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Transmitted to the Congress February 1998 Economic Report of the President Transmitted to the Congress February 1998 TOGETHER WITH THE ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON: 1998 For sale by the U.S. Government Printing Office Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328 ISBN 0-16-049419-2 C O N T E N T S Page ECONOMIC REPORT OF THE PRESIDENT 1 ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS* 7 CHAPTER 1. PROMOTING PROSPERITY IN A HIGH-EMPLOYMENT ECONOMY 19 CHAPTER 2. MACROECONOMIC POLICY AND PERFORMANCE 43 CHAPTER 3. THE ECONOMIC WELL-BEING OF CHILDREN 89 CHAPTER 4. ECONOMIC INEQUALITY AMONG RACIAL AND ETHNIC GROUPS 119 CHAPTER 5. IMPROVING ECONOMIC EFFICIENCY: ENVIRONMENTAL AND HEALTH ISSUES 155 CHAPTER 6. RECENT INITIATIVES IN ANTITRUST ENFORCEMENT 195 CHAPTER 7. THE BENEFITS OF MARKET OPENING 215 APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THE COUNCIL OF ECONOMIC ADVISERS DURING 1997 261 APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EMPLOYMENT, AND PRODUCTION 273 * For a detailed table of contents of the Council's Report, seepage 11 111 ECONOMIC REPORT OF THE PRESIDENT ECONOMIC REPORT OF THE PRESIDENT To the Congress of the United States: For the last 5 years this Administration has worked to strengthen our Nation for the 21st century, expanding opportunity for all Americans, demanding responsibility from all Americans, and bringing us together as a community of all Americans. Building a strong economy is the cornerstone of our efforts to meet these challenges. When I first took office in 1993, the Federal budget deficit was out of control, unemployment was unacceptably high, and wages were stagnant. To reverse this course, we took a new approach, putting in place a bold economic strategy designed to bring down the deficit and give America's workers the tools and training they need to help them thrive in our changing economy. Our strategy has succeeded: the economy has created more than 14 million new jobs, unemployment is at its lowest level in 24 years, and core inflation is at its lowest level in 30 years. Economic growth in 1997 was the strongest in almost a decade, and the benefits of that growth are being shared by all Americans: poverty is dropping and median family income has gone up nearly $2,200 since 1993. We also saw the biggest drop in welfare rolls in history. Many challenges remain, but Americans are enjoying the fruits of an economy that is steady and strong. THE ADMINISTRATION'S ECONOMIC STRATEGY From the beginning, this Administration's economic strategy has had three crucial elements: reducing the deficit, investing in people, and opening markets abroad. Deficit reduction. In 1993 this Administration's deficit reduction plan set the Nation on a course of fiscal responsibility, while making critical investments in the skills and well-being of our people. When I took office, the deficit was $290 billion and projected to go much higher. This year the deficit will fall to just $10 billion and possibly lower still. That is a reduction of more than 95 percent, leaving the deficit today smaller in relation to the size of the economy than it has been since 1969. And this year I have proposed a budget that will eliminate the deficit entirely, achieving the first balanced budget in 30 years. Beyond that, it is projected that the budget will show a sizable surplus in the years to come. I propose that we reserve 100 percent of the surplus until we have taken the necessary measures to strengthen the Social Security system for the 21st century. I am committed to address- ing Social Security first, to ensure that all Americans are confident that it will be there when they need it. Investing in our people. In the new economy, the most precious resource this Nation has is the skills and ingenuity of working Americans. Investing in the education and health of our people will help all Americans reap the rewards of a growing, changing economy. Those who are better educated, with the flexibility and the skills they need to move from one job to another and seize new opportunities, will succeed in the new economy; those who do not will fall behind. That is why the historic balanced budget agreement I signed into law in 1997 included the largest increase in aid to education in 30 years, and the biggest increase to help people go to college since the G.I. Bill was passed 50 years ago. The agreement provided funds to ensure that we stay on track to help 1 million disadvantaged children prepare for success in school. It provided funding for the America Reads Challenge, with the goal of mobilizing a million volunteers to promote literacy, and it made new investments in our schools themselves, to help connect every classroom and library in this country to the Internet by the year 2000. The balanced budget agreement created the HOPE scholarship program, to make completion of the 13th and 14th years of formal education as widespread as a high school diploma is today. It offered other tuition tax credits for college and skills training. It created a new Individual Retirement Account that allows tax-free withdrawals to pay for education. It provided the biggest increase in Pell grants in two decades. Finally, it provided more funds so that aid to dislocated workers is more than double what it was in 1993, to help these workers get the skills they need to remain productive in a changing economy. But we must do more to guarantee all Americans the quality education they need to succeed. That is why I have proposed a new initiative to improve the quality of education in our public schools— through high national standards and national tests, more charter schools to stimulate competition, greater accountability, higher quality teaching, smaller class sizes, and more classrooms. To strengthen our Nation we must also strengthen our families. The Family and Medical Leave Act, which I signed into law in 1993, ensures that millions of people no longer have to choose between being good parents and being good workers. The Health Care Portability and Accountability Act, enacted in 1996, ensures that workers can keep their health insurance if they change jobs or suffer a family emergency. We have also increased the minimum wage, expanded the earned income tax credit, and provided for a new $500-per-child tax credit for working families. To continue making progress toward strengthening families, the balanced budget agreement allocated $24 billion to provide health insurance to up to 5 million uninsured chil- dren—the largest Federal investment in children's health care since Medicaid was created in 1965. Opening markets and expanding exports. To create more good jobs and increase wages, we must open markets abroad and expand U.S. exports. Trade has been key to the strength of this economic expansion—about a third of our economic growth in recent years has come from selling American goods and services overseas. The Information Technology Agreement signed in 1997 lowers tariff and other barriers to 90 percent of world trade in information technology services. To continue opening new markets, creating new jobs, and increasing our prosperity, it is critically important to renew fast-track negotiating authority. This authority, which every President of either party has had for the last 20 years, enables the President to negotiate trade agreements and submit them to the Congress for an up-or-down vote, without modification. Renewing this traditional trade authority is essential to America's ability to shape the global economy of the 21st century. SEIZING THE BENEFITS OF A GROWING, CHANGING ECONOMY As we approach the 21st century the American economy is sound and strong, but challenges remain. We know that information and technology and global commerce are rapidly transforming the economy, offering new opportunities but also posing new challenges. Our goal must be to ensure that all Americans are equipped with the skills to succeed in this growing, changing economy. Our economic strategy—balancing the budget, investing in our people, opening markets—has set this Nation on the right course to meet this goal. This strategy will support and contribute to America's strength in the new economic era, removing barriers to our economy's potential and providing our people with the skills, the flexibility, and the security to succeed. We must continue to maintain the fiscal discipline that is balancing the budget, to invest in our people and their skills, and to lead the world to greater prosperity in the 21st century. THE WHITE HOUSE FEBRUARY 10, 1998 THE ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS LETTER OF TRANSMITTAL COUNCIL OF ECONOMIC ADVISERS Washington, D.C., February 10, 1998 MR. PRESIDENT: The Council of Economic Advisers herewith submits its 1998 Annual Report in accordance with the provisions of the Employment Act of 1946 as amended by the Full Employment and Balanced Growth Act of 1978. Sincerely, <r Janet L. Yellen, Chair Jeffrey A. Frankel, Member Rebecca M. Blank, Member-Nominee C O N T E N T S Page CHAPTER 1. PROMOTING PROSPERITY IN A HIGH-EMPLOYMENT ECONOMY The Administration's Economic Strategy A Credible Plan for Deficit Reduction Investing in People and Technology Opening Markets at Home and Abroad A Record of Accomplishment Benefits of a High-Employment Economy Deficit Reduction: Completing the Task Policies to Raise Growth, Reduce Inequality, and Increase Opportunity Strengthening Cities and Communities Strengthening the Performance of Domestic Markets.. Opening Foreign Markets Promoting an Economically Sound Environmental Agenda Facing the Challenges Ahead Conclusion CHAPTER 2. MACROECONOMIC POLICY AND PERFORMANCE Overview of 1997: A Burst of Growth Aggregate Spending in 1997 Monetary Policy and Financial Markets Inflation and the Labor Market Productivity Explaining Recent Inflation Performance Recent Inflation Performance and the NAIRU Alternative Measures of Utilization and Capacity A New Era for the Economy? The Economic Condition of Households The Confident Consumer The Condition of Household Balance Sheets The Personal Saving Rate The Long-Term Uptrend in the Bankruptcy Rate Long-Term Growth: Budget Deficits and National Saving .. Saving in a Closed Economy Saving in an Open Economy Implications 11 19 21 22 22 23 25 25 26 28 34 35 36 36 37 42 43 44 45 52 54 57 57 57 60 62 63 64 66 70 74 75 77 77 78 Page Forecast and Outlook The Administration Forecast Components of Long-Term Growth Productivity Inflation Considerations The Demand for Housing The Near-Term Outlook CHAPTER 3. THE ECONOMIC WELL-BEING OF CHILDREN Trends in the Economic Well-Being of Children The Link Between Income and Children's Well-Being.. Measuring Trends in Child Poverty Rates Explaining Recent Changes in Child Poverty Policy Initiatives to Support Family Incomes Other Measures of Children's Material Weil-Being Availability of Food Adequacy of Housing New Housing Policy Initiatives Health Status and Health Insurance Health Outcomes Health Insurance Recent Initiatives to Expand Children's Access to Health Insurance Child Care and Education Child Care Early Childhood Education Elementary and Secondary Education Conclusion 78 78 80 81 84 84 85 89 90 90 91 94 98 100 100 101 102 102 102 104 108 109 109 110 Ill 117 CHAPTER 4. ECONOMIC INEQUALITY AMONG RACIAL AND ETHNIC GROUPS 119 Population Composition Economic Status Family Income Household Wealth The Role of Family Structure in Income and Poverty Education Differences and Trends in Educational Attainment Explaining Educational Attainment Gaps Affirmative Action in Higher Education Admissions .... Labor Markets Trends in Labor Market Outcomes Explaining Earnings Gaps Discrimination 12 122 124 124 129 131 133 134 136 138 140 141 146 152 Page CHAPTER 5. IMPROVING ECONOMIC EFFICIENCY: ENVIRONMENTAL AND HEALTH ISSUES Cost-Effective Environmental Protection Tradable Emissions Permits Air Quality Standards Climate Change Non-Point Source Water Pollution Improving Health Care and Health Insurance Markets Improving Access and Portability Consumer Protection and Quality in the Health Care Industry Food and Drug Administration Reform Reducing Teenage Smoking CHAPTER 6. RECENT INITIATIVES IN ANTITRUST ENFORCEMENT Origins and Principles of Antitrust Mergers Market Definition Competitive Effects Entry Efficiencies Electronic Commerce High-Technology Industries, Innovation, and Intellectual Property Innovation and Intellectual Property Network Externalities Fast-Paced Technological Change The Global Marketplace and International Antitrust Efforts CHAPTER 7. THE BENEFITS OF MARKET OPENING Trends in U.S. International Trade The Sectoral Composition of U.S. Trade The Geographic Composition of U.S. Trade U.S. Trade by Domestic Region Initiatives in Market Opening Trade-Negotiating Authority Multilateral Initiatives Regional Initiatives Bilateral Initiatives The Effects of Market Opening The Benefits of Trade Liberalization Measuring the Gains from Trade Trade and the American Worker Trade and Average Wages 13 155 156 157 162 165 176 180 180 184 187 191 195 196 197 200 202 204 205 206 209 209 210 211 213 215 216 217 218 219 220 221 222 228 233 236 236 237 238 239 Page Trade and Relative Wages Trade and Aggregate Employment Trade and Job Displacement The U.S. Trade Balance Foreign Direct Investment Current Trends in FDI The Benefits of FDI Current U.S. Initiatives in Investment Policy Conclusion 241 244 244 246 249 253 255 258 260 APPENDIXES A. B. Report to the President on the Activities of the Council of Economic Advisers During 1997 261 Statistical Tables Relating to Income, Employment, and Production 273 LIST OF TABLES 2-1. 2-2. 2-3. 2-4. 2-5. 2-6. 2-7. 3-1. 3-2. 3-3. 3-4. 3-5. 3-6. 3-7. 3-8. 4-1. 4-2. Components of GDP and Growth in GDP, 1997 Household Debt Service Burden Household Credit Card Balances as a Percent of Income Expected Effects on Changes in the CPI and Real GDP of CPI Methodological Changes Accounting for Growth in Real GDP, 1960-2005 Contribution of Selected Determinants of Demand and Supply for New Homes Administration Forecast Children with Family Incomes Below Different Income Cutoffs, 1996 Changes in Child Poverty Rate and Selected Macroeconomic Indicators Accounting for Changes in Child Poverty Children in Households Reporting That There Was Sometimes or Often Not Enough to Eat During the Last 3 Months Housing Problems Among Households with Children.... Children with Health Insurance, by Age of Child and Type of Coverage Average Number of Physician Contacts in Last Year for Children Under 15, by Family Income Uninsured Children by Family Income, 1996 Racial and Ethnic Composition of the U.S. Population.. Ratios of Black and Hispanic to White Median Weekly Earnings, 1997 14 45 70 73 80 82 85 86 93 95 97 100 101 105 107 108 123 146 Page 7-1. 7-2. 7-3. 7-4. 1-1. 1-2. 1-3. 1-4. 1-5. 2-1. 2-2. 2-3. 2-4. 2-5. 2-6. 2-7. 2-8. 2-9. 2-10. 3-1. 3-2. 3-3. 3-4. 3-5. 3-6. 3-7. 3-8. 4-1. 4-2. 4-3. 4-4. 4-5. 4-6. 4-7. Tariff Rates of Asia-Pacific Economic Cooperation Members Industry Compensation Premiums, 1984 Inward and Outward Foreign Direct Investment, by Industry, Selected Years Countries with Which the United States Has Bilateral Investment Treaties LIST OF CHARTS Investment and Government Spending in Overall GDP Growth Real Household Income Growth by Quintile, 1993-96.... Federal Budget Deficit as a Percent of GDP Net Interest as a Share of Federal Outlays Returns to Education Inflation and Trend Unit Labor Costs Computer Prices and Total Inflation Wage Growth and the Unemployment Rate Consumer Sentiment Ratio of Household Net Worth to Disposable Personal Income Household Debt by Type Household Debt Delinquency Rates Household Debt Service Payments Alternative Measures of Productivity Productivity Growth and the End-of-Expansion Effect.. Poverty Rates of Children Children Living with Their Mother Only, by Marital Status of Mother Monthly AFDC and Food Stamp Benefits for a Family of Four Infant Mortality Rates and Incidence of Low Birthweight Child and Youth Mortality Rates Children Without Physician Visit Within Past Year NAEP Long-Term Trend Assessment: Science and Mathematics Scores NAEP Long-Term Trend Assessment: Reading Scores... Median Family Income Distribution of White Persons by Household Income Distribution of Black Persons by Household Income Gini Index for Family Income Poverty Rates for Persons Family Structure High School Completion Rates for 25- to 29-Year-Olds .. 15 232 243 255 259 20 27 27 29 30 56 58 60 65 66 67 68 69 83 83 92 94 96 103 104 107 112 113 125 126 126 127 128 132 135 Page 4-8. Women Aged 25-29 with 4-Year College Degree or Higher 4-9. Men Aged 25-29 with 4-Year College Degree or Higher . 4-10. Unemployment Rates 4-11. Ratios of Median Weekly Earnings of Male Full-Time Workers 4-12. Ratios of Median Weekly Earnings of Female Full-Time Workers 5-1. Sulfur Dioxide Emissions Permit Prices 5-2. Volume of Sulfur Dioxide Emissions Permit Trades 5-3. Sources of Nitrogen Oxides Emissions in 1995 5-4. U.S. Greenhouse Gas Emissions, Actual and Projected . 5-5. Cumulative World Emissions of Carbon Dioxide, 1950-95 5-6. Projected World Carbon Dioxide Emissions Without Kyoto Agreement 5-7. Energy Prices and Private Energy Research 5-8. Clinical Trial and Drug Application Approval Times for New Drugs 6-1. Mergers Filed with the Antitrust Agencies 7-1. Exports and Imports as a Percent of GDP 7-2. U.S. Exports and Imports by Category in 1986 and 1996 7-3. U.S. Goods Exports and Imports by World Region in 1986 and 1996 7-4. Exports of Goods by U.S. Region 7-5. U.S.-Initiated WTO Dispute Settlement Cases by Target Country 7-6. Real Wages and Labor Compensation, and Productivity 7-7. Saving, Investment, and the Current Account Balance . 7-8. Real Value of the Dollar and the Trade Deficit 7-9. Growth in Real Imports and GDP 7-10. Foreign Direct Investment Flows 1-1. 2-1. 2-2. 2-3. 2-4. 2-5. 2-6. 3-1. LIST OF BOXES Poverty Alleviation, the Earned Income Tax Credit, and the Minimum Wage Accounting for the Deficit Surprise During Fiscal 1997. Turmoil in Asian Economies Circuit Breakers Recent Revisions to Capacity and Utilization The National Bankruptcy Review Commission Methodological Changes in the Consumer Price Index.. How Does Our Poverty Measure Affect Our Conception of Poverty? 16 137 137 142 145 145 161 162 164 167 171 171 174 189 197 216 218 219 220 224 240 247 248 249 250 33 48 50 55 62 76 79 91 Page 4-1. 4-2. 5-1. 5-2. 5-3. 5-4. 6-1. 7-1. 7-2. 7-3. 7-4 7-5. 7-6. Racial and Ethnic Identity and Classification The President's Initiative on Race The Clean Water Initiative Quality Data Collection for Medicare Managed Care History of Food and Drug Administration Regulation of Drugs The Prescription Drug Users Fee Act of 1992 Consolidation in the Defense Industry The WTO Dispute Settlement Process and U.S. Trade Policy Regional Trade Agreements: Building Blocks or Stumbling Blocks for the Multilateral Process? APEC Tariff Reductions and Other Initiatives Industry-Related Differences in Wages Fears and Facts about Foreign Direct Investment Bilateral Investment Treaties 17 120 123 176 186 189 190 198 223 229 232 242 251 259 CHAPTER 1 Promoting Prosperity in a HighEmployment Economy THE PAST YEAR SAW THE NATION'S ECONOMY turn in its best performance in a generation. Over the course of 1997, output growth and job creation remained vigorous while inflation declined. Real (inflation-adjusted) gross domestic product (GDP) grew 3.9 percent, and employment rose by 3.2 million, for an average rate of 267,000 jobs per month. The unemployment rate dropped below 5 percent for the first time in 24 years, yet core inflation (as measured by the consumer price index, excluding its volatile food and energy components) averaged only 2.2 percent, its lowest rate in over 30 years. This exceptional economic performance occurred during a period of historic deficit reduction: the Federal budget deficit, which reached $290 billion in the 1992 fiscal year, declined to only $22 billion in fiscal 1997. And the Administration has submitted a budget for fiscal 1999 that projects a balanced budget for the first time since 1969. As 1998 begins, the prospects for continued growth with high employment and low inflation remain excellent. The economy is remarkably free of the symptoms that often presage an economic downturn—such as an increase in inflation, an accumulation of inventories, or evidence of financial imbalance. Inflation fell in 1997, and developments in East Asia, by reducing U.S. import prices, are likely to exert additional downward pressure on U.S. inflation in 1998. Economic turmoil in East Asia could affect the global economy, but if international efforts to restore stability there succeed, the main effect on the U.S. economy could simply be to allow continued growth and job creation with a more moderate outlook for interest rates. Another sign that an expansion is nearing its end would be a sudden accumulation of inventories, as businesses find their sales falling short of production. Yet sales were strong in 1997, and inventory-sales ratios are near historical lows. Financial imbalances can also threaten to disrupt an expansion. But today banks and other financial institutions do not appear overextended, as they did in the late 1980s and early 1990s, and the stock market shrugged off a oneday plunge in October (although its continuing high valuation relative to earnings is a source of concern to some). Although the business cycle may not have been vanquished, the economy is in fun- 19 damentally sound shape and well-equipped to handle any unexpected bouts of rougher weather. A principal force behind the current expansion has been private fixed investment. Almost none of the growth in GDP over this expansion has come from increased government spending, whereas close to one-third has come from greater private fixed investment (Chart 1-1). Because of the Administration's deficit reduction efforts, the contribution of government spending to overall growth has been much lower than in most previous postwar expansions (real Federal Government spending has actually declined), while that of private fixed investment has been substantially higher. One benefit of this burst of investment has been a rapid expansion of industrial capacity: over the past 3 years average annual capacity growth has exceeded every previous growth rate since 1968. Policies such as deficit reduction have contributed to an investment-led recovery and a climate conducive to sustained economic Chart 1-1 Investment and Government Spending in Overall GDP Growth Real GDP growth during this expansion has been driven by private spending, particularly on fixed investment. Share of real GDP change (percent) Private fixed investment Fl Government spending 1954-57 1958-60 1961-69 1970-73 1975-80 1982-90 1991-present Note: Change in component expressed as fraction of overall change in real GDP. Sources: Department of Commerce (Bureau of Economic Analysis) and National Bureau of Economic Research. growth. But the lion's share of the credit for the economy's performance goes to American workers and firms, who have risen to the challenges of a competitive global economy and rapidly changing technology. The role of government in such an economy is not to prop up economic growth with government spending but, more subtly, to provide individuals and businesses with the tools they need to flourish through their own efforts. The range of appropriate government 20 policies in such an economy includes promoting private investment through sound macroeconomic policies, encouraging the formation of skills through training and education, securing opportunity for the marginalized members of our society, and—where necessary—providing assistance to the most vulnerable. Using government to complement, not replace, the market and the private sector has been a fundamental, guiding principle of this Administration's economic strategy from the very beginning. And it is this strategy that has borne fruit over the last 5 years. Despite the economy's recent exemplary performance, a number of challenges remain. The first is to preserve and nurture the successes achieved so far. And although progress has been made in addressing the longer term problems that have affected the economy since the productivity slowdown of the early 1970s—problems like slow growth in wages and incomes and widening income inequality—more needs to be done. This chapter describes the principles and policies of this Administration for achieving its two basic, overarching goals: securing high and rising living standards now and in the future, and ensuring that the benefits of a higher standard of living are extended to all Americans. THE ADMINISTRATION'S ECONOMIC STRATEGY The Employment Act of 1946 (which created the Council of Economic Advisers), together with its later amendments, gave the Federal Government responsibility for stabilizing short-run economic fluctuations, promoting balanced and noninflationary economic growth, and fostering low unemployment. This Administration's strategy in pursuing this mandate has focused on getting the fundamentals right: reducing the budget deficit, investing in technology and the American people, and opening markets at home and abroad. These were the right policies for encouraging the job creation needed to move the economy to full employment, and they are the right policies for attacking the longer term problems of sluggish productivity growth and widening income inequality that began to afflict the economy in the early 1970s. But there is more to the Administration's policy agenda than can be measured by aggregate economic statistics alone. Getting the fundamentals right means removing the barriers that block people from realizing their potential; it means promoting their sense of individual responsibility and giving them the tools to succeed. Getting the fundamentals right also means fostering a personal commitment by all Americans to help others, a sense of shared responsibility for our Nation's children, and a sense of community in an increasingly multiethnic society. 21 A CREDIBLE PLAN FOR DEFICIT REDUCTION The policy course set in 1993 has contributed to the Nation's recent economic health and strength. In 1993 the economy was still recovering from the 1990-91 recession, and it labored under the burden of a Federal budget deficit that had ballooned to $290 billion, an all-time record. The linchpin of the Administration's economic strategy was a credible budget plan that could achieve substantial deficit reduction over the longer term, yet be balanced and gradual enough to allow the economy to gather strength and move toward full employment in the short term. The success of this program rested on achieving an interest rate environment conducive to investment, which would allow the economy to grow in the face of a contractionary fiscal policy. This in turn required that financial markets correctly anticipate an appropriately accommodative monetary policy. In large measure, that is exactly what happened. Long-term interest rates fell to 25-year lows in 1993, spurring a pickup in economic growth. A key feature of the Administration's deficit reduction plan was its credibility. A credible and realistic program for deficit reduction—one that observers and financial markets judged likely to be fully implemented—was a precondition for the reduction in interest rates that spurred investment-led growth. Fundamental to the plan's credibility was the adoption of a set of economic projections that represented conservative, mainstream forecasts of future growth and inflation. These projections eschewed the "rosy scenarios" of previous budgets, which invariably fell short of reality; they were not meant to indicate the best that the economy could do, but rather how the economy was most likely to perform given past experience. In fact, the economy's performance has been stronger than the Administration projected. In the 1980s expansive fiscal policy required relatively tight monetary policy in the form of high interest rates to prevent the economy from overheating. This policy mix is particularly unfavorable from the standpoint of fostering longer term growth: high interest rates impede capital formation, while burgeoning government deficits depress national saving and contribute to more borrowing from abroad. The net result of deficit reduction in the 1990s has been to promote a more balanced mix of fiscal and monetary policy. Deficit reduction has also had an important collateral benefit, namely, a restoration of Americans' confidence in the ability of their government to manage its own affairs. INVESTING IN PEOPLE AND TECHNOLOGY The primary purpose of deficit reduction, however, is to encourage investment. Hence, this Administration recognized from the outset that a plan that balanced the budget at the expense of the government's own productive investments would ultimately be self-defeating. Far from curtailing public investment, the 22 Administration has given investment in people and technology a major place in its economic agenda. Government invests in people by promoting public health and safety, encouraging opportunity and individual responsibility, and assisting in the formation of human capital through education and training. This last function is especially vital in today's high-technology economy, where a skilled work force is an essential condition for future growth. Education is critical if Americans are to capitalize on the opportunities created by new technologies and more open global markets. And education and training programs are of particular importance in the present economic environment as a means of preventing poverty and ensuring opportunity for all. The return to education has risen dramatically since the late 1970s; today, highly skilled workers command a large premium in the labor market over their less skilled counterparts. This rising skill premium is an important reason why earnings inequality is greater today than it was in the late 1970s. Governments have an important role to play in ensuring that all Americans have the opportunity to accumulate the skills necessary for economic success. This requires initiatives to improve public education at the primary and secondary levels, as well as programs to make higher education more accessible. It also requires recognizing that learning must be a lifelong activity in an economy where technological change is ongoing. Investing in basic research and the development of new technologies is another important function of government. The private sector spends billions of dollars every year on research and development. But economists have long recognized that private sector spending alone in these areas will be less than the optimum. Since the fruits of a new scientific discovery, for example, are enjoyed not merely by the discoverer but by society as a whole, the private incentive for pursuing scientific research falls short of the total social benefit. Moreover, new theories of economic growth place a special emphasis on advances in knowledge through research and development as the motive force behind long-run increases in living standards. This analysis implies that the return to government investment in basic research and technology is likely to be especially high. OPENING MARKETS AT HOME AND ABROAD A third major component of the Administration's economic agenda is the promotion of freer and more competitive markets at home and abroad. Domestically, this has involved the pursuit of initiatives directed at enhancing competition—particularly in such industries as telecommunications, electric power, financial services, and health care—and a vigorous approach to antitrust enforcement. It has also meant addressing market failures in such areas as health care and environmental protection. In some cases the effect of these initiatives is a one-time boost to the level of output, through greater efficiency 23 and lower costs. But these policies can also sometimes lead to a faster rate of economic growth. For example, past experience provides evidence that sensible deregulation can not only help raise efficiency, but also spur continued innovation through greater competition. Moreover, some benefits of these policies are not captured in the GDP statistics at all, but rather take the form of improvements in our quality of life. The Administration is also committed to reducing the burden of government regulation and ensuring that the benefits of new regulations justify their costs. Many government regulations apply to industries in which technological change is rapidly altering the nature of market competition. A key precept of this Administration's approach to regulation, therefore, is that the regulatory process must be dynamic, with regulatory policies under constant review so as to minimize their burden on consumers and businesses. Another important precept is to refrain from policies that regulate through government fiat in favor of policies that use market-based incentives to attain the desired outcome. Experience with such policies as permit trading for sulfur dioxide emissions suggests that this approach can help ensure that compliance with socially beneficial goals is achieved efficiently and cost-effectively. This Administration has also worked hard to open markets abroad by encouraging fairer and freer international trade. From his earliest days in office, the President has advocated an outward-looking, internationalist trade policy. During the Administration's first 4 years the United States concluded over 200 trade agreements with other countries. Some of these agreements, such as the North American Free Trade Agreement (NAFTA) and the Uruguay Round agreement of the General Agreement on Tariffs and Trade, were comprehensive in scope, whereas others had much more limited aims—but all are vital to our Nation's competitive future. Economists generally recognize that an open economy offers both static and dynamic advantages. First, trade benefits an economy by allowing it to specialize in what it does best—a point that economists have made since the early 1800s. Even if a country is more efficient than its neighbors at producing every good it consumes, it can still benefit from trade by specializing in the production of goods in which it is relatively more efficient, and then trading its surplus production for whatever else it wants to consume. In addition, a new view of international trade argues that increased trade actually raises an economy's rate of growth, because increased competition and larger markets spur the acquisition of new skills and the development of new technologies. If so, the case for trade liberalization becomes even more compelling, since raising the economy's growth rate—even by a few tenths of a percentage point per year—has vastly more significance for long-run living standards than even a relatively large one-time increase in the level of output. 24 A RECORD OF ACCOMPLISHMENT Focusing on the fundamentals in shaping economic policy has paid off by helping to produce an economy that is stronger than it has been in decades. This past year alone saw a drop in the unemployment rate to its lowest level in a generation and the forging of a budget agreement that promises to bring the Federal deficit under control for the first time in decades. Last year also saw significant advances in this Administration's economic agenda along other fronts. BENEFITS OF A HIGH-EMPLOYMENT ECONOMY Driven largely by strong growth in business fixed investment, growth in real GDP and employment picked up in the second half of 1993 and persisted in 1994. This robust growth led to a series of monetary policy tightenings over the course of 1994, which resulted in more moderate growth in 1995. In retrospect, 1995 may have been the pause that refreshes. Economic growth exceeded expectations in 1996, and strong growth continued through 1997. The result has been a high-employment economy with the potential to overcome some of the longer term problems of productivity growth and income distribution that built up in the 1970s and 1980s. A high-employment economy brings enormous economic and social benefits. Essential to personal economic security is the knowledge that work is available to those who seek it, at wages sufficient to keep them and their families out of poverty. A tight labor market increases the confidence of job losers that they will be able to return to work, lures discouraged workers back into the labor force, enhances the prospects of those already at work to get ahead, enables those who want or need to switch jobs to do so without a long period of joblessness, and lowers the duration of a typical unemployment spell. Returning the economy to full employment yields a direct benefit by ensuring that the economy's resources—human and material—are not squandered by needless cyclical unemployment. On average, reducing the unemployment rate by a percentage point raises output by approximately 2 percent; in 1997, 2 percent of GDP was $160 billion, or roughly $600 for every American man, woman, and child. Wasted resources from not producing at potential, together with the human cost of unemployment, are intolerable; the elimination of this waste is the principal benefit of a sustained return to full employment. But a high-employment economy in which jobs are plentiful and labor markets tight yields other benefits as well. Short-term economic conditions can affect long-term structural unemployment. A tight labor market encourages participation by those who might otherwise be forced to sit on the sidelines, and makes it easier to absorb less skilled or younger and more inexperienced workers into the labor force. These new labor market entrants gain much-needed job experi 25 ence, building the skills they will need to hold down a job in the future. The importance of this can be seen from the experience of some European countries: prolonged stagnation or recession may have led to a permanent increase in unemployment there, as the unemployed and the never-employed have seen their skills atrophy or become obsolete. Running a high-employment economy, then, may be one of the surest ways to ensure that an unacceptably large fraction of our citizens are not consigned to long-term joblessness and economic marginalization. From the 1980s until the early 1990s, the economy's ability to reduce poverty through growth alone was hampered by a strong headwind: sustained declines in wages at the low end of the earnings distribution that offset the benefits of an expanding economy for the poorest Americans. As a result, holding a job no longer ensured that a less skilled worker would be able to lift his or her family out of poverty. This adverse secular trend raises even further the stakes of maintaining a high-employment economy. Keeping the unemployment rate low and job growth high is also necessary if we are to move current welfare recipients into the work force. Early, indirect evidence here is encouraging: employment and labor force participation rates among single women who maintain families—about two-thirds of whom have children under 18—have increased in the past few years. This is probably in part the result of recent welfare reform: the greatest acceleration in employment rates has occurred among those single women most likely to be affected by welfare reform, namely, those with young children. Nevertheless, it is obvious that fostering an economy in which job opportunities are plentiful plays a crucial part in aiding the transition from welfare to work. We have begun to see heartening signs that the current expansion is yielding gains in living standards for all Americans, especially those at the bottom of the income distribution. The poverty rate fell to 13.7 percent in 1996, from 15.1 percent in 1993; the poverty rate for black Americans is at a historical low, and in 1997 unemployment among blacks fell to its lowest rate since 1973. Since 1993, household income has grown in each quintile of the income distribution, with the largest percentage increase going to the poorest members of our society (Chart 1-2). Maintaining a full-employment economy is essential if this progress is to continue. DEFICIT REDUCTION: COMPLETING THE TASK The most significant economic policy event of 1997 was the passage of a deficit reduction package that will finish the task of balancing the Federal budget by 1999. This will be the first balanced budget since 1969, and only the ninth since World War II (Chart 1-3). Some have claimed that the expanding economy, not government policy, deserves all the credit for vanquishing the deficit. It is cer 26 tainly true that ups and downs in the business cycle have an important effect on both revenues and outlays, leading to fluctuations in the deficit. But even when cyclical factors are thus accounted for, it Chart 1 -2 Real Household Income Growth by Quintile, 1993-96 From 1993 to 1996, households in the lowest quintile of the income distribution enjoyed the fastest growth in real incomes. Average annual percent change 2.5 Lowest Second Third Quintiles Fourth Highest Source: Department of Commerce (Bureau of the Census). Chart 1-3 Federal Budget Deficit as a Percent of GDP The budget is projected to be in balance in fiscal 1999 for the first time since 1969. Percent of GDP 8 6 - 4 - 2 - 1950 1954 1958 1970 1974 1978 1982 1986 1990 Fiscal years Sources: Department of Commerce (Bureau of Economic Analysis) and Office of Management and Budget. 1962 1966 27 1994 1998 is evident that policy has played a major role in bringing the deficit under control. It is also worth noting that in January 1993, before the 1993 deficit reduction package was adopted, the Federal deficit was projected to reach $350 billion in fiscal 1998 and to rise to $650 billion in fiscal 2003, even when the economy was projected to be at full employment. Finally, it is difficult to imagine that the economy's performance would have been anywhere near as strong as it has been without a credible and successful attempt to put the government's fiscal house in order. Improvements in economic conditions have played a part in reducing the deficit, but a balanced budget would not now be in sight had the Nation remained on the fiscal course in place in 1992. Although a balanced budget is often taken as the goal of fiscal policy, from an economic standpoint the motivation for deficit reduction is to raise national saving, thereby augmenting society's future consumption possibilities. When the government's budget is in surplus, in the sense that revenues exceed outlays, the government makes a positive contribution to national saving. As discussed in Chapter 2 of this Report, a case for higher national saving can be based on the high return on saving in the United States and the fact that private saving remains low. A higher rate of national saving now would lead to a larger economy when the baby-boom generation retires, thus making it easier to provide for their retirement without imposing undue burdens on younger generations. Although a balanced budget does not add to the government's outstanding debt to the public, which past deficits have ballooned, it does not subtract from it either. Leaving a large public debt in place implies that a sizable portion of existing government resources will continue to be absorbed by interest payments, leaving less for all other spending. Indeed, one legacy of the runup in the national debt that accompanied the deficits of the 1980s and early 1990s has been a sharp increase in the share of total outlays that must be used to make interest payments on the debt (Chart 1-4). POLICIES TO RAISE GROWTH, REDUCE INEQUALITY, AND INCREASE OPPORTUNITY A significant part of the Administration's economic agenda also involves investment in people: in a broad sense, this encompasses education and training, measures to promote health, and policies that extend opportunity to all Americans. A number of policies have been put in place to ensure that these investments are made. Education The 1997 balanced budget agreement included the largest Federal investment in education in a generation, in the form of initiatives to improve the quality and accessibility of primary, secondary, and higher education. 28 Chart 1 -4 Net Interest as a Share of Federal Outlays Net interest payments now represent twice as large a share of total outlays as they did in the 1970s. Percent 16 14 12 10 1967 1972 1977 1982 1987 1992 1997 Fiscal years Source: Office of Management and Budget. Higher education is a particular priority. The earnings of college graduates have risen sharply relative to those of workers with only a high school education; in today's economy, a college degree has become as vital for success as a high school diploma was a generation ago. Even post-high school education that does not lead to a bachelor's degree (such as an associate's degree program or vocational or technical training) boosts earnings substantially over just completing high school (Chart 1-5). Moreover, learning must be a lifelong process. A fundamental characteristic of our economy is constant technological change. Such progress holds the promise of higher living standards for all, but it also requires workers to adapt to employers' demands for a welltrained, highly skilled work force. It is therefore critical to provide all individuals—including those not traditionally thought of as "school age"—with access to additional education or training. The President's higher education initiatives reflect these principles. Specific measures include: • The largest Pell grant increase in 20 years. The balanced budget agreement raises the maximum Pell grant by over 10 percent, to $3,000. Approximately 3.7 million students receive Pell grants, and close to a quarter of a million families will become eligible for the grant for the first time. 29 Chart 1 -5 Returns to Education Earning an associate's degree raises earnings significantly. Percent change in earnings relative to an individual with a high school diploma only 9th grade 11th grade Associate's degree (vocational) Associate's degree (academic) Bachelor's degree Master's degree Professional school Doctorate 150 50 100 -50 0 Note: 1993 data used in calculations. Source: Calculations by Council of Economic Advisers, based on the Current Population Survey. • HOPE scholarships for post-high school education. In his 1997 State of the Union address, the President called for making the 13th and 14th years of education as universal as a high school education is today. The HOPE scholarship program accomplishes this by providing a tax credit for higher education expenses of as much as $1,500, enough to cover tuition at a typical community college. • A tuition tax credit for Americans of all ages. A 20-percent tax credit for post-high school tuition expenses will be available for the first $5,000 (and after 2002, $10,000) of qualified education expenses. This tax credit is offered not just to school-age Americans but to those already working as well, to permit workers to upgrade their skills at any time during their life. • Tax exemptions for employer-provided education benefits. The budget agreement extends Section 127 of the tax code for 3 years, allowing workers to exclude up to $5,250 of employer-provided education benefits from their taxable income. • A tax deduction for interest on student loans. Up to $1,000 of interest payments on loans for higher education expenses will be tax-deductible in any given tax year, starting in 1998. This deduction will rise by $500 each year until 2001. Because public education in the United States is largely administered by local authorities, the Federal Government's ability to 30 influence primary and secondary education is somewhat less direct. Nevertheless, this Administration recognizes that there is much that the Federal Government can do to improve our public schools, and has worked to enact programs that will ensure that our children have access to the best possible primary and secondary education. These initiatives include: • Establishing national standards. Research shows that students in countries that have standardized, mandatory examinations do better than students in countries that do not. The Administration's voluntary national testing program has received full funding; this will allow for the development of national fourth-grade reading and eighth-grade mathematics examinations. • Expanding Head Start. The balanced budget agreement raised funding for Head Start by $374 million, to $4.4 billion, to reach the Administration's goal of having 1 million children in the Head Start program by 2002. Since 1993, funding for this program, which has shown great success in preparing low-income preschoolers to enter school, has increased by 57 percent. The program will serve over 830,000 children and their families in 1998, including 40,000 infants and toddlers in the Early Head Start program. • Establishing a comprehensive literacy strategy. Every child should be able to read by the third grade. To meet this basic goal, the President's comprehensive literacy strategy will receive nearly $46 million in new funding in 1998 for State teacher training, family literacy, and tutoring efforts; $210 million was provided in an advance appropriation to be available in 1999, contingent on authorization of a literacy initiative such as the America Reads Challenge. • Increasing funding for charter schools. The President set a goal of having 3,000 locally designed public charter schools in operation by early in the next century. Funding for charter schools is increased by over 50 percent in the balanced budget agreement, to allow the Department of Education to support nearly 1,000 charter schools by the end of 1998. Health This Administration has made promoting health, increasing access to health insurance, and improving the functioning of health insurance markets a major priority. The Balanced Budget Act of 1997 allocates $24 billion over 5 years to assist States in providing health insurance for up to 5 million children through Medicaid or State programs. This represents the single largest investment in children's health since Medicaid was begun in 1965. The Administration's 1999 budget proposes to expand access to health insurance further by allowing uninsured Americans between 62 and 65 years old, as well as 55- to 61-year-olds who have been laid off or displaced from their 31 jobs, to buy into the Medicare program. These measures are fully offset so as not to increase the cost of Medicare to the government. The Balanced Budget Act also takes important steps toward ensuring that Medicare itself remains viable. Structural reforms—such as expanded choice among health care plans and the restructuring of payment systems—will help save $115 billion over 5 years. Recently passed legislation also provides additional funding for preventive care, such as mammograms, which can help keep health care expenses down by catching and treating health problems before they become serious. These and other measures will keep the Medicare trust fund solvent for at least the next decade. The Balanced Budget Act also created a commission to examine long-term solutions to the problems that will face Medicare as a result of the demographic changes coming in the 21st century. The Administration has also promoted policies to improve the functioning of health insurance markets, increase consumer protection, and improve access to new Pharmaceuticals. The Health Insurance Portability and Accountability Act of 1996 helps workers who change jobs by making it easier to carry their health insurance with them to the new job. In 1997 the President's Commission on Consumer Protection and Quality in the Health Care Industry, established to advise the President on changes in the health care system, responded to the President's request to develop and recommend a "Consumer Bill of Rights and Responsibilities." The President urged the Congress to pass appropriate and necessary legislation to ensure that a range of protections are extended to all Americans. And the Food and Drug Administration Modernization Act of 1997, which codifies a number of initiatives taken by this Administration as part of the reinventing government initiative, will help ensure the timely availability of safe and effective new drugs. These policies and others are considered in greater detail in Chapter 5 of this Report. Finally, teenage tobacco use is one of the most important public health concerns that the Nation faces, and it has been rising in recent years. The increase in the tobacco tax passed last year not only will help fund the expansions in children's health insurance coverage described above, but also will help reduce teen smoking. The rise in the tax complements recent Food and Drug Administration rules to limit advertising targeted at youth. Finally, the Administration has indicated its support for national legislation designed to achieve large reductions in teen smoking, with strict financial penalties on the tobacco industry if specific targets in this effort are not met. Welfare Reform and Poverty Alleviation Welfare reform presents an ongoing challenge: to ensure that our neediest citizens can maintain a decent standard of living without creating incentives that encourage a life of dependency. This Administration has committed itself to a policy that combines work 32 incentives and community efforts to move people off of welfare and into employment. This has contributed to the largest reduction in welfare rolls in history. The same long-term changes in the wage structure that give greater rewards to education and skill also imply that some workers will find it difficult to raise themselves and their families out of poverty, even with a full-time job. To make work pay, all those who work must be guaranteed a minimum level of earnings. The Administration has made an expansion of the earned income tax credit (EITC), which raises the take-home pay of eligible low-income workers, a cornerstone of its strategy to promote work and reduce poverty (Box 1-1). This expansion has occurred alongside two increases in the minimum wage (the second Box l~l+~P0wrty Alla^iitttoii, the Earned toeome Credit, and the Minimum Wage A typical cash assistance program guarantees its maximum benefit to those who receive no income* then phases out this ben* eflt aa the recipient's income from other sources (usually labor) rises, The disincentive to work that such programs create has been a major concern—perhaps the major concern—of policymakers with regard to welfare policy. These disincentives will persist so long as we confine ourselves to considering policies with this structure* One way to avoid these work disincentive effects is to design programs that add to the wages of low-income workers. One such program^ the earned income tax. credit, was expanded substantially in 1093. Under the EITC, eligible low-wage workers receive a credit against their income and payroll tax lability; this credit is rebated in cash if the worker^ income tax ttebility is zero, The EITC differs from the typical cash assistance pro* gram in that no benefits are paid to those who do not work? and benefits rise as earnings increase (up to some threshold earnings level). It therefore largely eliminates the typical program's work disincentive effects. Hie asdiiimum wage complements and enhances the ISITC* When used by itself to guarantee a subsistence level of income, the minimum wage must be set very high. But an excessively Mgh minimum wage (that is, substantially above the current one) eould discourage hiring. On the other hand, using tfca EITC alone to guarantee an income floor would require payment of a large subsidy^ which would then have to be phased out slowly to minimise the disincentive to earn additional income. This makes the program much more costly, Henee? the minimum wage and the EITC are best employed jointly in designing an optimal asttetaitea package. 33 of which, in September 1997, raised the minimum wage from $4.75 to $5.15 an hour). In August 1996 the President signed into law a comprehensive, bipartisan welfare reform bill, which established the Temporary Assistance for Needy Families program. This created a new system of block grants to States and dramatically altered the nature and provision of Federal welfare benefits in America. This legislation has changed the Nation's welfare system into one that requires work in exchange for time-limited assistance and provides support for families moving from welfare to work. Although these policies have helped shrink the welfare rolls significantly since 1993, much remains to be done. To that end, two additional initiatives have been put in place to advance this Administration's strategy for moving welfare recipients into employment. The first is a tax credit for employers who hire long-term welfare recipients; the credit rebates to employers up to $3,500 in wages paid in the first year and up to $5,000 in the second. The second initiative is the Welfare to Work Job Challenge Fund, which will assist States and communities in moving long-term welfare recipients into lasting, unsubsidized employment. A hallmark of this fund, for which $3 billion has been earmarked, is that it is targeted to those areas of the country most in need of poverty alleviation. The Child Tax Credit The Administration proposed a tax cut to help working families with the expense of raising their children. The Taxpayer Relief Act of 1997 will reduce taxes for 26 million families by providing a tax credit of $500 per child. This credit will benefit over 40 million children under age 17, including over 10 million children from working families with incomes below $30,000. Because the credit is partly refundable, large families who have paid significant out-of-pocket payroll taxes can benefit even if they have little or no income tax liability. STRENGTHENING CITIES AND COMMUNITIES This Administration has worked to make Federal resources available for investment in our Nation's cities and communities. First, the Administration has sought to expand the number of Empowerment Zones and Enterprise Communities. The initial round of competition, in 1994, led to the establishment of 95 Enterprise Communities and 9 Empowerment Zones; both urban and rural areas were represented. The Taxpayer Relief Act of 1997 established 22 additional Empowerment Zones. To compete for these designations, communities submitted strategic plans for revitalization; this requirement is intended to mobilize local communities and encourage them to harness their talents and resources in framing a plan for local economic development. Designated zones and communities receive tax benefits 34 and flexible grants and are entitled to apply for waivers of certain Federal regulations; the underlying principle of the program is that communities know best how to solve their own problems but may lack the necessary resources. The Administration has also worked to promote fair access to loans and investment capital for residents of low- and moderateincome areas. Reform of the Community Reinvestment Act regulations required banks to focus on performance—actual lending, investments, and services—rather than paperwork. Since 1993, conventional home mortgage lending to black Americans has increased by 67 percent, lending to Hispanic borrowers is up nearly 50 percent, and lending activity in low- and moderate-income communities has risen by 37 percent. The Administration also obtained $80 million in funding for Community Development Financial Institutions, which make investment capital and other financial products available to low- and moderate-income communities. The President's 1999 budget requests an additional $45 million for this program. In addition, the President signed into law the "brownfields" program, which will provide tax incentives for the restoration of urban land contaminated by pollution. These incentives will leverage more than $6 billion for nationwide private sector cleanups and the redevelopment of 14,000 contaminated and abandoned sites in economically distressed urban areas. Several basic principles inform these policies. First, they seek to equip communities with the tools they need in order to flourish—they are helping hands, not handouts. Second, they place the principal responsibility for community development with the communities themselves, because they are closest to their problems. Third, they emphasize private sector engagement rather than government mandates. And finally, they stress results over process: the Enterprise Communities/Empowerment Zones program, for example, gives communities broad scope to determine for themselves the best path for development; similarly, the reformed regulations implementing the Community Reinvestment Act use criteria based on actual outcomes to judge compliance with its provisions. STRENGTHENING THE PERFORMANCE OF DOMESTIC MARKETS As part of this Administration's commitment to free and open markets, the Antitrust Division of the Department of Justice has worked together with the Federal Trade Commission to vigorously enforce the Nation's antitrust laws. Recent cases and investigations reveal that the Department of Justice and the Federal Trade Commission have both pursued an aggressive but balanced approach in enforcing antitrust law; in particular, both agencies have sought to ensure the continued growth and competitiveness of high-technology industries. 35 Chapter 6 of this Report describes how the antitrust agencies have worked to attain these goals in several recent cases. OPENING FOREIGN MARKETS Progress was also made in 1997 toward opening foreign markets to U.S. goods, as a number of important international trade initiatives were made final. Trade agreements affecting three important sectors were reached, concluding some unfinished business from the Uruguay Round of multilateral negotiations. The first of these agreements, the Information Technology Agreement (ITA), will eliminate tariffs on a large array of information technology products, in which U.S. firms tend to be highly competitive. Also successfully concluded were an agreement covering financial services, which will foster broad liberalization of banking, securities, and insurance markets, and a key agreement to liberalize basic telecommunications services (including telephone services). Chapter 7 of this Report considers the Administration's trade policies in more detail. These negotiations illustrate an important point about trade liberalization. Even though all three agreements involved sectors in which the United States is generally thought to have a competitive advantage, other countries were willing nevertheless to agree to their liberalization. They did so because they recognized that the entry of efficiently produced foreign products in these markets would improve the competitiveness of their own economies: securing goods of the highest quality at the lowest possible price is good for any economy. PROMOTING AN ECONOMICALLY SOUND ENVIRONMENTAL AGENDA The Administration took several important steps in 1997 to protect the environment. These included efforts to address global climate change and to improve air quality. In December representatives of the United States and some 160 other countries, meeting in Kyoto, Japan, agreed to establish binding limits on industrial countries' greenhouse gas emissions. These limits are intended to stem the disruptive effects of climate change by stabilizing atmospheric concentrations of greenhouse gases. (Because developing countries will emit an increasing share of global greenhouse gases, the President has indicated that the Kyoto agreement will not be submitted for ratification without meaningful developing-country participation.) The Administration has proposed several market-based approaches to meeting the Kyoto limits. Domestically, tax incentives for energyefficient technologies and research and development will spur early efforts to reduce emissions. A national system of tradable permits for greenhouse gas emissions, patterned after the successful permit trading program for sulfur dioxide emissions, will be implemented later 36 under the President's proposal. In addition, the Kyoto agreement allows for trading in greenhouse gas emissions permits on an international scale, as well as opportunities for firms in the industrial countries to receive emissions credits for investing in climate-friendly technologies in developing countries. All of these efforts will help the United States attain its greenhouse gas emissions target in a costeffective way. In July 1997 the Environmental Protection Agency (EPA) issued a significantly more stringent standard for ground-level ozone and a new standard for fine particulate matter in the atmosphere. Although the Clean Air Act does not allow for the consideration of costs in setting these standards, under the President's policy the EPA must implement these health-based standards in a cost-effective manner. The Administration's plan for achieving the new air quality standards departs from traditional command-and-control approaches by designing regional strategies that will complement local efforts, and encouraging the development of trading programs for emissions of nitrogen oxides, which are ozone precursors. The nitrogen oxide trading program, like the acid rain program and the trading program envisioned for greenhouse gas emissions, enlists market incentives in controlling pollution and should reduce pollution more cheaply than do traditional regulatory approaches. Chapter 5 of this Report provides a detailed assessment of the Administration's environmental policies. FACING THE CHALLENGES AHEAD In many ways the U.S. economy today is very different from that in which our parents and grandparents lived and worked. Today, 24 percent of families are headed by a single parent, compared with 14 percent 25 years ago. And three in five married mothers with children under 6 are in the work force—twice as large a share as in 1970. This makes affordable, quality child care a pressing concern for most families. Meanwhile the nature of the labor market has changed significantly: few American workers expect to be working for the same employer—or even to be in the same career—when they retire. Industry has also changed radically: in the 1950s the information technology industry barely existed; today it employs a larger share of the labor force than the automobile industry did in the 1950s and 1960s. And the U.S. population is aging, implying that in the next century there will be fewer workers for every retiree. This Administration's economic agenda is designed to deal with these changes and the challenges they pose. If the American economy is to maintain its preeminence as the strongest and most dynamic in the world, both policymakers and citizens will have to meet and overcome a number of challenges in the 21st century. Several such challenges already loom large for this Administration and Congress. Perhaps the most important is preparing for the aging 37 of the population, which requires reforming Medicare and Social Security and promoting retirement security more generally. As reported above, some progress was made in addressing Medicare's immediate problems, but comprehensive reforms are still needed to ensure the program's long-term viability. Likewise, steps will have to be taken to strengthen the finances of the Social Security system. For almost 60 years Social Security has provided Americans with income security in retirement and protection against loss of family income due to disability or death. A large share of elderly Americans, particularly those with low incomes, rely on Social Security as their primary source of pension income in retirement. The system has enjoyed dramatic success in reducing poverty rates among older Americans. However, many Americans now fear that Social Security will not be there for them when they are ready to retire. This concern reflects the widespread recognition that, under current "intermediate" projections of the Social Security trustees, the system faces a long-term funding gap: beginning in 2012, unless the system is reformed by then, the government will be unable to pay current Social Security benefits in full out of current payroll taxes; it will then have to draw down the system's trust fund, and by 2029 those funds will be exhausted. If still nothing has been done, the government would then face several options which it could adopt singly or in combination: it could reduce benefits until they are in line with collections, raise payroll taxes to cover an unchanged level of benefits, or finance the shortfall from other parts of the budget, by raising other taxes, cutting expenditures on other programs, or borrowing and allowing the budget deficit to increase. One or more of these measures will have to be taken so long as no changes are made to the present system. Although the seriousness of the financial imbalance facing Social Security should not be downplayed, its magnitude is not so large as to be insurmountable, particularly if early action is taken. For- example, even if nothing is done and the trust fund is exhausted, payroll taxes will still be sufficient to permanently finance roughly 75 percent of benefits. Put another way, the difference between the anticipated income and the anticipated expenditures of the Old Age, Survivors', and Disability Insurance program over the next 75 years amounts to around 21A percentage points of taxable payroll, or approximately 1 percent of GDP. (The imbalance is somewhat larger when viewed over a longer horizon.) These facts suggest that the problem of placing Social Security on a sound financial footing can admit of eventual resolution, and the President has proposed a process to devise an appropriate solution over the next 2 years. The President has also proposed that any budget surpluses should be reserved until Social Security reform is achieved. Medicare reform presents a somewhat thornier problem, in terms of both its complexity and its scale. Unlike Social Security, Medicare promises not just the payment of a sum of money but the delivery of 38 a service: health insurance. The government has little influence over the rate of increase in the cost of providing this service, which has been rising faster than general inflation for decades, largely driven by technological advances in medical care. Higher costs for medical care are projected to account for the bulk of the increase in Medicare expenditures for the next 25 years or so, after which the aging of the baby-boom generation will act to raise expenditures still further through increases in program enrollment. Hence, any long-term reform will have to involve slowing both the rise in health care prices and the growth in volume and intensity of use of covered services. Neither will be accomplished easily. Before last year's budget legislation was enacted, the trust fund for the component of Medicare that covers hospital costs was projected to fall to zero in 2001. The 1997 reforms will delay the trust fund's depletion until 2010. The legislation also calls for the establishment of a bipartisan commission to assess and recommend the structural changes that will be needed to ensure Medicare's long-term viability. A second major policy challenge involves continuing the drive for more open international markets. Preferential trade agreements are being negotiated among countries around the world at a rapid pace, and the United States could easily be left behind through inaction. Since 1992, countries in Latin America and Asia have negotiated 20 preferential trade arrangements that exclude the United States. One of these is MERCOSUR, a customs union among four South American countries. The European Union has begun a process intended to culminate in a free trade agreement with Brazil, Argentina, and the other MERCOSUR nations; the President of one European nation has even gone so far as to declare that the economic interests of Latin America lie with Europe, not the United States. Meanwhile the MERCOSUR nations are attempting to extend their preferential trade arrangement to the entire continent. It is clear that now, more than ever, continued engagement with the world trading system will require an active effort on the part of the United States. In 1997 the Senate voted to move forward on extending the President's so-called fast-track negotiating authority. This authority allows the President to negotiate trade agreements and submit them to the Congress for a yes-or-no vote, without amendments. However, in the House of Representatives the vote to renew fast-track was postponed. Some have voiced concern that free trade hurts American workers and contributes to the U.S. trade deficit. As discussed in Chapter 7, however, market-opening initiatives do not cause net job losses to the U.S. economy as a whole, although they do result in a reallocation of jobs into expanding, export-oriented industries. As the chapter documents, the jobs created by increased trade are good jobs, offering high pay. But some workers are indeed hurt by more open markets, just as some workers are harmed by technological innova- 39 tion, even though market-opening initiatives unambiguously benefit the economy as a whole. This Administration has realized from the beginning that the government can minimize the impact of dislocations affecting workers who lose their jobs, by speeding the adjustment process. For example, one of the key provisions of NAFTA involved monitoring those industries that were in danger of being adversely affected by the agreement, and the Administration committed itself early on to providing for dislocated workers through retraining programs. The President's 1999 budget includes proposals to expand the scope of trade adjustment assistance and to increase funding for these programs. More generally, the Administration's commitment to investing in people through education and training serves as a strong complement to its policy of trade liberalization. A widespread misconception is that one of the benefits of increased trade comes in the form of an improved balance of trade. Economic policies do indeed affect the current account (the broad measure of U.S. international transactions that includes investment income and transfers as well as trade in goods and services), but it is budget, saving, and investment policies, not trade liberalization policies, that do so. The Nation's current account deficit equals its borrowing abroad to finance any excess of investment over domestic saving. The current account is therefore a macroeconomic phenomenon that mirrors the gap between what we as a Nation invest and what we save. The large Federal budget deficits of the 1980s and early 1990s were a form of negative saving, or dissaving, which reduced the total amount of national saving available to cover the Nation's investment in plant and equipment. In an important sense, the Nation was overconsuming in the 1980s, financing its consumption binge by borrowing from foreigners. The result was a large and persistent current account deficit. We still have a current account deficit today, but for a very different reason. The near elimination of the budget deficit has left more saving available for investment in plant and equipment by the private sector. National saving has risen. But because of the investment boom during this expansion, the gap between investment and saving has persisted. Once again, this shortfall is made up by borrowing from abroad, and the result is a current account deficit. But there is a big difference between borrowing to invest—as the Nation is doing now—and borrowing to consume, as it did in the 1980s. In fact, running a trade deficit in order to expand the Nation's productive capacity is not new to American history—we did much the same thing in the last century, to build up the Nation's infrastructure, most notably during the railroad construction boom. Ironically, therefore, today's trade deficit reflects the economy's current success in growing more rapidly than our trading partners and investing so much—and not our free trade policies. 40 It is always difficult to explain this macroeconomic perspective on the trade deficit to those who are primarily concerned with the microeconomics of their daily lives. But making the case in favor of trade is particularly important now, because real danger threatens should countries turn their backs on a progressive and integrated world economic order. Besides postponing the renewal of the President's traditional trade-negotiating authority, the Congress chose not to support the sort of financial participation in international institutions that is vital for the sound functioning of the international system. Meanwhile financial crises in East Asia have made U.S. international engagement more important, rather than less. Other emerging-market countries are themselves in danger of reacting to the East Asian crises by turning inward. It is important for their economic well-being, as well as our own, that they continue along the path toward an outward-oriented market system, on which they had until recently been making such astonishing progress. This will require difficult macroeconomic and structural adjustments on their part, including reducing their dependence on foreign borrowing. As a result, these countries will have to reduce their trade deficits, and in some cases even turn them into trade surpluses. This will inevitably lead to an increase in U.S. bilateral trade deficits with some East Asian countries. Again, however, such deficits are not the proper gauge of the success or failure of U.S. trade policy. The Nation faces other, broader challenges in shaping economic policies for the 21st century. First, we must act to help families address the problems they face in today's economy. More American workers today are faced with the need to juggle the demands of the workplace with the demands of family and home. Government must act to ease this burden by ensuring that families have access to quality child care and health care. For this reason the President's 1999 budget includes a $21 billion increase in funding for child care, to make it accessible to more families and raise its quality. An important part of this proposal is increased tax credits for 3 million working families to help them pay for child care, as well as an increase in block grants to States that will directly subsidize child care for low-income families. In addition, the proposal calls for a new Early Learning Fund, along with support for the enforcement of State child care health and safety standards, scholarships for up to 50,000 child care providers per year, and funding for research and consumer education. We must also continue to invest in our Nation's children. Chapter 3 of this Report shows that the last 3 years have witnessed notable improvements in children's well-being along several fronts, including decreases in child poverty, increases in consumption of basic health care services, and improvements in health status and in some measures of educational achievement. However, many children remain economically vulnerable. One in five children in the United States lives in a family whose income is below the poverty line, one in seven 41 does not have access to health insurance, and a large proportion of children fail to achieve basic levels of proficiency in science, mathematics, and reading. Chapter 3 considers ongoing and proposed Administration initiatives that address these problems. Finally, this country's longstanding goal of achieving equality of opportunity among racial and ethnic groups has not yet been attained. Chapter 4 of this Report reviews differences in economic status among blacks, Hispanics, non-Hispanic whites, Asians, and American Indians. Although there has been progress in narrowing these gaps in the postwar period, it has been very uneven, with rapid progress in the 1960s and early 1970s followed by 20 years of stagnation from the early to mid-1970s to the early 1990s. For example, since the mid-1970s the wages of young black college graduates have fallen relative to those of their white counterparts. Although the current expansion has brought signs of renewed progress, substantial disparities in economic status persist. For example, the median wealth of white families is by some estimates 10 times that of black and Hispanic families. More needs to be done to promote equality of opportunity for all Americans. Many of the Administration's current and proposed policies, such as those that encourage community empowerment and education, are intended to address these disparities. And this Administration has pledged itself to furthering a dialogue on race in America. CONCLUSION The United States today enjoys some of the most favorable economic conditions in a generation: high growth and low unemployment combined with low and stable inflation. And the success of Americans in adapting to the new economy in which they find themselves has been truly remarkable. But that success—and the economy's present strength—cannot be taken for granted. Recent developments do not herald the end of inflation, the conquest of the business cycle, or the permanent reversal of such secular trends as weak productivity growth and rising income inequality. Rather, there are still long-term changes at work that demand action by individuals, businesses, and governments alike. This Administration has put in place a set of policies that has allowed the economy to grow and to flourish—in particular by putting the Nation's fiscal house in order. But we must continue to pursue sound policies aimed at opening markets at home and abroad, promoting private and public investment, and ensuring that all Americans, regardless of age or origin, have the skills they need to prosper in a world of change and opportunity. 42 CHAPTER 2 Macroeconomic Policy and Performance MACROECONOMIC PERFORMANCE over the past 5 years has been excellent, and the record in 1997 was truly remarkable. In general, the behavior of the economy last year bore out the analysis of macroeconomic conditions presented in last year's Economic Report of the President, which was confident that the economy would continue to grow without rising inflation. What was not anticipated fully at that time, however, was how rapidly the economy would grow or how strong the pace of job creation would be—or that inflation would actually decline. Last year the Administration forecast 2-percent growth during 1997 with an average unemployment rate of 5.3 percent. This forecast was not meant as an assessment of the best the economy could do. Rather, it represented a conservative and credible set of economic assumptions to be used for forecasting Federal revenues, outlays, and deficits in the preparation of the budget. Last year's Report recognized that the actual outcome could be even better. And it was, with growth at nearly 4 percent and the unemployment rate averaging only 4.9 percent. More jobs were created in 1997 than in either of the 2 previous years. Yet inflation remained subdued, with the consumer price index (CPI) rising just 1.7 percent during the year. This chapter's analysis of macroeconomic policy and performance concludes that the economy should continue to grow with low inflation in 1998. The chapter begins with a review of macroeconomic performance and policy in 1997, to show in some detail where the year's growth came from and how inflation remained so tame. The second section examines the important question of whether our understanding of inflation and our ability to predict it have changed in significant ways. This question is part of a broader inquiry into whether the economy has changed in such fundamental ways that standard analyses of how fast it can grow without inflation need to be replaced with a new view. The conclusion reached here is that no sea change has occurred that would justify ignoring the threat of inflation when the labor market is as tight as it is now; however, the unemployment rate at which rising inflation becomes a serious threat appears to be lower than it was in the 1980s, and the rate of growth of potential output may be higher. 43 Prudence dictates keeping a wary eye on inflationary pressures, but, as discussed in Chapter 1, the economy remains remarkably free of the kinds of imbalances that often appear at the end of expansions. For example, the analysis in the third section of this chapter indicates that the financial condition of households remains fundamentally sound, even though they took on considerable debt in 1997. Two cautionary notes are introduced. First, the rise in the stock market over the first 7 months of 1997 put price-earnings ratios and other measures of stock market valuation near historical highs. Second, households are continuing to consume a very high proportion of their disposable income and are saving little. The implications of this low saving rate for long-term growth are explored in the fourth section of the chapter, which also assesses the positive contribution of deficit reduction. The chapter concludes with the Administration's forecast and outlook. OVERVIEW OF 1997: A BURST OF GROWTH Economic growth exceeded expectations in 1997, and the unemployment rate declined to a 24-year low. Households and firms both increased their spending at robust rates as continued low inflation, low unemployment, declining costs of business equipment, and lower long-term interest rates contributed to a favorable economic environment for both consumers and producers. Federal Government purchases of goods and services declined in real terms, and purchases by State and local governments increased only modestly. Net exports continued to be a restraining influence on growth. Strong investment in new productive capacity in the past few years has helped the economy accommodate higher spending without rising inflation. But inflation has also been held in check by several other favorable developments that have kept prices from accelerating even as wage growth has picked up. Chief among these have been the rise in the value of the dollar on foreign exchange markets (which makes imports cheaper), unusually steep declines in prices for computers, and continued moderation in employer costs of health insurance. Late in 1996 the economy was already operating near the consensus estimate of its noninflationary potential. Continued robust economic growth in the latter part of 1996 and early 1997 promised to increase resource utilization rates even further, raising concerns that inflationary pressures would build, and the Federal Reserve raised short-term interest rates in March. With inflation low and stable—and in light of the turmoil in Asian financial markets that began to emerge in mid-1997—the Federal Reserve made no further interest rate moves. 44 AGGREGATE SPENDING IN 1997 An accounting of the sectoral contributions to growth in 1997 shows that increases in private domestic spending for consumption and investment combined exceeded growth in gross domestic product (GDP; Table 2-1). Modest increases in State and local government expenditures accounted for the increase in total government spending. Net exports became more negative. TABLE 2-1.—Components of GDP and Growth in GDP, 1997 Contribution to growth Item Billions of dollars Percent of GDP Percentage points Percent of total change Personal consumption expenditures 5,488.6 67.9 2.5 65.2 Gross private domestic investment 1,237.6 15.3 1.5 38.4 1,173.0 14.5 1.1 27.3 845.4 230.2 615.2 327.5 10.5 .8 -.0 .9 .2 21.3 Fixed investment Nonresidential Structures Producers' durable equipment Residential 2.8 7.6 4.1 .8 Change in business inventories 64.6 Net exports of goods and services -96.7 -1.2 958.8 1,055.5 11.9 13.1 1,453.9 18.0 Exports Imports Government consumption expenditures and gross investment Federal State and local -.6 21.9 6.0 .4 10.9 -.4 -10.0 1.2 -1.6 31.7 -41.9 .2 6.1 11.5 -.0 .2 -.0 6.1 8,083.4 100.0 3.9 100.0 8,018.8 99.2 3.5 89.1 524.8 929.1 GROSS DOMESTIC PRODUCT MEMORANDUM: FINAL SALES 6.5 Note.—Data are preliminary estimates. Contribution to growth is measured fourth quarter to fourth quarter. Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers. Private Domestic Spending The factors traditionally thought to determine household spending are household income, consumer sentiment, and household net worth in the current and recent years. Signals were favorable for all of these fundamentals through most of 1997: real disposable personal income grew 3.7 percent over the four quarters of the year, consumer sentiment remained at or near record highs for most of the year, and year-end stock market values were up about 30 percent from a year earlier. Outlays grew even faster than income, and as a result, the personal saving rate edged down. Although consumption was robust over the past year, it was not smooth. Real consumption grew in excess of a 5-percent annual rate in the first and third quarters, but at only a 0.9-percent annual rate in the second. No reason for this volatility is apparent; neither fluctuating income, changes in consumer confidence, nor ups and downs in the stock market explain it. Although the stock market dipped in 45 April after the Federal Reserve's interest rate hike, it had fully recovered by mid-May. At the same time, consumer sentiment continued to rise. Most of the volatility was in goods consumption; services consumption grew at around a 4- to 5-percent annual rate in each quarter. Durable goods, which rose at double-digit annual rates in the first and third quarters but fell at a 5-percent annual rate in the second, accounted for much of the quarter-to-quarter fluctuations in growth. Light motor vehicle sales of roughly 15 million units in 1997 were about the same as in each of the past 3 years; over this 4-year period, sales of light motor vehicles were just shy of the record 4-year pace set in the mid-1980s. Like those for consumption, the signals for the traditional determinants of business investment—lagged GDP growth, cash flow growth, and the cost of capital—were strongly favorable throughout 1997. Several special factors added further impetus to investment spending. Business equipment grew 12 percent over the four quarters of the year, with strong demand for most types of equipment. Industrial equipment grew a healthy 7 percent over the year, and transportation equipment advanced 10 percent, with particularly rapid growth in aircraft purchases. The standout categories of business equipment investment in 1997 were office and computing equipment and telecommunications equipment. Growth in real computer spending was fueled in part by price declines that were even sharper than normal (32 percent over the past year). Real spending on telecommunications equipment increased 10 percent. One factor possibly boosting sales in this industry is the rapidly expanding capacity and availability of cellular telephone and other wireless services. Although nominal spending on computers and telecommunications equipment represents about 25 percent of investment in equipment, measured relative declines in computer prices have been rapid, so that these categories now account for a rising fraction of real equipment purchases. In contrast to the strength in equipment spending, investment in nonresidential structures was about flat last year, following solid gains in 1996. Construction of new office buildings made solid gains, as the strength in the economy allowed the sector to grow out from under an overhang of empty office buildings at the beginning of the decade. These gains were offset by small declines in the construction of industrial, utility, and mining structures. A pickup in inventory investment added 0.4 percentage point to real GDP growth over the four quarters of 1997, with an especially large buildup in the first quarter. The demand for inventories was probably a result of strong final sales, which increased faster than inventories over the first three quarters of the year. As a result, stocks remained lean in relation to sales. Residential construction increased 6 percent over the four quarters of 1997, with much of that growth occurring in the fourth quarter. The 46 pickup toward the end of year reflected in part the pattern of mortgage rates, which after rising through April, fell more than 1 percentage point later in the year. Falling mortgage rates, together with strong real income growth, resulted in an increase in housing affordability in the second half of the year. In addition to new home construction, real estate commissions moved up over the year, as sales of existing homes grew by 3 percent over 1997 as a whole to their highest level ever. When consumption and investment are combined, real private domestic demand grew 4.8 percent over the four quarters of 1997; this was somewhat faster than plausible estimates of the sustainable longrun growth rate of the economy. The impact of this surge of private spending was muted, however, by an erosion in net exports, a continuing decline in real Federal Government spending, and slow growth in spending by State and local governments. Government Spending and Fiscal Policy Government expenditures made only a modest contribution to growth in real GDP in 1997—and all of that came from expenditures by State and local governments. Real Federal Government expenditures were lower last year than in 1996. Fiscal policy was tight in 1997, with the adjusted structural budget deficit (the deficit measured at a standardized level of economic activity) declining by $54 billion in fiscal 1997 from $112 billion in fiscal 1996. These developments reflected ongoing efforts to restore Federal fiscal responsibility, which culminated in the Balanced Budget Act of 1997. The Federal Government's unified budget deficit for fiscal 1997 was $22 billion, a reduction of $86 billion from 1996. The Federal budget position has now improved in each of the last 5 years, the longest unbroken period of improvement since 1948. Last year's unified deficit was just 0.3 percent of GDP, the smallest by this measure since 1970. Relative to the size of the economy, last year's general-government deficit (the combined deficit of all levels of government) is estimated to have been smaller than that of any other large industrial country except Canada. Moreover, last year's primary Federal surplus (defined as revenues less outlays other than net interest) was $221 billion; as a share of GDP this was the largest since the 1950s. It reveals that the overall budget would have shown a substantial surplus last year were it not for the interest obligations on debt run up during the period of large deficits. Much of the long-term progress on the deficit can be traced to the effects of the Omnibus Budget Reconciliation Act of 1993. However, last year's improvement in the deficit was considerably greater than had been anticipated; as recently as February 1997 the projected deficit for fiscal 1997 was $126 billion. The continuing vigor of the economy is clearly responsible for part of this progress toward a balanced budget. Of course, sound policies— 47 including a credible commitment to deficit reduction—have nurtured the expansion. About $30 billion of the improvement in the deficit resulted from lower-than-expected expenditures. Robust economic growth also was responsible for some of the $76 billion in unanticipated revenues collected by the Treasury. However, revenues increased even more than would have been predicted on the basis of observed economic growth (Box 2-1). Box 2-1.—A^eontttiiig for the Dafieit Sui^rke Fisenl 199? In last year's budget the current-services deficit for fiscal 109? was projected at $127.7 billion. (The current-services deficit assumes no change in taw. The President's budget, which includes policy proposals, was projected at $125,6 billion,) The actual budget deficit was $21,9 billion—or $105,8 billion lower than the eurrent~services projection* Although a full accounting for this deficit surprise will not be possible for seTeral years? the ta&le below summarises what is BOW known. Of the $105,8 billion difference between the actual and the current-services deficit, $30.3 billion was accounted for by Iower4han~expected outlays. About one-quarter of these savings were in income security programs such as food stamps, unemployment insurance, and family support programs; spending on all of these programs is typically linked to economic performance. The remaining $75.5 billion of the difference was attributable to unexpectedly high revenues, Only $12.3 billion of this revenue surprise was accounted for by higher-than-expacted collections of corporate, social insurance* excise, and other taxes. Most ($63,2 billion) of the unanticipated revenues caine from individual income taxes. A large portion of the unanticipated individual income tax revenue* $28*2 billion, came in as payments on 199? obligations* A full accounting of this surprise will have to wait until 1997 tax returns are processed, but a large share of the unanticipated collections on 1997 liabilities is likely related to better4han~expected economic growth in 1997, Approximately $6,0 Mlliom in additional individual tax receipts came from payment of back taxes or from taxes on trusts. Another $29.0 billion of the revenue surprise arrived in the form of Mgher4han~antieipated final payments and Iower4han~ anticipated refunds on 1996 individual income tax liabilities. The largest identifiable contributing factor was Mgher4han* anticipated tax liability on capital gain realisations, which accounted for $20,1 billion of the $29*0 billion in unanticipated 48 Box %~ls^ontmwt$ payments on 1996 obligations. The remaining $8*9 billion came from higher4han-eiqpeeted tax liabilities on pensions, dMdenda, distributions from Individual Retirement Accounts, interest payments, and wages and salaries, which were partially offg^t by higher4han~anticipated deductions, Accounting for the Fueal 1997 Deficit Surprise \ wmm$mm$ A&tasl mints prated1 ttera Ottfeys „„ „ Iflfi^ffifi ssctif 1^ ^frasis Other .. ,.„, _„.„ „„..».,„.„ „ , ~_ 40.3 ; *. > < , „ , ..„_ „,. ._„., „.„ „. -U 43J& -j 755 | §32 : ._.,_ .„..„.„. „.„ IfeCfcJptS iftdiygiudi Jncoifls t3x0$<>. <n + ,, <> <> +.» + <» i o * <+ « .>.,> «« « «.«<+ + ^ ,> <>» « <^ «.+»«>« ^ Oa !596liabaity , ~ „„ «.^.».« ,»^. .,» „„,„ ,. W^|es a^^ salaiies > . „ .„ , ,.„,. , „, Capital ggia$ Jf,+.,« ^^<.,..,<>,<.,^..,,t,<,,.,^,t,<^<,^^.> o ^.,+ ,<,.+,<»^.,<^,.+v^<t f^nsfeD aftd II?A d}stril>uttofls,,,,> «,OT^ +,„ «.w.* >^.rt.* ^^,_^ Interest jncosgifi , , , ,., T . * Siyietend incoiBS .>,„,.,<« <„<.„+„*.„ .., t, +.,^^ ,v«.,+.,+wf ,. ,.<+v-^,. «.,,.w^<^<>,<.>. itemized ^edti^tions,,^,^, *,.+.,„ „«„„ ^^^.^^^^^^.^^ „,„„„ 19,1 Jl ai 4>1 5.3 19 -31 _.^,. ,^^.«^4t ,,^^.^,.>^^. n>t &j Co^po^ate income taxes,., „>„ , ,„„„..„. ». «., , + Social insurance lax&s . . ,v , Ixclse taxes >.,„„«. „* .^.^^o-o-o-.^^.^^^"*.*. ^^x^, «»«» ,«,«.« 8.1 3J 2,$ -^ Iucf83$$ fti ^afplus &r r^uctioti is dsf&it , <k ^ <+ <> ,» <k « * ^ « <> * « <>„> ,> «.«>^ ,> ,»< iOSJ 0« 1$S7 liability .«„ Back taxes a ad fl^uciafifts .,_ ....^^^.^ , > , OUttf 1 Current-sBrvfces projection, $&ur&e& 0eparlm&nl of tha Treasury ^nd OffiM af Haagg^meirt aad 8&dpt. i i i ! j 1 In national income accounting terms, the slowdown in the growth of government expenditures and the improving general-government budget balance have exerted a moderating influence on overall aggregate demand that has partly offset the robust stimulus coming from private consumption and investment. Nevertheless, the combined impetus from private and government spending exceeded the increase in domestic aggregate production, so that net exports declined further. Net Exports and the Current Account U.S. exporters had a good year in 1997, as real exports rose 10.9 percent. However, robust growth in domestic demand pushed real 49 imports up by 13.3 percent. Real net exports fell by $35.8 billion over the course of the year, and their contribution to growth in real GDP was -0.4 percentage point. One useful perspective on the performance of real net exports comes from looking at the pattern of growth in the global economy. At least four major locomotives matter for global economic growth: North America, Europe, Japan, and—in the past decade—the East Asian industrializing economies. Expectations at the end of 1996 were that Box 2*2.—Turmoil in Asian Economies The outbreak of financial crisis in Asia was one of the most notable—and troubling—developments in the global economy during 1997, Events began in midyear as a currency crisis and intensified over the rest of the year, spilling over to the real sectors of the affected economies as well as to the rest of the world. By May 1997 Thailand was in the throes of the fourth speculative attack on its currency, the baht, since August 1998, By then the buildup of financial difficulties and balance of payments pressures had reached such a point that efforts to defend the baht could not be sustained. Pressures soon spilled over to other emerging Asian economies (especially Indonesia, Malaysia, and South Korea), most of which also had some balance of payments weaknesses* as well as to Eastern Europe* These countries' difficulties shook financial market confidence elsewhere in Asia and in emerging markets around the world, even those with sounder policies and economic fundamentals, in a contagion effect. Since June, four of the countries in the region (Indonesia, the Philippines* South Korea, and Thailand) have requested and received assistance from the International Monetary Fund (IMF). In each instance the adjustment programs developed by the domestic authorities and the IMF have included a heavy emphasis on financial and structural adjustment measures (for example, to reform bank lending practices and further liberalize the econ0my)? as well as the more traditional macroecanomic acijustmente necessary to restore financial market stability, For each of the affected economies, the question of when their financial and balance of payments situations will stabilize depends, first and foremost, on whether and how aggressively they implement their policy commitments, and second, on the easing of the contagion effect from those economies that continue to experience difficulties. In the medium term the return of these economies' strong growth performance w01 depend significantly upon the degree to which structural and financial sector reforms are implemented, 50 growth would slow in the United States and that the other regions (except Japan) would easily outpace it. Instead, the United States (and Canada) saw higher growth rates in 1997 (about 4 percent each), while growth among our trading partners in the other regions slowed. In Japan the recovery from the recession of the early 1990s came to a standstill. In Europe growth continued in 1997, especially in a northern tier composed of the British Isles and the Nordic countries. In the developing economies of East Asia, slowing growth turned to financial crisis in the second half of the year (Box 2-2). Growth rates in the United States and its trading partners, along with exchange rates, are major determinants of short-run fluctuations in real net exports. The fact that income increased more rapidly here in 1997 than it did in most other advanced industrial economies worked to increase U.S. imports from those economies more rapidly than their imports from the United States. The negative effects of the East Asian crunch on U.S. net exports to developing countries had barely begun to materialize at the end of the year. In analyzing the components of real growth, it is appropriate to look at real net exports. But the focus generally shifts to nominal imports and exports when examining current income flows between the United States and the rest of the world. The comprehensive measure of such flows is the current account balance, which comprises not only the trade balance in goods and services but also net investment income and transfers. In a fundamental sense, trends in the current account balance reflect movements in saving and investment. When the demand for investment in the United States exceeds the pool of national saving, the difference is made up by borrowing from foreigners. Conversely, when saving exceeds investment, the surplus is invested abroad. The United States first experienced large current account deficits during the mid-1980s, when net investment fell as a share of national income and net national saving fell even faster. The deficit shrank briefly as investment collapsed in the 1990-91 recession, but it has reemerged in the current expansion. The good news in this expansion is that investment has been booming. But saving does not appear to have kept pace. (The interpretation of current trends in saving, investment, and the current account is complicated by the statistical discrepancy between GDP measured as the sum of all spending on output and GDP measured as the sum of all income generated in producing that output.) The current account deficit for the first 9 months of 1997 was about $8.7 billion greater than in the comparable period in 1996, and the deficit for the year is likely to be moderately higher than the $148 billion (1.9 percent of GDP) recorded in 1996. Much of the increase reflects the emergence of a deficit in the balance on investment income. As a result of past deficits, foreign holdings of U.S. assets are 51 now sufficiently large that the investment income paid to foreigners now exceeds investment income earned on U.S. holdings of foreign assets. The balance on all goods and services may show little change at all from last year's $111 billion. The modest size of the increase in the trade deficit last year is probably related to changes in the exchange rate of the dollar. The effect of exchange rates on the nominal trade balance last year is complicated. The trade-weighted exchange rate of the dollar rose about 3 percent during the first quarter of the year (that is, the dollar strengthened against a weighted average of the currencies of our trading partners). In the long run the effect of a stronger dollar is to slow exports and probably raise spending on imports, thereby depressing the trade balance. But in the short run the effects on the nominal trade balance may go the other way. This is because, with a stronger dollar, importers do not have to pay out as many dollars to obtain the foreign currency they need to pay for previous quantities of imports (in what is called a valuation effect), and because it takes time for the quantity demanded to adjust. There can be a lag of 2 years or more before price changes have their full effect on trade volumes, but when they do they dominate the valuation effect. (This pattern of response is often called the J-curve, because the dollar value of imports at first declines with a stronger dollar but later rises.) The difficulty in interpreting what happened in 1997 is due to the fact that in 1996, before the most recent appreciation, the dollar had also increased in value. Thus the lagged effects from that earlier appreciation may have partly canceled out the immediate effects from the 1997 appreciation. The delayed effects of the dollar's appreciation, together with the other effects of the East Asian financial crisis, are likely to show up in a more marked increase in the trade deficit, by all measures, in 1998. MONETAEY POLICY AND FINANCIAL MARKETS The Federal Reserve raised its target Federal funds rate by 25 basis points in March, to 5.5 percent. The proximate cause of the rate increase was the perception that strong demand would boost utilization rates, which were already approaching levels that in the past had been associated with rising inflation. The mild deceleration in GDP prices in the second half of the year translated into a slight upward drift in the real Federal funds rate as 1997 came to a close, putting the real rate slightly above its mid-1995 peak. Moreover, the rise in the real short-term rate did not appear to feed through to intermediateand long-term real rates, which remained essentially unchanged—or, by some measures, even declined—in the second half of the year. Short-term interest rates fluctuated within a narrow range over the course of the year, whereas long-term rates rose slightly early in the year but then declined, finishing the year roughly 50 basis points (half 52 a percentage point) lower. Long-term interest rates remain very low. The yield on 10-year Treasury notes remained within 50 basis points of its 30-year low, while the 30-year Treasury yield stood near its lowest level since that bond's introduction in 1977. This largely reflects two related factors: continued progress in deficit reduction, which lowers nominal interest rates by reducing expected future real rates, and market participants' expectations of low future inflation, which act to reduce nominal rates. In addition, turmoil in foreign asset markets in the second half of the year helped make U.S. securities more attractive to investors; this "flight to quality" probably boosted demand for U.S. assets, putting additional downward pressure on nominal interest rates. The net result was a flattening of the yield curve, with the spread (the difference in interest rates) between 3-month Treasury bills and 10-year Treasury notes falling to roughly 60 basis points by the end of 1997. This spread is now well below its historical average of 135 basis points and is roughly equal to the level that prevailed during the 1960s. The risk premium on corporate debt—measured as the spread between the yield on Baa-rated corporate bonds and the 30-year Treasury bond yield—averaged roughly 125 basis points in 1997 (a Baa rating denotes bonds of intermediate credit quality); this spread remains quite narrow by historical standards. The spread between riskier, high-yield corporate debt ("junk" bonds) and 10-year Treasury securities also remained narrow in 1997 but began to rise toward the end of the year. Taken as a whole, these low risk premiums suggest that market participants perceive the financial and business sectors to be quite healthy; most relevant statistics provide support for this view. In the banking sector, business loan charge-offs and delinquency rates remained low, while bank capital ratios remained high. Although business failures increased in 1997, a large portion of this increase appears to reflect special, one-time factors, not a permanent change in trend. For equity markets 1997 was a noteworthy year. The rise in stock prices was checked only slightly following the Federal Reserve's March tightening, and even sharp declines in some foreign stock markets were unable to do more than temporarily slow the market's advance. All three major stock price indexes—the Dow Jones Industrial Average, the Standard & Poor's (S&P) 500, and the NASDAQ composite—shattered previous records; the S&P 500, for example, peaked in October at 983.12, a record high and 40 percent above its October 1996 average. The runup in stock prices appeared to be fueled by continued high profitability in the corporate sector and forecasts of strong future earnings growth, and it pushed aggregate price-earnings ratios up sharply. By some measures price-earnings ratios are at levels not seen in decades. Declines in foreign stock markets spread to domestic markets later in the year, causing them to retreat from these record highs. On October 27th the Dow posted a 554-point decline—the 12th-largest in percentage terms in its history. The drop was steep enough to cause the New York 53 Stock Exchange's system of "circuit breakers" to suspend trading temporarily for the first time ever (Box 2-3). The day after the plunge saw the volume of shares traded on the New York Stock Exchange reach a record high of 1.2 billion (the market made up much of its previous day's decline that day). The stock market rebounded quickly following its October losses, with the S&P 500 index and the Dow finishing 1997 near their highs for the year. Turmoil in East Asia apparently continued to be a source of downward pressure on stock prices for the remainder of the year. The rise in stock prices in 1997 represents the continuation of a trend that has seen major indexes more than double over the past 3 years. One explanatory factor is market expectations of strong future corporate earnings. Another possible factor is a reduction of the premium that investors require to hold stocks in lieu of less risky assets. Such a reduction could occur if the perception has become more widespread that stocks represent an attractive, high-return asset, or if investors' interest in longer term investments for retirement has grown. Still other possible explanations are a reduction in investors' expectations of future inflation or of future real interest rates, or the effect of financial innovations in channeling a larger share of savings into the stock market by way of mutual funds and pension funds. There is some scattered evidence that investors have come to view stocks as a less risky investment: for example, a survey of individuals' attitudes toward the stock market shows a marked decline in the perceived riskiness of stocks since 1994. Similarly, participants in the largest private retirement savings plan in the United States have directed an increasing fraction of their retirement saving contributions to equities since 1986; however, it is unclear how much this reflects a reduction in participants' tolerance for risk, a change in their perception of the riskiness of the stock market, or other factors. If the risk premium on stocks has declined, this could explain why price-earnings ratios are at historically high levels; a simple calculation indicates that even a relatively small change in the risk premium is sufficient to raise price-earnings ratios sharply. Nevertheless, the possibility exists that price-earnings ratios will eventually return to more normal levels, given that periods in which price-earnings ratios are high tend to be followed by slower future growth in stock prices. INFLATION AND THE LABOR MARKET Inflation remained remarkably subdued in 1997. Both GDP and core CPI inflation (a measure of inflation that excludes the volatile food and energy components) fell over the course of the year, continuing a decline that began in 1995. Surprisingly, this deceleration of prices occurred in an economic environment that was characterized by extremely low unemployment: as 1997 came to a close, the unemployment rate had been at or below 5.5 percent for almost 2 years, and at or below 5 per- 54 Box 2-3+—Circuit Breakers ^Circuit breakers* are rules that automatically halt trading on a securities exchange when prices move by a given amount The hoards of a number of major exchanges, induding the New York Stock Exchange (NYSE) and the Chicago Mercantile Exchange, set up circuit breakers in the wake of the 1987 stock market crash, The NYSE circuit breakers provide a good example of how such rules operate* Before the October 27th stock market decline* the circuit breakers were set to halt trading for SO minutes if the Dow Jones Industrial Average declined more than 350 points from its morning opening price, and for another hour if the Dow were to fan an additional 200 points, Both of these Emits were hit on October 27th? and the circuit breakers operated as designed and dosed the market twice (the second eTent occurred less than an hour before the closing bell and thus ended trading for the day). When they were introduced, it was argued that circuit breakers would reduce the chance of a major market disruption in three ways; by preventing an overload of the exchanges' trading systems during periods of extimordinary price movements; by reducing the possibility that sharp (and possibly unchecked) declines in stock prices would leave market participants unable to make good on their trading commitments; and by providing a forced pause in trading—a chance for market participants to "take a deep breath** Many observers and market participants criticized the role that the circuit breakers actually played on October 27th, The trigger limits had only been adjusted once since 1988, and the percentage declines in the Dow that they reflected were only about a third as large as they were when the triggers were set up in 1988. Furthermore, the securities exchanges now have enormously greater capacity to process trades than they did in 1987; by all accounts the record trading volumes on October 27th and 28th did not remotely threaten to overload the system* And concerns about fuJfillment of trading commitments appear to have been at least partially allayed, because traders now have greater access to emergency credit The "deep breath** argument is more difficultto assess* because nobody knows what would have happened had the markets not closed early on October 27th. But some critics argue that circuit breakers can add to market volatility by causing a race to the exit—a sharp selMf in shares—as stock prices approach the threshold for a trading hall Indeed, many traders argue that that is just what happened when the NYSE reopened after the first of its tw0 shutdowns on October 27th, The NYSE has announced that it will propose modifications to the rule in 1998, 55 cent for 9 months. The unemployment rate fell from 5.3 percent in the fourth quarter of 1996 to 4.7 percent in the fourth quarter of 1997; all major demographic groups participated, with declines of 1.0 percentage point among blacks, 0.6 percentage point among whites, and 0.6 percentage point among Hispanics. The pace of job creation was quite rapid. More than 3.2 million jobs were created in 1997, for an average of 267,000 new jobs per month—a substantially faster rate than in either of the 2 preceding years. Factory employment rose significantly, by 230,000 new jobs, while employment at construction sites rose by 210,000 jobs following a slightly larger gain in 1996. Among the service-producing industries growth was particularly rapid in computers and data processing (which increased 13 percent) and engineering and management services (which increased 7 percent). These hiring gains were matched by large increases in industrial capacity. Nevertheless, tightness in labor markets was reflected in a continued acceleration of wages during the year. Hourly wages as measured by the employment cost index (ECI) rose by 3.9 percent in 1997, 0.5 percentage point faster than in 1996. The ECI for total hourly compensation accelerated by a slightly smaller amount, and continued slow growth in the cost of benefits—particularly health insurance—kept the growth rate of total hourly compensation 0.5 percentage point lower than that for hourly wages. Trend unit labor costs (defined as compensation growth relative to trend productivity growth) continued to rise moderately through the year, while overall price inflation fell slightly (Chart 2-1). Chart 2-1 Inflation and Trend Unit Labor Costs Inflation has dropped below growth in trend unit labor costs. Percent Four-quarter output price inflation (nonfarm business less housing) Trend unit labor costs 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Note: Trend unit labor costs defined as the four-quarter percent change in compensation as measured by the employment cost index minus 1.1 percentage points. Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor (Bureau of Labor Statistics), and Council of Economic Advisers. 56 1997 PRODUCTIVITY Growth in output per hour worked picked up sharply in 1997: over the first three quarters of the year the official measure of productivity in the nonfarm business sector rose at an average annual rate of 2.6 percent. This measure has exceeded its trend rate of growth in all but one of the past eight quarters. These recent gains were sufficient to offset the earlier weak performance of this product-side measure of productivity, bringing it back to its post-1973 trend. (Trend growth in productivity is discussed in the "Forecast and Outlook" section of this chapter.) Part of the surge in productivity probably reflected special factors: productivity growth in the third quarter of 1997 was boosted in part by a decline in hours worked by self-employed workers; these data tend to be more volatile and somewhat less reliable than measures of hours worked by employees. However, even when self-employed workers are excluded, measured productivity growth in the third quarter remains over twice as fast as its trend rate. The pickup in productivity growth is significant because it occurred at the same time that hourly compensation showed some signs of accelerating. This has kept growth in unit labor costs from rising by as much as compensation, thus eliminating a potential source of inflationary pressure. EXPLAINING RECENT INFLATION PERFORMANCE Inflation continued to moderate in 1997 even as the unemployment rate reached a 24-year low. To what extent can recent inflation performance be explained with the traditional tools of macroeconomic forecasting and analysis? RECENT INFLATION PERFORMANCE AND THE NAIRU The present combination of low and declining inflation and sustained low unemployment would appear to pose a challenge to models of price inflation based on the concept of a NAIRU, or nonaccelerating-inflation rate of unemployment. As discussed in the 1997 Economic Report of the President, historical experience indicates that the chances are high that inflation will rise in periods when the unemployment rate is very low, and fall when unemployment is unusually high. The NAIRU can therefore be defined as the unemployment rate at which—absent special factors—the odds of falling and rising inflation are roughly balanced. Although a specific value of the NAIRU represents a forecaster's best estimate of the rate of unemployment that can be sustained on average without causing an increase in inflation, any estimate of the NAIRU is subject to some degree of imprecision, inasmuch as there will be periods when inflation is falling even though unemployment is below the NAIRU, and vice versa. In addition, the NAIRU itself is not invariant over time, but is instead affected by such factors as the demographic composition of the labor force and changes in the structure of labor and product markets. 57 The 1997 Report indicated that reasonable estimates for the NAIRU lie between 5 and 6 percent, with a midpoint of 5.5 percent. In 1997 the unemployment rate averaged 4.9 percent, about one-half percentage point below the midrange estimate of the NAIRU. A forecasting model built around a NAIRU of 5.5 percent would therefore have predicted some acceleration in prices over the course of 1997; one reasonable estimate would have been a 0.3-percentage-point increase in core CPI inflation. Instead, core CPI inflation finished the year roughly 0.4 percentage point below its year-earlier rate, although 0.1 percentage point of this deceleration can be accounted for by methodological changes introduced into the calculation of the CPI. The observed decline in inflation is consistent with the view that changes in inflation are influenced by other factors besides labor market slack (measured here by the gap between the actual unemployment rate and the NAIRU). A number of factors did in fact help mitigate inflationary pressure in 1997. First, the costs of providing workers with nonwage compensation (such as health insurance) continued to rise at a very low rate; as mentioned above, this helped keep growth in labor costs from adding to inflation. Second, also as noted above, computer prices have recently declined at a faster-than-average rate; without this decline, overall inflation would have risen steadily since early 1994 (Chart 2-2). Although it is always possible to find components of GDP whose prices are growing faster or slower than the average, relative price changes for computers are particularly noteworthy in that they are largely driven by technological change, as opposed to cyclical forces such as shortages in raw materials, bottlenecks in production, or rising labor costs. Chart 2-2 Computer Prices and Total Inflation Declines in computer prices have helped to keep overall inflation from increasing in recent years. Four-quarter percent change 5 GDP deflator excluding computers Overall GDP deflator i ... i 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers. 58 1997 Overall price inflation has been further reduced by sharp declines in the relative price of imported goods, particularly non-oil merchandise imports. Since the second quarter of 1995 the relative price of all imported goods has fallen by 14 percent, and the relative price of nonoil merchandise imports has declined by 15 percent. In part this decline in import prices reflects two interrelated factors: significant excess capacity—and hence low rates of inflation—abroad, and the dollar's appreciation against other major currencies. It is difficult to determine precisely what effect this has had on overall inflation, but some estimates indicate that this factor could have reversed much if not all of the increase in inflation that would have been predicted solely from the gap between the actual unemployment rate and the estimated NAIRU. Judged from the perspective of a NAIRU model, therefore, it seems possible that the economy is currently operating at an unemployment rate that is inconsistent with stable inflation over the long run, but that the influence of special, possibly transitory factors has prevented prices and labor costs from accelerating. Although this is a plausible explanation for recent inflation performance, it is certainly not the only one; an alternative hypothesis is that structural changes in labor and product markets have led to further declines in the NAIRU. If true, this would imply that at least some portion of the recent decline in the unemployment rate can be sustained without an eventual increase in inflation. The rate of unemployment consistent with stable inflation would be expected to vary over time in response to such factors as shifts in labor force demographics, changes in the relation between workers' real wage demands and their productivity, and structural shifts that alter the degree of mismatch between workers and jobs (both sectorally and regionally). For a number of reasons, however, it is difficult at present to justify a large additional reduction in the estimated NAIRU on the basis of recent experience. First, the presence of fortuitous supply shocks clouds the inflation picture significantly; although it is evident that these shocks have contributed to lower inflation, the exact extent of this contribution cannot be perfectly gauged. Second, although inflation in goods and services prices has not risen as unemployment has fallen below 5.5 percent, some acceleration in wages has occurred (Chart 2-3), which might reflect labor market tightness. Finally, the unemployment rate has been below 5.5 percent for too short a time to allow any certainty that the risk of a gradual buildup of inflationary pressure is entirely absent. However, a small downward revision to the estimated range of the NAIRU is indeed justifiable. A portion of recent inflation performance cannot be explained by special factors; moreover, the fact that prices have not accelerated as the unemployment rate has fallen below 5.5 percent suggests that the estimated range should be shifted down. A 59 model that accounts for supply shocks such as recent declines in relative import prices and that allows the NAIRU to vary over time indicates that a reasonable range for the NAIRU now has a midpoint of 5.4 percent, 0.1 percentage point lower than in previous estimates. The Administration's budget forecast has been revised to reflect this slightly lower estimated midpoint of the NAIRU's range. Chart 2-3 Wage Growth and the Unemployment Rate Wages have accelerated as the unemployment rate has fallen. Percent 12-month percent change 8 5.0 4.5 Unemployment rate (left scale) 4.0 3.5 3.0 Wage growth ' (right scale) ~" 1990 1991 1992 1993 1994 1995 1996 1997 Note: Wage inflation is measured by the wages and salaries component of the employment cost index. Source: Department of Labor (Bureau of Labor Statistics). ALTERNATIVE MEASURES OF UTILIZATION AND CAPACITY The unemployment rate is a useful predictor of future inflation in that it can directly indicate the potential for rising inflationary pressure on the cost side, as excess demand in the labor market tends to raise nominal wages and thus nominal labor costs. The unemployment rate can also proxy for the state of aggregate demand in the economy, and thus help assess the degree of excess demand in product markets. However, the unemployment rate is not the only indicator of resource utilization and demand (even for the labor market), nor does it necessarily provide the best forecast of future inflation. It is therefore of interest to consider what other measures of resource utilization and labor market tightness suggest about the current degree of inflationary pressure in the economy. Several plausible indicators—such as the State insured unemployment rate, the demographically adjusted unemployment rate, and the unemployment rate for men of prime working age—imply a degree of 60 labor market tightness that exceeds that which has historically been associated with stable inflation. In addition, an index of help-wanted advertising (which can be considered a proxy for the job vacancy rate) fails to reveal a large degree of slack in the labor market at present; earlier in the expansion some observers argued that this measure indicated a weaker labor market than did the unemployment rate. The picture painted by these labor market variables is therefore one in which the potential for inflationary pressure is relatively high. The effects of a tight labor market on wages may have been muted by the presence of widespread worker insecurity, which has been evident since the 1990-91 recession. Despite a strong job market and a high level of consumer confidence, surveys indicate that workers' fears of job loss remain high relative to the level that prevailed before the recession. Quit rates are low as well, which could reflect workers' unwillingness to leave their current jobs in the hope of "trading up" to better jobs. And strike activity is at a low ebb, although this is related at least in part to declines in unionization rates. These factors suggest that workers may be relatively unwilling to press for the wage gains that they could normally command in a labor market as tight as that of today. One indicator that tempers somewhat the general conclusion that labor and product markets are tight is the rate of capacity utilization (both in the manufacturing sector alone and for all industry). Capacity utilization remains below its peak for this expansion and is roughly at the level historically associated with stable inflation. It is also noteworthy that core producer price inflation, which more closely reflects the output price measure that is relevant to manufacturing capacity utilization, has declined rapidly since the end of 1995. This suggests that industry has not yet reached the point where production bottlenecks or other capacity constraints are putting upward pressure on inflation. Gains in capacity, which have followed an increase in real private investment growth, have helped keep capacity utilization in the noninflationary zone; measured capacity growth increased sharply after 1993 and has stayed high as real business fixed investment growth has remained strong. In fact, recent revisions to the capacity utilization data indicate that the economy had more industrial capacity over the past 4 years than was previously thought (Box 2-4), making the recent declines in core producer price inflation somewhat less of a mystery. However, manufacturing represents only about 20 percent of total output, and although total goods output (which includes manufacturing as well as trade and mining) accounts for a larger fraction (40 percent), it is still less than half of the economy. The possibility of overheating in the economy as a whole, therefore, should not be dismissed. 61 Bon 2»4»—Raeexit Revisions to Capacity amd Utilisation In December the Federal Reserve revised its estimates of eapndty and industrial production, on the ba&is of improved source data* For the preceding 2 years estimates of industrial capacity and utilisation had largely been extrapolated from national accounts data on real investment. The recent revision incorporates direct estimates of utilisation based on survey data ami industry reporfa, as well as more comprehensive data on physical output and labor and other inputs. The new data indicate that industrial capacity has been growing about 1 percentage point faster than previously estimated, Over the past 3 years capacity has grown at an average annual rate of 4,7 percent In each of the past 3 years average annual capacity growth h&% exceeded every previous growth rate since 1988, Similarly, recent estimates of the rate of capacity utilization were revised downward by more than a percentage point Currently; production as a share of total capacity is about 83 percent; this is only slightly Mgfaer than the series' long-term average. A NEW ERA FOR THE ECONOMY? To summarize the chapter thus far, the past few years have seen rapid growth in output with stable inflation, gradual declines in the NAIRU, strong growth in profits and stock prices, and a pickup in productivity that, if sustained, would herald a significant departure from past productivity trends. Indeed, economic performance in recent years has been so extraordinary that some have wondered whether it reflects fundamental structural change in the economy— change so great that a "new paradigm" is needed to describe an economy that is in a "new era." Many such assessments are extreme and unsupportable. In particular, any claim that the business cycle has been vanquished must be viewed with considerable skepticism. Nevertheless, it is possible to identify a number of areas in which fundamental changes are probably influencing the economy's current performance, in many cases favorably. First, U.S. producers face increased foreign and domestic competition. Exports and imports today play a greater role in the U.S. economy than at any other time in history. And here at home, deregulation has taken place or is under way in a number of industries, including telecommunications, transportation, electricity, and banking. Increased competition and more open markets contribute to greater efficiency, thus helping raise the level of output. But it is possible that greater competition also fosters a faster pace of innovation, 62 inducing long-run improvements in productivity and thus a higher rate of output growth. Labor and product markets have also changed in significant ways. Since the early 1980s the unionization rate has dropped by nearly half, continuing a decline in union membership that began in the late 1960s. In addition, the use of temporary and contingent employees is much higher than it was 15 years ago. Although this has probably made labor markets more flexible, it might also have contributed to an increase in worker anxiety. Information technology might prove as revolutionary as the steam engine or the automobile. Adoption of justin-time inventory management by manufacturers also represents a significant development, since changes in inventories have often been an important source of business-cycle fluctuations. Whether just-intime inventories will be able to dampen future business cycles, however, remains to be seen. Even the public sector has been transformed in recent years. Our system of social welfare has been changed to help welfare recipients make the transition to employment. The end of the Cold War saw a vast amount of defense-related resources freed up for civilian uses. The government itself is being reinvented to make it more efficient and responsive. Perhaps most important, deficit reduction has increased private sector investment; this recent expansion in capital investment raises productivity by providing workers with more modern and efficient workplaces. Not all of these changes represent unalloyed boons. Nor is it possible to quantify the effects of these changes on the economy or on specific groups or sectors with any degree of precision (although these factors would have to be very large to reverse the post-1973 productivity slowdown to any significant degree). And even if these changes are having a significant influence on recent economic performance, it may imply not that a new model of the economy is needed, but rather that certain key parameters of the current model, such as the NAIRU or trend productivity growth, have changed. Hence one cannot declare with any certainty that the old rules no longer apply. But the factors just described suggest that the economy may be experiencing some important structural changes that will shape our economic analysis and forecasts in the years ahead. THE ECONOMIC CONDITION OF HOUSEHOLDS Both aggregate statistics and consumer surveys painted an exceptionally favorable picture of the economic circumstances of American households in 1997. The tight labor market that led to a 24-year-low in the unemployment rate also lured enough new workers into the labor market to set an all-time record for the labor force participation rate. The combination of healthy wage growth and increasing employment helped push real disposable personal income up a solid 3 percent 63 over the year. Despite the stock market volatility witnessed in the second half of the year, at year's end all major market indexes remained sharply above their levels at the end of 1996, representing a substantial boost to household net worth. Largely reflecting this combination of favorable circumstances and the low inflation rate, consumer sentiment reached record highs in early summer and remained near those levels for the rest of the year. Growing income and wealth together with buoyant sentiment led to a 3.8-percent rate of spending growth over the four quarters of 1997—outpacing even the robust growth of disposable income. Against this backdrop of general prosperity only a few potentially worrisome trends were discernible. The first was the drop in the personal saving rate implied by the excess of consumption growth over income growth. A temporary shortfall in personal saving would not necessarily be a problem, but the personal saving rate has remained low for about a decade now, raising questions about whether American households are preparing adequately for the future. A second persistent concern has been the ongoing buildup of household debt. Upon analysis, however, this growth in debt does not appear very menacing, both because household assets have risen even faster, and because households still appear to be able to service their rising debt loads comfortably. A final potential concern has been the continuing rise in personal bankruptcies despite the robust economy, which might seem to suggest an increase in the number of households experiencing sudden financial shocks. However, the bankruptcy rate has been trending upward for about 20 years now, and the available evidence suggests that the uptrend is attributable to a complex mix of economic, legal, and social developments rather than a dramatic worsening of the economic shocks hitting households. THE CONFIDENT CONSUMER Early in the summer of 1997 the Index of Consumer Sentiment constructed by the University of Michigan reached an all-time high; it remained near that record level for the remainder of the year (Chart 2-4). Some observers have suggested that consumers have become overly optimistic, and that a return to more normal levels of confidence could have adverse economic consequences. But a major part of the surge in consumer sentiment in 1997 can be explained by the simultaneously favorable values of all four of the indicators that have historically influenced consumer sentiment: the inflation rate, the unemployment rate, the performance of the stock market, and, to a lesser extent, the growth rate of household income. Moreover, although Chart 2-4 shows that the actual level of sentiment in 1997 has been even higher than would be predicted given the values of these indicators, the size of the underprediction is not large compared with typical past prediction errors. 64 The Michigan index comprises two subindexes: one for current conditions and one for expected future conditions. Recently, both have been hovering near record levels. Roughly two-thirds of the increase in the index of expected conditions over 1997 can be attributed to the favorable economic environment, and the remaining underprediction is not large by historical standards. This suggests that consumers are not unrealistically optimistic about future developments. However, very little of 1997's increase in the index of current conditions can be explained by changes in observed aggregate variables. Again, the magnitude of underprediction is not very large; moreover, there are good reasons not to attribute this prediction error to irrational confidence on the part of consumers. Because the current conditions index largely reflects consumers' answers to questions about their own individual financial circumstances, a plausible interpretation of the prediction error is simply that economy-wide variables such as the inflation rate and the unemployment rate do not fully capture the complex elements that influence consumers' assessments of their personal financial situation. It therefore seems more appropriate to accept consumers' rosy assessments of their personal financial circumstances at face value. And judging by past episodes when sentiment has exceeded the predicted value, the danger appears modest of a sudden sharp plunge in sentiment that would quickly return it to the level that aggregate indicators would predict. Chart 2-4 Consumer Sentiment Much of the increase in consumer sentiment recently can be explained by the exceptional performance of the economy. Index, 1966:Q1 =100 110 Index of Consumer^ Sentiment 100 90 80 70 60 50 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 Note: Predicted sentiment is calculated from a model in which the inflation rate, the unemployment rate, stock market performance, and wages and salaries are independent variables. Sources: University of Michigan and calculations by Council of Economic Advisers. 65 Other measures of consumer attitudes also reflect optimism. The Conference Board's Consumer Confidence Index, the main alternative to the Michigan index, rose to a 28-year record in December; as with the Michigan index, a large part of the improvement in the Conference Board index can be attributed to observable economic conditions. Both the Michigan and the Conference Board surveys contain many questions that are not incorporated in their overall indexes, and answers to these other survey questions have also generally been quite favorable. For example, throughout the year consumers interviewed for the Michigan survey said they expected low inflation rates to continue and believed it was a good time to buy automobiles and houses. THE CONDITION OF HOUSEHOLD BALANCE SHEETS The exceptional performance of the stock market appears to be one of the factors contributing to consumers' sanguine assessments of their financial circumstances. The rise in the stock market boosted total household net worth by around $2.6 trillion over the course of 1997, following similarly strong gains in 1995 and 1996. Higher stock prices lifted the ratio of household net worth to disposable income to record levels (Chart 2-5). Chart 2-5 Ratio of Household Net Worth to Disposable Personal Income The stock market boom helped boost the household net-worth-to-income ratio to a record level in 1997. Ratio 5.8 5.6 5.4 5.2 5.0 4.8 4.6 4.4 1950 1955 1960 1965 1970 1975 1980 1985 1990 Sources: Department of Commerce (Bureau of Economic Analysis), Board of Governors of the Federal Reserve System, and Council of Economic Advisers' estimate of 1997 net worth. 1995 Despite the recent boost to stock market wealth, the family home is still the most valuable single asset most American households own. On this front, too, 1997 brought encouraging news: the rate of homeownership reached a new all-time record, boosted by robust income 66 growth and relatively low mortgage interest rates. Another factor that has likely contributed to the increase in the homeownership rates in the 1990s is the increasing availability of sub-prime mortgage loans, which do not meet traditional industry lending guidelines. Such loans carry a higher interest rate to compensate lenders for the extra risk. For example, home buyers who put up less than the traditional 20-percent down payment usually have to purchase private mortgage insurance to guarantee repayment of the loan; the premium for this insurance rises as the size of the down payment declines. Indeed, mortgages that require no down payment at all are now available for consumers willing to pay very high rates. Home buyers who take advantage of these loans, of course, take on more debt than was typical of past buyers who put up a traditional down payment of 20 percent. The relaxation of down payment constraints is therefore probably part of the explanation for the runup in mortgage debt depicted in Chart 2-6. Some of this rise, however, is attributable to the increasing popularity of home equity borrowing. A substantial part of new home equity borrowing likely reflects the growing use of home equity loans to buy motor vehicles, to pay for home repairs and additions, and to finance other large expenses that might previously have been financed by separate consumer loans. Home equity loans are an attractive way of financing such expenditures because their interest is tax deductible, whereas the interest on traditional consumer loans lost its tax-deductible status with the tax reform of 1986. Chart 2-6 Household Debt by Type The ratio of household debt to disposable income has risen sharply since the mid-1970s, mostly in the form of higher mortgage debt. Percent of disposable personal income 100 Revolving credit (including credit cards) > 80 40 20 o 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 Sources: Department of Commerce (Bureau of Economic Analysis) and Board of Governors of the Federal Reserve System. 67 The increasing substitution of mortgage debt for other kinds of debt suggests that any assessment of the aggregate household balance sheet needs to look at the value of all debts combined, not just mortgage debt. As Chart 2-6 shows, the uptrend in overall household debt is somewhat less dramatic than that for mortgage debt alone; the ratio of total debt to disposable income increased from 77 percent in 1986 to 92 percent in 1997. Nevertheless, the ratio of overall debt to disposable personal income has been trending upward since the mid1970s, except for pauses around the recessions of the early 1980s and early 1990s. The chart does not support the common perception that aggregate credit card borrowing has soared out of control. Although revolving debt (which consists mainly of credit card debt) has grown more rapidly than other kinds of borrowing, it still represents only a modest fraction of consumers' debt load. Most of the runup in total debt instead reflects the sharp rise in mortgage debt. Chart 2-7 Household Debt Delinquency Rates After rising from 1994 to 1996, delinquency rates on credit cards and consumer loans have stabilized. Mortgage delinquencies edged down to the lowest rate since 1980. Percent 6 Consumer loans 1980 1982 1984 1986 1988 1990 1992 1994 1996 Note: The mortgage delinquency rate is the percentage of all loans 60 days or more past due. The consumer loan and credit card delinquency rate is the percentage of loan balances that are 30 days or more past due or nonaccruing. Sources: Board of Governors of the Federal Reserve System and Mortgage Bankers Association. The dominance of mortgage debt in household balance sheets implies that the mortgage delinquency rate is a particularly important indicator of the magnitude of debt repayment problems. Chart 2-7 shows that the mortgage delinquency rate has actually edged down over the last year and remains well below rates posted in the mid-1980s, suggesting that comparatively few consumers have found their rising mortgage debt insupportable. The chart also shows that although delinquency rates on credit card borrowing and consumer 68 loans have gone up, they remain below their peak levels of the early 1990s and appear to have flattened off in the past year or so. One probable reason why the continuing runup in debt has not caused greater repayment problems is that interest rates have fallen, reducing the payments required to service the outstanding stock of debt (the debt service burden). The debt service burden has also been lightened by an increase in the average duration of loans. Chart 2-8 shows that although the aggregate debt service burden has risen substantially since its trough in 1993, it is still below the level attained in the late 1980s and certainly does not exhibit the relentless uptrend evident in the ratio of total debt to disposable income. Chart 2-8 Household Debt Service Payments The debt service burden fell after the 1990-91 recession but has risen since 1994. Although high by historical standards, it remains below late-1980s levels. Percent of disposable personal income 18 17 16 15 14 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 Sources: Department of Commerce (Bureau of Economic Analysis) and Board of Governors of the Federal Reserve System. 1996 On the whole, then, aggregate statistics paint a favorable picture of the financial condition of households. Although household debt has risen, the aggregate value of household assets has risen even more, leading to a net gain in aggregate household net worth. Judging from mortgage delinquency rates, the recent rise in the debt service burden does not seem to be causing unusual strain. And although credit card debt has been growing, this category still represents a relatively minor fraction of the aggregate debt households owe. Aggregate statistics, however, can sometimes mask divergent trends among different subgroups of the population. If, for example, the rise in household assets were occurring entirely among the affluent, and if the rise in household debt were concentrated among lower income households, then the increase in aggregate household net worth would 69 not provide much reassurance about the ability of the indebted households to repay their debt. In practice, however, household-level data do not seem to be telling a story very different from that told by the aggregate data. Although affluent households still hold disproportionate amounts of stock, the surging popularity of mutual funds and the rise of 401(k) and other tax-sheltered retirement plans have considerably increased the fraction of households who benefit directly from stock market gains. Indeed, a recent poll found that roughly half of American families own stock in some form. And as Table 2-2 shows, although the debt service burden for the median household increased somewhat between 1983 and 1989, by 1995 the combination of falling interest rates and lengthening debt maturities had reduced the median household's burden to near its 1983 level; the fraction of households with high or very high debt service burdens (defined as debt service payments greater than 30 and 50 percent of income, respectively) was actually lower in 1995 than in 1983. TABLE 2-2.—Household Debt Service Burden Item 1983 Debt service burden of the median household (percent of income) ' 1989 1995 12.8 15.2 13.1 188 64 23 1 163 56 Percent of households with debt service burden: Over 30 percent Over 50 percent 1 7.9 Debt service burden is required debt service payments as a percent of income. Note. —Data are for households whose heads are employed. Sources-. Board of Governors of the Federal Reserve System and calculations of the Council of Economic Advisers. THE PERSONAL SAVING RATE The personal saving rate has been trending downward since the mid-1980s. According to the preliminary figures currently available, the personal saving rate in 1997 was only 3.8 percent, down from 4.3 percent in 1996. Given the exuberant level of consumer sentiment and the large gains in household wealth last year, the fact that there was a modest decline in the saving rate from 1996 to 1997 is neither surprising nor disturbing; such modest annual fluctuations are of little consequence. The longer term decline in personal saving, however, has aroused considerable concern among academic economists and policymakers, for at least three reasons. First, because national saving is the sum of personal, business, and government saving, low personal saving contributes to a low national saving rate, and low national saving has a variety of negative consequences, which are discussed in more detail later in this chapter. Second, the falling saving rate raises questions about whether many American consumers are preparing 70 adequately for their retirement. Finally, families with too little savings may be unprepared to deal successfully with financial emergencies such as a spell of unemployment or large medical expenses. Personal Saving and Retirement One of the most obvious reasons for households to save is to provide for a comfortable standard of living in retirement. One way to judge whether personal saving is too low, then, is to ask whether consumers appear to be saving enough for retirement. Several recent studies have examined whether the baby-boom generation, in particular, is doing enough retirement saving. One set of studies has concluded that typical baby-boomers need to roughly triple their saving rates if they hope to maintain their living standards in retirement. Another study, however, asserts that even if they do not change their saving behavior at all, the majority of boomers probably will not experience a sharp drop in living standards upon retirement. These different conclusions largely reflect a difference in approach. The first set of studies begins by calculating the gap between the income that baby-boomers can expect to receive from the combination of Social Security and traditional pensions, and the income that would be required to maintain their preretirement standard of living. These studies then calculate the "target" saving rates that babyboomers would need to achieve to plug that income gap, and show that the saving rates of typical baby-boom households are only about a third of the target rates, leading to a "baby boom retirement adequacy index" of 33 percent. Critics point out that this approach can be misleading, in part because it is not a measure of the consequences if consumers decide not to increase their saving. In particular, an index value of 33 percent does not imply that retirement spending will have to be one-third the level of preretirement spending. For example, consider a household for whom Social Security and pensions will provide sufficient retirement income to finance spending at 80 percent of preretirement income, and suppose that the household only needs 85 percent of preretirement income to maintain its accustomed standard of living. (Spending needs could decline in retirement for several reasons, notably the decline in commuting and other work-related expenses.) Such a household could save nothing, and therefore would have an index value of zero, yet would only experience about a 5-percent decline in its standard of living at retirement. An alternative way to evaluate the adequacy of retirement saving is to calculate the ratio of the level of sustainable retirement spending to the level of spending necessary to maintain standards of living. Using this measure of retirement adequacy, a recent study calculated that, under plausible assumptions about the rate of return on savings, and assuming no changes in saving behavior or in the Social 71 Security system, almost half of married-couple baby-boomer households in which the husband works full-time are saving enough to maintain their standard of living in retirement. (Single baby-boomers are probably not faring as well, however.) And only about a third of these married-couple baby-boomer households are projected to suffer large cuts in their standard of living. These figures improve if home equity is included in the measure of retirement savings, although there is some debate whether including home equity is appropriate. The recent runup in the stock market would improve the picture further, although most of the improvement would likely be concentrated among the third of households who are already best prepared for retirement to the extent that they hold a disproportionate share of equity investments. Even the optimists, however, acknowledge that current saving rates of most baby-boom households are not high enough to provide much of a cushion against the many uncertainties that they face. In particular, if their retirement savings earn low rates of return, or if rising medical costs or other unexpected expenses increase their spending needs in retirement, or if retirement income from sources other than personal savings falls substantially short of the projections made on the basis of current pension and social insurance programs, then many baby-boomers may end up wishing they had saved much more. And even under optimistic assumptions, it appears likely that unless they boost their saving, most unmarried boomers will reach normal retirement age with insufficient assets to fully maintain their preretirement standard of living. On the whole, therefore, it does appear that unless their saving rates rise, a very substantial proportion of the baby-boom generation is at risk of reaching retirement age with insufficient assets to maintain their standard of living. One response may be for them to delay retirement. Since Social Security and many other pension benefits are adjusted upward for those who delay retirement, some of the boomers who are not saving enough to retire at the normal retirement age may nevertheless be able to retire in relative comfort several years later. Of course, those who have saved little but whose state of health or line of work prevents them from remaining in the work force may have no choice but to accept significantly lower living standards in their retirement years. Personal Saving and Financial Emergencies When consumers are asked about their primary reasons for saving, the most common answer is that saving is important in order to build up resources that can be drawn upon in case of emergency. Although precautionary saving of this kind cannot plausibly explain either the practice of regular payroll deductions for pension plans or the accumulation of wealth held by the richest few percent of households, it can account for the consistent finding by consumer surveys that most 72 households usually have on hand an amount of liquid assets that corresponds to between a few weeks' and a few months' worth of spending. It is difficult to judge whether these liquid assets are enough to cushion consumers against financial emergencies. Certainly, they alone would not be enough to fully maintain spending through the worst possible emergencies such as a long spell of unemployment. But most households could probably substantially cut their spending during an extended unemployment spell. Also, in today's economy most consumers have the option of credit card, home equity, or other kinds of borrowing to finance emergency spending. Indeed, a potential partial explanation of the drop in the personal saving rate over the past decade is that some consumers have decided that credit cards or other consumer credit sources can help fill the buffer role traditionally served by liquid assets. Unquestionably, credit card availability has risen in recent years. Particularly notable has been the increase in availability of credit cards to consumers in lower income and wealth brackets: in 1983 only 28 percent of consumers with annual incomes of less than $15,000 (in 1992 dollars) held credit cards, but by 1995 the ownership rate for that group had increased to 44 percent. In addition, those groups of consumers who already had credit cards in 1983 have seen a large increase in their credit limits in recent years: the median total credit limit among all consumers with cards increased from about $6,000 in 1989 to over $9,000 in 1995 (both in 1992 dollars). As might be expected, credit card borrowing has increased as credit has become more available. But the increases in borrowing have been fairly modest compared with the increases in credit limits. Table 2-3 shows the distribution of credit balances (the part of the credit card bill that consumers choose not to pay off at the end of the month) as a percentage of income for employed working-age consumers in 1983, 1989, and 1995. Whereas the median ratio of credit card balance to income was close to zero in all 3 years, consumers at the 75th and 95th percentiles of the distribution had increasingly large balances relative to their incomes. Still, even in 1995 consumers at the 95th percentile of the distribution had credit card debt equal to only 22 percent of annual income—a substantial but by no means unbearable burden. TABLE 2-3.—Household Credit Card Balances as a Percent of Income Point in distribution ' 1983 1989 1995 Median household 0 0 1 Household at 75th percentile . . 2 3 6 Household at 95th percentile 7 14 22 1 Distribution is that of households according to credit card balances as a fraction of income. Note. — Data are for households whose heads are employed. Sources: Board of Governors of the Federal Reserve System and calculations of the Council of Economic Advisers. 73 The available data are consistent with the idea that the expanding availability of credit card debt may have somewhat reduced the need for consumers to hold buffer stocks of liquid assets, and thus may have contributed at least modestly to the drop in the personal saving rate. But for most households credit availability appears to have increased considerably more than credit use, so that there appears to be little reason to worry that typical households have less capacity to withstand financial shocks. Even the small subset of consumers who have run up quite substantial credit card debts could plausibly expect to be able to repay those debts, if they do not experience a major disruption to their income or a large unavoidable expenditure. On the other hand, consumers with large credit card debts who do experience a major financial blow may be forced into bankruptcy. THE LONG-TERM UPTREND IN THE BANKRUPTCY RATE After remaining roughly stable over much of the 1960s and 1970s, the personal bankruptcy rate began rising sharply sometime around the late 1970s or early 1980s. Some have argued that this uptrend resulted from passage of the Bankruptcy Act of 1978, which eased some of the burdens of bankruptcy. Other analysts argue that the approximate correspondence between passage of that act and the beginning of the uptrend in bankruptcies is just a coincidence, and that rising bankruptcy rates reflect other social and economic developments that would have led to a rising bankruptcy rate even if the law had remained unchanged. One intuitively plausible explanation is that the rise in bankruptcies reflects the increasingly aggressive marketing of credit cards to high-risk consumers who previously would not have been granted credit at all. As noted above, it is true that some households have bor- • rowed increasingly large amounts on credit cards. Some of those highly indebted individuals presumably end up in bankruptcy if they lose their jobs or experience other large financial shocks. But there are reasons to doubt that increased availability of credit cards provides a full explanation of the rise in bankruptcies. First, some suggestive evidence indicates that credit card debt is not a large fraction of the total debt of consumers who declare bankruptcy; consumers who end up in bankruptcy court must therefore have borrowed heavily from non-credit card sources. Second, much of the increase in bankruptcy appears to have come not from low-income consumers who until recently could not get cards, but from the kinds of middle-income consumers who have presumably had access to credit cards all along. If excessive credit card borrowing is not a complete explanation for the rising bankruptcy rate, what does explain the rise? One possibility is that an increasing number of consumers are simply taking on more debt than they can manage, in non-credit card form as well as 74 with credit cards. On its face, this explanation seems plausible in light of the large increases in aggregate household debt over the past 15 years, depicted in Chart 2-6. But as noted above, although the aggregate debt service burden has climbed recently, it remains below its late-1980s levels, yet the bankruptcy rate has continued to rise. And as shown in Table 2-2, the proportion of households who had either high or very high debt service burdens was actually lower in 1995 than in 1983. Hence, the available data do not seem to support the theory that bankruptcy has risen simply because increasingly large numbers of ordinary consumers have unwisely taken out so much debt that any financial shock will send them into bankruptcy. Unfortunately, the evidence on alternative explanations is scant, and no consensus has emerged among experts. One researcher points out that, under the post-1978 bankruptcy law, up to 15 percent of households could increase their net worth by declaring bankruptcy; this researcher and others argue that the rise in the bankruptcy rate over time largely reflects consumers learning about the costs and benefits of declaring bankruptcy, perhaps partly through advertising by bankruptcy lawyers. A related hypothesis is that there has been a decline in the stigma associated with bankruptcy. This theory is consistent with evidence showing that, controlling for other factors, people who live in areas where the bankruptcy rate has been high in the past are more likely to declare bankruptcy. Other authors have suggested that increasing divorce rates, skyrocketing medical costs, or large legal judgments or settlements may have contributed to the rise in the bankruptcy rate. However, although each of these factors is clearly important in many individual bankruptcy cases, none appears to be sufficient to explain more than a small fraction of the increase in bankruptcies. For example, the divorce rate stabilized in the mid- to late-1980s, yet bankruptcies have continued to rise. And some evidence indicates that only a modest fraction of bankrupt consumers have significant amounts of medical debt or large legal judgments against them. Whatever is driving the increase in bankruptcies, the rising bankruptcy rate has focused attention on the bankruptcy system. In response, in 1994 the Congress established a commission to recommend reforms in the bankruptcy system. The National Bankruptcy Review Commission released its final report in October 1997 (Box 2-5). LONG-TERM GROWTH: BUDGET DEFICITS AND NATIONAL SAVING Since its first budget proposal in 1993, this Administration has demonstrated a strong commitment to reducing the Federal budget deficit. As a result, the deficit has declined from $290 billion in 1992 to only $22 billion in 1997, or from 4.7 percent to 0.3 percent of GDP. 75 BOK 2*5*~T!te National Bankruptcy Review Commission The National Bankruptcy Review Commission, created by Ckmgreas in 1994 and charged with recommending bankruptcy reforms, released its final report in October 1997. The commission's proposals for business bankruptcy reform are largely uncontrwersiaL Perhaps partly because of a lack of compelling evidence, the commissioners were unable to achieve consensus on what has caused the rise in personal bankruptcies* and therefore could not agree on a set of final recommendations for personal bankruptcy reform. Many of the commission's final recommendations regarding personal bankruptcy were approved by a bare 5*4 majority of commissioners, and the minority wrote a series of detailed dissents explaining their objections. The dissenting commissioners argue that the recommendations of the report are too lenient toward debtors. For example, the majority^ reform plan does not mandate that consumers with incomes over some threshold be forced to repay a portion of their debts out of future earnings. In August 1997 the President and the Congress sealed a historic agreement that was projected to lead to a balanced budget by 2002; the continuing robust performance of the economy since August has improved the outlook further, leading the President to propose a balanced budget for fiscal 1999. Balancing the budget has been achieved in large part through a combination of expenditure restraint and increases in income taxes for the 1 percent of households with the highest incomes. Both budget cuts and tax increases are difficult and painful measures. Why did the Administration judge that taking such measures was so important? Principally because persistent budget deficits as large as those of the 1980s and early 1990s constitute an unacceptable drain on national saving. To see why budget deficits reduce national saving, it is useful to imagine the private saving of all Americans as flowing into a common national pool. This pool of saving is then made available to borrowers. The budget deficit measures how much of this pool of saving is drawn down by the government; national saving is the amount left in the pool after the government has borrowed what it needs to pay for that portion of current expenses that exceed its current revenues. Because of the reduction in Federal borrowing, net national saving (gross national saving less depreciation of the private and public capital stock) has increased from 3.1 percent of GDP in 1992 to 6.4 percent in 1997 (on the basis of incomplete data for the year). But even this net national saving rate is far below the 10-percent average over the period 1960-80. 76 Given the Nation's favorable recent economic performance even without a high national saving rate, it might be tempting to conclude that the low national saving rate does not matter. But such a conclusion would be a mistake. There are still good reasons to believe that the benefits of boosting national saving would outweigh the short-term pain of cutting back on spending. SAVING IN A CLOSED ECONOMY One way of thinking about whether more saving would make the Nation better off is to ask whether the aggregate capital stock is at the "golden rule" level—the level that maximizes sustainable per capita consumption. (Economists call this the golden rule level because every generation must resist the temptation to consume more than its share and thereby leave less for future generations.) Whether an economy is at the golden rule level can be determined by comparing the net extra output that would be produced by more capital against the cost of equipping the growing work force with that extra capital. If the extra output is greater than this cost, then total national output could be increased by adding to the capital stock. In the United States, economists estimate that the before-tax rate of return on additional capital is much higher than the cost of equipping the work force with extra capital, implying that the Nation's capital stock is well below the golden rule level. The golden rule, however, is an imperfect way to judge whether saving should be higher. The principal problem is that the rule provides no way to weigh the short-term pain from lower current consumption against the long-term gain from eventually higher future consumption. A more flexible framework is provided by the "modified golden rule," which makes explicit assumptions about how current consumption should be traded off against future consumption. The modified golden rule assumes that society as a whole is slightly impatient, in the sense of preferring current consumption to future consumption, and that consumers prefer gradual changes in the level of consumption and dislike abrupt changes. But under plausible assumptions about the before-tax rate of return, the rate of impatience, and the degree to which one year's consumption is substitutable for another year's, even the modified golden rule implies that the saving rate is too low. SAVING IN AN OPEN ECONOMY In an economy closed to foreign trade and capital, all domestic investment must be financed by domestic saving. One of the principal benefits of increasing globalization of trade and capital markets is that the ability to borrow and lend in foreign markets relaxes the need to balance national saving with national investment in every year. If attractive investment opportunities are available at home but domestic 77 saving is insufficient to pursue them, foreign investors can step in; the resulting excess of investment over national saving is manifested in a current account deficit. This aspect of globalization has been a favorable development for the United States, because it has allowed the economy recently to invest in capital equipment at high rates despite the persistently low national saving rate. The high rates of investment in capital equipment over the past few years have been critical in preventing the kinds of production bottlenecks that have often led to rising inflation rates at comparable points in past business cycles. But maintaining national investment above national saving over long periods does come at a price: growing indebtedness to foreign investors. In the long run, increased foreign indebtedness means that apportion of the extra future output generated by the extra investment will be needed to pay a return to foreign lenders. In light of the demands that will be placed on the economy over the next 30 or 40 years by the retirement of the baby-boom generation, and considering that countries that are currently lending to us face similar demographic challenges, there remains a strong argument that it would be better to finance our high investment rates more through higher national saving and less by borrowing abroad. IMPLICATIONS This Administration has believed from the beginning that the case for a higher national saving rate is compelling. That conviction led to the Administration's steadfast commitment to reducing the budget deficit. But as important as the progress on the budget deficit has been, the net national saving rate is still too low. One important priority for the Administration and the Nation is to address the actuarial imbalance in the Nation's entitlement programs in a way that increases the national saving rate and thereby increases the resources available to meet the impending demographic crunch. FORECAST AND OUTLOOK THE ADMINISTRATION FORECAST The Administration projects GDP growth over the long term at about 2.4 percent per year—a figure consistent with the experience so far during this business cycle as well as with reasonable growth rates of its supply-side components. From the business-cycle peak in the third quarter of 1990 until the third quarter of 1997, real output growth has averaged 2.4 percent per year. This figure is the average of real growth rates of the product side (gross domestic product, 2.3 percent) and the income side (gross domestic income, 2.6 percent). Because the unemployment rate fell by 0.1 percentage point per year over this period, the empirical regularity known as Okun's law sug 78 gests that these growth rates overstate the growth of trend output by 0.2 percentage point—a calculation that results in a backward-looking estimate of 2.2-percent growth of potential output. This estimate is likely understated by about 0.2 percentage point because of methodological problems with the CPI that have been or will soon be corrected (Box 2-6). By lowering measured inflation while leaving nominal GDP unaffected, these methodological changes will boost measured real output (and better capture its true value). Box 2-6. — Methodological Changes in the Consumer Index The Bureau of Labor Statistics has recently made several methodological changes that have improved the accuracy of the consumer prise iiutex; a few more changes are planned over the ne&t several year§ (Table 2-4). Moat of these improvements have redueed the measured increase in the CPI> and many of these also will affect the deflation of nominal output, and therefore will raiae the growth rate of measure*! real CJDB Changes made through 1997 include the substitution of generic drags when patents e&pire on proprietary brands; the correction of a problem in rotating new etores into the survey through a procedure called ^seasoning** (a problem that was corrected first in the food category and later in other categories of goods); the modification of Hie formula for measuring increases in rent; and a change to measuring transaction rather than list prices for hospital services* Changes scheduled to be made in the aaxt 2 years include a switch to measuring computer prices by their intrinsic characteristics ("hedonics*}; an update of the market basket from 1982-84 to 1093*95; the use of geometric rather than arithmetic means to address substitution bias within categories; and more frequent rotation of the items sampled in categories with many new product introductions. The changes made through 1997 have a combined effect of lowering the CPI inflation rate by 0.28 percentage point per ye&r» and raising real GBP growth by 0,06 percentage point per year* Tfeepost* 199? changes, lower CPI inflation by &41 percentage point per year and raise real GDP iprowth by 0,14 percentage point per year, In addition, continued capital deepening may add a bit to productivity growth as the net capital stock grows faster than GDP. This would not happen in a steady state where capital and output are growing at the same pace. But the economy is projected not to reach a steady state during the forecast period, as the relative price of capital is expected to continue to fall. 79 TABLE 2-4.—Expected Effects on Changes in the CPI and Real GDP ofCPI Methodological Changes Percentage-point effect on: Year introduced Change in method Real GDP percent change CPI percent change Pre-1998 -0.28 0.06 Generic prescription drugs Food at home seasoning Owners' equivalent rent formula Rent composite estimator 1995 1995 1995 1995 -.01 -.04 -.10 .00 .0 .00 .00 General seasoning 1996 -.10 .06 1997 -.06 .00 -.41 .14 Hospital services index 1998 and after . . .03 Personal computer hedonics Updated market basket 1998 1998 -.06 -.15 .00 .02 Geometric means Rotation by item 1999 1999 -.15 -.05 .09 .03 -.69 .20 Total Sources: Department of Labor (Bureau of Labor Statistics) and Council of Economic Advisers. COMPONENTS OF LONG-TERM GROWTH After rising rapidly in the 1970s and 1980s, the labor force participation rate was relatively flat between 1990 and 1996. But the participation rate rose 0.3 percentage point to 67.1 percent in 1997—the first year in which it surpassed the 1990 level (after correcting for the redesign of the Current Population Survey). One might interpret the pickup in participation in 1997 as a return toward the rapid growth of earlier decades, but other explanations, which suggest that the increase in the rate of participation growth will not endure, are also likely. Given the strong growth of labor demand, it seems that some of last year's labor force pickup ought to be interpreted as a cyclical response to a tight labor market. The welfare reform law passed in the summer of 1996 may also have boosted labor force participation growth last year and can be expected to do so for several years to come. The legislation requires that, by 2002, States either reduce their welfare caseloads by 50 percent or have 50 percent of the caseload either working or engaged in work-related activities (such as vocational or job skills training), or some combination or the two (with some exemptions). This legislation also set a 2-year time limit on any spell of welfare recipiency and a 5year lifetime limit, except that 20 percent of a State's caseload may be exempted from this requirement. Rough calculations suggest that the 80 requirement for work-related activities and the 2-year limit on welfare spells together could cause the labor force participation rate to grow by almost 0.1 percentage point per year over the next several years. At the same time, the long-term demographic forces that have restrained growth in labor force participation in the 1990s are expected to remain in place. The stalling of the overall participation rate in the 1990s is accounted for largely by a deceleration in the participation rate of women; the participation rate for men has fallen no faster than in earlier years. The child dependency ratio (the number of children per woman aged 20-54) fell between the late 1960s and the early 1980s, echoing the earlier pattern in the birth rate. The decline in this ratio allowed an increasing fraction of women to enter the labor force between the mid-1970s and the 1980s, but its subsequent flattening in the late 1980s has limited further increases in participation. Balancing these influences, the Administration's long-term outlook includes a 0.1-percent per year increase in the participation rate through 2007. Together with population growth of 1.0 percent per year for the working-age population, this implies labor force growth of 1.1 percent per year (Table 2-5). PRODUCTIVITY A good way to begin the analysis of productivity growth is by examining the recent past. Labor productivity (that is, worker output per hour) can be measured using either the product-side or the incomeside measure of output (Chart 2-9). By the product-side measure, labor productivity has grown at a 1.1-percent annual rate since the business-cycle peak in the third quarter of 1990, whereas the incomeside measure shows productivity growth at a more robust 1.5-percent annual rate. Because neither of these two measures is perfect, an argument can be made for averaging them, to yield an estimated annual rate of 1.3 percent over this business cycle. By either measure, productivity growth was particularly rapid over the first three quarters of 1997, as noted earlier. An acceleration in productivity is not usually observed in the latter part of an expansion (Chart 2-10); historically, productivity growth has tended to slow as the economy returns to full employment. This tendency could reflect several factors, such as overly optimistic hiring decisions by firms, or firms' having to hire less productive workers as the labor market tightens. Whatever the explanation, the fact that no such slowdown is now apparent is evidence that none of these imbalances are currently present, and that the economy is behaving as if it remains in a mid-expansion phase, rather than an end-ofexpansion phase. 81 TABLE 2-5.—Accounting for Growth in Real GDP, 1960-2005 [Average annual percent change] 196011 to 1973 IV Item 1973 IV to 1990 III 1990 III to 1997 III 1997 III to 2005 1.8 2 1.5 5 1.0 0 1.0 1 2.0 0 2.0 -1 11 1 1.1 4) PLUS- Civilian employment rate ' 5) EQUALS- Civilian employment ' 20 19 12 10 6) PLUS: Nonfarm business employment as a share of civilian employment 12 1 1 2 1 1) Civilian noninstitutional population aged 16 and over 2) PLUS- Civilian labor force participation rate ' 3) EQUALS: Civilian labor force ' -1 21 20 14 11 8) PLUS: Average weekly hours (nonfarm business) -5 -4 1 0 9) EQUALS: Hours of all persons (nonfarm business) 1.6 1.7 1.5 7) EQUALS- Nonfarm business employment 10) PLUS-. Output per hour (productivity, nonfarm business) 2.9 11) EQUALS- Nonfarm business output 12) LESS: Nonfarm business output as a share of real GDP * 45 28 3 1 42 13) EQUALS- Real GDP 1.1 27 1.1 1.1 3 27 3 3 24 (3 0) 3 4 23 1.3 (1.5) 1 (4) (2 6) 5 23 1 Adjusted for 1994 revision of the Current Population Survey. Line 6 translates the civilian employment growth rate into the nonfarm business employment growth rate. Income-side definition. 4 Line 12 translates nonfarm business output back into output for all sectors (GDP), which includes the output of farms and general government. 5 GDP growth is projected to fall below its long-term trend (2.4 percent) as the employment rate is projected to fall 0.1 percent per year over this period. 2 3 Note.—Detail may not add to totals because of rounding. Except for 1997, time periods are from business-cycle peak to business-cycle peak to avoid cyclical variation. Sources: Council of Economic Advisers, Department of Commerce (Bureau of Economic Analysis), and Department of Labor (Bureau of Labor Statistics). Because hours worked usually reacts to changes in output with a lag, hours probably have not caught up with the acceleration in GDP in 1997. As a result, the growth of productivity over the four quarters ending in the third quarter of 1997 likely exceeded its trend rate, as it often does midway through an expansion. A better estimate of trend productivity growth comes from a model that takes this lagged adjustment into account. This procedure estimates that the trend rate of productivity thus far in this business cycle has been similar to the 1.1-percent annual rate that has prevailed since 1973. Looking ahead, measured productivity can be expected to grow at a 1.3-percent annual rate because of the 0.2-percentage-point effect that the CPI methodological adjustments will have on real GDP. 82 Chart 2-9 Alternative Measures of Productivity Since the last business-cycle peak, the income-side measure of productivity has grown significantly faster than the product-side measure. Index, 1990:Q3 = 100 (ratio scale) 112 Income-side measure 110 108 106 104 Official (product-side) measure 102 100 98 i 96 i i i i 1988 1989 1990 1991 1992 1993 1994 1995 1996 Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor (Bureau of Labor Statistics), and Council of Economic Advisers. i 1997 Chart 2-10 Productivity Growth and the End-of-Expansion Effect Nonfarm business productivity growth has slowed in the late stages of almost all previous postwar expansions. Over the past year, productivity accelerated. Average annual percent change 6 • D ,-0.6 1949-53 1954-57 Average productivity growth: full expansion less last four quarters Average productivity growth: last (most recent) four quarters of previous (current) expansion(s) I 1958-60 1961-69 1970-73 1975-80 1982-90 1991-97:03 Expansion dates (trough to peak) Sources: Department of Labor (Bureau of Labor Statistics) and National Bureau of Economic Research. 83 INFLATION CONSIDERATIONS Continued labor market tightness can be expected to put some upward pressure on inflation. With the relative price of investment goods continuing to fall, strong growth of investment is expected to keep industrial capacity relatively more ample than labor supply. And the future development of inflation will also be affected by the factors that have thus far suppressed it. The restructuring of the Asian economies virtually guarantees that the price of imports from these economies will remain low and may fall further. The relative price of computers will continue to fall, although the rate of decline is expected to return to the roughly 15-percent annual rate that has prevailed over much of the 1990s. Finally, the methodological changes to the CPI planned to be implemented before 2000 are eventually expected to lower annual CPI inflation by another 0.4 percentage point, and the price index for GDP by 0.1 percentage point. With these considerations in mind, the Administration projects CPI inflation to creep up by about 0.3 percentage point over the next few years, to 2.3 percent by 2000. THE DEMAND FOR HOUSING A surge in the fourth quarter raised residential investment growth above that of GDP during the past year. New home construction (housing starts and shipments of mobile homes) was roughly unchanged in 1997 from its year-earlier pace, despite a jump in the fourth quarter. Demographic trends indicate stable demand for housing during the next decade. The current shape of the age distribution reflects the legacy of the baby boom and the baby bust. Because most new households are formed by young adults, the passage of the first wave of baby-boomers into the prime years of household formation in the late 1970s was associated with a rapid pace of home construction and rising house prices. But household formation fell to an annual rate of about 1.1 million per year during the first half of the 1990s as the smaller baby-bust cohort moved into adulthood. Demographic forecasts project a similar rate of household formation over the second half of the 1990s. In addition to growth in the number of households, demand for new homes is created by the replacement of homes that are scrapped or destroyed and by the increase in the number of second homes and vacant homes (Table 2-6). Replacement demand (which can be estimated over long periods only) has averaged about 300,000 units per year. The increase in "vacant" homes (which includes second homes) is highly cyclical and has reflected the general economic strength of recent years, but tends to average about 200,000 units per year. Altogether, housing demand has averaged 1.53 million units per year thus far in the 1990s and, in light of the demographic forecast, is expected to continue at a similar pace for the next decade. 84 This projection of the long-run demand for housing is slightly stronger than what has prevailed thus far in the 1990s, but not quite as strong as demand in the past 2 years. As Table 2-6 shows, long-run demand is consistent with a rate of housing starts of roughly 1.40 million units per year, slightly below the 1.48-million-unit pace of homebuilding in 1997. Of course, economic conditions can push housing starts away from their demographic fundamentals. Recessions generally slow the pace of both home construction and household formation as young people remain longer in their parents' homes—this is what happened in 1990. In good times, people spend more on larger homes and second homes. If the current good times continue, homebuilding could exceed these projections of its demographic determinants. TABLE 2-6.—Contribution of Selected Determinants of Demand and Supply for New Homes [Millions, annual average] Determinant 1970s 1990-96 1980s 1996-2006 Demand: Household growth 1.73 1.26 1.05 1.10 20 .30 40 .30 18 .30 24 .30 223 196 153 164 Single-family homes 1 14 Multifamily homes. .62 .37 99 .51 .25 105 24 .26 108 30 .26 175 154 164 .21 -01 00 Change in vacancies Net removals Total demand Supply: Mobile homes Total supply .. 2.12 .11 Measurement error Note. — Detail may not add to totals because of rounding. Sources: Department of Commerce (Bureau of the Census) and Council of Economic Advisers. THE NEAR-TERM OUTLOOK Both supply- and demand-side considerations argue for some moderation in real GDP growth from its rapid 3.6-percent annual pace of the past 2 years (Table 2-7). On the supply side, the unemployment rate has fallen about a percentage point over the past 2 years, and it is therefore doubtful whether a further decline of this magnitude could be accommodated without inflationary consequences. Labor force growth has not kept up with demand in the past 2 years, nor can it be expected to keep up with a repetition of that kind of demand growth. On the demand side, some restraint is likely to come from the international economy, where the recent rise in the dollar and the restructuring of several Asian economies may slow the demand for American-built products. Because the direction of trade responds 85 with a lag to changes in the exchange rate, the large rise in the dollar over the past 2 years is likely to boost demand for imports and limit growth of our exports. The recent movements of the Asian currencies are particularly dramatic and will make imports from these economies less expensive. Even so, the cloud formed by the Asian restructuring has a silver lining: aggressive competition from foreign producers is likely to restrain domestic inflation—as it has during the past 2 years. TABLE 2-7.—Administration Forecast Actual Item 1998 1996 1999 2000 2001 2002 2003 2004 1997 Percent change, fourth quarter to fourth quarter Nominal GDP 5.6 >5.8 4.0 4.1 4.3 4.6 4.6 4.6 4.7 Real GDP (chain-type) 3.2 '3.9 2.0 2.0 2.0 2.3 2.4 2.4 2.4 GDP price index (chain-type) 2.3 4.8 2.0 2.1 2.2 2.2 2.2 2.2 2.2 Consumer price index (CPI-U) 3.2 1.9 2.2 2.2 2.3 2.3 2.3 2.3 2.3 Calendar year average Unemployment rate (percent) 5.4 4.9 4.9 5.1 5.3 5.4 5.4 5.4 5.4 Interest rate, 91-day Treasury bills (percent) 5.0 5.1 5.0 4.9 4.8 4.7 4.7 4.7 4.7 Interest rate, 10-year Treasury notes (percent) 6.4 6.4 5.9 5.8 5.8 5.7 5.7 5.7 5.7 119.5 422.3 124.0 125.4 126.8 128.4 130.4 132.5 134.5 Nonfarm payroll employment (millions) 1 Preliminary. Sources: Council of Economic Advisers, Department of Commerce, Department of Labor, Department of the Treasury, and Office of Management and Budget. Other factors also are expected to slow the growth of demand. Business purchases of capital goods have been growing faster than the overall economy, and because the relative price of equipment investment is falling, this trend is expected to continue. However, some moderation of the recent torrid pace is expected as business demand for capital goods becomes more sated. A similar effect may limit expenditures on consumer durables, where—given the length and strength of this expansion—pent-up demand has been exhausted. The rate of inventory investment was particularly strong during the first half of 1997 and remained high despite tapering off somewhat in the second half of the year. Because output grew so rapidly, inventories remain lean with respect to sales, and certainly no overhang of excess inventories exists at this point. Still, the rate of inventory growth during 1997, at about 5 percent, is in excess of what will be needed once demand moderates to its trend. As a result, inventory investment is also expected to restrain near-term growth in demand. 86 As in recent Administration projections, a moderation in output growth to 2.0 percent is projected in the near term—slightly below the economy's long-run growth rate, but in line with the consensus of professional economic forecasters. The balance of the Administration's forecast is built around a growth rate for potential output of 2.4 percent per year. The Administration does not think that 2.4-percent annual real growth is the best that the economy can do; rather, this projected growth reflects a conservative estimate of the effects of Administration policies to promote education and investment and to balance the budget. The outcome could be even better—as it has been in the past 2 years. But the Administration's forecast is used for a very important purpose: to project Federal revenues and outlays and the Federal budget deficit. For this purpose excessive optimism is dangerous and can stand in the way of making difficult but necessary budget decisions. In the final analysis, the most important goal is the creation of a sound forecast that accurately captures likely economic trends. As of December 1997 the current expansion had lasted 81 months, making it the third longest in the postwar record. There is no foreseeable reason why this expansion cannot continue. As the 1996 Report argued, expansions do not die of old age. Instead, recent postwar expansions have ended because of rising inflation, financial imbalances, or inventory overhangs. None of these conditions exists at present. The most likely prognosis is therefore for sustained job creation and continued noninflationary growth. 87 CHAPTER 3 The Economic Weil-Being of Children AFTER DROPPING SHARPLY IN THE 1960s, the official poverty rate among children trended upward from 1969 to 1993, reflecting increases in the share of children in single-parent families and declines in real wages at the bottom of the income distribution. Recently, however, the picture has improved, as the child poverty rate declined by 2.2 percentage points from 1993 to 1996. Other measures of children's material well-being have improved recently as well. Since the early 1990s the share of children in households reporting that they did not have enough food to eat has decreased, the share of households with children living in inadequate housing has fallen, and children's use of basic health services has increased. Continued declines have also been recorded in infant and child mortality rates, and some measures of children's educational achievement have improved. Nevertheless, many children remain economically vulnerable. In 1996 one in five children was officially poor; in 1995 one in nine lived in households paying more than half of their income for housing, and one in seven did not have health insurance; and in 1994 one in 56 lived in households where children experienced hunger due to inadequate resources for food. These factors place children at risk of both current and future hardship, as many of these factors may be critical to children's long-term development. This Administration has adopted a range of strategies to improve the economic and social well-being of children. The first of these is to put in place a system that guarantees that children's basic needs are met. For this reason the Administration has supported major initiatives to expand health insurance, child care, and subsidized housing and has substantially strengthened the child support enforcement system. The second strategy is to provide financial support to needy families in a way that promotes work and personal responsibility. To achieve these goals the Administration proposed and the Congress enacted increases in the minimum wage, an expansion in the earned income tax credit (EITC), and a major restructuring of the welfare system. The third strategy is to invest in programs that enrich children's educational opportunities, by expanding the Head Start program and encouraging higher standards for elementary and secondary schools. 89 This chapter begins by describing recent economic and demographic trends that have influenced the economic well-being of children, and recent programs designed to improve the economic status of families with children. The second section reports on changes in two key components of children's material well-being: food sufficiency and housing conditions. The third section describes recent changes in children's health outcomes, access to health care, and health insurance coverage rates. The concluding section discusses child care and educational programs for children. TRENDS IN THE ECONOMIC WELL-BEING OF CHILDREN THE LINK BETWEEN INCOME AND CHILDREN'S WELL-BEING The adequacy of family income is a critical predictor of both the present and the future well-being of children. Children who grow up in low-income families score lower on standardized academic achievement tests, are less likely to complete high school, complete fewer years of school, and are likely to have lower earnings when they enter the labor market than children who grow up in higher income families. Most studies find that family income is more strongly correlated with children's achievement than parental schooling or family structure. Low family income might affect children's well-being for any of several reasons. One is that low-income parents may not be able to afford to invest as much in the things that improve their children's wellbeing, such as food, shelter, medical care, and education. A second is that the poor are more likely to live in neighborhoods with a high concentration of poverty and thus may face higher crime rates, poorer quality schools, and more limited connections to mainstream economic activity. A third is that low-income families may experience higher levels of emotional distress, due to the economic pressures of living on a limited income. Finally, income may be highly correlated with children's achievement not because income directly affects child well-being, but because income is associated with some other, hard-to-measure factor that does affect child well-being, such as the value that parents place on education. For example, children from high-income families may perform better on standardized academic tests than children from low-income families not because they have higher incomes but because their parents encouraged them to work harder in school. If this is so, increasing family income will not necessarily increase children's academic achievement unless it also increases parents' commitment to their children's education. A recent study found that more sophisticated techniques that control for potential differences 90 across families produced lower estimated impacts of family income on child well-being than suggested by simple correlations of family income and child well-being. MEASURING TRENDS IN CHILD POVERTY RATES One of the most commonly used measures of the adequacy of family income is the poverty rate. The poverty rate is the percentage of the population who live in families with before-tax cash incomes below a defined level of need, called the poverty line. The official poverty line in use today was devised in the early 1960s and based on the minimum cost of a nutritionally adequate diet. This amount was multiplied by three, because data from the late 1950s suggested that the typical family spent one-third of its income on food. Since then the poverty line has been updated annually for inflation using the consumer price index for all urban consumers. In 1996 the poverty line for a family of two adults and two children was $15,911. Many people have argued that the official poverty measure should be modified to account for family income and family income requirements differently. Box 3-1 describes a recent proposal by the National Research Council to change the way we measure poverty. Boss 3~JL—Bow Does Our Poverty Measure Affect Gtn? Conception of P0wrty? A 1005 report by the National Besearch Council (NEC) recommended a number of changes in the way we measure poverty, Its recommendations include the following: * Defimmg income* On the one hand* the definition of family income should be expanded to include other important sources of purchasing power, such as the MTC? food stampSj and housing subsidies. On the other hand, some necessary eispenditiires that reduce a famil/s resources available for basic consumption needs should be subtracted from income, such as taxes* necessary child care and other work-related expenditure^ child support payments^ and out-of-pocket medical esqpendltures, « Setting & threshold* Poverty thresholds should ha adjusted to provide a more accurate measure of family income requirements* Pirstt the consumption bundle used to derive thresholds should be based om food* clothing* and shelter* not food <^naumption alone, Seeond* thresholds should reflect regional variations in housing costs, fHiird, thresholds should be adjusted for family si^e in a more consistent way than earrentiy Finally, thresholds should be updated to reflect changes to expenditure patterns over time, 91 Box 3~ A recent study tis&d key elements $f the NEC proposal to estimate alternative poverty rates from 1901 to 199ft, Th&ie estimates profaeed in poverty fri>m 1§01 to 1993 similar to* am<i decreases in pweiiy from 19SS to 1996 somewhat largertiban^those winder the offieial t&easiire. In addition, wider the alternative nieasw® a emdObr pr0p0rtiim of the poor are children* blaek, or members of femate*tieaded Iioiiadboida. These reflect the faet that tiba n0w meamire'mora aDmpIetelj for in-Madl transfer^ gneh as food stamps and homing benefite, 0&<i for work-related es^fenditiires, AB a re^alt^ the new measure tends to deewaae ttie rd&tiw pwarty rate of persons who are more lifetly to reeeiw in-Mmd teBaftra^ and to iiKareaw the relative pover^ jmte of employed I&w4wmm® persona with Mgher work-related Chart 3-1 shows that the poverty rate for children declined sharply from 1960 to 1969 and has since trended upward, with peaks in 1983 and 1993. (Throughout this chapter "children" refers to persons under age 18 except where stated to the contrary.) Chart 3-1 also illustrates an experimental poverty measure developed by the Bureau of the Chart 3-1 Poverty Rates of Children The child poverty rate rose between 1978 and 1993 after falling steeply in the 1960s. It has declined again since 1993, especially after including taxes and in-kind benefits. Percent 30 25 •"" \ ^ Official measure 20 15 \ / v / Including taxes and in-kind benefits I 1960 1963 1966 1969 1972 1975 1978 1981 Source: Department of Commerce (Bureau of the Census). 92 1984 1987 1990 1993 1996 Census, which includes taxes and in-kind transfers in family income. Including taxes and transfers reduces the estimated poverty rate in each year but does not substantially affect the trend in poverty from 1979 to 1993. Since 1993, poverty rates have declined more rapidly under the experimental than under the official measure. This is largely attributable to recent expansions in the EITC, which affect the experimental but not the official measure of poverty. Estimates of changes in the poverty rate are sensitive to the method used to adjust the poverty line for inflation. Some have argued that the price index used in the official poverty measure has overestimated the actual level of inflation. (See the 1997 Economic Report of the President for a discussion of this issue.) Under some alternative estimates of poverty that incorporate different inflation estimates, poverty trends for children are flat or down over the last several decades. Table 3-1 shows poverty rates for children of different ages, races, family status, and incomes in 1996. In that year 20.5 percent of all children were poor, 9.0 percent were in extreme poverty (defined here TABLE 3-1.—Children with Family Incomes Below Different Income Cutoffs, 1996 [Percent of children in each category] Family income Demographic category Less than half of poverty line Less than poverty line Less than twice poverty line Age of child:1 Under 6 10.5 7.4 6-17 227 18.3 46.2 40.7 Race/ethnicity of child: White Black Hispanic 163 382 20.6 39.9 68.0 147 403 720 Female-headed Married couple 258 2.8 493 763 10.1 31.0 All children 90 205 432 66 Family status: 1 Children in families. Note.—Income is before-tax cash income. Source: Department of Commerce (Bureau of the Census). as family income less than half the poverty line), and 43.2 percent were poor or near poor (defined here as family income less than twice the poverty line). The poverty rate for children under age 6 was 1.25 times that for children aged 6-17, the rate for black and Hispanic children was 2.5 times that for white children, and the rate for children in female-headed households with no husband present was nearly five times that for children in married-couple families. Over one-quar 93 ter of children in female-headed families lived in families with incomes below half the poverty line, and over three-quarters of this group lived in families with incomes below twice the poverty line. EXPLAINING RECENT CHANGES IN CHILD POVERTY Changes in family structure, labor market opportunities, and transfers are all likely to have an important influence on child poverty. This section briefly describes each of these three factors. It then estimates the relative influence of these factors on changes in child poverty since 1979. Family Structure Changes in family structure are likely to have had a substantial influence on child poverty rates over the past few decades. The percentage of children living with their mother only has nearly tripled since 1960. This reflects increases both in the percentage of children living with a mother who is divorced or who is married but not currently living with her husband and in the percentage living with a never-married mother (Chart 3-2). Because children in female-headed households have poverty rates nearly five times those of children in married-couple households, an increase in the percentage of children in female-headed households is likely to increase child poverty. Chart 3-2 Children Living with Their Mother Only, by Marital Status of Mother The percent of children living with their mother only has nearly tripled since 1960. Percent of all children 25 Mother widowed Mother divorced or spouse absent Mother never married 20 1960 1963 1966 1969 1972 1975 1978 Source: Department of Commerce (Bureau of the Census). 1981 1984 1987 1990 1993 Children in female-headed households have a higher risk of living in poverty for two reasons. First, most single mothers do not receive 94 child support and must therefore rely on a single income. Nearly twothirds of all divorced, separated, or never-married women with children did not receive child support payments in 1991. Second, that single income is likely to be lower in a female-headed than in a maleheaded household, because women typically earn less in the labor market than men. In 1996 the median earnings of full-time, yearround workers were about 25 percent lower for women than for men. Macroeconomic and Labor Market Conditions Both macroeconomic and labor market conditions can affect child poverty because they influence the quality and quantity of jobs available to parents. Table 3-2 shows how changes in child poverty rates are related to two key indicators of macroeconomic performance: the unemployment rate and the economic growth rate, as measured by annual growth in real gross domestic product per capita. The marked decline in child poverty from 1959 to 1969 coincided with both high economic growth rates and decreases in unemployment. Some studies have attributed the decline in poverty over this period to these strong macroeconomic conditions. TABLE 3-2.—Changes in Child Poverty Rate and Selected Macroeconomic Indicators Change in official poverty rate of children (percentage points) Period Average annual growth rate in real GDP per capita (percent) Change in unemployment rate (percentage points) 1959-69 -13.3 3.0 -2.0 1969-79 24 21 23 1979-89 32 18 -5 1989-93 31 3 1.6 1993-96 -22 18 -15 Sources: Department of Commerce (Bureau of the Census and Bureau of Economic Analysis) and Department of Labor (Bureau of Labor Statistics). Despite continued strong rates of economic growth, the child poverty rate increased during the 1970s and 1980s. This was partly a result of the increase in the unemployment rate from 1969 to 1979, and partly attributable to an increase in wage inequality since the 1970s. (See Chapter 4 of the 1997 Economic Report of the President for a discussion of these trends.) Two recent studies have concluded that the increases in overall poverty in the 1980s were largely attributable to increases in wage inequality and to decreases in the real wages of low-wage workers. During the 1990s changes in child poverty have been more closely aligned with changes in unemployment and economic growth rates. The increase in child poverty from 1989 to 1993 coincided with increases in unemployment and low economic growth rates, whereas 95 the decrease from 1993 to 1996 coincided with lower unemployment and higher rates of economic growth. Changes in Transfer Policy One other factor that has had an important influence on child poverty is changes in the generosity of the tax-and-transfer system. The real value of cash transfers available to low-income families with children has deteriorated significantly since the 1970s. This reflects a decline in the real value of benefits under the Aid to Families with Dependent Children (AFDC) program, the main cash assistance program for low-income families with children until 1996. Although this decline was offset somewhat by expansions in food stamps, combined benefits from both AFDC and food stamps have also decreased (Chart 3-3). Since 1993, expansions of the EITC have increased the transfers available to low-income working families. In addition, the welfare system has been restructured to promote work and family responsibility. These changes are described further below. Chart 3-3 Monthly AFDC and Food Stamp Benefits for a Family of Four The purchasing power of AFDC and food stamp benefits has eroded since 1970. AFDC payments alone have lost nearly half their real value. 1996 dollars 1200 1100 x AFDC and food stamps \ 900 800 700 600 500 1970 1973 1976 1979 1982 1985 1988 1991 1994 Note: Each data point represents the maximum benefit paid by the median State. Sources: U.S. House of Representatives (Committee on Ways and Means), Department of Health and Human Services, and Department of Agriculture. Assessing Relative Magnitudes—A Decomposition Table 3-3 presents estimates of the impact of changes in family composition, earnings and other before-tax-and-transfer income, and taxes and transfers on the change in child poverty since 1979. It presents two measures of poverty: the official measure, which is based on before-tax cash income, and an alternative measure, which includes 96 both taxes and means-tested food and housing transfers. These estimates may not accurately reflect the full impact of each of these factors on poverty over this period, because they assume that the observed changes in family composition have not been influenced by changes in underlying poverty rates for married couples and singleparent families. These estimates may also be sensitive to the order in which each income source is accounted for in the analysis. The first line of the table shows the impact of changes in family structure on changes in the child poverty rate for various periods since 1979. It shows how changes in the percentage of children living in each of three family types—married couples, female householders with no husband present, and male householders with no wife present—would have affected child poverty in each period, if the poverty rates of each group had not changed. The second line shows the impact of market earnings. It shows the effect of changes in beforetax-and-transfer poverty rates of children in each family category. The third line shows the impact of cash transfers (social insurance and welfare payments). It shows the effect of changes in the percentage of children within each family category whose incomes are brought above the poverty line when cash transfers are included in income. The fifth and sixth lines show similar calculations for meanstested food and housing transfers and for taxes. TABLE 3-3.—Accounting for Changes in Child Poverty [Percentage points] 1979-89 Factor 1989-93 1979-96 1993-96 Change in official poverty measure attributable to changes in: Family structure 12 Earnings and other before-tax-and-transfer income Social insurance and welfare payments Total change m official poverty measure 08 03 23 1.1 3.5 -3.0 1.6 10 -1 1 5 4 32 31 -22 41 .4 -.3 .0 .1 3 0 -25 -22 4.0 2.9 -4.7 2.2 Change in extended poverty measure attributable to changes in: Means-tested food and housing transfers Taxes Total change in extended poverty measure Note.—A positive number indicates an increase, and a negative number a decrease, in the child poverty rate resulting from that factor. Detail may not add to totals because of rounding. Sources: Department of Commerce (Bureau of the Census) and Office of Management and Budget. These calculations imply that the increase of 3.2 percentage points in the official poverty rate from 1979 to 1989 is attributable to changes in family structure (1.2 percentage points), increases in before-tax-and-transfer poverty (1.1 percentage points), and decreases in social insurance and welfare payments (1.0 percentage point). 97 Changes in food and housing transfer payments further increased the extended poverty measure by 0.7 percentage point. By contrast, the 2.9-percentage-point increase in the extended child poverty measure from 1989 to 1993 is mainly attributable to an increase in before-tax-and-transfer poverty (3.5 percentage points) and to changes in family composition (0.8 percentage point). These factors were offset by transfers, which tended to decrease poverty over this period. Finally, the table suggests that the 4.7-percentage-point decline in the after-tax-and-transfer extended child poverty measure from 1993 to 1996 is attributable to both a 3.0-percentage-point decrease in before-tax-and-transfer poverty and a 2.0-percentage-point increase in the proportion of children moved out of poverty by taxes and transfers (primarily the EITC). Changes in family structure had a small impact on child poverty during this period, increasing the poverty rate by 0.3 percentage point from 1993 to 1996. Overall, this table suggests that changes in family structure have put upward pressure on child poverty rates since 1979. The long-term increase in wage inequality has been reflected in an increase in before-tax-and-transfer poverty since 1979, although there have also been cyclical fluctuations in before-tax-and-transfer poverty in the 1980s and 1990s. Finally, the tax-and-transfer system did more to reduce child poverty in 1996 than in 1979. This largely reflects the recent expansion of the EITC. POLICY INITIATIVES TO SUPPORT FAMILY INCOMES This Administration has established a number of initiatives to expand the resources available to families with children in a way that creates positive incentives for work and personal responsibility. Recent policy initiatives include: • A higher minimum wage. The Congress and the Administration increased the minimum wage from $4.25 to $4.75 per hour in October 1996, and to $5.15 per hour in September 1997, bringing the minimum wage to its highest level in real terms since 1984. • An expanded EITC. In 1993 the Congress approved the Administration's proposal to expand the EITC. The EITC is a refundable tax credit designed primarily for low-income working families with children. In 1997 the maximum credit for a family with one child was $2,210 (a 54-percent increase since 1993), and that for a family with two or more children was $3,656 (a 140-percent increase since 1993). • Welfare reform. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 dramatically restructured the welfare system to promote work and personal responsibility, and to allow States greater flexibility in designing welfare assistance programs. The law converted the Aid to Families with Dependent Children program into a new block grant, called Temporary Assistance for 98 Needy Families. To promote work and personal responsibility, the law includes new work requirements, a 5-year limit on the length of time that families can receive assistance, and new measures to strengthen child support enforcement. The law also expands funding for child care to make it easier for families to move from welfare to work. Even before the new welfare law was enacted, the Administration had granted waivers to 43 States to allow them to reform their welfare systems to require work, make work pay, and encourage parental responsibility. • Increased child support enforcement. Federal legislation in 1993, 1994, and 1996 included measures designed to make the child support enforcement system more effective. Key reforms include streamlined procedures to establish paternity, a new-hire reporting system to track delinquent parents across State lines, uniform interstate child support laws, computerized registries of statewide child support collections, and tough new penalties, such as revocation of the driver's licenses of delinquents. These initiatives have already had noticeable effects. The combination of a higher minimum wage with an expanded EITC guarantees a more adequate income to working families with children. A single mother with two children can now earn enough, if she works full-time, to bring her income with the EITC above the poverty line. In addition, because the EITC benefit increases the financial reward to working, it encourages parents to enter the labor market. Research has shown that expansions in the EITC have been associated with increases in the employment rate of single mothers with children. The changes to the welfare system have already been associated with a large decline in welfare caseloads. The number of children on welfare declined by 23 percent from January 1993 to June 1997. Research suggests that the decline in welfare caseloads from January 1993 to January 1997 was due to a strong economy and to recent State welfare reforms that the Federal waiver process facilitated. Finally, the child support enforcement system has become more effective in guaranteeing that absent parents fulfill their obligations to pay child support. From 1992 to 1996, child support collections increased by 50 percent, to a record $12 billion. In addition, the number of paternities established for children born to unmarried women rose to 1 million in 1996, almost double the number in 1992. These changes are reflected in a substantial increase from 1992 to 1996 in the percentage of never-married mothers who received child support payments. 99 OTHER MEASURES OF CHILDREN'S MATERIAL WELL-BEING Two alternative measures of the adequacy of housing conditions and the sufficiency of household food supply suggest that the material well-being of children has improved since 1989. These trends are consistent with the reduction in child poverty over this period, under the extended measure of child poverty that includes taxes and meanstested food and housing benefits. AVAILABILITY OF FOOD One alternative measure of children's material well-being is the adequacy of household food supply. It has been shown that households that report having an insufficient food supply consume smaller quantities of essential nutrients than other households. Estimates from the Department of Agriculture's Continuing Survey of Food Intakes by Individuals (CSFII) provide information on the percentage of children living in households where there sometimes or often was not enough to eat in the last 3 months. These estimates may overstate the prevalence of hunger among children, if many adults typically go without food before they let their children go hungry. Estimates from the CSFII suggest that the percentage of children living in households without enough to eat has fallen from 4.1 percent in 1989-91 to 3.0 percent in 1994-96 for all children, and from 13.5 percent to 9.4 percent for children in households with incomes below 130 percent of the poverty line (Table 3-4). TABLE 3-4.—Children in Households Reporting That There Was Sometimes or Often Not Enough to Eat During the Last 3 Months [Percent] 1989-91 Category Children in households at or below 130 percent of poverty line Children in households above 130 percent of poverty line All children 1994-96 13.5 9.4 .8 .6 4.1 3.0 Source.- Department of Agriculture. The Department of Agriculture's Food and Nutrition Service has recently developed a detailed questionnaire that makes it possible to separately identify whether children or adults in the household experienced hunger. This questionnaire was incorporated into the April 1995 Current Population Survey. The survey found evidence that hunger is more likely among adults than among children: among households with children, 4.3 percent had adult members who had been hungry in the last year due to insufficient resources, but only 1.8 100 percent had children who had been hungry in the last 12 months because the parents could not afford to buy more food. This survey also suggests that it is unusual for children to go without food for an extended period: 0.9 percent of households with children reported that at least one of their children had skipped a meal in the past year, and 0.2 percent reported that their children had not eaten for a whole day at least once in the past year because of insufficient resources. ADEQUACY OF HOUSING Estimates from the Annual Housing Survey and the American Housing Survey present a mixed picture of the changes in housing conditions of households with children. On the one hand, the percentage of these households that have high rent burdens has increased substantially. The percentage of households with children that spend more than half their income on housing has increased from 6.5 percent in 1978 to 11.5 percent in 1995 (Table 3-5). For renters with very low incomes (defined as households with incomes below 50 percent of the median income for their area), this figure has increased from 31.0 percent to 37.6 percent. TABLE 3-5.—Housing Problems Among Households with Children [Percent of all households with children] Housing cost or condition 1978 1989 1993 1995 All households with children: Housing costs more than 50 percent of income 65 87 109 11 5 Housing costs 31-50 percent of income 83 151 156 167 Severe physical problems with housing 31 32 20 22 Moderate physical problems with housing 5.6 5.5 5.1 5.0 Crowding (more than 1 person per room) 94 70 63 66 Housing costs more than 50 percent of income 31.0 361 382 376 Housing costs 31-50 percent of income 280 306 291 306 Severe physical problems with housing 7.5 5.8 3.6 3.4 Moderate physical problems with housing 105 120 101 95 Crowding (more than 1 person per room) 219 167 142 170 Very low income households with children: Note.—Income is before-tax cash income. Very low income is defined as family income below half the median for the area. Source: Department of Housing and Urban Development (Office of Policy Development and Research). On the other hand, measures of housing quality for households with children have shown improvement. The percentage of all households with children living in housing with either moderate or severe physical problems fell from 8.7 percent in 1978 to 7.2 percent in 1995, and from 18.0 percent to 12.9 percent for very low income renters. In addition, households with children were less likely to live in crowded 101 living situations in 1995 than in 1978: the percentage living in housing with more than one person per room dropped from 9.4 percent to 6.6 percent for all households and from 21.9 percent to 17.0 percent for very low income renters. These findings are consistent with the results of a recent study which found that many measures of the housing quality of children in households in the bottom income quintile had improved since the early 1970s. These children were more likely to live in modern (that is, post-1940 vintage) housing and more likely to have air conditioning in the 1990s than in the early 1970s. On the other hand, this study also found that children in the bottom household income quintile were more likely to live in neighborhoods where their parents reported that crime was a serious problem in 1991-93 than in 1973-75. NEW HOUSING POLICY INITIATIVES This Administration will continue to make housing quality and affordability high priorities in fiscal 1999. Key initiatives include: • Expanding the low-income housing tax credit. The low-income housing tax credit gives States the authority to allocate a fixed pool of tax credits to developers of affordable housing. For fiscal 1999 the President has proposed increasing the total amount of tax credits available to each State from $1.25 to $1.75 per State resident. • The HOME Investments Partnerships Program. The Administration has expanded funding for the HOME program by 50 percent since 1993, to $1.5 billion in fiscal 1999. This program offers funding to States, cities, and counties to develop affordable housing options for low-income families. These funds can be used for rehabilitation of existing housing, new housing development, and tenant-based rental subsidies. To date, almost 310,000 families have been awarded assistance through this program. HEALTH STATUS AND HEALTH INSURANCE HEALTH OUTCOMES Over the past 10 years infant and child mortality rates have continued to decline. Other measures, however, such as the incidence of chronic health conditions and of low birthweight, are stable or increasing. One of the most frequently cited measures of children's health status is the infant mortality rate. Infant mortality has continued its decades-long decline in the 1990s, falling from 9.8 deaths per thousand live births in 1989 to 7.2 per thousand in 1996 (Chart 3-4). During the same period the incidence of low birthweight (weight at birth below 2,500 grams, or about 5.5 pounds) has increased slightly, 102 from 7.0 percent of live births in 1989 to 7.3 percent in 1995. This shows that the improvement in infant mortality in the 1990s has been entirely due to factors other than reductions in low-birthweight births. This improvement has been attributed in part to two key interventions. First, new medical treatments have been developed for infant respiratory disorders, an important cause of mortality among preterm infants. Second, there has been a marked decline in sudden infant death syndrome since researchers discovered that these deaths could be prevented by placing babies on their backs to sleep. The slightly increased incidence of low birthweight since the mid1980s is due in part to an increase in multiple births and births to older women. Failure to prevent low-birthweight births is costly to society because many of these infants require more-expensive medical interventions than do infants born at normal weight. In addition, lowbirthweight infants have a much higher risk of infant mortality. In 1995 nearly two-thirds of all infant deaths occurred among the 7.3 percent of all infants born at low birthweight. Chart 3-4 Infant Mortality Rates and Incidence of Low Birthweight Infant mortality has continued to decrease since 1989 despite an increase in low-birthweight births. Deaths per thousand live births Percent of live births 30 25 12 Infant mortality (left scale) 10 ^ Low brrthweight (right scale) 20 15 10 i 1960 1963 1966 1969 1972 1975 1978 Source: Department of Health and Human Services. 1981 1984 1987 1990 1993 1996 Mortality rates of older children have also fallen throughout the 1990s, continuing a steady decline since 1960 (Chart 3-5). Much of the decline in the 1960s has been attributed to medical interventions, which have minimized the risk of death from such conditions as congenital anomalies of the heart, infectious diseases, and certain childhood cancers. By contrast, the reduction in mortality during the 103 1980s has been primarily attributed to a decline in injury-related mortality. The one exception to this pattern is among those aged 15-19, whose mortality rates have increased since 1985. This largely reflects the more than doubling in homicides among adolescents since 1985. The homicide rate for black male adolescents has nearly tripled since 1985, and in 1994 it was nearly seven times higher than the homicide rate for all adolescents. Other indicators of child health have shown less progress in the 1980s and 1990s. The prevalence of asthma among children has increased substantially since the mid-1980s. The prevalence of most other chronic health conditions has fluctuated, without a consistent upward or downward trend. Chart 3-5 Child and Youth Mortality Rates Mortality rates have continued to decline since the mid-1980s for all children and youths except those aged 15-19. Deaths per hundred thousand 120 100 80 60 40 20 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 Source: Department of Health and Human Services. HEALTH INSURANCE One of the critical determinants of children's access to health care is whether or not they have health insurance. Research has shown that children with health insurance coverage are more likely to receive preventive and primary care, and more likely to have a regular relationship with a primary care provider, than uninsured children. Insured children are also more likely to receive treatment for such conditions (when they are present) as injury, asthma, and acute earache. They are less likely to be hospitalized for conditions 104 that appropriate outpatient care could have prevented, and they receive less intensive hospital services when admitted to the hospital. Since 1987 the Congress and the Administration have substantially expanded children's access to health insurance through Medicaid, the primary government program offering health insurance to lowincome children. Before 1987 Medicaid was mainly restricted to children in very low income, single-parent families. Since then a series of legislative initiatives have extended Medicaid to much broader groups of children. By 1996 all pregnant women and all children under age 6 who had family incomes below 133 percent of the poverty line, and all children age 13 and younger with family incomes below 100 percent of the poverty line, were eligible for Medicaid. Coverage will continue to be phased in for all children born after September 1983 until poor children of all ages are covered. In addition, many States have expanded children's eligibility for Medicaid beyond these federally required levels. The net result of these expansions is that a much larger share of the child population are now enrolled in Medicaid. Estimates from the Current Population Survey suggest that the proportion of children who are enrolled in Medicaid increased from 16 percent in 1989 to 23 percent in 1995 (Table 3-6). For children under age 6 the increase in Medicaid coverage was even larger, and by 1995, 30 percent of all children under age 6 were covered by Medicaid. TABLE 3-6.—Children with Health Insurance, by Age of Child and Type of Coverage [Percent] Medicaid Any insurance Private insurance Age of child 1989 1995 1989 1995 1989 1995 Current Population Survey: Under 6 87.2 86.7 20.3 29.6 70.6 60.4 6-17 86.4 86.0 13.2 19.9 75.3 69.1 86.7 86.2 15.7 23.2 73.6 66.1 Under 6 84.9 88.4 18.7 28.2 67.9 60.1 6-17 85.5 85.7 10.9 16.6 74.0 68.7 85.3 86.7 12.8 20.6 71.8 65.7 AH children Health Interview Survey: All children . .. . Sources: Department of Commerce (Bureau of the Census) and Department of Health and Human Services (National Center for Health Statistics). At the same time that Medicaid eligibility has increased, there has been a reduction in children's private insurance coverage. This decline is likely to have been driven in part by a general reduction in employer-provided health insurance, which has affected both lowand high-income families. It may also have resulted in part from 105 newly eligible families dropping their private insurance coverage in order to enroll in Medicaid. Studies have tried to estimate the extent to which the expansion in Medicaid eligibility has crowded out private insurance coverage. These studies have produced a wide range of estimates. One study found that at least one person dropped private insurance coverage for every two persons made eligible for Medicaid. Two other studies estimated that anywhere between 0 and 25 percent of new Medicaid coverage displaced existing private coverage. Table 3-6 presents estimates of the change in insurance coverage for children from 1989 to 1995 from two large household-based surveys, the March Current Population Survey and the Health Interview Survey. Both surveys suggest that the percentage of children under age 18 with health insurance from any source remained constant from 1989 to 1995. These surveys provide a somewhat different picture, however, of the change in total insurance coverage for young children. Whereas the Health Interview Survey finds a moderate increase in insurance coverage for children under age 6, the Current Population Survey finds no increase for this group. This may result from changes in question content in the Health Interview Survey in 1990. It may also reflect differences in the way the two surveys ask about health insurance coverage. Even though there have not been substantial increases in the percentage of children with health insurance, the recent increase in the percentage of children covered by Medicaid may have important implications for the quality of children's medical care. On the one hand, since Medicaid requires no copayments from the insured, covers prescription drugs, and in many States covers services such as dental care, it may promote greater utilization of medical care than private insurance. On the other hand, since provider reimbursement levels tend to be much lower under Medicaid than under other insurance plans, fewer providers may be willing to provide care to children with Medicaid coverage than to children with private insurance. Although research to date on the impact of the recent Medicaid expansion on children's utilization of medical care is inconclusive, Table 3-7 suggests that basic medical care services received by lowincome children have increased. The average number of physician visits per year rose by more than 30 percent for poor children in fair or poor health, and by more than 10 percent for poor children in excellent or good health, from 1987-89 to 1993-95. By contrast, during the same period the average annual number of physician visits decreased for children with family incomes above twice the poverty level. 106 TABLE 3-7.—Average Number of Physician Contacts in Last Year for Children Under 15, by Family Income [Number of contacts] Fair or poor health Good or excellent health Family income 1993-95 1987-89 1987-89 1993-95 Below poverty fine 3.6 4.0 10.8 14.2 Poverty line to twice poverty line 3.8 3.9 15.2 16.2 Above twice poverty line 5.0 4.9 22.6 20.7 Note.—tacome is before-tax cash income. Source: Department of Health and Human Services (National Center for Hearth Statistics). This evidence is also consistent with data pointing to an increase in the share of pregnant women and children receiving at least a minimal level of primary care. The percentage of children under age 5 who did not see a doctor during the previous year fell from 8 percent in 1983 to 5 percent in 1994, while the comparable percentage of children aged 5-17 decreased from 27 percent to 21 percent (Chart 3-6). In addition, the percentage of pregnant women who initiated care in the first trimester of pregnancy increased to a record high of 82 percent in 1996, from 76 percent in 1989. Chart 3-6 Children Without Physician Visit Within Past Year Fewer children went without regular doctor visits in the mid-1990s than a decade before. Percent 30 Ages 5-17 \ 25 20 15 Under 5 years of age 10 \ i 1983 1984 1985 1986 1987 1988 Source: Department of Health and Human Services. 107 1989 i 1990 1991 1992 1993 1994 RECENT INITIATIVES TO EXPAND CHILDREN'S ACCESS TO HEALTH INSURANCE Despite recent efforts to expand children's access to health insurance, a large share of children remain uninsured. Estimates from the Current Population Survey suggest that 15 percent of all children did not have health insurance in 1996. Table 3-8 presents estimates from the Current Population Survey on the characteristics of these children. Roughly 21 percent are potentially eligible for Medicaid, because they TABLE 3-8.—Uninsured Children by Family Income, 1996 Percent of all uninsured children Family income and age of child Below poverty line 326 Under 6 98 109 120 6-11 12-17 Between 100 and 150 percent of poverty line 200 Between 150 and 200 percent of poverty line 164 Above twice poverty line .. 309 Note.—Income is before-tax cash income. Source: Department of Commerce (Bureau of the Census). are under age 12 and have family incomes below the poverty level. An additional 48 percent either are poor children aged 12 and over or have family incomes between 100 percent and 200 percent of the poverty level. Their family incomes are low enough so that the cost of health insurance may pose a significant barrier, but probably not low enough to guarantee them eligibility for Medicaid. This Administration has developed a two-pronged effort to continue progress in increasing insurance coverage for low-income children. The first component is to extend insurance coverage to more lowincome children through the new Children's Health Insurance Program (CHIP). This program offers $24 billion in new Federal funding to States over the next 5 years to expand health insurance programs for uninsured low-income children. States have the option of using the funding to expand children's health insurance coverage through Medicaid, separate State programs, or a combination of the two. In general, States must use their allocation to cover children in families below twice the poverty level, or within 50 percent of the State's current Medicaid income limits for children if the State already covers children at or near twice the poverty level. States must contribute some of their own funds to the program in order to receive these Federal funds, and they must maintain Medicaid eligibility standards at least equal to those in effect in June 1997. In addition, the President will make enrolling eligible uninsured children in both Medicaid and CHIP a priority. In partnership with 108 the States, health care providers, and business and community groups, the Administration will identify and encourage successful outreach campaigns to enroll up to 5 million uninsured children. To facilitate this effort, the proposed budget for fiscal 1999 includes an option for States to determine presumptive eligibility for Medicaid among children at sites such as schools and day care centers. It will also allow States to receive Federal funding for outreach activities at a 90-percent matching rate from a fixed pool of funds. These legislative proposals will be complemented by administrative actions to simplify enrollment of uninsured children. CHILD CARE AND EDUCATION CHILD CARE Over the past two decades the adequacy and affordability of day care have become increasingly salient issues, as a growing proportion of mothers with young children have entered the work force. Whereas 30 percent of married mothers with one or more children under age 6 were working in 1977, by 1997 that figure had risen to 61 percent. This increase in employment of women with young children has translated into a substantial increase in nonparental child care. Between 1977 and 1993 the number of children under 5 in nonparental child care whose mother was working more than doubled. By 1993, 47 percent of young children with employed mothers had their primary day care arrangement in a day care center or a family day care home, and only 5 percent were cared for by a nonrelative in the child's home. The affordability of child care is an especially critical issue for lowincome working families. Although Federal programs subsidize day care costs for low-income families, a large share of these families do not have access to subsidized care. Approximately 1 million lowincome children under 13 received federally subsidized care in fiscal 1995. This compares with the approximately 10 million children under 13 with employed mothers and family incomes below 200 percent of the poverty level. For families without access to subsidies, the cost of child care can represent a substantial financial burden. In 1993 child care expenditures represented 25 percent of annual income for those families with annual incomes below $14,400 with employed mothers and preschool children in paid child care. Comparable families with annual incomes above $54,000 spent only 6 percent of their income on child care. The quality of child care is also a critical issue. Two recent studies of regulated child care providers offer reason for concern. One study found that 86 percent of child care centers surveyed provided mediocre or poor care when judged from the perspective of child development, and 12 percent were of such poor quality that the children's health and safety needs were only partly met. The second 109 study, of family day care homes, found that 91 percent were of only adequate quality or less. The President's fiscal 1999 budget includes a dramatic increase in Federal investments in child care to increase its affordability and quality. Key initiatives would: • Expand child care subsidies. The proposed budget builds on the increases in child care subsidies legislated in 1996, by expanding funding for the Child Care and Development Block Grant Program by $7.5 billion over 5 years. These new funds, combined with funds provided in welfare reform, would allow States to provide child care subsidies to more than 2 million low-income children by 2003— more than double the number of children served in fiscal 1995. • Increase tax credits for child care expenses. The proposed budget would increase tax subsidies for working parents who pay for child care expenditures, by expanding the child and dependent care tax credit. The President's proposal would offer more help to 3 million families with annual incomes below $59,000, providing nearly $5 billion in aid over the next 5 years. The President's proposal also includes a new tax credit for private employers that offer child care services for their employees. • Expand after-school care for school-age children. The President's proposed budget includes $800 million in new funding over 5 years to dramatically expand the 21st Century Community Learning Program. This program provides funding to school-community partnerships to establish or expand before- and after-school programs for school-age children. The program will serve up to half a million children each year. • Improve early learning and child care quality. The President's proposed Early Learning Fund would provide $3 billion over 5 years in challenge grants to communities for programs that improve early learning and the quality and safety of child care for young children. The"President's proposed budget also includes funding for scholarships for up to 50,000 child care providers per year, and for improved enforcement of State health and safety standards. EARLY CHILDHOOD EDUCATION Early childhood education programs can play a critical role in preparing children aged 3-5 for entry into school and can have an important effect on children's short-run and long-run development. Research has found that children who participate in early childhood education programs show large short-run gains in IQ, which persist until entry into kindergarten. Research has also linked early childhood education to a number of longer term outcomes, such as grade retention and placement in special education programs. Studies of a smaller number of programs have also shown early childhood education to be associated with increases in high school graduation rates 110 and post-high school monthly earnings, and with a lower probability of teen pregnancy. One of the principal Federal programs supporting early childhood education for disadvantaged children is the Head Start program. The major focus of Head Start is support for enriched preschool programs and development services for children aged 3-5. Federal guidelines require that 90 percent of all children served be from families with incomes below the poverty line. Head Start offers disadvantaged children and their parents a range of services that focus on education, social and emotional development, and health and nutrition. With the establishment of the Early Head Start program in 1994, for which disadvantaged children under age 3 are eligible, the range of Head Start services was extended to younger children as well. A recent nationwide study found that participation in Head Start was associated with increased performance on the Peabody Picture Vocabulary Test and a reduction in grade repetition for white and Hispanic children, although it did not find similar gains for black children. The study also found that both white and black children who participated in Head Start were more likely to be immunized against measles than nonparticipating children from the same family. The President's proposed budget includes $3.8 billion in additional funding over 5 years to help reach the goal of expanding participation in Head Start to 1 million children in 2002, from 714,000 in fiscal 1993. This funding would also allow a doubling of participation in Early Head Start, to 80,000 children by 2002. ELEMENTARY AND SECONDARY EDUCATION One of our society's most important investments in children is elementary and secondary education. Elementary and secondary schools play a critical role in preparing children for college and for entry into the labor market. Research has shown that increases in educational attainment are associated with increases in labor market earnings: each year invested in elementary or secondary education is estimated to increase annual earnings by 5 to 12 percent. Investments in elementary and secondary education can also achieve other important social goals, such as the development of an informed electorate. Measures of Student Performance One of the key tools used in assessing the performance of our elementary and secondary school students is the National Assessment of Educational Progress (NAEP). The NAEP has two parts: the longterm trends assessment, which has repeated the same set of questions since the early 1970s to provide a consistent record of progress over time, and the main assessment, a more recent set of tests designed to reflect current testing methodology and educational content. The main assessment also groups students into three levels 111 of achievement based upon collective judgments about what students should know and be able to do in each subject area. Evidence from the NAEP long-term assessment suggests that achievement in science, mathematics, and reading has improved since the late 1970s. Charts 3-7 and 3-8 show average NAEP long-term Chart 3-7 NAEP Long-Term Trend Assessment: Science and Mathematics Scores Science and mathematics achievement scores have improved modestly since the mid-1970s for white, black, and Hispanic 13-year-olds. Score 290 SCIENCE 280 270 260 250 240 230 Hispanic 220 V Black \ 210 200 i i 1970 1973 1976 i 1979 1982 1985 1988 1991 1994 1991 1994 Score 290 White MATHEMATICS 280 270 Hispanic 260 \ 250 240 230 Black 220 210 200 o' 1970 1973 1976 1979 1982 1985 1988 Source: Department of Education (National Center for Education Statistics). 112 assessment scores for 13-year-old white, black, and Hispanic students in these subjects. Chart 3-7 reveals increases in mathematics and science scores since the late 1970s, which have been larger for black and Hispanic than for white children. Improvement in reading scores has been somewhat less dramatic overall (Chart 3-8), but both white and black children have recorded measurable improvement since 1971. Despite these recent gains, significant challenges remain for the Nation's educational system. Evidence from the main NAEP assessments suggests that many students do not achieve basic competency in mathematics, science, or reading. The most recent main assessments found that 38 percent of eighth-grade children performed below the basic level in mathematics, as did 40 percent in science and 30 percent in reading. In addition, U.S. students do not perform well in comparison with students in other countries. According to the Third International Mathematics and Science Study, a study of half a million children in 41 countries, U.S. eighth-graders had average mathematics scores that were below those of 20 other countries. Although U.S. eighth-graders performed better in science, they were still outperformed by students in nine other countries. A second challenge facing the Nation's educational system is the substantial variation in the performance of schools across the country. A recent study of first-grade students found that those attending the top quarter of schools with respect to student performance had average scores in both reading and mathematics nearly 75 points Chart 3-8 NAEP Long-Term Trend Assessment: Reading Scores Reading achievement scores have changed little for white and Hispanic 13-year-olds and improved modestly for black 13-year-olds since 1971. Score 290 READING 280 White 270 260 250 Hispanic 240 230 Black 220 210 200 1970 1973 1976 1979 1982 1985 1988 Source: Department of Education (National Center for Education Statistics). 113 1991 1994 higher than those of students in the bottom quarter. This difference is approximately equal to the average achievement gain of students from the spring of first grade to the spring of second grade. In other words, by the end of second grade the average student's achievement in the bottom-ranked schools will just about equal that of students finishing first grade in the top schools. Differences in student performance are evident across States as well. For example, in 1994 the share of fourth-graders in public schools who scored at or above the basic level in reading ranged across 39 States from a low of 40 percent to a high of 75 percent, and in 1996 the share of eighth-graders in public schools who attained at least the basic level of proficiency in mathematics ranged across 40 States from a low of 36 percent to a high of 77 percent. Impact of School Inputs on School Performance A substantial body of research has investigated the extent to which school quality is related to measurable inputs, such as expenditures per pupil, pupil-teacher ratios, or the level of teacher training. This research has had mixed results. On the one hand, most studies that attempt to relate school resources to students' achievement on standardized tests tend to find only weak evidence that these resources do influence school quality. This may be because most research in this area is based on samples that are not large enough to find a statistically measurable effect. A recent study which combined the results from a large number of other studies found stronger evidence that school expenditures per pupil are positively associated with student achievement. On the other hand, studies that estimate the relationship between school resources and students' earnings later in life tend to find much larger effects. A recent study used data from the 1980 Census to estimate the relationship between the average level of school resources in the State in which workers were born and their subsequent earnings. This study found that workers who had been born (and probably attended school) in States with more abundant school resources earned higher rates of return to each additional year of schooling than other workers. A decrease in the pupil-teacher ratio by five students was associated with an increase in the rate of return to each additional year of school of 0.4 percentage point, and a 10-percent increase in teachers' pay was associated with a 0.1-percentage-point increase. (The average rate of return for all workers in the sample was 5 to 7 percent.) This literature also found that there are important dimensions of school and teacher quality that are unrelated to school expenditure patterns. After controlling for student and parent characteristics likely to affect student performance, and even after controlling for measurable characteristics of schools and classrooms, it is clear that 114 students in particular schools, or enrolled in particular teachers' classes, consistently perform better than average. This suggests that certain aspects of teacher or school quality that are not easily measured, such as the teacher's level of enthusiasm or the school's management style, may be critically related to student performance. Recent Federal Initiatives in Primary and Secondary Education Recognizing that the quality of primary and secondary education can have an important influence on children's later economic opportunities, the Administration has developed and supported a number of initiatives to improve the quality of America's schools. In his 1998 State of the Union address the President proposed two major new initiatives that would increase the financial resources available to public schools: • Smaller classes with qualified teachers in grades 1-3. The President is proposing that $12.4 billion be devoted over 7 years ($7.3 billion over 5 years) to reducing class sizes in public schools in grades 1 to 3 from a nationwide average of 22 pupils to an average of 18, and to helping local school districts hire an additional 100,000 well-prepared teachers. The initiative will also provide funds to States and local school districts to test new teachers, develop more rigorous teacher testing and certification requirements, and train teachers in effective reading instruction. This initiative will help ensure that every child receives personal attention, learns to read independently, and gets a solid foundation for further learning. • New construction and renovation of school buildings. The President is proposing Federal tax credits to pay interest on nearly $22 billion in bonds to build and renovate public schools. This initiative provides more than double the assistance of the Administration's earlier school construction proposal, which covered half the interest on an estimated $20 billion in bonds. Half of this new bond authority would be allocated to the 100 school districts with the largest number of low-income children, and the other half would be allocated to the States. These proposals build on a number of ongoing Administration efforts to improve the quality of primary and secondary education. To increase the educational opportunities of disadvantaged children, the Administration has expanded the Title I program, which targets resources to children in high-poverty schools. In addition, since it is clear that some important differences in the quality of individual teachers and schools are not directly related to the level of a school's financial resources, the Administration has supported initiatives to change the way schools operate, to better reward performance, and to grant schools more flexibility in meeting measurable performance standards. These are the key emphases of the Goals 2000 and the 115 Charter Schools programs. Finally, the Administration has developed two new initiatives to improve literacy and to increase students' access to the Internet: •Title I^-Education for the Disadvantaged. Title I provides funds to raise the achievement of disadvantaged children. In 1994 the President proposed, and the Congress adopted, changes to Title I to focus resources on schools with a high percentage of children from poor families, to raise standards of achievement for disadvantaged students, and to give schools greater flexibility in helping students meet these standards. The appropriation for Title I grants to local education agencies was increased by about 20 percent from fiscal 1993 to fiscal 1998. • Goals 2000. Enacted in 1994, the Goals 2000 program encourages States to set rigorous academic standards for student performance and to determine whether students are making progress in meeting these goals. It also provides funding to support reform of individual schools and for parental information and resource centers in each State, to help parents become more involved in their children's education. • Charter Schools. The Federal Charter Schools program supports the efforts of parents, teachers, and communities to develop innovative public schools that are free from most of the rules and regulations that apply to most public schools and are held accountable for raising student achievement. Since the program's inception in 1995 over 700 charter schools have been established, and Federal funding has increased from $6 million in fiscal 1995 to $80 million in fiscal 1998. • The America Reads Challenge. The proposed America Reads program is a multipronged effort to help States and communities ensure that all children are reading well and independently by the end of the third grade. Key initiatives include recruiting and training volunteer reading tutors and helping families help their children build literacy skills. In addition, the Administration has recruited work-study students in 800 universities to help with tutoring initiatives. • Technology. The Technology Literacy Challenge Fund and the Technology Innovation Grants program are aimed at meeting four goals: to connect all schools to the Internet, to provide teachers with professional development in the use of technology, to put modern computers in all schools, and to provide challenging software that encourages children to learn more. These initiatives should help prepare our children for the 21st century and keep the Nation competitive in a global economy. 116 CONCLUSION It is clear that children have shared in the benefits of the economic recovery of the past 3 years. The child poverty rate fell from 1993 to 1996, and under an extended poverty measure that includes taxes and means-tested food and housing benefits, the rate was lower in 1996 than in 1989. Other measures of well-being, such as health status, educational achievement, food sufficiency, and housing quality have also shown improvements during the 1990s. Yet many children remain vulnerable, either because they have low family incomes, or because they lack access to health insurance, or because they are not learning basic mathematics, science, and reading skills in school. For this reason the Administration will continue to invest in initiatives to improve the well-being of children. Key initiatives for fiscal 1999 will focus on increasing access to child care and early childhood education, improving the quality of primary and secondary education, and increasing access to affordable housing for families with children. 117 CHAPTER 4 Economic Inequality Among Racial and Ethnic Groups THIRTY-FOUR YEARS AGO the signing of the Civil Rights Act of 1964 set the Nation on a course toward racial equality. As the economy surged, income differences narrowed for a full decade. The sharp recessions of the mid-1970s and early 1980s hit black and Hispanic Americans particularly hard, however. And in the expansion of the 1980s, economic growth was accompanied by sharp increases in overall income inequality. As a result, despite the economic growth of this period, income differences between black and Hispanic families on the one hand, and non-Hispanic white families on the other, did not diminish. The recession of the early 1990s brought further economic hardship, as the poverty rate climbed to near a 30-year high. Since 1993, incomes have once again been rising. But the present recovery differs from those of the 1970s and 1980s in one important respect: economic growth has not been accompanied by sharp increases in income inequality. Moreover, this recovery has been accompanied by a narrowing of some measures of racial inequality. The median black family income reached a new high, and the poverty rate for blacks fell to a new low. After nearly 20 years of stagnation, these developments have again raised hope for sustained progress toward economic equality among racial and ethnic groups. This chapter reviews statistics on the differences in economic status among racial and ethnic groups—whites, blacks, Hispanics, Asians, and American Indians—and evaluates various explanations for those differences (Box 4-1). Three themes are developed in this review. First, although some narrowing of gaps in economic status among racial and ethnic groups has occurred, it has been uneven—faster in some periods and for some groups than others—and substantial differences persist. The median incomes of non-Hispanic white families and of Asian families are nearly double those of black and Hispanic families. The median wealth of non-Hispanic white households is 10 times that of blacks and Hispanics. Poverty rates among Hispanics and blacks are more than triple those of non-Hispanic whites. Unemployment rates for blacks are twice those for whites. Second, the sources or causes of current differences in economic status across racial and ethnic groups are numerous and complex. The economic status of a person, a household, or a family reflects a 119 mixture of current conditions, such as the state of the economy, and more permanent characteristics, such as educational background, occupational experience, and family background, which have antecedents in constraints faced in childhood and by previous generations. This commingling of short-term and long-term influences poses a challenge for the interpretation of trends in racial inequality. For example, current progress toward racial equality is due both to the recent effects of the strong economy and to longer term developments such as improvements in educational attainment and reduced discrimination over the past half-century. The complexity of these social and economic processes cautions against a simple explanation of trends in racial and ethnic economic equality. A third theme of the chapter is that racial inequality and related policy issues are intertwined with the long-term general increase in economic inequality that extends beyond racial differences. Lack of progress toward racial economic equality between the early to mid-1970s and the early 1990s coincided with marked increases in inequality both overall and within racial and ethnic groups. data presented in 120 The increase in income inequality has two major implications. First, since blacks, Hispanics, and American Indians are disproportionately represented at the bottom of the income distribution, they are affected disproportionately by developments that make all those at the bottom worse off relative to the middle or the top. A second and more subtle implication is that inequality within racial and ethnic groups has grown relative to inequality between such groups. Growing income inequality within the previously largely impoverished black population is partly a product of black economic progress: by some measures more than half of black families have attained middle-class incomes or higher. Despite persistent gaps in income between blacks and whites, the growth of the black middle class, combined with widening inequality within the white population and the general slowdown of economic growth in the 1970s and 1980s, may have fueled opposition to measures or programs perceived to benefit members of minority groups without regard to individual economic circumstances. Box 4-1.— eon/mwe*/ % The terms %merieaB Ita&aii* and ^Mfativa American* &ra & -'speed* mid writing Iix thfe ' chapter ' rathfer that* "Native Amedeaa1* m ng&t'to, awid eoaftsim 'catwecl by the uae in mm® Federal ym^mm of the term *1%fciye Amerteatf* to iitgbide Natiw Hawaiia&s OK October S0# 190% tihe O&m of Matogem^iit and Bmdgat announced its decision to wvifle fcha jstaAdards fer olasBtfytog ^ Federal data on race and ethnicity. The new standards recognize to mark' m^re tttaii toe raw on th^ ^Aiaum « Fadfie a tdtel. offiw ethnic toteg^ry }* ISia has been dianffd .'jfco %laek &? Federal itgepde^ will pr$dp$e data on ilswhoi^trkoul; well as tliose who mark more than one. aMm Al a^ beItog '!M»«UM» iwrw^' «S^V rj^/'ft&Baa ^^ 1^./fi^^^W,j^l ^lkH0^ttart^ fbr^Ml'' 121 The chapter begins with a brief description of recent and projected changes in the racial and ethnic composition of the population. The most prominent of these changes are the increase in the proportion of the population that is Asian or Hispanic and the decrease in the proportion that is non-Hispanic white. The chapter then provides a detailed description of differences among racial and ethnic groups in traditional indicators of economic status: family income, poverty, and wealth. The next two sections of the chapter review the evidence and the economic literature in two arenas critical to the determination of economic status: education and the labor market. The chapter ends with a review of evidence of contemporary racial discrimination. Although it is difficult to quantify the precise contribution of contemporary acts of discrimination to the wide economic disparities across racial and ethnic groups, there is substantial evidence that such discrimination persists in many areas of the economy. Such evidence highlights the need for racial reconciliation, as promoted in the President's Initiative on Race as well as the President's proposals to strengthen enforcement of the civil rights laws (Box 4-2). POPULATION COMPOSITION Since 1970 the percentage of the population that is non-Hispanic and white has fallen substantially; the percentages that are Hispanic, American Indian, and Asian (including Pacific Islanders) have risen rapidly, and the percentage that is black has risen slowly (Table 4-1). The large increases in the Hispanic and Asian populations are largely due to immigration and reflect changes in immigration laws, especially the 1965 Immigration Act, which raised the ceiling on admissions and ended the system of national origin quotas that had restricted immigration from the developing worldi The Immigration Reform and Control Act of 1986, which legalized a large number of immigrants, also contributed to these changes. Under the assumption that these trends will continue, the non-Hispanic white population, currently the majority, is projected to fall to about half of the total population in the middle of the next century. (These projections assume there will be no change in rates of intermarriage, although these rates have been increasing.) These national population changes mask differences across and within regions. The geographic distribution of racial and ethnic groups is important both because it influences the potential for social and economic interaction among them, and because it affects their economic fortunes. For example, over this century employment has shifted from rural to urban areas and, within urban areas, from the central cities to the suburbs. Hispanics and American Indians are heavily concentrated in the West and, to some extent, the South. Asians are concentrated in the West. Within the South, Hispanics are concentrated in Florida, Texas, 122 Box 4-2.—The President's Initiative on Race OtoJime 14,188T, fi*e Bre&ideiit Ram The P&esidte&t ®iwMoii& for all* responsibility from all» and one cc^mm^iiiity^ of -alt American Bsce relations ramains an that too often, <Mmitei' otir NatioiL The Presidettfte ^Moi* fe:to haw 3 diverse, demoemfe* ic <x)mmiiMty In wMeh all Americans tw|)ect and eyaa^eleferate 'their diffimosces wMe jembmdtag tiba ' iham, 1b readb &is goal'the FtesMaat:b^ latmcfeed a effort to deal oparij and honestly with oar - effort indhides 0todyf-diak^ii% and action',to tog dbatienga of how to live antd work mom prodtietiwly togetfaer, n witti the £he "Vice Fresidmi-aimo-ypcad on Jfannaiy Lntiher King, «fo Day' at the tat Atlanta^ a p&ekage of new d?fl rights enfo-^TOBiitSm~; on : the ability of tfaeTcderaTsiiri fight* a^fietes'to' ^P^UlStti^OH law* *!*1& ^djDG^Oti^t^t't^Oll $ f^lKJEl m^PEN^fe1" m »aonr€as for ^mpliapfm re^ri^^s and fetofeal assMitti^ knd^ offeiB^altematIy0i to Mti^attoi! by feo^tag^paimoii of alfemafee dispute resolution mechanisms. Hie plan would set performance tto would piwida for better eoordmatioxi a^ioss Federal offices, $he AdmiBfetratloB% 1999 budget prop<^i omtaftas ^8ft2 ^ mlMoii for civfl ^hts eirfoK^i^ent and offio0£h^aa in. eroa^ of $86 million^ or mote tha^Ei 16 peroeiat^ oror 1998 fim&ig. * TABLE 4-1.—Racial and Ethnic Composition of the U.S. Population [Percent of population] Year American Indian Asian1 Black Hispanic Non-Hispanic white 04 0.7 10.9 4.5 83.5 1997 (estimated) 9 38 121 103 729 2050 (projected) 11 87 13,6 238 52.8 2 .5 ,6 16 25 1.3 1.3 73 103 9.5 74 2.9 7.9 191 85.8 71.8 1970 1990 by region2: Northeast . Midwest South West 1 Includes Pacific Islanders. Detail may not add to 100 percent because data for the category "other" are not shown. Source: Department of Commerce (Bureau of the Census). 2 123 18.3 51 794 667 and Washington, D.C. And despite massive outmigration over much of the 20th century, the majority of blacks continue to live in the South. In fact, net black migration from the South to the North ended some time in the 1960s. There are also differences within regions in the racial and ethnic distribution of populations. In 1990 Hispanics, Asians, and blacks were much more likely than whites or American Indians to live in the central cities of metropolitan areas. Hispanics, Asians, and whites were much more likely than blacks or American Indians to live in the parts of metropolitan areas outside the central city. Nearly half of American Indians lived in rural areas; 37 percent lived on reservations or other American Indian and Alaska Native areas. ECONOMIC STATUS FAMILY INCOME Annual income is the most widely accepted indicator of current economic status. This section reports incomes for families, where a family is defined as two or more persons related by birth, marriage, or adoption who reside together. In 1996 the median income of Asian families was about $49,100, the highest among the groups considered in this chapter. Asians are followed closely by non-Hispanic whites ($47,100) and, with a $20,000 gap, by blacks ($26,500) and Hispanics ($26,200; Chart 4-1). Because of the smaller size of the American Indian population, reliable national data on their incomes are not available for every year. However, according to the most recent data (from the 1990 Census), American Indians had the lowest median family income (and the highest poverty rate) of the five racial and ethnic groups. With few exceptions these rankings have been stable over the past 25 years. Black and non-Hispanic white real median family incomes are somewhat higher than they were 25 years ago, and Hispanic incomes are somewhat lower. Since 1972, when data for Hispanics first became available on an annual basis, real median family income has increased 14 percent among non-Hispanic whites and 9 percent among blacks, but has fallen 9 percent among Hispanics. As a result of faster income growth for non-Hispanic whites, the Hispanic median family income has dropped sharply relative to nonHispanic white income over the past 25 years, and the relative incomes of blacks has also dropped somewhat over the same period. However, the Hispanic population has grown tremendously over this period, primarily because of immigration. The relative decline in the Hispanic median income reflects, at least in part, compositional changes in the Hispanic population resulting from the immigration of persons with relatively little education. The median incomes of both 124 Chart 4-1 Median Family Income Family income of non-Hispanic whites and Asians has been well above that of blacks and Hispanics. Thousands of 1996 dollars 55 55 Non-Hispanic white 45 45 40 40 35 35 30 30 25 20 20 .>0 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 Note: Prior to 1972, data for whites include Hispanic whites and data for blacks include Hispanic blacks. Source: Department of Commerce (Bureau of the Census). black and Hispanic families are about 56 percent of the non-Hispanic white median, lower than in 1972. Because these ratios vary by a fair amount from year to year, it is difficult to identify turning points precisely. But it is clear that, between the early to mid-1970s and the early 1990s, black and Hispanic family incomes declined relative to non-Hispanic white family incomes. Since 1993, however, black family incomes have increased faster than those of non-Hispanic white families. Inequality Within Groups and the Growth of the Middle Class Although a useful summary measure, median family income is an incomplete indicator of the economic status of entire groups. For example, trends in median income do not reveal the dramatic increases in overall income inequality between the early 1970s and the early 1990s, nor do they speak to inequality within groups. Consideration of other indicators of economic status may alter conclusions about the nature of economic inequality among racial and ethnic groups. For example, despite their higher median family income, the poverty rate for Asians exceeds the rate for nonHispanic whites by nearly 6 percentage points, indicating that this population is economically heterogeneous. Definitions of "middle class" are necessarily arbitrary. By one indicator—household income between two and five times the poverty line — a large middle class emerged among both blacks and whites between 1940 and 1970 (Charts 4-2 and 4-3). The poverty line used 125 here to adjust income corresponds to a 1960s' standard, since the poverty line was developed in the early 1960s and reflects societal standards of economic need at that time. Chart 4-2 Distribution of White Persons by Household Income Between 1940 and 1970 the white middle class grew. Since 1960 the percent of high-income whites has also grown substantially. 1940 1950 1960 1970 1980 Note: "Very poor" is household income less than 50 percent of the poverty line, "poor" is 50 to 99 percent, "near poor" is 100 to 199 percent, "middle income" is 200 to 499 percent, and "high income" is 500 percent or higher. Sources: University of Michigan Population Studies Center and Reynolds Farley, Russell Sage Foundation. Chart 4-3 Distribution of Black Persons by Household Income Between 1940 and 1970 the proportion of blacks who were poor or very poor fell, and the black middle class grew. - 20 1940 1950 1970 1960 1980 Note: "Very poor" is household income less than 50 percent of the poverty line, "poor" is 50 to 99 percent, "near poor" is 100 to 199 percent, "middle income" is 200 to 499 percent, and "high income" is 500 percent or higher. Sources: University of Michigan Population Studies Center and Reynolds Farley, Russell Sage Foundation. 126 1990 According to this measure, the white middle class expanded considerably in each decade from 1940 to 1970, whereas the expansion of the black middle class was greatest in the 1960s. Some scholars have pointed to figures such as these as evidence of tremendous black economic progress since 1940. However, that progress has not been steady. Progress clearly slowed in the 1970s and 1980s. Furthermore, although Chart 4-3 suggests that moderate growth of the black middle class continued over the 1970s, annual data show little growth between the early to mid-1970s and the early 1990s. In sum, a substantial economic expansion of the black middle class between the 1940s and the early 1970s was followed by 15 to 20 years of stagnation between the mid-1970s and the early 1990s, with perhaps a resumption of growth in the mid-1990s. Chart 4-4 Gini Index for Family Income Overall and within-group inequality grew steadily from the early 1970s to the early 1990s. Inequality has been consistently higher for blacks than for whites or Hispanics. Gini index 0.50 Break in series^. 0.48 0.46 Black 0.44 0.42 0.40 0.38 0.36 White 0.34 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 Note: The Gini index is a measure of inequality ranging from zero to one, where zero indicates perfect equality. Source: Department of Commerce (Bureau of the Census). Since the early 1970s, income inequality has increased not only overall but also within racial groups (Chart 4-4). However, only among Hispanics has increased inequality taken the form of growth in the proportions of both upper income and poor families at the expense of the middle. Although both whites and Hispanics experienced declines in the proportion of middle-income families, among whites there was rapid growth in the proportion at the top, and a small decline in the proportion at the bottom. The proportion of black families in the middle- and upper income groups combined has changed little since the mid-1970s, but by some measures there has been movement of families from the middle of the income distribution to the top. 127 Poverty Gaps in poverty rates between non-Hispanic whites and Asians on the one hand, and blacks and Hispanics on the other, remain substantial (Chart 4-5). However, the gaps in poverty rates between blacks and whites have decreased since 1993, after remaining largely stagnant from the mid-1970s to the early 1990s. In 1996 the black poverty rate reached its lowest level ever, as did the difference in poverty rates between blacks and whites. The decline in the black poverty rate in the current recovery exceeds slightly the declines recorded in the recoveries of the 1970s and 1980s. The poverty rate for Hispanics fell slightly from 1993 to 1996, although it is still high, exceeding the rate for blacks. The poverty rate for Asians has been flat since 1994. Chart 4-5 Poverty Rates for Persons Poverty rates fell over the 1960s and early 1970s, and since then differences across groups have been relatively stable. Percent 60 50 50 Black 40 40 30 30 20 20 10 10 Non-Hispanic white i . . i . . i . . i 1959 1962 1965 1968 1971 1974 1977 1980 Source: Department of Commerce (Bureau of the Census). 1983 1989 1992 1995 Child Poverty Differences across racial and ethnic groups in the prevalence of child poverty not only indicate inequality in the current well-being of children, but also represent differences in economic opportunity that contribute to future inequality among adults and in subsequent generations. Although child poverty is associated with health, developmental, and educational disadvantages, the importance of low family income per se as compared with parental education, family structure, or other characteristics associated with poverty remains in dispute (see Chapter 3). 128 Since 1993, child poverty rates have generally fallen, but they remain too high, and differences in child poverty rates across racial and ethnic groups are stark. Between 1993 and 1996 the poverty rate for white children fell 1.5 percentage points to 16.3 percent. The rate for black children fell even more, from 46.1 percent to 39.9 percent, the lowest rate in more than 20 years but still very high. The rate for Hispanic children fell marginally after 1993 and stood at 40.3 percent in 1996, higher than the rate for black children. The poverty rate for Asian children rose 1.3 percentage points, to 19.5 percent, between 1993 and 1996. HOUSEHOLD WEALTH Household wealth—the total value of a household's material and financial assets, minus its liabilities—contributes to economic well-being independently of income. Greater wealth allows a household to maintain its standard of living when income falls because of job loss, family changes such as divorce or widowhood, or retirement. Financial wealth may also be particularly important in the presence of borrowing constraints. For example, evidence that the receipt of an inheritance increases entry into self-employment suggests that a lack of personal financial capital limits small business ownership. Wealth has been measured less frequently than income in government statistics. There are two major Federal sources of data on household wealth for the population: the Survey of Income and Program Participation (SIPP) and the Survey of Consumer Finances (SCF). Figures are not comparable across the two surveys for many reasons: for example, the SCF and the SIPP employ different definitions of "family" and "household." Measures of wealth show even greater disparities across racial and ethnic groups than do measures of income. For example, according to data from the 1993 SIPP, the median net worth of white households ($47,740) was over 10 times that of black or Hispanic households ($4,418 and $4,656, in 1993 dollars, respectively). Figures from the 1995 SCF are $73,900 for non-Hispanic whites and $16,500 for all other groups combined (in 1995 dollars). Very substantial wealth gaps between whites on the one hand and blacks and Hispanics on the other are found even among families with similar incomes. Differences in wealth result primarily from differences in lifetime labor market compensation, differences in saving rates and the return on those savings (including appreciation of the value of assets), and differences in inheritances or other transfers from relatives. Holdings among non-Hispanic whites in all major categories of wealth exceed those of blacks and Hispanics. Three important components of wealth for families are housing equity, holdings of stocks and mutual funds, and private pension wealth. 129 Home Equity The most important asset for most households is the equity in their home. Differences in home equity arise from differences in homeownership rates, in home values, and, among homes of a given value, in the level of equity accumulated. Since 1993 there have been increases in homeownership among all groups, but the homeownership rate among non-Hispanic whites is more than 50 percent higher than that of blacks or Hispanics. Some evidence suggests that gaps among racial groups in home values, although large, are narrowing. For example, between 1992 and 1995 the median value of the primary residence was unchanged at about $92,000 for non-Hispanic whites but increased from $54,200 to $70,000 for all other groups combined. In 1993 the median equity among homeowners was about $50,000 for whites (in 1993 dollars), $29,000 for blacks, and $36,000 for Hispanics. These values were $3,000 to $5,000 higher in 1993 than in 1991 (in 1993 dollars). This Administration's efforts may have contributed to recent increases in homeownership and home values among blacks and Hispanics. The Administration has strengthened regulations under the Community Reinvestment Act and has stepped up enforcement of fair lending laws. Data collected under the Home Mortgage Disclosure Act show that, between 1993 and 1996, conventional home mortgage lending to blacks has increased 67 percent; such lending to Hispanics has increased 49 percent. These increases are much larger than the percentage increase in conventional home mortgage lending overall in this period. Discrimination in Mortgage Lending There are a variety of possible explanations for differences in homeownership rates among racial and ethnic groups. Research has documented substantially higher denial rates in applications for home mortgages among blacks and Hispanics than among whites. An analysis of lending practices in Boston found that applications from blacks and Hispanics were rejected about 28 percent of the time, compared with 10 percent for whites. However, applications from whites, blacks, and Hispanics differed along many economic dimensions— including income, loan-to-value ratios, and the presence of private mortgage insurance, as well as other characteristics of properties and applicants—which together explained about two-thirds of the difference in rejection rates. Still, about one-third of the gap remained unexplained by these factors. The remaining gap has three possible explanations. The first is that some relevant economic characteristics correlated with race are observed by the lender but not by the analyst, and average differences in those characteristics across racial and ethnic groups account for the higher denial rate among minorities. However, the Boston study 130 was careful to incorporate extensive controls, including all factors that lenders, underwriters, and others reported to be important in making lending decisions. The second explanation is that the higher denial rate reflects lenders' expectations of higher default rates among minorities with similar qualifications and other characteristics. This practice—rejecting applications on the basis of group characteristics—is known as statistical discrimination and is illegal. The third possible explanation, "noneconomic" or prejudice-based discrimination, in which lenders discriminate against minorities and lower their profits as a result, is also illegal. The authors of the Boston study argue that no clear-cut evidence exists of differences by race in default rates, after adjusting for other characteristics of applicants and properties such as those measured in the study. However, this argument and the study itself have been challenged in subsequent studies, which claim to find evidence of higher default rates among minorities. Other researchers have argued in response that differences in default rates between minorities and whites may not be a good indication of their creditworthiness because, for example, whites might be treated more favorably in foreclosure proceedings. As discussed in the concluding section of this chapter, audit studies provide additional evidence of discrimination in home mortgage lending, although continued research is needed on the extent and nature of discrimination in this area. Holdings of Major Financial Assets Whites have higher rates of ownership of every kind of major financial asset than do blacks or Hispanics, and among those holding each kind of asset, holdings by whites are much more valuable. This is not surprising given whites7 greater median wealth. But some gaps are particularly striking. For example, as of 1993 nearly 95 percent of black households owned no stocks or mutual funds, and 95 percent reported owning no private pension wealth (the corresponding figure for whites is about 75 percent in each category). Differences in stock ownership in 1993 are particularly important because between 1993 and 1997 the value of common stock appreciated enormously: for example, the Standard and Poor's 500 index roughly doubled in value. Another striking difference is in transaction accounts (such as checking accounts), which are held by the vast majority (92 percent) of non-Hispanic white families but by only 69 percent of all other racial and ethnic groups combined. THE ROLE OF FAMILY STRUCTURE IN INCOME AND POVERTY Increases in family income and decreases in poverty rates for both blacks and whites were rapid in the postwar period, especially in the 1960s. Blacks also made progress relative to whites in the 1960s. But 131 black family income was flat from the early to mid-1970s to the early 1990s, and the ratio of black to white family income generally fell over this period. For example, since 1967 the ratio of black to white average income for all families has fallen slightly, from 0.65 to 0.62. However, black-white ratios of income within family types have increased, from 0.71 to 0.80 among married-couple families, and from 0.63 to 0.73 among female-headed families. (The overall ratio of income is lower than the ratios among these subgroups because a larger proportion of black families are female headed, a group with much lower average income than other family types.) During this period the shift toward female-headed families was faster for blacks than for whites (Chart 4-6). Some observers have suggested that these trends—particularly the rise of female-headed families—may largely explain the persistence of differences in family income and poverty rates among racial and ethnic groups. However, an adjustment for changes in family structure since 1967 suggests that such changes explain only about one-fifth of the income and poverty gaps between blacks and whites observed today. Moreover, this adjustment may overstate, perhaps greatly, the adverse effects of family structure on income if those with lower income or lower expected income are less likely to marry or to stay married. Chart 4-6 Family Structure Since 1970 all groups have experienced increases in the proportion of families headed by single women. The rise has been most pronounced for black families. Married couple Q Male-headed, no spouse EH Female-headed, no spouse 20 Source: Department of Commerce (Bureau of the Census). The adjustment amounts to taking a weighted average in which the average income or poverty rate specific to a racial group and family type in 1996 is weighted by the corresponding percentage of 132 families of that racial group and family type in 1967. The adjustment shows that if family structure for blacks and whites had not changed since 1967, in 1996 the black-white ratio of family income would have been 0.70 rather than 0.62, and the ratio of poverty rates would have been 2.6 rather than 3.0. Thus, these ratios indicate that roughly onefifth of both the income gap and the poverty gap in 1996 is explained by changes in family structure after 1967. These are surprisingly modest effects when one considers that since 1967 the proportion of female-headed families increased from 28 percent to 47 percent among black families and from 9 percent to 14 percent among white families. (Results are similar if the difference in family incomes rather than their ratio is used to measure the income gap between blacks and whites; differences in poverty rates rather than ratios suggest a somewhat larger effect of family structure changes since 1967 on the poverty gap. Also, similar adjustments demonstrate that family structure can account for only a small portion of the difference in income and poverty between Hispanics and non-Hispanic whites.) If the dramatic changes in family structure since the 1960s account for only a modest portion of current income gaps among whites, blacks, and Hispanics, what accounts for the remainder? Since the labor market is the most important source of family income, a later section of this chapter investigates gaps among racial and ethnic groups in labor market outcomes such as earnings and employment. However, such outcomes are linked to the skills that workers bring to the labor market, many of which are developed prior to labor market entry. The next section therefore discusses differences in education across racial and ethnic groups. EDUCATION Education is one of the most powerful predictors of economic status. Many dimensions of education are important, including the quality of schooling, the quantity of schooling (often called "attainment," for example the number of years completed), and student achievement or learning. The link between educational attainment and earnings has been well established, in part because data on attainment have been collected in the Census and in labor market surveys over a number of years. There is less agreement on the measurement and economic importance of other dimensions of education. Furthermore, the economic importance of a college education has increased dramatically over the past 20 years, as the relative demand for highly educated workers has risen sharply. The focus of this section is on secondary and postsecondary educational attainment. Of course, differences in later educational attainment among racial and ethnic groups can result from effects of discrimination and social and economic disad- 133 vantages experienced in early childhood or in elementary education. (Chapter 3 discusses early childhood and elementary education.) DIFFERENCES AND TRENDS IN EDUCATIONAL ATTAINMENT Differences Substantial gaps in educational attainment persist among racial and ethnic groups. The most recent year for which comparable national data are available for all groups discussed in this chapter is 1990. Asians had the highest average attainment: in 1990, 40 percent of Asians 25 years and older had completed 4 or more years of college, compared with 22 percent of whites, 11 percent of blacks, and about 9 percent of Hispanics and American Indians. About 80 percent of whites and Asians had at least completed high school, versus twothirds of American Indians and blacks and about half of Hispanics. For Hispanics, attainment also varies considerably between immigrants and the native-born. For example, Hispanic immigrants have much lower rates of high school completion than native-born Hispanics. Asian immigrants, on the other hand, have educational attainment similar to that of their native-born counterparts. Trends To provide an indication of recent changes in educational attainment across racial and ethnic groups, this section examines attainment for younger persons (those aged 25-29 years). High school. High school completion rates have increased steadily over the 20th century. As educational attainment has increased, gaps in high school completion among racial and ethnic groups have generally narrowed, at least among the native-born. In 1967 the gap between blacks and whites in high school completion rates was 20 percentage points. This gap has narrowed considerably, but a 7-percentage-point difference remains between blacks and non-Hispanic whites (Chart 4-7). And although their high school completion rate has risen since the early 1970s, Hispanics lag far behind and have not gained ground relative to non-Hispanic whites. In interpreting these trends, however, it is important to recall that the composition of the Hispanic population has changed rapidly. The Hispanic population has roughly doubled in size between 1980 and 1996, and the fraction that is foreign-born has been growing. In fact, the slow progress in high school attainment among Hispanics is in large part explained by the increasing representation of immigrants with less education. For example, between 1980 and 1990 the proportion of 18- to 21-year-old dropouts (those who were neither enrolled in nor had completed high school) fell from 30 percent to 23 percent among native-born Hispanics, but remained at 47 percent for foreign-born Hispanics. 134 Still, as of 1990 a substantial gap in high school completion rates remained between native-born Hispanics and non-Hispanic whites. Postsecondary education. Educational attainment beyond high school has increased dramatically for blacks, Hispanics, and whites over the past 30 years, although Hispanics have shown little increase in the 1980s and 1990s. The percentage of non-Hispanic whites with a bachelor's degree or higher is more than twice that of their black and Hispanic counterparts. High school completion rates, college enrollment rates among high school graduates, and college completion rates among college enrollees combine to determine rates of college completion. Some of the gaps in college completion rates reflect differences in high school completion rates. For example, the gap between blacks and Hispanics in completing 1 or more years of college is explained almost entirely by lower high school completion rates among Hispanics. But even among those who have completed high school, non-Hispanic whites are more likely to enter and to complete college than blacks or Hispanics. Again, Hispanics' low college attainment rates appear to be due partly to low rates among immigrants: between 1980 and 1990 the proportion of 18- to 24-year-olds enrolled in college increased from 18 percent to 28 percent among native-born Hispanics, but remained at about 16 percent for foreignborn Hispanics. Among women aged 25-29, college completion gaps widened between whites on the one hand, and blacks and Hispanics on the other, over the 1980s. In fact, except among white women, there was Chart 4-7 High School Completion Rates for 25- to 29-Year-Olds High school completion rates have risen since the late 1960s, and blacks are closing the gap with whites. The completion rate for Hispanics remains low. Non-Hispanic white 70 60 >0 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 Note: Prior to 1 971 , data for whites include Hispanic whites, and data for blacks include Hispanic blacks. Sources: Department of Commerce (Bureau of the Census) and Department of Education (National Center for Education Statistics). 135 relatively little increase in college completion rates over the 1980s for men or women of these ages (Charts 4-8 and 4-9). However, in the 1990s rates of college completion among black men and women began to pick up, reflecting an increase in college enrollment rates of black high school graduates in the mid-1980s. College completion also increased among white men in the early 1990s. EXPLAINING EDUCATIONAL ATTAINMENT GAPS High school completion rates increased sharply in the postwar period. Compared with the rather steady increase in high school completion, college attendance and completion have fluctuated, especially for males, although they have increased steadily since the mid-1980s. Increases in college attainment have been attributed to two developments. First, since the late 1970s growth in demand for highly educated workers has raised the relative wages of college graduates. Second, because educational attainment has generally increased over time, the parents of recent high school graduates tend to be better educated than the parents of high school graduates some years ago. This is important because parents' and children's education levels are highly correlated. Federal financial aid has also expanded dramatically in the 1990s, doubling in real terms since 1993. This expansion is expected to increase college enrollment and attainment among low-income students, but it is too early to assess the magnitude of this effect. Levels Most studies in the economics literature of gaps in college-level educational attainment among racial and ethnic groups have focused on college entry. Parental education and family income are important determinants of gaps in college entry among racial and ethnic groups. Both factors affect high school completion as well. For example, one detailed recent study concluded that differences among blacks, whites, and Hispanics in family background (primarily parental education and income) can account for all the gaps in rates of high school completion and college entry among racial and ethnic groups. The study found that among young people with similar family income and parental education, rates of college entry appear to be higher among blacks and Hispanics than among whites. The importance of family background and income differences is reduced when achievement test scores are controlled for, but the interpretation of this finding is the subject of great controversy. For example, low test scores result at least partly from disadvantages relating to family background and may therefore be a mechanism whereby such disadvantages are translated into low educational attainment. 136 Chart 4-8 Women Aged 25-29 with 4-Year College Degree or Higher The fraction of women with at least a 4-year college degree has increased for non-Hispanic whites, blacks, and Hispanics, but considerable gaps persist. Percent 35 30 Non-Hispanic white \ 25 20 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 Notes: Prior to 1971, data for whites include Hispanic whites, and data for blacks include Hispanic blacks. Data for blacks and Hispanics are 3-year centered averages. Prior to 1992, series shows fraction of women completing 4 or more years of college. Sources: Department of Commerce (Bureau of the Census) and Department of Education (National Center for Education Statistics). Chart 4-9 Men Aged 25-29 with 4-Year College Degree or Higher The fraction of men with a 4-year college degree or higher has tripled for blacks and nearly doubled for whites and Hispanics, but considerable gaps persist. Percent 35 35 \ Non-Hispanic white 10 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 Notes: Prior to 1971, data for whites include Hispanic whites, and data for blacks include Hispanic blacks. Data for blacks and Hispanics are 3-year centered averages. Prior to 1992, series shows fraction of men completing 4 or more years of college. Source: Department of Commerce (Bureau of the Census) and Department of Education (National Center for Education Statistics). 137 Trends More attention has been paid to explaining differences in educational attainment among racial and ethnic groups than to explaining their trends. Large inflows of less educated immigrants have kept the average educational attainment of Hispanics relatively flat. As noted above, high school graduation rates have increased for native-born Hispanics but continue to be much lower among immigrants. The narrowing of differences in high school attainment between blacks and whites over the past 30 years can be largely explained by increases relative to whites in black parental educational attainment. As high school completion gaps between blacks and whites were decreasing steadily, differences in earnings between college and high school graduates of all races were increasing markedly. Naturally, attention has turned to explaining differences among racial and ethnic groups in college enrollment and completion. College attendance among high school graduates has increased for all groups. However, the enrollment rate among recent graduates began to increase for whites around 1980, about 5 years before the rate for blacks began to increase. Therefore, the disparity in college enrollment rates widened in the early 1980s and translated into wider differences in college completion among racial and ethnic groups in the late 1980s or early 1990s (Charts 4-8 and 4-9). One possible explanation of these differences is the increasing direct costs of college. A recent study found that the schooling decisions of blacks are more sensitive than those of whites with similar incomes to tuition and other direct costs, perhaps because of lower wealth among blacks than among whites with similar incomes. It also found that the rise in the direct cost of higher education explains some, but no more than one-third, of the lower propensity of blacks to enter college in the 1980s. However, college tuition and other costs continued to increase in the late 1980s, a time when black college enrollment began to increase. The study concluded that the positive effects of rising parental education appear to have more than offset the negative effects of rising costs. AFFIRMATIVE ACTION IN HIGHER EDUCATION ADMISSIONS The term "affirmative action" encompasses a variety of activities and programs, ranging from outreach and recruitment efforts to programs that consider race as a factor in an evaluation process, which are intended to increase minority representation in employment, education, or contracting. Under the law, and as reflected in Department of Education guidelines, colleges and universities may not establish quotas for admission or set aside a certain number or percentage of admissions slots based on race. However, they may consider race or national origin as one factor in making admissions decisions, for the purpose of remedying the effects of past discrimination or achieving a diverse student body. 138 Affirmative action in admissions has been the subject of recent contention. The Board of Regents of the University of California voted in 1995 to prohibit universities within its system from considering race in admissions. The California Civil Rights Initiative, known as Proposition 209, prohibits the State from utilizing race- or genderbased affirmative action programs in State employment, public contracting, and education. In Texas et al. v. Hopwood the Court of Appeals for the Fifth Circuit held that the admissions procedure used by the University of Texas Law School in 1992 was unconstitutional. However, this Administration strongly supports affirmative action in higher education, and the practice remains widespread. Such programs are intended to serve a variety of societal purposes, including to remedy past or present discrimination, to secure the educational benefits of a diverse campus community, to compensate for educational or other disadvantages faced by promising applicants, to prepare students for an increasingly diverse society, and to train students to serve the needs of diverse communities. But what are the more narrow economic effects of affirmative action in higher education admissions? A recent study found that black and Hispanic students are more likely to be admitted to "elite" institutions of higher education (that is, those with average Scholastic Aptitude Test, or SAT, scores in the top 20 percent of 4-year institutions) than non-Hispanic white or Asian students with similar grade point averages (GPAs) and test scores. Of course, in assessing student merit and making admissions decisions, universities consider many criteria, such as letters of recommendation, extracurricular activities, region of residence, and adverse personal circumstances. The study also found no evidence of differences by race, after controlling for test scores and grades, in admissions to the less elite institutions where 80 percent of college students are educated. Nonetheless, admission to elite institutions is of interest because of the strong link between college selectivity and later earnings. Critics of affirmative action programs in higher education admissions argue that some of the intended beneficiaries may actually be harmed by such policies. (The same criticism could also be made of programs for children of alumni or faculty.) They contend that affirmative action programs impede the academic performance of minority students and increase their college dropout rates by encouraging them to enter colleges for which they may not be well prepared. However, the study discussed above found little evidence of economic harm to these students, as measured by graduation rates and earnings. The key question this criticism raises is whether students admitted to elite institutions because of affirmative action would have fared better had they instead attended less selective institutions. In fact, attending an elite institution is associated with a lower college GPA, but a higher graduation rate and higher earnings, for all 139 students, after controlling for SAT scores and high school GPA. The relationship between college selectivity and both college completion and earnings is similar for blacks and Hispanics and others. The higher graduation rate among similar students attending more elite institutions raises questions about which practices at elite institutions increase graduation rates. Possibilities range from more engaging professors or classes to better support services. It is also possible that students expect a higher economic return to additional investment in education at an elite college and are therefore more highly motivated to obtain a degree. The authors of the study argue that the number of applicants denied admission because of affirmative action programs is small. But many other students who are rejected may erroneously conclude that they would have been admitted in the absence of such programs. As a result, affirmative action in admissions may generate resentment far in excess of its actual aggregate effects. Nonetheless, individuals denied admission as a result of these policies may bear some costs—even if those individuals are difficult to identify and are few in number. As an alternative to race-conscious admissions policies, some have called for "color-blind" policies that might target low parental income or education. Blacks and Hispanics are, of course, a minority of the population and account for a small minority of the population of youths with high SAT scores. As a result, although blacks and Hispanics are much more likely than whites to be poor, they make up a relatively small share of the low-income population with the SAT scores or GPA needed to gain admission to elite colleges. Therefore, targeting low-income applicants alone would very likely result in a dramatic reduction in minority representation at elite colleges. Classbased, color-blind admissions standards would not yield substantial numbers of blacks and Hispanics at most top-ranked institutions at present. Some commentators have therefore concluded that raceconscious admissions policies are needed to retain a semblance of racial diversity on elite college campuses. LABOR MARKETS The largest share of most families' income is derived from earnings from labor. Changes in labor markets can therefore have considerable effects on economic inequality across racial groups. Differences in labor market outcomes among racial and ethnic groups are intertwined with general developments in labor markets. Among the most important recent developments are technological changes that have increased the demand for highly educated labor, growing immigration and international trade, declining trade union membership, increased participation of women in the labor market, and, most 140 recently, increases in the minimum wage and expansions of the earned income tax credit. (See Chapter 7 for a discussion of the effects of international trade on labor markets.) Developments that appear race-neutral may nonetheless affect racial and ethnic groups differently. For example, since Hispanics, on average, have much lower educational attainment than whites and blacks, they are more likely to be harmed by falling demand for less educated workers. However, lower demand for less skilled workers would not necessarily be expected to increase wage gaps among racial and ethnic groups for workers with similar levels of education. In analyzing changes in racial inequality in labor markets it is important to bear in mind the growing economic diversity within racial groups that began to be observed in the mid-1960s. For example, the growing income inequality among blacks described above is mirrored in the labor market, with college-educated professionals at one extreme and labor force dropouts at the other. Although both groups face substantial barriers in the labor market related to race, the nature of these barriers could be quite different. The growing labor market diversity within racial groups cautions against the search for a single explanation for changes over time in differences among racial groups. Three periods mark changes in black-white inequality in the labor market since 1960: a period of rapid progress from 1965 to the mid1970s; a period of stagnation or erosion of gains between the mid-1970s and the early 1990s; and a period of mixed results since the early 1990s. The beginnings and ends of these periods are difficult to determine precisely because focusing on different data series and different subgroups can yield somewhat different results. TRENDS IN LABOR MARKET OUTCOMES Unemployment and Employment Gaps The current economic recovery has reduced unemployment substantially for all groups. The overall unemployment rate has been below 6 percent for over 3 years and has been at 5 percent or below since April 1997. Improvement in the employment situation overall has been accompanied by a reduction in the difference in the unemployment rate between blacks and Hispanics on the one hand, and whites on the other. The proportion of black women employed has risen above that for white women in recent months. However, unemployment rates for blacks are more than double those for whites and fluctuate more sharply over the business cycle (Chart 4-10). Men. In 1997 the unemployment rate for black men 20 years and older was 8.4 percent, its lowest annual average since 1974. At 3.6 percent, the white male unemployment rate for 1997 was also near a 20-year low. Although the ratio of black unemployment to white unemployment is thus more than 2 to 1, as it has been for many 141 years, for the past 3 years the difference in rates has been roughly 4 to 5 percentage points, smaller than the gaps that prevailed from 1975 to 1994. Among men aged 25-54, the labor force participation rate for blacks is about 84 percent, about 9 percentage points lower than the rate for whites. These rates have fallen in the past 25 years for both blacks and whites, although the decline has been somewhat larger among blacks. Chart 4-10 Unemployment Rates Unemployment rates for blacks and Hispanics are higher and increase more in recessions than unemployment rates for whites. Percent 25 , 25 20 20 15 15 10 10 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 Note: Prior to 1972, data for blacks include all nonwhites. Source: Department of Labor (Bureau of Labor Statistics). Women. Labor market outcomes for women are important for understanding differences in economic well-being among racial groups, for two reasons. First, women's earnings have historically made up a larger proportion of two-parent family income among blacks than among whites. Second, because of their much higher rate of single parenthood, black families rely more heavily on female earnings than do white families. For women aged 20 and above the most striking employment trend is a long-term increase in labor force participation. Participation rates for black women have long exceeded rates for white women, but the difference has narrowed considerably and nearly disappeared by the early 1990s. However, beginning in 1995, participation rates of black women accelerated, reaching 64 percent in 1997. The rate for white women appears to have reached a plateau at about 60 percent. But because black women also have higher unemployment rates than white women, their employment-topopulation ratios are much more similar than are their participation rates. Still, the black female employment-to-population ratio sur 142 passed the white ratio in 1996. Labor force participation rates for Hispanic women are lower than those for either blacks or whites. Gaps (both ratios and differences) among racial groups in unemployment rates for women are similar to those for men. The black-white unemployment ratio for women has remained above 2, but the difference has been somewhat smaller in the 1990s than in the 1980s. Occupations Like educational attainment, occupation is regarded as an indicator of more permanent economic and social status than are wages or income in a single year or month. Workers in different occupations are affected differently by changes in the economy. For example, workers in blue-collar occupations are more likely than white-collar workers to be laid off in recessions. Over the postwar period black men and women have both experienced tremendous change in the occupations in which they work. Some of these changes were experienced by all workers, black and white, but some are specific to blacks, due, for example, to reduction in the most overt forms of discrimination and to large migration flows out of the rural South. Women. In 1940, 60 percent of employed black women worked in domestic service occupations, more than triple the percentage among all employed women. The proportion of black women employed in domestic service fell to 35 percent by 1960 and to 2 percent by 1996. Over the same period, black (and white) women moved in large numbers into other service occupations, as well as into clerical and sales jobs. The proportion of black women in managerial and professional occupations increased slowly between 1940 and 1960, then jumped in the 1960s and 1970s, reaching about 19 percent in 1980. A major revision of the occupational classification system, implemented after 1982, makes tracking changes over the entire 1980s difficult. Since 1983 the fraction of black women employed in managerial and professional occupations grew steadily, but increased less than that of white women. As a result, the gap between white and black v/omen in the percentage working in managerial and professional occupations widened by more than 2 percentage points over the past 15 years. Hispanic women are less likely than black or white women to be employed in managerial and professional occupations, and more likely to be employed in private household service and in the relatively low skill blue-collar occupations of operators and fabricators. Men. In 1940, 41 percent of black men worked as farmers or farm laborers; that share had fallen to only 14 percent in 1960. (The corresponding percentages for all men were 22 percent and 8 percent, respectively.) By 1970 employed black men were more likely than other employed men to work in blue-collar occupations (60 percent compared with 48 percent). Black men were therefore concentrated in 143 those occupations that were the most affected by the severe cyclical downturns of the 1970s and early 1980s, and at least until recently by the long-term decline in manufacturing employment. By 1996 only about 45 percent of employed black men and 38 percent of all employed men worked in blue-collar jobs. In the period between 1960 and 1980 the percentages of black men and black women who worked in professional and managerial occupations were roughly equal, and both increased by about 10 percentage points. But since 1980 black men have not moved into professional and managerial occupations as rapidly as black or white women. In 1996 the share of black men working in managerial and professional occupations stood 6 percentage points behind that of black women, 11 percentage points behind that of white men, and 15 percentage points behind that of white women. Hispanic men are the least likely of all the groups considered here to work in managerial and professional occupations. They are far more likely than black or white men to work in farming and related occupations, more likely than black men to work in precision production ("craft") occupations, and slightly less likely than black men to work in the lower skill blue-collar occupations. Earnings Gaps Black-white earnings gaps. By all available measures, the wages of blacks increased rapidly relative to those of whites in the 1960s and early 1970s, but progress slowed or reversed between the mid-1970s and the early 1990s (Charts 4-11 and 4-12). Trends in earnings inequality among racial groups in the 1990s are less clear. Most wage series show little progress in the pay of blacks relative to that of whites. However, one wage series—median annual earnings for fulltime, year-round male workers—does show substantial recent progress among black men relative to white men, with the blackwhite ratio reaching a new high of about 0.8 in 1996. Firm conclusions about black-white pay gaps for men in the 1990s are therefore difficult to reach. Explanations for the narrowing of the pay gap in the 1960s, as well as the widening between the mid-1970s and the early 1990s, are discussed below. Researchers have just begun to examine the record of the 1990s. Wage growth in the 1960s and early 1970s was faster for black women than for black men, both relative to white women (Chart 4-12) and relative to white men. Between 1967 and 1975 the gap in median wages between white and black women fell from about 20 to about 5 percentage points. Among younger women the differential disappeared, and there is even evidence that young, college-educated black women were paid more than comparable white women in the 1970s. But the earnings gap increased starting in the mid-1970s and stood at about 17 percentage points in 1997. Black and white women have both gained relative to white men. 144 Chart 4-11 Ratios of Median Weekly Earnings of Male Full-Time Workers Since the 1970s, black men's earnings have held roughly constant relative to those of white men, while Hispanic men have lost ground. Percent of white male earnings 100 90 70 60 60 i . i . i . i . i . i . i . i r 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 Notes: Prior to 1979, the series for blacks includes other nonwhites. Beginning in 1979 data are for workers aged 25 and over. Source: Department of Labor (Bureau of Labor Statistics). Chart 4-12 Ratios of Median Weekly Earnings of Female Full-Time Workers Black women nearly closed the pay gap with white women by the early 1970s, but relative wages of black and Hispanic women have been falling since then. Percent of white female earnings 100 100 90 80 70 70 60 60 Break in series 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 Notes: Prior to 1979, the series for blacks includes other nonwhites. Beginning in 1979 data are for workers aged 25 and over. Source: Department of Labor (Bureau of Labor Statistics). As noted above, whites on average have higher educational attainment than blacks. But sizable pay gaps among racial and ethnic 145 groups remain for workers with similar educational attainment (Table 4-2). At least until the 1990s, these trends in black-white pay gaps were more pronounced for younger workers, who tend to bear the brunt of labor market adjustment. For example, the pay gap between blacks and whites narrowed most among young college graduates in the 1960s and early 1970s, and then widened most among this group after 1975. TABLE 4-2.—Ratios of Black and Hispanic to White Median Weekly Earnings, 1997 H ispanic-white rati 0 Black-white ratio Sex Workers with high school diploma only Workers with bachelor's degree only All workers Workers with high school diploma only 074 075 074 063 078 086 .83 .85 .90 .71 .86 .94 All workers Men Women Workers with bachelor's degree only Note—Data are for full-time workers aged 25 and over. Source: Department of Labor (Bureau of Labor Statistics). Earnings gaps for other groups. Less information is available about differences in pay between whites and other minority groups. The pay of Hispanic men and women fell relative to that of whites over the 1970s and 1980s. Much of the deterioration in the pay of Hispanics is linked to educational differences and immigration. For example, differences in pay between Hispanics and whites with similar educational attainment are much smaller than the overall differences (Table 4-2). In fact, a recent study reported that, between 1980 and 1990, differences in pay between whites and minorities living in the same metropolitan areas, with comparable levels of schooling and working in similar occupations, widened by 2.5 percentage points for blacks and 4.1 percentage points for American Indians, but by less than 1 percentage point for Hispanics and Asians. EXPLAINING EARNINGS GAPS Differences in pay among racial and ethnic groups can result from differences in the average quantities of factors related to labor market success, such as educational attainment, and from differences in the "prices" of such factors, that is, their value in the labor market. Differences among racial and ethnic groups in the prices these factors command have been attributed to labor market discrimination. But differences in the quantities of these factors may also reflect discrimination outside the labor market or even within it. For example, if blacks with higher educational attainment are discriminated against in the labor market, their returns to investing in education may be artificially reduced. Facing a lower return, blacks may invest less in higher education. 146 Historically, blacks have received less schooling and attended schools with larger class sizes and smaller budgets than those attended by whites. Largely as a result of the 1954 Supreme Court decision in Brown v. Board of Education, the Civil Rights Act of 1964, and the 1968 decision in Green v. County School Board, which required active integration of schools, schools became increasingly integrated in the late 1960s and early 1970s. Schooling gains can account for perhaps 20 percent of the gains in black workers' relative earnings in the 1960s and early 1970s. Other factors that explain trends in wage gaps among various racial groups include migration (especially before the 1960s), regional and industry demand conditions, macroeconomic shocks, and government intervention. Government intervention to increase economic opportunities for disadvantaged minorities has taken many forms, including education and training programs, the enactment and enforcement of civil rights and equal opportunity laws, requirements (under Executive Order 11246) that Federal contractors engage in affirmative action programs, and court-monitored affirmative action programs intended to remedy past practices of discrimination. Changes to the Mid-1970s Between 1920 and 1990 blacks experienced two periods of rapid progress relative to whites in the labor market: the first was during the wartime economy of the 1940s, and the second was the period from 1965 to 1975. Migration from the South was substantial in the 1940s, 1950s, and into the 1960s: 10 to 15 percent of all blacks and roughly 20 to 25 percent of young black men migrated in each of these decades. Wage gaps between blacks and whites were much larger in the South than in other regions. For example, in 1960 the black-white gap in wages was about twice as large in the South (50 to 60 percent compared with 20 to 30 percent outside the South). Following passage of the Civil Rights Act of 1964, the relative wages of black workers increased sharply—more than can be explained by macroeconomic factors such as growth in gross domestic product. The improvement in relative wages was by far the greatest in the South, where State fair-employment laws were weakest, where institutional discrimination was greatest, and where Federal antidiscrimination efforts were focused. Although there was some progress in the relative earnings of blacks before 1964, the evidence is overwhelming that progress accelerated substantially in the period from 1964 to 1975, and that Federal attacks on racial exclusion in the South were critical to this acceleration. As noted above, gains in years of schooling and school quality explain perhaps 20 percent of the gain in relative wages for blacks in this period. There were large increases in the economic returns to schooling for blacks. In principle, these could result from either increased quality of schooling or decreased discrimination in the labor 147 market. However, decreased discrimination is the more compelling explanation, since returns to education increased even among older cohorts whose education had been completed prior to 1965. But part of the improvement in schooling and school quality is also attributable to Federal actions. The Supreme Court ruled in the Brown decision that segregated schools are unconstitutional. Yet despite the Brown decision and provisions of the Civil Rights Act that threatened to cut off Federal aid to segregated schools, in the mid1960s black children in the South still overwhelmingly went to segregated schools. The dramatic changes came after the 1968 and 1969 Supreme Court decisions that required immediate integration. Therefore, improvements in school quality that resulted from school desegregation do not explain improvements in black wages in the South between 1965 and 1975. Demand forces seem responsible for much of the improvement in relative wages between 1964 and 1975. Partly because Federal actions coincided with a strong economy, the precise role of Federal action, including the associated voluntary compliance, has been difficult to establish statistically. However, the observation that the most rapid progress came in the South, where Federal efforts were concentrated, supports the importance of the Federal role. Detailed studies show that blacks moved into industries in the South from which they had previously been excluded. For example, after 55 years of neartotal exclusion, black employment advanced rapidly in South Carolina's textile industry from 1965 to 1975. A recent evaluation of the impact of the Equal Employment Opportunity Act of 1972 confirms earlier findings of the importance of Federal equal opportunity law to the labor market progress of blacks. The act expanded civil rights coverage of Title VII of the Civil Rights Act to employers with 15 to 24 employees (previously only larger establishments were covered), as well as to State and local governments. Blacks employed in the newly covered small establishments in States where small employers were not already covered by State fairemployment practice laws, largely in the South, were most affected by this legal change. Blacks gained in relative employment, earnings, and occupational status in small establishments in Southern States after 1972. Changes Since the Mid-1970s Men. In the mid-1970s and 1980s, wages for less educated workers and for black and Hispanic workers deteriorated. Wage differences between blacks and whites grew fastest in the North Central region, where employment and earnings declined more generally. On the demand side, the heavy concentration of blacks in central-city manufacturing jobs in the Midwest in the 1970s made them particularly vulnerable to recessions and the decline of manufacturing employment. Ironically, then, the movement out of the South and into 148 manufacturing employment that had contributed so much to black economic progress in the 1960s and early 1970s also contributed to the deterioration of the late 1970s and 1980s. Labor supply responses such as migration and training can help offset the effects of reductions in labor demand. Lower mobility will produce larger wage and employment declines in response to demand shocks. There appears to have been slower adjustment out of declining areas and industries among blacks and less educated workers, on average, although it is unclear whether this supply adjustment was slower for minorities than for whites with similar educational attainment. Perhaps the most important change in the labor market over the past 25 years has been the increase in the demand for more educated workers. But wage inequality has generally increased even for workers with the same educational attainment. Although growing wage differences between blacks and whites could be a symptom of increased discrimination, the increase in general wage inequality makes this inference more difficult. The increase in general wage inequality for workers of the same age and educational attainment could lead to widening differences in wages between blacks and whites, as the following example illustrates. Suppose that in 1975 the median wage for black men aged 30 with a high school degree stood at the 35th percentile of the distribution of wages for the corresponding group of white men. Suppose further that wage inequality increased generally after 1975, so that by 1990, wages at the 35th percentile of the white wage distribution had fallen 10 percent relative to the white median (for this group). Then, even if the black median wage remained at the 35th percentile of the white wage distribution, the general growth of wage inequality would have resulted in a 10-percent decline in the black-white ratio of median wages. Scholars have recently attempted to quantify these effects. Estimates vary, however, regarding the extent to which the widening of pay gaps between blacks and whites is accounted for by increasing general wage inequality. One early study concluded that such effects could account for the entire increase in black-white wage differences among young workers in the 1980s. But this conclusion has been challenged. For example, the increase in wage gaps between blacks and whites has been greatest among young, college-educated workers. But the median wages of black and white workers for this group were similar in the mid-1970s. Therefore, a general decline at the bottom of the wage distribution relative to the median cannot account for the fall of the black median relative to the white median for this group. For other groups of workers, however, increases in general wage inequality appear to be more important. Researchers have also hypothesized that the increase in general wage inequality among workers of similar ages and education levels is due to the growing value in the labor market of "unmeasured skills" (skills not measured by years of schooling or age). Some have hypoth 149 esized further that the growth in wage differences between blacks and whites is related to differences in unmeasured skills between blacks and whites. For example, skills differences between blacks and whites with the same years of schooling might result from differences in the quality of the schools that blacks and whites attend. Some studies have attempted to explore this issue by directly examining school quality or measures of "skill" such as performance on tests of cognitive achievement or ability. However, important aspects of school quality may be difficult to measure. Studies find that differences in test scores can explain a substantial portion of black-white differences in wages in a given year, but have not been able empirically to account for the reversal in black-white wage convergence since the mid-1970s. In addition, a recent study concludes that growing returns to unmeasured skills are simply not large enough to account for the stagnation of black economic progress after the mid-1970s. First, changes in school quality cannot explain the widening of pay gaps over time within cohorts whose schooling is of fixed quality over their lifetimes. In principle, an increase in the labor market return to school quality could lead to a widening of pay gaps between blacks and whites even within cohorts, if blacks attended lower quality schools. But second, the study found that even after differences in schooling, age, location, and unmeasured skills are taken into account, young, college-educated black men experienced at least a 13percent drop in wages relative to their white counterparts in the 1980s. In sum, black men's earnings fell relative to those of white men of similar age and educational attainment in the late 1970s and 1980s. The evidence available indicates that increasing overall wage inequality may have contributed to this deterioration and may be linked to unmeasured skill differences, but these explanations are incomplete. For example, this explanation does a poor job with young, college-educated black men, for whom the erosion of relative pay was substantial. These investigations therefore provide indirect evidence that discrimination also contributed to widening pay gaps across racial groups. Women. Less attention has been paid to recent increases in the wage gap between black and white women. Since the early 1970s, working women have made substantial gains in earnings relative to men. The narrowing of the gender pay gap has been attributed to greater lifetime labor force participation among women and the dramatic increase in the value of education and work force experience. As noted above, black women reached virtual pay parity with white women in the early 1970s, after a long period of steady improvement (Chart 4-12). Since the mid-1970s, however, the wages of young black women have fallen about 10 percentage points relative to those of young white women. The relative decline was more rapid among 150 young college graduates. Chart 4-12 shows only ratios of weekly earnings of full-time workers, but the trends in pay gaps among racial and ethnic groups for women are similar in other data series (such as annual earnings of full-time, year-round workers) and for workers of similar ages and educational attainment. Both labor force participation rates and attainment of a college degree rose more for white women than for black women in the 1980s. Over the 1980s the returns to education also increased. Changes in demand for specific occupations and the decline in unionization rates appear to have hurt black women relative to white women. Black women were also more likely to be employed in declining industries than white women. Studies document a widening of pay gaps among racial groups for women of similar ages and educational attainment. But since white women's labor force participation rates have increased relative to those of black women (at least until the mid-1990s), their labor market experience at any age may also have increased relative to that of black women. And pay tends to rise with greater labor market experience. Thus, a possible yet unexplored explanation for the decrease in the pay of black women relative to white women since the mid1970s is the increasing relative attachment of white women to the labor force. Discrimination could also have contributed to the decline in the black-white earnings ratio among women. Affirmative Action in Employment Aside from labor market changes that increased the demand for more skilled labor, weaker enforcement of antidiscrimination laws during the 1980s may have contributed to the decline in black workers' relative earnings between the mid-1970s and the late 1980s. There is evidence that enforcement of equal opportunity and affirmative action laws has an effect on hiring decisions. Affirmative action programs have proved controversial, but their aggregate effects remain unclear. Because a variety of civil rights and antidiscrimination measures were undertaken in a relatively short time, it has been difficult to distinguish the effects of affirmative action from those of broader civil rights enforcement. The Office of Federal Contract Compliance Programs (OFCCP) is responsible for monitoring the hiring and promotion practices of Federal contractors. Large government contractors (those with 50 or more employees and $50,000 or more in Federal contracts) must develop an affirmative action program to remedy any underutilization of minorities and women and must make good faith efforts to implement the program. One approach to assessing the effects of affirmative action on employment, therefore, is to compare government contractors (who are covered by OFCCP enforcement) with firms that are not government contractors (noncontractors). This approach, however, is subject to biases that can lead it to overstate or understate the effects of affir 151 mative action plans. On the one hand, noncontractors often take steps to ensure diversity and compliance with equal opportunity laws, even though they are not covered by OFCCP rules. This would lead the method to understate the effects of affirmative action. On the other hand, increased employment at contractor firms could also result from a shift of employment from noncontractors to contractors. In this case the difference between contractor and noncontractor hiring could overstate the employment effects of affirmative action. According to these studies, active enforcement by OFCCP during the 1970s appears to be related to government contractors' increasing their hiring of minority workers, although the effect is relatively modest. For example, one study found that the employment share of black males in contractor firms increased from 5.8 percent to 6.7 percent between 1974 and 1980. In noncontractor firms the share increased from 5.3 percent to 5.9 percent. The literature also finds that OFCCP had a significantly positive effect on the employment of black females and a smaller but still positive effect on white females. A 1996 study concluded that, in contrast to findings for the 1970s, there was no consistent evidence of the success of government antidiscrimination efforts in the 1980s. As noted, in the 1980s OFCCP enforcement was greatly weakened. Debarments of contractors found to be noncompliant, awards of back pay to affected employees, and conciliation agreements following violations all decreased during the decade. Enforcement has apparently increased in the 1990s as new initiatives have been adopted that focus enforcement on the worst offenders, target areas of obvious noncompliance, and strengthen sanctions. DISCRIMINATION No discussion of differences in economic status among racial and ethnic groups would be complete without a consideration of the ongoing importance of discrimination. Two statements appear to be true. First, discrimination is far less pervasive and overt today than it was before the Civil Rights Act of 1964. Second, audit studies and significant judgments in favor of victims of discrimination make it clear that discrimination against members of racial and ethnic minority groups persists in many areas of the economy. However, there is far less agreement about the degree to which current acts of discrimination are responsible for differences in economic status among racial and ethnic groups. Many States' laws dictated a system of race-based classifications that placed blacks at a disadvantage in the economy, in education, and before the law. As late as the early 1960s overt racial discrimination was common. For example, newspaper advertisements clearly stated employer preferences for whites or blacks for specific jobs. The 152 practice was common even in States like New York, where antidiscrimination legislation predated national civil rights legislation. Evidence of continued racial discrimination takes a variety of forms. Perhaps the most convincing evidence comes from audit studies, in which similar white and minority candidates are sent to the same sources to seek jobs, rent apartments, or apply for loans for home mortgages. For example, a white and a black job seeker may be given similar resumes and sent to the same set of firms to apply for a job. These studies typically find that employers are less likely to interview or offer a job to minority applicants, and that minority applicants are treated less favorably by real estate agents and lenders and in some types of consumer purchases (such as automobiles and meals in restaurants). For example, one national study found that the incidence of unfavorable treatment in the housing market was 23 to 30 percentage points higher for a black or Hispanic auditor than for his or her "matched" white counterpart. In the area of housing discrimination the Department of Justice recently launched a national program to test housing developments, seeking evidence of discriminatory practices. Pairs of black and white persons are trained to pose as prospective tenants and sent to ask about the availability of units. In a case brought using evidence developed with this technique, the Department of Justice obtained a consent decree against housing providers in suburban Detroit that resulted in a $125,000 civil penalty paid to the Treasury and required the defendants to make $225,000 available to the victims of their discrimination. Various Federal agencies also receive and resolve thousands of discrimination complaints each year. On the one hand, although a settlement of charges does not always involve admission of discriminatory practice, at a minimum the bringing of a charge indicates the perception that discrimination has occurred. On the other hand, only a portion of employees who experience discrimination actually bring charges. In fiscal 1996 alone, the Equal Employment Opportunity Commission, which is responsible for enforcing the principal Federal statutes prohibiting employment discrimination including Title VII of the Civil Rights Act of 1964, obtained $145 million in monetary benefits (excluding litigation awards) for parties bringing discrimination charges, through settlement and conciliation. From 1993 to 1997 the OFCCP conducted 19,852 compliance reviews and 3,192 complaint investigations and obtained over $158 million in financial settlements, including over $60 million in back pay for 30,171 victims of employment discrimination by Federal contractors. During the first term of this Administration, the Department of Housing and Urban Development (HUD) reached out-of-court settlements on 6,517 housing discrimination cases. HUD took enforcement action on 1,085 cases, either issuing housing discrimination charges or referring cases to the Department of Justice. During this period HUD obtained $17.8 million in compensation for victims of housing discrimination. 153 The Department of Justice settled major mortgage lending discrimination suits in the 1990s, including suits against large lenders in the Atlanta and Boston areas. In fiscal 1997 the Department of Education's Office of Civil Rights received 1,422 complaints alleging discrimination based on race, color, or national origin in access to equal educational opportunities. The office facilitated a change in 249 of these cases. Less direct evidence of discrimination comes from earnings comparisons such as those described earlier in this chapter. As noted there, even after adjusting for many characteristics that affect earnings, these studies typically find that blacks are paid less than their white counterparts. The traditional interpretation is that the unexplained differential reflects discrimination in pay. However, these studies are not uniformly accepted as providing evidence of discrimination in the labor market: some researchers have argued that the studies fail to control adequately for differences in average characteristics between groups. Others argue that controlling for such characteristics may not be appropriate if differences in characteristics such as education and labor market experience are themselves partly the result of discrimination both outside and within the labor market. More direct evidence of labor market discrimination, in addition to that from audit studies, comes from lawsuits that prove in a court of law a pattern and practice of discriminatory behavior. But these narrow, albeit powerful, pieces of evidence do not translate easily into estimates of the aggregate economic impacts on employment or economic well-being of discriminatory behavior. Significant analytical challenges, requiring a combination of approaches, remain in assessing the contribution of current acts of discrimination to current differences in economic status among racial and ethnic groups. For example, minorities who face discrimination by one employer may be able to find employment with another, nondiscriminatory employer. (But even in this case, discrimination imposes psychological costs and additional job search costs on minorities.) This example also suggests sthat, especially where discrimination is prevalent, reducing discrimination can yield substantial economic benefits, by increasing the number of nondiscriminatory employers. It is an important goal of social and economic policy to ensure that discrimination does not limit the economic opportunities available to members of racial and ethnic minority groups. This Administration remains committed to ensuring equal opportunity for all Americans. 154 CHAPTER 5 Improving Economic Efficiency: Environmental and Health Issues THE U.S. ECONOMY RELIES PRIMARILY on market forces and price signals to allocate economic resources efficiently. Economists have long recognized that a system of decentralized, competitive markets in which businesses and households act in their own best interest promotes economic growth and well-being. Market prices signal how resources should be used to produce goods and services of the highest value, and facilitate the distribution of these goods and services to those willing and able to pay the most for them. In a wellfunctioning market the price of a good or service reflects both its marginal value to the consumer and its marginal cost to the producer. So long as there is no divergence between the private and the social values and costs of these goods and services, the market system is likely to bring about the most efficient allocation of economic resources. Although economic efficiency is not the only concern of policymakers, it is important because it largely determines the total quantity of goods and services available. However, economists also recognize that sometimes prices might be distorted and that a market economy may fail to allocate resources efficiently. When market failures occur, appropriate government action may be able to improve upon market performance and enhance overall economic well-being. Examples of such action include protecting the environment, promoting health and safety, providing intellectual and physical infrastructure, and promoting competition. Potential sources of market failure are: • Externalities. An externality arises when production or consumption by one person or group provides a benefit to others (for example, by revealing a useful scientific discovery) without receiving compensation equal to the benefit, or imposes a cost on others (for example, by polluting the environment) without paying compensation for the full cost. • Incomplete or asymmetric information. When two parties to an economic transaction do not have complete information, or do not have the same information, about the goods or services being exchanged, they may face distorted incentives that prevent markets from supplying the amount or the type of products most 155 desired. These information problems are especially prevalent in the market for health care, where incomplete or asymmetric information about a patient's health status or the value of a provider's services can adversely affect the decisions of both provider and consumer. • Public goods. A public good is one that many people can use simultaneously without reducing its availability to others, and whose benefits are such that one person cannot exclude others from enjoying them. An example of a public good is national security, which, once provided, cannot be denied to anyone residing in the protected nation. • Imperfect competition. Imperfect competition may result when a few suppliers or buyers can exercise market power to limit supply, keep prices high, and prevent new competitors from entering the market. Economics provides important insights into the circumstances in which governments can act to improve upon market performance, how they can do so in a cost-effective manner, and how the costs and benefits of such actions are likely to be distributed. Economics has shown that market mechanisms can be a powerful instrument for achieving desired policy outcomes without incurring unnecessary costs. A prime example is the use of tradable pollution permits in environmental policy, described in detail later in this chapter. This chapter presents several examples of market failures in the areas of environmental protection and health care and discusses new approaches to addressing them. Recent environmental initiatives include policies to improve air quality, address global climate change, and reduce non-point source water pollution from agriculture. These policies are designed to build upon the considerable success of past efforts in improving the quality of our environmental resources. In the domain of health care and consumer safety, rules governing health insurance and drug approval have been reformed, and new policies are being proposed to improve the performance of health maintenance organizations and reduce teenage smoking. These policies are intended to further enhance the health and well-being of our Nation's people. Recent antitrust reforms designed to increase market competition are discussed in Chapter 6. COST-EFFECTIVE ENVIRONMENTAL PROTECTION Achieving environmental targets at the lowest possible cost is an important policy objective. The President's Executive Order 12866, issued in 1993, directs Federal agencies to design regulations in the most cost-effective manner to achieve the regulatory objective and to propose or adopt a regulation only upon a reasoned determination 156 that its benefits justify its costs. Further, the 1995 Unfunded Mandates Reform Act requires agencies either to certify that the regulatory approaches they adopt to achieve policy goals are the least burdensome, the most cost-effective, or the least costly among available alternatives, or to state the reasons for choosing an alternative approach. TRADABLE EMISSIONS PERMITS In implementing environmental policy, economists often advocate the use of market-based mechanisms such as tradable emissions permits for environmental pollutants, to encourage emissions reduction from those sources where the cost of emissions reduction is lowest and to foster innovation in emissions control technology. Tradable permits can be especially useful in achieving quantitative targets for emissions control or abatement. Under the traditional regulatory approach to environmental protection, a regulatory agency may specify an allowable emissions level for each firm or facility or require firms to use specific technologies to reduce emissions. This is often inefficient because the cost of reducing emissions by a given amount differs from firm to firm. A tradable permit system instead caps total emissions from all firms but neither places limits on emissions by any one firm nor dictates how the reduction in emissions must be achieved. Instead the regulatory agency issues permits for emissions in a total amount equal to the cap and prohibits emissions without a permit. After their initial allocation (methods for which are discussed below), firms may freely buy and sell permits among themselves. Any firm that can reduce its emissions for less than the going price of a permit has an incentive to do so and then sell its unused permits to other firms for which emissions reduction is more costly. With tradable emissions permits, firms thus have more choices and can meet environmental standards at lower cost than under traditional regulation. An emission permit trading system also gives firms an incentive to innovate. Firms that develop more effective and cheaper pollution control measures can sell not only their unused permits but the technology itself. Furthermore, trading systems that allow unused permits to be saved, or "banked," for future use encourage the early adoption of unanticipated technological improvements that lower the cost of emissions controls. These features lower the cost of emissions reductions still further. Economists have identified some other key features of successful emissions permit trading programs. First, firms should perceive that owning a permit is like owning any other asset. A firm will purchase a permit only if it expects that the permit conveys a legitimate right to emit. Similarly, a firm will reduce emissions in order to sell unused permits only if it believes that the permit will be valuable to other firms. Thus, if there is a risk that the right to emit or the right to 157 trade will be revoked, both the trading price and the volume of permits traded will be depressed, and some of the efficiency gains from permit trading will be lost. Of course, the government retains its authority to restrict or revoke trades for legitimate compliance and enforcement purposes under terms and conditions specified by law. A second key feature is broad scope: because trading lowers costs, it should be permitted among all sources of emissions that cause the same type of environmental harm. Excluding some sources may raise costs if emissions from these sources can be reduced at relatively low cost. However, including all sources of a pollutant in the emissions cap may not always be practical. For example, emissions from natural sources and from other countries may affect our Nation's environment but be beyond the control of U.S. regulatory authorities. Even within our borders, measuring pollutant discharges from all sources may be prohibitively costly, especially when discharges are dispersed or affected by weather, as is the case with fertilizer and pesticide runoff from cropland. One way to broaden the scope of a program is to offer firms subject to the emissions cap a credit for emissions if they contract with uncapped sources to reduce their emissions. So long as a satisfactory means of measuring and verifying these reductions can be established, this approach can provide further opportunities to lower the cost of meeting environmental objectives. To ensure the broadest possible scope for permit trading, permits should reflect units of environmental damage from emissions, not necessarily units of emissions. Permit trading then lowers costs by allowing trades in emissions that differ with respect to location, time period, chemical, or pathway (by air or by water, for example). If suitable conversion factors can be devised, trades in different emissions representing equivalent amounts of environmental damage can be made. This approach could also help prevent local environmental "hot spots" from developing. Suppose, for example, emissions from an area far upwind of a heavily polluted area have half the environmental effect there of local emissions of the same quantity of the contaminant. Then 2 tons of upwind emissions could trade for 1 ton of local emissions without changing total effects on the environment. Likewise, to the extent that different chemicals affect the environment similarly (as, for example, both carbon dioxide and methane contribute to the global greenhouse effect), the permit trading system could allow reductions in one pollutant to substitute for reductions in another by an amount that causes equivalent environmental effects. Finally, suppose a certain pollutant causes similar environmental damage whether it is introduced into lakes through the air or by surface water. Then permits for air emissions could be tradable for permits for water discharges, again encouraging reductions from those sources with the least costly control opportunities. 158 A final key feature of a successful emissions permit trading system is an effective compliance mechanism that ensures the integrity and fairness of the system and at the same time ensures that transaction costs are relatively low. The compliance mechanism will normally include monitoring and reporting requirements as well as enforcement provisions. Transaction costs include the costs of paperwork, recordkeeping, notification, and prior-approval requirements for permit trading. Although some requirements are inevitable in operating a credible trading system, they should be balanced against the need to keep transaction costs low. High transaction costs could discourage trading, thus eroding the potential gains from trade, and may make participation in the program prohibitively expensive for some firms. Initial Allocation of Permits A tradable permit system achieves its environmental benefit by capping pollutant emissions below the level that would otherwise occur. The costs of reducing emissions are then borne by the firms responsible for the emissions and (through higher prices) those who buy their products, as well as by suppliers of inputs such as labor and capital equipment to these firms. Firms and consumers in related markets, such as those for substitutes and complements of the goods produced by the regulated firms, will also be affected. The government could arrange the initial allocation of permits in any of a number of ways, for example by auction, by free allocation in proportion to firms' historical emissions ("grandfathering"), or even by lottery. Anyone receiving permits may then sell all or some of them, or use them as needed to keep actual emissions within regulatory requirements. So long as a permit trading system imposes low transaction costs, the choice of allocation system does not generally affect the efficiency with which emissions reductions are achieved; after the permits are first allocated, the trading of permits itself minimizes the cost of pollution reduction. However, the choice of allocation method does have other consequences. If the method chosen yields revenue to the government, the program presents an opportunity to lower taxes, such as those on earnings from labor and investments, without affecting budget balance. Shifting the tax burden in this way, called "revenue recycling," could enhance economic efficiency and growth as lower taxes increase incentives to work and save. These economic benefits can significantly lower the net economic cost of reducing emissions. The allocation system has further implications for who bears the cost of monitoring and reducing emissions. The extent to which firms can pass on some of the costs to consumers in the form of higher product prices depends on the degree of competition and the price elasticities of supply and demand for goods in the markets affected by the emissions constraint. In some cases, granting free permits to participants in the permit market could go beyond compensating them 159 for their cost share of emissions reductions, leaving them better off than before the permit system was introduced. Lessons from the Sulfur Dioxide Program Practical experience in designing and implementing trading programs for pollution emissions permits is still limited. The highly acclaimed sulfur dioxide (SO2) program—also called the acid rain program—administered by the Environmental Protection Agency (EPA) relies on, among other things, a system of tradable permits to reduce emissions of SO2 from electric utilities. Trading of emissions permits began in 1992, and to date the program is the only emissions permit trading program that is national in scope. The SO2 program is being implemented in two phases. The first phase covers the 110 most heavily polluting electric generating plants. Phase II, beginning in 2000, will impose a more stringent emissions cap and include a total of more than 2,000 units. The program has been successful in several ways: a large number of utilities engage in trading, SO2 emissions and ambient concentrations have fallen, and the costs of reducing emissions have been considerably lower than originally forecast. Why the early cost estimates were higher than the costs actually realized is a matter of considerable discussion. One contributing factor was a greater-than-expected decline in rail freight rates, which made low-sulfur coal from the Powder River Basin of Wyoming more competitive with locally mined, high-sulfur coal in Midwestern markets. Use of low-sulfur coal proved a less costly means of reducing SO2 emissions than the smokestack scrubbers that utilities had anticipated using. A second factor was lower-than-predicted costs of using scrubbers, in part because of unexpectedly high utilization rates. The average cost of reducing SO2 emissions using retrofitted smokestack scrubbers was about $270 per ton in 1995, far below early estimates of around $450 to $500 per ton. One measure of the decline in cost relative to expectations is the trend in emission permit prices (Chart 5-1). Currently, at approximately $100 per ton of SO2, permit prices are well below earlier estimates of around $250 to $400 per ton. These prices reflect the short-run marginal cost of reducing SO2. Prices are low partly because firms, believing that permit prices would be much higher, overinvested in scrubbers. Average total control costs are likely to be higher than these short-run marginal costs. The permit trading program also allows firms to bank unused emissions permits for future use, for example when emissions limits become more stringent in phase II. By banking, utilities can lower costs by timing their reductions according to their projections of emissions control costs and permit prices. If firms expect permit prices or control costs to go up, or if they want to take advantage of newly available control technology, they can adopt measures to reduce emissions sooner than they otherwise might. 160 Chart 5-1 Sulfur Dioxide Emissions Permit Prices The sulfur dioxide permit price has fluctuated and fallen over time. Dollars per ton 160 140 120 100 80 1995 Note: Trades reported by the Emissions Exchange. Source: Environmental Protection Agency. 1996 1997 Trading programs may not always bring cost savings as large as those achieved by the SO2 program, nor will they always lead to the discovery of much cheaper control strategies. Programs that involve multiple pollutants or international cooperation will necessarily be more complex. However, the SO2 experience does demonstrate how such programs offer market incentives to find cheaper ways of reducing emissions, and the flexibility to take advantage of them. Had regulators simply required all utilities to install scrubbers, utilities would not have been able to take advantage of the new availability of cheap, low-sulfur coal, and the costs of pollution abatement would have been much higher. Another important lesson from the SO2 program is that efforts to minimize transaction costs help ensure the successful operation of markets for pollution permits. But even so, it takes time to develop the institutions needed to facilitate trading and instill confidence in the value of credits so that markets run smoothly. The volume of trade in the market for SO2 permits, a measure of the potential gains from such trade, started out quite small but has grown rapidly as utilities gained experience with the program. In addition, increased trading volume and the annual public permit auctions tightened the range of market prices for permits. In the program's fifth year about 7.9 million allowances were traded, up from 900,000 allowances in the second year (Chart 5-2). We now turn to three other areas where the Administration is seeking to improve the environment in a cost-effective manner: 161 Chart 5-2 Volume of Sulfur Dioxide Emissions Permit Trades Permit trading increased considerably after the first few years of the acid rain program. Million tons traded 10 4 - 2 - 0 1994 1995 1996 1997 Note: Data show the volume of trades among firms. Source: Environmental Protection Agency. attainment of the new air quality standards, policies to address global climate change, and programs to reduce water pollution from agriculture. AIR QUALITY STANDARDS Air pollution has been linked to a variety of health problems ranging from decreased lung function to increased mortality risk. These adverse health effects are a classic externality: the emitter does not bear the full cost of its actions. Under the Clean Air Act, the EPA must periodically review, and may revise as appropriate, national air quality standards for pollutants. State agencies are largely responsible for developing programs (subject to EPA approval) to meet these standards. In July 1997 the EPA issued a more stringent standard for ground-level ozone and a new standard for fine airborne particulate matter. Under the act, these standards must be set so as to protect public health, with an adequate margin of safety. Courts have confirmed the EPA's interpretation of this to mean that consideration of costs or feasibility is excluded in setting the standard. However, under the President's policy the EPA is to implement these healthbased standards cost-effectively. Efforts to meet air quality standards have traditionally focused on controlling emissions within "nonattainment areas"—mostly urban areas where concentrations of pollutants exceed the standard. Although some States—California, for example—have set up trading 162 programs or used other market mechanisms to reduce the costs of compliance with air quality standards, most rely on traditional prescriptive approaches to controlling pollution. The Administration's plan for achieving the new air quality standards departs from these traditional approaches by designing regional strategies to complement local efforts, and by encouraging the development of nitrogen oxides (NOX) trading programs among sources in different States. Regional Strategies and Market-Based Approaches Studies of air quality have found that high ground-level ozone concentrations are not just a local problem: under certain weather conditions, ozone and NOX can travel hundreds of miles and contribute to nonattainment of standards in downwind areas. Under traditional regulatory approaches, nonattainment areas would have to make costly emissions reductions within their borders even if upwind reductions that would have similar environmental impact were available at lower cost. To address this problem, the plan for implementing the new standards will expand the geographic scope of the program. Under the Clean Air Act the EPA has the authority to require emissions reductions in any State that significantly contributes to nonattainment outside its borders. In November 1997 the EPA proposed a regional strategy that would require 22 Eastern States and the District of Columbia to reduce NOX emissions by an average of 35 percent during May through September (when ozone levels are highest) by 2007. Reductions in NOX emissions, apart from reducing ground-level ozone, may also reduce excess nutrients in waterways and the formation of airborne particles linked to adverse health effects. The design of a cost-effective regional strategy that contributes to attaining and maintaining the new standards will require careful attention to the effects of emissions on air quality. Later this year the EPA will also propose a rule to facilitate trading of NOX emissions reductions among the States covered by the regional program. Designing a Trading Program for Nitrogen Oxides In designing a trading program for NOX, the EPA faces a number of challenges. These include ensuring adequate scope for the trading program, ensuring that trading does not adversely affect the environment, and providing for necessary accountability and compliance. As discussed above, the scope of trading programs like the NOX program is an important determinant of their cost-effectiveness. As more emissions sources are included in the program, the increased opportunity to trade emissions permits tends to lower the cost of achieving a given level of emissions reduction. Utilities currently account for only about 30 percent of NOX emissions, compared with about 65 percent of SO2 emissions (Chart 5-3). Transportation accounts for 49 percent and nonutility combustion for 18 percent of NOX emissions. 163 Chart 5-3 Sources of Nitrogen Oxides Emissions in 1995 Vehicles are the principal source of nitrogen oxides emissions. Electric utilities 29% Other 1% Industrial processes 4% Transportation «_^^_^^^^M_HH^»> 49% Nonutility combustion 18% Note: Nonutility combustion includes residential and commercial heating. Source: Environmental Protection Agency. Thus, extending NOX trading to nonutility sources could reduce costs. However, the scope of the program may be limited by the need to ensure accountability. For example, some smaller sources have considerably lower control costs than electric utilities, but their claimed emissions reductions may be more costly to monitor. Including more sources from different sectors in the trading program may also have desirable distributional effects. Utilities are likely to pass the cost of compliance on to consumers in the form of higher electricity prices, and low-income households spend a higher share of their income on electricity bills than do households near the median income. Moreover, broader scope can decrease the average cost of pollution abatement, reducing the burden on all parties, including the poor. Another challenge in designing a trading program for NOX within the context of the regional ozone reduction strategy is to maintain broad geographic scope while ensuring that trading does not result in significant adverse environmental effects. The goal of this strategy is to improve air quality in nonattainment areas cost-effectively. In its simplest form, the problem of pollution transport can be thought of in terms of a single downwind nonattainment area that is affected by a number of upwind pollution sources located at varying distances from it along a line indicating wind direction. In this case, sources that are farther upwind will have less impact on the air quality of the area than sources that are closer, all other things being equal, and such differences may be as large as 10 to 1. It might then appear that emis 164 sions trading could undercut the effectiveness of pollution controls if it resulted in shifting emission reductions farther upwind. Trading ratios that weight the reductions made at different sources according to their distance from the downwind nonattainment area might be considered to address this problem. In reality, however, there are a large number of nonattainment areas spread out over the region, and several different weather patterns and wind conditions characterize the ozone pollution episodes that the program is trying to remedy. Sources affect multiple nonattainment areas in a variety of directions from them, and it affects any single nonattainment area differently under different weather conditions. The polycentric nature of this problem complicates the identification of a unique and stable set of trading ratios that would work for all relevant cases. Thus, striking the proper balance between achieving the cost savings from larger geographic scope and limiting the potentially significant adverse environmental effects of trading is an ongoing challenge. Like most air pollution control programs, NOX trading programs would require an estimate of emissions from each regulated source in order to ensure compliance. The estimation method can have significant implications for cost-effectiveness, both directly, through the cost of performing the estimate, and indirectly. One indirect implication is that more costly requirements may limit the number of sources that could meet the estimation requirements and participate in trading, and thereby raise costs. On the other hand, a more reliable estimation method may offer regulators and sources greater confidence in the permits, and thereby increase the willingness of sources to buy them or offer them for sale. For example, the SO2 program requires continuous emissions monitoring to provide precise information on emissions. Such monitoring is expensive and impractical for many smaller sources and thus may effectively exclude such sources from participating. But such precise monitoring may not always be necessary. Methods for estimating emissions that provide unbiased, although less precise, estimates of emissions may be accurate enough to ensure accountability. CLIMATE CHANGE Climate change is a global environmental externality: warming of the earth's surface results from the accumulation of greenhouse gases from myriad sources worldwide, none of which presently pay the cost to others of warming's ill effects. The Intergovernmental Panel on Climate Change, jointly established by the World Meteorological Organization and the United Nations Environment Programme, concluded in 1995 that "the balance of evidence suggests that there is a discernible human influence on global climate." Current concentrations of carbon dioxide (SO2), methane, nitrous oxide (N2O), and other so-called greenhouse gases have reached levels well above those of 165 preindustrial times. Of these, CO2 is the most important: net cumulative CO2 emissions resulting from the burning of fossil fuels and deforestation account for about two-thirds of potential warming from changes in greenhouse gas concentrations related to human activity. If growth in global emissions continues unabated, the atmospheric concentration of CO2 will likely double, relative to its preindustrial level, midway through the next century. The accumulation of greenhouse gases poses significant risks to the world's climate and to human well-being. Potential impacts include a rise in sea levels, greater frequency of severe weather events, shifts in agricultural growing conditions from changing weather patterns, threats to human health from increased range and incidence of diseases, changes in availability of freshwater supplies, and damage to ecosystems and biodiversity. Climate change is a complex, long-term problem requiring global cooperation and a long-term solution. No single country has an incentive to reduce emissions sufficiently to protect the global environment against climate change. Even if the United States sharply reduced its emissions unilaterally, greenhouse gas emissions from all other countries would continue to grow, and the risks posed by climate change would not be significantly abated. Since many of these gases remain in the atmosphere for a century or more, the climatic effects of actions taken today will primarily benefit future generations. But delaying action to reduce greenhouse gas emissions until the disruptive effects of climate change become widespread will considerably reduce the options for remedial or preventive measures. The Framework Convention on Climate Change The threat of disruptive climate change has led to coordinated international efforts to reduce the risks of global warming by reducing emissions of greenhouse gases. The first international agreement to address global warming was the Framework Convention on Climate Change signed during the Earth Summit in Rio de Janeiro in 1992. This convention established a long-term objective of limiting greenhouse gas concentrations and encouraged the established industrial countries to return their emissions to 1990 levels by 2000. Since then it has become clear that the United States and many other participating countries will not meet this goal. To address the lack of progress among many industrial countries toward meeting this first target, the United States and approximately 159 other nations, in negotiations held in Kyoto, Japan, last December, agreed to take substantial steps to stabilize atmospheric concentrations of greenhouse gases. The Kyoto agreement, which requires the advice and consent of the Senate, would place binding limits on industrial countries' emissions of the six principal categories of greenhouse gases: CO2, methane, N2O, sulfur hexafluoride, perfluorocarbons, and hydrofluorocarbons. Each industrial country's "1990 166 baseline" is actually based on its 1990 emissions of CO2, methane, and N2O and its choice of 1990 or 1995 levels of the other three categories of gases. The United States agreed to a target of 7 percent below 1990 levels over 2008-2012. To meet that target, net U.S. emissions of greenhouse gases—all emissions minus removals of CO2 by certain forest activities such as planting trees—must average no more than 1,484 million metric tons of carbon equivalent per year during that period (Chart 5-4). The targets for the European Union and Japan are 8 percent and 6 percent below 1990 levels, respectively. Australia, New Zealand, Norway, Russia, and Ukraine all have less stringent limits. In sum, over the period from 2008 to 2012, the industrial countries are Chart 5-4 U.S. Greenhouse Gas Emissions, Actual and Projected The U.S. emissions target under the Kyoto agreement is about 25 percent below current projections in 2008-2012. Billion tons of carbon equivalent 2.5 Projected emissions without Kyoto agreement 2.0 All greenhouse gases 1.5 . Carbon dioxide Kyoto emissions target for the U.S. is an annual average of 1.484 billion tons during 2008-2012. 1.0 nil i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i . . . i I 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 Notes: All greenhouse gases include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. Carbon equivalence is calculated assuming a global warming potential over a 100-year time horizon. Targets can be met through forest activities that remove carbon from the atmosphere and international permit purchases and credits in addition to domestic emissions reductions. Sources: Department of Energy, United Nations Framework Convention on Climate Change, and U.S. Climate Action Report 1997. expected to reduce their average emissions of greenhouse gases to about 5 percent below their 1990 levels. The Kyoto agreement provides opportunities for the industrial countries to trade rights to emit greenhouse gases with each other. They may also invest in "clean development" projects in the developing world and use these projects' certified emissions reductions toward meeting their targets. Both of these mechanisms allow for emissions reductions to occur where they are least expensive. Many of the details of these provisions will be worked out in subsequent negotiations. 167 Emissions Permit Trading for Greenhouse Gases One component of the Administration's climate change proposal, announced last October by the President, is a domestic emissions permit trading program for greenhouse gases starting in 2008. As in the similar program for SO2, permit trading would allow emissions targets to be met at a lower cost than under a traditional regulatory approach that sets fixed limits on individual firms' emissions. As previously discussed, one consideration in designing an emissions permit trading program for greenhouse gases is how initially to distribute permits. The method of initial allocation would not generally affect the efficiency with which emissions reductions are achieved, but would have significant distributional implications. Another issue is where, in the marketing chain of products responsible for greenhouse gas emissions, permits would be required. One approach, called the permit-to-market approach, would impose the emissions limits at the point of first sale of the commodities responsible for greenhouse gases. In the case of SO2 emissions, permits would be required for the sale of fossil fuels and specified in terms of the amount of SO2 released in their combustion. The requirement would be imposed at the wellhead or the refinery (in the case of oil or natural gas), at the mine (in the case of coal), or at the port of entry (in the case of imported fossil fuels). Alternatively, a permit-to-emit approach would issue permits to consume these fuels or to sell products, such as automobiles, that do so. A hybrid of the two approaches may also be possible. The design of an effective greenhouse gas permit system needs to take several other issues into account. First, a sufficient number of participants must be included in the domestic permit market to ensure that the market is competitive and efficient. Second, the system should include a monitoring mechanism that assesses compliance in the most cost-effective manner possible. In the case of a permit-to-market system, since the amount of SO2 emitted per barrel of oil or ton of coal consumed is relatively fixed, the task of measuring SO2 emissions is straightforward. Moreover, for accounting purposes firms already collect information and keep records about their fuel transactions. Under the permit-to-emit approach, monitoring would likely involve a more complex combination of emissions calculation and measurement for all regulated greenhouse gas emitters. Third, a permit system that would allow trades across all sectors of the economy would minimize total cost. If, for example, the incremental cost of reducing emissions is much lower in electric power generation than in transportation, one could reduce the cost of meeting the reduction target by allowing permit trading between the two sectors. The permit-to-market approach would generally allow trades across sectors. The permit-to-emit approach could also yield the same result, depending on how it is implemented. 168 Timing Flexibility in Meeting Emissions Reductions Flexibility about when emissions reductions take place can further lower the cost of reducing greenhouse gas emissions. A system that allows participants to borrow emissions permits from the future or to save unused permits for future use would take advantage of differences in cost abatement opportunities across time. Three features of the Kyoto agreement contribute to timing flexibility. First, the target for emissions reductions is based on a 5-year commitment period. For example, the target set for the United States of a 7-percent reduction in emissions below 1990 levels is specified as an annual average over 2008-2012. By averaging over 5 years instead of requiring the United States to meet the 7-percent target each year, the agreement provides flexibility in the timing of reductions that can lower costs, especially given an uncertain future. Averaging can smooth out the effects of short-term events such as fluctuations in the business cycle and energy demand. It can also lessen the impact of a year with a hard winter, when energy demand, and thus emissions, would increase. Further, if firms anticipate that a new technology will soon be available that lowers the cost of reducing emissions, they could emit more greenhouse gases in the early years of the period and less after the technology becomes available. Another advantage of this approach is that it may avoid forcing a costly rapid turnover of capital stock for electricity generation. The Kyoto agreement allows countries to bank unused emissions rights from one commitment period for use in the next. Should investments in research and development yield some pleasant surprises in the form of cleaner and more efficient technologies, banking will encourage the early adoption of these technologies in order to save unused emissions permits for future periods when the costs of emissions abatement may be higher. In addition to banking across commitment periods, countries may bank certified emissions reductions obtained through the "clean development mechanism" discussed below. Countries may use emissions reductions achieved through this mechanism over the 2000-2007 period to assist in complying with their targets in the first commitment period. This provides an incentive for firms in industrial countries to begin investing in energy-efficient technologies in developing countries before 2008. International Trading in Greenhouse Gas Emissions Building on the benefits of the domestic trading program just described, the Administration proposed in Kyoto an international trading program for greenhouse gas emissions permits. The Kyoto agreement established the right of countries assigned emissions targets to meet their commitments by trading among themselves. This establishment of the right to trade provides the foundation for a trad 169 ing regime among industrial countries, but leaves the details to be agreed upon later. Since it is easier to reduce emissions in some countries than others, and given that greenhouse gas emissions have equivalent climate effects regardless of their location, allowing global trading would achieve climate change objectives at lower cost. Such a global approach would ideally allow trading among all sources of greenhouse gases in participating countries and could incorporate opportunities to remove greenhouse gases from the atmosphere, for example by issuing emissions credits (which could then be sold to other firms) for reforestation projects. International trading could take place among firms that have been allocated permits through domestic trading programs. For countries that have no domestically tradable permits because they have opted for a command-and-control or a tax approach to controlling emissions, it may still be possible instead to arrange exchanges on a government-to-firm or government-to-government basis. The setting of binding targets among all countries, together with international trade in permits, could in principle result in a global market price for permits for greenhouse gas emissions. For example, the permit price could be expressed in terms of dollars per ton of carbon equivalent emitted. Firms in all countries would reduce their emissions until the cost of further reductions exceeded this price, at which point they would buy additional permits. Large differences in both the patterns of energy use and the efficiency of energy technologies among countries imply that the cost savings from international permit trading would be large compared with a system without international trading. Put differently, even in comparison with a system with full domestic trading of emissions permits, international trading could substantially lower costs. Some models predict that the incremental cost of reducing CO2 emissions may be as little as one-seventh of the cost of reductions from domestic trading alone. The gains from international trade in permits would be particularly large if developing countries were to participate. The Importance of Developing-Country Participation Negotiations leading up to the Kyoto agreement sought binding limits on greenhouse gas emissions among industrial nations. Developing countries have resisted committing themselves to binding limits on their emissions because of concern that to do so would severely constrain their economic growth, and because by far the greater part of accumulated greenhouse gases in the atmosphere is the result of past economic activity in the industrial countries (Chart 5-5). However, current forecasts project that greenhouse gas emissions from developing countries will surpass those from industrial countries around 2030, and even sooner if industrial countries are successful in limiting their emissions (Chart 5-6). Thus, eventual curbs on emissions from developing countries are essential in order to 170 Chart 5-5 Cumulative World Emissions of Carbon Dioxide, 1950-95 Industrial countries are responsible for the vast majority of accumulated carbon dioxide in the atmosphere. Other OECD countries 27% United States 27% Eastern Europe and former Soviet Union 22% Other developing countries 16% Note: Other OECD countries include the countries of the European Union, Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland. Source: Department of Energy. Chart 5-6 Projected World Carbon Dioxide Emissions Without Kyoto Agreement Around 2030, annual carbon dioxide emissions from developing countries are expected to surpass industrial countries' emissions. Billion tons of carbon equivalent per year 10 Developing countries Industrial countries 1990 2000 2010 2020 2030 2040 Note: These projections are consistent with the Intergovernmental Panel on Climate Change IS92A global projection through 2100. Source: Unpublished calculations by A. Manne, Stanford University and R. Richels, Electric Power Research Institute. 171 2050 stabilize the amount of greenhouse gases in the atmosphere. Moreover, some of the least cost opportunities for reducing greenhouse gas emissions are in developing countries, because those countries now use energy relatively inefficiently. Moreover, those that are industrializing rapidly have greater scope to build their industry around cleaner and more efficient energy technologies and fuels than do mature economies whose capital stock is already in place. Failure to involve developing countries in an international agreement limiting greenhouse gas emissions could lead to a more rapid rate of increase in emissions in those countries than would occur without any agreement at all. This "leakage" effect of emissions reductions could come about in any of several ways. As industrial countries reduce their use of fossil fuels in response to emissions controls, future world oil and coal prices are likely to be lower than they would be otherwise. This is likely to increase energy consumption in countries not bound to limit their emissions. U.S. industries are also concerned about their international competitiveness if some countries remain outside an international agreement, since factories in those countries will face lower costs for producing goods that take relatively large amounts of energy to manufacture. Some may be concerned that energy-intensive industries might choose to relocate to countries not subject to emissions constraints, although there is little evidence to suggest that this would pose a significant problem in most industries. For example, energy costs for manufacturing industries average just 2.2 percent of total costs. Given the projected growth of developing countries' emissions, the Administration's position is to seek meaningful participation by key developing countries in the reduction of greenhouse gas emissions as a condition for the United States taking on binding emissions reductions. The President has indicated he will not submit the Kyoto agreement for Senate ratification until there is meaningful participation by key developing countries. Joint Implementation and the Clean Development Mechanism To encourage participation by developing countries in the climate change initiative even before they formally sign on for binding emissions limits, the President has proposed a program known as joint implementation. This program would provide incentives to developing countries to reduce their emissions of CO2 and other greenhouse gases. The Kyoto agreement embraces the President's proposal in its designation of a "clean development mechanism" (CDM): U.S. companies that undertake projects that reduce greenhouse gas emissions in developing countries could count those reductions to meet their commitments. Institutionalizing key elements of joint implementation through this mechanism would encourage firms in the United States to transfer a larger volume of cleaner and more energy-efficient technology to developing countries, especially in the electric power 172 generating industry, while providing substantial cost savings to U.S. firms. It would also provide incentives to expand forests, which absorb CO2. In addition to the CDM, the agreement allows industrial countries to undertake joint implementation projects with each other. A key issue is how to ensure that credits are awarded for actual, additional emissions reductions, and not simply for projects that would have been carried out anyway. The Kyoto agreement requires that emissions reductions occurring through the CDM be certified to provide real, measurable, and long-term benefits related to the mitigation of climate change, and that the emissions reductions achieved are additional to any that would occur in the absence of these projects. Future negotiations will focus on developing the rules for certifying and enforcing projects undertaken through the CDM. Promoting Clean and Efficient Energy Technology The President's plan to reduce greenhouse gases commits new resources to energy research and programs to promote the wider use of cleaner and more energy-efficient technologies in the U.S economy. The emissions permit trading system for greenhouse gases is also likely to encourage more private research and innovation, as companies seek to lower the cost of meeting environmental targets. Government support for science and technology in general addresses an important market failure. Promising new technologies often fail to attract sufficient private sector interest if their technical risk is high and if they create economic and social benefits beyond what the investing firms can capture for themselves. Economic studies have shown that private firms, despite intellectual property protection, are able to appropriate only about half of the total economic benefits from their own research. This gap between social and private returns may be particularly large for research on cleaner and more efficient energy technology, when the environmental externalities associated with energy use have not been fully addressed by environmental and other regulatory policies. The appropriability problem is not limited to basic research but frequently extends to precommercial research as well. Precommercial research is research that is close to yielding new products or processes, but still far enough away from commercialization that further development poses a substantial financial risk. New renewable energy industries (wind power, solar energy, and biomass energy, for example) may face particularly formidable constraints to commercialization. First-of-a-kind products often have high unit costs. High-volume production provides economies of scale, generates experience in manufacturing and operation, and opens new opportunities for incremental technological improvements—all of which may lead to lower costs. The President's commitment to increase Federal support for new energy technology seeks to reverse a trend of declining national 173 investment in energy research (Chart 5-7). One reason investment in energy research has declined since the late 1970s is falling or stagnant energy prices, which reduced the economic incentive to develop new sources of energy and improve efficiency. In the 1990s it is primarily private sector energy research that has declined. Increasing government investment in energy research is likely to be complemented by more private research: public research on longer term, basic scientific studies can open up new, profitable opportunities for applied research and commercial development by the private sector. An increase in support for research that raises the rate of progress in developing cleaner and more efficient technologies would lower the costs of reducing greenhouse gas emissions. Chart 5-7 Energy Prices and Private Energy Research Energy prices and private investment in energy research have followed similar trends since the 1970s. Index, 1982 = 100 Billions of 1996 dollars 6 110 100 - - 5 Private research spending (right scale) - 3 Relative price of energy (left scale) 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 Note: The relative price of energy is the ratio of the PPI for processed fuels to the PPI for all intermediate materials. Sources: Department of Energy and Department of Labor (Bureau of Labor Statistics). 1996 The President's proposal also includes programs and tax incentives to encourage the wider adoption of existing technologies that can decrease greenhouse gas emissions. Of particular importance are technologies that reduce consumption of fossil fuels. In addition to encouraging clean and renewable energy sources, these programs will provide economic incentives and other forms of assistance (such as better information) for improving energy efficiency in industry, transportation, and homes. The President's plan to use Federal procurement policy to reduce greenhouse gas emissions is another way to increase market penetration of these technologies. Until an emissions cap and trading system are in place, however, the economic incentive to use these technologies may be low, because at present the price of energy does not reflect the environmental cost of 174 CO2 emissions. This environmental externality results in a market failure to make the most efficient use of new technologies that lower emissions. Many of these technologies are expected to be more profitable once a CO2 emissions cap is in place and the environmental costs associated with energy use are more fully reflected in energy prices. There is also evidence that many households and businesses fail to invest in some home and building improvements that appear profitable even at today's energy prices. More efficient home refrigerators and air conditioners, fluorescent lighting, and "low-E" glass for windows, for example, are available on the market and, by some accounts, offer potentially large energy and cost savings. By spending money now on these more efficient technologies, proponents argue, many consumers could quickly recoup their investments in the form of lower energy bills. But if such investments are in consumers' own economic interest, why don't they invest in them on their own? Insufficient knowledge and information may be a key factor: consumers may not be aware of new technologies that could reduce CO2 emissions and save them money on energy bills, or may not be convinced of the economic benefits that could be realized from adopting them. Lack of up-to-date information on recent technological developments may also lead people to overestimate technical risks—they may doubt whether a new technology is as reliable as current methods, particularly if the new technology is not yet widely used. On the other hand, even if a new technology is beneficial for many users, it may not be so for everyone. People differ in their willingness and ability to make investments today in order to realize savings in the future, especially if the initial expense is relatively large. In addition, some consumers may value a product for attributes other than its energy efficiency—for example, its convenience, size, or design. And not all consumers may achieve all of the promised energy savings, depending on the climate of the region where they live. These considerations reflect the great diversity of needs and preferences among businesses and households and help explain why new technologies may diffuse slowly over time. Better information about the potential cost savings from improving energy efficiency may increase the use of technologies that already meet the market test—that is, that meet consumer standards for quality and dependability and offer real economic benefits. The Federal Government is working with the private sector to promote wider use of such technologies. For example, through the Green Lights program, the EPA provides technical information to private companies on the economic and environmental benefits of switching to new, fluorescent lighting systems. Energy Star is another EPA program, in which innovative products that use significantly less energy than older generation products are allowed to bear a special, readily identifiable label. More rapid diffusion of new emissions-saving technologies would make an important contribution toward meeting the goals of the Kyoto agreement. 175 NON-POINT SOURCE WATER POLLUTION Protecting the quality of the Nation's water resources has been a major component of U.S. environmental policy since passage of the Clean Water Act in 1972. The act regulates water pollution from point sources—discrete, concentrated sources such as the discharge from factories and municipal sewage treatment plants—but not from nonpoint sources. Non-point source water pollution is the entry of pollutants into a body of water from a broad area, such as a cultivated field or the streets and lawns of a city. In recent years attention has increasingly turned to pollution from these non-point sources, especially runoff from agricultural operations. Since environmental regulation has already led to extensive control of point sources of water pollution, further improvements in water quality are likely to be less expensive if they address non-point sources. Recently, the Administration has given renewed emphasis to non-point source water pollution (Box 5-1). Agriculture is one of the principal sources of non-point source pollution. The environmental problems caused by agriculture stem mainly from the runoff of soil, agricultural chemicals, and livestock waste into lakes, rivers, and estuaries. These pollutants may cause undesirable algal blooms, impair recreation and fishing, and adversely affect wildlife. Pesticides and nutrients can also leach into groundwater, threatening drinking water supplies. Soil erosion from U.S. farmland raises the cost of municipal and industrial water use, shortens the life span of dams and hydroelectric projects, damages aquatic habitat, and can contribute to flooding. These off-farm damages from soil erosion have been estimated at $7 billion to $25 billion 176 per year. In 1994 the EPA estimated that at least 6 percent of all U.S. river miles and 21 percent of lake surface areas were water-quality impaired (that is, unsuitable for their designated uses). The same study identified agriculture as a major contributor to impairment in about 60 percent of those river miles and 50 percent of those lakes and reservoirs. Since these environmental effects are largely imposed on other users of the water resources, and not on the farms that caused them, agricultural non-point source water pollution is another example of an environmental externality that market forces alone are unlikely to solve. In a world of perfect and costless information, the efficient policy response would be to monitor the erosion and runoff from each farm and reduce it to the point at which the incremental cost of further reduction equals the incremental benefit to the environment. This textbook approach, however, is often unworkable because the cost of assessing the pollution caused by each farm can be prohibitive. Instead, public policies to address non-point source pollution from agriculture tend to focus on farmers' choice of farming practices, which is much more easily observed. Non-point source pollution from agriculture, like many other environmental problems, raises the policy question of whether and how to encourage the adoption of environmentally friendly technologies. Examples of such practices include conservation tillage, integrated pest and nutrient management, precision farming, and buffer zones along waterways. These practices may actually be profitable for some farmers to adopt. As discussed above in the context of energy technology, direct subsidies for the adoption of existing technology improve ecomonic efficiency when the benefits to society at least equal the costs, including the social cost of subsidies. This section examines three policy approaches that have been used to encourage the adoption of farming practices that reduce non-point source pollution: incentive programs, regulations, and emissions trading programs. Incentive Programs The U.S. Government has implemented several programs that provide incentives to farmers and ranchers to limit their impacts on the environment. These include support for State programs through Section 319 of the Clean Water Act and several important components of the 1996 Federal Agriculture Improvement and Reform (FAIR) Act. Three programs account for the bulk of Federal spending on environmental incentive programs for agriculture: the Conservation Reserve Program (CRP), begun in 1985; the Wetland Reserve Program (WRP), initiated in 1990; and the Environmental Quality Incentives Program (EQIP), established by the FAIR act. The CRP and the WRP (both of which were reauthorized by the FAIR act) establish voluntary contracts with producers in which they agree to adopt certain practices 177 on their land, including establishing long-term conservation easements and taking it out of production for a period of years. In return, the government provides incentive payments, subsidies for the cost of the practices, and technical assistance as needed. EQIP provides assistance for environmental and conservation improvements on the farm. The FAIR act requires new acres enrolled in the CRP to meet higher environmental and conservation criteria than land enrolled under earlier versions of the program, and funds for EQIP are intended to maximize the environmental benefits per dollar expended and help farmers and ranchers meet national, State, and local environmental standards. Other program provisions, such as Conservation Compliance, require farmers who cultivate highly erodible land to adopt conservation practices or else forgo benefits from other agricultural programs. All these programs differ significantly from traditional regulation in that they are voluntary: no requirements apply to producers who do not wish to participate. Efforts to remove environmentally sensitive land from agricultural production and encourage the adoption of resource-conserving farming practices have met with much success in reducing soil erosion from cropland. Between 1982 and 1992, erosion from cropland is estimated to have declined by about one-third. Regulatory Control of Agricultural Pollution The Coastal Zone Act Reauthorization Amendments (CZARA) authorized the first federally mandated program requiring specific measures to address agricultural runoff as well as four other major non-point sources of water pollution. The EPA and the Department of Commerce's National Oceanic and Atmospheric Administration (NOAA) issued Federal guidelines for implementing CZARA in 1993. The guidelines set out certain requirements that State coastal nonpoint source pollution control programs must meet, but they allow States to tailor their programs to their own environmental concerns, geographic conditions, site characteristics, and farmer preferences. These programs, currently in the approval process, identify the set of management measures that may be required of individual farms in the State. This process is designed to provide enough flexibility to allow farmers and technical assistance providers to select the practices appropriate for a given farming operation, and to help keep farm compliance costs low. Existing sources of pollution, such as most agricultural sources, will have 3 to 8 years to comply from the time their State program is approved, adding further flexibility and cost-saving opportunities in the timing of implementation. Trading Water Pollution Credits To achieve water quality standards cost-effectively, several State and local governments have experimented with programs that are 178 similar in principle to the air pollution trading programs discussed earlier, but do not involve marketed permits as such. Much like the joint implementation projects discussed in the context of climate change above, these programs allow point sources of pollution to meet environmental standards by paying non-point sources (such as farms) to adopt practices to reduce pollution. As already noted, it may be considerably less expensive to attain the same environmental outcome by reducing pollution from non-point sources than from point sources. But because verifying pollution reduction from farms is prohibitively expensive, the agencies administering these programs rely on verifying that farmers have adopted land management practices that are linked with pollution reduction, assessing credits based on the estimated amount of pollution reduced, and certifying the "trades." Most of these programs focus on fertilizer and animal waste pollution, including nitrogen and phosphorus compounds. Cost savings from such exchanges, if fully implemented, could reach several billion dollars annually. But few trades have occurred to date. For example, the Dillon Reservoir program in Colorado provides opportunities for trading between point and non-point sources. Early estimates expected significant cost savings from trading for the four municipal sewage treatment facilities, but few trades between a point source and a non-point source have occurred since 1984. The Tar-Pamlico Basin program, implemented in North Carolina in 1989, is not strictly a trading program. Rather, it allows an association of 14 point sources to average all of the members' nutrient discharges under one cap. Then, if total discharges exceed the cap, the association must contribute to a State program that subsidizes management practices on farmland to reduce non-point source pollution. To date, the association has not exceeded its cap, so no contributions to the non-point program have been required. Trading has been limited both because the scope of trading opportunities has been constrained and because transaction costs have been high. To ensure that all sections of water bodies meet environmental standards, trading is often restricted to a local watershed or certain stretches of a river. Other policy constraints on trades may further limit the potential gains from discharge credit trading. For example, point sources are often required to adopt specific pollution control technologies before they may consider trading. This may limit the discharge reductions that they buy from other sources and reduce the potential gains from trading. In the Tar-Pamlico program, point sources receive only one unit of pollution credit for every two units of pollution reduction they buy from non-point sources. By explicitly requiring nonequivalent emissions to be traded, the program increases the cost of participation. Moreover, these point sources must pay a 10-percent administrative surcharge for every pollution credit they purchase. Finally, programs have often failed to provide assurances 179 that the credits will continue to be honored in the future. This reduces the economic value of the credits and is another impediment to trading. Although economic theory indicates that the costs of complying with environmental regulation can be significantly reduced through a trading system, the limited experience with water pollution credit trading has not yet provided substantial cost savings. So far the small size of the markets for trades, both geographically and in the number of potential traders, and the regulatory constraints on trades have generated extra costs that make trading less attractive. IMPROVING HEALTH CARE AND HEALTH INSURANCE MARKETS Without regulation, health insurance markets do not function well. A variety of policies have been implemented or proposed to address these shortcomings. This section discusses policy initiatives that this Administration has promoted to help improve the functioning of these markets. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 helps workers maintain continuous insurance coverage by limiting exclusions of preexisting conditions, whereby insurers do not cover previously diagnosed conditions for some period, and by expanding guaranteed issue and renewability requirements, which prohibit insurers from denying coverage or renewal on the basis of health status or claims experience. The President's 1999 budget includes policies that improve access to affordable health insurance for people aged 55-65 and for small businesses. In addition, the Administration and the Congress are considering legislation to help ensure that consumers have enough information about health insurance plans and prescription drugs to make informed decisions. Finally, new initiatives to discourage teenage use of tobacco products are aimed at protecting those who may lack the maturity to make decisions about risky behaviors like smoking. IMPROVING ACCESS AND PORTABILITY Adverse Selection in Health Insurance Markets A variety of concerns about health insurance markets relate to the problem of adverse selection, the danger that only those persons most likely to need insurance will purchase it. Adverse selection in insurance markets can arise because of asymmetric information: would-be customers typically know more about their likelihood of incurring high medical costs than do insurers. If insurance is priced to reflect the average risk of a particular population (a practice called community rating), some healthier people may choose to go without. The average risk (or expected medical costs) of the insured pool will then be higher than that for the whole population, and the insurer will lose 180 money. Insurers will, therefore, seek ways to ensure that they do not attract a group that is particularly unhealthy. For example, they may avoid offering comprehensive coverage (by limiting access to specialists or not covering chronic conditions, for example). They may also engage in targeted marketing or change their health plans to appeal to healthier persons and discourage sicker ones from enrolling, by adding benefits, such as health club discounts or coverage for wellbaby care, that are more attractive to persons in good health. In addition, in an unregulated market insurers may explicitly exclude higher risk individuals through exclusions of preexisting conditions or by simply denying coverage. Thus, adverse selection in health insurance markets can result in underinsurance among both younger, healthier individuals and the very sick. Adverse selection is reduced when insurers can insure large groups of people whose purpose in associating is unrelated to their preferences for health insurance. Insurers can be reasonably sure that the members of such groups are not exceptionally unhealthy on average, and healthy people are not likely to leave the insured pool. Employee groups, particularly those of larger organizations, are a natural pool for spreading risk, and this, in part, explains why employer-based insurance is widespread. The lower premiums offered to such groups, the tax-preferred treatment of employer-provided insurance, employer subsidies, and the difficulty of obtaining coverage on the individual market all encourage healthy workers to purchase insurance through their employers, making adverse selection a much less serious problem. Small firms might like to pool together to offer insurers larger risk pools and reduce administrative costs, but these pools may fall apart, as firms with healthier employees are likely to want to leave the pool to seek lower premiums on their own. The prevalence of employer-based insurance may also discourage self-employment or employment in smaller firms, where obtaining affordable insurance is more difficult. Even if one could correct the problem of asymmetric information directly, by giving insurers the same information that their customers have, this may not lead to a better outcome, for two reasons. First, there may be a "missing market" for longer term contracts for health insurance. Most health insurance contracts are for 1 year, but purchasers might prefer to buy long-term insurance to avoid the possibility of high premiums or cancellation should they become sick. In addition, the government cares not only about efficiency and market failures in health insurance markets, but also about improving access to care. If insurers had more information, they could choose not to cover some individuals or could charge higher premiums, which is likely to reduce insurance coverage and access to care. 181 Employer-Based Insurance and "Job Lock" Health insurance coverage in the United States is closely tied to employment: about 90 percent of the privately insured have employment-related coverage. Thus, changing jobs often means changing health plans. Before HIPAA, workers starting a new job often had to wait to qualify for coverage of preexisting conditions. In some cases, new hires faced waiting periods for any health insurance. However, one important drawback of employer-based insurance is reduced mobility between jobs, or "job lock." Waiting periods or preexisting condition exclusions make it difficult to ensure continuity of insurance coverage when changing jobs. This can be a barrier to job mobility, particularly for those with chronic conditions. Evidence on the extent of job lock is mixed: some studies find little or no effect, but one study estimates that employer-based health insurance can decrease job turnover rates by up to 25 percent. When a person obtains coverage through a new employer, he or she may be subject to preexisting conditions exclusions or waiting periods under the new plan. In addition to creating costs for individuals, who may stay with a particular employer in order to keep health insurance, job lock may also impose costs on the economy by preventing workers from moving to those jobs where they are most productive. Policies like HIPAA and the proposed Medicare buy-in may help improve mobility between jobs. The Health Insurance Portability and Accountability Act HIPAA contains a number of reforms designed to improve the operation of individual and group health insurance markets. It helps ease the transition between jobs and into self-employment and improves access to insurance for those who lack access to employment-based insurance and for small firms. Guaranteed issue and renewability. HIPAA prohibits insurers from declining to cover individuals who were previously covered by a group plan and who have elected and exhausted their eligibility for extended coverage under COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985), which allows workers to buy into their former employer's plan for up to 18 months. HIPAA also prohibits insurers from refusing to renew coverage on the basis of health status, claims experience, genetic information, or other related factors. These provisions can help improve access to health insurance for small firms and individuals. However, HIPAA imposes no restrictions on the premiums that insurers may charge, so some individuals or firms may still be effectively excluded by prohibitively high premiums. In addition, insurers may try to find other ways to avoid selling insurance policies to high-cost individuals, through more targeted marketing or plan design as described above, for example. Newspaper accounts report that some insurers may even be instructing their agents in how to avoid enrolling higher risk applicants. 182 Limiting preexisting condition exclusions. HIPAA generally limits exclusion periods for preexisting conditions to 12 months. Some exclusions for preexisting conditions are appropriate, because otherwise people would have little incentive to purchase insurance when they are healthy, knowing that they could simply sign up after they get sick. Thus, it is important to design policies that increase accessibility without exacerbating this free-rider problem. HIPAA addresses this problem by requiring that individuals have continuous coverage in order to take full advantage of the limits on preexisting conditions exclusions. If a person was covered for a particular condition at one job and then changes jobs or elects to purchase individual insurance, he or she can "credit" the time covered under the previous plan against the preexisting condition period in the new plan. For example, someone who had 8 months of coverage could be required to wait no more than 4 months for coverage at a new job (assuming the employer offers insurance). In addition, those seeking insurance on the individual market must have 18 months of creditable coverage and must have exhausted coverage under COBRA (if eligible). Insurers offering coverage to these persons may not impose preexisting condition exclusions. Proposals to Improve Access to Health Insurance for 55- to 64-Year-Olds Americans aged 55-64 are one of the more difficult-to-insure populations: they have less access to and great risk of losing employer-based health insurance, and they are twice as likely as younger people to have health problems. Many lose their coverage when they lose their jobs as a result of company downsizing or plant closings. Still others lose insurance when their retiree health coverage is dropped unexpectedly. To address these problems, the Administration has proposed three policies as part of its proposed 1999 budget. First, persons aged 62-64 who lack access to employer-provided insurance would be allowed to buy into Medicare. The premiums, which would be paid in two parts—one contemporaneously, the second after turning 65—would cover the full cost of participation, making the policy self-financing in the long run. Second, displaced workers aged 55 and older who have lost their employer-based insurance as a result of job loss could also buy into Medicare. Third, retirees aged 55 and older whose employer drops their retiree health coverage would be eligible to buy into their former employer's health insurance through COBRA. Retirees would pay a higher premium than do other COBRA participants, to reflect their higher costs. Each of these options provides a competitive alternative to individual insurance for people in this age group. 183 Voluntary Purchasing Cooperatives for Small Businesses As described earlier, small businesses are at a disadvantage in purchasing health insurance. To address this problem the Administration has proposed giving States grants to establish voluntary purchasing cooperatives for small businesses. Small firms could then pool together to negotiate insurance rates that are more affordable than those offered to them individually. This policy could help the large numbers of individuals working for small firms who are presently uninsured. CONSUMER PROTECTION AND QUALITY IN THE HEALTH CARE INDUSTRY Health insurance plans are of two general types: fee-for-service plans pay providers for each service they perform, whereas managed care plans (such as health maintenance organizations) usually shift some financial risk to providers. Between 1980 and 1996, the share of workers enrolled in fee-for-service plans fell from 92 percent to 25 percent, primarily in response to rising health insurance costs. The expansion of managed care has helped slow the rate of growth in health insurance premiums by giving providers a greater incentive to control costs. But perceptions that the quality of care has suffered in managed care plans have made managed care the subject of criticism from consumer groups, the press, and the public. The last few years have seen a flurry of activity by the Congress and State legislatures, regulatory agencies, health plans, consumer advocates, and others to define a new set of consumer rights, protections, and responsibilities in response to consumers' concerns about the changing health care system. Although managed care has focused new attention on these issues, many of the concerns raised by these groups—and the actions they propose to address them—are equally important for traditional insurance plans. The President's Commission on Consumer Protection and Quality in the Health Care Industry was established to advise the President on changes occurring in the health care system and, where appropriate, to make recommendations on how best to promote and ensure consumer protection and the quality of health care. The commission submitted a report, including a Consumer Bill of Rights and Responsibilities, to the President in November 1997. In addition, the Health Care Financing Administration (HCFA) has promulgated rules designed to protect Medicare and Medicaid managed care participants. How Managed Care Works Managed care organizations typically contract with a group of hospitals and doctors to care for their enrollees. Enrollees generally must seek care from providers in the plan's network, although point-of-service plans, which allow enrollees to see providers outside the network, with higher cost sharing, are growing in popularity. ("Cost sharing" refers to out-of-pocket payments, such as deductibles and copay 184 ments, required of insured individuals who receive care.) Whereas traditional fee-for-service plans control utilization mainly through cost sharing, managed care organizations rely on a number of "supply-side" utilization controls. For example, they may require enrollees to see a primary care physician, or "gatekeeper," before they can go to a specialist, or may limit the types of treatments that providers can offer. Another important feature of managed care plans is that providers often bear some of the financial risk. For example, managed care plans may pay providers a fixed ("capitated") payment for each member or use other mechanisms that give providers financial incentives to limit care. Promises and Pitfalls in Consumer Protection Legislation Managed care highlights a new challenge to policymakers, namely, how to protect consumers and promote their informed choice among health plans without undermining managed care's ability to control costs. More employers now offer their employees a choice of health plans—including managed care plans—and many of these ask employees to pay more for more expensive coverage. This can encourage plans to operate more efficiently, control costs, and provide higher quality care, but consumers need sufficient information to make good decisions about what features they want in a health plan—and how much they are willing to pay for them. Many of the activities of the President's commission have focused on addressing the need for more user-friendly information about health plan features and quality, and for strengthening consumer confidence in the health care system. In addition, government attempts to micromanage the practice of medicine—whether in the name of cost containment or in the name of consumer protection—are an unwise use of regulatory authority and would either waste valuable resources or run counter to the goal of a quality-focused system. The commission includes consumers, health care providers, health insurers, health care purchasers, representatives of State and local governments, and experts in health care quality, financing, and administration. In drafting its Consumer Bill of Rights and Responsibilities, the commission was guided by four principles: • All consumers are created equal. The rights and responsibilities outlined by the commission should apply to all participants in the health care system, including beneficiaries of public programs, government employees, persons with individual policies, and those with employer-based coverage, including self-funded coverage. In addition, to the extent possible, these rights should be accorded to those who have no health insurance but make use of the health care system. 185 Box 5-2.—Quality Data Collection for Medicare Managed Care Hie Health Care Financing Adis&nigteation has promulgated roles that will enable the agency to collect data on quality of oate in and beneficiary satisfaction with Medicare managed care plam The National Committee for Quality Assurance, in coiyimction with HCFA, industry representethres, other purchaser^ and beneficiary advocate^ has developed 40 quality measures related to the Medicare imputation. These measures build on the Health Plan Employer Data and Information Set (HEDIS) developed by the National Committee for Quality Assurance for the nncler~6§ population. HCFA will piablisfa summary date to help beneficiaries choose among plans. Quality indicators will also allow HCFA to ensure that Medicare beneficiaries receive appropriate care from managed care providers, and will help identify areas for quality improvement. Currently managed care plans contracting with Medicare may have no more than 50 percent of their enmllment from Medicare, This prwMon was designed to help ensuiB that plans contracting with Medicare offer service of similar qtialitf to that provided in the private sector, The Balanced Budget Aet of 1997 eliminated tMs requirement, and new rules will allow HCFA to use actual quality data* rather than the 50~pereent role, in deciding which managed care organisations are eligible to contract with Medicare* This effort wfll improY® HCFA*s ability to ensure high-quality care and help beneficiaries make informed health plan decisions* In addition, mom information about these plans could improve confidence in Medicare managed care, en*»-u?aging more to enroll in these plans. Quality first. In considering each proposal, the commission asked whether it would improve the quality of care and of the system that delivers that care. Preserve what works. Some elements of managed care and of feefor-service plans must be changed to protect the rights of consumers. But each delivery system can also point to elements that have improved quality and expanded access. Costs matter. The need for stronger consumer rights must be balanced against the need to keep coverage affordable. Ultimately costs are borne by consumers and their families through higher health insurance premiums, higher prices, lower wages, fewer benefits, or less coverage. 186 Some reforms proposed by States and consumer groups would make managed care plans look more like traditional plans—for example, by requiring health maintenance organizations to accept all providers or limiting the use of financial incentives that may encourage physicians to limit treatment. To the extent that these regulations would prohibit practices that have helped managed care plans control utilization and spending, they could undermine the ability of health plans to control costs, and could ultimately reduce accessibility and affordability. However, to the extent that such policies improve the delivery of highquality, efficacious care, they could improve health outcomes and may help offset cost increases. Among the rights laid out by the commission is the right of consumers to "fully participate in decisions related to their medical care." In order for consumers to participate in decisions affecting their health care, both when choosing a health plan and when considering treatment, they need information. The commission recommended that plans should disclose all factors—for example, the method of provider compensation and the plan's ownership of or financial interest in health care facilities—that could influence providers' advice or treatment decisions. In addition, "gag clauses" and penalties on health care professionals who advocate on behalf of their patients should be eliminated, so that providers can freely discuss all treatment options with their patients, and so that patients can make decisions based on informed consent. New Rules for Plans Serving Medicare and Medicaid In 1996, HCFA adopted regulations limiting the use of some financial arrangements for health plans serving the Medicare and Medicaid populations. These rules prohibited plans from making payments to providers to limit necessary care, required plans to institute "stop-loss" provisions—which protect providers from very large financial losses—if the compensation method used places physicians or groups of physicians at substantial financial risk, and required disclosure of information about arrangements that transfer substantial financial risk to the health care provider. HCFA also banned the use of "gag clauses" for Medicare plans beginning in 1996 and Medicaid plans beginning in 1997. In addition, HCFA has sought new ways to ensure that Medicare managed care plans provide high-quality care by collecting data on quality and satisfaction in those plans (Box 5-2). FOOD AND DRUG ADMINISTRATION REFORM The Food and Drug Administration Modernization Act of 1997 is designed to ensure the timely availability of safe and effective new products that will benefit the public health. The act, which codifies a number of initiatives taken by the Administration as part of its reinventing government effort, includes important provisions that will 187 establish a clearly defined, balanced mission statement for the Food and Drug Administration (FDA), improve access to certain experimental drugs prior to their final approval, establish a fast-track approval process for drugs to treat life-threatening or serious diseases, and reauthorize the Prescription Drug Users Fee Act (PDUFA) of 1992, increasing the resources available for the drug approval process. Why Drug Regulation Is Needed Even without regulation, drug manufacturers would have some incentive to distribute honest and accurate information about their products. If a manufacturer repeatedly releases drugs that turn out to be ineffective or unsafe, its reputation will suffer, and it may have more difficulty selling new products in the future. The threat of litigation or a public relations crisis can further discourage drug companies from marketing unsafe products. However, drug companies are not likely to produce enough information about their products' safety and efficacy without regulation. The legal system may not provide adequate consumer protection, and regulation through litigation may come with high transaction costs. For example, companies could set up corporate subsidiaries to issue new drugs and shield the parent company from loss of reputation. Government regulation is then needed to remedy this underprovision of information by evaluating and approving drugs before they may be marketed. Setting the Standard of Proof Setting the standard of proof for new drug approvals entails balancing two risks. On the one hand, approval of unsafe drugs may cause injury or death, and approval of ineffective drugs may crowd out alternative treatments or increase wasteful medical spending. On the other hand, denials or delays in approval may prevent sick people from getting more effective treatment. The FDA has historically focused primarily on minimizing the first type of risk (Box 5-3). In the late 1980s, however, the focus began to shift with respect to drugs for life-threatening illnesses, particularly AIDS. The FDA instituted a fast-track approval process for these drugs, and more patients were offered early access to these drugs before final approval. These policies recognize that the risk that a drug will prove unsafe or ineffective must be weighed against the risks of the disease itself. The FDA Modernization Act codifies and expands upon these reforms and establishes a mission for the FDA that explicitly emphasizes not only protecting the public health, by ensuring that products approved by the FDA meet high standards for safety and efficacy, but also designing a review process that does not unduly limit innovation or product availability. 188 5*3*—History of Pood and Drug Administration Regulation of In 1937 an elbdr of stilfamlamid^ an antibiotic, killed 10? people, most of them eMldrenu This tragedy hastened the enaetmeM, the following year, of food and drug legislation already pending: the Federal Pood, Bmg? and Cosmetic Act gave the PDA authority to regulate cosmetics, preseription druga, and therapexrtte devices, 'The act required that products be shown to be safe before they are marketed, During the 1940s and 1950s the Congress subjected a number of other products^ including food additives and pesticides, to PDA approval and enacted other requirements. In 1962 the sleeping pill thalidomide was linked to serious birth defects in Europe, Although concerns with thaJidomide related to safety not efficacy* and the drug had not been approved to the United States, the scare generated support for extending the FDA's mandate to determining the efficacy of new drugs. These events culnnnated in the passage of the 1962 Drug Amendments, which required drag manufacturers to show that drugs were not only safe but also effective. The effectiveness requirement was associated with a rapid increase in total drug development time (Chart 5-8), Chart 5-8 Ciinica! Trial and Drug Application Approval Times for New Drugs New drug development time has trended upward since the 1960s, although drug application approval time is at an all-time low. Years 12 Total development time 10 Drug application approval time JL 1964 1967 1970 1973 1976 1979 1982 1985 Note: Data are 3-year moving averages. Source: Tufts Center for the Study of Drug Development, Tufts University. 189 1988 1991 1994 Box .5*4*—The Prescription I>rttg Users Pee Act erf 1992 Between 1080 and 1991 the Congress enacted 34 laws that placed additional demands on the FDA, Yet the agenc/s budget resources have not always kept pace with growth in the number of products it reviews. The Prescription Drug Users Fee Act (PDBFA) of 1992 helped address this problem by allowing the PDA to assess fees on manufacturers seeking approval for drugs, PDUFA also set ambitious performance goals for reducing approval time for new drug applications and required that the feea not offset current funding. Although faster NDA approval is important, it represents only a fraction of the total time necessary to develop and approve new drugs. Nor do shorter NDA approval times necessarily translate month for month into shorter total drug development times. The standard of proof for approval determines how many trials and how much analysis must be completed and is an important determinant of the time it takes a drug to travel from the laboratory to the medicine cabinet. In addition? total drug development time may rise or fall in response to a variety of other factors, from the efficiency of laboratory analysis to the chemical complexity of the drug. Growth in total development time appears to have slowed nev~ ertheless^ and PDUFA is widely viewed as a success. The FDA has hired more than 600 new reviewers^ and NDA approval times have fallen to record lows. As a result, PDUPA and its recent ^authorization have garnered broad industry support, In fiscal 1995 the FDA reported that 100 percent of the application backlog had been eliminated* In addition, the agency has met and exceeded PDUFA% performance goals for action on NBAs. Improving Efficiency in the Drug Approval Process Whatever the standard of proof for approval, rapid processing of new drug applications (NBAs) reduces the health costs associated with delay. Over the last several years the FDA has endeavored to streamline the NDA approval process and reduce unnecessary delays, and NDA approval times have declined significantly, especially for "priority" medications expected to have important therapeutic value. For example, seven drugs for AIDS and other life-threatening illnesses were approved in under 6 months in 1995. After rising since the early 1960s, the growth in total drug development time seems to have stabilized in the 1990s (Chart 5-8). The FDA Modernization Act builds on the success of these initiatives to further streamline the approval process and reduce costly delays in 190 drug application reviews. The act reauthorizes the Prescription Drug Users Fee Act of 1992, ensuring that the FDA has the resources to review drug applications quickly and efficiently (Box 5-4). REDUCING TEENAGE SMOKING The mere fact that people engage in hazardous behavior is not by itself evidence of market failure. But an externality exists if their behavior imposes costs on others, and an information market failure exists if they are not aware of the full costs to themselves of the activity. Smoking, especially by teenagers, arguably illustrates both types of market failure. In addition, because the cigarette manufacturing industry is highly concentrated, with just four firms accounting for the bulk of sales, market power is also a concern—although the higher prices that might result discourage smoking and ameliorate the other possible market failures. This section reviews important tobacco policy developments in 1997 and assesses them with respect to the rationale for government action based on market failure. Last year marked a historic turning point in the long-running battle between tobacco companies and public health advocates over the harmful effects of cigarettes. First, a landmark rule by the FDA to protect children from the damage of tobacco products was upheld by a Federal judge in North Carolina. Next, the 1997 Balanced Budget Act took a first step toward reducing teen smoking by increasing the Federal excise tax on cigarettes. Revenue from this tax increase will help fund the State Children's Health Insurance Program. In addition, a proposed national tobacco settlement was reached last June between the major tobacco companies and a group of state attorneys general. Following an Administration review of the proposed settlement, the President challenged the Congress to pass sweeping tobacco legislation to reduce teen smoking. Full congressional consideration of such legislation was postponed until this year. A major objective of both the FDA rule and the proposed settlement is to reduce access to and use of tobacco products by minors. The FDA rule prohibits the sale of nicotine-containing cigarettes and smokeless tobacco to persons under age 18 and imposes a number of restrictions on manufacturers, distributors, and retailers to limit easy access to cigarettes and other tobacco products and to decrease the amount of positive advertising imagery that makes these products appealing to children and teenagers. The proposed settlement goes beyond these prohibitions: it would increase the price of cigarettes and impose penalties on the industry if specific targets for reducing youth smoking are not met. Teens are more sensitive to the price of cigarettes than adult smokers. Estimates suggest that for every 10-percent increase in the price of cigarettes, the number of teenage smokers falls by 7 percent, versus about 4 percent for adults. The President's call for legislative action sought a comprehensive plan to reduce teen 191 smoking, including even tougher penalties than under the proposed settlement if targets are not met. The Rationale for Regulating Smoking Tobacco use is one of the most important preventable causes of illness and premature death in the United States. Tobacco use is responsible for over 400,000 deaths each year—about 20 percent of all deaths. The average smoking-related death costs its victim up to 15 years of life. These facts alone might justify an active antismoking effort on public health grounds. But to make an economic case for discouraging smoking based on market failure requires evidence that people are unaware of the risks of smoking or that their smoking imposes costs on others. This case is less obvious than the public health case. It is hard to argue, for example, that people do not know that smoking is hazardous to their health. Indeed, at least one study suggests that people generally perceive the risks from smoking to be even greater than is consistent with scientific evidence. Another study finds that light and moderate smokers' assessments of the impact of their smoking on life expectancy are realistic, whereas heavy smokers significantly underestimate the risks. Similarly, it is widely recognized that smoking is habit-forming and most likely addictive. Yet mature adults are generally given the freedom to make choices that involve trading off the best possible health for other pleasures (like playing dangerous sports, overeating, overdrinking, or sitting on a couch watching too much TV). The economic case for discouraging smoking based on incomplete information focuses therefore on the decision by teenagers to start smoking. To the extent that young people have short time horizons and are influenced by industry advertising, they may discount too heavily the risks of smoking and the difficulty of quitting. The studies cited above of people's perceptions of the risks associated with smoking did not include teenagers. The finding that heavy smokers underestimate the risks included only 50- to 62-year-olds; it is likely that teenagers' assessments are even more unrealistic. Society may legitimately wish to limit to adults the right to make such a risky decision as whether or not to smoke. Tobacco use also imposes externalities. To the extent that the costs of treating smoking-related illnesses are not reflected in the insurance premiums paid by smokers, or in their tax and premium contributions to programs such as Medicare and Medicaid, smokers impose uncompensated costs on the rest of society. One influential study suggests that these costs are offset to some extent by the social savings in reduced pension and Social Security payments due to the premature death of smokers; it also suggests that existing excise taxes cover the net external costs of smoking. However, this study does not include the costs of all diseases in which smoking has been implicated, nor does it 192 consider such additional, potentially large external effects as illness and death from second-hand smoke. Thus, reasonable economic grounds exist for policies aimed at regulating and discouraging smoking. Until last year, the tobacco industry was able to mount a largely successful effort to limit such efforts. It did, however, face the prospect of numerous lawsuits, including several State-initiated class action suits, aimed at recovering damages for smoking-related State Medicaid expenditures. Although the industry had a good record of winning such lawsuits, the ongoing litigation costs and the huge potential costs of an adverse verdict apparently made it worthwhile to the tobacco companies to seek a settlement. Economics of the Proposed Settlement The proposed tobacco settlement reached last June illustrates some of the issues that will have to be addressed in any tobacco legislation. The settlement would impose a one-time $10 billion charge on tobacco firms plus an annual payment, which would be adjusted for inflation and for the quantity of tobacco sold in the United States. In effect, the annual payment would function like an excise tax. Although the figure of $368.5 billion is often cited as the industry's total payment, this number is misleading in several respects. First, $368.5 billion is the simple sum of the $10 billion initial payment and the base value of the first 25 years of annual payments (in constant 1997 dollars). A more economically meaningful approach would calculate the discounted present value of the stream of payments expected from the settlement, recognizing that a dollar paid 25 years from now is worth far less than a dollar paid today. For example, using a conservative discount rate of 3 percent, the present value of the first 25 years of payments described in the proposed settlement would be about $260 billion at current sales volumes. Second, the base payment does not represent the amount that would actually be paid. Because the annual payment functions like an excise tax, the quantity of cigarettes sold will decline to the extent that the payment is passed on to consumers through higher cigarette prices. The payment collected will fall accordingly. (On the other hand, other features of the proposed settlement, such as the surcharge for not meeting youth smoking targets and an "excess profits" provision, could increase the payment.) Third, because it is anticipated that the settlement payment will be fully reflected in the price of cigarettes, the incidence of the annual payment will fall primarily on continuing smokers, not on the tobacco companies. A Federal Trade Commission analysis of the proposed settlement raises additional concerns about its antitrust implications. The tobacco industry is highly concentrated, as noted above. Gross profit margins are also high. But even in highly concentrated industries, where prices may be higher than would prevail under perfect compe- 193 tition, rivalry among firms and the illegality of explicit collusion tend to keep prices below the level that would maximize industry profits. Numerous economic studies have found an elasticity of demand for cigarettes in the range of about 0.4 to 0.5 in the short run—meaning that each 10-percent increase in the price of cigarettes leads to a 4- to 5-percent decline in the number of packs sold. This implies that a price increase would raise industry profits: not only would the increase in price be more than enough to offset the decline in the quantity sold, but total costs would also fall with the reduction in quantity. Since demand is inelastic, if firms were free to collude they would have an incentive to raise prices substantially. The Federal Trade Commission's analysis points to certain aspects of the settlement, most notably its broad antitrust exemption, that could reduce rivalry and increase collusion. In general, the antitrust laws forbid collusion to fix prices because higher prices increase industry profits at the expense of consumer welfare and economic efficiency. In the case of cigarettes, however, higher prices could further the social policy goal of reducing smoking. Nevertheless, granting a broad antitrust exemption is neither the most direct nor the most socially desirable way of achieving higher cigarette prices. This Administration believes that tobacco legislation must include stiff penalties that give the tobacco industry the strongest possible incentive to stop targeting young smokers. The proposed settlement includes targets to cut teen smoking by 30 percent in 5 years, 50 percent in 7 years, and 60 percent in 10 years. Legislation should further impose financial penalties that hold tobacco companies accountable to meet those targets. The Administration supports penalties that are non-tax-deductible, uncapped, and escalating—so that the penalties get stiffer and the price increases greater the more the companies miss their targets. Recognizing that one of the surest ways to reduce youth smoking is to increase the price of cigarettes, the President has called for a combination of industry payments and penalties that could add up to $1.50 per pack to the price of cigarettes over the next decade. The Administration also supports a number of nonprice strategies for reducing youth smoking through tobacco settlement legislation, including public education, counteradvertising, stronger and more visible warning labels, and expanded efforts to prevent youth access to tobacco products. 194 CHAPTER 6 Recent Initiatives in Antitrust Enforcement DURING THIS ADMINISTRATION the Federal antitrust enforcement agencies have been aggressive in enforcing the Nation's antitrust laws. The Antitrust Division of the Department of Justice has imposed record fines—over $200 million in fiscal 1997—and the Justice Department and the Federal Trade Commission (FTC) have both pursued many important cases and investigations, involving such firms as Microsoft, Archer Daniels Midland, Toys "R" Us, and Staples and Office Depot, as well as traders on the NASDAQ overthe-counter stock market. This more aggressive stance does not, however, return Federal antitrust philosophy to an earlier era in which big was viewed as inherently bad. Recent cases and investigations suggest that the Justice Department and the FTC have taken a balanced approach to antitrust enforcement, bringing an action only when thorough investigation and analysis reveal a substantial threat to competition. In doing so, these agencies are guided by their mission to protect the competitive process, recognizing that free markets are likely to provide the best outcomes for society. This chapter reviews how these agencies have analyzed market competition in a number of recent cases. In so doing it attempts to explain some apparent paradoxes in antitrust enforcement—why, for example, in 1997 the FTC stopped Staples and Office Depot from merging, even though the vast majority of office products are sold by neither company, but allowed a merger between the two leading U.S. manufacturers of large commercial aircraft in an already highly concentrated industry. The chapter begins with a broad overview of the origins and principles of antitrust efforts in the United States and then proceeds to survey several recent developments. The most striking of these has been the growth in corporate merger filings to record levels. The chapter explores the efforts of the antitrust enforcement agencies to allow those mergers that reduce costs, without allowing firms to gain the power to raise prices. Next the chapter discusses the potential impact of electronic commerce on competition. Although electronic commerce will in many cases make competition work more smoothly, it may also make it easier to establish price-fixing agreements. The chapter also surveys the efforts of 195 antitrust enforcers to ensure the continued growth and competitiveness of high-technology industries. Finally, the chapter discusses international antitrust enforcement, an aspect of antitrust policy that has become increasingly important as global trade has expanded. ORIGINS AND PRINCIPLES OF ANTITRUST As the American economy shifted from agriculture toward industry during the 19th century, large corporations and trusts began to emerge, eventually dominating or threatening to dominate a number of industries. Public opposition to these monopolies mounted, and in 1889 alone, 12 States passed antitrust or antimonopoly statutes. The Congress followed swiftly. In 1890 it passed the Sherman Act by an overwhelming margin: 52 to 1 in the Senate and 242 to 0 in the House of Representatives. The broad contours of American antitrust law were completed in 1914 with the passage of the Federal Trade Commission Act and the Clayton Act. The Sherman Act contains broad bans—with both criminal and civil penalties—on monopolization, price-fixing agreements, and other unreasonable restraints on trade. The Clayton Act contains more specific prohibitions of mergers and of certain forms of price discrimination, exclusive dealing agreements, and tie-in sales (sales conditioned on the purchase of another product) when the effect may be to substantially lessen competition or to tend to create a monopoly. The Justice Department and the FTC have overlapping but distinct authorities: the Justice Department may bring actions under the Sherman Act and the FTC under the Federal Trade Commission Act, but either may bring actions under the Clayton Act. In addition, the major regulatory agencies, such as the Federal Communications Commission, the Federal Energy Regulatory Commission, and the Surface Transportation Board, all review mergers under their own statutory authority. The antitrust laws' primary objection to monopolies, cartels, and other restrictive practices and restraints of trade is that they injure consumers by increasing prices. Another concern, which has been a particular focus of economists, is that these high prices inappropriately curtail consumption of the monopolized good. Inefficiencies arise when sellers charge monopoly prices, because consumers lose more from the price increase than sellers gain. Another objection to monopoly was expressed by Judge Learned Hand, who argued that "Unchallenged economic power deadens initiative, discourages thrift and depresses energy," and that "immunity from competition is a narcotic, and rivalry is a stimulant, to industrial progress." In a similar vein, the British economist John Hicks wrote that "the best of all monopoly profits is a quiet life." This complacency on the part of monopolists can impede economic progress. 196 The concern that firms with market power—the power to raise prices above their production costs—can limit innovation has become an important part of antitrust enforcement during this Administration. The choice between competition and monopoly is easy. Unfortunately, however, that is not usually the choice that antitrust enforcers face. The industries in which antitrust issues tend to arise can seldom be appropriately classified as either perfectly competitive or monopolized. Usually they lie somewhere in between. Firms typically have some market power, but they also have competitors. Mergers and restrictive practices may create or enhance market power, but they may also promote efficiencies and hence can benefit consumers. Identifying corporate conduct whose primary effect is to lessen competition is the task of antitrust enforcers—a task that often presents a formidable analytical challenge. MERGERS Another challenge for the antitrust enforcement agencies during this Administration has been the dramatic increase in merger activity. As Chart 6-1 shows, after a lull in the early 1990s the merger market has come roaring back to life. Both the 1996 and 1997 fiscal years set new records for the number of merger filings. Chart 6-1 Mergers Filed with the Antitrust Agencies Large mergers must be filed with the U.S. antitrust enforcement agencies. Fiscal 1997 was the second consecutive year of record filings. Number of mergers 4,000 3,000 - 2,000 - 1,000 - 1990 1991 1992 1993 1994 1995 1996 Fiscal years Sources: Department of Justice (Antitrust Division) and Federal Trade Comission. 197 1997 Box 6-1*—Consolidation m tfcta Defense Industry The recent merger wave m the U.S. defense Industry highlights the difficult tradeoffs involved in antitrust policy and the balanced approach that the antitrust enforcement agencies have taken during this Administration. The end of the Cold War and the ensiling 65-percent real reduction in the Pentagon's procurement budget created intense pressure toward consolidation* A large share of the defense business is now concentrated in the hands of a few large firms—notably Lockheed Martin, Northrop Grumman, Boeing, Raytheon, and General Dynamics—that have acquired numerous other major defense contractors a$ they exited the industry. The challenge for the antitrust authorities has been to balance the perceived need for consolidation to reduce overhead costs against the potential for a reduction in competition. On the one hand, if the mergers allow defense contractors to eliminate duplicative overhead costs the Pentagon will be able to purchase weapons systems more cheaply, On the other hand, if the number of effective bidders falls, prices may rise, forcing either higher defense budgets or reduced defense purchases, In a number of cases where anticompetitive effects have been a concern, instead of trying to block the merger and forgoing the potential cost savings, the antitrust agencies have tried to adopt narrowly focused remedies. For example, they have invalidated exclusivity arrangements, insisted on the divestiture of key assets, and required the creation of provisional information In evaluating these mergers and deciding which ones to challenge, the enforcement agencies must strike a fine balance. A merger may yield significant cost savings, but it may also threaten to increase industry concentration (that is, reduce the number of firms in the industry) and stifle competition, allowing the remaining firms to increase prices and reduce output. The impact on concentration and competition is particularly difficult to evaluate in the many industries now experiencing rapid structural and technological change, such as the defense industry, considered in Box 6-1. The enforcement agencies must consider who will be the merged firm's competitors in the future, not just today. A merger does not have to create a monopoly in order to result in higher prices and lower output. By increasing concentration, a merger may increase the likelihood of successful collusion, either overt or tacit, among the remaining firms. Greater concentration may make it easier for each firm to communicate its intentions to the others, and 198 Box $-1*— continued merging companies An example of tite first remedy is provided by the 1095 merger of Lockheed Corp. with Martin Marietta Corp. This merger raised antitrust concerns tha companies had entered into exclusive teaming with Hughes and Northrop Grumman Corp., respectively* In the wake of a merger, these agreements would raise the prospect that there might be only one bidder on spacebaaed infrared aarly warning satellite systems, since Hughes and Northrop Grumman were the leading providers of eleetrooptieal sensors for these satellites. T0 promote competition in tM§ market, the FTC's consent order forbade Lockheed Martin enforcing the exclusivity provisions, , Baytheon Co/s $5*1 billion acquisition of Hughes Aircraft Co, might have substantially lessened competition in both infrared sensors and electro-optical systems had the Justice Department not forced Raytheon to make a large divestiture. Raytheon agreed to seE off the infrared sensor business it had acquired from Texaa Instruments Ine^ as well as electro-optical system^ businesses that it would otherwise have acquired with the purchase of Hughes. Raytheon also agreed to a firm price on an jMrFdree missile to compensate for the lost competition from Hughes* Finally,, Raytheon agreed to maintain an information firewall to preserve the independence of Raythaon and Hughei for a new Army antitank missile* the interests of the firms may be less likely to diverge. The smaller number of firms may also reduce the benefits and increase the cost of cheating on the collusive agreement. For example, mergers make price cutting less profitable because the merger eliminates one firm from which customers might be attracted away by the price cut. It may also become easier for colluding firms to detect and punish those firms that deviate from the agreement. Mergers may result in price increases even when firms do not collude in any sense. For example, a firm with market power by virtue of control over a large portion of industry capacity will enhance that power, and may therefore raise prices, if it acquires still more capacity by merging with a competitor. Another important example of such a "unilateral competitive effect" arises when formerly standardized products become differentiated, giving rise to market power as consumers develop brand preferences. Such power is limited by the availability of competing brands; hence a merger between firms sell 199 ing competing brands relaxes the constraint that competition places on prices. The merged firm recognizes that some of the sales lost through a price increase on one brand will be recaptured by the other brand, and therefore be retained by the firm. This encourages the merged firm to raise the price of both brands. When the brands are particularly close substitutes, the firm may want to raise both prices substantially. Enforcement agencies must balance these concerns about market power against the efficiencies in production that mergers can make possible. There are several ways in which mergers can reduce the average cost of production in an industry. A merger may allow one firm to take advantage of another's superior technology. Where production processes are composed of multiple distinct activities, a merger can allow each of the merging firms to specialize in those activities that it does best. Mergers may also increase efficiency in industries subject to economies of scale, that is, those in which average production cost declines as output increases. In these industries a merger may reduce costs by eliminating duplicative fixed costs or allowing longer production runs. Consumers benefit from the merger as well if merging firms pass these savings along in the form of lower prices. The challenge for antitrust enforcement, then, is to prevent those mergers that would harm consumers by enhancing market power, but to allow those that create substantial benefits. To evaluate the market power and the efficiency effects of mergers, the FTC and the Justice Department use the framework that they jointly established in the 1992 Horizontal Merger Guidelines, which were partially revised in 1997. According to the guidelines, the steps to be taken in a merger review for a merger among competitors are as follows: • define the relevant market and calculate its concentration before and after the merger • assess whether the merger raises concerns about adverse competitive effects • determine whether entry by other firms into the market would counteract those effects, and • consider any expected efficiency gains. This chapter discusses each step in turn below. MARKET DEFINITION The first step is to determine the relevant market and whether the merger will increase concentration significantly in that market. The Merger Guidelines state that the relevant market is generally the smallest group of products and geographical area such that a hypothetical monopolist in that market would raise the price significantly, 200 taking into account the reduction in demand caused by consumers curtailing their purchases. Having defined the relevant market, the agencies determine the market shares of all firms identified as market participants, and use these market shares to calculate an index of market concentration. Mergers that would increase concentration significantly tend to attract more scrutiny from the enforcement agencies, because these mergers are more apt to lead to large price hikes. Typically, therefore, the narrower the relevant market, the more likely it is that a merger will be investigated. In 1997 the FTC challenged the merger of Staples Inc. and Office Depot Inc. because it believed that the relevant product market was "the sale of consumable office supplies through office superstores," and these firms were the two largest in that market. Staples countered that the relevant market was all sales of office products, including sales by discount stores, drugstores, and wholesale clubs. The combined firm would have accounted for less than 6 percent of this broader market, which suggested that the firm could not have raised prices significantly after the merger if this market definition were indeed correct. The FTC maintained, however, that even though most individual items could themselves be bought from many retailers, the size, selection, and inventory offered by office superstores distinguish them from other office supply retailers. The FTC's statistical analysis showed that, when the presence of other potential competitors was controlled for, Staples' prices were over 5 percent higher in cities where it did not face competition from other office supply superstores. The FTC took this as evidence that nonsuperstore sellers of office supplies do not constrain superstores' prices effectively. This pricing evidence led the court to accept the FTC's market definition and conclude that the merger would significantly increase concentration in the office superstore market and so be anticompetitive. The key issue in defining the relevant market in a recent merger between two gypsum drywall producers was not the type of seller, but rather the sellers' geographic location. In 1995 Georgia-Pacific Corp., which had 10 drywall plants nationwide, including one each in New York and Delaware, proposed to acquire nine drywall plants from a Canadian-based competitor, Domtar Inc. Two of the nine plants were located in New Hampshire and New Jersey. The Justice Department determined that if the relevant geographic market was national, the acquisition would likely not have raised competitive concerns. However, the merger would have increased concentration significantly in the Northeastern States, so that if the relevant market were localized to that region, the merger likely would have led to price increases there. To determine the relevant geographic market, the Justice Department examined whether a small but significant local price increase by Northeastern producers would be profitable, taking into account the extent to which customers could switch to producers out 201 side the region. The agency considered such factors as current shipping patterns, constraints on production capacity outside the region, and transportation costs. Gypsum drywall is heavy, bulky, expensive to ship, and likely to break during transport if handled excessively. The Justice Department found that drywall plants in the Northeastern States accounted for the majority of sales to consumers in those states; sales from plants outside the region were comparatively small. Furthermore, drywall plants outside the Northeast had relatively little excess capacity. From this evidence, the Justice Department determined that customers in the Northeast could not have switched to out-of-region producers in sufficient quantities to make a local price increase unprofitable. The agency therefore decided that the relevant geographic market was regional, and Georgia-Pacific, to satisfy the Justice Department's concerns, agreed that it would divest its New York and Delaware plants. COMPETITIVE EFFECTS Defining the market and assessing its concentration are only the beginning of the merger review process. The next step is to determine whether the merger would have adverse competitive effects. The 1992 Merger Guidelines recognize that mergers may lessen competition through either collusion or unilateral effects. Indeed, unilateral effects received new prominence in the 1992 Merger Guidelines and have been the dominant concern in several recent mergers. One recent example where the analysis of unilateral effects suggested significant harm to competition is the acquisition of Continental Baking Co. by Interstate Bakeries Corp. Continental's Wonder Bread brand competed against various Interstate brands in several regions. Although these two firms were by no means the only producers of white bread in these regions, the Justice Department concluded that white bread is a highly differentiated product, with various brands commanding significant customer loyalty, and that after the merger Interstate would likely have raised prices on its brands even if other bakers kept their prices constant. Interstate would no longer be discouraged from raising prices on its own brands by the risk of customers switching to Wonder Bread, since after the merger Interstate would own Wonder Bread. Likewise, whereas Continental was discouraged from raising the price of Wonder Bread by the prospect of customers switching to Interstate's brands, after Interstate bought Wonder Bread this would no longer be a worry. Simulations based on estimated demand elasticities helped convince the Justice Department that significant price increases would likely follow the merger, even in the absence of coordination among the remaining firms. To avoid these price increases, the Justice Department entered into a consent decree requiring the merged firm to divest a brand of bread in each of five geographic regions. 202 Sometimes the antitrust authorities can limit a merged firm's power to raise prices without requiring a divestiture, as illustrated in the merger of Time Warner Inc. with Turner Broadcasting System Inc. In 1995 Time Warner proposed to acquire Turner in a deal valued at over $7 billion. Both companies were important providers of programming to local cable system operators. Time Warner owned Home Box Office (HBO), the leading cable movie channel, and Turner owned Cable News Network (CNN). Both these channels are "marquee" channels that cable operators have a strong desire to carry in order to attract and retain subscribers. The FTC was concerned that if Time Warner controlled both these marquee channels it would increase the prices it charged to cable operators. To limit the anticompetitive effects of the merger, the FTC's consent order prohibited Time Warner from "bundling" HBO with Turner channels, and CNN with Time Warner channels. The bundling restriction required that the Time Warner and Turner channels be offered separately at prices that do not depend on whether the other is purchased. It may not be immediately apparent why restrictions on bundling can sometimes be an appropriate remedy; after all, once the merged firm controls the price of both channels it could simply implement an across-the-board price increase. However, a hypothetical example demonstrates that when a merged firm sells goods that are substitutes for each other, prohibiting bundling can limit price increases. Consider a cable operator in a city with 50,000 potential subscribers, and assume that the cable operator earns a dollar in profits from each subscriber. Suppose that 20,000 of the potential subscribers like movies: they will subscribe only if the cable system offers a movie channel. Another 20,000 like news and will subscribe only if a news channel is offered. The remaining 10,000 like both movies and news and will subscribe if either is offered. In this city the cable operator would be willing to pay up to $30,000 for either movies or news, since in each case 30,000 people will subscribe. However, as soon as the cable operator buys a movie channel and gets all the subscribers who like movies, it will be willing to pay only $20,000 for a news channel, since the only additional subscribers it will attract are the 20,000 people who like news but not movies. Similarly, a cable operator that already offers news would be willing to pay only $20,000 for movies. Since some people subscribe if either a movie channel or a news channel is offered, the two channels are substitutes from the point of view of the cable operator. If movies and news can be sold as a bundle, they can be sold for $50,000, because a total of 50,000 people will subscribe. On the other hand, if bundling is forbidden and each channel must be for sale individually, the merged firm will not be able to charge that much. Suppose, for instance, that the merged firm tried to sell each channel for $25,000. The cable station would respond by buying only one of the channels; since the channels are substitutes, once the cable sta 203 tion purchases one channel, its willingness to pay for the other channel diminishes to $20,000. If the channels are sold separately, the most the merged firm could sell them for is $40,000 ($20,000 each). For this reason, restrictions on bundling such as those in the FTC's consent order can sometimes limit the exploitation of market power, even when the firm can charge whatever it likes for its products individually. ENTRY The analysis of a merger does not end with defining the market and determining whether the increase in concentration would allow the merged firm to raise prices. Entry can in principle constrain the merged firm's ability to raise prices: a merger that leads to increased prices may also create opportunities for new firms to enter the market, charge a lower price to gain market share, and still earn profits. Loss of sales to new entrants could cause the anticompetitive price increase to be unprofitable. As a result, entry or the threat of entry can in some cases prevent any appreciable price increase after a merger. One difficulty with entry analysis is that it can be highly speculative. It is easy to be overly optimistic and assume that entrants will materialize and eradicate the anticompetitive effects of a merger. Accordingly, the antitrust enforcement agencies have taken seriously the Merger Guidelines' caution that entry must be timely, likely, and sufficient to counter the merger's adverse competitive effects. One merger where entry seemed unlikely to offset the effects of increased concentration was the proposed 1995 acquisition of Intuit Inc. by Microsoft Corp. Each of the two software firms produced a popular personal finance program: Microsoft's Money and Intuit's Quicken together accounted for more than 90 percent of the personal finance software market. Here the question faced by the Justice Department was whether other firms were likely to enter this market in sufficient force to constrain Microsoft's market power once it owned both programs. Two important features of software markets limited the likelihood of entry: the importance of reputation and the "lock-in effect." Purchasers of personal finance software generally prefer a product that is widely accepted as reliable and successful and that has a reputation for performance and customer support. It can take many years and a significant investment for an entrant to develop such a reputation. Even Microsoft had considerable difficulty overcoming the initial success of Intuit. After 4 years of effort, the market share of Microsoft's Money remained far less than that of Quicken, and Microsoft had yet to achieve a positive return on its investment. The fact that consumers have to put considerable time and effort into learning to use a given program gives rise to the lock-in effect. Users of existing software may be reluctant to incur the switching costs of 204 learning another program. Future purchasers may likewise hesitate to invest time and effort in learning to use an entrant's new and untested product because of the risk that the product may not succeed in the marketplace, requiring the customer to eventually switch to the established product. To make the deal acceptable to the antitrust authorities, Microsoft planned to transfer part of its assets in Money to another software developer. Even so, the Justice Department felt that the importance of reputation and the lock-in effect, among other factors, meant that entry could not be relied upon to offset the high concentration that a merger of Microsoft and Intuit would have caused. The merger was challenged, and Microsoft decided not to pursue it. EFFICIENCIES The final major step in the merger review process is to consider the efficiencies promised by the merger. Economists have long recognized the potential benefits of such efficiencies, and in recent years the antitrust agencies have been increasingly willing to consider these benefits when reviewing mergers. Most recently, in April 1997 the Justice Department and the FTC issued revisions to the section of the Merger Guidelines devoted to efficiencies. These revisions reflect the balanced approach of current antitrust enforcement. Under the revised guidelines, the agencies consider the creation of efficiencies, but only verifiable, merger-specific efficiencies. Many studies have suggested that mergers may not produce the synergies and cost savings claimed by managers. Since the agencies understand that it is easier for firms to claim efficiencies than to realize them, they subject efficiency claims to careful scrutiny. If the agencies determine that the claimed efficiencies are likely to be realized and are of sufficient magnitude that the merger is not likely to be anticompetitive, they will not challenge the merger. The proposed merger between Staples and Office Depot illustrates the increased consideration and scrutiny of efficiencies in antitrust enforcement. The two firms claimed that by merging they would be able to take advantage of large cost reductions and efficiencies in purchasing, distribution, operations, and marketing, and that these savings would be passed on to customers in the form of lower prices. Consistent with the revised Merger Guidelines, the court deciding the case considered whether these efficiencies would offset the presumed anticompetitive effects of the merger. The court refused to accept cost savings that were not merger-specific and dismissed those that could not be verified. Also at issue was the degree to which Staples and Office Depot would pass any cost savings through to consumers. The companies projected that for every dollar of cost savings their prices would go down by about 67 cents. However, the FTC presented evidence that historically Staples had passed through only 15 to 17 percent of its achieved cost savings. Accordingly, the court found that 205 the merger's efficiencies would not offset its anticompetitive effects. It granted the FTC's request for an injunction, leading Staples and Office Depot to terminate their merger agreement. ELECTRONIC COMMERCE The potential impact of electronic commerce on competition is dramatic, as described in a recent White House report titled A Framework for Global Electronic Commerce. Electronic commerce is already common in several industries. Travelers, for example, buy airline tickets from travel agents who use computer reservation systems. Over-the-counter stocks are traded on a computerized system. And consumers can buy everything from books to automobiles over the Internet. The potential for electronic commerce to make the economy function better is clear. Computer networks can inform buyers about products available in other States or, just as easily, in foreign countries. Cheap information about wide-ranging markets means that buyers can buy products that they would not otherwise have known about, and can pay lower prices as well. A seller who is the only supplier in a given area may have little power to raise prices if buyers can easily compare prices around the country or around the world. Music stores in Philadelphia will find it pointless to conspire to sell compact discs at high prices if buyers can easily locate competing dealers around the country. Putting cheap information in the hands of consumers thus seems likely to make markets more competitive. One might well wonder if electronic commerce could lessen the need for antitrust enforcement in many markets. However, two cases that the Justice Department recently filed and settled—one against a group of U.S. airlines, and the other against so-called market makers who execute over-the-counter stock trades— highlight a straightforward problem with electronic commerce. Computers do increase the information available in the marketplace, but not just to consumers; they also make more information available to producers and other sellers. Sellers may be able to use this wealth of information to form or maintain cartels. For a cartel to raise prices successfully, the members must somehow come to an agreement about what prices to charge and must figure out a way to maintain that agreement. The airline and stock trading cases illustrate how computer networks can sometimes help a cartel solve both these problems. They suggest that, rather than lessening the need for antitrust authorities, the growth of electronic commerce may in some cases increase it. In 1994 the Justice Department reached a final settlement in a price-fixing case involving eight major airlines and the Airline Tariff Publishing Company (ATP). According to the Justice Department, the 206 airlines had used ATP's computerized fare dissemination services to negotiate increases in fares and to trade fare changes in certain markets for changes in other markets. The alleged collusive arrangement worked as follows. Each airline submitted its fare changes or planned future changes to ATP. In turn, ATP reported the changes to all the other airlines. The resulting data base was enormous, as each airline offered numerous fares, under various terms and conditions, on each of thousands of city pairs. Moreover, these fares changed frequently. In such a complex system it would seem difficult for the airlines to negotiate or maintain any price-fixing agreement, much less a covert one. With so many interrelated fares and fare changes, one might ask how one airline would distinguish, for example, whether another's price change was an attempt to cheat on a collusive agreement, an attempt to punish a third airline for deviating from an agreement in another market, or simply a normal response to increased costs. The Justice Department alleged that such confusion was avoided by linking fare changes with alphanumeric footnote designators and by the judicious use of first ticket dates. Since the ATP data were computerized, this mass of information could be analyzed by sophisticated computer programs each day. Aided by these computer analyses, airlines could engage in intricate but camouflaged negotiations and could monitor cheating on agreements. The settlement that the Justice Department entered into with the airlines barred them from using footnote designators, first ticket dates, and other devices to communicate with each other. According to one study, price leadership in the airline industry cost air travelers $365 million per year during the 1980s. Others have estimated that the cost of such behavior in the airline industry, had it been left unchecked, could have reached several billion dollars per year. These figures suggest that the Justice Department's attempts to eliminate anticompetitive practices in the airline industry could yield large dividends for consumers. The stock trading case, which resulted in a 1996 consent decree, involved transactions in over-the-counter stocks over the automated quotation system operated by the National Association of Securities Dealers (the NASDAQ system). This case also revealed how computerized information networks can sometimes make it easier for firms to maintain agreements to sell at high prices. When an investor places a buy or sell order for shares of a company traded on NASDAQ, special traders called "market makers" typically execute the trade. These intermediaries make their profits from the bid-ask spread, the difference between the price at which they buy a stock and the price at which they sell it. In the NASDAQ case the Justice Department alleged that NASDAQ market makers had agreed to a strategy, or convention, for quoting stocks that essentially limited their incentives to narrow spreads. Also working to support the agreement was the fact that the 207 NASDAQ computer network provided sellers with ready (essentially instantaneous) information about the strategies other sellers were using to quote prices. Market makers that were observed to deviate from the convention were harassed by other market makers and threatened with economic harm. Traditional economic theory predicts that the price-fixing agreement alleged by the Justice Department and the Securities and Exchange Commission (SEC) could not have been maintained on NASDAQ, because entry barriers were low and any of over 100 firms could enter the market for any security. If a price-fixing agreement kept the bid-ask spread high, some market maker would have been tempted to offer the security at a price below the best asking price, or to buy it at a price above the best bid, in an effort to increase market share. But the rules and common practices that governed the way in which NASDAQ securities were traded could have combined to deter market makers from undermining the agreement in this way, with the computer network used for trades playing a key role. NASDAQ market makers may decline to trade a security at the price quoted by other market makers. But if a market maker does execute a trade, the NASD's best-execution rule requires it to make the trade at the best price quoted on the NASDAQ network. A key feature of trading on NASDAQ is the widespread practice of preferencing. A preferencing arrangement between a broker and a market maker commits the market maker to execute trades submitted by the broker. In combination with the NASD's best-execution rule, this practice could have sharply limited the benefits that any market maker could have anticipated from cheating on any anticompetitive agreement, and so significantly enhanced the ability of a cartel to maintain collusion. A market maker that attempted to cheat on an agreement would not expect to significantly increase its market share, because other firms would, in effect, match its prices instantaneously and retain their preferenced order flow. Thus, a practice that initially seemed to offer a great deal to investors—a guarantee of the best price available, regardless of which market maker executes the order—in fact may have tended to support an anticompetitive agreement. In 1996 the Justice Department entered into an agreement with NASDAQ market makers. The market makers agreed not to fix prices in the future and to commit resources to an ongoing monitoring effort to ensure that they adhere to the antitrust laws. The lesson of the airline and NASDAQ cases is that computer networks can sometimes make it easier for sellers to form and maintain price-fixing agreements, by providing sellers with information about the prices that other sellers charge. Agreements negotiated by posting prices on computer networks may prove difficult for the antitrust authorities to ferret out. In the airline case there was sufficient ancillary information—in particular the use of annotations linking one fare proposal to another—to convince the Justice Department that a nego 208 tiation was taking place. In contrast, when one firm tries to take advantage of the fact that prices can be quickly and easily changed on computer systems and raises price for a few instants (at a small cost) in the hope that others will follow, most antitrust experts believe that there is no violation of antitrust laws, even if other firms do follow. Simple price leadership is not banned by the Sherman Act, in part because there is no adequate way to frame a remedy. Firms in collusion and firms in competition may both move prices in concert. Antitrust authorities can only try to prevent sellers from negotiating and offering each other mutual assurances in order to form pricefixing agreements. It has always been difficult to tell whether firms are being forced by competition to charge the same prices, or whether they have agreed to fix prices. The task could become steadily more troublesome as the electronic age progresses. Antitrust authorities in the electronic age need to maintain vigilance in seeking out and enjoining illegal agreements. Electronic commerce may make antitrust enforcement more challenging—and more important. HIGH-TECHNOLOGY INDUSTRIES, INNOVATION, AND INTELLECTUAL PROPERTY Many of the fastest growing and fastest changing U.S. industries are to be found in such high-technology fields as aerospace, computer hardware and software, and telecommunications. These industries present several additional challenges for antitrust enforcers. One is that antitrust enforcers must promote both competition and innovation in these fields through a balanced treatment of intellectual property. Another is to account for the tendency for network externalities, common in many high-technology fields, to create a strong potential for market dominance. A third challenge is to anticipate future developments in these fast-paced industries and conduct antitrust policy accordingly. INNOVATION AND INTELLECTUAL PROPERTY The key assets in high-technology industries are often not factories or machines but intangibles such as scientific ideas or the algorithms contained in computer programs. These assets, unlike physical assets, can be used by any number of people at once. Without intellectual property protection, firms and individuals would have insufficient incentive to produce these assets, because they are costly to produce but cheap to copy or imitate. In recognition of this problem, the U.S. Constitution empowers the Congress to "promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Patent and copyright laws do just that. 209 An important initiative of this Administration has been its use of antitrust enforcement to further encourage innovation and to clarify the role of intellectual property in antitrust law. The Administration recognizes that the licensing of intellectual property for use by persons other than its creator can benefit society both directly, by allowing the more widespread use of intellectual properties, and indirectly, by increasing the return to such assets and thereby encouraging innovation. Such licenses, however, sometimes contain restrictions that limit competition and actually discourage innovation. These restrictions may violate the antitrust laws. The recent case involving the British firm Pilkington pic, the world's largest float glass producer, provides one example of the Justice Department's attempts to use antitrust enforcement to encourage innovation. Beginning in 1962, after acquiring hundreds of patents worldwide on glass production processes, Pilkington entered into licensing agreements with all of its principal competitors. These agreements generally included territorial restrictions, so that each licensee could construct and operate float glass plants in only one country or group of countries. These restrictions allegedly limited the incentives of Pilkington's competitors to innovate in glass processing, by geographically restricting their opportunities to exploit such innovations. Their incentive to innovate was allegedly further limited by requirements to report any improvements in float glass technology and to cede the rights to such improvements back to Pilkington. In 1994 the Justice Department entered into a consent decree with Pilkington, which, among other prohibitions, enjoined Pilkington from enforcing its licensing restrictions against U.S. licensees. The Justice Department's case was strengthened by the fact that Pilkington's principal patents had expired long before the complaint was filed. The Department does not, however, in general limit its attention to restrictions that outlive the life of patents. The 1995 Antitrust Guidelines for the Licensing of Intellectual Property explain the balanced approach taken by the antitrust agencies. The guidelines recognize that intellectual property licensing can create efficiencies by allowing firms to combine complementary factors of production. However, licensing arrangements such as those used by Pilkington may contain restrictive terms that reduce competition among alternative technologies, and the antitrust agencies have sought to eliminate such anticompetitive arrangements. In evaluating the licensing of intellectual property, the agencies balance the procompetitive and anticompetitive effects. NETWORK EXTERNALITIES Many high-technology industries such as computers and communications exhibit network externalities: that is, consumers derive more value from the products of these industries the more people use them. For example, a computer program often becomes more valuable as its 210 network of users grows, because users like to trade data files and exchange ideas about how to use the program effectively. Network externalities can sometimes therefore make entry difficult, because small firms may be unable to compete effectively against large ones, whose products enjoy additional value from widespread usage. The challenge for antitrust policy is to preserve the benefits of network externalities for consumers while preventing firms from exploiting the market power to which these externalities can give rise. When sellers agree to standards, consumers benefit because the products of different sellers are then compatible. Unfortunately, however, firms can sometimes manipulate the standards-setting process to their own advantage, as the FTC claimed happened in a 1995 action against Dell Computer Corp. Dell was a member of the Video Electronics Standards Association (VESA), a standards-setting organization in the computer industry. In 1992 VESA set a new standard for the design of computer bus hardware (the hardware that transmits information between a computer's components). According to the FTC, before the standard was approved, Dell certified that it did not violate any of its intellectual property rights, but after the standard was implemented the company announced that the standard did violate one of its patents. Since by then over a million computers using the standard had already been sold, other computer manufacturers could not switch to an alternative design without creating a compatibility problem. This would have put Dell in a good position to collect substantial royalties on its patent, were it not for a settlement with the FTC, in which Dell agreed not to enforce its patent rights against computer manufacturers using the standard. FAST-PACED TECHNOLOGICAL CHANGE The fast pace of change in high-technology industries makes it hard for antitrust enforcers to anticipate the impact of future developments when deciding the proper course of action. For example, a merger that seems innocuous today may eliminate future competition. Alternatively, a merger may increase concentration significantly today but may not pose anticompetitive problems, either because of entry, as discussed earlier, or because of exit, as revealed by the 1997 merger between Boeing Co. and McDonnell Douglas Corp. Although the Boeing-McDonnell Douglas merger reduced the number of sellers of large commercial aircraft worldwide from three to two, thereby sharply increasing concentration, the FTC decided that McDonnell Douglas's 5-percent market share overstated the company's likely future competitive significance, because this market share reflected only the filling of old orders. Extensive interviews by the FTC revealed that advances in aviation design had left McDonnell Douglas behind: since the firm had not invested as much as its competitors in improving the technology of its aircraft, the vast majority of airlines no 211 longer considered purchasing its aircraft. As a result, the merger did not eliminate viable future competition in the commercial aircraft market. Moreover, after consulting with the Department of Defense, the FTC concluded that there were no prospects for Boeing and McDonnell Douglas to bid on the same defense projects. Having concluded that the merger raised antitrust concerns in neither commercial nor defense markets, the FTC did not challenge the merger. Future competition was a critical issue in the investigation of Bell Atlantic Corp.'s 1997 acquisition of NYNEX Corp. The merger did not increase current concentration in any local telephone market, because neither Bell Atlantic nor NYNEX competed in each other's markets at the time of the merger. However, the Justice Department and the Federal Communications Commission (FCC) needed to assess the likelihood that, in the absence of the merger, each company would someday enter the other's geographic market, and the likely extent of other firms' entry. One focus of the Justice Department's investigation was the effect of the merger on future competition in local service in New York City and nearby portions of NYNEX's service area. NYNEX was the dominant supplier in that area, whereas Bell Atlantic was one of many potential entrants. After carefully studying the plans of other potential entrants, such as AT&T Corp. and MCI Communications Corp., the Justice Department concluded that the prospect for entry by a number of experienced, capable, and well-financed competitors was significant. Therefore it was by no means clear how much the loss of Bell Atlantic as an independent competitive force would adversely affect consumers, particularly given the evidence concerning efficiencies. The Justice Department concluded that it could not meet its burden of proving that the loss of Bell Atlantic as an independent entrant was likely to have so significant a market impact as "substantially to lessen competition," the test of a violation under Section 7 of the Clayton Act. The FCC, on the other hand, which also had authority to review the Bell Atlantic-NYNEX merger, operates under a different statute with a different substantive standard. Under the FCC's interpretations of the Communications Act of 1934, the merging parties had the burden of proving that the merger would on balance enhance competition and be in the public interest. The FCC concluded that the merger would not enhance competition, and it exercised its power to place conditions on its approval of the merger. To remedy the merger's possibly anticompetitive effects, and to advance the goal, set forth in the Telecommunications Act of 1996, of opening local telephone markets to competition, Bell Atlantic offered to make several market-opening commitments, which the FCC accepted before approving the merger. 212 THE GLOBAL MARKETPLACE AND INTERNATIONAL ANTITRUST EFFORTS The emergence of a global marketplace for many goods and services has important implications for U.S. antitrust policy. On the one hand, as transportation costs and trade barriers fall, many problems in antitrust become easier. Mergers that would have led to significant concentration in the absence of international trade may not do so once one accounts for foreign competitors. Also, domestic price-fixing agreements will be undermined if foreign competitors are willing to sell in the U.S. market at a lower price. On the other hand, international price-fixing agreements are more difficult than domestic ones for U.S. antitrust enforcement agencies to police; success often requires cooperation with foreign governments or international organizations. Unlike in the 1980s, when most antitrust fines were imposed in domestic bid-rigging cases, the vast bulk of the over $200 million imposed by the Justice Department's Antitrust Division during fiscal 1997 was collected in judgments against large international price-fixing conspiracies. This suggests that even though international trade may make price fixing more difficult, it will probably remain a serious concern for some time to come. Criminal prosecution in international price-fixing conspiracies is generally much more difficult and complex than prosecuting domestic conspiracies. First, the antitrust authorities must demonstrate that U.S. antitrust law applies. In 1997 the Justice Department made significant headway on this point, when the First Circuit Court of Appeals held that Section 1 of the Sherman Act applies to "wholly foreign conduct which has an intended and substantial effect in the United States," regardless of whether the case is civil or criminal. Even when U.S. antitrust laws do apply, crucial evidence or culpable individuals or firms may be located outside the United States and be beyond the jurisdiction of U.S. courts. These jurisdictional problems make it imperative that U.S. antitrust enforcement authorities coordinate their activities and cooperate with authorities abroad. In several recent investigations, the United States made good use of its mutual legal assistance treaties with a number of foreign countries: the Justice Department sought and received assistance in cartel investigations from several countries, including Japan and Canada. In 1994 the Congress passed the International Antitrust Enforcement Assistance Act (IAEAA), which empowered the U.S. antitrust enforcement agencies to negotiate reciprocal agreements with foreign antitrust enforcers. Under these agreements each government will assist the other in obtaining evidence located in the country of the former, while ensuring confidentiality. Unfortunately, foreign antitrust authorities have been slow in following the U.S. lead 213 in negotiating these agreements, in many cases because they lack similar legislative authorization from their own governments. In April 1997 the United States nonetheless managed to negotiate its first proposed agreement under the IAEAA, with Australia. The United States has also been pursuing discussions with the Organization for Economic Cooperation and Development toward a formal recommendation by that body that would encourage its member countries to enter into mutual assistance agreements that would permit more sharing of evidence with foreign antitrust authorities. At the same time the United States has also worked to improve international antitrust enforcement through the so-called positive comity approach. This approach is used in cases where markets outside U.S. jurisdiction are affected by anticompetitive behavior that harms U.S. interests. Under a positive comity agreement, if one country believes that its firms are being excluded from another's markets by the anticompetitive behavior of firms there, it will conduct a preliminary analysis and then refer the matter to the foreign antitrust authority for further investigation and, if appropriate, prosecution. In April 1997 the Justice Department announced its first formal request to the European Union under a 1991 positive comity agreement. The Justice Department asked the Directorate General IV (DG IV), the European Union's antitrust arm, to investigate possible anticompetitive conduct by European airlines that may be preventing U.S.-based computer reservation systems from competing effectively in Europe. DG IV has announced that it is actively pursuing the matter. Another notable ongoing effort in this domain is the competition advocacy program undertaken jointly by the Justice Department and the FTC. The two agencies are working together, in programs funded by the U.S. Agency for International Development, to educate and otherwise assist governments of developing countries in setting up antitrust enforcement programs. This assistance has included helping countries to draft competition laws, setting up implementation procedures, training their staffs, and, in some countries, placing longterm U.S. advisers in the antitrust office. Several countries in Eastern Europe have benefited from this extensive interaction with the U.S. agencies, and the program has now expanded into countries of the former Soviet Union and Latin America. Although significant progress has been made in international antitrust enforcement, the growing importance of international trade makes it imperative that the antitrust enforcement agencies continue their efforts in this area. To this end, the Justice Department has established the first-ever International Competition Policy Advisory Committee, comprised of distinguished business, labor, academic, economic, and legal experts, to advise it on these cutting-edge issues. Investing in expanded enforcement and globalization of antitrust principles will lead to better protection of competition worldwide, and will yield substantial benefits that can be shared by many. 214 CHAPTER 7 The Benefits of Market Opening THE UNITED STATES HAS LONG RECOGNIZED that open domestic markets and an open global trading system are superior to trade protection and isolationism at promoting broad-based growth and prosperity. For decades our open economy and successful U.S. leadership in liberalizing global trade and investment have generated important benefits for the American people, in the form of stronger growth and improved employment opportunities. The opportunity to acquire goods and services from abroad both encourages us as producers to stay competitive and allows us as consumers to raise our standard of living. In the 1990s, openness to trade and investment, combined with U.S.-led liberalization of world markets, has been essential to our economy's sustained expansion. This contemporary picture of a prosperous America in an increasingly open world economy contrasts powerfully with the economic climate and international trade policies that prevailed at home and abroad some six and a half decades ago. In the early 1930s widespread isolationism had reduced world trade to a level only one-third that of 1929. Fortunately the Nation's leaders of that era saw that the path of economic isolation and tit-for-tat protectionism had no exit. During the 1930s and after, the Administration and the Congress worked together, through such measures as the Reciprocal Trade Agreements Act of 1934, the precursor of later fast-track legislation, to revive international trade, just as the programs of the New Deal worked to restart the domestic economy. World War II disrupted these early efforts, but after the war the U.S.-led campaign to open markets worldwide enjoyed a series of outstanding successes. Those countries that joined us in welcoming market opening, in particular through participation in the General Agreement on Tariffs and Trade, have grown and developed at impressive rates. True, these countries might have experienced growth even without open markets, but the history of this century has made it increasingly clear that strong growth is more likely in open than in closed economies. Bearing this history in mind, this Administration's strategy for economic growth includes a campaign to foster the continued liberalization of markets worldwide. Although much has been accomplished in the postwar period, much remains to be done. As the United States currently enjoys the benefits of relatively open markets at home, this campaign reflects an export-driven agenda aimed 215 at opening markets abroad, reducing current asymmetries in countries' openness. This chapter surveys the primary elements of this campaign. It also reviews the impact that international trade has had on national economies including our own and on the distribution of the benefits of trade within economies (especially among workers). This discussion underscores the need for a strong commitment to trade liberalization not only by the United States, but by all of our trading partners. The chapter concludes with a presentation of recent developments in a second important dimension of open international markets, namely, foreign direct investment, and discusses the implications of the growth of U.S. direct investment abroad and of foreign investment in the United States. The chapter begins, however, with a review of recent trends in U.S. trade. TRENDS IN U.S. INTERNATIONAL TRADE The role of international trade in the U.S. economy today is unprecedented. Until 1970, U.S. exports and imports combined rarely amounted to more than one-tenth of gross domestic product (GDP; Chart 7-1). Since 1970, the real volume of trade has grown at more than twice the rate of output, so that by 1997 exports alone were 12 percent of GDP, and imports were equivalent to 13 percent. Yet trade remains a much smaller component of the U.S. economy than in most countries: in 1995 only four countries had smaller ratios of Chart 7-1 Exports and Imports as a Percent of GDP Trade is an increasingly important component of the U.S. economy, although close to nine-tenths of U.S. expenditure is still on domestic goods and services. Percent of GDP 14 12 •" Imports of goods and services 10 Exports of goods and services Q\ I . . I . . I . . 1 . . 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 Source: Department of Commerce (Bureau of Economic Analysis). 216 trade to GDP than the United States. This does not reflect high U.S. trade barriers, but rather such factors as the size of our economy and the diversity of our endowments, which favor self-sufficiency, and our geographic location, relatively distant from most trading partners. Estimates that adjust for such factors have often found that the United States is more open to imports than are most other major countries. But the point remains that the United States feels the effects of trade and pressures for globalization much less than do most other countries. The rising importance of trade in the U.S. economy is part of a worldwide phenomenon. Technological advances in transportation and communications have contributed to a rapid expansion of the global exchange of goods and services. There is also strong evidence that policy reforms in many countries, in particular the removal of trade barriers and other protectionist measures, have played a significant role in this explosion of trade. The history of the United States during the interwar period points to the importance of policy in stimulating or inhibiting trade. In the years between 1920 and 1930, technological progress continued, but policy moved in a different direction: average U.S. tariff rates more than doubled. The fact that the volume of trade in those years fell by half rather than rose reveals the important role that government policies can play. THE SECTORAL COMPOSITION OF U.S. TRADE The composition of U.S. trade, both exports and imports, has also changed markedly. Exports of services have enjoyed particularly strong growth in recent years, rising from $48 billion (18 percent of total exports) in 1980 to $237 billion (28 percent) in 1996. Over the same period exports of agricultural merchandise have risen only from $42 billion (15 percent of the total) to $61 billion (7 percent). In part these trends reflect Engel's law (as the incomes of households rise, the share devoted to food falls) and the evolution of U.S. comparative advantage in more skill-intensive goods and services. But the impact of market opening may be discerned in these trends as well. Innovations in global communications infrastructure and the liberalization of services trade in many countries have promoted greater trade in services. Large tariff reductions on manufactured products, negotiated in a series of rounds within the General Agreement on Tariffs and Trade (GATT), have lowered export costs in that sector. However, agriculture remains relatively protected in most countries. Exports of both consumer and capital goods have enjoyed rapid sustained growth since the 1980s (Chart 7-2). These two sectors also represent the fastest-growing components of U.S. imports. But whereas growth in exports of these goods has tended to occur relatively evenly across industries, growth of imports has been more concentrated, with especially dramatic increases in such categories as computer goods. 217 Chart 7-2 U.S. Exports and Imports by Category in 1986 and 1996 Both exports and imports, most notably in services and in consumer and capital goods, have grown rapidly, due in part to market opening. U 1986 • 1996 Exports 100 200 0 0 Billions of 1996 dollars Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers. 300 200 100 300 The fact that growth is occurring in both imports and exports of consumer and capital goods may seem contrary to the conventional logic of international trade theory, which is based on specialization according to countries' comparative advantage. In fact, this trend reflects the changing nature of trade. Imports and exports today often grow in tandem even within very narrowly defined product categories: that is, an increasing share of trade is intraindustry rather than interindustry. In 1996, for example, 57 percent of U.S. trade occurred within, rather than between, four-digit SITC commodity groupings (the SITC is a standard classification of goods in international trade; four-digit categories in this system represent highly disaggregated product groups), and this share has risen from 51 percent in 1989. Whereas interindustry trade (for example, the exchange of Chinese sweaters for U.S. computers) is associated with traditional notions of comparative advantage, intraindustry trade (for example, in automobiles and auto parts) is thought to arise principally from fixed costs in production and consumer tastes for variety. THE GEOGRAPHIC COMPOSITION OF U.S. TRADE Canada and Japan remain the United States' leading trade partners, together accounting for one-third of both our exports and our imports. In recent years Mexico and China have risen quickly to the third and fourth positions; together they represent about 13 percent of total U.S. merchandise trade. When trade is broken down by world region, Europe represents one-fifth of both U.S. exports and imports 218 (Chart 7-3). The Asia-Pacific region has experienced an explosion in growth of both trade and output over the past two decades and now accounts for more than one-third of total U.S. trade. This trade is principally with other industrial countries, although trade with developing economies in the region is also among the fastest growing anywhere. Trade with Latin America and the Caribbean is also growing but remains less than 10 percent of the total. Chart 7-3 U.S. Goods Exports and Imports by World Region in 1986 and 1996 Imports from developing Asia have risen rapidly, but are less important than growing exports and imports with industrialized partners. North America Industrialized Pacific Europe U 1986 • 1996 Developing Asia Latin America and Caribbean Exports Africa and other 150 150 50 Billions of 1996 dollars Note: Industrialized Pacific includes Australia, Japan, Hong Kong, Korea, Singapore, and Taiwan. Sources: Department of Commerce (Bureau of Economc Analysis) and Council of Economic Advisers. 250 50 250 U.S. TRADE BY DOMESTIC REGION In a country as large as the United States, the regional distribution of the gains from trade is a relevant concern. The North Central and Pacific States remain the largest sources of exports, and both regions continue to enjoy strong export growth (Chart 7-4). However, the highest rates of export growth have recently been recorded in regions and States in the center of the country. This is a positive sign, suggesting that the benefits of trade are being realized throughout the country, not just in the coastal and border States. The impact of the North American Free Trade Agreement (NAFTA) on regional trends in production and exporting has no doubt been significant and may be partly responsible for the rapid growth in exports from the Mountain, Southern, and North Central regions. These statistics suggest that the export opportunities presented by market-opening agreements can benefit the Nation as a whole. 219 Chart 7-4 Exports of Goods by U.S. Region Although exports are a larger share of Gross State Product on the East and West Coasts, the fastest growth in exports has come from the central regions of the country. Export share of Gross State Product Q 0 to 5% H 5 to 10% H 10 to 15% • 15% and above North Central ($145bn; 13%) New England ($35 bn; 9%) South Atlantic ($70 bn; 11%) Note: The first number in parentheses is 1996 goods exports in billions of dollars; the second is average annual growth in exports in the region over 1991-1996. Sources: Department of Commerce (Bureau of the Census and Bureau of Economic Analysis) and Council of Economic Advisers. INITIATIVES IN MARKET OPENING This Administration's primary focus in its conduct of international economic relations is on the continued opening of markets worldwide to trade. However, experience has shown that there is no universal solvent for trade barriers: no single strategy works in all situations to open foreign markets. Accordingly, the Administration has pursued an active trade liberalization agenda on several fronts. While recognizing the importance of an internationally coordinated effort to reduce trade barriers on a broad multilateral and reciprocal basis, the Administration is supplementing these negotiations with liberalization efforts at the regional level. In addition, since market access impediments may be peculiar to a single country, and may not be of the type traditionally dealt with in a multilateral forum, the United States sometimes needs to pursue bilateral negotiations to remove these obstacles to trade. As this brief survey shows, the Administration is pursuing greater market access for both U.S. and other countries' exports in a number of arenas. The importance of this undertaking is highlighted by the extent to which large portions of the world economy have previously been exempt from formal negotiations. Although the trade-liberalizing initiatives described above are generally reciprocal in nature, they tend to lower foreign barriers more than they do our own. This is the result of the relatively open position taken by the United States 220 throughout most of the postwar period, which has resulted in U.S. barriers that are already lower on average than those of our major trading partners. What is more, the United States has led the way toward the deregulation of domestic industries. In many cases this earlier deregulation in the United States has produced highly competitive U.S. industries, well poised to benefit from deregulation abroad. TRADE-NEGOTIATING AUTHORITY The U.S. Constitution places ultimate authority to regulate international trade with the legislative branch. However, for the better part of this century the Congress has provided the executive branch considerable authority to negotiate trade agreements with foreign nations. Most recently, between 1974 and 1993, the Congress repeatedly passed legislation giving the President so-called fast-track negotiating authority. This legislation allows the President to negotiate sensitive and complex trade agreements with other countries, and commits the Congress to either accept or reject the entire agreement, without amendment. In this way the Congress retains its constitutionally mandated final authority to regulate international trade, while turning over the task of negotiating agreements to the executive branch, which is organizationally better suited for that role. Fast-track authority lends credibility to U.S. commitments in trade negotiations. Foreign parties to a trade agreement with the United States know that the agreed-upon package cannot later be reopened for renegotiation of individual provisions, which in effect would reopen the entire package, undermining commitments made by executive branch negotiators. In the absence of fast-track authority, this possibility is real and can have the effect of preventing other countries from engaging in negotiations with the United States. The history of executive branch trade-negotiating authority has its roots in the 1930s, a time when international trade flows were heavily restricted by high tariffs throughout much of the world. The Congress granted President Franklin D. Roosevelt power to negotiate tariff reductions. This shift in authority came in the form of the Reciprocal Trade Agreements Act (RTAA) of 1934, which allowed the President to reduce U.S. tariffs on a bilateral basis by up to 50 percent in exchange for reductions in barriers faced by U.S. exports. The RTAA was used often in the 1930s and was repeatedly renewed. The resulting agreements generated large reductions in tariff barriers and embodied some of the same principles that formed the basis for GATT after World War II and, more recently, the World Trade Organization (WTO). Under the RTAA and later under GATT, tariffs of participating countries were reduced from more than 40 percent in the 1930s to less than 6 percent by the late 1980s. By the 1960s negotiations had expanded to cover nontariff barriers (NTBs) to trade as well. These 221 include price controls, quantitative restrictions (such as import quotas), and quality control measures. But because the RTAA provided no authority to reduce these barriers, complications arose in congressional ratification of the Kennedy Round GATT agreement in the late 1960s. The Congress's refusal to implement the entire agreement as negotiated undermined the credibility of the President's negotiating efforts. The Nixon Administration confronted this problem by pursuing expanded negotiating authority prior to undertaking a round of negotiations in which nontariff barriers figured prominently. For this reason, in 1974 the Congress passed the first fast-track legislation. The primary difference between this new authority and that granted under the RTAA was that fast-track extended presidential authority to agreements covering NTBs as well as tariff barriers. Fast-track bills have also generally called for extensive consultations between the executive branch and both houses of the Congress and with private sector advisory committees during the negotiations. The Congress must also be notified in advance of the intention to conclude an agreement. In return, the Congress promises to introduce the implementing bill in both houses, with language unchanged, and to vote on the unamended bill within 60 days. Through these provisions, the Congress has historically exerted influence over the negotiations—and hence over the resulting agreements—prior to submission of the implementing legislation. Fast-track has thus proved successful at facilitating negotiations while keeping the Congress involved in the process and preserving its ultimate authority to regulate trade. Since the inception of fast-track, two extremely successful rounds of GATT negotiations have taken place: the Tokyo Round, signed by WTO members in December 1979, and the Uruguay Round, concluded in 1993 and signed in April 1994. Agreements resulting from other negotiations have also been approved by the Congress under fasttrack procedures, including the free trade agreement with Israel in 1985, the U.S.-Canada Free Trade Agreement in 1988, and the North American Free Trade Agreement in 1993. MULTILATERAL INITIATIVES By the conclusion of the Uruguay Round negotiations, participants recognized that pursuing multilateral liberalization exclusively in the context of negotiating "rounds" was insufficient. Thus, the final Uruguay Round agreement included a "built-in agenda" for future, more focused talks within the WTO. This agenda provides a mandate and an opportunity to continue the liberalization process within the new organization's regular work program. In some cases the built-in agenda calls for the review and updating of the rules of the multilateral system, including its dispute settlement mechanism (Box 7-1); in other areas the goal is the further opening of markets and the reform or elimination of practices that distort or restrict trade. In the few years since the Uruguay Round agreement was concluded, negotiations toward further 222 liberalization have occurred—or are occurring—in several sectors. Some of these negotiations were launched as a result of commitments contained within existing WTO agreements. Others are the result of forward-looking initiatives given impetus by the United States and its trading partners within the Asia-Pacific Economic Cooperation (APEC) forum and other international organizations. Box 7*1.—The WTO Dispute Settlement Process and U.S. The WTO Hspute Settlement Understanding (DSU), part of the Uruguay Round package of agreements, improves on GATT dispute settlement proceedingsfeyexpediting dedstornnakmg and institutimplementation of dispute panel ruling^ one of which is the acceptance of cross-sector retaliation for countries that choose not to abide by the ruling. In the 8 years since its institution, many countries have made efficient use of the reformed dispute settlement mechanism, largely to the satisfaction of all involved. The introduction of a atrengthened multilateral dispute settlement system in the WTO* together with new WT0 agreements cohering the protection of intellectual property rights and trade in services, has brought about a shift in UJ8> tactics for resolving trade disputes. During the 1980s the United States frequently resorted to the bilateral negotiations and unilateral sanctions authorised in Section 301 of U.S* trade law to resolve differences with other countries This approach was used in particular in the areas of agriculture, intellectual property protection, and services, which (MTT covered barely or not at all. Beginning in 1995* however, the DSU and new WTO rules have permitted the United States to use multilateral dispute settlement procedures to address the overwhelming majority of issues that have been the subject of Section 301 investigations. The results of 35 complaints filed by the United States suggest that the DSU process has proved veiy effective, with the United States prevailing in 9 out of 10 rulings to date. The United States has also reached a bilateral settlement prior to a formal ruling in eight eases. Seventeen petitions are still pending, Section 301 investigations can now more often make use of multilateral dispute settlement, at least for disputes with WTO member in areas subject to WTO commitments, All nine of the Section 301 investigations initiated during 1996, and three of the sk investigations initiated in 1997, have involved resort to the WTO dispute settlement procedures; a fourth was terminated before WTO consultations were initiated* As Chart 7-5 shows, the DSU process has been used against a variety of comtries, the majority of whieh are our major trading partners, 223 The Success of Single-Sector Initiatives The success of multilateral negotiations in the 4 years since the Uruguay Round ended has in some ways been remarkable. The traditional practice of conducting negotiations in comprehensive, multisector rounds had been based on the belief that only an agreement covering many sectors simultaneously could gain enough political support to be viable. Usually when two or more countries seek reciprocal trade liberalization, the easiest approach is to find one sector that is heavily protected in one country and another sector that is heavily protected in the other. By agreeing to liberalize both sectors simultaneously, each country can please at least one group of domestic producers. Chart 7-5 U.S.-lnitiated WTO Dispute Settlement Cases by Target Country Since their inception in 1995, the WTO dispute settlement procedures have been broadly used by the United States. Japan 5 x"\ ^ EU and affiliates 11 Korea 3 Australia 2 Canada 2 ^ IIIIIB^ Others 10 India 2 Source: Office of the U.S. Trade Representative. However, recent WTO agreements in financial services, telecommunications, and information technology represent significant departures from this traditional negotiating format, in that each sector was negotiated separately from the others. Because the United States is believed to be highly competitive in all three of these sectors, one would have thought that U.S. concessions in some other sector would be necessary to reach an agreement. But a common element in all three sectors is that they are key inputs into production in other sectors, and are necessary for economic development and profitable participation in an advanced, information-driven global economy. Industrialists in emerging-market countries, for example, understand that a modern telecommunications infrastructure is 224 essential to economic development. Hence, liberalization of these sectors enjoys weighty domestic support in most countries, so that cross-sector tradeoffs proved unnecessary. As transportation services are also important inputs to trade and production in the modern global economy, it is hoped that the future resumption of single-sector negotiations in this area will bear fruit. Other sectors slated for individual negotiation under the built-in agenda are agriculture and government procurement. Services Two of the new WTO agreements—those in financial services and telecommunications—deal with trade in service industries. For most of its history GATT did not cover trade in most types of services. Thus the conclusion of a new General Agreement on Trade in Services (GATS) was an important contribution of the Uruguay Round. The new agreement made it possible for the first time to undertake the negotiations that led to the recent financial services and telecommunications agreements, and should eventually lead to the liberalization of other services. GATS provides for the first time a solid framework of trading rules and obligations for services and the continued expansion and refinement of those rules in multilateral negotiations. However, the pledges from WTO member countries within GATS itself to liberalize their services sectors are fairly narrow in scope. Out of some 150 individual service activities identified, most countries have committed themselves to liberalize fewer than 100. Moreover, most of these commitments are in services where countries have either little domestic production or little domestic protection. Although it is typical in trade negotiations for countries to liberalize first where the domestic impact is smallest, in this case it means that GATS as written falls well short of comprehensive liberalization. This was acknowledged by the signatories at the time. They therefore included in the agreement specific deadlines for future negotiations in key areas. Some success has been achieved in financial services and telecommunications; the maritime negotiations, on the other hand, have been suspended until more comprehensive services negotiations take place in 2000. Financial services. Multilateral negotiations on a broad range of financial services resumed in April 1997. (An earlier attempt had ended in 1995 with only an interim solution, as the United States had found some other countries' offers inadequate.) In continuing these negotiations, the United States emphasized the need for agreement on four principles. Foreign-based firms should be assured of retaining any rights they had acquired prior to the agreement, of the right to establish new operations, of the right of full majority ownership, and of substantially full national treatment (that is, legal and regulatory treatment equivalent to that received by domestic firms). 225 These talks were successfully concluded on December 13 and produced agreement among 102 WTO member countries on broad liberalization of their banking, securities, insurance, and financial data services sectors. The commitments apply to about $18 trillion in global securities assets, $38 trillion in global bank lending, and about $2.2 trillion in worldwide insurance premiums. Telecommunications. On February 15, 1997, the United States and 69 other WTO members successfully concluded negotiations on basic telecommunications services, such as telephone service. The agreement commits countries to provide market access and national treatment to service suppliers from other WTO members. Sixty-five countries also agreed to a set of specific procompetitive regulatory principles. The agreement eliminates certain restrictive practices in countries that account for 95 percent of world telecommunications revenues, estimated at about $600 billion in 1996. Before the agreement, activities representing only 17 percent of telecommunications revenues in the top 20 markets were open to U.S. companies. The opening of these markets to foreign providers offers enormous opportunities for U.S. telecommunications firms. Whereas telecommunications markets in many countries continue to be served by inefficient government monopolies, markets in the United States have been largely deregulated. Deregulation, along with a large internal market, has resulted in a position of competitive advantage and technological leadership in this area for U.S. suppliers. Information Technology Information technology products are often "enablers" for the efficient production of goods in other sectors. Liberalization of this sector therefore takes on added importance as a source of growth worldwide. Concluded in Singapore in December 1996, the Information Technology Agreement (ITA) will liberalize trade in this half-trillion-dollar market. The agreement covers global information technology products such as semiconductors, telecommunications equipment, computers and computer equipment, and software. Signatories include countries accounting for over 90 percent of trade in this sector. The agreement also covers office machines and unrecorded electronic media (such as computer diskettes and CDROMs). Each of the 43 participating countries has agreed to eliminate tariffs on these products by 2000, although some countries were granted an extended phaseout of tariffs for a limited number of products. The agreement will benefit all the countries participating, but it is especially important for the United States as a major exporter of information technology products. The ITA also calls for further negotiations to extend country and product coverage and eliminate NTBs under an expanded agreement, dubbed ITA-II. These negotiations are scheduled to conclude by the summer of 1998. 226 Agriculture Some agricultural tariffs were reduced in various GATT negotiations over the decades, but as in the case of services, comprehensive agricultural trade barriers only recently became a central focus of GATT talks. The result was the historic Uruguay Round Agreement on Agriculture, the first comprehensive agreement to reduce barriers to trade in agriculture. Among other commitments, the agreement specifies cuts in agricultural export subsidies, reduces aggregate support to farmers, converts NTBs to tariffs, binds all tariffs at levels that imply reductions in previously existing tariffs, and provides for minimum access quotas for products whose trade had been largely eliminated by past protection. Reflecting a general interest in further liberalization, agricultural negotiations are a part of the WTO's built-in agenda, with talks scheduled to resume by January 2000. Government Procurement Government procurement and contracting account for up to 15 percent of economic activity in some countries, yet are often subject to policies that discriminate against foreign suppliers. Many countries maintain explicit preferences for goods and services provided by domestic firms over those from foreign competitors. Bias toward domestic producers can manifest itself in many other subtle ways, for instance in limited advertising for bids and a reluctance to spell out selection criteria in advance. Governments may also specify contracts in terms of a certain process or method rather than in terms of the final product. Different firms often develop products that serve the same purpose, but by different processes. If only domestic firms use a particular process, and foreign firms another, governments can in effect exclude foreign suppliers by specifying that process. Government procurement has historically been excluded from international trade rules; the nondiscrimination principles contained in the original GATT of 1947 do not apply. To address this situation, a group of countries consisting principally of members of the Organization for Economic Cooperation and Development (the OECD, which is composed mainly of high-income industrial countries) negotiated the 1979 GATT Agreement on Government Procurement during the Tokyo Round of multilateral trade negotiations. That agreement was renegotiated and expanded during the Uruguay Round, and the resulting WTO Agreement on Government Procurement (GPA) went into effect on January 1, 1996. The GPA requires signatories to accord nondiscriminatory treatment to the goods and services, including construction services, of other signatories and to follow transparent government procurement procedures. The agreement presently applies to government purchases estimated to be worth over $400 billion annually. 227 Although the GPA was a significant achievement, only 26 countries participate in it, most of them OECD countries; many of the world's emerging markets in Asia, Latin America, and elsewhere are not signatories. Given the size of the worldwide market (with an estimated value over $3.1 trillion) and its importance for U.S. exporters, the United States has long sought to extend rules on government procurement to all participants in the multilateral system. Largely at the United States' urging, WTO members agreed in 1996 to establish the WTO Working Group on Transparency in Government Procurement. Formal negotiations are scheduled to begin by January 1999. REGIONAL INITIATIVES During the 1980s the United States turned an eye toward bilateral and regional liberalization initiatives, not with the purpose of supplanting the multilateral talks, but rather to supplement and spur progress on that front. Regional agreements can be beneficial, but they raise some valid concerns: although such agreements can generate new trade by lowering barriers between participating countries, they may also inefficiently divert trade from nonparticipants that would otherwise supply goods and services more cheaply. From the participants' perspective, whether the benefits of trade creation outweigh the costs of trade diversion depends on how the agreement is structured. There are reasons to believe trade creation will predominate when the agreement encompasses countries that geography has made natural trading partners: when costs of transportation are included, countries in close proximity are more likely to be each other's low-cost suppliers, minimizing the scope for trade diversion. But for countries on the outside, regional agreements are more likely to impose costs than provide direct benefits. Sometimes regional agreements can exert a positive influence on the multilateral process (Box 7-2) or support the participants' foreign policy positions. For example, the benefits for the United States of the free trade agreement with Israel, negotiated in 1985, were more symbolic than economic. The agreement reinforced political ties between the two countries, and Israel did reap important economic benefits from it as well. Similarly, although economic motivations were significant in the formation of what is now the European Union, a contributing factor was the desire to engender a sense of community that might prevent another intra-European war. The promotion of democracy and political stability as well as economic stability and development is also a factor in the Free Trade Area of the Americas initiative, discussed below. In the last 10 years the United States has initiated and signed a number of important regional initiatives. The agenda for the remainder of this century and beyond includes laying the foundation for open trade in the Americas as well as moving toward expanded trade throughout the Pacific Rim. 228 Box 7-2*—Regional Trade AgJFaem^iits: Building Blocks or Stumbling Blocks for the Multilateral Process? Does regionalism accelerate or slow the momentum of multilateral liberalization? Some compelling arguments suggest that the formation of regional blocs can serve as a building block—or act as a stumbling block—to the multilateral process. Perhaps the most compelling theoretical argument for protectionism—and the primary mechanism by which regionalism might act as a stumbling block—is the optimal tariff argument, Imposing tariffs may enable a country to exploit some monopsony power in its import markets, and so achieve more favorable terms of trade with the rest of the world. Moreover, a group of countries setting this optimal tariff in concert may have more success, because of their combined market power, than if each acted alone. Fortunately, Article XXIV of GATT, which governs regional trading arrangements among members, prohibits increases in tariffs against nonparticipants* (GATS now extends the same principle to services,) A regional trading arrangement may also undermine the multilateral process if special Interests ean manipulate the airangement's more technical aspects (such as exemptions, phaseotits, and rules of origin) to their advantage or if regional initiatives divert political capital and energy from multilateral initiatives, On the other hand* regional arrangements can serve as build* ing blocks for multOateralism in several ways* They can lock in countries' unilateral reforms, simplify negotiations by reducing the number of countries involved, and Bet in motion a process of competitive liberalization in which reluctant countries are prodded into liberalizing by the threat of exclusion from a regional agreement. The history of NAFTA provides an example of how regionalism can lock in reforms. By entering into NAFTA, the then-President of Mexico hoped to prevent Ms successors from undoing the unilateral liberalizations his government had undertaken since the mid-1980s, Mexico's reaction to the peso crisis of 1994-95 showed that this lock-in strategy worked, Unlike in the 1982 debt crisis, when Mexico raised trade barriers against all its trading partners, in the 1994-95 crisis Mexico continued to reduce tariffs for its NAFTA partners (while raising tariffs against some other countries). Negotiating with 150 other countries over dozens of sector^ as WTO negotiators must do, can be inefficient and difficult. The process can be made more efficient if countries can join into customs unions and thus negotiate as a larger unit. Also, within 229 Bent 7i&r-Continued a group it may be easier to test out mnoYative agreements in curtate' areas—such as serviees, in^estment^ dispute settlement, and eompetitlon policy—before introducing their provisions into the mtiltilateral negotiations. The events rf 1993 demonstrate the power of competitive liberalization. Ttie Administration is said to ha^e made a ^triple play® that year, with the passage of NAFTA, the pathbreaMng APEC summit* and the a)nctoaion of the Uruguay Hound* These not only were landmark achievements in themselves hut interacted with each other in advantageous ways. By pushing NAFTA through the Congreaa despite strong opposition, the President revealed the political will to make free trade commitments stick* Combined with the upgrading of APEC negotiations to a Mgh-profile leaders* meeting in Seattle, the passage of NAFTA sent a strong signal to the Europeans that the United States had serious regional alternatives should the Uruguay Bound of GATT negotiations fall apart. German polieymakerg have reportedly stated that this was part of their motivation for piwMling on their EU partners to make certain concessions that allowed the GATT negotiations to be success&Ily concluded in December 1093. These examples show that there are both positive and negative links between regionalism and the multilateral negotiations Every regional bloc will have its share of each. In the and? however,, the evidence suggests that the recent growth of regionalism has served more to foster than hinder progress toward Kberalfeation. Those groups of countries that have participated in regional liberaM^ation have often tended to reduce their barriers against nonmembers at the same time that they do m internally, The Free Trade Area of the Americas The idea of a free trade area encompassing all of the Americas took its first step toward realization in December 1994, when the President of the United States and leaders of 33 other Western Hemisphere countries met in Miami for the first hemispheric summit since 1967. There they committed their governments to concluding the negotiation of a comprehensive free trade agreement no later than 2005, with concrete progress due by the end of the century. The Miami Summit led to three meetings of the countries' trade ministers, at which 12 working groups were established to lay the foundation and begin preparations for actual negotiations toward a Free Trade Area of the Americas (FTAA). 230 The United States has championed this regional initiative and remains actively engaged in it, as a means of fostering closer political and economic ties with and further trade liberalization in our hemispheric neighbors. Building on unilateral liberalizations undertaken in the late 1980s, many Latin American countries have already negotiated preferential trading arrangements with each other. Examples include MERCOSUR (which includes Argentina, Brazil, Paraguay, and Uruguay), the revitalized Central American Common Market, and the Andean Community. Their dismantling of trade barriers, both unilaterally and in the context of regional agreements, reflects a significant shift away from traditionally inward-oriented trade policies toward more liberalized regimes. Although generally reflective of progressive policy programs, the preferential nature of these arrangements is of concern to the United States, because it means that other countries are gaining favored access to some of our most natural trading partners. As these arrangements proliferate, the potential benefits to the United States of participating in them—and the costs of remaining outside—are rising. Chile, for example, is now linked in preferential trading agreements with every major country in the hemisphere except the United States. For this reason, U.S. exports to Chile remain subject to tariffs averaging 11 percent, while exports from other Western Hemisphere countries increasingly enjoy dutyfree access. Although Chile is only one country, it is a salient example of a growing trend. An FTAA will bring substantial benefits to all countries in the region, which had a combined GDP of over $9 trillion and a market of 756 million people in 1995. These benefits include not only a significant reduction of import barriers but also deeper geopolitical ties. The general lowering of trade barriers will be particularly beneficial to the United States, since our market already is much more open than most. Although this benefit could in principle be achieved through the multilateral process, regional action probably offers more immediate and complete liberalization. Asia-Pacific Economic Cooperation Created in 1989, the APEC forum began to take on deeper significance in November 1993, when the President hosted the first-ever summit of the leaders of the member countries, in Seattle. This meeting elevated the importance of the organization and set the stage for a second summit, in Bogor, Indonesia, in 1994. There the leaders announced the goal of achieving "free and open trade and investment in the region" by 2010 for the developed-country members and by 2020 for the developing countries in the group (Box 7-3). In Osaka, Japan, the following year, an agenda was laid out for achieving that goal, and in 1996, in discussions at Subic Bay in the Philippines, implementation of the agenda got under way. The most immediate 231 result of the Subic Bay meeting was a call by the APEC leaders for the elimination of all tariff barriers among member countries to trade in the information technology sector. This declaration laid the foundation for the Information Technology Agreement described above. Box 7-3.—APEC Tariff Reductions and Other Initiatives Mthough APEC members have not yet engaged in formal negotiations owr tariff reductions, many haw already implemented dramatic reductions in their tariff lewis, Betwete 1988 and 1998 the average applied tariff among AP1C members fell by more than a third, from 15*4 percent to 9*1 per* cent (Table 7*1); Hie progressive lowering of tariff barriers k otdy 0&e aspect of the APEC Aetion Agenda, 13iis agenda details steps that AFBC members have agreed to take to promote greater economic interaction throughout the region. Other agenda items include reducing barriers to competition m the fast-growing air transport market, and a variety of measures designed to reduce the cost of doing business in the region. These include the development $f an infraatmeture opportunity data base, the promotion of uniform customa dasmfieatioms and procedure^ and advances in the hurmoni^atfoii of standards. TABLE 7-1.—Tariff Rates of Asia-Pacific Economic Cooperation Members [Percent, simple average] Economy 1988 1996 61 2.0 67 Australia Brunei Canada 156 39 91 Chile China . Chinese Taipei (Taiwan) Hong Kong 199 403 126 0 Indonesia.. . Japan Malaysia 203 72 130 13.1 Mexico .. .. New Zealand Papua New Guinea 106 150 (') 12.5 Philippines .. Singapore South Korea 27.9 15.6 4 192 0 79 Thailand United States 408 66 170 64 154 9.1 Average 'Not available. Sources: Institute for International Economics. 232 109 23.0 86 0 90 90 70 (') Fundamental to relations within APEC is the pledge of "open regionalism." APEC seeks to serve as a building block to the multilateral system of liberalization and not a stumbling block. As a start toward implementing this vision, in November 1996 APEC served as a catalyst for the ITA. APEC members are engaged in a process that builds upon the success achieved in the ITA. At the most recent summit, in November 1997 in Vancouver, Canada, the APEC leaders agreed to expand APEC's role as a catalyst for global market opening, by endorsing liberalization initiatives in 15 sectors. Among these are environmental services and technology, medical equipment and instruments, and chemicals—sectors in which the United States is a major exporter. APEC will thus capitalize upon the fact that its collective size and importance in world trade will help in leveraging multilateral agreements that will cut trade barriers globally. The leaders' decision recognizes the importance of taking APEC sectoral initiatives into the WTO where appropriate, and including binding global agreements, as was done with the ITA. With its member countries now accounting for approximately half of world output and trade, the APEC region has grown in significance for the United States. Already the share of U.S. exports going to APEC members has increased from 52 percent in 1986 to 70 percent in 1996. APEC is also demonstrating its importance in other ways: in November 1997 APEC leaders embraced a strategy for dealing with the ongoing currency crisis in East Asia. BILATERAL INITIATIVES As successful as these multilateral and regional initiatives have been, significant barriers to U.S. exports remain, in some countries more than others. The reduction of formal barriers to trade worldwide often exposes cross-country differences in institutions and norms that also serve to limit trade. To the extent these practices are countryspecific, it is sometimes easier to address them on a bilateral rather than a multilateral or regional basis. This Administration has a record of actively pursuing remedies to trade barriers abroad. These efforts are designed not only to liberalize markets for American products, but to provide broad market access for all would-be exporters. China China is the world's lOth-largest trading nation and the United States' fourth-largest trading partner. U.S. exports to China have nearly quadrupled in the last decade. However, China's wide array of barriers to trade, together with the relocation of the source of many of our imports to China, has resulted in a U.S. trade deficit with China of over $39.5 billion in 1996, an increase of more than $5.7 billion from 1995. Trade data from 1996 show that, when both goods and services are included, our recorded deficit with China exceeds our 233 deficit with Japan. U.S. exports to China grew a slight 8 percent in 1997 (through November), compared with 21-percent growth in U.S. imports from China. Further opening the Chinese market to our exports is an important goal of U.S. bilateral and multilateral negotiations with China. Negotiating the terms of China's accession to the WTO is a major part of the Administration's effort to address this trade imbalance. The focus of the WTO access negotiations rests on opening China's market to foreign goods and services and bringing China's trade regime into conformity with international trade rules. The United States is also pursuing an active bilateral agenda with China to resolve outstanding issues ranging from market access for U.S. agricultural exports (including citrus, wheat, and meat) to protection for intellectual property rights. European Union The trading relationship between the United States and the European Union is important and strong, but it has had its frictions. The U.S.-EU Agreement on Mutual Recognition of Product Testing or Approval Requirements, concluded in June 1997, is evidence of this strength. When fully implemented, the agreement will require each government to recognize the results of product testing and certification requirements set by the other, thus eliminating the need for duplicative testing, inspection, and certification requirements for products in trans-Atlantic trade. The agreement reduces trade barriers in six areas—telecommunications, medical devices, electromagnetic compatibility, electrical safety, recreational craft, and Pharmaceuticals—covering approximately $50 billion in two-way trade. The agreement will allow products and processes to be assessed in the United States for conformity to European standards, and vice versa, saving U.S. exporters more than a billion dollars annually. In recent years, however, longstanding divides between the United States and the European countries have reemerged, along with new areas of disagreement. In 1997 alone the United States has had to deal with disputes resulting from decisions made and deadlines set by the European Commission. The first involved a European ban on products made with so-called specified risk materials; these are foodstuffs that the European Union considers potentially contaminated with the agent that causes bovine spongiform encephalopathy, or mad cow disease. The other disputes involved restrictions on the imports of furs obtained through the use of leghold traps, the biogenetic alteration of corn, and the process by which wine for export to Europe is made. The fur dispute was resolved by an agreement to phase out the use of certain traps in the United States; the other issues remain outstanding. 234 Japan Japan is our second-largest trading partner. Our two countries share a long history of negotiated access to the Japanese market for U.S. goods. A series of agreements have sought to address a range of structural features of the Japanese economy that act as market access barriers; these include closed distribution systems, overregulation, lack of transparency in procurement practices, and exclusionary business practices. In addition, the two countries have negotiated sectoral agreements on semiconductors, wood products, cellular phones, construction, and other goods and services. Since the beginning of this Administration the United States and Japan have negotiated 33 trade agreements. Under the U.S.-Japan Framework for a New Economic Partnership Agreement, reached in 1993, the two countries have negotiated sectoral agreements covering such sectors as automobiles and auto parts, insurance, financial services, telecommunications, medical technology, and flat glass. These are generally sectors in which the United States is competitive but in which our share of the Japanese market often lags behind our shares in the same sectors in other industrial countries' markets. These agreements included objective criteria to guide the two countries in evaluating their success. Under the Framework Agreement, bilateral agreements on structural issues including deregulation, investment, and intellectual property rights also were reached. Although noteworthy progress has been made under many of these agreements, progress has fallen short in some areas. The United States places priority on full implementation of its bilateral agreements with Japan and believes that more vigorous enforcement is necessary to ensure that their goals are achieved. In addition, the United States continues to seek new market access agreements with Japan to address barriers in specific sectors. Market opening is consistent with a larger deregulation program currently under way within Japan. Under the Enhanced Initiative on Deregulation and Competition Policy, to which the President and the Japanese Prime Minister agreed in June, four sectors—financial services, telecommunications, housing, and medical devices and Pharmaceuticals—were identified as the focus of efforts in this area. The United States also sees the WTO dispute settlement process as useful in addressing specific Japanese market access barriers. In December 1997 the United States reached a settlement with Japan regarding Japan's compliance with a WTO decision against its discriminatory taxation of distilled spirits. The United States is also pursuing a case against Japan's varietal testing requirements for fruit. On another front, the United States challenged an array of measures that Japan has put in place over the past 30 years to restrict imports of photographic film and paper, but the WTO panel did not rule favorably. 235 Negotiations in both regional and multilateral fora have also generated real market opening in Japan. The WTO agreements on information technology, basic telecommunications, and financial services will increase U.S. market access to many WTO members, including Japan. THE EFFECTS OF MARKET OPENING This Administration's efforts to open markets worldwide, reviewed in the previous section, are part of a long U.S. tradition of leadership in market liberalization. These efforts have been remarkably successful: barriers to international transactions, on average, are at a mere fraction of their 1930s levels. But it is not enough to measure the extent to which markets have been opened. The bottom line for the United States is the net benefits this opening brings, not just for the U.S. economy as a whole but for typical American workers and consumers. This section discusses the sources of benefit from international trade and some estimates of the impact of trade on U.S. GDP. This is followed by a discussion of international trade's impact on U.S. workers. THE BENEFITS OF TRADE LIBERALIZATION The benefits to an economy from international trade are of two types: static gains provide a one-time increase in income, whereas dynamic gains result in a more or less permanent increase in the economy's rate of growth. The former can be significant, but it is the accumulation over time of the latter that can generate much larger improvements in living standards. The primary source of the static gains from trade is specialization, which allows resources to be used more efficiently. When one country produces and exports those goods that it can produce relatively cheaply (for instance, wheat in the United States) and imports those that are relatively cheap to produce abroad (for example, coffee from Brazil), this trade can boost living standards on both sides of the transaction. Such trade can be beneficial even in cases where one country could produce both goods more efficiently. This notion, commonly referred to as comparative advantage, is straightforward when applied to individuals—each of us sometimes purchases from others some goods or services that we could make or perform even better ourselves, because we realize that our time is most profitably spent doing those things we do best. But the principle applies equally well to countries. When each country specializes in what it produces relatively more efficiently, the resources of both are put to use where they generate the greatest economic value. Free trade thus is a positivesum, not a negative- or a zero-sum, game. 236 The benefits of more efficient resource allocation are augmented when economies of scale are present. For some goods, such as automobiles, the average cost of production falls as more of the good is produced. Again, opening markets to trade allows production of such goods to be concentrated in those countries that produce them relatively well. They can then produce more of those goods, exploiting these economies of scale. This helps explain why the United States trades more with similar countries (Canada and Europe, for example) than dissimilar ones: such countries presumably have similar resource endowments, and this limits the potential gains from more efficient allocation, but they can still gain from exploiting scale economies. Such trade often offers yet another benefit: besides making goods cheaper, it increases the variety of goods available to both consumers and producers. By encouraging continuous productivity improvements, international trade can increase an economy's growth rate; this is the source of the dynamic gains from trade. Trade stimulates productivity improvements most directly through its procompetitive effects. By subjecting domestic firms to foreign competition, trade gives them an incentive not only to lower prices, but also to strive to enhance productivity, which further reduces prices by lowering average cost. These gains from increased competition differ from the other gains from trade in that they are recurring: although competition is only introduced once, it leads to a cycle of productivity improvements and quality enhancements that continue to benefit the economy indefinitely. Trade (and international investment, discussed below) can also lead to increases in the growth rate by facilitating the transfer of technology between countries. Although the protection of intellectual property rights in the short term is important for maintaining the incentive to conduct research and development, over the longer term the free flow of technological advances across borders will encourage ever more efficient utilization of the world's scarce resources. MEASURING THE GAINS FROM TRADE How are the benefits from liberal trade policies to be gauged in practice? The difficulty in measuring the effects of international trade agreements is that they are but one event among many. In an economy the size of the United States, GDP both rises and falls in response to many factors, most of which have nothing to do with trade agreements. NAFTA provides a prime example of the problems involved. NAFTA entered into force in January 1994. The following December, Mexico experienced a deep economic and financial crisis for reasons unrelated to the agreement. The result, in 1995, was a steep fall in output in Mexico, an increase in unemployment, and a drop in real wages there. A natural side effect of the crisis was a dramatic decline in Mexico's imports, brought on by greatly reduced domestic income and 237 demand, higher import prices due to devaluation of the peso, and, to a limited extent, higher tariff barriers against non-NAFTA trading partners. Despite this crisis-induced decline in trade with Mexico, it is possible to discuss gains for the U.S. economy derived from NAFTA. Because of the agreement, Mexico did not raise tariff barriers against the United States or Canada, but only against other countries. As a consequence, not only did U.S. exports to Mexico not decline by as much as they might have, but some believe the agreement sped the general recovery of the Mexican economy and of imports from the United States. Seeking to take the extraneous effects of the crisis into account, the Administration commissioned a report, which estimated that NAFTA increased U.S. income by $13 billion in 1996. Despite the difficulty of disentangling the many causes of national income growth, a large number of studies have assessed the benefits of trade liberalizations, real and hypothetical. Some have examined the potential benefits from removing existing restrictive measures. A recent study of the costs of protection in the United States, for example, suggests potential consumer gains of approximately $70 billion in 1990 (1.3 percent of GDP) from removing existing barriers. A drawback of these studies is their inability to incorporate all the benefits of international trade enumerated above. Although they do capture the static costs of inefficient resource allocation, these studies are incapable of quantifying the value of forgone varieties, quality improvements, or productivity enhancements that would take place in the absence of trade barriers. Thus, studies of this type understate the benefits from trade. Another approach to understanding the benefits of trade is to examine the statistical correspondence between openness and growth rates across a large sample of countries. Such cross-country studies hold constant other well-known determinants of growth, such as investment and education. The common empirical finding is that increased trade is associated with higher income. For example, one recent study, using data from 123 countries, estimated that every percentage-point increase in openness (measured as the sum of imports and exports, expressed as a percentage of GDP) was associated with a 0.34-percent increase in real income per capita between 1960 and 1985. Since 1960, U.S. openness by this measure has increased by 12.7 percent of GDP; this estimate would imply that the increase in trade was responsible for approximately a 4.3-percent increase in U.S. income per capita by 1997. TRADE AND THE AMERICAN WORKER The public debate over trade liberalization tends not to focus on whether trade brings benefits for the economy as a whole. It is widely 238 conceded that it does. Instead, recent concerns have focused on the distributional impact of increased trade. This issue arises from the tendency of increased trade to favor some domestic industries while putting others at a disadvantage. As export-oriented industries expand, they draw resources away from the rest of the economy, resulting in a relative decline in other industries. This reallocation of resources will in all likelihood benefit some groups and injure others. Of particular concern are the impacts on workers, including average wages, the wages received by low-skilled relative to more highly skilled workers, the availability of jobs in the economy, and the extent to which workers suffer from job dislocation due to trade. This section discusses first the effects of trade on wages, and then the effects on employment. In each case we begin by discussing effects in the aggregate (on average wages and total employment) and then turn to distributional and individual effects that can be masked by the aggregates. TRADE AND AVERAGE WAGES Throughout the first half of the postwar era, real average hourly wages for U.S. production and nonsupervisory workers increased at an average rate of about 2 percent per year. Between 1974 and 1996, however, this measure of real wages fell by roughly 10 percent, retreating to 1965 levels. The early 1970s also saw a dramatic acceleration in the growth of world trade, to rates that (since 1972) have consistently outpaced that of world income growth. This trend was especially striking in the United States, where growth in trade exceeded growth in output by approximately 3.5 percentage points per year following 1972. The coincidence of increasing trade and falling real average hourly earnings suggested to many that international forces were the source of this decline. This inference is probably wrong, however. To begin with, it is more appropriate to focus on the level of total compensation (wages of all workers plus nonwage compensation) than on wages of production and nonsupervisory workers alone. Wages of production workers have recently grown less rapidly than overall wages. Nonwage compensation, which includes health care benefits, pension costs, and other fringe benefits, has grown relative to wages in recent decades—so much so that total real compensation has increased by almost 8 percent since 1974, despite the decline in real wages. Although this represents slower growth of total compensation than in the 15 years before 1974, this slowdown is more appropriately explained by factors other than international trade, in particular by a slowdown in productivity growth. The compensation of labor is generally believed to be determined by worker productivity. Between 1959 and 1973, nonfarm business productivity (output per worker hour in the nonfarm business sector) grew at a rate of 2.9 percent per year. Productivity growth slowed, however, between 1973 and 1990 to approximately 1.0 percent per 239 year. Given the productivity slowdown, one would expect a slower rate of increase in real compensation during this period. Adjusting compensation by the consumer price index will not necessarily reveal this relationship: to producers—the ones making the hiring decisions—the real output of their workers must be judged only in terms of the prices received for their goods, not the prices of all goods and services that consumers buy. This implies that a more appropriate deflator is the nonfarm business implicit price deflator. And indeed when this measure of prices is used, a remarkable correlation is observed between productivity growth and growth in compensation over both periods (Chart 7-6). Policies aimed at increasing productivity growth, rather than at reducing international competition, are therefore more likely to increase the growth rate of real compensation. Chart 7-6 Real Wages and Labor Compensation, and Productivity Using the implicit price deflator, real compensation has kept pace with productivity growth. Using the consumer price index as a deflator, real compensation has lagged. Index, 1959 = 100 200 Nonfarm business (NFB) productivity Real compensation using NFB implicit price deflator 180 160 140 * -"* Real compensation using the consumer price index 120 100 "~ Real average hourly earnings using the consumer price index i . . i . . i . . i . . i . . i . , i . . i . . i . . i . . i 80 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor (Bureau of Labor Statistics), and Council of Economic Advisers. Although total compensation is thus driven by overall productivity growth, there is an additional effect related to the industry in which workers are employed. Standard theories of wage determination assume perfectly competitive labor markets, in which workers of similar skill should earn comparable compensation even when employed in different industries. These assumptions, however, are not borne out in reality. There has long been a relationship between industry and compensation, such that individuals with similar characteristics tend to earn more in some industries and less in others (Box 7-4). This 240 raises the possibility that some workers could increase their pay simply by moving to another industry. A recent study indicates that jobs associated with goods exports tend to pay wages approximately 12.5 to 18 percent higher than other jobs. As exporters typically employ relatively skilled workers, a part of this figure is due to differences in observable skills. But even after this factor is accounted for, a significant wage differential remains: the adjusted wages of unskilled workers are approximately 7 percent higher, and those of skilled workers approximately 5 percent higher, in export-oriented industries than in the rest of the economy; accounting for differences in nonmonetary compensation results in differentials that are larger still. Working in export industries thus has the potential to benefit workers—and to benefit unskilled workers even more than skilled workers. TRADE AND RELATIVE WAGES Some commentators have pointed to growing differences in the relative wages of skilled and unskilled workers as an indictment of free trade. During the 1980s, a time when U.S. trade volumes were rising, the wages of skilled workers rose between 8 and 15 percent relative to those of unskilled workers (depending on how one defines "skilled"). Given the rough coincidence of these changes, it is tempting to single out international trade as responsible for this increasing wage disparity. Moreover, a significant source of the expansion in world trade has been the entry into the world marketplace of many Asian economies well endowed with unskilled workers. Thus, casual observation seems to support the claim that free trade is detrimental to unskilled U.S. workers: these workers now compete with a vast pool of unskilled workers abroad, and the expected result of this competition is a decline in their wages. Most careful analysis of the direct evidence does not strongly support the notion that international trade is the major source of increasing wage inequality. Skill-biased technological change, for instance the use of computers and robotics, has been a more important source. The nature of this technological change has reduced demand for unskilled workers and increased demand for skilled workers. This phenomenon can be expected to reduce the wages of unskilled workers relative to those of skilled workers, and perhaps reduce them absolutely. Although the contribution of international trade to observed productivity changes has yet to be established, recent research indicates that international trade is responsible for only perhaps 10 to 15 percent of the observed increase in wage inequality during the 1980s. Furthermore, U.S. trading patterns are inconsistent with the notion that trade liberalization is substantially depressing the wages of unskilled workers. Although the surge of imports from some low-wage 241 Box 7-4.—Industry-Related Differences in Wages Basic economic theory tells us that equally productive workers might to receive equivalent compensation. But there has long been a fairly stable pattern of differences in wages for similar workers across U.S. industries* as Table 7-2 illustrates* The table shows that a worker in the petroleum industry for example,, can expect to receive about 53 percent more in compensation than the average U.S. worker with similar characteristics (such as education, race, and geographic location). Similarly, workers employed in private household services can expect compensation that is 51 percent below the national average for similar workers* There is no single reason for these differences in compensation levels. However^ a number of possible explanations do present themselves: * Compensating wage differentials. The work environment tends to differ from industry to industry. Work may be more pleasant or safe in some industries, less so in others, Workers in unhealthy or dangerous environments, for instance* may receive compensation that exceeds that in otherwise similar jobs, * Unobserved productivity differences, Our ability to assess the productive characteristics of workers from survey data is limited. Workers may have skills not reflected in measures of education, In addition,, firms may provide their workers with training that makes them more productive on the job, and their level of compensation may reflect this on-the-job training. * Effwi&ncy wages* Providing increased compensation may raise worker productivity for example by increasing motivation and effort* and may reduce the probability that workers will quit. To the extent that the benefit to employers of paying higher wages differ across industries, compensation levels will differ, * Monopoly rents. Competition is weaker, and therefore profitability higher, in some industries than in others. Workers may be able to extract some fraction of these higher profits in the form of higher compensation, Differences in the profitability of firms and the bargaining power of workers can thus give rise to differences in compensation across industries. In the ease of compensating wage differentials or exogenous skill differences^ moving a worker from one job to another will not make that worker better off. In the first case the worker is merely being compensated for bearing an additional burden, 242 and in the second for some unobsarvabte productive eapadty* in the same way that we expect workers to be compensated for higher levels of education. But in cases where positive wage differentials are due ta skills acquired OB the jab, efficiency wages, or monopoly rente, increasing the number of export jobs has the potential of raising the standard of living for workers, TABLE 7-2.—Industry Compensation Premiums, 1984 [Percent] Bottom 10 industries Top 10 industries Industry 1 Premium Industry 1 Premium Petroleum Tobacco 53.3 42.6 Leather Repair services -11.8 -12.3 Communications Public utilities 37.1 34.2 Entertainment Apparel -14.9 -15.0 Transportation equipment Mining . 28.2 27.7 Other retail trade Education services -17.3 -19.4 Primary metals Chemical 26.2 23.1 Personal services Eating and drinking -22.3 -28.3 Paper Machinery except electrical 19.9 18.2 Welfare services Private household services -32.8 -50.8 1 Two-digit Census Industrial Classification industries. Note.—The premium is calculated as the percentage by which compensation in the industry (wages plus benefits) exceeds the national average for all industries, after accounting for worker characteristics. Source: Katz, Lawrence F., and Lawrence H. Summers, "Industry Rents: Evidence and Implications," Brookings Papers: Microeconomics 1989. countries has received tremendous attention, the United States still buys the bulk of its imports from other advanced industrial countries, whose workers have similar skills and wages. If we define low-wage countries as those whose average wage is half or less that in the United States, trade with such countries in 1990 was roughly the same as it was in 1960, when Japan and much of Europe qualified as low-wage countries. Imports from low-wage countries were 2.2 percent of GDP in 1960 and rose to only 2.8 percent of GDP by 1990. In addition, the trade-weighted average hourly manufacturing wage of U.S. trade partners was 88 percent of that in the United States in 1990; this seems much too small a difference to have produced the observed changes in relative wages. This raises a more subtle but no less valid point: in order for international trade to result in a decrease in the wages of low-skilled workers, the price of low-skill-intensive imports must necessarily fall. But prices of such imports actually rose during the 1980s and 1990s. 243 In short, while trade may contribute a bit to the widening wage gap between skilled and unskilled workers, the evidence does not suggest that it is the prime source of the gap, nor that it hurts unskilled workers in an absolute sense. TRADE AND AGGREGATE EMPLOYMENT Much of the debate over trade has been over jobs. Critics of more open trade have claimed that trade destroys jobs; advocates often argue that trade creates them. According to basic economic theory, however, in general trade does neither. Today the United States is close to full employment. In such times, market opening means that opportunities will decrease in some industries and increase in others. The effect of export growth in this circumstance is not to increase the number of jobs but rather to increase the number of "good" jobs. There are circumstances, however, in which trade can lead to job gains: when unemployment rates are high, the expansion in exporting industries can be accomplished by hiring unemployed workers. In January 1993 U.S. unemployment was still 7.1 percent (even though the recession had ended 2 years earlier). During the next 2 years the number of American jobs supported by exports rose by 446,000, helping reduce unemployment to its present level below 5 percent. As the economy comes closer to full employment, however, trade's positive effect on aggregate U.S. real incomes shows up less in the form of higher employment and more in the form of higher real compensation for workers. TRADE AND JOB DISPLACEMENT As reported in the 1997 Economic Report of the President, public opinion polls continue to reveal a low sense of job security among American workers. This is surprising in that, historically, periods of robust economic activity such as the present one have been characterized by much less anxiety over job loss. This anxiety is also evidenced by a relatively low propensity for workers to quit their jobs—a low quit rate suggests uncertainty about the prospects of finding a new job. Rightly or wrongly, workers may associate much of their concern about job security with the expansion of trade. These concerns must be addressed. This means going beyond aggregate measures of expanding employment that might mask individual hardship. The evidence suggests that, for a variety of reasons, trade is not a primary contributor to total job displacements. Because the U.S. economy is highly dynamic, a great deal of job turnover occurs as new firms go into business or expand and others drop out or contract. Data from the 1980s reveal that trade contributed at most 10 percent of the observed displacements from manufacturing in the worst year of that 244 decade; in most years it contributed significantly less. Most of the job loss resulted from other forces, principally technological change. Trade can lead to increased displacements because an increase in imports is likely to displace workers in import-competing domestic industries. However, expanded export opportunities may reduce the incidence of displacements in other sectors. Some evidence suggests that expanded export opportunities have been sufficient to offset the effect of growing imports on total displacements. When the effects of increased imports and exports over the 1980s are combined, there is evidence that changing trade patterns over this period left the total volume of displacements relatively unchanged. This is possible because, over time, the displacements resulting from imports were generally offset by expansion in export-oriented industries, which served to reduce the number of displacements. The net effect was then only a reshuffling of displacements across industries and across time. Although trade may not have increased the number of displaced workers in the 1980s, in some cases it may have increased the hardship associated with displacement. By shifting production from one industry to another, international trade brings about a shift in employment from one industry to another. This change in the distribution of employment, although it generally increases the quality of jobs available, can lead to greater transitional hardship than some other causes of displacement, for instance the closure of an inefficient plant in an otherwise thriving industry, because it is more likely to involve finding a job in a new industry. In recognition of the relationship between imports and labor displacements, U.S. trade laws have included provisions for trade adjustment assistance since 1962. This assistance offers cash benefits, in the form of extended unemployment insurance benefits, and retraining to workers who lose their jobs as a result of trade. It also pays for job search assistance and relocation expenses. Since the inception of these programs, about 2 million workers have been certified as eligible. A smaller number have actually received benefits, as many found jobs in the meantime. The Administration is conscious of the need to provide support for workers injured by international trade, but also aware that not all workers deserving of such support are now getting it. Accordingly, the President has made significant reform of the existing trade adjustment assistance programs a priority. One such reform is to extend adjustment assistance to all workers displaced from firms that have shifted production to another country. The NAFTA legislation already provides such assistance to workers displaced from companies that have shut down their plants and moved production to Mexico or Canada. Also in need of assistance are displaced secondary workers—those employed as subcontractors or in businesses that provided services to plants that have moved abroad. The 245 NAFTA legislation offered benefits for these workers as well, but most have been unaware they were entitled to the same types of benefits as other dislocated workers. These extensions of assistance, coupled with efforts to streamline the certification process, should significantly improve the quantity and quality of assistance provided to workers displaced by trade and investment liberalization. THE U.S. TRADE BALANCE A popular measure of the impact of trade policies is the trade balance, or the difference between exports and imports of goods and services. But use of the trade balance as a measure of the success of market-opening endeavors is problematic. Changes in the trade balance are seldom related to specific market-opening efforts; indeed, the trade balance is generally determined by macroeconomic factors, not microeconomic barriers to trade. National income accounting identities demonstrate that the difference between exports and imports must equal the difference between national saving and domestic investment. In practice this relationship applies to the current account balance rather than to the trade balance. Trade in goods and services is by far the largest component of the current account, but it also includes overseas investment income and transfers. Measurement issues can also intrude to obscure the accounting identity. In particular, the existence in recent years of a large statistical discrepancy between the income- and the product-side measures of GDP has led to a situation in which the gap between official measures of saving and investment has narrowed as the current account has widened (Chart 7-7). The source of the statistical discrepancy is, by definition, unknown at present. But if, for example, the current account and investment are being measured relatively accurately, the current official measure of saving is too high. Measurement issues aside, in periods when domestic investment exceeds national saving, the current account balance will necessarily be in deficit, whatever the state of trade policy. Whether the Nation is borrowing to finance a consumption binge or an investment boom, the current account deficit that results will represent the inevitable consequence of these aggregate borrowing decisions—not the failure of market-opening policies. Until the 1980s the current account of the U.S. balance of payments was seldom far from balance. Since then, however, both the trade balance and the current account balance have been in substantial deficit, as growth in imports has largely exceeded growth in exports. These deficits have not arisen because we in the United States have expanded access to our markets while our trading partners have not done the same. In fact, over this period our major trading partners have 246 Chart 7-7 Saving, Investment, and the Current Account Balance The current account deficit grew in the mid-1980s as saving fell faster than investment. In the 1990s, however, both investment and saving are increasing. Percent of GDP 10 Net national investment 7 - Net national saving plus statistical discrepancy Net national saving Current account balance -6 1980 1982 1984 1986 1988 1990 1992 1994 1996 Source: Department of Commerce (Bureau of Economic Analysis). reduced their trade barriers more than has the United States.Rather, the explanation is macroeconomic. As Chart 7-8 shows, changes in the trade deficit have often closely followed movements in the real exchange rate. The exchange rate, in turn, reflects global demand for U.S. dollars by those who want to buy U.S. goods and assets, and the supply of dollars from those who want to use them to buy foreign goods and assets. The trade deficit grew in the early 1980s as the Federal Government maintained a mix of tight monetary policy and expansionary fiscal policy. Growing Federal budget deficits were a drain on the pool of domestic saving, requiring new investment to be financed increasingly through borrowing on international capital markets. In particular, the saving shortfall and tight monetary policy raised U.S. interest rates, which in turn caused the real exchange rate of the dollar to strengthen. As the dollar appreciated, imports became cheaper for Americans and U.S. exports more expensive for foreigners, so that the U.S. trade balance went deep into deficit. The deficit was thus financed by borrowing abroad. This problem was often referred to as the "twin deficits," emphasizing the role of the Federal budget deficit (that is, negative Federal Government saving) in the low overall national saving rate and the resulting trade deficit. Since 1992 the Federal budget deficit has fallen steadily and national saving has increased, yet the trade deficit has once again grown. This is because of the strong boom in investment. Moreover, 247 Chart 7-8 Real Value of the Dollar and the Trade Deficit The trade deficit is a macroeconomic phenomenon: increases in the deficit typically follow an appreciation of the dollar. Index, 1976 = 100 Percent of GDP 140 5 130 120 Real value of the dollar (left scale) Trade deficit 110 100 90 80 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 Sources: Department of Commerce (Bureau of Economic Analysis) and Federal Reserve Bank of Dallas. the trade deficit tends to widen when the economy is growing rapidly. As Chart 7-9 shows for the United States, import growth is strongly correlated with growth in national income (as measured by GDP)—as our incomes rise, we demand more goods and services generally, including more foreign goods and services. The faster our incomes are rising relative to foreign incomes, the more our demand for imports can be expected to accelerate relative to that for our exports (which are foreigners' imports). The result is a growing trade deficit here at home. Arguably, a current account deficit is less worrisome when it is accompanied by rising saving and investment. At the beginning of 1997 it seemed likely that the U.S. growth rate would fall behind that of our trading partners in Asia and elsewhere, which would help reduce the U.S. trade deficit. Instead, U.S. growth and import demand remained unusually strong, while much of the rest of the world grew less rapidly than expected. However, as discussed in Chapter 2, the dollar appreciated, keeping the nominal trade deficit from widening. The currency crisis and slower growth that hit East Asia in the second half of the year suggest that the U.S. deficit is likely to grow in 1998. The current trade deficit reflects decisions by households and businesses, policy choices, and the strength of the U.S. economy, particularly in the context of financial instability and slowing growth abroad. In theory, a smaller deficit might be realized with a different mix of fiscal and monetary policy, but it would bring problems of its 248 own. In particular, under current conditions of very low unemployment, an increase in the trade balance would simply crowd out growth in other sectors. The additional demand for U.S. goods and services would put upward pressure on inflation and interest rates, and other sectors would have to contract to make room for the rising net exports. In other words, the trade deficit has acted as a safety valve for the current economic expansion. Imports of goods have kept inflation low, while imports of capital have kept interest rates low, helping to sustain rapid income growth. In the strongly expanding full-employment economy that the United States now enjoys, it should be easier for Americans to see that trade deficits do not necessarily reduce output and employment. Chart 7-9 Growth in Real Imports and GDP Growth in demand for imports is strongly correlated with income growth. Four-quarter percent change Four-quarter percent change 16 40 12 30 ;\ I \ '/ \ » // V Real GDP growth (left scale) \ 20 Real import growth (right scale) 10 -10 1981 1983 1985 1987 1989 1991 Source: Department of Commerce (Bureau of Economic Analysis). 1993 1995 1997 FOREIGN DIRECT INVESTMENT Although trade has been a primary focus of the Economic Report of the President since its inception, capital flows have become increasingly predominant in international transactions. A significant share of these flows has taken the form of foreign direct investment (FBI), wherein the investor acquires or increases foreign assets in which it then has some lasting interest or influence. In recent years growth in recorded FBI has outpaced even the rapid growth of trade. In the last decade nominal FBI outflows from the United States rose 249 an average of 17 percent per year to reach $88 billion in 1996; growth in FBI inflows averaged 8 percent per year to $77 billion (Chart 7-10). Chart 7-10 Foreign Direct Investment Flows The 1980s saw a surge in foreign direct investment into the United States. In the 1990s, however, outflows of FDI have once again surpassed inflows. Billions of dollars 100 U.S. direct investment abroad 80 \ Foreign direct investment N in the United States / . 60 / / / / V 40 20 -20 1960 1963 1966 1969 1972 1975 1978 1981 1984 Source: Department of Commerce (Bureau of Economic Analysis). 1987 1990 1993 1996 Commentators tend to speak in universal terms about the motivations for FDI, but in reality no single factor determines why a firm chooses to become a multinational enterprise and operate affiliates in foreign countries. It may be to take advantage of unique opportunities only available overseas (for example, to develop new oil fields), to lower production costs by exploiting international comparative advantage, or to gain or improve access to foreign markets by avoiding trade barriers and transportation costs. Although a firm always has alternatives to FDI, such as exporting or licensing foreign firms to produce its goods, sometimes it is more cost-effective to internalize operations within the firm's command-and-control structure rather than conduct arm's-length transactions. This is especially true as telecommunications technology has improved, making the coordination of foreign operations easier. FDI and trade are interlinked in a number of ways. Often, FDI is a substitute for exporting: firms invest in operations abroad in response to tariffs or other barriers that hinder the export of goods to those markets. But FDI and trade are also complementary. In 1994 reported intrafirm trade—the cross-border transactions between affiliated units of multinational companies—accounted for one-third of U.S. exports and two-fifths of U.S. imports of goods. An understanding of the large and growing role of FDI in modern trade 250 patterns may be useful in assessing the benefits of this important aspect of our integrating world economy. As the importance of international direct investment has increased, countries have moved to negotiate a set of rules for FBI along the lines of those for trade. Unfortunately, many misunderstandings remain regarding FBI, which threaten to hinder these efforts (Box 7-5). Before reporting on the progress of these efforts, this section reviews recent trends in FBI flows and the ways in which both the home and the host country benefit from FBI. Box 7-5.— Fears and Facts about Foreign Direct Investment In &a 1080$ concerns arose in the United State that the rapid rise in inward FBI would have adverse effects on American workers, Some feared that fomgn-cootelled affiliates that displaced firms might change the composition of employment> mmmg jobs to the home , country and offering only %ad* jobs in the United States, In feet, foreign mtflttoationals in the United States pay higher than average wages, suggetting that in fact they provide jobs, When net fDI flows turned outward during the 199Cte, the sera became that UJSL companies would begin outsoumng mueh of their production to other soimtries, again at the esqpense of jobs and wages at home, This seeming ^>nferadktion~~tiiat inward and outward PDI would hare similar effects on UJSL woikers—may reflect how little was actually known about the effects of FDL Unlike trade* wWch has been the subject of study for hundreds of years, FBI has been subjected to little rigorous atudy until recently* As more has been learned about FWt many of these initial fears have subsided, The following are some fears that have been recently eiqpressed about FBI, and the facts that we now know. Fear: Won't U,S« industries leare for low-wage developing countries? Fact: During the NAFTA debate* mm® voiced concern that lowering barriers to investment to Ifetico would result in a large movement of UJ3« industry there, m firms ei|ioited low Meodcati wagg& But aince the passage of NAFTA in 19933 Mexico's sha^e of the U.3, outward FBI position has deceased, The reason thei?e has been no mam exodus of U$> industry to Mexico or to other low*w^e countries is simple: there is no free luncfc— for multinattonals as for the rest of us, Keal wage& may vary significantly aarc^s countries, but studies show that these differences are linked to ptMuotodty differences, Just as economic theory would predict Low wages a#e not a sufficient reason to move production to a foreign mu&tiy, if l<rw pro 251 'rafees the later tmt per wit of output to a dose to that of the United States* 5fi0 Yast mqfofi&r of UJS; EDI conti&pas tabe with other Mgh~wage e0uxibi$8, so dearly other motivations than fee potential for low-wage o&tsmircteg am heWnd Fear: Are U.S. firms that invest abroad e&partteg j$te? Pact: It may seem reasonable to suppose that a UJB* firm that hires workers fa an orerseas affiliate Is contributing to 113* tinemplojmeiit, since the fitm emdd fea htetag U.S» workers to do the same job hem Evide&ee shows, however, that generafly this is not the eaae; inereaaes m employment in foreign affiliates of 0J5, firms ara oftep assodated wife mcreasea in emplo^^meBt at the pai^nt aa well What employment sijbstituMon there is seems to be oc^riimiig entirely offshore, batweeii couatries competing for U.8L IT>I, not between UA parents and tfaeir foreign affiliates Par from export- *S, WDl abit>ad • Fact: Witfi the snrge to outward PDI in recent yeaxa, WDI outflows now amount to more than 10 percent <tf grosB private 'nonresMential , fixed iwe&tment, Howe¥0ry- whei-a-ttS, firm inv^Bta abr$act? that do^s not nec^B0M|Iy/meai^ it woiald hava - toasted here instead if WDl had not bee-m aai option. It might then 'ham chosen not- to Invert at all. M&femrer* two-lMrds of recorded outflows in 1998 were acteally the reinwated earnings of foreign aifiliatas, not capital orig&taJaiiEg im the United' States. Considering omly actual eapital outtlow% a recent stedy estimated that outward FDI .-a^^raged only CMJ percent of nonresMential feed inTestment between 1970 and 1990—and the share has been trending dowiiward. Capital outflows are also largely wmpensated by foreign investment inflows, Evidence suggests- that a {^mpleme&tarity may e^i^t between ertment, deeMow of domestic and -foreigii firms, which imply ;tibat redprocal di»et iHTesteient between - the United States and other industrial countries increases total investment to all eotmtries that participate, In short*' opponents ^of FDI ha^e incoirectly framed it as a ^ero-smm; centum,- where for one country to gain? another must torn Both the theoretical arguments of the benefits of FBI and the eirfdenee now available suggest that PDI eati provide net gams for all parties, . ' 252 CURRENT TRENDS IN FBI The United States remains both the largest source of and the largest host to FDI in the world. Throughout most of the postwar period the United States has been a net direct investor overseas, with FDI outflows exceeding inflows (Chart 7-10). However, in 1981 the balance of U.S. FDI flows turned inward for the first time, led by a large expansion of investment in the United States by Japanese and U.K. firms. This direct investment by foreign firms in the United States grew rapidly throughout the 1980s, peaked in 1989, and then dropped sharply in the early 1990s. Investment abroad by U.S. firms has increased tremendously in the 1990s, so that since 1991 the balance of FDI flows has once again been outward. These trends continue: in the first three quarters of 1997, FDI outflows in the balance of payments accounts rose to $94 billion, $14 billion more than inflows and already surpassing the level for all of 1996 ($88 billion). By 1996 the cumulative direct investment position of foreign firms in the United States (the inward FDI stock), measured on a historical cost basis, had reached $630 billion, an increase of 60 percent since 1990. There are some accepted problems in measuring FDI precisely. U.S. balance of payments accounting rules define FDI as financial flows from a parent company to an overseas affiliate in which it has at least 10 percent ownership. Thus, investment in foreign affiliates not financed directly by the parent company is excluded. In addition, historical cost positions are measured at the book value of purchases each year and therefore do not adjust for capital gains (including those due to inflation). Estimates that attempt to adjust for increases in the market value of assets are almost double the 1996 historical cost measure. However, historical cost measurements do indicate the distributional changes of FDI across countries and sectors. More than half of the reported FDI stock in the United States has come from three countries: the United Kingdom holds the largest share, followed by Japan and the Netherlands. The United Kingdom is also the largest host to U.S. direct investment abroad, followed by Canada. European countries are host to half of the stock of U.S. investment abroad. In 1996 U.S. firms directly controlled overseas assets of $797 billion, again valued at historical cost; member countries of the OECD were home to over 73 percent of this investment. Much of the rest was in Bermuda, the Caribbean, and some Asian newly industrializing economies such as Hong Kong; this investment is concentrated in sectors such as wholesale trade, finance, real estate, and services. China, the second-largest host to worldwide FDI, still represents only a negligible share of U.S. direct investment abroad. However, between 1992 and 1996 the U.S. position in China increased at an average rate of 50 percent per year. FDI in other 253 Asian developing countries has been increasing as well; however, the majority of growth has come from investment in the higher income economies that are still host to 75 percent of U.S. FBI in the region. Among developing countries, Brazil, Mexico, and Panama are the largest hosts to recorded U.S. FBI. Annual FBI flows to these countries represent about 10 percent of the total, but the stock of U.S. FDI in all of Latin America is still less than 12 percent of the total U.S. position abroad. Nevertheless, the brightening economic prospects in Latin America have been accompanied by a pronounced expansion of the U.S. direct investment position in the region. The emerging markets there are poised to become increasingly important to U.S. investors in the future, especially if investment barriers are liberalized under the proposed Free Trade Area of the Americas. Although wages are lower in developing countries, these do not always entail the cost advantages many people assume (Box 7-5). Rather, the developing countries that receive the most FDI are usually those regarded as potentially large future markets. This suggests that companies investing in these countries hope to establish a market presence, in the expectation of profitable future sales, and are not simply outsourcing production for reexport to other markets. Although the public image of FDI in the United States is often one of large manufacturing multinationals, manufacturing accounts for only one-third of both the inward and the outward FDI stock. Much FDI in manufacturing occurs in motor vehicles, electronic and electrical equipment, office machines and computers, and chemicals and allied products. In 1996 these sectors accounted for over half of both the U.S. FDI position abroad in manufacturing and almost half of the foreign position in the United States (Table 7-3). The industrial composition of U.S. FDI has evolved in tandem with that of the U.S. economy. Much of U.S. outward FDI in past decades was motivated by the opportunity to use U.S. technology to extract foreign raw material resources such as oil, coal, and natural gas: in 1980 the petroleum industry accounted for roughly 22 percent of the outward U.S. FDI position. But this share has been falling steadily, and in 1996 the figure was less than 10 percent. Between 1980 and 1990 FDI became associated with the relocation of manufacturing activities abroad, in part because of the rapid expansion of foreign firms in the U.S. manufacturing sector. More recently, a growing share of FDI is in service industries—primarily finance, insurance, and real estate but also wholesale and retail trade and banking—mirroring the evolution of the U.S. economy from a manufacturing to a services economy. In 1996 service industries accounted for 52 percent of the U.S. position abroad, exceeding the share of the entire manufacturing sector. However, these figures may overstate the role of services, which include sectors such as finance where large holdings of "paper assets" are the norm. 254 TABLE 7-3.—Inward and Outward Foreign Direct Investment, by Industry, Selected Years [Billions of dollars] U.S. direct investment abroad Industry Foreign direct investment in the United States 1980 1990 1996 1980 1990 Petroleum 47.6 52.8 75.5 12.2 42.9 42.3 Manufacturing 89.3 170.2 272.6 33.0 152.8 234.3 Food and kindred products .... Chemicals and allied products Primary and fabricated metals Industrial machinery and equipment Office and computing machines 8.3 18.9 6.3 16.1 9.3 15.6 38.0 10.5 30.9 22.2 36.2 69.4 13.6 35.0 21.7 4.9 10.4 3.6 2.9 .4 22.5 45.7 13.7 11.5 2.6 28.1 74.8 18.7 16.3 2.7 Electronic and other electric equipment Motor vehicles and equipment Other manufacturing 7.3 11.8 20.6 15.6 20.4 39.3 29.5 31.6 57.2 4.1 .7 6.4 1S.1 3.1 40.1 20.8 12.3 63.3 66.3 194.5 410.7 34.4 179.6 323.6 60.2 18.4 70.4 30.6 92.9 31.9 159.9 38.9 Services Wholesale and retail trade Banking Finance (excluding banking), insurance, and real estate .. Other services Other industries . Communications and public utilities All industries . 19% 7.3 50.7 20.7 84.3 32.5 27.5 109.7 257.2 5.6 13.4 36.7 15.2 4.6 13.5 1.1 12.2 13.1 37.7 3.4 19.6 29.7 1.3 4.4 20.4 .1 3.3 11.4 215.4 430.5 796.5 83.0 394.9 630.0 25.9 Note.—Detail may not add to totals because of rounding. Source: Department of Commerce (Bureau of Economic Analysis). Employment in foreign-owned U.S. affiliates rose from 2 million in 1980 to almost 5 million in 1995. This represents an average annual increase of more than 6 percent, over three times the rate of growth in nonfarm U.S. employment over the same period, and led to an increase in the share of U.S. private industry employment in foreign-controlled firms from less than 3 percent to 5 percent of total employment. The share of private industry GDP accounted for by foreign-owned U.S. affiliates has increased from 3 percent in 1980 to 6 percent in 1995. However, these increases largely represent growth during the 1980s and early 1990s; in fact, by both measures the foreign presence in U.S. industry has been constant or decreasing in recent years. THE BENEFITS OF FBI The benefits of FDI to the economy as a whole seem less clear than the benefits of trade. Yet in a world where trade results from differences in relative factor abundance, capital mobility should act as a substitute for trade. This corresponds with the notion that FDI occurs in response to trade barriers and suggests that capital flows have welfare implications similar to those of trade. Capital mobility can also have macroeconomic benefits by relaxing the tradeoff 255 between investment and consumption. However, the benefits of FDI go beyond increased capital mobility: FDI has direct impacts on both the host and the home countries that have little in common with other types of international investment, such as portfolio asset flows. Benefits to the Host Country The nature of the benefits of FDI to the host country is likely to depend on whether the country is developed or developing, and on the reasons why FDI is taking place. FDI in the higher income countries is often a response to market access concerns. By establishing operations closer to customers, a firm may be able to increase the quality of support services and the ability to match products to local tastes. The presence of multinationals also entails all the traditional benefits of local investment, creating jobs and fostering demand from local suppliers. When FDI occurs in developing countries, the gains from fostering demand from local industry may be even greater. "Big push" theories of industrialization emphasize that the profitability to a single firm of adopting new technological advances often depends on other firms' decisions to do likewise. For example, an automobile assembly plant requires dependable suppliers of parts and machinery, but these are not likely to exist locally if no automobile plants exist. In this scenario the gap between developed and developing countries occurs because the former have managed to overcome this coordination problem. By internalizing such transactions, often by using already established global supply networks, multinationals can overcome the coordination problem and provide the first step toward industrialization in a developing country. FDI may have additional advantages in developing countries, particularly over portfolio investment. The ability to own a foreign firm directly rather than through passive stock holdings may increase the incentive to invest in countries that offer attractive opportunities but little domestic entrepreneurial experience. Furthermore, since the commitments involved in direct ownership imply greater adjustment costs than under stock ownership when conditions turn unfavorable, FDI can create a more stable investment atmosphere by discouraging capital flight like that which plagued developing economies in Southeast Asia in 1997. When investors are forced to weather financial storms, a country's market volatility and macroeconomic instability are reduced, and this may help the storms pass more quickly. Lastly, through direct control of their affiliates, multinationals provide crucial links in the international dissemination of technology and best practices. This promotes more efficient production and resource use in home countries and rising incomes throughout the world. The recent literature on economic growth emphasizes the 256 importance of an expanding common pool of ideas in increasing growth rates in all countries. As new trade and investment agreements are negotiated to strengthen global intellectual property rights, these transfers of knowledge can proceed without destroying the incentive to innovate or sacrificing the profitability of innovating firms. FBI is frequently shown to be an important vehicle for increasing productivity in host countries, in some cases contributing relatively more to growth than does domestic investment. Although developing countries that now employ outdated technologies may have the most to gain from new ideas brought in by foreign multinationals, they are not the only beneficiaries. The resurgent competitiveness of the U.S. automotive industry in the 1990s is often attributed in part to the adoption of just-in-time inventory practices used successfully by Japanese production facilities located in the United States. Benefits to the Home Country It might seem natural that foreign investment helps foreigners, but what is less apparent is that the activities of multinationals can promote growth in their home countries as well (see Box 7-5). By developing and expanding foreign markets, multinationals provide an important benefit to the home country, because growth in a country's trade partners means growth in its export opportunities. And in many cases, as firms expand their operations overseas, they expand their management and support operations at home also, increasing employment both at home and abroad. Moreover, multinationals create trade by moving goods and services between parents and their foreign affiliates. As already noted, this intrafirm trade now plays a significant role in total U.S. trade. Although the move from arm's-length to intrafirm transactions need not represent "new" trade, evidence suggests that FBI is likely to increase trade. This can be considered a benefit in itself, by promoting the interchange of goods. FBI often plays an important role in promoting trade when barriers to traditional exports exist. A recent study shows that, in 1992, 70 percent of U.S. exports to Japan were intrafirm exports, as were 74 percent of exports to Switzerland and 64 percent to Russia. By contrast, only 12 percent of U.S. exports to Taiwan, our seventh-largest foreign market, were intrafirm exports. Arguably, intrafirm trade might not be beneficial if it represents the foreign outsourcing of goods for production and reexport to the home country. If this were the case, we might expect to see an intrafirm trade deficit equal to the amount of value added overseas. But U.S. intrafirm trade is in surplus: U.S. multinationals export more to their overseas affiliates than they import from them. This suggests that, on balance, shipments to foreign affiliates represent goods to be sold in the overseas market (perhaps after final assembly 257 there) rather than outsourcing for reexport. In a rapidly changing world environment, firms hoping to enter foreign markets are increasingly coming to realize that establishing a direct presence in those markets may be the best way to compete. CURRENT U.S. INITIATIVES IN INVESTMENT POLICY Evidence has shown that a stable policy environment is a good determinant of the amount of FDI a country attracts. Countries that are prone to nationalization, corruption, and political instability are less likely to receive foreign investment, whereas those that protect foreign investors and intellectual property rights do better. This suggests that there are benefits to achieving multilateral standards for investment rules. Under the auspices of the OECD, the United States has joined other countries in negotiations toward a Multilateral Agreement on Investment (MAI) that will set "high standards for the liberalization of investment regimes and investment protection...with effective dispute settlement procedures." The goal is to eliminate discrimination in investment by achieving a uniform set of rules for all signatories, thereby removing market distortions and facilitating the investment process. The MAI is being negotiated principally among the 29 OECD countries that account for the vast majority of worldwide FDI flows. But the MAI is being designed as a free-standing international treaty to which other nations may accede. Even though the negotiations are primarily among similar countries with similar objectives, the negotiations have been difficult at times. Meanwhile over 1,000 bilateral investment treaties already exist, primarily between developed and developing countries. The United States has signed 40 such treaties to date (Box 7-6). With these treaties the United States has been able to establish deeper agreements more quickly with more countries than it could by negotiating a single agreement with a large number of countries. Another recent initiative in which the United States has been active is the international effort to combat corruption. Corruption is a particularly thorny problem for multinationals in many developing countries, and its presence may offset much of the benefit to multinationals of locating in those countries. One recent study estimated that the effects of corruption were equivalent to an increase in the marginal tax rate for foreign investors of as much as 21 percentage points. Given the benefits of FDI to both home and host countries, this strong disincentive to investment is likely to reduce the welfare of both. It has also had important legal ramifications for U.S. investors abroad, who are prohibited under the Foreign Corrupt Practices Act from bribing foreign officials. This legislation has made it even more difficult for U.S. multinationals to establish and maintain businesses in countries with pervasive corruption. 258 Box 7-6.—Bilateral Investment TVeaties For much of the last decade the United States has been actively piimiing the negotiation of bilateral investment treaties with emerg~ i&g-mark&t cmmtries aim&iil the world The UJ3, goyeiwuaiit plaa&s priority on negotiating sadk treaties with countries imdergofag eeo~ noniie reform where It tellers the United States can haye a sipiifieant impact on the adoption of liberal polititoi on the treatment of FDI, The stnidiitfe of these treaties has also laid the polky grotmdwork for broader urnMeonntry Mttative§ In the O1GD {tbe MAI) and ev^otrat ly the WTO, "Ehe stniftere of ow bilateral in^a^meiit treaties protidef treatment tiiat is as favorable as that received hj their eampetitors—tiiis impfe the better of national or clear liniits OB fihe expropriation df fewsteieiits, and fair compensation when expropriation does occur the right to transfer allfimdgrelated to an inv^tmeiit Into and out Iteite on the ability of the bc^t government to i ineffident the right to s&tait mi towstaMrtt dispute with the host government to international arf>iteatio0 the tight of UJS. inT^to^ to eng^e the top managerial personnel In where national treatment is the MndKi^g standardj the are assured treatment no worse than investors Imm any thkd conntiy resewe, % date^ the UiriteJ States has snose^rfuffly nego> iMed Mtateral InTestmeat treaties wiftt some 40 mnntries (Ikble 7-4} and is actively engaged in pweiifag a mtdtttateral vemon of the troadgr under the auspices of ihe 0BCI). TABLE 7-4.—Countries with Which the United States Has Bilateral Investment Treaties Country and date Albania Argentina Armenia Azerbaijan Bangladesh Belarus Bulgaria • Cameroon Congo (Brazzaville) Congo (Kinshasa) Country and date pending 1994 1996 pending 1989 Croatia Czech Republic Ecuador Egypt . Estonia pending 1994 1989 1994 1989 Georgia Grenada Haiti Honduras Jamaica Country and date pending Jordan 1992 Kazakhstan 1997 Kyrgyzstan . .. 1992 Latvia 1997 Moldova Mongolia Morocco .... pending Nicaragua pending Panama 1997 Poland 1997 1989 Note.—Years are those when the treaty entered into force. Source-. Office of the U.S. Trade Representative. 259 Country and date pending 1994 1994 1996 1994 Romania Russia . Senegal Slovakia Sri Lanka 1994 . . pending 1990 1992 1993 1996 Trinidad and Tobago Tunisia 1993 1990 pending Turkey 1991 Ukraine 1996 Uzbekistan pending 1994 1997 1991 In late 1997 the member countries of the OECD finalized a draft treaty to outlaw bribery of foreign public officials. Holding multinationals of all nationalities to similar standards will put pressure on foreign officials to abide by legal and transparent procedures in doing business with foreign companies, rather than allow them to promote a "race to the ethical bottom" among companies seeking government contracts or licensing. It is hoped that, together with the establishment of a common set of investment rules in the MAI, the reduction of corruption abroad will act as an incentive to FBI, bringing increased benefits to both home and host countries worldwide. CONCLUSION Economies that are open to international trade and investment are more likely to experience a rising standard of living than are economies with significant barriers to cross-border economic activities. Consumers in open economies benefit from a wider variety of goods at lower prices than do consumers in economies that resist competition from foreign suppliers. The economy as a whole benefits from an increased ability to devote its scarce resources to economic activities that it performs relatively efficiently. Over time, through both international trade and international investment, open economies benefit from higher rates of productivity growth and innovation that result from increased participation in international markets. Many, however, fear that international transactions will disadvantage certain segments of the economy. As this chapter has shown, it is difficult to associate cross-border interactions with declining real wages of workers, or even of particular groups of workers. Indeed, there is evidence that adjustments resulting from growth in international trade have the potential to make workers better off. In the United States, jobs with exporting firms pay between 5 percent and 10 percent more than do jobs in other sectors of the economy. At the same time, the Administration recognizes that the transition from one job to another is not always easy and that assistance must be provided to those most affected by displacement. As the United States is already among the most open economies in the world, the Administration's activities have been directed toward opening foreign markets to imports not only from the United States but from other exporters as well. This goal has been actively and successfully pursued in multilateral, regional, and bilateral forums. Partly reflecting these pursuits, U.S. imports and exports have increased significantly since 1993. Although much has been accomplished, the Administration maintains an active international policy agenda promoting free trade throughout the Americas, across the Pacific, and around the world. 260 Appendix A REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THE COUNCIL OF ECONOMIC ADVISERS DURING 1997 LETTER OF TRANSMITTAL COUNCIL OF ECONOMIC ADVISERS Washington, D. C., December 31, 1997 MR. PRESIDENT: The Council of Economic Advisers submits this report on its activities during the calendar year 1997 in accordance with the requirements of the Congress, as set forth in section 10(d) of the Employment Act of 1946 as amended by the Full Employment and Balanced Growth Act of 1978. Sincerely, Janet L. Yellen, Chair Jeffrey A. Frankel, Member Rebecca M. Blank, Member-Nominee 263 Council Members and Their Dates of Service Name Edwin G. Nourse Leon H. Keyserling John D.Clark Roy Blough Robert C. Turner Arthur F Burns Neil H Jacoby Walter W. Stewart Raymond J Saulnier Joseph S Davis Paul W. McCracken Karl Brandt Henry C Wallich Walter W. Heller James Tobin Kermit Gordon Gardner Ackley John P Lewis Otto Eckstein Arthur M.Okun James S Duesenberry MertonJ Peck Warren L Smith PaulW McCracken HendrikS Houthakker Herbert Stein Ezra Solomon Marina v.N. Whitman Gary L Seevers William J Fellner Alan Greenspan Paul W. MacAvoy Burton G Malkiel Charles L Schultze William D Nordhaus Lyle E. Gramley George C Eads Stephen M. Goldfeld Murray L Weidenbaum William A. Niskanen Jerry L Jordan Martin Feldstein William Poole Beryl W Sprinkel Thomas Gale Moore Michael L Mussa Michael J Boskin John B.Taylor Richard L Schmalensee David F Bradford Paul Wonnacott Laura D'Andrea Tyson Alan S Blinder Joseph E Stiglitz Martin N Baily Alicia H Munnell Janet L Yellen Jeffrey A Frankel Position 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 Chairman Member Member Member Member Chairman Member Member Chairman Member Chairman Member Member Chairman Member Member Member Member Chair Member Member Chairman Member Member Chair Member Oath of office date August 9, 1946 . August 9, 1946 November 2 1949 May 10, 1950 August 9, 1946 May 10 1950 June 29, 1950 September 8, 1952 March 19 1953 September^ 1953 December 2, 1953 April 4 1955 Decembers 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 . .. . 264 January 22, 1977 March 18 1977 March 18, 1977 June 6, 1979 August 20, 1980 February 27 1981 June 12, 1981 July 14, 1981 October 14 1982 December 10, 1982 April 18 1985 July 1, 1985 August 18, 1986 February 2, 1989 June 9, 1989 Octobers 1989 Novemberl3 1991 November 13, 1991 February 5, 1993 July 27 1993 July 27, 1993 June 28, 1995 June 30 1995 January 29 1996 February 18 1997 April 23, 1997 Separation date November 1 1949 January 20 1953 February 11 1953 August 20, 1952 January 20, 1953. December 1 1956 February 9 1955 April 29, 1955. January 20 1961 October 31 1958 January 31, 1959. January 20 1961 January 20, 1961. November 15, 1964. July 31 1962 December 27 1962 February 15, 1968. August 31 1964 February 1, 1966. January 20 1969 June 30 1968 January 20, 1969. January 20, 1969. December 31 1971 July 15 1971 August 31 1974 March 26, 1973. August 15, 1973. April 15 1975 February 25, 1975. January 20, 1977. November 15, 1976. January 20 1977 January 20, 1981. February 4 1979 May 27, 1980. January 20 1981. January 20, 1981. August 25, 1982. March 30, 1985. July 31, 1982. July 10 1984 January 20, 1985. January 20 1989 Mayl 1989 September. 19, 1988. January 12, 1993. August 2, 1991. June 21 1991 January 20 1993. January 20, 1993. April 22, 1995. June 26 1994 February 10, 1997. August 30 1996 August 1 1997 Report to the President on the Activities of the Council of Economic Advisers During 1997 The Council of Economic Advisers was established by the Employment Act of 1946 to provide the President with objective economic analysis and advice on the development and implementation of a wide range of domestic and international economic policy issues. The Chair of the Council Janet L. Yellen was appointed Chair on February 18,1997. Dr. Yellen replaced Joseph E. Stiglitz, who left the Council to become Senior Vice President of Development Economics and Chief Economist of the World Bank. Before becoming Chair of the Council, Dr. Yellen served as a Member of the Board of Governors of the Federal Reserve System. Dr. Yellen is on leave from the Haas School of Business at the University of California, Berkeley, where she is the Bernard T. Rocca, Jr. Professor of International Business and Trade. Dr. Yellen is responsible for communicating the Council's views on economic matters directly to the President through personal discussions and written reports. Dr. Yellen also represents the Council at Cabinet meetings, meetings of the National Economic Council (NEC), daily White House senior staff meetings, budget team meetings with the President, and other formal and informal meetings with the President, senior White House staff, and other senior government officials. Dr. Yellen is the Council's chief public spokesperson. She directs the work of the Council and exercises ultimate responsibility for the work of the professional staff. The Members of the Council Jeffrey A. Frankel is a Member of the Council of Economic Advisers. Dr. Frankel is on leave from the University of California, Berkeley, where he is Professor of Economics. He previously directed the program on International Finance and Macroeconomics at the National Bureau of Economic Research and is a former Senior Fellow at the Institute for International Economics. Alicia H. Munnell was a Member of the Council of Economic Advisers until August 1997. Dr. Munnell currently holds the Peter F. Drucker Chair in Management Sciences at Boston College's Carroll School of Management. The President has nominated Rebecca M. Blank to suc- 265 ceed Dr. Munnell as a Member of the Council. While awaiting confirmation, Dr. Blank has been serving as Chief Economist. She is on leave from Northwestern University, where she is Professor of Economics. Dr. Blank previously served as the first Director of the Northwestern University/University of Chicago Joint Center for Poverty Research and was a faculty affiliate at Northwestern University's Institute for Policy Research. The Chair and Members work as a team on most economic policy issues. Dr. Frankel and Dr. Munnell shared responsibility for domestic macroeconomic analysis, the Administration's economic forecast, and budget and tax issues. Dr. Frankel is primarily responsible for international economic issues and certain microeconomic issues, including those relating to natural resources, the environment, and industrial organization. Dr. Munnell was primarily responsible for retirement, health care, welfare reform, and labor issues. Dr. Blank has taken over responsibility for these issues. She is also responsible for child and family policy issues and is working closely with the President's Initiative on Race. The Chair and Members participate in the deliberations of the NEC, and Dr. Yellen is a member of the NEC Principals Committee. WEEKLY ECONOMIC BRIEFINGS Dr. Yellen and the Members continued during 1997 to conduct a weekly economic briefing for the President, the Vice President, and the President's other senior economic and policy advisers. The Council, in cooperation with the Office of the Vice President, prepares a written Weekly Economic Briefing of the President, which provides analysis of current economic developments, more extended discussions of a wide range of economic issues and problems, and summaries of economic developments in different regions and sectors of the economy. This document serves as a basis for the oral economic briefing of the President. MACROECONOMIC POLICIES A primary function of the Council is to advise the President on all major macroeconomic issues and developments. The Council prepares for the President, the Vice President, and the White House senior staff almost daily memoranda that report key economic data and analyze current economic events. The Council, the Department of the Treasury, and the Office of Management and Budget—the Administration's economic "troika"— are responsible for producing the economic forecast that underlies the Administration's budget proposals. The Council, under the leadership of the Members, initiates the forecasting process twice each year. In preparing these forecasts, the Council consults with a variety of outside sources, including leading private sector forecasters. 266 In 1997 the Council continued to take part in discussions about the President's balanced budget plan. The Council also participated in meetings on a range of budget issues including Medicare reform, discretionary spending priorities, and the Administration's tax proposals. The Council participated in discussions regarding proposals to strengthen the Social Security system, and in an interagency effort to develop a package of proposed reforms to the private pension system to promote higher rates of national saving and greater retirement security. The Council participates in the Working Group on Financial Markets, an interagency group that monitors developments related to financial markets and the banking sector. The group includes representatives from the Treasury, the Federal Reserve, the NEC, and various regulatory agencies. The Council continued its efforts to improve the public's understanding of economic issues and the Administration's economic agenda through regular briefings with the economic and financial press, frequent discussions with outside economists, and presentations to outside organizations. Drs. Yellen, Frankel, Munnell, and Blank also regularly exchanged views on the macroeconomy with the Chairman and Members of the Board of Governors of the Federal Reserve System. INTERNATIONAL ECONOMIC POLICIES The Council was an active participant in 1997 in the international economic policymaking process through the NEC and the National Security Council, providing both technical and analytical support and policy guidance. In particular, the Council has helped assess the economic impact of international sanctions against foreign nations, and the efficacy of relaxing restrictions in the U.S.-Japan civil aviation market. The Council has taken an active role on a range of other international economic issues, including evaluating and explaining the case for trade liberalization, the Administration's policy approach to Asia's financial turmoil, U.S. trade remedy laws (antidumping, countervailing duties, safeguards, and Section 301 actions), and the agendas of multilateral and regional forums such as the World Trade Organization, the Asia-Pacific Economic Cooperation forum, and the proposed Free Trade Area of the Americas. The Council played a significant role in preparing both the Administration's 1997 Study on the Operation and Effects of the North American Free Trade Agreement and the 1997 APEC Economic Outlook. The Weekly Economic Briefing of the President also regularly included articles on international events and issues. Because of the growing importance of international economic issues to the U.S. economy, the Council often represents the United States at international meetings and forums. In November Dr. Yellen gave the keynote address at the U.S.-R.O.C. Economic Council Plenary Session. Also in November Dr. Frankel participated in the annual meeting of 267 the APEC Senior Economic Advisers, a meeting initiated in 1996 by the Council during the APEC Leaders Summit. At this meeting Dr. Frankel presented a Council paper on the long-term determinants of growth. In December Dr. Frankel participated in the Joint Economic Development Group with Israel. The Council also continued annual meetings with the Economic Planning Agency of Japan and the State Planning Commission of China, the Council's counterparts in those countries. The Council is a leading U.S. participant in the Organization for Economic Cooperation and Development (OECD), the principal forum for economic cooperation among the high-income industrial countries. The Council heads the U.S. delegation to the semiannual meetings of the OECD's Economic Policy Committee; Dr. Yellen serves as that committee's chair. In 1997 Dr. Frankel participated in Working Party 3 on macroeconomic policy coordination. Dr. Steven N. Braun, Director, Macroeconomic Forecasting at the Council, led the U.S. delegation to the OECD annual examination of the United States, and to the Short-term Economic Forecasters' Meeting. Dr. Christopher Carroll, Senior Economist at the Council, led the U.S. delegation to the Working Party 1 meeting on structural issues. MICROECONOMIC POLICIES During 1997 the Council was an active participant in a range of microeconomic policy discussions. The Council participated in various interagency policy discussions on labor market issues, health care, education, child care, and welfare reform; in the development of the Child Health Insurance Program; in interagency discussions of proposals to increase health insurance coverage for older workers; and in a working group investigating alternative measures of poverty. The Council also participated in working groups on the minimum wage, training initiatives for displaced workers, and unemployment insurance reform. The Council has been actively involved in the President's Initiative on Race and is coordinating production of a document that will present important indicators of social and economic well-being by race and ethnicity for use by a national audience including educators and policymakers. In May the Council issued a report titled Explaining the Decline in Welfare Receipt, 1993 to 1996. The report examined the causes of the 20-percent decline (2.75 million recipients) in the welfare caseload that took place between 1993 and 1996 and concluded that roughly 40 percent of the decline was due to the stronger economy, roughly 30 percent to welfare reform policies, and the remainder to other factors such as the earned income tax credit. The Council was involved in White House conferences on early childhood development and child care. In conjunction with the early child- 268 hood development conference, the Council released a white paper titled The First Three Years: Investments That Pay. This report documented the importance of programs to encourage children's development in the first 3 years of life and the high long-term payoff of such investments. As a follow-up to the White House child care conference, the Council issued a report titled The Economics of Child Care. This report reviewed the economics literature regarding the availability, cost, and quality of child care and the importance of policies to support access to affordable, quality care. In the areas of regulation and competition policy, the Council helped develop important Administration initiatives to improve the performance of markets, both domestically and internationally. On the domestic front the Council took part in interagency efforts to increase competition in electric power markets in a manner consistent with important environmental and social objectives. The Council contributed to the Administration's analysis of whether and how much to reform product liability law, and to discussions of the Federal Communications Commission's methods for pricing telecommunications services. The Council also worked with the Federal Trade Commission, the Department of Justice, and the Department of the Treasury to consider questions raised by the proposed industry-wide tobacco settlement. In addition, the Council worked with the Treasury, the Department of Education, and the Office of Management and Budget to develop reforms of the college financial aid system to make it fairer and more efficient. With respect to international regulation and competition policy, the Council cooperated with the Department of State and other agencies to bring more competition to the satellite communications industry, to support the OECD's adoption of principles for economically sound regulation, to promote efficient infrastructure development in the AsiaPacific region, and to coordinate merger policy with the European Union. The Council was also active in a range of policy discussions on natural resources and the environment. The Council took part in the interagency evaluation of National Ambient Air Quality Standards for ozone and particulate matter under the Clean Air Act and the implementation plans for the revised standards. The Council was actively involved in the development and analysis of the Administration's global climate change policy. The Staff of the Council of Economic Advisers The professional staff of the Council consists of the Chief of Staff, the Senior Statistician, 11 senior economists, 5 staff economists, and 3 research assistants. The professional staff and their areas of concentration at the end of 1997 were: 269 Chief of Staff and General Counsel Michele M. Jolin Senior Economists Steven N. Braun Christopher D. Carroll Aaron S. Edlin Keith O. Fuglie Maria J. Hanratty Jon D. Haveman Sanders D. Korenman Randall W. Lutter Adele C. Morris Jeremy B, Rudd Charles F. Stone Director, Macroeconomic Forecasting Macroeconomics and Aging Regulation, Industrial Organization, and Antitrust Agriculture and Natural Resources Health Care and Labor International Economics Labor, Welfare, and Education Regulation and Environment Environment and Natural Resources Macroeconomics Macroeconomics and Editor, Weekly Economic Briefing of the President Senior Statistician Catherine H. Furlong Staff Economists Joseph E. Aldy Amy N. Finkelstein Mark R. Hopkins Mark C. Rainey Sarah J. Reber Environment and Natural Resources Labor and Public Finance International Economics Industrial Organization and Regulation Health Care and Environment Senior Research Assistant Ha Yan Lee Macroeconomics Research Assistants Zachary M. Candelario Daniel K. Chang Weekly Economic Briefing of the President, Labor, and Environment Weekly Economic Briefing of the President and International Economics Statistical Office Mrs. Furlong directs the Statistical Office. The Statistical Office maintains and updates the Council's statistical information, oversees the publication of the monthly Economic Indicators and the statistical appendix to the Economic Report, and verifies statistics in Presidential and Council memoranda, testimony, and speeches. 270 Susan P. Clements Linda A. Reilly Brian A. Amorosi Statistician Statistician Research Assistant Administrative Officer Catherine Fibich Office of the Chairman Alice H. Williams Sandra F. Daigle Lisa D. Branch Francine P. Obermiller Executive Assistant to the Chairman Executive Assistant to the Chairman and Assistant to the Chief of Staff Executive Assistant to Dr. Frankel Executive Assistant to Dr. Blank Staff Secretaries Mary E. Jones Rosalind V. Rasin Mary A. Thomas International Economics, Labor, and Health Care Environment, Industrial Organization, and Public Finance Macroeconomics Mrs. Thomas also served as executive assistant for the Weekly Economic Briefing of the President. Michael Treadway provided editorial assistance in the preparation of the 1997 Economic Report. Michael A. Toman, Resources for the Future, served as a consultant during the year. Student interns during the year were Aryeh J. Asian, Elizabeth T. Burns, Carol L. Capece, Quindi C. Franco, Robert K. Kaproth, Mark N. Levine, Jennifer A. Meyers, Andrew J. Miller, Praveen Rangnath, Katharine S. Rogers, Ravi K. Sandill, Kristen M. Scarafia, Courtney A. Sweeney, Harsh N. Trivedi, and Jennifer H. Yoon. The following student interns joined the Council in January to assist with the preparation of the Economic Report: Keith H. Monk, Jenny E. Pippin, and Samuel G. Steckley. DEPARTURES The Council's senior economists, in most cases, are on leave of absence from faculty positions at academic institutions or from other government agencies or research institutions. Their tenure with the Council is usually limited to 1 or 2 years. Most of the senior economists who left the Council during 1997 returned to their previous affiliations. They are Timothy J. Brennan (University of Maryland, Baltimore County, and Resources for the Future), William B. English (Board of Governors of the Federal Reserve System), Phillip B. Levine (Wellesley College), John D. Montgomery (International Monetary 271 Fund), Raymond Prince (Department of Energy), Christopher J. Ruhm (University of North Carolina, Greensboro), Jason F. Shogren (University of Wyoming), and David L. Sunding (University of California, Berkeley). Mark J. Mazur became Senior Policy Adviser and Chief Economist at the Department of Energy. Staff economists are generally graduate students who spend 1 year with the Council and then return to complete their dissertations. Those who returned to their graduate studies in 1997 are Carrie S. Cihak (University of Michigan), Cynthia K. Gustafson (University of California, Berkeley), Andrea Richter (London School of Economics), Cristian J. Santesteban (Stanford University), and Caroline M. Thompson (Princeton University). Jason L. Furman accepted a position with the World Bank. Thomas A. Rhoads accepted a position with Resources for the Future and has since returned to graduate studies at the University of Wyoming. After serving as research assistants at the Council, Jennifer C. Daskal accepted a position at the Center on Budget and Policy Priorities, and Diane M. Whitmore began graduate studies at Princeton University. Elizabeth A. Kaminski and Margaret L. Snyder retired in 1997 after serving the Council for 32 and 36 years, respectively. Mrs. Kaminski served most recently as Administrative Officer, and Mrs. Snyder retired from the Statistical Office. Public Information The Council's Annual Report is an important vehicle for presenting the Administration's domestic and international economic policies. It is now available for distribution as a bound volume, on CD-ROM, and on the Internet, where it is accessible at http://www.access.gpo.gov/eop. The Council also has primary responsibility for compiling the monthly Economic Indicators, which is issued by the Joint Economic Committee of the Congress. The Internet address for the Economic Indicators is www.access.gpo.gov/congress/cong002.html. 272 Appendix B STATISTICAL TABLES RELATING TO INCOME, EMPLOYMENT, AND PRODUCTION CONTENTS NATIONAL INCOME OR EXPENDITURE: B-l. B-2. B-3. B-4. B-5. B-6. B-7. B-8. B-9. B-10. B-ll. B-12. B-13. B-14. B-15. B-16. B-17. B-18. B-19. B-20. B-21. B-22. B-23. B-24. B-25. B-26. B-27. B-28. B-29. B-30. B-31. B-32. B-33. Gross domestic product, 1959-97 Real gross domestic product, 1959-97 Quantity and price indexes for gross domestic product, and percent changes, 1959-97 Percent changes in real gross domestic product, 1959-97 Contributions to percent change in real gross domestic product, 1959-97 Chain-type quantity indexes for gross domestic product, 1959-97 Chain-type price indexes for gross domestic product, 1959-97 Gross domestic product by major type of product, 1959-97 Real gross domestic product by major type of product, 1959-97 Gross domestic product by sector, 1959-97 Real gross domestic product by sector, 1959-97 Gross domestic product by industry, 1959-96 Real gross domestic product by industry, 1977-96 Gross domestic product of nonfinancial corporate business, 195997 Output, costs, and profits of nonfinancial corporate business, 1959-97 Personal consumption expenditures, 1959-97 Real personal consumption expenditures, 1982-97 Private gross fixed investment by type, 1959-97 Real private gross fixed investment by type, 1982-97 Government consumption expenditures and gross investment by type, 1959-97 Real government consumption expenditures and gross investment by type, 1982-97 Inventories and final sales of domestic business, 1959-97 Real inventories and final sales of domestic business, 1959-97 .... Foreign transactions in the national income and product accounts, 1959-97 Real exports and imports of goods and services and receipts and payments of factor income, 1982-97 Relation of gross domestic product, gross national product, net national product, and national income, 1959-97 Relation of national income and personal income, 1959-97 National income by type of income, 1959-97 Sources of personal income, 1959-97 Disposition of personal income, 1959-97 Total and per capita disposable personal income and personal consumption expenditures in current and real dollars, 1959-97 Gross saving and investment, 1959-97 Median money income (in 1996 dollars) and poverty status of families and persons, by race, selected years, 1978-96 275 Page 280 282 284 285 286 288 290 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 314 316 317 318 320 Page POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY: B-34. B-35. B-36. B-37. B-38. B-39. B-40. B-41. B-42. B-43. B-44. B-45. B-46. B-47. B-48. B-49. B-50. Population by age group, 1929-97 . Civilian population and labor force, 1929-97 Civilian employment and unemployment by sex and age, 195097 Civilian employment by demographic characteristic, 1954-97 Unemployment by demographic characteristic, 1954-97 Civilian labor force participation rate and employment/population ratio, 1950-97 Civilian labor force participation rate by demographic characteristic, 1954-97 Civilian employment/population ratio by demographic characteristic, 1954-97 Civilian unemployment rate, 1950-97 Civilian unemployment rate by demographic characteristic, 1954-97 Unemployment by duration and reason, 1950-97 Unemployment insurance programs, selected data, 1965-97 Employees on nonagricultural payrolls, by major industry, 195097 Hours and earnings in private nonagricultural industries, 195997 Employment cost index, private industry, 1980-97 Productivity and related data, business sector, 1959-97 Changes in productivity and related data, business sector, 195997 321 322 324 325 326 327 328 329 330 331 332 333 334 336 337 338 339 PRODUCTION AND BUSINESS ACTIVITY: B-51. B-52. B-53. B-54. B-55. B-56. B-57. B-58. B-59. Industrial production indexes, major industry divisions, 1947-97 Industrial production indexes, market groupings, 1947-97 Industrial production indexes, selected manufactures, 1947-97 ... Capacity utilization rates, 1948-97 New construction activity, 1959-97 New housing units started and authorized, 1959-97 Manufacturing and trade sales and inventories, 1954-97 Manufacturers' shipments and inventories, 1954-97 Manufacturers' new and unfilled orders, 1954-97 340 341 342 343 344 345 346 347 348 Consumer price indexes for major expenditure classes, 1954—97 Consumer price indexes for selected expenditure classes, 1954— 97 Consumer price indexes for commodities, services, and special groups, 1954-97 Changes in special consumer price indexes, 1960-97 Changes in consumer price indexes for commodities and services, 1929-97 Producer price indexes by stage of processing, 1954-97 Producer price indexes by stage of processing, special groups, 1974-97 Producer price indexes for major commodity groups, 1954-97 Changes in producer price indexes for finished goods, 1960-97 .... 349 PRICES: B-60. B-61. B-62. B-63. B-64. B-65. B-66. B-67. B-68. 276 350 352 353 354 355 357 358 360 Page MONEY STOCK, CREDIT, AND FINANCE: B-69. Money stock, liquid assets, and debt measures, 1959-97 B-70. Components of money stock measures and liquid assets, 195&-97 B-71. Aggregate reserves of depository institutions and monetary base, 1959-97 B-72. Bank credit at all commercial banks, 1972-97 B-73. Bond yields and interest rates, 1929-97 B-74. Credit market borrowing, 1988-97 B-75. Mortgage debt outstanding by type of property and of financing, 1945-97 B-76. Mortgage debt outstanding by holder, 1945-97 B-77. Consumer credit outstanding, 1955-97 361 362 364 365 366 368 370 371 372 GOVERNMENT FINANCE: B-78. Federal receipts, outlays, surplus or deficit, and debt, selected fiscal years, 1929-99 373 B-79. Federal budget receipts, outlays, surplus or deficit, and debt, as percent of gross domestic product, fiscal years 1934-99 374 B-80. Federal receipts and outlays, by major category, and surplus or deficit, fiscal years 1940-99 375 B-81. Federal receipts, outlays, deficit, and debt, fiscal years 1993-99 376 B-82. Federal Government receipts and current expenditures, national income and product accounts (NIPA), 1978-97 377 B-83. Federal and State and local government receipts and current expenditures, national income and product accounts (NIPA), 1959-97 378 B-84. Federal and State and local government receipts and current expenditures, national income and product accounts (NIPA), by major type, 1959-97 379 B-85. State and local government receipts and current expenditures, national income and product accounts (NIPA), 1959-97 380 B-86. State and local government revenues and expenditures, selected fiscal years, 1927-94 381 B-87. Interest-bearing public debt securities by kind of obligation, 1967-97 382 B-88. Maturity distribution and average length of marketable interestbearing public debt securities held by private investors, 196797 383 B-89. Estimated ownership of public debt securities by private investors, 1976-97 384 CORPORATE PROFITS AND FINANCE: B-90. Corporate profits with inventory valuation and capital consumption adjustments, 1959-97 B-91. Corporate profits by industry, 1959-97 B-92. Corporate profits of manufacturing industries, 1959-97 B-93. Sales, profits, and stockholders' equity, all manufacturing corporations, 1952-97 B-94. Relation of profits after taxes to stockholders' equity and to sales, all manufacturing corporations, 1947-97 B-95. Common stock prices and yields, 1955-97 B-96. Business formation and business failures, 1955-97 277 385 386 387 388 389 390 391 Page AGRICULTURE: B-97. Farm income, 1945-97 B-98. Farm business balance sheet, 1950-96 B-99. Farm output and productivity indexes, 1948-94 B-100. Farm input use, selected inputs, 1948-97 B-101. Indexes of prices received and prices paid by farmers, 1975-97 B-102. U.S. exports and imports of agricultural commodities, 1940-97 ... 392 393 394 395 396 397 INTERNATIONAL STATISTICS: B-103. U.S. international transactions, 1946-97 398 B—104. U.S. international trade in goods by principal end-use category, 1965-97 400 B-105. U.S. international trade in goods by area, 1988-97 401 B—106. U.S. international trade in goods on balance of payments (BOP) and Census basis, and trade in services on BOP basis, 197497 402 B-107. International investment position of the United States at yearend, 1988-96 403 B-108. Industrial production and consumer prices, major industrial countries, 1972-97 404 B-109. Civilian unemployment rate, and hourly compensation, major industrial countries, 1972-97 405 B-110. Foreign exchange rates, 1972-97 406 B-lll. International reserves, selected years, 1952-97 407 B-112. Growth rates in real gross domestic product, 1979-97 408 278 General Notes Detail in these tables may not add to totals because of rounding. Because of the formula used for calculating real gross domestic product (GDP), the chained (1992) dollar estimates for the detailed components do not add to the chained-dollar value of GDP or to any intermediate aggregates. In addition, the Department of Commerce (Bureau of Economic Analysis) no longer publishes chained-dollar estimates prior to 1982, except for selected series. This change is reflected in these tables. Unless otherwise noted, all dollar figures are in current dollars. Symbols used: P Preliminary. .... Not available (also, not applicable). Data in these tables reflect revisions made by the source agencies from February 1997 through early February 1998. NATIONAL INCOME OR EXPENDITURE TABLE B-l.—Gross domestic product, 1959-97 [BILLIONS OF DOLLARS, EXCEPT AS NOTED; QUARTERLY DATA AT SEASONALLY ADJUSTED ANNUAL RATES] Personal consumption expenditures Gross private domestic investment Fixed investment Year or quarter 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 .. 1982 1983 1984 1985 1986 . 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997? 1992-1 II Ill IV 1993:1 II Ill IV 1994:1 || III IV 1995-1 II Ill IV 1996:1 II Ill IV 1997:1 || III IV* Gross domestic product 507.2 526.6 544.8 585.2 617.4 663.0 719.1 787.8 833.6 910.6 982.2 1,035.6 1,125.4 1,237.3 1,382.6 1,496.9 1,630.6 1,819.0 2,026.9 2,291.4 2,557.5 2,784.2 3,115.9 3,242.1 3,514.5 3,902.4 4,180.7 4,422.2 4,692.3 5,049.6 5,438.7 5,743.8 5,916.7 6,244.4 6,558.1 6,947.0 7,265.4 7,636.0 8,083.4 6,121.8 6,201.2 6,271.7 6,383.1 6,444.5 6,509.1 6,574.6 6,704.2 6,794.3 6,911.4 6,986.5 7,095.7 7,168.9 7,209.5 7,301.3 7,381.9 7,467.5 7,607.7 7,676.0 7,792.9 7,933.6 8,034.3 8,124.3 8,241.5 Total NonDurable durable goods goods 318.1 332.2 342.6 363.4 383.0 411.4 444.3 481.9 509.5 559.8 604.7 648.1 702.5 770.7 851.6 931.2 1,029.1 1,148.8 1,277.1 1,428.8 1,593.5 1,760.4 1,941.3 2,076.8 2,283.4 2,492.3 2,704.8 2,892.7 3,094.5 3,349.7 3,594.8 3,839.3 3,975.1 4,219.8 4,459.2 4,717.0 4,957.7 5,207.6 5,488.6 4,127.6 4,183.0 4,238.9 4,329.6 4,365.4 4,428.1 4,488.6 4,554.9 4,616.6 4,680.5 4,750.6 4,820.2 4,871.7 4,934.8 4,990.6 5,033.8 5,105.8 5,189.1 5,227.4 5,308.1 5,405.7 5,432.1 5,527.4 5,589.3 42.7 43.3 41.8 46.9 51.6 56.7 63.3 68.3 70.4 80.8 85.9 85.0 96.9 110.4 123.5 122.3 133.5 158.9 181.1 201.4 213.9 213.5 230.5 239.3 279.8 325.1 361.1 398.7 416.7 451.0 472.8 476.5 455.2 488.5 530.2 579.5 608.5 634.5 659.4 474.1 481.3 492.5 506.2 506.4 524.2 537.2 553.1 563.2 572.4 583.3 599.3 596.9 602.8 616.0 618.4 626.7 638.6 634.5 638.2 658.4 644.5 667.3 667.6 148.5 152.9 156.6 162.8 168.2 178.7 191.6 208.8 217.1 235.7 253.2 272.0 285.5 308.0 343.1 384.5 420.6 458.2 496.9 549.9 624.0 695.5 758.2 786.8 830.3 883.6 927.6 957.2 1,014.0 1,081.1 1,163.8 1,245.3 1,277.6 1,321.8 1,370.7 1,428.4 1,475.8 1,534.7 1,592.7 1,303.1 1,308.4 1,326.3 1,349.5 1,354.4 1,366.3 1,373.9 1,388.0 1,404.4 1,416.0 1,439.5 1,453.7 1,462.7 1,472.4 1,480.4 1,487.8 1,508.1 1,532.3 1,538.3 1,560.1 1,587.4 1,578.9 1,600.8 1,603.9 Nonresidential Services 127.0 136.0 144.3 153.7 163.2 176.1 189.4 204.8 222.0 243.4 265.5 291.1 320.1 352.3 384.9 424.4 475.0 531.8 599.0 677.4 755.6 851.4 952.6 1,050.7 1,173.3 1,283.6 1,416.1 1,536.8 1,663.8 1,817.6 1,958.1 2,117.5 2,242.3 2,409.4 2,558.4 2,709.1 2,873.4 3,038.4 3,236.5 2,350.4 2,393.3 2,420.1 2,473.9 2,504.6 2,537.6 2,577.4 2,613.8 2,649.0 2,692.2 2,727.8 2,767.2 2,812.2 2,859.6 2,894.2 2,927.5 2,970.9 3,018.2 3,054.6 3,109.8 3,159.9 3,208.7 3,259.3 3,317.9 See next page for continuation of table. 280 Total 78.8 78.8 77.9 87.9 93.4 101.7 118.0 130.4 128.0 139.9 155.0 150.2 176.0 205.6 242.9 245.6 225.4 286.6 356.6 430.8 480.9 465.9 556.2 501.1 547.1 715.6 715.1 722.5 747.2 773.9 829.2 799.7 736.2 790.4 876.2 1,007.9 1,038.2 1,116.5 1,237.6 755.2 790.7 799.7 816.1 854.3 857.4 872.8 920.3 963.4 1,017.9 1,007.1 1,043.1 1,050.8 1,024.0 1,028.8 1,049.1 1,060.5 1,105.4 1,149.2 1,151.1 1,193.6 1,242.0 1,250.2 1,264.5 Total 74.6 75.5 75.0 81.8 87.7 96.7 108.3 116.7 117.6 130.8 145.5 148.1 167.5 195.7 225.4 231.5 231.7 269.6 333.5 403.6 464.0 473.5 528.1 515.6 552.0 648.1 688.9 712.9 722.9 763.1 797.5 791.6 738.5 783.4 855.7 946.6 1,008.1 1,090.7 1,173.0 755.4 780.5 788.1 809.7 823.5 842.9 858.8 897.5 911.0 941.7 956.9 977.0 998.7 999.6 1,009.4 1,024.6 1,049.4 1,082.0 1,112.0 1,119.2 1,127.5 1,160.8 1,201.3 1,202.4 Total 46.5 49.2 48.6 52.8 55.6 62.4 74.1 84.4 85.2 92.1 102.9 106.7 111.7 126.1 150.0 165.6 169.0 187.2 223.2 272.0 323.0 350.3 405.4 409.9 399.4 468.3 502.0 494.8 495.4 530.6 566.2 575.9 547.3 557.9 604.1 660.6 723.0 781.4 845.4 544.1 556.8 561.0 569.6 580.5 598.8 606.4 630.6 634.6 652.9 667.4 687.5 710.9 722.5 725.4 733.1 750.7 769.3 798.6 807.2 811.3 836.3 872.0 862.3 Structures 18.1 19.6 19.7 20.8 21.2 23.7 28.3 31.3 31.5 33.6 37.7 40.3 42.7 47.2 55.0 61.2 61.4 65.9 74.6 91.4 114.9 133.9 164.6 175.0 152.7 176.0 193.3 175.8 172.1 181.3 192.3 200.8 181.7 169.2 176.4 184.5 200.6 215.2 230.2 171.6 170.4 167.6 167.1 171.7 175.2 177.8 180.7 175.4 185.2 186.8 190.7 197.7 201.1 202.8 200.7 205.7 210.6 217.7 227.0 227.4 226.8 232.9 233.7 Producers' durable equipment 28.3 29.7 28.9 32.1 34.4 38.7 45.8 53.0 53.7 58.5 65.2 66.4 69.1 78.9 95.1 104.3 107.6 121.2 148.7 180.6 208.1 216.4 240.9 234.9 246.7 292.3 308.7 319.0 323.3 349.3 373.9 375.1 365.6 388.7 427.7 476.1 522.4 566.2 615.2 372.5 386.3 393.4 402.5 408.9 423.6 428.6 449.9 459.3 467.7 480.6 496.8 513.2 521.4 522.6 532.4 545.0 558.7 580.9 580.2 583.9 609.5 639.1 628.5 Residential 28.1 26.3 26.4 29.0 32.1 34.3 34.2 32.3 32.4 38.7 42.6 41.4 55.8 69.7 75.3 66.0 62.7 82.5 110.3 131.6 141.0 123.2 122.6 105.7 152.5 179.8 186.9 218.1 227.6 232.5 231.3 215.7 191.2 225.6 251.6 286.0 285.1 309.2 327.5 211.3 223.7 227.1 240.1 243.0 244.1 252.4 266.8 276.4 288.7 289.5 289.5 287.8 277.1 284.0 291.4 298.8 312.7 313.5 312.0 316.2 324.6 329.3 340.1 Change in business inventories 4.2 3.2 2.9 6.1 5.7 5.0 9.7 13.8 10.5 9.1 9.5 2.2 8.5 9.9 17.5 14.1 -6.3 16.9 23.1 27.2 16.9 -7.6 28.2 -14.5 -4.9 67.5 26.2 9.6 24.2 10.9 31.7 8.0 -2.3 7.0 20.5 61.2 30.1 25.9 64.6 -.2 10.2 11.6 6.5 30.7 14.5 14.0 22.9 52.4 76.3 50.2 66.2 52.1 24.5 19.4 24.5 11.1 23.4 37.1 31.9 66.1 81.1 48.9 62.1 TABLE B-l.—Gross domestic product, 1959-97—Continued [Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates] Net exports of goods and services Government consumption expenditures and gross investment Net exports Exports Imports National defense Federal Year or quarter Total Total Nondefense 67.2 55.7 11.5 22.3 112.0 20.6 10.8 65.6 54.9 22.8 113.2 25.3 11.4 22.7 120.9 69.1 57.7 26.0 14.2 27.4 76.5 62.3 25.0 131.4 15.9 29.4 78.1 62.2 26.1 137.7 ZZ: 79.4 18.1 61.3 28.1 144.4 33.6 19.7 81.8 62.0 31.5 153.0 35.4 94.1 20.7 73.4 37.1 173.6 38.9 21.0 41.4 85.5 39.9 194.6 106.6 92.0 21.8 46.6 212.1 113.8 45.3 23.4 92.4 50.5 223.8 115.8 49.3 25.3 57.0 90.6 55.8 236.1 115.9 88.7 28.3 62.3 249.9 117.1 59.3 31.9 93.2 74.2 268.9 125.1 66.2 94.7 33.5 91.2 287.6 128.2 91.8 38.0 -3'.1 124.3 127.5 323.2 139.9 101.9 122.7 362.6 154.5 110.9 43.6 13.6 136.3 '... -2.3 148.9 46.6 151.1 385.9 162.7 116.1 182.4 416.9 178.4 125.8 52.6 -23.7 158.8 58.9 212.3 457.9 194.4 135.6 -26.1 186.1 63.8 252.7 507.1 215.0 151.2 -24.0 228.7 74.2 293.8 572.8 248.4 174.2 -14.9 278.9 82.2 317.8 633.4 284.1 202.0 -15.0 302.8 82.3 303.2 684.8 313.2 230.9 -20.5 282.6 89.4 -51.7 277.0 328.6 735.7 344.5 255.0 89.9 405.1 796.6 372.6 282.7 -102.0 303.1 97.7 417.2 875.0 410.1 312.4 " -114.2 303.0 -131.5 320.7 452.2 938.5 435.2 332.4 102.9 507.9 992.8 455.7 350.4 105.3 -142.1 365.7 553.2 1,032.0 457.3 354.0 103.3 -106.1 447.2 589.7 1,095.1 477.2 360.6 116.7 -80.4 509.3 628.6 1,176.1 503.6 373.1 130.4 -71.3 557.3 622.3 1,225.9 522.6 383.5 139.1 -20.5 601.8 -29.5 639.4 1992 669.0 1,263.8 528.0 375.8 152.2 -60.7 658.6 1993 719.3 1,283.4 518.3 360.7 157.7 1994 -90.9 721.2 812.1 1,313.0 510.2 349.2 161.0 -86.0 818.4 1995 904.5 1,355.5 509.6 344.6 165.0 965.7 1,406.7 520.0 352.8 167.3 -94.8 870.9 1996 1997* -96.7 958.8 1,055.5 1,453.9 524.8 350.8 174.0 1992:1 641.3 1,247.9 521.8 372.8 149.0 -8.9 632.4 II -29.0 635.9 664.9 1,256.4 523.2 374.1 149.1 Ill -37.6 640.2 677.8 1,270.7 532.0 380.9 151.1 -42.7 649.1 IV 691.8 1,280.0 535.0 375.3 159.7 693.7 1,271.5 521.3 363.6 157.7 1993:1 -46.6 647.1 II 718.7 1,281.2 517.8 361.7 156.1 -57.5 661.2 Ill -72.1 646.8 718.9 1,285.3 515.7 358.0 157.7 -66.6 679.4 IV 746.0 1,295.5 518.5 359.4 159.1 1994:1 -76.6 678.5 755.1 1,291.0 506.9 344.9 162.0 II 797.9 1,300.8 505.3 348.5 156.8 -87.9 710.1 Ill -103.4 732.6 836.0 1,332.3 520.4 359.7 160.7 -95.6 763.7 IV 859.2 1,328.0 508.3 343.6 164.7 -98.3 784.5 1995:1 882.8 1,344.7 513.6 346.3 167.3 IJ -105.4 807.7 913.1 1,356.0 511.2 348.1 163.0 -80.4 831.6 Ill 912.0 1,362.2 512.9 347.3 165.5 IV -60.1 849.9 909.9 1,359.2 500.6 336.5 164.1 -83.0 850.2 1996:1 933.2 1,384.2 516.4 348.4 168.0 II 958.7 1,407.0 524.6 357.3 167.3 -93.8 865.0 Ill -114.0 836.7 977.6 1,413.5 521.6 354.8 166.8 993.2 1,422.3 517.6 350.6 167.0 -88.6 904.6 IV 1997:1 -98.8 922.2 1,021.0 1,433.1 516.1 343.3 172.8 -88.7 960.3 1,049.0 1,449.0 526.1 350.6 175.5 II Ill -111.3 965.8 1,077.1 1,457.9 525.7 352.1 173.6 IV/> -87.9 986.9 1,074.8 1,475.6 531.1 357.1 174.0 1 Gross domestic product (GOP) less exports of goods and services plus imports of 2 GDP plus net receipts of factor income from rest of the world. Source: Department of Commerce, Bureau of Economic Analysis. 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 -1.7 2.4 3.4 2.4 3.3 5.5 3.9 1.9 1.4 -1.3 -1.2 1.2 -3.0 -8.0 ;.; 281 State and local Percent change from preceding Final period Gross Addendum: sales of domes- Gross domesGross Gross tic national purtic domes- domestic tic product chases l product ^ purproduct chases l 508.9 44.8 503.0 524.1 47.6 523.3 541.5 51.8 541.9 55.0 579.1 582.8 614.1 611.7 59.6 657.6 65.0 658.0 709.4 715.3 71.2 79.5 774.0 785.9 823.1 832.2 88.1 901.4 911.8 98.3 983.4 972.7 108.0 120.2 1,033.4 1,034.4 132.8 1,116.9 1,128.4 143.8 1,227.4 1,245.3 159.4 1,365.2 1,382.0 183.3 1,482.8 1,500.0 208.1 1,636.9 1,617.1 223.1 1,802.0 1,821.2 238.5 2,003.8 2,050.5 263.4 2,264.2 2,317.5 292.0 2,540.6 2,581.5 324.4 2,791.9 2,799.1 349.2 3,087.8 3,130.9 371.6 3,256.6 3,262.6 391.2 3,519.4 3,566.2 424.0 3,835.0 4,004.5 464.9 4,154.5 4,294.9 503.3 4,412.6 4,553.7 537.2 4,668.1 4,834.5 574.7 5,038.7 5,155.6 617.9 5,407.0 5,519.1 672.6 5,735.8 5,815.1 703.4 5,919.0 5,937.2 735.8 6,237.4 6,274.0 765.0 6,537.6 6,618.8 802.8 6,885.7 7,037.9 846.0 7,235.3 7,351.4 886.7 7,610.2 7,730.9 929.1 8,018.8 8,180.1 726.1 6,122.1 6,130.8 733.2 6,191.0 6,230.2 738.7 6,260.1 6,309.2 745.1 6,376.6 6,425.8 750.1 6,413.8 6,491.1 763.4 6,494.7 6,566.7 769.6 6,560.6 6,646.7 777.0 6,681.3 6,770.8 784.1 6,741.9 6,870.9 795.5 6,835.1 6,999.2 811.9 6,936.3 7,090.0 819.6 7,029.6 7,191.3 831.1 7,116.8 7,267.2 844.8 7,185.0 7,314.8 849.3 7,281.8 7,381.7 858.6 7,357.4 7,442.0 867.8 7,456.4 7,550.5 882.4 7,584.3 7,701.5 891.9 7,638.9 7,790.0 904.7 7,761.0 7,881.5 917.0 7,867.4 8,032.4 923.0 7,953.2 8,123.1 932.3 8,075.3 8,235.6 944.4 8,179.3 8,329.4 goods and services. 510.1 529.8 548.4 589.4 621.9 668.0 724.5 793.0 839.1 916.7 988.4 1,042.0 1,133.1 1,246.0 1,395.4 1,512.6 1,643.9 1,836.1 2,047.5 2,313.5 2,590.4 2,819.5 3,150.6 3,273.2 3,546.5 3,933.5 4,201.0 4,435.1 4,701.3 5,062.6 5,452.8 5,764.9 5,932.4 6,255.5 6,576.8 6,955.2 7,270.6 7,637.7 6,138.3 6.212.2 6,281.1 6,390.5 6,468.1 6,525.3 6,596.9 6,717.1 6,811.2 6,920.3 6,992.3 7,096.8 7,175.1 7,220.6 7,298.3 7,388.5 7,475.3 7,610.5 7,669.1 7,796.1 7,919.2 8,013.6 8,103.5 8.5 3.8 3.5 7.4 5.5 7.4 8.5 9.5 5.8 9.2 7.9 5.4 8.7 9.9 11.7 8.3 8.9 11.5 11.4 13.0 11.6 8.9 11.9 4.1 8.4 11.0 7.1 5.8 6.1 7.6 7.7 5.6 3.0 5.5 5.0 5.9 4.6 5.1 5.9 8.2 5.3 4.6 7.3 3.9 4.1 4.1 8.1 5.5 7.1 4.4 6.4 4.2 2.3 5.2 4.5 4.7 7.7 3.6 6.2 7.4 5.2 4.6 5.9 9.0 3.0 3.3 7.6 5.4 7.1 8.8 9.9 5.9 9.6 7.8 5.2 9.1 10.4 11.0 8.5 7.8 12.6 12.6 13.0 11.4 8.4 11.9 4.2 9.3 12.3 7.3 6.0 6.2 6.6 7.0 5.4 2.1 5.7 5.5 6.3 4.5 5.2 5.8 7.8 6.6 5.2 7.6 4.1 4.7 5.0 7.7 6.0 7.7 5.3 5.8 4.3 2.6 3.7 3.3 6.0 8.2 4.7 4.8 7.9 4.6 5.7 4.6 TABLE B-2.—Real gnus domestic product, 1959-97 [Billions ef chained (1992) dollars, except as noted; quarterly data at seasonally adjusted annual rates} Personal consumption expenditures Year or quarter 1959 I960 1961 1962 1963 Z! "Ill 1964 1965 1966 1967 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 .! 1996 . . 1997* 1968 .: :.: 1992:1 II III IV 1993:1 || Ill IV 1994- 1 II Ill IV 1995- 1 II Ill IV 1996:1 || III IV 1997:1 || III IV" Gross domestic product 2,210.2 2,262.9 2,314.3 2,454.8 2,559.4 2,708.4 2,881.1 3,069.2 3,147.2 3,293.9 3,393.6 3,397.6 3,510.0 3,702.3 3,916.3 3,891.2 3,873.9 4,082.9 4,273.6 4,503.0 4,630.6 4,615.0 4,720.7 4,620.3 4,803.7 5,140.1 5,323.5 5,487.7 5,649.5 5,865.2 6,062.0 6,136.3 6.079.4 6,244.4 6,389.6 6,610J 6,742.1 6,928.4 7,191.4 6,175.7 6,214.2 6,260.7 6,327.1 6,327.9 6,359.9 6,393.5 6,476.9 6,524.5 6,600.3 6,629.5 6,688.6 6,703.7 6,708.8 6,759.2 6,796.5 6,826.4 6,926.0 6,943.8 7,017.4 7,101.6 7,159.6 7,214.0 7,290.3 Total Durable goods 1,394.6 1,432.6 1,461.5 1,533.8 1,596.6 1,692.3 1,799.1 1,902.0 1,958.6 2,070.2 2,147.5 2,197.8 2,279.5 2,415.9 2,532.6 2,514.7 2,570.0 2,714.3 2,829.8 2,951.6 3,020.2 3,009.7 3,046.4 3,081.5 3,240.6 3,407.6 3,566.5 3,708.7 3,822.3 3,972.7 4,064.6 4,132.2 4,105.8 4,219.8 4,343.6 4,486.0 4,595.3 4,714.1 4,869.7 4,173.8 4,196.4 4,226.7 4,282.3 4,286.8 4,322.8 4,366.6 4,398.0 4,439.4 4,472.2 4,498.2 4,534.1 4,551.3 4,583.5 4,612.9 4,633.5 4,669.4 4,712.2 4,718.2 4,756.4 4,818.1 4,829.4 4,896.2 4,935.0 285.5 327.4 374.9 411.4 448.4 454.9 483.5 496.2 493.3 462.0 488.5 523.8 561.2 583.6 611.1 645.8 476.1 481.1 491.9 505.0 504.0 519.3 529.9 542.1 550.7 555.8 561.7 576.6 572.2 577.7 590.8 593.7 600.7 614.8 611.9 617.1 637.8 629.0 656.1 660.3 Gross private domestic investment Fixed investment Nondurable Services goods 1,080.6 1,112.4 1,151.8 1,178.3 1,215.9 1,239.3 1,274.4 1,303.5 1,316.1 1,302.9 1,321.8 1,351.0 1,389.9 1,412.6 1,432.3 1,459.3 1,314.4 1,312.0 1,321.1 1,339.8 1,337.5 1,347.8 1,356.8 1,361.8 1,378.4 1,385.5 1,393.2 1,402.5 1,408.4 1,411.6 1,413.9 1,416.3 1,422.5 1,431.6 1,433.9 1,441.2 1,457.8 1,450.0 1,465.5 1,464.1 1,728.2 1,809.0 1,883.0 1,977.3 2,041.4 2,126.9 2,212.4 2,262.3 2,321.3 2,341.0 2,409.4 2,468.9 2,535.5 2,599.6 2,671.0 2,765.2 2,383.2 2,403.2 2,413.6 2,437.6 2,445.3 2,455.9 2,480.0 2,494.4 2,510.9 2,531.4 2,543.8 2,555.9 2,571.2 2,594.5 2,608.7 2,623.8 2,646.5 2,666.5 2,672.8 2,698.2 2,723.9 2,749.8 2,776.1 2,811.0 Nonresktential Total 271.7 270.5 267.6 302.1 321.6 348.3 397.2 430.6 411.8 433.3 458.3 426.1 4749 531.8 595.5 546.5 446.6 537.4 622.1 693.4 7097 628.3 686.0 587.2 642.1 833.4 823.8 811.8 821.5 828.2 863.5 815.0 738.1 790.4 863.6 975.7 991.5 1,069.1 1,192.2 758.2 792.8 798.5 812.2 845.5 846.1 858.6 904.0 939.9 987.8 972.2 1,003.0 1,005.8 977.5 982.0 1,000.8 1,012.2 1,059.2 1,100.3 1,104.8 1,149.2 1,197.1 1,204.6 1,217.9 See next page for continuation of table. 282 Total 610.4 654.2 762.4 799.3 805.0 799.4 818.3 832.0 805.8 741.3 783.4 842.8 915.5 962.1 1,041.7 1,122.3 758.3 782.4 787.3 805.8 814.8 831.1 844.5 880.8 887.8 913.2 922.7 938.5 955.8 954.0 962.3 976.3 1,001.5 1,035.7 1,060.9 1,068.7 1,079.0 1,111.4 1,149.3 1,149.6 Total 464.3 456.4 535.4 568.4 548.5 542.4 566.0 588.8 585.2 547.7 557.9 600.2 648.4 706.5 771.7 846.7 544.4 557.5 560.6 569.1 577.8 595.1 602.3 625.6 626.2 641.2 653.2 672.9 695.7 705.4 708.2 716.8 736.9 759.7 789.3 800.8 808.9 837.0 874.5 866.5 Structures 207.2 185.7 212.2 227.8 203.3 195.9 196.8 201.2 203.3 181.6 169.2 170.8 172.5 179.9 188.7 195.4 172.7 171.0 167.4 165.6 168.0 170.3 171.7 173.1 166.3 174.5 174.0 175.0 179.0 180.9 181.2 178.6 182.1 185.6 190.0 196.9 195.9 193.5 196.7 195.3 Producers' Residurable dential equipment 260.3 272.4 324.6 342.4 345.9 346.9 369.2 387.6 381.9 366.2 388.7 429.6 476.8 528.3 586.0 657.4 371.7 386.4 393.1 403.5 409.8 424.9 430.7 452.9 460.6 467.3 480.0 499.1 518.1 525.9 528.5 540.5 557.4 577.1 602.9 606.7 616.6 649.3 685.3 678.5 140.1 197.6 226.4 229.5 257.0 257.6 252.5 243.2 220.6 193.4 225.6 242.6 267.0 257.0 272.1 279.7 213.9 224.9 226.7 236.7 237.0 236.1 242.2 255.1 261.3 271.5 269.4 265.9 261.2 250.4 255.5 260.8 266.1 277.2 274.1 271.1 273.3 278.2 280.1 287.1 •P business inventories 13.2 10.5 8.6 19.5 17.8 15.6 30.3 42.4 32.0 26.9 27.0 5.4 22.3 24.7 37.7 23.4 -10.2 29.8 38.8 43.3 23.4 -10.2 33.1 -15.6 -5.7 75.3 30.2 11.1 26.4 11.7 33.3 10.4 -3.0 7.0 22.1 60.6 27.3 25.0 62.2 1LO 12.0 5.6 32.3 16.6 15.3 24.2 53.1 75.9 49.7 63.6 48.5 21.6 17.0 22.2 8.0 21.3 37.9 32.9 63.7 77.6 47.5 59.9 TABLE B-2.—Real gross domestic product, 1959-97—Continued [Billions of chained (1992) dollars, except as noted; quarterly data at seasonally adjusted annual rates] Net exports of goods and services Year or quarter Government consumption expenditures and gross investment Federal Net exports Exports Imports Total Total National defense Nondefense Gross Final sales of domesdomestic State pur- ] tic and product chases local 2,206.9 2,268.0 71.9 106.6 618.5 86.8 108.1 617.2 2,264.2 2.304.1 2,318.0 2,354.3 88.3 107.3 647.2 2,445.4 2,503.0 93.0 119.5 686.0 2,552.4 2,604.2 100.0 122.7 701.9 2,705.1 2,745.9 113.3 129.2 715.9 2,860.4 2,932.1 115.6 143.0 737.6 123.4 164.2 804.6 3,033.5 3,134.0 126.1 176.2 865.6 3,125.1 3,221.1 3,278.0 3,382.7 135.3 202.5 892.4 142.7 214.0 887.5 3,377.2 3,485.6 3,406.5 3,478.5 158.1 223.1 866.8 3,499.8 3,602.4 159.2 235.0 851.0 3,689.5 3,806.2 172.0 261.0 854.1 3,883.9 3,989.3 209.6 272.6 848.4 3,873.4 3,928.6 229.8 265.3 862.9 3,906.4 3,875.9 228.2 235.4 876.3 4,061.7 4,124.6 241.6 281.5 876.8 247.4 311.6 884.7 4,240.8 4,345.7 4,464.4 4,574.9 273.1 338.6 910.6 4,614.4 4,674.6 299.0 344.3 924.9 331.4 321.3 941.4 4,641.9 4,581.5 4,691.6 4,693.1 335.3 329.7 947.7 -14.1 311.4 325.5 960.1 429.4 316.5 113.3 531.4 4,651.2 4,619.3 334.6 118.5 534.9 4,821.2 4,864.3 -63.3 303.3 366.6 987.3 452.7 348.1 115.9 555.0 5,061.6 5,276.2 -127.3 328.4 455.7 1,018.4 463.7 374.1 121.8 584.7 5,296.9 5,482.8 -147.9 337.3 485.2 1,080.1 495.6 393.4 125.2 616.9 5,480.9 5,663.9 -163.9 362.2 526.1 1,135.0 518.4 409.2 125.3 631.8 5,626.0 5,816.7 -156.2 402.0 558.2 1,165.9 534.4 -114.4 465.8 580.2 1,180.9 524.6 405.5 119.1 656.6 5,855.1 5,986.1 -82.7 520.2 603.0 1,213.9 531.5 401.6 130.1 682.6 6,028.7 6,147.8 401.5 140.5 708.6 6,126.7 6,199.8 -61.9 564.4 626.3 1,250.4 541.9 397.5 142.0 718.7 6,082.6 6,101.6 -22.3 599.9 622.2 1,258.0 539.4 375.8 152.2 735.8 6,237.4 6,274.0 -29.5 639.4 669.0 1,263.8 528.0 354.4 151.2 746.4 6,368.9 6,459.0 -70.2 658.2 728.4 1,252.1 505.7 336.9 149.5 765.7 6,551.2 6,712.7 -104.6 712.4 817.0 1,252.3 486.6 322.6 147.5 781.6 6,712.7 6,837.5 -98.8 791.2 890.1 1,251.9 470.3 317.8 146.1 793.7 6,901.0 7,037.7 . .. -114.4 857.0 971.5 1,257.9 464.2 309.0 148.3 812.9 7,124.2 7,323.4 -142.1 964.4 1,106.5 1,270.6 457.8 374.2 150.8 733.5 6,175.8 6,190.3 -14.8 633.0 647.8 1,258.5 525.1 1992:1 373.3 150.0 734.2 6,203.8 6,246.9 II -32.5 635.8 668.3 1,257.5 523.3 Ill 378.7 150.9 736.9 6,249.5 6,291.7 -30.8 639.7 670.5 1,266.5 529.6 376.8 157.1 738.5 6,320.7 6,367.0 -40.0 649.1 689.1 1,272.5 534.0 IV 359.2 152.9 738.0 6,297.3 6,382.3 1993-1 -54.7 647.2 701.9 1,250.1 512.1 II 356.7 151.1 745.3 6,344.9 6,422.0 660.1 722.7 1,253.1 507.8 -62.6 Ill 351.1 150.3 749.1 6,379.3 6,475.6 -83.1 646.3 729.4 1,250.5 501.5 IV 350.8 150.4 753.4 6,453.8 6,556.2 -S0.5 679.1 759.7 1,254.7 501.3 1994:1 335.1 151.9 754.7 6,473.0 6,620.2 676.0 773.6 1,241.9 487.2 -97.6 II 335.9 145.1 762.2 6,526.7 6,701.8 -103.9 704.1 808.0 1,243.3 481.2 Ill -111.1 722.1 833.2 1,268.1 496.4 347.0 149.4 771.7 6,580.4 6,737.5 IV 329.6 151.7 774.1 6,624.8 6,791.3 -105.9 747.3 853.2 1,255.8 481.7 328.7 151.4 777.3 6,654.3 6,813.2 -113.5 760.4 873.9 1,257.7 480.4 1995:1 II 327.4 147.3 782.3 6,685.3 6,817.3 -112.8 777.4 890.3 1,257.3 474.9 III 324.0 149.1 781.5 6,739.3 6,848.9 -92.9 802.4 895.4 1,255.0 473.4 IV 310.3 142.1 785.1 6,771.9 6,870.4 -76.1 824.6 900.7 1,237.7 452.6 1996:1 314.9 145.7 782.4 6,815.0 6,923.2 -100.8 828.2 929.0 1,243.2 460.9 || 323.2 147.2 794.4 6,902.3 7,033.6 -112.6 847.4 960.0 1,265.1 470.7 319.4 146.0 795.9 6,905.0 7,075.3 III -138.9 851.4 990.2 1,261.5 465.7 IV 313.6 145.7 802.3 6,981.7 7,118.4 -105.6 901.1 1,006.6 1,261.8 459.6 1997-1 303.9 148.5 807.7 7,034.1 7,220.9 -126.3 922.7 1,048.9 1,260.5 452.8 II 309.4 150.2 810.1 7,077.7 7,286.9 -136.6 962.5 1,099.1 1,270.1 460.1 Ill -164.1 973.0 1,137.1 1,273.4 458.8 310.3 148.0 814.7 7,160.3 7,364.6 IV*> -141.4 999.3 1,140.8 1,278.5 459.5 312.6 146.6 819.0 7,224.6 7,421.2 1 Gross domestic product (GDP) less exports of goods and services plus imports of goods and services. 2 GOP plus net receipts of factor income from rest of the world. Source: Department of Commerce, Bureau of Economic Analysis. 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 283 Addendum: Gross national product 2 2,222.0 2,276.0 2,329.1 2,471.5 2,577.3 2,727.8 2,901.4 3,087.8 3,166.4 3,314.5 3,413.3 3,417.1 3,532.1 3,726.3 3,950.1 3,930.2 3,903.3 4,118.8 4,314.5 4,543.7 4,687.4 4,670.8 4,769.9 4,662.0 4,844.8 5,178.0 5,346.7 5,501.2 5,658.2 5,878.5 6,075.7 6,157.0 6,094.9 6,255.5 6,408.0 6,619.1 6,748.7 6,932.0 6,192.0 6,225.2 6,270.3 6,334.6 6,351.3 6,375.9 6,415.3 6,489.7 6,540.5 6,609.3 6,635.6 6,691.2 6,711.3 6,721.0 6,758.3 6,804.2 6,834.7 6,930.1 6,940.2 7,023.1 7,091.8 7,144.4 7,198.8 Percent change from preceding period Gross Gross domes- domestic tic prod- puruct chases * 7.4 2.4 2.3 6.1 4.3 5.8 6.4 6.5 2.5 4.7 3.0 7.8 1.6 2.2 6.3 4.0 5.4 6.8 6.9 2.8 5.0 3.0 3i3 5.5 5.8 -.6 -.4 5.4 4.7 5.4 2.8 -.3 2.3 -2.1 4.0 7.0 3.6 3.1 2.9 3.8 3.4 1.2 -.9 2.7 2.3 3.5 2.0 2.8 3.8 4.7 2.5 3.0 4.3 16 5.7 4.8 -1.5 -1.3 6.4 5.4 5.3 2.2 -2.0 2.4 -1.6 5.3 8.5 3.9 3.3 2.7 2.9 2.7 .8 -1.6 2.8 2.9 3.9 1.9 2.9 4.1 4.5 3.7 2.9 4.9 1.0 2.5 3.4 5.1 4.0 5.0 2.1 3.2 1.3 2!o 2.1 5.3 3.0 4.7 1.8 3.6 .9 .3 3.0 2.2 1.8 6.0 1.0 4.3 4.9 3.3 3.1 4.3 L9 1.3 3.1 6.5 2.4 2.5 5.9 3.7 4.3 3.1 TABLE B-3.—Quantity and price indexes for gross domestic product, and percent changes, 1959—97 [Quarterly data are seasonally adjusted] Gross domestic product (GDP) Percent change from preceding period l Index numbers, 1992=100 Year or quarter GDP (current dollars) Real GDP GDP (chain-type chain-type quantity price index index) 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997p 1992-1 H Ill IV 1993- 1 II III IV 1994- t || Ill IV 1995-1 || III IV 1996:1 || HI IV 1997-1 II Ill IY/» GDP implicit price deflator GDP (current dollars) 22.95 22.95 8.12 35.39 23.27 36.24 23.27 8.43 23.54 23.54 8.72 37.06 23.84 23.84 9.37 39.31 24.12 40.99 24.12 9.89 43.37 24.48 24.48 10.62 46.14 24.95 24.96 11.52 25.67 49.15 25.66 12.62 26.49 50.40 26.48 13.35 27.64 52.75 27.64 14.58 28.94 28.94 54.35 15.73 54.41 30.48 30.48 16.58 32.06 18.02 56.21 32.05 33.42 59.29 33.42 19.81 22.14 62.72 35.30 35.30 38.47 23.97 62.32 38.46 62.04 42.09 26.11 42.09 65.38 44.55 44.55 29.13 68.44 47.42 47.43 32.46 50.88 50.89 36.69 72.11 55.23 40.96 74.16 55.22 60.34 60.33 44.59 73.91 66.01 75.60 66.01 49.90 70.17 73.99 70.18 51.92 73.16 56.28 76.93 73.16 82.32 75.92 75.92 62.49 85.25 78.53 78.53 66.95 70.82 87.88 80.58 80.58 75.14 90.47 83.06 83.06 80.87 93.93 86.10 86.09 89.72 89.72 87.10 97.08 98.27 93.64 93.60 91.98 97.32 94.75 97.36 97.32 100.00 100.00 100.00 100.00 102.64 102.64 102.32 105.02 105.87 105.09 105.09 111.25 107.97 107.76 116.35 107.76 110.21 110.22 122.29 110.95 115.17 112.46 112.40 129.45 98.04 99.14 99.13 98.90 99.79 99.31 99.52 99.81 100.17 100.17 100.44 100.26 100.88 102.22 101.32 100.88 101.84 101.34 103.20 101.85 102.35 104.24 101.85 102.38 102.83 102.39 102.83 105.29 103.72 103.52 103.51 107.36 104.13 108.81 104.16 104.49 104.74 104.71 105.70 110.68 106.17 105.39 111.88 105.39 106.07 106.09 107.11 113.63 106.94 106.93 114.80 107.36 107.44 107.49 107.46 115.45 108.24 108.02 116.92 108.03 108.61 108.84 108.60 118.22 109.39 109.32 119.59 109.35 109.84 110.92 121.83 109.86 110.54 111.20 122.93 110.59 112.38 111.10 111.05 124.80 111.71 127.05 113.73 111.78 112.27 114.66 112.22 128.66 112.62 112.67 130.10 115.53 113.10 113.05 131.98 116.75 1 Percent changes based on unrounded data. Quarterly percent changes are at annual rates. Source: Department of Commerce, Bureau of Economic Analysis. 284 8.5 3.8 3.5 7.4 5.5 7.4 8.5 9.5 5.8 9.2 7.9 5.4 8.7 9.9 11.7 8.3 8.9 11.5 11.4 13.0 11.6 8.9 11.9 4.1 8.4 11.0 7.1 5.8 6.1 7.6 7.7 5.6 3.0 5.5 5.0 5.9 4.6 5.1 5.9 8.2 5.3 4.6 7.3 3.9 4.1 4.1 8.1 5.5 7.1 4.4 6.4 4.2 2.3 5.2 4.5 4.7 7.7 3.6 6.2 7.4 5.2 4.6 5.9 Real GDP GDP (chain-type chain-type quantity price index index) 7.4 2.4 2.3 6.1 4.3 5.8 6.4 6.5 2.5 4.7 3.0 3i3 5.5 5.8 -.6 ?4 4.7 5.4 2.8 -.3 2.3 -2.1 4.0 7.0 3.6 3.1 2.9 3.8 3.4 1.2 -.9 2.7 2.3 3.5 2.0 2.8 3.8 4.7 2.5 3.0 4.3 2iO 2.1 5.3 3.0 4.7 1.8 3.6 .9 3^0 2.2 1.8 6.0 1.0 4.3 4.9 3.3 3.1 4.3 1.0 1.4 1.2 1.3 1.2 1.5 1.9 2.8 3.2 4.4 4.7 5.3 5.2 4.2 5.6 8.9 9.4 5.8 6.5 7.3 8.5 9.3 9.4 6.3 4.3 3.8 3.4 2.6 3.1 3.7 4.2 4.4 3.9 2.8 2.6 2.4 2.5 2.3 2.0 3.4 2.8 1.4 2.8 3.9 2.1 1.8 2.7 2.5 2.2 2.5 2.6 3.3 2.1 2.0 2.1 2.8 1.9 2.7 1.9 2.4 1.8 1.4 1.5 GDP implicit price deflator 1.0 1.4 1.2 1.3 1.2 1.5 2.0 2.8 3.2 4.4 4.7 5.3 5.2 4.2 5.6 9.0 9.4 5.8 6.5 7.3 8.5 9.2 9.4 6.3 4.3 3.8 3.4 2.6 3.1 3.7 4.2 4.3 4.0 2.8 2.6 2.4 2.5 2.3 2.0 3.4 2.7 1.5 2.9 3.9 2.0 1.9 2.7 2.4 2.2 2.6 2.7 3.3 2.0 2.1 2.2 2.9 1.7 2.6 1.9 2.4 1.8 1.4 1.5 TABLE B-4.—Percent changes in real gross domestic product, 7939-97 [Percent change from preceding period; quarterly data at seasonally adjusted annual rates] Personal consumption expenditures Year or quarter 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 .. . 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/> 1992-1 II Ill IV 1993-1 II Ill IV 1994:1 || III IV 1995:1 II Ill IV 1996:1 II Ill IV 1997:1 II Ill IV" Gross domestic product 7.4 2.4 2.3 6.1 4.3 5.8 6.4 6.5 2.5 4.7 3.0 3^ 5.5 5.8 -.6 -.4 5.4 4.7 5.4 2.8 2^3 -2.1 4.0 7.0 3.6 3.1 2.9 3.8 3.4 1.2 -.9 2.7 2.3 3.5 2.0 2.8 3.8 4.7 2.5 3.0 4.3 2.0 2.1 5.3 3.0 4.7 1.8 3.6 .9 3!0 2.2 1.8 6.0 1.0 4.3 4.9 3.3 3.1 4.3 Exports and im- Government consumpports of goods tion expenditures and and services gross investment Gross private domestic investment Nonresidential fixed Total Durable goods Nondurable goods 13.4 2.0 -3.8 11.7 9.7 9.2 12.7 8.5 1.6 11.0 3.6 -3.2 10.0 12.7 10.3 -6.9 .0 12.8 9.3 5.3 -.5 -8.0 1.2 -.1 14.7 14.5 9.7 9.0 1.5 6.3 2.6 -.6 -6.4 5.8 7.2 7.1 4.0 4.7 5.7 13.3 4.3 9.3 11.0 -.7 12.6 8.4 9.6 6.4 3.8 4.3 11.0 -3.0 3.9 9.3 2.0 4.8 9.7 -1.9 3.5 14.1 -5.4 18.4 2.6 4.1 1.5 1.8 3.1 2.1 4.9 5.3 5.5 1.6 4.5 2.7 2.4 1.8 4.4 3.3 -2.0 1.5 5.0 2.6 3.5 2.3 -.4 .9 .6 2.9 3.5 2.3 3.2 1.9 2.8 2.3 1.0 -1.0 1.5 2.2 2.9 1.6 1.4 1.9 5.9 5.7 2.7 2.0 4.9 4.1 6.0 6.3 5.7 3.0 5.7 3.7 2.3 3.7 6.0 4.8 2'.2 5.6 4.3 4.3 2.3 L2 1.2 5.2 5.2 4.7 4.0 3.1 3.9 2.3 1.7 -.6 2.8 2.9 3.3 2.4 2.6 3.3 6.4 2.2 2.9 5.4 .4 3.4 4.1 2.9 3.8 3.0 2.3 3.2 1.5 2.9 2.6 1.8 3.1 3.7 .5 3.3 5.3 .9 5.6 3.2 2i8 5.8 -.7 3.1 2.7 1.5 5.0 2.1 2.2 2.7 1.7 .9 .7 1.7 2.6 .6 2.1 4.7 -2.1 4.3 -.4 Services Total Structures 5.2 8.3 2.4 4.4 5.6 7.9 4.1 1.4 -.9 8.7 4.9 4.5 5.0 4.5 1.1 10.4 6.1 11.8 5.3 17.3 15.9 5.1 12.1 6.8 4.8 -1.6 -2.5 1.4 5.2 4.3 7.2 5.4 4.8 4.0 -1.0 .3 -.1 -1.6 3.7 5.4 9.0 3.1 4.5 14.6 8.2 2.4 -2.1 3.5 -10^5 -10.5 4.2 4.8 2.5 4.2 11.8 4.9 4.7 13.7 10.9 3.2 9.6 12.6 6.7 1.9 1.5 ?3 7.9 1.9 -4.4 -1.5 4.7 -1.7 -10.4 4.1 17.3 14.3 5.0 6.2 7.3 3.2 -3.5 -10.8 4.2 -1.1 -3.6 4.4 4.0 2.3 4.0 2^2 2.6 -.6 1.1 .8 -6.4 -10.7 2.9 1.9 -6.8 2.5 7.6 1.0 2.7 8.0 1.0 9.0 2.5 4.3 2.7 9.2 4.8 9.7 3.5 3.6 5.4 3.6 2.9 3.4 10.0 -3.9 1.7 2.2 -8.1 6.2 -4.3 4.0 1.3 6.2 6.0 1.7 12.5 5.5 4.0 4.9 3.4 2.3 16.4 3.3 .4 -14.8 2.7 9.9 21.1 3.3 7.7 -1.1 2.0 1.9 12.6 2.3 2.4 14.2 9.5 3.7 5.7 4.3 .7 2.2 1.6 4.9 -5.8 2.3 3.5 11.7 8.2 3.1 13.0 7.9 1.0 16.5 10.0 5.9 15.3 3.9 4.1 -2.1 3.9 14.6 -4.7 3.9 3.9 19.2 6.7 5.1 -3.6 -2.7 Note.—Percent changes based on unrounded data. Source: Department of Commerce, Bureau of Economic Analysis. 285 Producers' Residura- dential ble equipment 12.4 4.1 -2.4 11.6 7.6 12.6 18.2 15.5 -1.0 6.1 8.3 -1.8 .8 12.7 18.5 2.1 -10.5 6.1 15.6 15.1 8.1 -4.4 3.7 -6.4 4.6 19.2 5.5 1.0 .3 6.4 5.0 -1.5 -4.1 6.2 10.5 11.0 10.8 10.9 12.2 3.9 16.9 7.1 11.0 6.4 15.6 5.5 22.3 7.0 5.9 11.4 16.9 16.1 6.2 2.0 9.4 13.1 14.9 19.1 2.6 6.7 23.0 24.1 -3.9 25.5 -7.1 9^6 11.8 5.8 -2.9 -«.9 -3.1 13.6 3.0 -6.0 27.4 17.8 -.6 -20.6 -13.0 23.6 21.2 6.6 -3.7 -21.1 -8.0 -18.2 41.1 14.6 1.4 12.0 -2^0 -3.7 -9.3 -12.3 16.6 7.6 10.1 -3.8 5.9 2.8 24.7 22.2 3.3 18.7 .6 -1.6 10.8 23.1 10.0 16.6 -3.1 -5.0 -7.0 -15.5 8.4 8.5 8.3 17.9 -4.5 -4.3 3.3 7.4 2.7 10.4 Exports Imports 0.9 10.5 1.3 20.8 1.7 5.4 in 2.7 7.5 13.3 5.3 2.0 10.6 6.7 14.9 2.2 7.3 7.3 14.9 5.7 5.5 10.8 4.3 .7 5.3 8.1 11.0 21.8 4.5 9.6 -2.7 -.7 -11.3 5.9 19.6 2.4 10.7 10.4 8.7 1.7 9.5 10.8 -6.7 1.2 2.6 -7.1 -1.3 -2.6 12.6 8.3 24.3 2.7 6.5 7.4 8.4 11.0 6.1 15.9 3.9 11.7 3.9 8.5 3.9 6.3 6.6 15 2.9 8.9 8.2 12.2 8.9 11.1 9.1 8.3 12.5 13.9 4.1 6.3 1.8 13.3 2.5 1.3 6.0 11.6 -1.2 7.6 8.2 12.4 3.8 -8.1 17.7 21.9 -1.8 7.6 17.7 19.0 10.6 13.1 14.7 9.9 7.2 10.0 7.7 9.3 2.3 13.5 2.4 11.5 1.7 13.1 9.6 14.1 1.9 13.2 25.5 6.8 17.9 9.9 18.4 20.5 4.4 14.6 1.3 11.3 Total 5.7 4i9 6.0 2.3 2.0 3.0 9.1 7.6 3.1 -.6 -2.3 -1.8 L7 1.5 !9 2.9 1.6 1.8 .7 1.3 2.8 3.1 6.1 5.1 2.7 1.3 2.8 3.0 .6 .5 -.9 .0 .0 i!o 2.5 -.3 2.9 1.9 -6.9 1.0 -.8 1.3 -4.0 .4 8.2 -3.8 .6 -.1 -.7 -5.4 1.8 7.2 -1.1 .1 —4 3.1 1.1 1.6 Federal 7.2 -3.1 3.9 8.3 -.4 -1.7 .0 11.4 9.9 1.0 -3.4 -7.1 -7.1 -1.7 -4.9 -.6 -LO 1.6 2.1 1.5 4.2 4.2 3.2 5.4 2.4 6.9 4.6 3.1 -1.8 1.3 2.0 -2.\ -4.2 -3.8 -3.3 -1.3 -1.4 -1.4 -1.4 4.9 3.4 -15.4 -3.3 -4.9 -.1 -10.7 -4.9 13.3 -11.3 -1.1 -4.5 -1.3 -16.4 7.5 8.8 -4.2 -5.2 -5.8 6.6 -1.1 State and local 3.5 4.1 6.2 2.9 6.0 6.8 6.7 6.4 4.9 5.7 2.8 2.8 3.3 2.2 3.0 3.6 2.9 .8 .4 3.6 1.6 .0 -2.0 -.3 3^8 5.3 5.5 2.4 3.9 4.0 3.8 1.4 2.4 1.5 2.6 2.1 1.6 2.4 5.4 .4 1.4 .9 -.3 4.0 2.1 2.3 .7 4.0 5.1 1.2 1.7 2.6 -.4 1.9 -1.4 6.3 3'.3 2.7 1.2 2.3 2.1 TABLE B-5.—Contributions to percent change in real gross domestic product, 1959-97 [Percentage points, except as noted; quarterly data at seasonally adjusted annual rates] Gross private domestic investment Personal consumption expenditures Year or quarter 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/> 1992:1 II Ill IV 1993:1 II Ill IV 1994:1 II Ill IV 1995-1 || III IV 1996-1 || III IV 1997:1 II Ill . IVA> Gross domestic product (percent change) 7.4 2.4 2.3 6.1 4.3 5.8 6.4 6.5 2.5 4.7 3.0 .1 3.3 5.5 5.8 -.6 -.4 5.4 4.7 5.4 2.8 -.3 2.3 -2.1 4.0 7.0 3.6 3.1 2.9 3.8 3.4 1.2 -.9 2.7 2.3 3.5 2.0 2.8 3.8 4.7 2.5 3.0 4.3 .1 2.0 2.1 5.3 3.0 4.7 1.8 3.6 .9 .3 3.0 2.2 1.8 6.0 1.0 4.3 4.9 3.3 3.1 4.3 Fixed investment Total NonDurable durable goods goods 3.7 1.7 1.3 3.1 2.5 3.7 3.9 3.5 1.8 3.5 2.3 1.4 2.3 3.7 3.0 -.4 1.4 3.5 2.7 2.7 1.5 -.2 .8 .7 3.3 3.3 3.0 2.6 2.0 2.6 1.5 -4 1.9 2.0 2.2 1.7 1.8 2.2 4.3 1.5 2.0 3.6 .5 2.3 2.8 2.0 2.6 2.0 1.6 2.2 1.0 1.9 1.8 1.2 2.1 2.5 .4 2.2 3.6 .6 3.8 2.2 1.1 .2 -.3 .9 .8 .8 1.1 .7 .1 .9 .3 -.3 .8 1.1 .9 -.6 0 1.0 .8 .5 0 -.7 .1 0 1.1 1.1 .8 .8 .1 .6 .2 -.1 -.5 .4 .6 .6 .3 .4 .4 1.0 .3 .7 .8 -.1 1.0 .7 .8 .5 .3 .3 .9 -.3 .3 .7 .2 .4 .8 -.2 .3 1.1 -.5 1.4 .2 1.3 .4 .5 .9 .6 1.3 1.4 1.5 .4 1.2 .7 .6 .5 1.1 .8 -.5 .4 1.3 .7 .9 .6 -.1 .2 .1 .7 .8 .5 .7 .4 .6 .5 .2 -.2 .3 .5 .6 .3 .3 .4 1.2 -.2 .6 1.2 -.2 .7 .6 .3 1.0 .4 .5 .5 .3 .2 .1 .1 .4 5 !i .4 .9 -.4 .8 -.1 Nonresidential Services 1.3 1.1 1.1 1.3 1.2 1.6 1.4 1.3 1.3 1.4 1.3 1.1 1.0 1.5 1.3 .7 1.0 1.2 1.2 1.4 .9 .6 .5 .6 1.5 1.4 1.7 1.1 1.5 1.4 .8 .9 .3 1.1 1.0 1.1 1.0 1.1 1.4 2.0 1.3 .7 1.6 .8 .7 1.6 .9 1.0 1.3 .8 .7 .9 1.4 .9 .9 1.4 1.2 .4 1.5 1.5 1.5 1.5 2.0 See next page for continuation of table. 286 Total 2.9 -.1 -.2 1.8 1.0 1.3 2.2 1.4 -.7 .8 .9 -1.1 1.7 1.9 2.0 -1.4 -3.0 2.8 2.5 2.0 .4 -2.2 1.5 -2.6 1.4 4.6 -.2 -.3 .2 .1 .6 -.8 -1.3 .8 1.2 1.7 .2 1.1 1.6 -.3 2.3 .4 .9 3.4 0 .8 2.8 2.2 2.9 -.9 1.8 .2 -1.7 .3 1.1 .6 2.6 2.3 .2 2.4 2.5 .4 .7 Total 2.0 .1 -.1 1.2 1.0 1.4 1.5 .8 -.3 1.0 .9 -.4 1.1 1.8 1.4 -1.1 -1.8 1.4 2.2 1.9 .9 -1.2 .3 -1.3 1.1 2.6 .8 .1 -.1 .4 .3 -.5 -1.1 .7 .9 1.1 .7 1.1 1.0 1.1 1.6 .3 1.2 .9 1.0 .8 2.3 .4 1.5 .6 .9 1.0 -.1 .5 .8 1.4 1.9 1.4 .4 .6 1.7 2.0 0 Total 0.8 .5 -.1 .8 .5 1.1 1.6 1.2 -.2 .4 .7 -.1 0 .9 1.5 .1 -1.2 .5 1.2 1.5 1.1 -.1 .7 -.6 -.2 1.9 .7 -.4 -.1 .5 .4 -.1 -.6 .1 .7 .7 .8 .9 .9 .3 .9 .2 .5 .9 1.1 .4 1.4 0 .9 .7 1.1 1.3 .6 .2 .5 1.1 1.3 1.6 .6 .4 1.4 1.9 -.4 Structures 0.1 .3 .1 .2 0 .4 .6 .3 -.1 .1 .2 0 -.1 .1 .3 -.1 -.4 .1 .2 .4 .5 .3 .4 -.1 -.5 .6 .3 -.5 -.1 0 .1 0 -.4 -.2 0 0 .1 .1 .1 .1 -.1 -.2 -.1 .3 .1 .1 .1 -.4 .5 0 .1 .2 .1 0 -.2 .2 .2 .3 .4 -.1 -.1 .2 -.1 Producers' durable equipment 0.7 .2 -.1 .6 .4 .7 1.1 1.0 -.1 .4 .5 -.1 .1 .8 1.2 .1 -.7 .4 1.0 1.1 .6 -.4 .3 -.5 .3 1.3 .4 .1 0 .4 .3 -.1 -.3 .3 .6 .7 .7 .8 .8 .2 1.0 .4 .7 .6 1.0 .4 1.3 .5 .4 .7 1.1 1.0 .4 .1 .6 .9 1.0 1.3 .2 .5 1.6 1.7 -.3 Residential 1.2 -.4 0 .5 .6 .3 -.2 -.4 -.1 .5 .1 -.3 1.1 .9 0 -1.1 -.6 .9 1.0 .4 -.2 -1.2 -.4 -.7 1.3 .6 .1 .5 0 -.1 -.2 -.4 -.5 .5 .3 .4 -.2 .2 .1 .8 .7 .1 .6 0 -.1 .4 .8 .4 .6 -.1 -.2 -.3 -.7 .3 .3 .3 .7 -.2 -.2 .1 .3 .1 .4 Change in business inventories 0.9 -.2 -.1 .6 -.1 -.1 .7 .6 -.4 -.2 0 -.7 .6 .1 .6 -.4 -1.3 1.4 .3 .2 -.5 -.9 1.2 -1.3 .3 2.0 -1.0 -.4 .3 -.2 .4 -.4 -.2 .2 .2 .6 -.5 0 .5 -1.4 .7 0 -.3 2.5 -1.0 -.1 .6 1.8 1.4 -1.5 .9 -.8 -1.6 -.2 .3 -.8 .7 .8 -.2 1.8 .8 -1.6 .7 TABLE B—5.—Contributions to percent change in real gross domestic product, 1959—97—Continued [Percentage points, except as noted; quarterly data at seasonally adjusted annual rates] Government consumption expenditures and gross investment Net exports of goods and services 1.1 2.0 .5 1.3 1.0 1.9 .3 1.3 '.2 .1 o' .1 .2 0 0 .2 0 .3 .2 .2 .2 .2 .1 .2 .1 .1 .2 .2 .2 .2 -.1 0 -2 .5 .1 0 .1 .1 .4 .1 .2 .2 .1 .6 .2 -.1 .3 0 .4 .1 .1 .2 0 -.2 -.5 -.7 -.3 -.7 -.3 -.2 -.3 -.6 -.3 .2 1.0 -1.5 -.9 -.8 -.2 .7 -.3 .1 -1.1 -2.2 -.7 -.8 -.6 -.4 -.4 —4 '.1 -.7 -.9 -1.3 -1.0 1i -1.6 -.4 -1.4 -.1 -1 2 -1.3 -1.3 -.4 -1.8 -.8 -2.0 -1.4 -1.1 -1.1 -.9 -.2 -.3 -1.5 -1.7 -1.6 -.8 -2.1 -2.5 -1.7 -.2 Source: Department of Commerce, Bureau of Economic Analysis. 287 -is -.4 _4 -A -.3 0 -.8 -.9 -1.2 9 -1.0 -1.4 -.4 -1.5 -.6 -6 17 -1.2 -.3 -1.5 8 -1.9 -1.4 -1.1 -.6 -1.0 _j -.2 -1.2 -1.6 16 -.8 -1.7 -2.3 -1.6 -.1 0 -.1 0 -.1 0 0 0 -.2 -.2 0 -.1 -.1 0 0 .1 0 -il -.1 _i o' 0 -.1 -.1 -A -.1 0 -.2 -.1 -.1 il 0 0 -.2 -.1 .1 .4 -fi I I I .7 1.0 1.4 1.2 .2 1.1 .2 2.7 .2 .2 -.1 -0.5 0 0 -.4 -.1 -.2 -.4 -.5 -.2 -.7 -.2 -.1 -.3 -.6 -.3 .2 .9 -1.4 -.8 -.7 -.1 .7 -.2 .2 -1.0 -1.8 _5 0 0 1 1 .1 .1 is .1 .7 .8 .9 -.1 -.7 -.2 .5 .2 .3 .6 1.0 .8 .6 .5 .5 .2 .7 .9 .7 1.2 .4 .3 .2 8 -.7 .7 -.8 1.9 -.3 1.3 1.0 1.2 .5 .9 .8 1.0 .3 .8 .2 2.2 -.2 .8 -.9 2.0 -.2 1.7 1.0 1.4 0 -.1 0 -.5 I .2 .3 .5 0 .3 0 .3 .2 .4 0 .4 1.0 .5 _2 -0.5 01 0 0.1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 O O l l .8 l 0 l -1.0 -.4 -1.3 1.1 .8 .1 .3 .4 .6 .1 .3 .1 .4 .3 .5 0 .4 1.2 .7 -.1 .5 .2 .8 .8 1.0 .1 -.7 -.2 .6 .2 .5 .8 1.2 1.0 .8 .6 .6 .3 .8 1.1 .9 1.3 .6 .2 .2 6 Serv- Total Total National Nondedefense fense ices l 1995-1 II Ill IV 1996-1 II Ill IV 1997-1 II Ill IV/> . . 0 Goods 1.3 0 1.0 1.3 .5 .4 .7 1.9 1.7 .7 -.1 1.0 -.4 .5 1.1 0 -.2 0 1.3 1.2 .1 -.4 '.2 .5 -.1 .6 4 -.8 -.8 -.2 -.5 -.1 0 -.1 .1 .2 .1 .4 .4 .3 .5 .2 .7 .4 .3 _2 il .2 0 -.2 -.4 -.3 -.2 -.1 -.1 -.1 -.1 .4 3 -2.3 .2 -.2 .3 -.8 .1 1.5 -.7 .1 0 -.1 -1.0 .3 1.3 -.2 0 -.1 .6 .2 .3 -2.2 -.3 -.4 0 _g -A .9 -.9 -.1 -.3 -.1 -1.2 .5 .6 -.3 -.4 -.4 .4 -.1 0 -.5 -.4 .1 -.1 .4 .3 0 .2 .6 .3 .4 .1 .3 .6 .7 1.2 1.1 .6 .3 .6 .6 .1 .1 -.2 0 0 0.3 -.2 .4 .6 -.3 -.4 -.2 1.3 1.2 .2 -.5 -.8 -.9 -.3 -.5 -.2 -.1 -.1 0 0 .1 .2 .3 .5 .4 .3 .5 .4 .3 _i -il 0 -.1 -.4 -.3 -.3 -.2 -.1 -.1 -.5 _} 'A -i -1.8 -.2 -.4 0 -1.0 0 .7 -1.0 -.1 -.1 -.2 -.8 .3 .5 -.2 -.3 -.6 .3 .1 .1 0.7 -.2 .1 .4 .2 .2 .2 0 0 -.1 .1 0 .1 .2 0 .1 .1 0 .1 .2 0 .1 0 _2 il -.1 .1 .1 0 -.1 .2 .2 0 .2 0 0 0 0 0 .4 -.1 .1 4 -.4 -.1 -.1 0 .1 -.4 .3 .1 0 -.3 .1 -.4 .2 .1 -.1 0 .2 .1 -.1 _i State and local CD | CD II Ill IV 1993-1 II Ill IV 1994-1 II III IV .. . -0.4 .8 .1 -.2 .2 .4 -.3 -.3 -.2 -.3 0 .3 -.3 -.2 .9 .9 .9 -1.0 -.7 0 .6 1.7 -.2 -.6 -1.4 -1.6 -.4 -.3 .2 .8 .6 .4 .7 -.1 -.6 -.5 .1 -.2 -.3 .2 -1.2 .1 -6 -1.5 _ jj -L3 .2 -1.0 -.3 -.4 .3 -.4 .1 1.1 1.0 -1.3 -.6 -1.4 1.8 Total CD 1992:1 . . Services CD 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997^ Federal Imports Exports Net exports Total Goods I Year or quarter -.1 .5 .2 .3 .1 .5 .6 .1 .2 .3 0 .2 -.2 .7 •1 .4 .3 .1 .3 .2 TABLE B-6.—Chain-type quantity indexes for gross domestic product, 1959—97 [Index numbers, 1992=100; quarterly data seasonally adjusted] Personal consumption expenditures Gross private domestic investment Fixed investment Year or quarter 1959 . I960 1961 1962 1963 1964 1965 . . . . 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 . 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* . 1992:1 II Ill IV 1993:1 II Ill IV 1994:1 II III IV 1995-1 II III IV 1996:1 || III IV 1997:1 II III \\IP Gross domestic product 35.39 36.24 37.06 39.31 40.99 43.37 46.14 49.15 50.40 52.75 54.35 54.41 56.21 59.29 62.72 62.32 62.04 65.38 68.44 72.11 74.16 73.91 75.60 73.99 76.93 82.32 85.25 87.88 90.47 93.93 97.08 98.27 97.36 100.00 102.32 105.87 107.97 110.95 115.17 98.90 99.52 100.26 101.32 101.34 101.85 102.39 103.72 104.49 105.70 106.17 107.11 107.36 107.44 108.24 108.84 109.32 110.92 111.20 112.38 113.73 114.66 115.53 116.75 Total 33.05 33.95 34.64 36.35 37.84 40.10 42.64 45.07 46.41 49.06 50.89 52.08 54.02 57.25 60.02 59.59 60.90 64.32 67.06 69.95 71.57 71.32 72.19 73.02 76.79 80.75 84.52 87.89 90.58 94.14 96.32 97.92 97.30 100.00 102.93 106.31 108.90 111.71 115.40 98.91 99.45 100.16 101.48 101.59 102.44 103.48 104.22 105.21 105.98 106.60 107.45 107.86 108.62 109.32 109.80 110.65 111.67 111.81 112.72 114.18 114.45 116.03 116.95 Durable goods 21.10 21.53 20.72 23.14 25.39 27.73 31.24 33.88 34.42 38.20 39.56 38.29 42.11 47.46 52.37 48.77 48.74 54.96 60.06 63.21 62.90 57.85 58.51 58.44 67.01 76.75 84.21 91.79 93.13 98.97 101.57 100.98 94.56 100.00 107.23 114.87 119.46 125.09 132.19 97.45 98.49 100.70 103.36 103.18 106.29 108.47 110.97 112.72 113.77 114.99 118.02 117.13 118.25 120.93 121.53 122.95 125.84 125.25 126.32 130.55 128.75 134.31 135.16 Nondurable goods 45.87 46.56 47.42 48.91 49.93 52.39 55.18 58.19 59.12 61.80 63.44 64.99 66.16 69.06 71.33 69.94 70.99 74.50 76.44 79.11 80.92 80.58 81.27 81.75 84.16 87.14 89.15 91.98 93.75 96.41 98.61 99.56 98.57 100.00 102.20 105.15 106.86 108.36 110.40 99.44 99.26 99.95 101.36 101.19 101.97 102.64 103.02 104.28 104.81 105.40 106.10 106.55 106.79 106.97 107.15 107.62 108.30 108.48 109.03 110.29 109.70 110.87 110.76 Nonresidential Services 28.53 29.78 30.98 32.52 33.98 36.04 37.96 39.88 41.82 43.98 46.10 47.96 49.72 52.40 54.76 56.08 58.03 60.47 63.01 65.96 68.06 69.34 70.39 71.73 75.08 78.15 82.06 84.72 88.27 91.82 93.90 96.34 97.16 100.00 102.47 105.23 107.89 110.86 114.77 98.91 99.74 100.17 101.17 101.49 101.93 102.93 103.53 104.21 105.06 105.58 106.08 106.72 107.68 108.27 108.90 109.84 110.67 110.93 111.99 113.05 114.13 115.22 116.67 See next page for continuation of table. 288 Total Total 34.37 34.09 34.22 34.36 34.19 33.86 37.28 38.23 40.04 40.69 43.87 44.06 48.31 50.25 50.94 54.48 52.10 49.91 53.37 54.82 56.54 57.98 55.16 53.91 59.34 60.08 66.41 67.28 75.33 72.43 69.14 67.68 60.12 56.50 66.07 67.99 78.71 75.78 84.34 87.73 88.78 89.79 82.77 79.49 84.32 86.78 77.91 74.29 83.51 81.23 97.32 105.43 102.02 104.23 102.71 102.76 102.05 103.93 104.45 104.77 109.24 - 106.20 103.11 102.86 94.62 93.39 100.00 100.00 107.58 109.25 123.44 116.86 125.44 122.81 132.97 135.26 150.83 143.26 96.79 95.93 99.87 100.30 101.02 100.49 102.85 102.75 104.00 106.96 107.05 106.08 107.79 108.63 114.37 112.43 118.91 113.32 116.56 124.96 117.78 123.00 119.79 126.89 127.25 122.01 121.78 123.66 124.24 122.83 124.62 126.62 127.84 128.06 132.20 134.00 135.42 139.21 136.41 139.77 137.73 145.39 141.86 151.45 152.40 146.70 146.74 154.08 Total 26.47 27.95 27.70 30.11 31.62 35.34 41.46 46.50 45.77 47.76 51.20 50.70 50.63 55.16 63.19 63.52 56.88 59.61 66.65 75.75 83.05 82.66 87.07 83.23 81.82 95.97 101.90 98.32 97.22 101.46 105.55 104.90 98.18 100.00 107.58 116.22 126.65 138.33 151.78 97.58 99.93 100.48 102.01 103.57 106.67 107.96 112.13 112.25 114.94 117.08 120.62 124.70 126.44 126.95 128.49 132.10 136.19 141.48 143.54 145.00 150.03 156.75 155.33 Structures 50.71 54.74 55.48 57.98 58.62 64.71 75.03 80.17 78.13 79.24 83.51 83.78 82.41 84.94 91.86 89.94 80.53 82.50 86.52 95.96 108.01 115.27 124.37 122.50 109.79 125.44 134.63 120.16 115.77 116.35 118.91 120.18 107.32 100.00 100.95 101.94 106.35 111.51 115.47 102.07 101.07 98.97 97.89 99.32 100.66 101.50 102.33 98.31 103.13 102.86 103.45 105.82 106.93 107.12 105.54 107.63 109.68 112.32 116.40 115.79 114.39 116.26 115.45 Producers' durable equipment 18.37 19.12 18.67 20.83 22.41 25.23 29.81 34.43 34.08 36.15 39.15 38.46 38.76 43.69 51.77 52.84 47.32 50.22 58.05 66.80 72.21 69.01 71.56 66.97 70.08 83.52 88.10 88.99 89.24 94.99 99.73 98.24 94.20 100.00 110.52 122.66 135.91 150.77 169.14 95.62 99.42 101.14 103.82 105.43 109.32 110.80 116.51 118.51 120.22 123.49 128.42 133.30 135.31 135.98 139.06 143.41 148.48 155.10 156.09 158.63 167.05 176.32 174.57 Residential 58.14 54.01 54.16 59.35 66.34 70.20 68.15 62.05 60.10 68.29 70.31 66.10 84.23 99.20 98.56 78.21 68.06 84.09 101.89 108.62 104.65 82.52 75.92 62.10 87.62 100.39 101.75 113.95 114.22 111.96 107.84 97.80 85.76 100.00 107.56 118.39 113.94 120.64 124.00 94.84 99.71 100.53 104.93 105.08 104.67 107.38 113.10 115.84 120.37 119.44 117.90 115.80 111.02 113.29 115.63 117.96 122.91 121.51 120.18 121.17 123.36 124.19 127.29 TABLE B-6.—Chain-type quantity indexes for gross domestic product, 1959-97—Continued [Index numbers, 1992=100; quarterly data seasonally adjusted] Exports of goods and services Year or quarter Imports of goods and services Government consumption expenditures and gross investment Federal Total Goods 11.24 11.53 14.23 13.58 14.30 13.80 14.94 14.54 15.64 16.11 17.73 18.32 18.41 18.08 19.30 19.69 19.79 19.72 21.35 21.16 22.47 22.31 25.03 24.73 24.94 24.90 27.62 26.90 33.96 32.78 36.66 35.93 35.81 35.69 37.51 37.79 38.00 38.69 42.24 42.71 46.77 47.23 52.86 51.83 52.32 52.43 48.71 47.58 47.44 46.20 49.85 51.36 51.65 52.76 54.30 56.65 62.87 60.28 71.63 72.85 80.61 81.36 88.27 87.29 93.82 93.43 100.00 100.00 102.94 103.35 111.41 113.62 123.74 127.91 134.03 140.05 161.77 150.82 98.13 99.00 99.44 99.20 99.93 100.05 102.75 101.52 101.22 101.22 103.24 103.70 100.74 101.07 106.21 107.75 106.79 105.73 111.72 110.12 115.54 112.93 120.44 116.88 122.68 118.92 121.59 126.09 129.35 125.50 133.54 128.96 134.88 129.52 138.00 132.53 133.15 138.85 140.92 148.48 152.94 144.30 150.53 161.76 163.11 152.17 156.29 169.26 Source: Department of Commerce, Bureau 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 1992-1 II Ill IV 1993-1 II III IV 1994-1 II Ill . . IV 1995-1 II Ill IV 1996-1 II Ill IV . 1997-1 II Ill \\!P. Services Total 9.78 15.94 10.82 16.15 11.54 16.05 12.59 17.87 13.39 18.34 14.99 19.32 16.17 21.37 17.10 24.55 18.60 26.34 19.55 30.26 20.76 31.99 22.59 33.35 23.60 35.13 23.45 39.01 27.58 40.76 32.27 39.66 34.40 35.19 37.98 42.08 40.46 46.59 43.52 50.62 43.99 51.47 46.78 48.03 51.66 49.28 51.65 48.66 50.76 54.81 55.50 68.12 55.65 72.53 63.06 78.65 69.94 83.44 76.04 86.73 83.20 90.13 90.74 93.62 94.77 93.01 100.00 100.00 101.96 108.89 106.38 122.13 114.27 133.05 120.51 145.22 127.12 165.40 101.08 96.84 99.98 99.91 100.29 100.23 98.65 103.02 101.21 104.93 102.15 108.03 101.81 109.04 102.68 113.56 103.28 115.65 106.46 120.79 106.99 124.56 108.79 127.54 110.39 130.63 111.42 133.09 116.70 133.85 118.59 134.65 117.43 138.87 120.19 143.51 120.28 148.03 124.14 150.48 125.27 156.80 126.25 164.30 128.46 169.98 128.51 170.53 of Economic Analysis. Goods 13.06 12.84 12.83 14.72 15.32 16.33 18.64 21.58 22.72 27.41 28.91 30.05 32.57 37.00 39.61 38.51 33.65 41.26 46.28 50.43 51.30 47.49 48.46 47.24 53.66 66.64 70.84 78.10 81.72 85.01 88.58 91.27 91.23 100.00 110.49 125.56 137.50 151.06 173.27 95.67 99.78 101.46 103.10 106.20 109.72 110.70 115.32 117.72 123.81 128.48 132.22 134.62 137.92 138.31 139.15 143.42 148.97 154.49 157.37 163.58 172.24 178.53 178.74 289 Services 28.14 30.35 29.83 31.23 31.18 31.98 32.92 37.10 41.64 42.39 45.06 47.41 46.06 47.63 45.70 44.65 42.32 45.28 47.02 50.36 51.08 49.82 52.68 55.49 59.97 74.85 80.37 80.72 91.14 94.38 96.88 104.26 100.97 100.00 101.91 107.31 113.82 120.06 131.77 102.06 100.45 94.87 102.62 99.34 100.63 101.79 105.89 106.61 107.69 107.58 107.34 113.37 112.23 114.52 115.14 119.13 119.94 120.29 120.90 127.64 130.41 133.58 135.44 Total 48.94 48.84 51.21 54.28 55.54 56.65 58.36 63.66 68.49 70.62 70.22 68.59 67.34 67.58 67.14 68.28 69.34 69.38 70.01 72.05 73.18 74.49 74.99 75.97 78.13 80.58 85.47 89.81 92.26 93.44 96.06 98.94 99.55 100.00 99.08 99.09 99.06 99.54 100.54 99.59 99.51 100.22 100.69 98.92 99.16 98.95 99.29 98.27 98.38 100.35 99.37 99.52 99.49 99.30 97.94 98.37 100.10 99.83 99.85 99.74 100.50 100.77 101.17 Total 68.29 66.18 68.76 74.48 74.21 72.95 72.96 81.28 81.34 90.22 87.11 80.90 75.19 73.90 70.29 69.85 69.68 68.99 70.09 71.54 72.59 75.63 78.77 81.33 85.74 87.83 93.87 98.18 101.21 99.36 100.67 102.64 102.16 100.00 95.78 92.17 89.08 87.92 86.71 99.45 99.11 100.31 101.14 97.00 96.19 94.98 94.95 92.28 91.13 94.02 91.23 90.99 89.95 89.66 85.72 87.29 89.15 88.21 87.04 85.76 87.14 86.89 87.04 National defense 81.85 80.17 83.51 88.45 86.22 82.48 80.84 92.66 104.71 106.69 101.56 92.88 83.49 79.91 74.82 72.80 71.78 70.43 70.89 70.99 72.13 74.71 78.77 84.23 89.05 92.63 99.55 104.68 108.89 107.92 106.86 106.86 105.79 100.00 94.32 89.66 85.84 84.56 82.24 99.59 99.34 100.79 100.28 95.58 94.92 93.42 93.36 89.19 89.40 92.33 87.71 87.46 87.12 86.22 82.56 83.79 86.01 85.00 83.44 80.86 82.33 82.58 83.18 Nondefense 38.65 35.54 36.44 43.88 47.89 52.02 55.56 56.27 55.66 54.18 55.41 54.56 56.70 60.39 60.11 63.34 65.13 65.97 68.55 73.17 74.04 78.21 79.09 74.46 77.85 76.17 80.02 82.25 82.32 78.25 85.45 92.31 93.28 100.00 99.33 98.24 96.88 96.01 97.46 99.10 98.54 99.13 103.23 100.46 99.29 98.76 98.81 99.77 95.36 98.13 99.69 99.46 96.80 97.94 93.33 95.70 96.72 95.93 95.69 97.54 98.71 97.27 96.33 State and local 34.90 36.32 38.57 39.70 42.09 44.98 48.00 51.09 53.58 56.61 58.17 59.80 61.75 63.12 65.03 67.35 69.32 69.90 70.18 72.68 73.87 73.88 72.41 72.22 72.69 75.44 79.47 83.85 85.87 89.24 92.78 96.31 97.68 100.00 101.45 104.06 106.23 107.88 110.48 99.69 99.79 100.15 100.37 100.30 101.29 101.81 102.40 102.57 103.59 104.89 105.21 105.64 106.33 106.22 106.71 106.33 107.97 108.17 109.04 109.78 110.10 110.73 111.31 TABLE B-7.—Chain-type price indexes for gross domestic product, 1959-97 [Index numbers, 1992=100, except as noted; quarterly data seasonally adjusted] Gross private domestic investment Personal consumption expenditures Fixed investment Gross domestic product Year or quarter 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* . . . 1992:1 || III IV 1993:1 II Ill IV 1994-1 II Ill IV 1995-1 II Ill IV 1996-1 II Ill IV 1997:1 II III \Mp . . 22.95 23.27 23.54 23.84 24.12 24.48 24.95 25.66 26.48 27.64 28.94 30.48 32.05 33.42 35.30 38.46 42.09 44.55 47.42 50.88 55.22 60.34 66.01 70.18 73.16 75.92 78.53 80.58 83.06 86.10 89.72 93.64 97.32 100.00 102.64 105.09 107.76 110.22 112.46 99.14 99.81 100.17 100.88 101.85 102.38 102.83 103.52 104.16 104.74 105.39 106.07 106.93 107.49 108.03 108.60 109.35 109.86 110.59 111.10 111.78 112.27 112.67 113.10 Total 22.81 23.19 23.44 23.69 23.99 24.31 24.69 25.34 26.01 27.04 28.16 29.49 30.82 31.90 33.62 37.03 40.04 42.32 45.13 48.41 52.76 58.49 63.73 67.40 70.46 73.14 75.84 78.00 80.96 84.32 88.44 92.91 96.82 100.00 102.66 105.15 107.89 110.47 112.72 98.90 99.70 100.30 101.10 101.83 102.46 102.80 103.57 104.00 104.68 105.61 106.31 107.05 107.69 108.19 108.63 109.34 110.13 110.80 111.61 112.21 112.49 112.91 113.27 Durable goods 41.38 41.18 41.27 41.47 41.61 41.82 41.44 41.25 41.89 43.28 44.47 45.44 47.10 47.60 48.29 51.35 56.04 59.16 61.73 65.23 69.62 75.56 80.64 83.81 85.48 86.71 87.76 88.91 91.59 93.28 95.29 96.59 98.54 100.00 101.22 103.27 104.27 103.83 102.16 99.59 100.09 100.10 100.23 100.47 101.00 101.38 102.03 102.28 103.02 103.85 103.94 104.35 104.43 104.25 104.07 104.25 103.89 103.72 103.45 103.27 102.50 101.74 101.14 Nondurable goods 24.49 24.84 24.99 25.18 25.48 25.80 26.27 27.14 27.78 28.85 30.19 31.66 32.65 33.74 36.39 41.59 44.83 46.53 49.18 52.59 58.33 65.30 70.57 72.81 74.64 76.71 78.72 78.73 81.82 84.83 89.28 94.62 98.06 100.00 101.46 102.77 104.48 107.15 109.15 99.15 99.74 100.39 100.72 101.26 101.38 101.27 101.92 101.90 102.23 103.31 103.64 103.85 104.32 104.70 105.05 106.02 107.04 107.29 108.26 108.90 108.89 109.24 109.56 Nonresidential Services 18.47 18.96 19.33 19.62 19.94 20.28 20.72 21.32 22.03 22.97 23.91 25.20 26.73 27.91 29.17 31.41 33.97 36.50 39.46 42.62 46.08 50.96 56.17 60.80 64.86 68.17 71.62 75.28 78.23 82.16 86.55 91.22 95.78 100.00 103.62 106.85 110.53 113.76 117.04 98.63 99.60 100.29 101.48 102.43 103.35 103.93 104.79 105.50 106.37 107.24 108.27 109.37 110.23 110.96 111.58 112.27 113.20 114.29 115.26 116.02 116.70 117.42 118.04 See next page for continuation of table. 290 Total 29.01 29.13 29.13 29.11 29.04 29.21 29.69 30.29 31.10 32.30 33.85 35.27 37.05 38.69 40.80 44.91 50.48 53.33 57.29 62.10 67.72 74.18 81.09 85.38 85.20 85.87 86.81 88.97 90.93 93.46 96.06 98.37 99.70 100.00 101.50 103.32 104.71 104.50 104.14 99.61 99.80 100.10 100.49 101.06 101.42 101.65 101.85 102.57 103.10 103.63 103.96 104.43 104.86 104.82 104.74 104.57 104.31 104.63 104.50 104.23 104.07 104.11 104.16 Total 27.95 28.08 28.03 28.03 27.98 28.15 28.64 29.25 30.08 31.31 32.87 34.28 36.05 37.64 39.74 43.69 49.22 52.12 56.19 61.09 66.71 73.03 79.94 84.47 84.38 85.01 86.20 88.56 90.44 93.25 95.85 98.24 99.63 100.00 101.53 103.40 104.78 104.70 104.54 99.60 99.80 100.10 100.50 101.08 101.45 101.69 101.91 102.64 103.19 103.71 104.04 104.48 104.90 104.88 104.83 104.70 104.50 104.85 104.75 104.52 104.47 104.55 104.62 Total 31.51 31.61 31.50 31.48 31.53 31.69 32.06 32.55 33.40 34.59 36.04 37.76 39.59 41.00 42.59 46.75 53.30 56.33 60.05 64.38 69.71 75.96 83.48 88.28 87.52 87.48 88.31 90.22 91.34 93.73 96.16 98.42 99.93 100.00 100.65 101.89 102.33 101.26 99.88 99.91 99.92 100.07 100.11 100.49 100.66 100.66 100.80 101.36 101.89 102.20 102.12 102.21 102.61 102.40 102.11 101.74 101.29 101.21 100.82 100.31 99.93 99.73 99.53 Structures 21.16 21.13 21.01 21.18 21.38 21.68 22.31 23.11 23.84 25.03 26.68 28.42 30.61 32.83 35.38 40.24 45.03 47.22 50.95 56.30 62.88 68.66 78.22 84.45 82.23 82.94 84.86 86.47 87.85 92.10 95.61 98.78 100.09 100.00 103.26 107.00 111.49 114.09 117.87 99.35 99.66 100.07 100.91 102.15 102.90 103.56 104.42 105.46 106.16 107.37 109.00 110.40 111.19 111.92 112.43 112.97 113.50 114.58 115.30 116.11 117.23 118.44 119.71 Producers' durable equipment 39.74 39.99 39.90 39.66 39.52 39.50 39.55 39.67 40.59 41.70 42.88 44.48 45.88 46.51 47.30 50.85 58.59 62.19 65.90 69.59 74.13 80.67 86.60 90.24 90.58 90.04 90.15 92.24 93.22 94.59 96.45 98.23 99.84 100.00 99.57 99.86 98.89 96.62 93.63 100.15 100.02 100.06 99.77 99.80 99.72 99.45 99.32 99.69 100.15 100.14 99.46 99.09 99.35 98.83 98.29 97.60 96.84 96.38 95.65 94.72 93.88 93.27 92.64 Residential 21.43 21.58 21.61 21.65 21.48 21.65 22.26 23.07 23.87 25.14 26.88 27.74 29.35 31.14 33.89 37.39 40.86 43.49 47.99 53.72 59.75 66.22 71.62 75.45 77.19 79.41 81.45 84.87 88.34 92.06 95.08 97.80 98.85 100.00 103.71 107.11 110.93 113.64 117.09 98.82 99.52 100.20 101.46 102.54 103.41 104.25 104.64 105.79 106.36 107.45 108.83 110.17 110.65 111.15 111.75 112.29 112.80 114.37 115.10 115.68 116.65 117.57 118.47 TABLE B-7.—Chain-type price indexes for gross domestic product, 1959-97—Continued [Index numbers, 1992=100, except as noted; quarterly data seasonally adjusted] Exports and imports of goods and services Government consumption expenditures and gross investment Exports Total Year or quarter 1959 Imports Federal Total National defense Nondefense State and local Final sales of domestic product Total Gross domestic Gross Gross purnadochases ' Less tional mesfood product tic Less and prodfood energy uct Total and energy 18.10 18.61 18.10 19.51 17.45 22.79 22.44 18.34 18.75 18.20 19.82 17.82 23.11 22.75 18.66 19.01 18.38 20.48 18.24 23.38 23.00 19.15 19.42 18.74 21.12 18.83 23.68 23.28 19.61 19.90 19.19 21.67 19.25 23.97 23.58 20.15 20.58 19.77 22.75 19.63 24.32 23.94 20.73 21.19 20.41 23.22 20.17 24.80 24.39 21.56 21.89 21.07 24.04 21.14 25.51 25.07 22.47 22.55 21.72 24.72 22.35 26.34 25.83 23.74 23.84 22.92 26.34 23.60 27.50 26.95 25.19 25.13 24.18 27.65 25.23 28.80 28.21 27.21 27.08 25.94 30.30 27.31 30.33 29.73 31.32 29.33 29.42 28.24 32.71 29.23 31.91 31.46 32.00 31.01 34.53 30.97 33.26 32.71 33.88 34.51 33.66 36.54 33.32 35.15 34.64 38.17 37.45 37.89 37.24 39.31 37.00 38.28 41.36 41.95 41.10 43.84 40.80 41.90 41.72 43.99 44.63 43.85 46.33 43.38 44.37 44.15 47.11 48.18 47.21 50.34 46.19 47.25 47.18 50.28 51.47 50.82 52.84 49.26 50.71 50.65 54.82 56.10 55.81 56.58 53.73 55.06 55.22 60.86 62.20 62.05 62.34 59.70 60.15 61.10 66.84 68.31 68.23 68.26 65.57 65.82 66.72 71.32 72.94 72.96 72.59 69.93 70.02 70.64 69.04 74.51 76.08 76.20 75.44 73.16 73.00 73.31 71.99 78.23 80.36 81.23 77.53 76.40 75.77 75.90 74.65 81.01 82.74 83.51 80.20 79.51 78.43 78.34 77.30 82.69 83.96 84.49 82.16 81.59 80.51 80.40 80.10 85.15 85.26 85.62 84.04 85.02 82.98 83.11 82.88 87.39 87.18 87.30 86.75 87.52 86.06 86.13 86.09 90.21 89.79 89.79 89.70 90.51 89.69 89.78 89.56 94.06 92.92 92.92 92.84 94.91 93.62 93.83 93.35 97.45 96.88 96.47 97.95 97.86 97.31 97.30 97.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 102.50 102.51 101.77 104.29 102.49 102.65 102.48 102.65 104.85 104.84 103.63 107.70 104.85 105.11 104.85 105.16 108.28 108.34 106.83 111.88 108.24 107.79 107.52 107.93 111.83 112.03 111.02 114.47 111.71 110.28 109.86 110.06 114.47 114.74 113.66 117.35 114.32 112.56 111.77 111.94 99.16 99.38 99.61 98.82 99.00 99.14 99.04 99.04 99.92 100.01 100.23 99.48 99.86 99.81 99.76 99.76 100.33 100.44 100.58 100.09 100.25 100.17 100.28 100.25 100.59 100.17 99.57 101.61 100.89 100.88 100.92 100.94 101.71 101.79 101.23 103.15 101.65 101.85 101.71 101.82 102.24 101.94 101.39 103.27 102.44 102.38 102.28 102.43 102.77 102.83 101.97 104.89 102.74 102.84 102.64 102.88 103.26 103.48 102.48 105.84 103.13 103.53 103.28 103.49 103.95 104.04 102.90 106.73 103.90 104.17 103.80 104.10 104.61 104.97 103.65 108.08 104.39 104.75 104.46 104.86 105.07 104.83 103.68 107.57 105.21 105.41 105.24 105.50 105.75 105.53 104.31 108.42 105.89 106.09 105.88 106.18 106.92 106.89 105.37 110.44 106.93 106.95 106.66 107.03 107.85 107.59 106.30 110.61 108.00 107.50 107.33 107.70 108.55 108.33 107.20 111.03 108.67 108.05 107.79 108.22 109.80 110.56 108.44 115.44 109.35 108.63 108.29 108.77 111.27 111.85 110.38 115.28 110.92 109.39 109.01 109.38 1996:1 II 111.23 111.47 110.58 113.63 111.08 109.91 109.50 109.67 112.07 112.05 111.16 114.25 112.07 110.65 110.15 110.34 Ill IV 112.76 112.74 111.94 114.72 112.77 111.17 110.79 110.86 113.74 114.10 113.14 116.44 113.54 111.85 111.32 111.36 1997-1 II 114.14 114.46 113.46 116.87 113.95 112.37 111.55 111.81 Ill 114.54 114.71 113.62 117.30 114.44 112.78 111.90 112.10 IV' 115.47 115.71 114.41 118.76 115.33 113.22 112.31 112.51 1 Gross domestic product (GDP) less exports of goods and services plus imports of goods and services. 2 Percent changes based on unrounded data. Quarterly percent changes are at annual rates. Source: Department of Commerce, Bureau of Economic Analysis. I960 1961 1962 1963 1964 1965 1966 1967 1968 Z Z 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 ... . 1991 1992 1993 1994 1995 1996 1997/> 1992-1 II Ill IV 1993-1 II Ill IV 1994-1 II Ill IV 1995:1 II Ill IV 28.74 29.10 29.51 29.48 29.44 29.64 30.61 31.55 32.80 33.48 34.54 36.04 37.27 38.50 43.78 54.11 59.72 61.62 64.17 68.16 76.48 84.17 90.31 90.76 91.32 92.30 89.82 88.54 90.99 96.00 97.91 98.74 100.31 100.00 100.07 101.24 103.44 101.61 99.39 99.86 100.10 100.07 99.98 99.97 100.22 100.04 100.03 100.44 100.99 101.40 102.11 103.21 104.09 103.57 102.88 102.50 102.14 101.47 100.35 99.90 99.72 99.21 98.71 20.94 21.14 21.14 20.89 21.30 21.75 22.05 22.56 22.65 23.00 23.60 24.99 26.53 28.44 33.44 48.04 52.13 53.69 58.54 62.68 73.39 91.45 96.39 93.13 89.64 88.90 85.99 85.95 90.99 95.35 97.81 100.37 100.02 100.00 98.75 99.39 101.62 99.41 95.52 98.95 99.60 101.03 100.42 98.82 99.45 98.55 98.19 97.64 98.87 100.34 100.72 101.12 102.82 101.77 100.75 100.28 99.83 98.76 98.75 97.42 95.52 94.81 94.30 291 Percent change 2 Gross domestic purchases ' 22.95 23.27 23.54 23.85 2413 24.49 24.96 25.68 26.49 27.65 28.95 30.49 32.07 3343 35.32 38.48 42.11 44.58 47.45 50.91 5526 60.37 6605 70.22 73.20 75.97 78.57 80.62 83.08 86.12 89.75 93.66 97.33 100.00 102.64 105.08 107.74 110.19 99.14 99.81 100.17 100.87 101.84 102.37 102.83 103.51 104.16 104.73 105.38 106.05 106.90 107.46 108.00 108.58 109.33 109.83 110.55 111.06 111.73 112.22 112.62 1.0 1.4 1.2 1.3 1? 11 1.9 2.8 3? 4.4 47 5.3 S? 42 5.6 89 94 S8 6S 73 85 9.3 94 6.3 4.3 3.8 3.4 2.6 3.1 3.7 4.2 4.4 3.9 2.8 2.6 2.4 2.5 2.3 2.0 3.4 2.8 1.4 2.8 3.9 2.1 1.8 2.7 2.5 2.2 2.5 2.6 3.3 2.1 2.0 2.1 2.8 1.9 2.7 1.9 2.4 1.8 1.4 1.5 1.0 1.4 1.1 1.2 13 16 1.9 2.8 30 43 47 5.4 S3 41 5.9 10? 93 S8 69 74 90 10.7 9? 5.9 ...„.„ 3.8 3.5 3.7 3.2 3.5 2.6 3.6 3.4 3.5 3.6 3.9 4.2 4.0 4.5 4.2 3.7 3.9 2.8 3.1 2.5 2.7 2.3 2.4 2.5 2.6 2.2 2.0 1.7 1.7 3.2 3.8 2.9 2.9 2.1 2.0 2.6 2.8 3.2 3.5 2.3 2.4 1.4 1.8, 2.5 2A 2.0 2.4 2.6 3.0 3.0 2.5 2.5 2.6 3.0 3.2 2.5 2.6 1.7 1.9 1.9 2.1 2.7 2.3 1.8 1.1 2.4 2.5 2.4 1.9 1.9 1.8 .8 1.6 1.3 1.1 1.5 1.5 TABLE B-8.—Gross domestic product by major type of product, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Goods Final Change in Gross sales of busidomestic domes- ness product tic product inventories Year or quarter 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997^ 1992:1 || III IV 1993-1 II Ill IV 1994:1 II Ill IV 1995:1 || III IV 1996:1 || III IV 1997:1 . . 507.2 526.6 544.8 585.2 617.4 663.0 719.1 787.8 833.6 910.6 982.2 1,035.6 1,125.4 1,237.3 1,382.6 1,496.9 1,630.6 1,819.0 2,026.9 2,291.4 2,557.5 2,784.2 3,115.9 3,242.1 3,514.5 3,902.4 4,180.7 4,422.2 4,692.3 5,049.6 5,438.7 5,743.8 5,916.7 6,244.4 6,558.1 6,947.0 7,265.4 7,636.0 8,083.4 6,121.8 6,201.2 6,271.7 6,383.1 6,444.5 6,509.1 6,574.6 6,704.2 6,794.3 6,911.4 6,986.5 7,095.7 7,168.9 7,209.5 7,301.3 7,381.9 7,467.5 7,607.7 7,676.0 7,792.9 7,933.6 8,034.3 8,124.3 8,241.5 503.0 4.2 523.3 3.2 541.9 2.9 579.1 6.1 611.7 5.7 658.0 5.0 709.4 9.7 774.0 13.8 823.1 10.5 901.4 9.1 972.7 9.5 1,033.4 2.2 1,116.9 8.5 1,227.4 9.9 1,365.2 17.5 14.1 1,482.8 1,636.9 -6.3 1,802.0 16.9 2,003.8 23.1 2,264.2 27.2 2,540.6 16.9 2,791.9 -7.6 3,087.8 28.2 3,256.6 -14.5 3,519.4 -4.9 3,835.0 67.5 4,154.5 26.2 4,412.6 9.6 4,668.1 24.2 5,038.7 10.9 5,407.0 31.7 5,735.8 8.0 5,919.0 -2.3 6,237.4 7.0 6,537.6 20.5 6,885.7 61.2 30.1 7,235.3 7,610.2 25.9 8,018.8 64.6 6,122.1 -.2 10.2 6,191.0 6,260.1 11.6 6,376.6 6.5 6,413.8 30.7 6,494.7 14.5 6,560.6 14.0 6,681.3 22.9 52.4 6,741.9 6,835.1 76.3 6,936.3 50.2 7,029.6 66.2 7,116.8 52.1 7,185.0 24.5 7,281.8 19.4 7,357.4 24.5 7,456.4 11.1 23.4 7,584.3 7,638.9 37.1 7,761.0 31.9 7,867.4 66.1 7,953.2 81.1 8,075.3 48.9 8,179.3 62.1 Total Change in business inventories Total Final sales 252.0 257.8 260.4 281.2 292.7 313.2 342.9 380.6 394.5 426.7 455.8 467.5 493.2 539.8 619.2 665.7 718.1 804.0 883.7 996.5 1,115.2 1,191.1 1,342.6 1,333.2 1,426.9 1,607.0 1,669.8 1,720.6 1,804.8 1,942.9 2,124.0 2,203.8 2,234.0 2,321.0 2,422.1 2,581.4 2,667.9 2,785.2 2,945.1 2,281.1 2,301.3 2,329.4 2,372.3 2,388.3 2,408.7 2,412.0 2,479.6 2,531.2 2,568.6 2,582.8 2,643.0 2,650.5 2,637.8 2,673.3 2,710.2 2,733.2 2,782.7 2,797.8 2,826.9 2,904.6 2,936.0 2,952.1 2,987.9 3.1 247.8 4.2 92.3 1.7 254.6 3.2 95.1 -.1 257.5 2.9 94.3 3.4 275.1 6.1 104.5 287.1 2.7 5.7 111.0 4.0 308.1 5.0 120.5 9.7 133.3 6.7 333.3 366.8 13.8 149.0 10.2 384.0 5.5 10.5 153.8 417.6 9.1 167.8 4.6 6.3 446.2 9.5 178.6 2.2 180.2 .0 465.3 484.7 3.2 8.5 187.0 7.2 529.9 9.9 209.3 601.8 17.5 241.4 14.6 14.1 256.7 11.0 651.6 -7.5 724.5 -6.3 288.1 787.1 10.6 16.9 322.5 10.2 860.6 23.1 366.9 969.3 27.2 416.9 20.3 1,098.3 16.9 475.0 12.5 1,198.7 -7.6 502.9 -2.7 1,314.5 7.5 28.2 546.0 1,347.7 -14.5 544.4 -15.5 1,431.8 -4.9 586.1 4.0 1,539.6 67.5 655.1 43.6 8.6 1,643.6 26.2 713.2 1,711.0 .6 9.6 741.3 21.5 1,780.6 24.2 764.7 16.4 1,932.0 10.9 837.0 2,092.3 31.7 907.3 21.3 2.5 2,195.8 8.0 935.7 2,236.3 -2.3 926.6 -16.6 2,314.0 7.0 965.9 -10.9 2,401.6 16.1 20.5 1,012.7 2,520.2 61.2 1,072.5 33.6 2,637.8 30.1 1,133.9 29.1 2,759.3 16.9 25.9 1,212.0 2,880.6 64.6 1,284.9 30.8 2,281.4 -.2 944.6 -18.8 1.1 10.2 955.7 2,291.0 11.6 969.2 -11.1 2,317.8 6.5 994.2 -14.9 2,365.8 30.7 980.8 20.6 2,357.5 2,394.2 14.5 1,014.9 7.0 14.0 1,009.4 14.2 2,398.0 2,456.7 22.9 1,045.9 22.5 52.4 1,052.3 2,478.8 29.0 2,492.4 40.5 76.3 1,062.1 2,532.6 50.2 1,082.3 29.3 2,576.9 35.6 66.2 1,093.4 2,598.4 52.1 1,108.9 41.6 2,613.4 24.5 1,120.8 26.9 19.4 1,143.9 21.6 2,653.9 2,685.7 26.2 24.5 1,162.1 17.2 2,722.1 11.1 1,183.4 23.4 1,214.8 2,759.3 18.1 2,760.7 37.1 1,216.3 33.3 2,795.0 31.9 1,233.5 -1.1 2,838.4 31.8 66.1 1,248.0 2,854.9 81.1 1,275.3 46.8 2,903.2 18.6 48.9 1,305.3 2,925.7 62.1 1,310.9 25.9 II III IVp Source: Department of Commerce, Bureau of Economic Analysis. Durable goods Change 292 business inventories Final sales Nondurable goods Final sales 155.5 159.5 163.2 170.7 176.1 187.6 199.9 217.8 230.2 249.8 267.6 285.1 297.7 320.6 360.3 394.9 436.4 464.6 493.7 552.5 623.3 695.8 768.4 803.3 845.7 884.5 930.4 969.7 1,015.9 1,095.0 1,185.0 1,260.1 1,309.7 1,348.1 1,388.9 1,447.6 1,503.9 1,547.3 1,595.7 1,336.8 1,335.4 1,348.6 1,371.6 1,376.7 1,379.3 1,388.6 1,410.8 1,426.5 1,430.2 1,450.3 1,483.5 1,489.4 1,492.6 1,510.0 1,523.6 1,538.7 1,544.5 1,544.4 1,561.5 1,590.4 1,579.6 1,597.9 1,614.8 Change in business inventories 1.1 1.6 3.0 2.7 3.0 1.0 3.0 3.6 5.0 4.5 3.2 2.2 5.3 2.7 2.9 3.1 1.2 6.3 12.8 6.9 4.3 -4.9 20.6 1.0 -S.9 23.9 17.6 9.0 2.8 -5.5 10.5 5.6 14.3 17.9 4.4 27.7 1.0 9.0 33.8 18.5 9.1 22.7 21.4 10.1 7.4 '.4 23.4 35.8 20.9 30.6 10.5 -2.5 -2.1 -1.7 -6.2 5.3 3.9 33.0 34.3 34.4 30.3 36.2 Services 192.7 206.8 220.8 236.1 252.0 271.4 291.5 319.2 349.5 383.9 418.2 458.5 503.8 550.5 600.5 665.6 745.8 823.8 916.4 1,023.1 1,131.7 1,274.1 1,423.3 1,566.9 1,720.9 1,871.8 2,054.6 2,224.2 2,398.2 2,600.0 2,795.3 3,016.9 3,201.3 3,411.1 3,589.5 3,772.3 3,980.7 4,187.3 4,432.8 3,338.4 3,387.5 3,432.1 3,486.4 3,527.4 3,561.8 3,612.4 3,656.1 3,695.1 3,749.6 3,800.8 3,843.9 3,903.0 3,961.4 4,011.0 4,047.3 4,096.2 4,162.2 4,208.1 4,282.7 4,338.2 4,400.1 4,462.3 4,530.4 Structures 62.5 61.9 63.6 67.8 72.7 78.4 84.7 88.0 89.6 100.0 108.3 109.7 128.4 146.9 162.9 165.6 166.7 191.2 226.8 271.8 310.6 319.1 350.0 342.0 366.8 423.6 456.3 477.4 489.3 506.7 519.4 523.1 481.4 512.3 546.5 593.2 616.8 663.6 705.5 502.3 512.4 510.1 524.4 528.8 538.6 550.2 568.5 568.0 593.1 602.9 608.8 615.5 610.2 617.0 624.4 638.1 662.8 670.1 683.3 690.8 698.2 709.8 723.2 TABLE B-9.—Real gross domestic product by major type of product, 1959-97 [Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates] Goods Year or quarter 1959 I960 1961 1962 1963 1964 .. 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 .. 1981 1982 . . 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 1992:1 II III IV 1993-1 II Ill IV 1994:1 || Ill IV 1995-1 II Ill IV 1996-1 II Ill IV 1997-1 II Ill IV/> Final Change in Gross sales of busidomestic domes- ness tic product product inventories 2,210.2 2,262.9 2,314.3 2,454.8 2,559.4 2,708.4 2,881.1 3,069.2 3,147.2 3,293.9 3,393.6 3,397.6 3,510.0 3,702.3 3,916.3 3,891.2 3,873.9 4,082.9 4,273.6 4,503.0 4,630.6 4,615.0 4,720.7 4,620.3 4,803.7 5,140.1 5,323.5 5,487.7 5,649.5 5,865.2 6,062.0 6,136.3 6,079.4 6,244.4 6,389.6 6,610.7 6,742.1 6,928.4 7,191.4 6,175.7 6,214.2 6,260.7 6,327.1 6,327.9 6,359.9 6,393.5 6,476.9 6,524.5 6,600.3 6,629.5 6,688.6 6,703.7 6,708.8 6,759.2 6,796.5 6,826.4 6,926.0 6,943.8 7,017.4 7,101.6 7,159.6 7,214.0 7,290.3 2,206.9 2,264.2 2,318.0 2,445.4 2,552.4 2,705.1 2,860.4 3,033.5 3,125.1 3,278.0 3,377.2 3,406.5 3,499.8 3,689.5 3,883.9 3,873.4 3,906.4 4,061.7 4,240.8 4,464.4 4,614.4 4,641.9 4,691.6 4,651.2 4,821.2 5,061.6 5,296.9 5,480.9 5,626.0 5,855.1 6,028.7 6,126.7 6,082.6 6,237.4 6,368.9 6,551.2 6,712.7 6,901.0 7,124.2 6,175.8 6,203.8 6,249.5 6,320.7 6,297.3 6,344.9 6,379.3 6,453.8 6,473.0 6,526.7 6,580.4 6,624.8 6,654.3 6,685.3 6,739.3 6,771.9 6.815.0 6,902.3 6,905.0 6,981.7 7,034.1 7,077.7 7,160.3 7,224.6 13.2 10.5 8.6 19.5 17.8 15.6 30.3 42.4 32.0 26.9 27.0 5.4 22.3 24.7 37.7 23.4 -10.2 29.8 38.8 43.3 23.4 -10.2 33.1 -15.6 -5.7 75.3 30.2 11.1 26.4 11.7 33.3 10.4 -3.0 7.0 22.1 60.6 27.3 25.0 62.2 -.5 11.0 12.0 5.6 32.3 16.6 15.3 24.2 53.1 75.9 49.7 63.6 48.5 21.6 17.0 22.2 8.0 21.3 37.9 32.9 63.7 77.6 47.5 59.9 Total Total 785.2 796.8 799.4 857.8 886.4 940.8 1,017.8 1,106.9 1,120.2 1,170.8 1,204.7 1,188.8 1,216.8 1,305.9 1,424.5 1,403.1 1,380.2 1,479.5 1,555.1 1,652.0 1,706.0 1,689.7 1,761.8 1,681.0 1,748.9 1,926.4 1,966.1 2,018.8 2,077.9 2,181.0 2,301.8 2,304.8 2,262.7 2,321.0 2,391.5 2,514.2 2,574.2 2,662.6 2,808.6 2,289.2 2,301.2 2,327.2 2,366.4 2,363.6 2,383.2 2,382.7 2,436.5 2,476.7 2,508.6 2,508.4 2,563.1 2,563.4 2,548.5 2,576.8 2,608.1 2,614.6 2,658.8 2,673.1 2,704.1 2,769.3 2,796.7 2,815.4 2,852.9 Final sales 1,706.7 1,762.6 1,853.3 1,940.6 2,011.7 2,055.0 2,171.0 2,269.2 2,295.4 2,265.9 2,314.0 2,370.7 2,453.9 2,545.0 2,635.5 2,739.4 2,289.3 2,290.7 2,316.0 2,360.1 2,332.9 2,368.1 2,368.6 2,413.2 2,424.5 2,433.8 2,458.9 2,498.4 2,513.5 2,525.3 2,557.4 2,583.8 2,604.1 2,635.5 2,634.0 2,668.4 2,699.6 2,711.8 2,760.7 2,785.3 Source: Department of Commerce, Bureau of Economic Analysis. 293 Durable goods Change in business inventories Final sales 604.4 637.6 703.1 758.2 793.6 819.8 897.0 951.9 963.9 934.2 965.9 1,007.0 1,056.7 1,124.3 1,205.8 1,295.0 945.2 953.8 1LO 12.0 970.0 5.6 994.8 32.3 977.3 16.6 1,009.0 15.3 1,003.4 24.2 1,038.2 53.1 1,040.4 75.9 1,044.7 49.7 1,062.1 63.6 1,079.4 48.5 1,094.9 21.6 1,110.6 17.0 1,137.2 22.2 1,154.3 8.0 1,171.9 21.3 1,210.0 37.9 1,211.4 32.9 1,230.1 63.7 1,245.8 77.6 1,281.4 47.5 1,320.4 59.9 1,332.3 -15.6 -5.7 75.3 30.2 11.1 26.4 11.7 33.3 10.4 -3.0 7.0 22.1 60.6 27.3 25.0 62.2 Change in business inventories -17.8 4.9 49.7 10.0 .9 23.5 17.6 22.4 2.7 -16.6 -10.9 15.8 32.3 27.3 15.9 28.9 -18.7 1.2 -11.4 -14.8 20.7 7.0 13.8 21.9 28.0 39.1 28.2 33.8 39.1 25.2 20.2 24.7 16.3 17.0 31.3 -.9 29.9 43.8 17.5 24.5 Nondurable goods Final sales Change in business inventories 1,122.6 2.0 1,142.6 -10.3 1,160.9 26.1 1,189.0 20.1 1,223.5 10.3 1,239.2 2.4 1,274.8 -6.1 1,317.2 11.0 1,331.3 7.6 1,331.8 13.4 1,348.1 17.9 1,363.8 6.2 1,397.5 28.2 1,421.9 -.2 1,433.2 9.1 1,451.6 33.3 1,344.2 18.1 1,336.9 9.7 1,346.0 23.4 1,365.3 20.5 1,355.6 11.6 1,359.2 9.7 1,365.2 1.4 1,375.3 2.1 1,384.3 25.0 1,389.3 36.8 1,397.2 21.4 1,419.3 29.7 1,419.1 9.1 1,415.5 -3.9 -3.4 1,421.8 1,431.3 -2.8 1,434.5 -8.3 1,429.3 4.3 1,426.5 6.6 1,442.6 33.8 1,458.3 33.8 1,437.5 33.8 1,449.0 30.1 1,461.8 35.4 Services 1,115.3 1,167.1 1,219.9 1,277.5 1,336.9 1,406.3 1,472.5 1,557.8 1,639.4 1,712.0 1,774.1 1,824.0 1,875.8 1,936.1 2,004.4 2,063.3 2,123.5 2,182.9 2,250.5 2,334.3 2,391.3 2,441.4 2,475.8 2,518.7 2,598.4 2,678.0 2,797.8 2,903.2 3,011.6 3,128.6 3,208.5 3,295.4 3,332.3 3,411.1 3,469.5 3,542.9 3,614.7 3,686.6 3,790.5 3,379.4 3,398.6 3,424.2 3,442.3 3,447.0 3,454.1 3,480.4 3,496.4 3,510.4 3,533.9 3,559.7 3,567.7 3,583.1 3,610.5 3,630.6 3,634.5 3,648.4 3,684.9 3,689.0 3,723.9 3,743.9 3,774.4 3,804.8 3,839.0 Structures 299.4 296.5 304.7 322.2 343.9 367.0 385.4 385.9 380.2 403.6 408.8 391.1 427.4 459.0 469.0 420.5 382.3 418.3 458.7 498.1 511.7 475.9 468.8 428.5 460.7 523.1 550.3 558.4 554.6 550.8 546.0 533.3 484J5 512.3 528.7 554.9 555.0 582.2 599.4 507.1 514.4 509.4 518.5 517.5 522.8 530.3 544.5 538.6 559.0 562.1 560.1 559.0 550.9 553.4 556.7 565.7 584.9 585.0 592.9 595.1 595.7 600.7 606.3 TABLE B-10.—Gross domestic product by sector, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Business ' Year or quarter Gross domestic product Households and institutions Nonfarm ' Total Total 1 Nonfarm less housing Housing Farm Total Private households Nonprofit institutions General government 2 Total Federal 382.4 12.4 418.0 35.6 3.6 8.9 57.9 31.8 18.9 4313 3927 139 3.8 329 386 198 101 615 403.4 41.4 3.7 10.7 444.8 20.1 14.5 34.2 65.5 479.3 434.7 44.6 15.6 3.8 11.8 36.3 20.2 70.1 47.4 16.7 3.8 505.5 20.4 12.8 38.1 458.1 74.8 50.2 17.9 3.9 80.4 545.5 495.3 19.3 14.0 40.5 591.9 538.4 4.0 53.5 21.9 19.3 15.3 86.0 42.3 47.1 647.5 590.6 57.0 21.3 4.0 17.2 22.9 96.1 23.4 4.2 681.5 620.6 60.8 22.2 19.2 106.5 51.6 743.4 4.4 22.7 21.7 118.4 56.5 678.6 64.8 26.1 4.4 798.1 728.2 69.9 29.5 25.0 60.2 25.2 129.5 834.1 32.4 759.2 74.9 4.5 27.9 64.3 26.2 142.9 905.8 824.1 81.7 35.6 4.6 68.2 28.1 31.1 155.9 88.7 4.6 995.6 906.9 32.6 39.0 34.3 170.1 73.1 1,104.9 1,007.9 96.9 43.0 4.8 38.2 76.9 49.8 185.0 1,198.6 1,092.8 105.9 47.4 47.2 4.6 42.6 203.7 83.5 47.4 227.1 91.7 1,302.7 1,188.4 114.3 52.0 4.6 48.8 5.4 464 57.1 51.7 2458 97.9 1,469.6 1,3446 125.0 139.4 62.4 5.9 1,650.3 1,510.9 47.2 56.5 266.9 106.1 1,877.1 1,721.3 155.8 54.7 69.8 6.5 63.2 289.7 113.8 6.4 2,099.7 1,923.6 176.1 77.3 71.0 316.0 122.3 64.5 2,290.2 2,085.0 87.1 6.1 205.1 56.1 81.0 350.8 135.6 2,561.9 2,326.6 97.6 6.2 151.0 235.3 69.9 91.5 386.4 6.3 102.0 419.2 2,649.5 2,390.0 259.5 65.1 108.2 164.0 2,900.8 2,624.1 276.7 6.3 112.9 445.3 173.5 492 119.2 3,221.1 2,918.6 302.5 7.3 123.9 481.7 190.8 68.5 131.2 3,453.1 3,121.1 332.0 67.1 140.9 7.3 133.6 519.6 203.6 7.7 3,653.7 3,295.2 358.5 145.9 551.9 211.1 63.0 153.7 386.4 7.7 3,868.0 3,481 6 221.3 651 173.3 165.6 586.0 4,169.6 3,750.4 419.2 8.3 186.8 63.8 195.1 621.0 230.0 451.4 76.2 214.6 8.9 205.7 660.3 240.5 4,487.5 4,036.1 9.4 228.5 709.0 252.7 4,717.3 4,234.1 483.2 79.6 237.9 509.9 9.1 248.3 750.7 268.1 4,835.6 4,325.7 72.9 257.4 543.2 10.1 269.0 781.0 274.4 5,103.8 4,560.6 80.6 279.1 10.7 285.8 5,380.1 4,822.9 557.1 73.0 296.5 808.5 276.9 594.4 11.0 301.7 832.7 275.2 5,718.1 5,123.6 83.5 312.7 629.2 11.8 319.9 858.9 275.5 6,001.3 5,372.0 73.5 331.8 6,311.6 5,652.8 658.8 89.4 346.0 11.5 334.6 281.4 889.0 11.4 355.0 919.7 285.9 689.4 6,702.6 6,013.2 94.8 366.3 9.7 260.4 771.7 274.4 5,000.9 4,475.0 525.9 79.2 270.1 1992:1 II 5,062.7 4,531.5 531.2 80.3 278.3 10.0 268.3 780.0 275.8 5,121.0 4,549.7 571.3 84.1 281.7 10.2 271.5 784.8 275.2 Ill 10.4 275.8 787.6 272.1 544.4 78.7 286.2 5,230.6 4,686.2 IV 10.5 279.6 801.4 278.9 5,282.0 4,725.6 556.5 71.0 290.1 1993:1 5,333.4 4,778.7 554.7 II 76.2 294.5 10.6 283.9 805.0 276.2 Ill 10.7 288.2 557.1 5,398.6 4,841.5 65.1 298.9 812.0 277.2 10.8 291.6 815.7 5,506.2 4,945.9 560.3 275.3 IV 79.9 302.4 10.8 295.1 825.4 277.5 5,572.3 4,984.5 587.8 90.7 305.9 1994:1 10.9 298.7 831.8 277.7 5,684.9 5,101.6 583.3 85.0 309.6 II Ill 5,756.2 5,158.0 598.2 11.1 303.8 834.7 80.8 314.9 273.6 608.4 11.3 309.2 838.9 272.0 5,858.8 5,250.4 77.5 320.5 IV 11.7 313.8 5,923.8 5,305.7 618.2 275.4 69.6 325.5 849.9 1995:1 5,952.4 5,326.2 11.8 318.3 855.8 275.2 626.2 71.1 330.1 II 6,032.2 5,403.0 629.2 73.4 333.5 11.9 321.6 862.2 276.1 Ill 11.9 326.0 867.6 275.3 6,096.6 5,453.3 643.3 79.8 337.9 IV 83.4 340.3 11.8 328.5 878.3 645.1 6,165.6 5,520.5 280.5 1996:1 652.8 6,289.2 5,636.3 11.6 332.3 886.1 281.9 II 88.6 343.9 11.4 336.6 893.9 664.4 6,341.7 5,677.3 92.5 347.9 282.1 Ill 11.1 341.0 897.8 281.1 673.0 6,450.0 5,777.1 93.0 352.0 IV 93.4 357.7 11.1 346.6 909.4 286.2 6,573.1 5,892.5 680.6 1997.- 1 II 686.8 11.3 352.3 915.8 286.2 97.1 363.6 6,657.9 5,971.0 11.4 357.9 692.7 286.1 Ill 6,736.8 6,044.2 95.0 369.3 923.2 6,842.5 6,145.2 697.3 93.7 374.7 11.6 363.1 930.5 285.4 IV* 1 Gross domestic business product equals gross domestic product less gross product of households and institutions and of general ment. Nonfarm product equals gross domestic business product less gross farm product. 2 Equals compensation of general government employees plus general government consumption of fixed capital. Source: Department of Commerce, Bureau of Economic Analysis. 1959 . .. 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 507.2 526.6 544.8 585.2 617.4 663.0 719.1 787.8 833.6 910.6 982.2 1,035.6 1,125.4 1,237.3 1,382.6 1,496.9 1,630.6 1,819.0 2,026.9 2,291.4 2,557.5 2,784.2 3,115.9 3,242.1 3,514.5 3,902.4 4,180.7 4,422.2 4,692.3 5.049.6 5,438.7 5,743.8 5,916.7 6,244.4 6,558.1 6,947.0 7,265.4 7,636.0 8,083.4 6,121.8 6,201.2 6,271.7 6,383.1 6,444.5 6,509.1 6,574.6 6,704.2 6,794.3 6,911.4 6,986.5 7,095.7 7,168.9 7,209.5 7,301.3 7,381.9 7,467.5 7,607.7 7,676.0 7,792.9 7,933.6 8,034.3 8,124.3 8,241.5 436.9 451.1 464.9 499.5 525.9 564.7 613.8 670.4 703.7 766.1 823.3 860.3 933.9 1,028.3 1,154.6 1,246.0 1,351.5 1,516.0 1,697.5 1,931.9 2,164.1 2,346.3 2,631.8 2,714.7 2,950.0 3,289.6 3,520.2 3,716.7 3,933.1 4,233.4 4,563.7 4,796.9 4,908.5 5,184.4 5,453.1 5,801.6 6,074.7 6,401.0 6,797.4 5,080.1 5,143.0 5,205.2 5,309.3 5,353.0 5,409.6 5,463.7 5,586.1 5,663.0 5,769.9 5,837.0 5,936.3 5,993.5 6,023.5 6,105.5 6,176.5 6,249.0 6,377.7 6,434.2 6,543.1 6,666.5 6,755.0 6,831.8 6,936.2 294 State and local 26.1 286 31.3 33.8 36.7 40.0 43.7 49.0 54.9 61.9 69.3 78.7 87.7 96.9 108.1 120.3 135.4 1479 160.9 175.9 193.7 215.2 235.4 255.2 271.8 290.9 316.0 340.7 364.7 391.0 419.8 456.3 482.6 506.6 531.6 557.5 583.4 607.6 633.8 497.3 504.2 509.6 515.5 522.5 528.9 534.8 540.4 547.8 554.1 561.1 566.9 574.5 580.6 586.1 592.3 597.8 604.2 611.8 616.7 623.3 629.6 637.1 645.1 govern- TABLE B-ll.—Real gross domestic product by sector, 7939-97 [Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates] Business ' Year or quarter Gross domestic product Households and institutions Nonfarm ' Total Total 1 Nonfarm less housing Housing Farm Total Private households Nonprofit institutions General government 2 Total Federal 33.7 105.0 232.1 149.8 78.6 415.1 18.5 35.3 160.0 112.1 18.6 85.9 429.3 236.4 169.4 35.6 87.8 444.6 241.5 113.1 18.1 180.4 34.9 117.2 92.3 461.8 251.7 17.9 475.7 189.9 35.9 17.7 254.3 120.1 95.6 123.4 99.4 492.4 256.8 198.9 34.6 17.5 210.0 36.5 127.9 105.0 509.3 258.8 16.9 35.4 132.6 220.3 542.1 276.4 16.3 110.9 37.7 231.2 136.9 16.3 115.2 571.1 295.1 240.3 36.5 141.0 120.6 592.6 300.6 15.5 301.7 251.1 37.5 145.5 14.7 126.5 607.3 258.7 38.7 144.0 126.4 609.7 288.9 13.8 40.4 147.2 276.1 269,3 13.1 130.6 611.3 282.7 40.4 151.4 135.4 611.5 263.5 12.7 12.4 295.9 40.3 154.9 139.6 614.8 253.8 311.7 39.3 156.1 10.7 143.2 625.2 252.0 315.4 46.4 149.2 631.1 249.0 161.2 10.1 323.4 44.7 10.4 247.5 163.0 150.6 634.3 47.0 639.1 246.3 333.6 167.5 10.5 155.0 44.9 351.7 170.3 10.8 157.5 649.2 247.3 370.7 48.3 173.7 163.1 654.2 245.1 9-4 46.7 246.7 395.6 178.7 8.3 169.8 660.9 174.7 411.6 60.0 182.7 662.3 248.3 7.8 418.7 180.4 62.6 666.6 250.3 188.0 7.6 421.3 40.2 184.8 668.7 254.2 192.3 7.6 56.7 437.5 197.1 188.2 8.7 258.2 676.0 66.9 203.4 8.7 451.9 194.6 693.2 263.9 459.7 64.2 213.5 9.0 204.3 709.9 266.9 473.9 65.3 224.1 724.2 272.3 8.9 215.2 58.2 240.6 491.0 9.5 231.0 741.3 274.1 506.8 65.9 253.4 10.1 243.3 758.1 276.2 70.8 264.1 774.7 280.3 515.9 253.8 10.2 526.8 71.6 9.4 262.6 781.1 281.0 272.1 543.2 80.6 279.1 10.1 269.0 781.0 274.4 267.7 542.1 71.0 290.1 279.8 10.3 782.3 562.7 258.4 85.0 297.9 10.4 287.5 782.6 577.0 74.2 305.1 10.8 294.3 780.3 248.1 585.7 75.5 311.2 10.1 301.1 775.9 240.9 779.4 595.3 79.9 9.6 311.0 236.1 320.6 1992:1 531.3 79.3 277.3 9.9 267.4 779.3 275.8 II 81.4 277.2 532.9 10.1 267.1 780.3 275.0 Ill 570.1 82.8 279.8 782.3 274.0 269.6 10.1 IV 78.7 538.5 272.7 282.0 10.3 271.7 782.0 546.2 74.0 1993:1 284.6 10.3 274.2 782.7 271.3 II 74.7 541.0 289.4 10.4 279.0 782.6 269.2 Ill 61.0 292.5 540.6 10.3 282.2 782.5 267.0 IV 74.4 540.6 283.6 781.3 263.5 293.9 10.3 1994:1 561.9 86.3 294.9 10.3 284.6 782.4 262.5 II 554.4 85.4 296.9 259.8 10.3 286.6 783.0 Ill 86.4 298.8 288.4 564.5 10.4 783.6 257.6 IV 569.8 81.9 301.0 10.5 290.5 781.5 253.8 1995:1 573.9 76.2 292.0 10.8 782.9 252.0 302.8 II 576.7 76.1 304.3 10.8 293.4 782.9 251.0 Ill 71.5 305.9 295.1 574.9 10.8 781.8 249.3 582.4 IV 73.1 307.4 296.7 10.7 773.6 240.3 579.3 76.6 1996:1 307.6 10.5 297.1 769.9 240.5 II 582.6 76.2 310.4 300.1 778.9 242.8 10.3 Ill 588.7 74.6 10.0 302.5 778.1 241.3 312.5 IV 74.7 314.4 592.3 9.6 304.8 776.6 238.9 1997 1 79.0 777.7 594.9 316.9 9.6 307.4 238.2 II 80.4 319.2 237.1 595.6 9.6 309.6 778.8 Ill 595.7 79.6 321.7 9.7 312.1 781.1 236.3 IV* 595.1 80.5 324.6 9.7 314.9 780.1 232.7 1 Gross domestic business product equals gross domestic product less gross product of households and institutions and of general ment. Nonfarm product equals gross domestic business product less gross farm product. 2 Equals compensation of general government employees plus general government consumption of fixed capital. Source: Department of Commerce, Bureau of Economic Analysis. 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 2,210.2 2,262.9 2,314.3 2,454.8 2,559.4 2,708.4 2,881.1 3,069.2 3,147.2 3,293.9 3,393.6 3,397.6 3,510.0 3,702.3 3,916.3 3,891.2 3,873.9 4,082.9 4,273.6 4,503.0 4,630.6 4,615.0 4,720.7 4,620.3 4,803.7 5,140.1 5,323.5 5,487.7 5,649.5 5,865.2 6,062.0 6,136.3 6,079.4 6,244.4 6,389.6 6,610.7 6,742.1 6,928.4 7,191.4 6,175.7 6,214.2 6,260.7 6,327.1 6,327.9 6,359.9 6,393.5 6,476.9 6,524.5 6,600.3 6,629.5 6,688.6 6,703.7 6,708.8 6,759.2 6,796.5 6,826.4 6,926.0 6,943.8 7,017.4 7,101.6 7,159.6 7,214.0 7,290.3 1,721.7 1,758.2 1,795.8 1,911.7 1,997.7 2,122.6 2,268.8 2,419.3 2,470.5 2,590.4 2,670.8 2,673.9 2,777.3 2,958.2 3,159.1 3,125.4 3,100.1 3,298.2 3,475.8 3,687.8 3,804.8 3,779.9 3,878.4 3,772.7 3,946.5 4,266.0 4,425.4 4,563.0 4,699.8 4,882.2 5,049.4 5,097.0 5,026.4 5,184.4 5,317.2 5,530.6 5,657.4 5,842.9 6,094.4 5,119.0 5,156.7 5,198.6 5,263.1 5,260.6 5,287.9 5,318.5 5,401.9 5,447.5 5,520.7 5,547.5 5,606.6 5,618.6 5,622.1 5,672.2 5,716.7 5,750.2 5,838.1 5,854.9 5,928.5 6,009.6 6,064.4 6,114.4 6,189.3 1,677.4 1,710.8 1,748.5 1,868.0 1,953.4 2,083.2 2,227.7 2,383.8 2,430.5 2,555.0 2,634.6 2,635.1 2,736.5 2,920.6 3,127.5 3,095.6 3,050.3 3,256.4 3,431.8 3,652.2 3,763.2 3,741.4 3,816.7 3,705.9 3,916.3 4,211.8 4,357.8 4,499.0 4,635.1 4,826.9 4,984.9 5,026.5 4,954.9 5,103.8 5,246.2 5,446.0 5,582.7 5,766.8 6,013.7 5,039.7 5,075.3 5,115.8 5,184.4 5,186.7 5,213.4 5,257.1 5,327.6 5,361.7 5,435.8 5,461.6 5,524.8 5,542.0 5,545.6 5,600.2 5,643.0 5,673.0 5,761.3 5,779.8 5,853.3 5,929.7 5,983.2 6,034.0 6,108.0 1,524.7 1,548.3 1,576.8 1,685.1 1,760.9 1,881.4 2,014.4 2,159.8 2,195.9 2,310.9 2,380.0 2,373.6 2,464.3 2,634.3 2,827.3 2,781.6 2,733.9 2,929.7 3,093.7 3,295.2 3,388.4 3,346.2 3,406.8 3,291.9 3,497.0 3,774.7 3,906.2 4,039.3 4,161.0 4,335.8 4,477.9 4,510.5 4,428.1 4,560.6 4,704.1 4,883.3 5,005.7 5,181.4 5,419.2 4,508.4 4,542.4 4,545.7 4,645.9 4,640.5 4,672.5 4,716.5 4,787.1 4,799.8 4,881.5 4,897.1 4,954.9 4,968.1 4,968.8 5,025.4 5,060.6 5,093.9 5,179.0 5,191.3 5,261.3 5,335.3 5,388.2 5,439.2 5,514.2 295 State and local 186.4 196.2 206.4 213.6 224.6 238.4 253.0 268.4 279.2 294.8 307.8 321.5 334.9 347.4 360.2 372.6 381.7 386.4 392.6 401.8 409.3 414.5 414.2 416.4 414.4 417.6 429.2 443.0 452.0 467.3 481.9 494.5 500.1 506.6 514.5 524.2 532.2 535.2 543.8 503.5 505.3 508.4 509.3 511.4 513.4 515.5 517.8 519.9 523.2 526.0 527.8 530.9 531.9 532.6 533.5 529.6 536.3 537.0 537.9 539.9 542.1 545.2 547.9 govern- TABLE B-12. ross domestic product by industry, 1959-96 [Billions of dollars] Private industries Gross AgriculManufacturing domes- ture, Contic forMining strucproduct estry, tion Dura- Nonble durable and Total fishing goods goods Year Finance, TransStainsurporta- Wholetistition sale Retail ance, Services cal and trade and dispublic trade real creputilities estate ancy 1 Government Based on 1972 SIC: 1959 507.2 20.3 12.5 23.7 140.3 81.7 58.6 44.9 36.0 49.1 68.6 48.4 -1.6 64.8 I960 1961 1962 1963 1964 526.6 544.8 585.2 617.4 663.0 21.4 21.7 22.1 22.3 21.4 12.9 13.0 13.2 13.5 13.9 24.2 25.2 27.0 28.8 31.5 142.5 82.6 142.9 81.7 156.7 92.1 166.1 98.3 177.9 105.9 59.8 61.3 64.6 67.8 72.0 47.2 48.7 51.8 54.7 58.1 37.6 38.7 41.3 43.0 46.3 50.4 51.7 55.4 57.9 63.5 73.2 77.7 82.2 86.8 92.7 51.6 55.0 59.3 63.4 69.1 -3.2 -2.8 -1.8 -3.0 -1.5 68.9 73.0 78.2 83.9 90.1 1965 1966 1967 1968 1969 719.1 787.8 833.6 910.6 982.2 24.2 25.4 24.9 25.7 28.6 14.0 14.7 15.2 16.3 17.1 34.6 37.7 39.5 43.3 48.4 196.3 215.3 220.8 241.1 254.4 118.8 77.5 131.1 84.3 134.1 86.7 146.3 94.8 154.4 100.0 62.2 67.1 70.4 76.2 82.5 49.9 54.3 57.7 63.3 68.4 68.0 72.7 78.2 86.6 94.2 99.7 107.8 117.0 126.6 136.1 74.7 82.7 90.8 99.4 110.8 -.8 3.3 1.3 .9 -1.5 96.3 106.9 117.9 131.2 143.3 1970 1971 1972 1973 1974 1,035.6 1,125.4 1,237.3 1,382.6 1,496.9 29.8 32.1 37.3 54.8 53.0 18.7 18.9 19.7 23.8 37.1 51 1 56.1 62.5 69.7 73.6 2496 263.0 290.5 323.5 337.4 1462 154.2 172.6 195.7 202.2 1034 881 721 108.9 97.2 77.9 117.9 108.3 87.0 127.8 119.2 97.6 135.3 129.8 111.0 1002 109.2 118.8 130.9 136.7 1460 162.8 176.2 192.9 208.7 1205 130.4 144.9 163.1 179.3 19 6.1 4.3 3.4 5.5 1576 171.7 187.8 203.8 224.8 1975 1976 1977 1978 1979 1,630.6 1,819.0 2,026.9 2,291.4 2,557.5 54.7 53.5 54.1 63.1 74.5 42.8 75.1 354.9 47.6 84.9 405.5 54.1 93.8 462.6 61.5 110.6 517.1 71.2 124.7 571.3 207.0 239.9 277.6 316.9 343.5 147.8 165.6 185.0 200.2 227.9 142.2 161.2 179.1 202.2 219.0 121.0 129.0 142.2 160.9 182.3 152.8 172.2 190.2 215.6 234.2 226.6 250.0 283.4 328.0 370.6 199.1 223.9 255.5 294.6 333.2 12.1 19.9 18.2 18.1 28.2 249.3 271.2 293.5 319.8 348.2 1980 1981 1982 1983 1984 2,784.2 3,115.9 3,242.1 3,514.5 3,902.4 66.7 81.1 77.0 62.5 83.5 348.7 388.1 377.4 397.3 469.5 235.7 264.0 272.4 292.8 311.1 242.1 276.2 293.0 328.1 357.8 195.2 216.3 219.5 229.1 264.3 245.9 270.4 288.1 321.9 362.2 418.3 470.9 504.0 565.3 625.6 377.3 426.2 471.8 521.5 590.4 27.6 14.9 -2.5 37.1 5.0 385.5 426.5 461.9 492.4 533.8 1985 1986 4,180.7 4,422.2 84.3 132.8 185.5 803.1 477.1 326.0 376.6 280.7 395.0 82.0 86.3 207.3 833.2 487.0 346.2 393.8 293.5 415.2 690.6 760.4 651.1 712.2 2.4 578.6 23.3 615.0 88.3 217.0 889.2 513.3 375.9 420.5 300.8 435.8 99.9 233.4 971.5 556.6 414.8 443.4 336.3 459.3 96.3 242.2 1,013.5 574.9 438.6 460.9 356.3 490.2 829.7 891.4 959.3 784.6 -15.4 653.2 877.8 -47.3 694.9 965.5 13.2 739.2 .. . .. . 112.7 151.7 149.5 127.5 134.2 128.6 129.6 129.8 138.9 165.0 584.4 652.1 649.8 690.2 780.6 Based on 1987 SIC: 1987 1988 1989 4,692.3 88.5 5,049.6 88.9 5,438.7 101.9 1990 1991 1992 1993 1994 5,743.8 5,916.7 6,244.4 6,558.1 6,947.0 108.7 112.3 245.2 1,031.4 572.8 458.6 102.9 101.1 228.8 1,028.1 558.3 469.8 112.4 92.2 229.7 1,063.6 573.4 490.3 106.1 94.6 242.4 1,116.5 615.7 500.8 119.2 94.9 268.7 1,216.1 679.2 536.9 17.4 10.1 44.8 52.6 14.6 792.5 839.5 873.6 902.7 933.5 7,265.4 111.0 99.8 286.4 1,286.3 716.8 569.5 622.4 484.4 637.6 1,361.3 1,440.3 -28.2 1995 7,636.0 129.8 113.6 306.1 1,332.1 749.0 583.1 645.3 516.8 667.9 1,448.5 1,539.5 -59.9 1996 Equals gross domestic product (GDP) measured as the sum of expenditures less gross domestic income. Source: Department of Commerce, Bureau of Economic Analysis. 964.1 996.3 1 296 482.1 511.6 528.7 561.7 598.7 367.2 388.1 406.4 423.3 468.0 503.5 517.4 544.3 573.2 615.3 1,024.1 1,081.6 1,147.9 1,218.1 1,267.6 1,059.4 1,107.6 1,200.8 1,267.0 1,350.4 TABLE B-13.—Real gross domestic product by industry, 1977-96 [Billions of chained (1992) dollars] Private industries Year Gross AgriManufacturing culdomes- ture, Contic forMining strucproduct estry, Dura- Nontion ble durable and Total fishing goods goods Not StaTransalloFinance, porta- Wholetisti- Govinsurern- cated tion sale Retail ance, Services cal ment by disindusand trade and try ' public trade real crep-1 utilities ancy estate Based on 1972 SIC: -4.4 23.2 -.9 742.7 786.0 830.7 712.5 37.3 717.4 759.5 34.5 731.6 787.3 49.5 739.4 374.5 386.2 387.9 422.6 465.0 862.8 878.1 875.8 900.0 945.0 810.8 830.0 838.1 862.8 920.8 87.1 232.9 976.4 534.6 442.1 423.8 298.1 496.8 83.6 239.0 967.6 527.4 441.0 421.7 333.0 526.6 968.1 969.0 963.9 3.0 777.9 996.8 28.6 795.7 7.3 35.8 891 864 2396 10417 5650 4779 4539 3228 5092 10157 10414 -184 8100 82.2 104.4 248.8 1,111.0 615.9 494.8 468.2 343.8 537.6 1,069.4 1,099.1 -54.6 829.0 89.1 92.8 251.9 1,106.0 612.9 492.8 474.5 366.3 553.4 1,101.8 1,149.5 14.7 847.7 534 22.9 9.5 1977 1978 1979 4,273.6 4,503.0 4,630.6 57.3 55.2 59.4 82.4 213.8 796.5 435.1 361.9 346.8 201.0 364.5 84.6 221.2 836.5 461.7 374.0 362.8 215.5 389.9 73.6 227.8 864.8 470.5 395.4 378.7 228.2 389.1 1980 1981 1982 1983 1984 4,615.0 4,720.7 4,620.3 4,803.7 5,140.1 58.2 72.3 76.0 54.6 73.2 82.0 81.4 78.8 73.7 82.0 1985 1986 5,323.5 5,487.7 85.4 85.9 1987 1988 1989 56495 51865.2 6,062.0 1990 1991 1992 1993 1994 6,136.3 6,079.4 6,244.4 6,389.6 6,610.7 214.7 195.4 172.8 181.0 210.1 822.6 858.5 810.0 856.7 948.1 451.2 468.6 427.9 448.3 521.8 371.5 390.5 386.2 413.8 426.1 385.0 391.0 379.6 405.2 422.1 226.0 241.1 246.5 251.5 286.8 44.5 22.0 -3.4 49.7 6.5 748.8 -17.0 749.4 11.7 3.4 748.3 753.0 -15.1 760.1 18.0 Based on 1987 SIC: 99.4 96.9 101.4 97.5 112.4 92.2 102.3 96.4 119.1 102.5 247.5 229.0 229.7 234.3 249.8 1,090.0 1,050.2 1,063.6 1,100.8 1,193.2 600.4 568.0 573.4 608.3 671.3 489.4 482.2 490.3 492.5 522.0 491.7 512.8 528.7 551.9 584.1 360.5 381.2 406.4 416.5 448.6 546.4 534.1 544.3 566.2 601.2 ,109.0 ,105.7 ,147.9 ,174.3 ,196.9 1,181.7 1,174.2 1,200.8 1,223.5 1,256.5 18.5 10.3 44.8 51.3 13.9 867.0 25.3 873.7 7.8 .0 873.6 875.8 -3.7 878.3 -33.8 6,742.1 111.4 108.4 254.1 1,273.7 731.2 543.2 593.8 457.5 622.5 1,231.1 1,298.8 -26.3 877.4 -61.3 1995 6,928.4 111.7 101.9 264.3 1,323.7 785.5 541.0 608.9 493.3 648.5 1,258.5 1,342.9 -54.7 874.1 -48.1 1996 1 Equals the current-dollar statistical discrepancy deflated by the implicit price deflator for gross domestic business product. 2 Equals GDP less the statistical discrepancy and the sum of the most detailed industry groups shown here. Source-. Department of Commerce, Bureau of Economic Analysis. 297 TABLE B—14.—Gross domestic product of nonfinaneial corporate business, 1959—97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Net domestic product Year or quarter Gross domestic product of noninancial corporate business Domestic income Consumption of fixed capital Total Indirect business 1 Total axes Corporate profits with inventory valuation and capital consumption adjustments CompensaProfits tion Profits after tax of employ- Total Profits Profits Undisees before tax Divi- tributed tax iability Total dends profits 20.7 171.5 43.2 43.6 181.2 40.7 40.3 19.2 185.3 41.6 40.1 19.5 20.6 200.1 49.1 45.0 22.8 211.1 54.9 49.8 226.7 61.2 56.0 24.0 27.2 66.2 246.5 71.4 71.4 29.5 274.0 76.1 27.8 292.3 73.0 67.5 33.6 323.2 77.5 74.0 358.8 72.5 70.8 33.3 378.7 58.3 58.1 27.2 402.0 68.8 67.1 29.9 447.1 80.4 78.6 33.8 40.2 505.9 87.1 98.6 42.2 556.8 74.8 109.2 41.5 580.3 97.3 109.9 657.4 118.4 137.3 53.0 742.6 139.4 158.6 59.9 852.9 154.0 183.5 67.1 69.6 968.1 147.2 195.5 1,058.5 130.1 181.6 67.0 1,171.5 160.3 181.4 63.9 1,217.0 142.1 133.7 46.3 59.4 1,280.5 181.5 157.4 73.7 1,421.7 239.0 191.0 69.9 1,521.9 243.5 167.6 1,603.2 226.0 151.5 75.6 93.5 1,715.5 258.6 214.9 1,846.7 294.3 260.6 101.7 1,950.0 276.7 237.0 98.8 2,056.0 275.3 237.3 95.7 85.4 2,090.6 269.7 218.1 2,195.3 295.6 257.8 91.1 2,290.7 346.4 308.6 105.0 2,426.7 437.1 392.3 128.8 2,555.5 474.6 438.3 139.4 2,682.9 545.8 477.2 154.8 2,866.5 2,548.4 2,152.8 285.5 236.3 82.4 2,878.9 3,202.2 1992:1 2,911.0 2,579.2 2,183.2 290.0 262.6 93.6 3,236.1 II 2,926.7 2,588.9 2,209.3 278.9 254.4 89.9 3,270.5 Ill 3,341.7 2,664.0 2,236.1 328.2 277.9 98.4 3,012.0 IV 2,667.7 2,253.5 316.0 275.6 92.5 3,015.9 3,351.8 1993:1 II 2,709.2 2,279.9 334.4 306.9 104.7 3,063.0 3,400.3 2,740.1 2,301.5 345.5 303.1 102.9 3,444.3 Ill 3,099.! 2,809.6 2,327.8 389.9 349.0 120.0 3,181.9 3,525.2 IV 2,868.9 2,372.5 405.4 359.1 119.5 3,249.3 1994:1 3,624.5 II 2,931.1 2,409.8 427.0 380.7 124.6 3,317.3 3,668.9 3,373.2 2,980.9 2,439.2 444.1 400.7 130.1 3,729.1 Ill 3,456.4 3,059.2 2,485.2 472.0 428.9 141.1 3,816.4 IV 3,469.2 3,073.5 2,519.3 449.0 437.6 140.8 3,833.6 1995:1 II 3,092.7 2,538.4 450.3 428.3 135.3 3,860.4 3,489.8 3,163.7 2,568.6 494.3 443.1 140.1 3,940.4 3,564.9 Ill 3,603.7 3,198.5 2,595.5 504.8 444.3 141.5 3,986.8 IV 3,232.0 2,613.1 525.4 463.4 149.2 3,645.2 4,030.7 1996:1 II 3,722.7 3,302.5 2,668.6 542.8 477.4 154.1 4,112.9 3,345.9 2,704.7 553.3 483.4 156.8 3,769.7 Ill 4,165.8 3,388.3 2,745.3 561.7 484.4 159.0 3,818.3 4,220.1 IV 3,893.4 3,461.2 2,801.9 575.4 494.5 159.4 4,299.7 1997:1 II 3,950.4 3,513.3 2,840.1 586.7 501.5 161.8 4,361.1 Ill 3,585.7 2,880.6 618.2 534.2 174.1 4,031.0 4,446.3 IV* 2.943.6 1 Indirect business tax and nontax liability plus business transfer payments less subsidies. Source: Department of Commerce, Bureau of Economic Analysis. 1959 1960 1961 1962 1963 1964 1965 1966 1967 . 1968 1969 ZII 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 267.5 278.1 285.5 311.7 331.8 358.1 393.5 431.0 453.4 500.5 543.3 561.4 606.4 673.3 754.5 814.6 881.2 995.3 1,125.4 1,284.1 1,429.7 1,553.8 1,767.3 1,823.4 1,950.3 2,187.5 2,319.3 2,416.3 2,589.6 2,805.2 2,950.9 3,084.0 3,132.1 3,262.6 3,430.4 3,709.7 3,905.3 4,132.4 23.6 24.5 25.1 26.0 27.0 28.4 30.3 33.2 36.3 39.9 44.1 48.5 53.0 57.6 62.6 73.3 87.5 96.9 108.8 124.4 143.9 165.4 193.2 209.7 222.7 228.7 238.9 253.2 263.6 279.7 297.4 308.4 320.2 330.5 340.3 360.7 373.4 393.4 413.3 323.3 325.1 343.8 329.7 335.8 337.3 344.5 343.4 375.1 351.6 355.9 360.0 364.4 370.6 375.4 383.1 385.5 390.2 396.2 401.8 406.3 4107 415.3 471.0 243.8 253.6 260.5 285.7 304.8 329.8 363.2 397.8 417.2 460.5 499.2 512.8 553.4 615.8 691.8 741.3 793.7 898.4 1,016.7 1,159.7 1,285.8 1,388.4 1,574.1 1,613.7 1,727.6 1,958.8 2,080.4 2,163.1 2,326.1 2,525.5 2,653.5 2,775.6 2,811.9 2,932.2 3,090.1 3,349.0 3,531.9 3,739.0 26.0 28.3 29.5 32.0 34.0 36.6 39.2 40.5 43.1 49.7 54.7 58.8 64.5 69.2 76.3 81.4 87.4 95.1 104.1 116.4 125.4 141.6 170.4 1771 189.0 210.2 224.4 235.8 246.7 263.5 280.8 296.8 318.0 3370 358.5 389.0 399.8 421.8 439.7 330.4 331.8 337.8 348.0 348.2 353.8 359.7 372.3 380.4 386.1 392.; 397.1 395.7 397.1 401.3 405.2 413.2 420.2 423.7 430.0 432.2 4370 445.3 444.4 217.8 225.3 230.9 253.7 270.8 293.2 324.0 357.4 374.1 410.8 444.5 454.0 488.9 546.6 615.5 659.9 706.3 803.3 912.6 1,043.2 1,160.4 1,246.8 1,403.7 1,441.6 1,538.6 1,748.6 1,856.0 1,927.3 2,079.3 2,262.0 2,372.7 2,478.8 2,493.9 2,595.1 2,731.6 2,960.1 3,132.1 3,317.2 298 12.9 10.6 10.1 13.0 14.4 18.4 23.4 25.1 22.2 21.3 18.4 12.5 18.7 24.7 37.3 45.2 43.6 56.3 67.2 80.0 87.9 69.2 64.2 34.2 33.8 49.5 25.4 2.1 45.5 79.4 34.8 23.3 8.2 33.1 55.9 104.9 110.6 126.0 Inventory valuation adjustment -0.3 -.2 22.9 21.1 20.7 24.3 27.0 32.1 39.0 41.9 39.7 40.4 37.5 31.0 37.1 44.8 58.4 67.0 68.4 84.4 98.7 116.4 125.9 114.6 117.5 87.4 97.9 117.3 97.6 75.9 121.4 158.8 138.3 141.6 132.8 166.7 203.6 263.5 298.9 322.4 10.0 10.6 10.6 11.4 12.6 13.7 15.6 16.8 17.5 19.1 19.1 18.5 18.5 20.1 21.1 21.7 24.8 28.0 31.5 36.4 38.1 45.3 53.3 53.3 64.2 67.8 72.3 73.9 75.9 79.4 103.5 118.4 124.6 133.6 147.7 158.6 188.3 196.4 153.9 169.0 164.5 179.5 183.1 202.2 200.2 228.9 239.6 256.1 270.6 287.8 296.9 293.0 303.0 302.9 314.2 323.3 326.6 325.5 335.1 339.8 360.1 124.0 29.9 129.7 39.3 -2LJ 134.3 -8.f 30.2 .i 33.2 146.3 143.5 39.6 -12.5 144.2 58.0 -17.1 147.6 52.5 -is. 155.6 73.4 150.4 89.2 -4.3 158.7 97.4 -15.1 158.5 112.1 -21.2 166.8 121.0 -23.6 183.4 113.5 -50.3 189.1 103.9 -37.8 191.4 111.6 -9.3 A 189.3 113.6 200.3 113.9 -5.1 -5.4 194.3 129.1 191.8 134.8 -2.7 199.4 126.1 3.3 3.5 207.0 128.2 5.9 208.1 131.7 3.6 207.7 152.4 65 !o -L2 -2.1 -1.6 -3.7 -5.9 -6.6 -4.6 -6.6 -20.0 -39.5 -11.0 -14.9 -16.6 -25.0 -41.6 -43.0 -25.7 -9.9 -9.1 -5.65 1L4 -20.7 -29.3 -17.5 -13.5 4.0 -7.5 -8.5 -16.1 -24.3 -2.5 49 Capital Net con- ntersump- est tion adjustment -0.1 .5 1.2 4.1 5.0 5.7 6.5 6.8 7.0 7.1 7.5 6.7 6.3 8.4 fi -1.6 -4.0 -2.6 -4.5 -6.8 -8.4 4.6 18.3 33.2 53.7 75.4 63.1 64.4 63.1 57.2 51.5 47.6 45.3 46.3 60.8 60.5 71.1 79.7 48.9 49.3 33.0 50.1 52.9 44.5 42.2 45.7 50.6 61.4 64.6 66.7 61.7 59.8 60.4 60.1 67.1 70.8 72.6 74.0 77.4 79.3 80.4 81 fi 3.1 3.5 4.0 4.5 4.8 5.3 6.1 7.4 8.8 10.1 13.2 17.1 18.1 19.2 22.5 28.3 28.7 27.5 30.6 36.3 45.1 58.2 71.9 82.5 76.6 87.8 90.6 98.1 105.3 121.0 145.9 147.5 133.7 104.2 94.5 96.3 102.0 88.5 110.2 106.0 100.8 99.7 98.2 95.0 93.1 91.9 91.1 94.3 97.6 102.1 105.2 104.0 100.8 98.2 93.5 91.2 88.0 81.3 83.9 86.6 87.0 TABLE B-15.—Output, costs, and profits of nonflnandal corporate business, 1959-97 [Quarterly data at seasonally adjusted annual rates] Year or quarter Gross domestic product of nonfinancial corporate business (billions of dollars) Current Chained (1992) dollars dollars 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 .. .. 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Current-dollar cost and profit per unit of real output (dollars)1 Total cost and profit 2 Consumption of fixed capital Indirect business 3 taxes Compensation of employees Corporate profits with inventory valuation and capital consumption adjustments Total Profits tax liability Profits after4 tax Net interest 0.188 0.047 0.003 0.023 0.025 .004 .193 .043 .023 .020 .023 .004 .193 .043 .020 .004 .192 .047 .027 .020 .004 .192 .050 .021 .029 .192 .032 .052 .020 .005 .193 .056 .021 .035 .005 .034 .201 .056 .022 .005 .209 .052 .032 .006 .020 .217 .007 .052 .030 .023 .047 .025 .232 .022 .009 .247 .038 .020 .011 .018 .024 .252 .011 .043 .019 .047 .027 .011 .260 .020 .026 .278 .048 .012 .022 .024 .018 .312 .042 .016 .024 .330 .055 .032 .016 .034 .014 .346 .062 .028 .364 .068 .029 .039 .015 .071 .040 .017 .392 .031 .435 .066 .035 .020 .031 .475 .058 .030 .028 .026 .041 .502 .069 .027 .031 .529 .062 .042 .036 .020 .532 .075 .025 .051 .032 .538 .063 .033 .090 .028 .554 .063 .033 .089 .025 .565 .027 .053 .035 .080 .577 .087 .056 .035 .031 .094 .590 .062 .039 .033 .613 .087 .056 .046 .031 .640 .056 .086 .030 .046 .027 .058 .042 .660 .085 .063 .032 .673 .091 .028 .679 .072 .028 .103 .031 .027 .677 .086 .122 .036 .687 .090 .027 .128 .037 .101 .023 .690 .140 .040 .034 1992:1 .063 .669 .089 .026 II .674 .061 .033 .090 .029 Ill .676 .058 .031 .085 .028 IV .069 .672 .099 .030 .030 1993:1 .681 .095 .068 .030 .028 || .069 .028 .680 .100 .031 III .027 .679 .102 .072 .030 IV .027 .078 .675 .113 .035 1994:1 .673 .115 .034 .081 .026 II .677 .085 .026 .120 .035 III .124 .087 .027 .679 .036 IV .028 .678 .129 .038 .090 1995:1 .687 .084 .123 .038 .029 jl .037 .028 .689 .122 .086 III .094 .027 .685 .132 .037 IV .037 .096 .026 .686 .133 1996:1 .687 .138 .099 .025 .039 II .024 .689 .100 .040 .140 Ill .101 .691 .141 .022 .040 IV .102 .040 .693 .142 .021 1997-1 . .697 .143 .103 .021 .040 II .104 .698 .144 .040 .021 Ill .107 .695 .149 .042 .021 'Output is measured by gross domestic product of nonfinancial corporate business in chained (1992) dollars. 2 This is equal to the deflator for gross domestic product of nonfinancial corporate business with the decimal point shifted two places to the3 left. Indirect business tax and nontax liability plus business transfer payments less subsidies. 4 With inventory valuation and capital consumption adjustments. Source: Department of Commerce, Bureau of Economic Analysis. 267.5 910.3 940.4 278.1 285.5 960.5 311.7 1,041.5 331.8 1,101.1 358.1 1,178.5 393.5 1,275.2 431.0 1,364.4 453.4 1,399.1 500.5 1,487.7 543.3 1,546.9 561.4 1,532.5 606.4 1,594.1 673.3 1,719.4 754.5 1,819.7 814.6 1,786.8 881.2 1,759.3 995.3 1,901.3 1,125.4 2,041.8 1,284.1 2,177.1 1,429.7 2,224.2 1,553.8 2,229.9 1,767.3 2,331.9 1,823.4 2,298.8 1,950.3 2,405.1 2,187.5 2,641.2 2,319.3 2,747.3 2,416.3 2,835.4 2,589.6 2,973.9 2,805.2 3,130.1 2,950.9 3,179.8 3,084.0 3,210.2 3,132.1 3,168.8 3,262.6 3,262.6 3,430.4 3,374.4 3,709.7 3,586.3 3,905.3 3,719.7 4,132.4 3,887.8 3,202.2 3,217.0 3,236.1 3,238.4 3,270.5 3,267.0 3,341.7 3,328.2 3,351.8 3,310.2 3,400.3 3,352.5 3,444.3 3,387.2 3,525.2 3,447.7 3,624.5 3,526.1 3,668.9 3,559.8 3,729.1 3,594.6 3,816.4 3,664.9 3,833.6 3,664.9 3,860.4 3,683.2 3,940.4 3,747.7 3,986.8 3,782.9 4,030.7 3,801.8 4,112.9 3,872.4 4,165.8 3,913.7 4,220.1 3,963.5 4,299.7 4,022.2 4,361.1 4,068.9 4,446.3 4,146.5 0.294 .296 .297 .299 .301 .304 .309 .316 .324 .336 .351 .366 .380 .392 .415 .456 .501 .524 .551 .590 .643 .697 .758 .793 .811 .828 .844 .852 .871 .896 .928 .961 .988 1.000 1.017 1.034 1.050 1.063 .995 .999 1.001 1.004 1.013 1.014 1.017 1.022 1.028 1.031 1.037 1.041 1.046 1.048 1.051 1.054 1.060 1.062 1.064 1.065 1.069 1.072 1.072 299 0.026 .026 .026 .025 .025 .024 .024 .024 .026 .027 .028 .032 .033 .033 .034 .041 .050 .051 .053 .057 .065 .074 .083 .091 .093 .087 .087 .089 .089 .089 .094 .096 .101 .101 .101 .101 .100 .101 .101 .100 .105 .099 .101 .101 .102 .100 .106 .099 .099 .098 .099 .101 .100 .101 .101 .101 .101 .101 .101 .101 .100 0.029 .030 .031 .031 .031 .031 .031 .030 .031 .033 .035 .038 .040 .040 .042 .046 .050 .050 .051 .053 .056 .064 .073 .075 .079 .080 .082 .083 .083 .084 .088 .092 .100 .103 .106 .108 .107 .108 .103 .102 .103 .105 .105 .106 .106 .108 .108 .108 .109 .108 .108 .108 .107 .107 .109 .109 .108 .108 .107 .107 .107 TABLE B-16.—Personal consumption expenditures, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Durable goods Year or quarter FurniPersonal conMotor ture vehisumption and expendi- Total 1 cles house- Total 1 tures and hold parts equipment 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 Nondurable goods Cloth- Gasoing line and and shoes oil Food 318.1 42.7 18.9 18.1 148.5 80.7 332.2 43.3 19.7 18.0 152.9 82.3 342.6 41.8 17.8 18.3 156.6 84.0 363.4 46.9 21.5 19.3 162.8 86.1 383.0 51.6 24.4 20.7 168.2 88.3 411.4 56.7 26.0 23.2 178.7 93.6 444.3 633 299 251 1916 1007 481.9 68.3 30.3 28.2 208.8 109.3 . . 509.5 70.4 30.0 30.0 217.1 112.5 559.8 80.8 36.1 32.9 235.7 122.2 604.7 85.9 38.4 34.7 253.2 131.5 648.1 85.0 35.5 35.7 272.0 143.8 702.5 96.9 44.5 37.8 285.5 149.7 770.7 110.4 51.1 42.4 308.0 161.4 851.6 123.5 56.1 47.9 343.1 179.6 931.2 122.3 49.5 51.5 384.5 201.8 1,029.1 133.5 54.8 54.5 420.6 223.1 1,148.8 158.9 71.3 60.2 458.2 242.4 1,277.1 181.1 83.5 67.1 496.9 262.4 1,428.8 201.4 93.1 74.0 549.9 289.2 1,593.5 213.9 93.5 82.3 624.0 324.2 1,760.4 213.5 87.0 1980 86.0 695.5 355.4 1,941.3 230.5 95.8 91.3 758.2 382.8 1981 1982 . . . 2,076.8 239.3 102.9 92.5 786.8 402.6 2,283.4 279.8 126.9 105.3 830.3 422.9 1983 2,492.3 325.1 152.5 117.2 883.6 446.3 1984 2,704.8 361.1 175.7 126.3 927.6 466.5 1985 2,892.7 398.7 192.4 140.3 957.2 490.8 1986 3,094.5 416.7 193.1 150.4 1,014.0 513.9 1987 3,349.7 451.0 207.5 162.8 1,081.1 551.2 1988 3,594.8 472.8 214.4 173.3 1,163.8 588.4 1989 3,839.3 476.5 210.3 176.0 1,245.3 630.5 1990 1991 3,975.1 455.2 187.6 178.5 1,277.6 650.0 1992 4,219.8 488.5 206.9 189.4 1,321.8 660.0 4,459.2 530.2 226.2 204.9 1,370.7 686.8 1993 1994 4,717.0 579.5 246.6 226.2 1,428.4 714.5 4,957.7 608.5 254.8 240.2 1,475.8 735.1 1995 1996 5,207.6 634.5 261.3 252.6 1,534.7 756.1 1997/> 5,488.6 659.4 262.9 267.6 1,592.7 776.4 4,127.6 474.1 199.1 184.8 1,303.1 657.3 1992-1 II 4,183.0 481.3 204.0 186.5 1,308.4 652.3 Ill 4,238.9 492.5 208.3 190.6 1,326.3 657.9 IV 4,329.6 506.2 216.1 195.5 1,349.5 672.3 4,365.4 506.4 212.4 198.0 1,354.4 676.4 1993:1 II 4,428.1 524.2 224.3 202.1 1,366.3 684.1 Ill 4,488.6 537.2 228.5 207.6 1,373.9 690.2 IV 4,554.9 553.1 239.6 212.0 1,388.0 696.6 1994:1 4,616.6 563.2 244.1 216.2 1,404.4 703.9 II 4,680.5 572.4 243.3 223.5 1,416.0 711.8 Ill 4,750.6 583.3 245.4 229.7 1,439.5 718.5 IV 4,820.2 599.3 253.7 235.4 1,453.7 723.7 4,871.7 596.9 249.1 235.8 1,462.7 729.3 1995-1 II 4,934.8 602.8 252.7 237.2 1,472.4 733.0 Ill 4,990.6 616.0 258.9 242.5 1,480.4 737.0 IV 5,033.8 618.4 258.5 245.1 1,487.8 741.2 5,105.8 626.7 262.4 246.5 1,508.1 748.4 1996:1 5,189.1 638.6 264.0 253.8 1,532.3 752.2 II Ill 5,227.4 634.5 260.0 254.2 1,538.3 757.4 IV 5,308.1 638.2 258.9 255.9 1,560.1 766.6 5,405.7 658.4 265.7 263.8 1,587.4 775.5 1997:1 II 5,432.1 644.5 252.7 265.4 1,578.9 771.4 Ill 5,527.4 667.3 268.7 269.9 1,600.8 779.3 \\lp 5,589.3 667.6 264.6 271.5 1,603.9 779.5 1 Includes other items not shown separately. 2 Includes imputed rental value of owner-occupied housing. Source: Department of Commerce, Bureau of Economic Analysis. 1979 : :.: 26.4 27.0 27.6 29.0 29.8 32.4 341 37.4 39.2 43.2 46.5 47.8 51.7 56.4 62.5 66.0 70.8 76.6 84.1 94.3 101.2 107.3 117.2 120.5 130.9 142.5 152.1 163.1 174.4 185.9 199.9 205.9 211.3 225.5 236.5 247.8 254.7 264.3 277.6 219.6 222.3 228.1 232.1 231.3 235.4 238.0 241.6 244.1 245.0 249.0 253.2 252.5 253.4 256.4 256.5 259.8 265.7 265.7 266.2 275.2 274.8 280.5 279.8 300 11.3 12.0 12.0 12.6 13.0 13.6 148 16.0 17.1 18.6 20.5 21.9 23.2 24.4 28.1 36.1 39.7 43.0 46.9 50.1 66.2 86.7 97.9 94.1 93.1 94.6 97.2 80.1 85.4 87.1 96.6 109.2 103.9 106.6 107.6 109.4 114.4 122.6 124.6 102.3 105.8 109.4 108.9 109.7 107.6 105.5 107.7 106.2 105.1 111.8 114.3 115.3 115.8 113.9 112.7 117.1 125.7 121.4 126.0 128.5 121.6 123.5 124.6 Services Fuel oil and coal 4.0 3.8 3.8 3.8 4.0 4.1 44 4.7 4.8 4.7 4.6 4.4 4.6 5.1 6.3 7.8 8.4 10.1 11.1 11.5 14.4 15.4 15.8 14.5 13.6 13.9 13.6 11.3 11.2 11.4 11.4 12.0 11.3 10.9 10.7 10.5 10.2 11.6 10.9 10.4 11.8 10.6 10.8 10.8 10.5 10.9 10.7 11.7 10.1 10.6 9.8 9.6 10.3 10.2 10.7 11.7 11.3 11.2 12.0 11.0 11.0 10.9 10.7 Household operation Total1 Housing 2 127.0 136.0 144.3 153.7 163.2 176.1 1894 204.8 222.0 243.4 265.5 291.1 320.1 352.3 384.9 424.4 475.0 531.8 599.0 677.4 755.6 851.4 952.6 1,050.7 1,173.3 1,283.6 1,416.1 1,536.8 1,663.8 1,817.6 1,958.1 2,117.5 2,242.3 2,409.4 2,558.4 2,709.1 2,873.4 3,038.4 3,236.5 2,350.4 2,393.3 2,420.1 2,473.9 2,504.6 2,537.6 2,577.4 2,613.8 2,649.0 2,692.2 2,727.8 2,767.2 2,812.2 2,859.6 2,894.2 2,927.5 2,970.9 3,018.2 3,054.6 3,109.8 3,159.9 3,208.7 3,259.3 3,317.9 45.0 48.2 51.2 54.7 58.0 61.4 654 69.5 74.1 79.7 86.8 94.0 102.7 112.1 122.7 134.1 147.0 161.5 179.5 201.7 226.6 255.2 287.9 313.2 339.0 370.6 407.1 442.2 476.6 512.9 547.4 586.3 616.5 646.8 672.8 712.7 750.3 787.2 826.4 636.6 643.4 649.9 657.4 662.2 668.8 675.8 684.4 698.1 707.8 717.7 727.2 736.1 745.6 754.7 764.6 773.8 782.5 791.8 800.7 810.5 821.2 831.9 842.2 Trans- MediElec- porta- cal tion tricity care Total and gas 1 18.7 20.3 21.2 22.4 23.6 25.0 265 28.2 30.2 32.3 35.1 37.8 41.0 45.3 49.8 55.5 63.7 72.4 81.9 91.2 100.0 113.0 126.0 141.4 155.9 168.0 180.3 186.9 194.9 206.6 219.8 226.3 237.6 248.2 268.8 283.7 300.7 315.9 328.7 241.5 248.8 243.6 259.0 260.3 264.0 274.1 276.7 274.8 287.1 286.2 286.6 290.6 299.1 305.8 307.3 310.7 317.5 313.4 321.8 320.8 326.7 328.8 338.6 7.6 8.3 8.8 9.4 9.9 10.4 109 11.5 12.2 13.0 14.0 15.2 16.6 18.4 20.0 23.5 28.5 32.5 37.6 42.1 46.8 56.3 63.4 72.6 80.7 84.7 88.8 87.2 88.9 94.1 98.8 98.7 104.9 106.6 115.8 116.6 119.5 125.3 127.2 102.1 106.2 106.6 111.4 112.4 112.6 119.2 118.8 118.2 120.0 115.6 112.8 113.8 118.8 123.3 122.2 124.8 126.7 122.8 126.8 124.9 127.2 125.2 131.5 10.5 11.2 11.7 12.2 12.7 13.4 145 15.9 17.3 18.9 20.9 23.7 27.1 29.8 31.2 33.3 35.7 41.3 49.2 53.5 59.1 64.7 68.7 70.9 79.4 90.0 100.0 107.3 118.2 130.5 137.8 143.7 145.3 158.1 170.2 186.2 203.1 218.4 236.3 154.9 156.9 156.0 164.5 166.8 168.6 170.7 174.5 179.6 184.5 188.3 192.6 196.4 201.1 205.7 209.2 212.3 216.6 219.7 224.8 228.9 233.4 238.5 244.3 16.4 17.6 18.7 20.8 22.6 25.8 28.0 30.7 33.9 39.2 44.7 50.4 56.9 63.8 71.6 80.6 93.5 106.7 123.0 140.0 158.0 181.2 213.0 239.4 267.8 294.1 321.8 346.1 381.1 428.7 477.1 537.7 586.5 646.6 695.6 731.6 772.8 808.1 855.C 624.2 640.6 655.0 666.8 680.8 690.8 701.6 709.2 717.8 726.5 735.9 746.4 760.5 768.4 776.5 785.8 790.3 803.3 811.9 826.9 841.0 849.6 859.7 869.7 TABLE B-17.—Real personal consumption expenditures, 1982-97 [Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates] Durable goods Year or quarter FurniPersonal Motor ture consumption vehi- and expendi- Total » cles house- Total' tures and hold parts equipment Food Cloth- Gaso- Fuel oil line ing and and and coal shoes oil 3,081.5 2855 1339 913 10806 565.1 1571 91.0 128 3,240.6 327.4 160.5 103.5 1,112.4 579.7 167.3 93.0 12.9 3,407.6 374.9 187.7 115.5 1,151.8 589.9 179.9 95.9 12.8 3,566.5 411.4 211.2 125.3 1,178.3 602.2 186.5 97.8 13.0 3,708.7 448.4 224.8 140.6 1,215.9 614.0 199.9 102.5 13.4 3,822.3 454.9 216.2 149.9 1,239.3 620.8 205.4 105.3 13.0 3972.7 4835 2294 1608 12744 6416 2100 1065 132 4,064.6 496.2 230.3 170.9 1,303.5 650.1 220.7 108.1 12.6 41322 4933 2243 1735 13161 6629 2179 1073 112 4405:8 462.0 193.2 177.0 1,302.9 659.6 215.9 103.4 10.8 4,219.8 488.5 206.9 189.4 1,321.8 660.0 225.5 106.6 10.9 43436 5238 2189 2078 13510 6753 2342 1087 107 4,486.0 561.2 230.0 229i4 1,389.9 687.9 247.1 109.8 10.7 4,595.3 583.6 229.5 248.4 1,412.6 690.5 257.5 113.1 10.5 47141 611 1 2313 2695 14323 6897 2677 1141 106 4,869.7 645.8 232.8 296J 1I459.3 689.9 278.2 115.9 10.0 4,173.8 476.1 201.7 183.7 1,314.4 661.0 220.4 104.8 10.5 1992:1 II 4,196.4 481.1 204.5 186.0 1,312.0 653.9 223.2 106.1 11.9 Ill 4,226.7 491.9 207.4 191.3 1,321.1 656.4 227.7 108.2 10.5 IV 4,282.3 505.0 213.9 196.4 1,339.8 668.6 230.9 107.3 10.7 4,286.8 504.0 209.1 200.4 1,337.5 670.1 228.8 107.2 10.8 1993:1 II 4,322.8 519.3 218.4 205.0 1,347.8 674.1 233.4 108.6 10.3 Ill 4,366.6 529.9 219.8 210.9 1,356.8 677.9 235.9 109.8 10.9 IV 4,398.0 542.1 228.4 214.8 1,361.8 679.2 238.6 109.0 10.9 4,439.4 550.7 231.6 219.1 1,378.4 684.3 243.1 109.2 11.9 1994:1 4,472.2 555.8 228.4 226.1 1,385.5 689.8 242.7 109.6 10.2 II Ill 4,498.2 561.7 227.3 232.2 1,393.2 687.9 248.1 109.9 10.7 4,534.1 576.6 232.6 240.3 1,402.5 689.5 254.7 110.7 10.2 IV 4,551.3 572.2 226.2 241.4 1,408.4 690.8 255.3 112.7 10.0 1995:1 II 4,583.5 577.7 227.5 244.6 1.411.6 690.2 257.0 113.2 10.6 Ill 4,612.9 590.8 232.9 251.5 1,413.9 690.6 259.1 113.0 10.4 IV 4,633.5 593.7 231.6 256.2 1,416.3 690.6 258.7 113.6 11.1 4,669.4 600.7 233.4 259.2 1,422.5 692.4 261.6 112.9 11.1 1996:1 II 4,712.2 614.8 234.2 269.9 1,431.6 690.3 268.4 114.5 10.4 Ill 4,718.2 611.9 229.7 272.3 1,433.9 687.3 270.8 114.1 10.6 4,756.4 617.1 228.0 276.8 1,441.2 689.0 270.0 114.8 10.3 IV 4,818.1 637.8 233.4 287.4 1,457.8 694.6 277.1 114.7 9.4 1997:1 II 4,829.4 629.0 223.1 292.3 1,450.0 688.2 273.8 116.1 10.1 Ill 4,896.2 656.1 238.7 301.1 1,465.5 689.5 281.3 116.2 10.4 IV * 4,935.0 660.3 236.0 305.9 1,464.1 687.3 280.6 116.7 10.1 1 Includes other items not shown separately. 2 Includes imputed rental value of owner-occupied housing. Note.—See Table B-2 for data for total personal consumption expenditures for 1959-81. Source: Department of Commerce, Bureau of Economic Analysis. 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* Services Nondurable goods 301 Household operation TotaM Housjpo2 Total 1,728 2 1,809.0 1,883.0 1,977.3 2,041.4 2,126.9 22124 2,262.3 23213 2,341.0 2,409.4 24689 2,535.5 2,599.6 26710 2>65.2 2,383.2 2,403.2 2,413.6 2,437.6 2,445.3 2,455.9 2,480.0 2,494.4 2,510.9 2,531.4 2,543.8 2,555.9 2,571.2 2,594.5 2,608.7 2,623.8 2,646.5 2,666.5 2,672.8 2,698.2 2,723.9 2,749.8 2,776.1 2,811.0 5009 511.8 531.8 551.1 565.5 583.4 6009 614.6 6272 635.2 646.8 6547 674.3 688.2 7002 713.8 642.6 645.5 648.5 650.6 650.6 652.4 655.8 660.0 666.8 672.2 677.0 681.1 683.7 686.7 689.7 692.8 695.6 698.7 701.7 704.8 708.3 712.0 715.6 719.2 1 187.0 193.0 197.7 205.6 209.8 219.4 2292 237.6 2401 243.4 248.2 261 5 270.5 282.9 2896 295.3 243.6 249.9 243.3 256.1 256.6 257.7 265.2 266.3 263.1 274.1 272.3 272.4 274.3 282.4 287.5 287.5 288.7 292.0 285.8 291.7 288.0 294.2 295.7 303.1 Trans- MediElec- porta- cal tricity tion care and gas 90.3 93.0 93.6 96.1 95.1 98.4 103.4 105.6 1037 107.0 106.6 1123 112.5 115.0 1178 116.9 103.2 106.8 106.6 109.7 111.0 109.2 114.7 114.1 113.8 115.8 111.4 108.9 109.7 114.8 118.7 116.9 119.0 119.7 114.8 117.7 113.8 117.8 115.7 120.3 109.9 117.0 128.6 140.6 145.7 151.0 1590 160.8 1599 152.3 158.1 1631 175.2 185.2 1946 202.7 155.4 156.7 160.5 159.6 160.3 161.9 163.8 166.6 170.3 173.6 176.7 180.1 182.5 183.8 185.4 189.0 192.1 193.8 195.4 197.0 199.3 200.9 203.9 206.6 4422 459.7 472.4 490.7 510.3 537.3 5613 575.8 6028 621.6 646.6 6553 662.1 674.9 6881 711.8 638.2 645.9 650.3 652.2 653.7 654.3 656.4 656.7 658.1 661.1 663.2 666.0 669.5 672.9 677.0 680.4 679.4 686.2 689.8 697.1 704.4 708.8 714.2 719.6 TABLE B-18.—Private gross fixed investment by type, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Nonresidential Structures Year or quarter 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 i 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* Private fixed investment Total nonresidential 74.6 75.5 75.0 81.8 87.7 96.7 108.3 116.7 117.6 130.8 145.5 148.1 167.5 195.7 225.4 231.5 231.7 269.6 333.5 403.6 464.0 473.5 528.1 515.6 552.0 648.1 688.9 712.9 722.9 763.1 797.5 791.6 738.5 783.4 855.7 946.6 1,008.1 1,090.7 1,173.0 755.4 780.5 788.1 809.7 823.5 842.9 858.8 897.5 911.0 941.7 956.9 977.0 998.7 999.6 1,009.4 1,024.6 1,049.4 1,082.0 1,112.0 1,119.2 1,127.5 1,160.8 1,201.3 1,202.4 Total 1 Nonresidential Utilibuildings ties including farm Producers' durable equipment Mining exploration, shafts, and wells 46.5 18.1 10.6 4.9 49.2 19.6 12.0 5.0 12.7 48.6 19.7 4.6 13.7 52.8 20.8 4.6 55.6 13.9 21.2 5.0 62.4 23.7 15.8 5.4 74.1 19.5 6.1 28.3 84.4 21.3 7.1 31.1 85.2 20.6 7.8 31.5 92.1 21.1 33.6 9.2 24.4 37.7 9.6 102.9 106.7 25.4 11.1 40.3 111.7 27.1 11.9 42.7 126.1 47.2 30.1 13.1 150.0 35.5 15.0 55.0 165.6 61.2 38.3 16.5 61.4 169.0 35.6 17.1 35.9 20.0 187.2 65.9 39.9 21.5 223.2 74.6 91.4 49.7 24.1 272.0 65.7 27.5 323.0 114.9 73.7 30.2 350.3 133.9 405.4 86.3 33.0 164.6 409.9 94.5 32.5 175.0 399.4 152.7 90.5 28.7 110.0 30.0 468.3 176.0 128.0 30.6 502.0 193.3 494.8 123.3 31.2 175.8 495.4 126.0 26.5 172.1 181.3 133.3 27.1 530.6 142.7 29.4 566.2 192.3 148.9 27.5 575.9 200.8 181.7 547.3 126.1 31.6 557.9 169.2 113.2 34.5 604.1 176.4 119.2 32.8 128.7 32.0 660.6 184.5 723.0 200.6 143.8 33.2 781.4 215.2 159.8 33.3 845.4 230.2 175.3 33.0 544.1 171.6 117.2 34.3 1992:1 .... 170.4 114.0 34.8 II ... 556.8 110.6 34.7 Ill .. 561.0 167.6 IV .. 167.1 111.0 34.2 569.6 113.6 33.8 1993:1 .... 580.5 171.7 II ... 598.8 175.2 117.6 32.7 III.. 606.4 121.5 32.2 177.8 IV .. 180.7 124.2 32.5 630.6 175.4 120.7 32.1 1994:1 .... 634.6 130.9 31.6 II ... 652.9 185.2 667.4 III.. 130.0 32.0 186.8 IV .. 133.2 32.4 687.5 190.7 138.9 33.2 197.7 710.9 1995:1 .... 144.1 33.5 II ... 722.5 201.1 725.4 III.. 145.6 33.5 202.8 146.4 32.7 IV .. 733.1 200.7 750.7 149.8 33.4 205.7 1996:1 .... II ... 769.3 210.6 155.5 32.9 217.7 162.5 32.7 Ill .. 798.6 171.2 34.1 IV.. 807.2 227.0 227.4 1997:1 .... 811.3 174.0 32.0 172.1 33.7 II ... 836.3 226.8 872.0 177.5 33.2 III.. 232.9 177.6 33.1 862.3 233.7 1 Includes other items, not shown separately. 2 Includes new computers and peripheral equipment only. Source: Department of Commerce, Bureau of Economic Analysis. 2.5 2.3 2.3 2.5 2.3 2.4 2.4 2.5 2.4 2.6 2.8 2.8 2.7 3.1 3.5 5.2 7.4 8.6 11.5 15.4 19.0 27.4 42.5 44.8 30.0 31.3 27.9 15.7 13.1 15.7 14.4 17.5 17.1 13.3 16.6 16.7 16.3 16.1 16.2 12.8 13.3 13.3 13.8 16.0 16.8 16.8 16.6 15.7 15.8 17.0 18.1 18.3 16.1 15.8 15.0 15.7 16.0 16.5 16.0 16.1 15.6 16.2 16.8 302 Information processing and related equipment Total 1 Total Computers and peripheral Other Industrial equipment ±T> 28.3 29.7 28.9 32.1 34.4 38.7 45.8 53.0 53.7 58.5 65.2 66.4 69.1 78.9 95.1 104.3 107.6 121.2 148.7 180.6 208.1 216.4 240.9 234.9 246.7 292.3 308.7 319.0 323.3 349.3 373.9 375.1 365.6 388.7 427.7 476.1 522.4 566.2 615.2 372.5 386.3 393.4 402.5 408.9 423.6 428.6 449.9 459.3 467.7 480.6 496.8 513.2 521.4 522.6 532.4 545.0 558.7 580.9 580.2 583.9 609.5 639.1 628.5 4.0 4.7 5.1 5.4 6.1 6.8 7.8 9.6 10.0 10.6 12.9 14.3 14.9 16.5 19.8 22.9 23.5 27.2 33.1 41.8 49.9 58.9 69.5 72.7 82.0 98.6 104.2 108.8 109.8 118.2 127.1 124.2 122.6 134.2 141.6 152.1 172.8 195.1 211.7 129.2 133.0 137.7 136.8 137.2 138.1 145.0 146.0 147.6 149.4 152.8 158.5 162.9 173.0 174.3 181.1 188.0 190.9 201.1 200.3 202.8 208.4 219.5 216.0 0.0 .2 .3 .3 .7 .9 1.2 1.7 1.9 1.9 2.4 2.7 2.8 3.5 3.5 3.9 3.6 4.4 5.7 7.6 10.2 12.5 17.1 18.9 23.9 31.6 33.7 33.4 35.8 38.1 43.3 38.9 38.1 43.9 48.6 51.8 65.6 78.7 85.1 41.9 44.4 44.6 44.9 47.1 47.1 49.8 50.5 49.9 50.6 51.5 55.1 57.3 64.7 67.0 73.5 76.4 76.8 80.9 81.0 81.8 84.5 88.1 86.0 4.0 4.5 4.8 5.1 5.3 5.8 6.6 7.9 8.1 8.6 10.4 11.6 12.1 13.1 16.3 19.0 19.9 22.8 27.5 34.2 39.8 46.4 52.3 53.9 58.1 67.0 70.5 75.4 74.0 80.1 83.8 85.2 84.5 90.2 93.0 100.3 107.2 116.3 126.6 87.3 88.6 93.1 91.9 90.1 91.0 95.2 95.5 97.7 98.8 101.2 103.4 105.6 108.3 107.3 107.6 111.6 114.1 120.3 119.3 121.0 123.9 131.3 130.0 8.4 9.3 8.7 9.2 10.0 11.4 13.6 16.1 16.8 17.2 18.9 20.2 19.4 21.3 25.9 30.5 31.1 33.9 39.2 47.4 55.8 60.4 65.2 62.2 58.2 67.4 71.7 74.6 75.9 82.9 91.5 89.8 86.4 89.3 97.9 109.3 121.5 127.5 134.4 86.2 87.7 90.5 92.8 94.0 95.4 98.1 104.1 105.4 107.0 110.8 114.0 118.1 123.0 123.0 121.8 124.7 129.2 128.2 127.9 127.7 134.9 137.5 137.3 Transportation and related equipment 8.3 8.5 8.0 9.8 9.4 10.6 13.2 14.5 14.3 17.6 18.9 16.2 18.4 21.8 26.6 26.3 25.2 30.0 39.3 47.3 53.6 48.4 50.6 46.8 53.7 64.8 69.7 71.8 70.4 76.0 71.2 75.5 79.5 86.2 99.9 118.6 125.7 134.5 150.0 79.5 87.8 85.5 91.9 92.9 102.9 96.4 107.5 113.1 115.5 119.8 126.1 129.9 123.6 122.9 126.4 127.1 130.8 140.0 140.1 137.7 147.1 159.9 155.3 Residential 28.1 26.3 26.4 29.0 32.1 34.3 34.2 32.3 32.4 38.7 42.6 41.4 55.8 69.7 75.3 66.0 62.7 82.5 110.3 131.6 141.0 123.2 122.6 105.7 152.5 179.8 186.9 218.1 227.6 232.5 231.3 215.7 191.2 225.6 251.6 286.0 285.1 309.2 327.5 211.3 223.7 227.1 240.1 243.0 244.1 252.4 266.8 276.4 288.7 289.5 289.5 287.8 277.1 284.0 291.4 298.8 312.7 313.5 312.0 316.2 324.6 329.3 340.1 TABLE B-19.—Real private gross fixed investment by type, 1982-97 [Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates] Nonresidential Producers' durable equipment Structures Year or quarter Priuato nlvaie fixed investment Total nonresidential Total » Nonresidential buildings including farm Utilities Mining exploration, shafts, and wells Information processing and related equipment Total 610.4 464.3 207.2 32.2 39.5 126.6 26.7 34.2 185.7 654.2 456.4 117.6 35.4 762.4 535.4 30.3 212.2 137.6 799.3 568.4 227.8 27.0 155.2 35.6 15.8 36.5 144.5 805.0 548.5 203.3 799.4 542.4 142.4 30.7 15.5 195.9 15.8 145.3 30.0 196.8 818.3 566.0 150.2 30.9 13.9 832.0 588.8 201.2 16.1 152.0 28.1 203.3 805.8 585.2 15.7 126.9 181.6 741.3 547.7 32.0 783.4 557.9 13.3 113.2 34.5 169.2 842.8 600.2 16.0 115.3 31.8 170.8 15.8 119.9 29.9 172.5 915.5 648.4 14.3 128.8 30.0 962.1 706.5 179.9 188.7 1,041.7 771.7 13.9 140.0 29.3 13.4 195.4 1,122.3 846.7 148.9 28.0 12.7 172.7 34.6 118.1 758.3 544.4 1992:1 .... 782.4 557.5 114.4 II ... 13.3 34.8 171.0 13.4 110.4 34.6 167.4 787.3 560.6 III.. 13.7 IV .. 109.8 33.9 165.6 805.8 569.1 15.2 111.3 33.4 168.0 814.8 577.8 1993:1 .... 114.4 16.2 31.7 II ... 170.3 831.1" 595.1 16.4 117.1 31.0 171.7 Ill .. 844.5 602.3 IV.. 16.2 118.5 31.0 173.1 880.8 625.6 1994:1 .... 15.1 114.3 30.3 166.3 887.8 626.2 15.1 123.1 29.6 174.5 913.2 641.2 II ... 16.2 922.7 653.2 Ill .. 29.8 120.6 174.0 16.7 IV.. 121.8 29.8 175.0 938.5 672.9 30.4 16.3 125.5 179.0 955.8 695.7 1995:1 .... 30.4 129.4 II ... 14.2 180.9 954.0 705.4 Ill .. 13.8 130.1 30.1 181.2 962.3 708.2 IV .. 13.1 130.3 29.2 178.6 976.3 716.8 29.7 132.7 13.6 182.1 1,001.5 736.9 1996:1 .... 13.9 II ... 1,035.7 759.7 137.0 29.1 185.6 14.1 28.7 141.7 Ill .. 1,060.9 789.3 190.0 148.4 29.5 IV .. 1,068.7 800.8 196.9 13.8 13.6 150.1 27.5 195.9 1,079.0 808.9 1997:1 .... 28.7 147.1 II ... 1,111.4 837.0 193.5 13.0 13.4 150.1 28.0 196.7 Ill .. 1,149.3 874.5 148.4 IV/> 13.6 27.8 195.3 1,149.6 866.5 1 Includes other items, not shown separately. 2 Includes new computers and peripheral equipment only. Source: Department of Commerce, Bureau of Economic Analysis. 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/> 303 1 Total 260.3 272.4 324.6 342.4 345.9 346.9 369.2 387.6 381.9 366.2 388.7 429.6 476.8 528.3 586.0 657.4 371.7 386.4 393.1 403.5 409.8 424.9 430.7 452.9 460.6 467.3 480.0 499.1 518.1 525.9 528.5 540.5 557.4 577.1 602.9 606.7 616.6 649.3 685.3 678.5 54.5 63.4 79.8 88.0 94.1 97.5 106.6 116.2 116.2 117.8 134.2 147.9 165.1 201.8 253.1 305.2 126.7 132.4 138.6 138.9 140.5 143.2 152.5 155.5 158.1 160.8 166.1 175.6 184.5 199.3 205.2 218.2 232.8 244.8 264.3 270.4 281.4 296.9 320.5 322.1 Computers and peripheral equip-2 ment 4.7 7.1 11.6 14.5 16.7 21.0 24.0 29.4 29.4 32.4 43.9 56.1 67.2 102.8 160.8 224.7 39.2 43.4 45.7 47.5 51.0 53.2 58.4 61.7 62.2 64.1 67.1 75.3 82.7 97.2 106.8 124.4 138.7 152.0 170.0 182.4 195.8 216.1 240.5 246.6 Other 67.0 70.4 79.0 81.9 84.6 80.2 85.7 88.1 88.2 85.9 90.2 92.3 99.4 107.0 116.3 126.9 87.7 88.9 92.8 91.5 89.6 90.3 94.6 94.8 96.8 97.8 100.2 102.8 105.1 107.9 107.2 107.8 111.7 114.0 120.3 119.3 121.5 124.4 131.5 130.4 Industrial equipment 85.5 78.5 89.9 94.1 93.5 91.1 95.3 101.5 95.0 88.3 89.3 96.5 105.5 113.4 117.0 122.8 86.8 88.1 89.8 92.6 93.4 94.2 96.5 102.0 102.8 103.8 106.7 108.9 112.1 114.9 114.1 112.5 114.8 118.8 117.6 116.9 116.8 123.5 125.6 125.1 Transportation and related equipment 63.7 71.7 85.1 88.4 85.6 82.1 87.1 78.9 81.2 81.7 86.2 98.3 113.2 118.9 125.0 138.3 79.9 87.9 85.4 91.5 91.9 101.5 94.8 105.2 108.8 110.0 113.5 120.5 124.0 117.3 115.7 118.6 119.2 121.8 129.5 129.7 127.5 136.0 146.8 143.0 Residential 140.1 197.6 226.4 229.5 257.0 257.6 252.5 243.2 220.6 193.4 225.6 242.6 267.0 257.0 272.1 279.7 213.9 224.9 226.7 236.7 237.0 236.1 242.2 255.1 261.3 271.5 269.4 265.9 261.2 250.4 255.5 260.8 266.1 277.2 274.1 271.1 273.3 278.2 280.1 287.1 TABLE B-20.—Government consumption expenditures and gross investment by type, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Government consumption expenditures and gross investment Federal Year or quarter Total Total Tntfll lUldl National defense P P ufOSS sumpinvestment tinn lion expend- Struc- Equiptures ment itures 112.0 67.2 55.7 42.0 2.5 11.2 113.2 65.6 54.9 2.2 42.5 10.1 2.4 120.9 69.1 57.7 43.9 11.5 131.4 76.5 62.3 2.0 47.8 12.5 137.7 78.1 62.2 1.6 49.6 11.0 144.4 79.4 61.3 49.9 1.3 10.2 153.0 81.8 62.0 52.0 1.1 8.9 173.6 94.1 73.4 61.2 1.3 11.0 194.6 106.6 85.5 71.3 1.2 13.0 212.1 113.8 92.0 1.2 78.9 11.8 223.8 115.8 92.4 80.0 1.5 10.9 236.1 115.9 90.6 78.6 1.3 10.7 1.8 7.7 249.9 117.1 88.7 79.2 268.9 125.1 93.2 82.3 1.8 9.1 83.7 2.1 287.6 128.2 94.7 8.9 323.2 139.9 101.9 9.7 90.1 2.2 2.3 362.6 154.5 110.9 97.0 11.6 2.1 385.9 162.7 116.1 101.3 12.6 2.4 416.9 178.4 125.8 109.6 13.8 118.4 457.9 194.4 135.6 2.5 14.6 507.1 215.0 151.2 130.7 2.5 18.0 572.8 248.4 174.2 3.2 150.9 20.1 633.4 284.1 202.0 3.2 174.3 24.5 684.8 313.2 230.9 4.0 29.4 197.6 735.7 344.5 255.0 35.4 214.9 4.8 796.6 372.6 282.7 4.9 236.3 41.5 875.0 410.1 312.4 257.6 6.2 48.5 272.7 938.5 435.2 332.4 6.8 52.9 992.8 455.7 350.4 7.7 287.6 55.1 7.4 48.7 1,032.0 457.3 354.0 297.9 6.4 1,095.1 477.2 360.6 303.3 51.0 1,176.1 503.6 373.1 312.7 6.1 54.3 325.4 4.6 1,225.9 522.6 383.5 53.5 319.7 5.2 1,263.8 528.0 375.8 50.9 1,283.4 518.3 360.7 311.1 5.1 44.5 1,313.0 510.2 349.2 301.6 5.8 41.8 6.4 1,355.5 509.6 344.6 298.6 39.6 1,406.7 520.0 352.8 305.7 6.8 40.2 1,453.9 524.8 350.8 6.3 311.2 33.3 50.4 317.2 5.2 1992:1 .... 1,247.9 521.8 372.8 5.5 51.4 II ... 1,256.4 523.2 374.1 317.3 52.7 Ill .. 1,270.7 532.0 380.9 323.5 4.8 IV .. 1,280.0 535.0 375.3 320.7 5.5 49.1 312.4 46.4 1993:1 .... 1,271.5 521.3 363.6 4.8 311.5 4.9 45.4 II ... 1,281.2 517.8 361.7 5.4 Ill .. 1,285.3 515.7 358.0 310.6 42.0 IV .. 1,295.5 518.5 359.4 5.3 309.8 44.3 1994:1 .... 1,291.0 506.9 344.9 5.4 39.7 299.8 300.7 5.5 II ... 1,300.8 505.3 348.5 42.2 I I I . . 1,332.3 520.4 359.7 308.7 6.1 45.0 IV .. 1,328.0 508.3 343.6 297.3 6.1 40.2 299.9 7.0 1995:1 .... 1,344.7 513.6 346.3 39.5 6.2 II ... 1,356.0 511.2 348.1 299.8 42.2 Ill .. 1,362.2 512.9 347.3 303.2 6.0 38.1 IV .. 1,359.2 500.6 336.5 291.6 6.5 38.5 298.2 6.7 1996:1 .... 1,384.2 516.4 348.4 43.5 II ... 1,407.0 524.6 357.3 7.3 307.8 42.2 Ill .. 1,413.5 521.6 354.8 6.6 38.8 309.3 IV .. 1,422.3 517.6 350.6 6.6 307.6 36.3 1997:1 .... 1,433.1 516.1 343.3 30.7 306.4 6.3 II ... 1,449.0 526.1 350.6 311.3 6.2 33.1 Ill .. 1,457.9 525.7 352.1 6.2 311.6 34.3 6.4 IV/> 1,475.6 531.1 357.1 315.5 35.2 Source: Department of Commerce, Bureau of Economic Analysis. 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/> State and local Nondefense Tntfll lUlal P sumptinn lion expenditures 11.5 10.8 11.4 14.2 15.9 18.1 19.7 20.7 21.0 21.8 23.4 25.3 28.3 31.9 33.5 38.0 43.6 46.6 52.6 58.9 63.8 74.2 82.2 82.3 89.4 89.9 97.7 102.9 105.3 103.3 116.7 130.4 139.1 152.2 157.7 161.0 165.0 167.3 174.0 149.0 149.1 151.1 159.7 157.7 156.1 157.7 159.1 162.0 156.8 160.7 164.7 167.3 163.0 165.5 164.1 168.0 167.3 166.8 167.0 172.8 175.5 173.6 174.0 304 9.9 8.8 9.0 11.3 12.4 14.0 15.1 15.9 17.0 18.2 20.0 21.9 24.6 27.8 29.2 33.2 38.0 40.4 45.7 50.4 55.2 64.3 71.7 72.3 78.2 77.9 84.9 89.7 90.7 89.9 101.9 113.9 120.6 131.4 136.2 141.6 144.9 145.7 152.9 128.5 129.1 130.9 137.0 134.7 134.3 136.4 139.4 142.6 138.5 141.8 143.5 144.9 144.2 145.8 144.7 146.4 145.9 144.6 146.0 151.7 152.9 153.1 153.8 P investment Structures Pnn i»on- Total Equipment 1.5 0.2 44.8 1.7 .3 47.6 1.9 .5 51.8 2.1 .8 55.0 2.3 1.1 59.6 2.5 1.6 65.0 2.8 1.8 71.2 2.8 2.0 79.5 2.2 1.8 88.1 2.1 1.6 98.3 1.9 1.5 108.0 2.1 1.3 120.2 2.5 1.3 132.8 2.7 1.3 143.8 3.1 1.2 159.4 3.4 1.4 183.3 4.1 1.4 208.1 4.6 1.6 223.1 5.0 1.9 238.5 6.1 2.3 263.4 6.3 - 2.4 292.0 7.1 2.9 324.4 7.7 2.8 349.2 6.8 3.2 371.6 6.7 4.5 391.2 7.0 5.0 424.0 7.3 5.4 464.9 8.0 5.2 503.3 9.0 5.6 537.2 6.8 6.6 574.7 6.9 7.9 617.9 8.0 8.6 672.6 9.2 9.3 703.4 10.3 10.5 735.8 11.2 10.2 765.0 10.4 9.0 802.8 11.0 9.1 846.0 11.3 10.2 886.7 10.8 10.3 929.1 10.3 10.1 726.1 10.2 9.9 733.2 9.6 10.5 738.7 11.0 11.6 745.1 11.5 11.5 750.1 10.9 10.8 763.4 11.3 10.1 769.6 11.1 8.6 777.0 10.3 9.1 784.1 9.7 8.6 795.5 9.9 8.9 811.9 9.4 819.6 11.8 12.1 10.3 831.1 10.7 8.2 844.8 10.9 8.8 849.3 10.1 9.2 858.6 11.1 10.4 867.8 11.6 9.9 882.4 11.3 10.9 891.9 11.4 9.6 904.7 11.2 9.9 917.0 10.5 12.0 923.0 10.9 9.6 932.3 10.6 9.6 944.4 tion expenditures 30.9 33.7 36.7 39.1 42.2 46.0 50.5 56.5 62.9 70.8 79.8 91.6 102.9 113.4 126.4 144.0 164.9 179.7 196.1 214.5 235.9 261.3 285.3 307.9 326.2 350.8 382.6 412.7 441.1 471.3 507.2 550.1 579.4 603.6 631.6 663.8 698.6 730.9 762.9 592.6 600.8 607.4 613.6 621.4 628.9 635.0 641.1 651.6 659.2 668.6 676.0 686.9 696.2 702.4 708.8 717.6 727.0 735.9 743.3 751.7 757.4 766.1 776.5 Gross investment <\trnr oiruc- tures 12.8 12.7 13.8 14.5 16.0 17.2 19.0 21.0 23.0 25.2 25.6 25.8 27.0 27.1 29.1 34.7 38.1 38.1 36.9 42.8 49.0 55.1 55.4 54.2 54.2 60.5 67.6 74.2 78.8 84.8 88.7 98.5 100.5 108.1 108.7 113.4 121.0 128.5 138.6 109.9 108.6 107.1 106.9 104.1 109.9 109.8 111.1 107.2 110.8 117.6 117.9 118.1 122.3 120.5 123.0 123.2 128.1 128.6 133.9 137.7 138.0 138.5 140.3 equipment 1.1 1.2 1.2 1.3 1.5 1.7 1.8 2.0 2.2 2.3 2.6 2.8 2.9 3.3 3.8 4.6 5.1 5.3 5.4 6.1 7.1 8.1 8.5 9.4 10.8 12.7 14.8 16.4 17.2 18.6 21.9 23.9 23.4 24.0 24.7 25.6 26.4 27.3 27.6 23.6 23.8 24.2 24.6 24.6 24.6 24.8 24.8 25.3 25.5 25.8 25.8 26.1 26.3 26.5 26.8 27.0 27.2 27.4 27.4 27.5 27.6 27.7 27.6 TABLE B—21.—Real government consumption expenditures and gross investment by type, 1982—97 [Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates] Government consumption expenditures and gross investment State and local Federal Voor nr Tear or quarter 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/> 1992:1 II ... Ill ... IV... 1993:1 II ... Ill ... IV... 1994:1 II ... Ill ... IV... 1995:1 II ... Ill ... IV... 1996:1 II ... Ill ... IV... 1997-1 II ... Ill ... IVp Tntfll luuJI 960.1 987.3 1,018.4 1,080.1 1,135.0 1,165.9 1,180.9 1,213.9 1,250.4 1,258.0 1,263.8 1,252.1 1,252.3 1,251.9 1,257.9 1,270.6 1,258.5 1,257.5 1,266.5 1,272.5 1,250.1 1,253.1 1,250.5 1,254.7 1,241.9 1,243.3 1,268.1 1,255.8 1,257.7 1,257.3 1,255.0 1,237.7 1,243.2 1,265.1 1,261.5 1,261.8 1,260.5 1,270.1 1,273.4 1,278.5 Total 429.4 452.7 463.7 495.6 518.4 534.4 524.6 531.5 541.9 539.4 528.0 505.7 486.6 470.3 464.2 457.8 525.1 523.3 529.6 534.0 512.1 507.8 501.5 501.3 487.2 481.2 496.4 481.7 480.4 474.9 473.4 452.6 460.9 470.7 465.7 459.6 452.8 460.1 458.8 459.5 Tntal luldl 316.5 334.6 348.1 374.1 393.4 409.2 405.5 401.6 401.5 397.5 375.8 354.4 336.9 322.6 317.8 309.0 374.2 373.3 378.7 376.8 359.2 356.7 351.1 350.8 335.1 335.9 347.0 329.6 328.7 327.4 324.0 310.3 314.9 323.2 319.4 313.6 303.9 309.4 310.3 312.6 National defense « r uiOSS iiOnsumpinvestment tinn HOD expend- Struc- Equipitures tures ment 282.0 293.3 301.3 318.2 331.1 341.1 345.3 340.9 338.9 338.7 319.7 306.0 292.2 280.6 275.5 273.2 318.3 316.5 321.2 322.6 308.5 307.1 305.0 303.2 292.4 291.5 298.7 286.2 285.6 283.1 283.8 269.7 271.3 278.4 278.1 274.4 270.3 273.9 273.6 274.8 5.6 6.6 6.4 7.9 8.6 9.2 8.5 6.9 6.4 4.7 5.2 4.7 5.0 5.4 5.6 5.0 5.2 5.5 4.8 5.4 4.6 4.6 4.8 4.7 4.7 4.8 5.3 5.2 5.9 5.3 5.1 5.4 5.6 6.0 5.4 5.4 5.0 4.9 4.9 5.0 32.0 37.0 41.7 48.6 53.7 58.4 51.9 53.8 56.1 54.1 50.9 43.8 39.7 36.5 36.5 30.7 50.7 51.3 52.7 48.9 46.1 44.9 41.3 42.9 38.1 39.6 42.9 38.1 37.1 38.9 35.1 35.1 37.9 38.7 35.8 33.7 28.2 30.3 31.7 32.6 Nondefense Pnn uon- Total lUlal 113.3 118.5 115.9 121.8 125.2 125.3 119.1 130.1 140.5 142.0 152.2 151.2 149.5 147.5 146.1 148.3 150.8 150.0 150.9 157.1 152.9 151.1 150.3 150.4 151.9 145.1 149.4 151.7 151.4 147.3 149.1 142.1 145.7 147.2 146.0 145.7 1485 150.2 148.0 146.6 Con- r oiOSS sumpinvestment Total uun expend- Struc- Equipitures tures ment 102.3 3.2 8.6 8.4 4.7 105.9 8.7 102.3 5.2 107.4 5.7 8.9 5.4 9.4 110.6 109.2 10.3 5.9 104.8 6.8 7.6 7.4 114.8 7.9 123.8 8.5 8.3 123.6 9.2 9.3 131.4 10.3 10.5 129.9 11.0 10.3 130.4 9.9 9.1 9.4 128.0 10.0 125.3 11.1 10.0 9.3 11.9 127.6 10.4 130.4 10.1 129.9 10.2 9.8 130.7 9.6 10.5 11.7 134.5 10.9 11.4 130.0 11.5 10.7 129.5 10.9 129.1 11.0 10.2 130.8 8.7 10.8 132.7 9.9 9.2 127.1 8.7 9.3 9.4 130.8 9.0 9.6 131.1 . 11.1 11.2 129.8 10.5 8.4 9.8 129.0 9.9 130.0 9.1 123.4 9.6 9.0 9.9 125.0 11.0126.5 10.2 10.6 124.6 10.0 11.9 125.1 10.7 10.0 127.7 113 98 9.1 128.2 13.8 127.8 11.2 9.3 126.6 9.0 11.3 tion CAJJCIIU- itures 531.4 534.9 555.0 584.7 616.9 631.8 656.6 682.6 708.6 718.7 735.8 746.4 765.7 781.6 793.7 812.9 733.5 734.2 736.9 738.5 738.0 745.3 749.1 753.4 754.7 762.2 771.7 774.1 777.3 782.3 781.5 785.1 782.4 794.4 795.9 802.3 8077 810.1 814.7 819.0 Note.—See Table B-2 for data for total Government consumption expenditures and gross investment for 1959-81. Source: Department of Commerce, Bureau of Economic Analysis. 305 455.6 458.2 467.9 487.8 513.3 525.5 545.3 566.3 583.2 593.8 603.6 615.8 633.4 646.0 653.6 666.7 599.0 601.7 605.9 607.9 610.8 613.5 617.5 621.5 627.2 631.6 635.9 639.0 643.2 645.0 646.8 648.9 646.6 654.2 655.7 657.8 661 1 664.3 668.6 672.6 Gross Cfrnr ouuc- tures 67.0 66.3 73.8 80.9 85.9 87.8 91.6 93.5 100.7 101.3 108.1 106.1 107.1 109.5 112.8 117.5 110.8 108.8 106.8 106.1 102.7 107.4 107.0 107.2 102.7 105.5 110.6 109.6 108.4 111.3 108.6 109.8 108.9 112.9 112,6 116.6 1184 117.2 117.2 117.4 equipment 10.7 12.1 14.2 16.4 18.0 18.8 20.0 23.0 24.7 23.6 24.0 24.5 25.2 26.1 27.4 28.8 23.6 23.8 24.2 24.6 24.5 24.4 24.5 24.7 24.9 25.0 25.2 25.4 25.7 26.0 26.2 26.5 26.9 27.3 27.6 28.0 283 28.6 29.1 29.2 TABLE B-22.—Inventories and final sales of domestic business, 1959-97 [Billions of dollars, except as noted; seasonally adjusted] Inventories 1 Quarter Fourth quarter: 1959 . 1960 1961 1962 1963 1964 1965 1966 1967 1968 . 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992-1 II Ill IV 1993:1 M III IV 1994-1 II Ill IV 1995:1 || III IV 1996:1 II III IV 1997:1 || III \Mp Nonfarm Total2 130.7 134.4 137.6 145.2 147.6 153.3 168.1 185.5 197.7 213.2 232.7 240.9 259.7 287.8 343.1 396.3 408.3 441.7 492.8 580.6 675.5 736.0 781.9 767.2 786.7 860.0 875.0 862.5 927.4 992.8 1,044.6 1,082.4 1,058.1 1,065.5 1,070.8 1,076.2 1,077.9 1,099.5 1,102.1 1,104.9 1,114.8 1,132.2 1,150.0 1,168.9 1,200.6 1,234.8 1,246.5 1,250.8 1,261.5 1,264.9 1,276.9 1,287.1 1,294.5 1,306.1 1,318.1 1,334.1 1,342.2 Farm 31.8 32.6 34.2 36.2 33.3 31.9 36.2 36.8 36.3 39.5 42.7 41.2 48.2 58.9 75.3 66.0 70.0 66.6 71.9 96.6 113.6 113.3 103.7 109.2 105.6 108.5 105.9 94.3 97.9 102.0 103.6 108.3 97.2 104.9 104.0 104.8 104.9 110.1 105.6 101.3 101.5 106.6 100.3 99.9 104.1 105.2 100.5 97.6 100.5 97.7 104.3 106.0 102.6 107.2 107.7 109.1 108.9 Total* 98.9 101.8 103.4 109.0 114.4 121.4 131.9 148.6 161.4 173.8 189.9 199.7 211.5 228.8 267.8 330.3 338.4 375.1 421.0 484.0 561.9 622.8 678.2 658.0 681.1 751.5 769.1 768.2 829.5 890.8 941.0 974.1 961.0 960.6 966.8 971.5 973.1 989.3 996.5 1,003.7 1,013.4 1,025.6 1,049.7 1,069.0 1,096.5 1,129.6 1,146.0 1,153.2 1,161.0 1,167.2 1,172.6 1,181.2 1,191.9 1,198.9 1,210.4 1,225.0 1,233.3 Manufacturing 51.6 52.8 54.3 57.6 59.6 63.2 68.2 78.3 85.2 91.4 99.0 102.8 103.5 109.4 125.1 158.2 164.5 181.1 202.8 228.4 268.7 296.5 318.1 299.5 302.6 333.4 325.3 314.6 332.9 358.8 382.1 399.7 383.4 379.2 378.1 380.1 375.5 378.4 381.9 383.5 384.0 388.9 396.4 403.9 413.3 423.7 428.6 430.8 431.1 433.2 432.5 436.3 440.3 443.3 448.0 453.5 458.3 Wholesale trade 18.3 18.6 19.1 19.9 21.3 22.7 24.3 27.7 29.9 31.7 35.2 39.0 42.1 46.0 54.8 69.8 69.3 77.2 866 101.9 120.5 138.5 151.4 150.3 154.1 169.0 173.4 177.2 190.6 208.5 218.4 232.4 235.5 236.9 240.5 242.0 245.3 247.8 248.4 251.9 254.5 255.9 262.5 268.2 277.5 287.6 292.9 296.2 298.0 300.7 303.2 300.3 300.8 306.2 310.8 316.1 318.0 Retail trade 20.0 21.4 20.9 22.3 23.6 24.9 27.7 30.1 31.1 34.4 37.7 38.7 44.9 50.0 58.7 64.2 64.7 73.3 81.2 94.5 105.3 113.7 123.9 123.5 138.0 157.3 171.9 176.8 199.5 213.8 232.7 237.1 240.1 240.1 244.1 246.4 249.4 260.4 262.2 263.3 267.3 270.9 279.3 284.2 290.7 298.5 303.4 304.8 306.2 303.5 306.0 312.5 313.0 313.3 313.2 314.7 316.2 Other 9.0 8.9 9.2 9.2 9.8 10.6 11.7 12.5 15.3 16.3 18.1 19.3 20.9 23.4 29.2 38.0 39.8 43.5 50.4 59.1 67.5 74.0 84.9 84.6 86.4 91.8 98.4 99.5 106.4 109.6 107.8 104.8 102.0 104.4 104.1 103.0 103.0 102.8 103.9 105.0 107.6 110.0 111.6 112.6 115.0 119.8 121.1 121.4 125.7 129.8 130.9 132.1 137.7 136.1 138.3 140.7 140.8 Final sales of domestic business3 36.5 37.7 39.5 41.8 44.5 47.4 52.5 55.6 59.2 65.1 69.1 72.9 79.4 88.5 97.5 105.4 118.0 129.7 145.0 167.6 186.4 204.8 221.8 232.8 255.4 276.7 297.7 315.7 333.1 362.8 384.9 403.4 413.1 423.4 427.7 432.8 441.9 443.5 449.6 454.1 463.6 467.6 474.5 482.2 489.2 495.1 499.9 507.2 512.7 519.8 529.5 533.1 542.6 550.0 556.2 565.2 572.8 Ratio of inventories to final sales of domestic business Total 3.58 3.57 3.48 3.47 3.32 3.23 3.20 3.33 3.34 3.28 3.37 3.31 3.27 3.25 3.52 3.76 3.46 3.40 3.40 3.46 3.62 3.59 3.53 3.29 3.08 3.11 2.94 2.73 2.78 2.74 2.71 2.68 2.56 2.52 2.50 2.49 2.44 2.48 2.45 2.43 2.40 2.42 2.42 2.42 2.45 2.49 2.49 2.47 2.46 2.43 2.41 2.41 2.39 2.37 2.37 2.36 2.34 Nonfarm 2.71 2.70 2.62 2.61 2.57 2.56 2.51 2.67 2.73 2.67 2.75 2.74 2.66 2.59 2.75 3.13 2.87 2.89 2.90 2.89 3.01 3.04 3.06 2.83 2.67 2.72 2.58 2.43 2.49 2.46 2.44 2.41 2.33 2.27 2.26 2.24 2.20 2.23 2.22 2.21 2.19 2.19 2.21 222 2.24 2.28 2.29 2.27 2.26 2.25 2.21 2.22 2.20 2.18 2.18 2.17 2.15 1 Inventories at end of quarter. Quarter-to-quarter change calculated from this table is not the current-dollar change in business inventories (CBI) component of GDP. The former is the difference between two inventory stocks, each valued at their respective end-of-quarter prices. The latter is the change in the physical volume of inventories valued at average prices of the quarter. In addition, changes calculated from this table are at quarterly rates, whereas CBI is stated at annual rates. 2 Inventories of construction establishments are included in "other" nonfarm inventories. 3 Quarterly totals at monthly rates. Final sales of domestic business equals final sales of domestic product less gross product of households and institutions and of general government and includes a small amount of final sales by farms. Note.—The industry classification of inventories is on an establishment basis. Estimates for nonfarm industries other than manufacturing and trade for 1986 and earlier periods are based on the 1972 Standard Industrial Classification (SIC). Manufacturing estimates for 1981 and earlier periods and trade estimates for 1966 and earlier periods are based on the 1972 SIC; later estimates for these industries are based on the 1987 SIC. The resulting discontinuities are small. Source: Department of Commerce, Bureau of Economic Analysis. 306 TABLE B-23-—Real inventories and final sales of domestic business, 1959—97 [Billions of chained (1992) dollars, except as noted; seasonally adjusted] Inventories l Nonfarm Quarter Fourth quarter: 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 . 1983 1984 .. 1985 1986 .. 1987 1988 1989 1990 1991 1992:1 II Ill IV Total 2 Farm Total2 Manufacturing Wholesale trade Retail trade Other Final sales of domestic business3 Ratio of inventories to final sales of domestic business Total Nonfarm 2.10 2.78 59.4 37.6 144.3 56.5 148.2 303.6 89.1 2.13 2.80 147.0 57.9 150.6 312.4 90.7 38.3 63.6 2.08 2.74 40.1 153.5 59.3 155.1 318.6 92.9 62.3 2.09 2.73 66.7 61.9 336.7 94.4 40.1 160.8 165.2 2.08 2.70 42.2 169.5 66.3 171.5 353.1 95.7 70.3 2.09 178.4 180.4 2.65 70.3 45.0 74.2 372.6 92.0 2.06 2.59 48.4 194.2 81.7 74.7 94.4 192.6 400.3 2.23 199.4 2.73 49.8 84.6 217.6 445.0 93.1 88.5 2.30 206.4 88.4 234.4 2.80 56.9 91.0 474.5 95.6 2.28 94.1 2.77 58.1 217.8 95.8 245.0 497.5 99.2 2.37 61.4 221.7 2.85 100.6 256.0 524.8 99.2 102.3 2.38 2.84 62.6 224.0 102.4 108.0 256.0 533.0 96.8 2.35 2.81 234.4 113.8 253.1 551.1 100.8 64.9 116.1 2.28 2.71 252.7 101.1 69.9 124.9 119.0 259.8 576.5 2.36 77.4 122.4 277.7 2.76 261.1 615.0 102.5 134.8 2.54 2.93 80.8 254.6 132.9 133.0 296.8 646.8 97.8 2.37 2.77 289.7 81.5 265.6 127.5 628.3 103.9 126.3 2.38 303.4 660.4 2.75 81.7 277.5 135.9 102.5 136.0 2.37 2.75 87.1 291.7 143.7 146.5 311.8 692.1 109.3 2.35 2.71 93.2 311.9 158.8 325.8 733.6 111.8 153.1 2.36 115.7 2.72 91.5 319.3 153.1 166.3 338.5 752.8 2.35 2.69 88.7 319.9 171.3 338.9 751.3 108.6 148.9 2.43 774.1 2.80 94.4 318.9 176.0 118.2 157.2 343.5 174.1 2.35 91.7 2.75 319.2 153.3 329.5 751.3 125.5 2.26 2.58 92.4 338.2 763.4 166.2 173.5 329.5 108.6 2.34 358.4 832.4 2.66 96.7 355.7 186.4 189.6 115.0 2.31 370.8 194.8 353.9 855.8 121.8 2.63 105.1 201.3 2.26 349.7 2.57 111.6 384.3 204.4 201.9 868.2 120.2 2.29 2.58 115.1 393.8 208.5 354.8 902.5 111.5 223.9 2.25 113.7 411.7 2.49 231.3 217.8 364.3 927.2 98.9 2.28 420.7 960.7 98.9 2.52 108.9 245.0 223.3 383.5 2.30 2.54 103.4 968.4 101.4 421.8 231.3 390.1 243.5 2.31 99.7 2.55 103.0 419.2 236.9 384.0 967.2 243.3 2.26 380.7 2.50 105.4 426.6 237.2 965.3 101.5 242.0 2.25 104.1 965.7 2.49 428.9 244.3 239.8 377.5 103.8 2.24 967.4 2.48 102.2 432.3 245.1 241.6 378.5 105.1 2.21 244.7 374.8 104.7 2.45 102.6 438.1 247.2 969.2 2.25 102.7 2.48 435.8 246.0 376.1 979.2 1993:1 100.6 256.5 II 2.24 439.4 247.1 378.4 101.1 2.47 101.5 985.1 258.0 Ill 2.24 380.4 249.7 992.0 98.0 2.47 102.3 442.0 259.6 2.23 998.7 97.4 IV 2.45 104.6 448.2 250.2 380.9 263.0 2.24 2.47 449.7 251.2 384.7 100.8 1994:1 106.5 266.2 1,008.6 || 2.25 387.3 105.0 2.49 107.9 453.9 272.7 255.6 1,023.5 III 2.25 259.4 2.49 108.3 458.2 389.6 1,033.1 107.9 275.8 IV 2.27 265.7 1,047.7 109.1 2.50 110.1 461.9 279.9 392.0 2.29 464.1 1,061.4 2.52 112.8 271.0 393.1 107.3 1995:1 284.5 II 2.29 2.52 273.9 395.1 1,069.9 103.9 112.8 466.6 288.2 Ill 2.29 100.5 2.50 114.0 471.0 288.7 276.8 397.8 1,077.3 IV 278.4 1,083.4 2.28 2.50 116.6 474.3 399.8 99.9 288.6 2.27 1,087.0 2.48 118.7 478.2 279.9 402.9 98.2 1996-1 285.5 II 2.25 287.4 1,091.4 99.3 2.46 119.5 484.5 281.3 403.0 Ill 2.27 2.48 484.7 292.4 280.1 406.6 1,099.3 100.9 120.1 IV 282.4 2.25 292.7 409.7 1,105.9 102.5 2.46 121.1 491.1 2.26 2.47 103.8 1997:1 124.5 495.1 288.1 414.9 1,120.5 292.8 || 105.7 2.28 422.1 1,138.0 2.50 126.7 498.5 294.7 294.3 III 2.27 295.4 108.0 2.49 128.2 505.0 298.0 425.8 1,147.6 IV* 110.7 2.27 431.1 1,160.0 2.49 510.3 297.6 301.6 129.6 1 Inventories at end of quarter. Quarter-to-quarter changes calculated from this table are at quarterly rates, whereas the change in business inventories component of GOP is stated at annual rates. 2 Inventories of construction establishments are included in "other" nonfarm inventories. 3 Quarterly totals at monthly rates. Final sales of domestic business equals final sales of domestic product less gross product of households and institutions and of general government and includes a small amount of final sales by farms. Note—The industry classification of inventories is on an establishment basis. Estimates for nonfarm industries other than manufacturing and trade for 1986 and earlier periods are based on the 1972 Standard Industrial Classification (SIC). Manufacturing estimates for 1981 and earlier periods and trade estimates for 1966 and earlier periods are based on the 1972 SIC; later estimates for these industries are based on the 1987 SIC. The resulting discontinuities are small. Source: Department of Commerce, Bureau of Economic Analysis. 400.8 411.3 419.9 439.4 457.2 472.7 503.0 545.4 577.5 604.3 631.3 636.7 659.0 683.7 721.5 744.8 734.6 764.4 803.2 846.6 869.9 859.7 892.8 877.2 871.5 946.8 977.0 988.1 1,014.5 1,026.2 1,059.5 1,069.9 1,066.9 1,066.8 1,069.5 1,072.5 1,073.9 1,082.0 1,086.1 1,090.0 1,096.0 1,109.3 1,128.2 1,140.7 1,156.6 1,168.7 1,174.1 1,178.3 1,183.9 1,185.9 1,191.2 1,200.7 1,208.9 1,224.8 1,244.2 1,256.1 1,271.1 307 TABLE B-24.—Foreign transactions in the national income and product accounts, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Year or quarter 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/» 1992:1 II Ill .... IV ... 1993:1 II Ill .... IV ... 1994:1 II Ill .... IV ... 1995:1 II Ill .... IV .... 1996:1 II Ill .... IV .... 1997:1 II Ill .... IV*.. Receipts from rest of the world Exports of goods and Reservices ceipts of Tntal i oiai 1* factor inTotal Goods2 Services2 come 25.0 30.2 31.4 33.5 36.1 41.0 43.5 47.2 50.2 55.6 61.2 70.8 74.2 83.4 115.6 152.6 164.4 181.7 196.6 233.5 300.3 361.9 399.5 379.5 374.6 421.8 411.1 427.1 481.8 591.9 678.3 734.8 757.9 777.3 809.4 897.7 1,041.2 1,105.1 773.1 779.2 774.0 783.0 792.7 810.0 800.0 835.0 839.6 878.3 914.4 958.2 998.1 1,034.1 1,054.2 1,078.4 1,076.1 1,092.0 1,099.0 1,153.4 1,170.4 1,221.9 1,235.2 20.6 25.3 26.0 27.4 29.4 33.6 35.4 38.9 41.4 45.3 49.3 57.0 59.3 66.2 91.8 124.3 136.3 148.9 158.8 186.1 228.7 278.9 302.8 282.6 277.0 303.1 303.0 320.7 365.7 447.2 509.3 557.3 601.8 639.4 658.6 721.2 818.4 870.9 958.8 632.4 635.9 640.2 649.1 647.1 661.2 646.8 679.4 678.5 710.1 732.6 763.7 784.5 807.7 831.6 849.9 850.2 865.0 863.7 904.6 922.2 960.3 965.8 9869 16.5 20.5 20.9 21.7 23.3 26.7 27.8 30.7 32.2 35.3 38.3 44.5 45.6 51.8 73.9 101.0 109.6 117.8 123.7 145.4 184.0 225.8 239.1 215.0 207.3 225.6 222.2 226.0 257.5 325.8 371.7 398.5 426.4 448.7 459.7 509.6 583.9 617.5 687.1 442.1 445.9 447.7 459.0 451.2 462.2 447.9 477.7 475.7 499.2 518.9 544.6 560.7 578.6 591.1 605.1 606.1 613.9 609.7 640.5 656.2 690.0 691.1 7111 4.2 4.8 5.1 5.7 6.1 6.9 7.6 8.2 9.2 10.0 11.0 12.4 13.8 14.4 17.8 23.3 26.7 31.1 35.1 40.7 44.7 53.2 63.7 67.6 69.7 77.5 80.8 94.7 108.2 121.4 137.6 158.8 175.4 190.7 198.9 211.6 234.6 253.3 271.7 190.3 190.0 192.5 190.1 195.8 199.0 198.9 201.7 202.8 210.9 213.7 219.0 223.9 229.2 240.5 244.7 244.1 251.1 254.0 264.2 266.0 270.3 274.8 7758 Payments to rest of the world Transfer payments pay. ray (net) ments of From From Serv-2 factor Total inpersons governices ment (net) come (net) Imports of goods and services Total 2 Total 4.3 5.0 5.4 6.1 6.6 7.4 8.1 8.3 8.9 10.3 11.9 13.0 14.1 16.4 23.8 30.3 28.2 32.9 37.9 47.4 70.4 81.8 95.6 96.9 97.6 118.7 108.1 106.5 116.0 144.7 169.0 177.5 156.2 137.9 150.8 176.5 222.8 234.3 25.0 30.2 31.4 33.5 36.1 41.0 43.5 47.2 50.2 55.6 61.2 70.8 74.2 83.4 115.6 152.6 164.4 181.7 196.6 233.5 300.3 361.9 399.5 379.5 374.6 421.8 411.1 427.1 481.8 591.9 678.3 734.8 757.9 777.3 809.4 897.7 1,041.2 1,105.1 140.7 143.3 133.8 133.9 145.6 148.9 153.2 155.6 161.1 168.3 181.9 194.6 213.6 226.4 222.6 228.5 226.0 227.1 235.4 248.8 248.2 261.6 269.4 773.1 779.2 774.0 783.0 792.7 810.0 800.0 835.0 839.6 878.3 914.4 958.2 998.1 1,034.1 1,054.2 1,078.4 1,076.1 1,092.0 1,099.0 1,153.4 1,170.4 1,221.9 1,235.2 Goods 22.3 22.8 22.7 25.0 26.1 28.1 31.5 37.1 39.9 46.6 50.5 55.8 62.3 74.2 91.2 127.5 122.7 151.1 182.4 212.3 252.7 293.8 317.8 303.2 328.6 405.1 417.2 452.2 507.9 553.2 589.7 628.6 622.3 669.0 719.3 812.1 904.5 965.7 1,055.5 641.3 664.9 677.8 691.8 693.7 718.7 718.9 746.0 755.1 797.9 836.0 859.2 882.8 913.1 912.0 909.9 933.2 958.7 977.6 993.2 1,021.0 1,049.0 1,077.1 1,074.8 15.3 15.2 15.1 16.9 17.7 19.4 22.2 26.3 27.8 33.9 36.8 40.9 46.6 56.9 71.8 104.5 99.0 124.6 152.6 177.4 212.8 248.6 267.8 250.5 272.7 336.3 343.3 370.0 414.8 452.1 484.5 508.0 500.7 544.9 592.8 676.8 757.5 809.0 885.4 516.8 541.1 557.2 564.4 570.8 593.2 592.8 614.4 622.4 663.8 699.2 721.7 739.3 767.0 762.9 761.0 778.4 802.9 820.2 834.6 855.8 880.1 905.6 900.0 1 Includes 2 7.0 7.6 7.6 8.1 8.4 8.7 9.3 10.7 12.2 12.6 13.7 14.9 15.8 17.3 19.3 22.9 23.7 26.5 29.8 34.8 39.9 45.3 49.9 52.6 56.0 68.8 73.9 82.2 93.1 101.1 105.3 120.6 121.6 124.1 126.5 135.3 146.9 156.7 170.1 124.5 123.8 120.6 127.4 122.9 125.4 126.1 131.6 132.8 134.1 136.9 137.5 143.5 146.1 149.1 149.0 154.8 155.8 157.5 158.6 165.2 168.9 171.6 174.8 1.5 1.8 1.8 1.8 2.1 2.4 2.7 3.1 3.4 4.1 5.8 6.6 6.4 7.7 11.1 14.6 14.9 15.7 17.2 25.3 37.5 46.5 60.9 65.8 65.6 87.6 87.7 93.6 107.1 131.7 154.8 156.4 140.5 126.8 132.1 168.3 217.5 232.6 124.2 132.3 124.3 126.4 122.1 132.7 130.9 142.7 144.2 159.3 176.1 193.5 207.4 215.3 225.6 221.9 218.2 224.3 242.3 245.6 262.5 282.3 290.1 2.4 2.4 2.7 2.8 2.8 3.0 3.0 3.2 3.4 3.2 3.2 3.6 4.1 4.3 4.6 5.4 5.4 6.0 6.0 6.4 7.5 9.0 13.4 16.7 17.7 20.6 23.1 24.3 23.3 25.1 26.1 28.4 -12.1 32.0 36.6 37.3 33.6 39.8 39.4 27.5 30.7 27.8 42.0 31.1 33.6 35.0 46.6 31.9 33.6 36.5 47.3 33.8 32.4 33.5 34.6 41.6 34.7 35.4 47.4 35.2 36.5 36.9 48.9 0.4 .5 .5 .5 .6 .7 .8 .8 1.0 1.0 1.1 1.2 1.3 1.3 1.4 1.2 1.2 1.2 1.2 1.3 1.4 1.6 5.2 6.2 6.5 7.4 7.8 8.1 8.7 9.1 9.6 9.9 10.4 9.6 13.3 14.2 14.8 15.9 17.9 9.4 9.7 9.2 9.9 13.1 13.1 13.4 13.7 14.0 14.1 14.2 14.4 14.5 14.3 14.9 15.4 15.4 15.8 15.9 16.7 17.0 17.6 18.2 18.5 1.8 1.9 2.1 2.1 2.1 2.1 2.1 2.2 2.1 1.9 1.8 2.0 2.4 2.5 2.5 3.2 3.5 3.7 3.4 3.8 4.1 5.0 5.0 7.0 7.8 9.7 12.2 12.9 11.2 11.4 11.4 13.3 -27.9 16.6 17.3 16.4 11.5 16.3 13.2 12.4 15.0 12.9 26.1 12.6 14.8 15.5 26.2 11.2 12.9 15.7 25.8 12.0 11.0 11.3 11.8 19.2 11.2 11.9 22.9 10.5 10.8 10.0 21.7 From business 0.1 .1 .1 .1 .1 .2 .2 .2 .2 .3 .3 .4 .4 .5 .7 1.0 .7 1.1 1.4 1.4 2.0 2.4 3.2 3.4 3.4 3.5 3.1 3.3 3.3 4.6 5.1 5.2 5.4 5.8 6.0 6.8 7.3 7.6 8.3 5.7 6.0 5.8 5.9 5.5 5.7 6.2 6.7 6.7 6.6 6.7 7.1 7.2 7.1 7.4 7.4 7.1 7.6 7.7 7.8 7.7 8.1 8.7 8.7 Net foreign investment -1.2 3.2 4.3 3.9 5.0 7.5 6.2 3.9 3.5 1.7 1.8 4.9 1.3 -2.9 8.7 5.1 21.4 8.9 -9.0 -10.4 2.6 12.5 7.4 -6.1 -37.3 -91.5 -116.9 -142.9 -156.4 -118.1 -92.4 -78.6 7.3 -50.5 -78.6 -120.0 -114.4 -132.9 -19.9 -48.7 -56.0 -77.2 -54.2 -74.9 -84.9 -100.4 -91.6 -112.5 -134.2 -141.8 -125.8 -126.7 -116.9 -88.0 -116.9 -125.6 -156.4 -132.9 -148.4 -146.0 -168.9 capital grants received by the United States (net), not shown separately. See Table B-32 for data. Certain goods, primarily military equipment purchased and sold by the Federal Government, are included in services. Beginning with 1986, repairs and alterations of equipment were reclassified from goods to services. Source: Department of Commerce, Bureau of Economic Analysis. 308 TABLE B-25.—Real exports and imports of goods and services and receipts and payments of factor income, 1982-97 [Billions of chained (1992) dollars; quarterly data at seasonally adjusted annual rates] Exports of goods and services Goods1 Year or quarter Total Total Durable goods Nondurable goods Serv-1 ices Receipts of factor income Imports of goods and services Goods1 Total Total Durable goods Nondurable goods Serv-1 ices Payments of factor income 1982 1983 1984 311.4 303.3 328.4 213.5 207.3 223.7 117.0 114.6 127.0 98.4 94.4 98.1 98.5 96.8 105.9 143.5 138.2 160.3 325.5 366.6 455.7 257.4 292.4 363.1 138.4 166.8 221.9 115.6 123.1 140.2 68.9 74.4 92.9 100.7 95.9 121.9 1985 1986 1987 1988 1989 337.3 362.2 402.0 465.8 520.2 231.7 243.6 270.5 321.4 361.7 137.3 145.3 165.7 205.5 236.7 95.3 99.1 105.0 115.8 124.9 106.1 120.3 133.4 145.0 158.7 140.5 134.6 141.9 170.2 189.9 485.2 526.1 558.2 580.2 603.0 385.9 425.5 445.2 463.2 482.7 244.1 266.7 278.5 290.1 302.6 142.0 158.8 166.8 173.2 180.1 99.7 100.2 113.1 117.1 120.2 116.8 120.9 133.0 157.1 176.7 1990 1991 1992 1993 1994 564.4 599.9 639.4 658.2 712.4 391.6 419.2 448.7 463.7 509.8 260.0 279.6 300.9 317.5 356.5 131.6 139.6 147.8 146.2 153.5 173.1 180.8 190.7 194.5 202.9 190.6 161.1 137.9 147.3 168.4 626.3 622.2 669.0 728.4 817.0 497.3 497.1 544.9 602.0 684.1 310.9 312.7 346.4 389.4 456.0 186.4 184.4 198.4 212.5 227.8 129.4 125.3 124.1 126.5 133.2 170.2 145.7 126.8 128.8 160.0 1995 1996 1997p 791.2 857.0 964.4 573.9 628.4 725.8 411.2 463.3 553.4 164.1 169.1 181.1 218.0 229.9 242.5 207.7 214.2 890.1 971.5 1,106.5 749.2 823.1 944.1 511.7 569.9 669.4 237.2 253.5 277.8 141.2 149.0 163.5 200.7 210.2 1992:1 || III IV 633.0 635.8 639.7 649.1 440.3 445.1 448.3 461.0 294.5 298.4 299.5 311.1 145.8 146.6 148.8 149.9 192.8 190.7 191.3 188.2 141.9 143.5 133.4 132.7 647.8 668.3 670.5 689.1 521.2 543.6 552.8 561.8 331.2 344.6 351.0 359.0 1900 199.0 201.8 202.8 126.7 124.7 117.7 127.4 125.6 132.6 123.9 125.2 1993-1 II Ill IV 647.2 660.1 646.3 679.1 454.1 465.3 452.0 483.5 308.0 318.3 309.8 334.0 146.1 147.0 142.1 149.6 193.1 194.8 194.2 195.9 143.3 145.6 149.3 150.8 701.9 722.7 729.4 759.7 578.7 597.8 603.1 628.3 372.9 383.5 389.5 411.8 205.7 214.3 213.5 216.4 123.3 124.9 126.3 131.4 119.9 129.6 127.5 138.0 1994:1 || III IV 676.0 704.1 722.1 747.3 479.1 501.2 518.4 540.4 334.8 352.6 361.8 376.9 144.6 149.1 156.8 163.6 197.0 203.1 204.1 207.5 155.3 161.3 173.0 184.2 773.6 808.0 833.2 853.2 641.4 674.6 700.0 720.4 421.8 447.6 464.8 489.7 219.4 226.6 234.8 230.4 132.3 133.6 133.5 133.2 139.3 152.3 166.9 181.4 1995-1 II Ill IV 760.4 777.4 802.4 824.6 550.4 565.7 580.4 599.1 388.7 406.4 416.2 433.5 162.3 160.8 165.5 167.8 210.6 212.5 222.6 226.2 200.8 211.4 207.0 211.5 873.9 890.3 895.4 900.7 733.5 751.4 753.6 758.2 499.7 512.7 511.9 522.6 233.5 238.5 241.2 235.7 140.7 139.3 142.1 142.9 192.9 198.9 207.5 203.5 1996:1 828.2 847.4 851.4 901.1 605.2 619.2 623.0 666.2 439.1 459.1 460.8 494.0 168.4 164.5 166.4 177.0 224.0 229.3 229.4 236.8 208.0 929.0 208.1 960.0 214.8 990.2 226.0 1,006.6 781.4 811.7 841.7 857.5 540.4 559.8 582.6 596.6 241.3 251.9 259.4 261.6 147.8 148.8 149.3 150.0 199.4 203.7 218.1 219.8 263.3 280.1 287.2 280.8 services. 158.4 234.0 161.8 250.8 165.8 256.9 168.1 Beginning with || III IV 922.7 686.2 517.0 176.0 238.9 224.6 1,048.9 891.3 630.8 962.5 725.8 555.8 179.2 240.8 236.3 1,099.1 938.4 660.7 973.0 731.8 559.8 181.1 245.0 242.5 1,137.1 972.7 688.5 999.3 759.4 580.9 188.0 245.1 1.140.8 973.9 697.5 1 Certain goods, primarily military equipment purchased and sold by the Federal Government, are included in 1986, repairs and alterations of equipment were reclassified from goods to services. Note.—See Table B-2 for data for total exports of goods and services and total imports of goods and services for Source: Department of Commerce, Bureau of Economic Analysis. 1997-1 II Ill IV/> 309 1959-81. TABLE B-26.—Relation of gross domestic product, gross national product, net national product, and national income, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] PIUS: Rpreintc Receipts Year or quarter 1 occ L6SS: Payfactor ofments factor Equals: Gross ofincome Gross domestic from income national to product rest of product rest of the tha me world world Less: Consumption of fixed capital Total 510.1 1.5 54.6 507.2 4.3 529.8 56.6 1.8 526.6 5.0 5484 54 18 581 5448 589.4 60.4 1.8 585.2 6.1 6219 6174 21 630 66 2.4 668.0 66.0 7.4 663.0 2.7 724.5 70.2 719.1 8.1 3.1 793.0 75.9 787.8 8.3 3.4 839.1 82.3 , 833.6 8.9 916.7 89.8 4.1 910.6 10.3 988.4 5.8 98.3 982.2 11.9 6.6 1,042.0 107.0 1,035.6 13.0 6.4 1,133.1 116.5 1,125.4 14.1 7.7 1,246.0 127.6 16.4 1,237.3 11.1 1,395.4 140.0 1,382.6 23.8 14.6 1,512.6 162.5 1,496.9 30.3 14.9 1,643.9 188.7 1,630.6 28.2 15.7 1,836.1 206.0 1,819.0 32.9 17.2 2,047.5 228.6 2,026.9 37.9 2,291.4 47.4 25.3 2,313.5 258.3 70.4 37.5 2,590.4 296.7 2,557.5 46.5 2,819.5 339.4 2,784.2 81.8 60.9 3,150.6 388.5 3,115.9 95.6 65.8 3,273.2 424.3 3,242.1 96.9 65.6 3,546.5 ; 445.3 3,514.5 97.6 3,902.4 87.6 3,933.5 461.5 118.7 87.7 4,201.0 486.6 4,180.7 108.1 4,422.2 106.5 , 93.6 4,435.1 517.9 107.1 4,701.3 545.8 116.0 4,692.3 131.7 5,062.6 582.2 144.7 5,049.6 5,438.7 154.8 5,452.8 625.4 169.0 156.4 5,764.9 651.5 5,743.8 177.5 140.5 5,932.4 679.9 5,916.7 156.2 6,244.4 126.8 6,255.5 713.5 137.9 132.1 6,576.8 727.9 6,558.1 150.8 168.3 6,955.2 777.5 6,947.0 176.5 7,265.4 217.5 7,270.6 796.8 222.8 232.6 7,637.7 830.1 7,636.0 234.3 8,083.4 868.0 140.7 124.2 6,138.3 687.2 6,121.8 1992:1 II 132.3 6,212.2 692.4 6,201 ? 143.3 Ill 6,271.7 124.3 6,281.1 770.1 133.8 IV 126.4 6,390.5 704.3 6,383.1 133.9 122.1 6,468.1 721.8 6,444.5 145.6 1993:1 II 132.7 6,525.3 720.7 6,509 1 148.9 130.9 6,596.9 735.3 6,574.6 153.2 Ill 142.7 6,717.1 733.6 6,704.2 155.6 IV 144.2 6,811.2 823.3 6,794.3 161.1 1994:1 6,911.4 II 159.3 6,920.3 753.1 168.3 Ill 6,986.5 181.9 176.1 6,992.3 762.2 7,095.7 IV 193.5 7,096.8 771.4 194.6 207.4 7,175.1 780.1 7,168.9 213.6 1995:1 226.4 II 215.3 7,220.6 790.6 7,209.5 Ill 225.6 7,298.3 799.0 7,301.3 222.6 221.9 7,388.5 817.3 IV 7,381.9 228.5 218.2 7,475.3 815.5 7,467.5 226.0 1996:1 II 7,607.7 227.1 224.3 7,610.5 824.1 242.3 7,669.1 835.4 Ill 7,676.0 235.4 248.8 245.6 7,796.1 845.6 IV ...... 7,792.9 1997:1 248.2 262.5 7,919.2 855.0 7,933.6 II 282.3 8,013.6 863.0 8,034.3 261.6 Ill 269.4 290.1 8,103.5 871.6 8,124.3 882.5 IV" .... 8.241.5 Source: Department of Commerce, Bureau of Economic Analysis. 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 Z 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997" Less: Eg* Indirect Busibusi- ness Statisnaness trans- tical Governdistional Private ment product tax and fer crepannontax paycy liability ments 40.5 42.1 431 44.6 463 48.6 52.0 56.6 61.5 67.3 74.3 81.2 88.9 97.8 107.1 124.5 146.3 161.3 181.0 206.8 239.9 276.0 318.0 346.2 365.2 378.4 399.5 424.4 447.0 478.0 515.1 534.3 556.4 585.4 594.5 638.6 653.0 682.7 717.0 560.9 564.7 641.5 574.3 590.5 588.1 601.1 598.1 685.2 614.9 623.3 631.2 638.3 647.4 654.7 671.7 669.2 676.8 687.7 697.2 705.4 712.3 720.3 729.8 310 14.1 14.5 150 15.8 167 17.4 18.2 19.3 20.8 22.4 24.1 25.8 27.6 29.9 32.9 38.0 42.4 44.7 47.6 51.5 56.8 63.4 70.4 78.1 80.1 83.1 87.1 93.5 98.7 104.2 110.3 117.3 123.5 128.2 133.4 138.8 143.8 147.4 151.1 126.3 127.7 128.6 130.0 131.3 132.7 134.2 135.5 138.1 138.1 138.9 140.2 141.9 143.2 144.3 145.6 146.2 147.2 147.8 148.4 149.6 150.6 151.3 152.7 455.5 473.2 4903 529.0 5590 602.1 654.3 717.1 756.7 827.0 890.0 935.0 1,016.6 1,118.3 1,255.4 1,350.0 1,455.2 1,630.0 1,818.9 2,055.2 2,293.6 2,480.1 2,762.1 2,848.9 3,101.3 3,472.0 3,714.5 3,917.2 4.155.5 4;480.5 4,827.4 5,113.4 5,252.5 5,542.0 5,848.9 6,177.7 6,473.9 6,807.6 5,451.1 5,519.7 5,510.9 5,686.2 5,746.2 5,804.6 5,861.5 5,983.5 5,987.9 6,167.3 6,230.1 6,325.4 6,395.0 6,429.9 6,499.2 6,571.2 6,659.8 6,786.4 6,833.6 6,950.4 7,064.2 7,150.7 7,231.9 41.9 45.5 481 51.7 547 58.8 62.7 65.4 70.4 79.0 86.6 94.3 103.6 111.4 121.0 129.3 140.0 151.6 165.5 177.8 188.7 212.0 249.3 256.4 280.1 309.5 329.6 344.7 364.8 385.5 414.7 442.6 478.1 505.6 532.5 568.5 582.8 604.8 619.5 495.7 497.9 507.1 521.7 520.6 525.9 534.4 549.4 556.9 564.4 573.2 579.4 578.9 580.9 584.0 587.3 594.0 599.0 600.9 625.3 610.2 616.2 625.4 626.2 1.4 -1.6 1.4 -3.2 15 -28 1.6 -1.8 18 -30 2.0 -L5 2.2 -.8 2.3 3.3 2.5 1.3 2.8 .9 3.1 -1.5 3.2 1.9 3.4 6.1 3.9 4.3 3.4 4.5 5.0 5.5 12.1 5.2 6.5 19.9 7.3 18.2 8.2 18.1 9.9 28.2 11.2 27.6 13.4 14.9 15.2 -2.5 37.1 16.2 18.6 5.0 2.4 20.9 23.9 23.3 24.2 -15.4 25.4 -47.3 26.3 13.2 17.4 26.5 26.3 10.1 28.4 44.8 28.2 52.6 30.5 14.6 32.2 -28.2 33.6 -59.9 35.4 27.6 24.5 37.4 28.5 52.7 28.6 28.8 64.6 27.8 71.0 489 27.7 28.2 47.5 29.0 45.0 29.7 6.3 42.4 30.1 30.7 15.2 -5.4 31.5 31.8 1.2 32.0 -20.2 32.5 -45.0 32.7 -48.9 32.7 -50.3 33.5 -50.2 33.8 -79.5 34.2 -59.5 34.4 -64.3 35.0 -73.5 35.9 -103.2 36.2 PIUS: Subsidies less cur- Equals: rent sur- National plus of govern- income ment enterprises 0.1 .3 13 1.5 9 1.4 1.7 3.0 2.9 3.1 3.6 4.9 5.1 6.4 5.9 4.5 8.1 7.4 10.1 11.1 11.7 15.2 16.9 21.1 25.6 25.5 21.9 25.1 31.0 28.5 24.2 25.3 23.6 27.1 31.1 26.6 25.2 25.4 26.1 24.6 25.4 26.9 31.5 33.0 32.8 30.2 28.5 28.1 25.9 25.1 27.4 24.8 25.1 25.7 25.5 25.3 25.2 24.9 26.0 26.1 26.0 25.8 26.4 413.9 429.8 4448 479.0 5063 544.1 592.0 648.9 685.5 747.3 805.4 840.6 908.6 1,005.3 1,132.3 1,214.9 1,305.9 1,459.4 1,638.0 1,862.3 2,078.5 2,244.5 2,501.4 2,600.8 2,793.3 3,164.4 3,383.4 3,550.3 3,813.0 4,145.3 4,397.3 4,652.1 4,761.6 4,990.4 5,266.8 5,590.7 5,912.3 6,254.5 4,927.9 4,981.5 4,949.5 5,102.6 5,159.8 5,236.9 5,281.7 5,388.7 5,423.2 5,556.3 5,636.1 5,747.3 5,807.9 5,862.4 5,953.4 6,025.5 6,108.8 6,229.4 6,303.3 6,376.5 6,510.0 6,599.0 6,699.6 TABLE B-27.—Relation of national income and personal income, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] L(JSS: Year or quarter 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997" National income Corporate profits with inventory valuation Net and capital interest consumption adjustments 52.9 514 52.5 60.5 663 73.3 841 89.8 874 94.2 90.9 78.7 920 106.7 1201 109.2 1282 154.9 1843 209.0 213.1 188.3 2070 182.3 235.2 290.1 304.0 2938 333.2 382.1 3800 3971 411.3 4280 492.8 5705 650.0 7359 PI US: Contributions for social insurance Wage accruals less disbursements 10.2 112 13.1 14.6 161 18.2 21 1 24.3 281 30.4 33.6 40.0 454 49.3 565 71.8 800 85.1 1007 120.5 150.3 191.9 2345 264.9 275.9 318.5 337.2 3631 372.2 398.9 4566 4673 448.0 4143 402.5 4123 425.1 4251 18.8 219 229 . .. . 25.4 285 30.1 316 40.6 455 50.4 578 62.0 696 79.5 979 111.7 121 1 137.7 1554 177.0 204.2 225.0 2616 280.6 3019 345.5 375.9 4020 423.3 4628 4912 5185 543.5 5714 596.0 6305 659.1 6920 732.0 419.2 444.2 1992:1 565.1 4,927.9 II 437.2 570.1 417.5 4,981.5 Ill 5748 376.1 408.1 4 949.5 412.4 IV 575.7 454.6 5,102.6 5853 411.2 459.2 51598 1993:1 || 5940 4046 4782 52369 III 598.7 492.8 5|281.7 398.9 3954 541.2 53887 IV 6061 512.0 1994:1 619.2 397.2 5,423.2 || 562.0 6282 4056 55563 III 590.1 415.6 633.4 5,636.1 430.7 617.7 IV 641.2 5,747.3 432.7 613.2 650.1 5,807.9 1995-1 || 4297 6280 58624 6551 III 662.4 419.5 672.8 5,953.4 685.7 IV 668.6 418.6 6,025.5 717.7 416.2 6,108.8 1996:1 677.3 II 6,229.4 688.7 738.5 422.5 7396 Ill 6968 4309 63033 IV 705.1 747.8 430.6 6,376.5 1997:1 7195 4405 779.6 65100 II 795.1 448.1 726.9 6,599.0 Ill 827.3 735.0 451.8 6,699.6 IV/> 746.6 Source: Department of Commerce, Bureau of Economic Analysis. 413.9 4298 4448 479.0 5063 544.1 5920 648.9 6855 747.3 8054 840.6 9086 1,005.3 1 1323 1214.9 13059 1>59.4 16380 1,862.3 2,078.5 2,244.5 25014 2,600.8 27933 3,164.4 3,383.4 35503 3]813.0 41453 43973 46521 4>61.6 49904 5|266.8 55907 5,912.3 62545 311 0.0 o 0 .0 0 .0 0 .0 0 .0 0 .0 6 .0 _1 1 1 -.2 .0 1 .0 -4 .2 -.2 0 .0 0 o 1 -.1 -158 4.4 133 13.1 11 1.2 .0 .0 0 -63.0 701 _1 -.1 -522 52.4 3 .3 13.1 131 131 13.1 1.1 1.1 11 11 12 1.2 1.2 1.2 Personal interest income 22.7 250 269 29.3 324 36.1 403 44.9 495 54.6 608 69.2 757 81.8 941 112.4 1230 134.6 1557 184.5 2236 274.7 3372 379.2 4032 472.3 508.4 5433 560.0 5955 6745 7044 6992 6672 651.0 6681 718.9 7357 7688 674.1 673.0 6612 660.4 6603 6537 647.8 6421 641.4 6564 674.1 700.4 713.9 7194 7179 724.2 7223 727.8 7427 7498 7572 7661 772.6 779.1 Equals: Govern- Business ment transfer Personal transfer dividend payments payments Personal income to income to persons persons 12.7 134 14.0 15.0 161 18.0 202 20.9 221 24.5 251 23.5 235 25.5 277 29.6 292 35.0 395 44.3 505 57.5 672 66.9 774 79.4 88.3 1051 101.1 1099 1309 1429 1536 1594 185.3 2048 251.9 291 2 3215 152.3 154.5 1608 170.1 1778 1821 187.8 1935 192.1 2003 2085 218.5 243.4 2486 2542 261.5 2874 290.0 2920 2952 3125 3183 324.5 330.7 25.7 275 315 32.6 345 36.0 391 43.6 523 60.6 675 81.8 970 108.4 1241 147.4 1857 202.8 2175 234.8 2628 312.6 3557 396.3 4266 438.5 468.7 4980 522.5 5568 6049 6665 7491 8357 889.8 9309 990.0 10420 10941 816.4 831.0 8425 853.0 8749 8860 895.3 9031 9173 9262 9348 945.4 972.4 9856 9964 1,005.7 10276 1,039.0 10463 10551 10805 10900 1,098.4 1.107.3 1.3 13 1.4 1.5 17 1.8 20 2.1 23 2.5 28 2.8 30 3.4 38 4.0 45 5.5 59 6.8 79 8.8 102 11.8 128 15.1 17.8 207 20.8 208 21 1 213 208 225 22.1 237 25.0 260 27 1 21.9 225 228 22.9 223 220 22.0 222 23.1 236 24.0 24.4 24.6 248 251 25.4 25.6 25.9 261 264 267 269 27.2 27.5 394.4 4125 430.0 457.0 480.0 514.5 556.7 605.7 650.7 714.5 779.3 837.1 9002 988.8 1 1075 U15.9 13190 M59.4 16161 l!825.9 2 055.8 2,293.0 25685 2,727.2 2 900.8 3,215.3 3,449.8 36584 3i888.7 4 184.6 45010 48042 4i981.6 52772 5i519.2 57918 6450.8 64952 6 874.4 5,164.2 5,237.7 5 277.7 5J429.3 5 369.4 5*504 1 5^544.2 56591 5,616.3 57666 5838.1 5,946.1 6,053.1 61148 6'l79.1 6,256.2 6 359.4 6,461.3 65419 6618.4 67462 6829.1 6,906.9 7.015.4 TABLE B-28.—National income by type of income, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Compensation of employees Year or quarter National income ' Wages and salaries Supplements to wages and salaries Total Government Other Total Employer contributions for social insurance labor income Total ftthpr UlllCI Proprietors' income with inventory valuation capnai consumption adjustments Nonfarm Farm Total Total Proprietors' income 2 Total Proprietors' income 3 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 413.9 429.8 444.8 479.0 506.3 544.1 592.0 648.9 685.5 747.3 805.4 840.6 908.6 1,005.3 1,132.3 1,214.9 1,305.9 1,459.4 1,638.0 1,862.3 2,078.5 2,244.5 2,501.4 2,600.8 2,793.3 3,164.4 3,383.4 3,550.3 3,813.0 4,145.3 4,397.3 4,652.1 4,761.6 4,990.4 5,266.8 5,590.7 5,912.3 6,254.5 281.2 296.7 305.6 327.4 345.5 371.0 399.8 443.0 475.5 524.7 578.3 618.1 660.1 726.8 813.1 892.4 951.3 1,061.5 1,182.9 1,338.5 1,503.3 1,653.9 1,827.8 1,927.6 2,044.2 2,257.0 2,425.7 2,572.4 2,757.7 2,973.9 3,151.6 3,352.8 3,457.9 3,644.9 3,814.9 4,012.0 4,215.4 4,426.9 4,703.4 259.8 272.8 280.5 299.3 314.8 337.7 363.7 400.3 428.9 471.9 518.3 551.5 584.5 638.7 708.6 772.2 814.7 899.6 994.0 1,121.1 1,255.7 1,377.6 1,517.6 1,593.9 1,684.8 1,855.3 1,995.7 2,116.5 2,272.7 2,453.6 2,598.1 2,757.5 2,827.6 2,970.6 3,094.0 3,254.0 3,442.6 3,633.6 3,878.4 46.0 49.2 52.4 56.3 60.0 64.9 69.9 78.3 86.4 96.6 105.5 117.1 126.7 137.8 148.7 160.4 176.1 188.7 202.4 219.8 236.9 261.2 285.6 307.3 324.5 347.8 373.5 396.6 423.1 450.4 479.4 517.2 546.0 567.8 584.3 602.2 623.0 642.6 665.4 213.8 223.7 228.0 243.0 254.8 272.9 293.8 321.9 342.5 375.3 412.7 434.3 457.8 500.9 560.0 611.8 638.6 710.8 791.6 901.2 1,018.8 1,116.4 1,232.0 1,286.7 1,360.3 1,507.5 1,622.1 1,720.0 1,849.5 2,003.2 2,118.7 2,240.3 2,281.5 2,402.9 2,509.7 2,651.8 2,819.6 2,991.0 3,213.0 21.4 23.8 25.1 28.1 30.7 33.2 36.1 42.7 46.6 52.8 60.0 66.6 75.6 88.1 104.4 120.3 136.6 162.0 188.9 217.4 247.5 276.3 310.2 333.7 359.4 401.7 430.0 455.9 485.0 520.3 553.5 595.2 630.4 674.3 720.8 758.0 772.9 793.3 825.0 10.9 12.6 13.3 15.1 16.7 17.5 18.3 22.8 24.9 27.6 31.5 34.1 38.9 45.1 55.3 63.7 70.6 82.2 94.1 107.3 123.2 136.4 157.1 168.3 182.2 212.8 226.9 239.9 249.7 268.6 280.4 294.6 307.7 323.0 335.7 353.0 366.0 385.7 408.4 10.6 11.2 11.8 13.0 14.0 15.7 17.8 19.9 21.7 25.2 28.5 32.5 36.7 43.0 49.2 56.5 65.9 79.7 94.7 110.1 124.3 139.8 153.0 165.4 177.2 188.9 203.1 216.0 235.4 251.7 273.1 300.6 322.7 351.3 385.1 405.0 406.8 407.6 416.6 51.9 51.9 54.4 56.5 57.8 60.6 65.1 69.4 71.0 75.3 79.1 80.2 86.5 98.3 116.8 115.7 121.8 133.6 147.4 169.5 185.0 176.6 187.6 179.6 191.9 248.7 268.6 279.5 305.1 335.3 357.4 374.0 376.5 423.8 450.8 471.6 489.0 520.3 544.7 10.9 11.5 12.1 12.1 11.9 10.8 13.0 14.1 12.7 12.8 14.6 14.8 15.4 19.5 32.6 25.8 24.1 18.6 17.5 22.2 25.3 12.2 21.9 14.5 4.1 23.2 23.6 24.2 31.5 27.5 36.3 35.4 29.3 37.1 32.4 36.9 23.4 37.2 40.9 11.8 12.3 12.9 12.9 12.7 11.6 13.9 15.0 13.7 13.8 15.8 16.1 16.9 21.2 34.5 28.4 27.5 22.6 21.8 27.0 31.1 19.4 30.2 23.4 12.8 31.6 31.5 32.1 39.2 35.1 43.9 43.3 37.2 45.2 40.4 44.8 31.4 45.0 48.5 40.9 40.5 42.3 44.4 45.8 49.8 52.1 55.3 58.2 62.5 64.6 65.4 71.1 78.8 84.2 89.8 97.7 115.0 129.9 147.4 159.7 164.4 165.7 165.1 187.8 225.5 245.0 255.3 273.6 307.8 321.1 338.6 347.2 386.7 418.4 434.7 465.5 483.1 503.8 40.2 39.8 41.8 43.9 45.2 49.2 51.9 55.4 58.3 63.0 65.0 66.0 72.0 79.3 85.9 93.4 99.2 116.3 131.0 148.7 160.9 165.2 160.7 158.2 172.2 199.7 210.5 215.9 238.2 272.0 284.8 312.7 325.0 363.1 392.7 415.0 438.8 455.3 474.6 1992:1 4,927.9 4,981.5 4,949.5 5,102.6 5,159.8 5,236.9 5,281.7 5,388.7 5,423.2 5,556.3 5,636.1 5,747.3 5,807.9 5,862.4 5,953.4 6,025.5 6,108.8 6,229.4 6,303.3 6,376.5 3,577.1 3,626.5 3,669.2 3,707.0 3,749.3 3,796.3 3,837.6 3,876.2 3,937.4 3,988.0 4,028.7 4,093.9 4,153.2 4,187.9 4,238.0 4,282.6 4,322.2 4,403.9 4,461.0 4,520.7 2,916.5 2,956.2 2,988.2 3,021.7 3,045.5 3,079.3 3,111.0 3,140.4 3,190.7 3,232.3 3,267.2 3,325.9 3,384.3 3,417.7 3,463.3 3,504.9 3,540.3 3,612.3 3,664.0 3,718.0 561.4 567.2 569.8 572.5 581.1 581.5 586.3 588.4 596.0 601.3 603.5 608.0 617.2 621.1 625.1 628.5 635.6 640.3 645.5 648.9 2,355.1 2,389.0 2,418.3 2,449.2 2,464.5 2,497.7 2,524.7 2,552.0 2,594.8 2,631.0 2,663.7 2,717.8 2,767.1 2,796.7 2,838.2 2,876.4 2,904.7 2,972.0 3,018.4 3,069.0 660.7 670.3 681.0 685.3 703.8 717.0 726.6 735.8 746.7 755.6 761.5 768.1 768.9 770.2 774.6 777.7 781.9 791.5 797.0 802.7 319.9 322.7 325.1 324.2 330.0 334.7 337.1 340.9 347.1 352.0 354.6 358.3 361.0 363.6 368.0 371.4 376.8 383.6 388.6 393.6 340.8 347.6 355.9 361.1 373.8 382.3 389.5 394.9 399.5 403.7 406.9 409.8 407.9 406.6 406.7 406.2 405.0 407.9 408.4 409.1 410.2 420.8 426.6 437.4 440.3 452.2 446.2 464.4 463.9 474.7 471.6 476.1 478.2 484.4 491.7 501.5 509.3 520.0 523.8 528.3 35.9 37.1 39.0 36.5 29.7 36.3 25.6 38.0 46.4 38.8 33.2 29.1 20.6 21.3 22.9 28.9 31.9 36.5 40.1 40.4 43.7 44.9 47.8 44.4 37.7 44.2 33.8 46.0 54.3 46.7 41.1 37.0 28.6 29.3 30.8 36.8 39.8 44.3 47.9 48.1 374.4 383.8 387.6 401.0 410.6 416.0 420.6 426.5 417.5 435,9 438.4 447.0 457.6 463.1 468.7 472.6 477.4 483.5 483.7 487.9 350.8 360.7 364.4 376.3 383.5 389.0 394.8 403.4 408.1 410.9 416.6 424.3 431.3 436.6 442.4 444.7 448.8 456.4 456.1 460.0 II ... Ill .. IV .. 1993:1 II ... Ill .. IV .. 1994:1 II ... Ill .. IV .. 1995:1 II ... Ill .. IV .. 1996:1 II ... Ill .. IV... 47.9 494.4 466.3 40.2 401.3 412.3 534.6 657.8 3,134.9 813.6 6,510.0 4,606.3 3,792.7 415.1 543.6 43.6 51.2 500.0 470.8 662.0 3,180.8 820.7 405.6 II ... 6,599.0 4,663.4 3,842.7 667.7 3,229.6 827.9 48.5 506.3 477.0 410.2 417.7 547.2 40.9 Ill .. 6,699.6 4,725.2 3,897.3 46.4 514.4 484.3 416.4 421.4 553.3 39.0 IV* 4,818.6 3,980.8 674.2 3,306.7 837.7 1 National income is the total net income earned in production. It differs from gross domestic product mainly in that it excludes depreciation charges and other allowances for business and institutional consumption of durable capital goods and indirect business taxes. See Table 1997:1 B-26. See next page for continuation of table. 312 TABLE B-28.—National income by type of income, 1959-97—Continued [Billions of dollars; quarterly data at seasonally adjusted annual rates] Rental income of persons with capital consumption adjustment Year or quarter Total Rental income of persons Capital consumption adjustment Corporate profits with inventory valuation and capital consumption adjustments Profits with inventory valuation adjustment and without capital consumption adjustment Profits Total Total Profits before tax 53.4 17.7 53.1 52.9 19.8 -2.0 51.4 51.0 -2.1 18.6 51.1 20.6 19.2 51.3 51.0 -2.0 52.5 21.2 56.4 -2.0 60.5 56.4 20.0 22.0 20.7 61.2 66.3 61.2 -1.9 22.6 68.0 73.3 67.5 21.0 23.0 -2.0 78.8 84.1 77.6 -2.2 21.8 23.9 89.8 83.0 85.1 -2.5 22.5 24.9 87.4 80.3 81.8 -2.7 23.6 26.3 22.7 86.9 90.6 -3.2 94.2 25.9 23.4 83.2 89.0 90.9 -3.9 27.3 78.4 71.8 -4.2 78.7 23.6 27.8 85.5 90.1 -4.9 92.0 24.6 29.5 97.9 104.5 106.7 24.3 30.3 -6.0 -7.0 25.8 32.8 120.1 110.9 130.9 25.7 34.4 -8.6 109.2 103.4 142.8 140.4 24.7 -10.2 128.2 129.4 34.9 35.7 -11.5 173.8 154.9 158.9 24.3 36.4 -13.6 203.5 184.3 186.8 22.8 209.0 213.1 238.1 24.8 -16.5 41.3 26.9 -20.0 213.1 220.2 261.8 46.9 188.3 198.3 241.4 33.9 -23.6 57.5 207.0 204.1 44.5 229.8 -26.5 70.9 182.3 166.8 176.7 46.5 75.0 -28.5 46.1 212.8 235.2 203.7 75.1 -28.9 50.1 79.4 -29.4 244.2 290.1 238.5 304.0 230.5 48.1 229.9 79.3 -31.2 -31.5 293.8 234.0 222.6 41.5 73.0 44.8 77.9 -33.1 333.2 272.9 293.6 55.1 382.1 325.0 354.3 90.1 -35.0 51.7 91.4 348.1 -39.7 380.0 330.6 371.7 61.0 -38.1 397.1 358.2 99.1 411.3 378.2 374.2 67.9 107.5 -39.6 79.4 -48.1 428.0 398.9 406.4 127.5 105.7 148.5 -42.8 492.8 456.9 465.4 124.4 535.1 172.0 -47.6 570.5 519.1 132.8 -47.0 650.0 598.4 622.6 179.8 146.3 676.6 193.3 -47.0 735.9 674.1 148.1 -49.5 197.6 411.1 77.2 444.2 411.4 115.3 -38.2 79.5 437.2 404.3 426.2 118.1 -38.6 145.4 -75.9 69.5 376.1 359.4 368.0 454.6 420.5 91.2 131.1 -39.8 420.3 99.7 431.7 -45.1 459.2 419.2 144.8 105.6 -41.0 478.2 444.4 461.5 146.6 492.8 459.8 106.1 149.4 459.6 -43.3 111.5 153.3 -41.9 541.2 504.1 508.9 112.7 1994:1 -58.4 512.0 470.8 475.1 171.2 || 126.0 -43.0 562.0 510.2 525.3 169.0 Ill 130.1 -43.9 590.1 535.0 556.2 174.0 128.9 IV -45.0 617.7 560.3 583.9 173.9 -45.7 613.2 560.4 130.5 1995-1 610.7 176.2 II 132.3 178.0 -45.7 628.0 577.2 615.0 Ill 131.5 177.3 630.6 -45.9 672.8 621.4 634.1 685.7 634.5 137.1 187.7 -50.6 IV 143.4 189.5 -46.1 717.7 659.8 1996:1 664.9 || 144.6 191.0 -46.4 738.5 676.8 682.2 III 739.6 676.4 679.1 148.0 195.5 -47.5 IV 149.2 -48.1 747.8 683.4 197.3 680.0 149.0 1997:1 197.9 -48.9 779.6 711.9 708.4 II 148.7 197.6 -48.9 795.1 725.7 719.8 Ill 148.0 197.7 -49.7 827.3 757.1 753.4 -50.4 IV 146.6 197.0 2 Without capital consumption adjustment. 3 Without inventory valuation and capital consumption adjustments. Source: Department of Commerce, Bureau of Economic Analysis. 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/> 1992-1 . || Ill IV 1993:1 II III IV ... . 313 Profits tax liability Profits after tax Total Divi- Undisdends tributed profits 12.7 29.7 28.4 13.4 14.0 28.2 32.4 15.0 16.1 34.9 18.0 40.0 20.2 47.9 51.4 20.9 22.1 49.2 24.6 51.2 49.4 25.2 23.7 44.0 23.7 52.4 25.8 62.6 81.6 28.1 30.4 91.0 89.5 30.1 35.9 109.6 130.4 40.8 46.0 154.6 173.8 52.5 59.3 156.6 69.5 148.6 113.6 69.8 135.5 80.8 150.1 83.2 92.8 133.4 116.1 110.2 166.5 107.0 217.3 116.8 206.8 138.9 231.2 151.9 240.8 163.1 263.4 169.5 300.2 195.8 348.5 216.2 409.4 264.4 447.6 304.8 336.1 143.9 267.2 162.1 150.9 275.2 164.6 127.6 240.4 170.9 149.7 270.6 180.4 149.2 282.5 188.0 165.4 296.1 192.5 161.2 298.4 198.3 184.9 324.0 204.2 163.0 312.1 203.2 182.8 342.5 211.6 194.6 361.6 220.0 206.2 377.7 230.2 209.6 401.0 255.5 209.1 405.9 260.8 218.8 411.8 266.8 215.3 418.8 274.4 226.2 438.7 300.7 232.2 450.0 303.7 231.6 447.5 305.7 226.0 454.0 309.1 241.2 467.2 326.8 244.5 475.3 333.0 258.2 495.2 339.1 345.6 23.6 22.7 22.8 24.0 26.2 28.0 30.9 33.7 32.7 39.4 39.7 34.4 37.7 41.9 49.3 51.8 50.9 64.2 73.0 83.5 88.0 84.8 81.1 63.1 77.2 94.0 96.5 106.5 127.1 137.0 141.3 140.5 133.4 143.0 165.2 186.6 213.2 229.0 17.0 15.0 14.3 17.4 18.8 22.0 27.8 30.5 27.1 26.6 24.1 20.3 28.6 36.9 53.5 60.6 59.4 73.7 89.6 108.6 121.3 97.3 79.1 43.8 54.8 66.9 40.6 5.8 59.5 100.5 67.9 79.4 77.7 93.9 104.5 132.3 145.0 142.8 105.2 110.6 69.5 90.3 94.5 103.6 100.1 119.7 108.9 131.0 141.6 147.5 145.6 145.1 145.0 144.5 138.0 146.4 141.8 144.9 140.3 142.3 156.1 Capital conInven- sumptory tion valu- adjustation ment adjustment Net interest -0.2 .5 1.2 4.1 5.1 5.8 6.6 6.9 7.1 7.3 7.8 6.9 6.5 8.8 9.2 5.8 -1.3 -4.0 -2.5 -4.1 -7.1 -10.1 3.0 15.5 31.5 51.5 73.5 59.8 60.2 57.1 49.3 38.9 33.1 29.1 36.0 51.4 51.6 61.8 69.7 32.7 32.9 16.7 34.1 40.0 33.8 33.0 37.1 41.2 51.8 55.1 57.4 52.9 50.8 51.5 51.1 57.9 61.6 63.2 64.4 67.7 69.4 70.3 71.3 10.2 11.2 13.1 14.6 16.1 18.2 21.1 24.3 28.1 30.4 33.6 40.0 45.4 49.3 56.5 71.8 80.0 85.1 100.7 120.5 150.3 191.9 234.5 264.9 275.9 318.5 337.2 363.1 372.2 398.9 456.6 467.3 448.0 414.3 402.5 412.3 425.1 425.1 -0.3 -.2 .3 .0 .1 -L2 -2.1 -1.6 -3.7 -5.9 -6.6 -4.6 -6.6 -20.0 -39.5 -11.0 -14.9 -16.6 -25.0 -41.6 -43.0 -25.7 -9.9 -9.1 -5.6 1L4 -20.7 -29.3 -17.5 -13.5 4.0 -7.5 -8.5 -16.1 -24.3 -2.5 4.9 -2L9 -8.6 .2 -12.5 -17.1 -4l8 -4.3 -15.1 -21.2 -23.6 -50.3 -37.8 -9.3 .4 -5.1 -5.4 -2.7 3.3 3.5 5.9 3.6 6.5 419.2 417.5 408.1 412.4 411.2 404.6 398.9 395.4 397.2 405.6 415.6 430.7 432.7 429.7 419.5 418.6 416.2 422.5 430.9 430.6 440.5 448.1 451.8 TABLE B-29.—Sources of personal income, 1959-97 [Billions of dollars; quarterly data at seasonally adjusted annual rates] Wage and salary disbursements1 Private industries Year or quarter Personal income Total Total Goodsproducing industries Total Manufacturing Distributive industries Service industries Government Other labor income1 Proprietors' income with inventory valuation and capital consumption adjustments Farm 46.0 10.6 86.9 38.8 65.1 213.8 109.9 113.4 49.2 11.2 41.7 223.7 89.8 68.6 52.4 44.4 89.9 11.8 69.6 228.0 114.0 56.3 13.0 243.0 122.2 96.8 47.6 73.3 14.0 50.7 127.4 100.7 60.0 76.8 254.8 15.7 64.9 54.9 82.0 272.9 136.0 107.3 59.4 115.7 69.9 17.8 87.9 293.8 146.6 78.3 19.9 321.9 161.6 128.2 65.3 95.1 86.4 21.7 134.3 72.0 101.6 342.5 169.0 25.2 80.4 184.1 96.6 110.8 375.3 146.0 412.7 200.4 157.7 105.5 28.5 90.6 121.7 158.4 117.1 32.5 99.4 203.7 131.2 434.3 36.7 457.4 126.5 107.9 140.4 209.1 160.5 137.4 119.7 43.0 501.2 228.2 175.6 153.3 148.7 49.2 170.3 133.9 560.0 255.9 196.6 1973 160.9 56.5 211.8 148.6 186.8 611.8 276.5 176.0 65.9 163.4 277.1 211.6 198.1 638.6 1975 79.7 188.6 710.8 309.7 238.0 219.5 181.6 1976 94.7 266.7 202.3 242.7 202.8 791.6 346.1 1977 219.6 110.1 901.2 300.1 274.9 233.7 392.6 1978 237.1 124.3 1,018.8 442.5 335.3 308.5 267.8 1979 1,116.4 356.4 261.3 139.8 307.2 336.7 472.5 1980 285.6 153.0 388.0 368.5 348.6 1,232.0 514.9 1981 165.4 307.3 1,286.7 515.1 386.2 385.9 385.7 1982 177.2 405.7 426.4 401.2 325.0 1,360.3 528.2 1983 347.6 188.9 445.9 445.2 475.6 1,507.5 586.6 1984 373.8 203.1 1,622.1 620.7 468.9 476.5 525.0 1985 396.6 216.0 1,720.0 637.3 481.2 501.6 581.0 1986 235.4 535.4 653.7 660.4 497.2 423.1 1,849.5 1987 450.4 251.7 575.3 . 720.9 2,003.2 707.0 530.1 1988 479.4 273.1 2,118.7 732.4 548.1 779.5 606.8 1989 634.1 517.2 300.6 852.1 2,240.3 754.2 561.2 1990 322.7 562.5 546.1 646.6 888.6 2,281.5 746.3 1991 765.7 567.8 351.3 972.6 2,418.6 583.5 680.3 1992 699.4 1,024.7 592.9 584.3 385.1 2,505.3 781.2 1993 741.4 1,072.7 824.4 602.2 405.0 2,638.5 620.8 1994 648.4 623.0 406.8 2,806.5 864.4 783.1 1,159.0 1995 642.6 407.6 674.7 823.3 1,257.5 2,989.9 909.1 1996 665.4 416.6 876.0 1,375.6 3,211.8 960.1 705.9 1997* 561.4 752.7 340.8 666.2 936.2 2,355.1 571.5 1992:1 567.2 347.6 953.4 579.6 II 673.6 2,389.0 761.9 Ill 569.8 355.9 681.5 972.2 2,418.3 583.0 764.6 599.7 361.1 2,512.2 572.5 699.9 1,028.6 783.6 IV 2,394.4 566.7 749.7 581.1 373.8 677.5 967.2 1993:1 581.5 382.3 697.7 1,020.2 592.8 2,497.8 II 779.9 Ill 586.3 389.5 597.2 704.3 1,034.0 2,524.8 786.5 588.4 1,077.4 394.9 718.2 2,604.2 614.9 808.6 IV 600.7 797.1 596.0 399.5 715.8 1,029.4 2,542.3 1994:1 618.4 403.7 2,630.7 601.3 737.9 1,072.3 820.5 II Ill 603.5 406.9 2,663.4 626.9 832.9 748.0 1,082.5 637.1 608.0 409.8 847.2 763.6 1,106.7 2,717.5 IV 643.4 617.2 407.9 2,754.0 854.8 769.9 1,129.3 1995:1 644.5 621.1 406.6 778.7 1,146.3 2,783.5 858.5 II Ill 406.7 788.4 1,169.0 867.7 650.2 625.1 2,825.1 628.5 406.2 876.4 655.3 795.5 1,191.4 2,863.3 IV 635.6 405.0 804.4 1,214.3 2,903.6 659.1 884.9 1996: I 674.1 640.3 407.9 II 819.2 1,245.3 2,970.9 906.3 408.4 645.5 3,017.3 680.1 917.2 Ill 829.0 1,271.1 648.9 409.1 685.6 927.8 840.6 1,299.5 IV 3,067.9 3,133.7 694.1 657.8 412.3 856.8 1,334.1 942.9 1997:1 II 662.0 415.1 867.0 1,359.8 3,179.6 952.8 700.3 667.7 417.7 Ill 3,228.4 961.4 880.8 1,386.3 706.0 674.2 421.4 723.1 899.6 1,422.4 3,305.5 983.5 IV/> 'The total of wage and salary disbursements and other labor income differs from compensation of employees in Table cludes employer contributions for social insurance and the excess of wage accruals over wage disbursements. See next page for continuation of table. 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 : : : : : .. 1974™;.: 394.4 412.5 430.0 457.0 480.0 514.5 556.7 605.7 650.7 714.5 779.3 837.1 900.2 988.8 1,107.5 1,215.9 1,319.0 1,459.4 1,616.1 1,825.9 2,055.8 2,293.0 2,568.5 2,727.2 2,900.8 3,215.3 3,449.8 3,658.4 3,888.7 4,184.6 4,501.0 4,804.2 4,981.6 5,227.2 5,519.2 5,791.8 6,150.8 6,495.2 6,874.4 5,164.2 5,237.7 5,277.7 5,429.3 5,369.4 5,504.1 5,544.2 5,659.1 5,616.3 5,766.6 5,838.1 5,946.1 6,053.1 6,114.8 6,179.1 6,256.2 6,359.4 6,461.3 6,541.9 6,618.4 6,746.2 6,829.1 6,906.9 7,015.4 259.8 272.8 280.5 299.3 314.8 337.7 363.7 400.3 428.9 471.9 518.3 551.5 583.9 638.7 708.7 772.6 814.6 899.5 993.9 1,120.8 1,255.9 1,377.7 1,517.6 1,593.9 1,685.3 1,855.1 1,995.9 2,116.5 2,272.7 2,453.6 2,598.1 2,757.5 2,827.6 2,986.4 3,089.6 3,240.7 3,429.5 3,632.5 3,877.2 2,916.5 2,956.2 2,988.2 3,084.7 2,975.4 3,079.3 3,111.1 3,192.6 3,138.3 3,232.0 3,266.9 3,325.6 3,371.2 3,404.6 3,450.2 3,491.8 3,539.2 3,611.2 3,662.8 3,716.9 3,791.5 3,841.6 3,896.1 3,979.7 314 10.9 11.5 12.1 12.1 11.9 10.8 13.0 14.1 12.7 12.8 14.6 14.8 15.4 19.5 32.6 25.8 24.1 18.6 17.5 22.2 25.3 12.2 21.9 14.5 4.1 23.2 23.6 24.2 31.5 27.5 36.3 35.4 29.3 37.1 32.4 36.9 23.4 37.2 40.9 35.9 37.1 39.0 36.5 29.7 36.3 25.6 38.0 46.4 38.8 33.2 29.1 20.6 21.3 22.9 28.9 31.9 36.5 40.1 40.4 40.2 43.6 40.9 39.0 Nonfarm 40.9 40.5 42.3 44.4 45.8 49.8 52.1 55.3 58.2 62.5 64.6 65.4 71.1 78.8 84.2 89.8 97.7 115.0 129.9 147.4 159.7 164.4 165.7 165.1 187.8 225.5 245.0 255.3 273.6 307.8 321.1 338.6 347.2 386.7 418.4 434.7 465.5 483.1 503.8 374.4 383.8 387.6 401.0 410.6 416.0 420.6 426.5 417.5 435.9 438.4 447.0 457.6 463.1 468.7 472.6 477.4 483.5 483.7 487.9 494.4 500.0 506.3 514.4 B-28 in that it ex- TABLE B-29.—Sources of personal income, 1959-97—Continued [Billions of dollars; quarterly data at seasonally adjusted annual rates] Rental income of persons with capital consumption adjustment Year or quarter 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/» ... Transfer payments to persons Personal dividend income 17.7 18.6 19.2 20.0 20.7 21.0 21.8 22.5 23.6 22.7 23.4 23.6 24.6 24.3 25.8 25.7 24.7 24.3 22.8 24.8 26.9 33.9 44.5 46.5 46.1 50.1 48.1 41.5 44.8 55.1 51.7 61.0 67.9 79.4 105.7 124.4 132.8 146.3 148.1 12.7 13.4 14.0 15.0 16.1 18.0 20.2 20.9 22.1 24.5 25.1 23.5 23.5 25.5 27.7 29.6 29.2 35.0 39.5 44.3 50.5 57.5 67.2 66.9 77.4 79.4 88.3 105.1 101.1 109.9 130.9 142.9 153.6 159.4 185.3 204.8 251.9 291.2 321.5 Personal interest income 22.7 25.0 26.9 29.3 32.4 36.1 40.3 44.9 49.5 54.6 60.8 69.2 75.7 81.8 94.1 112.4 123.0 134.6 155.7 184.5 223.6 274.7 337.2 379.2 403.2 472.3 508.4 543.3 560.0 595.5 674.5 704.4 699.2 667.2 651.0 668.1 718.9 735.7 768.8 Total 27.0 28.8 32.8 34.1 36.2 37.9 41.1 45.7 54.6 63.2 70.3 84.6 100.1 111.8 127.9 151.3 190.2 208.3 223.3 241.6 270.7 321.5 365.9 408.1 439.4 453.6 486.5 518.6 543.3 577.6 626.0 687.8 769.9 858.2 912.0 954.7 1,015.0 1,068.0 1,121.1 Old-age, Governsurvivors, Government ment disability, unemand Veterans employployment ees health insur- benefits retireinsurance ment ance benefits benefits benefits 10.2 11.1 12.6 14.3 15.2 16.0 18.1 20.8 25.5 30.2 32.9 38.5 44.5 49.6 60.4 70.1 81.4 92.9 104.9 116.2 131.8 154.2 182.0 204.5 221.7 235.7 253.4 269.2 282.9 300.4 325.1 352.0 382.3 414.0 444.4 473.0 507.8 537.6 566.7 2.8 3.0 4.3 3.1 3.0 2.7 2.3 1.9 2.2 2.1 2.2 4.0 5.8 5.7 4.4 6.8 17.6 15.8 12.7 9.7 9.8 16.1 15.9 25.2 26.3 15.9 15.7 16.3 14.5 13.3 14.4 18.1 26.8 38.9 34.0 23.6 21.4 22.0 21.8 4.6 4.6 5.0 4.7 4.8 4.7 4.9 4.9 5.6 5.9 6.7 7.7 8.8 9.7 10.4 11.8 14.5 14.4 13.8 13.9 14.4 15.0 16.1 16.4 16.6 16.4 16.7 16.7 16.6 16.9 17.3 17.8 18.3 19.3 20.2 20.2 20.8 21.6 22.4 2.8 3.1 3.4 3.7 4.2 4.7 5.2 6.1 6.9 7.6 8.7 10.2 11.8 13.8 16.0 19.0 22.7 26.1 29.0 32.7 36.9 43.0 49.4 54.6 58.0 60.9 66.6 70.7 76.0 82.2 87.6 94.5 102.2 109.0 116.6 124.5 133.6 142.5 153.4 Family assistance 1 0.9 1.0 1.1 1.3 1.4 1.5 1.7 1.9 2.3 2.8 3.5 4.8 6.2 6.9 7.2 7.9 9.2 10.1 10.6 10.7 11.0 12.4 13.0 13.3 14.2 14.8 15.4 16.4 16.7 17.3 18.0 19.8 22.0 23.3 24.0 24.3 23.3 21.7 18.8 Other 5.7 6.1 6.5 7.0 7.6 8.2 9.0 10.3 12.2 14.5 16.2 19.4 23.0 26.1 29.5 35.7 44.7 49.1 52.4 58.4 66.8 80.8 89.7 94.1 102.6 109.9 118.7 129.3 136.6 147.6 163.6 185.6 218.2 253.8 272.8 289.3 308.0 322.5 338.2 Less: Personal contributions for social insurance 7.9 9.3 9.7 10.3 11.8 12.6 13.3 17.8 20.6 22.9 26.2 27.9 30.7 34.5 42.6 47.9 50.4 55.5 61.2 69.8 81.0 88.6 104.5 112.3 119.7 132.7 149.0 162.1 173.7 194.2 210.8 223.9 235.8 248.4 260.3 277.5 293.1 306.3 323.6 405.4 77.2 152.3 674.1 838.3 20.4 39.2 107.8 23.0 242.5 245.2 412.2 40.4 247.4 79.5 154.5 673.0 853.5 108.6 23.1 250.2 18.9 69.5 160.8 865.3 416.9 38.7 109.0 23.4 661.2 258.5 249.7 18.8 660.4 . 91.2 170.1 875.8 421.5 37.1 251.4 110.5 23.5 264.2 19.1 99.7 897.2 177.8 437.6 34.5 114.2 23.7 267.3 660.3 20.0 255.2 ... 105.6 182.1 908.0 441.9 34.4 115.9 271.4 653.7 20.5 24.0 259.2 446.4 106.1 187.8 917.3 34.7 117.4 647.8 24.0 274.6 261.6 20.3 111.5 193.5 642.1 925.3 451.8 32.6 119.0 19.8 24.2 277.9 265.2 112.7 192.1 641.4 940.4 463.3 27.7 120.5 20.0 24.3 284.6 272.0 470.4 126.0 200.3 656.4 949.8 23.9 20.1 123.8 287.3 276.2 24.3 130.1 208.5 674.1 958.8 475.8 21.6 125.9 24.4 290.7 278.8 20.5 128.9 700.4 482.4 218.5 969.8 20.9 127.6 282.9 20.1 24.2 294.5 130.5 243.4 498.4 997.0 21.0 130.0 713.9 289.1 20.7 23.9 303.1 719.4 1,010.4 132.3 248.6 505.8 21.0 132.9 291.5 20.8 23.5 306.3 131.5 254.2 717.9 1,021.5 511.1 21.8 21.1 134.8 294.5 23.2 309.6 137.1 261.5 516.0 724.2 1,031.0 22.0 136.6 22.8 313.2 297.2 20.5 143.4 287.4 529.5 23.0 21.4 722.3 1,053.2 300.5 138.3 22.5 318.5 .... 144.6 290.0 1,064.8 535.4 22.1 142.2 727.8 21.9 22.0 321.3 305.0 148.0 292.0 143.7 742.7 1,072.4 540.0 21.3 21.7 324.2 308.2 21.6 149.2 295.2 545.6 21.4 20.7 749.8 1,081.5 145.9 311.5 21.6 326.2 1997:1 149.0 1,107.2 558.9 22.1 22.4 150.4 312.5 757.2 19.7 333.8 318.2 II 148.7 564.4 318.3 21.9 22.4 152.7 766.1 1,117.0 19.0 336.6 321.3 III 569.4 148.0 324.5 154.2 772.6 1,125.7 21.6 22.5 18.2 339.8 324.8 IV" 330.7 146.6 574.1 156.3 779.1 1,134.8 21.5 22.3 18.1 342.5 330.2 1 Consists of aid to families with dependent children and, beginning with 1996, assistance programs operating under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Note.—The industry classification of wage and salary disbursements and proprietors' income is on an establishment basis and is based on the 1987 Standard Industrial Classification (SIC) beginning 1987 and on the 1972 SIC for earlier years shown. Source: Department of Commerce, Bureau of Economic Analysis. 1992-1 || III IV 1993:1 II Ill IV 1994-1 II Ill IV 1995-1 || Ill IV 1996-1 II Ill IV ... 315 TABLE B-30.—Disposition of personal income, 1959-97 [Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates] Less: Personal outlays Year or quarter 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1983 1989 1990 1991 1992 1993 1994 1995 1996 1997P Personal income Less: Personal tax and nontax payments Equals: Disposable personal Total 44.5 349.9 324.7 48.7 363.8 339.6 379.7 50.3 350.5 402.2 54.8 371.8 422.0 58.0 392.5 56.0 458.5 422.1 494.8 61.9 456.2 534.7 71.0 494.7 77.9 572.9 523.0 92.1 622.5 574.6 669.4 109.9 621.4 109.0 728.1 666.1 108.7 791.5 721.6 132.0 856.8 791.6 967.0 875.4 140.6 1,056.8 159.1 956.6 156.4 1,162.6 1,054.8 1,277.1 1,176.7 182.3 210.0 1,406.1 1,308.9 1,585.8 1,467.6 240.1 1,775.7 1,639.5 280.2 312.4 1,980.5 1,811.5 360.2 2,208.3 2,001.1 371.4 2,355.8 2,141.8 369.3 2,531.5 2,355.5 395.5 2,819.8 2,574.4 437.7 3,012.1 2,795.8 459.9 3,198.5 2,991.1 514.2 3,374.6 3,194.7 532.0 3,652.6 3,451.7 594.9 3,906.1 3,706.7 4,179.4 3,958.1 624.8 624.8 4,356.8 4,097.4 4,626.7 4,341.0 650.5 690.0 4,829.2 4,580.7 5,052.7 4,842.1 739.1 5,355.7 5,101.1 795.1 886.9 5,608.3 5,368.8 987.9 5,886.6 5,661.0 636.7 4,527.5 4,250.0 1992:1 || 4,597.7 4,304.8 640.0 4,627.1 4,359.5 650.6 Ill 4,754.5 4,450.0 674.8 IV 662.5 4,707.0 4,488.4 1993-1 II 685.6 4,818.5 4,549.5 4,848.7 4,609.8 695.5 Ill IV 716.4 4,942.8 4,675.2 712.9 4,903.4 4,738.2 1994-1 II 5,016.1 4,803.3 750.5 739.9 5,098.2 4,876.1 Ill 753.0 5,193.1 4,950.7 IV 1995-1 766.5 5,286.6 5,007.3 II 795.1 5,319.6 5,074.3 798.9 Ill 5,380.2 5,136.4 820.0 5,436.2 5,186.3 IV 5,519.4 5,261.3 840.0 1996:1 II 887.8 5,573.5 5,347.8 Ill 897.3 5,644.6 5,390.6 922.6 IV 5,695.8 5,475.4 955.7 1997-1 5,790.5 5,574.6 || 979.2 5,849.9 5,602.8 Ill 998.0 5,908.9 5,700.8 IVp 1,018.5 5,996.9 5,765.8 1 Percents based on data in millions of dollars. Source: Department of Commerce, Bureau of Economic Analysis. 394.4 412.5 430.0 457.0 480.0 514.5 556.7 605.7 650.7 714.5 779.3 837.1 900.2 988.8 1,107.5 1,215.9 1,319.0 1,459.4 1,616.1 1,825.9 2,055.8 2,293.0 2,568.5 2,727.2 2,900.8 3,215.3 3,449.8 3,658.4 3,888.7 4,184.6 4,501.0 4,804.2 4,981.6 5,277.2 5,519.2 5,791.8 6,150.8 6,495.2 6,874.4 5,164.2 5,237.7 5,277.7 5,429.3 5,369.4 5,504.1 5,544.2 5,659.1 5,616.3 5,766.6 5,838.1 5,946.1 6,053.1 6,114.8 6,179.1 6,256.2 6,359.4 6,461.3 6,541.9 6,618.4 6,746.2 6,829.1 6,906.9 7,015.4 Personal Personal Interest transfer Equals: conpay- Personal sumption paid ments saving by expendi- persons to rest tures of the world (net) 318.1 332.2 342.6 363.4 383.0 411.4 444.3 481.9 509.5 559.8 604.7 648.1 702.5 770.7 851.6 931.2 1,029.1 1,148.8 1,277.1 1,428.8 1,593.5 1,760.4 1,941.3 2,076.8 2,283.4 2,492.3 2,704.8 2,892.7 3,094.5 3,349.7 3,594.8 3,839.3 3,975.1 4,219.8 4,459.2 4,717.0 4,957.7 5,207.6 5,488.6 4,127.6 4,183.0 4,238.9 4,329.6 4,365.4 4,428.1 4,488.6 4,554.9 4,616.6 4,680.5 4,750.6 4,820.2 4,871.7 4,934.8 4,990.6 5,033.8 5,105.8 5,189.1 5,227.4 5,308.1 5,405.7 5,432.1 5,527.4 5,589.3 316 6.1 7.0 7.3 7.8 8.9 10.0 11.1 12.0 12.5 13.8 15.7 16.8 17.8 19.6 22.4 24.2 24.5 26.7 30.7 37.5 44.5 49.4 54.6 58.8 65.5 74.7 83.2 90.3 91.5 92.9 102.4 108.9 111.9 111.7 108.2 110.9 128.5 145.2 154.5 112.9 112.1 111.4 110.4 110.0 108.3 107.9 106.6 107.6 108.7 111.4 116.1 121.1 125.2 130.9 137.1 140.1 143.0 147.4 150.5 151.9 153.1 155.1 157.9 0.4 .5 !5 .6 !s .8 1.0 1.0 1.1 1.2 1.3 1.3 1.4 1.2 1.2 1.2 1.2 1.3 1.4 1.6 5.2 6.2 6.5 7.4 7.8 8.1 8.7 9.1 9.6 9.9 10.4 9.6 13.3 14.2 14.8 15.9 17.9 9.4 9.7 9.2 9.9 13.1 13.1 13.4 13.7 14.0 14.1 14.2 14.4 14.5 14.3 14.9 15.4 15.4 15.8 15.9 16.7 17.0 17.6 18.2 18.5 25.2 24.2 29.2 30.4 29.5 36.4 38.7 40.1 49.9 47.8 47.9 62.0 69.9 65.2 91.5 100.2 107.8 100.4 97.2 118.2 136.2 169.1 207.2 214.0 176.1 245.5 216.4 207.4 179.9 200.9 199.4 221.3 259.5 285.6 248.5 210.6 254.6 239.6 225.6 277.5 292.9 267.6 304.5 218.6 269.0 239.0 267.6 165.2 212.8 222.1 242.4 279.2 245.4 243.8 249.9 258.1 225.7 254.0 220.4 215.9 247.0 208.2 231.1 Percent of disposable personal income ? Personal outlays Total 92.8 93.4 92.3 92.4 93.0 92.1 92.2 92.5 91.3 92.3 92.8 91.5 91.2 92.4 90.5 90.5 90.7 92.1 93.1 92.5 92.3 91.5 90.6 90.9 93.0 91.3 92.8 93.5 94.7 94.5 94.9 94.7 94.0 93.8 94.9 95.8 95.2 95.7 96.2 93.9 93.6 94.2 93.6 95.4 94.4 95.1 94.6 96.6 95.8 95.6 95.3 94.7 95.4 95.5 95.4 95.3 95.9 95.5 96.1 96.3 95.8 96.5 96.1 Personal Personal consumption saving expenditures 90.9 91.3 90.3 90.4 90.7 89.7 89.8 90.1 88.9 89.9 90.3 89.0 88.8 89.9 88.1 88.1 88.5 90.0 90.8 90.1 89.7 88.9 87.9 88.2 90.2 88.4 89.8 90.4 91.7 91.7 92.0 91.9 91.2 91.2 92.3 93.4 92.6 92.9 93.2 91.2 91.0 91.6 91.1 92.7 91.9 92.6 92.2 94.2 93.3 93.2 92.8 92.2 92.8 92.8 92.6 92.5 93.1 92.6 93.2 93.4 92.9 93.5 93.2 7.2 6.6 7.7 7.6 7.0 7.9 7.8 7.5 8.7 7.7 7.2 8.5 8.8 7.6 9.5 '9.5 9.3 7.9 6.9 7.5 7.7 8.5 9.4 9.1 7.0 8.7 7.2 6.5 5.3 5.5 5.1 5.3 6.0 6.2 5.1 4.2 4.8 4.3 3.8 6.1 6.4 5.8 6.4 4.6 5.6 4.9 5.4 3.4 4.2 4.4 4.7 5.3 4.6 4.5 4.6 4.7 4.1 4.5 3.9 3.7 4.2 3.5 3.9 TABLE B-31.—Total and per capita disposable personal income and personal consumption expenditures in current and real dollars, 1959—97 [Quarterly data at seasonally adjusted annual rates, except as noted] Year or 1959 1960 1961 . 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/> 1992:1 II Ill IV 1993:1 II Ill IV 1994:1 II Ill IV 1995:1 11 Ill IV 1996:1 II Ill IV 1997:1 II Ill \\!P Disposable personal income Per capita Total (billions of dollars) (dollars) Chained Chained Current (1992) Current (1992) dollars dollars dollars dollars Personal consumption expenditures Total (billions of Per capita (dollars) dollars) Chained Chained Current (1992) Current (1992) dollars dollars dollars dollars 349.9 363.8 379.7 4022 4220 458.5 494.8 534.7 5729 622!5 669.4 728.1 791.5 856.8 967.0 1,056.8 1,162.6 1,277.1 1,406.1 1,585.8 1,775.7 1,980.5 2,208.3 2,355.8 2,531.5 2,819.8 3,012.1 3,198.5 3,374.6 3,652.6 3,906.1 4,179.4 4,356.8 4,626.7 4,829.2 5,052.7 5,355.7 5,608.3 5,886.6 4,527.5 4,597.7 4,627.1 4,754.5 4,707.0 4,818.5 4,848.7 4,942.8 4,903.4 5,016.1 5,098.2 5,193.1 5,286.6 5,319.6 5,380.2 5,436.2 5,519.4 5,573.5 5,644.6 5,695.8 5,790.5 5,849.9 5,908.9 5,996.9 318.1 332.2 342.6 3634 3830 411.4 444.3 481.9 5095 559.8 604.7 648.1 702.5 770.7 851.6 931.2 1,029.1 1,148.8 1,277.1 1,428.8 1,593.5 1,760.4 1,941.3 2,076.8 2,283.4 2,492.3 2,704.8 2,892.7 3,094.5 3,349.7 3,594.8 3,839.3 3,975.1 4,219.8 4,459.2 4,717.0 4,957.7 5,207.6 5,488.6 4,127.6 4,183.0 4,238.9 4,329.6 4,365.4 4,428.1 4,488.6 4,554.9 4,616.6 4,680.5 4,750.6 4,820.2 4,871.7 4,934.8 4,990.6 5,033.8 5,105.8 5,189.1 5,227.4 5,308.1 5,405.7 5,432.1 5,527.4 5,589.3 1,533.9 1,569.2 1,619.4 16975 17593 1,885.8 2,003.9 2,110.6 22023 2,302.1 2,377.2 2,469.0 2,568.3 2,685.7 2,875.2 2,854.2 2,903.6 3,017.6 3,115.4 3,276.0 3,365.5 3,385.7 3,464.9 3,495.6 3,592.8 3,855.4 3,972.0 4,101.0 4,168.2 4,332.1 4,416.8 4,498.2 4,500.0 4,626.7 4,703.9 4,805.1 4,964.2 5,076.9 5,222.7 4,578.1 4,612.4 4,613.8 4,702.5 4,622.3 4,703.9 4,716.9 4,772.5 4,715.3 4,792.8 4,827.3 4,884.9 4,938.9 4,940.9 4,973.0 5,003.9 5,047.6 5,061.3 5,094.8 5,103.8 5,161.1 5,200.9 5,234.1 5,294.8 1,975 2,013 2,066 2156 2229 2,389 2,546 2,720 2882 3,101 3,302 3,550 3,811 4,082 4,562 4,941 5,383 5,856 6,383 7,123 7,888 8,697 9,601 10,145 10,803 11,929 12,629 13,289 13,896 14,905 15,790 16,721 17,242 18,113 18,706 19,381 20,349 21,117 21,976 17,801 18,028 18,088 18,533 18,304 18,692 18,756 19,070 18,878 19,267 19,530 19,844 20,160 20,239 20,416 20,579 20,853 21,012 21,229 21,373 21,689 21,865 22,034 22,312 8,660 8,681 8,814 9098 9*294 9,825 10,311 10,735 11081 11468 11,726 12,039 12,366 12,794 13,566 13,344 13,444 13,837 14,142 14,715 14,951 14,867 15,064 15,053 15,332 16,309 16,654 17,039 17,164 17,678 17,854 17,996 17,809 18,113 18,221 18,431 18,861 19,116 19,497 18,000 18,085 18,036 18,330 17,975 18,247 18,246 18,413 18,154 18,409 18,493 18,667 18,834 18,798 18,871 18,942 19,071 19,081 19,161 19,152 19,331 19,439 19,518 19,700 1,394.6 1,432.6 1,461 5 15338 15966 l',692'.3 1,799.1 1,902.0 19586 2,070.2 2,147.5 2,197.8 2,279.5 2,415.9 2,532.6 2,514.7 2,570.0 2,714.3 2,829.8 2,951.6 3,020.2 3,009.7 3,046.4 3,081.5 3,240.6 3,407.6 3,566.5 3,708.7 3,822.3 3,972.7 4,064.6 4,132.2 4,105.8 4,219.8 4,343.6 4,486.0 4,595.3 4,714.1 4,869.7 4,173.8 4,196.4 4,226.7 4,282.3 4,286.8 4,322.8 4,366.6 4,398.0 4,439.4 4,472.2 4,498.2 4,534.1 4,551.3 4,583.5 4,612.9 4,633.5 4,669.4 4,712.2 4,718.2 4,756.4 4,818.1 4,829.4 4,896.2 4,935.0 1,796 1,838 1,865 1948 2023 2',144 2,286 2,451 2563 2,789 2,982 3,160 3,383 3,671 4,018 4,353 4,765 5,268 5,797 6,418 7,079 7,730 8,440 8,943 9,744 10,543 11,341 12,019 12,743 13669 14,531 15,360 15,732 16,520 17,273 18,093 18,837 19,608 20,490 16,229 16,402 16,570 16,877 16,976 17,177 17,363 17,574 17,774 17,978 18,199 18,419 18,578 18,774 18,938 19,055 19,291 19,562 19,660 19,919 20,247 20,303 20,612 20,796 7,873 7,926 7,954 8220 8434 8,817 9,257 9,674 9854 10,313 10,593 10,717 10,975 11,508 11,950 11,756 11,899 12,446 12,846 13,258 13,417 13,216 13,245 13,270 13,829 14,415 14,954 15,409 15,740 16,211 16,430 16,532 16,249 16,520 16,825 17,207 17,460 17,750 18,179 16,410 16,454 16,522 16,692 16,671 16,769 16,891 16,968 17,092 17,178 17,232 17,326 17,356 17,438 17,505 17,540 17,642 17,765 17,745 17,848 18,046 18,051 18,258 18,361 Gross domestic per capita (dollars) Current Chained (1992) dollars dollars 2,864 12,478 2,913 12,519 2,965 12,595 3136 13156 3261 13520 3,455 14,112 3,700 14,825 4,007 15,612 4194 15835 4,536 16,408 4,845 16,739 5,050 16,566 5,419 16,900 5,894 17,637 6,524 18,479 6,998 18,192 7,550 17,936 8,341 18,721 9,201 19,400 10,292 20,226 11,361 20,571 12,226 20,265 13,547 20,524 13,961 19,896 14,998 20,499 16,508 21,744 17,529 22,320 18,374 22,801 23,264 19,323 20605 23934 21,984 24,504 22,979 24,549 23,416 24,060 24,447 24,447 25,403 24,750 26,647 25,357 27,605 25,616 28,752 26,088 30,177 26,847 24,070 24,281 24,315 24,366 24,474 24,516 24,881 24,663 25,061 24,608 24,671 25,250 25,432 24,732 25,866 24,989 26,158 25,120 26,546 25,352 26,764 25,396 27,115 25,559 25,564 27,338 27,428 25,524 27,706 25,649 27,944 25,728 28.213 25,791 28,680 26,111 28,869 26,116 29,243 26,333 29,715 26,599 30,030 26,760 26,901 30,295 30,664 27,124 Population (thousands)1 177,130 180,760 183,742 186 590 189 300 191,927 194,347 196,599 198 752 200,745 202,736 205,089 207,692 209,924 211,939 213,898 215,981 218,086 220,289 222,629 225,106 227,726 230,008 232,218 234,332 236,394 238,506 240,682 242,842 245 061 247,387 249,956 252,680 255,432 258,161 260,705 263,194 265,579 267,869 254,338 255,032 255,815 256,543 257,151 257,785 258,516 259,191 259,738 260,351 261,040 261,692 262,235 262,847 263,527 264,169 264,680 265,258 265,887 266,491 266,987 267,545 268,171 268,772 'Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning 1960. Annual data are averages of quarterly data. Quarterly data are averages for the period. Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census). 317 TABLE B-32.—Gross saving and investment, 1959-97 [Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates] Gross saving Gross private saving Gross government saving Gross business saving Year or quarter Total Total Undis- Corporate Perand nontrib- corporate sonal 1 utedsaving Total corpo- consumption of rate fixed profits2 capital Total 108.5 82.3 25.2 57.1 16.5 40.5 26.2 1959 1134 816 242 574 1960 153 421 318 15.7 43.1 28.3 1961 116.3 88.0 29.2 58.8 1962 126.8 96.5 30.4 66.1 21.5 44.6 30.3 1349 99.8 295 702 1963 240 462 351 1964 145.3 112.3 36.4 75.9 48.7 32.9 27.3 160.4 123.8 38.7 85.1 1965 33.1 52.0 36.6 56.7 39.2 171.1 131.9 401 919 352 1966 ... 1967 173.8 144.1 49.9 94.2 32.7 61.5 29.7 1968 185.1 145.4 47.8 97.6 30.2 67.3 39.7 202.1 148.2 47.9 100.3 74.2 53.9 1969 26.0 197.3 163.8 62.0 101.8 20.7 81.2 32.6 1970 1971 214.3 189.7 69.9 119.8 88.9 23.9 30.5 1972 243.9 201.7 65.2 136.5 39.0 97.8 41.5 296.4 241.3 91.5 149.7 42.7 107.1 55.1 1973 1974 301.2 251.7 100.2 151.5 27.0 124.5 51.5 297.3 301.2 107.8 193.5 47.2 1975 146.3 -3.9 340.0 316.5 100.4 216.1 54.8 161.3 23.5 1976 1977 394.7 348.6 97.2 251.4 70.5 181.0 46.1 476.9 404.5 118.2 286.3 79.5 206.8 72.4 1978 540.6 448.8 136.2 312.5 239.9 90.7 1979 72.6 547.2 489.2 169.1 320.1 44.1 1980 276.0 56.8 56.4 1981 650.8 581.7 207.2 374.4 318.1 68.1 49.4 346.2 -5.3 1982 604.3 609.6 214.0 395.6 589.0 618.4 176.1 442.4 365.2 -29.4 1983 77.2 378.4 14.0 1984 750.7 736.7 245.5 491.2 112.8 399.4 15.2 745.6 730.5 216.4 514.1 114.7 1985 424.4 10.8 719.8 708.9 207.4 501.5 77.1 1986 447.1 53.6 1987 779.6 726.0 179.9 546.1 99.1 876.0 807.2 200.9 606.3 128.3 478.0 68.8 1988 99.7 515.1 92.0 1989 906.3 814.3 199.4 614.8 903.1 860.3 221.3 639.0 104.7 534.3 42.7 1990 556.4 3.3 1991 .... 934.0 930.6 259.5 671.2 114.8 585.4 -66.5 1992 .... 904.3 970.7 285.6 685.1 115.5 1993 .... 949.5 979.3 248.5 730.8 131.9 594.5 -29.8 1994 .... 1,079.2 1,030.2 210.6 819.6 167.6 638.6 49.0 1995 .. 1,165.5 1 093 1 254.6 838.5 172.4 653.0 72.4 1996 .... 1,267.8 1,125.5 239.6 885.9 202.1 682.8 142.3 1997* 2256 717.0 920.3 976.6 277.5 699.1 138.2 560.9 -56.3 1992:1 564.7 -65.3 II .... 914.0 979.3 292.9 686.4 121.7 Ill ... 899.9 986.7 267.6 719.1 77.6 641.5 -86.9 IV ... 883.0 940.3 304.5 635.8 124.5 574.3 -57.3 932.0 1,001.1 218.6 782.5 121.9 590.5 -69.1 1993:1 II .... 942.1 977.3 269.0 708.3 120.3 588.0 -35.2 Ill ... 943.8 973.3 239.0 734.3 133.2 601.1 -29.4 IV ... 980.1 965.6 267.6 698.0 152.1 598.1 14.5 1,062.4 1,048.6 165.2 883.4 145.8 1994:1 685.2 13.8 II .... 1,065.5 995.7 212.8 782.9 167.7 614.9 69.7 Ill ... 1,071.0 1,021.2 222.1 799.1 175.5 623.3 49.7 IV ... 1,118.0 1,055.3 242.4 812.9 181.3 631.2 62.7 1,136.8 1,078.7 279.2 799.5 148.1 1995:1 638.2 58.0 II .... 1,133.4 1,064.0 245.4 818.6 158.1 647.4 69.4 Ill ... 1,167.7 1,098.8 243.8 855.0 187.2 654.7 68.9 IV ... 1,224.0 1,130.7 249.9 880.8 196.0 671.7 93.3 1,215.9 1,119.3 258.1 861.2 190.8 1996:1 669.2 96.7 II .... 1,256.3 1,106.3 225.7 880.5 202.6 676.8 150.0 Ill ... 1,295.9 1,145.1 254.0 891.1 202.3 687.7 150.8 IV ... 1,303.0 1,131.4 220.4 911.0 212.6 697.2 171.6 1997:1 705.4 198.9 1,332.9 1,134.0 215.9 918.1 211.5 II .... 1,396.9 1,178.1 247.0 931.1 217.6 712.3 218.8 Ill ... 1,411.6 1,159.6 208.2 951.4 230.0 720.4 251.9 IV" 729.9 231.1 1 Includes private wage accruals less disbursements not shown separately. 2 With inventory valuation and capital consumption adjustments. 3 Consists mainly of allocations of special drawing rights (SDRs). See next page for continuation of table. Capital grants ConCon- Current received sump- Current sumpby the tion surplus tion surplus or or United of Total of deficit deficit States fixed fixed (-) capital (NIPA) capital (NIPA) (net) 3 Federal 318 Total 12.8 178 13.6 14.0 172 13.0 15.9 15.6 5.6 12.0 24.3 2.2 -8.5 -2.4 8.7 5.1 -49.9 -31.9 -19.3 -2.8 13.0 -26.8 -20.6 -92.8 -131.8 -111.9 -116.9 -127.9 -77.2 -67.0 -56.4 -94.0 -132.2 -215.0 -182.7 -117.2 -103.6 -39.2 -202.2 -213.9 -231.5 -212.5 -211.2 -181.7 -182.2 -155.8 -139.9 -93.6 -118.3 -117.0 -121.2 -108.6 -105.5 -78.9 -82.6 -40.2 -28.3 -5.9 15.9 34.7 60.8 10.2 105 10.7 11.2 118 12.1 12.5 13.0 13.9 14.9 15.6 16.2 16.9 18.2 19.9 22.0 24.0 25.4 27.0 28.9 31.5 34.1 37.1 41.9 42.6 44.1 46.1 49.6 51.7 54.3 57.0 60.7 63.9 65.9 67.9 69.5 70.9 71.2 716 65.2 65.8 66.0 66.5 67.0 67.5 68.4 68.8 69.1 69.6 69.3 69.8 70.3 70.9 71.0 71.3 71.0 71.4 71.2 71.3 71.4 71.5 71.6 71.9 State and local 2.6 74 2.9 2.8 54 .9 3.4 2.6 -8.3 -2.8 8.7 -14.1 -25.3 -20.5 -11.1 -16.9 -73.9 -57.2 -46.3 -31.7 -18.4 -61.0 -57.8 -134.7 -174.4 -156.0 -162.9 -177.5 -128.9 -121.3 -113.4 -154.7 -196.0 -280.9 -250.7 -186.7 -174.4 -110.5 13.5 140 14.7 16.3 179 19.9 20.8 235 24.1 27.6 29.6 30.4 32.4 43.9 46.4 46.5 46.0 55.3 65.4 75.1 77.7 83.6 88.7 87.5 102.4 125.9 132.0 138.8 130.8 135.8 148.4 136.7 135.5 148.6 152.9 166.2 176.0 181.5 -267.4 -279.6 -297.5 -279.0 -278.2 -249.2 -250.6 -224.6 -209.0 -163.2 -187.6 -186.8 -191.5 -179.5 -176.5 -150.2 -153.6 -111.6 -99.5 -77.1 -55.5 -36.8 -10.8 145.9 148.5 144.6 155.2 142.1 146.5 152.7 170.4 153.7 163.3 168.0 179.7 179.2 178.0 174.5 172.1 179.3 190.2 179.1 177.5 182.9 184.1 191.1 3.9 40 4.3 4.6 49 5.2 5.7 6.3 6.8 7.6 8.5 9.6 10.7 11.7 13.0 16.0 18.4 19.4 20.7 22.5 25.4 29.2 33.3 36.2 37.5 39.0 41.0 43.9 47.1 49.9 53.3 56.6 59.6 62.3 65.5 69.4 72.9 76.2 795 61.1 62.0 62.7 63.5 64.3 65.2 65.8 66.6 69.0 68.5 69.6 70.4 71.5 72.4 73.3 74.3 75.2 75.8 76.5 77.2 78.2 79.2 79.7 80.8 9.6 99 10.4 11.7 130 14.7 15.1 17.3 17.3 20.0 21.1 20.8 21.7 32.2 33.4 30.5 27.6 35.9 44.7 52.6 52.3 54.4 55.4 51.3 64.9 86.9 91.0 94.9 83.8 85.9 95.1 80.1 75.8 86.3 87.4 96.8 103.1 105.3 84.8 86.6 82.0 91.7 77.8 81.3 86.9 103.7 84.7 94.8 98.4 109.3 107.7 105.6 101.1 97.8 104.1 114.4 102.6 100.4 104.7 104.9 111.4 0.9 .7 .7 0 «-2.0 0 0 0 0 1.1 1.2 1.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TABLE B-32.—Gross saving and investment, 1959—97—Continued [Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates] Addenda: Gross investment Year or quarter 1959 . . I960 1961 1962 1963 1964 1965 1966 . . . 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 . 1991 1992 1993 1994 1995 1996 1997» 1992: 1 II Ill IV 1993: 1 II ... Ill IV 1994: 1 II III IV 1995: 1 || III IV 1996-1 II III IV . . 1997:1 || III . IV*> Total 106.9 110.2 113.5 125.0 131.9 143.8 159.6 174.4 175.1 186.0 200.7 199.1 220.4 248.1 299.9 306.7 309.5 359.9 413.0 494.9 568.7 574.8 665.7 601.8 626.2 755.7 748.0 743.1 764.2 828.7 919.5 920.5 944.0 949.1 1,002.1 1,093.8 1,137.2 1,207.9 944.8 951.3 952.5 947.7 1,003.0 989.0 991.3 1,025.1 1,068.7 1,107.8 1,086.2 1,112.6 1,138.0 1,113.2 1,122.7 1,175.1 1,165.6 1,206.0 1,216.4 1,243.5 1,268.6 1,323.4 1,308.4 4 For details on 5 Gross private domestic investment 78.8 78.8 77.9 87.9 93.4 101.7 118.0 130.4 128.0 139.9 155.0 150.2 176.0 205.6 242.9 245.6 225.4 286.6 356.6 430.8 480.9 465.9 556.2 501.1 547.1 715.6 715.1 722.5 747.2 773.9 829.2 799.7 736.2 790.4 876.2 1,007.9 1,038.2 1,116.5 1,237.6 755.2 790.7 799.7 816.1 854.3 857.4 872.8 920.3 963.4 1,017.9 1,007.1 1,043.1 1,050.8 1,024.0 1,028.8 1,049.1 1,060.5 1,105.4 1,149.2 1,151.1 1,193.6 1,242.0 1,250.2 1,264.5 Gross government invest-4 ment 29.3 28.2 31.3 33.2 33.5 34.5 35.4 40.1 43.5 44.3 43.9 44.0 43.1 45.4 48.3 56.0 62.7 64.4 65.4 74.6 85.3 96.4 102.1 106.9 116.5 131.7 149.9 163.5 173.5 172.9 182.7 199.4 200.5 209.1 204.5 205.9 213.4 224.3 226.9 209.5 209.3 208.9 208.8 202.9 206.5 203.4 205.2 197.0 202.4 213.2 211.2 213.0 215.8 210.8 214.1 222.0 226.3 223.6 225.3 223.3 227.4 227.1 229.7 Net foreign invest-5 ment Statistical discrepancy Gross saving as a percent gross national product -1.2 3.2 4.3 3.9 5.0 7.5 6.2 3.9 3.5 1.7 1.8 4.9 1.3 -2.9 8.7 5.1 21.4 8.9 -9.0 -10.4 2.6 12.5 7.4 -6.1 -37.3 -91.5 -116.9 -142.9 -156.4 -118.1 -92.4 -78.6 7.3 -50.5 -78.6 -120.0 -114.4 -132.9 -1.6 -3.2 -2.8 -1.8 -3.0 -1.5 -.8 3.3 1.3 .9 -1.5 1.9 6.1 4.3 3.4 5.5 12.1 19.9 18.2 18.1 28.2 27.6 14.9 -2.5 37.1 5.0 2.4 23.3 -15.4 -47.3 13.2 17.4 10.1 44.8 52.6 14.6 -28.2 -59.9 21.3 21.4 21.2 21.5 21.7 21.7 22.1 21.6 20.7 20.2 20.5 18.9 18.9 19.6 21.2 19.9 18.1 18.5 19.3 20.6 20.9 19.4 20.7 18.5 16.6 19.1 17.7 16.2 16.6 17.3 16.6 15.7 15.7 14.5 14.4 15.5 16.0 16.6 -19.9 -48.7 -56.0 -77.2 -54.2 -74.9 -84.9 -100.4 -91.6 -112.5 -134.2 -141.8 -125.8 -126.7 -116.9 -88.0 -116.9 -125.6 -156.4 -132.9 -148.4 -146.0 -168.9 24.5 37.4 52.7 64.6 71.0 46.9 47.5 45.0 6.3 42.4 15.2 -5.4 1.2 -20.2 -45.0 -48.9 -50.3 -50.2 -79.5 -59.5 -64.3 -73.5 -103.2 15.0 14.7 14.3 13.8 14.4 14.4 14.3 14.6 15.6 15.4 15.3 15.8 15.8 15.7 16.0 16.6 16.3 16.5 16.9 16.7 16.8 17.4 17.4 Personal saving as a percent of disposable personal income 7.2 6.6 7.7 7.6 7.0 7.9 7.8 7.5 8.7 7.7 7.2 8.5 8.8 7.6 9.5 9.5 9.3 7.9 6.9 7.5 7.7 8.5 9.4 9.1 7.0 8.7 7.2 6.5 5.3 5.5 5.1 5.3 6.0 6.2 5.1 4.2 4.8 4.3 3.8 6.1 6.4 5.8 6.4 4.6 5.6 4.9 5.4 3.4 4.2 4.4 4.7 5.3 4.6 4.5 4.6 4.7 4.1 4.5 3.9 3.7 4.2 3.5 3.9 government investment, see Table B-20. Net exports of goods and services plus net receipts of factor income from rest of the world less net transfers plus net capital grants received by the United States. See also Table B-24. 6 Consists of a U.S. payment to India under the Agricultural Trade Development and Assistance Act. This payment is included in capital grants received by the United States, net. Source: Department of Commerce, Bureau of Economic Analysis. 319 TABLE B-33.—Median money income (in 1996 dollars) and poverty status of families and persons, by race, selected years, 1978-96 Families^ Year Number (millions) ALL RACES 1978 4 1979 1980 1981 1982 1983* 1984 1985 1986 6 1987 1988 1989 1990 1991 19927 1993 1994 1995 1996 WHITE 1978 4 1979 1980 1981 1982 5 1983 1984 1985 1986 1987 6 1988 1989 1990 1991 1992 7 1993 1994 1995 1996 BLACK 1978 1979* 1980 1981 1982 5 1983 1984 1985 1986 6 1987 1988 1989 1990 1991 1992 7 1993 1994 1995 1996 Median money income (in 1996 dol- 2 lars) Persons below poverty level Below poverty level Female householder Total Number (millions) Percent Number (millions) Percent Median money income (in 1996 dollars) of persons 15 years old23 and over with income Males Number (millions) Percent All persons Females Yearround full-time workers All persons Yearround full-time workers 57.8 59.6 60.3 61.0 61.4 62.0 62.7 63.6 64.5 65.2 65.8 66.1 66.3 67.2 68.2 68.5 69.3 69.6 70.2 $41,003 41,530 40,079 38,986 38,459 38,869 39,917 40,443 42,171 42,775 42,695 43,290 42,440 41,401 40,900 40,131 41,059 41,810 42,300 5.3 5.5 6.2 6.9 7.5 7.6 7.3 7.2 7.0 7.0 6.9 6.8 7.1 7.7 8.1 8.4 8.1 7.5 7.7 9.1 9.2 10.3 11.2 12.2 12.3 11.6 11.4 10.9 10.7 10.4 10.3 10.7 11.5 11.9 12.3 11.6 10.8 11.0 2.7 2.6 3.0 3.3 3.4 3.6 3.5 3.5 3.6 3.7 3.6 3.5 3.8 4.2 4.3 4.4 4.2 4.1 4.2 31.4 30.4 32.7 34.6 36.3 36.0 34.5 34.0 34.6 34.2 33.4 32.2 33.4 35.6 35.4 35.6 34.6 32.4 32.6 24.5 26.1 29.3 31.8 34.4 35.3 33.7 33.1 32.4 32.2 31.7 31.5 33.6 35.7 38.0 39.3 38.1 36.4 36.5 11.4 $25,418 $37,335 11.7 24,975 37,060 13.0 23,888 36,552 14.0 23,462 36,033 15.0 22,895 35,540 15.2 23,095 35,454 14.4 23,558 36,249 14.0 23,784 36,453 13.6 24,500 37,069 13.4 24,565 36,851 13.0 25,077 36,263 12.8 25,171 35,959 13.5 24,361 34,788 14.2 23,580 34,941 14.8 22,875 34,480 15.1 22,913 33,744 14.5 22,995 33,468 13.8 23,228 33,150 13.7 23,834 33,538 $9,456 $22,410 9,227 22,329 9,380 22,098 9,505 21,693 9,662 22,424 10,090 22,823 10,371 23,289 10,524 23,698 10,894 24,112 11,457 24,259 11,783 24,596 12,177 24,848 12,089 24,719 12,068 24,474 24,707 11,982 11,994 24,397 12,139 24,631 12,488 24,479 12,815 24,935 50.9 52.2 52.7 53.3 53.4 53.9 54.4 55.0 55.7 56.1 56.5 56.6 56.8 57.2 57.7 57.9 58.4 58.9 58.9 42,695 43,336 41,759 40,952 40,379 40,701 41,809 42,509 44,105 44,729 44,981 45,520 44,315 43,525 43,245 42,672 43,284 43,905 44,756 3.5 3.6 4.2 4.7 5.1 5.2 4.9 5.0 4.8 4.6 4.5 4.4 4.6 5.0 5.3 5.5 5.3 5.0 5.1 6.9 6.9 8.0 8.8 9.6 9.7 9.1 9.1 8.6 8.1 7.9 7.8 8.1 8.8 9.1 9.4 9.1 8.5 8.6 1.4 1.4 1.6 1.8 1.8 1.9 1.9 2.0 2.0 2.0 1.9 1.9 2.0 2.2 2.2 2.4 2.3 2.2 2.3 23.5 22.3 25.7 27.4 27.9 28.3 27.1 27.4 28.2 26.9 26.5 25.4 26.8 28.4 28.5 29.2 29.0 26.6 27.3 16.3 17.2 19.7 21.6 23.5 24.0 23.0 22.9 22.2 21.2 20.7 20.8 22.3 23.7 25.3 26.2 25.4 24.4 24.7 8.7 9.0 10.2 11.1 12.0 12.1 11.5 11.4 11.0 10.4 10.1 10.0 10.7 11.3 11.9 12.2 11.7 11.2 11.2 9,570 9,314 9,431 9,611 9,793 10,266 10,494 10,728 11,109 11,750 12,073 12,415 12,385 12,350 12,260 12,233 12,313 12,680 12,961 26,622 26,090 25,409 24,895 24,205 24,297 24,867 24,951 25,854 26,111 26,471 26,398 25,414 24,647 23,939 23,867 24,000 24,601 24,949 38,028 38,131 37,595 36,879 36,487 36,400 37,490 37,465 38,104 37,710 37,484 37,545 36,111 35,657 35,300 34,564 34,344 34,505 34,741 22,621 22,524 22,311 22,055 22,726 23,129 23,520 24,034 24,481 24,708 24,965 25,143 25,016 24,831 24,993 24,951 25,297 24,980 25,358 5.9 25,288 1.2 7.6 30.6 15,948 29,125 8,617 20,966 50.6 1.6 27.5 49.4 8,477 20,639 6.2 24,540 1.7 27.8 1.2 8.1 31.0 16,150 27,481 49.4 6.3 24,162 1.3 8.6 32.5 15,269 26,452 1.8 28.9 8,731 20,809 6.4 23,101 1.4 9.2 34.2 14,804 26,093 52.9 8,538 19,918 2.0 30.8 9.7 35.6 14,505 25,915 6.5 22,317 1.5 8,638 20,312 56.2 2.2 33.0 53.7 6.7 22,938 1.5 9.9 35.7 14,209 25,953 8,773 20,531 2.2 32.3 9.5 33.8 14,267 25,586 51.7 6.8 23,302 1.5 9,308 21,196 2.1 30.9 6.9 24,477 1.5 8.9 31.3 15,702 26,205 50.5 2.0 28.7 9,153 21,275 50.1 7.1 25,201 1.5 9.0 31.1 15,492 26,865 9,400 21,422 2.0 28.0 7.2 25,422 1.6 9.5 32.4 15,490 26,963 51.1 2.1 29.4 9,598 22,068 7.4 25,636 9.4 15,974 27,475 9,747 22,371 1.6 49.0 2.1 28.2 31.3 1.5 9,964 22,613 46.5 7.5 25,571 * 2.1 27.8 9.3 30.7 15,954 26,197 25,787 7.5 25,717 9.8 31.9 15,448 9,997 22,261 48.1 2.2 29.3 1.6 7.7 24,823 1.8 51.2 10.2 32.7 14,932 26,067 10,156 22,042 2.3 30.4 8.0 23,600 1.9 9,938 22,655 50.2 10.8 33.4 14,610 25,711 2.5 31.1 8.0 23,391 1.9 49.9 10.9 33.1 15,858 25,588 10,324 22,058 2.5 31.3 1.7 46.2 10.2 30.6 15,862 25,838 11,163 21,839 8.1 26,148 2.2 27.3 1.7 9.9 29.3 16,479 25,530 11,285 21,701 45.1 8.1 26,737 2.1 26.4 1.7 9.7 28.4 16.491 27.136 11.772 21.990 43.7 8.5 26.522 2.2 ?6.1 ! The term "family" refers to a group of two or more persons related by birth, marriage, or adoption and residing together. Every family must include a reference person. Beginning 1979, based on householder concept and restricted to primary families. 2 Current dollar median money income adjusted by CPI-U-X1. 3 Prior to 1979, data are for persons 14 years and over. 4 Based on 1980 census population controls,- comparable with succeeding years. 5 Reflects implementation of Hispanic population controls; comparable with succeeding years. 6 Based on revised methodology; comparable with succeeding years. 7 Based on 1990 census adjusted population controls; comparable with succeeding years. Note.—Poverty rates (percent of persons below poverty level) for all races for years not shown above are: 1959, 22.4; 1960, 22.2; 1961, 21.9; 1962, 21.0; 1963, 19.5; 1964, 19.0; 1965, 17.3; 1966, 14.7; 1967, 14.2; 1968, 12.8; 1969, 12.1; 1970, 12.6; 1971, 12.5; 1972, 11.9; 1973,11.1; 1974,11.2; 1975,12.3; 1976,11.8; and 1977,11.6. Poverty thresholds are updated each year to reflect changes in the consumer price index (CPI-U). For details see "Current Population Reports," Series P-60. Source-. Department of Commerce, Bureau of the Census. 320 POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY TABLE B-34.—Population by age group, 1929-97 [Thousands of persons] Age (years) Julyl 1929 1933 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 . 1958 1959 1960 .. .. 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 .. 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 ' 1995 1996 1997 Total 121,767 125,579 130,880 132,122 133,402 134 860 136,739 138,397 139 928 141*389 144 126 146*631 149 188 152 271 154*878 157 553 160 184 163 026 165 931 168*903 171 984 174,882 177 830 180 671 183*691 186 538 189*242 191 889 194 303 196*560 198712 200,706 202 677 205 052 207,661 209 896 211909 213 854 215 973 218 035 220 239 222*585 225,055 227 726 229*966 232 188 234307 236,348 238,466 240 651 242 804 245,021 247,342 249,949 252,636 255 382 258^089 260 602 263,039 265,453 267.901 Under 5 11,734 10,612 10,418 10,579 10,850 11301 12,016 12,524 12979 13,244 14406 14*919 15607 16410 17*333 17312 17*638 18057 18566 19*003 19494 19,887 20175 20341 20,522 20469 20*342 20165 19824 19*208 18563 17,913 17376 17166 17,244 17101 16,851 16487 16121 15617 15564 15*735 16,063 16451 16,893 17228 17*547 17695 17,842 17963 18052 18195 18,508 18,851 19,187 19489 19^670 19694 19,526 19,324 19.150 5-15 16-19 9,127 9,302 9,822 9,895 9,840 9730 9,607 9,561 9361 9,119 9097 8*952 8788 8542 8,446 8414 8460 8637 8744 8*916 9195 9*543 10215 10683 11025 11 180 12007 12736 13516 14,311 14200 14*452 14800 15289 1 5*688 16039 16,446 16769 17017 17*194 17276 17*288 17242 17167 16812 16332 15,823 15295 15,005 15024 15*215 15198 14*,913 14461 13,970 13736 13879 14122 14379 14,874 15.211 26,800 26,897 25,179 24811 24,516 24231 24*093 23,949 23907 24,103 24468 25209 25852 26721 27279 28894 30227 31480 32682 33,994 35272 36*445 37368 38494 39765 41205 41626 42297 42938 43,702 44244 44*622 44840 44816 44*591 44203 43,582 42989 42 508 42*099 41298 40,428 39552 38838 38144 37784 37,526 37461 37,450 37404 37*333 37593 37*972 38588 39,146 39802 40386 41009 41666 42,157 42.648 20-24 10,694 11,152 11,519 11,690 11,807 11955 12,064 12,062 12036 12*004 11814 11>94 11700 11680 11552 11350 11062 10832 10714 10*616 10603 10756 10969 11 134 11483 11959 12,714 13269 13746 14*050 15248 15J786 16480 17202 18*159 18153 18*521 18975 19527 19*986 20499 20*946 21297 21590 21,869 21902 21*844 21737 21,478 20942 20*385 19846 19*442 19309 19,357 19211 18949 18553 18136 17,650 17.594 Note.—Includes Armed Forces overseas beginning 1940. Includes Alaska and Hawaii beginning 1950. All estimates are consistent with decennial census enumerations. Source: Department of Commerce, Bureau of the Census. 321 25-44 35,862 37,319 39,354 39,868 40,383 40861 41,420 42,016 42521 43,027 43657 44288 44916 45672 46103 46495 46786 47001 47194 47379 47440 47*337 47192 47140 47084 47013 46994 46958 46912 47001 47194 47721 48064 48473 48,936 50482 51749 53051 54302 55*852 57*561 59400 61379 63470 65528 67692 69733 71735 73673 75651 77338 78595 79943 81207 82444 82516 82 831 83*155 83513 83*847 83.771 45-64 21,076 22,933 25,823 26,249 26,718 27196 27,671 28,138 28630 29*064 29498 29*931 30405 30849 31*362 31884 32394 32942 33506 34*057 34591 35il09 35663 36203 36722 37255 37782 38338 38 916 39,534 40 193 40*846 41437 41999 42*482 42898 43235 43522 43801 44*008 44150 44,286 44390 44504 44500 44462 44,474 44547 44,602 44660 44*854 45471 45*882 46294 46766 48355 49595 50906 52258 53,734 55.452 65 and over 6,474 7,363 8,764 9,031 9,288 9,584 9,867 10,147 10494 10,828 11 185 11,538 11921 12397 12*803 13203 13*617 14076 14525 14*938 15388 1 5*806 16248 16675 17*089 17457 17778 18127 18451 18755 19071 19,365 19680 20107 20*561 21020 21*525 22061 22696 23*278 23892 24*502 25134 25707 26,221 26787 27*361 27878 28,416 29008 29*626 30124 30,682 31237 31,766 32273 32779 33164 33560 33,867 34.076 TABLE B-35.—Civilian population and labor force, 1929-97 [Monthly data seasonally adjusted, except as noted] Civilian labor force Civilian noninstitutional population' Year or month Employment Total Total Agricultural Non- X,, Unemployment Not in labor force Civilian labor force participation rate* Thousands of persons 14 years of age and over 1929 1933 1939 1940 1941 1942 1943 1944 1945 1946 1947 99,840 99,900 98,640 94,640 93,220 94,090 103,070 106,018 1947 1948 1949 1950 1951 1952 5 1953 1954 1955 1956 1957 1958 1959 I9605 1961 5 1962 1963 1964 1965 1966 1967 1968 1969 1970 19715 1972 5 1973 1974 1975 1976 1977 5 1978 1979 1980 1981 1982 1983 1984 1985 s 1986 1987 1988 1989 19905 1991 1992 1993 5 1994 1995 1996 5 1997 101,827 103,068 103,994 104,995 104,621 105,231 107,056 108,321 109,683 110,954 112,265 113,727 115,329 117,245 118,771 120,153 122,416 124,485 126,513 128,058 129,874 132,028 134,335 137,085 140,216 144,126 147,096 150,120 153,153 156,150 159,033 161,910 164,863 167,745 170,130 172,271 174,215 176,383 178,206 180,587 182,753 184,613 186,393 189,164 190,925 192,805 194,838 196,814 198,584 200,591 203.133 49,180 51,590 55,230 55,640 55,910 56,410 55,540 54,630 53,860 57,520 60,168 47,630 10,450 38,760 10,090 45,750 9,610 47,520 9,540 50,350 9,100 53,750 9,250 54,470 9,080 53,960 8,950 52,820 8,580 55,250 8,320 57,812 8,256 37,180 28,670 36,140 37,980 41,250 44,500 45,390 45,010 44,240 46,930 49,557 1,550 12,830 9,480 8,120 5,560 2,660 1,070 670 1,040 2,270 2,356 Civil- Unemian em- ployploy- ment rate, ment/ civilian 4 tion 3 workers ratio K Percent 44,200 43,990 42,230 39,100 38,590 40,230 45,550 45,850 55.7 56.0 57.2 58.7 58.6 57.2 55.8 56.8 47.6 50.4 54.5 57.6 57.9 56.1 53.6 54.5 3.2 24.9 17.2 14.6 9.9 4.7 1.9 1.2 1.9 3.9 3.9 42,477 42,447 42,708 42,787 42,604 43,093 44,041 44,678 44,660 44,402 45,336 46,088 46,960 47,617 48,312 49,539 50,583 51,394 52,058 52,288 52,527 53,291 53,602 54,315 55,834 57,091 57,667 58,171 59,377 59,991 60,025 59,659 59,900 60,806 61,460 62,067 62,665 62,839 62,744 62,752 62,888 62,944 62,523 63,324 64,578 64,700 65,638 65,758 66,280 66,647 66.837 58.3 58.8 58.9 59.2 59.2 59.0 58.9 58.8 59.3 60.0 59.6 59.5 59.3 59.4 59.3 58.8 58.7 58.7 58.9 59.2 59.6 59.6 60.1 60.4 60.2 60.4 60.8 61.3 61.2 61.6 62.3 63.2 63.7 63.8 63.9 64.0 64.0 64.4 64.8 65.3 65.6 65.9 66.5 66.5 66.2 66.4 66.3 66.6 66.6 66.8 67.1 56.0 56.6 55.4 56.1 57.3 57.3 57.1 55.5 56.7 57.5 57.1 55.4 56.0 56.1 55.4 55.5 55.4 55.7 56.2 56.9 57.3 57.5 58.0 57.4 56.6 57.0 57.8 57.8 56.1 56.8 57.9 59.3 59.9 59.2 59.0 57.8 57.9 59.5 60.1 60.7 61.5 62.3 63.0 62.8 61.7 61.5 61.7 62.5 62.9 63.2 63.8 3.9 3.8 5.9 5.3 3.3 3.0 2.9 5.5 4.4 4.1 4.3 6.8 5.5 5.5 6.7 5.5 5.7 5.2 4.5 3.8 3.8 3.6 3.5 4.9 5.9 5.6 4.9 5.6 8.5 7.7 7.1 6.1 5.8 7.1 7.6 9.7 9.6 7.5 7.2 7.0 6.2 5.5 5.3 5.6 6.8 7.5 6.9 6.1 5.6 5.4 4.9 Thousands of persons 16 years of age and over ... ... .... .... 59,350 60,621 61,286 62,208 62,017 62,138 63,015 63,643 65,023 66,552 66,929 67,639 68,369 69,628 70,459 70,614 71,833 73,091 74,455 75,770 77,347 78,737 80,734 82,771 84,382 87,034 89,429 91,949 93,775 96,158 99,009 102,251 104,962 106,940 108,670 110,204 111,550 113,544 115,461 117,834 119,865 121,669 123,869 125,840 126,346 128,105 129,200 131,056 132,304 133,943 136.297 1 Not seasonally adjusted. 2 Civilian labor force as percent of civilian noninstitutional f 3 Civilian employment as percent of civilian noninstitutional 4 Unemployed as percent of civilian labor force. See next page for continuation of table. 57,038 58,343 57,651 58,918 59,961 60,250 61,179 60,109 62,170 63,799 64,071 63,036 64,630 65,778 65,746 66,702 67,762 69,305 71,088 72,895 74,372 75,920 77,902 78,678 79,367 82,153 85,064 86,794 85,846 88,752 92,017 96,048 98,824 99,303 100,397 99,526 100,834 105,005 107,150 109,597 112,440 114,968 117,342 118,793 117,718 118,492 120,259 123,060 124,900 126,708 129.558 . population. 322 7,890 7,629 7,658 7,160 6,726 6,500 6,260 6,205 6,450 6,283 5,947 5,586 5,565 5,458 5,200 4,944 4,687 4,523 4,361 3,979 3,844 3,817 3,606 3,463 3,394 3,484 3,470 3,515 3,408 3,331 3,283 3,387 3,347 3,364 3,368 3,401 3,383 3,321 3,179 3,163 3,208 3,169 3,199 3,223 3,269 3,247 3,115 3,409 3,440 3,443 3.399 49,148 50,714 49,993 51,758 53,235 53,749 54,919 53,904 55,722 57,514 58,123 57,450 59,065 60,318 60,546 61,759 63,076 64,782 66,726 68,915 70,527 72,103 74,296 75,215 75,972 78,669 81,594 83,279 82,438 85,421 88,734 92,661 95,477 95,938 97,030 96,125 97,450 101,685 103,971 106,434 109,232 111,800 114,142 115,570 114,449 115,245 117,144 119,651 121,460 123,264 126.159 2,311 2,276 3,637 3,288 2,055 1,883 1,834 3,532 2,852 2,750 2,859 4,602 3,740 3,852 4,714 3,911 4,070 3,786 3,366 2,875 2,975 2,817 2,832 4,093 5,016 4,882 4,365 5,156 7,929 7,406 6,991 6,202 6,137 7,637 8,273 10,678 10,717 8,539 8,312 8,237 7,425 6,701 6,528 7,047 8,628 9,613 8,940 7,996 7,404 7,236 6.739 TABLE B-35.—Civilian population and labor force, 1929—97—Continued [Monthly data seasonally adjusted, except as noted] Civilian labor force Civilian noninstitutional population1 Year or month Employment Total Total Agricultural UnNon- employagriment cultural Not in labor force Civilian labor force participation2 rate sept' ::::::: : : : : : : .: .: : : : :"" Oct Nov Dec 1995:Jan Feb Mar Apr May June July Aug sept ':::"":..:.:::::::::":: Oct Nov Dec 1996:Jan Feb Mar Apr May June July ::r:r:: . . : Aug I:::::..:.:::::::::::::::: : : : : : : Sept octNov .::::::::::::::::::: :::::: Dec 1997: Jan 5 Feb Mar Apr May June July Aug Sept Nov Dec oct ..I:::.:.:::.:::::::::::::::::"::::::::::::" 195,953 196,090 196,213 196,363 196,510 196,693 196,859 197,043 197,248 197,430 197,607 197,765 197,753 197,886 198,007 198,148 198,286 198,453 198,615 198,801 199,005 199,192 199,355 199,508 199,634 199,773 199,921 200,101 200,278 200,459 200,641 200,847 201,061 201,273 201,463 201,636 202,285 202,389 202,513 202,674 202,832 203,000 203,166 203,364 203,570 203,767 203,941 204,098 130,638 130,698 130,441 130,638 130,782 130,567 130,669 131,221 131,318 131,754 131,916 131,893 132,100 132,167 132,171 132,598 131,873 131,951 132,335 132,256 132,490 132,684 132,640 132,470 132,768 133,116 133,306 133,405 133,680 133,686 134,214 133,911 134,341 134,794 134,977 135,060 135,729 135,689 136,115 136,043 136,060 136,206 136,294 136,404 136,439 136,406 136,864 137,169 121,971 122,118 121,955 122,303 122,907 122,643 122,714 123,271 123,601 124,085 124,531 124,729 124,716 124,976 125,000 124,975 124,496 124,526 124,791 124,735 125,002 125,303 125,203 125,116 125,246 125,771 125,951 126,057 126,321 126,591 126,867 126,995 127,338 127,715 127,746 127,899 128,541 128,515 129,035 129,275 129,494 129,392 129,661 129,747 129,761 129,910 130,575 130,777 3,306 3,343 3,351 3,411 3,408 3,296 3,339 3,457 3,435 3,494 3,581 3,573 3,525 3,612 3,626 3,548 3,344 3,458 3,389 3,385 3,297 3,445 3,346 3,347 3,488 3,544 3,472 3,382 3,466 3,412 3,454 3,415 3,466 3,477 3,363 3,423 3,453 3,340 3,387 3,462 3,418 3,389 3,452 3,379 3,422 3,327 3,384 3,385 118,665 118,775 118,604 118,892 119,499 119,347 119,375 119,814 120,166 120,591 120,950 121,156 121,191 121,364 121,374 121,427 121,152 121,068 121,402 121,350 121,705 121,858 121,857 121,769 121,758 122,227 122,479 122,675 122,855 123,179 123,413 123,580 123,872 124,238 124,383 124,476 125,088 125,175 125,648 125,813 126,076 126,003 126,209 126,368 126,339 126,583 127,191 127,392 8,667 8,580 8,486 8,335 7,875 7,924 7,955 7,950 7,717 7,669 7,385 7,164 7,384 7,191 7,171 7,623 7,377 7,425 7,544 7,521 7,488 7,381 7,437 7,354 7,522 7,345 7,355 7,348 7,359 7,095 7,347 6,916 7,003 7,079 7,231 7,161 7,188 7,174 7,080 6,768 6,566 6,814 6,633 6,657 6,678 6,496 6,289 6,392 Unemployment rate, civilian work-4 ers Percent Thousands of persons 16 years of age and over 1994:Jan5 Feb Mar Apr May June July Aug Civilian employment/ population ratio3 65,315 65,392 65,772 65,725 65,728 66,126 66,190 65,822 65,930 65,676 65,691 65,872 65,653 65,719 65,836 65,550 66,413 66,502 66,280 66,545 66,515 66,508 66,715 67,038 66,866 66,657 66,615 66,696 66,598 66,773 66,427 66,936 66,720 66,479 66,486 66,576 66,556 66,700 66,398 66,631 66,772 66,794 66,872 66,960 67,131 67,361 67,077 66,929 66.7 66.7 66.5 66.5 66.6 66.4 66.4 66.6 66.6 66.7 66.8 66.7 66.8 66.8 66.8 66.9 66.5 66.5 66.6 66.5 66.6 66.6 66.5 66.4 66.5 66.6 66.7 66.7 66.7 66.7 66.9 66.7 66.8 67.0 67.0 67.0 67.1 67.0 67.2 67.1 67.1 67.1 67.1 67.1 67.0 66.9 67.1 67.2 62.2 62.3 62.2 62.3 62.5 62.4 62.3 62.6 62.7 62.9 63.0 63.1 63.1 63.2 63.1 63.1 62.8 62.7 62.8 62.7 62.8 62.9 62.8 62.7 62.7 63.0 63.0 63.0 63.1 63.2 63.2 63.2 63.3 63.5 63.4 63.4 63.5 63.5 63.7 63.8 63.8 63.7 63.8 63.8 63.7 63.8 64.0 64.1 6.6 6.6 6.5 6.4 6.0 6.1 6.1 6.1 5.9 5.8 5.6 5.4 5.6 5.4 5.4 5.7 5.6 5.6 5.7 5.7 5.7 5.6 5.6 5.6 5.7 5.5 5.5 5.5 5.5 5.3 5.5 5.2 5.2 5.3 5.4 5.3 5.3 5.3 5.2 5.0 4.8 5.0 4.9 4.9 4.9 4.8 4.6 4.7 5 Not strictly comparable with earlier data due to population adjustments as follows: Beginning 1953, introduction of 1950 census data added about 600,000 to population and 350,000 to labor force, total employment, and agricultural employment. Beginning 1960, inclusion of Alaska and Hawaii added about 500,000 to population, 300,000 to labor force, and 240,000 to nonagricultural employment. Beginning 1962, introduction of 1960 census data reduced population by about 50,000 and labor force and employment by 200,000. Beginning 1972, introduction of 1970 census data added about 800,000 to civilian noninstitutional population and 333,000 to labor force and employment. A subsequent adjustment based on 1970 census in March 1973 added 60,000 to labor force and to employment. Beginning 1978, changes in sampling and estimation procedures introduced into the household survey added about 250,000 to labor force and to employment. Unemployment levels and rates were not significantly affected. Beginning 1986, the introduction of revised population controls added about 400,000 to the civilian population and labor force and 350,000 to civilian employment. Unemployment levels and rates were not significantly affected. Beginning 1990, the introduction of 1990 census-based population controls, adjusted for the estimated undercount, added about 1.1 million to the civilian population and labor force, 880,000 to civilian employment, and 175,000 to unemployment. The overall unemployment rate rose by about 0.1 percentage point. Beginning 1994, data are not strictly comparable with earlier data because of the introduction of a major redesign of the Current Population Survey and collection methodology. Beginning 1997, data are not strictly comparable with earlier data due to the introduction of revised population controls which added about 470,000 to the civilian population, 320,000 to the labor force, and 290,000 to employment. Unemployment rates and other percentages of labor market participation were not affected. Note.—Labor force data in Tables B-35 through EM4 are based on household interviews and relate to the calendar week including the 12th of the month. For definitions of terms, area samples used, historical comparability of the data, comparability with other series, etc., see "Employment and Earnings." Source: Department of Labor, Bureau of Labor Statistics. 323 TABLE B-36.—Civilian employment and unemployment by sex and age, 1950—97 [Thousands of persons 16 years of age and over; monthly data seasonally adjusted] Civilian employment Males Year or month 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1996: Jan Feb Mar May June July Aug Sept Oct Nov Dec 1997-. Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Total 58,918 59,961 60,250 61,179 60,109 62,170 63,799 64,071 63,036 64,630 65,778 65,746 66,702 67,762 69,305 71,088 72,895 74,372 75,920 77,902 78,678 79,367 82,153 85,064 86,794 85,846 88,752 92,017 96,048 98,824 99,303 100,397 99,526 100,834 105,005 107,150 109,597 112,440 114,968 117,342 118,793 117,718 118,492 120,259 123,060 124,900 126,708 129,558 125,246 125,771 125,951 126,057 126,321 126,591 126,867 126,995 127,338 127,715 127,746 127,899 128,541 128,515 129,035 129,275 129,494 129,392 129,661 129,747 129,761 129,910 130,575 130,777 Total 41,578 41,780 41,682 42,430 41,619 42,621 43,379 43,357 42,423 43,466 43,904 43,656 44,177 44,657 45,474 46,340 46,919 47,479 48,114 48,818 48,990 49,390 50,896 52,349 53,024 51,857 53,138 54,728 56,479 57,607 57,186 57,397 56,271 56,787 59,091 59,891 60,892 62,107 63,273 64,315 65,104 64,223 64,440 65,349 66,450 67,377 68,207 69,685 67,538 67,765 67,817 67,888 68,079 68,266 68,362 68,374 68,373 68,686 68,590 68,773 69,209 69,248 69,415 69,565 69,765 69,586 69,711 69,748 69,656 69,785 70,352 70,195 16-19 years 2,186 2,156 2,107 2,136 1,985 2,095 2,164 2,115 2,012 2,198 2,361 2,315 2,362 2,406 2,587 2,918 3,253 3,186 3,255 3,430 3,409 3,478 3,765 4,039 4,103 3,839 3,947 4,174 4,336 4,300 4,085 3,815 3,379 3,300 3,322 3,328 3,323 3,381 3,492 3,477 3,427 3,044 2,944 2,994 3,156 3,292 3,310 3,401 3,270 3,309 3,268 3,345 3,359 3,340 3,323 3,259 3,376 3,346 3,212 3,318 3,353 3,388 3,384 3,367 3,456 3,328 3,350 3,362 3,358 3,448 3,528 3,519 20 years and over Total 39,394 39,626 39,578 40,296 39,634 40,526 41,216 41,239 40,411 41,267 41,543 41,342 41,815 42,251 42,886 43,422 43,668 44,294 44,859 45,388 45,581 45,912 47,130 48,310 48,922 48,018 49,190 50,555 52,143 53,308 53,101 53,582 52,891 53,487 55,769 56,562 57,569 58,726 59,781 60,837 61,678 61,178 61,496 62,355 63,294 64,085 64,897 66,284 64,268 64,456 64,549 64,543 64,720 64,926 65,039 65,115 64,997 65,340 65,378 65,455 65,856 65,860 66,031 66,198 66,309 66,258 66,361 66,386 66,298 66,337 66,824 66,676 17,340 18,181 18,568 18,749 18,490 19,551 20,419 20,714 20,613 21,164 21,874 22,090 22,525 23,105 23,831 24,748 25,976 26,893 27,807 29,084 29,688 29,976 31,257 32,715 33,769 33,989 35,615 37,289 39,569 41,217 42,117 43,000 43,256 44,047 45,915 47,259 48,706 50,334 51,696 53,027 53,689 53,496 54,052 54,910 56,610 57,523 58,501 59,873 57,708 58,006 58,134 58,169 58,242 58,325 58,505 58,621 58,965 59,029 59,156 59,126 59,332 59,267 59,620 59,710 59,729 59,806 59,950 59,999 60,105 60,125 60,223 60,582 16-19 years 1,517 1,611 1,612 1,584 1,490 1,547 1,654 1,663 1,570 1,640 1,768 1,793 1,833 1,849 1,929 2,118 2,468 2,496 2,526 2,687 2,735 2,730 2,980 3,231 3^45 3,263 3,389 3,514 3,734 3,783 3,625 3,411 3,170 3,043 3,122 3,105 3,149 3,260 3,313 3,282 3,154 2,862 2,724 2,811 3,005 3,127 3,190 3,260 3,101 3,121 3,118 3,109 3,182 3,156 3,192 3,128 3,320 3,308 3,297 3,256 3,254 3,246 3,298 3,353 3,241 3,231 3,257 3,210 3,222 3,206 3,270 3,327 Note.—See footnote 5 and Note, Table B-35. Source: Department of Labor, Bureau of Labor Statistics. Unemployment Males Females 324 Females 20 years and over Total 20 20 years Total 16-19 years Total 16-19 years and years and over over 15,824 16,570 16,958 17,164 17,000 18,002 18,767 19,052 19,043 19,524 20,105 20,296 20,693 21,257 21,903 22,630 23,510 24,397 25,281 26,397 26,952 27,246 28,276 29,484 30,424 30,726 32,226 33,775 35,836 37,434 38,492 39,590 40,086 41,004 42,793 44,154 45,556 47,074 48,383 49,745 50,535 50,634 51,328 52,099 53,606 54,396 55,311 56,613 54,607 54,885 55,016 55,060 55,060 55,169 55,313 55,493 55,645 55,721 55,859 55,870 56,078 56,021 56,322 56,357 56,488 56,575 56,693 56,789 56,883 56,919 56,953 57,255 3,288 2,055 1,883 1,834 3,532 2,852 2,750 2,859 4,602 3,740 3,852 4,714 3,911 4,070 3,786 3,366 2,875 2,975 2,817 2,832 4,093 5,016 4,882 4,365 5,156 7,929 7,406 6,991 6,202 6,137 7,637 8,273 10,678 10,717 8,539 8,312 8,237 7,425 6,701 6,528 7,047 8,628 9,613 8,940 7,996 7,404 7,236 6,739 7,522 7,345 7,355 7,348 7,359 7,095 7,347 6,916 7,003 7,079 7,231 7,161 7,188 7,174 7,080 6,768 6,566 6,814 6,633 6,657 6,678 6,496 6,289 6,392 2,239 318 1,922 1,049 834 1,221 191 1,029 1,185 205 980 698 184 1,019 632 1,202 2,344 310 2,035 1,188 1,854 274 1,580 998 1,711 269 1,442 1,039 1,841 300 1,541 1,018 3,098 416 2,681 1,504 2,420 398 2,022 1,320 2,486 426 2,060 1,366 2,997 479 2,518 1,717 2,423 408 2,016 1,488 2,472 501 1,971 1,598 2,205 487 1,718 1,581 1,914 479 1,435 1,452 1,551 432 1,120 1,324 1,508 448 1,060 1,468 1,419 426 993 1,397 440 963 1,429 1,403 2,238 599 1,638 1,855 2,789 693 2,097 2,227 2,659 711 1,948 2,222 2,275 653 1,624 2,089 757 1,957 2,441 2,714 4,442 966 3,476 3,486 4,036 939 3,098 3,369 3,667 874 2,794 3,324 3,142 813 2,328 3,061 811 2,308 3,018 3,120 4,267 913 3,353 3,370 4,577 962 3,615 3,696 6,179 1,090 5,089 4,499 6,260 1,003 5,257 4,457 4,744 812 3,932 3,794 4,521 806 3,715 3,791 4,530 779 3,751 3,707 732 3,369 3,324 4,101 3,655 667 2,987 3,046 3,525 658 2,867 3,003 3,906 667 3,239 3,140 4,946 751 4,195 3,683 5,523 806 4,717 4,090 5,055 768 4,287 3,885 4,367 740 3,627 3,629 3,983 744 3,239 3,421 3,880 733 3,146 3,356 3,577 694 2,882 3,162 3,972 757 3,215 3,550 4,004 727 3,277 3,341 4,054 755 3,299 3,301 4,002 741 3,261 3,346 3,976 732 3,243 3,383 3,827 673 3,154 3,268 3,990 796 3,194 3,357 3,608 709 2,899 3,308 3,801 702 3,099 3,202 3,739 746 2,993 3,340 3,809 739 3,070 3,422 722 2,969 3,470 3,691 3,843 750 3,093 3,345 3,753 741 3,012 3,421 3,749 740 3,009 3,331 3,619 710 2,909 3,149 3,324 643 2,681 3,242 3,639 740 2,899 3,175 3,507 697 2,810 3,126 3,517 705 2,812 3,140 3,536 698 2,838 3,142 3,526 670 2,856 2,970 3,330 654 2,676 2,959 3,467 582 2,885 2,925 195 145 140 123 191 176 209 197 262 256 286 349 313 383 385 395 405 391 412 413 506 568 598 583 665 802 780 789 769 743 755 800 886 825 687 661 675 616 558 536 544 608 621 597 580 602 573 577 615 581 573 570 570 559 491 590 550 578 597 609 591 651 583 531 601 555 587 567 593 551 564 556 854 689 559 510 997 823 832 821 1,242 1,063 1,080 1,368 1,175 1,216 1,195 1,056 921 1,078 985 1,015 1,349 1,658 1,625 1,507 1,777 2,684 2,588 2,535 2,292 2,276 2,615 2,895 3,613 3,632 3,107 3,129 3,032 2,709 2,487 2,467 2,596 3,074 3,469 3,288 3,049 2,819 2,783 2,585 2,935 2,760 2,728 2,776 2,813 2,709 2,866 2,718 2,652 2,762 2,825 2,861 2,754 2,770 2,748 2,618 2,641 2,620 2,539 2,573 2,549 2,419 2,395 2,369 TABLE B-37.—Chilian employment by demographic characteristic, 1954—97 [Thousands of persons 16 years of age and over; monthly data seasonally adjusted] Year or month 1954 1955 1956 1957 '.... 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 . 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1996:Jan Feb Mar .... Apr May .... June ... All civilian workers 60,109 62,170 63,799 64,071 63,036 64,630 65,778 65,746 66,702 67,762 69,305 71,088 72,895 74,372 75,920 77,902 78,678 79,367 82,153 85,064 86,794 85,846 88,752 92,017 96,048 98,824 99,303 100,397 99,526 100,834 105,005 107,150 109,597 112,440 114,968 117,342 118,793 117,718 118,492 120,259 123,060 124,900 126,708 129.558 125,246 125,771 125,951 126,057 126,321 126,591 126,867 July Aug 126,995 Sept .... 127,338 Oct 127,715 Nov 127,746 127,899 Dec 128,541 1997:Jan Feb 128,515 Mar .... 129,035 129,275 129,494 June ... 129,392 129,661 {uiy Aug 129,747 Sept .... 129,761 129,910 Oct Nov 130,575 130,777 Dec &:: Total Males Females Both sexes 16-19 53,957 55,833 57,269 57,465 56,613 58,006 58,850 58,913 59,698 60,622 61,922 63,446 65,021 66,361 67,750 69,518 70,217 70,878 73,370 75,708 77,184 76,411 78,853 81,700 84,936 87,259 87,715 88,709 87,903 88,893 92,120 93,736 95,660 97,789 99,812 101,584 102,261 101,182 101,669 103,045 105,190 106,490 107,808 109,856 106,594 107,237 107,313 107,289 107,446 107,698 107,860 107,936 108,377 108,597 108,594 108,752 109,154 109,211 109,528 109,721 109,906 109,779 109,851 109,832 109,904 110,063 110,604 110,729 37,846 38,719 39,368 39,349 38,591 39,494 39,755 39,588 40,016 40,428 41,115 41,844 42,331 42,833 43,411 44,048 44,178 44,595 45,944 47,085 47,674 46,697 47,775 49,150 50,544 51,452 51,127 51,315 50,287 50,621 52,462 53,046 53,785 54,647 55,550 56,352 56,703 55,797 55,959 56,656 57,452 58,146 58,888 59,998 58,350 58,631 58,576 58,639 58,731 58,929 58,988 58,966 59,094 59,284 59,159 59,337 59,631 59,686 59,855 59,955 60,093 59,893 59,967 59,949 59,981 60,025 60,545 60,416 16,111 17,114 17,901 18,116 18,022 18,512 19,095 19,325 19,682 20,194 20,807 21,602 22,690 23,528 24,339 25,470 26,039 26,283 27,426 28,623 29,511 29,714 31,078 32,550 34,392 35,807 36,587 37,394 37,615 38,272 39,659 40,690 41,876 43,142 44,262 45,232 45,558 45,385 45,710 46,390 47,738 48,344 48,920 49,859 48,244 48,606 48,737 48,650 48,715 48,769 48,872 48,970 49,283 49,313 49,435 49,415 49,523 49,525 49,673 49,766 49,813 49,886 49,884 49,883 49,923 50,038 50,059 50,313 3,078 3,225 3,389 3,374 3,216 3,475 3,700 3,693 3,774 3,851 4,076 4,562 5,176 5,114 5,195 5,508 5,571 5,670 6,173 6,623 6,796 6,487 6,724 7,068 7,367 7,356 7,021 6,588 5,984 5,799 5,836 5,768 5,792 5,898 6,030 5,946 5,779 5,216 4,985 5,113 5,398 5i593 5,667 5,807 5,555 5,627 5,570 5,597 5,671 5,683 5,686 5,526 5,826 5,811 5,732 5,736 5,742 5,755 5,776 5,849 5,851 5,735 5,768 5,699 5,750 5,813 5,976 5,983 Total Males Females 6,152 6,341 6,534 6,604 6,423 6,623 6,928 6,833 7,003 7,140 7,383 7,643 7,877 8,011 8,169 8,384 8,464 8,488 8,783 9,356 9,610 9,435 9,899 10,317 11,112 11,565 11,588 11,688 11,624 11,941 12,885 13,414 13,937 14,652 15,156 15,757 16,533 16,536 16,823 17,214 17,870 18,409 18,900 19,701 18,579 18,503 18,626 18,728 18,860 18,884 19,003 19,133 19,037 19,112 19,162 19,154 19,316 19,296 19,508 19,512 19,563 19,584 19,786 19,989 19,955 19,857 19,984 20,061 3,773 3,904 4,013 4,006 3,833 3,971 4,149 4,068 4,160 4,229 4,359 4,496 4,588 4,646 4,702 4,770 4,813 4,796 4,952 5,265 5,352 5,161 5,363 5,579 5,936 6,156 6,059 6,083 5,983 6,166 6,629 6,845 7,107 7,459 7,722 7,963 8,401 8,426 8,482 8,693 8,998 9,231 9,319 9,687 9,151 9,119 9,213 9,227 9,311 9,307 9,366 9,482 9,373 9,406 9,437 9,434 9,523 9,569 9,528 9,583 9,631 9,649 9,714 9,869 9,786 9,780 9,818 9,790 2,379 2,437 2,521 2,598 2,590 2,652 2,779 2,765 2,843 2,911 3,024 3,147 3,289 3,365 3,467 3,614 3,650 3,692 3,832 4,092 4,258 4,275 4,536 4,739 5,177 5,409 5,529 5,606 5,641 5,775 6,256 6,569 6,830 7,192 7,434 7,795 8,131 8,110 8,342 8,521 8,872 9,179 9,580 10,014 9,428 9,384 9,413 9,501 9,549 9,577 9,637 9,651 9,664 9,706 9,725 9,720 9,793 9,727 9,980 9,929 9,932 9,935 10,072 10,120 10,169 10,077 10,166 10,271 Note.—See footnote 5 and Note, Table B-35. Source: Department of Labor, Bureau of Labor Statistics. Black Black and other White 325 Both sexes 16-19 396 418 430 407 365 362 430 414 420 404 440 474 545 568 584 609 574 538 573 647 652 615 611 619 703 727 689 637 565 543 607 666 681 742 774 813 801 690 684 691 763 826 832 853 822 782 822 855 874 823 843 818 857 850 808 832 856 875 912 863 850 815 831 832 823 857 855 872 Total FeMales males Both sexes 16-19 7,802 8,128 8,203 7,894 8,227 8,540 9,102 9,359 9,313 9,355 9,189 9,375 10,119 10,501 10,814 11,309 11,658 11,953 12,175 12,074 12,151 12,382 12,835 13,279 13,542 13,969 13,410 13,360 13,420 13,434 13,587 13,512 13,604 13,629 13,511 13,653 13,680 13,692 13,736 13,722 13,816 13,864 13,837 13,836 14,040 14,237 14,180 14,067 14,128 14,149 4,368 4,527 4,527 4,275 4,404 4,565 4,796 4,923 4,798 4,794 4,637 4,753 5,124 5,270 5,428 5,661 5,824 5,928 5,995 5,961 5,930 6,047 6,241 6,422 6,456 6,607 6,412 6,391 6,406 6,409 6,490 6,425 6,478 6,544 6,421 6,483 6,495 6,515 6,501 6,506 6,487 6,535 6,565 6,571 6,641 6,766 6,690 6,680 6,700 6,628 3,433 3,601 3,677 3,618 3,823 3,975 4,307 4,436 4,515 4,561 4,552 4,622 4,995 5,231 5,386 5,648 5,834 6,025 6,180 6,113 6,221 6,334 6,595 6,857 7,086 7,362 6,998 6,969 7,014 7,025 7,097 7,087 7,126 7,085 7,090 7,170 7,185 7,177 7,235 7,216 7,329 7,329 7272 7,265 7,399 7,471 7,490 7,387 7,428 7,521 509 570 ' 554 507 508 508 571 579 547 505 428 416 474 532 536 587 601 625 598 494 492 494 552 586 613 631 601 581 623 641 674 615 607 590 609 622 582 615 633 658 665 624 596 599 621 642 621 656 628 630 TABLE B-38.—Unemployment by demographic characteristic, 1954-97 [Thousands of persons 16 years of age and over; monthly data seasonally adjusted] Year or month All civilian workers 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 ... 1".... 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1996:Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 1997:Jan Feb Mar Total Males 3,532 2,859 1,913 2,852 2,252 1,478 2,750 2,159 1,366 2,859 2,289 1,477 4,602 3,680 2,489 3,740 2,946 1,903 3,852 3,065 1,988 4,714 3,743 2,398 3,911 3,052 1,915 4,070 3,208 1,976 3,786 2,999 1,779 3,366 2,691 1,556 2,875 2,255 1,241 2,975 2,338 1,208 2,817 2,226 1,142 2,832 2,260 1,137 4,093 3,339 1,857 5,016 4,085 2,309 4,882 3,906 2,173 4,365 3,442 1,836 5,156 4,097 2,169 7,929 6,421 3,627 7,406 5,914 3,258 6,991 5,441 2,883 6,202 4,698 2,411 6,137 4,664 2,405 7,637 5,884 3,345 8,273 6,343 3,580 10,678 8,241 4,846 10,717 8,128 4,859 8,539 6,372 3,600 8,312 6,191 3,426 8,237 6,140 3,433 7,425 5,501 3,132 6,701 4,944 2,766 6,528 4,770 2,636 7,047 5,186 2,935 8,628 6,560 3,859 9,613 7,169 4,209 8,940 6,655 3,828 7,996 5,892 3,275 7,404 5,459 2,999 7,236 5,300 2,896 6,739 4,836 2,641 7,522 5,520 2,982 7,345 5,444 2,974 7,355 5,397 3,006 7,348 5,407 2,972 7,359 5,538 3,028 7,095 5,214 2,889 7,347 5,297 2,933 6,916 5,027 2,710 7,003 5,057 2,808 7,079 5,097 2,779 7,231 5,302 2,839 7,161 5,266 2,761 7,188 5,157 2,842 7,174 5,115 2,766 7,080 5,069 2,746 6,768 4,846 2,657 6,566 4,656 2,427 6,814 4,880 2,669 June 6,633 4,771 2,607 J«iy 6,657 4,837 2,631 Aug 6,678 4,854 2,626 Sept 6,496 4,721 2,642 Oct Nov 6,289 4,469 2,460 6,392 4,534 2,518 Dec Note.—See footnote 5 and Note, Table B-35. Source: Department of Labor, Bureau of Labor fc- Black and other White Females Both sexes 16-19 Total 423 373 382 401 541 525 575 669 580 708 708 705 651 635 644 660 871 1,011 1,021 955 1,104 1,413 1,364 1,284 1,189 1,193 1,291 1,374 1,534 1,387 1,116 1,074 1,070 995 910 863 903 1,029 1,037 992 960 952 939 912 1,011 954 956 950 951 911 921 911 886 915 964 946 944 985 945 909 865 961 968 942 943 897 836 757 673 601 591 570 923 793 788 971 861 863 787 678 622 638 590 571 754 930 977 924 1,058 1,507 1,492 1,550 1,505 1,473 1,752 1,930 2,437 2,588 2,167 2,121 2,097 1,924 1,757 1,757 1,860 2,068 2,444 2,285 2,104 1,945 1,936 1,903 1,956 1,878 1,940 1,933 1,905 1,875 1,992 1,895 1,950 2,003 1,952 1,938 1,991 2,037 1,996 1,915 1,975 1,923 1,814 1,824 1,835 1,781 1,843 1,892 946 774 793 812 1,191 1,043 1,077 1,345 1,137 1,232 1,220 1,135 1,014 1,130 1,084 1,123 1,482 1,777 1,733 1,606 1,927 2,794 2,656 2,558 2,287 2,260 2,540 2,762 3,395 3,270 2>72 2,765 2,708 2,369 2,177 2,135 2,251 2,701 2,959 2,827 2,617 2,460 2,404 2,195 2,538 2,470 2,391 2i435 2,510 2,325 2,364 2,317 2,249 2,318 2,463 2,505 2,315 2,349 2,323 2,189 2,229 2,211 2,164 2,206 2,228 2,079 2,009 2,016 Statistics. 326 Males 431 376 345 364 610 517 498 599 509 496 426 360 310 300 277 267 380 481 486 440 544 815 779 784 731 714 922 997 1,334 1,401 1,144 1,095 1,097 969 888 889 971 1,087 1,314 1,227 1,092 984 984 935 971 1,009 1,033 1,024 998 941 1,035 905 985 986 985 925 988 962 995 960 931 973 882 891 907 900 884 943 Females 242 225 246 206 313 276 290 372 352 367 361 318 312 338 313 304 374 450 491 484 514 692 713 766 774 759 830 933 1,104 1,187 1,022 1,026 999 955 869 868 889 981 1,130 1,058 1,011 961 952 967 985 869 907 909 907 934 957 990 965 1,017 967 1,013 1,003 1,075 1,001 955 1,044 950 932 933 928 881 959 949 Black Both sexes 16-19 79 77 95 96 138 128 138 159 142 176 165 171 186 203 194 193 235 249 288 280 318 355 355 379 394 362 377 388 443 441 384 394 383 353 316 331 308 330 390 373 360 394 367 359 354 344 367 375 356 325 364 392 366 404 376 381 389 398 373 347 387 339 313 334 350 319 378 376 Total 906 846 965 1,369 1,334 1,393 1,330 1,319 1,553 1,731 2,142 2,272 1,914 1,864 1,840 1,684 1,547 1,544 1,565 1,723 2,011 1,844 1,666 1,538 1,592 1,560 1,578 1,509 1,590 1,589 1,547 1,520 1,624 1,627 1,616 1,650 1,645 1,607 1,644 1,698 1,622 1,525 1,587 1,590 1,484 1,491 1,511 1,488 1,510 1,560 Males 448 395 494 741 698 698 641 636 815 891 1,167 1,213 1,003 951 946 826 771 773 806 890 1,067 971 848 762 808 747 779 798 841 816 802 768 859 779 833 827 847 746 805 782 795 745 732 791 718 702 714 713 696 755 Females 458 451 470 629 637 695 690 683 738 840 975 1,059 911 913 894 858 776 772 758 833 944 872 818 777 784 813 799 711 749 773 745 752 765 848 783 823 798 861 839 916 827 780 855 799 766 789 797 775 814 805 Both sexes 16-19 279 262 297 330 330 354 360 333 343 357 396 392 353 357 347 312 288 300 268 280 324 313 300 325 310 302 304 276 301 320 292 279 318 356 308 336 310 315 328 333 314 292 306 285 266 280 302 274 314 331 TABLE B—39-—Civilian labor force participation rate and employment/population ratio, 1950—97 [Percent;1 monthly data seasonally adjusted] Employment/population ratio Labor force participation rate Year or month 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 I960 1961 1962 1963 1964 1965 1966 ... 1967 1968 ... 1969 1970 1971 1972 1973 ... . 1974 1975 .. 1976 1977 .... 1978 1979 1980 1981 1982 1983 .. 1984 1985 .... 1986 1987 1988 1989 1990 1991 1992 1993 ... 1994 1995 1996 1997 1996:Jan Feb Mar Apr May June July Aug Sept. Both Both All All civilian Males Fe- sexes White Black Fe- sexes White Black and Black and Black civilian Males males work16-19 workmales 16-19 other other years ers years ers 51.8 59.2 86.4 33.9 56.1 52.2 57.3 59.2 86.3 34.6 51.3 57.3 59.0 86.3 34.7 50.2 57.1 58.9 86.0 34.4 48.3 58.2 64.0 55.5 58.8 85.5 34.6 58.7 64.2 56.7 59.3 85.4 35.7 48.9 59.4 85.5 36.9 50.9 60.0 64.9 57.5 49.6 59.1 64.4 57.1 59.6 84.8 36.9 47.4 58.9 64.8 55.4 59.5 84.2 37.1 46.7 58.7 643 593 83.7 37.1 560 59.4 83.3 37.7 47.5 58.8 64.5 56.1 46.9 58.8 64.1 55.4 59.3 82.9 38.1 46.1 58.3 63.2 55.5 58.8 82.0 37.9 58.7 81.4 38.3 45.2 58.2 63.0 55.4 58.7 81.0 38.7 44.5 58.2 63.1 55.7 58.4 62.9 45.7 56.2 58.9 80.7 39.3 48.2 58.7 63.0 59.2 80.4 40.3 56.9 48.4 59.2 62.8 59.6 80.4 41.1 57.3 48.3 59.3 62.2 59.6 80.1 41.6 57.5 60.1 79.8 42.7 49.4 59.9 62.1 58.0 60.4 79.7 43.3 57.4 49.9 60.2 61.8 49.7 60.1 60.9 60.2 79.1 43.4 56.6 60.4 78.9 43.9 60.4 60.2 "59.9 51.9 57.0 60.8 78.8 44.7 53.7 60.8 60.5 60.2 57.8 61.4 60.3 59.8 61.3 78.7 45.7 54.8 57.8 61.5 59.6 58.8 61.2 77.9 46.3 54.0 56.1 61.6 77.5 47.3 54.5 61.8 59.8 59.0 56.8 56.0 62.5 60.4 59.8 62.3 77.7 48.4 57.9 57.8 63.3 62.2 61.5 63.2 77.9 50.0 59.3 63.7 77.8 50.9 57.9 63.9 62.2 61.4 59.9 56.7 64.1 61.7 61.0 63.8 77.4 51.5 59.2 55.4 63.9 77.0 52.1 64.3 61.3 60.8 59.0 54.1 64.3 61.6 61.0 64.0 76.6 52.6 57.8 64.0 76.4 52.9 53.5 64.3 62.1 61.5 57.9 64.4 76.4 53.6 53.9 64.6 62.6 62.2 59.5 64.8 76.3 54.5 54.5 65.0 63.3 62.9 60.1 54.7 65.5 63.7 63.3 60.7 65.3 76.3 55.3 65.6 76.2 56.0 54.7 65.8 64.3 63.8 61.5 65.9 76.2 56.6 55.3 66.2 64.0 63.8 62.3 66.7 64.7 64.2 66.5 76.4 57.4 55.9 63.0 53.7 66.9 64.4 64.0 66.5 76.4 57.5 62.8 66.2 75.8 57.4 51.6 66.6 63.8 63.3 61.7 66.4 75.8 57.8 51.3 66.8 64.6 63.9 61.5 66.3 75.4 57.9 51.5 66.8 63.8 63.2 61.7 625 666 751 588 527 671 639 634 53.5 66.6 75.0 58.9 67.1 64.3 63.7 62.9 66.8 74.9 59.3 52.3 67.2 64.6 64.1 63.2 67.1 75.0 59.8 51.6 67.5 65.2 64.7 63.8 52.7 66.9 64.2 64.0 62.7 66.5 74.7 58.9 66.6 74.9 59.0 52.6 67.2 63.7 63.4 63.0 66.7 75.0 59.0 52.3 67.1 64.1 63.9 63.0 52.4 67.1 64.3 63.9 66.7 74.9 59.1 63.0 66.7 75.0 59.1 52.9 67.2 64.5 64.3 63.1 66.7 75.0 59.0 51.9 67.1 64.4 63.8 63.2 52.1 67.2 65.0 64.5 66.9 75.2 59.2 63.2 66.7 74.7 59.3 51.1 67.0 65.0 64.5 63.2 67.3 64.7 63.9 66.8 74.8 59.4 52.6 63.3 67.0 75.0 59.6 52.7 67.4 65.0 64.5 63.5 Nov .. 67.4 64.9 64.5 67.0 74.9 59.7 51.9 63.4 Dec 67.0 74.9 59.7 52.2 67.4 64.7 64.3 63.4 1997:Jan 67.1 75.1 59.7 51.9 67.5 64.9 64.5 63.5 Feb 52.6 67.5 64.8 64.6 67.0 75.0 59.7 63.5 Mar 52.4 67.6 65.3 64.6 67.2 75.1 59.9 63.7 Apr 67.1 75.1 59.8 52.0 67.5 64.9 64.3 63.8 May 67.1 74.9 59.8 51.9 67.5 65.2 64.4 63.8 June 67.1 75.0 59.8 51.2 67.5 65.0 64.3 63.7 July 67.1 74.9 59.8 51.4 67.4 65.1 64.7 63.8 Aug 67.1 74.9 59.8 67.4 65.7 65.4 51.0 63.8 Sept '' 67.0 74.7 59.9 51.0 67.4 65.5 65.2 63.7 Oct 67.4 64.9 64.5 66.9 74.8 59.7 50.9 63.8 Nov 67.1 75.1 59.7 51.8 67.5 65.4 64.8 64.0 Dec . 67.2 75.0 60.0 51.6 675 656 65.0 64.1 1 Civilian labor force or civilian employment as percent of civilian noninstitutional population Note.—Data relate to persons 16 years of age and over. See footnote 5 and Note, Table B-35. Source: Department of Labor, Bureau of Labor Statistics. ocf zz : .: 327 82.0 32.0 45.5 47.9 84.0 33.1 83.9 33.4 46.9 46.4 83.6 33.3 81.0 32.5 42.3 81.8 34.0 43.5 82.3 35.1 45.3 43.9 81.3 35.1 39.9 78.5 34.5 79.3 350 39.9 78.9 35.5 40.5 39.1 77.6 35.4 39.4 77.7 35.6 77.1 35.8 37.4 77.3 36.3 37.3 77.5 37.1 38.9 77.9 38.3 42.1 78.0 39.0 42.2 77.8 39.6 42.2 43.4 77.6 40.7 76.2 40.8 42.3 74.9 40.4 41.3 75.0 41.0 43.5 75.5 42.0 45.9 74.9 42.6 46.0 71.7 42.0 43.3 72.0 43.2 44.2 46.1 72.8 44.5 73.8 46.4 48.3 73.8 47.5 48.5 72.0 47.7 46.6 71.3 48.0 44.6 69.0 47.7 41.5 68.8 48.0 41.5 70.7 49.5 43.7 44.4 70.9 50.4 71.0 51.4 44.6 71.5 52.5 45.5 46.8 72.0 53.4 72.5 54.3 47.5 72.0 54.3 45.3 70.4 53.7 42.0 69.8 53.8 41.0 41.7 70.0 54.1 704 553 434 44.2 70.8 55.6 70.9 56.0 43.5 43.4 71.3 56.8 43.4 70.6 55.5 70.7 55.8 43.7 70.7 55.9 43.3 70.7 55.9 43.6 44.1 70.9 55.9 71.0 55.9 43.6 71.0 56.0 43.5 42.4 71.0 56.1 70.9 56.4 44.3 71.1 56.4 43.9 71.0 56.4 43.0 71.1 56.4 43.4 71.2 56.5 43.1 71.2 56.4 43.5 71.3 56.7 43.8 71.4 56.8 43.9 71.5 56.7 43.8 71.3 56.8 42.8 71.3 56.9 43.0 71.3 56.9 42.7 71.1 56.9 42.7 71.2 56.9 43.0 71.7 56.9 43.9 715 57.2 44.3 in group specified. 55.2 56.5 57.3 56.8 55.3 55.9 55.9 55.3 55.4 55.3 55.5 56.0 56.8 57.2 57.4 58.0 57.5 56.8 57.4 58.2 58.3 56.7 57.5 58.6 60.0 60.6 60.0 60.0 58.8 58.9 60.5 61.0 61.5 62.3 63.1 63.8 63.7 62.6 62.4 62.7 635 63.8 64.1 64.6 63.6 63.9 63.9 63.9 63.9 64.0 64.1 64.1 64.3 64.3 64.3 64.3 64.4 64.4 64.6 64.7 64.7 64.6 64.6 64.6 64.5 64.6 64.9 64.9 58.0 58.7 59.5 59.3 56.7 57.5 57.9 56.2 56.3 56.2 57.0 57.8 58.4 58.2 58.0 58.1 56.8 54.9 54.1 "537 55.0 54.5 54.3 53.5 51.4 50.1 52.0 50.8 52.5 51.4 54.7 53.6 55.2 53.8 53.6 52.3 52.6 51.3 50.9 49.4 51.0 49.5 53.6 52.3 54.7 53.4 55.4 54.1 56.8 55.6 57.4 56.3 58.2 56.9 57.9 56.7 56.7 55.4 56.4 54.9 56.3 55.0 57.2 56.1 58.1 57.1 58.6 57.4 59.4 58.2 58.1 57.2 57.8 57.0 58.1 57.1 58.3 57.1 58.6 57.7 58.6 57.3 58.8 57.6 59.1 57.6 58.7 57.0 58.8 57.5 58.9 57.6 58.8 57.5 58.8 57.6 58.7 57.5 59.2 57.8 59.1 58.0 59.2 57.8 59.2 57.7 59.7 58.5 60.2 59.2 60.0 58.9 59.6 58.3 59.8 58.5 60.0 58.5 TABLE B—40.—Civilian labor force participation rate by demographic characteristic, 1954—97 [Percent;1 monthly data seasonally adjusted] Black and other or black White Year or month All civilian work- Total ers Total Males 16-19 years Females 20 years Total and over 16-19 years 33.3 34.5 35.7 35.7 35.8 36.0 36.5 36.9 36.7 37.2 37.5 38.1 39.2 40.1 40.7 41.8 42.6 42.6 43.2 40.6 40.7 43.1 42.2 40.1 39.6 40.3 40.6 39.8 38.7 37.8 39.2 42.6 42.5 43.0 44.6 45.6 45.4 48.1 Males 20 years Total Total and over 16-19 years Females 20 years Total and over 16-19 years 20 years and over Black and other 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 . 58.8 59.3 60.0 59.6 59.5 59.3 59.4 59.3 58.8 58.7 58.7 58.9 59.2 59.6 59.6 60.1 60.4 60.2 60.4 58.2 58.7 59.4 59.1 58.9 58.7 58.8 58.8 58.3 58.2 58.2 58.4 58.7 59.2 59.3 59.9 60.2 60.1 60.4 85.6 85.4 85.6 84.8 84.3 83.8 83.4 83.0 82.1 81.5 81.1 80.8 80.6 80.6 80.4 80.2 80.0 79.6 79.6 57.6 58.6 60.4 59.2 56.5 55.9 55.9 54.5 53.8 53.1 52.7 54.1 55.9 56.3 55.9 56.8 57.5 57.9 60.1 87.8 87.5 87.6 86.9 86.6 86.3 86.0 85.7 84.9 84.4 84.2 83.9 83.6 83.5 83.2 83.0 82.8 82.3 82.0 32.7 34.0 35.1 35.2 35.5 35.6 36.2 36.6 36.5 37.0 37.5 38.0 38.8 39.8 40.4 41.5 42.2 42.3 42.7 64.0 64.2 64.9 64.4 64.8 64.3 64.5 64.1 63.2 63.0 63.1 62.9 63.0 62.8 62.2 62.1 61.8 60.9 60.2 85.2 85.1 85.1 84.2 84.1 83.4 83.0 82.2 80.8 80.2 80.1 79.6 79.0 78.5 77.7 76.9 76.5 74.9 73.9 61.2 60.8 61.5 58.8 57.3 55.5 57.6 55.8 53.5 51.5 49.9 51.3 51.4 51.1 49.7 49.6 47.4 44.7 46.0 87.1 87.8 87.8 87.0 87.1 86.7 86.2 85.5 84.2 83.9 84.1 83.7 83.3 82.9 82.2 81.4 81.4 80.0 78.6 46.1 46.1 47.3 47.1 48.0 47.7 48.2 48.3 48.0 48.1 48.6 48.6 49.4 49.5 49.3 49.8 49.5 49.2 48.8 31.0 32.7 36.3 33.2 31.9 28.2 32.9 32.8 33.1 32.6 31.7 29.5 33.5 35.2 34.8 34.6 34.1 31.2 32.3 47.7 47.5 48.4 48.6 49.8 49.8 49.9 50.1 49.6 49.9 50.7 51.1 51.6 51.6 51.4 52.0 51.8 51.8 51.2 48.7 49.3 49.0 48.8 49.8 50.8 53.1 53.1 53.1 53.5 53.7 54.2 55.2 56.5 56.9 58.0 58.0 58.7 58.3 57.5 58.5 57.9 58.7 59.5 60.4 61.7 60.3 59.3 59.9 60.1 60.3 60.2 60.5 60.8 60.2 61.0 60.9 61.2 61.4 61.7 61.9 61.4 61.5 61.0 61.7 62.3 62.4 61.4 61.9 62.4 32.2 34.2 33.4 34.2 32.9 32.9 37.3 36.8 34.9 34.0 33.5 33.0 35.0 37.9 39.1 39.6 37.9 40.4 36.8 33.5 35.2 34.6 36.3 39.8 38.9 39.9 39.6 36.9 39.3 40.3 40.7 38.6 35.3 39.3 38.6 39.7 37.6 40.2 40.5 40.8 42.7 38.5 37.5 36.0 38.4 39.8 40.6 39.4 41.7 43.6 51.2 51.6 51.4 51.1 52.5 53.6 55.5 55.4 55.6 56.0 56.2 56.8 57.6 58.6 58.9 60.0 60.1 60.6 60.6 60.0 60.8 60.2 60.9 61.4 62.6 64.0 62.3 61.5 61.9 62.0 62.3 62.4 63.1 63.0 62.4 63.2 63.3 63.4 63.5 63.9 63.8 63.8 63.9 63.5 64.1 64.6 64.6 63.6 63.9 64.4 Black 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 . 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1996:Jan Feb Mar Apr May June July Aug Sept Oct Nov . .. Dec 1997:Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 60.4 60.8 61.3 61.2 61.6 62.3 63.2 63.7 63.8 63.9 64.0 64.0 64.4 64.8 65.3 65.6 65.9 66.5 66.5 66.2 66.4 66.3 66.6 66.6 66.8 67.1 66.5 66.6 66.7 66.7 66.7 66.7 66.9 66.7 66.8 670 67.0 67.0 67.1 67.0 67.2 67.1 67.1 67.1 67.1 67.1 67.0 66.9 67.1 67.2 60.4 60.8 61.4 61.5 61.8 62.5 63.3 63.9 64.1 64.3 64.3 64.3 64.6 65.0 65.5 65.8 66.2 66.7 66.9 66.6 66.8 66.8 67.1 67.1 67.2 67.5 66.9 67.2 67.1 67.1 67.2 67.1 67.2 67.0 67.3 674 674 67.4 67.5 67.5 67.6 67.5 67.5 67.5 67.4 67.4 67.4 67.4 67.5 67.5 79.6 79.4 79.4 78.7 78.4 78.5 78.6 78.6 78.2 77.9 77.4 77.1 77.1 77.0 76.9 76.8 76.9 77.1 77.1 76.5 76.5 76.2 75.9 75.7 75.8 75.9 75.6 75.9 75.8 75.8 75.9 75.9 76.0 75.6 75.8 759 758 75.8 75.9 75.9 76.0 76.0 75.8 75.8 75.8 75.7 75.7 75.7 76.0 75.9 60.1 62.0 62.9 61.9 62.3 64.0 65.0 64.8 63.7 62.4 60.0 59.4 59.0 59.7 59.3 59.0 60.0 61.0 59.6 57.3 56.9 56.6 57.7 58.5 57.1 56.1 58.1 58.0 57.1 57.9 58.1 57.3 57.4 54.6 57.1 570 56.0 56.4 55.8 56.1 56.5 56.0 56.4 55.6 55.5 55.2 55.7 56.8 58.1 56.3 82.0 81.6 81.4 80.7 80.3 80.2 80.1 80.1 79.8 79.5 79.2 78.9 78.7 78.5 78.5 78.4 78.3 78.5 78.5 78.0 78.0 77.7 77.3 77.1 77.3 77.5 77.0 77.3 77.3 77.2 77.3 77.4 77.5 77.3 77.3 775 77.4 77.4 77.6 77.5 77.6 77.6 77.4 77.5 77.4 77.4 77.3 77.2 77.5 77.5 43.2 44.1 45.2 45.9 46.9 48.0 49.4 50.5 51.2 51.9 52.4 52.7 53.3 54.1 55.0 55.7 56.4 57.2 57.4 57.4 57.7 58.0 58.9 59.0 59.1 59.5 58.7 59.0 59.0 58.9 59.1 58.9 59.0 59.0 59.2 593 59.6 59.6 59.5 59.5 59.6 59.5 59.6 59.6 59.5 59.5 59.6 59.5 59.4 59.7 48.1 50.1 51.7 51.5 52.8 54.5 56.7 57.4 56.2 55.4 55.0 54.5 55.4 55.2 56.3 56.5 57.2 57.1 55.3 54.1 52.5 53.5 55.1 55.5 54.7 54.1 54.8 54.9 54.5 53.7 54.3 54.3 54.1 53.7 55.5 555 55.8 54.9 54.5 55.1 54.3 55.4 54.1 54.4 55.0 53.6 53.8 52.8 53.1 53.6 42.7 43.5 44.4 45.3 46.2 47.3 48.7 49.8 50.6 51.5 52.2 52.5 53.1 54.0 54.9 55.6 56.3 57.2 57.6 57.6 58.1 58.3 59.2 59.2 59.4 59.9 59.0 59.3 59.4 59.3 59.4 59.2 59.4 59.4 59.5 596 59.9 59.9 59.8 59.8 60.0 59.8 60.0 60.0 59.9 60.0 60.0 60.0 59.9 60.1 59.9 60.2 59.8 58.8 59.0 59.8 61.5 61.4 61.0 60.8 61.0 61.5 62.2 62.9 63.3 63.8 63.8 64.2 64.0 63.3 63.9 63.2 63.4 63.7 64.1 64.7 64.0 63.4 63.9 63.9 64.3 63.8 64.5 64.5 63.9 MS 645 64.3 64.5 64.6 64.6 64.3 64.4 64.3 64.7 65.4 65.2 64.5 64.8 65.0 1 Civilian labor force as percent of civilian noninstitutional population in group specified. Note.—See Note, Table B-39. Source: Department of Labor, Bureau of Labor Statistics. 328 73.6 73.4 72.9 70.9 70.0 70.6 71.5 71.3 70.3 70.0 70.1 70.6 70.8 70.8 71.2 71.1 71.0 71.0 71.0 70.4 70.7 69.6 69.1 69.0 68.7 68.3 68.6 68.4 68.9 68.6 69.1 68.1 69.4 69.1 68.3 68.7 68.9 68.1 68.4 68.1 68.0 67.9 68.0 68.5 68.4 69.3 68.6 68.3 68.3 68.1 46.3 45.7 46.7 42.6 41.3 43.2 44.9 43.6 43.2 41.6 39.8 39.9 41.7 44.6 43.7 43.6 43.8 44.6 40.7 37.3 40.6 39.5 40.8 40.1 39.5 37.4 38.8 37.3 40.3 42.2 41.9 37.5 43.3 39.9 37.6 40.1 37.4 37.6 39.7 42.0 38.0 37.4 37.6 37.0 34.9 36.6 36.0 37.0 36.6 35.8 78.5 78.4 77.6 76.0 75.4 75.6 76.2 76.3 75.1 74.5 74.7 75.2 74.8 74.4 74.8 74.7 74.6 74.4 75.0 74.6 74.3 73.2 72.5 72.5 72.3 72.2 72.2 72.2 72.4 71.8 72.4 71.8 72.6 72.8 72.2 72.3 72.8 71.8 71.9 71.3 71.8 71.7 71.7 72.4 72.5 73.3 72.6 72.3 72.1 72.0 TABLE B-41.—Civilian employment/population ratio by demographic characteristic, 1954-97 [Percent;1 monthly data seasonally adjusted] Black and other or black White Year or month All civilian work- Total ers Total Females Males 16-19 years 20 years Total and over 16-19 years Females Males 20 years Total Total and over 16-19 years 20 years Total and over 16-19 years 20 years and over 41.9 42.2 43.0 43.7 42.8 43.2 43.6 476 42.7 42.7 43.4 44.1 45.1 45.0 45.2 45.9 44.9 43.9 43.3 24.7 26.4 28.0 26.5 22.8 20.3 24.8 23.2 23.1 21.3 21.8 20.2 23.1 24.8 24.7 25.1 22.4 20.2 19.9 43.7 43.9 44.7 45.5 45.0 45.7 45.8 448 44.9 45.2 46.1 47.3 48.2 47.9 48.2 48.9 48.2 47.3 46.7 43.0 43.8 43.5 41.6 42.8 43.3 45.8 46.0 45.7 45.1 44.2 44.1 46.7 48.1 48.8 50.3 51.2 52.0 51.9 50.6 50.8 50.9 52.3 53.4 54.4 55.6 54.1 53.8 54.1 54.1 54.6 54.4 54.7 54.3 54.2 54.8 54.8 54.7 55.0 54.8 55.6 55.5 55.0 54.9 55.9 56.3 56.4 55.5 55.8 56.4 19.2 22.0 20.9 20.2 19.2 18.5 22.1 22.4 21.0 19.7 17.7 17.0 20.1 23.1 23.8 25.8 25.8 27.1 25.8 21.5 22.1 21.6 24.5 26.1 27.1 28.5 27.4 24.9 27.6 27.7 28.8 28.0 27.1 24.9 26.8 27.2 26.9 28.1 29.3 28.4 32.2 28.4 25.0 26.8 28.4 29.0 29.0 28.0 28.4 29.2 46.5 47.2 46.9 44.9 46.4 47.0 49.3 49.3 49.1 48.5 47.5 47.4 49.8 50.9 51.6 53.0 53.9 54.6 54.7 53.6 53.6 53.8 55.0 56.1 57.1 58.4 56.8 56.7 56.7 56.8 57.2 57.1 57.5 57.3 57.0 57.6 57.7 57.4 57.6 57.5 58.0 58.3 58.1 57.8 58.7 59.1 59.2 58.3 58.6 59.2 Black and other 1954 1955 1956 1957 1958 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 ... . 55.5 56.7 57.5 57.1 55.4 56.0 56.1 55.4 55.5 55.4 55.7 56.2 56.9 57.3 57.5 58.0 57.4 56.6 57.0 55.2 56.5 57.3 56.8 55.3 55.9 55.9 55.3 55.4 55.3 55.5 56.0 56.8 57.2 57.4 58.0 57.5 56.8 57.4 81.5 82.2 82.7 81.8 79.2 79.9 79.4 78.2 78.4 77.7 77.8 77.9 78.3 78.4 78.3 78.2 76.8 75.7 76.0 49.9 52.0 54.1 52.4 47.6 48.1 48.1 45.9 46.4 44.7 45.0 47.1 50.1 50.2 50.3 51.1 49.6 49.2 51.5 84.0 84.7 85.0 84.1 81.8 82.8 82.4 81.4 81.5 81.1 81.3 81.5 81.7 81.7 81.6 81.4 80.1 79.0 79.0 31.4 33.0 34.2 34.2 33.6 34.0 34.6 34.5 34.7 35.0 35.5 36.2 37.5 38.3 38.9 40.1 40.3 39.9 40.7 36.4 37.0 38.9 38.2 35.0 34.8 35.1 34.6 34.8 32.9 32.2 33.7 37.5 37.7 37.8 39.5 39.5 38.6 41.3 31.1 32.7 33.8 33.9 33.5 34.0 34.5 34.5 34.7 35.2 35.8 36.5 37.5 38.3 39.1 40.1 40.4 40.1 40.6 58.0 58.7 59.5 59.3 56.7 57.5 57.9 56.2 56.3 56.2 57.0 57.8 58.4 58.2 58.0 58.1 56.8 54.9 54.1 76.5 77.6 78.4 77.2 72.5 73.8 74.1 71 7 72.0 71.8 72.9 73.7 74.0 73.8 73.3 72.8 70.9 68.1 67.3 52.4 52.7 52.2 48.0 42.0 41.4 43.8 41.0 41.7 37.4 37.8 39.4 40.5 38.8 38.7 39.0 35.5 31.8 32.4 66.8 67.5 65.8 60.6 60.6 61.4 63.3 63.4 60.4 59.1 56.0 56.3 59.2 60.0 60.6 62.0 62.7 62.8 62.6 61.3 59.9 60.0 60.8 61.7 61.1 61.4 61.1 60.8 60.9 60.8 61.5 60.8 61.2 61.8 60.5 61.0 61.0 61.1 60.8 60.8 60.6 60.9 61.1 61.1 61.7 62.8 61.9 61.8 61.9 61.1 31.6 32.8 31.4 26.3 25.8 26.4 28.5 28.7 27.0 24.6 20.3 20.4 23.9 26.3 26.5 28.5 29.4 30.4 27.7 23.8 23.6 23.6 25.4 25.2 24.9 23.7 24.6 25.4 26.1 27.3 28.8 24.3 24.3 24.5 23.9 24.6 22.0 23.3 23.4 26.5 22.6 23.3 24.6 22.5 22.8 24.2 22.5 25.9 23.8 22.9 79.2 80.4 81.3 80.5 76.0 77.6 77.9 75.5 75.7 76.2 77.7 78.7 79.2 79.4 78.9 78.4 76.8 74.2 73.2 Black 57.4 76.0 51.5 79.0 40.7 41.3 40.6 53.7 58.2 76.5 54.3 79.2 41.8 43.6 41.6 54.5 54.4 78.6 42.4 44.3 42.2 53.5 58.3 75.9 42.5 41.9 50.1 56.7 73.0 50.6 75.7 42.0 44.2 43.1 50.8 51.5 76.0 43.2 57.5 73.4 54.4 76.5 44.5 45.9 44.4 51.4 58.6 74.1 56.3 77.2 46.3 48.5 46.1 53.6 60.0 75.0 55.7 77.3 47.5 49.4 47.3 53.8 60.6 75.1 53.4 75.6 47.8 47.9 47.8 52.3 60.0 73.4 51.3 75.1 48.3 46.2 48.5 51.3 60.0 72.8 47.0 73.0 48.1 44.6 48.4 49.4 58.8 70.6 47.4 72.6 48.5 44.5 48.9 49.5 58.9 70.4 49.1 74.3 49.8 47.0 50.0 52.3 60.5 72.1 47.1 51.0 53.4 49.9 74.3 50.7 61.0 72.3 49.6 74.3 51.7 47.9 52.0 54.1 61.5 72.3 49.9 74.7 52.8 49.0 53.1 55.6 62.3 72.7 51.7 75.1 53.8 50.2 54.0 56.3 63.1 73.2 52.6 75.4 54.6 50.5 54.9 56.9 63.8 73.7 63.7 73.3 51.0 75.1 54.7 48.3 55.2 56.7 47.2 73.5 54.2 45.9 54.8 55.4 62.6 71.6 62.4 71.1 46.4 73.1 54.2 44.2 54.9 54.9 45.7 55.2 55.0 62.7 71.4 46.6 73.3 54.6 63.5 71.8 48.3 73.6 55.8 47.5 56.4 56.1 49.4 73.8 56.1 48.1 56.7 57.1 63.8 72.0 64.1 72.3 48.2 74.2 56.3 47.6 57.0 57.4 48.1 74.7 57.0 47.2 57.8 58.2 64.6 72.7 48.6 73.8 55.8 47.0 56.4 57.2 63.6 71.9 49.0 74.1 56.1 47.6 56.8 57.0 63.9 72.2 48.0 74.0 56.3 47.3 56.9 57.1 63.9 72.1 48.9 74.0 56.1 63.9 72.1 46.5 56.8 57.1 49.0 74.0 56.2 47.3 56.8 57.7 63.9 72.2 47.2 56.8 57.3 64.0 72.4 49.0 74.2 56.2 72.4 64.1 47.7 74.3 56.3 56.9 57.6 48.3 July 46.7 57.0 57.6 64.1 72.3 46.3 74.4 56.3 Aug Sept 48.7 74.3 56.7 49.0 57.2 57.0 64.3 72.4 Oct 48.4 74.5 56.7 64.3 72.5 48.9 57.2 57.5 Nov 47.1 74.3 56.8 64.3 72.3 48.6 57.3 57.6 Dec 47.9 74.5 56.7 64.3 72.5 47.6 57.3 57.5 1997:Jan 47.4 74.5 56.8 64.4 72.5 47.3 57.5 57.6 Feb 64.4 72.5 47.7 74.6 56.8 47.2 57.5 57.5 Mar 64.6 72.7 48.0 74.7 56.9 47.3 57.6 57.8 64.7 72.8 47.8 74.8 57.0 48.6 57.6 58.0 47.2 57.8 57.8 64.7 72.9 49.0 74.8 57.0 Marine 64.6 72.6 46.8 74.7 57.1 47.5 57.8 57.7 64.6 72.6 47.2 74.7 57.1 47.5 57.8 58.5 {uiy 46.8 74.6 57.0 46.5 57.8 59.2 Aug 64.6 72.5 46.4 57.8 58.9 Sept 47.7 74.5 57.0 64.5 72.5 48.7 74.4 57.1 64.6 72.5 46.3 57.9 58.3 Nov 46.9 57.8 58.5 64.9 73.0 50.6 74.9 57.1 Dec 50.0 74.7 57.4 47.6 58.1 58.5 64.9 72.8 1 Civilian employment as percent of civilian noninstitutional population in group specified. Note.—Data relate to persons 16 years of age and over. See footnote 5 and Note, Table B-35. Source: Department of Labor, Bureau of Labor Statistics. 1972 1973 1974 1975 1976 1977 .. 1978 1979 1980 1981 1982 1983 1984 1985 1986 . . 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1996:Jan Feb Mar Apr May June oct .:::::: 57.0 57.8 57.8 56.1 56.8 57.9 59.3 59.9 59.2 59.0 57.8 57.9 59.5 60.1 60.7 61.5 62.3 63.0 62.8 61.7 61.5 61.7 62.5 62.9 63.2 63.8 62.7 63.0 63.0 63.0 63.1 63.2 63.2 63.2 63.3 63.5 63.4 63.4 63.5 63.5 63.7 63.8 63.8 63.7 63.8 63.8 63.7 63.8 64.0 64.1 329 73.0 73.7 71.9 66.5 66.8 67.5 69.1 69.1 65.8 64.5 61.4 61.6 64.1 64.6 65.1 66.4 67.1 67.0 67.1 65.9 64.3 64.3 65.0 66.1 65.5 66.1 65.6 65.2 65.1 64.9 65.5 65.3 65.8 66.4 65.1 65.5 65.8 65.7 65.5 65.0 65.4 65.7 65.7 65.9 66.5 67.5 66.8 66.3 66.5 65.8 TABLE B-42.—Civilian unemployment rate, 1950-97 [Percent;1 monthly data seasonally adjusted] Year or month All civilian work- Total ers Males Females 4.7 5.7 11.4 5.3 5.1 12.7 4.4 3.3 2.8 8.1 2.5 8.3 2.4 3.0 28 89 3.6 80 2.5 2.9 2.8 7.9 3.3 7.2 5.5 4.9 6.0 11.4 5.3 13.5 4.4 3.8 4.2 11.6 4.9 10.2 4.1 3.4 3.8 11.1 4.8 11.2 3.6 4.7 10.6 4.3 4.1 12.4 6.2 6.8 6.8 17.1 6.8 14.3 4.7 5.5 5.2 15.3 5.9 13.5 4.7 5.5 5.4 15.3 5.9 13.9 6.7 6.4 17.1 5.7 7.2 16.3 55 52 147 46 62 146 5.7 5.2 17.2 4.5 6.5 17.2 5.2 3.9 6.2 16.6 4.6 15.8 3.2 5.5 15.7 . 4.5 4.0 14.1 3.8 3.2 11.7 2.5 4.8 14.1 3.8 3.1 12.3 2.3 5.2 13.5 2.2 3.6 2.9 11.6 4.8 14.0 2.1 4.7 13.3 3.5 2.8 11.4 4.4 15.0 4.9 3.5 5.9 15.6 4.4 6.9 17.2 5.9 5.3 16.6 5.6 4.0 6.6 16.7 5.0 15.9 4.9 3.3 6.0 15.3 4.2 13.9 6.7 16.6 5.6 15.6 3.8 4.9 8.5 7.9 20.1 6.8 9.3 19.7 7.7 7.1 19.2 5.9 8.6 18.7 7.1 5.2 8.2 18.3 6.3 17.3 4.3 7.2 17.1 6.1 5.3 15.8 42 68 164 58 51 159 7.4 17.2 7.1 5.9 6.9 18.3 7.4 20.1 6.3 7.9 19.0 7.6 9.4 21.9 9.7 8.8 9.9 24.4 9.6 8.9 9.2 21.3 9.9 23.3 7.4 19.6 7.5 6.6 7.6 18.0 6.2 7.4 17.6 7.2 7.0 19.5 7.1 17.6 6.1 7.0 6.9 19.0 5.4 6.2 15.9 6.2 6.2 17.8 4.8 5.6 14.4 5.5 5.5 16.0 5.4 14.0 4.5 5.3 5.2 15.9 5.7 16.3 5.0 5.6 5.5 14.7 6.4 6.4 17.5 7.2 19.8 6.8 7.1 7.0 18.6 7.5 7.9 21.5 6.4 6.9 7.2 20.4 6.6 17.5 5.4 6.1 6.2 19.0 6.0 16.2 4.8 5.6 16.1 5.6 5.6 18.4 54 5.4 15.2 54 181 4.6 4.2 4.9 4.9 16.9 5.0 15.0 5.7 4.8 5.8 16.6 5.6 18.8 5.4 15.7 4.8 5.5 5.6 18.0 4.9 5.4 15.5 5.5 5.6 18.8 5.4 15.5 5.5 4.8 5.6 18.1 4.8 5.5 15.2 5.5 5.5 17.9 4.6 5.3 15.0 5.3 5.3 16.8 June 4.7 5.4 13.3 5.5 5.5 19.3 4.3 5.3 15.9 5.2 5.0 17.9 5.2 4.6 5.2 14.2 5.3 17.2 4.4 5.4 14.9 5.3 5.2 18.2 5.4 4.5 5.5 15.3 Nov 5.3 18.7 4.3 5.5 15.8 5.3 5.1 17.9 Dec 5.3 4.5 5.3 15.4 1997:Jan 5.3 18.3 4.4 5.3 5.5 16.7 Feb 5.1 17.9 4.4 Mar 5.2 5.3 15.0 5.1 17.9 4.2 5.0 13.7 5.0 4.9 17.4 3.9 5.1 15.6 4.8 4.5 15.7 4.2 5.0 14.7 5.0 5.0 18.2 June 4.1 5.0 15.3 4.9 4.8 17.2 July 4.1 4.9 17.3 5.0 15.0 Aug 4.8 4.1 5.0 15.5 4.9 4.8 17.2 Sept 4.1 4.7 14.7 4.8 4.8 16.3 Oct 3.9 4.7 14.7 Nov 4.6 4.5 15.6 4.1 4.7 4.7 14.2 4.6 14.3 Dec 1 Unemployed as percent of civilian labor force in group specified. 2 Data for 1950 are for March; data for 1951-54 are for April. Note.—Data relate to persons 16 years of age and over. See footnote 5 and Note, Table B-35. Source: Department of Labor, Bureau of Labor Statistics. 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 . . 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 . .. . 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1996:Jan Feb Mar Slay'z:: ig ::: SP&::::: Expert- Rnth 20 20 16- years 16- years Total 19 19 and and years over years over 5.1 4.0 32 2.9 5.5 44 4.2 4.1 6.1 5.2 5.1 6.3 54 5.4 5.2 4.5 3.8 4.2 3.8 3.7 4.8 5.7 5.4 4.9 5.5 8.0 7.4 7.0 6.0 57 6.4 6.8 8.3 8.1 6.8 6.6 6.2 5.4 4.9 4.7 4.9 5.7 6.3 5.9 5.4 4.9 48 4.4 5.1 4.8 4.7 4.8 4.9 4.7 4.9 4.7 4.5 4.7 4.8 4.9 4.7 4.7 4.7 4.4 4.5 4.4 4.3 4.3 4.3 4.1 4.0 4.0 330 sexes 16-19 years 12.2 8.2 85 7.6 12.6 11.0 11.1 11.6 15.9 14.6 14.7 16.8 147 17.2 16.2 14.8 12.8 12.9 12.7 12.2 15.3 16.9 16.2 14.5 16.0 19.9 19.0 17.8 16.4 16.1 17.8 19.6 23.2 22.4 18.9 18.6 18.3 16.9 15.3 15.0 15.5 18.7 20.1 19.0 17.6 17.3 16.7 16.0 17.7 16.9 17.2 16.9 16.6 15.9 16.5 16.9 15.8 16.6 17.0 16.8 16.9 17.3 16.5 15.6 15.7 16.5 16.3 16.2 16.4 15.5 15.2 14.3 White 4.9 3.1 28 2.7 5.0 3.9 3.6 3.8 6.1 4.8 5.0 6.0 49 5.0 4.6 4.1 3.4 3.4 3.2 3.1 4.5 5.4 5.1 4.3 5.0 7.8 7.0 6.2 5.2 51 6.3 6.7 8.6 8.4 6.5 6.2 6.0 5.3 4.7 4.5 4.8 6.1 6.6 6.1 5.3 4.9 4.7 4.2 4.9 4.8 4.8 4.8 4.9 4.6 4.7 4.5 4.5 4.5 4.7 4.6 4.5 4.5 4.4 4.2 4.1 4.3 4.2 4.2 4.2 4.1 3.9 3.9 Black and other 9.0 5.3 54 4.5 9.9 8.7 8.3 7.9 12.6 10.7 10.2 12.4 109 10.8 9.6 8.1 7.3 7.4 6.7 6.4 8.2 9.9 10.0 9.0 9.9 13.8 13.1 13.1 11.9 11.3 13.1 14.2 17.3 17.8 14.4 13.7 13.1 11.6 10.4 10.0 10.1 11.1 12.7 11.7 10.5 9.6 9.3 8.8 9.5 9.2 9.4 9.4 9.2 9.0 9.5 9.0 9.3 9.5 9.2 9.2 9.3 9.5 9.3 8.9 9.2 8.9 8.4 8.4 8.4 8.2 8.4 8.6 Black ::.::: ::::: 10.4 9.4 10.5 14.8 14.0 14.0 12.8 12.3 14.3 15.6 18.9 19.5 15.9 15.1 14.5 13.0 11.7 11.4 11.4 12.5 14.2 13.0 11.5 10.4 10.5 10.0 10.5 10.1 10.6 10.6 10.2 10.1 10.7 10.7 10.7 10.8 10.7 10.5 10.7 11.0 10.5 9.9 10.3 10.3 9.6 9.5 9.6 9.6 9.7 9.9 wage and salary workers 6.0 3.7 34 3.2 6.2 4.8 4.4 4.6 7.3 5.7 5.7 6.8 56 5.6 5.0 4.3 3.5 3.6 3.4 3.3 4.8 5.7 5.3 4.5 5.3 8.2 7.3 6.6 5.6 55 6.9 7.3 9.3 9.2 7.1 6.8 6.6 5.8 5.2 5.0 5.3 6.6 7.2 6.6 5.9 5.4 5.2 4.7 5.4 5.3 5.4 5.3 5.5 5.1 5.3 5.0 5.0 5.1 5.2 5.1 5.1 5.0 4.9 4.7 4.7 4.8 4.6 4.7 4.7 4.5 4.4 4.5 Women who men, spouse 2 maintain present families Marriprt 4.6 1.5 14 1.7 4.0 2.6 2.3 2.8 5.1 3.6 •••• •"••••• 3.7 4.6 36 3.4 2.8 2.4 1.9 4.9 1.8 4.4 1.6 4.4 1.5 5.4 2.6 3.2 7.3 2.8 7.2 7.1 2.3 2.7 7.0 5.1 10.0 4.2 10.1 9.4 3.6 2.8 8.5 83 2.8 4.2 9.2 10.4 4.3 11.7 6.5 12.2 6.5 10.3 4.6 10.4 4.3 4.4 9.8 3.9 9.2 8.1 3.3 8.1 3.0 3.4 8.3 4.4 9.3 5.1 10.0 4.4 9.7 3.7 8.9 8.0 3.3 3.0 8.2 2.7 8.1 7.9 3.2 7.4 3.1 7.4 3.1 7.6 3.0 8.7 3.0 7.7 3.0 9.0 3.0 8.5 2.9 8.4 3.0 8.5 2.9 8.7 3.1 8.5 2.9 8.7 2.8 8.8 2.8 8.7 2.8 7.9 2.7 2.7 7.9 2.7 8.0 7.6 2.6 2.6 8.0 7.8 2.6 7.8 2.6 2.4 8.1 7.7 2.6 TABLE B-43.—Civilian unemployment rate by demographic characteristic, 1954—97 [Percent;1 monthly data seasonally adjusted] Year or month White Black and other or black All Females Males Males Females civilian 20 Total 20 20 20 work- Total years 16-19 years years 16-19 years Total 16-19 ers Total 16-19 years and Total years and years and Total years and over over over over Black and other 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 5.5 4.4 4.1 4.3 6.8 5.5 5.5 6.7 5.5 5.7 5.2 4.5 3.8 3.8 3.6 3.5 4.9 5.9 5.6 5.0 3.9 3.6 3.8 6.1 4.8 5.0 6.0 4.9 5.0 4.6 4.1 3.4 3.4 3.2 3.1 4.5 5.4 5.1 4.8 3.7 3.4 3.6 6.1 4.6 4.8 5.7 4.6 4.7 4.1 3.6 2.8 2.7 2.6 2.5 4.0 4.9 4.5 13.4 11.3 10.5 11.5 15.7 14.0 14.0 15.7 13.7 15.9 14.7 12.9 10.5 10.7 10.1 10.0 13.7 15.1 142 4.4 3.3 3.0 3.2 5.5 4.1 4.2 5.1 4.0 3.9 3.4 2.9 2.2 2.1 2.0 1.9 3.2 4.0 3.6 5.5 4.3 4.2 4.3 6.2 5.3 5.3 6.5 5.5 5.8 5.5 5.0 4.3 4.6 4.3 4.2 5.4 6.3 S9 10.4 9.1 9.7 9.5 12.7 12.0 12.7 14.8 12.8 15.1 14.9 14.0 12.1 11.5 12.1 11.5 13.4 15.1 14.2 5.1 3.9 3.7 3.8 5.6 4.7 4.6 5.7 4.7 4.8 4.6 4.0 3.3 3.8 3.4 3.4 4.4 5.3 4.9 9.9 10.3 8.7 8.8 8.3 7.9 7.9 8.3 12.6 13.7 10.7 11.5 10.2 10.7 12.4 12.8 10.9 10.9 10.8 10.5 9.6 8.9 8.1 7.4 7.3 6.3 7.4 6.0 6.7 5.6 6.4 5.3 8.2 7.3 9.9 9.1 10.0 89 4.9 4.3 5.1 7.5 6.8 6.2 5.2 5.0 5.6 5.9 7.3 6.9 5.8 5.7 5.4 4.6 4.1 4.0 4.1 5.0 5.5 5.2 4.6 4.3 4.1 3.7 4.4 4.3 4.1 4.2 4.4 4.0 4.1 4.0 3.9 4.0 4.2 4.3 3.9 3.9 3.9 3.7 3.7 3.7 3.5 3.7 3.7 3.5 3.4 3,4 10.4 9.4 10.5 14.8 14.0 14.0 12.8 12.3 14.3 15.6 18.9 19.5 15.9 15.1 14.5 13.0 11.7 11.4 11.4 12.5 14.2 13.0 11.5 10.4 10.5 10.0 10.5 10.1 10.6 10.6 10.2 10.1 10.7 10.7 10.7 10.8 10.7 10.5 10.7 11.0 10.5 9.9 10.3 10.3 9.6 9.5 9.6 9.6 9.7 99 14.4 13.4 15.0 18.4 26.8 25.2 24.0 26.8 22.0 27.3 24.3 23.3 21.3 23.9 22.1 21.4 25.0 28.8 297 9.9 8.4 7.4 7.6 12.7 10.5 9.6 11.7 10.0 9.2 7.7 6.0 4.9 4.3 3.9 3.7 5.6 7.3 69 9.2 8.5 8.9 7.3 10.8 9.4 9.4 11.9 11.0 11.2 10.7 9.2 8.7 9.1 8.3 7.8 9.3 10.9 114 20.6 19.2 22.8 20.2 28.4 27.7 24.8 29.2 30.2 34.7 31.6 31.7 31.3 29.6 28.7 27.6 34.5 35.4 384 8.4 7.7 7.8 6.4 9.5 8.3 8.3 10.6 9.6 9.4 9.0 7.5 6.6 7.1 6.3 5.8 6.9 8.7 8.8 11.8 11.1 11.3 14.8 14.3 14.9 13.8 13.3 14.0 15.6 17.6 18.6 15.4 14.9 14.2 13.2 11.7 11.4 10.9 12.0 13.2 12.1 11.0 10.2 10.0 9.9 10.2 9.3 9.6 9.9 9.5 96 9.7 10.7 9.9 10.3 10.0 10.7 10.4 11.3 10.1 9.6 10.5 9.9 9.4 9.6 9.6 9.5 9.9 97 40.5 36.1 37.4 41.0 41.6 43.4 40.8 39.1 39.8 42.2 47.1 48.2 42.6 39.2 39.2 34.9 32.0 33.0 29.9 36.0 37.2 37.4 32.6 34.3 30.3 28.7 30.7 32.6 30.0 31.4 29.1 275 23.2 36.6 30.7 31.6 28.7 30.1 27.7 30.4 24.6 26.3 33.3 25.5 25.9 27.2 28.6 28.8 31.9 33.1 9.0 8.6 8.8 12.2 11.7 12.3 11.2 10.9 11.9 13.4 15.4 16.5 13.5 13.1 12.4 11.6 10.4 9.8 9.7 10.6 11.8 10.7 9.8 8.6 8.7 8.8 9.0 7.9 8.4 8.5 8.2 8.5 8.9 9.0 8.6 8.9 8.9 9.5 9.3 10.0 9.2 8.6 9.2 9.0 8.4 8.4 8.4 8.3 8.4 81 Black 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1996:Jan Feb Mar Apr May June July Aug 3.6 3.0 3.5 6.2 5.4 4.7 3.7 3.6 5.3 5.6 7.8 7.9 5.7 5.4 5.3 4.8 4.1 3.9 4.3 5.8 6.4 5.7 4.8 4.3 4.1 3.6 4.2 4.2 4.2 4.2 4.3 41 4.1 3.8 3.9 3.8 3.9 3.8 3.9 3.8 3.8 3.6 3.3 3.6 3.5 3.6 3.6 3.6 3.4 36 5.9 5.3 6.1 8.6 7.9 7.3 6.2 5.9 6.5 6.9 8.3 7.9 6.5 6.4 6.1 5.2 4.7 4.5 4.7 5.6 6.1 5.7 5.2 4.8 4.7 4.2 5.0 4.8 4.7 4.8 49 4fi 4.6 4.5 4.4 4.5 Oct Nov 4.7 Dec 4.8 1997Jan 4.5 Feb 4.5 Mar 4.5 Apr 4.2 4.3 May : 4.2 June July 4.2 Aug 4.2 Sept 4.3 4.0 Oct Nov 3.9 Dec 3,9 1 Unemployed as percent of civilian labor force in group specified. Note.—See Note, Table 8^42. Source: Department of Labor, Bureau of Labor Statistics. sept . .::"" : 5.6 4.9 5.6 8.5 7.7 7.1 6.1 5.8 7.1 7.6 9.7 9.6 7.5 7.2 7.0 6.2 5.5 5.3 5.6 6.8 7.5 6.9 6.1 5.6 5.4 4.9 5.7 5.5 5.5 5.5 5.5 53 5.5 5.2 5.2 5.3 5.4 5.3 5.3 5.3 5.2 5.0 4.8 5.0 4.9 4.9 4.9 4.8 4.6 4.7 5.1 4.3 5.0 7.8 7.0 6.2 5.2 5.1 6.3 6.7 8.6 8.4 6.5 6.2 6.0 5.3 4.7 4.5 4.8 6.1 6.6 6.1 5.3 4.9 4.7 4.2 4.9 4.8 4.8 4.8 49 46 4.7 4.5 4.5 4.5 4.7 4.6 4.5 4.5 4.4 4.2 4.1 4.3 4.2 4.2 4.2 4.1 3.9 39 4.5 3.8 4.4 7.2 6.4 5.5 4.6 4.5 6.1 6.5 8.8 8.8 6.4 6.1 6.0 5.4 4.7 4.5 4.9 6.5 7.0 6.3 5.4 4.9 4.7 4.2 4.9 4.8 4.9 4.8 4.9 4.7 4.7 4.4 4.5 4.5 4.6 4.4 4.5 4.4 4.4 4.2 3.9 4.3 4.2 4.2 4.2 4.2 3.9 40 14.2 12.3 13.5 18.3 17.3 15.0 13.5 13.9 16.2 17.9 21.7 20.2 16.8 16.5 16.3 15.5 13.9 13.7 14.3 17.6 18.5 17.7 16.3 15.6 15.5 14.3 16.4 15.6 16.0 15.6 15.6 14.6 15.9 15.3 14.6 15.1 15.8 15.0 15.1 14.8 15.1 14.6 13.0 15.8 15.0 15.1 14.4 14.3 12.8 11.3 14.2 13.0 14.5 17.4 16.4 15.9 14.4 14.0 14.8 16.6 19.0 18.3 15.2 14.8 14.9 13.4 12.3 11.5 12.6 15.2 15.8 14.7 13.8 13.4 12.9 12.8 14.3 13.3 13.2 13.3 12.9 12.9 11.8 13.0 11.7 12.0 13.0 13.2 13.1 14.4 13.0 12.2 12.7 12.8 13.7 13.1 13.7 12.3 11.6 11.1 331 9.3 8.0 9.8 14.8 13.7 13.3 11.8 11.4 14.5 15.7 20.1 20.3 16.4 15.3 14.8 12.7 11.7 11.5 11.9 13.0 15.2 13.8 12.0 10.6 11.1 10.2 10.8 11.1 11.6 11.3 no 107 11.7 10.6 11.5 11.3 11.5 10.3 11.0 10.7 10.9 10.2 10.0 10.7 9.8 9.4 9.6 9.6 9.4 10? 31.7 27.8 33.1 38.1 37.5 39.2 36.7 34.2 37.5 40.7 48.9 48.8 42.7 41.0 39.3 34.4 32.7 31.9 31.9 36.3 42.0 40.1 37.6 37.1 36.9 36.5 36.7 31.8 35.2 35.2 31.3 351 43.8 38.7 36.6 38.6 41.1 38.1 40.9 36.8 40.5 37.7 34.5 39.1 34.6 33.9 37.6 30.1 35.0 36.2 7.0 6.0 7.4 12.5 11.4 10.7 9.3 9.3 12.4 13.5 17.8 18.1 14.3 13.2 12.9 11.1 10.1 10.0 10.4 11.5 13.5 12.1 10.3 8.8 9.4 8.5 9.1 9.8 10.0 9.6 9.6 91 9.3 8.7 9.8 9.4 9.7 8.5 9.0 8.8 8.9 8.4 8.4 9.0 8.3 7.9 7.9 8.3 7.8 ftfi TABLE B-44.—Unemployment by duration and reason, 1950-97 [Thousands of persons, except as noted; monthly data seasonally adjusted1] Duration of unemployment Year or month Unemployment 27 Less than 5-14 15-26 weeks 5 weeks weeks and weeks over 12.1 3,288 1,450 1,055 425 357 574 137 9.7 2,055 1,177 166 8.4 516 148 84 1,883 1,135 1,834 1,142 482 132 78 8.0 3,532 1,605 1,116 495 317 11.8 2,852 1,335 815 366 336 13.0 2,750 1,412 805 301 232 11.3 2,859 1,408 891 321 239 10.5 785 667 4,602 1,753 1,396 13.9 14.4 3,740 1,585 1,114 469 571 3,852 1,719 1,176 503 454 12.8 4,714 1,806 1,376 728 804 15.6 534 585 14.7 3,911 1,663 1,134 535 553 14.0 4,070 1,751 1,231 1,117 491 482 13.3 3,786 1,697 404 351 983 11.8 3,366 1,628 287 239 10.4 2,875 1,573 779 177 8.7 893 271 2.3 1,229 2,975 1,634 8.4 810 256 4.5 1,070 2,817 1,594 156 827 242 4.4 1,017 133 7.8 2,832 1,629 428 235 4.9 1,811 4,093 2,139 1,290 8.6 668 519 11.3 6.3 2,323 5,016 2,245 1,585 566 12.0 6.2 2,108 4,882 2,242 1,472 601 5.2 1,694 4,365 2,224 1,314 483 343 10.0 574 381 5.2 2,242 9.8 5,156 2,604 1,597 8.4 4,386 14.2 7,929 2,940 2,484 1,303 1,203 15.8 8.2 3,679 7,406 2,844 2,196 1,018 1,348 913 1,028 14.3 7.0 3,166 6,991 2,919 2,132 766 648 11.9 5.9 2,585 6,202 2,865 1,923 706 535 5.4 2,635 6,137 2,950 1,946 10.8 7,637 3,295 2,470 1,052 820 11.9 6.5 3,947 13.7 6.9 4,267 8,273 3,449 2,539 1,122 1,162 8.7 6,268 10,678 3,883 3,311 1,708 1,776 15.6 10,717 3,570 2,937 1,652 2,559 20.0 10.1 6,258 18.2 7.9 4,421 8,539 3,350 2,451 1,104 1,634 8,312 3,498 2,509 1,025 1,280 15.6 6.8 4,139 8,237 3,448 2,557 1,045 1,187 15.0 6.9 4,033 943 1,040 14.5 6.5 3,566 7,425 3,246 2,196 6,701 3,084 2,007 5.9 3,092 801 809 13.5 730 646 11.9 4.8 2,983 6,528 3,174 1,978 7,047 3,265 2,257 5.3 3,387 822 703 12.0 13.7 8,628 3,480 2,791 1,246 1,111 6.8 4,694 8.7 5,389 17.7 9,613 3,376 2,830 1,453 1,954 8.3 4,848 8,940 3,262 2,584 1,297 1,798 18.0 9.2 3,815 7,996 2,728 2,408 1,237 1,623 18.8 7,404 2,700 2,342 1,085 1,278 16.6 8.3 3,476 16.7 8.3 3,370 7,236 2,633 2,287 1,053 1,262 6,739 2,538 2,138 995 1,067 15.8 8.0 3,037 7,522 2,673 2,397 1,133 1,233 16.1 8.3 3,539 7.9 3,532 7,345 2,731 2,259 1,107 1,212 16.5 7,355 2,606 2,264 1,103 1,318 17.2 8.3 3,474 17.4 8.5 3,601 7,348 2,538 2,351 1,073 1,312 7,359 2,778 2,350 1,027 1,336 17.0 8.5 3,459 17.4 8.2 3,357 7,095 2,542 2,177 1,033 1,323 974 1,326 8.2 3,386 7,347 2,711 2,342 16.8 17.1 8.5 3,079 6,916 2,516 2,190 1,020 1,262 8.4 3,226 7,003 2,535 2,227 1,039 1,223 16.8 8.4 3,186 Oct 7,079 2,473 2,292 1,085 1,216 16.5 7.8 3,333 Nov 7,231 2,879 2,224 1,025 1,170 16.1 989 1,189 7.9 3,174 Dec 7,161 2,622 2,382 15.8 1997:Jan 964 1,186 7.9 3,191 7,188 2,678 2,251 15.9 7,174 2,580 2,341 1,031 1,127 15.9 8.2 3,147 Feb Mar 15.4 7.9 3,148 7,080 2,618 2,325 1,003 1,076 15.4 Apr 6,768 2,471 2,177 1,033 1,055 8.1 3,038 15.3 7.8 2,961 May 6,566 2,542 2,067 1,054 1,022 6,814 2,541 2,188 1,031 1,038 15.3 7.9 3,094 June 6,633 2,446 2,097 1,061 1,067 16.5 8.2 2,954 July 6,657 2,564 2,121 950 1,077 15.8 7.9 3,010 Aug 6,678 2,484 2,115 1,031 1,078 15.9 Sept 8.1 3,007 7.7 2,934 919 1,071 Oct 6,496 2,558 1,912 16.3 Nov 899 966 7.8 2,886 6,289 2,423 2,048 15.6 936 1.028 7.7 2.991 Dec 6.392 2.531 1.922 16.3 1 2 Because of independent seasonal adjustment of the various series, detail will not add to totals. 3 Data for 1967 by reason for unemployment are not equal to total unemployment. Beginning January 1994, job losers and persons who completed temporary jobs. Note.—Data relate to persons 16 years of age and over. See footnote 5 and Note, Table B-35. Source: Department of Labor, Bureau of Labor Statistics. 332 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 2 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1996:Jan Feb Mar Apr May June July Aue Sept Reason for unemployment Average Median Job losers3 (mean) duraduraOn Other tion tion Total layoff (weeks) (weeks) 394 334 339 675 735 582 472 746 1,671 1,050 865 712 851 1,488 1,430 2,127 1,780 1,171 1,157 1,090 943 851 850 1,028 1,292 1,260 1,115 977 1,030 1,021 931 1,108 1,043 1,008 1,078 1,112 1,002 993 953 1,002 936 999 960 953 949 993 958 909 928 894 891 893 963 815 961 836 736 678 1,137 1,588 1,526 1,221 1,495 2,714 2,628 2,300 1,873 1,784 2,459 2,837 4,141 4,478 3,250 2,982 2,943 2,623 2,241 2,133 2,359 3,402 4,129 3,733 2,838 2,446 2,349 2,106 2,431 2,489 2,466 2,523 2,347 2,355 2,393 2,126 2,224 2,250 2,334 2,214 2,238 2,198 2,155 2,080 2,052 2,166 2,060 2,119 2,114 1,971 2,071 2.030 Job leavers Reen- New entrants trants 438 431 436 550 590 641 683 768 827 903 909 874 880 891 923 840 830 823 877 1,015 965 983 1,024 1,041 1,004 1,002 976 791 824 774 795 817 759 792 739 690 699 751 762 785 802 829 849 861 804 797 776 808 827 812 894 853 732 655 692 945 909 965 1,228 1,472 1,456 1,340 1,463 1,892 1,928 1,963 1,857 1,806 1,927 2,102 2,384 2,412 2,184 2,256 2,160 1,974 1,809 1,843 1,930 2,139 2,285 2,198 2,786 2,525 2,512 2,338 2,477 2,470 2,506 2,492 2,747 2,409 2,546 2,495 2,444 2,491 2,518 2,567 2,499 2,608 2,497 2,422 £,338 2,333 2,263 2,173 2,263 2,247 2,229 2.170 396 407 413 504 630 677 649 681 823 895 953 885 817 872 981 1,185 1,216 1,110 1,039 1,029 920 816 677 688 792 937 919 604 579 580 569 619 586 569 558 545 568 609 562 559 581 587 627 596 623 617 569 573 510 564 554 560 555 560 552 TABLE B-45.—Unemployment insurance programs, selected data, 1965-97 All programs Year or month Covered employment 1 Insured unemployment (weekly average)" State programs Total benefits paid (millions of dollars) 24 Insured unemployment 3 Thousands 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997p 1996- Jan Feb Mar Apr May June July Aue Sept Oct Nov Dec 1997- Jan Feb Mar Apr 51,580 54,739 56,342 57,977 59,999 59,526 59,375 66,458 69,897 72,451 71,037 73,459 76,419 88,804 92,062 92,659 93,300 91,628 91,898 96,474 99,186 101,099 103,936 107,156 109,929 111,500 109,606 110,167 112,146 115,255 118,068 M20.567 .. . . May ::.: : : .: June July Aug Sept Oct Nov Dec* Initial claims Exhaustions 5 Insured unemployment as percent of covered employment Benefits paid Total (millions of dollars)4 Average weekly check (dollars)6 Weekly average; thousands 1,450 1,129 1,270 1,187 1,177 2,070 2,608 2,192 1,793 2,558 4,937 3,846 3,308 2,645 2,592 3,837 3,410 4,592 3,774 2,560 2,699 2,739 2,369 2,135 2,205 2,575 3,406 3,348 2,845 2,746 2,639 2,656 2,369 2,360 1,891 2,222 2,191 2,299 4,209 6,154 5,491 4,517 6,934 16,802 12,345 10,999 9,007 9,401 16,175 15,287 24,491 21,000 13,838 15,283 16,670 14,929 13,694 14,948 18,721 26,717 826,460 «22,950 22,844 22,386 22,915 1,328 1,061 1,205 1,111 1,101 1,805 2,150 1,848 1,632 2,262 3,986 2,991 2,655 2,359 2,434 3,350 3,047 4,059 3,395 2,475 2,617 2,643 2,300 2,081 2,158 2,522 3,342 3,245 2,751 2,670 2,572 2,595 2,321 232 203 226 201 200 296 295 261 247 363 478 386 375 346 388 488 460 583 438 377 397 378 328 310 330 388 447 408 341 340 357 356 324 21 15 17 16 16 25 39 35 29 37 81 63 55 39 39 59 57 80 80 50 49 52 46 38 37 45 67 74 62 57 51 53 48 3,507 3,343 3,170 2,941 2,358 2,387 2,554 2,258 2,188 2,050 2,108 2,754 3,041 3,039 2,936 2,508 2,073 2,211 2,232 2,110 1,973 1,759 2,021 2,450 2,568.1 2,371.7 2,247.9 2,130.0 1,793.7 1,550.6 1,838.7 1,599.6 1,452.0 1,520.0 1,418.6 1,928.8 2,299.5 2,072.9 2,111.1 1,885.9 1,534.5 1,495.5 1,649.8 1,424.8 1,416.0 1,333.5 1,284.7 1,844.8 2,642 2,652 2,639 2,584 2,554 2,573 2,535 2,524 2,468 2,470 2,444 2,518 2,453 2,375 2,294 2,274 2,263 2,326 2,300 2,308 2,233 2,229 2,241 2,282 371 369 389 356 349 355 334 325 335 334 338 355 334 311 312 333 326 341 319 325 308 308 318 317 58 53 55 61 53 52 56 49 47 46 44 53 53 51 52 55 47 47 50 44 43 41 43 48 3.0 2.3 2.5 2.2 2.1 3.4 4.1 3.5 2.7 3.5 6.0 4.6 3.9 3.3 2.9 3.9 3.5 4.6 3.9 2.8 2.9 2.8 2.4 2.0 2.1 2.4 3.2 3.1 2.6 2.5 2.3 2.3 2,166 1,771 2,092 2,032 2,128 3,849 4[957 4,471 4,008 5,975 11,755 8,975 8,357 7,717 8,613 13,761 13,262 20,649 17,787 12,610 14,131 15,329 13,607 12,565 13,760 17,356 24,526 23,869 20,539 20,401 20,125 20,645 37.19 39.75 41.25 43.43 46.17 50.34 54.02 56.76 59.00 64.25 70.23 75.16 78.79 83.67 89.67 98.95 106.70 119.34 123.59 123.47 128.14 135.65 140.55 144.97 151.73 161.56 169.88 173.64 179.62 182.16 187.29 189.51 192.73 2.4 2.4 2.4 2.3 2.3 2.3 2.2 2.2 2.2 2.2 2.1 2.2 2.1 2.1 2.0 2.0 2.0 2.0 2.0 2.0 1.9 1.9 1.9 2.0 2,488.2 2,305.3 2,188.1 2,073.8 1,744.3 1,504.0 1,782.3 1,549.1 1,405.4 1,467.3 1,371.3 1,871.7 2,242.0 2,020.2 2,058.1 1,837.3 1,495.9 1,457.8 1,608.3 1,385.0 1,369.6 1,283.7 1,236.8 1,787.7 191.92 193.85 193.45 192.11 189.02 187.70 176.96 184.79 188.92 189.07 190.43 192.30 194.44 196.38 196.75 194.50 193.43 191.22 188.09 184.69 191.35 191.80 191.80 193.99 ** **Monthly data are seasonally adjusted. 1 Includes persons under the Mate, UCFE (Federal employee, effective January 1955), RRB (Railroad Retirement Board) programs, and UCX (unemployment compensation for ex-servicemembers, effective October 1958) programs. 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), SUA (special unemployment assistance), Federal Supplemental Compensation, and Emergency Unemployment Compensation programs, except as noted in footnote 8. 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 Latest data available for all programs combined. Workers covered by State programs account for about 97 percent of wage and salary earners. 8 Including Emergency Unemployment Compensation and Federal Supplemental Compensation, total benefits paid for 1992 and 1993 would be approximately (in millions of dollars): for 1992, 39,990 and for 1993, 34,876. Note.—Insured unemployment and initial claims programs include Puerto Rican sugar cane workers beginning 1963. Source: Department of Labor, Employment and Training Administration. 333 TABLE B—46.—Employees on nonagricultural payrolls, by major industry, 1950—97 [Thousands of persons; monthly data seasonally adjusted] Goods-producing industries Year or month Manufacturing Total Total 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997? 1996: Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 1997- Jan Feb Mar Apr May .. June .:: ...::r : : : July AugSept :. " :"..: "... Oct NOVP Dec* 45,197 47,819 48,793 50,202 48,990 50,641 52,369 52,855 51,322 53,270 54,189 53,999 55,549 56,653 58,283 60,763 63,901 65,803 67,897 70,384 70,880 71,211 73,675 76,790 78,265 76,945 79,382 82,471 86,697 89,823 90,406 91,152 89,544 90,152 94,408 97,387 99,344 101,958 105,209 107,884 109,403 108,249 108,601 110,713 114,163 117,191 119,523 122,257 118,058 118,550 118,804 118,966 119,263 119,516 119,691 119,983 120,019 120,248 120,450 120,659 120,909 121,162 121,344 121,671 121,834 122,056 122,440 122,492 122,792 123,083 123,495 123,865 18,506 19,959 20,198 21,074 19,751 20,513 21,104 20,967 19,513 20,411 20,434 19,857 20,451 20,640 21,005 21,926 23,158 23,308 23,737 24,361 23,578 22,935 23,668 24,893 24,794 22,600 23,352 24,346 25,585 26,461 25,658 25,497 23,812 23,330 24,718 24,842 24,533 24,674 25,125 25,254 24,905 23,745 23,231 23,352 23,908 24,265 24,431 24,738 24,247 24,383 24,377 24,398 24,432 24,453 24,433 24,468 24,439 24,479 24,508 24,540 24,581 24,653 24,670 24,667 24,702 24,714 24,713 24,765 24,771 24,814 24,891 24,980 Mining 901 929 898 866 791 792 822 828 751 732 712 672 650 635 634 632 627 613 606 619 623 609 628 642 697 752 779 813 851 958 1,027 1,139 1,128 952 966 927 777 717 713 692 709 689 635 610 601 581 574 573 573 576 577 577 579 577 574 574 571 570 571 571 574 574 572 573 576 574 574 573 576 574 572 572 Construction 2,364 2,637 2,668 2,659 2,646 2,839 3,039 2,962 2,817 3,004 2,926 2,859 2,948 3,010 3,097 3,232 3,317 3,248 3,350 3]575 3,588 3,704 3,889 4,097 4,020 3,525 3,576 3,851 4,229 4,463 4,346 4,188 3,904 3,946 4,380 4,668 4,810 4,958 5,098 5,171 5,120 4,650 4,492 4,668 4,986 5,160 5,400 5,627 5,214 5,309 5,340 5,356 5,384 5,408 5,417 5,433 5,441 5,467 5,495 5,521 5,542 5,604 5,609 5,599 5,628 5,622 5,625 5,637 5,642 5,650 5,680 5,730 Total 15,241 16,393 16,632 17,549 16,314 16,882 17,243 17,176 15,945 16,675 16,796 16,326 16,853 16,995 17,274 18,062 19,214 19,447 19,781 20,167 19,367 18,623 19,151 20,154 20,077 18,323 18,997 19,682 20,505 21,040 20,285 20,170 18,780 18,432 19,372 19,248 18,947 18,999 19,314 19,391 19,076 18,406 18,104 18,075 18,321 18,524 18,457 18,538 18,460 18,498 18,460 18,465 18,469 18,468 18,442 18,461 18,427 18,442 18,442 18,448 18,465 18,475 18,489 18,495 18,498 18,518 18,514 18,555 18,553 18,590 18,639 18,678 Durable goods 8,066 9,059 9,320 10,080 9,101 9,511 9,802 9,825 8,801 9,342 9,429 9,041 9,450 9,586 9,785 10,374 11,250 11,408 11,594 11,862 11,176 10,604 11,022 11,863 11,897 10,662 11,051 11,570 12,245 12,730 12,159 12,082 11,014 10,707 11,476 11,458 11,195 11,154 11,363 11,394 11,109 10,569 10,277 10,221 10,448 10,683 10,766 10,915 10,724 10,749 10,718 10,749 10,762 10,778 10,766 10,788 10,771 10,780 10,791 10,803 10,821 10,836 10,848 10,856 10,864 10,891 10,910 10,957 10,952 10,985 11,019 11,050 Nondurable goods 7,175 7,334 7,313 7,468 7,213 7,370 7,442 7,351 7,144 7,333 7,367 7,285 7,403 7,410 7,489 7,688 7,963 8,039 ,8,187 8,304 8,190 8,019 8,129 8,291 8,181 7,661 7,946 8,112 8,259 8,310 8,127 8,089 7,766 7,725 7,896 7,790 7,752 7,845 7,951 7,997 7,968 7,837 7,827 7,854 7,873 7,841 7,691 7,622 7,736 7,749 7,742 7,716 7,707 7,690 7,676 7,673 7,656 7,662 7,651 7,645 7,644 7,639 7,641 7,639 7,634 7,627 7,604 7,598 7,601 7,605 7,620 7,628 Note.—Data in Tables B-46 and B-47 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 6-35 through B-44), which include proprietors, self-employed persons, domestic servants, See next page for continuation of table. 334 TABLE B-46.—Employees on nonagricultural payrolls, by major industry, 1950-97—Continued [Thousands of persons; monthly data seasonally adjusted] Service-producing industries Year or month 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 1996:Jan Feb Mar Apr May June July Au£ Sept Oct Nov Dec 1997:Jan Feb Mar Apr M?y June July Aug Sept Oct NOVA> Dec* . .. Total 26,691 27,860 28,595 29,128 29,239 30,128 31,264 31,889 31,811 32,857 33,755 34,142 35,098 36,013 37,278 38,839 40,743 42,495 44,158 46,023 47,302 48,276 50,007 51,897 53,471 54,345 56,030 58,125 61,113 63,363 64,748 65,655 65,732 66,821 69,690 72,544 74,811 77,284 80,084 82,630 84,497 84,504 85,370 87,361 90,256 92,925 95,092 97,519 93,811 94,167 94,427 94,568 94,831 95,063 95,258 95,515 95,580 95,769 95,942 96,119 96,328 96,509 96,674 97,004 97,132 97,342 97,727 97,727 98,021 98,269 98,604 98,885 Transportation and public utilities Wholesale trade 4,034 4,226 4,248 4,290 4,084 4,141 4,244 4,241 3,976 4,011 4,004 3,903 3,906 3,903 3,951 4,036 4,158 4,268 4,318 4,442 4,515 4,476 4,541 4,656 4,725 4,542 4,582 4,713 4,923 5,136 5,146 5,165 5,081 4,952 5,156 5,233 5,247 5,362 5,512 5,614 5,777 5,755 5,718 5,811 5,984 6,132 6,261 6,426 6,195 6,203 6,211 6,229 6,246 6,270 6,296 6,299 6,290 6,293 6,303 6,288 6,351 6,376 6,405 6,421 6,431 6,434 6,443 6,289 6,473 6,497 6,498 6,488 2,643 2,735 2,821 2,862 2,875 2,934 3,027 3,037 2,989 3,092 3,153 3,142 3,207 3,258 3,347 3477 3,608 3,700 3,791 3,919 4,006 4,014 4il27 4,291 4,447 4,430 4,562 4,723 4,985 5,221 5,292 5,375 5,295 5,283 5,568 5,727 5,761 5,848 6,030 6,187 6,173 6,081 5,997 5,981 6,162 6,378 6,483 6,657 6,421 6,429 6,437 6,443 6,457 6,469 6,481 6,497 6,513 6,538 6,549 6,559 6,570 6,593 6,611 6,622 6,630 6,634 6,664 6,675 6,687 6,712 6,730 6,743 Retail trade 6,743 7,007 7,184 7,385 7,360 7,601 7,831 7,848 7,761 8,035 8,238 8,195 8,359 8,520 8,812 9,239 9,637 9,906 10,308 10,785 11,034 11,338 11,822 12,315 12,539 12,630 13,193 13,792 14,556 14,972 15,018 15,171 15,158 15,587 16,512 17,315 17,880 18,422 19,023 19,475 19,601 19,284 19,356 19,773 20,507 21,187 21,625 22,131 21,340 21,393 21,463 21,479 21,547 21,600 21,651 21,692 21,718 21,791 21,847 21,912 21,917 21,922 21,945 22,029 22,026 22,079 22,159 22,189 22,215 22,258 22,373 22,425 Finance, insurance, and real estate 1,888 1,956 2,035 2,111 2,200 2,298 2,389 2,438 2,481 2,549 2,628 2,688 2,754 2,830 2,911 2,977 3,058 3,185 3,337 3,512 3,645 3,772 3,908 4,046 4,148 4,165 4,271 4,467 4,724 4,975 5,160 5,298 5,340 5,466 5,684 5,948 6,273 6,533 6,630 6,668 6,709 6,646 6,602 6,757 6,896 6,806 6,899 7,053 6,831 6,848 6,856 6,867 6,888 6,897 6,910 6,917 6,925 6,941 6,949 6,962 6,971 6,980 6,992 7,019 7,029 7,034 7,058 7,068 7,082 7,108 7,132 7,155 Government Services 5,356 5,547 5,699 5,835 5,969 6,240 6,497 6,708 6,765 7,087 7,378 7,619 7,982 8,277 8,660 9,036 9,498 10,045 10,567 11,169 11,548 11,797 12,276 12,857 13,441 13,892 14,551 15,302 16,252 17,112 17,890 18,615 19,021 19,664 20,746 21,927 22,957 24,110 25,504 26,907 27,934 28,336 29,052 30,197 31,579 33,117 34,377 35,597 33,698 33,938 34,064 34,150 34,277 34,390 34,465 34,560 34,621 34,717 34,800 34,884 34,990 35,091 35,176 35,334 35,451 35,522 35,684 35,702 35,850 35,945 36,109 36,290 Total 6,026 6,389 6,609 6,645 6,751 6,914 7,278 7,616 7,839 8,083 8,353 8,594 8,890 9,225 9,596 10,074 10,784 11,391 11,839 12,195 12,554 12,881 13,334 13,732 14,170 14,686 14,871 15,127 15,672 15,947 16,241 16,031 15,837 15,869 16,024 16,394 16,693 17,010 17,386 17,779 18,304 18,402 18,645 18,841 19,128 19,305 19,447 19,655 19,326 19,356 19,396 19,400 19,416 19,437 19,455 19,550 19,513 19,489 19,494 19,514 19,529 19,547 19,545 19,579 19,565 19,639 19,719 19,804 19,714 19,749 19,762 19,784 Federal 1,928 2,302 2,420 2,305 2,188 2,187 2,209 2,217 2,191 2,233 2,270 2,279 2,340 2,358 2,348 2,378 2,564 2,719 2,737 2,758 2,731 2,696 2,684 2,663 2724 2,748 2,733 2,727 2,753 2,773 2,866 2,772 2,739 2,774 2,807 2,875 2,899 2,943 2,971 2,988 3,085 2,966 2,969 2,915 2,870 2,822 2757 2,700 2,782 2,782 2,779 2,774 2,770 2,757 2,752 2,743 2,740 2,732 2,732 2,728 2,723 2,716 2,709 2,708 2,703 2,694 2,689 2,690 2,680 2,687 2,696 2,689 State and local 4,098 4,087 4,188 4,340 4,563 4,727 5,069 5,399 5,648 5,850 6,083 6,315 6,550 6,868 7,248 7,696 8,220 8,672 9,102 9,437 9,823 10,185 10,649 11,068 11,446 11,937 12,138 12,399 12,919 13,174 13,375 13,259 13,098 13,096 13,216 13,519 13,794 14,067 14,415 14,791 15,219 15,436 15,676 15,926 16,258 16,484 16,690 16,956 16,544 16,574 16,617 16,626 16,646 16,680 16,703 16,807 16,773 16,757 16,762 16,786 16,806 16,831 16,836 16,871 16,862 16,945 17,030 17,114 17,034 17,062 17,066 17,095 Note (cont'd).—which count persons as employed when they are not at work because of industrial disputes, bad weather, etc., even if they are not paid for the time off; and which are based on a sample of the working-age population. For description and details of the various establishment data, see "Employment and Earnings." Source: Department of Labor, Bureau of Labor Statistics. 335 TABLE B—47.—Hours and earnings in private nonagricultural industries, 1959-97l [Monthly data seasonally adjusted, except as noted] Average weekly hours Year or month Total private Manufacturing Total Overtime Average hourly earnings Total private Current 1982 2 dollars dollars Manufacturing (current dollars) Average weekly earnings, total private Level Current dollars 1982 dollars 2 2.7 $2.02 39.0 $6.69 $2.19 40.3 $78.78 $260.86 38.6 39.7 2.5 2.09 6.79 2.26 80.67 261.92 2.4 2.14 38.6 39.8 6.88 2.32 265.59 82.60 38.7 40.4 7.07 2.8 2.22 2.39 85.91 273.60 38.8 2.8 7.17 40.5 2.28 2.45 278.18 88.46 38.7 40.7 7.33 3.1 2.36 2.53 91.33 283.63 38.8 3.6 2.46 7.52 2.61 41.2 95.45 291.90 41.4 2.71 294.11 38.6 3.9 7.62 2.56 98.82 3.4 .. 38.0 7.72 2.82 40.6 2.68 101.84 293.49 37.8 3.6 3.01 40.7 285 7.89 107.73 298.42 37.7 3.6 3.04 7.98 3.19 40.6 114.61 300.81 37.1 3.0 3.23 8.03 3.35 119.83 298.08 39.8 3.57 36.9 2.9 39.9 3.45 8.21 127.31 303.12 37.0 3.5 3.70 8.53 3.82 136.90 315.44 40.5 3.94 36.9 40.7 3.8 8.55 4.09 315.38 145.39 4.24 302.27 36.5 3.3 8.28 4.42 40.0 154.76 2.6 36.1 4.53 8.12 4.83 163.53 293.06 39.5 8.24 36.1 4.86 5.22 40.1 3.1 175.45 297.37 36.0 3.5 5.25 8.36 5.68 189.00 300.96 40.3 40.4 6.17 35.8 3.6 5.69 8.40 203.70 300.89 35.7 3.3 8.17 6.70 40.2 6.16 219.91 291.66 2.8 35.3 39.7 7.78 111 235.10 274.65 6.66 35.2 2.8 7.69 7.99 39.8 7.25 255.20 270.63 8.49 2.3 7.68 7.68 267.26 34.8 38.9 267.26 3.0 35.0 40.1 8.02 7.79 8.83 280.70 272.52 3.4 35.2 40.7 8.32 7.80 9.19 274.73 292.86 7.77 9.54 34.9 3.3 8.57 40.5 299.09 271.16 3.4 271.94 34.8 40.7 8.76 9.73 7.81 304.85 3.7 34.8 7.73 9.91 41.0 8.98 312.50 269.16 34.7 41.1 3.9 7.69 266.79 9.28 10.19 322.02 7.64 3.8 10.48 334.24 264.22 34.6 41.0 9.66 3.6 10.01 7.52 10.83 345.35 259.47 34.5 40.8 40.7 3.6 10.32 7.45 11.18 353.98 255.40 34.3 34.4 3.8 10.57 7.41 41.0 11.46 363.61 254.99 41.4 4.1 10.83 11.74 34.5 7.39 373.64 254.87 4.7 11.12 12.07 34.7 7.40 256.73 42.0 385.86 4.4 11.43 12.37 34.5 7.39 394.34 255.07 41.6 34.4 4.5 11.81 7.43 12.78 255.51 41.6 406.26 7.54 4.8 12.26 13.17 424.20 260.89 34.6 42.0 12.64 33.9 4.2 11.62 7.41 251.06 40.1 393.92 4.4 11.64 34.4 41.4 7.40 12.60 400.42 254.72 34.4 12.54 4.3 11.66 7.39 41.3 401.10 254.18 12.71 34.3 4.5 11.71 7.40 253.73 41.5 401.65 7.40 34.3 4.6 11.74 12.73 41.6 402.68 253.74 7.44 12.77 258.07 34.7 4.5 11.81 41.7 409.81 4.5 11.81 7.42 12.80 254.45 34.3 41.6 405.08 7.44 34.5 41.7 4.5 11.86 12.85 409.17 256.69 12.87 34.7 4.5 11.91 7.45 258.46 41.7 413.28 12.87 34.4 41.7 4.5 11.91 7.42 409.70 255.26 7.44 4.6 11.98 12.93 Nov 34.5 41.7 413.31 256.71 4.7 12.03 258.64 34.7 12.99 417.44 Dec 42.0 7.45 1997-Jan . 34.4 4.7 12.05 7.46 13.02 414.52 256.51 41.8 4.7 12.10 7.47 Feb 13.03 421.08 260.09 34.8 41.9 Mar 13.07 34.8 4.9 12.14 42.1 7.49 260.78 422.47 Apr 4.9 12.14 7.49 13.07 418.83 258.54 34.5 42.1 13.11 420.56 259.60 May 34.5 4.8 12.19 7.52 42.0 7.54 260.89 13.12 June 34.6 4.6 12.23 41.8 423.16 July 34.4 4.7 12.24 13.11 421.06 259.11 7.53 41.8 4.7 12.31 7.56 34.6 13.20 425.93 261.63 Aug 41.8 4.7 12.35 7.56 13.22 34.5 41.9 426.08 260.92 4.8 12.40 7.58 Oct 34.5 42.0 13.35 427.80 261.49 Nov 4.9 12.47 7.62 13.36 433.96 265.09 34.8 42.1 4.9 12.48 7.62 13.37 Dec* 34.6 42.3 431.81 263.62 1 For production or nonsupervisory workers; total includes private industry groups shown in Table B-46. 2 Current dollars divided by the consumer price index for urban wage earners and clerical workers on a 1982=100 base. 3 Percent changes are based on data that are not seasonally adjusted. Note.—See Note, Table 6-46. Source: Department of Labor, Bureau of Labor Statistics. 1959 1960 1961 1962 1963 1964 1965 1966 1967 . 1968 1969 1970 . 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 1996- Jan Feb Mar Apr May June July Aug Sept Oct.. :::::.. :::::::::..:.:::::..: "... sept: . :". :;: ".. 336 Percent change from year earlier 3 Current 1982 2 dollars dollars 4.9 2.4 2.4 4.0 3.0 3.2 4.5 3.5 3.1 5.8 6.4 4.6 6.2 7.5 6.2 6.4 5.7 7.3 7.7 7.8 8.0 6.9 8.5 4.7 5.0 4.3 2.1 1.9 2.5 3.0 3.8 3.3 2.5 2.7 2.8 3.3 2.2 3.0 4.4 2^ 3.0 2.6 3.6 4.6 2.4 3.5 4.5 2.5 3.9 5.5 5.1 5.2 5.4 4.6 4.4 3.6 3.9 4.4 3.1 4.3 5.2 3.4 4.2 .4 1.4 3.0 1.7 2.0 2.9 .8 I'.l .8 -.9 1.7 4.1 -.0 -4.2 -3.0 1.5 1.2 -.0 -3.1 -5.8 -1.5 -1.2 2.0 .8 -1.3 .3 -1.0 -.9 -1.0 -1.8 -1.6 ~:o ~:e.2 2.1 -2.5 -.1 .2 ~:e1.8 -.5 .7 1.4 ~:2.1& 2.0 2.1 2.7 2.2 2.3 1.4 1.8 2.2 1.0 2.3 3.4 1.9 TABLE B-48.—Employment cost index, private industry, 1980-97 Year and month Service-producing Goods-producing Total private Total Wages com- and pen- salasation ries Bene-1 fits Manufacturing Total Wages Total Wages com- and Bene-1 com- and Bene-1 pen- sala- fits pen- sala- fits sation ries sation ries Nonmanufacturing Total Wages Total Wages com- and Bene-1 com- and Bene-1 pen- sala- fits pen- sala- fits sation ries sation ries Index, June 1989=100; not seasonally adjusted December: 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996: Mar June Sept Dec 1997: Mar June Sept Dec 64.8 71.2 75.8 80.1 84.0 87.3 90.1 93.1 97.6 102.3 107.0 111.7 115.6 119.8 123.5 126.7 127.9 129.0 129.8 130.6 131.7 132.8 133.9 135.1 67.1 73.0 77.6 81.4 84.8 88.3 91.1 94.1 98.0 102.0 106.1 110.0 112.9 116.4 119.7 123.1 124.4 125.6 126.5 127.3 128.6 129.7 131.0 132.3 59.4 66.6 71.4 76.7 81.7 84.6 87.5 90.5 96.7 102.6 109.4 116.2 122.2 128.3 133.0 135.9 136.6 137.4 138.1 138.6 139.4 140.1 140.8 141.8 66.7 73.3 77.8 81.6 85.4 88.2 91.0 93.8 97.9 102.1 107.0 111.9 116.1 120.6 124.3 127.3 128.2 129.3 130.1 130.9 131.4 132.7 133.6 134.1 69.7 75.7 80.0 83.2 86.4 89.4 92.3 95.2 98.2 102.0 105.8 109.7 112.8 116.1 119.6 122.9 123.9 125.1 126.1 126.8 127.5 128.9 129.9 130.6 1996: Mar June Sept Dec 1997: Mar June Sept Deb 127.7 128.8 129.7 130.6 131.4 132.5 133.6 135.2 124.4 125.5 126.4 127.4 128.5 129.7 130.9 132.5 136.0 137.0 137.7 138.7 138.7 139.7 140.4 141.9 128.2 129.4 130.3 131.1 131.4 132.7 133.7 134.3 123.9 125.1 126.1 126.8 127.5 128.9 129.9 130.6 60.5 68.2 73.2 78.3 83.2 85.7 88.3 90.9 97.3 102.6 109.9 116.7 123.4 130.3 134.8 137.1 137.7 138.6 138.8 139.7 139.9 140.9 141.5 141.5 63.3 69.5 74.1 78.9 82.9 86.6 89.3 92.6 97.3 102.3 107.0 111.6 115.2 119.3 122.8 126.2 127.6 128.6 129.5 130.2 131.6 132.5 133.8 135.3 65.3 71.1 75.9 80.2 83.7 87.7 90.3 93.4 97.8 102.2 106.3 110.2 113.0 116.6 119.7 123.2 124.7 125.8 126.7 127.5 129.0 130.1 131.5 133.1 58.4 65.1 69.6 75.2 80.4 83.6 86.8 90.2 96.1 102.6 109.0 115.7 121.2 126.7 131.5 134.7 135.5 136.2 137.2 137.4 138.5 139.2 139.8 141.4 66.0 72.5 76.9 80.8 85.0 87.8 90.7 93.4 97.6 102.0 107.2 112.2 116.5 121.3 125.1 128.3 129.3 130.4 131.3 132.1 132.6 133.8 134.6 135.3 68.9 74.9 79.1 82.5 86.1 89.2 92.1 95.2 98.1 101.9 106.2 110.3 113.7 117.3 120.8 124.3 125.4 126.5 127.7 128.4 129.1 130.3 131.3 132.2 59.9 67.5 72.4 77.5 82.7 85.0 87.5 89.8 96.6 102.3 109.5 116.1 122.6 130.0 134.3 136.7 137.5 138.5 138.8 139.8 139.9 141.0 141.4 141.7 64.2 70.4 75.1 79.6 83.4 87.0 89.7 92.9 97.5 102.3 106.9 111.5 115.1 119.0 122.6 125.9 127.2 128.2 129.1 129.8 131.1 132.1 133.3 134.7 66.2 72.1 76.8 81.0 84.2 88.0 90.6 93.7 97.8 102.2 106.1 109.8 112.6 116.0 119.1 122.5 123.9 125.1 125.9 126.8 128.2 129.3 130.7 132.1 59.1 66.1 70.6 76.2 81.1 84.4 87.5 91.0 96.8 102.8 109.3 116.2 122.0 127.4 132.3 135.3 136.0 136.7 137.5 137.9 138.9 139.5 140.2 141.5 125.4 126.5 127.7 128.4 129.1 130.3 131.3 1322 137.0 138.3 139.1 140.2 139.4 140.8 141.7 142.1 127.1 128.1 129.0 130.1 131.0 132.0 133.1 135.0 123.9 125.0 125.8 127.0 128.2 129.2 130.6 132.3 135.9 136.6 137.3 138.3 138.8 139.4 140.0 141.9 10.5 12.7 7.3 7.0 6.7 2.8 2.9 2.6 7.6 5.9 7.0 6.0 5.6 6.0 3.3 1.8 1.6 2.4 2.4 2.3 1.7 1.8 1.9 1.4 9.7 9.7 6.7 6.0 4.8 4.3 3.1 3.6 5.0 4.9 4.5 4.3 3.2 3.4 3.0 2.7 2.8 2.9 2.9 3.1 3.1 3.0 3.3 3.8 8.9 8.9 6.5 5.5 4.0 4.5 3.0 3.4 4.4 4.5 3.8 3.5 2.6 3.0 2.7 2.9 3.3 3.5 3.3 3.5 3.5 3.4 3.8 4.2 12.6 11.8 6.8 7.9 6.4 4.1 3.7 4.0 6.4 6.2 6.3 6.3 5.0 4.4 3.8 2.3 1.6 1.5 1.6 1.9 2.1 2.0 2.0 2.6 -0.1 .9 .6 .8 -.6 1.0 .6 .3 0.7 .8 .7 .9 1.0 .9 .6 1.0 .9 .8 1.1 1.3 0.1 Index, June 1989=100; seasonally adjusted 137.3 138.4 139.0 140.2 139.4 140.7 141.7 142.0 127.5 128.5 129.4 130.4 131.5 132.4 133.6 135.6 124.7 125.7 126.6 127.7 129.0 130.0 131.4 133.3 135.3 136.1 137.0 137.8 138.3 139.1 139.6 141.8 129.1 130.2 131.3 132.2 132.4 133.6 134.6 135.4 Percent change from 12 months earlier, not seasonally adjusted December: 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996: Mar June Sept Dec 1997: Mar June Sept Dec 9.6 9.9 6.5 5.7 4.9 3.9 3.2 3.3 4.8 4.8 4.6 4.4 3.5 3.6 3.1 2.6 2.7 2.9 2.9 3.1 3.0 2.9 3.2 3.4 9.1 8.8 6.3 4.9 4.2 4.1 3.2 3.3 4.1 4.1 4.0 3.7 2.6 3.1 2.8 2.8 3.2 3.4 3.3 3.4 3.4 3.3 3.6 3.9 11.7 12.1 7.2 7.4 6.5 3.5 3.4 3.4 6.9 6.1 6.6 6.2 5.2 5.0 3.7 2.2 1.6 1.7 1.8 2.0 2.0 2.0 2.0 2.3 9.9 9.9 6.1 4.9 4.7 3.3 3.2 3.1 4.4 4.3 4.8 4.6 3.8 3.9 3.1 2.4 2.3 2.7 2.8 2.8 2.5 2.6 2.7 2.4 9.4 8.6 5.7 4.0 3.8 3.5 3.2 3.1 3.2 3.9 3.7 3.7 2.8 2.9 3.0 2.8 2.9 3.0 3.3 3.2 2.9 3.0 3.0 3.0 10.8 12.7 7.3 7.0 6.3 3.0 3.0 2.9 7.0 5.4 7.1 6.2 5.7 5.6 3.5 1.7 1.3 2.0 1.9 1.9 1.6 1.7 1.9 1.3 9.7 9.8 6.6 6.5 5.1 4.5 3.1 3.7 5.1 5.1 4.6 4.3 3.2 3.6 2.9 2.8 3.0 3.0 2.9 3.2 3.1 3.0 3.3 3.9 8.8 8.9 6.8 5.7 4.4 4.8 3.0 3.4 4.7 4.5 4.0 3.7 2.5 3.2 2.7 2.9 3.3 3.5 3.3 3.5 3.4 3.4 3.8 4.4 12.5 11.5 6.9 8.0 6.9 4.0 3.8 3.9 6.5 6.8 6.2 6.1 4.8 4.5 3.8 2.4 1.7 1.6 1.8 2.0 2.2 2.2 1.9 2.9 9.8 9.8 6.1 5.1 5.2 3.3 3.3 3.0 4.5 4.5 5.1 4.7 3.8 4.1 3.1 2.6 2.5 2.8 3.1 3.0 2.6 2.6 2.5 2.4 9.4 8.7 5.6 4.3 4.4 3.6 3.3 3.4 3.0 3.9 4.2 3.9 3.1 3.2 3.0 2.9 2.9 2.9 3.4 3.3 3.0 3.0 2.8 3.0 Percent change from 3 months earlier, seasonally adjusted 0.4 0.8 -0.2 0.6 0 0.8 1996: Mar 1.0 .8 .9 .9 .8 June '.. .9 1.0 .7 .7 Sept !s .7 .8 .4 .7 .7 .7 .6 .8 .6 .9 Deb .8 .6 .8 .6 0 -.6 1997: Mar .9 1.1 .7 .8 LO .9 June .9 .8 .7 .9 .8 .9 ^5 .8 Sept .4 1.5 1.1 .2 Dec 1.2 1.2 1 Employer costs for employee benefits. Note.—The employment cost index is a measure of the change in the cost of occupations and industries. Data exclude farm and household workers. Source: Department of Labor, Bureau of Labor Statistics. 337 1.1 .8 .7 .9 1.0 .8 1.1 1.4 0.1 .6 .7 .6 .6 lie 0.5 .9 .8 '.2 .9 .7 .6 0.9 .9 .9 .5 !9 .8 .7 .8 .8 1.4 !5 .7 .4 .4 .4 1.4 labor, free from the influence of employment shifts among TABLE B-49.—Productivity and related data, business sector, 1959-97 [Index numbers, 1992=100; quarterly data seasonally adjusted] Year or quarter Output per hour of all persons Hours of all persons2 Output1 Compensation per hour 3 Real compensation per hour 4 Unit labor costs Implicit price deflator * Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm ness business ness business ness business ness business ness business ness business ness business sector sector sector sector sector sector sector sector sector sector sector sector sector sector 1959 50.5 54.2 33.7 33.5 66.7 61.7 13.1 13.7 63.1 66.0 25.9 25.3 25.6 25.0 1960 1961 1962 1963 1964 1965 .. 1966 1967 1968 : : :. 1969.... 51.4 53.2 55.7 57.9 60.5 62.7 65.2 66.6 68.9 69.2 54.8 56.5 59.1 61.2 63.8 65.7 68.0 69.2 71.6 71.6 34.3 34.9 37.2 38.9 41.4 44.2 47.2 48.1 50.5 52.0 34.0 34.7 37.0 38.7 41.3 44.2 47.4 48.2 50.7 52.3 66.7 65.7 66.8 67.2 68.3 70.6 72.5 72.3 73.3 75.2 62.0 61.3 62.6 63.3 64.8 67.3 69.7 69.7 70.9 72.9 13.6 14.2 14.8 15.4 16.2 16.8 17.9 18.9 20.5 21.9 14.3 14.8 15.4 15.9 16.7 17.2 18.2 19.3 20.8 22.2 64.7 66.6 68.9 70.5 73.2 74.8 77.5 79.5 82.5 83.7 67.7 69.3 71.5 73.0 75.4 76.7 78.8 80.9 83.8 84.9 26.6 26.7 26.6 26.6 26.7 26.8 27.5 28.4 29.7 31.7 26.1 26.1 26.0 26.0 26.1 26.2 26.8 27.8 29.0 31.0 25.8 26.1 26.3 26.5 26.8 27.2 27.9 28.7 29.8 31.1 25.3 25.6 25.8 26.0 26.3 26.7 27.3 28.2 29.3 30.5 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 70.5 73.6 76.0 78.4 77.1 79.8 82.5 83.9 84.9 84.5 72.6 75.6 78.2 80.7 79.4 81.5 84.5 85.8 86.9 86.3 52.0 54.0 57.6 61.6 60.6 60.0 64.0 67.6 71.7 73.9 52.1 54.1 57.8 62.0 61.1 60.0 64.3 67.9 72.3 74.3 73.7 73.3 75.7 78.5 78.6 75.2 77.6 80.6 84.5 87.4 71.8 71.5 73.9 76.9 77.0 73.6 76.1 79.2 83.1 86.1 23.6 25.1 26.7 29.0 31.8 35.1 38.2 41.2 44.8 49.2 23.8 25.4 27.0 29.2 32.1 35.3 38.4 41.5 45.2 49.5 85.4 87.0 89.6 91.6 90.5 91.5 94.1 95.3 96.5 95.0 86.1 87.8 90.6 92.3 91.3 92.1 94.6 96.0 97.3 95.7 33.5 34.1 35.1 37.0 41.3 44.0 46.2 49.0 52.8 58.2 32.8 33.5 34.5 36.2 40.4 43.3 45.4 48.3 52.0 57.4 32.4 33.9 35.0 36.8 40.3 44.2 46.5 49.4 53.0 57.6 31.9 33.3 34.3 35.5 39.1 43.2 45.6 48.6 51.9 56.4 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 84.2 85.7 85.3 88.0 90.2 91.7 94.0 94.0 94.6 95.4 86.0 86.9 86.3 89.9 91.4 92.3 94.7 94.5 95.2 95.7 73.0 74.8 72.5 76.1 82.5 85.7 88.5 91.1 94.6 97.8 73.4 86.6 74.8 87.2 72.4 85.0 76.8 86.5 82.8 91.5 85.8 93.5 88.7 94.1 91.3 97.0 95.1 100.0 98.1 102.5 85.4 86.1 83.9 85.5 90.6 92.9 93.7 96.7 99.9 102.5 54.5 59.6 64.1 66.7 69.6 73.0 76.8 79.8 83.5 85.8 54.8 60.1 64.6 67.3 70.1 73.4 77.2 80.) 83.6 85.8 92.7 92.0 93.1 94.0 94.0 95.2 98.3 98.5 99.0 97.1 93.3 92.8 93.9 94.8 94.7 95.7 98.8 98.9 99.1 97.1 64.7 69.5 75.1 75.8 77.2 79.7 81.7 84.9 88.2 89.9 63.8 69.2 74.8 74.9 76.7 79.5 81.5 84.7 87.8 89.7 62.8 68.7 72.7 75.4 77.7 80.0 81.7 83.8 86.8 90.4 61.9 67.9 72.2 74.7 77.0 79.6 81.4 83.6 86.4 90.0 1990 1991 1992 1993 1994 96.1 96.7 100.0 100.2 100.6 96.2 98.6 96.9 96.9 100.0 100.0 100.1 102.7 100.5 107.0 98.8 97.1 100.0 103.0 107.0 102.7 90.7 100.2 95.1 100.0 100.0 102.8 102.6 106.4 104.3 90.6 95.1 100.0 102.3 104.1 97.4 97.9 100.0 99.6 98.7 97.3 94.4 97.9 98.3 100.0 100.0 99.3 102.4 98.5 103.7 94.1 94.1 98.1 97.7 100.0 100.0 102.2 102.5 103.6 104.8 93.8 97.6 100.0 102.5 104.9 1995 1996 100.5 102.0 100.7 109.5 102.0 113.3 109.8 108.9 113.6 111.0 109.0 111.3 106.9 110.4 106.7 110.1 98.4 98.7 98.3 106.3 98.4 108.2 106.0 107.2 107.9 109.2 107.3 109.1 1992:1 99.4 99.9 99.7 101.0 99.3 98.8 100.0 99.6 99.7 99.8 101.1 101.7 98.8 99.5 99.6 99.7 99.8 100.1 101.8 100.7 99.5 98.6 99.6 99.5 100.1 100.7 100.7 101.2 98.6 99.6 100.7 101.2 99.7 99.8 100.2 99.9 99.7 99.3 99.9 99.6 100.2 101.0 99.9 100.1 99.2 99.3 99.6 99.7 101.0 100.1 100.1 100.9 99.2 99.8 100.1 100.9 1993:1 100.1 99.7 99.9 101.0 100.1 99.6 100.0 100.8 101.4 102.1 102.8 104.6 101.6 102.3 103.2 104.8 101.4 102.4 102.9 103.6 101.5 102.6 103.2 103.9 101.8 102.4 102.9 103.3 101.6 102.1 102.5 103.0 99.8 99.7 99.6 99.2 99.6 99.4 99.3 98.9 101.7 102.7 103.0 102.3 101.6 102.5 102.5 102.1 101.7 102.3 102.7 103.4 101.8 102.3 102.6 103.3 1994:1 100.7 100.7 100.5 100.7 100.6 100.7 100.4 100.8 105.2 106.9 107.3 108.5 105.2 106.9 107.3 108.6 104.5 106.1 106.7 107.7 104.6 106.1 106.8 107.8 104.0 104.0 104.4 105.1 103.8 103.9 104.2 105.0 99.5 98.8 98.3 98.3 99.2 98.7 98.1 98.2 103.3 103.2 103.9 104.3 103.2 103.1 103.8 104.2 103.9 104.4 105.1 105.8 103.8 104.5 105.3 106.0 1995:1 100.2 100.4 100.6 101.1 100.3 100.5 100.8 101.2 108.7 108.7 109.8 110.7 108.9 108.9 110.2 111.0 108.5 108.3 109.2 109.5 108.5 108.4 109.3 109.7 105.8 106.6 107.3 108.1 105.6 106.4 107.1 107.9 98.3 98.3 98.4 98.6 98.2 98.1 98.98.4 105.6 106.1 106.7 107.0 105.3 105.8 106.3 106.6 106.5 107.0 107.4 107.8 106.8 107.2 107.5 107.8 1996:1 101.6 102.3 102.0 102.5 101.7 102.2 102.0 102.4 111.4 113.2 113.5 115.0 111.7 113.5 113.8 115.3 109.6 110.7 111.3 112.2 109.8 111.0 111.6 112.6 108.9 110.1 111.0 111.9 108.7 109.8 110.6 111.5 98.4 98.8 98.9 98.9 98.3 98.5 98.6 98.5 107.1 107.7 108.8 109.2 106.9 107.4 108.5 108.9 108.4 108.9 109.6 110.0 108.4 108.8 109.4 109.8 . II Ill .... IV II Ill .... IV II Ill .... IV II Ill .... IV II Ill .... IV 102.6 100.2 100.0 102.6 106.3 113.8 113.1 112.8 99.4 109.7 110.6 102.9 102.8 116.6 116.9 113.3 99.1 109.9 110.5 113.7 II 103.4 117.8 114.2 114.0 99.6 110.1 110.0 111.0 110.9 103.5 118.0 113.7 99.9 104.4 118.9 114.1 115.2 Ill .... 104.6 119.2 113.7 114.8 100.5 100.1 110.2 109.9 111.3 111.2 1 Output refers to real gross domestic product in the sector. 2 Hours at work of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based primarily on 3establishment data. Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also includes an estimate of 4wages, salaries, and supplemental payments for the self-employed. Hourly compensation divided by the consumer price index for all urban consumers. 5 Current dollar output divided by the output index. Source: Department of Labor, Bureau of Labor Statistics. 1997:1 338 TABLE B-50.—Changes in productivity and related data, business sector, 1959—97 [Percent change from preceding period; quarterly data at seasonally adjusted annual rates] Output per hour of all persons Output1 Compensation per hour3 Hours of all persons2 Real compensation per hour4 Unit labor costs Implicit price deflator * Vpor «r ICdl 01 quarter Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm Busi- Nonfarm ness business ness business ness business ness business sector sector sector sector sector sector sector sector Nonfarm Busibusiness ness sector sector Business sector 1959 4.2 4.2 8.5 9.0 4.1 4.6 4.2 4.0 3.5 1960 1961 1962 1963 }964 1.7 3.5 4.7 3.9 4.6 1.2 3.1 4.6 3.4 4.3 1.8 1.9 6.5 4.5 6.4 1.6 1.9 6.9 4.5 6.8 .1 .5 4.4 3.4 4.1 3.5 4.6 2.6 2.9 3.5 2.3 3.8 3.2 2.7 2.4 3.0 2.2 3.3 1965 1966 1967 1968 1969 35 4.0 2.2 3.4 .4 30 35 1.7 3.4 .1 70 6.7 1.9 4.9 3.0 70 7.1 1.7 5.2 3.0 1970 1971 1972 1973 1974 2.0 4.3 3.3 3.2 1.4 4.1 3.4 3.1 -.1 3.8 6.7 7.0 -.2 3.8 6.9 7.3 0 Nonfarm Busi- Nonfarm business ness business sector sector sector -0.2 0.6 1.1 3.2 .3 -.5 .1 .3 3 2.3 4.0 4.3 6.7 1.1 .9 .9 .7 1.0 1.1 .9 .8 .8 1.2 17 2.5 2.9 3.9 4.3 15 2.3 3.3 3.9 4.2 4.4 4.5 3.3 5.2 9.4 4.5 4.5 2.9 3.6 1.7 .6 1.7 2.1 1.1 2.4 4.3 4.0 4.5 3.7 5.2 34 2.6 -.3 1.4 2.5 39 3.6 -.0 1.7 2.9 3.7 6.7 5.7 8.1 7.0 33 5.8 5.8 7.9 6.8 21 3.7 2.5 3.8 1.5 1.7 2.8 2.7 3.5 1.3 2.5 .4 -.2 -.2 .5 2 2.6 3.4 4.6 6.6 1.9 1.9 3.0 2.2 1.4 2.0 3.1 1.9 5.7 2.0 2.9 5.2 5.7 2.3 2.9 4.9 11.6 11.6 6.6 5.2 6.0 7.7 7.2 4.9 6.3 7.6 -1.6 -2.0 -1.2 -.3 3.4 4.0 .1 7.8 6.4 6.3 8.6 9.7 7.2 6.5 6.4 8.2 9.9 -1.6 -1.5 -1.5 -.4 3.3 3.7 .1 1975 1976 1977 1978 1979 3.5 3.4 1.7 1.1 -.4 2.7 3.6 1.6 1.3 -.8 -1.0 -1.7 -4.3 -4.3 10.3 10.1 3.1 3.9 4.9 3.4 3.4 4.0 5.0 3.6 8.8 7.9 8.9 9.7 8.6 8.0 9.1 9.5 -1.5 -1.7 10.1 10.3 1980 1981 1982 1983 1984 -.3 1.8 -.5 3.2 2.5 -.4 1.1 -.8 4.2 1.7 -1.2 -.9 .7 -.8 .7 10.8 10.8 -2.4 -2.4 11.2 9.7 7.4 4.2 4.2 11.1 -.8 1.2 .9 .0 -.6 1.1 1.0 -.1 7.6 8.0 .9 1.8 1985 1986 1987 1988 1989 1.6 2.6 -.1 .6 .8 1.3 3.3 .2 .5 1.0 3.2 .1 .3 1990 1991 1992 1993 1994 1995 1996 -1.7 1992:1 II Ill IV 1993:1 II Ill IV 1994:1 II Ill IV 1995:1 II Ill IV 1996:1 II Ill IV 1997: I II Ill -1.6 6.7 5.7 6.1 2.9 7.1 5.7 6.4 2.8 -1.2 -1.2 1.0 2.9 1.3 1.3 -1.1 .9 2.7 1.4 1.4 10.0 9.5 5.4 6.1 7.3 8.6 10.6 8.5 8.2 .1 2.5 9.1 9.3 5.9 3.7 3.0 9.8 9.6 6.4 3.4 3.1 3.2 2.5 3.9 4.0 1.9 3.6 2.5 4.0 3.6 2.1 3.0 2.1 2.6 3.5 4.2 3.4 2.2 2.6 3.4 4.2 5.6 6.4 6.9 8.6 4.9 8.5 6.1 7.9 1.7 5.8 1.9 6.0 9.5 7.5 4.2 4.4 1.0 2.6 -.2 .7 .6 3.9 3.3 2.9 3.8 3.4 3.6 3.4 3.0 4.1 3.2 2.2 .7 3.0 3.2 2.5 2.5 .8 3.2 3.3 2.6 4.9 5.2 3.9 4.6 2.8 4.6 5.2 3.8 4.4 2.7 .7 .7 3.4 .2 .4 .5 .7 3.2 .1 .4 .8 .7 .1 .2 5.5 4.9 5.2 2.3 1.7 .3 .6 2.1 -.4 -.9 .1 .7 2.1 -.7 -.8 5.0 4.1 1.7 2.4 1.2 5.0 4.2 1.9 2.2 1.4 4.0 3.8 2.4 2.5 2.2 4.2 4.1 2.4 2.5 2.3 -.0 1.5 8.0 2.2 -.7 5.4 -3.8 -1.3 .7 4.3 -.9 0 -.7 .7 -2.1 .9 .7 2.0 2.2 2.5 2.5 -3.1 -2.5 -2.5 -1.9 -2.0 3.2 2.7 4.1 3.0 3.0 3.9 -.2 2.6 3.7 -.2 2.8 3.5 5.7 4.8 5.2 2.6 1.6 .2 1.3 2.3 3.5 2.6 3.5 2.4 2.0 2.4 2.2 2.5 3.3 2.5 3.1 -.3 .3 -.3 .2 2.6 1.8 2.4 1.8 2.3 1.9 2.3 1.7 7.1 2.6 6.2 3.2 .8 7.9 5.6 3.0 .7 8.4 7.7 4.3 4.4 2.0 5.0 .5 1.6 4.8 1.1 1.2 0 1.4 5.5 .5 1.6 5.6 2.8 2.0 1.5 3.0 3.5 2.1 1.6 2.7 3.0 2.1 1.4 3.2 3.8 1.7 1.5 2.6 -1.2 5.9 -4.0 -1.8 1.7 3.3 -1.1 .6 -1.1 1.3 -1.6 .8 1.1 1.6 1.9 2.2 -1.7 -2.3 -2.5 .4 1.9 2.4 2.7 2.8 7.1 -.8 2.6 3.9 6.1 3.3 4.5 2.2 2.7 7.9 3.6 4.7 2.0 2.5 2.5 1.8 1.6 2.6 6.4 1.5 4.5 1.6 6.6 1.5 5.0 3.5 6.3 2.3 3.8 2.8 5.9 2.6 3.7 3.0 -.2 1.7 2.5 3.2 .3 1.3 2.8 .0 .8 .2 4.2 3.0 1.2 .2 4.6 3.0 2.9 -.7 3.5 1.0 2.9 -.6 3.5 1.4 2.6 3.2 2.6 3.2 2.6 3.1 2.7 2.9 -.2 .1 .5 .7 2.6 6.8 1.0 5.4 .6 4.0 2.0 3.4 .6 4.4 2.1 3.6 2.7 4.7 3.3 3.3 2.8 4.4 2.9 3.3 5.6 3.8 4.0 4.0 1.5 _2 4.2 1.4 -.1 4.4 3.3 4.3 4.5 3.3 3.9 -1.2 1.9 1.8 1.8 2.4 4.0 1.4 2.4 4.1 5.9 3.9 3.8 -1.0 -1.8 .9 1.5 2.3 2.7 4.0 2.0 2.7 2.8 6.6 .9 5.4 -1.1 1.9 -3.2 -1.6 -1.4 1.9 2.0 1.6 1.7 -1.5 -.4 -.4 -.1 -1.6 .9 -1.5 -1.0 -.9 -.3 -1.6 -3.2 6.6 3.9 1.0 -2.6 -3.7 6.1 3.9 -.1 -1.5 .3 3.9 -.2 2.4 1.8 4.4 -.2 2.4 1.6 2.0 2.1 2.7 2.5 2.1 2.5 3.2 2.4 -.2 -.1 .6 .5 4.8 2.3 1.9 1.2 4.2 2.3 1.6 1.3 3.1 1.5 1.2 1.0 -.6 1.3 .6 -.1 -.5 1.0 .2 -.1 .5 2.2 4.4 1.4 .9 2.1 3.9 1.5 2.9 1.6 1.7 1-3 2.3 2.1 2.4 1.7 1.9 2.2 2.3 2.1 2.2 1.9 2.5 .9 .3 3.1 .9 -.2 2.0 1.5 1.1 2.4 1.4 1.2 -2.5 -2.0 1.2 -2.0 -2.3 1 2.3 1.7 2.0 1.7 Output refers to real gross domestic product in the sector. Hours at work of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based primarily on establishment data. 3 Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also includes an estimate of wages, salaries, and supplemental payments for the self-employed. 4 Hourly compensation divided by the consumer price index for all urban consumers. 5 Current dollar output divided by the output index. 2 Note.—Percent changes are based on original data and may differ slightly from percent changes based on indexes in Table B-49. Source: Department of Labor, Bureau of Labor Statistics. 339 PRODUCTION AND BUSINESS ACTIVITY TABLE B-51.—Industrial production indexes, major industry divisions, 1941-91 [1992=100; monthly data seasonally adjusted] Total industrial production Year or month 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 .... 1957 1958 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 . . 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997p 1996Jan Feb Mar Apr May June July Aug Sept Manufacturing Total 217 22.6 214 247 268 27.8 302 286 32.2 . . . . 336 34.1 319 35.7 36.5 367 39.8 421 450 495 ... . 538 55.0 . ... 581 60.7 587 59.5 653 70.6 696 63.4 69.3 74.9 793 82.0 797 810 767 79.5 86.6 880 ... . 890 93.2 974 991 98.9 970 100.0 103.6 1092 114.5 1185 124.5 115.3 1167 116.3 117.5 1183 1189 .... 1189 119.3 1196 1197 Nov 120.6 Dec 1209 1997:Jan 121.3 Feb 1221 Mar ... . ... . 1225 Apr 123.1 May 123.3 June 1235 July 1245 Aug 1252 Sept 1256 Octp 126.5 Nov 127.5 Dec? 128.1 Source: Board of Governors of the Federal Reserve System. Oct.":::: : 206 21.3 202 235 25.4 26.4 288 26.9 30.3 316 31.9 297 33.5 34.1 342 37.3 395 42.2 468 510 52.0 549 57.4 548 55.6 615 66.9 659 59.3 65.4 71.2 758 78.5 755 76.7 721 76.3 83.8 85.7 881 92.8 97.1 990 98.5 962 100.0 103.8 1100 116.0 1202 127.0 116.7 118.1 117.4 119.0 1197 120.4 120.9 121.1 1215 121.5 122.5 1231 123.5 1244 124.9 125.4 125.7 1261 1269 1279 128.0 128.9 130.5 131.1 :: : 340 Durable 197 20.6 187 227 25.6 27.2 307 27.1 31.0 320 32.2 282 32.4 32.9 323 35.9 383 41.0 466 51.8 52.3 54.9 57.1 527 52.5 586 65.4 641 56.1 61.9 68.1 736 77.4 734 74.6 682 72.2 82.7 85.6 874 92.0 98.1 100.5 99.0 95.5 100.0 105.7 114.4 123.9 131.7 142.4 126.7 128.9 127.1 130.4 131.3 132.4 132.8 133.5 1334 133.3 134.9 1353 136.1 137.8 138.7 139.5 140.1 141.2 1424 144.3 144.4 145.4 147.8 148.8 Nondurable 214 22.1 217 242 25.0 25.4 265 26.7 29.6 31 1 31.6 319 35.1 35.9 370 39.3 414 44.1 471 500 51.6 549 57.8 578 60.2 655 68.8 683 64.0 70.5 75.7 789 79.9 783 79.5 777 81.9 85.3 860 891 93.8 96.0 973 97.9 97.0 100.0 101.7 1052 107.4 108.0 111.1 106.0 106.7 107.1 106.9 107.5 107.9 108.3 108.0 1089 109.1 109.6 1103 110.2 110.4 110.5 110.8 110.7 1105 1109 111.0 111.3 112.0 112.7 113.1 Mining 564 593 526 587 644 63.9 656 643 71.7 754 755 693 72.5 73.9 744 765 795 827 858 904 92.1 956 99.5 1020 995 1015 1025 1019 99.7 100.5 103.4 1065 108.3 1115 1156 1112 106.6 113.9 1110 1026 102.1 1047 1032 104.8 102.6 100.0 100.1 1026 102.3 1039 106.0 100.6 1022 103.9 104.5 1044 105.5 105.2 104.9 1050 104.4 103.6 1029 103.7 1060 106.7 105.5 106.7 1057 1065 1063 106.5 106.2 105.8 106.1 Utilities 107 119 127 145 165 17.9 194 209 23.3 256 27.3 286 31.5 33.7 356 382 409 444 471 507 53.3 576 62.7 665 69.7 742 77.1 761 76.9 79.9 82.0 844 86.8 873 85.0 823 83.7 86.7 888 864 89.4 93.9 971 98.3 100.4 100.0 103.9 1053 109.0 112.5 112.5 112.3 1135 114.5 112.5 1137 113.0 109.4 111.3 1115 112.1 113.6 1127 112.5 110.3 109.6 112.5 111.8 1109 1138 113.0 115.1 116.7 114.5 114.9 TABLE B-52.—Industrial production indexes, market groupings, 1947-97 [1992=100; monthly data seasonally adjusted] Year or month Total industrial production Final products Total Total 23.7 21.7 21.0 22.3 18.6 25.5 24.4 23.4 19.4 26.2 22.6 21.7 26.4 21.4 21.1 24.3 23.2 18.0 24.7 23.8 29.2 24.8 28.6 27.8 26.8 25.7 27.5 25.8 21.4 29.6 28.1 23.2 21.4 30.8 27.8 27.5 31.7 29.8 29.3 24.2 30.2 29.4 32.1 29.6 28.6 27.9 27.3 22.3 34.5 32.2 30.1 33.0 36.3 26.3 36.8 33.6 31.9 34.2 29.9 27.7 34.1 32.8 37.9 35.1 31.3 27.1 34.8 39.0 31.9 31.3 24.9 25.6 41.7 35.7 34.3 38.1 31.2 29.4 39.6 35.7 29.6 43.1 36.5 35.5 40.4 36.7 35.8 44.5 32.6 30.5 43.1 46.6 39.8 38.8 39.5 33.1 48.7 42.1 41.0 45.5 43.2 35.7 48.1 51.1 45.0 43.3 45.3 39.0 51.8 53.3 49.5 47.6 55.8 44.2 55.8 53.8 52.1 54.5 55.6 48.7 58.7 55.0 54.2 55.8 48.9 49.3 59.2 58.2 52.8 61.0 58.1 56.8 60.7 58.6 61.4 63.1 58.5 56.3 64.1 58.7 56.5 60.7 49.2 54.6 64.2 62.7 57.8 66.0 59.5 57.0 69.3 67.7 66.2 70.2 65.3 61.9 72.4 72.4 74.7 70.0 70.6 66.5 72.4 70.2 64.6 64.7 69.6 66.3 67.4 63.4 62.4 60.8 57.0 70.9 74.1 76.1 69.3 66.8 75.5 63.9 79.5 87.2 71.8 79.8 74.9 72.4 82.6 82.9 79.3 77.2 89.6 74.9 81.5 81.4 73.6 82.9 82.0 79.7 79.7 79.3 79.6 62.3 69.7 83.8 80.1 84.3 81.0 81.2 61.6 70.7 76.7 78.3 78.8 84.2 59.1 64.4 83.2 86.2 79.5 80.0 74.3 73.1 86.7 86.6 87.0 89.4 80.1 87.5 95.4 77.3 87.6 88.5 88.0 89.3 90.7 89.0 90.3 97.5 82.6 91.3 93.7 100.7 89.1 93.2 93.3 93.6 97.4 97.9 96.7 107.1 94.5 95.9 97.7 108.9 95.9 96.7 99.1 99.9 97.1 98.9 99.5 97.3 100.9 96.0 97.0 97.7 97.0 90.3 95.2 98.1 100.0 100.0 100.0 100.0 100.0 100.0 103.6 103.4 103.0 111.0 108.0 101.5 109.2 107.5 107.1 122.7 117.2 104.0 114.5 111.3 109.9 122.3 121.1 106.9 118.5 114.6 111.8 123.9 127.3 108.3 124.5 119.6 114.4 130.0 132.3 110.1 115.3 111.7 109.7 118.3 121.7 107.1 116.7 113.5 111.2 123.2 124.0 108.0 116.3 112.7 110.7 111.2 124.8 108.6 117.5 114.0 111.2 125.7 126.1 107.5 118.3 114.3 111.6 125.8 128.2 107.7 118.9 115.0 112.1 128.3 130.6 107.8 118.9 115.3 112.1 130.8 127.8 107.8 July Aug 127.4 128.8 107.6 119.3 115.0 111.7 Sept 119.6 115.6 112.4 125.5 128.6 108.7 Oct 119.7 115.3 112.1 120.7 127.4 108.9 Nov 120.6 116.3 113.1 124.5 128.8 109.7 Dec 120.9 116.8 113.6 125.9 130.4 109.9 1997:Jan 121.3 116.8 113.2 127.4 128.5 109.4 Feb 122.1 117.2 113.1 128.5 130.1 109.0 Mar 122.5 117.9 113.4 129.0 132.0 109.1 Apr 123.1 118.0 113.4 122.3 131.4 109.9 May 123.3 118.6 113.9 124.6 132.1 110.1 June 123.5 118.6 113.5 126.7 132.3 109.4 July . . 124.5 119.2 113.9 120.3 134.4 110.3 Aug 125.2 120.5 114.6 131.6 132.5 110.3 Sept 125.6 120.3 114.5 132.8 131.1 110.2 Oct" 126.5 121.1 115.4 131.2 131.0 111.4 Nov/> 127.5 122.2 116.3 138.5 134.1 111.5 Dec" 128.1 122.6 116.6 135.0 136.6 111.9 'Two components—oil and gas well drilling and manufactured homes—are Source: Board of Governors of the Federal Reserve System. 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 . I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 1996:Jan Feb Mar Apr May June Materials Intermediate De- prod- Total Auto- Other Nonmotive dura- durable Total ! Busi- fense ucts prodble ness and space ucts goods goods Consumer goods 341 Equipment 8.3 16.3 16.0 22.6 9.7 23.9 17.2 16.7 15.3 14.6 10.2 22.6 16.6 15.6 11.9 26.3 23.1 19.1 29.3 27.6 27.7 21.6 41.2 27.5 29.4 30.1 22.5 49.4 26.3 19.8 43.5 29.3 26.9 21.4 39.8 33.2 29.5 24.8 38.9 34.7 30.7 25.8 40.6 34.7 27.5 21.8 40.8 33.9 30.2 24.5 43.0 37.5 31.0 25.1 44.2 37.7 30.6 24.4 44.9 38.5 34.0 26.5 52.0 40.8 36.1 27.8 56.1 43.1 38.1 31.1 54.3 45.9 43.1 35.6 60.1 48.9 50.2 41.3 70.6 51.9 53.4 42.1 80.6 54.0 54.9 43.9 80.7 57.1 56.4 46.8 76.8 60.2 52.4 45.1 65.1 59.3 49.1 42.9 58.5 61.1 53.7 48.9 56.8 68.2 59.9 57.2 55.5 72.6 61.9 59.7 54.7 70.0 56.7 53.3 53.7 63.2 58.6 55.3 54.6 69.6 64.3 62.0 54.4 75.7 71.0 69.3 55.9 79.9 77.6 77.3 57.7 82.0 79.1 76.7 63.2 77.7 82.8 78.0 64.5 77.6 77.7 70.6 72.6 75.8 76.4 68.3 80.4 81.0 87.6 79.2 89.5 86.9 91.8 82.5 103.8 89.1 90.0 82.0 113.0 92.7 92.9 85.1 117.5 100.7 99.9 93.5 117.1 102.5 103.7 98.8 117.4 102.9 103.2 98.2 115.9 101.9 98.8 95.7 106.7 97.5 100.0 100.0 100.0 100.0 104.1 105.8 93.8 102.5 108.1 112.5 86.9 106.3 113.8 121.5 81.4 108.3 119.6 129.7 76.9 110.8 128.7 141.8 75.3 115.0 115.1 124.4 75.4 107.6 117.5 127.1 76.6 108.7 116.3 125.2 77.8 109.5 118.8 128.4 77.3 109.0 119.1 128.6 77.5 110.4 119.9 130.1 76.5 111.4 121.0 131.3 77.2 110.8 120.7 131.0 77.3 111.4 121.1 131.5 77.5 111.9 121.0 131.6 76.9 111.9 121.8 133.0 76.5 113.7 122.4 134.0 76.2 113.0 123.1 134.9 75.5 113.5 124.6 136.5 75.6 114.1 125.8 137.5 75.7 114.1 126.0 137.9 75.4 114.7 126.8 139.0 75.6 114.9 127.7 140.2 76.0 114.7 128.6 141.6 74.9 114.6 130.9 144.6 75.0 115.3 130.6 144.4 74.7 115.2 131.3 145.4 74.7 116.4 132.5 147.1 75.1 116.6 133.1 147.8 75.2 117.2 included in total equipment, but Dura- Nonble durable 22.1 18.4 23.0 18.9 21.0 16.9 25.1 21.3 27.8 24.3 28.2 24.8 31.3 28.9 28.9 25.0 "2lO 34.2 30.6 26.3 35.1 30.7 27.6 35.1 30.6 27.4 31.6 25.8 27.3 36.4 30.7 31.2 36.9 31.1 31.7 36.9 30.4 33.0 40.2 33.8 35.8 42.8 36.0 37.9 46.3 39.3 41.3 51.6 45.0 45.3 56.2 49.6 48.9 55.7 47.8 49.8 59.4 50.7 54.7 62.9 53.3 59.2 60.7 48.4 59.5 61.6 48.6 62.0 67.9 54.9 68.4 74.3 62.8 73.4 72.8 61.0 73.7 63.9 50.8 65.6 71.4 58.5 74.3 76.9 64.6 78.9 81.0 70.2 81.6 83.9 73.3 84.4 80.3 67.7 80.7 81.4 70.4 82.3 75.1 62.6 74.6 78.3 68.2 81.0 85.9 79.5 84.5 86.3 80.9 83.2 86.3 82.3 85.7 90.4 87.5 90.9 95.1 93.6 94.8 97.0 95.7 97.2 97.2 95.3 98.1 95.9 93.2 96.9 100.0 100.0 100.0 104.1 107.1 101.8 112.3 119.5 106.9 120.8 134.4 108.6 126.2 144.7 108.3 134.2 158.3 112.9 122.6 139.9 105.1 123.7 141.3 105.9 123.2 139.6 105.9 125.1 142.9 107.2 126.1 144.3 107.8 126.5 145.0 108.0 126.5 145.1 109.1 127.4 147.1 108.6 127.5 146.5 109.6 127.9 147.2 110.1 128.4 148.4 110.4 129.0 149.3 111.4 129.7 150.2 111.6 131.0 152.2 112.6 131.3 153.0 112.5 132.5 155.1 113.0 132.4 155.4 111.8 133.0 156.9 111.9 134.9 159.3 113.5 134.9 160.3 112.3 136.1 161.3 113.3 136.9 163.2 113.2 138.3 166.0 114.3 139.3 167.4 114.8 not in detail shown. Energy "5U 57.8 61.1 61.8 57.3 60.7 61.5 62.0 64.1 67.9 70.7 73.9 78.6 81.3 85.0 89.4 93.8 94.6 98.2 98.9 96.3 94.2 96.5 97.9 98.9 101.4 102.2 100.2 96.7 94.7 99.5 99.1 95.2 96.2 98.5 99.5 100.6 100.8 100.0 99.6 101.4 102.6 103.5 104.1 102.0 103.1 104.4 103.9 104.4 104.6 103.2 103.6 103.9 103.8 103.0 102.7 103.6 103.8 103.4 103.7 103.7 103.2 104.6 103.9 105.5 105.3 104.5 105.0 TABLE B-53.—Industrial production indexes, selected manufactures, 1947-97 [1992=100; monthly data seasonally adjusted] Year or month 1947 1948 .. 1949 1950 1951 1952 1953 1954 . 1955 1956 1957 1958 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997* 1996:Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 1997:Jan Feb Mar Apr May June {uiy Aug Sept Oct* NOVP Dec* Primary metals Total Iron and steel 68.6 71.3 60.0 75.5 82.1 75.0 85.0 68.8 89.4 88.8 85.0 67.4 78.8 78.5 77.0 82.6 89.1 100.5 110.6 117.4 108.5 112.4 120.9 112.5 106.7 119.5 135.6 131.4 104.7 117.1 119.0 128.0 130.0 108.0 113.9 80.5 88.2 98.7 98.4 91.2 97.8 106.2 104.9 104.0 96.7 100.0 105.7 113.4 117.2 118.9 124.6 115.8 116.0 117.6 118.0 117.7 119.1 117.7 120.1 121.3 121.9 120.8 120.5 119.4 121.6 121.8 122.3 124.2 124.9 125.2 125.5 125.9 127.4 128.5 129.6 97.1 101.6 86.7 106.9 119.5 105.2 121.3 94.3 125.3 123.0 118.5 89.3 102.8 104.5 99.8 104.0 113.3 128.9 141.4 145.7 134.6 139.0 151.4 140.9 128.9 143.3 163.1 158.0 127.0 139.9 138.0 147.5 148.4 119.0 126.6 80.5 90.0 98.9 98.8 86.8 95.4 107.6 106.2 106.4 96.0 100.0 107.1 113.7 117.7 117.6 123.1 116.7 114.3 116.3 116.4 115.6 118.4 116.7 118.9 118.5 121.9 119.3 118.0 118.8 119.9 119.6 121.2 123.9 122.6 122.2 121.8 124.5 126.5 127.9 128.8 Fabricated metal products 38.2 38.9 35.1 43.0 45.9 44.8 50.6 45.5 52.0 52.7 54.1 48.5 54.4 54.5 53.1 57.7 59.6 63.3 69.6 74.5 77.9 82.1 83.5 77.4 77.0 84.5 93.9 90.1 78.1 86.5 94.7 98.2 101.6 94.4 93.0 84.9 87.2 95.2 96.5 95.6 101.9 106.1 104.8 101.2 96.2 100.0 104.4 112.2 116.6 119.6 123.0 117.7 118.7 118.5 118.4 119.2 119.5 120.0 120.1 120.4 120.8 120.9 120.6 120.6 121.7 122.1 122.5 122.7 121.9 122.4 122.8 122.7 124.2 125.4 127.1 Durable manufactures 1 IndusTransportation equipment trial Electrimacal chinery machinMotor and ery Total vehicles equipand parts ment 15.1 15.1 12.9 14.5 18.4 20.0 20.9 17.8 19.5 22.4 22.3 18.8 21.9 22.0 21.4 24.0 25.6 29.2 32.8 38.1 38.9 39.2 42.4 41.1 38.2 44.3 51.8 55.1 47.7 50.1 56.6 63.3 70.2 70.5 74.7 65.8 65.2 78.9 81.2 81.8 86.0 97.1 103.0 100.1 95.4 100.0 109.9 124.8 142.7 155.3 171.4 148.7 151.3 152.2 152.4 153.8 155.1 155.8 157.8 157.3 157.6 159.9 161.3 162.8 164.0 165.1 167.8 168.0 168.8 172.2 175.9 173.7 176.3 177.5 179.3 5.5 5.7 5.4 7.4 7.4 8.5 9.7 8.6 9.9 10.7 10.6 9.7 11.8 12.8 13.6 15.7 16.1 17.0 20.3 24.4 24.5 25.8 27.5 26.3 26.4 30.2 34.4 34.1 29.3 32.9 38.1 42.2 46.9 48.6 51.0 51.7 55.9 66.7 68.4 71.0 75.6 82.5 85.8 87.7 89.6 100.0 110.7 133.2 170.9 199.3 231.6 185.6 192.5 192.6 194.8 197.1 200.0 200.4 201.9 203.9 204.8 207.7 210.5 211.1 217.4 220.8 223.7 226.3 229.7 235.5 236.8 237.5 240.8 247.0 251.5 19.0 20.7 20.8 24.9 27.8 32.3 40.6 35.3 40.6 39.4 42.2 33.3 37.7 39.0 36.7 42.4 46.5 47.7 56.7 60.8 59.5 64.6 64.1 53.8 58.2 62.2 70.8 64.4 57.9 65.9 71.9 77.5 78.7 70.3 66.9 63.0 70.5 80.5 88.8 94.1 96.1 101.1 105.1 102.3 96.5 100.0 103.8 107.1 105.7 106.5 115.5 103.1 104.9 94.7 107.8 108.2 108.3 110.3 109.6 107.7 105.9 108.8 109.1 110.9 111.4 112.3 110.7 110.8 113.0 112.2 117.0 118.8 118.2 122.2 121.0 Source: Board of Governors of the Federal Reserve System. 342 26.5 28.8 29.5 38.0 34.8 29.8 37.6 32.4 43.4 35.2 36.9 27.3 35.4 40.0 35.1 42.7 47.3 48.5 62.0 60.9 53.6 64.2 64.5 51.9 65.0 71.0 82.7 71.4 60.5 79.7 92.4 96.8 89.0 65.8 62.8 56.9 72.1 87.3 95.0 94.2 94.9 100.2 101.2 95.3 88.5 100.0 113.6 129.8 131.0 130.2 136.9 128.8 130.2 108.7 135.1 135.2 134.6 137.9 135.8 130.1 125.4 130.7 130.1 133.4 133.3 134.0 129.7 129.2 132.5 130.0 138.9 141.2 139.6 146.9 141.6 Nondurable manufactures Lumber and products 40.6 42.2 37.3 45.3 45.2 44.6 47.1 46.8 52.3 51.7 47.4 48.2 54.6 51.5 53.9 56.8 59.5 63.9 66.4 68.9 68.2 70.2 70.1 69.7 71.5 81.9 82.2 74.6 69.5 79.0 86.1 87.5 86.3 80.4 78.1 70.3 83.3 89.8 92.0 99.6 104.9 105.1 104.3 101.6 94.5 100.0 100.8 105.9 107.8 111.8 114.8 107.5 108.3 111.5 112.3 112.4 114.7 111.6 113.5 112.6 111.6 115.2 110.2 111.4 114.2 114.9 115.9 116.4 117.0 116.1 115.4 113.3 112.5 115.2 114.8 Printing Apparel Textile mill and prodprod- publishucts ucts ing 47.2 49.2 48.8 52.5 51.5 54.2 54.9 54.2 59.9 61.3 61.1 59.4 65.4 66.7 67.1 69.9 72.7 75.3 79.5 81.6 81.2 83.2 85.9 82.5 83.5 88.6 89.3 85.3 77.9 91.8 98.0 100.4 95.3 95.4 97.3 96.3 100.3 102.2 98.6 101.8 105.5 103.5 100.3 97.2 97.8 100.0 102.4 106.5 107.1 102.2 99.7 100.7 103.6 102.4 103.4 103.2 102.9 102.2 102.9 102.3 101.6 101.2 100.0 100.5 99.5 100.1 99.8 99.8 99.6 99.7 99.1 99.1 99.3 98.8 100.0 34.1 36.5 33.7 38.3 38.0 37.6 38.6 36.1 41.2 42.3 40.3 39.8 45.0 44.1 45.4 48.5 50.3 54.3 59.1 62.7 62.7 70.0 73.6 72.0 76.0 83.3 86.7 78.9 75.2 83.5 88.3 88.6 91.5 89.0 86.3 80.1 89.9 90.4 86.5 90.5 96.3 95.0 96.5 93.2 92.7 100.0 105.2 110.6 109.9 106.7 109.8 102.4 104.6 107.7 105.7 106.9 108.9 107.6 108.2 107.3 107.5 108.0 105.9 107.0 107.0 108.0 109.2 107.2 109.1 110.7 110.7 111.4 111.7 112.9 113.1 22.7 23.9 24.5 25.7 26.2 26.1 27.3 28.4 31.3 33.2 34.4 33.6 35.9 37.3 37.5 38.9 40.9 43.4 46.2 49.7 52.4 53.3 55.9 54.3 54.8 58.5 60.0 59.1 55.3 60.4 66.3 70.1 72.0 72.4 74.3 77.5 81.4 87.0 90.2 93.4 102.5 103.4 103.5 103.1 99.1 100.0 100.6 100.7 101.5 101.5 104.8 99.7 101.0 100.3 100.5 101.7 101.2 101.4 101.4 102.1 102.6 103.1 103.2 103.2 103.3 103.6 104.4 104.5 104.1 104.1 104.4 105.1 106.7 107.4 106.8 Chemicals and products 7.5 8.2 8.0 10.1 11.4 11.9 12.9 13.1 15.3 16.4 17.3 17.9 20.8 21.6 22.7 25.2 27.6 30.2 33.7 36.7 38.4 43.2 46.7 48.6 51.7 58.2 63.6 65.9 60.1 67.2 72.4 76.4 79.2 75.9 77.3 71.0 76.0 79.3 79.4 82.4 87.0 92.2 95.1 97.3 96.4 100.0 101.4 104.7 107.5 110.5 115.1 107.9 108.0 108.0 108.1 109.1 109.5 110.8 110.8 112.0 113.2 113.5 114.9 115.2 114.6 113.6 115.2 114.5 114.6 114.3 114.5 115.6 116.1 115.8 116.6 Foods 31.1 30.8 31.1 32.2 32.8 33.5 34.2 34.9 36.9 39.0 39.6 40.6 42.6 43.8 45.0 46.4 48.1 50.3 51.5 53.4 55.8 57.3 59.2 60.1 62.0 65.3 66.6 67.5 67.1 70.9 74.6 77.2 77.9 79.7 81.4 82.4 84.6 86.4 88.9 91.2 93.5 94.9 95.9 97.0 98.4 100.0 102.0 103.7 106.8 107.3 109.6 106.6 107.0 107.4 107.1 106.8 107.1 107.2 105.9 107.0 107.8 108.2 109.0 109.3 109.4 110.0 109.2 109.2 108.8 110.0 108.9 108.6 109.3 111.0 111.1 TABLE B-54.—Capacity utilization rates, 1948-97 [Percent;1 monthly data seasonally adjusted] Manufacturing Total industry Year or month 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997/> 1996-Jan Feb Mar Apr May :::: sept SetNov :""'.'"'::;: : :.: June July Aug Dec 1997-Jan Feb Mar Apr M?y June July Aug Sept Otfp Nov/> Dec^ . . 87.0 873 873 81.1 794 84.4 884 84.3 746 79.3 835 858 860 815 80.8 745 75.7 808 79.8 787 81.3 840 84.1 823 793 802 813 831 83.4 824 82.7 818 825 819 825 82.7 828 82.6 825 824 82.2 825 825 824 826 825 826 824 82.3 826 82.8 827 830 833 83.4 Total 825 742 828 85.8 854 89.3 801 87.0 861 836 75.0 816 801 77.3 814 83.5 856 89.5 91 1 872 871 866 794 779 834 877 83.4 729 782 826 852 853 795 783 718 74.4 798 78.8 787 81.3 838 83.6 814 779 794 805 825 82.8 814 81.7 808 815 806 814 816 817 817 815 814 811 815 815 814 817 816 816 814 813 815 818 816 818 824 82.5 Durable goods 87.5 872 867 772 747 814 880 83.1 706 757 808 844 856 784 76.8 680 70.1 776 76.8 757 77.9 81 7 82.0 790 747 766 788 815 82.1 808 81.0 804 81 3 796 812 81.3 815 813 813 807 802 807 804 804 809 809 808 806 807 808 81.4 810 810 819 81.8 1 Output as percent of capacity. Source: Board of Governors of the Federal Reserve System. 343 Nondurable goods 863 866 865 828 826 864 873 839 763 818 853 864 849 810 804 775 808 829 815 828 859 864 85.7 844 819 827 824 836 835 820 826 814 818 819 816 818 819 821 818 823 823 825 829 826 826 826 827 825 821 823 822 823 827 830 83.2 Primary processing Advanced processing 873 762 88.5 90.2 849 89.4 806 92.0 894 847 75.4 830 798 77.9 815 83.8 878 91.0 914 85.3 861 865 799 787 855 905 85.1 721 792 838 859 860 772 772 686 74.5 800 791 799 845 868 86.1 839 796 823 841 874 871 856 86.0 848 848 852 851 854 860 858 859 860 860 860 857 855 861 861 862 860 858 860 858 857 857 863 86.7 800 732 798 83.4 859 89.3 800 842 844 831 74.9 81 1 805 77.2 816 83.4 846 88.8 91 1 880 873 864 789 771 822 862 825 733 776 819 848 849 808 788 735 744 797 786 781 799 823 825 803 772 782 789 804 808 795 79.8 791 800 786 798 799 798 799 796 794 790 795 797 796 797 797 796 794 794 796 800 797 800 806 80.6 Mining 81.2 835 865 888 873 903 923 92.3 897 898 909 909 914 934 93.9 863 80.4 860 84.3 776 803 852 86.9 898 884 865 862 876 871 888 89.8 861 874 888 893 893 902 899 896 896 890 883 876 882 901 906 895 905 896 903 900 901 898 895 89.7 Utilities - 94.5 951 967 96.2 946 95.2 935 87.3 844 852 850 854 866 859 825 793 797 819 835 806 825 849 863 857 863 846 872 873 890 902 893 906 916 922 905 914 907 877 892 891 895 906 898 895 877 870 892 885 877 899 892 908 920 901 90.3 TABLE B-55.—New construction activity, 1959-97 [Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates] Private construction Total new construction Year or month 1959 I960 1961 1962 1963 . New series 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 . 1975 1976 1977 1978 1979 1980 1981 . 1982 1983 1984 1985 1986 1987 .. 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997p 1996- Jan Feb Mar Apr May June July Aug sept:::::::::::::: Oct Nov Dec 1997: Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec/' """ '."' Residential1 buildings Total Public construction Nonresidential buildings1 and other construction Total 2 New housing units Total Commercial 3 Industrial Total Other 4 and Federal State local * 55.4 54.7 56.4 60.2 64.8 39.3 38.9 39.3 42.3 45.5 24.3 23.0 23.1 25.2 27.9 19.2 17.3 17.1 19.4 21.7 15.1 15.9 16.2 17.2 17.6 3.9 4.2 4.7 5.1 5.0 2.1 2.9 2.8 2.8 2.9 9.0 8.9 8.7 9.2 9.7 16.1 15.9 17.1 17.9 19.4 3.7 3.6 3.9 3.9 4.0 12.3 12.2 13.3 14.0 15.4 75.1 81.9 85.8 87.2 96.8 104.9 105.9 122.4 139.1 153.8 155.2 152.6 172.1 200.5 239.9 272.9 273.9 289.1 279.3 311.6 369.0 401.4 429.9 441.6 455.6 469.8 468.5 424.2 452.1 478.6 519.9 534.1 568.6 600.7 550.7 546.1 548.6 562.9 562.3 568.2 567.0 571.0 580.0 584.1 586.2 579.1 577.1 592.4 593.9 596.9 595.8 594.2 603.0 603.7 605.7 611.8 611.3 611.8 54.9 60.0 61.9 61.8 69.4 77.2 78.0 92.7 109.1 121.4 117.0 109.3 128.2 157.4 189.7 216.2 210.3 224.4 216.3 248.1 298.8 323.6 345.3 351.0 360.9 371.6 361.1 314.1 336.2 362.7 399.4 406.8 437.1 461.9 420.3 421.7 421.2 431.1 428.5 438.6 436.8 443.6 444.4 449.0 448.9 447.0 444.4 452.0 452.7 457.6 459.9 456.9 464.3 465.2 468.8 469.6 469.4 472.9 30.5 30.2 28.6 28.7 34.2 37.2 35.9 48.5 60.7 65.1 56.0 51.6 68.3 92.0 109.8 116.4 100.4 99.2 84.7 125.5 153.8 158.5 187.1 194.7 198.1 196.6 182.9 157.8 187.8 210.5 238.9 230.7 247.2 260.2 237.4 239.3 243.0 248.8 249.7 250.2 249.4 249.2 249.0 247.9 248.3 247.9 246.7 251.4 254.0 259.9 259.7 257.3 258.8 260.0 263.8 265.7 268.1 271.9 24.1 23.8 21.8 21.5 26.7 29.2 27.1 38.7 50.1 54.6 43.4 36.3 50.8 72.2 85.6 89.3 69.6 69.4 57.0 94.6 113.8 114.7 133.2 139.9 138.9 139.2 128.0 110.6 129.6 144.1 167.9 162.9 179.4 185.5 171.1 173.5 176.5 181.4 181.8 182.4 181.2 181.1 180.6 179.9 180.0 179.1 178.3 183.4 184.1 185.2 185.3 182.8 182.9 183.8 186.7 189.9 190.1 193.5 24.4 29.7 33.3 33.1 35.2 39.9 42.1 44.2 48.4 56.3 61.1 57.8 59.9 65.4 79.9 99.8 109.9 125.1 131.6 122.6 144.9 165.1 158.2 156.3 162.8 175.1 178.2 156.2 148.4 152.2 160.5 176.1 189.9 201.8 182.9 182.5 178.3 182.3 178.8 188.4 187.4 194.3 195.4 201.1 200.6 199.1 197.7 200.6 198.8 197.7 200.2 199.7 205.5 205.3 205.0 203.9 201.3 200.9 7.9 9.4 9.4 9.3 10.4 12.5 13.0 15.3 18.8 21.7 21.7 17.2 17.0 19.7 24.7 34.0 41.7 48.7 53.9 53.4 71.6 88.1 84.0 83.2 86.4 89.2 85.8 62.2 53.2 57.9 64.4 75.4 86.7 93.6 79.3 80.1 79.5 83.1 82.7 87.9 85.8 90.5 89.4 92.5 93.2 92.2 94.9 96.0 94.0 89.0 91.8 92.3 96.0 94.7 93.9 94.3 92.4 93.8 5.0 7.2 9.3 8.4 8.5 9.6 9.3 7.8 6.7 9.0 11.5 11.7 10.5 11.3 16.2 22.0 20.5 25.4 26.1 19.5 20.9 24.1 21.0 21.2 23.2 28.8 33.6 31.4 29.0 26.5 28.9 32.5 32.1 30.6 33.4 32.1 31.4 31.9 30.2 32.0 30.5 31.0 32.8 34.7 33.2 30.8 31.9 32.2 30.5 29.3 30.5 31.0 31.8 31.5 30.7 30.0 29.4 28.1 11.5 13.1 14.6 15.4 16.3 17.8 19.8 21.1 22.9 25.6 27.9 28.9 32.4 34.5 39.0 43.7 47.7 51.0 51.6 49.8 52.4 52.9 53.2 52.0 53.2 57.1 58.8 62.6 66.2 67.8 67.2 68.2 71.1 77.5 70.2 70.3 67.5 67.3 65.9 68.5 71.1 72.9 73.2 73.8 74.2 76.2 70.9 72.5 74.2 79.4 77.9 76.3 77.7 79.1 80.5 79.6 79.4 79.0 20.2 21.9 23.8 25.4 27.4 27.8 27.9 29.7 30.0 32.3 38.1 43.3 44.0 43.1 50.1 56.6 63.6 64.7 63.1 63.5 70.2 77.8 84.6 90.6 94.7 98.2 107.5 110.1 115.8 116.0 120.5 127.3 131.5 138.8 130.4 124.3 127.3 131.8 133.8 129.6 130.2 127.4 135.6 135.2 137.3 132.1 132.7 140.3 141.2 139.3 135.9 137.3 138.7 138.4 136.9 142.2 141.9 138.9 3.7 3.9 3.8 3.3 3.2 3.2 3.1 3.8 4.2 4.7 5.1 6.1 6.8 7.1 8.1 8.6 9.6 10.4 10.0 10.6 11.2 12.0 12.4 14.1 12.3 12.2 12.1 12.8 14.4 14.4 14.4 15.9 15.6 15.3 15.7 15.7 15.4 16.2 16.2 15.3 14.9 14.4 16.9 15.5 16.0 14.1 14.8 15.9 14.9 14.7 14.1 14.1 14.9 14.6 15.5 16.8 17.1 16.9 16.5 18.0 20.0 22.1 24.2 24.6 24.8 25.9 25.8 27.6 33.0 37.2 37.2 36.0 42.0 48.1 54.0 54.3 53.1 52.9 59.0 65.8 72.2 76.6 82.5 86.0 95.4 97.3 101.5 101.5 106.1 111.4 115.9 123.4 114.8 108.6 111.9 115.7 117.6 114.3 115.2 113.0 118.7 119.7 121.3 117.9 118.0 124.4 126.3 124.6 121.8 123.2 123.8 123.9 121.4 125.4 124.9 121.9 1 Beginning 1960, farm residential buildings included in residential buildings; prior to 1960, included in nonresidential buildings and other construction. 2 Incjudes residential improvements, not shown separately. Prior to 1964, also includes nonhousekeeping units (hotels, motels, etc.). 3 Office buildings, warehouses, stores, restaurants, garages, etc., and, beginning 1964, hotels and motels; prior to 1964 hotels and motels are4 included in total residential. Religious, educational, hospital and institutional, miscellaneous nonresidential, farm (see also footnote 1), public utilities (telecommunications, gas, electric, railroad, and petroleum pipelines), and all other private. 5 Includes Federal grants-in-aid for State and local projects. Source: Department of Commerce, Bureau of the Census. 344 TABLE B-56.—New housing units started and authorized, 1959-97 [Thousands of units; monthly data at seasonally adjusted annual rates] New private housing units authorized 2 New housing units started Year or month Private (farm and nonfarm) Private and public 1 Total (farm and nonfarm) l Type of structure Nonfarm Total 1 unit 2 to 4 units 5 units or more Type of structure Total 1 unit 2 to 4 5 units units • or more 77.1 938.3 28 2.9 1,208.3 192.9 187.4 746.1 64.6 25 7.5 998.0 722.8 67.6 33 8.7 1,064.2 273.8 716.2 87.1 47 1.5 1,186.6 383.3 1,334.7 750.2 118.9 59 0.7 465.6 100.8 108.4 450.0 720.1 464.9 1,285.8 422.5 709.9 84.8 1,239.8 445.1 86.6 563.2 61.0 347.7 61.1 325.1 971.9 376.1 650.6 73.0 417.5 71.6 1,141.0 694.7 527.3 1,353.4 84.3 574.4 80.9 571.2 1,323.7 625.9 85.2 612.7 85.0 535.9 88.1 616.7 1,351.5 646.8 84.8 780.9 906.1 132.9 885.7 120.3 1,924.6 906.2 148.6 1,037.2 2,218.9 1,033.1 141.3 117.0 795.0 882.1 820.5 118.3 1,819.5 1,074.4 381.6 643.8 64.3 366.2 68.1 (3) 3 63.9 204.3 939.2 675.5 199.8 64.0 ( 3) 289.2 1,296.2 893.6 93.1 85.9 309.5 () 414.4 121.7 1,690.0 1,126.1 121.3 442.7 ( 33 ) 462.0 125.0 1,800.5 1,182.6 130.6 487.3 (3) 125.4 429.0 122.0 1,551.8 981.5 444.8 ( ) 3 710.4 330.5 114.5 365.7 109.5 1,190.6 ( ) 287.7 319.4 564.3 101.8 91.1 985.5 546.4 319.6 88.3 80.0 1,000.5 365.8 522.0 1,605.2 901.5 133.6 113.5 570.1 121.4 544.0 922.4 1,681.8 142.6 616.8 93.4 576.1 1,733.3 956.6 120.1 656.6 1,769.4 108.4 542.0 1,077.6 84.0 583.5 408.7 1,024.4 89.3 1,534.8 421.1 65.3 348.0 75.7 58.8 1,455.6 993.8 386.1 3 317.6 1,338.4 931.7 55.2 67.0 339.8 ( 260.4 793.9 54.3 37.5 1,110.8 262.6 137.9 948.8 753.5 43.1 35.6 152.1 30.7 139.0 910.7 45.8 138.4 1,094.9 4 29.4 132.6 1,199.1 986.5 52.3 ) 160.2 3 4 223.5 1,068.5 62.2 35.0 1,371.6 241.0 ) (3) 244.1 63.7 33.7 1,332.5 997.3 271.5 ( 3) 270.8 45.2 1,425.6 1,069.5 65.8 290.3 (3) 4 298.1 44.2 1,442.3 1,055.6 70.5 316.1 ( 3) ) 284 64 1,047 274 22 1,385 (3 297 35 1,425 1,083 60 282 (3 24 249 60 1,438 1,119 259 (3 74 284 252 1,128 55 1,486 ( 3 4 64 286 1,457 ) 48 1,101 292 ( ) 3 4 1,094 64 228 1,432 274 46 ( 3) ) 4 44 284 1,454 67 1,077 ) 310 (3) 37 256 62 1,405 1,061 282 () 277 1,391 45 1,029 70 292 ( 33 ) 4 245 1,349 1,003 68 ) 58 278 () Nov 293 1,391 65 60 1,016 310 Dec 281 65 341 48 1,405 999 4 1997-Jan 207 1,052 62 43 1,395 281 4) Feb 44 273 1,069 68 ) 1,438 301 Mar 1,034 71 292 1,457 45 352 Apr 310 40 1,442 1,060 68 314 4 May 34 270 1,432 1,053 66 313 (3) 4) 332 1,402 70 37 1,049 283 )4 (3) 3 July 37 279 1,414 1,030 77 307 ) (3) A!* 262 1,397 1,027 66 304 42 ( 3) Sept 280 1,460 1,065 69 46 326 ( ) 77 Oct 342 1,487 1,087 63 323 ( 33 ) ( 44 ) NOVA330 1,440 1,061 58 321 40 (3) (4) Deep 372 1,071 1,482 92 319 55 () () 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. Authorized by issuance of local building permit: in 19,000 permit-issuing places beginning 1994; in 17,000 places for 1984-93; in 16,000 places for 1978-83; in 14,000 places for 1972-77; in 13,000 places for 1967-71; in 12,000 places for 1963-66; and in 10,000 places prior 1959 I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 . 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 . 1996 1997* 1996:Jan Feb Mar Apr May June Julyy Aug ffzuz: June :::::::::: 1,553.7 1,296.1 1,365.0 1,492.5 1,634.9 1,561.0 1,509.7 1,195.8 1,321.9 1,545.4 1,499.5 1,469.0 2,084.5 2,378.5 2,057.5 1,352.5 1,171.4 1,547.6 2,001.7 2,036.1 1,760.0 1,312.6 1,100.3 1,072.1 1,712.5 1,755.8 1,745.0 1,807.1 1,622.7 :i !i :j 1,531.3 1,274.0 1,336.8 1,468.7 1,614.8 1,534.0 1,487.5 1,172.8 1,298.8 1,521.4 1,482.3 ( 33 ( IS (i |J iii P P' i: i! :i :i J) Jj PI U ii! 1,517.0 1,252.2 1,313.0 1,462.9 1,603.2 1,528.8 1,472.8 1,164.9 1,291.6 1,507.6 1,466.8 1,433.6 2,052.2 2,356.6 2,045.3 1,337.7 1,160.4 1,537.5 1,987.1 2,020.3 1,745.1 1,292.2 1,084.2 1,062.2 1,703.0 1,749.5 1,741.8 1,805.4 1,620.5 1,488.1 1,376.1 1,192.7 1,013.9 1,199.7 1,287.6 1,457.0 1,354.1 1,476.8 1,475.9 1,444 1,520 1,429 1,522 1,476 1,488 1,492 1,515 1,470 1,407 1,486 1,353 1,375 1,554 1,479 1,483 1,402 1,503 1,465 1,395 1,507 1,527 1,531 1,519 1,234.0 994.7 974.3 991.4 1,012.4 970.5 963.7 778.6 843.9 899.4 810.6 812.9 1,151.0 1,309.2 1,132.0 888.1 892.2 1,162.4 1,450.9 1,433.3 1,194.1 852.2 705.4 662.6 1,067.6 1,084.2 1,072.4 1,179.4 1,146.4 1,081.3 1,003.3 894.8 840.4 1,029.9 1,125.7 1,198.4 1,076.2 1,160.9 1,133.6 1,138 1,188 1,156 1,215 1,142 1,214 1,164 1,222 1,148 1,104 1,133 1,024 1,125 1,237 1,142 1,133 1,098 1,134 1,149 1,091 1,181 1,122 1,161 1,092 to 1963. 4 Series discontinued December 1988. Source: Department of Commerce, Bureau of the Census. 345 TABLE B-57.—Manufacturing and trade sales and inventories, 1954-97 [Amounts in millions of dollars; monthly data seasonally adjusted] Year or month Sales1 Inventories2 46,443 73,175 1954 51,694 79,516 1955 87,304 54,063 1956 89,052 55,879 1957 87,055 54,201 1958 ' 1959 92,097 59,729 60,827 94,719 1960 1961 95,580 61,159 65,662 101,049 1962 1963 68,995 105,463 73,682 111,504 1964 120,929 80,283 1965 87,187 136,824 1966 90,820 145,681 1967 98,685 156,611 1968 105,690 170,400 1969 108,221 178,594 1970 116,895 188,991 1971 131,081 203,227 1972 153,677 234,406 1973 1974 ...... 177,912 287,144 182,198 288,992 1975 204,150 318,345 1976 229,513 350,706 1977 260,320 400,931 1978 297,701 452,640 1979 327,233 508,924 1980 1981 355,822 545,786 347,625 573,908 1982 1983 369,286 590,287 410,124 649,780 1984 1985 422,583 664,039 430,419 662,738 1986 457,735 709,848 1987 497,157 767,222 1988 527,039 815,455 1989 545,909 840,396 1990 1991 542,815 834,287 567,176 842,204 1992 867,513 595,049 1993 637,585 930,049 1994 681,597 985,905 1995 1996 716,763 1,004,425 693,216 990,600 1996Jan 699,473 990,843 Feb 700,685 989,251 Mar 711,826 993,660 717,503 992,630 712,727 992,101 June 720,755 996,582 July 719,660 998,876 Aug 724,357 999,312 Sept 728,644 1,003,742 Oct 730,974 1,003,740 Nov 728,394 1,004,425 Dec 737,464 1,007,618 1997:Jan 747,790 1,011,899 Feb 745,460 1,013,376 Mar 746,769 1,017,150 Apr 742,945 1,019,025 May 750,027 1,026,255 June 757,485 1,027,787 July 752,886 1,030,243 Aug 762,543 1,037,172 Sept 759,880 1,040,265 Oct* 757,296 1,044,312 Nov f&V:::: 1 Annual 2 Ratio3 1.60 1.47 1.55 1.59 1.61 1.54 1.56 1.56 1.54 1.53 1.51 1.51 1.57 1.60 1.59 1.61 1.65 1.62 1.55 1.53 1.61 1.59 1.56 1.53 1.54 1.52 1.56 1.53 1.67 1.56 1.53 1.56 1.55 1.50 1.49 1.52 1.52 1.53 1.48 1.44 1.41 1.42 1.39 1.43 1.42 1.41 1.40 1.38 1.39 1.38 1.39 1.38 1.38 1.37 1.38 1.37 1.35 1.36 1.36 1.37 1.37 1.36 1.37 1.36 1.37 1.38 Merchant wholesalers Manufacturing Total manufacturing and trade Sales' Inventories2 23,355 26,480 27,740 28,736 27,248 30,286 30,878 30,922 33,358 35,058 37,331 40,995 44,870 46,486 50,229 53,501 52,805 55,906 63,027 72,931 84,790 86,589 98,797 113,201 126,905 143,936 154,391 168,129 163,351 172,547 190,682 194,538 194,657 206,326 224,619 236,698 242,686 239,847 250,394 260,635 279,002 299,116 311,265 300,439 303,090 301,666 309,477 313,247 310,052 313,851 313,854 315,971 316,461 319,296 316,306 319,725 322,967 322,923 326,909 323,567 328,315 332,895 330,178 335,366 334,064 332,339 41,612 45,069 50,642 51,871 50,203 52,913 53,786 54,871 58,172 60,029 63,410 68,207 77,986 84,646 90,560 98,145 101,599 102,567 108,121 124,499 157,625 159,708 174,636 188,378 211,691 242,157 265,215 283,413 311,852 312,379 339,516 334,749 322,654 338,109 369,374 391,212 405,073 390,950 382,547 384,138 405,028 429,089 434,434 431,192 431,462 431,363 431,352 430,298 429,802 430,543 431,647 432,674 434,038 435,200 434,434 435,743 437,873 438,560 441,508 443,460 444,823 446,602 448,447 449,152 452,139 453,955 Ratio3 1.81 1.62 1.73 1.80 1.84 1.75 1.74 1.77 1.74 1.71 1.70 1.66 1.74 1.82 1.80 1.83 1.92 1.83 1.72 1.71 1.86 1.84 1.77 1.66 1.67 1.68 1.72 1.69 1.95 1.78 1.73 1.73 1.68 1.59 1.57 1.63 1.65 1.65 1.54 1.48 1.41 1.41 1.39 1.44 1.42 1.43 1.39 1.37 1.39 1.37 1.38 1.37 1.37 1.36 1.37 1.36 1.36 1.36 1.35 1.37 1.35 1.34 1.36 1.34 1.35 1,37 Sales1 Inventories2 8,993 9,893 10,513 10,475 10,257 11,491 11,656 11,988 12,674 13,382 14,529 15,611 16,987 19,576 21,012 22,818 24,167 26,492 29,866 38,115 47,982 46,634 50,698 56,136 66,413 79,051 93,099 101,180 95,211 99,225 112,199 113,459 114,960 122,968 134,521 143,760 149,506 148,306 154,150 161,681 172,973 188,811 201,723 195,063 195,298 197,334 199,853 200,079 199,977 203,814 202,719 203.437 205,490 205,712 205,560 207,506 211,801 210,195 209,926 210,008 210,772 211,041 208,336 213,372 212,299 210,864 10,637 11,678 13,260 12,730 12,739 13,879 14,120 14,488 14,936 16,048 17,000 18,317 20,765 25,786 27,166 29,800 33,354 36,568 40,297 46,918 58,667 57,774 64,622 73,179 86,934 99,679 122,631 129,654 127,428 130,075 142,452 147,409 153,574 163,903 178,801 187,009 195,550 200,062 207,663 215,878 234,893 253,066 255,808 254,314 254,045 254,151 257,612 256,740 256,122 256,053 256.189 254.654 255,526 255,670 255,808 257,895 258,088 259,389 258,046 259,029 264,154 262,314 264,899 268,112 268,183 270,627 Retail trade Ratio3 1.18 1.13 1.19 1.23 1.24 1.21 1.21 1.21 1.18 1.20 1.17 1.17 1.22 1.32 1.29 1.31 1.38 1.38 1.35 1.23 1.22 1.24 1.27 1.30 1.31 1.26 1.32 1.28 1.36 1.28 1.23 1.28 1.32 1.29 1.30 1.28 1.29 1.33 1.32 1.31 1.30 1.31 1.27 1.30 1.30 1.29 1.29 1.28 1.28 1.26 1.26 1.25 1.24 1.24 1.24 1.24 1.22 1.23 1.23 1.23 1.25 1.24 1.27 1.26 1.26 1.28 Sales1 Inventories2 14,095 15,321 15,811 16,667 16,696 17,951 18,294 18,249 19,630 20,556 21,823 23,677 25,330 24,757 27,445 29,371 31,249 34,497 38,189 42,631 45,141 48,975 54,655 60,176 67,002 74,713 79,743 86,514 89,062 97,514 107,243 114,586 120,803 128,442 138,017 146,581 153,718 154,661 162,632 172,732 185,610 193,670 203,775 197,714 201,085 201,685 202,496 204,177 202,698 203,090 203,087 204,949 206,693 205,966 206,528 210,233 213,022 212,342 209,934 209,370 210,940 213,549 214,372 213,805 213,517 214,093 20,926 22,769 23,402 24,451 24,113 25,305 26,813 26,221 27,941 29,386 31,094 34,405 38,073 35,249 38,885 42,455 43,641 49,856 54,809 62,989 70,852 71,510 79,087 89,149 102,306 110,804 121,078 132,719 134,628 147,833 167,812 181,881 186,510 207,836 219,047 237,234 239,773 243,275 251,994 267,497 290,128 303,750 314,183 305,094 305,336 303,737 304,696 305,592 306,177 309,986 311,040 311,984 314,178 312,870 314,183 313,980 315,938 315,427 317,596 316,536 317,278 318,871 316,897 319,908 319,943 319,730 Ratio3 1.51 1.43 1.47 1.44 1.44 1.41 1.47 1.44 1.42 1.43 1.42 1.45 1.50 1.42 1.42 1.45 1.40 1.45 1.44 1.48 1.57 1.46 1.45 1.48 1.53 1.48 1.52 1.53 1.49 1.44 1.49 1.52 1.56 1.55 1.54 1.58 1.55 1.54 1.52 1.51 1.50 1.55 1.52 1.54 1.52 1.51 1.50 1.50 1.51 1.53 1.53 1.52 1.52 1.52 1.52 1.49 1.48 1.49 1.51 1.51 1.50 1.49 1.48 1.50 1.50 1.49 data are averages of monthly not seasonally adjusted figures. Seasonally adjusted, end of period. Inventories beginning January 1982 for manufacturing and December 1980 for wholesale and retail trade are not comparable with earlier periods. 3 Inventory/sales ratio. Annual data are: beginning 1982, averages of monthly ratios; for 1958-81, ratio of December inventories to monthly average sales for the year; and for earlier years, weighted averages. Monthly data are ratio of inventories at end of month to sales for month. Note.—Earlier data are not strictly comparable with data beginning 1958 for manufacturing and beginning 1967 for wholesale and retail trade. Source: Department of Commerce, Bureau of the Census. 346 TABLE B-58.—Manufacturers' shipments and inventories, 1954—97 [Millions of dollars; monthly data seasonally adjusted] Inventories2 Shipments1 Year or month Total 1954 1955 1956 1957 23,355 26,480 27,740 28,736 27,248 1959 30,286 1960 30,878 1961 . 30,922 1962 33,358 1963 35,058 1964 ! 37,331 1965 40,995 1966 44,870 1967 46,486 1968 50,229 1969 53,501 1970 52,805 1971 55,906 63,027 1972 1973 72,931 1974 84,790 1975 86,589 98,797 1976 1977 113,201 1978 126,905 1979 143,936 1980 154,391 1981 168,129 1982 163,351 1983 172,547 1984 190,682 1985 194,538 194,657 1986 1987 206,326 1988 224,619 236,698 1989 242,686 1990 1991 239,847 250,394 1992 1993 260,635 1994 279,002 1995 299,116 1996 X 311,265 300,439 1996- Jan Feb 303,090 Mar 301,666 Apr 309,477 313,247 May June 310,052 July 313,851 313,854 Aug 315,971 Sept Oct 316,461 Nov 319,296 Dec 316,306 1997:Jan 319,725 Feb 322,967 Mar 322,923 Apr 326,909 May 323,567 June 328,315 332,895 July Aug 330,178 Sept 335,366 334,064 Oct Nov 332,339 ' 1958 ..:.:..: : Durable Nondurable goods goods indus- industries tries 11,828 14,071 14,715 15,237 13,553 15,597 15,870 15,601 17,247 18,255 19,611 22,193 24,617 25,233 27,624 29,403 28,156 29,924 33,987 39,635 44,173 43,598 50,623 59,168 67,731 75,927 77,419 83,727 79,212 85,481 97,940 101,279 103,238 108,128 118,458 123,158 123,776 121,000 128,489 135,886 149,131 160,101 167,166 160,363 162,473 160,768 165,496 168,781 167,524 168,762 168,960 171,415 169,368 171,426 169,504 171,403 174,862 176,224 178,482 175,900 180,687 183,827 181,131 185,496 183,602 182,797 11,527 12,409 13,025 13,499 13,695 14,689 15,008 15,321 16,111 16,803 17,720 18,802 20,253 21,253 22,605 24,098 24,649 25,982 29,040 33,296 40,617 42,991 48,174 54,033 59,174 68,009 76,972 84,402 84,139 87,066 92,742 93,259 91,419 98,198 106,161 113,540 118,910 118,847 121,905 124,749 129,870 139,015 144,099 140,076 140,617 140,898 143,981 144,466 142,528 145,089 144,894 144,556 147,093 147,870 146,802 148,322 148,105 146,699 148,427 147,667 147,628 149,068 149,047 149,870 150,462 149,542 Total 41,612 45,069 50,642 51,871 50,203 52,913 53,786 54,871 58,172 60,029 63,410 68,207 77,986 84,646 90,560 98,145 101,599 102,567 108,121 124,499 157,625 159,708 174,636 188,378 211,691 242,157 265,215 283,413 311,852 312,379 339,516 334,749 322,654 338,109 369,374 391,212 405,073 390,950 382,547 384,138 405,028 429,089 434,434 431,192 431,462 431,363 431,352 430,298 429,802 430,543 431,647 432,674 434,038 435,200 434,434 435,743 437,873 438,560 441,508 443,460 444,823 446,602 448,447 449,152 452,139 453,955 Total Materials and supplies 23,710 26,405 30,447 31,728 30,194 32,012 32,337 32,496 34,565 35,776 38,421 42,189 49,852 54,896 58,732 64,598 66,651 66,136 70,067 81,192 101,493 102,590 111,988 120,877 138,181 160,734 174,788 186,443 200,444 199,854 221,330 218,193 211,997 220,799 242,468 257,513 263,209 250,019 238,166 239,404 253,691 265,915 271,329 267,964 268,245 268,392 268,648 268,657 268,294 269,493 270,537 270,794 271,616 272,198 271,329 272,652 274,170 274,633 276,992 278,084 279,166 280,800 281,878 281,762 283,477 284,463 7,894 9,194 10,417 10,608 9,970 10,709 10,306 10,246 10,794 11,053 11,946 13,298 15,464 16,423 17,344 18,636 19,149 19,679 20,807 25,944 35,070 33,903 37,457 40,186 45,198 52,670 55,173 57,998 59,136 60,325 66,031 63,904 61,331 63,562 69,611 72,435 73,559 70,834 69,427 72,544 78,401 85,040 83,846 85,722 86,049 85,891 85,844 85,483 84,397 85,307 84,805 85,018 84,227 84,154 83,846 84,033 84,147 84,982 85,066 85,373 86,081 86,461 86,360 87,175 87,261 87,163 Work in process Finished goods 9,721 10,756 12,317 12,837 12,408 13,086 12,809 13,211 14,124 14,835 16,158 18,055 21,908 24,933 27,213 30,282 29,745 28,550 30,713 35,490 42,530 43,227 46,074 50,226 58,848 69,325 76,945 80,998 86,707 86,899 98,251 98,162 97,000 102,393 112,958 122,251 124,130 114,960 104,572 102,632 107,244 105,810 110,559 106,519 106,456 107,003 107,500 107,734 108,228 108,368 108,874 108,712 109,806 110,655 110,559 110,804 111,395 111,780 112,555 112,939 113,043 113,931 114,626 113,995 115,099 116,275 I not seasonally adjusted figures. Seasonally adjusted, end of period. Data beginning 1982 are not comparable with data for prior periods. 2 Note.—Data beginning 1958 are not strictly comparable with earlier data. Source: Department of Commerce, Bureau of the Census. Nondurable goods industries Durable goods industries 347 6,040 6,348 7,565 8,125 7,816 8,217 9,222 9,039 9,647 9,888 10,317 10,836 12,480 13,540 14,175 15,680 17,757 17,907 18,547 19,758 23,893 25,460 28,457 30,465 34,135 38,739 42,670 47,447 54,601 52,630 57,048 56,127 53,666 54,844 59,899 62,827 65,520 64,225 64,167 64,228 68,046 75,065 76,924 75,723 75,740 75,498 75,304 75,440 75,669 75,818 76,858 77,064 77,583 77,389 76,924 77,815 78,628 77,871 79,371 79,772 80,042 80,408 80,892 80,592 81,117 81,025 Total 17,902 18,664 20,195 20,143 20,009 20,901 21,449 22,375 23,607 24,253 24,989 26,018 28,134 29,750 31,828 33,547 34,948 36,431 38,054 43,307 56,132 57,118 62,648 67,501 73,510 81,423 90,427 96,970 111,408 112,525 118,186 116,556 110,657 117,310 126,906 133,699 141,864 140,931 144,381