Full text of Economic Report of the President : January 1949
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The Economic Report
of the President
TRANSMITTED TO THE CONGRESS
January 1949
THE ECONOMIC REPORT
OF THE PRESIDENT
To the Congress, January 7, 1949
Together with a report
THE ANNUAL ECONOMIC REVIEW
JANUARY 1949
by the
COUNCIL OF ECONOMIC ADVISERS
UNITED STATES GOVERNMENT PRINTING OFFICE
WASHINGTON : 1949
LETTER OF TRANSMITTAL
THE WHITE HOUSE,
Washington, D. C v January 7,1949.
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.
Together with this report, I am transmitting a report, the Annual Economic Review: January 1949, prepared for me by the Council of Economic
Advisers in accordance with section 4 (c) (2) of the Employment Act
of 1946.
Respectfully,
tpL
III
Contents
T H E ECONOMIC REPORT OF THE PRESIDENT.
Sources of our economic strength.
High points in the economic situation.
Guides to economic policy.
Legislative recommendations.
T H E ANNUAL ECONOMIC REVIEW: JANUARY
by the Council of Economic Advisers).
1949 (a report to the President
To the Congress of the United States:
T
HE people of the United States have just enjoyed another year of
bountiful prosperity. This has enabled us further to strengthen our
economy at home, and further to supplement the recovery of freedomloving peoples elsewhere who seek lasting peace.
The resourcefulness of American business, the skill of our labor force,
and the productivity of our agriculture have lifted our standards of living
beyond any prewar expectation. We have achieved these blessings through
the happy combination of our free institutions, our system of private enterprise upon which we primarily rely for economic results, our vigorous
Government, and the mutual respect and trust that we all hold for one
another. My pledge to all elements in our economic system is that their
Government will continue to steer a course guided by full recognition of
these values. Toward this end, I ask of all the cooperation and confidence
upon which our way of life depends.
Let us all remember that our unparalleled prosperity has not been maintained by chance, and that we can lose it if we leave the future to chance.
Courageous and positive action has contributed to our progress, and some
of the most serious difficulties still confronting us exist because our thought
and action have not been sufficiently clear and vigorous.
As we work together in 1949 to combat the remaining dangers of postwar
inflation, we should bear always in mind that our purpose is at the same time
to build strong bulwarks against deflation and depression, and thus to consolidate our past gains and move forward to new levels of sustained prosperity for all.
This third annual Economic Report, under the Employment Act of 1946,
affords not only the President but also the Congress and the whole country
still another occasion to look to our current economic position, to draw
courage from our progress, and to benefit by our mistakes. Now is the
time to formulate and execute a practical program of immediate and
long-range economic measures pointed toward stability and growth.
Sources of Our Economic Strength
T
HE year just ended has tested the strength of our economy, and challenged our ability and willingness to act to protect our prosperity.
When 1948 opened, the inflation which had attained threatening proportions in the preceding months was continuing unchecked. Prices were rising
everywhere. They brought higher but uneasy profits to business firms.
They squeezed the family budget of workers, who in turn sought to press
wages upward as the cost of living advanced. The rising spiral created
more and more maladjustment among prices, wages, and other incomes.
Early in 1948, a sharp break in grain prices spread concern throughout
the economy. Commodity speculation, fed by a world demand of unprecedented magnitude and intensified by our own short corn crop, had carried
the prices of wheat and corn to levels which could not be sustained. The
market structure collapsed of its own weight. On February 13, the price
of cash wheat was 25 percent or 74 cents a bushel lower than it had been a
month earlier.
But this break did not set off a train of consequences similar to those which,
following World War I, had turned the boom into a deflation of unusual
depth and rapidity in 1920-1922. In 1948, the decline of the speculative
grain market did not bring unemployment, cutbacks in production, general
unloading of inventories, or abandonment of plans for capital investment.
Our economy showed strength sufficient to withstand shock of a kind which
had ended earlier inflations with collapse.
The reasons for this were not just that we were luckier in 1948 than we had
been in 1920. Affirmative national policies and greater caution in the business community combined with other developments to make the economy
more shock-resistant. The farm price support program guaranteed that
the collapse of grain prices would not go far enough to impoverish the
farmers, to curtail the farmers' demand for the products of industry, or to
bring about a chain reaction of price breaks in other markets. As the
price drop was localized, it did not cause cancellation of the buying and
investment plans of businessmen and consumers.
Nor was the farm price support policy the only source of our strength.
Our whole financial and banking structure was stronger and more resilient
than in the early twenties. Our businessmen, having become better informed, were more prudent. Our working groups were better supplied
with current income and accumulated savings. Our social security and
related policies added to the feeling of stability. The Government had so
employed a large budget surplus as to prevent the inflation from becoming as
hectic as it otherwise would have been; and such policies served to moderate
the extent of the reaction. This combination of private and Government
action helped us to avoid serious trouble last year, although it was not
effective enough to terminate the inflationary trend which was soon augmented by the defense program and by the reduction in taxes. Nor did we
develop an adequate protective program against hurtful deflation in the
future. We must now look to an improved combination of basic private
action and supplementary government action to develop still better remedies
and safeguards.
Our escape from the danger of a general recession in the spring of
1948 does not mean that no further dangers will appear, or that we can
wait until they descend upon us in full force before taking wise preventive
measures. We have been granted a breathing spell, but we have not been
granted lasting prosperity without further effort and vigilance. So long
as the rising course of incomes and activity continues, there will be in
operation many of the forces which have been responsible for the longsustained advance of prices. There are a few sectors of our economy where
dangerous inflationary forces continue to be predominant. For example,
the shortages of steel and electric power, and the steadily mounting costs
of public utility services, add further to the higher costs of production which
up to now have been rather readily passed on to the consuming public.
The recent appearance of wider areas in the economy where supply conditions have improved, where the pressure of demand has been reduced, and
where price inflation has been halted or reversed, should be looked upon as a
desirable development to be welcomed rather than feared. It marks the
beginning of the process by which a more stable condition can be reached
after a long period of rising prices. But these adjustments have not proceeded far enough to justify a cessation of concern about inflation. Besides,
a sharp and uneven adjustment of prices downward may cause dislocations
quite as serious as the sharp and uneven movement of prices upward.
Since both factors may be at work in different parts of the economy at the
same time or in rapid sequence, we need to have available a range of governmental measures which can be applied as brake or as accelerator according to the need.
While the prosperity of the postwar years has been great, it has rested
in considerable part on somewhat temporary factors which were the aftermath of war. In 1949, we are entering a period of harder tests. The
momentum of war-created demand and war-created purchasing power has
waned, and we must now rely more fully on currently generated purchasing
power to absorb a full output of goods and services. We must be more
than ever on the alert, to make sure that withdrawal or lessening of temporary demand factors is not accompanied by a reduction of productive
activity and the mounting unemployment to which this would lead.
I believe that prosperity can be continued and that, with proper action,
the prospective volume of business investment, consumer spending, and
governmental transactions should promote ample employment opportunities
for the coming year. But many adjustments in price and income relations
need to be made, and these must flow mainly from the wise action of the
leaders in our enterprise economy. These leaders should draw sustaining
confidence from the fact that it is the policy of the Government under the
Employment Act of 1946 to use all its resources to avoid depression and to
maintain continuous prosperity.
These favorable prospects will not be realized automatically. The
strength of our economy, the strength of our great Nation, depends upon
our capacity and willingness to adopt the salutary policies which are required
by changing circumstances and to put them into effect.
In this Economic Report, drawing upon the more* detailed information and analysis furnished to me by the Annual Economic Review of the
Council of Economic Advisers (transmitted to the Congress herewith), I
shall first cover the high points in the current and prospective economic
situation, and then propose both policy guides and a program to deal with
the situation as I evaluate it.
High Points in the Economic Situation
Employment in 1948 ranged from 57 to nearly 62 million civilian workers
and averaged more than 59 million. This included over a million workers
who were added to the labor force. Unemployment remained at the low
level of around 2 million.
Production for the economy as a whole was between 3 and 4 percent
higher than in 1947. With bumper crops, agricultural output increased
about 9 percent. Industrial output increased 3 percent, while employment
in the service businesses rose 3 percent and in government 4 percent.
Prices ceased the broad upward movement which had persisted with
few interruptions ever since the removal of price controls. The trends of
prices became more irregular and more selective. Metals and metal products, building materials, fuel and lighting materials, and most durable
goods moved upward, while some other groups weakened, with farm products leading the decline. Lower food prices brought the consumer price
index down a little in the late months of the year, although other components of the index continued to rise throughout most of the year.
This halt in the upward march of prices has been a welcome sign in
the battle against inflation. I hope that it proves more enduring than
similar pauses during the past two years. But the sharply divergent movements of prices—both up and down—confront us with urgent problems of
adjustment to sustain maximum employment and production throughout
the economy.
Wages went up during 1948, but there was considerable disparity in the
increases obtained by workers in different lines. While some groups
managed to keep ahead of rising living costs, others fell behind.
Work stoppages in 1948 were at about the same level as in 1947. In
most industries, settlements were obtained without prolonged negotiations
or strikes. Nevertheless, considerable loss of production resulted directly
and indirectly from strikes, especially in coal mining and in east coast and
west coast shipping and trucking.
Profits in 1948 again surpassed all previous records and were rising
throughout the year. Corporate profits after taxes amounted to about 21
billion dollars, contrasted with a record level of about 18 billion dollars in
1947. With sales booming, the ratio of profits to sales was again maintained at around 5 percent after taxes. As I pointed out a year ago, such
profits are in excess of the levels needed to furnish incentives and equity
funds for industrial expansion and to promote sustained economic health,
although some businesses have not thrived nearly so well as others.
The supply of money and credit, which increased enormously during the
war, continued to expand thereafter. During 1948, however, partly as a
result of restrictive actions adopted by governmental authorities and voluntary restraints observed by banks, and partly because of a decline in the
demand for short-term capital, the expansion of bank credit was substantially slowed. A large Government surplus used to retire bank-held
debt, together with the slackened growth of credit, resulted in a slight
decrease in the amount of privately held bank deposits and currency.
While bank loan expansion was less in 1948 than in 1947, this was in good
part offset by increased lending by other financial institutions.
Credit expansion has been an important element in the process of
inflation. In the first months of 1948, it was offset by the large Treasury
surplus. When that surplus disappeared, the Government did not have
authority to take other action which would effectively restrain inflationary
expansion of bank credit and at the same time assure the maintenance of an
orderly market for the vast public debt.
Consumer income in 1948 increased per capita about in proportion to the
increase in consumer prices, which meant that consumers had no appreciable gain in real incomes despite an increase of 3 to 4 percent in total
national output. Income from most major sources was greater than in
1947. But in the latter half of 1948, income from farming fell relative to
the normal seasonal pattern and that from other unincorporated business
and from rents ceased to rise, while that from dividend payments increased
sharply. Income distribution is less unequal than it was in prewar years,
but this improvement has probably been halted as a result of inflation and
of changes in income taxes in 1948.
Consumption expenditure went up less than income in 1948. While
personal saving increased, this was not reflected in the rate at which people
accumulated liquid assets—currency and bank deposits, insurance policies,
and securities. A larger proportion of saving was invested in housing,
unincorporated businesses, and farms.
Business investment continued at a high level throughout 1948. Plant
and equipment outlays by businesses other than farms totaled about 19 billion
dollars, slightly above the level reached in the latter half of 1947, although
with higher costs the physical volume of such investment was not quite
maintained. Expansion to catch up with postwar demands appeared to
be nearing completion in some lines, but substantial further increases in
capacity are planned in a number of industries—chemicals, petroleum,
metals, utilities, and transportation. Even where expansion goals have been
met, modernization to reduce costs and improve products should continue
to require substantial investment, though at a rate of growth lower than that
of the past two years.
Inventories of nonfarm businesses likewise continued to increase in value
throughout the year, the increase amounting to about 7 billion dollars.
Of this amount, 4 billion was accounted for by price increases. Restocking
after wartime shortages appears to have been virtually completed except
for metals and some building materials.
Corporate financing of investment in plant and equipment, inventories,
and customer credit required 26 billion dollars in 1948, 2 billion less than
in 1947, but that part of new investment which went into plant and equipment increased. Of the total, 65 percent was internally financed. For
the part externally financed, bonds were a more important source, and
bank loans and stock issues less important sources, than in 1947. While
stock market financing has been less important during the postwar years
than in the late 1920's, this has been offset by greater retained earnings
so that equity-debt ratios are generally more favorable now than in the
last two decades.
The housing supply was increased by well over a million residential units
during 1948. But since last May the number of new housing starts has
been falling off rapidly. This does not mean that the housing shortage
has been overcome. Rather it means, as I have pointed out in previous
reports, that the construction industry has been pricing itself out of the
market for all but expensive homes. A continued decline in home building would constitute a threat, not only to the improvement of living standards for millions of low-income families who are still inadequately housed,
but also to the maintenance of maximum employment over the years.
The housing shortage is one that calls for prompt and bold action by
Government and by industry—action by Government that will produce
low-rent public housing, slum clearance, and rural housing for families of
low incomes; action by industry to reduce costs so that decent homes can
be built at prices that wage earners with moderate incomes can afford.
The major portion of the housing job must be done by private industry.
Here the bottleneck is cost. At this time of national stock-taking I urge
all elements of the building industry substantially to lower costs so that
housing production may reach new record levels. The present decline in
housing starts points up the danger that inflated building costs can bring
down upon the industry. If housing costs are lowered and the consumer
gets better value, builders will be able to continue to build in volume and
the building industry need not fear a continued downward trend.
Municipalities can perform a major role in reducing costs by modernizing
their obsolete building codes, which add to costs unnecessarily.
The surplus of exports of goods and services in 1948 was substantially
less than in 1947, being 6 billion dollars compared with 11 billion. This
reflected in part an increase in imports, a necessary development for placing
our international transactions on a sustainable basis. It reflected even
more a decrease in exports, because foreign purchasers lacked dollars with
which to buy from us, and because of increased supplies of needed goods
produced abroad. The impact of this decline has been selective. Foreign
countries have continued to buy products which they consider essential, like
wheat, petroleum, agricultural and industrial machinery, and chemicals.
Other items have been cut very drastically.
As shipments under the European Recovery Program continue to expand, some increase in the level of exports can be anticipated. For certain
products, especially those for which the domestic market is tight, countries
are being authorized to use European Recovery Program funds for purchases
outside the United States. This will not reduce total export demand, since
the sellers of such goods will generally spend here the dollars they receive.
However, the expansion of exports under this program will, it is hoped, be
offset in part by further increases in imports.
Government fiscal transactions were again a strong anti-inflationary factor in the early part of 1948, due to the excess of receipts over expenditures.
But this factor declined substantially during the year. Federal receipts from
the public exceeded cash payments by about 6 billion dollars in the calendar year 1947. Measured after adjustment for seasonal factors, the excess
ran at an annual rate of 12.5 billion dollars in the first half of 1948, and
only at a rate of 4 billion dollars in the second half. One of the main
supports of an anti-inflation policy is a large Treasury surplus. As a result
of the tax reduction of last year and the necessary increase in Government
expenditures, this powerful weapon is not now available. Tax receipts, it is
true, have been rising but this has been largely due to the inflationary rise in
incomes, profits, and pay rolls. This inflationary rise, in turn, was aggravated by the effects of the tax reduction. Rising expenditures of State and
local governments are expected to add to deficits in 1949, and these deficits
increase the general inflationary pressure.
In the Nation's Economic Budget, retained earnings of business and business investments showed the largest percentage increase from 1947 to 1948.
Among the other components, consumer incomes and expenditures increased
less, government payments rose only moderately, and net foreign investment
declined substantially. Expectations of continued inflation have added to
the incentives for business investment, while the price rise has acted as a
brake on the demand of consumers with relatively fixed incomes. The
proportion of consumer expenditures in the total national product has
never been lower in any peacetime year for which statistics are available.
This is not an immediate problem so long as the sum of government expenditures, business expenditures, and net foreign investment is still rising. It
could become a critical problem as these other factors begin to turn down
or even to assume a declining relative importance in a constantly growing
total economy. This situation calls for a vigorous anti-inflation program
now, while at the same time we must pursue those policies of adjustment and
expansion which will be needed to promote balanced economic growth
over the years.
Guides to Economic Policy
S WE turn from consideration of the facts of our economic situation
. to a program of action, there are several broad principles which I
believe should guide us. These principles should help us to keep clearly in
mind where we want to go and how certain roads rather than others are the
surest and quickest way of getting there.
First. We should remember that the goal we seek is the greatest prosperity for the whole country and not the special gain of any particular group.
That is why the Employment Act of 1946 calls upon the President to present
an economic program aimed at continuous "maximum employment, production, and purchasing power." I firmly believe that this goal is attainable.
Maximum employment for 1949 means that nearly 1 million additional
job opportunities should be provided for the growing labor force. Maximum production means that our increased labor force and modernized plant
should strive for a 3 to 4 percent increase in total output. Maximum purchasing power means that the sum total of market demand by government,
business, and consumers, domestic and foreign, should be proportionate to
our productive capacity. It must not be more or we shall suffer inflation.
It must not be less or we shall suffer unemployment and under-utilization
of our resources.
Second. We should think and work with a reasonably long look ahead,
not keeping cur eyes just on the problems of the moment. Our immediate
tasks must be placed in the perspective of our long-range national objectives.
While we must deal promptly with the problem of inflation, we must
not unduly hold back undertakings that are needed to preserve and
develop our employment opportunities and our productivity in later years.
Policies needed to develop our resources and to prevent depression in the
long run must be reconciled with policies needed to curb inflation in the
short run.
We must pursue affirmative programs for housing and health, for education and resource development. Yet the fight against inflation prevents
us from undertaking these long-range programs with the speed and on a scale
that would otherwise be desirable. In the recommendations made in this
Economic Report and in the Budget which will be transmitted to the Congress in a few days, I have sought to reconcile these objectives in a way that
strikes the safest balance.
Third. In order to have a yardstick for appraising strength and weaknesses in our economy and the adequacy of Government programs, we need
concrete objectives for economic growth, and particularly standards for a
better balance between production and consumption, income and investment, and prices, profits, and wages which will be conducive to sustained
economic progress. In the Annual Economic Review of the Council of
A
Economic Advisers, transmitted herewith, there is a detailed treatment of
our growth possibilities over the next few years. This shows how our employment, our output, and our standards of living can rise if we encourage and
place major reliance upon our free enterprise system, conserve and develop
our natural and human resources, retain our faith in responsible Government, and do not relax our efforts.
This study by the Council of Economic Advisers shows that action is
now needed on the long range programs which I set forth in the concluding
section of this Economic Report.
Fourth, We are dedicated to the principle that economic stability and
economic justice are compatible ends. The fact that our total purchasing
power is now at record levels cannot blind us to the equally important fact
that the incomes of many people have not risen apace with the cost of living
and that they have become the victims of inflation. A prosperity that is too
uneven in the distribution of its fruits cannot last.
Fifth. We must fulfill the requirements of our essential programs—
national defense, international reconstruction, and domestic improvements
and welfare—even if doing so may require the temporary exercise of selective controls in our economy. We want the greatest amount of economic
freedom that is consistent with the security and welfare of the people; but we
do not want to sacrifice that security and welfare because of narrow and
selfish concepts as to the acceptable limits of government action. If we
could have the amount of national defense that we need, make the contribution to international reconstruction to which we are committed, and at the
same time maintain and expand our standards of living now and in the future
without any kind of selective controls over the economy, that would be
most highly desirable. And it is possible that we may not, in fact, be ferced
to use such controls. But we would rather have these relatively unpleasant
restrictions on our freedom of action for a while than imperil our security or allow our human and material resources to deteriorate.
Sixth. The vigorous commitment by the Government to an anti-inflation
policy should not obscure the fact that the Government is equally committed
to an anti-depression policy. In fact, curbing inflation is the first step
toward preventing depression. And in times like the present, when the
economic situation has mixed elements, the Government needs both antiinflationary weapons and anti-deflationary weapons so that it will be ready
for either contingency. It may even be necessary to employ both types of
measures concurrently in some combination, for some prices or incomes
could rise too rapidly while others could be falling dangerously. The same
dictates of prudent policy which call for higher taxes in a period of inflation
would call for tax adjustments designed to counteract any serious recessionary movement.
Legislative Recommendations
With these principles as a guide, I turn now to the recommendations
which I am presenting to a new Congress invested by the American people
with enormous responsibility for their welfare and security. We are
pledged to prompt action when needed. We must not wait to act only in
the eleventh hour of crisis. Moderate measures, taken in time, can save us
from drastic action later on.
1. POLICIES TO COMBAT INFLATION AND TO PROMOTE PRODUCTION IN
CERTAIN INDUSTRIES
Fiscal policy
It is essential to sound fiscal policy to have a budget surplus now. This is
our most effective weapon against inflation. It will enable us to reduce our
debt now; it would be much more difficult to do so in less prosperous times.
I recommend legislation to increase the Government revenue from taxation by 4 billion dollars a year. The principal source of additional revenue
should be additional taxes upon corporate profits, which can be applied
without unduly interfering with prospects for continued business expansion
and with assurance that profits, after taxes and dividends, will be sufficient
for investments and contingencies.
Another source of additional revenue should be the tax upon estates
and gifts. The already small yield from this tax was reduced by one-third
by the Revenue Act of 1948. Careful study should also be directed to the
increase of rates of individual income taxes in the upper and middle
brackets. Some additional excise taxes may be desirable, but some excise
taxes, particularly on oleomargarine, should be repealed.
I also recommend an increase in social security contributions under
existing and extended social insurance programs. This would exert an
anti-inflation effect in addition to that of the 4 billion dollar increase in
taxes which I have recommended above.
The national tax policy should be flexible and should be promptly
adjusted to the changing needs of business and consumers in the course of
evolving economic events.
Increased taxation is only one of the means by which we can accumulate
a budget surplus. The other is a careful limitation of Federal expenditures.
It is essential that our fiscal policy under present circumstances contemplate
not only a surplus of revenues over expenditures, but also a surplus achieved
at the lowest level of expenditures which is consistent with our needs.
The implications of this policy requirement will be discussed at length in my
Budget Message.
10
Debt management
The public debt will continue to be managed in a manner that will make
a maximum contribution to the stability of the economy. An important
factor in this program will continue to be the maintenance of stability in the
Government bond market.
Such stability in the Government bond market has been a most significant
element in the smooth reconversion from a wartime economy to a civilian
peacetime economy. It contributes to the underlying strength of the financial structure of the country. It engenders business confidence. It has
made it easier for business and industry to obtain the capital funds necessary
for their reconversion and expansion projects.
The stability of the Government bond market was maintained throughout 1948 by the joint effort of the Treasury Department and the Federal
Reserve System. Despite the necessity for market support at times during
the year, there was only moderate increase in the total Government security
holdings of the System as a result of the support program. There were
occasions, however, when the bond price support policy proved its value
in stabilizing the market and the need for continuance of the policy was
demonstrated.
Only during the last few years have we had experience in dealing with
the problems of managing a public debt of the size the country now bears.
The policy of supporting the price of long-term Government bonds at the 2/4
percent yield level has been eminently successful.
Through its vigorous promotion of savings bond sales during the year,
the Treasury has placed a large volume of bonds in the hands of individuals,
who have thereby aided in the battle against inflation by adding to their
savings. The most gratifying aspect of this situation is that the amount of
Series E bonds outstanding was brought to the new high level of 32 billion
dollars, and that this was accomplished with the cooperation of the banks
of the country, thousands of business firms and their employees, and an
army of patriotic volunteer workers.
Credit policy
On previous occasions I have recommended that adequate means be provided in order that monetary authorities may at all times be in a position to
carry out their traditional function of exerting effective restraint upon excessive credit expansion in an inflationary period and conversely of easing credit
conditions in a time of deflationary pressures. The temporary authority
to increase reserve requirements of member banks of the Federal Reserve
System, granted by the Congress last August, will expire on June 30, 1949.
The expiration of this authority without further action of the Congress
would automatically release a substantial volume of bank reserves irre-
II
spective of credit needs at the time. The Congress should promptly provide
continuing authority to the Board of Governors of the Federal Reserve
System to require banks to hold supplemental reserves up to the limits
requested last August, 10 percent against demand deposits and 4 percent
against time deposits. This authority to the Board of Governors should
not be confined to member banks of the Federal Reserve System but should
be applicable to all banks insured by the Federal Deposit Insurance
Corporation.
Authority for the regulation of consumer installment credit, which likewise expires under present law on June 30, 1949, should be continued in
order to exert a stabilizing influence on the economy.
Promotion of supply and production
There are shortages of supply in certain critical areas which are so serious
as to impede maximum production in an expanding economy and to limit
programs related to national security.
I recommend immediate legislation to deal with this problem of capacity
and supply. It should impose upon the Government the specific responsibility and provide the funds to make careful surveys of future supply needs
and productive capacity. It should further require that these specific studies
be correlated with the general requirements of an economy operating at maximum employment, production, and purchasing power. To the extent that
facts reveal the need, it should provide additional authority to deal more
effectively with inadequacy of capacity and supply.
Allocation powers
In my Economic Report of last year, I stressed the need for the supplementation of voluntary action with mandatory controls over key materials
in short supply. The need for mandatory controls still exists. I propose the
temporary extension of the law under which voluntary agreements are now
permitted. However, there is grave danger that the problems of acute shortage cannot be adequately met by voluntary agreements. I therefore recommend that the use of mandatory allocation powers be authorized so that they
may be employed on a selective basis without delay where they prove to be
needed.
I also recommend that the Congress continue the priorities and allocation
authority in the field of railroad transportation.
Selective price and related wage controls
I recommend that selective price control authority should promptly be
made available to the Government. My reasons for this have repeatedly
been set before the Congress and the country. I have not earlier and do
not now propose general or over-all price control of the wartime variety.
But we are still in a situation where the prices of certain critical materials
or commodities of vital industrial or consumer importance are moving
upward for the third consecutive year or longer. Sharp rises in the prices
of essential products may be harmful to the economy even when the general
12
price level is fairly stable. Further, we cannot be certain that another
upsurge of general inflation will not reappear this year under the composite
pressures which are at work throughout the economy.
Legislation to authorize selective price control should encourage voluntary adjustments without the actual imposition of price control. It is
in this spirit that I would administer the authority. But I am firmly
convinced that such voluntary efforts, which have been tried with partial
but insufficient results since the middle of 1946, cannot meet the problem
unless the Government possesses the authority to act firmly. With such
authority available, however, its actual application might not be required. It should be supplemented with a provision permitting the Government to order the withholding of price advances for a reasonable period
while public inquiry into their justification is being made.
In my message to the special session of the Congress in July 1948, I
said: "Where the Government imposes a price ceiling, wage adjustments
which can be absorbed within the price ceiling should not be interfered
with by the Government. The Government should have the authority,
however, to limit wage adjustments which would force a break in a price
ceiling, except where wage adjustments are essential to remedy hardship,
to correct inequities, or to prevent an actual lowering of living standards."
I then stated my belief, which I still firmly hold, that wage increases based
upon productivity and designed to provide a rising standard of living embody the American way. The facts show some current situations where
non-inflationary wage increases can be granted by employers without price
increases. I firmly believe that the normal processes of collective bargaining
will result in sound wage adjustments without the actual application of any
governmental authority related to wages if business and Government make
genuine efforts to hold down excessive prices and profits and to reduce the
cost of living.
Rent control
The present housing shortage makes it necessary to continue rent control
for at least two years, and to strengthen its enforcement. I recommend that
this be done.
Even if the most optimistic interpretation is placed upon the slight reduction in the cost of living in recent months, it would be unwise to lift
living costs again by rent increases even larger than the moderate ones
taking place under the present system of control. Such a course would
inflict further hardship upon the families who have already been the prime
victims of inflation, and would make it harder to exercise moderation in
wage demands.
Export controls
In view of the large volume of exports required to carry out our
program of aiding economic reconstruction abroad, it is essential that those
exports be controlled, both to minimize their adverse impact on the domes-
13
tic economy and to make them most fully conformable to our foreign
policies. I therefore recommend that the existing powers of control over
exports be extended, and that the machinery for enforcement be
strengthened.
Commodity exchanges
Excessive speculation in grains, cotton, and other agricultural commodities results in wide and harmful fluctuations in prices. The experience in
the fall of 1947, and in the winter and spring of 1948, demonstrated the
need for more effective governmental supervision over speculative trading
on the commodity exchanges. I recommend that the Congress grant more
specific and more adequate authority to prevent excessive speculation or
the manipulation of prices.
2. POLICIES TO PROTECT THE VICTIMS OF INFLATION
While we are fighting further inflation, we should recognize that severe
hardship has already been imposed on those whose incomes have lagged
far behind the increase in the cost of living. Whatever is feasible to alleviate this hardship should be accomplished without delay. I recommend
specifically:
That the benefits under the old-age and survivors insurance be substantially increased in order to bring them in line with the increase in
the cost of living;
That the coverage of the Fair Labor Standards Act be broadened
and the minimum wage increased from the present 40 cents an hour—
a figure determined in 1938—to at least 75 cents an hour. It should be
permissible to provide higher minima by tripartite action of employers,
unions, and the Government on an industry basis;
That the public assistance program for relief be improved to meet
the basic human needs of the less fortunate.
The housing program which I recommend will make a start toward providing decent housing for those whose low incomes confine them to slums
in these days of grossly inflated housing prices.
3. POLICIES TO PROMOTE BALANCED ECONOMIC GROWTH
While alleviating the hardships of inflation and overcoming maladjustments which threaten our future prosperity, we must continue to develop our
resources for healthy growth. We should press forward at once with
some programs of high priority needed now to conserve and increase the
strength of our Nation. In addition, we should be prepared with fully
formulated plans for others. We cannot accept the dangerous idea that
inflation's end will automatically bring about a period of stable prosperity.
The continuing need for prudence in Government expenditures must not
be translated into false economy.
14
Natural resources
The Federal Government has an important role in the development of our
natural resources which is essential to the achievement of programs to relieve
shortages which threaten economic development. These shortages include
many of our most essential minerals and metals, our energy resources, especially electric power and oil, and some chemicals and fertilizers.
Present shortages of electric power in many areas are not temporary; our
long-range needs require enormous expansion of existing capacity. It is
essential that public power programs be expanded this year, even where this
requires use of scarce materials for construction of dams and generators.
Such expansion should include the construction of transmission lines where
needed. A start on the St. Lawrence River waterway and power project
should be made immediately. The programs in the important river basins
should be examined and prompt action taken where needed to provide
improved coordinated development plans.
Agriculture
With certain abnormal postwar demands for farm products diminishing,
problems of adjustment to longer-range conditions are becoming more pressing. We need to fit a prosperous and equitably treated agriculture consistently into an economy seeking to operate continuously at maximum levels
of employment, production, and purchasing power.
We must make sure that our long-range price-support legislation moves
toward the goal of farm living standards comparable to those of the rest
of the population. We need farm production even more abundant than we
have yet attained to supply the industrial and consumer needs of a full
employment economy. But at the same time, we need measures to encourage shifts in the composition of farm output realistically adjusted to
our domestic and export needs. We should supplement such measures
with others, including the provision of adequate storage facilities, the improvement of distribution, and adequate credit facilities.
Even with farm production and national income at their present high
levels, many families lack adequate diets. We should assure maintenance in the future of a level of consumption consistent with real food
needs. This will help to stabilize domestic markets for farm products.
To stabilize foreign markets, consultations are already under way toward
preparing a new International Wheat Agreement.
I urge the Congress to reexamine existing and proposed farm legislation
in the light of all these objectives.
International economic relations
The European Recovery Program is designed to further world recovery
and reconstruction. It must be continued. Its success will facilitate a
return to reasonable freedom of world trade. The proposed Charter of
the International Trade Organization, which was signed by 54 nations last
year, lays the foundation for this return.
The present inadequate authority for the conclusion of reciprocal trade
agreements expires June 30, 1949. I urge that immediate action be taken
to restore the Trade Agreements Act to full effectiveness and to extend
it for three years.
Housing
The steady decline in new housing starts since last May adds fresh evidence
of the need for housing legislation. I again recommend immediate passage
of the unenacted portions of the comprehensive housing bill; and the need
has now become so great that its meager quota of 500,000 units of low-rent
housing over 5 years should be increased to provide for 1,000,000 units
within 7 years.
If we are to achieve levels of housing production adequate to our needs,
construction materials in the necessary volume must be available continuously and in balanced proportions. If it proves necessary, I shall not
hesitate to use the allocation authority, which I have requested, to channel
such materials into home building.
Urban redevelopment and community facilities
The comprehensive housing bill includes substantial Federal aid to the
States and localities to enable them to make more rapid progress in clearing
slums and in assembling land for balanced redevelopment. Such action
can be taken now without adding significantly to inflationary pressures, and
it is an essential basis for future progress.
While the Annual Economic Review of the Council of Economic Advisers this year does not deal at length with programs, such as education,
health, and social security, which are directed toward the improvement of
our human resources, my Economic Report last January stressed the intimate connection between the conservation and improvement of these resources and the prosperity and productivity of our economy. The Council
this year firmly reiterates this principle.
Because the programs flowing from this analysis have not yet been authorized, I submit the following recommendations.
Education
The crisis facing education must be met, and the basis for the continued
improvement of our system of education made firm. Only with Federal
resources can we meet adequately the increased cost imposed by expanding
enrollments and the general rise in expenditures for maintenance and
operation. I recommend that a Federal program for aid to elementary
and secondary education be initiated. We should make plans whereby the
opportunities for higher education would be expanded through cooperation
between the Federal Government and public agencies and private
institutions, including a system of general scholarships and fellowships.
And a study should be initiated to determine authoritatively our national
needs for educational facilities and the most feasible methods of providing
them.
Health
The high percentage of rejections under the military recruitment programs
has provided striking evidence of the unsatisfactory state of the Nation's
health. National health insurance is the only workable way to assure that
all individuals have access to the medical care they need. I recommend
the enactment of such a program this year. Federal grants in support of
hospital construction are an indispensable support to such a program. We
also need to augment the number of doctors, dentists, and nurses in order
to overcome the present serious national shortage of medical personnel.
Old age, disability, and unemployment insurance
Millions of workers are excluded from the benefits of our old age and
unemployment insurance systems. Such exclusion denies to individuals
protection to which they are entitled by every consideration of equity. I
urge that the coverage of these systems be widened this year and the benefits
made more adequate.
Few of our workers enjoy systematic protection against loss of income
through temporary or permanent disability. We should inaugurate a system of insurance against such loss.
I have included in this Economic Report only those legislative recommendations which have large significance for maintaining maximum employment, production, and purchasing power and which require the immediate attention of the Congress. There are a number of other important
projects on which we should make further progress this year. Our conservation practices in many areas require improvement, including the regulation
of timber cutting, the protection of public range lands, and the development of our tidelands oil resources. We should press forward with our
programs of basic research and exploration. We should seek continually
to encourage the bargaining of labor and management along lines most
consistent with national progress and stability.
This is a period in which our ability to master our affairs in our own way
will be rigorously tested. Abundant resources and rapidly advancing technology are both a blessing and a responsibility. Our strength lies, however,
Jess in these resources themselves than in our will to use them effectively.
This task requires adapting our private and Government institutions to
changing circumstances.
We are committed to working out our economic problems in a way
that combines economic and social progress with democratic self-responsibility. This is the spirit in which the Employment Act of 1946 was
conceived and in which we shall attempt to live up to its high purpose.
18
THE ANNUAL ECONOMIC REVIEW
JANUARY 1949
A REPORT TO THE PRESIDENT
BY THE
COUNCIL OF ECONOMIC ADVISERS
LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS,
Washington, D. C, January 331949.
The PRESIDENT:
SIR: The Council of Economic Advisers herewith submits a report, the
Annual Economic Review: January 1949, in accordance with section
4 (c) (2) of the Employment Act of 1946.
Respectfully,
Chairman.
Vice Chairman.
fW
Til
Contents
I. ECONOMIC TRENDS DURING 1948
The course of employment and production
Employment
Production
Prices, wages, and profits
Prices
Wages and labor relations
Profits
Money and credit
The flow of goods and purchasing power
Consumer income, spending, and saving
Business investment and
finance
International transactions
Government transactions
Summary: The Nation's Economic Budget
II. GOALS AND MEANS OF APPROACHING THEM IN 1949
Basic economic objectives
Maximum employment
Maximum production
Maximum purchasing power
Needed adjustments
Fiscal policy
Credit policy
Voluntary adjustments in prices and wages
Treatment of critical shortages and capacity expansion.
Selective controls
Rent control
Farm price supports
III.
BASIC OBJECTIVES FOR BALANCED ECONOMIC GROWTH
Production objectives
Mining and manufacturing production
Agricultural production
Energy production
Investment objectives
Needed investment in manufacturing
Needed investment in electric utilities
Needed investment in mining facilities
Railroad investment
Page
1
1
1
1
4
4
8
9
10
12
12
17
21
25
30
36
36
36
36
36
38
38
40
43
46
46
47
47
50
52
53
54
54
55
55
56
56
58
III. BASIC OBJECTIVES FOR BALANCED ECONOMIC GROWTH—Con.
Investment objectives—Continued
Highways
Agricultural investment
Forest investment
Commercial construction
Objectives for consumption and living standards.
Balancing production and consumption
Promoting economic growth
Research and information
Financing business expansion
Promoting competition
Agricultural growth
Conserving and developing the Nation's resources
Water resources and power
Land resources
Forests
'.
Petroleum and other minerals
The need for program review
Housing
Human resources
International economic relations
From inflation to stability
Fundamental strength of the economy
Vulnerability of the economy
Preventive measures
Page
59
59
60
60
61
62
63
63
64
65
66
67
67
68
68
68
69
70
72
72
74
74
75
75
APPENDIXES
A. The Nation's Economic Budget
B. The Distribution of Family Income, Before and After Federal
Income Tax
G. Statistical Tables Relating to Employment, Production, and
Purchasing Power
VI
79
91
97
I. Economic Trends During 1948
THE COURSE OF EMPLOYMENT AND PRODUCTION
Employment
IGH levels of employment were characteristic of 1948. Job opportunities were ample not only for the large labor force with which
we started the year, but also for more than a million additions during the
year. This large expansion consisted in part of veterans who completed
their education, and also in part of a relatively large number of women
seeking work because of the pressure of high living costs on family budgets.
Total civilian employment established a record annual level of 59.4
million, fluctuating seasonally between a winter low of 57.1 million in
January and February to a summer high of 61.6 million in July. Continuing a long-term trend, average agricultural employment declined slightly.
Total unemployment hovered in the vicinity of 2 million, being somewhat
higher during the first half of the year and somewhat lower during the
fall months, but increasing a bit during the closing weeks of the year. (See
appendix table C-7.)
While the firm demand for labor was felt in almost all major lines of
activity, there was considerable variation in particular areas and industries.
(See appendix table G—8.) Although jobs in manufacturing increased by
about half a million, a number of consumers' goods industries, such as textiles, electrical appliances, and shoes, showed some lay-offs and reduced
the hours of some of their workers. Consequently, while average weekly
hours remained essentially unchanged in most major industrial groups, a
number of revisions downward and few upward meant that the average
hours of work per employed person for the economy as a whole were just
below the level of 1947. (See appendix table G-l 1.)
Nonetheless, due to the rise in number of workers, the total hours of work
performed were greater in 1948 than in 1947.
H
Production
With record numbers employed at only slightly reduced weekly hours, the
economy produced 4 percent more goods and utilities in 1948 than in
1947. This was about in line with the goal set in the January 1948
Economic Report. All major categories showed noticeable increases except transportation, which was close to its 1947 level. Highest gains were
made by the electric and gas utilities, where output rose 11 percent, and
CHART 1.
LABOR FORCE
High level employment continued throughout 1948.
MILLIONS OF PERSONS*
80
MILLIONS OF PERSONS*
80
TOTAL LABOR
FORCE
UNEMPLOYMENT.
ARMED FORCES
60
60
40
.
CIVILIAN
EMPLOYMENT
20
1947
1946
1948
MILLIONS OF PERSONS'*
MILLIONS OF PERSONS*
UNEMPLOYMENT
(magnified scale)
N O J F M A M J J A S O N O O F M A M J J A S O N O
1946
*
14 YEARS OF AGE AND OVER.
SOURCE: DEPARTMENT OF COMMERCE.
1947
1948
by the construction industry where the volume of new construction was 14
percent higher. (See appendix table C-l2.)
Total agricultural output increased 9 percent, thanks to bumper crops.
But total supplies of food currently available to the consumer were somewhat smaller than in 1947. The large crops of corn and other feeds will
be reflected in food supplies only as an expanding volume of livestock
products begins to come to market this summer and fall.
Industrial production (manufacturing and mining) in 1948 was 3 percent higher than in the previous year. (See appendix table C-l3.)
After reaching a postwar peak in the early part of the year, it dropped
CHART 2.
CHANGES IN PRODUCTION OF GOODS
AND UTILITIES*
Total output of goods and utilities in 1948 was about 4 percent
above the 1947 level. Increases ranged from one-half of one
percent in transportation to 14 percent in construction.
0
PERCENTAGE INCREASE, 1947-1948
5
10
TOTAL GOODS
AND UTILITIES*
TRANSPORTATION
MANUFACTURES
MINERALS
AGRICULTURE
ELECTRIC AND
GAS UTILITIES
CONSTRUCTION
"EXCLUDES TRADE, FINANCE, GOVERNMI
) SERVICE INDUSTRIES
SOURCE: BASED ON DATA IN APPENDIX TABLE C - 1 2 .
during the spring and summer but by fall was back to its peak levels. In
November, iron and steel production reached a new all-time high, about 3
percent above its wartime top. Most other major industries registered
gains for the year, with a lower physical output only in the leather, alcoholic beverages, tobacco, and rubber industries.
For services (trade, finance, and Government), quantitative measurement
of output is difficult. Roughly measured by the volume of employment,
the year's total activity in trade increased by about 3 percent, in finance
and service by 2 percent, and in government by 4 percent.
With the output of goods up 4 percent, and with employment in services
up somewhat less, it appears that the total output of goods and services
together increased between 3 and 4 percent in 1948.
PRICES, WAGES, AND PROFITS
Prices
The pattern of price changes during 1948 was far more uneven than at
any time since the end of price control. In the 18 months between mid-1946
and December 1947, prices rose steadily, except for one brief pause in the
second quarter of 1947, but the rate of advance slowed down during the
latter part of the period.
In the field of wholesale prices, a sharp break in farm prices occurred in
the first quarter of 1948, while industrial prices on the average remained
relatively steady. Then, under the impact of the stepped-up defense program, the authorization of the European Recovery Program, tax reductions,
and numerous wage increases, prices began a new upward surge, which
reached its peak in August. Thereafter, due to bountiful crops, farm and
wholesale food prices declined, while the industrial price index has reflected
declines in textiles, hides and leather, lumber, and chemicals, largely offset
by continued increases in the prices of metals and metal products. (See
appendix table C-21.)
By the end of the year, the average of wholesale prices was just below
the level of December 1947, and 4 percent below August 1948. Measured
by the same periods, wholesale prices of farm products declined 10 and 7
percent, and wholesale food prices 5 and 10 percent. On the other hand,
industrial prices by the end of the year averaged more than 5 percent above
December 1947, and were practically unchanged from August 1948, with
important divergent trends among groups of commodities. Hides and
leather products, textile products, and chemicals and allied products were
lower than in December 1947; while fuel and lighting materials, metals
and metal products, housefurnishings, and building materials were substantially higher.
The continuance of inflationary pressures was particularly significant in
metals and metal products. The prices of lead and zinc showed striking
increases, lead rising more than 40 percent and zinc more than 60 percent
during 1948. High investment and automobile demand, plus the growing
impact of the defense program, stockpiling, and foreign aid maintained pressure on available supply. This was true even though many types of consumers' durable and light equipment were in increasingly easy supply. The
supply-demand relationship of the basic metals and many metal products
is still unsatisfactory.
CHART 3.
WHOLESALE PRICES
Wholesale price trends were more divergent in 1948 than
during the previous 2 years. Farm, food, and many other prices
ended the year below their levels of a year ago; many others
ended the year considerably higher.
PERCENT OF 1926 AVERAGE
220
PERCENT OF 1 9 2 6 AVERAGE
220
200
200
FARM PRODUCTS
\
180
180
A. /
160
V.--
160
140
140
(20
120
100
100
1947
1946
PERCENTAGE CHANGES
DECREASES
INCREASES
ALL ITEMS
OEC'47 TO DEC.'48
FARM
PRODUCTS
FOODS
E:
OTHER THAN
FARM PRODUCTS
AND FOODS
SOURCE: DEPARTMENT OF LABOR.
1948
Consumers' prices as a whole declined during the first quarter of 1948,
recovered and rose to an all-time peak in August, and since then have shown
a slight reduction. By November they were 3 percent higher than in December 1947, and more than 1 percent lower than in August 1948. (See
appendix table C-20.) Preliminary reports for December indicate that
there were some further slight declines in consumer prices. As in the case
of wholesale prices, there have been divergent trends, with food moving
downward and other groups moving upward since late summer. Further,
retail food prices have not fully reflected the decline in wholesale food costs,
nor have declines in the wholesale prices of textile products been accompanied by a significant similar movement in regular retail clothing prices.
In part, this has undoubtedly been due to the customary lag between a fall
in material costs and a fall in retail prices of consumer products; but in
part also to the pricing policy which business follows under the influence
of a high national income.
There are a number of factors explaining the uneven pattern of price
trends in 1948. In the case of farm products, the improvement in crops
has altered materially the supply-demand relationships at least for the current crop year. We have not yet, however, witnessed any major improvement in the supply of livestock products, even though prices of these products have declined from their 1948 peaks.
In many fields there has been a disappearance of the war-created backlog demand and a major improvement in the supply position, notably in
most consumer goods. There has been some drop in inventory buying.
The availability of a much greater variety of products has resulted in increasing competition for the consumers' dollar. The markets for materials
have, however, beeen more sensitive in responding to this changed situation
than the wholesale and retail markets for finished products, although at the
year's end retail clearance sales have become very widespread.
Viewing the range of wholesale and retail price developments since
August in terms of inflationary pressures, caution seems necessary on several
grounds. First of all, it is too early to derive assurance from the slight
downward movement in the cost of living. Twice before since the end of
the war, in the second quarter of 1947 and the first quarter of 1948, wholesale and retail prices behaved in approximately the same manner as described above. Yet on each of these previous occasions there emerged new
factors which generated a fresh wave of price increases.
Caution is required also in appraising the significance of the divergent
trends in recent price developments. The differences in the direction of
price movements reflect in part changes in the relationship between supply
and demand, but they also reflect the fact that different parts of the economy
do not respond with equal sensitivity to changes in this relationship. Price
responsiveness to the shifting of demand leaves unanswered the question
whether the falling off in demand at one place in the market is a healthy
6
CHART 4.
CONSUMERS' PRICES
After reaching a new all-time peak in August and September,
consumers' prices turned downward, mainly because of a decline
in food prices. Other retail prices continued strong.
PERCENT Of ( 9 3 5 * 3 9 AVERAGE
PERCENT OF 1935-39 AVERAGE
220
220
200
200
180
180
160
160
140
140
120
too
100
1946
1947
1948
PERCENTAGE INCREASES
ALL ITEMS
IE'46 TO OEC'46
FOOD
APPAREL
RENT
ALSO INCLUDES HOUSCFURNISHINGS. fUCL,,ELeCTRIClTY, ICE,
ANO MISCELLANEOUS GOODS AND SERVICES NOT SHOWN ON CHART.
SOURCE: DEPARTMENT OF LABOR.
* L E S S THAN ONE-HALF OF ONE PERCENT.
reaction to the satisfaction of accumulated needs or an unhealthy reaction
to a growing discrepancy between continuing need and declining ability to
buy. In short, we are moving into a period where much more highly
selective efforts will be needed to achieve workable price relationships for the
maintenance of economic stability. Analysis shedding light upon this
paramount problem is developed in other sections of this report.
Wages and labor relations
When 1948 opened, most union workers and sizeable groups of nonunion
workers had received two postwar wage increases, and some had received
three or more. But these increases, in many instances, had been more than
offset by rising living costs during the previous 2 years.
The price drop in the commodity markets early in 1948 changed the wage
outlook. A widespread hope was raised that food prices might be reduced,
and that there would not be further increases in industrial prices. Under
these circumstances, the major electrical companies maintained a strong
stand against wage increases. The United States Steel Corporation rejected
proposals for a substantial increase and moderately reduced the prices of finished steel products, following previous price increases. A number of major
automobile companies opposed wage increases, and negotiations in some
other branches of industry were suspended.
Very quickly, however, the uncertainty engendered by the price break
in the commodity markets was overcome. Price declines in these markets
had not spread, and in fact these markets had partially recovered. The
announcement of an expanded defense program in late March added new
impetus to inflationary forces. Tax reduction created the expectation
of added billions of dollars in the spending stream. Living costs resumed
their rise, and it appeared that the passing on of wage increases in higher
prices leading to even higher profits would continue to be feasible. With
profit prospects good so long as strikes could be avoided, the stage was set
by late May for further wage increases.
Since then, the contracts that have come up for renewal and renegotiation have in most cases been peaceably settled. The increases have varied
widely from industry to industry. Although they have ranged from only a
negligible increase to as much as 35 cents an hour, a large proportion have
been in the neighborhood of 10 cents, which represented an average increase
of about 8 percent. Generally, such settlements have tended to reflect the
rise in the cost of living during the life of the prior contract. It is estimated
that the annual rate of wage and salary payments by the end of the year
was 7 to 8 billion dollars above the level that would have prevailed without
the rate increases. About one-half of this amount was actually realized by
workers during the year. In addition to the increases in wages, there was
some enlargement of fringe benefits such as health and welfare funds, paid
holidays, and paid vacations.
8
After adjusting for price increases, there was no significant change in the
average weekly earnings of workers in manufacturing industries during
the year. (See appendix tables C-9 and C-20.) This does not mean, however, that no workers were either better off or worse off at the end of the year.
Some have suffered declines in their real earnings, while others have succeeded in keeping ahead of rising living costs. But those who negotiated
wage increases early have seen much of their gains subsequently dissipated by
increases in the cost of living. Prices in manufacturing industry increased,
in general, more than the increase in costs, including wages, during the year.
In some cases wage increases forced prices up. In other instances they
served as an excuse for raising prices unnecessarily, thus resulting in even
wider profit margins.
The instances where wage settlements were reached only after prolonged
negotiations and strikes were somewhat fewer in 1948 than in 1947. Yet
they were of some significance. In the March-May period, several major
strikes (affecting coal mining, meat packing, and one large automobile
company), together with numerous smaller strikes, caused considerable
loss of time. Since June, the month-by-month losses directly caused by
strikes have not been more than about one-third of one percent of estimated
available working time. A few major stoppages have had sizeable indirect
effects—including those in east and west coast shipping and in trucking in
New York.
While most work stoppages involved wage issues, there were a number
that stemmed from other considerations. The strike of west coast longshoremen, for example, was at least made more difficult of solution because
of the hiring-hall and Communist-affidavit issues. Some other stoppages
arose from grievances not associated with wage questions.
Profits
The achievement of new peak records in production and sales, coupled
with higher prices for manufactured goods, led to a new peak record in the
dollar volume of profits (see chart 11). Corporate profits, before taxes, rose
from 30 billion dollars in 1947 to an estimated 34 billion in 1948; after taxes,
corporate profits rose from about 18 billion dollars in 1947 to an estimated
21 billion in 1948. In the third quarter of 1948 corporate profits were at
the rate of 35 billion dollars before taxes and 22 billion after taxes. The
net income of unincorporated business and the professions rose from 24
billion dollars to 26 billion, and net farm income, allowing for the large
increase in farmers' stocks of corn and other crops, rose from almost 16
billion dollars to about 18 billion.
Corporate profits after taxes in 1948 represented over 5 percent on sales
and about 10 percent on net worth, compared with about 5 percent on sales
and about 9.5 percent on net worth in 1947. Since the return on sales applied
to a higher price level than in 1947, net dollar margins per unit of goods sold
have increased. Thus during two years of peak and growing production
there has been little change in over-all profit ratios, and an enlarging physical volume of sales has resulted in enlarged profits, rather than in lower
profits er unit of goods sold in an expanding market. (See chart 11, page
39, and appendix tables O-3 and C-28 through C-33 for data on profits.)
There has been much discussion as to whether the volume of reported
profits overstates the actual position of business. This point was recognized
in the January 1948 Economic Report, which said: "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."
How applicable is that judgment one year later? A review of the profit
situation shows that corporate profits after taxes in 1948 were 15 percent
higher than in 1947. On the other hand, the total corporate requirements
for new capital funds were 7 percent lower in 1948 than in 1947 because
of a considerable decline in the requirements for new working capital.
(See appendix table C-34.) The rate of investment in plant and equipment
was only slightly higher in 1948 than in the second half of 1947, while
there was an increase in corporate allowances for depreciation. In particular, the need of corporations for additional funds to maintain the same
physical volume of inventories amounted, at an annual rate, to only 1.5
billion dollars in the fourth quarter of 1948 compared witfi 3.3 billion
dollars for 1948 as a whole and 5.1 billion dollars for 1947. In the light of
these developments, the conclusion reached last year is still valid.
The foregoing comment should not mask the fact that widely varying
profit situations and trends exist, and that any proposed policies on the
part of business, labor, and government should take account of these variations. The over-all ratios of profits to sales and net worth have declined
somewhat for a number of the nondurable goods industries, while the metal
industries have shown increases. And the smallest manufacturing corporations, with assets of $250,000 or less, are reporting average profit ratios
well below their 1947 levels, while the largest manufacturing corporations,
with assets above $100,000,000, are running well ahead. The intermediate
groups are showing profit ratios somewhat below their 1947 levels.
MONEY AND CREDIT
The very large wartime expansion of the public debt led to a great
enlargement of the money supply and of the buying power of the people.
10
The inflationary result of this situation was aggravated after the end of
the war by the increase of bank credit, which reached dangerous proportions
in the last half of 1947.
For the year 1948 as a whole, however, there was no further net increase
in the money supply. During the first half, privately held deposits and
currency outside the banks fell by more than 4 billion dollars, largely
because of the sizable Treasury surplus in the first quarter. In the second
half of the year, the money supply again expanded, but much less than
in the same period of 1947. A gold inflow of 1.5 billion dollars in 1948
added to the money supply about equally in both the first and second half
years. The expansion of bank loans proceeded throughout the year, but
at a lower rate than in 1947.
T A B L E 1.—Monetary expansion
[Billions of dollars]
Change from—
Type of monetary expansion
Privately held deposits and currency outside banks
Loans: All banks
Insured commercial banks
. Commercial and industrial loans__
Agriculturalloans
loans_
-- _--Real-estate
Consumer installment credit
Commercial3 bank holdings of U. S. Government securities
_
_-
Jan. 1 to
June 30,
1947
July 1 to
Dec. 31,
1947
Jan. 1 to
June 30,
1948
+0.1
+2.7
+2.5
+.7
+.2
+1.1
+1.0
+5.9
+4.6
+4.3
+3.2
+.1
+1.1
+1.3
-4.3
+2.1
+2.3
+2.8
+2.4
-4.6
-1.2
+.4
+.8
+1.0
+1 0
-1.8
t1:!
-4.2
July 1 to
Dec. 31,
1948 *
1
Estimates by Council of Economic Advisers. * Estimates by Treasury Department.
Source: Board of Governors of the Federal Reserve System (except as noted).
The major part of this slackening, as the above table shows, occurred in
loans to commercial and industrial concerns. With slower rises in prices,
wages and material costs, and with inventory shortages fairly well made up,
less additional working capital was required than in previous years. Bank
real estate loans also slowed up markedly. The important factor here was
not a lower demand for mortgage credit, but a greater reluctance of banks
to lend on an inflated housing market. Also, many banks were reaching
the maximum amount of real estate loans they wished to carry as a matter
of policy, or were legally permitted to carry.
The demand for long-term funds continued strong throughout the year,
and though the rate of expansion of long-term bank loans declined, this
was in good part offset by increased lending of other financial institutions,
notably insurance companies.
The increase of credit has been an important factor in the growth of
inflationary conditions during the postwar period. The large Treasury
surplus had considerable anti-inflationary effect, but was not in itself a
sufficient means of stemming the growth of bank credit. The other principal line of attack was action by the Federal Reserve Board to decrease the
II
availability of reserves, and to increase interest rates. However, while continuing the basic aim of maintaining a stable and orderly market for
Government securities, the Board could increase short-term interest rates
only to a very limited extent, and under existing authority its influence
over bank reserve requirements was also severely limited. Part II will
treat the problem of restricting bank credit as a deterrent to further inflation.
(Statistics on money, banking, and credit may be found in appendix tables
C-23 through C-27.)
T H E FLOW OF GOODS AND PURCHASING POWER
Consumer income, spending, and saving
Consumer income and expenditures are the largest and most stable element in the Nation's Economic Budget but the relation between income and
expenditures has undergone marked changes in recent years. During the
CHART 5.
CONSUMER INCOME AND SPENDING
Consumption expenditures increased less than personal income
during 1948.
BILLIONS OF DOLLARS*
250
BILLIONS OF DOLLARS*
250
DISPOSABLE PERSONAL INCOME
(PERSONAL INCOME LESS TAXES)
200
200
DISPOSABLE
INCOME
I 50
100
I 00
60
1941
1942
• AWNBAL RATES, SEASONALLY
SOURCE:
1943
1944
1945
ADJUSTED.
DEPARTMENT OF COMMERCE.
12
1946
1947
1948
period of wartime shortages and restrictions, consumers spent an unusually
low portion and saved an unusually high portion of their rapidly increasing
incomes. Large backlog demands were built up for all kinds of durable
goods. After 1945, people set about earnestly to raise their levels of
consumption, and especially sought houses and furnishings, electric appliances and automobiles. Despite the high level of incomes, many consumers
drew on wartime savings; others borrowed. The saved portion of personal
income shrank rapidly.
Price and rationing controls were removed before the goods and services
became available to meet this pent-up demand, and prices soared. In
dollars, the increase in consumption expenditures since prewar has accounted
for two-thirds of the increase in total gross national expenditure, although
consumption expenditures have gone up much less percentagewise than
private domestic investment.
During 1948 there were indications that some of the extraordinary consumer demands were tapering off. Consumption expenditure ceased to go
up faster than disposable personal income. The rapid rate of increase in
consumer credit was slowed. A larger portion of personal income appeared
to be going into investment in housing and farms and other unincorporated businesses. And the portion going into personal bank balances,
securities, and other liquid assets appeared to have ceased declining.
Consumer income. Aggregate personal income increased continuously
throughout 1948. For the year as a whole, it amounted to more than 211
billion dollars before taxes; in 1947 it was 195 billion. Disposable personal
income (income after taxes) amounted to 190 billion dollars; in 1947 it was
174 billion. Adjusted for changes in consumer prices, however, disposable
personal income per capita was substantially the same for both years.
The increase in personal incomes from 1947 to 1948 was roughly proportionate among major sources: wages and salaries, proprietors' and rental
income, dividends and interest. But in the latter half of 1948 net farm
income fell off, relative to the normal seasonal pattern, while rental income
of persons and business and professional income ceased to rise. Dividend
payments, on the other hand, increased at an accelerated rate. An appreciable decrease occurred during the year in transfer payments to
individuals—chiefly veterans' benefits. (Data relating to personal income
are shown in appendix tables G-4, G-5, and G-6.)
Income distribution. As compared to prewar, there has been an improvement in the real purchasing power of families in all income ranges. While
the dollar increases are larger in the higher income groups, percentagewise
the lower-income groups have enjoyed the larger gains. (See table 2 and
chart 6.)
TABLE 2.—Average money income, after taxes, received by each fifth of the Nation's
ran\ed by size of income
families
[Dollars of 1947 purchasing power]
Money income after t a x 3
(1947 dollars)
Family units ranked from lowest to highest income *
1941
1947
$562
1,444
2,421
3,523
7,245
Lowest fifth_.
Second fifthThird fifth—.
Fourth fifthHighest fifth..
Percentage
change,
1941 to 1947
$796
1,933
2,992
4,226
8,574
41.6
33.9
23.6
20.0
18.3
i Includes single-person families.
* Liability for Federal personal income tax.
Source: See appendix B .
The Federal personal income tax has reduced somewhat the concentration
of income (see table 3). In 1947, for example, the lowest three-fifths of
families received 29 percent of total money income before tax compared
to 31 percent after tax, while the share of the upper one-fifth was reduced by
taxes from 48 percent to 46. The income-equalizing effect of the tax strucCHART
CHANGES IN AVERAGE FAMILY INCOME
Real income of all groups increased from 1941 to 1947 and
income disparities were reduced.
FAMILIES*
ranked from
lowest to
highest income
LOWEST
FIFTH
$2,000
MONEY INCOME, 1947 DOLLARS
$4,000
$6,000
$10,000
$8,000
T
T
1941
1947
SECOND
FIFTH
INCOME AFTER
PERSONAL TAXES
*
v
INCOME BEFORE PERSONAL TAXES
THIRD
FIFTH
FOURTH
FIFTH
HIGHEST
FIFTH
*
INCLUDES SINGLE INDIVIDUALS
SOURCE: SEE APPENDIX B.
JJ
'
PERSONAL
TAXES j
ture was somewhat greater in 1947 than in 1941, although perhaps less than
would be expected considering that the tax in 1947 absorbed over 10 percent
of personal money income, compared with less than 5 percent in 1941. But
the considerable increase since before the war in real income of families at
the low end of the scale has probably come about chiefly from the decrease
in unemployment and the increase in number of multi-earner families, rather
than from the equalizing effect of more-progressive taxation.
Inflation, however, has probably checked this favorable trend in income
distribution. Such data as are available indicate a slight increase in concentration from 1946 to 1947.
TABLE
3.—Percent of money income, before and after taxes, received by each fifth of Nation's
families ranked by size of income
Cumulative percent of total money income
Family units ranked from lowest to highest income ]
Before t a x 2
1941
Lowest fifth
Lowest two-fifths
Lowest three-fifths
Lowest four-fifths
All family units
3.5
12.6
27 9
50.4
100.0
After tax a
1947
4.0
13.8
29.2
51.8
100.0
1941
3.7
13.2
29.1
52.3
100.0
1947
4.3
14.7
30.9
53.7
100.0
1
Includes single-person families.
2 Liability for Federal personal income tax.
Source: See appendix B .
We have as yet no information on the distribution of 1948 incomes, either
before or after tax, but the effects of the Revenue Act of 1948 are relatively
more favorable to upper than to lower income groups. The provision
allowing married persons to split their incomes for tax purposes is especially
advantageous to those in upper tax brackets. While many persons at the
lower end of the income scale have been exempted from paying any tax, and
rates were reduced all along the line, the percentage increase in income after
tax is greatest for upper-bracket married persons.
Consumption expenditures. Aggregate outlays for personal consumption
continued to increase during 1948, though not so rapidly as during 1947.
For the year as a whole they amounted to about 177 billion dollars; in the
preceding year they were 165 billion. They represented a slightly smaller
share of gross national product than in 1947, 70 percent compared with 71
percent. Thus we have moved farther away from the prewar ratio between
consumption and other expenditures (about 75 percent in 1939).
Total consumption in real terms has been rising since the war, as shown
by unit sales of durables and by production of nondurable goods. Food
consumption has declined slightly. The pattern of consumer expenditures
continues to differ markedly from that before the war. Expenditures for
durable and nondurable goods have increased much more than for services.
Outstanding is the purchase of automobiles, expenditure for which continues to increase faster than for almost any other major type of purchase.
The increase in other durable goods expenditure appears to have tapered off.
In the case of nondurable goods, the higher level of food outlays is the
chief factor in the great increase since prewar; higher clothing expenditures
is second in importance. Spending for both these items, however, has gone
up less than proportionately to total consumer expenditure during 1948.
The less-than-average increase since before the war in spending for
services reflects the relatively low level of rents, and of outlays for household
operation, in which utilities and domestic service are the largest items.
During 1948, expenditures for services increased about as rapidly as for
durable goods.
Saving and consumer credit. The percentage of disposable income not
spent for consumption was higher in 1948 than in 1947, contrary to the
trend ever since the war. This additional personal saving, however, is
predominantly in the form of investment in family dwellings, farms (and
farm inventories), and other unincorporated businesses. The rate of individuals' net saving in liquid form—bank deposits, savings and loan associations, insurance policies, and government and corporate securities, less
net personal borrowing—continued to decrease at least through the first
half of 1948. This was in accordance with the trend reported in the January
and midyear reports for 1948.
Preliminary data on net liquid saving in the third quarter of the year
suggest that this downward trend may have been checked, but show no
substantial reversal of the trend. There appeared to be an increased flow
of funds into personal checking accounts and United States savings bonds
and a smaller flow into corporate securities than had occurred earlier in the
year. The high level of liquid saving in the third quarter probably came
in part from many consumers not spending the money they received as a
result of the reduction of income taxes.
Few recent data are available on the relative volumes of gross saving and
dissaving by individuals. The most recent figures on consumer credit show
a slower rate of expansion of installment credit last fall than in the fall of
1947.
The use of consumer credit, greatly cut down during the war, expanded
rapidly after wartime controls were removed and when durable goods became available. While the current volume of consumer credit—16 billion
dollars at the end of 1948—is substantially larger than anything we have
known before, nevertheless in comparison with present income and volume of retail sales it is lower than in many prewar years. For example,
the amount of consumer credit outstanding at the end of 1939 was nearly
12 percent of consumption expenditures during the year; in 1948 it was only
about 9 percent. (See appendix table C-23.)
16
Nonetheless, the great expansion in consumer credit after the war unquestionably added appreciably to inflationary pressure in the economy, and it
was for this reason that Regulation W restricting its use was reinstated last
September. It is not yet possible to determine to what extent this reimposition of control was responsible for the recen* slowing of the increase in
volume of consumer credit. However, Regulation W probably has tended
to restrict additional instalment credit for certain purposes, including the
purchase of automobiles and some other durable goods.
Outlook for consumption and saving. The limited and imperfect data
on consumer income, expenditure, and saving give an incomplete picture.
They indicate that many consumers have been spending less freely, especially
during the latter part of 1948. This appears to reflect three developments:
(1) a substantial fulfillment of backlog demands for many goods that consumers had not been able to get during the war; (2) a limitation of consumption by those for whom investment in homes and in private businesses
has become a more urgent use of funds; and (3) the using up of past savings
and feasible credit resources by people who have been unable to make ends
meet during inflation. All three elements are implied, but without
adequate basis for appraising their relative importance.
Such a picture reinforces the concern expressed in previous reports that
we are still far from obtaining the amount and distribution of consumer
income in relation to the other component parts of the economy which
seem essential for balanced economic growth.
Business investment and finance
The high investment outlays of business during the past two years have
contributed an unusually large portion of the total flow of spending. This
has been a natural aftermath of the wartime deferral of most lines of facilities expansion and improvement, accompanied by acute depletion of inventories. To undertake this investment, business emerged from the war
with large accumulated reserves of liquid assets, elaborate postwar plans,
and a relatively reduced burden of debt charges.
In many fields, including nearly all nondurable goods lines, the expansion of capacity to catch up with postwar markets, the replenishment of
inventories, and the reduction of order backlogs to reasonably normal proportions has now been accomplished; further investment will take largely
the form of cost-cutting improvements and new products. In a few important industries, expansion of facilities and inventories has still not overtaken obvious current needs.
Plant and equipment outlays. Total nonfarm business outlays on new
plant and equipment rose rapidly after the war to reach an annual rate
of 18.2 billion dollars in the latter half of 1947. Thereafter they increased
only slightly, with a seasonal dip in the first quarter of last year. The
continued rise has been due entirely to rising construction costs and equipment prices; the physical volume of such investment has not quite maintained its late 1947 peak. (See appendix table G-15.)
A recent sample survey by Government agencies indicates that dollar
outlays on plant and equipment in the first quarter of 1949 are expected
to run about 12 percent below those of the fourth quarter of 1948, which
is roughly in line with normal seasonal behavior. Compared with the
first quarter of last year, planned outlays for the first quarter of this year
are up about 5 percent, which is substantially less than the increase in
costs in the interval.
Plant and equipment outlays during and since the war have greatly
expanded productive capacity in many industries. A survey by a private
agency indicates that manufacturing industry as a whole has increased its
capacity by more than one half since 1939 and by perhaps as much as a
quarter since the end of 1945. To keep pace with a normal growth trend
in total demand, as will be indicated in Part III, the recent over-all rate of
increase in manufacturing capacity would not need to be maintained indefinitely. However, in connection with two prominent areas of current shortage, it should be noted that electric utility generating capacity has increased
only about 45 percent since 1939 and 12 percent in the past three years,
and steel furnace capacity about 16 percent since 1939 and about 3 5/2 percent in the past three years.
While there is some indication of prospective softening of investment
in various manufacturing lines, plans for expansion and modernization are
still strong in chemicals, petroleum, and metals. In some major nonmanufacturing lines also—particularly utilities and transportation—the program
of expansion and improvement is still active, and the outlook is for continued
high expenditure. It is quite possible that investment in utilities and transportation may rise still further, to the extent that increases in the supply
of steel and essential equipment items are not absorbed by other private or
public investment programs.
The fact that many expansion goals have been met should not portend,
therefore, an abrupt slackening of investment. Higher materials and labor
costs and a sharpening of competitive pressure have provided powerful
incentives for modernization programs designed to cut costs. Many businessmen feel that they must devote all available funds to improvements of this
type in order to preserve their competitive position.
Business investment has entered a phase in which added investment will
be largely determined by the effort to reduce costs and to improve product,
rather than by the purpose to expand capacity. Recent surveys in the
metal-working and other industries indicate that equipment is being replaced
only when the replacement will pay off in 4 or 5 years, or in many cases an
even shorter time. Considerably longer pay-off periods would be consistent
with reasonable investment incentives.
Business inventories. Of the 6.7 billion dollar increase in value of nonfarm business inventories during 1948, 4.1 billion was attributable to price
rises. Adjusting for these rises, the physical increase during the year was
only 2.6 billion dollars, which was registered largely in the first quarter.
In the second half, total nonfarm inventories increased only 0.8 billion
dollars after allowance for price rises and normal seasonal variation. (See
appendix tables C-16, G-17, and C-18 for additional inventory data.)
In the summer and fall, some accumulation of nondurable products inventories in the hands of both manufacturers and distributors reflected
failure of sales to meet earlier expectations. Inventory policies were cautious, and adjustments were initiated fairly promptly. Present inventories
could become burdensome in a period of falling sales.
The dollar value of durable-goods inventories rose rather steadily through
the year. Restocking after wartime shortages appears now to have been
virtually completed except for metals and some building materials.
Over-all ratios of inventories to sales remained roughly constant in 1948,
and there appears to be no basis for substantial further increases. Any
general slackening of sales would produce temporary involuntary accumulation followed by sloughing off of excess inventories. This occurred in
some sectors of business in early 1947 and again in 1948, but has not appeared on a general scale since the war.
Corporate financing. Total corporate expenditure on plant and equipment and for expansion of inventories and customer receivables was 26
billion dollars in 1948, or 2 billion dollars less than in 1947. A rise in plant
and equipment expenditures was more than offset by the decline in funds
used to extend credit to customers, and to finance additional investment in
inventories. (See chart 15 on page 64 and appendix table C-34.)
The major part of capital funds in 1948, as in 1947, came from internal
sources, chiefly undistributed profits and depreciation allowances. Internal
sources provided 65 percent of corporate funds in 1948, compared with 53
percent in the previous year. The rise in the importance of internal financing in 1948 was due to a higher level of corporate profits and a less-thanequivalent increase in dividends. Corporate profits after taxes totaled
about 21 billion dollars, 15 percent more than in 1947. During the past
year corporations paid out 36 percent of their profits in dividends, compared
with 38 percent in 1947.
In external financing, security issues played a more important and bank
loans a less important role than in 1947. In the first half of 1948, for the
first time since the war, outstanding business bank loans declined slightly;
and in the second half of the year, though such loans showed a seasonal increase, the increase was much smaller than in the corresponding period of
1947. The bulk of the new security issues were bonds; stock issues were
responsible for only about 19 percent of the total volume, compared with
30 percent in 1947.
One reason for the higher percentage of bond financing in 1948 was that
public utility financing occupied a relatively more important position in the
total volume of security issues. Companies in this industry usually raise a
high proportion of their capital through bonds. Another important factor
in the high proportion of debt financing in the whole postwar period, and
especially in recent months, has been its low cost relative to financing by
stock issues. The spread between bond and stock yields was considerable
during the whole period and has further increased in recent months. Another general factor which has favored debt financing is the tax advantage;
interest payments are deductible expenses in computing taxable income.
The small amount of common stock issued in recent years, compared with
the late 1920's, has given rise to concern in some quarters that there is a
serious general shortage of equity capital. While it is true that outside
equity capital is difficult to obtain on terms as favorable as those available
for loan capital, it does not appear that, so long as profits remain large, there
will be any general lack of sufficient total equity capital for desirable levels
of business investment. Although detailed figures for the 1920's are not
available, preliminary investigations show that a markedly smaller percentage of business capital needs has been financed by debt in the postwar period
than was the case in the 1920's.
Housing. The volume of residential construction accelerated rapidly
after the war. (See appendix table C-14.) From a low of about 142,000
in 1944, the number of permanent nonfarm units started in new structures
rose to an estimated 925,000 in 1948. Adding to this the units provided
by conversions and remodeling, it appears that well over a million completed residential units were added to the housing supply in 1948. The
provision of adequate plumbing, heating, and other facilities and of major
repairs further increased the availability of dwellings meeting a reasonable
standard of comfort.
In the latter half of 1948, however, there appeared a pronounced decline
in new housing starts. (See chart 16 on page 70.) This does not mean that
the housing shortage is no longer acute. Instead, as previous reports
clearly foresaw, it reflected the approaching saturation of the housing market
related to the demands of families who can buy or rent expensive quarters,
and the inability of the industry thus far to produce housing in quantity for
the bulk of the population whose incomes are moderate or low. It now
takes the average home owner about one-third more of his working time to
earn the money to pay for a comparable house #than it took before World
War I, and about one-fifth more than in 1925-29. Neither food nor clothing nor any of the other necessities of life has risen comparably to the cost of
building houses over the past two or three decades.
From the strictly economic viewpoint, we cannot be complacent about
the rapid decline in housing starts on the ground that the manpower and
other resources thereby released are being absorbed by the other demands
20
of the economy; for some of these other demands are temporary in character and within a few years will need to be supplanted by a much larger
volume of residential construction than can be supported at anywhere near
present costs. In fact, if the rate of decline in house building continues,
its ramifying effects could cause substantial unemployment and general
deterioration in business conditions even before the temporary factors in
postwar demand are reduced.
The need for a comprehensive housing program in its fundamental aspects
is treated in Part III.
International transactions
The only major component of the Nation's Economic Budget which did
not increase between 1947 and 1948 was net foreign investment; it declined from 8.9 billion dollars to approximately 1.8 billion. Net foreign
investment represents the portion of our excess of exports over imports of
goods and services that is financed by loans and investments and by net
liquidation of foreign dollar assets and gold. It does not include the portion
financed by grants, gifts and other unilateral transfers made by the United
States Government and by private citizens. Part of the drastic decline in
net foreign investment has resulted merely from a shift in the form of
foreign aid from loans to grants, the increase in which is reflected in the
Government-goods-and-services component of the Nation's Economic
Budget.
Decline in the export surplus. To appraise the effect of international
transactions upon the domestic economy, it is necessary to examine the
total export surplus, which takes into account government grants and
private gifts as well as net foreign investment. The total export surplus
fell from 11.3 billion dollars in 1947 to 6.5 billion in 1948, a decline of
4.8 billion. This decline began in mid-1947, after the export surplus had
reached an annual rate of 12.5 billion, and continued through the autumn
of 1948, when it was only 5.2 billion.
The 4.8 billion dollar decline in the export surplus was primarily the
result of a 3.4 billion dollar reduction in the liquidation of gold and dollar
assets by foreign countries, made necessary by the rapid depletion of these
assets in 1947. Aid extended by the United States Government also was
less than in 1947. Although the European Recovery Program got under
way during 1948, aid extended under early postwar programs was virtually
exhausted early in the year. These changes are shown in table 4, and
details of the balance of international payments and the foreign aid program
are shown in appendix tables G-35 and C-36.
21
CHART
7.
EXPORTS AND IMPORTS OF
GOODS AND SERVICES
The export surplus fell during most of 1948 as exports dropped
and imports rose.
BILLIONS OF DOLLARS
ANNUAL RATES
BILLIONS OF DOLLARS
ANNUAL RATES
25
25
EXPORTS OF GOODS.
AND SERVICES* \ ^ s .
-
20
20
15
15
10
10
:•;•.VV-V .vv.-..';.
• • • . • • . • . • • ; • • . • • . • • . • • • • • • : • • • • • •
5
5
us
0
1
2
3
4
f
2
1946
3
4
1
2
1947
0
4**
3
1948
Dependence of the export surplus on government aid increased
as other means of financing decreased.
15
15
EXPORT SURPLUS
10
-
^ $ ^
y^EA^SOF^^^V
—
5
10
5
U S . GOVERNMENT AID
0
.. i
1
)....)
2
3
1.
4
1946
*
# *
\
I
I.
2
1947
INCLUDES INCOME ON INVESTMENT
ESTIMATE BASED ON INCOMPLETE DATA
SOURCE: DEPARTMENT OF COMMERCE.
r
5
22
. 1
4
t
1
t
.
Z
3
1948
I
O
4**
TABLE 4.—Financing the surplus of goods and services supplied to foreign countries
[Billions of dollars]
Means of financing
Period
1936-38 average
1946
1947.
1948»
Annual rates:
1947:
First quarter
Second quarterThird quarter
Fourth quarter.—
1948:
First quarter
Second quarter...
Third quarter 5
Fourth quarter .
Surplus of
exports of
goods andl
services
0.5
7.8
11.3
6.5
11.2
12.5
10.9
10.5
7.8
6.5
5.2
6.6
Liquidation
foreign Other means
Government of
gold and
of financing
aid (net) * dollar
assets
(net) *
(net) 3
5.1
5.7
4.6
0.8
2.0
4.5
1.1
-0.3
.7
1.1
5.2
8.0
6.8
2.9
4.8
4.6
3.4
5.3
1.2
-.1
.7
2.3
5.3
3.3
4.3
5.3
1.2
2.5
.8
.1
1.3
.7
.1
1.2
1 Includes income on investments.
2 Includes grants and loans, but excludes subscriptions to the International Bank and International
Monetary Fund. For detail, see appendix table C-36.
3 Includes net sales of gold to the United States and net change in foreign dollar assets (bank balance, claims
on the United States Government, and long-term investments). Excludes liquidation of assets held by the
International Bank and the International Monetary Fund.
* Includes private gifts and remittances, movement of United States private capital, net dollar disbursements by the International Bank and the International Monetary Fund, and errors and omissions.
* Estimates based on incomplete data.
Source: Department of Commerce.
The large deficits which other countries were incurring in their transactions with the Unitied States forced upon them trade policies designed
to curtail their dollar purchases and to increase their dollar exports. These
efforts were supported in many countries by internal policies and developments. In western Europe, for example, industrial production in the first
nine months of 1948 was about 15 percent higher than in the corresponding
period of 1947, while agricultural production, which suffered so greatly
from unfavorable weather in 1947, was also much higher. These increases
permitted larger exports and smaller imports in trade with the United
States. At the same time, some though not all of the western European
countries appear through their domestic monetary and fiscal policies to
have reduced inflationary pressures or brought them under control. This
contributed to the improvement in production most dramatically in the case
of western Germany, where industrial production rose very rapidly following the monetary reform of June, 1948. Recovery progress may be
expected to continue in the coming year, although at a more gradual pace,
provided that foreign countries do not suffer from serious interruptions
of production and do not have to divert too large a proportion of their
resources to meeting the requirements of national defense.
The decline in our export surplus took the form of a reduction between
1947 and 1948 of 3.0 billion dollars in exports of goods and services and a
rise of 1.8 billion in imports, as the following table shows.
TABLE 5.—United States exports and imports of goods and services
[Billions of dollars]
Period
1936-38 average
1946
—
1947
19483
—
Annual rates:
1947:
First quarter
Second quarterThird quarter ._
Fourth quarter..
1948:
First quarter
Second quarter.
Third quarter. _2
Fourth quarter
Exports of
goods and
services *
Imports of
goods and
services *
Surplus of
exports of
goods and
services *
4.1
15.0
19.8
16.8
3.6
7.2
8.5
10.3
0.5
7.8
11.3
6.5
19.3
21.1
19.2
19.4
8.1
8.6
8.3
8.9
11.2
12.5
10.9
10.5
17.8
16.9
15.9
16.6
10.0
10.4
10.7
10.0
7.8
6.5
5.2
6.6
1
Includes income on investments.
2Estimates based on incomplete data.
Source: Department of Commerce.
Merchandise trade. Merchandise exports fell 18 percent in dollar
volume and more than 20 percent in quantity from 1947 to 1948. Between
the second quarter of 1947, when this decline began, and the third quarter
of 1948 the decline in quantity amounted to 34 percent. The fall in
dollar volume has affected our shipments to all major areas of the world,
although it has been sharpest in the case of eastern Europe as a result of
the tightening of export controls in March of last year. Despite the
initiation of the European Recovery Program, our exports to the participating countries have been a slightly lower proportion of total exports in
recent months than they were both before the Program began and before
the war.
The commodity impact of the fall in exports has been quite general,
although uneven. Foreign countries are restricting their purchases selectively. Our exports of a few important products, such as wheat, petroleum
and its products, agricultural machinery, certain types of industrial
machinery, and chemicals have been well maintained or have actually
risen, while exports of coal, dairy products and animal fats, textiles and
textile manufactures and rubber products have been cut very drastically.
Exports of steel mill products have also fallen sharply, in part because of
more restrictive export controls imposed to alleviate the drain on the
American economy. (Additional information relating to merchandise exports is given in appendix tables C-19, C-37, C-38, and C-39.)
The reduction of the export surplus was also furthered by a rise of 20
percent in the dollar volume of imports between 1947 and 1948, reflecting
higher quantities and higher average prices in similar proportions. Even
though the physical quantity of goods imported into the United States rose
in 1948, it was still only about 20 percent above the average import level
of 1936-38, reflecting substantial increases above prewar in imports of
crude materials and semimanufactured goods, but no increase in imports of
foods and finished manufactures. Our demand for some commodities from
abroad can now be fully met, but our greatly enlarged need for many others
remains far from satisfied. Further increases are to be expected and
welcomed in a prosperous economy. (For additional information regarding
the source and character of our merchandise imports see appendix tables
C-40, C-41, and 0 4 2 . )
European Recovery Program. Last spring Congress provided 5 billion
dollars for the European Recovery Program, including a public debt authorization of 1 billion dollars. The 4 billion dollars of appropriated funds were
to be used over the 15-month period ending June 30, 1949, unless the
President, after recommendation by the Administrator for Economic Cooperation, found it necessary to use them in 12 months. After a careful review
it was decided in November that this more rapid use of the funds would be
necessary. By the end of 1948, after the Program had been in operation nine
months, procurement of 4 billion dollars had been authorized. At the outset of the program these authorizations were primarily for food and agricultural commodities, but the emphasis has been shifting away from these commodities toward an increasing proportion of industrial products, especially
machinery and equipment. In the case of certain products for which the
domestic market situation is tight, a major share of authorizations has been
for procurement outside the United States. Through November 1948 such
"offshore" procurement has constituted 40 percent of the total for all commodities and much larger proportions for petroleum products, nonferrous
metals, fertilizer, and some other products.
The procurement of such commodities in other countries relieves the
United States of the burden of supplying them. But the exporting countries
receive dollars in payment and, with some exceptions, they may be expected
to spend those dollars in the United States. To the extent that they do,
offshore procurement will affect the distribution rather than the total
amount of foreign purchases in the United States.
As shipments under the European Recovery Program increase, the decline
in United States exports may be expected, on the basis of existing programs,
to give way to a rise from the levels reached in the second half of 1948. If
the expansion in imports continues, as there is reason to expect, any rise of
the export surplus will be moderate.
Government transactions
Needs engendered by war and its aftermath of international tension
continued during 1948 to overshadow the civil programs of government and
to exert crucial influence throughout the economy. It was necessary to
hold back government programs urgently needed for peacetime growth and
progress, while extraordinary activities to meet world responsibilities prolonged and strengthened the general forces of inflation. The enlarged
expenditures for national security and foreign aid authorized in 1948 will
25
impinge in 1949 upon a private economy still sensitive to inflationary pressures. Not only will total Government spending be rising, but its impact
in critical areas will be intensified.
The programs of the Federal Government, framed in the light of these
requirements, are set forth in detail in the Budget Message and in various
other reports. This report assesses the economic impacts of these Federal
programs and of the programs of State and local governments insofar as
they can be estimated.
The best available general measure of these economic impacts is the volume of current cash transactions, other than borrowing, between government
and public, without regard to whether these transactions arise in connection
with the receipts and expenditure accounts of the regular Budget or in connection with social security or other trust accounts or whether they represent
cash payments of some liability which accrued and was recorded as a budget
expenditure at some previous date.
The total volume of cash payments to the public by Federal, State, and
local governments during 1948 amounted to 52.1 billion dollars, or 1.4 billion
more than in 1947 despite a tapering off of such extraordinary payments as
the cashing in of veterans' terminal leave bonds. Because the reduction
in Federal income tax rates was offset by continuing inflation and by expanding State and local revenues, total cash receipts in 1948 were about 2 billion
dollars higher than in 1947 and the surplus of cash receipts over payments
increased from 6.7 to 7.4 billion dollars as shown in Table 6. Despite the
very high levels of economic activity which prevailed, progress in reducing
the Federal debt was seriously retarded during the latter part of the year,
and the volume of State and local debt expanded very sharply after a
moderate increase in 1947. Thus while inflation continued, the restraining
influence of government fiscal policy was weakened. (For further detail,
see appendix A.)
TABLE 6.—Government cash receipts from and payments to the public
[Billions of dollars]
Calendar
year 1947
Receipt or payment
Cash receipts:
Federal
State and local
Total cash receipts
Cash payments:
Federal
State and local.
Total cash payments
_
Surplus (+) or deficit (—):
Federal. _
_._
State and local-.
Total, surplus (+) or deficit (-)
_
_.
_
_
_
_.
_
_
i Estimate based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See appendix A.
26
Calendar
year 19481
44.3
13.1
57.4
45.2
14.3
59.5
38.6
12.1
50.7
36.9
15.2
52.1
+5.7
+1.0
+6.7
+8.3
-.9
+7.4
A substantial further increase in cash payments is expected this year and
next. Federal payments for national security and foreign aid are still rising
under authorized programs, and we must make some further progress in
meeting urgent needs in our domestic economy. In addition, payment of
accumulated dividends on National Service Life Insurance policies will
result in large disbursements. Including the continued upward trend in
payments by State and local governments, it is expected that total government cash payments will rise to perhaps 61 billion dollars for the calendar
year 1949, more than 9 billion dollars higher than in 1948.
Without additional Federal taxation, such an increase in cash payments
of Federal, State, and local governments during 1949 would mean that the
cash surplus that amounted to 7.4 billion dollars in 1948 would be replaced
by a deficit this year. Such a drastic shift in the net cash position of
all government might provide the stimulus to a fresh surge of inflation.
Cash payments by the Federal Government. Programs necessitated by
past wars and present requirements for national security accounted for just
over 70 percent of total Federal cash payments to the public in both 1947
and 1948, and this proportion may be expected to increase somewhat in
1949.
The total volume of Federal cash payments to the public declined by
about 1.7 billion dollars between 1947 and 1948. There were substantial
changes in the amounts going to different groups in the economy, with
corresponding shifts in areas of impact on the economy. As shown in the
following table, Federal cash payments to individuals declined slightly,
largely because of the tapering-off in the redemption of veterans' terminal
leave bonds, which more than offset moderate increases in wages and
salaries and in miscellaneous payments. The most important changes,
however, occurred in payments to business and in loans and other payments to foreign countries and international organizations.
TABLE
7.—Federal cash payments to the public by type of recipient
[Billions of dollars, annual rates, seasonally adjusted]
Payments
Total i
17.7
11.6
7.4
1.8
17.1
12.6
5.6
1.9
Individuals
Business
«
International_ _ _. - _
_
State and local governments and public agenciesAdjustment for outstanding checks and telegraphic
orders
Total Federal cash payments.
1
Calendar year 1948
Calendar
year
1947
17.1
14.0
6.1
1.9
.2
-.1
.2
-.4
36.9
35.1
38.7
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See appendix A.
17.1
11.0
5.1
1.8
38.6
Based on incomplete data.
27
Calendar
year
1949 3
January- July-De-l estimate
cember
June
19.4
14.7
7.9
2.3
44.3
The total payments to business increased by about 1 billion dollars
between 1947 and 1948, and are expected to increase further by about 2
billion dollars in 1949. Most of this increase is accounted for by expanding
payments in support of national security, especially for the aircraft procurement and the stockpiling programs. This expansion may be expected
to intensify specific shortages in labor and certain critical materials. Indeed, rising metals prices already reflect in part the effect of present and
planned stockpiling.
Federal public works have been held to a low level. They increased only
about 14 percent in 1948 over 1947, to a total of 1.3 billion dollars—
roughly the same dollar value as in 1940 despite a doubling of construction
costs. The continuation of projects already under way will require some
further increase in 1949. More widely dispersed will be the effect of
increases in consumer income that will result from disbursements of National
Service Life Insurance dividends and proposed increases in social security
benefits and other payments to individuals.
Cash payments by State and local governments. While a number of
States have granted bonuses to veterans of World War II, more of which
will be paid during 1949, the very great proportion of the transactions of
State and local governments are in support of normal civilian programs,
such as education, community facilities, police and fire protection. Rising
costs and expanding needs account for the sharply rising trend of State
and local expenditures. The hiring of teachers and construction of new
schools cannot be deferred in the face of the currently large and still growing numbers of school children, nor can the laying of streets and sewers
and the enlargement of water systems be postponed when the new housing
developments requiring them are being built. The need for recruiting new
staff while living costs are rising has required substantial increases in State
and local pay scales, and other aspects of activity are suffering from the
impact of generally rising costs.
Total cash payments to the public by State and local governments in
1948 were about 15 billion dollars, 25 percent higher than in 1947, and
a further substantial rise is in prospect for 1949. Despite deliberate postponements by many States and localities in the hope of lower costs, construction activities have been rising at a very rapid rate and will continue
to do so. The dollar value of State and local construction activities, which
expanded much more slowly than private construction immediately after
the war, was more than 37 percent higher in 1948 than in 1947, compared
with a little more than 30 percent increase for private construction and
only a 14 percent increase in Federal construction. Costs have risen sharply,
and the rise in physical volume has been substantially less than shown by
the dollar figures. While the number of people on relief rolls has
remained relatively low, increased assistance has become essential, and in
many cases it has been found necessary to supplement inadequate old-age
insurance benefits with relief payments.
28
Federal cash receipts from the public and excess of receipts. Federal
cash receipts from the public (including receipts of trust accounts)
increased in the first half of 1948 and declined in the second half after income
taxes were reduced. Without new tax measures, the volume of receipts in
1949 would be about the same as in 1947.
There is, however, but little comfort in the fact that receipts have continued at a rather stable high level in spite of the tax reduction that was
adopted last year. This has come about only as the result of the inflationary
rise in dollar incomes, profits, and payrolls. The inflationary rise in turn
was aggravated by the effects of the tax reduction.
In 1948 the excess of cash receipts dropped from an annual rate of
12.5 billion dollars to 4.0 billion from the first to the second half of the
year. With the expected increase in Federal cash payments and without
new tax measures, Federal cash transactions will result in an excess of
payments this year.
T A B L E 8.—Federal cash receipts from and payments
to the public
[Billions of dollars, annual rates, seasonally adjusted]
Receipt or payment
Cash receipts..
Cash payments
_
Calendar
year
1949
estiJanuary- July-De-1
mate
June
cember
Total i
44.3
38.6
45.2
36.9
47.6
35.1
42.7
38.7
2 43.7
8 44.3
+5.7
+8.3
+12.5
+4.0
-.6
_
Cash surplus (+) or deficit (—)
Calendar year 1948
Calendar
year
1947
_
i Preliminary; based on incomplete data.
*3 Receipts based on present tax legislation (for exception see appendix A, table A-6, footnote 3).
Payments based on present and proposed legislation.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See appendix A.
The question whether cash transactions will show a small surplus or
deficit this year is less important than the fact that we have lost the large
excess of receipts that early last year was one of the main factors counteracting inflationary pressures. Unless new tax measures are adopted, this
fiscal support for an anti-inflationary policy will disappear.
State and local cash receipts. Cash receipts of State and local governments in 1948 continued their rising trend, in response both to the general
rise in national income and to increases in the rates of existing taxes and
the imposition of new taxes. A growing number of States have granted
to localities the authority, which has quickly been exercised, to levy a wide
variety of new sales and other taxes and fees for specific services. Local
governments have exerted great pressure on the States to increase the
amounts of State grants, a pressure which may be intensified in 1949.
Revenues from real property taxes, which, because of stable valuations and
rates, failed during the war years to rise in line with growing prosperity,
have since increased as assessments and rates have been adjusted to expand-
29
ing local needs. This indicates that this source of revenue is potentially
more productive than has been widely assumed.
State and local borrowing has continued to increase, and at a sharply
increased rate. The general picture, particularly for local governments, is
of revenues inadequate to meet pressing current local needs, and larger cash
deficits and borrowing may be expected in 1949.
The total cash receipts of State and local governments during 1948 were
about 14.3 billion dollars, more than 1 billion higher than in 1947. The
cash deficit was nearly 1 billion dollars. While receipts should rise in
1949, payments will probably increase faster, leading to a somewhat larger
deficit.
Summary: The Nation's Economic Budget
The Nation's Economic Budget total, or the total output of goods and
services of the economy, has increased at a fairly steady rate over the last
two years, when measured in current dollars. Comparing 1947 with 1948,
this dollar value increased by approximately 10 percent. A large gain in
physical production occurred from 1946 to 1947, through the elimination of
bottlenecks and fewer work stoppages. The gain from 1947 to 1948 was
smaller, about 4 percent, because the economy had reached the stage where
further increases in production depended upon additions to the labor force
and improved productivity and technology. The physical output of the
economy has increased more slowly than the dollar values, as shown in the
following table:
TABLE 9.—Indexes of output
[1946=100]
Gross
national
product
(current
prices)
Calendar year
111
109
113
121
118
123
1947: total
First half
Second, half
1948* total
First half
Second half
Physical production of
goods and utilities
Total i
108
8
112
Excluding
agriculture
109
109
110
113
113
113
8
i Because of the seasonal nature of agricultural crop production, the total index which includes agricultural production has not been computed.
Sources: Appendix tables O-l and 0-12.
Comparing 1947 with 1948, business income (retained earnings and
additions to reserves) and gross private domestic investment showed the
largest percentage increase; consumer incomes and expenditures increased
less; government expenditures remained at about the same level; and net
foreign investments declined substantially. (See charts 8 and 9 and table
10.) In fact, it is an outstanding characteristic of the present economy
that business income and expenditures have increased more than consumer
income and expenditures since the prewar year 1939*
30
T A B L E 10.—The Nation's Economic Budget, Calendar years 1947 and 1948
[Billions of dollars, annual rates, seasonally adjusted]
1947
Economic group
1948, first half
Excess of
Expendi- receipts Receipts
(+)or
tures
170.8
15.4
186.2
180.0
14.6
194.6
deficit
(-)
CONSUMERS
Disposable income relating to current production
Government transfer payments and net interest
Disposable personal income .
_.
Expenditures for goods and services
Personal saving..
BUSINESS
Retained business receipts from current production
Government transfers.
_
_
Receipts
_
Gross private domestic investment
Excess of receipts (+) or investment (—)
INTERNATIONAL
Net cash government loan transfers abroad
Net foreign investment
Excess of investment (—)
G O V E R N M E N T (FEDERAL, STATE, AND LOCAL)
Tax payments or liabilities
Adjustment to cash basis
Cash receipts from the public
Purchases of goods and services
Government transfers
Cash payments to the public
Excess of receipts (+) or payments (—)
ADJUSTMENTS
For receipts relating to Gross National Product
Other adjustments.
_
Total: Gross National Product
158.1
15.5
173.6
164 8
28.0
tft.l
60.7
—15.2
Excess of
Expendi- receipts
(+)or
tures
deficit
(-)
179.2
39 5
.2
—1.7
59.0
+2.8
61.9
59.5
-2.2
67.3
31.8
18.0
49.8
+12.0
+6.7
+1.5
0.0
—.1
3.3
—3.5
-2.9
231.6
25.6
.3
25.9
38.2
—10.7
1.6
8.9
—2 9
+1.5
231.6
+11.9
22.3
.8
23.0
30 0
57.4
-.1
57.3
deficit
(-)
174.3
+8.8
19.0
.3
19.4
_
1948, second half i
Excess of
Expendi- receipts
:Receipts
(+)or Receipts
tures
-4.6
-2.4
247.6
247.6
-4.6
-2.4
0.0
-7.1
+2.8
257.8
38.8
15.6
64-4
257.8
+15.4
-13.6
-.3
+2.8
-7.1
+2.8
0.0
1
Estimates based on incomplete data.
NOTE.—Items relating to current production of goods and services are shown in roman type. Transfer payments and receipts and subtotals including them are in
italics; they are not included in the gross national product.
Detail will not necessarily add to totals because of rounding.
CHART
8.
THE NATION'S ECONOMIC BUDGET, 1947-1948
The Nations Economic Budget dollar total increased by 9 percent
from 1947 to 1948. The business account increased the most,
consumers1 account moderately, and government account the
least. Net/foreign investment declined.
1947
{BILLIONS OF DOLLARS)
TOTAL**
(Gross National Product
vRECEIPfsX
231.6
291.6
Transfer
EXCESS OF
EXPENDITURES(-)
RECEIPTS (+)
payments^
0
+
=£1 CONSUMER
vj
SAVING
CONSUMERS
BUSINESS
EXCESS OF
INVESTMENT
INTERNATIONAL
EXCESS OF
INVESTMENT
A=|
CASH
£ SURPLUS
GOVERNMENT
(Federal, state, local)
1943
(BILLIONS OF OOLLARS)
•Xv:%%XvXv:v:::v::vXX\<\\\\Xv:v:v:v:v R E C E i p t s :v:x-:ovX\vX^<\:\\\v>x^vXvX-X'X-: •*•:•»
TOTAL**
(Gross National Product)
Transfer payments £ *
CONSUMERS
BUSINESS
INTERNATIONAL
GOVERNMENT
(Federol,state, local)
VAVI CONSUMER
vXvi SAVING
EXCESS OF
INVESTMENT
EXCESS OF
INVESTMENT
Ivl
CASH
i l SURPLUS
• ' * TRANSFER PAYMENTS ARE INCLUOED IN RECEIPTS OR EXPENDITURES OF THE SEPARATE ACCOUNTS BUT NOT
IN THE TOTAL CROSS NATIONAL PRODUCT.'
SOURCE: SEE APPENDIX A .
TABLE 11.—Changes in the Nation*s economic budget
[Calendar years]
Economic group
Consumers:
Disposable income *
Expenditure
_
Business:
Retained earnings *
Private investment
International: Net foreign investment..
Qovernment:
Cash receipts
Cash payments
Total: Gross national product..
+11.3
* Includes Government transfers. See table 10.
Source: See appendix A.
The basic causes for the high relative rate of business expenditures in
recent years were inherited from the war. Expansion, modernization, and
repair of productive capacity were badly needed, business had large liquid
assets accumulated during the war, and credit was easily available. In addition, inflation has permitted profits to rise more than personal incomes, and
business has been able to finance a great deal of expansion out of current
earnings. Rising prices do not have a depressing effect on investment if
business expects that they may rise still further; only when prices are
expected to decline do they tend to depress investment. In contrast, rising
prices have been a more effective brake on consumer demand. It is true
that inflation has permitted some increase in the standard of living of those
farmers and workers who could increase the prices for their products or
services faster than the rise in prices of the products they purchased. By
the same token the burden of inflation has fallen mainly on those consumers
whose incomes have been fixed or have lagged behind. And although business, Government, consumers, and foreign countries have each absorbed
some part of the large increase in production which has taken place since
1939, the percentage increase for consumers has been the smallest.
During the year 1948 the inflationary process continued. There was,
however, a considerable change in the character of developments, as is
shown by comparing the first and second halves of the year. Business investment no longer showed the greatest percentage gains, as it had from
1939 to 1947, and from 1947 to 1948 as a whole; Government payments now
showed the greatest relative increase. At the same time Government
receipts declined as a result of Federal income tax reduction.
The consequent reduction in governmental cash surpluses (Federal,
State, and local) from a seasonally adjusted annual rate of 12 billion dollars
in the first half of the year to a little more than 3 billion in the second half
was the most important change in the Nation's Economic Budget during
1948.
33
CHART 9.
THE NATION'S ECONOMIC BUDGET, 1948
The Nation's Economic Budget dollar total increased by 4 percent
from the 1st half to the 2nd half of 1948. The Government
surplus declined sharply as receipts fell and payments rose.
1948,
FIRST HALF (BILLIONS OF DOLLARS)*
>X\vXv>x%v:vX£^
TOTAL**
(Gross National Product
EXCESS OF
EXPENDITURES H
RECEIPTS (+)
7
0
t
vlvi CONSUMER
.X.I SAVING
CONSUMERS
BUSINESS
EXCESS OF
INVESTMENT
INTERNATIONAL
EXCESS OF
INVESTMENT
£v| CASH
::A SURPLUS
GOVERNMENT
(Federal,state, local)
1948,
SECOND HALF
(BILLIONS OF DOLLARS)0
TOTAL
< Gross Notional Produd
Transfer payments -
W~Z\ CONSUMER
CONSUMERS
•v.v.l
BUSINESS
EXCESS OF
INVESTMENT
INTERNATIONAL
EXCESS OF
INVESTMENT
CASH
SURPLUS
GOVERNMENT
(Federal j state, local)
• A N N U A L RATES,,SEASOWALLY ADJUSTED
IN THE TOTAL GROSS NATIONAL PRODUCT
INCLUDES AN ADJUSTMENT OF+.$2-8 BILLION IN F I R S f HALF A N ( 5 - $ 2 . 3 B I L L I O N IN SECOND HALF.
SEt APPENDIX A FOR EXPLANATION
SOURCE: SEE APPENDIX A ,
SAVING
34
This rise in governmental payments and reduction in Federal taxes, combined with price and wage increases, added to consumer incomes and business earnings. The inflationary impetus of these developments was somewhat mitigated by the fact that consumer expenditures increased less than
consumer incomes, and business investment less than business earnings.
Also, net foreign investment declined, partly because Federal grants, which
are recorded in the Government account, took the place of foreign investments. Thus the 9-billion-dollar drop in the combined Federal, State, and
local surpluses was, as shown in table 10 and chart 9, offset by an increase in
net saving and a reduction in the excess of domestic and foreign investment. The new balance was brought about only through another turn in
the inflationary spiral. Most of the gains obtained through increases in
incomes and reduction of taxes were lost through price increases.
The analysis of the Nation's Economic Budget suggests two conclusions.
It demonstrates the essential role that a Government surplus plays in a
period of inflationary pressures and the dangers that would result if last
year's surplus should disappear entirely or be replaced by a deficit. Adjustments that may be needed to deal with such a situation will be discussed in
Part II of this report.
From the longer-run aspect, the most important item is the reduction in
the role consumption has recently played in the economy relative to business
investment and Government expenditures. Adjustments which may become necessary as the special conditions of the postwar period gradually
disappear will be discussed in Part III of this report.
35
II. Goals and Means of Approaching
Them in 1949
BASIC ECONOMIC OBJECTIVES
HE Employment Act of 1946 stated the needs of our economy admirably when it set the objectives of "maximum employment, production,
and purchasing power." In terms of these objectives, the immediate tasks
that loom largest in 1949 may conveniently be stated.
T
Maximum employment
It is estimated that the labor force will increase by nearly one million
during 1949. This increase will reflect not only the increase in the population of working age but also the large number of students under the GI program who will complete their training and education. The civilian employment goal for 1949 should include provision of useful work opportunities for
the net increase in the labor force. Maximum employment means steady
work at customary hours, not work sharing. While some temporary frictional unemployment is inevitable in a fluid economy, its volume should be
kept as near as possible to the present low level.
Maximum production
An increase in the total production of goods and services of 3 to 4 percent,
or 8 to 10 billion dollars measured in 1948 prices, should be regarded as a
reasonable objective for this year. In agriculture, the improvement in
plant and the abundance of last year's feed crops promise a continued high
total output with an increase in livestock products which would somewhat
improve consumption standards for our people. On the industrial side,
about 50 billion dollars have been invested in expansion and modernization
since the end of the war. Hence the slight increase in output per man-hour
which occurred last year should be enlarged upon this year. In spite of
these improvements in industrial productivity, there will still be several bottlenecks where there are persistent shortages of capacity for producing
electric power and critical materials, particularly certain metals. Industry
and government should press their efforts to overcome these shortages.
Maximum purchasing power
The basic concept underlying "maximum purchasing power" is that the
income generated by productive effort should flow to groups and individuals
throughout the economy in a manner that will provide adequate funds and
36
CHART
10.
FEDERAL CASH RECEIPTS FROM
AND PAYMENTS TO THE PUBLIC
The cash surplus was sharply reduced in the 2nd half of 1948
and would disappear in 1949 under present tax rates and
proposed expenditures.
BILLIONS OF DOLLARS
50
10
BILLIONS OF DOLLARS
50
-
—
10
1949
Estimate
1939
+ 15
+ 15
+ 10
10
Surplus ,
+5
+5
-Deficit
-5
1939
* ANNUAL
RATES,
SEASONALLY
1946
1st half*
1948
CALENDAR YEARS
1947
2dhalf*
1948
AOJUSTEO.
SOURCES: TREASURY DEPARTMENT AND BUREAU OF THE BUDGET.
37
1949
Estimate
incentives for maximum production in the factory and on the farm, and
furnish buying power to consumers and business sufficient to take promptly
off the market the goods available for their use. Broadly conceived, it
requires the balanced allocation of resources and manpower in accord with
the interests of the economy as a whole. These interests must include
support for basic national policies such as national defense and welfare.
Since prices and wages are the main mediums through which purchasing
power is distributed, price and wage movements and relationships decisively
affect the outlook for stable prosperity. Most economic policies are directed
in one way or another toward this problem of balanced purchasing power in
order to bring the pattern of production and consumption into better alignment so as to attain economic stability at the highest feasible levels. In
addition to price and wage adjustments, there is need for a proper balance
between total money purchasing power and the supply of goods if inflation
or deflation are to be avoided.
The goal for 1949 should be to make as much progress as we can within
one year toward achieving adjustments which will maintain purchasing
power on a stable basis.
NEEDED ADJUSTMENTS
Fulfillment of our 1949 goals for maximum employment, production, and
purchasing power will not come by chance. It will require wise economic
adjustments, toward which some progress was made during 1948. Yet
much remains to be done. There are seven areas of adjustment which seem
to us of signal importance.
Fiscal policy
The large excess of cash revenues over expenditures, running at an annual
rate of more than 12 billion dollars in the first half of last year, was the main
bulwark of our anti-inflationary policy. The review of Government
transactions in Part I indicates that this surplus will disappear and
change into a deficit unless new tax legislation is adopted. It is well-nigh
axiomatic that the Government should operate at a substantial surplus
during a period of unparalleled prosperity when inflationary pressures
persist. This is essential not only to deal sensibly with the current situation,
but also to permit fiscal policy to be reversed if recessionary trends should
later develop which might call both for tax reductions to stimulate business
and markets and for additional public expenditure.
On general economic grounds, tax measures should be devised to result
in an increase of at least 4 billion dollars. However, the range of prime
considerations in matters of tax policy extends so far beyond purely economic analysis that ultimate decisions must be made within that wider
perspective.
In formulating a tax program for 1949, the following principles seem
paramount: The additional tax measures should (a) provide a budgetary
38
surplus; (b) absorb some of the high current profits, while avoiding tax
measures which would lead business firms to charge higher prices or impair
their ability to maintain desirable rates of expansion; (c) guard against
aggravating any recessionary tendencies and provide sufficient fiscal flexibility to enable quick readjustments if such tendencies should become strong;
(d) reduce the inequities of previous legislation and strengthen the enforcement of the tax-collecting system.
Clearly there are various combinations of tax measures that would be
consistent with the foregoing principles. One workable combination would
include a tax on corporate profits, and some increase in the tax on personal
incomes, estates, and gifts. Consideration should also be given to reductions
or abandonment of some excise taxes and increases of others. These revenue measures should have priority over any technical improvement of the
tax system in general, although exceptions should be made for the most
urgently needed revisions.
CHART
11.
CORPORATE PROFITS
Corporate profits reached new peak levels in 1948, exceeding
the levels of 1947, quarter by quarter.
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
40
40
30
30
20
PROFITS
•BEFORE
TAXES*
10
10
1929
3
1939 1943
1947
•
4
1 2
3
1948
NO ALLOWANCE FOH INVENTORY VALUATION ADJUSTMENT
SOURCE: DEPARTMENT OP COMMERCE.
With respect to taxes on corporate profits, there are some arguments for
an excess-profits tax and others for an increase in the regular corporate tax
rates. The excess-profits tax has these advantages: It is sensitive to changes
in business conditions, and therefore will rapidly reduce its demands on
39
taxpayers in the event of a recession; it is difficult to shift to the consumer; it
reduces incentives to increase prices; it may reduce the pressure for increases
in wages of a kind that would be inflationary. An increase in regular
corporation rates has certain advantages, provided the increase is moderate;
it has administrative simplicity; it avoids the high marginal rate that would
exist in some concerns under an excess-profits tax and that might lead to a
relaxation of managerial efficiency; it avoids some of the inequities which
might result under the excess-profits tax. In any event, the noneconomic
elements involved in the choice between these two types of taxes or in a
combination of the two make it clear that the decision should rest on the
broadest grounds of policy.
Under present conditions increases in the tax on personal incomes
should be limited to the middle and upper brackets, primarily on grounds
of equity. However, a further substantial increase in defense and military
aid budgets would call for an increase in personal income taxes in all
brackets.
With respect to estate and gift taxes, these taxes can be more easily
administered than an income tax with very high marginal rates, and such
taxes have the minimum adverse economic effects.
Gash receipts could be increased further by advancing the date of the
statutory increase in pay-roll taxes. Early expansion in the social security
program would strengthen anti-inflationary factors now and provide for
additional purchasing power cushions later.
Credit policy
In addition to the use of fiscal policy, it is necessary that monetary authorities at all times be in position to carry out their traditional function of
exerting effective restraint upon excessive credit expansion in an inflationary period and conversely of easing credit conditions in a time of deflationary
pressures.
In view of the problem of managing our huge war debt, the Federal
Reserve Board has only limited power to curb effectively any substantial
pressure towards credit expansion. Maintaining a stable and orderly market for Government securities means, in effect, that the Reserve banks must
purchase long-time marketable Government securities offered for sale by
bank and nonbank holders and not taken by other investors. These Federal Reserve purchases create an equivalent quantity of bank reserves upon
which a multiple expansion of credit can be based. Without power to immobilize these reserves, the Board's ability to restrain credit creation is
severely limited since commercial banks, insurance companies, and mutual
savings banks still hold Government securities in an amount of 95 billion
dollars, and individuals and corporations also hold large amounts, which
could be readily transformed into bank reserves.
40
Whether or not we are likely to be involved in a serious embarrassment
on this score depends on the strength of the basic inflationary forces during
the coming year, and on the measures taken to limit their impact. The
forces of inflation may be activated by the requirements of Federal expenditure to meet our responsibilities in international affairs, and the Government in that situation would need the power to meet the serious problem
arising out of our dual objective of maintaining a stable and orderly market
for Government securities and at the same time attempting to prevent an
excessive credit expansion.
Such action as is consistent with the debt management policy includes
(1) raising rates on short-term Government securities in order to make them
more attractive to bank and nonbank holders and in order to raise the price
of short-term money generally, (2) raising the discount rate, and (3)
increasing reserve requirements.
CHART
12.
SECURITY YIELDS AND MONEY RATES
Since the end of the war security yields and money rates have
remained at a low level, but have increased moderately in 1948.
PERCENT PER ANNUM
3
PERCENT PER ANNUM
3
Aaa CORPORATE BONOS
MOODY'S .
BANK LOAN
RATES CHARGED CUSTOMERS
PRINCIPAL CITIES
—
GOVERNMENT BONOS
15 YEARS AND OVER
TAXABLE
. — . .*—•«--,.—.-—• —"• "J- .—~
WMENT CERTIFICATES OF INDEBTEDNESS
( 9 - 1 2 MONTHS)
I
J
I1
1944
1945
1946
I
1947
1948
SOURCES: TREASURY DEPARTMENT, MOODY'S INVESTORS SERVICE, AND BOARD Of GOVERNORS OF
THE FEDERAL RESERVE SYSTEM. (EkCEPT 4th QUARTER OF 1948).
Rates on Government short-term securities were raised in July 1947 and
August 1948, bringing the yield on Treasury certificates from about % to
1J4 percent. The immediate effect was a pronounced rise in short-term
interest rates generally and a moderate rise in corporate bond yields. These
actions in conjunction with developing conditions had some deterrent effect
on the willingness of bankers to lend and on the demand for funds. Although a much more pronounced rise in short-term rates than has occurred
in the past might be somewhat more effective in deterring credit expansion,
there are limitations on the possibilities of exerting effective restraint
through such action.
The discount rate was raised from 1 to 1*4 percent in January 1948,
and from 1*4 to l*/£ percent in August. Under prevailing conditions, this
action also can have but limited effectiveness, since with their enormous
holdings of Government securities most banks can readily obtain any needed
funds by selling securities rather than by borrowing from the Reserve banks.
At the present time the Board's power to increase bank reserves is limited
to an increase of 2 percentage points against demand deposits for all member
banks and 2 additional percentage points against demand deposits for central reserve city banks. Under the temporary authority granted by the Congress in August 1948, which expires June 30, 1949, the Board had power
to raise reserves against demand deposits by 4 percentage points and against
time deposits by V/2 points. Raising requirements by the last two percentage points allowed under temporary authority would increase total
reserves that banks have to keep against deposits by about 1J/2 billion dollars.
Though this might help to restrain credit expansion by placing banks under
pressure to obtain additional reserves or by absorbing any additional reserves
that banks may obtain from gold imports or Federal Reserve purchases of
United States securities, it could not have much effect considering the
ability of the banks to obtain additional reserves. The lapse of the present
temporary authority would add several billion dollars to their reserves.
One proposed method to restore the power of the Reserve System to
influence the volume of bank credit is to give up our aim of maintaining a
stable and orderly market for Government securities. The immediate
impact of such a step, however, is highly uncertain. Indeed, it is entirely
conceivable that, in some circumstances, the unsettling of financial markets
following complete removal of the peg would contribute to a serious business downturn. Another method might be the continuance of support but
at a lower level, in the hope that this would discourage existing holders
from selling, or bring new buyers into the market to take advantage of
higher yields. There is no promise that such a policy would provide a
definite solution to the problem. A moderate reduction of the peg might
create the expectation of a further reduction and increase the volume of
purchases required to support the market. Or, if the inflationary pressures
42
were substantial, the only effect might be a general rise in the structure of
interest rates, with the Federal Reserve banks obliged to continue a sizeable
volume of support purchases at the lower peg.
The stability of the Government bond market has been a significant element in the smooth postwar reconversion. This stability has contributed
to the underlying strength of the financial structure of the country. It
would be a serious error to introduce new elements of uncertainty and
possible financial disburbances which would follow a change of the policy
with respect to the support of bond prices.
A constructive approach would be the granting of additional powers to
the Federal Reserve Board to vary the level of reserve requirements. This,
together with use of other powers available to the System, would provide a
flexible mechanism of credit restraint under current monetary conditions.
The process would be more effective if applied to all banks insured by the
Federal Deposit Insurance Corporation.
Authority for the regulation of consumer instalment credit expires on
June 30, 1949. This authority has had gradually increasing influence in
checking credit extension of an inflationary character. To abandon this
restraining influence at this time would increase our vulnerability to
inflationary strain.
Voluntary adjustments in prices and wages
Since the end of the war we have been faced with an inflationary spiral
of prices and wages which at times has appeared to be burning itself out,
only to flame up again under the impetus of new factors. At the moment
we are witnessing a welcome abatement of inflationary pressures in substantial parts of the economy, while other areas are still subject to strong
inflationary pressures. Much as we may hope that the present relaxations
of inflationary pressures will continue and spread to the rest of the economy,
it would be foolhardy to count on it. This is no time to relax our vigilance
against the dangers of a possible spurt in the inflationary spiral. We need
to be prepared to deal with that possibility as well as to make the adjustments required when markets weaken.
An essential part of the process of adjustment depends upon the voluntary
behavior of business, labor, and other groups. Indeed, it is upon the voluntary pursuit of sound economic policies that we rely mainly for the strength
and progress of our economy. The forces of competition, however, are
never wholly adequate to bring about all the adjustments required. In a
full-employment economy beset by inflationary pressures, and vexed by international as well as domestic complications, the need is greater than ever
for restraint and foresight, for appreciation of the interests of the whole
economy and of how its various sectors interact upon one another.
Price adjustments. It is the natural inclination of businessmen to gain
whatever profits they can. Profits in fact are the central and legitimate
purpose of their undertaking. In an inflationary period, higher costs, actual
43
or anticipated, impel them to protect themselves by higher prices. And their
apprehension of a possible recession at some later date may impel them to
make hay while the sun shines and to make maximum improvement in their
financial and physical position while profits are high.
At the same time, the case for a moderate and restrained price policy
rests on the law of self-preservation, once the conditions of self-preservation
are fully perceived. For businessmen know that maximum profits in the
long run depend upon sustained prosperity. They know, too, that this
prosperity is endangered when prices are pushed so high or needed adjustments so long delayed as to culminate in a choice between the equally undesirable alternatives of slashing prices too rapidly or attempting to meet a
softening of demand through cutbacks in employment and production. The
hope that businessmen actually will set their prices below the highest levels
that a lush market will temporarily sustain is supported by the fact that
many of them have already done so.
The postwar level of demand has been compounded of many factors: the
reconversion needs of business, the extraordinary character of some government programs, the use of wartime savings, and generally high levels of
income. Wise management recognizes that prices geared to such a compound demand cannot be maintained when the temporary elements disappear. The great danger in a situation of this sort is that management,
feeling a decline in the pressure of demand, will respond by lowering the
rate of production rather than by attempting to maintain it by making
downward adjustments in prices.
Recent price trends have been running in two directions. For a considerable range of commodities, they have been moving downward or
leveling out. For another range of commodities, the demand continues
very strong in relation to the supply, and upward pressure on prices still
continues. These divergent trends indicate an over-all market situation
which makes it more risky than* a year ago to cling shortsightedly or obstinately to prices beyond those yielding a reasonable return. Increasingly,
month by month, there is need for discernment and discrimination in
pricing policy.
In those industrial areas in which supply has caught up with demand, or
even exceeded it at present price levels, downward price adjustments to
maintain a high level of production become essential. Moreover, where
price cuts are made at initial stages of production, they should be passed
through promptly at subsequent stages of production and distribution so as
to pass the price benefits on to the consumer.
The discriminating and prudent price adjustments which we have been
discussing would reinvigorate demand where it may lag and would help to
sustain continuous maximum production. They would assist the market in
avoiding the drastic general slashes in prices which would mark the advent
44
of a serious recession or depression. We should not expect the process of
price adjustment to bring us back to the preinflationary price level, since
incomes, costs, and prices have become interrelated at a higher level of
prices.
It does not lie within the scope of this Report to point to exactly what
individual price adjustments are required. But the enunciation of the
principle is worthwhile even though its specific application must be left to
those on the scene of action.
Wage adjustments. Labor's interest in the maintenance of stable prosperity transcends even that of management, because while profits may fall
more than wages in a period of depression, workers and their families bear
the real brunt of hard times. Pushing for the highest possible wage advance is dangerous to the economy in a period when that advance necessitates even higher prices. It is more dangerous if this course is followed
when rising labor costs lead to reduction in employment. Wage advances
that contribute to inflation are undesirable; but wage advances that may
contribute to serious deflation are more so. With the balance between
inflation and deflation more closely drawn than it was a year ago, a restrained wage policy is now even more urgent in the interest of labor as
well as management.
This admonition should not lead to the assumption that wage principles
and profit principles are identical. Profits become unreasonable when they
yield more than the amounts which support adequate incentives for production and growth; but there is no upper limit to wages in exactly that
sense. Certainly an objective of the American economy is to provide constantly higher real wages and a constantly improving standard of living
as rapidly as our resources will permit. Money wages may, however, become too high when they run ahead of the supply of goods so that they
lead only to more inflation instead of more consumer enjoyment; or when
they attempt to yield to a particular group a larger share of the national
output than can be theirs without undue deprivation of others; or when
they induce unemployment.
There is, however, sound ground for wage increases which are in line
with productivity trends. Further, substantial wage increases are still called
for in a number of instances where wages are substandard. The postwar
inflation has led to a permanently higher level of prices (though not necessarily as high as the present level), and it would be intolerable to leave its
worst victims without relief. The adjustments required for this purpose
would not interfere with the movement of the economy toward greater
stability, but would in fact contribute toward stability in the long run.
It should be emphasized that the above discussion of wages is related to
a broad anti-inflation program and is based on the assumption that other
Government and business policies will effectively contribute to stabilizing
the cost of living.
45
Treatment of critical shortages and capacity expansion
While the supply situation relative to demand has greatly improved in
most segments of the economy, this is not the case in a number of highly
important areas. There are serious deficiencies of supply in the case of
lead, copper, and a few other materials which are of vital importance to the
defense plans of the country. These shortages appear likely to persist for
some time under circumstances of maximum employment and production
throughout the economy. Steel has presented the outstanding shortage
problem since the war, and would present grave danger in case of the need
for a much enlarged defense program. It is, therefore, necessary to give
special attention to policies which may be needed in these fields.
Expansion of capacity and production. Under developmental contracts
in connection with the stockpiling program, substantial progress is expected
to be made toward overcoming some critical deficiencies of supply. But
this attack upon the problem alone is too restricted. There is need to
determine the extent to which serious shortages will persist for essential
products and to determine what special measures may be needed to stimulate
the increase of capacity and production. While accelerated expansion in
bottleneck areas would require materials already in critically short supply,
this effort on a selective basis can and should move forward.
Voluntary allocation agreements. The shortage situation led to the
enactment of Public Law 395 authorizing the President to approve voluntary
agreements which he finds will "aid in stabilizing the economy of the United
States * * * in curbing inflationary tendencies, to promote the orderly
and equitable distribution of goods and facilities, and to aid in preventing
maldistribution of goods and facilities which basically affect the cost of
living or industrial production." The allocations under this law have been
confined to steel, pig iron, and petroleum. In addition, the National Military Establishment, in fulfilling the stockpiling objectives for critical and
strategic materials, has recently made an informal arrangement with the
copper industry to furnish several thousand tons of copper each month, and
is discussing similar arrangements with other industries.
There can be no doubt that, even with this limited application, the voluntary cooperative efforts between business and Government have produced
important results in directing scarce commodities to their more essential
uses. However, as the proportion of a scarce commodity which is allocated
increases, orderly distribution to the priority programs tends to be at the
expense of the rest of the economy and strong inflationary pressures tend
to appear.
Selective controls
The easing of demand in some sectors of the economy cannot hide the
fact that for other commodities inflationary forces are still strong and
may increase. The existence of serious shortages of supply, which interfere
with essential programs and which continue inflationary pressures, has been
noted at earlier points. This problem will present itself in a more acute
form if it should become necessary to withdraw substantial minor fractions
of essential materials from the civilian market as a priority for security programs. There is some prospect that the problems which these shortages
present can be met by improvement in the supply situation and by the use of
voluntary allocation agreements. This would be the most satisfactory
solution. But attention should be given to the possibility that the utilization of mandatory allocation controls might be called for on short notice at
points where the present voluntary programs are found inadequate. Since
the shortages also carry the threat of serious further price inflation, selective
price controls also call for consideration.
The authorization of selective allocations and price controls would not
need to rest upon the conviction that they would have to be used. It would
rest, instead, upon the proposition that the Government should be provided
with the weapons which may be needed in the carrying out of public programs and in the battle against inflation.
Rent control
The extreme housing shortage has caused us to continue rent control long
after other wartime controls have been dropped. Continuation of these
controls has held down one important item in the cost of living in the midst
of general inflation. They are not rigid, however, since they do not apply to
new housing, and the Housing Expediter has substantial power to permit
increases to allow for landlords' expenditures on improvements or to grant
relief in cases of demonstrable hardship.
It is true that those who own property subject to rent control have earned
less profit than those who have sold commodities in short supply not subject
to control, but the vacancy ratio in most rental properties is still so low
that incomes of landlords, in spite of increases in cost, are as good as, or
better than, earnings before the war. In addition, removal of rent control
would bear most heavily on families with fixed incomes. At this juncture,
it would also quite possibly stiffen demands for wage increases. Reasons
for extending this control outweigh reasons for terminating it. If extended
for a year or two, we might hope that return to free market conditions could
be effected at a time when other items in the cost of living had eased.
Farm price supports
Long-range farm price support policies and programs are being widely
discussed. The immediate concern over them stems partly from the drop
in farm prices (see appendix table C-22) and farmers' net incomes during
1948, partly from the associated expansion of Government loan and purchase operations, and partly from certain adjustments in support levels*
provided in the Agricultural Act of 1948, to take effect on January 1, 1950.
The current concern with price-support measures should not blind us to
47
the fact that they are only a part—although an important part—of a broad
agricultural program. Three criteria for a sound farm price support program are relevant within the framework of an economy seeking to operate
continuously at maximum levels of employment, production, and purchasing power. First, the program must contribute to maintaining adequate
levels of farm income. Second, it must simultaneously promote sound price
relationships among individual farm products and between agricultural and
industrial prices. And third, it must be implemented with a variety of
measures adequate to give real effect to the support commitments that are
made.
Farm income, to be adequate, must suffice—and must be sufficiently
assured—to encourage farmers to continue a high level of production commensurate with the Nation's needs. Furthermore, it must enable farmers
while doing this to maintain the fertility of their farms, and in general
must justify the continuing investment in farm plant necessary for achieving
our longer-range production objectives. Finally, farm incomes must provide
farmers the purchasing power to share fully as consumers in the output of a
maximum-production economy.
Intercommodity price relationships must be kept consistent with basic
trends in demand and supply conditions. To the maximum extent possible, parity-price relationships and support-price programs should encourage shifts to those commodities that are most wanted. Rigid systems of
support, in violation of this principle, can only lead to rigid systems for
restricting output that violate our tenets of economic freedom, that work
against our objectives of maximum production, and that in the end take
away from farmers' incomes through decreased volume as much as, or more
than, they add through increased prices.
The Agricultural Act of 1948 represents an important step forward in
recognizing the difficulties associated with over-rigid supports. But while
retaining this essential improvement, the precise formulas for adjustments
in support levels, including standards for discretionary action, need careful
review and further testing against the criteria both of adequate farm income
and of adaptability to meet specific commodity situations.
A grave defect in recent agricultural legislation is its failure adequately
to implement the declared support intentions with concrete measures for
making supports effective. It denies authority for the Commodity Credit
Corporation to provide necessary storage facilities. Methods of assigning
acreage allotments for basic crops likewise need the most careful examination. There is danger that the rigidity of present methods may in some
cases hinder farmers from making needed adjustments in production that
the support programs should encourage.
From a* broader standpoint, if price supports are to fulfill their proper
role of encouraging the adjustment of farm production to our needs, they
also should be supplemented by measures to assure consumption at the
needed levels. This implies examination of the adequacy of the school
lunch program and development of measures wider in scope for assuring
that proper diets will be continuously available to all our people.
It likewise implies more aggressive action to broaden the utilization of
farm products, to reduce the costs of processing and distributing them, to
eliminate destabilizing speculative influences from commodity exchanges
and other markets, and generally to assure that retail prices are properly
proportional to the prices that farmers receive. And it would require renewed efforts generally to devise trade mechanisms for making our farm
products available in other countries where they are so sorely needed.
The gains that agriculture has made since the initiation of broadly constructive legislation in 1933 should not be jeopardized in the process of
adjustment to conditions of the peacetime economy. Rather, we must
establish the basis for continued progress. Price supports alone cannot be
relied upon to achieve this. They do not, for example, solve the underlying
problems of small farmers who have too little to sell. Other programs are
necessary to deal with their problems. Price supports make their greatest
contribution in stabilizing farm incomes against economic downturn. In
doing so they contribute significantly also to general economic stabilization.
Price supports and all the other parts of the broad agricultural program
must be directed toward this over-all goal: that all farmers shall have
opportunity comparable to that enjoyed by other groups for realizing the
high standard of living that our maximum-production economy makes
possible.
49
III. Basic Objectives for Balanced
Economic Growth
URING the nineteen thirties the country fell into a tremendous
under-use of its productive resources. This led to a dominating fear
of surpluses in capacities and in goods. The real problem, however, was
how to restore full use of our productive resources and initiate a further
process of growth. During the war years, full employment and phenomenal
levels of production were achieved, but there remained doubts in the minds
of many whether we would be able to maintain full and effective use of
our resources after the return of peace.
The Employment Act of 1946 is based on the conviction that our economic
system can sustain high and steady levels of employment and production.
But such an outcome is not automatic. It will be achieved only if business,
workers, farmers, and the Government are guided less by the records of the
past than by the possibilities of the future. The Employment Act therefore
calls for estimates of the levels of employment, production, and purchasing
power needed to accomplish the purposes of the law.
This part of our report continues the effort begun last year to formulate
needed levels for the American economy in a somewhat longer perspective
than that of Parts I and II, which deal with conditions in 1948 and adjustments for 1949.
Such a formulation does not substitute distant dreaming for immediate
practical action. It simply recognizes that the decisions affecting the whole
economy which we make from year to year will be more intelligent if we
take a longer look ahead. The intent is to keep our objectives responsive to
current experience by reviewing them annually. The aid of experts in
business, labor, and agriculture, and in Government and independent research has been sought. Success in the venture of defining common
objectives should promote success in the task of furthering cooperative action
in the solution of common problems.
Such economic objectives are not to be confused with economic blueprints
or plans used in regulated economies. They are conceived simply as bench
marks for the orientation of private enterprise and public policies. Nor
are they forecasts of what would be likely to happen without special effort.
They depend upon success in accomplishing the objectives of the Employment Act. We present them as an attempt to integrate governmental and
private thinking in a way that is essential for making rational decisions.
D
50
In formulating these economic objectives, the future of our foreign relations is now the major uncertainty. However, even at present levels of the
defense budget and international aid, we are able to make some progress
toward peacetime objectives. This year, for example, will see further additions to plant and equipment and a further improvement in the standard
of living. A deterioration in the international outlook, bringing the necessity
for greatly increased defense programs at home and military aid abroad,
CHART 13.
GROWTH IN OUTPUT OF THE ECONOMY
Total production, as measured by the deflated gross national
product, has increased about 3 3/ 4 percent a year since 1875.
The progress has been irregular.
RATIO SCALE
BILLIONS OF 1947 DOLLARS
300
RATIO SCALE
BILLIONS OF 1947 DOLLARS
ANNUAL
ESTIMATES
OECADE ESTIMATES
100
90
80
70
60
5Q.
40
100
90
80
70
60
50
40
J
10
1869
1879
1889
* DEFLATED GROSS NATIONAL
PRODUCT
1899
IS NOT AN
929 NOT EXACTLY
I
1111 p 111 > i l 111 i i i
1909
EXACT
1918*19
MEASURE
'25
'30
'35
'40
'45
'50
OF OUTPUT IN WAR YEARS (ESTIMATES NOT
4 AND CONSUMPTION.
RABLE WITH DATA FOR
SOURCE: BASED ON DATA FROM DEPARTMENT OF COMMERCE, DEPARTMENT OF LABOR, AND
SIMON KUZNETS* "NATIONAL PRODUCT SINCE 1869."
would reverse the situation. But an assumption underlying the economic
objectives now presented is a gradual improvement in international affairs.
Between the decade beginning in 1869 (earliest available estimates) and
the decade ending in 1918, the gross output of the economy doubled about
every 20 years. This is shown in the preceding chart.
From 1919 to 1929, a very high rate of expansion resulted in an increase
of 33 percent. In the next 10-year period, including the Great Depres-
sion, but little gain was registered. A visitor from Mars looking at
the national production chart would have imagined that one-quarter of
the arable land had been destroyed by a flood, over one-quarter of the
population wiped out by plague, and one-quarter of the industrial plants
destroyed by earthquake. From 1939 to 1948, including the war years, the
increase in output was resumed and a rise of more than 50 percent was
accomplished. Thus, from 1919 to 1948 the output of the economy again
doubled.
In addition to the increase in output, the number of leisure hours has
risen substantially. In the last century, the hours worked were frequently
as high as 70 or more per week. In manufacturing industries, the average
weekly hours of work have dropped more than 20 percent since 1909.
PRODUCTION OBJECTIVES
A reasonable development for the next few years would be an annual
increase in output of about 3 percent. This target depends upon several
factors, chief among them being the growth in the labor force, the length
of the average work-week, and the output per man-hour.
It is estimated that our population will increase less than 1 percent
annually over the next decade, compared with about 2 percent in the
period 1870 to 1919. Since the proportion of the population within
age brackets seeking work will increase slightly more, the increase in the
labor force is estimated at about 1 percent a year. This increase allows
for about a million and a half net immigration over the next 10 years. It
assumes that expanded social security legislation will enable more old people
to retire somewhat earlier. Young people may enjoy longer educations but
will engage in considerable summer and part-time work.
Although average hours worked per week are now at a level consistent with
health and reasonable leisure, some reduction in annual working time would
result from continuation of the present trend toward additional holidays
and paid vacations. Such reductions would partially offset the increase in
the labor force. Under these circumstances, economic growth over the
next few years would depend to a considerable extent on the rise in output
per man-hour.
As far as conclusions can be derived from deficient statistics, it appears
that output per man-hour has increased on the average by nearly 2 percent
per year for a half century or more. The rate of increase for manufacturing industries has been about 3 percent. Over the next few years, a productivity increase for the whole economy averaging somewhat more than 2]/^
percent a year should be possible. This rate of productivity increase is
based on the assumption that Government, labor, and management cooperate fully in achieving maximum productive efficiency. To achieve it
requires continued large investment in labor-saving plant and equipment,
52
expanded research, and lessening of restrictive practices on the part of both
labor and management.
CHART
14.
GROWTH OF POPULATION AND
THE LABOR FORCE
During the past 6 0 years, the labor force has increased about
180 percent and population about 130 percent.
MILLIONS OF PERSONS
(RATIO SCALE)
200
MILLIONS OF PERSONS
(RATIO SCALE)
200
150
150
100
_
100
POPULATION-^^*"**^
90
90
80
80
70
70
60
60
50
"~
^
^
^
LABOR
50
FORCE^
40
40
EMPLOYMENT
30
30
1
20
1870
1880
T
1890
1
1900
1
1910
1
1920
1
1930
20
1940
1950
ALL SERIES INCLUDE ARMED FORCES.
SOURCE: DEPARTMENT OF COMMERCE AND DEPARTMENT OF LABOR.
Mining and manufacturing production
The output of mining and manufacturing accounts for about 30 percent
of all goods and services in peacetime, although it fluctuates more widely
than other types of activity. Industrial production is at a record for peacetime. It is almost double the rate of 1935-39, and has increased far more
than other types of production and services.
This high rate of total industrial production partly reflects the abnormal
composition of postwar demand. It results from very large purchases of
new equipment by domestic business, large purchases of consumer durable
goods, large exports, and large Government orders for the defense programs. Over the next few years, with an expected increase in the rate of
consumption, particularly of services, industrial production is likely to
expand at a rate somewhat less than total output.
53
Agricultural production
Agriculture and fishing, not counting processing of food and other farm
products, account for about one-tenth of the total output of the economy.
In 1948, we produced enough food to maintain per capita consumption
at 12 percent above the 1935-39 average, and to ship abroad three to four
times as much food as in that prewar period. Assuming peacetime conditions in the world, we do not expect to continue to ship abroad the large
quantities of foods that have been required in the last few years. On the
other hand, exports and domestic industrial use of nonfood agricultural
products may be expected to increase.
It should be our aim to increase further the per capita domestic food
consumption, in order to provide adequate diets for the many millions of
families whose consumption is considerably below a desirable standard.
Even so, the increase in the over-all production goals for agriculture does
not need to be as large as in those for other industries. Allowing for reduced
food exports, it is estimated that a 1 to V/2 percent annual rise in agricultural output would provide adequate nutrition for an increasing population.
Because of improvement in farm productivity, it should be possible to
accomplish this objective with a somewhat reduced labor force in
agriculture.
Energy production
Half our nonhuman energy now comes from coal, about one-third from
oil, one-seventh from natural gas, and 4 percent from water power. Practically all the water power and an increasing proportion of the fuels are
converted to electricity. It is not regarded as likely that such potential
further sources as atomic energy, sunlight, wind and tides will play a
significant role within the next few years, although they deserve continuing
exploration and development in view of the exhaustible character of
mineral fuels.
Historically, the trend of increasing reliance on nonhuman energy has
been partially offset by increased efficiency of energy utilization. Nevertheless, the demands on primary energy sources (fuels and water power) have
increased nearly in proportion to total national output. It may be expected that the total need for mineral fuels will continue to increase at
about the same rate as total output.
It is impossible to predict what expansion will take place in the development of power through the use of coal, oil, natural gas and water power,
respectively. Competition among these rival sources is sharp, and technical
developments still in the making will play a large part in shaping relative
growth trends. A sound conservation policy should encourage the use of
water power and coal as against the more quickly exhaustible oil and
natural gas.
The use of electric power has increased tremendously since the war, and
there is no sign of any tapering-off in the development of expanded and new
54
uses for this most convenient form of energy. The wider use of light metals
and other electro-metallurgical and electro-chemical products, in addition
to the further mechanization of industry in general and the rapid growth
in rural electrification, promises a continued increase in the demand for
electric energy.
INVESTMENT OBJECTIVES
The unprecedentedly heavy investment of the past few years has brought
capacity in most lines of business up to a reasonable relationship to current demand. Utilization rates are high, but no longer excessively so in
terms of what might be expected under sustained high employment. In a
few industries which were greatly expanded during the war, such as aircraft, shipbuilding, and magnesium production, excess capacity prevails.
On the other hand, remaining bottlenecks in production of metals and electricity, the transmission of gas, and in transportation indicate areas where
we have not caught up and where provisions should be made to restore an
adequate reserve margin.
A more difficult question~concerns the quality or condition of our present
productive facilities. Whether they are now in better or worse condition
than at some previous time, they are less modern and less efficient than they
could be. The newest and best types of facilities in any industry are superior
to the bulk of those in use, and still better types are generally in the offing
awaiting development and introduction. This situation is a normal and
necessary consequence of the progress of technology and the durability of
capital goods. Technology is always in the lead. If technical development
were to cease tomorrow, American industry could still go on for many years
modernizing its plants up to present attainable standards, with large investment outlays and large gains in efficiency.
Needed investment in manufacturing
Some indication of gross investment requirements in manufacturing
industry may be gained from a study of the relation between gross investment
outlays and capacity expansion during the past three decades.
Contrasting 1919 with 1929 (both years of reasonably high utilization of
industrial capacity), the Federal Reserve Board index number of manufacturing output rose by 38 points (on the 1935-39 base). This is a rough
measure of the expansion in industrial capacity achieved in that interval.
From 1929 to the spring of 1941, again taking an interval between two dates
with reasonably high utilization of capacity, the production index rose
another 40 points. In 1948, with high utilization, the index was another
48 points higher.
In these three periods of industrial growth, the gross outlays for new
nonwar manufacturing facilities—in 1947 prices—were almost precisely in
proportion to the amounts of apparent expansion in capacity. The record
of thirty years thus puts an approximate price tag on expansion and moderni-
55
zation—somewhat below 1 billion dollars (1947) for each point of capacity
expansion in terms of the Federal Reserve index.
This analysis of the record of production under conditions of full employment suggests that to maintain adequate manufacturing facilities the future
ratio of new investment to total production may be below that of 1948.
Needed investment in electric utilities
Electric utilities is another important field in which it is possible to venture a projection of gross investment requirements. Consistent with our
estimate of an increase of 3 percent annually in total production, an acceptable estimate of the annual increase in electric utility output is 20 to
25 billion kilowatt-hours. To provide for this output at reasonable ratios
of plant-use with allowance for restoration of that normal margin of reserve
capacity which is now lacking in many parts of the country, we should need
to increase capacity each year by approximately 5J4 million kilowatts. Allowing l/2 million kilowatts for further retirements of obsolete capacity as
soon as the present tightness of reserve capacity is alleviated, the necessary
gross addition of capacity would be 6 million kilowatts each year. Capital
outlays per kilowatt of capacity for generation, transmission, and distribution facilities are estimated to run between $400 and $500, depending partly
on the proportions of steam and hydroelectric capacity built. The annual
addition to capacity of about 6 million kilowatts would involve an outlay
of 2/2 to 3 billion dollars per year.
This rate of expansion is substantially higher than that attained in 1948.
Privately and publicly owned utility systems have reported plans for additions of about 18 million kilowatts of capacity over the next three years. It
appears altogether likely that, assuming sustained growth and activity in
the whole economy, the electric utility expansion program would have to
continue at better than 1948 rates. For the next two or three years the
rate of expansion is limited by the capacity of equipment producers; that
capacity is itself being increased, but no substantial margin of reserve for
possible military requirements is in sight.
Needed investment in mining facilities
In mining, a major proportion of the foreseeable expansion will undoubtedly come in mineral fuels, now supplying 96 percent of our energy.
As noted in the discussion of production objectives, the total requirements
for mineral fuels are unlikely to increase more than the 3 percent per annum
set for national output as a whole. There is some reason to expect, however,
that more capital investment might be involved in relation to capacity
expansion than in the past. The sharp competition which is in prospect
among coal, oil, gas, and electricity will speed certain technical developments, all of which require relatively large amounts of capital. These are:
(1) further mechanization of coal mining; (2) gasification of coal; (3)
synthetic oil; (4) further substitution of electricity for direct use of fuels.
56
In the coal mining industry, there are great potentialities for further
mechanization of mining, handling and cleaning operations. With sustained high employment, the demand for coal should increase substantially,
though the amount of increase will depend mainly on the development of
liquefaction and gasification of coal, and other new uses. However, expansion of markets may not automatically call forth corresponding outlays on
facilities. In relation to output, coal mining requires a large capital investment which is only slowly recovered in earnings. The inducement to make
major capital outlays hinges on the competitive outlook far into the future.
This means that within the next few years we may have to face a major
adjustment problem. Investment in coal mining and handling facilities
may be checked, even prematurely, by uncertainty concerning the possible
competition of atomic energy.
The petroleum industry spent about a billion and a half dollars in 1948
for wells and other facilities for production of crude oil in the United
States, and probably almost as much for domestic facilities for transportation, refining, and marketing. The need for continued expansion is clear,
but all estimates of future investment must be conditioned upon the rate of
development of new oil reserves.
In 19473 2.7 billion barrels were added to visible reserves of petroleum,
and in 1948 about 3 billion barrels. Since only 2 billion barrels were withdrawn in 1948, our known reserves have expanded roughly in line with the
trend of increase in production. In the interests of national security, we
should attempt to maintain or improve the relationship between reserves
and production. If new reserves could hereafter be added at the 1948 rate,
capital outlays at about the 1948 scale would have to be maintained. Any
increase in the difficulty of development of new reserves would be reflected
in larger outlays in relation to accomplishment. At the same time, higher
prices resulting from such higher costs would have the offsetting effect of
encouraging substitution of imports, synthetics, or other fuel sources.
The rapid expansion of natural gas production and transmission accounts
for the bulk of current capital outlays in the whole gas industry. The natural gas utility companies spent 427 million dollars on pipelines in 1948 and
a further 234 million on other facilities. The industry association has estimated the current expansion program outlays at 2,650 million dollars over
the five-year period 1948-52, which implies a large decline from present
rates of expenditure. The program figures for the later years are almost
certainly too low, if only because plans are not fully made so far in advance.
On the other hand, the expansion of long-distance natural gas pipelines
seems unlikely to continue at present rates for as long as a decade. The
present market advantage of gas over other fuels in some industrial regions
will be reduced somewhat as higher field prices and pipeline construction
costs are reflected in delivered gas prices. Moreover, more rigorous application of public policies which encourage the use of natural gas in the areas
57
of its production rather than transmission to other areas may limit the
investment requirements of the gas industry.
Another mineral industry which we know will require large capital outlays in the near future is iron ore mining. Depletion of the high-grade
Mesabi ore makes necessary the immediate development of alternative
sources. Whether this takes the form primarily of exploitation of new
sources in Labrador and elsewhere, with heavy transportation facilities outlays in addition to the mining development proper, or whether it involves
primarily the construction of beneficiation plants for low-grade domestic ore,
the new investment outlay will be enormous. Development of foreign
sources will involve international investment by United States companies.
Railroad investment
Although transportation as a whole is increasingly important in the national economy, much traffic has shifted from railroads to other carriers.
It is anticipated that, in line with trends of the past two decades, further
freight traffic will be shifted to trucks, pipelines and waterways, and passenger traffic to air lines, automobiles, and busses. Rail freight traffic would
continue to increase, though slowly, while rail passenger traffic would substantially diminish.
The need for freight cars is conditioned by the expansion of traffic (which
we may assume to be partly offset by continued improvement in efficiency
of car use) and the abnormally heavy replacement requirements arising
from war and postwar conditions of heavy traffic and steel shortage. It is
estimated that the average service life of new freight cars now being built will
be about 30 years with allowance for the normal proportion of rebuilding.
To provide a 1 percent annual increase in cars in use and reduce the average
age of cars from 32% in 1947 to 30 years by ten years from now, would
require car purchases at the rate of 120,000 a year; or just the number for
which steel has been allocated under the present voluntary program. With
appropriate allowance for car rebuilding, such a freight-car program would
cost about 500 million dollars a year at 1947 prices. Any acceleration of this
program for rehabilitation and expansion of our freight-car fleet, for
national security reasons, would require a car-building schedule substantially
larger than the present one.
Because of the expected loss in passenger business and its small importance
as compared with freight, only a small part of the necessary equipment outlays should be for passenger cars. The annual average rate of outlays should
be about 80 million dollars at 1947 prices, or roughly the same as in 1947.
Railroad motive power is in process of Dieselization. In 1947, less than
4 percent of all locomotive units ordered were powered by steam. In view
of the superior operating efficiency of Diesel locomotives, any projection must
assume a continued upward trend in traffic handled per locomotive. With
allowance for this factor and the age of present locomotives, the projected
traffic level would call for about 1,800 new units per year. An annual outlay of about 450 million dollars (1947 prices) is entailed. This analysis
makes no allowance for the possible substitution of gas turbine locomotives
on a substantial scale, which is still uncertain.
In view of the trend to higher speeds and heavier trains, substantial expenditures on permanent way will be needed to reduce grades and curves
and lay heavier rail. Rail replacement needs are closely related to the
amount of freight traffic. Total outlays on roadway and structures, in keeping with the other projections, should average annually about 300 million
dollars, a rate slightly in excess of the current rate.
Total capital requirements of the railroads would amount to about 1.3
to 1.4 billion dollars (1947 prices) annually, representing a rate about onesixth higher than in 1948. Actual outlays will, of course, depend largely on
earnings, rates, construction and equipment costs, and the availability of
external financing.
Highways
Highway traffic has increased faster than total production, population
growth, or highway capacity. An annual 3 percent increase in output and
transportation would require an annual expenditure of at least 4 billion
dollars for maintenance, repair, and new construction of our road system.
About one-third of this should be assigned to city streets and expressways,
one-third to primary rural roads, and one-third to secondary and local
roads. Expenditures in 1949, including maintenance and repair, are not
expected to equal even half our annual long-run needs. Present activities
in relation to need are much lower than they were either in the 1920's or in
the 1930's and far less than what is needed for the future. Provision for the
flow of traffic implied in our production goals calls for an increase in these
expenditures as labor and materials are released from other uses. It also
implies a balanced and economical use of both railroads and highways.
Agricultural investment
The amount of investment that will be required in agriculture to expand
output in line with consumption requirements will depend considerably
upon the nature of future technological developments. Over the 30 years
prior to the war there was little change in the combined value, measured in
constant dollars, of farm horses and mules and farm machinery. The substitution of tractor and tractor-drawn machinery for animal power has,
however, been an important factor in the substantial increase in farm
production. The reduction in feed requirements for horses and mules has
freed many acres for other production. Great increases in productivity
have likewise arisen, without any corresponding increase in capital, from
developments like hybrid corn and improvements in animal breeding and
feeding.
During the war, the pressure for rapid expansion of production, high labor
costs, and increased farm income combined to bring about a rapid increase
59
of investment in tractors and other machinery. This increase has been
accelerated since the war as such equipment has become more readily available. From January 1, 1940, to January 1, 1948, the number of tractors
on farms, and the volume of other machinery and equipment, more than
doubled. Farmers' purchases of motor vehicles, machinery, and equipment
for use in production and their expenditures on farm buildings totaled
nearly 10 billion dollars from 1940 through 1945—an average gross investment of more than 1.5 billion dollars a year in current prices, equivalent
to 2 to 2 J/2 billion in 1947 prices. Since the war, however, these outlays
have averaged around 4 billion dollars annually (1947 prices). Over the
next few years, an annual gross investment would be desirable at least equal
to that during the war years.
Another form of agricultural investment that will be needed is in breeding-herds of livestock. The consumption goals that have been outlined
include, along with the increase in total production, a substantial shift in
favor of livestock products, which are favored both nutritionally and in
taste preferences of consumers. Since the war, however, livestock numbers
have been decreasing. To attain and maintain the level of output of livestock products that appears desirable, over 1 billion dollars (1947 prices)
should be invested within the next few years in building up herds and
flocks. Adding this to the investment in farm power and machinery gives
around 3 billion dollars as an annual farm investment goal.
In addition to the investments just discussed, a substantial amount
should go into land improvements for conserving the soil and maintaining
or increasing its fertility. It is difficult to separate farmers' outlays of this
kind between capital investment and current expenses. In addition to
farmers' private outlays, substantial public expenditures are needed for irrigation, drainage, land retirement, and for encouraging the widespread
adoption of conservation practices in farming and grazing. Public
measures in this field are discussed in a subsequent section.
Forest investment
To establish adequate forest growing stocks and otherwise to put our
forests in shape to yield the increased timber growth needed by our
economy will call for substantial investment in access road construction
in our national forests and in privately-owned timberland, in planting and
timber stand improvement, and in protection of forests from fire, insects, and
disease. Forest investment needs are not limited to the objective of timber
growing but also include expanding needs for watershed development,
forest recreation, forest range, and wildlife.
Commercial construction
New commercial facilities, including stores, restaurants, and other service
establishments, follow the growth and redistribution of population. Urban
redevelopment programs and expansion of suburban residential areas will
6o
create the need for commercial construction. In addition, there is need for
expansion of trade facilities even in many areas of stable population, since
sales and activity are now much higher than at the time these areas were
developed. Office space is also scarce at the present time, vacancy ratios
being less than 1 percent. The volume of construction of stores, restaurants,
and garages is currently running at about the levels needed to serve an
economy growing at the rate ours should expand. However, building for
offices and warehouses is very low and will need to increase from a third to a
half to take care of present and future needs.
In the immediate future, there is need for restraint in commercial construction in order to channel materials into housing. Over the longer
range, however, commercial and private institutional construction should
increase somewhat as a proportion of the total, and account for 2 billion
dollars or more per year.
The foregoing analysis suggests that the proportion of resources currently
being devoted to productive facilities as a whole is somewhat higher than
the level that will be required on a sustained basis over the next few years to
meet maximum production objectives in a self-sustaining and steadily growing economy. Additions to capital equipment in the past were accomplished in spurts, and periods in which they exceeded long-run requirements
were followed by periods in which they fell far short. These violent fluctuations in private capital outlays have been a major factor in generating
booms and depressions.
OBJECTIVES FOR CONSUMPTION AND LIVING STANDARDS
In an economy of steady growth moving from postwar to peacetime conditions, the output of consumer goods and services should increase not only
in absolute amounts but also in ratio to total production. In 1948, consumers were receiving about 70 percent of gross output, compared with 76
percent in 1929 and 75 percent in 1939. Even allowing for the contingency
that Government expenditures and net exports may hereafter account for a
larger portion of the Nation's Economic Budget than in previous periods of
high employment, it is felt that final consumers should absorb at least 75
percent of all goods and services within a few years. Coupling this with the
growth of the economy as a whole, the result would increase total consumption per year by about 4 percent and per capita consumption by about 3
percent above present levels.
This higher consumption pattern must be brought about by a substantially
equivalent increase in total consumer income. It will require improvements in the distribution of that income not only to avoid areas of want in
a land of plenty, but also to avoid higher saving than is necessary to permit
the expansion of investment needed for stable growth.
Changes in consumption patterns would flow from these desirable develop-
6i
ments. We have already witnessed great strides forward in standards of
consumption of food and other goods, although here the standards of many
low-income families leave much to be desired. On a national basis, we
have fallen behind in terms of housing accommodations, medical and other
health care, and the provision of educational facilities. Assuming higher
and better distributed incomes, and adequate governmental programs, relatively greater increases may be expected in these areas. Increased leisure
will presumably result also in more travel and higher recreational expenditures in general.
Periods of high income and employment are also usually associated with
a high proportion of expenditures for durable consumer goods. To some
extent in the past this has been the result of the fact that in years of depression such purchases have been postponed. Still, there is little doubt that
an enormous potential market exists for the durable appliances which have
contributed so much to the convenience and comfort of modern life. Services and durable goods may hereafter absorb a higher proportion of consumers' budgets than they did before the war. Nevertheless, there would
also be some increase in food consumption, especially in the variety and
interest of the diets of lower income groups, and in other types of nondurable consumption. New frontiers will be provided for the development
of private initiative by the rise in living standards. The enlargement of
many community and governmental services will also be required.
Balancing production and consumption
At present, private capital expenditures are running at 15 percent of the
Nation's Economic Budget, reflecting in part the need to make up for wartime and some prewar deficiencies. The shift to more sustainable long-run
patterns will require a relative decline to about 11 or 12 percent of the
Nation's Economic Budget, though perhaps a moderate increase in absolute amounts. In addition, certain other elements of the Nation's Economic
Budget, such as the Government's foreign-aid program and expansion of
business inventories, will decline in absolute or relative importance. To
some extent, urgently needed domestic programs of the Government will
take their place. Nevertheless, to reach sustainable patterns of growth
will require that personal consumption increase by considerably more than
total output and assume a larger relative share in the Nation's Economic
Budget. This means that the general standard of living can and should
rise substantially.
In the immediate situation there may appear to be a conflict between the
increase in consumption needed to attain long-run objectives, and the actuality of inflationary forces to which largely increased consumer demand
would further contribute. The more fundamental danger is that the automatic forces of the market tending to increase consumption are of uncertain
and perhaps insufficient strength to bring about needed changes in the
patterns of income and expenditure when the temporary factors in demand
decline.
62
One of the great dangers ahead is that the process of adjusting to these
changed patterns will lead us into a depression through failure of consumption to rise sufficiently. But to be forewarned is to be partly, though not
wholly, forearmed. Major reliance should be placed upon, and full encouragement given to, those free automatic forces within the economy which
bring about adjustments. We must get from privately organized activities
as much handling of the Nation's economic problems as they are capable
of achieving. But we should be prepared to supplement them when needed
through appropriate Government policies directed toward economic balance
at the highest feasible levels of activity. In this, we should not neglect the
problems of those whose living standards have lagged seriously even during
past and present periods of high prosperity.
PROMOTING ECONOMIC GROWTH
The Government has played an historic role in stimulating the growth
of private industry. In earlier times, this aid took the form of grants and
protective tariffs. Present-day conditions require new methods. One of
these, developed in recent decades and particularly during the war, is Government scientific research and development.
Research and information
Progress in this field for military purposes indicates the tremendous benefits that may result from scientific research for peacetime application. Research in managerial techniques and market information can also be of
great value, particularly to small business. The fact-gathering and statistical services of the Government are of enormous value to business managers,
farmers, and others. There are many gaps in this service which will need
to be filled in future years at the same time that care is exercised to see that
duplication is avoided and economies are effected. Standardization and
grading of commercial products and regulation of containers and practices
have also promoted equitable and economical commerce.
The Government can make a signal contribution to the steady expansion
of private industry by accepting responsibility for promoting maximum
levels of employment, production, and purchasing power. When business
has confidence in the determination to exercise this responsibility vigorously,
investment planning will be guided more by long-range objectives of economic growth and will be influenced less by fear of impending downswing
and depression. The major task of such investment planning would then
be to gauge correctly the impact that an expansion in national income
will have on the demand for specific products, instead of guessing whether
general economic activity is going to expand, shrink, or collapse. The Economic Reports under the Employment Act should progressively help in
this task.
Financing business expansion
Since the war, capital in large amounts has been available for business
reconversion and expansion. This has been due mainly to the large volume
of liquid assets accumulated by business during the war, as revenues expanded faster than indebtedness, and to the unprecedented volume of profits
available since the war for reinvestment. Also, both long- and short-term
credit has been available at low interest rates. The only source of capital
which does not appear to have been large, compared with earlier experience,
has been outside equity capital. Total new money raised in the stock
market has been somewhat smaller than during the prosperity of the late
twenties. But this has been so far offset by retained earnings that business
debt-equity ratios are now generally more favorable than in the two previous
decades.
Whether the financial needs of business can be satisfied in the future
depends importantly on the level of profits. These are the immediate
source from which the bulk of financial needs is met, and are also an
important factor in the availability of outside capital, both loan and equity.
Abundant profits during the past two years have stimulated and permitted
CHART 15.
SOURCES AND USES OF CORPORATE FUNDS
Internal sources, mainly retained net earnings and depreciation
reserves, supplied a larger part of corporate financial
requirements in 1948 than in 1947BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
USES
30
-
-
SOURCES
30
'OTHER*
OTHER*
•m 1
•
-
--
«
r ^
~~
20
*
K*
.. \..
PLANT AND
t EQUIPMENT
~~
RETAINED NET
EARNINGS AND
DEPLETION
ALLOWANCES
10
""!
Hi _am
1947
1948**
1948*
SEE APPENDIX TABLE C - 3 4
ESTIMATES
8ASE0 ON INCOMPLETE
DATA
SOURCES: DEPARTMENT OF COMMERCE (ESTIMATES BASED ON SECURITIES AND
EXCHANGE COMMISSION AND OTHER FINANCIAL DATA ) .
__
«.CASH AND U.S.
SECURITIES
0
1947
NET NEW
SECURITY
ISSUES
•
888< INCREASE IN
W
INVENTORIES
to -
10
,
64
DEPRECIATION
RESERVES
•>-
business investment so large in proportion to total national income that it
is probable that investment of a lower proportion in the future will meet
our long-term peacetime needs. The general level of profits should continue to be ample so long as we are successful in maintaining high production and employment.
It should not be assumed, however, that financial resources will be adequate for all types of business, or that a higher share of equity investment
would not be desirable. Difficulties arise, particularly, for small and new
business enterprises, which often find it difficult to obtain long-term bank
loans and practically impossible to secure outside equity capital. It is
undoubtedly true that certain features of our tax system bear particularly
on equity financing. When a reduction in taxes becomes possible, the tax
system should be revised to strike the best balance between the objectives of
maintaining adequate consumer markets and of providing capital of the
needed character in adequate amounts.
Important also are the long-range changes that have taken place in the
distribution of income and in the saving habits of the people. Economic
policy should recognize that the bulk of saving will come from people in
the middle income brackets, who are rightly more concerned with the safety
of their investment than with gains that involve high risks. This calls for
financial institutions that transform these savings into venture capital.
Study should be made of the experience of Nation-wide or local investment companies which can extend venture capital with diversification
of risks. The possibilities of developing other types of organization which
could effectively channel private savings into venturesome fields of investment and the extent to which the Government can promote them require
thorough exploration. Also, the legal and economic problems of investment
of insurance reserves require continuing study in the light of the change in
saving habits of the people and the changing demand for industry financing.
The Council of Economic Advisers will continue its work upon these
problems.
Promoting competition
The problem of achieving a steady rate of growth of our economy is intimately bound up with the way the price mechanism operates. If it operates
so as to promote balance among prices, wages, and profits, the role which
Government will be called upon to play in seeking to maintain high levels
of employment is thereby reduced. A healthy competition among sellers
is an indispensable prerequisite for the proper functioning of the price mechanism in promoting a balanced growth in the rates of consumption and
investment.
In this connection, the role of the antitrust policy is of fundamental importance. It is designed to hold in check private monopolistic control, to
encourage the competitive forces which induce improvement and expansion,
and to maintain freedom of entry for new and enterprising firms. The im-
65
portance of strengthening the antitrust laws has been repeatedly emphasized
in earlier Economic Reports.
Healthy competition, however, cannot be kept adequately in play simply
by legal prohibitions. It must rest upon the attitudes and motivation of
business managements. If they were generally to prefer monopoly to competition, restrictionism to expansion, high profit margins on low production to
lower profit margins on high production, security to innovation, then the
essential basis of the private enterprise economy could be undermined.
Whether competition is effective now lies substantially within the control of business itself. In highly concentrated industries, there is a choice
between two roads to profits. One lies in the direction of exploring all
avenues of reducing costs and prices and expanding sales, the other in the
direction of exploring all avenues of avoiding price competition with one's
rivals. The latter, if dominant, could greatly retard growth even though
held short of practices and agreements in violation of the antitrust laws.
If the Government uses the fiscal and other powers at its disposal to moderate the swings in general business activity, effective competition should
keep cost-price margins down to the levels of reasonable necessity and adjust
capacities to the expectation of greater stability. The extent to which this
effective competition in large-scale industry is forthcoming will do much
to determine what kind and degree of Government action will be needed to
promote economic stability and growth.
Agricultural growth
Our production goals require not only continued expansion of total agricultural output but also particular adjustments to the anticipated domestic
and foreign demand pattern for foods and other farm products. In addition,
shifts in types of output and in farming practices are needed to sustain the
fertility of our land. Increased agricultural investment, both public and
private, is needed in order to support these changes and to make the most
efficient use of our labor.
Achievement of these goals will require rapid advancement of farm technology and its practical application. This means emphasis on research,
education, and other programs to aid farmers in carrying out shifts in production and management practices. These programs should include special
technical assistance and adequate credit facilities.
Long-term programs for supporting farm prices and incomes, because of
their immediacy, are discussed somewhat more fully in Part II of this report.
The long-run downward trend in the proportion of our total labor force
needed for farm production requirements will continue. It is essential to
broaden the educational opportunities for farm children, and to plan
vocational training that will help a part of the farm population to qualify
for profitable off-farm pursuits.
It is one of the unfortunate but salient phenomena of our economy that
countless families have incomes too low to maintain adequate diets even in
66
periods of high prosperity; and all too frequently these families have suffered even more than others when prosperity has tapered off or disappeared.
While better training for earning higher incomes should be the main approach to this problem, we know realistically that it creates a vicious circle
to wait for families to improve their own lot while depriving them of the
food, housing, education, and medical care which must be at the foundation
of this improvement. Our national nutrition program should be further
developed.
CONSERVING AND DEVELOPING THE NATION'S RESOURCES
Continuing heavy demands for national security and foreign aid following
the war place a heavy drain on many natural resources while at the same
time requiring some reduction and deferment of essential programs for their
conservation and development. Yet the requirements of a high-level economy for agricultural and forest products, oil, minerals, electric power, and
other basic materials can be met only by early action. This calls for a
careful screening process, selecting the most urgent and productive projects
for development now, and pushing ahead with preparatory work for others.
We must re-examine our development programs in such fields as reclamation,
and assess them in terms of our national production objectives and of alternative means for achieving the same results. There is danger in doing too
much now; there would equally be danger in a penny wise but pound foolish
policy that weakened our native strength.
Water resources and power
A number of programs and projects are now being undertaken, particularly in the West, for controlling and using water for various purposes,
including irrigation, navigation, flood control, hydroelectric power, and
industrial and municipal use. Some of these programs require re-examination in a broad perspective to determine which essential aspects, such as
hydroelectric power development, should be pressed forward with great
speed, and which may be postponed.
The desirable annual increase of 3 percent in the output of the economy
is not likely to be achieved without a considerably greater increase in electric
power. It has been indicated that facilities able to produce 6 million kilowatts of electric power should be added annually to our capacity. Perhaps
30 percent of this might be furnished most efficiently through public hydroelectric power developments, at an average annual cost in the neighborhood
of 800 million dollars, including programs for which the Federal Government has direct responsibility. It is essential that public power programs
be expanded in the coming year, including construction of transmission lines
where needed, even where this requires temporary allocation of scarce
materials for construction of dams and generators. Hydroelectric power
tends to be lower cost power; it economizes irreplaceable mineral fuels.
Land resources
While much progress has been made in the conservation and efficient use
of our existing farm land through education, cooperation, and the efforts
of individual farmers, much remains to be done. One quarter of our cropland is being damaged at a rapid rate by erosion and other causes, and should
be placed under sound conservation practices within the next ten years.
Our conservation program must be intensified. We should add substantially
to our land resources through drainage and irrigation, while some land now
being farmed should be returned to grass and timber.
We should make clear to all that public range lands, which comprise 40
percent of all range land in the West, will be protected, and that grazing
shall not exceed the sustainable carrying capacity of the range with allowance for other possible uses. We should plan to spend increasing amounts
for conserving and restoring those lands. Additional credit should be
released for long-range soil conservation.
Production of concentrated fertilizer from western phosphate deposits
should be developed further as part of a program to increase agricultural
output.
Forests
There has been no measurable improvement during the past year in our
timber prospects. The saw timber cut still far exceeds annual growth. The
depletion of our remaining supply, especially in small, privately owned
forest properties, is proceeding so rapidly that immediate consideration
should be given to legislation for regulation of forest practices. Unless much
more rapid progress is made along lines of improved private practices or
State legislation for the control of cutting practices, national interest and
security will require Federal-State action. As in the case of soil conservation, improved long-term credit would be helpful. Other forest conservation
should be strengthened. Our depleted forest resources should be rebuilt to
meet fully our needs on a sustained-yield basis.
Petroleum and other minerals
In terms of production objectives and national security, and in the light
of the continuing shortages of domestic supply relative to demand, new
sources and substitutes for petroleum and scarce minerals are needed. A
synthetic liquid fuels program now offers the best hope for relieving the
mounting pressure on our limited supply of natural petroleum. Under
present Federal programs about 10 million dollars annually will be spent
during the next few years, not including any additional funds that may be
provided to assist in the construction of plants of commercial size. The
development of tidelands oil reserves should be so regulated that waste is
eliminated as far as possible. Programs for a continuous appraisal of our
68
minerals position, geologic exploration and mapping and research on utilization of submarginal mineral deposits and substitutes, should be expanded
as one element of a larger program emphasizing basic scientific research.
The cost of expanding these research and study programs would be about
25 million dollars a year.
The need for program review
If properly directed, this improvement in the utilization of our land,
forest, water, mineral, and other basic resources will yield a rich national
dividend. To a large extent these programs will pay for themselves through
the sale of electricity, through repayments by farmers for use of water and,
indirectly, through increased productivity, stable communities, and higher
tax revenues. It is imperative that utmost care be taken in planning these
huge investments in all phases of program formulation, timing of
construction, and operation.
A large number of Government departments and agencies and private
organizations are involved in the planning and execution of these programs.
Several congressional committees are concerned with closely related aspects
of the same program. Among the Federal agencies concerned there is much
overlapping of legislative authority and many contradictions in financing
procedures, administrative methods, and water-use policies. A new approach is needed to assure a program of national resources development that
is geared into the economic needs and potentialities of the country.
One of the reasons for establishment of annually revised production goals
is the need for benchmarks which may be used in the appraisal of long-range
Government investment programs. The irrigation of land, the production
of power and navigation facilities, programs for the conservation and development of mineral resources, and the like, must be examined in the light
of production needs for industrial and agricultural products, for energy,
and for transportation. The present time, during which the less urgent
aspects of these programs can proceed only at a slow pace, should be used
for a thorough re-examination of the consistency of the programs with our
national objectives, of future benefits related to present costs, of comparative
urgency and usefulness of various programs, and of the best methods of
procedure and organization.
In advancing a unified program for the development of water, agriculture,
forests, and other resources and in promoting social and economic welfare
in a large region, we can learn much from the successful experiment in the
Tennessee Valley. Experience has shown that an authority of this type can
coordinate effectively a variety of programs and cooperate with States and
localities and with private individuals and groups.
The same methods may or may not be applicable to the development of
other river valleys. The programs in the Missouri River and Columbia
River and other river basins should be examined in order to perfect coordinated development plans.
69
Housing
The problem of housing involves an almost unique complex of inseparable
economic and social considerations. Housing is both a prime outlet for
capital investment and a prime consumer satisfaction. It looms so large
in the investment picture that a large and sustained volume is essential for
maximum employment and production; in the latter frame of reference a
large and sustained volume is essential for the conservation of human resources and the well-being and contentment of the individual. In an increasingly urban population, housing is at the center of the network of developCHART
16.
NEW HOUSING STARTS
Starts have been declining since spring, and in recent months
have been running below the 1947 rate.
THOUSANDS OF UNITS
THOUSANDS OF UNITS
125
125
NEW NONFARM DWELLING UNITS
100
75
100
^
J
—
75
\
50
50
25
0
—
-
I
I
I
I
1
!
1
1
1
25
I
SOURCE: DEPARTMENT OF LABOR.
ments that range out over the city—stores, schools, hospitals, factories,
transportation. It figures largely in community revenues and costs.
And yet, our housing supply has lagged behind the rise in our general
standards of living, and far behind our real capacities. Slums corrode our
cities and shacks blot our rural landscape. Even in prosperous times, for
example between 1922 and 1929, residential production was unstable, and
when the depression came it sank to about 10 percent of "normal." After
1932, despite extensive public and private efforts, the industry revived more
slowly than almost any other important activity.
In the postwar period, within the short space of three years, we have
70
already witnessed a substantial expansion in home building, which cut into
the acute shortage but has served the population very unevenly. Starts
have commenced recently to decline. This decline has been taking place,
not because of shortages of manpower or materials, not because the housing
needs of the country have been met, and not because "backlogs" in any
real sense have disappeared. It is occurring because the housing product,
more conspicuously than any other, has priced itself out of any reasonably
defined market. This is not a mere inflationary phenomenon, but rather
the resumption of a long prewar trend. It reflects the technological backwardness of the housing industry and a host of related conditions such as
land use and local taxation.
Analyses based on the assumption of continued full employment and high
national income indicate that our housing needs cannot even be approached
without a comprehensive program. Against an estimated annual need of a
million or more new dwelling units in urban areas for a 10-year period,
analysis shows that perhaps one-fifth or more can be provided at workable
rent-income relationships only through subsidized low-rent housing. A
very substantial part of the balance of the need will require large-scale
private institutional investment quite different in its nature from the smallscale home building that has typified the industry.
Most of the houses built since the war, high in price, have either served
the needs of the high income groups, or, with the aid of very high public
guarantees to private investors, have been sold to people of low or moderate
means at costs which might involve losses both to them and to the Government in the long run. About 80 percent of the housing now being built
is for sale, although veterans and others with families of uncertain future
size and jobs of uncertain tenure would much prefer to rent. And now
the decline in starts has set in, before achieving even for one year a rate
of new construction as high as the estimated annual need for ten years.
Vigorous efforts to reduce housing costs are an essential part of a longrange program, but cannot be expected to produce prompt enough results
to meet pressing current needs. Such efforts should recognize that a large
and assured volume is the best foundation for achieving economy in production, or for working out changes in hourly wage rates consistent with fair
annual earnings and reasonable security for the workers involved.
Enactment of the remaining portions of the comprehensive housing program already before the Congress would be a starting operation toward the
more effective solution of the housing problem. It would provide facilities
for research and better community planning directed toward lower costs;
it would aid in the assembly of land areas suitable for redevelopment; it
would provide a modest flow of rental housing for families of low and
moderate income in urban areas; and it would directly tackle the insufficiency and inadequacy of rural housing.
But these proposals are inadequate. For example, the provision of
1005000 units a year of low-rent housing in urban areas should be substantially increased. If this were accompanied by a more rigorous screening
of Federal aid in the form of insurance or guarantees for high-priced housing, it would not lead to a higher total volume than should be undertaken
immediately in view of competing demands upon the economy* In fact,
less materials per house would be used, and the composition of house
production would be more in accord with sustainable patterns for the future.
The increase in the Federal financial burden imposed by a more adequate
program would be moderate. While every additional dollar in the Budget
makes it larger, the inflationary impact should be measured by the effect on
the housing industry as a whole. The amount of housing generated by this
expanded program would absorb less critical materials and manpower than
an equal number of units built for the higher-priced trade.
Human resources
The end objective of our economic and political system is to provide the
individual with the means for a high standard of living and with wider
opportunities for cultural pursuits. These aims will be furthered by the
dedication of more of our resources to education, to health, to housing, and
to the enrichment of the whole physical environment—both urban and
rural—in which people live and work and play. The specific programs
directed toward these ends, and their intimate relationships to a healthy
economic structure, have been identified in the Economic Report of the
President last year and in subsequent messages. It is therefore unnecessary
to spell them out in detail again here. But this does not imply any abatement of interest on the part of the Council of Economic Advisers in their
fulfillment. As our continuing studies shed more light upon how these programs may be even more closely integrated with the maintenance of a high
level of economic activity, or how improvement in them may have general
economic significance, we shall treat of them again.
INTERNATIONAL ECONOMIC RELATIONS
Balanced economic growth will require large increases in our imports of
raw materials and many other goods and services. Our own interests require that we concentrate domestic productive efforts in those fields where
we can produce most efficiently and not draw down our reserves of exhaustible resources unduly. We need large imports to strengthen our conservation policy and increase the stock piles of critical materials; our imports also
provide exchange to purchasers of our exports.
The main lines of international economic policy for balanced economic
growth have already been laid out, and great progress has been made in
implementing them. The initiation of the European Recovery Program was
the main additional step taken during 1948 in pursuit of the goal of world
recovery and reconstruction. Further progress was also made toward
creating conditions for the post-recovery exgansion of world trade on a
72
nondiscriminatory and multilateral basis. The proposed charter for an
International Trade Organization was accepted, after difficult negotiations,
by 54 countries; and the General Agreement on Tariffs and Trade came
into effect. These measures are important steps in the direction of reducing
the barriers to world trade.
Another aspect in the development of international economic policy is
the better coordination of our international trade policies with policies in
certain other areas of the economy. The present situation of prosperity
at home and of extensive American participation in economic affairs abroad
offers a favorable opportunity for progress in this field.
Conflicts between our foreign and domestic programs lie less in general
policy than in specific actions. The most serious of these arise out of
programs designed to protect domestic producers of specific commodities.
While these conflicts tend to be submerged in periods of intense demand and
inflationary pressure, they may be expected to appear in acute form when
some markets ease. The best time to resolve these conflicts is now.
The basic approach in readjusting these domestic programs to our international policy should be similar to that involved in the improvement of
farm price support policies: namely, to provide the necessary degree of
domestic support in periods when it may be needed, but at the same time to
encourage adjustment of production in line with the basic supply and
demand conditions throughout the world. Existing programs adopted to
protect less productive industries indefinitely not only are contrary to our
basic international policy, but also impede our efforts at home to make full
and efficient use of our resources. They are a hangover from a period of
fear of inadequate market and employment opportunities.
Even with the maximum feasible level of imports, substantial foreign
investment will be needed to maintain a level of exports sufficiently high to
avoid a painful readjustment in certain areas of domestic agricultural and
industrial production. Furthermore, such investment will probably be
requisite if Western Europe is to relax its restrictive policies and still balance
its international payments at a high level after the European Recovery
Program is over.
In the international field, the inseparability of economic and political
objectives is particularly apparent; and it is not only in Western Europe
that our economic policy must serve a dual purpose. Major areas of the
world have emerged from the prewar and war years with a determination
to develop their own economic resources by improving their industrial and
agricultural equipment. This determination reflects a basic popular aspiration on the part of hundreds of millions throughout the world towards higher
standards of living and economic progress after centuries of grinding
poverty. The United States cannot maintain its world position of moral
prestige and political leadership unless it positively supports those
aspirations.
23
Our abundant stock of capital and large savings enable us to do this
by making both capital goods and our knowledge of technology and
production methods available abroad. This function is now being performed in a small degree by private capital, either directly or through the
International Bank for Reconstruction and Development. It is to be hoped
that it can be done more fully by private capital rather than Government
aid as foreign countries bent on capital development give reasonable assurance of safety to private investors. This they must do if they wish to secure
capital in large amounts.
FROM INFLATION TO STABILITY
Stabilization policy for the immediate future is still concerned mainly
with restraining inflationary forces, breaking bottlenecks, and selectively adjusting the markets and prices of some commodities. Yet this report has
designated some basic longer run maladjustments concealed under cover of
the inflationary boom. Since the war, increases in consumption have been
limited by the very high demands of business for reconversion and modernization after the war, and by requirements for national defense and foreign
aid. Our analysis shows that over the ensuing years consumer income and
expenditure should be increased both absolutely and relatively.
The fundamental issue is: Will this increase result automatically through
the interplay of prices and costs in the market place? Or will a depression
appear when the gap between potential output and effective demand of
consumers and business becomes unmanageable as has happened in the
past? Or can affirmative policies, as envisaged in the Employment Act,
close or bridge this gap before it becomes a chasm?
Fundamental strength of the economy
It is true that the economy today is in much better position to withstand
shock than in the twenties. Business has become better informed and more
prudent, particularly in its inventory policies. There has been less speculation generally. The so-called "built-in flexibilities", such as the social
security system, veterans' programs, and the farm price-support program
would all have a cushioning effect in case of a downswing. In general,
large Government budgets make an economy more resistant to shock, and on
the revenue side the progressive income tax increases flexibility. War-created liquid assets, in the hands of business, State and local governments, and
individuals could act as an immediate shock absorber even though their real
value has been reduced by inflation. Federal deposit insurance would
operate against large-scale withdrawals of funds such as occurred during
the last depression, and the Reconstruction Finance Corporation could exert
some mitigating influence. Finally, with a tight labor market, more breadwinners per family, and more progressive taxation, the distribution of income has improved since the prewar period, although these gains have been
halted by inflation,
74
Vulnerability of the economy
These improvements, however, probably do not outweigh the fact that a
very high-level economy, which has been supported by an investment boom
and permeated with inflation, is vulnerable to sharp declines. Moreover, in
terms of the basic problems of lifting consumption to higher levels in the
years ahead, we cannot rely on a simple reversal of the inflationary process
with its accompanying lag in consumption. When price weakness becomes
widespread, businessmen tend to become pessimistic and often curtail investment and production; consumer purchases are deferred. The stickiness
of many prices enhances the shrinking of production as demand falls off.
Consumers' real incomes are cut by unemployment more quickly than they
gain by price declines. The slack thus develops into a downward spiral.
Preventive measures
More important than the preparation of measures to combat a depression
after its advent, are those measures which reduce the likelihood of a serious
downturn in the economy by correcting maladjustments in time.
The long-term problem of a shift in the balance between investment and
consumption depends for its solution largely upon an improved working of
the market mechanism. Adjustments in prices and in wages, or some combination of the two, are the primary tools. In general, these adjustments
entail an upward movement of wages relative to prices. But these adjustments require the drawing of some very delicate lines. It is not easy to
determine the exact point at which price decreases which increase sales
become price decreases which impair business confidence or income and thus
reduce production. It is not easy to determine the exact point at which
wage increases which add to purchasing power become deflationary because
they add too much to costs. It is difficult through the market mechanism
alone to solve the problem of timing, to determine just when the shifts in
the composition of national income and spending should be encouraged
without being either excessively inflationary or excessively deflationary.
Furthermore, these shifts involve the interests of powerful organized groups
and also involve competing social priorities or values, so that agreements
are frequently not easy to reach.
The problem of inflation is not limited to the peculiar conditions of the
"postwar boom." There is a continuing possibility of increases in prices
and wages in an economy sustained at high levels of activity. Here lies a
problem of long-range wage and price policies that must be solved within the
context of general labor-management relations. The important organized
groups within the economy, such as business, labor and agriculture, need
both the economic analysis and the practical machinery which will enable
them better to harmonize their separate interests with the common good
and to compose even if not completely agree upon those matters which
from a narrower perspective might seem irreconcilable. The work under
75
the Employment Act of 1946, boldly conceived and faithfully exercised, can
help to improve the economic analysis and to stimulate the cooperation
required for this central aspect of stabilization in a free enterprise
democracy.
Experience teaches that Government policies are also necessary. One
type of public policy, the expansion of social security programs, is particularly
appropriate now because it would strengthen mass purchasing power and
markets in the long run, while contributing immediately to the restraint
of inflationary pressures. By increasing the coverage and benefits of unemployment and old age insurance, by introducing disability and health insurance, and by providing more adequate public assistance, we would thus contribute towards that reconciliation of immediate and longer-run needs which
is so difficult to achieve through the market mechanism.
To have the optimum immediate anti-inflationary effect, payroll taxes
should be increased by more than the increase in benefit payments. To
have the optimum long-range stabilizing effect, the expansion of these programs should not be financed exclusively by payroll taxes. It should draw
some support in future years from general budget sources.
A minimum wage realistically adjusted to present price levels also helps
to maintain a floor under wage incomes.
Future tax revisions should also take account of the need to strengthen
consumer markets, even while they should not neglect the need for stimulating investments, especially in areas which offer both great rewards and
heavy risks.
These social security programs, minimum wage laws, and tax revisions
are recommended on the ground of social objectives. These same programs,
however, have an important economic impact and may help to maintain or
increase the purchasing power of a considerable sector of the people.
Balanced growth. The upward adjustment of consumer incomes relatively to prices will be essential in the future to establish sustainable patterns of balanced economic growth. It is important that these adjustments
be made. But we cannot be sure that these adjustments alone will insure an
increase in consumption and the maintenance of a high level of activity.
Decreases in prices or increases in costs may lead to a recession if they occur
at a time when markets are weak and aggregate demand is shrinking.
Therefore it is essential that, during threatening times, adequate support be
given to demand while fundamental adjustments are going on.
Such support may be provided by stepping up these basic governmental
programs which are essential to economic growth. At times it may become
necessary to supplement these programs by specific measures to insure
stability. Without adjustments in the price-wage-profit relationship, we
shall not be able to place the economy on a basis of continuing stability.
Without the simultaneous adoption of policies designed to promote economic
growth, we may not safely rely on the adjustments. It is necessary to
combine measures that promote growth with those that support stability
in an integrated program.
We should adapt our policies accordingly. In schools, housing, health
and community facilities, resource development and conservation, transportation and other fields, there are enormous discrepancies between the
work now being done and the needs of a growing economy. Advance
planning on all these fronts should go forward in larger magnitudes than
present programs can be pushed. With careful timing, these programs
should be stepped up sufficiently so that adjustments in costs, prices and
profits can be made on a strong underpinning which prevents adjustments
from turning into a downswing.
77
Appendix A
The Nation's Economic Budget
Tables
A-l.
A-2.
A-3.
A-4.
A-5.
A-6.
The Nation's Economic Budget, 1947 and 1948
Consumer account, 1947 and 1948
Business account, 1947 and 1948
International account, 1947 and 1948
Government account, 1947 and 1948
Federal cash receipts from the public other than borrowing,
and Federal cash surplus or deficit, 1947, 1948,1949
A-7. Federal cash payments by function, 1947, 1948, 1949
A-8. Federal cash payments by type of recipient, 1947, 1948,
1949
A-9. Reconciliation of Budget receipts with Cash Receipts from
the Public, 1948
A—10. Reconciliation of Budget payments with Cash Payments to
the Public, 1948
79
Page
82
84
84
85
86
87
87
88
89
90
The Nation's Economic Budget
The Nation's Economic Budget is designed to show significant changes
in the economy as indicated by the receipts and expenditures of consumers,
business, and government, and by international transactions. The net additions to and absorption of saving of these groups are also shown in the
Budget. The total of the Nation's Economic Budget measures the gross
national product, i. e., total current production of goods and services.
On the receipts side the total consists of wages and salaries, retained
business earnings, and other incomes relating to current production, and
on the expenditure side of purchases of current output.
Besides expenditures for current output and the corresponding receipts
there are transfers of purchasing power, such as government payments to
social security beneficiaries and veterans' pensions. While governmental
transfers are not derived from current production, as a source of purchasing
power they do not differ from any of the payments that are so derived.
They have an important bearing on production and prices and are included
in the Nation's Economic Budget. Omitting transfers from government
accounts would understate the size and impact of government budgets on
incomes and expenditures of consumers, business and foreign trade. In an
economic analysis, transactions directly related to current production and
governmental transfers must both be taken into consideration.
In the presentation of the Nation's Economic Budget in previous economic
reports, transfers were accordingly included with the other governmental
transactions on the expenditure side, and the receipt of such transfers in
total receipts of consumers. The sum of receipts and expenditures, including both transfers and transactions related to current production, is, of
course, in excess of the gross national product. In order to reconcile with
the gross national product, which is the magnitude used to measure economic activity, an adjustment was made to deduct the transfer items. This
large adjustment item gave rise to many questions.
In the present revised presentation of the Nation's Economic Budget an
attempt has been made to limit the "adjustment" item to corrections of a
statistical character. Government transfers are shown separately from expenditures for goods and services in the government expenditure account
and also shown as separate items of receipts in the accounts of consumers,
business, and foreign countries and international organizations. These
transfer items and subtotals including transfer items are shown in italics,
while the flows relating to current production are shown in roman type.
80
Only the latter figures are added to arrive at the total. This total then
needs no major adjustments to make it equal to the gross national product.
Since the transfers of the government augment the income of consumers,
business, or foreign countries, the transfer expenditures and receipts are
conceptually equal. The small discrepancy between the totals is due to
statistical problems of measurement. (See note to line 22 of table A-l.)
Tables A-2 through A-5 contain the accounts of consumers, business,
international transactions, and the government. They indicate how the
receipts and expenditures in each account have been derived, and present
some break-down of the totals where this has been feasible. Some textual
explanatory material relating to the consumer, business, and international
accounts may be found in the Midyear Economic Report of the President of
July 1948. Table V, the government account, is new in its present form.
It shows the reconciliation between taxes estimated on a payment or a
liability basis (personal and indirect business tax payments, liabilities on
corporate income) and cash receipts from the public, and between expenditures for goods and services and cash payments to the public. (Table
A-5 takes the place of tables 5, 12, 13, and 14 of appendix A in the Midyear
Economic Report, July 1948.)
Following the government account, table A-5, there are three supplementary tables on Federal cash receipts and payments. These tables show
(a) Federal cash receipts by major tax sources, (b) Federal cash payments
by major governmental function, and (c) payments according to the type
of recipient who initially receives the payment, whether consumers, business, foreign countries, or State and local governments. (Tables A-6,
A-7, and A-8.) These tables are designed to give an insight into the impact
of the government on the economy. To aid in analysis, advance estimates
are given for calendar 1949 in addition to actual data for 1947 and late
estimates for 1948. The 1949 estimates of payments are based on the
President's program and are consistent with the proposed Budget of the
United States for fiscal 1950. The estimates of tax receipts, however, are
based in general on present tax legislation.
Tables A-9 and A-10 show the reconciliation of Budget receipts with cash
receipts from the public, and Budget expenditures with cash payments to
the public. A brief explanation of these reconciliations is contained in the
Midyear Economic Report, page 56.
8i
TABLE A - l . — The Nation's Economic Budget, Calendar years 1947 and 1948
[Billions of dollars, annual rates, seasonally adjusted]
1948, First half
1947
Item
No.
Economic group
Receipts Expenditures
14
15
CONSUMERS
Disposable income relating to current production
Government transfer payments and net interest
Disposable personal income
Expenditures for goods and services
. .
Personal saving.
BUSINESS
Retained business receipts from current production
Government transfers
__
. ._.
__. _
Total receipts
_ _
Gross private domestic investment.
Excess of receipts (+) or investment (—)
_
INTERNATIONAL
Net cash government loan transfers abroad _
Net foreign investment
Excess of investment (—)
G O V E R N M E N T (Federal, State, and local)
Tax payments or liabilities
__ __
Adjustment to cash basis __ __
_
16
17
18
Cash receipts from the public
Purchases of goods and services..
Government transfers
_
19
20
21
22
Cash payments to the public
_
Excess of receipts (+) or payments (—)
ADJUSTMENTS
For receipts relating to gross national product.Other adjustments
23
Total: gross national product
1
2
3
4
5
6
7
8
9
10
11
12
13
_
158.1
15.5
173.6
19.0
.3
19.4
5 4
(+)or
deficit
186.2
164.8
30.0
8.9
+8.8
22.3
.8
23.0
—10.7
Excess of
receipts
(+)or
deficit
1.6
59.0
2.8
61.9
231.6
(+)or
deficit
179.2
+11.9
+15.4
25.6
.3
25.9
39.5
-13.6
-.1
3.3
.2
—1.7
-.3
59.5
—2.2
57. S
31.8
18.0
247.6
0.0
38.8
15.6
54.4
+12 0
-4.6
-2.4
-4.6
—2 4
247.6
Excess of
receipts
180.0
14.6
194.6
38.2
49.8
+6 ?
-2.9
+1 5
0.0
174.3
Receipts Expenditures
—15.2
—3.5
28.0
22.7
50.7
-2.9
+1 5
231.6
Receipts Expenditures
170.8
15.4
57.4
—. 1
57.3
_
Excess of
receipts
1948, Second half i
-7.1
+2,8
257.8
257.8
+2.8
-7.1
+2.8
0.0
1
Estimates based on incomplete data.
NOTE.—Items relating to current production of goods and services are shown in roman type. Transfer payments and receipts and subtotals including them are in
italics; they are not included in the gross national product.
Detail will not necessarily add to totals because of rounding.
Sources:
This table is based on the national income and product statistics of the Department of Commerce and Federal cash receipts from and payments to the public as
estimated by the Bureau of the Budget. Estimates for the last half of the year have been prepared especially for the Council of Economic Advisers by these agencies
and are based on incomplete data. A number of the principal series comprised in the income and product estimates are shown in appendix C, tables C-l through C-6.
Those desiring more detailed information may refer to the National Income Supplement to the Survey of Current Business, July 1947, and to the Survey of Current Business,
July and November 1948.
Explanatory notes:
Lines 1-5: See Table A-2, Consumer Account
Lines 6-10: See Table A-3, Business Account
Lines 11-13: See Table A-4, International Account
Lines 14-20: See Table A-5, Government Account
Line 21: Includes the statistical discrepancy and the current surplus of government enterprises. The statistical discrepancy represents the difference between two
independent estimates of gross national product, one arrived at by estimating the income received from current output and one by estimating expenditures for this output.
The adjustment for statistical discrepancy brings the estimate on the receipts side into agreement with that on the expenditure side of the accounts. The discrepancy
for 1947 was 3.4 billion dollars, and for thefirstand second half of 1948, 5.2 and 7.1 billion, at annual rates, respectively. The current surplus of government enterprises
must be added to receipts because it has not been included in the income of any sector although it represents income arising from the current production of goods
and services.
Line 22: An adjustment is necessary to balance the sum of the transfers on the receipts side with that on the payment side because of the fact that somewhat different
bases for measurement have been used in estimating various components of receipts and payments. Most of the discrepancies reduce to a difference in timing between
the recording of a receipt and a payment. A correction must be made for the difference between the time a tax liability is incurred or payments are made and the time
a receipt is recorded by the government. Payment is sometimes made for goods produced in a previous period, interest payments on a cash basis differ from the accrued
interest shown under consumer receipts, etc.
T A B L E A—2.—Consumer account
Calendar years 1947 and 1948
[Billions of dollars]
1948 annual
rates, seasonally
adjusted
Receipts or expenditures
1947
First
half
Receipts:
Personal income arising from current production of goods and services:
Salaries, wages, and other labor income
Proprietors' and rental income
_
_
Dividends and private interest
_
_
Business transfer payments
_._
Total
Plus: Net interest paid by Government
Other Government transfer payments
Equals: Total personal income
Less: Personal tax and nontax payments—
Equals: Disposable income
Expenditures:
Durable goods
Nondurable goods
Services
_
Total
Saving
_
Second
half i
121.9
46.0
11.2
.6
179.7
4.4
11.1
195.2
21.6
173.6
129.0
51.2
12.0
.6
192.8
4.6
10.8
208.2
22.0
186.2
136.6
50.3
12.8
.6
200.3
4.8
9.8
214.8
20.3
194.6
21.0
96.5
47.3
21.9
102.2
50.2
23.6
103.2
52.4
164.8
174.3
179.2
8.8
11.9
15.4
i Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
TABLE A—3.—Business account
Calendar years 1947 and 1948
[Billions of dollars]
1948 annual rates,
seasonally adjusted
1947
Receipts or investment
First
half
Receipts:
From current production of goods
and services:
Corporate profits before tax 2
Less: Corporate profits tax liabilities 3 .
Dividends
E quals: C orporate undivided profits
Plus: Capital consumption allowances
Less: Corporate inventory valuation adjustment
Subsidy payments to business by Government
Total
Plus: Government transfers 8
Subsidies
_
Capital transactions
Equals: Retained earnings and additions to reserves
Domestic gross investment:
Construction
.._ .
Residential, nonfann
Nonresidential
Producers'durable equipment
Change in inventories
Total
.
Excess of receipts (+) or investment (—) .
(4)
.
_
__
19.4
32.4
12.6
73
12.5
14.2
3.9
.5
22 3
.8
.5
.3
23.0
35.5
13.8
7.9
13.8
14.7
2.7
.2
25.6
.3
.2
.1
25.9
11.7
5.2
6.5
17.8
.6
14.4
7.0
7.4
20.4
3.4
14.6
6.9
7.8
22.0
2.9
30.0
38.2
39.5
—15.2
-13.6
29.8
11.7
6.9
11.2
13.2
5.1
.4
19.0
.3
.4
_.
Second
halfi
-10.7
12 Estimates based on incomplete data.
Fourth quarter estimated by Council of Economic Advisers.
*Includes acquisition of silver and minor coin not shown separately, which was less than 50 million
dollars in each period.
< Less than 50 million dollars.
NOTE. Detail will not necessarily^add to totals because of rounding.
TABLE A-4.—International Account
Calendar years 1947 and 1948
[Billions of dollars]
1948 annual rates i
Item
1947
First half
Excess of exports of goods and services over imports
Less: Net unilateral 3transfers:
Government
.
Private
_
Equals: Net foreign investment—
Second half
11.3
7.2
5.9
1.8
.6
8.9
3.2
.6
3.3
5.1
.6
.2
Less: Government3 long-term capital:
Net loans
_
_
Subscriptions to the International Monetary Fund and
International Bank *
_
3.6
1.0
-.1
1.8
.6
.1
Excess of investment over Government long-term capital
3.5
1.7
.3
_
1
Estimates based on incomplete data.
* Based partly on shipments. Differs from international unilateral aid shown in table A-8, which is on
a cash payments basis and is not net.
* Includes only cash withdrawals under loan agreements. I t does not include noncash transactions such
as lend-lease and surplus property credits, which are included in text table 4, p. 21, under Government aid.
* Includes only cash payments on subscriptions to the International Monetary Fund and Bank. In
Appendix table C-36, figures include the total subscription, including payment in the form of noninterestbearing notes.
NOTE.—Detail will not necessarily add to totals because of rounding.
T A B L E A—5.—Government account {Federal, State, and local)
Calendar years 1947 and 1948
[Billions of dollars]
1948 annual rates,
seasonally adjusted
Receipt or expenditure
1947
First half
Receipts:
Tax and non-tax payments or liabilities: 2
Federal
State and local
.Total
Adjustment to cash basis:
Non-cash receipts 3
.
Excess of cash receipts over tax liabilities or payments 4
Equals: Cash receipts from the public
Expenditures:
Purchases of goods and services:
Federal
.
State and local
Total
Plus: Other Government payments:
Transfers to individuals
Cash interest payments to the public 5
Transfers to business 6
Loans to foreign Governments and subscriptions to the International Bank and Monetary Fund 1
All other 8
Total
Equals: Cash payments to the public.
Surplus (+) or deficit (—)
Second
half i
43.8
13.6
44.3
14.8
44.4
15.1
57.4
59.0
59.5
-1.5
+1.4
+3.9
-1.0
-1.1
—1.1
57.3
61.9
57.3
15.6
12.3
17.6
14.2
22.9
16.0
28.0
31.8
38.8
11.1
4.2
.3
10.8
4.4
.8
9.8
4.4
.3
5.4
1.7
1.6
.4
-.1
1.2
22.7
18.0
15.6
50.7
+6.7
49.8
+12.0
54.4
+2.8
44.3
13.1
47.6
14.2
42.7
14.5
38.6
12.1
35.1
14.7
38.7
15.7
ADDENDUM
Total cash receipts:
Federal
.
State and local
Total cash payments:
Federal
State and local
_
_.
.
___
_
1 Estimates based on incomplete data.
2 Personal and indirect business tax payments and corporation tax liabilities. Includes contributions for
social insurance. A breakdown of these estimates may be found for 1947 in the Survey of Current Business,
July
1948, table 8, p. 17. They have not yet been published for 1948.
3
Consists of deductions from Government employees' salaries for retirement funds, and Government
contributions
to retirement funds, national service life, and Government life insurance funds.
4
Includes excess of corporation tax receipts over liabilities and excess of personal tax receipts over payments. Cash receipts also include various miscellaneous items such as receipts from sales of surplus
property, etc.
« Does not agree with net interest paid by Government (table A-2) which is on an accrual basis.
6 See table A-3, Business Account.
? See table A-4, International Account.
s This item consists of various other Government cash payments. These payments are not shown as
receipts in the other accounts. They include miscellaneous trust account disbursements, e. g., withdrawal
of deposits made by overseas personnel; payments for goods and services produced in earlier periods; checks
which have been issued but not paid (clearing account for outstanding checks); and net payments by Government business enterprises for purposes other than capital formation. In addition, an adjustment is
made for noncash purchases of goods and services and for surplus property sales.
NOTE.—Detail will not necessarily add to totals because of rounding.
86
T A B L E A-6.—Federal receipts from the public other than borrowing and Federal cash surplus
Calendar years 1947,1948, and 1949
[Billions of dollars]
1947
actual
Item
1948 annual rates, seasonally adjusted
First half Second half
actual
preliminary
Federal cash receipts from the public:
Direct taxes on individuals 1
Direct taxes on corporations
Employment taxes
Excises and customs
Surplus property receipts
Deposits by States, unemployment insurance.
Veterans' life insurance premiums
Other
Less: refunds of receipts
21.0
9.1
2.2
7.7
3.1
1.1
.5
2.1
2.6
22.8
11.3
2.4
7.8
Total cash receipts
Federal cash payments to the public
Federal cash surplus (+) or deficit (—)
1949
estimate
.4
3.2
2.2
19.0
11.3
2.5
8.1
.3
1.1
.4
2.3
2.2
19.8
2 11.9
3 3.2
8.2
.6
.9
.5
1.4
2.7
44.3
38.6
47.6
35.1
42.7
38.7
4
+5.7
+12.5
+4.0
43.7
44. 3
1
2
Includes personal income taxes and estate and gift taxes.
Based on present legislation.
3 Assumes change in method of collections to speed up the payment of liabilities. Includes $400 million
under proposed legislation advancing the statutory increase in pay-roll taxes from January 1,1950, to July
1,1949.
4
Based on present and proposed legislation.
NOTE.—Figures in this table differ from previously published estimates for the same periods because
refunds of receipts are now deducted from gross receipts rather than included as a cash payment. This
represents a conceptual revision in the concepts of cash receipts from the public and payments to the public.
NOTE.—Detail will not necessarily add to totals because of rounding.
T A B L E A—7.—Federal cash payments to the public by function
Calendar years 1947,1948 and 1949
[Billions of dollars]
1948 annual rates, seasonally adjusted
1947
actual
Function
National defense..
International affairs and finance
Veterans'services and benefits
Social welfare, health, and security
Agriculture and agricultural resources
Interest on the public debt
Other
_
Deduction from Federal employees' salaries for retirement
Clearing account for outstanding checks and telegraphic reports
Adjustment to daily Treasury statement
Total payments to the public.
1
_
1949
estimate *
First half
actual
Second half
preliminary
12.7
7.6
6.8
2.1
1.0
3.8
4.4
11.1
5.2
7.0
2.2
.4
3.9
5.5
11.2
6.1
6.9
2.5
2.3
3.9
6.4
13.2
8.0
8.2
2 3.2
1.5
4.0
6.6
-.2
-.2
-.3
-.4
+.2
+.2
+.2
-.4
-.2
+.1
38.6
35.1
38.7
44.3
Includes proposed legislation.
2 Includes almost $400 million under proposed legislation to extend coverage of old-age and survivors
insurance.
NOTE.—Detail will not necessarily add to totals because of rounding.
T A B L E A—8.—Federal cash payments to the public,
by type of recipient
Calendar years 1947,1948, and 1949
[Billions of dollars]
1948 annual rates, seasonally adjusted
Total
Business:
Payments for purchases of goods and services•
Subsidies and other payments to farmers
Loans and investments
Interest 4
Subsidy arising from postal deficit »
Home-mortgage purchases from financial institutions
Total
International:
Loans to foreign governments (net)
Payments to the International Monetary Fund
and International Bank
_
Unilateral
aid programs 10
Other 11
Total
State and local governments and public agencies:
Grants-in-aid
Interest on the Federal debt
Loans
«
Total
Clearing account for outstanding checks and telegraphic reports
Total Federal cash payments to the public
1949
estimate
First half,
actual
Second
half, preliminary
3.0
4.6
.3
2.7
4.4
.3
2.9
4.8
.3
3.2
4.8
.3
7.0
1.8
-.2
.8
.4
5.9
1.9
—.1
1.2
.9
5.5
1.9
-.1
1.0
.8
6.9
2.7
—.1
1.2
.4
17.7
17.1
17.1
19.4
7.4
.8
.1
2.9
.2
7.8
.1
8.4
1.9
10.1
1.2
2.7
.3
2.8
.6
2.7
.3
.1
.1
.2
.3
11.5
11.0
14.0
14.7
3.6
1.0
-.1
3
Individuals:
Salaries and wages of Federal personnel:
Military (excluding terminal-leave pay to enlisted personnel) _
Civilian i
Allowances to dependents of military personnel
Readjustment benefits,
pensions, and other payments to veterans 2
Social insurance beneficiaries
_
Loans to4 home owners 3
__
Interest
Other 5
1947
actual
1.8
1.9
.1
.6
3.3
.1
.1
6.0
.2
333
Payments to—
7.4
5.1
6.1
7.9
1.6
.1
1.7
.1
1.8
2.1
.1
.1
1.8
1.8
1.9
2.3
(7)
.2
.2
-.4
38.6
35.1
38.7
44.3
1
Civilian wages and salaries exclude pay-roll deductions for Federal employees' retirement, and Post
Office wages and salaries.
2 Also includes cash terminal-leave pay to enlisted personnel, cashing of terminal-leave bonds, musteringout
pay, and payment of Government and National Service Life Insurance benefits to veterans' beneficiaries.
3
Repayments exceed loans.
* Includes interest payments on the Federal debt, and a small amount of interest on tax refunds. Interest
figures in this table are not comparable with those in Table A-2. Interest in that table includes payments
to unincorporated business as well as to individuals and is adjusted for certain inter-account transfers.
« Consists of cash trust account payments other than payment of social insurance benefits and Government and National Service Life Insurance. Such items as repayments of personal funds of military and
civilian personnel located overseas which were deposited in trust accounts, and payments of earnings to
prisoners of war are included.
6 Excludes purchases of goods and services by Federal agencies for grants-in-aid to State and local governments and for unilateral aid programs. Such purchases are included in the international and State and local
categories to give a comprehensive total for such aid.
*8 Less than 50 million dollars.
In cash payments to the public, the Post Office is included on a net basis. The whole deficit is shown
here as a subsidy, and is included in the business category because the deficit arises primarily out of the
subsidy
to mail other than first class.
9
Not available separately.
10 Estimates are on a payments basis, while those for unilateral aid in Table A-4 are partly on a shipments
basis and are net. Includes payments from Foreign Economic Cooperation Trust Fund.
" Includes'payments for membership in international organizations, and purchases abroad for Army
programs.
NOTE.—Detail will not necessarily add to totals because of rounding.
T A B L E A-9.—Reconciliation of Budget receipts with cash receipts from the public
Calendar year 1948
[Billions of dollars]
Calendar
year
Receipts
1948*
Net budget receipts 2
Trust account receipts 3
41. 6
6.1
Total recorded receipts
47. 7
Less: Intragovernmental transactions:
Payments to U. S. Treasury by Government enterprises
.2
Transfers from general fund to trust accounts 8
1.0
Interest received by trust funds on investments in U. S. securities
.8
Receipts from sale of surplus vessels transferred to U. S. Treasury but also
recorded as a trust account receipt and expenditure
.4
Other
«>
Less: Recorded receipts not paid in cash by the public:
Deduction from Federal employees' salaries for retirement funds
.3
Other
«>
Equals: Cash receipts from the public 2
i Estimates based on incomplete data.
* Net of refunds of receipts.
8 Excludes 3 billion dollars bookkeeping transfer to Foreign Economic Cooperation trust fund.
< Less than 60 million dollars.
NOTE.—Detail will not necessarily add to totals because of rounding.
45. 2
TABLE A-10.—Reconciliation of budget expenditures with cask payments to the public
Calendar year 1948
Billions of dollars]
Calendar
year
79481
Budget expenditures 2 3
Trust account expenditures 3
35. 9
6. 4
Total recorded expenditures
Clearing account for outstanding checks and telegraphic reports
Adjusted total, recorded expenditures
Less: Intragovernmental transactions:
Payments to U. S. Treasury by Government enterprises
Transfers from general fund to trust accounts
Interest paid to trust funds on investments in U. S. securities
Investments of trust funds and Government enterprises in U. S. securities...
Receipts from surplus vessels transferred to U. S. Treasury, but also recorded
as a trust account expenditure
Other
Less: Recorded expenditures not paid out in cash:
Deduction from Federal employees' salaries for retirement funds
Interest on savings bonds (net increase in redemption value of outstanding
issues)
Terminal leave bonds issued
Plus: Cash payments not recorded as expenditures:
Redemption of excess profits tax refund bonds and adjusted service certificates
Terminal leave bonds redeemed for cash
Redemption of non-interest-bearing notes by the International Bank and
Monetary Fund
Expenditures of Government enterprises from proceeds of sales of obligations
in the market
Equals: Cash payments to the public 2
42. 3
— 0. 1
42. 2
.2
1.0
.8
2.9
.4
(*)
.3
.5
(4)
(4)
.3
.3
.1
36. 9
1
Based on incomplete data.
2
Excludes refunds of receipts.
3
Excludes bookkeeping adjustment for 3 billion dollars transfer to the Foreign Economic Cooperation
trust fund.
* Less than 50 million dollars.
NOTE.—Detail will not necessarily add to totals because of rounding.
9°
Appendix B
The Distribution of Family Income Before and
After Federal Income Tax
The distribution of income, prewar and postwar
Despite the great economic and social importance of the distribution of
personal incomes by size classes and of changes in that distribution, our
statistical data are very incomplete. The best information is for the years
1935-36, 1941, and the postwar years, but even here the statistical sources
leave much to be desired on the grounds of comprehensiveness and comparability. After adjustments have been made in these data to make them
as* comparable as possible in all respects, however, they support the thesis
that the distribution of income is now less concentrated than before the
war (table B-l).
TABLE B - l . Percent of money income received by each fifth of the Nation's families
l
Percent of total money income
Family units ranked from lowest to highest income 1
1935-36
Lowest fifth
Second fifth
Third fifth
Fourth fifth
Highest fifth
All family units
1941
1947
4.0
8.7
13.6
20.5
63.2
3.5
9.1
15.3
22.5
49.6
4.0
9.8
15.4
22.6
48.2
100.0
100.0
100.0
1
Includes single-person families.
Source: See technical notes, p. 94.
The shifts in percentage of income going to each fifth of the population
do not appear large. But because families at the lower end of the scale
have such small incomes to start with, small shifts in the distribution
represent large improvements in their relative position. The one-half
percent increase, 1941 to 1947, in the share of total income received by the
lowest fifth represented a nearly 15 percent increase in income per family
in this group. This shift in distribution accounted for over $100 of their
$800 average income in 1947.1 (See also text table 2, p. 14.)
The decline in income concentration from the depression period to the
immediate prewar and to the postwar period is most probably due to the
In appraising this average, which seems very low, it should be noted that the term
"families" includes one-person families living alone or in hotels and rooming houses.
Since the income of one-person families runs lower than for families of two or more,
single persons account for a relatively larger proportion of the lower than of upper
income groups.
91
virtual elimination of unemployment, which raised the share of income of
lower and middle groups. The increase in the number of families with more
than one earner and the relative increase in farm income are also significant
factors. Farm families' cash income is lower on the average than that of
other families, but the disparity has been narrowed in the postwar period.
From the aspect of buying power and family welfare, the distribution of
income after taxes is more important than the distribution of income
received. The trend toward less concentration is somewhat more pronounced if income after taxes rather than income before taxes is compared
from the prewar to the postwar period.
Our figures take account only of the Federal income tax. Information
on the impact of all taxes combined, sales taxes, property taxes, income
taxes, etc., at various income levels is not available for the postwar period.
The Federal individual income tax, which yields more revenue than any
other tax, is graduated and exempts low-income families. Sales and
excise taxes, which accounted for over a sixth of all tax collections in 1947,
bear more heavily than the income tax on lower bracket families, who
spend a larger percent of their income.
Table B-2 shows the share of money income going to each fifth of the
Nation's families before and after Federal individual income taxes in 1941
and 1947. The 1947 tax reduced total money income by over 10 percent
as compared to less than 5 percent in 1941. Consequently, the effect
of the 1947 tax in reducing income concentration was somewhat greater.
TABLE B—2.—Percent of money income, before and after tax, received by each fifth of the Nation's
families, ranked by size of income, 1941 and 1947 l
Percent of total money income
Family units ranked from lowest to highest income *
Before tax *
1941
Lowest fifth
Second
Third fifth
Fourth fifth
Highest fifth
All family units . _
fifth
_.
^
_
After tax *
1947
1941
1947
3.5
9.1
15.3
22.5
49.6
4.0
9.8
15.4
22.6
48.2
3.7
9.5
15.9
23.2
47.7
43
10.4
16.2
22.8
46.3
100.0
100.0
100.0
100.0
1 Includes single-person families.
Liability for the Federal personal income tax.
Source: See technical notes, p. 94.
The effect of the Federal individual income tax in the two years over the
higher range of income is shown in more detail in Table B-3, which gives
the percentage distribution of families by income levels before and after tax.
Only 10 percent of families had money incomes before tax in excess
of $7,500 per year in 1947, and one-fifth of these families were shifted
into a lower class by the effect of the tax. The proportion of families with
incomes in excess of $5,000 was also reduced by almost one-sixth.
T A B L E B—3.—Percentage distribution of families
by money income level, 7947 and 7947
1
Percent of all family units *
Money income classes
1941
Before tax
Under $500
$500-$l,000
$1,000-$1,500
$l,500-$2,000
$2,000-$3,000
$3,000-$4,000
$4,000-$5,000
$5,000-$7,500
$7,500-$10,000—_.
$10,000 and over..
2
After t a x
1947
2
Before tax
2
After t a x 8
4
9
18
19
17
12
13
4
4
1
Includes single-person families.
Liability for the Federal personal income tax.
Source: See technical notes, p. 94.
2
Changes in income distribution in recent years
The trend to less concentration of income that existed before and during
the war probably has not continued during the last three years. This was to
have been expected, since the general inflation of incomes did not extend to
all groups equally. To the extent that pensioners, retired persons, and some
others whose incomes are relatively fixed are more frequent at the lower end
of the scale the share of income in the lower brackets would decline as a
result of inflation. Comparative data suggest some increase in income
concentration between 1946 and 1947, but adequate analysis of the postwar
trend must await collection of 1948 data. 2
Income after taxes in 1948 will partially reflect the changes in the income
tax structure made by the Revenue Act of 1948. The provision allowing
married couples in all States to split their income for tax purposes is particularly advantageous to married couples with combined incomes in high tax
brackets, especially those who had been filing joint returns. While the
raising of exemptions has freed many families at the lower end of the scale
from paying income taxes at all and rates in all brackets are reduced, the
percentage increase in income after tax is greatest for those in a position to
benefit by the split income provision.
2
A comparison of the 1946 distribution by quintiles shown in the President's Economic
Report of January 14, 1948, p. 105, with the distribution shown here for 1947 would
indicate an increase in concentration. However, there is some lack of comparability
between these two distributions because a separate adjustment for numbers of singleperson families was made in the 1947 statistics. Since the income of single persons runs
lower than that of other family units, this tended to lower the amounts of income in the
lower quintiles in 1947 as compared to 1946. Nonetheless, the data before adjustment
which are essentially comparable also suggest an increase in concentration.
93
TECHNICAL NOTES
Sources of data
1935-36.—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." An explanation of the procedures used in analyzing
these data may be found on p. 103 of the Economic Report of the President,
January 1948.
1941.—These distributions were derived from the "Study of Family
Spending and Saving in Wartime" (Bureau of Labor Statistics, Bulletin
822) and the "Statistics of Income, 1941" (Bureau of Internal Revenue,
Treasury Department). "Family Spending and Saving in Wartime" was
based on a sample survey of family incomes conducted jointly by the Bureau
of Human Nutrition and Home Economics and the Bureau of Labor Statistics. The "Statistics of Income, 1941" contains tabulations of Federal
individual income tax returns for that year.
1947.—The estimates for 1947 are based on the 1948 "Survey of Consumer Finances," conducted for the Board of Governors of the Federal
Reserve System by the Survey Research Center of the University of Michigan. The estimate of the tax liability was not based directly on information obtained in the interviews concerning tax returns or on tax returns
themselves, but on comprehensive data concerning family composition and
income assembled in connection with the "Survey of Consumer Finances."
Special tabulations from this Survey were made available to the Council
of Economic Advisers through the courtesy of the Board of Governors and
the Survey Research Center. The methods used in the "Survey of Consumer Finances" are described in the "Federal Reserve Bulletin," June
1948, p. 643.
Definition of the family
Only the civilian noninstitutional population are included in the estimates. A family unit consists of related persons living in one dwelling.
A single person living alone is considered as a separate family unit. The
estimate of the number of family units in 1935-36 is 38.4 million; in 1941,
41.4 million; and in 1947, 44.6 million.
Definition of money income
Money income refers to income of the civilian noninstitutional population. Income in kind, such as imputed rent of owner-occupied dwellings,
or food and fuel produced and consumed on farms is not included. The
estimate of civilian noninstitutional cash income is 58.9 billion dollars in
1935-36, 86.9 billion in 1941, and 184.2 billion in 1947.
94
Definition of the tax
The tax included here is the estimated liability for Federal income tax
for the year indicated. Taxes on capital gains, and estate and gift taxes
are excluded as well as State income taxes.
Conversion of 1941 income into 1947 dollars
The estimates of average income for each quintile in 1941 (text table 2,
p. 14) were adjusted to dollars of 1947 purchasing power according to the
increase in the Consumers' Price Index adjusted for wartime changes in
composition of output. (See table C-6.)
Comparability with estimates contained in previous Economic Reports of the President
1941.—The estimates of 1941 income before tax included in this report represent a refinement of the estimates contained in the Economic Report of
January 14, 1948. The estimates of the amounts of income received by
upper income groups and by single individuals have been improved by use
of data from "Statistics of Income, 1941." A detailed discussion of the procedure used to estimate the 1941 distributions will be presented at the 1949
Annual Conference of the Committee on Income and Wealth of the
National Bureau of Economic Research.
1947.—The 1947 estimate of the distribution of families by income level
before tax represents a minor revision of the estimates contained in table
2-a, p. 69, of the Midyear Economic Report, July 1948. The survey data
for 1947 income after tax were also presented in the Midyear Report,
table 2. The present estimates are based on these survey data but are adjusted for population coverage and to agree with an independently estimated aggregate of money income before tax. The estimates for 1947 are
still preliminary. A need for revisions in the distribution may be indicated by the 1947 Statistics of Income, which has not yet become available. The distributions for 1935-36 and 1941 have been adjusted in the
light of the Statistics of Income for those years.
95
Appendix C
Statistical Tables Relating to Employment,
Production, and Purchasing Power
CONTENTS
National Income:
Page
C-l. Gross national product or expenditure, 1929-48
99
G-2. Disposition of gross national product, 1939-48
100
G-3. National income by distributive shares, 1929-48
101
G-4. Personal income, 1929-48
102
C-5. Disposition of personal income, 1929-48
103
C-6. Per capita disposable income in current and 1947 dollars, 1929-48.
104
Employment and Wages:
G-7. Labor force, 1929-48
105
C-8. Number of wage and salary workers in nonagricultural establishments,
1929-48
106
G-9. Average gross weekly earnings in selected industries, 1929-48
107
G-10. Average hourly earnings in selected industries, 1929-48
108
C-ll. Average weekly hours in selected industries, 1929-48
109
Production and Business Activity:
G-12. Physical production index of goods and utilities, 1929-48
110
C-13. Industrial production index, 1929-48
Ill
G-14. New construction activity, 1929-48
112
C—15. Business expenditures for new plant and equipment, 1929—49
113
C-l6. Inventories and sales in manufacturing and trade, 1939-48
114
C—17. Inventories and sales, by durable and nondurable goods, in manufacturing and trade, 1939-48
115
C-l 8. Sales, stocks, and outstanding orders at 296 department stores, 193948
116
C-l 9. Distribution of selected agricultural products moving into consumption
channels, 1939 and 1946-48
117
Prices:
C-20. Consumers' price index, 1929-48
119
C-21. Wholesale price index, 1929-48
120
C-22. Indexes of prices received and prices paid by farmers and parity
ratio, 1929-48
121
Money, Banking, and Credit:
G-23. Consumer credit outstanding, 1929-48
122
C-24. Loans and investments of all commercial banks, 1929-48
123
C—25. Adjusted deposits of all banks and currency outside banks, 1929—48. 124
C-26. Estimated ownership of Federal securities, 1939-48
125
C-27. Bond yields, long and short term interest rates, and commercial
loan rates, selected years, 1929-48
126
97
Corporate Profits and Finance:
Page
C-28. Profits before and after taxes, all private corporations, 1929-48
127
G—29. Profits after taxes, 629 large private industrial corporations, by industry groups, 1939-48
128
C-30. Relation of profits before and after taxes to sales, private corporations
excluding finance, insurance, and real estate, 1946-48
128
G—31. Relation of profits before and after taxes to investment, private manufacturing corporations, by industry groups, 1947—48
129
C—32. Relation of profits before and after taxes to sales, private manufacturing
corporations, by industry groups, 1947-48
130
C-33. Relation of profits before and after taxes to investment and to sales,
all private manufacturing corporations, by size classes, 1947-48....
131
C-34. Sources and uses of corporate funds, 1947-48
131
International Transactions:
C-35. The international transactions of the United States, 1946-48
132
C-36. United States Government aid to foreign countries, 1946-48
133
G-37. United States merchandise exports, including reexports, by areas,
1936-38 quarterly average, 1947 and 1948
134
C-38. United States domestic merchandise exports, by economic classes,
1936-38 quarterly average, 1947 and 1948
135
C-39. Indexes of quantity and unit value of United States domestic merchandise exports, by economic classes, 1936-38 quarterly average, 1947
and 1948
136
C-40. United States general merchandise imports, by areas, 1936-38
quarterly average, 1947 and 1948
137
G-41. United States merchandise imports for consumption, by economic
classes, 1936-38 quarterly average, 1947 and 1948
138
G-42. Indexes of quantity and unit value of United States merchandise imports for consumption, by economic classes, 1936-38 quarterly
average, 1947 and 1948
139
Summary:
C-43. Changes in selected economic series since 1939 and 1947
139
TABLE C-l.—Gross national product or expenditure, 1929-48
{Billions of dollars]
Period
Gross
national
product
GovernPersonal
Gross
purNet foreign ment
consumpprivate
chases of
tion exdomestic investment goods
and
penditures investment
services
1929.
103.8
78.8
15.8
0.8
8.5
1930
1931
1932
1933
1934
90.9
75.9
58.3
55.8
64.9
70.8
61.2
49.2
46.3
51.9
10.2
5.4
.9
1.3
2.8
.7
.2
.2
.2
.4
9.2
9.2
8.1
8.0
9.8
1935
1936
1937
1938
1939
72.2
82.5
90.2
84.7
90.4
56.2
62.5
67.1
64.5
67.5
6.1
8.3
11.4
6.3
9.0
-.1
—.1
.1
1.1
9.9
11.7
11.6
12.8
13.1
1940
1941
1942
1943
1944
100.5
125.3
159.6
192.6
212.2
72.1
82.3
90.8
101.6
111.4
13.0
17.2
9.3
4.6
6.4
1.5
1.1
-.2
-2.2
-2.1
13.9
24.7
59.7
88.6
96.5
1945
1946
1947
1948
213.4
209.3
231.6
252.7
122.8
147.4
164.8
176.8
9.2
26.5
30.0
38.8
-1.4
4.7
8.9
1.8
82.8
30.8
28.0
35.3
Annual rates, seasonally adjusted
1947—First half..
Second half
1948—First half
Second half i
227.4
235.9
161.2
168.4
29.5
30.5
9.5
8.3
27.3
28.7
247.6
257.8
174.3
179.2
38.2
39.5
3.3
.2
31.8
38.8
1947—First quarter
Second quarter. .
Third quarter...
Fourth quarter-.
226.4
228.3
227.9
243.8
158.1
164.2
165.6
171.1
32.6
26.4
25.6
35.4
8.8
10.2
8.4
8.2
26.9
27.6
28.3
29.0
1948—First quarter
Second quarter..
Third quarter...
Fourth quarter V
244.9
250.2
254.9
260.8
172.1
176.5
178.5
180.0
38.7
37.6
39.0
40.0
3.9
2.7
-.3
30.1
33.5
37.7
40.0
i Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).
99
T A B L E C—2.—Disposition of gross national product, 1939—48
Disposition of gross national product
Period
Total
gross
national
product
Export surplus of goods and
services 1
Total
Government
Product
war or
for
national
domestic
Financed Financed defense
civilian
by Govother expendiuse
ernment by
tures
means
aid
Billions of dollars
(2)
-
1.1
1.2
88.1
1.7
2.3
6.1
10.7
12.0
0.1
1.3
6.4
12.8
14.0
1.6
1.0
-.3
-2.1
-2.0
2.2
12.8
43.2
67.1
73.7
96.6
110.2
110.3
114.8
126.5
213.4
209.3
231.6
252.7
5.7
7.5
11.3
6.5
7.7
5.1
5.7
4.6
-2.0
2.5
5.6
1.9
67.2
15.9
10.0
10.2
140.5
185.9
210.3
236.0
227.4
235.9
11.8
10.7
6.6
4.8
10.2
9.8
205.4
215.4
1948—First half
Second half *_.
1947—First quarter
Second quarter..
Third quarter...
Fourth quarter.
247.6
257.8
7.2
5.9
9.8
10.6
230.6
241.3
226.4
228.3
227.9
243.8
11.2
12.5
10.9
10.5
4.3
4.8
5.2
8.0
6.8
2.9
5.3
5.9
2.8
1.1
6.0
4.5
4.1
7.6
9.4
10.9
9.2
10.3
205.8
204.9
207.8
223.0
1948—First quarter
Second quarter. _.
Third quarter 8
Fourth quarter ..
244.9
250.2
254.9
260.8
7.8
6.5
5.2
6.6
5.3
3.3
4.3
5.3
2.5
3.2
.9
1.3
9.4
10.3
10.2
11.0
227.7
233.4
239.5
243.2
1939..
90.4
1.1
1940...
1941..
1942..
1943..
1944..
100.5
125.3
159.6
192.6
212.2
1945..
1946..
1947..
1948 s.
Annual rates:
1947—First half....
Second half..
Percentage of total
1939
100
1.2
1.2
1.3
97.5
1940.
1941.
1942
1943
1944
100
100
100
100
100
1.7
1.8
3.8
5.6
5.7
0.1
1.0
4.0
6.6
6.6
1.6
.8
-.2
-1.1
-.9
2.2
10.2
27.1
34.8
34.7
96.1
87.9
69.1
59.6
59.6
1945
1946
1947.
1948 3
100
100
100
100
2.7
3.6
4.9
2.6
3.6
2.4
2.5
1.8
-.9
1.2
2.4
.8
31.5
7.6
4.3
4.0
65.8
88.8
90.8
93.4
1947—First half
Second half
100
100
5.2
4.5
2.9
2.0
2.3
2.5
4.5
4.2
90.3
91.3
1948—First half
Second half a...
100
100
2.9
2.3
1.7
1.9
1.1
.4
4.0
4.1
93.1
93.6
1947—First quarter. _
Second quarter.
Third quarter..
Fourth quarter
100
100
100
100
4.9
5.5
4.8
4.3
2.3
3.5
3.0
1.2
2.7
2.0
1.8
3.1
4.2
4.8
4.0
4.2
90.9
89.8
91.2
91.5
1948—First quarter. _
Second quarter.
Third quarter.
Fourth quarter
100
100
100
100
3.2
2.6
2.0
2.5
2.2
1.3
1.7
2.0
1.0
1.3
.4
.5
3.8
4.1
4.0
4.2
93.0
93.3
94.0
93.3
(*)
i U. S. Government unilateral transfers to foreign countries are included in the export surplus and are excluded from the Government war or national defense expenditures and from product for domestic civilian
use.
a Less than $50,000,000.
* Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
* Percent not shown because dollar figure was less than $50,000,000.
NOTE.—Detail will not necessarily add to totals because of rounding.
Sources: Department of Commerce and Bureau of the Budget (except as noted).
IOQ
TABLE C—3.—National income by distributive shares, 7929-48
[Billions of dollars]
Proprietors' and rental
income
tion o:f employe
8
Period
3
iii
1
1
Q
Corporate profits and inventory
valuation adjustment
Corporate profits
i
ft
1
CO
1
g 1
C3
m
s
O
EH
1
i
11
1
1
°'*
>
1£
EH
1
1.4
8.4
o3
1929___
87.4
50.8
19.7
8.3
5.7
5.8
1930—
1931...
1932...
1933...
1934...
75.0
58.9
41.7
39.6
48.6
46.5
39.5
30.8
29.3
34.1
15.7
11.8
7.4
7.2
8.7
7.0
5.3
3.2
2.9
4.3
3.9
2.9
1.7
2.3
2.3
4.8
6.6
3.3
3. 6 1.6 - . 8
2.5 - 2 . 0 - 3 . 0
2.0 - 2 . 0
.2
2.1
1.1 1.7
1935...
1936...
1937..,
1938___
1939._.
56.8
64.7
73.6
67.4
72.5
37.1
42.7
47.7
44.7
47.8
12.1
12.6
15.4
14.0
14.7
5.0
6.1
6.6
6.3
6.8
4.9
3.9
5.6
4.4
4.5
2.3
2.7
3.1
3.3
3.5
3.0
4.9
6.2
4.3
5.8
3.2
5.7
6.2
3.3
6.5
1.0
14
1.5
1.0
1.5
1940—
1941...
1942...
1943...
1944...
51.8
81.3
103.8
64.3
136. 5 84.7
168.3 109.1
182.4 121.1
16.3
20.8
28.1
32.1
34.1
7.7
9.6
12.1
14.1
15.4
4.9
6.9
10.6
11.8
11.9
3.6
4.3
5.4
6.2
6.7
9.2
14.6
19.8
23.7
24.0
9.3
17.2
21.1
24.5
24.3
1945...
1946...
1947...
1948 8..
181.7
179.3
202.5
224.0
122.9
117.3
127.5
137.8
36.0
41.8
46.0
50.7
16.8
20.4
23.2
25.2
12.3
14.6
15.6
18.0
7.0
6.7
7.1
7.6
19.8
16.8
24.7
30.7
20.4
21.8
29.8
34.0
10.3
9.8
p|
0.5
6.5
.8
2.5
3.3
2.4
.5 - 1 . 3
1.0
.4 - 3 . 4
.5 - . 4 - 2 . 1
.7
1.0 - . 6
6.2
5.9
5.4
5.0
4.7
2.3
4.3
4.7
2.3
5.0
1.0
-.7
4.5
4.5
4.4
4.3
4.2
2.9
7.8
11.7
14.2
13.5
6.4 - . 1
9.4 - 2 . 6
9.4 - 1 . 3
10.4 - . 8
10.8 - . 3
4.1
4.1
3.9
3.4
3.1
11.6
9.0
11.7
13.2
8.7 - . 6
12.8 - 5 . 0
18.1 - 5 . 1
20.8 - 3 . 3
3.0
3.4
4.3
4.7
-.2
-.7
Annual rates, seasonally adjusted
1947—First half
Second half
198.3
206.7
125.2
129.9
45.5
46.5
22.6
23.9
15.9
15.4
7.0
7.3
23.5
25.9
28.9
30.8
11.4
12.1
17.5 - 5 . 4
18.7 - 4 . 9
4.2
4.5
1948—First half
Second half •
1947—First quarter
Second quarter.
Third quarter
Fourth quarter.
218.4
229.7
134.0
141.7
51.2
50.3
25.2
25.2
18.4
17.5
7.6
7.6
28.6
32.8
32.4
35.5
12.6
13.8
19.8 - 3 . 9
21.7 - 2 . 7
197.3
199.3
200.6
212.8
125.0
125.3
127.6
132.2
46.4
44.6
44.4
48.6
22.5
22.7
23.0"
24.7
16.9
14.9
14.3
16.5
7.0
7.0
7.1
7.4
21.8
25.2
24.3
27.5
28.9
28.8
29.1
32.4
11.4
11.3
11.4
12.7
17.5
17.5
17.7
19.7
-7.1
-3.6
-4.8
-4.9
4.6
4.8
4.1
4.2
4.4
4.5
1948—First quarter
Second quarterThird quarter
Fourth quarter
215.1
221.7
227.4
232.0
133.7
134.2
140.6
142.8
50.6
51.8
50.2
50.3
25.0
25.4
24.8
25.6
18.0
18.9
17.9
17.1
7.5
7.6
7.5
7.6
26.2
30.9
31.6
34.0
31.4
33.4
35.5
35.5
12.2
13.0
13.8
13.8
19.2
20.4
21.7
21.7
-5.3
-2.5
-3.9
-1.5
4.6
4.7
4.8
4.9
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 that it excludes
depreciation charges and other allowances for business and institutional consumption of durable capital
goods.
2 Includes wage and salary receipts and other labor income (see appendix table C-4), and employer and
employee
contributions for social insurance.
3
Net income after inventory valuation adjustment. This adjustment was -1.2 billion dollars in 1947,
and —0.8 billion (annual rate) in each half of 1948.
* Federal and Stato income and excess-profits taxes.
«Less than $50,000,000.
8
Estimates based on incomplete data; profits by Council of Economic Advisers and all others by Department of Commerce.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).
IOI
TABLE C-4.—Personal income, 1929-48
[Billions of dollars]
Period
Salaries, ProprieDiviwages,
Total
Transfer
and dendsand
personal
paypersonal and other tors'
rental 2 interest
labor
income
income income 3 ments
income
Nonagricultural
income *
1929..
85.1
50.5
19.7
13.3
1.5
76.8
19301931-_
19321933..
1934..
76.2
64.8
49.3
46.6
53.2
46.3
39.2
30.5
29.0
33.8
15.7
11.8
7.4
7.2
8.7
12.6
11.1
9.1
8.2
8.6
1.5
2.7
2.2
2.1
2.2
70.0
60.1
46.2
43.0
49.5
1935..
1936193719381939-
68.4
74.0
68.3
72.6
36.8
42.1
45.9
42.8
45.7
12.1
12.6
15.4
14.0
14.7
8.6
10.1
10.3
8.7
9.2
2.4
3.5
2.4
2.8
3.0
53.4
62.8
66.5
62.1
66.3
19401941194219431944-
78.3
95.3
122.2
149.4
164.5
49.5
61.5
81.2
104.4
116.1
16.3
20.8
28.1
32.1
34.1
9.4
9.9
9.7
10.0
10.6
3.1
3.1
3.2
3.0
3.6
71.5
86.1
108.7
134.3
149.0
1945194619471948».
170.3
178.1
195.2
211.5
116.8
111.4
121.9
132.8
36.0
41.8
46.0
50.7
11.4
13.5
15.6
17.1
6.2
11.4
11.7
10.9
154.3
159.4
174.9
CO
Annual rates, seasonally adjusted
1947—First half.
Second half
190.3
199.9
119.1
124.7
45.5
46.5
15.1
16.0
10.6
12.8
169.8
179.8
1948—First half—
Second halffi
1947—First quarter
Second quarter..
Third quarter.._
Fourth quarter—
208.2
214.8
129.0
136.6
51.2
50.3
16.7
17.6
11.4
10.4
184.8
(6)
190.9
189.6
196.7
203.1
119.0
119.2
122.3
127.1
46.4
44.6
44.4
48.6
14.9
15.3
15.8
16.1
10.7
10.5
14.3
11.2
169.4
170.2
177.8
181.8
1948—First quarter
Second quarterThird quarter...
Fourth quarter 8.
207.3
209.0
213.9
215.8
128.7
129.2
135.6
137.6
50.6
51.8
50.2
50.3
16.6
16.8
17.3
17.8
11.5
11.2
10.8
10.1
184.4
185.3
191.0
(6)
1
Differs from "compensation of employees" in appendix table C-3, in that it excludes employer
and employee contributions to social insurance. Includes wage and salary receipts and other labor
income—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.
2
See appendix table O-3, for major components.
8
See appendix table C-28 for dividend payments.
* Equals personal income exclusive of net income of unincorporated farm enterprises, farm wages, agricultural net rents, agricultural net interest, and net dividends paid by agricultural corporations.
« Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
fl
Not available.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).
102
T A B L E C—5. Disposition of personal income,
Period
Less:
Personal Personal
tax
and
income
nontax
payments
7929-48
Less:
Equals: Personal
Equals:
Dispos- consump- Personal
able
tion
net
personal expendisaving
income
tures
Net
saving as
percent
of disposable
income
Billions of dollars
1929-
85.1
2.6
82.5
78.8
3.7
4.5
1930_.
19311932..
19331934..
76.2
64.8
49.3
46.6
53.2
2.5
1.9
1.5
1.5
1.6
73.7
63.0
47.8
45.2
51.6
70.8
61.2
49.2
46.3
51.9
2.9
1.8
-1.4
-1.2
—.2
3.9
2.9
-2.9
-2.7
—.4
1935—
1936193719381939-
59.9
68.4
74.0
68.3
72.6
1.9
2.3
2.9
2.9
2.4
58.0
66.1
71.1
65.5
70.2
56.2
62.5
67.1
64.5
67.5
1.8
3.6
3.9
1.0
2.7
3.1
5.4
5.5
1.5
3.8
19401941194219431944-
78.3
95.3
122.2
149.4
164.5
2.6
3.3
6.0
17.8
18.9
75.7
92.0
116.2
131.6
145.6
72.1
82.3
90.8
101.6
111.4
3.7
9.8
25.4
30.0
34.2
4.9
10.7
21.9
22.8
23.5
19451946—
194719481.
170.3
178.1
195.2
211.5
20.9
18.9
21.6
21.2
149.4
159.2
173.6
190.4
122.8
147.4
164.8
176.8
26.6
11.8
8.8
13.6
17.8
7.4
5.1
7.1
Annual rates, seasonally adjusted
1947—First h a l f Second half..
190.3
199.9
21.3
22.0
169.0
178.0
161.2
168.4
7.9
9.6
4.7
5.4
1948—First half
Second half i.
208.2
214.8
22.0
20.3
186.2
194.6
174.3
179.2
11.9
15.3
6.4
7.9
1947—First quarter
Second quarterThird quarter.. .
Fourth quarter-
190.9
189.6
196.7
203.1
21.2
21.4
21.7
22.2
169.7
168.2
175.0
180.9
158.1
164.2
165.6
171.1
11.6
4.1
9.4
9.7
6.8
2.4
5.4
5.4
1948—First quarter
Second quarter..
Third quarter. _.1
Fourth quarter
207.3
209.0
213.9
215.8
23.2
20.8
20.2
20.4
184.1
188.2
193.7
195.4
172.1
176.5
178.5
180.0
12.0
11.7
15.2
15.4
6.5
6.2
7.8
7.9
i Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).
103
TABLE C~6.—Per capita disposable income in current and 1947 dollars, 1929-48
Period
Disposable
personal Population Consumers'
(thou- price index,
income
(billions of
sands)!
1947=100
dollars)
Per capita disposable
personal income
Current
dollars
1947
dollars *
1929..
82.5
121,770
76.9
678
882
1930..
1931..
1932..
1933..
1934..
73.7
63.0
47.8
45.2
51.6
123,077
124,040
124,840
125,579
126, 374
74.9
68.2
61.2
58.0
60.0
599
508
383
360
408
800
745
626
621
680
1935..
1936..
1937..
1938_.
1939..
58.0
66.1
71.1
65.5
70.2
127, 250
128,053
128, 825
129,825
130,880
61.5
62.2
64.4
63.2
62.4
456
516
552
605
536
741
830
857
799
859
1940..
1941..
1942..
1943..
1944..
75.7
92.0
116.2
131.6
145.6
131,970
133,203
134, 665
136,497
138,083
62.9
66.0
3 73.8
3 79.2
3 81.4
574
691
863
964
1,054
913
1,047
1,169
1,217
1,295
1945..
1946..
1947..
1948*
149.4
159.2
173.6
190.4
139,586
141, 235
144,034
146,571
3 83.6
3 89.6
3100.0
107.4
1,070
1,127
1,205
1,299
1,280
1,258
1,205
1,209
Not adjusted for
seasonal
variation
Annual
rates,
seasonally
adjusted
1947—First half
Second half
1948—First half.. _
Second half*
1947—First quarter
Second quarter..
Third quarter...
Fourth quarter..
1948—First quarter
Second quarter..
Third quarter
Fourth quarter *.
Annual rates
169.0
178.0
143,385
144,807
397.8
102.3
1,179
1,229
1,206
1,201
186.2
194.6
146,018
147,147
106.1
108.7
1,275
1,322
1,202
1,216
169.7
168.2
175.0
180.9
143,049
143,702
144,411
145,150
3 97.4
98.1
100.9
103.6
1,186
1,170
1,212
1,246
1,218
1,193
1,201
1,203
184.1
188.2
193.7
195.4
145,716
146,298
146,914
147,380
105.2
107.0
109.3
108.2
1,263
1,286
1,318
1,326
1,201
1,202
1,206
1,226
1 Estimated population of continental United States, including armed forces overseas; annual data as of
July 1 and quarterly and semiannual data as of middle of period, interpolated from published monthly
estimates.
2 Current dollars divided by the consumers' price index on the base 1947=100 to give a rough measure of
changes
in buying power of disposable income.
3
The consumers' price index has been roughly adjusted to take account of the understatement during the
price control period. This adjustment is in line with the report of the Mitchell Committee. The unadjusted index will be found in appendix table C-20.
* Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
Sources: Department of Commerce (disposable income and population) and Department of Labor (consumers' price index).
IO4
TABLE C-7.—Labor force, 1929-48
[Thousands of persons, 14 years of age and over]
Total
labor
force
(including
armed
forces)1
Period
Monthly average:
1929
Civilian labor force
Armed
forces1
Total
civilian
labor
force
Employment
Total
Nonagri- Agriculcultural
tural
Unemployment
49,440
260
49,180
47,630
37,180
10,450
1,550
50,080
50,680
51, 250
51, 840
52,490
260
260
250
250
260
49,820
50,420
51,000
51, 590
52, 230
45,480
42,400
38,940
35,140
32,110
28, 770
28, 670
30,990
10,340
10,290
10,170
10,090
9,900
4,340
8,020
12,060
12,830
11,340
53,140
53, 740
54,320
54,950
55, 600
270
300
320
340
370
52, 870
53,440
54, 000
54,610
55, 230
42,260
44,410
32,150
34,410
36,480
34, 530
36,140
10,110
10,000
9,820
9,690
9,610
10,610
9,030
7,700
10,390
56, 030
57,380
60,230
64,410
65, 890
390
1,470
3,820
8,870
11, 260
55, 640
55,910
56, 410
55, 540
54, 630
37,980
41,250
44, 500
45, 390
45, 010
9,540
9,100
9,250
9,080
8,950
8,120
5,560
2,660
1,070
670
_
65,140
60, 820
61, 610
62, 748
11,280
3,300
1,440
1,307
53, 860
57, 520
60,170
61,442
44, 240
46, 930
49, 770
51,405
8,580
8,320
8,260
7,973
1,040
2,270
2,140
2,064
1947—First half...
Second half.
60, 920
62,297
1,551
1.328
60,968
52, 820
55, 250
58, 030
59,378
57,009
59,044
7,976
8,556
2,359
1,924
1948—First half—
Second half.
61,771
63,726
1,240
1,374
60,531
62, 352
58,317
60,439
49,033
50,488
50,754
52,057
7,564
2,214
1,914
1947—January.
February
March
April
...._
May
June
July...
August
September
October
November
December
59, 510
59,630
59, 960
60, 650
61,760
64,007
64,035
63,017
62,130
62, 219
61, 510
60,870
1,720
1,620
1,570
1,530
1,470
1,398
1,371
1,352
1,346
I,b27
1,294
1,280
57,790
58,010
58,390
59,120
60, 290
62, 609
62, 664
61,665
60, 784
60, 892
60,216
59, 590
55,390
55, 520
56,060
56, 700
58,330
60,055
60,079
59, 569
58, 872
59, 204
58, 595
57,947
6,500
48,600
48,820
48,840
49,370
49,678
50.013
50,594
50,145
50,583
50,609
50,985
7,240
7,860
8,960
10,377
10,066
8,975
8,727
8,622
7,985
6,962
2,400
2,490
2,330
2,420
1,960
2,555
2,584
2,096
1,912
1,687
1,621
1,643
1948—January.
February
March
April
May
June
July
August
September
October. __
November
December
60,455
61,004
61, 005
61,760
61, 660
64, 740
65,135
64,511
63,578
63,166
63,138
62,828
1,241
1,226
1,236
1,236
1.238
1,261
1,293
1,325
1,366
1,391
1,414
1,453
59,214
59,778
59,769
60,524
60.422
63,479
63,842
63,186
62,212
61,775
61,724
61,375
57,149
57,139
57,329
58,830
58.660
61,296
61,615
61,245
60,312
60,134
59,893
59,434
50,089
7,060
50,368
6,771
50,482
6,847
50,883
7,448
50,800
7,861
51,899
9,396
52,452
9,163
52,801 * 8,444
51, 590
8,723
51,506
8,627
51, 932
7,961
52,059
7,375
2,065
2,639
2,440
2,193
1,761
2,184
2,227
1,941
1,899
1,642
1,831
1,941
1930
1931
1932
1933
1934
_
_
1935
1936
1937
1938
1939
1940
1941___
1942
1943
1944
1945__
1946_
1947
1948
._.-
_
40,890
44, 220
45, 750
47, 520
50,350
53, 750
54, 470
53,960
1
Data for 1940-48 exclude about 150,000 members of the armed forces who were outside the continental
United States in 1940 and who were therefore not enumerated in the 1940 Census. This figure is
deducted by the Census Bureau from its current estimates for comparability with 1940 data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Sources: Department of Labor (1929-39) and Department of Commerce (1940-48).
105
TABLE C-8.—Number of wage and salary workers in nonagricultural establishments, 1Q20-48i
[Thousands of employees]
Manufacturing
FedTransTotal
eral,
Con- ports
wage
State,
tract
tion
Fiand
Minand
Nonconand
Trade
Service
nance
salary
Dur- during struc- public
local
work- Total able
governtion
utiliable
ers
goods goods
ment
ties
Period
Monthly average:
1929
31,041 10,534
1930_
1931
1932
1933___
1934
29,143
26,383
23,377
23,466
25,699
9,401
8,021
6,797
1935_.
1936
1937
1938
1939
1,078
1,497
3,907
6,401
1,431
3,127
3,066
V
1,333
1,270
1,225
1,247
3,084
2,913
2,682
2,614
2,784
3,149
3,264
3,225
3,167
3,298
7,258
8,346
1,000
864
722
735
874
1,372
1,214
970
809
862
3,675
3,243
2,804
2,659
2,736
6,064
5,531
4,907
4, r ~"
5,552
26,792
28,802
30,718
28, 902
30,287
8,907
9,653
10,606
9,253
10,078
937
1,006
882
845
912
1,145
1,112
1,055
1,150
2,771
2,956
3,114
2,840
2,912
6,076
6, 543
6,453
6,705
1,
1,313
1,355
1,347
1,382
2,883
3,060
3,233
3,196
3,228
3,477
3,662
3,749
3,876
3,987
32,031
36,164
39, 697
42,042
41,480
10,780
12, 974
15,051
17,381
17, 111
4,975
6,485
8,179
10,297
10,200
6,873
7,084
6,912
916
947
983
917
883
1,294
1,790
2,170
1,567
1,094
3,013
3,248
3,433
3,619
3,798
7,055
7,567
7,481
7,322
7,399
1,419
1,462
1,440
1,401
1,374
3,362
3,554
3,708
3,786
3,795
4,192
4,622
5,431
6,049
6,026
40,069
41,494
43,970
45,132
15,302
14, 515
15,901
16,282
8,477
7,180
8,055
8,221
6.825
7,335
7,846
8,061
852
911
924
1,132
1,661
1,921
2,056
3,872
4,023
4,060
4,066
7,685
8,820
9,450
9,741
1,394
1,586
1,656
1,718
3,891
4,430
4,622
4, " "
5,967
5,607
5,449
5,654
1947—First half. _. 43,337 15,713
Second halL 44,603 16,089
8,022
7,691
8,002
906
917
1,781
2,062
4,003
4,116
9,232
9,667
1,637
1,675
4,584
4, " "
5,482
5,417
1948—First half...
44, 568 16,113
Second half3. 45,696 16,450
8,180
8,261
7,932
8,189
910
1,928
2,185
4,032
4,101
9,600
9,8S2
1,702
1,734
4,725
4,656
5,557
5,751
910
907
906
881
910
919
890
923
921
922
923
925
1,690
1,668
1,709
1^865
1,957
2,043
2,107
2,099
2,046
1,978
4,018 9,160
4,016 9,143
4,027 9,236
3,845 9,255
3,981 9,277
4,129 9,324
4,155 9,316
4,163 9,356
4,134 9,471
4,097 9,684
4,077
4,071 10,288
1,626
1,628
1,638
1,636
1,643
1,650
1,675
1,688
1,668
1,671
1,673
1,676
4,527
4,561
4,565
4,552
4,590
4,711
4,686
4,619
4,634
4,662
4,670
4,688
5,455
5,463
5,503
5,504
5,510
5,454
5,341
5,318
5,403
5,414
5,387
5,638
922
914
924
817
935
950
922
952
948
941
934
1,871
1,731
1,805
1,933
2,052
2,173
2,219
2,253
2,239
2,197
2,150
4,020 9,622
4,019 9,520
4,032 9,598
3,974 9,576
4,042 9,617
4,105 9,670
4,136 9,646
4,139 9,660
4,092 9,733
4,090 9,889
4,076 10, Q33
1,
1,690
1,697
1,704
1,716
1,726
1,754
1,761
1,732
1,723
1,718
4,723
4,730
4,729
4,768
4,738
4,663
4,645
4,622
4,647
4,667
4,673
5,498
5,492
5,546
5,577
5,624
5,607
5,604
5,650
5,801
5,789
5,714
1940___
1941....
1942
1943._.
1944
—
1945__
1946
1947
1948 3
()
5,720
5,805
1947—January. _
February. _
March
April
May
June
July
August...
September
October
November
December
43,063
43,169
43,410
43, 221
43,345
43,816
43,686
44,125
44, 513
44, 758
44,918
45,618
15,677 7,949
15,783 8,030
15, 826 8,071
15, 750 8,068
15, 569 7,962
15,672 8,050
15, 580 7,874
15, 962 7,987
16,175 8,070
16, 209 8,126
16,256 8,194
16,354 8,274
7,728
7,753
7,755
7,682
7,607
7,622
7,706
7,975
8,105
1948—January _ _
February..
March...
April...
May
June
July
August..
September
October *
November *
44,603
44,279
44,600
44,299
44,616
45,009
45,098
45,478
45,875
45,872
16,267
16,183
16,269
15, 950
15,892
8,256
8,167
8,258
8,164
8,114
8,122
8,165
8,188
8,280
8,011
8,016
8,011
7,786
7,778
7,993
8,007
8,253
8,403
8,270
8,099
16,115
16,172
16,441
16,683
16, 576
45, 701 16,403 8,304
8,062
1 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. Excludes proprietors, selfemployed persons, domestic servants, and personnel of the armed forces. Not comparable with estimates
of nonagricultural employment of the civilian labor force reported by the Department of Commerce (appendix table C-7) which include proprietors, self-employed persons, and domestic servants; which count
persons as employed when they are not at work because of industrial disputes, bad weather, or temporary
lay-offs and which are based on an enumeration of population, whereas the estimates in this table are based
on reports from employing establishments.
2 Not available.
3 Includes preliminary estimates for December.
* Preliminary estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Labor.
106
TABLE C-9.—Average gross weekly earnings in selected industries, 1929-48
M anufacturing
Period
Total
Bitu- Private Class I
DUUQsteam Tele- w noie- Retail Hotels
minous "Kn-fM
(year
DurNoncoal ing con- rail- phone sale
trade round)
*
trade
able durable mining struc- roads
goods
goods
$25.03
$27.22
$22.93
$25.72
<•>
$28.49
23.25
20.87
17.05
16.73
18.40
24.77
21.28
16.21
16.43
18.87
21.84
20.50
17.57
16.89
18.05
22.21
17.69
13.91
14.47
18.10
(22)
(2)
()
(2)
$22.97
27.76
26.76
23.34
23.09
24.32
20.13
21.78
24.05
22.30
23.86
21.52
24.04
26.91
24.01
26.50
19.11
19.94
21.53
21.05
21.78
19.58
22.71
23.84
20.80
23.88
24.51
27.01
30.14
29.19
30.39
26.76
28.01
29.20
30.26
30.99
19401941..
1942.._
1943...
1944
25.20
29.58
36.65
43.14
46.08
28.44
34.04
42.73
49.30
52.07
22.27
24.92
29.13
34.12
37.12
24.71
30.86
35.02
41.62
51.27
31.70
35.14
41.80
48.13
52.18
1945
1946
1947
1948 8..
44.39
43.74
49.25
53.12
49.05
46.49
52.45
56.73
38.29
41.02
45.87
49.33
52.25
58.03
66.86
72.09
47.89
50.78
44.77
64.41
60.94
50.61
54.12
46.96
69.20
65.32
tion
Monthly average:
1929
1930
1931.
1932
1933_.
1934
1935..
1936
1937.
1938__
1939.
_
_
...
_
_
1947—First half.
Second
half.-..
m
(22)
()
((22))
<>)
«
(2)
$27.72
26.11
26.37
$20.71
19.18
19.86
$14.25
12.79
13.17
$29.81
31.53
31.94
26.93
28.53
29.94
29.48
29.85
19.96
20.68
21.73
21.14
21.17
13.57
13.97
14.78
14.93
15.25
31.55
34.25
38.65
43.68
46.06
32.44
32.74
33.97
36.30
38.39
30.39
32.32
35.56
39.40
42.29
21.17
21.94
23.24
24.88
26.58
15.52
16.09
17.62
20.21
22.65
45.69
53.73
56.24 4 51. 22
63.30
54.17
69.57
58.70
44.04
44.96
48.75
44.07
48.06
52.40
56.41
28.31
32.55
36.67
40.26
24.53
26.95
29.65
31.77
52.38
40.86
51.22
35.98
29.18
56.02
47.92
53.54
37.40
30.10
(2)
(2)
(3)
8
8
1948—First half.
Second
half e. _
52.06
55.23
48.67
69.77
67.57
58.70
48.06
55.64
39.08
31.31
54.18
58.16
49.98
74.41
71.57
(2)
49.45
57.21
41.45
32.23
1947—January.
February
March
_!
April
May
_
June...
July
August
__
September-__
October
November...
December
47.10
47.29
47.69
47.50
48.44
49.33
48.98
49.17
50.47
51.05
51.29
52.69
49.60
49.74
50.30
50.34
51.72
52.99
52.19
52.46
54.06
54. 69
54.86
56.48
44.47
44.67
44.89
44.40
44.88
45.31
45.61
45.78
46.80
47.29
47.56
48.72
69.54
65.30
64.90
54.14
65.51
67.09
54.87
70.23
71.19
71.91
71.77
75.22
59.97
58.92
61.23
60.57
62.26
62.71
63.60
64.71
65.36
66.36
64.55
67.31
43.37
52.70
43.31
54.10
42.51
52.43
52.03 e 32. 26
51.30 6 38.13
45.58
51.72
46.51
51.16
46.92
51.68
48.02
57.47
48.77
58.44
49.44
58. 38
47.83
59.02
50.05
50.87
50.80
51.13
51.57
52.88
52.22
52.05
53.65
53.68
54.70
54.97
35.02
35.27
35.31
35.93
36.50
37.82
37.99
38.14
37.06
36.74
37.14
37.36
28.62
28.91
29.09
29.41
29. 23
29.85
29.36
29.50
29.86
30.45
30.54
30.89
1948—January
February
March
April...
May
June
JulyAugust
September...
October»
November 7 ..
52.07
51.75
52.07
51.79
51.86
52.85
52.95
54.05
54.18
54.50
54.49
55.46
54.77
55.25
54.96
54.81
56.13
56.21
58.19
57.90
59.13
58.58
48.45
75.78
48.56
70.54
48.66
74.84
48.33 6 49. 53
48.65
74.08
49.37
73.87
49.49
67.62
49.79
78.10
50.38
74.98
49.68
76.40
(2)
50.14
66.28
66.31
66.89
67.31
68.13
70.49
71.38
71.89
72.06
71.79
2
59.60
60.54
58.94
56.86
57.24
59.05
58.22
59.17
2
54.36
55.87
55.17
55.84
56.61
56.00
56.54
57.51
57.67
57.58
37.62
38.33
38.89
39.27
39.84
40.52
41.19
41.19
40.48
40.32
2
30.55
31.19
30.96
31.59
31.70
31.88
32.04
32.34
32.21
32.45
)
()
()
(2)
(2)
48.20
47.82
47.31
47.56
48.82
48.67
49.19
48.35
49.21
49.75
(2)
(2)
()
1
2
3
Money payments only; additional value of room, board, uniforms, and tips is not included.
Not available.
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.
< Annual average includes retroactive pay increases not included in the monthly averages.
* Includes preliminary estimates for November and December except in the case of class I steam railroads
for6 which data are available only through August.
Data for these months reflect work stoppages.
7
Preliminary estimates based on incomplete data.
NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in railroads, and for all employees in other industries. Data are for pay-roll periods ending closest to the middle
of the month except in railroads where monthly pay-roll and employment figures are used.
Source: Department of Labor.
107
T A B L E G—10.—Average hourly earnings in selected
industries , 7929-48
Manufacturing
Bitu- Private Class I
Hotels
steam
minous building
Tele- Whole- Retail
(year
consale
railcoal
Nonphone
trade round)
*
structrade
Durable
roads
Total goods durable mining tion
goods
Period
Monthly average:
1929-
$0,681
_ $0,566
1930
1931
1932
1933
1934
.552
.515
.446
.442
.532
$0,497
.472
.556
1935
1936
1937
1938
1939
.550
.556
.624
.627
.633
(2)
2
$0,636
(2)
(2)
(a)
2
()
(2)
(22)
(22)
$0,420
.427
.515
.684
.647
.520
.501
.673
$0,795
.644
.651
.600
.595
.602
.577
.586
.674
.686
.698
.530
.529
.577
.584
.582
.745
.794
.856
.878
.886
.815
.824
.903
.908
.932
.651
.659
.676
.712
.714
(2)
(2)
$0.774
.816
.822
.661
.729
.853
.961
1.019
.724
.808
.947
1.059
1.117
.602
.640
.723
.803
.861
.883
.993
1.059
1.139
1.186
.958
1.010
1.148
1.252
1.319
.717
.751
.824
.897
.938
1.023
1.084
1.221
1.327
1.111
1.156
1.292
1.401
.904
1.012
1.145
1.247
1.240
1.401
1.633
1.896
1.379
1.478
1.681
1.865
1947—First half.
Second
half.....
1.188
1.252
1.119
1.485
1.253
1.331
1.172
1.804
1948—First half.
Second
half's...
1.295
1.361
1.223
1.838
1.817
1.359
1.441
1.270
1.955
1.913
1947—January
February
March
April
May.
June
July
August
_
September. __
October
November. _.
December
1.161
1.170
1.180
1.186
1.207
1.226
1.230
1.236
1.249
1.258
1.268
1.278
1.224
1.229
1.236
1.243
1.278
1.303
1.305
1.312
1.331
1.337
1.346
1.354
1.094
1.107
1.119
1.122
1.130
1.140
1.150
1.158
1.165
1.175
1.185
1.196
1.491
1.491
1.484
1.483
1.470
1.489
1.740
1.787
1.819
1.798
1.851
1.826
1.594
1.598
1.610
1.632
1 655
1.661
1.676
1.694
1.723
1.743
1.765
1.774
1948—January
February
March.
April
May.
June
July
August
_.
September. „
October e 6
November __
1.285
1.287
1.289
1.292
1.301
1.316
1.332
1.349
1.362
1.366
1.355
1.352
1.352
1.357
1.366
1.385
1.407
1.431
1.449
1.451
1.452
1.210
1.217
1.220
1.220
1.230
1.242
1.252
1.262
1.272
1.272
1.280
1.847
1.826
1.842
1.821
1.841
1.850
1.936
1.967
1.966
1.959
1.781
1.806
1.805
1.818
1.835
1.858
1.890
1.901
1.919
1.920
—
1940
1941
1942
1943
1944
1945
1946 .
1947
1948 8
._
1.370
:
:
()
(2)
(2)
(2)
(2)
()
()
(22)
(2)
(2)
()
$0,528
$0,273
$0,648
.667
.698
.700
.715
.521
.522
.551
.543
.536
.279
.287
.308
.315
.324
.827
.820
.843
.870
.911
.739
.793
.860
.933
.985
.542
.568
.614
.670
.724
.332
.348
.386
.451
.505
.942
* 1.116
1.170
1.272
1.124
1.199
1.243
1.029
1.144
1.258
1.362
.773
.878
.991
1.068
.550
.612
.661
.710
1.625
1.129
1.163
1.232
.971
.646
1.729
1.212
1.230
1.283
1.012
.675
1.272
1.233
1.341
1.054
.700
1.254
1.382
1.082
.720
1.131
1.151
1.130
1.119
1.120
1.122
1.117
1.121
1.244
1.233
1.283
1.272
1.132
1.141
1.124
1.174
1.189
1.218
1.211
1.215
1.230
1.241
1.254
1.229
1.197
1.230
1.231
1.229
1.241
1.262
1.257
1.258
1.281
1.289
1.314
1.300
.953
.957
.960
.974
.985
.996
1.003
1.003
1.012
1.013
1.025
1.016
.648
.652
.644
.642
.643
.650
.652
.660
.672
.684
.687
.693
1.279
1.302
1.262
1.258
1.272
1.259
1.263
1.278
1.241
1.238
1.223
1.225
1.240
1.232
1.237
1.229
1.250
1.264
1.309
1.343
1.334
1.346
1.363
1.353
1.365
1.379
1.381
1.385
1.044
1.050
1.044
1.055
1.064
1.070
1.077
1.080
1.086
1.080
.695
.695
.695
.700
.707
.711
.714
.709
.722
.723
* Money payments only; additional value of room, board, uniforms, and tips is not included,
a N o t available.
3 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.
* Annual average includes retroactive pay increases not included in the monthly averages.
«Includes preliminary estimates for November and December except in the case of class I steam railroads
for which data are available only through August.
«Preliminary estimates based on incomplete data.
NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in railroads, and for all employees in other industries. Data are for pay-roll periods ending closest to the middle of
the month except in railroads where monthly pay-roll and employment figures are used.
Source: Department of Labor.
108
TABLE C - l 1.—Average weekly hours in selected industries, 1929-48
Manufacturing
Bitu- Private Class I
Retail
minous building steam Tele- Whole. . 1 .
saie
conNonrailcoal
trade
phone
trade
struc- roads
durable
mining
Total Durable
goods goods
tion
Period
Monthly average:
0)
0)
0)
0)
32.6
34.8
33.9
1937
1938
1939
36.6
39.2
38.6
35.6
37.7
1940
1941
1942
1943
1944
1945
1946
1947
1948 3 . . .
44.2
1929
1930
1931
_
1932___
1933__
1934...
1935__
1936___.
1947—First half.
Second
half..._
1948—First half.
Second
half3___
42.1
40.5
38.3
38.1
34.6
44.8
0)
0)
0)
(J)
0)
0)
0)
0)
(0
8
28.9
43.1
41.1
38.9
38.8
40.4
41.5
0)
47.2
30.1
32.8
33.4
32.1
32.6
41.1
42.5
43.2
42.5
43.4
8
38.8
38.9
39.1
41.3
42.6
42.8
42.2
41.7
41.8
43.5
43.3
42.6
43.0
47.8
48.3
47.7
46.8
46.6
28.1
31.1
32.9
36.6
43.4
33.1
34.8
36.4
38.4
39.6
44.0
45.6
46.9
48.7
49.1
39.5
40.1
40.5
41.9
42.3
41.2
41.0
41.3
42.2
42.9
42.9
42.5
41.6
40.5
40.3
46.3
45.6
45.3
44.7
44.5
42.3
41.6
40.6
37.8
39.0
38.1
37.6
37.3
48.5
45.9
46.3
46.2
(2)
39.4
37.3
39.2
42.7
41.8
41.2
41.1
40.3
40.5
40.2
40.0
44.2
43.9
44.5
44.2
44.6
38.4
41.9
40.0
35.1
33.5
28.3
27.2
29.5
27.0
37.3
41.0
40.0
35.0
38.0
36.1
37.7
37.4
36.1
37.4
26.4
28.8
27.9
23.5
27.1
38.1
40.6
42.9
44.9
45.2
39.3
42.1
45.1
46.6
46.6
37.0
38.9
40.3
42.5
43.1
43.4
40.4
40.3
40.1
44.1
40.2
40.6
40.5
42.3
40.5
40.1
39.6
0)
0)
Hotels
(year
round)
0)
0)
0)
0)
(0
0)
0)
(0
40.3
40.6
40.0
43.1
37.5
46.4
35.0
41.2
40.1
40.4
40.6
40.1
38.3
37.8
46.2
39.0
41.3
40.2
44.4
40.2
40.6
39.8
37.9
37.2
46.2
39.0
41.0
39.9
44.2
39.9
40.4
39.4
37.7
37.4
0)
39.5
41.1
40.1
44.3
1947—January
February...
March
April
May
June.
July
August
September..
October...
November..
December...
40.6
40.4
40.4
40.1
40.1
40.2
39.8
39.8
40.4
40.6
40.4
41.2
40.5
40.5
40.7
40.5
40.5
40.7
40.0
40.0
40.6
40.9
40.7
41.7
40.7
40.4
40.1
39.6
39.7
39.8
39.7
39.5
40.2
40.2
40.1
40.8
46.7
43.6
43.7
4 36.4
44.3
43.7
4 31.8
39.1
39.1
39.9
38.5
41.2
37.6
36.9
38.0
37.1
37.6
37.8
38.0
38.2
37.9
38.1
36.6
37.9
46.6
47.0
46.4
46.5
45.8
46.1
45.8
46.1
46.2
47.4
45.5
46.4
38.4
38.0
37.9
4 26.9
4 31.5
37.5
38.4
38.7
39.1
39.3
39.5
39.0
41.5
40.8
40.8
41.2
41.2
41.6
41.1
41.1
41.2
41.3
41.4
41.6
39.9
40.1
40.0
40.0
40.0
40.8
41.1
41.0
40.0
40.0
39.5
39.7
43.8
44.3
44.7
44.9
45.0
45.2
44.9
45.0
44.1
44.0
44.4
44.1
1948—January
February...
March
April
May
June
July.
August
September..
October s___.
November3.
40.5
40.2
40.4
40.1
39.9
40.2
39.8
40.1
39.8
39.9
39.8
40.9
40.5
40.9
40.5
40.1
40.5
40.0
40.7
40.0
40.7
40.4
40.0
39.9
39.9
39.6
39.6
39.8
39.5
39.5
39.6
39.1
39.2
40.9
38.7
40.6
4 27.0
40.3
39.9
4 34.2
39.4
37.7
38.6
37.2
36.7
37.1
37.0
37.1
37.9
37.8
37.8
37.5
37.4
1
46.6
46.5
46.7
45.2
45.0
46.9
46.1
46.3
38.9
38.7
38.7
38.8
39.4
39.5
39.8
39.4
39.4
39.4
41.0
41.1
40.9
41.0
41.2
41.1
41.2
41.3
41.2
41.0
39.8
40.0
39.8
39.8
39.9
40.3
40.8
41.0
40.2
39.7
43.9
44.6
44.0
44.2
44.2
44.1
44.0
44.9
43.9
44.3
C1)
0)
1
J
C)
0)
0)
0)
0)
0)
0)
Not available.
Average for the year not available because new series was started in April.
3 Includes preliminary estimates for November and December except in the case of class I steam railroads for which data are available only through August.
* Data for these months reflect work stoppages.
NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in railroads, and for all employees in other industries. Data are for pay-roll periods ending closest to the middle
of the month except in railroads where monthly pay-roll and employment figures are used.
Source: Department of Labor.
109
TABLE C-12.—Physical production index of goods and utilities, 1929-48
[1935-39=1001]
Nonagricultural production
Total
production
Period
Weights: a
Total
Nonagricultural
100.0
Agricultural
production
Total
nonagricultural
production
Industrial production
Total
Manufactures
Minerals
19.2
80.8
100.0
55.4
68.5
50.6
62.6
4.8
5.9
Electric
and
gas
utilities
Construction
Transportation
7.6
9.4
12.9
16.0
4.9
6.1
1929
112
97
116
110
110
107
180
117
82
1930
1931
1932
1933
1934
97
86
70
73
75
95
104
101
93
79
98
82
63
69
75
91
75
58
69
75
90
74
57
68
74
93
80
67
76
80
153
124
79
53
58
104
89
73
76
83
82
78
71
72
78
1935
1936
1937 .
1938
1939
87
99
111
94
109
96
85
108
105
106
85
102
111
91
110
87
103
113
89
109
87
104
113
87
109
86
99
112
97
106
69
101
106
101
123
88
101
110
95
106
85
97
106
100
112
1940
1941
1942
1943
1944
122
152
184
206
202
110
114
128
125
130
124
161
198
225
219
125
162
199
239
235
126
168
212
258
252
117
125
129
132
140
133
182
202
112
60
116
142
180
214
224
123
141
158
184
193
182
166
179
186
129
134
129
141
195
174
190
197
203
170
187
192
214
177
194
198
137
134
149
155
68
127
143
163
217
198
208
209
190
192
219
244
189
191
187
186
194
193
147
152
134
152
208
208
218
219
197
197
192
192
199
197
153
157
160
165
208
210
243
245
1945
1946
1947
1948 3
- . _
_
1
1947—First half
Second half
1948—First half 3
Second half
-_
8
8
8
8
1 All half year data have been seasonally adjusted except the electric and gas utilities for which no satisfactory adjustment factor is available.
2 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.
8 Estimates based on incomplete data.
* Not available. See footnote 5.
*Because of the extreme seasonal nature of agricultural crop production, only an annual index has been
computed.
Sources; Based on the following data:
Agricultural production.—Department of Agriculture index of farm output which measures the physical
volume of farm production for human use.
Minerals.—Federal Reserve index of mineral production.
Manufactures — Federal Reserve index of manufacturing production.
Construction.—Department of Commerce value of new construction activity deflated by their index of
construction costs and converted into relatives with 1935-39 as 100.
Transportation.—Department of Commerce index of transportation. The figures for 1947 and 1948 are
estimated by the Board of Governors of the Federal Reserve System on the basis of transportation data.
Electric and gas utilities— Based on the following series: Electric power generated for public use as reported
by the Federal Power Commission, and sales of gas to consumers as reported by the American Gas Asso.
ciation. 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 b y each of the utilities to the total revenues
produced by both in the base period 1935-39.
IIO
TABLE C-13.—Industrial production index, 1929-48
[1935-39=100, seasonally adjusted]
Total industrial
production
Period
Monthly average:
1929
Manufacture
3
Minerals
Durable
Total
Nondurable
110
110
132
93
107
91
75
58
69
75
90
74
57
68
74
98
67
41
54
65
84
79
70
79
81
93
80
67
76
80
1935
1936 . _
1937
1938
1939
87
103
113
89
109
87
104
113
87
109
83
108
122
78
109
90
100
106
95
109
86
99
112
97
106
1940
1941
1942
1943 .
1944
125
162
199
239
235
126
168
212
258
252
139
201
279
360
353
115
142
158
176
171
117
125
129
132
140
1945
1946
1947
19481
203
170
187
192
214
177
194
198
274
192
220
224
166
165
172
177
137
134
149
155
1947—First half
Second half
187
186
194
193
221
219
173
172
147
152
192
192
199
197
224
225
178
175
153
157
189
189
190
187
185
184
176
182
186
191
192
192
196
197
198
195
192
191
183
188
192
197
199
198
221
223
225
222
218
219
208
211
216
223
224
230
176
176
175
172
170
168
163
169
172
176
179
173
146
146
148
143
151
148
140
150
153
155
155
156
193
194
191
188
192
192
186
191
192
195
194
191
201
201
200
195
197
198
191
197
199
202
200
195
229
226
229
217
221
222
219
222
224
230
229
226
178
180
177
177
178
179
169
176
178
179
177
173
154
155
142
147
162
159
153
159
156
158
160
155
1930
1931
1932
1933
1934
„. .
1948—First half 1
Second half
.
1947—January
February
March.
April
May
June
July
August _
September
October _
November
December
1948—January
February..
March
April
May
June
July
August
September
October
_
November i
December * -
_
_
_. _. __
-«_
i Estimates based on incomplete data.
Source: Board of Governors of the Federal Reserve System
III
TABLE O14.—New construction activity, 1929-48
[Value put in place, millions of dollars]
Private construction
Public construction
By source of
funds
By type of construction
Total
Resi- Non- Pubnew
den- resilic
contial
den- utilstruc- Total
buildpritial
tion * vate
ing
and
2
(non- buildfarm
farm) ing
Total
public
1929-
9,873
7,476
2,797
2,822
1,857
2,397
237 2,160
19 1,254
1,124
19301931193219331934-
8,042
5,967
3,290
2,376
2,805
5,265
3,375
1,467
1,012
1,235
1,446
1,228
462
278
361
2,099
1,104
499
404
455
1,720
1,043
506
330
419
2,777
2,592
1,823
1,364
1,570
2,439
451 2,141
510 1,313
812
552
850
720
29 1,505
40 1,351
34
961
38
58
1,243
1,201
828
517
19351936193719381939-
3,230
4,836
5,487
5,186
6,307
1,676
2,550
3,390
3,076
3,808
665
1,131
1,372
1,511
2,114
472
712
1,088
764
785
539
707
930
801
909
1,554
2,286
2,097
2,110
2,499
1,262
1,154
989
1,257
1,024
943
1,121
1,242
39
33
39
74
148
70.9
927
902
858
806
1,326
1,156
1,178
1,484
19401941194219431944-
7,042
10,490
13,412
7,784
4,136
4,390
5,426
3,007
1,744
1,823
2,355
2,765
1,315
650
535
1,028
1,486
635
232
350
1,007 2,652
1,175 5,064
1,057 10,405
862 6,040
938 2,313
1,397
3,853
9,544
5,614
1,912
1,255
1,211
861
426
401
549
2,900
8,453
4,218
1,344
882
800
616
420
346
1,221
1,364
1,336
1,402
623
1945194619471948 3
2,716
10,458 8,253
13,977 10,893
17,666 13,631
684
3,183
5,260
1,014
3,346
3,131
3,615
1,018
1,724
2,502
3,036
2,092
2,205
3,084
4,035
1,558
1,074
1,175
1,339
534
1,131
1,909
2,696
1,160
386
272
772
229 1,233
164 1,500
546
1,161
1,622
2,371
Period
Federal
Military
State and fed- High- Other
and erally fi- ways publocal nanced
lic
industrial
Totals for period, not adjusted for seasonal variation
1947—First half
Second half___
1948—First half
Second half 3....
1947—January
February
March
April
May
June
July
August
_.
September
October.
___
November
December. _.
1948—January
February
March
April
May
June
July
August
September
October
November 3
December
5,677
8,300
4,432
6,461
1,935
3,325
1,504
1,627
1,509
1,839
518
727
657 1,182
102
127
426
807
717
905
7,720
9,946
6,104
7,527
3,120
3,860
1,650
1,965
1,334
1,702
1,616
2,419
531 1,085
808 1,611
83
81
555
945
978
873
823
859
928
703
662
679
713
790
885
966
300
280
285
310
355
405
455
500
540
590
630
610
275
258
241
238
242
250
254
260
267
275
287
284
128
124
153
165
193
230
257
282
279
264
224
203
170
161
180
215
242
277
298
822
337
368
291
223
83
81
76
84
90
104
112
120
121
128
99
77
87
80
104
131
152
173
186
202
216
240
192
146
18
15
15
19
18
17
21
23
23
24
19
17
39
36
50
76
100
125
137
149
159
178
119
65
113
110
115
120
124
135
140
150
155
166
153
141
500
400
475
525
585
635
680
695
685
650
600
550
273
265
266
264
277
305
324
332
334
333
330
312
175
172
199
235
258
295
314
327
313
282
248
218
209
172
226
287
341
381
397
445
450
442
374
311
71
55
71
94
113
127
133
155
154
146
120
100
138
117
155
193
228
254
264
290
296
296
254
211
15
12
13
15
15
13
14
15
15
14
12
11
56
41
57
98
136
167
169
200
190
180
126
80
138
119
156
174
190
201
214
230
245
248
236
220
1,032
1,162
1,264
1,364
1,423
1,497
1,432
1,320
1,157
1,009
1,166
1,311
1,461
1,616
1,715
1,799
_ 1,782
1,707
1,552
1,391
1,042
1,086
1,129
1,141
1,097
948
837
940
1,024
1,120
1,235
1,318
1,354
1,332
1,265
1,178
1,080
993 1,245
1 Excludes construction expenditures for crude petroleum and natural gas drilling, and, therefore does not
agree with the new construction expenditures in the gross national product.
2 Excludes farm and public utility; for 1929-32 includes negligible amount of public industrial and commercial building not segregable.
3 Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Sources: Departments of Commerce and Labor.
112
TABLE C-15.—Business expenditures for new plant and equipment, 1929-49
[Millions of dollars]
Manufacturing and mining Transportation
Total
1929..
9,165
3,596
1930..
1931..
1932..
1933..
1934..
7,610
4,712
2,608
2,137
3,080
2,541
1,435
930
992
1,460
1935..
1936..
1937..
1938-.
1939..
3,738
5,077
6,730
4,520
5,200
1,790
2,450
3,330
1,830
2,310
1940..
1941-.
1942..
1943..
1944..
6,490
8,190
6,110
4,530
5,210
1945-.
1946..
1947..
1948«
6,630
12,040
16,180
18,840
Manufac- Mining
turing
Railroad
0
m
840
33333
Total i
1
865
360
164
101
218
8
1,930
380
166
306
525
238
280
3,140
4,080
3,170
2,610
2,890
2,580
3,400
2,760
2,250
2,390
560
680
410
360
500
3,650
6,470
8,150
8,950
3,210
5,910
7,460
8,180
440
560
690
770
333
Period
(3)
(3)
(3)
Commercial and
miscellaneous a
Other
Electric
and gas
utilities
(4)
(4)
4,729
?
4,204
2,917
1,514
1,044
1,402
4)
4
8
)
280
()
480
1,782
2,321
2,875
2,452
1,850
440
560
540
460
580
390
340
260
190
280
550
710
680
540
490
1,980
2,490
1,470
730
970
550
570
910
1,310
320
660
800
690
630
1,040
1,900
2,610
1,480
3,300
4,430
5,280
(4)
(4)
(4)
(44)
Annual rates, not adjusted for seasonal variation
1947—First halfSecond half
14,200
18,160
7,220
9,100
6,600
8,320
620
780
760
1,060
820
780
1,560
2,240
5,000
1948— First half
Second half 5. _.
17,980
19,680
8,640
9,260
7,880
8,500
760
760
1,160
1,460
740
660
2,280
2,940
5,160
5,380
1947—First quarter...
Second quarter
Third quarter,i
Fourth quarter.
12,640
15,760
16,560
19,760
6,400
8,040
8,200
10,000
5,800
7,400
7,480
9,160
600
640
720
840
640
880
920
1,200
720
920
800
760
1,320
1,800
2,000
2,480
3,600
4,120
4,640
5,360
1948—First quarter .
Second quarter
Third quarter
Fourth quarter
16,680
19,280
19,320
20,040
7,920
9,360
9,160
9,360
7,200
8,560
8,360
8,640
720
800
800
720
1,080
1,240
1,320
1,600
720
760
680
640
2,000
2,560
2,760
3,120
4,960
5,360
5,440
5,320
1949—First quarter «..
17,560
7,840
7,120
720
1,480
600
2,720
4,880
1
Excludes agriculture.
2 Includes trade, service, finance, and communication for all years shown. Also includes prior to 1939,
transportation other than railroad, and electric and gas utilities not available separately for those years.
3 Not available separately for years prior to 1939.
* Included hi commercial and miscellaneous prior to 1939.
« Estimates for fourth quarter of 1948 and first quarter 1949 were based upon 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 1929-44 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 $10,000,000.
Sources: Securities and Exchange Commission and Department of Commerce (except as noted).
"3
TABLE G-16.—Inventories and sales in manufacturing and trade, 1939-48
Manufacturing 1
Wholesale *
Retail *
Millions of
dollars
Period
Inventories 3
Millions of
Millions of
Ratio
Ratio
Ratio
dollars
dollars
of inof inof inventoventoventories to Invenries to Invenries to
Sales * sales tories
a Sales * sales tories * Sales * sales
1939
11,516
5,112
2.25
3,200
2,505
1.28
5,502
3,504
1.57
1940
1941
1942.
1943
1944
12,873
17,024
19,221
19,897
19,122
5,859
8,172
10,346
12,603
13,402
2.20
2.08
1.86
1.58
1.43
3,357
4,151
3,702
3,577
3,686
2,790
3,650
4,016
4,330
4,505
1.20
1.14
6,011
7,620
7,874
7,350
7,396
3,866
4,624
4,803
5,310
5,798
1.55
1.65
1.64
1.38
1.28
12,371
12,020
15,671
1.45
1.95
1.79
4,216
5,823
7,545
4,777
6,138
7,304
.88
.95
—
17,924
23,435
28,020
7,502
11,049
12,953
6,387
8,399
9,860
1.17
1.32
1.31
1947—First half. __
Second half.
26,479
28,020
14,947
16,396
1.77
1.71
6,837
7,545
6,787
7,820
1.01
.96
11,948
12,953
9,520
10,202
1.26
1.27
1945.
1946
1947.-
-
.92
.83
.82
1.03
1948—First half...
29,727
17,129
1.74
8,011
7,558
1.06
14,065
10,660
1.32
1947—January
February. __
March
April
May
June
July
August
September._
October
November..
December...
24, 213
24,831
25,398
25,853
26,440
26,479
26,846
27,051
27,055
27,397
27,627
28,020
14,453
14,175
15, 546
15,398
15,048
15,063
14,361
15, 257
16, 597
18,082
16, 554
17, 523
1.68
1.75
1.63
1.68
1.76
1.76
1.87
1.77
1.63
1.52
1.67
1.60
6,135
6,398
6,841
6,749
6,690
6,837
6,699
7,068
7,233
7,342
7,467
7,545
6,967
6,459
6,796
6,843
6,859
6,800
7,096
7,072
7,763
8,716
8,013
8,262
.88
.99
11,427
11,653
11,832
11,974
11, 772
11,948
11,925
11,944
12,073
12,435
12,621
12,953
9,156
9,354
9,453
9,648
9,697
9,810
9,822
9,786
10,264
10,292
10,426
10,620
1.25
1.25
1.25
1.24
1.21
1.22
1.21
1.22
1.18
1.21
1.21
1.22
1948—January
February...
March
April
May
June
July
August
September. _
October 5.. _
November ».
28, 501
28, 768
29,064
29,161
29,437
29, 727
30, 236
30, 429
30, 710
30, 784
31,000
16, 552
16, 225
18,117
17, 229
16, 777
17,871
16, 403
18,169
18, 781
18, 894
18,200
1.72
1.77
1.60
1.69
1.75
1.66
1.84
1.67
1.64
1.63
1.70
7,850
7,885
7,869
7,777
7,801
7,953
7,930
8,100
8,243
8,394
8,536
7,692
7,121
7,726
7,652
7,389
7,766
7,796
8,161
8,286
8,376
8,248
13,384
13,751
14,040
13,907
13,951
14,065
14,080
14,145
14, 531
14,514
14, 652
10,464
10,463
10, 658
10,891
10,620
10,862
10,857
10,893
10,968
10,906
10,775
:1.28
1.01
.99
.98
1.01
.94
1.00
.93
.84
.93
.91
1.02
1.11
1.02
1.02
1.06
1.03
1.02
.99
.99
1.00
1.03
L.31
L.32
L.28
L.31
:L.29
'.L.30
L.30
1.32
1.33
]L.36
1 Not adjusted for seasonal variation.
2 Adjusted for seasonal variation.
• Book value, end of period.
4
Monthly average shown for year and half year and total for month.
«Preliminary figures based on incomplete data.
NOTE.—The inventory figures in this table do not agree with the estimates of "change in business inventories" included in the gross national product since they cover only manufacturing and trade rather than all
business,, and show inventories in terms of current book value without adjustment for revaluation.
Detail]*will not necessarily add to totals because of rounding.
Source: Department of Commerce (Office of Business Economics).
114
TABLE G-17.—Inventories and sales, by durable and nondurable goods, in manufacturing
and trade; 1939-48
[Not adjusted for seasonal variation]
Total
Period
Durable goods
Nondurable goods
Millions of
dollars
Millions of
Ratio
Ratio
dollars
of inof inventoventories
to
ries
to
Inven- Sales a sales Inven-1 Sales 2 sales
tories *
tories
Millions of
dollars
Ratio
of in-
Inven- Sales 2
tories i
ventories to
sales
1939..
20,001
11,119
1.80
7,938
3,335
2.38
12,063
7,784
1.55
1940...
1941...
1942...
1943—
1944...
21,997
28,437
30, 230
30, 346
29, 714
12,515
16,376
19,165
22, 242
23, 704
1.76
1.74
1.58
1.36
1.25
9,260
12.159
13', 297
13, 405
12, 559
4,173
6,027
6,668
8,100
8,543
2.24
2.02
1.99
1.65
1.47
12,737
16, 278
16, 933
16,941
17,155
8,342
10,349
12,497
14,142
15,161
1.53
1.57
1.35
1.20
1.13
1945
1946
1947
1947—First half....
Second half..
29,189
39, 846
47, 987
44,910
47, 991
23, 535
26,556
30,643
30,831
34,841
1.24
1.50
1.57
1.46
1.38
11, 230
15,964
20,003
18,953
20,007
7,660
7,735
10, 616
10,133
11,098
1.47
2.06
1.88
1.87
1.80
17,959
23, 882
27, 984
25, 957
27,984
15, 875
18,821
20,027
20, 698
23, 743
1.13
1.27
L.40
:L.25
]L.18
1948—First half....
51,354
34,908
1.47
21, 704
11,483
1.89
29,650
23,425
]L.27
1947—January
February...
March
April.
May
June
July
August
SeptemberOctober
November..
December..
41,237
42, 759
44,276
44, 781
44, 900
44, 910
44, 976
45,934
46,443
47,838
48,581
47,991
29, 718
28, 510
31,678
31,725
31,945
31,409
30,917
32,113
34,612
37,739
35,239
38,426
1.39
1.50
1.40
1.41
1.41
1.43
1.45
1.43
1.34
1.27
1.38
1.25
16,632
17, 454
18, 227
18,665
18, 864
18, 953
19,041
19,416
19,536
19,808
19,860
20,007
9,372
9,269
10, 342
10, 713
10, 613
10, 491
9,856
10,184
11,072
12,202
11,122
12,151
1.77
1.88
]L.76
L.74
L. 78
L.81
L. 93
L.91
:L.76
]L.62
L.79
L.65
24,605
25, 305
26, 049
26,116
26, 036
25, 957
25, 935
26,518
26,907
28,030
28,721
27,984
20,346
19, 241
21,336
21,012
21, 332
20,918
21, 061
21,929
23, 540
25,537
24,117
26,275
]L.21
]L.32
1948—January
February. _.
March
April
May
June.
July
August
SeptemberOctober
November..
49,130
50, 278
51,213
51,102
51,230
51,296
51,763
52,500
53,655
54, 526
55,337
33,939
32, 267
36,476
35,495
34,878
36,392
34,936
37,004
38,125
38,741
37,286
1.45
1.59
1.40
1.44
1.47
1.41
1.48
1.42
1.41
1.41
1.48
20,408
20,823
21,328
21,441
21,515
21,646
21,756
21,787
22,191
22, 527
22,852
10,625
10,495
12, 235
11,924
11,403
12,216
11,749
12,705
13,027
13, 303
12,733
L.92
L.98
28,722
29,455
29,885
29,661
29,715
29,650
30,007
30,713
31,464
31,999
32,485
23,314
21, 772
24,241
23,571
23,475
24,176
23,187
24,299
25,098
25,438
24,553
]L.74
]L.80
]L.89
]1.78
:L.86
L.72
1.71
1.69
]L.79
L.22
]L.24
]L.23
]L.22
]1.23
iL.21
:L.14
L.10
L.19
L.06
L.23
L.35
L.23
iL.26
iL.27
L.23
L.29
L.26
.25
.26
L32
* Book value, end of period.
8
Monthly average shown for year and half-year and total for month.
NOTE.—The inventory figures in this table do not agree with the estimates of "change in business inventories" included in the gross national product since they cover only manufacturing and trade rather than all
business, and show inventories in terms of current book value without adjustment for revaluation.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (Office of Business Economics).
TABLE G—18.—Sales, stocks, and outstanding orders at 296 department stores, 1939-48
Millions of dollars *
Period
Monthly average:
1939
Sales
(total for
month)
Stocks
(end of
month)
128
344
1940—
1941—
1942—
1943.
1944....
136
156
179
204
227
353
419
1945...
1946—
1947—
1948 8-
255
318
336
329
1947—First half....
Second half.
Outstanding
orders
(end of
month)
<*>
Ratio of
stocks
Ratio of
orders
Ratio of
orders
to stocks
2.69
534
108
194
263
530
560
2.60
2.69
3.35
2.49
2.35
0.79
1.24
1.47
2.60
2.47
0.31
.46
.44
1.04
1.05
563
714
823
918
729
909
553
483
2.21
2.25
2.45
2.79
2.86
2.86
1.65
1.47
1.29
1.27
.67
.53
299
373
817
828
487
619
2.73
2.22
1.63
1.66
.60
.75
1948—First half
Second half 3.
316
344
887
955
464
505
2.81
2.78
1.47
1.47
.52
1947—January
February. _.
March
April
May
June
July
August
SeptemberOctober
November..
December-.
255
250
331
321
336
304
253
274
341
367
416
584
766
835
866
850
817
765
731
789
827
913
941
770
619
607
2.43
2.43
1.48
1.20
1.05
1.54
2.36
2.28
1.99
1.81
1.45
544
3.00
3.34
2.62
2.65
2.43
2.52
2.89
2.88
2.43
2.49
2.26
1.32
.81
.73
.56
.45
.43
.61
.82
.79
.82
.73
.64
.71
1948—January
February...
March
April
May
June
July.
August
SeptemberOctober
November..
271
263
355
331
339
789
878
941
938
919
859
827
893
944
1,058
1,051
575
420
356
339
462
551
545
539
507
385
2.91
3.34
2.65
2.83
2.71
2.56
3.09
3.03
2.64
2.73
2.55
2.34
2.19
1.18
1.08
1.00
1.38
2.06
1.85
1.51
1.31
.80
.65
.45
.38
.37
.54
.67
.61
.57
.48
.37
295
357
387
412
354
469
625
677
i Not adjusted for seasonal variation.
a Not available.
3 Estimates 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. Data are not
available prior to 1939.
Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System.
TABLE G-19.—Distribution of selected agricultural products moving into consumption channels.
7939 and 7946-48
Distribution of supplies
Commodity and year
Exports
and shipments, as
a percent
of total
distribution
Million
pounds
17,493
21,367
22,242
21,232
Pounds
132.8
153.4
155.0
145
Percent
1.4
5.2
1.6
.8
108,556
112,666
113,644
112,295
824
809
792
768
Exports Military Civilian
and ship- distribu- distribution
tion
t *
Total i
Food:
Meat (carcass equivalent):
Per
capita
civilian
distribution
Million
pounds
17,739
23,469
23,252
21,792
Million
pounds
246
1,215
366
166
108,985
121,612
119,621
116,573
429
6,353
4,586
2,766
4,612
5,067
5,373
5,425
365
4,247
4,357
617
468
Canned fruit, excluding fruit juices
(processed weight):
1938-39 pack year
1946
1947.
1948 2
2,361
3,224
3,032
3,007
359
202
244
85
Dried fruit (processed
1938-39 marketing
1945-46 marketing
1946-47 marketing
1947-48 marketing
1,186
1,110
954
1,159
478
299
497
21,359
21,203
22,547
20,724
1,277
1,167
1,445
913
4,163
6,948
6,242
6,020
1939.
1946
1947.
1948«
Million
pounds
887
644
Dairy products (milk equivalent):
1939
1946.
1947
1948 K
Food fats and oils, excluding butter
(fat content basis):
1939
1946
1947
1948 3
weight):
year
year
year
year
2,593
1,391
1,512
.4
5.2
3.8
2.4
4,905
32.2
31.3
32.8
33.6
7.9
13.2
11.5
8.6
2,002
2,933
2,711
2,812
15.3
21.1
18.9
19.2
15.2
6.3
8.0
2.8
708
797
641
653
5.4
5.9
4.5
4.5
40.3
25.9
31.3
42.9
484
213
162
20,082
19,552
20,889
19,649
152.5
140.4
145.6
134.4
6.0
5.5
6.4
4.4
57
361
222
100
151
214
345
4,106
6,436
5,806
5,575
31.3
46.2
40.5
38.1
1.4
5.2
3.6
1.7
32,153
38,608
36,677
37,417
134
494
475
175
470
208
250
32,019
37,644
35,994
243
270
251
253
.4
1.3
1.3
Million
dozen
3,418
4,846
4,850
4,896
Million
dozen
3
414
229
194
Million
dozen
3,415
4,338
4,542
4,616
Number
89
77
no
Fresh fruits (farm weight):
1939
1946
1947
1948 2
Canned vegetables (processed weight):
1938-39 pack year
_
1946.
1947.
1948 2
_.
„
Fresh vegetables (farm weight):
1939
1946
19471948 2
_
Eggs (fresh egg equivalent):
1939
1946
1947.2
1948
See footnote at end of table.
117
Million
dozen
374
380
379
.1
8.5
4.7
4.0
T A B L E C—19.—Distribution of selected agricultural products moving into consumption channels,
7939 and 1946-48— Continued
Distribution of supplies
Commodity and year
Food and nonfood:
Wheat (grain equivalent):3
1939..
1946—
19471948 2....
_
_
Corn (grain equivalent): *
1939
1946
.„.
1947
1948 2
Per
capita
civilian
Exports Military Civilian distribudistribu- distribuTotal i and shiption
tion
tion
ments 1
Million
bushels
689
832
709
785
Million
bushels
782
1,193
1,210
1,310
Million
bushels
93
357
494
520
2,169
2,658
2,795
2,343
33
24
130
27
2,136
2,632
2,664
2,315
Thousand
bales *
3,629
4,205
4,597
3,228
Thousand
bales *
5 6,635
«8,591
«8,995
6 8,109
Million
pounds
Nonfood:
Cotton:
1938-39 crop
1945-46 crop
1946-47 crop
1947-48 crop
year.
year.
year.
year.
Thousand
bales *
10,264
12, 796
13,592
11,337
Tobacco: 6
1938-39 crop
1945-46 crop
1946-47 crop
1947-48 crop
year.
year.
year.
year.
Million
pounds
1,520
2,020
2,100
1,960
7
7
7
7
540
660
730
520
Million
bushels
Million
pounds
« 980
8 1,360
«1,370
«1,440
Pounds
food use
218
209
204
203
Exports
and shipments, as
a percent
of total
distribution
11.9
40.8
39.7
1.5
.9
4.7
1.2
Pounds
8 24.8
8 29.8
8 30.7
5 27.2
35.4
32.9
33.8
28.5
8 7.5
89.6
8 9.5
8 9.8
35.5
32.7
34.8
26.5
1
Includes military civilian feeding programs in liberated and occupied areas, both from current procurement and from surplus stock.
2a Preliminary estimates based on reports for first 8 months and forecasts for balance of year.
Includes amounts used for animal feed, industrial raw materials, and seed, except in per capita column.
If these amounts were excluded the percentages in the last column would be: 1939, 16.3; 1946, 42.2; 1947,
49.9; 1948, 51.0.
* Thousands of "running" bales, equal to about 490 pounds net per bale. Exports include cotton textiles
and yarns, on a raw cotton equivalent.
68 Estimated domestic distribution (i. e., 17. S. civilian plus U. S. military).
Domestically produced tobacco on a farm-sales weight equivalent basis, and imported tobacco on an
unstemmed-weight
basis.
7
Includes unmanufactured tobacco and an estimated farm-sales weight equivalent of the tobacco used in
the exports of manufactured tobacco products.
Source: Department of Agriculture.
n8
TABLE C-20.—Consumers'' price index, 1929-48
For moderate-income families in large cities
[1935-39=100]
Period
Monthly average:
1929
All
items
Food
Apparel
Kent
Fuel,
elec- House
Misceltricity, furand re- nish- laneous
frigera- ings
tion
122.5
132.5
115.3
141.4
112.5
111.7
104.6
119.4
108.7
97.6
92.4
95.7
126.0
103.9
86.5
84.1
93.7
112.7
102.6
90.8
87.9
96.1
137.5
130.3
116.9
100.7
94.4
111.4
108.9
103.4
100.0
101.4
108.9
98.0
85.4
84.2
92.8
105.1
104.1
101.7
98.4
97.9
98.1
99.1
102.7
100.8
99.4
100.4
101.3
105.3
97.8
95.2
96.8
97.6
102.8
102.2
100.5
94.2
96.4
100.9
104.1
104.3
100.7
100.2
100.2
99.9
99.0
94.8
96.3
104.3
103.3
101.3
98.1
98.7
101.0
101.5
100.7
100.2
105.2
116.5
123.6
125.5
96.6
105.5
123.9
138.0
136.1
101.7
106.3
124.2
129.7
138.8
104.6
106.2
108.5
108.0
108.2
99.7
102.2
105.4
107.7
109.8
100.5
107.3
122.2
125.6
136.4
101.1
104.0
110.9
115.8
121.3
128.4
139.3
159.2
171.2
139.1
159.6
193.8
210.7
145.9
160.2
185.8
197.7
108.3
108.6
111.2
117.2
110.3
112.4
121.1
133.6
145.8
159.2
184.4
195.6
124.1
128.8
139.9
149.6
1947—First half....
Second half..
155.4
163.0
187.0
200.7
183.4
188.1
109.0
113.4
117.7
124.6
181.5
187.4
138.3
141.6
1948—First half...
Second half V
169.1
173.7
208.3
213.5
195.7
200.2
116.4
118.2
130.8
136.9
193.9
197.6
147.0
152.7
1946—June.
133.3
145.6
157.2
108.5
110.5
156.1
127.9
1947—January
February.
March
April..
May.
June
July
August
September
October
November
December
153.3
153.2
156.3
156.2
156.0
157.1
158.4
160.3
163.8
163.8
164.9
167.0
183.8
182.3
189.5
188.0
187.6
190.5
193.1
196.5
203.5
201.6
202.7
206.9
179.0
181.5
184.3
184.9
185.0
185.7
184.7
185.9
187.6
189.0
190.2
191.2
108.8
108.9
109.0
109.0
109.2
109.2
110.0
111.2
113.6
114.9
115.2
115.4
117.3
117.5
117.6
118.4
117.7
117.7
119.5
123.8
124.6
125.2
126.9
127.8
179.1
180.8
182.3
182.5
181.9
182.6
184.3
184.2
187.5
187.8
188.9
191.4
137.1
137.4
138.2
139.2
139.0
139.1
139.5
139.8
140.8
141.8
143.0
144.4
168.8
167.5
166.9
169.3
170.5
171.7
173.7
174.5
174.5
173.6
172.2
209.7
204.7
202.3
207.9
210.9
214.1
216.8
216.6
215.2
211.5
207.5
192.1
195.1
196.3
196.4
197.5
196.9
197.1
199.7
201.0
201.6
201.4
115.9
116.0
116.3
116.3
116.7
117.0
117.3
117.7
118.5
118.7
118.8
129.5
130.0
130.3
130.7
131.8
132.6
134.8
136.8
137.3
137.8
137.9
192.3
193.0
194.9
194.7
193.6
194.8
195.9
196.3
198.1
198.8
198.7
146.4
146.4
146.2
147.8
147.5
147.5
150.8
152.4
152.7
153.7
153.9
1930_
1931
1932
1933
1934
..._
1935
1936
1937
1938.
1939
1940...
1941
1942
1943
1944
1945._1946
1947
19481
.-_
_..
._
1948—January _
February
March
April...
May
June
July
August
September
October
November
_
* Estimates based on data available through November 1948.
Source: Department of Labor.
TABLE C - 2 1 . — Wholesale price index, 1929-48
[1926=100]
Other than farm products and foods
Period
Average:
1929
1930
1931
1932
1933
1934
95.3 104.9
1935
1936
1937
1938
1939
1940
1941..
1942
1943
1944
83.0
100.5
95.4
94.0
94.3
82.6
79.2
71.4
77.0
86.2
79.3
73.9
72.1
75.3
92.7
84.9
75.1
75.8
81.5
77.7
69.8
64.4
62.5
69.7
85.3
86.7
95.2
90.3
90.5
79.0
78.7
82.6
77.0
76.0
80.6
81.7
89.7
86.8
86.3
68.3
70.5
77.8
73.3
74.8
77.0 88.5
84.4 94.3
95.5 102.4
94.9 102.7
95.2 104.3
77.3
82.0
89.7
92.2
93.6
88.3
64.8
48.2
51.4
65.3
90.5
74.6
61.0
60.5
70.5
85.2 100.0
75.0 86.1
70.2 72.9
71.2
78.4
80.3
66.3
54.9
64.8
72.9
78.5
67.5
70.3
66.3
73.3
92.1
84.5
80.2
79.8
86.9
80.0
80.8
86.3
78.6
77.1
78.8
80.9
86.4
68.5
65.3
83.7
82.1
85.5
73.6
70.4
77.9 89.6
79.6 95.4
85.3 104.6
81.7 92.8
81.3 95.6
70.9
71.5
76.3
66.7
69.7
73.5
76.2
77.6
76.5
73.1
86.4
87.0
95.7
95.7
94.4
83.0
89.0
95.5
96.9
98.5
73.8
84.8
96.9
97.4
98.4
71.7 95.8 94.8
76.2 99.4 103.2
78.5 103.1 110.2
80.8 103.8 111.4
83.0 103.8 115.5
105.8
121.1
152.1
164.9
1945
1946
1947.
19481
90.4
86.4
73.0
64.8
65.9
74.9
78.6 67.7 71.3
87.3 82.4 82.7
98.8 105.9 99.6
103.1 122.6 106.6
104.0 123.3 104.9
_
91.6 109.1
128.2
148.9
181.2
188.4
100.8
108.3
117.7
117.5
116.7
106.2 99.7 118.1 100.1 84.0 104.7 117.8 95.2 104.5 94.7
130.7 109.5 137.2 116.3 90.1 115.5 132.6 101.4 111.6 100.3
168.7 135.2 182.4 141.7 108.7 145.0 179.7 127.3 131.1 115.5
179.1 150.6 188.5 148.5 134.2 163.6 198.5 134.5 144.4 120.5
1947—First half.. .___ 146.7 174.7 161.8 131.0 173.8 139.7 101.2 140.8 175.2 128.5 128.7 114.1
157.: 187.3 175.4 139.3 191.1 143.6 115.8 149.1 183.8 126.3 133.4 116.6
Second half
1948—First half.. .
Second half *
163.5 190.4 176.9 148.5 190.1 149.5 131.5 156.4 194.6 136.0 142.2 121.6
166.4 186.4 181.: 152.8 186.9 147.4 136.8 170.8 202.5 132.9 146.6 119.5
112.2 129.9
1946—June
112.9 140.1 112.9 105.6 122.4 109.2
1947—January
February
March
April
May
June
July
August
SeptemberOctober
November
December
142.0
145.2
150.0
148.0
147.
147.
150.6
153.7
157.4
158.5
159.6
163.2
165.0
170.4
182.6
176.9
175.4
177.8
181.4
181.6
186.4
189.7
187.9
196.7
156.6
162.3
167.9
162.4
159.6
161.8
167.1
172.3
179.2
177.
177.9
178.4
128.4 176.2
129.4 174.1
131.7 175.1
132.4 172.1
132.3 171.5
131.6 173.8
133.5 179.1
136. 182.8
138.3 185.6
140.1 193.1
142.1 202.5
145.5 203.4
138.
139.5
140.5
140.3
139.9
139.9
140.5
141.8
142.4
143.4
145.
148.0
97.7
98.2
100.7
103.2
103.4
104.0
109.0
112.6
114.2
116.1
118.2
124.6
139.0
139.
141.1
141.3
141.9
142.0
143.1
148.5
150.1
150.5
150.8
151.5
170.2
174.8
177.5
178.1
176.2
174.1
175.5
179.6
183.4
185.8
187.
191.0
165.7
- 160.9
161.4
162.8
163.9
166.2
168.7
169.5
168.7
165.
163.9
162.3
199.2
185.3
186.0
186.7
189.1
196.0
195.2
191.0
189.9
183.5
180.8
178.0
179.9
172.4
173.8
176.
177.4
181.4
188.3
189.5
186.9
178.
174.3
169.8
148.3
147.6
147.
148.7
149.1
149.5
151.1
153.1
153.3
153.1
153.3
152.9
148.4
148.9
149.8
150.3
150.
149.6
149.4
148.9
147.9
146.9
146.1
145.4
130.0
130.8
130.9
131.6
132.6
133.1
135.7
136.6
136.7
137.2
137.3
137.
154.3
155.3
155.9
157.
157.1
158.
162.2
170.9
172.0
172.4
173.3
173.8
193.3
192.
193.1
195.0
196.4
196.8
199.9
203.6
204.0
203.5
1948—January.
February
March..
April
May
June
July
August
September
October...
November 1
December
__.
._
200.3
192.8
185.4
186.1
188.4
187.
189.
188.4
187.5
185.5
186.
184.4
i Estimates based on incomplete data.
Source: Department of Labor.
120
87.8
96.4 110. < 98.5
128.3
129.3
132.2
133.5
127.1
120.8
118.8
117.5
122.3
128.6
135.8
135.0
126.5
128.3
129.0
129.1
129.5
129.7
129.8
129.9
131.3
132.4
137.5
139.4
110.9
111.7
115.6
116.1
116.9
113.5
113.2
113.1
115.9
117.1
118.8
121.5
138.8
134.6
136.1
136.
134.
135.8
134.4
132.0
133.3
134.4
202.9 133.
201.2 130.0
141.3
141.8
142.0
142.3
142.6
143.2
144.5
145.4
146.6
147.4
148.2
147.5
123.6
120.1
120.8
121.8
121.5
121.5
120.3
119. 7
119.9
119.0
119.2
118.7
TABLE C-22.—Indexes of prices received and prices paid by farmers and parity ratio, 1929-48
Prices
received 1
Period
Monthly average:
1929
Prices paid
(including
interest
and taxes) *
Parity
ratio»
149
167
89
1930
1931
1932
1933
1934
128
90
68
72
90
160
141
124
120
129
80
64
55
60
70
1935
1936
1937
1938
1939
109
114
122
97
95
130
127
133
126
124
84
90
92
77
77
1940
1941
1942
1943
1944
100
124
159
192
195
125
132
150
162
169
80
94
106
119
115
202
233
278
287
172
193
231
249
117
121
120
115
1947—First half
Second half
270
286
225
238
120
120
1948—First half
Second half
291
283
249
249
117
114
*__
260
262
280
276
272
271
276
276
286
289
287
301
215
221
226
229
228
230
230
234
238
239
241
245
121
119
124
121
119
118
120
118
120
121
119
123
1948—January
February
March
_ __ __
April
9 ,
May
June
July
August
September
October
November
December
307
279
283
291
289
295
301
293
290
277
271
268
251
248
247
249
250
251
251
251
250
249
247
247
122
112
115
117
116
118
120
117
116
111
110
109
1945
1946
1947
1948.
__
.
1947—January....
February
March
April
May
June
July
August
September
October
November
December.
. .
i August 1909 to July 1914=100.
a 1910-14=100.
• Ratio of prices received to prices paid (including interest and taxes).
Source: Department of Agriculture.
121
TABLE C-23.—Consumer credit outstanding, 1929-48
[Millions of dollars]
End of period
Total
consumer
credit
Instalment credit
Total
Automobile
sale credit
Charge
accounts
Other i
Other
consumer
credit a
1929
7,628
3,158
1,318
1,840
1,749
2,721
1930__
1931...
1932__
1933._
1934...
6,821
5,518
4,085
3,912
4,389
2,688
2,204
1,518
1,588
1,860
928
637
322
459
576
1,760
1,567
1,196
1,129
1,284
,611
,381
,114
,081
,203
2,522
\ 933
, 453
[,243
,326
5,434
7,480
7,047
7,969
2,622
3,518
3,960
3,595
4,424
940
1,289
1,384
970
1,267
1,682
2,229
2,576
2,625
3,157
,292
,419
,459
,487
,544
,520
,851
2,061
1,965
2,001
9,115
9,862
6,452
5,310
5,747
5,417
5,887
2,922
1,933
2,005
1,729
1,942
482
175
200
3,945
2,440
1,758
1,805
,650
,764
,513
,498
,758
2,048
2,211
2,017
1,879
1,984
10.101
13,426
16,100
2,325
3,910
6,187
8,200
227
544
1,151
2,000
3,366
5,036
6,200
1,981
3,054
3,612
4,000
2,292
3,137
3,627
3,900
581
631
691
753
816
880
922
965
1,004
1,047
1,099
1,151
3,418
3,484
3,606
3,757
3,904
4,029
4,120
4,215
4,296
4,433
4,659
5,036
2,764
2,602
2,768
2,782
2,835
2,887
2,786
2,755
2,864
3,029
3,309
3,612
3,214
3,263
3,284
3,316
3,363
3,428
3,476
3,506
3,534
3,565
3,596
3,627
1,202
1,254
1,367
1,468
1,536
1,602
1,689
1,781
1,858
1,889
1,936
2,000
5,019
5,045
5,188
5,329
5,457
5,583
5,680
5,797
5,916
5,928
5,981
3,240
3,061
3,275
3,236
3,245
3,352
3,185
3,130
3,227
3,457
3,557
4,000
3,666
3,693
3,709
3,729
3,748
3,784
3,800
3,814
3,814
3,828
3,845
3,900
1935—
1936...
1937.—
1938—.
1939—
_.
-.
1940—
1941..
1942..
1943—
1944
1945.19461947
1948 »
1947—January
F e b r u a r y . _.
March
April
May
_.
June
July
August
September..
October
November..
December...
9,977
9,980
10,349
10,608
10,918
11, 224
11,304
11,441
11,698
12,074
12,663
13,426
3,999
4,115
4,297
4,510
4,720
4,909
5,042
5,180
5,300
5,480
5,758
6,187
1948—January
F e b r u a r y . _.
March
April
May..
June
July
August
September..
October *.__.
November *.
December 3.
13,127
13,053
13, 539
13,762
13,986
14,321
14,354
14, 522
14,815
15.102
15,319
16,100
6,221
6,299
6,555
6,797
6,993
7,185
7,369
7,578
7,774
7,817
7,917
8,200
1
Includes other sale credit and repair and modernization loans insured by Federal Housing Admin*
istration.
2
Includes single-payment loans of commercial banks, and pawnbrokers and service credit.
3 Estimates by Council of Economic Advisers.
* Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System (except as noted).
122
TABLE C-24.—Loans and investments of all commercial banks, 1929-48
[Billions of dollars]
Investments
End of month
Total
loans and
investments
Loans
Total
U. S. Government
obligations
Other
securities
1929—June 1
49.4
35.7
13.7
4.9
8.7
1930—June 11
1931—June
1932—June 1i
1933—June 1
1934—June
48.9
44.9
36.1
30.4
32.7
34.5
29.2
21.8
16.3
15.7
14.4
15.7
14.3
14.0
17.0
5.0
6.0
6.2
7.5
10.3
9.4
9.7
8.1
6.5
6.7
1935—June»
1936—December __
1937—December
1938—December
1939—December
34 6
39 5
38.3
38 7
40.7
14.9
16.4
17.1
16.4
17.2
19 7
23.1
21.2
22 3
23.4
12.7
15.3
14.2
15.1
16.3
7.0
7.8
7.1
7.2
7.1
43 9
50.7
67.4
85 1
105.5
18.8
21.7
19.2
19.1
21.6
25.1
29.0
48.2
66.0
83.9
17.8
21.8
41.4
59.8
77.6
7.4
7.2
6.8
6.1
6.3
1945—December
124.0
26.1
97.9
90.6
7.3
1946—June
December
119.4
114.0
27.1
31.1
92.3
82.9
84.5
74.8
7.8
8.1
1947—June.
112.8
116.3
33.7
38.1
79.1
78.2
70.5
69.2
8.5
9.0
1948—June - 2
December
113.9
114.2
39.9
42.3
74.0
71.9
64.8
62.8
9.2
9.1
1940—December
1941—December
1942—December
1943—December
1944—December
1
2
_
Complete end-of-year figures are not available for years prior to 1936.
Estimates by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System (except as noted).
123
TABLE C-25.—Adjusted deposits of all banks and currency outside banks, 1929-48
[Billions of dollars]
Total
deposits
S. Govadjusted U.
ernmentl
and curdeposits
rency outside banks
End of period
Other deposits and currency outside banks
Total
Demand
deposits
adjusted 2
Time
deposits 3
Currency
outside
banks
54.7
0.2
54.6
22.8
28.2
3.6
53.6
48.3
45.4
42.5
48.0
.3
.5
.5
1.0
1.7
53.2
47.9
44.9
41.5
46.3
21.0
17.4
15.7
15.0
18.5
28.7
26.0
24.5
21.7
23.2
3.6
4.5
4.7
4.8
4.7
62.2
57.4
56.6
59.0
64.1
.9
1.0
.8
.9
.8
51.3
56.4
55.8
58.1
63.3
22.1
25.5
24.0
26.0
29.8
24.2
25.4
26.2
26.3
27.1
4.9
5.5
5.6
5.8
6.4
1940
1941
1942
1943
1944
70.8
78.2
99.7
122.8
151.0
,8
1.9
8.4
10.4
20.8
70.0
76.3
91.3
112.4
130.2
34.9
39.0
48.9
60.8
66.9
27.7
27.7
28.4
32.7
39.8
7.3
9.6
13.9
18.8
23.5
1945
175.4
24.6
150.8
75.9
48.5
26.5
1946—June
171.2
167.1
13.4
3.1
157.8
164.0
79.5
83.3
51.8
54.0
26.5
26.7
165.5
171.4
1.4
1.5
164.1
170.0
82.1
87.1
55.7
56.4
26.3
26.5
167.9
170.1
2.2
2.1
165.7
168.0
82.7
84.7
57.4
57.4
25.6
25.9
1929
1930
1931
1932
1933.
1934
„
.
1935 . .
1936
1937
1938
1939
. . .
. . . .
1947—June
December _ 1948-—June
December 4
-
.
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.
8
Includes deposits in commercial banks, mutual savings banks, and Postal Savings System.
* Estimates by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System (except as noted).
124
TABLE C-26.—Estimated ownership of Federal securities, 1939-48
[Billions of dollars—par values *]
Gross debt and guaranteed obligations outstanding
End of period
Total
1939—December
1940—December
1941—December. . . .
1942—December
1493—December _
1944—December
1945—D ecember
1946—D ecember _
1947—December
1948—June
December 6__
47.6
50.9
64.3
112.5
170.1
232.1
278.7
259.5
257.0
252.4
252.9
Held by
U.S.
Government
agencies
and trust Total
funds
6.5
7.6
9.5
12.2
16.9
21.7
27.0
30.9
34.4
35.7
37.3
41.1
43.3
54.7
100.2
153.2
210.5
251.6
228.6
222.6
216.6
215.6
Held by public
Nonbank
private
State
Com- Federal corpora- Indiand local mercial
tions viduals*
Reserve
governand
ments 2 banks 3 banks associations 4
0.4
.5
.7
1.0
2.1
4.3
6.5
* 6.3
7.3
7.8
8.0
15.9
17.3
21.4
41.1
59.9
77.7
90.8
74.5
68.7
64.6
62.8
2.5
2.2
2.3
6.2
11.5
18.8
24.3
23.3
22.6
21.4
23.3
12.0
12.5
16.3
27.4
41.2
56.1
65.3
59.5
57.5
55.9
53.9
10.4
10.9
14.1
24.5
38.4
53.5
64.8
64.9
66.6
67.0
67.6
i United States savings bonds, Series A-D, E, and F, are included at current redemption values.
* Includes trust, sinking, and investment funds of State and local governments and their agencies, and
Territories and insular possessions.
8 Includes commercial banks, trust companies, and stock savings banks in the United States and in Territories and insular possessions. Figures exclude securities held in trust departments.
* Includes insurance companies, mutual savings banks, savings and loan associations, dealers and brokers
and foreign accounts in this country. Beginning with December 1946, the foreign accounts include investments by the International Bank for Reconstruction and Development and International Monetary Fund
in special non-interest bearing notes issued by the U.S. Government. Beginning with June 30,1947, includes
holdings of Federal land banks.
* Includes partnerships and personal trust accounts.
fi Estimates by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Treasury Department (except as noted).
125
T A B L E G-27.—Bond yields, long and short term interest rates and commercial loan rates,
selected years, 1929-48
[Percent per annum]
U. S. Government security
yields
Period
Bonds
9-12
month
certifiLong15 years
cates of term
par- and
over,
indebtedtially
taxl
ness
exempt 2 taxable
1929 average..
1933 average..
1935 average..
1937 average.
1939 average..
1941 average.
1943 average.
1945 average.
1946 average.
1947 average.
3.60
3.31
1.79
2.74
2.41
0.75
.81
.82
5.05
1.98
1.66
High grade corporate bond
yields
Average
(Moody's)
of rates Bankers
charged acceptcustom- ances 90
ers by
days—
banks in
New
Aaa
Baa principal
York
bonds bonds
Federal
Reserve
Bank
discount
rateNew
York
4.73
4.49
3.60
3.27
3.01
5.90
7.76
5.75
5.03
4.96
5.83
4.27
2.93
2.59
2.78
5.03
.63
.13
.43
.44
5.16
2.56
1.50
1.00
1.00
2.47
2.37
2.19
2.25
2.77
2.73
2.62
2.53
2.61
4.33
3.91
3.29
3.05
3.24
2.54
2.72
2.39
2.34
2.28
.44
.44
.44
.61
.87
1.00
U.OO
U.00
8 1.00
1.00
1948 average 8
1.14
2.44
2.82
3.47
2.61
1.11
1.34
1947—First quarter
Second quarter. __
Third quarter
Fourth quarter...
.84
.84
.86
1.00
2.20
2.20
2.24
2.34
2.56
2.54
2.57
2.78
3.13
3.18
3.19
3.44
2.31
2.38
2.21
2.22
.81
.81
.88
.97
1.00
1.00
1.00
1.00
1948—First quarter
Second quarter. __
Third quarter 5
Fourth quarter _.
1.09
1.09
1.14
1.22
2.45
2.42
2.45
2.44
2.85
2.77
2.83
2.83
3.53
3.40
3.42
3.52
2.46
2.59
2.70
2.70
1.06
1.06
1.13
1.19
1.22
1.25
1.38
1.50
1
Tax-exempt prior to Mar. 1,1941; taxable thereafter.
a Average of yields on all outstanding partially tax-exempt Government bonds due or callable after 8 years,
rom
1919 to 1925; after 12 years, from 1926 to 1934; and after 15 years, from 1935.
3
From October 30,1942 to April 24, 1946, a preferential rate of 0.50 percent was in effect for advances
secured by Government securities maturing in one year or less.
* No partially tax-exempt bonds due or callable in 15 years.
« Estimates by Council of Economic Advisers.
Sources: Treasury Department, Moody's Investors Service, and Board of Governors of the Federal
Reserve System (except as noted).
126
TABLE C-28.—Profits before and after taxes, all private corporations, 1929-48
[Billions of dollars]
Corporate profits after taxes
Corporate
profits
before
taxes
Corporate
tax liability i
1929..
9.8
1.4
8.4
5.8
2.6
19301931..
1932..
1933..
1934..
3.3
-.8
-3.0
.2
1.7
.8
.5
.4
.5
.7
2.5
-1.3
-3.4
-.4
1.0
5.5
4.1
2.6
2.1
2.6
-3.0
-5.4
-6.0
-2.4
-1.6
1935..
1936..
1937..
1938..
1939..
3.2
5.7
6.2
3.3
6.5
1.0
1.4
1.5
1.0
1.5
2.3
4.3
4.7
2.3
5.0
2.9
4.6
4.7
3.2
-.6
- . 32
()
-.9
1.2
1940..
1941..
1942-.
1943..
1944..
9.3
17.2
21.1
24.5
24.3
2.9
7.8
11.7
14.2
13.5
6.4
9.4
9.4
10.4
10.8
4.0
4.5
4.3
4.5
4.7
2.4
4.9
5.1
5.9
6.1
1945..
1946..
1947..
1948 3.
20.4
21.8
29.8
34.0
11.6
9.0
11.7
13.2
8.7
12.8
18.1
20.8
4.7
5.6
6.9
7.6
4.0
7.2
11.2
13.2
Period
Total
Dividend
payments
Undistributed
profits
Annual rates, seasonally adjusted
1947—First half....
Second half..
28.9
30.8
11.4
12.1
17.5
18.7
6.6
7.0
10.9
11.7
1948—First half
Second half 3_
32.4
35.5
12.6
13.8
19.8
21.7
7.3
7.9
12.5
13.8
1947—First quarter
Second quarter..
Third quarter...
Fourth quarter..
28.9
28.8
29.1
32.4
11.4
11.3
11.4
12.7
17.5
17.5
17.7
19.7
6.4
6.7
6.9
7.1
11.1
10.8
10.8
12.6
1948—First quarter
Second quarter...
Third quarter 3
Fourth quarter _.
31.4
33.4
35.5
35.5
12.2
13.0
13.8
13.8
19.2
20.4
21.7
21.7
7.3
7.3
7.7
8.1
11.9
13.1
14.0
13.6
1
Federal and State corporate income and excess profits taxes.
Minus 8 million dollars.
3
Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).
2
127
TABLE C-29.—Profits after taxes, 629 large private industrial corporations, by industry groups,
1939-48 i
[Millions of dollars]
Manufacturing and mining
Period
t
629
Number of companies
47
m
77
3
80
69
15
75
49
45
1939
1,465
146
115
223
102
119
70
151
98
186
134
122
1940
1941
1942..
1943
1944.
1,818
2,163
1,769
1,800
1,896
278
325
226
204
194
158
193
159
165
174
242
274
209
201
222
173
227
182
180
190
133
153
138
128
115
88
113
90
83
148
159
151
162
175
112
174
152
186
220
194
207
164
170
187
160
187
136
149
147
132
152
161
171
184
1,965
2,552
3,671
189
282
437
164
171
334
241
131
417
207
129
205
109
135
198
90
163
199
357
354
224
281
480
187
275
345
155
302
370
202
324
293
1945
1946..
1947
_._.
30
74
Totals for period, not adjusted for seasonal variation
1947—First half....
Second half..
966
113
106
1948—First half—.
Second half..
1,065
115
90
140
871
1947—First quarter
Second quarter.„__ 866
Third quarter
900
Fourth quarter
1,033
126
100
100
112
70
83
77
105
94
105
103
115
100
109
81
66
100
140
67
80
193
50
64
85
108
110
121
160
87
81
88
100
67
92
93
90
63
71
80
80
114
1948—First quarter
129
192
1,023
77
57
91
101
1,101
110
194
Second quarter
151
86
98
100
77
1,178
186
Third quarter.. .
150
91
163
103
107
80
1 Profits after Federal and State income and excess-profits taxes.
2 Includes 29 companies engaged in wholesale and retail trade (largely department stores), 13 in the amusement industry, 21 in shipping and transportation other than railroads (largely air lines), and 11 companies
furnishing scattered types of service.
Source: Compiled by the Board of Governors of the Federal Reserve System and based on published
reports of various industrial corporations.
TABLE C-30.—Relation of profits before and after taxes to sales, private corporations, excluding
finance, insurance, and real estate, 7946-48
Private corporations, excluding finance, insurance, and real estate
Manufacturing
Period
Total
Mining
Total
Profits before taxes as percent of sales:
1946
1947
1948—First quarter
Second quarter
Third quarter 2... _
7.9
8.6
8.6
8.9
9.2
11.5
14.9
16.0
16.3
16.9
8.7
10.3
10.2
10.5
11.1
Other
Metal manuindus- facturtries
ing
5.8
11.1
11.0
11.2
12.7
10.0
9.9
9.8
10.2
10.2
ComWholemunisale
All
Trans- cations
and
other
and
retail portaindustion
public tries i
trade
utilities
5.6
4.8
5.0
4.8
4.5
Profits after taxes as percent
of sales:
5.1
4.6
8.2
3.3
2.9
1946
6.0
6.2
5.2
10.5
6.6
1947
6.1
2.8
6.2
5.2
6.5
1948—First quarter.
11.2
6.1
2.9
6.4
5.4
6.7
Second quarter
6.3
2.9
11.4
6.8
5.6
7.5
Third quarter«...
6.3
2.7
11.8
i Includes agriculture, forestry and fisheries, contract construction, and services.
s Estimates based on incomplete data.
Source: Department of Commerce.
128
6.0
7.2
4.7
8.9
11.4
18.5
15.7
16.7
15.2
13.6
9.0
8.3
7.5
8.0
7.9
2.5
4.2
2.8
5.3
6.9
11.2
9.6
10.2
9.3
8.3
5.3
4.9
4.4
4.8
4.7
TABLE C-31.—Relation of profits before and after taxes to investment) private manufacturing
corporations, by industry groups, 1947—48
Ratio of profits (annual rate) to stockholders'
equity
Industry group
Before Federal taxes
All private manufacturing corporations.
24.7
26.8
25.2
25.2
29.5
16.2
30.6
31.4
18.4
16.0
39.2
31.6
38.8
22.0
18.0
34.0
17.6
24.0
28.0
26.8
23.6
30.8
Furniture and fixtures.
Paper and allied products
Printing and publishing (except newspapers)
Chemicals and allied products..
Products of petroleum and coal__
28.9
33.8
28.8
25.1
18.8
32.8
31.2
25.6
27.6
32.8
28.8
28.0
26.4
22.8
27.6
24.8
26.0
25.2
24.0
Rubber products
Leather and leather products
Stone, clay, and glass products..
Primary nonferrous metal industries
Primary iron and steel industries
24.2
23.8
22.7
19.3
19.2
20.0
20.0
18.4
21.6
20.8
23.6
17.2
26.0
21.6
20.4
20.8
20.0
27.6
21.2
24.0
Fabricated metal products
Machinery (except electrical and transportation)
Electrical machinery
Transportation equipment (except motor vehicles)
Motor vehicles and parts
28.0
25.8
30.5
4.8
28.2
28.0
28.8
28.8
12.0
30.8
26.0
28.0
26.8
14.4
29.6
28.0
24.8
22.8
11.6
36.4
Instruments; photographic and optical goods; watches
and clocks.Miscellaneous manufacturing (including ordnance)
22.6
24.3
19.6
21.2
22.4
18.4
21.6
23.6
Food
Tobacco manufactures
Textile mill products.
Apparel and finished textiles
Lumber and wood products..
_
__
After Federal taxes
All private manufacturing corporations..
15.1
16.8
16.0
16.0
Food
Tobacco manufactures
Textile mill products
Apparel and finished textiles
Lumber and wood products.
17.4
9.8
18.4
18.5
22.0
10.8
10.0
24.0
18.8
24.8
13.6
11.6
20.8
10.4
20.8
14.8
17.6
16.0
14.4
19.2
Furniture and fixtures
Paper and allied products
Printing and publishing (except newspapers)..
Chemicals and allied products
Products of petroleum and coal
«
17.3
20.8
17.4
15.5
14.0
19.6
19.2
15.6
17.2
23.2
17.6
17.2
16.0
14.0
20.0
13.6
15.2
16.8
16.0
18.0
Rubber products
Leather and leather products
Stone, clay, and glass products
Primary nonferrous metal industries Primary iron and steel industries
12.2
13.8
13.7
11.6
11.7
11.2
12.0
11.2
14.0
12.8
13.6
10.4
16.4
13.6
12.8
12.0
11.6
17.2
13.6
14.8
Fabricated metal products.
Machinery (except electrical and transportation).
Electrical machinery..
Transportation equipment (except motor vehicles)
Motor vehicles and parts
17.0
15.4
18.4
.4
15.8
17.2
17.6
16.8
6.8
17.6
16.4
17.2
15.6
8.4
17.6
17.2
14.8
14.0
6.8
21.2
Instruments; photographic and optical goods; watches
and clocks.._
_.
Miscellaneous manufacturing (including ordnance)
14.1
14.0
12.4
12.4
13.6
10.4
13.2
14.8
_.
Sources: Federal Trade Commission and Securities and Exchange Commission.
129
TABLE C—32.—Relation of profits before and after taxes to sales, private manufacturing corpora'
tions, bjy industry groups, 7947—48
Profits in cents per dollar of sales
1948
Industry group
1947 total
First
quarter
Second
quarter
Third
quarter
Before Federal taxes
11.0
11.5
11.1
11.0
7.1
6.7
13.7
7.8
18.1
5.0
6.6
15.1
7.6
19.4
5.6
6.6
14.7
4.8
16.1
6.1
9.7
12.8
5.8
15.1
Furniture and fixtures.Paper and allied products
Printing and publishing (except newspapers)
Chemicals and allied products
Products of petroleum and coal
10.1
17.4
10.1
14.2
14.6
11.2
15.9
9.1
15.1
19.1
9.9
14.6
9.4
12.8
18.8
8.3
12.8
9.4
14.5
16.4
Rubber products..
-.
Leather and leather products
Stone, clay, and glass products.
Primary nonferrous metal industries
Primary iron and steel industries
8.7
7.4
13.1
14.6
10.9
7.7
5.9
11.0
14.6
11.3
8.8
5.7
14.9
13.3
11.0
7.8
6.2
15.5
12.6
12.5
Fabricated metal products
Machinery (except electrical and transportation)
Electrical machinery
Transportation equipment (except motor vehicles)
Motor vehicles and parts
12.1
12.1
10.4
2.8
10.7
12.0
12.6
10.4
6.9
11.1
11.4
12.1
10.3
7.3
10.7
11.4
11.5
9.0
5.3
12.5
Instruments; photographic and optical goods; watches
and clocks
Miscellaneous manufacturing (including ordnance)
12.5
10.8
12.1
9.5
12.7
8.8
12.3
10.4
All private manufacturing corporations
Food
_
Tobacco manufactures
Textile mill products
Apparel and finished textiles
Lumber and wood products
_
_-.
-_
_
After Federal taxes
6.7
7.2
7.0
6.9
Food
Tobacco manufactures
Textile mill products
Apparel and finished textiles _
Lumber and wood products._
4.2
4.1
8.2
4.6
11.4
2.9
4.1
9.2
4.5
12.3
3.4
4.2
9.0
2.8
10.3
3.7
6.1
7.7
3.6
9.5
Furniture and fixtures
Paper and allied products
Printing and publishing (except newspapers).
Chemicals and allied products—
Products of petroleum and coal
_
6.0
10.7
6.1
8.7
10.9
6.7
9.7
5.6
9.4
13.5
6.0
8.9
5.7
7.9
13.6
4.8
7.8
6.1
9.2
12.2
4.4
4.3
7.9
8.8
6.6
4.3
3.5
6.6
9.4
6.9
5.1
3.4
9.3
8.4
6.7
4.5
3.7
9.6
8.1
7.7
7.4
7.2
6.3
.3
6.0
7.3
7.7
6.1
3.8
6.4
7.1
7.4
6.0
4.4
6.4
7.0
6.9
5.5
3.0
7.3
7.8
6.2
7.5
5.5
7.7
4.9
7.6
6.4
All private manufacturing corporations..
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)
Sources: Federal Tra.de Commission and Securities and Exchange Commission.
I3Q
TABLE C-33.—Relation of profits before and after taxes to investment and to sales, all private
manufacturing corporations, by sizje classes, 1947-48
Before Federal taxes
Assets class (thousands
of dollars)
After Federal taxes
1948
1947
total
First
quarter
Second
quarter
1948
1947
total
Third
quarter
First
quarter
Second
quarter
Third
quarter
Katio of profits (annual rate) to stockholders' equity
All sizes. _
1 to 249
250 to 999
1,000 to 4,999
5,000 to 99,999
100,000 and over
__
24.7
26.8
25.2
25.2
15.1
16.8
16.0
16.0
24.4
29.2
30.6
27.3
20.3
14.4
28.0
28.0
27.2
26.8
21.6
27.6
26.4
26.8
23.6
23.2
23.2
25.2
25.6
26.4
14.8
16.9
18.2
16.5
12.9
7.2
16.4
16.4
16.4
17.2
13.6
17.2
16.0
16.4
15.2
15.2
14.0
15.2
15.6
17.2
Profits in cents per dollar of sales
All sizes. _
1 to 249
250 to 999
1,000 to 4.999
5,000 to 99,999
100,000 and over
11.0
11.5
11.1
11.0
6.7
7.2
7.0
6.9
6.5
8.8
10.7
11.9
11.4
4.0
8.4
10.0
11.6
13.5
5.6
8.5
9.5
11.5
12.5
5.8
7.3
9.2
11.1
12.8
3.9
5.1
6.3
7.2
7.2
2.0
4.9
6.0
7.1
8.7
3.6
5.3
5.8
7.1
8.1
3.8
4.4
5.6
6.8
8.3
Sources: Federal Trade Commission and Securities and Exchange Commission.
TABLE C-34.—Sources and uses of corporate funds, 1947-48*
[Billions of dollars]
Use or source of funds
Uses:
Plant and equipment outlays
Inventories (increase in book value)
Increase in customer
financing
Net repayment of R F C loans
Other net uses
1947
_
_-
_
Total uses of funds....
Sources:
Internal sources:
Funds retained from operations:
Depreciation reserves
Retained net earnings and depletion allowances-Reduction in cash and XT. S. Government securities
External sources:
Increase in bank loans:
Short-term
Long-term
Increase in mortgage loans
New security issues:
Bonds _ _ _
_
Stocks
Increase in liability for Federal income tax_
Increase in trade debt
Other net sources
_
Total sources of funds
Discrepancy (sources less uses)
__
1948 *
15.0
7.2
5.9
.2
0
17.1
5.5
3.3
28.3
26.3
4.5
10.6
.3
4.9
12,5
.2
1.6
1.3
.8
.4
.4
.8
3.1
1.3
2.4
2.4
.8
4.8
1.1
1.2
.6
0
29.1
26.9
.8
.6
i Excludes banks and insurance companies.
3
Estimates based on incomplete data.
s Net increase (less than 50 million dollars) of such loans.
Sources: Department of Commerce estimates based on Securities and Exchange Commission and other
financial data.
TABLE C-35.—The international transactions of the United States, 1946-48
[Millions of dollars]
1947
1946
Item
Exports of goods and services:
Recorded goods
*
Other goods 8
Total goods
Services
Income on investments
_
-_ _
Total exports
Imports of goods and services:
Recorded goods
Other goods 3
Total goods
Services
Income on investments
-
Total imports.Surplus of exports of goods and services:
Recorded goods. _ _
Other goods
Total goods
Services
Income on investments
Total surplus of exports
Means of financing surplus of exports of goods
a n d services:
Net liquidation of gold and dollar assets
by foreign countries
Net dollar disbursements by:
International Monetary F u n d
International Bank
N e t U. S. private capital outflow to foreign countries
Net U . S Government loans
Net U . S. Government unilateral transfers
Net private unilateral transfers
Total means of financing
Errors and omissions
1948
Second Total i
half
Total
First
half
10,188
1,686
15,339
717
7,961
301
7,378
416
12,495
810
6,558
489
5,937
321
11,874
2,272
820
16,056
2,611
1,074
8,262
1,376
455
7,794
1,235
619
13,305
2,189
1,282
7,047
1,082
536
6,258
1,107
746
14,966
19,741
10,093
9,648
16,776
8,665
8,111
4,908
260
5,733
338
2,861
208
2,872
130
6,902
615
3,487
324
3,415
291
5,168
1,783
216
6,071
2,165
227
3,069
996
106
3,002
1,169
121
7,517
2,467
269
3,811
1,164
112
3,706
1,303
157
7,167
8,463
4,171
4,292
10,253
5,087
5,166
5,280
1,426
9,606
379
5,100
93
4,506
286
5,593
195
3,071
165
2,522
30
6,706
489
604
9,985
446
847
5,193
380
349
4,792
66
498
5,788
-278
1,013
3,236
-82
424
2,552
-196
589
7,779
11, 278
5,922
5,356
6,523
3,578
2,945
1,968
4,514
2,341
2,173
1,129
920
209
464
297
56
92
408
205
170
206
154
170
16
36
335
2,774
727
3,900
508
2,392
219
1,508
905
402
459
-145
2,279
598
1,812
568
901
264
911
304
4,164
598
446
547
1,602
319
2,562
279
7,954 12,282
-155 -1,004
6,554
-632
5,728
7,574
-372 -1,051
4,158
-580
3,416
-471
First
half
Second
halfi
1 Estimates based on incomplete data.
2 Figures for recorded exports of goods in 1946 and 1947 have been adjusted to include goods shipped to
United States armed forces abroad for distribution to civilians in occupied areas in order to make them
comparable with figures for 1948. Such shipments are included in exports as recorded by the Bureau of
t h 3e Census in 1948 b u t were not so included in prior years.
Includes goods sold to or bought from other countries t h a t have not been shipped from or into the United
States customs area and other adjustments.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.
132
TABLE C-36.—United States Government aid to foreign countries, 1946-48
[Millions of dollars]
1947
Type of aid
1946
total
A. Unilateral payments:
Straight lend-lease
209
UNRRA
1,524
Post-UNRRA
Civilian supplies for occupied
areas
539
Transfers to Philippines
60
Chinese aid
_
_ __
15
Greek-Turkish aid.
International Refugee OrganizationsInterim aid.
_
European Recovery Program
Other —
170
1948
First Second Third Fourth First Second Third Fourth
quar- quar- quar- quar- quar- quar- quar- quarter
ter
ter i
ter
ter
ter
ter
ter
285
209
2
49
98
145
56
21
12
(2)
219
18
240
20
306
38
215
20
341
11
38
36
91
287
23
1
95
400
45
77
105
15
2
12
33
301
12
62
564
43
8
8
822
(( ))
101
113
33
58
45
21
197
204
43
2,517
238
623
179
584
127
577
85
488
69
878
71
892
97
1,320
78
1,420
100
Ejq u a 1 s: Net unilateral payments
2,279
444
457
492
419
807
795
1,242
1,320
1
1
96
280
500
60
249
950
53
61
1,300
65
206
100
177
170
300
44
145
13
70
317
159
159
5
2,715
12
28
49
1
2
5
4
6
Total, long-term loans and investments
Less: Repayments _ _
3,320
90
3,808
51
1,467
34
1,416
40
374
49
652
52
192
32
89
212
70
40
Equals: Net long-term loans
and investments, including
International Bank and International Fund
3,230
3,757
1,433
1,376
325
600
161
-123
30
Total unilateral payments
Less: Unilateral receipts. _
B. Long-term loans and investments:
Lend-lease credits
Surplus property including ship
sales
- - . . .
Export-Import Bank
United Kingdom loan
Investment in International
Bank
._
._
Investment in International
Monetary Fund
European Recovery Program
Other
600
841
945
600
(2)
8
((22))
Less: Investments in International
Bank and International Fund
Equals: Net long-term loans
and investments, excluding
International Bank and International Fund
322
2,904
159
2,908
853
1,274
1,376
325
600
161
-123
30
C. Short-term loans (net)
-134
1
264
-175
-18
-89
-125
-32
-20
Net unilateral payments and loans
and investments, excluding International Bank and International
Fund (A+ B-f- C)
5,053
1,298
1,995
1,693
726
1,318
831
1,087
1,330
i Estimates based on incomplete data.
»Not available.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.
133
TABLE G-37.—United States merchandise exports, including reexports, by areas, 1936-38 quarterly
average, 1947 and 1948
Period
Total
Other
exports,
includ- Canada Western
ing
Hemireexsphere
ports
AusERP
Other
coun- Europe
Asia* tralia
Africa
and
tries *
Oceania
Millions of dollars
Quarterly average:
1936-38
1947
1948 *
742
3,835
3,124
1947—First quarter
Second quarter..
Third quarter. _.
Fourth quarter..
3,775
4,186
3,716
471
572
509
522
1,063
1948—First quarter
Second quarter..
Third quarter...
Fourth quarter *
3,319
3,238
2,937
3,000
425
494
484
(3)
914
902
736
(3)
113
519
00
32
205
138
282
1,027
1,323
3
()
(3)
1,006
1,089
1,368
1,440
1,324
1,160
133
162
86
92
550
618
547
532
64
74
97
86
183
230
202
206
1,143
1,062
84
33
38
513
507
486
42
34
30
197
207
195
952
968
(3)
31
118
(3)
09
122
562
09
09
23
80
09
09
09
09
Percentage of total
1947—First quarter...
Second quarter.
Third quarter..
Fourth quarter.
1948—First quarter..,
Second quarter.
Third quarter.
100
100
15.3
13.5
18.6
26.8
38.1
34.5
4.2
3.1
16.4
14.7
3.1
2.1
4.3
5.4
8888 888
Quarterly average:
1936-38
1947-
12.5
13.7
13.7
14.3
26.6
26.0
25.6
29.0
36.2
34.4
35.6
31.7
3.5
3.9
2.3
2.5
14.6
14.8
14.7
14.5
1.7
1.8
2.6
2.3
4.8
5.5
5.4
5.6
12.8
27.5
15.2
27.8
16.5 , 25.1
34.4
32.8
33.0
2.5
1.0
1.3
15.5
15.7
16.5
1.3
1.0
1.0
6.0
6.4
6.6
i Turkey is included with E R P countries and excluded from Asia. Exports to Germany in the postwar
period relate almost wholly to exports to the three Western zones.
* Estimate based on incomplete data.
»Not available.
NOTE.—Data in this table cover all merchandise, includmg reexports, shipped from the United States
customs area to foreign countries including, in 1947 and 1948, goods destined to United States armed forces
atjroad for distribution in occupied areas as civilian supplies.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.
134
TABLE G-38.—United States domestic merchandise exports, by economic classes, 1936-38 quarterly
average, 1947 and 1948
Period
Total
domestic
exports
Crude
materials
Crude
foodstuffs
Manufactured food- Semimanufactures
stuffs
Finished
manufactures
Millions of dollars
Quarterly average:
1936-38
1947
19481
731
3,790
3,094
1947—First quarter
Second quarter
Third quarter
Fourth quarter
3,713
4,140
3,683
3,624
430
431
352
389
319
333
369
324
1948—First quarter
Second quarter
Third quarter
Fourth quarter *
3,288
3,207
2,909
2,970
329
328
374
322
246
360
(2)
(2)
167
400
<2)
(2)
34
336
(2)
(2)
42
439
130
446
358
2,168
455
490
436
376
384
485
478
438
2,124
2,402
2,049
2,097
344
371
308
381
357
314
1,912
1,905
1,552
<2)
00
(J)
Percentage of total
Quarterly average:
1936-381947
100
100
22.8
10.6
4.7
8.9
5.7
11.6
17.8
11.8
49.0
57.2
1947—First quarter..
Second quarter__
Third quarter
Fourth quarter
100
100
100
100
11.6
10.4
9.6
10.7
8.6
8.0
10.0
8.9
12.3
11.8
11.8
10.4
10.3
11.7
13.0
12.1
67.2
58J3
55.6
57.9
1948—First quarter
Second quarter___
Third quarter....
100
100
100
10.0
10.2
12.9
9.8
7.7
12.4
10.5
11.6
10.6
11.6
11.1
10.8
58.2
59.4
63.4
1
Estimate based on incomplete data.
Not available.
NOTE.—Data in this table cover all domestic merchandise shipped from the United States customs area
to foreign countries including, in 1947 and 1948, goods destined to United States armed forces abroad for
distribution in occupied areas as civilian supplies.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.
2
TABLE C-39.—Indexes of quantity and unit value of United States domestic merchandise
exports, by economic classes, 1936-38 quarterly average, 1947 and 1948
[1936-38= 100]
Period
Total
domestic
exports
Crude
materials
Crude
foodstuffs
Manufactured
foodstuffs
Semimanufactures
Finished
manufactures
Quantity indexes
Quarterly average:
1936-38
1947
1948 i .
100
275
211
100
123
91
100
397
333
100
478
353
100
203
146
100
332
258
1947—First quarter
Second quarter __
Third quarter.. _
Fourth quarter__
281
299
260
249
130
127
101
110
421
414
426
334
497
523
480
388
189
221
213
191
341
367
303
307
1948—First quarter
Second quarter^.
Third quarter
220
217
197
87
86
100
324
266
409
355
388
316
160
149
130
275
275
225
Unit value indexes
Quarterly average:
1936-38
1947
19481
100
188
203
100
196
227
100
247
272
100
218
230
100
169
186
100
182
194
1947—First quarter
Second quarter
Third quarter
Fourth quarter
181
189
194
199
197
203
208
210
221
235
252
283
217
222
215
229
157
169
173
177
174
183
189
191
1948—First quarter
Second quarter
Third quarter
204
202
202
227
229
224
290
269
267
230
227
232
184
185
187
194
194
193
i Average of three quarters.
NOTE.—The indexes of quantity are a measure of t h e volume of trade after the influence on value of changes
inaverage prices has been eliminated. T h e indexes of unit value provide a measure of change in the average
prices at which trade transactions are reported in official foreign trade statistics, including change in average
prices that result from changes in the commodity composition of trade. T h e indexes for 1947 and 1948 are
based on data which include goods destined to t h e United States armed forces abroad for distribution to
civilians in occupied areas.
Source: Department of Commerce.
x36
TABLE G—40.—United States general merchandise imports, by areas, 1936—38 quarterly average,
1947 and 1948
Other
Total
general Canada Western
Hemiimports
sphere
ERP
countries i
Other
Europe Asia i
Australia
Africa
and
Oceania
Millions of dollars
Quarterly average:
1936-38
1947
1948 2
1,433
1,726
86
274
(3)
1947—First quarter....
Second quarter..
Third quarter...
Fourth quarter..
1,412
1,449
1,323
1,549
244
268
269
314
1948—First quarter
Second quarter..
Third quarter...
Fourth quarter 3 .
1,794
1,693
1,715
1,700
328
355
410
(3)
622
152
174
(3)
30
45
(3)
183
248
(3)
561
591
527
606
173
165
160
197
37
42
56
47
281
255
202
254
47
54
25
30
74
83
101
700
623
577
(3)
230
223
228
(3)
45
49
49
(3)
326
316
296
(3)
48
34
48
116
94
107
145
571
09
10
39
17
82
09
09
09
Percentage of total
Quarterly average:
193648...._.
1947....
100
100
13.8
19.1
23.3
39.8
24.4
12.1
4.8
3.1
29.4
17.3
1.6
2.7
2.7
5.7
1947—First quarter-..
Second quarter.
Third quarter..
Fourth quarter.
100
100
100
100
17.3
18.5
20.3
20.3
39.7
40.8
39.8
39.1
12.3
11.4
12.1
12.7
2.6
2.9
4.2
3.0
19.9
17.6
15.3
16.4
3.3
3.7
1.9
1.9
4.9
5.1
6.3
6.5
1948—First quarter...
Second quarter.
Third quarter..
100
100
100
18.3
21.0
23.9
39.0
36.8
33.6
12.8
13.2
13.3
2.5
2.9
2.9
18.2
18.7
17.3
2.7
2.0
2.8
6.5
5.6
6.2
1 Turkey is included with ERP countries and excluded from Asia. Imports from Germany in the postwar period relate almost wholly to imports from the three Western zones.
28 Estimate based on incomplete data.
Not available.
NOTE.—Data in this table cover all merchandise received in the United States customs area from foreign
countries. General imports include merchandise entered immediately upon arrival into merchandising
channels, plus entries into bonded customs warehouses.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.
137
TABLE C-41.—United States merchandise imports for consumption, by economic classes, 7936-38
quarterly average, 7947 and 7948
Period
Total imports for
consumption
Manufac- Semi-manu- Finished
Crude ma- Crude food- tured
manufac
food- factures
terials
stuffs
tures
stuffs
Millions of dollars
Quarterly average:
1936-38
1947
1948 1
615
1,411
1,716
190
436
85
254
95
164
126
311
120
246
1947—First q u a r t e r . .
Second quarter
Third q u a r t e r . .
Fourth quarter
1,395
1,409
1,322
1,516
460
453
389
440
288
227
201
300
134
182
169
171
281
312
310
342
231
236
254
262
1948—First quarter. _
Second quarter. _
Third quarter. _
Fourth quarter 1
1,769
1,665
1,740
1,690
571
494
530
346
287
271
161
180
199
396
385
418
295
319
322
Percentage of total
Quarterly average:
1936-38
1947
100
100
30.9
30.9
13.8
18.0
15.4
11.6
20.5
22.0
19.5
17.4
1947—First quarter
Second quarter
Third quarter
Fourth quarter
100
100
100
100
33.0
32.2
29.4
29.0
20.6
16.1
15.2
19.8
9.6
12.9
12.8
11.3
20.1
22.1
23.4
22.6
16.6
16.7
19.2
17.3
1948—First quarter
Second quarter
Third quarter
100
100
100
32.3
29.7
30.5
19.6
17.2
15.6
9.1
10.8
11.4
22.4
23.1
24.0
16.7
19.2
18.5
1
Estimate based on incomplete data.
* Not available.
NOTE.—Imports for consumption include merchandise entered immediately upon arrival into merchandising or consumption channels, plus withdrawals from bonded customs warehouses for consumption.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.
138
TABLE C—42.—Indexes of quantity and unit value of United States merchandise imports for
consumption, by economic classes, 7936—38 quarterly average, 7947 and 7948
[1936-38=100]
Total imports for
consumption
Period
Manufac- SemimanCrude ma- Crude food- tured
food- ufactures
terials
stuffs
stuffs
Finished
manufactures
Quantity indexes
Quarterly average:
1936-38
_
1947
19481
1947—First quarter
Second quarter
Third quarter.
Fourth quarter
__
1948—First quarter.
Second quarter
Third quarter.
100
109
121
100
130
142
100
96
103
100
83
90
100
130
148
100
84
98
113
107
102
115
138
133
120
135
116
85
78
107
73
87
86
87
126
129
126
140
86
80
83
86
126
117
120
156
132
138
118
100
91
81
89
99
153
142
150
93
100
102
Unit value indexes
Quarterly average:
1936-38
1947 1
1948
1947—First quarter.
Second quarter
Third quarter. _
Fourth quarter
_
_
1948—First quarter
Second quarter. _
Third quarter
100
211
232
100
176
197
100
311
343
100
208
212
100
191
214
100
245
266
201
214
211
215
175
179
170
172
293
314
302
330
195
220
208
206
177
193
196
194
226
245
256
255
228
232
236
193
196
203
343
338
349
210
215
212
206
215
221
266
268
265
i Average of three quarters.
NOTE.—The indexes of quantity are a measure of the volume of trade after the influence on value of changes
in average prices has been eliminated. The indexes of unit value provide a measure of change in the average
prices at which trade transactions are reported in official foreign trade statistics, including changes in average
prices that result from changes in the commodity composition of trade.
Source: Department of Commerce.
T A B L E C—43.—Changes in selected economic series since 7939 and 7947
Source:
Appendix
table
number
1939=100
Economic series
1946
1947
1948
Percent
changes,
1947 to
1948
Gross national product
Personal consumption expenditures
Gross private domestic investment
Net foreign investment
Government purchases of goods and services
232
218
294
522
235
256
244
333
989
214
280
262
431
200
269
+9.4
+7.4
+29.4
-79.8
+25.7
National income
Compensation of employees
247
245
279
267
309
288
+10.8
+7.9
Personal income
Disposable personal income
Personal net saving
245
227
437
269
247
326
291
271
504
+8.2
+9.7
+54.6
Per capita disposable personal income:
Current dollars
_
1947 dollars
._.
210
146
225
140
242
141
+
Labor force, including armed forces..
Civilian labor force.
Employment..
Nonagricultural..
Agricultural
Unemployment
109
104
121
130
87
24
111
109
127
138
86
23
113
111
130
142
83
22
+1.8
+1.8
+2.4
+2.9
-3.5
-4.3
_
#
TABLE C-43.—Changes in selected economic series since 1939 and 1947—Continued
Source:
Appendix
table
number
1946
Average gross weekly earnings:
Manufacturing
Bituminous coal mining
Private building construction.—
Retail trade
12 Physical production of goods and utilities: total
Agriculture
Nonagriculture
__.
13 Industrial production index: total
Durable manufactures
Nondurable manufactures
Minerals
14
20
21
22
23
Percent
changes,
1939=100
Economic series
New construction: total
_
Private
Residential
_
_.
Nonresidential
_
_
__,
Public utility and farm. _
Public
_
-—
Business expenditures for new plant and equipment
Inventories:
Manufacturing
Wholesale-—
Retail..
_
_
_
Sales:
Manufacturing
Wholesale
._
Retail
Consumers' price index: All items
Foods
Apparel
Rent
._
Wholesale price index: All commodities.
__.
Farm products
_
Foods
Other than farm products and foods
Prices received by farmers
Prices paid by farmers (including interest and taxes).
Parity ratio
Consumer credit outstanding, end of period
Corporate profits:
Profits before taxes
Profits after taxes—
Dividend payments
Undistributed profits
1948
1947 to
1948
183
243
185
154
206
280
208
173
223
302
229
190
+8.3
+7.9
+10.1
+9.8
152
126
158
164
122
173
171
133
179
+4.3
+9.0
+3.5
156
176
151
126
172
202
158
141
176
206
162
146
+2.3
+2.0
+2.5
+3.5
166
217
151
426
190
222
286
249
399
276
123
280
358
330
461
334
161
+26.1
+25.2
+32.5
+15.5
+21.0
+30.9
232
311
362
+16.4
203
182
201
243
236
235
235
245
240
307
292
281
140
168
159
104
160
204
185
107
172
221
197
112
+7.5
+8.3
+6.5
+4.7
157
228
186
135
197
277
240
166
214
286
254
185
+8.6
+3.2
+5.8
+11.4
245
156
157
293
186
157
302
201
149
+3.1
+8.1
-5.1
127
168
202
+20.2
335
256
147
600
458
362
182
523
416
200
1,100
517
421
+14.2
+14.9
+9.9
+17.9
-18.6
+20.4
Merchandise exports, including reexports2
General merchandise imports3_._
1947
197
277
i Not available.
a 1936-38 average=100.
Sources: Appendix C, tables as indicated above. Data have been converted to the base 1939—100.
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