turned to such drastic remedies as threatening
plant or mine shutdowns to enforce the rules.
Use of penalty fees based on levels of emissions could supplement the
present arsenal of enforcement techniques and at the same time improve
the efficiency of the regulatory system. For example, properly designed fees
would make processes and commodities entailing severe pollution or serious
hazards more expensive, discouraging their use relative to cleaner or safer
processes. They would also encourage rather than stifle the discovery of
more effective technologies for curbing socially undesirable side effects.
Equally important, fees allow firms more flexibility to plan for the future in
a way that threats of more drastic action do not.
The potential advantages of fees in inducing compliance with regulations suggest that they should receive greater attention by policy makers
than they have done in the past. Administration efforts last year in this
direction included a proposed noncompliance fee for industrial point
sources. The current standards of the Federal Water Pollution Control Act
are based on the installation of discharge-reducing equipment, but the
incentives to maintain that equipment in working order are weak. A noncompliance fee, on the other hand, based on the amount by which actual
discharges exceed allowed amounts, would give firms a strong inducement to
operate the machinery properly. In a similar effort, the Administration initiated a study of economic incentives to control nitrogen oxides as provided
for in the 1977 amendments to the Clean Air Act.
Review and Evaluation of the Regulatory Process
The economic effects of social regulations have rapidly grown more important during recent years, as their number and scope have increased.
Regulatory decisions not only determine the speed at which the Nation
214
advances toward important achievements in environmental protection,
health, and safety; they also substantially affect costs of production, patterns of investment, flows of capital, and locational decisions. Indeed, as
noted earlier, the effects of these decisions on the economy now merit as
much notice as the effects of Federal budgetary decisions.
Improving Federal performance in the regulatory area to minimize the
various costs of achieving our social goals requires improvements in the
design and structure of regulations as well as in the way they are arrived at
and evaluated. The first necessity is a careful analysis and review of the
economic issues in the individual regulations, especially the cost-effectiveness
of various alternatives. Second, a system must be developed through which
the total effect of regulations on social objectives and on the economy can be
brought together and assessed.
To improve the economic analysis and review of individual regulations,
the Administration has instituted a program that will allow the President's
advisers to review the consequences to the economy of major proposed regulations. The program requires the preparation of a Regulatory Analysis
(RA) for each major regulatory proposal. A review group will examine a
limited number of such analyses each year to ensure that full attention is
given to all feasible alternatives before a regulation is issued. Peer review
of the regulatory agencies' decisions should improve the effectiveness and
economic efficiency of the final regulations.
It is not enough, however, to deal solely with individual regulations.
Regulatory requirements from different agencies have sometimes conflicted
with each other, and particular industries, firms, or communities are confronted with a series of regulatory requirements imposed by different Federal
agencies. No one of these may pose serious problems, but taken together they
may have serious economic consequences: increasing costs or requiring large
capital outlays in a short time. There is now no mechanism to assess these
combined effects and take them into account in regulatory decisions. On a
larger scale, there is no institutional framework within the Federal Government—analogous to the budget for Federal spending programs—in which
the total costs of regulations are brought together, to permit the evaluation
of economic impacts, setting of priorities, and the like.
Several steps are planned or already being taken to develop a careful
and appropriate means of reviewing the comprehensive effects of the regulatory process. Last year the heads of the four regulatory agencies concerned
with toxic chemicals—the Environmental Protection Agency, the Occupational Safety and Health Administration, the Food and Drug Administration, and the Consumer Product Safety Commission—formed working
groups that meet regularly to seek a consistent approach to regulation. Early
this year the President will issue an Executive Order that directs Federal
regulatory agencies twice a year to give public notice of the major planned
regulations. Members of the public and senior government officials will thus
215
be able to make orderly preparations for participating in the development
and analysis of the proposed regulations.
Finally, the President has directed his advisers to explore means by which
the overall effects of Federal regulations can be regularly reviewed and
judged within the executive branch. Particular attention must be paid to
availability of data and to the legal and institutional characteristics of regulatory programs. In view of the importance of regulatory programs, however, improving the Government's ability to understand both their economic
and their social effects is a crucial need.
TAX REDUCTION AND REFORM
The Administration's tax proposals are designed to aid continued economic recovery and achieve important tax reforms. The tax relief that
these proposals provide is tied closely to the tax reform elements of the
package. In general the reform measures increase the amount of income
subject to taxation by eliminating various forms of deductions and exclusions. The attendant tax increases are more than offset by lower tax rates.
The net result for calendar year 1979 will be a reduction in Federal tax
liabilities of about $25 billion. Individual tax liabilities will decline by $16.8
billion, the net effect of $23.5 billion of gross tax reductions and $6.7 billion
of revenue-raising reform. Business tax reforms are expected to raise revenues by $2.6 billion. These reforms are offset by cuts in the corporate income
tax and liberalization of the investment tax credit worth $8.3 billion, thus
providing a net corporate tax cut of $5.7 billion. Special tax reductions of
over $2.0 billion are proposed on excise taxes for telephone services and
Federal unemployment insurance taxes in order to reduce prices for consumers and costs for businesses. Chapter 2 contains a discussion of the fiscal
policy issues associated with these tax reductions.
MAJOR INDIVIDUAL INCOME TAX CHANGES
The most fundamental change proposed in the individual income tax is
the replacement of the $750 personal exemption and the general tax credit
with a single per capita tax credit of $240. This change is accompanied
by an across-the-board reduction in tax rates. The new system of personal
credits will replace the current confusing combination of a personal exemption and a credit of $35 per dependent or 2 percent of the first $9,000 of
taxable income and thus simplify tax returns. Moreover, since the tax rate
reduction is proportionately larger in low- and middle-income brackets,
progressivity of the tax system will be increased. The system of personal
credits also alters the way taxes change with family size. Unlike the current
deductions for exemptions, under which families in high brackets gain more
from an additional dependent than those in low brackets, the new credit will
provide the same benefit for an additional dependent at all income levels.
216
For a taxpayer with three dependents the personal credit will be worth $960
regardless of the income of the family.
Additional personal tax reductions may be enacted as part of the Administration's energy plan. Under the Administration's crude oil equalization tax
(COET) proposal of April 1977, the net proceeds are rebated on a per
capita basis to protect consumers' real incomes and to avoid a new source of
restraint on economic activity. If the final energy bill allows only for a rebate
in 1978—as provided in the House version—the Administration intends to
send to Congress a supplemental message recommending that the proposed
individual tax reduction be increased by the amount of the net proceeds of
the COET.
The tax reform package restructures the system of itemized deductions.
Deductions for medical care and casualty losses would be allowed only
for extraordinary expenses—combined medical payments and uninsured
casualty losses in excess of 10 percent of adjusted gross income. Medical and
casualty expenditures should properly be deductible only when they are
unusually large and have a significant impact on the taxpayer's ability to pay.
The deductions for medical care were originally intended to meet this
standard, but the changing relation between medical costs and income has
resulted in the deductibilty of amounts that can no longer be considered
extraordinary. Moreover, the current casualty loss provision is a form of
costless coinsurance that particularly benefits taxpayers in high tax brackets.
The new extraordinary expense provision will restore the law to its original
intent and simplify tax computations for many middle-income taxpayers.
Itemized deductions for State and local sales, gasoline, and miscellaneous
taxes are eliminated. Since these deductions are very closely related to income, a rate reduction may be substituted for them with very little equity loss.
In any case, deductions for gasoline taxes are contrary to our energy goals.
Several reform proposals are directed toward reducing the use of tax
shelters and eliminating other means by which high-income individuals avoid
their fair share of tax. The minimum tax first enacted in 1969 will be strengthened. Under current law, many tax preferences are subject to the minimum
tax of 15 percent, but preference income may be reduced by $10,000 or
one-half of ordinary tax liability, whichever is greater, before the minimum
tax is applied. The proposed elimination of the optional offset of one-half of
ordinary tax liability will increase the ability of the minimum tax to reach
sheltered incomes of high-income taxpayers. In addition, the preferential tax
rate of 25 percent on the first $50,000 of capital gains will be abolished.
Real estate depreciation practices will also be reformed by generally limiting
depreciation deductions to straight line rather than accelerated methods.
These and other related proposals will be directed toward broadening the
provisions of the Tax Reform Act of 1976 that were intended to create a
more equitable tax structure.
217
The Administration's tax package also introduces for the first time a provision for the taxation of unemployment insurance benefits received by highincome families. Unemployment benefits would be taxable for single individuals with total income, including unemployment insurance benefits, above
$20,000 and for married couples with income above $25,000. For each dollar
of income above the threshold, 50 cents of the taxpayer's unemployment
compensation would be taxable. The current system provides an unwarranted
tax advantage for high-income households in which one family member receives unemployment compensation. Since unemployment compensation is
intended to replace lost earnings, it should be taxed in the same way as earnings. At the same time, the high threshold for taxation assures that benefits
will not be taxed when a family's income is low.
MAJOR BUSINESS TAX CHANGES
As discussed in Chapter 2, the most important proposal designed
specifically to aid businesses is the 4-percentage point reduction in the
corporation tax rate. As an additional incentive for investment, the
package also contains proposals to increase the limit on investment tax
credits from 50 percent to 90 percent of tax liability and to extend the
credit to industrial and utility structures as well as equipment. It is further
proposed that the current 10-percent level be made permanent instead of
reverting to 7 percent in 1981. These changes in the investment tax credit
will reduce the cost of new investment and make future tax treatment less
uncertain, thereby creating incentives for additional capital formation. Because investment in industrial structures has grown much more slowly than
investment in equipment since 1973, the move toward equal treatment of
structures and equipment should be particularly beneficial. As a means of
promoting investment in urban areas, rehabilitation expenses for qualified
structures will be eligible for the tax credit.
Business tax reforms include the repeal of business deductions for a
large class of expenses, covering such items as yachts, club dues, tickets to the
theater and sporting events, and the difference between first-class and coach
airfare. The deduction for business meals would be reduced from 100 percent to 50 percent. In many cases these expenditures are a form of tax
exempt compensation that provides little or no business benefit. Elimination of these deductions will be a highly visible improvement in tax equity
and wall ultimately improve overall economic efficiency.
Financial institutions now have a favored tax status that is greatly in need
of revision. Deductions that commercial banks, mutual savings banks, and
savings and loan associations are permitted to make for deposits into bad
debt reserves are considerably higher than the amount necessary to cover
actual losses; credit unions are totally exempt from income taxes. The proposed reforms will reduce excessive deductions for bad debt reserves and will
tax credit unions in the same manner as mutual savings banks and savings
and loan associations.
218
The tax reforms of international business include phasing out preferential
tax treatment for domestic international sales corporations (DISCs) over a
3-year period and also gradually eliminating the deferral of taxes on profits of
domestically controlled foreign corporations. A DISC is a subsidiary set
up to receive export-related income; current law allows a DISC to defer
tax on half its income. This tax preference—enacted in the waning days of
the fixed exchange rate system in 1971—was originally intended to encourage increased exports. But since most of the benefits accrue to corporations
that would export in any case, the small export benefits generated by DISCs
are extremely costly. A recent Treasury study estimated that the tax preference for DISCs contributed only $1 billion to $3 billion to U.S. exports in
1974 at a cost of $1.2 billion. Such a special tax preference is particularly
wasteful in a world with flexible exchange rates. Its overall effect on the
trade balance will eventually be offset by induced exchange rate changes.
The only lasting effect is an increase in production by industries that can
take advantage of the DISC tax preference and a reduction in the output
of all other industries.
Disallowing the deferral of taxes on income of U.S. controlled foreign corporations will equalize the tax treatment of domestic and overseas branches
of U.S. businesses. It will allow the repeal of the complex legislation controlling tax havens and reduce the incentive to distort the allocation of profits
between parent companies and their subsidiaries.
TAX TREATMENT OF MUNICIPAL BONDS
The Administration's tax package also proposes a fundamental change in
the treatment of debt instruments issued by State and local governments.
Under the taxable bond option State and local governments will be given the
choice of issuing either taxable bonds that will receive an interest subsidy
from the Federal Government or conventional tax exempt bonds. The subsidy rate on taxable interest, 35 percent in 1979 and 1980 and 40 percent
thereafter, will lower the borrowing costs of State and local governments.
Currently, issuers of tax exempt bonds pay 30 to 35 percent less interest than
that on comparable taxable bonds. The taxable bond option will increase this
difference to 40 percent in 1981. The larger difference between the yields of
taxable and tax exempt bonds will reduce the value of this tax preference to
wealthy holders of the tax exempt issues.
DISTRIBUTIONAL ASPECTS OF INCOME AND SOCIAL SECURITY TAX
CHANGES
The tax reform package has been designed to improve the distribution
of the individual income tax burden. The three major elements—the personal credit, the revised rate structure, and the reduction in itemized deductions—significantly increase the progressivity of the individual income tax
structure. The effect of these three changes is illustrated in Table 34, which
shows tax reductions for a family of four at several levels of adjusted gross
income. Under current law, a four-person family claiming only the standard
219
TABLE 34.—Income tax liability for one-earner four-person families
{Dollars, except as noted]
Present
law tax *
Adjusted gross income
5,000.
10,000
15,000
20,000
25,000
30,000
40,000
Proposed
tax 2
-300
446
1,330
2,180
3,150
4,232
6,848
Change in tax
as percent
of before-tax
income
Change
in tax
-300
134
1,072
1,910
2,830
3,910
6,630
0
-312
-258
-270
-320
-322
-218
0
-3.1
-1.7
-1.4
-1.3
-1.1
-.5
1 Assumes the greater of the standard deduction or deductible expenses equal to 23 percent of income.
2 Assumes the greater of the standard deduction or deductible expenses equal to 20 percent of income.
Source: Department of the Treasury.
deduction begins paying income tax when its income rises above $7,200
per year. With the proposed changes, the same family would pay no tax
if its yearly income was $9,256 or less. The greatest relative reductions
occur in the low-income brackets. For a four-person family earning $10,000,
income tax liability falls 70 percent from $446 to $134 a year. A family of
four earning $15,000 annually would have its taxes cut from $1,330 to $1,072,
or 19 percent.
Table 35 illustrates the combined effects that the tax reform package and
the recently enacted changes in social security taxes will exert on aggregate
tax liabilities by income class. Tlje combined effect is progressive, as shown
by the final column of the table. Taxpayers with expanded incomes below
$20,000, who earn approximately 56 percent of income, will receive 77 percent of the net tax reduction. This calculation ignores the progressivity of
TABLE 35.—Estimated tax changes resulting from tax reform proposals and social
security amendments
(Billions of dollars, except as noted]
Expanded income
class
(thousands of
dollars)
Tax liability under
current law:
individual income
taxes and social
security taxes1
Amount
5
5-10
10-15
15-20
20-30
30-50
50-100
100-200
200 and over
Total
Percent
distribution
Tax liability under
proposed individual
income tax and
social security tax
Individual and social security tax
changes
Total tax
change
Tax reform
Social
security2
Amount
Percent
distribution
3.0
15.0
27.5
32.3
42.1
25.3
17.4
8.3
6.5
1.7
8.5
15.5
18.2
23.7
14.3
9.8
4.7
3.7
-0.3
-1.5
-2.3
-2.3
-2.1
-.5
.0
.2
.4
-0.4
-1.9
-2.7
-2.9
-3.2
-1.0
-.1
.2
.4
0.1
.3
.5
.5
1.1
.6
.2
.0
.0
2.7
13.5
25.2
30.0
40.0
24.8
17.5
8.5
6.9
1.6
8.0
14.9
17.7
23.7
14.7
10.3
5.0
4.1
177.4
100.0
-8.3
-11.7
3.3
169.1
100.0
1
Employees' share of social security taxes calculated assuming former wage ceiling for 1979 ($18,900) and
former tax rate (5.85 percent). Employers' share of social security tax not included.
2
Employees' share calculated assuming current wage ceiling for 1979 ($22,900) and 1979 tax rate
(6.13 percent). Employers' share of social security tax not included.
Note.—Calculations based on 1976 levels of income and 1979 tax law.
Source: Department of the Treasury.
220
social security benefits and the income distribution effect of business tax
changes. At least as important as this gain in progressivity, however, is the
progress toward other goals that the Administration's tax program will help
to achieve: tax reform, tax simplification, solvency for the social security
system, stimulation of aggregate demand, incentives for investment, and
maintenance of the economic expansion.
INCOME MAINTENANCE
The publicly financed income maintenance system in the United States
is composed of two essential elements: social insurance programs that provide partial replacement of earnings lost because of retirement, disability, or
temporary unemployment; and public assistance, or welfare, programs for
those unable to earn their own living—that is, the aged, the blind, the
permanently disabled, and dependent children whose parents are unable
to support them. The social insurance programs—principally social security
and unemployment compensation—are financed on a pay-as-you-go basis
with earmarked payroll taxes. While these programs are not funded on
strictly actuarial principles and certain of their benefits have the characteristics of public assistance, they have traditionally been viewed by the public
as insurance systems. Apart from limitations on earnings, recipients are
not subjected to an income test as a condition of payment, and benefits are
generally considered to be an earned right and carry no stigma of public
charity. Public assistance programs, on the other hand, are financed out of
general revenues. The benefits are income-tested and hence generally available only to the low-income population.
Total expenditures for income maintenance have risen from about 4
percent of GNP in 1940 to nearly 10 percent in fiscal 1977. The social
insurance programs account for about three-fourths of this total, and
social security is by far the largest single program. The Federal Government finances nearly all the expenditures for social insurance and about
two-thirds of those for public assistance.
Two important changes in the income maintenance system were enacted
during 1977. The Food and Agriculture Act of 1977 made certain structural
modifications to the food stamp program, and the Social Security Amendments of 1977 assured the continued financial viability of the social security
system. In addition, the Administration proposed a major new initiative—
the Program for Better Jobs and Income—to consolidate and rationalize
the several disparate components of the welfare system.
THE FEDERAL WELFARE SYSTEM
The principal public assistance programs created by the Social Security
Act of 1935 were aid to families with dependent children, aid to the blind,
and old age assistance. Since then, these programs have been expanded
and new ones have been enacted. Following is a brief summary of the major
Federal welfare programs in existence today (Table 36).
221
248-947 O - 78 - 15
TABLE 36.—Government income maintenance programs
Fiscal year 1977
Program
Date
enacted
Form of aid
Source of funds
Beneflt
payments
(billions of
dollars)
Beneficiaries
(millions)
Social insurance:
1935
1965
1935
1956
1908
1917
1937
1969
Old age and survivors insurance...
Medicare
Unemployment insurance
Disability insurance
Workmen's compensation
Veterans' compensation
Railroad retirement
Black lung
Cash
In-kind
Cash
Cash
Cash
Cash
Cash
Cash
_
Federal
Federal
Federal-State
Federal . . .
Federal-State...
Federal
Federal
Federal
71.3
20.8
14.3
11.1
6.7
5.7
3.8
1.0
28.5
125.4
9.8
4.7
2.6
3.5
1 0
16.3
21.6
9.8
6.2
5.0
3 5
3.1
3.0
1.4
1.3
1.3
11.2
4.3
17.1
28.0
3.4
7.1
2.0
.9
6.3
Public assistance:
Medicaid
Aid to families with dependent
children
Supplemental security income
Food stamp program
Child nutrition
Veterans' pensions
Housing assistance
Basic opportunity grants
General assistance.
Earned income tax credit
<2>
1965
In-kind
Federal-State
1935
1972
1964
1946
1933
1937
1972
Cash
Cash
In-kind
In-kind
Cash
In-kind
Cash
Cash
Cash
Federal-State
Federal-State
Federal
Federal
Federal
Federal .
Federal . .
_
State.
Federal
1975
1 Eligible to receive benefits as of July 1,1977.
Varies by State.
2
Sources: Department of Agriculture, Department o f Health, Education, and Welfare, Department of Housing and Urban
Development, Department of Labor, Department of the Treasury, and Office of Management and Budget.
Aid to Families with Dependent Children
Aid to families with dependent children (AFDC) is a joint FederalState program that provides cash assistance to families with children under
18 years of age needing support because of the death, prolonged absence,
or incapacity of one or both parents. At the States' option, and provided certain conditions are met, assistance may also be made available to families
where both parents are present but the father is unemployed (AFDC-UF).
As of 1977, 26 States and the District of Columbia operated such programs;
the total number of participating families averaged about 170,000 per
month during fiscal 1977. AFDC payment standards for basic needs are determined separately by each State; in July 1977 the largest payments for a
family of four ranged from $720 a year in Mississippi to $6,396 in Hawaii.
Benefits are reduced by 67 cents for each dollar of monthly earnings over
$30 and after liberal deductions for work expenses. Certain recipients of
AFDC are required to register with the work incentive (WIN) program
and must accept suitable offers of employment or training. The Federal
Government finances about 54 percent of total AFDC expenditures; the
remainder is paid for by the States and a few localities.
Supplemental Security Income
Supplemental security income (SSI) is a Federal program that furnishes
cash assistance to the aged, blind, and disabled. SSI was created in 1972 to
replace the existing joint Federal-State programs providing assistance to
222
these groups. Basic annual SSI payments are about $2,100 for an individual
and about $3,200 for a couple; benefits are reduced by 50 cents for each
dollar of earnings in excess of $65 a month. The basic SSI benefit is uniform
across the country and entirely paid for by the Federal Government; many
States, however, continue to provide supplementary support to SSI
recipients.
Food Stamps
The food stamp program provides the needy with a monthly allotment
of coupons that can be used only to purchase food. This program is the only
form of public assistance that is universally available to all low-income individuals, regardless of their family or employment status. The maximum allotment of food stamps for a family of four with no other income
was $2,088 in 1977, and this is reduced by 30 cents for each dollar of net
income received. With certain exceptions, able-bodied adult recipients of
food stamps are required to register for work and must accept suitable offers
of employment. The Federal Government bears the entire cost of food stamp
benefits and shares administrative expenses with the States.
Medicaid
Medicaid is a Federal-State program that provides free medical services
to the low-income population. Individuals are categorically eligible for
medicaid benefits if they also participate in AFDC or SSI—or, in States with
programs for the "medically indigent," if they meet an income test. In
States without programs for the medically indigent, once individuals become
ineligible for public assistance, they also lose all medical benefits. Benefits
vary significantly among the States, ranging from an estimated average in
1975 of $334 per family in Mississippi to $1,824 in New York. The Federal share of medicaid payments is always at least 50 percent but may be
substantially higher in States with low per capita income.
Housing Assistance
A variety of Federal programs provide housing assistance to low-income
families, including low-rent public housing, interest rate subsidies for home
ownership, and rental subsidies. The newest and most active program was
created in 1974 by an amendment to the Housing Act of 1937 (section 8).
This program provides subsidies to families who occupy new or existing
rental units, and whose incomes are less than 80 percent of the median
income for the area at the time of application. Of the families that meet the
income test, those that belong to specified categorical groups or meet certain
other criteria actually participate in the program. About 8 percent of the
families potentially eligible in 1976 on the basis of their incomes were estimated to have received section 8 assistance. In general, participating families
pay 25 percent of their gross income in rent to eligible landlords, and the
Federal Government makes up the difference between this amount and the
223
local area "fair market rent/ 5 as established by the Department of Housing
and Urban Development. Because of large geographic differentials in housing
costs, section 8 subsidies vary significantly among the States and may reach
several thousand dollars in some areas.
Earned Income Tax Credit
The earned income tax credit (EITC) was enacted by the Tax Reduction Act of 1975, principally to ease the burden of rising payroll taxes on
low-income taxpayers. The EITC is available only to families with at least
one dependent child or a disabled adult claimed as an exemption. The credit
is equal to 10 percent of the first $4,000 of earnings, and it is reduced by 10
percent of the difference between total income and $4,000. Hence the
EITC reaches a maximum of $400, and it phases out completely for those
with incomes above $8,000. If the amount of the credit exceeds total tax
liabilities, the difference is refunded to the eligible family, provided it files
a tax return.
PROBLEMS WITH THE PRESENT WELFARE SYSTEM
Adequacy
Some critics of the welfare system contend that it provides inadequate support, while others believe it is too generous. The official poverty income level
was defined by the U.S. Census Bureau to average $5,815 for a nonfarm
family of four in 1976. Though this concept suffers from certain difficulties in
definition and measurement, it is the most widely accepted indicator of minimum income adequacy in the United States. According to estimates of the
Congressional Budget Office, some 21.4 million families would have had
incomes below the poverty level in fiscal 1976 if no income transfer programs
had been in existence (Table 37). If cash benefits of both the social insurance and the public assistance programs are added to other sources of income,
the number of families with incomes below the poverty level is reduced by
about 50 percent to 10.7 million. If in-kind transfers (for example, food
stamps, medicaid, housing assistance) are also counted as income and taxes
are netted out, the decline in the number of poor families is even more striking. Under this comprehensive definition of income, 6.6 million families
remained below the poverty line in 1976.
Inclusion of in-kind benefits in the measure of income is controversial
and almost certainly overstates the value of such transfers to recipients.
Recipients have been found to value cash more highly than in-kind benefits
because it affords relatively greater freedom of choice in the disposition of
their income. Medical benefits are a particularly controversial item because
of the difficulties in allocating them to the low-income population and because their inclusion seems to imply that the more illness people suffer, the
better off they are. Nevertheless, those who are entitled to receive free
medical assistance are undoubtedly made better off as a result, and it would
be inappropriate to ignore such benefits in a comprehensive measure of
224
TABLE 37.—Families below the poverty level before and after the effects of
income maintenance programs and taxes, fiscal year 1976x
Families below the poverty level, based on income
Before taxes and after cash
and in-kind transfers3
Kind of family
Before taxes
and before
transfers
Before taxes
and after
cash
transfers2
21.4
27.0
10.7
13.5
9.0
11.3
6.4
8.1
10.3
5.4
5.0
Excluding
medical
benefits
Including
medical
benefits
After taxes and after cash
and in-kind transfers4
Excluding
medical
benefits
Including
medical
benefits
All families:
Number (millions)
Percent of all families
_.
9.2
11.5
6.6
8.3
3.5
5.1
3.7
16.4
23.8
17.0
Single-person families:
Number (millions)
Percent of single-person
families
47.8
25.0
23.2
Multiple-person families:
Number (millions)
_
Percent of multiple-person
families
11.1
5.3
4.0
2.9
4.0
2.9
19.2
9.2
6.9
5.0
7.0
5.1
1 Data based on 1975 Current Population Survey, with adjustments to reflect underreporting of income and changes in
the characteristics of the population between the survey year (calendar year 1974) and fiscal year 1976.
2 Cash transfers include payments under government-financed social insurance and public assistance programs.
3
In-kind transfers include food stamps, child nutrition assistance, housing assistance, medicare, and medicaid.
4
Taxes include Federal personal income and employee payroll taxes and State income taxes.
Source: Congressional Budget Office.
income. Table 37 presents changes in the number of families below the
poverty level when medical benefits are included in income and when they
are not. Exclusion of medicaid and medicare increased the total number of
families below the poverty line in 1976 by an estimated 2.6 million.
On balance, regardless of whether in-kind transfers are included in
income, the present income maintenance system significantly improves the
distribution of income that would otherwise exist. Nevertheless, further
progress is still necessary before poverty in the United States is completely
eradicated.
Equity
Even among those who consider benefit levels to be adequate, it is generally agreed that a serious fault of the present welfare system is the different
treatment it accords to people with similar needs. Benefit levels vary widely
among States and among different demographic and family groups. Geographic differentials arise primarily because benefits under the two major
public assistance programs—AFDC and medicaid—are essentially controlled
by the States. As a result, sharp disparities in benefit levels exist between the
poorer, rural States and the wealthier, more urban areas. These differences are mitigated somewhat by the existence of the Federal food stamp
225
program, which adds substantially to AFDC benefit levels in low-income
States. Nevertheless, Table 38 shows that in 1976 a single-parent family
of four with no earnings could obtain combined welfare benefits in New York
City that were more than 2J/2 times larger than those available to the
same family in Mississippi. This disparity is much greater than can be explained by regional differentials in the cost-of-living. Such disparities in
the distribution of benefits are inequitable in and of themselves and create
incentives for migration from low-benefit to high-benefit States.
The variety of public assistance programs and the ways in which they categorize recipients also result in differential treatment of families and demogiaphic groups. Since AFDC payments are restricted to families in which the
father is absent (or, in 26 States, unemployed), the income of a two-parent
family of four, with one parent working full time at the minimum wage, was
TABLE 38.—Comparison of public assistance benefit levels with alternative income
standards, family of four, 1976
Level (dollars)
Item
Median four-person family income...
__.
17,315
_
Bureau of Labor Statistics low-income budget
__
New York City family with AFDC, food stamps, medicaid
10,040
8,302
_
Illinois family with AFDC, food stamps, medicaid
_
Family earning full-time minimum wage, plus food stamps and earned income tax credit
6,412
5,958
Official poverty line
5,815
Texas family with AFDC, food stamps, medicaid
4,174
Mississippi family with AFDC, food stamps, medicaid
2,914
Two-parent family with food stamps only (all States). _.
1,992
Note.—Data relate generally to mid-1976.
Sources: Department of Ccmmerce, Department of Health, Education, and Welfare, and Department of Labor.
only slightly above the poverty level in 1976, even after supplementation
through food stamps and the EITC. In contrast, in many States a mother
with three children can receive welfare benefits that are well above the
poverty line (Table 38). Moreover, if the two-parent family of four has no
earnings and resides in a State without an AFDC-UF program, it is eligible
only for food stamps, unless the father should desert the family. Needless
to say, such disparities are highly inequitable, discourage work effort, and
create incentives for disintegration of families.
The welfare system also discriminates against childless couples and single
individuals who are not aged. Federal income support for these groups is
limited to food stamps worth a maximum of $624 per year per individual.
Hence, the level of public assistance for many poor people is clearly inadequate. Finally, access to certain in-kind programs is restricted by categorical
eligibility requirements (medicaid) or by limited supplies (section 8 housing
226
allowances and day care), and inequities therefore arise. Since the cash
value of in-kind assistance can amount to several thousand dollars, the
resulting differences in benefits can be very large.
Work Incentives
The current welfare system discourages work in several ways. First, inadequate employment and training opportunities for the poor severely limit
their chances to enter the work force and become fully productive members of society. Second, as already noted, in many States earnings from a
minimum wage job plus food stamps amount to less than the welfare benefits available to a family of equal size where no one works. Third, both the
medicaid and AFDG programs have severe "notches," creating situations
where a small increase in earnings can cause recipients to lose their benefits entirely and thus to be worse off as a result of their extra work. Finally,
since all the welfare programs are income tested, an extra dollar of earnings
(after deductions for work-related expenses) yields less than a dollar of net
income. This loss in benefits per dollar of additional earnings is called the
benefit reduction rate, or marginal tax rate, and the higher this rate is,
the smaller the reward for working. No single program has a benefit reduction rate on earned income that exceeds 70 percent. But for poor people
who participate in more than one program, the benefit reduction rates of
all the programs cumulate to yield a much higher total rate. In addition,
workers must pay social security taxes on the first dollar of earnings, and
eventually Federal (and perhaps State) income taxes as well. The net result
in some cases can be marginal tax rates that exceed 100 percent, so that
disincentives to work are strong.
Administrative
Inefficiency and Complexity
The welfare system is both inefficient and exceedingly complex. Administrative expenses account for large portions of the total budgets for the
various programs, and error rates are high. Because the system is slow to respond to the needs of recipients, they become frustrated and their rates of
participation may decline as a result. In addition, administration of the welfare system is split among several units of government, and the programs
operate with a variety of different benefit structures, accounting periods,
filing unit definitions, and work requirements.
Fiscal Burdens
The Federal Government currently pays about two-thirds of total* welfare
costs, the remainder being spread over State and local governments, principally in the AFDC and medicaid programs. However, a small number of
States and localities (mainly in the North and Northeast) bear a heavy share
of this burden, a development that has contributed to their precarious
budgetary situations. The variation in benefit levels that exists has also encouraged migration of poor people to areas where the payments are highest,
227
This in turn has led to a further deterioration of the financial condition of
these governmental units. Of course, these differences in welfare expenditures
implicitly reflect the particular preferences of States and localities regarding the level of income support they wish to provide. Nevertheless, if a
system of income maintenance for the poor is viewed as a truly national
responsibility, the burden of supporting it should be equitably distributed
among the States on the basis of ability to pay.
Policy Control and Responsiveness
As noted above, control over the income maintenance system is fragmented and many low-income persons do not receive satisfactory coverage.
As a result, the Nation does not have a tool to deal with the effects
of other national policies on the distribution of income. For example, the
proposed tax on crude oil contained in the National Energy Plan would, by
raising prices of energy, have a significant impact on real incomes of the
poor. Yet there exists no simple and efficient mechanism to neutralize these
adverse effects. While little thought has been given to this shortcoming in
our income security system, it may be the one that causes the most hardship
to the poor.
CHANGES IN THE FOOD STAMP PROGRAM
The Administration proposed significant changes in the food stamp
program as a first step toward reform and rationalization of the welfare
system. The Congress adopted most of the proposals and extended the
program for 4 years in the Food and Agriculture Act of 1977. The changes
included in the 1977 act are generally designed to achieve a more efficient
operation of the food stamp program, to permit more individuals who are
genuinely poor to participate in the program, and to reduce the availability
of food stamps to those with higher incomes. Eligibility for food stamps is
defined more clearly in the 1977 act than previously, and participation is
limited to those households whose income net of certain deductions is below
the poverty level. In addition, the system of deductions used to arrive at
net income is simplified. The most significant reform in the 1977 legislation was the elimination of the purchase requirement. This feature of the old
program required recipients to pay cash for their food stamp allotments.
The net benefit, or "bonus value," was the difference between the face
value of the stamps and their purchase price. Under the new law, the
basic allotment is simply equivalent to the bonus value. Because recipients
no longer have to buy their food stamps, for a given total income, including
food stamps, the amount of their disposable cash income will increase and
the amount of coupons exchangeable only for food will decline.
THE PROGRAM FOR BETTER JOBS AND INCOME
The Administration's Program for Better Jobs and Income (PBJI)
is a job-oriented proposal designed to replace the existing welfare system
228
with a comprehensive approach to income security for the low-income
population. The new program would provide jobs and employment
services for those who are able to work, income supplementation and strong
work incentives for those who work but whose incomes are inadequate to
support their families, and cash assistance for those who cannot work because
of age, disability, or family circumstance. If enacted, the program would
become fully operational in fiscal 1982. The major features of PBJI are
described below.
Employment Opportunities
A central element of the proposed PBJI is to be an expanded effort to find
jobs in the private and regular public sectors for low-income persons who
are able to work. Prime sponsors under the Comprehensive Employment
and Training Act (CETA), State employment service agencies, and community based organizations are expected to play important roles in assuring
that a full array of employment and training services is made available to
these individuals. When principal wage earners in low-income families
with children cannot find regular employment, PBJI would provide
up to 1.4 million full- and part-time special public service jobs and training
slots. The new public service job program is carefully structured to avoid
disruptive effects on the private economy. Applicants would be required
to engage in an intensive 5-week search for regular employment before
becoming eligible for a special public service job. The jobs themselves would
be temporary and participants must continue to search for a regular job.
To minimize adverse effects on private labor markets and ensure
that jobs in the private sector are more attractive than the special
public service jobs, the basic wage rate would be kept at or slightly above
the minimum wage. Moreover, holders of these jobs would not be eligible
for the earned income tax credit. Finally, it is intended that the job and
training opportunities in this new program would provide useful skills and
work experience to the participants, thus making them better able to obtain
employment in the regular economy. Additional discussion of the public
service employment component of PBJI is contained in Chapter 4 of this
Report.
Cash Assistance and Work Incentives
SSI, food stamps, and the Federal share of AFDC would be consolidated
into a single Federal system of cash assistance. The Federal benefit structure
would be divided into two tiers: an upper tier for those not expected to work
(i.e., the aged, blind, disabled, and single-parent families with children under
7 years), and a lower tier for those who are expected to work (two-parent
families, single-parent families with older children, single individuals, and
childless couples). Families in the second category could move to the upper
tier if neither parent could find work after 8 weeks of search. If a job were
229
found but refused, the family would remain on the lower tier. Adults in
single-parent families where the youngest child is between 7 and 13 years
of age would be expected to work during school hours. They would initially
receive the upper-tier benefit, but if they refused an appropriate part-time
job they would receive the lower-tier benefit.
On the upper tier, the basic Federal benefit in 1978 dollars would be
$2,500 for an aged, blind, or disabled individual, and $4,200 for both a
single-parent family of four and a two-parent family of four, if after a period
of intensive job search the family head was unable to find a regular job.
The level of benefits for a family of four is approximately 65 percent of the
projected poverty threshold in 1978; it exceeds the value of food stamps
plus the Federal share of AFDC in all but one State. The four-person
family on the upper tier would cease to be eligible for benefits when
earned income reached $8,400. On the lower tier, the basic benefit would
be $1,100 for a single individual and $2,300 for a two-parent family of
four. Single individuals would become ineligible for cash assistance at
incomes above $2,200, while working families of four would become ineligible at incomes above $8,400.
The two-tier benefit structure is designed to encourage work and ensure
that the focus of aid to needy families is on employment, not welfare
dependency. The minimum income guarantee on the lower tier provides
strong incentives to work, while successful implementation of the employment aspects of the program would assure that the incomes of families in
these categories need not remain at such low levels. Adults in families in
the expected-to-work category would be given lower cash benefits if they
do not work or if they refuse an appropriate job offer. Once a job is taken,
the first $3,800 of earnings would be disregarded in calculating their Federal
benefit; that is, recipients would face a zero marginal tax rate on those earnings. Thereafter benefits are reduced by no more than 50 cents for each
additional dollar earned above $3,800, or by no more than 52 cents for
each additional dollar in States that supplement the basic benefit level.
For those who are not expected to work, there would be no earnings disregard, and benefit reduction rates could range from 50 percent to 70 percent, depending on the benefit reduction rates applied by States that supplement the Federal benefit. Single-parent families with young children would
be permitted a special deduction to pay for child care.
In addition to the incentives built into the cash benefit structure, the
earned income tax credit would be expanded to increase the rewards for working and to achieve better integration of the welfare system
and the personal income tax structure. For a family of four, the existing
10-percent credit on earnings up to $4,000 would be supplemented by an
additional 5-percent credit on earned income between $4,000 and $9,100,
approximately the point at which such a family would become liable
for Federal income taxes as a result of the proposed tax reform measures
230
discussed in this chapter. The credit would then decline by 10 percent
of the excess of actual income over $9,100. Hence the new EITC would
reach a maximum of about $650 and phase out entirely at an income
of about $15,650 for a family of four. As already noted, those working in the
special public service jobs would not be eligible for the E I T C This exclusion creates an incentive for holders of the special public service jobs to
search for work in the private or regular public sector.
Existing eligibility criteria for medicaid are to be preserved temporarily by
PBJL While the medicaid notch would therefore remain as a disincentive
to work, the forthcoming national health insurance proposals are expected
to address this issue.
To summarize, the Program for Better Jobs and Income is designed to
provide employment opportunities and strong incentives for those who can
work, and adequate cash assistance to those who cannot find a job or are
otherwise unable to work. Consolidation of the three public assistance programs into a uniform Federal system would improve administrative efficiency
and create a structure where error and fraud are less likely. Federal income
support would be extended for the first time to all needy two-parent families,
single individuals, and childless couples, thereby eliminating a major inequity
in the current system and reducing the incentives for families to separate. By
instituting a Federal floor under the incomes of the poor, benefit disparities
among the States would be substantially diminished. Finally, the provision
of cash supplements would be fully integrated with employment and training programs.
State Supplementation and Fiscal Relief
While an important long-run dbjective of welfare reform is to create a
uniform system of benefits, it cannot be achieved overnight. Raising all
benefits to the levels in the high-benefit States would be too costly, and
lowering all benefits to the levels in the low-benefit States would cause severe
hardship. Hence there is a strong case for allowing States to supplement the
basic Federal benefit. To provide fiscal relief for States and localities, while
encouraging a more uniform national system, the Federal Government
would share in the cost of supplementation. The new program provides
that, under certain conditions, the Federal Government would pay 75 percent of the cost of supplementing the benefits of a family of four between
$4,200 and $4,700, and 25 percent of the cost of supplementing from $4,700
to the poverty line. The conditions are that the supplements must employ
the new Federal eligibility standards and that the benefit reduction rate
after supplementation must not exceed 52 percent for those expected to work,
and 70 percent for those not expected to work. Federal sharing in the cost
of such matching supplements would help States maintain existing benefits,
while encouraging them to move toward a structure that embodies the goals
of the new Federal program.
231
It is estimated that State and local governments would realize savings
of about $2 billion on their 1978 welfare expenditures if the Program
for Better Jobs and Income were fully operative this year. The States that
have traditionally had the highest welfare expenditures—California, Illinois,
Massachusetts, Michigan, New York, and Pennsylvania—would realize savings of more than 20 percent on their outlays.
Distributional Implications
The three main components of PBJI—employment opportunities,
cash assistance, and expansion of the EITC—would have different
effects on the distribution of income. Because disparities in benefit
levels among States and demographic groups would be reduced, over
two-thirds of the cash assistance benefits would go to families with
incomes below $5,000. The public service jobs and training programs would
provide a higher fraction of benefits to families farther up the income distribution because these jobs are available to primary earners in families with
children. Nonetheless about half of the wages paid to holders of special
public service jobs would go to families with income under $5,000. The
expansion of the earned income tax credit would provide benefits to families
well up in the income distribution. In fact the maximum benefit for a
family of four is reached when annual earnings are $9,100. The purpose
of this component, however, is not to provide basic income support but to
alleviate the burden of payroll taxes and generally improve work incentives for low- and middle-income families. It is estimated that all three
components combined would reduce the number of families with incomes
below the poverty line by about 1.6 million.
THE SOCIAL SECURITY SYSTEM
Four separate programs together comprise the social security system: old
age and survivors insurance (OASI), disability insurance (DI), hospital
insurance (HI), and supplementary medical insurance (SMI). OASI and
DI are cash benefit programs that replace earnings lost because of retirement, disability, or death; HI and SMI, which are also known as medicare,
provide payments for medical services to the elderly and to disabled workers. OASI, DI, and HI are financed by specific payroll taxes levied on
employees, their employers, and the self-employed. For 1978 the combined
social security tax rate (OASDHI rate) is 12.1 percent and is applied
against earnings of covered workers up to a maximum of $17,700. About
90 percent of all wage and salary earners are currently covered by social
security and therefore subject to mandatory payroll taxes. The major exceptions are Federal Government employees, about 25 percent of State and
local government employees, and some employees of nonprofit institutions.
Approximately 106 million workers contributed to the system in 1977 and
232
total OASDHI tax revenues were $93 billion. Participation in the SMI
program is voluntary; benefits are financed partly through premiums paid
by current beneficiaries and partly out of general revenues.
Benefits under the OASDI programs are calculated according to a procedure that takes into account the average lifetime earnings, age, and other
characteristics of recipients. The benefit formula is progressive and produces proportionately smaller benefits as earnings rise. That is, while highwage workers receive larger dollar benefits than low-wage workers, benefits
as a percentage of preretirement earnings decline as a worker's average wage
increases. For example, the "replacement rate" (first-year benefit as a percentage of earnings in the year before retirement) of a 65-year-old male
retiree wrho has a dependent spouse, and always earned one-half the median
wage for males, was 90 percent in 1977; the replacement rate for a similar
retiree who always earned the maximum wage subject to social security taxes
was only 50 percent. Benefits under the two medical insurance programs are
not tied to earnings histories but provide reimbursement for medical expenses incurred. Table 39 shows the distribution of social security benefits
and recipients among the four programs.
TABLE 39.—Social security benefit payments and beneficiaries, 1977
Number of
beneficiaries
(millions) 2
Program
Total social security..
Old age and survivors insurance (OASI).
Reti red workers
Dependents and survivors
Other
Disability insurance (Dl)
Medicare (HI and SMI)
1
Benefits paid in fiscal year 1977.
2 OASI and Dl beneficiaries as of September 30, 1977. For medicare, entry represents number eligible to receive
benefits as of July 1, 1977.
3
Not applicable.
Source: Department of Health, Education, and Welfare.
The Social Security Financing Problem
In recent years, the OASDI trust funds have been faced with serious
short- and long-run financial problems. Assets in these two trust funds as a
percentage of annual outlays have fallen steadily from slightly over 100
percent in 1970 to 41 percent at the end of 1977. Moreover, since 1975
current expenditures have exceeded receipts, so that the level of assets has
actually declined. It was estimated that without remedial action, Dl trust
fund assets would be exhausted by 1979 and assets in the OASI fund
depleted by 1982 or 1983. Since benefits can only be paid out of the trust
funds, depletion would have required new legislation to prevent OASDI
recipients from receiving less than the full amount of benefits to which they
were entitled.
233
Several factors explain the recent decline in OASDI trust fund balances.
First, since 1972 the benefits for people already retired have been
automatically indexed to changes in consumer prices and as a result have
increased sharply and regularly because of the recent high rates of inflation.
Second, because of high unemployment and the slow growth in real wages
since 1973, payroll tax receipts have not grown as rapidly as benefit payments. Third, since the late 1960s the number of beneficiaries in the disability
insurance program has consistently been higher than expected. Finally, an
unintended consequence of the provision in the Social Security Amendments of 1972 that adjusts benefit schedules automatically for inflation has
been to cause the initial benefits of newly retiring workers to rise somewhat
more rapidly than wages. As a result, initial benefit levels grew by about
6 percent more than preretirement wages between 1973 and 1977.
Over the longer term the cash benefit programs were even more seriously
underfinanced. Under the intermediate set of assumptions in the 1977 report
of the Social Security Trustees, average OASDI expenditures over the next
75 years were estimated to exceed projected payroll taxes by an amount
equivalent to about 8 percent of taxable earnings. This outcome would
have required a tripling of current OASDI tax rates by the year 2050 to
finance benefits provided under the old law.
Roughly half of the long-range deficit in the OASDI programs was
due to the interaction between high rates of inflation and a technical flaw
in the benefit formula under which future retirees received a double adjustment for cost-of-living increases. Benefits were first increased as higher prices
produced higher lifetime earnings.—and therefore higher benefits at retirement—and again as the formula used to compute benefits was also adjusted
upward to account for inflation. As noted above, this double-indexing procedure was made automatic in 1972; it not only raised the level of new
benefits faster than the growth in average wages, but caused the relation
between future benefits and preretirement earnings to vary erratically,
depending on the relative movements of wages and prices. Under plausible
assumptions about projected rates of wage and price inflation, doubleindexing would eventually have caused benefits to exceed preretirement
wages for some workers.
The other half of the 75-year deficit was due to a combination of the
future consequences of the short-run deficit, continued increases in the
incidence of disability, and the sharp projected expansion of the retired
population relative to the working population after the year 2010. Today
there are about 19 persons aged 65 or over for every 100 persons aged
20 through 64. In 2030, under the trustees' assumptions, there will be
about 34 persons aged 65 and over for every 100 persons aged 20 through 64.
This dramatic change is a result of the combined effects of the decline in the
fertility rate (the average number of births a woman can expect to have
234
over her lifetime) and the fact that those born during the post-World War
II baby boom will begin retiring after 2010.
Social Security Amendments of 1977
The Social Security Amendments of 1977 were designed primarily to
prevent the assets of OASDI trust funds from being depleted in the next
few years and to eliminate most of the long-range deficit. Since the Congress has always believed that the social security system should be fully
financed by earmarked payroll taxes, substantial increases in OASDHI taxes
were necessary. The major features of the new legislation are outlined below.
While little could be done to offset the effects of the shifting age distribution of the population, the provision in the old law that double-indexed
benefits for future retirees was corrected. Under the new law, the procedures
that automatically adjust benefits of current and future retirees for inflation are separated, or "decoupled." This change has the effect of eliminating
the extreme sensitivity of projected benefit levels to assumptions about inflation and real wage growth. The new system would stabilize initial benefit
levels for a 65-year-old retiree who always earned the average wage at
about 42 percent of earnings in the year prior to retirement, regardless of
the behavior of wages and prices. As a result, the long-run deficit is cut by
about one-half.
TABLE 40.—Tax rates for social security trust funds, old and new laws, calendar
years 1977-2011
[Percent]
Social Security Amendments of 1977
Prior law
Calendar year
Total
OASI
Total
Dl
OASI
Dl
HI
Employer and employee, each
1977
1978
1979-80
1981..
1982-84
1985
1986-89
1990-2010...
2011 and after.
5.85
6.05
6.05
6.30
6.30
6.30
6.45
6.45
7.45
4.375
4.350
4.350
4.300
4.300
4.300
4.250
4.250
5.100
0.575
.600
.600
.650
.650
.650
.700
.700
.850
0.900
1.100
1.100
1.350
1.350
1.350
1.500
1.500
1.500
5.85
6.05
6.13
6.65
6.70
7.05
7.15
7.65
7.65
1.330
1.525
1.575
1.750
1.750
5.100
5.100
0.575
.775
.750
.825
.825
.950
.950
1.100
1.100
0.900
1.000
1.050
1.300
1.300
1.350
1.450
1.450
1.450
6.185
6.010
6.010
6.7625
6.8125
7.125
7.125
7.650
7.650
0.815
1.090
1.040
1.2375
1.2375
1.425
1.425
1.650
1.650
0.900
1.000
1.050
1.300
1.300
1.350
1.450
1.450
1.450
I. 375
i1.275
Self-employed persons
1977
.
1978
1979-80 ..
1981
1982-84
1985...
1986-89
1990-2010....
2011 and after.
7.90
8.10
8.10
8.35
8.35
8.35
8.50
8.50
8.50
6.185
6.150
6.150
6.080
6.080
6.080
6.010
6.010
6.000
0.815
.850
.850
.920
.920
.920
.990
.990
1.000
Source: Department of Health, Education, and Welfare.
235
0.900
1.100
1.100
1.350
1.350
1.350
1.500
1.500
1.500
7.90
8.10
8.10
9.30
9.35
9.'90
10.00
10.75
10.75
To prevent the assets of the DI trust fund from being exhausted, the
new law provides for a reallocation of current-law tax rates among the trust
funds in 1978. To cover the deficits caused by demographic changes and the
recent recession and inflation, social security tax rates on employers and
employees are to be raised above those in the old law, beginning in 1979
(Table 40). In addition, beginning in 1981 the OASDI rate for the selfemployed is to be adjusted to restore its original relationship of one and
one-half times the OASDI rate for employees. Finally, the taxable wage
base for employers, employees, and the self-employed is to be increased
above the levels provided in the old law, beginning in 1979 (Table 41). The
new legislation maintains the parity principle whereby employers and employees pay taxes on the same amount of earnings.
In 1981, under the new law, a worker with earnings at the taxable maximum of $29,700 would pay social security taxes of $1,975, while a worker
earning the projected average wage in covered employment (about
$12,000) would pay $797. Altogether the higher tax rates and wage bases
are expected to yield $89 billion in new social security tax revenues in the 5
years between 1979 and 1983. As noted in Chapter 2, these increases are
an important component of the fiscal restraint on the economy that may
have to be offset by tax reductions if we are to achieve our long-term
economic goals.
TABLE 41.—Social security contribution and benefit base, old and new laws,
calendar years 1977-83
Contribution and benefit base l
Calendar year
Prior law
1977
1978
1979
1980
1981 . .
1982
1983
$16, 500
17, 700
18,900
20,400
21,900
23,700
25,800
_.
Social Security
Amendments
of 1977
$16, 500
17, 700
22,900
25,900
29, 700
32,100
34,800
i After 1978 under the old law and after 1981 under the new law, based on path of wages projected in the Budget of the
United States Government, Fiscal Year 1979.
Source: Department of Health, Education, and Welfare.
Several changes were also made in the OASDI benefit structure: an
increase in the amount of earnings allowed to retirees aged 65 and over
before their benefits are reduced; an increase in the bonus for postponing
retirement beyond age 65; and a freezing of the regular minimum benefit
for future beneficiaries at its January 1979 level. The bill also provides for
a one-time $187-million payment to State and local governments in fiscal
1978 to help relieve the cost of their public assistance programs.
Some longer-term issues were not addressed by the 1977 legislation—
for example, the differential treatment of one- and two-earner households
236
in the benefit structure and the interaction between the cash benefit
programs and private retirement systems. But the Social Security Amendments of 1977 nonetheless did remove the threat that the cash benefit
programs would actually run out of funds; they corrected an obvious flaw
in the benefit computation formula; and they reduced the average deficit
over the next 75 years from 8 percent to an estimated 1 l/<x percent of payroll.
237
248-947 O - 78 - 16
Appendix A
REPORT TO THE PRESIDENT ON THE ACTIVITIES
OF THE
COUNCIL OF ECONOMIC ADVISERS DURING 1977
239
LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS,
Washington, D.C., December 30,1977.
M R . PRESIDENT:
The Council of Economic Advisers submits this report on its activities
during the calendar year 1977 in accordance with the requirements of the
Congress, as set forth in section 4(d) of the Employment Act of 1946.
Cordially,
CHARLES L. SCHULTZE, Chairman.
LYLE E. GRAMLEY.
WILLIAM D. NORDHAUS.
241
Report to the President on the Activities of the
Council of Economic Advisers during 1977
The membership of the Council of Economic Advisers changed entirely
in January 1977 when the Garter Administration took office. Charles L.
Schultze became Chairman of the Council on January 22, 1977, replacing
Alan Greenspan, who returned to Townsend-Greenspan, New York. Mr.
Schultze had been a senior fellow at the Brookings Institution in Washington,
D.C.
Lyle E. Gramley and William D. Nordhaus became Members on
March 18, 1977, succeeding Burton G. Malkiel, who returned to Princeton
University. Mr. Gramley came to the Council from the Board of Governors
of the Federal Reserve System. Mr. Nordhaus is on leave of absence from
Yale University, where he is Professor of Economics and a member of the
Cowles Foundation for Research in Economics.
Past Council Members and their dates of service are listed below
Name
Edwin G. Nourse
Leon H. Keyserling
John D. Clark.
Roy Blough..
Robert C. Turner
Arthur F. Burns
Neil H. Jacoby
Walter W. Stewart...
Raymond J. Saulnier
Joseph S. Davis.
Paul W. McCracken...
Karl Brandt
Henry C. Wallich
Walter W. Heller
James Tobin
Kermit Gordon..
Gardner Ackley
John P. Lewis
Otto Eckstein
Arthur M. Okun.
James S. Duesenberry
Merton J. Peck
Warren L. Smith
Paul W. McCracken-...
Hendrik S. Houthakker
Herbert Stein.
Ezra Solomon
Marina v.N. Whitman
Gary L. Seevers
William J. Fellner
Alan Greenspan..
Paul W. MacAvoy
Burton G. Malkiel
Position
Oath of office date
Augusts 1946.
Augusts 1946
November 2,1949
May 10,1950
Augusts 1946
May 10,1950
June 29,1950
September 8,1952
March 19,1953...
September 15,1953
December 2,1953
April 4,1955
December 3,1956
May 2,1955
December 3,1956
November 1,1958.
May 7,1959
January 29,1961
January 29,1961
January 29,1961
August 3,1962
November 16,1964
May 17,1963
September 2,1964
November 16,1964
February 15,1968
February 2,1966
February 15,1968
July 1,1968.
February 4,1969
February 4,1969
February 4,1969
January 1,1972
September 9,1971
March 13,1972...
July 23,1973
October 31,1973
September 4,1974..
June 13,1975.
July 22,1975....
Chairman
Vice Chairman
Acting Chairman
Chairman
Member
Vice Chairman
Member
Member
Chairman
Member..
Member
Member
_
Chairman
Member
Member..
Member
Member
Chairman..
_ Member
Member.
Member
Chairman
Member.
Member.
Member
Chairman...
Member
Member
Member..
Chairman
Member
Member.
Chairman..
Member
Member.
Member
Member
Chairman
Member..
Member
243
Separation date
November 1,1949.
January 20,1953.
February 11,1953.
August 20, 1952.
January 20,1953.
December 1,1956.
February 9, 1955.
April 29, 1955.
January 20,1961.
October 31,1958.
January 31,1959.
January 20,1961.
January 20, 1961.
November 15,1964.
July 31,1962.
December 27, 1962.
February 15,1968.
August 31,1964.
February 1,1966.
January 20,1969.
June 30, 1968.
January 20,1969.
January 20,1969.
December 31,1971.
July 15,1971.
August 31,1974.
March 26,1973.
August 15, 1973.
April 15,1975.
February 25,1975.
January 20,1977.
November 15,1976.
January 20,1977.
RESPONSIBILITIES OF THE COUNCIL
The principal directive of the Employment Act is that the Federal
Government "use all practicable means consistent with its needs and obligations . . . for the purpose of creating and maintaining . . . conditions . . . to promote maximum employment, production, and purchasing
power."
To this end, the Council of Economic Advisers analyzes economic problems and interprets trends and changes in the economy in order to help
the President develop and evaluate national economic policies. The Council
prepares regular reports on current economic conditions in the United
States and abroad and prepares forecasts of future economic developments.
The Council also performs an advisory role within the Executive Office
of the President and participates in interagency groups that analyze economic problems and develop programs to address them.
During 1977 the Council and its staff contributed to the study of a wide
variety of economic issues. An important part of the Council's work during
the year was to analyze current developments in business activity and evaluate alternative macroeconomic policies in keeping with the President's
efforts continually to assess his decisions on taxation and expenditures within
the context of long-run budgetary and economic requirements. The Council
participated in the development of such Administration initiatives as welfare reform, tax reform, social security financing proposals, the National
Energy Plan, agricultural legislation, minimum wage legislation, and urban
policy proposals, and played a major role in the development of the Administration's international economic policies.
The Council, in cooperation with other Government agencies, became
actively involved in many different regulatory reform issues. The Regulatory Analysis Program authorized by the President in 1977 called upon the
Council to establish and chair an interagency group to review analyses
prepared by regulatory agencies of the economic consequences of major
regulatory proposals. This review is intended to assure that the costs of
regulatory proposals have been considered, including the costs of all alternative methods of regulation, so that the least-cost approach to regulation
may be found and applied.
Early each year the President submits the Economic Report of the President to the Congress as required by the Employment Act. The Council
assumes major responsibility for the preparation of the Report, which together with the Annual Report of the Council of Economic Advisers reviews
the progress of the economy during the preceding year and outlines the
Administration's policies and programs.
The Chairman of the Council of Economic Advisers is a member of the
Economic Policy Group (EPG) and of its Executive Committee and Steering Committee. The EPG was formed in January 1977 to direct the formulation and coordination of economic policy. The Steering Committee meets
weekly to address current issues of economic policy.
244
The Chairman of the Council also heads the U.S. delegation to the Economic Policy Committee of the Organization for Economic Cooperation and
Development (OECD). Council Members and staff economists meet with
various working parties of the committee and attend other meetings of the
OECD during the year.
The review and analysis of the overall performance of the economy is
conducted and coordinated through interagency working groups comprising
representatives from the Council, the Treasury, the Office of Management
and Budget, and the Departments of Commerce and Labor. At regular
intervals representatives of these agencies, chaired by the Council, meet to
evaluate recent economic performance and formulate economic forecasts.
The analysis and projections developed at these sessions are finally reviewed
and cleared through the Chairman of the Council for presentation to and
consideration by the Economic Policy Group and the President.
The Joint Economic Committee of the Congress (JEC), like the Council,
was created by the Employment Act of 1946 to make a continuing study of
matters relating to the economy and to submit its own report and recommendations to the Congress. During 1977 the Chairman and Members of the
Council appeared twice before the JEC and once before its Subcommittee
on International Economics. The Chairman and Council Members also
presented testimony before the House Budget Committee; the House Appropriations Committee; the House Ways and Means Committee and its Subcommittee on Trade; the House Committee on Banking, Finance, and
Urban Affairs and its Subcommittee on Economic Stabilization; the House
Ad Hoc Committee on Energy; the House Committee on Public Works and
Transportation and its Subcommittee on Investigations and Review; the
House Appropriations Committee's Subcommittee on Treasury, Postal Services, and General Governmental Affairs; the House Committee on Interstate and Foreign Commerce and its Subcommittee on Energy and Power;
the Senate Budget Committee; the Senate Finance Committee; the Senate
Appropriations Committee; the Senate Commerce Committee and its Subcommittee on Aviation; and the Senate Committee on Banking, Housing,
and Urban Affairs.
PUBLIC INFORMATION
The annual Economic Report of the President and the Annual Report of
the Council are the principal publications through which the public is informed of the Council's work and views. These publications are also an important vehicle for presenting and explaining the Administration's overall
economic policy, both domestic and international. Distribution of Reports in
recent years has averaged about 50,000 copies. The Council also assumes
primary responsibility for preparing Economic Indicators, a monthly publication prepared by the Council's Statistical Office and issued by the Joint
Economic Committee. Economic Indicators has a monthly distribution of
approximately 10,000 copies.
245
Information is also provided to members of the public through speeches
and other public appearances by the Chairman, the Members, and the
senior staff economists. Each year the Council answers numerous requests
from the press and provides information in response to inquiries from individual citizens. In addition, the Council and staff receive frequent visits
from business, academic, and other groups and individuals.
ORGANIZATION AND STAFF OF THE COUNCIL
OFFICE OF THE CHAIRMAN
The Chairman is responsible for communicating the Council's views to
the President. This duty is performed through direct consultation with the
President, and through written reports on economic developments and on
particular programs and proposals. The Chairman represents the Council at
meetings of the Cabinet and in many other formal and informal contacts
with Government officials.
COUNCIL MEMBERS
The two Council Members are responsible for all subject matter covered
by the Council, including direct supervision of the work of the professional
staff. Members represent the Council at a wide variety of meetings and
assume major responsibility for the Council's involvement in many activities.
In practice, the small size of the Council's staff permits the Chairman
and Council Members to work as a team in most circumstances. There is,
however, an informal division of subject matter between them. Mr. Gramley
assumed primary responsibility in 1977 for macroeconomic analysis, including the preparation of economic forecasts. Mr. Nordhaus is primarily
responsible for international economic analysis and for microeconomic
analysis, including such policy areas as energy, agriculture, labor markets,
social welfare, and regulated industries.
PROFESSIONAL STAFF
At the end of 1977 the professional staff consisted of the Special Assistant
to the Chairman, 10 senior staff economists, 2 staff economists, 1 statistician,
and 6 junior staff economists. Members of the professional staff were
responsible for economic analysis and policy recommendations in major
subject areas involving the Council's interests and responsibilities.
The professional staff and their special fields at the end of the year were:
Peter G. Gould
Special Assistant to the Chairman
246
Senior Staff Economists
Roger E. Brinner
Peter K. Clark
Nina W. Cornell
George E. Johnson
Susan J. Lepper
David C. Munro
J. B. Penn
Jeffrey R. Shafer
William L. Springer
David A. Wyss
Business Conditions Analysis, Econometrics,
and Forecasting
Macro- and Microeconomic Analysis, Econometrics, Trade, and Aggregate Supply
Regulated Industries, Transportation, Environmental, and Health and Safety Issues
Labor Policy, Human Resources, Welfare, and
Health Issues
Monetary Policy, Financial Institutions, Capital Markets, Housing, and State and Local
Finances
Business Conditions Analysis, Econometrics,
and Forecasting
Agriculture and Food Policy
International Finance and Trade
Fiscal Policy, Public Finance, Income Distribution, Human Resources, Welfare, and
Health Issues
Macro- and Microeconomic Analysis, Econometrics, and Prices and Wages
Statistician
Catherine H. Furlong
Arthur E. Blakemore
Robert E. Litan
Michael S. Golden
Howard K. Gruenspecht
Richard I. Kolsky
Richard A. Koss
Julianne M. Malveaux
Martha M. Parry
Senior Statistician
Staff Economists
Labor Markets
Energy Analysis and Policy, Science and Technology, and Natural Resources
Junior Staff Economists
Agriculture and Food Policy, Econometrics, and
Forecasting
Regulation, Monetary Developments, and Industry Analysis
Regulation, Energy Policy, and Industry Analysis
Econometrics and Forecasting
Labor Markets and Monetary Developments
International Economics
Catherine H. Furlong, Senior Statistician, is in charge of the Council's
Statistical Office. In 1977 Mrs. Furlong replaced Frances M. James, who
retired after 31 years of service as Senior Statistician for the Council. Mrs.
Furlong has primary responsibility for managing the Council's statistical
information system. She supervises the publication of Economic Indicators
and the preparation of the statistical appendix to the Economic Report. She
also oversees the verification of statistics in memoranda, testimony, and
speeches. Natalie V. Rentfro and Earnestine Reid assist Mrs. Furlong.
247
George C. Eads (The Rand Corporation), Murray F. Foss (National
Bureau of Economic Research), and John B. Shoven (Stanford University)
served as consultants to the Council.
In preparing the Economic Report the Council relied upon the editorial
assistance of Rosannah C. SteinhofT. Also called on for special assistance in
connection with the Report was Dorothy L. Reid, a former member of the
Council staff.
SUPPORTING STAFF
The Administrative Office provides administrative support for the Council. Nancy F. Skidmore, Administrative Officer, prepares and analyzes the
budget and provides general administrative services. Duplicating, mail, and
messenger services were the responsibility of James W. Gatling and Frank
C. Norman. Elizabeth A. Kaminski serves as Staff Assistant to the Council.
Members of the secretarial staff for the Chairman and Council Members
during 1977 were Patricia A. Lee, Linda A. Reilly, Florence T. Torrison,
and Alice H. Williams. Secretaries for the professional staff were M.
Catherine Fibich, Bessie M. Lafakis, Joyce A. Pilkerton, Bettye T. Siegel,
Margaret L. Snyder, and Lillie M. Sturniolo.
DEPARTURES
The Council's professional staff members are drawn primarily from universities and research institutions. Senior staff economists who resigned
during the year were Barry P. Bosworth (Council on Wage and Price
Stability), Barry R. Chiswick (Hoover Institution, Stanford University),
John M. Davis, Jr. (Federal Reserve Bank of Cleveland), Bruce L. Gardner
(Texas A&M University), Helen B. Junz (Department of the Treasury),
Michael D. McCarthy (Wharton Econometric Forecasting Associates, Inc.),
John J. Siegfried (Vanderbilt University), John B. Taylor (Columbia University), and Philip K. Verleger, Jr. (Department of the Treasury). Doral
S. Cooper, staff economist, resigned to accept a position with the Special
Representative for Trade Negotiations.
Frances M. James, Senior Staff Statistician of the Council, retired in
1977 after having served on the staff since 1946. More than any other
person she was responsible for establishing and maintaining a standard of
rigorous accuracy in the data used by the Council and published in the
Council's Annual Report and monthly Economic Indicators. A generation
of economists who have been members of the Council of Economic Advisers have been indebted to her for wise guidance in the exercise of their
duties. All future Councils, although they will not have the privilege of
working with her, will nevertheless be the beneficiaries of the tradition she
left behind.
248
Junior economists who resigned in 1977 were Richard E. Browning
(Georgetown University), Timothy H. Quinn (University of California,
Los Angeles), Barbara A. Smith (Mathematica Policy Research, Inc.),
Paul G. Westcott (Department of Agriculture), and Benjamin Zycher (University of California, Los Angeles). Retired during the year were Dorothy
Bagovich, statistical assistant, and Dorothy L. Green, secretary. Margaret A.
Bocek, secretary, resigned from the Council staff.
249
Appendix B
STATISTICAL TABLES RELATING TO INCOME,
EMPLOYMENT, AND PRODUCTION
251
CONTENTS
NATIONAL INCOME OR EXPENDITURE:
B-l. Gross national product, 1929-77
B-2. Gross national product in 1972 dollars, 1929-77
B-3. Implicit price deflators for gross national product, 1929-77
B-4. Implicit price deflators and alternative price measures of gross
national product and gross domestic product, 1929-77
B-5. Gross national product by industry in 1972 dollars, 1947-76
B-6. Gross national product by major type of product, 1929-77
B-7. Gross national product by major type of product in 1972 dollars,
1929-77
B-8. Gross national product: Receipts and expenditures by major economic groups, 1929-77
B-9. Gross national product by sector, 1929-77
B-10. Gross national product by sector in 1972 dollars, 1929-77
B-ll. Gross domestic product of nonfinancial corporate business, 1929-77. .
B-l2. Output, costs, and profits of nonfinancial corporate business, 1948-77.
B-l 3. Personal consumption expenditures, 1929-77
B-14. Gross private domestic investment, 1929-77
B-l5. Inventories and final sales of business, 1946-77
B-16. Inventories and final sales of business in 1972 dollars, 1947-77
B-l7. Relation of gross national product and national income, 1929-77....
B-18. Relation of national income and personal income, 1929-77
B-19. National income by type of income, 1929-77
B-20. Sources of personal income, 1929-77
B-21. Disposition of personal income, 1929-77
B-22. Total and per capita disposable personal income and personal consumption expenditures in current and 1972 dollars, 1929-77
B-23. Gross saving and investment, 1929-77
B-24. Saving by individuals, 1946-77
B-25. Number and money income (in 1976 dollars) of families and unrelated
individuals by race of head, 1947-76
,.
POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY:
B-26. Population by age groups, 1929-77
B-27. Noninstitutional population and the labor force, 1929-77
B-28. Civilian employment and unemployment by sex and age, 1947-77. .
B-29. Selected employment and unemployment data, 1948-77
B-30. Unemployment rate by demographic characteristic, 1948-77
B-31. Unemployment by duration, 1947-77
B-32. Unemployment by reason, 1967-77
B-33. Unemployment insurance programs, selected data, 1946-77
B-34. Wage and salary workers in nonagricultural establishments, 1929-77.
B-35. Average weekly hours and hourly earnings in selected private nonagricultural industries, 1947-77
B-36. Average weekly earnings in selected private nonagricultural industries, 1947-77
B-37. Productivity and related data, private business economy, 1947-77. . .
B-38. Changes in productivity and related data, private business economy,
1948-77
253
248-947 O - 78 - 17
Page
257
258
260
262
263
264
265
266
268
269
270
271
272
273
274
275
276
277
278
280
282
283
284
285
286
287
288
290
291
292
293
294
295
296
298
299
300
301
PRODUCTION AND BUSINESS ACTIVITY:
B-39.
B-40.
B-41.
B-42.
B-43.
B-44.
B-45.
B-46.
B-47.
B-48.
Page
Industrial production indexes, major industry divisions, 1929-77. .. .
Industrial production indexes, market groupings, 1947-77
Industrial production indexes, selected manufactures, 1947-77
Capacity utilization rate in manufacturing, 1948-77
New construction activity, 1929-77
New housing units started and authorized, 1959-77
Business expenditures for new plant and equipment, 1947-78
Sales and inventories in manufacturing and trade, 1947-77
Manufacturers' shipments and inventories, 1947-77
Manufacturers' new and unfilled orders, 1947-77
302
303
304
305
306
308
309
310
311
312
Consumer price indexes by expenditure classes, 1929-77
Consumer price indexes by commodity and service groups, 1939-77 .
Consumer price indexes, selected commodities and services, 1939-77.
Consumer price indexes for commodity groups, seasonally adjusted,
1974-77
Consumer price indexes for service groups and selected expenditure
classes, seasonally adjusted, 1974-77
Percent changes in consumer price indexes, major groups, 1948-77. .
Wholesale price indexes by major commodity groups, 1929-77
Wholesale price indexes by stage of processing and by special groupings, 1947-77
Wholesale price indexes for selected groupings, seasonally adjusted,
1974-77
Percent changes in wholesale price indexes, major groups, 1948-77. .
313
314
315
PRICES:
B-49.
B-50.
B-51.
B-52.
B-53.
B-54.
B-55.
B-56.
B-57.
B-58.
316
317
318
319
321
323
324
MONEY STOCK, CREDIT, AND FINANCE:
B-59.
B-60.
B—61.
B-62.
B-63.
B-64.
B-65.
B-66.
B-67.
Money stock measures, 1947-77
Commercial bank loans and investments, 1930-77
Liquid asset holdings, private domestic nonfinancial investors, 1952—77.
Total funds raised in credit markets by nonfinancial sectors, 1969-77.
Federal Reserve Bank credit and member bank reserves, 1929-77. . .
Aggregate reserves and deposits, member banks, 1959-77
Bond yields and interest rates, 1929-77
Instalment credit extensions and liquidations, 1971-77
Mortgage debt outstanding by type of property and of financing,
1939-77
B-68. Mortgage debt outstanding by holder, 1939-77
B-69. Net public and private debt, 1929-76
325
326
327
328
330
331
332
334
335
336
337
GOVERNMENT FINANCE:
B-70. Federal budget receipts, outlays, and debt, fiscal years 1969-79
B-71. Federal budget receipts and outlays, fiscal years 1929-79
B-72. Relation of the Federal budget to the Federal sector of the national
income and product accounts, fiscal years 1977-79
B-73. Receipts and expenditures of the government sector of the national
income and product accounts, 1929-77
B-74. Receipts and expenditures of the Federal Government sector of the
national income and product accounts, 1952-79
B-75. Receipts and expenditures of the State and local government sector of
the national incoms and product accounts, 1946-77
B-76. State and local government revenues and expenditures, selected fiscal
years, 1927-76
B-77. Interest-bearing public debt by kind of obligation, 1967-77
254
338
340
341
342
343
344
345
346
GOVERNMENT FINANCE—Continued
B-78. Estimated ownership of public debt securities, 1967-77
B-79. Average length and maturity distribution of marketable interestbearing public debt held by private investors, 1967-77
CORPORATE PROFITS AND FINANCE:
B-80. Corporate profits with inventory valuation and capital consumption
adjustments, 1946-77
B-81. Corporate profits by industry, 1929-77
B-82. Corporate profits of manufacturing industries, 1929-77
B-83. Sales, profits, and stockholders' equity, all manufacturing corporations, 1947-77
B-84. Relation of profits after taxes to stockholders' equity and to sales, all
manufacturing corporations, 1947-77. . .
B-85. Relation of profits after taxes to stockholders' equity and to sales, all
manufacturing corporations, by industry group, 1976-77
B-86. Sources and uses of funds, nonfarm nonfinancial corporate business,
1946-77
B-87. Current assets and liabilities of U.S. corporations, 1939-77
B-88. State and municipal and corporate securities offered, 1934-77
B-89. Common stock prices and yields, 1949-77
B-90. Business formation and business failures, 1929-77
AGRICULTURE:
B-91. Income of farm people and farmers, 1929-77
B-92. Farm production indexes, 1929-77
B-93. Farm population, employment, and productivity, 1929-77
B-94. Indexes of prices received and prices paid by farmers and selected farm
resource prices, 1929-77
B-95. Selected measures of farm resources and inputs, 1929-77
B-96. Comparative balance sheet of the farming sector, 1929-78
INTERNATIONAL STATISTICS:
B-97. U.S. international transactions, 1946-77
B-98. U.S. merchandise exports and imports by principal end-use categories,
1965-77
B-99. U.S. merchandise exports and imports by area, 1971—77
B-100. International investment position of the United States at year-end,
1970-76.
B-101. Summary of major U.S. Government net foreign assistance, July 1,
1945 to December 31, 1976
B-102. International reserves, 1952, 1962, and 1973-77
B-103. World trade: Exports and imports, 1965, 1970, and 1973-77
B-104. World trade balance and current account balances, 1965, 1970,
and 1973-77
B-105. Consumer prices and hourly compensation, major industrial countries, 1960-77
B-106. Industrial production and unemployment rate, major industrial
countries, 1960-77
B-107. Growth rates in real gross national product, 1961-77
B-108. Exchange rates, 1970-77
255
Page
347
348
349
350
352
354
355
356
357
358
359
360
361
362
363
364
365
366
367
368
370
371
372
373
375
376
377
378
379
380
381
General Notes
Detail in these tables may not add to totals because of rounding.
Unless otherwise noted, all dollar figures are in current dollars.
Symbols used:
* Preliminary.
_ . Not available (also, not applicable).
256
NATIONAL INCOME OR EXPENDITURE
T A B L E B-l.—Gross national product, 1929-77
IBillicns of dollars, except as ncted; quarterly data at seasonally adjusted annual rates]
Year or quarter
Gross
national
product
Net exports of goods
and services
Personal Gross
con- private
sump- dotion mestic Net
ImExex- investpend- ment exports ports ports
itures
Government purchases of goods and
services
Federal
Total
Total
State
and
National Non- local
de- i defense
fense
Percent
change
from
preceding
period,
gross
national
product »
103.4
77 3
16.2
1.1
7.0
5.9
8.8
1.4
1933
55.8
45.8
1.4
.4
2.4
2.0
8.2
2.1
1939
90.8
67.0
9.3
1.1
4.4
3.4
13.5
5.2
1.2
3.9
8.3
6.9
1940
1941
1942.
1943
1944
1945 .
1946
1947
1948
1949
100.0
124.9
158.3
192.0
210 5
212.3
209.6
232.8
259.1
258.0
71.0
80 8
88.6
99.4
108 2
119 5
143.8
161.7
174 7
178.1
13.1
17 9
9.9
5.8
72
10.6
30.7
34.0
45.9
35.3
1.7
1.3
.0
-2.0
-1.8
-.6
7.6
11.6
6.5
6.2
5.4
5.9
4.8
4.4
5.3
7.2
14.8
19.8
16.9
15.9
3.6
4.6
4.8
6.5
7.1
7.8
7.2
8.2
10.4
9.6
14.2
24.9
59.8
88.9
97.0
82.8
27.5
25.5
32.0
38.4
6.1
16.9
52.0
81.3
89.4
74.6
17.6
12.7
16.7
20.4
2.2
13.7
49.4
79.7
87.4
73.5
14.8
9.0
10.7
13.2
3.9
3.2
2.6
1.6
2.0
1.1
2.8
3.7
6.0
7.2
8.1
8.0
7.8
7.5
7.6
8.2
9.9
12.8
15.3
18.0
10.1
24 9
26.8
21.3
96
.9
-1.3
11.1
11.3
-.4
1950
1951
1952
1953
1954
1955
1956 .
1957
1958
1959 .
286.2
330.2
347 2
366.1
366.3
399 3
420.7
442.8
448.9
486.5
192 0
207.1
217 1
229 7
235.8
253 7
266.0
280.4
289.5
310.8
53.8
59.2
52.1
53.3
52.7
68 4
71.0
69.2
61.9
77.6
1.9
3.8
2.4
.6
2.0
2.2
4.3
6.1
2.5
.6
13.9
18.9
18.2
17.1
18.0
20.0
23.9
26.7
23.3
23.7
12.0
15.1
15.8
16.6
16.0
17.8
19.6
20.7
20.8
23.2
38.5
60.1
75.6
82.5
75.8
75.0
79.4
87.1
95.0
97.6
18.7
38.3
52.4
57.5
47.9
44.5
45.9
50.0
53.9
53.9
14.0
33.5
45.8
48.6
41.1
38.4
40.2
44.0
45.6
45.6
4.7
4.8
6.5
8.9
6.8
6.0
5.7
5.9
8.3
8.3
19.8
21.8
23.2
25.0
27.8
30.6
33.5
37.1
41.1
43.7
10.9
15.4
51
5.5
.0
9.0
5.4
5.2
1.4
8.4
506 0
523.3
563.8
594.7
635 7
688.1
753.0
796.3
868.5
935.5
324 9
335.0
355.2
374.6
400 4
430 2
464.8
490 4
535.9
579.7
76 4
74.3
85.2
90.2
96 6
112.0
124.5
120 8
131.5
146.2
4.4
5.8
5.4
6.3
8.9
7.6
5.1
4.9
2.3
1.8
27.6
28.9
30.6
32.7
37.4
39.5
42.8
45.6
49.9
54.7
23.2
23.1
25.2
26.4
28.4
32.0
37.7
40.6
47.7
52.9
100.3
108.2
118.0
123.7
129.8
138.4
158.7
180.2
198.7
207.9
53.7
57.4
63.7
64.6
65.2
67.3
78.8
90.9
98.0
97.5
44.5
47.0
51.1
50.3
49.0
49.4
60.3
71.5
76.9
76.3
9.3
10.4
12.7
14.3
16.2
17.8
18.5
19.5
21.2
21.2
46.5
50.8
54.3
59.0
64.6
71.1
79.8
89.3
100.7
110.4
4.0
3.4
7.7
5.5
69
8.2
9.4
5.8
9.1
7.7
982.4
618.8
1, 063.4
668.2
733 0
1.171.1
1, 306.6
809.9
1,412.9
889 6
1, 528.8 980.4
1, 706. 5 1, 094 0
1,890.4 1,210 1
140.8
160.0
188 3
220.0
214.6
189.1
243.3
294 3
3.9
1.6
-3.3
7.1
6.0
20.4
7.8
-9 0
62.5
65.6
72.7
101.6
137.9
147.3
162.9
175 6
58.5
64.0
75.9
94.4
131.9
126.9
155.1
184.7
218.9
233.7
253.1
269.5
302.7
338.9
361.4
395.0
95.6
96.2
102.1
102.2
111.1
123.3
130.1
145.4
73.5
70.2
73.5
73.5
77.0
83.9
86.8
94.3
22.1
26.0
28.6
28.7
34.1
39.4
43.3
51.1
123.2
137.5
151.0
167.3
191.5
215.6
231.2
249.5
5.0
8.2
10.1
11.6
8.1
8.2
11.6
10.8
1975- 1
II
III
IV
1, 453 0
936 5
1,496. 6 965.9
1,564.9
995.1
1,600.7 1, 024.1
175 1
171.2
205.4
204.7
15 4
24.3
20.8
20.8
147 4
142.7
146.9
152.1
131.9
118.3
126.1
131.3
326.0
335.2
343.5
351.0
119.6
121.8
123.8
128.1
81.6
83.0
84.4
86.7
38.0
38.8
39.4
41.4
206.4
213.3
219.7
222.9
.2
12.5
19.5
9.5
1976: 1
II
III
IV
1, 651. 2
1,691.9
1, 727. 3
1,755.4
1, 056.0
1, 078. 5
1,102.2
1,139. 0
231.3
244.4
254.3
243.4
10.2
10.2
7.9
3.0
153.9
160.6
168.4
168.5
143.7
150.4
160.6
165.6
353.6
358.9
363.0
370.0
127.6
128.5
130.2
134.2
86.3
86.0
86.4
88.4
41.3
42.5
43.8
45.8
225.9
230.4
232.7
235.8
13.2
10.2
8.6
6.7
1,810.8
1, 869. 9
1.915.9
1,965.1
1,172 4
1,194.0
1,218.9
1,255.3
271 8 - 8 2
294.9 - 9 . 7
303.6 - 7 . 5
307.0 - 1 0 . 8
170 4
178.1
179.9
174.3
178 6
187.7
187.4
185.1
374 9
390.6
400.9
413.6
136.3
143.6
148.1
153.8
89 7
93.4
95.6
98.6
46.7
50.2
52.5
55.2
238.5
247.0
252.9
259.8
13.2
13.7
10.2
10.7
1929 .
.
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975 .
1976
1977 P
._„
1977: 1
II
III
IV v
..
7.4
6.1
-4.2
1
This category corresponds closely to the national defense classification in "The Budget of the United States Government, Fiscal Year 1979."
' Changes are based on unrou nded data and therefore may differ slightly from those obtained from data shown here.
Source: Department of Commerce, Bureau of Economic Analysis.
257
T A B L E B-2.—Gross national product in 1972 dollars, 1929-77
[Billions of 1972 dollars; quarterly data at seasonally adjusted annual rates]
Personal consumption expenditures
Gross private domestic investment
Fixed investment
Gross
national
product
Year or quarter
Total
NonDurable durable
Services
goods
goods
Nonresidential
Total
Total
Structures
Producers'
durable
equipment
16.4
Total
1929
314 7
215.6
21.5
98 1
96.1
55.9
51.3
37.0
20.6
1933
222.1
170.7
10.9
82.9
76.8
8.4
13.3
10.4
4.9
5.5
1939
319.7
220.3
19.1
115.1
86.1
33.6
32.0
20.7
8.6
12.1
1940
1941..
1942
1943...
1944.
1945
1946
1947
1948
1949
343.6
396.6
454 6
527.3
567.0
559 0
477.0
468 3
487 7
490.7
230.4
244.1
241.7
248.7
255.7
271.4
301.4
306 2
312.8
320.0
21.8
24.7
16 3
14.5
13.5
14.8
25.8
30 6
33.1
36.3
119.9
127.6
129 9
134.0
139.4
150.3
158.9
154 8
155.0
157.4
88.7
91.8
95.5
100.1
102.7
106.3
116.7
120 8
124.6
126.4
44.6
55.8
29.6
18.1
19.8
27.8
71.0
70.1
82.3
65.6
38.4
43.8
24.4
18.0
22.1
31.4
58.8
70.4
76.8
70.0
25.7
30.3
17.6
14.0
18.7
27.6
42.0
48.9
51.0
46.0
9.9
11.9
6.7
4.2
5.5
8.3
18.8
17.3
18.4
17.8
15.8
18.5
10.9
9.8
13.2
19.2
23.2
31.6
32.7
28.2
1950
1951
1952
1953
1954
1955
1956
1957 .
1958
1959.
533 5
576.5
598 5
621.8
613 7
654.8
668.8
680 9
679.5
720.4
338.1
342.3
350.9
364.2
370 9
395.1
406.3
414.7
419.0
441.5
43.4
39.9
38 9
43.1
43 5
52.2
'49.8
49.7
46.4
51.8
161.8
165.3
171.2
175.7
177 0
185.4
191.6
194.9
196.8
205.0
132.8
137.1
140 8
145.5
150 4
157.5
164.9
170.2
175.8
184.7
93.7
94.1
83.2
85.6
83.4
104.1
102.9
97.2
87.7
107.4
83.2
80.4
78.9
84.1
85.6
96.3
97.1
95.7
89.6
101.0
50.0
52.9
52.1
56.3
55.4
61.2
65.2
66.0
58.9
62.9
19.1
20.6
20.6
22.5
23.5
25.3
28.1
28.1
26.4
26.8
30.9
32.3
31.5
33.8
31.8
35.9
37.1
37.9
32.5
36.1
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
736 8
755.3
799 1
830.7
874.4
925.9
981 0
1,007. 7
1051.8
1, 078. 8
453 0
462.2
482 9
501.4
528.7
558.1
586 1
603.2
633.4
655.4
52 5
50.3
55 7
60.7
65.7
73.4
79 0
79.7
88.2
91.9
208 2
211.9
218 5
223.0
233.3
244.0
255 5
259.5
270.2
276.4
192 3
200.0
208.7
217.6
229.7
240.7
251 6
264.0
275.0
287.2
105.4
103.6
117.4
124.5
132.1
150.1
161.3
152.7
159.5
168.0
101.0
100.7
109.3
116.8
124.8
138.8
144.6
140.7
150.8
157.5
66.0
65.6
70.9
73.5
81.0
95.6
106.1
103.5
108.0
114.3
28.8
29.3
30.8
30.8
33.3
39.6
42 5
41.1
42.0
44.0
37.2
36.3
40.1
42.7
47.7
56.0
63 6
62.4
66.1
70.3
1970
1971
1972
1973
1974
1975
1976
1977 P
1,075.3
1,107.5
1,171.1
1,235.0
1,217.8
1, 202.1
1,274.7
1,337.6
668.9
691.9
733.0
767.7
760.7
775.1
821.3
860.3
88.9
98.1
111.2
121.8
112.5
112.7
127.5
138.0
282.7
287.5
299.3
309.3
303.9
307.6
321.6
333.3
297.3
306.3
322.4
336.5
344.3
354.8
372.2
389.0
154.7
166.8
188.3
207.2
183.6
141.6
173.0
195.6
150.4
160.2
178.8
190.7
175.6
151.5
164.5
184.0
110.0
108.0
116.8
131.0
130.6
112.7
116.8
127.1
42.8
41.7
42.5
45.5
42.5
36.3
37.1
38.4
67.2
66.3
74.3
85.5
88.1
76.5
79.7
88.7
1975:1
II
III
IV
1,169.8
1,188. 2
1,220.7
1,229.8
756.9
770.4
780.2
792.8
106.2
109.0
115.4
120.2
301.8
308.4
308.6
311.5
349.0
353.0
356.2
361.2
133.0
130.9
153.1
149.2
152.9
148.9
150.2
153.8
116.6
112.0
111.0
111.3
37.2
35.8
36.0
36.1
79.5
76.2
75.0
75.2
1976: 1
II
III
IV
.
1,256.0
1,271.5
1, 283 7
1, 287. 4
807.2
815.5
822 7
839.8
125.4
126.6
127 1
130.7
316.1
319.3
321 5
329.4
365.6
369.6
374 0
379.7
168.1
175.2
179 4
169.2
158.4
163.1
165 6
171.0
113.7
115.9
118 5
119.0
36.8
37.1
37 1
37.3
* 76.8
78.9
81.4
81.7
.
1,311.0
1 330 7
1,347.4
1,361.4
850.4
854 1
860.4
876.4
136.9
137 9
136 5
140.8
329.7
330 0
332 4
340.9
383.8
386 3
391 4
394.7
186.7
197 2
200.8
197.6
177.0
184 0
185 1
190.0
124.3
126 4
127.6
130.2
37.0
38 2
38.9
39.6
87.3
88.1
88.7
90.7
. .
_.
.
.
1977:1..
II
III
IV v . .
See footnotes at end of table.
258
TABLE B-2.—Gross national product in 1972 dollars, 1929-77— Continued
[Billions of 1972 dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Gross private domestic
investment—continued
Net exports of goods
and services
Government purchases
of goods and services
Fixed investment—continued
Residential
Year or
quarter
Total
Non- Farm
farm
struc- structures tures
Producers'
durable
equipment
Change
in
business
inventories
Net
exports
Exports
Imports
Total
Federal
State
and
local
33.9
Percent
change
from
preceding
period,
gross
national
product1
1929
14.3
13.6
0.6
0.1
4.6
2.2
15.6
13.4
40.9
6.9
1933
2.9
2.6
.2
.1
-4.9
.2
9.4
9.3
42.8
10.8
32.0
-2.1
1939
11.3
10.6
.6
.1
1.6
2.0
13.3
11.4
63.8
22.6
41.2
7.6
1940
1941
1942
1943 .
1944
1945
1946
1947
1948
1949..
.1
.2
6.2
3.0
.8
.6
.4
.1
.0
.
3.8
16.8
21.5
25.8
24.0
11.8
12.5
6.1
3.5
3.0
3.5
15.5
19.8
23.9
22.3
.8
.9
.
12.8
13.5
6.8
4.0
14.6
14.7
10.3
9.0
10.0
13.5
26.1
30 2
24.2
24.2
11.5
14.0
12.8
16.3
17.3
18.0
14.6
13.6
15.7
15.4
65.5
95.9
185.8
267.9
298.8
264.3
93.1
75.4
84.1
96.2
26.3
58.6
151.5
236.3
268.2
232.7
58.4
36.1
42.4
48.9
39.2
37.3
34.3
31.6
30.6
31.6
34.8
39.3
41.8
47.4
7.5
15.4
14.6
16.0
7.5
-1.4
-14.7
-1.8
4.1
.6
1950
1951
1952
1953
1954
1955
1956..
1957
1958..
1959
33.2
27.5
26.8
27.8
30.2
35.1
31.9
29.7
30.6
38.1
31.5
25.9
25.3
26.3
28.8
33.8
30.4
28.3
29.2
36.5
21.7
25 9
24.9
23.8
25 3
27.9
32.3
34.8
30.7
31.5
17.7
18.5
20.0
21.8
20.8
23.2
25.0
26.0
27.2
30.6
97.7
132.7
159.5
170.0
154.9
150.9
152.4
160.1
169.3
170.7
47.0
81.3
107.0
114.6
95.2
86.9
85.9
89.8
92.8
91.8
50.7
51.3
52.5
55.4
59.7
64.0
66.5
70.3
76.4
78.9
8.7
8.1
3.8
3.9
-1.3
6.7
2.1
1.8
-.2
6.0
1960
1961
1962.
1963
1964
1965
1966
1967
1968
1969..
35.0
35.1
38.4
43.2
43.8
43.2
38.5
37.2
42.8
43.2
33.7
33.6
36.9
41.7
42.2
41.6
36.9
35.5
41.1
30.3
30.3
33.9
35.0
36.9
41.0
47.3
50.7
58.9
63.5
172.9
182.8
193.1
197.6
202.7
209.6
229.3
248.3
259.2
256.7
90.8
95.6
103.1
102.2
100.6
100.5
112.5
125.3
128.3
121.8
82.0
87.1
90.0
95.4
102.1
109.1
116.8
123.1
130.9
134.9
2.3
2.5
5.8
4.0
5.3
5.9
5.9
2.7
4.4
2.6
1970
1971
1972
1973
1974
1975
1976
1977 v
40.4
52.2
62 0
59.7
45.0
38.8
47 7
56.9
38.9
50.5
60 3
57.9
43.0
37 1
46 0
55.1
.6
.7
7
.5
.9
.7
7
-.3
3.0
5.7
5.5
1975: 1
II
III..IV
36.3
36.9
39.3
42.6
1976:1
II
III..IV.....
1977:1
II
III....
3.4
IV p . . _
1
41.5
.4
.3
.0
12.0
5.2
.1
-2.3
-3.6
12.2
1.3
'.2
.3
1.5
1.4
.3
.3
5.5
-4.4
1.3
1 3
-.2
-2.5
-7.3
-7.2
-4.5
11.6
16.6
8.5
8.8
.3
.3
10.6
13.7
4.0
7.4
1.2
1.2
1.1
.3
.3
.3
4.3
1.5
.9
1.0
1.0
.9
.4
.4
.4
.5
-2.2
7.7
5.8
1.5
-1.8
4.9
2.0
4.5
1.0
.6
6.5
.9
.8
1.0
.9
.5
.5
.6
5.5
.9
.9
.8
.9
.6
.7
.7
.8
.8
.9
.9
4.4
2.9
8.1
7.8
7.3
11.3
16.7
12.0
.9
.8
.9
4.7
7.3
8.9
3.5
8.7
3.5
-.4
10.6
-1.3
35 8
37.0
39.6
42.2
47.8
49.1
51.6
54.2
58.5
62.2
4.3
6.6
9.4
67.1
67.9
72 7
87.4
93.0
89.9
95 8
98.0
65.7
68.5
75.9
79.9
77.1
67.4
79 8
87.3
250.2
249.4
253.1
252.5
257.7
263.0
264.4
271.1
110.7
103.9
102.1
96.6
95.8
96.7
96 5
101.4
139.5
145.5
151.0
155.9
161.8
166.3
167.9
169.7
6.7
5.8
7.3
10.9
8.2
4.3
.7
.9
1.0
1 l
1.2
1.1
.9
1 0
1.1
-9.9
8 5
11.6
1.4
-.6
-3 3
7.6
15.9
22.5
16 0
10.7
35.0
35.4
37.5
40 7
.4
.6
.9
.9
.9
.9
.9
1.0
-20.0
-18.0
2.9
-4.6
20.5
24.5
22.7
22.3
89.7
87.4
89.7
92.8
69.2
62.9
67.0
70.6
259.4
262.3
264.8
265.4
96.0
96.5
96.9
97.4
163.4
165.8
167.8
168.0
-9.6
6.4
11.4
3.0
44.8
47.1
47.1
52.0
42.9
45.4
45.4
1.0
1.0
1.0
1.1
9.7
50.2
.9
.7
.6
.7
12.1
13.8
-1.8
16.8
16.4
17.0
13.8
93.1
95.2
97.9
96.9
76.3
78.9
80.9
83.1
263.9
264.4
264.6
264.6
96.4
96.1
96.7
97.1
167.5
168.4
168.0
167.5
8.8
5.1
3.9
1.2
52.7
57.6
57.5
59.8
50.9
55.7
55.7
58.0
.7
.8
.7
.6
1.1
1.1
1.1
1.2
9.7
13.2
15.7
7.7
10.6
9.4
12.2
10.6
96.9
98.5
99.8
96.8
86.3
89.1
87.6
86.2
263.3
270.0
274.0
276.8
97.0
101.1
103.3
104.1
166.4
168.9
170.7
172.8
7.5
6.2
5.1
4.2
16.5
8.0
-1.4
-1.3
6.0
4.9
Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here.
Source: Department of Commerce, Bureau of Economic Analysis.
259
TABLE B-3.—Implicit price deflators for gross national product, 1929-77
[Index numbers, 1972=100, except as noted; quarterly data seasonally adjusted]
Gross private domestic investmentl
Personal consumption expenditures
Fixed investment
Year or
quarter
Gross
national
uct
Nonresidential
1
Total
Durable
goods
Nondurable
goods
Services
Total
Total
Structures
Producers'
durable
equipment
1929
32 87
35.8
43.1
38.4
31 6
28.2
28.2
24 1
33.4
1933
25.13
26.8
31.7
26.8
26.1
22.4
22.8
19.1
26.2
1939
28.40
30.4
34.9
30.5
29.2
27.6
28.2
22.8
32.0
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
29.10
31 49
34 82
36.41
37 13
37.99
43.88
49 70
53.13
52.59
30.8
33.1
36.7
40.0
42.3
44.0
47.7
52.8
55.9
55.7
35.7
39 1
42.1
45.0
49.5
53.7
61.1
66 8
69.1
69.1
30.9
33.6
39.1
43.7
46.2
47.8
52.1
58.7
62.3
60.3
29.5
30 8
32.4
34.2
36 1
37.3
38.9
41 7
44.4
46.1
28.5
30.6
33.4
35.6
36.9
37.1
41.3
48.9
53.6
54.8
29.1
30.9
33.8
35.7
36.6
36.6
39.9
46.8
51.3
52.8
23.1
24 7
28.1
32.0
33 4
33.6
36.3
43 7
48.4
48.0
32.8
34.9
37.3
37.3
38 0
37.9
42.8
48 5
52.9
55.9
1950
1951
1952...
1953
1954
1955.
1956
1957
1958
1959...
53 64
57.27
58.00
58 88
59.69
60.98
62 90
65.02
66.06
67.52
56.8
60.5
61.9
63.1
63.6
64.2
65 5
67.6
69.1
70.4
70.8
74.7
74.8
75 5
73.2
74.0
76 0
79.2
79.4
81.9
60.7
65.8
66.6
66 3
66.6
66.3
67 3
69.4
71.0
71.4
47.4
49.9
52.6
55 4
57.2
58.5
60 2
62.2
64.2
66.0
56.5
60.8
62.1
62.9
63.4
64.8
68.3
70.9
70.8
71.6
54.3
58.9
59.9
61.0
61.4
62.6
67 0
70.7
70.6
72.0
48 8
54.7
55.8
56 8
55.9
57.0
61 8
64.4
63.3
63.6
57 6
61.6
62.5
63.7
65.4
66.5
71.0
75.4
76.5
78.2
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
. ..
68.67
69.28
70.55
71 59
72.71
74.32
76.76
79.02
82.57
86.72
71.7
72.5
73.6
74 7
75.7
77.1
79.3
81.3
84.6
88.5
82.1
82.7
83.9
84.8
85.7
85.6
85.7
87.4
90.7
93.1
72.6
73.3
73.9
74.9
75.8
77.3
80.1
81.9
85.3
89.4
68.0
69.1
70.4
71.7
72.8
74.3
76.5
78.8
82.0
86.1
71.9
71.6
72.0
72.1
72.8
73.8
76.2
78.7
82.1
86.9
72.2
71.8
72.3
72.9
73.6
74.5
76.8
79.3
82.6
86.6
63.1
62.7
63.0
63.5
64.4
65.9
68.8
71.8
75.3
81.1
79.3
79.2
79.4
79.6
80.1
80.6
82.1
84.3
87.3
90.0
1970 . . . .
1971
1972 . . .
1973
1974
1975
1976
1977 v, _
91.36
96 02
100.00
105 80
116 02
127.18
133 88
141.32
92.5
96.6
100.0
105 5
116 9
126.5
133 2
140.7
95.5
99.0
100.0
101 6
108 4
117.9
124 7
130.0
93.6
96.6
100.0
107.9
123.8
133.1
137 7
144.1
90.5
95.8
100.0
104.7
113.6
123.5
132.3
141.5
91.1
95.9
100.0
106.0
117.1
132.4
139.8
150.3
91.3
96.4
100.0
103.8
115.3
132.3
138.7
146.0
88.0
94.4
100.0
107.8
128.1
145.8
150.7
160.3
93.4
97.6
100.0
101.7
109.2
125.9
133.1
139.8
1975: 1
II...
124.21
125.96
128. 20
130.17
123.7
125.4
127.5
129.2
115.6
117.2
118.4
120.1
130.6
131.8
134.5
135.5
120.3
122.3
124.5
126.8
128.9
131.8
133.5
135.5
128.5
131.8
133.6
135.5
143.5
145.1
146.7
147.9
121.4
125.6
127.2
129.5
1976: 1
II
III
IV
131.47
133. 06
134.56
136.35
130.8
132.3
134.0
135.6
122.2
123.8
125.3
127.2
136.2
136.9
138.3
139.3
129.2
131.1
133.2
135.4
136.9
138.6
140.6
142.9
136.8
137.8
139.2
140.9
148.5
150.4
150.9
152.8
131.2
131.9
133.9
135.4
1977: 1
II
III....
138.13
140. 52
142.19
144.34
137.9
139.8
141.7
143.2
129.3
129.5
130.0
131.2
141.5
143.8
144.9
146.0
137.8
140.1
142.9
145.1
145.8
148.5
151.3
155.3
142.5
144.4
146.9
150.2
156.6
159.7
160.9
164.0
136.5
137.7
140.8
144.1
..
.
.
IV.".""
IV p . . .
See footnotes at end of table.
260
TABLE B-3.—Implicit price deflators for gross national product,
1929-77—Continued
[Index numbers, 1972=100, except as noted; quarterly data seasonally adjusted]
Gross private domestic
investment*—continued
Fixed investment—continued
Year or
quarter
Exports and
imports of
goods and
services i
Residential
ProExducers' ports
durable
equipment
Percent change
from pr seeding
peri )d2
Government purchases
of goods and services
Gross
domestic
prodGross
uct
national
product
implicit
price
deflator
Gross
domestic
product
implicit
price
deflator
Imports
Total
Federal
State
and
local
45.0
43.8
21.6
20.7
21.8
32.8
25.5
22.1
19.3
19.6
19.1
25.2
-2.2
-2.1
61.1
33.3
29.6
21.2
22.9
20.2
28.4
-.7
-.7
23.6
26.6
30.7
35.7
40.8
42.9
46.6
52.8
57.3
58.0
59.6
63.8
71.3
71.4
75.0
84.6
95.2
105.6
111.5
107.9
36.8
40.2
46.5
49.2
52.6
53.6
56.7
65.8
69.8
65.5
31.5
33.2
37.4
39.6
41.1
43.6
49.7
60.7
66.1
62.7
21.6
26.0
32.2
33.2
32.5
31.3
29.4
33.8
38.0
39.9
23.1
28.9
34.3
34.4
33.3
32.1
29.9
35.1
39.4
41.8
20.6
21.4
22.8
23.8
24.9
25.9
28.6
32.5
36.6
38.0
29.1
31.5
34.8
36.4
37.1
38.0
43.9
49.7
53.1
52.6
2.5
8.2
10.6
46
2.0
2.3
15 7
13 1
6.9
-1.0
2.5
8.2
10.6
4 5
2.0
2.3
15 6
13.1
6.9
-1.0
59.5
63.8
65.8
66.3
66.6
68.2
70.5
70.8
70.7
70.6
59.4
63.8
65.7
66.2
66.5
68.3
70.6
70.9
70.8
70.8
107.4
114.9
114.6
114.2
112.4
109.1
104.3
103.4
101.9
101.8
64.0
73.1
73.0
71.9
71.2
71.8
73.9
76.4
75.7
75.4
67.8
81.8
79.1
75.8
76.9
76.8
78.3
79.5
76.5
75.7
39.4
45.3
47.4
48.5
48.9
49.7
52.1
54.4
56.1
57.2
39.9
47.1
48.9
50.2
50.4
51.1
53.4
55.7
58.1
58.7
39.0
42.4
44.2
45.1
46.6
47.8
50.4
52.8
53.8
55.4
53.6
57.2
57.9
58.8
59.6
60.9
62.8
65.0
66.0
67.5
2.0
6.8
1.3
1.5
1.4
2.2
3.2
3.4
1.6
2.2
2.0
6.7
1.3
1.5
1.4
2.2
3.2
3.4
1.6
2.2
71.4
71.3
71.5
70.9
71.2
72.3
74.6
77.0
80.7
87.7
70.9
70.9
71.1
70.5
70.8
72.0
74.2
76.7
80.4
87.5
71.2
70.7
71.3
70.7
71.0
72.3
74.3
76.7
80.5
87.5
100.8
99.1
96.8
95.3
94.3
92.1
90.8
91.0
93.2
95.2
77.1
78.0
77.3
77.5
78 3
80.5
82.8
84.0
85.3
87.9
76.7
76.1
74.5
75.6
77.1
78.0
79.7
80.1
80.9
83.3
58.0
59.2
61.1
62.6
64.0
66.0
69.2
72.6
76.7
81.0
59.1
60.0
61.8
63.3
64.8
67.0
70.1
72.6
76.4
80.0
56.8
58.3
60.3
61.9
63.3
65.1
68.4
72.5
76.9
81.9
68.6
69.2
70.5
71.6
72.7
74.3
76.8
79.0
82.6
86.8
1.7
.9
1.8
1.5
1.6
2.2
3.3
2.9
4.5
5.0
1.7
.9
1.9
1.5
1.6
2.2
3.3
3.0
4.5
5.1
90.6
94.9
100.0
110.8
122.3
132.8
142.5
159.9
90.4
94.8
100.0
111.0
122.7
133.2
143.0
160.5
90.5
95.0
100.0
110.7
122.7
132.9
142.9
159.4
97.5
99.3
100.0
100.1
105.3
116.7
122.6
126.8
93.1
96.6
100.0
116.2
148.3
163.8
170.0
179.2
89.1
93.5
100.0
118.2
171.0
188.2
194.3
211.5
87.5
93.7
100.0
106.7
117.5
128.9
136.7
145.7
86.4
92.6
100.0
105.8
115.9
127.5
134.8
143.5
88.3
94.5
100.0
107.3
118.4
129.7
137.7
147.1
91.4
96.0
100.0
105.7
115.6
126.8
133.4
140.8
5.4
5.1
4.1
5.8
5.6
9.6
5.3
5.6
5.3
5.1
4.1
5.7
5.5
9.7
5.2
5.5
1975: 1 __ - 130.3
II
131.7
133.2
III
IV
135.4
130.7
132.1
133.6
135.8
129.6
131.2
133.0
135.4
114.0
115.9
117.4
119.0
164.4
163.2
163.9
163.8
190.7
188.1
188.1
186.0
125.7
127.8
129.7
132.3
124.5
126.3
127.7
131.5
126.3
128.6
130.9
132.7
123.8
125.6
127.8
129.8
10.8
5.7
7.3
6.3
11.4
5.8
7.4
6.4
1976: 1
II
III
IV
137.1
140.7
144.1
147.5
137.5
141.0
144.5
148.0
137.4
141.3
145.3
148.9
120.8
122.4
123.4
123.8
165.3
168.6
172.0
174.0
188.2
190.7
198.4
199.3
134.0
135.7
137.2
139.8
132.4
133.7
134.7
138.2
134.9
136.8
138.6
140.7
131.0
132.7
134.1
135.9
4.1
4.9
4.6
5.4
3.8
5.0
4.4
5.5
1977: 1
II
III
153.7
157.6
160.9
166.5
154.3
158.2
161.5
167.3
153.7
157.7
160.6
166.5
125.2
126.6
127.6
127.9
175.9
180.8
180.2
180.0
207.0
210.6
213.9
214.6
142.3
144.6
146.3
149.4
140.6
142.0
143.3
147.8
143.4
146.2
148.1
150.4
137.6
140.0
141.7
143.8
5.3
7.1
4.8
6.2
5.0
7.1
4.9
6.3
Total
Nonfarm
structures
Farm
structures
1929
28.2
27.8
28.6
77.2
1933
20.7
19.8
19.5
58.8
.
26.6
26.3
23.4
..
27.4
29.9
32.4
34.9
38.1
40.8
44.6
53.7
58.1
58.7
27.2
29.7
31.8
34.3
37.3
40.0
43.9
53.0
57.4
i,3.1
60.0
64.4
66.4
66.9
67.1
68.7
70.9
71.3
71.2
71.0
1939 .
.
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949 . .
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
.
.
1970
1971
1972
1973
1974
1975
1976
1977 v
IVP__._
1 Separate deflators are not available for gross private domestic investment, change in business inventories, and net
exports
of goods and services.
2
Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here.
Quarterly data are at annual rates.
Source: Department of Commerce, Bureau of Economic Analysis.
261
TABLE B-4.—Implicit price deflators and alternative price measures of gross national product
and gross domestic product, 1929-77
[Quarterly data seasonally adjusted]
Index numbers, 1972=100
Year or
quarter
Gross national
product
Percent change from preceding period »
Gross domestic
product
Gross national product
FixedFixedFixedImplicit weighted Implicit weighted Implicit weighted
price price index price price index price price index
deflator
deflator
(1972
(1972
detlator
(1972
weights)
weights)
weights)
1929
32.87
Gross domestic product
Chain
price
index
FixedImplicit weighted
price price index
deflator
(1972
weights)
Chain
price
index
32.8
25.13
25.2
-2.2
-2.1
1939
28.40
28.4
-.7
-.7
1940
1941
1942
1943.
1944
1945
1946
1947
1948
1949
29.10
31.49
34.82
36.41
37.13
37.99
43.88
49 70
53.13
52.59
29.1
31.5
34.8
36.4
37.1
38.0
43.9
49 7
53.1
52.6
2.5
8.2
10 6
4.6
2.0
23
15.7
13 1
6 9
-1.0
2.5
8.2
10.6
4.5
2.0
2.3
15.6
13.1
6.9
-1.0
1950
1951 .
1952
1953
1954 .
1955
1956
1957
1958
1959
53.64
57.27
58.00
58.88
59.69
60.98
62.90
65.02
66.06
67.52
68.1
69.1
53.6
57.2
57 9
58.8
59.6
60.9
62.8
65 0
66.0
67.5
68.0
69.1
2.0
6.8
1 3
1.5
1.4
22
3.2
34
1.6
2.2
1.6
1.6
2.0
6.7
1 3
1.5
1.4
2.2
3.2
34
1.6
2.2
1.6
1.6
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
68.67
69.28
70.55
71.59
72.71
74.32
76.76
79.02
82.57
86.72
70.3
71.1
72.0
72.8
73.7
75.0
77.2
79.5
83.0
87.1
68.6
69.2
70.5
71.6
72.7
74.3
76.8
79.0
82.6
86.8
70.2
71.1
72.0
72.8
73.7
75.0
77.2
79.6
83.0
87.1
1.7
.9
1.8
1.5
1.6
2.2
3.3
2.9
4.5
5.0
1.7
1.1
1.3
1.1
1.2
1.8
2.9
3.0
1.7
1.2
1.4
1.3
1.4
1.9
3.1
3.0
1.7
.9
1.9
1.5
1.6
2.2
3.3
3.0
1.7
1.2
1.3
1.1
1.2
1.8
3.0
3.0
1.7
1.2
l!3
1.4
1.9
3.1
3.1
5.0
5.0
5.1
5.0
5.0
1970
1971
1972
1973
1974
1975
1976
1977 v,
91.36
96.02
100. 00
105.80
116.02
127.18
133. 88
141.32
91.6
96.1
100.0
106.0
116.8
127.7
134.9
143.2
91.4
96.0
100.0
105.7
115.6
126.8
133.4
140.8
91.7
96.2
100.0
105.9
116.4
127.3
134.4
142.6
5.4
5.1
4.1
5.8
9.7
9.6
5.3
5.6
5.2
4.9
4.0
6.0
10.2
9.4
5.6
6.1
5.3
5.0
4.1
6.0
9.9
9.5
5.6
6.0
5.3
5.1
4.1
5.7
9.3
9.7
5.2
5.5
5.2
4.9
4.0
5.9
9.9
9.4
5.6
6.1
5.3
5.0
4.1
5.9
9.6
9.5
5.6
5.9
1975:1
II.-.
III...
IV....
124.21
125.96
128.20
130.17
124.5
126.5
128.8
130.8
123.8
125.6
127.8
129.8
124.1
126.0
128.3
130.4
10.8
5.7
7.3
6.3
8.8
6.4
7.4
6.4
9.5
6.5
7.4
6.1
11.4
5.8
7.4
6.4
8.8
6.5
7.5
6.6
9.6
6.6
7.4
6.2
1976:1
II.-.
III...
IV....
131.47
133.06
134.56
136. 35
132.3
133.9
135.5
137.5
131.0
132.7
134.1
135.9
131.9
133.5
135.1
137.1
4.1
4.9
4.6
5.4
4.6
5.2
4.8
6.0
4.9
5.3
4.6
5.9
3.8
5.0
4.4
5.5
4.6
5.2
4.6
6.1
4.8
5.4
4.5
6.0
1977:1
ll.__.
III...
IV p . .
138.13
140. 52
142.19
144.34
139.9
142.3
144.0
146.1
137.6
140.0
141.7
143.8
139.4
141.8
143.4
145.6
5.3
7.1
4.8
6.2
7.1
7.0
4.8
6.1
6.9
7.0
4.3
6.0
5.0
7.1
4.9
6.3
7.0
7.0
4.8
6.2
6.7
7.0
4.3
6.0
1933
..
i Changes are based on unrounded data and therefore may differ slightly from those obtained from published indexes
shown here. Quarterly data are at annual rates.
Source: Department of Commerce, Bureau of Economic Analysis.
262
TABLE B-5.—Gross national product by industry in 1972 dollars, 1947-76
[Billions of 1972 dollars]
Year
Agriculture,
Gross fores- Contry,
strucnaand
tion
tional
product fisheries
Manufacturing
Total
TransGovportaerntion, Whole- Finance,
insurment
comsale
ance,
and
ServAll
Non- muni- and
Duand
ices govern- other i
rable durable cation, retail
real
ment
and
trade estate
goods goods
enterindus- indus- utiliprises
ties
tries
tries
1947
1948
1949
468.3
487.7
490.7
26.1
28.0
27.8
22.9
26.5
26.5
114.9
121.5
115.0
68.5
72.0
66.3
46.4
49.6
48.8
38.3
38.7
36.4
76.1
78.0
79.9
55.4
57.1
60.7
55.1
56.7
57.2
68.5
69.0
73.1
11.1
12.0
14.1
1950
1951
1952
1953
1954
533 5
576.5
598.5
621.8
613 7
29 1
28.2
29.0
30.3
31 1
29.3
32.5
33.8
34.8
36.0
131.3
146.0
150.7
161.2
149.6
78.1
89.9
94.3
102.6
91.7
53.2
56.1
56.4
58.6
57.9
39.6
44.2
44.3
45.9
45.6
87.6
88.3
91.1
94.0
94.6
64.4
66.7
71.1
74.0
77.7
59.4
60.6
61.6
63.0
63.1
75.4
89.8
96.6
96.4
94 9
17.5
20.2
20.2
22.3
21.1
1955
1956
1957
1958
1959
654.8
668.8
680.9
679.5
720.4
31.9
31.4
30.8
32.0
30.9
38 2
40 9
40 9
42 1
45.5
165.8
166.9
167.8
153.3
170.7
103.4
102.5
102.9
88.8
100.7
62.4
64.4
64.9
64.5
70.0
49.4
52.3
53.4
52.2
55.7
103.2
106.2
108.0
107.9
115.8
82 0
85.7
89 8
93 5
98.1
67.5
71.1
73.3
75.8
80.3
95.4
97.6
100.1
101.7
103.6
21.4
16.6
16.8
21.0
20.0
1960
1961
1962
1963
1964
736.8
755.3
799 1
830.7
874.4
32.2
32.3
32 3
32.8
32.1
46 1
46.6
48 3
49 8
53 7
172.0
171.2
186.2
201.0
215.7
101.5
99.3
110.1
119.0
129.3
70.5
72.0
76.2
82.1
86.4
58.0
59.1
62.1
65.6
68.9
117.9
119.2
126.7
131.7
139.7
101 9
106.8
115 3
115 3
119 3
82.2
85.4
88 6
92.2
96.9
107.2
111.1
115 1
118.3
122.6
19.4
23.6
24.5
24.1
25.6
925.9
981.0
1,007.7
..."... 1,051.8
1, 078.8
33.0
31.3
32.6
32.4
33.0
57.0
59 0
59.5
62.5
61.2
235.1
254.0
254.1
268.4
276.2
144.1
157.0
157.2
165.5
169.1
91.0
97.0
96.9
102.9
107.2
74.3
80.0
82.3
88.2
92.9
148.6
156.9
160.7
170.6
174.5
127 2
131 4
136.5
142 9
149 3
101.2
106.5
112.7
116.3
121.4
127.4
136.4
143.5
148.1
151.8
22.1
25.4
25.7
22.4
18.4
1970
1971
1972
1973
1974
1, 075.3
1,107.5
1.171.1
1,235.0
1,217.8
34.3
36.1
35.4
35.9
35.7
57.1
57.1
58.0
58.3
56.0
260.6
264.1
288.8
313.0
291.9
154.4
155.3
171.9
189.0
176.0
106.2
108.7
116.8
124.1
115.9
95.1
97.3
103.6
112.6
112.4
178.4
186.8
201.2
212.0
205.7
152 9
160.6
167 3
171.1
180.3
124.7
126.6
134.5
143.1
144.7
152.0
153.1
154.9
157.3
160.0
20.4
25.7
27.7
31.6
31.1
1975
1976
1, 202.1
1,274.7
37.1
36.8
50.5
55.3
273.3
304.9
161.1
180.6
112.1
124.3
112.8
116.9
208.7
219.5
182.6
193.9
145.0
152.3
162.7
164.0
29.5
31.1
1965..
1966
1967
1968..
1969
i Mining, rest of world, and residual (GNP in 1972 dollars measured as the sum of final products less GNP in 1972 dollars
measured as the sum of gross product by industry).
Note.—The industry classification is on an establishment basis and is based on the 1972 Standard Industrial Classification.
Source: Department of Commerce, Bureau of Economic Analysis.
263
T A E L E E-6.—Gross natioral product by major type of product% 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual ratesl
Goods
Year
or
quarter
1929..
Gross
national
product
Final
sales
Total
Final
sales
Nondi rable
goc ds
Dur< ble
goo ds
Total
Inventory
change
Inventory
change
Final
sales
Inventory
change
Services
Structures
Final Inventory
sales change
103.4
101.7
1.7
56.1
54.4
1.7
16.1
1.4
38.3
0.3
35.9
11.4
55.8
57.4
-1.6
27.0
28.6
-1.6
5.4
-.5
23.2
-1.1
25.9
2.9
.4
49.0
48.6
.4
12.4
.3
36.2
.1
34.3
7.5
1933..
Auto
output
90.8
90.4
1940..
1941..
1942..
1943..
1944..
1945..
1946..
1947..
1948..
1949..
100.0
124.9
158.3
192.0
210.5
212.3
209.6
232.8
259.1
258.0
97.8
120.4
156.5
192.5
211.5
213.4
203.2
233.2
254.4
261.1
2.2
4.5
1.8
-.6
-1.0
-1.0
6.4
-.5
4.7
-3.1
56.0
72.5
93.7
120.4
132.3
128.9
125.3
139.8
154.4
147.7
53.8
68.0
91.9
121.0
138.3
129.9
118.9
140.3
149.7
150.8
2.2
4.5
1.8
-.6
-1.0
-1.0
6.4
-.5
4.7
-3.1
15.4
23.8
34.5
54.2
58.5
50.1
31.8
44.1
46.9
48.3
1.2
3.1
1.0
.0
-.6
-1.3
5.3
1.7
.7
-2.1
38.4
44.2
57.4
66.8
74.8
79.8
87.1
96.2
102.8
102.5
1.0
1.4
.7
-.6
-.3
.2
1.1
-2.2
4.0
-1.0
35.7
40.6
50.6
62.9
72.2
76.9
68.6
71.3
76.7
81.9
8.3
11.8
14.0
8.7
6.1
6.5
15.7
21.7
28.0
28.4
"7.1
8.9
12.0
1950..
1951..
1952..
1953..
1954..
1955..
1956..
1957..
1958..
1959..
286.2
330.2
347.2
366.1
366.3
399.3
420.7
442.8
448.9
486.5
279.4
319.9
344.0
365.7
367.8
393.3
416.0
441.4
450.4
481.2
6.8
10.3
3.1
.4
-1.5
6.0
4.7
1.3
-1.5
5.2
162.4
189.5
194.6
203.1
196.1
214.5
223.3
232.3
228.2
247.4
155.6
179.2
191.5
202.7
197.6
208.5
218.6
231.0
229.7
242.2
6.8
10.3
3.1
.4
-1.5
6.0
4.7
1.3
-1.5
5.2
54.7
62.5
67.6
71.5
69.0
78.2
82.3
87.3
80.5
87.4
4.1
6.9
1.1
.9
-2.5
3.0
2.8
1.3
-2.8
2.7
100.9
116.7
123.9
131.2
128.7
130.3
136.3
143.7
149.2
154.8
2.7
3.4
2.0
-.5
1.0
2.9
1.9
.0
1.3
2.5
88.2
102.9
113.1
121.0
125.7
135.3
145.2
157.5
166.9
179.5
35.6
37.8
39.4
42.0
44.5
49.5
52.2
53.0
53.8
59.5
15.5
13.4
12.2
16.3
14.9
21.5
17.2
19.6
14.6
19.6
1960..
1961..
1962..
1963..
1964..
1965..
1966..
1967..
1968..
1969..
506.0
523.3
563.8
594.7
635.7
688.1
753.0
796.3
868.5
935.5
502.2
521.1
557.3
588.8
629.9
678.6
738.7
786.2
860.8
926.2
3.8
2.2
6.5
6.0
5.8
9.5
14.3
10.1
7.7
9.4
254.3
256.5
278.0
289.7
309.0
336.6
373.9
387.3
418.9
446.2
250.6
254.3
271.5
283.7
303.2
327.1
359.6
377.2
411.2
436.8
3.8
2.2
6.5
6.0
5.8
9.5
14.3
10.1
7.7
9.4
89.1
90.2
98.4
105.4
115.0
127.0
139.0
143.5
157.4
169.2
2.4
-.1
3.6
2.7
3.9
6.6
10.0
5.3
5.0
6.1
161.4
164.1
173.2
178.3
188.2
200.1
220.6
233.7
253.8
267.6
1.4
2.3
2.9
3.3
1.9
2.9
4.3
4.8
2.8
3.3
193.2
206.7
221.5
236.2
254.4
272.7
297.7
326.1
356.6
388.7
58.4
60.1
64.3
68.9
72.4
78.8
81.4
82.9
93.0
100.7
21.6
18.1
22.9
25.6
26.5
31.8
31.1
28.8
36.6
36.8
1970..
1971..
1972__
1973..
1974..
1975..
1976.,
1977 v
982.4
1,063.4
1,171.1
1,306.6
1,412.9
1, 528.8
1, 706. 5
1,890.4
3.8
978.6
1,057.1
6.4
1,161.7
9.4
1,288.6
17.9
1,404. 0
8.9
1, 540. 3 - 1 1 . 5
1, 693.1
13.3
1,872.7
17.8
456.2
479.8
526.0
598.8
638.6
686.2
764.2
834.5
452.4
3.8
473.5
6.4
516.6
9.4
580.9
17.9
629.7
8.9
697.7 - 1 1 . 5
750.9
13.3
816.8
17.8
170.7
179.8
202.1
229.6
240.8
267.5
299.3
333.2
.0
1.8
6.3
10.9
7.1
-9.2
4.1
8.8
281.7
293.7
314.5
351.3
389.0
430.2
451.6
483.5
3.7
4.6
3.2
7.0
1.8
-2.2
9.3
9.0
424.6
465.5
510.8
560.5
626.8
699.2
782.0
868.4
101.6
118.1
134.3
147.2
147.4
143.5
160.2
187.5
30.6
42.2
45.1
50.7
42.9
46.2
62.9
72.8
1975:
l__.
II...
III..
IV..
1,453.0 1,475.0 - 2 2 . 0
1,496.6 1,521.7 - 2 5 . 1
1,564. 9 1, 560.0
4.9
1, 600. 7 1,604.4 - 3 . 6
643.8
667.8
711.5
721.6
665.8 - 2 2 . 0
692.9 - 2 5 . 1
706.6
4.9
725.2 - 3 . 6
250.6 - 1 2 . 8
263.8 - 1 1 . 7
272.5 - 2 . 1
283.1 - 1 0 . 3
415.2 - 9 . 2
429.1 - 1 3 . 4
7.0
434.2
6.7
442.1
670.5
689.5
708.4
728.3
138.8
139.3
145.0
150.8
36.2
44.0
51.9
52.5
1939..
1976:
L - 1,651.2
II... 1,691.9
III.. 1,727.3
IV.. 1, 755. 4
1,636.7
1, 673. 7
1,705.8
1,756. 3
14.5
18.3
21.5
-.9
744.6
761.7
776.0
774.7
730.0
743.4
754.5
775.6
14.5
18.3
21.5
-.9
287.6
294.9
302.7
312.0
-2.0
7.0
10.7
.6
442.4
448.5
451.8
463.6
16.6
11.2
10.9
-1.6
751.6
770.8
791.8
813.8
155.0
159.4
159.6
166.9
61.1
63.5
60.9
66.1
1977:
LILIII..
IV v
1,797.0
1, 848. 2
1, 892. 2
1,953.2
13.8
21.7
23.6
11.9
805.9
827.1
843.5
861.5
792.1
805.4
819.9
849.6
13.8
21.7
23.6
11.9
326.6
329.5
332.1
344.9
7.8
11.5
10.3
5.5
465.6
475.9
487.8
504.8
6.0
10.2
13.4
6.4
833.7
855.3
881.6
903.1
171.2
187.5
190.7
200.4
74.1
73.2
70.8
73.2
1,810.8
1, 869. 9
1,915.9
1, 965.1
Source: Department of Commerce, Bureau of Economic Analysis.
264
TABLE B-7.—Gross national product by major type of product in 1972 dollars, 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual ratesl
Goods
Total
Year
or
quar-
ter
Gross
national
product
Final
sales
Inventory
change
Nondurable
goods
Durable
goods
Total
Final Inventory
sales change
Final InvenFinal Inventory
tory
sales change
sales change
Services
Structures
Auto
output
1929..
314.7
310.0
4.6
143.9
139.3
4.6
40.7
3.5
98.6
1.1
126.8
44.0
1933..
222.1
227.0
-4.9
97.2
102.1
-4.9
17.6
-2.1
84.5
-2.8
110.9
14.0
1939..
319.7
318.1
1.6
153.9
152.3
1.6
35.6
.7
116.7
.9
134.6
31.2
1940..
1941..
1942..
1943..
1944..
1945..
1946..
1947..
1948..
1949..
343.6
396.6
454.6
527.3
567.0
559.0
477.0
468.3
487.7
490.7
337.4
384.6
449.4
527.3
569.3
562.6
464.9
468.5
482.2
495.1
6.2
12.0
5.2
.1
-2.3
-3.6
12.2
-.2
5.5
-4.4
171.2
197.4
221.1
263.5
286.8
279.2
238.0
236.8
244.2
239.9
165.0
185.4
215.9
263.4
289.1
282.8
225.8
237.0
238.7
244.3
6.2
12.0
5.2
.9
-2.3
-3.6
12.2
-.2
5.5
-4.4
43.1
57.5
76.0
119.3
135.9
121.9
60.5
74.9
75.6
76.1
3.4
8.2
3.5
.7
-1.8
-3.7
10.8
1.8
1.5
-3.7
121.8
127.9
140.0
144.1
153.2
161.0
165.3
162.1
163.1
168.2
2.8
3.8
1.7
-.6
-.5
.1
1.3
-2.0
4.0
-.8
139.5
157.6
192.7
240.9
263.6
261.9
199.7
186.9
190.9
197.0
32.9
41.5
40.7
23.0
16.6
17.9
39.4
44.7
52.5
53.7
12.9
14.7
18.9
1950..
1951..
1952..
1953..
1954..
1955..
1956..
1957..
1958..
1959..
533.5
576.5
598.5
621.8
613.7
654.8
668.8
680.9
679.5
720.4
522.9
562.8
594.2
620.3
615.8
647.1
663.0
679.4
681.3
714.0
10.6
13.7
4.3
1.5
-2.2
7.7
5.8
1.5
-1.8
6.5
261.5
283.1
292.3
306.9
292.2
316.3
320.9
321.8
312.0
332.5
250.9
269.4
288.0
305.4
294.4
308.6
315.1
320.3
313.8
326.1
10.6
13.7
4.3
1.5
-2.2
7.7
5.8
1.5
-1.8
6.5
84.4
92.6
100.6
105.9
101.7
112.9
113.5
114.6
104.8
110.6
6.3
9.8
1.8
1.4
-3.6
4.2
3.7
1.5
-3.4
3.3
166.5
176.8
187.4
199.5
192.7
195.7
201.6
205.6
209.0
215.5
4.2
3.9
2.5
.1
1.4
3.5
2.1
.0
1.6
3.2
206.0
229.0
240.6
245.5
247.0
257.6
267.2
279.3
285.6
298.0
66.0
64.4
65.6
69.4
74.5
80.9
80.7
79.9
81.9
89.9
24.0
20.4
18.4
23.9
22.9
31.3
24.4
25.8
20.0
24.7
I960..
736.8
1961..
755.3
1962..
799.1
1963..
830.7
1964..
874.4
1965..
925.9
1966..
981.0
1967.. 1,007.7
1968.. 1,051.8
1969.. 1,078.8
732.4
752.4
791.0
823.0
867.1
914.6
964.3
995.7
1,043.1
1,068.2
4.4
2.9
8.1
7.8
7.3
11.3
16.7
12.0
8.7
10.6
337.1
338.1
362.0
373.0
394.0
421.5
455.6
461.9
481.1
492.3
332.8
335.2
353.8
365.2
386.7
410.2
438.9
449.9
472.4
481.7
4.4
2.9
8.1
7.8
7.3
11.3
16.7
12.0
8.7
10.6
111.6
112.6
121.1
128.4
139.2
152.6
165.2
166.6
175.7
183.3
2.9
-.1
4.4
3.4
5.0
8.0
11.9
6.4
5.6
6.8
221.2
222.7
232.7
236.8
247.5
257.7
273.7
283.3
296.7
298.4
1.5
3.0
3.7
4.3
2.3
3.3
4.8
5.6
3.2
3.7
310.7
325.5
339.9
354.0
372.2
389.1
410.2
432.7
449.9
465.4
89.0
91.7
97.2
103.8
108.1
115.3
115.2
113.1
120.9
121.1
26.8
22.6
27.5
30.3
31.1
37.4
36.7
33.5
40.6
40.0
1,075.3
1,107.5
1,171.1
1,235.0
1,217.8
1 202 1
1,'274.7
1,337.6
1,071.0
1,100.9
1,161.7
1,218.5
1,209.9
1 212 f)
I] 266.2
1,326.1
4.3
6.6
9.4
16.5
8.0
-9 9
8.5
11.6
483.4
491.6
526.0
569.0
554.2
538.8
580.1
612.9
479.1
484.9
516.6
552.5
546.2
548.7
571.6
601.3
4.3
6.6
9.4
16.5
8.0
-9.9
8.5
11.6
179.1
181.5
202.1
225.9
222.7
219.2
232.4
248.4
.1
1.8
6.2
10.6
5.6
-7.2
2.8
5.9
300.0
303.4
314.5
326.6
323.5
329.5
339.3
353.0
4.2
4.8
3.2
5.9
2.4
-2.7
5.7
5.7
477.2
491.1
510.8
531.1
546.4
560.7
584.7
606.7
114.6
124.9
134.3
134.8
117.2
102.7
109.9
118.0
32.5
42.1
45.1
50.6
40.1
39 8
50.1
55.7
1,189.7 - 2 0 . 0
1,206.2 - 1 8 . 0
1,217.8
2.9
1,234.4 - 4 . 6
516.8
529.7
553.9
554.7
536.7 -20.0
547.8 - 1 8 . 0
551.0
2.9
559.3 - 4 . 6
212.9 - 1 1 . 4
216.9 - 9 . 3
221.0 - 1 . 1
226.1 - 7 . 3
323.8
330.9
330.0
333.2
-8.6
-8.8
3.9
2.7
552.3
558.3
563.5
568.5
100.7
100.1
103.3
106.6
32.2
38.4
44.7
44.0
1970..
1971.
1972..
1973..
1974..
1975
1976..
1977 v.
~
1975:
1,169.8
if". 1,188.2
III.. 1,220.7
IV.. 1,229.8
1976:
1...
II —
III.
IV..
1,256.0
1,271.5
1,283.7
1,287.4
1,246.3
1,259.4
1,269.8
1,289.2
9.7
12.1
13.8
-1.8
571.8
579.8
586.9
581.9
562.1
567.6
573.0
583.7
9.7
12.1
13.8
-1.8
228.1
230.9
233.5
237.0
-1.2
5.0
7.2
.1
334.0
336.8
339.5
346.7
10.8
7.1
6.6
-1.9
575.4
581.7
587.9
593.6
108.7
110.1
108.8
111.9
49.9
51.1
48.2
51.2
1977:
1...
IL_.
III..
IV v.
1,311.0
1,330.7
1,347.4
1,361.4
1,301.2
1,317.5
1,331.8
1,353.8
9.7
13.2
15.7
7.7
602.4
608.5
617.0
623.7
592.7
595.3
601.3
616.1
9.7
13.2
15.7
7.7
246.7
247.4
246.8
252.7
5.6
7.3
6.7
3.8
346.0
347.9
354.5
363.4
4.2
5.8
9.0
3.8
597.1
602.9
611.1
615.6
111.5
119.3
119.4
122.1
56.8
56.4
54.6
54.9
Source: Department of Commerce, Bureau of Economic Analysis.
265
T A B L E B—8.—Gross national product: Receipts and expenditures by major
economic groups,
1929-77
[Billions of dollars]
Persons
Government
Disposable personal
income
Year or
quarter
Total«
Expenditures
Surplus
or
PerPerdeficit
Equals'. sonal sonal
Tax
Less:
Less:
Equals:
Less: Total
conna-'
and TransTrans- PurInter- exclud- sump- saving
or
nonfers, Equals: Total fers, chases tional
ing in- tion
est
indistax
interinterof
exNet
terest
paid
excome
reest
goods
pendi- est
repaid pendiand
and
ceipts
and
and
and
ceipts tures
and
transtures
prodor ac- subsubservfers a transuct accruals sidies*
sidies* ices
fers
counts
Net receipts
1929 .
82.3
1.9
80.4
77.3
3.1
11.3
1.5
9.8
10.3
1.5
8.8
1.0
1933
45.5
.7
44.8
45.8 - 1 . 0
9.3
2.5
6.9
10.7
2.5
8.2
-1.4
1939
69.9
.9
69.1
67.0
2.1
15.4
4.1
11.3
17.6
4.1
13.5
-2.2
75.2
92.0
116.5
132.9
145.5
149.0
158.6
168.4
187.4
187.1
1.0
'.B
.7
.8
.9
1.4
1.7
2.1
2.3
74.3
91.0
115.6
132.1
144.6
148.0
157.3
166.7
185.3
184.9
71 0
80.8
88.6
99.4
108.2
119.5
143.8
161.7
174.7
178.1
33
10.2
27.0
32 7
36.5
28 5
13.4
4.9
10 6
6.7
17 7
25.0
32.6
49.2
51.2
53.2
51.0
56.9
58.9
55.9
43
3.8
4.2
4.4
6.0
99
18.0
17.1
18.5
20.9
13 5
21.2
28.4
44.7
45.2
43 3
33.0
39.9
40.4
35.0
18 4
28.8
64.0
93.3
103.0
92.7
45.6
42.5
50.5
59.3
43
3.8
4.2
4.4
6.0
9.9
18.0
17.1
18.5
20.9
14 2
24.9
59.8
88.9
97.0
82.8
27.5
25.5
32.0
38.4
- 7
-3.8
-31.4
-44.1
-51.8
-39.5
5.4
14.4
8.4
-3.4
2.7
2.9
3.3
40
4.3
4.8
5.6
5.9
6.0
6.5
202.8
221.9
233.1
246.6
251.4
268.6
285.7
301.0
311.1
329.6
192.0
207.1
217.1
229.7
235.8
253.7
266.0
280.4
289.5
310.8
10.8
14 8
16.0
17 0
15.6
14.9
19.7
20.6
21 7
18.8
69.0
85 2
90.1
94.6
89.9
101.1
109.7
116.2
115 0
129.4
22.5
19 1
18.3
19 0
21.3
23.0
25.1
28.2
32.6
33.4
46.5
66 2
71.8
75 6
68.6
78.1
84.6
88.0
82.4
96.0
61.0
79 2
93.9
101 6
97.0
98.0
104.5
115.3
127.6
131.0
22.5
19.1
18.3
19 0
21.3
23.0
25.1
28.2
32.6
33.4
38.5
60 1
75.6
82 5
75.8
75.0
79.4
87.1
95.0
97.6
8.0
6.1
-3.8
-6.9
-7.1
3.1
5.2
.9
-12.6
-1.6
7.4
7.7
8.3
9.4
10.5
11.7
12.6
13.3
14.1
15.6
342.0
355.2
375.6
393.4
426.5
460.4
497.8
531.2
574.0
614.8
324 9
335.0
355.2
374.6
400.4
430.2
464.8
490.4
535.9
579.7
17.1
20.2
20.4
18.8
26.1
30 3
33.0
40.9
38.1
35.1
139.5
144.8
156.7
168.5
174.0
188.3
212.3
228.2
263.4
296.3
36.1
40.9
42.4
44.1
46.5
49.5
54.9
62.2
70.2
77.8
103.4
103.9
114.3
124.4
127.5
138.9
157.4
166.0
193.2
218.5
136.4
149.1
160.5
167.8
176.3
187.8
213.6
242.4
268.9
285.6
36.1
40.9
42.4
44.1
46.5
49.5
54.9
62.2
70.2
77.8
100.3
108.2
118.0
123.7
129.8
138.4
158.7
180.2
198.7
207.9
3.1
-4.3
-3.8
-2.3
.5
-1.3
-14.2
-5.5
10.7
669.4 618.8
16.6
17.3
725.5 668.2
782.4
18.9
733.0
21.5
880.2
809.9
23.4
961.3
889.6
23.8 1, 060.6 980.4
25.9 1,159.9 1, 094.0
30.7 1,277.9 1,210.1
50.6
57.3
49.4
70.3
71.7
80.2
65.9
67.8
302.6
322.2
367.4
411.2
455.1
468.0
535.9
600.8
93.1
106.8
117.8
135.4
155.6
193.4
210.1
226.2
209.5
215.5
249.6
275.8
299.5
274.6
325.8
374.6
311.9
340.5
370.9
404.9
458.2
532.3
571.5
621.2
93.1
106.8
117.8
135.4
155.6
193.4
210.1
226.2
218.9
233.7
253.1
269.5
302.7
338.9
361.4
395.0
-9.4
-18.3
-3.5
6.3
-3.2
-64.3
-35.6
-20.4
1940
1941 . .
1942
1943 .
1944
1945
1946 ..
1947
1948
1949
1950
1951
1952
1953
1954 .
1955
1956
1957
1958
1959 ..
.
.
.
205.5
224.8
236.4
250.7
255.7
273.4
291.3
306.9
317.1
336.1
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969 ..
.
349.4
362.9
383.9
402.8
437.0
472.2
510.4
544.5
588.1
630.4
1970
1971
1972
1973
1974 .
1975
1976
1977 v
685.9
742.8
801.3
901.7
.
984.6
1,084.4
1,185.8
1,308.6
See footnotes at end of table.
266
TABLE B-8.—Gross national product: Receipts and expenditures by major
economic groups, 1929-77—Continued
[Billions of dollars]
Busines j
International
Net exports of goods
Excess
and services
of
Net
net
Gross Excess transtransGross
pri- of earn- fers and
fers
revate
ings or interand
tained
doest
of inEquals:
interLess:
earn- mestic vest- paid to ExNet
est
Imings* investforment
ports ports
exor of
ment5
(-) eigners
ports net ex6
( )
ports
(-)7
Year
or
quarter
-4.4
1.8
-.5
-2 2
-5.8
1929
11.7
16.2
1933
3.2
1.4
1939
8.8
9.3
10 9
12.0
14 8
16.7
17.7
16 0
15.8
21.8
30 0
31.4
13 1
17.9
99
5.8
7.2
10 6
30.7
34.0
45 9
35.3
49
10.9
10.5
54
-14.9
-12.1
-15 8
-3.8
1950
1951
1952 .
1953
1954
1955
1956
1957
1958....
1959
30.8
34 6
37 1
38.0
41 0
47.5
48 7
51.1
51.3
58 5
53.8
59 2
52 1
53.3
52 7
68.4
71 0
69.2
61.9
77 6
-23.0
-24 6
-15.1
-15.3
-11 7
-20.8
-22 3
-18.1
-10.6
-19.0
4.0
35
1960
1961
1962....
1963
1964 .
1965...
1966
1967.
1968
1969.. .
58 7
59 8
67.0
70 1
76 2
84 6
91.2
93 7
98 2
101.7
76 4
74.3
85.2
90.2
96.6
112.0
124.5
120.8
131 5
146.2
-17.7
-14.5
-18.2
-20.1
-20.4
-27.4
-33.3
-27.1
-33 3
-44.5
2 6
2.8
3.0
3.1
3.2
3.3
1970
1971 .
1972
1973.
1974
1975. .
1976
1977 p__
101.4
115.7
131.0
140.2
137.9
179.2
206 6
226.9
140.8
160.0
188.3
220.0
214.6
189.1
243 3
294.3
-39.5
-44.3
-57.3
-79.8
-76.7
-9.9
-36.8
-67.4
4.3
1940. .
1941
1942
1943
1944
1945 .
1946
1947
1948
1949
.
Total
income
or receipts
Statistical
discrepancy
Gross
national
product
or expenditure
0.4
7.0
5.9
1.1
-0.7
102.3
1.1
.2
2.4
2.0
.4
-.2
55.1
.7
55.8
.2
4.4
3.4
1.1
-.9
89.4
1.4
90.8
2
.2
2
.2
5 4
5.9
48
4.4
5.3
7.2
14.8
19.8
16.9
15.9
3.6
4.6
4.8
6.5
7.1
7.8
7.2
8.2
10.4
9.6
17
1.3
0
-2.0
-1.8
-.6
7.6
11.6
6 5
6.2
-1.5
-1.1
2
2.2
2.1
1.4
-4.6
-9.0
-2.0
-.6
98 9
124.3
159 1
193.8
207.8
208 2
208.9
231.0
260 3
257.0
1 i
.5
— 8
-1.8
2.7
4.1
.7
1.8
-1.2
1.0
100 0
124.9
158 3
192.0
210.5
212 3
209.6
232.8
259.1
258.0
13.9
18 9
18.2
17.1
18.0
20.0
23.9
26.7
23.3
23.7
12.0
15.1
15.8
16.6
16.0
17.8
19.6
20.7
20.8
23.2
1.9
38
2.4
.6
2.0
2.2
4.3
6.1
2.5
.6
2.1
-.3
.2
1.9
.3
.3
-1.8
-3.6
-.1
2.0
284.1
326 2
344.5
362.8
363.3
396.8
421.5
442.6
447.2
486.7
2.0
4.0
2.7
3.3
3.0
2.5
-.8
.2
1.7
-.2
286.2
330.2
347.2
366.1
366.3
399.3
420.7
442.8
448.9
486.5
27.6
28.9
30.6
32.7
37.4
39.5
42.8
45.6
49.9
54.7
23.2
23.1
25.2
26.4
28.4
32.0
37.7
40.6
47.7
52.9
4.4
-1.7
-3.0
506.7
521.7
559.8
591.0
633.5
687.2
749.8
794.6
869.1
938.8
-.7
1.6
4.0
3.7
2.2
.9
506.0
523.3
563.8
594.7
635.7
688.1
753.0
796.3
868.5
935.5
62.5
65.6
72.7
101.6
137.9
147.3
162.9
175.6
58.5
64.0
75.9
94.4
131.9
126.9
155.1
184.7
3.9
.3
1.6
3.9
9.8
.6
2.5
'8
2.9
2.6
4 5
5.6
2.6
2.5
2 3
2.5
2 5
2.5
2.4
2.6
3.5
3.7
36
3.8
5.5
6.5
7.7
8.5
8.5
8.7
10.0
1
2
3
5.8
5.4
6.3
8.9
7.6
5.1
4.9
2.3
1.8
-3.3
7.1
6.0
-2.4
-3.2
-5.7
-4.3
-1.6
-1.2
1.4
2.0
20.4 - 1 1 . 8
7.8
.9
-9.0
19.1
984.5
1,062.1
1,169.4
1,303.9
1, 407.1
1, 523.0
1,701.0
1,889.4
3.2
1.7
-.6
-3.3
-2.1
1.3
1.7
2.6
5.8
5.9
5.5
1.0
103.4
982.4
1,063.4
1,171.1
1, 306.6
1,412.9
1, 528.8
1,706. 5
1,890.4
Personal income less personal tax and nontax payments (fines, penalties, etc.).
Interest paid by consumers to business and net personal transfer payments to foreigners.
Government transfer payments to persons and foreigners, net interest paid by government, subsidies less current
surplus of government enterprises, and disbursements less wage accruals.
4
Undistributed corporate profits with inventory valuation and capital consumption adjustments, corporate and noncorporate capital consumption allowances with capital consumption adjustment, and private wage accruals less
disbursements.
s See Table B-14.
6
Net transfers to foreigners by persons and government and interest paid by government to foreigners.
7
Capital grants received by the United States (net) less net foreign investment.
Source: Department of Commerce, Bureau of Economic Analysis.
267
T A B L E B-9.—Gross national product by sector, 1929-77
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Gross domestic product
Business
Gross
Year or quarter national
product
Total
Total
Nonfarm l
Government 2
StatisFarm tical
discrepancy
Households
and
institutions
Total
Federal
State
and
local
Rest
of the
world
Percent
change
from
preceding
period,
gross
domestic
product*
103.4
102.6
95.4
84.7
9.7
1.1
2.9
43
0.9
3.5
0.8
1933
55.8
55.5
49.1
43.8
4.6
.7
1.7
4.7
1.2
3.5
.3
1939
90.8
90.5
80.6
72.9
6.3
1.4
2.3
7.6
3.4
4.2
.3
7.0
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
100.0
124.9
158.3
192.0
210.5
212.3
209.6
232 8
259.1
258.0
99.6
124.5
157.9
191.6
210.1
212.0
209.0
231.8
257.9
256.9
89.4
112.6
139.9
162.8
174.2
172.8
183.8
210.0
234.9
231.5
81.8
103.1
127.7
149.3
156.2
152.7
164.2
188 0
212.7
211.7
6.5
1.1
.5
8.9
13.0 - . 8
15.3 - 1 . 8
2.7
15.3
4.1
16.0
.7
18.9
1.8
20.2
23.3 - 1 . 2
1.0
18.8
2.4
2.5
2.9
3.2
3.7
4.1
4.5
5.1
5.6
5.9
7.8
9.4
15.1
25.6
32.2
35.2
20.8
16.7
17.4
19.4
3.5
5.0
10.6
20.9
27.2
29.8
14.6
9.4
8.9
10.0
4.3
4.4
4.5
4.7
4.9
5.4
6.2
7.3
8.5
9.4
4
.4
.4
.3
.4
.3
.5
9
1.2
1.1
10 1
25.0
26.8
21.4
9.6
.9
-1.4
10 9
11.3
286.2
330.2
347.2
366 1
3b6. 3
399.3
420 7
442.8
448 9
486.5
284.8
328.7
345.7
364.6
364.5
397.3
418.5
440.5
446.6
484.0
257.5
294.4
307.3
324 9
323.9
354.0
372.1
390.8
393.1
427.7
235.5
267.4
282.5
301 2
301.3
332.8
354.3
372.3
370 7
408.9
20.0
22.9
22.2
20 3
19.6
18.8
18.6
18.4
20.7
19.1
6.4
6.9
7.2
7.8
8.1
9.1
9.8
10.5
11.4
12.3
20.9
27.4
31.2
31.9
32.5
34.2
36.6
39.1
42.1
44.0
10.7
16.2
18.9
18.6
17.8
18.4
19.0
19.6
20.5
20.9
10.1
11.2
12.3
13 3
14.7
15.8
17.6
19.6
21.6
23.1
1.3
1.5
1.5
15
1.8
2.0
22
2.3
22
2.4
10.9
15.4
5.2
55
-.0
9.0
53
5.2
14
84
506.0
523.3
563.8
594.7
635.7
688.1
753.0
796.3
868.5
935.5
503.5
520.2
560.2
59L1
631.4
683.4
748.8
791.8
863.7
931.1
442.5
455.3
490.4
516.5
550.7
596.6
651.1
682.7
742.2
798.1
423.0
433.4
465.9
492.2
529.2
573.8
625.0
658.8
720.2
776.2
20.2 - . 7
20.2
1.6
20.5
4.0
20.5
3.7
19.3
2.2
.9
22.0
22.9
3.2
22.2
1.7
22.6 - . 6
25.2 - 3 . 3
13.8 47.1
14.4 50.5
15.5 54.3
16.6 58.0
17.8 62.9
19.2 67.6
21.1 76.5
23.9 85.1
26.4 95.2
29.2 103.7
21.7
22.6
24.1
25.2
27.0
28.3
32.4
35.6
39.3
41.8
25.5
27.9
30.2
32.9
35.9
39.3
44.1
49.5
55.9
61.9
2.5
3.1
36
3.7
4.3
4.7
4.2
4.6
4.8
4.5
40
3.3
77
5. 5
6.8
82
9.6
5.7
9.1
7.8
.
982.4
1, 063. 4
1,171.1
1,306.6
1,412.9
1, 528.8
1, 706. 5
1,890.4
977.8
1, 056.8
1,164.1
1, 297. 5
1, 399.8
1,518.3
1, 692.1
1, 872.9
831.5
896.9
989.5
1,108.0
1, 193. 7
1, 289 6
1, 444.3
1,604.1
807.6
867.9
955.8
1, 055. 2
1,139.9
1, 234.6
1, 390.9
1,552.8
25.9 - 2 . 1
27.7
1.3
32.0
1.7
2.6
50.1
5.8
48.0
49 2
5.9
5.5
47.9
1.0
50.3
31.6
34.7
37.2
40.5
44.8
50.4
56.2
63.0
114.7
125.2
137.4
149.1
161.4
178.2
191.6
205.8
44.7
46.8
50.1
51.9
54.9
59.0
62.4
66.5
70.0
78.5
87.3
97.1
106.5
119.2
129.2
139.4
4.6
6.6
7.0
9.1
13.1
10.5
14.4
17.5
5.0
8.1
10.1
11.5
7.9
8.5
11.4
10.7
1975: 1
II
III
IV
1,453.0
1,496.6
1, 564.9
1,600. 7
1, 443.2
1, 486.1
1,553.9
1, 590.0
1, 222. 3
1, 260.1
1, 323.1
1, 353.1
1,173.2
1, 208. 4
1, 262. 8
1, 294.1
43.1
48.2
52.3
53.1
6.0
3.5
8.0
5.9
48.5
49.5
51.0
52.7
172.4
176.5
179.8
184.2
58.0
58.3
58.7
61.1
114.4
118.2
121.1
123.2
9.8
10.5
11.0
10.8
1.6
12.4
19.5
9.6
1976: 1
II
III
IV
1,651.2
1,691.9
1,727.3
1, 755.4
1,637.0
1,678.4
1,712.0
1, 740. 9
1, 395. 8
1, 433. 3
1, 463.0
1, 485.1
1, 343.1
1, 378. 0
1, 409. 4
1, 433. 4
48.6
50.9
45.6
46.4
4.2
4.5
8.0
5.3
54.4
55.5
56.4
58.3
186.8
189.6
192.6
197.5
61.4
61.6
61.8
64.7
125.4
128.1
130.7
132.8
14.2
13.5
15.3
14.4
12.4
10.5
8.2
6.9
1977: 1
II
III
1,810.8
1,869.9
1,915.9
1,965.1
1, 793. 2
1,851.4
1, 898. 2
1,948.8
1, 532. 3 1, 478.0
1, 586. 4 1, 536. 7
1, 628.1 1, 580. 0
1,669. 5
3.3
51.0
50.8 - 1 . 2
47.2
.9
52.0
60.4
62.0
63.6
66.0
200.5
203.1
206.5
213.2
65.4
65.5
65.8
69.2
135.1
137.6
140.7
144.1
17.6
18.4
17.7
16.3
12.6
13.6
10.5
11.1
1929....
. .
.
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959 .
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
. .
. . .
. .
P
2.0
4.0
2.7
3.3
3.0
2.5
-.8
.2
1.7
-.2
-4.1
i Includes compensation of employees in government enterprises.
* Compensation of government employees.
3 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here.
See Table B-l for percent changes in gross national product.
Source: Department of Commerce, Bureau of Economic Analysis.
268
TABLE B-10.—Gross national product by sector in 1972 dollars, 1929-77
[Billions of 1972 dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Gross domestic product
Year or quarter
Gross
national
product
Business
House-
Total
Total
Nonfarm i
Farm
and
Resid- instiual 2 utions Total
1929
314.7
312.8
271.1
244.2
23.8
3.1
1933
222.1
220.5
179.7
152.1
25.0
2.6
1939
319.7
318.6
261.5
231.6
25.3
4.7
1940
1941
1942
1943
1944...
1945
1946
1947
1948
1949
343.6
396.6
454.6
527.3
567.0
559.0
477.0
468.3
487.7
490.7
342.3
395.4
453.5
526.4
566.0
558.1
475.9
466.7
485.9
488.8
282.4
324.4
355.3
381.9
401.9
396.9
385.1
392.8
411.2
409.4
254.1
297.2
330.3
360.6
371.2
365.3
362.3
370.8
387.2
382.1
24.7
26.3
28.7
27.8
27.3
25.8
25.8
23.9
25.7
25.5
3.6
.9
-3.8
-6.6
3.5
5.8
-3.0
-1.9
-1.7
1.8
533.5
576.5
598.5
621.8
613.7
654.8
668.8
680 9
679.5
720.4
531.5
574.7
596.7
619.9
611.4
652.2
666.1
678.0
676.5
717.3
448.6
477.2
492.8
515.6
508.0
546.5
557.2
566 0
561.9
600.5
417.9
445.9
460.7
480.6
473.4
512.5
529.3
538.7
528.2
569.6
26.9
25.8
26.3
27.6
28.3
29.2
28.8
28.1
29.3
28.2
3.8
5.5
5.7
7.3
6.2
4.8
-.9
-.8
4.4
2.7
1960
1961
1962
1963
1964
1965 . .
1966
1967
1968
1969
733.6
736.8
751.2
755.3
799.1
794.3
825.8
830.7
868.7
874.4
919.9
925.9
975.6
981.0
1,007. 7 1, 001.9
1,051.8 1,045.7
1,078.8 1,073.1
611.8
625.6
663.9
692.0
730.4
776.4
822.4
839.8
878.2
901.5
580.5
590.9
629.6
658.4
697.1
746.7
791.1
807.8
850.6
877.4
1970
1971
1972
1973 .
1974 _
1975
1976
1977 v
1,075.3
1,107.5
1,171 1
1,235.0
1,217.8
1, 202.1
1, 274.7
1,337.6
871.3
1,069.8
898.3
894.9
1,100.3
927.6
955.8
1,164.1
989 5
1,227.4 1,050.4 1,013.2
993.7
1,211.0 1,031.2
974.3
1,197.3 1,013.7
1,268.0 1, 082.0 1, 043. 8
1,330.2 1,141.4 1,103.8
1975: 1
II
III.
IV
1,169.8
1,188.2
1,220.7
1, 229.8
1,165. 5
983.3
1,183.4
999 8
1,215.6 1, 031. 5
1, 224.6 1,040.1
1976: 1
II—
III
IV
1,256.0
1,271.5
1,283.7
1, 287.4
1, 249 2
1, 265.1
1, 276.7
1, 280.9
1,
1,
1,
1,
1,311.0
1,330.7
1, 347.4
1,361.4
1, 303.3
1, 322.8
1, 340.1
1,354.8
.
1950
1951
1952
1953
1954
1955 .
1956
1957
1958
1959
1977: 1 . . .
II...
III
IVP
..
.
.
Government3
Federal
State
and
local
Rest
of the
world
Percent
change
from
preceding
period,
gross
domestic
product«
15 6
26.1
5 2
20.9
1 9
12.2
28.7
6.6
22.0
1.6
-2.1
15.1
42.0
16.9
25.1
1.2
7.7
16 1 43.9 18 6
15.9 55.1 29.6
16.4 81.8 56.7
15 2 129.3 105 0
15.1 149.0 125.2
15.0 146.2 121.8
15.1 75.8 49.7
16 0 57 9 29 8
16 7 58.0 29 2
17.3 62.2 31.3
25.3
25.5
25.0
24.4
23.8
24.5
26.1
28 1
28 8
30.9
1 3
1.2
1.1
1 0
1.0
.8
1.1
1 6
1 8
1.9
7 5
15.5
14.7
16 1
7.5
-1.4
-14.7
-1 9
4 1
.6
18 3
18.7
18 6
19 3
19.4
21 4
22.5
23 1
24*2
24.9
64 6
78.8
85 3
85.0
83.9
84 4
86.5
38 9
90 4
91.8
32 7
46.2
51 6
49 6
47.2
45 9
45.6
45 8
44 5
44.5
31 9
32.6
33 7
35.5
36.7
38 4
40.8
43 1
45 8
47.3
1 9
1.8
1 8
2 0
2.3
2 5
2.7
2 9
3 0
3.2
8 7
8.1
3 8
3 9
-1.4
6 7
2.1
1 8
_ 2
6.0
29.5
1.8
29.6
5.1
29.5
4.8
30.0
3.6
4.0
29.2
30.1 - . 4
2.8
28.5
2.4
29.6
29.4 - 1 . 8
29.9 - 5 . 9
26 8
27.2
28 3
29.0
29.9
31 1
32.8
34.8
35 9
36 6
94.9
98.5
102 1
104.8
108.4
112 4
120.4
127.2
131 7
135 0
45 2
46.2
48 3
48.2
48.5
48 7
53.0
57.2
58 1
58 2
49.7
b2.3
53 9
56.6
60.0
63 6
67.5
70.0
73 6
76 8
3 2
4.1
4 8
4.9
5.7
6 1
5.4
5.8
6 1
5.7
2.3
2.4
5 7
4.0
5.2
5 9
6.1
2.7
4 4
2 6
31.1 - 4 . 2
32.8 - . 1
1.7
32 0
32.3
4.9
5.3
32.2
5.6
33.8
33.0
5.2
1.7
35.9
36 3
36 6
37 2
38 1
38.0
38.9
40 2
41.4
135 2
136.0
137 4
138 9
141.9
144.6
145 8
147.5
55 2
52 5
50 1
48 3
48.6
48.5
48.4
48.6
80 1
83.5
87 3
90.6
93.3
96.1
97.3
98.8
5 5
7 2
7 0
7.6
6.8
4.9
6 7
7.4
_ 3
2 8
5 8
5 4
-1.3
-1 1
5 9
4.9
946.2
961.7
989.4
999.8
31.8
34.3
34.6
34.4
5.3
3.8
7.5
5.9
38.5
38 8
39.1
39.4
143.7
144 7
145.0
145.1
48.7
48 5
48.5
48.4
95.0
96.2
96.5
96.7
4.3
4 8
5.1
5.2
-8.9
6 3
11.3
3.0
064 2
079.3
090.5
093.9
1, 026.4
1, 042.5
1,051.2
1,054.8
33.3
32.3
32.2
34.1
4.5
4.5
7.0
4.9
40 1
40.3
40.0
40 6
144 9
145.5
146.2
146.4
48.3
48.3
48.5
48.6
96.6
97.2
97.7
97.8
6.8
6.4
7.0
6.5
8 3
5.2
3.7
1.3
1,116.2
1,134.9
1,150. 5
1,163.9
1, 077.8
1,099.8
1,112.7
1,125.0
35.1
34.9
36.2
37.4
3.4
.2
1.6
1.6
40.6
41.2
41.7
42.1
146.5
146.7
147.9
148.8
48.6 97.9
48.6 98.1
48.7 99.2
48.7 100.1
7.7
7.9
7.4
6.6
7.2
6.1
5.3
4.5
i Includes compensation of employees in government enterprises.
* The difference between gross product in 1972 dollars measured as the sum of final products and that measured as the
sum of gross product by industry.
3 Compensation of government employees.
* Changes are based on unrounded data and therefore may differ from those obtained from data shown here. See Table
B-2 for percent changes in gross national product in 1972 dollars.
Source: Department of Commerce, Bureau of Economic Analysis.
269
248-947 O - 78 •
TABLE B-ll.—Gross domestic product of nonfinancial corporate business, 1929—77
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Gross
domestic
product
of
nonfinancial
corporate
business
Year
or
quarter
Capital
consumption
allowances
with
capi- Total
tal
conumption
adjustment
Net domestic product
Domestic income
Corporate profits with inventory valuation and capital
consumption adjustments
ComIndiProfits before tax
penrect
sation
busiof
Profits after tax
ness Total
emProfits
tax,
ploy- Total Total tax
etc. i
Undisees
iabilDivi- tribu'ty Total dends
ted
profits
1929..
50.1
5.4
44.7
3.4
41.3
32.3
7.6
8.4
1.2
7.3
1933..
24.4
4.2
20.2
3.8
16 4
16.7 - 2 . 0
.6
.5
.1
1939..
43.7
4.7
39.1
5.1
34.0
28.2
4.3
6.1
1.4
4.7
3.3
1.4
1940..
1941..
1942..
1943
1944..
1945.
1946..
1947
1948..
1949..
50.4
65.6
82.9
98.7
102.1
95.3
99.3
120.0
137.3
133.5
4.8
5.3
6.0
6 1
6.2
6.4
7 3
9.1
10.7
11.6
45.6
60.4
77.0
92.6
95.9
88.9
92.1
110.9
126.5
121.9
5.5 40.1
6.4 53.9
6.8 70.1
7.3 85.3
8.1 87.8
8.9 80.0
10.1 81.9
11.2 99.8
12.1 114.4
12.6 109.3
31.2
39.8
51.0
62.2
65.1
61.9
67.2
79.1
87.8
85.3
7.5
12.8
17.9
22.0
21.7
17.2
14.1
19.9
25.8
23.0
8.8
16.4
20.1
23.6
22.2
17.8
22.0
29.1
31.8
24.9
2.7
7.5
11.2
13 8
12.6
10.2
8.6
10 8
11.8
9.3
6.1
9.0
8.9
9.8
9.6
7.6
13.4
18.3
20.0
15.6
3.6
4.0
3.8
4.0
4.2
4.2
5.1
5.9
6.5
6.5
1950.
1951..
1952
1953..
1954..
1955..
1956..
1957
1958
1959..
151.9
174.5
182 3
195.0
191.9
216.7
231.6
242.3
236 3
265.7
12.6 139.3
14.6 159.9
15 7 166 7
17.0 178.1
17.9 174.1
19.2 197. 5
21.5 210.1
23.7 218.5
24 9 211 4
26.0 239.7
14.1
15.2
16 8
18.2
17.4
19.2
20.8
22.4
22 8
25.4
125.2
144.7
149 8
159. S
156.6
178.3
189.2
196.2
188 6
214.4
94.7
110.2
118 3
128.7
126.5
138.5
151.4
159.1
155 9
171.6
29.6
33.4
30.3
29.9
28.6
38.2
36.1
35.0
30.1
39.7
38.5
39.1
33.8
34.9
32.1
42.0
41.8
39.8
33.7
43.1
16.9
21.2
17.8
18.5
15.6
20.2
20.1
19.1
16 2
20.7
21.6
17.9
16.0
16.4
16.4
21.8
21.8
20.7
17.5
22.3
1960
1961..
1962..
1963
1964
1965..
1966..
1967..
1968..
1969..
277 3
284.5
311.0
330 9
357 6
392.1
430.7
452.9
498.4
541.8
27 0
27.8
28 7
29 8
31 0
32.8
35.7
39.3
43.0
47.8
28 3
30.1
33 0
35 6
38 4
41.1
42.9
45.8
51.6
57.1
222 C
226.5
249 2
265 6
288 3
318.2
352 0
367.9
403.8
437.0
181 1
185.1
199 8
210 7
226 3
246.1
273 5
291.9
321.6
357.4
37 4
37.4
44 9
50.0
56 7
66.1
71 2
67.2
72.1
66.4
39 5 19 2
39.2 19.5
43 7 20 6
48.3 22.8
54 6 24 0
64.4 27.2
69 5 29 5
65.4 27.7
71.9 33.6
68.4 33.3
1970.. 560.6 53.1
1971
602 5 58 2
1972.. 671.0 62.6
1973.. 752.0 68.7
1974.. 808.8 80.8
1975.. 875.2 97.3
1976.. 991.0 107.0
1977 p. 1,104.9 116.6
507.5 61.8
544 2 68 2
608.4 73.5
683.3 80.5
728.0 85.7
778.0 92.1
884.0 99.4
988.3 108.5
445.7
476 0
534.8
602.8
642.3
685.8
784.6
879.8
377.1 51.6 55.1
399 4 58 7 63 3
443.8 72.0 75.9
503.8 76.0 92.7
552.9 59.5 102.9
576.6 78.3 102.3
650.3 101.9 130.6
732.7 110.4 141.9
1975:
l-_II...
III..
IV
733.2
759.3
800.2
819 2
87.6
90.8
94.2
95 9
645.6
668.5
705.9
723 2
561.7
565.2
580.3
599 3
5.2
Inventory
valuation
adjustment
Capital
Net
con- intersump- est
tion
adjustment
0.5 - 1 . 3
1.4
- 5
1 7
-1.0
1.5
2.5
4.9
5.1
5.7
5.4
3.4
8.3
1? 4
13.5
9.1
-.2 -1.1
-2.5 - 1 . 1
-1.2 - 1 . 0
g
-.8
-.2
-!6 - . 1
-5.3 -2.7
-5.9 - 3 . 3
-2.2 -3.9
1.9 - 3 . 8
7.9
7.8
7.8
8.0
8.2
9.4
10.1
10.4
10.2
10.8
13.6
10.1
8 1
8.4
8.2
12.4
11.6
10.3
7 3
11.5
-5.0
-1.2
1.0
-1.0
-3.9
-4.5
-4 4
-4.0
-3.2
-l!7 -2.1
-2.7 - 3 . 0
-1.5 - 3 . 3
-3 4
5 -2.9
1.4
1.3
1.3
1.1
1.0
1.0
.7
.8
.9
1.0
.9
1.1
1.2
1.3
1.6
1.6
1.7
2.2
2.7
3.1
20.3
19.7
23 1
25.5
30 7
37.2
40 0
37.7
38.3
35.1
11.5
11.7
12 7
14.1
15 3
17.2
18 1
18.9
20.7
20.7
8.7
8.0
10 3
11.4
15 4
20.0
21 9
18.8
17.6
14.4
-2.3
!i - 1 . 8
.1
10
—. 2
1.9
26
-1.9
3.6
-2 1
38
3.6
-3^4
3.6
3.5
-5.5
3.5
3.9
4.5
4.8
5.3
6.1
7.4
8.7
10.1
13.1
27.3
29 9
33.5
39.6
42.7
40.8
53.7
57.0
27.9
33 3
42.4
53.1
60.2
61.6
76.9
84.9
19 9
20 0
21.7
23.9
26.0
29.0
32.4
38.2
8.0
13 3
20.7
29.2
34.2
32.5
44.5
46.6
-5.1
-5 0
-6.6
-18.6
-40.4
-12.0
-14.1
-14.5
2.7
1.8
-3.0
-12.0
-14.5
-17.0
17.0
17.9
19.1
23.1
29.9
30.9
32.4
36.7
53.0 80.5
72.4 93.4
94.9 116.6
92 9 118 9
31.3
36.7
47.2
48 0
49.1
56.7
69.5
70 9
29.1
28.9
29.2
28.8
20.1 - 1 8 . 3
27.8 - 9 . 3
40.2 - 8 . 8
42.1 - 1 1 . 8
-9 1
-11.7
-13.0
-14.3
30.9
30.8
30.8
31.0
626.1 100.2 127.0
643.3 103.6 133.5
657.3 106.8 133.0
674.4 97.1 128.7
52.1
55.1
54.8
52.7
74.9
78.4
78.2
76.0
28.3
32.1
33.2
36.0
46.5
46.3
45.0
40.0
-12.4
-15.5
-11.7
-16.9
-14.3
-14.4
-14.5
-14.7
31.9
32.2
32.6
33.0
1977:
1 . . . 1, 049. 3 112.5 936.8 105.3 831.6 700.6 96.3 132.4
II — 1,094.9 114.2 980.7 107.5 873.3 727.4 109.8 143.4
IIL. 1,124.8 118.2 1, 006. 6 109.4 897.2 741.2 118.5 142.0
52.8
57.7
56.9
79.5
85.7
85.1
35.2
37.2
39.4
44.3 -20.6 - 1 5 . 5
48.5 -17.1 - 1 5 . 8
-17.6
45.7
34.6
36.1
37.5
824.8 91.6
855.3 96.1
899.5 99.4
921 3 102 1
1976:
1.-958.4 104.0
11... 983.6 105.6
III.. 1,004.7 108.0
IV.. 1,017.2 110.2
1
250 3
256.7
282 3
301.1
326 6
359.3
394.9
413.6
455.4
494.0
854.4 96.1 758.3
877.9 98.8 779.1
896.7 100.0 796.6
907.0 102.5 804.5
2.0
2.0 - 1 9
Indirect business tax and nontax liability plus business transfer payments less subsidies.
Source: Department of Commerce, Bureau of Economic Analysis.
270
-2 1
-j
1.5
T A B L E B-12.—Output, costs, and profits of nonfinancial corporate business,
1948—77
[Quarterly data at seasonally adjusted annual rates]
Current-dollar cost and profit per unit of output (dollars) I
Gross domestic
product of
nonfinancial
corporate
business
(billions of
dollars)
Year or
quarter
Total
cost
and
profit2
Capital
consumption
allowances
with
capital
consumption
adjustment
Indirect
business
tax
etc. 3
CompenNet
sation
inof
terest
employees
Current
dollars
1972
dollars
137.3
133.5
229.7
219.9
0.598
.607
0.047
.053
0.053
.057
0.382
.388
151.9
174.5
182.3
195.0
191.9
247.5
270.2
275.2
292.0
283.5
.614
.646
.663
.668
.677
.051
.054
.057
.058
.063
.057
.056
.061
.062
.061
216.7
231.6
242 3
236.3
265.7
315.1
324.1
328 3
313.4
347.3
.688
.715
.738
.754
.765
.061
.066
072
.080
.075
1960
1961
1962
1963
1964 .
277.3
284.5
311.0
330.9
_. 357.6
358.9
366.7
399.7
425.4
455.2
.773
.776
.778
.778
.786
1965
1966 _
1967__
1968
1969
392.1
. . 430.7
„ 452.9
498.4
541.8
494.6
532.9
545.8
581.6
607.3
560.6
602.5
671.0
752.0
. . . 808.8
Corporate profits with
inventory valuation
and capital
consumption adjustments
Output Compenper
sation
hour of
per
all em- hour of
ployees all em(1972
ployees
dollars) (dollars)
Total
Profits Profits
tax
after
lability tax*
0.004
.004
0.112
.105
0.051
.042
0.061
.062
.383
.408
.430
.441
.446
.004
.004
.004
.004
.006
.120
.124
.110
.102
.101
.068
.079
.065
.063
.055
.051
.045
.046
.039
.046
.061
.064
.068
.073
.073
.439
.467
.484
.497
.494
.005
.005
.007
.009
.009
.121
.112
.106
.096
.114
.064
.062
.058
.052
.060
.057
.050
048
.044
.055
5.110
5.333
2.541
2.635
.075
.076
.072
.070
.068
.079
.082
.083
.084
.084
.505
.505
.500
.495
.497
.010
.011
.011
.011
.012
.104
.102
.112
.118
.125
.053
.053
.052
.054
.053
.051
.049
.061
.064
.072
5.455
5.634
5.912
6.167
6.427
2.752
2.844
2.956
3.054
3.195
.793
.808
.830
.857
.892
.066
.067
.072
.074
.079
.083
.080
.084
.089
.094
.497
.513
.535
.553
.589
.012
.014
.016
.017
.022
.134
.134
.123
.124
.109
.055
.055
.051
.058
.055
.079
.078
.072
.066
.055
6.625
6.777
6.873
7.105
7.139
3.296
3.478
3.676
3.929
4.198
600.6
619.3
671.0
720.4
695.0
.933
.973
1.000
1.044
1.164
.088
.094
.093
.095
.116
.103
.110
.110
.112
.123
.628
.645
.661
.699
.796
.028
.029
.028
.032
.043
.086
.095
.107
.105
.086
.045
.048
.050
.055
.061
.041
.046
.057
.050
.024
7.132
7.374
7.595
7.781
7.506
4.478
4.757
5.024
5.441
5.972
875.2
991.0
1,104.9
678.9
731.0
774.1
1.289
1.356
1.427
.143
.146
.151
.136
.136
.140
.849
.890
.947
.045
.044
.047
.115
.139
.143
.060
.073
.074
.055
.066
.069
7.766
8.055
6.596
7.166
1975:1....
II...
III..
IV..
824.8
855.3
899.5
921.3
654.0
669.4
692.7
699.5
1.261
1.278
1.299
1.317
.140
.144
.143
.146
.134
.136
.136
.137
.859
.844
.838
.857
.047
.046
.044
.044
.081
.108
.137
.133
.048
.055
.068
.069
.033
.053
.069
.064
7.490
7.749
7.935
7.892
6.432
6.543
6.647
6.761
1976: 1 . . .
II
III
IV..
958.4
983.6
1004.7
1017.2
719.4
731.3
736.6
736.5
1.332
1.345
1.364
1.381
.145
.144
.147
.150
.134
.135
.136
.139
.870
.880
.892
.916
.044
.044
.044
.045
.139
.142
.145
.132
.072
.075
.074
.072
.067
.066
.071
.060
7.987
8.067
8.109
8.057
6.952
7.096
7.236
7.378
1977:1...
II
III.
1049.3
1094.9
1,124.8
753.3
771.7
781.2
1.393
1.419
1.440
.149
.148
.151
.140
.139
.140
.930
.943
.949
.046
.047
.048
.128
.142
.152
.070
.075
.073
.058
.068
.079
8.171
8.202
8.278
7.599
7.731
7.871
1948__ _
1949
1950__
1951
1952
1953
1954 _
.
1955
1956
1957
1958
1959
1970
1971
1972
1973
1974.
1975
1976 _
1977 p
1
Output is measured by gross domestic product of nonfinancial corporate business in 1972 dollars.
3
This is equal to the deflator for gross domestic product of nonfinancial corporate business with the decimal point
shifted two places to the left.
3
Indirect business tax and nontax liability plus business transfer payments less subsidies.
4
With inventory valuation and capital consumption adjustments.
Sources: Department of Commerce (Bureau of Economic Analysis) and Department of Labor (Bureau of Labor Statistics)
271
TABLE B-13.—Personal consumption expenditures, 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Nondurable goodsl
Personal consumption
expenditures
Durable goods1
Year
or
quarter
1929.
.
Services i
Household
operationl
o
Q.
T3
.
1
1
o
J=
o
<D
Id
2
CO
«E
3
o
"o
DO
Q-
E °"
1
c
a
S
T3
o
ID
tz
O
c
Lu
"o
O
e>
CO
o
o
3
u_
c
co
1
O
I
"o
<u
LU
c
2
77.3
9.2
3.3
4.7
37.7
19.5
9.4
1.8
1.6
30.3
11.7
4.0
1.2
2.6
1933
45.8
3.5
1.1
1.9
22.3
11.5
4.6
1.5
1.2
20.1
8.1
2.8
1.1
1.5
1939
67.0
6.7
2.3
3.4
35.1
19.1
7.1
2.2
1.4
25.2
9.4
3.8
1.4
2 0
71.0
80.8
88.6
99.4
108.2
119.5
143 8
161 7
174.7
178.1
7.8
9.7
6.9
6.5
6.7
8.0
15 8
20 4
22.9
25.0
2.8
3.5
.7
.8
.8
1.0
4.1
6.6
8.0
10.6
3.8
4.8
4.6
3.9
3.8
4.5
84
10 6
11.5
11.3
37.0
42.9
50.8
58.6
64.3
71.9
82.7
90.9
96.6
94.9
20.2
23.4
28.4
33.2
36.7
40.6
47 4
52.3
54.2
52.5
7.5
8.8
11.0
13.4
14.6
16.5
18 2
18.8
20.1
19.3
2.3
2.6
2.1
1.3
1.4
1.8
3.4
4.0
4.8
5.3
1.5
1.7
1.9
2.0
2.0
2.2
2.5
30
3.4
3.1
26.2
28.2
31.0
34.3
37.1
39.6
45 3
50 4
55.3
58.2
9.7
10.4
11.2
11.8
12.3
12.8
14 2
16 0
17.9
19.6
4.0
4.3
4.8
5.2
5.9
6.4
68
75
8.1
8.5
1.5
1.5
1.6
1.7
1.8
1.9
21
23
2.6
2.9
2.1
2.4
2.7
3.4
3.7
4.0
50
5 3
5.8
5.9
1950
1951
1952
1953 . .
1954
1955
1956
1957-.
1958
1959
192.0
207.1
217 1
229 7
235.8
253.7
266.0
280.4
289 5
310 8
30.8
29.8
29 1
32.5
31.8
38.6
37.9
39.3
36 8
42.4
13.7
12.2
11.3
13.9
13.0
17.8
15.8
17.2
14.8
18.9
13.7
14.0
14 0
i4 6
14.6
16.2
17.1
16.9
16 6
17 8
98.2
108.8
113 9
116 5
118.0
122.9
128.9
135.2
139 8
146.4
53.9
60.4
63 4
64.4
65.4
67.2
69.9
73.6
76 4
79.1
19.6
5.5
21.2
6.1
21 9 6 8
22.1
7 4
22.1
7.8
23.1
8.6
24.1
9.4
24.3 10.2
24.7 10 6
26.1 11.3
3.4
3.5
34
34
3.5
3.8
3.9
4.1
4 2
4.0
63.0
68.5
74 0
80 6
86.1
92.1
99.2
105.9
112 8
121.9
21.7
24.3
27 0
29 8
32.2
34.3
36.7
39.3
42 0
45.0
9.5
10.4
11 1
12 0
12.6
14.0
15.2
16.2
17 3
18 5
3.3
3.7
41
45
5.0
5.5
6.1
6.5
71
7.6
6.2
6.7
71
7 8
7.9
8.2
8.6
9.0
93
10 1
1960
1961.
1962
1963
1964..
1965
1966
1967
. .
1968
1969
. .
324.9
335.0
355.2
374 6
400.4
430.2
464.8
490.4
535.9
579.7
43.1
41.6
46.7
51.4
56.3
62.8
67.7
69.6
80.0
85.5
19.7
17.8
21.5
24.4
26.0
29.8
30.1
29.7
35.8
37.7
17.7
17.9
18.9
20 3
22.8
24.7
27.7
29.5
32.6
35.0
151.1
155.3
161.6
167.1
176.9
188.6
204.7
212.6
230.4
247.0
81.1
83.2
85.5
87.8
92.7
98.9
106.6
109.6
118.3
126.1
26.7
27.4
28.7
29.5
31.9
33.5
36.6
38.2
41.8
45.1
12.0
12.0
12.6
12.9
13.5
14.7
16.0
17.0
18.4
20.4
3.8
3.7
3.7
4.0
4.1
4.4
4.7
4.8
5.0
5.2
130.7
138.1
147.0
156.1
167.1
178.7
192.4
208.1
225.6
247.2
48.1
51.2
54.7
58.0
61.4
65.5
69.5
74.1
79.9
86.8
8.3
20.1
8.8
21.0
9.4
22.2
23 4 9.9
24.8 10.4
26.3 10.9
28.0 11.5
30.6 12.2
32.7 13.1
35.5 14.2
10.7
11.2
11.7
12.2
12.8
13.7
15.0
16.2
17.4
18.9
618.8
668.2
733.0
809.9
889.6
980.4
1,094.0
1,210.1
84.9
97.1
111.2
123.7
122.0
132.9
158.9
179.4
34.9
43.8
50.6
55.2
48.0
53.9
71.9
83.8
36.7
39.4
44.8
50.7
54.9
58.0
63 9
70.3
264.7
277.7
299.3
333.8
376.3
409.3
442 7
480.1
136.3
140.6
150.4
168.1
189.8
209.5
225 5
246.3
46.6
50.5
55.1
61.3
65.3
70.2
76.3
82.6
22.0
5.4 269.1
23.4
5.5 293.4
24.9
6.3 322.4
27.8
7.7 352.3
36.4
9.6 391.3
39.1 10.1 438.2
41 4 12 0 492 3
44.8 12.9 550.6
94.0
102.7
112.3
123.2
136.5
150.8
167.9
184.5
38.3
41.6
45.9
50.2
56.1
64.2
73.0
83.1
15.5
17.0
18.9
20.6
24.1
29.0
33.3
39.4
21.1
23.8
26.0
27.9
30.7
32.2
36.8
41.4
1975:1
936.5
II.
965.9
III...
995.1
IV.... 1, 024.1
122.8
127.8
136.7
144.3
48.0
49.9
56.5
61.3
54.8
57.4
58.7
61.0
394.0
406.4
415.0
421.9
202.6
207.9
212.1
215.4
66.6
69.8
71.5
73.0
38.2
39.1
39.1
39.8
9.6
10.0
10.8
10.2
419.7
431.7
443.4
457.9
145.1
148.5
152.4
157.2
61.4
63.7
65.3
66.3
27.6
29.0
29.7
29.8
31.6
31.6
32.2
33.2
1976:1
1,056.0 153.3
II
1,078.5 156.7
III..-. 1,102.2 159.3
1,139.0 166.3
68.8
71.0
72.1
75.7
61.9
63.0
63.9
66.5
430.4
437.1
444.7
458.8
219.3
223.8
227.0
232.0
74.2
74.3
76.9
79.9
40.6
40.3
41.2
43.5
11.4
11.3
12.0
13.3
472.4
484.6
498.2
513.9
161.5
166.2
170.4
173.7
69.5
70.4
73.1
78.8
31.5
31.4
32.8
37.6
34.8
36.3
37.6
38.7
1977:1
II
III
85.3
84.5
81.2
84.1
67.4
69.3
70.9
73.4
466.6
474.4
481.8
497.7
237.9
244.8
248.3
254.2
79.3
80.4
83.3
87.5
44.1
44.3
44.2
46.4
13.7
12.3
12.3
13.4
528.8
541.1
559.5
572.9
177.6
181.9
186.7
191.6
80.7
79.2
85.2
87.2
38.7
36.1
41.0
41.7
39.5
40.5
42.3
43.2
1940...
1941
1942
1943
1944. .
1945
1946
1947
1948-.1949
1970
1971
1972
1973
1974
1975
1976
.
.
. .
.
1977P
1,172.4
1,194.0
1,218.9
1,255.3
177.0
178.6
177.6
184.6
1
Total includes "other" category, not shown separately.
Includes imputed rental value of owner-occupied dwellings.
Source: Department of Commerce, Bureau of Economic Analysis.
2
272
TABLE B—14.—Gross private domestic investment, 1929-77
(Billions of dollars; quarterly data at seasonally adjusted annual rates]
Change in
business
inventories
\"ixed in vest ment
Year or
quarter
Gross
private
domestic
invest- Total
ment
Structures
Total
1929..
1933
Residential
Nonresidential
Producers'
durable
equipment
Total
Nonfarm
Total
Nonfarm
Total
Nonfarm
structures
ProTotal
Farm ducers'
durstruc- able
tures equipment
Nonfarm
16.2
14.5
10.5
5.0
4.8
5.5
4.8
4.0
3.8
0.2
0.1
1.7
1.8
1.4
3.0
2.4
.9
.9
1.4
1.3
.6
.5
.0
.0
-1.6
-1.4
9.3
8.8
5.8
2.0
1.9
3.9
3.3
3.0
2.8
.1
.1
.4
.3
1940..
1941
1942
1943.
1944...
1945... . .
1946 . .
1947
1948 .
1949
13.1
17.9
99
5.8
7.2
10.6
30.7
34 0
45 9
35.3
10.9
13.4
8 1
6.4
8.1
11.7
24.3
34.4
41.1
38.4
7.5
9.4
6.0
5.0
6.8
10.1
16.8
22.9
26.2
24.3
2.3
2.9
1.9
1.3
1.8
2.8
6.8
7.6
8.9
8.6
2.2
2.8
1.8
1.2
1.7
2.6
6.1
6.8
8.1
7.8
5.2
6.4
41
3.7
5.0
7.3
9.9
15.3
17.3
15.7
4.5
5.5
35
3.2
4.2
9.0
13.4
14.7
12.8
3.2
3.7
19
1.2
1.1
1.4
6.8
10.5
13.8
12.9
2
.2
6.3
3.5
4.0
2.2
1.4
1.3
1.6
7.5
11.5
15.0
14.1
.1
.1
.1
.0
.0
.0
.2
3
.3
.3
22
4.5
18
- 6
-1.0
-1.0
6.4
- 5
4.7
-3.1
1.9
4.0
.7
-.6
-.6
-.6
6.4
1.3
3.0
-2.2
1950
1951
1952 .
1953
1954
1955 . . .
1956
1957 .
1958
1959
53.8
59 2
52 1
53.3
52 7
68.4
71.0
69 2
61.9
77.6
47.0
48 9
49.0
52.9
54.3
62.4
66.3
67.9
63.4
72.3
27.1
31.1
31.2
34.3
34.0
38.3
43.7
46.7
41.6
45.3
9.3
11 3
11.5
12.8
13 2
14.4
17.4
18.1
16.7
17.0
8.6
10.5
10.6
12.0
12.4
13.7
16.6
17.4
16.0
16.1
17.8
19.9
19.7
21.5
20.8
23.9
26.3
28.6
24.9
28.3
14.9
16.9
17.1
18.7
18.4
21.3
24.1
26.2
21.9
25.2
19.9
17.7
17.8
18.6
20.3
24.1
22.6
21.2
21.8
27.0
18.7
16.6
16.6
17.5
19.2
23.0
21.4
20.0
20.7
25.8
.8
8
.3
.8
7
.6
.7
7
.7
.7
6.8
10 3
3.1
6.0
9.1
2.1
1.1
-2.1
5.5
5.1
76.4
74.3
85.2
90 2
96.6
112.0
124.5
120.8
131.5
146.2
72.7
72.1
78.7
84.2
90.8
102.5
110.2
110.7
123.8
136.8
47.7
47.1
51.2
53.6
59.7
71.3
81.4
82.1
89.3
98.9
18.2
18.4
19.4
19.6
21.5
26.1
29.2
29.5
31.6
35.7
17.3
17.5
18.5
18.6
20.5
25.1
28.1
28.2
30.4
34.3
29.5
28.7
31.8
34.0
38.2
45.1
52.2
52.6
57.7
63.3
27.0
26.1
28.9
30.6
34.6
41.2
47.9
48.0
53.4
58.9
25.0
25.0
27.4
30.6
31.2
31.2
28.7
28.6
34.5
37.9
23.9
23.8
26.3
29.4
29.9
29.9
27.4
27.2
33.1
36.3
.6
.7
.6
.7
.7
.6
.7
.7
1970
1971
1972
1973
1974
1975
1976..
1977 v
140 8
160.0
188 3
220 0
214 6
189.1
243.3
294 3
137.0
153.6
178.8
202 1
205.7
200.6
230.0
276.6
100.5
104.1
116.8
136.0
150.6
149.1
161.9
185.6
37.7
39.3
42.5
49.0
54.5
52.9
55.8
61.6
36.1 62.8
37.8 64.7
41.1 74.3
46.9 87 0
51.8 96.2
50.4 96.3
53.4 106.1
58.9 124.0
58.1
59.9
69.1
80.1
88.2
87.1
95.9
112.9
36.6
49.6
62.0
66.1
55.1
51.5
68.0
90.9
35.1
47.9
60.3
64 3
52.7
49.5
65.7
88.4
1975: 1 . .
II
III — .
IV
175.1
171.2
205.4
204.7
197.1
196.3
200.5
208.4
149.8*
147.7
148.2
150.7
53.3
51.9
52.8
53.4
50.7
49.4
50.4
51.1
96.5
95.7
95.4
97.4
87.6
86.5
86.6
87.7
47.3
48.6
52.3
57.6
1976: 1
II
III....
IV
231.3
244.4
254.3
243.4
216.8
226.1
232.8
244.3
155.4
159.8
164.9
167.6
54.7
55.8
56.0
57.0
52.1
53.4
53.6
54.4
100.8
104.0
109.0
110.6
90.5
93.8
98.4
100.7
1977: 1
II
III....
IV»...
271.8
294.9
303.6
307.0
258.0
273.2
280.0
295.1
177.0
182.4
187.5
1S5.5
57.9
61.0
62.6
64.9
55.1
58.2
60.1
62.1
119.2
121.4
124.9
130.7
107.8
110.0
114.0
119.7
1939
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
.. .
.. . .
. .
. .
. .
. . .
Source: Department of Commerce, Bureau of Economic Analysis.
273
.2
.1
.1
.5
7
.9
.8
!5
.5
.5
.6
.5
.5
.5
.6
.6
.7
-15
6.0
4.7
1.3
-1.5
5.2
3.8
2.2
6.5
6.0
5.8
9.5
.7
.7
14.3
10.1
.9
9.4
.6
.9
3.8
.7
6.4
9.4
.6
.7
.8
7.7
-2.3
5.3
3.5
1.9
5.8
5.2
6.4
8.5
14.5
9.4
7.6
9.2
1.0
1.1
1.0
1.1
1.2
1.2
1.1
1.3
1.4
-11.5
13.3
17.8
3.7
5.1
8.8
14.7
10.8
-15.1
14.9
17.5
45.7
46.8
50.1
55.3
.5
.8
1.1
1.2
1.0 - 2 2 . 0
1.0 - 2 5 . 1
4.9
1.1
1.2 - 3 . 6
-25.9
-26.5
1.4
-9.2
61.4
66.3
67.8
76.7
58.9
64.1
65.7
74.3
1.2
1.0
.9
1.1
1.2
1.2
1.2
1.3
14.5
18.3
21.5
-.9
15.9
20.4
22.0
.14
81.0
90.8
92.5
99.5
78.5
88.2
89.9
97.0
1.1
1.2
1.1
1.0
1.4
1.4
1.5
1.5
13.8
21.7
23.6
11.9
14.1
22.4
23.1
10.4
.7
.6
1.2
.9
17.9
8.9
TABLE B—15.—Inventories and final sales of business, 1946-77
[Billions of dollars, except as noted; seasonally adjusted]
Inventory-final
sales ratio
Inventories
Nonfarm
Year and
quarter
Total
Farm
Total
Fourth quarter:
1946
1947
1948
1949
Final
sales»
Total
Manufacturing
Wholesale
trade
Retail
trade
Other
Nonfarm 3
73.7
86.9
90.6
81.0
21.8
25.8
23.4
19.5
51.9
61.1
67.2
61.4
26.7
31.8
34.8
31.0
9.6
10.6
12.1
11.7
11.9
14.1
15.3
14.3
3.7
4.6
4.9
4.4
192.0
219.6
235 7
234.6
0.384
.396
.384
.345
0.270
.278
285
.262
98.8
112.1
109.4
110.1
107.2
24.2
26.5
23.1
21.6
20.5
74.6
85.6
86.3
88.5
86.7
37.4
46.2
47.3
49.3
47.0
14.3
14.9
14.9
15.1
15.4
17.7
18.3
17.9
18.5
18.7
5.2
6.2
6.2
5.5
5.6
259 8
295.6
313.3
325.8
330.1
.380
.379
.349
.338
.325
.287
.290
.275
.272
.263
112.1
121.8
126.7
128.9
132.3
17.6
18.3
20.9
24.9
23.6
94.6
103.5
105.8
103.9
108.7
51.4
57.5
57.9
56.0
57.5
16.7
17.8
18.1
18.1
19.2
20.9
21 8
22 9
22.9
24.1
5.6
64
6.9
6.9
8.0
356.5
377 0
392 7
405.0
426.7
.315
.323
.323
.318
.310
.265
274
269
.257
.255
136.2
138.4
145 2
151.5
157.6
24.8
25.0
26 6
26.9
25.7
111.3
113.4
118 6
124.6
131.8
58.1
59.5
62 5
64.8
68.5
19.6
20.2
20.9
22.4
23.6
25.6
25.1
26.7
28.2
29.8
8.1
8.7
8.6
9.2
9.9
442 1
465.3
492 7
524.2
553.1
.308
.297
.295
.289
.285
.252
.244
241
.238
.238
172.7
189.1
202.2
215.3
236.2
29.7
28.9
29.2
30.4
33.4
143.0
160.2
173.0
184.9
202.8
73.7
83.4
91.1
97.4
107.1
25.3
28.6
30.6
32.4
35.3
33.1
36.6
37.8
40.7
44.4
10.9
11.6
13 5
14.4
16.1
610.7
647.5
688 0
757.6
804.5
.283
.292
.294
.284
.294
.234
.247
.251
.244
.252
244.2
261.9
288.6
355.8
425.6
31.7
36.8
44.6
66.2
61.9
212.5
225.1
243.9
289.6
363.7
110.8
113.6
120.4
143.6
186.4
38 3
41.2
45 7
55.2
69.8
45 6
51.0
55 9
64.4
72.3
17.7
19.2
21.8
26.4
35.2
839.4
915.2
,019.9
,120.5
,216.0
.291
.286
.283
.318
.350
.253
.246
.239
.258
.299
1975
1976
1977 v
427.3 63.9
461 5 59.8
504.7 60.5
363.4
401 7
444.1
187.6
206 1
223.7
67.7
75 2
82.6
72.6 35.5
81 2 39 1
94.5 43.4
, 356.7
,486 1
,657.6
.315
.311
.304
.268
.270
.268
1975:1
417.9
417 9
427.3
427.3
58.8
63 5
66.9
63.9
359.1
354.4
360.4
363.4
186.2
183.7
185.4
187.6
68.6
66 9
68.1
67.7
69.9
69 7
72.5
72.6
34.4
34.0
34.5
35.5
, 244.3
, 285.2
,318.2
, 356.7
.336
.325
.324
.315
.289
.276
.273
.268
436 2 63 9
449.1 65.7
455.5 61.3
461.5 59.8
372.3
383.4
394.2
401.7
190.7
196.3
201.7
206.1
69 8
72.8
74.3
75.2
75.7
77.7
80.4
81.2
36.2
36.5
37.9
39.1
, 381.3
,415.0
1,441.5
I, 486.1
.316
.317
.316
.311
.270
.271
.273
.270
478.6
482.5
492.0
504.7
415.8
422.5
434.4
444.1
210.8
213.7
219.3
223.7
78.8
79.5
80.8
82.6
86.0
88.5
91.9
94.5
40.2
40.8
42.4
43.4
I, 518. 5
L, 564.7
1,604.4
1,657.6
.315
.308
.307
.304
.274
.270
.271
.268
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
..
..
1960
1961
1962
1963
1964
.
1965
1966
1967
1968
1969
..
.
.
.
.
.
1970
1971
1972
1973
1974
II
III
IV
1976:1
II
III
IV
1977:1
II
Ill
IV v
62.8
60.0
57.6
60.5
1
End of quarter.
Annual rates.
3 Ratio based on total final sales, which include a small amount of final sales by farms.
3
Note.—The industry classification of inventories is on an establishment basis and is based on the 1972 Standard Industrial Classification (SIC) beginning in 1948 and on the 1942 SIC prior to 1948.
Source: Department of Commerce, Bureau of Economic Analysis.
274
TABLE B-16.—Inventories and final sales of business in 1972 dollars, 1947-77
[Billions of 1972 dollars, except as noted; seasonally adjusted]
Inventory-final
sales ratio
Inventories1
Nonfarm
Year and
quarter
Final
sales 2
Total
Total
Manufacturing
Wholesale
trade
Retail
trade
Other
Total
Nonfarm 3
Fourth quarter:
1947
1948
1949
118.6
124.1
119.7
25.7
26.7
26.2
93.0
97.3
93.5
49.9
51.3
48.6
13.8
16.1
16.1
20.5
21.3
20.9
8.7
8.6
7.8
397.2
412.0
415.1
0.299
.301
.288
0.234
.236
.225
1950..
1951..
1952..
1953..
1954..
130.2
143.9
148.2
149.7
147.5
27.5
29.1
30.4
30.2
31.1
102.7
114.8
117.9
119.6
116.5
51.8
62.5
65.2
66.9
63.3
18.3
18.9
19.2
19.4
19.7
23.9
23.9
23.9
24.5
24.6
8.7
9.5
9.6
8.7
8.8
442.6
476.5
499.1
516.2
517.0
.294
.302
.297
.290
.285
.232
.241
.236
.232
.225
1955..
1956..
1957.
1958.
1959.
155.3
161.1
162.6
160.8
167.2
31.5
30.7
31.4
32.4
32.4
123.7
130.3
131.2
128.4
134.8
66.7
71.6
71.1
68.6
71.1
21.4
22.0
21.9
21.8
23.7
27.2
27.5
28.4
28.2
29.6
8.4
9.2
9.8
9.8
10.5
547.4
557.6
565.3
577.2
596.8
.284
.289
.288
.279
.280
.226
.234
.232
.222
.226
I960..
1961..
1962..
1963..
1964..
171.6
174.5
182.6
190.4
197.7
32.8
33.2
34.5
35.7
35.1
138.8
141.2
148.1
154.7
162.6
72.4
74.2
78.4
80.8
84.7
24.3
25.0
25.9
27.8
29.1
31.5
30.6
32.5
34.1
36.0
10.7
11.4
11.4
12.0
12.8
609.0
636.6
664.2
699.3
730.7
.282
.274
.275
.272
.271
.228
.221
.223
.221
.223
1965..
1966..
1967..
1968..
1969..
209.0
225.7
237.7
246.4
257.0
36.2
36.0
36.8
37.0
37.3
172.8
189.7
200.9
209.4
219.7
89.1
99.0
105.9
110.7
115.8
30.5
33.7
35.5
36.6
38.2
39.4
42.7
43.1
45.3
47.7
13.8
14.3
16.3
16.8
18.0
791.3
809.2
837.2
882.8
892.2
.264
.279
.284
.279
.288
.218
.234
.240
.237
.246
1970..
1971.
1972..
1973..
1974..
261.3
267.9
277.4
293.9
301.8
37.7
39.2
39.8
42.1
41.8
223.6
228.8
237.6
251.8
260.1
117.1
115.4
117.5
123.6
128.6
40.4
44.4
47.4
50.6
47.3
51.9
54.4
58.2
56.5
18.8
19.5
21.3
22.7
24.5
891.7
935.0
1,007.6
1,031.8
1, 005. 3
.293
.287
.275
.285
.300
.251
.245
.236
.244
.259
1975..
1976..
1977 ^
291.9
300.4
312.0
43.0
41.4
41.6
248.9
259.0
270.4
124.0
128.1
131.8
47.1
49.7
51.9
54.5
57.7
62.9
23.4
23.6
23.8
1, 044. 7
1, 095.7
1,156.3
.279
.274
.270
.238
.236
.234
1975: I...
II..
III.
IV..
296.9
292.3
293.1
291.9
42.1
42.2
42.6
43.0
254.8
250.1
250.5
248.9
127.6
125.7
124.7
124.0
49.3
47.8
47.7
47.1
54.0
53.4
54.7
54.5
23.9
23.3
23.3
23.4
1.003.2
1,017.9
1,028.6
1, 044.7
.296
.287
.285
.279
.254
.246
.244
.238
1976: I...
IV..
294.3
297.4
300.8
300.4
42.7
42.
42.0
41.4
251.7
255.2
258.8
259.0
124.4
126.1
127.7
128.1
47.9
49.0
49.8
49.7
55.9
56.7
58.0
57.7
23.5
23.5
23.4
23.6
1, 054.5
1, 067.2
1,076.6
1,095.7
.279
.279
.279
.274
.239
.239
.240
.236
1977: I.
II
III
IV v
302.8
306.1
310.0
312.0
41.3
41.2
41.3
41.6
261.5
264.9
268.7
270.4
128.7
130.3
131.4
131.8
50.5
51.1
51.7
51.9
58.8
60.0
62.0
62.9
23.5
23.6
23.7
23.8
1,106.5
1,121.7
1,134. 8
1.156.3
.274
.273
.273
.270
.236
.236
.237
.234
42.
1
End of quarter.
Annual rates.
3 Ratio based on total final sales, which include a small amount of final sales by farms.
3
Note.—The industry classification of inventories is on an establishment basis and is based on the 1972 Standard Industrial Classification (SIC) beginning in 1948 and on the 1942 SIC prior to 1948.
Source: Department of Commerce, Bureau of Economic Analysis.
275
TABLE B-17.—Relation of gross national product and national income, 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Gross
national
product
Year or quarter
Less:
Capital
consumption allowances with
capital
consumption adjustment
Equals:
Net
national
product
Plus:
Subsidies
less
current
surplus
of government
enterprises
Less:
Indirect
business
tax and
nontax
liability
Business
transfer
payments
Statistical
discrepancy
Equals:
National
income
1929
103.4
9.7
93.7
-0.2
7.1
0.6
1.1
84.8
1933
55.8
7.5
48.3
-.0
7.1
.7
.7
39.9
1939
90.8
8.7
82.1
.4
9.4
.5
1.4
71.3
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
100.0
124.9
158.3
192.0
210.5
212.3
209.6
232.8
259.1
258.0
9.0
10.0
11.2
11.5
11.8
12.3
13.8
17.2
20.3
22.0
91.0
114.9
147.1
180.5
198.7
200.0
195.7
215.6
238.8
236.1
.4
.1
.1
.1
.6
.7
.9
-.2
-.1
-.3
10.1
11.3
11.8
12.8
14.2
15.5
17.1
18.4
20.1
21.3
.4
.5
.5
.5
.5
.5
.5
.6
.7
.8
1.1
.5
-.8
1.0
79.7
102.6
135.7
169.1
181.9
180.6
178.3
194.6
219.0
212.7
286.2
330.2
347.2
366.1
366.3
399.3
420.7
442.8
448.9
486.5
23.9
27.6
29.6
31.6
33.1
35.3
38.9
42.0
44.1
46.1
262.3
302.6
317.6
334.5
333.2
364.0
381.8
400.8
404.8
440.4
.1
-.1
-.3
-.5
-.3
-.0
.7
.7
1.1
.1
23.4
25.3
27.7
29.7
29.6
32.2
35.1
37.5
38.7
41.8
.8
.9
1.0
?
1
?
4
,5
6
8
2.0
4.0
2.7
3.3
3.0
2.5
-.8
.2
1.7
-.2
236.2
272.3
285.8
299.7
299.1
328.0
346.9
362.3
364.0
397.1
506.0
523.3
563.8
594.7
635.7
688.1
753.0
796.3
868.5
935.5
47.7
49.1
50.5
52.2
54.6
57.5
61.7
67.0
73.8
82.5
458.3
474.2
513.3
542.5
581.2
630.6
691.3
729.3
794.7
853.1
.4
7
8
1
7
6
6
3
8
45.4
48.0
51.6
54.6
58.8
62.6
65.3
70.2
78.8
86.4
2.0
2.0
2.1
2.4
2.7
2.8
3.0
3.1
3.4
3.8
-.7
1.6
4.0
3.7
2.2
.9
3.2
1.7
-.6
412.0
424.2
457.4
482.8
519.2
566.0
622.2
655.8
714.4
767.9
982.4
1, 063.4
1,171.1
1,306.6
1,412.9
1, 528.8
1, 706. 5
1, 890.4
90.8
98.8
105.4
117.7
137.7
162.5
179.0
197.0
891.6
964.7
, 065.8
,188.9
,275.2
I, 366.3
I, 527.4
, 693.4
2.7
2.4
3.6
3.9
1.0
2.3
.8
2.1
94.0
103.4
111.0
120.2
128.6
138.7
150.5
165.2
4.0
4.2
4.7
5.4
5.9
7.0
8.1
9.0
-2.1
1.3
1.7
2.6
5.8
5.9
5.5
1.0
798.4
858.1
951.9
1,064.6
1,136.0
1,217.0
1, 364.1
1,520.3
1,
1,
1,
1,
453.0
496.6
564.9
600. 7
153.9
160.4
165.6
170.2
I, 299.1
L, 336.2
1,399.2
1.430.6
1.9
2.0
2.3
2.9
132.7
136.5
141.4
144.2
6.3
6.8
7.3
7.6
6.0
3.5
8.0
5.9
1,156.0
1,191.4
1,244.9
1, 275.7
1,651.2
1,691.9
1, 727.3
1, 755.4
173.8
177.0
180.9
184.5
1, 477.4
1,514.9
1, 546. 5
1, 570.9
1.0
.5
1.1
.5
145.5
149.1
151.8
155.5
7.8
8.0
8.2
8.4
4.2
4.5
8.0
5.3
1,321.0
1, 353.9
1, 379.6
1, 402.1
1,810.8
1,869.9
1,915.9
1, 965.1
189.0
193.3
199.8
205.9
1,621.8
1,676.6
1,716.0
1, 759.1
.5
.1
1.4
6.3
160.1
163.3
166.9
170.4
8.7
8.9
9.1
9.4
3.3
1,450.2
1,505.7
1, 540.5
. .
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
.
. ..
.
.
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974 .
1975
1976 .
1977 v
_____
__
1975:1
||
III
IV
1976:1
II
III
IV
1977:1
II
III
IV v
Source: Department of Commerce, Bureau of Economic Analysis.
276
>5
-1.8
2.7
4.1
.7
1.8
-1.2
-3.3
-1.2
.9
TABLE B-18.—Relation of national income and personal income, 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Less:
Corporate
profits
with
National inventory
income
valuation
and
capital
consumption
adjustments
Year or
quarter
Plus:
Net
interest
Contributions
for
social
insurance
Wage
accruals
less
disbursements
Government
transfer
payments
to
persons
Personal
interest
income
Equals:
Dividends
Business
transfer Personal
payincome
ments
1929
84.8
9.2
4.7
0.2
0.9
6.9
5.8
0.6
1933
39.9
-1.7
4.1
.3
1.5
5.5
2.0
.7
46.9
1939
71.3
5.3
3.6
2.1
2.5
5.4
3.8
.5
72.4
1940
1941
1942
1943
1944
1945 ___
1946...."
1947
1948 ...
1949....:
79.7
102.6
135.7
169.1
181.9
180.6
178.3
194.6
219.0
212.7
8.7
14.1
19.3
23.5
23.6
19.0
16.6
22.2
29.1
26.9
3.3
3.3
3.1
2.7
2.4
2.2
1.6
2.1
2.1
2.2
2.3
2.8
3.5
4.5
5.2
6.1
6.1
5.8
5.4
5.9
2.7
2.6
2.7
2.5
3.1
5.6
10.8
11.2
10.6
11.7
5.3
5.3
5.2
5.1
b.2
5.9
6.4
7.3
7.7
8.2
4.0
4.4
4.3
4.4
4.6
4.6
5.6
6.3
7.0
7.2
.4
.5
.5
.5
.5
.5
.5
.6
.7
77.8
95.3
122.4
150.7
164.4
169.8
177.3
189.8
208.5
205.6
1950....
1951
1952
1953
1954
1955....
1956
J957
1958....
1959
236.2
272.3
285.8
299.7
299.1
328.0
346.9
362.3
364.0
397.1
33.7
38.1
35.4
35.5
34.6
44.6
42.9
42.1
37.5
48.2
2.3
2.7
3.0
3.4
4.3
4.8
5.2
6.5
8.0
8.8
7.1
8.5
9.0
9.1
10.1
11.5
12.9
14.9
15.2
18.0
14.4
11.6
12.1
12.9
15.1
16.2
17.3
20.1
24.3
25.2
8.9
9.6
10.3
11.4
12.7
13.8
15.3
17.4
18.8
20.9
8.8
8.5
8.5
8.8
9.1
10.3
11.1
11.5
11.3
12.2
.9
1.0
1.2
1.1
1.2
1.4
1.5
1.6
1.8
226.1
253.7
270.4
286.1
288.2
308.8
330.9
349.3
359.3
382.1
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
412.0
424.2
457.4
482.8
519.2
566.0
622.2
655.8
714.4
767.9
46.6
46.9
54.9
59.6
67.0
77.1
82.5
79.3
85.8
81.4
9.8
11.2
12.8
14.3
15.9
18.5
21.9
24.3
26.8
30.8
21.1
21.9
24.3
27.3
28.7
30.0
38.8
43.4
48.1
54.9
27.0
30.8
31.6
33.4
34.8
37.6
41.6
49.5
56.5
62.7
23.3
24.6
27.1
30.2
33.3
37.2
41.8
45.0
49.6
55.9
12.9
13.3
14.4
15.5
17.3
19.1
19.4
20.1
2L9
22.6
2.0
2.0
2.1
2.4
2.7
2.8
3.0
3.1
3.4
3.8
399.7
415.0
440.7
463.1
495.7
537.0
584.9
626.6
685.2
745.8
798.4
858.1
951.9
1, 064.6
1,136.0
1,217.0
1,364.1
1,520.3
67.9
77.2
92.1
99.1
83.6
99.3
128.1
140.3
37.5
42.8
47.0
52.3
69.0
79.1
88.4
100.9
58.7
64.8
73.6
91.5
103.8
110.1
123.8
139.0
75.9
89.9
99.4
113.5
134.9
169.8
184.7
197.8
64.3
69.3
74.6
84.1
103.0
115.6
130.3
147.9
22.9
23.0
24.6
27.8
31.0
32.4
35.8
41.2
4.0
4.2
4.7
5.4
5.9
7.0
8.1
9.0
801.3
859.1
942.5
1,052.4
1,154.9
1,253.4
1,382.7
1,536.1
1975: L._.
II._
III..
IV..
1,156.0
1,191.4
1, 244.9
1, 275.7
74.0
92.7
115.6
114.7
76.4
77.6
79.9
82.3
108.0
108.5
110.7
113.3
157.6
169.9
174.2
177.5
111.5
113.3
116.6
121.0
32.0
32.2
32.9
32.5
6.3
6.8
7.3
7.6
1, 205.1
1,234.7
1,269.7
1, 304.0
1976: L._
II._
ML.
IV..
1,321.0
1,353.9
1,379.6
1, 402.1
126.5
129.2
133.5
123.1
85.0
86.5
90.1
92.0
120.3
122.8
124.7
127.5
182.5
180.8
186.2
189.5
125.0
127.5
132.2
136.4
33.6
35.0
36.0
38.4
7.8
8.0
8.2
8.4
1,338.1
1,366.7
1,393.9
1,432.2
1977: I...
II._
III..
IV*.
1, 450.2
1,505.7
1,540.5
125.4
140.2
149.0
95.3
98.9
103.1
106.4
135.0
138.0
139.9
143.1
194.8
194.0
199.5
203.1
140.3
145.4
150.3
155.6
38.5
40.3
42.3
43.6
8.7
8.9
9.1
9.4
1, 476.8
1,517.2
1,549.8
1,600. 5
1970
1971
1972
1973
1974
1975
1976
1977*
;
Source: Department of Commerce, Bureau of Economic Analysis.
277
84.9
TABLE B-19.—National income by type of income, 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Proprietors 1 income with inventory valuation and capital
consumption adjustments
Compensation of
employee i
Farm
National
income^
Year or
quarter
Total
SuppleWages ments
to
and
sala- wages
and
ries
salaries 2
Total
Total
Nonfarm
Capital
conInsumpcome' tion
adjustment
Total
Income 4
Inven- Capital
tory
convalua- sumption
tion
adadjustjustment ment
84.8
51.1
50.5
0.6
14.9
6.2
6.3
-0.1
8.8
8.8
0.1
-0.2
1933
39.9
29.5
29.0
.5
5.8
2.6
2.5
.1
3.2
3.9
-.5
-.2
1939
71.3
48.1
46.0
2.1
11.7
4.4
4.4
-.0
7.3
7.6
-.2
-.1
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949 . . . .
79.7
102.6
135.7
169.1
181.9
180.6
178.3
194.6
219.0
212.7
52.1
64.8
85.3
109.5
121.2
123.1
118.1
129.2
141.4
141.3
49.9
62.1
82.1
105.8
116.7
117.5
112.0
123.1
135.5
134.7
2.3
2.7
3.2
3.8
4.5
5.6
6.0
6.1
5.9
6.6
12.9
17.4
24.0
29.0
30.2
31.7
36.6
35.8
40.7
36.1
4.5
6.4
9.8
11.7
11.6
12.2
14.9
15.2
17.5
12.7
4.5
6.5
10.3
12.2
12.2
12.6
15.1
15.6
18.1
13.4
-.0
-.0
-.5
-.5
-.6
-.4
-.2
-.4
-.6
-.7
8.4
10.9
14.3
17.3
18.6
19.4
21.6
20.6
23.2
23.5
8.6
11.7
14.4
17.1
18.3
19.3
23.3
21.8
23.1
22.2
-.0
-.6
-.4
-.1
-.1
.2
.3
.4
.2
.0
.4
.5
.8
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
236.2
272.3
285.8
299.7
299.1
328.0
346.9
362.3
364.0
397.1
154.8
181.0
195.7
209.6
208.4
224.9
243.5
256.5
258.2
279.6
147.0
171.3
185.3
198.5
196.8
211.7
228.3
239.3
240.5
258.9
7.8
9.7
10.4
11.0
11.6
13.2
15.2
17.2
17.7
20.6
38.4
42.8
42.9
41.3
40.8
42.5
43.6
45.0
47.4
47.2
13.5
15.8
14.9
12.9
12.3
11.3
11.2
11.0
13.1
10.7
14.1
16.6
15.7
13.7
12.9
11.9
11.8
11.8
13.9
11.6
-.7
-.8
-.8
-.7
-.6
-.6
-.6
-.8
-.8
-.9
24.9
27.0
28.0
28.4
28.5
31.2
32.4
33.9
34.3
36.6
25.1
26.4
26.9
27.6
27.6
30.5
31.8
33.1
33.2
35.3
-1.1
412.0
424.2
457.4
482.8
519.2
566.0
622.2
655.8
714.4
767.9
294.9
303.6
325.1
342.9
368.0
396.5
439.3
471.9
519.8
571.4
271.9
279.5
298.0
313.4
336.1
362.0
398.4
427.5
469.5
514.6
23.0
24.1
27.1
29.5
31.8
34.5
40.9
44.4
50.3
56.8
47.0
48.3
49.6
50.3
52.2
56.7
60.3
61.0
63.4
66.2
11.4
11.8
11.9
11.6
10.3
12.6
13.6
12.1
12.0
13.9
12.3
12.7
12.8
12.5
11.2
13.5
14.6
13.2
13.3
15.4
-.9
-.9
-1.0
-.9
-1.0
-.9
-1.0
-1.2
-1.3
-1.4
35.6
36.4
37.7
38.7
42.0
44.1
46.7
48.9
51.4
52.3
34.2
35.3
36.4
37.2
40.2
42.7
45.3
47.5
50.4
51.3
.1
-.1
-.0
-.0
-.0
-.2
-.3
-.3
-.4
-.5
1.3
1.2
1.4
1.6
1.8
1.6
1.6
1.7
1.5
1.4
1970
1971
1972
1973
1974
1975
1976.
1977 v
798.4 609.2
858.1 650.3
951.9 715.1
1,064.6 799.2
1,136.0 875.8
1,217.0 930.3
1, 364.1 1,036.3
1,520.3 1,155.8
546.5
580.0
633.8
701.2
764.1
805.7
891.8
989.5
62.7
70.3
81.4
98.0
111.7
124.6
144.5
166.3
65.1
67.7
76.1
92.4
86.2
86.0
88.0
97.9
13.9
14.3
18.0
32.0
25.4
23.2
18.6
19.5
15.3
16.0
20.0
34.2
27.9
26.8
22.8
24.2
-1.4
-1.7
-2.0
-2.2
-2.5
-3.6
-4.2
-4.7
51.2
53.4
58.1
60.4
60.9
62.8
69.4
78.4
50.7
52.8
56.4
60.3
62.9
63.4
70.4
79.9
-.5
-.4
-.7
-1.7
-3.6
-1.2
-1.3
-1.4
1.0
1.1
2.5
1.8
1.6
.6
.3
-.1
1975: 1
II
III..IV
1,156.0
1,191.4
1, 244.9
1, 275. 7
904.6
914.4
936.7
965.6
785.1
792.4
810.5
834.9
119.6
122.1
126.3
130.7
78.9
84.3
90.4
90.4
18.3
22.7
26.2
25.5
21.3
26.1
30.1
29.7
-3.1
-3.5
-3.8
-4.2
60.6
61.6
64.2
64.9
61.2
62.0
64.8
65.5
-1.6
-1.1
-1.1
-1.0
.9
.6
.5
.5
1976: 1
II
III....
IV
1,321.0 999.6
1, 353. 9 1,024.9
1, 379.6 1,046.5
1, 402.1 1,074.2
861.5
882.4
900.2
923.2
138.1
142.5
146.3
150.9
86.9
90.4
86.2
88.7
20.0
21.6
16.2
16.6
24.1
25.8
20.3
20.8
-4.2
-4.2
-4.2
-4.2
66.9
68.8
70.0
72.0
67.6
70.1
70.7
73.2
-1.0
-1.5
-1.1
-1.7
.3
.2
.4
.5
1977: 1
1, 450.2 1,109.9 951.3
1, 505.7 1,144.7 980.9
II
III. „ 1, 540. 5 1,167.4 998.9
1,201.3 1,027.1
IV v
158.6
163.8
168.5
174.2
95.1
97.0
95.5
104.2
20.7
19.7
15.5
22.1
25.0
24.2
20.3
27.4
-4.2
-4.5
-4.8
-5.2
74.3
77.3
80.0
82.0
76.1
78.9
80.7
83.9
-2.0
-1.7
—. 6
-1.4
.3
.0
-.1
-.4
1929
.
.
1960
1961
1962
1963
1964
1965
1966
1967
1968 .
1969
See footnotes at end of table.
278
-.1
__ |
-1.7
-1.5
-.4
.5
.2
-.0
-.2
-.3
-.1
.9
.9
.9
.9
1.0
1.0
1.1
1.2
1.1
1.3
TABLE B-19.—National income by type of income,
1929-77—Continued
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Rental i ncome of persons with capital
consumption
adjustment
Year or
quarter
Corporate profits with inventory valuation and capital consumption
adjustments
Profits with inventory valuation adjustment and without
capital consumption adjustment
Capital
Net
Inven- con- intersump- est
tory
tion
valuation adjustUndisment
Divi- tributed adjustdends profits ment
Profits before tax
Capital
conRental
income sumpTotal
tion
of
persons adjustment
Profits after tax
Total
Total
Total
Profits
tax
lability Total
1929
4.9
5.7
-0.8
9.2
10.5
10.0
1.4
1933
2.2
2.3
-.1
-1.7
-1.2
1.0
.5
1939
2.6
3.1
-.6
5.3
6.3
7.0
1.4
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
2.7
3.1
4.0
4.4
4.5
4.6
5.5
5.3
5.7
6.1
3.3
3.9
5.0
5.6
5.9
6.2
7.3
7.7
8.5
8.9
-.6
-.8
-1.0
-1.2
-1.4
-1.6
-1.8
-2.5
-2.8
-2.8
8.7
14.1
19.3
23.5
23.6
19.0
16.6
22.2
29.1
26.9
9.8
15.2
20.3
24.4
23.8
19.2
19.3
25.6
33.0
30.8
10.0
17.7
21.5
25.1
24.1
19.7
24.6
31.5
35.2
28.9
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
7.1
7.7
8.8
10.0
11.0
11.3
11.6
12.2
12.9
13.2
10.0
11.0
12.2
13.4
14.4
14.8
15.2
15.9
16.7
17.3
-2.9
-3.3
-3.4
-3.4
-3.3
-3.5
-3.6
-3.6
-3.8
-4.0
33.7
38.1
35.4
35.5
34.6
44.6
42.9
42.1
37.5
48.2
37.6
42.7
39.8
39.5
37.8
46.7
45.9
45.4
40.8
51.2
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
13.8
14.3
15.0
15.7
16.1
17.1
18.2
19.4
18.6
18.1
17.8
18.3
19.0
19.6
20.1
21.0
22.1
23.4
23.8
24.8
-4.1
-4.0
-4.0
-3.9
-4.0
-3.9
-3.9
-4.0
-5.2
-6.7
46.6
46.9
54.9
59.6
67.0
77.1
82.5
79.3
85.8
81.4
1970
1971
1972
1973
1974
.
1975
1976
1977 P . . . .
18.6
20.1
21.5
21.6
21.4
22.3
23.3
25.3
25.8
27.7
29.4
31.3
33.7
36.8
40.0
45.3
-7.1
-7.6
-7.9
-9.8
-12.3
-14.5
-16.7
-20.0
1975:1...
II —
III.
IV..
22.1
22.3
22.2
22.6
35.8
36.6
37.0
37.9
1976:1...
II
III.
IV..
23.0
22.9
23.3
24.1
1977:1...
II._
III.
IV v
24.5
24.9
25.5
26.4
8.6
5.8
2.8
0.5
-1.3
4.7
2.0
-1.6
-2.1
-.5
4.1
5.6
3.8
1.8
-1.0
3.6
2.8
7.6
11.4
14.1
12.9
10.7
9.1
11.3
12.4
10.2
7.2
10.1
10.1
11.1
11.2
9.0
15.5
20.2
22.7
18.7
4.0
4.4
4.3
4.4
4.6
4.6
5.6
6.3
7.0
7.2
3.2
5.7
5.9
6.6
6.5
4.4
9.9
13.9
15.7
11.5
-1.1
-1.1
-1.0
-.8
2
-".1
-2.7
-3.4
-3.9
-3.8
3.3
3.3
3.1
2.7
2.4
2.2
1.6
2.1
2.1
2.2
42.6
43.9
38.9
40.5
38.1
48.4
48.6
46.9
41.1
51.6
17.9
22.6
19.4
20.3
17.6
22.0
22.0
21.4
19.0
23.6
24.7
21.3
19.5
20.2
20.5
26.4
26.6
25.5
22.1
28.0
8.8
8.5
8.5
8.8
9.1
10.3
11.1
11.5
11.3
12.2
15.9
12.8
11.0
11.5
11.4
16.1
15.5
14.0
10.8
15.8
-.7
2
-2. 5
-1.2
-.8
3
-!6
-5.3
-5.9
-2.2
1.9
-5.0
-1.2
1.0
-1.0
-4.0
-4.6
-4.5
-4.1
-3.2
-2.1
-3.0
-3.3
-3.4
-2.9
2.3
2.7
3.0
3.4
4.3
4.8
5.2
6.5
8.0
8.8
48.9
48.7
53.7
57.6
64.2
73.3
78.6
75.6
82.1
77.9
48.5
48.6
53.6
57.7
64.7
75.2
80.7
77.3
85.6
83.4
22.7
22.8
24.0
26.2
28.0
30.9
33.7
32.5
39.4
39.7
25.8
25.8
29.6
31.5
36.7
44.3
47.1
44.9
46.2
43.8
12.9
13.3
14.4
15.5
17.3
19.1
19.4
20.1
21.9
22.6
13.0
12.5
15.2
16.0
19.4
25.2
27.6
24.7
24.2
21.2
-2.3
-1.8
1.2
2.1
2.8
3.8
3.9
3.7
3.7
3.5
9.8
11.2
12.8
14.3
15.9
18.5
21.9
24.3
26.8
30.8
67.9
77.2
92.1
99.1
83.6
99.3
128.1
140.3
66.4
76.9
89.6
97.2
86.5
111.5
142.7
157.5
71.5
82.0
96.2
115.8
126.9
123.5
156.9
172.1
34.5
37.7
41.5
48.7
52.4
50.2
64.7
69.2
37.0
44.3
54.6
67.1
74.5
73.4
92.1
102.9
22.9
23.0
24.6
27.8
31.0
32.4
35.8
41.2
14.1
21.3
30.0
39.3
43.6
41.0
56.4
61.7
-5.1
1.5
-5.0
.3
-6.6
2.5
-18.6
1.9
-40.4 - 2 . 9
-12.0 -12.2
-14.1 -14.7
-14.5 -17.0
37.5
42.8
47.0
52.3
69.0
79.1
88.4
100.9
-13.7
-14.3
-14.8
-15.3
74.0
92.7
115.6
114.7
83.2
104.6
128.9
129.2
101.5
113.9
137.7
141.0
40.8
45.7
56.3
57.9
60.8
68.2
81.4
83.1
32.0
32.2
32.9
32.5
28.8 -18.3 - 9 . 2
36.0 - 9 . 3 -11.9
48.5 - 8 . 8 -13.3
50.6 -11.8 -14.5
76.4
77.6
79.9
82.3
38.9
39.4
40.3
41.5
-15.9
-16.4
-16.9
-17.3
126.5
129.2
133.5
123.1
141.1
143.7
148.2
137.9
153.5
159.2
159.9
154.8
63.1
66.1
65.9
63.9
90.4
93.1
94.0
90.9
33.6
35.0
36.0
38.4
56.8
58.1
58.0
52.5
-14.6
-14.6
-14.7
-14.8
85.0
86.5
90.1
92.0
42.9
44.6
45.7
48.1
-18.4
-19.7
-20.2
-21.7
125.4
140.2
149.0
141.0
156.2
166.9
161.7
174.0
172.8
64.4
69.7
69.3
97.2
104.3
103.6
38.5
40.3
42.3
43.6
58.8 -20.6 -15.6
64.1 -17.8 -15.9
61.2 - 5 . 9 -17.9
-13.8 -19.4
95.3
98.9
103.1
106.4
-L7
-2.7
-1.5
.3
.1
.1
-.2
-.5
-1.9
-2.1
-1.7
-3.4
-5.5
-12.4
-15.5
-11.7
-16.9
!
National income is the total net inco
income earned in production. It differs from gross national product mainly in that it
excludes depreciation charges and
nd other allo
allowances for business and institutional consumption of durable capital goods
and indirect business taxes. Seek Table
Tohlo B-17.
D_17
2
Employer contributions for social insurance and to private pension, health, and welfare funds; workmen's
compensation; directors' fees; and a few other minor items.
3
With inventory valuation adjustment and without capital consumption adjustment.
* Without inventory valuation and capital consumption adjustments.
Source: Department of Commerce, Bureau of Economic Analysis.
279
TABLE B-20.—Sources of personal income, 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Wage and salary disbursements1
Personal
income
Year or quarter
Total
Commodityproducing
industries
Total
Manufacturing
GovernDistrib- Service ment
and
utive
governindus- industries
ment
tries
enterprises
Other
labor
income1
Proprietors' income with inventory valuation and
capital consumption adjustments
Farm
Nonfarm
1929
84.9
50.5
21.5
16.1
15.6
8.4
5.0
0.5
6.2
8.8
1933
46.9
29.0
9.8
7.8
8.8
5.2
5.2
.4
2.6
3.2
72.4
46.0
17 4
13.6
13.3
7 1
8.2
.6
4.4
7 3
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
77.8
95.3
122.4
150.7
164.4
169.8
177.3
189.8
208.5
205.6
49.9
62.1
82.1
105.6
116.9
117.5
112.0
123.1
135.5
134.8
19 7
27 5
39 1
49 0
50.4
45 9
46.0
54.2
61.1
57.8
15.6
21.7
30.9
40.9
42.9
38.2
36.5
42.5
47.1
44.6
14.2
16.3
18.0
20.1
22.7
24.8
31.0
35.2
37.5
37.7
7 5
81
9.0
9 9
10.9
11 9
14.3
16.1
17.9
18.5
85
10.2
16.0
26.6
33.0
34.9
20.7
17.5
19.0
20.8
.6
.7
.9
1.1
1.5
1.8
2.0
2.4
2.7
2.9
45
6 4
9.8
11 7
11.6
12 2
14.9
15.2
17.5
12.7
84
10.9
14.3
17 3
18.6
19 4
21.6
20.6
23.2
23.5
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
226.1
253.7
270.4
286.1
288.2
308.8
330.9
349.3
359.3
382.1
147.0
171.3
185.4
198.6
196.8
211.7
228.3
239.3
240.5
258.9
64.8
76.3
82 0
89.6
85.7
93.1
100 6
104.2
100.0
109.6
50.3
59.3
64.1
71.2
67.5
73.8
79 4
82.4
78.6
86.8
39.8
44.3
46.9
49.7
50.1
53.4
57.7
60.5
60.8
64.8
19.8
21.5
23 1
24.9
26.1
28.6
31.3
33.6
35.6
38.5
22.6
29.2
33 3
34.4
34.9
36.6
38 8
41.0
44.1
46.0
3.7
4.6
5.2
5.9
6.1
7.0
8.0
9.0
9.4
10.6
13.5
15.8
14 9
12.9
12.3
11.3
11 2
11.0
13.1
10.7
24.9
27.0
28 0
28.4
28.5
31.2
32 4
33.9
34.3
36.6
399.7
415.0
440.7
463.1
495.7
537.0
584.9
626.6
685.2
745.8
271.9
279.5
298.0
313.4
336.1
362.0
398.4
427.5
469.5
514.6
113.1
113 7
121.8
126.9
135 4
146.0
161.0
168.3
183.4
199.6
89.7
89 8
96.7
100.6
107 1
115.5
128.0
134.1
145.8
157.5
68.2
69.3
72.8
76.3
81.4
87.2
94.4
100.9
109.9
120.7
41.4
44.1
47.2
50.2
54.4
58.9
64.7
71.8
79.8
89.4
49.2
52.4
56.3
60.0
64.9
69.9
78.3
86.4
96.4
104.9
11.2
11.8
13.0
14.0
15.7
17.8
19.9
21.7
25.1
28.2
11.4
11.8
11.9
11.6
10.3
12.6
13.6
12.1
12.0
13.9
35.6
36.4
37.7
38.7
42.0
44.1
46.7
48.9
51.4
52.3
1970
1971. .
1972
1973
1974
1975
1976
1977*
801.3
859.1
942.5
1,052.4
1,154.9
1, 253. 4
1, 382. 7
1, 536.1
546.5
579.4
633.8
701.3
764.6
805.7
891.8
989.5
202.9
208.3
227.3
254.3
274.6
275.0
308.5
346.3
158 2
160.3
175 4
196.2
211.4
211.0
238.2
267.2
130.1
139.3
151.9
168.1
184.3
195.4
217.1
242.5
97.5
106.2
117.2
130.3
145.1
159.9
179.0
200.8
116.0
125.6
137.3
148.6
160.5
175.4
187.2
199.9
32.0
36.2
42.0
48.7
55.6
64.9
75.9
88.6
13.9
14.3
18.0
32.0
25.4
23.2
18.6
19.5
51.2
53.4
58.1
60.4
60.9
62.8
69.4
78.4
1975: 1
1 205 1
1, 234. 7
1, 269. 7
1, 304.0
785 1
792.4
810.5
834.9
269.0
269.0
276.0
285.9
205 8
206.6
212.1
219.6
191 1
192.2
196.7
201.6
155.1
157.5
160.8
166.3
169.8
173.7
176.9
181.2
61.2
63.3
66.1
69.0
18.3
22.7
26.2
25.5
60.6
61.6
64.2
64.9
1, 338.1
1, 366.7
1, 393.9
1, 432. 2
861.5
882.4
900.2
923.2
298.6
306.7
310.8
317.7
230.6
236.7
240.2
245.1
208.2
213.7
220.2
226.4
172.0
176.6
180.9
186.7
182.7
185.4
188.2
192.5
71.7
74.5
77.3
80.0
20.0
21.6
16.2
16.6
66.9
68.8
70.0
72.0
1, 476. 8
951.3
980.9
1,517.2
1, 549.8
998.9
1,600.5 1,027.1
329.0
345.4
351.0
359.7
255.4
265.9
270.0
277.5
234.5
240.5
244.4
250.7
193.0
197.7
202.8
209.7
194.8
197.2
200.6
206.9
83.2
86.7
90.3
94.0
20.7
19.7
15.5
22.1
74.3
77.3
80.0
82.0
1939
. .
.
.
..
1960
1961
1962
1963
1964
1965
1966
1967
1968.
1969
II
III
IV
1976: 1
II
III .
IV
1977: 1
II
III
IV p
.
See footnotes at end of table.
280
T A B L E B-20.—Sources of personal income, 1929-77—Continued
(Billions of dollars; quarterly data at seasonally adjusted annual rates]
Rental
income
of per-
Transfer payments
with
Year or capital Divi- Personal
interest
quarter
con- dends income Total
sumption adjustment
Government
survivors,
disability, unemployand health
insurance ment insurance
benefits
benefits
Veterans
benefits
Government
employee
retirement
benefits
Old age,
Less:
Personal
contriAid to
butions
families
for
with de- Other social
pendent
insurchildren
ance
(AFDC)
1929
4.9
5.8
6.9
1.5
0.6
0.1
0. g
0.1
1933
2.2
2.0
5.5
2.1
.6
.2
1 4
.2
1939....
2.6
3.8
5.4
3.0
0.0
0.4
.5
.3
17
.6
1940....
2.7
3.1
4.0
4.4
4.0
4.4
4.3
4.4
4.6
4.6
5.6
6.3
7.0
5.3
5.3
5.2
5.1
5.2
3.1
3.1
.0
.1
.5
.4
.4
.1
.5
.5
.5
.5
1.0
3.0
.3
.3
.3
.4
.4
1
7
1.1
.8
7.0
.7
.7
.7
.9
.7
.8
1.2
1.8
2.2
2.3
2.0
2.1
2.2
2.2
1.5
.9
1.1
7.7
4.6
4.3
4.1
4.2
4.4
4.4
4.5
4.7
4.6
1.0
1.1
1.2
1.4
1.5
1.7
1.9
2.2
2.5
4.6
5.0
4.7
4.8
4.7
4.9
4.9
5.6
5.9
6.7
3.1
3.4
3.7
4.2
4.7
5.2
6.1
6.9
7.7
8.6
1.3
1.4
1.5
1.7
1.9
2.3
2.8
3.5
10.2
10.2
11.1
12.5
7.7
10.1
11.7
4.8
14.9
6.2
17.2
1941....
1942..
1943....
1944....
1945
1946 .
1947....
1948....
1949....
1950....
1951....
1952....
1953....
1954....
1955....
1956....
1957.....
1958....
1959....
4.5
4.6
5.5
5.3
5.7
6.1
8.8
7.7
8.8
8.5
8.5
10.0
11.0
11.3
11.6
12.2
12.9
13.2
1963....
13.8
14.3
15.0
15.7
1964....
1965....
1966....
1967....
1968....
1969....
16.1
17.1
18.2
19.4
18.6
18.1
I960....
1961....
1962....
7.2
7.1
5.9
6.4
7.3
3.1
3.0
3.6
6.2
11.3
11.7
7.7
8.2
11.3
8.9
9.6
15.2
12.6
13.1
14.1
10.3
11.4
12.7
13.8
12.5
.1
.2
.2
.3
.4
.5
.6
.7
1.0
1.9
2.2
3.0
3.6
4.9
.1
.4
.9
1.9
25.9
27.0
10.2
1.0
2.2
1.5
1.5
1.9
4.1
2.8
21.9
22.6
27.1
30.2
33.3
37.2
41.8
45.0
49.6
55.9
28.9
32.8
33.8
35.8
37.4
40.4
44.7
52.6
59.9
66.5
11.1
12.6
14.3
15.2
16.0
18.1
19.8
25.5
30.2
32.9
3.0
4.3
3.1
3.0
2.7
2.3
1.9
2.2
2.1
2.2
4.0
5.8
5.6
4.3
6.6
8.8
9.1
10.3
11.1
11.5
11.3
12.2
12.9
13.3
14.4
15.5
17.3
19.1
19.4
20.1
15.3
17.4
18.8
20.9
23.3
24.6
16.2
17.5
18.7
21.6
5.7
7.3
8.5
1970....
18.6
1971....
1972....
1973
1974
1975
1976____
20.1
21.5
21.6
21.4
22.3
23.3
25.3
22.9
23.0
24.6
27.8
31.0
32.4
35.8
41.2
64.3
69.3
74.6
84.1
103.0
115.6
130.3
147.9
79.9
94.1
104.1
118.9
140.8
176.8
192.8
206.9
38.5
44.5
49.6
60.4
70.1
81.4
92.9
105.0
17.4
15.7
12.7
1975: L
22.1
22.3
22.2
22.6
32.0
32.2
32.9
32.5
111.5
113.3
116.6
121.0
163.9
176.8
181.5
185.2
76.7
77.9
84.8
86.3
23.0
22.9
23.3
24.1
33.6
35.0
36.0
38.4
125.0
127.5
132.2
136.4
190.3
188.7
194.3
198.0
24.5
24.9
25.5
26.4
38.5
40.3
42.3
43.6
140.3
145.4
150.3
155.6
203.5
203.0
208.7
212.5
1977P.._
II.
Ill
IV.
1976:1.
II.
ill
IV.
1977:1.
11.
Ill
IVr
7.0
5.9
5.3
8.8
9.7
1. 8
1. 8
1. 8
2. 0
2. 0
2. 1
.5
2.8
.3
.4
.5
2.5
2.9
3.3
.6
.6
.5
.5
.6
.6
.6
.7
.8
.9
3.5
3.6
3.8
4.1
4.1
4.3
4.5
4.9
5.3
5.8
1.0
1.1
2.9
3.4
3.8
4.0
4.6
5.2
5.8
6.7
6.9
7.9
6.2
6.4
9.3
9.7
6.7
10.3
11.8
12.6
13.3
7.3
7.8
8.3
Nonfarm
personal
income 2
159.6
171.5
187.7
189.9
209.3
234.4
252.0
269.9
272.7
294.3
316.4
335.0
342.6
367.7
384.4
399.0
424.5
447.0
480.7
17.8
519.5
566.1
20.6
22.8
26.3
609.1
667.5
725.8
28.0
30.8
34.2
42.2
M.I
50.4
55.2
61.2
780.7
838.0
917.3
1,011.9
1,119.3
1,218.8
1,351.3
1,502.3
10.4
11.8
14.5
14.4
13.8
13.5
15.6
18.8
22.6
25.7
28.8
10.3
18.9
21.0
25.5
31.7
34.3
36.3
14.8
17.9
18.7
18.2
14.2
13.9
14.6
15.1
21.5
22.1
23.0
24.0
8.8
9.0
9.4
9.7
28.0
35.8
31.0
31.9
49.6
49.8
50.5
51.6
1,175.6
1, 200. 8
1, 232.1
1,266.7
88.1
89.3
95.8
98.4
17.5
15.0
15.1
15.0
15.9
14.4
13.6
13.9
24.5
25.7
26.1
26.4
9.8
9.9
10.0
10.0
34.6
34.5
33.8
34.3
53.9
54.8
55.6
56.6
1,305.9
1,332.5
1, 364. 7
1, 402.1
99.9
101.8
108.5
109.8
15.1
12.3
11.6
14.3
13.7
13.3
13.8
27.1
28.4
29.2
30.5
37.0
36.6
35.6
36.0
59.6
60.8
61.7
1, 442. 4
1, 483. 5
1,519.9
1.563.4
11.8
6.9
7.2
7.9
9.2
9.9
10.0
10.2
10.3
10.5
62.9
1
The total of wage and salary disbursements and other labor income differs from compensation of employees in Table
B-19 in that it excludes employer contributions for social insurance and the excess of wage accruals over wage disbursements.
3
Personal income exclusive of farm proprietors' income, farm wages, farm other labor income, and agricultural net
interest.
Note.—The industry classification of wage and salary disbursements and proprietors' income is on an establishment
basis and is based on the 1972 Standard Industrial Classification (SIC) beginning 1948 and on the 1942 SIC prior to 1948.
Source: Department of Commerce, Bureau of Economic Analysis.
281
T A B L E B—21.—Disposition cf personal income, 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual rates, except as noted]
Percent of disposable
personal income
Less: Personal outlays
Personal
income
Year or
quarter
Less:
Personal
tax
and
nontax
payments
Equals:
Disposable
personal
income
2.6
82.3
79.1
Total
PerEquals:
PerInterest sonal
Personal paid by transfer
sonal
conconsaving
paysump- sumers ments
to
tion
to forexpend- busi- eigners
ness
itures
(net)
1929
84.9
1933 . .
46.9
1.4
45.5
46.5
45.8
1939
72.4
2.4
69.9
67.8
67.0
1940
1941
1942 .
1943
1944
1945
1946..
1947
1948
1949
77.8
95 3
122.4
150.7
164.4
169.8
177.3
189 8
208 5
205.6
2.6
33
5.9
17.8
18.9
20.8
18.7
21 4
21 0
18.5
75.2
92 0
116.5
132.9
145.5
149.0
158.6
168 4
187 4
187.1
72.0
81 8
89.4
100.1
109.0
120.4
145.2
163 5
176.9
180.4
1950
1951
1952
1953
1954
1955
1956. .
1957
1958
1959.
226.1
253.7
270 4
286.1
288.2
308 8
330.9
349.3
359.3
382.1
20 6
28.9
34 0
35.5
32.5
35 4
39.7
42.4
42 1
46.0
205 5
224.8
236 4
250.7
255.7
273 4
291.3
306.9
317.1
336.1
1960.
1961
1962
1963
1964...
1965
1966
1967
1968...
1969
399.7
415.0
440.7
463.1
495.7
537.0
584 9
626.6
685.2
745.8
50.4
52.1
56 8
60.3
58.6
64.9
74 5
82.1
97.1
115.4
349.4
362.9
383 9
402.8
437.0
472 2
510 4
544 5
588.1
630.4
Personal
outlays
Total
Consumption
expenditures
Personal
saving
0.3
3.1
96.2
93.9
3.8
.5
.2
-1.0
102.2
100.7
-2.2
.7
.2
2.1
97.0
95.8
3.0
71.0
80 8
88.6
99.4
108.2
119.5
143.8
161 7
174 7
178.1
.8
9
.7
.5
.5
.5
.7
10
1.4
1.7
.2
2
.1
.2
.4
.5
.7
7
.7
.5
3.3
10 2
27.0
32.7
36.5
28.5
13.4
49
10 6
6.7
95.6
88 9
76.8
75.4
74.9
80.8
91.5
97 1
94.3
96.4
94.3
87 7
76.1
74.8
74.4
80.2
90.6
96 1
93.2
95.2
4.4
11 1
23.2
24.6
25.1
19.2
8.5
29
57
3.6
194.7
210.0
220 4
233.7
240.1
258.5
271.6
286.4
295.4
317.3
192.0
207.1
217 1
229.7
235.8
253 7
266.0
280.4
289.5
310.8
2.3
2.5
2.9
3.6
3.8
4.4
5.1
5.5
5.6
6.1
.4
.4
4
.5
.5
.4
.5
.5
.4
.4
10.8
14.8
16 0
17.0
15.6
14.9
19.7
20.6
21.7
18.8
94.7
93.4
93.2
93.2
93.9
94.6
93.2
93.3
93.2
94.4
93.4
92.1
91.8
91.6
92.2
92.8
91.3
91.4
91.3
92.5
5.3
6.6
68
6.8
6.1
54
6.8
6.7
6.8
5.6
332.3
342.7
363.5
384.0
410.9
441.9
477 4
503.7
550.1
595.3
324.9
335.0
355 2
374.6
400.4
430 2
464 8
490 4
535.9
579.7
7.0
7.3
7.8
8.8
9.9
11.1
12 0
12.5
13.3
14.7
.4
.4
.5
.6
.6
.7
6
.9
.8
.9
17.1
20.2
20 4
18.8
26.1
30.3
33.0
40.9
38.1
35.1
95.1
94.4
94 7
95.3
94.0
93.6
93.5
92.5
93.5
94.4
93.0
92.3
92.5
93.0
91.6
91.1
91.1
90.0
91.1
92.0
4.9
5.6
5 3
4.7
6.0
6.4
6.5
7.5
6.5
5.6
801.3
859.1
942.5
1, 052. 4
1,154.9
1,253.4
1,382.7
1,536 1
635.4
618.8
115.3
685.9
116.3
685.5
668.2
742.8
733.0
141.2
751.9
801.3
150.8
901.7
831.3
809.9
913.0
889.6
170.3
984.6
169.0 1, 084. 4 1, 004.2
980.4
196.9 1,185.8 1,119.9 1, 094.0
227.5 1,308.6 1, 240. 9 1,210.1
15.5
16.2
17.9
20.2
22.4
22.9
25.0
29.6
1.1
1.1
1.0
1.3
1.0
.9
.9
1.2
50.6
57.3
49.4
70.3
71.7
80.2
65.9
67.8
92.6
92.3
93.8
92.2
92.7
92.6
94.4
94.8
90.2
90.0
91.5
89.8
90.3
90.4
92.3
92.5
7.4
7.7
6.2
7.8
7.3
7.4
5.6
5.2
1975: 1
II...
III...
IV...
1, 205.1
1, 234. 7
1, 269. 7
1,304.0
179.6
142.5
173.9
179.9
960.1
1, 025. 4
989.1
1, 092.2
1, 095. 7 1, 019.1
1,124.1 1, 048.6 1,
936.5
965.9
995.1
024.1
22.6
22.4
23.0
23.6
1.0
.8
1.0
.9
65.4
103.1
76.7
75.5
93.6
90.6
93.0
93.3
91.3
88.4
90.8
91.1
6.4
9.4
7.0
6.7
1976: l . . _ .
II...
III...
IV.__
1, 338.1
1, 366.7
1, 393.9
1, 432.2
184.8
192.6
200.6
209.5
1,153. 3
1,174.1
1,193.3
1, 222.6
1, 080.9
1,103.8
1,128.5
1,166. 3
1, 056.0
1,078. 5
1,102.2
1,139. 0
23.8
24.4
25.5
26.3
1.0
.9
.9
1.0
72.4
70.3
64.8
56.3
93.7
94.0
94.6
95.4
91.6
91.9
92.4
93.2
6.3
6.0
5.4
4.6
1977: I . . . .
IL...
III...
IV P .
1, 476.8
1,517.2
1, 549.8
1,600.5
224.4
224.8
226.1
234.6
1, 252.4
1, 292. 5
1, 323.8
1,365.9
1,201.0
1, 223.9
1, 250. 5
1, 288.1
1,172.4
1,194.0
1,218.9
1,255.3
27.5
28.9
30.4
31.6
1.1
1.0
1.3
1.2
51.4
68.5
73.3
77.8
95.9
94.7
94.5
94.3
93.6
92.4
92.1
91.9
4.1
5.3
5.5
5.7
1970...
1971
1972
1973
1974
1975
1976
1977 v
.
.
.
77.3
1.5
Source: Department of Commerce, Bureau of Economic Analysis.
282
T A B L E B—22.— Total and per capita disposable personal income and personal consumption expenditures in current and 1972 dollars,
1929-77
[Quarterly data at seasonally adjusted annual rates, except as noted]
Disposable personal income
Total (billions
of dollars)
Year or quarter
Current
dollars
1972
dollars
Personal consumption expenditures
Per capita
(dollars)
Current
dollars
Total (billions
of dollars)
1972
dollars
Current
dollars
1972
dollars
Per capita
(dollars)
Current
dollars
Population
(thousands) *
1972
dollars
1929
82.3
229.8
675
1,886
77.3
215.6
634
1,769
121, 875
1933 . .
45.5
169.7
362
1,350
45.8
170.7
364
1,358
125,690
1939
69.9
230.1
534
1,756
67.0
220.3
511
1,681
131,028
1940.
1941
1942
1943
1944
1945
1946
1947
1948
1949
75.2
92.0
116.5
132.9
145.5
149.0
158.6
168.4
187.4
187.1
244.3
278.1
317 3
332.2
343.9
338 6
332.4
318.8
335.5
336.1
570
690
863
972
1,051
1,065
1,122
1,168
1,278
1,254
1,849
2,084
2 353
2,429
2,485
2 420
2,351
2,212
2,288
2,253
71.0
80.8
88 6
99.4
108.2
119 5
143.8
161.7
174.7
178.1
230.4
244.1
241 7
248.7
255.7
271 4
301.4
306.2
312.8
320.0
537
605
657
727
781
854
1,017
1,122
1,192
1,194
1,744
1,830
1,792
1,819
1,847
1,939
2,131
2,124
2,133
2,145
132,122
133, 402
134, 860
136,739
138, 397
139,928
141,389
144,126
146,631
149,188
205.5
224.8
236.4
250.7
255.7
273.4
291 3
306.9
317.1
336.1
361 9
371 6
382.1
397 5
402.1
425.9
444 9
453.9
459.0
477.4
1,355
1,457
1,506
1,571
1,574
1,654
1,731
1,792
1,821
1,898
2 386
2,408
2,434
2 491
2,476
2,577
2,643
2,650
2,636
2,696
192 0
207 1
217.1
229 7
235 8
253.7
266 0
280 4
289.5
310.8
338 1
342.3
350.9
364 2
370.9
395.1
406 3
414.7
419.0
441.5
1,266
1,342
1,383
1,439
1,452
1,535
1,581
1,637
1,662
1,755
2,229
2,219
2,236
2,283
2,284
2,391
2,415
2,421
2,406
2,493
151,684
154,287
156,954
159,565
162,391
165,275
168,221
171,274
174,141
177,073
349 4
362 9
383 9
402 8
437.0
472 2
510 4
544.5
588 1
630.4
487 3
500 6
521 6
539 2
577.3
612 4
643 6
669.8
695 2
712.3
1,934
1,976
2 058
2,128
2,278
2 430
2 597
2,740
2 930
3,111
2,697
2,725
2 796
2 849
3,009
3 152
3 274
3,371
3 464
3,515
324 9
335 0
355 2
374 6
400.4
430 2
464 8
490.4
535 9
579.7
453 0
462.2
482 9
501 4
528.7
558 1
586.1
603.2
633.4
655.4
1,798
1,824
1 904
1,979
2,087
2,214
2,365
2,468
2,670
2,860
2,507
2,516
2,589
2,649
2,755
2,872
2,982
3,035
3,156
3,234
180,671
183,691
186,538
189,242
191,889
194,303
196,560
198,712
200,706
202,677
685 9
742.8
801.3
901.7
384 fi
, 084.4
,185 8
, 308.6
741 6
769.0
801.3
854.7
842 0
857.3
890 3
930.3
3 348
3,588
3,837
4,285
4 646
5,077
5 511
6|035
3 619
3,714
3 837
4,062
3 973
4,014
4 137
4,290
618.8
668.2
733.0
809.9
889 6
980.4
1,094.0
1,210.1
668.9
691.9
733.0
767.7
760.7
775.1
821.3
860.3
3,020
3,227
3,510
3,849
4,197
4,591
5,084
5,580
3,265
3,342
3,510
3,648
3,589
3,629
3,817
3,967
204,878
207,053
208, 846
210,410
211,945
213, 566
215,191
216, 856
1975: 1
II.
III
IV
, 025.4
,092.2
, 095.7
, 124.1
828.8
871.1
859.1
870.2
4,817
5,120
5,125
5,247
3,893
4,084
4,018
4,062
936.5
965.9
995.1
1,024.1
756.9
770.4
780.2
792.8
4,399
4,529
4,654
4,780
3,555
3,612
3,649
3,700
212, 895
213,298
213,816
214,258
1976: 1
II
III
IV
1,153.3
1,174.1
1,193.3
1,222.6
881.5
887.8
890.7
901.5
5,374
5,462
5,540
5,665
4,107
4,130
4,135
4,177
1.056.0
1,078.5
L, 102.2
1,139.0
807.2
815.5
822.7
839.8
4,921
5,018
5,117
5,278
3,761
3,794
3,820
3,891
214,608
214, 948
215,38C
215, 827
1,252.4
L 292.5
I, 323.8
L, 365.9
908.4
924.5
934.4
953.6
5,793
5,967
6,098
6,279
4,202
4,268
4,305
4,383
1,172.4
1,194.0
1,218.9
1,255.3
850.4
854.1
860.4
876.4
5,422
5,513
5,615
5,770
3,933
3,943
3,964
4,028
216,206
216,603
217,073
217,542
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977*
.
. .
. .
. .
_ _
1977:1
. .
II
III
IVP
.
_.
.
_
i Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning 1960. Annual
data are for July 1 through 1973 and are averages of quarterly data beginning 1974. Quarterly data are average for the
period.
Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).
283
T A B L E B-23.—Gross saving and investment, 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Gross saving
Gross investment
Government surplus or
deficit (—), national
Capital
income and product
grants
accounts
received
by the Total
United
Gross
States,
State
PerFed(net) 2
and
Total
sonal business
eral
local
saving savingi
Gross private saving
Year or
quarter
Total
Total
Gross
private
Net
domes- foreign
tic in- investvestment 3
ment
Statistical
discrepancy
1 l
1929
15 9
14.9
3.1
11.7
1.0
1.2
-0.2
17.0
16 2
0.8
1933
9
22
—1 0
3.2
-1.4
-1.3
-.1
1.6
1.4
.2
.7
1939
87
10.9
21
8.8
-2.2
-2.2
.0
10.1
93
.9
1.4
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
13.5
18 5
10.5
53
2.3
5.1
34.6
41 2
49 0
34.8
14.2
22 2
41.9
49 4
54.1
44.6
29.2
26 8
40 6
38.2
3.3
10 2
27.0
32 7
36.5
28.5
13.4
49
10 6
6.7
10.9
12.0
14.8
16.7
17.7
16.0
15.8
21.8
30.0
31.4
-.7
-3.8
-31.4
-44.1
-51.8
-39.5
5.4
14.4
8.4
-3.4
-1.3
-5.1
-33.1
-46.6
-54.5
-42.1
3.5
13.4
8.3
-2.6
.6
1.3
1.8
2.5
2.7
2.6
1.9
1.0
.1
-.7
14.6
19 0
9.7
3.5
5.1
9.2
35.3
42.9
47.8
35.9
13.1
17 9
9.9
58
7.2
10.6
30.7
34 0
45.9
35.3
1.5
1 l
-.2
-2.2
-2.1
-1.4
4.6
90
20
.6
1.1
5
-.8
-1.8
2.7
4.1
.7
1 8
-1.2
1.0
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
49 7
55.5
49.3
48.1
49.4
65.6
73 6
72.6
60 4
75.8
41 6
49.4
53.1
55.0
56.5
62.4
68 4
71.7
73 0
77.3
10 8
14.8
16.0
17.0
15.6
14.9
19 7
20.6
21 7
18.8
8.0
9.2
30.8
6.1
6.5
34.6
37.1 - 3 . 8 - 3 . 7
38.0 - 6 . 9 - 7 . 1
41.0 - 7 . 1 - 6 . 0
3.1
4.4
47.5
5.2
6.1
48.7
2.3
.9
51.1
51 3 -12.6 - 1 0 . 3
58.5 - 1 . 6 - 1 . 1
-1.2
-.4
-.0
.1
-1.1
-1.3
-.9
-1.4
-2 4
-.4
51.7
59.5
51.9
51.4
52.4
68.0
72.8
72.8
62 0
75.5
53.8
59.2
52.1
53.3
52.7
68.4
71.0
69.2
61.9
77.6
-2 1
.3
-.2
-1.9
-.3
-.3
1 8
3.6
1
-2.0
20
4.0
2.7
3.3
3.0
2.5
-.8
.2
17
1960
1961....
1962
1963
1964
1965
1966
1967
1968
1969
78.9
75.8
83 6
89 6
100 1
115.4
122.9
1 120.3
130 8
147.5
75.8
80.0
87 4
88 9
102 4
114.9
124.2
134.6
136 3
136 8
17.1
20.2
20 4
18 8
26 1
30.3
33.0
40.9
38 1
35 1
.1
-.4
5
5
1.0
-.0
.5
-1.1
78.2
77.3
87 6
93 4
102 3
116.3
------- 126.1
122.1
130 2
144.2
76.4
74.3
85.2
90.2
96.6
112.0
124.5
120.8
131.5
146.2
1.7
3.0
24
32
5.7
4.3
1.6
1.2
-1 4
-2.0
-.7
1.6
40
3.7
2.2
.9
3.2
1.7
-.6
-3.3
1970
1971 . .
1972
1973
1974
1975....
1976
1977 v
143.4
155.4
177 5
216.8
204 4
195.1
237.0
274.3
151.9
173 0
180 4
210.5
209 5
259.4
272 5
294.7
50 6
57 3
49 4
70.3
71 7
80.2
65 9
67.8
1975: I . .
II...
III...IV....
175.6
183.6
209.8
211.4
220.5
278.3
268.8
270.0
65.4
103.1
76.7
75.5
3.1
3.0
58.7
59.8 - 4 . 3 - 3 . 9
67 0 - 3 . 8 - 4 . 2
.3
.7
70 1
76 2 —2.3 —3.3
.5
.5
84.6
91.2 - 1 . 3 - 1 . 8
93.7 -14.2 -13.2
98 2 - 5 . 5 - 5 . 8
8.5
10.7
101.7
101.4 - 9 . 4 - 1 2 . 1
115 7 - 1 8 . 3 -22.0
131 0 - 3 5 - 1 7 . 3
6.3 - 6 . 7
140.2
137 9 - 3 2 -10.7
179.2 - 6 4 . 3 -70.2
206 6 -35.6 -54.0
226.9 -20.4 -49.6
155.1 -44.9 -48.5
175.2 -94.7 -99.2
192.1 -59.0 - 8 5 . 5
194.5 -58.7 -67.6
1976: 1
II
III....
IV....
228.9
242.1
244.8
232.2
276.0
275.4
277.2
261.6
72.4
70.3
64.8
56.3
203.6
205.1
212.4
205.3
1977: 1
251.4
I L . . . 277.2
IIL... 284.5
IV v--
262.9
292.1
310.5
51.4
68.5
73.3
77.8
2.1
0.9
7
.0
-2.0
.0
.0
.0
141.4
156 8
179 2
219.4
210 1
201.0
242 5
275.3
140.8
160.0
188 3
220.0
214.6
189.1
243.3
294.3
.5
—3 2
-9 0
-.6
-4.5
11.8
-.9
-19.1
-2.1
1.3
17
2.6
58
5.9
5.5
1.0
3.7
4.5
6.6
8.9
.0
.0
.0
.0
181.6
187.2
217.8
217.2
175.1
171.2
205.4
204.7
6.5
16.0
12.4
12.5
6.0
3.5
8.0
5.9
-60.3
-46.2
-53.5
-55.9
13.3
12.9
21.1
26.5
.0
.0
.0
.0
233.1
246.5
252.8
237.5
231.3
244.4
254.3
243.4
1.8
2.2
-1.5
-5.9
4.2
4.5
8.0
5.3
211.5 -11.5 - 3 8 . 8
223.6 -14.9 - 4 0 . 3
237.2 -26.0 - 5 8 . 9
27.3
25.4
32.9
.0
.0
.0
.0
254.7
276.1
285.4
284.9
271.8
294.9
303.6
307.0
-17.1
-18.8
-18.2
-22.1
3.3
-1.2
.9
-47.1
-33.3
-32.4
-29.4
2.8
37
13 7
13.0
76
5.9
18 4
29.2
4
1 Undistributed corporate profits with inventory valuation and capital consumption adjustments, corporate and noncorporate capital consumption allowances with capital consumption adjustment, and private wage accruals less disbursements.
2
Allocations of special drawing rights (SDR), except as noted in footnote 4.
3
Net exports of goods and services less net transfers to foreigners and interest paid by government to foreigners plus
capital grants received by the United States, net.
* In February 1974, the U.S. Government paid to India $2,010 million in rupees under provisions of the Agricultural
Trade Development and Assistance Act. This transaction is being treated as capital grants paid to foreigners, i.e., a —$2.0
billion entry in capital grants received by the United States (net).
Source: Department of Commerce, Bureau of Economic Analysis.
284
T A B L E "R-24.—Saving by individuals, 1946-771
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Increase in financial assets
Year or
quarter
Total
Net investment in
Securities
Currency
SavCorpoand
ings Gov- rate CorpoTotal 2 deernacmand
rate
counts ment and
deequisecu- forposits
eign
ties*
rities a
bonds
1.1
1.1
1.0
J
5.3
5.4
5.3
5.6
3.6
6.7
9.1
8.4
3.9
9.5
10.4
10.9
-.1
-.6
2.5
2.5
1.0
-.8
.2
-.0
-!9
.7
1.8
1.6
1.0
.8
6.9
6.3
7.7
7.9
7.8
11.8
11.7
11.3
12.3
12.7
14.2
10.4
7.5
9.6
7.0
8.6
5.8
9.5
3.9
12.0
2.3
13.9 - 2 . 5
11.1
9.1
.7
1.0
.9
1.2
.4
1.0
2.0
1.5
1.5
.6
8.5
9.5
9.5
10.4
11.9
16.7
15.6
13.2
12.1
15.9
.7
- 5
-.1
.3
- . 4 -2.1
.1 - 2 . 5
-.5
11.5
12.1
12.7
13.9
16.1
-2.1
-.7
-4.2
-6.5
-3.7
22.3
21.0
25.2
21.4
18.9
13.2
9.0
9.9
5.6
.1
-2.9
-2.0
1950
1951
1952
1953
1954
30.4
34.0
29.9
31.5
27 8
13.7
19.1
23.1
22.6
22 1
2.6
4.6
1.6
1.0
22
1955
1956
1957
1958
1959
33.2
36.3
36.1
33.5
37.4
27.9
30.0
28.6
31.6
37 1
1.2
1.8
-.4
3.8
.8
1960
1961
1962
1963
1964
34.9
34.7
40.2
45.2
54.9
31 9
35.7
39.6
46.5
55.2
1.0
-.9
-1.2
-.5
4.9
12 1
18.3
26.2
26.3
26.2
3.4
1.8
1.3
6.4
5.4
1965
1966
1967
1968
1969
62.0
72.0
72.7
78,0
69.6
58.3
60.1
67.8
73.4
62.7
7.5
2.4
9.9
11.1
2.5
28.0
19.1
35.3
31.1
9.1
3.9
11.7
-.7
5.7
20.3
.5
1.4
4.G
4.2
5.4
1970
1971
1972
1973
1974
82.6
97.9
112.8
132.0
127.6
77.7
103.7
128.1
142.8
140.5
8.9
9.1
14.8
12.9
5.6
43 6 - 9 . 2
67.8 - 9 . 9
1.9
71.0
67.8 22.8
57.2 22.6
9.5
8.3
4.4
1.3
4.7
1975
1976
143.0 165.1
149.6 191.4
1976: l.._.
II._.
III..
IV._
148.6
158.6
146.4
144.5
1977: l.._
II..
III.
139.9 213.6
154.7 220.5
165.2 242.9
186.7
196.0
194.0
188.6
InsurNon- Mortance
corgage
Non- Conand
debt Consumer porate
on sumer Other
pen- farm
dusion homes rables busi- non- credit debt*
ness farm
reassets homes
serves
(5)
6.3 - 1 . 4 - 0 . 9
3.4
1.6 - . 8
2.2
1.3 - . 1
2.6
1.8 - . 4
1946
1947
1948
1949
Less: Net increase
in debt
i\
2,7
3.2
2.9
2.9
-O.0
2.6
3.0
2.4
7.0
4.4
2.0
.8
15
3.6
4.7
4. a
4.4
6.7
6.6
6.2
7.6
8.7
4.1
1.2
4.8
3.9
1.1
5.4
3.8
3.0
2.2
5.8
11.6
8.4
7.8
3.5
8.0
2.4
.5
2.1
2.3
3 4
12.2
11.2
8.9
9.5
12 8
6.4
3.5
2.6
.2
6.4
6.9
35
4.0
6.3
7.8
14.3
12.0
12.8
13.4
13.9
74
4.8
9.1
12.2
15.3
31
3.3
6.3
8.5
7.7
11 7
12 2
14.1
16.2
17.5
4 6
18
5.8
7.9
8.5
55
71
7.5
11.2
11.2
16.9
19.2
19.0
20.2
21.3
13.4
12.6
10.9
14.3
14.2
19.1
21.2
18.7
24.3
23.8
11.2
9.4
8.5
9.4
11.4
17.0
13.8
12.5
17.1
18.5
9.6
6.4
4.5
10.0
10.4
13.4
11.1
16.1
16.2
13.6
-1 6
-5.1
-4.5
-6.9
-2.2
24.4
27.3
29.3
33.0
36.0
11.7
18.8
25.9
28.2
23.1
17.4
25.1
33.6
39.0
27.0
98
13.5
17.8
20.3
2.8
14 1
27.0
41.6
47.1
35.4
59
13.1
18.9
22.0
10.2
13 9
23.0
32.1
29.1
20.2
20.7
3.2
8.2 - 4 . 1
4.0 - 3 . 8
42.8
53.6
20.8
32.8
22.7 - . 8
42.3 - 2 . 5
38.0
61.2
9.4
23.6
17.4
29.6
14.4 96.3
7.0
1.6 101.8
7.0
8.7 114.3 - 1 . 4
7.3 122.8
.1
5.2 - 9 . 1
4.6
.0
6.8 - 4 . 1
- . 7 -2.1
53.4
54.4
51.0
55.4
28.5
31.6
33.5
37.9
39.5
42.4
42.4
44.8
-1.9
-2.6
-1.4
-4.3
54.8
54.1
66.9
69.3
22.7
23.1
23.3
25.1
26.7
31.7
31.9
28.2
-.4
23.5 - 6 . 7
7.4
2.0
5.5
1.2 - 5 . 6
31.0
55.3
73.2
65.9
40.3
46.2
52.7
50.9 - 1 . 1
48.2 - . 4
42.8 - 4 . 7
73.4
90.3
96.4
35.5
34.8
32.1
55.0
34.8
40.0
2.5
4.8
7.8
8.2
9.2
7.1 84.9
8.0 108.8
8.5 116.6
22.6 88.9
5.7 123.4
1
2:0
7.1
2.0
Saving by households, personal trust funds, nonprofit institutions, farms, and other noncorporate business.
Includes commercial paper and miscellaneous financial assets, not shown separately.
Consists of U.S. savings bonds, other U.S. Treasury securities, U.S. Government agency securities and sponsored
agency securities, and State and local obligations.
4
Includes investment company shares.
5
Private life insurance reserves, private insured and noninsured pension reserves, and government insurance and
pension reserves.
6 Security credit, policy loans, noncorporate business mortgage debt, and other debt.
2
3
Source: Board of Governors of the Federal Reserve System.
285
248-947 O - 78 - 19
TABLE B-25.—Number and money income {in 1976 dollars) oj'families and unrelated individuals
by race of head, 1947-76
White
Total
Year
FAMILIES
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
_
1962
1963
1964
1965
1266
1967
1968
1969
1970
1971
1972
1973
1974
1974 2
1975
1976
Black and other races
Percent with
incomes
Total
number
(milions)
Total
numMedian Be- Below ber Median
Be- Below
pov- (mil- income low
income low
poverty
lions)
erty
$5,000 level
$5,000 level
Total
number
(millions)
37.2
$7, 724
7,538
7,421
7,850
8,128
8,343
9,029
8,826
9,393
10,012
10, 044
10,015
10, 580
10, 803
10,913
11,208
11,618
12,056
12, 552
13,212
13, 526
14, 124
14, 648
14, 465
14, 457
15,126
15, 437
14,817
14, 894
14, 510
14,958
34.1
35.3
31
3 3
- 38.6
_
Percent with
incomes
39.3
39.9
40.6
40.8
41.2
42.0
42.9
43.5
43.7
44.2
45.1
45.5
„ 46.4
47.1
47.5
48.0
48.5
49.2
50.1
50.8
51.6
52.2
53.3
54.4
55.1
55.7
55.7
56.2
56.7
26.8
27.8
29.1
27.0
25.2
23.9
22.5
24.0
21.6
19.6
19.9
19.9
18.6
18.5
18.5
17.2
16.4
15.5
14.5
12.7
12.2
10.7
10.5
11.0
11.0
10.3
9.8
10.4
10.0
11.0
10.3
18.5
18.1
18.1
17.2
15.9
15.0
13.9
11.8
11.4
10.0
9.7
10.1
10.0
9.3
8.8
9.2
8.8
9.7
9.4
Below
$3, 000
Below
poverty
level
38.2
39.0
39.5
39.7
40.2
40 9
41.1
41.9
42.4
42.7
43.1
43.5
44.1
44.8
45.4
46.0
46.5
47.6
48.5
48.9
49.5
49.4
49.9
50.1
$8 046
7,827
7,717
8 146
8,457
8,824
9,362
9,188
9,806
10, 477
10, 452
10, 435
11 021
11,216
11,380
11,738
12,176
12, 586
13, 083
13, 726
14, 039
14, 623
15, 208
15, 006
15,001
15,715
16,134
15,418
15,478
15, 091
15, 537
23.4
24.8
26.2
24.4
22.2
20.8
20.1
21.5
19.0
16.9
17.2
17.0
15.9
16.0
15.9
14.8
13.9
13.5
12.5
10.9
10.6
9.2
9.1
9.5
9.3
8.6
8.1
8.7
8.3
9.3
8.4
15.2
14.9
14.8
13.9
12.8
12.2
11.1
9.3
9.0
8.0
7.7
8.0
7.9
7.1
6.6
7.0
6.8
7.7
7.1
Below
$3,000
Below
poverty
level
38
3.9
40
40
4.0
42
4.3
4.5
4.6
4.8
4.8
4.8
5.0
5.0
5.1
5.2
5.4
5.7
5.9
6.1
6.3
6.3
6.4
6.6
Percent with
incomes
Median
income
$4 112
4 181
3,941
4 419
4 453
5 014
5 249
5 118
5 408
5 512
5 589
5 345
5 693
6,209
6,072
6,262
6,442
7,044
7,205
8,229
8,685
9,147
9,614
9,553
9,437
9,669
9,730
9,541
9,902
9,859
9,821
Below
$5,000
61 5
59 9
62 5
57 1
56 6
50 5
47 9
49*4
46 9
45 7
45 8
47 6
44 8
41.4
42.3
39.4
38.4
33.8
32.3
28.2
26.8
23.6
23.0
24.2
24.4
24.4
23.1
24.6
23.8
24.4
24.5
Below
poverty
level
50 4
49.0
49.0
48.0
43.7
40.0
39.7
33.9
32.1
28.2
26.9
28.1
27.4
27.7
26.2
26.0
25.1
25.3
26.4
Below
$3,000
Below
poverty
level
69 9
70.0
67.7
65.9
60.1
64.1
57.5
64.6
64.8
56.2
61.2
62.2
61.0
61.7
61.7
61 7
58.6
54.6
50.9
53, 6
49.4
47.1
46.5
47.1
46.8
4? 6
39.2
42.9
40.5
42.3
40.8
57.4
59.3
62.7
6?.l
58.3
55.0
50.7
UNRELATED
INDIVIDUALS
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1S62
1S63
1964
1S65
1S66
1967
1968
1969
1970
1971
1972
1973
1974
1974 -'
1975
1976
$2 498 56 4
2,356 58.3
2,507 55.7
2,470 55.4
2 618 53 5
3,023 50.3
2 971 50 7
2,589 54.6
2 801 52.9
2,986 50.5
3,021 49.9
2 926 50 8
3'041 49 8
3,306 47.9
3 337 47.2
3,299 47.3
3,348 46.8
3,639 44.7
3,884 41.7
._ U2! 2
4,017 40.6
U2.5
113.2
4,056 40.3
113.9
4,559 36.3
il4.6
4,551 35.9
115.5
4,599 35.3
16 3
4,661 34.1
16.8
4,791 32.0
18.3
5,296 28.5
18.9
5,124 28.8
18.9
5,313 27.3
20.2
5,164 27.7
21.5
5,375 27.2
82
8.4
9.0
9.4
9 1
9.7
95
9.7
99
9.8
10.4
10 9
10 9
111.1
ill 2
ill.O
iH.2
. _
72
7.3
46.1
45.2
45.9
45.4
44.2
42.7
39.8
38.3
38.1
34.0
34.0
32.9
31.6
29.0
25.6
25.5
24.1
25.1
24.9
8.3
8.5
8.5
8.9
92
9.3
9.6
9.6
9.5
9.7
10.4
10.5
10.7
11.3
12.0
12.5
13.4
14.2
14.5
15.8
16.3
16.3
17.5
18.6
$2 639
2,490
2,707
2,636
2 756
3,257
3 135
2,786
2,977
3,066
3,231
3 135
3 249
3,575
3,587
3,530
3,509
3,833
4,051
4,224
4,211
4,830
4,780
4,813
4,870
5,003
5,470
5,351
5,505
5,393
5,606
54.4
56.6
53.6
53.9
52.4
47.9
49.2
52.6
50.8
49.6
48.0
49.0
47.9
45.7
44.7
45.0
45.0
43.1
40.3
38.7
38.9
34.6
34.2
33.6
32.2
30.3
26.8
26.5
25.2
25.4
25.1
10
$1 901
1,866
1,957
1,931
2 036
2,253
2,465
.4
1,850
4
1,988
2,276
!5
2,053
6
2 126
6
2,099
2,052
fi
2,203
1.5
2,357
1.5
2,408
1.6
2,626
1.7
2,954
1.6
2,656
3,112
1.8
3,271
1.8
2.0
3,370
1.9
3,288
2.1
3,268
2.3
3,716
? 5
4,088
2.6
3,635
2.6
3,849
? 1
3,588
2.9
3,882
1.0
44.1
43.0
43.2
42.7
42.0
40.7
38.1
36.1
36.5
32.2
32.1
30.8
29.6
27.1
23.7
23.2
21.8
22.7
22.7
53.1
48.2
45.7
45.5
46.7
44.9
40,9
37.8
40. Q
38.0
40.9
39.5
1 Revised using population controls based on the 1970 census. Such controls are not available by race.
2 Based on revised methodology procedures.
Note.—The poverty level is based on the poverty index adopted by a Federal interagency committee in 1969. That
index reflects different consumption requirements for families based on size and composition, sex and age of family head,
and farm-nonfarm residence. The poverty threshold is updated every year to reflect changes in the consumer price index.
For further details, see "Current Population Reports", Series P-60, No. 107, Bureau of the Census.
Source: Department of Commerce, Bureau of the Census.
286
POPULATION, EMPLOYMENT, WAGES, AND
PRODUCTIVITY
TABLE B-26.—Population by age groups, 1929-77
[Thousands of persons]
Age (years)
July 1
Total
Under 5
5-15
16-19
20-24
25-44
45-64
65 and
over
1929
121,767
11,734
26, 800
9,127
10,694
35, 862
21,076
6,474
1933
125, 579
10,612
26, 897
9,302
11,152
37,319
22, 933
7,363
1939
130, 880
10,418
25,179
9,822
11,519
39, 354
25, 823
8,764
1940
1941
1942
1943
1944
132,122
133,402
134, 860
136, 739
138, 397
10, 579
10,850
11,301
12,016
12,524
24,811
24,516
24, 231
24, 093
23, 949
9,895
9,840
9,730
9,607
9,561
11,690
11,807
11,955
12,064
12,062
39, 868
40, 383
40, 861
41,420
42,016
26, 249
26,718
27,196
27,671
28,138
9,031
9,288
9,584
9,867
10,147
1945
1946
1947
1948
1949
139,928
141,389
144,126
146,631
149,188
12,979
13, ?44
14,406
14,919
15,607
23, 907
24,103
24, 468
25, 209
25, 852
9,361
9,119
9,097
8,952
8,788
12,036
12,004
11,814
11,794
11,700
42, 521
43, 027
43,657
44, 288
44,916
28,630
29, 064
29, 498
29, 931
30, 405
10, 494
10,828
11,185
11,538
11,921
1950
1951
1952 .
1953
1954
152 271
154,878
157, 553
160 184
163, 026
16 410
17,333
17,312
17, 638
18, 057
26, 721
27,279
28, 894
30, 227
31, 480
8,542
8,446
8,414
8,460
8,637
11,680
11,552
11,350
11,062
10,832
45, 672
46,103
46, 495
46, 786
47, 001
30, 849
31,362
31, 884
32,394
32,942
12,397
12,803
13, 203
13,617
14, 076
1955
1956 .
1957
1958
1959
165 931
168, 903
171,984
174 882
177, 830
18, 566
19, 003
19, 494
19, 887
20,175
32,682
33, 994
35, 272
36, 445
37, 368
8,744
8,916
9,195
9,543
10,215
10,714
10,616
10,603
10,756
10, 969
47,194
47, 379
47,440
47, 337
47, 192
33, 506
34, 057
34,591
35, 109
35, 663
14,525
14, 938
15, 388
15, 806
16, 248
1960
1961
1962
1963
1964
180,671
183,691
186,538
189, 242
191,889
20,341
20, 522
20, 469
20, 342
20,165
38,494
39, 765
41,205
41,626
42,297
10,683
11,025
11,180
12,007
12,736
11,134
11,483
11,959
12,714
13,269
47,140
47, 084
47,013
46,994
46,958
36, 203
36,722
37,255
37,782
38, 338
16,675
17, 089
17,457
17,778
18,127
1965
1966
1967
1968
1969
194,303
196,560
198,712
200, 706
202,677
19,824
19,208
18,563
17,913
17,376
42,938
43,702
44, 244
44,622
44,840
13,516
14,311
14,200
14,452
14,800
13,746
14,050
15,248
15,786
16,480
46,912
47,001
47,194
47,721
48, 064
38,916
39, 534
40,193
40, 846
41,437
18,451
18,755
19,071
19, 365
19,680
1970
1971..
1972
1973
1974 .
204, 878
207,053
208, 846
210,410
211,901
17,148
17,177
16,990
16,694
16, 288
44, 774
44, 441
43,948
43,227
42, 538
15,275
15,635
15,946
16,310
16, 590
17,184
18, 089
18,032
18,345
18,741
48, 435
48,811
50,254
51,411
52, 593
41,975
42,413
42,785
43, 077
43, 319
20, 087
20, 488
20, 892
21,346
21,833
213,559
215, 142
216,817
15, 879
15, 343
15,236
41,956
41, 459
40, 572
16, 793
16, 928
16, 966
19, 229
19, 629
20, 073
53, 735
55, 130
56, 692
43, 546
43, 705
43, 784
22, 420
22, 947
23, 494
. .
1975
1976
1977__
_
Note.—Includes Armed Forces overseas beginning 1940. Includes Alaska and Hawaii beginning 1950.
Source: Department of Commerce, Bureau of the Census.
287
TABLE B-27.—Noninstitutional population and the labor force, 1929-77
[Monthly data seasonally adjusted, except as noted]
Civilian labor force
Year or
month
Noninstitutional
population *
Employment
Armed
Forcesi
Total
Total
Nonagricultural
Agricultural
Unemployment
Unemployment
rate
(percent
of
civilian
labor
force)
Thousands of persons 14 years of age and over
260
1929
49,180
47,630
10,450
37,180
Civilian labor force
participation rate 2
Total
Males
Females
Percent
1 550
3.2
1933
250
51, 590
38, 760
10, 090
28, 670
12, 830
24.9
1939
370
55, 230
45, 750
9,610
36,140
9,480
17.2
1940
1941
1942
1943
1944
100, 380
101,520
102,610
103,660
104,630
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
9,540
9,100
9,250
9,080
8,950
37,980
41,250
44,500
45,390
45,010
8,120
5,560
2,660
1,070
670
14.6
9.9
4.7
1.9
1.2
55.7
56.0
57.2
58.7
58.6
83.7
84.3
85.6
86.4
87.0
28.1
28.7
31.3
36.0
36.5
1945
1946
1947
105,530
106,520
107,608
11,440
3,450
1,590
53,860
57,520
60,168
52,820
55,250
57,812
8,580
8,320
8,256
44,240
46,930
49,557
1,040
2,270
2,356
1.9
3.9
3.9
57.2
55.8
56.8
84.8
82.6
84.0
35.9
31.2
31.0
i
Thousands of persons 16 years of age and over
1947
1948
1949
103,418
104,527
105,611
1,591
1,459
1,617
59,350
60,621
61,286
57,038
58,343
57,651
7,890
7,629
7,658
49,148
50,714
49,993
2,311
2,276
3,637
3.9
3.8
5.9
58.3
58.8
58.9
86.4
86.6
86.4
31.8
32.7
33.1
1950
1951
1952
19533
1954
106,645
107,721
108,823
110,601
111,671
1,650
3,100
3,592
3,545
3,350
62,208
62,017
62,138
63,015
63,643
58,918
59,961
60,250
61,179
60,109
7,160
6,726
6,500
6,260
6,205
51,758
53, 235
53,749
54,919
53,904
3,288
2,055
1,883
1,834
3,532
5.3
3.3
3.0
2.9
5.5
59.2
59.3
59.0
58.9
58.8
86.4
86.5
86.3
86.0
85.5
33.9
34.6
34.7
34.4
34.6
1955
112 732
1956
_ 113,811
1957 . . 115,065
1958
116,363
1959
117,881
3 049
2,857
2,800
2,636
2,552
65 023
66,552
66,929
67,639
68,369
62 170
63,799
64,071
63,036
64,630
6 450
6,283
5,947
5,586
5,565
55 722
57,514
58,123
57,450
59,065
2 852
2,750
2,859
4,602
3,740
4.4
4.1
4.3
6.8
5.5
59.3
60.0
59.6
59.5
59.3
85.3
85.5
84.8
84.2
83.7
35.7
36.9
36.9
37.1
37.1
I9603.....
1961
1962 3
1963
1964
119,759
121,343
122,981
125,154
127,224
2,514
2,572
2,828
2,738
2,739
69,628
70,459
70,614
71,833
73,091
65,778
65,746
66, 702
67,762
69,305
5,458
5,200
4,944
4,687
4,523
60,318
60,546
61,759
63,076
64,782
3,852
4,714
3,911
4,070
3,786
5.5
6.7
5.5
5.7
5.2
59.4
59.3
58.8
58.7
58.7
83.3
82.9
82.0
81.4
81.0
37.7
38.1
37.9
38.3
38.7
1965....__
1966
1967
1968
1969
129,236
131,180
133,319
135,562
137,841
2,723
3,123
3,446
3,535
3,506
74,455
75,770
77,347
78,737
80,734
71,088
72,895
74,372
75,920
77,902
4,361
3,979
3,844
3,817
3,606
66,726
68,915
70,527
72,103
74, 296
3,366
2,875
2,975
2,817
2,832
4.5
3.8
3.8
3.6
3.5
58.9
59.2
59.6
59.6
60.1
80.7
80.4
80.4
80.1
79.8
39.3
40.3
41.1
41.6
42.7
140,182
1970
142,596
1971
1972 3 ____ 145,775
19733
148,263
1974
150, 827
3,188
2,817
2,449
2,326
2,229
82,715
84,113
86, 542
88,714
91,011
78, 627
79,120
81,702
84,409
85,935
3,462
3,387
3,472
3,452
3,492
75,165
75,732
78,230
80,957
82,443
4,088
4,993
4,840
4,304
5,076
4.9
5.9
5.6
4.9
5.6
60.4
60.2
60.4
60.8
61.2
79.7
79.1
79.0
78.8
78.7
43.3
43.3
43.9
44.7
45.6
153,449
156,048
158, 559
2,180
2,144
2,133
92,613
94,773
97, 401
84,783
87,485
90, 546
3,380
3,297
3,244
81,403
84,188
87, 302
7,830
7,288
6,855
8.5
7.7
7.0
61.2
61.6
62.3
77.9
77.5
77.7
46.3
47.3
48.4
1975
1976
1977
See footnotes at end of table.
288
TABLE B-27.—Noninstitutional population and the labor force,
1929-77—Continued
[Monthly data seasonally adjusted, except as noted]
Civilian labor force
Year or month
Noninstitutional
population^
Employment
Armed
Forcesi
Total
Total
Agricultural
Nqnagricultural
Unemployment
Unemployment
rate
[percent
of
civilian
labor
force)
Thousands of persons 16 years of age and over
Civilian labor force
participation rate 2
Total Males Females
Percent
1975:Jan.._.
Feb....
Mar....
Apr....
May....
June...
152,230
152,445
152,646
152,840
153,051
153,278
2,193
2,198
2,198
2,195
2,181
2,178
92,008
91,694
92,053
92,234
92,821
92,433
84,642
84,263
84,180
84,153
84,379
84, 382
3,361
3,340
3,332
3,278
3,504
3,350
81,281
80,923
80,848
80,875
80,875
81,032
7,366
7,431
7,873
8,081
8,442
8,051
8.0
8.1
8.6
8.8
9.1
8.7
61. 3
61.0
61.2
61.2
61. 5
61. 2
78.2
78.0
78.1
78.0
78.3
77.9
46.2
45.8
46. 1
46.2
46. 5
46.3
July....
Aug
s e
Nov....
Dec..!.
153, 585
153,824
154,052
154, 256
154,476
154,700
2,186
2,185
2,170
2,164
2,155
2,157
92,833
92,877
92,979
93, 002
92,966
93,182
84,813
85,063
85,120
85,188
85,281
85,495
3,428
3,405
3,493
3,374
3,305
3,244
81, 385
81,658
81,627
81,814
81,976
82,251
8,020
7,814
7,859
7,814
7,685
7,687
8.6
8.4
8.5
8.4
8.3
8.2
61. 3
61. 2
61. 2
61. 1
61. 0
61. 1
78.1
77.8
77.8
77.5
77.5
77.3
46.4
46.4
46.4
46.5
46.3
46.6
1976:Jan....
Feb....
Mar....
Apr
May....
June...
154,915
155,106
155,325
155, 516
155,711
155,925
2,140
2,146
2,148
2,144
2,142
2,137
93,652
93,757
93,936
94,391
94, 568
94, 549
86,293
86, 552
86,828
87,217
87, 527
87,432
3,337
3,265
3,266
3,392
3,295
3,298
82,956
83,287
83, 562
83,825
84, 232
84,134
7,359
7,205
7,108
7,174
7,041
7,117
7.9
7.7
7.6
7.6
7.4
7.5
61. 3
61. 3
61. 3
61. 5
61 6
61 5
77.5
77.4
77.4
77.7
77.6
77.4
46.8
46.9
47.0
47.1
47.2
47.3
July...
Aug...
Sept...
Oct...
Nov...
Dec...
156,142
156,367
156,595
156,788
157,006
157,176
2,140
2,147
2,145
2,147
2,149
2,146
95,176
95,208
95,089
95,197
95,741
95,936
87,801
87,806
87,777
87,844
88,255
88,446
3,324
3,353
3,265
3,290
3,238
3,240
84,477
84,453
84,512
84, 554
85,017
85,206
7,375
7,402
7,312
7,353
7,486
7,490
7.7
7.8
7.7
7.7
7.8
7.8
61
61
61
61
61
61
8
7
6
6
8
9
77.6
77.5
77.4
77.5
77.6
77.7
47.6
47.6
47.4
47.3
47.7
47.7
1977: J a n . . .
Feb...
Mar..
Apr...
May..
June..
157, 381
157,584
157, 782
157,986
158,228
158,456
2,133
2,137
2,138
2,132
2,128
2,129
95,719 88,653
96,320 89,047
96,623 89,478
96,746 89,877
97,161 90,267
97, 552 90,648
3,121
3,164
3,179
3,256
3,335
3,330
85, 532
85,883
86, 299
86,621
86,932
87,318
7,066
7,273
7,145
6,869
6,894
6,904
7.4
7.6
7.4
7.1
7.1
7.1
61 7
62 0
62 1
62 1
62 2
62.4
77.4
77.7
77.6
77.5
77.6
77.9
47.5
47.9
48.1
48.3
48.5
48.5
July..
Aug..
Sept..
Oct...
Nov..
Dec...
158,682
158,899
159,114
159,334
159,522
159,736
2,135
2,137
2,131
2,134
2,132
2,129
97,307
97,614
97,756
98,071
98,877
98,919
3,206
3,224
3,199
3,243
3,357
3,323
87,382
87, 569
87,889
88,140
88,857
89,286
6,719
6,821
6,668
6,688
6,663
6,310
6.9
7.0
6.8
6.8
6.7
6.4
62.2
62.3
62 3
62.4
62.8
62.8
77.5
77.5
77.2
77.8
78.1
78.1
48.4
48.6
48.9
48.6
49.2
49.0
o c?!:::
90,588
90,793
91,088
91,383
92, 214
92,609
1
2
3
Not seasonally adjusted.
Civilian labor force as percent of civilian noninstitutional population.
Not strictly comparable with earlier data due to population adjustments as follows: Beginning 1953, introduction of
1950 census data added about 600,000 to popu\ation and about 350,000 to labor force, total employment, and agricultural
employment. Beginning 1960, inclusion of Alaska and Hawaii added about 500,000 to population, about 300,000 to labor
force, and about 240,000 to nonagricultural employment. Beginning 1962, introduction of 1960 census data reduced population by about 50,000 and labor force and employment by about 200,000. Beginning 1972, introduction of 1970 census
data added about 800,000 to civilian noninstitutional population and about 333,000 to labor force and employment. A
subsequent adjustment based on 1970 census in March 1973 added 60,000 to labor force and to employment. Overall
categories of the labor force other than those noted were not appreciably affected.
Note.—Labor force data in Tables B-27 through B-32 are based on household interviews and relate to the calendar
week including the 12th of the month. For definitions of terms, area samples used, historical comparability of the data,
comparability with other series, etc., see "Employment and Earnings."
Source: Department of Labor, Bureau of Labor Statistics.
289
TABLE B-28.—Civilian employment and unemployment by sex and age, 1947—77
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]
Employment
Unemployment
Females
Males
Year or
month
20
Total
Total
1947... 57,038 40,994
1948... 58,343 41,726
1949._. 57,651 40,926
16-19
years
years
and
over
Total
2,218 38,776 16,045
2,345 39,382 16,618
2,124 38,803 16,723
16-19
years
Males
Females
20 Total
20
20
years
years
16-19 years
Total 16-19
and
years and Total years and
over
over
over
,691 14,354 2,311 1,692
,683 14,937 2,276 1,559
1,588 15,137 3,637 2,572
619
270 1,422
255 1,305
717
352 2,219 1,065
144
152
223
475
564
841
1950...
1951...
1952...
19531..
1954...
58,918
59,961
60, 250
61,179
60,109
41,580
41, 780
41,684
42,431
41,620
2,186
2,156
2,106
2,135
1,985
39,394
39,626
39,578
40,296
39,634
17,340
18,182
18,570
18,750
18,490
1,517
1,611
1,612
1,584
1,490
15,824
16,570
16,958
17,164
17,000
3,288
2,055
1,883
1,834
3,532
2,239
1,221
1,185
1,202
2,344
318
191
205
184
310
1,922 1,049
1,029
834
698
980
1,019
632
2,035 1,188
195
145
140
123
191
854
689
559
510
997
1955...
1956._.
1957...
1958...
1959...
62,170
63,799
64,071
63,036
64,630
42,621
43,380
43,357
42,423
43,466
2,095
2,164
2,117
2,012
2,198
40,526
41,216
41,239
40,411
41,267
19,550
20,422
20,714
20,613
21,164
1,548
1,654
1,663
1,570
1,640
18,002
18.767
19,052
19,043
19,524
2,852
2,750
2,859
4,602
3,740
1,854
1,711
1,841
3,098
2,420
274
269
299
416
398
1,580
1,442
1,541
2,681
2,022
998
1,039
1,018
1,504
1,320
176
209
197
262
296
823
832
821
1.242
1,063
I960 1 ..
1961...
19621..
1963...
1964...
65,778
65,746
66,702
67,762
69,305
43,904
43,656
44,177
44,657
45,474
2,360
2,314
2,362
2,406
2,587
41,543
41,342
41,815
42,251
42,886
21,874
22,090
22, 525
23,105
23,831
1,769
1.793
1,833
1,849
1,929
20,105
20,296
20,693
21,257
21,903
3,852
4,714
3,911
4,070
3,786
2,486
2,997
2,423
2,472
2,205
425
479
407
500
487
2,060
2.518
2,016
1,971
1,718
,366
1,717
1,488
1,598
L.581
286
349
313
383
386
1,080
1,368
L. 175
1,216
1,195
1965...
1966
1967
1968___
1969...
71,088
72,895
74,372
75,920
77,902
46,340
46,919
47,479
48,114
48,818
2,918
3,252
3,186
3,255
3,430
43,422
43,668
44,293
44,859
45,388
24,748
25,976
26,893
27,807
29,084
2,118
2,469
2,497
2,525
2,686
22.630
23,510
24,397
25,281
26,397
3,366
2,875
2,975
2,817
2,832
1,914
1,551
1,508
1,419
1,403
479 1,435 1,452
432 1,120 1,324
448 1,060 1,468
427
993 1,397
441
963 1,429
395
404
391
412
412
1,056
921
1,078
985
1,016
1970...
1971...
19721
19731..
1974...
78,627
79,120
81,702
84,409
85,935
48,960
49,245
50.630
51,963
52, 518
3,407
3,470
3,750
4,017
4,074
45,553
45,775
46.880
47,946
48,445
29,667
29,875
31.072
32,446
33,417
2,734
2,725
2.972
3,219
3,329
26,933
27,149
28.100
29,228
30,088
4,088
4.993
4.840
4,304
5,076
2,235
2,776
2.635
2,240
2,668
599
691
707
647
749
1,853
2,217
2.205
2,064
2,408
506
567
595
579
660
1,347
.650
1.610
,485
1,748
957 3,428 3,445
928 3,041 3,320
861 2,727 3,267
795
773
781
2,649
2,546
2,486
1975. . 84,783 51,230 3,803 47.427 33,553 3,243 30,310 7,830 4,385
1976... 87, 485 52, 391 3,904 48, 486 35,095 3,365 31, 730 7,288 3,968
1977... 90, 546 53, 861 4,124 49, 737 36, 685 3,486 33,199 6,855 3,588
1976:
Jan_.
Feb._
Mar..
Apr..
May..
June.
1,636
2,086
1.928
1,594
1,918
86, 293
86, 552
86, 828
87,217
87, 527
87, 432
51,819
51, 990
52, 084
52, 341
52,432
52,286
3,857
3,885
3,889
3,910
3,908
3,877
47, 962
48,105
48,195
48,431
48, 524
48, 409
34, 474
34, 562
34, 744
34,876
35, 095
35,146
3,308
3,291
3,339
3,370
3,454
3,380
31,166
31,271
31, 405
31, 506
31,641
31, 766
7,359
7,205
7,108
7,174
7,041
7,117
4,073
946 3,127 3,286
3,923
924 2,999 3,282
3,898
922 2,976 3,210
3,933 1,009 2,924 3,241
3,854
948 2,906 3,187
3,902
828 3,074 3,215
760 2,526
781 2,501
769 2,441
766 2,475
752 2,435
751 2,464
July..
Aug..
Sept.
Oct..
Nov..
Dec.
1977:
Jan..
Feb..
Mar..
Apr..
May..
June.
87,801
87,806
87, 777
87, 844
88, 255
88, 446
52, 485
52, 567
52, 543
52,622
52,679
52,816
3,984
3,970
3,856
3,906
3,884
3,953
48, 501
48, 597
48, 687
48, 716
48, 795
48, 863
35, 316
35,239
35,234
35,222
35, 576
35, 630
3,498
3,362
3,323
3,363
3,374
3,301
31,818
31, 877
31,911
31, 859
32, 202
32, 329
7,375
7,402
7,312
7,353
7,486
7,490
3,977
3,881
3,949
3,972
4,125
4,113
901
910
918
952
943
939
3,076
2,971
3,031
3,020
3,182
3,174
3,398
3,521
3,363
3,381
3,361
3,377
761 2,637
873 2,648
750 2,613
758 2,623
772 2,589
791 2,586
88,653
89, 047
89, 478
89, 877
90, 267
90, 648
52,962
53, 094
53, 301
53, 482
53, 644
54, 006
3,955
3,958
4,004
4,063
4,139
4,156
49, 007
49,136
49, 297
49, 419
49, 505
49, 850
35, 691
35, 953
36,177
36, 395
36, 623
36, 642
3,319
3,421
3,435
3,441
3,374
3,563
32, 372
32, 532
32,742
32, 954
33, 249
33, 079
7,066
7,273
7,145
6,869
6,894
6,904
3,839
3,978
3,812
3,592
3,638
3,543
829
905
914
864
870
882
3,010
3,073
2,898
2,728
2,768
2,661
3,227
3,295
3,333
3,277
3,256
3,361
811 2,416
783 2,512
797 2,536
803 2,474
794 2,462
811 2,550
July..
Aug_.
Sept.
Oct..
Nov..
Dec.
90, 588
90, 793
91, 088
91, 383
92, 214
92,609
53, 901
53, 942
53,964
54,341
54, 745
55, 012
4,173
4,155
4,076
4,223
4,286
4,324
49, 728
49, 787
49, 888
50,118
50,459
50,688
36, 687
36,851
37,124
37, 024
37, 469
37, 597
3,527
3,688
3,434
3,505
3,546
3,588
33,160
33,163
33,690
33, 537
33,923
34, 009
6,719
6,821
6,668
6,688
6,663
6,310
3,498
3,533
3,354
3,469
3,352
3,213
851
875
876
848
840
779
2,647
2,658
2,478
2,621
2,512
2,434
3,221
3,288
3,314
3,219
3,311
3,097
762 2,459
765 2,523
801 2,513
2, 447
783 2,528
688 2,409
iSee footnote 3, Table B-27.
Note.-See Note, Table B-27.
Source: Department of Labor, Bureau of Labor Statistics.
290
m
TABLE B-29.—Selected employment and unemployment data, 1948-77
(Percent1; monthly data seasonally adjusted]
Unemployment rate 1
By sex and age
Year or month
All
workers
Both
sexes
16-19
years
Males
20
years
and
over
:
Employment as percent
of population 5
By selected groups
emales
20
years
and
over
Experienced
wage Household
and
salary heads
workers
Married
men?
Fulltime
workers 3
Bluecollar
workers*
Total
"~5.T
4.2
8.0
55.8
54.6
7.2
3.9
3.6
3.4
7.2
5.8
5.1
6.2
10.2
7.6
55.2
55.7
55 4
55.3
53.8
55.1
56.1
55.7
54.2
54.8
54 9
54.2
54.2
54.1
54.5
55.0
55.6
55.8
56.0
56.5
54.0
54.3
54.8 '
55.4
55.7
55.9
56.5
55.2
56.1
56.8
57.2
56.9
56.6
56.7
White
Black
and
other
1948.
1949
3.8
5.9
9.2
13.4
3.2
5.4
3.6
5.3
4.3
6.8
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
5.3
3.3
3 0
2.9
5.5
4.4
4.1
4.3
6.8
5.5
12.2
8.2
8.5
7.6
12.6
11.0
11.1
11.6
15.9
14.6
4.7
2.5
2.4
2.5
4.9
3.8
3.4
3.6
6.2
4.7
5.1
4.0
3.2
2.9
5.5
4.4
4.2
4.1
6.1
5.2
6.0
3.7
33
3.2
6.2
4.8
4.4
4.6
7.2
5.7
4.6
1.5
1.4
1.7
4.0
2.8
2.6
2.8
5.1
3.6
1960
1961
1962
1963
1964
1965 . . .
1966
1967
1968
1969
5.5
6.7
5.5
5.7
5.2
4.5
3.8
3.8
3.6
3.5
14.7
16.8
14.7
17.2
16.2
14.8
12.8
12.8
12.7
12.2
4.7
5.7
4.6
4.5
3.9
3.2
2.5
2.3
2.2
2.1
5.1
6.3
5.4
5.4
5.2
4.5
3.8
4.2
3.8
3.7
5.7
6.8
5.6
5.5
5.0
4.3
3.5
3.6
3.4
3.3
3.7
3.2
2.7
2.2
2.1
1.9
1.8
3.7
4.6
3.6
3.4
2.8
2.4
1.9
1.8
1.6
1.5
5.5
4.9
4.2
3.5
3.4
3.1
3.1
7.8
9.2
7.4
7.3
6.3
5.3
4.2
4.4
4.1
3.9
1970
1971
1972
1973
1974
1975
1976
1977 . .
4.9
5.9
5.6
4.9
5.6
8.5
7.7
7.0
15.2
16.9
16.2
14.5
16.0
19.9
19.0
17.7
3.5
4.4
4.0
3.2
3.8
6.7
5.9
5.2
4.8
5.7
5.4
4.8
5.5
8.0
7.4
7.0
4.8
5.7
5.3
4.5
5.3
8.2
7.3
6.6
2.9
3.6
3.3
2.9
3.3
5.8
5.1
4.5
2.6
3.2
2.8
2.3
2.7
5.1
4.2
3.6
4.5
5.5
5.1
4.3
5.1
8.1
7.3
6.5
6.2
7.4
6.5
5.3
6.7
11.7
9.4
8.1
56.1
55.5
56.0
56.9
57.0
55.3
56.1
57.1
56.2
55.7
56.4
57.3
57.5
55.9
56.8
57.9
55.5
53.7
53.0
53.9
53.0
50.0
50.5
51.1
1976: Jan
Feb_ . .
Mar
Apr
May
June
7.9
7.7
7.6
7.6
7.4
7.5
19.2
19.2
19.0
19.6
18.8
17.9
6.1
5.9
5.8
5.7
5.7
6.0
7.5
7.4
7.2
7.3
7.1
7.2
7.6
7.3
7.2
7.2
7.1
7.2
5.3
5.0
5.0
5.0
4.9
5.1
4.2
4.2
4.2
4.1
4.1
4.3
7.4
7.2
7.1
7.1
7.0
7.3
9.5
9.4
9.2
9.0
9.0
9.4
55.7
55.8
55.9
56.1
56.2
56.1
56.4
56.6
56.6
56.8
56.9
56.9
50.3
49.4
51.0
51.0
50.2
50.5
July
Aug
Sept
Oct
Nov
Dec
7.7
78
7.7
7.7
78
7.8
18.2
19 6
18.9
19.0
19 1
19.3
6.0
58
5.9
5.8
61
6.1
7.7
7 7
7.6
7.6
7 4
7.4
7.5
75
7.3
7.4
7 4
7.4
5.4
5 2
5.3
5.2
52
5.1
4.4
4.2
4.4
4.3
4 4
4.2
7.2
7 4
7.4
7.4
73
7.4
9.6
9.7
9.8
9.5
94
9.6
56.2
56.2
56.1
56.0
56.2
56.3
57.0
56 9
56.8
56.9
56 9
57.1
50.5
50.5
50.5
50.3
50.9
50.8
1977: Jan
Feb
Mar
Apr _ __
May
June
7.4
7.6
7.4
7.1
7.1
7.1
18.4
18.6
18.7
18.2
18.1
18.0
5.8
5.9
5.6
5.2
5.3
5.1
6.9
7.2
7.2
7.0
6.9
7.2
7.0
7.1
6.9
6.6
6.7
6.5
4.9
4.9
4.7
4.5
4.5
4.3
3.8
4.1
3.8
3.7
3.6
3.4
6.9
6.9
6.8
6.6
6.6
6.5
8.5
8.8
8.5
7.9
8.0
7.8
56.3
56.5
56.7
56.9
57.0
57.2
57.1
57.3
57.5
57.7
57.9
58.0
50.9
51.0
50.9
50.9
50.8
51.3
July
Aug
Sept
Oct
Nov . . _
Dec
6.9
7.0
6.8
6.8
6.7
6.4
17.3
17.3
18.3
17.3
17.2
15.6
5.1
5.1
4.7
5.0
4.7
4.6
6.9
7.1
6.9
6.8
6.9
6.6
6.4
6.5
6.3
6.5
6.3
6.0
4.4
4.5
4.4
4.4
4.2
3.9
3.4
3.5
3.3
3.6
3.3
3.2
6.5
6.6
6.4
6.4
6.2
5.9
8.1
8.3
7.8
8.0
7.6
7.2
57.1
57.1
57.2
57.4
57.8
58.0
57.9
58.0
58.1
58.3
58.7
58.7
50.4
50.6
51.0
50.8
51.3
52.7
.
5.0
2.6
2.5
5.2
3.8
3.7
4.0
7.2
6.7
1
Unemployment as percent of civilian labor force in group specified.
2 Married men living with their wives. Data for 1949 and 1951-54 are for April; 1950, for March,
s Data for 1949-61 are for May.
4
Includes craft and kindred workers, operatives, and nonfarm laborers. Data for 1948-57 are based on data for
January, April, July, and October,
s Civilian employment as percent of total noninstitutional population.
Note—See footnote 3 and Note, Table B-27.
Sou rce: Department of Labor, Bureau of Labor Statistics.
291
T A B L E B—30.—Unemployment rate by demographic characteristic, 1948—77
[Percent •; monthly data seasonally adjusted]
Black and other
White
Females
Males
-"emales
Males
Year or month
Total
Total
1948
1949
3 5
1950
1951
1952
49
3.1
2.8
16-19
years
20
years
and
over
Total
16-19
years
20
years
and
over
Total
16-19
years
20
years
and
over
Total
16-19
years
20
years
and
over
5.9
8.9
5.6
1953
Total
9.0
5.3
5.4
4.5
2 7
1954
5.0
4.8
13.4
4.4
5.5
10.4
5.1
9.9
10.3
14.4
9.9
9.2
20.6
8.4
1955
3.9
3.7
3.4
3.6
6.1
4.6
11.3
10.5
11.5
3.3
3.0
3.2
5.5
4.1
4.3
4.2
9.1
9.7
3.9
3.7
8.8
7.9
3.8
5.6
8.5
8.9
7.3
5.3
9.5
12.7
12.0
4.7
13.4
15.0
18.4
26.8
25.2
8.4
7.4
4.3
6.2
8.7
8.3
7.9
12.6
10.7
19.2
22.8
20.2
28.4
27.7
7.8
6.4
9.5
8.3
4.2
5.1
5.3
6.5
5.5
12.7
14.8
12.8
4.6
5.7
4.7
1956
1957
3.6
3.8
1958
1959
6.1
1960
1961
4.9
6.0
4.9
5 0
4.8
5.7
4.6
4.6
47
14.0
15.7
13.7
15 9
4.1
14.7
3.4
3.6
2.8
2.7
2.6
12.9
10.5
4.8
1962
1963
1964
4.1
1965
1966
1967
1968
1969
3.3
3.4
3.2
3.1
1970
1971
15.7
14.0
4.0
3 9
58
8.3
13.7
11.5
10.2
12.4
10.9
10.8
9.6
10.7
12.8
10.9
10 5
8.1
7.4
6.3
12.1
11.5
4.0
3.3
3.8
3.4
3.4
13.4
15.1
14.2
13.0
14.5
4.4
5.3
4.9
4.3
5.0
8.2
15 1
5.5
14.9
2.9
2.2
2.1
2.0
1.9
5.0
4.3
4.6
4.3
4.2
14.0
3.2
4.0
3.6
5.4
6.3
5.9
5.3
12.1
11.5
48
4.6
7.3
7.4
6.7
6.4
8.9
24.0
26.8
22.0
27.3
24.3
7.6
12.7
10.5
10.8
9.4
7.7
24.8
29.2
30.2
34.7
10.6
9.6
31.6
9.0
31.7
31.3
7.5
7.1
7.8
29.6
28.7
27.6
5.6
7.2
6.8
5.7
6.8
9.3
10.8
11.3
10.5
10.7
34.4
35.4
38.5
34.5
34.6
6.9
8.7
8.8
8.2
8.4
9.6
9.4
11.7
10.0
9.2
7.7
11.9
11.0
11.2
10.7
23.3
21.3
23.9
22.1
21.4
6.0
4.9
4.3
9.2
25.0
28.9
29.7
26.9
8.7
9.1
8.3
8.3
94
6.6
2.5
10.7
10.1
10.0
4.5
5.4
5.0
4.3
5.0
4.0
4.9
4.5
3.7
4.3
13.7
15.1
14.2
12.3
13.5
1975
1976
7.8
7.0
6.2
7.2
6.4
5.5
18.3
17.3
15.0
6.2
8.6
6.8
6.2
12.7
12.4
35.4
37.0
11.7
10.6
10.0
14.0
13.6
14.0
38.5
39.0
39.9
11.5
7.9
7.3
13.9
13.1
13.1
35.4
5.4
4.6
17.4
16.4
15.9
13.7
1977
1976: Jan
Feb
Mar
Apr....
May....
June...
7.9
7.7
76
7.6
7.4
7.5
7.2
6.9
68
6.9
6.8
6.8
18.6
17.3
17 7
18.4
17.6
15.5
5.5
5.1
52
5.1
5.2
5.4
8.1
7.9
77
7.8
7.5
7.6
16.5
17.1
16 2
16.0
15.2
15.8
7.0
6.7
67
6.7
6.5
6.6
13.3
13.6
12.7
13.0
12.3
13.4
13.0
13.1
12 3
12.4
11.9
13.1
33.1
35.2
32.6
35.9
36.1
39.3
11.1
11.0
10.4
10.1
9.6
10.8
13.5
14.2
13.1
13.7
12.8
13.9
37.8
36.5
39.0
41.3
39.9
43.1
11.2
12.1
10.6
11.0
10.2
11.3
Aug
Sept....
Oct
Nov....
Dec...
77
7.8
7.7
7.7
7.8
7.8
7 l
7.1
7.1
7.1
7.1
7.0
16 9
16.6
16.8
17.5
17.9
17.2
55
5.4
5.6
5.5
5.5
5.4
80
8.3
7.9
8.0
8.0
7.9
15 4
18.0
16.2
16.2
16.4
17.3
70
7.0
6.9
7.0
6.9
6.8
13 0
13.4
12.8
13.3
13.3
13.5
12 3
12.5
12.2
12.9
13.4
13.4
29.8
36.9
38.4
37.7
35.2
35.2
10.7
10.2
9.8
10.5
11.3
11.3
13.9
14.4
13.5
13.7
13.3
13.6
39.0
42.7
37.4
38.5
37.6
35.3
11.6
11.7
11.4
11.5
11.1
11.7
1977: Jan
Feb....
Mar....
Apr....
May.—
June...
7.4
7.6
7.4
7.1
7.1
7.1
6.7
6.8
6.6
6.4
6.3
6.3
15.9
16.2
16.3
15.5
15.1
15.6
5.2
5.3
5.0
4.8
4.7
4.5
7.7
7.6
7.6
7.4
7.2
7.5
17.7
16.7
-16.9
17.0
16.9
15.7
6.4
6.4
6.5
6.2
6.0
6.5
12.6
13.1
12.9
12.3
12.9
13.2
12.1
12.2
12.1
10.6
12.3
11.8
34.5
38.4
40.0
34.4
38.5
35.7
10.1
9.9
9.6
8.6
10.0
9.6
13.2
14.1
13.8
14.2
13.6
14.7
38.2
36.3
37.4
37.4
38.4
44.8
11.0
12.2
11.8
12.2
11.6
11.8
6.9
7.0
6.8
6.8
6.7
6.4
6.1
6.1
6.0
6.0
5.9
5.5
13.7
14.8
15.5
14.5
14.0
12.5
4.5
4.4
4.2
4.4
4.1
4.0
7.2
7.3
7.3
7.1
7.1
6.6
15.0
14.5
16.2
15.4
15.5
12.8
6.2
6.3
6.2
6.1
6.1
5.9
13.3
14.3
13.1
13.7
13.7
12.7
13.0
14.2
12.6
13.5
12.6
11.6
40.0
37.9
34.5
35.8
38.4
36.1
10.2
11.7
10.5
11.3
13.6
14.3
13.7
13.9
14.9
13.9
41.7
41.4
40.8
40.5
39.9
40.4
11.1
11.8
11.2
11.4
12.6
11.5
1972
1973
1974
July
July
Aug
Sept...,
Oct
Nov.—
Dec...
2.9
3.5
6.1
7.5
9.9
10.0
8.9
9.9
i Unemployment as percent of civilian labor force in group specified.
Note.—See Note, Table B-27.
Source: Department of Labor, Bureau of Labor Statistics.
292
6.1
5.6
5.3
7.3
9.1
8.9
7.6
9.1
31.6
3.9
3.7
10.0
9.1
6.3
5.8
11.3
11.7
TABLE B - 3 1 . — Unemployment by duration, 1947-77
[Monthly data seasonally adjusted ! ]
Total unemployment
Year or month
Duration of unemployment
Less than
5 weeks
5-14
weeks
15-26
weeks
27 weeks
and over
Average
(mean)
duration
in weeks
Thousands of persons 16 yean of age and over
1947.
1948..
1949
2,311
2 276
3,637
1,210
1 300
1,756
704
669
1 194
234
193
428
164
116
256
86
10.0
1950
1951..
1952
1953
1954
3,288
2 055
1,883
1,834
3,532
1,450
1 177
1,135
1,142
1,605
1 055
'574
516
482
1,116
425
166
148
132
495
357
137
84
78
317
12.1
97
8.4
8.0
11.8
1955
1956
1957
1958 .
1959
2,852
2 750
2,859
4 602
3,740
1,335
1,412
1,408
1 753
1,585
815
805
891
1 396
1,114
366
301
321
785
469
336
232
239
667
571
13.0
11.3
10.5
13.9
14.4
1960
1961
1962
1963
1964
3,852
4,714
3,911
4,070
3,786
1,719
1,806
1,663
1,751
1 697
1,176
1,376
1 134
1,231
1,117
503
728
534
535
491
454
804
585
553
482
12.8
15.6
14.7
14.0
13.3
1965 .
1966
1967
1968
1969
3 366
2,875
2 975
2,817
2,832
1 628
1,573
1 634
1,594
1,629
983
779
893
810
827
404
287
271
256
242
351
239
177
156
133
11.8
10.4
8.8
8.4
7.9
4 088
4,993
4,840
4,304
5,076
2 137
2,234
2,223
2 196
2,567
1 289
1,578
1,459
1,296
1,572
427
665
597
475
563
235
517
562
337
373
8.7
11.3
12.0
10.0
9.7
7 830
7,288
6,855
2 894
2,790
2,856
2,452
2,159
2,089
1,290
1,003
896
1,193
1,336
1,015
14.1
15.8
14.3
7,359
7,205
7,108
7 174
7,041
7,117
2,665
2,687
2,586
2 934
2,813
2,729
2,096
1,921
1,946
1 939
2,004
2,249
1,145
981
963
721
860
930
1,593
1,535
1,449
1,396
1,211
1,306
16.7
16.3
16.4
15.9
15.1
16.8
7,375
7,402
7,312
7,353
7 486
7,490
2,923
2,855
2,849
2,881
2,761
2,843
2,159
2,342
2,337
2,274
2,420
2,298
1,023
1,085
1,078
1,095
1,110
1,124
1,221
1,248
1,194
1,243
1,279
1,338
15.6
15.5
15.3
15.3
15.4
15.3
7,066
7,273
7,145
6,869
6,894
6,904
2,784
2,863
2,944
3,041
2,789
3,076
2,118
2,142
2,140
1,899
2,128
2,050
1,020
959
859
720
812
826
1,224
1,209
1,149
1,108
1,057
962
15.3
14.7
14.4
14.4
14.9
14.3
6,719
6,821
6,668
6,688
6,663
6,310
2,820
2,865
2,784
2,804
2,851
2,628
2,050
2,237
2,152
2,117
2,037
1,937
881
933
908
920
936
941
943
867
926
928
893
856
14.1
13.7
14. C
13.8
13.7
13.8
.
1970
1971
1972
1973
1974
. .
1975..
1976.
1977
1976: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct . .
Nov
Dec
1977:Jan
Feb
Mar
Apr
May. __
June
._
.-.
._
July
Aug
Sept
Oct
Nov
Dec
1
._
_ ._
„
_.._ _ „
Because of independent seasonal adjustment of the various series, detail will not add to totals.
Note.—See footnote 3 and Note, Table B-27.
Source: Department of Labor, Bureau of Labor Statistics.
293
TABLE B-32.—Unemployment by reason, 1967-77
[Monthly data seasonally adjusted']
Total
unemployment
Year or month
Job
losers
Job
leavers
Reentrants
New
entrants
Thousands of persons 16 years of age and over
1967
1968
1969
2,975
2,817
2,832
1 229
1,070
1,017
438
945
396
431
436
909
965
407
413
1970
1971
1972
1973
1974
4,088
4,993
4,840
4,304
5,076
1,809
2 313
2,089
1,666
2,205
549
587
635
674
756
1,227
1 466
1,444
1,323
1,441
503
627
672
642
672
1975
1976
1977
7,830
7,288
6,855
4 341
3,625
3,103
812
886
889
1 865
1,895
1,926
812
882
938
7,066
7,273
7,145
6,869
6,894
6,904
3,264
3,425
3,212
3,043
3,080
2,972
932
881
916
868
913
938
1,981
1 972
2,000
1 993
1,961
1,917
915
942
999
985
890
1,087
6,719
6,821
6,668
6,688
6,663
6,310
3,042
3,197
3,055
3,035
2,969
2,748
842
891
869
876
881
1,860
1,872
1,879
1,906
1,891
1,886
973
947
935
857
901
1977•Jan
Feb
Mar
Apr
May.
June
.
July
Aug
Sept
Oct
Nov
Dec
877
820
Percent of civilian labor force
3.8
3.6
3.5
1.6
1.3
1.2
0.6
.5
1.2
1.2
1.2
0.5
.5
.5
1970
1971
1972
1973
1974
4.9
5.9
5.6
4.9
2.2
2.8
2.4
1.9
.7
.7
.7
.8
1.5
1.7
1.7
1.5
.6
.7
.8
.7
5.6
2.4
.8
1.6
1975
1976
1977
8.5
4.7
3.8
3.2
.9
.9
.9
2.0
2.0
2.0
.9
1.0
7.4
7.6
7.4
3.4
3.6
3.3
1.0
.9
.9
2.1
2.0
2.1
1.0
1.0
1.0
1967
1968
1969
.
. .
7.7
7.0
1977-Jan
Feb
Mar
Apr
May
June
.,
July
Aug
Sept
..
Oct
Nov
Dec
1
.-
.9
3.1
3.2
.9
.9
2.1
2.0
1.0
.9
7.1
3.0
1.0
2.0
1.1
6.9
7.0
6.8
6.8
6.7
6.4
3.1
3.3
3.1
3.1
3.0
2.8
.9
.9
.9
.9
.9
.9
1.9
1.9
1.9
1.9
1.9
1.9
1.0
1.0
1.0
.9
.9
.8
7.1
7.1
Because of independent seasonal adjustment of the various series, detail will not add to totals.
Note.—See footnote 3 and Note, Table B-27.
Source: Department of Labor, Bureau of Labor Statistics.
.7
294
T A B L E B—33.—Unemployment insurance programs, selected data, 1946—77
State programs
All programs
Year
or month
Covered
employment 1
Insured
unemployment
(weekly
average^
Total
benefits
paid
(millions
of dollars^*
31,856
33,876
34,646
33,098
34,308
36,334
37,006
38,072
36,622
40,018
42,751
43,436
44,411
45,728
46,334
46,266
47,776
48,434
49,637
51,580
54,739
56, 342
57,977
59,999
59,526
59,375
66, 458
69, 897
72,451
71,037
8 73,459
2,804
1,793
1,446
2,474
1,605
1,000
1,069
1,067
2,051
1,399
1,323
1,571
3,269
2,099
2,071
2,994
1,946
7
1,973
1,753
1,450
1,129
1,270
1,187
1,177
2,070
2,608
2,192
1,793
2,558
4,937
3,846
3,112
Initial
claims
Exhaustions'
Insured
unemployment as
percent
of covered
employment
Benefits paid
Total
(millions
of
dollars) *
Average
weekly
check
(dollars) s
Weekly average; thousands
Thousands
1946...
1947...
1948...
1949...
1950...
1951...
1952...
1953...
1954...
1955...
1956...
1957...
1958...
1959...
1960...
1961...
1962...
1963...
1964...
1965...
1966...
1967...
1968...
1969...
1970..
1971...
1972...
1973...
1974...
1975...
1976 p..
1977 v..
nsured
unemployment
2,878.5
1,785.5
1,328.7
2,269.8
1,467.6
862.9
1,043.5
1,050.6
2,291.6
1,560.2
1,540.6
1,913.0
4,290.6
2,854.3
3,022.8
4,358.1
3.145.1
3,025.9
2.749.2
2,360.4
1,890.9
2,221.5
2,191.0
2,298.6
4, 209.3
6.154.0
5.491.1
4,517.3
6,933.9
16,802.4
12,344. 8
1,295
997
980
1,973
1,513
969
1,044
990
1,870
1,265
1,215
1,446
2,526
1,684
1,908
2,290
1,783
11,806
1,605
1,328
1,061
1,205
1,111
1,101
1,805
2,150
1,848
1,632
2,262
3,986
2,991
2,473
189
187
200
340
236
208
215
218
304
226
227
270
369
277
331
350
302
*298
268
232
203
226
201
200
296
295
261
247
363
478
386
375
*
367
345
354
373
394
401
4.3
3.1
3.0
6.2
4.6
2.8
2.9
2.8
5.2
3.5
3.2
3.6
6.4
4.4
4.8
5.6
4.4
4.3
3.8
3.0
2.3
2.5
2.2
2.1
3.4
4.1
3.5
2.7
3.5
6.0
4.6
3.6
*
1, 373.1
840.4
998.2
962.2
2,026.9
1.350.3
1,380.7
1,733.9
3,512.7
2,279.0
2,726.7
3,422.7
2.675.4
2,774.7
2,522.1
2,166.0
1,771.3
2,092.3
2,031.6
2,127.9
3.848.5
4,957.0
4,471.0
4,007.6
5,974.9
11,754.7
8,974. 5
18.50
17.83
19.03
20.48
20.76
21.09
22.79
23.58
24.93
25.04
27.02
28.17
30.58
30.41
32.87
33.80
34.56
35.27
35.92
37.19
39.75
41.25
43.43
46.17
50.34
53.23
56.76
59.00
64.25
70.23
75.16
4.6
4.4
4.3
4.2
4.3
4.4
1,018.6
945.1
1,022.4
860.5
691.3
715.2
74.71
75.66
75.71
75.50
74.97
74.27
703.0
695.8
633.7
590.6
666.7
819.0
73.66
73.91
74.40
75.47
75.95
77.29
1,094.9
775.1
789.9
1,736. 0
1976: Jan__.
Feb...
Mar...
Apr...
May..
June..
4,962
4,721
4,366
3,917
3,564
3,457
1, 344.9
1,231.9
977.8
3,012
2,865
2,815
2,807
2,888
2,950
July..
Aug...
Sept..
Oct...
Nov...
Dec...
3,642
3,446
3,235
3,217
3,453
3,884
950.4
947.8
886.3
821.2
909.2
1,074. 8
3,017
3,110
3,134
3,127
3,085
2,915
404
403
409
411
391
365
4.5
4.7
4.7
4.7
4.6
4.4
1977: Jan...
Feb...
Mar...
Apr...
May..
June..
4,442
4,448
3,972
3,506
3,105
2,939
1,212.0
1, 214. 5
1,322.0
998.5
887.0
882.8
2,823
2,822
2,636
2,565
2,565
2,568
407
430
344
374
383
372
4.2
4.2
4.0
3.8
3.8
3.8
955.3
975.6
1, 038. 5
763.1
666.0
658.3
78.61
80.48
79.60
78.63
77.69
76.90
July..
Aug...
Sept..
Octp..
3,065
2,751
2,643
2,649
2,853
3,225
784.5
824.8
712.2
774.6
2,626
2,733
2,664
2,624
2,602
2,516
385
385
368
361
354
346
3.9
4.0
3.9
3.8
3.8
3.7
592.4
671.3
565.2
584.2
604.6
75.91
77.16
77.75
77.08
79.37
NOVP_.
Dec p..
1, 338.7
1,141.5
938.3
* Monthly data are seasonally adjusted.
1
Includes persons under the State, UCFE (Federal employee, effective January 1955), and RRB (Railroad Retirement
Board) programs. Beginning October 1958, also includes the UCX program (unemploymentcompensation for ex-servicemen).
2
Includes State, UCFE, RR, UCX, UCV (unemployment compensation for veterans, October 1952-January 1960), and
SRA (Servicemen's Readjustment Act, September 1944-September 1951) programs. Also includes Federal and State
extended benefit programs. Does not include FSB (Federal supplemental benefits) and SUA (special unemployment
assistance) programs.
3
Covered workers who have completed at least 1 week of unemployment.
4
Annual data are net amounts and monthly data are gross amounts.
5
Individuals receiving final payments in benefit year.
6
For total unemployment only.
7
iPrograms
lusiamo include
muuuc Puerto
rucnu Rican
r\n,du sugarcane workers for initial clai
claims and insured unemployment beginning July 1963.
«Latest data available for all programs combined. Workers covered by State programs account for about 94 percent of
the total.
Source: Department of Labor, Employment and Training Administration.
295
T A B L E B—34.—Wage and salary workers in nonagricultural establishments, 1929—77
[Thousands of persons; monthly data seasonally adjusted]
Year or
month
Total
wage
and
salary
workers
Manufacturing
Total
Durable
goods
Nondurable
goods
Mining
Contract
construction
Transportation
and
public
utilities
Wholesale
and
retail
trade
Government
Finance,
insurance,
and
real
estate
Services
Federal
State
and
local
1929
31,339
10,702
1,087
1,497
3,916
6,123
1,509
3,440
533
2,532
1933
23,711
7,397
744
809
2,672
4,755
1,295
2,873
565
2,601
1939
30,618
10, 278
4,715
5,564
854
1,150
2,936
6,426
1,462
3,517
905
3,090
1940
1941
1942
1943
1944
32,376
36,554
40,125
42,452
41,883
10,985
5,363
13,192
6,968
15, 280 8,823
17,602 11,084
17,328 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
6,982
7,058
1,502
1,549
1,538
1,502
1,476
3,681
3,921
4,084
4,148
4,163
996
1,340
2,213
2,905
2,928
3,206
3,320
3,270
3,174
3,116
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
836
862
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
1,497
1,697
1,754
1,829
1,857
4,241
4,719
5,050
5,206
5,264
2,808
2,254
1,892
1,863
1,908
3,137
3,341
3,582
3,787
3,948
1950
1951
1952
1953
1954
45, 222
47,849
48,825
50, 232
49,022
15,241
16, 393
16,632
17,549
16,314
8,094
9,089
9,349
10,110
9,129
7,147
7,304
7,284
7,438
7,185
901
929
898
866
791
2,333
2,603
2,634
2,623
2,612
4,034
4,226
4,248
4,290
4,084
9,386 1,919
9,742 1,991
10,004 2,069
10, 247 2,146
10, 235 2,234
5,382
5,576
5,730
5,867
6,002
1,928
2,302
2,420
2,305
2,188
4,098
4,087
4,188
4,340
4,563
1955
1956
1957
1958
1959
50,675
52,408
52,894
51,363
53,313
16,882
17,243
17,174
15, 945
16,675
9,541
9,834
9,856
8,830
9,373
7,340
7,409
7,319
7,116
7,303
792
822
828
751
732
2,802
2,999
2,923
2,778
2,960
4,141
4,244
4,241
3,976
4,011
10, 535
10, 858
10,886
10, 750
11,127
2,335
2,429
2,477
2,519
2,594
6,274
6,536
6,749
6,806
7,130
2,187
2,209
2,217
2,191
2,233
4,727
5,069
5,399
5,648
5,850
1960
1961
1962
1963
1964
54,234
54,042
55, 596
56,702
58,331
16,796
16, 326
16,853
16,995
17, 274
9,459
9,070
9,480
9,616
9,816
7,336
7,256
7,373
7,380
7,458
712
672
650
635
634
2,885
2,816
2,902
2,963
3,050
4,004
3,903
3,906
3,903
3,951
11,391
11,337
11,566
11,778
12,160
2,669
2,731
2,800
2,877
2,957
7,423
7,664
8,028
8,325
8,709
2,270
2,279
2,340
2,358
2,348
6,083
6,315
6,550
6,868
7,248
1965
1966
1967
1968
1969
60,815 18, 062
63,955 19,214
65, 857 19,447
67,951 19,781
70,442 20,167
10,406
11,284
11,439
11,626
11,895
7.656
7; 930
8,008
8,155
8,272
632
627
613
606
619
3,186
3,275
3,208
3,306
3,525
4,036
4,151
4,261
4,311
4,435
12,716
13,245
13,606
14,099
14, 704
3,023 9,087
3,100 9,551
3,225 10,099
3,381 10,622
3,562 11,228
2,378
2,564
2,719
2,737
2,758
7,696
8,227
8,679
9,109
9,444
1970
1971
1972
1973
1974
70,920
71,222
73,714
76, 896
78, 413
77, 051
79, 443
82,140
19, 349
18, 572
19, 090
20,068
20, 046
11,195
10,597
11,006
11,839
11,895
8,154
7,975
8,084
8,229
8,151
623
609
625
644
694
3,536
3,639
3,831
4,015
3,957
4,504
4,457
4,517
4,644
4,696
15,040
15,352
15,975
16,674
17,017
3,687
3,802
3,943
4,091
4,208
11,621
11,903
12,392
13,021
13,617
2,731
2,696
2,684
2,663
2,724
9,830
10,192
10, 656
11,075
11,453
18, 347
18,956
19, 555
10,679
11, 026
11,480
7,668
7,930
8,075
745
783
831
3,512
3,594
3,845
4,498
4,509
4,590
17, 000
17, 694
18,281
4,223 14, 006
4,316 14, 644
4,509 15,334
2,748
2,733
2,727
11,973
12,215
12,468
1975
1976
1977*
See footnotes at end of table.
296
TABLE B-34.—Wage and salary workers in nonagricultural establishments,
1929-77—Continued
[Thousands of persons; monthly data seasonally adjusted!
Year or
month
Total
wage
and
salary
workers
1975: Jan._.
Feb...
Mar...
Apr...
May__
June..
Manufacturin g
Transportation
and
public
utilities
Wholesale
and
retail
trade
Finance,
insurance,
and
real
estate
Services
Government
Total
Durable
goods
Nondurable
goods
Mining
tract
construction
77,280
76, 832
76, 507
76, 441
76, 524
76, 460
18, 783
18, 394
18, 237
18,166
18,175
18,118
11,088
10, 828
10, 735
10, 642
10, 597
10, 533
7,695
7,566
7,502
7,524
7,578
7,585
725
729
731
734
741
743
3,724
3,605
3,479
3,448
3,442
3,412
4,594
4,556
4,506
4,508
4,496
4,478
16, 903
16, 865
16, 851
16, 830
16, 848
16, 899
4,215
4,210
4,208
4,205
4,212
4,206
July..
Aug...
Sept..
Oct—
Nov...
Dec...
76, 720
77, 064
77, 384
77, 626
77, 749
78, 032
18,114
18, 254
18, 396
18, 477
18, 479
18, 570
10, 491
10, 563
10, 649
10, 664
10, 652
10,713
7, 623
7,691
7,747
7,813
7,827
7,857
745
750
752
759
762
767
3,434
3,474
3,517
3,523
3,548
3,571
4,473
4,471
4,467
4,476
4,487
4,473
16,979
17,055
17,133
17,150
17,188
17, 282
1976: Jan.._
Feb...
Mar...
Apr...
May..
June..
78, 413
78, 650
78, 929
79, 228
79, 263
79, 402
18, 707
18, 797
18, 897
18, 983
18, 975
18, 973
10, 809
10, 870
10, 950
11,004
11,052
11,053
7,898
7,927
7,947
7,979
7,923
7,920
767
767
772
775
776
782
3,595
3,579
3,575
3,613
3,602
3,602
4,485
4,504
4,503
4,510
4,503
4,491
17, 401
17, 469
17, 537
17, 608
17,645
17,682
79, 520
79, 606
79, 895
79, 835
80,127
80, 370;
18, 956
18, 958
19, 064
18,970
19, 070
19,114
11, 046
11,069
11,119
11, 046
11,126
11,165
7,910
7,889
7,945
7,924
7,944
7,949
790
753
798
800
805
809
3,605
3,582
3,572
3,586
3,609
3,605
4,508
4,506
4,524
4,511
4,523
4,549
17, 737 4,312 14, 664 2,723 12,225
17, 778 4,316 14, 736 2,729 12, 248
17, 839 4,338 14, 783 2,728 12,249
17, 807 4,359 14, 805 2,727 12,270
17, 848 4,381 14,858 2,731 12, 302
17,925 4,398 14,936 2,720 12, 314
1977:Jan...
Feb._.
Mar...
Apr...
May...
June..
80, 574
80, 870
81,331
81, 620
81, 837
82,157
19, 219
19, 278
19,417
19, 499
19, 566
19,611
11,236
11,261
11,373
11,404
11,451
11,484
7,983
8,017
8,044
8,095
8,115
8,127
817
824
841
847
845
856
3,549
3,661
3,759
3,830
3,853
3,888
4,544
4,553
4,563
4,575
4,586
4,588
17, 994
18,039
18,118
18,175
18, 202
18, 264
4,419
4,431
4,453
4,463
4,481
4,494
15,010 2,721 12, 301
15,068 2,721 12,295
15,149 2,725 12, 306
15,182 2,721 12, 328
15,197 2,725 12, 382
15, 260 2,735 12, 461
July...
Aug...
Sept..
Oct...
Nov p.
Decp.
82, 407
82, 474
82, 763
82, 902
83, 222
83, 439
19, 666
19, 594
19, 612
19, 666
19,717
19, 876
11, 548
11, 527
11,545
1.1, 604
11,627
11, 746
8,118
8,067
8,067
8,062
8,090
8,130
833
818
856
859
863
713
3,913
3,893
3,892
3,911
3,946
3,964
4,572
4,581
4,616
4,610
4,630
4,660
18, 322
18, 377
18, 431
18,414
18, 486
18,511
4,506
4,524
4,545
4,572
4,600
4,618
15, 372
15, 448
15, 482
15, 533
15,601
15,676
July..
Aug...
Sept..
Oct—
Nov...
Dec...
Federal
State
and
local
13,843
13, 865
13, 864
13,878
13, 903
13, 898
2,736
2,735
2,735
2,735
2,736
2,741
11,757
11,873
11,896
11,937
11,971
11,965
4,211
4,222
4,235
4,242
4,248
4,256
13,997
14, 049
14,118
14,182
14,218
14, 265
2,750
2,753
2,757
2,759
2,756
2,752
12,017
12, 036
12, 009
12, 058
12, 063
12, 096
4,261
4,266
4,276
4,289
4,282
4,305
14, 342 2,749
14, 397 2,742
14, 460 2,735
14, 536 2,735
14, 567 2,732
14, 625 2,728
12,106
12,129
12,174
12,179
12,181
12,214
2,721
2,732
2,728
2,730
2,727
2,722
12, 502
12, 507
12, 601
12, 607
12,652
12,699
Note.—Data in Tables B-34 Ihrough B-36 are based on reports from employing establishments and relate to full- and
part-time wage and salary workers in nonagricultural establishments who received pay for any part of the pay period which
includes the 12th of the month.
Not comparable with labor force data (Tables B-27 through B-32), 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., even if they are not paid for the time off and which are based on a sample of the
working-age population, whereas the estimates in this table are based on reports from employing establishments.
For description and details of the various establishment data, see "Employment and Earnings."
Source: Department of Labor, Bureau of Labor Statistics.
297
TABLE B-35.—Average weekly hours and hourly earnings in selected private nonagricultural
industries, 1947-77
(For production or nonsupervisory workers; monthly data seasonally adjusted)
Average weekly hours
Year
or
month
Total
private Manunonag- facturriculing
tural1
Contract
construction
Average gross hourly earnings,
current dollars
Whole- Total
Manusale private
nonfacturand
agriing
retail
cultrade tural i
Con- Wholetract
sale
conand
struc- retail
tion
trade
Adjusted hourly earnings,
total private nonagricultural J
Index,
1967 = 100
Current
dollars
1967
dollars 3
Percent
change
from
a year
earlier4
Current
dollars
1967
dollars
1947
1948.
1949
40.3
40.0
39.4
40.4
40.0
39.1
38.2
38.1
37.7
40.5 $1,131 $1,217 $1,541 $0.940
40.4 1.225 1.328 1.713 1.010
40.5 1.275 1.378 1.792 1.060
42.6
46.0
48.2
63.7
63.8
67.5
8.0
4.8
0.2
5.8
1950
1951
1952
1953
1954
39.8
39.9
39.9
39.6
39.1
40.5
40.6
40.7
40.5
39.6
37.4
38.1
38.9
37.9
37.2
40.5
40.5
40.0
39.5
39.5
1.335
1.45
1.52
1.61
1.65
1.440
1.56
1.65
1.74
1.78
1.863
2.02
2.13
2.28
2.39
1.100
1.18
1.23
1.30
1.35
50.0
53.7
56.4
59.6
61.7
69.3
69.0
70.9
74.4
76.6
3.7
7.4
5.0
5.7
3.5
2.7
-.4
2.8
4.9
3.0
1955
1956
1959
39.6
39.3
38.8
38.5
39.0
40.7
40.4
39.8
39.2
40.3
37.1
37.5
37.0
36.8
37.0
39.4
39.1
38.7
38.6
38.8
1.71
1.80
1.89
1.95
2.02
1.86
1.95
2.05
2.11
2.19
2.45
2.57
2.71
2.82
2.93
1.40
1.47
1.54
1.60
1.66
63.7
67.0
70.3
73.2
75.8
79.4
82.3
83.4
84.5
86.8
3.2
5.2
4.9
4.1
3.6
3.7
3.7
1.3
1.3
2.7
1960
1961
1962
1963.
1964.
38.6
38.6
38.7
38.8
38.7
39.7
39.8
40.4
40.5
40.7
36.7
36.9
37.0
37.3
37.2
38.6
38.3
38.2
38.1
37.9
2.09
2.14
2.22
2.28
2.36
2.26
2.32
2.39
2.46
2.53
3.08
3.20
3.31
3.41
3.55
1.71
1.76
1.83
1.89
1.96
78.4
80.8
83.5
85.9
88.2
88.4
90.2
92.2
93.7
95.0
3.4
3.1
3.3
2.9
2.7
1.8
2.0
2.2
1.6
1.4
1965
1966
1967.......
1968
1969
38.8
38.6
38.0
37.8
37.7
41.2
41.3
40.6
40.7
40.6
37.4
37.6
37.7
37.3
37.9
37.7
37.1
36.5
36.0
35.6
2.45
2.56
2.68
2.85
3.04
2.61
2.72
2.83
3.01
3.19
3.70
3.89
4.11
4.41
4.79
2.03
2.13
2.24
2.40
2.55
91.2
95.3
100.0
106.2
113.2
96.6
98.0
100.0
101.9
103.1
3.4
4.5
4.9
6.2
6.6
1.7
1.4
2.0
1.9
1.2
1970
1971
1972
1973
1974
37.1
37.0
37.1
37.1
36.6
39.8
39.9
40.6
40.7
40.0
37.3
37.2
36.9
37.0
36.9
35.3
35.1
35.1
34.7
34.1
3.22
3.44
3.67
3.92
4.22
3.36
3.57
3.81
4.08
4.41
5.24
5.69
6.03
6.37
6.75
2.71
2.86
3.01
3.20
3.47
120.7
129.2
137.7
146.5
158.5
103.8
106.5
109.9
110.0
107.3
6.6
7.0
6.6
6.4
8.2
.7
2.6
3.2
1975
1976
1977 v
36.1
36.2
36.1
39.4
40.0
40.3
36.6
37.1
36.8
33.8
33.6
33.7
4.54
4.87
5.24
4.81
5.19
5.63
7.25
7.68
8.04
3.75
3.97
4.28
172.5
185.0
198.5
107.0
108.5
109.4
8.8
7.2
7.3
-.3
1.4
1976: Jan..
Feb..
MarApr-.
May.
June.
36.4
36.4
36.1
36.1
36.3
36.1
40.4
40.3
40.2
39.4
40.3
40.2
37.6
37.6
36.0
37.4
37.0
37.3
33.9
33.8
33.5
33.9
33.7
33.5
4.72
4.75
4.77
4.79
4.83
4.85
5.00
5.05
5.08
5.08
5.13
5.16
7.46
7.48
7.60
7.57
7.66
7.67
3.87
3.88
3.90
3.91
3.94
3.95
179.6
180.5
181.4
182.4
183.6
184.2
107.5
107.9
108.2
108.3
108.3
108.2
8.1
7.8
7.3
7.6
7.7
7.1
1.4
1.1
1.5
•1.3
1.1
36.1
36.1
36.0
36.2
36.2
36.2
40.1
40.0
39.7
39.9
40.1
40.0
37.0
36.9
36.1
37.3
37.3
37.2
33.6
33.6
33.6
33.6
33.4
33.6
4.88
4.90
4.93
4.96
5.00
5.02
5.21
5.24
5.29
5.29
5.34
5.38
7.73
7.73
7.71
7.77
7.81
7.83
3.98
4.00
4.03
4.05
4.08
4.11
185.5
186.6
187.5
188.4
189.7
190.7
108.5
108.6
108.7
108.9
109.3
109.5
7.3
7.1
7.1
6.8
6.7
6.9
1.8
1.4
1.5
1.5
1.6
2,0
1977: Jan_._.
Feb....
Mar....
Apr
May...
June...
35.8
36.2
36.2
36.2
36.3
36.2
39.5
40.3
40.4
40.3
40.4
40.5
35.4
37.5
37.2
37.3
37.4
36.8
33.3
33.4
33.4
33.4
33.5
33.3
5.07
5.10
5.13
5.17
5.20
5.22
5.43
5.45
5.49
5.53
5.57
5.61
7.92
7.90
7.91
7.95
7.97
8.04
4.15
4.17
4.20
4.23
4.24
4.26
192.6
193.2
194.2
195.6
196.4
197.4
109.7
109.0
108.8
108.8
108.6
108.5
7.2
7.0
7.0
7.2
7.0
7.1
2.0
1.0
.6
.4
.2
.3
July...
Aug...
Sept.-.
Oct.__.
Nov p..
Dec*...
36.1
36.0
36.0
36.2
36.1
36.0
40.2
40.3
40.3
40.4
40.5
40.3
36.9
36.5
36.4
36.8
36.9
36.5
33.3
33.2
33.2
33.5
33.3
33.2
5.27
5.28
5.32
5.38
5.39
5.41
5.66
5.68
5.73
5.79
5.81
5.82
8.06
8.08
8.09
8.17
8.16
8.17
4.30
4.31
4.33
4.37
4.38
4.42
199.4
199.9
201.2
203.3
204.0
204.8
109.2
109.1
109.5
110.3
110.1
110.2
7.5
7.1
7.3
7.9
7.5
7.4
.7
.4
.7
1.3
.7
.6
1957
1958
July.
Aug.
8£
Nov....
Dec.._.
1
Also includes other private industry groups shown in Table B-34.
2 Adjusted for overtime (in manufacturing only) and for interindustry employment shifts.
3 Current dollar earnings index divided by the consumer price index.
* Monthly data are computed from indexes to two decimal places.
Note—See Note,Table B-34.
Source: Department of Labor, Bureau of Labor Statistics.
298
-2.5
TABLE B-36.—Average weekly earnings in selected private nonagricultural industries, 1947-77
[For production or nonsupervisory workers; monthly data seasonally adjusted]
Percent change from a
year earlier, total private
nonagricultural 3
Average gross weekly earnings
Year or month
Total private
nonagricultural i
Current
dollars
Manufacturing
1967
dollars 2
Contract
construction
Wholesale
and retail
trade
Current
dollars
1967 dollars
Current dollars
1947
1948
1949
$45.58
49.00
50.24
$68.13
67.96
70.36
$49.17
53.12
53.88
$58.87
65.27
67.56
$38.07
40.80
42.93
7.5
2.5
-0.2
3.5
1950
1951
1952
1953
1954
53.13
57.86
60.65
63.76
64.52
73.69
74.37
76.29
79.60
80.15
58.32
63.34
67.16
70.47
70.49
69.68
76.96
82.86
86.41
88.91
44.55
47.79
49 20
51 35
53 33
5.8
8.9
4.8
5.1
1.2
4.7
.9
2 6
4.3
1955
1956..
1957
1958
1959.
67.72
70.74
73.33
75.08
78.78
84.44
86.90
86.99
86.70
90.24
75.70
78.78
81.59
82.71
88.26
90.90
96.38
100.27
103.78
108.41
55 16
57 48
59.60
61.76
64 41
5.0
4.5
3.7
2.4
4.9
5.4
2.9
-.3
4.1
1960
1961.
1962
1963
1964
80.67
82.60
85.91
88.46
91.33
90.95
92.19
94.82
96.47
98.31
89.72
92.34
96.56
99.63
102.97
113.04
118.08
122.47
127.19
132.06
66.01
67 41
69.91
72 01
74.28
2.4
2.4
4.0
3.0
3.2
.8
1.4
2.9
1.7
1.9
1965
1966
1967
1968
1969
95.06
98.82
101.84
107.73
114.61
100.59
101.67
101.84
103.39
104.38
107.53
112.34
114.90
122.51
129.51
138.38
146.26
154.95
164.49
181.54
76 53
79.02
81.76
86 40
90.78
4.1
4.0
3.1
5.8
6.4
2.3
1.1
.2
1.5
1.0
1970
1971
1972
1973
1974
119.46
127.28
136.16
145.43
154. 45
102.72
104.93
108.67
109.26
104.57
133.73
142.44
154,69
166.06
176.40
195.45
211.67
222.51
235.69
249.08
95.66
100.39
105.65
111.04
118.33
4.2
6.5
7.0
6.8
6.2
-1.6
2.2
3.6
.5
-4.3
1975
1976
1977 v
163.89
176. 29
189.16
101.67
103. 40
104.22
189. 51
207. 60
226. 89
265.35
284.93
295. 87
126.75
133. 39
142. 52
6.1
7.6
7.3
-2.8
1.7
.8
1976: Jan
Feb
Mar
Apr
May
June
171.81
172.90
172. 20
172. 92
175. 33
175. 09
102.82
103.35
102.68
102. 68
103. 44
102. 87
202.00
203.52
204. 22
200.15
206. 74
207. 43
280. 50
281.25
273. 60
283.12
283. 42
286. 09
131.19
131.14
130. 65
132. 55
132. 78
132. 33
8.2
8.1
8.1
7.5
8.7
7.8
1.3
1.7
l.S
1.3
2.4
l.S
July
Aug.
Sept
Oct
Nov
Dec
176.17
176. 89
177. 48
179. 55
181. 00
181. 72
103. 02
102.96
102.95
103. 79
104. 32
104. 32
208.92
209. 60
210. 01
211.07
214.13
215. 20
286.
285.
278.
289.
291.
291.
01
24
33
82
31
28
133. 73
134. 40
135.41
136. 08
136. 27
138.10
7.9
7.0
6.6
6.9
6.5
6.7
2.3
1.3
l.C
1.5
1.5
1.8
1977:Jan
Feb
Mar
Apr
May
June
181.51
184. 62
185. 71
187.15
188. 76
188. 96
103. 37
104.13
104.10
104. 09
104. 34
103. 88
214.
219.
221.
222.
225.
227.
280.
296.
294.
296.
298.
295.
37
25
25
54
08
87
138.
139.
140.
141.
142.
141.
20
28
28
28
04
86
5.6
7.1
7.7
8.3
7.5
7.6
.4
l.C
1.2
1.5
.7
.7
July
Aug
Sept
Oct
190. 25
190. 08
191. 52
194. 76
194. 58
194.76
104.19
103. 76
104. 20
105. 68
105.06
104.77
227. 53
228. 90
230. 92
233. 92
235. 31
234.55
143.19
143. 09
143. 76
146. 40
145. 85
146. 74
7.7
7.3
8.1
8.4
7.9
7.2
1.0
.6
1.4
1.8
1.1
A
NOVP
Dec p
49
64
80
86
03
21
1
2
Also includes other private industry groups shown in Table B-34.
Earnings in current dollars divided by the consumer price index.
> Based on unadjusted data.
Note.—See Note, Table B-34.
Source: Department of Labor, Bureau of Labor Statistics.
299
297. 41
294. 92
294. 48
300. 66
301.10
298. 21
T A B L E B-37.—Productivity and related data, private business economy^ 1947—77
[1967 = 100; quarterly data seasonally adjusted]
Output 1
Year or quarter
Hours of all
persons2
Output per
hour of all
persons
Compensation
per hour3
Unit labor
costs
Implicit price
deflator4
Non- Private Non- Private Non- Private NonNonPrivate farm
farm
farm Private
farm
busi- busi- busi- busibusi- farm
busibusibusibusibusiness
ness
ness
ness
ness
ness
ness
ness sector
ness
ness
sector sector
sector secto r sector sector sector sector sector
sector
Nonfarm
business
sector
48.6
50.8
49.9
47.5
49.5
48.7
92.9
93.5
90.3
80.9
82.1
78.9
52.3
54.4
55.3
58.7
60.3
61.7
35.1
38.1
38.8
37.5
40.7
42.0
67.1
70.1
70.2
63.9
67.5
68.1
65.1
70.6
69.8
62.3
67.5
68.0
1950—
1951
1952
1953
1954-
54.5
57.7
59.1
61.9
60.8
53.2
56.7
58.4
60.8
59.6
91.2
93.9
93.9
94 7
91.5
81.3
85.0
85.8
87 9
84.8
59.7
61.5
63.0
65.3
66.5
65.5
66.7
68.1
69 2
70.3
41.6
45.6
48.6
51.8
53.5
44.5
48.4
51.0
54.0
55.8
69.6
74.3
77.1
79 3
80.5
67.9
72.5
75.0
78.0
79.3
70.8
76.0
77.4
77 9
78.6
69.1
73.7
75.2
76 8
77.8
1955
1956
1957
1958...
1959
65.6
67 5
68.4
66.9
71.8
64.5
66.5
67.5
65.8
71.0
94.8
96 2
94.6
90.2
93.4
88.1
90.3
89.7
85.8
89.3
69.2
70.2
72.3
74.2
76.8
73.2
73.6
75.3
76.8
79.6
54.9
58.6
62.5
65.4
68.5
57.8
61.4
65.0
67.6
70.6
79.3
83.5
86.5
88.2
89.1
79.0
83.3
86.4
88.1
88.8
79.8
82 2
84 8
86.4
88.1
79.4
81 9
84 6
85.9
88.0
1960
1961.. .
1962
1963
1964
73.1
74.1
78.8
82.2
86.8
72.2
73.3
78.1
81.6
86.4
93.6
92.0
93.4
93.8
95.1
89.9
88.7
90 5
91.4
93.3
78.1
80.6
84.4
87.7
91.3
80.3
82.6
86.2
89.3
92.6
71.4
74.2
77.7
80.7
85.1
73.7
76.2
79.4
82.3
86.2
91.4
92.1
92.1
92.0
93.2
91.7
92.3
92.0
92.2
93.1
89.3
89.8
90 6
91.4
92.7
89 2
89.8
90 5
91.5
92.9
92.9 92.6
98.1
98.0
100 0 100.0
105.1 105.4
108.3 108.6
98.1
100.3
100.0
101.7
104.5
96.8
94.7
100.0 97.8
100 0 100.0
102.1 103.3
105.3 103.7
95.7
98.1
100.0
103.2
103.1
88.4
94.7
100.0
107.6
115.1
89.1
94.5
100.0
107.3
114.3
93.4
96.8
100.0
111.0
93.2
96.4
100.0
103.9
110.9
94 2
97.2
100 0
103 9
108.8
94 1
96.8
100 0
104 0
108.7
107.4
110.3
117.9
125.0
121.9
102.8
102.3
106.0
110.1
110.6
104.0
103.7
107.6
112.2
112.7
104.5
107.8
111.0
113.1
109.9
103.3
106.3
109.5
111.4
123.3
131.5
138.9
150.3
164.3
121.9
129.9
137.4
148.1
162.0
118.1
121.9
125.2
132.9
149.5
118.1
122.2
125.5
133.0
149.8
113 9
118.9
123.2
130.3
143.1
114 0
119.2
122.9
128.0
141.5
118.7 118.7
126.9 127.4
134 6 134.9
106.1
108.9
112.8
108.1
115.7
111.4
111.8
116.5
119.3
114.3
116.7
180.2
196.5
213.6
177.6
193.1
209.6
161.1
168.7
179.0
161.7
168.9
179.7
158.0
165.6
174 2
156.9
165.0
174 0
121.8
115.3
117.1
120 6
121.8
105.7
104.9
106 0
107.5
107.8
106.8
107.7
109.7
108.9
111.7
113.8
113.3
106.9
109.6
112.0
111.0
176.2
179.2
181.1
184.6
173.2
176.3
179.1
181.9
161.7
160.4
159.1
163.0
162.0
160.9
160.0
163.9
154.2
156.5
159.4
161.6
153 4
155.6
158 1
160.3
124.9
126.7
127.7
128 4
125.2
127.2
128.3
128.7
108.2
108.9
109.0
109.6
111.0
111.2
111.4
112.3
115.4
116.4
117.2
117.2
112.9
114.5
115.2
114.6
190.5
194.5
198.6
202.7
186.9
191.3
195.2
198.7
165.1
167.1
169.4
173.0
165.6
167.1
169.5
173.3
162.9
164.8
166.5
168.3
162.1
163 6
166.0
168 1
131.3
134.0
131.6
134.5
136.0
137.5
110 4
113.0
112.9
113.9
113.4
115.6
115.9
116.8
118.9
118.6
120.2
120.6
116.1
116.3
117.4
117.8
208.4
211.7
216.0
219.7
204.3
208.1
211.9
215.7
175.2
178.5
179.7
182.2
176.0
178.9
180.5
183.2
170.1
173.1
175.4
177.7
169 6
172.7
175.6
177.7
1947
1948
1949
.
1965
1966
1967
1968
1969.
.
1970
1971
1972
1973
1974
.
..
107.4
110.3
117.6
124.5
121.5
.
1975
. .
1976
1977 v
..
115.1
117.2
1975: 1
II
III
IV .
Private
business
120 6
..
1976: 1
II
III
IV
1977: 1
II
III
IVP
135.7
137.3
108.1
109.9
104.1
1
Output refers to gross domestic product originating in the sector in 1972 dollars.
2 Hours of all persons in private industry engaged in production, including hours of proprietors and unpaid family
workers.
Estimates based primarily on establishment data.
3
Wages and salaries of employees plus employers' contributions for social insurance z.id private benefit plans. Also
includes an estimate of wages, salaries, and supplemental payments for the self-employed.
* Current dollar gross domestic product divided by constant dollar gross domestic product.
Source: Department of Labor, Bureau of Labor Statistics.
300
TABLE B-38.—Changes in productivity and related data, private business economy, 1948-77
[Percent change from preceding period; quarterly data at seasonally adjusted annual rates]
Hours of
all persons ^
Output*
Output per hour
of all persons
Year or quarter Private Non- Private Nonfarm
farm
busibusi- busibusiness
ness
ness
ness
sector sector sector sector
Private
business
sector
Compensation
per hours
Non- Private Nonfarm
farm
busibusi- business
ness
ness sector
sector
sector
Unit labor
costs
Implicit price
deflator*
Non- Private NonPrivate farm
farm
busibusibusibusiness
ness
ness
ness
sector sector sector sector
1948
1949
4.6
-1.8
4.4
-1.7
0.6
-3.4
1.6
-4.0
3.9
1.7
2.8
2.3
8.6
1.8
8.7
3.2
4.5
.1
5.8
.8
8.4
-1.1
8.3
.7
1950
1951. .
1952
1953
1954. . .
9.2
5.9
2.5
4.6
-1.7
9.4
6.5
3.0
4.1
-1.9
i.l
2.9
.0
.9
-3.5
3.1
4.6
1.0
2.4
-3.6
8.0
2.9
2.5
3.7
1.8
6.1
1.8
2 0
1.6
1.7
7.1
9.8
6.4
6.6
3.4
5.8
8.7
5.6
5.7
3.3
-.8
6.7
3.8
2.9
1.5
-.3
6.7
3.5
4.0
1.6
1.5
7.3
1.9
.6
.9
1.6
6.5
2.1
2.1
1.3
8.0
2.8
1.3
-2.1
7.3
8.2
3.1
1.5
-2.4
7.9
3.7
1.4
-1.6
-4.7
3.6
4.0
2.4
-.7
-4.3
4.1
4.1
1.4
3.0
2.7
3.6
4.1
.6
2.2
2.0
3.7
2.6
6.7
6.7
4.7
4.6
3.7
6.2
5.9
4.0
4.4
-1.5
5.2
3.7
1.9
1.0
-.4
5.5
3.7
2.0
.7
1.5
3.0
3.2
1.9
2.0
2.1
3.2
3.3
1.5
2.4
1960
1961 .
1962
1963
1964
1.8
1.5
62
4.4
5.6
1.6
1.5
65
4.5
5.9
.2
-1.7
15
.4
1.4
.6
-1.3
21
.9
2.1
1.6
3.3
46
4.0
4.1
1.0
28
44
3.5
37
4.3
3.5
41
3.7
4.8
2.6
.7
1
-.1
1.3
7.0
5.5
2.0
5.1
3.0
7.1
6.0
1.9
54
3.0
3.1
2.3
-.3
1.7
2.7
3.7
3.3
-.0
2.1
3.2
3.7
3.2
2.3
3.3
.3
3.3
2.5
1.9
32
2
3.4
6.1
5.8
7.3
6.5
.2
3.7
3.3
4.1
6.6
3.3
.6
_ 3
.1
1.0
.1
3.4
3.8
3.9
6.6
1.4
.6
9
.9
1.4
1.6
3.2
2.9
3.9
4.7
1.4
.6
8
1.0
1.5
1965
1966
1967
1968
1969
4.2
4.0
47
3.9
5.4
3.9
7.0
5.6
7.6
7.0
1.3
2.9
3.3
40
4.5
1970
1971
1972
1973
1974
-.9
2.8
6.6
5.9
-2.4
-1.1
2.7
6.9
6.0
-2.5
-1.6
-.4
3.6
3.9
.4
-1.2
3'. 7
4.3
.4
.7
3.2
2.9
1.9
-2.8
.2
2.9
3.0
1.7
-2.9
7.2
6.6
5.7
8.2
9.4
6.7
6.6
5.8
7.8
9.4
6.4
3.2
2.7
6.2
12.5
6.5
3.5
2.7
6.0
12.7
4.7
4.4
3.6
5.8
9.8
4.9
4.5
3.1
4.1
10.5
1975
1976
-2.4
70
60
-2.6
7 3
59
-4.1
27
3.6
-4.1
31
38
1.8
42
24
1.6
41
20
9.6
91
8.7
9.6
8.7
8.5
7.7
47
61
7.9
45
64
10.4
48
5.1
10.9
5.1
5.5
-11.6 -11.6 -12.7 -12.5
7.5
6.5 - 2 . 8 - 3 . 6
12.2
12.5
3.3
4.2
3.9
4.1
7.6
5.9
1.3
10.6
7.7
-1.9
1.0
10.5
8.9
-3.3
13.1
6.9
4.4
8.1
12.1
7.4
6.5
6.4
11.7
-3.3
-3.0
10.2
10.9
-2.8
-2.2
10.0
12.9
6.2
7.5
5.9
14.2
5.7
6.6
5.8
.
1955
1956..
1957...
1958
1959
1977P
1975:1
II
III
IV
1976:1...
11
III
IV
.
1977:1
II
III
IVP
0
10.8
5.9
3.1
2.1
11.7
6.6
3.2
1.3
2.8
2.3
.3
2.2
4.6
.8
.6
3.3
7.8
3.5
2.8
-.1
6.8
5.7
2.6
-1.9
13.3
8.6
8.7
8.5
11.4
9.7
8.5
7.3
5.1
4.9
5.8
8.6
4.3
3.8
5.7
9.4
3.1
4.8
4.1
4.6
4.4
3.8
6.0
5.3
9.6
8.5
5.2
4.8
9.5
8.8
4.8
4.5
3.3
9.5
-.2
3.4
4.2
7.9
.9
3.2
6.1
-1.0
5.4
1.4
5.1
.8
3.8
1.2
11.8
6.5
8.5
7.0
11.7
7.7
7.5
7.5
5.4
7.6
2.9
5.6
6.3
6.8
3.5
6.1
4.4
7.2
5.2
5.5
3.5
7.5
7.0
4.8
1 Output refers to gross domestic product originating in the sector in 1972 dollars.
» Hours of all persons in private industry engaged in production, includ ing hours of proprietors and unpaid family workers.
Estimates based primarily on establishment data.
'Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also
includes an estimate of wages, salaries, and supplemental payments for the self-employed.
* Current dollar gross domestic product divided by constant dollar gross domestic product.
Note.—Percent changes are based on original data and therefore may differ slightly from percent changes based on
indexes in Table B-37.
Source: Department of Labor, Bureau of Labor Statistics.
301
(248-947 O - 78 - 20
PRODUCTION AND BUSINESS ACTIVITY
TABLE E-39.—Industrial production indexes, major industry divisions, 1929-77
[1967=100; monthly data seasonally adjusted]
Total
industrial
production
Year or month
Manufacturing
Mining
Total
Durable
Utilities
Nondurable
100.00
87.95
51.98
35.97
6.36
5.69
1929
21.6
22.8
22.5
23.2
43.1
7.4
1933
13.7
14.0
9.1
19.9
30.6
6.7
1939 .
21.7
21.5
17.7
26.1
42.1
10.7
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
25.0
31.6
36.3
44.0
47.4
40.7
35.0
39.4
41.1
38.8
25.4
32.4
37.8
47.0
50.9
42.6
35.3
39.4
40.9
38.7
23.5
31.4
39.9
54.2
59.9
45.2
31.6
37.7
39.3
35.7
27.5
33 3
34.6
37.1
38.6
38.5
39.7
41.3
42.7
42.0
46.8
49 7
51.3
52.5
56 2
55.1
54.2
61.3
64.4
57.1
11.8
13 3
14.9
16.5
17 5
17.8
18.6
20.1
22.4
23.9
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
44.9
48.7
50.6
54.8
51.9
58.5
61.1
61.9
57.9
64.8
45.0
48.6
50.6
55.2
51.5
58.2
60.5
61.2
57.0
64.2
43.5
48.9
51.9
58.7
51.8
59.2
61.1
61.6
53.9
61.9
46.7
48.3
49.2
51.2
51.6
57.2
60.1
61.1
61.6
67.7
63.8
70.0
69.4
71.2
69.9
77.9
82.0
82.1
75.3
78.7
27.2
31.0
33.7
36.5
39.3
43.9
48.2
51.5
53.9
59.3
66.2
66.7
72.2
76.5
81.7
89.8
97.8
100.0
106.3
111.1
107.8
109.6
119.7
129.8
129.3
117.8
129.8
137.1
65.4
65.6
71.5
75.8
81.0
89.7
97.9
100.0
106.4
111.0
106.4
108.2
118.9
129.8
129.4
116.3
129.5
137.1
62.9
61.8
68.6
73.1
78.3
89.0
98.9
100.0
106.5
110.6
102.3
102.4
113.7
127.1
125.7
109.3
121 7
129.4
69.3
71.5
75.8
80.0
85.2
90.9
96.7
100.0
106.2
111.5
112.3
116.6
126.5
133.8
134.6
126.4
140.9
148.1
80.3
80.8
83.1
86.4
89.9
93.2
98.2
100.0
104.2
108.3
112.2
109.8
113.1
114.7
115.3
112.8
114.2
117.8
63.4
67.0
72.0
77.0
83.6
88.7
95.5
100.0
108.4
117.3
124.5
130.5
139.4
145.4
143.7
146.0
151.0
156.8
1976: Jan
Feb
Mar
Apr
May
June
125.9
127.6
128.3
128.7
129.7
129.8
124.8
127.1
128.0
128.4
129.7
129.8
116.0
118.4
119 5
120.3
122.2
122.4
137.5
139.9
140.3
140.4
140.6
140.6
113.2
113.6
113.8
112.6
113.8
114.6
151.9
152.4
149.5
147.6
149.1
148.7
July
Aug
Sept
Oct
Nov
Dec
130.7
131.3
130.6
130 2
131.5
133.0
130.7
131.2
130.5
129.8
131.4
132.5
124 0
125.0
122.4
121 4
123.4
125.0
140.3
140.4
142.3
141.9
143.0
143.3
112.7
114.0
115.5
116.1
115.3
115.4
150.0
150.5
149.6
150.8
154.6
157.9
132.3
133.2
135 3
136.1
137.0
137.8
131.6
132.6
135.1
135.8
137.1
137.8
123.4
124.0
126 8
128.0
129.3
130 5
143.4
145.3
147.0
147.0
148.5
148.4
112.8
116.3
120.6
119.2
119.5
122.8
163.8
160.3
154.8
154.0
156.7
156.8
138. 7
138.1
138.5
138.8
P9.3
139.6
138.5
138.6
139.0
139.2
139.6
140.4
131.6
131.3
131.7
132.3
132 2
133.0
148.6
149.4
149.5
149.4
150.3
151.1
119.8
115.4
118.0
119.1
118.3
113.4
161.4
155.7
154.1
153.5
155.7
157.4
1967 proportion
.
1960
1961
1962
1963
1964 .
1965
1966
1967
1968
1969...
1970
1971 .
1972
1973 .
1974
1975... .
1976
1977 1
-
...
-
„
1977: Jan
Feb.
Mar
Apr
May_
June
July
Aug
Sept
Oct
Nov P
Dec*
.
1
Preliminary; annual by Council of Economic Advisers.
Source: Board of Governors of the Federal Reserve System.
302
TABLE B-40.—Industrial production indexes, market groupings, 1947-77
[1967=100; monthly data seasonally adjusted]
Final products
Total
industrial
production
Year or
month
1967 proportion...
Consumer goods i
Total
Total
Automotive
products
Materials 2
Equipment
Home
goods
Total
Business
Intermediate
products
Total
Durable
goods
Nondurable
goods
100.00
47.82
27.68
2.83
5.06
20.14
12.63
12.89
39.29
20.35
1947.
1948
1949
39.4
41.1
38.8
38.6
40.0
38.8
42.4
43.7
43.4
45.3
47.4
47.0
37.5
39.1
36.2
30.6
32.2
28.7
38.0
39.5
34.5
41.9
44.3
42.0
39.5
41.2
37.6
38.3
39.4
35.3
1950
1951
1952
1953
1954
44.9
48.7
50.6
54.8
51.9
43.7
47.2
50.7
54.1
51.3
49.6
49.1
50.2
53.2
52.9
59.1
52.3
47.1
59.5
55.4
49.9
43.0
43.0
48.6
44.9
31.1
43.3
51.9
56.3
49.3
37.0
45.2
51.2
53.3
46.8
48.8
51.3
50.9
54.5
54.3
45.0
49.8
50.5
56.1
51.8
44.4
50.5
51.6
60.3
52.0
45.9
1955
1956
1957
1958
1959
,
58.5
61.1
61.9
57.9
64.8
55.4
58.6
60.3
57.6
63.2
59.0
61.2
62.6
62.1
68.1
73.6
60.6
63.5
50.5
63.3
53.0
55.7
54.5
51.4
59.0
50.4
55.3
57.5
51.5
56.5
50.8
58.8
61.1
51.5
57.9
61.7
64.4
64.4
63.0
69.5
61.3
62.8
62.8
56.5
65.2
63.7
63.9
63.8
53.7
64.0
52.5
54.9
54.7
54.4
62.1
1960
1961
1962
1963.......
1964
66.2
66.7
72.2
76.5
81.7
65.3
65.8
71.4
75.5
79.7
70.7
72.2
77.1
81.3
85.9
72.5
66.1
80.1
87.7
91.9
59.4
61.3
66.5
71.8
78.4
58.1
57.3
63.7
67.5
71.4
59.4
57.7
62.7
65.8
73.7
70.0
71.4
75.7
79.9
85.2
66.1
66.2
72.1
76.7
82.9
64.8
63.3
70.4
75.1
81.9
63.2
65.8
71.3
75.6
82.2
1965
1966
1967
1968
1969
89.8
97.8
100.0
106.3
111.1
87.6
95.9
100.0
106.2
109.6
92.6
97.3
100.0
105.9
109.8
113.3
112.8
100.0
119.4
118.1
88.9
97.9
100.0
106.4
113.2
80.7
94.0
100.0
106.5
109.3
84.4
97.7
100.0
105.5
112.5
90.6
96.2
100.0
106.3
112.9
92.4
100.7
100.0
106.5
112.5
93.8
103.3
100.0
106.2
112.1
90.3
97.5
100.0
108.8
115.7
1970
1971
1972
1973
1974
107.8
109.6
119.7
129.8
129.3
105.3
106.3
115.7
124.4
125.1
109.0
114.7
124.4
131.5
128.9
124.4
141.4
153.0
132.8
110.2
115.6
129.5
142.5
136.8
100.1
94.7
103.8
114.5
120.0
107.0
104.1
118.0
134.2
142.4
112.9
116.7
126.5
137.2
135.3
109.2
111.3
122.3
133.9
132.4
103.8
104.9
117.7
134.6
132.7
115.4
120.2
132.9
142.2
142.6
1975
1976
117.8
129.8
118.2
127.2
124.0
136.2
125.8
154.8
118.8
133.9
110.2
114.6
128.2
136.3
123.1
137.2
115.5
130.6
109.1
126.8
126.6
146.3
1976: J a n . .
Feb..
Mar..
Apr..
May..
June.
125.9
127.6
128.3
128.7
129.7
129.8
124.1
125.6
126.1
126.1
126.9
126.8
132.6
134.6
135.2
135.4
136.5
136.0
142.5
149.6
155.0
155.5
153.5
155.9
130.9
131.5
132.3
133.0
137.0
135.3
112.4
113.2
113.8
113.5
113.7
114.2
131.4
132.8
134.2
134.4
134.8
136.2
134.1
136.0
134.6
135.1
136.2
136.7
125.4
127.6
129.0
129.7
130.8
131.0
118.4
121.9
123.6
125.4
127.3
128.0
142.8
144.8
147.2
147.3
147.1
146.5
July._
Aug..
Sept..
Oct..
Nov..
130.7
131.3
130.6
130.2
131.5
133.0
127.4
128.0
126.9
126.7
129.3
131.5
136.1
137.0
135.7
135.9
138.4
141.3
156.1
157.8
147.6
147.8
161.6
178.8
133.4
136.5
133.8
133.9
133.7
134.5
115.3
115.6
114.8
114.2
116.8
118.0
137.9
137.6
137.0
135.7
140.1
142.3
138.4
138.4
138.7
138.8
139.0
140.5
132.1
133.0
132.4
131.8
131.9
132.0
131.0
131.4
129.9
128.3
128.2
128.7
145.1
146.3
147.6
147.5
147.3
145.8
132.3
133.2
135.3
136.1
137.0
137.8
130.8
131.6
133.3
134.1
134.7
135.4
139.9
140.5
142.9
142.9
143.1
143.8
164.2
161.7
178.3
173.9
172.8
179.8
134.8
137.3
137.9
138.8
140.6
142.3
118.4
119.2
120.0
122.1
123.2
124.1
142.3
143.5
144.8
147.1
148.9
150.1
142.2
141.6
141.8
142.3
143.5
144.7
131.1
132.7
135.5
136.5
137.8
138.7
127.4
128.4
131.9
133.8
135.2
136.4
144.8
150.4
153.3
153.7
155.4
154.7
138.7
138.1
138.5
138.8
139.3
139.6
136.8
136.3
136.8
136.6
137.0
137.6
145.4
144.7
144.9
145.2
145.7
146.2
184.8
177.2
177.0
180.1
173.7
173.5
142.9
142.1
143.6
144.4
145.3
146.2
124.8
124.9
125.6
124.9
125.3
126.0
151.2
151.1
152.1
152.3
152.7
153.3
146.3
146.1
146.5
147.0
147.9
149.2
138.9
137.6
137.9
138.8
139.2
139.1
136.8
135.4
135.7
137.0
137.3
138.3
154.1
155.1
153.9
154.7
155.7
156.7
Dec
1977: Jan..
Feb..
Mar..
Apr..
May..
June.
July_.
Aug__
Sept..
Oct..
Nov p.
Dec p.
* Also includes clothing and consumer staples, not shown separately.
Also includes energy materials, not shown separately.
3
Source: Board of Governors of the Federal Reserve System.
303
10.47
TABLE B-41.—Industrial production indexes, selected manufactures, 1947-77
[1967=100; monthly data seasonally adjusted]
Durable manufactures
Year
or
month
Nondurable manufactures
Transportation
equipment
Primary metals
Fabricated
metal
products
Nonelectrical
machinery
Electrical
machinery
Total
Motor
vehicles
and
parts
4.50
Lumber
and
products
Apparel
products
Print- Chemicals
ing
and
and
pubprodlishing ucts
Foods
Total
Iron
and
steel
1967 proportion.
6.57
4.21
5.93
9.15
8.05
9.27
1.64
3.31
4.72
7.74
8.75
1947..
1948..
1949..
63.3
65.8
58
55.4
49.9
50.8
45.8
39.0
39.2
33.4
22.2
23.0
21.6
31.8
34.8
34.9
58.9
61.3
54.1
57.8
60.3
59.7
43.3
45.4
46.6
19.7
21.3
21.0
55.8
55.2
55.9
1950.
1951.
1952..
1953.
1954..
69.7
75.8
69.2
78.5
63.5
70.1
56.1
59.9
58.5
66.0
59.4
37.5
47.7
51.9
54.0
46.1
29.6
29.8
34.0
39.0
34.7
41.8
46.6
54.2
68.0
59.2
60.5
65.7
65.5
64.7
68.4
68.0
64.3
63.1
66.3
67.2
66.4
48.9
49.7
49.7
52.0
54.1
26.2
29.7
31.1
33.6
34.1
57.9
59.0
60.2
61.4
62.7
1955..
1956..
1957..
1958..
1959..
82.5
82.0
78.5
62.3
72.7
93.2
91.5
88.2
66.5
76.5
67.8
68.8
70.6
63.3
71.0
50.6
58.0
57.9
48.6
56.7
39.9
43.1
42.8
39.2
47.6
68.0
66.0
70.7
55.8
63.2
81.2
65.8
69.0
51.0
66.2
75.9
75.0
68.8
69.9
79.3
73.3
75.0
74.9
72.8
80.1
59.5
63.2
65.4
63.9
68.2
39.8
42.7
45.2
46.6
54.3
66.3
70.1
71.1
72.9
76.5
I960..
1961..
1962..
1963..
1964..
72.4
71.1
76.3
82.3
92.8
77.7
74.2
77.3
84.3
95.9
71.1
69.4
75.4
77.8
82.6
56.9
55.4
62.1
66.3
75.6
51.6
54.8
62.9
64.7
68.4
65.4
61.5
71.1
78.0
80.0
74.7
65.5
79.8
88.3
90.7
74.7
78.2
82.5
86.3
92.7
81.7
82.2
85.5
89.1
92.2
71.0
71.3
73.9
77.8
82.6
56.4
59.2
65.7
71.8
78.8
78.6
80.9
83.4
86.4
90.4
1965..
1966..
1967..
1968..
1969.
102.1
108.4
100.0
104.3
113.8
105.2
108.4
100.0
103.2
112.6
90.8
97.2
100.0
105.6
107.9
85.0
98.8
100.0
101.8
109.3
81.7
97.9
100.0
105.5
111.9
95.1
102.0
100.0
111.1
108.4
115.9
113.9
100.0
120.3
116.5
96.3
100.0
100.0
105.5
107.9
97.4
99.9
100.0
102.9
106.7
87.9
94.6
100.0
103.2
107.4
87.8
95.7
100.0
109.5
118.4
92.4
96.0
100.0
102.6
106.1
1970..
1971..
1972..
1973..
1974..
106.6
100.2
112.1
126.7
123.1
104.7
96.1
107.1
122.3
119.8
102.4
103.5
112.1
124.7
124.2
104.4
100.2
116.0
133.7
140.1
108.1
107.7
122.2
143.1
143.8
89.5
97.9
108.2
118.3
108.7
92.3
118.6
135.8
148.8
128.2
105.6
113.8
120.8
126.0
116.2
101.4
104.7
109.4
117.3
114.3
107.0
107.1
112.7
118.2
118.2
120.4
125.9
143.6
154.5
159.4
108.9
112.8
116.8
120.9
124.0
1975..
1976..
96.4
108.9
95.8
104.9
109.9
123.3
125.1
135.0
116.5
131.6
97.4
110.6
111.1
140.7
107.6
125.1
107.6
122.2
113.3
120.6
147.2
169.3
123.4
132.3
1976: J a n . . .
Feb....
Mar...
Apr...
May..
June..
98.2
104.0
104.9
107.9
113.9
113.5
92.8
100.7
99.4
105.0
111.2
112.5
116.6
120.9
120.3
121.4
121.4
124.0
129.4
131.5
133.0
133.5
134.1
134.1
125.1
126.6
127.9
129.9
131.7
131.5
105.8
109.1
111.0
110.8
112.6
112.8
127.0
135.3
140.5
141.4
144.1
146.9
122.5
123.3
121.1
122.8
123.0
120.3
120.6
122.0
121.2
122.7
126.9
124.5
120.0
121.0
121.0
122.0
120.5
119.7
163.4
166.5
169.6
168.7
167.2
169.2
129.2
130.7
128.7
129.4
132.0
131.4
July..
Aug..
Sept._
Oct___
Nov..
Dec...
117.7
118.3
113.0
109.9
104.6
101.5
115.0
116.0
108.6
105.1
100.3
93.4
124.6
125.8
126.5
123.5
126.7
128.1
137.9
136.4
136.8
134.3
137.5
141.5
131.4
135.4
133.9
135.0
135.7
135.1
112.8
114.6
104.7
104.3
112.7
117.4
147.5
149.7
130.6
128.4
145.5
155.0
124.6
127.9
128.7
129.6
129.5
128.1
120.2
117.5
119.5
122.9
122.7
124.9
121.2
120.6
120.6
119.3
119.7
123.0
167.6
169.7
171.3
170.7
173.7
173.1
134.5
134.8
134.6
134.8
134.3
132.9
1977: Jan.._
Feb...
Mar...
Apr...
May..
June
100.8
100.2
108.3
112.2
117.1
114.7
89.7
91.3
97.9
103.9
111.0
109.2
125.7
125.8
127.5
127.6
128.2
130.8
139.9
139.8
139.8
142.9
142.6
144.0
134.0
137.6
137.6
139.6
141.8
142.6
113.5
113.4
120.5
119.8
120.3
123.7
145.5
145.4
161.2
158.1
157.7
163.2
132.7
132.2
132.1
130.6
133.0
132.4
123.0
124.4
122.2
121.4
123.5
122.1
124.7
122.4
124.8
123.4
124.4
124.1
172.2
174.9
180.0
180.6
182.8
183.5
134.2
136.4
138.7
138.0
138.3
136.9
July..
Aug..
Sept..
Oct...
114.4
112.5
109.0
113.7
111.9
111.2
110.9
110.6
104.6
108.1
105.6
132.0
134.0
133.6
134.4
135.2
136.0
145.7
145.2
147.4
148.2
148.9
150.4
143.6
143.9
144.6
144.2
145.1
146.6
125.6
124.3
125.5
124.1
121.9
122.2
166.2
164.4
165.6
167.9
163.0
161.9
132.9
131.8
137.1
136.2
137.4
121.1
124.1
127.7
129.2
124.9
125.0
124.2
124.8
124.7
126.5
182.6
182.6
181.3
180.8
183.0
138.3
139.3
138.3
137.6
138.4
NOVP.
Dec p.
Source: Board of Governors of the Federal Reserve System.
304
TABLE B-42.—Capacity utilization rate in manufacturing, 1948-77
[Percent; quarterly data seasonally adjusted]
Commerce series2
FRB series 1
Year or
quarter
Total
Primary
manu- procfacessing
turing
Advanced
processing
Total
manufacturing
Durable
goods
Nondurable
goods
Primaryprocessed
goods
Wharton series»
Advancedprocessed
goods
Total
manufacturing
Durable
goods
Nondurable
goods
1948
1949
82.5
74.2
87.3
76.2
80.0
73.2
1950
1951
1952
1953
1954
82.8
85.8
85.4
89.2
80.1
88.5
90.2
84.9
89.4
80.6
79.8
83.4
85.9
89.3
80.0
88.9
90.3
88.4
92.4
82.9
83.7
87.2
86.0
93.3
79.5
96.1
94.8
91.8
91.2
87.7
1955
1956
1957
1958
1959
87.0
86.1
83.6
75.0
81.6
92.0
89.4
84.7
75.4
83.0
84.2
84.4
83.1
74.9
81.1
91.4
90.8
88.0
77.5
84.0
90.2
89.1
86.1
70.8
78.6
93.1
93.4
90.8
87.4
92.0
1960
1961
1962
1963
1964
80.1
77.3
81.4
83.5
85.7
79.8
77.9
81.5
83.8
87.8
80.5
77.2
81.6
83.4
84.6
82.1
79.1
82.5
84.0
86.8
77.0
72.9
77.7
79.6
82.9
88.5
89.8
90.8
92.8
1965
1966
1967
1968
1969
89.5
91.1
86.9
87.0
86.2
91.0
91.4
85.7
87.6
88.6
88.9
91.1
87.6
86.8
85.0
92.4
96.6
93.5
95.0
95.3
90.6
96.0
91.8
93.7
94.0
95.3
97.5
96.0
97.0
97.2
1970
1971
1972
1973
1974
79.2
78.0
83.1
87.5
84.2
82.8
82.0
88 0
92.4
87.7
77.3
75.9
80.5
84.9
82.2
87.9
86.4
91.8
97.1
93.0
84.2
82.3
88.9
96.6
91.9
93.5
92.9
96.3
98.0
94.6
1975
1976
1977 »_.__
73.6
80.2
82.4
73.8
82.2
84.3
73.5
79.1
81.4
80.4
87.5
90.2
77.1
84.7
88.1
85.9
92.2
93.6
1972: I . . .
II..
III.
IV.
80.9
82.4
83.4
85.8
85.2
87.2
88.6
91.1
78.6
79.8
80.6
83.1
89.3
90.9
92.1
94.9
85.6
87.7
89.3
93.1
95.1
96.0
96.4
97.8
1973: I . . .
IL_
III.
IV.
87.1
87.6
87.8
87.7
91.8
92.1
92.7
93.0
84.5
85.2
85.0
85.0
96.4
97.1
97.4
97.5
95.4
96.4
97.1
97.4
98.1
98.4
97.8
97.6
1974: I . . .
IV....
85.7
85.8
85.5
79.7
90.6
90.1
89.3
80.7
83.0
83.3
83.5
79.1
94.7
94.8
94.6
87.8
93.3
93.5
93.9
86.9
96.8
96.8
95.7
89.2
1975: I
ll_-_.
III...
IV....
70.9
71.3
75.3
76.9
69.9
70.4
76.3
78.6
71.3
71.9
74.8
75.9
77.3
77.9
82.4
84.0
74.8
74.7
78.8
80.0
81.4
83.2
88.3
90.6
1976: I
IL._.
III...
IV...
79.1
80.3
80.8
80.6
81.0
82.5
83.1
82.2
78.0
79.1
79.5
79.7
86.3
87.9
88.2
87.7
82.7
85.1
86.0
85.0
92.3
92.5
91.8
92.1
1977: l . . _ _
II...
III...
IV p . .
81.2
82.7
83.0
82.8
82.3
85.1
85.0
84.8
80.5
81.4
81.9
81.8
88.4
90.4
90.9
91.0
85.6
88.3
89.2
89.4
93.1
93.8
93.8
93.7
1
For description of the series, see "Federal Reserve Bulletin," November 1976.
2
Quarterly data are for last month in quarter. Annual data are averages of the four indexes, except for 1965 (December
index) and 1966-67 (averages of June and December indexes). For description of the series, see "Survey of Current Business," July 1974.
3
Annual data are averages of quarterly indexes. For description of the series, see F. Gerard Adams and Robert Summers,
"The Wharton Index of Capacity Utilization: A Ten Year Perspective," 1973 Proceedings of the Business and Economic
Statistics Section, American Statistical Association.
Sources: Board of Governors of the Federal Reserve System, Department of Commerce (Bureau of Economic Analysis),
and Wharton School of Finance.
305
T A B L E B-43.—New construction activity, 1929-77
(Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]
Private construction
Year or month
Total
new
construction
Residential1
buildings
Total
Public construction
Nonresidential buildings1 and other
construction
Total a
New
housing
units
Total
Total
Commercial
Industrial
Other*
Federal
State
and
local »
1929
10.8
8.3
3.6
3.0
4.7
1.1
0.9
2.6
2.5
0.2
1933
2.9
1.2
.5
.3
.8
.1
.2
.5
1.6
.5
1 l
1939
8.2
4.4
2.7
2.3
1.7
.3
.3
1.2
3.8
.8
3.1
1940
1941
1942
1943.
1944
8.7
12.0
14.1
8.3
5.3
5.1
6.2
3.4
2.0
2.2
3.0
3.5
1.7
.9
.8
2.6
3.0
1.4
.7
.6
2.1
2.7
1.7
1.1
1.4
.3
.4
.2
.0
.1
.4
.8
3
.2
.2
1.3
1.5
1.2
.9
1.1
3.6
5.8
10 7
6.3
3.1
1.2
3.8
93
5.6
2.5
2.4
2.0
13
.7
.6
1945
1946
New series
5.8
14.3
3.4
12.1
1.3
6.2
.7
4.8
2.1
5.8
.2
1.2
.6
1.7
1.3
3.0
2.4
2.2
1.7
.9
.7
1.4
1947
1948
1949
20.0
26.1
26.7
16.7
21.4
20.5
9.9
13.1
12.4
7.8
10.5
10.0
6.9
8.2
8.0
1.0
1.4
1.2
1.7
1.4
1.0
4.2
5.5
5.9
3.3
4.7
6.3
.8
1.2
1.5
2.5
3.5
4.8
33.6
35.4
36.8
39.1
41.4
26.7
26.2
26.0
27.9
29.7
18.1
15.9
15.8
16.6
18.2
15.6
13.2
12.9
13.4
14.9
8.6
10.3
10.2
11.3
11.5
1.4
1.5
1.1
1.8
2.2
1.1
2.1
2.3
2.2
2.0
6.1
6.7
6.8
7.3
7.2
6.9
9.3
10.8
11.2
11.7
1.6
3.0
42
4.1
3.4
5.2
6.3
6.6
7.1
8.3
1955 . . .
1956 . .
1957 . .
1958 .
1959
46.5
47.6
49.1
50.0
55.4
34.8
34.9
35.1
34.6
39.3
21.9
20.2
19.0
19.8
24.3
18.2
16.1
14.7
15.4
19.2
12.9
14.7
16.1
14.8
15.1
3.2
3.6
3.6
3.6
3.9
2.4
3.1
3.6
2.4
2.1
7.3
8.0
9.0
8.8
9.0
11.7
12.7
14.1
15.5
16.1
2.8
2.7
3.0
3.4
3.7
8.9
10.0
11.1
12.1
12.3
1960 _
1961
1962. .
1963
1964 _
54.7
56.4
60.2
64 8
67.7
38.9
39.3
42.3
45.5
47.3
23.0
23.1
25.2
27.9
28.0
17.3
17.1
19.4
21.7
21.8
15.9
16.2
17.2
17.6
19.3
4.2
4.7
5.1
5.0
5.4
2.9
2.8
2.8
2.9
3.6
8.9
8.7
9.2
9.7
10.3
15.9
17.1
17.9
19.4
20.4
3.6
3.9
3.9
40
3.9
12.2
13 3
14.0
15 4
16.5
1965
1966
1967
1968
1969
73.7
76 4
78.1
87.1
93.9
51.7
52.4
52.5
59.5
66.0
27.9
25.7
25.6
30.6
33.2
21.7
19.4
19.0
24.0
25.9
23.8
26 7
27.0
28.9
32.8
7.8
9.4
6.0
6.8
15.1
16.6
22.1
24.0
25.5
27.6
28.0
4.0
40
3.5
3.4
3.3
18.0
20 0
22.1
24.2
24.7
1970
1971 1972
1973
1974 .
94.9
110.0
124.1
137.9
138.5
66.8
80.1
93.9
105.4
100.2
31.9
43.3
54.3
59.7
50.4
24.3
35.1
44.9
50.1
40.6
34.9
36.8
39.6
45.7
49.8
9.8
11.6
13.5
15.5
15.9
6.5
5.4
4.7
6.2
7.9
18.6
19.8
21.5
24.0
25.9
28.1
29.9
30.2
32.5
38.3
3.3
4.0
4.4
4.9
5.3
24.8
25.9
25.8
27.7
33.0
1975
1976
134.3
147.5
93.6
109.5
46.5
60.5
34.4
47.3
47.2
49.0
12.8
12.8
8.0
7.2
26.3
29.0
40.7
38.0
6.1
6.4
34.6
31.6
..
1950
1951..-.
1952 . .
1953
1954
..
.
See footnotes at end of table.
306
2.3
T A B L E B - 4 3 . — N e w construction activity,
1929-77—Continued
[Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]
Private construction
Year or month
Total
new
construction
Residential
buildings i
Total
Nonresidential buildings and other
construction i
New
Total >
hnuc
nousing
ino
units
Public construction
Total
Commercial'
Industrial
Total
r6Q-
eral
State
and
local «
Other'
141.9
144.5
148.0
147.2
147.8
149.6
101.8
104.7
107.9
107.2
108.2
109.7
53.5
56.3
58.6
58.7
59.2
61.0
40.1
42.4
44.4
45.1
45.4
45.8
48.3
48.4
49.3
48.5
49.0
48.7
12.1
12.6
13.1
12.8
12.8
12.6
7.8
7.9
7.8
7.6
7.2
7.2
28.4
27.9
28.4
28.1
29.0
28.9
40.2
39.8
40.1
40.1
39.6
39.9
6.5
7.0
6.4
6.6
6.2
6.4
33.6
32.9
33.7
33.4
33.4
33.5
July....
Aug.....
Sept....
Oct
Nov
Dec
145.8
141.8
145.2
150.1
153.8
155.4
107.1
103.6
107.4
114.8
119.0
121.2
59.2
54.5
57.7
65.5
69.6
71.1
46.3
47.1
48.7
50.9
52.7
54.8
47.9
49.0
49.7
49.3
49.4
50.1
13.0
12.9
12.8
12.7
12.6
12.8
6.6
7.2
7.1
6.9
6.7
6.6
28.3
29.0
29.7
29.7
30.1
30.7
38.7
38.2
37.9
35.3
34.9
34.3
6.4
6.3
7.4
5.5
6.6
6.3
32.3
31.9
30.4
29.8
28.3
28.0
1977:Jan
Feb
Mar
Apr
May....
June
148.1
156.9
163.8
167.5
172.1
174.6
116.2
122.4
128.4
131.3
133.7
135.2
66.5
72.1
76.7
79.5
82.4
82.5
52.1
58.3
62.2
63.5
65.8
66.0
49.6
50.3
51.7
51.9
51.3
52.7
12.5
12.5
13.7
13.9
13.8
15.2
6.2
6.3
7.2
7.3
7.2
7.1
30.9
31.5
30.9
30.7
30.4
30.4
32.0
34.5
35.4
36.2
38.4
39.4
6.7
7.2
6.9
7.2
6.8
6.3
25.2
27.3
28.5
29.0
31.6
33.0
July....
Aug
Sept..Oct
Nov....
173.0
172.0
175.9
177.9
178.0
133.8
133.8
136.7
140.2
142.1
80.8
80.7
82.4
85.8
87.9
65.1
65.1
66.4
68.9
70.7
53.0
53.1
54.3
54.4
54.2
15.5
15.3
16.1
15.8
15.5
7.2
7.6
7.5
7.6
7.3
30.2
30.2
30.8
31.0
31.3
39.2
38.2
39.3
37.7
35.9
7.5
7.6
8.5
6.1
6.8
31.7
30.6
30.7
31.6
29.2
1976:Jan
Feb
Mar
Apr
May
June
* Beginning I960, farm residential buildings included in residential buildings; prior to I960, included in nonresidential
buildings and other construction.
2 Total includes additions and alterations and nonhousekeeping units, not shown separately.
3 Office buildings, warehouses, stores, restaurants, garages, etc.
« Religious, educational, hospital and institutional, miscellaneous nonresidential, farm (see also footnote 1), public
utilities, and all other private.
5
Includes Federal grants-in-aid for State and local projects.
Source: Department of Commerce (Bureau of the Census).
307
TABLE B—44.—New- housing units started and authorized, 1959—77
[Thousands of units]
New housing units started
Private and
public 1
Private»
New private housing units
authorized2
Total (farm and nonfarm)
Year or month
Total
(farm
and
nonfarm)
Nonfarm
Type of structure
Total
One
unit
2 to 4
units
1959_.
1,553.7 1,531.3 1,517.0 1,234.0
I960..
1961..
1962.
1963.
1964.
1, 296.1
1,365.0
1,492.5
1,634.9
1,561.0
, 274.0
1,336.8
1,468.7
1,614.8
1, 534.0
1, 252.2
1,313.0
1,462.9
1, 603.2
1, 528. 8
994.7
974.3
991.4
1,012.4
970.5
1965.
1966.
1967.
19681969.
1, 509.7
1,195.8
1,321.9
1, 545.4
1, 499.5
1, 487.5
1,172.8
1, 298.8
1,521.4
1,482.3
1,472.8
1,164.9
1,291.6
1, 507.6
1,466.8
963.7
778.6
843.9
899.4
810.6
86.6
61.1
71.6
80.9
85.0
19701971_
1972.
19731974.
1, 469.0
2, 084. 5
2, 378. 5
2, 057.5
1,352.5
812.9
1,433.6
2, 052.2 1,151.0
2,356.6 1,309.2
2,045.3 1,132.0
888.1
1,337.7
1975.
1976.
1977*
1,171.4
1,547.6
1, 989.1
1,160.4
892.2
1, 537.5 1,162.4
1,986.4 1,451.3
5 units
or
more
Total
1,208.3
283.0
One
unit
2 to 4 5 units
units or more
77.1
192.9
998.0 > 746.1 64.6
1,064.2
722.8
67.6
1,186.6
716.2
87.1
1,334.7
750.2
118.9
1,285.8
720.1
100.8
187.4
273.8
383.3
465.6
464.9
422.5
325.1
376.1
527.3
571.2
1,239.8
971.9
1,141.0
1,353.4
1,323.7
709.9
563.2
650.6
694.7
625.9
84.8
61.0
73.0
84.3
85.2
445.1
347.7
417.5
574.4
612.7
84.8
120.3
141.3
118.3
68.1
535.9
780.9
906.2
795.0
381.6
1,351.5
646.8
1,924.6
906.1
2,218.9 1, 033.1
1,819.5
882.1
1,074.4
643.8
88.1
132.9
148.6
117.0
64.3
616.7
885.7
1,037.2
820.5
366.2
64.0
85.9
122.0
939.2
675.5
204.3
289.2 1,296.2
893.6
413.1 1,680.0 1,125.8
63.9
93.1
114.6
199.8
309.5
439.7
257.4
338.7
471.5
590.8
108.4
450.0
938.3
Seasonally adjusted annual rates
1976: Jan...
Feb...
MarApr.-.
May..
June..
72.9
91.6
118.8
137.4
148.3
155.1
1,259
1,476
1,426
1,385
1,435
1,494
973
1,216
1,124
1,071
1,091
1,122
76
210
64
80
77
88
75
196
111
237
256
297
1,185
1,176
1,181
1,120
lf 183
1,170
854
858
866
819
817
834
78
82
82
77
82
81
253
236
233
224
284
255
July..
Aug..
Sept..
Oct...
Nov..
Dec...
137.5
146.8
153.1
149.8
128.2
108.1
1,413
1,530
1,768
1,715
1,706
1,889
1,129
1,172
1,254
1,269
1,236
1,324
72
83
106
98
98
120
212
275
408
348
372
445
1,229
1,308
1,481
1,481
1,583
1,532
866
876
914
987
1,055
1,047
79
102
114
116
124
114
284
330
453
378
404
371
1977: Jan..
Feb..
Mar..
Apr..
May..
June.
81.5
112.7
173.6
182.4
201.3
197.8
1,384
1,006
1,424
1,503
\ 413
\,455
1,389
103
1,802
2,089
1,880
1,937
1,897
275
258
473
351
362
403
1,333
1,526
1,687
1,605
1,615
1,678
930
1,060
1,188
1,051
1,077
1,105
101
107
112
105
99
105
302
359
387
449
439
468
189.8
194.2
177.8
193 2
If6.0
128.6
2,083
2,029
2,065
2,203
2,121
2,295
1,437
1,453
1,523
1,562
1,543
1,605
519
463
414
509
442
521
1,639
1,772
1,695
1,850
1,893
1,858
1,089
1,156
1,135
1,216
1,257
1,223
112
127
114
131
151
125
438
489
446
503
485
510
July..
Aug..
Sept.
Oct..
NOVP
Dec*
120
113
116
120
105
127
113
128
132
136
169
1
Units in structures built by private developers for sale upon completion to local public housing authorities under the
Department of Housing and Urban Development "Turnkey" program are classified as private housing. Military housing
starts, including those financed with mortgages insured by FHA under Section 803 of the National Housing Act, are included
in publicly owned starts and excluded from total private starts.
2
Authorized by issuance of local building permit: in 14,000 permit-issuing places beginning 1972; 13,000 for 1967-71;
12,000 for 1963-66; and 10,000 prior to 1963.
3
Not available separately beginning January 1970.
Note.—Only the series on private and public nonfarm housing units started is available prior to 1959. See 1976 "Economic Report" for this earlier series.
Source: Department of Commerce, Bureau of the Census.
308
l
TABLE B-45.-—Business expenditures for new plant and equipment, 1947-78
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Manufacturing
Year
or quarter
Total
Total
Nonmanufacturing
Transportation
Durable
goods
Nondurable
goods
Total
Railroad
Air
Other
Public
utilities
Mining
Communication
Commercial
and
other 2
1947
1948
1949
19.33
21.30
18.98
8.44
9.01
7.12
3.25
3.30
2.45
5.19
5.71
4.68
10.89
12.29
11.86
0.69
.93
0.91
1.37
1.42
0.17
.10
.12
1.13
1.17
.76
1.54
2.54
3.10
1.40
1.74
1.34
5.05
4.42
4.24
1950
1951
1952
1953
1954
20.21
25.46
26.43
28.20
27.19
7.39
10.71
11.45
11.86
11.24
2.94
4.82
5.21
5.31
4.91
4.45
5.89
6.24
6.56
6.33
12.82
14.75
14.98
16.34
15.95
.84
1.11
1.21
1.25
1.28
1.18
1.58
1.50
1.42
.93
.10
.14
.24
.24
.24
1.09
1.33
1.23
1.29
1.22
3.24
3.56
3.74
4.34
3.99
1.14
1.37
1.61
1.78
1.82
5.22
5.67
5.45
6.02
6.45
1955
1956
1957
1958
1959
29.53
35.73
37.94
31.89
33.55
11.89
15.40
16.51
12.38
12.77
5.41
7.45
7.84
5.61
5.81
6.48
7.95
8.68
6.77
6.95
17.64
20.34
21.43
19.51
20.78
1.31
1.64
1.69
1.43
1.36
1.02
1.37
1.58
.86
1.02
.26
.35
.41
.37
.78
1.30
1.31
1.30
1.06
1.33
4.03
4.52
5.67
5.52
5.14
2.11
2.82
3.19
2.79
2.72
7.63
8.32
7.60
7.48
8.44
1960
1961
1962
1963
1964
36.75
35.91
38.39
40.77
46.97
15.09
14.33
15.06
16.22
19.34
7.23
6.31
6.79
7.53
9.28
7.85
8.02
8.26
8.70
10.07
21.66
21.58
23.33
24.55
27.62
1.30
1.29
1.40
1.27
1.34
1.16
.82
1.02
1.26
1.66
.66
.73
.52
.40
1.02
1.30
1.23
1.65
1.58
1.50
5.24
5.00
4.90
4.98
5.49
3.24
3.39
3.85
4.06
4.61
8.75
9.13
9.99
10.99
12.02
1965
1966
1967
1968
1969
54.42
63.51
65.47
67.76
75.56
23.44
28.20
28.51
28.37
31.68
11.50
14.06
14.06
14.12
15.96
11.94
14.14
14.45
14.25
15.72
30.98
35.32
36.96
39.40
43.88
1.46
1.62
1.65
1.63
1.86
1.99
2.37
1.86
1.45
1.86
1.22
1.74
2.29
2.56
2.51
1.68
1.64
1.48
1.59
1.68
6.13
7.43
8.74
10.20
11.61
5.30
6.02
6.34
6.83
8.30
13.19
14.48
14.59
15.14
16.05
1970
1971
1972
1973
1974
79.71
81.21
88.44
99.74
112.40
31.95
29.99
31.35
38.01
46.01
15.80
14.15
15.64
19.25
22.62
16.15
15.84
15.72
18.76
23.39
47.76
51.22
57.09
61.73
66.39
1.89
2.16
2.42
2.74
3.18
1.78
1.67
1.80
1.96
2.54
3.03
1.88
2.46
2.41
2.00
1.23
1.38
1.46
1.66
2.12
13.14
15.30
17.00
18.71
20.55
10.10
10.77
11.89
12.85
13.96
16.59
18.05
20.07
21.40
22.05
1975
1976
1977 3....
1978 3...
112.78
120. 49
137. 02
150.89
47.95
52.48
61.03
67.35
21.84
23.68
28.26
31.57
26.11
28.81
32.77
35.78
64.82
68.01
75.99
83.54
3.79
4.00
4.44
5.27
2.55
2.52
2.90
3.34
1.84
1.30
1.68
2.17
3.18
3.63
2.41
1.88
20.14
22.28
26.14
29.27
12.74
20.60
13.30
20.99
15.36
23.06
41.61
1975: I
114.57
112.46
112.16
111.80
49.05
48.78
47.39
46.82
22.86
22.59
21.01
21.07
26.20
26.19
26.38
25.75
65.52
63.68
64.76
64.98
3.76
3.78
3.82
3.82
2.39
2.70
2.75
2.39
2.09
1.60
2.12
1.65
2.82
2.75
2.99
3.56
20.28
19.52
19.79
20.91
13.36
12.50
12.95
12.22
20.82
20.83
20.34
20.44
1976: I
II
III..-.
114.72
118.12
122.55
125. 22
49.21
50.64
54.78
54.44
21.63
22.54
24.59
25.50
27.58
28.09
30.20
28.93
65.51
67.48
67.76
70.78
3.83
3.83
4.21
4.13
2.08
2.64
2.69
2.63
1.18
1.44
1.12
1.41
3.29
4.16
3.44
3.49
21.91
21.85
21.67
23.46
12.54
12.62
13.64
14.30
20.68
20.94
20.99
21.36
130.16
134.24
140. 38
IV 3___ 142.38
56.43
59.46
63.02
64.42
26.30
27.26
29.23
29.88
30.13
32.19
33.79
34.54
73.74
74.78
77.36
77.96
4.24
4.49
4.74
4.30
2.71
2.57
3.20
3.18
1.62
1.43
1.69
2.01
2.96
2.96
1.96
1.98
25.35
25.29
26.22
27.41
22.67
14.19
15.32
22.73
16.40
23.14
39.09
146.26
149. 86
64.14
67.73
30.46
31.82
33.68
35.91
82.12
82.13
4.61
3.80
2.39
1.83
28.72
40.76
1977: I
1978:
1
Excludes agricultural business; real estate operators; medical, legal, educational, and cultural services; and nonprofit
organizations. These figures do not agree precisely with the nonresidential fixed investment data in the gross national
product estimates, mainly because those data include investment by farmers, professionals, nonprofit institutions, and
real estate firms, and certain outlays charged to current account.
2
Commercial and other includes trade, service, construction, finance, and insurance.
3
Estimates based on expected capital expenditures reported by business in October-December 1977. Includes adjustments when necessary for systematic tendencies in expectations data.
Source: Department of Commerce, Bureau of Economic Analysis.
309
TABLE E-46.—Sales and inventories in manufacturing and trade, 1947-77
[Amounts in millions of dollars; monthly data seasonally adjusted]
Total manufacturing
and trade
Manufacturing
Merchant wholesalers
Retail trade
Year or mcnth
Sales t
InvenRatio
tories 2
Inventories 2
Sales
Sales »
Inventories 2
1.58
1.57
1.75
6,808
6,514
7,957
7,706
7,695 9,284
8,597 9,886
8,782 10, 210
9,052 10,686
8,993 10,637
Ratio»
1.07
1.16
1.12
1.17
1.18
12,268
13,046
13,529
14,091
14,095
19,460
21,050
21,031
21,488
20,926
1.38
1.64
1.52
1.53
1.51
11,678
13,260
12, 730
12, 739
13,879
1.13
1.19
1.23
1.24
1.15
15,321
15,811
16,667
16,696
17,951
22,769
23,402
24,451
24,113
25,305
1.43
1.47
1.44
1.43
1.40
14,120
14,488
14,936
16,048
17,000
1.22
1.20
1.16
1.15
1.14
18,294
18,249
19,630
20, 556
21,823
26,813
26,221
27,941
29,386
31,094
1.45
1.43
1.38
1.39
1.40
68,190
77,951
84,527
90,394
98,011
60 15,611 18,317
62 16,987 20,765
76 19,448 25,377
74 20,846 26,604
76 22,609 29,114
1.15
1.15
1.25
1.25
1.23
23,677
25,330
24,413
27,092
29,041
34,405
38,073
36,250
39,643
42,991
1.39
1.44
1.47
1.41
1.42
101,502
,
102,
"!,490
108,072
1,072
124,i,395
""
157,971
89 23,943 32,803
83 26,257 35,823
67 29, 584 39,786
58 36,822 46,254
66 45,836 56,537
1.29
1.30
1.27
1.17
1.12
30,924
34,169
37,422
41,871
44,543
43,976
49,867
54, 433
62,691
70,767
1.41
1.39
1.38
1.40
1.49
64
,57
44,633 55,113
48, 408 61,307
53,179 66,422
1.24
1.21
1.22
48,370
53, 542
58, 527
71, 031
78,431
88,465
1.45
1.41
1.43
93,884 156,120
95,262 156,458
157,560
97,502 157;
98,178 158,134
98,191 159,488
98,597 161,118
66
64
62
61
62
63
46,257
46,997
47,239
47,714
47,359
48, 554
55,683
56, 263
56, 531
57,326
58, 308
59,427
1.20
1.20
1.20
1.20
1.23
1.22
51,669
52,076
52,174
52,600
52,298
52,916
71,566
72,552
73,543
74, 347
74,758
75, 538
1.39
1.39
1.41
1.41
1.43
1.43
98,932 162,144
99, 078 163,184
98,387 164,
, 966
97, 043 '-1,674
166,
99,919 167,,114
LO4, 475 166, 587
1.64
L. 65
.68
.72
,67
.59
48,604
48,548
49, 336
48, 355
48,990
50,935
59,703
59, 913
60, 440
60, 553
61,049
61, 307
1.23
1.23
1.23
1.25
1.25
1.20
52,946
53,197
53, 370
54,171
54,822
56,685
76,052
77, 331
78,062
78,007
77,988
78,431
1.44
1.45
1.46
1.44
1.42
1.38
J, 063 1.47 03, 569 167,482
209,950 309,
215, 281 311,232 1.45 LO6, 133 168,449
314, 875 1.42 111,241 169, 379
221,903 314;
640 170, 747
221,167 317,873 1.44 .09,""
221, 327 "1,492
320',
1. 45 109;
" 1 , 458 172, 629
222,240 322,,899 1.45 110, 680 173; 818
.62
.59
.52
.56
.58
.57
50,678
51,857
52,672
53, 385
53, 866
53,735
62,123
63,062
64,300
65, 301
64, 838
64,947
1.23
1.22
1.22
1.22
1.20
1.21
55,703
57,291
57, 990
58,142
58,003
57,825
79,458
79,721
81,196
81, 825
83,025
84,134
1.43
1.39
1.40
1.41
1.43
1.45
221,255 324,, 107 1. 46109,208 174,571
46111,376 175,104
223,604 326,849
224,242 329, 510 L4747 111, 921 176,164
330,460
45113,119
176,789
227, 536 330;
177,162
229, 848 332,049 l'. 44 113;
.60
.57
.57
.56
1.56
53,495
53,208
53, 307
53, 639
55,126
64,210
65,095
66,119
66, 209
66,422
1.20
1.22
1.24
1.23
1.20
58,552
59,020
59, 014
60, 778
61,482
61,048
85,326
86,650
87,227
87,462
88,465
1.46
1.47
1.48
1.44
1.44
52,507
49,497
15,513 25,897
1.42 17,316 28, 543
1.53 16,126 26,321
1950..
1951..
1952..
1953..
1954..
38, 596
43,356
44,840
47,987
46,443
59,822
70,242
72,377
76,122
73,175
1.36
1.55
1.58
1.58
1.60
18, 634
21,714
22, 529
24, 843
23,355
31,078
39,306
41,136
43,948
41,612
1.48
1.66
1.78
1.76
1.81
1955...
1956...
1957...
1958...
1959...
51,694
54,063
55, 879
54, 200
79,516
87,304
89,052
87, 094
59, 728 92,132
1.47
1.55
1..59
1.60
1.50
45,069
50,642
51,871
50, 242
52,948
1.62
1.73
1.80
1.84
1.70
9,893
10, 513
10, 475
10,257
11,491
1960...
1961..
1962...
1963...
1964...
60, 828
61,160
65, 660
68,995
73,682
94,718
95, 596
101,064
105,482
111,501
1.56
1.54
1.50
1.49
1.47
26,480
27, 740
28, 736
27, 247
30, 286
30,879
30,923
33,357
35,058
37, 330
53,785
54,887
58,187
60,048
63,407
1.76
1.74
1.70
.69
.64
11,656
11,988
12,674
13, 382
14,529
1965...
1966...
1967...
1968...
1969...
80, 283 120, 912
87,186 136,789
90,349 146,154
207 156,641
98,207
105,190 170,116
1.45
1.48
1.57
1.54
1.56
40,995
44,869
46,487
50, 269
53,540
1970...
1971...
1973...
1974...
1975...
1976...
1977*..
107,697 .78,281
116,351 88,180
130,049 202,291
151,647 233,340
174, 991 285,275
1.62
1.58
1.49
1.43
1.48
52,831
55,925
63,042
72, 954
84,612
180,229 281,837
118 306,325
200,118
221,668 332,049
1.57
1.47
1.45
87,226 155,693
98',
168 166, 587
98,168
.09,962 177,162
1976:Jan...
Feb__.
Mar...
Apr...
May..
June..
191,810 283,369
194, 335 285, 273
196, 915 287,
287] 634
198,492 289,807
197,848 292,554
200,067 296,083
1.48
1.47
1.46
1.46
1.48
1.48
200,482 2297,899
,
200,823 300,
"1,428
201, 093 303,
1,468
199, 569 305,
i, 234
203, 731 306,151
212, 095 3O6i
~\ 325
1.49
1.50
1.51
1.53
1.50
1.44
1977:Jan..
Feb__.
Mar...
Apr__.
May..
June..
July
Aug
Sept
Oct
Nov
_
_
_
Inventories 2 Ratio i
1.26
1.39
1.41
35,260
33,788
July..
Aug..
Sept..
Oct..
Nov__
Dec__
Sales »
10, 200 14,241
1.13 11,135 16,007
1.19 11,149 15,470
1947..
1948..
1949..
mi...
Ratio s
Dec*
1 Monthly average for year and total for month.
Seasonally adjusted, end of period.
Inventory/sales ratio. For annual periods, ratio of weighted average inventories to average monthly sales; for monthly
data, ratio of inventories at end ot month to sales for month.
4
Based on seasonally adjusted data through November.
3
3
Note.—The inventory figures in this table do not agree with the estimates of change in business inv entories 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 (Bureau of Economic Analysis and Bureau of the Census).
310
TABLE B-47.—Manufacturers'
shipments and inventories, 1947-77
[Millions of dollars; monthly data seasonally adjusted]
Shipments1
Inventories2
Durable goods industries
Year or month
Total
Durable
goods
industries
Nondurable
goods
industries
Total
Total
Materials
and
supplies
FinWork
ished
in
process goods
Nondurable goods industries
Total
Materials
and
supplies
FinWork
ished
in
process goods
1947
1948...
1949
15,513
17,316
16,126
6,694
7,579
7,191
1950..
1951
1952
1953..
1954
18, 634
21,714
22,529
24, 843
23, 355
8,845
10, 493
11,313
13, 349
11,828
9,789
11,221
11,216
11,494
11,527
31, 078
39, 306
41, 136
43, 948
41,612
15, 539
20, 991
23, 731
25, 878
23, 710
1955.
1956
1957
1958
1959
14,071
14,715
15, 237
13, 563
15, 609
12, 409
13, 025
13, 499
13, 684
14, 677
45, 069
50, 642
51,871
50, 242
52, 948
26, 405
30, 447
31, 728
30, 259
32, 077
9,194
10,417
10, 608
10,041
10, 781
10, 756
12,31"
12, 83
12,391
13, 065
6,348
7,565
8,125
7,829
8,232
1960
1961
1962
1963
1964
26, 480
27, 740
28, 736
27, 247
30, 286
30, 879
30, 923
33, 357
35, 058
37, 330
15, 883
15,616
17, 262
18, 280
19, 637
14, 996
15, 307
16, 095
16,778
17, 693
53,
54,
58,
60,
63,
785
887
187
048
407
32,375
32, 544
34, 632
35, 867
38, 506
10, 354
10, 276
10, 802
11,062
11,958
12, 777
13,210
14, 170
14, 885
16, 209
9,243
9,058
9,659
9,920
10, 342
21,410 9,104
22, 343 9,519
23, 555 9,844
24,182 10, 005
24, 901 10,151
2,949 9,357
3,109 9,715
3,297 10,414
3,410 10, 764
3,522 11,229
1965
1966
1967
1968
1969
40, 995
44, 869
46, 487
50, 269
53, 540
22, 221
24, 648
25, 267
27, 698
29, 477
18, 773
20, 220
21,220
22, 570
24, 064
68,190
77,951
84, 527
90, 394
98,011
42, 264
49, 922
54, 885
58, 675
64, 561
13,311
15, 033
16, 397
17,314
18, 638
18, 098
22, 583
24, 984r
27, 26
30, 329
10, 853
12, 305
13, 505
14,121
15, 606
25, 926
28, 029
29, 641
31,719
33, 450
10,464
11,163
11,714
12, 287
12,718
3,820
4,222
4,432
4,851
5,117
11,643
12, 645
13, 496
14, 581
15,612
1970
1971
1972
1973.
1974
52, 831
55, 925
63, 042
72, 954
84, 612
28, 215
29, 973
34, 042
39, 704
44, 043
24, 616 101, 502 66, 648
25, 953 102i
' 1,490 66,149
28, 999 108, 072 70, 098
33, 250 124,
124; 395 81,218
40, 569 157, 971 101, 780
29, 785
28, 586
30, 738
35, 440
41,254
17,714
17, 839
18, 556
19, 812
24, 613
5,269
5,676
6,009
6,751
8,503
16, 447
17, 003
17, 306
18, 545
23, 726
87, 226 43, 912
98,168 50, 376
[09, 962 57, 261
34, 854
36, 341
37, 974
43, 177
56,191
41, 304 25, 747 55, 382
43, 020 28, 088 60, 858
44, 938 30, 463 64,614
13,139
13,661
14, 655
17, 882
23, 963
1975
1976
19773
19,123
19, 681
20, 752
25, 892
35, 809
43, 313 155, 693 100,
1,310 33,145
47, 792 166, 587 105, 729 34, 621
52, 701 177, 162 112,548 37, 147
23,023
26, 013
26, 353
8,234 24,124
9,182 25, 663
9,761 28, 500
93, 884
95, 262
97, 502
98, 178
98,191
98, 597
47,
48,
50,
50,
50,
50,
289
430
382
146
558
606
46, 595 156,120 99, 980
46, 832 156, 458 99, 942
47,120 157, 560 100, 740
48, 033 158, 134 101,033
47, 634 159, 488 101, 502
47, 990 161,118 102, 429
33, 551
33, 269
33, 541
33, 416
33, 669
33, 927
40, 910
40, 568
40, 745
40, 910
40, 978
41,411
25,371
25, 438
25, 558
25, 855
26, 045
26, 344
56,140
56, 516
56, 820
57, 101
57, 986
58, 689
23, 288
23, 460
23, 666
23, 765
24, 366
24, 453
8,391
8,520
8,640
8,677
8,705
8,873
24, 461
24, 536
24, 512
24, 660
24,913
25, 364
98, 932
99, 078
98, 387
97, 043
99, 919
.04, 475
03, 569
06, 133
11,241
09, 640
09, 458
10, 680
09, 208
.11,376
11,921
13,119
13, 240
51, 090
51, 648
50, 060
49, 029
51,238
55, 295
47, 842 162, 144 .02, 856
47, 430 163, 184 .03, 282
48, 328 164, 966 .04,117
48, 014 166, 674 .05, 589
48, 681 167,114 .06,128
49, 180 166, 587 .05, 729
34, 064
33, 822
34,113
35, 047
35, 320
34, 621
26, 495
26, 862
27,114
27,915
27, 803
28, 088
59, 288
59, 902
60, 850
61, 085
60, 986
60, 858
24, 900 8,929
25, 023 9,004
25, 502 9,096
26, 880 8,524
25, 843 9,171
26, 013 9,182
25, 460
25, 875
26, 250
25, 681
25, 972
25, 663
53,
54,
58,
56,
56,
57,
50, 228 167, 482
51, 430 168, 449
52, 392 169, 379
52,876 170, 747
52, 741 172,629
53,110 173, 818
.06, 562
.07, 222
07, 685
08, 190
09,154
10,421
35, 141
35, 229
35, 798
35, 758
36,615
37, 289
41, 499
41, 743
41, 987
42, 627
43, 005
43, 020
43, 235
43,611
43, 343
43, 805
43, 339
43, 584
28, 186
28, 382
28, 544
28, 627
29, 200
29, 548
60, 920
61,227
61, 694
62, 557
63, 475
63, 397
25,678 9,067 26,175
25, 988 9,141 26, 098
26, 405 9,356 25, 933
26, 810 9,379 26, 368
27, 068 9,422 26, 985
26, 842 9, 429 27,126
52,
53,
53,
53,
54,
10,978
11,452
11,787
11,904
12,548
37, 209
37, 312
37, 538
37, 394
37,147
44,120
44, 529
44, 750
44, 430
44, 938
29, 649
29,611
29, 499
30, 080
30, 463
63, 593
63, 652
64,377
64, 885
64, 614
26, 701
26, 579
26, 765
26, 696
26, 353
1976: Jan
Feb
Mar
Apr
May..__
June
July
Aug
Sept
Oct
Nov
Dec
1977: Jan ___
Feb
Mar
Apr
May..__
June
July
Aug
Sept_.__
Oct
Nov
1
2
3
341
703
849
764
717
570
56, 820
58, 087
58, 608
59, 262
59,154
8,819 25, 897 13, 061
9,738 28, 543 14,662
8,935 26, 321 13,060
388 174,571
289 175,104
313 176,164
857 176, 789
086 177,162
12, 836
13,881
13, 261
8,966 10, 720
7,894 9,721
15,
18,
17,
6,206 18,
6,040 17,
539
31.r
405
070 8,317
902 8,167
18, 664
20,195
20,143
19, 983
20, 871
8,556
8,971
8,775
8,674
9,097
2,47!
2,440
7,409
7,415
2,571
2,721
2,
2,835
7,666
8,622
8,624
8,474
8,825
2,950
9,574
9,547
9,629
9,741
9,761
27,318
27, 526
27, 983
28, 448
28, 500
Monthly average for year and total for month.
Book value, seasonally adjusted, end of period, except as noted.
Based on seasonally adjusted data through November.
Note.—Data are as published by Bureau of the Census, but for 1968-75 detail for durable goods inventories does not
add to totals. Correction will be published later by Census.
Source: Department of Commerce, Bureau of the Census.
311
TABLE B-48.—Manufacturers1 new and unfilled orders, 1947-77
[Amounts in millions of dollars; monthly data seasonally adjusted!
New orders i
Unfilled ordersshipments ratio s
Unfilled orders 2
Durable goods
industries
Year or month
Total
Total
1947
1948
1949
15,256
17,693
15,614
1950
1951
1952
1953
1954
20,110
23,907
23,204
23,586
22,335
1955
1956
1957
1958
1959
27,465
28, 368
27, 559
27, 002
30, 724
6,388
8,126
6,633
10,165
12,841
12, 061
12,147
10, 768
14,996
15,365
14,111
13, 290
16, 003
1960
1961
1962
1963
1964
30,235
31,104
33, 436
35, 524
38, 357
1965
1966
1967
1968
1969
42,100
46, 402
47, 062
50, 720
54,014
52,096
55, 937
64, 246
76, 217
86, 988
Capital
goods
industries,
nondefense
Nondurable
goods
industries
Total
34,473
30,736
24,045
Durable
goods
industries
Nondurable
goods
industries
41,456
67,266
75, 857
61,178
48,266
12,469 60,004 56,241
13, 003 67,375 63,880
13.448 53,183 50,352
13,712 47, 280 44,465
14, 720 52, 571 49, 207
5,894
4,117
4,423
6,021
3,872
3,177
2,541
3,016
3,763
3,495
2,831
2,815
3,364
15,303
15,759
17, 374
18, 709
20, 652
14,932
15,345
16, 061
16,815
17, 705
42, 491
44,345
45, 983
51,321
63,806
23, 278
26,177
25,831
28,149
29, 934
7,079
7,821
27, 447
29, 951
35,142
42, 888
46, 570
9,566
8,981
9,945
11,066
11,143
11, 439
11,566
28, 579
26,619
19, 622
35,435
63, 394
72,680
58,637
45,250
Total
Durable
goods
industries
Nondurable
goods
industries
3.42
4.12
0.96
3.63
3.87
3.35
3.07
3.00
4.27
4.55
4.00
3.67
3.53
1.12
1.04
.85
.86
.94
2,570
3,039
2,617
3,063
3,195
2.78
2.64
2.68
2.81
3.10
3.36
3.14
3.21
3.38
3.71
.72
.79
.68
.73
.72
18, 823 80,174 76, 395
20, 225 98, 519 94, 689
21,232 105,114 101,144
22, 571 110, 537 106, 563
24,079 116,330 112,158
3,778
3,830
3,970
3,974
4,172
3.34
3.80
3.73
3.85
3.76
3.97
4.54
4.44
4.64
4.50
.76
.73
.69
.69
7,053
7,575
8,947
11,169
12,656
24, 649
25,986
29,104
33, 329
40, 418
102,867
102,623
116,004
154, 361
184,697
4,593
5,033
6,358
7,404
5,575
3.70
3.39
3.35
3.94
4.23
4.45
4.06
3.96
4.66
5.09
.77
.78
.88
.93
.64
85, 659 42,164
98, 497 50, 681
111,233 58, 488
10, 899
12, 820
15,119
43, 495 171,438 163, 582
47,816 175,453 167,261
52,744 189,416 180, 750
7,856
8,192
8,666
3.63
3.28
3.22
4.40
3.93
3.85
.78
.75
.73
45, 904
47, 930
51,111
50, 245
51, 354
51, 249
11,663
11,900
12,173
12, 476
12, 666
12, 607
7,996
7,989
8,024
8,162
8,198
8, 094
3.53
3.46
3.37
3.39
3.35
3.38
4.26
4.19
4.06
4.08
4.02
4.06
.79
.77
.77
.77
.78
.77
51,180
50, 380
50, 068
50, 754
52,235
57, 040
13,778
12, 690
13, 468
14,124
12, 734
13, 835
170,193
169, 686
170, 450
170, 687
171,520
172,059
171,938
170, 414
170, 503
172,468
173, 333
175, 453
162,197
161, 697
162,426
162, 525
163, 322
163, 965
811
554
476
006
784
600
46, 735
46, 825
47, 155
48,170
47, 670
47, 886
47, 631
47,174
48, 409
48, 252
48, 549
49, 560
164, 055
162, 787
162, 795
164, 522
165,519
167, 261
7,883
7,627
7,708
7,946
7,814
8,192
3.38
3.31
3.33
3.45
3.39
3.28
4.04
3.97
4.02
4.14
4.07
3.93
.76
.73
.72
.77
.75
.75
1977: Jan.
Feb.
Mar.
Apr.
May.
June
105, 288
106, 575
111,788
111,547
111,693
111,524
55, 037
55,133
59,160
58, 652
59,176
58, 378
14, 621
14, 249
14, 561
14, 679
15, 000
15, 535
50, 251
51,442
52, 628
52, 895
52, 517
53,146
177,179
177,623
178,167
180, 065
182, 301
183,150
168, 962
169, 394
169,704
171,587
174, 047
174, 859
8,217
8,229
8,463
8,478
8,254
8,291
3.34
3.29
3.11
3.20
3.23
3.22
4.02
3.96
3.71
3.86
3.89
3.88
.75
.73
.73
.72
.70
.71
July.
Aug.
Sept
Oct..
Nov.
108, 598
111,494
112,441
116, 543
116, 068
56, 031
58, 270
59, 048
62, 503
61, 984
14, 409
14, 678
16,189
16, 502
15, 883
52, 567
53, 224
53, 393
54, 040
54, 084
182,541
182, 646
183,166
186, 590
189,416
174,
174,
174,
177,
180,
8,469
8,401
8,484
8,667
8,666
3.23
3.17
3.15
3.19
3.22
3.88
3.81
3.78
3.81
3.85
.73
.70
.71
.73
.73
1970
1971
1972
1973 .
1974
1975
1976
19774
1976:Jan .
Feb..
Mar_.
Apr..
May..
June.
July.
Aug..
Sept.
Oct..
Nov.
Dec.
92, 639
94,755
98, 267
98, 415
99, 025
99,135
98,
97,
98,
99,
100,
106,
45, 061
47, 384
48,600
54,384
67,001
107, 460
107, 656
122,362
161,766
190,271
072
245
682
923
750
1
Monthly average for year and total for month.
2 Seasonally adjusted, end of period.
Ratio of unfilled orders at end of period to shipments for period; excludes industries with no unfilled orders. Annual
figures relate to seasonally adjusted data for December.
* Based on seasonally adjusted data through November.
3
Source: Department of Commerce, Bureau of the Census.
312
PRICES
TABLE B-49.—Consumer price indexes by expenditure classes, 1929-77
For urban wage earners and clerical workers
[1967=100]
Housing
Year or month
All
items
Food
Total
1929
51.3
48.3
1933
38.8
30.6
1939
41.6
34.6
52.2
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
42.0
44 1
48 8
51.8
52.7
53 9
58 5
66.9
72.1
71.4
35.2
38.4
45.1
50.3
49.6
50 7
58.1
70.6
76.6
73.5
72.1
77 8
79.5
80.1
80 5
80 2
81.4
84.3
86 6
87.3
1960
1961 . .
.
1962
1963
1964
1965 . . .
1966
1967
1968 .
1969
1970
1971
1972
1973
1974
1975
1976
1977
Rent
Apparel
and
upkeep
Transportation
Reading
Other
and
Medical Personal
goods
recreacare
care
and
tion
services
76.0
48.5
54.1
36.9
56.0
42.4
43.0
36.7
40.3
45.3
46.9
52.4
53 7
56 2
56.8
58.1
59 1
60 6
65.2
69.8
70.9
56.2
57 2
58 5
58.5
58.6
58 8
59 2
61.1
65.1
68.0
42.8
44.8
52.3
54.6
58.5
61 5
67.5
78.2
83.3
80.1
42.7
44 2
48 1
47.9
47.9
47 8
50 3
55.5
61.8
66.4
36.8
37 0
38 0
39.9
41.1
42 1
44 4
48.1
51.1
52.7
40.2
41 2
45.2
49.9
53.4
55.1
59.0
66.0
68.5
68.3
46.1
47 7
50 0
54.1
60.0
62.4
64 5
68.7
72.2
74.9
48.3
49 2
50.7
53.3
54.7
56.9
58.8
63.8
66.8
68.7
74.5
82 8
84.3
83.0
82 8
81.6
82.2
84.9
88 5
87.1
72.8
77 2
78 7
80.8
81 7
82 3
83.6
86.2
87 7
88 6
70.4
73 2
76 2
80.3
83 2
84 3
85.9
87.5
89 1
90 4
79.0
86 1
85.3
84.6
84 5
84 1
85.8
87.3
87 5
88.2
68.2
72 5
77 3
79.5
78 3
77 4
78.8
83.3
86 0
89 6
53.7
56 3
59 3
61.4
63 4
64 8
67.2
69.9
73 2
76.4
68.3
74 7
75.6
76.3
76 6
77.9
81.1
84.1
86 9
88.7
74.4
76 6
76.9
77.7
76 9
76.7
77.8
80.7
83 9
85.3
69.9
72.8
76.6
78.5
79.8
79.8
81.0
83.3
84.4
86.1
88 7
89 6
90.6
91.7
92 9
94 5
97.2
100 0
104 2
109.8
88 0
89 1
89.9
91.2
92 4
94.4
99.1
100 0
103.6
108.9
90 2
90 9
91.7
92.7
93 8
94 9
97.2
100 0
104 2
110.8
91 7
92 9
94.0
95.0
95 9
96 9
98.2
100 0
102.4
105.7
89 6
90.4
90.9
91.9
92 7
93.7
96.1
100 0
105.4
111.5
89 6
90 6
92.5
93.0
94 3
95 9
97.2
100 0
103 2
107.2
79 1
81 4
83.5
85.6
87 3
89.5
93.4
100 0
106.1
113.4
90 1
90.6
92.2
93.4
94 5
95.2
97.1
100 0
104.2
109.3
87.3
89.3
91.3
92.8
95.0
95.9
97.5
100.0
104.7
108.7
87.8
88.5
89.1
90.6
92.0
94.2
97.2
100.0
104.6
109.1
116 3
121 3
125.3
133 1
147 7
161 2
170 5
181.5
114.9
118.4
123.5
141.4
161.7
175.4
180 8
192.2
118 9
124.3
129.2
135.0
150 6
166 8
177 2
189.6
110 1
115.2
119.2
124.3
130 6
137.3
144 7
153.5
116.1
119.8
122.3
126.8
136 2
142.3
147 6
154.2
112.7
118.6
119.9
123.8
137 7
150.6
165 5
177.2
120.6
128.4
132.5
137.7
150.5
168.6
184 7
202.4
113.2
116.8
119.8
125.2
137.3
150.7
160.5
170.9
113.4
119.3
122.8
125.9
133.8
144.4
151.2
157.9
116.0
120.9
125.5
129.0
137.2
147.4
153.3
159.2
166.7
167 1
167.5
168 2
169.2
170.1
180.8
180.0
178.7
179.2
180.0
180.9
173.2
173 8
174.5
174 9
175.6
176.5
141.2
142 1
142.7
143 2
143.8
144.4
143.3
144 0
145.0
145 7
146.8
146.9
158.1
158 5
159.8
161.3
163.5
165.9
176.6
178.8
180.6
181.6
182.6
183.7
155.7
157.0
157.4
158.3
158.9
159.8
148.2
148.5
149.0
149.5
1^0.3
150.9
150.5
151.3
151.8
152.5
152.9
153.2
July .
Aug
Sept
Oct
Nov
Dec
171.1
171.9
172 6
173.3
173.8
174.3
182.1
182.4
181 6
181.6
181.1
181.7
177.5
178.4
179 5
180.1
180.7
181.6
145.0
145.6
146 2
146.9
147.5
148.3
146.5
148.1
150 2
150.9
151.9
151.8
167.6
168.5
169 5
170.9
171.4
171.4
185.5
186.8
187 9
188.9
191.3
192.3
160.5
161.6
162.8
163.9
1P4.8
165.2
151.2
151.4
152.8
153.5
154.1
154.4
153.6
153.8
153.9
154.4
155.3
155.9
1977: Jan
Feb
Mar .
Apr
May
June
175.3
177 1
178 2
179.6
180.6
181.8
183.4
187 7
188 6
190.9
191.7
193.6
183.1
184 3
185 5
186.7
187.6
189.0
149.5
150 2
150 8
151.6
152.2
152.9
150.0
150 8
151 7
152.3
153.4
153.9
172.2
173 2
174 7
176.7
178.1
179.1
194.1
195 8
197 6
199.1
200.5
201.8
166.2
166.7
167.3
168.4
169.5
170.6
154.9
155.5
155.8
156.0
156.8
157.6
156.7
156.9
157.3
157.7
158.0
158.4
182.6
183.3
184 0
184.5
185.4
186.1
194.6
195.2
194 5
194.4
195.6
196.3
190.5
191.4
192 7
193.6
194.6
195.7
153.6
154.4
155 3
156.1
157.0
157.9
153.4
154.8
156 2
157.2
158.5
158.2
179.2
178.8
178 4
178.6
178.7
178.8
203.5
204.9
206.3
207.2
208.1
209.3
171.3
172.1
172.8
173.9
175.5
176.3
157.7
158.1
159.8
160.6
160.9
161.3
159.1
159.1
160.6
161.5
162.4
162.7
.
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
_
1976: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct __
Nov
Dec
_
Source: Department of Labor, Bureau of Labor Statistics.
313
TABLE B-50.—Consumer price indexes by commodity and service groups, 1939-77
For urban wage earners and clerical workers
[1967=1001
Services
Commodities
Year or
month
All
items
Commodities less food
All
commodities
Food
All
Durable
All
Non- services Rent
durable
Special indexes
Services
less
rent
All
items
less
food
All
items
less
shelter
Nondurable
commodities
1939
41.6
40.2
34.6
47.7
48.5
44.3
43.5
56.0
38.1
47.2
39.7
38.4
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
42.0
44 1
48.8
51.8
52.7
53 9
58.5
66.9
72 1
71.4
40.6
43 3
49.6
54.0
54.7
56 3
62.4
75.0
80 4
78.3
35.2
38 4
45.1
50.3
49.6
50.7
58.1
70.6
76.6
73.5
48.0
50.4
56.0
58.4
61.6
64.1
68.1
76.8
82.7
81.5
48.1
51.4
58.4
60.3
65.9
70.9
74.1
80.3
86.2
87.4
44.7
46.7
51.6
53.8
56.6
58.6
62.9
72.2
77.8
76.3
43.6
44 2
45.6
46.4
47.5
48 2
49.1
51.1
54.3
56.9
56.2
57.2
58.5
58.5
58.6
58.8
59.2
61.1
65.1
68.0
38.1
38.6
40.3
42.1
44.2
45.1
46.7
49.0
51.9
54.5
47.3
48.7
52.1
53.6
55.7
56.9
59.4
64.9
69.6
70.3
39.9
42.4
47.7
51.3
52.2
53.6
59.0
68.5
73.9
72.6
38.9
41.6
47.6
51.8
52.2
53.7
59.6
71.9
77.2
74.9
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
72.1
77.8
79.5
80.1
80.5
80.2
81.4
84.3
86.6
87.3
78.8
85.9
87.0
86.7
85.9
85.1
85 9
88.6
90.6
90.7
74.5
82.8
84.3
83.0
82.8
81.6
82.2
84.9
88.5
87.1
81.4
87.5
88.3
88.5
87.5
86.9
87.8
90.5
91.5
92.7
88.4
95.1
96.4
95.7
93.3
91.5
91.5
94.4
95.9
97.3
76.2
82.0
82.4
83.1
83.5
83.5
85.3
87.6
88.2
89.3
58.7
61.8
64.5
67.3
69.5
70.9
72 7
75.6
78.5
80.8
70.4
73.2
76.2
80.3
83.2
84.3
85.9
87.5
89.1
90.4
56.0
59.3
62.2
64.8
66.7
68.2
70.1
73.3
76.4
79.0
71.1
75.7
77.5
79.0
79.5
79.7
81.1
83.8
85.7
87.3
73.1
79.2
80.8
81.0
81.0
80.6
81.7
84.4
86.9
87.6
75.4
82.5
83.4
83.2
83.2
82.5
83.7
86.3
88.6
88.2
I960
1961
1962
1963
1964
1965
1966 . . .
1967
1968
1969
88.7
89.6
90.6
91.7
92.9
94.5
97.2
100.0
104.2
109.8
91.5
92.0
92.8
93.6
94.6
95.7
98.2
100.0
103.7
108.4
88.0
89.1
89.9
91.2
92.4
94.4
99.1
100.0
103.6
108.9
93.1
93.4
94.1
94.8
95.6
96.2
97.5
100.0
103.7
108.1
96.7
96.6
97.6
97.9
98.8
98.4
98.5
100.0
103.1
107.0
90.7
91.2
91.8
92.7
93.5
94.8
97.0
100.0
104.1
108.8
83.5
85.2
86.8
88.5
90.2
92.2
95.8
100.0
105.2
112.5
91.7
92.9
94.0
95.0
95.9
96.9
98.2
100.0
102.4
105.7
81.9
83.9
85.5
87.3
89.2
91.5
95.3
100.0
105.7
113.8
88.8
89.7
90.8
92.0
93.2
94.5
96.7
100.0
104.4
110.1
88.9
89.9
90.9
92.1
93.2
94.6
97.4
100.0
104.1
109.0
89.4
90.2
90.9
92.0
93.0
94.6
98.1
100.0
103.9
108.9
1970
1971
1972
1973
1974
1975
1976
1977
116.3
121.3
125.3
133.1
147.7
161.2
170.5
181.5
113.5
117.4
120.9
129.9
145.5
158.4
165.2
174.7
114.9
118.4
123.5
141.4
161.7
175.4
180.8
192.2
112.5
116.8
119.4
123.5
136.6
149.1
156.6
165.1
111.8
116.5
118.9
121.9
130.6
145.5
154.3
163.2
113.1 121.6
117 0 128 4
119.8 133.3
124.8 139.1
140.9 152.1
151.7 166.6
158.3 180.4
166.5 194.3
110.1
115 2
119.2
124.3
130.6
137.3
144.7
153.5
123.7
130.8
135.9
141.8
156.0
171.9
186.8
201.6
116.7
122.1
125.8
130.7
143.7
157.1
167.5
178.4
114.4
119.3
122.9
131.1
146.1
159.1
168.3
179.1
114.0
117.7
121.7
132.8
151.0
163.2
169.2
178.9
1976: Jan
Feb
Mar
Apr
May
June
166.7
167.1
167.5
168.2
169.2
170.1
162.4
162.3
162.3
163.1
164.2
165.2
180.8
180.0
178.7
179.2
180.0
180.9
152.3
152.7
153.3
154.2
155.5
156.5
149.0
149.3
150.4
151.9
153.5
154.7
154.7
155.2
155.5
156.0
157.0
157.9
174.9
176.1
177.2
177.7
178.4
179.5
141.2
142.1
142.7
143.2
143.8
144.4
181.0
182.2
183.4
184.0
184.7
185.8
162.6
163.4
164.2
165.0
166.0
167.0
164.4
164.9
165.3
166.1
167.1
168.1
167.3
167.2
166.7
167.2
168.2
169.0
July
Aug
Sept
Oct
Nov
Dec
171.1
171.9
172.6
173.3
173.8
174.3
166.0
166.6
167.0
167.4
167.7
168.1
182.1
182.4
181.6
181.6
181.1
181.7
157.1
158.0
158.9
159.6
160.3
160.6
155.8
156.4
156.9
157.8
158.0
158.4
158.1
159.1
160.4
161.0
161.9
162.3
180.7
181.8
183.2
184.1
185.1
185.8
145.0
145.6
146.2
146.9
147.5
148.3
187.2
188.4
189.8
190.8
191.8
192.6
167.9
168.9
170.0
170.8
171.6
172.2
169.0
169.7
170.4
171.0
171.6
172.2
169.7
170.4
170.7
171.0
171.3
171.7
1977: Jan
Feb
Mar
Apr
May
June
175.3
177.1
178.2
179.6
180.6
181.8
168.7
170.9
171.8
173.3
174.3
175.4
183.4
187.7
188.6
190.9
191.7
193.6
160.6
161.6
162.6
163.6
164.7
165.4
158.9
159.7
160.8
162.2
163.4
163.9
161.9
163.1
163.9
164.7
165.7
166.6
187.4
188.7
190.0
191.2
192.2
193.7
149.5
150.2
150.8
151.6
152.2
152.9
194.3
195.6
197.0
198.4
199.4
201.1
172.9
174.0
175.1
176.2
177.3
178.4
173.0
175.0
176.1
177.5
178.4
179.6
172.4
175.0
175.9
177.4
178.3
179.7
182.6
183.3
184.0
184.5
185.4
186.1
175.8
176.3
176.6
177.0
177.9
178.3
194.6
195.2
194.5
194.4
195.6
1S6.3
165.6
166.0
166.7
167.4
168.1
168.4
164.3
164.3
164.5
165.0
165.5
165.9
166.6
167.3
168.4
169.2
170.1
170.3
195.3
196.3
197.7
198.5
199.5
200.5
153.6
154.4
155.3
156.1
157.0
157.9
202.8
203.8
205.3
206.2
207.2
208.2
179.1
179.8
180.9
181.6
182.5
183.1
180.2
180.8
181.2
181.7
182.5
183.0
180.1
180.8
181.0
181.4
182.4
182.9
July....
Aug
Sept_._.
Oct
Nov
Dec
Source: Department of Labor, Bureau of Labor Statistics.
314
TABLE B-51.—Consumer price indexes, selected commodities and services, 1939-77
For urban wage earners and clerical workers
[1967 = 100]
Nondurable commodities less food
Durable commodities
Year or month
1939
1940
1941
1942 . .
1943
1944
1945
1946 .
1947
1948
1949
1950
1951
1952 .
1953
1954
1955
1956
1957
1958
1959
1960 . .
1961
1962
1963
1964
1965 . . .
1966
1967
1968
1969
1970 .
1971.
1972
1973
1974
1975
1976
1977
1976:Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Dec
1977:Jan
Feb
Mar
Apr
May
June
July.
Aug
Sept
Oct
Nov
Dec
Total i
New
cars
48.5
48.1
43.2
51.4
58.4
60.3
65.9
70.9
74.1
80.3
86.2
87.4
88.4
95.1
96.4
95.7
93.3
91.5
91.5
94.4
95.9
97.3
96.7
96.6
97.6
97.9
98.8
98.4
98.5
100.0
103.1
107.0
111.8
116.5
118.9
121.9
130.6
145.5
154.3
163.2
149.0
149.3
150.4
151.9
153.5
154.7
155.8
156.4
156.9
157.8
158.0
I" 158.4
158.9
159.7
160.8
162.2
163.4
163.9
164.3
164.3
164.5
165.0
165.5
165.9
Used
cars
43.3
46.6
69.2
75.6
82.8
83.4
87.4
94.9
95.8
94.3
90.9
93.5
98.4
101.5
105.9
104.5
104.5
104.1
103.5
103.2
100.9
99.1
100.0
102.8
104.4
107.6
112.0
111.0
111.1
117.5
127.6
135.7
142.9
134.2
134.3
134.5
134.4
134.5
134.5
134.4
134.4
134.2
139.1
139.7
140.4
141.1
140.7
140.9
140.6
141.4
141.7
141.6
141.6
141.1
145.7
148.2
150.5
89.2
75.9
71.8
69.1
77.4
80.2
89.5
Household
durables
Total
56.6
55.9
44.3
44.7
59.8
66.9
69.5
76.0
81.8
86.5
95.6
101.7
99.0
100.2
109.8
106.9
105.7
102.9
46.7
51.6
53.8
56.6
58.6
62.9
72.2
77.8
76.3
76.2
82.0
82.4
83.1
83.5
83.5
85.3
87.6
100.1
99.7
101.4
102.1
102.0
101.9
100.7
100.6
100 3
100.2
98.7
98.6
100.0
103.3
107.4
110.2
112.9
115.0
118 8
128.9
140.3
146 0
151.5
143.3
144.0
144.8
145.5
145.8
146.1
146.5
146.3
146.7
147.2
147.8
148.2
148.4
148.8
149.7
150.7
151.2
151.6
151.8
152.3
152.8
153 2
83.6
86.9
94.8
96.0
100.1
99.4
97.0
100.0
(3)
103.1
104.3
110.2
110.5
117.6
122.6
146.4
167.9
182.8
144.6
144.9
150.9
159.4
167.8
173.4
177.5
179.6
180.1
179.9
179.0
178.0
177.7
179.1
182.7
187.8
191.4
192.2
190.6
186.4
182.5
178.0
175 o 153.7
170.7 154.2
Apparel
commodities
43.0
43.5
45.8
53.5
55.9
59.8
63.0
69.5
80.4
85.4
82.0
81.1
88.7
87.7
86.7
86.3
85.8
87.3
88.2
88.2
89.0
90.3
88.2
89.3
90.7
91.2
91.8
92 7
93.5
94.8
97.0
100.0
104.1
108.8
113.1
117.0
119.8
124 8
140.9
151.7
90.8
91.2
92.0
92.8
93.6
96.0
100.0
105.6
111.9
116.5
120.1
122.7
127.1
136.1
141.2
158 3
166.5
154.7
155.2
155.5
156.0
157.0
157.9
158.1
159.1
160.4
161.0
161.9
162.3
161.9
163.1
163.9
164.7
165.7
166.6
166.6
167.3
168.4
169 2
145.8
151.6
141.5
142.2
143.1
143.9
145.1
145.0
144.4
146.2
148.5
149.2
150.1
149.9
147.6
148.5
149.3
149.8
150.9
151.3
150.6
152.1
153.5
154.6
170.1
170.3
155.9
155.3
1
Nondurables
less
food
and
apparel
46.3
46.8
48.4
51.1
53.2
54 7
55.8
58.2
66.2
72.3
72.4
72.9
77 5
79.0
81.0
81.8
82.1
84.1
87.4
88 3
89.6
90.9
91.3
92.1
93 1
93 9
95 5
97.5
100.0
103 3
107.0
111.2
115.2
118.2
123 4
143.8
157.9
165 7
175.3
162.6
162.9
162.8
163.2
164.2
165.6
166.3
166.8
167.4
168.1
169.0
169.7
170.5
171.8
172.6
173.5
174.5
175.6
176.1
176.3
177.2
177.9
178.6
179.3
Services less rent
Total
38.1
38.1
Household Transportaservtion
ices
servless
ices
rent
36.1
36.1
38.6
36.3
40.3
38.2
42.1
38.2
44.2
38 2
45.1
38.2
46.7
39.0
49.0
40.3
51.9
44.9
54.5
50.0
56.0
53.3
59.3
58.3
62.2
62.4
64.8
66.4
66.7
69.2
68.2
69.4
70.1 ~~71.T 70.5
75.4
73.3
73.8
76.4
79.4
78 5
79.0
81.6
81.2
81.9
85.0
83.3
86.0
83.9
85.3
85.5
87.1
86.6
87.3
89.0
87.5
90.4
89.2
89.6
92.1
92.9
91.5
95.3
95.7
96.8
100.0 100.0 100.0
105.7 105.9 104.0
113.8 115.3 111.3
123.7 126.8 123.1
130.8 132.6 133.0
135.9 139.2 136.0
141.8 146.8 136.9
156.0 166.0 141.9
171.9 184.7 152.7
186.8 198.4 174.3
201.6 213.8 188.4
181.0 193.7 167.0
182.2 194.4 168.9
183.4 195.1 171.1
184.0 195.4 171.7
184.7 196.1 172.3
185.8 197.3 173.2
187.2 198.7 174.7
188.4 200.1 175.5
189.8 201.5 177.3
190.8 202.3 178.9
191.8 202.6 180.2
192.6 203.5 180.8
194.3 205.7 182.9
195.6 206.8 183.3
197.0 208.4 184.8
198.4 209.7 186.7
199.4 210.8 187.4
201.1 212.9 188.7
202.8 215.4 189.4
203.8 216.6 190.0
205.3 218.1 191.0
206.2 219.2 191.3
207.2 220.4 192.0
208.2 221.4 192.9
Medical
care
services
Other 2
32.5
32 5
32 7
33.7
35.4
36 9
37.9
40.1
43.5
46.4
48.1
49.2
51.7
55.0
57.0
58.7
60.4 . . . . . . .
62.8
73.9
65.5
76.2
68 7
78.0
72.0
74.9
80.8
83.4
77.7
85.6
80.2
87.7
82 6
90.1
84 6
87.3
92.6
96.2
92.0
100.0
100.0
107.3
105.6
116.0
110.6
124.2
116.7
133.3
122.5
138.2
125.8
131.6
144 3
141.6
159.1
152.1
179.1
197.1
161.1
216.7
171.1
156.6
188.0
157.4
190.4
192.5
158.4
193.5
159.1
194.6
159.7
195.8
160.5
161.2
197.9
162.0
199.4
163.6
200.6
201.7
164.3
165.2
204.5
165.7
205.7
166.7
207.6
167.5
209.4
168.1
211.5
168.9
213.1
214.6
169.6
216.0
170.5
171.2
217.9
171.8
219.6
221.1
173.6
222.0
174.3
175.3
223 0
224.2
176.0
Also includes the "other durables" group.
»Includes the services components of apparel, personal care, reading and recreation, and other goods and services.
3 Not available.
Source: Department of Labor, Bureau of Labor Statistics.
315
TABLE B—52.—Consumer price indexes for commodity groups, seasonally adjusted, 1974-77
For urban wage earners and clerical workers
!I"967-100, seasonally adjusted]
Commodities less food
All
Year and
month
commodities
Durable commodities
Nondurables less food
Food
Total
Total i
Household
durables
123.7
124.2
125.1
126.1
127.5
129.4
Apparel Gasocom- line and
modmotor
ities
oil
Fuel
oil
and
coal
New
Used
cars
cars
122.1
123.0
124.0
125.1
126.3
128.0
111.7
112.0
112.5
113.1
114.7
116.6
111.0
109.4
108.1
110.6
114.7
119.7
131.9
133.9
136.2
137.6
139.3
140.8
130.1
131.4
132.5
133.7
134.7
135.7
140.6
148,0
157.9
160.2
163.3
163.8
191.1
197.6
198.6
204.8
210.6
215.3
Total i
May."
June..
137,4
13&5
141.1
14*. *
143.4
144.5
1516
160.1
160.3
128.5
129.9
13L6
132.8
134.4
136.0
July.
Aug..
Sept..
Oct...
Nov..
Dec...
145.2
147.3
149.1
150.4
151.8
152.9
159.8
162.1
165.1
166.6
168.4
170.0
137.4
139.2
140.5
141.6
142.8
143.7
130.9
132.7
134.4
135.9
137.4
138.7
129.3
131.3
132.7
133.8
135.2
136.1
118.5
119.3
120.9
123.0
123.6
123.9
123.4
127.3
130.6
134.2
138.2
138.7
142.1
143.9
144.9
145.7
146.6
147.3
136.3
139.0
139.0
139.4
140.2
140.1
163.8
163.1
162.8
161.1
160.6
160.9
221,0
225.2
in A
228.9
228.9
226.7
1975:Jan...
Feb,.
Mar..
May."
June..
153.9
154.7
155.2
155.8
156.6
157.8
171.1
171.2
171.0
171.3
172.5
174.6
144.7
145.8
146.7
147.5
148.0
148.6
140.0
141.6
143.3
144.3
144.9
145.5
137.3
138.0
138.7
139.4
139.9
140.1
122.3
123.9
127.0
127.3
127.0
127.3
140.5
142.5
143.7
143.3
142.9
144.6
148.0
148.8
149.1
149.8
150.3
150.9
140.4
140.6
140.5
140.5
140.6
140.5
161.1
161.3
161.2
162.2
164.4
167.4
224.8
224.5
225.4
227.5
230.2
232.2
July..
Aug..
Sept..
Oct...
Nov...
Dec...
159.6
160.0
160.4
161.3
161.9
162.5
177.8
177.5
177.9
179.5
180.3
181.0
149.8
150.5
151.0
151.6
152.0
152.6
146.2
146.9
147.6
147.9
148.5
149.2
140.4
140.8
141.4
142.0
142.6
143.1
127.2
128.1
129.1
129.1
130.2
132.8
147.5
150.0
149.9
150.3
150.0
149.9
152.3
153.2
153.4
154.2
154.5
155.0
141.3
142.1
141.4
141.8
142.2
142.5
173.2
174.8
176.4
178.3
178.4
178.1
236.9
240.3
243.7
246.7
245.7
245.9
1976:Jan...
Feb...
Mar..
Apr...
May..
June..
163.0
162.7
162.6
163.3
164.4
165.0
181.1
179.5
178.5
179.4
180.8
181.2
153.2
153.7
154.1
154.6
155.6
156.2
149.9
150.7
151.8
152.7
153.7
154.2
143.8
144.7
145.2
145.5
145.7
145.9
133.1
133.8
134.3
134.2
134.8
134.8
150.9
155.0
160.6
165.7
168.8
170.0
155.6
155.8
155.7
156.0
156.9
157.6
143.4
143.7
143.7
144.2
144.9
145.3
176.5
174.5
171.7
170.4
172.2
174.7
244.3
243.8
244.7
245.3
246.5
249.3
July..
Aug..
Sept..
Oct...
Nov..
Dec...
165.5
166.2
166.6
167.1
167.4
168.0
181.4
181.8
181.9
182.2
181.7
181.9
156.9
157.8
158.3
159.0
159.6
160.5
155.0
155.6
156.1
156.6
157.3
158.4
146.3
146.2
146.4
146.9
147.5
148.4
135.1
135.9
136.9
138.2
138.6
139.2
170.7
172.3
172.1
172.6
174.8
178.7
158.4
159.3
159.9
160.6
161.3
162.0
145.9
147.2
147.5
147.5
147.8
148.5
175.8
177.5
179.0
181.7
183.0
183.1
251.2
254.2
256.0
256.5
257.0
261.4
1977:Jan...
Feb...
Mar..
Apr...
May..
June..
169.4
171.4
172.2
173.6
174.5
175.3
183.5
187.1
188.2
191.0
192.4
193.9
161.6
162.7
163.4
164.0
164.7
165.1
159.9
161.4
162.4
163.2
163.5
163.4
148.8
149.5
150.2
150.7
151.0
151.4
140.0
140.1
140.6
140.5
141.7
142.0
185.5
191.6
194.4
195.2
192.6
188.4
162.8
163.7
164.2
164.7
165.6
166.3
149.4
150.0
149.9
150.1
150.7
151.6
181.8
183.5
184.3
185.4
186.9
186.2
266.6
272.0
278.1
280.6
282.9
285.4
July..
Aug_.
Sept.
Oct...
Nov..
Dec...
175.5
176.0
176.3
176.7
177.6
178.3
194.0
194.5
194.7
194.9
196.1
196.5
165.3
165.8
166.2
166.7
167.5
168.3
163.4
163.5
163.8
163.8
164.8
165.9
151.6
152.1
152.5
152.9
153.4
154.4
142.3
143.2
144.0
144.8
147.0
149.2
183.3
178.9
174.5
170.8
170.9
171.4
166.8
167.5
168.0
168.8
169.5
170.1
152.1
153.1
152.5
152.8
153.5
153.8
185.7
186.1
187.2
189.8
191.3
192.0
287.1
289.6
290.9
291.0
288.7
288.4
1974:Jan...
Feb_
Mar...
154.0
157.3
158.8
i Includes certain groups not shown separately.
Source: Department of Labor, Bureau of Labor Statistics.
316
TABLE B-53.—Consumer price indexes JOT service groups and selected expenditure classes,
seasonally adjusted, 1974-77
For urban wage earners and clerical workers
(1967=100, seasonally adjusted]
Services
Selected expenditure classes
Services less rent
Year
and month
All
Mil
services
Rent
Total i
Household
services
less rent
Transportation
services
Medical
care
services
Fuel
and
utilities
Household
furnishings
and
operation
Apparel
and
upkeep
Transportation
1974: J a n . . .
Feb...
Mar...
Apr...
May..
June..
144.6
145.6
146.9
148.0
149.7
151.2
127.6
128.1
128.5
129.1
129.6
130.2
147.6
148.8
150.2
151.4
153.3
155.0
155.2
156.8
158.8
160.5
162.7
164.7
138.2
138.6
139.2
139.7
140.6
141.6
149.9
151.0
152.4
153.5
155.5
158.0
140.2
142.2
143.9
146.0
148.2
149.5
129.3
130.6
132.7
133.9
136.8
139.0
130.0
131.3
132.6
133.7
134.7
135.8
128.7
130.3
132.8
134.3
136.2
137.9
July...
Aug...
Sept..
Oct...
Nov...
Dec.._
152.9
154.5
155.9
157.2
158.4
159.7
130.7
131.3
131.9
132.5
133.2
133.6
156.8
158.6
160.1
161.6
162.9
164.3
167.1
169.4
171.4
173.4
174.9
176.6
142.6
143.2
143.8
144.3
145.0
145.8
160.0
162.4
164.1
165.6
167.3
168.9
151.5
153.6
155.1
156.4
157.5
158.2
141.4
144.0
146.3
148.7
150.7
152.2
136.5
138.8
139.2
139.7
140.5
140.7
139.4
140.4
141.9
142.3
143.1
143.8
1975: J a n . . .
Feb...
Mar...
Apr._.
May..
June..
161.1
162.3
163.1
164.2
164.9
166.1
134.5
134.9
135.4
135.8
136.4
136.9
165.8
167.2
168.1
169.3
170.0
171.3
178.4
180.1
180.8
182.3
182.9
184.7
145.9
146.8
147.9
149.1
149.7
150.6
171.1
172.9
174.4
175.9
177.2
178.5
159.9
160.8
161.9
163.7
165.1
167.0
153.7
155.4
155.8
156.7
157.2
157.9
140.9
141.3
141.4
141.5
141.6
141.6
144.2
144.9
145.9
147.0
147.4
148.9
July...
Aug...
Sept..
Oct...
Nov...
Dec...
167.0
167.7
169.0
170.0
171.6
172.7
137.5
138.1
138.5
139.3
139.9
140.5
172.2
173.0
174.4
175.4
177.3
178.4
185.5
186.1
186.9
187.7
189.9
191.0
151.5
152.5
156.5
157.3
161.7
162.9
180.1
181.2
182.8
184.7
184.5
186.3
168.7
170.0
172.0
173.3
174.8
175.8
158.4
159.0
159.8
160.5
161.2
161.9
142.4
142.9
142.8
143.1
143.5
143.9
151.2
152.5
154.9
155.4
157.0
158.0
1976: J a n . . .
Feb.._
Mar...
Apr...
May..
June..
174.6
175.8
177.1
177.9
178.9
179.9
141.2
141.8
142.6
143.1
143.8
144.5
180.6
181.9
183.2
184.1
185.1
186.2
193.1
194.1
195.1
196.0
196.9
198.2
166.3
168.4
170.6
171.2
172.5
173.5
188.4
190.4
192.1
193.5
194.9
195.9
175.6
176.4
177.8
178.4
179.8
181.9
164.2
165.9
166.8
167.3
167.7
168.3
144.9
145.2
145.6
146.0
146.6
147.1
159.3
160.1
161.1
162.2
163.6
164.8
July...
Aug...
Sept..
Oct.._
Nov...
Dec-
181.1
182.2
183.2
184.0
184.8
185.5
145.2
145.7
146.4
147.0
147.6
148.3
187.5
188.7
189.7
190.6
191.4
192.2
199.5
200.7
201.5
201.8
201.8
202.5
175.2
176.3
177.8
179.2
180.2
180.6
197.6
198.9
200.1
201.9
204.9
206.4
183.3
184.9
186.3
187.9
188.7
191.8
169.0
169.3
169.9
170.6
171.4
172.2
147.8
148.7
149.4
149.4
149.9
150.6
166.0
167.3
168.9
170.2
171.0
171.9
1977: J a n . . .
Feb...
Mar...
Apr.__
May...
June..
187.0
188.4
189.9
191.4
192.6
194.2
149.5
149.9
150.6
151.6
152.2
152.9
193.9
195.4
196.8
198.6
199.8
201.6
205.1
206.4
208.4
210.3
211.6
213.8
182.2
182.8
184.2
186.1
187.6
189.1
208.0
209.4
211.1
213.1
215.0
216.2
194.0
194.6
197.3
198.4
199.8
202.0
173.1
174.3
174.8
175.4
175.7
176.9
151.7
152.0
152.3
152.6
153.2
154.2
173.6
174.9
176.1
177.8
178.3
178.0
July...
Aug...
Sept..
Oct-Nov...
Dec...
195.7
196.7
197.7
198.4
199.2
200.1
153.8
154.6
155.5
156.1
157.2
157.9
203.3
204.2
205.3
206.1
206.8
207.7
216.3
217.3
218.1
218.8
219.5
220.3
190.0
191.0
191.6
191.7
192.0
192.7
217.7
218.9
220.7
222.2
223.4
224.9
204.3
205.9
206.9
208.3
208.0
207.4
177.6
178.3
178.5
179.1
179.7
180.9
154.8
155.4
155.4
155.6
156.3
156.9
177.4
177.6
177.7
177.9
178.3
179.3
* Also includes the "other services" group.
Source: Department of Labor, Bureau of Labor Statistics.
317
248-947 O - 78 - 21
TABLE B-54.—Percent changes in consumer price indexes, major groups, 1948-77
[Percent change]
Year or month
Dec.
to
Dec*
Commodities less
food
Food
All items
Year
to
year
Dec.
to
Dec*
Dec.
to
Dec*
Year
to
year
Year
to
year
Services
Dec.
to
Dec. i
Year
to
year
2.7
-1.8
7.8
-1.0
-0.8
-3.7
8.5
-4.0
5.3
-4.8
7.7
-1.5
6.1
3.6
6.3
4.8
1950
1951
1952
1953
1954
5.8
5.9
.9
.6
1.0
7.9
2.2
.8
.5
9.6
7.4
-1.1
-1.3
-1.6
1.4
11.1
1.8
-1.5
5.7
4.6
-.1
7.5
.9
3.2
5.3
4.4
4.3
3.3
1955
1956
1957
1958
1959
.4
2.9
3.0
1.8
1.5
-.4
1.5
3.6
2.7
.8
-.9
3.1
2.8
2.2
-.8
I960
1961
1962
1963
1964
1.5
1.6
1.0
1.1
1965
1966
1967
1968
1969
1948.
1949
.
.2
-1.4
-1.1
3.6
5.2
4.6
4.2
1.9
-1.4
.7
3.3
4.2
-1.6
0
2.5
2.2
.8
1.5
-.7
1.0
3.1
1.1
1.3
2.3
3.1
4.5
2.7
3.7
2.0
2.5
4.0
3.8
2.9
1.0
1.3
.9
1.4
1.3
-.3
.6
.7
1.2
.4
.4
.3
1.3
3.1
-.9
1.5
1.9
1.4
.7
.8
2.7
1.9
1.7
2.3
1.8
3.3
2.0
1.9
2.0
1.9
1.9
3.4
3.0
4.7
6.1
1.7
2.9
2.9
4.2
5.4
3.4
3.9
1.2
4.3
7.2
2.2
5.0
.9
3.6
5.1
.7
1.9
3.1
3.7
4.5
.6
1.4
2.6
3.7
4.2
2.6
4.9
4.0
6.1
7.4
2.2
3.9
4.4
5.2
6.9
1970
1971
1972
1973
1974
5.5
3.4
3.4
8.8
12.2
5.9
4.3
3.3
6.2
11.0
2.2
4.3
4.7
20.1
12.2
5.5
3.0
4.3
14.5
14.4
4.8
2.3
2.5
5.0
13.2
4.1
3.8
2.2
3.4
10.6
8.2
4.1
3.6
6.2
11.3
8.1
5.6
3.8
4.4
9.3
1975
1976
1977
7.0
4.8
6.8
9.1
5.8
6.5
6.5
.6
8.0
8.5
3.1
6.3
6.2
5.1
4.9
9.2
5.0
5.4
8.1
7.3
7.9
9.5
8. A
7.7
1.2
1.6
1.2
Change from preceding month
Unadjusted
Seasonally
adjusted
Unadjusted
Seasonally
adjusted
Unadjusted
Seasonally
adjusted
Unadjusted
Seasonally
adjusted
1976: Jan . .
Feb
Mar.._
Apr
May
June
0.2
.2
.2
.4
.6
.5
0.6
.1
.2
.4
.7
.4
0.1
- 4
-.7
.3
.4
.5
0.1
-.9
-.6
.5
.8
.2
-0.3
.3
.4
.6
.8
.6
0.4
.3
.3
.3
.6
.4
1.0
.7
.6
.3
.4
.6
1.1
.7
.7
.5
.6
.6
July
Aug
Sept
Oct..._
Nov
Dec
.6
.5
.4
.4
.3
.3
.5
.5
.3
.3
.3
.4
.7
.2
-.4
0
-.3
.3
.1
.2
.1
.2
-.3
.4
.6
.6
.4
.4
.2
.4
.6
.3
.4
.4
.6
.7
.6
.8
.5
.5
.4
.7
.6
.5
.4
.4
.4
1977: Jan
Feb
Mar.
Apr...
May
June
.6
1.0
.6
.8
.6
.7
.8
1.0
.6
.8
.6
.6
.9
2.3
.5
1.2
.4
1.0
.9
2.0
.6
1.5
.7
.8
.0
.6
.6
.6
.7
.4
.7
.7
.4
.4
.4
.2
.9
.7
.7
.6
.5
.8
.8
.7
.8
.8
.6
.8
.4
.4
.4
.3
.5
.4
.4
.3
.3
.3
.5
.4
.5
.3
.1
.3
-.1
.6
.4
.1
.6
.2
.1
.2
.4
.4
.4
.2
.1
.3
.2
.3
.5
.5
.8
.5
.7
.4
.5
.5
.8
.5
.5
.4
.4
.5
July
Aug
Sept
Oct
Nov
Dec
1
Changes from December to December are based on unadjusted indexes.
Source: Department of Labor, Bureau of Labor Statistics.
318
TABLE B—55.— Wholesale price indexes by major commodity groups, 1929—77
[1967=100]
Farm products and processed
foods and feeds
Year or month
All commodities
Total
Farm
products
Processed
foods
and
feeds
Industrial commodities
Total
Textile
products
and
apparel
Hides,
Fuels
skins,
and
leather, related Chemicals
allied
and
products, and
products i
related
and
products power *
1929
49.1
64.1
48.6
48.9
59.4
1933
34.0
31.4
37.8
36.3
47.6
47.4
1939.....
39.8
40.0
43.3
42.8
52.3
51.5
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
40.5
45 1
50 9
53 3
53.6
54 6
62 3
76 5
82.8
78.7
94 3
101.5
89.6
41.4
50 3
64 8
75 0
75.5
78 5
90 9
109.4
117.5
101.6
82.9
88.7
80.6
44.0
47.3
50.7
51.5
52.3
53.0
58.0
70.8
76.9
75.3
103.6
108.1
98.9
45.2
48 4
52.8
52.7
52.2
52.9
61.1
83.3
84.2
79.9
51.4
54 6
56.2
57.8
59.5
60.1
64.4
76.9
90.5
86.2
52.4
57 0
63.3
64.1
64.8
65.2
70.5
93.7
95.9
87.6
1950 . . .
1951
1952
1953
1954
1955
1956
1957
1958
1959
81.8
91.1
88.6
87 4
87.6
87.8
90.7
93.3
94.6
94.8
93 9
106.9
102.7
96 0
95.7
91.2
90.6
93 7
98.1
93.5
106.7
124.2
117.2
106 2
104.7
98.2
96.9
99 5
103.9
97.5
83.4
92.7
91.6
87 4
88.9
85.0
84.9
87.4
91.8
89.4
78.0
86.1
84.1
84.8
85.0
86.9
90.8
93.3
93.6
95.3
102.7
114.6
103.4
100.8
98.6
98.7
98.7
98.8
97.0
98.4
86.3
99.1
80.1
81.3
77.6
77.3
81.9
82.0
82.9
94.2
87.1
90.3
90.1
92.6
91.3
91.2
94.0
99.1
95.3
95.3
88.9
101.7
96.5
97.7
98.9
98.5
99.1
101.2
102.0
101.6
1960
1961
1962
1963
1964
1965.
1966
1967
1968
1969
94.9
94.5
94.8
94.5
94.7
96.6
99 8
100.0
102.5
106.5
93.7
93.7
94.7
93.8
93.2
97.1
103 5
100.0
102.4
108.0
97.2
96.3
98.0
96.0
94.6
98.7
105 9
100.0
102.5
109.1
89.5
91.0
91.9
92.5
92.3
95.5
101 2
100.0
102.2
107.3
95.3
94.8
94.8
94.7
95.2
96.4
98.5
100.0
102.5
106.0
99.5
97.7
98.6
98.5
99.2
99.8
100 1
100.0
103.7
106.0
90.8
91.7
92.7
90.0
90.3
94.3
103 4
100.0
103.2
108.9
96.1
97.2
96.7
96.3
93.7
95.5
97.8
100.0
98.9
100.9
101.8
100.7
99.1
97.9
98.3
99.0
99.4
100.0
99.8
99.9
1970
1971
1972
1973
1974
1975
1976
1977
110.4
114 0
119.1
134 7
160.1
174 9
183.0
194.2
111.7
113 9
122.4
159 1
177.4
184 2
183.1
188.8
111.0
112 9
125.0
176 3
187 7
186 7
191.0
192.5
112.1
114 5
120.8
148 1
170 9
182 6
178.0
186.1
110.0
114 1
117.9
125.9
153.8
171 5
182.4
195.1
107.1
109 0
113.6
123.8
139.1
137 9
148.2
154.0
110.3
114 1
131.3
143 1
145.1
148 5
167.8
179.5
106.2
115.2
118.6
134.3
208.3
245.1
265.6
302.2
102.2
104.1
104.2
110.0
146.8
181.3
187.2
192.7
1976: Jan
Feb
Mar
Apr
May
June
179.4
179.4
179 7
181.3
181.9
183.2
184.6
181.9
180 0
183.7
184.8
187.4
192.8
190.7
186 5
192.9
192.6
196.5
174.4
176.4
175 8
178.0
179.9
181.8
177.4
178.1
179 0
180.1
180.5
181.5
145.6
146.3
146 8
147.3
147.3
148.3
158.2
160.8
162.9
166.1
170.1
168.1
257.2
255.6
255.8
257.0
257.2
260.5
184.5
185.1
185.8
187.0
187.1
187.3
July
Aug
Sept
Oct
Nov
Dec
184.4
183 8
184.8
185.3
185 6
187.1
188.1
181 7
182.9
179.5
178 3
183.9
196.9
189 7
191.9
186.7
183 6
191.6
182.6
176 7
177.2
174.9
174 8
179.0
182.7
183 8
184.8
186.3
187 1
187.4
149.0
149.5
149.0
149.3
150 1
149.9
170.3
171.6
173.6
170.9
169.8
171.5
265.3
269.2
271.2
277.1
281.6
279.0
187.1
188.0
188.6
188.6
188.6
188.2
188.1
190.2
192.0
194.3
195.2
194.5
184 8
188.4
190.9
195.9
196 8
191.5
193 5
199.1
202.5
208.2
204 3
192.8
179 3
181.9
183.9
188.5
191 9
190.1
188 4
190.0
191.7
193.3
194 2
194.7
150.8
151.7
152.4
153.7
154.0
154.6
175.3
176.9
177.9
179.9
181.9
179.4
278.8
289.1
293.7
298.8
302.4
304.3
188.9
190.1
191.2
192.9
194.0
193.9
194 8
194.6
195.3
196.3
197.0
198.2
188 7
184.2
183.9
184.2
186.8
189.5
190 2
181 2
181.9
182.4
1P5 5
188.3
187 2
185 1
184.2
184.5
186 7
189.3
195 9
196.9
197.8
199.1
199 2
200.0
154 5
154.4
155.1
155.2
155.3
155.9
180.0
180.5
179.9
179.6
180.3
181.8
307.0
309.5
309.7
310.6
310.4
311.9
193.6
193.5
193.2
193.5
193.8
193.9
. .
. ..
1977- Jan
Feb
Mar
Apr
May
June
.
_
___.
July
Aug
Sept.
Oct
Nov
Dec
See next page for continuation of table and for footnotes.
319
TABLE B-55.— Wholesale price indexes by major commodity groups, J929-77—Continued
11967=100]
Industrial commodities—Continued
FurniPulp,
Metals Machin- ture
Rubber Lumber
and Nonmepaper,
and
and
tallic
and
ery and
houseand
metal
wood
plastic
mineral
equipallied
hold
products products products products
ment
durables products
Year or month
Transportation
equipment:
MiscelMotor
laneous
vehicles products
and
equip-2
ment
1929
59.4
25.0
40.2
55.8
51.2
41 9
1933
40.2
19.0
30.7
44.6
47.2
34 8
1939
61.2
24.8
37.6
41.3
52.6
49.1
39.1
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
57.1
61.5
71.6
73 6
72.7
70.5
70.8
70.5
72.8
70.5
27.4
32.7
35.6
37 7
40.6
41.2
47.2
73.4
84.0
77.7
72.5
75.7
72.4
37.8
38 5
39.1
39 0
39 0
39 6
44.3
54.9
62.5
63.0
41.4
42.1
42.8
42 4
42 1
42 2
46.4
53.7
58 2
61.0
53.8
57.2
61.8
61 4
63 1
63.2
67.1
77.0
81.6
82.9
49.1
50.2
52.3
52 4
53 5
55.7
59.3
66.3
71.6
73.5
40.4
43 2
47.2
47 2
47 5
48 3
56.0
64.1
70 8
75.7
73.5
76 5
78.0
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
85 9
105.4
95.5
89 1
90 4
102.4
103.8
103.4
103.3
102.9
89 3
97.2
94.4
94 3
92 6
97.1
98.5
93.5
92.4
98.8
74.3
88.0
85.7
85.5
85.5
87.8
93.6
95.4
96.4
97.3
66 3
73 8
73.9
76 3
76 9
82.1
89.2
91.0
90.4
92.3
63 1
70.5
70.6
72 2
73 4
75.7
81.8
87.6
89.4
91.3
84.7
91.8
90.1
91 9
92.9
93.3
95.8
98.3
99.1
99.3
75 4
80.1
80.1
83 3
85 1
87.5
91.3
94.8
95.8
97.0
75 3
79.4
84.0
83 6
83 8
86.3
91.2
95 1
98.1
100.3
79 2
83.9
83.4
85 6
86.4
86.5
87.6
90.2
92.0
92.2
103.1
99.2
96.3
96.8
95.5
95.9
97.8
100 0
103 4
105.3
95.3
91.0
91.6
93.5
95.4
95 9
100.2
100 0
113 3
125.3
98.1
95.2
96.3
95.6
95.4
96 2
98.8
100 0
101.1
104.0
92.4
91.9
91 2
91.3
93.8
96 4
98.8
100 0
102.6
108.5
92.0
91.9
92 0
92.2
92.8
93 9
96.8
100 0
103 2
106.5
99.0
98.4
97.7
97.0
97.4
96.9
98.0
100.0
102.8
104.9
97.2
97.6
97.6
97.1
97.3
97.5
98.4
100 0
103 7
107.7
98.8
98.6
98.6
97.8
98.3
98.5
98.6
100 0
102 8
104.8
93.0
93.3
93.7
94.5
95.2
95.9
97.7
100 0
102.2
105.2
108.3
109.1
109 3
112.4
136 2
150 2
159.2
167.5
113.6
127.3
144 3
177.2
183 6
176.9
205.6
236.2
108.2
110.1
113 4
122.1
151 7
170.4
179.4
186.4
116.6
118.7
123 5
132.8
171 9
185.6
195.9
209.0
111.4
115.5
117 9
121.7
139 4
161.4
171.0
181.7
107.5
110.0
111.4
115.2
127 9
139.7
145.6
151.4
112.9
122.4
126 1
130.2
153 2
174.0
186.3
200.4
108.7
114.9
118 0
119.2
129.2
144.6
153.8
163.7
109.9
112.9
114.6
119.7
133.1
147.7
153.7
164.4
152.3
154.1
155 5
156.7
157.1
157.1
190.7
196.3
202.5
203.3
202.4
199.9
174.8
175.7
176 9
178.6
179.3
179.6
187.8
189.2
190 7
193.0
194.2
196.6
167.1
167.8
168 4
169.2
169.6
170.4
143.3
143.7
144.0
144.5
144.9
145.3
181.2
181.5
182.7
185.4
186.0
186.3
151.3
151.4
151.6
151.8
151.6
151.8
151.9
152.2
152.6
152.5
152.7
154.4
158.3
161.1
163.9
164.6
164.8
164.7
203.7
207.5
212.8
213.6
214.3
220.0
180.5
181.0
181 6
181 6
181.5
181.8
198.9
199.5
200 1
200.0
200.1
200.9
171.2
171.6
172.8
174.0
174.5
175.4
145.7
146.1
146.7
147.2
147.5
147.9
187.3
188.0
188.6
189.4
189.5
189.6
151.7
152.8
153.5
159.0
159.2
159.5
153.8
153.5
153.9
154.1
156.1
157.0
164.6
164.2
164 6
165 7
166.3
167.5
222.8
224.4
229 0
229.8
229.5
228.8
182 9
183.0
183 6
185 3
186.2
187.3
202.1
203.2
206 5
208.2
208.5
207.7
176.7
177.5
178 2
178.9
180.0
180.7
148.8
149.1
149.6
150.1
150.6
151.5
192.4
193.6
195.1
198.6
199.3
200.6
159.2
159.4
160.7
161.0
161.4
161.9
160.2
160.6
161.0
162.5
163.1
163.5
168 9
169 1
169 4
170 0
170.0
169.8
235.6
242 7
252 4
247 3
243.2
249.1
187 8
187 8
188 5
188 8
188 3
187.6
210.6
211 7
212 6
211 8
212.0
213.3
181.8
182 8
183 9
185 7
186.7
187.3
151.4
152.4
152.5
153.0
153.6
154.0
201.7
202.4
204.2
205.3
205.6
206.5
161.9
163.1
163.8
170.8
170.6
170.9
163.9
164.2
166.5
168.4
168.9
169.6
.
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
.
...
..
.
1970
1971
1972
1973
1974
1975
1976
19771976: Jan
Feb
_
Mar
Apr .
May
June
__
July
Aug
Sept
Oct
Nov
Dec
_.
_
1977: Jan __
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
_.
» Prices for some items in this grouping are lagged and refer to 1 or 2 months earlier than the index month.
' Index for total transportation equipment is not shown but is available beginning December 1968.
Source: Department of Labor, Bureau of Labor Statistics.
320
TABLE B-56.— Wholesale price indexes by stage of processing and by special groupings, 1947-77
[1967=1001
Intermediate material $, supplies, and components •
Crude materials
for further processing
Materials and components for
manufacturing
Materials
and
com)onents
For
For
For
Com- or connon- durable
food durable
ponents struction
manu- manu- manufactur- facturfacturing
ing
ing
Materials
Year or month
Total
Foodstuffs
and
feedstuffs
Nonfood
materials
except
fuel
Fuel
101.2
110.9
96.0
111.7
120.8
100.3
90.6
100.7
91.6
66.6
78.7
78.3
72.4
78.3
75.2
72.1
77.8
74.5
94.0
96.9
83.3
95.2
100.8
91.9
54.4
61.4
63.1
58.3
63.0
64.2
66.0
73.1
73.2
104.6
120.1
110.3
101.9
101.0
107.6
124.5
117.2
104.9
104.9
104.7
120.7
104.6
100.1
98.2
77.9
79.4
79.9
82.7
79.0
78.6
88.1
85.5
86.0
86.5
78.1
88.5
84.8
86.2
86.3
86.7
96.6
92.9
93.0
92.2
96.5
111.7
100.6
99.8
98.2
66.7
74.1
74.3
77.6
79.3
66.6
75.6
75.7
77.1
77.5
77 0
84.3
83.7
85.1
85.5
97.1
97.6
99.8
102.0
_.__ 99.4
95.1
93.1
97.2
103.0
96.2
103.8
107.6
106.2
102.2
105.8
78.8
84.4
89.2
90.3
91.9
88.1
92.0
94.1
94.3
95.6
88.4
92.6
94.8
95.2
96.5
89.3
89.7
91.3
93.4
90.0
98.6
100.1
101.4
100.4
102.1
83.3
88.5
91.4
92.0
94.2
80.9
88.3
91.8
92.5
93.6
88 9
93.5
94.0
94 0
96.6
I960
1961..
1962
1963
1964
97.0
96.5
97.5
95.4
94.5
95.1
93.8
95.7
92.9
90.8
101.4
102.5
102.0
100.7
102.4
92.8
92.6
92.1
93.2
92.8
95.6
95.0
94.9
95.2
95.5
96.5
95.3
94.7
94.9
95.9
91.1
94.0
92.0
96.6
95.2
102.1
99.9
99.3
98.4
99.1
94.3
93.0
92.9
93.0
94.8
93.1
92.2
91.5
91.5
92.3
95.9
94 6
94.2
94.5
95.4
1965
1966 .
1967
1968
1969
99.3
105.7
100.0
101.6
108.4
97.1
105.9
100.0
101.3
109.3
104.5
106.7
100.0
102.1
106.9
93.5
96.3
100.0
102.3
106.6
96.8
99.2
100.0
102.3
105.8
97.4
99.3
100.0
102.2
105.8
97.6
101.9
100.0
101.5
107.1
100.0
100.8
100.0
101.3
102.4
96.8
98.6
100.0
103.3
109.1
93.8
97.1
100.0
102.3
105.5
96.2
98.8
100 0
104.9
110.8
___ 112.3
115.1
127.6
174.0
196.1
112.0
114 2
127.5
180.0
189.4
109.8
110.7
121.9
161.5
205.4
122.6
139 0
148.7
164.5
219.4
109.9
114.1
118.7
131.6
162.9
110.0
112.8
117.0
127.7
162.2
112.9
116.5
119.9
146.0
209.2
103.8
105.3
109.4
121.2
155.2
114.7
118.2
123.8
133.7
171.7
111.1
114.8
117.6
121.4
139.9
112.6
119 7
126.2
136.7
161.6
196.9
205.1
214.3
191.8
190.1
190.9
188.3
210.2
217.3
271.5
314.7
400.5
180.0
189.3
201.7
178.7
185.6
195.5
209.4
180.6
181.7
174.7
183.6
189.2
188.4
202.3
218.9
158.3
165.6
175.9
176.4
188.0
202.9
1976- Jan
Feb
Mar
Apr
May
June
201.2
199.3
198.5
205.3
205.7
210.2
193.2
191.3
187.4
194.5
194.1
197.8
198.7
196.3
200.5
206.9
208.7
214.3
279.3
278.5
286.1
291.5
293.4
301.7
183.8
184.6
185.7
186.9
187.7
189.1
180.7
181.6
182.5
183.6
184.4
185.3
186.4
183.0
183.6
182.9
183.5
182.2
180.4
181.3
181.9
183.2
183.5
183.7
192.7
194.7
196.2
198.1
199.6
202.3
161.7
162.2
162.6
163.2
163.8
164.4
181.8
183.0
184.7
185.5
186.2
186.6
July
Aug
Sept
Oct
Nov
Dec
211.8
_- __ 206.2
206.4
204.1
204.5
207.9
196.3
188.6
189.0
182.3
178.8
187.4
222.7
217.5
217.3
213.1
213.2
213.7
305.9
315.8
316.0
356.8
390.4
361.3
190.6
191.1
192.6
192.7
193.1
194.0
186.8
187.2
188.2
188.4
188.7
189.2
187.0
177.6
176.6
174.5
174.7
175.5
184.5
184.9
185.4
184.9
185.2
184.8
204.4
205.7
207.3
208.4
208.6
210.0
165.0
166.9
168.3
169.3
169.7
170.3
188.3
190.0
191.7
192.2
192.6
193.6
208.1
215.5
219.9
226.1
224.4
215.4
189.7
194.0
197.1
203.7
201.8
192.0
214.1
220.8
228.0
232.7
227.6
219.0
342.8
377.8
383.9
392.3
404.5
399.4
195.0
196.6
198.7
201.2
202.1
202.1
189.7
190.8
192.7
194.6
195.8
195.5
174.5
178.5
182.0
189.0
191.1
185.6
184.9
185.8
187.1
189.3
190.7
190.8
211.2
212.4
215.0
216.6
217.6
216.8
170.9
171.2
172.9
173.4
174.2
175.1
195.1
195.9
197.8
199.4
200.3
201.3
212.9
207.3
207.8
208.0
210.5
215.6
191.2
181.4
182 0
182.6
185.4
189.9
210.6
210.7
210 4
209.1
209.6
215.1
403.2
412.4
415 6
416.8
424.5
432.2
202.6
203.4
204 2
204.4
204.8
205.3
196.6
197.3
197.8
197.9
198.2
198.8
179.9
179.9
175.8
177.5
181.1
185.8
190.8
190.6
190.2
190.4
190.2
190.1
220.9
222.2
224.1
223.2
223.0
224.0
176.1
177.5
179.0
179.7
180.4
180.6
204.1
206.2
208.7
208.4
208.3
209.6
1947
1948 .
1949
1950 .
1951
1952
1953
1954
_ .
.
1955
1956
1957
1958
1959
1970... _...
1971
1972
1973...
1974
1975
1976
1977
_
_
1977: Jan
Feb
Mar
Apr
May
June
July
Aug _ _
Sept
Oct
Nov
Dec
._
Total
Total
See next page for continuation of table and for footnotes.
321
T A B L E B-56.—Wholesale price indexes by stage of processing and by special groupings, 1947—77—
Continued
[1967=1001
Finished goods
Special grouping s
(Consume r finished goods
Year or month
Manufactured
goods
Excluding foods
Total
Total
Total
Nondurable
goods
Durable
goods
Foods
Producer
finished
goods
Total
Durable
Crude
materials 2
Intermediate
materials,
SUD-
plies,
and
components 3
74.0
79.9
77.6
80.5
86.5
82.5
82.8
90.4
83.1
79.0
84.0
82.2
80.7
85.8
82.3
74.6
79.7
81.8
55 4
60.4
63.4
72 3
78.2
75.5
59 4
65 4
67.3
79 2
92 5
84 0
70 0
76 1
74 2
79.0
86.5
86.0
85.1
85.3
83.9
91.8
90.7
89.2
89.1
84.7
95.2
94.3
89.4
88.7
83.5
89.5
88.3
89.1
89.4
83.6
90.0
87.8
88.6
88.9
82.7
88.2
88.9
89.6
90.3
64.9
71.2
72.4
73 6
74.5
78.4
87.0
85.1
85.0
85.7
69 6
76 3
76.7
78 4
79 4
93 6
102 9
93.1
92 4
88.0
77.7
87.0
84.3
85 3
85 7
1955
1956
1957
1958
1959
85.5
87.9
91.1
93.2
93.0
88.5
89.8
92.4
94.4
93.6
86.5
86.3
89.3
94.5
90.1
90.1
92.3
94.6
94.7
95.9
89.4
91.1
93.2
92.6
94.0
91.2
94.3
97.1
98.4
99.6
76.7
82 4
87.5
89.8
91.5
86.6
90.0
92.8
93.8
94.6
82.2
87 5
90.9
92.2
94.0
96.6
102 3
100 9
96.9
102.3
88.3
92 6
95 0
94.8
96.4
1960
1961
1962
1963
1964
93.7
93.7
94.0
93.7
94.1
94.5
94.3
94.6
94.1
94.3
92.1
91.7
92.5
91.4
91.9
96.3
96.2
96.0
96.0
95.9
94.7
94.7
94.8
95.1
94.8
99.2
98.8
98.3
97.8
98.2
91.7
91.8
92.2
92.4
93.3
94.8
94.4
94.5
94.3
94.8
94.1
93.6
93.5
93.5
94.6
98.3
97.2
95.6
94.3
97.1
96.8
95.5
95.3
95.0
95.6
1965
1966
1967
1968
1969
95.7
98.8
100.0
102.9
106.6
96.1
99.4
100.0
102.7
106.6
95.4
101.6
100.0
103.7
110.0
96.6
98.1
100.0
102.1
104.6
95.9
97.8
100.0
102.2
105.0
97.9
98.5
100.0
102.2
104.0
94.4
96.8
100.0
103.5
106.9
96.3
99.1
100.0
102.6
106.3
95.8
97.9
100 0
103.5
107.7
100.9
104.5
100 0
102.0
110.6
96.9
98.9
100 0
102.6
106.1
1970
1971
1972
1973
1974
1975
1976
1977
110.3
113.7
117.2
127.9
147.5
163.4
170.3
180.6
109.9
112.9
116.6
129.2
149.3
163.6
169 0
178.9
113.5
115.3
121.7
146.4
166.9
181.0
180 2
189.1
107.7
111.4
113.4
118.5
138.6
153.1
161.8
172.1
108.3
111.7
113.6
120.5
146.8
163.0
173.3
185.4
106.9
110.8
113.2
115.8
126.3
138.2
144.4
152.1
112.0
116.6
119.5
123.5
141.0
162.5
173.2
184.5
110.2
113.9
117.9
129.2
154.1
171.1
179.0
190.1
112.0
117 0
121.1
127.4
148.6
165.6
175.6
188.0
118.9
123 1
131.1
155.2
219.1
225.1
249.9
280.4
109.9
114 3
118.9
128.1
159.5
178.6
189 5
202.4
1976: Jan
Feb
Mar
Apr
May
June
168.8
168.2
168.0
169.0
169.4
169.9
168.4
167.4
166.8
168.0
168.5
168.9
183.7
180.2
178.6
182.0
183.2
182.1
159.1
159.4
159.3
159.3
159.4
160.7
169.8
170.1
169.9
170.1
170.3
172.0
143.0
143.1
143.1
143.0
143.0
143.6
169.5
170.0
170.6
171.3
171.4
172.1
175.4
175.6
176.0
177.1
177.7
178.9
170.7
171.5
172.4
173.2
173.8
174.8
233.8
231.7
237.9
245.8
246.2
248.6
183.8
184.9
186.1
187.3
188.0
188.8
170.5
170.0
170.7
172.2
172.3
174.0
169.6
168.7
169.3
170.0
170.1
172.0
182.2
177.8
178.1
177.0
176.0
180.9
161.6
162.5
163.2
164.9
165.6
166.0
173.6
175.1
176.0
176.7
177.6
178.0
143.6
143.6
144.2
147.2
147.5
147.8
172.6
173.1
174.0
177.2
177.6
178.7
179.8
179.8
180.9
181.5
181.9
183.2
175.7
176.6
177.8
179.7
180.0
181.0
254.2
254.9
252.9
261.4
269.6
262.3
190.1
191.4
192.8
193.2
193.6
194.2
1977: Jan
Feb .
Mar
Apr
May...
June
175.1
176.6
177.5
178.8
180.3
180.5
173.2
175.0
176.1
177.5
179.4
179.4
181.5
185.0
186.6
188.5
192.3
190.7
167.4
168.3
169.2
170.4
171.1
172.0
179.6
181.0
182.3
183.6
184.8
185.9
149.0
149.3
149.7
150.6
150.8
151.4
179.6
180.2
180.7
181.6
182.4
183.1
184.2
185.4
186.9
188.9
190.2
190.4
182.1
182.9
184.3
185.4
186.2
186.7
259.4
273.7
279.6
283.1
284.5
279.5
195.3
196.7
198.7
200.7
201.6
202.2
July..
Aug
Sept
Oct...
Nov
Dec...
181.3
181.3
181.8
183.9
184.5
185.5
180.2
179 7
180.2
181.4
181.8
182.9
192.1
190 0
189.7
189.8
190 4
192.9
172.5
172.9
173.7
175.5
175.8
176.2
186.6
186.8
188.2
188.4
188.7
189.1
151.5
152.1
152.1
156.1
156.3
156.8
183.8
184.7
185.6
189.9
190.8
191.5
190.9
191.1
191.9
193.1
193.7
194.5
188.3
189.5
190.9
192.8
193.2
194.0
279.1
283.4
283.7
282.3
284.6
292.4
203.8
204.9
206.0
206.2
206.0
206.5
1947
1948
1949
1950
1951
1952
1953
1954
.
..
July
Aug...
Oct
Nov
Dec
.
* 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.
Excludes intermediate materials for food manufacturing and manufactured animal feeds.
Source: Department of Labor, Bureau of Labor Statistics.
1
322
TABLE B-57.—Wholesale price indexes for selected groupings, seasonally adjusted\ 1974-77
[1967=100, seasonally adjusted]
Farm products and
processed foods
and feeds
Manufactured goods
Finished goods
rude
mate-1
ials
nitermediate
materials,
upplies,
and .
components 2
90.3
01.5
11.1
21.7
14.1
15.8
138.6
141.2
145.9
150.5
155.3
159.0
51.2 28.0
54.3 229.3
56.6 230.2
58.4 230.4
59.9 230.3
60.9 224.3
163.7
168.6
170.1
172.2
173.7
174.4
Consumer finished goods
Year and
month
ProcFarm essed
Total prod- foods
ucts and
feeds
Excluding foods
Total Foods
NonTotal dur- Durable able
goods goods
roducer
inished Total
goods
77.2
1974: Jan
Feb
79.8
Mar
76.8
Apr
70.9
M a y . — 68.3
June
61.5
02.3
04.1
97.0
87.4
81.0
67.6
61.2
64.4
64.0
60.4
60.2
57.6
39.3
42.3
43.4
45.0
46.5
145.9
61.2
64.9
63.6
64.0
63.8
58.5
25.9
28.3
30.9
33.5
36.0
38.5
30.6
34.0
37.8
41.2
44.2
47.4
18.9
19.7
20.7
21.9
23.8
25.3
127.9
129.2
130.9
132.5
136.1
138.9
70.9
82.2
77.7
85.7
90.6
86.4
79.1
88.0
80.6
89.2
91.1
83.9
65.8
78.6
75.8
83.5
90.2
87.9
149.5
152.0
153.3
155.9
158.9
158.6
63.9
67.5
68.4
71.5
78.0
75.8
40.8
42.7
44.3
46.6
47.2
48.1
50.0
52.4
54.0
55.7
56.7
57.2
27.1
28.2
29.6
32.6
33.3
34.6
141.8 155.8
145.4 161.0
148.3 161.9
151.4 165.0
153.7 166.5
155.0 167.2
83.1 79.3
78.8 73.4
75.6 71.2
80.3 79.1
82.4 85.3
81.6 184.6
85.5
182.3
178.4
181.1
180.5
179.7
159.3
158.7
158.3
160.3
161.9
163.3
July
Aug
Sept
Oct
Nov
Dec
1975: Jan
Feb
Mar
Apr
May_...
June
175.6 49.5 58.8 35.2
174.0 49.7 58.8 135.9
171.9 50.2 59.1 136.6
176.4 50.7 159.7 137.0
179.6 51.1 160.4 137.1
182.2 151.8 161.3 137.6
157.0
158.3
159.8
160.8
161.4
161.9
38.5
41.0
43.7
46.3
49.3
51.5
168.2
168.3
168.3
169.2
169.7
170.1
Durable
33.9
35.3
37.9
41.0
45.2
48.0
62.3
163.5
163.9
164.4
164.6
164.6
222.0
220.1
217.9
220.0
223.7
224.7
176.1
176.6
176.8
177.1
177.0
177.1
85.7
88.0
188.8
191.4
188.3
186.1
191.2
92.4
195.0
199. 2
195.4
194.2
182.3 164.6 184.2 152.8 162.5 137.8
185.3 165.3 184.0 154.1 164.3 138.5
184.9 166.7 185.9 155.1 165.8 139.1
186.4 168.0 186.9 156.5 167.2 140.4
183.8 168.0 185.6 157.6 168.3 141.1
180.9 168.2 184.9 158.1 169.2 141.4
162.9 170.7 164.7 222.3
163.2 171.6 165.2 225.3
164.4 172.3 166.2 231.7
165.9 174.2 167.9 229.7
166.9 174.6 169.1 228.3
167.7 174.9 170.1 234.4
177.3
178.3
179.1
181.6
182.7
183.9
184.4
181.6
181.2
185.4
May"-"--" 186.3
June
187.0
193.3
189.8
187.3
195.0
194.3
195.3
178.7 168.2 182.7 159.3 170.7 142.1
176.5 167.0 179.4 159.2 170.1 142.7
177.2 166.7 178.1 159.3 170.2 142.8
179.5 168.8 184.3 159.4 170.3 143.0
181.1 169.3 185.5 159.5 170.3 143.3
181.6 169.5 183.7 160.7 171.8 143.9
169.0 175.4 171.0 237.0
169.8 176.1 172.0 231.1
170.7 176.7 172.7 237.6
171.5 177.8 173.2 242.9
171.8 178.1 173.5 244.1
172.5 179.1 174.5 246.8
184.9
185.8
186.6
187.2
187.4
188.2
185.8
180.5
181.1
180.1
180.1
184.0
194.2
187.7
189.2
188.2
187.1
191.9
180.5
175.9
176.0
174.9
175.6
178.8
144.2
144.9
145.7
146.5
146.8
146.9
173.1 179.3 175.3
173.6 179.1 176.2
174.5 180.2 177.8
176.3 181.0 179.3
177.0 182.1 180.4
178.4 183.4 181.7
252.7
254.4
253.1
262.4
271.6
265.9
189.1
190.3
192.0
193.3
194.3
195.5
184.5
188.2
192.2
197.8
May"---1 198.2
191.0
June
194.0
198.3
203.5
210.4
205.5
191.4
178.5 173.0 180.6 167.5 180.5 148.1
181.9 174.6 184.2 168.1 181.0 148.9
185.3 176.0 186.2 169.3 182.7 149.4
190.1 178.4 190.8 170.5 183.8 150.6
193.4 180.3 194.6 171.3 184.8 151.1
190.1 180.0 192.3 172.0 185.7 151.7
179.0 184.2 182.5
180.1 186.0 183.5
180.8 187.7 184.7
181.8 189.7 185.4
182.8 190.6 185.8
183.5 190.6 186.3
262.6
273.0
279.3
280.1
282.3
277.8
196.4
197.6
199.3
200.5
200.9
201.5
184.4
185.2
186.1
188.9
190.2
191.2
277.7
283.0
283.9
283.2
286.8
296.0
202.7
203.7
205.2
206.3
206.7
207.8
July
Aug
Sept....
Oct
Nov
Dec
1976: Jan
Feb
Mar
July....
Aug.--Sept
Oct
Nov
Dec
1977: Jan
Feb
Mar
169.2
168.5
169.3
169.6
169.9
171.9
181.0
177.1
177.1
176.4
175.7
180.7
161.5
162.5
163.7
164.6
165.5
165.8
173.1
174.2
175.6
176.7
178.0
178.4
186.4 187.6 185.0 179.7 190.9 172.4 186.0 152.1
July
183.1 179.9 184.2 179.5 189.2 172.9 185.9 153.5
Aug
Sept.— 182.3 179.6 183.1 180.1 188.6 174.1 187.8 153.6
184.7 184.0 184.5 181.0 189.2 175.1 188.4 155.3
Oct
188.9 189.5 187.7 181.6 190.0 175.6 189.1 155.5
Nov
189.7 189.0 189.3 182.7 192.8 176.0 189.5 155.9
Dec
190.3
190.3
191.1
192.5
193.9
194.7
i Excludes crude foodstuffs and feedstuffs, plant and animal fibers, oilseeds, and leaf tobacco.
1
Excludes intermediate materials for food manufacturing and manufactured animal feeds.
Source: Department of Labor, Bureau of Labor Statistics.
323
187.9
189.1
190.9
192.4
193.6
194.8
TABLE B-58.—Percent changes in wholesale price indexes, major groups, 1948-77
IPercent change!
Year or month
Farm products
and processed
foods and feeds
Dec.
to
Dec.i
Year
to
year
Dec.
to
Dec.i
Year
to
year
Dec.
to
Dec.i
-11.7
5 0
-5.0
8.6
-2.1
3.0
-4.6
80
-2.9
-2.4
-7.4
92
-8.1
4.C
-4.5
6.3
-2.1
10 4
-.6
90
5.0
4.8
13.8
-3.9
-6.5
14.0
-1.4
1.4
3.6
10.4
-2.3
.8
10.4
2.9
-2.2
1 8 13.3
5.3
9.5
-.6 -5.9
-1.0 -2.2
.2 - 1 . 9
1.9
82
12.4
.9
g -1.1
1.6
-5^2
— 8
1.6
7.2
-1.3
.9
10 3
34
.8
23
1.1
24
9 7
1.7
1 7
1.2
4.3
4.2
1.1
.9
1.2
2.2
4.5
2.8
.3
1.8
1.2
4.2
3.2
2.4
2.5
.1
1.3
5.6
8.3
4.3
13
1.0
3.0
7.4
6.2
26
1.9
-.6
-.1
-.2
.1
!6
0
-.5
0
-.1
.5
1950
1951
1952
1953
1954
-8.2
-2.3
-2.6
. .
-4.4
7.6
-4.7
3*. 4
4.7
-4.7
.4
-.1
-2.5
-.2
3.5
5.8
-4.7
1.7
2.5
1.7
-.4
-2.9
3.6
5.3
.4
-3.7
1.8
-.5
.1
-.2
.5
.8
0
.3
-.3
.4
5.2
-1.8
.4
-.3
-.1
.1
.1
.4
-.1
-1.3
.4
2.2
-.4
.9
-1.2
.5
0
-.1
19
2
.1
4
.2
1.0
1.7
3.2
1.2
2.9
3.6
9.1
1.4
—.4
4.8
8.2
3.8
6.5
-1.6
3.7
6.1
.9
1.7
2.1
2.0
2.9
.7
1.6
1.9
2.1
2.4
1.5
3.9
3.1
3.0
4.6
1.2
2.5
33
3.5
3.3
3.5 - 2 . 5
5.9
3.1
3.1
8.0
9 1 22.5
15.3
13.0
3.2
1.6
5.6
20.3
14.0
3.9
2.0
2.0
7.4
20.5
3.0
3.2
2.1
4.5
16.9
4.9
2.4
2.0
53
22.6
4.8
4.1
2.5
33
14.2
5.5
-2.5
6.6
84
-.4
4.9
6.7
4.9
6.1
10.5
5.7
6.4
82
6.4
7.2
15 2
6.6
6.5
3.9
-.6
.6
-2.1
0
.2
0
1.1
-1.0
-.6
1965
1966
1967
1968
1969
9.5
.2
—1 8
3.5
7.5
4.2
6.6
-3.4
2.4
5.5
1.4
2.2
1 9
2.7
3.9
1.3
2.2
1.5
2.5
3.4
3.3
2.2
1.6
3.1
4.8
-1.4
6 0
14.4
26 7
11.0
3.4
2 0
7.5
30 0
11.5
3.6
3.4
3.4
10 7
25.6
3.8
3 7
3.3
68
22.2
2.2
3.2
3.8
11.8
18.3
3 8
60
6.4
6.7
11 5
6.4
7.0
6.6
3.3
6.6
1970
1971.
-.
1972
1973 . .
1974
.
.
1975
1976
1977
- 3
-1 1
3.0
-.6
3.1
Year
to
year
.2
2.8
3.6
2.3
-.2
1960
1961
1962
1963
1964
. .
Producer
finished goods
Year
to
year
-6.8
-8.9
-6.4
6.0
4.2
All except food
Dec.
to
Dec.i
1948
1949
1955
1956
1957
1958
1959
Foods
Year
to
year
Year
to
year
3.5
Consumer finished goods
Dec.
to
Dec.i
Dec.
to
Dec.»
17.0
Total
finished goods
Industrial
commodities
10 8
4.2
6.0
'3
Change from preceding month
Unadjusted
1976: Jan
Feb
Mar
Seasonally
adjusted
-0.9
-1.5
-.2
2.3
SeaSeaSeaSeaSeaUnad- sonally Unad- sonally Unad- sonally Unad- sonally Unad- sonally
adadadjusted
justed
ad- justed
justed
justed
adjusted
justed
justed
justed
justed
0.7
.4
.5
.6
.2
.6
0.7
.2
.4
.4
.2
.6
0.2
-.4
-1.5
-2.2
0
.6
.6
.4
1.0
l!8
\l
.5
.6
.7
.5
.5
.2
.6
.8
.3
1.9
.9
1.0
2.0
-.8
-.1
2.0
1.1
2.5
2.0
-1.2
.8
.5
.5
1.0
.4
.7
'A
.5
!5
.4
]3
.5
.4
.4
.2
.3
.5
1.0
.2
.3
.7
.6
.3
.2
.4
.5
.5
2.3
.5
.4
.7
.6
.5
.8
.4
.2
.6
.6
'.9
.6
.3
.4
-.3
.4
.9
.1
1.0
1977: Jan
Feb
Mar
Apr.....
May....
June
.5
1.9
1.3
2.6
.5
-2.7
.3
2.0
2.1
2.9
.5
.8
.9
.8
-3*. 6
'.3
.5
.7
.7
.6
.4
.3
.6
9
.5
.7
.8
.1
July....
Aug...
-1.5
-2.7
-2.4
-2.1
-.4
1.3
2.3
.6
.6
.5
.7
.1
.5
.5
.8
.6
.4
.5
.4
0
.3
1.2
'.5
1.1
.9
0
0
.1
'.8
.4
.7
.7
-1.2
-.2
.1
L3
1 Changes from December to December are based on unadjusted indexes.
Source: Department of Labor, Bureau of Labor Statistics.
r.o
.1
-2.4
.2
-.6
-.6
2.8
-.6
-2.9
.3
-.6
0
2.2
~'.2
1.4
1.4
l'.8
.2
.6
-.1
-.2
.5
.5
.3
1.0
.4
Nov....
Dec...
.3
.3
0.5
.2
-.1
0
-3.4
.7
-1.9
-.7
3.1
Sfcr
.3
.3
~!6
.2
.3
-1.2
-1.8
-.7
3.5
.7
-1.0
July
Au*
Sept___.
Octt
Nov
Dec
4
0.8
.5
.5
.5
.2
.4
-1.0
-1.9
-.9
1.9
.7
-.6
June
fc:
0.9
.3
.4
.4
.1
.4
0.2
-.4
0
1.1
.2
2
-0.8
—1.5
-1.0
2.1
.6
1 4
324
-.9
-.3
.3
.4
1.5
.8
'.2
0.8
-.1
!l
.1
.8
.5
.4
.8
.3
.6
.4
.6
.6
.4
.5
.4
.5
1.5
.5
MONEY STOCK, CREDIT, AND FINANCE
T A B L E B - 5 9 . — Money stock measures, 1947-77
[Averages of daily figures; billions of dollars, seasonally adjusted, except as noted!
Components and related items
Overall measures
Mi
(Currency
plus
demand
deposits)
Year and
month
1947: Dec
1948: Dec
1949: Dec .
,.
1950:
1951:
1952:
1953:
1954:
1955:
1956:
1957:
1958:
1959:
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec. .
Dec
1960:
1961:
1962:
1963:
1964:
1965:
1966:
1967:
1968:
1969:
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
1970:
1971:
1972:
1973:
1974:
1975:
1976:
1977:
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Deep...
1976:Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct . .
Nov
Dec
1977:Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec p
..
M2
3
(Mi plus (M M
2 plus
time
deposits
deposits
at nonat combank
mercial
thrift
banks
instituther than
arge CDs) tions)
Deposits at commercial banks
Curency l
113.1
111.5
111.2
116.2
122.7
127.4
128.8
132.3
135.2
136.9
135.9
141. 1
143.4
144.2
148.7
150.9
156.5
163.7
171.3
175.7
187.3
202.2
208.8
219.6
233.8
255.3
270.5
283.1
294.8
312.4
335.4
210.9
217.1
228.6
242.9
258.9
277.1
301.3
318.1
349.9
382.9
392.3
423.5
471.7
525.3
571.4
612.4
664.3
740.3
806.5
303.8
319.3
342.1
369.2
400.3
434.4
471.7
495.4
543.9
589.6
607.3
656.2
742.8
844.5
919.6
981.5
1, 092.6
1, 237.1
1, 373.9
26.4
25.8
25.1
25.0
26.1
27.3
27.7
27.4
27.8
28.2
28.3
28.6
28.9
29 0
29.6
30.6
32.5
34.3
36.3
38.3
40.4
43.4
46.1
49.1
52.6
56.9
61.5
67.8
73.7
80.5
88.4
295.3
296.8
298.1
301 8
303.5
303.2
305.0
306.5
306.9
310.4
310.4
312.4
313.8
314.0
315.4
320.5
320.7
321.9
326.8
328.4
330.4
333.7
333.3
335.4
670.3
678.2
682.6
690 6
695.7
698.2
705.2
710.4
716.3
725 9
732.3
740.3
746.3
750.7
756.1
764.6
767.6
772.8
783.5
787.7
792.9
799.6
802.7
806.5
1,103.6
1,117.1
1,126. 5
1,139.7
1,149.7
1,156. 5
1,168. 8
1,180.8
1,193.9
1,210.7
1,223.4
1, 237.1
1, 248.9
1,258.2
1, 268.1
1, 281. 2
1, 289.0
1, 299. 5
1,316.9
1, 329. 5
1, 343.1
1, 357.1
1, 365. 6
1, 373.9
74.3
75.0
75.7
76 6
77.3
77.5
78.1
78.6
79.2
79.8
80.2
80.5
81.1
81.8
82.2
83.1
83.6
84.0
85.1
85.5
86.4
87.1
87.8
88.4
Time and savings 3
Demand 2
86.7
85.8
86.0
91.2
96.5
100.1
101.1
104.9
107.4
108.7
107.6
112.6
114.5
115.2
119.1
120.3
124.1
129.5
134.9
137.3
146.9
158.7
162.8
170.5
181.3
198.4
209.0
215.3
221.0
231.9
247.0
221.1
221.8
222.4
225 2
226.2
225.6
226.9
227.9
227.7
230.6
230.2
231.9
232.7
232.1
233.2
237.4
237.1
238.0
241.7
242.9
244.0
246.6
245.5
247.0
1
2
Total
35.4
36.0
36.4
36.7
38.2
41.1
44.5
48.3
50.0
51.9
57.4
65.4
67.4
72.9
82.7
97.6
112.0
126.2
146.4
157.9
183.3
204.3
194.4
229.2
271.1
313.5
363.9
418.3
451.7
491.1
545.8
453.3
456.7
457.8
460.0
460.7
465.3
469.0
468.9
472.5
477.8
484.2
491.1
495.6
500.0
502.8
505.7
509.2
514.8
519.5
522.5
525.8
532.2
5<0.3
545.8
Large
CDs *
Other
Deposits
at nonbank
thrift
institutions 5
2.8
5.7
9.6
12.8
16.4
15.5
20.6
23.5
10.9
25.3
33.3
43.5
63.0
89.0
82.1
63.3
74.7
67.4
72.9
79.9
92.0
102.3
113.4
130.0
142.4
162.6
180.8
183.5
204.0
. 237.8
270.0
300.9
329.3
369.6
427.9
471.1
92.9
102 3
113.4
126.4
141.4
157.3
170.4
177.3
194.0
206.7
214.9
232.7
271.1
319.3
348.1
369.1
428.3
496.8
567.4
78.4
75.4
73.4
71 2
68.6
70.2
68.9
65.0
63.1
62.3
62.2
63.3
63.1
63.3
62.2
61.6
62.3
63.9
62.8
63.2
63.2
66.4
70.9
74.7
374.9
381.3
384.4
388.9
392.1
395.1
400.1
403.9
409.4
415.5
422.0
427.9
432.5
436.7
440.6
444.1
446.9
450.9
456.7
459.3
462.6
465.9
469.4
471.1
433.4
438.9
443.9
449.1
454.0
458.2
463.6
470.5
477.6
484.8
491.0
496.8
502.6
507.5
512.1
516.6
521.4
526.7
533.5
541.7
550.2
557.5
563.0
567.4
U.S.
Government
demand
deposits
(unadjusted) 6
1.0
1.8
2.8
2.4
2.7
4.9
38
5.0
3.4
3.4
3.5
3.9
4.9
4.7
4.9
5.6
5.1
5.5
4.6
3.4
5.0
5.0
5.6
7.3
6.9
7.4
6.3
4.9
4.1
4.7
5.5
3.8
4.5
3.9
3.9
3.5
3.7
5.0
4.0
4.2
4.7
4.2
4.4
4.5
5.6
3.8
5.2
3.9
3.7
5.4
4.1
3.8
5.4
Currency outside the Treasury, the Federal Reserve Banks, and the vaults of all commercial banks.
Demand deposits other than those due to domestic commercial banks and the U.S. Government, less cash items in
process
of collection and Federal Reserve float, plus foreign balances at Federal Reserve Banks.
3
Time and savings deposits other than those due to domestic commercial banks and the U.S. Government. Effective
June
1966,
excludes balances accumulated for payment of personal loans (about $1.1 billion).
4
Negotiable time certificates of deposit (CDs) issued in denominations of $100,000 or more by large weekly reporting
commercial
banks.
4
Average of the beginning- and end-of-month deposits of mutual savings banks, savings capital at savings and loan
associations,
and credit union shares.
6
Deposits at all commercial banks.
Source: Board of Governors of the Federal Reserve System.
325
TABLE B-60.—Commercial bank loans and investments, 1930-77
[Billions of dollars]
Loans
Total loans
and investments *
End of year
or month 1
1930:June
1933: June
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
Total»
48.9
30.4
40.7
43.9
50.7
67.4
85.1
105.5
124.0
114.0
116.3
114.2
34.5
16.3
17.2
18.8
21.7
19.2
19.1
21.6
26.1
31.1
38.1
42.4
113.0
118.7
124.7
130.2
139.1
143.1
153.1
157.6
161.6
166 4
181.2
188.7
197.4
212.8
231.2
250.2
272.3
300.1
4
316.1
352.0
390 2
401.7
435.5
485.7
558.0
633.4
690.4
721.1
784.4
865.4
787.3
797.9
805.1
815.7
823.9
830.5
41.5
42.0
51.1
56.5
62.8
66.2
69.1
80.6
88.1
91 5
95.6
110.5
116.7
123.6
137.3
153 7
172.9
198.2
4
213 9
231.3
258 2
279.4
292.0
e 320.9
378.9
449.0
500.2
496.9
538.9
612.9
541.4
546.6
552.9
560.7
566.1
572.4
837.0
845.6
848.4
857.9
866.1
865.4
579.0
587.0
592.2
602.5
611.2
612.9
Investments
Commercial
and
industrial
U.S. Government securities
5.0
7.5
16.3
17.8
21.8
41.4
59.8
77.6
90.6
74.8
69.2
62.6
Other
securities
Loans plus
loans sold to
bank affiliates 2
9.4
6.5
7.1
7.4
7.2
6.8
6.1
6.3
7.3
8.1
9.0
9.2
Seasonally adjusted
1948
1949 .
1950
1951
1952
1953
1954
1955
1956
1957
1958 s
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969 6
1970
1971
1972
1973
1974
1975.
1976
1977 P
1977:Jan
Feb . .
Mar
Apr.
. .
May
June ._
July*.Aug »
Sept*
Oct*
.
NOVP
Dec*
39.4
42.1
43.9
47.6
52.1
58.4
69.5
78.6
86.2
95.9
105.7
110.0
116.1
130.2
156.4
183.3
176.0
179.5
8 202.2
180.4
182.2
184.4
186.7
188.2
190.2
62.3
66.4
61.1
60.4
62.2
62.2
67.6
60.3
57.2
56 9
65.1
57.7
59.9
65.3
64.7
61.5
60.7
57.1
53.5
59.4
60 7
51.2
57.8
60.6
62.6
54.5
50.4
79.4
97.3
93.5
97.0
101.7
103.8
103.2
105.1
105.2
9.2
10.3
12.4
13.4
14.2
14.7
16.4
16.8
16.3
17.9
20.5
20.5
20.8
23.9
29.2
35.0
38.7
44.8
4
48.7
61.3
71.3
71.1
85.7
«104.2
116.5
129.9
139.8
144.8
148.2
159.0
148.9
149.6
148.4
151.8
152.7
152.9
283.3
294.7
• 323.7
381.5
453.3
7 505.0
501.3
542.7
617.5
545.4
550.5
556.9
564.7
570.1
576.4
192.4
194.6
195.1
199.3
201.6
6 202.2
103.6
103.1
100.1
97.8
95.0
93.5
154.4
155.5
156.1
157.6
159.9
159.0
583.1
591.1
596.2
606.6
615.6
617.5
> Data are for last Wednesday of month or year (except June 30 and December 31 call dates).
Adjusted to exclude all interbank loans beginning 1948 and domestic bank loans only beginning January 1959.
Beginning January 1959, loans and investments are reported gross, without valuation reserves deducted, rather than
net of valuation reserves, as in earlier periods.
< Effective June 1966, balances accumulated for payment of personal loans (then about $1.1 billion) are excluded from
loans at all commercial banks, and certain certificates of CCC and Export-Import Bank (then about $1 billion) are included
in other securities rather than in loans.
* Beginning June 1969, data include all bank-premises subsidiaries and other significant majority-owned domestic
subsidiaries;
earlier data include commercial banks only.
6
Beginning June 1971, Farmers Home Administration insured notes (then about $0.7 billion) are classified as other
securities
rather
than as loans.
7
Beginning August 1974, reflects new definition of affiliates included and different grcup of reporting banks. Amount of
total loans sold was reduced by $0.1 billion.
» Loan ^classifications reduced these loans by $0.3 billion in December 1977.
Note.—Data may not be strictly comparable because of bank mergers, liquidations, loan ^classifications, etc.
1
1
Source: Board of Governors of the Federal Reserve System.
326
TABLE B-61.—Liquid asset holdings, private domestic nonfinancial investors, 1952-77
[Month by average outstandings; billions of dollars, seasonally adjusted]
Currency and deposits
Time deposits
Total
liquid
assets
Year
and
month
Total
Currency i
Demand
deposits i
Commercial
banksi
1952: Dec
1953: Dec
1954: Dec
U.S. Treasury
securities
Nonbank
Savthrift . ings 3
institu- bonds
tions 2
Negotiable
certificates
Shortof determ
market- posit5
able
securities *
Other
private
money
market
instruments fl
269.1
284.5
295.2
200 9
211.0
223.9
27 3
27.7
27.4
91 6
92 8
96.2
39 I
41 9
45.1
42 8
48 6
55.2
49 2
49 3
49.9
18 4
23.1
20.1
0.7
1.1
1.2
314 7
325.3
337.9
354.2
373.2
235 4
246 2
257 2
277.4
290.7
27 8
28 2
28 3
28.6
28.9
98 5
99 5
97 9
102.2
104.2
46 9
49 0
54 6
61.8
64.7
62 3
69 5
76 4
84.8
92.9
50 2
50 1
48'3
47.8
46.1
27 7
27 4
30 6
27.6
35.5
1 4
16
1.8
1.4
.9
1955:
1956:
1957:
1958:
1959:
Dec
Dec
Dec
Dec
Dec...
1960:
1961:
1962:
1963:
1964:
Dec
Dec
Dec
Dec
Dec
386.6
410.4
441.8
479.1
515.2
305.7
326.2
352.2
382.2
414.6
29.0
29.6
30.6
32.5
34.3
104.6
106.3
106.5
109.7
114.3
69.9
77.0
88.8
98.6
108.8
102.3
113.4
126.4
141.4
157.3
45.7
46.5
46.9
48.1
49.0
32.4
32.0
33.4
35.0
33.0
2.7
5.3
9.0
11.6
2.8
3.1
4.0
4.8
6.9
1965:
1966:
1967:
1968:
1969:
Dec
Dec
Dec
Dec
Dec
559.2
586.9
638.0
696.4
722.4
451.1
474.3
521.0
565.3
582.8
36.3
38.3
40.4
43.4
46.1
119.3
121.7
130.3
140.9
145.0
125.1
136.9
156.2
174.3
176.8
170.4
177.3
194.0
206.7
214.9
49.6
50.2
51.2
51.8
51.7
35.8
37.8
34.8
40.9
53.2
15.1
14.4
18.7
21.7
8.3
7.5
10.3
12.4
16.6
26.4
1970:
1971:
1972:
1973:
1974:
Dec
Dec
Dec
Dec
Dec
769.5
851.8
967.4
1, 079 2
1,166.9
632.4
718.9
817.0
887 5
945.2
49.1
52 6
56.9
61 5
67.8
151.8
161 6
176.4
183 3
187.2
198.9
233 6
264.5
294 5
321.2
232.7
271 1
319.3
348 1
369.1
52.0
54 3
57.6
60 4
63.3
41.9
31 3
34.4
43 3
47.5
21.8
27.7
36.3
53 8
70.4
21.4
19.6
22.2
34 3
40.5
1975: Dec .
1976: Dec
1977: Deep
1 290 4 1 054 4
1, 423 7 1,194. 2
1,599.6 1, 330.8
73 7
80 5
88.4
191 7
198 8
214.7
360 6
418 1
460.3
428 3
496 8
567.4
67 2
71 9
76.6
66 5
66 1
76.4
59 4
44.2
55.0
43 0
47.4
60.9
1976: Jan
Apr
May
June .
1, 300 4
1,311.7
1, 320.1
1,333 1
1, 343.7
1, 354.1
1 065.9
1, 079. 5
1, 088.4
1 101 4
1,111.7
1,118.0
74 3
75.0
75.7
76 6
77.3
77.5
192 2
193.0
192.9
195 2
196.5
195.5
366 1
372.6
375.9
380 6
383.9
386.8
433 4
438.9
443.9
449 1
454.0
458.2
67 6
68.0
68.3
68.7
69.0
69.4
67 2
67.2
68.0
68.5
69.1
70.1
56.2
53.7
52.2
50.7
49.0
50.6
43.5
43.4
43.2
43.8
44.9
46.1
July
Aug
Sept
Oct
Nov
Dec _
1 367 5
1 376 7
1, 386 9
1 402 8
1, 413.0
1, 423. 7
1 130 2
1 142 9
1,155 1
1 171 0
1,182. 2
1,194.2
78 1
78 6
79 2
79 8
80.2
80.5
196 7
198 0
197.4
199 8
198.3
198.8
391 8
395 9
401 0
406 5
412.7
418.1
463 6
470 5
477.6
484 8
491.0
496.8
69 8
70 4
70.7
71.1
71.5
71.9
70.9
69 9
68.7
68.9
68.5
66.1
49.7
46.1
44.6
44.0
43.4
44.2
46.9
47.4
47.8
47.8
47.5
47.4
1, 438. 5
1 453 6
1, 464. 3
1, 478 6
1, 486.8
1, 499.6
1, 207. 6
1 216 7
1, 226. 0
1 239 4
1, 246. 3
1, 256.0
81.1
81 8
82.2
83 1
83.6
84.0
200.9
200 1
200.9
205 5
204.5
205.0
423.0
427 2
430.8
434 2
436.8
440.4
502.6
507 5
512.1
516 6
521.4
526.7
72.3
72 6
73.0
73 4
73.8
74.2
66.9
70 3
70.3
70.0
69.2
68.4
43.6
44.2
43.3
42.5
42.8
44.3
48.1
49.7
51.7
53.3
54.7
56.6
1,519.4
1, 534.1
1, 549. 7
1, 570.2
1, 585.1
1,599.6
1,273.4
1,284.7
1, 299.0
1, 313. 5
1,321.4
1, 330.8
85.1
85.5
86.4
87.1
87.8
88.4
208.7
2C8.6
209.9
213.3
212.4
214.7
446.1
448.9
452.5
455.7
458.5
460.3
533.5
541.7
550.2
557.5
562.7
567.4
74.7
75.1
75.4
75.8
76.2
76.6
69.8
71.8
72.5
74.4
75.8
76.4
43.4
43.8
43.5
46.8
51.3
55.0
58.1
58.7
59.3
59.9
60.4
60.9
„__
.
Feb
Mar
1977: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov. _ .
Dec*
.
1 Money stock components (see Table B-59) after deducting foreign holdings and holdings by domestic financial institutions. The three columns add to M2 held by domestic nonfinancial sectors.
2 As published in money stock statistics.
3 Series E and H savings bonds, other savings bonds, and savings notes held by individuals.
•5 Short-term marketable U.S. Treasury securities excluding official, foreign, and financial institution holdings.
Certificates over $100,000 at weekly reporting banks, except foreign holdings.
e Commercial paper, bankers' acceptances, Federal funds, security repurchase agreements, and money market mutual
fund shares held outside banks and other financial institutions.
Source: Board of Governors of the Federal Reserve System.
327
TABLE B-62.—Total funds raised in credit markets by nonfinancial sectors, 1969-77
[Billions of dollars]
Item
1969
1970
1971
1972
1973
1974
1975
1976
93.7
100.6
153.5
177.8
202.0
189.6
205.6
268.3
U.S. Government
-3.7
11.9
24.9
15.1
8.3
11.8
85.4
69.0
Treasury issues..
Agency issues and mortgages
Foreign
-1.3
-2.4
12.9
-1.0
26.0
-1.1
14.3
.8
7.9
12.0
85.8
-.4
69.1
-.1
3.7
2.7
5.2
4.0
6.2
15.4
13.2
20.3
.5
.1
2.7
.0
5.2
-.4
4.4
-.2
6.4
-.2
15.7
n'.o
.0
20.3
93.6
Total funds raised
Corporate equities.
Debt instruments
86.0
123.5
158.7
187.5
162.4
107.0
179.0
3.4
90.2
. 5.7
80.3
11.4
112.0
10.9
147.8
7.9
179.7
4.1
158.3
9.9
97.1
10.5
168.4
52.5
60.2
86.8
102.3
105.0
98.7
95.8
122.7
9.9
12.0
30.6
18.1
4.9
5.7
1.8
11.2
19.8
29.2
14.4
6.9
7.1
17.4
18.8
50.5
28.6
9.7
9.8
2.4
14.7
12.2
75.4
42.6
12.7
16.5
3.6
14.7
9.2
81.2
46.4
10.4
18.9
5.5
17.1
19.7
61.9
34.8
6.9
15.1
5.0
13.6
27.2
55.0
39.5
.0
11.0
4.6
15.1
22.8
84.8
63.6
1.6
13.4
6.1
37.8
20.1
25.3
45.5
74.6
59.6
1.3
45.7
10.4
15.7
1.8
9.9
5.9
6.8
2.6
4.8
13.1
8.1
-.4
4.4
18.9
18.9
.8
22.0
39.8
2.5
10.3
10.2
9.4
29.1 -14.5
6.6 - 2 . 6
13.7
9.0
23.6
3.7
4.0
14.4
93.6
86.0
123.5
158.7
187.5
162.4
107.0
179.0
10.7
34.4
48.6
3.0
7.3
38.2
11.3
24.9
49.8
2.3
6.8
40.7
17.7
45.2
60.6
4.5
11.6
44.5
14.5
66.6
77.6
5.8
14.1
57.7
13.2
79.1
95.2
9.7
12.8
72.7
16.2
49.2
97.0
7.9
7.4
81.8
11.2
48.6
47.3
8.7
2.0
36.6
14.6
89.8
74.6
11.0
5.2
58.3
93.7
100.6
153.5
177.8
202.0
189.6
205.6
268.3
48.1
63.4
85.9
119.6
133.3
120.2
138.1
166.9
5.1
64.2
92.8
105.2
90.4
75.7
97.1
130.1
Demand deposits and currency..
7.3
Time and savings accounts
-2.2
At commercial banks
-10.6
At savings institutions
8.4
8.9
55.3
38.7
16.6
13.7
79.1
39.5
39.6
21.4
83.8
38.3
45.4
14.3
76.1
47.7
28.5
8.9
66.7
45.0
21.8
12.3
84.8
25.3
59.4
17.2
113.0
43.9
69.1
42.9
-6.9
14.4
42.9
44.5
41.0
36.8
17.7
-7.3 -10.7
3.9
19.5
18.2
22.2
19.4
Private domestic nonfinancial sectors..
Corporate equities.
Debt instruments..
Debt capital instruments
State and local government obligations
Corporate bonds
Mortgages.
Home
Multi-family residential
Commercial
Farm
Other debt instruments
Consumer credit
Bank loans n.e.c
Open-market paper
Other
By borrowing sector: Total
State and local governments
Households
Nonfinancial business
Farm
Nonfarm noncorporate
Corporate
Total funds advanced to nonfinancial sectors
Financed directly or indirectly by:
Private domestic nonfinancial sectors
Deposits
Credit market instruments, net
U.S. Government securities
Private credit market instruments
Corporate equities
Less security debt
27.3
-3.7
-1.6
7.2
-1.6
11.0
-5.1
2.1
19.4
-4.5
4.3
26.0
-6.9
-4.2
27.7
-2.2
23.1
-4.1
24.5
-3.8
3.3
10.8
9.6
1.1
3.0
-8.1
11.1
23.3
-3.9
27.2
16.1
5.3
10.8
10.4
6.9
3.5
26.3
14.5
11.7
10.4
-.4
10.7
21.0
3.1
18.0
.5
3.1
2.8
2.8
3.2
2.8
-.3
1.8
-1.7
2.8
-4.6
9.8
2.9
15.1
3.2
8.9
19.7
11.6
21.9
6.7
24.4
14.0
26.1
14.3
30.6
26.6
33.2
4.7
39.1
.1
48.8
19.5
Other sources:
Foreign funds
At banks
Direct
Change in U.S. Government cash
balance
U.S. Government loans
Private insurance and pension reserves
Other
See footnotes at end of table.
328
TABLE B-62.—Total funds raised in credit markets by nonfinancial sectors, 1969-77—Continued
[Billions of dollars]
1977 unadjusted
quarterly flows
1977 seasonally
adjusted annual rates
Item
III
Total funds raised
U.S. Government
Treasury securities..
III
65.0
81.3
90.0
300.4
318.9
17.6
-1.1
19.6
41.4
39.2
83.8
17.8
-1.0
20.1
-.5
42.1
-.7
39.6
-.4
85.8
-2.1
369.9
Agency issues and mortgages
.4
2.9
4.3
2.2
6.7
21.6
.2
.2
.1
2.8
.4
3.9
.8
1.4
.4
6.3
1.6
20.1
46.9
79.6
66.1
256.8
273.0
264.5
1.5
45.4
2.6
77.0
1.5
64.6
6.2
250.7
10.3
262.6
6.1
258.4
30.2
51.5
47.7
135.8
191.2
186.2
2.4
5.4
22.4
16.4
3".O
2.2
11.1
5.8
34.6
25.3
1.6
5.0
2.7
8.6
3.8
35.3
26.3
2.0
5.0
2.0
13.1
18.1
104.6
76.5
3.6
15.4
9.1
41.3
21.1
128.8
94.8
5.5
19.1
9.3
32.5
20.5
133.2
97.7
7.8
19.3
8.3
15.2
25.5
16.9
114.9
71.4
72.1
2.6
5.6
.8
6.1
10.8
10.9
1.3
2.5
10.6
3.1
-.0
3.2
35.5
53.0
3.4
23.1
34.8
21.4
6.6
8.6
32.1
24.3
-.5
16.2
46.9
79.6
66.1
256.8
273.0
264.5
29.1
130.4
113.5
17.1
8.8
87.7
37.0
140.5
87.0
15.2
6.2
65.5
Foreign
Corporate equities
Debt instruments
Private domestic nonfinancial sectors
Corporate equities
Debt instruments
Debt capital instruments
State and local government obligations.
Corporate bonds
Mortgages
Home
Multi-family
Commercial
Farm
Other debt instruments
Consumer credit
Bank loans n.e.c.
Open-market paper
Other
By borrowing sector: Total
State and local governments
Households
Nonfinancial business
Farm
Nonfarm noncorporate
Corporate
2.2
21.6
23.1
3.9
1.4
17.8
8.0
36.8
34.8
5.7
2.8
26.2
9.7
36.6
19.7
3.8
1.6
14.3
12.1
128.9
115.8
16.7
12.4
86.6
65.0
81.3
90.0
300.4
318.9
369.9
40.4
42.2
47.4
200.5
163.3
234.2
22.7
36.4
21.4
142.7
111.4
146.6
-15.8
38.5
17.5
21.1
13.3
23.1
5.8
17.3
-5.7
27.1
9.6
17.5
18.2
124.6
55.7
68.9
22.8
88.6
22.8
65.8
6.7
139.9
56.8
83.0
17.7
5.8
25.9
57.7
51.9
87.6
7.9
9.5
1.3
1.0
-6.5
12.2
.1
-.1
16.8
10.0
-.5
.4
25.1
37.2
-.4
4.2
-3.1
52.8
2.0
-.2
57.1
37.7
-5.6
Foreign funds
At banks
Direct
3.8
-4.4
8.2
8.5
1.9
6.7
10.8
17.7
1.2 -15.7
9.6
33.4
37.1
7.5
29.5
38.6
5.4
33.2
Change in U.S. Government cash balance...
U.S. Government loans
Private insurance and pension reserves
Other
-2.8
1.2
12.7
9.7
7.4
1.1
16.1
5.9
1.1
4.7
14.4
11.6
17.5
3.3
64.5
33.1
-.3
15.9
56.4
25.1
Total funds advanced to nonfinancial sectors
Financed directly or indirectly by:
Private domestic nonfinancial sectors
Deposits
Demand deposits and currency
Time an d savings accounts
At commercial b a n k s . .
At savings institutions
Credit market instruments, net
U.S. Government securities
Private credit market instruments
Corporate equities
Less security debt
1.6
Other sources:
Source: Board of Governors of the Federal Reserve System.
329
-4.3
8.5
50.4
27.7
TABLE B-63.—Federal Reserve Bank credit and member bank reserves. 1929-77
[Averages of daily figures; millions of dollars]
Reserve Bank credit outstanding
Year and month
Total
1929:
19331939:
1940:
1941:
1942:
1943:
1944:
1945:
1946:
19471948:
1949:
1950:
1951:
1952:
1953:
1954*
19551956:
1957:
1958:
1959I9601961:
1962:
1963'
1964:
1965:
1966:
196719681969:
1970:
197119721973:
1974:
1975:
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
1,643
2,669
2,612
2,305
2,404
6,035
11,914
19,612
24,744
24, 746
22,858
23, 978
19,012
21,606
25,446
27,299
27,107
26,317
26, 853
27,156
26,186
28,412
29, 435
29, 060
31,217
33,218
36,610
39,873
43, 853
46, 864
U.S.
Government securities
64,100
66,708
74,255
76,851
85,642
93, 967
99, 651
107, 632
116,382
446
2,432
2,510
2,188
2,219
5,549
11,166
18,693
23, 708
23, 767
21,905
23, 002
18, 287
20,345
23,409
24, 400
25, 639
24,917
24, 602
24, 765
23,982
26,312
27,036
27, 248
29, 098
30, 546
33, 729
37,126
40,885
43, 760
48,891
52, 529
57, 500
61,688
69,158
71,094
79,701
86, 679
92,108
100, 328
107,948
108, 700
109,021
108, 085
108, 558
112,694
109, 453
July
Aug
113,886
110,886
Sept
Oct
Nov
112,171
113, 279
110,650
Dec?
116,382
. .
. . .
. . .
51,268
56,610
. . .
1976: Dec
1977: D e c
1977: Jan
Feb
Mar
Apr
May
June
_
Member bank
borrowings
Member bank reserves
Other
Total
Required
Excess
Seasonal
Total
801
95
3
3
5
4
90
265
334
157
224
396
142
99
114
180
482
658
654
702
822
729
134
842
607
118
142
657
1,593
441
246
839
688
710
557
906
87
149
304
327
243
454
557
,119
1,380
,306
1,027
1,154
1,412
,703
,494
,543
,493
,725
1.970
2,368
2,554
2,504
2,395
2,588
11,473
14,049
12,812
13,152
12,749
14,168
16,027
16,517
17,261
19,990
16,291
17,391
20,310
21,180
19, 920
19,279
19, 240
19, 535
19,420
18,899
2 18,932
2,347
U,822
6,462
7,403
9,422
10,776
11,701
12,884
14,536
15,617
16 275
19,193
15,488
16, 364
19,484
20, 457
19, 227
18, 576
18,646
18,883
18, 843
18,383
18,450
18,514
19, 550
19,468
20,210
21,198
22, 267
23,438
24,915
26,766
27, 774
28,993
31,164
31,134
34,806
36, 602
34,727
34, 964
36, 296
558
54
7,876
19,283
20,118
20, 040
20, 746
21,609
22,719
23, 830
25, 260
27,221
28, 031
29, 265
31,329
8
31,353
3 35,068
3 36,941
4 34,989
35,136
36, 471
101, 397
102,689
102, 092
102,129
106, 282
102, 649
61
79
110
73
200
8
12
13
14
31
55
7,242
6,253
5,883
6,356
6,212
6,542
36, 290
34,199
34,135
34, 613
34, 732
34, 406
35, 796
34, 234
33, 870
34, 602
34, 460
34, 293
105,970
103, 389
105, 037
105, 426
102, 776
107,948
336
1,071
634
1,319
840
60
101
7,580
6,426
6,500
6,534
7.034
7,876
35, 391
35,186
35,156
35, 860
35, 782
36, 471
35, 043
34, 987
34, 965
35,521
35,647
36, 296
2,514
2,547
238
765
1,086
321
107
1,049
1,298
703
127
62
262
558
1
2
32
13
2,139
3,316
5,514
4,699
4,990
4,708
4,643
6,585
7,416
12
7,242
41
112
114
83
54
48
1766
5,011
6 646
3,390
2,376
1 048
1)284
1,491
900
986
797
803
1,027
826
723
693
703
594
652
577
516
482
769
568
572
536
411
452
392
345
455
257
272
165
3 219
3 262
3 339
4 262
172
175
494
-35
265
11
272
113
348
199
191
339
135
175
Data are for licensed banks only.
Beginning December 1959, total reserves held include vault cash allowed.
s Beginning November 1972, includes $450 million of reserve deficiencies on which Federal Reserve Banks were allowed
t o waive penalties for a transition period in connection with bank adaptation to Regulation J as amended effective November 9,1972. Beginning 1973, allowable deficiencies included are (beginning with first statement week of quarter): first
quarter, $279 million; second quarter, $173 million; third quarter, $112 million; fourth quarter, $84 million. Beginning
1974 allowable deficiencies included are: first quarter, $67 million and second quarter, $58 million. Transition period
e nded
after second quarter 1974.
4
Effective November 1975 includes reserve deficiencies on which penalties are waived over a 24-month period when a
nonmember bank merges into an existing member bank, or when a nonmember bank joins the Federal Reserve System.
Source: Board of Governors of the Federal Reserve System.
330
TABLE B-64.—Aggregate reserves and deposits, member banks, 1959-77
[Averages of daily figures; billions of dollars, seasonally adjusted)
Member bank reservesi
Member bank deposits subject
to reserve
requirements2
Year and month
Total
Nonborrowed
Required
Total
Time
and
savings
Demand
Private
U.S. Government
1959: Dec
18.63
17.68
18.12
158.2
54.3
99.0
4.8
1960:
1961:
1962:
1963:
1964:
Dec
Dec
Dec
Dec
Dec.
18.92
19.75
19.66
20.31
21.19
18.84
19.61
19.40
19.98
20.92
18.17
19.16
19.08
19.82
20.78
162.5
175.5
189.0
203.2
218.7
58.8
67.7
79 9
92.1
103.7
99 1
102.9
103 3
105 9
109.1
46
4.9
57
52
5.9
1965:
1966:
1967:
1968:
1969:
Dec
Dec
Dec
Dec
Dec
22.18
23.28
24.76
27.05
27.94
21.74
22.75
24.54
26.31
26.82
21.76
22.94
24.39
26.63
27.66
238.3
246.3
275.7
299.8
287.8
120.7
128.7
148.9
164.5
150.5
112 8
113.9
121 3
130 5
132.1
49
3.7
55
49
5.2
1970:
1971*
1972:
1973:
1974:
Dec
Dec
Dec
Dec
Dec
29.12
31.22
31.41
34.94
36.60
28.79
31.10
30.36
33.64
35.87
28.87
31.04
31.12
34.64
36.34
321.1
360.2
402.1
442.3
486.2
178.8
210.5
241.6
279.2
322.1
136.1
144.0
154 4
158.1
160.6
6 2
5.8
6 2
50
3.5
1975: Dec
1976- Dec
1977- Dec v
34.73
34.95
36.21
34.60
34.90
35.64
34.46
34.68
36.02
505.4
529.6
569.8
337.9
355.0
387.7
164.5
171.4
178.4
3.0
32
3.7
1976- Jan
Feb
Mar
Apr
May
June
34.31
34.07
34.02
34 05
34.17
34.29
34.23
33.99
33.97
34.00
34.05
34.16
34.07
33.85
33.80
33.89
33.96
34.07
506.0
507.9
508.0
509.7
508.1
513.0
338.1
339.5
339.7
339.9
338.7
341.9
165.2
165.6
165.8
167 2
167.1
167.5
2.7
27
2.5
26
2 3
3.6
34.34
34.51
34.34
34.51
34.85
34.95
34.21
34.41
34.27
34.41
34.78
34.90
34.11
34.31
34.14
34.29
34.59
34.68
514.1
514.2
515.6
520.0
524.9
529.6
343.5
341.7
343.3
346.2
350.2
355.0
167.9
168.6
168.7
170.4
170.7
171.4
2.7
3.9
3.6
3.4
4.0
3.2
34.78
34.40
34.31
34.68
34.72
34.86
34.71
34.33
34.20
34.61
34.52
34.60
34.51
34.20
34.09
34.49
34.51
34.71
532.5
532.0
535.2
538.4
537.6
544.5
357.3
360.1
361.3
361.4
363.1
367.0
172.5
169.5
171.1
173.4
172.3
173.8
2.7
2.5
2.8
3.6
2.1
3.7
35.35
35.64
35.63
35.90
36.01
36.21
35.03
34.58
35.00
34.59
35.15
35.64
35.08
35.44
35.42
35.69
35.76
36.02
547.7
551.4
552.9
559.4
564.6
569.8
369.2
370.8
372.4
377.1
383.5
387.7
175.8
177.0
176.9
179.0
177.6
178.4
2.8
3.6
3.7
3.3
3.5
3.7
July
Aug
Sept .
Oct
Nov
Dec
1977: Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov . .
Dec v
_
.
.
. . .
1 Member bank reserves series reflects actual reserve requirement percentages with no adjustment to eliminate the
effect of changes in Regulations D and M.
2 Deposits subject to reserve requirements include total time and savings deposits and net demand deposits as defined
by Regulation D. Private demand deposits include all demand deposits except those due to the U.S. Government, less
cash items in process of collection and demand balances due from domestic commercial banks.
Source: Board of Governors of the Federal Reserve System.
331
TABLE B-65.—Bond yields and interest rates, 1929-77
[Percent per annum]
U.S. Government securities
Year or month
3-month
3-5
Treasyear Taxable
ury
issues 2 bonds 3
bills i
Corporate
bonds
(Moody's>
Aaa
Baa
High- Average
grade rate on Prime
communic- shortmerterm
ipal
cial
bank
bonds
paper,
(Stand- loans
4-6
ard & to busi- months
ness
Poor's)
Discount
rate,
Federal
Reserve
Bank
of New
York *
Federal
funds
rates
Newhome
mortgage
yields
(FHLBB)
(6)
4.73
5.90
4.27
5.85
5 16
1933
0.515
2.66
4.49
7.76
4.71
1.73
2.56
1939
.023
.59
3.01
4.96
2.76
2.1
.59
1.00
1940
1941
1942
1943
1944
.014
.103
.326
.373
.375
.50
.73
1.46
1.34
1.33
4.75
4.33
4.28
3.91
3.61
2.50
2.10
2.36
2.06
1.86
2.1
2.0
2.2
2.6
2.4
.56
.53
.66
.69
.73
1 00
2.46
2.47
2.48
2.84
2.77
2.83
2.73
2.72
1945
1946
1947
1948
1949
.375
.375
.594
1.040
1.102
1.18
1.16
1.32
1.62
1.43
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
1.67
1.64
2.01
2.40
2.21
2.2
2.1
2.1
2.5
2.68
.75
.81
1.03
1.44
1.49
1 00
1.00
1.00
1.34
1 50
1950
1951
1952
1953
1954
1.218
1.552
1.766
1.931
.953
1.50
1.93
2.13
2.56
1.82
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
1 98
2.00
2.19
2.72
2.37
2.69
3.11
3.49
3.69
3.61
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
2.50
3.12
3.62
2.90
4.33
2.84
3.08
3.47
3.43
4.07
3.06
3.36
3.89
3.79
4.38
3.53
3.88
4.71
4.73
5.05
2.53
2.93
3.60
3.56
3.95
3.70
4.20
4.62
4.34
8 5.00
2.18
3.31
3.81
2.46
3.97
1.89
2.77
3.12
2.15
3.36
1.78
2.73
3.11
1.57
3.30
1960
1961
1962
1963
1964
2.928
2.378
2.778
3.157
3.549
3.99
3.60
3.57
3.72
4.06
4.01
3.90
3.95
4.00
4.15
4.41
4.35
4.33
4.26
4.40
5.19
5.08
5.02
4.86
4.83
3.73
3.46
3.18
3.23
3.22
5.16
4.97
5.00
5.01
4.99
3.85
2.97
3.26
3.55
3.97
3.53
3.00
3.00
3.23
3.22
1.96
2.68
3.18
3.55
3.50
5.93
5.86
1965
1966.._
1967
1968
1969
3.954
4.881
4.321
5.339
6.677
4.22
5.16
5.07
5.59
6.85
4.21
4.66
4.85
5.25
6.10
4.49
5.13
5.51
6.18
7.03
4.87
5.67
6.23
6.94
7.81
3.27
3.82
3.98
4.51
5.81
5.06
6.00
8 6.00
6.68
8.21
4.38
5.55
5.10
5.90
7.83
4.04
4.50
4.19
5.17
5.87
4.07
5.11
4.22
5.66
8.22
5.81
6.25
6.46
6.97
7.81
6.458
4.348
4.071
7.041
7.886
7.37
5.77
5.85
6.92
7.81
6.59
5.74
5.63
6.30
6.99
8.04
7.39
7.21
7.44
8.57
9.11
8.56
8.16
8.24
9.50
6.51
5.70
5.27
5.18
6.09
8.48
8 6.32
7.72
5.11
4.69
8.15
9.87
5.95
4.88
4.50
6.45
7.83
7.17
4.67
4.44
8.74
10.51
8.45
7.74
7.60
7.95
8.92
5.838
4.989
5.265
7.55
6.94
6.85
6.98
6.78
7.06
8.83 10.61
8.43 9.75
8.02 8.97
6.89
6.49
5.56
8.65
7.52
6.33
5.35
5.60
6.25
5.50
5.46
5.82
5.05
5.54
9.01
8.99
9.01
1929
1970
1971
1972
1973
1974
1975
1976.
1977
.
.....
.
.
.
.
See next page for continuation of table and for footnotes.
332
5.82
8.30
11 28
1.00
1 00
i on
1.00
TABLE B-65.—Bond yields and interest rates, 1929-77— Continued
[Percent per annum]
U.S. Government securities
Corporate
bonds
(Moody's)
Year or month
3-month
3-5
Treasyear
ury
2
issues
bills i
1975: Jan
Feb
Mar
Apr
May....
June
July .
Aug
Sept
Oct
Nov . .
Dec
1976:Jan .
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct .
Nov
Dec
1977-Jan
Feb
Mar..
Apr . . .
May
June
July
Aug
Sept
Oct . . . .
Nov
Dec
Taxable
bonds 3
Aaa
Baa
Highgrade
municipal
bonds
(Standard &
Poor's)
6.493
5.583
5.544
5.694
5.315
5.193
7.29
6.85
7.00
7.76
7.49
7.26
6.68
6.61
6.73
7.03
6.99
6.86
8.83
8.62
8.67
8.95
8.90
8.77
10.81
10.65
10.48
10.58
10.69
10.62
6.66
6.30
6.61
6.83
6.81
6.76
6.164
6.463
6.383
6.081
5.468
5.504
7.72
8.12
8.22
7.80
7.51
7.50
6.89
7.06
7.29
7.29
7.21
7.17
8.84
8.95
8.95
8.86
8.78
8.79
10.55
10.59
10.61
10.62
10.56
10.56
6.94
7.02
7.23
7.22
7.21
7.06
4.961
4.852
5.047
4.878
5.185
5.443
7.18
7.18
7.25
6.99
7.35
7.40
6.94
6.92
6.87
6.73
6.99
6.92
8.60
8.55
8.52
8.40
8.58
8.62
10.41
10.24
10.12
9. £4
9.86
9.89
6.80
6.91
6.86
6.62
6.87
6.85
5.278
5.153
5.075
4.930
4.810
4.355
7.24
7.04
6.84
6.50
6.35
5. £6
6.85
6.79
6.70
6.65
6.62
6.39
8.56
8.45
8.38
8.32
8.25
7.98
9.82
9.64
9.40
9.29
9.23
9.12
6.64
6.28
6.20
6.06
6.05
5.69
4.597
4.662
4.613
4.540
4.942
5.004
6.49
6.69
6.73
6.58
6 76
6.58
6.68
7.15
7.20
7.14
7.17
6.99
7.96
8.04
8.10
8.04
8.05
7.95
9.08
9.12
9.12
9.07
9.01
8.91
5.70
5.75
5.76
5.61
5.64
5.53
5.146
5.500
5.770
6.188
6.160
6.063
6 67
6.90
6.92
7.23
7.28
7.40
6.97
7.00
6.94
7.08
7.14
7.23
7.94
7.98
7.92
8.04
8.08
8.19
8.87
8.82
8.80
8.89
8.95
8.99
5.50
5.46
5.37
5.53
5.38
5.48
Average
rate on
shortterm
bank
loans
to business
9.94
8.16
8.22
8.29
7.54
7.44
7.80
7.28
8 7.48
7.37
7.87
Prime
commercial
paper,
4-6
months
Discount
rate,
Federal
Reserve
Bank
of New
York*
Federal
funds
rates
Newhome
mortyields
(FHLBB)
7.30
6.33
6.06
6.15
5.82
5.79
7H-7K
7 ]/-&%.
6%-6J4
6^-634
6^-6
6 -6
7.13
6.24
5.54
5 49
5.22
5.55
9.33
9.12
9.06
8.96
8.90
8.96
6.44
6.70
6.86
6.48
5.91
5.97
6
6
6
6
6
6
-6
-6
-6
-6
-6
-6
6 10
6.14
6.24
5.82
5.22
5.20
8.89
8.89
8.94
9.01
9.01
9.01
5.27
5.23
5.37
5.23
5.54
5.94
6 -5K
4.87
4.77
4.84
4.82
5.29
5.48
8.99
8.93
8.93
8.92
8.97
8.89
5 31
5 29
5.25
5.03
4.95
4.65
8 97
9.02
9.08
9.07
9.05
9.10
4.61
4.68
4.69
4.73
5.35
5.39
9.05
8.99
8.95
8.94
8.96
8.98
5.42
5.90
6.14
6.47
6.51
6.56
9.00
9.02
9.04
9.07
9.07
9.08
5.67
5.47
5.45
5.22
5.05
4.70
4.74
4.82
4.87
4.87
5.35
5.49
5.41
5.84
6.17
6.55
6.59
6.68
51^-51^
5J*-5H
ill
5 J/-5 */
5^-534
514-534
5K-534
534-5 ! 4
A
ty~%
6 4 -6
6 -6
1
Rate on new issues within period. First issued in December 1929.
2 Selected note and bond issues.
* 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; November 1941-March 1952,15 years.
4
Average effective rate for the year; opening and closing rate for the month.
5 Based on seven-day averages of daily effective rates for weeks ending Wednesday. Since July 19,1975, the daily effective
rate is an average of the rates on a given day weighted by the volume of transactions at these rates. Prior to that date,
the daily effective rate was the rate considered most representative of the day's transactions, usually the one at which
most
transactions occurred.
6
Effective rate (in the primary market) on conventional mortgages, refecting fees and charges as well as ccntract rate
and assumed, on the average, repayment at end of 10 years. Rates beginning January 1S73 not strictly ccmparable with
prior rates.
7 From October 30, 1942, to April 24, 1946, a preferential rate of 0.50 percent was in effect for advances secured by
Government securities maturing in 1 year or less.
s Series revised. Not strictly comparable with earlier data. Beginning 1977, data are for short-term commercial and
industrial loans (other than construction and land development) and are from survey of terms of bank lending.
Sources: Department of the Treasury, Board of Governors of the Federal Reserve System, Federal Home Loan Bank
Board (FHLBB), Moody's Investors Service, and Standard & Poor's Corporation.
333
TABLE B-66.—Instalment credit extensions and liquidations, 1971-77 *
(Millions of dollars; monthly data seasonally adjusted]
Revolving
Year or month
Extensions:
1971
1972
1973
1974
1975
1976
1977»
Total
Automobile
Mobile
home
Home
improve*
ment
Bank
credit
card
123,826
137,117
157,863
157, 200
164,169
193, 328
225,974
35,820
42,700
48,399
45,429
51,413
62,988
72,946
2,630
5,122
7,061
5,782
4,323
4,841
5,272
3,170
4,126
4,771
5,211
5,556
6,738
8,110
8,377
10,390
13,863
17,098
20,428
25, 862
31,563
May."
June.
15,332
15,762
15,693
15, 425
15,616
15,989
5,079
5,153
5,255
5,233
5,223
5,245
441
421
435
385
372
410
519
536
545
557
534
541
July..
Aug..
Sept.
Oct..
Nov..
Dec_.
15,796
16,118
16, 420
15,844
16, 712
17,677
5,097
5,204
5,298
4,834
5,312
5,869
399
380
393
361
403
470
1977: Jan..
Feb..
Mar..
Apr..
May.
June.
17,241
17, 595
18, 496
18, 784
18, 503
18, 810
5,511
5,819
6,199
6,106
6,048
6,063
July..
Aug..
Sept.
Oct..
Nov..
Oec>.
18, 631
19, 204
19,164
19, 787
19,680
20,079
Bank
check
credit
All
other
1,916
2,009
2,086
2,001
2,106
2,105
2,026
2,489
3,373
4,227
4,024
4,783
5,877
361
364
361
369
385
398
71,803
72,289
80,396
79,453
78,425
88,117
102,202
7,017
7,279
7,011
6,881
6,996
7,290
547
560
584
549
622
624
2,185
2,209
2,211
2,266
2,260
2,297
404
419
394
421
430
441
7,164
7,345
7,539
7,412
7,686
7,977
372
383
445
479
415
420
571
577
648
668
636
686
2,182
2,408
2,406
2,576
2,621
2,640
465
465
475
475
506
521
8,139
7,942
8,323
8,480
8,277
8,480
5,966
6,158
6,109
6,083
6,330
6,554
455
479
424
457
464
479
671
733
679
718
761
762
2,566
2,711
2,847
2,973
2,828
2,805
499
510
485
487
492
497
8,476
8,612
8,620
9,067
113,784
121,926
138,156
147,920
156,665
172, 795
195,115
31,614
37,188
42,642
44,929
48, 406
52, 750
59, 526
1,753
2,966
4,182
4,715
4,517
4,691
4,862
2,939
3,396
3,572
4,117
4,675
5,151
6,105
7,679
9,472
12,433
15,655
19, 208
24,012
28,910
1,901
2,175
2,894
3,684
4,010
4,552
5,235
67,898
66,729
72,434
74,821
75, 849
81,638
90,479
1976: Jan..
Feb..
Mar..
Apr..
May..
June.
14, 001
14,000
13,989
13, 514
13, 855
14, 454
4,132
4,194
4,264
4,205
4,191
4,456
398
413
390
372
360
395
390
405
407
429
387
415
1,854
1,858
1,903
1,844
1,921
2,003
358
367
361
359
363
399
6,869
6,763
6,664
6,306
6,632
6,786
July..
Aug..
Sept.
Oct..
Nov..
Dec.
14, 349
14, 589
14, 589
14, 753
15,077
15,236
4,389
4,451
4,532
4,500
4,630
4,667
391
379
407
386
406
385
432
443
450
469
459
463
2,002
2,092
2,007
2,095
2,148
2,228
369
401
356
383
403
415
6,766
6,823
6,836
6,920
7,031
7,078
1977: Jan..
Feb..
Mar.
Apr..
May.
June.
15,084
15,610
15,525
15, 886
15, 849
16, 388
4,712
4,801
4,816
4,901
4,801
5,100
393
412
391
414
421
386
463
478
480
480
502
505
2,176
2,201
2,142
2,298
2,430
2,403
421
420
422
415
402
431
6,921
7,297
7,274
7,379
7,292
7,564
July.
Aug.
Sept.
Oct..
Nov..
Dec 2,
16,167
16, 553
16, 814
17,160
16,826
17,253
4,897
5,104
5,005
5,234
5,089
5,066
397
424
392
413
390
429
506
551
536
517
550
537
2,382
2,396
2,567
2,687
2,585
2,643
459
450
436
430
466
483
7,525
7,628
7,877
7,880
7,747
8,095
1976: Jan..
Feb..
Mar..
Liquidations:
1971..
1972
1973
1974
1975
1976
1977*
8,982
t Excludes 30-day charge credit held by retailers, oil and gas companies, and travel and entertainment companies.
Preliminary; December by Council of Economic Advisers.
Note.—Consumer instalment credit consists of short- and intermediate-term credit extended through regular business
channels to finance the purchase of goods and services for personal consumption, or to refinance debts incurred for such
purposes, and scheduled to be repaid in two or more instalments. Mortgage credit is excluded.
2
Source: Board of Governors of the Federal Reserve System (except as noted).
334
TABLE B-67.—Mortgage debt outstanding by type of property and of financing, 1939-77
(Billions of dollars]
Nonfarm properties
Nonfarm properties by type of mortgage
Government underwritten
End of year
or quarter
All
properties
Farm
properties
Total
1- to 4family
houses
Multifamily
properties
Commercial
properties i
Conventional'
1- to 4-family houses
Total
Total
FHA
insured
VA
guaranteed
Total
1- to 4family
houses
1939
35.5
6.6
28.9
16.3
5.6
7.0
1.8
1.8
1.8
27.1
14.5
1940
1941
1942
1943
1944 . .
36.5
37.6
36.7
35.3
34.7
6.5
6.4
6.0
5.4
4.9
30.0
31.2
30.8
29.9
29.7
17.4
18.4
18.2
17.8
17.9
5.7
5.9
5.8
5.8
5.6
6.9
7.0
6.7
6.3
6.2
2.3
3.0
3.7
4.1
4.2
2.3
3.0
3.7
4.1
4.2
2.3
3.0
3.7
4.1
4.2
27.7
28.2
27.1
25.8
25.5
15.1
15.4
14.5
13.7
13.7
1945
1946
1947
1948
1949.
35.5
41.8
48.9
56.2
62.7
4.8
4.9
5.1
5.3
5.6
30.8
36.9
43.9
50.9
57.1
18.6
23.0
28.2
33.3
37.6
5.7
6.1
6.6
7.5
8.6
6.4
7.7
9.1
10.2
10.8
4.3
6.3
9.8
13.6
17.1
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
26.5
30.6
34.1
37.3
40.0
14.3
16.9
18.9
20.8
22.6
1950
1951
1952
1953
1954
72.8
82.3
91.4
101.3
113.7
6.1
6.7
7.2
7.7
8.2
66.7
75.6
84.2
93.6
105.4
45.2
51.7
58.5
66.1
75.7
10.1
11.5
12.3
12.9
13.5
11.5
12.5
13.4
14.5
16.3
22.1
26.6
29.3
32.1
36.2
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
44.6
49.0
54.9
61.5
69.2
26.3
28.8
33.1
38.0
43.6
1955
1956
1957
1958
1959
129.9
144.5
156.5
171.8
190.8
9.0
9.8
10.4
11.1
12.1
120.9
134.6
146.1
160.7
178.7
88.2
99.0
107.6
117.7
130.9
14.3
14.9
15.3
16.8
18.7
18.3
20.7
23.2
26.1
29.2
42.9
47.8
51.6
55.1
59.3
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
78.0
86.8
94.6
105.5
119.4
49.3
55.1
60.4
67.6
77.0
1960
1961
1962
1963
1964
207.5
228.0
251.4
278.5
305.9
12.8
13.9
15.2
16.8
18.9
194.7
214.1
236.2
261.7
287.0
141.9
154.7
169.3
186.4
203.4
20.3
23.0
25.8
29.0
33.6
32.4
36.4
41.1
46.2
50.0
62.3
65.6
69.4
73.4
77.2
56.4
59.1
62.2
65.9
69.2
26.7
29.5
32.3
35.0
38.3
29.7
29.6
29.9
30.9
30.9
132.3
148.5
166.9
188.2
209.8
85.5
95.6
107.1
120.5
134.1
1965
1966
1967
1968
1969
333.3
356.5
381.2
410.9
441.4
21.2
23.1
25.1
27.4
29.2
312.1
333.4
356.1
383.5
412.2
220.5
232.9
247.3
264.8
282.8
37.2
40.3
43.9
47.3
52.3
54.5
60.1
64.8
71.4
77.1
81.2
84.1
88.2
93.4
100.2
73.1
76.1
79.9
84.4
90.2
42.0
44.8
47.4
50.6
54.5
31.1
31.3
32.5
33.8
35.7
231.0
249 3
267.9
290.1
312.0
147.4
156.9
167.4
180.4
192.7
1970 .
1971
1972
1973
1974
474 2 30.3
526 5 32.2
603.4 35.8
682 3 41 3
742 5 46.3
443.8
494.3
567.7
641.1
696.2
298.1
328.3
372.2
416.2
449.4
60.1
70.1
82.8
93.1
100.0
85.6
95.9
112.7
131.7
146.9
109.2
120.7
131.1
135.0
140.2
97.3
105.2
113.0
116.2
121.3
59.9
65.7
68.2
66.2
65.1
37.3
39.5
44.7
50.0
56.2
334.6
373.5
436.5
506.0
556.0
200.8
223.1
259.2
300.0
328.1
1975
1976
801 5
889.1
50.9
57.1
750 7
832.0
490.8
556.3
100.6
104.3
159.3
171.4
147.0
154.1
127.7
133.5
66.1
66.5
61.6
67.0
603.7
677.9
363.0
422.8
1975:1
II....
III...
IV....
752.2
768.5
785.3
801.5
47.6
49.2
50.2
50.9
704.6
719.3
735.1
750.7
454.6
466.6
479.2
490.8
100.6
100.6
100.6
100.6
149.4
152.1
155.3
159.3
142.0
142.9
145.0
147.0
123.3
123.7
125.7
127.7
65.5
65.8
65.9
66.1
57.7
58.0
59.8
61.6
562.6
576.4
590.1
603.7
331.3
342.9
353.5
363.0
1976:1
II...III...
IV....
818.4
840.6
865.7
889.1
52.2
53.8
55.5
57.1
766.2
786.8
810.3
832.0
503.3
519.8
538.8
556.3
101.8
102.9
103.9
104.3
161.2
164.1
167.5
171.4
148.3
150.5
150.8
154.1
129.1
131.2
131.2
133.5
66.2
67.1
66.4
66.5
62.9
64.1
64.8
67.0
617.9
636.3
659.5
677.9
374.2
388.7
407.7
422.8
1977:1
ll.-__
III.--
911.3
947.1
983.2
59.3
61.8
63.9
852.1
885.3
919.4
572.7
599.2
626.3
105.0
106.7
108.6
174.4
179.4
184.4
155.7
158.7
161.5
134.9
137.4
139.8
66.9
67.8
67.9
68.0
69.6
71.9
696.4
726.6
757.9
437.8
461.8
486.5
.
.
i Includes negligible amount of farm loans held by savings and loan associations.
> Derived figures.
Source: Board of Governors of the Federal Reserve System, estimated and compiled from data supplied by various
Government and private organizations.
335
TABLE B-68.—Mortgage debt outstanding by holder, 1939-77
[Billions of dollars]
Major financial institutions
End of year
or quarter
Total
Total
Savings
and
loan
associations
Mutual
savings
banks
Other holders
Commercial
banks»
Life
Federal
insurance
and
comrelated
panies
agencies'
Individuals
and
others
1939
35.5
18.6
3.8
4.8
4.3
5.7
5.0
11.9
1940
1941
1942
1943
1944
36.5
37.6
36.7
35.3
34.7
19.5
20.7
20.7
20.2
20.2
4.1
4.6
4.6
4.6
4.8
4.9
4.8
4.6
4.4
4.3
4.6
4.9
4.7
4.5
4.4
6.0
6.4
6.7
6.7
6.7
49
4.7
43
3 6
3.0
12
12
11
11
11
1945
1946
1947
1948
1949
35.5
41.8
48.9
56.2
62.7
21.0
26.0
31.8
37.8
42.9
5.4
7.1
8.9
10.3
11.6
4.2
4.4
4.9
5.8
6.7
4.8
7.2
9.4
10.9
11.6
66
7.2
8.7
10.8
12.9
2 4
2.0
1.8
1.8
2.3
12*1
13 8
15 3
16.6
17.5
1950
1951
1952
1953
1954
72.8
82.3
91.4
101.3
113.7
51.7
59.5
66.9
75.1
85.7
13.7
15.6
18.4
22.0
26.1
8.3
9.9
11.4
12.9
15.0
13.7
14.7
15.9
16.9
18.6
16.1
19.3
21.3
23.3
26.0
2.8
3.5
4.1
4.6
4.8
18.4
19 3
20.4
21.7
23.2
1955
1956
1957
1958
1959
129.9
144.5
156.5
171.8
190.8
99.3
111.2
119.7
131.5
145.5
31.4
35.7
40.0
45.6
53.1
17.5
19.7
21.2
23.3
25.0
21.0
22.7
23.3
25.5
28.1
29.4
33.0
35.2
37.1
39.2
5.3
6.2
7.7
8.0
10.2
25.3
27.1
29.1
32.3
35.1
I960
1961
1962
1963
1964
207.5
228.0
251.4
278.5
305.9
157.6
172.6
192.5
217.1
241.0
60.1
68.8
78.8
90.9
101.3
26.9
29.1
32.3
36.2
40.6
28.8
30.4
34.5
39.4
44.0
41.8
44.2
46.9
50.5
55.2
11.5
12.2
12.6
11.8
12.2
38.4
43.1
46.3
49.5
52.7
1965
1966
1967.
1968
1969
333.3
356. b
381.2
410.9
441.4
264.6
280.8
298.8
319.9
339.1
110.3
114.4
121.8
130.8
140.2
44.6
47.3
50.5
53.5
56.1
49.7
54.4
59.0
65.7
70.7
60.0
64.6
67.5
70.0
72.0
13.5
17.5
20.9
25.1
31.1
55.2
58.2
61.4
65.9
71.2
1970
1971
1972
1973
1974
474.2
526.5
603.4
682.3
742.5
355.9
394.2
450.0
505.4
542.6
150.3
174.3
206.2
231.7
249.3
57.9
62.0
67.6
73.2
74.9
73.3
82.5
99.3
119.1
132.1
74.4
75.5
76.9
81.4
86.2
38.3
46.4
54.6
64.8
82.1
79.9
85.9
98.9
112.2
117.8
1975
1976
801.5
889.1
581.2
647.7
278.6
323.1
77.2
81.6
136.2
151.3
89.2
91.6
101.0
116.6
119.3
124.9
1975: 1
II
III
IV
752.2
768.5
785.3
801.5
546.7
558.1
569.9
581.2
252.4
261.3
270.5
278.6
75.2
75.8
76.5
77.2
131.9
133.0
134.5
136.2
87.2
88.0
88.3
89.2
86.3
91.0
95.9
101.0
119.2
119.4
119.5
119.3
1976: 1
II
III
IV
818.4
840.6
865.7
889.1
593.2
611.5
630.1
647.7
286.3
299.3
311.8
323.1
77.9
78.8
80.2
81.6
139.6
143.7
147.8
151.3
89.4
89.7
90.2
91.6
105.0
107.3
112.3
116.6
120.2
121.8
123.4
124.9
1977: 1
II
III....
911.3
947.1
983.2
662.4
688.8
715.2
333.7
350.8
367.0
82.3
84.1
86.1
154.6
161.1
168.5
91.8
92.9
93.6
121.5
127.0
133.5
127.4
131.3
134.5
0
2
7
5
5
1
Includes loans held hy nondeposit trust companies, but not by bank trust departments.
Includes former Federal National Mortgage Association ( F N M A ) and new Government National Mortgage Association
( G N M A ) , as well as Federal Housing Administration, Veterans Administration, Public Housing Administration, Farmers
Home Administration, and in earlier years Reconstruction Finance Corporation, Homeowners Loan Corporation, and
Federal Farm Mortgage Corporation. Also includes GNMA Pools and U.S.-sponsored agencies such as new FNMA, Federal
Land Banks, and Federal Home Loan Mortgage Corporation. Other U.S. agencies (amounts small or current separate data
not readily available) included with "individuals and others."
2
Source: Board of Governors of the Federal Reserve System, based on data from various Government and private
organizations.
336
TABLE B-69.—Net public and private debt, 1929-76
l
[Billions of dollars]
Private
Public
Individual and unincorporated enterprise
End of year
Total
FedFederally
eral
sponGovsored
erncredit
ment > agencies 3
State
and
local
governments
Total
Nonfarm
Corporate
Total
Total
Mortgage
Commercial
and
financial*
Consumer
Farm*
1929
191.9
16.5
13.6
161.8
88.9
72.9
12.2
60.7
31.2
22.4
7.1
1933
168.5
24.3
16.3
127.9
76.9
51.0
9.1
41.9
26.3
11.7
3.9
1939
183.3
42.6
16.4
124.3
73.5
50.8
8.8
42.0
25.0
9.8
7.2
1940 .
1941
1942
1943
1944
189.8
211.4
258.6
313.2
370.6
44.8
56.3
101.7
154.4
211.9
16.4
16.1
15.4
14.5
13.9
128.6
139.0
141.5
144.3
144.8
75.6
83.4
91.6
95.5
94.1
53.0
55.6
49.9
48.8
50.7
9.1
9.3
9.0
8.2
7.7
43.9
46.3
40.9
40.5
42.9
26.1
27.1
26.8
26.1
26.0
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 . . .
405.9
396.6
415.7
431.3
445.8
252.5
229.5
221.7
215.3
217.6
.6
.7
13.4
13.7
15.0
17.0
19.1
140.0
153.4
178.3
198.4
208.4
85.3
93.5
108.9
117.8
118.0
54.7
59.9
69.4
80.6
90.4
7.3
7.6
8.6
10.8
12.0
47.4
52.3
60.7
69.7
78.4
27.0
31.8
37.2
42.4
47.1
14.7
12.1
11.9
12.9
13.9
5.7
8.4
11.6
14.4
17.4
1950
1951 .
1952
1953
1954 . . . .
486.2
519.2
550.2
581.6
605.9
217.4
216.9
221.5
226.8
229.1
.7
1.3
1.3
1.4
1.3
21.7
24.2
27.0
30.7
35.5
246.4
276.8
300.4
322.7
340.0
142.1
162.5
171.0
179.5
182.8
104.3
114.3
129.4
143.2
157.2
12.3
13.7
15.2
16.8
17.5
92.0
100.6
114.2
126.4
139.7
54.8
61.7
68.9
76.7
86.4
15.8
16.2
17.8
18.4
20.8
21.5
22.7
27.5
31.4
32.5
1955
1956 . . . .
1957
1958
1959
665.8
698.4
728.3
769.6
833.0
229.6
224.3
223.0
231.0
241.4
2.9
2.4
2.4
2.5
3.7
41.1
44.5
48.6
53.7
59.6
392.2
427.2
454.3
482.4
528.3
212.1
231.7
246.7
259.5
283.3
180.1
195.5
207.6
222.9
245.0
18.7
19.4
20.2
23.2
23.8
161.4
176.1
187.4
199.7
221.2
98.7
109.4
118.1
128.1
141.0
24.0
24.4
24.3
26.5
28.7
38.8
42.3
45.0
45.1
51.5
874.2
930.3
996.0
, 070.9
,151.6
239.8
246.7
253.6
257.5
264.0
3.5
4.0
5.3
7.2
7.5
64.9
70.5
77.0
83.9
90.4
566.1
609.1
660.1
722.3
789.7
302.8
324.3
348.2
376.4
409.6
263.3
284.8
311.9
345.8
380.1
25.1
27.5
30.2
33.2
36.0
238.2
257.3
281.7
312.6
344.1
151.3
164.5
180.3
198.6
218.9
30.8
34.8
37.6
42.3
45.0
56.1
58.0
63.8
71.7
80.3
_ . . 1,252.5
L, 349.1
1,450.8
I, 596.8
L. 753.4
266.4
271.8
286.4
291.9
289.3
8.9
11.2
9.0
21.5
30.6
98.3
878.9
104.7
961.3
112.8 1,042.7
122.7 1,160.9
133.3 1, 300.2
454.3
506.6
553.6
631.5
734.1
424.6
454.7
489.1
529.3
566.2
39.3
42.2
47.9
51.7
55.2
385.3
412.5
441.1
477.6
511.0
244.3
260.9
278.2
298.4
319.8
51.1
55.4
62.2
68.5
70.0
89.9
96.2
100.8
110.8
121.1
1970
1971
1972
1973
1974
1, 881.9
2,067. 3
2, 299. 8
2, 562. 3
2, 793.5
301.1
325.9
341.2
349.1
360.8
38.8
39.9
41.4
59.8
76.4
144.8
162.7
178.0
192.3
211.2
1,397.2
797.3
1, 538.8
871.3
1,739.2
975.3
1,961.1 1,106.7
2,145.1 1,223.0
600.0
667.5
763.9
854.4
922.1
57.8
62.5
68.2
79.0
89.2
542.1
604.9
695.8
775.5
832.9
344.9
389.3
448.7
510.4
561.0
70.3
77.0
89.8
86.1
83.1
127.0
138.6
157.2
179.0
188.7
1975
1976
3,028.8
3,354.9
446.3
515.8
78.8
81.4
98.2
222.7 2,281.0 1, 286.6 994.4
236.3 2, 521. 5 1, 414.7 1,106.8 108.5
896.2
998.3
612.8
684.1
86.2
96.4
197.3
217.8
1960
1961
1962
1963
1964
1965 .
1966
1967
1968
1969
.
"~6.T
1 Net public and private debt is a comprehensive aggregate of the indebtedness of borrowers after eliminating certain
types of duplicating government and corporate debt.
2 Net Federal Government debt is the outstanding debt held by the public, as defined in "The Budget of the United
States Government, Fiscal Year 1979."
»Debt of agencies in which there is no longer any Federal proprietary interest. The obligations of the Federal land
banks are included beginning with 1947, the debt of the Federal home loan banks is included beginning with 1951, and
the debts of the Federal National Mortgage Association, Federal intermediate credit banks, and banks for cooperatives
are included beginning with 1968.
* Farm mortgages andf arm production loans. Farmers' financial and consumer debt is included in the nonfarm categories.
«Debt to banks (other than consumer credit), security credit, policy loans, and some single-payments loans.
Source: Department of Commerce (Bureau of Economic Analysis), based on data from various Federal agencies and
ther sources.
337
GOVERNMENT FINANCE
TABLE B-70.—Federal budget receipts, outlays, and debt, fiscal years 1969-79
[Millions of dollars; fiscal years]
Actual
Description
1969
1970
187,784
143,321
52,009
- 7 , 547
1971
1972
1973
193,743
188,392
208,649
232,225
264,932
143,158
59,362
- 8 , 778
133, 785
66,193
-11,586
148, 846
72,959
-13,156
161, 357
92,193
-21,325
181,219
104, 846
-21,133
184, 548
196, 588
211,425
232, 021
247,074
269,620
148,811
43, 284
- 7 , 547
156,301
49, 065
- 8 , 778
163,651
59,361
-11, 586
178,104
67,073
-13,156
186,951
81,447
-21, 325
199,920
90, 833
-21,133
1974
BUDGET RECEIPTS AND OUTLAYS:
Total receipts....
Federal funds
Trust funds
Interfund transactions..
Total outlays
Federal funds
Trust funds
~
Interfund transactions.
Total surplus or deficit (—).
Federal funds.
Trust funds...
3,236
-2,845
-23,033
-23, 373
-14,849
- 4 , 688
-5,490
8,725
-13,143
10,297
-29, 866
6,832
-29,259
5,886
-25, 594
10,746
-18,701
14, 013
367,144
382,603
409, 467
437, 329
468, 426
486,247
87,661
279, 483
97,723
284, 880
105,140
304, 328
113, 559
323,770
125, 381
343,045
140,194
346,053
54,095
225, 388
57, 714
227,166
65, 518
238,810
71,426
252,344
75,182
267,863
80,649
265, 404
187,784
193,743
188, 392
208,649
232,225
264,932
87,249
36,678
39,918
15, 222
3,491
2,319
90,412
32, 829
45, 298
15,705
3,644
2,430
86,230
26,785
48, 578
16,614
3,735
2,591
94,737
32,166
53,914
15, 477
5,436
3,287
103,246
36,153
64, 542
16, 260
4,917
3,188
118, 952
38,620
76, 780
16, 844
5,035
3,334
2,662
247
3,266
158
3,533
325
3,252
381
3,495
426
4,845
524
184, 548
196, 588
211,425
232,021
247,074
269,620
79, 418
4,573
5,016
1,001
2,848
5,779
533
6,531
1,545
78, 553
4,295
4,508
990
3,003
5,164
2,077
7,013
2,395
75, 808
4,092
4,180
1,031
3,855
4,288
2,339
8,057
2,846
76, 550
4,674
4,174
1,270
4,195
5,279
2,206
8,395
3,413
74,541
4,036
4,030
1,180
4,714
4,855
860
9,070
4,593
77,750
5,640
3,977
843
5,664
2,230
3,920
9,176
4,084
7,538
11,758
37,281
7,640
761
1,649
430
15, 793
8,624
13,051
43,066
8,677
952
1,940
536
18,312
9,839
14,716
55,423
9,776
1,299
2,159
535
19, 609
12, 519
17, 471
63,911
10,730
1,650
2,466
673
20, 582
12,735
18,832
72,958
12,013
2,131
2,682
7,351
22,813
12,344
22, 074
84, 431
13,386
2,462
3,327
6,890
28,072
-5,545
- 6 , 567
- 8 , 427
-8,137
-12,318
-16,651
-2,018
-3,099
- 2 , 444
-3,936
-2,611
- 4 , 765
-2,768
-5,089
-2,927
-5,436
-3,319
-6, 583
-428
-187
-1,051
-279
-3,956
-6,748
OUTSTANDING DEBT, END OF PERIOD:
Gross Federal debt
Held by Government agencies..
Held by the public
Federal Reserve System..
Other
BUDGET RECEIPTS.
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions..
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts:
Deposits of earnings by Federal Reserve System
Allother
BUDGET OUTLAYS..
National defense
International affairs
General science, space, and technology
Energy
Natural resources and environment
Agriculture
Commerce and housing credit
Transportation
Community and regional development
Education, training, employment, and social
services
Health
Income security
Veterans benefits and services
Administration of justice
General government
General purpose fiscal assistance
Interest
Allowances
Undistributed offsetting receipts
Composition of undistributed offsetting receipts:
Employer share, employee retirement..
Interest received by trust funds
Rents and royalties on the Outer Continental Shelf
See next page for continuation of table and for footnotes.
338
TABLE B-70.—Federal budget receipts, outlays, and debt,fiscalyears 1969-79—Continued
[Millions of dollars; fiscal years]
Actual
Estimate
Description
BUDGET RECEIPTS AND OUTLAYS:
Total receipts
Federal funds
Trust funds
Interfund transactions.
Total outlays.
1975
1976
ransition
quarter
280,997
299,197
81,687
356, 861
400, 387
439, 588
187,505
118,590
-25,098
200,291
133,695
-34,789
53,999
32,071
-4,383
240, 412
152, 763
-36, 313
267, 889
168,490
-35,992
289,095
187,991
-37,497
500,174
1977
1978
1979
326,092
365, 643
94, 657
401, 902
462,234
Federal funds
Trust funds
I nterfund transactions.
240,018
111,171
-25,098
269,146
131,286
-34, 789
65,017
34,023
- 4 , 383
294, 948
143,267
-36, 313
340, 036
158,190
-35,992
Total surplus or deficit ( - ) _
-45,095
-66,446
-12,970
-45, 040
-61, 847
-60, 586
Federal funds.
Trust funds...
OUTSTANDING DEBT, END OF PERIOD:
Gross Federal debt
-52,514
7,419
-68,855
2,410
-11,018
-1,952
-54, 536
9,496
-72,147
10, 300
-74, 485
13,899
544,131
631,866
646, 379
709,138
785, 583
873,668
147,225
396,906
151, 566
480,300
148,052
498,327
157, 295
551,843
167, 740
617,843
182,826
690, 843
84,993
311,913
94,714
385, 586
96,702
401,625
105,004
446, 839
BUDGET RECEIPTS
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions..
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts:
Deposits of earnings by Federal Reserve
System
Allother
280,997
122,386
40,621
86,441
16, 551
4,611
3,676
299,197
130,794
41,409
92,714
16,963
5,216
4,074
81, 687
38,715
25, 760
4,473
1,455
1,212
356, 861
156, 725
54, 892
108,688
17, 548
7,327
5,150
400, 387
178,828
58,949
124,122
20,150
5,618
5,792
439,588
190,077
62,487
141,889
25,475
6,067
6,390
5,777
934
5,451
2,575
1,500
112
5,908
622
6,200
728
6,300
902
BUDGET OUTLAYS
National defense
International affairs
General science, space, and technology
Energy
Natural resources and environment..
Agriculture
Commerce and housing credit
Transportation
Community and regional development
Education, training, employment, and social
services...
Health
Income security.
Veterans benefits and services
Administration of justice.
General government
General purpose fiscal assistance...
Interest
Allowances..
Undistributed offsetting receipts
326,092
85,550
6,861
3,989
2,179
7,329
1,660
5,604
10, 392
3,692
365,643
89, 430
5,567
4,370
3,127
8,124
2,502
3,795
13,438
4,709
94,657
22,307
2,180
1,161
794
2,532
584
1,391
3,306
1,340
401, 902
97, 501
4,831
4,677
4,172
10,000
5,526
-31
14, 636
6,283
462, 234
107, 626
6,747
4,757
7,837
12,125
9,106
3,523
16, 310
9,694
500,174
117,779
7,691
5,077
9,634
12,222
5,433
2,969
17, 399
8,669
15,870
27,647
108,605
16, 597
2,942
3,089
7,187
30,974
18, 737
33,448
126, 598
18,432
3,320
2,927
7,235
34, 589
5,162
8,720
32,710
3,962
859
878
2,092
7,246
20,985
38,785
137, 004
18,038
3,600
3,357
9,499
38,092
27,471
44, 261
147,640
18,916
4,019
4,119
9,860
43,841
Held by Government agencies.
Held by the public
Federal Reserve System.
Other
Composition of undistributed offsetting
receipts:
Employer share, employee retirementInterest received by trust funds
Rents and royalties on the Outer Continental Shelf.
363, 580
174,092
-37,497
-14,075
-14,704
- 2 , 567
-15,053
-15,619
30, 421
49,677
160,024
19, 257
4,211
4,304
9,636
48,991
2,800
-16,021
-3,980
-7,667
-4,242
-7,800
-985
-270
- 4 , 548
-8,131
-5,024
- 8 , 595
-5,157
-9,064
-2,428
-2,662
-1,311
- 2 , 374
- 2 , 000
-1,800
Note.—Through fiscal year 1976, the fiscal year runs from July 1 through June 30; starting in October
1976 (fiscal year 1977), the fiscal year runs from October 1 through September 30. The period July 1 , 1976
through September 30, 1976 is a separate fiscal period known as the transition quarter.
Earned income credit payments in excess of an individual's taxable liability are classified as income tax refunds beginning
1976 and as outlays prior to 1976.
Sources: Department of the Treasury and Office of Management and Budget.
339
TABLE B-71.—Federal budget receipts and outlays,fiscalyears 1929-79
[Millions of dollars]
Fiscal year
Receipts
1929
3,862
Outlays
Surplus or
deficit ( - )
3,127
734
1933
1,997
4,598
-2,602
1939 .
4,979
8,841
-3,862
1940
1941
1942
1943
1944
6,361
8 621
14,350
23,649
44,276
9,456
13,634
35 114
78,533
91,280
-3,095
-5,013
-20,7R4
-54,884
-47,004
1945
1946
1947
1948
1949
45,216
39,327
38,394
41,774
39,437
92,690
55,183
34, 532
29,773
38,834
-47,474
-15,856
3,862
12,001
603
1950
1951
1952
1953
1954
39 ^85
51 646
66,204
69, 574
69,719
42 597
45 546
67!721
76,107
70,890
- 3 112
6,100
-1,517
- 6 , 533
-1,170
1955
1956
1957
1958
1959
65,469
74,547
79 990
79,636
79,249
68,509
70,460
76,741
82,575
92,104
-3,041
4,087
3,249
-2,939
-12,855
I960
1961
1962
1963..
1964
92,492
94,389
99,676
106,560
112,662
92,223
97,795
106,813
111,311
118,584
269
-3,406
- 7 137
-4,751
-5,922
1965
1966
1967
1968
1969
116,833
130 856
149,552
153,671
187,784
118,430
134 652
158,254
178,833
184,548
-1,596
- 3 796
- 8 ! 702
-25,161
3,236
1970
1971
1972
1973
1974
19^, 743
188,392
208, 649
232,225
264,932
196,588
211,425
232,021
247,074
269,620
-2,845
-23,033
-23,373
- 1 4 , 849
-4,688
1975
1976
Transition quarter
1977
19781
19791
280, 997
299,197
81,687
356,861
400,387
439,588
326, 092
365,643
94,657
401,902
462,234
500,174
-45,095
-66,446
-12,970
-45,040
-61,847
-60,586
i Estimate.
Note.—Under provisions of the Congressional Budget Act of 1974, the fiscal year for the Federal Government shifted
beginning with fiscal year 1977. Through fiscal year 1976, the fiscal year ran from July 1 through June 30; starting in
October 1976 (fiscal year 1977), the fiscal year ran from October 1 through September 30. The 3-month period from
July 1,1976 through September 30,1976 is a separate fiscal period known as the transition quarter.
See Note, Table B-70 regarding treatment of earned income credit payment.
Data for 1929-39 are according to the administrative budget and those beginning 1940 according to the unified budget.
Certain interfund transactions are excluded from receipts and outlays beginning 1932. For years prior to 1932 the amounts
of such transactions are not significant.
Refunds of receipts are excluded from receipts and outlays.
Sources: Department of the Treasury and Office of Management and Budget.
340
TABLE B-72.—Relation of the Federal budget to the Federal sector of the national income and
product accounts, fiscal years 1977-79
[Billions of dollars; fiscal years]
Estimate
Receipts and expenditures
1977
1978
Total budget receipts
RECEIPTS
Government contribution for employee retirement (grossing).
Other netting and grossing
Adjustment to accruals
Other
Federal sector, national income and product accounts, receipts
1979
356.9
400.4
439.6
6.4
3.7
7.1
3.9
.5
-1.9
-1.0
-1.1
7.5
4.4
1.1
-1.2
364.0
410.8
451.4
401.9
462.2
500.2
-1.3
6.4
3.7
2.7
1.5
-3.2
-7.1
7.1
3.9
.3
1.2
-4.0
-4.7
7.5
4.4
-.2
.9
-4.1
411.8
463.6
504.0
EXPENDITURES
Total budget outlays
Lending and financial transactions
Government contribution for employee retirement (grossing)...
Other netting and grossing
Defense timing adjustment.
Bcnuses en Outer Continental Shelf land leases.
._.
Other
Federal sector, national income and product accounts, expenditures.-
Note.-See Note, Table B-71.
See Special Analysis A, "Special Analyses, Budget of the United States Government, Fiscal Year 1979" for description
of these categories.
Sources: Department of Commerce (Bureau of Economic Analysis), Department of the Treasury, and Office of Management and Budget.
341
248-947 O - 78 - 22
TABLE B-73.—Receipts and expenditures of the government sector of the national income and product
accounts, 1929-77
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Total government
Calendar year or quarter
Receipts
Expenditures
State and local
government
Federal Government
Surplus or
deficit
(-).
national
income
and
product accounts
Receipts
Expenditures
Surplus or
deficit
(->,
nationa
income
and
product accounts
Receipts
Expenditures
Surplus or
deficit
(-),
national
income
and
product accounts
1929
11.3
10.3
1.0
3.8
2.6
1.2
7.6
7.8
-0.2
1933
9.3
10.7
-1.4
2.7
4.0
-1.3
7.2
7.2
-.1
1939
15.4
17.6
-2.2
6.7
8.9
-2.2
9.6
9.6
.0
1940
1941
1942
1943
1944.
1945
1946
1947
1948.
1949
17.7
25.0
32.6
49.2
51.2
53.2
51.0
56.9
58.9
55.9
18.4
28.8
64.0
93.3
103.0
92.7
45 6
42.5
50.5
59.3
-.7
-3.8
-31.4
-44.1
-51.8
-39.5
54
14.4
8.4
-3.4
8.6
15.4
22.9
39.3
41.0
42.5
39.1
43.2
43.2
38.7
10.0
20.5
56.1
85.8
95.5
84.6
35.6
29.8
34.9
41.3
-1.3
-5.1
-33.1
-46.6
-54.5
-42.1
3.5
13.4
8.3
-2.6
10.0
10.4
10.6
10.9
11.1
11.6
13.0
15.4
17.7
19.5
9.3
9.1
8.8
8.4
8.5
9.0
11.1
14.4
17.6
20.2
.6
1.3
1.8
2.5
2.7
2.6
1.9
1.0
.1
-.7
1950
1951
1952
1953
1954
1955
1956
1957..
1958
1959..
69.0
85.2
90.1
94.6
89.9
101.1
109.7
116.2
115.0
129.4
61.0
79.2
93.9
101.6
97.0
98.0
104.5
115.3
127.6
131.0
8.0
6.1
-3.8
-6.9
-7.1
3.1
5.2
.9
-12.6
-1.6
50.0
64.3
67.3
70.0
63.7
72.6
78.0
81.9
78.7
89.8
40.8
57.8
71.1
77.1
69.8
68.1
71.9
79.6
88.9
91.0
9.2
6.5
-3.7
-7.1
-6.0
4.4
6.1
2.3
-10.3
-1.1
21.3
23.4
25.4
27.4
29.0
31.7
35.0
38.5
42.0
46.4
22.5
23.9
25.5
27.3
30.2
32.9
35.9
39.8
44.3
46.9
-1.2
-.4
-.0
.1
—1.1
-1.3
—.9
-1.4
-2.4
—.4
1960
1961
1962
1963..
1964
1965 .
1966
1967
1968
1969
139.5
144.8
156.7
168.5
174.0
188.3
212.3
228.2
263.4
296.3
136.4
149.1
160.5
167.8
176.3
187.8
213.6
242.4
268.9
285.6
3.1
-4.3
-3.8
.7
-2.3
.5
-1.3
-14.2
-5.5
10.7
96.1
98.1
106.2
114.4
114.9
124.3
141.8
150.5
174.7
197.0
93.1
101.9
110.4
114.2
118.2
123.8
143.6
163.7
180.6
188.4
3.0
-3.9
-4.2
.3
-3.3
.5
-1.8
-13.2
-5.8
8.5
49.9
54.0
58.5
63.2
69.5
75.1
84.8
93.6
107.2
119.7
49.8
54.4
58.0
62.8
68.5
75.1
84.3
94.7
106.9
117.6
.1
-.4
.5
.5
1.0
-.0
.5
-1.1
.3
2.1
1977P
302.6
322.2
367.4
411.2
455.1
468.0
535.9
600.8
311.9
340.5
370.9
404.9
458.2
532.3
571.5
621.2
-9.4
-18.3
-3.5
6.3
-3.2
-64.3
-35.6
-20.4
192.1
198.6
227.5
258.3
288.6
286.9
332.3
373.9
204.2
220.6
244.7
265.0
299.3
357.1
386.3
423.5
-12.1
-22.0
-17.3
-6.7
-10.7
-70.2
-54.0
-49.6
134.9
152.6
177.4
193.5
210.4
235.7
264.7
294.5
132.2
148.9
163.7
180.5
202.8
229.8
246.2
265.3
2.8
3.7
13.7
13.0
7.6
5.9
18.4
29.2
1975: 1.
II
III.. .
IV....
461.1
433.2
482.3
495.4
505.9
527.9
541.2
554.0
-44.9
-94.7
-59.0
-58.7
287.4
255.1
298.2
307.0
335.9
354.3
363.7
374.5
-48.5
-99.2
-65.5
-67.6
223.7
231.8
240.8
246.4
220.0
227.3
234.2
237.5
3.7
4.5
6.6
8.9
1976: l__
II
Ill
IV.
513.7
530.7
543.0
556.5
560.7
564.0
575.4
586.0
-47.1
-33.3
-32.4
-29.4
318.4
329.1
337.1
344.5
378.7
375.3
390.6
400.4
-60.3
-46.2
-53.5
-55.9
253.8
258.4
269.0
277.5
240.5
245.5
247.9
251.1
13.3
12.9
21.1
26.5
1977: 1
II...
Ill
IV*
583.9
595.7
602.2
595.4
610.5
628.1
650.7
-11.5
-14.9
-26.0
364.9
371.2
373.2
403.7
411.5
432.1
446.7
-38.8
-40.3
-58.9
281.0
288.1
301.6
253.7
262.6
268.7
276.2
27.3
25.4
32.9
1970
1971
1972
1973
1974..
1975
1976
. . . .
Note.—Federal grants-in-aid to State and local governments are reflected in Federal expenditures and State and local
receipts. Total government receipts and expenditures have been adjusted to eliminate this duplication.
Source: Department of Commerce, Bureau of Economic Analysis.
342
T A B L E B-74.—Receipts and expenditures of the Federal Government sector of the national income
and product accounts, 1952-79
[Billions of dollars; quarterly data at seasonally adjusted annual rates)
\Receipts
Expenditures
Transfer
payments
Indirect
PerConPurbusisonal Corpo- ness tribuchases
tax
rate tax tions
Year or quarter
of
and profits and
Total nonfor TotaM goods To
tax non- social
and
tax
acperserv- sons
insurre- cruals tax
ices
acance
ceipts
cruals
Fiscal year:
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970.
1971
1972
1973
1974
1975
1976
1977
19782
19792
Calendar year:
1952
1953....
1954....
1955
1956
1957
1958
1959
I960....
1961
1962. .
1963
1964.
1965
1966
1967
1968 . .
1969
1970
1971
1972
1973
1974
1975
1976
1977*
Grantsin-aid
to State
and
To
forlocal
eign- governers
ments
Net
interest
paid
Surplus
or
Subsidefidies
cit
less
cur- (->,
narent
tionsurplus al income
of
and
govprodernuct
ment
enter- acprises counts
65.2
69.4
65.8
67.4
76.3
81.0
78.1
85.4
94.8
95.0
104.0
110.0
115.6
120.0
132.7
146.0
160.0
190 1
194.9
192.5
213.5
240.5
271.8
283.6
314.1
364.0
410.8
451.4
28.8
31.4
30.3
29.7
33.6
36.7
36.3
38.2
42 5
43.6
47.3
49.6
50.7
51.4
57.5
64.4
71.4
90 0
93.6
87.5
100.3
107.3
122.6
127.3
137.2
165.5
185.5
195.6
19.4
19.7
17.3
18.9
21.5
20.8
17.9
21.4
22 3
20 0
22.7
23.3
25.7
27.1
30.8
30.3
33.2
37 0
33.0
32.0
34.2
41.0
43.7
42.1
52.2
57.4
63.1
69.7
7.3
7.6
7.8
8.7
10.3
11.7
12.3
13.9
16 7
18.1
19.9
22.1
23.6
24.5
28.9
35.5
38.4
44 5
49.2
52.9
59.1
71.5
84.2
92.1
100.5
116.5
133.7
151.3
66.0
75.9
74.3
67.2
70.0
76.0
82.8
91.2
91.3
98.1
106.2
111.7
117.2
118.5
132.7
154.9
172.2
184.7
195 6
212.7
232.9
256.2
278.8
328.7
372.3
411.8
463.6
504.0
47.2
56.4
53.9
44.3
45.5
48.1
51.1
54.8
52.9
55.8
61.0
63.7
65.9
64.6
72.4
86.0
95.0
98.0
97.0
94.8
100.9
101.7
104.6
117.9
126.5
140.7
158.4
171.6
8.5
9.2
10.5
12.1
12.8
14.4
17.8
19.9
20.6
23.6
25.1
26.5
27.4
28.4
31.8
37.2
42.7
48 7
55.0
67.7
76.1
87.1
101.7
131.1
153.9
[66.5
.80. 7
,98.0
2.6
2.1
1.7
2-1
8
1.9
1.7
8
ft
2.1
2.1
2.1
2.2
2.2
2.3
2.2
2.1
2.2
2.0
2.3
2.8
2.7
3.0
3.1
3.0
3.2
3.5
3.8
2.5
2.8
2.9
3.0
3.2
3.7
4.7
6.2
6.9
6.9
7.6
8.3
9.8
10.9
12.7
14.8
17.8
19.2
22.6
26.8
32.6
40.4
41.6
48.4
57.5
66.0
77.0
81.6
4.5
4.5
4.6
4.6
4.8
5.3
5.4
5.6
6.8
6.4
6.4
7.1
7.7
8.2
8.7
9.6
10.5
12.1
13.6
14.2
14.1
15.9
19.8
21.9
25.4
29.3
34.5
39.8
0.8
.9
.8
1.2
1.7
2.6
2.4
2.5
24
3.3
4.1
4.0
4.1
4.3
4.8
5.2
4.1
46
5.4
6.8
6.4
9.1
8.0
5.7
6.1
6.1
9.5
9.2
-0.8
-6.5
-8.5
.2
6.3
5.0
-4.7
-5.8
3.4
-3.1
-2.2
-1.7
-1.5
1.4
.0
-8.9
-12.2
5.4
-.6
-20.2
-19.5
-15.7
-7.0
-45.0
-58.2
-47.8
-52.8
-52.6
67.3
70.0
63.7
72.6
78.0
81.9
78.7
89.8
96.1
98.1
106.2
114.4
114.9
124.3
141.8
150.5
174.7
197 0
192.1
198.6
227.5
258.3
288.6
286.9
332.3
373.9
31.0
32.2
29.0
31.4
35.2
37.4
36.8
39.9
43.6
44.7
48.6
51.5
48.6
53.9
61.7
67.5
79.6
94.8
92.2
89.9
108.2
114.6
131.1
125.6
147.3
170.7
18 6 10 3
7.4
7.4
19.5 10.9
9.7
16.9
8.2
21.1 10.7
9.4
20 9 11 2 10 6
20.4 11.8 12.3
18.0 11.5 12.4
22 5 12 5 14 9
21.4 13.4 17.6
21 5 13 6 18 3
22.5 14.6 20.5
24 6 15 3 23 1
26.1 16.2 24 0
28.9 16.5 25.0
31.4 15.6 33.1
30.0 16.3 36.7
36.3 18 0 40.8
36 2 19 0 47 0
30.8 19.3 49.7
33.5 20.4 54.9
36 6 20 0 62 8
43 0 21 2 79 4
45.9 21.7 89.9
43.1 24.0 94.2
55.9 23.4 105.7
59.5 24.8 118.9
71.1
77.1
69.8
68.1
71.9
79.6
88.9
91 0
93.1
101.9
110.4
114.2
118.2
123.8
143.6
163.7
180.6
188 4
204.2
220.6
244 7
265 0
299.3
357.1
386.3
423.5
52.4
57.5
47.9
44.5
45 9
50.0
53.9
53 9
53.7
57.4
63.7
64.6
65.2
67.3
78.8
90.9
98.0
97 5
95.6
96.2
102 1
102 2
111.1
123.3
130.1
145.4
8.8
9.4
11.5
1? 4
13.4
15.7
19.6
20.1
21.6
25.0
25.6
27.0
27.9
30 3
33.5
40 1
46.0
50.6
61.3
7? 7
80.5
93.2
114.4
146.1
158.8
169.4
2.1
2.0
1.8
2.0
19
1.8
1.8
1.8
1.9
2.1
2.2
2.2
2.2
2.2
2.3
2.2
2.1
2.1
2.2
2.6
2.7
2.6
3.2
3.1
3.2
3.2
2.6
2.8
2.9
3.1
3.3
4.2
5.6
6.8
6.5
7.2
8.0
9.1
10.4
11.1
14.4
15.9
18.6
20.3
24.4
29.0
37.5
40.6
43.9
54.6
61.0
67.6
4.5
4.6
4.6
4.6
5.1
5.5
5.2
6.2
6.8
6.2
6.8
7.3
8.0
8.4
9.2
9.8
11.4
12.9
14.3
14.0
14.6
18.2
20.9
23.3
27.2
29.5
.8
.7
1.0
1.5
2.4
2.4
2.8
2.1
2.6
4.0
4.2
3.9
4.5
4.6
5.5
4,7
4.5
5.2
6.3
6.2
7.8
8.2
5.3
6.7
5.9
7.9
-3.7
-7.1
-6.0
4.4
6.1
2.3
-10.3
-1.1
3.0
-3.9
-4.2
.3
-3.3
.5
-1.8
-13.2
-5.8
8.5
-12.1
-22.0
-17.3
-6.7
-10.7
-70.2
-54.0
-49.6
1976:1.
II...
Ill
IV
318.4
329.1
337.1
344.5
138 0
143 9
150.3
157.1
54 4
57 0
56.9
55.1
22 7
23 2
23.7
23.8
103 2
105 0
106.2
108.4
378 7
375 3
390.6
400.4
127 6
128 5
130.2
134.2
157 1
155 0
160.0
163.1
30
27
3.9
3.2
58 5
56 8
63.1
65.5
26 2
26.7
27.3
28.5
6.2
5.5
6.1
6.0
-60.3
-46.2
-53.5
-55.9
1977:l__ _
II
III
364.9 170.0
371.2 168.6
373.2 168.6
175 5
55.4
59.9
59.5
24.2
24.6
25.4
25.2
115.4
118.1
119.7
122.4
403.7
411.5
432.1
446.7
136.3
143.6
148.1
153.8
167.8
166.4
171.2
174.0
2.9
2.9
3.6
3.6
62.0
63.6
72.7
72.2
28.6
29.1
29.4
30.9
6.1
5.9
7.2
12.3
-38.8
-40.3
-58.9
IVP
9.7
10.7
10.4
10.0
10.8
11.7
11.6
12.0
13 2
13 3
14.2
15.0
15.6
16.9
15.5
15.8
17.1
18 6
19.2
20.0
19.9
20.7
21.4
22.1
24.2
24.6
28.5
34.8
» Excludes wape accruals less disbursements not shown separately. These were (in billions of dollars at seasonally
adjusted annual rates) .0 in each of the quarters of 1976 and 1977.
2 Estimates.
Sources: Department of Commerce (Bureau of Economic Analysis) and Office of Management and Budget.
343
TABLE B-75.—-Receipts and expenditures of the State and local government sector of the national
income and product accounts, 1946—77
(Billions of dollars; quarterly data at seasonally adjusted annual rates]
Receipts
Calendar
year or
quarter
Total
ndirect
PerbusiCorsonal porate
ness
tax
tax
profits
and
and
tax
nontax accruals nontax
receipts
accruals
1946...
1947...
1948...
1949...
13.0
15.4
17.7
19.5
1.5
1.7
2.1
2.4
1950...
1951—
1952...
1953...
1954...
21.3
23.4
25.4
27.4
29.0
2.5
2.8
3.0
3.2
3.5
'.8
.8
1955...
1956...
1957...
1958...
1959...
31.7
35.0
38.5
42.0
46.4
1960...
1961..
1962..
1963..
1964..
Expenditures
Pur- TransContrichases
fer
butions Fedof
payfor
eral
ments
goods
Total
i
social grantsto
and
insur- in-aid
servperance
ices
sons
Subsidies
less
current
Net surplus
nterest of govpaid
ernment
enterprises
Surplus
or
deficit
<-),
national
income
and
product accounts
9.3
10.7
12.2
13.3
0.6
.7
.8
.9
1.1
1.7
2.0
2.2
11.1
14.4
17.6
20.2
9.9
12.8
15.3
18.0
1.7
2.3
3.0
3.0
0.2
.1
.1
.1
-0.7
-.8
1.9
1.0
.1
-.7
14.6
15.9
17.4
18.8
19.9
1.1
1.4
1.6
1.7
2.0
2.3
2.5
2.6
2.8
2.9
22.5
23.9
25.5
27.3
30.2
19.8
21.8
23.2
25.0
27.8
3.6
3.1
3.3
3.5
3.6
.1
.0
.0
.0
.1
-.9
-1.0
-1.1
-1.2
-1.3
-1.2
-.4
-.0
-LI
3.9
4.5
5.0
5.4
6.1
.0
.0
.0
.0
.2
21.6
23.8
25.7
27.2
29.3
2.1
2.3
2.6
2.8
3.1
3.1
3.3
4.2
5.6
6.8
32.9
35.9
39.8
44.3
46.9
30.6
33.5
37.1
41.1
43.7
3.8
3.9
4.3
4.8
5.1
.1
.1
.1
.1
.1
-1.5
-1.6
-1.7
-1.7
-2.0
-1.3
-.9
-1.4
-2.4
-.4
49.9
54.0
58.5
63.2
69.5
6.7
7.4
8.2
8.8
10.0
1.2
3.4
3.7
3.9
4.2
4.7
6.5
7.2
8.0
9.1
10.4
49.8
54.4
58.0
62.8
68.5
46.5
50.8
54.3
59.0
64.6
5.4
5.8
6.0
6.4
6.9
.1
.1
.1
.1
-2.2
-2.3
-2.5
-2.8
-2.8
.1
-.4
.5
L8
32.0
34.4
37.0
39.4
42.6
1965..
1966..
1967..
1968..
1969..
75.1
84.8
93.6
107.2
119.7
10.9
12.8
14.6
17.4
20.6
2.0
2.2
2.5
3.1
3.4
46.1
49.7
54.0
60.8
67.4
5.0
5.7
6.7
7.2
7.9
11.1
14.4
15.9
18.6
20.3
75.1
84.3
94.7
106.9
117.6
71.1
79.8
89.3
100.7
110.4
7.3
8.1
9.4
10.6
12.1
-.3
-.7
g
-L2
-1.6
-3.0
-3.0
-3.1
-3.2
-3.3
-1.1
1970..
1971..
1972..
1973..
1974..
134.9
152.6
177.4
193.5
210.4
23.1
26.4
33.0
36.1
39.2
3.7
4.2
5.0
5.7
6.5
74.7
83.1
91.0
99.0
106.9
9.0
9.9
10.8
12.1
13.9
24.4
29.0
37.5
40.6
43.9
132.2
148.9
163.7
180.5
202.8
123.2
137.5
151.0
167.3
191.5
14.6
17.2
18.9
20.3
20.5
-2.0
-1.8
-2.1
-2.9
-4.9
-3.6
-3.8
-4.2
-4.4
-4.3
2.8
3.7
13.7
13.0
7.6
1975...
1976...
1977 *>_
235.7
264.7
294.5
43.4
49.6
56.8
7.1
8.9
9.7
114.7
127.1
140.3
15.9
18.1
20.1
54.6
61.0
67.6
229.8
246.2
265.3
215.6
231.2
249.5
23.8
25.9
28.0
-5.2
-5.7
-6.5
-4.5
-5.2
-5.8
5.9
18.4
29.2
1975: I
II
Ill
IV
223.7
231.8
240.8
246.4
42.1
42.8
43.8
44.9
5.7
6.4
8.0
8.2
110.8
113.3
116.2
118.7
15.2
15.7
16.1
16.6
50.0
53.7
56.7
58.0
220.0
227.3
234.2
237.5
206.4
213.3
219.7
222.9
22.6
23.3
24.2
25.0
-4.7
-5.0
-5.2
-5.6
-4.3
-4.4
-4.5
-4.8
3.7
4.5
6.6
8.9
1976: I.
II
Ill
IV
253.8
258.4
269.0
277.5
46.8
48.7
50.3
52.5
8.6
9.1
9.0
8.8
122.7
126.0
128.1
131.7
17.2
17.8
18.5
19.1
58.5
56.8
63.1
65.5
240.5
245.5
247.9
251.1
225.9
230.4
232.7
235.8
25.3
25.8
26.2
26.5
-5.6
-5.7
-6.0
-5.7
-5.1
-5.0
-5.1
-5.5
13.3
12.9
21.1
26.5
1977: I.
II
Ill
IV *____.
281.0
288.1
301.6
54.4
56.2
57.5
59.1
9.0
9.8
9.8
135.9
138.6
141.5
145.2
19.5
19.9
20.2
20.7
62.0
63.6
72.7
72.2
253.7
262.6
268.7
276.2
238.5
247.0
252.9
259.8
27.0
27.7
28.3
29.0
-6.2
-6.3
-6.7
-6.7
-5.7
-5.7
-5.8
-5.9
27.3
25.4
32.9
0.5
.6
.7
,6
.9
'.5
1
l'.O
2.1
Excludes wage accruals less disbursements not shown separately. These were (in billions of dollars, at seasonally
adjusted annual rates) .0 in each of the quarters of 1975,1976, and 1977.
Source: Department of Commerce, Bureau of Economic Analysis.
344
T A B L E B-76.—State and local government revenues and expenditures^ selected fiscal years\
1927-76
[Millions of dollars]
General expenditures by function J
General revenues by source*
Fiscal year »
Total
Property
taxes
Sales
and
gross
receipts
taxes
Individual
ncome
taxes
Revenue
All
from
ederal others
iovernment
Corporation
net
income
taxes
Total
Education
Highways
Public
welfare
All
other«
1927...
7,271
4,730
470
70
92
116
1,793
7,210
2,235
1,809
151
3,015
1932...
1934..
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
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..
1944..
1946..
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
2,123
2,269
2,661
3,685
9,229
9,190
8,863
11,028
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..
1953..
1954..
20,911
25,181
27,307
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,""
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..
19571958..
1959..
31,073
34,667
38,164
41,219
45,306
10,735 7,643
11,749 8,69"
12,864 9,46
14,047 9,829
14,983 10,437
1,23;
1,538
1,754
l,75f
1,99'
744
890
984
1,018
1,001
3,131
3,335
3,843
4,865
6,377
7,584
8,465
9,250
9,699
10,516
33,724
36,711
40,375
44,851
48,887
11,907
13,220
14,134
15,919
17,283
6,452
6,953
7,816
8,567
9,592
3,168
3,139
3,485
3,818
4,136
12,197
13,399
14,940
16, 547
17,876
I960..
1961..
1962..
1963..
50,505
54,037
58,252
62,890
16,405
18,002
19,054
20,089
11,849
12,463
13,494
14,456
2,46,
2,61:
3,03;
3,26!
1,180
1,266
1,308
1,505
6,97<
7,13;
7,871
8,722
11,634
12,563
13,489
14,850
51,876
56,201
60,206
64,816
18,719 9,428
20,574 9,844
22,216 10,357
23,776 11,136
4,404
4,720
5,084
5,481
19,325
21,063
22,549
24,423
1962-63 8...
1963-64 5...
1964-65«...
62.26S 19,83! 14,446
68,443 21,24 15,762
74,00C 22,582 17,11
3,26'
3,791
4,09C
1,505 8,663 14,556 63,97 23,729 11,150
1,695 10,002 15,951 69,302 26.286 11,664
1,929 11,029 17,250 74,546 28,563 12,221
29, or
800
5,420 23,678
5,766 25,586
6,315 27,447
1965-66«_.
1966-67 8..
1967-68«_.
1968-69 5..
1969-70 5..
83,036 24,671
91,197 26,04
101,264 27, 74]
114,55C 30,673
130,756 34,054
19,08!
20,531
22,91:
26,51!
30,32;
4,760
5,826
7,30?
8,90*
10,81;
2,03?
2,22'
2,51J
3.18C
3,73.r
13,214
15,37f
17,18:
19,15;
21,85'
19,269
21,197
23,598
26,lir
29,97
82,843
93,350
102,411
116,728
131,33f
33.287
37,919
41,158
47,238
52,718
12,770 6,757 30,029
13,932 8,218 33,281
14,481 9,857 36,915
15,41" 12,110 41,963
16,42 14,679 47,508
1970-715..
1971-72 5..
1972-73»..
1973-74 5...
1974-75 5...
144,92;
166,35;
190, 21<
207, 671
228,17
37,851
42,13!
45,28!
47, 70!
51,49
33,23:
37,48!
42,04;
46, 091
49, 81!
ll,90C
15,237
17,99'
19, 49!
21, 45^
3,42'
4,41
5,42!
6,01
6,64;
26,141
31,253
39, 256
41, 820
47,034
32,37
35,82i
40,2H
46,54
51, 73*
150,67
166,873
181,227
198,959
230, 721
59,413
64,886
69,714
75, 833
87, 858
18,095
19,010
18,615
19, 946
22,528
18,226
21,070
23, 582
25,085
28,155
54,940
61,907
69,316
78,096
92,180
1975-76 5
256,17
57,00
54, 54
24,57
7,27:
55, 589
57,19
256,73:
97, 216
23,907
32,604
103,004
1 Fiscal years not the same for all governments. See footnote 5.
2 Excludes revenues or expenditures of publicly owned utilities and liquor stores, and of insurance-trust activities.
Intergovernmental receipts and payments between State and local governments 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
urban renewal, local parks and recreation, general control, financial administration, interest on general debt, and unallocable expenditures.
* Data for fiscal year ending in the 12-month period through June 30. Data for 1963 and earlier years include local government amounts grouped in terms of fiscal years ended during the particular calendar year.
Note.—Data are not available for intervening years.
See Table B-69 for net debt of State and local governments.
Source: Department of Commerce, Bureau of the Census.
345
TABLE B-77.—Interest-bearing public debt by kind of obligation, 1967-77
[Millions of dollars]
Marketable
End of year
or month
Total
interestbearing
public
debt
Total
Bills
58, 535
64,440
68,356
Fiscal year:
1967....
1968....
1969....
322,286
344,401
351,729
210,672
226, 592
226,107
1970.
1971.
1972.
1973.
1974.
369,026
396,289
425,360
456,353
473,238
1975.
1976.
1977.
Nonmarketable
Treasury Treasury
notes
bonds *
Total
U.S.
savings
bonds
97,418 .11,614
91,079 17,808
78,805 .25,623
51,213
51,712
51,711
232, 599 76,154 93,489
245,473 86,677 104, 807
257,202 94,648 113,419
262,971 100,061 117,840
266,575 105,019 128,419
62,956
53,989
49,135
45,071
33,137
136,426
150, 816
168,158
193,382
206,663
532,122
619,254
697,629
315.606 128,569 150,257
392,581 161,198 191,758
443,508 156, 091 241,692
1976: Jan..
Feb...
Mar..
Apr..
MayJune.
581,861
592,874
599, 224
600,927
608,077
619,254
369,316
378,773
385,296
386,444
388,021
392,581
159, 645
162,088
163,140
161,764
161, 840
161,198
July..
Aug..
Sept..
Oct..
Nov..
Dec.
623,580
632,291
633,560
635,062
643, 643
352, 457
397,719
404, 314
407,663
408, 590
415, 399
421,276
1977: Jan..
Feb..
Mar..
Apr__
May..
June.
552,980
562,320
568,216
568, 509
570,958
573, 389
July..
Aug..
Sept.
Oct..
Nov_.
Dec.
371, 386
584, 081
597,629
596,
301
7
06,973
'15, 227
49,108
71,073
78,946
Foreign Governgovernment
ment account
series2 series *
1,514
3,741
4,070
Other«
56,155
59, 526
66,790
2,731
2,828
3,051
51, 281
53,003
55,921
59,418
61,921
4,755 76,323
9,270 82,784
18,985 89,598
28, 524 101, 738
25,011 115,442
4,068
5,759
3,654
3,701
4,289
36,779 216,516
39,626 226,673
45, 724 254,121
65,482
69,733
75,411
23, 216 124,173
21, 500 130, 557
21, 799 140,113
3,644
4,883
16, 797
171,110
177,576
183,143
185.757
186, 473
191.758
38,562
39,110
39,014
38,922
39,708
39,626
212, 544
214,100
213,928
214, 484
220,056
226,673
67,826
68,170
68, 567
68,968
69,394
69,733
21,601
21,689
21,669
21,612
21,515
21, 500
119,041
120,105
119,438
119,453
124,570
130,557
4,076
4,138
4,254
4,449
4,577
4,883
161, 399
161,433
161, 505
161, 545
161,711
163,992
197, 204
202, 979
206, 319
207,275
212, 986
216,669
39,115
39,902
39,839
39, 769
40, 702
40, 615
225,861
227, 977
225,897
226,472
228, 243
231,181
70, 428 21,357 128,912
71,079 20,967 130,591
70,752 20,814 128,640
71,113 22,290 127,162
71, 506 22, 487 127,405
71, 853 22, 299 129,744
5,164
5,340
5,690
5,906
6,844
7,284
423,995
431.607
435, 379
434, 065
431, 447
431,149
164,005
164,175
164,264
161,977
157,931
155, 064
219,474
225, 856
229,625
230,655
230, 230
232,885
40, 516
41, 576
41,490
41, 433
43, 286
43, 200
228,985
230,714
232, 837
234, 444
239, 511
242, 240
72,234
72,640
73, 037
73, 457
73, 908
74, 282
22, 209
22, 069
22, 078
21, 903
21, 831
21, 732
126,810
127, 770
128,192
128, 992
133, 029
134, 754
7,731
8,235
9,529
10, 092
10, 743
11,473
430, 248
438,146
443, 508
447, 435
454, 862
459, 927
154, 227
154, 283
156, 091
156,174
156, 656
161, 081
231, 371
238, 084
241, 692
245, 587
251,104
251, 800
44, 650
45, 778
45, 724
45,674
47,102
47, 045
241,138
245, 935
254,121
248, 866
252, 111
255, 300
74, 803
75, 059
75,411
75, 816
76, 224
76,602
21, 545
21,370
21, 799
21,123
21,665
22,187
132,447
136, 329
140,113
136, 890
138, 580
139,774
12, 342
13,176
16,797
15, 039
15,642
16, 737
1 Includes Treasury bonds and minor amounts of Panama Canal and postal savings bonds.
2 Nonmarketable certificates of indebtedness, notes, bonds, and bills in the Treasury foreign series and foreign-currencyseries issues.
» Includes Treasury deposit funds and some special issues formerly included in "Other."
< Includes depository bonds, retirement plan bonds, Rural Electrification Administration bonds, State and local bonds,
and special issues held only by U.S. Government agencies and trust funds and the Federal home loan banks.
* Includes $5,610 million in certificates not shown separately.
Note.—Through fiscal year 1976, the fiscal year runs from July 1 through June 30; starting in October 1976 (fiscal year
1977), the fiscal year runs from October 1 through September 30.
Source: Department of the Treasury.
346
TABLE B-78.— Estimated ownership of public debt securities, 1967-77
[Par values; 1 billions of dollars]
Total public debt securities
Held by private investors
Held
Held by
Federal
Govern- Reserve
ment
Total 2
accounts Banks
End of year or
month
Fiscal year:
1967
1968
1969
Mutual
savings
State
MiscelCombanks
Total 3 mercial and in- Corpo- 5 and local Indi- 7 laneous
rations
governinvesviduals
banks « surance
tors 3 8
ments «
companies
322.9
345.4
352.9
71.8
76.1
84.8
46.7
52.2
54.1
204.4
217.0
214.0
55.5
59.7
55.3
13.2
12.5
11.6
11.0
12.0
11.1
23.6
25.1
26.4
70.4
74.2
77.3
30.7
33.4
32.3
1970
1971
1972
1973
1974
370.1
397.3
426.4
457.3
474.2
95.2
102.9
111.5
123.4
138.2
57.7
65.5
71.4
75.0
80.5
217.2
228.9
243.6
258.9
255.6
52.6
61.0
60.9
58.8
53.2
10.4
10.3
10.2
9.6
8.5
8.5
7.4
9.3
9.8
10.8
29.0
25.9
26.9
28.8
28.3
81.8
75.4
73.2
75.9
80.7
35.0
49.1
63.2
76.0
74.2
1975
1976
1977
533.2
620.4
698.8
145.3
149.6
155.5
84.7
94.4
104.7
303.2
376.4
438.6
69.0
92.5
101.0
10.6
16.0
20.6
13.2
24.3
23.9
31.7
39.3
53.5
87.1
96.4
103.9
91.5
107.9
135.8
1976: Jan_
Feb
Mar
Apr
May
June
584.4
593.9
600.5
602.0
610 7
620.4
139.3
139.8
139.1
139.1
143.7
149.6
89.8
89.0
89.8
91.8
90.5
94.4
355.3
365.0
371.7
371.0
376.4
376.4
88.8
87.5
90.3
90.9
91.5
92.5
14.9
15.2
15.7
15.8
16.0
16.0
20.6
22.6
22.3
23.3
25.5
24.3
34.8
35.9
36.8
36.9
37.0
39.3
91.7
93.9
94.5
94.7
95.9
96.4
104.5
109 9
112.0
109.4
110 5
107 9
July
Aug
Sept
Oct .
Nov
Dec
624.5
633.3
634.7
637.6
644 6
653 5
147.6
148.0
146.1
144.6
144.9
147.1
90.7
94.0
96.4
95.7
91.7
97.0
386.2
391.3
392.2
397.3
408.1
409.5
94.5
93.5
95.3
96.8
100.7
103.8
16.8
17.5
17.4
17.9
18 3
18.2
26.8
27.6
25.3
24.5
24.0
26.5
37.4
38 2
38.7
40.5
41 5
41 6
97.1
99.7
99.7
100.0
100 7
100.8
113.7
114 7
115 8
117 4
123 0
118 6
-.
653.9
663.3
669.2
671 0
672.1
674.4
144.1
144.4
144.9
145.5
149.4
151.2
94.1
95.8
96.0
99.8
97.4
102.2
415.7
423.1
428.3
425.7
425.3
421.0
102.4
104.7
106.3
103.5
102.2
102.4
18.1
18.6
18.8
18.8
19.0
20.2
28.5
29.8
27.7
27.4
25.8
23.8
44.8
43.3
44.4
48.4
49.1
47.6
101.0
101.5
101.9
102.2
102.7
103.0
120.9
125.2
129.4
125 4
126.7
123.9
July
-. _
Aug _. . _
Sept
Oct
Nov
Dec*
673.9
685.2
698.8
697.4
708.0
718.9
148.7
151.9
155.5
152.2
153.9
154.8
98.6
98.4
104.7
94.6
96.5
101.2
426.5
434.9
438.6
450.6
457.6
462.9
100.1
100.0
101.0
100.5
101.4
20.1
20.1
20.6
20.7
21.3
23.5
24.5
23.9
23.8
23.4
47.8
52.7
53.5
54.5
55.6
103.4
103.7
103.9
104.4
104.9
131.7
134.0
135.8
146.7
151.0
.
_._
1977: Jan
Feb
Mar
Apr
May
June
1
U.S. savings bonds, series A - F and J, and U.S. savings notes are included at current redemption value.
2
As of July 3 1 , 1974, public debt outstanding has been adjusted to exclude the notes of the International Monetary
Fund to conform with the Budget presentation. This adjustment applies to the 1967-77 data in this table.
3
For comparability with 1975-77 published data, published data for 1967-74 have been adjusted to exclude notes of
the International Monetary Fund. These adjustments amounted to $3.3 billion in 1967, $2.2 billion in 1968, and $0.8 billion
in each year 1969 through 1974. These adjustments were necessary in order to add to the total public debt figures as
published by the Department of the Treasury.
4
Includes commercial banks, trust companies, and stock savings banks in the United States and Territories and island
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-60, which are based on book values and relate only to banks within the United States.
8
Exclusive of banks and insurance companies.
e
Includes trust, sinking, and investment funds of State and local governments and their agencies, and of Territories
and possessions.
7
Includes partnerships and personal trust accounts.
8
Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, dealers and brokers,
certain government deposit accounts and government-sponsored agencies, and investments of foreign balances and international accounts in the United States.
Note.—Through fiscal year 1976, the fiscal year runs from July 1 through June 30; starting in October 1976 (fiscal year
1977), the fiscal year runs from October 1 through September 30.
Source: Department of the Treasury.
347
TABLE B-79.—Average length and maturity distribution of marketable interest-bearing
public debt held by private investors, 1967-77
Maturity class
End of year or month
Amount
outstanding
Within
1 year
Ho 5
years
5 to 10
years
10 to 20
years
20 years
and over
Millions of dollars
Average length
Years
Months
Fiscal year:
1967...
1968..
1969._
150, 321
159, 671
156,008
56, 561
66, 746
69,311
53, 584
52,295
50,182
21, 057
21,850
18,078
6,153
6,110
6,097
12,968
12,670
12,337
1970...
1971...
1972...
1973...
1974...
157,910
161,863
165,978
167, 869
164, 862
76,443
74,803
79, 509
84, 041
87,150
57,035
58, 557
57,157
54,139
50,103
8,286
14, 503
16,033
16,385
14,197
7,876
6,357
6,358
8,741
9,930
8,272
7,645
6,922
4,564
3,481
6
3
1
11
1975...
1976...
1977...
210,382
279, 782
326, 674
115,677
151, 723
161, 329
65,852
89,151
113,319
15,385
24,169
33,067
8,857
8,087
8,428
4,611
6,652
10, 531
8
7
11
1976: Jan..
Feb..
Mar..
Apr..
MayJune.
259, 831
270, 625
276, 434
275,520
278, 929
279, 782
152,077
151,875
154, 258
153,441
153,464
151, 723
75,179
82,484
86, 214
86,198
86, 242
89,151
18, 310
21, 707
21, 538
21, 597
24, 336
24,169
8,466
8,417
8,350
8,242
8,172
8,087
5,800
6,142
6,074
6,042
6,716
6,652
5
6
5
5
7
7
July..
Aug..
Sept.
Oct..
Nov..
Dec.
289,044
293, 627
294, 595
296,211
307, 309
307, 820
156,595
153, 304
153, 302
155,179
158, 422
157, 453
91,042
93, 396
94,845
91,795
101, 684
103, 742
26,694
31, 523
31, 247
33,922
31, 349
31, 017
8,059
7,986
7,939
7,897
7,511
7,399
6,654
7,418
7,262
7,419
8,345
8,209
6
10
9
9
10
9
1977: Jan..
Feb..
MarApr..
May..
June.
313,497
319, 982
323,604
318,699
318, 619
313, 485
162,633
165, 942
166,427
162,419
162,211
157, 353
101,626
106, 685
109, 983
106,929
106, 823
107, 000
33,688
7,342
31, 204
7,291
31,155
7,236
33, 469 - 7,172
32, 658
7,180
32,442
7,092
8,208
8,860
8,803
8,709
9,746
9,598
9
9
9
9
11
10
July..
Aug..
Sept.
Oct_.
Nov..
Dec.
316,177
325, 001
326,674
338,290
343, 870
344, 314
160, 332
161, 932
161, 329
167,699
169, 552
172, 084
105, 255
110,681
113, 319
115,744
121, 346
119,463
32, 521
33, 260
33, 067
35,912
32, 858
32, 796
9,628
10, 616
10, 531
10,529
11,751
11,677
10
0
11
10
0
11
8,440
8,512
8,428
8,406
8,364
8,294
Note.—All issues classified to final maturity.
Through fiscal year 1976, the fiscal year runs from July 1 through June 30; starting in October 1976 (fiscal year 1977),
the fiscal year runs f
@FedFRASER