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The Economic Report
of the President
TRANSMITTED TO THE CONGRESS

January 1948

THE ECONOMIC REPORT
OF THE
PRESIDENT
To the Congress, January 14, 1948

UNITED STATES GOVERNMENT PRINTING OFFICE
WASHINGTON : 1948

LETTER OF TRANSMITTAL
T H E WHITE HOUSE,

Washington, D. C, January 14} 1948.
The Honorable the PRESIDENT OF THE SENATE,
The Honorable the SPEAKER OF THE HOUSE OF REPRESENTATIVES.

SIRS : I am presenting herewith my Economic Report to the Congress,
as required under the Employment Act of 1946.
In preparing this report I have had the advice and assistance of the
Council of Economic Advisers, members of the Cabinet, and heads of
independent agencies.
Respectfully,

Contents
Page
I. FOREWORD AND SUMMARY
II. LEVELS OF ECONOMIC ACTIVITY IN 1947

The course of employment and production
Employment
Production
Productivity
The flow of goods and purchasing power
Consumer income, expenditure, and saving
Business investment, income, and
financing
International transactions
Government transactions
Summary: The Nation's Economic Budget
III.

PRICE AND INCOME TRENDS AND THE COURSE OF INFLATION... .

Price trends
Wage trends
Profits
The nature of inflationary pressures
Why inflation is dangerous
IV.

LEVELS OF ACTIVITY AND ADJUSTMENTS NEEDED IN 1948

Needed levels of employment, production, and purchasing
power
Employment objective
Production objective
Purchasing power objective
Fiscal policy to combat inflation
The regulation of credit
The need for selective controls
The need for voluntary restraint

1
11

11
11
11
15
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22
25
28
31
34

34
37
40
41
43
45

45
45
45
46
47
48
50
51

Page
V. LONG-RANGE OBJECTIVES FOR THE AMERICAN ECONOMY

Our ability to grow
Development of natural resources and capital equipment.
Natural resources
Business plant and equipment
Transportation
Urban redevelopment
Housing
Development of human resources and productivity
Size and composition of the labor force
Education for the modern economy
Research
Good health and productivity
Security and productivity
Fiscal aspects of benefit programs
Development of institutions and practices for a highproduction economy
Industrial price-wage-profit policies
Agricultural and food policies
Taxation and debt management
International economic relations
The timing of economic programs to promote stabilization.
Appendix A: The Nation's Economic Budget, the Federal Budget,
and the Distribution of Income, prewar and postwar
Appendix B: Statistical tables relating to employment, production,
and purchasing power

53
56
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59
62
64
65
68
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84
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91
107

To the Congress of the United States:
N my first Economic Report to the Congress, presented a year ago in
accordance with the provisions of the Employment Act of 1946, I foresaw a bright prospect for the year 1947. In large measure that prospect has
been fulfilled.
However, my Midyear Report recorded the fact that agricultural
prospects had become less favorable, that certain price adjustments were
not proceeding satisfactorily, and that the need for foreign aid would probably be greater and more prolonged than had been anticipated. During
the six months since that report, the country has maintained a high level
of prosperity but on a wave of inflation which has already caused serious
hardship and presents grave concern for the future.
In this second annual Economic Report, I shall set forth the difficulties of the situation by which the Nation is confronted as it enters 1948.
At the same time, I have great confidence in our ability to surmount these
difficulties and to show another year of splendid achievement for the
welfare of our own people and the meeting of our responsibilities in the
family of nations.

I. Foreword and Summary

HE year 1947 has afforded a new demonstration of the tremendous
productivity of the United States when our natural resources, our accumulated capital, and our able and enterprising labor force are used at high
levels of activity. Looked at from another point of view, the year has
revealed the previously unmeasured size of the profitable market which is
furnished when nearly 60 million workers are steadily employed with
modern equipment and organization. With high pay rolls and relatively
few work stoppages and with a new high record in farm income, most
of the people were able to enjoy a level of consumption far above prewar
standards. We were able also to satisfy many of the wants for durable
consumers' goods whose production had been curtailed during the war
and to extend the conveniences of life and modest luxuries to a larger
percentage of our homes than had ever shared them in the past. In
addition, we were able to provide aid to war-torn and distressed countries
abroad.

The main features of last year's economic activity may be summarized
as follows:
THE RECORD OF ECONOMIC ACTIVITY DURING 1947

Employment during 1947 made a new record, passing the mark of
60 million civilian jobs in June and, even with seasonal dips, averaging
about 58 million for the whole year. This was almost 3 million more than in
1946 and about 10.5 million more than in 1940. Unemployment was even
lower than in 1946, and reached what is probably the practical minimum.
Production measured as total physical output of goods was about 7
percent above 1946 and 76 percent above the 1935-39 average. A slight
drop in agricultural production was more than offset by larger production
in manufacturing, minerals, construction, transportation, and public utilities. The first Economic Report set up as an objective for 1947 a total
outpmt of goods and services about 5 percent above 1946. This goal was
not quite reached. The increased output of goods was partly offset by a
decline in services.
Productivity per man-hour increased slightly over 1946. In manufacturing, production increased somewhat more than numbers employed.
Output of the average farm worker declined somewhat because of bad
weather conditions but remained far above prewar levels.
Consumer income after taxes reached a new high in 1947. It was running at the annual rate of $1,264 per capita in the last quarter of 1947,
compared with a rate of $1,074 in the first quarter of 1946. However,
the rapid rise in prices caused the purchasing power of the consumer's
dollar income to decline by nearly 8 percent during the same period. This
did most injury to people with low incomes and moderate fixed incomes.
Total spending for consumption was maintained by reduction in the rate
of current saving, drawing on past savings, and the rise of consumer credit
to a new peak of 13.3 billion dollars at the end of 1947.
Business investment and income throughout 1947 remained consistently
above the level of any previous year. Investment in plant, equipment,
and increased inventories amounted to over 25 billion dollars contrasted
with 21 billion dollars in 1946. Some part of this increase reflected higher
prices. Dividend payments reached a new high although corporations
retained five-eighths of their profits after taxes to plow back into the business. Retained corporate earnings were double those of the war years
and four times those of 1929. Flotation of securities, mostly of fixedinterest types, provided 4 billion dollars of new capital as against 3.3 billion
in 1946. Commercial bank loans to business increased about 4.2 billion
dollars in 1947, with credit expanding so rapidly in the last half year as
to cause grave concern as to its inflationary effect.

Housing units completed in 1947 were nearly double the number in 1946,
but high costs raised the question whether this rate could be continued.
Exports of goods and services ran at the annual rate of 20 billion dollars
in the early part of the year but declined later. Imports were much less
than exports resulting in an export surplus of more than 11 billion dollars
for the year. The ability of foreign countries to finance imports declined
in the latter part of the year and the future of our international balance
will depend in considerable measure on the size of Government aid and
private credits extended.
Government expenditures were reduced to 41.3 billion dollars in the
calendar year 1947, leaving a balance of cash receipts of 5.6 billion dollars
which was used primarily to reduce bank holdings of Federal debt. This
was a counterinflationary factor during a year of mounting inflation.
The Nation's Economic Budget for the second half of 1947 indicates a
gross national production at an annual rate of 237 billion dollars, contrasted with about 204 billion for 1946. Investment for construction,
equipment, and inventories increased by 24 percent over 1946, and net
foreign investments increased by 83 percent, while consumer expenditures
increased by only 14 percent. The increase in consumer expenditures
was 3.5 billion dollars more than the increase in their incomes. The
continuance of such a relationship would not enable consumers to absorb,
with their current incomes, the output of a maximum employment economy
when the extraordinary volume of business reequipment, net exports, and
the use of credit level off at more permanently sustainable rates. The
relationships within the Nation's Economic Budget permitted maximum
employment and high production through 1947 but did not include all the
adjustments required for permanent prosperity and growth.
The maintenance and stabilization of such a high level of production
and consumption will require proper adjustment among money, price,
and income relationships. While changes in price and income relationships during the past year have not disrupted activity in any serious way
as yet, they have brought us progressively into a more unstable situation.
As we enter the new year, the American people are keenly aware that
inflation is the dominant problem in our economic affairs.
*
PRICES, WAGES, PROFITS,, AND INFLATION IN 1947

At the time of the first Economic Report a year ago, I warned against the
danger of advancing prices, which would undermine our structure of
national prosperity. I strongly urged businessmen to bring prices into line
with the requirements of a stabilized economy. I called upon workers to
limit their demands for wage increases to those situations where wages were
substandard or where wage increases would not necessitate higher prices.

I called for the holding of public works down to the minimum of necessity
and called upon procurement agencies to avoid practices that would stimulate price increases.
Prices in the first quarter of 1947 continued the upward trend of the last
quarter of 1946. In its first-quarter review to me, the Council of Economic
Advisers stressed the fact that the faster rate at which prices were beginning
to move up constituted a serious danger. During the following weeks, I
emphasized in several public statements the need for all groups in the
business world to adopt policies and follow practices which would halt
this inflationary trend.
There then followed several months of a remarkably stable price level.
One cannot say how far this was due to the voluntary action of the many
businessmen who deliberately withheld price advances and in a few cases
reduced prices, or to what extent the cessation of price increases was the
result of the widespread resistance of retail merchants to higher wholesale
prices or was due to the spread of a generally more cautious attitude among
businessmen and individual consumers.
Although the upward movement of prices had apparently been checked
when I presented my Midyear Economic Report, I warned that there were
strong new inflationary forces. I endeavored again to impress businessmen
with the great need for price stability and I again asked labor to refrain from
demands for such wage increases as would require price advances. Unfortunately, even as the Midyear Report was presented, unfavorable developments in agriculture, industry, and the international situation started
changes in incomes and prices quite different from those recommended in
my first Economic Report. Businessmen were in the main finding it easy
to pass added costs on in price advances of like or greater amount.
Since June, wholesale prices have risen at an annual rate of 20 percent
and consumer prices at an annual rate of about 12 percent. Retail food
prices have risen at an annual rate of about 15 percent. Rent, since the
modification of rent control, has been rising at an annual rate of about 13
percent. At the wholesale level, textiles during the second half of 1947
were rising at an annual rate of 12 percent, fuel and lighting 36 percent, and
building materials 18 percent.
Wages, too, were moving up. Wage earners had in the first half of the
year sought to obtain increases in rates that would maintain their takehome pay at or near the wartime level and thus enable them to buy
the enlarged product of goods and services that a high-production peacetime economy could turn out. Wage advances during 1947 kept up
generally with the cost of living trend during the year but did not gain
the ground lost when price increases exceeded wage increases in 1946.

The renewed rise in the cost of living during the second half of 1947
brought demands for further wage increases. At the end of the year there
was a continuing prospect of a fruitless and dangerous spiraling of prices
and wages.
Profits were substantially above the 1946 level, and remained high
through the year as increased costs were covered, and in many cases exceeded,
by higher prices. Corporate profits before taxes rose to 28 billion dollars,
contrasted with 21 billion in 1946, and profits after taxes rose to 17 billion
dollars, compared with 12.5 billion in 1946. Corporate earnings after taxes
represented about 9.5 percent on net worth, and 5.5 percent on sales. Unincorporated non-farm enterprises earned 23.5 billion dollars before taxes,
an increase of 2,5 billion. Total business income before taxes increased
by 22 percent during the year. Net farm income before taxes rose from
15.2 billion dollars in 1946 to 18.3 billion in 1947.
The record of prices, wages and profits during 1947 shows how they fed
upon one another in a developing process of inflation. In spite of the
heartening production record of the year, this inflationary trend was profoundly disturbing. It not only produced great inequities among our
people, but also created the danger of a serious setback.
The purposes of the Employment Act are beginning to meet their first real
test. Unless we as a nation show an ability to impose restraints upon ourselves and to utilize the machinery of our representative government to devise
well-considered regulatory measures, we stand in great danger that runaway
prices, overextended credit, and unbalanced developments will lead to an
economic recession. We cannot be sure that such a recession would not be
severe and recovery slow and painful.
OBJECTIVES FOR 1948

The first objective for 1948 must be to halt the inflationary trend. On
November 17,1 recommended to the Congress a ten-point program for this
purpose. Every point in that program is essential.
The nature of the inflation from which we are suffering arises in part
from the total excess of buying power over the available supply of goods
and in part from relative scarcities at strategic points in the economy which
give impetus to particular price-wage spirals.
To deal with these two phases of inflation, my ten-point program divides
into three main parts. First, it proposes appropriate restraints upon business
credit and consumer credit and commodity speculation. Second, to deal
with the scarcities at strategic spots in the economy, it calls for authority to
allocate to their most efficient and necessary uses those scarce commodities
and services which enter basically into the cost of living or industrial pro-

duction. And third, it calls for the extension and strengthening of rent
control, and for authority to impose rationing and price control on a highly
selective basis on items of outstanding importance to industrial production
or to the cost of living so that these powers may be used promptly to protect
the public if other measures prove inadequate.
As I have made clear in a statement on December 29, the three points in
my ten-point program which were enacted in the special session of the
Congress are necessary but insufficient.. The other seven points are needed,
needed badly, and needed promptly.
This program, which the situation requires, does not lessen the need for
voluntary restraint. This applies both to those who price goods and those
who buy goods. No program undertaken by the Government can succeed
unless it is accompanied by public cooperation based upon a realization of
common dangers and common objectives.
Taxes at present are providing revenues substantially larger than expenditures. It is important to maintain this favorable balance as long as the
inflationary trend continues. However, certain adjustments need to be
made immediately in order to protect those in the lower income groups hit
hardest by inflation.
Our second main objective for 1948 should be to maintain maximum employment, achieve maximum production, and adjust the price-income structure so as to stop the inflationary spiral without production cutbacks or
extensive unemployment.
More production this year will help in combatting inflation, but there
is no possibility of enough additional production this year to overcome inflation without other measures. In fact, if these other measures are not undertaken, inflation may cause such disruption of our economy as to drive
production and employment downward.
With healthy adjustments in our economy achieved during the year, our
employment objective should be to absorb in useful work the net increase
of 700,000 additional people in the labor force. This would mean an average of nearly 59 million jobs for the year as a whole, contrasted with about
58 million as the year's average for 1947.
Our objective for production should be to increase the total output of
goods and services by some 3 percent above 1947.
Our third main objective for 1948 should be to establish firmer foundations
for the long-range growth and prosperity of our economy in the years ahead.
LONG-RANGE OBJECTIVES

The economic growth and stability of the United States cannot be
achieved by dealing with problems merely from day to day. We must have

a sufficiently long-time perspective to do also those things which require
some time for their planning and organization.
Our total annual national production has increased since 1939 by 53
percent. We cannot expect such rapid advance within the next 10 years
because we are now at a fuller use of our resources than we were in 1939.
Yet we should within 10 years be able to increase our annual national
output by 35 percent. Progress at this rate would bring the per capita
real income of our people to 27 percent above the level of 1947 and 80
percent above the level of 1937.
But our record of periodic depressions in the past warns us that we cannot have stabilized prosperity at this rate of progress without carefully
considered and well-directed efforts.
The Nation's long-range economic programs should be geared to three
major purposes: conserving and developing our natural resources and capital equipment, enabling our human resources to become fully productive
and thus provide richer and more satisfying lives, and improving our
economic institutions and practices so as to utilize free enterprise and
representative government effectively toward maximum production and
sustained general prosperity.
Development of natural resources and capital equipment
Development of natural resources in land, water power, minerals, and
forests requires that we make up as soon as possible for the lapses in many
of these efforts during the pressures of war and postwar reconversion.
Wise conservation and development efforts are now all the more needed
because in many respects these resources were subjected to excessive drains
to supply wartime production.
One-half of the Nation's crop and pasture land needs to be put under
improved soil management. Programs for flood control and power need
to be expanded. Further construction of multipurpose dams and related
facilities is desirable. Our sustained yield of saw timber should be
doubled. With regard to minerals for industrial and strategic purposes,
we need increased emphasis upon research, development of substitutes, and
importation and stockpiling.
There are areas of the country which, for a combination of reasons,
have been underdeveloped or retarded economically. We must push regional development through improved agricultural methods and land use,
further industrial expansion and diversification, and lifting the levels of
health and education.
All of our resource development activities will require the alert interest
of the people, vigorous private enterprise, and a wise pooling of the efforts
of Federal, State, and local governments.

Our business plant and equipment need to be expanded to sustain continuous maximum employment and production. We shall require more
capacity in steel, petroleum, coke, electricity, and other industries.
We can rely mainly upon business for this expansion, if business adjusts
its plans to an economy of continuous maximum production instead of
adjusting its plans to an economy of recurrent low resource utilization.
Government has the responsibility of providing favorable conditions for
adequate and well-balanced private investment in productive facilities,
with prudent use of Government initiative when private resources lag.
Both private and public policy must, however, impose restraints on boomtime overdevelopment and overcapitalization.
In transportation, at least 45 percent of our highways leading into cities
need to be rebuilt within 10 years, financial aid to airlines should be continued, railroad consolidation should be carried out with increasing vigor,
and national policies should recognize the need for protecting the credit
of the railroads.
Urban redevelopment and housing afford an immense challenge. The
blight and deterioration of our cities have created grave problems of
municipal taxation and management, and have damped the rate of
investment in rebuilding. This problem is closely related to the inadequacy
and instability of house production. As a start toward the objective of a
decent standard of American housing within 10 years and for the release
of investment opportunities over a decade of as much as 75 billion dollars—
mostly private funds—in urban redevelopment, there should be prompt
enactment of comprehensive housing and urban redevelopment legislation.
Development of human resources and productivity
Within 10 years, maximum employment will mean 64 million jobs or
more.
To raise the individual to the highest practical level of productivity, and
to provide an outlet for the increasing part of the labor force which technological changes may displace from the mass-production industries or
from agriculture, we need improved services in education, health, and
social security.
For education, the first step, which should not be deferred, is to provide
Federal aid for elementary and secondary education to help remedy the
deplorable shortages and the maldistribution of school facilities and teachers. At present, our ten poorest States are spending about $64 annually
for each school child, while our ten wealthiest States are spending about
$177. Federal aid should be given not only to this educational effort but
also to research work both in basic principles of natural and social science
and in their practical application.

Our health standards are not being met because of the inability of
millions of families to purchase adequate medical care with their incomes,
and also because of the great disparities in the resources of different areas
of the country available for investment in hospitals and other health
services. We need a comprehensive national health program, including
prepaid health insurance and aid to hospitals and health centers.
Social security, both in its unemployment insurance and its old-age insurance aspects, should be increased and its coverage should be made more
general.
Development of institutions and practices for a high-production economy
We have learned from experience that the capacity to produce does
not alone assure continuous maximum employment. The distribution of
purchasing power determines whether there will be enough funds available
to provide adequate investment for maximum production and enough buying power to absorb the output.
Industrial price-wage-profit policies, arrived at without compulsion in a
free, competitive economy, play an important part in preserving or destroying balance in our economy. In those areas where businessmen and workers
make conscious decisions about prices, wages, and profits, we must seek
through education and understanding to adjust these decisions ever more
closely to the broad needs of the whole economy.
At the same time, the adaptability of the economy to changing circumstances requires the maintenance of active competition which, through
amendment and improved enforcement of the antitrust laws, must be preserved where it exists and revived where it has languished. Collusive
monopolistic practices must be eradicated and the trend toward concentration of economic power reversed.
For balanced expansion, our economy requires a larger flow of income
to consumers. Comparing 1939 with today in dollars of constant purchasing power, annual expenditures for producers' durable equipment have
increased by 170 percent, while annual consumers' expenditures have increased by only 48 percent. When the export surplus and business retooling
and the use of savings and credit level off or are reduced, we shall need
more consumer income to sustain maximum production.
More consumer income must be accompanied by better income distribution. In 1946, the lowest-income fifth of our families had an average annual
income before taxes of only $835. The second fifth had an average annual
income of only about $2,000. The top fifth had an average annual income
of almost $93000.

Agricultural and food policy throughout the decade ahead should be
based on the expanding needs of a maximum production economy. With
improvements in the incomes and living standards of wage earners, and
with continued concentration upon improving nutrition, our agricultural
output should within 10 years reach a level about 10 percent above the
present level. This would mean a crop output about 25 percent, and a
livestock output nearly 50 percent, above prewar levels.
Soil conservation activities should be intensified. Capital investment
per farm worker will need to be increased, and there JS need for three times
as many tractors on farms as before the war. There are 2 or 3 million
farmers with too little land or whose land is too poor or whose equipment
is inadequate.
We shall continue to need the farm programs that have been developed
to advise farmers in adjusting their production patterns to the changing
patterns of demand, and to offset in some degree the special hazards affecting their industry through crop insurance and price support for major
farm commodities.
Tax policy for the long run should have two major elements: first, a
level of revenue above expenditures in all except depression years which
will permit systematic reduction of the public debt; and, second, a tax
structure which will promote stabilized prosperity through adjustment of
particular taxes to stimulate or to check consumer expenditure or business
expenditure as circumstances require.
Debt management policies should be so conducted that appropriate restraints on bank credit can be applied without abandoning or impairing the
sound principle of Government price support of bonds which the people have
bought as an expression of their faith in the Government's financial security.
Our international economic relations should be such as to aid in the
restoration of Europe under the European Recovery Program. We are
now seeking, and should seek always, to negotiate with other nations better
standards for the conduct of world trade so that each country may be facilitated in producing the things which it can produce best and buying the
things which can be produced more economically elsewhere. In a framework of increasing world prosperity, our country can move forward most
confidently to meet the problems of our domestic economy.

II. Levels of Economic Activity
in 1947
THE COURSE OF EMPLOYMENT AND PRODUCTION

Employment
INETEEN forty-seven was a record year for civilian employment. In
June, civilian employment passed the sixty-million mark for the first
time. Allowing for seasonal variations, employment in December (57.9
million) was at about the same level. Employment averaged 58 million for
the year contrasting with an average of 55.3 million in 1946 and 47.5 million
in 1940. (See appendix B, table VIII.)
This increase in employment was most pronounced in the manufacturing industries, with construction and mining registering sizeable percentage gains. Employment increased slightly in trade, finance, and
services, and decreased in government.
Compared with 2.3 million in 1946, the number of unemployed averaged
2.1 million during 1947. In November and December, it dropped to 1.6
million, the lowest figure in two years.

Production
The total physical output of the economy in 1947 was about 7 percent
above 1946, and about 76 percent above the 1935-39 average.
From 1946 to 1947 increased output was registered in each major category
except agriculture. The total output of farm products dropped 3 percent
due to the disappointing corn crop. The slight drop in agricultural output
was more than balanced by increased production in manufacturing, minerals, construction, transportation, and electric and gas utilities. This is
shown in chart 2 and appendix B, table XVI.
The above figures do not fully account for all changes in economic activity,
since they do not include services such as trade, finance, and government. It
is obviously impossible to measure precisely the production of such services
in physical terms, but a rough indication is given by employment in the
service industries. The number of persons in nongovernmental services in770958°—48

CHART!

THE LABOR FORCE
Civilian employment was at record levels in 1 9 4 7
MILLIONS OP PERSONS*

MILLIONS OF PCfiSONS*

so
- 70

TOTAL LABOR FORCE

70
60

. -\ -<v
r

~~>'

"^ ^P,5S?

f t ^ ^ U / TJ ^ CIVIL IAN

NONAGRICulTURALji""ii

•*•

»" _

10
; " " ", r:-Zi"l

-..A.

t939

" "* ! J -„.! ^ ' " • » , T F ? r L j I ! l

. -r- -.t:i .s -r"T ! : f *c .-: *£r~ " i C
1940 1941 1942 1943 1944 J945

1946 1947

+14 YEARS OF AGE AND OVER

SOURCEi DEPARTMENT OF LABOR (1939) AND DEPARTMENT OF COMMERCE (/940-47)

creased moderately from 1946 to 1947, but this increase was more than offset
by a sharp drop in government employment, particularly military, as a
result of demobilization.
With an increase of 7 percent in the physical output of goods and with
a drop in services, it appears that the total increase in the output of goods
and services together from 1946 to 1947 was less than 5 percent. Similar
results are obtained by adjusting the gross national product for changes in
prices.
The first Economic Report stated the objective of increasing the total
output of goods and services by about 5 percent from the end of 1946 to
the end of 1947. Apparently the actual increase was below that objective.
Production trends were uneven during the year. The second quarter of
1947 marked a period of hesitation by individual consumers and business,

CHART 2

CHANGES IN PRODUCTION OF GOODS
Physical output in 1947 averaged 7 percent above 1946—
an increase for atl industries except agriculture.
PERCENTAGE
DECREASE

PERCENTAGE
INCREASE

SOURCE: $E€ APPENDIX B, TABLE EH

explicable partly by high prices and the expectation of early price reductions. The temporary drop in production was prolonged partly by the
fact that many plants were shut down entirely during workers' vacation
periods in July and August instead of attempting to stagger vacations over
the year.
In the fall, restraining forces gave way to new forces of expansion. Steel,
automobile, printing, and fuel output rose above the peaks reached early in
the year. However, a number of industries continued to operate at lower
levels, some because of a shortage of raw materials, some because of lagging
demand. (See appendix B, table XV.)

CHART 3

INDUSTRIAL PRODUCTION
Output in 1947 was far above prewar in alt major industries,and
exceeded wartime peaks in some industries.
PERCENT OF 1 9 3 9 AVERAGE*

800
SELECTED

DURABLE MANUFACTURES

600 -

NOVEMBER

1947*

400 -

200

100

TRANSPORTATION
EQUIPMENT

MACHINERY

NONFERROUS
METALS a
PRODUCTS

IRON a
STEEL

LUMBER a
PRODUCTS

400
SELECTED

NONDURABLE MANUFACTURES
AND MINERALS
200

100

1939 AVER ABE'100

I(4 H

P HP HP HP HP H

CHEMICAL
PRODUCTS

MANUFACTURED TEXTILES a
FOOD PRODUCTS PRODUCTS

*CONVERTED FROM PUBLISHED BASE,

(939-39*100.

* SEASONALLY ADJUSTED.

SOURCE' BOARD OF GOVERNORS OF THE FEDERAL RESERVE

LEATHER a
PROOUCTS

SYSTEM.

FUELS

Productivity
Output per man-hour was somewhat higher in 1947 than in 1946. The
increase in production for the economy as a whole was primarily the result
of an increase in capital equipment and in employment. Since both capital
equipment and employment expanded in manufacturing, the capital equipment available per worker (the most important single factor affecting productivity) , increased slightly, if at all. In agriculture, even though capital
equipment increased in 1947 over 1946 and employment remained almost
constant, bad weather was primarily responsible for a decline of some 3
percent in output per farm worker. Output per worker was still far above
prewar levels.
THE FLOW OF GOODS AND PURCHASING POWER

Purchasing power over the economy as a whole remained high throughout
1947, with resultant high demand for goods and services. The significance
of this strong demand and high purchasing power, and particularly their
bearing upon prices, can be more fully understood by tracing the flow of
goods and income to domestic consumers and exports, to business and
government.
Consumer income, expenditure, and saving
Full employment, high wages, and large proprietors' incomes—both
industrial and agricultural—pushed consumers' incomes to record levels
during 1947. Most of this money was spent, and a decreasing proportion
went into net saving. Consumers drew increasingly upon credit to supplement their current earnings. Real purchasing power per capita has
remained above prewar levels, but the sharp rise in prices has caused it
to decline during the past 2 years. (See table 1.)
Consumer income. In 1946, total personal incomes were 177.2 billion
dollars. Increases were registered in each quarter of 1947, reaching the
annual rate of 205.3 billion dollars in the fourth quarter. Disposable personal
income (total personal incomes minus taxes and similar payments) increased
from 158.4 billion dollars in 1946 to an annual rate of 183.0 billion dollars
in the last quarter of 1947. (See appendix B, tables III and IV.)
Although the disposable dollar income of the average American consumer reached a new high in 1947, the rapid rise in prices during the last
18 months caused its purchasing power to be less than in 1946. Consumption, however, was maintained by liquidation of past savings, a reduction of the saving out of current incomes, and the extensive use of consumer
credit.
Changes in the purchasing power of the disposable income of the average
consumer during 1946 and 1947 show the inability of incomes to keep pace

CHART 4

CONSUMER INCOME, SPENDING, AND SAVING
Spending increased more than income.
BILLIONS OF DOLLARS

BILLIONS OP 00LLAR3

200

200.

DISPOSABLE PERSONAL INCOME*
(Personol income less toxes)

160

DISPOSABLE
INCOME

120

CONSUMER
EXPENDITURES

1939

1940

1941

1942

1943

1944

1945

1946

1947

Rate of net saving continued to drop.
PERCENT

PERCENT

NET SAVING AS
PERCENT OF
DISPOSABLE INCOME

1939

(940

1941

(942

(943

•SEASONALLY ADJUSTS ANNUAL RATES

SOURCE: DEPARTMENT OF COMMERCE.

1944

1945

1 i i i 1i i i Io
1946 1947

with the inflationary rise in prices. Average disposable income, in terms
of current dollars, has increased steadily since the first quarter of 1946,
rising from $1,074 then to $1,264 in the fourth quarter of 1947, an increase
of 18 percent. Yet its real purchasing power declined nearly 8 percent
during the same period. The decline in real purchasing power was much
greater for the millions of people whose incomes were fixed or lagged behind
the increase in average incomes.
The initial impact of the elimination of price controls caused a substantial decline in real disposable income of consumers in the second half
of 1946. The rate of decline slowed up in the first half of 1947, as the
price rise tapered off and as incomes continued to increase owing to wage
increases and a higher level of employment. During the third quarter,
the cashing of veterans' terminal leave bonds, counted as addition to disposable income, halted momentarily the decline in real purchasing power
in spite of the rapid rise in consumer prices.
TABLE 1.—Per capita disposable income
Personal income after taxes

Period
1985-39 average_
1941
1944
1946
1947 2
Seasonally adjusted annual rates:
1946—First quarter
Second quarter
Third quarter
_.
Fourth quarter
1947—First quarter
Second quarter
Third quarter
Fourth quarter *

Current
dollars

First half
of 1947
dollars»

513
691
1,057
1,122
1,219

797
,021
,308
,251
,190

1,074
1,091
1,133
1,181
1,186
1,190
1,238
1,262

,285
,284
1,225
1,211
1,194
1,183
1,196
1,188

\ Deflated by the consumers' price index, which cannot fully reflect changes in the quality and relative
availability of higher-priced and lower-priced goods.
* Estimates based on incomplete data.
Source: Department of Commerce and Department of Labor. (See appendix B, table V)

The decline in the purchasing power of the average consumer's income
since the middle of 1946 reversed a very desirable trend in the distribution
of real income. High levels of employment and production during the war
and postwar period had raised per capita disposable incomes, measured in
first half of 1947 dollars, from an average of $797 in 1935-39 to $1,021 in
1941, and $1,251 in 1946.
Not only did average incomes increase during this period, but also important changes occurred in income distribution. The relative increase in
income (before taxes) was greatest for families in the lower- and middleincome groups. For example, the increase in incomes between 1941 and

1946 was over 60 percent for the lowest 40 percent of families and only 20
percent for the highest 20 percent of families. This is shown in the following table.
TABLE 2.—Average family incomex
Money income before taxes, 1946 dollars
Money income before taxes,
1946 dollars

Percent increase

Families grouped from lowest to highest income *
1935-36
Lowest fifth
Second fifth
Third
fifth
Fourth fifth
Highest
fifth

_
_

Average for all families 1

1941

1946

1935-36
to 1946

1941 to
1946

$446
969
1,515
2,284
5,928

$498
1,275
2,243
3,225
7,418

$835
2,023
3,050
4,201
8,921

87
109
101
84
50

68
59
36
30
20

2,229

2,932

3,806

* Includes single individuals.
Source: See appendix A, section III.

The table shows the increase in money incomes before taxes. If personal
income taxes were taken into account, the relative improvement in the
lowest income group would be more marked.
The greater increase in incomes in the lower and middle groups
during this period is to be explained principally by the fact that more people
were working in 1946, that more jobs were on a full-time basis, and that many
families now had more than one person gainfully employed. Thus, the
relative gain of these groups was mainly due to a greater availability of
jobs. A second cause of the pronounced shift in distribution was that the
share of the national income going to farmers, whose cash income was low
relative to urban groups, had increased. Third, wage increases from 1941
through 1946 were greatest in the lower wage brackets.
Under the influence of these trends, there has been a pronounced change
in the type of family which constitutes the poorest 20 percent of the population. Many persons formerly unemployed, or farmers formerly operating at
marginal levels, have moved out of the lowest group, while persons living on
small fixed incomes have moved down relative to others. These trends
undoubtedly continued in 1947, as the effects of inflation continued to raise
the incomes of many groups, leaving others behind.
The number of persons living on relatively fixed incomes is large. Veterans living on pensions number about 3 million. Survivors and socialsecurity beneficiaries total about 2 million persons, and veterans living
on educational allowances, without other jobs, about 2 million. The number receiving public assistance at the end of 1946 was about 4 million, and
this number is increasing. Some of these persons, of course, receive income
from more than one of these sources, and some have other sources of income.

CHART 5

AVERAGE FAMILY INCOME
All groups received more income in 1946 than before the war Greatest
relative increases were in the lower and middle groups.
MONEY INCOME BEFORE TAXES, 1946 DOLLARS
2,000
4,000
6,000
8,000

FAMILIES*
GROUPED

FROM LOWEST
TO HIGHEST
INCOME

10,000

LOWEST
FIFTH

SECONO
FJFTH

THIRD
FIFTH

FOURTH
FIFTH

HIGHEST
FIFTH

^INCLUDES SINGLE INDIVIDUALS.
S O U R C E : S E E A P P E N D I X A , S E C T I O N III.

Even in 1946, many families had incomes below what can be considered
an adequate standard: 28 percent of the families had money incomes less
than $2,000, and 48 percent less than $3,000.

This is shown in the follow-

ing table.
TABLE 3.—Percentage distribution of families, by income levels in 1946
Civilian money income classes (1946 dollars)
Under 1,000
1,000 to 1,999
2,000 to 2,999
3,000 to 3,999
4,000 to 4,999
5,000 to 7,499
7,500 and over

_._

* Includes single individuals.
Source: See appendix A, section III.

Percent of
families 1

Cumulated
percent of
families l

12.8
15.4
19.5
18.4
13.0
13.0
7.9

12.8
28.2
47.7
66.1
79.1
92.1
100.0

Consumer expenditures. Since consumers as a whole spend most of
their income currently, high levels of income have been accompanied by
high levels of expenditure. Consumers were spending at a record annual
rate of 172 billion dollars in the fourth quarter of 1947, compared with
144 billion dollars during 1946. This high rate of spending was a very
important factor in the rise of prices.
The widespread expectation of price declines during the first half of
1947 caused many prospective purchasers to delay buying houses and
durable goods. But for the year as a whole, minor shifts in patterns of
demand were far overshadowed by the willingness and ability of consumers
to buy.
Whether this willingness and ability to purchase will continue at current
levels will be strongly affected by two factors emphasized in prior Economic
Reports—consumer saving and consumer credit.
The decline in net saving. During 1947 consumers saved only 6.3 percent of their disposable incomes, a larger proportion than was saved in
prewar years but well below the 1946 level of 9.3 percent. Desire to buy
durable goods, the increased use of consumer credit, the pressure on lowincome groups to retain wartime and immediate postwar living standards
reduced the rate of net saving. (See appendix B, table IV.)
The decline in the rate of net saving was especially significant since
families with high incomes and large accumulations tended to add to their
holdings, while many low-income families reduced their holdings. Recent
studies indicate that more than one-quarter of all spending units and
almost half of those with incomes under $2,000 a year held no liquid assets
in 1947. Consumers who are drawing upon accumulated assets are now
using these substantially for general living expenses and medical care,
rather than for durable goods and housing. Such use of savings for current living expenses is an ominous sign for the economy as a whole.
Consumer credit. A gradual increase in consumer credit has bolstered
the current purchasing power of consumers. The credit outstanding totaled
13.3 billion dollars at the end of 1947, an increase of 3.1 billion dollars
over the level at the end of 1946, and 3.2 billion dollars higher than the
previous peak reached in September 1941.
Consumers are using larger amounts of all forms of credit than they
did a year ago. Total instalment credit increased over 50 percent, charge
accounts, 11 percent, and other types of consumer credit, 19 percent. (See
appendix B, table VII.)
Although the present levels of credit are not alarmingly high in relation
to the size of our economy, the increase that has occurred during the past
two years has been adding to inflationary pressures.
This survey of consumer income and expenditures during 1947 points

CHART 6

CONSUMER CREDIT
Consumer credit continued its sharp rise in 1947
BILLIONS OF DOLLARS

BILLIONS OF DOLLARS

1929 1939 1941 1943
END OF YEAR

SOURCE:

\rJ

| - " - r'

I "" " I " "*

JJLL
J O. AJUJbl ULLJilJ. LI I 1 i i l J i 1.J M i l i
JFMAMJJASONOJFMAMJJASONOJFMAMJJASONO

1945

BOARD OF GOVERNORS OF THE FEDERAL

1946
END OF MONTH
RESERVE

1947

SYSTEM.

to two causes for concern. On the one hand, with supplementation of
current incomes through the use of past savings and the extension of consumer credit, total consumer demand exceeded the portion of the total
national output available for consumers after allowing for business and
foreign demand. This excess added to inflationary pressure. On the
other hand, the rapid rise in prices reduced the real purchasing power of
consumers to the point where it will not be adequate to take the consumers'
share of the national output at present prices when certain abnormal demands are reduced and when the rate of consumer saving cannot be further
reduced. Since adjustment to meet conditions of this kind take time to

make, this underscores the need for prompt action to halt the rising cost
of living. The present situation is particularly serious for consumers who
have low incomes or who live on fixed incomes.
Business investment, income, and financing
The record level of business investment in 1947 was another major source
of demand for goods and services, swelling the pressure upon our available
resources. Business expenditures for plant, equipment, and additional inventories amounted to over 25 billion dollars in 1947 compared with about
21 billion in 1946. Nonfarm residential construction increased from 3.2
billion dollars in 1946 to 4.9 billion in 1947. These high levels of investment and residential construction in part reflected the effects of higher
prices.
Domestic business investment: producers3 goods. Business outlays for
productive equipment were at record levels during the last three quarters
of 1947 despite continued shortages of many basic materials and machinery
items. Total outlays for new equipment in 1947 were about 40 percent
greater than in 1946, with about a third of this increase representing higher
prices. These heavy expenditures for producers' goods were a direct and
important stimulus to the economy. Plant and equipment outlays were
high in every major field, but were particularly noteworthy in utilities, transportation, and those lines of manufacturing, such as textiles, which had not
undergone a normal rate of expansion or modernization of facilities during
the war period.
Most types of industrial equipment were in considerably easier supply at
the end of the year than at the beginning, as equipment manufacturers expanded capacity, completed their reconversions from wartime production,
and balanced their inventories. In some fields, primarily utilities and transportation, the backlog of commitments for new facilities was still great at
the year's end. This was also true of some important manufacturing industries such as steel, coke, and oil, where expansion programs extending
beyond 1948 were announced.
Although the rate of replacement and improvement of productive equipment will vary in response to the outlook for demand, prices, and costs, it
appears that total plant and equipment outlays may be leveling off. Industrial construction contracts have remained well below the high levels of
1946. In many industries, postwar expansion programs for capacity are
nearly completed. According to the latest quarterly survey by the Securities
and Exchange Commission and the Department of Commerce, all major
categories of business plan to spend less on plant and equipment in the first
quarter of 1948 than in the preceding quarter, though more than was
actually spent in the first quarter of 1947. (See appendix B, table XIX.)

Inventories, Accumulation of business inventories, which had been a
substantial supporting factor in the demand for goods through 1946 and the
early part of 1947, was interrupted in the middle of the year but resumed in
the fall. After allowance for normal seasonal variation, the rate of accumulation in physical terms during the last quarter of the year was about the
same as that of the first quarter of 1947, but well below that of the fourth
quarter of 1946. The book value of all nonfarm business inventories rose
about 8 billion dollars during 1947, a substantial part of this amount
representing price increases.
Initial programs of postwar restocking in nondurable lines had been substantially completed early in 1947, and expectations of a decline in sales and
prices led to a more than seasonal cutback of inventories in the second quarter. In durable goods lines, with considerable backlogs of consumer
demand, accumulation was only slowed. As business optimism revived during the latter part of the year, inventories were again built up at increasing
rates in nondurable lines, particularly at the retail level.
Short stocks of some durable items continue to hamper industrial activity.
But in contrast to the inventory accumulation of a year ago, which represented restoration of war-depleted stocks, the recent wave of accumulation
appears to have been based largely on the expectation of further price rises
in lines where stocks are already adequate. Though overall ratios of inventories to sales are still below prewar ratios, liquidation of inventories in case
of a decline in sales raises a greater potential threat to the maintenance of
production and employment than has been the case at any time since the
war began. (See appendix B, tables XX and XXI.)
Private construction. The construction industry expanded less in 1947
than most major sections of the economy in terms of physical activity.
Though its dollar volume was high, the physical volume was actually less
than it had been in any year from 1923 to 1930. There was a sharp increase in construction costs in 1947, with average costs reaching a level
double what they were in 1940. In the decade following the first World
War the construction industry represented about 10 percent of the economy.
It now represents only about half that percentage. Unless important
changes are made in present methods and prices, its relative importance may
continue to decline. This problem, as it relates to housing, is discussed
more fully in Section V. (See appendix B, tables XVII and XVIII.)
The number of housing units completed in 1947 was nearly double that
of 1946, and the backlog of houses under construction was as great by the
end of the year as at the beginning despite the reduction in construction
time and the increased volume of completions. Current high costs, however, raised question as to the ability of the industry to continue to operate
at current levels, in the residential field at least. A promising development

was the ability of many construction companies to shift from nonresidential
to residential construction. Men and materials which were producing
factories and commercial construction in 1946 were producing housing
in 1947.
Business income and financing. Business income in 1947 remained consistently above the level of any previous year. The need for business funds,
however, was also unprecedented due in large part to higher prices. Business spent about 25 billion dollars during the year on plant, equipment,
and increase of inventories, exclusive of almost 5 billion dollars devoted
to residential construction. In addition, the increased cost of inventories due simply to rising prices amounted to about 6 billion dollars.
Business corporations, while paying out a record amount in dividends,
retained the remarkably high proportion of five-eighths of their profits after
taxes in 1947. (See appendix B, table XXII.) Consequently, reinvested
corporate earnings were a much more important source of business funds in
1947 than ever before, providing 10.3 billion dollars compared with 6.9
billion the previous year. Retained corporate earnings in 1947 were about
double the annual retention during the war years and four times those of
1929. The general profit situation is discussed more fully in Section III.
Accruals to depreciation and similar reserves were higher than in 1946.
Due to increased costs, these allowances were generally insufficient in themselves to finance replacement of plant and equipment.
In addition to the internal financing from current receipts, business also
drew upon its previously accumulated liquid assets, though to a much
smaller extent than in 1946. Nonfinancial corporations, for example,
reduced their liquid assets by around 1.5 billion dollars in 1947 compared
with 5.5 billion dollars in 1946. This drop was substantial even when allowance is made in the 1946 figure for the elimination of the excess profits tax
which permitted firms to begin holding a smaller volume of liquid assets
as a reserve for tax payments.
Flotation of securities for new capital provided around 4 billion dollars
in 1947, compared with 3.3 billion in the previous year. The increase was
in fixed-interest types of securities, reflecting particularly a great increase
in the proportion of the total offerings made by utilities. The securities
markets furnished less equity capital. Further, it is interesting to note that,
while in 1947 the issues for new capital amounted to only around one-sixth
of total financial requirements of business, in 1929 they amounted to around
60 percent. Moreover, only about 30 percent of the 1947 new capital
issues were of the equity type rather than fixed-interest-bearing securities,
compared with about 75 percent in 1929.
Another important outside source of funds to finance the investment
program of business was bank loans. Banks furnished almost as much new

credit to business in 1947 as in 1946. Most of the expansion of bank credit
took place in the second half of 1947.
Commercial bank loans to business, including the purchase of open
market paper and excluding agricultural loans, increased during 1947 by
about 4.2 billion dollars, compared with an increase of 4.6 billion dollars
during 1946. Agricultural loans, which had remained stable during 1946,
increased in 1947. Although outstanding loans declined temporarily
during the second quarter, the rise in commercial credit in the latter part
of the year was so rapid as to cause concern in the prevailing inflationary
situation. (See appendix B, table XXVII.)
In residential construction, the estimated mortgage indebtedness upon
one- to four-family structures increased about one-half billion dollars in
1945, 4.5 billion in 1946, and 5.5 billion in 1947. Thus, for the last two
years, mortgage indebtedness has been rising faster than the construction
expenditures on new housing. There has been no important shift in the
source of funds for this financing. Saving and loan associations accounted
for about one-third of the value of mortgages recorded, banks for about onefourth, individuals for over one-sixth, and miscellaneous groups for the remainder. The size of the average mortgage has been rising and is now
about 30 percent higher than it was two years ago. Veterans' loans guaranteed by the Government increased from 17 percent of the total number of
recorded residential loans in 1946 to 21 percent in the first 10 months of
1947. The proportion of new housing started which has been financed
with FHA insurance increased from 10 percent in 1946 to 26 percent in the
first 11 months of 1947.
During 1947, as in other years, the situation regarding business investment, income, and financing was not uniform for all firms and industries.
Some businessmen experienced difficulties in floating new capital on the
security market. Others reached the limit of what they regarded as the safe
use of bank credit. Most business required large amounts of additional
working capital for carrying inventories at increasing prices and for meeting
payrolls at higher wage rates. But after making allowance for these factors, it remains clear that the extraordinary rate of business income in general allowed investment to proceed at record levels. Even greater expansion
was prevented mainly by lack of material rather than by lack of intention
to invest or lack of financial resources.
International transactions
Our international transactions during 1947 were characterized by a very
rapid expansion of exports of goods and services in the early part of the
year, followed by a decline. Since imports of goods and services did not
change much during the year, the export surplus rose and then fell corre-

spondingly. For the year as a whole, exports of goods and services exceeded imports by more than 11 billion dollars, compared with 8.1 billion
in 1946. The lack of balance in our trade was thus intensified. Quarterly
movements are shown in the following table:
TABLE 4.—United States exports and imports of goods and services
[Billions of dollars, annual rate]
Exports of Imports of
goods and goods and
services 1 services 1

Period
1936-38 average..
1946—First quarter
Second quarter..
Third quarter
Fourth quarter..
1947—First quarter
Second quarter..
Third quarter...
Fourth quarter 3_

Export
surplus

4.1

3.6

0.5

14.3
16.4
15.0
15.3
18.7
21.0
18.6
19.6

7.2
6.5
7.1
7.6
8.0
8.2
8.1
8.0

7.1
9.9
7.9
7.7
10.7
12.8
10.5
11.6

Includes income on investments.
Estimates based on incomplete data.
Source: Department of Commerce.

The increase in the export surplus during the first part of 1947 reflected
shipments of goods not only to Europe but also to the countries of this
hemisphere and to other continents. (See appendix B, table XXXII.)
It resulted primarily from an increased physical quantity of exports of
manufactured products, although increased shipments of grain and higher
prices for all types of exports contributed to the rising dollar total. There
was an intense need for goods in Europe, and high demand and purchasing
power in other countries.
Since foreign countries were able to increase their sales of goods and
services to us only slightly, they had to utilize the aid extended by the
United States Government and their gold and dollar assets much more
rapidly than in 1946. As table 5 shows, these two forms of financing,
which were being utilized at a combined annual rate of 7.6 billion dollars
in the last quarter of 1946, were drawn on at a rate of 11.7 billion in the
second quarter of 1947.
The rate at which foreign countries were utilizing United States credits
and their own gold and dollar assets was depleting these resources rapidly
and the ability of some countries to import from the United States was being
exhausted. Many of these countries were forced to put more rigid restrictions upon their purchases from the United States.
During the first half of 1947, the increase in the export surplus accounted
for about half of the total increase in the money value of total national
production. Exports of nonagricultural commodities directly and indirectly
provided employment for nearly 2.5 million workers in nonagricultural

CHART 7

EXPORTS AND IMPORTS
OF GOODS AND SERVICES
Exports increased much more than imports in 1946 and 1947,
resulting in a larger export surplus.
BILLIONS OF DOLLARS
ANNUAL RATE

BILLIONS OF DOLLARS
ANNUAL IRATE

EXPORTS OF GOODS AND SERVICES*

.15

IMPORTS OF GOODS AND SERVICES*

3d Or. 4th Qr.
l94

1st Qr.

2d Qr.

3d Qr 4th Qr.

1946

1st Qr.

"2dQr.

> . *

3d Qr. 4thQr

,947

U S. Government aid continued to be a major factor in
financing the export surplus
15

EXPORT SURPLUS
10

US GOVERNMENT AID
J-.
3dQr.
l94
*

INCLUDES

1st Qr.

INCOME ON

770958°—48

-i

4th Qr.

1.
2d Qr.

1946
INVESTMENTS.

, ,t

3dQr.

4th Qr.

J-,

1st Qr.

2d Qr.

3dQr.

l947

4th Qr

TABLE 5.—Financing the excess of goods and services supplied to foreign countries
[Billions of dollars, annual rate]
Means of financing

Period

Total
excess of
exports of
goods and
services i

Government aid
(net) 2

Liquidation
of short-term Private gifts
Other
capital and and remit- means
of
gold by
financing
tances
foreign
(net)
(net)
3
countries
(net)

1936-38..

0.5

1.1

0.2

-0.8

1946—First quarter....
Second quarter..
Third quarter...
Fourth quarter..

7.1
9.9
7.9
7.7

5.0
6.5
5.8
4.2

2.1
.8
3.4

.6
.7
-.6

1947—First quarter
Second quarter..
Third quarter...
Fourth quarter«

10.7
12.8
10.5
11.6

5.3
7.0
7.6
3.5

4.6
4.7
3.4
4.5

.2
.4
-1.1
2.8

i Includes income on investments.
* Excludes investment in International Bank and Monetary Fund. See appendix Bf table XXXI for
types of Government aid.
3 Includes disbursements by International Bank and Monetary Fund, movement of private long-term
capital and private and U. S. Government short-term capital, and errors and omissions.
* Estimates based on incomplete data.
Source: Department of Commerce.

industries. In some of the durable goods manufacturing industries, the
employment resulting from exports approached 20 percent of the total. It
is clear from these facts that our exports during the first half of the year
had an important bearing upon total levels of employment and production
and upon the level of prices. Foreign demand for certain products in relatively short supply, such as grain and steel, when added to high domestic
demand, continued to exert inflationary pressure at these strategic spots in the
economy throughout the year. (See appendix B, tables XXXIV and
XXXV.)
Government transactions
Expenditures. During 1947, the Federal Government reduced its spending. Federal cash payments to the public in 1946 and 1947 are shown in
table 6.
The largest items of expenditure in 1947 were for defense, veterans,
international affairs, interest, tax refunds, and social security. These
accounted for about 85 percent of total cash expenditures. (See appendix
A, table X.)
During the year, expenditures of State and local governments rose above 12
billion dollars, compared with 10 billion dollars in 1946. Part of this
increase resulted from payment of bonuses to veterans by the States, totaling almost 400 million dollars in 1947, as compared with only a few million
dollars in 1946. Receipts and expenditures of State and local govern-

TABLE 6.—Federal cash payments to the public
[Billions of dollars]
Group receiving payment and type of payment
Individuals:
Salaries and wages of Federal personnel:
Military a
Civilian
Pensions and other payments to veterans'
Social welfare beneficiaries Loans to home owners
Interest on Federal debt
Refunds of taxes..__

---

Total
Business:
Payments for purchases of goods and services8
Subsidies and other payments to farmers
Loans and subsidies to business
Interest on the Federal debt -- - - - -Refunds of taxes

Total
International:
Loans to foreign governments
Subscriptions to and membership in international organizations7
Total

State and local governments (grants-in-aid, interest on Federal debt, and loans).
Adjustment to daily Treasury statement basis
Total, Federal cash payments to the public

Calendar
year 1946

Calendar
year 1947 *

6.7
6.5
6.9
2.0
*-.3
1.2
1.6

3.5
6.1
6.9
1.9

24.6

21.3

12.8
.9
2.4
2.4

8.5
.8
.1
2.3
1.0

18.0

12.7

1.5
.3

3.6
1.9

1.7

5.5

1.2
-.4

1.6
.2

45.3

41.3

1.4
1.6

i Preliminary estimate based on incomplete data.
3 Includes dependency allowances.
3 Includes mustering-out pay and cash terminal-leave pay.
*8 Repayments exceed loans.
Includes purchases made by this Government for occupied areas and other overseas relief.
• Repayments exceed loans and subsidies.
» Includes subscriptions to the International Monetary Fund and Bank, membership in the United
Nations and other international organizations.
NOTE.—Detail will not necessarily add to totals because of rounding.

ments were probably in approximate balance for the calendar year 1947
as a whole, but during the second half of the year expenditures began to
outrun receipts, thus adding somewhat to the inflationary pressure. (See
appendix A, table V.)
Construction expenditures of 1.2 billion dollars by the Federal Government in 1947 were somewhat higher than in 1946, although the physical
volume of work performed declined. Similar outlays by State and local
governments were about 1.8 billion dollars, an increase of about two-thirds
above the 1946 level in dollar terms.
Despite the war-created shortage of urgently needed public facilities,
State and local governments, as well as Federal agencies, have shown commendable restraint in refusing to undertake new construction activities in
the face of high prices. Both State and Federal public-roads officials have
been meeting constantly with engineers and contractors to hold down costs
by simplifying their designs and improving their working methods. Other
Federal agencies are alsp employing these techniques.

Receipts and debt management. While cash payments to the public
were being reduced, Federal cash receipts during 1947 were at the record
peacetime level of 46.9 billion dollars and exceeded payments by over
5.5 billion. The sources of these receipts were as follows:
TABLE 7.—Federal receipts from the public other than borrowing
[Billions of dollars]
Calendar
year 1946

Calendar *
year 1947

Personal taxes
C orporation taxes __ >
Employment taxes *
Excises and customs.. >
Miscellaneous receipts
Total budgetary receipts
Receipts of trust accounts2

18.8
11.0
.5
7.7

21.0

41.5
4.0

43.2
3.7

Total cash receipts

45.5

46.9

Source

3.5

9.2

.7
7.7
4.7

1
Estimates
2

based on incomplete data.
Net appropriation to Federal old-age and survivors insurance trust fund is excluded from employment
taxes but included in trust-account receipts.
NOTE.—Detail will not necessarily add to totals because of rounding.

The cash surplus of over 5.5 billion dollars in 1947 was used primarily
to reduce the volume of Federal debt held by the banks. Retirement of
securities owned by commercial banks, and especially Federal Reserve Banks,
has been emphasized in order to secure a maximum deflationary effect from
the Federal program of debt reduction. Total bank holdings of Federal
securities were under 92 billion dollars at the end of the year. This is 25
billion dollars below the peak in February 1946 and more than 6 billion
dollars below the level of bank holdings at the end of 1946.
At the present time the gross national debt is under 257 billion dollars, as
compared with a peak of 279.8 billion dollars on February 28, 1946. However, the Treasury cash balance at the present time is under 3 billion dollars,
although when the debt was at its highest point, the balance was about 25
billion dollars. At the present time about 34 billion dollars of the Federal
debt is held by Government agencies and trust funds with the remaining
223 billion dollars in private hands. (See appendix B, table XXX.)
In addition to the cash basis for recording Federal expenditures, receipts,
and surplus used in this Report, there is the conventional budgetary concept used in the Budget Message. A detailed reconciliation between
these two methods is shown in appendix A, section II.
The difference between the cash surplus of over 5.5 billion dollars and
the budgetary surplus of about 2.5 billion dollars in 1947 is accounted for
largely by the increase in social security reserves. Appropriations to social
security funds, whether used for payments of benefits, or for reserve accumulation are a charge on the budget, thereby reducing the budget surplus in

the conventional definition. Using the cash concept, however, the excess
of social insurance contributions over benefit payments appears as an addition to the Government surplus. Such surplus has a counter-inflationary
effect, as it comes out of labor and business incomes, thereby decreasing
demand.
This survey of Government transactions during 1947 indicates that high
taxes and reduced expenditures have partly offset the powerful inflationary
pressures in other sectors of the economy.
Summary: The Nation's Economic Budget
The Nation's Economic Budget summarizes in a few broad figures the
flow of goods and purchasing power through the main sectors of the
economy: consumer households, business, Government activities, and the
international area. The following table portrays our economy in action
and transition during 1946 and 1947:
TABLE 8.—The Nation's economic budget, calendar years 1946 and 1947
[Billions of dollars, current prices]
Calendar year 1947, seasonally
adjusted
annual rates 1

Calendar year 1946

First half
Accounts

Ex- Excess
Re- pend(+)or
ceipts itures deficit

(-)

Second half

Ex- Excess
Ex- Excess
Re- pend(+)or Re- pend(+)or
ceipts itures
deficit ceipts itures deficit

(-)

Consumers:
Disposable income
Expenditures
Saving (+)
Business:
Undistributed profits and
reserves
Gross domestic investment:
New construction. _
Producers' durable equipment
Change in inventories

158.4

143.7

170.3
~+l4.~8~

169.0

10.0

11.2

12.4
3.7

17 2

18.0
2.5

2.1

29 3
-11.3

31 7
-13.9

—11 9
9.4

-4.8

226.1

Estimates based on incomplete data.
Note.—Detail will not necessarily add to totals because of rounding.
Source: See appendix A, section I.

52.7

+5 5

0 -21.4 -26.8
0

-8.2
58.7

54 2

+1.3

203.7

8.2

-9.4
59.7

"+Il.~8

17.8

8.5

24.6
Total
Excess of receipts (+) or
lnvestnifvpt (—)
International:
4.8
Net foreign investment
Excess of receipts (+) or investment (—)
Government (Federal, State,
and local):
Cash receipts from the p u b l i c 56.5
Cash payments to the public
55.2
Excess of receipts (+) or payments (—)
Adjustments to arrive at gross
-24.5 -24.5
national product

180.8

"+I6.T

17.4

13.3

Total gross national product.. 203.7

160.0

(-)

+6.0

+5.4 -19.8 -24.1
0

237.4

+4.3
0

CHARTS

THE NATION'S ECONOMIC BUDGET
BILLIONS OF OOLLARS- CURRENT PRICES
CONSUMERS

— 200

200

160

INCOME

Hi
1 —
1—
—
•1

HBHL_

EXPENDITURES ^ ^ K ^ V Z
120

1946

I1
1
1
1

1947 1st half*

160

~ 120

— 80

- 40

1947 2d half*

BUSINESS
EXCESS C.
EXPENDITURES

1946

1947

1st half*

1947 2d half*

INTERNATIONAL
40

40
NET FOREIGN
INVESTMENT

V/////X
1946

1947 1st half*

1947 2d half*

- 40

40 -

1946

1947 1st half*

J947 2d half*

*$£asoNJiur
Aojusreo ANNUAL
BATCS.
NOTE. THE COMPONENTS 00 NOT AOO TO THE GROSS NATIONAL PR00UCT BECAUSE OF CERTAIN
ADJUSTMENTS. SEE APPENDIX A.

SOURCE: SEE APPENDIX A.

The changes in the Nation's Economic Budget between 1946 and 1947
showed increases in all major categories except government expenditures.
While a higher price level enlarged the dollar size of these increases, the
fact that they were not the same in all categories indicated significant shifts
in the composition of the economy in action.
While consumers' expenditures increased 14 percent, investment expenditures for construction, equipment, and inventories increased 24 percent, and net foreign investment by 83 percent. Thus, in the expansion of
the Nation's Economic Budget from 1946 to 1947, the relative increases in
outlays by business and net foreign investment were much greater than the
increases in consumer expenditures. This is all the more significant as the
rise in consumers' disposable income was 3.5 billion dollars less than the
increase in consumers' expenditures, which indicates that consumers financed
a growing part of their purchases by consumer credits, use of past savings,
or a smaller rate of new saving. Consumers saved about 11 billion dollars
in 1947 while net exports plus the excess of domestic investment over retained corporate earnings and reserves totaled about 22 billion dollars.
A considerable portion of the increase in personal incomes and profits was
absorbed by taxes, while government cash expenditures declined. The
large tax collections functioned as a kind of forced saving, supplementing individual saving and business saving in financing the huge net outlays
for domestic capital formulation and the export surplus.
A comparison of the estimates for the first and second halves of the year
1947 shows substantial changes in the component sectors of the economy.
Outlays for producers' durable equipment, which increased very rapidly
during the first half of 1947, expanded only slightly in the second half
of the year. The rate of increase in inventories dropped in the first half of
1947, and rose again in the second half of the year. The export surplus
declined somewhat in the last half of the year. Consumer expenditures
and new construction increased all through the year in dollar terms.
Viewed as a whole, the adjustments within the economy during 1947 were
sufficient to maintain maximum employment and high production throughout the year. That this should have occurred during a year of considerable
flux indicates the flexibility and strength of the economy.
This, however, does not necessarily mean that capital investment, exports,
and domestic consumption grew in balanced proportion or that the factors
which maintained high-level activity through 1947 can be regarded as
the ordinary and permanent elements of economic growth. Price increases
operated to hold the purchasing power of consumers at levels which would
have been insufficient to permit absorption of the full output had it not
been for the extraordinary export surplus, the use of savings and credit
at abnormal rates, and the continuance of backlog business demands.

III. Price and Income Trends and
the Course of Inflation

ACK of the income and expenditure totals whose trends have just been
traced lies a whole network of price, wage, and profit relationships
which determine whether or not we move toward economic stability. The
changes in these relationships during 1947 have not accomplished that
end, nor have they assured the maintenance of high production and employment in 1948. It becomes necessary, therefore, to examine the underlying facts more carefully and to uncover the dangerous tendencies which
they include.
PRICE TRENDS

A review of price movements during 1947 cannot ignore the events of
the last half of 1946. The abolition of OPA raised the question how the
economy would adjust itself to freedom from price controls. The answer
was soon read in the sharp rise of wholesale prices between June and
December 1946. This was at an annual rate of almost 50 percent, one of
the steepest rises ever recorded. Consumers' prices rose at an annual rate of
30 percent during the same period.
The dangers of this situation were emphasized in the first Economic
Report and, when prices continued to rise during the first quarter of 1947,
it was found necessary to repeat the warnings about high prices late in
March and in April, urging businessmen to exert every effort to "hold the
line" and help check the spiraling forces of inflation.
Prices leveled off in the second quarter of 1947. Business was pursuing
a much more cautious inventory policy. Sellers of a number of commodities found that backlogs of demand had dwindled. There was evidence
that many sellers were seeking to hold prices below the maximum that the
traffic would bear. However, the pressure which many distributors put on
manufacturers to lower their prices had little effect.
In the early summer of 1947 substantial price increases in coal, steel, and
steel products took place, following the increase in freight rates and after the
new wage contracts negotiated in the coal industry. There also com-

CHART 9

WHOLESALE PRICES
Wholesale prices, after leveling off in the second Quarter of 1947,
resumed their sharp rise in the second half of the year.
PERCENT OF 1926 AVERAGE

PERCENT OF 1926 AVERAGE

>OO

200

180

r 180
FARM
PRODUCTS

160

- h

140

- 160
OS

f
'

- 140

^ + *

N OTHER THAN FARM
PRODUCTS AND FOODS

1 i
J

COMMODITIES

120

100

1 1 1 1 1 1 1 1 1 I 1

N D

1946

- 120

100

1947

PERCENTAGE INCREASE SINCE JUNE 1946
FOODS

f"'

ALL COMMODITIES

'""sZ^;' ^iv>

IZ^ ^

U
*

*L "/'I "....< Z\. T i l 4 4

% * ,'? V*£ < ; A% $ '\;^,<X
£.../.r*...\./...f.:.
*.**?. **A

SOURCE: DEPARTMENT OF LABOR.

^\?.1?^SLC^..^>^"*' J

FARM PRODUCTS
OTHER THAN FARM
PRODUCTS AND FOODS

:''

3 7
Of

'^158

menced a sharp rise in the prices of meats, dairy products, eggs and poultry,
due to a normal seasonal downturn in the marketings of these products,
and to a rise in the level of consumer demand growing out of increasing
incomes and the larger number of people at work. And in the middle of
August, grain prices began to move up rapidly. Although our wheat crop
was of record-breaking size, our corn crop was poor. This put additional
pressure on our domestic supply of wheat to supplement the deficiency in
corn for animal-feeding purposes. It also became clear that foreign requirements for wheat would be large because of the poor crop in Europe.
The large rise in wheat and corn prices caused increases in the prices of
flour and cereal products. Led by these specific price increases, there
developed during the third quarter a general upward movement of prices
which continued through the rest of the year.
Since June 1947, wholesale prices have risen at an annual rate of 20
percent and consumers' prices at a rate of 12 percent.
The behavior of wholesale prices is shown in table 9 by commodity
groups and by periods:
TABLE 9.—Percentage changes in wholesale prices since June 1946
Commodity group

June to
December
1946

All commodities..

December March to
1946 to
March 1947 June 1947

June to
December
1947

June 1946
to December 1947

24.8

6.1

-1.3

10.2

44.1

Farm products
Foods
All other than farm products and foods.
Hides and leather products
Textile products...
Fuel and lighting materials
Metals and metal products
._
Building materials
Chemicals and allied products
Housefurnishings
Miscellaneous

20.0
41.8
18.1
44.4
23.4
9.5
20.1
21.5
30.4
8.9
10.6

8.6
4.7
5.1
-1.2
3.6
4.8
3.9
12.5
5.2
4.7
5.9

-2.6
-3.5
.2
-.8
—.5
3.2
1.9
-1.7
-9.1
2.7
-2.3

10.2
10.4
10.1
18.9
6.1
18.2
6.5
9.0
14.0
3.7
7.5

39.9
58.3
37.0
68.3
35.0
39.9
35.3
46.3
42.1
21.4
22.9

Special groups:
Raw materials.
Semimanufactured articlesManufactured products

21.3
28.9
26.5

6.5
7.1
5.6

-1.8

12.9
8.1
8.8

43.2
49.2
43.7

-I.I'

Source: Department of Labor (see appendix B, table XIII).

Wholesale prices during the second half of 1947 advanced at a slower rate
than during the first quarter of the year. The character of the two movements differed fundamentally. During the first quarter, the price rise
represented a tapering off of the broad upward thrust of prices following the
removal of price controls. It was followed by a period of relative stability,
when it appeared possible that the inflationary pressures had spent themselves. But the recent sustained rise in prices represents a renewal of
inflationary pressures.

In response to the factors described above, consumer prices, too, have
been rising rapidly on a broad front. This is shown in the following table:
TABLE 10.—Percentage changes in consumers' prices since June 1946
Item
All itemsFoods...
Apparel
Rent
Fuel, electricity, and ice.
Hqusefurnishings
Miscellaneous

June to
December March to
1946 to
December
March 1947 June 1947
1946
15.0

2.0

27.7
12.3
.3
4.5
13.5
6.4

1.9
4.4
.2
1.8
2.9
1.5

0.5

June to
June 1946
November to November 1947
1947
5.0

23.7

6.4
2.4
5.5
7.8
3.5
2.8

39.2
21.0
6.2
14.8
21.0
11.8

Source : Department of Labor (see appendix B, table X I I ) .

One notable aspect of the rise in consumer prices since June 1947 is that,
unlike the movement of wholesale prices, they have been rising at a faster
rate than during the first quarter of the year. In the first quarter, consumer prices rose at an annual rate of 8 percent. Since June, they have
been rising at the rate of 12 percent per annum. Two factors contributed
to this acceleration. In the first place, foods, which represent 43 percent of
the total consumers' price index, have risen much more since June than they
did during the first quarter of 1947. In the second place, rents rose from
June to November at an annual rate of about 13 percent. Since June,
they have risen more than they had over the previous eight years.
Although November is the latest month for which complete data are
available, preliminary reports indicate that consumers' prices rose over 1
percent between November and December.
WAGE TRENDS

Efforts of labor unions in 1947 were concentrated on wages rather than
on security issues because the employment situation was good and because
of the over-riding importance of the rise in the cost of living.
Wage adjustments in early 1946, largely to compensate for reduced hours,
had brought about a reasonably stabilized wage situation by the middle of
that year. But this stability was shortly disrupted by the rapid rise in the
cost of living. By late 1946 and early 1947, industry in general seemed
willing to offer, and unions to accept, wage increases approximating the
advance in consumer prices which had taken place following the lifting of
price controls in June. Some of these wage contracts contained escalator
clauses to compensate automatically for further rises in the cost of living.
An examination of the early "second round" contracts of late 1946 shows
relatively few wage increases above 15 cents per hour, most of them falling

CHART 10

CONSUMERS1 PRICES
The

upward

with

food

rents

trend

prices

beginning

in retail
in

prices

the lead

continues,

220

and

increase.

PERCENT OF 1935-39 AVERAGE
200

200

FOODS
180

180

160

140

120

120
RENT

100

1946
PERCENTAGE

100

1947

INCREASE

FOODS

ALL

ITEMS*

SINCE JUNE

"T:

1946

J39

' 1 24

APPAREL

RENT

SOURCE: DEPARTMENT OF LABOR.

*AL$0 INCLUDES H0U$EFUftNlSHIN6$, FUEL, ELECTRICITY, lCEt ANO
MISCELLANEOUS GOODS AND SERVICES NOT SHOWN ON CHART.

within the range of 10 to 15 cents. Contracts negotiated later, mainly in
April and May 1947, in rubber, steel, automobiles, electrical equipment, and
other metal products were similar to the fall contracts. These settlements
were dubbed the "15-cent package," which included an evaluation of fringe
benefits such as paid holidays and occasional retirement or insurance plans.
Wage earners during this period, however, generally preferred wage increases, and pressure was concentrated on these rather than on fringe issues.
The 1947 wage "pattern" was less widely adopted than the 18% cents
of the "first round." Numerous contracts were negotiated at a figure below
the pattern, while many wage and particularly salary workers received no
increases. On the other hand, some other groups of workers, notably in the
bituminous coal, construction, and printing industries, won wage increases in excess of the pattern. An examination of the second round contracts indicates that workers in the lower paid industries made smaller gains,
both absolutely and on a percentage basis, than did higher paid workers.
The effect of the wage settlements in late 1946 and 1947 was to raise
wages—both rates and earnings—to an all-time high. For the first time,
average weekly earnings in manufacturing have exceeded $50, and
throughout most of the wage sector of the economy average weekly earnings
have become twice what they were in 1939. The wage increases which took
place in 1947 expanded consumers' money income by approximately 3.5
to 4 billion dollars during the year.
The 1947 rise in prices left wage earners in no better position at the end
of the year than they were at the beginning. The real income of many
groups, such as government workers, teachers, and the white-collar class
generally, was substantially less.
From June 1946, following the "first round" of wage increases, to October
1947, the cost of living rose 23 percent compared with an increase of 18
percent in weekly earnings in manufacturing. Earnings in nonmanufacturing industries during the same period registered diverse gains: 12 percent
in bituminous coal mining, 20 percent in private construction, 8 percent in
telephones, 10 percent in wholesale trade, 14 percent in retail trade, and
14 percent in hotel services. In general, earnings lagged behind living costs.
Though labor as a whole through wage gains was as well off at the end
of 1947 as at the beginning, workers had lost ground steadily in terms of
real income during the last half of 1946. This, primarily, explains the
"second round" of wage increases. It also helps to account for the present
movement for further wage advances unless an effective anti-inflation program is adopted. (See appendix B, tables X, XI, and XII.)
Several other 1947 wage developments should be noted. There was an
extension of the practice of providing paid vacations and holidays to wage
earners. One of the results of these practices was to cause a sizable reduc-

tion in the number of man-hours worked during the summer, particularly
in July and August. Increasingly, it is becoming industry practice to shut
down operations for one week during that period.
Efforts to standardize job classifications and to develop an equitable
wage-payment program have been carried on by industry for a good many
years. One of the most notable developments in this area took place
last January when, following two years of joint effort, a wage rationalization
agreement was concluded in the steel industry. This was the culmination
of a major job-reclassification program designed to eliminate wage inequities both within and among the plants. This scientific approach to a complicated wage problem is a commendable development that could well be
adopted more widely.
PROFITS

Profits during 1947 reached a new peak. They also maintained remarkable stability throughout the year despite considerable increases in wages
and raw material costs. Compared with 1946, corporate profits rose from
21.1 billion dollars to 28 billion dollars before taxes and from 12.5 billion
dollars to 17 billion dollars after taxes. In 1947 they averaged, after taxes,
about 9.5 percent on net worth and 5.5 percent on sales. The income of unincorporated nonfarm enterprises rose during the same period from 21 billion
dollars to 23.5 billion before taxes. Total business income before taxes in
1947 exceeded the 1946 total by 9.4 billion dollars, or 22 percent. Net farm
income before taxes rose from 15.2 billion dollars to 18.3 billion dollars.
Not only profits for industry as a whole, but also profits for most industry
subgroups were exceptionally high. There were, however, some divergencies in trend. Some industries, such as food, beverages, tobacco, and
iron and steel, showed a downward trend, although profits continued high,
while other industries, such as oil-producing and refining, and automobiles,
showed an upward trend as well as a high rate. For profit data, see Appendix
B, tables XXII to XXVI. Individual firms within each industry also showed
divergent trends.
This stability of profits throughout the year indicates that business
generally reacted to increases in costs by increasing prices rather than by
absorbing them in whole or in part by reducing profits. It is also noteworthy that high and stable profits continued even where there was no
appreciable expansion in production. In some categories where exceptionally high profits persisted, we were very close to a temporary ceiling
on production due to physical limitations of capacity and shortages of raw
materials and certain classes of skilled labor. While industrial production
reached a postwar peak in March, receded to a low point in July, and has

since recovered to approximately the March level, profits in manufacturing
continued at approximately peak levels throughout the year.
In appraising profit trends, allowance should be made for the fact that
business, like every other group, finds that the purchasing power of money
has declined considerably. To maintain the same physical volume of inventories requires large additional amounts of capital funds. Furthermore,
replacement costs have risen substantially, while profits are usually calculated by basing depreciation allowances on original costs rather than replacement costs. Although a portion of the large profits earned during 1947
merely compensated for changes in prices, profits on the whole were above
the levels necessary to furnish incentives and funds for the expansion of
business and to promote the sustained health of the economy.
THE NATURE OF INFLATIONARY PRESSURES

The movements of prices and incomes during 1947 constituted a strong
inflationary trend. Increasingly through the second half of the year the
total demand for goods was in excess of the amount of goods and services
available at current prices to satisfy the combined requirements for final consumption, private capital formation, Government services, and exports.
The question has been raised as to whether we had inflationary pressure
because of large exports, because of the very high rate of business investment,
because of the large amount of residential and commercial construction, or
because of the high level of consumer spending. The answer is that we had
inflationary pressure because the sum total of these combined factors exerted
too great a demand on available supplies. No one factor can be singled out
as the principal cause.
Moreover, these factors could not have become fully operative without
funds to make them effective. In addition to funds growing out of current
incomes, there were several large special sources of funds in 1947. The
major ones were: (1) the liquidation of dollar balances and sales of gold by
foreign countries and spending by foreign countries of loans and grants provided by the United States; (2) the spending of liquid funds accumulated
by business firms during the war; (3) the liquidation of private savings; (4)
the increase of bank credit to finance inventory accumulation, capital expansion, and construction; (5) the increase of consumer credit; and (6) the
ashing of veterans' terminal-leave bonds. Some of these sources of liquid
• unds are being exhausted and are nonrecurring, so that further expansion
mist increasingly be financed out of current income credit.
The inflationary impact of spending was strong in all fields—capita!
expansion, exports, and consumption. The high level of domestic business
investment and construction aided in unfolding a total demand which in-

creased prices, individual incomes, business profits, and Government receipts. The supply of consumer goods was limited by the large amount of
resources devoted to capital goods and exports. Consumer demand, swelled
by wage increases, by high farm earnings, by the use of consumer credit,
and by the cashing of terminal leave bonds, was in excess of the supply at
current prices.
The general excess of demand does not fully explain the resumption of
the price rise in the second half of the year. In an important degree, the
rise stemmed from actual and anticipated shortages of specific commodities,
which caused price rises at particular points and from there spiraled into
higher costs and prices all through the economy.
The most important specific shortage developed in the grains. This led
to higher prices of many food products. New wage demands resulteH
from the increased cost of living. These in turn presented the prospect
of higher costs transmitted into higher prices. The specific shortage was
thus generalized into a broad increase of prices at many points, and often
these increases were greater than were necessary to meet increased costs.
The spiraling of prices from a specific point of shortage was not confined
to the case of food products. It also existed in the case of key industrial
products, particularly steel.
The inflationary forces arising out of generally excessive demand and
those arising at points of specific shortages are interacting. If general demand were not so great, the upward pressure on the prices of specific commodities in short supply would be less and could not so easily spread to
other commodities. Moreover, the mere prospect of higher prices at particular points gives rise to strengthened general demand. Expectation of
higher prices, for instance, stimulates the demand of business for inventories
and of consumers for goods. Expectation that higher wages will follow
higher costs of living may cause the increase in prices to take place even before wages have been adjusted upward.
In the face of the special and general factors outlined above, the precarious basis of the restraint and stability which had developed in the second
quarter became evident. The fears of a recession subsided, the spiral effect
of wage and other cost increases got under way, the increased cost of living
gave rise to expectations of further wage demands, and the impact of expected foreign aid programs received wide attention. Such influences induced an upsurge of speculative activity superimposed upon the already
great strength in most markets. In addition, there occurred a collateral
development which had great significance. The high business demand
in the earlier part of 1947 was financed almost wholly out of current revenues and liquid assets, with only moderate use of bank credit. After the
middle of the year, when business expectations ran in the direction of higher

prices, and as higher prices actually emerged, business borrowing underwent a rapid increase.
The year's end brought no evidence of an early weakening of inflationary
forces. Unless anti-inflationary steps are taken, the prospect is that, in
view of the grain shortage, prices of food, especially meat, will go still higher.
Business sentiment now appears to entertain the expectation of strong
markets for as far ahead as it can see. There is added to the forward outlook the possibility that, even though other sources of excessive demand
diminish and a substantial budget surplus is continued, the inflationary
spiral will be supported by funds from credit sources.
While the export surplus, even with our foreign-aid program, may be
smaller than in 1947, exports are heavily concentrated on commodities
that are subject to especially strong domestic demand. This makes it
desirable that foreign aid funds be used as far as possible to finance purchases
from other countries. The fact that foreign aid presents problems provides no reason to doubt the wisdom of a foreign-aid program which meets
essential requirements of other nations within the limits of our own resources.
The effects upon other countries directly, and upon us indirectly, of not
providing this aid would be calamitous. Upon broad grounds of national
policy, it is essential that the program go forward. But it must be recognized that carrying it out will make it all the more important that we invoke
the measures required to stop the inflation.
WHY INFLATION IS DANGEROUS

During the course of an inflationary movement there are many who find
it difficult to think that anything is wrong. There is a ready market, everyone is employed, wages are good, production is high, profits are good, and
industrial capacity is being expanded.
There are some, indeed, who find real merit in the situation. They say
that the cure for specific shortages is still higher prices. They expect that
these will stimulate larger output and restore balance. But this is a vain
hope. The stubborn and intractable fact about an economy already
operating at peak levels is that output cannot be expanded except by slow
degrees.
Nor are the immediate consequences of inflation as favorable as superficially appears. Some people are gaining at the expense of others. The
heavy weight of higher costs of living bears down upon the millions of
families who are unable to keep up with advancing prices. Economic relations degenerate into a hectic struggle to catch up or keep ahead. No firm
basis can be established for orderly and stable progress.
But what most fully justifies every effort to halt an inflation is the certainty that, if it runs its course unimpeded, it will spread in its wake the
770958°—48

disaster of falling markets, unemployment, and business losses. A rapid
general rise in prices has the effect of unduly bunching investment in inventories and equipment at early dates and according to distorted calculations of possible profit. It induces investments, many of which will not
pay out.
Rising prices breed upon easy access to credit, which supports the trend.
They introduce speculative activities which also support the trend. They
produce a price structure which is increasingly sensitive and precarious
and vulnerable to changes in business and consumer expectations, spending, and investment.
At whatever point these developments induce a reversal of business sentiment or a withholding of consumer demand, some markets weaken, with
a spreading impact. Caution dictates the withholding of demand. Buying
for inventory, capital expansion, and consumption declines. A decline of
production necessarily follows, spreading unemployment and loss of income
from point to point in a widening and deepening downward spiral.
These developments are not inescapable. A well-designed program of
measures to combat the inflationary trend will permit us to reach a state
of economic stability without an interlude of severe depression. Such a
program is presented in Section IV.

IV. Levels of Activity and Adjustments Needed in 1948

N spite of some disappointments on the supply side and serious inflationary distortions on the demand side during 1947, we enter 1948 on
a high tide of economic activity and with prospects for another prosperous
year if we handle our economic affairs wisely and firmly. The Employment Act calls upon the President at the opening of each year not merely
to review current trends but also to state what levels of employment,
production, and purchasing power during the ensuing year are needed
to carry out the policy declared in the act and to recommend measures
by which these objectives may be attained. These two requirements will
be met in this section.
We face in the months and years immediately ahead a test of whether we
have the foresight and courage to safeguard our economy against a return
to the devastating sequence of boom and depression. If we are to complete
safely the transition from a war economy to a stable peacetime economy
and clear the way for the great progress which lies within our reach, we
must, promptly, take vigorous measures to check the course of inflation which
now has the economy in its grip.
NEEDED LEVELS OF EMPLOYMENT, PRODUCTION, AND PURCHASING POWER

Employment objective
The American economy is now operating at a level of employment which
may be regarded as a practical maximum. It is estimated that the labor
force will increase by about 700,000 persons during 1948. If we provide
them as well as the present labor force with opportunities to work, this
would mean an average civilian employment of almost 59 million for the
coming year.
Production objective
This labor force will have at its disposal expanded and improved capital
equipment and there should in general be a better flow of raw materials.
During the past year, business expended 23 billion dollars for plant and

equipment, approximately one-half of which represents a net addition in
excess of wear and tear and obsolescence. Since there are still some
shortages of materials, particularly in metals, some of the new plant and
equipment may begin operating at the expense of somewhat less production
in older plants.
It should be our objective to open up most of these bottlenecks in the
course of 1948, with the use of new capacity to produce materials and
components which are now scarce. Assuming that new capital equipment
and other efficiency factors raise nonagricultural productivity somewhat
more than 2 percent, our objective should be to increase the output of goods
and services in this sector of the economy to a level somewhat more than
3 percent above 1947.
For farm production, the Department of Agriculture has announced
production goals for this year which call for an increase of 3 percent in
the acreage of crops. Reduced feed supplies, however, will inevitably
cause some decrease in the output of livestock and livestock products.
Balancing this against a possible increase in crop production, it appears
doubtful that total agricultural production this year can surpass that of 1947.
For the economy as a whole, an increase of total output by about 3
percent above 1947 is a feasible objective. To reach this objective will
require skillful management, the maintenance of good labor-management
relations, and some improvements in the geographical distribution of labor.
Purchasing power objective
Our purchasing power objective for 1948 should be to effect the economic
adjustments which are necessary to afford adequate protection against increasing inflation. The view has been expressed that the only cure for
inflation and the only means of providing maximum real purchasing power
is more production. Certainly the continuation of full employment and the
removal of impediments to maximum production will provide the surest
long-run remedy for scarcity prices and the exploitation of monopolistic
situations. But we cannot increase industrial and agricultural production
enough within the next few months to catch up fully with market demands
or to surmount the inflationary dangers of the coming year.
Weather will be a major determining factor in our farm output. The
reduction in the corn crop of 1947 has required drastic revision of livestock
producers' operations and makes it certain that supplies of meat, poultry,
and dairy products will be less abundant in 1948 than in 1947.
On the industrial side also, the inability to re-equip producers and to fill
pipe lines, while simultaneously turning out enough consumers' goods for all

the demands of a fully employed population and providing needed foreign
aid, will result in some relative shortages during 1948. The basic shortages
in coke, in steel, and other metals, in petroleum and petroleum transport
facilities, and in railway cars and motive power will not fully be made up
during 1948.
This leads to the conclusion that, even were our employment and production goals for 1948 fully realized, this would not of itself meet our
purchasing-power objective nor substantially dispel the need for other
affirmative anti-inflation measures. More than this, we face the danger
that the continuance of maximum employment and production will be
impossible unless we achieve the necessary purchasing-power adjustments in
the price-wage-profit structure. When a price-wage spiral breeds business
uncertainty and impairs confidence, employment and production go down
instead of up.
The affirmative measures which I have proposed to the special session
of the Congress, and which I shall here reaffirm, are not a substitute for
more production, but rather constitute the only assurance of maintaining
high and increasing production.
FISCAL POLICY TO COMBAT INFLATION

It is well established that a substantial excess of Government receipts
over expenditures is counter-inflationary.
The Federal agencies will have to make cash payments to the public
in calendar year 1948 of over 40 billion dollars. This is about 1 billion
dollars less than cash payments to the public in calendar year 1947. It
includes proposed expenditures under new legislation, mainly foreign aid,
of about 3 billion dollars. (These figures and those below represent cash
payments and receipts and apply to the calendar year. They differ in both
respects from the conventional Federal Budget, as is explained on page 30
and in more detail in appendix A, section II.)
Over 40 percent of the total is required for defense and for veterans.
Most of the remainder represents expenditures to carry out the provisions
of existing law and to meet the Government's commitments, such as interest
payments on the public debt, refund of taxes, loans to foreign governments,
social-security payments, and expenditures under previously authorized
contracts.
On the basis of receipts from present taxes and of expected payments,
the excess of receipts over expenditures for calendar year 1948 will be substantial. With inflationary pressures a major threat to the stability of the
American economy, no action should be taken now to reduce this excess.
But while waging war against inflation, we should not neglect the casual-

ties. Certain tax changes now will help those millions of families whose
disposable incomes have lagged more and more behind the increased cost
of living during the past year and a half.
I therefore propose that the Congress enact legislation extending a costof-living tax credit of $40 for each taxpayer and each dependent.
To offset this decrease in government revenues, corporate taxes should
be increased sufficiently to yield an equivalent amount. Corporations were
given early relief after the war in very substantial amount through repeal
of the excess profits tax. While present corporate income taxes are very
high by all prewar standards, they have permitted both high business activity and an unexampled addition to capital investment. An increase in
corporate taxes would not cause production to fall below the highest output
that available materials, capacity, and labor will permit. It would, however, have an anti-inflationary effect which would wholly or in large degree
offset the inflationary influence of the reduction in individual income taxes.
Any net change one way or the other in the effect of these tax revisions
upon inflation is outweighed by the manifest equity of the revisions proposed.
In any event, these equitable adjustments will not interfere with success
in our anti-inflationary efforts if the other anti-inflationary measures which
I shall now discuss are promptly adopted and vigorously applied.
THE REGULATION OF CREDIT

In the process of inflation, one of the most potentially dangerous sources
of excessive demand is the expansion of credit. This applies to consumer
credit, commercial credit, real estate credit, and credit on securities.
I again recommend that the power of the Board of Governors of the
Federal Reserve System to regulate consumer credit be restored. Even
under the controls which existed, and which expired only on November 1,
1947, the volume of instalment consumer credit outstanding had increased
from 4 billion dollars on January 1, 1947, to 5.5 billion dollars on November 1. Since the lapse of control, and due only partly to seasonal influences,
the rate of increase has moved sharply ahead. A further rapid expansion
at this time can only contribute to inflationary price increases. (See
appendix B, table VII.)
Also dangerous is the mounting volume of mortgage debt, urban and
rural. The longer-run interest of the people requires careful consideration
of the present financing policies of both private and governmental agencies.
More dangerous than the expansion of consumer credit is the over-rapid
expansion of commercial loans by banks. During the first half of 1947,
commercial credit expanded only moderately, but during the second half
it rose at an annual rate of almost 10 billion dollars, a much more than

seasonal increase. This increase coincided with the upsurge of inflationary
developments.
The increase of bank credit was both a result and a further source of inflationary pressure. The increase in bank loans reflected a growing demand for funds that arose from a variety of sources. In adapting their
operations to a rising cost and price structure, business firms needed a larger
volume of credit for working capital, and borrowed additional amounts to
maintain and expand expenditures on plant and equipment. Farmers increased their borrowing to purchase real estate and to acquire farm machinery and finance other capital improvements. Increased consumer buying of durable goods, payments for the purchase and modernization of
homes, and outlays to meet current living expenses were financed in part
by expanded bank loans.
When demand from other sources is already pressing against the price
structure, the injection of large amounts of bank-created funds to support
business, real estate, and consumer expenditures necessarily contributes to
further inflation. The impact of this additional supply of money is felt first*
of course, in those markets in which the borrowers are direct participants.
But as the funds are used by the borrowers to purchase the goods and services they want, they become part of an enlarged general income stream. As
other temporary sources of demand decline, the expansion of bank credit
could potentially keep the inflationary trend rising and interfere with the
gradual transition to a stable situation. Among the strategic points at
which to curb the inflation movement, none is potentially more powerful
than the restriction of bank credit.
The control of bank credit is not a simple task, nor is it free from dangers.
Unwisely exercised, it could overplay its role and precipitate an undue liquidation of credit and a lowering of economic activity. Furthermore, the
problem is complicated by the relation of credit to the administration of the
public debt. Limitation of the amount of commercial lending would probably be accompanied by higher interest rates. Except as special devices may
be introduced which can partially insulate the public debt, two unfortunate
developments might take place: a decline in the value of Government bonds
held by the public, and an increase in the cost of servicing the debt as refunding takes place. But these difficulties can be surmounted through the wise
exercise of restraints upon excessive bank credit.
In view of their central relation to the control of inflation, current proposals for credit control, especially those which have been presented by the
Board of Governors of the Federal Reserve System for the increase of bank
reserve requirements, should be given close study by the Congress, and legislation should be enacted of a sufficiently comprehensive character to make
available all the powers that may be needed.

Within the last fortnight the leaders of our commercial banking system
have taken positive organized action to secure the curtailment of inflationary expansion of bank credit by their members. I commend this far-sighted
action. If they succeed in this voluntary effort, they will be curtailing credit
at the points where it is most likely to exercise inflationary influence and
further general action might not be required.
As part of our program for restraining excessive credit expansion, the
Federal bank supervisory agencies have already announced policies designed
to confine extension of private bank credit to legitimate production requirements. The credit standards of the Government lending agencies have
also been reviewed with the objective of checking inflationary influences
from this source. It is essential that the major Government credit agencies
in making direct loans and in guaranteeing private loans shall pursue
policies consistent with a national anti-inflationary policy.
THE NEED FOR SELECTIVE CONTROLS

While the credit controls and budget policies discussed above are essential
instruments for halting the inflationary trend, there have arisen specific
situations which, in all probability, cannot be dealt with adequately by
these measures.
The most important of these special situations is the shortage of grains
and the related mounting price of food. In the case of meat, for example,
the shortage will almost certainly be greater next spring. The use of credit
and budgetary controls to the point where they could halt the rise of meat
prices would probably cause widespread unemployment. Depriving people
of their livelihood in order to cause a decline in the cost of food is obviously
not an acceptable alternative. Nor is it an acceptable alternative to let
mounting prices ration the short supply at the expense of millions of families
of modest income.
In meeting this situation, consumer rationing of selected commodities
would not only relieve the demand pressure, but would also provide for
a more equitable distribution of the available supply. There should also
exist limited powers of price control to be used for combating rising prices
at those points where they bear most disastrously upon the cost of living.
I have already recommended to the Congress that such powers be authorized. It is also necessary to authorize, and to use if necessary on a selective
basis, price control of a few vital industrial products that are in short supply,
since we have had ample demonstration that these areas of shortage are
also a focal point of spreading inflation.
There should also be set up powers for dealing with the distribution
of basic industrial and agricultural products where scarcity threatens to

impede production or raise prices unduly. These should not subject business firms to a detailed plan of operation prescribed by the control agency,
but merely provide a check on such distribution of scarce supplies as is
found to be impeding domestic production, defeating the purposes of the
foreign aid program, or working inequities as between legitimate users of
the scarce commodity.
In areas where price control might be employed, its workability might
be impaired by excessive wage increases. I therefore repeat my recommendation to the Congress that authority should be granted to prevent
wage increases where such action is necessary to maintain any price ceiling
that may be established. This is a power which should be restricted in its
use, and might not need to be used at all. Its existence would not supersede
the general practice of fixing wages by voluntary agreement, nor would it
relieve labor of any of the responsibility it now bears for moderation in
wage demands to help curb inflationary pressures.
I also repeat my recommendation that rent control be continued and
strengthened. Nothing could be more disastrous to the standard of living
of millions of people, or better calculated to initiate another spiral of wages
and prices, than the continuation of the sharp increases in rents now under
way. This is particularly true because relaxation of rent control could not
effect a rapid increase in the supply of housing.
The measure enacted by the Congress toward the end of its recent
session extended the Export Control Act, and also extended the authority
to allocate transportation facilities and equipment. In addition, it authorized measures to increase the production of food in non-European foreign
countries and to encourage conservation practices in this country. While
these steps are desirable, they constitute only a small part of an effective
anti-inflation program.
The same measure also provided for voluntary agreements among businessmen, relating to the allocation of transportation facilities and scarce
commodities and relating also to the regulation of speculative trading on
commodity exchanges. While I have stressed many times that certain
types of appropriate voluntary action are important, the experience reviewed in this Report, and the facts which it sets forth, demonstrate conclusively that governmental action along the lines that I have recommended
is absolutely essential.
THE NEED FOR VOLUNTARY RESTRAINT

The need for some government controls does not lessen the need for
voluntary restraint. Only with the voluntary cooperation of the American
people can any controls be made to work effectively, and the more effective
voluntary restraint becomes, the less will controls be needed.

I have already urged consumers to restrict their purchases of scarce
products. The Federal Government is deferring many public works projects and following procurement policies designed to minimize their effect
upon price increases. I urge State and local governments to do likewise.
Businessmen should defer expansion that does not immediately augment
production. They should also strive to maintain inventories at the lowest
efficient working levels.
The campaign to sell savings bonds will be intensified. Voluntary savings of all types should be encouraged. The new bond buyers and millions
of loyal Americans who enabled their country to finance the war are
assured that the power which their Government possesses to maintain the
value of their bonds will be exercised wherever necessary.
Most important of all, businessmen should hold the line against price
increases and reduce prices wherever they can, foregoing a quick and dangerous excessive profit in favor of long-run stability. And labor should be
moderate in its wage demands, mindful of recent experience which demonstrates the impossibility of registering real gains in an inflationary spiral.
I cannot too strongly emphasize that every self-imposed voluntary restraint, in the making of purchases, in the setting of prices, and in the
demand for wages, contributes to the restoration of economic stability and
prolonged prosperity. But to the extent that the result is not achieved by
these means, it is essential that proper agencies of Government be given and
that they use powers to restore the balance.
When an inflation is in progress, there is no way of predicting when it will
break of its own accord. One can only be certain that, if permitted to run
its own course, it will break with destructive force. How serious or prolonged such a situation would be in the current instance cannot be foretold.
Whatever its character, if a depression occurs, it will be far more costly in
human welfare and will involve the Government in far more pervasive intervention in the economic life of the country than the measures which are
necessary to prevent it. I therefore urge that the Congress consider with the
utmost speed the nature of the problem which we have to meet and adopt
the measures that are appropriate to its solution.

V. Long-Range Objectives for the
American Economy
OUR ABILITY TO GROW

HILE striving to overcome the inflation of today, we cannot safely
neglect the problems of tomorrow. No great nation lives for the
moment alone. In restraining the excessive demand which is now apparent,
we must not cripple the market for an expanding output of American industry and agriculture. Our whole history shows that unless we go forward
we shall slip backward. Our economy should be stable, but nonetheless it
must continue to grow.
We cannot set aside long-range considerations while we deal with the
immediate task of combating inflation. The Employment Act requires that
we set objectives for the needed levels of employment, production, and
purchasing power. Such objectives require that we look ahead and appraise our economic potentials in the perspective of long-range economic
growth.
The best way to realize the growth that we can achieve is to look at what
we have recently done. The Nation's Economic Budget has already been
used in this Report as a summary device to depict the present state of our
economy. In table 11, it is used to show the enormous strides that we
have made since just before World War II, with the figures adjusted to
allow for price changes.
No one can fail to be impressed by the fact that^ within 8 years, our annual
national product has increased by about 53 percent measured in constant
prices. Some part of this increase is explained by the fact that our economy
in 1939 was not running at maximum employment or production. The
relentless pressure of the war speeded up certain economic developments.
The American people hold a profound conviction that our war-time production record furnishes a significant demonstration of what we can do with
maximum employment and effective economic policies.
In recent years, a number of attempts have been made by private and
public research agencies to measure the growth that lies ahead if we are
successful in maintaining maximum levels of economic activity. These

CHART 11

THE NATION'S ECONOMIC BUDGET IN
CONSTANT DOLLARS

BILLIONS OF DOLLARS
!tt HALF OF 1947 PRICES

200

CONSUMERS

...•Showing our economic
growth from 1939 to i$47 f
with adjustments for
chonges in prices

160

BILLIONS OP OOLLARS
1st HALF OF 1947 PRICES

INCOME

360 f
GROSS NATIONAL PRODUCT

320 -

40
280 -

1939

240 -

1947

BUSINESS
EXCESS OF
EXPENDITURES

200 -

1939

160 -

1947

INTERNATIONAL

120 -

- 40

NET FOREIGN
INVESTMENT

1939

1947

1939

1947

40 -

1939

1947

* GROSS NATIONAL PRODUCT IS NOT EXACTLY THE SUM OF THE COMPONENTS BECAUSE
OF CERTAIN ADJUSTMENTS. SEE APPENDIX A.

SOURCE: SEE APPENDIX A.

T A B L E 1 1 . — T h e Ration's Economic Budget in constant dollars, calendar years

1939 and 1947

Billions of dollars, first half of 1947 prices
Calendar year 1939

Calendar year 1947 *

Excess
Re- Expend- (+)or
ceipts itures
deficit

Accounts

Consumers:
Disposable income
Expenditures
Saving (+)
Business:
Undistributed profits and reserves .
Gross private domestic investment:
New construction
Producers' durable equipment
Net change in inventories

112.6

171.0

+4.3

13.1

160.2
+10.8

17.1
74
6.4
.6

106
-12.5

8.4
-1.3

27.0

38
170
250

29.6
-1.3

1.3

31.7

-5.1

-8.1

+3.0

-21.2

-25.5

+5.8
+4.3

Total gross national product

147.5

226.3

-4.7

646
119
69

53.6

Adjustments to arrive at gross national
product

TTlfiptS (—)

862
546

—8 4
59 4

52
48
151
31

10 2
17 3
2.1

14.4

Total
Excess of receipts (+) or investment (—)
International:
Net foreign investment
Excess of receipts (+) or investGovernment (Federal, State, and local):
Cash receipts from the public
Cash payments to the public
Excess of receipts (+) or pay-

108.2

Percent
increase
1939-47

* Estimates based on incomplete data.
Source: See appendix A, sections I and II.

studies recognize that foresight is not perfect and that our knowledge of
technological trends and economic relationships is still limited. Further
improvements in these measurements are needed. But even now, they can
serve to furnish us at least with some broad outlines of our prospects and
problems.
Ten years from now, if we maintain maximum employment, we should
reach a level of nearly 64 million jobs. This allows for population growth.
It also allows for withdrawal from the labor force of some women to their
homes and for longer school attendance of some of our young people.
Output per man-hour for our economy as a whole has increased by approximately 2 percent annually in recent decades. The war brought many
technological advances which have not yet been adopted fully by peacetime
industry. Assuming even the very conservative estimate of 2 percent annual
increase in productivity, and allowing for population growth, maximum
production 10 years hence would mean an increase of about 35 percent in
our total output of goods and services if average weekly hours of work remain unchanged. This would mean per capita disposable income about 80
percent above the level of 1937 and 27 percent above the level of 1947 in

terms of constant dollars. Some part of this possible increase may, of course,
be taken in the form of increased leisure.
We have within our reach an economic environment that would make it
unnecessary for masses of people to be undernourished or ill-housed, to work
in obsolete plants and shops, or to lack essential medical care, social security
or education. No one would need to go without adequate rest and vacation
after hard work. Attainment of these economic objectives would afford
ever-increasing opportunities for individual initiative and greatly strengthen
the cherished free institutions of American life.
But these gains will not come by accident. They would not be registered
in an economy characterized by a period of idle or wasted resources after any
period when for a few years we attain full utilization of our plant and labor
force, or in an economy running at only three-quarter capacity even in
"fairly good times." The attainment of our objectives will depend upon
the best efforts of industry, agriculture, and labor, working with sympathetic
understanding of one another's problems and of the common good. It
will depend on a clear appreciation of maladjustments in the relationships
among production, prices, and purchasing power; it will depend upon the
willingness of all concerned to make necessary adjustments, and upon vigorous and forward-looking government.
DEVELOPMENT OF NATURAL RESOURCES AND CAPITAL EQUIPMENT

In the perspective of balanced economic expansion for the future, our
first attention should be concentrated upon our productive resources, developed and potential, and the ways in which these resources are utilized.
Since the beginning of the war, we have been forced to forego at many points
development of our basic natural resources and the essential maintenance
and improvement of our capital facilities.
Improvement of the country's natural resources and its capital equipment is a cooperative effort. Private groups and individuals, State and
local governments, as well as the Federal Government, are challenged by
the task. An expanding base of natural resources and capital equipment is
necessary for the realization of increasing production and a rising standard
of living.
Natural resources
Land. To meet the needs of a population of perhaps 175 to 185 million persons by 1975 living in an economic environment of sustained maximum employment and production with a considerable volume of agricultural exports, would require an increase of about 30 percent in agricultural
production. It would also require a substantial shift in the pattern of agricultural land use to meet changes in demand.

The yield of present cropland can be enlarged by improvements in giant
breeding, increased use of machinery, supplemental irrigation, increased use
of fertilizers, and more efficient marketing. To some extent, we can also
increase production by adding to cropland through drainage, clearing, and
irrigation.
Erosion of top soil and depletion of soil fertility are becoming more and
more serious. About 60 million acres now cultivated should be used for
grass and trees. Despite significant progress in soil conservation in recent
years, half the Nation's cropland and pasture still needs to be put under
improved soil-management practices as rapidly as possible. Expanded
research, education, and demonstration programs are required. We need
a Nation-wide program for increased application of fertilizers to depleted
soils.
About half our acreage of farm pastures and range land has been impaired seriously by overgrazing, fires, and other abuses. Large tracts of
land which should be ranges have been plowed for wheat. Higher levels
of meat consumption can be met only if individual farmers and stockmen who own two-thirds of the country's range-land adopt better grazing
practices. The 300 million acres of western grazing land controlled by the
Federal Government, much of it organized in grazing districts, is being
improved, but a large part of it requires further rehabilitation.
Water, Bound up as they are with land uses, water resources should be
developed and controlled as an integral part of a broader national and
regional resources-development program. Expanding programs are needed
to prevent floods, provide for navigation, furnish urgently needed power,
promote recreation, control pollution, conserve fish and wildlife, and maintain and improve underground and surface water supplies needed for agriculture and other uses.
An impressive example of the interrelated nature of water and land
resources is provided by large multiple purpose dams and accompanying
watershed programs. Such integrated programs should be stepped up, as
soon as economic conditions permit, in a number of our larger river basins.
Forests. The estimated 461 million acres of private and public commercial forest land in the country ultimately will grow all the timber products we are likely to need, provided they are well managed. The problem
is most acute in saw timber. Our present saw-timber stand is less than half
that in 1909, and is poorly distributed and deteriorating in quality and
size. Better forest practices would provide the greatest assurance of
adequate supplies for the future. Achievement of better practices may be
furthered by strengthening and expanding technical and other assistance
to private forest landowners, including farmers. In addition, multipurpose

development of the national forests and other Federal forest land should
be pushed to help meet national needs.
Minerals. Ample supplies of all essential minerals are vital to an
expanding economy and for the Nation's security. Those minerals with
which we are well endowed, such as coal and phosphates, should be mined
and utilized efficiently. Those minerals for which we depend on foreign
sources, such as tin, antimony, chromite, and strategic mica, will continue
to require stockpiling and intensive search for substitutes and alternative
sources of supply. Finally, those minerals for which we depend partially
on foreign sources, such as zinc, lead, copper and, increasingly, high-grade
iron ore, call for policies which emphasize stepping up the rate of discovery, improving mining methods, and developing commercial processes for
the utilization of low-grade ores. For petroleum, new techniques and
sources of supply from coal, natural gas, and oil shale will have to be
increasingly relied upon to prevent the reserve situation from deteriorating
and to meet the rapidly growing demand.
Regional development. Some large regions in the country possess the
basic raw materials, population, and locational advantages to support a
much higher standard of living, but are below the national average
in material well-being. They require large-scale developmental efforts
both for their own benefit and to contribute in larger measure to the
national welfare. The objective should be to narrow such differentials
by raising productivity and incomes in the lagging regions, particularly
through improvement in agricultural methods and land uses, further industrial expansion and diversification, and lifting education and health levels.
In recent years, large parts of the West have been growing, in terms
of per capita income and production, at rates well in excess of national
averages, but they are so meagerly equipped with capital and population
that they may accurately be termed underdeveloped. Programs for the
development of these regions are practical and productive, and should be
continued.
The Territory of Alaska furnishes a special case. Because of its resources
and its strategic location as our last northwest frontier, a concerted and
expanded effort on the part of public and private agencies and individuals for the rapid economic and social development of Alaska is required.
Regional development requires integrated programs of business, labor,
agriculture, and all levels of Government. The Council of Economic
Advisers, in cooperation with other agencies of the Government, is studying
this problem.

Business plant and equipment
Productive capacity. A growing economy requires balanced expansion
of our capacity to turn out consumer goods and crude and semi-finished
materials and equipment.
For the greater part of the last two decades, business expansion has been
irregular. In the worst depression years of the 30's, outlays were insufficient
even for normal replacement. Table 12, which covers producers' durable
equipment, shows how the rate of expansion varied from decade to decade
before the war.
TABLE 12.—Gross and net outlays for producers* durable equipment, by decades, 7869-7938
Billions of 1929 dollars , average
annual rate

Percentage of gross national
product

Decade
Gross
outlays
1869-78... .
1879-88
1889-98 .
1899-1908
1909-18
1919-28
1929-38

0.48
1.03
1.42
2.58
3.88
5.48
4.77

Replacement
0.27
.58
1.03
1.54
2.52
3.88
4.47

Net
expansion
0.20
.45
.40
1.04
1.36
1.60
.30

Gross
outlays
4.6
5.3
5.3
6.2
7.0
7.0
5.9

Replacement
2.7
3.0
3.8
3.7
4.5
5.0
5.5

Net
expansion
1.9
? <t
1.5
2.5
2.4
2.0
.4

Source: Simon Kuznets, National Product Since 1869, National Bureau of Economic Research, New
York, 1946.

New stimulus to business investment came with the defense program of
1940-41. But during the war, though certain critical facilities were expanded, we had to curtail many lines of civilian goods and expansion of
all facilities not contributing to war production. After 15 years of depression and wartime restriction, productive capacity was highly unbalanced and
generally inadequate to meet the peacetime demand. The high rate of
investment in new equipment during the past 2 years reflects in part the
efforts of producers to make up the deficiencies.
In some industries, present capacity appears adequate for the near future.
In others, such as electric power and petroleum refining, expansion of
capacity is substantial and is likely to continue for a considerable period until
a better balance between demands and capacity has been reached. In a
few industries, net capacity expansion during 1947 was less than that
required annually to sustain maximum production and employment.
The best available studies indicate that to attain the levels of employment
and output we hope to reach, we shall need substantial increases in the
output of such basic commodities as steel, petroleum products, coke, and

770958°—48

CHART 1 2

CAPACITY AND PRODUCTION
Many industries are operating at close to practical capacity.
INOEX (YEAR OF MAXIMUM
UTIL1ZATI0NM00)

150
125
100

PETROLEUM REFINING

* * * *

CAPACITY

75.

_f*—r*^

50
•

y ^ PRODUCTION

25
125
100

r
_

75
>+
^

ELECTRICITY

CAPACITY

H 50

PRODUCTION
.

- 25

STEEL INGOTS AND STEEL

CAPACITY

\ y
V
\

COKE

- ^ r - s ^ * ^ .

125
100
75

- 50

- 25

PRODUCTION

i
(00
75
- 50

S PRODUCTION

- 200
150
125
100
75

PORTLAND CEMENT
CAPACITY

~i i i i i i i i i r i i i I
1915

1920

1925

1930

- J PRODUCTION
nn

1940

1945

1950

HOTS: CAPACITY AND PRODUCTION FOR EACH INDUSTRY HAVE BEEN PLOTTED SO AS TO TOUCH AT THE YEAR WHEN THE RATIO
OF PRODUCTION TO CAPACITY REACHED ITS MAXIMUM. SUCH POINTS CORRESPOND APPROXIMATELY TO OPERATIONS
AT THE LIMIT OF PRACTICAL CAPACITY, THOUGH RATED OR THEORETICAL CAPACITY WOULD IN MOST CASES BE HlSHER.
ALL 1947 FIGURES ARE ESTIMATES BASED ON INCOMPLETE OAT A.
SOURCES. BUREAU OF MINES (COKE. CEMENT, AND PETROLEUM), FEDERAL POWER COMMISSION
(ELECTRICITY y , AND AMERICAN IRON AND STEEL INSTITUTE fSTEEL)

electricity. For these industries, the needed increases during the next 10
years range from 20 to 50 percent. Though such studies make no claim
to precision, the only reasonable expectation is that continued high-level
production will require large increases of capacity in the industries mentioned and in many others.
Chart 12 gives the historical perspective of expansion of capacity relative
to output in several important industries. The tightness of present capacity
is apparent. Potential stringencies are even greater than might appear
from the chart. For example^ if either freight cars or steel were more
plentiful, demand for many other commodities would increase, disclosing
further deficiencies in capacity. In fact, there are some industries where
present capacity is inadequate for current output, providing less elbow room
than management considers desirable for continuously efficient operation,
satisfactory servicing of the market, and emergencies. Dependable reserve
capacity of electric power generating facilities, for example, is normally at
least 15 percent of peak load for any system. Near the end of 1947, it
dropped to below 1 percent for the United States as a whole; in most areas
no reserve capacity was available and in some areas acute shortages exist.
The needed capacities for various industries are related. There is no
point in having capacity to make more automobiles unless we have capacity
to supply steel and other materials. The output of steel is limited by supplies of coke, scrap, steel furnace capacity, blast furnace capacity, finishing
capacity, and rail transportation.
The same principle applies to the development of raw-material-producing and raw-material-consuming industries. There is a serious question, in particular, whether our capacity to produce fuels and energy is
being expanded fast enough to meet the fuel and energy demands indicated
by expansion in other lines.
If the whole level of output is to rise steadily and rapidly with minimum
waste of capacity, the balancing of expansion in different industries calls for
considerably more thorough study than it has been given in the past.
Modernization of facilities. The amount of business capital required is
only partly measured in terms of scaling up capacity to meet enlarged demands. As table 12 indicates, a large and increasing share of outlays for
business equipment is devoted to replacement. The rate at which this
renewal and improvement proceeds is set not so much by physical wear and
tear as by the profitability of setting up facilities of new types, or for new
kinds of products, or at new locations. Industrial equipment and structures
are often obsolete long before they are worn out.
In deciding upon replacement, business has not felt it could afford to substitute new types of equipment for old as rapidly as the pace of technological
advance would make possible. This lag was accentuated during the war.

At its close the progress of industrial and business technology had accumulated a reservoir of potentially profitable opportunities for modernization.
If still more rapid technical advances are made and if prospective production economies justify the costs of accelerated modernization, both business investment and the rate of increase of productivity will exceed past
rates.
Programs and responsibilities. In a period of far-reaching economic
change, an adequate investment program of expansion and modernization
taxes the vision and initiative of business management. This is especially
true of the long-range planning of business expansion in a manner which
preserves proper relationships among the productive capacities of various
industries.
In a free enterprise system, business investment rests on profit expectations, which in turn reflect the outlook for consumer spending, costs of
production and investment, availability of improved techniques, availability of funds, and the degree of uncertainty and risk involved in gauging
these and other factors. The investment "program" is essentially the sum
of a great many private programs—privately planned, financed, and executed. Government investment and operation, in special cases such as
hydroelectric power and atomic energy development, clearly serve the public
interest. More generally, the Government can help to develop a favorable
climate which will encourage business to adopt adequate investment programs.
As the task of making up obvious war-accumulated deficiencies in productive capacity is completed, and as inflation is reduced, increasing attention
will have to be given to fostering favorable conditions for balanced expansion and for aggressive development of new fields of investment. The
most essential condition is continued acceptance and determined implementation of the national policy laid down in the Employment Act of 1946.
A policy of sustained maximum production requires that the actions of
business, labor and Government be based on broad agreement as to our
over-all economic goals and on a reasonable degree of assurance that
appropriate action will be taken to achieve them.
Transportation
In our far-flung economy, transportation needs are so obviously related
to the development of natural resources and industrial production that the
people long ago undertook through their Government to encourage and in
many cases to participate in the building of extensive transportation facilities.
Shipping. Maintenance of a healthy shipbuilding industry, capable of
rapid expansion, and the continued operation of an efficient and competitive
merchant marine, are not only necessary to national security but are also

essential elements in the achievement of a continued high level of employment in the United States. Except for a few ships which are urgently
needed now, construction of new vessels can well be deferred until inflationary demands have eased and materials are more readily available.
Our present needs for shipping should be met basically by the use of existing
war-built vessels. Meanwhile, the shipbuilding industry, by virtue of repair
and conversion of war-built ships, is operating at levels considerably above
the prewar average.
Highways. In the field of highway transportation, the Congress more
than 30 years ago created what is now the Public Roads Administration.
At that time, the Congress gave top priority to the problem of getting the
farmers out of the mud—providing access to our agricultural resources and
to markets for these resources. Although substantial progress has been
made in this direction, much remains to be accomplished. In addition,
major tasks before us are the efficient maintenance of rural roads, and
their reconstruction as age or increased traffic dictate.
The second objective, making it possible to get to and from cities, was
well on the way to attainment before the war, but we have lost ground
in the last 7 or 8 years. Costs of maintaining many of our highways are so
high that it is more economical to rebuild them. Maintenance and traffic
records indicate that within 10 years at least 45 percent of existing highways
will have to be rebuilt.
A third task, providing adequate facilities for intra-city traffic and healthy
urban growth, is one we have hardly begun to tackle. The Congress has
recognized the national importance of this problem by authorizing the expenditure of 125 million dollars per year out of the 500 million dollars
Federal-aid funds for building through arteries in cities. This is an important undertaking and deserves continued attention.
Air trnnsportation. The Government has undertaken a program of financial aid to air lines through mail payments under which rates of payment
are related to the operating income and operating expenditures of the air
lines and to the volume of the mail and the value of the service. Those
charged with the administration of this program are constantly testing its
effectiveness.
Government aid is most effective when it stimulates the resourcefulness
and inventiveness of private enterprise in developing and applying technological advances in aviation.
The Government has also expedited the construction of necessary airports
by sharing costs of construction of many publicly owned fields. The Federal Airport Act of 1946 authorized Federal expenditures aggregating 500
million dollars over 7 years. While that program is being completed, growing experience will furnish a basis for further decision as to the pattern of

the aviation network which national prosperity requires and how far it is
desirable to go in multiplying air lines and in furnishing to a multitude of
communities air transportation facilities with their accompanying burdens of
maintenance costs.
Railroads. A most urgent national problem in the field of domestic transportation is the maintenance of an expanding and efficient railroad service.
Large earnings of the war period permitted the more prosperous lines to
fortify their financial position and brought about the financial rehabilitation of many railroads which for years had been in receivership. These
great improvements in their financial position are rapidly being dissipated
by the effects of inflation, and the railroads will benefit as greatly as any
part of our business institutions from a successful effort to end the inflationary movement.
It is in the national interest to insure the continuance of efficient rail
transportation. Consolidation of facilities, though it has shown but little
progress after nearly 30 years of study and effort, offers such possibilities of
convenience and economy that it should be steadily pursued. We can be
optimistic about technical improvements helping to offset the rising costs
of wages and goods if management and labor are alert to the opportunities
which their introduction offers. The need must be recognized to protect the credit of the roads in order to enable them to finance the heavy
expenditures which are necessarily involved in these technical changes.
Urban redevelopment
Approximately three-quarters of our population and three-quarters of
our wealth are now essentially urban. Our cities, both large and small,
make up an integral part of the productive plant that we need for maximum growth. Improved planning and redevelopment of these cities will
not only enhance their physical usefulness as facilities for manufacturing
and commerce, but will also increase workers' productivity in a living environment more conducive to good health and high morale.
When land is assembled in suitable blocks to facilitate economic redevelopment, extremely large investment opportunities become available. The
construction industry will be called upon to supply management, labor to
supply skills, and manufacturers to supply building materials and all the
products and services which go into residences, schools, factories, offices,
stores, and the other elements which constitute the communities of today.
Moderate government outlays in redevelopment of urban areas will provide
large investment opportunities for private capital. It has been estimated
that over the next decade as much as 75 billion dollars—mostly private
investment—could profitably be employed in these redeveloped areas. This
is in addition to general urban public works.

It is none too early for basic planning of land acquisition and the
working out of financial arrangements for urban redevelopment. This
will permit rapid progress when there is less pressure on certain materials
in short supply, and when additional investment opportunities will aid in
maintaining maximum levels of employment and production.
The present acute housing shortage requires a large amount of new
construction in outlying areas before we can engage in slum clearance and
urban redevelopment on the large scale that will be needed. Some of this
suburban construction needs to be located in whole new communities with
adequate provision for municipal services, commercial facilities, and available employment opportunities. These need to be carefully integrated
with better planning of our present urban areas. Otherwise urban congestion will be aggravated and local governments, both central and suburban, will be faced with ever-mounting costs.
Private enterprise and local initiative alone cannot rebuild and modernize our cities. Private developers lack both the resources and the legal
powers to acquire land in large enough blocks to permit sound profitable
redevelopment. Local governments are obtaining powers of land assembly but lack financial powers to undertake the task on the scale needed to
encourage private investment and to permit cleared land to be made available at economically feasible prices.
Local governments should take the initiative in providing for site assembly and for area planning, and for streets, schools, and water, sewer, and
other connected facilities. State governments should provide enabling and
fiscal legislation. Under existing State powers, some worthy redevelopment
projects have been undertaken, but most informed sentiment is in general
agreement that some Federal aid is also required. The Federal Government
is also concerned with highways, airports, Federal buildings, and other
facilities as well as with slum clearance and low-rent housing.
I again urge that the Congress consider Federal aid to urban redevelopment along the general lines I have previously recommended.
Housing
We must maintain residential construction at much higher than present
levels in order to eliminate the quantitative shortage and also to replace
urban slums and rural shacks with an American standard of housing within
a reasonable period of time.
From the viewpoint of economic stabilization, there is a compelling reason for maintaining residential construction at consistently high levels. In
the past, the volume of housing production has fluctuated more violently
than any other major segment of economic activity. This is shown in
chart 13. The instability of housing has contributed significantly to the

CHART 13

RESIDENTIAL CONSTRUCTION AND
ECONOMIC ACTIVITY
Residential construction has fluctuated more widely
than other economic activities.
PERCENT OP 1920-39 AVERAGE

PERCENT OF 1920-39 AVERAGE
300
1 |

30a

//
J / L200
/

*
a re

/ j

200

1/
/

100

JL
~m

J
x

mOB

WEN7 'AL

L- LJ

t
*
/

Gh OSS NATIONAL PRODUGT^C

J 1

1920

1925

/
/

\£\/

RTMENT
Di
SI 'ORE SALes

r/?

1930

1935

I
I

100

pV 1

4- s. /

1i
1940

1945

(NC1UDES P/HVATC FARM AND N0NFARM AND PUBLIC.

SOURCES: DEPARTMENT OF COMMERCE (CONSTRUCTION AND GROSS NATIONAL PRODUCT1929-47),
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (DEPARTMENT STORE SALES), AND
HOUSING AND HOME FINANCE AGENCY (GROSS NATIONAL PRODUCT1920-28).

instability of the economy as a whole, and stabilizing residential construction
would be a powerful factor in helping to stabilize the general economy.
The importance of housing in the national economy is shown in chart 14.
A reasonably steady flow of house production, starting at a high level
and increasing gradually from year to year, is essential during the next
decade. Taking account of our growing population, the urgent desirability
of replacing substandard units as rapidly as possible, and the amounts of
home building that will help to maintain maximum employment for the
economy as a whole, we need an average of more than a million new urban
dwelling units a year for the next 10 years. The needs of rural areas are
also great.
During 1947, more than 850,000 new permanent nonfarm dwelling units
were started, and conversion and temporary units brought the total to more
than 900,000. Measured by volume and allowing for shortages of materials and the unusual strength of competing demands, this was a good
start for a 10-year program. But the record cannot be measured by volume
alone. When examination is made of the relationship between the cost of
this housing and our income structure, it is clearly apparent that most of

the housing is being built for families in the higher income brackets. To
the extent that families of low and middle income are being served, the high
cost is placing an excessive financial strain upon them.
The cost of housing has been getting further and further out of line with
incomes. Only a small minority of our families can afford to purchase
new houses of satisfactory size and quality. This is true despite the fact
that we have maximum employment and a high national income, and a
better income distribution than we had before the war. Unless housing
costs drop, the volume of private residential construction will almost certainly decline in coming years, placing new difficulties in the way of our
CHART 14

HOUSING EXPENDITURES IN RELATION
TO GROSS NATIONAL PRODUCT
Housing expenditures, doubled since 1939, hove increased
less than the gross national product.
GROSS NATIONAL PRODUCT

1939

1947

1939

/ NEW CONSTRUCTION, REPAIRS, ADDITIONS, ALTERATIONS, AND MAINTENANCE.
t RENT OF TENANT-OCCUPIED UNITS AND RENTAL EQUIVALENT OF OWNER-OCCUPIED UNITS,
3. FURNITURE AND HOUSEHOLD EQUIPMENT. FURNISHINGS, AND OPERATION SERVICES SUCH AS
FUEL AND UTILITY AND DOMESTIC SERVICES.
SOURCE* DEPARTMENT OF COMMERCE AND HOUSING AND HOME FINANCE AGENCY.

1947

maintaining maximum employment. The poor adjustment of housing costs
to income in the 1920's is precisely what caused a sharp and increasing
decline in home building which commenced four full years before the general
depression to which it contributed.
Industry and labor and local governments need to bend ever-increasing
efforts toward the abolition of obsolete practices and restrictions. Many of
these restrictions have developed as protective devices for individuals or
organizations caught in the insecurity of an industry subject to wide fluctuations. The fluctuations have caused the restrictions far more than the
restrictions have caused the fluctuations. Only an affirmative program
for stabilizing housing construction can clear the way for the elimination of
restrictions, reduction in costs, and adequate provision of housing.
Even the minimum housing program required embraces a number of
items. These include research and experimentation to devise better building techniques and concerted efforts to modernize building codes; land
assembly programs as an aid to housing; the use of Federal insurance to
stimulate longer term investment with lower financing charges both for
home ownership and for rental housing; special forms of insurance to
amplify the interest in large-scale projects already being shown by builders
and institutional investors who have the resources to lay the foundation
for the reorganization of the housing industry along more modern lines;
and the provision of publicly-aided housing in urban and rural areas—
on both a rental and home ownership basis—for families of low income.
On several occasions^ I have recommended the enactment of comprehensive, long-range housing legislation. Postponement of this action represents postponement of attention to a problem of utmost economic
importance.
DEVELOPMENT OF HUMAN RESOURCES AND PRODUCTIVITY

Even with modern factories, fertile fields, abundant sources of power and
raw materials, and smoothly flowing arteries of commerce, the growth of
our economy will depend ultimately upon the men and women whose mental
and physical energies constitute its greatest wealth. We have learned that
those programs which make people healthier and more secure also make
them more efficient. In this light, the educational and health and social
security programs which were once thought of as purely "social" take on a
deep economic significance.
Size and composition of the labor force
Our total population, now about 145 million, will continue to grow for a
number of decades at a rate exceeding prewar estimates. This is due to an
unusually high rate of marriages and births during and since the war together

with a steadily declining death rate. As a result of population growth and
plentiful job opportunities, the labor force, and particularly the employed
segment of the labor force, has expanded during and after the war.
Civilian employment is now 6 percent higher than the war peak and 26
percent above the 1939 level.
One result of the war has been to increase the employment of teen-age
workers, and of men and women in the older age groups. The exacting
economic demands of modern employment, no less than social considerations, should impel us gradually to reverse this trend. Educational and
retirement programs thus influence the optimum use of our labor force.
While these considerations should increasingly determine the size of
the labor force, there is the further question of its quality. The progress of industrialization has led to the use of more complicated equipment
although much of it is more automatic in its operation. This reduces both
the physical exertion and the need for manual skill of operatives generally.
At the same time, it increases the proportional demand for engineers and
supervisors of higher technical training. And while many operatives have
their task reduced to a simple routine, they assume new responsibilities for
the proper handling of expensive machinery.
As members of labor unions voting on strike action and other union
issues, and as citizens reacting to economic policies and candidates for office,
they need a higher degree of economic and civic education. The general
requirements of intellectual competence are steadily moving upward.
Moreover, the progress of modern technology, both industrial and agricultural, means that a smaller proportion of the population is required in
manufacturing and farming and more people are available for the service
callings and professions, where even higher levels of training are required.
This trend is reinforced because some of these areas will suffer from shortages of trained personnel for some time to come—teaching, medicine, and
nursing being the chief examples.
The adjustment of the labor force to the changing character of our
economy thus commences with the problem of education.
Education for the modern economy
With a higher average of competence required by our economy, the most
urgent educational problems now center in the elementary and secondary
schools. It is here that boys and girls receive their basic training and prepare themselves to absorb more specialized training.
The number of children of school age is increasing far more rapidly than
had been estimated before the war. In 1940, there were 27.6 million children between the ages of 6 and 17; by 1955 there will be more than 33.3

CHART 15

THE SCHOOL-AGE POPULATION
More children will require increased school facilities.
MILLIONS OF CHILOREN, AGED 6-17 YEARS
10

1940

1946
1955

I960
* BASED ON TOTAL POPULATION FORECASTS MADE ON THE ASSUMPTIONS OF HIGH. FERTILITY, LOW
MORTALITY,. AND NET IMMIGRATION OF I MILLION PERSONS EVERY 5 YEARS AFTER JULY I, 1945
SOURCE: DEPARTMENT OF COMMERCE.

million. By 1955, school enrollment should be more than one-third above
the 1940 level.
In the face of this need, our educational plant is desperately inadequate.
State school officials report minimum needs for 7.5 billion dollars of capital
outlays for elementary and secondary schools—twice as great as total construction expenditures for all levels of education during the decade of the
20's. Due largely to low salaries, the number of trained teachers is not
keeping up with the increasing need. These shortages in plant and personnel are much more serious in some regions than in others. While the 10
States with the highest per capita incomes are spending about $177 annually for each school child, the 10 States with the lowest per capita income
are spending only about $64.
This maldistribution of educational opportunities is both result and cause
of differences in wealth and income in the several areas. Some of the States
that are paying least per capita for education are devoting a higher percentage of their total revenues to educational purposes than others with
higher per capita outlays. Federal aid to elementary and secondary education should contribute to that equalization of opportunity in various parts
of the country which will fit our youth for living and working in the kind
of economy that we shall have when they are grown.

CHART 16

EDUCATIONAL EXPENDITURES IN
HIGH AND LOW INCOME STATES
Low per capita income means low educational standards
even with equal effort to finance schools.
EDUCATIONAL EXPENDITURES PER PUPIL

HIGH PER CAPITA
INCOME STATES

LOW PER CAPITA
INCOME STATES

EOUCATIONAL EXPENDITURES AS PERCENTAGE OF TOTAL PERSONAL INCOME

HIGH PER CAPITA I
INCOME STATES *

LOW PER CAPITA
INCOME STATES

1.8%

SOURCE: FEDERAL SECURITY AGENC*

A large proportion of the young people who are now crowding the elementary schools will progress through high school and enter college after
1955. They will replace the veterans who are now in college. Compared
with an enrollment of 1.4 million when the war started and a current enrollment of 2.4 million, we should now plan for an enrollment by 1960 of 4
to 5 million students in an expanded and improved system of higher
education.
I urge the Congress to consider a comprehensive program of Federal aid
to education and to enact immediately assistance to elementary and
secondary schools.
Research
The expansion of national output, as well as national security, depends
increasingly upon scientific accomplishments. Before the war, we drew

heavily upon the basic discoveries of scholars all over the world. The war
impeded this free flow of knowledge from other lands, and destroyed much
of it at the source. During recent decades our own progress in industrial
and agricultural research has been tremendous, but we cannot afford to
rest on our laurels. There is need for enlarged research, both in basic principles of physical, biological, and social science, and also in their practical
application.
Part of the expansion required to meet a reasonable goal of research
development will occur as part of the long-range growth of our economy.
Considerable growth in industrial research may be counted on. Existing
universities and research institutes will continue to make important contributions. But it is clear that the required expansion in research into scientific
principles and their application will be impossible without a comprehensive
program in which Federal aid should play a part.
Good health and productivity
Study of health records affords another example of the connection between
the economic objective of maximum production and the humanitarian objective of improved well-being. With the labor force at its present size, the
annual cost of illness, long-term disability and accidents is about 3,500,000
man-years. A part of this loss arises from improper working conditions.
Occupational diseases and industrial accidents also take their toll. An
even greater charge upon productivity are the millions of people who are
physically substandard without being disabled. Inadequate diet is impairing the strength of too many workers. Our goal should be the establishment of safe working conditions and an increase in the physical standards of the whole population.
This problem has economic aspects, not only because health standards
below the maximum attainable reduce productivity, but also because the
lifting of these standards requires economic measures which remove the
incapacity of many communities to support and of millions of individuals to
purchase adequate medical care.
On these grounds, I again urge the Congress to enact a comprehensive
national health program of the character I have already recommended.
Security and productivity
Job security. No matter how stable a particular business, industry, or
region may be, it can rarely avoid unemployment in the event of a serious
depression. A national policy of vigorously promoting maximum employment will be the longest step toward the sense of individual security which
is conducive to high productivity.
There is no substitute for this national policy, but it should be supple-

merited with planning by individual firms and industries for the stabilization
of their own activities. Wage security plans have been proposed, and a
report on this subject is being prepared by the Council of Economic Advisers.
Training programs, an adequate and efficient public employment service,
and other improvements of the labor market can all play their part. For
those who will be temporarily unemployed despite our best efforts, unemployment compensation should be increased in amount and duration, and
extended in coverage.
Maximum production must be based upon proof that it is not selfdefeating. Only by providing alternative jobs for those who suffer displacement, and by ironing out the fluctuations in business, can we convince
both labor and industry that restrictive tendencies are unnecessary for them
as well as hurtful to the economy as a whole.
Old-age security. The retirement problem has economic as well as
social aspects. Those who have withdrawn from productive activity because of age continue to require goods and services, and to make expenditures which flow into the general income stream. A systematic national
program which provides for regularity and certainty in the basic income
of those who have retired is a more efficient economic policy than the haphazard treatment of this problem which preceded the establishment of
old-age insurance. Such a system has the further advantage that it helps
to regularize the saving habits of workers during their productive years.
There are now more than 10 million people in the United States, about
8 percent of the total population, who have reached the age of 65. (See
appendix B, table XXXVI.) By 1960, about 15 million people, or about
9 percent of the population, will have reached that age. Our systems of
protection against the economic hazards of old age and dependency are
inadequate. There are now some 17 million jobs in which workers cannot build up wage credits for old-age retirement. The coverage of old
age and survivors' insurance should be extended, and benefits should be
adjusted upward with a higher limit upon earnings which may be received
after retirement without loss of benefits.
A lowering of the retirement age will be feasible in future years as we
attain the levels of national output that sustained maximum employment
and production will bring. At the same time, industry should provide
opportunities for the efficient employment of those older people who are
able and willing to work although they have earned the right to retire.
Public assistance. The social insurances are supplemented by publicassistance programs financed by States with the aid of Federal grants.
The public-assistance programs are now more significant, both in terms of
the number of people aided and in terms of total expenditures, than the
social insurances. About 4 million people now depend on public assist-

CHART 17

THE AGING POPULATION
The total population continues to increase rapidly,
with relatively more people over 65.
MILLIONS OF PERSONS

MILLIONS OF PERSONS

200

200
65 YEARS
AND OVER

160

120

20-64 YEARS

I
1900

40
UNDER 20 YEARS

1920

1940 1947

I960

1975

* FORECAST BASED ON ASSUMPTIONS OF HIGH FERTILITY. LOW MORTALITY, AND NET IMMIGRATION OF
I MILLION PERSONS EVERY S'YEAR PERIOD AFTER JULY I, 1945.
SOURCE : DEPARTMENT OF COMMERCE.

ance, in part because existing social insurances, particularly old age and
survivors' insurance, are deficient and because there is no national health
insurance program. Expansion of social insurance will decrease the need
for public assistance expenditures, but those who must still rely on public
assistance should receive adequate payments. The Federal Government
should make grants to States to help them finance general-assistance payments, and all public-assistance grants should take account of variations in
the ability of the States to finance adequate assistance programs.
Freedom from discrimination. Maximum employment and production
cannot be maintained when men and women are discriminated against because of race or color, creed or national origin. An effective system which
will assure fair employment practices should be established.

Fiscal aspects of benefit programs
The whole question of benefits cannot be divorced from the question of
the cost of the payments and how these costs are borne. It is of paramount
importance to bear in mind that the costs of unemployment, old age, and
sickness are borne by the community whether social security measures exist
or not. Social security measures involve a change in the distribution of
money, goods, and services among consumers only to the extent that the
existence of the measures diverts additional funds to the support of the
aided groups. This diversion does occur, but the additional funds are
far less than the total volume of benefits provided under the programs.
Nevertheless, the fact that wage earners' risks are met under social
security measures through payments derived from taxes rather than directly
from private sources in itself has economic implications. The social insurances are now financed by employees' contributions and employers' payroll taxes; the public assistance payments are financed from general revenues.
Employees' pay-roll taxes place a heavy drain upon mass purchasing power
while the employers' share of these taxes adds to costs of production. In
financing an expanded social-insurance program, these economic aspects
should be considered.
DEVELOPMENT OF INSTITUTIONS AND PRACTICES FOR A
HIGH-PRODUCTION ECONOMY

Preceding sections have discussed the means by which our natural resources, our capital equipment, and our human resources may be developed
to support a maximum level of well-being. But the ability to produce will
not alone assure economic stability and growth. Recurrent periods of recession or depression have led to the realization that maximum resource utilization depends upon many adjustments within our complex economy. It is
necessary for us to apply systematic forward thinking to the shaping of our
economic institutions and the practices of the men and women whose
behavior determines how those institutions will in fact operate.
The problem of progressively improving these institutions, policies, and
practices so as to attain balanced growth of the economy divides naturally
into four main parts: first, in the industrial area we need price-wage-profit
policies which maintain balance between the output of industry and the
ability of consumers to buy that output. Second, in the agricultural area,
we need balance between city and farm income and between farm and
industrial prices. Third, the fiscal policies of the Government, such as
taxation and debt management, need to be so contrived as to afford maximum incentives to production and to improve the balance within the
economic system generally. And fourth, we must strike a wise balance
between our internal economic activities and our international trade.
770958°—48

Industrial price-wage-profit policies
The national purpose of maximum employment, production, and purchasing power enunciated in the Employment Act of 1946 includes a declaration "to foster and promote free competitive enterprise and the general
welfare." Discussion of industrial price-wage-profit policies may therefore
quite properly begin with the problem of maintaining a truly competitive
system of free enterprise.
Maintenance of competition. To operate effectively without a high degree of Government intervention, a free enterprise economy must adjust
itself to changing conditions through appropriate movements of prices,
costs, and production. In a very vital way this depends on the maintenance
of fair competitive rivalry among business enterprises. This is recognized in
the long-standing policy embodied in the antitrust laws, the central purpose of which is to prevent monopolistic control of markets, and, in the
words of the author of the Sherman Act, to gain for the people the advantage of "the natural competition of increasing production."
Unregulated private monopoly tends to undermine independent enterprises and to create exaggerated extremes of wealth and power within the
country. Strong monopoly elements are likely to retard seriously the costprice-output adjustments necessary to economic stability with full employment. For these reasons, as well as for the other counts against unregulated
monopoly, there must be a strong and continuing pressure by the Government to keep alive the competitive characteristics of the business system.
If this were not to be done, we should have to look forward, first, to a great
increase of private monopolistic control of American business, and thereafter, since this would be intolerable, to a great increase in the public regulation of business activity, if not actual public operation in some fields.
In considering the character of competition in the future, it is impossible to ignore the tremendous changes which have occurred in the organization of business control over the past 50 or 60 years. From a situation in
which industry was typically organized on a small scale basis, we have
arrived at a situation in which there exist corporations of gigantic size. In
many industries one, two, three or four companies control a major fraction
of production. In many areas of industry, modern technology requires that
firms be of a very considerable size. The best opinion is, however, that the
largest enterprises in many industries are larger than is necessary to secure
the benefits of technical efficiency. In the future amendment and enforcement of the antitrust laws, the principle should be followed of checking
the further excessive concentration of industrial control and, by protecting
the position of smaller competing enterprises, of reversing the past trend
toward concentration.

Much of the adaptability of the American economy stems from the initiative and enterprise which give rise to small business concerns throughout
the Nation. They should have the opportunity to develop and prosper.
The existence of the antitrust laws, although not a sufficient basis for a
healthy development of new enterprises, is an essential condition. Beyond
this, we must insure that no artificial barriers to their growth exist either
through the tax laws or otherwise, and in particular that credit suited and
adequate to their needs is made available.
The present degree of concentration of economic power and the existence
of other monopolistic elements pose very grave problems. It was in recognition of this fact that the Temporary National Economic Committee was
set up in 1938 to engage in a far-reaching inquiry into business organization and practice. The central problems have not been altered by economic
changes in the intervening years and it is important that in the light of the
findings of the TNEC we move forward to a clear enunciation of public
policy and a program of public action.
The problem of price policies. The effect upon prices of corporate bigness and collusive monopolistic practices is only one aspect of a much wider
pricing problem. Many a business manager fears that the use of price reductions to expand his share of the market will merely result in retaliatory
price changes by other firms. Business therefore has sought, as far as possible, to place the competition for markets which it must meet upon some
other basis than price competition. The pricing system is thereby deprived
of much of the elasticity needed to adjust relative changes in cost and
demand.
Moreover, in the effort to realize profits through the ups and downs of
business, prices and profit margins are geared to the expectation that full
use of capacity is not a normal situation. This means that, in periods of
high production, pricing policies and practices are followed that produce a
level of profits designed to protect the individual company during future
declines in business activity rather than to contribute to the prevention of
such declines. Such policies are not conducive to the continued health of
the business community because they act on the assumption that it will not
continue.
The price mechanism may serve either to promote or to prevent a safe
balance among prices, wages, and profits. The greater the success of our
free enterprise system in maintaining this balance, the less need there will
be for direct governmental intervention in the economic system. This
imposes a heavy responsibility upon those business managers whose decisions
importantly affect the levels of prices, wages, and profits. Management
must recognize that sustained maximum production requires that gains in
productivity be passed on through lower prices and better wages to the

fullest extent consistent with adequate incentives to business enterprise.
The collective bargaining process to determine wages also plays a vital part
in the determination and maintenance of healthy price-wage-profit policies.
It cannot fulfill its function if it is used merely as a test of the sheer force
which one party or the other can exert in the pursuit of immediate selfinterest. Collective bargaining must be based upon a better understanding
of the long-range interests of management and labor in the context of the
interests of the whole economy.
The greatest opportunity for bringing about economic betterment lies in
achieving and maintaining a proper balance among prices, wages, and
profits. One of the purposes of the Employment Act is to provide a new
climate for pricing policies. The act contemplates that the combined
resources of business, labor, agriculture, and the Government will be used
to do away with business fluctuations of the violence known in the past. To
determine what price and wage policies and practices are appropriate to this
objective, a reexamination of the problem is necessary.
Therefore, I have instructed the Council of Economic Advisers to continue its work on this problem with the assistance of representatives of- all
groups concerned. The results of such a study should contribute to the
development of sound legislative proposals. But its most important outcome should be a wider and deeper understanding on the part of the
Government, business, labor, and consumer groups as to the price, wage and
production policies and practices which will contribute most fully to the
maintenance of high levels of consumption and investment.
Markets and income distribution. During the postwar period, our economic balance has thus far been maintained in the sense that we are still
operating at maximum levels of employment and very high levels of production. But the situation is precarious to the extent that the balance cannot
be maintained indefinitely without changes in the current pattern of
economic relationships.
The Nation's Economic Budget, in constant dollars, for 1939 and 1947,
shown on page 55 of this Report, indicates changes in the relationships of
the major components of the economy. At the present time, an unusually
large proportion of the market demand for goods and services results from
business investments, net exports, and Government outlays. These have
attained a level relatively higher than consumer expenditures, compared
with the prewar period. In terms of 1947 prices, annual expenditures for
producers' durable equipment have increased by 170 percent, while annual
consumers' expenditures have increased by only 48 percent above the prewar level.
We cannot regard the relationship between capital formation and consumption either in 1939 or in 1947 as a model for the future. Domestic

capital formation in 1939 was not sufficient. On the other hand, we are
now in the stage where the improvement and modernization of our national
productive plant has a high priority claim on our resources. Nonetheless,
after the most urgent deficiencies in our national plant have been overcome, and the extraordinary export surplus has been reduced, a very substantial increase, both absolute and relative, in individual consumption will
be possible and necessary. Without this substantial increase in the general
standard of living, we would not be able to sustain an expanding economy of
full resource utilization.
The increases in consumer incomes and expenditures which have taken
place over the last decade are the result not only of the general increase in
national income, but also of significant changes in income distribution. On
page 18 of this Report, estimates are presented which show the trend toward
better distribution of family incomes. This trend needs to be continued if
ready and constant markets are to be available for a potential increase of 35
percent in total output of goods and services within a decade. The trend
should be continued also because there are still millions of families whose
incomes are too low to provide a decent standard of living. A substantial
part of our increasing productivity should be devoted to the betterment of
these families.
An increase in full-time employment and in the number of employed
persons per family were important elements contributing to creating equality
of income during the past decade. But with maximum employment now
virtually achieved, further increase in these factors can no longer be
expected. Already, recent trends in the real incomes of individuals and
families indicate that we are losing some of the gains registered before
price inflation gained momentum in the middle of 1946. This price
inflation presents in a new and aggravated form the old and unsolved
problem of assuring continuous maximum production by maintaining the
maximum real purchasing power which must go with it without relying
too long upon the depletion of savings, extraordinary use of credit, and an
abnormal export surplus.
Our central problem is to make gradual readjustments so that the conditions for permanent stability are reached without generating a recession
of employment and business activity in the process.
Agricultural and food policies
The new farm problem. For two full decades after the first world war
congressional and executive policy was dominated by "surpluses" and low
prices for farm products. The trends in our economy since the start of
World War II have changed basic conditions so markedly that the farm

CHART 18

CONSUMER INCOME, FOOD CONSUMPTION,
AND FARM INCOME
Increased consumer income has brought higher food consumption,
and has raised farm income.
PERCENT OF 1935"39 AVERAGE

PERCENT OF 1 9 3 5 - 3 9 AVERAGE

1200

200
REAL DISPOSABLE PERSONAL INCOME
(PER CAPITA)*

150

100

100
CIVILIAN FOOD CONSUMPTION
(PER CAPITA)

fin 1

1 I

1 1 I

250

200

200
REA L NET FARM INCOME **
(PER CAPITA)

150

100

1930

50
1940

1935

1945

ADJUSTED FOR CHANGES IN CONSUMERS' PRICES
"NET INCOME OF PERSONS ON FARMS, FROM FARMING, ADJUSTED FOR CHANGES IN PRICES PAID BY FARMERS
FOR COMMODITIES USED IN FAMILY MAINTENANCE.

SOURCES: DEPARTMENT OF AGRICULTURE (FOOD CONSUMPTION, FARM INCOME, AND PRICES PAID BY FARMERS).
DEPARTMENT OF COMMERCE (DISPOSABLE INCOME AND POPULATION). DEPARTMENT OFLABOR (CONSUMERS'PRICES).

problem of today is not to dispose of surpluses but to get enough production
to prevent inflated prices. (See appendix B, tables VI and XIV.)
If we succeed in our efforts to maintain industrial stability, we can look
forward to many years of large markets and agricultural prosperity. Farmers have a large stake in this endeavor. The farm problem today and in the
foreseeable future should be stated in terms of a maximum production
economy. Farm policies should aim at continuing expansion.
To achieve stabilized farm prosperity, there will need to be changes in the
traditional patterns of farm production. Increased efficiency will be required to enlarge the total production of a farming industry which cannot
be materially increased in acreage. The depletion of our soil resources
during the war years calls urgently for the extension of conservation
programs.
Needed levels of farm production. The greatly increased demand for
food on the part of our civilian population was a remarkable feature of our
wartime economy. This profound change in eating habits, founded upon
higher and better-distributed national income, has continued since VJ-day.
In 1947, per capita food consumption was about 17 percent above the
1935-39 average. Among the items increasing more than the average
were chickens and turkeys, 33 percent; eggs, 28 percent; meats, 24 percent;
and fluid milk and cream, 18 percent. (See also appendix B, table XXXV.)
In view of the growing population and expanding income, we should
seek within a decade to raise agricultural production about 10 percent
above present levels. This would mean that crop production would be
about 25 percent, and livestock production nearly 50 percent, above prewar
levels.
Increasing farm productivity. Achievement of the high objectives set
for agriculture will require efficient use of resources. This means increasing emphasis upon research and education to improve technology. It will
necessitate an increased capital investment per worker, to raise the individual's productivity about 50 percent above the prewar level. It will also
mean using two or three times as much fertilizer as before the war, about
three times as many tractors on farms, and more of other types of machinery and equipment.
There are still tremendous variations in the efficiency of farm manpower
use. Many farms are well organized. But some 2 or 3 million are too
small or have poor land or have inadequate buildings and equipment.
There is need to increase the efficiency of labor on such farms, and to help
some farmers and farm laborers find other, more profitable, employment.
More adequate educational and financial aids should be provided for this
purpose.
Security for agriculture and the farm market. Both farmers and con-

sumers should be protected from the feast-and-famine cycle that the vagaries
of nature impose from time to time on farm production. Technological
progress will reduce this problem, but there will be continuing need for crop
insurance and for storage programs for staples and marketing programs
for perishables. Orderly marketing and the widest possible distribution of
bumper crops call for educational and service work with industry and consumers in moving large supplies.
Great opportunities exist for further advances in marketing farm products through intensified research and through educational and service programs. From the farmer's standpoint, marketing improvements mean wider
outlets and more adequate returns for his product. From the consumer's
standpoint they mean both savings in costs of these products and better,
more adequate, and more conveniently available supplies.
Commodity price supports are desirable as assurances against special dislocations which might arise in case of recession. I emphasize, however, the
need for keeping support levels flexible. I am glad to note the effort currently being made by various groups, outside as well as inside the Government, to modernize and improve the parity formula.
I also realize the stake of many American farmers in maintaining a stable
and satisfactory foreign market. Our farmers should continue to export
substantial quantities of wheat, cotton, tobacco, rice, and fruit. Though
export demands, especially for grain, are now at a high level, some of our
more difficult long-term problems are in the foreign trade field.
Interdependence of farm and city. Maintaining an expanding demand
for farm products depends not only on maximum employment for the
whole economy, but also upon raising the incomes and living standards of
those portions of the urban population who have suffered from excessively
low incomes even in times of prosperity.
So long as 13 percent of our total families have incomes under $1,000 a
year, and 28 percent have incomes under $2,000 a year, as is shown in
table 3 on page 19, the dietary standards of these low-income families
cannot comport with the true meaning of maximum production for agriculture. Studies made in 1941 indicated that the families and single individuals having incomes of $2,000 or more—enough to satisfy their food
wants fairly liberally at the price level then prevailing—bought 60 percent
more fruit, 25 percent more vegetables and meats and milk, and 10 percent
more eggs than the average for the population as a whole. This means
that minimum wage and other programs designed to encourage a better income balance throughout the wage-earning population should be regarded
by the farm population as serving their interests also. The farmer is a
prime beneficiary of well-distributed prosperity.
High and stable levels of food consumption are essential to a prosperous

agriculture. When demand is high there is little need for direct price
supports. Programs to maintain food consumption can go far to prevent
economic recessions, to maintain good markets for farmers, and to safeguard the diets and health of the public. Our agricultural and food program
should therefore give increased emphasis to measures designed to protect
the diets of such groups as school children and low-income families.
Just as the farmer sells to the city and depends upon urban prosperity,
so also the products of industry are sold to farmers in larger quantities
when there is farm prosperity.
The relatively low income of farmers before the war was proverbial.
Its effects on the demand for industrial products are equally striking. This is
shown in the following figures comparing per capita net income from farming of farm people with what they bought, in three significant years:
Farm income, per capita: 1929—$223; 1933—$90; 1947—about $725.
Farm implement sales: 1929—519 million dollars; 1933—177 million dollars;
1947—around 850 million dollars.
Mail-order sales: 1929—447 million dollars; 1933—220 million dollars;
1947—over 1,100 million dollars.
Feed and farm supply store sales: 1929—1,119 million dollars; 1933—463
million dollars; 1947—nearly 3 billion dollars.

Despite recent gains, the purchasing power of many farmers is low compared with that of nonfarm people. The average per capita income of
farm people derived from all sources was $779 in 1946, while the income
of nonfarm people was $1,288. This low average for farm people reflects,
not low farm prices—prices were high—but the low productivity of many
farmers.
The more widespread enjoyment of satisfactory incomes in farm areas
will provide enormous new outlets for industrial products. As recently as
1945, only 58 percent of all rural homes had refrigerators or ice boxes;
only 46 percent had electric irons, and only 28 percent had running water.
Since then, the installation of these conveniences in farm homes has given
businessmen and wage earners some conception of the large stake they
have in the maintenance of farm prosperity and its extension to an everincreasing number of farm families. Electrification, particularly, is providing for farmers a vast range of labor-saving equipment and living conveniences and is creating an increasing market for industrial products.
Our economy is indivisible. Maximum production and purchasing
power in the city and on the farm are inseparably connected. As shown
by the relative instability and inadequacy of farm income in the past, and
the impact of this upon the whole economy, the economic future of the
country as a whole will require concentration upon those policies which

will enable the farm population to share equitably in economic growth
and in the improvement of living standards.
Taxation and debt management
Taxation. The first feature of our long-range tax policy must be
the maintenance of tax revenue which, except in years of depression,
will balance the Federal budget and provide a substantial surplus for debt
retirement.
It is a remarkable feature of the postwar period that there has been so
little fear of the effects upon the national credit or upon the national
well-being of a public debt ten times as large as the debt which a dozen
years ago was causing much uneasiness in the financial world. But although
we have learned that an enormous public debt is not necessarily ruinous to
public credit nor destructive of national prosperity, we should never forget
that within it is a sleeping danger. If less propitious conditions arise within
the economy, the public debt may indeed be found a serious burden upon the
process of readjustment. Every consideration of prudence with respect
to future problems of the national economy and of the national credit in
critical circumstances requires a firm and sustained policy of reducing the
public debt.
The second requirement of our long-range tax policy is that the tax rates
and the character of the taxes be such as to help sustain prosperity. This
cannot be done by a tax structure that remains the same regardless of
changing economic circumstances. Lowering particular taxes on business
may at one time be needed as a means of stimulating business expenditures
when they are inclined to lag, but maintaining or advancing taxes at another time may be needed as a means of checking overexpansion or overcapitalization. These adaptations can be made without the injection of
uncertainties into businessmen's calculations greater than those they are
already accustomed to deal with. Similarly, the abatement of taxes on
consumers or certain classes of consumers may at one time be important
as a means of supporting their purchasing power, whereas at another time
the maintenance or increase of taxes may be the most effective means of
damping an inflationary tendency.
There is an obvious conflict between the desire of consumers to have
taxes upon their incomes reduced and the desire of business to be relieved
of taxes which figure in operating costs or which lessen the funds that they
have for reinvestment and business expansion or that large income receivers
have available to invest as equity capital. This conflict of private interests
must, in the consideration of tax policy, be resolved by the Congress through
adjustments which will promote the most prosperous and stable economy.
There is no formula by which the best distribution of the tax burden can

be determined. However, the lessons of wartime and early postwar experience seem to indicate that for the sustaining of an economy of maximum
production and a market commensurate with this rate of production, more
concern will need to be directed during the years just ahead toward easing
the tax burden on the consumer than toward accelerating the rate of
capital formation.
Debt management. The vast increase in the public debt has not created
the difficulties that many people feared, partly because our national debt
is owned by our own citizens, and partly because of the technical skill with
which the debt has been managed jointly by the Treasury Department and
the Federal Reserve System.
A most important part of our debt-management policy has been the
program to support the market for Government securities. During the
war period, when it was vitally necessary to maintain a market which
would absorb vast issues of securities at low interest rates, the Federal
Reserve stabilized the market through its open market operations in buying and selling short-term Government securities at low rates of interest.
Now that it is no longer necessary for the Government to increase its
debt, short-term interest rates have been permitted to rise. A decline
has also been permitted in prices of bonds from the premium prices to which
they had risen as a result of market demands in the early postwar period.
No bonds, however, have been permitted to fall below par and it is the
declared purpose to continue active support of Government bonds for the
purpose of maintaining an orderly and stable market at a low level of
long-term interest rates.
The established policy of supporting the market for Government securities makes it possible for banks to obtain additional reserves, on the basis
of which to expand credit, by selling part of their large holdings of securities to the Federal Reserve. This policy, therefore, does not permit the
Federal Reserve to make effective use of the traditional method of limiting inflationary movements in the economy by requiring banks to borrow
in order to obtain additional reserves and by raising the discount rate
charged on such borrowings. The result of such a policy would be an
increase in general interest rates. If the rate of interest upon other investments rose, they would become more attractive than Government bonds,
both to banks and to other investment holders, who would call upon the
Federal Reserve banks to buy bonds. Any purchases by the Reserve System would offset the effects of the restrictive discount rate policy.
In the recent congressional hearings there have been proposals to solve
this dilemma by abandoning the support policy and freeing the Federal
Reserve banks to bring about an anti-inflationary contraction of credit by
increasing the discount rate, as was done in 1920. No such change in

policy should be considered. The financial world should rest easy that
the investment market will not be subjected to the demoralization which
swept over it in 1920 when the unsupported market for Government bonds
fell about 20 percent below par.
Affirmation of a policy of supporting the Government bond market as a
continuing program of the Government requires the use of other and less
dangerous methods to restrain inflationary bank credit. Voluntary but
effective restraint by the banks of inflationary bank credit expansion may
prove adequate to the problem. If it does not, more direct action by the
Federal Reserve banks will be required. Such actions as may be taken will
not involve withdrawing support from the Government bond market.
International economic relations
The far-reaching effects of World War II upon the use of economic resources and upon the trade and business relations between nations will be
felt for many years. The enormous destruction of the physical and organizational basis of production spread over most of Europe and parts of Asia,
while elsewhere many new industries were developed and old ones stimulated. In the reconstruction process many alterations in the patterns of
economic organization and trade relations are taking place. Great Britain
is engaged in a difficult task of industrial and trade rehabilitation, while
two other former leading industrial nations, Germany and Japan, are now
thrust into minor roles.
The relative importance of the United States in the world economy has
been greatly enhanced, partly because some of the older great nations have
suffered adversity, but primarily because of our own increase in production.
Although other nations fortunately possess most of the resources which they
need for reconstruction, certain critical resources, such as food and machinery, which are needed to revitalize their productive energies, can be
supplemented only by supplies from the United States and other countries
of the Western Hemisphere. The program which I have asked Congress to
authorize in order to assist European recovery over the next 4 years may
make the difference between success and failure of world reconstruction.
The changing economic position of the other industrial nations is of
great significance. During the war and its aftermath, many areas that
formerly looked to these nations for industrial products have become intent
upon their own industrial development. They cannot secure supplies sufficient to meet their increased requirements for capital goods from their traditional trade sources, and they are beckoning increasingly to American machine makers, to American capital, and to American skill in management and
production.

A development which we cannot yet evaluate is the growth of the policy
of state control of foreign trade in many countries. Because of critical
shortages throughout the world there has been little relaxation of the wartime controls over exports, imports, and foreign exchange, and the course
of action in some countries indicates a purpose to continue these controls.
Our experience, however, shows that the difficulties of trade between a
nation with state control and a nation with free enterprise can be surmounted and they can be expected to diminish as goods become more
readily available in world markets.
Other developments bound to affect the course of trade are the occupation of Germany and Japan and the emergence of several new independent
and self-governing states.
Against this background of new developments we can place the more
familiar consideration of our own requirements. For some commodities
we must have foreign markets or undertake a serious task of shifting our
resources. A substantial part of agricultural and industrial employment is
in production for export. On the other hand, our need for imports, especially of raw materials, will increase, notwithstanding our progress in the
production of substitutes for such materials as natural rubber and silk,
two of our most important prewar imports. The great enlargement in national production which has been portrayed in this Report requires a corresponding increase in those raw materials which come from abroad and in
many other goods and services supplied by foreign countries. The heavy
drain of war production upon our own natural resources must be remedied
by a conservation policy supported by heavier imports, and the national
security must be fortified by stockpiles of strategic materials which we do
not produce at home.
Undeterred by the uncertainties arising from new political and economic
conditions, this Government has been striving consistently to promote recovery and reconstruction efforts which would eventually contribute to
mutually profitable and harmonious international economic relations. In
addition to relief and reconstruction aid, we have supported within the
framework of the United Nations a series of international organizations,
such as the International Bank for Reconstruction and Development, the
International Monetary Fund, and the Food and Agriculture Organization,
to cope with the different categories of economic problems. This vast effort
is now well advanced and many of these international organizations are
already operating.
Still in process of creation is the International Trade Organization. The
draft charter of this organization lays down a code of fair play in the international trade field. Nondiscriminatory and multilateral trade unhampered by high barriers, is the central aim of the proposed organization.

A major step toward this long-range goal is the General Agreement on
Tariffs and Trade, recently concluded between ourselves and 22 other
countries. This agreement reduces or eliminates preferences affecting a
large part of our trade with the British Commonwealth. It provides for
reductions of many tariffs and the maintenance of a low rate or free entry
on other products. These concessions are protected by provisions designed
to prevent participating countries from resorting to alternative means of
restriction or discrimination. Like the proposed charter of the International Trade Organization, this agreement will help establish conditions
under which world trade can flourish in less troubled times and under
which the present reconstruction efforts can be carried forward.
The recovery of foreign production and ability to export, our own high
demand for imports, and the international agreements to reduce obstacles
to trade may be expected to help other countries buy our products in the
future without depending upon the extraordinary financial assistance that
is now required. Nevertheless, it is natural and desirable that we maintain
some surplus of exports in the years ahead by the steady investment abroad
of private capital. It is desirable both from our point of view and that of
other countries that we, a country rich in capital, make some of our savings
available to areas where capital is needed and where properly safeguarded
private investments can earn a good return.
THE TIMING OF ECONOMIC PROGRAMS TO PROMOTE STABILIZATION

While it is most urgent now that we combat inflationary dangers, we
cannot wait until the tide turns before considering affirmative measures
that will be needed in the future. Economic conditions may turn rapidly,
but the formulation, enactment, and initiation of economic and fiscal
programs require a considerable amount of time. Prudence demands
that we look ahead and prepare for tomorrow while we act for today.
In timing the adoption of measures for long-run prosperity we must give
careful consideration to the following principles:
(1) Certain programs related to national security and foreign policy, to
promotion of urgently needed production, and to protection of our natural
and human resources against serious economic hazards must go ahead even
though Government outlays for foreign or domestic programs contribute to
the necessity of anti-inflationary measures.
(2) Certain adjustments, such as the increase in minimum wages and
tax adjustments, are needed in order to mitigate the hardship imposed on
those who are the hardest-hit victims of the inflationary price rise.
(3) Major parts of the proposed expansion in the social security program
will be deflationary in the first period after inauguration. Therefore,

there is no reason to postpone the adoption of these urgently needed
measures.
(4) Federal, State, and local public works in general should still be deferred wherever feasible. We need, however, certain initial steps immediately to prepare these measures for future years. For instance, the Federal Government and State and local governments should be preparing
drawings and specifications for public-works projects to be undertaken
when needed. In my budget for the fiscal year 1949, I have included
appropriation requests and estimated expenditures in amounts sufficient
for the initial steps of new public works.
(5) When the inflationary pressure subsides, we should speed up the
programs of resource development, transportation, and urban rehabilitation, and further expand the social security, health, and education programs.
Since our first experience with the Employment Act is occurring under
conditions that give priority to measures needed to counteract inflation, we
are given time to consider carefully the measures that will aid in meeting
the threat of unemployment at some time in the future. But we must not
fritter away the time thus granted us. We must not be complacent and believe that the job of employment stabilization has been solved. A boom carries in it the seeds of its own destruction. We must be prepared to act in
time if we want to make good our promise and prove to the world as well
as ourselves that an economic system of free institutions can be made to work
steadily as well as efficiently.

Appendix A
CONTENTS
Page

I. The Nation's Economic Budget,
Explanation of the tables
The constant dollar estimates
II. The Federal Budget
III. The distribution of income, prewar and postwar

92
92
97
98
102

List of Tables

I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.

The Nation's Economic Budget
Consumer account
Business account
Net exports and net foreign investment
Government cash receipts and payments to the public
Adjustments to receipts (or income) in the Nation's
Economic Budget
Adjustments to expenditures in the Nation's Economic
Budget
Federal cash surplus, calendar years 1946, 1947, andl948.
Federal cash receipts from the public other than borrowing,
calendar years 1946, 1947, and 1948
Federal cash payments to the public, calendar years 1946,
1947, and 1948
Reconciliation of Budget receipts with cash receipts from the
public, calendar year 1947
Reconciliation of Budget expenditures with cash payments
to the public, calendar year 1947

770958°— 48

92
94
95
96
97
97
98
99
99
100
100
101

I. The Nation's Economic Budget
Explanation of the tables
Table I presents the Nation's Economic Budget for calendar years 1939,
1946, and the first and second half of 1947.
T A B L E I.—The Nation's Economic Budget
Calender years 1939,1946; and 1947
[Billions of dollars, current prices]
1947, seasonally adjusted annual rates
1939

1946
First half

Second half»

Economic group

2+1

1+1

CONSUMERS
Disposable income
Expenditures

—

158.4

70.2

67.5

170.3
143.7

+2.7

180.8
160.0

+14.8

19.0

+10.3

+11.8

BUSINESS
Undistributed profits and
additions to reserves
Gross private domestic investment
Excess of receipts ( + ) or
investment (—)

13.3

17.8

17.4
24.6

9.0

-0.4

29.3

31.7
-11.9

-11.3

-13.9

INTERNATIONAL
Net foreign investment...
Excess of receipts ( + ) or

4.8

0.9
-0.9

9.4

8.2
-9.4

-4.8

-8.2

investment (—)
GOVERNMENT
(Federal, State, and local)
public
Cash
receipts from the
Cash payments to the
public.
Excess of receipts ( + ) or
payments (—)

15.0

56.5
17.6

58.7
55.2

54.2

+1.3

-2.6

52.7

+6.0

+5.5

A D J U S T M E N T S (To
arrive at gross national
product)
For receipts.,.
For payments
Total Gross National Product

-3.3

90.4

-3.3 -24.5

-4.5 +4.5
90.

-24.

-24.5 +24.

203.7 203.7

-21.4

-21.4 - 1 9 . 8

- 2 6 . 8 +26.8

226.1 226.1

-19.8
-24.1 +24.1

237.4 237.4

* Based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.

Sources. The Nation's Economic Budget is based on the estimates of
national income and product by the Department of Commerce, and of

Government cash receipts and payments by the Bureau of the Budget.
Corporate profits before and after taxes in the last half of 1947 are the tentative estimates of the Council of Economic Advisers. All estimates for the
second half of 1947 are preliminary and subject to revision.
A number of the principal series comprised in the national income and
product estimates are shown in appendix B, tables I through IV (by calendar
years from 1929 through 1945 and by quarters for 1946 and 1947). Those
desiring more detailed information are referred to the National Income
Supplement to the Survey of Current Business, published in July of 1947.
Appendix A of the Economic Report of January 1947 contains a general
description of the income and product flows depicted in the Nation's Economic Budget.
Change in treatment.
For purposes of statistical simplification a
minor change in treatment has been incorporated in the present estimates
of the Nation's Economic Budget from that used in previous reports to the
Congress. The Nation's Economic Budget presents Government receipts
and expenditures on a cash basis. In estimating business and personal
income and expenditures the Department of Commerce does not reckon
the transactions of individuals and businesses with the Government on a
cash basis; e. g., corporate taxes correspond to liabilities rather than payments. Adjustments were formerly made in the income of business and
consumers, as estimated by the Department of Commerce, to place these
accounts on a cash basis as far as transactions with the Government are
involved, thus making them consistent with the Government accounts in
the Budget.
It has been decided, however, that the advantage of conceptual consistency in the Nation's Economic Budget table is outweighed by the complication of having two sets of estimates of income which are similar in purpose
and differ only for technical reasons. Consequently, all adjustments are now
consolidated in the "adjustment" item at the bottom of the Nation's Economic Budget table, and the consumers' and business account correspond
with the Department of Commerce concepts.
The simplification is most important in the business income account. The
latter has formerly included a considerable number of adjustment items,
mostly representing transactions with the Government, which made the
adjusted total differ markedly from the accounting concept of business
income. For example, the difference between business tax liabilities and
payments to the Government, as well as receipts from the sale of surplus
property, were formerly adjustments in business income. The present
treatment of business income, which corresponds more closely to business
usage, is described below.

The Accounts
Consumer account. Table II below shows the principal sources of
personal income, personal taxes, and a break-down of expenditures by
important classifications. Consumer income includes the net profits of unincorporated business. Expenditures exclude purchases of new homes but
include imputed rent on owner-occupied dwellings.
TABLE II—Consumer account
Calendar years 1939,1946, and 1947
[Billions of dollars]
1947
seasonally adjusted annual rates
Receipts or expenditures

1939

1946
First
half

Receipts:
Personal income 2
Labor income
Proprietors and rental income—.
Dividends and interest
_
Transfer payments 8
Veterans*
Other
Less: Personal tax and nontax paymentsEquals: Disposable income

2.4
70.2

177.2
110.8
41.8
13.3
11.3
6.9
4.4
18.8
158.4

191.6
119.8
47.1
14.0
10.8
6.2
4.5
21.3
170.3

202.9
126.2
49.0
14.8
12.9
7.6
5.2
22.0
180.8

67.5
6.7
2.1
3.4
1.2
35.3
19.3
7.0
9.0
25.5
8.9
16.6
2.7

143.7
14.9
3.6
7.7
3.6
87.1
51.7
18.9
16.5
41.7
12.7
29.0
14.8

160.0
18.9
5.7
9.4

169.0
20.5
6.4
10.2
3.9
101.7
61.6
20.4
19.7
46.8
13.9
32.9
11.8

72.6
45.7
14.7
9.2
3.0

Expenditures—Total
Durable goods
_
Automobiles and parts
Household equipment and furniture..
Other
Nondurable goods
Food*
Clothing and shoes
Other nondurable goods
Services
Housing
Other..Saving
-

Second
half*

58.3
19.5
18.8
44.6
13.1
31.6
10.3

i8 Preliminary estimate based on incomplete data.
Includes employer disbursements for wages and salaries minus employee contributions for social insurance
3 plus other labor income.
Includes business transfers.
* Includes military pension, disability and retirement payments, mustering-out pay, readjustment, selfemployment
and subsistence allowances, terminal leave bonds, and other miscellaneous payments.
8
Includes alcoholic beverages.
NOTE.—Detail will not necessarily add to totals because of rounding.

Business account. The business income acocunt is shown in table III.
Business income includes undistributed corporate profits, and the adjustment
for corporate inventory valuation, plus capital consumption allowances for
all business. Because there is no information on entrepreneurial withdrawals, it is impossible to include an estimate of retained earnings for unincorporated business. Thus the true amount of business saving is understated
and personal saving over-estimated by an equal amount. Since investment
includes the investment of all business, including the investment of individuals in homes, business income and expenditures are not entirely
comparable.

TABLE III—Business account
Calendar years 1939, 1946, and 1947
[Billions of dollars]

Receipts or investment

1939

1946

1947
seasonally adjusted annual rates
First half

Receipts:
Corporate profits
Less:
Corporate profits tax liabilities
Dividends
_____
Equals: Corporate undivided profits
Plus: Capital consumption allowance
Less: Corporate inventory valuation adjustment

6.5
1.5
3.8
1.2
8.1
.7

Equals: Undistributed profits and additions to reservesDomestic gross investment:
Construction
Residential, nonfarm
Nonresidential
Producers' durable equipment
Change in business inventories
Total.

___

4.0
2.1
1.9
4.6
.4

21.1

28.2

27.8

5.6
6.9
11.0
4.7
13.3

11.2
6.3
10.7
12.0
5.4
17.4

11.1
6.8
9.9
12.3
4.4
17.8

8.5
3.3
5.2
12.4
3.7

10.0
4.3
5.7
17.3
2.1

11.2
5.3
5.9
18.0
2.5

Excess of receipts (+) or investment (—).

Second
half*

9.0

24.6

29.3

31.7

-.4

-11.3

-11.9

-13.9

i Preliminary estimate based on incomplete data.

The adjustment for inventory valuation arises out of the definition of
gross national product or income. The increase in the physical volume of
inventories, measured in current prices, is included as part of the gross output of the economy, and the income derived therefrom as part of the gross
national receipts. When prices are rising, the value of inventories increases
more than the increase in physical volume, since the value of the existing
stock rises as units are sold and replaced at higher costs. Income arises in
the form of "windfall" profits which are not derived from current production. The inventory valuation adjustment measures this income. By
deducting this adjustment from retained corporate profits, income and output are obtained on a comparable basis. (It should be noted that an adjustment for noncorporate inventory valuation is made in business and professional income by the Department of Commerce.)
The investment items shown in the business account cannot be totaled
to indicate the amount of funds required for financing. For example,
investment includes only that part of an increase in the value of inventory arising from an increase in physical volume, while the whole
amount of any increase in the value of inventories must be financed. Needs
for capital also arise in connection with the transfer of fixed assets, though
such transfers are not reflected in the gross national product. In addition,
some investment in equipment is financed through depreciation allowances
and some is charged to current expense. Agricultural equipment is fre-

quently financed out of farmers' current income and residential construction
by the owner-occupant. Thus these investments do not give rise to financing
requirements in the usual sense.
International account. Net foreign investment equals the excess of
goods and services supplied to foreign countries, including income on capital
supplied to them, over goods and services received, minus the excess of
unilateral transfers to foreign countries over transfers to the United States.
The net balance of unilateral transfers or gifts to foreign countries by the
United States Government is included in Government expenditures for
goods and services, while private gifts to foreign countries are included under
consumers' expenditures in the Nation's Budget. Such transfer expenditures are therefore deducted from exports in order to avoid double counting.
Unilateral transfers do not constitute the entire means of financing exports
made available by the Government, but only that portion which is a gift
and which consequently does not constitute investment abroad. The total
of Government aid used in financing exports in 1946 and 1947 is shown in
table 5 page 28 of the text and in greater detail in appendix B, table XXXI.
The derivation of net foreign investment from the excess of exports of goods
and services is shown in table IV below.
TABLE IV.—Net exports and net foreign investment
C a l e n d a r y e a r s 1939, 1946, a n d 1947
IBillions of dollars]
Annual rates
1947
Exports and investment

1939

Net exports of goods and services
_
Less: Net balance of unilateral transfers:
Government
Private.
Equals: Net balance of payments on current accountLess: Adjustment for expenditures in United States territories.
Equals: Net foreign investment

1.1
.2

1946

First
half

Second
half*

8.1

11.8

11.1

2.4
.7
5.0
.2
4.8

1.8
.6
9.4

8! 2

9.4

8.2

2.2

i Based on incomplete data.

Government account. A break-down of Government cash receipts and
payments to show Federal, State, and local governments separately is shown
in table V. (The derivation of Federal cash receipts and payments from
budgetary receipts and payments, as well as a break-down of Federal payments by functional classification and Federal receipts by source are shown
in section I I of this appendix.)
Adjustments to receipts and expenditures. The gross national product
for any period is the current output of the economy valued at prices to the
final user. Gross national expenditure is confined to expenditure for that
output, and gross national receipts to income arising from that output.
Expenditures or receipts arising from the sale of assets existing at the be-

T A B L E V.—Government cash receipts and payments to the public
Calendar y e a r s 1939, 1946, a n d 1947
[Billions of dollars]
1947 seasonally adjusted annual rates
Receipts or payments

1939

1946
First
half

Receipts:
Federal.._
State and local *
Total receipts
Payments:
Federal
State and local *

Total payments
Surplus (+) or deficit (—)

Second
half i

6.6
8.4

45.5
11.0

47.7
12.0

15.0

56.5

59.7

58.7

9.5
8.1

45.3
9.9

42.7
11.5

39.9
12.8

46.1
12.6

17.6

55.2

54.2

52.7

-2.5

+1.4

+5.5

+6.0

i Based on incomplete data.
3
Excludes Federal grants in aid.

ginning of the period are not included in these concepts, nor are sums transferred in the form of gifts, pensions, annuities, etc.
Tables VI and VII show the deduction which must be made from the
sum total of receipts and of expenditures to eliminate capital transactions,
transfer payments, and double counting in the estimate of the gross output
or income.
T A B L E VI.—Adjustments

to receipts (or income) in the Nation9s Economic

Budget

Calendar years 1939, 1946, and 1947
[Billions of dollars]
1947 seasonally adjusted annual rates
Description

1946
First
half

Total receipts (or income).Less: Income not derived from current production of goods and
services:
(a) Net interest payments by government
(b) Transfer payments to individuals
.__
(c) Subsidies less current surplus of Government enterprises. __
(d) Receipts from sale of surplus property 2
Adjustments to Government cash receipts
Statistical discrepancy
Equals: Gross national receipts

1.2
2.5
.5
-.4
-.5
90.4

Second
half 1

228.2

247.4

257.3

4.5
10.8
.8
1.3
5.0
2.1
203.7

4.5
10.3

4.5
12.4
-.1
2.1
.5
.4
237.4

4.1
0.0
2.5
226.1

i Based on incomplete data.
a Includes excess of Government receipts over liabilities on corporate income taxes, and of Government
receipts over personal tax payments, minus contributions to Government retirement funds, National
Service Life Insurance, and Government Life Insurance. The last 3 items are noneash in nature and
consequently are not included in cash receipts of the Government, ,but must be included in the gross
national income.
NOTE.—Detail will not necessarily add to totals because of rounding.

The constant dollar estimates
Transforming the current dollar estimates in the Nation's Economic
Budget into constant dollar equivalents necessitated the use of special price

TABLE VII.—Adjustments to expenditures in the Nation's Economic Budget
Calendar years 1939,1946, and 1947
[Billions of dollars]
1947
seasonally adjusted annual rates
Description

1939

1946
First
half

Total expenditures of consumers, business, and government.
Less: Government transfer
payments—
To individuals J
To business 3
_
Abroad*....
Government cash interest payments.
Tax refunds
Other adjustments 8
Equals: Expenditures for gross national product

95.0

228.3

2.5
1.1
-.2
1.4
.1
-.5
90.4

10.8
2.6
3.6
4.3
4.0
— 9

Second
half*

252.9

261.6

10.3
.8
9.0
4.1
3.2
-.7
226.1

12.4
.6
5.3
4.4
2.0
-.6
237.4

1 Based on incomplete data.
2
Includes payments to social insurance beneficiaries, veterans' pensions, and readjustment allowances,
etc. Agrees with the Commerce concept of transfers to individuals.
3 Includes Government subsidies, domestic sales of consumer-type surplus property, net receivables, and
capital transactions. (Purchases of consumer-type surplus property are included in consumer expenditures. Hence a deduction is made to avoid double-counting.)
* Includes loans to foreign governments and subscriptions to the International Fund and Bank, and
sales of surplus property abroad.
«Includes the net expenditures of Government corporations which do not represent capital formation,
plus payments from deposit accounts set up by military and civilian personnel overseas, less noncash
expenditures for goods and services.
NOTE.—Detail will not necessarily add to totals because of rounding.

indexes because of the variety of types of incomes and expenditures involved.
(See page 55 of text.) These indexes were constructed by breaking expenditures down into a large number of components, and deflating each by the
most appropriate price index. The implicit index of price change for each
account, consumers, business, and Government, could then be determined
from the sum of the deflated components. This "implicit" index was used
to adjust the income in each account.
The usefulness of the estimates of National Income and Product would
be greatly increased if it were possible to present the key series in terms of
constant as well as current dollars in all recent years. However, at the
present time no price indexes adjusted to take account of the differences
in the composition of war output and civilian type output are available.
Comparisons between 1947 and 1939 are more satisfactory since the present
composition of production is more similar to that of 1939 than to that
of the war years.

II. The Federal Budget
Table VIII shows the Federal cash surplus for calendar years 1946, 1947,
and the anticipated surplus for calendar 1948. The 1948 estimate is based
on the assumption of continued high levels of employment and income, no
changes in tax legislation, and the enactment of the Presidential recom-

mendations for new legislation as set forth in the budget message for fiscal
1949. Estimates of the main sources of cash revenue for the same years are
shown in table IX, while table X shows expenditures by function insofar
as this was feasible with available information.
Tables XI and XII contain a reconciliation between budgetary receipts
and cash receipts and between budgetary payments and cash payments, respectively. The budgetary accounts contain some receipts and expenditures, which have no immediate economic impact, being merely accounting
entries from the standpoint of the economy as a whole. For example,
funds may be transferred from the general and special accounts to the
trust accounts without affecting transactions with the public, or funds may be
set aside for interest accruing but not yet payable. The cash receipts and
payments, on the other hand, present Government operations on a consolidated basis. Transactions between various types of accounts are eliminated,
as well as various types of expenditure which do not involve receipt or payment of cash. The estimates of cash receipts from and payments to the
public are more informative for purposes of economic analysis than are the
conventional budgetary concepts; the cash concepts are consequently used
in the Nation's Economic Budget.
TABLE VIII.—Federal cash surplus
Calendar years 1946,1947, and 1948
[Billions of dollars]
Receipts or payments

1946

Receipts
Payments
Cash surplus ...

19471

1948 *

45.5
45.3

46.9
41.3

49.2
40.4

+.2

+5.6

+8.8

i Based on actual data through mid-December,
a See footnote 2, tables I X and X below.
TABLE IX.—Federal cash receipts from the public other than borrowing
Calender years 1946,1947, and 1948
[Billions of dollars!
1946
actual

Source
Personal income taxes
Corporation income taxes..
Employment taxes 3
Excises and customs
Miscellaneous receipts
Receipts of trust accountsTotal cash receipts. _.

1947
1948
estimate 1 estimate J

18.8
11.1
.5
7.7
3.4
4.0

21.0
9.2
.7
7.7
4.7
3.7

23.1
10.1
.9
7.6
3.6
3.9

45.5

46.9

49.2

* Based on actual data through mid-December.
' Assumes no changes in tax legislation and continued high levels of employment and income.
*Excludes amounts transferred to trust accounts.
NOTE.—Detail will not necessarily add to totals because of rounding.

TABLE X.—Federal cash payments to the public
Calendar years 1946,1947, and 1948
[Billions of dollars]
1946
actual

Payment
Budget account:
National defense
Veterans' services and benefits
_
International affairs and finance
___
_.
Interest on the public debt
Eefunds of receipts
Other
Trust accounts
Exchange Stabilization Fund
Deductions from Federal employees' salaries for retirement
Clearing account for outstanding checks and telegraphic reportsAdjustment to daily Treasury statement basis

21.1
5.2
3.0
3.9
4.0
4.4
5.1

Total payments to the public.

1947
1948
estimate [estimate >

-.3
—.4
-.7

12.8
6.6
5.9
3.9
2.6
5.6
2.8
1.5
-.2
+•2
-.3

11.0
6.4
6.9
3.9
2.0
7.1
3.0
.3
-.2

45.3

41.3

40.4

i Based on actual data through November 1947.
* Includes anticipated Presidential recommendations for new legislation.
Note:—Detail will not necessarily add to totals because of rounding.

TABLE XL—Reconciliation of Budget receipts with cash receipts from the public
Calendar year 19471
[Billions of dollars]
Description
Net budget receipts
Trust account receipts

Total recorded receipts

50. 7

Less: Intragovernmental transactions:
Payments to U. S. Treasury (miscellaneous receipts) by Government
enterprises
Transfers from general fund to trust accounts
Interest received by trust funds on investments in United States securitiesReceipts from sale of surplus vessels transferred to U. S. Treasury (miscellaneous receipts) but also recorded as a trust account receipt and
expenditure
Less: Recorded receipts not paid in cash by the public:
Deductions from Federal employees' salaries for retirement funds
National Service Life Insurance premiums paid with terminal leave bonds
prior to general redemption date
Equals: Cash receipts from the public2
1
Based on actual data through November.
2
Excluding borrowing.
NOTE.—Detail will not necessarily add to totals because of rounding.

44. 0
6. 7

ioo

.7
1. 5
.6

.6
.2
.1
46. 9

TABLE XII.—Reconciliation of Budget expenditures
Calendar year

with cash payments to the public

19471

[Billions of dollars]

Description
Budget expenditures
Trust account expenditures
Exchange Stabilization Fund expenditures

41. 5
7. 0
1. 8

Total recorded expenditures
Clearing account for outstanding checks and telegraphic reports

50. 3
.2

Adjusted total, recorded expenditures

50. 6

Less: Intragovernmental transactions:
Payments to U. S. Treasury (miscellaneous receipts) by Government
enterprises
Transfers from general fund to trust accounts
Interest received by trust funds on investments in United States securitiesInvestments of trust funds and Government enterprises in United States
securities
Receipts from sale of surplus vessels transferred to U. S. Treasury (miscellaneous receipts) but also recorded as trust account expenditure
Less: Recorded expenditures not paid out in cash:
Deduction from employees' salaries for retirement funds
Interest on savings bonds (net increase in redemption value of outstanding issues)
.
Terminal leave bonds issued
Subscriptions in non-interest-bearing notes to Bretton Woods Organization from General and Exchange Stabilization Funds
Plus: Gash payments not recorded as expenditures:
Redemption of excess profits tax bonds and adjusted service certificatesTerminal leave bonds redeemed for cash
Redemption of notes by Bretton Woods Organizations
Expenditures of Government enterprises from proceeds of sales of obligations in the market

—. 2

Equals: Cash payments to the public

41. 3

Based on actual data through November.
2
Less than 50 million dollars.
NOTE.—Detail will not necessarily add to totals because of rounding.

IOI

.7
1. 5
.6
3. 5
.6
•2
•5
1. 4
2. 1
(a)
1. 2
.8

III. The Distribution of Income, Prewar
and Postwar
There has been little opportunity to compare the distribution of income
in the United States over a number of years because the results of various
surveys are not readily comparable. Sample studies of income, national
in scope, were made in 1935-36, 1941, 1944, 1945, and 1946. The estimates presented in this report are the result of an attempt to revise and
arrange the data to make them as nearly comparable as possible. Distributions for the wartime years were not included in the present analysis
because the pattern of family structure and income was abnormal during
the war period. The following paragraphs describe the procedure that was
used to compare the income distribution in the years 1935-36, 1941, and
1946. The results obtained are still subject to further refinement and revision but they are probably reliable enough to indicate the general changes
that have taken place in the distribution of income and are believed to substantiate the conclusions presented in the text.
Income distributions used for prewar and postwar comparisons
The estimates for 1946 used for these comparisons are based on the
second Survey of Consumer Finances by the Board of Governors of the
Federal Reserve System. This survey, covering a national sample of 3,000
households, shows the distribution of money income for the civilian population by income level for the calendar year. The results are presented both
for spending units and for family units. Family units, including single
individuals, form the basis of classification used in the present analysis.
{Federal Reserve Bulletin, July 1947, pages 791 and 802.)
While the small Federal Reserve survey is sufficient to derive useful
estimates on an over-all basis, larger surveys by the Bureau of the Census
and the Bureau of Agricultural Economics in 1946 include distributions
by family size, occupational group, size of community, and other breakdowns, significant both in themselves and for general income analysis.
These data have not been utilized in the present report since the results are
not yet available on a national basis. Preliminary tabulations from the
Census sample of urban families, however, appear to substantiate the findings of the Federal Reserve study.
For 1941 the distributions shown here are derived from the Study of
Family Spending and Saving in Wartime, conducted jointly by the Bureau
of Labor Statistics and the Bureau of Human Nutrition and Home Economics. This survey also covered a national sample of about 3,000 households, with distributions for families and single individuals by money-

IO2

income levels. (Bureau of Labor Statistics, Bulletin 822, tables 1 and 3,
pp. 68 and 71, and pp. 22-34.)
For 1935-36, use has been made of unpublished distributions prepared
by the Research Division of the Office of Price Administration, based on
the National Resources Committee's study, "Consumer Incomes in the
United States.33 x
Adjustments for comparability of population coverage
In each of these basic studies, the results are presented in terms of
national coverage, with estimates showing the total number of family
units in the population. The population weights used in expanding the
sample data differ in coverage and are otherwise not on a comparable
basis.2 They were therefore revised to insure comparability, and now
include the total number of families and single individuals at the end of
each year; that is, on June 30, 1936, and December 31, 1941 and 1946.8
1

The revision of the original distributions (which in turn were based on the largescale sample survey of consumer purchases and on income-tax statistics) involved the
following steps: (1) Eliminating imputed items of income to give estimates by levels of
money income; (2) Revising the "tail" of the distributions on the basis of Treasury
income-tax tabulations not available when the NRG report was prepared; (3) Revising the distributions for single individuals on the basis of further analysis of incomes
of occupational groups; (4) Adjusting the distributions to cover revised estimates of
the total number of families and single consumers, based on the 1940 Census; and
(5) Adjusting the distributions below the "tail" to bring the total income for all family
units up to the total derived from the Department of Commerce monthly series on
income payments to individuals. The revisions were carried through separately for
families and single individuals.
2
The studies for 1941 and 1946 were limited to families and single individuals in
private households, excluding those living in rooming houses, hotels, clubs, labor
camps, and other types of quasi households. Both of these reports, moreover, underrepresent the number of single individuals in private households. The estimates for
all three years differ in the treatment of the time period covered; the 1946 figures apply
to the population at the end of the year (or the beginning of 1947), those for 1935-36
to the average for the 12-month period, and those for 1941 to the yearly average with
part-year families and individuals converted to a full-year-equivalent basis.
8
These estimates were based on the results of recent sample surveys by the Census
Bureau, on the decennial censuses of 1930 and 1940, and on monthly or semiannual
estimates of the civilian noninstitutional population and the number of primary
families in private households, issued currently by the Census Bureau.
The definition of the family used in preparing the weights conforms to that used
by the Census Bureau for family units of two or more persons; individuals classified
by the Census as one-person private families are included with other single individuals—that is, with those living as lodgers or paid help in private and quasi households. The estimates cover all persons in the continental population except inmates
of institutions and Armed Forces personnel in military posts or overseas.

103

The resulting figures for the three years are as follows:

Year

1935-36
1941
1946

— _

Families
and single
individuals

Families (2
or more persons)

38, 410,000
41,030,000
43,330,000

30,430,000
32,880,000
35,860,000

Single individuals
7,980,000
8,150,000
7,470,000

The basic income distributions for each year were then adjusted to cover
the revised population weights. For 1935-36 the revisions required in the
OPA estimates were minor. For the two later years, however, the adjustments involved a substantial increase in the number of single consumers,
with some reduction in the number of families for 1941 and some increase
for 1946. For lack of evidence to the contrary, the changes were allocated
by income level so as to maintain the original percentage distributions of
family units.4
Adjustments of aggregate income covered
The adjustments for population coverage resulted in some increase in the
aggregate amount of income accounted for in the distributions for each year
studied. Nevertheless, the revised figures still fell short of the national totals
of civilian noninstitutional money income derived from the personal-income
series prepared by the Department of Commerce.
A further adjustment of the distributions was therefore required to place
them on a more comparable basis with respect to income coverage. This
adjustment also was necessarily made on an arbitrary basis, by assuming that
incomes at all levels were under-reported by the same percent. While there
is evidence that some under-reporting is apt to occur at all income levels, it
is probable that the proportion tends to be greater at the higher levels.
In both the 1941 and the 1946 studies special measures were adopted
to minimize this bias as fully as possible, but with the information now at
4
For 1941 (and 1935-36), it was possible to handle the adjustment for families
and single consumers separately. This procedure, however, was not possible for 1946,
since the Federal Reserve estimates were available only for all family units combined.
Thus, while the results for 1941 are probably fairly reliable, the adjustment for 1946
involves some upward bias, since the original distribution used to allocate the additional single consumers by income level was heavily weighted by families of two or
more persons.

104

hand it is impossible to evaluate the success of these measures.5 Pending the
completion of detailed analysis of these survey data and comparison with
data from the 1946 income surveys of the Bureaus of the Census and
Agricultural Economics and with income-tax returns and other statistical
series, it seems inadvisable to attempt differential adjustments by income
levels.
The percentage expansion of the total amount of income at each income
level was made for each year on the basis of the combined distributions for
families and single consumers. For 1946, the expansion (after adjustment
for population coverage) was 16 percent, for 1941 it was 13.5 percent,
and for 1935-36, due to the refinements already made in the distributions,
it was only about 1.5 percent
Comparison of shares of income
From these adjusted income-level figures, the proportion of the total
income going to each fifth of families and single individuals ranked in order
of their cash income was estimated for each year. These percentages are
shown below.

Families and single individuals grouped from lowest to

Percentage of total civilian money
income
1935-36

Lowest fifth.
Second fifth
Third fifth
Fourth fifth
Highest fifth

4.0
8.7
13 6
20.5
53.2

1941
3.4
8.7
15 3
22.0
50.6

1946
4.4
10.6
16.0
22.1
46.9

An average income for each fifth of the population may be obtained
from these proportionate shares of income for each period. Comparisons
of income among various years require a further adjustment, however,
since the purchasing power of income changes from year to year, altering
the real value of money incomes. This was especially marked over the
period we are considering. To adjust for changes in purchasing jgower,
the aggregates of income were raised in 1935-36 and 1941 to the price
8

For methods of sampling at high income levels in 1946, see pp. 662, 663, Federal
Reserve Bulletin, June 1947. The adjustments made for refusal rates by income level
and for mean incomes at higher levels in the 1941 study are described in Bureau of
Labor Statistics bulletin 822, pages 22 through 28.

105

level of the year 1946. By applying the percentages shown in the table
above to the aggregates expressed in 1946 dollars, and dividing by the
number of families in each fifth, average family income in constant dollars
for each fifth of thejpopulation was obtained. The aggregate money income
of civilians for each period, in current dollars, and after adjustment for price
change, is shown below.
Aggregate money income
of civilians
Year

Billions of
dollars in
current
prices i
58.9
88.3
164.9

1935-36
1941
1946

Billions of
dollars in
1946
prices 2
85.6
120.3
164.9

1 Derived from the personal income series of the National Income Division, Department of Commerce.
Eepresents
money income of civilian noninstitutional population.
2
Adjusted for price changes according to the BLS consumer price index.

The estimates for 1946 are also presented in the form of a distribution of
families and single individuals by money-income level in table 3, page 19 of
the text.

106

Appendix B
Statistical Tables Relating to Employment,
Production, and Purchasing Power
CONTENTS
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
XIII.
XIV.
XV.
XVI.
XVII.
XVIII.
XIX.
XX.
XXI.
XXII.
XXIII.
XXIV.
XXV.
XXVI.
XXVII.
XXVIII.
XXIX.
XXX.

Gross national product or expenditure, 1929-47.
National income by distributive shares, 1929-47.
Personal income, 1929-47.
Disposition of personal income, 1929-47.
Per capita disposable income in current dollars and first half of 1947 dollars,
1929-47.
Real disposable income, food consumption, and real farm income, per
capita, 1929-47.
Total consumer credit, 1929-47.
The labor force, 1940-47.
Number of wage and salary workers in nonagricultural establishments,
1939-47.
Average gross weekly earnings in selected industries, 1939—47.
Average hourly earnings in selected industries, 1939—47.
Consumers5 price index, 1939-47.
Wholesale price index, 1939-47.
Index of prices paid and of prices received by farmers and parity ratio,
1939-47.
Industrial production index, 1939-47.
Physical production index, 1935-39, 1946, and 1947.
New construction activity, 1929-47.
Gross national product, department store sales, and residential construction,
1920-47.
Business expenditures for new plant and equipment, 1939-48.
Business inventories and sales, 1939-47.
Sales, stocks, and outstanding orders at 296 department stores, 1939—47.
Profits before and after taxes, all private corporations, 1929-47.
Profits after taxes, 629 large private industrial corporations, 1939-47.
Relation of profits before and after taxes to investment and to sales, private
manufacturing corporations, by industry, 1947.
Relation of profits before and after taxes to investment and sales, private
manufacturing corporations, by size classes, 1947.
Relation of profits before and after taxes to sales, private corporations,
excluding finance, insurance, and real estate, 1946-47.
Loans and investments of all commercial banks, 1929-47.
Adjusted deposits of all banks and currency outside banks, 1929—47.
Bond and common stock yields and commercial loan rates, 1929-47.
Public debt and guaranteed obligations of the United States Government
outstanding, 1939-47.

770958°—48

107

XXXI. United States Government aid to foreign countries, 1946-47.
XXXII. United States exports, including reexports, by continents, 1936-38 average
and 1946-47 by quarters.
XXXIII. United States general imports, by continents, 1936-38 average and 1946-47
by quarters.
XXXIV. Production and exports of selected nonagricultural commodities, 1939, 1946,
and 1947.
XXXV. Distribution of selected food supplies moving into consumption channels,
1939, 1946, and 1947.
XXXVI. Population by age groups, selected years, 1900-1975.
XXXVII. Changes in selected economic series since 1939.

108

Statistical Tables Relating to Employment,
Production, and Purchasing Power
TABLE I.—Gross national product or expenditure, 1929-47
[Billions of dollars]

Year or quarter

1929.
1930.
1931.
1932.
1933.
1934.
1935.
1936.
1937.
1938.
1939.
1940.
1941.
1942..
1943..
1944..
1945..
1946-.
1947 V

Gross national
product
103.8
90.9
75.9
58.3
55.8
64.9
72.2
82.5
90.2
84.7
90.4
100.5
125.3
159.6
192.6
210.6
213.1
203.7
231.8

GovernPersonal Gross priment purconsump- vate do- Net foreign chases of
tion exmestic in- investment goods and
penditures vestment
78.8
70.8
61.2
49.2
46.3
61.9
66.2
62.5
67.1
64.6
67.5
72.1
82.3
90.8
101.6
110.4
121.7
143.7
164.5

15.8
10.2
5.4
.9
1.3
2.8
6.1
8.3
11.4
6.3
9.0
13.0
17.2
9.3
4.6
5.7
9.1
24.6
30.5

0.8
.7
.2
.2
.2
.4
-.1
—.1
.1
1.1
.9
1.5
1.1
-.2
-2.2
-2.1
-.8
4.8
8.8

8.5
9.2
9.2
8.1
8.0
9.8
9.9
11.7
11.6
12.8
13.1
13.9
24.7
59.7
88.6
96.6
83.1
30.6
28.0

Seasonally adjusted annual rates
1946—First quarter...
Second quarter.
Third quarter..
Fourth quarter.
1947—First quarter...
Second quarter.
Third quarter..
Fourth quarter

191.7
197.0
207.5
218.6
223.1
229.1
232.3
242.5

134.3
138.2
147.3
154.9
158.0
162.0
166.0
172.0

i Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.

IO9

18.6
22.3
27.0
30.4
29.4
29.1
30.4
33.0

3.3
6.1
4.5
5.2
8.3
10.5
7.7
8.5

35.4
30.3
28.6
28.2
27.4
27.5
28.2
29.0

TABLE II.—National income by distributive shares, 7929-47
[Billions of dollars]

Proprietors' and rental
income

Corporate profits and inventory
valuation adjustment
Corporate profits

Year or quarter

fl8

O G>

O
1929
1930
1931
1932
1933
1934
1935..
1936___
1937
1938
1939
1940
1941
1942
1943
1944...
1945
1946...
1947«

87.
75.
58.
_ — 41.
39.
48.
56.
64.
73.
67.
72.
81.
103.
136.
168.
182.
_.
182.
178.
_ 203.

50.8
46.5
39.5
30.8
29.3
34.1
37.1
42.
47.
44.7
47.8
51.8
64.3
84.7
109.1
121.
122.9
116.8
128.5

19.7
15.7
11.8
7.4
7.2
8.7
12.1
12.6
15.4
14.0
14.
16.3
20.8
28.1
32.1
34.4
37.1
41.8
48.1

8.3
7.0
5.3
3.
2.9
4.3
5.0
6.1
6.6
6.3
6.8
7.
9.6
12.1
14.1
15.3
16.7
19.
22.5

5.
3.9
2.9
1.
2.3
2.3
4.9
3.9
5.6
4.4
4.5
4.9
6.9
10.6
11.8
12.4
13.5
15.2
18.3

5.8 10.3
6.6
3.3
4.8
1.6 - . 8
3.6
2.5 - 2 . 0 - 3 . 0
.2
2.0 - 2 . 0
1.1
2.1
1.7
3.0
2.3
3.2
4.9
2.
5.7
6.
3.1
6.
4.3
3.3
3.3
5.8
6.5
3.5
9.2
9.3
3.6
14.6
17.
4.3
5.4 19.8 21.1
24.5
6.2 23.
6.7 23.5 23.8
19.7
20.
7.0
6.9 16.5 21.1
7.3 23.1 28.0

1.4
8.4
2.5
.8
.5 - 1 . 3
.4 - 3 . 4
.5
.7
l'.O
2.3
1.0
4.3
1.4
4
1.5
2.3
1.0
5.0
1.5
6.4
2.9
9.4
7.8
9.4
11.7
14.2 10.4
9.9
13.9
8.9
11.3
8.6 12.5
11.1 16.9

0.5
3.3
2.4
1.0
-2.1
-.6
-.2
-.7

— .4
—.5
-4.
-4.9

6.5
6.2
5.9
5.4
5.0
4.7
4.5
4.5
4.4
4.3
4.2
4.1
4.1
3.9
3.4
3.2
3.1
3.2
3.4

6.1
8.0
9.3
11.0
11.6
10.8
10.8
11.4

-1.0
-2.3
-7.3
-8.3
-6.6
-4.1
-4.5
-4.3

3.1
3.2
3.2
3.2
3.3
3.3
3.4
3.5

1.0
— .7
-.1
-2.6
-1.3

Seasonally adjusted annual rates
1946—First quarter
Second quarter
Third quarter
Fourth quarter
1947—First quarter
Second quarter
Third quarter
Fourth quarter •

168.2
173.5
179.9
191.0
197.6
200.1
203.3
211.1

111.5
114.0
119.2
122.2
124.9
126.3
129.7
133.0

39.4
39.2
41.9
46.7
47.0
47.2
47.3
50.7

18.5
18.6
19.9
22.0
22.4
21.9
22.1
23.5

14.1
13.8
15.2
17.8
17.6
18.0
17.9
19.5

6.9
6.8
6.8
7.0
7.0
7.2
7.3
7.7

14.2
17.2
15.6
18.8
22.4
23.3
22.9
23.9

15.2
19.4
22.9
27.1
29.0
27.4
27.4
28.2

9.1
11.5
13.5
16.1
17.4
16.6
16.6
16.8

1 National income is the total net income earned in production by individuals or businesses. The concept
of national income currently used differs from the concept of gross national product in excluding depreciation charges and other allowances for business and institutional consumption of durable capital goods.
2 Includes wages and salaries, employer contributions for social insurance, and other labor income.
3 Includes noncorporate inventory valuation adjustment.
* Federal and State income and excess-profits taxes.
» Less than 50 million dollars.
• Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.

IIO

TABLE III—Personal income, 1929-47
[Billions of dollars]

Year or quarter

1929..
1930._
1931..
1932..
1933..
1934..
1935..
1936..
19371938..
1939..
1940..
1941..
1942..
1943..
1944..
1945..
1946..
1947».

ProprieTotal Wage and Other
tors' and
personal
salary
labor
rental
income receipts * income * income
85.1
76.2
64.8
49.3
46.6
53.2
59.9
68.4
74.0
68.3
72.6
78.3
95.3
122.2
149.4
164.9
171.6
177.2
197.2

0.5
.5
.5
.4
.4
.4
.4
.5
.5
.5
.5

50.0
45.7
38.7
30.1
28.7
33.4
36.3
41.6
45.4
42.3
45.1
48.9
60.9
80.5
103.5
114.9
115.2
109.2
121.2

.7
.9
1.3
1.6
1.6
1.8

19.7
15.7
11.8
7.4
7.2
8.7
12.1
12.6
15.4
14.0
14.7
16.3
20.8
28.1
32.1
34.4
37.1
41.8
48.1

Dividends

5.8
5.5
4.1
2.6
2.1
2.6
2.9
4.6
4.7
3.2
3.8
4.0
4.5
4.3
4.5
4.7
4.8
5.6

Personal
interest
income

Transfer
payments

7.5
7.1
7.0
6.6
6.2
6.0
5.7
5.6
5.6
5.5
5.4
5.4
5.4
5.4
5.5
6.0
6.8
7.7
7.9

1.5
1.5
2.7
2.2
2.1
2.2
2.4
3.5
2.4
2.8
3.0
3.1
3.1
3.2
3.0
3.6
6.2
11.3
11.8

7.6
7.7
7.7
7.7
7.8
7.8
7.9
8.0

12.5
11.6
10.9
10.3
10.9
10.6
14.2
11.5

Seasonally adjusted annual rates
1946—First quarter...
Second quarter.
Third quarter..
Fourth quarter.
1947—First quarter...
Second quarter.
Third quarter..
Fourth quarter

168.7
172.5
179.5
187.5
190.9
192.3
200.4
205.3

102.6
107.0
111.8
115.4
117.4
118.7
122.7
126.0

1
2

1.6
1.6
1.6
1.6
1.7
1.8
1.8
1.9

39.4
39.2
41.9
46.7
47.0
47.2
47.3
50.7

5.1
5.4
5.6
5.9
6.2
6.3
6.5
7.2

Total employer disbursements less employee contributions for social insurance.
Includes compensation for injuries, employer contributions to private pension and welfare funds, pay of
military reservists not on full-time active duty (pay for full-time active duty included in military wages and
salaries), directors' fees, jury and witness fees, compensation of prison inmates, Government payments to
enemy prisoners of war, marriage fees to justices of the peace, and Merchant Marine war-risk life and injury
claims.
* Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.

Ill

T A B L E IV.—Disposition of personal income, 1929-47

Year or quarter

Personal
income

Less:
Personal
tax and
nontax
payments

Less:
Equals:
Personal
Disposable consumppersonal
tion exincome
penditures

Billions of dollars
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947

_
-.

86.1
76.2
64.8
49.3
46.6
53.2
59.9
68.4
74.0
68.3
72.6
78.3
95.3
122.2
149.4
164.9
171.6
177.2
197.2

2.6
2.5
1.9
1.5
1.5
1.6
1.9
2.3
2.9
2.9
2.4
2.6
3.3
6.0
17.8
18.9
20.9
18.8
21.7

82.5
73.7
63.0
47.8
45.2
51.6
58.0
66.1
71.1
65.5
70.2
75.7
92.0
116.2
131.6
146.0
150.7
158.4
175.6

Equals:
Personal
saving

Saving as
percent of
disposable
income

78.8
70.8
61.2
49.2
46.3
51.9
56.2
62.5
67.1
64.5
67.5
72.1
82.3
90.8
101.6
110.4
121.7
143.7
164.5

3.7
2.9
1.8
-1.4
—1.2
-.2
1.8
3.6
3.9
1.0
2.7
3.7
9.8
25.4
30.0
35.6
29.0
14.8
11.1

4.5
3.9
2.9
-2.9
-2.7
-.4
3.1
5.4
5.5
1.5
3.8
4.9
10.7
21.9
22.8
24.4
19.2
9.3
6.3

16.6
15.5
13.1
13.1
11.7
8.9
12.7
11.0

11.0
10.1
8.2
7.8
6.9
5.2
7.1
6.0

Seasonally adjusted annual rates
1946—First quarter
Second quarter
Third quarter
Fourth quarter
1947—First quarter.
Second quarter
Third quarter..
Fourth quarter i

168.7
172.5
179.5
187.5
190.9
192.3
200.4
205.3

17.8
18.7
19.1
19.5
21.2
21.4
21.7
22.3

150.9
153.8
160.4
168.0
169.7
170.9
178.7
183.0

i Estimates based on incomplete data.
NOTE.—Detail will not necessarily^add to totalsjtecause of rounding.
Source: Department of Commerce.

112

134.3
138.2
147.3
154.9
158.0
162.0
166.0
172.0

TABLE V.—Per capita disposable income in current dollars and first half of 1947 dollars, 1929-47
Disposable
personal
income
(billions
of dollars)

Year or quarter

1929
1930
1931
1932.
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947 3

—

82.5
73.7
63.0
47.8
45.2
51.6
58.0
66.1
71.1
65.5
70.2
75.7
92.0
116.2
131.6
146.0
150.7
158.4
175.6

Consumers'
Population
price index,
(thousands) i" 1st half of
1947=100

121,770
123,077
124,040
124,840
125,579
126,374
127,250
128,053
128,825
129,825
130,880
131,970
133,203
134,665
136,497
138,083
139,586
141,229
144,002

150.9
153.8
160.4
168.0
169.7
170.9
178.7
183.0

Current
dollars
678
599
508
383
360
408
456
516
552
505
536
574
691
863
964
1,057
1,080
1,122
1,219

1st half of 1947
dollars *
860
780
727
610
605
662
723
809
835
778
838
890
1,021
1,151
1,211
j308
]L, 306
]1,251

1 ion

Not adjusted
Seasonally adjusted annual
for seasonal
rates
variation 4

Seasonally
adjusted
annual rates

1946—First quarter
Second quarter.
Third quarter
Fourth quarter.1947—First quarter
Second quarter
Third quarter. 3
Fourth q u a r t e r

78.8
76.8
69.9
62.8
59.5
61.6
63.1
63.8
66.1
64.9
64.0
64.5
67.7
75.0
79.5
80.8
82.6
89.6
102.4

Per capita disposable
personal income

«140,549
•140,985
•141,547
«142,288
•143,030
«143,672
»144,356
145,013

83.6
84.9
92.5
97.4
99.3
100.6
103.5
106.2

]1,074
]1,091
]L, 133

1,181
1,186
1,190
1,238
1,262

:L,285
1,284
1,225
1,211
1,194
1,183
1,196
1,188

1 Estimated population of continental United States, including armed forces overseas; annual data as of
July 1 and quarterly data as of middle of quarter.
3 Current dollars divided b y the consumers' price index on the base first half of 1947=100 to give a rough
measure of changes in buying power of disposable income.
3 Estimates based on incomplete data.
* A small part of the increase m a y be seasonal.
* Interpolated from published data.
Sources: Department of Commerce (disposable income and population) and Department of Labor (consumers' price index).

TABLE VI.—Real disposable income, food consumption, and real farm incorne9per capita, 7929-47
[1935-39=100]
Net income
Real disCivilian
from farm
posable1
food con-2 marketing to
sumption
persons
on
income
(per capita) (per capita) farms 3 (per
capita)

Year

1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947

108
98

91
77
76
83
_.

102
100

101
81

64
49
62
65

100
98
97
99

102
105
98
105
112
128
144
152
164
164
157
149

99
100
100
104
105
108
108
107
112
114
118
117

99
110
96
103
105
141
182
222
213
209
210
201

Computed from the deflated dollar figures in appendix B, table V.
2 Based on the retail weight equivalent, weighted by average retail prices for the base period, 1935-39.
Consumption is for total population, 1929-40; civilian only, beginning 1941.
3 Realized net income of farm operators plus adjustments for inventory changes and wages to hired workers
living on farms divided by farm population of the United States as of January 1 was adjusted for changes in
prices^paid by farmers for family maintenance and then expressed as an index.
Sources: Based on Department of Agriculture, Department of Commerce, and Department of Labor data.
TABLE VII.-— Total consumer credit, 1929-47

(Estimated amounts outstanding)
[Millions of dollars]
End of year or month
1929____
19331937
1939..
1940
1941___
1942
1943
1944-.
1945
1946-...
1947 3

Total
consumer
credit

Instalment
credit i

Charge
accounts

Other
consumer
credit a

._..
_.

7,637
3,929
7,491
7,994
9,146
9,895
6,478
5,334
5,776
6,637
10,157
13,300

3,167
1,605
3,971
4,449
5,448
5,920
2,948
1,957
2,034
2,365
3,976
6,100

1,749
1,081
1,459
1,544
L,650
L764
1,513
1,498
1,758
1,981
3,054
3,500

2,721
1,243
2,061
2,001
2,048
2,211
2,017
1,879
1,984
2,291
3,127
3,700

1947—January....
February, _
March
April
_.
May
June
July
August
September.
October
November.
December a

9,982
9,939
10,255
10,464
10,729
10,992
11,055
11,191
11,671
12,050
12, 700
13,300

4,048
4,156
4,329
4,536
4,739
4,919
5,045
5,185
5,284
5,454
5,700
6,100

2,764
2,602
2,768
2,782
2,835
2,887
2,786
2,755
2,859
3,035
3,300
3,500

3,170
3,181
3,158
3,146
3,155
3,187
3,228
3,251
3,528
3,561
3,700
3,700

1 Includes automobile and other sale credit and repair and modernization loans insured by the Federal
Housing Administration.
2 Includes noninstalment single-payment loans of commercial banks and pawnbrokers, and service credit.
* Preliminary estimate based on incomplete data.
Source: Board of Governors of the Federal Reserve System.

TABLE VIII.—The labor force, 1940-47
(Thousands of persons 14 years of age and over)
Civilian labor force
Year or month

1939 monthly
1940 monthly
1941 monthly
1942 monthly
1943 monthly
1944 monthly
1945 monthly
1946 monthly
1947 monthly

average _
average _.
average.
average.
average.
average.
average.
average.
average...

1946—January
February. _.
March
April
May
June
July
August
September..
October
November..
December..
1947—January
February...
March.
April
May
June
July
August
SeptemberOctober
November..
December...

Total labor
force
including
armed
forces

Total
civilian
labor
force

Employment
Total

Nonagricultural

Unemployment

55,600
56,030
57,380
60,230
64,410
65,890
65,140
60,820
61,608

55, 230
55,640
55,910
56,410
55,540
54,630
53,860
57,520
60,168

45,930
47, 520
50,350
53,750
54,470
53,960
52,820
55,250
58,027

36,320
37,980
41, 250
44, 500
45,390
45,010
44,240
46,930
49,761

9,610
9,540
9,100
9,250
9,080
8,950
8,580
8,320
8,266

9,300
8,120
5,560
2,660
1,070
670
1,040
2,270
2,142

59,490
59,130
59,630
60,300
60, 570
62,000
62,820
62,200
61, 340
61,160
60,980
60,320
59, 510
59,630
59,960
60,650
61, 760
64,007
64,035
63,017
62,130
62,219
61, 510
60,870

53,320
53, 890
55,160
56,450
57,160
58,930
60,110
59,750
59,120
58,990
58,970
58,430
57,790
58,010
58,390
59,120
60,290
62,609
62, 664
61,665
60, 784
60,892
60,216
59, 590

51,020
51,240
52,460
54,120
54,850
56, 360
57,840
57,690
57,050
57,030
57,040
56, 310
55,390
55, 520
56,060
56,700
58, 330
60,055
60,079
59, 569
58,872
59,204
58,595
57,947

44,300
44,300
44,930
45,950
45,970
46,350
47,870
48,550
48, 300
48, 410
49,140
49,100
48,890
48,600
48,820
48,840
49, 370
49,678
50,013
50,594
50,145
50, 583
50,609
50,985

6,720
6,940
7,530
8,170
8,880
10, 010
9,970
9,140
8,750
8,620
7,900
7,210
6,500
6,920
7,240
7,'"

2,300
2,650
2,700
2,330
2,310
2,570
2,270
2,060
2,070
1,960
1,930
2,120
2,400
2,490
2,330
2,420
1,960
2,555
2,584
2,096
1,912
1,687
1,621
1,643

NOTE.—Detail will not necessarily add to totals because of rounding.
Sources: Department of Labor (1939) Department of Commerce (1940-47)

Agricultural

10,377
10,066
8,975
8,727
8,622
7, " "

TABLE IX.—Jsumber of wage and salary workers in nonagricultural establishments, 1939-47l
[Thousands]
Manufacturing
•23
Year or month

II
1939
1940
1941
1942
1943
1944
1945
1946
1947

monthly average._.
monthly average...
monthly average...
monthly average...
monthly average...
monthly average. _.
monthly average...
monthly average. _.
monthly average a_

1946—January
February
March
April
May
June
July
August
September. _.
October
November...
December...
1947—January
February
March
April
May
June...
July
August
September....
October
November8-.

30,287
32,031
36,164
39,697
42.042
41,480
39,977
40,712
42,401

10,078
10, 780
12, 974
15,051
17,381
17, 111
15,302
14,365
15, 515

4,357
4,975
6,485
8,179
10, 297
10,200
8,477
7,102
7,850

5,720
5,805
6,488
6,873
7,084
6,912
6,825
7,263
7,664

845
916
947
983
917
883
826
836
884

1,150
1,294
1,790
2,170
1,567
1,094
1,082
1,
1,730

2,912
3,013
3,248
3,433
3,619
3,798
3,872
4,023
4,049

6,705
7,055
7,567
7,481
7,322
7,399
7,654
8,448
8,645

4,610
4,781
5,016
5,148
5,187
5,169
5,274
5,953
6,187

3,987
4,192
4,622
5,431
6,049
6,026
5,967
5,595
5,392

38, 745
38,148
39,184
39,908
40,258
40,680
40,877
41,466
41,848
42,065
42,439
42,928
41,803
41,849
42.043
41,824
41,919
42,363
42,201
42,624
43,036
43,298
43,449

13,499
12, 751
13,433
14,045
14,159
14.371
14,526
14,876
15,035
15,064
15,271
15,348
15.372
15,475
15,510
15,429
15,237
15,328
15,233
15, 595
15, 798
15,832
15,851

6,601
5,731
6,324
6,904
7,035
7,172
7,307
7,486
7,590
7,623
7,721
7,731
7,781
7,857
7,892
7,892
7,781
7,863
7,691
7,795
7,881
7,938
7,984

6,898
7,020
7,109
7,141
7,124
7,199
7,219
7,390
7,445
7,441
7,550
7,617
7,591
7,618
7,618
7,537
7,456
7,465
7,542
7,800
7,917
7,894
7,867

864
864
857
542
753
864
873
886
884
883
883
874
883
880
879
856
884
893
866
896
894
894
896

1,085
1,101
1,203
1,356
1,438
1,532
1,627
1,713
1,747
1,753
1,713
1,644
1,527
1,502
1,534
1,619
1,685
1,768
1,847
1,894
1,904
1,895
1,852

3,932
3,943
3,983
3,991
3,946
3,996
4,051
4,103
4,064
4,093
4,101
4,071
4,014
4,011
4,020
3,836
3,970
4,115
4,140
4,144
4,114
4,102
4,077

8,056
8,090
8,197
8,329
8,302
8,342
8,337
8,402
8,523
8,667
8,898
9,234
8,552
8,507
8, 565
8,552
8,545
8,582
8,558
8,586
8,684
8,880
9,081

5,696
6,776
5,840
5,984
5,965
5,961
5,975
5,984
5,990
6,054
6,098
6,119
6,071
6,107
6,120
6,106
6,151
6,278
6,276
6,221
6,217
6,248
6,264

5,613
5,623
5,671
5,661
5,695
5,614
5,488
5,502
5,605
5,551
5,475
5,638
6,384
5,367
5,415
5,426
5,447
5,399
5,281
5,288
5,425
5,447
5,428

i Number of wage and salary workers in nonagricultural establishments includes all full- and part-time
wage and salary workers in nonagricultural establishments who worked or received pay during the pay period
ending nearest the 15th of the month. Proprietors, self-employed persons, domestic servants, and personnel of the armed forces are excluded. Not comparable with estimates for nonagricultural employment of the
civilian labor force derived from data in appendix B, table VIII, because latter include self-employed, proprietors and domestic servants and are based on population enumeration whereas estimates in this table are
based on establishment reports.
3 Average of 11 months.
s Preliminary.
Source: Department of Labor.

116

TABLE X.—Average gross weekly earnings in selected industries, 1939-47
Manufacturing
Year or month

1939 monthly
1940 monthly
1941 monthly
1942 monthly
1943 monthly
1944 monthly
1945 monthly
1946 monthly
1947 monthly

Bitu- Private
I
Hotels
build- Class
minous ing
Tele- WholeNon(year 1
con- steam
sale Retail
Dura- durcoal
trade round)
railphone trade
strucmining
roads
Total able
able
tion
goods goods

average.. $23.86 $26.50 $21.78
average- _ 25.20 28.44 22.27
average
29.58 34.04 24.92
average.. 36.65 42.73 29.13
average.. 43.14 49.30 34.12
average. - 46.08 52.07 37.12
average._ 44.39 49.05 38.29
average.. 43.74 46.49 41.02
average 4- 48.90 52.06 45.56

1946—January
February
March
April
May
June
July
August
September
October
November
December
1947—January
February
March
April..
May
_
June
July
August
September
Octobers
November 6

41.15
40.58
42.15
42.88
42.51
43.31
43.38
44.99
45.39
45.73
45.79
46.96
47.10
47.29
47.69
47.50
48.44
49.33
49.17
50.43
60.98
51.02

43.67
42.57
44.79
45.71
45.10
46.32
46.24
48.02
48.36
48.90
48.62
49.57
49.60
49.74
50.30
50.34
51.72
52.99
52.19
52.46
54.01
54.66
54.70

38.75
39.01
39.83
40.13
39.93
40.28
40.46
41.89
42.34
42.45
42.87
44.24
44.47
44.67
44.89
44.40
44.88
45.31
45.61
45.78
46.78
47.17
47.19

$23.88
24.71
30.86
35.02
41.58
51.27
52, 25
58.03
54.16
57.37
58.30
30.15
34.20
64.44
52.27
62.84
61.65
62.49
61.54
69.56
69.54
65.30
64.90
54.14
65.51
67.09
54.87
70.23
71.19
71.87
(5)

1
8

$30.39 $30.99
31.55
31.70
34.25
35.14
38.65
41.80
43.68
48.13
46.06
52.18
45.69
53.73
56.24 3 51. 22
(
52.89
53.04
52.87
54.29
53.63
55.23
56.25
56.67
58.49
59.20
57.65
60.32
59.97
58.92
61.23
60.53
62.38
62.68
63.30
66.97
65.22
66.14
(6)

43.48
44.03
43.15
47.94
46.57
51.23
52.01
52.68
51.51
52.88
51.71
50.76
52.70
54.10
52.43
52.03
51.30
51.72
51.16
51.68
57.47
)

$31.94
32.44
32.74
33.97
36.30
38.39
(8)

44.04
)
41.19
44.37
43.76
44.09
44.82
44.93
44.82
44.19
44.10
44.30
44.40
42.98
43.37
43.31
42.51
32.26
38.13
45.58
46.51
46.92
48.02
48.77

$29.85 $21.17
30.39 21.17
32.32 21.94
35.56 23.24
39.40 24.88
42.29 26.58
44.07 28.31
48.06 32.55
()
(5)

$15.25
15.52
16.09
17.62
20.21
22.65
24.53
26.95
()

45.14 30.54
46.07 30.77
46.31 31.12
47.13 31.40
47.48 31.45
47.88
48.06 33.64
48.14 33.81
49.54 33.76
49.44 33.19
49.80 33.04
51.20 34.06
50.05 35.02
50.87 35.27
50.80 35.31
51.13 35.93
51.57 36.50
52.88 37.82
52.22 37.99
52.05 38.14
52.86 37.54
52.76 37.46
()
(4)

26.21
26.43
26.57
26.64
26.65
26.70
26.63
27.15
26.98
27.27
28.15
28.40
28.62
28.91
29.09
29.41
29.23
29.85
29.36
29.50
29.86
30.43
(6)

Money payments only; additional value of room, board, uniforms, and tips are not included.
Not available. New series, beginning April 1945; includes only employees subject to provisions of the
Fair Labor Standards Act and is not comparable with preceding series, which includes all employees.
3 Annual average includes retroactive pay increases not included in the monthly averages.
* Average of 11 months.
* Not available.
6
Preliminary.
NOTE.—Data are for production workers in manufacturing and mining and for all employees in other
industries.
Source: Department of Labor

117

TABLE XL—Average hourly earnings in selected industries, 1939-47
Manufacturing
Year or month

1939 monthly
1940 monthly
1941 monthly
1942 monthly
1943 monthly
1944 monthly
1945 monthly
1946 monthly
1947 monthly

DuraTotal able
goods

Nondurable
goods

Bituminous
coal
mining

Private
building construction

average.... $0.633 $0.698 $0,582
.602
average
.661
.724
.640
average.— . 729
.808
.723
average
853
.947
.803
average
961 1.059
.861
average.,.. 1.019 1.117
.904
average
1.023 1.111
average
1.084 1.156 1.012
average *. _ 1.215 1.285 1.140

.883
.993
1.059
.139
.186
.240
.401

.958
1.010
1.148
1.252
1.319
1.379
1.478

.941
.953
.975
.988
.996
1.003
1.009
1.036
1.050
1.056
1.065
1.077
1.094
1.107
1.119
1.122
1.130
1.140
1.150
1.158
1.165
1.173
1.185

259
265
274
239
321
474
457
466
480
460
477
491
491
.491
484
483
470
489
1.740
1.787
1.819
1.797

1.402
1.422
1.411
1.423
1.431
1.444
1.473
1.482
1.510
1.526
1.549
1.569
1.594
1.598
1.610
1.634
1.656
1.661
1.669
1.689
1.718
1.738

1946—January
February
March
_
April
May
June
July
August
September
October.
November.
December.
1947—January..
February--March...
April...
May
June
July
August
September.
OctoberNovember 5

_
_
_
_
_
_

1.004
1.002
1.035
1.058
1.071
1.084
1.
1.112
1.126
1.130
1,139
1.148
1.161
1.170
1.180
1.186
1.207
1.226
1.230
1.237
1.249
1.257
1.266

1.070
1.064
1.103
1.131
1.147
1.165
1.177
1.186
1.201
1.202
1.210
1.216
1.224
1.229
1.236
1.243
1.278
1.303
1.305
1.312
1.331
1.336
1.341

Class I
Hotels
steam Tele- Wholesale Retail
(year 1
rail- phone trade
trade round)
roads

$0.714 $0.822
.717
.827
.751
.820
.824
.843
.897
.870
.938
.911
.942
(2)
31.116 1.124

CO
.953
.934
1.049
1.073
1.121
1.121
1.116
1.137
1.118
1.129
1.133
1.131
1.151
1.130
1.119
1.120
1.122
1.117
1.121
1.244

1.030
1.095
1.105
1.131
1.143
1.147
1.135
1.129
1.148
1.137
1.131
1.132
1.132
1.141
1.124
1.174
1.189
1.218
1.211
1.215
1.230
1.241

$0.715 $0,536
.739
.542
.793
.568
.860
.614
.933
.670
.985
.724
1.029
.773
1.144
.878
(
(8)
1.070
1.095
1.101
1.121
1.135
1.146
1.155
1.148
1.179
1.172
1.186
1.202
1.197
1.230
1.231
1.229
1.241
1.262
1.257
1.258
1.269
1.283

.828
.835
.841
.851
.859
.876

.907
.917
.919
.953
.957
.960
.974
1.0Q3
1.003
1.009
L.015
()

$0,324
.332
.348
.386
.451
.505
.550
.612

()

.604
.602
.600
.599
.596
.598
.602
.614
.620
.626
.642
.651
.648
.654
.642
.642
.643
.650
.652
.660
.672
.683

i Money payments only; additional value of room, board, uniforms, and tips are not included.
* Not available. New series, beginning April 1945 includes only employees subject to provisions of the
Fair Labor Standards Act and is not comparable with preceding series, which includes all employees.
3 Annual average includes retroactive pay increases not included in the monthly averages.
* Average of 11 months.
*6 Preliminary.
Not available.
NOTE.—Data are for production workers in manufacturing and mining and for all employees in other
industries.
Source: Department of Labor.

TABLE XII.—Consumers' price index, 7939-47
For moderate-income families in large cities
[1935-39=100]

Year or month

1939 monthly
1940 monthly
1941 monthly
1942 monthly
1943 monthly
1944 monthly
1945 monthly
1946 monthly
1947 monthly

average.
average _
averageaverage_
average _
averageaverage _
average 1_
average

1946—January
February. _.
March
April
May
June
July
August
September..
October
November..
December..
1947—January
February. _
March
April
May
June
July
August
September .
October
November.

All items

Apparel

Rent

Fuel, electricity,
and ice

House
furnishings

Miscellaneous

99.4
100.2
105.2
116.5
123.6
125.5
128.4
139.3
158.5

95.2
96.6
105.5
123.9
138.0
136.1
139.1
159.6
192.6

100.5
101.7
106.3
124.2
129.7
138.8
145.9
160.2
185.3

99.0
99.7
102.2
105.4
107.7
109.8
110.3
112.4
120.6

101.3
100.5
107.3
122.2
125.6
136.4
145.8
159.2
183.8

100.7
101.1
104.0
110.9
115.8
121.3
124.1
128.8
139.5

129.9
129.6
130.2
131.1
131.7
133.3
141.2
144.1
145.9
146.6
152.2
153.3
153.3
153.2
156.3
156.2
156.0
157.1
158.4
160.3
163.8
163.8
164.9

141.0
139.6
140.1
141.7
142.6
145.6
165.7
171.2
174.1
180.0
187.7
185.9
183.8
182.3
189.5
188.0
187.6
190.5
193.1
196.5
203.5
201.6
202.7

149.7
150.5
153.1
154.5
155.7
157.2
158.7
161.2
165.9
168.1
171.0
176.5
179.0
181.5
184.3
184.9
185.0
185.7
184.7
185.9
187.6
189.0
190.2

110. 8
111.0
110.5
110.4
110.3
110.5
113.3
113.7
114.4
114.4
114.8
115.5
117.3
117.5
117.6
118.4
117.7
117.7
119.5
123.8
124.6
125.2
126.9

148.8
149.7
1.50.2
152.0
153.7
156.1
157.9
160.0
165.6
168.5
171.0
177.1
179.1
180.8
182.3
182.5
181.9
182.6
184.3
184.2
187.5
187.8
188.9

125.4
125.6
125.9
126.7
127.2
127.9
128.2
129.8
129.9
131.0
132.5
136.1
137.1
137.4
138.2
139.2
139.0
139.1
139.5
139.8
140.8
141.8
143.0

1
Average of 11 months.
* Not surveyed this month.
Source: Department of Labor.

Foods

TABLE XIII.—Wholesale price index, 1939-47
[1926=100]
Other than farm products and foods

Year or month

«2
1939 monthly average
1940 monthly average
1941 monthly average
1942 monthly average
1943 monthly average
1944 monthly average
1945 monthly average
1946 monthly average
1947 monthly average
1946—January
February
March
April
May
June
July
August
September
October
November
December
1947—January
February
March
April
May
June
July
August
September
October
November
December i

77.1
78.6
87.3
98.8
103.1
104.0
105.8
121.1
151.

65.3
67.7
82.4
105.9
122.6
123.3
128.2
148.9
181.0

70.4 81.3 95.6 69.7 73.1
71.3 83.0 100.
73.8 71.7
82.7 89.0 108.3 84.8 76.2
99.6 95.5 117.7 96.9 78.5
106.6 96.9 117.5 97.4 80.8
104.9 98.5 116.7 98.4 83.0
106.2 99.7 118.1 100.1 84.0
130.7 109.5 137.2 116.3 90.1
168.6 134.7 181.6 140.7 108.3

94.4
95.8
99.4
103.8
103.8
103.8
104.7
115.5
144.8

74.8
90.5 76.0
94.8 77.0 88.5 77.3
103.2 84.4 94.3 82.0
110.2 95.5 102.4 89.7
111.4 94.9 102.7 92.2
115.5 95.2 104.3 93.6
117.8 95.2 104.5 94.7
132.6 101.4 111.6 100.3
179.5 127.2 129.1 115.0

107.1
107.
108.9
110.2
111.0
112.9
124.7
129.1
124.0
134.1
139.7
140.9
141.5
_ 144.5
149.5
147.
147.1
147.6
150.6
153.6
157.
158.5
159.5
162.7

129.9
130.8
133.4
135.4
137.5
140.1
157.0
161.0
154.
165.3
169.8
168.1
165.0
170.4
182.6
177.0
175.
177.9
181.4
181.7
186.4
189.7
187.9
196.0

107.3
107.8
109.4
110.8
111.
112.9
140.2
149.0
131.9
157.9
165.4
160.1
156.2
162.0
167.6
162.4
159.8
161.8
167.1
172.3
179.3
177.8
178.0
178.

119.4
119.6
119.8
119.8
120.4
122.4
141.2
138.9
141.6

105.7
106.6
108.4
108.8
109.4
112.2
113.3
114.0
114.2
125.8
130.2
134.7
138.0
137.9
139.9
140.3
141.4
142.6
143.8
148.9
150.7
151.1
151.5
151.8

120.0
120.9
124.9
126.5
127.8
129.9
132.1
132.7
133.8
134.8
145.5
157.8
169.7
174.8
177.5
178.8
177.0
174.4
175.7
179.7
183.3
185.8
187.5
190.1

100.8
101.3
102.2
103.3
103.9
105.6
109.5
111.6
112.2
115.8
120.7
124.7
127.6
128.5
131.1
131.8
131.9
131.4
133.4
136.0
138.
140.0
142.1
144.7

142.4

172.5
176.7
175.1
173.8
174.6
166.4
170.8
173.
178.4
182.1
184.8
191.7
202.4
206.0

101.6
102.2
104.7
107.9
108.8
109.2
118.1
124.0
125.7
128.6
131.6
134.7
136.6
138.0
139.6
139.2
138.9
138.9
139.5
140.8
142.0
143.0
144.7
147.4

i Preliminary estimate based on weekly data for December.
Source: Department of Labor.

I2O

84.9
85.1
85.0
86.1
86.1
87.8
90.3
94.4
94.3
94.2
94.5
96.1
97.7
97.9
100.7
103.4
103.3
103.9
108.9
112.5
114.1
115.9
118.1
122.8

96.0
95.9
96.0
96.1
96.5
96.4
99.3
98.4
98.4
99.9
118.9
125.7
128.1
129.3
132.2
133.2
127.1
120.2
118.8
117.5
121.3
126.3
135.8
137.0

106.2
106.5
106.9
107.5
108.3
110.4
111.9
112.6
113.6
115.3
118.2
120.2
123.3
124.6
125.8
127.8
128.8
129.2
129.8
129.7
130.6
132.3
132.9
134.0

95.3
95.6
95.6
95.7
97.0
98.5
101.3
102.0
102.1
104.0
106.5
108.9
110.3
110.9
115.3
115.7
116.1
112.7
113.0
112.7
115.9
117.1
118.8
121.1

TABLE XIV.—Index of prices paid and of prices received by farmers and parity ratio, 1939—47
[1910-14=100
Prices paid
(including Prices reinterest
ceived i
and taxes)

Year orjnonth

1939 monthly
1940 monthly
1941 monthly
1942 monthly
1943 monthly
1944 monthly
1945 monthly
1946 monthly
1947 monthly

Parity
ratio a

average average.
average.
average.
average.
average.
average.
average.
average.

124
125
132
150
162
170
174
193
232

95
100
124
159
192
195
202
233
278

77
80
94
106
119
115
116
120
120

1946—January
February
March
April
May..—
June
July
_._.
August
September
October..
November
December
1947—-January
February
March
April
May
June
-.
July
August
September
October
November
December

177
179
180
181
185
188
199
202
199
207
211
212
215
221
227
230
229
231
231
235
238
239
241
245

206
207
209
212
211
218
244
249
243
273
263
264
260
262
280
276
272
271
276
276
286
289
287
301

116
116
116
117
114
116
123
123
122
132
125
125
121
119
124
121
119
117
119
118
120
121
119
123

i August 1909-July 1914=100.
* Ratio of prices received to prices paid (including interest and taxes).
Source: Department of Agriculture.

121

TABLE XV'.—Industrial production index, 7939-47
[1935-39=100, seasonally adjusted]

1939 monthly
1940 monthly
1941 monthly
1942 monthly
1943 monthly
1944 monthly
1945 monthly
1946 monthly
1947 monthly

average..
average._
average~
average..
average..
average..
average..
average..l
average

1946—July.
August
September
October
November
December
1947—January
February
March
April
May
June
July...
August
September
October
November

Manufactures

Total industrial
production

Year or month

.-.
._-

Total

Durable

Nondurable

Minerals

109
125
162
199
239
235
203
170
186

109
126
168
212
258
252
214
177
193

109
139
201
279
360
353
274
192
219

109
115
142
158
176
171
166
165
172

106
117
125
129
132
140
137
134
149

172
178
180
182
183
182
189
189
190
187
185
184
176
182
186
190
192

177
184
186
188
191
190
196
197
198
194
191
191
183
188
. 192
197
198

202
208
212
214
214
211
221
222
225
222
218
219
207
210
218
223
225

157
164
165
168
173
174
176
176
175
172
170
168
163
169
172
175
177

146
144
146
145
136
137
146
146
148
143
152
148
140
150
153
154
156

i Average of 11 months.
Source: Board of Governors of the Federal Reserve System.
TABLE XVI.—Physical production index, 1935-39, 7946, and 1947
Indexes, 1935-39=100
Industry

Weight i

100.0

20.6
4.9
50.8
7.6
12.9
3.2

1946
average

1947
average 2

Percentage
change, from
1946 to 1947

100

165

176

888888

Total production...
Agriculture 3 Minerals *
6
Manufacturing
._
Construction 6
Transportation 7
Electric and gas utilities

1935-39
average

133
134
177
123
200
192

129
149
194
132
208
217

-3
+11
+10

+7
+4
+13

1 Computed from the Department of Commerce data of national income. The weight factors are percentages of the national income for each industry to the total for the 6 industries. The weight for construction has been adjusted to include force account and other construction done outside of the contract
construction industry, the weights for other industry groups to exclude such construction.
2 Preliminary estimates based on incomplete data.
3 Department of Agriculture index of farm output, which measures the physical volume of farm production for human use.
* Federal Reserve index of mineral production.
• Federal Reserve index of manufacturing production.
6
Department of Commerce value of new construction activity deflated by their index of construction
costs and converted into relatives with 1935-39 as 100.
7 Department of Commerce index of transportation. The figure for 1947 is estimated by the Board of
Governors
of the Federal Reserve System on the basis of transportation data.
8
The index of electric and gas utilities is based on the following series: electric power generated for public
use as reported by the Federal Power Commission, and gas produced for public use as reported by the
American Gas Association. The two series are converted into relatives with the average for the period
1935-39 as 100. The relative series are combined into an index of public utility production with electric
power given a weight of 73 and gas 27, the respective percentages of the revenues by each of the utilities to
the total revenues produced by both in the base year 1935-39.

122

TABLE XVII.—New construction activity, 1929-47
[Millions of dollars]
Private construction

S"ear or quarter

1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946

_ .

Total
new
construc-1 Total
tion private

-.
.--

9,913
8,059
5,980
3,260
. . .
2,223
_
2,756
3,110
4,714
5,308
5,018
6,062
6,807
10,308
13,353
7,734
4,073
4,609
9,890
3
1,524
First quarter
Second quarter 3__ 2,300
3
3,104
Third q u a r t e r . . .
Fourth quarter 3 _ 2,962
12,878
1947:
2,460
First quarter3 3
Second quarter3 _. 2,901
3,682
Third quarter ..__
Fourth quarter3 4 . 3,835

7,522
5,306
3,416
1,482
1,005
1,221
1,648
2,486
3,274
2,941
3,619
4,199
5,238
2,908
1,669
1,746
2,561
7,739
1,257
1,862
2,376
2,244
9,878
1,948
2,195
2,775
2,960

Public construction
By funds

Residential
building
(nonfarm)

2,797
1,446
1,228
462
278
361
665
1,131
1,372
1,511
2,114
2,355
2,765
1,315
650
535
684
3,183
432
722
1,027
1,002
4,939
869
1,035
1,380
1,655

Nonresidential
building2

Public
utility
and
farm

2,822
2,099
1,104
499
404
455
472
712
1,088
764
785
1,028
1,486
635
232
350
1,014
3,350
632
843
953
922
3,181
782
739
800
860

Total
public

1,903 2,391
1,761 2,753
1,084 2,564
521 1,778
323 1,218
405 1,535
511 1,462
643 2,228
814 2,034
666 2,077
720 2,443
816 2,608
987 5,070
958 10,445
787 6,065
861 2,327
863 2,048
1,206 2,151
267
193
438
297
728
396
718
320
1,758 3,000
512
297
706
421
907
595
875
445

Federal

237
338
451
510
540
698
822
1,255
1,143
976
1,251
1,406
3,845
9,531
5,605
1,912
1,558
1,067
140
199
344
384
1,156
236
270
346
304

State
and
local

2,154
2,415
2,113
1,268
678
837
640
973
891
1,101
1,192
1,202
1,225
914
460
415
490
1,084
127
239
384
334
1,844
276
436
561
671

By types
Military
and
federally
financed
industrial
19
29
40
34
38
58
39
33
39
74
148
549
2,900
8,453
4,218
1,344
1,160
272
67
61
70
74
225
47
54
66
58

High- Other
ways public

1,248
1,481
1,323
916
675
821
622
876
850
837
835
875
850
675
450
360
342
706
60
149
265
232
1,214
119
287
414
394

1,124
1,243
1,201
828
505
656
801
1,319
1,145
1,166
1,460
1,184
1,320
1,317
1,397
623
546
1,173
140
228
393
412
1,561
346
365
427
423

1
Excludes construction expenditures for crude petroleum and natural gas drilling, and, therefore does
not2 agree with the new construction expenditures in the gross national product.
Excludes
farm and public utility.
3
Not adjusted for seasonal variation.
* Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because ofrounding.
Source: Departments of Commerce and Labor.

770958°—18

123

TABLE XVIII.—Gross national product, department store sales, and residential construction,
1920-47
[1920-39=100]

Year

Gross national
product i

Department store
sales 2

107
88
92
105
104
112
118
117
119
124
108
91
70
67

99
92
94
105
105
110
113
114
115
117
108
97
75
73

1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933

Residential construction i

Gross national
product l

Year

77
75
122
162
185
199
198
185
172
126
66
55
21
14

1934 _
1935
1936
1937
1938
1939...
1940
1941
1942
1943
1944
1945
1946
1947 3

ResidenDepartment store tial consales»
struction *

77
86
98
108
101
108
120
149
190
230
251
254
243
276

83
88
100
107
99
106
114
133
149
168
186
207
264
280

18
33
55
68
71
98
115
144
86
66
37
37
162
229

1 Converted from the reported dollar figures to an index.
2 Converted from the reported base, 1935-39=100.
3 Estimates based on incomplete data.
Sources: Department of Commerce (gross national product, 1929-47, residential construction), National
Housing and Home Finance Agency (gross national product, 1920-28), and Board of Governors of the Federal Reserve System (department store sales).

TABLE XIX.—Business expenditures JOT new plant and equipment, 1939—48l

[Millions of dollars]
Transportation

Year or quarter

Total i

Manufacturing
Mining
Railroad

1939..
1940..
1941..
1942..
19431944..
1945..
19461947 3.

5,200
6,490
8,190
6,110
4,530
5,210
6,630
12,040
15,680

380
560
680
410
360
500
440
560
670

1,930
2,580
3,400
2,760
2,250
2,390
3,210
5,910
7,210

280
440
560
540
460
580
550
570
980

Other

Electric
and gas
utilities

280
390
340
260
190
280
320
660
810

Commercial and
miscellaneous*

480
550
710
680
540
490
630
1,040
1,820

1,850
1,980
2,490
1,470
730
970
1,480
3,300
4,190

1,320
1,800
2,000
2,200
1,960

3,600
4,120
4,640
4,400
4,320

Annual rates, not adjusted for seasonal
1947—First quarter
Second quarter
Third quarter 3
Fourth quarter
1948—F irst quarter 3

12,640
15,760
16,560
17, 760
16,400

5,800
7,400
7,480
8,160
7,240

600
640
720
760
680

640
880
920
1,480
1,440

720
920
800
800
760

I Excludes agriculture.
' Includes trade, service, finance, and communication.
» Estimates for fourth quarter of 1947 and first quarter of 1948 based on anticipated capital expenditures
of business.
NOTE.— These figures do not agree with the totals included in the gross national product estimates of the
Department of Commerce, principally because the latter cover agricultural investment and also certain
equipment and construction outlays charged to current expense. Figures for 1939-44 are Federal Reserve
Board estimates based on Securities and Exchange Commission and other data. Detail will not necessarily
add to totals because figures are rounded to the nearest 10 million.
Sources: Securities and Exchange Commission and Department of Commerce (except as noted).

124

TABLE XX.—Business inventories and sales, 1939-4?
Wholesale 3

Manufacturing i

Year or month

Millions of dollars

Ratio
of inventories

Millions of dollars

of dol- Ratio
Ratio Millions
lars
of inof invenventories Inventories
Sales * to sales tories 3 Sales * to sales

Inventories 3

Sales *

1939 average...
1940 average. _.
1941 average...
1946 average.6_.
1947 average ..

9,941
11,171
13,379
17,817
22,424

4,741
5,482
7,783
10,472
13,953

2.10
2.04
1.72
1.70
1.61

3,497
3,698
4,273
4,833
6,780

4,580
5,146
6,977
10,955
12,935

1946—January
February
March
April
May
June
July.
August
September...
October
November. __
December
1947—January
February
March
April
May
__..
June
July
August
September—.
October
November <L.

16,369
16,590
16,829
16,837
16,934
17,175
18,010
18,466
18,886
19,533
19,896
20,259
20, 805
21,176
21, 612
22,058
22,424
22,618
22, 778
22, 936
23,120
23, 435
23, 700

8,913
8,163
9,507
9,956
10,058
9,702

1.84
2.03
1.77
1.69
1.68
1.77
1.81
1.66
1.76
1,60
1.60
1.58
1.57
1.64
1.55
1.59
1.64
1.66
1.74
1.68
1.58
1.47
1.60

4,294
4,209
4,304
4,390
4,464
4,578
4,685
4,890
5,131
5,343
5,713
5,994
6,248
6,444
6,611
6,778
6,737

9,644
9,868
9,691
9,592
10,087
10,370
10,998
11,174
11,402
12, 399
13,069
13,160
12, 713
13, 013
12,635
12, 227
12,639
12, 541
12, 403
12, 571
13,331
13, 731
14,479

11,157
10, 738
12,240
12,426
12, 849
13,226
12, 940
13, 937
13,906
13, 688
13,602
13,115
13,651
14,628
15, 985
14,800

Retail«

Inventories 3

1
2

6,726

6,997
6,943
7,349

0.76
.72
.61
.44
.52
.45
.43
.44
.46
.44
.44
.43
.44
.45
.43
.44
.46
.49
.50
.52
.55
.53
.55
.54
.55
.52
.51
.51

5,284
5,484
6,040
7,512

6,446
6,522
6,729
7,043
7,426
7,793
8,216
8,716
8,931
9,141
9,337
9,582
9,715
9,703
9,502
9,440
9,574
9,838
10,052
10,266
(7)

3,504
3,866
4,624
8,056

1.51
1.42
1.31
.93

7,425
7,653
7,648
7,730
7,806
7,826
8,047
8,449
8,370
8,384
8,622
8,718
8,653

.85
.84
.85
.87
.88
.90
.92
.92
.98
1.04
1.04
1.05
1.08
1.08
1.10
1.08
1.06
1.05
1.07
1.11
1.08
1.09
0)

8,824
8,957
8,974
9,003
8,937
8,845
9,336

Not adjusted for seasonal variation.
Adjusted for seasonal variation,
s Book value, end of month.
«Total for month.
' Average of 11 months.
8
Preliminary.
7
Not available.
NOTE .—Detail will not necessarily add to totals because of rounding. The inventoryfiguresin this table
do not agree with the estimates of "change in business inventories" included in the gross national product
estimates of the Department of Commerce. This table covers only manufacturing and trade rather than
all business, and shows inventories in terms of current book value without adjustment for revaluation.
Source: Department of Commerce (Office of Business Economics).

125

TABLE XXI.—Sales, stocks, and outstanding orders at 296 department stores, 1939-47
Millions of dollars
Year or month
(total for
month)

Stocks
(end of
month)

1939 average
1940 average
1941 average.
1942 average
1943 average
1944 average
1945 average.
1946 average
1947 average 2 .

128
136
156
179
204
227
255
318
313

344
353
419
599
508
534
564
714
828

1946—January
February. _.
March
April
May
June
July...
August
September..
October
November-.
December. _
1947—January
February. _.
March
April
May
June
July
August
September..
October
November 3.

224
239
301
319
304
303
244
303
309
341
404
526
256
250
332
321
336
304
252
273
340
367
417

491
533
583
644
674
700
738
882
919
776
769
838
865
849
818
769
730
793
819
912
943

1
2

Ratio of Ratio of Ratio of
Outstand- stocks to orders to orders to
ing orders
stocks
sales
sales
(end of
month)

108
194
263
530
560
728
907
551

2.69
2.60
2.69
3.35
2.49
2.35
2.21
2.25
2.65

979
971
910
934
1,048
1,074
1,014
961
846
691
557
619
603
485
387
351
470
593
622
659
663
605

2.19
2.23
1.94
2.02
2.22
2.31
3.02
2.67
2.68
2.59
2.27
1.48
3.00
3.35
2.61
2.64
2.43
2.53
2.90
2.90
2.41
2.49
2.26

0.79
1.24
1.47
2.60
2.47
2.85
2.85
1.76

4.01
4.10
3.23
2.85
3.07
3.46
4.40
3.35
3.11
2.48
1.71
1.06
2.42
2.41
1.46
1.21
1.04
1.55
2.35
2.28
1.94
1.81
1.45

C1)0.31

.46
.44
1.04
1.05
1.29
1.27
.67

1.83
1.84
1.67
1.41
1.39
1.50
1.46
1.25
1.16
.96
.75
.72
.80
.72
.56
.46
.43
.61
.81
.78
.80
.73
.64

Not available.
Average of 11 months.
a Preliminary estimate based on incomplete data.
NOTE.—These figures represent retail sales, stocks, and outstanding orders as reported by a sample of 296
of the larger department stores located in various cities throughout the country and are not estimates of
total sales, stocks, and outstanding orders for all department stores in the United States.
Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System.

126

TABLE XXII.—Profits before and after taxes, all private corporations, 1929-47
[Billions of dollars]
Corporate profits after taxes
Corporate
profits
before

Year or quarter

Corporate
tax liability i

9.8
.2
6.2
6.5
9.3
17.2
21.1
24.5
23.8
20.2
21.1
28.0

1929..
1933..
1937..
1939..
1940-.
1941..
1942..
1943_.
1944..
1945..
1946_.
1947 3

Total

Dividend
payments

8.4
-.4
4.7
5.0
6.4
9.4
9.4
10.4

1.4
.5
1.5
1.5
2.9
7.8
11.7
14.2
13.9
11.3
8.6
11.1

Undistributed
profits
2.6
-2.4

5.8
2.1
4.7
3.8
4.0
4.5
4.3
4.5
4.7
4.8
5.6
6.6

12.5
16.9

1.2
2.4
4.9
5.1
5.9
5.2
4.2
6.9
10.3

Seasonally adjusted annual rates
15.2
19.4
22.9
27.1
29.0
27.4
27.4
28.2

1946—First quarter...
Second quarter.
Third quarter..
Fourth quarter.
1947—First quarter...
Second quarter.
Third quarter..
Fourth quarter

6.1
8.0
9.3
11.0
11.6
10.8
10.8
11.4

9.1
11.5
13.5
16.1
17.4
16.6
16.6
16.8

5.1
5.4
5.6
5.9
6.2
6.3
6.5
7.2

4.0
6.1
7.9
10.2
11.2
10.3
10.1
9.6

*2 Federal and state corporate income and excess profits taxes.
Minus 8 million dollars.
s Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except estimate for fourth quarter of 1947).
TABLE XXIII.—Profits after taxes,1 629 large private industrial corporations, 7939-47

N u m b e r of companies
1939
1940
1941
1942
1943
1944
1945
1946
1946—First quarter
Second quarter
Third quarter
Fourth quarter
1947—First quarter
Second quarter
Third quarter

629

1,465
1,818
2,163
1,769
1,800
1,896
1,925
2,545

146
278
325
226
204
194
188
283

115
158
193
159
165
174
163
171

323 22 -19
604 67 49
698 96 32
853 97 61
870 126 69
870 99 83
860 98 77

t—i

iscellaneous
services

ther nondurables

242
274
209
201
222
243
130

102
173
227
182
180
190
169
127

119
133
153
138
128
115
108
136

70
88
113
90
83
88
88
165

151
148
159
151
162
175
199
356

98
112
174
152
186
220
223
281

186
194
207
164
170
187
187
273

134
160
187
136
149
147
154
302

122
132
152
161
171
184
203
321

-5
51
38
44
50
56
51

20
26
41
50
47
46
46

12
37
41
57
50
57
58

65
74
93
124
98
64
69

56
62
77
85
90
111
122

63
66
67
77
89
87
78

62
71
77
91
96
92
93

82
80
93
66
63
71
67

-34
42
102
94
105
102

i Federal and State income and excess-profits taxes.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System.

ndustrial
chemicals

il producing
and refining

ood, beverages, and tobacco

ther durable
goods

t h e r transportation
equipment
onferrous
metals and
products

utomobiles

otal

Year or quarter

on and steel

[Millions of dollars]

127

TABLE XXIV.—Relation of profits before and after taxes to investment and to sales, private
manufacturing corporations, by industry, 1947
Katio of profits (annual rate) to
stockholders' equity
Before Federal
taxes

Industry

After Federal
taxes

Profits in cents per dollar of sales
Before Federal
taxes

After Federal

First Second First Second First Second First Second
quarter quarter quarter quarter quarter; quarter quarter quarter
All private manufacturing corporations
_
Food
—
Tobacco manufactures.._
Textile mill products
Apparel and finished textiles
Lumber and wood products
Furniture and fixtures.
Paper and allied products
Printing and publishing (except
newspapers)
Chemicals and allied products
Products of petroleum and coal
Rubber products
Leather and leather products
Stone, clay, and glass products
Primary nonferrous metal industries Primary iron and steel industries
Fabricated metal products
Machinery (except electrical and
transportation)
Electrical machinery
Transportation equipment (except
motor vehicles)
Motor vehicles and parts
Instruments; photographic and optical goods; watches and clocks
Miscellaneous manufacturing (including ordnance)

28.0
32.4
14.8
40.0
36.0
36.4
32.8
41.6

25.2
28.0
15.2
31.2
28.4
35.6
32.8
38.4

16.8
18.8
8.8
24.0
21.2
22.4
20.0
25.6

15.6
16.4
9.2
18.8
16.0
22.4
20.0
23.6

12.3
8.1
6.8
15.8
8.8
19.5
11.2
19.6

11.0
7.0
6.1
13.7
7.6
18.3
11.1
18.1

7.5
4.7
4.1
9.5
5.2
12.1
6.8
12.0

6.7
4.1
3.7
8.2
4.3
11.4
6.8
11.2

35.2
31.6
16.8
28.4
34.4
24.4
24.4
23.6
32.0

30.8
24.8
19.2
24.4
21.6
25.2
21.6
18.4
28.4

21.6
19.2
12.4
16.4
20.4
14.4
14.8
14.4
19.6

18.8
15.2
14.4
8.4
12.8
15.6
13.2
11.2
17.2

12.6
16.9
13.8
10.8
10.1
13.9
15.4
13.6
14.1

11.3
14.2
14.4
8.7
7.2
13.9
14.1
10.1
12.1

7.8
10.4
10.1
6.2
5.9
8.2
9.2
8.2
8.6

6.9
8.7
10.8
3.0
4.2
8.5
8.5
6.2
7.4

27.6
32.4

29.2
32.0

16.4
20.0

17.6
19.2

13.2
11.0

12.8
10.3

7.9

7.8
6.1

29.2

5.6
28.4

3.2
16.8

1.2
16.8

4.8
11.2

3.2
10.4

2.0
6.4

6.1

24.0

23.2

14.8

14.4

13.5

12.0

8.3

7.5

26.8

24.4

15.2

14.8

12.2

10.8

7.0

6.5

7.2

Sources: Federal Trade Commission and Securities and Exchange Commission.
T A B L E X X V . — R e l a t i o n of profits before and after taxes to investment and sales, private
facturing corporations, by size classes, 1947
Ratio of profits (annual rate) to
stockholders' equity
Assets class

Before Federal
taxes

After Federal
taxes

manu-

Profits in cents per dollar of sales
Before Federal
taxes

After Federal taxes

First Second First Second First Second First Second Third
quarter quarter quarter quarter quarter quarter quarter quarter quarter
All private manufacturing corporations.
$1,000 to $249,000
$250,000 to $999,000...
$1,000,000 to $4,999,000
$5,000,000 to $99,999,000
$100,000,000 and over

28.0
26.8
35.2
38.8
31.2
20.8

25.2
28.4
30.8
32.4
28.4
19.6

16.8
16.4
20.4
23.2
18.8
13.2

15.6
18.0
18.0
19.6
17.2
12.4

12.3
7.6
10.5
13.0
13.3
12.1

11.0
8.0
9.3
11.2
11.9
10.9

Sources: Federal Trade Commission and Securities and Exchange Commission.

128

7.5
4.7
6.1
7.9
8.0
7.6

6.8
5.1
5.4
6.7
7.2
6.9

6.5
5.1
5.6
6.4
6.9
6.7

TABLE XXVI.—Relation of profits before and after taxes to sales, private corporations excluding
finance, insurance, and real estate, 1946-47
Profits before taxes as percent of
sales
Industry

Profits after taxes as percent of
sales

1947
1946

All private corporations, excluding finance, insurance,
and real estate
_
. -Mining
_
_
Manufacturing
Metal industries
Other manufacturing
__
Wholesale and retail trade
Transportation..
___
Communication and public utilitiesAll other industries
_._

First
quarter

7.9
12.5
8.6
6.0
9.8
5.7
5.7
17.6
10.4

1947

Second Third
quar- quarter
ter

9.3
12.5
10.8
10.8
10.8
5.7
7.4
18.3
9.6

8.7
12.8
10.1
9.6
10.4
5.2
7.9
15.0
9.5

8.5
12.0
10.1
9.9
10.2
5.0
7.6
12.5
9.5

1946

4.7
9.0
5.0
3.0
5.9
3.3
2.9
10.7
6.5

First
quarter

Second Third
quar- quarter
ter

5.6
9.1
6.4
6.3
6.5
3.4
4.0
11.1
6.1

5.3
9.2
6.1
5.6
6.3
3.1
4.8
9.1
6.0

5.1
8.7
6.1
5.8
6.3
2.9
4.5
7.6
5.9

Source: Department of Commerce.
TABLE XXVII.—Loans and investments of all commercial banks, 7929-47
[Millions of dollars]
Investments
End of month

1929: June* . . . .
1933: June 1
_
1937: December
1939: December
1941: December
1944: December
1945: December
1946: June
1947: June

Total loans
and investments

49,424
30,357
38,333
40,6b8
50,746
105,530
124,019
119,448
113,993
112,756
116,740

Loans
Total

35,738
16,349
17,100
17,238
21,714
21,644
26,083
27,130
31,122
33,679
37,700

1 Complete end of year figures not available for years prior to 1936.
2 Estimates based on incomplete data.
Source: Board of Governors of the Federal Reserve System.

129

13,686
14,008
21,233
23,430
29,032
83,886
97,936
92,318
82,871
79,077
79,040

U.S.
Government
4,941
7,476
14,156
16,316
21,808
77,557
90,606
84,473
74,780
70,539
70,120

Other
securities

8,745
6,532
7,077
7,114
7,225
6,329
7,331
7,845
8,091
8,538
8,920

TABLE XXVIII.—Adjusted deposits of all banks and currrency outside banks, 7929-47
[Millions of dollars]

End of calendar year or
month

Total
deposits
U. S.
adjusted
Government
and
deposits
currency outside banks

Other deposits and currency outside banks
Demand
deposits
adjusted 2

Total

Currency
outside
banks

Time

1929.
1933
1934
1937
1939.
1944
1945

54,713
42, 548
47, 985
56, 639
64,099
150,988
175,401

158
1,016
1,715
824
846
20, 763
24,608

54, 555
41, 532
46, 270
55,815
63,253
130, 225
150,793

22,809
15,035
18,459
23,959
29, 793
66,930
75,851

28,189
21,715
23,156
26, 218
27,059
39, 790
48,452

3,557
4,782
4,655
5,638
6,401
23, 505
26,490

1946: June
December..

171,237
167,107

13,416
3,103

157,821
164,004

79,476
83, 314

51,829
53, 960

26,516
26, 730

1947: June
November 4 .

165,455
170,400

1,367
1,900

164,088
168, 500

82, 276
85,900

55, 513
56,000

26, 299
26,600

1 Beginning with December 1938, includes U. S. Treasurer's time deposits, open account.
2
Includes demand deposits, other than interbank and U. S. Government, less cash items in process of
collection.
2
Includes
deposits in commercial banks, mutual savings banks, and Postal Savings System.
4
Preliminary.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System.

TABLE XXIX.—Bond and common stock yields and commercial loan rates, 7929-47
[Percent per annum]

U. S. Government security yields

Year or quarter

1947—First quarter
Second quarter
Third quarter
Fourth quarter

Dividend
yields on
common
stock
(Moody's)

Commercial loan
rates

30 issues

200 stocks

19 cities

5.90
7.76
6.32
5.03
4.96
3.61
3.29
3.05
3.24

3.5
4.4
4.1
4.8
4.2
4.7
4.1
3.9

5.83
4.27
3.45
2.59
2.78
2.59
2.39
2.34
2.28

3.13
3.18
3.19
3.44

4.7
5.2
5.1

2.31
2.38
2.21
2.22

9 to 12
Bonds
months
certificates of Long-term 15 years and
indebted- partially 2
over,
tax-exempt
taxable

Aaa
bonds

Baa
bonds

1-5 issues

1-9 issues

30 issues

2.48
2.37
2.19
2.24

4.73
4.49
4.00
3.26
3.01
2.72
2.62
2.53
2.61

2.20
2.20
2.24
2.33

2.56
2.54
2.57
2.77

Number.
1929 average
1933 average
1934 average
1937 average
1939 average
1944 average
1945 average
1946 average
1947 average

High gra de corporate bo ad yields
(Moody's)

0.75
.79
.81
.82
.84
.84
1.00

1 Tax-exempt prior to Mar. 1,1941; taxable thereafter.
2 Average of yields on all outstanding partially tax-exempt Government bonds due or callable after 8
years, from 1919 to 1925; after 12 years, from 1926 to 1934; and after 15 years, from 1935.
3 No partially t ax-exempt bonds due or callable in 15 years.
* Not available.
Sources: Treasury Department, Moody's Investors Service, and Board of Governors of the Federal Reserve System.

I3O

TABLE XXX.—Public debt and guaranteed obligations of the U. S. Government outstanding*
1939-47
[Billions of Dollars]
Public debt and
guaranteed obligations

Ownership of public debt and guaranteed obligations
Interest-bearing public debt and guaranteed
obligations (par values;*

End of calendar year

Held by public

Ill
111
1939.
1940.
1941.
1942.
1943.
1944.
1945.
1946.
1947

47.6
50.9
64.3
112.5
170.1
232.1
278.7
259.5
257.0

41.9
45.0
57.9
108.2
165.9
230.6
278.1
259.1
256.9

5.7
5.9
6.3
4.3
4.2
1.5
.6
.4
.1

47.6
50.9
64.3
112.5
170.1
232.1
278.7
259.5
257.0

47.1
6.5
40.6
50.4
7.6
42.8
63.8
9.5
54.3
111. 6 12.2
99.4
168.7 16.9 151.8
230.4 21.7 208. 5
276.2 27.0 249. 2
258.0 30.9 227.1
254.3 634.4 6 219.9

0.4 18.4
.5 19.5
.7 23.7
1.0 47.3
2.1 71.5
4.3 96.5
6.5 115.0
6.2 97.9
6
7.0 691.5

12.0
12.5 10.3
16.3 13.6
27.4 23.7
41.2 37.1
55.5 52.2
64.2 63.5
59.5 63.5
6 55.9 665.5

0.6
.6
.5
.9
1.4
1.8
2.4
1.5
2.7

1 United States savings bonds, series A-D, E, and F are included at current redemption values.
2
Includes interest-bearing debt and debt bearing no interest.
3
Excludes guaranteed securities held by the Treasury and securities guaranteed as to interest only.
* Includes insurance companies, mutual savings banks, savings and loan associations, dealers and brokers,
and investments of foreign balances and international accounts in this country.
»Includes matured public debt, International Bank, Monetary Fund, United States savings stamps,
excess-profits-tax refund bonds, and currency items.
6 Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Treasury Department.

TABLE XXXI.—United States Government aid to foreign countries, 7946-47
[Millions of dollars]
1946
Type of aid

A. Unilateral payments:
Straight lend-lease
XJNRRA.
Post-UNRRA
-_.
Civilian supplies for occupied
territories
Greek-Turkish aid
Interim aid. _
Transfer to Philippines
Other Government transfers...
Total unilateral payments. __
Less: Unilateral receipts
Net unilateralpayments
B . Long-term loans and investments:
Lend-lease credits
Surplus property, including
ship sales
Export-Import Bank
United TTingrinTn loan
Investment in International
Bank.
Investment in International
Monetary Fund
_
Other

1947

First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter l

109
532

46
414

6
382

194

264

188
1

50
85

1
162

107

207

115

125

225

262

155

250
76
50
26
24

768
52
716

31
70

25
91

736
24

33
636
8

311
48
34
40

391
10

590
140

567
120

568
49

589
30

712

628

381

450

447

519

559

271

173

135
137

414
333

110
231
400

201
270
200

113
280
500

89
249
950

56
61
1,300

159

5
2

2,745
27

159

58
205
100

Total, long-term loans and
investments
Less: Repayments. >

543
22

1,079
19

836
18

861
20

3,838
50

1,501
34

1,423
39

363
34

Net long-term loans and investments, including Bank
and Fund
Less: Investments in International Bank and Fund

521

1,060

818

841

3,788

1,467

1,384

329

164

2,904

159

Net long-term loans and
investments,
excluding
Bank and Fund

521

901

818

677

884

1,308

1,384

329

Net unilateral payments and
loans and investments,
excluding
Bank
and
Fund

1,237

1,613

1,446

1,058

1,334

1,755

1,903

888

I Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce,

132

T A B L E XXXII.—United States exports, including reexports, by continents, 7936-38 average and
1946-47 by quarters
Total
Period

South
North
America America

Europe

Asia

Oceania

Africa

Millions of dollars
1936-38 quarterly average.
1946—First quarter
Second quarter
Third quarter
Fourth quarter
1947—First quarter. _
Second quarter
Third quarter 1
Fourth quarter ...

742
2,283
2,485
2,351
2,620
3,591
3,961
3,399
3,600

183
500
585
649
809
912
1,018

905

69
236
275
263
379
571
648
561
(2)

311

125
268
365
342
367
487
547
424
(2)

1,117
1,093

969
919
1,374
1,444
1,210

(2)

74
97

32
129
140
103
116
183
230
202

3.1
1.4
1.1
1.1
1.1
1.8
1.9
2.9

4.3
5.7
5.6
4.4
4.4
5.1
5.8
6.9

23
33
28
26
30
64

Percentage of total
1936-38 quarterly average
1946—First quarter
Second quarter
Third quarter. _
Fourth quarter
1947—First quarter.
Second quarter
Third quarter

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

24.7
21.9
23.5
27.6
30.9
25.4
25.7
26.6

9.3
10.3
11.1
11.2
14.5
15.9
16.4
16.5

41.9
48.9
44.0
41.2
35.1
38.3
36.4
35.6

16.8
11.7
14.7
14.5
14.0
13.6
13.8
12.5

1 Estimate based on incomplete data.
2
Not available.
NOTE.—Exports in this table include merchandise shipped from the United States custom area with the
exception of goods destined to United States armed forces abroad, either for their own use or for distribution
to civilians in occupied areas. Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.
TABLE XXXIII.—United States general imports, by continents, 1936-38 average and 1946-47,
by quarters
Period

Total

South
North
America America

Europe

Asia

Oceania

Africa

Millions of dollars
1936-38 quarterly average.
1946—First quarter.
Second quarter
Third quarter.
Fourth quarter
1947—First quarter
Second quarter
Third quarter 1
Fourth quarter ...

622
1,096
1,181
1,231
1,401
1,412
1,449
1,331
1,450

150
364
398
424
462
496
569
528
(2)

81
254
275
263
303
309
291
277
(2)

177
165
210
192
229
186
193
213
(2)

187
193
192
210
286
303
269
205
(2)

10
41
35
62
45
47
53
25
(2)

17
78
72
81
76
69
74
83

30.1
17.6
16.3
17.1
20.4
21.5
18.6
15.4

1.6
3.7
3.0
5.0
3.2
3.3
3.7
1.9

2.7
7.1
6.1
6.6
5.4
4.9
5.1
6.2

Percentage of total

1936-38 quarterly average.
1946—First quarter..
Second quarter
Third quarter
Fourth quarter
1947—First quarter
Second quarter
Third quarter.

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

24.1
33.2
33.7
34.4
33.0
35.1
39.3
39.7

13.0
23.2
23.3
21.4
21.6
21.9
20.1
20.8

28.5
15.1
17.8
15.6
16.3
13.2
13.3
16.0

i Estimate based on incomplete data.
* Not available.
NOTE.—Imports in this table include merchandise entered immediately upon arrival into merchandising
or consumption channels, plus commodities entered into bonded customs warehouse for storage.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.

133

TABLE XXXIV.—Production and exports of selected nonagricultural commodities, 7939, 7946,
and 7947
Exports
as
percent
For do- For ex- of total
mestic use
port production

Production
Commodity and period

Unit
Total

Agricultural machinery and implements:
1939
Million dollars...
do
1946
1947—January-June (annual rate) _ _ _ . . . . -do
do
July-September (annual rate)
Chemicals and related products:
1939
._—do_1946
do
1947—January-June (annual rate)
.....doJuly-September (annual rate) _. _
do
Coal, bituminous:
Million short tons.
1939
1946
.....do
1947—January-June (annual rate)
..—do
July-September (annual rate) _.. . . — d o . —
Electrical machinery and apparatus:
Million dollars.
1939
1946
.—do
1947—January-June (annual rate)
.....do
July-September (annual r a t e ) . . . .....do
Freight cars: 3
1,000 dollars
1939
do
1946
....do
1947—January-June (annual rate)
do
July-September (annual rate)
Lumber, sawmill products:
1939
Million board feet-.
1946
....do
1947—January-June (annual rate)
.—do
July-September
(annual rate) - . _
do
8
Motor trucks:
1939
Thousand
1946
—do
1947—January-June (annual rate)
do
July-September
(annual
r
a
t
e
)
.
.
.
.—do
Passenger cars: 5
1939..
___
Thousand..
1946
.....do
1947—January-June (annual rate)
do
July-September (annual rate) _ _ _
do
Petroleum, crude:
Million barrels«_.
1939
do
1946
.....do
1947—January-June (annual rate)
.....do
July-September
(annual
rate)__.
Rolled steel products: 7
1,000 short tons
1939
1946
do
1947—January-June (annual rate)
do
July-September (annual rate) _ _ _
Wearing apparel:
Million dollars..
1939
._
—do
1946
....-do—
.._
1947—January-June (annual rate)
do.
July-September (annual r a t e ) . . .

416

347
834
(2)

00
3,298
8,600
(2)

3,123
8,077
(2)
(2)

158
302
320
175
523
820
844

395
532
624
568

383
491
564
484

12
41
60
84

1,788
4,500
6,758
6,856

1,683
4,196
6,200
6,312

105
304
558
544

63, 249
208, 216
331, 792
360,816

62,830
419
167, 665 40, 551
195, 634 * 136,158
349, 900 10, 916

16.6
16.0

5.3
6.1
6.

30
7.7
9.6
14.8
5.9
6.8
8.3
7.9

.7
19.5
4 41.0
3.0

1,104
649
1,308
1,644

4.4
2.1
4.2
4.8

710
951
1,236
1,180

23, 871
29, 651
30, 064
32,640
558
764
970
940

152
187
266
240

21.4
19.7
21.5
20.3

2,867
2,149
3,442
3,396

2,702
2,005
3,178
3,136

165
144
264

5.8
6.7
7.7
7.7

1,265
1,733
1,780
1,908

1,193
1,690
1,738
1,856

72
43
42
52

5.7
2.5
2.4
2.7

34,955
48, 776
62,344
61, 792

32,427
43,976
55, 786
55,536

2,528
4,800
6,558
6,256

7.2
9.8
10.5
10.1

3,351
7,031
7,022
(2)

3,329

22
151
186
(2)

0.7
2.1
2.6

24,975
30,300
31,372
34,284

1
8
3

Sales; production data not available.
Not available.
Estimated value of shipments to United States railroads and to foreign markets.
* Eighty-nine percent of the cars exported during this period went to France as a result of an accumulation
of 6deliveries against orders previously placed.
Factory sales are used to represent production. Exports are as reported by the Automotive Manufactures'
Association and include exports shipped as completed cars and parts for assembly aboard.
6
Barrels of 42 gallons each.
7 Net shipments for sale; production data not available.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.

134

TABLE XXXV.—Distribution of selected food supplies moving into consumption channels, 1939,
7946, and 1947
Distribution of food supplies *
Commodity and year

Total i

Million Million
pounds pounds
17,739
246
23, 362
1,187
23,189
300

Meat (carcass equivalent):
1939.
1946
1947 2

Dairy products (milk equivalent):
1939
1946
_
1947 2
Food fats and oils (excluding butter): 3
1939
1946
__
1947 2
Canned fruit (processed weight):
1938-39 pack year
1946
1947 2

_ _

1.4
6.1
1.3

2,644
1,734

108, 556
112,497
115, 524

824
809
811

.4
5.2
2.9

365

669
792

41
74

4,247
4,357
4,370

32.2
31.3
30.5

7.9
13.2
15.1

2,361
3,239
3,263

359
202
215

94
110

2,002
2,943
2,938

15.3
21.2
20.5

15.2
6.2
6.6

21,359
21, 206
22,604

1,277
1,167
1,483

484
243

20,082
19, 555
20,878

152.5
140.7
145.7

6.0
5.5

4,163
6,976
7,117

57
361
125

153
313

4,106
6,462
6,679

31.3
46.5
46.6

1.4
5.2
1.8

32,153
38, 855
37,162
Million
bushels
571

134
494
444
Million
bushels
93

470
230
Million
bushels

32,019
37, 891
36, 488
Million
bushels
478

844

340

489

1,005
Million
dozen
3,418
4,862
4,781

494
Million
dozen
3

5
Million
dozen

430
156

94
90

506
Million
dozen
3,415
4,338
4,535

1946
1947

Fresh vegetables (farm weight):
1939
__

Pounds
132.8
152.8
156

4,612
5,067
5,236

941
600

Million
pounds
17, 493
21,234
22, 289

429
6,339
3,540

Canned vegetables (processed weight):
1938-39 pack year

1946
1947 2

Million
pounds

108, 985
___ 121,480
120, 798

Fresh fruits (farm weight):
1939
1946 _.
1947 2

Exports
Per
shipcapita and
ments
civilian percentas
of
distri- total disbution tribution

Exports Military Civilian
and
distri- distrishipments i bution bution

Wheat (grain equivalent): *
1939
1946 2
.
1947
Eggs (fresh egg equivalent):
1939
1946 2
1947

6.6

243
273
255

.4
1.3
1.2

217.8
207.2
211.0
Number
of eggs
311

16.3
40.3
49.2

374
380

8.8
3.4

1
Includes military civilian feeding programs in liberated and occupied areas, both from current procurement
and from surplus stock.
2
Preliminary estimates based on reports for the first 9 months and forecasts for the balance of the year.
3
Actual weight except for margarine which is on a "fat content" basis.
* Excludes amounts used for animal feed, industrial raw materials, and seed. If these amounts were
included, percentages in last column would be 1939,11.9; 1946, 28.9; 1947, 38.8.
Source: Department of Agriculture.

TABLE XXXVI.—Population by age groups, selected years, 1900-1975
[Thousands of persons]

Age

1900

75,995
All ages
33, 681
Under 20 years
20 to 64 years______ 39,032
65 years and over_ _ _ 3,080
Age unknown. _
201

1920

1930

1940

1947
estimate 1 2

105, 711
43,043
57, 586
4,933
149

122, 775
47, 609
68, 438
6,634
94

131, 669
45, 306
77,344
9,019

143, 980
48, 631
84, 669
10, 650

1960 forecast

1975 forecast

Medium

High

Medium

153, 375
49, 075
90, 321
13, 978

162,011
54, 062
93, 274
14, 674

162, 337
45, 843
98, 849
17, 646

High
185,071
56, 858
108, 279
19,935

1
The total differs slightly from the independent estimate of 144,002,000 published in "Current Population
Reports,
Series P-25, No. 3."
2
Estimate for 1947 and high forecasts for 1960 and 1975 assume high fertility, low mortality and 1
million net immigration in each 5-year period after July 1, 1945. Medium forecasts assume medium
fertility and mortality and no net immigration after July 1, 1945.
NOTE .—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.

TABLE XXXVII.—Changes in selected economic series since 1939

[1939=100]
Source,
appendix B,
table
number

IIIV.

VI.

VII..
VIII.

IX.

XII

XIII

XIV.
XV..

XVII.

XIX..
XXII.

Economic series

Gross national product
_
Personal consumption expenditures
Gross private domestic investment..
Net foreign investment
Government purchases of goods and services.
National income
Compensation of employees
Personal income..
Disposable personal income
Personal saving
Per capita disposable income:
Current dollars
..First half of 1947 dollars
Civilian food consumption (per capita)
Net income from farm marketings to persons on farms (per
capita).
Consumer credit outstanding, end of year
_
Labor force, including armed forces...
Civilian labor force
Employment
Nonagricultural-Agricultural
Unemployment
Wage and salary workers in nonagricultural establishments.
Manufacturing...
Mining
_
Construction
_
_
_.
Transportation and public utilities.. _
Trade
Finance and service
Federal, State- and local government
Average gross weekly earnings:
Manufacturing
Bituminous coal mining
Private building construction
._.
Wholesale trade
Retail trade
._. Consumers' price index: all items
Foods
Apparel
._._
Rent
Wholesale price index: All commodities.
_
Farm products.
Foods
_
Other than farm products and foods
Prices paid by farmers (including interest and taxes)
Prices received by farmers
Parity ratio..
_
_
Industrial production index: total—_
Durable manufactures
Nondurable manufactures
Minerals
New construction
Private
Residential.—
Nonresidential
Public utility and farm
_
Public
Business expenditures for new plant and equipment
Corporate profits before taxes
Corporate tax liability
Corporate profits after taxes
Dividend payments
Undistributed profits

1939

1946

1947

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

225.3
212.9
273.3
533.3
233.6
245.8
244.4
244.1
225.6
548.1

256.4
243.7
338.9
977.8
213.7
280.0
268.8
271.6
250.1
411.1

100.0
100.0
100.0
100.0

209.3
149.3
113.5
203.9

227.4
142.0
112.5
195.1

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

127.1
109.4
104.1
120.3
129.2
86.6
24.4
134.4
142.5
98.9
129.8
138.2
126.0
129.1
140.3

166.4
110.8
108.9
126.3
137.0
86.0
23.0
140.0
153.9
104.6
150.4
139.0
128.9
134.2
135.2

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

183.3
243.0
185.1
161.0
153.8
140.1
167.6
159.4
104.1
157.1
228.0
185.7
134.7
155.6
245.3
155.8
156.0
176.1
151.4
126.4
163.1
213.8
150.6
426.8
167.5
88.0
231.5
324.6
573.3
250.0
147.4
575.0

204.9

159.5
202.3
184.4
106.2
196.8
277.2
239.5
165.7
187.1
292.6
155.8
170.6
200.9
157.8
140.6
212.4
272.9
233.6
405.2
244.2
122.8
301.5
430.8
740.0
338.0
173.7
858.3

NOTE.—For some series, 1947 data are based on 11-month averages.
Sources: Data in indicated appendix B tables have been converted to the base, 1939=100.
For sale by the Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C«
Price 35 cents

O
I36

Full text of Economic Report of the President : January 1948

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