Full text of Economic Report of the President : January 1951
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The Economic Report
of the President
TRANSMITTED TO THE CONGRESS
Together With a Report to the President
THE ANNUAL ECONOMIC REVIEW
By the
COUNCIL OF ECONOMIC ADVISERS
The Economic Report
of the President
TRANSMITTED TO THE CONGRESS
January 12, 1951
Together With a Report to the President
THE ANNUAL ECONOMIC REVIEW
By the
COUNCIL OF ECONOMIC ADVISERS
UNITED STATES GOVERNMENT PRINTING OFFICE
WASHINGTON : 1951
Additional copies of this report are for sale by the Superintendent of Documents,
U. S. Government Printing Office, Washington 25, D. C.
Price of single copy, 50 cents
LETTER OF TRANSMITTAL
THE WHITE HOUSE,
Washington, D. C., January 12,1951.
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 1951, prepared for me by the Council of Economic
Advisers in accordance with section 4 (c) (2) of the Employment Act
of 1946.
Respectfully,
m
Contents
Page
THE ECONOMIC REPORT OF THE PRESIDENT
The nature of the task
The power of the American economy to perform the task . .
The inflationary danger
Principles for action
All of us must plan
All of us must serve
Sacrifices must be shared fairly
We must develop all our resources wisely
We must work with our allies in the common cause . . .
Government economic policies
Expansion of production
Health services and education
Economic stabilization
International economic programs
Summary of economic developments in 1950
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ANNUAL ECONOMIC REVIEW, JANUARY 1951 (a report to the President by the Council of Economic Advisers)
27
To the Congress of the United States:
We face enormously greater economic problems, as I transmit this fifth
annual Economic Report, than at any time since the end of World War II.
Although our economic strength is now greater than ever before, very large
new burdens of long duration are now being imposed upon it.
The United States is pledged and determined, along with other free
peoples, to check aggression and to advance freedom. Arrayed against the
free world are large and menacing forces. The great manpower under
the control of Soviet communism is,being driven with fanatic zeal to build
up military and industrial strength. We invite disaster if we underestimate
the forces working against us.
The economic strength of the free peoples of the world is, however,
superior to that of their enemies. If the free nations mobilize and direct
their strength properly, they can support whatever military effort may be
necessary to avert a general war or to win such a war if it comes. The
resources are on our side. The only question is whether they will be used
with speed and determination. The answer will depend upon unity of
purpose and of action—unity among the free nations, unity here in the
United States.
Unity is imperative on the economic front. On this front, under the
American system, everybody is involved—every businessman, worker and
farmer; every banker and scientist and housewife; every man and woman.
We can win our way through to ultimate triumph if we all pull together.
Decisive action, essential to our safety, should not be halted by controversy
now.
It is in this spirit that I transmit this Economic Report to the Congress.
The Nature of the Task
We must understand the nature of our defense effort here at home. Our
job has three parts.
In the first place, we must achieve a large and very rapid increase in
our armed strength, while helping to strengthen our allies. This means more
trained men in uniform, and more planes, tanks, ships, and other military
supplies. Second, we must achieve, as rapidly as possible, an expansion of
our capacity for producing military supplies. Thus must be substantially
greater than would be required to achieve our present targets for armed
strength; it must be large enough to enable us to swing rapidly into full-scale
war production if necessity should require. And third, we must maintain
and expand our basic economic strength—important both to military production and to our civilian economy—so that we can continue to grow
stronger rather than weaker if it should prove necessary to continue a
defense effort of great size for a number of years.
The first part of this task—the primary military build-up—imposes the
major immediate burden on the economy.
For the fiscal years 1951 and 1952 combined, new obligational authority
enacted or anticipated for our primary national security programs—for our
military forces, for economic and military aid to other free nations, for
atomic energy and stockpiling, and for related purposes—will probably
total more than 140 billion dollars. Actual expenditures on these programs
in the fiscal year 1950, the last full year before the Korean outbreak, totaled
about 18 billion dollars. At the present time, they are running at an annual
rate of somewhat more than 20 billion dollars. By the end of this calendar
year, they should attain an annual rate between 45 and 55 billion dollars,
or from 25 to 35 billion dollars above the present rate. The actions we
are taking should enable us, within twelve months, to expand this rate of
expenditure very rapidly if necessity should require.
Current expenditures for these purposes now represent about 7 percent
of our total national output. By the end of this year, this proportion may
rise to as much as 18 percent. This compares with the roughly 45 percent
of our total output that we were devoting to defense during the peak year
of World War II. While the present program is thus very substantially
short of the requirements imposed by full-scale war, it nonetheless requires a
major diversion of effort. Furthermore, there will be a much more severe
drain on some particular supply lines. By the end of the year, our expanding defense programs, including stockpiling, may be absorbing up to a third
or more of the total supply of some of our basic commodities, such as
copper, aluminum, and natural rubber. While direct defense requirements for steel may not total more than 10 percent of total output, the
needed expansion of our essential industrial capacity will require a much
greater diversion of steel from ordinary civilian uses.
In terms of manpower, our present defense targets will require an increase
of nearly one million men and women in the armed forces within a few
months, and probably not less than four million more in defense production
by the end of the year. This means that an additional 8 percent of our
labor force, and possibly much more, will be required by direct defense needs
by the end of the year.
These manpower needs will call both for increasing our labor force by
reducing unemployment and drawing in women and older workers, and for
lengthening hours of work in essential industries. These manpower requirements can be met. There will be manpower shortages, but they can
be solved.
The second part of the job is to build up our capacity for producing military supplies—our military production base. For example, our present
aircraft program calls for capacity to produce 50,000 planes a year. Our
present program for tanks calls for the capacity to produce 35,000 tanks a
year. We are not now placing orders for that many planes or tanks, but we
are getting ready to produce them if we need them.
There are many cases where our immediate production needs will require
the diversion of plants now devoted to civilian production,, but we cannot
be satisfied with this solution alone. We must increasingly create new
capacity to meet defense production targets. This will give us more economic strength, which means more power in reserve for any contingency.
The job is made easier because we still have substantial reserve plant and
equipment, as a result of the industrial reserve policy instituted at the close
of World War II. It is a great program, but we can meet it.
The third part of the job is to increase our basic industrial strength—to
build up our facilities for the production of steel, aluminum, power, and
other basic commodities and services. This ability should be brought to
a level where it can carry the present defense burden without the necessity
for irksome controls extending over a long period. This will also increase
our ability to meet any requirements for a greater military effort.
In the case of steel, for example, we must raise the capacity of the industry from its present level of about 103 million ingot tons a year by enough
to support our defense effort and to sustain our civilian economy. The
Council of Economic Advisers estimates that this will require an increase
in capacity to about 120 million ingot tons in the next three or four years.
This estimate is not necessarily final. But it suggests the kind of growth
we are working for in our economy in the years immediately ahead.
To increase our steel supply, we must also increase our supplies of iron
ore. Output of the high-grade Lake Superior ore fields can be maintained
at present levels for only a few years longer. Thereafter, we shall have to
rely more and more on lower-grade domestic ores and on imported supplies. Expansion of domestic plants for treating low-grade ores, and of
ore production facilities in Labrador and Venezuela, together with related
transportation facilities, is essential.
Electric power is another field in which we must expand capacity
promptly. At the present time, electric power is in short supply in the
Pacific Northwest, in the Tennessee Valley area, and in some other regions.
The supply is expected to become increasingly short throughout the country,
as demands will increase faster than the expansion of capacity now planned.
Reserves will fall more and more below safe and desirable margins. Already the reserve margin has practically disappeared, in areas where the
power shortage is most acute. Yet, expansion of capacity now planned in
atomic energy, chemicals, and aluminum and other metals related to the
defense effort, will impose an additional load of 4 to 4J/2 million kilowatts
on our power facilities.
In the face of this situation, we should plan to increase our generating
capacity by well over 20 million kilowatts during the next three years. The
major share of this expansion must come from private utility enterprises.
The large public hydroelectric projects take more time, but I am recommending the development of additional public power capacity in the Pacific
Northwest, in the Tennessee Valley area, at Niagara Falls, along the St.
Lawrence River as a part of the seaway and power project, and elsewhere,
to contribute needed additions to the power supply as quickly as they can
be built.
These are but two examples of the need to build up our productive capacity. If we were now engaged in full-scale war, we could not afford to devote
manpower and materials to these longer-range programs. But to fail to do
so under present circumstances would be short-sighted and potentially costly.
Action now is essential, to make us stronger year by year in all of the components which enter into any military strength that we may need in future.
The Power of the American Economy To
Perform the Task
There is no question that our economy can sustain the great exertions outlined above, and still remain strong and grow stronger. The past performance and present condition of the American economy make this plain.
In the ten years since this Nation decided that fascist aggression had to
be stopped, the growth of our economic power has been prodigious. Comparing 1950 with 1940, our total output, in actual units of goods and
services, is more than 50 percent higher. Farm production is up 25 percent. The total labor supply has increased by 9 million, and civilian employment by 13 million. In addition, we have more and better tools and
equipment. Steel capacity is up more than 20 percent; oil refining capacity
up 40 percent; electric power capacity up 70 percent. On our farms, there
are two or three times as many tractors, trucks, and power-driven machines.
Farm use of electric power has gone up three or four times.
It is sometimes thought that most of this economic growth occurred
during World War II. True, under the dire necessity of wartime, we
expanded with very great speed. But during the past five years, we have
added greatly to the productive strength attained before V-J Day. More
than 90 billion dollars (in 1950 prices) have been invested by private
enterprise in plant and equipment. Total manufacturing capacity has
increased by between 25 and 30 percent. Steel capacity is 12 percent
higher; that of our chemical and machinery industries, 60 to 70 percent
higher. Civilian employment late in 1950 was 8 million above the peak
year of World War II, and output per man-hour for the economy as a
whole has advanced by about 10 percent.
There has been very recent demonstration of our economic power, and
of our capacity for further growth. In the first half of 1950, the upsurge
of business recovery from the mild recession of 1949 was swift and com-
prehensive. This demonstrated the soundness of our economic structure.
In the second half of the year, the pace of economic expansion became
more rapid. Every part of the economy responded to the challenge of
international developments. During these six months, private investment
in construction, equipment, and additions to inventory reached the record
annual rate of 53 billion dollars. Taking the year as a whole, industrial
production was 14 percent higher than in 1949, and by June had exceeded
the 1948 peak. The total output of goods and services during the year
1950 was 7 percent higher, in real terms, than during the previous year. It
is now running at an annual rate more than 10 percent above the average
for 1949. Civilian employment increased by about 1.3 million from 1949
to 1950, and there were more people in civilian jobs at the peak of 1950
employment than ever before.
Our economic history shows that we have risen to our greatest heights in
the face of our greatest dangers. From the beginning of World War II
to the time of our peak effort, we stepped up farm output by 20 percent, and
industrial production by nearly 90 percent. Our total national output rose
by more than 60 percent. If it had been necessary, we could have done
much more.
We may not be able to add to our production so rapidly in the years
immediately ahead. We had more unused resources of manpower, plant,
and materials in 1940 than we have now. There are now some relative
shortages of raw materials. On the other hand, as long as we avert a total
war, we can devote a larger part of our total resources to building up our
economy than we did after Pearl Harbor.
The accompanying Annual Review by the Council of Economic Advisers
estimates, after careful examination of our economic resources, that we can
and should achieve an annual rate of total output more than 7 percent above
the current level by the end of this year. The estimates made by the
Council at the start of 1950, concerning how much the economy could grow
in real terms during the year, were realized. I believe that this progress
will continue. We must plan and work together, to increase the total
productive strength of our economy by at least 25 percent within the next
five years.
We have not reached, and cannot foresee reaching, any final ceiling on
our productive power. Throughout the years we have grown, despite ups
and downs, and we will continue to grow. We have a growing population.
We have business initiative and daring. We have workers of great skill
and energy. We have the ability to make practical use of new scientific
discoveries and inventions. We have, despite some shortages, bountiful
natural resources. Above all, we have faith, justified by accomplishment,
in our economic system.
This great vitality of our economy provides the answer to the question
of whether we can sustain the burden of our defense program. In relative
terms, this burden at present is much less than it was in World War II.
At the peak of World War II, we were devoting about 45 percent of our
national output to defense. By the end of this year, we will be devoting
about 18 percent to defense. During World War II, even when defense
production was at its highest, we maintained a strong economy. Civilians
made sacrifices, but they did not suffer.
Our total output today has reached approximately the 1944 peak. More
important, we are now maintaining this rate of production with much
shorter hours and less strain upon facilities. Our productive potential is
not as fully mobilized as at the height of World War II. If we approached
the same degree of economic mobilization, our total output would be very
much greater, and so would our output of defense items. Our contemplated defense program, even if it were doubled, would still be clearly within
our capabilities.
The Inflationary Danger
While it is clear that we have the productive ability to meet even far
greater defense demands on our economy, we must not be misled into thinking that we can make the change to a defense economy easily. It will
require effort, restraint, and sacrifice by all of us.
The character of our economy must now be changed rapidly to meet the
new challenge. Those types of production which support the expanding
defense effort must be greatly enlarged. The part of our total national
output going into defense should rise from 7 percent to nearly 18 percent,
during the year 1951. By the end of the year, the expanding defense
program may be absorbing one-third or more of some basic materials.
In some respects, it will be harder to convert to defense production than
it was in 1940., Then, there were idle plants and men and materials which
could be channeled into the defense effort. Since our economy has recently
been running full blast, the defense program will have to pull men and
materials, as well as plants, away from existing peacetime uses. This will
pull millions of people away from normal peacetime production.
Although we can increase production, we cannot do it quickly enough to
expand the defense program, and at the same time still have as much left
over for other purposes. We must put heavy restraints upon nonessential
business activity. During the past few years, nearly 70 percent of our
growing national output has gone into consumption. This has led to
higher standards of living, which is the ultimate purpose of a peacetime
economy. But the total supply of consumer goods cannot be increased
this year, and many types of goods must be sharply curtailed. Yet the
population will continue to grow; new families will continue to be formed;
and more incomes for practically all groups will be generated by more production, more employment, and longer hours. The excess of consumer
demand over available goods will rise by many billions of dollars.
This will cause intense and mounting inflationary pressures, which must
be counteracted.
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During 1950, even before the defense expansion gathered speed, inflation
started to march. Wholesale prices rose almost 15/2 percent, and passed
the previous all-time peak in the second half of the year. Particular price
increases were even more spectacular, with chemicals rising by 21 1 /2 percent,
and textiles by 24 percent. The average price of goods to consumers rose
over 6 percent; and there was over a 4l/z percent rise to a new all-time peak
in the six months from June to December.
Incomes also started to rise sharply. During the year, real weekly earnings
in manufacturing, after adjusting for changes in prices, rose by 10 percent.
Corporate profits before taxes rose by about 6 billion dollars above the
previous record year. Most types of income, particularly in the second half
of the year, rose faster than production.
If inflation continues to gain cumulative force, it will multiply the cost of
the defense program. It will undermine production, destroy confidence,
generate friction and economic strife, impair the value of the dollar, dissipate
the value of savings, and impose an intolerable burden upon fixed income
groups. This must not happen.
To fight inflation, demand must be held down until supplies can catch up.
This is why we must have a stringent stabilization program. It will mean
sacrifices by everybody. But under the conditions now facing us, restraints
will serve the interest of all.
Principles for Action
As we prepare ourselves for the stern task which confronts us, we must keep
in mind five basic principles. These are: (1) all of us must plan; (2) all of
us must serve; (3) sacrifices must be shared fairly; (4) we must develop all
our resources wisely; (5) we must work with our allies in the common cause.
All of us must plan
A defense emergency requires far more planning than is customary or
desirable in normal peacetime. The military build-up is a planned effort.
The mobilization of industrial support for this military build-up is a planned
effort. The industrial cutbacks and civilian restraints, necessary to achieve
military and economic mobilization, are planned efforts. The major decisions as to how much goods and services must be left over for consumers, to
maintain a strong base for the whole undertaking, also require planning.
In a defense emergency, all of these problems are interrelated.
In these critical times, it is recognized that Government must assume
leadership in this planning. It has the prime responsibility for national
security. It has access to the basic information. The most important operation toward this end is the broad programming of various major
requirements; the balancing of these requirements against supply; and the
development of policies to satisfy needs according to priority of purpose.
But the Government cannot develop these basic plans alone. The necessary experience and know-how are to be found throughout our whole
economic system. Through constant consultation, these talents should be
drawn into the whole planning effort. After the basic economic plans are
outlined, most of them will have to be carried out by businessmen, workers,
and farmers. They will be able to carry out these plans better, if they have
had a chance to participate in creating them from the start.
These basic economic plans set general targets or goals. The details
must be filled in by people all over the country. It may become necessary
for the Government to indicate that longer hours of work are desirable.
But working arrangements are made between employers and employees.
The Government may indicate that more steel is needed. But steel production is in private hands. The Government may indicate that more cotton
will be needed. But cotton is grown by farmers.
Businessmen always plan; and now they must plan how they can best
help to make their country stronger. Labor organizations always plan;
and now they must plan their contribution to the defense effort. Farmers
also plan; and they, too, must now plan to play their full role in the national
security effort. Government plans can aid, but cannot substitute for, this
individual and group planning. To neglect this, would be to undermine
one of the greatest sources of our economic strength.
All of us must serve
In a defense emergency, all those on the home front should serve, to the
limit of their ability, in the kind of work for which they are best fitted.
Businessmen should serve, by employing their financial resources and
managerial skills to produce the greatest possible amount of the goods which
the Nation needs. In the period ahead, businessmen will have responsibility for a much larger part of the investment program than during World
War II, when a very high percentage of investment in new capacity was
made by the Government. Our ability to reach production goals will
depend in large measure upon how effectively businessmen do their job.
Farmers should serve, by increasing their output. They have less manpower than before World War II, but far more machinery and fertilizer, and
far better scientific methods. They can also serve, by making shifts in output which are responsive to the needs of the defense economy.
Workers should serve, by helping to improve productivity. They should
seek out jobs which are essential to the defense effort. They should cooperate by working longer hours wherever it will help the defense effort.
More people should seek work than in normal times.
Millions of others, in addition to businessmen, industrial workers, and
farmers, are now called upon to do their jobs more efficiently, and to
readjust their efforts to the needs of national defense.
For all to serve in full measure, it must be in a common cause and not
primarily for personal gain. This does not mean that we should undermine
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the incentives which lead to more production. But the rewards for increased production cannot be as great under a defense program as they are
in normal peacetime. This is because most of the increased production
must go into national defense, and consequently cannot be used to improve incomes or lift standards of living.
Each group and individual will be more willing to put forth greater
effort, if it appears clearly that everybody is doing the same. Businessmen,
workers, and farmers will be willing to work harder, to the extent that they
feel that they are working harder to serve their country, and not just to
benefit somebody else. There should be a sense of equality of service in
the defense program. Public policies must help to assure this.
Service by all is even more important than sacrifice, because it is work,
and more work, that increases production.
Sacrifices must be shared fairly
No matter how efficiently we do our jobs, all of us must make sacrifices.
Businessmen must make sacrifices. They must pay much higher taxes.
While profits should not be taxed to the extent which would jeopardize
production or destroy incentives, businessmen cannot expect to retain profits
on the scale which would be expected during normal peacetime prosperity.
They must also accept restraints and controls upon many of their business
practices—including price policy and the use of materials and manpower—
which are not customary in peacetime. They must be willing to withdraw
from enterprises which are nonessential and wasteful during a national
emergency.
Workers must make sacrifices. They must seek the jobs which need
doing, in the locations where these jobs must be done, instead of the jobs
which may be most pleasant in the locations which are most convenient.
They must accept restraints and controls upon wages, designed to prevent
the wage increases which would be attainable if more goods were being
produced for wage earners to buy. While the right to bargain collectively
will be preserved, workers—along with management—must find ways to
settle disputes without stopping essential production.
Farmers must make sacrifices. They should receive their fair share of
available national income. But they cannot expect to avoid their fair share
of the cost of national defense. Over the past two decades, farm standards
of living have risen substantially, and they needed to rise, because farmers
had lagged far behind others in sharing the national income. But that
rate of progress cannot be continued in these perilous times.
All economic groups must pay much higher taxes.
American families must make sacrifices. They can expect very sharp curtailments in the supply of durable equipment which brings convenience and
entertainment to the home. They will have to make their household goods
last longer, their automobiles and appliances3 their linen and clothes. They
must save a larger portion of their incomes. Many of them must postpone buying a new house.
These sacrifices will not prevent us from maintaining a strong and growing economy, capable of supporting the current defense program or any
greater program that we may need to undertake. On the contrary, these
sacrifices will make for a stronger nation by curbing inflation. They will
make us stronger, not only by augmenting our military strength, but also by
enabling us to increase the productive facilities which can lighten the
economic burden in the long run.
It is essential that the sacrifices which are necessary in these critical times
be shared fairly by all groups. Businessmen will be more cooperative in
sacrificing peacetime profit objectives and paying more taxes, if it is clear
that this is not being done just so farmers and workers can have more
income. Farmers will be more cooperative in sacrificing peacetime farm
income objectives, if it is clear that this is not being done just so workers
can get more wages and businessmen can get more profits. Workers will be
more cooperative in sacrificing peacetime wage objectives, if it is clear
that this is not being done just to provide more profits for business or more
farm income. Professional people, civil servants, office workers, and those
living on fixed incomes^ will be willing to accept their share of necessary
sacrifices, to the extent that it is clear that this is not being done just to
provide for other people more profits or wages or farm income. All will
be willing to make far more sacrifices for national defense and to keep our
economy strong, if the burden is shared on a fair and equitable basis.
We must develop all our resources wisely
The rapid expansion of the defense program must be the first objective in
all that we do. But military strength does not depend upon guns and armed
forces alone. These forces must be equipped by our industry, fed by our
farms, and supported by all the people. There must be a continuing balance
between the build-up of military strength and the build-up of economic
strength.
In a total war, this balance would be very different from what it should
be now. In a total war, we would have total military mobilization, accomplished by considerable depletion of other kinds of strength. In the current
situation, we must place considerable stress upon economic strength, or run
the danger of being weak at some future time if total military strength should
then be required.
With these purposes in mind, we must apportion materials and manpower
carefully among military needs, stockpiling, and industrial needs. We must
divide industrial supply carefully, so as to expand in some areas while contracting in others. We must divide total civilian supply carefully between
industry and consumers, so that we do not weaken manpower while improving tools.
The handling of our natural resources is a vital aspect of this problem.
Many projects must be cancelled or deferred, but those necessary for defense
and essential civilian needs must go forward. If we allow our agricultural
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and range lands and our forests to deteriorate, and if we misuse critically
needed minerals and supplies of water, we shall become weaker each year
instead of stronger. If we do not expand the use of some of these resources—as, for example, through carefully selected power developments—
we cannot expect to reach the full potential of our industrial strength. We
can cut down enough on the private and public use of materials and manpower for nonessentials to accomplish these essential projects.
Our human resources are our main economic strength. When we finally
win in the contest between freedom and slavery, it will not be primarily
because of our superior technology. It will be primarily because we value
human beings, and because the free man can outproduce the oppressed man.
No danger could be greater than to concentrate so blindly upon building
up our military strength that we neglected and impoverished the ultimate
sources of that strength. Three examples will illustrate this principle.
First, we cannot afford in the immediate future to devote as large a part
of our resources to the improvement of health services and facilities as we
had planned to do in normal peacetime. But we cannot maintain a sound
base for whatever military mobilization may be needed in the months or
years ahead, if we let sickness and inadequate health standards continue to
take their heavy toll. We must devote somewhat more of our resources
toward improving the health of the general public. Whether the children
of today will be the soldiers or civilians of tomorrow, they must grow to a
strong and healthy maturity.
Second, we cannot in the immediate future find the materials and manpower to build as many new schools and provide as many new teachers
as we had planned to do in prosperous peacetime. But whether the youth
of today is to become a soldier or a civilian citizen tomorrow, he must receive the general education for citizenship and the technical training which
a modern army, a modern factory, and a modern farm all require.
Third, we cannot expect in the immediate future to achieve all of the
expansion of social security which we had planned for in prosperous peacetime. But some of the hazards which social security is designed to guard
against are increased by the mobilization effort. Increased protection
against these hazards will make the mobilization effort more effective. In
addition, the expansion of some contributory social security programs can
be an important factor in meeting the stabilization problems we will face
during this period, because their immediate effect would be anti-inflationary.
In these three matters, we should give vigorous attention to meeting
human needs in such a way as to increase our economic and military
strength.
A strong America must be strong throughout.
We must work with our allies in the common cause
To meet the present danger, we must help to strengthen our allies,
and they must help to strengthen us.
922781—51
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II
The effort must be made by the community of free nations, working
together, and contributing their common strength in accordance with their
ability to do so. As the single most powerful member of the community
of free nations, our country has the special responsibility of leadership.
We must help other free nations to do their share effectively.
In two world wars, this country has been spared the ravages of war on its
own soil. Partly as a consequence, the United States has grown stronger,
while some of the other free nations have become relatively weaker. Under
these circumstances, it would be wrong for us to shrink from bearing a larger
part of the burden now. We are able to bear it. We must bear it.
Since the Korean outbreak we have sharply shifted the emphasis in our
economic assistance programs toward supporting the defense programs of
the free countries associated with us, and we have greatly enlarged our
military assistance program.
There is no water-tight distinction between military assistance and economic assistance. Our friends abroad need both. For their military efforts to be strong, their economies must be strong. When we contribute to
their military strength, we leave more of their own resources free to
improve their economic strength. When we contribute to their economic
strength, we leave more of their own resources free to build up their
military strength. The relationship between the two types of assistance
should be determined realistically on grounds of efficiency, and not by
arbitrary labels.
The programs of economic assistance thus far undertaken have acWed
greatly to the strength of other nations friendly to us—nations believing
in freedom and justice. This gain could be dissipated, if the military
build-up which they must now undertake should weaken their economies.
The close connection between a nation's economy and its military efforts
makes it impossible for peoples to be allies on one front and strangers on
other fronts. When we join together for military purposes, we must also
cooperate for economic purposes. When we consider jointly the distribution
of armed forces, we must consider cooperatively the use of strategic economic
assets.
In this whole process of cooperation, the strongest must do the most, but
all must do their part. While our resources are great, they are not unlimited.
As we make a portion of our resources available for use by others, we expect
them to use this aid well and efficiently in the common purpose. In addition, our aid will enable them in many cases to increase their production, for
their use and ours, of materials which we do not have, or do not have in sufficient quantity.
Government Economic Policies
The actions of the Government are being redirected to meet the overriding demands of national security. The Budget I shall transmit next week
12
provides only for urgent needs for Government activities and services in this
defense period. Many Government programs are being sharply curtailed.
The departments and agencies of Government are moving rapidly ahead
with their part in the defense effort, and deferring wherever possible any
work which is not immediately necessary.
The same principle should guide the Congress in enacting legislation at
this time. We must all put first things first.
Certain immediate tasks will confront the Congress at this session, as it
enacts the legislation necessary to carry us forward. I mentioned these
briefly in my Message on the State of the Union earlier this week. Some of
them are discussed more fully in this Economic Report, and in the Budget
Message to follow. In a number of cases, however, details are still being
worked out, and I shall transmit recommendations in later special messages.
The first priority, of course, attaches to the support of our own military
services and of our combined efforts, with other free countries, to build up
the strength of the free world. In both cases, we are concentrating on the
urgent task of preparing stronger defenses against aggression. At the same
time, we are building a foundation for continuous growth in the ability of
free men, in our country and elsewhere, to advance the cause of freedom.
Toward these ends, the economic policies of the Government should now
be directed.
Expansion of production
Industrial production. Under the Defense Production Act, enacted last
September, we have taken the first essential steps to give priority to defense
requirements out of current industrial production. In the field of priorities
and allocations, where Government action has already been vigorous, steps
have already been taken (a) to insure that defense requirements for production materials and facilities are met on schedule; (b) to distribute the
remaining available supply of critical materials and products equitably
among other users after defense requirements have been satisfied; (c) to
provide materials for needed expansion of productive capacities; and (d) to
promote conservation of scarce materials and the development of substitutes. The commodities affected have included aluminum, cobalt, cadmium, copper, nickel, rubber, steel, tin, zinc, and other basic materials.
Selective rather than general curtailment is now being put into effect, and a
comprehensive materials control plan is being prepared for use when necessary. Priorities and allocations powers will have to be renewed by the
Congress this year, if our production control program is to be continued.
It is, of course, essential that this be done.
In placing orders, the Defense Department and the other agencies concerned are adjusting contracting and subcontracting policies to broaden
the supply base and to bring in more small producers. Procurement is
being related more closely to geographic availability of manpower, materials, and equipment resources. Procurement cost-price policies are being
13
centered upon efficiency problems. Greater uniformity of standards is
being developed for all procurement activities.
In planning and carrying out the military procurement program,, the
Department of Defense is giving major emphasis to obtaining productive
capacity broad enough to support a much larger military procurement program than the one now under way. Thus, the Department is spreading
orders among as many contractors as practicable, and tooling-up plants with
reserve capacity, so that military procurement can be further enlarged on
short notice if necessary.
In addition, we have begun the work of obtaining increased plant capacity in key industries, among them steel and aluminum. Two main
types of assistance are now being furnished by the Government to help
private industry expand: accelerated amortization under the new tax laws,
and long-term Government loans under the Defense Production Act. These
aids will help to secure much of the needed expansion.
Under the authorization of the Defense Production Act, Government
agencies have received requests for direct loans totaling more than 830 million dollars, and are processing requests for accelerated amortization involving outlays for plant expansions totaling nearly 4 billion dollars. Of those
on which approval has already been recommended, 66 from the steel industry alone represent capital outlays of more than 1 }4 billion dollars.
Our loan program for expansion of productive capacity and supplies will
soon require more funds than have so far been made available. The program will of course need to be continued in operation beyond June 30, 1951,
the current expiration date. In addition, our present aid programs will
need to be backed up by legislative authority for direct government construction of industrial facilities, in those special cases where private enterprise
cannot undertake the job even with the government assistance available.
These and other aspects of our economic mobilization laws are now under
review by the Director of Defense Mobilization. After he has completed his
investigations, detailed recommendations will be made to the Congress for
appropriate revision of the Defense Production Act and other related
statutes.
In addition to our efforts to expand industrial capacity, steps are being
taken to increase production of essential raw materials, both here and
abroad. Through financial aids for exploration and development and
long-term expansion loans, authorized under the Defense Production Act,
and through our stockpiling and foreign economic aid programs, we are
stepping up the production and procurement of critical materials, both at
home and abroad.
Iron ore constitutes one of our most serious potential shortages. As the
Annual Economic Review points out, we should be receiving large shipments from the new Venezuela and Labrador developments by 1954 or
1955. This is urgently needed to meet the expected decline in ore production from the Lake Superior region. But to avoid extremely high-cost
transportation, and hence high-cost steel operations, we should start at once
on the St. Lawrence Seaway and Power Project, so that imported iron ore
can be shipped efficiently by water to the great steel producing centers of
the Middle West,
The St. Lawrence project is vital also to bring in a new source of power
for industry in the Northeast. We must have more power, in this and
other areas, if we are not to place sharp limits on our industrial capacity.
Agricultural production. Our farms are no less involved in the production effort than our factories and mines. The demand for farm products
has increased greatly since the Korean outbreak. Military needs for cotton
and wool have risen sharply. Military food requirements are also rising, as
more men come into military service. There has been an exceptionally high
civilian demand for meats and many other foods, and this is expected to
continue.
In the face of these rising demands, we now have low supplies of cotton
and wool. Our food supplies, while entirely adequate for the time being,
will clearly have to be increased. The Government is moving now to help
meet the need for increased production, especially of cotton, corn, wheat,
wool, and livestock. Acreage allotments and marketing quotas have been
set aside. Price supports at 90 per cent of parity have been announced for
cotton and wheat for the 1951 crop year. Every effort is being made to
bring the new cotton crop to a level 60 per cent above that of last year.
Our farms are now more mechanized than ever before. To get out the
increased crops, they will need a steady supply of farm machinery and spare
parts. Fertilizers will be equally necessary to meet expanding production
goals. Our farmers are using much more fertilizer than before the war,
and will need still more to get the yields that we are after. Many of the
things the farmers need will be in short supply. Farm and industry requirements will have to be balanced very carefully. But we will do our best to
see to it that the essential farm needs are met.
Manpower. We cannot produce in industry or agriculture without the
trained workers to do the job. As the defense production job speeds up, we
will have to be increasingly careful about the distribution and use of the
skilled labor we have available. We will have to train more and more new
workers who are not now in the labor force. Major emphasis should be
upon training and recruitment of unmarried women and married women
without young children. Support should be extended to nursery schools as
an aid to mothers who want jobs.
Additional shifts and longer hours in some defense industries are being
encouraged. Industry hiring standards are being reviewed, to provide
suitable jobs for more workers. Arrangements are under study to protect
the pension and seniority rights of workers who shift to defense jobs.
Health, education, rehabilitation, and training programs are being reshaped
to concentrate upon problems of defense workers. Existing housing, com-
munity facilities, and service programs are being modified, and construction
is being shifted to defense areas.
We are already setting up voluntary labor-management committees to
work with the United States Employment Service in the principal defense
areas. These committees will help to shift workers into essential industries,
and will gain cooperation in installing the most efficient hiring practices and
promoting the best use of skilled workers on the job. To provide better protection of workers who leave their communities to take defense jobs in other
States, the unemployment insurance system should be improved.
It is now quite clear that, just as in World War II, we will need special
legislation to provide housing and community facilities and services for
defense workers in areas where adequate quarters are not now available.
We will need to encourage private construction of rental housing in these
areas. We will need publicly financed construction of housing and related
facilities where private enterprise is unable to handle the job. We will
need additional aid to community facilities and services in defense production centers. The Housing and Home Finance Administrator has submitted
recommendations for legislation to accomplish these purposes. I hope that
prompt action will be taken by the Congress.
Health services and education
It is clear that we cannot neglect the education and health of our people,
without the most serious results for a long-run defense effort. Obviously,
we will not now have available the resources to build or staff as many
schools and clinics and hospitals in as many places as we hoped to do in
normal times. But the quality of essential services must be maintained and
improved, as fast as can be managed. This is imperative for the success of
the defense job.
It is not enough to train people as workers—or as soldiers. They have
to be healthy enough to get a job and do it effectively. Right now, sickness is keeping about a million workers off the job every day. Right now,
failure to meet health standards is making about a quarter of our young
men unavailable for military service. During World War II, about six
million men were rejected by the armed services for physical or mental
disabilities.
We cannot afford this waste of manpower, our most vital resource. As
a first step,, we must obtain more doctors, more dentists, and more nurses.
The growing needs of the armed forces, piled on top of civilian needs,
threaten the most dangerous shortages unless prompt action is taken by the
Congress.
At the same time, we must expand our local public health services. They
are essential to our civil defenses, and to the maintenance of safe health
standards in our growing production centers.
As we move into a period when we will have an urgent need for all
our trained men and women, we must face the fact that nothing can make
16
up for faulty basic education in our primary and secondary schools. This
is as true for the men in military service, as for the factory worker or the
farm hand.
Our public school system faces the greatest crisis in its history. More
than ever before, we need positive action by the Federal Government to
help the States meet their educational tasks. We simply cannot afford to
let overcrowding, or lack of equipment or staff impair the basic education
of our young people.
Under legislation passed last year, the Federal Government is stepping up
its aid to school districts overburdened as a result of Federal activities. But
special aid of this type to particular school districts will not come anywhere
near meeting the general crisis which exists. Therefore, it is vital that
the Congress act now to give the States general aid for school maintenance
and operation.
Economic stabilization
The Government has been moving ahead in several ways to stabilize the
cost of living and hold down inflation.
Taxation. We should make it the first principle of economic and fiscal
policy in these times to maintain a balanced budget, and to finance the cost
of national defense on a "pay-as-we-go" basis.
The Congress is to be commended upon the successful completion of two
vitally important pieces of tax legislation since the middle of the calendar
year 1950. But it was commonly acknowledged that these were only the
first steps. We must now, as rapidly as possible, take the next step, and it
must be a very big step, in view of the size of the new defense funds which
have necessarily been appropriated and the required additions to these
funds which will be set forth more fully in the Budget Message. Legislation
should be enacted, at this session of the Congress, to increase taxes by very
much more than they were increased by the last two major tax bills which
the Congress enacted.
These new taxes are required to finance the defense effort; and to help
keep total spending within the capacity of current production, so that inflation does not reduce the purchasing power of the defense budget, reduce the
real value of people's savings, generate speculative buying and hoarding,
and impede essential production. The real economic cost of this defense
effort is that we must work harder, reduce consumption, and forego improvements in farm, business, and household equipment. This cost cannot be put
off into the future. It must be paid by the people now, one way or another,
and it should be paid through taxation, in the manner consciously determined by the Congress and not by the uncontrolled and inequitable incidence of inflation.
The new tax increases, now required, must press harder upon every
source of available revenue. Corporations should pay much higher taxes.
Individuals should pay much higher taxes. Excise taxes should be higher
17
and more extensive. Many loopholes in the tax laws should be closed.
In the near future, after further consultation with legislative leaders, new
tax proposals will be transmitted to the Congress.
Taxation must be supplemented by greatly increased saving. Every
dollar saved means a dollar less of inflationary price pressure. The alternative to saving is not buying more goods now, because more goods are not
now available. The saving will give a nest egg with which to buy the
goods at a later time when they again become plentiful. The alternatives
to more saving are either more taxes or inflation.
Savings help most in the defense effort, and do the most to hold down
inflation, when they are invested in Government bonds. The Treasury
will continue its policy of reducing the amount of debt held by banks and
placing the maximum proportion of Government securities in the hands of
the public, particularly individuals. The savings bond program supports
this goal and encourages saving.
Credit controls. Controls over business and consumer credit also help
hold down inflation.
Regulations W and X, issued by the Federal Reserve Board, have established higher down payments and shorter repayment periods for those who
buy durable goods and new one- and two-family houses on credit. Multifamily housing is now being brought under Regulation X. As the detailed
requirements for the defense program and other vital purposes become
clearer, it may be necessary to make further changes in these regulations.
These regulations are well suited to help deal with moderate reductions in
supply. If circumstances force acute reductions, more direct measures
will be needed to assure equitable distribution. In the meantime, the authority to control housing credit through Regulation X should be enlarged
by the Congress to include credit for the purchase of existing homes exempt
under the present law.
The Federal Reserve Board has also taken steps to restrain excessive bank
lending, by raising bank reserve requirements and allowing short-term
interest rates to rise.
Price and wage controls. We must use direct controls, as well as these
tax and credit measures, in order to deal with the problem of inflation.
In the case of prices and wages, considerable work has been done. In
addition to the mandatory order affecting automobile prices, substantial
progress has already been made through negotiations towards securing
effective price stabilization in such basic materials as steel, copper, lead,
zinc, and certain basic industrial chemicals. Negotiations to secure effective
price stabilization are under way with producers of other basic products. A
number of regulations for mandatory action are in preparation.
We must achieve general stability as rapidly as possible, and hold it for
the duration of the present emergency. This will require the broad exten-
18
sion of price and wage controls to hold down the upward spiral. The staffs
to apply broader controls are now being rapidly gathered.
In the case of prices,, the general policy must be to hold the price line
with utmost vigor, as the instances are rare indeed where further price
increases are needed, either to stimulate production or to provide adequate
profit incentives. In these rare cases, some price adjustments subsequent
to stabilization may become necessary to stimulate vital production.
It is my confident belief that price adjustments, after stabilization^ will
not be only in an upward direction. In many industrial lines, extensive
additional production, made possible in many instances by military orders
added to civilian orders, will result in lower costs, which can be passed on
both to civilian buyers and to the Defense Department.
To prevent excessive speculation in farm products, and wide fluctuations
in their prices, the Department of Agriculture should be granted authority
to control speculative trading and to strengthen its regulation of commodity exchanges.
Price and wage stabilization must both be undertaken, because of the
economic connection between prices and wages. It follows from this that
neither price action nor wage action can be decided upon in isolation. The
decisions must be reconciled. They must be subject to central direction.
But it does not follow that prices and wages are precisely similar, or can be
treated identically. Prices are only one factor in the incomes of business,
which may rise or fall independently of prices. But wages are the very
livelihood of millions of families. This makes wage stabilization the more
difficult part of the task. But it must be undertaken if prices are to be
stabilized.
A more rapid rise of total wages available for spending than of the production of goods which workers can buy will not make more goods available, but
rather will add to inflationary pressures. Since the amount of goods available for consumers cannot be increased in the near future, and many types of
goods must be severely contracted, the objective should be to limit correspondingly total spending of wages. Strong tax and savings programs are
required, but stabilization of wage rates is also necessary. This is particularly necessary because, even with no wage rate increases, there will be an
expanding volume of total wages. Hundreds of thousands, of new workers
will be employed, and hours of work will be longer. Moreover, there are a
few kinds of situations where adjustments in wage rates will be necessary and
desirable. But this should be done only upon a clear showing of necessity in
exceptional circumstances. The predominant general rule should be to
achieve stable wage rates until the flow of consumer goods can be increased.
It would be impossible to achieve lasting wage stabilization without
holding the line on the cost of living. This makes it all the more important
to stabilize the price level. Unless this line is held, it will not be practical
to avoid some "cost of living adjustments" in wages in some cases. However, there are many groups which could not be protected in this way. And
19
to extend such adjustments without limitation, even in all those cases where
it could be done, would add to the process of wages chasing prices and prices
chasing wages. The only way out of this dilemma is to stabilize the cost of
living, and to do it quickly.
Wage stabilization also involves the problem of incentives. Without
incentives, it would be harder to sustain longer hours of work in defense
industries, and to spur on workers toward their participation in efforts to
improve productivity. As we look forward to years of constantly increasing
effort to strengthen our economy, this problem of incentives cannot be overlooked. Yet the peacetime increases in wages, which normally provide
incentives, would under current conditions add to inflationary forces. Consideration should be given to the suggestion that, where some wage adjustments become necessary over the long pull to provide incentives^ the
increased potential spending power should be diverted from the actual
spending stream until inflationary pressures become less serious. Various
constructive proposals may be developed to obtain this deferred effect.
Wage adjustments related to increased social security contributions would
be one method. Other effective savings programs should also be considered.
I firmly believe that effective wage stabilization must draw heavily upon
the experience and viewpoint of workers and employers with practical experience. That is the principle underlying the Wage Stabilization Board.
The Board is to be commended for its policy of consultation with representatives of labor, management, and the public. I earnestly trust that a sound
and fair wage stabilization policy will quickly result. Such a policy will
provide the best foundation for effective wage stabilization in detail. The
principles which I have outlined can be the starting point for a wage stabilization policy which will receive the cooperation of those who would be affected
and which will serve the best interests of the Nation in this emergency.
In the interest of economic stabilization all groups should consider what
they receive before taxation. Of course, heavier taxes will make it harder
for everybody. But for any group to seek to adjust its income upward, to
counteract the higher taxes which the defense program is making necessary,
would tend to relieve that group from its share in the cost of achieving
national security.
I am sure that every group will be willing to accept the necessary sacrifices in this emergency, if the whole stabilization program is fair and
equitable. Effective price and wage controls, much higher taxes on business profits, along with many other restrictions which will affect the whole
population, are all aspects of a comprehensive stabilization program in
which everyone will do his part.
It is already plain that the present rent control law has been made
obsolete, in the light of the necessary curtailment in the rate of housing
construction and the current inflationary pressures. Since rents are such
a key element in the cost of living, I recommend that the Congress extend
and strengthen the rent control law.
20
International economic programs
Our program of military and economic aid for the strengthening of the
community of free nations, including our programs for underdeveloped
areas, are of vital importance. They are closely related to other aspects
of our foreign economic policy. The defense program increases the importance of strategic raw materials, and we are already working with other
free nations to increase the supply of these materials, and to distribute them
fairly. We should take cooperative action with the free nations, to make
sure that critical materials are used to strengthen the common defense of
freedom, and are not diverted to other purposes. In a short time, I shall
send to the Congress detailed recommendations on our international economic programs.
Use of export controls and allocations will enable the United States to
carry out more effectively its part of international allocations agreements,
and to distribute more efficiently other commodities in short supply.
The power to control exports, now scheduled to expire June 30th, should
be extended.
International trade policies should be adjusted to joint requirements.
While the defense effort will require a wide increase in trade controls, a
large part of the world's trade will continue to be conducted in normal
channels. The common defense objective can be furthered by the reduction of tariffs, quotas, and other trade barriers. To this end, the Trade
Agreements Act should be extended, our customs laws and procedures
should be simplified, and the import tax on copper should again be waived.
Summary of Economic Developments in 1950
By June 1950, the economy had almost fully recovered from the mild
recession of the previous year. Employment and production were high,
and prices were rising. The anticipated expansion of our defense program,
following the Korean outbreak, led to still further increases in employment
and production. It created strong inflationary pressures.
In this situation, many economic indicators reached record highs, and
most of them are still rising. Higher employment, longer hours of work, and
overtime payments raised wages and salaries and swelled the already high
demand of consumers. On all fronts, strong demand raised prices, and in
some shortage areas the price advance was rapid. Increased volume at
higher prices boosted business profits. The obvious need for greater productive capacity stimulated business investment. Rising living costs and high
business profits led to increasingly successful efforts to obtain wage increases.
The record levels of employment, production, and business investment
have demonstrated the vigor of our economy. But the spiraling rise in
prices, wages, and profits is a warning that inflation endangers our economic
prospects and our defense efforts.
21
Civilian employment averaged almost 60.0 million persons in 1950, compared with 58.7 million in 1949. The gain in nonagricultural employment
was about 1.8 million, but farm jobs declined by about 500 thousand.
Employment increased steadily throughout the year, except for a small
seasonal drop in the fall months. At the end of the year, employment was at
an all-time record for December.
Unemployment, after reaching a peak of 4.7 million persons in February,
dropped markedly through most of the year. It reached a low of 1.9 million in October, and then rose slightly in the last two months of the year.
At the end of 1950, only 3.6 percent of the labor force was unemployed.
This is near a practical minimum for a peacetime economy, but is not
irreducible under present conditions.
Production of goods and services as a whole in 1950 was 7 percent greater
than in 1949. This was a record for any postwar year, and apparently
was close to the record reached in World War II. In the fourth quarter
of 1950, total production was 10 percent higher than for the year 1949.
The physical production of goods alone (not including services) was
11 percent greater than in 1949, despite a 2 percent drop in agricultural
output. Industrial production increased 14 percent. Gains were especially marked in the case of durable goods. More steel was produced in
1950 than in any previous year. The automobile industry operated at a
record rate during most of the year. Electric power rose 13 percent over
1949. Construction, measured in physical terms, reached an all-time high,
and averaged 17 percent above 1949.
Prices moved upward throughout 1950, the pace of the advance increasing sharply after the Korean developments at midyear.
Wholesale prices in December were at an all-time high, 10.9 percent
above the June level and 15.4 percent above December 1949. The price
increases were not limited to a few commodities, nor to a few groups. For
a few weeks after the Korean outbreak, farm and food prices rose sharply.
The rise in industrial prices, while at first less spectacular, was steady and
persistent. At times, the violent gyrations in prices of imported raw materials have been in the spotlight. But now the rise in wholesale prices has
been quite general, affecting all major categories of goods.
Consumers' prices rose over 6 percent during 1950, the major part of the
rise occurring in the latter half of the year. They ended the year at a
record level. Rising living costs absorbed a considerable part of the gains
in consumer incomes.
Wages and salaries and other labor income rose continuously in 1950,
reflecting wage rate increases, longer hours of work, and increased employment. By the fourth quarter, they had reached a record high of 155.9
billion dollars, 16 percent above the level a year earlier. Weekly earnings
in all manufacturing industries rose from $54.43 in November 1949 to $62.06
in November 1950, a gain of 14 percent.
22
CHART I
PEFVENTAGE CHANGES IN
SEIJECTED ECONOMIC INDICATORS
PERC ENT
PER CENT
+ 10
+ 10
LABOR FORCED
mm^^^\
0
Wmf^
UNEMPLOYMENT
0
TOTAL
(INCLUDING
CIVILIAN
EMPLOYMENT
ARMED FORCES)
- -10
-10
-20
1949 TO
•'••••••••••:
1st TO 2nd
I960 *N^
B •••'
-30
~~
-20
f HALF OF 1950
-30
-40
-40
+20
+20
PRODUCTION
"Mfiffifflft.
+ 10
+ 10
\tmmmtffi •'••'•'•'•'•'•' "\
wxwwmfo
%
AftRIDI LTURAL^
0
0
TOTAL GOODS 9
AND SERVICES-^
INDUSTRIAL
-10
-10
+ 30
+ 30
INCOME
+ 20
+20
+ 10
:
0
PERSONAL
DISPOSABLE
^^^
F . RM
(AFTER TAXES,
• i
H
CORPORATE PROFITS
AFTER TAXES
0
PROPRIETORS'
-10
+ 10
+ 10
-10
PRICES-*'
0
+ 10
•r
ALL COMMODITIES
-10
•• !
INDUSTRIAL
PRonnrTc 4/\
C NS
WHOLESALE
°
J/ NO r ADJUSTED FOR SEASONAL VARIATION.
£/ 6R 3SS NATIONAL PRODUCT IN 1950 PRICES.
*/ ON LY AVAILABLE ANNUALLY.
£/ AL L COMMODITIES OTHER THAN FARM PRODUCTS AND FOODS.
SOUR CE: APPENDIX TABLE A - 48.
_j
i ALL ITEMS i
^
J
23
0
fJMERS*
-10
Wage increases were widespread and substantial in the second half of
the year, being accelerated by a continued rise in the cost of living and by
expectations of wage and price controls.
Profits of American business, before taxes, exceeded all records in 1950,
reaching 40.2 billion dollars, or 46 percent above the level of 1949. They
attained a peak annual rate of 48.0 billion dollars in the fourth quarter.
The previous peak rate was 35.3 billion in the third quarter of 1948. The
higher profits reflected increased output, greater sales, and higher prices.
Corporate profits after taxes, and net incomes of unincorporated business,
also made new records. The net income of farm proprietors rose in the
latter half of the year. By the fourth quarter, it was 9.4 percent above the
fourth quarter of 1949, although 25 percent below the postwar peak in the
second quarter of 1948.
Money and credit expanded with the growth of the Nation's output and
the rise in prices. Many components of business and consumer debt
reached new highs.
The housing boom stepped up the growth in residential mortgage debt,
from an 11 percent increase during 1949 to 17 percent during 1950. Consumer instalment credit increased 22 percent in the first nine months of 1950,
compared to a rise of 15 percent in the same period of 1949. Government
policies helped restrain the rate of consumer credit expansion during the last
quarter of the year.
Total privately-held bank deposits and currency increased by 6.4 billion
dollars, reaching 176 billion by the end of the year.
Personal income, at an annual rate of 233 billion dollars in the final quarter
of 1950, was 14 percent greater than a year earlier, and more than 8 percent
above the second quarter of 1950. Although the annual rate of personal
taxes increased by over 2 billion dollars from the first half to the second half
of the year, personal income after taxes rose by 11 billion. The rise in prices
partly offset this increase, but there was a gain of about 2 percent in consumer purchasing power.
Consumption expenditures in the second half of the year far surpassed
those of any previous period, nearing an annual rate of 200 billion dollars.
The increase was especially marked in the purchase of durable goods. A
substantial part of the increased consumer expenditures was a reflection
of higher prices.
Personal net saving dropped from a rate of 6.5 percent of disposable
income in the first half of the year to a rate of 3.1 percent in the third
quarter, reflecting the first wave of post-Korean buying. Then it rose to
6.4 percent in the final quarter.
Private domestic investment in construction, equipment, and additions
to inventory rose very sharply, increasing 19 percent from the first half
of 1950 to the second half, and increasing 67 percent from the second half
of 1949 to the second half of 1950. In the second half of 1950, this investment reached an all-time record of 53 billion dollars at a seasonally adjusted
24
annual rate. The increase during 1950 was most marked in the case of
producers' durable equipment.
The investment trend was already upward before the Korean attack led
to an expansion of the defense program, and to a rapid further rise in investment. Private and Government surveys indicate that business plans
to spend more for plant and equipment in 1951 than in 1950.
The resumption of inventory accumulation during the first half of 1950
was a factor contributing to business recovery. Economic developments
made it difficult for business to build up inventories immediately after midyear; the strong demand forced some reduction in the third quarter. But
in the fourth quarter, inventory accumulation was marked.
The use of capital funds by nonfinancial corporations was almost 24
billion dollars above 1949. Three-fifths of these funds were obtained
internally from retained earnings and depreciation allowances.
Construction put in place in 1950 was 23 percent higher than for the
year 1949, and greater than in any previous year. The sharpest increase
was in housing. A peak of 149,000 new dwelling units was started in May,
and approximately that level was maintained through August. In the
fourth quarter, starts fell sharply, partly as a result of credit restrictions.
International developments greatly stimulated domestic demand and
production, but the pressure of foreign purchases lessened. Exports in 1950
were nearly 1.9 billion dollars less than in 1949. The surplus of exports over
imports fell from 6.2 billion dollars in 1949 to an annual rate of 3.0 billion
in the first half of 1950. An increase in our imports, after we decided to
speed up the rebuilding of our defenses, brought this annual rate down to
the probably transitory level of 600 million in the second half.
Both the volume and prices of imports increased substantially. In
1950 our export surplus was less than our foreign aid, but this aid declined
substantially from the 1949 level.
Government transactions showed a close balance between receipts and
expenditures for the year as a whole. Gash receipts increased while expenditures fell in the second half of 1950. After a cash deficit of 4.2
billion dollars (annual rate) in the first half, there was a surplus of 2.9 billion
in the second half. But the effect upon business operations of the anticipated increase in the military program more than offset any counterinflationary impact of the cash surplus.
An increase of 1.1 billion dollars in Federal cash receipts from calendar
year 1949 to calendar year 1950 was due to higher economic activity, to
increased employment tax rates, and to higher withholding tax rates on
individuals in the closing months of the year. Collections from corporate
income taxes will increase substantially this year, reflecting high profits in
1950 and increased tax rates.
HARRY S. TRUMAN.
JANUARY 12, 1951.
The Annual Economic
Review
January 1951
A Report to the President
By the
COUNCIL OF ECONOMIC ADVISERS
922781—51
3
LETTER OF TRANSMITTAL
COUNCIL OF ECONOMIC ADVISERS,
Washington,, D. C., January 9, 1951.
The PRESIDENT :
SIR: The Council of Economic Advisers herewith submits a report, the
Annual Economic Review: January 1951, in accordance with section
4 (c) (2) of the Employment Act of 1946.
Respectfully,
ff
Chairman.
Contents
Page
I. THE BROAD FEATURES OF 1950
Recovery from the business recession
The period of partial mobilization
The period of intensified mobilization
II. GUIDES FROM THE PAST
Conversion from peace to war, 1940-45
Magnitudes of expansion
Sources of expansion
Shifts in resource use
Inflationary pressures
The relevance of World War II experience
Conversion from war to a peacetime economy, 1945-50
The general pattern of developments
Labor participation and business investment . . .
Incomes and demand
The implications of our current prosperity
I I I . THE MAGNITUDE OF THE TASK AHEAD
The general nature of the task
The size of the national security build-up
Expanding production to meet the strain
Increased labor participation
Expansion of productive facilities
Obstacles to expansion
Production goals for the end of 1951
Impact on civilian supplies
Inflationary pressures
How much defense can our economy support?
IV. ECONOMIC POLICIES FOR DEFENSE
.
Three requisites for economic mobilization
The need for comprehensive programming
The need for speed
The need for public support
Maximizing our productive strength
Industrial expansion
Basic resources
Manpower
Adjustment of agricultural production
31
.
.
.
.
33
33
34
39
43
43
43
45
49
51
52
53
54
57
59
61
66
66
67
70
70
72
76
76
77
77
79
84
84
84
85
86
87
88
90
92
96
IV. ECONOMIC POLICIES FOR DEFENSE—Continued
Promotion of economic stability
Mobilizing our financial resources
Taxation
Debt management
General credit policy
Selective credit controls
Materials controls
Policy for profits, prices, and wages
International economic policy
Economic aid to foreign countries
Control of commodities in world trade
Commercial and financial policies
V. DETAILS OF ECONOMIC TRENDS IN 1950
Employment and production
Employment
Unemployment
Production
Prices, wages, and profits
Prices .
Wages
Profits
Money and credit
The flow of goods and purchasing power
Personal income, consumption expenditures, and
saving
Business investment and
finance
International transactions
Government transactions
Summary: The Nation's Economic Budget . . . . .
page
97
99
102
107
107
108
110
113
119
119
122
123
125
125
125
127
127
129
129
133
137
139
143
143
149
156
159
164
APPENDIXES
A. STATISTICAL TABLES RELATING TO EMPLOYMENT, PRODUCTION,
AND PURCHASING POWER
B. THE DISTRIBUTION OF INCOME AND SAVING IN THE UNITED
STATES
C. THE NATION'S ECONOMIC BUDGET
32
169
221
231
I. The Broad Features of 1950
T
HE AMERICAN ECONOMY at the end of 1950 presented a far
different picture from that which would have been projected from
trends at the start of the year. Twice there occurred the sharply defined
changes in direction ©r speed which come from the shock of armed conflict.
The outlook for 1951, and the appropriate national policies, will rest to a
greater extent than for some years past on Federal activity stemming largely
from international developments. Whatever occurs, however, will start
from the economy at the close of 1950, and the policies to be followed should
make full use of the experience already gained.
The economic history of 1950 divides into three distinct parts: the period
of recovery from the recession of 1949; the period of expansion of the defense program following the Korean outbreak on June 25; and the more
intense period following the beginning of major Chinese hostilities in late
November.
RECOVERY FROM THE BUSINESS RECESSION
The hesitant business recovery, which began in August 1949, grew into a
vigorous and sustained upward movement early in 1950. Industrial production increased more than 10 percent from February to June, and by then
surpassed the postwar record level established in 1948. Employment followed a parallel course. It furnished sufficient jobs, not only to absorb more
than one-fourth of the 4.7 million who were without work in February, but
also to match increases in a labor force which rose to new levels.
The final part of this Review discloses in detail the degree to which each
important factor in the economy supported the rapid recovery to a high
prosperity level in June. Personal incomes, enlarged by the veterans' insurance refund of 2.6 billion dollars and by increasing wage payments, fed a
growing volume of consumers' expenditures. Residential construction
starts, which had declined less than seasonally during the winter, sprang
upward in March beyond the peak month of other postwar years and proceeded at an unprecedented pace throughout the second quarter. Investment in new plant and equipment, after a larger than seasonal decline in
the first quarter, expanded briskly in the second quarter. Businessmen both
reflected and contributed to the ebullience by indicating their purpose to
undertake still greater programs of plant expansion.
This rising level of business activity in the early months of 1950 was
not based upon transitory causes which might have been expected to
33
terminate expansion toward midyear. The payment of the veterans' dividend, which some observers overstressed, contributed to the recovery, but
was not the basic factor in recovery. Nor did the upward movement have
the ephemeral quality of an inventory boom. Producers and merchants
were cautious about accepting the bounding market as a firm foundation
for a reversal of their inventory policies. Manufacturing inventories (seasonally adjusted) did not exceed the September 1949 level until May 1950,
and the increase in value from January to June was only 3 percent. The
increase in value of retail inventories during the same period was 5 percent.
In both cases, inventories were expanded less rapidly than sales.
Rising prices have often accompanied sustained periods of business
expansion following recessions. They were not to be interpreted as a
portent of coming inflation, when the price rise was within the moderate
limits recorded during the first half of 1950. It was not until the end of
April that the weekly wholesale price index began to mount with any vigor.
The total rise, from 151.1 in the first week in January to 157.4 in the last
week in June, was about 4 percent. The index of industrial prices rose less
than 3 percent during the same period. The volatile index of wholesale
prices of farm and food products opened the year near the lowest point since
1946, and these prices increased more during the first half-year than the
wholesale prices of manufactured goods. The slower-moving index of consumers' prices rose only 2 percent.
The changes in money supply and in bank credit during the first half
of 1950 were moderate. The increase in the privately-held money supply
was inconsequential, and the addition of 1.8 billion dollars to the loans of
all commercial banks was a rise of only 4.2 percent. There was, however,
an increase of 11 percent in outstanding instalment credit. Nearly all of
this occurred in the second quarter, indicating one point in the economy
where an inflationary potential might be developing. Residential mortgage
credit was also rising rapidly.
This rapid business recovery brought a speedy change in the fiscal condition of the Government. Treasury revenue from excise taxes and from
taxes upon the wages of the growing body of employed workers began
to expand. Improving conditions also reduced demands upon the Treasury for the farm-price-support program and for unemployment insurance
benefits. In combination, these shifts resulted in a small budget surplus
in the first half of the year.
THE PERIOD OF PARTIAL MOBILIZATION
The shock of the initial involvement in Korea fell upon an economy
which was experiencing a high level of prosperity, with few slack resources
or signs that the boom forces were leveling off. There was prompt and
universal recognition by the American people that a great defense effort
must be made. This meant that there would be imposed, upon an extended
34
economy, military demands for goods and for manpower which had to be
met by diverting factors of production from civilian uses.
The first result took the form of those mass movements which occasionally upset economic analysis based solely upon statistical data or assuming
a regular pattern of economic behavior. There was a rush by consumers to
buy fantastic quantities of certain goods, even though such goods were
being produced under conditions which assured the continuance of ample
supplies for many months. Local stocks of sugar were exhausted; merchants
were forced to limit purchases of nylon stockings; household linens flowed
out of the shops and into the homes; automobile tires were eagerly seized;
meat was crowded into deep-freeze units. Such movements, however shortlived they may be, continue to influence the economy long after the originating incident has disappeared.
Although the supply situation did not warrant such panic buying, consumers were not wholly irrational. The goods they bought were important
household commodities, the limitations upon which had been most sharply
felt during the days of World War II shortages. The buying did not represent any flight from the dollar; rather it was an effort to anticipate the needs
of the future. Such buying would probably soon subside, and sales would
settle down when consumers found ample supplies in the shops and began
to use up what they had bought beyond their immediate needs.
The outburst of consumer buying was neither sufficiently great nor
sustained to require Government intervention to prevent demoralization
of markets. Nevertheless, it had lasting effects upon economic conditions.
The consumers' price index made the unusually large jump of 1.4 percent
between June 15 and July 15, as retail food prices moved upward. The
rise in consumers' prices was followed by a round of wage adjustments, many
of them voluntary, that before the end of the year gave wage increases to
millions of workers in manufacturing and other nonagricultural industries.
The July bulge also caused merchants to flood manufacturers with orders
for goods to replenish inventories which had been held at conservative
levels. (See chart 2.) Manufacturers in turn entered the markets for
raw materials with large demands. Speculative buying of futures at rising
price levels began in the commodity exchanges. The upward pressures
on raw material prices became a persistant inflationary factor throughout
the second half-year.
While the heavy buying of nondurable goods was running its course,
a more enduring trend of buying appeared in the markets for consumers'
durable goods, especially automobiles and household appliances. Incidental
to this, there were heavy liquidations of personal savings and an accelerated
growth of instalment credit. Instalment credit continued to increase
rapidly until action was taken to curb it.
Building operations were at a very high level when the Korean blow was
struck. Then every builder began frantically to search out and buy all
35
CHART 2
MANUFACTURERS' SALES AND ORDERS
New orders ran well ahead of sales in the latter part of I960. The
accumulation of order backlogs was especially rapid in the durable
lines.
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
- 10
- 5
1948
1949
1950
1948
1949
I960
•J'NOT ADJUSTED FOR SEASONAL VARIATION.
SOURCE: DEPARTMENT OF COMMERCE.
materials needed for the completion of his 1950 operations, most of which
he would normally have purchased as the work progressed. The multiplied demand for building materials drove the regular market prices upward rapidly, and generated irregular markets in which commodities exchanged hands at still higher prices. This excited buying eventually
subsided. But it left its mark in the continuance of much higher prices
of building materials generally, although lumber prices declined temporarily.
Other business investment was immediately affected by the booming
markets, and by the expectation that a greatly enlarged defense program
would assure their continuance. Expenditures for new plant and equipment in the third quarter were substantially larger than those in the second
quarter, while plans were hastily enlarged for'far greater expansion in the
fourth quarter of 1950 and in 1951. The effect upon additional investment in inventories was immediate. Between July and October, manufacturing and retail inventories increased 5 billion dollars.
The financing of new business investment by bank loans is a normal
process in our economic structure. It has contributed greatly to our economic growth^ but may at times lead to difficulty by contributing to inflation. In the four-month period, July to October, the loans of all commercial banks increased more than 5 billion dollars, or 11 percent.
The central bank authorities became concerned over inflationary dangers,
and in the latter part of August increased discount rates at the Federal
Reserve Banks and initiated open-market operations to make it less attractive to the banking system and other lenders to sell Government securities
for the purpose of expanding loans. The responsibility of the Federal
Reserve to support the operations of the Treasury in refunding large maturing issues of securities limited the use of the general central banking instruments of credit restraint, and business loans of banks and other lenders
continued to increase to new high records under the pressure of the strong
inflationary forces in the economy.
The fiscal operations of Government did not contribute to inflationary
forces in the third quarter of the year, except insofar as anticipations influenced the plans and conduct of consumers, workers, and businessmen. The
third quarter is one of relatively low revenue receipts by the Treasury, but
there was a modest budget surplus in that period of 1950. Budget expenditures for the Defense Department were less than in the third quarter of
1949, and were slow in rising despite large increases in appropriations.
Government contracts to purchase have economic effects long before payments are ultimately made by the Treasury. But even these effects were
limited, since the business world received far fewer orders than it had
been led to anticipate from speculations in the daily press and trade
publications.
The force which directly sustained the rapid advance in economic activity
during the third quarter was civilian demand, buttressed by rising civilian
income, but without any extraordinary increment from Government sources.
Producers were making goods for civilians, and not for defense, when they
pushed up the industrial production index 6.6 percent between July and
August, and continued to carry it forward, although less rapidly, during the
next two months.
The effect of the Korean outbreak, and of the resulting burst of buying by
consumers and by business firms, was a sharp rise in the prices of industrial
raw materials, farm products, and foods. Many of these prices became
more stable by the end of July. But a general advance of the index of
wholesale prices of industrial products continued, although with decreasing
rapidity, until Thanksgiving Day, when they were 9 percent above the level
of the last week in June. Retail prices advanced more slowly, but this was
merely a postponement of inflation, since the retail price level ultimately
reflects earlier changes in wholesale prices.
In considering at midyear appropriate domestic economic policies to meet
the new situation, assumptions had to be made about the size and character
37
of the defense program. The assumption then adopted was that the defense
program would move forward in stages, with defense expenditure reaching
a peak rate in two years. It followed that, for the first twelve months, the
diversion of productive resources would not require drastic readjustment of
the civilian economy. The initial program of the President to stabilize the
economy was based upon this hypothesis.
The principal legislation requested and enacted to deal with the new outlook included additional military appropriations, higher taxes, and increased
control powers. Additional appropriations of more than 15 billion, dollars
for building up the armed forces, increasing military assistance to Europe,
and enlarging stockpiles were requested in the course of the summer and
were approved. The President, in his first legislative proposal in July, recommended an increase in taxes of 5 billion dollars. In response to this
request, the Congress enacted a tax measure imposing additional rates on
individuals and corporations to add about 4.7 billion dollars to the annual
revenue. In November, the President recommended an excess profits tax,
and signified his purpose to request broader tax legislation in January.
The principal powers requested by the President, in recommending the
enactment of the Defense Production Act of 1950, were to allocate materials and limit their use, to limit credit to consumers and for new construction, and to furnish direct and indirect financial assistance to business
expansion. Following the passage of the Defense Production Act of 1950,
including authority to control prices and wages, official action was centered
upon establishing selective controls. These have the great advantage of
striking directly at the point where it is desirable to apply restraint. The
Federal Reserve Board moved immediately to require larger down payments upon automobiles and other consumers' durable goods than those
in many instalment contracts, and to shorten the period for full payment.
A month later the Board tightened its requirements. The affected goods
were largely those in the manufacture of which it is necessary to use raw
materials required for the defense program.
The Federal Reserve Board and the Federal Housing and Home Finance
Administrator established regulations requiring larger down payments and
shorter periods of amortization in the construction and sales of new houses.
The Secretary of Commerce promulgated rules limiting exports of specific
commodities in short supply which were either directly required in defense
production or were of great importance to the domestic economy. The
National Production Administrator prohibited the use of building materials in structures for amusement and for a few other purposes. One of
the first orders of the Administrator prohibited the accumulation of excess
inventories of certain essential commodities. Vigor was shown in the exercise of authority to establish priorities. A basic regulation established priorities for purchases for defense. Such regulations, however, have the
defect that they take a part of an inadequate supply and leave all other
users to battle more furiously for the remainder. To remedy this defect
38
with respect to some important scarce raw materials., orders were issued
to limit the amount which manufacturers might use in their operations.
Evaluation of the group of controls established during the five months
following the attack in Korea runs into the difficulty that causal relations
are very hard to establish in the economic world. Of some controls., such
as those restricting exports, it may be said with confidence that they had
positive effect in reducing the total demand for certain goods. Of others,
such as the regulation of the terms of instalment credit, it can be said that
the expansion of instalment credit was virtually halted. But one cannot
know how far this was caused by the tighter credit terms, and how far it
was due to other influences affecting the purposes of consumers.
Price increases of raw materials and commodities at wholesale, which
got under way in the summer of 1950, were checked near the end of the
third quarter. For six weeks before the blow from China, the wholesale
price index advanced very slowly. The course of prices of basic raw materials changed from an upward rush to a series of fluctuations. Wages, in
contrast, continued to rise as new contracts were signed in many industries.
A large number of these contracts included provisions for adjustment of
wages to further changes in the cost of living.
THE PERIOD OF INTENSIFIED MOBILIZATION
The initiation of heavy hostilities by China in late November blasted
the hope that the Korean campaign could be brought quickly to a close.
The support of China by the Soviet Union disclosed dangers of incalculable
magnitude, and made necessary a vigorous increase in the speed and size
of defense preparations.
The most important of the immediate changes in the Government defense
program was an increase of almost 100 percent in the draft calls ordered by
the Department of Defense for January and succeeding months. The plan
for procurement for the armed services required substantial upward revision.
Additional funds were requested of the Congress in December to finance the
initial phase of the revised procurement program, and were provided.
There was no great change in the placement and scheduling of orders
before the end of 1950.
Industrial production in December remained close to the level established
during October and November. Employment, when seasonal adjustment
is made for the customary additions to the labor force and jobs incident to
the holiday trade, was likewise steady. Yet national income and consumers' income continued to rise under the impact of rising prices and
rising wages.
Wholesale prices of industrial products, which had moved slowly for
nearly two months, immediately pressed upward at the same fast rate
at which they had advanced in July and August. In the four weeks
39
following the Chinese intervention the index rose more than in the preceding
eight weeks, and more than in the four weeks following the Korea attack.
Wholesale prices of farm and food products, after a sharp rise in the first
week in December, were stable for two weeks and then bounded upward
again.
The market conditions under which wholesale prices advanced rapidly
in December were very different from those of July and August. Christmas
buying by consumers was little if any greater, in unit volume, than in
1949. Wholesale price rises in December seem to have been very largely
the result of two factors: first, an effort by sellers to increase prices before
they could be frozen by price controls and, second, the evaluation by businessmen of the pressure on prices which would flow from an accelerated
defense program, and a continuing upward trend of money incomes. An
inflationary spiral of rising costs of production, rising prices, rising wage
rates, and still again rising costs was soon under way. (See chart 3.)
This new impetus to inflationary forces in December was not related to
any deficit financing by the Treasury. A substantial budget surplus and a
larger cash surplus was accumulated during the month. This rounded out
a period of five months over which there was a net surplus, and a calendar
year in which the Budget was close to a balance. Bank credit, on the
other hand, continued to add to the inflationary pressure at an accelerating
rate. Outstanding business loans of commercial banks in 94 leading
cities, which had expanded at an average weekly rate of 160 million dollars
since the end of June, increased more than 700 million dollars in the three
weeks following the China attack.
The important positive measures taken by Government during December to stabilize the economy were quick action upon a corporate excess
profits tax bill, which was made ready for final enactment before January
3; an extension of the rent control act; an order of the Federal Reserve
Board increasing member bank reserve requirements; additional allocation
and limitation orders by the National Production Administrator affecting
specific materials, and in some cases specific uses; and an order establishing a Government monopoly in importing rubber.
Other measures were preparatory. The President issued a proclamation
on December 16 declaring a national emergency, and immediately thereafter established the Office of Defense Mobilization to which he assigned
control and direction of the exercise of the powers given to the President by
the Defense Production Act. Before the end of the month, the Director
of the new agency was coordinating the plans and operations of the several
government offices under his jurisdiction.
The Economic Stabilization Administrator hastened the work of organizing a staff to administer price and wage controls, the need for which
promised to be far greater under the accelerated defense program than
before. When the major automobile companies increased prices on their
CHART
3
WHOLESALE PRICES
Wholesale prices, after a moderate advance in the 1st half of I960,
rose rapidly and on a wide front in the 2nd half of the year to new
record levels. During the year farm prices scored the largest
increases, with food and industrial prices not far behind.
PERCENT OF 1926 AVERAGE
PERCENT OF 1926 A V E R A G E
220
220
200
* FARM
200
PRODUCTS
180
180
160
160
BOTHER THAN FARM
PRODUCTS AND FOODS
(INDUSTRIAL PRODUCTS)
140
140
120
120
100 I i ' ' ' i I i i
100
1948
1949
I960
PERCENTAGE CHANGES
DECREASE
ALL
INCREASE
DECEMBER 19491 TO JUNE 1 950
^•X^^--v:^T^:::::::::;:;A-^^:;>V;>v:v.v^'-;'l J U N E I960 TO
^:^::-^//^:J:l:;^-\^^;^^::-°^
DECEMBER I960
COMMODITIES
2.8| PRE-KOREAN PEAK TO DECEMBER 1950
FARM
PRODUCTS
FOODS
OTHER T H A N F A R M
P R O D U C T S A N D FOODS
(INDUSTRIAL PRODUCTS)
SOURCE:' DEPARTMENT
OF LABOR.
new models, the Administrator issued his first mandatory order fixing
prices at the December 1 level until March 1, 1951. This was followed
by an order, in compliance with the statute, prohibiting wage increases
for the same period. These orders had limited effect upon the inflationary forces that were affecting wholesale prices and the cost of living.
But they were in a sense preparatory to much more extended action. The
Administrator scheduled a series of conferences with producers of a number
of basic industrial commodities to consider means of holding down prices
of their products until his organization was prepared to administer more
extensive price and wage controls. This procedure closely followed the
early course of action to control prices in 1940-41. The precedent was
further adopted in appeals to businessmen to follow, voluntarily, a price
policy which the Administrator outlined in a formal statement.
At the end of 1950, the national economy was subject to forces of
inflation far more powerful than those which arose following the original
outbreak in Korea. Originally the advance in prices, which had slowed
down during the mid-autumn, was accelerated under pressures which
promised to continue until curbed by positive action. The outlook is
that to these pressures there will soon be added the direct effect of the
rapidly expanding military program, with its increasing draft upon
productive resources which have thus far continued to serve civilian needs.
Clearly it will be necessary to resort to more direct action than has thus
far been taken to prevent inflation from continuing its destructive spiral.
The policies now needed are treated more extensively in a later part of
this Review.
II. Guides From the Past
T
HE ECONOMY at the end of 1950 is the foundation on which we
must build for the task ahead. But this economy was not built in a
day; and the experience of more than one year can contribute much to
our understanding of the job to be done. The five years between 1940
and 1945 witnessed a gigantic conversion from peace to war. The work
immediately before us now, measured by defense goals already defined, is of
smaller magnitude. These goals are not based upon the prospect of
inevitable total war; they are a part, rather, of our continuing efforts to
achieve a durable peace. Nonetheless, as the Nation now embarks upon
a program for conversion to defense, it would be folly to ignore an experience into which so much effort was poured only a few short years ago.
The record of economic development between the cessation of hostilities
in 1945 and 1950 is also of large significance today. That record exceeded
expectation in reconverting from war to peace, without the prolonged dislocation of postwar periods in earlier times. The managerial and labor
skills, the private financial mechanisms, and the public policies which
smoothed and accelerated this transition, are national assets which should
embolden us now as we face an even harder task. Moreover, these five
years have brought our economy to unprecedented levels of strength, judged
by every index of business activity and by all of the human and other
resources which enter into our total power. We are far abler than a
decade ago to assume the heavy burdens now confronting us. Yet the
very fact that our resources are now being more fully used than they
were in 1940, makes more difficult in some respects the problem of redirecting a large part of our resources to national defense.
Thus the history of the past decade, in war and in peace, should encourage
and guide us in the months and years ahead. If we evaluate this experience
carefully, it can contribute immensely to the shaping of policies for the
future.
CONVERSION FROM PEACE TO WAR, 1940-45
Magnitudes of expansion
The first major United States defense appropriation was requested in
June 1940, at the time of the fall of France. The estimates presented to
the Congress in January 1941, were described by the President as a budget
for "total defense." The total of defense spending authority requested by
that time was 29 billion dollars, or nearly 30 percent of the total national
922781—51
4
-
output of the preceding twelve months. During the following year, 46
billion dollars were added, bringing the total to 75 billion dollars over a
period of 18 months in terms of the prices then prevailing. In 1950 prices,
this was roughly equivalent to about 115 billion dollars. The budget presented in January 1942, one month after Pearl Harbor, was called "a budget
for a Nation at war in a world at war." From that date forward, the only
limitations on our war efforts were the intensity of our purpose, the skill
of our planning, and our physical capabilities. The dollars were made
available as rapidly as they could be used.
The results were stupendous. The dollars were used to train, feed, house,
and clothe 12 million men in uniform, and to provide them and the armed
forces of our allies with munitions of war. Victory was the final measure
of success. The economic dimensions of this effort, however, were shown
by the growth of Federal war expenditures. The 1941 rate was nearly 2l/z
times the second half of 1940 rate, and the rate in 1942 was over 3 times
the 1941 rate. Total war expenditures in 1944 were 135 billion dollars,
or nearly 13 times greater than the rate during the second half of 1940.
These comparisons are all stated at the 1950 price level, in order to make
them more meaningful.
Expenditures for munitions production more than doubled in 1941, and
in 1942 were 3/2 times their 1941 level. In 1944, they stood at about 85
billion dollars (in 1950 prices), or more than 13 times the annual rate in
the second half of 1940. This 1944 outlay represented production of
96,000 aircraft, 18,000 tanks (nearly 30,000 had been produced in 1943),
more than 30,000 ships and nearly 2 million tons of aircraft bombs. It
supported the landings on the Normandy beaches and on the Pacific islands,
and made good the tremendous attrition of full-scale combat. Had necessity dictated, it could have been still further increased.
But understanding of what took place would be superficial, if one looked
at the military effort alone. Behind this effort was a build-up of the economic strength which underlies striking power. This build-up was ample
in scope and unparalleled in size. Total national production in 1941 was
about 15 percent greater than in 1940. (See appendix table A-10.) In
1942, it increased by nearly 15 percent again. In 1944, the peak year of
war production, total national output was about 60 percent above the
1940 level. The surge of industrial output was even greater. The index
of industrial production rose 30 percent in 1941 above the previous year,
and rose a further 23 percent in 1942. It reached its peak in 1943. In
that year, and again in 1944, it stood about 90 percent above the 1940
level. Agricultural output increased nearly 20 percent between 1940 and
1944, despite a substantial reduction in the farm labor force and continued shortages of many farm supplies. The rise in total output not only
supplied the primary military effort. It was also sufficient to service vital
industrial expansion, and actually to achieve some general improvement in
the basic consumption standard of those employed at home. In short, a
44
CHART 4
CHANGES IN PRODUCTION & EMPLOYMENT
1940-1944
TOTAL PRODUCTION OF GOODS AND SERVICES^
(BILLIONS OF DOLLARS, 1950 PRICES)
1940
INDUSTRIAL PRODUCTION
(PERCENT OF 1935-39 AVERAGE)
1940
1944
AGRICULTURAL PRODUCTION
(PERCENT OF 1935-39 AVERAGE)
CIVILIAN EMPLOYMENT
(MILLIONS OF PERSONS)
GROSS NATIONAL PRODUCT.
SOURCES: VARIOUS GOVERNMENT AGENCIES.
major productive effort enabled us to grow stronger, not only on one vital
front, but on several vital fronts. This conclusion is clear, even though
there are statistical difficulties in comparing peacetime output with war
output. (See charts 4 and 5.)
Sources of expansion
The mainspring of this growth was an economy which possessed great
power and resiliency. Although total production rose by 60 percent between
1940 and 1944, the level from which it started was very high by the standards of any other country in the world. The years of common action to
combat depression, and to help those groups and areas which had been
hardest hit, had built new sources of strength into the economic structure.
From 1940 onward, the basic sources of expansion were three: the absorption of unemployed manpower and other idle resources into production; the
expansion of productive capacity through enlarging plant and facilities; and
the recruitment of new workers—for example, more women—into the labor
force. Each of these three sources played a major role in the final result.
45
CHART 5
TOTAL OUTPUT
Total production of goods and services in 1944 reached a peak about 60
percent above the 1940 level. In 1950, it was about 50 percent higher
than in 1940.
PERCENT OF 1940
200
PERCENT OF 1940
200
.INDUSTRIAL PRODUCTION
180
180
160
160
140
140
120
I 20
I
100
1940
41
42
I
43
I
44
I
45
I
46
47
100
48
49
50
^INDEX OF GROSS NATIONAL PRODUCT BASED ON 1950 PRICES.
SOURCES: COUNCIL OF ECONOMIC ADVISERS; BASED ON DATA FROM BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM, DEPARTMENT OF COMMERCE,AND DEPARTMENT OF AGRICULTURE.
They operated concurrently, and their contributions to the expansion of
output cannot be separately measured.
Between 1940 and 1944, the total number of people in the armed forces and
civilian employment combined rose by 17.3 million, or about 35 percent.
Of this increase, 10.9 million went into the armed forces, and 6.4 million
were drawn into civilian employment. To supply this increase, 9.9 million,
or well over half, came from the increased participation of the population
in the labor force and normal growth, while 7.4 million were absorbed from
the pool of unemployed which existed in 1940. Thus the expansion of the
labor force was more important than the reduction of unemployment in
meeting our manpower needs.
From the standpoint of timing, the major increases in civilian employment came during the years 1940-42. The largest growth in the armed
forces occurred during the next two years, particularly during the twelvemonth period from mid-1942 to mid-1943, when 5 million men, or over 40
percent of the total increase, were put in uniform. This timing eased the
job of preparing for all-out war production.
The enlargement of labor effort did not come only from increases in
the number of workers. Between 1940 and 1944, average working hours
in manufacturing industries rose from 38.1 to 45.2 hours a week, or by
about 19 percent. In construction, they rose from 33.1 to 39.6, or nearly
20 percent; and in bituminous coal mining, they rose from 28.1 to 43.4, or
nearly 55 percent.
This tremendous increase in labor input was devoted largely to the
production of finished munitions, civilian goods, and essential supporting
services. A substantial fraction, however, especially up to mid-1943, was
devoted to enlargement of plant and facilities for the production of munitions and basic materials. During the five-year period from mid-1940 to
mid-1945, investment in industrial and industrial-service facilities totalled
nearly 57 billion dollars (in 1950 prices), or nearly 4^4 percent of total
national output. Of this total, over 16 billion dollars worth were put in
place in 1942 alone, the peak year. This represented nearly 7 percent of
total national output.
The great emphasis in this investment program was on facilities for the
production of ordnance, aircraft, ships and chemicals (including synthetic
rubber). These categories alone accounted for almost 60 percent of the
total outlays for war industry facilities during the five-year period. The
factory space devoted to aircraft production was increased 13-fold from
January 1940 to March 1944.
Other very large programs were undertaken for the expansion of basic
capacity in metals and metal products, machinery and electrical equipment,
and petroleum and coal products; these categories accounted for another
24 percent of the total. Rough estimates indicate that, between 1939 and
the end of 1945, the total capacity of all manufacturing industries was
increased by as much as 30 percent. In individual industries, the increase
in capacity was 12 percent for steel, over 50 percent for nonelectrical
machinery, and 70 to 75 percent for chemicals and electrical machinery.
Electric generating capacity increased by more than one-fourth. In an
even shorter period, aluminum capacity increased nearly six-fold. In a
number of less essential industries there was little or no increase in capacity,
and there were serious lags in maintenance, and modernization.
As shown in chart 6, these expansions of capacity supported very large
increases in output. Between 1940 and 1944, steel production rose by
nearly one-fourth; power output by about one-half; and aluminum production nearly quadrupled.
Direct Government financing played a major role in the World War II
expansion program. Nearly 72 percent of the total war industrial facilities
of the period were built with public funds. The major reason for this was
that such a high proportion of the facilities constituted special types needed
for direct war materiel output, offering only limited prospects of economical
47
CHART 6
GROWTH IN PRODUCTION, 1940-1944
ALUMINUM
STEEL
THOUSANDS OF SHORT TONS
0
300
600
1
1
I
MILLIONS OF SHORT TONS
0
50
100
1
1
1
900
1
150
I
fc^^^^j
I
1.,
1944
ELECTRIC POWER-17
BITUMINOUS COAL
BILLIONS OF KILOWATT HOURS
0
30
60
T
i
l
90
l
MILLIONS OF SHORT TONS
0
200
400
1
•940 w/mt/M
600
I
1
w///////mmm&
1944 I,
I
%
1
PETROLEUM
' !
FOOD
BILLIONS OF BARRELS
0
1
1
1
1940 &M%M%\
1944 |
1
2
1
3
1
PERCENT OF 1935-39 AVERAGE
0
50
100
1
1
I
150
1
VMrn^mzMa
, j
11111
-'FOURTH QUARTER RATE
SOURCES: DEPARTMENT OF INTERIOR, AMERICAN IRON AND STEEL INSTITUTE,
FEDERAL POWER COMMISSION AND DEPARTMENT OF AGRICULTURE.
postwar use. The facilities built for ordnance, aircraft,, and shipbuilding,
for example, accounting in all for a little over half of total public and private outlays, were more than 90 percent Government-financed. In the expansion of basic industries such as steel and machine tools, Government and
private industry put up about equal shares, while the transport and utility
expansions were financed predominantly from private sources.
Policies were developed to support expansion in ways which were orderly, least disruptive of community life, and most compatible with our
enterprise system. Recruitment and training programs, special transportation arrangements, day nurseries, special arrangements for part-time work—
these and related policies were devised to secure maximum participation
in the labor force. Investment policies, including direct Federal loans,
loan guarantees, and accelerated amortization, were devised to secure
maximum participation by private business in the needed expansion of
capacity.
Shifts in resource use
Despite the great increase in total output between 1940 and 1944, it was
not possible merely to superimpose the war program on our civilian economy. Massive shifts in the use of resources were required. The size and
difficulty of these shifts were only partially indicated by changes in the
broad components of the labor force or of total national output, because
many shifts were within major components, and virtually all major segments
of the economy showed some expansion.
In 1940, Federal defense expenditures absorbed about 2 percent of the
total national output of 184 billion dollars (all of these figures are based on
computations in terms of 1950 prices). In the first quarter of 1941, the percentage was about 7; in the first quarter of 1942, it was about 20; and in the
first quarter of 1943, it was over 40 percent, or close to the wartime peak.
In the peak war year 1944, war outlays absorbed about 45 percent of a total
output of nearly 300 billion dollars. Civilian consumption in the aggregate rose somewhat in every war year except 1942, being nearly 15 percent
higher in 1944 than in 1940. Per capita food consumption grew considerably, although the more equitable distribution meant declines in consumption for many. Nonetheless, there were marked and unfavorable changes
in the range and quality of available consumer goods, which cannot be
adequately accounted for in the statistics. Furthermore, there were many
individuals and families whose tax payments rose substantially more than
income, and whose standards of living declined markedly. As a proportion
of total output, consumption declined from about 70 percent in 1940 to
about 50 percent in 1944.
War demand for particular types of materials, facilities, and skilled manpower was great enough to require the virtual elimination of production
of a number of durable consumer goods. Total production of all consumer
durable goods was cut by about one-half between 1941 and 1944. From
relatively small quantities at the beginning of 1940, direct military consumption of steel rose to more than 40 percent of total supply in 1944, and
of copper and aluminum to two-thirds or more.
On the manpower side, only agricultural employment and domestic
service showed major and steady declines between 1940 and 1944, falling
by nearly 2 million. Construction employment rose by nearly a million—
almost doubling—between 1940 and 1942, and then was cut back even more
as the expansion of facilities was sharply contracted. All other major areas
of employment remained fairly stable, or showed increases, throughout the
five-year period. By far the major increase was in the metals, metal-working, and other durable-goods industries chiefly devoted to munitions production. Employment in the durable-goods industries expanded from 5.3
million in 1940 to 10.9 million in 1944. This was equivalent to nearly 60
percent of the total increase in nonagricultural wage and salary workers
between 1940 and 1944. (See chart 7.)
49
CHART 7
NONAGRICULTURAL EMPLOYMENT
MILLIONS
OF PERSONS
MILLIONS OF PERSONS
60
60
FvEj
50
50
40
40
>LOY VIE NT
OTHER
;
30
•-••••
<.
20
GOVERNMENT
!
20
'
-
i1I
Mff.ti
'///,
V/A
TURI NJG
'
x/y>
^
10
•
1940
41
42
43
44
45
46
47
48
SOURCES: DEPARTMENT OF COMMERCE AND DEPARTMENT OF LABOR.
49
50
Inflationary pressures
These very great increases in employment, working hours, and production generated similarly large increases in incomes—even with adjustment
for increases in prices and wage rates. Disposable personal income (in 1950
prices) rose by nearly 45 percent, or roughly 55 billion dollars, between
1940 and 1944; income before taxes rose even more. (See table 1.) During
the same period, the supply of consumer goods and services increased by
less than 15 percent, for while total production expanded by 60 percent, or
nearly 115 billion dollars, Federal war expenditures absorbed the whole of
the increase, and the declines in private investment and net foreign investment were not sufficient to permit a greater expansion of consumption.
The inflationary pressure caused by incomes rising so much faster than
civilian supplies was only partially counteracted by taxation. With government expenditures rising much faster than revenues, and with restricted
civilian supplies, there was necessarily a very great increase in personal
savings. They rose from about 5 percent of disposable personal income in
1940 to nearly 25 percent in 1944. In 1944 private saving, both personal
and business, totalled more than 60 billion dollars (in terms of 1950 prices).
TABLE 1.—Production and private income and expenditure, 1940 and 7944
[Billions of dollars, 1950 prices]
Item
1940
Production:
Total production of goods and services (gross national product)
Total war production
_
184.4
Income and expenditures:
Disposable personal income
Retained business receipts i . .
Total retained private income
.
Personal consumption expenditures
Gross private domestic investment
Total private domestic expenditures
Total excess of private income (-{-) or expenditures ( — )
-
1944
4.6
298.5
135.0
133.0
21.2
189.9
27.8
154.2
217.7
127.2
27.6
144.3
12.1
154.8
156.4
—.6
+61.3
* For definition, see appendix table C-3.
Source: Based on data in appendix table A-10.
At no time during the war period, however, were taxes and funds earmarked for savings sufficient to offset inflationary pressures. Between
1940 and 1944, the index of consumer prices rose by 25 percent, and the
index of wholesale prices by nearly one-third. The bulk of these increases
occurred before the inauguration of general price control in 1942, but
strong upward pressures nonetheless persisted, making the task of maintaining stable prices one of continuing difficulty. Furthermore, when the
war ended and controls were removed, the very large volume of liquid savings accumulated during the war was a major inflationary factor in the
reconversion period.
The relevance of World War II experience
This resume of World War II experience has points of relevance to
the large though different defense effort now being undertaken. It
indicates that the economic aspects of mobilization, whether partial or
complete, are not confined solely to servicing the military front. Policies
must be directed toward achieving that balance between strength on the
home front and strength on the fighting front which provides the greatest
total strength in terms of the strategy of the contest. The resume underscores the importance of expanding production. But it also shows clearly
that a magnificent increase in production could not avert the necessity
for cutbacks and reallocations of manpower, materials, and equipment to
new purposes. And although the Nation started its defense effort at
a time when there were many slack resources, this did not prevent the
rapid gathering of inflationary forces.
To meet these problems, many and varied policies were adopted and
made effective. Government expenditures, financial aids, and tax incentives contributed to the rapid expansion of total output. By the end of
1943 they were setting the pattern of final demand for over 40 percent
of national output, and largely guided the necessary shifts in manpower.
Direct allocations of materials, and prohibition of nonessential uses, assured
the availability of resources to meet these primary needs. Increased tax
rates, savings campaigns, and rationing helped to restrain the pressure of
civilian incomes on limited supplies. Direct price control and wage
stabilization gave necessary support to these policies, and at the same time
kept the remaining pressures from breaking out of bounds. It is a major
question, however, whether inflationary pressures could have been contained successfully over a longer period without higher taxation.
It is of high significance that, even with this necessary intensification
of public controls and centralized action, the great records of wartime
production were achieved in large measure without destroying—and in
fact, by enlivening—the dynamic initiative of enterprise all over the
country. This not only helped us to win the war; it also left us in a
strong position to move forward when hostilities ceased.
The value of this experience is not lessened because the problems we
now face are somewhat different from those which confronted us after
1940. Experience is useful, not only in dealing with identical situations,
but also in dealing with new variations. Besides, there are numerous
important points of similarity between what we must now do and what we
did after 1940. That experience should be studied and drawn upon now.
More detailed reference to its pertinence will be undertaken in the policy
section of this Review.
CHART 8
CHANGES IN PRODUCTION & EMPLOYMENT
SINCE 1944
TOTAL PRODUCTION OF GOODS AND SERVICES'17
(BILLIONS OF DOLLARS, 1.950 PRICES)
1944
INDUSTRIAL PRODUCTION
(PERCENT OF 1935-39 AVERAGE)
1944
I960,
AGRICULTURAL PRODUCTION
(PERCENT OF 1935-39 AVERAGE)
1944
I960
CIVILIAN EMPLOYMENT
(MILLIONS OF PERSONS)
1944
I960,
^ANNUAL RATE, SEASONALLY ADJUSTED.
^SEASONALLY ADJUSTED.
SOURCES: VARIOUS GOVERNMENT AGENCIES.
CONVERSION FROM WAR TO A PEACETIME ECONOMY, 1945-50
In the Midyear Economic Review of last July, the Council undertook
an analysis of developments during the preceding five years. This survey
outlined the unparalleled height of peacetime productive power to which
the American economy had ascended. The survey also revealed new magnitudes and modes of private economic behavior and public policy, which
suggested new limitations on the applicability of traditional cycle analysis.
The mildness of the 1949 business recession, and the speed and vigor of the
recovery, led the Council to suggest that new factors of stability had been
built into the structure of our system, and that this would contribute to
further dynamic growth.
The tasks now confronting the Nation suggest a further appraisal of these
five years in a somewhat different perspective. The economic situation now
is vastly different from what it was in 1940, when we began so vigorously to
build up military strength and to adjust the rest of our economy to this
primary task. In consequence, the Nation is now in a novel situation as it
53
faces a defense emergency. This, in turn, has great bearing upon what we
now need to do, and upon the speed and facility with which we can adjust
to the accomplishment of new goals and the assumption of new burdens.
The general pattern of developments
The dominant feature of the beginning of the reconversion period was a
precipitate decline in war expenditures. From their peak of about 135
billion dollars in 1944 (in 1950 prices), these expenditures dropped to only
about 25 billion dollars in 1946, or by more than 80 percent. They declined
still further in 1947.
Despite this drastic contraction of the major single segment of demand,
the total output of the economy fell by only about 15 percent between 1944
and 1946. By the end of 1950, after the moderate setback in 1949, total
output stood close to the 1944 level. (See chart 8.)
Industrial production, weighted so heavily during the war by munitions
output, has varied much more sharply than total output. From a 1943
peak of 239, the index of industrial production fell to 170 in 1946; or by
nearly 30 percent. Since 1946, except for the 1949 setback, the index has
climbed steadily, and by the end of 1950 was within 10 percent of its wartime peak year. (See chart 9.) Except for the industries which had concentrated on munitions production, virtually all types of industrial output
at the end of 1950 were substantially above wartime peaks. In view of the
record of expansion and modernization of industrial facilities during the
postwar years, basic industrial capacity is now well above the 1944 level.
Agricultural production as a whole did not decline at all from its wartime levels, and in both 1949 and 1950 was well above those levels.
Furthermore, there were substantial shifts in types of farm output, toward
higher-value livestock products more nearly in accord with the pattern of
consumer demands at high levels of incomes.
The physical volume of total new construction in 1950 was more than 15
percent above its 1942 wartime peak.
Thus in some areas of basic importance to long-term economic growth
and to the steady improvement of living standards, production in 1950 was
substantially above its wartime levels. Even though total output was
probably no greater, it was attained with far less strenuous utilization
of plant and manpower. The capacity to produce was much greater.
The pattern of output in 1950 was predominantly adjusted to the needs
of a prosperous peacetime economy. Total civilian consumption was onethird above the 1944 level. It absorbed about 70 percent of aggregate
production, compared with about 50 percent in 1944. (See chart 10.)
Residential construction in 1950 totalled 12.5 billion dollars, or nearly ten
times the 1944 level (in terms of 1950 prices). About 6*/2 million new
passenger cars, or 11 billion dollars worth, were produced in 1950, compared with practically none in 1944. A completely new product, television,
54
CHART 9
INDUSTRIAL OUTPUT
Total industrial output rose about 90 percent from 1940 to the wartime
peak in 1943, when it was very heavily weighted by munitions production.
During 1950, although below the wartime peak, it was 60 percent above
the 1940 level, and was rising rapidly.
POINTS IN TOTAL INDEX
POINTS IN TOTAL INDEX
250
250
1935-39 AVERAGE FOR TOTAL = 100
TOTAL INDUSTRIAL
PRODUCTION
200
200
150
150
100
100
'DURABLE
50
1940
41
42
43
44
MANUFACTURES^ + , ' " V'^- * ' « * ''• "' "c "
45
46
47
SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
48
50
49
50
CHART 10
CHANGING SHARES IN NATIONAL OUTPUT
The record of the past decade shows the growth and changing pattern
of the economy under the impact of World War IE, the conversion to
peacetime, and the postwar resumption of expansion. Real consumption
has expanded steadily to new all-time highs, while total output in
I960 was only moderately below the wartime peak.
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
350
1950
350
PRICES
TOTAL GROSS NATIONAL PRODUCT
300
300
250
250
200
200
150
150
\
\f
100
GOVERNMENT PURCHASES
OF GOODS AND SERVICES
100
\
50
50
1940
41
42
4*S
'4*4*
'4*5*"
46
47
48
49*
50
PERCENT OF
PERCENT OF TOTAL
100
TOTAL
100
75
75
PERSONAL CONSUMPTION EXPENDITURES:
50
50
25
25
1940
41
42
43
44
45
46
47
48
49
50
U GROSS PRIVATE DOMESTIC INVESTMENT AND NET FOREIGN INVESTMENT. SEE UPPER PART OF CHART FOR
DOLLAR VOLUME OF EACH ITEM.
SOURCE : COUNCIL OF ECONOMIC ADVISERS.
56
was being produced at a rate in the neighborhood of 2 billion dollars a year.
Throughout the civilian economy, new peacetime records were being
established.
Labor participation and business investment
Between 1944 and 1946, the total labor force (including the armed
forces) declined from 65.9 to 60.8 million, or by about 5 million. Over
this same period, the decline in the armed forces was about 8 million. Thus
there was an increase of about 3 million in the civilian labor force, although
many women and older people left the labor force, and many veterans
resumed their education instead of looking for jobs. After 1946, both the
total labor force and the civilian labor force steadily increased. By late in
1950, the total labor force was close to the World War II peak year, 1944.
The civilian labor force was higher than in 1944 by well over 8 million,
or more than 15 percent; and civilian employment was also higher by more
than 6 million, or more than 10 percent.
Throughout most of the postwar period, with the exception of 1949 and
the first half of 1950, unemployment was little if any above what might be
regarded as a normal peacetime average, between 2 and 2J/2 million, or
3J/2 to 4 percent of the labor force. This level of unemployment, however, was substantially above the 1944 average of 670,000 or 1.2 percent
of the labor force.
Average weekly working hours, however, have declined substantially. In
manufacturing, they fell from their 1944 peak of 45.2 to 40.4 in 1946, or by
about 10 percent. After that, they remained between 39 and 41. In other
industries, declines of smaller magnitude took place. The eight-hour day
and the five-day week became widely established as an acceptable balance
between work and leisure under going wage rates and aggregate demand
for labor. Thus there was a substantial decline in the intensity of labor
effort during the postwar period, measured by degree of participation in the
labor force by women and older people, by volume of unemployment in
relation to the total labor force, and by length of the work week.
With continuing high employment and intensive investment in modernization and expansion of productive facilities, there has almost certainly
been a substantial improvement in productivity. Although statistical
measurements in this field are necessarily lacking in precision, it seems likely
that output per man-hour for the economy as a whole has increased by at
least 10 percent during the past five years.
Business investment has been a major cause of this rise in productivity.
Outlays during the postwar years for nonfarm plant and equipment have
totalled over 90 billion dollars, or 7 percent of total national output. (See
chart 11.) These expenditures rose substantially in every year until 1949,
when there was a slight drop, and again increased sharply in the second half
of 1950. This very large volume of investment was devoted not only to the
57
CHART 11
NONFARM PLANT AND EQUIPMENT OUTLAYS
The total physical volume of private and public facilities investmen t
rea :hed a wartime peak in 1942, which was equalled in 1948 by
priv ate investment alone. Government outlays for productive
fac lities accounted for a large share of the total from 1941 to I94Zi.
Priv ate outlays in I960 were 90 percent of the wartime peak fo r
toteJl outlays, and 52 percent above 1940,
BILL
«|
ONS OF DOLLARS
BILLIONS OF OOLl ARS
25
25
1950 PRICES
•*
w
.
20 —
~
•*•
20
* :
HTTP*
JJ
T~~™
<
"
',*
15
-"•*•
—
;
— 15
_,
PU BLI ;:
L,
r10
-
^
*i
10
^;
|^L
-
-
^j
'v i
* ;
5
5
PR IVAT E
*
•>j
'
i
"•';
1-
-i
-
I-
,
0
0
1940
41
42
43
44
45
46
47
48
49
50
•* PUI
. . PO RTION OF THE TOTAL.
SOUFICES: COUNCrL OF 'ECONOMIC ADVISERS;
BASED ON DATA FROM DEPARTMENT OF COMMERCE,
• , SECU RITtES AND EXCHANGE COMMISSION, AND BOAiRD OF GOVERNORS OF THE FEOJERAL RESERVE SYSTEM.,
enlargement of plant and equipment, but also to extensive modernization
programs. These activities have established a base for further increases in
productivity, and have greatly enlarged our capabilities for the tasks ahead.
Steelmaking capacity is about 8 percent greater now than it was at the
end of 1944, despite the retirement of much obsolete capacity just after the
war. Capacity for refining petroleum has increased about 28 percent in
the same interval, and electric utility generating capacity has risen nearly 40
percent. Much more rapid growth has occurred in some important industries such as chemicals and electrical machinery, which are estimated now to
have capacities about two-thirds larger than at the end of the war.
Changes in the production of individual basic industries have differed
markedly. (See chart 12.) Output of crude petroleum at the end of 1950
was more than 75 percent above the 1944 level; of electric power, more
than 50 percent; and of steel, nearly 15. Aluminum production, however,
was moderately below the wartime peak, and coal production had fallen
nearly 20 percent.
Some estimates indicate that the over-all capacity of private manufacturing industry increased about 27 percent between the end of 1945 and the
end of 1950, compared with 31 percent during the period 1939-1945. In
absolute terms, the expansion was probably larger in the five postwar years
than during the war.
Since the Federal Reserve Board index of manufacturing production
is only now approaching the peak registered during the war, it might appear
that present capacity could support very much more than the present level of
output. But these possibilities should not be overrated in the face of the
mobilization task before us. The over-all estimate of expansion of capacity
during 1945-50 refers to the pattern of output of the past few years, and is
less relevant to the considerably different pattern of output needed in the
build-up of economic mobilization. Moreover, a significant part of the
reported postwar increase in private industrial capacity for production of
civilian-type goods did not represent a net addition to total capacity; it
was secured by reconversion of war facilities. Finally, some existing capacity
of the less essential types may not be fully utilized in the next few years, as
manpower and materials are necessarily diverted elsewhere.
Incomes and demand
In the years from 1945 to 1950, the volume and pattern of private demand
again became the main influence upon the volume and pattern of production. This was true although, by prewar standards, government programs remained large. Civilian consumption and private investment accounted for about 86 percent of total national output in 1950, compared
with about 52 percent in 1944.
The deficiencies accumulated during a decade of depression and incomplete recovery followed by five years of war, and the new wants generated
by high employment and high incomes, were tremendous. These high
922781—51
5
59
incomes, together with more than 150 billion dollars of wartime liquid savings, gave an additional impetus to an economy released from the needs of
war, comparable to the impetus imparted by the great volume of defense
appropriations from 1940 onward. As peacetime incomes and consumer
spending continued to rise, business adjusted its investment plans to what
were gradually recognized as permanently greater markets.
The expanding scope of business investment in productive facilities has
already been outlined. The production of housing and durable goods for
consumers was even greater. The still larger output of nondurable goods
and services showed a slight but steady upward trend, despite the increasing
absorption of consumer savings and incomes by housing and durable goods.
By 1950, total consumer expenditures, together with residential construction,
amounted to about 203 billion dollars, or in the neighborhood of 40 percent
above the 1944 level.
During 1946-50, residential construction and output of durable consumer
goods together totalled roughly 160 billion dollars (in 1950 prices), or 12
percent of total national output over the whole period. Some 21 million
passenger cars were produced^ and the total number of passenger cars on
the road rose from about 26 million at the end of 1945 to about 40 million
by the end of 1950. Between 4*/2 and 5 million new housing units were
put up, raising the total stock of housing by nearly the same amount.
The high and rising level of total production was necessarily accompanied
by high and rising incomes. Both in the aggregate and in composition, the
output available to consumers after 1945 was much more nearly in accord
with the demand arising from those incomes than it had been during the
war. By the first half of 1950, there were reasonable grounds for believing
that we could look forward to a period of orderly economic expansion.
True, there had been considerable periods of time between 1945 and 1950
which were characterized by strong inflationary pressures, notably after the
hasty abandonment of controls in 1946. This inflationary experience
stemmed from many causes. But particularly, it indicated that financing
too large a proportion of a war burden through borrowing, and too small a
portion through taxation, leads to dangerously excessive purchasing power
in the postwar period when the cashing-in of wartime savings adds to the
purchasing power generated by current production.
There were times when the consequences of these inflationary pressures
seemed to threaten a major and sustained economic reversal. But even
when the first manifestations of deflation appeared in 1949, the underlying
factors of strength appeared to be predominant. Many stabilizing factors—
both private and public—had been developed to make the economy more
shock-resistant. The Council accordingly urged business to move ahead
confidently with its investment planning, and did not advocate the sharp
shift in Government policies which a more pessimistic appraisal of the situation would have called for. The recovery in the first half of 1950, before
CHART 12
CHANGES IN PRODUCTION SINCE 1944
ALUMINUM
STEEL I/
THOUSANDS OF SHORT TONS
0
300
600
I
I
I
1944 |
-
MILLIONS OF SHORT TONS
900
!
|
t
0
50
100
150
1
1
1
1
I
i
1950
ELECTRIC
POWER £/
BITUMINOUS COAL
MILLIONS OF SHORT TONS
BILLIONS OF KILOWATT HOURS
0
I
!944 |
30
1
60
1
.
90
1
j
0
200
400
600
l
i
l
t
1
i
1950
PETROLEUM i/
FOOD
BILLIONS OF BARRELS
0
1
1
t
PERCENT OF 1935-39 AVERAGE
1944 |
2
1
3
1
]
0
I
50
1
100
1
1
150
1
1
1950
I/
I960- ANNUAL RATE, END OF YEAR.
SOURCES.- DEPARTMENT OF INTERIOR, AMERICAN IRON AND STEEL INSTITUTE,
FEDERAL POWER COMMISSION AND DEPARTMENT OF AGRICULTURE.
the stimulating effect of the developments in Korea, was vigorous and
extensive.
The implications of our current prosperity
Having reviewed five years of war and five years of peacetime prosperity, the central question arises: What economic strength, actual and
potential, do we now have to throw into the scales on the side of human
freedom? This question may be approached, first of all, by comparing
our economic situation now with our situation in 1940 when we commenced
in earnest to serve as the arsenal of democracy.
We now stand at the close of a decade of intensive economic growth,
while in 1940 we were just emerging from ten years of depression and
partial recovery. Our total national output, in real terms, is more than
50 percent higher than it was ten years ago. Our industrial output is 70
percent higher. Our agricultural production is 25 percent higher. Our
labor force is larger by more than 8 million people, and the actual number
61
at work and consequently absorbing training and skill is nearly 13 million
higher. (See chart 13.)
Production in the durable goods industries, from which the bulk of
munitions output comes, has increased more than 80 percent. Steel capacity
is about 103 million ingot tons, compared with about 84 million at the end of
1940; aluminum capacity is about 2l/<z times as great; electric power
capacity has expanded by 70 percent; and oil refining capacity by 40
percent. Actual production in certain of these industries has expanded even
more: steel by more than 50 percent, power by about 130 percent, and
petroleum by about 120 percent. (See chart 14.) We have 4 percent more
freight cars and nearly 80 percent more trucks in service, and both these
types of transport equipment have improved markedly in effective carrying
capacity. Stocks of consumer durable goods are substantially greater in proportion to the population. At the same time, however, it must be recognized
that with respect to certain natural resources, such as high-grade iron ore,
copper, sulphur, mercury, and high-grade saw timber, we are not in so
favorable a position as we were ten years ago.
CHART 13
CHANGES IN PRODUCTION & EMPLOYMENT
SINCE 1940
TOTAL PRODUCTION OF GOODS AND SERVICES^
(BILLIONS OF DOLLARS, 1950 PRICES)
1940
INDUSTRIAL PRODUCTION
(PERCENT OF 1935-39 AVERAGE)
1940
AGRICULTURAL PRODUCTION
(PERCENT OF 1935-39 AVERAGE)
1940
1950
CIVILIAN EMPLOYMENT
(MILLIONS OF PERSONS)
1940
I960
-'GROSS NATIONAL PRODUCT.
^ANNUAL RATE, SEASONALLY ADJUSTED
SOURCES: VARIOUS GOVERNMENT AGENCIES.
CHART
14
GROWTH IN PRODUCTION SINCE 1940
STEEL17
ALUMINUM
T H O U S A N D S OF SHORT TONS
0
300
600
BILLIONS OF KILOWATT HOURS
30
50
100
BITUMINOUS COAL
ELECTRIC POWER^
O
MILLIONS OF SHORT TONS
0
60
MILLIONS OF SHORT TONS
0
200
400
600
1940
1950
PETROLEUM- 7
BILLIONS OF BARRELS
O
«
FOOD
PERCENT OF 1935-39 AVERAGE
0
SO
100
-^1950-ANNUAL RATE, END OF YEAR.
2/
FOURTH QUARTER RATE.
SOURCES: DEPARTMENT OF INTERIOR, AMERICAN IRON AND STEEL INSTITUTE,
FEDERAL POWER COMMISSION AND DEPARTMENT OF AGRICULTURE.
By almost every available measurement, our current productive strength
has far surpassed that of a decade ago. Total per capita output of consumption goods in 1950 was roughly 30 percent higher than in 1940; in the
case of consumer durables alone, per capita output was probably about
three-fourths higher.
We are also far better equipped than ten years ago in our supply of
many of the facilities for maintaining our national security or for fighting if we must. We have a substantial reserve of plants and equipment for
increased production of military items. The privately-owned United States
merchant fleet now totals about 1,200 vessels of about 14 million dead-weight
tons, compared with a tonnage of about 10 million at the beginning of 1940.
In addition, there are 2,200 Government-owned vessels, most of which are in
the national defense reserve fleet. Our military bases and training facilities
are far greater than in 1940. These provide a source of greater immediate strength; in addition, they mean that the resources which we had
to devote to the expansion of such facilities during the period after 1940
are now free for other uses.
Not only is our economy enormously stronger than ten years ago, but on top
of this we are in an excellent position to expand our strength. It is true
that we have fewer unutilized resources of manpower and basic industrial
plant than in 1940; but this disadvantage—if it be called that—is at least
partially compensated for by the fact that present plans do not call for so
gigantic a military build-up as was undertaken successfully 'during World
War II. Thus we have a larger proportion of our resources available, as
well as larger absolute amounts, to devote to the further build-up of our
economic strength in the years ahead.
Moreover, there is still substantial slack in our economy when measured
against the efforts which we should now exert. In addition to the roughly
600,000 to 700,000 persons per year who will be arriving at working age
through normal population growth, we can increase the effective strength of
the civilian working force substantially by recruiting and training more
secondary workers, and by lengthening the work week by several hours without jeopardizing health or morale.
More important than manpower, in which we cannot exceed in number
the forces arrayed against us, we have reserves of technology and inventiveness which have been the major sources of our superior industrial strength
throughout this century. No one can calculate precisely how much we can
add to production through the further practical application of already
achieved scientific knowledge and already demonstrated ingenuity. But no
one can doubt that our resources in this direction are enormous, if we use
them to the full in the factory and on the farm.
We expanded total output by about 60 percent during the war years
between 1940 and 1944. Expansion by about 25 percent over the next
five years—which would represent a less intensive effort, although starting from a period of less slack—would give us the supplies for both an
enormous defense effort and a strong supporting economy, if these supplies were distributed efficiently according to priority of need. We could
do far better than this, with an intensified effort on all fronts.
So much for our assets. Yet it cannot be denied that the conversion
to defense problems is in some respects more complicated than in 1940.
This is because we are now so much closer to the full utilization of our currently available productive capacity than we were ten years ago. For example, it was easier in some respects after 1940 to bring unemployed people
into defense work, than it will be in the months ahead to shift them from
peacetime employment to defense work (although even here the skilled and
currently employed worker will almost certainly prove more productive than
one who had been idle for a long time). The slack in the economy, for a
substantial period of time after 1940, meant that the step-up of over-all production resulted in a widespread improvement in living standards, especially
among those who had been partially or completely idle. On the contrary
now, because of the fullness of the living standards which we have recently
been enjoying, the vast increase in the defense "take" will certainly mean for
a considerable period of time the abandonment of yearly gains to which the
population had rightfully been accustomed in an expanding peacetime economy. Further, there will be need for sacrifice of some benefits now enjoyed,
as well as of others that had been held in prospect. In short, we must now
make a sharp and drastic switch from some types of highly rewarding
activity to other types of activity. This is more difficult in some ways, and
calls for more drastic policies of some types, than the drawing of idle
resources of plant and manpower into defense production.
But despite all this, one salient fact remains of transcendent importance:
Our total resources and productive power are far more adequate to serve
whatever task may confront us than they were in 1940. The expanding
defense program, now getting under way, will require sacrifices of goods and
services by the people, measured against what they have recently been enjoying. But a defense program of this size, or considerably greater size,
would still leave the people with a higher general standard of living than
they had before World War II or during the course of that war. If, under
these circumstances, the fact that we have less slack in the economy than in
1940 is used to support the argument that we consequently can less afford
to meet whatever burdens our national security may require, that would be
tantamount to saying that the great prosperity and economic strength which
we have achieved is a handicap rather than an asset.
A few years ago, it was said correctly that the Soviet Union would gain
immensely if there should be a depression in the United States. Such an
event would have weakened us immeasurably. It would be a grim irony
indeed if our prosperity had made us weaker for the tasks ahead than if we
were in a recession or mild depression. It is true that we must now show
the courage and vigor to convert employed strength to new purposes instead of drawing upon unemployed strength. But our prosperity could be
a liability rather than an asset only if we had become soft and fat in becoming prosperous. That has happened to other civilizations before; but we
cannot afford to let it happen to the United States. We must beat many
of our plowshares into swords; but let us start with the confident realization
that we have more real power than ever before to do so.
Part III. The Magnitude of the Task Ahead
THE GENERAL NATURE OF THE TASK
I
N 1940, the array of our enemies included the two greatest industrial
nations in Europe and the Far East. In winning the war against them,
some people say that we may have overestimated their economic potential
and consequently their military strength. But even if this be true, it is of
small significance compared with the gains we derived, in setting our
production targets, from not underestimating our opponents.
It is true that, at the present time, the aggressor nations do not even
approximate the actual and potential industrial strength of the United States
alone—and far less, of the United States and the free nations associated with
us. Steel capacity is often cited as a vivid illustration. The current capacity of the Soviet Union and its satellites is estimated to be about 25 to 30
million tons. That of the United States is about 103 million; and that of
Western Europe about 60 million. Undoubtedly, measured by many other
indexes as well, and by skilled manpower and technical know-how, our
margin of current superiority is large.
But the economic strength of the Soviet Union is both great and increasing. It is concentrated upon building up those sectors of the economy
which support military effort. Toward this end, the Soviet Union is
willing and able to compress and degrade the people's living standards,
below levels conceivable in this country. Technical ability has been revealed
to do new and difficult things. And because the Soviet Union demobilized
to a far lesser extent than did the Western Nations at the close of World War
II, its present striking power is formidable.
Confronted by this threat, the general nature of our economic task in
support of our primary defense build-up is three-fold. In the first place,
and of first priority, our economy must provide the manpower and materials to achieve a large and very rapid increase in the immediate military
capabilities of ourselves, and to aid in building up the strength of our allies.
Second, we must achieve as rapidly as feasible an expansion of our industrial mobilization base, sufficently large to enable us to swing rapidly into
full-scale war production if necessity should require. And third, really
as a corollary of the other two propositions, we must service our industries
and our civilian population with enough goods and services, not to maintain them in peacetime grooves, but at least to maintain them strong enough
66
to support quickly or in the indeterminate future any intensification of the
military effort which circumstances may demand.
These three objectives cannot all be fully served. Consequently, the
allocation of great but nonetheless limited resources among these three purposes is the task of economic and military mobilization—whether partial or
complete. This task is in some respects more difficult than in a total war,
because the outbreak of hostilities of that kind removes some of the imponderables from the scene. In the current situation, these imponderables
still remain. We do not know whether the ultimate test will come, or when
it will come, if it comes. Yet in apportioning our total resources among
these three purposes, there must be some guiding strategy as to which among
various contingencies should be given most weight. This is true because
the apportionment of our resources which would be best on one hypothesis,
would not be best on another. While we must retain enough flexibility to
adjust our strategy rapidly if conditions change, there is no such thing as
getting fully ready for a variety of conflicting hypotheses.
The initial hypothesis must result from an appraisal of the international
situation, which in turn governs the speed and scope of the primary military
build-up. That must be determined by those directly responsible for international and military policy, subject of course to the President and the
Congress.
While that basic military determination in the very nature of things can
never be complete or final, its status at any particular time provides the
frame of reference within which economic policies must be formulated.
In this framework, the effects of the military effort must be analyzed and
programs formulated for the best use of resources to mesh our economic
strength with imperative military needs.
The size and scope of the primary military build-up, which provides the
central frame of reference for economic analysis and programs, has now
been determined, at least for the time being. This permits the Council
to turn to an examination of the economic aspects of the new job before
the nation.
THE SIZE OF THE NATIONAL SECURITY BUILD-UP
New obligational authority already granted or anticipated for national
security programs at the time of the President's Budget Message this January will probably total much closer to 150 than to 100 billion dollars for the
fiscal years 1951 and 1952 combined. The amounts for each of the two
fiscal years will probably be roughly equal. These funds are intended to
achieve as rapidly as possible a virtual doubling of our strength on the ground
and in the air, and an increase of more than one-half in our naval strength.
The funds are intended also to provide military and economic aid to friendly
nations abroad; to enlarge the atomic energy programs; to expand our
industrial mobilization base; and for stockpiling and other purposes.
The very large volume of obligational authority already granted or in
67
CHART 15
NATIONAL SECURITY EXPENDITURES
AS PERCENT OF GROSS NATIONAL PRODUCT
PERCENT OF 6.N.P.
50
PERCENT OF 6.N.R
50
1950 PRICES
40
40
30
30
TOTAL NATIONAL
SECURITY EXPENDITURES
20
20
ECONOMIC AND MILITARY
AID TO FOREIGN COUNTRIES
10
10
U. S. ARMED FORCES
AND RELATED PROGRAMS
J0
1940
1944
A LARGE PART OF THE ECONOMIC AND MILITARY AID TO FOREIGN COUNTRIES IN 1944 WAS LEND-LEASE.
/'ANNUAL RATE, SEASONALLY ADJUSTED.
SOURCE: COUNCIL OF ECONOMIC ADVISERS; BASED ON DATA FROM BUREAU OF THE BUDGET.
prospect has already had a major impact upon the economy—far more than
would be indicated by the moderate increase in expenditures which has so
far occurred. Expenditures, however, are the most useful indication of the
size and speed of the continuing procurement effort, and of the proportion
of total output going to defense.
Federal expenditures on all these national security programs totalled
about 18 billion dollars in the fiscal year 1950, the last full year before the
Korean outbreak. At the present time, they are running at an annual rate
of somewhat more than 20 billion dollars, and by the end of the calendar
year 1951 they should attain an annual rate between 45 and 55 billion dollars,
or from 25 to 35 billion above the rate a year earlier. The procurement
effort, twelve months from now, should enable this volume of expenditures
to be expanded very rapidly if necessary. In addition to these direct Federal expenditures, there will be major investment programs by private industry to build or convert the facilities necessary for defense production.
These dollar figures represent present plans. Depending on events, it
68
may become necessary to increase them substantially. Attainment of present plans would mean that, between the end of calendar 1950 and the end
of calendar 1951, the proportion of total national output devoted to expenditures on national security programs would increase from less than
7 percent to possibly as much as 18 percent. This compares with an increase
from about 4 percent in the last quarter of 1940 to 16 percent by the last
quarter of 1941, and to about 38 percent by the fourth quarter of 1942. In
terms of relation to total output or absolute increases in defense expenditures, the acceleration of effort now under way is substantially below that
achieved in the first year after Pearl Harbor. (See chart 15.)
This effort will nonetheless impose a substantial strain on manpower,
materials and facilities. In terms of manpower, the present target is to
increase the total strength of the armed forces by nearly 1 million men within
a few months. Procurement objectives have so far been scheduled in detail
sufficient only to permit the roughest appraisal of the total number of administrative and industrial workers that may be required. But this total
is unlikely to be less than 4 million persons by the end of this year, and may
well be considerably more. Thus the minimum manpower now estimated
to be required by the additions to our national security programs totals
about 5 million, or nearly 8 percent of the average 1950 labor force; and
this total may be very much increased. A considerable proportion of this
additional personnel must, of course, be drawn from other industries.
Because military procurement schedules have not yet been developed in
full detail, and because of the need to relate purchases of basic materials for
the strategic stockpile not only to our own military procurement and essential civilian need, but also to those of friendly nations abroad, assessment of
the probable drain on basic materials over the coming twelve months is very
difficult at the present time. In the case of steel, for which there is no stockpile objective and where supplies are far less tight internationally than they
are for a number of other basic materials, the direct requirements of national
security programs as presently known are unlikely to exceed 10 percent of
total supply by the end of this year. Indirect needs for the expansion of
essential industrial and transportation facilities, however, will increase this
percentage substantially. In the case of materials like copper, aluminum,
rubber and wool, however, national security requirements are likely to be
substantially greater, ranging up to one-fourth, one-third, or more of total
supplies.
The direct requirements of our national security programs do not, of
course, include the total additional burdens that will be thrown on the
economy by our present needs. There must be an expansion of productive
facilities not only for the production of munitions, but also for the production of basic industrial materials and services. The creation of an industrial
mobilization base which would on the one hand be adequate for a very rapid
expansion to all-out military production if that should become necessary,
and on the other hand support a long-continuing effort of the present size
69
without impairing our strength, is a task which is as challenging as the direct
defense effort itself. The size and character of this task is discussed in
the following section.
EXPANDING PRODUCTION To MEET THE STRAIN
In earlier Reviews, the Council has stressed that even in peacetime the
effective operation of the American economy is based on continued growth;
and that when growth does not occur, it is because of undesirable influences
which threaten stability as well. These influences require corrective action
in ordinary peacetime, and the principle of growth is even more applicable
in times like these when we urgently need every bit of our strength.
The basic sources of our capacity to grow are two: manpower and productive facilities. In neither case is sheer quantity the only consideration.
Training, quality, and the skill with which manpower and facilities are
organized to achieve our objectives, are also vitally important in the job
ahead.
Increased labor participation
The size of the present targets for national security programs is not
sufficiently great to call for an all-out labor effort of the peak World War II
magnitude, nor to give absolute guides as to the extent to which we should
seek to draw into the labor force additional people beyond those who
would enter on the basis of normal population growth. Nor is the extent
to which we should rely on lengthened working hours, as an alternative
to expansion of numbers, determined in the present situation. If, however, our national security programs are to be fulfilled, and if, in addition,
we are to increase our productive strength and maintain civilian consumption at reasonable levels, it is clear that a labor input substantially above
the level of the past few years will be required.
In the present situation, it appears generally desirable to place greater
emphasis on increased numbers rather than on lengthened working hours.
This would mean a larger trained working force should full mobilization
be forced upon us, and would forestall the fatigue and lowered productivity
that come from working many extra hours over prolonged periods. But
at least in the case of highly skilled labor in important industries, it is
clear that longer hours will be required in order to produce essential goods.
The balance which will in fact be struck among these two sources of increased labor effort, and the degree to which the total labor effort will in
fact be increased over the coming year, cannot be forecast, nor influenced
by government policy with precision.
It is useful, however, to examine alternatives as a basis for appraising
our productive capabilities. An average increase, for example, of 2
hours in weekly working hours throughout the economy, which would be
feasible, could lay the basis for an increase in total output in the neighborhood of 5 percent, apart from any changes in productivity. Likewise, an
70
CHART 16
LABOR FORCE UTILIZATION
The total labor force in I960 was within 2 percent of the peak year
in World WarH, when over II million men were in the armed forces.
Total civilian employment, however, was 10 percent above the wartime
peak year.
MILLIONS OF PERSONS*
MILLIONS OF PERSONS*
70
70
TOTAL LABOR
FORCE
60
60
50
50
40
40
30
30
20
20
10
10
1940 41
42
43
44
45
46
47
48
49
50
A larger percentage of the population is in the labor force today
than in 1940; however, it is considerably lower than the prevailing
rate during World WarE.
PERCENT
100
100
PARTICIPATION RATE
90
90
TOTAL LABOR FORCE
AS PERCENT OF NONINSTITUTIONAL POPULATION*
80
80
70
70
60
60
50
50
r
L
1940 41
I
42
43
44
*I4 Y E A R S OF AGE AND OVER.
SOURCE: DEPARTMENT
OF COMMERCE.
I
_L
I
I
45
46
47
48
J_
49
-Do
50
increase of 2 million persons in civilian employment would permit an expansion of output by roughly 3 percent. A substantial fraction of such an
increase could come from a reduction in unemployment, and from the
normal annual growth of 600,000 to 700,000 in the labor force. Changes
such as these in the intensity of labor participation in production would
still be substantially below the wartime peaks. Average weekly working
hours in 1944 were 45.1. The average labor force participation rate then
was 63 percent, compared with 58.5 percent in 1950, and with the roughly
60 percent for the end of 1951 implied above.
The lengthening of working hours and rapid expansion of civilian
employment, together with conversion difficulties, would tend to have an
unfavorable impact on productivity. Such evidence as is available, however, suggests that there would probably still be some rise in over-all
productivity, although perhaps at a somewhat lower rate than in past
peacetime periods. (See chart 16.)
Expansion of productive facilities
As a result of the programs to expand capacity during World War II
and during the postwar period, and because our present defense production targets are smaller than those of World War II, we find ourselves
in 1951 facing a quite different set of needs for facilities expansion than
was the case in 1940. While the creation of an adequate industrial mobilizaton base will call for a considerable amount of new and enlarged capacity
to produce munitions, that type of investment will probably be substantially
smaller than in the years 1940-43, when we had to build up our munitions
capacity from scratch. Short of total war, investment of other types should
remain on a much higher level than during World War II. This is necessary
if we are to carry a very heavy burden of primary defense for an indefinitely
long period, and at the same time maintain our productive capital for necessary growth of output.
The high desirability of expanding general industrial strength for the
long pull, however, should not prevent us from putting first things first.
For some time to come, we cannot afford unrestrained and indiscriminate
use of resources for investment any more than for consumption. Over the
coming year, the prospective shortages of materials, skilled manpower, and
specialized facilities call for a selective pattern of investment, giving major
emphasis, in addition to munitions facilities, to the expansion of capacity
for the production of those basic industrial materials and services which
are of crucial importance both to a wartime economy and to an expanding
peacetime economy. Where expansion programs require several years to
complete, it is even more important to start at once.
The steel and electric power industries present two outstanding examples
of the problem under discussion.
Iron and steel. The determination of objectives for the expansion of
iron and steel production illustrates the extent to which economic issues
72
turn on the general strategy of the national defense program. For example,
if total war in 1951 were regarded as inevitable, it would probably be
an inefficient use of resources to start further substantial increases in steel
capacity now. It would be better, under that assumption, to use the available steel for making weapons instead of for building more capacity; and
to rely on enormous cutbacks in civilian use of steel to release enough
steel for war purposes.
But our primary defense strategy does not now rest on the inevitability of
a total war in 1951 or in any other year. On the contrary, that strategy
rests on a sufficiently rapid build-up of military strength—substantially short
of total mobilization—to deter aggression, while at the same time creating
an industrial mobilization base which would facilitate rapid achievement of
maximum military effort if that should become necessary. This strategy,
which contemplates a substantially increased military burden of indefinite
duration, must also allow for the servicing of industrial and consumer needs
at a considerably higher level than would be permissible in an all-out war
emergency.
The principal drain on resources involved in an expansion of steelmaking capacity is the use of steel itself. If the quick adjustability of our
economy to full-scale mobilization in case of need would of necessity be
impaired by plowing some steel back into expansion of steelmaking facilities,
such expansion would be at best risky. But if the necessary steel can be
borrowed from uses not essential to mobilization, there is a strong case
for the expansion of capacity. If we do become involved in a major conflict,
it seems certain that a larger steel capacity would stand us in greater stead
than the equivalent amount of steel in the form of additional automobiles or
commercial buildings.
The prospective steel requirements for munitions production and essential industrial uses are not so large as to call for elimination of so many of
the major ordinary peacetime uses as was the case during World War II.
While we shall have to reduce drastically the production of automobiles and
other consumer durable goods over the next several years, and similarly curtail less essential types of public and private investment in construction and
equipment, we still shall be able to devote sizable quantities of steel to such
uses. The cost of a steel expansion program is a slightly greater reduction
of such types of output over the next few years. On the other hand, the
consequences of not expanding capacity adequately would be the indefinite
prolongation of a serious steel shortage requiring elaborate and irksome
controls.
The rate at which we ought to expand steel capacity cannot be precisely
determined. In part it must depend on the maximum rate at which iron
ore supply can be assured—a problem discussed below. It depends also
on the balance between major types of steel consumption—notably public
and private investment, and consumer durables production—and other
73
activities which we should like to achieve. The cost in terms of resources
of the expansion of capacity must also be considered. We should not propose as an objective the meeting of all demands for steel four or five years
hence on an unrestricted basis, even if we could determine just how much
steel that would take. It would be an extravagant use of resources to build
up a capacity capable of eliminating in short order the backlogs of steel
demand which will have been incurred in the next few years, in addition
to meeting the long-run normal demand. In the type of long-run economic
situation we must contemplate, all resources will be scarce; for the present
we should attempt only to bring steel production up to the point where it
will not be a principal deterrent to economic expansion, nor require the
indefinite continuation of comprehensive controls.
Our analysis indicates that we should aim to bring steel capacity up to
about 120 million ingot tons within 3 or 4 years, or sooner if feasible. This
takes account of such considerations as the increase in aggregate production
we should be able to achieve; the amount of output that would be available
for other uses; the probable use of steel in defense production; and the rate
at which it would be feasible and desirable, given the probable volume of
future demand, to increase stocks of goods and equipment in the hands of
consumers, business, and government. Some types of requirements, notably
steel for automobile production, are projected at rates somewhat below
1950; while other types, like industrial machinery, exceed the 1950 level.
The cost of the additional blast furnaces, steel furnaces, and finishing
facilities would total about 2 to 2l/z billion dollars, in terms of present prices.
This amounts to about 12 percent of total business plant and equipment
expenditures in 1950. The finished steel requirements for the expansion
would total 3 to 4 million tons, or l/$ to J4 as much steel as was used in
automobile production in 1950, or two to three weeks' output of the steel
industry at the present rate of production. The copper requirements would
represent about 5 percent of current annual supply, and aluminum requirements 2 to 3 percent. An expansion of steel capacity from the present 103
million tons to 120 million, therefore, does not appear to involve any drain
on our resources which we could not fairly easily offset by moderate further
curtailment in some less essential uses over the next few years. The steel
industry has already made application for accelerated amortization on
approximately this amount of expansion.
A much more difficult and pressing problem than expanding steel capacity
itself is that of maintaining and expanding the supply of iron ore without
which steelmaking facilities are useless.
There is, first, the immediate need for more ore-carrying boats on the
Great Lakes. Stocks of ore at lower Lake points are so dangerously low
that some blast-furnace shutdowns may occur this winter and next. Several of the necessary boats are already under construction, and additional
ones should be started as rapidly as the ways are vacated. In view of
74
prospective shifts in ore sources, these vessels should be convertible for use on
the salt water of the lower St. Lawrence River.
Recent estimates indicate that we shall also be hard pressed, for several
years at least, to mine and import enough iron ore to keep our expanding
steel industry operating near capacity. In 1950, our ore consumption was
about 109 million long tons. A steelmaking capacity of about 120 million
tons would call for about 130 million long tons of ore a year to keep it
busy. Output of the Lake Superior mines can be maintained at present
levels for only a few years longer. Thereafter, supplies from that source will
fall off fairly rapidly, and we shall have to rely more and more on imports
(principally from Venezuela and Labrador, and to a much lesser degree
from Chile, Brazil, and Liberia) and on refined low-grade ores such as
taconite. The St. Lawrence seaway project must be begun immediately if
imported iron ore is to be economically available in quantity in our inland
steel centers by 1956, when the flow of Mesabi ore will almost certainly have
begun to dwindle.
Electric power. The case for accelerated expansion of electric power
capacity is even more compelling than in the case of steel and iron ore.
Present supply falls even more seriously below the demands that would arise
in a full-scale war, and any major curtailment of less essential civilian uses
is more difficult than in the case of steel.
The over-all national power generation capacity, under average hydroelectric conditions, was about 67.5 million kilowatts at the end of 1950,
representing an increase of almost 10 percent during the year. The reserve
margin came up to about 12 percent of load in 1950, having been restored
during the past few years from a dangerously low level. According to recent
estimates of planned public and private expansion, about 7 5/2 million kilowatts of new capacity will be added during each of the next three years,
representing a somewhat faster rate of expansion than has prevailed since
the end of World War II. The annual rate of investment outlays involved
will approach 3 billion dollars, covering generating equipment and also new
and enlarged transmission and distribution facilities.
At the present time, electric power is in short supply in the Pacific Northwest, in the Tennessee Valley area, and some other regions. The supply is
expected to become increasingly tight throughout the country as demands
will increase faster than the expansion of capacity now planned. Reserves
will fall more and more below safe and desirable margins. Already the
reserve margin has practically disappeared in the areas where the power
shortage is most acute. Expansion of programs in atomic energy, chemicals,
aluminum and other metals related to the defense effort will impose an
additional load of 4 to 4% million kilowatts on our power facilities.
In the face of this situation, government policies must be adjusted to
the need to make capital, materials and workers available to the utility
enterprises to which we must look for the major expansion of electric
power capacity. Public hydro-electric projects take more time, but devel922781—51
6
75
opment of additional public power capacity in the Pacific Northwest, in
the Tennessee Valley area, at Niagara Falls, along the international section
of the St. Lawrence River as a part of the seaway and power project, and
elsewhere, can provide more than 6 million additional kilowatts of capacity
within 5 or 6 years.
Relationship between military and industrial planning. The foregoing
effort to specify investment and expansion needs is sketchy. More precision
will emerge through the more comprehensive study and planning now under
way as to the general size and major classifications of investment and capacity expansion. This will result in programs compatible with maximizing
our total strength by achieving the wisest allocation of our resources between
military and civilian use, and among various segments of the civilian economy. This more comprehensive industrial planning is linked with the
current effort to develop primary military requirements in more detail.
For only to the extent that these primary requirements emerge, can the
rest of the economy be most effectively enlisted in their support.
Obstacles to expansion
The preceding discussions of labor effort and investment in productive
facilities have necessarily taken little account of the bottlenecks in individual materials, in key facilities and in skilled manpower that will certainly
occur over the coming twelve months. These and other difficulties of a
conversion period will tend to slow down the rapidity of expansion. Such
bottlenecks could become serious in the case of individual items and in individual localities. There is no way, however, in which to measure in broad
terms their impact on production. Nor does the experience of World War
II, or the present size of military plans, offer any basis for believing that individual bottlenecks will become of such general importance as to impede the
broad expansion of output.
Production goals for the end of 1951
Under the Employment Act of 1946, the Council is called upon to define
"needed levels of production" for the economy as a whole, as a primary
guide to economic policy. This we have done each year. In the face of
current circumstances and problems, we feel that maximum production for
1951 should bring an annual rate of output of about 310 billion dollars,
at 1950 prices, by the end of the year. While this rate of growth is much
higher than the average rate of growth sustainable in more normal times,
it is not above the reach of our resources as we now should use them.
The total increase would be about 20 billion dollars, or about 7 percent,
above the annual rate at the end of 1950. Roughly 15 billion dollars of
this total gain could be expected to come from increases in employment and
working hours, and the remainder from increases in productivity. The
degree to which over-all productivity is likely to increase during a period
of conversion, with major shifts in type of output and with many new
workers being brought into the labor force, is necessarily uncertain. The
amount here assumed is somewhat lower than appears to have occurred in
past peacetime periods.
IMPACT ON CIVILIAN SUPPLIES
Even with the large increase in total output which has been estimated
as attainable, the expanding defense program will have a major impact
upon consumption and living standards. If the total output and national
security programs discussed in the preceding section are realized, some
reduction in total per capita consumption may take place, and very sharp
cuts in the production of individual items of consumption will be required, at a time when total employment and working hours had
increased substantially.
Defense needs for basic materials and skilled manpower can be expected to force particularly sharp cutbacks in some areas. Production of
passenger cars and other metal-using durable goods may well have to be
cut by percentages ranging from one-third to well over one-half below the
record levels of the second half of 1950.
It will be impossible, from the viewpoint both of total resources
and particular supplies., to avoid sharp cutbacks in many types of private
investment in order to service the defense program. Already, steps have
been taken to cut back investment sharply in certain less essential areas.
During this year, housing will have to be cut back substantially and less
essential types of construction by much more. These cutbacks, and others
which must follow, should lead to a considerably lower level of total
investment in 1951 than in 1950. In short, both consumption and
general investment must be restrained to service the primary defense program more rapidly than total output can be expanded. The pattern
of investment in 1951 must be very selective, so that cutbacks in less
essential areas can be combined with the maintenance and in some cases
expansion of investment required for the achievement of an adequate
mobilization base. If private judgment and Government policies are used
with sufficient skill to effectuate this balanced realignment of investment,
even a larger defense effort in future years would be more bearable. Thus
the problem of mobilizing our economic strength for the long pull rests very
heavily upon the programming and execution of realistic investment goals
geared to priority of needs. Allocations, tax programs, and various incentives should be shaped to the nature of this problem.
INFLATIONARY PRESSURES
The expansion of our total national output, with selective emphasis upon
vital lines of production, will help to ease the immediate burden of our
enlarged defense objectives. In the longer run, production, and more
production, is the most fundamental economic remedy.
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But production alone will not be enough to solve immediate problems.
In the course of this year, as already indicated, national security programs
will increase their take of the total output of the economy from about
7 percent to possibly as much as 18 percent. The increase will be much
greater in the case of particular types of materials, skilled manpower, and
facilities. Since it is manifestly impossible to increase production at this
rate, and according to this pattern, there must be a large-scale diversion of
resources from less essential uses to those having the highest priority. The
total volume of goods available for private consumption and investment
must be cut. This gives rise to major problems of materials control, and to
intense inflationary pressures.
While the supply of goods that buyers want will be cut back, consumer
and business incomes will be sharply rising. During the course of 1951,
there will be a general expansion of income resulting from the increase in
production required to meet our defense objectives. Longer working hours
and more employment will result in an equivalent expansion in wage and
salary income, even without allowing for overtime pay, upgrading, and wage
and salary increases. Gross farm income will also rise as production increases, apart from any allowance for upward price movements, as will
corporate profits. While, even under the current tax structure, increased
taxes will absorb some of the increase in incomes generated, disposable
personal incomes would, without prompt and substantial new tax action,
increase much more than the supply of consumable goods.
Further increasing the dangers arising from the pressure of expanding
incomes against limited civilian supplies is the fact that consumers already
have more than 150 billion dollars in liquid assets, which can in large
measure at their discretion be thrown into the markets for goods; and corporations have almost as high a volume of liquid assets as at the end of the
war. Actual and anticipated shortages of particular materials and goods,
and concern about continuing price rises, will, unless counteracted, greatly
reinforce the desire to spend money and to acquire tangible goods.
These facts would represent a very seriously inflationary prospect for the
coming year even if the past six months had been a period of reasonable
economic stability. Yet the economy is now, and has been for some time,
in the throes of a serious inflation. Between June and December of 1950,
this general inflation raised wholesale prices 11 percent and consumer prices
by about 4l/% percent. Average hourly earnings rose about 4 percent between June and November, and corporate profits before taxes were about 28
percent higher in the fourth quarter than in the second. The rise in consumer prices occurred despite a generally adequate supply of consumer goods.
Price rises, in considerable measure speculative, spread out from the primary
commodity markets through the cost structure generally, communicating
upward price tendencies to a wide variety of products. Wage increases
were granted in many industries in amounts substantially above the rise
in the consumer price index. Neither the increase in primary commodity
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prices nor the wage increases of 1950 have fully worked themselves out
through the price structure of intermediate and final commodities; and
many classes of workers have been left behind in the wage advances of the
past six months.
If price and wage increases such as have characterized the last six
months were permitted to continue, consumers would be induced to draw
heavily on their holdings of liquid assets—either to protect their standard
of living and the real value of their savings, or for speculative reasons.
The ability and incentives of business concerns to enter such a movement
to convert liquid assets into goods would be even greater.
This leads to the conclusion, which will be amplified in the policy section of this Review, that anti-inflation weapons must be employed more
widely and more rapidly than in the period from 1940 to 1942. The
measures now being planned and put into effect by the Economic Stabilization Agency are a reflection of the urgency of the task.
The main reason for the seriousness of the inflationary problem, however, is not that we are now weaker but rather that we are now stronger
than we were then. Being more fully prosperous now, we have less room
to undertake new burdens without generating inflationary pressures. If
we were unwilling to convert the strength underlying this greater prosperity
to meet the new challenge now confronting us, that strength would become
a liability rather than an asset. But if we are willing to channel that
strength—of tools and manpower and skills—we shall find ourselves now
better able than ever before, and far more able than in 1940, to measure
up to the responsibilities imposed upon us by world events.
How MUCH DEFENSE CAN OUR ECONOMY SUPPORT?
While a defense effort of the size now under way will sharply alter the
character of the functioning economy, there can be no question that this
effort to achieve national security is well within the power of our resources
and our skills. It is a far smaller effort than we have made in the past with
far fewer resources and skills; and it is a far smaller effort than we could
safely and effectively make in the future if our national safety should so require. It is an effort of a magnitude which will involve sacrifices and restraints and changes in customary ways on the part of all of the people.
These changes may be great, when measured against the habits of peacetime.
But they are mild indeed when measured against the issues at stake, or
against what the American people have done in their earlier history at times
when the national interest has taken clear and universal precedence over
personal pursuits.
Deep as some of the needed cuts may appear, they could hardly be described as austerity. Per capita consumption at the end of 1951 would be
far greater, perhaps by more than one-fourth, than in 1940, and even
further above 1929. (See chart 17.) By the standards of any other country
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CHART 17
PERSONAL CONSUMPTION EXPENDITURES
1950 PRICES
TOTAL CONSUMPTION EXPENDITURES
BILLIONS OF DOLLARS
200
150
100
50
1929
1939
1944
1946
1950
1946
I960
PER CAPITA CONSUMPTION EXPENDITURES
DOLLARS
1,500
1,000
500
1929
1939
1944
SOURCE: COUNCIL OF ECONOMIC ADVISERS.
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in the world, such consumption levels could only be described as luxurious.
Moreover, consumers are currently better stocked with household equipment
and automobiles than ever before. At the present time, there is one automobile for every 3.8 persons in the United States, compared with a ratio
of one to 4.8 in 1940. Our housing standards, though far from being
fully satisfactory, are substantially better than at the beginning of World
War II.
Although over-all consumption levels will be high, many individuals
and families will suffer much sharper cuts in their standards of living than
would be indicated by the aggregate figures; and the general range of consumption goods will be much more restricted than in recent years, and less
in accord with consumer wants. This is the necessary meaning of higher
taxes and restrictions on the use of basic materials.
The defense program will impose many restraints upon economic activity
as well as upon personal consumption. But the restraints upon consumption will require sacrifice, not real hardship, and the restraints upon business activity will have no results justifying the complaint that the program
is beyond the capacity of our economy.
The expanding defense effort which has thus far been defined may, of
course, have to be greatly expanded in future, or level off. Later on, this
Review will make some reference to the economic consequences of a larger
defense effort. At this point, suffice it to say that a leveling off of the rate
to be reached at the end of the calendar year 1951 would impose in succeeding years lesser and not greater strains upon the economy. This is
because the economy would gradually "build up" to meet the new burden.
By way of rough illustration, if the labor and investment efforts which will
be essential to accomplish the targets for 1951 are achieved and maintained,
total national production at an annual rate should rise by about 25 percent
within five years. This would bring us about 60 billion dollars above the
current level, which would be enough to absorb a yearly defense effort at
the levels to be reached at the end of this year, to maintain and expand our
productive plant, and at the same time to bring per capita consumption for
a growing population at least up to the level achieved in 1950.
Under current international conditions, however, economic analysis cannot stop short with an appraisal of the impact of the present defense targets.
It must also help to appraise what the economy can sustain and support in
terms of its actual and potential resources, and to shed light upon what
variations in this program—whether upward or downward—would still be
compatible with the maintenance of the strong economy required to support
the military effort.
This further responsibility is particularly apparent at a time when there
is an entirely appropriate debate throughout the nation on this very question
of what our economy can afford to do. The viewpoint is sometimes expressed that if the military build-up should advance above some stated size,
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it would within a few years "bleed our economy white/' and thus accomplish
through our own actions the purposes of the Soviet Union.
On this point, we can draw upon our own experience in World War II.
We devoted as much as 45 percent of our total output to defense purposes
and, far from wrecking our economy, we continued to build its basic productive capacity. The consequences were revealed when hostilities ended.
In the light of this, the American people can certainly not take the position
that the allocation of as much as 18 percent of our much larger resources
to national security will reach or even near the limits of what we can do
if necessity demands. Economies have not been wrecked because the people
decided to do with fewer new pleasure cars and elaborate mechanical
amusements, or wear their topcoats for longer or get healthier by eating less.
This point is so important that the illustration needs to be made more
concrete. Let us suppose that, by the end of the calendar year 1952, international conditions made it desirable for us as a nation to be devoting 25
percent of our total output to national defense. It should be feasible with
increasing efforts to expand total output by the end of 1952 by close to
15 percent, or roughly 40 billion dollars above the present level. At this
level of production, the allocation of one-fourth of our total output to
national security—if this should become necessary—would by no means be
inconsistent with maintaining our fundamental economic strength and productive power. Marked changes in the composition of output would be
required, but nonetheless it would permit the maintenance of satisfactory
standards of living, although production of housing and many types of
consumer goods would have to be more sharply restricted than presently
contemplated. However, a large number of families and individuals would
undergo a more marked reduction in living standards than would be indicated by the over-all figures.
To achieve these results, if this should become necessary, would require
harder efforts and more sacrifices than we are now being called upon to
make. But this larger effort, if it should prove imperative, would neither
wreck nor bankrupt the American economy. It would still represent a
much smaller effort than was achieved during World War II. Hours of
work would not be as long; the percentage of the population of working
age serving in the labor force would be smaller; and the output of civilian
durable goods and of housing would be restricted to a much smaller degree.
An effort of this size would still leave us with enough resources to improve
and enlarge our industrial capacity, and to maintain reasonable standards
in education, health, and housing. The over-all level of consumption would
be lower than the 1950 peak level, but it would still represent a high standard of living. Even on a per capita basis, the level of consumption by the
end of 1952, under these assumptions, would be far higher than in 1944.
Much of the discussion of "what our economy can stand" has involved
a misuse of economic analysis, and has led to dangerously erroneous conclusions. Every economy, even the most powerful, has ultimate limits upon
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what it can support; but in the case of our economy, these ultimate limits
are not threatened.
The tests now confronting us are not so much tests of our economy as
they are tests of our moral fiber and cohesiveness as a nation. They are
tests not so much of our material capacity as of our courage and vision.
We have what it takes to purchase reasonable security in a troubled
world, but we cannot buy it cheaply. The way to protect ourselves is to
build up our strength; and there are no bargain price tags on aircraft, tanks
or guns. Giving up other things will be involved, because we cannot have
our cake and eat it too. But we must stop eating so much cake, when the
aggressors are arming so many divisions.
IV. Economic Policies for Defense
THREE REQUISITES FOR ECONOMIC MOBILIZATION
T
HERE are three indispensable requirements for an efficient economic
mobilization, whether partial or total. The first need is for a thoroughly comprehensive and unified programming operation, to balance competing requirements against available supplies. Such programming is
essential to all policy, whether designed to direct resources to the highest
priority uses or to avoid disruptive inflation. The second need is for utmost
speed in accomplishing defined objectives. The third need is to conduct
the economic mobilization program with a determination and fairness which
elicit general support from a public kept fully informed of the nature of
the program and its implications.
The need for comprehensive programming
Economic mobilization means a vast and rapid shift in the use of our
resources, to which every policy must be attuned. This shift is executed
throughout the economic system. But in the very nature of a defense emergency, the Government must outline the basic needs and project the major
policies to satisfy them. The essentiality of a complete and always current
programming operation does not depend upon "full mobilization." The
importance of a clear definition of what needs to be done does not depend
upon how much needs to be done. In some respects, partial mobilization
requires an even greater clarification of objectives than full mobilization.
The definition of all major requirements necessarily draws its frame
of reference from the primary military program, because it is the military
build-up which is at the core of the whole effort. More and more precision
should be sought, as rapidly as feasible, in the definition of what our primary defense goals are at any particular time. And for the purposes of
economic adjustment to these primary goals, requirements in terms of
manpower and materials are obviously more important than requirements
in terms of dollars. This emphasis is not inconsistent with realization that
primary military objectives must remain reasonably fluid, and that for
security and other reasons they cannot be revealed in full even where they
have become crystallized.
But it would be dangerous to assume that all other aspects of economic
programming can be delayed until primary military programming reaches
any particular point. There is an interrelationship between the two, which
requires to a considerable degree that they move forward simultaneously
towards ever-improving clarification. Nor is it true that the other aspects
of economic programming consist solely in saying that whatever is not
taken for military purposes is available for other uses. These other uses
must in turn be subjected to constant programming, because some of them
promote our security and others do not. Our security in the long run
depends upon how we divide available resources between maintenance
and improvement of our national plant and tools on the one hand, and
ultimate consumer needs on the other. Within the industrial structure,
it depends upon what kind of activities we carry forward vigorously and
what kind we cut back. Above all, there should be a balance of how much
we seek to achieve through cutbacks and restraints, as against how much we
seek to achieve through expansion of total production.
The early experience during World War II afforded eloquent proof that
the greatest obstacle to over-all efficiency was the slowness in developing
a useful and comprehensive programming operation, and locating it ultimately at one point of authority. The Council now urges that the first
steps already taken in this direction be carried as quickly as practicable to
their logical conclusion. This does not mean that detailed operations cannot be parcelled out; but it does mean that the ultimate "budgeting" of
our resources for defense should be centralized. Budgeting, which is a
process of reconciliation of competing requirements, cannot be done in
several separate places.
The need for speed
Speed is of the essence in economic mobilization. This sound principle
should not be confused with the question of the size of targets. Speed does
not mean, for example, that we should as rapidly as possible achieve total
mobilization; that is a matter of grand strategy. Nor does it mean that
mobilization should not proceed in an orderly fashion, with speed concentrated first on the earlier steps and later on the subsequent steps of
the program. But speed does mean that decisions as to targets should
be reached as quickly as possible, and that every effort should be made
to attain whatever targets are decided upon as rapidly as the basic program
calls for.
In economic mobilization, tardiness has a cumulative effect because of the
interrelationship among all the parts. Delay at one point generates even
more delay at succeeding points. Indecision at one point promotes apathy
at another. As an apt illustration, there may be debate as to when the
Government should apply price controls over a given commodity. But once
the Government has announced or intimated that it is going to do so, delay
in accomplishing the result can only add fuel to inflation, speculation, and
an enervating let-down on the part of the general public. Conversely,
demonstrated celerity at one point awakens others more fully to the urgency
of the situation and consequently accelerates their own necessary actions.
Since our nation is now undertaking to catch up with the mobilized military strength of the aggressors, every day is precious.
The need for public support
The necessary concentration, during a defense period, of more authority
and responsibility in the Government than is customary in peacetime should
not blind us to the fact that nationwide understanding and cooperation
must be achieved. The very severity of the departure from customary
methods, and from the level of peacetime enjoyment of goods and services,
makes such public understanding even more essential.
The whole American people should consider the extent of this departure
from normalcy, as it affects our economy and our economic problems.
The objective of maintaining maximum employment, production, and
purchasing power, established by the Congress in the Employment Act
of 1946, should be considered today in the light of circumstances very
different from those of peacetime. In the months to come, there will
be no general problem of unemployment, but instead one of encouraging
the entry of more men and women into a labor force too small to meet all
our national needs. There will be no problem of inducing the expansion
of purchasing power, but instead one of restraining the growth and the
use of purchasing power. Maximum production will be even more vital
than in peacetime. But the major problem here will not be to devise
national economic policies to furnish incentives, markets, or capital to
private enterprise, in general, but instead to channel our limited resources of
manpower and of materials into lines of production which are most essential.
In the first months after the outbreak in Korea, it was perhaps justifiable
in the formulation of national programs to give considerable weight to
maintaining our standards of living or even pushing them forward. It
was also hoped that we might progress, although at a slower pace,
with national policies of long-range social and economic value. It is
still necessary to seek balance between these longer-range objectives and
the requirements of national security, remembering that many of these
objectives themselves are essential to defense. But in a national emergency,
the weight to be given to the defense program grows vastly. The weight
to be given to other objectives becomes correspondingly smaller.
The new effort will call for sacrifices not limited to those matters which
the citizen himself directs, such as the buying of goods, the settlement of
wages, and the making and saving of profits. During the past generation,
our people have greatly expanded the role of their Government toward
adding to the supply of services which in our civilization make up a substantial part of the requirements of comfortable living. The needs of the
American family for education, for highways, for libraries, and for many
health services, have been largely reflected in community action. We have
steadily enlarged the responsibility of the State for the conservation and
development of natural resources, as sources of future goods and services.
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The demand for sacrifice now falls upon many of these operations of
Government, each of which may compete with defense requirements.
Each of these operations must justify itself thoroughly under present conditions, before money, manpower, or scarce materials may properly be
allocated to it.
Next to the primary need to meet defense requirements, the policies and
programs of greatest importance at this time are those which counteract
or curb inflationary forces, and those which assist the expansion of productive capacity. The trend of the economy at the end of the year was highly
inflationary, despite the progressive imposition of controls of an increasingly
rigorous character. The accelerated defense program will now intensify
these inflationary forces. The people must now choose between permitting
serious inflation to proceed, and accepting sterner restrictions.
The American people are realistic enough to accept and help to implement these restraints. But by the same token, they are realistic enough to
be slow in doing so, unless they know what greater purposes will be served
by the surrender or suspension of the lesser but nonetheless important purposes toward which they were oriented before the defense emergency.
Moreover, the Government can only to a limited extent, even in an
emergency, tell the people what to do; for the most part, it must ask for
their action and their cooperation. And their cooperation will be given most
enthusiastically if they feel that the burden is being shared equitably by all.
MAXIMIZING OUR PRODUCTIVE STRENGTH
This Review has constantly reiterated that production is at the heart of
our economic strength. Only by more total production year by year
can we generate the enormous power which we will need. This is not
negated by the necessity to cut back sharply some lines of production,
for the ultimate purpose even of these cutbacks is to get more vital production elsewhere and to enlarge the total. We have also indicated why
accent on production may be even more vital, for the long hard pull which
now seems to confront us, than in the event of total hostilities. And we
have taken a resolute stand against the proposition that there is but little
new productive potential within the economy, although we were near
maximum production by peacetime standards in 1950. The American
economy has not reached an absolute ceiling prohibiting further progress.
The following discussion of production problems is somewhat general.
This is in part because a general economic staff like the Council can
highlight problems, but must leave detailed decisions and execution to
operating agencies. It is also in part because many precise decisions on the
allocation of our resources for various productive purposes must await
the further development of a comprehensive programming and priority
operation.
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Industrial expansion
Selective industrial expansion. The need to devote a substantial portion
of our resources to the primary military build-up limits our ability to expand
productive facilities of all types. The expansion, for the time being, must
be highly selective, but it is nonetheless urgent. While highly selective, it
should be on a broader base than during World War II. This is true because
we are not so short now as we were then of certain critical facilities;
and also because, in the absence of total war, we can justifiably put more
emphasis upon the development of general strength for the long pull.
Legislation enacted after the Korean outbreak authorizes the use of many
of the same types of Government stimuli to selective private expansion
which proved useful and essential in World War II.
Up to the end of 1950, 1,014 applications had been filed for the accelerated amortization privilege, covering 3.9 billion dollars of plant and equipment investment. Accelerated amortization had been approved by the
National Security Resources Board in 149 cases on a total of 1.0 billion
dollars of outlays, or about three-fourths of the total investment contemplated under these 149 applications.
Under the direct Government loan provision of the Defense Production
Act, 136 applications had been filed by the end of the year for 822 million
dollars of loans; two loans had been granted, for a total of about 1 million
dollars.
At the end of 1950, after the initial three months of operations under
the loan guarantee program authorized by the Defense Production Act, the
Federal Reserve Banks had received a total of 157 applications for this
type of assistance, totaling 82 million dollars. All of these requests were
for working capital for firms supplying the Defense Departments directly.
Fifty-eight applications had been approved, for a total of 30 million dollars,
while the remainder were pending.
Private enterprise and funds can and should play a larger part in plant
and equipment investment than was the case in World War II. The expansion program now needed places much less emphasis on temporary
needs for war materiel facilities than the World War II program. During
the next few years at least, the major part of facilities investment must go
into expansion of basic industrial capacity, which will remain useful when
peacetime conditions return. Private industry is currently in a much
better financial position than it was at the outset of World War II to carry
this load.
In most cases, the role of the Government should be limited to a programming of basic needs which will provide industry with a full consciousness of priorities of purpose, and to such controls over materials as will
enable high-priority industrial expansion projects to get what they need to
do the job. Government financial assistance and incentives should be
centered upon projects required in the national interest which, because of
type, location, or other special cost factors, do not offer a prospect of reasonable long-term returns to private investment.
The incentives offered to private investors can be based on proper
economic considerations only if the Government has possible recourse to the
alternative of direct construction. This was demonstrated in World War II.
The effectiveness of Government policies for encouraging crucial types
of expansion should be improved by legislation empowering the Government to finance and construct facilities itself in special cases where reasonable available inducements to private investors are insufficient.
It is becoming increasingly important that we develop and apply
standards of security dispersal regarding the location of new plants. In
the present situation, very little can be done to alter the location of existing
industrial plants and associated community facilities, or to affect plant
expansion which is mainly a rounding-out of present facilities. New locations, certainly those aided by the Government, should be established with
security in mind. Decentralization may be promoted locally within the
commuting radius of metropolitan and industrial centers, or may involve
the establishment of new plants in small or medium-sized cities beyond this
radius. There is also the broad decentralization which stems from plans
to .develop regional economic strength.
The economic effects of the first type of decentralization are more
localized, and involve mainly labor supply, transportation and communications, a variety of community and industrial facilities, and housing.
Wherever possible, expenses of such decentralization should be borne
privately; in some cases, governmental aid will be necessary.
The large regional type of decentralization affects the whole economic
location patern of the Nation. It is desirable that new industry important
to security be located on the basis of careful consideration of the kind
of defense and industrial expansion which each region can best support
in view of cost and market as well as defense considerations.
Electric power. The electric power outlook, as discussed earlier in this
Review, indicates a serious shortage of power—especially in some regions.
The further development of power at Niagara Falls would bring in about
a million and a quarter kilowatts of very low-cost generating capacity by
1955. The St. Lawrence seaway and power project would mean an additional 940,000 kilowatts of installed capacity, which will be needed in
the area within a few years. A speeding-up of public power projects in
the Pacific Northwest, plus the starting of several new ones, could add
about 1,150,000 kilowatts in a region of critical shortage by 1954. The
TVA program is being expanded greatly, so that some 3 million additional
kilowatts should be available in that region by the end of 1953. These
projects should be carried forward promptly, to meet the inevitable loads
of defense production and other essential uses.
Increases in public power capacity will be much smaller than the increases in private power, which now are expected to total almost 20 million
kilowatts over the next three years, and probably will have to be stepped
up. Necessary supplies of critical materials will have to be made available
if these power expansions are to be realized.
Atomic energy. In terms of human resources, the atomic energy enterprise constitutes one of the largest bodies of scientific and technical personnel in the country today. In terms of plant and equipment, it represents
one of our largest specialized productive assets, ranking with the plant
investment of the nation's leading industrial enterprises. Recently industry has shown an increasing interest in participating on a profit and
risk basis in developing nuclear power. The Atomic Energy Commission
has received exploratory proposals from industry, looking toward the development of dual-purpose nuclear reactors designed to produce power
for private use and fissionable material for sale to the Government. If
such development should appear technically and economically feasible,
a number of new questions would be raised relating to such matters as
pricing, patents, and the coordination of the private and public roles.
These questions would become the joint concern of the Congress, the
President, and the Atomic Energy Commission, as provided by the Atomic
Energy Act.
It is too early to calculate the contributions which this source of energy
may add to our general productive strength. But certainly, in time, their
contribution will be significant. This is another reason why, in the future
as in the past, we may expect technological developments to add even more
than increases in manpower utilization to the productive power of the
United States.
Basic resources
The prospect of a rapid build-up in national defense during the next
few years, followed by an indefinitely long period during which we must
maintain and improve our defenses, emphasizes sharply the need for maximizing the productive capacity of our natural resources and the services
our transportation system can yield, both for the short run and the long
run. In a very real sense, the long-run strength of the economy, for peace
or for war, will be measured by the availability of natural resources, their
quality, and the care with which we handle them. At this time, when the
more strictly civilian expenditures of Government must be held in check, it
is essential that we be highly selective in our minerals, soil, forestry, transportation, and water programs. While they must be affected by our lack
of resources to do all the things which are important, those which are most
essential should be included in the program for industrial expansion.
This calls for intense planning to get the most efficient utilization of
available facilities. It also warns us that, if we are not to be penny wise
and pound foolish, we may need to make some highly selective additions to
these facilities despite the additional strain upon resources, and to be even
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more ruthless in slashing nonessentials. Roads, for example, range all the
way from essential feeder lines for military and industrial mobilization to
roads which add only to the pleasure or convenience of the peregrinating
public.
Minerals. In contrast to our stronger position now than before World
War II with respect to manpower and plant and equipment, we are less
well off with respect to domestic supplies of the major strategic minerals.
Net imports in metal equivalent, expressed as a percent of total U. S.
consumption, increased from 1939 to 1949 by 4 percent for iron ore,
13 percent for bauxite, 23 percent for zinc, and 40 percent for lead.
For copper, we moved from net exports equal to 36 percent of U. S.
consumption in 1939 to a 1949 net import position of 38 percent. This
points conclusively to the need for developing for these metals new sources
which are as safe as possible from enemy attack.
Both private and public policies should be directed toward assuring
additional supplies of iron ore as quickly as possible. Private companies
are going ahead with the Labrador and Venezuela developments, so
that by 1954 or 1955 the steel industry will be getting large tonnages
of iron ore from these sources. The St. Lawrence seaway and power
project should be started immediately, to make additional iron ore available in quantity in the great steel centers of Pittsburgh and the Great Lakes
area. Demands on construction materials and manpower for this project
would not be large during the next year and a half. If we move swiftly,
the seaway could be in operation for the 1956 season, when Lake Superior
ore production is expected to be falling off. Increased emphasis should
also be given to research into technological methods for refining and using
low-grade ores such as the taconites of the Lake Superior region.
Military and stockpile programs require large amounts of aluminum,
copper, and many other metals., running in certain instances to a large
percentage of total supply. Selective capacity expansion programs should
be carefully related to the supplies of ores, electric power, and transport
facilities which can be made available. Strenuous efforts should continue
to be exerted to increase our imports of certain minerals and metals without
harming friendly nations. Careful use of technical and capital assistance
can lead to substantial increases in imports of some strategic minerals.
Discoveries of new petroleum reserves have been keeping pace with
increased production during recent years, but we cannot expect this to
continue indefinitely. Prudence requires that we encourage imports of
petroleum and petroleum products, especially from nearby sources, while
at the same time giving our full assistance to the development of foreign
oil fields to supply friendly nations as well as ourselves. In addition, processes for the production of synthetic liquid fuels from oil shale and coal
are rapidly approaching the point where they can be developed privately.
Land and water conservation and development. The pattern of expenditure in these areas which should be followed in the next few years is influ922781—51
7
9*
enced greatly by the time schedule of the defense program. The rapid
build-up of defense expenditures, with the accompanying draft upon materials and other productive resources, will bring the defense part of the
national effort to a peak within two years under present plans. Thereafter,
if widespread warfare does not occur, and as general production increases,
more of our productive resources would be available for civilian needs and
for long-range programs of national development. This would give a
hue of good fortune to a backlog of internal development projects, which
are now well advanced in construction and, having been suspended or
continued at minimum pace, will then be ready for immediate resumption
on a speedy schedule.
In economizing on natural resources programs, we must be selective in
what we curtail and what we allow to proceed. During the period of
defense build-up, it will be necessary to curtail progress on certain development projects and programs for flood control, navigation, irrigation, and
rural electrification. However, those uncompleted projects which will
yield substantial amounts of hydroelectric power or municipal and industrial water supply needed for defense should be brought to completion as
soon as feasible. Other developmental projects now well under way, and
whose benefits can be made available within about the next year and a
half, in general should be completed so that the substantial investments
already made can be utilized. Other projects, whether started or only
planned, which will make substantial additions to productive capacity,
should receive careful consideration.
In this period of selective curtailment of resource development programs,
it is important for defense that a variety of basic-data gathering, survey,
investigation and experimental activities be continued in the various river
basins and other regions. Increasing pressures on our forest, range, and
agricultural land resources resulting from the defense program require
adequate land management and conservation programs as basic supports
for both military and industrial strength.
Manpower
The objective of full employment takes on new and broader meaning as
a result of the defense program. Our manpower resources are a vital factor
limiting the ultimate expansion of our mobilization effort. It, therefore,
becomes even more important to make full use of persons normally in the
labor force. This means that unemployment and underemployment should
be reduced to a minimum. To this point, our objectives remain the same
as they were prior to the defense program.
In addition, however, defense requirements now make it essential for us
to take steps to assure that the members of the civilian labor force are
employed in ways in which they can individually contribute most to the
total defense program. It means that every effort must be made to use the
highest skills which each worker possesses, since the high quality of our labor
force is a prime advantage.
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The demands of the defense program mean not only that we must use
our normal work force fully and efficiently, but also that we must expand
the labor force by calling upon persons who do not normally seek employment. It is especially vital to secure complete public understanding of our
manpower needs and active community cooperation.
Expanding the labor force. In expanding the labor force, the most important source is women, especially nonworking married women who do
not have the responsibility of caring for young children. Women who work
in defense jobs and who have children should be assisted, by means of
nursery schools and other child care and community facilities, to care for
their families and their homes.
Another important group is the aged; they should be encouraged to join
the labor force by stepped-up recruiting efforts, and by a relaxation of
those hiring standards which bar older workers from jobs which they are
capable of performing. In the present state of partial but long-sustained
mobilization, we do not believe that teenagers should be encouraged to
leave school and join the civilian labor force. We should carry on our vocational rehabilitation work to enable a large number of disabled men and
women to become employable; we should train older women, younger persons not in school, and others. Vigorous programs should assist members
of minority groups to be utilized to the maximum of their capacities.
In addition to recruiting additional workers, we should utilize all of our
present workers. It should be possible to gain about a million more workers
by a reduction in the present level of unemployment. Moreover, there are
about a million part-time workers who are willing and able to accept fulltime jobs.
Longer hours. Some selective increases in the work week are needed
immediately. In certain defense industries, where it is necessary to expand
production without waiting for expanded capacity, additional shifts should be
instituted. In other defense industries, shortages of critical skills indicate
the need for longer hours for skilled workers. There is not yet a clear and
urgent need for adopting a general increase in the work week for the economy as a whole. We should be ready to adopt such an increase as soon as it
is needed, and in the meantime effort should be concentrated upon expanding the present labor force so that we will have more workers with experience and training.
Improved utilization of the work force. Attracting workers to the jobs
where they are now most needed is at the heart of an effective manpower
program. Basic responsibility for this problem must continue to be borne
by informed workers in their individual employment decisions. But these
decisions must be guided and supported by more positive governmental
action.
First, there should be further development of the management-labor committees, now being established in many of the more acute labor market areas.
These can help to provide essential local cooperation. Second, arrange-
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merits will be necessary to remove the impediments to voluntary transfers of
workers from less essential to essential activities, and protect workers affected
by the curtailments in nonessential production. Such arrangements should
safeguard seniority and pension rights, and offer better protection on a
broader basis during conversion unemployment. Third, we must make certain that workers are most productively utilized while on the job. Here
employers must assume basic responsibility for necessary training and upgrading, for taking all possible steps to improve the supervision, mechanization,
and other factors contributory to maximum productivity, and restrict their
hiring to the absolute minimum needed to meet production goals. The
Government should encourage and facilitate these actions.
Health^ education, and security. One of the thorniest questions confronting the whole defense effort is how to reappraise and redirect the public
services whose necessary growth was resumed after World War II, and
for which further growth had been appropriately planned before the defense
emergency.
In education, for example, we cannot remedy the shortage of school
buildings at the pace which seemed eminently desirable a year ago. On
the other hand, there is a high priority for promoting education and training
in the health professions. Also the vocational education program, which
complements within-industry training, must be redirected toward greater
emphasis on training for defense jobs. General education, which modern
elementary and high school training affords, no less than specialized skills,
is essential to the maintenance, of a vital citizenry, whether in the civilian
labor force or in the military. It would be wasteful beyond description,
by any test., to deprive those not yet of military age of decent opportunities
for such training, and to force them, by lack of equipment or staffing, into
the streets instead of the schools. This would hardly make them more
serviceable in the event that an even larger military establishment should
become essential by the time they will have reached the age of service.
In the case of health, it is obvious that widespread deficiencies in health
care do not make for maximum national strength at any time. Obviously
we do not now have resources to build as many hospitals in as many places
as we would like to do. On the other hand, certain features of health
progress are now more vital than before and should be accelerated. Federal
aid should be extended to local health units, with special emphasis on units
in the more rapidly growing defense areas. As a part of a community
facilities and housing program for rapidly growing defense areas, adequate
health facilities and services, as well as schools, will be necessary.
In the case of social security, there are types of expansion wrlich would
constitute an immediate drain upon our resources, and which are less urgent
by the test of national priorities than they seemed a year ago. But other
types of social security expansion, such as old-age and survivor insurance,
may be undertaken without an immediate drain upon our resources, and
in fact over the next few years would be anti-inflationary by collecting more
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funds than they disbursed. Moreover, since the fight against inflation will
make it necessary to reduce the incentives which flow from wage increases
available for spending, some incentives may be substituted by granting some
wage increases where necessary but withholding them from the purchasing
power stream by social security deductions which are a form of compulsory
saving. In any event, even without increases in wage rates, there will be
an enormous increase in total wages earned, through additions to the labor
force and through longer working hours, at a time when it will be impossible
to increase the supply of consumer goods. Increased social security deductions might provide one highly useful approach to this inflationary problem.
Because many of these services now under discussion are public rather
than private in their nature, it may seem easier to curtail them than to
curtail nonessential private activity and spending. But in a national
emergency, the question of who spends the dollar, while not unimportant,
should be subordinated to the larger question of what use of resources will
do most to maximize our total strength. Nonessential Government outlays
should by all means be cut; but essential public outlays should have priority
over nonessential private demand. This whole problem calls for a kind of
"budgeting" process more discriminating than that practiced in peacetime.
In terms of the over-all programming of requirements and needs upon which
the Council has placed so much stress, the amount of materials, manpower,
and money which we can and should devote to education, to health services,
and to other factors in human efficiency and morale, should be carefully and
constantly weighed.
Housing and community facilities. The World War II experience
brought into sharp focus the close relationship between industrial production and sufficient housing of adequate quality. Despite the nearly 5 million new nonfarm housing units which have been built since 1945, we have
not yet caught up with the requirements of a nation of our population, incomes, and living standards. This was illustrated by the unprecedented and
rising level of house construction in 1950. The defense emergency requires
that we now set aside the praiseworthy targets for an even larger number
and more varied types of housing which were projected last year and
earlier. If the housing goals set forth in connection with the recent
credit restrictions do not need to be reduced, they will permit a level of
housing output at least sufficient to keep up with new family formations
and even to allow some reduction of overcrowding.
In areas of defense expansion, on the other hand, the housing supply
will need to be enlarged considerably. The emphasis should be upon rental
housing serving the needs of middle- and lower-income families, along with
necessary community facilities. While private industry should be encouraged to do as large a part of this job as it can, the experience in World
War II makes it clear that publicly-financed housing must serve a larger
portion of this type of need than in ordinary times. More easily than
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privately-financed housing, such housing can be developed on a rental
rather than a sale basis, and is more suited to migrating defense workers.
Such housing is also more easily susceptible to occupancy standards.
And such housing can save somewhat more by way of critical materials,
because its utility after the defense period need not be taken so largely into
consideration, and because it may even be built on a temporary or mobile
basis if necessary—although previous experience casts some doubt upon
large-scale resort to temporary housing in the current situation. Previous
experience also demonstrates that, wherever possible, such housing should
be built by local agencies, with Federal aid when needed, rather than by
direct Federal construction. The latter method has always seemed superficially to promise greater speed; but actually, it has usually proved slower
because of the high degree of interdependence among housing structures, the
selection of sites, and municipal and other services which cannot be provided
by the Federal Government.
The scheduling of housing for defense workers needs to be integrated
more closely with other aspects of the defense program. In addition, the
general determination of what volume of total housing can be permitted
in the near future, throughout the country, will be made most wisely in
the framework of the complete resource programming operation which
the Council has identified as a first need of the whole defense effort.
Housing is so essential to our general strength, that decisions affecting housing should rest upon the general strategy of the relative emphasis being
placed upon immediate military needs and long-range economic strength.
Adjustment of agricultural production
The defense situation has significantly changed the farm outlook. Surpluses, which seemed difficult last June, present few problems today. While
our agricultural policy continues to encourage abundance of farm products
in general, it is now concentrated on specific items which are in short
supply.
The demand for farm products has increased markedly in recent months.
Military needs for cotton and wool have greatly enlarged the markets for
these products. In addition, there is an exceptionally strong consumer
demand for meats and many other foods. Coupled with these high demands, we have low supplies of cotton and wool—although fairly liberal
stocks of foods. And we will need to maintain large stocks of food and feed
as an insurance against unpredictable demands and against the hazards
of weather.
In World War II, our food and fiber needs were met by a great increase in
agricultural production. Total output of farm commodities increased by
almost 20 percent from 1940 to 1944. This was made possible by good
weather, by the rapid adoption of hybrid corn, and by using much more
fertilizer and machinery. Since the war, output has remained at high
levels, despite gradual reduction in the number of persons working on farms.
It will doubtless be more difficult to increase farm output in the future
than it was after 1940. Yet substantial gains are feasible. Programs are
being readjusted to help bring about the highest possible total output, and
especially to encourage the production of the most needed commodities, such
as cotton, wool, corn, and livestock products. In the case of cotton, there
will be no 1951 acreage allotments or marketing quotas, and every effort
is being made to produce a crop of 16 million bales, or 60 percent more than
the 1950 crop. On January 5, it was announced that there will be no
acreage allotments for wheat and corn in 1951. In the case of cotton and
wheat, prices will be supported at 90 percent of parity. On the other
hand, there are now no supports on potatoes or on eggs.
Farmers are using less manpower than before the war. But they are
using three times as many tractors, twice the number of trucks, two and
one-half times as much fertilizer, and two to three times as much electric
power and power-driven machinery. The increased use of steel in the defense programs, and possibly the increased use of nitrogen in explosives,
make it difficult to avoid some bottlenecks in food production. But our
experience with this problem in World War II indicates that these bottlenecks can be kept at a minimum by the careful scheduling of requirements
and by appropriate measures of allocation.
Although using less manpower, farmers are more dependent on skilled
labor than in prewar times. This could rapidly become a difficult problem
if the defense program continues to expand. For the present, it is less serious
than the problem of assuring needed materials and facilities.
PROMOTION OF ECONOMIC STABILITY
The diversion of large amounts of resources to the defense effort tends
powerfully to upset the economy by causing inflation, dislocating production
and employment, and distorting the distribution of essential goods among
the population. Such instabilities, if not brought under control, would
undermine production and the whole defense effort by imposing hardships
and inequities on the home front. The vigorous promotion of economic
stability thus supports our basic production effort just as expansion of
production buttresses economic stabilization.
Inflation is the principal threat to economic stability. Earlier in this
review, we depicted the enormous inflationary forces which grow out of the
expanding defense program, and which have already begun to march even
before that program has gotten into high gear. The control of inflation is
much more difficult than the expansion of production. The release of productive effort is gratifying in itself. The preponderant bulk of American
production and production expansion will come through private initiative
with no more than general guidance from government. But the imposition
of harsh restraints goes against the grain and requires all of us to do things
we would very much rather not do. The reasons for a mighty productive
97
effort are more or less self-explanatory; but to succeed with controls requires
a constant effort toward the enlargement of public understanding.
There are three main ranges of controls available: (1) the indirect controls, such as tax and credit measures, which absorb or restrict the growth of
excess purchasing power; (2) direct controls over production and distribution, such as allocations and limitation orders, which distribute resources
among necessary purposes; and (3) direct price and wage controls, which
are designed to suppress the price-wage spiral.
All three of these types of control are now clearly needed. In effective
combination, they can provide a sound platform of economic stability upon
which an abundant and balanced production program can build. Each
is necessary to the other two and must be supported by the other two; in
large measure, they are complements, not alternatives. This will be clearer
if we examine their interrelations.
Allocations and limitation orders help to place goods where they are
most needed. An inevitable result is to reduce the supply available for
other uses. But allocations and limitation orders do not reduce consumer
demand. If nothing else is done, prices will rise and some consumers may
fail to receive essential supplies. Accordingly it is necessary to make use of
taxes and other financial measures which reduce total purchasing power,
and thereby reduce civilian demand for scarce supplies. These measures
can be aided further by imposing selective credit restrictions and specific
excise taxes, to curtail civilian demand for those products which are scarce
because materials or plants are concentrated on defense production.
Even the most rigorous tax program designed to keep disposable incomes
in line with available production requires the assistance of price and wage
controls. If tax increases were followed by compensatory price and wage
increases, the effects of the tax program in holding down spending would
be largely nullified. Moreover, tax increases may be inadequate to check
spending if there is a large volume of liquid savings which both business
and consumers can use to buy goods. For the public to continue to hold
these savings and for it to save at the needed higher rate in the future,
requires confidence in the stability of prices. Only broad, direct price and
wage stabilization can now convincingly provide this confidence.
Also, effective stabilization of prices is necessary to make our allocation
and priority system work effectively. As long as prices are not controlled,
the orderly flow of materials to the most needed places would be disrupted
and our production schedules disorganized. This makes all the more urgent
the need to stabilize prices if we are to achieve our production program.
It would be unwarranted, however, to embrace direct controls of prices
and wages in the hope that they offer a less painful and more palatable
remedy than do higher taxes. Price and wage controls prevent incomes
from rising and thus help limit the growth of demand. But they do not
in themselves reduce demand; on the contrary, the lower the prices, the
greater the demand; and this provides a breeding ground for black markets
and evasion if purchasing power is not restrained. Disposable income must
be reduced through taxation and other financial measures, or price and
wage controls may be seriously undermined. Further, price controls must
be supplemented by some direct controls over the kinds of civilian goods
produced, if sellers are not to be able to sidestep price controls by varying
their products and shifting to higher-priced and higher profits lines.
It should be recognized that controls, particularly direct controls, would
place obstacles in the way of production unless the controls were carefully
designed and competently administered. For example, delay in granting
a priority may hold up a defense order; or, wages in less vital industries may
be set relatively so high as to impede the recruitment of workers into the
more vital ones; or, an error in price regulation may make it impossible to
produce and sell certain goods except at a loss. The risk of these and similar
mistakes are costs which we must expect in using direct controls. If the inflationary forces in the economy were minor, these costs of controls would be
likely to far outweigh the benefits which they contribute to production. But
when the inflationary forces are powerful, the losses to production resulting
from direct controls are likely to be far smaller than the losses to production
if instability develops. It is the latter kind of situation which we face
in a major defense mobilization. We must do everything within our power
to make the controls work smoothly, so as to interfere as little as possible
with production.
While the interdependence and necessity of the different kinds of controls are clear, the emphasis in the last analysis must be placed upon the
financial measures which drain off excessive purchasing power. These
are basic for any long-run program, and without them, the others are
bound to fail. This statement must be emphasized repeatedly because
taxation seems to most people to be the most painful of stabilization measures, and, as a result, there is a tendency to seek in the direct controls an
easy substitute. No economic mistake could be more serious. Indirect
financial control measures, notably taxation, must be at the center of
stabilization policy in the defense economy.
Mobilizing our financial resources
The distinguishing mark of indirect controls is that they operate through
their effects on people's income and on their financial assets and liabilities.
Their purpose is to mobilize the Nation's financial resources for the promotion of defense mobilization.
Defense mobilization requires the redirection of physical resources. To
some extent this is done by direct order, as when men and women are drafted
into the armed services. But to a major extent, financial measures are
relied on to facilitate the redirection of resources. Financial mobilization
is thus the rechanneling of the flows of incomes and expenditures, receipts
and disbursements, in order to guide production in line with the require-
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merits of defense and to distribute equitably that part of the product
available for the civilian population.
The instruments of financial mobilization include, on the one hand, government expenditures whereby resources are commanded for the defense
effort, and, on the other hand, a variety of measures for maintaining economic stability by reducing the competition of private demand for resources
which are needed for defense.
Foremost among these measures of financial mobilization is taxation,
which withdraws spending power by compulsion from private hands. The
effect of taxation in reducing consumer and business spending is limited by
the fact that it ordinarily does not impinge on past accumulations of funds.
A second measure is borrowing by government. To have an immediate
effect on private demand, borrowing must be accompanied by an increase
in net saving or a reduction in real investment, or both. Borrowing also
helps to reduce demand by absorbing liquid funds which would otherwise
be spent. Campaigns to sell government securities to the public promote
this objective. A sort of "induced saving" also results when goods subject
to price controls are in short supply, since people are thereby encouraged to
save until the goods can be purchased at a later date. Saving as an instrument of financial mobilization is voluntary^ and therefore more subject to
unpredictable fluctuations.
A third measure of financial mobilization is credit control, whereby private
borrowing is reduced or restrained from rising. The impact of credit control is limited, since it cannot prevent persons from spending their own assets.
It has previously been pointed out that financial measures and direct controls supplement each other in the maintenance of price stability. Thus,
increased taxation is the basic financial measure on which government must
place its greatest reliance if the gap between demand and supply is not to
undermine price and wage controls. On the other hand, price and wage
controls supplement taxation, since in their absence tax increases can be
largely nullified through compensatory price and wage increases.
In one respect, the problem of financial mobilization, at least for the
defense effort now contemplated, is not so serious as it was in World
War II, since the present defense program does not require nearly so large
a proportion of the national product as that war did. In several respects,
however, the problem of financial mobilization is far more serious today
than it was during World War II.
First, a longer period of mobilization is anticipated than was the case at
the beginning of World War II. Accordingly, the measures to be adopted
must be adequate not merely for a few years, but possibly for an indefinite
period of years.
Second, World War II mobilization was undertaken when the country was
still in a period of incomplete recovery, while the present defense mobilization is being added to a business boom which even before the Korean
attack had carried industrial production to postwar record levels and
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was being reflected in higher prices. In World War II, there was little
credit expansion for business or consumption purposes, while thus far in
the defense mobilization nearly the whole expansion of credit has been for
private uses.
Third, the country is entering the present defense mobilization at a time
when there is a tremendous volume of accumulated liquid assets. A substantial portion of the liquid assets is held in the form of Government debt.
At the end of 1950 the debt outstanding not held by Federal Government
agencies and trust accounts totaled 217.5 billion dollars, compared with
41.1 billion dollars at the beginning of 1940. This debt has a high degree
of liquidity, so that for many persons and businesses it serves the function
of cash. The large volume of liquid funds makes it more difficult than
it would otherwise be to hold down demand through taxation. The large
amounts of savings bonds held by the public, resulting from the successful savings campaign of World War II, add to the importance of present
savings programs. This is accentuated by the fact that a large part of
the Federal debt which was incurred during the war will mature over the
next few years. Moreover, if and to the extent that the budget is not
balanced through current tax collections, further borrowing will be
necessary.
Fourth, the country is entering the defense program with far higher
tax rates already on the books than was the case in 1940. For example,
for 1939 there were less than 4 million taxable individual income tax
returns; the exemption of a married couple was $2,500, and the starting
tax rate was 4 percent. Today there are approximately 43 million taxable
returns; the exemption of a married couple is $1,200, and the starting tax
rate is 20 percent. In 1939, the top corporate income tax rate was 19
percent; today it is 47 percent, with an additional tax of 30 percent on
excess profits. Clearly, it would be more difficult to obtain large additional
revenues from increases in these taxes than was possible from the starting
point of low rates and high exemptions at the beginning of World War II.
Fifth, effective stabilization measures need to be in operation more
quickly and more completely than was necessary at the beginning of World
War II. This results, in part, from the tightness of the economy since
increased spending is reflected immediately in price increases. Moreover,
the public is more conscious of the threat of rising prices than it was in
1940. Then, mobilization followed half a decade in which price increases
had been accompanied by recovery and the increase in employment, and
in which deflation and price decreases seemed more probable and more
dangerous than price increases. Since then, the public has experienced
substantial price rises which have affected not only their personal budgets,
but also the financial assets upon which they rely for economic security
in later life. People's willingness to save more and spend less is dependent
largely on their being convinced that price stability will be achieved and
maintained.
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For this reassurance to be effective, it is imperative to stabilize prices as
part of the mobilization effort. This presents the old problem of the hen
and the egg. A high level of saving is important if prices are to be stabilized,
but it is going to be difficult to achieve that saving unless prices are stabilized.
Clearly, it will be necessary to move on this problem from every practical
direction. In doing so, it should be with regard to both the immediate
defense period and the more distant time when resources and funds can be
shifted back again into their more customary uses. An important goal for
mobilizing financial resources for defense is to reduce to a minimum the
inflationary and other distorting effects on the economy in later years, as well
as in the immediate period ahead.
The three segments of policy most important to financial mobilization—
taxation, debt management, and credit policy—are discussed in the immediately following paragraphs. Other measures which directly reduce spending
or prevent the enlargement of incomes are discussed in later sections dealing
with priorities and allocations, and price and wage controls. While not in
themselves financial measures, they are necessary for the success of financial
policies, under present or prospective conditions.
Taxation
The Council believes it to be of great importance to the future of the
country that the firm and continuing policy of the Government be to pay
through taxation for the entire cost of the defense program at present and
contemplated levels. The reasons are clear and convincing. First, paying
for the defense program out of current taxes largely offsets the inflationary
pressures resulting from increased government expenditures. Taxation is
superior to other methods of holding down spending by consumers and
businesses. It does not rely on voluntary action. It does not interfere
with the flexibility of market adjustments. It avoids the increase of debt,
and obviates the danger that inflationary pressures of expenditures will not
be offset at the time of borrowing or may arise at some later date.
Second, paying through current taxes distributes the burden immediately in a manner in which the Congress determines it should be distributed,
not unpredictably and unfairly through inflation. When we pay as we go,
those who serve in the armed forces will not have to pay taxes for increased
debt service and debt retirement after they return to civilian life.
Third, there is no economic advantage in postponing taxes through borrowing, for the economic burden of the defense effort must be borne
currently regardless of the manner in which the expenditures are financed.
It is not the imposition of taxes to pay for defense that creates the economic
burden of defense, and it is an illusion to think that through borrowing, the
Nation can escape or postpone paying the bill.
Fourth, the tax load required to finance a defense program of the size
now contemplated would not be unduly heavy at anticipated economic
levels. Federal cash revenues collected during the fiscal year 1945
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amounted to about 27 percent of the national income. To pay for
Federal expenditures at the level projected for the end of the calendar
year 1951 would not require a much higher percentage of national income.
Such a tax load is heavy but not unbearable.
It is not to be concluded that a balanced budget could necessarily be
maintained during a major war. But the magnitude of the present and
planned defense effort is far from being as heavy a charge on the production of the country as was made during World War II. In general, a
defense program that does not require a diversion of productive resources
too large to be sustained over a long period of time is not too large to be
financed through current taxation. We believe that from an economic
point of view, a defense effort of present and contemplated size can and
should be financed through taxation during the period of the effort.
This is not the same as saying that during the relatively short build-up
period when expenditures are mounting rapidly month after month, tax
collections can be kept equal to expenditures at all times. There are
time lags in the passage of tax legislation, and time lags in the collection
of taxes under new tax legislation. The shock of the tax bite on the
economic system must also be considered. The adjustment to drastically
higher taxes of the taxpayer's personal budget, as well as his attitude, outlook, and expectations, takes time. With due recognition of this, which
means simply that taxes should be raised just as fast as possible, the point
must be everlastingly stressed that there is to be no giving up the policy
and goal of the balanced budget. There must be no let-up in tax increases
until balance is achieved and maintained.
It must be recognized that to balance the defense budget will require
taxes at rates substantially higher, perhaps even drastically higher, than
have ever been imposed before in the United States. The regular corporation income tax is already substantially above the wartime level. Excise tax rates are at their wartime peak. Individual income rates are 3
percentage points below the wartime peak, although, due largely to income
splitting, tax liabilities for married couples are substantially lower. The
fact that the rates will have to exceed the wartime levels is regrettable,
but should not be discouraging. It is generally recognized that taxes were
much lower than they could and should have been during the last war.
The importance of reducing private spending influences the forms of
taxes which should be used in a tax program, as well as its size. Other
considerations are also important. A maximum productive effort should not
be discouraged. The tax burden should be distributed in an equitable
manner. The higher the tax burden becomes, the more important it is to
avoid inequities which permit some taxpayers to escape paying their full
share.
The individual income tax. We should continue to rely on the individual
income tax for a large part of the additional revenue which will be required
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for the defense effort. Drastic increases in rates will be necessary, which
will make it more important than ever that the base be an equitable one.
There are numerous special provisions in the law which need to be
changed, in order that the base of the tax may be a fair one on which heavy
burdens can be appropriately levied. Thus, the rates on capital gains are
too low in relation to the rates on other incomes, while the holding period is
so short that the hiding of ordinary income under the capital gains cloak is
encouraged. The depletion allowed under the percentage depletion treatment is so excessive for some industries as to constitute a major inequity,
and percentage depletion has been extended to industries where it has no
justification whatsoever. The split-income provisions of the Revenue Act
of 1948 removed an inequity among certain married couples in different
States, but introduced an extremely favorable concession for married couples
generally. If this concession cannot be removed, it should be taken into
account when considering the increase of income taxes. The exemption
of interest on State and local securities provides the anomaly that States
and localities can sell securities at lower interest rates than the Federal
Government. More important, a large part of the tax benefit accrues to the
security holder rather than to the State and local government. The defense
period would be an excellent time to remove this old-time anomaly from
the tax law.
Income tax increases should be imposed at all levels, emphasizing the progressive character of the tax structure; but by far the largest part of the
additional revenue must come from the middle and lower tax brackets.
These are the brackets in which the great bulk of the income is located.
Of the total net income shown on all taxable returns, 86 percent of the
amount remaining after Federal income taxes is estimated to be received
by taxpayers with net incomes of less than $10,000. To hold down consumption, which is vital to the control of inflation, the bulk of consumers
must be affected directly by the tax increases.
Estate and Gift Taxes. The estate and gift taxes have less direct antiinflationary effects than most other taxes, but in the interests of distributing
the defense burden fairly, these taxes need to be overhauled and strengthened. The structure of the estate and gift taxes permits large amounts of
transfers to be made with no tax or at a very low tax rate. These defects
were accentuated by the Revenue Act of 1948. The defective structure of
the taxes should be corrected to make them fairer and more productive, and
the rates and exemptions should be set at such levels as to give their proper
and more adequate place in the tax structure.
Corporate taxes. Taxes on corporate profits were raised substantially
in 1950, but there is room for further increase. Corporate profits before
taxes in the second half of 1950 have been approximating a rate of about
47 billion dollars. Federal, State, and local corporate taxes, including the
excess profits tax, will absorb at this rate of profits on a full year basis approximately 24 billion dollars, leaving 23 billion dollars after taxes. Several
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billion dollars of this can be taken through further taxation and still permit
corporations to maintain reasonable dividend payments, and to continue
necessary programs of expansion without impairment of their financial
position (see chart 18). Heavy corporate taxes contribute to the anti-inflation program, because they limit the amounts corporations have available for
dividends and for investment. Moreover, without a further substantial inCHART
18
CORPORATE PROFITS
Corporate profits rose spectacularly during 1950 to reach the
highest levels on record, as sales and prices climbed to
new highs. Undistributed profits were the second highest on
record and the volume of dividends swelled to new all-time highs.
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
50
50
ANNUAL RATES, SEASONALLY ADJUSTED
—
20
10
1950
' NO ALLOWANCE FOR INVENTORY VALUATION ADJUSTMENT; SEE APPENDIX TABLE A-4
PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC A D V I S E R S ; ALLOWANCE HAS BEEN MADE FOR
THE EFFECT OF THE HIGHER TAXES INCLUDING THE EXCESS P R O F I T S TAXES.
SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED)
crease in corporate tax rates, there may be an accelerated rise in security
prices, which feeds inflationary consumer spending and could easily spread
to other markets and run directly counter to the goals of the stabilization
program. Increasing the tax burden on corporations is essential also from
the point of view of equity. It is not convincing to tell the public that
consumption must be reduced and personal taxes greatly increased, while
corporations maintain profits at very high levels. Wage earners can hardly
105
be expected not to demand higher wages, if they see that corporations have
profits that would permit substantial wage concessions without making
necessary an increase in prices.
The excess profits tax, which was passed by the recent Congress, makes
a major contribution to the corporate tax structure. It appears probable,
however, that some of the allowances made are unnecessarily generous and
remove from the excess profits tax some profits which should be taxed at
the higher rate.
Excise taxes. There is a particularly good reason for heavy increases of
excise taxes on civilian goods which compete for materials and facilities with
the defense effort, and the supply of which will very likely have to be drastically reduced. In the absence of the most rigorously enforced price control,
the price of such goods is almost certain to rise. There is no justification
lor such price increases going to producers or dealers, and the effect would
be to inflate business incomes and to stimulate workers to demand increased
wages. By means of heavy excise taxes on such goods, the price increase
would be diverted into the Federal Treasury in the form of tax revenue to
the extent that the goods were available. Such taxes would be particularly
appropriate on durable goods which are not essentials of life.
The rates of many of the other excise taxes might be increased somewhat.
New items might be taxed, but to add substantially to the excise tax base
would involve the taxation of commodities of mass consumption. These
are, in general, necessities of life, and to tax them would place an inordinate
burden on low-income families. Circumspection will be required also in
increasing taxes on business-cost items, since these would most likely be
passed on in the form of higher prices and affect the cost of living and of the
defense program.
Increases in some excise taxes, which are reflected in the price structure,
are a necessary device under current conditions. Yet it cannot be overlooked that such measures, in their very nature, bear more heavily on
families with limited means than upon families in higher income groups.
To a degree, this may be unavoidable, because an economic mobilization
program cannot attempt to remove all of the differentials in real incomes
and in consumption which are inherent in our economic system. Nonetheless, a defense program calls for sacrifices so great that there must be
even more emphasis upon considerations of equity than in normal times.
Towards this end, should the situation become more critical and some
shortages become acute, there would need to be relatively more emphasis
than thus far upon rationing and other devices, outside the price and tax
structure, to promote equitable distribution of certain types of goods.
State and local taxes. Since tax policies are not solely a matter of Federal
legislation, it may be added that the State and local governments also can
help to reduce inflationary pressures. With the existing State and local tax
structure, advancing prices and personal incomes tend to produce surplus
revenues, particularly for the States. To the extent that these surpluses
106
occur, the State and local governments should build up reserves for later
use rather than reduce the level of tax rates. In their expenditure policies,
likewise, these governments should take all possible steps to conserve manpower and materials. By adhering to such policies during the last war,
the State and local governments made a noteworthy contribution to economic
stabilization. They can help again during the present emergency.
Debt management
Policies of debt management can make an important contribution to the
success or failure of our stabilization objective for the defense period and
afterwards. The public debt today is more than five times as large as it
was at the beginning of the defense financing period prior to World War II.
It comprises approximately one-half of the total debt of the country, and
constitutes a large portion of the assets of all the major investor classes
of the country. Operations affecting the public debt have repercussions
which are felt throughout every sector of the economy.
It is of major importance for the maintenance of economic stability that
the public debt be bought and held by nonbank investors. Bank purchases
of government securities are accompanied by an expansion of bank credit.
Under present conditions, it is even more important than during World
War II that the maximum amount of debt, including both new and refunding issues, be sold to and held by the nonbank public. We believe
that the Treasury should continue to use every effort to expand Government
security holdings of nonbank investors, particularly individuals.
An important objective of debt management policy has been the maintenance of an orderly public market for United States securities. A stable
and confident situation in the market for Federal securities is particularly
important during a period of large military expenditures when new and
heavy demands will have to be made on the Nation's financial system.
The accumulated savings of the wartime period eased to a large extent
the reconversion of business in the postwar years and supported postwar
prosperity. The highly liquid condition of the Nation's financial assets,
however, also made for excessive demand and contributed to the postwar
inflation. The achievement of monetary stability in the future will be made
easier if the proportion of debt held in readily monetizable forms can be
reduced.
General credit policy
Three purposes of credit policy which are particularly important in
the period ahead are, first, to facilitate the smooth transition of business
and industry to meet the requirements of defense mobilization; second, to
assist Government debt management; and third, to minimize inflationary
pressures. To achieve all three purposes at the same time presents something of a dilemma, since smooth economic transition may require easily
available credit, while minimizing the pressure on prices calls for restrict922781—51
8
I0
7
ing the volume of credit at many points. The problem is pointed up by the
fact that, during the second half of 1950, the rapid expansion of bank
loans contributed to the inflationary pressures built up during that period.
There is a real danger that, for a time at least, consumer and business
buying, based on credit, will continue to be of a magnitude which will
aggravate inflationary pressures. Because of the needs of debt management, however, general credit policy cannot be expected to be a major
anti-inflationary instrument during the coming period of intensive mobilization.
Finding the solution to this problem of credit policy will call for a careful
appraisal of the applicability under present and prospective conditions of
such traditional central banking techniques as changes in rediscount rates,
reserve requirements, and open-market operations. It will undoubtedly
be necessary, at least in the immediate period ahead, to rely more on selective than on general credit controls. It may be found feasible to extend
selective controls to other kinds of loans than those to finance the purchase of
consumers' goods, real estate, and securities, and to secure voluntary cooperative action on the part of banks to attain this objective. It is possible, and
it may be found desirable, to regulate and limit the issue of new private
securities.
One hopeful element in the picture is suggested by the experience of
World War II, which supports the view that, if price controls and controls over inventories and facilities expansion are vigorously used, the
problem of inflationary growth of bank credit will be mitigated. Price
control, combined with the diversion of materials from civilian production,
may be expected to restrict new credit to that used for the promotion of
productive capacity in the defense program.
Selective credit controls
At the present time, two major selective credit controls are in operation:
Regulation W, which requires minimum down payments on purchases of
the principal types of consumer durables; and Regulation X, which regulates
terms on residential mortgages. Regulation W was in effect during the
war and during most of the postwar period until June 30, 1949, at which
time legislative authority expired. It was reinstituted on September 18,
1950. Less than a month after the Korean outbreak, the President asked
the Government housing agencies substantially to tighten terms on all
mortgage loans insured or guaranteed by them—roughly half of all mortgage
loans. In October, a more comprehensive regulation covering conventional
loans on new one- and two-family dwellings, as well as Government-insured
or guaranteed loans, was put into effect. At the present time, the regulation
is being extended to multi-family structures, principally by the requirement
of maximum loan values. During World War II, the substantial reduction
of private residential construction by direct controls minimized the need for
credit controls, although it would have been desirable to curb demand and
108
limit the price rise on existing dwellings. In the postwar period, previous to
the Korean outbreak, overcoming the acute housing shortage was regarded
as a primary aim of public policy, and accordingly, credit measures were
designed to provide positive encouragement to residential construction.
Regulation W has had some immediate effect in curtailing demand, but
to date the effect has been small, in comparison to the reduction in sales
which will be necessary in the future. In the case of Regulation X, the
effects of the regulation cannot yet be appraised, to determine whether
further tightening of terms will be warranted. The large volume of work
under way, and commitments made prior to the date of the regulation,
will assure the continuance of a relatively large volume of residential construction well into the spring months. This has delayed the full impact
of the regulation.
The restriction of consumer credit and of housing credit inevitably bears
harder on the lower income groups which have used these forms of credit
most extensively. The restraint upon their buying imposed through the
present regulation should not be considered a serious and unreasonable
hardship. If, however^ much more severe restrictions on the supply of
consumer durable goods and the construction of housing should become
necessary, it would no longer be feasible nor equitable to achieve the needed
restraint exclusively through the device of making credit unavailable. This
would mean that the drastically reduced supply would go exclusively to
those who have the ready cash to pay for appliances or houses. In the
case of such drastic restrictions, other forms of allocating the remaining
supply would have to be considered. Such drastic curtailments are, however, not contemplated at the present time. The sacrifices imposed on
consumers under present regulations are not great in comparison with the
benefit they derive from a successful policy of price stabilization.
In the case of housing, the adaptation of the program to a defense
economy will require modification of the over-all approach taken in Regulation X. Terms applicable to some housing construction may have to be
further tightened. In general, a more selective approach will be required.
Measures will be needed to focus housing construction upon defense areas.
Other measures will be needed to adjust the character of this housing—as
to prices, rents, and size—to the needs of defense workers. Still other measures may be needed with respect to the general housing program, so that
throughout the country the limited supply of new houses may be made to
serve first needs first. To encourage a larger volume of rental housing, legislation should provide the FHA with a special type of insurance authority,
differing in terms from the current legislation and concentrating mainly
upon defense needs. A substantial volume of public housing will also be
needed, with reshaping to meet defense requirements.
One serious defect of the Defense Production Act of 1950 is that it does
not contain authority to prescribe credit terms on the sales of existing homes,
109
except on mortgages insured or guaranteed by the Federal Government.
Exemption of these homes from credit regulation may result in a large
rise in the price of existing homes, thus adding credit-created capital gains
to the spending stream. A rise in the price of existing homes would intensify inflation also, by affecting prices on new homes.
Materials controls
Priorities and allocations. Under the Defense Production Act enacted
last September, the National Production Authority quickly put into force a
basic regulation under which the materials and components needed to fill
defense orders were given priority over other business. Subsequently,
recognition of the urgency of protecting certain other essential programs
led to special assistance in providing steel for the accelerated building of
freight cars and of Great Lakes vessels, primarily iron ore carriers. Steps
have also been taken to insure more equitable and orderly distribution of
priority-rated orders, in a number of industries, by establishing maximum
percentages of output beyond which individual producers need not accept
further rated orders.
Orders have been issued cutting back nonpriority uses of aluminum,
copper, zinc, rubber, tin, nickel, cadmium, columbium-bearing steel, and
cobalt. The first purpose of these orders was to distribute the necessary
curtailment fairly evenly over the various nonpriority users, to avoid drastic
dislocations of production and employment. These restraints also afford
incentive to the directly-affected users to conserve scarce material, by
redesign or substitutions, while maintaining their output.
By the end of the year, a number of orders had been issued which selectively curtail or prohibit certain less essential uses of the material in question,
rather than curtailing all non-rated uses uniformly. For one material,
cobalt, complete allocation was ordered.
The development of priorities and allocation controls since the Korean
outbreak, as outlined above, has been patterned on methods employed immediately before and during the early stages of U. S. participation in World
War II. Some shortcomings in these types of controls are already becoming
evident. For one thing, it has been impossible as yet to build effective
machinery for insuring compliance with the increasingly complex pattern
of rules—a defect which should be remedied as rapidly as possible. Also,
the system of curtailing non-priority uses of scarce materials by uniform percentages at the level of primary shapes and semifinished products often
fails to give the producer of finished products an adequate incentive to
substitute, where feasible, components containing less of the scarce material.
The basic shortcoming of the uniform horizontal-cut approach is that it
makes no distinction between more and less essential civilian uses. Thus
it does not really maximize the production of the most necessary goods,
and quite possibly does not even maximize total production.
The use of direct controls has thus far been limited almost entirely to
110
aiding the direct defense programs, and the proportions of supply eligible
for rated orders are still low. But these proportions are rising rapidly as
the pace of mobilization is stepped up. It should now be possible to
progress to the necessary next stage of more comprehensive and effective
control, with far less lost motion than a decade ago. The exigencies of
current mobilization call for all speed in staffing and other preparations for
instituting complete allocations of a few key materials, along the lines of
the Controlled Materials Plan, at the earliest possible date. In the interim,
there will be increased pressure for development and authorization of essential civilian programs eligible for priorities assistance, on the footing now
represented by the freight car and Great Lakes vessels programs. It has
been realized from the start that a proliferation of such priority programs
leads rapidly to a breakdown of the priority system. Advancing the date
for instituting allocations would shorten the interval to be bridged by a
priorities system, and thus remove the danger of such a breakdown.
Even before complete allocations are in operation, it will be necessary to
Impose further and more drastic cutbacks and prohibitions of selected least
essential end uses. The control agencies are moving in this direction. In
the initial phase of the mobilization effort, the preference for uniform percentage rather than selective cutbacks on civilian uses could be justified to
some extent, on grounds of maintaining production and employment in
general. But in the phase of mobilization which we have now entered,
this justification loses weight progressively.
An improved system of direct control of materials should entail a careful
program for conserving scarce materials by all those who process, use, or
handle them in any way. Many of the practices evolved during World
War II to stretch supplies of scarce materials are being put to use again.
Various sales-appeal features, such as chromium trim and nonessential
parts, can be removed from equipment. In the production of metal parts
and alloys, use of substitutes for the more essential materials will bring
great savings of scarce materials. The useful life of clothing, tools, and
other commodities can be lengthened by the use of protective coatings and
treatments. Holding styles of articles to a limited number would reduce
the need for maintaining large and varied inventories, and permit greater
economies of production.
The search for substitutes, already under way, should be intensified. The
military research program is seeking substitutes for the copper used in
cartridge cases, for scarce alloy metals used in jet engines, and for many
other commodities. Federal agencies are conducting research in such
fields as new and substitute agricultural materials, new techniques of minerals exploration, and new sources of minerals and substitutes. Programs
are presently being conducted to standardize descriptions and unify terminology and classification systems for supply items.
Procurement. With the prospect that, during this year, the Federal
Government will be buying an increasingly substantial share of the total na-
III
tional product for defense purposes, procurement policies become a major
factor in the mobilization of productive resources. Without effective
policies, there would inevitably be loss of output through disruption of production schedules, and inefficient and unbalanced utilization of the Nation's
resources of manpower and facilities. The policies followed in large-scale
military procurement have lasting effects on the competitive and geographical structure of our industries, and on their ability to expand and adapt
themselves to the demands which will be made on them.
The most important general principle of sound procurement policy, at
this stage in the program, is that the supply base should be broadened as far
as practicable. Contracts should not be piled on a few large and familiar
suppliers, but spread widely; and subcontracting should be actively encouraged. Broad distribution of defense business will give many firms the
basic experience needed for subsequent rapid step-ups in war goods production. There are, of course, special cases in which a large procurement
contract could not be split up without excessive loss of time or efficiency;
and as the mobilization proceeds, many plants should for technical reasons
devote themselves exclusively either to military or nonmilitary output.
But the basic objective of broadening the base of supply will remain valid.
Such a policy requires a major continuing effort to hunt out and develop
hitherto unused suppliers, particularly among the smaller firms. These
firms in the aggregate have much to contribute, but they are normally at a
disadvantage in securing business where large quantities of goods are being
procured in great urgency. The extra time and effort required for their
utilization will pay off increasingly as the pressure grows. Maximum practicable latitude in specifications will be helpful.
To promote better utilization of facilities and manpower, to ease the
burden on transportation, and to make essential supply systems less vulnerable to disruption by attack or sabotage, it is vital that procurement policy
take account of the relative availability of resources in different communities and plants. For the most part, there should be reliance upon cooperation by business, supplemented in exceptional cases by the use of Government powers to requisition facilities or to place mandatory contracts.
The pricing policies followed in procurement importantly affect efficiency.
Although excess profit taxation and contract renegotiation are both useful
in recapturing some of the windfall gains of the emergency, neither takes
the place of a careful drawing of the original contracts in such a way as
to encourage the cutting of production costs. Both in the initial letting of
contracts and in subsequent renegotiation, the principle should be that the
supplier has an opportunity to secure extra profits by finding additional
economies, but not to retain extra profits which he may receive without
constructive effort on his part.
It is clear that, in order to implement a procurement policy which meets
the needs sketched above, central formulation of standards and coordination
112
of procurement activities are essential. Procurement policy must be closely
tied to the other phases of the effort to expand production, and to avoid
disruptive price rises.
Policy for profits, prices, and wages
In a defense emergency, more widespread use of controls than in peacetime is essential. But controls obviously do not remove the need to formulate
policy. On the contrary, controls make this even more essential, because
the very purpose of controls is to achieve policy objectives with more rapidity
and certainty than they could be accomplished without controls. Although
taxation is an authoritative indirect control action on the part of Government, one seldom hears the proposition advanced that there is no need
for tax policy to guide tax action. But there is more frequent expression
of the fallacy that the imposition of extraordinary or emergency controls
upon profits, prices, and wages does not equally depend upon sound policy
for their success. In these areas, consequently, the Council feels that it
can be most helpful by outlining policy guides, rather than by treating those
detailed questions of formulae, timing, and application which must necessarily rest with specialized agencies charged with segments of the stabilization effort.
In peacetime, the function of profits, prices, and wages is to contribute
to the most efficient use of our total resources for the purposes which the
Nation deems desirable. Prices serve to allocate products among buyers and
to guide producers toward the most desirable products and the most economical methods of production. Profits provide incentives and direction
to enterprise in making business investments and help supply funds for that
purpose. Wages serve to provide purchasing power and work incentives
to a large part of the consuming public and lead to the most effective use of
labor.
In early 1950 the Council sought to outline profit, price, and wage policies for peacetime stability and growth. We found the key to stability
and growth in a continuing "balance" between investment and consumption.
This balance on the one hand would enable business to make full utilization
of the labor force and of new technology toward the end of maximum production; and on the other hand would provide wage earners and other consumers with enough purchasing power to consume the goods produced,
without excess demand leading to inflation or inadequate demand leading
to recession or depression.
The economy seemed to be in fairly good balance in early 1950, although
some further adjustments were needed. This led to the question of how
this balance might be maintained in future years, as the total output of the
economy increased three percent a year on the average. It seemed clear
that the ratio of profits to the volume of business activity was in general
rewarding, and that the further growth of the economy would keep these
profits rewarding (and even increase them in absolute terms) without the
"3
aid of further price increases. This disposed of the only argument that
could legitimately be advanced for a rise in the general price level, namely,
that business was not receiving sufficient funds to exercise its function in a
vigorous and growing economy.
The next question was whether the large share of increasing production,
which over the years must find its way into ultimate consumption and
higher living standards, should be passed on in the form of a general
declining price level or a generally rising wage level. We observed that,
while either approach was theoretically obtainable, the dynamics of the
American economy argued strongly for a fairly stable price level and a
rising level of incomes measured by increases in production and productivity. Thus, in early 1950, we looked with general favor upon the new wage
formulae which gave reflection to this economic philosophy. In all matters
of profits, prices, and wages, however, we recognize the need for individual
variations to promote efficient operations in a complex and variegated
economy.
The time has now come to reconsider this entire formulation of profitprice-wage policy, in the light of new facts which drastically change the
use to which we must put our resources. The central character of this
change has been discussed fully in other sections of this Review. We must
strive even harder to lift total production, although we must drastically
alter its composition. But since so large a part of this total production will
be absorbed in the primary defense effort, the level of consumption, during
the next few years at least, cannot rise as in normal peacetime and may
have to move downward. Cutbacks in some types of investment must be
sufficiently drastic to permit expansion essential to the defense effort to
move forward even faster.
What do these new facts mean for profit policy? They indicate that
the current general level of profits, which is much higher than the rewarding level in early 1950, can be reduced further through taxation without
impairing the initiative or types of investment which are now urgently
needed. This is demonstrated more comprehensively in other parts of this
Review, including the discussion of tax policy. A further reason for compressing profits after taxes below the unprecedented high levels which
they have now attained is that, unless this is done, it will be futile to attempt
to achieve wage stabilization. We cannot afford a soft tax policy, in order
to take care of the exceptional instances where further incentives may
be needed to stimulate some types of business investment. These isolated
instances should be taken care of by selective policies, such as tax amortization, selective price allowances, or financial aid.
These conclusions about profits have an important bearing upon price
policy under current and foreseeable circumstances. Every argument
which was advanced a year ago against increases in the general price level
applies with multiple force now. The price level is already much higher
than a year ago, and inflationary forces are mounting. Further price in-
114
creases in general can serve no economic function, and if these increases
go much further they will do irreparable damage. There is no proposition
of economics on which there is more general agreement than this. Consequently, the imposition of price controls having been initiated, this activity
should move forward with speed and decisiveness. It should seek, as
rapidly as possible, along with other controls both indirect and direct, to
achieve and maintain general price stability. Clearly, the determination of
the items on which price controls should next be imposed, or in what
order, or to what exact scope, is an operational function for the Economic
Stabilization Agency, subject to the general direction of the Office of
Defense Mobilization.
Drastic action on the price front—and it should be drastic—does not mean
the use of only one technique of price control as has been urged in some
quarters. We must be flexible in the use of pricing methods. The pricing
techniques, whether of the freeze, "dollars-and-cents", or margin control
variety, must be skillfully and closely attuned to the peculiarities of individual industries, labor markets, and distributive levels. It is necessary
to deal with wide differences among profit and cost conditions. It is
necessary to encompass a vast variety of commodities, some standardized
and others highly differentiated.
Any nation-wide program must sacrifice some desirable refinements in
the interest of speed, uniformity, administrative feasibility, and public acceptance. In fact, more stress should be placed upon these latter considerations than upon the minutiae of differential treatment, because it is more
important to put brakes upon inflation than to get a perfect system of
controls. Nonetheless, discretion and discriminating judgment must be
exercised, lest the objective of effective price control cut across other equally
important objectives. The most important of these other objectives is
to maintain maximum production, and this requires, among other things,
some flexibility in dealing with specific prices.
The prices of speculative farm products, such as cotton, wheat, and
soybeans are affected substantially by trading in futures contracts on the
commodity exchanges. In an inflationary period, excessive speculation
in farm commodities would make price stabilization difficult, if not impossible. One of the most effective ways of limiting speculative trading,
without hindering legitimate hedging operations, is by regulating the minimum margins required fpr speculative deals. No Government agency now
has authority to require adequate margins for this purpose. Such authority
should be granted by the Congress without delay.
The experience of World War II revealed clearly that price controls,
particularly in the case of low-priced lines and commodities subject to
frequent changes in style and model, must be reinforced by and meshed
with production and distribution controls. Since we will be diverting nearly
one-fifth of our production to the defense effort, it becomes all the more
necessary to ensure that resources available for civilian output are devoted
"5
to the most urgent civilian needs at least cost. With the imposition of controls to prevent an inflationary price spiral, we must recognize that a price
structure geared to peacetime patterns of demand cannot be expected to
bring about the pattern of output necessary to an advanced defense economy.
While price and wage controls must be operated in such a manner as
to provide adequate incentives to maintain maximum output, they cannot,
except in rare cases, be used to determine the composition of output. Such
a task is not administratively feasible. It is more simply and properly the
task of the appropriate production controls.
In view of the particularly inflationary price performance of many of
the scarce raw materials in international trade, and because of the inability
of the United States to cope with this problem unilaterally by means of
simple domestic price controls, every effort should be made to hasten the
development of international agreements to allocate such materials and
restrain their price movements. Meanwhile, the United States purchases
of some commodities should be centralized in the hands of the Government,
which, in turn, would resell them to domestic users. This has already
been done in the case of rubber, and the immediate impact of this action
has been a drop in its price.
The stabilization of wages, since it affects the very livelihood of millions
of families, depends for its success upon three pivotal points. First, holding
the line on wages depends basically upon holding the line on the cost of
living. When a ceiling is placed upon prices in a particular industry, it
follows that wages in that industry must take account of this price ceiling
from the viewpoint of business costs and adequate profit margins. But
the establishment of price ceilings in a particular industry is not a sufficient
foundation for holding the line on wages in that industry, if the prices of
things which workers must buy continue to rise. Efforts to achieve wage
stabilization cannot await a complete or perfect stabilization of the cost of
living, because no practical aspect of economic stabilization can be delayed
until some other aspect of the problem is completely solved. Nonetheless,
success in holding the line on wages cannot be expected without practical
success in holding the line on the cost of living. This requires vigorous
action on the price front, on the tax front, and on all fronts designed to
achieve price stability both by indirect and direct controls. It requires much
tighter rent control, reinforced by adequate legislation for that purpose,
because rent is so large an item in the cost of living of middle income and
low income families.
The second requisite for successful wage stabilization is a rounded program of economic stabilization which recognizes that excessive purchasing
power must be restrained in all major sectors in the economy, and that the
imposition of sacrifices must be equitable. The Council feels that its recommendations with respect to corporate and other taxes, with respect to price
controls, and with respect to other types of restraints, provide a fair guide to
the achievement of this balanced stabilization program through legislative
116
and administrative action. Wage earners are an important segment of the
income-earning population; but there are other important segments—office
workers, professional people, farmers, and business groups. Each will be
willing to do more in support of the defense program, if all are doing their
share. Much toward this end has already been accomplished.
A third consideration in effective wage stabilization is that there be consultation between Government and representatives of workers both in the
formulation of policy and with regard to its execution. The Council has
frequently expressed the high value which it places upon such conferences.
With these three pivotal points as a foundation, the economic objective
of wage stabilization should be to prevent the total of all wages available
for spending from rising greatly, during a period when the availability of
goods for consumption cannot rise and, on a per capita basis, is likely to fall.
There are factors which will make it extremely difficult to achieve the
objective of holding total wages available for spending in line with the
availability of consumer goods. The obstacles are fairly obvious. In the
first place, the great numbers of new workers called for by the defense
effort, and the longer hours, will result in more total wage earnings even
without any increase in wage rates. In the second place, there will be a few
instances where some wages must be raised to facilitate the recruitment of
workers for defense production, by modifying some of the wage differentials
which now exist. In the third place, there is the problem of ensuring that
some incentives exist, particularly to effectuate shifts toward defense production. It may not be possible to achieve completely the objective of
holding wages available for spending in line with the availability of consumer goods, but every effort should be made to get as close to it as
feasible. Doubtful questions should be resolved in favor of stabilization.
In seeking to achieve this objective of wage stabilization as rapidly as
possible, two of the most difficult problems involve "cost of living" adjustments and "productivity" or other adjustments designed to provide incentive for increased effort. The principal adjustments to cover increases
in the cost of living can not be entirely set aside, for to do so would make
a particular sector of the population liable for any inability of the Government to hold the line on the most important front of all. The gaps
have not yet been closed in the defense line against increases in the cost
of living; and if these increases continued at a fast pace, the buying power
of workers would decline relative to the available supply of the consumer
goods, instead of tending to maintain a constant relationship to it. On
the other hand, only a small percentage of middle income and low income
families in United States are now protected by "cost of living" adjustments;
and to afford full protection to one group alone would be at the expense
of others and would not represent equality of sacrifice. There is no hard
and fast rule which can be applied to this problem. Insofar as the Government is successful in holding the line on the cost of living, the problem
reduces itself to nominal proportions. So long as this effort is not successful.
117
it is practical to expect that adjustments will have to be made in many cases,
but that the relation and speed of these adjustments should be restrained to
avoid the spiral which results when prices and wages and costs start chasing
each other.
The problem of wage increases to reflect increased effort, whether by
"productivity" allowances or other methods arrived at by collective bargaining, is different from the "cost of living" adjustment problems. In
ordinary times, as the foregoing discussion has indicated, such adjustments
are a desirable way of passing along part of the benefits of increasing output.
But during the defense emergency, over the next year or two at least, the
defense program will be absorbing the increased output and it will not be
available for civilian use. Under these circumstances, one approach to
help to keep total wages available for spending as nearly as possible in line
with the available supply of consumer goods, would be to restrain increases
in wage rates. A second approach to this same objective would be to permit some increases in these wage rates, in return for increased productive
results, but to prevent these increases from finding their way into the spending stream, by means of higher taxes, or larger social security deductions.
Each of these two approaches has points of desirability. The first makes
for more uniformity, the second for more flexibility. From the viewpoint
of a smooth wage controls operation, and the promotion of harmonious
industrial relations, one approach will work better in some instances and
the other approach will work better in other instances. The second approach, to a degree, furnishes an incentive factor which might prove
valuable for the long-sustained effort which we must now make to increase
production and to work harder and longer. This incentive factor, as
applied to the individual, may prove very important. In view of all
these considerations, perhaps some combination of the two approaches
discussed in. this paragraph may prove necessary. In addition, labor can
help in the stabilization effort by encouraging the purchase of bonds, as
one of the means by which excess purchasing power can be kept away from
the markets for goods.
In the case of wages even more than prices, some flexibility must be
maintained. Some wage adjustments may become necessary to correct clear
inequities among rates for comparable work; to allow for legitimate job
reclassifications within given firms; to correct "substandards" of living;
and, in certain instances, to assist in the recruitment of scarce labor skills
urgently needed by defense industries. But these adjustments should be
carefully screened and held to a minimum. Otherwise, they will cumulate
the pressures which at best will make it very hard to hold average wage receipts in line with the availability of goods or to prevent the total volume
of wages (including those paid to new workers and for longer hours) from
rising dangerously above the availability of goods.
From the time the OPA issued its first formal price schedule until the
institution of general price controls in April 1942, fourteen months elapsed
118
and the agency had developed an organization of 20,000 employees. Authority to stabilize wages was not granted for still another six months. This
time, whatever the ultimate goal, the pace of action should be much more
rapid. The Economic Stabilization Agency has power to put ceilings on
wages as well as prices. It is already moving to hold basic industrial prices,
to control selectively the prices and wages of some products; and to develop
general price and wage standards to serve as a framework for price and wage
policy and to identify the areas where controls become urgent because these
standards are violated. The Agency should strive to accelerate action, in
view of the inflationary potential now so clearly apparent, and in view of the
fact that control action anticipated but not made effective in itself stimulates
speculative inflation.
INTERNATIONAL ECONOMIC POLICY
In framing the economic programs to build up our national strength,
we must bear in mind that this strength is bound up with that of other
free nations, immediately as well as in the long run. The requirements of
defense call for the adoption of some new economic programs in the international field, for changes of emphasis in some of our present ones, and
for close coordination of our international and our domestic economic programs. Certain broad principles imposed by these requirements can be
stated at the present time.
Economic aid to foreign countries
With our economic resources strained by the burden of defense, every
use of these resources implies the sacrifice of some alternative use. Under
these conditions, our foreign as well as our domestic programs must be
designed so that they are effective and efficient in furthering the purposes
which now have highest priority. In determining what we can afford by
way of aid to other countries, we must take into account that such aid limits
the expansion of goods available for domestic use. Against this consideration, we must balance the contribution that aid to friendly countries will make
in sustaining or increasing our joint strength, taking into account the combined military, political, and economic aspects of our security interests.
The fact that our economy is operating under forced draft means not only
that foreign aid programs must be screened to serve high priority purposes;
they must all be under continuous survey to see that such purposes are carried
out, and that the programs are adjusted to changing conditions.
Aid to Western Europe should be related to the high priority requirement
for a rapid rebuilding of common defensive strength. This calls for
the fullest possible use of resources outside as well as inside the United
States. In Western Europe is to be found the largest industrial potential
in the world outside the United States, and a skilled labor force exceeding
in number either our own or that of the Soviet Union. It would be a
formidable asset in the hands of a potential enemy. Western Europe
119
can and should provide the major, part of the resources for its own rearmament. In some countries, notably Germany and Italy, the labor
force and plant capacity are not being fully utilized; production can be
expanded by placement of orders, if adequate raw materials and certain
needed ancillary facilities are made available. Hours of work and participation in the labor force will have to be increased in Western Europe, as
they will in the United States. But resources needed for defense production
will also have to be provided in Western European countries, as in the
United States, by restricting both consumption and normal improvement of
the capital stock.
Even this will not provide enough labor, material, and plant capacity.
In order to obtain the most rapid possible build-up of defensive strength, we,
with a much larger industrial potential in relation to population, shall have
to provide large amounts of military equipment and supplies to our North
Atlantic Treaty partners.
Achievement of the necessary defensive strength in Western Europe will
also require provision of economic aid. Although most of these countries
had been making substantial progress toward self-support, indicating that
their resources were becoming more nearly adequate to the demands being
made upon them at that time, these demands are now being much increased.
Their own rearmament will greatly intensify the pressure on their economic
resources. The rise in the prices of their raw material imports, more rapid
than that of their export prices, has already increased the volume of exports
required to pay for a given quantity of imports. This has put some additional pressure on their resources. The full impact of this rise has probably
not yet been felt. More important, the increase in their armed forces and in
their own armament production will reduce the resources available to produce goods for export, and for their own consumption and investment.
Economic aid for recovery purposes, the need for which has been declining
rapidly, must give way to aid needed to support a strengthening of the
common defenses.
The degree to which our aid takes a military or nonmilitary form does not
indicate its essentiality to the defense effort. If one country can produce
military goods most efficiently, the most economic use of common resources
may make it desirable for that country to produce more of these goods
than its own military establishment requires. If this forces it to cut its
production of civilian goods below its requirements, a larger proportion
of the aid it requires may take a nonmilitary form. Similarly, one country
may make its greatest contribution in the form of manpower for the common armed forces, and, as a result, have to cut its civilian production. Provided that a country is making its maximum contribution to production and
to curtailing nonessential use of civilian goods, such aid as it may require in
making this contribution is essential to the common defense effort, whether
it takes a military or economic form.
120
In reappraising foreign aid programs and shifting their emphasis, we must
continue to recognize that Soviet-dominated aggression is neither solely
military nor of short-run character. Some parts of the world are threatened
by Communist penetration but are not subject to direct military threat.
In many areas where there is a direct military threat, this threat exists or
is particularly dangerous because political social, and economic conditions
provide a fertile soil for penetration of Soviet-Communist ideology. In
some of these cases, well-designed assistance in expanding production, even
of goods unrelated to military strength, can contribute to the essential
aspects of common security.
The productivity of some of the underdeveloped countries is also an
important element in the defense of the free world. Not only do these areas
produce the raw materials upon which essential production in the United
States and other industrial countries depends; in addition, they must be
able to provide for the essential needs of their peoples if they are to be kept
free from Communist domination. While there is a great production potential in these countries, the difficulties are primarily inefficient techniques of
production, inadequate capital to develop the resources, and in many cases
institutional obstacles. The large contribution which many of these countries can nevertheless make to the common strength must be fully taken
into account. Increased demand for their products has already substantially improved their financial position and their ability to contribute.
Present plans to help them increase their productive capacity are based
on a recognition that such increases contribute to our national security,
both directly and indirectly, by improving the economic strength of these
countries and reducing their vulnerability to subversion.
But the common danger and the greatly increased strain on our own
resources call for reappraising and, if necessary, altering the character and
time focus of such programs. Greater emphasis must be put on production
of raw materials which will be scarce in relation to important demands.
Increased production of food in these countries would reduce the drain
on the United States. It will also be necessary to shift emphasis to programs
which produce results quickly.
Expansion of productive capacity calls for private capital investment, and
public investment by the Export-Import Bank and the International Bank
for Reconstruction and Development. Grants for technical assistance and,
in some critical areas, capital development will be necessary. Despite present international tensions, measures to facilitate private investment can still
be effective in certain areas and are particularly needed to expand raw
material production. It is desirable to enact legislation authorizing guarantees to private capital against certain risks peculiar to foreign investment,
and to continue efforts to negotiate investment treaties.
A carefully selective expansion of public investment is also required to
support the security effort. The burden of lending to develop production,
especially where security interests primarily of the United States are in-
121
volved, requires the Export-Import Bank to play an active role. The
Bank's uncommitted lending authority is now only about 500 million
dollars. This seriously restricts it. Its lending authority should be raised
by 1 billion dollars, from the present 3.5 billion dollars to 4.5 billion.
Control of commodities in world trade
Even vigorous efforts to expand foreign and domestic production of the
major raw materials cannot achieve results in time to prevent some important cases of severe shortages,, sharp price rises, and maldistribution of
supplies. For some commodities, these effects have already occurred. In a
few cases, greatly increased United States demand or, as in cotton, reduced
supply, has in fact threatened to cut essential production abroad. International collaboration is needed to improve the distribution of important
products in acutely short supply, so that nonessential uses in some countries
do not deprive essential uses in others. The major concrete problems are
to identify the commodities requiring such collaboration, to work out the
policies which should govern their distribution, and to work out and put
into effect the mechanisms best suited for the purpose, both internationally
and within the countries affected.
It will become increasingly necessary to control the export of materials
in short supply in the United States which are necessary to our defense program, and to direct exports of some commodities to countries where they
are most urgently needed. For these reasons, as well as for obvious security
reasons, the power to control exports, which is scheduled to expire on June
30, 1951, should be extended.
In view of emergency shortages of raw materials, and to implement international arrangements for their distribution, the power to control imports,
which also expires on June 30, 1951, needs to be extended.
It will also become increasingly urgent to secure close coordination between the day-to-day operation of domestic and of international commodity
control programs. Where there is excess demand for commodities which
we import or export, we must limit domestic use, not only to avoid taking
more than our agreed-upon share of world imports, but also to assure that
goods are available for necessary exports. Fiscal and credit policies can
help by restraining demand for the final products which use the particular
raw materials. For example, controls which cut the demand for automobiles also indirectly cut the demand for rubber. But such measures probably
cannot suffice; international allocation of a commodity implies domestic
priority or allocation as well. The administration of these domestic controls must take into account the needs of other countries, not only for goods
used in defense production, but also for essential civilian goods and services.
Fiscal, credit, and allocation measures will exert some restraining influence upon prices of the major commodities in world trade. But this influence is likely to be limited. Violent price rises in these commodities create
balance of payments difficulties in the importing countries and, through
122
their effects upon costs, reinforce existing inflationary pressures. For the
exporting countries, they raise real incomes but may also introduce a considerable element of inflation and lay the basis for future dislocations. The
advisability of attempting to control them by international action depends
on the extent to which the higher prices elicit increased production, which
depends largely on the technical conditions of production for the particular
commodity and on how long the price increase is expected to last. In
general, it seems desirable to place primary emphasis on vigorous measures to reduce or eliminate nonessential uses.
Commercial and financial policies
With the virtual certainty of widespread labor and material shortages
for an indefinite period, we must use all methods of increasing our available
supplies which do not prevent friendly countries from satisfying their own
needs. Commercial and financial practices which divert demand from
foreign to United States production put pressure on our resources; their
relaxation can help to counter inflationary pressures.
First, various statutes require, with certain exceptions, that the Federal
Government, and State and local government authorities receiving Federal
funds, buy only goods manufactured or mined in the United States or produced from domestic materials. The defense effort generally, and especially the stockpile program, will require increasing Government purchases
of imported materials. Such purchases will, in addition, relieve shortages
and inflationary pressures in this country. The Congress has just given the
President emergency and temporary power to authorize Federal procurement in connection with national defense without regard to these and other
restrictive provisions of existing law, when such procurement is in the interest
of national defense. Under these new powers, the fullest possible use should
be made of foreign as well as domestic sources of commodities needed for
defense purposes, including stockpiling.
Second, the diminishing availability of goods in this country makes
more desirable a reduction of tariff barriers. Despite duty reductions
under reciprocal trade agreements, many United States imports are still
subject to high duties. For reasons which have often been explained, our
long- as well as short-run policies require that we extend the Trade Agreements Act, which expires on June 12, 1951, and that customs procedures,
which now also impede the entry of foreign supplies, be simplified by enacting the proposed Customs Simplification Act. But further action is desirable
in the present inflationary situation. It would be desirable to enact temporary legislation, authorizing the President to make unilateral reductions
or suspensions of tariff duties and import restrictions on commodities in
short supply, as long as emergency conditions exist. This is desirable, not
only in connection with materials for further processing, such as copper, but
may also be desirable in connection with finished commodities.
922781—51
9
I2
3
Third, we place an additional strain upon our resources, and add to
domestic inflationary pressures, when we require that Government loans
or grants to foreign countries be spent on goods produced in the United
States. Such aid is generally intended to supplement the recipient country's
total economic resources, not to promote United States exports. If the
recipient can obtain the particular commodities it needs more cheaply
from another source, it should in general be left free to do so. Until
recently, it was probable that the "tying" of loans or grants affected primarily the composition rather than the total amount of United States
exports; if the recipient of dollar assistance did not spend the proceeds
in the United States, the country in which it did spend the dollars would
probably do so. Even under these conditions, there would be good reasons
why it should be our general policy not to tie our aid to our exports. Now,
however, it is probable that a smaller portion of aid spent in foreign countries
would be re-spent here. A general policy of not tying dollar aid to United
States goods would, therefore, help ease the inflationary strain of exports
on our economy. At the same time, it would give other countries a greater
chance to earn dollars by exporting to the recipients of our aid. Since
some of these countries may themselves be receiving aid from us, this policy
may reduce their need for such aid. These principles were recognized in
the Mutual Defense Assistance Act, which provided that United States
military assistance for foreign countries may be used to obtain equipment,
materials, and services from any source.
In general, all measures to reduce artificial barriers to imports and artificial stimuli to exports tend to ease inflationary pressures in this country.
Present circumstances offer the opportunity for taking these measures with
little, if any, disturbance to related domestic industries, and with maximum
benefit to the American public as a whole.
124
Part V. Details of Economic Trends in 1950
EMPLOYMENT AND PRODUCTION
Employment
URING the past year, there have been significant labor market
changes. The civilian labor force averaged 63.1 million in 1950, compared with 62.1 in 1949. For the year as a whole, almost 60.0 million persons were employed in civilian occupations, or about 1.3 million
more than in 1949 and 0.6 million above the average of 59.4 in 1948. Nonfarm employment increased by 1.8 million. Farm employment decreased
by about 500,000; part of this decline may be attributable to the availability
of better paying jobs in industry, which tended to attract workers away from
the farm. Unemployment averaged 250,000 less than in 1949. (See
chart 19.)
From 56.9 million in January 1950, with seasonal activity at a low point,
civilian employment increased rapidly to an all-time high of 62.4 million
in the summer. It then declined seasonally to 61.1 million in the fourth
quarter, or about 2.1 million above the average in the fourth quarter of
1949. During the first half of 1950, this steady increase in the number of
people at work reflected the growing momentum of economic recovery.
Employment was given an additional push in the third quarter, when the
outbreak in Korea led to anticipatory buying of consumer durables, when
expenditures for expansion of plant and equipment increased, and when
manufacturers began to build up their work forces.
Average .manufacturing employment in 1950 exceeded that in 1949
by about 700,000, with the largest gains in establishments manufacturing durable goods. In November 1950, 15.7 million persons were
enga/ged in manufacturing, compared with 13.8 million in November
1949. Between June and November, 683,000 employees were added to
the payrolls of durable goods establishments. The most important rises
came in electrical and nonelectrical machinery, primary and fabricated
metals, instruments, and aircraft. As a result, employment in durable
goods manufacturing reached 8.6 million, climbing above the high level
of 8.4 million in November 1948. There was also a significant increase
in employment in nondurable industries, with the November 1950 figure
at 7.1 million, compared with 6.8 a year earlier. Employment in nondurable manufacturing increased by 358,000 between June and November. Employment in the production of textiles, apparel, and foods
D
125
CHART
19
CIVILIAN LABOR FORCE
Civilian employment averaged 60.0 million persons in I960, 1.3
million higher than in 1949. The increase was entirely in the
nonagricultural segment of the economy, agricultural employment
dropping about a half million.
MILLIONS OF PERSONS'*
MILLIONS OF PERSONS'*
70
70
TOTAL
CIVILIAN
LABOR
FORCE
30
20
:- 20
10
:- 10
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
1948
1949
I960
During 1950, unemployment averaged about 250,000 less than
in 1949. There was a striking improvement during the year. The
December level of 2.2 million, pr 3.6 percent of the civilian
labor force, was more than a million below December a year ago,
when 5.6 percent of the labor force was unemployed.
10
10
UNEMPL VI'M ElYT
AS PEIRCENT OF CIV IL IA
^
LABOR
F()R CE
T?
m
r*
5 -
T
p*r
F*
«• ffr.
>
TrH
,
J F M A M J J A S O N O J F M A M J J A S O N O J F M A M J J A S O N O
1948
1949
*I4 YEARS OF AGE AND OVER.
SOURCE: DEPARTMENT OF COMMERCE.
126
I960
expanded seasonally; chemicals, paper, and rubber products made significant
gains. Compared with November 1949, important gains in employment
also appeared in contract construction, where there was a rise of about
290,000; in trade, where there was a gain of about 270,000; and in the
Federal Government, where a pronounced upturn in employment toward
the end of the year reflected the impact of the defense program.
The general tightening which took place in the labor market is shown
by the change in labor market classifications between late 1949 and 1950.
In November 1949, out of 139 major labor market areas surveyed, only
five were classified as having a tight or balanced labor supply (under 3 percent unemployed). By November 1950, out of 152 areas, 56 had been
given this classification. In addition to this general tightening in the
labor market areas, serious shortages of certain skills had developed by
the end of the year in some parts of the country. In addition, nationwide
shortages have emerged of certain professional workers who are of prime
importance to the defense effort. This is particularly noticeable in the
science and engineering professions.
Unemployment
The general economic recovery during the first half of 1950, and inflationary pressures in the second half, were mirrored in a marked improvement in the unemployment situation. Beginning with March, the number
of unemployed persons decreased almost steadily and more than seasonally,
until in October unemployment was down to 1.9 million. The December
figure of 2.2 million unemployed is more than a million below a year ago.
The average number of persons unemployed for the year 1950 as a whole
was only about 250,000 less than for 1949. (See chart 19.)
At the end of the year 1950, 3.6 percent of the civilian labor force was
unemployed. Such a small percentage of unemployment indicates that we
are nearing what is ordinarily considered to be the minimum for a peacetime economy. It is not irreducible, however, and the employment of more
persons now unemployed can help to meet pressing needs for a larger
number of workers and greater production. Production may also be increased by a fuller utilization of the 1.1 million persons who at the end of
the year were working part-time, but who were able and willing to accept
full-time jobs. (See appendix tables A-ll and A-12 for further statistics
of employment and unemployment.)
Production
Last January3 the Council stated that to achieve maximum employment
it would be necessary to increase total production of goods and services
by about 7 percent over 1949. As a result of the strong demand following
the Korean outbreak, the economy actually produced 7 percent more goods
and services in the year 1950 than during 1949, and by the fourth quarter
had reached an annual rate 10 percent higher than for the year 1949.
127
These measurements of production of goods and services are based on gross
national product adjusted for price changes. (See appendix tables A-l,
A-9,andA-10.)
Production of goods. Total physical production of goods during 1950
was 11 percent above 1949, and reached a record high for any peacetime
year, according to the physical production index which includes agricultural
and nonagricultural production. Comparison with war years is difficult,
but apparently the 1950 output was close to the record reached in World
War II. (See appendix table A-16.)
Total agricultural output in 1950 was 2 percent below 1949, and 3 percent below 1948. Although the production of farm crops in 1950 was
the fourth largest on record, it was 4J/2 percent below 1949, due mainly to
a large drop in the output of cotton. The drop in crop production was
partly offset by an increase of 2 percent in the output of livestock products.
Per capita food consumption in 1951 is likely to be about 3 percent higher
than last year.
Industrial production recovered early in 1950 from the 1949 drop and
continued to increase throughout most of the year. For the year as a whole,
the industrial production index was about 200 percent of the 1935-39
average. This represented an increase of 14 percent above 1949, and more
than 4 percent above 1948. (See chart 20 and appendix table A-17.)
Gains in output occurred during 1950 in most industries. The output
of durables at the end of the year was 31 percent above that of a year
earlier. Steel production was about 96.5 million tons, almost 25 percent
more than in 1949, and an all-time record. The automobile industry
produced at a record rate during most of the year, turning out 8 million
cars and trucks for the year as a whole. Production was hampered by
work stoppages early in the year, but reached a peak in June.
Production of such consumer durable goods as household appliances,
radios, and television sets leveled off toward the end of the year, after increasing sharply in earlier months.
As the defense program got under way in the second half, industries
related to the defense program, such as machinery, aircraft, shipbuilding,
and railroad equipment, increased their output.
Total production of nondurable goods for the year was about 11 percent above the 1949 level. The output of nondurable goods increased
throughout the first three quarters of the year, reached a peak in the
early part of the fourth quarter, and declined very slightly during the
rest of the year.
Mineral production was hampered in the early part of 1950 by the
work stoppage in the coal mining industry, but then moved up to a level
above the highest prevailing rate during 1949. Bituminous coal stocks
held by industrial consumers and retail dealers at the end of 1950 were
estimated to be only 700,000 tons below the postwar peak reached a
year and a half ago.
128
CHART 20
INDUSTRIAL PRODUCTION
Total industrial production rose throughout I960, and averaged
14 percent above 1949. Gains occurred in most industries, but were
especially marked in industries manufacturing durable goods.
PERCENT OF 1935-39 AVERAGE
300
PERCENT OF 1935-39 AVERAGE
300
250 -
- 250
200 -
- 200
**\ /*- NONDURABLE
MANUFACTURES
150 -
100 I ' I I i ' I I I i I I
1948
-
i i i i i I i i i I I
1949
150
100
I960
SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
Higher output was also registered by several important industries which
are not included in the industrial production index. Electric power output showed a steady expansion in the last half of the year, averaging about
13 percent above 1949 for the year as a whole.
In physical terms, construction reached an all-time peak during the
third quarter of the year; for the year as a whole it was 17 percent over
1949.
Production of services. Detailed figures are not available to show
changes in the output of most services. There was an increase of 4 percent
in real (constant prices) personal expenditures for services from 1949 to
1950, suggesting a roughly similar change in the total output of services.
(See appendix table A-10.)
PRICES, WAGES, AND PROFITS
Prices
Commodity prices as a whole moved upward throughout 1950, but the
pace of the advance, particularly in wholesale markets, picked up sharply
after the outbreak of the Korean hostilities at midyear. The prices of
129
most commodities followed a rough pattern of moderate strength in the
first half of 1950, followed by rapid increases in the second half, which
brought most indexes to all-time highs.
The general upsurge of prices in the second half of the year was not
regular. It developed in a series of partially overlapping waves, the
first of which reached a crest and flattened out with the temporarily good
news from Korea in September. Following the intervention of the
Chinese in late November, price increases accelerated again.
The speed and force with which industrial prices responded to the new
international dangers were exceptional when compared with most previous
inflations. There was a good deal of price-raising by industries in anticipation of the announced expansion of the defense program and of price control.
Wholesale prices. In December 1950 wholesale prices were 10.9 percent
above their level last June, and 15.4 percent higher than in December 1949.
The all-commodity index exceeded the previous postwar 1948 peak for the
first time in November 1950. Of the three major categories, farm products
scored the greatest over-all gain during the year, but foods and industrial
products did not lag very far behind, and all three groups recorded price
increases of over 10 percent during the second half of the year. The timing
of their movements differed. (See chart 3 on page 41, and table 2.)
The 4 percent rise in wholesale prices during the first six months of the
year was mainly the result of increases in farm and food prices. Industrial
prices rose 2.3 percent during the period in a slow but steady gain which
reflected the major recovery of the domestic economy.
Immediately after the Korean outbreak, the monthly rate of increase
in wholesale industrial prices, which had averaged less than one-half
percent during the first half-year, increased almost five-fold. The rate
of increase averaged more than 2 percent per month during the third
quarter, and much less during October and November. Following the
China attack, the rate of increase immediately accelerated.
The swiftness of the response of manufacturers' and other industrial pricing to the Korean situation exceeded what might have been expected from
past experience. It was not confined to a few industries. By mid-October,
at the end of the "first wave," the prices of over 75 percent of the industrial
commodities in the BLS weekly wholesale price index had increased; 44
percent had risen 10 percent or more, and 26 percent were up 20 percent or
more over their pre-Korean levels. These increases, in a .great many cases,
were not forced by cost increases already incurred. In part, they were a
reflection of the enormous wave of consumer buying and of business orders
in the third quarter. And in considerable measure, no doubt, they represented efforts to jockey into a favorable position in the event a price freeze
were ordered.
The rise in industrial prices during the second half of 1950, while notable
for its generality, was by no means uniform among industrial groups.
Textiles, recording the largest increase, rose 24 percent; chemicals and
130
CHART 21
WHOLESALE PRICES
OF INDUSTRIAL PRODUCTS
Industrial prices, which were comparatively stable in the 1st half of
I960, rose with exceptional vigor in response to the Korean outbreak.
All major groups advanced substantially, and most groups reached
new postwar highs.
PERCENT OF 1926 AVERAGE
225 I
PERCENT OF 1926 AVERAGE
1 225
200 -
- 200
175 —
175
PRODUCTS**
TEXTILE PRODUCTS
150
- 150
125 -
- 425
100 LJL
100
J F M A M J J A S O N Q J F M A M J J A S O N D J F M A M J J A S O N D
1948
1949
1950
225
225
200
- 200
- 175
175 —
- 150
- 125
100
100
J F M A M J J A S O N D J F M A M J J A S O N O J F M A M J J A S O N D
1948
1949
* ALL COMMODITIES OTHER THAN FARM PRODUCTS AND fOODS.
SOURCE: DEPARTMENT OF LABOR.
1950
allied products 21.5 percent; and metal and metal products 7.1 percent.
Prices of building materials reached a peak in September, receded in October and November because of a sharp drop in some lumber prices, and
then moved to an all-time high in December. (See chart 21.)
The inflation was marked, moreover, by the violent gyrations in the
generally upward course of prices of imported raw materials directly demanded for defense production. Tin, natural rubber, and wool were the
notable instances. Such prices were particularly sensitive to the military
news from Korea. In the case of rubber, the institution of centralized
purchasing late in December resulted in a substantial drop in prices.
For a few weeks immediately after the Korean outbreak, there was a
precipitous upshoot in wholesale farm and food prices. Thereafter, farm
prices moved unevenly before beginning to rise again in late October, and
wholesale foods roughly paralleled their course. Livestock and meats were
the principal moderating factors in the agricultural sector, reaching their
post-Korean highs in the last week of August and thereafter entering a
seasonal decline as hog prices dropped sharply. By late November, prices
of these products began to rise again. Other farm prices were much more
buoyant during the last four months of the year, with cotton, as a result
of a short supply and the sudden expansion in domestic and export demand,
reaching all-time highs. Currently, beef cattle, veal calves, lambs, rice,
wool, cotton, and cottonseed are the major farm commodities selling at
prices above the minimum permissible ceilings provided for in the Defense
Production Act. (Further details on wholesale prices may be found in
appendix table A-24. Prices received and paid by farmers are shown
in appendix table A-25.)
TABLE 2.—Changes in wholesale prices
Percentage change
Commodity group
December
1949 to
June 1950
All commodities
Farm products
.
_
Foods
Other than farm products and foods
- __
Hides and leather products
Textile products
Fuel and lighting materials.
_ __
Metals and metal products
Building materials
...
Chemicals and allied products .. __ _
Housefurnishing goods
M iscellaneous
Special groups:
R a w materials Semimanufactured articles
Manufactured products
_ _ _ _ _
__
1
November 1950 used.
Source: Department of Labor. (See appendix table A-24.)
132
June 1950 December Pre-Korean
to Decem- 1949 to De- peak to Deber 1950 cember 1950 cember 1950
+4.0
+10.9
+15.4
+2.8
+7.1
+4.1
+2.3
+12.9
+10.4
+11.5
+20.9
+14.9
+14.1
-6.0
-5.8
+8.0
+1.5
-1.2
+1.8
+2.4
+6.1
-.7
+1.9
+3.6
+18.2
+24.0
+2.2
+7.1
+8.9
+21.5
+14.3
+22.5
+20.0
+22.6
+4.0
+9.7
+15. 5
+20.7
+16.4
+26.9
+6.1
+12.5
-1.5
+4.8
+7.8
+.2
+13.1
+13.7
+5.1
+2.6
+3.7
i +10. 0
i +16. 6
1+7.4
.
i +15. 6
i +19. 6
1+11.4
!
1
+.l
+7.3
'+.2
Consumers' prices. The consumers' price index by November 1950 was
4.8 percent over December 1949, and 3.2 percent above the June 1950 level.
It reached a record high in October, and continued to climb in the last two
months of the year. Preliminary indications are that the index rose sharply
in December. (See appendix table A-23.)
A sharp rise in retail food prices after April accounted for much of the
over-all increase in consumers' prices in the first half-year, and continued
to lead the index upward in July. Thereafter, however, because of a seasonal decline in fresh vegetable prices and, more importantly, because of
some weakening of meat prices, the food component of the index leveled
off for several months. The other components, particularly apparel and
housefurnishings, supplied the principal upward force. Fuel and utility
costs also rose substantially, and rents continued to edge higher. (See
chart 22 and table 3.)
However, in the second half of November, food prices began to move up
again sharply and by December 15 were 3.2 percent above the November
level and 5.7 percent above the pre-Korean level. Particularly spectacular
was the rise in egg prices which advanced 66 percent over the June level,
accounting for more than half of the rise in retail food prices. Fats and
oils, beverages, and dairy products also scored substantial gains. While
complete data for December are not yet available, it should be noted that
the estimated increase in retail food prices of 3.2 percent between November
and December will alone raise the consumers' price index for December
by about 1.4 percent above November. Since other retail prices have
undoubtedly also advanced, the total increase in consumers' prices in
December will be substantially above 1.4 percent. This indicates a rise of
over 6 percent in consumers' prices during 1950, and of over 4J^ percent
during the second half of 1950.
TABLE 3.—Changes in consumers' prices
Percentage change
r
Pre-Korean
December June 1950 December
peak to
1949 to
1949 to * to Novem- November
November
ber 1950
June 1950
1950
1950
Item
All items ..
. . . .
Food
Apparel
Rent .-.
Fuel, electricity, and refrigeration ,
Housefurnishings
Miscellaneous _
__
.
. .. .-._,_
+1.6
i +3.2
i +4.8
+3.7
—.4
+1.4
-.6
—.1
—.1
2+5.7
+5.4
+1.2
+3.5
+9.2
+3.3
a +9. 6
+5 0
+2.6
+2.9
+9.1
+3.2
1
+0.6
» -.2
-3.3
+1.2
+1.6
+1.8
+3.2
1
2
Incomplete data for December indicate a substantial further rise in that month.
December 1950 used.
Source : Department of Labor. (See appendix table A-23.)
Wages
Wages and salaries, which had remained relatively steady throughout
1949, rose continuously in 1950, as wage rate increases, longer weekly hours.
133
CHART 22
CONSUMERS' PRICES
Consumers' prices reached new high levels in I960. A sharp increase in food prices began in the 2nd quarter of the year, but
the rise was not steady. Most other components were stable in
the 1st half of the year but advanced steadily and rapidly in
the 2nd half.
PERCENT OF 1935-39 AVERAGE
PERCENT OF 1935-39 AVERAGE
220
220
200
200
180
180
160
ALL ITEMS^
160
140
140
120
120
100 I I I I I I I I I I I I
I I I I I I I I I I I
1948
I I I I I I I I I I I I (00
1949
I960
PERCENTAGE CHANGES
DECREASE
INCREASE
DECEMBER (949 TO JUNE 1950
ALL ITEMS-17
JUNE 1950 TO NOVEMBER 1950
FOOD
APPAREL
RENT
• A L S O INCLUDES HOUSEFURNISHINGS, FUEL, ELECTRICITY, REFRIGERATION, AND MISCELLANEOUS GOODS AND
SERVICES NOT SHOWN ON THIS CHART.
£/PERCENTAGE CHANGE
TO DECEMBER 1950.
SOURCE: DEPARTMENT OF LABOR.
134
and increased employment were reflected in workers' incomes. In the fourth
quarter of 1949, aggregate wages and salaries and other labor income (see
appendix table A-5) were at a seasonally adjusted annual rate of 134.6
billion dollars. By the fourth quarter of 1950, they had risen by over 21 billion, to a new high of 155.9 billion. About half of the increase during the
year may be attributed to increased employment. The other half may be
attributed to increased hours, higher wage rates, and increases in other labor
income.
In November 1949, average hourly earnings in all manufacturing industries were $1.392. By November 1950, they had risen about 12 cents,
to a new high of $1.510. The increase has been especially pronounced
since August. In the durable goods manufacturing segment, there was an
increase of about 13 cents between November 1949 and November 1950,
compared with an increase of about 9 rents in nondurable goods manufacturing.
Average weekly earnings showed an even sharper increase, due largely to
the increase in the length of the work week in many industries, with consequent overtime pay. Such earnings in all manufacturing were $54.43 in
November 1949, and by November 1950 they had risen to $62.06. The
increase in durable goods manufacturing was sharper than in nondurable
goods; average weekly earnings in durable manufacturing increased by
about $9.50 during the period, while those in nondurable manufacturing
increased by half this amount. Real weekly earnings in all manufacturing,
measured by changes in the consumers' price index, rose by almost 10
percent between November 1949 and November 1950.
Average weekly hours in all manufacturing increased from 39.1 hours
in November 1949 to 41.1 hours in November 1950, a gain of 2.0 hours.
The upward trend was markedly greater in durable goods manufacturing,
where the rise was 2.8 hours to 41.8 hours a week, than in nondurable goods
manufacturing, where the rise was 0.9 hour to 40.2 hours a week. (Statistics on wages, hours of work, and earnings are shown in appendix tables
A-13,A-14,andA-15.)
Wage negotiations. The pattern of wage negotiations and contract settlements during 1950 divided into two distinct parts. During the first half
of the year, contract settlements were generally moderate by postwar standards, with emphasis on supplementary benefits. After September, a landslide movement developed for sizable wage increases, accompanied in some
instances by fringe benefits.
During the first half of the year, contract settlements with general wage
advances were made most frequently in nonmanufacturing industries, particularly in construction. The most important settlement was the renewal
of the General Motors contract, with a provision for a five-year term with
cost-of-living adjustments, "productivity" increases of 4 cents each year
throughout the life of the contract, and a pension plan and increased social
insurance benefits.
135
After the Korean development, pressures built up for wage increases as
the labor market tightened, the cost of living began to increase, and profits
reached new highs. Late in August and in September, a movement for
rapid and sizable wage increases developed in the mass production industries, led by a round of wage increases in the automobile industry. Some
of the wage increases were based in part on cost-of-living adjustments,
within the terms of existing contracts. General Motors production workers,
for example, received a 5 cents cost-of-living adjustment at the beginning
of September, in consequence of the rise in the consumers' price index
between April and July and another increase of 3 cents in December. In
August, Chrysler employees were granted an increase of 10 cents an hour,
without the formality of a wage reopening, and without a change in the
terms of the three and a half month old contract. However, the contract
was changed in December to include the General Motors wage arrangement, bringing an additional increase of one cent. On September 4, Ford
and the UAW-GIO set aside a contract four months before a permissive
reopening date to negotiate a new agreement with wage provisions similar
to the General Motors arrangement, and with an immediate cost-of-living
increase of eight cents an hour which was later raised to 11 cents. Other
automobile companies quickly fell into line.
The wage-increase movement spread rapidly during the last four
months of 1950, accelerated by the continued rise in the consumers'
price index, and by expectations of wage and price controls. Most increases were granted in manufacturing industries. Through formal or
voluntary wage reopenings, adjustments became widespread in meat packing, textiles, apparel, petroleum, rubber, glass, and the major metalworking
industries (including basic steel, aluminum, aircraft, electrical machinery,
and agricultural implements). A substantial number of workers in nonmanufacturing industries (particularly maritime, telephone, and the railroad industries) also received wage increases. In addition, a large number
of unorganized clerical and production workers have received wage increases
since midyear 1950. Even when all of these groups are included, it is probable that somewhat less than half of the workers in private nonagricultural
employment have participated in the wage adjustments which have been
made since the Korean outbreak.
During the past few months, second adjustments were common which
supplemented increases negotiated earlier in the year. Many of these second
adjustments were prompted by a desire to revise agreements which were
concluded before the Korean outbreak. In many cases, wage increases were
granted by voluntary action on the part of employers, either by consenting
to discuss wage matters with union representatives prior to formal wage
reopening dates, or by offering increases prior to formal negotiations. This
willingness of many employers to consider wage increases made it possible
for so many organized workers to receive increases within such a short
period of time.
136
During 1950, two devices to cover future adjustments under long-term
contracts came into prominence: the first, cost-of-living escalator clauses
which tie wage rates or cost-of-living allowances to changes in the BLS
Consumers' Price Index; the second, stipulations regarding adjustments
to be made in 1951 or later without reference to price developments.
A large number of workers are covered by contracts which provide one
or both arrangements. According to BLS estimates, about ll/<2. million
organized workers are now covered by cost-of-living escalator clauses.
Close to the same number, but not always the same workers, have been
promised a specified increase or increases in 1951 or later. The combination of the two devices, commonly identified as the General Motors formula,
appears in many contracts.
As a result of these developments, wage increases in the second half of
1950 have contributed materially to the underlying inflationary situation.
In many instances, increases in wage rates have been followed by price
increases. In other instances, price increases have encouraged demands
for wage increases. Between the second and fourth quarters of 1950, the
total increase in aggregate wages and salaries, which resulted from more
employment, longer hours, higher wage rates, and other increases in labor
income, amounted to almost 15 billion dollars.
Profits
The year 1950 witnessed the largest total profits in American business
history, reflecting record levels of sales and prices. (See chart 18 on page
105.) For 1950 as a whole, corporate book profits before taxes (not adjusted
for inventory valuation) were 40.2 billion dollars, compared with 27.6 billion
dollars in 1949, and 33.9 billion in 1948, the previous record year. (See
appendix tables A-32 through A-36 for statistics on profits.)
The recovery movement in the first half of 1950 had, by the second
quarter, already brought profits to new record levels and with the tremendous expansion in business during the second half of the year, profits
rose to even higher levels. By the fourth quarter, corporate book profits
were at an estimated annual rate of 48 billion dollars before taxes, compared
with an annual rate of 27.6 billion in the fourth quarter of 1949, a rise of
almost 75 percent. Prior to 1950, the previous peak was reached in the
third quarter of 1948, with corporate book profits at an annual rate of
35.3 billion dollars.
Corporate book profits after taxes also reached new highs. (The tax
liabilities reflect the higher income taxes already passed, including the
effects of excess profits taxes.) In the fourth quarter of 1950, corporate
book profits after taxes (not adjusted for inventory valuation) were running
at an estimated annual rate of 24.5 billion dollars, compared with 16.9
billion dollars in the fourth quarter of 1949, and with the previous peak
of 21.9 billion in the third quarter of 1948. Corporate book profits after
137
taxes in 1950 were 21.9 billion dollars, compared with 17.0 billion in 1949,
and 20.9 billion in 1948. The 1950 profits after taxes represented about 5
percent on sales, and over 9J4 percent on net worth, compared with under
4J/2 percent and 8 percent, respectively, in 1949.
Net income of nonagricultural unincorporated businesses and the professions (not adjusted for inventory valuation) also made new records. In
the fourth quarter of 1950, it was running at an annual rate of 25.9 billion
dollars before taxes, compared with 20.3 billion in the fourth quarter of
1949, a rise of 28 percent. For 1950 as a whole, net income of unincorporated business amounted to 24.7 billion dollars, compared with 20.3
billion in 1949. (See appendix table A-4.)
Net income of farm proprietors in the second half of 1950 increased in
response to higher farm prices. By the fourth quarter of 1950, net income
of farm proprietors before taxes was at an annual rate of 14.0 billion dollars,
compared with 12.8 billion dollars in the fourth quarter of 1949. However, the fourth quarter level was about 25 percent below the postwar peak
annual rate of 18.6 billion in the second quarter of 1948. For 1950 as a
whole, net income of farm proprietors was 13 billion, slightly below the
1949 level.
Although profits rose generally throughout 1950, the rate of rise differed
sharply among different industries. During the first half of 1950, and particularly in the second quarter of 1950, the increase in profits was most
marked for manufacturers of durable goods. This reflected the relatively
greater level of output and demand for these industries. During the second
half of the year, the rise in profits was most marked for producers of nondurable goods, where prices rose relatively more than for the durable goods
producers. But, during the third quarter, profits before taxes were higher
than in the two previous 'quarters for every major manufacturing group.
In addition, the sharp rise in over-all profits was reflected in a striking
improvement in the position of small firms. In the third quarter of 1950,
the smallest manufacturing corporations, those with assets of less than
250,000 dollars, showed the largest relative improvement in their profits
after taxes, compared with the corresponding quarter of 1949. However, on
a before tax basis the return on net worth and on sales for these firms continued to be below that of the larger corporations. Particularly in the case
of return on sales, the smallest firms in the third quarter earned 6 percent on
sales before taxes, compared with 16 percent for those firms with assets of 100
million dollars and over. On an after tax basis, the smallest firms in the third
quarter had a return on net worth somewhat above that for the larger firms,
while their return on sales continued to be substantially below that for the
larger firms.
138
TABLE 4.—Corporate profits as a source of funds after allowing for changes in costs
of replacing inventories
[Billions of dollars, annual rates, seasonally adjusted]
Net funds
available
Changes in from corpocosts of
rate profits
replacing after allowing
for changes
invenAfter taxes
in costs of
tories i
replacing
inventories
Corporate profits
Period
1946
1947
1948
1949 2
1950
Before
taxes
- -
-
-
First half 2
Second half
23.5
30.5
33.9
27.6
40.2
13.9
18.5
20.9
17.0
21.9
5.2
5.8
2.0
-2.2
4.7
8.7
12.7
18.9
19.2
17.2
33.3
47.0
19.7
24.0
1.6
7.7
18.1
16.3
1
Inventory valuation adjustment with sign reversed.
2 Estimates based on incomplete data; by Council of Economic Advisers. Profits after taxes include an
estimate for the effects of higher income taxes, including excess profits taxes.
Source: Department of Commerce (except as noted).
In appraising the availability of profits as a source of funds, account must
be taken of the effects of changes in prices, particularly in the replacement
costs of inventories. (See table 4.) In periods of rapid price increase such
as 1950, more funds are needed to finance inventories even without any
increase in the physical volume of stocks held. Such requirements reduce
the availability of profits for such purposes as expansion of plant, dividends,
the financing of accounts receivable, and the building-up of liquid assets.
The net availability of funds from corporate profits after taxes, after
allowing for the change in costs of replacing inventories was 17.2 billion
dollars in 1950, about 10 percent below 1949, the previous peak. There
was also a large use of bank credit, as well as considerable flotation of security
issues, to finance the tremendous expansion in business activity. (See appendix table A-37 and "Corporate Finance33 in the section on Business Investment and Finance.)
MONEY AND CREDIT
The expansion of outstanding public and private credit during 1950
reflected the speed, dimension, and directions of growth in the nation's
output. The movement was almost entirely in business, consumer, and
State and local government indebtedness. Several types of private credit
increased with extraordinary rapidity, especially during the third quarter,
and many reached new highs during the year. On the other hand, the gross
Federal debt declined slightly.
The housing boom stepped up the growth in the outstanding volume of
residential mortgage debt, from an annual rate of 11 percent in 1949 to 17
922781—51-
-10
139
CHART 23
CONSUMER CREDIT
After expanding at a record rate during the summer of I960, instalment credit outstanding leveled off in the 4th quarter as the anticipatory buying of durable goods slackened and credit restrictions took
hold. Total consumer credit continued to rise during the latter part
of the year because of seasonal additions to charge accounts.
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
20
J
F
1948
1949
1950
END OF MONTH
_!/ PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS.
SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (EXCEPT AS NOTED).
percent in 1950. Consumer instalment credit, which helped implement
the strong demand for automobiles and other durables, increased 2.4 billion
or 22 percent during the first nine months of 1950, compared to 1.3 billion
or 15 percent during the same period of 1949. During the third quarter of
1950, when buying of consumer durables reached its peak, the instalment
debt of consumers expanded almost as much as during the first three
quarters of 1949. (See chart 23 and appendix table A-26.)
Total loans and investments of commercial banks expanded not much
more in 1950 than in 1949, but there were marked differences in the movements of the various components. In 1949 the rise of 5.9 billion dollars,
or 5.2 percent, in the earning assets of banks was mainly in holdings of
Government securities and other investments, which increased 5.4 billion
or 7.5 percent, while the increase in loans was but 0.5 billion or 1.2 percent.
In contrast, the increase of 7.0 billion, or about 5.8 percent, in loans and
investments of all banks during 1950 resulted entirely from new loans, chiefly
to business. Loans to all classes of borrowers jumped nearly 10 billion
dollars, or 22 percent, while investments in Government and private securi-
140
ties dropped about 2.7 billion or 3.5 percent. (See appendix table A-27.)
Business loans of commercial banks, after a somewhat less than usual seasonal decline in the first half of the year, moved upward more than seasonally during the second half. These loans attained the record high of more
than 22 billion in December, about 30 percent above the December 1949
total. During 1949 business loans outstanding had dropped nearly 10
percent.
Total bank deposits and currency held by individuals, business firms
and State and local governments increased by about 6.4 billion dollars
in 1950, the largest expansion since 1946, to reach an all-time high of
more than 176 billion at the end of the year. Though some factors such
as gold exports and a net drop in the ownership of Government securities
by the banking system as a whole, tended to pull the volume of deposits
and currency down, these factors were far more than counterbalanced by
the growth of loans and by bank investments in State and private securities. (See table 5.) Adjusted demand deposits, which had increased
only slightly between December 1948 and December 1949, declined 0.7
billion during the first half of 1950, partly because of seasonal tax payments. During the latter half of the year demand deposits climbed more
than 7.0 billion dollars, principally because of loan expansion, to about
92 billion, which was more than 7 percent above the December 1949 level.
During the first half of 1950 time deposits increased 1.1 billion, but they
were drawn down 0.8 billion in the second half. The net increase in time
deposits in 1950 was 0.3 billion compared with 1.1 billion in 1949. (See
appendix table A-28.)
TABLE 5.—Factors changing the volume of deposits and currency
[Billions of dollars]
Changes in volume 1
Factors
Loans of commercial and mutual savings
banks
_
Securities of U.
S. Government held by banking system 3
Securities of State and local governments
held by commercial and mutual savings
banks
_ _
Treasury deposits *
Monetary gold stock
Other factors, net .
Net change in deposits and currency '__
1949
1948,
total
Total
+5.2
-6.0
+1.4
-.2
+.7
-1.3
+1.5
-1.0
+1.2
-.5
+.2
-1.4
-.9
+.7
First
half
1950
Second Total 3
half
First
half
Second
half 2
-1.1
+2.5
+11.3
+2.5
+8.9
-3.3
+3.1
-3.9
-1.7
-2.3
+.7
-1.3
—.1
-.7
+1.9
+.5
-1.6
-1.8
+1.0
-.7
-.2
-.7
+.9
+1.2
-1.4
-1.1
+4.2
+6.4
+.2
+6.2
+.5
+.8
+.3
-.7
-3.5
* Signs preceding figures in columns indicate change from the previous period. An increase is denoted
by a positive figure and a decrease by a negative figure for all factors except Treasury deposits, where the
reverse is true.
2 Estimates based on incomplete data; second half by Council of Economic Advisers.
s4 Includes commercial banks, mutual savings banks, and Federal Reserve banks.
See footnote 1 above.
8
See appendix table A-28 for aggregate money supply and its components.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Board of Governors of the Federal Reserve System (except as noted).
141
During the first half of 1950, credit expansion supported consumer and
business demand to a degree that was not generally excessive for a recovery
period, though it contributed to higher prices for some commodities. After
the Korean outbreak, with the accelerated growth of business and consumer
credit, heavy liquidation of accumulated savings and rising personal income, private demand surged to an inflationary level. In the second half
of 1950 the growth of credit was subjected to several restraints. Federal
and State bank supervisory authorities pressed banks to restrict their loans
and investments. In August, the Federal Reserve System raised rediscount
rates from \l/z to 1% percent, and at the same time modified its program
of open market operations. The purpose of the increase in discount rates
was to make borrowing additional reserves more costly for member banks.
The objective of the new open market policy, without which the discount
rate rise would have little effect, was to limit sales of Government securities by banks and others and thus restrict creation of new bank reserves
which could be used as a basis for further credit expansion. At the end
of December, the Federal Reserve Board announced increases, effective in
January and February, 1951, in the cash reserves required of member
banks.
Though interest rates, in general, rose only slightly during the first half
of 1950, the policy adopted by the Federal Reserve System in August
brought sharp increases in short-term rates. The rate on Treasury bills,
which rose from 1.09 percent at the beginning of the year to 1.17 percent
at the end of July, reached 1.38 percent by the end of December. The yield
on 9-12 month Government issues averaged 1.44 percent in the fourth quarter of 1950, compared to 1.09 percent in the fourth quarter of 1949. Rates
on short-term open market loans to private borrowers moved with the rates
on Government obligations of like maturity. (See appendix table A-31.)
Selective controls on consumer and real estate credit were also imposed.
In September the Federal Reserve Board applied regulations to consumer
instalment credit which required minimum downpayments and set maximum maturities on instalment loans for the purchase of automobiles and
other durables. In October, terms were substantially tightened. As a
result of the regulation, and the subsidence of late summer buying which
began before the regulation was put into effect, total instalment credit
increased less than 2 percent during the fourth quarter of 1950, compared
to 10 percent during the same period of 1949.
Action to restrict residential construction was first taken on July 19, when
terms were tightened on Government insured or guaranteed real estate
loans. In October, under authority granted by the Defense Production
Act, a more comprehensive regulation was put into effect. Minimum
downpayments and maximum loan maturity periods were prescribed for
new conventionally financed one- and two-family houses, and the same
terms, with some preference for veterans, were applied to new and
existing houses insured by the Federal Housing Administration and the
142
Veterans Administration. On all types of housing the severity of the
terms increased progressively with the price of the house. In general,
the terms required by the October regulations were substantially more
stringent than typical terms charged by lenders previously. The actions
taken to tighten housing credit terms have contributed to a large drop in
the volume of applications for Government insured or guaranteed loans.
At the present time multi-family structures are being brought under a
credit regulation. But because of the large construction backlog not affected by the new regulations it will be a number of months before the
regulations can result in substantial decline in housing production.
THE FLOW OF GOODS AND PURCHASING POWER
Personal income, consumption expenditures, and saving
Personal income. Personal income attained an annual rate of 233.4
billion dollars, seasonally adjusted, in the fourth quarter of 1950. This
was 14 percent higher than during the same period of 1949, and more than
8 percent higher than the second quarter of 1950. The rise was most
impressive between the second and third quarters when increases in economic activity and prices pushed the total up from 215 to 225 billion dollars
(annual rate), despite a 3 billion decline in transfer payments. From the
third to the fourth quarter there was a further rise of about 85/2 billion
dollars in total personal income. (See chart 24.)
Wage and salary receipts and other labor income rose rapidly in the
second half of 1950, attaining a peak level of 156 billion dollars in the
fourth quarter, or more than 20 billion dollars above a year earlier. A gain
of 7.3 billion dollars between the second and third quarters resulted for
the most part from longer hours and rising employment. A further gain
of 7.5 billion dollars from the third to the fourth quarter was due largely
to rising wage rates.
Farm income, which had dipped to a postwar low in the second quarter
of 1950, gained over 2 billion dollars (annual rate) between the second
and fourth quarters, rising to the level of 14 billion dollars. Rising farm
prices were largely responsible for the increase. However, while all of the
other major components of income were at higher levels in the fourth
quarter of 1950 than in 1948, farm income was only 79 percent of its 1948
level.
Business and professional income advanced 2.4 billion dollars between
the second and third quarters of 1950 to a peak of 24.7 billion dollars
(seasonally adjusted annual rate). Profits in retail trade showed the greatest gain, owing to the greatly increased volume of consumer purchases. In
the fourth quarter there was some decline. Dividends increased substantially in the second half of this year, reflecting a 14 billion dollar increase
in corporate earnings.
The volume of Government transfer payments fell, from an annual rate
of 17.6 billion in the first half of the year to the more normal level of 11.2
CHART 24
PERSONAL INCOME
Personal income increased by 16 billion dollars between 1949 and I960,
with all categories except farm proprietors' income participating in
the rise. The increase was most marked in the 2nd half. Total income
reached a record high of over 233 billion dollars (seasonally adjusted
annual rate) in the final quarter.
BILLIONS OF DOLLARS
250
BILLIONS OF DOLLARS
250
ANNUAL RATES. SEASONALLY ADJUSTED
200
- 200
-
150 -
— 150
IOO —
—
if
OTHER
?J
PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS.
INCOME CONSISTS OF RENTS, INTEREST, AND DIVIDENDS.
•SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED).
144
100
billion in the third quarter, as payment of the National Service Life Insurance dividend was completed. In the fourth quarter, the statutory increase,
about 70 percent, in the average benefit paid recipients of Old-Age and
Survivors' Insurance was offset by declines in benefits to the unemployed
and other payments.
Personal tax payments rose by 2 billion dollars (annual rate) from
the first to the second half, due partly to rising incomes and partly to
the increase in withholding rates on October 1. The rise in tax liabilities
was considerably greater than the increase in collections, and there will
be a sharp step-up in collections in the first half of this year.
Owing to rising tax payments, the increase in personal income after
taxes from the first to the second half was only 11.0 billion dollars, compared
to an increase of 13.3 billion in total personal income. A considerable fraction of the rise in income was offset by a rise in prices of consumer goods,
but when disposable income is adjusted for changes in prices, there was a
gain from the first to the second half of about 2 percent in purchasing power.
This places the second half about 8 percent above the 1948 level. On a
per capita basis, real income in the second half of this year (annual rate)
was about 4 percent above 1948., (Appendix tables A-5 through A-8 give
further detail on personal income.)
Personal consumption expenditures. The annual rate of consumption
expenditures almost reached the 200 billion dollar mark in the third quarter
of 1950, and receded only slightly in the fourth quarter as purchases of
durables and nondurables reached heights surpassing those of any previous
period. A spurt in consumer purchasing took place between the second
and third quarters, when news of the crisis in Korea transformed a moderate
upward trend into a buying spree for durable and semi-durable commodities.
The quarterly rise of 13 billion dollars (annual rate), or 7 percent, was
the greatest on record, both in dollar terms and percentage-wise. In
1946, when similarly large increases were recorded, a larger part of the
rise was the result of higher prices. (See appendix table A-2.)
Over one-half of the increase from the second to the third quarter was
accounted for by purchases of durable goods. Even in the first half of
the year, durable goods purchases had accounted for a higher percent of
disposable income than in any previous period. This may be attributed,
at least partially, to the distribution of the veterans' insurance dividend.
In the third quarter, durable goods expenditures rose to 16.9 percent of
income, or an annual rate of 33.5 billion dollars. (See chart 25.)
The fourth quarter rate of total consumption expenditures was somewhat below that in the third quarter. Increases in the nondurable goods
category and in services partially compensated for a moderate decline in
purchases of durable goods.
The first buying wave for durable and household goods prospectively
in short supply began in July and had apparently subsided somewhat before
the Regulation W credit restrictions were imposed on September 18. Con-
145
CHART 25
CONSUMPTION EXPENDITURES
FOR DURABLE GOODS
Expenditures for durable goods in the last half of I960 were 5 billion
dollars (seasonally adjusted annual rate) above the 1st half of the year
and 7 billion above the last half of 1949.
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
40
40
EXPENDITURES FOR DURABLE GOODS
ANNUAL RATES, SEASONALLY ADJUSTED
30
30
20
20
10
10
2
3
1948
4
1
2
3
1949
4
I
2
3
I960
The proportion of disposable income spent for durable goods rose to
over 16 percent, an all-time high, in the 3rd quarter of 1950.
20
20
EXPENDITURES FOR DURABLE GOODS
AS PERCENT OF DISPOSABLE INCOME
15
15
10
10
I
2
3
1948
I
2
3
1949
^PRELIMINARY ESTIMATES BY COUNCIL. OF ECONOMIC ADVISERS.
SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED).
146
1
2
I
3
1950
I
4
-
trols were tightened on October 14 to restrict demand further. Nevertheless, durable goods purchases in the fourth quarter were still in excess of
any previous period except the immediately preceding quarter.
The general rises in the prices of consumer goods in the second half of
1950 were probably sufficient to account for about half of the increase in
dollar volume, limiting the increase in the physical volume of consumption to about 3^2 percent, between the first and second half of the year.
Personal saving. The volume of personal saving dropped from an annual rate of 10.4 billion dollars in the second quarter to 6.4 billion dollars
in the third quarter during the post-Korean wave of consumer spending.
(See appendix table A-7.) Saving in the first half of the year, in which
personal income was augmented by the National Service Life Insurance
dividend, had averaged 6.5 percent of disposable income, a fairly high rate
for peacetime. In the third quarter, consumer instalment credit mounted
rapidly, savings accounts were drawn down, and redemptions of Series E
bonds ran considerably in excess of sales. Unspent portions of the NSLI
dividend were in many cases added to spending. As a result, savings
dropped to 3.1 percent of income in the third quarter. (See chart 26.)
However, in the final quarter of the year, despite a rise in tax collections,
saving rose to a rate of 6.4 percent of income.
The distribution of income, expenditure, and saving. There was an
increase of 2 million spending units receiving money incomes of less than
S2,000 from 1948 to 1949, despite the fact that total personal income declined only about 1 /2 percent. Higher unemployment, a substantial drop
in farm income, and greater frequency of farm and business losses were
mainly accountable for the increase in the number of spending units with
very low incomes. While unemployment averaged only 5^2 percent of the
labor force in 1949, three out of every ten employees in the major occupational groupings were unemployed one month or more during the year.
In 1950, expanded economic activity benefited many lower-income
families. However, many other families at the lower end of the income
scale, particularly fixed income recipients, do not benefit from a rise in
economic activity, while they do suffer from concomitant price rises. According to the Survey of Consumer Finances, sponsored by the Board of
Governors of the Federal Reserve System, pensions, allowances, annuities,
or contributions are the chief source of income for about one-fifth of all
units having annual money incomes of less than $1,000. In October, a
long-recommended step was taken to raise the income of one large group of
fixed income receivers, the recipients of benefits from old-age and survivors'
insurance. The average benefit for aged couples was raised from $41 to
about $75 per month, and the eligibility requirements were relaxed.
In 1950, as in previous years, the expenditures of the two-fifths of the
population with lowest incomes probably exceeded their incomes. In 1949,
as shown in table 6, the lowest one-fifth of the nation's spending units, those
with incomes below $1,280, dissaved an amount equal to over one-half of
147
CHART 26
PERSONAL INCOME, SPENDING, .AND SAVING
Personal consumption expenditures declined somewhat in the 4th
quarter of I960 after reaching a peak of over 198 billion dollars
(seasonally adjusted annual rate) in the 3rd quarter. Disposable
income continued to rise.
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
ANNUAL RATES, SEASONALLY ADJUSTED
210
210
200
DISPOSABLE PERSONAL INCOME
(PERSONAL INCOME LESS TAXES)
200
190
190
180
180
PERSONAL CONSUMPTION
EXPENDITURES
170
170
160 I
2
3
1948
4
2
3
1949
4
2
I
- 160
—*—
I O
3
1950
The rate of saving dropped sharply immediately after the Korean
outbreak but increased again in the 4th quarter.
15
15
PERSONAL NET SAVING
AS PERCENT OF DISPOSABLE INCOME
10
10
2
3
1948
2
3
1949
I/ PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS.
SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED).
148
n
3
1950
4V
their income. Only the top two-fifths, those with incomes in excess of
$3,200, saved an appreciable amount.
The dissaving in the lowest income quintile is attributable to only about
40 percent of the spending units in the quintile; about 20 percent of the
units just "make ends meet," and an additional 35-40 percent have positive savings. A high proportion of the dissaving in the lowest income
brackets is done by a relatively few units with low or negative incomes but
large assets. The exceptionally heavy dissaving on the part of lower income
groups in 1949 to some extent reflects the fact that many farmers and
businessmen suffered income declines during the year, which brought them
into income brackets below their accustomed level.
The acquisition of durable goods on a wide scale in the postwar period has
been the major cause of dissaving by many families. In 1949, 66 percent of
families with negative saving also purchased consumer durables, which is
considered a consumption expenditure. The volume of consumer debt has
risen consistently, while many families have reduced their holdings of
liquid assets in the postwar period. The median size of liquid asset holdings (Government bonds, bank deposits, and saving and loan shares) per
family has declined each year since 1947, and there has been an increase in
the number of units with no assets. Owing to the fact that the number of
spending units has been increasing, total liquid asset holdings have grown
somewhat. According to the most recent Survey of Consumer Finances,
the median liquid asset holding in early 1950 was about $250. (Statistics
on the distribution of income and saving may be found in appendix B.)
TABLE 6.—Proportion of income spent or saved, by income groups, 1949
Percent of income of each fifth used for—
Spending units ranked by
size of annual money
income
Lowest fifth
Second fifth ..
Third fifth
Fourth fifth
Highest fifth
All spending units __
Income
range
Under $1,280
$1,280-2,289
$2,290-3,199
$3,200-4,499
$4;500andover
All uses
Federal
Selected
income
durable
tax
goods ex- 2
liability » penditures
All other
expenditures
100
100
100
100
100
2
4
5
6
12
16
11
11
10
9
139
91
84
79
63
100
8
11
76
Net
saving
3
-57
-6
(<)
5
16
5
1 Estimated personal tax liability on income, apart from capital gains and losses. Other taxes are included
in "all other expenditures."
2 Includes automobiles, furniture, radios, television sets, and household appliances.
3 The definition of saving used here is not identical with that of personal net saving as denned for the
national
income accounts. See 1960 Survey of Consumer Finances, Part IV, Appendix I.
4
Less than one-half of 1 percent.
Source: Board of Governors of the Federal Reserve System.
Business investment and finance
During the second half of 1950, gross private domestic investment in
construction, equipment, and additions to inventory rose to the all-time
record level of nearly 53 billion dollars at a seasonally adjusted annual
149
rate. (See table 7 and chart 27.) This was an increase of 19 percent from
the first half of 1950 and 67 percent from the second half of 1949. The
corresponding increases in consumer expenditures were only 8 and 10 percent, respectively.
TABLE 7.—Gross private domestic investmentl
[Billions of dollars, annual rates, seasonally adjusted]
Total gross
private
domestic
investment
Period
Construction and equipment
Total
Nonfarm
residential
construction
Other
private
construction
Producers'
durable
equipment
Increase
in inventories
43.1
33.0
48.5
37.6
36.8
46.2
8.6
8.3
12.4
9.1
9.0
9.3
19.9
19.5
24.5
5.5
-3.7
2.4
34.4
31.6
36.9
36.6
7.7
8.9
9.3
8.6
20.0
19.0
-2.5
-5.0
1950— First half 2
Second half
44.3
52.7
41.7
50.7
11.6
13.2
9.0
9.6
21.1
27.9
2.7
2.0
1949— First quarter
Second quarter
Third quarter
Fourth quarter
37.5
31.3
32.1
31.2
37.2
36.6
36.3
36.9
7.8
7.6
8.2
9.5
9.4
9.2
8.7
8.6
20.1
19.8
19.4
18.7
.3
-5.3
-4.2
-5.7
1950— First quarter .
Second quarter
Third quarter 2
Fourth quarter .
41.7
46.9
48.4
57.0
39.8
43.6
50.0
51.5
11.0
12.2
13.5
12.9
8.9
9.1
9.4
10.0
19.9
22.3
27.1
28.7
2.0
3.4
-1.5
5.5
1948
1949 2
1950
.-
1949— First half
Second half
.
12 See appendix table A-3 for further details.
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).
In the fourth quarter of 1950, gross private domestic investment was
running at a seasonally adjusted annual rate of 57 billion dollars, or 19
percent of the total national output of goods and services. This is the
highest proportion yet on record.
The most dynamic major component of business investment in the latter
half of 1950 was the purchase of producers' durable equipment, which rose
abruptly to a record rate nearly 32 percent higher (after allowance for
normal seasonal variation) than that of the first half of 1950 and 47 percent
above the second half of 1949. At the end of the year, equipment purchases
were at or near all-time record levels, and the inflow of new orders for
machinery still exceeded deliveries.
Government restrictions imposed in the summer and fall curtailed some
types of construction, primarily housing, although the momentum of previous starts kept house building at the year's end above the level of a year
earlier. Nonresidential building activity rose steadily through the year, to
reach a record level of outlays in the fourth quarter.
Inventory accumulation proceeded at a moderate rate during the first
half of 1950, in contrast with the sharp liquidation that had prevailed
through most of 1949. The sudden post-Korean upsurge of consumer and
150
CHART 27
BUSINESS INVESTMENT
Private outlays for producers' equipment, housing, and nonresidential
construction all rose to record levels in I960. Inventory accumulation was
only briefly interrupted by the post-Korean buying rush.
BILLIONS OF DOLLARS
60
I/ PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS.
SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED).
BILLIONS OF DOLLARS
60
business demand temporarily depleted inventories, but by the end of the
third quarter inventories were growing again. During the fourth quarter,
there was a rapid accumulation of inventories as sales leveled off and production continued to rise.
Plant and equipment. A significant revival in business investment in
productive facilities became evident during the second quarter of 1950.
This played an important part in the general upsurge of production, employment, and income after the 1949 recession. By the second quarter, the
rate of outlays for producers' construction and equipment was nearly back
to peak 1948 levels, and was rising rapidly. (See appendix tables A-3 and
A-19.) The dollar value of new orders for machinery already exceeded
that of any previous time since World War II, and contracts for nonresidential building, in terms of floor space, were at a new high since late 1947.
The stimulus of the expanding defense program in the second half of
1950 was thus superimposed on an already buoyant investment trend. As
it became clear that for a considerable period existing capacity would be
inadequate to meet demands and that the construction and equipping of
facilities might become progressively more costly and difficult, business
hastened to step up its plans and commitments for investment. The major
emphasis was on purchases of machinery and other equipment, which rose
from 19.9 billion dollars (seasonally adjusted annual rate) in the first
quarter, and 22.3 billion in the second quarter, to 28.7 billion in the fourth.
Even after allowing for price increases, this rate of private investment in
equipment far exceeded the previous peak reached in 1948. New orders
for machinery, by August, were being placed at more than double the rate
of a year previous. Though ordering slackened off slightly after the initial
post-Korea rush, it continued through the rest of 1950 to run well ahead
of the rate of deliveries. (See chart 2 on page 36.) The unfilled-orders
backlogs of machinery producers, which had touched a postwar low at the
end of 1949, rose gradually in the first half of 1950 and very rapidly in the
second half, to levels not experienced since early 1948.
Foremost in the investment boom of the latter half of the year were the
manufacturing industries. Purchases of railroad and highway transport
equipment also rose rapidly and the expansion of utilities continued at a
rapid pace.
As the year ended, business was planning to continue investment in
plant and equipment at a high rate. Private and Government surveys
of investment plans for 1951, made late in 1950, indicated a substantially
larger total outlay in 1951 than in 1950, particularly in the industrial sector.
(See appendix table A-19.) With continued high earnings and readily
available outside capital, business seemed likely to continue spending on
plant and equipment at very high rates, subject to the influence of materials shortages and Government controls.
Nonfarm inventories. The resumption of inventory accumulation during the first half of 1950 was an important factor contributing to business
152
recovery. By the second quarter of the year, nonfarm inventories were
being accumulated at an annual rate of 4.0 billion dollars, compared with
a rate of liquidation of 4.7 billion dollars a year in the fourth quarter of
1949. There was thus a net change of nearly 9 billion dollars in terms of
seasonally adjusted annual rates. (See appendix tables A-3, A-20, and
A-21, and chart 27.)
Economic developments following the outbreak in Korea increased the
desire of business to build up inventories, but made it more difficult to do so.
Despite the sharp rise in output during the third quarter and the enormous
increase in new orders, consumer buying was so great that stocks fell off
slightly. During the third quarter, nonfarm inventories were being reduced
at an annual rate of about a billion dollars.
This reduction was primarily in manufacturers' stocks of finished goods.
The book value of finished-goods inventories held by manufacturers declined by more than 9 percent during July and August. During the same
interval, there were increases of about the same percent in stocks of raw
materials and goods in process. These increases were in part necessary
to maintain the higher levels of output, though the sharp rise in materials
prices provided additional inducement to accumulate materials.
The book value of retailers5 inventories was higher at the end of the third
quarter than at the beginning, but the rise was not steady. (See appendix
tables A-20 and A-22.) In July, inventories declined; in August, the
mounting tide of deliveries overtook the rate of consumer buying, and
inventories began to rise again. The increase was greater in nondurable
than in durable goods lines.
In the last five months of the year, with the leveling-off in consumer
buying from the summer peak and the continued rise in output, inventory
accumulation was resumed in both trade and manufacturing. In the
fourth quarter it reached a seasonally adjusted annual rate of 6.0 billion dollars, the highest since 1948. (See appendix tables A-3 and A-20.) Particularly noteworthy was the increase in nondurable goods inventories.
Corporate finance. In 1950, the use of capital funds by non-financial
corporations was higher than in any previous year, and almost 24 billion
dollars above 1949. Plant and equipment outlays, which by the end of the
year had reached the 1948 peak rate, accounted for nearly half of this
total. The other half was required for a sizable expansion of inventories
and customer accounts and for a substantial addition to corporations'
liquid asset holdings. The shift from a 5-billion-dollar liquidation of inventory book values and accounts receivable in 1949 to an expansion of 13 billion
dollars in 1950 involved an 18-billion-dollar increase in the need for funds.
At the end of the year, corporations' total holdings of Government securities
were about as large as at the end of World War II.
Corporations were able to finance more than half of their total requirements internally, from retained earnings and depreciation allowances.
Despite record disbursements of dividends, accounting for about 40 percent
CHART 28
SOURCES AND USES OF CORPORATE FUNDS
In 1950, total corporate expenditure on fixed and working capital was at a
record level. More than half of the expenditure was financed from retained
earnings and depreciation reserves.
BILLIONS OF DOLLARS
-5
5
10
15
20
SOURCES
RETAINED
EARNINGS
DEPRECIATION
RESERVES
.t,
OTHER SOURCES
(i
USES
1949
PLANT AND
EQUIPMENT OUTLAYS
CHANGE IN |i|iji£ij;H:!H:;:i:!|ii;i
INVENTORIES
OTHER USES
-'PROFIT ESTIMATES FOR oso BY COUNCIL OF ECONOMIC ADVISERS.
^NEGATIVE ITEM IN 1949 RESULTED FROM DECLINE IN TRADE PAYABLES, FEDERAL INCOME TAX LIABILITY, AND BANK LOANS.
SOURCES: DEPARTMENT OF COMMERCE ESTIMATES BASED ON SECURITIES AND EXCHANGE
COMMISSION AND OTHER FINANCIAL DATA (EXCEPT AS NOTED).
of earnings after taxes in 1950, compared with 45 percent in 1949 and
about 35 percent in 1948, 12.5 billion dollars of earnings were retained for
investment, an amount which was only slightly exceeded in 1948. Because
of the increase in tax rates and sharply rising corporate profits, corporation
tax liabilities rose 7.0 billion dollars.
External sources of funds provided about 19 billion dollars, the largest
amount in any postwar year. Bank loans increased by about 2.5 billion
dollars, and trade debt by about 3.5 billion, much larger expansions than
occurred in 1948. This was in sharp contrast to 1949, when corporations
were retiring both bank and trade debt. (See chart 28 and appendix
table A-37.)
154
Total net new issues of securities in 1950 were about 1.5 billion dollars
smaller than in 1949, and nearly 2 billion smaller than 1948. The volume
of stock issues, on the other hand, was larger than in either of the two
previous years, due mainly to the more favorable market for floating new
stock issues. Hdwever, corporations were still not using the stock market
as a major source of capital.
Construction. Total new construction in 1950 reached a record level
of 27.7 billion dollars, compared with 22.6 billion in 1949, the previous high.
This was an increase of 23 percent. The pattern was one of expansion
through most of 1950, with declining tendencies beginning to appear
toward the end of the year. (See appendix table A-18.)
In December 1950, total new construction was running at a seasonally
adjusted annual rate of 29.7 billion dollars, or 21 percent above the level
of a year earlier. Private construction was at an annual rate of 21.2 billion
dollars, a rise of 20 percent, while public construction was at an annual rate
of 8.5 billion, an increase of 24 percent.
The trends of major categories were sharply different in 1950. Private
new construction increased greatly through October, thereafter declining
slightly as a substantial drop in residential construction was not wholly
compensated by large increases in industrial and commercial construction.
-Public construction fluctuated within a narrow range through August,
but then rose sharply in each succeeding month. Total construction
increased steadily until December, when it fell off slightly, with the increase
in public outlays more than offsetting the decrease in private outlays during
the last few months.
More nonfarm housing units were started in 1950 than in any previous
year. The total was over 1.3 million, more than 30 percent higher than
the slightly more than 1 million started in 1949, the previous peak year.
But there was a sharp reversal of trend during the year. The peak of
149,000 monthly starts was reached in May and a level of over 140,000
starts was maintained through August. Thereafter, in part under the
impact of the credit restrictions on residential construction, housing starts
declined sharply and in the last three months of the year fell below the
levels of the corresponding months in 1949.
Beginning in the spring of 1950, private nonresidential construction
climbed steadily. Increases in industrial and commercial construction accounted for much of the increase during the final months of the year.
New recreational construction tapered off following the National Production Authority's October order designed to eliminate most types of such
construction, but this category represents only a very small fraction of
total construction. Electric and gas utility construction totaled about the
same in 1950 as in 1949; construction of railroad and telephone and telegraph facilities declined.
The largest increases in new public construction between 1949 and 1950
were for schools, highways, and for military and naval construction which
922781—51
11
155
CHART 29
EXPORTS AND IMPORTS
OF GOODS AND SERVICES
A rapid growth in imports practically eliminated the U. S. export surplus in
the 2nd half of 1950.
BILLIONS OF DOLLARS
35
BILLIONS OF DOLLARS
25
EXPORTS OF GOODS
AND SERVICES-*'
10
-
5
-
IMPORTS OF GOODS
AND SERVICES-^
- 5
-/ INCLUDES INCOME ON INVESTMENTS.
& PRELIMINARY ESTIMATES Q,Y COUNCIL OF ECONOMIC ADVISERS.
SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED).
had begun to reflect the impact of the defense program by the end of the
year. A major step-up in military and naval construction will appear
during this year.
During 1950, the Department of Commerce composite index of construction costs rose about 9 percent. The increase in the wholesale price of
lumber was about 20 percent. In the hourly earnings of construction
workers, it was about 4 percent.
The seasonally adjusted composite index of the production of building
materials increased by about 19 percent during 1950. For the year as a
whole, nearly all such materials were produced in record volume.
International transactions
Although the expansion of domestic economic activity and the rise of
prices in the second half of 1950 were the result of international developments, these developments made their influence felt on the economy mainly
156
by stimulating domestic demand, rather than by increasing foreign purchases
here or by reducing the supplies available to us from abroad. In fact,
1950 saw a reduction in the net demands upon American output arising
from international transactions.
In early 1950, exports of goods and services were at the lowest levels
since termination of the Lend-Lease program after World War II.
Although a rise began late in the summer of 1950, such exports were nearly
1.9 billion dollars less for the year as a whole than they were in 1949. Imports of goods and services, on the other hand, which had been rising steadily
since the summer of 1949, rose even more sharply in the second half of
1950 than in the first half, and for the year as a whole were 2.6 billion dollars higher than in 1949. As a result of these changes, the surplus of United
States exports over imports of goods and services, which had amounted to
6.2 billion dollars in 1949, fell to an annual rate of 3.0 billion in the first half
of 1950, and to an estimated annual rate of 600 million dollars in the second
half of the year. (See table 8 and chart 29; also appendix tables A-38
through A-47 for detailed statistics on international transactions.)
TABLE 8.—United States exports and imports of goods and services
[Billions of dollars]
Exports of
goods and
services l
Period
1946
1947 .
1948..._
1949 .
19502...
Annual rates:
194<)— First half
Second half
195()— First half 2
Second half
Imports of
goods and
services l
Surplus of
exports of
goods and
services 1
14.7
19.8
17.1
16.0
14.1
7.0
8.3
10.4
9.7
12.3
7.8
11.5
6.7
6.2
1.8
17.5
14.4
13.6
14.7
9.7
9.5
10.6
14.1
7.6
4.9
3.0
.6
1
2
Includes income on investments.
Estimates by Council of Economic Advisers; based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).
There were substantial increases both in the quantity of goods brought
into the country and in their prices. Although merchandise imports had
been rising steadily throughout the first half of the year as domestic business
activity rose, they were given a sharp impetus, following the aggression in
Korea, by the decision of the United States and its North Atlantic Treaty
partners to strengthen their defenses. These developments gave rise to
large purchases abroad to meet the needs of current and expected increases
in production, and for stockpiling purposes. Imported raw materials such
as rubber, wool, tin, wood pulp, burlap, and other products rose sharply
in price, in some cases to twice their June levels. These price rises have
not yet been fully reflected in the dollar value of our imports. (See
chart 30.)
Foreign countries were able to get along with a smaller volume of net
157
goods and services from the United States, in large part because of continued increases in Western European production. For Western Europe
itself, this made possible a reduction in its total imports of certain major
products and an expansion of exports without impairment of domestic
consumption or investment. For countries in other areas, it made possible
a shift of imports from the United States to Western European sources of
supply.
The changes in our merchandise trade, which brought it into virtual
balance in the second half of the year, greatly reduced the dollar difficulties
of foreign countries which had characterized earlier postwar years. The
expanded United States demand for foreign products has vastly increased
foreign earnings in this country. Many of the Western European countries
and Japan have been able not only to increase their direct sales to the
United States, but also to improve their competitive position in other areas
because of the relative fall in their export prices resulting from devaluation,
the rise in our export prices, and the tighter supply situation in the United
States. South America, the Far East, and Africa were able to earn dollars
on balance in their merchandise trade with the United States. Western
Europe was able to cut its trade deficit with us drastically between the first
and second halves of the year. Moreover, the financial position of some
Western European countries, the United Kingdom in particular, was greatly
aided by the increase in dollar earnings of raw-material-producing countries
whose monetary reserves they hold or in which they have investments.
In the first half of 1950, the United States export surplus was less than
our foreign aid. In the second half of 1950, the export surplus fell still
further below the volume of our aid, although this aid itself was reduced
during the course of the year. (See appendix table A-38.) Partly because
our aid exceeded our export surplus, but also partly because of a speculative
outflow of capital in the third quarter of the year, foreign countries in the
aggregate were able to accelerate greatly the process of rebuilding their
depleted gold and dollar reserves. The main increases were in the sterling
area and Canada. Japan and a number of raw material exporting countries outside the sterling area, chiefly in Latin America, also made large
relative gains or were able to pay off short-term debts. The rebuilding of
these reserves proceeded during the second half of 1950 at an even more
rapid rate than it had in the nine months between the widespread devaluations of foreign currencies and the middle of 1950. The rapidity of improvement in the financial position of the United Kingdom was so great
that it was possible to suspend aid to it under the European Recovery
Program.
The decision to increase the defensive strength of the Western World,
coming on top of a recovery of economic activity in the United States, has
created a new problem of inflationary pressures on a world-wide scale.
In many countries a considerable degree of internal financial stability had
been achieved, though often the stability was a precarious one. In the
'58
CHART 30
PRICES OF IMPORTS
Prices of U.S. imports (average unit value) have risen 20 percent
since the currency devaluations of September 1949, and 13 percent
si'nce June .1950, when hostilities broke out in Korea.
PERCENT OF SEPTEMBER
PERCENT OF SEPTEMBER 1949
1949
160
-
— 160
140
-
— 140
120
-
- 120
100
100
I/
ALSO INCLUDES MANUFACTURED FOODSTUFFS AND FINISHED MANUFACTURES NOT SHOWN ON THIS CHART.
SOURCE:
DEPARTMENT
OF COMMERCE.
second half of 1950, expanded defense needs were beginning to reduce
supplies available for civilian use by absorbing manpower., materials, and
industrial facilities. At the same time, actual and anticipated increases in
defense expenditures were increasing effective money demand in countries
accounting for the bulk of the world's consumption. Thus, inflationary
pressures were again being activated throughout the world.
Government transactions
Total cash payments of Federal, State, and local governments in the
second half of the calendar year 1950 were running at a seasonally adjusted
annual rate of almost 60 billion dollars. This was about 3 billion dollars
lower than in the first half of the calendar year. Cash receipts were running
at an annual rate of about 4 billion dollars higher than in the first half of the
year. The reduction in public payments changed a total cash deficit of
more than 4 billion dollars for the first half of 1950 into a surplus of around
3 billion dollars for the second half. (See chart 31 and table 9.)
159
TABLE 9.—Government cash receipts from and payments to the public
[Billions of dollars, annual rates, seasonally adjusted]
Calendar year 1950
Calendar
yearJ949
Receiptj>r 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 (— )
Total i
First half
Second
half i
41.3
16.3
42.4
18.4
41.1
17.7
43.8
18.9
57.6
60.8
58.8
62.7
42.6
17.5
41.9
19.5
44.0
19.0
39.9
19.9
60.2
61.4
63.0
59.8
-1.3
-1.3
+.5
-1.1
-2.9
-1.3
+3.9
-1.0
-2.5
-.6
-4.2
+2.9
i Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See Appendix C.
The counter-inflationary impact of the surplus on the expansion in
economic activity was lost in the effect of the large amounts of contracts
placed both by Government and by consumers and business acting in anticipation of an enlarged defense program. The accelerated pace of economic
activity after the outbreak of the Korean war was in fact largely due to
the actual and anticipated increase in defense activities of the Government.
Government expenditures have not yet reflected much of the increase in
these defense activities, but a rapid increase in expenditures must be expected to occur during the course of 1951.
Cash payments by the Federal Government. The decrease in Federal
cash payments to the public, between the first and the second half of the
calendar year 1950 was due to the large National Service Life Insurance
dividend paid out in the first half of the year. Excluding the NSLI
dividend, cash payments were running at an annual rate of about one
billion dollars higher in the second half of the year than in the first half.
Significant declines took place in expenditures for the price support program,
in payments to veterans and international programs, and in the net purchase
by the Federal National Mortgage Association of government-insured and
guaranteed mortgages. Increases occurred in social security payments, particularly because of the increased benefits under the amended Social Security
law.
Expenditures by the military services, which declined in the first half of
the calendar year, increased by an annual rate of 3.5 billion dollars in the
second half of the year. But until the beginning of the fourth quarter,
they were running only about the level of the year 1949.
160
CHART
31
GOVERNMENT CASH RECEIPTS FROM
AND PAYMENTS TO THE PUBLIC
Federal cash payments to the public in the 1st half of 1950, including
the National Service Life Insurance dividend, exceeded receipts by 2.9
billion dollars (seasonally adjusted annual rate). In the 2nd half of
the year receipts were 3v9 billion larger than payments. State and
local governments had cash deficits in both periods.
FEDERAL
BILLIONS OF DOLLARS, ANNUAL RATES, SEASONALLY ADJUSTED
^DEFICIT
RECEIPTS
SURPLUS'
PAYMENTS
RECEIPTS
I960, FIRST HALF
PAYMENTS
I960,SECOND HALF
STATE AND LOCAL
BILLIONS OF DOLLARS, ANNUAL RATES, SEASONALLY ADJUSTED
DEFICIT
RECEIPTS
1950, FIRST
PAYMENTS
RECEIPTS
HALF
CALENDAR
SOURCE: SEE APPENDIX C.
PAYMENTS
I960, SECOND HALF
161
YEAR
TABLE 10.—Federal cash payments to the public by junction
[Billions of dollars, annual rates, seasonally adjusted]
Calendar year 1950
Calendar
year 1949
Function
Military services
International security and foreign relations. __
Veterans' services and benefits
Social security, welfare and health
Agriculture and agricultural resources.
Interest
Other
Deductions from Federal employees' salaries for retirement
Clearing account for outstanding checks and telegraphic
reports
12.9
6.0
7.1
2.7
3.0
4.3
7.1
Total Federal cash payments to the public
Total i
First
half
Second
halfi
15.4
3.9
6.1
3.5
.2
4.1
6.6
13.7
4.1
8.9
3.3
1.3
4.1
6.9
11.9
4.4
11.8
3.1
2.4
4.2
7.2
-.3
-.4
-.4
-.4
-.2
-.1
-.7
+.5
42.6
41.9
44.0
39.9
1
Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See Appendix C.
A month by month comparison shows that the expenditures for defense
began to rise appreciably only during the last quarter of the year. Expenditures by the military services were 1.6 billion dollars in December 1950,
compared with about 1.0 billion dollars in June 1950, the last month before the Korean outbreak. The increase in expenditures does not, however, fully reflect the actual progress in military programs. During the
five-month period from July through November, obligations incurred by the
Defense Department for military purposes exceeded comparable expenditures by about 7.5 billion dollars. Procurement has an impact on the economy when contracts are placed as well as when payments are made. In the
initial period, work on contracts is financed largely by business funds, and
is only later reflected in Government expenditures. (See tables 10 and 11.)
TABLE 11.—Federal cash payments to the public by type of recipient and transaction
[Billions of dollars, annual rates, seasonally adjusted]
Calendar year 1950
Calendar
year 1949
Classification of payment
Direct cash payments for goods and services; excluding
military services:
To individuals for services rendered
.
To business and international institutions for goods
and services
Loans and transfer payments to individuals
Loans, investments, subsidies and other transfers to
business and agriculture..
Loans and transfer payments to foreign countries and
international institutions .
Military services—cash payments for goods and services 2.
Clearing account for outstanding checks and telegraphic reports
__
__
Total Federal cash payments
1
2
Total i
First half
Second
halfi
3.3
3.2
3.3
3.2
3.0
11.3
3.4
13.5
3.3
16.4
3.6
10.6
6.9
4.8
6.1
3.6
5.8
12.5
3.9
13.1
4.2
11.4
3.6
14.8
-.2
-.1
-.7
+.5
42.6
41.9
44.0
39.9
Estimates based on incomplete data.
Differs from the estimate of military service payments in table 10 above by the exclusion of certain
transfer items here included with loans and transfer payments to individuals.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See Appendix C.
162
Federal cash receipts. The increase in cash receipts from calendar
year 1949 to calendar year 1950, and especially from the first to the second
half of 1950 (seasonally adjusted), largely reflected the increase in economic activity. In addition, the increase in rates of employment taxes that
became effective January 1, 1950, added to cash collections. Because of
lags in collection, the additional revenue resulting during the last few
months of the year from the Revenue Act of 1950 was only a modeist
amount, collected through increased withholding tax rates. The 1950
collections of the corporate income tax reflected the lower profits of the
recession year 1949, and collections from corporate income taxes will increase substantially this year, reflecting both the high profits of 1950 and
the increases in tax rates. (See table 12.)
TABLE 12.—Federal cash receipts from the public
[Billions of dollars, annual rates, seasonally adjusted]
1950
1949
Source of cash receipts
Total i
Direct taxes on individuals
Direct taxes on corporations
_ _
Employment taxes
__
Excises and customs
Surplus property receipts _
Deposits by States, unemployment insurance
Veterans' life insurance premiums _
Other
Refunds of receipts
__ _
Total Federal cash receipts from the public
First
half
Second
halfi
18 4
12.0
2.5
7.9
.5
10
.4
1.4
-2.8
19 3
9.9
3.4
8.6
.2
12
.5
1.5
—2.2
18 4
9.9
3.4
82
.3
1i
.5
1.4
—2.2
20 1
99
3.4
9.0
.1
1.3
.5
1.6
—2.2
41.3
42 4
41 1
43 8
* Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See Appendix O.
The Federal budget deficit, the cash surplus, and changes in the national
debt. The foregoing analysis has been in terms of the consolidated cash
statement of Federal cash payments and Federal receipts. While the consolidated cash statement is a preferable means of measuring the impact
upon the economy of government transactions on the flow of funds and
incomes, it is also important to consider the conventional budget. (See table
13.) Surpluses or deficits in the conventional budget decrease or increase
the national debt held by the public and Government trust accounts. The
conventional budget is the basis of the appropriations recommended by the
President and voted by Congress.
In calendar 1950 the budget, measured in conventional terms, showed
a deficit of 422 million dollars. There was an excess of cash receipts from
the public over cash payments to the public of about 500 million dollars.
Though there was a deficit in the conventional budget, the gross public
debt dropped 423 million dollars in calendar 1950 because of a surplus
of trust and clearing account receipts, and a drop in the Treasury's general
163
TABLE 13.—Federal receipts and expenditures: Budget totals and consolidated cash totals
[Billions of dollars, annual rate]
Calendar year 1950
Calendar
year 1949
Receipt or expenditure
Total i
First half
Second
hain
Budget totals, not adjusted for seasonal variation:
Receipts (net)
_ _
Expenditures
_
38.1
41.7
37.8
38.3
38.7
38.4
Budget surplus (-{-) or deficit (— )
-3.6
-.4
-K4
41.3
42.6
42.4
41.9
43.0
43.7
41.8
40.1
-1.3
+.5
-.8
+1.7
41.3
42.6
42.4
41.9
41.1
44.0
43.8
39.9
Consolidated cash totals:
Not adjusted for seasonal variation:
Cash receipts from the public
Cash payments to the public
Cash surplus (+) or deficit (— )
Adjusted for seasonal variation:
Cash receipts from the public
Cash payments to the public
.- -
-1.3
Cash surplus (+) or deficit (— )
+.5
-2.9
36.9
38.1
-1.2
+3.9
i Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Treasury Department and Bureau of the Budget.
fund. In the calendar year 1949 the public debt had increased 4.3 billion
dollars. (See appendix tables A-29 and A-30.)
State and local transactions. State and local government expenditures,
after a very rapid rise in the immediate postwar years, increased at a slower
pace in 1949 and 1950, although demands for additional school, highway,
and other facilities remained pressing. To a large extent, this flattening of
the trend was forced by a reversal of the favorable financial position in which
most State and local governments emerged from World War II. (See
table 9 above.)
The expansion of general business activity, beginning in 1950 and accelerating sharply after the Korean invasion, had a marked effect upon many
types of State and local revenue. The sales tax, an important revenue
source in many States, showed rapidly increasing yields. During the second
half of calendar year 1950, State and local cash expenditures advanced moderately above the level of the previous year or of the first half of 1950 despite
delay in some projects because of increasing costs of construction. Cash
deficits of State and local governments for the second half of the calendar
year 1950 are estimated at an annual rate of 1.0 billion dollars, somewhat
smaller than the deficit of the preceding half-years.
Summary: The Nation's Economic Budget
In order to form a statistical picture of the total domestic economy,
it is necessary to bring together in a single statement the description of the
flow of receipts and expenditures within the separate segments of the
economy, under the influence of the forces and events which have been
discussed in this part of the Review with respect to each segment.
164
This comprehensive statement, The Nation's Economic Budget, is set forth
and treated in great detail in Appendix G. Being a double entry statement,
it must always be in balance, and for every change in any item there must be
compensating changes in one or more of the other items. It is presented in
three divisions, for the year 1949, for the first half of 1950, and for the second
half of 1950. Sharp changes in economic currents have taken place between
each of these periods, and the Economic Budget shows how these changes
have affected, in quantitative terms, the money flow within and among the
principal sectors of the economy. It also indicates how the necessary
balancing changes have actually occurred during the past year. (See
chart 32 and table 14.)
TABLE 14.—-The Nation's Economic Budget, calendar years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1950, first half
1949
Economic group
1950, second half 1
Excess
Excess
Excess
of reof reof reExceipts
ExExceipts
ceipts
Re- pend- (+)or Re- pend- (+)or Re- pend- (+)or
ceipts itures expend- ceipts itures expend- ceipts itures expenditures
itures
itures
(-)
(-)
(-)
CONSUMERS
Disposable income
Consumption expenditures
Personal net saving (-}-)
187.4
178.8
196.6
+8.6
183.8
207.6
+12 7
197.7
+10.0
BUSINESS
Retained receipts
_
Gross private domestic investment
Excess of receipts (+), or investment (— ).
30.1
30.2
28.4
52.7
44.3
33 0
-24.3
—14.2
—2 8
INTERNATIONAL
Cash loans abroad
_
Net foreign investment
Excess of receipts (+), or investment (— )
1.1
—.2
4
.1
-3 4
—1 8
+.7
+3.5
+1.6
GOVERNMENT
Cash receipts from the public
Cash payments to the public
Cash surplus (+), or deficit
57 6
58 8
60 2
62.7
63 0
—2 5
59 8
+2.9
—4 2
ADJUSTMENTS
(To arrive at gross national
product)
For receipts 2
—20 7
For expenditures 3
-16.8
Difference between adjustments
Total gross national product. 255.6
—18 5
266.8
1
2
-16.2
+7.9
+4.1
—4 0
255.6
—8 2
-22.5
266.8
290.6
290.6
Estimates based on incomplete data.
Includes receipts which do not arise from current production and hence are not a part of the national
income: Transfers to individuals, Government interest, cash loans abroad, and the difference between tax
liabilities and cash receipts. Also includes statistical discrepancy.
3 Includes all cash payments which are not payments for goods and services and hence are not included
in the gross national product.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: See Appendix C for more detailed treatment of the Nation's Economic Budget.
165
CHART
32
THE NATION'S ECONOMIC BUDGET
Business and consumer expenditures rose more than receipts from
the 1st to the 2nd half of 1950, while the Government cash deficit
gave way to a small surplus.
BILLIONS'OF DOLLARS
ANNUAL RATES, SEASONALLY ADJUSTED
-50
0,
50
100
CONSUMERS
I960,
FIRST HALF
Transfer
f payments
1950,
SECOND HALF
BUSINESS
I960,
1950,
SECOND HALF
INTERNATIONAL
1950,
FIRST HALF
I960,
SECOND HALF
GOVERNMENT
1950,
FIRST HALF
1950,
SECOND HALF
EXCESS OF RECEIPTS (+),
1950, FIRST HALF
-25
0
+25
CONSUMERS
BUSINESS
INTERNATIONAL
GOVERNMENT
SOURCE: SEE APPENDIX C.
166
EXPENDITURES (-)
1950, SECOND HALF
-25 •
0
+25
For the second half of 1950 as a whole, gross national product, at a seasonally adjusted annual rate, which appears as the total figure in the Nation's
Economic Budget, reached a record level of about 290 billion dollars. This
was nearly 9 percent above the rate of 267 billion dollars in the first half of
the year. About half of this rise was due to price increases; the growth in
physical volume of output was less than 5 percent.
The decision of the United States to undertake a large-scale preparedness program had its impact on the economy, in 1950, largely through
anticipations of businessmen and consumers. In terms of actual Government expenditures, national defense, and international programs rose only
3 billion dollars (at an annual rate) in the second half of the year. Total
Government payments even showed a decline, while receipts rose.
The increase in activity and in inflationary pressure between the first
and the second half of the year was thus primarily attributable to private
spending. While all categories of consumer expenditures increased,
expenditures for durable goods, which were already at unparalleled high
rates, rose 20 percent, compared with a rise of 5 percent for nondurable
goods and services. Expenditures for producers' durable equipment advanced 32 percent. Total private domestic investment reached a level
of nearly 53 billion dollars (annual rate) in the second half of the year,
an increase of nearly 20 percent over the first half.
The rise in private incomes, while impressive, was less rapid than that
in expenditures. The rate of personal net saving declined from an annual
rate of 12.7 billion dollars in the first half of 1950 to 10.0 billion in the second
half, partly as a result of expanding consumer credit and cashing of Government bonds by many families. In the business sector, investment expenditures exceeded retained receipts by 24.3 billion dollars (annual rate) in the
second half of 1950, compared with 14.2 billion in the first half.
The Nation's Economic Budget, in summary,, portrays an economy which
is undergoing a boom in expenditures for both producers' and consumers'
durable equipment, stimulated by anticipation of a large and expanding
defense program.
167
Appendix A
Statistical Tables Relating to Employment,
Production, and Purchasing Power
CONTENTS
National income or expenditure:
A-l. Gross national product or expenditure, 1929-50
A-2. Personal consumption exDenditures, 1929-50 . ,
A-3. Gross private domestic investment, 1929-50
A—4. National income by distributive shares, 1929—50
A-5. Personal income, 1929-50
A-6. Relation of national income and personal income, 1929—50 . . . .
A-7. Disposition of personal income, 1929-50
A-8. Total and per capita disposable oersonal income in current and 1950
prices, 1929-50
A-9. Gross national product or expenditure in 1939 prices, 1929-50 . . .
A-10. Gross national product or expenditure in 1950 prices, 1940-50 . . .
Employment and wages:
A—11. Labor force, employment, and unemployment, 1929—50
A—12. Number of wage and salary workers in nonagricultural establishments,
1929-50
A—13. Average gross weekly earnings in selected industries, 1929-50 . . . .
A-l 4. Average hourly earnings in selected industries, 1929-50
A—15. Average weekly hours in selected industries, 1929—50
Production and business activity:
A-l 6. Physical production index of goods and selected services, 1929-50 . .
A-l 7. Industrial production index, 1929-50
A-18. New construction activity, 1929-50
A-l 9. Business expenditures for new plant and equipment, 1929—51 . . . .
A—20. Inventories and sales in manufacturing and trade, 1939-50
A-21. Manufacturers' inventories by stage of fabrication and as ratios to
sales, 1946-50
A-22. Sales, stocks, and outstanding orders at 296 department stores,
1939-50
Prices:
A-23. Consumers'price index, 1929-50
A-24. Wholesale price index, 1929-50
A-25. Indexes of prices received and prices paid by farmers, and parity ratio,
1929-50
169
Page
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
Money, banking, and credit:
page
A-26. Consumer credit outstanding, 1929-50
196
A—27. Loans and investments of all commercial banks and weekly reporting
member banks, 1929-50
. 197
A-28. Deposits and currency, 1929-50
198
A-29. Estimated ownership of Federal securities, 1939-50
199
A-30. United States Government debt—volume and kind of securities,
1929-50
200
A-31. Bond yields and interest rates, selected years, 1929-50
201
Corporate profits and finance:
A-32. Profits before and after tax, all private corporations, 1929-50 . . . . 202
A-33. Sales and profits of large manufacturing corporations, 1939-50 . . .
203
A-34. Relation of profits before and after taxes to stockholders' equity,
private manufacturing corporations, by industry group, 1948-50 .
204
A-35. Relation of profits before and after taxes to sales, private manufacturing corporations, by industry group, 1948-50
205
A-36. Relation of profits before and after taxes to stockholders' equity and to
sales, all private manufacturing corporations, by size class, 1948-50.
206
A-37. Sources and uses of corporate funds, 1946-50
207
International transactions:
A-38. The international transactions of the United States, 1947-50 . . . . 208
A-39. United States exports and imports of goods and services, by area, 1937
and 1947-50
209
A—40. United States Government grants, other unilateral transfers, and loans
to foreign countries, 1947-50
210
A—41. United States merchandise export surplus, by area, 1936—38 quarterly
average and 1947-50
211
A—42. United States merchandise exports, including reexports, by area,
1936-38 quarterly average and 1947-50
212
A-43. United States domestic merchandise exports, by economic class,
1936-38 quarterly average and 1947-50
213
A-44. Indexes of quantity and unit value of United States domestic merchandise exports, by economic class, 1936—38 quarterly average and
1947-50
214
A-45. United States general merchandise imports, by area, 1936-38 quarterly average and 1947-50
215
A—46. United States merchandise imports for consumption, by economic
class, 1936-38 quarterly average and 1947-50
216
A—47. Indexes of quantity and unit value of United States merchandise imports for consumption, by economic class, 1936-38 quarterly average
and 1947-50
217
Summary:
A-48. Changes in selected economic series since 1939 and 1949 and during 1950
218
170
Statistical Tables Relating to Employment,
Production, and Purchasing Power
TABLE A-1. Gross national product or expenditure, 1929-50
[Billions of dollars]
Gross
national
product
Period
Gross
Personal
Net foreign
consumpprivate
tion exdomestic investment
penditures investment
Government purchases of
goods and
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
72.2
82.5
90.2
84.7
91.3
56.2
62.5
67.1
64.5
67.5
6.1
8.3
11.4
6.3
9.9
-.1
-.1
.1
1.1
.9
9.9
11.7
11.6
12.8
13.1
101.4
126.4
161.6
194.3
213.7
72.1
82.3
91.2
102.2
111.6'
13.9
18.3
10.9
5.7
7.7
1.5
1.1
-.2
-2.2
—2.1
13.9
24.7
59.7
88.6
96.5
215.2
211. 1
233.3
259.1
255.6
123.1
146.9
165.6
177.4
178.8
10.7
28.7
30.2
43.1
33.0
-1.4
4.6
8.9
1.9
.4
82.8
30.9
28.6
36.6
43.3
278.8
190.8
48.5
-2.6
42.1
_
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
.
- -
.
._
_
-
_.-
1950 *
Annual rates, seasonally adjusted
1949— First half. _
Second half.
1950—First half
Second half 1
___
1949—First quarter Second quarter
Third quarter _
Fourth quarter
1950— First quarter .
Second quarter
Third quarter. Fourth quarter 1
-
.
257.0
254.1
177.9
179.8
34.4
31.6
1.2
-.3
43.6
43.0
266.8
290.6
183.8
197.7
44.3
52.7
-1.8
-3.4
40.6
43.6
258.8
255.2
254.4
253.8
177.4
178.4
179.0
180.6
37.5
31.3
32.1
31.2
1.0
1.3
.1
-.7
42.9
44.3
43.2
42.8
263.4
270.3
284.3
297. 0'
182.4
185. 2
198.4
197.0
41.7
46.9
48.4}
57.0
-1.7
-2.0
-3.3
-3.5
41.0
40.2
40.8
46.5
* 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).
022781—51-
171
TABLE A-2.—Personal consumption expenditures, 1929-50
[Billions of dollars]
Durable goods
Nondurable goods
Services
Total
exAutomopendiHoustures Total biles Other Total Foodi Clothing 2 Other Total ings Other
and
parts
Period
1929
78.8
9.4
3.2
6.1
9.2
8.9
31.7
11.4
20.2
70.8
61.2
49.2
46.3
51.9
7.3
5.6
3.7
3.5
4.3
2.2
1.6
.9
1.0
1.4
5.1
4.0
2.8
2.5
2.9
37.7
34.1
29.0
22.7
22.3
26.7
19.7
1930
1931 1932
1933
1934
18.1
14.8
11.4
11.5
14.3
7.9
6.8
5.0
4.6
5.6
8.1
7.4
6.4
6.2
6.9
29.5
26.6
22.8
20.6
20.9
11.0
10.2
9.0
7.8
7.5
18.5
16.4
13.8
12.7
13.4
1935
1936
1937
1938
1939
56.2
62.5
67.1
64.5
67.5
5.2
6.4
7.0
5.8
6.7
1.9
2.3
2.4
1.6
2.1
3.3
4.1
4.6
4.1
4.6
29.4
32.9
35.2
34.0
35.3
16.3
18.5
20.0
19.0
19.3
5.9
6.5
6.7
6.6
7.0
7.2
7.9
8.6
8.4
8.9
21.7
23.3
24.9
24.7
25.5
7.6
7.9
8.4
8.7
8.9
14.1
15.4
16.5
16.0
16.5
1940
1941
1942
1943
1944
72.1
82.3
91.2
102.2
111.6
7.9
9.8
7.1
6.8
7.1
2.7
3.3
.7
.8
.9
5.1
6.4
6.4
6.0
6.2
37.6
44.0
52.9
61.0
67.1
20.7
24.4
30.5
35.3
38.9
7.4
8.8
11.0
13.7
15.3
9.5
10.8
11.4
11.9
12.9
26.6
28.5
31.2
34.4
37.4
9.2
9.9
10.6
11.1
11.7
17.4
18.7
20.6
23.3
25.7
1945
1946
1947
1948
1949
123.1
146.9
165.6
177.4
178.8
8.5
16.6
21.4
22.9
23.8
1.1
4.2
6.6
7.5
9.5
7.4
12.4
14.8
15.4
14.4
74.9
85.8
95.1
100.9
98.5
43.0
50.3
56.6
59.9
58.6
17.1
18.6
19.1
20.0
18.6
14.8
16.9
19.4
21.0
21.3
39.7
44.5
49.1
53.7
56.4
12.2
13.0
14.6
16.1
17.2
27.5
31.4
34.5
37.6
39.2
_ 190.8
29.4
12.1
17.4
101.8
60.6
19.0
22.4
59.6
18.3
41.3
1950 <
Annual rates, seasonally adjusted
. . _. 177.9
179.8
22.7
25.0
8.7
10.3
14.0
14.7
99.3
97.8
58.9
58.3
19.2
18.1
21.2
21.4
55.9
57.0
16.9
17.5
38.9
39.6
1950— First half
Second half *
183.8
197.7
26.8
32.0
10.9
13.2
15.9
19.0
98.4
105.2
58.7
62.6
18.1
19.8
21.6
23.0
58.6
60.4
18.0
18.6
40.7
41.9
1949— First quarter _
Second quarter
Third quarter
Fourth quarter
177.4
178.4
179.0
180.6
22.4
23.0
24.7
25.3
8.2
9.1
10.2
10.4
14.2
13.9
14.6
14.9
99.4
99.2
97.6
97.9
59.1
58.7
58.4
58.3
19.3
19.1
18.0
18.1
21.0
21.4
21.2
21.5
55.6
56.2
56.6
57.4
16.8
17.1
17.3
17.6
38.8
39.1
39.3
39.8
__ 182.4
185.2
198.4
197.0
26.9
26.7
33.5
30.5
10.8
11.0
13.5
13.0
16.2
15.6
20.0
17.5
97.4
99.3
104.9
105.5
58.2
59.1
62.5
62.6
17.7
18.4
19.7
19.8
21.4
21.9
22.8
23.1
58.1
59.2
59.9
61.0
17.9
18.1
18.4
18.7
40.3
41.1
41.5
42.3
1949— First half
Second half
1950— First quarter
Second quarter.
Third quarter .
Fourth quarter *
. .
* Includes alcoholic beverages.
Includes shoes and standard clothing issued to military personnel.
Includes imputed rental value of owner-occupied dwellings.
2
3
4
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).
172
TABLE A-3.—Gross private domestic investment, 1929-50
[Billions of dollars]
Period
Nonfarm producers' Farm equipment and
construction
plant and equipment
Total
gross
private
domesConContic Total i Equipstruc-3 Total * Equipment 2 tion
ment strucinvest-1
tion
i
ment
Residential
construction
(nonfarm)"
Net change in business inventories
Other
priNonvate
farm
conafter
struc- Total revaluFarm
tion e
ation
adjustment
1929
15.8
9.8
5.6
4.2
1.1
0.8
0.3
2.8
1.6
1.8
-0.3
1930
1931
1932
1933
1934
10.2
5.4
.9
1.3
2.8
7.6
4.6
2.5
2.3
31
4.3
2.8
1.6
1.6
2 2
3.4
1.8
1.0
.7
.9
.9
.5
.3
.3
4
.7
.4
.3
.3
.3
.2
.1
1.4
1.2
.5
.3
4
-.3
.5
.4 -1.4
.2 -2.6
.1 -1.6
1 —1 1
-2 7
-2.6
-1.3
2
-.2
.3
(7) 2
—13
1935
1936
1937- . .
1938
1939
6.1
8.3
11.4
6.3
9.9
0
5.2
6.6
4.7
5.7
2.9
3.9
4.7
3.4
4.0
1.0
1.3
1.9
1.4
1.7
.6
.8
1.0
.8
.8
.5
.6
1.8
.6
.6
.1
.2
.2
.2
.2
.7
1.1
1.4
1.5
2.7
.1
.1
.2
.2
.2
.9
1.0
2.3
-1.0
.4
.4
2.1
1.8.
-1,1
.3
.5
-1.1
.5
.1
.1
1940
1941
1942
1943
1944
13.9
18.3
10.9
5.7
7.7
7.4
9.3
5.8
4.6
6 3
5.3
6.6
4.1
3.5
4 7
2.1
2.7
1.7
1.1
16
1.0
1.3
1.0
.9
12
.8
1.0
.7
.6
9
.2
.3
.3
.3
3
3.0
3.4
1.8
1.0
8
.2
.3
.1
(7)
2.3
3.9
2.1
-.9
2.0
3.4
.8
-.5
— 3
.2
.5
1.3
-.4
— 5
1945
1946
1947
1948
1949
10.7
28.7
30.2
43.1
33.0
8.7
15.5
20.3
23.4
22.5
6.3
10.7
14.6
16.7
16.1
2.4
4.8
5.7
6.7
6.4
1.4
2.4
3.8
4.6
4.7
1.1
1.6
2.5
3.2
3.4
.3
.9
1.3
1.4
1.3
1.1
4.0
6.3
8.6
8.3
.2
.6
.7
1.0
1.3
7
Q.I
-.8
5.5
-3.7
-.6
6.3
1.4
4.4
-3.1
-.1
-.2
-2.2
1.2
-.6
1950 8
48.5
26.9
20.2
6.7
5.4
4.3
1.1
12.4
1.5
2.4
2.9
-.6
. _
Q
0)
(7)
0.5
o
Annual rates, seasonally adjusted
1949:
1st half . . .
2dhalf
34.4
31.6
22.9
22.0
16.2
16.0
6.7
6.0
5.0
4.3
3.8
3.0
1.3
1.2
7.7
8.9
1.2
1.4
-2.5
-5.0
-2.2
-4.0
-.3
-1.0
1950:
1st half
2dhalf 8 .
44.3
52.7
23.6
30.0
17.4
23.0
6.3
7.0
4.8
6.0
3.8
4.9
1.2
1.0
11.6
13.2
1.5
1.6
2.7
2.0
3.4
2.5
-.6
-.5
1949:
1st quarter
2d quarter
3d quarter
4th quarter. _.
37.5
31.3
32.1
31.2
23.2
22.6
22.2
21.9
16.4
16.0
16.1
15.9
6.8
6.6
6.1
6.0
5.0
5.1
4.6
4.0
3.7
3.8
3.3
2.8
1.3
1.3
1.3
1.2
7.8
7.6
8.2
9.5
1.2
1.3
1.3
1.4
.3
-5.3
-4.2
-5.7
.1
-4.5
-3.2
-4.7
.2
-.8
-1.0
-.9
1950:
1st quarter
2d quarter
3d quarter 8
4th quarter __
41.7
46.9
48.4
57.0
22.6
24.7
29.2
30.9
16.4
18.3
22.4
23.6
6.2
6.4
6.8
7.3
4.6
5.1
5.7
6.2
3.5
4.0
4.7
5.1
1.2
1.1
1.1
1.0
11.0
12.2
13.5
12.9
1.5
1.5
1.5
1.6
2.0
3.4
-1.5
5.5
2.7
4.0
-1.0
6.0
-.7
-.6
-.5
-.5
1
Items for 1945 and earlier years are not comparable with those for later years, nor with figures shown in
appendix
table A-18.
2
Total producers' durable equipment less "farm machinery and equipment" and farmers' purchases of
"tractors" and "business motor vehicles." These figures assume that farmers purchase 85 and 15 percent,
respectively,
of all tractors and motor vehicles used for productive purposes.
3
Industrial buildings, public utilities, gas- and oil-well drilling, warehouses, office and loft buildings,
stores,
restaurants, and garages. Includes hotel construction prior to 1946 only.
4
Farm construction (residential and nonresidential) plus "farm machinery and equipment" and farmers'
purchases
of "tractors" and "business motor vehicles." (See footnote 2.)
5
Includes
construction of hotels, tourist cabins, motor courts, and dormitories since 1946 only.
6
Includes religious, educational, social and recreational, hospital and institutional, miscellaneous nonresidential,
and
all other private.
7
Less than 50 million dollars.
s 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).
TABLE A—4.—National income by distributive shares, 1929-50
[Billions of dollars]
Business and professional income
and inventory
valuation
Inadjustment
Total Comcome
pennation- sation
of
al
InIn- farm
emin- l of
venprocome
come ployof
tory prieees 2
unin- valu- tors
Total corpoation
rated adenter- justprises ment
Period
Rental income
of
persons
Corporate profits
and inventory
valuation
adjustment
Net
Corporate
Total profits
before
tax 3
In- interven- est
tory
valuation
adjustment
1929
87.4
50.8
8.3
8.1
0.1
5.7
5.8
0.5
6.5
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
7.0
5.3
3.2
2.9
4.3
6.3
4.7
2.9
3.4
4.3
.8
.6
.3
-.5
-.1
3.9
2.9
1.7
2.3
2.3
6.6
4.8
3.3
3.3
1.6 -.8
3.6
2.4
2.5 -2.0 -3.0
1.0
2.0 -2.0
.2 -2.1
2.1
1.1
1.7 -.6
6.2
5.9
5.4
5.0
4.8
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
5.0
6.1
6.6
6.3
6.8
5.0
6.2
6.7
6.1
6.9
-.1
-.1
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
81.3
103.8
137.1
169.7
183.8
51.8
64.3
84.9
109.2
121.2
7.7
9.6
12.6
15.0
17.2
7.8
10.2
12.9
15.1
17.2
-.'l
4.9
6.9
10.5
11.8
11.8
3.6
4.3
5.4
6.1
6.5
182.7
180.3
198.7
223.5
216.8
123.0
117.1
128.0
140.2
140.6
18.7
20.6
19.8
22.1
21.0
18.8 -.1
22.4 — 1.8
21.3 -1.5
22.5 -.4
20.3
.7
12.5
14.8
15.6
17.7
13.4
236.2
152.2
23.2
24.7 -1.5
13.0
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949 .
-- .
-
.
1950 •
.2
-.2
-.1
-.6
-.4
2
10.3
9.8
-.2
-.7
1.0
-.7
4.5
4.5
4.4
4.3
4.2
9.2
14.6
19.9
24.3
24.0
9.3 -.1
17.2 -2.6
21.1 -1.2
25.1 -.8
24.3 -.3
4.1
4.1
3.9
3.4
3.1
6.3
6.6
7.1
7.5
7.3
19.2
18.3
24.7
31.8
29.9
19.7 -.6
23.5 -5.2
30.5 -5.8
33.9 -2.0
2.2
27.6
3.0
2.9
3.5
4.1
4.7
7.4
35.5
40.2 -4.7
5.0
3.2
5.7
6.2
3.3
6.5
(4)
Annual rates, seasonally adjusted
1949_First half
Second half
1950— First half 5
Second half
._
1949— First quarter
Second quarter
Third quarter
Fourth quarter. _
1 950— First quarter.
Second quarter
Third quarter5 5
Fourth quarter
_
218.3
215.4
141.0
140.1
21.3
20.6
20.4
20.1
.9
.5
14.3
12.5
7.4
7.2
29.6
30.1
27.4
27.9
2.2
2.2
4.6
4.8
223.0
249.2
145.1
159.2
21.8
24.6
22.4 -.6
26.8 -2.3
12.2
13.6
7.2
7.5
31.6
39.3
33.3 -1.6
47.0 -7.7
5.0
5.0
218.8
217.8
216.7
214.2
141.5
140.5
140.0
140.2
21.5
21.1
20.7
20.6
20.7
20.1
20.0
20.3
.8
1.0
.7
.3
14.9
13.7
12.2
12.8
7.4
7.4
7.2
7.3
28.8
30.4
31.8
28.4
28.3
26.4
28.2
27.6
.5
3.9
3.7
.8
4.6
4.7
4.8
4.8
216.9
229.1
243.7
_. 254.7
142.3
147.9
155. 2
163.2
21.4
22.3
24.7
24.4
21.6 -.2
23.3 -1.0
31
27.8
25.9 -1.5
12.8
11.7
13.3
14.0
7.3
7.1
7.4
7.6
28.2
35.0
38.1
40.5
29.2
37.4
46.0
48.0
-1.0
-2.3
-7.9
-7.5
5.0
5.0
5.0
5.0
1
National income is the total net income earned in production by individuals and 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 A-5), and employer and
employee
contributions for social insurance (see appendix table A-6).
3
See appendix table A-32 for corporate tax liability (Federal and State income and excess profits taxes)
and
corporate
profits after taxes.
4
Less than 50 million dollars.
5
Estimates based on incomplete data; corporate profits and total national income for third quarter and all
items for 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).
174
TABLE A-5.—Personal income, 1929-50
[Billions of dollars]
Total
personal
income
Period
Salaries,
wages,
and other
labor
income *
Proprietors' and
rental
income 2
Dividends
and
personal
interest3
income
Transfer
payments
Nonagricultural
personal
income 4
1929 ._
85.1
50.5
19.7
13.3
1.5
76.8
1930
1931
1932 .
1933
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
1936 .
1937
1938
1939
59.9
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
78.3
95.3
122.7
150.3
165.9
49.5
61.5
81.4
104. 5
116.2
16.3
20.8
28.4
32.8
35.5
9.4
9.9
9.7
10.0
10.6
3.1
3.1
3.2
3.0
3.6
71.5
86.1
109.4
135. 2
150.5
171.9
177.7
191.0
209.5
206.1
116.9
111.1
122.3
134.9
134.9
37.5
42.0
42.4
47.3
41.7
11.4
13.2
14.5
16.1
17.2
6.2
11.4
11.8
11.2
12.3
155.7
158.8
170.8
187.0
188.2
222,4
145.2
43.5
18.6
15.1
205.2
1940
1941
1942 _ _
1943
1944 _
1945
1946. .
1947
1948
1949
_ . _
_
1950 8
Annual rates, seasonally adjusted
1949— First half
Second half _ . _ .
207.7
204.6
135.4
134.5
43.0
40.4
17.1
17.3
12.2
12.5
188.7
187.8
1950— First half .. 8_
Second half
215.8
229.1
138.3
152.2
41.4
45.7
17.8
19.4
18.2
11.9
199.3
211.0
1949— First quarter
Second quarter
Third quarter.
Fourth quarter
208.6
206.8
203. 8
205.4
135.7
135.2
134.4
134.6
43.8
42.2
40.1
40.7
17.1
17.1
16.8
17.8
11.9
12.4
12.5
12.5
189.0
188.4
187.3
188.2
1950— First quarter
Second quarter
Third quarter- 5
Fourth quarter
216.4
215.1
224.8
233.4
135.5
141.1
148.4
155.9
41.5
41.2
45.4
46.0
17.7
17.9
19.1
19.6
21.6
14.9
11.9
11.9
199.3
199.3
207.2
214.9
1
Differs from "compensation of employees" in appendix table A-4, in that it excludes employer and em
ployee contributions to social insurance. Includes wage and salary receipts and other labor income—compensation tor 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 piison inmates, Government payments to enemy prisoners of
war, marriage fees to justices of the peace, and merchant marine wai-risk life and injury claims.
fe 23 See appendix table A-4, for major components.
!r_ See appendix table A-32. for dividend payments.
* Nonagricultural income is 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.
5
Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because 01 rounding.
Source: Department of Commerce (except as noted).
TABLE A-6. Relation of national income and personal income, 1929-50
[Billions of dollars]
Plus:
Less:
CorpoExcess
rate
of
Nation- profits Contri- wage
and
inbutions acal
income vento
tory social cruals
valu- insur- over
disation ance burseadjustments
ment
Period
Net
Gov- interBusi- Equals:
Perernest
ness sonal
ment paid
Divi- trans- income
transby dends fer
fer
paypay- Governments
ments ment
87.4
10.3
0.2
0.9
1.0
5.8
0.6
85.1
75.0
58.9
41.7
39.6
48.6
6.6
1.6
-2.0
-2.0
1. 1
.3
.3
.3
.3
.3
1.0
2.0
1.4
1.5
1.6
1.0
1.1
1.1
1.2
1.2
5.5
4.1
2.6
2.1
2.6
.5
.6
.7
.7
.6
76.2
64.8
49.3
46.6
53.2
56.8
64.7
73.6
67.4
72.5
3.0
4.9
6.2
4.3
5.8
.3
.6
1.8
2.0
2.1
1.8
2.9
1.9
2.4
2.5
1.1
1.1
1.2
1.2
1.2
2.9
4,6
4.7
3.2
3.8
.6
.6
.6
.4
.5
59.9
68.4
74.0
68.3
72.6
1940
1941
1942
1943
1944
81.3
103.8
137.1
169.7
183.8
9.2
14.6
19.9
24.3
24.0
2.3
2.8
3.5
4.5
5.2
2.7
2.6
2.7
2.5
3.1
1.3
1.3
1.5
2.1
2.8
4.0
4.5
4.3
4.5
4.7
.4
.5
.5
.5
.5
78.3
95.3
122.7
150.3
165.9
1945
1946
1947
1948
1949
182.7
180.3
198.7
223.5
216.8
19.2
18.3
24.7
31.8
29.9
6.1
6.0
5.7
5.2
5.7
5.6
10.9
11.1
10.6
11.6
3.7
4.4
4.4
4.5
4.7
4.7
5.8
6.6
7.5
7.8
.5
.6
.7
.7
.7
171.9
177.7
191.0
209.5
206.1
236.2
35.5
6.9
14.4
4.8
8.9
.7
222.4
1929.'.
.— .
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
19502.--
_
-.
-
__
.-.
.__
0.2
-.2
0)
0)
0)
0)
0)
0)
Annual rates, seasonally adjusted
1949—-First half
Second half
218.3
215.4
29.6
30.1
5.6
5.6
-.1
11.4
11.8
4.6
4.7
7.8
7.8
.7
.7
207.7
204.6
1950— First half 2
Second half
223.0
249.2
31.6
39.3
6.8
7.1
17.6
11.2
4.7
4.8
8.2
9.6
.7
.7
215.8
229.1
1949— First quarter
Second quarter
Third quarter
Fourth quarter
218.8
217.8
216.7
214.2
28.8
30.4
31.8
28.4
5.7
5.6
5.6
5.7
11.2
11.7
11.9
11.8
4.6
4.6
4.7
4.7
7.9
7.7
7.4
8.2
.7
.7
.7
.7
208.6
206.8
203.8
205. 4
1950— First quarter
Second quarter _
Third quarter 2
Fourth quarter 2
216.9
229.1
243.7
254.7
28.2
35.0
38.1
40.5
6.7
6.8
6.9
7.3
P)
0)
.1
-.3
(0
0)
(0
(0
0)
0)
20.9
14.2
11.2
11.2
4.7
4.7
4.8
4.8
8.1
8.2
9.4
9.8
.7
.7
.7
.7
216.4
215.1
224.8
233. 4
0)
1 Less than 50 million dollars.
2 Estimates based on incomplete data; corporate profits and total national income for third quarter and
all items for fourth quarter by Council of Economic Advisers.
f NOTE.—Detail will not necessarily add to totals because of rounding.
f Source:'-Departmentjof Commerce (except as noted).
176
TABLE A—7. Disposition oj personal income, 1929-50
Personal
income
Period
Less:
Less:
Equals:
Equals:
Personal Disposa- Personal
Personal
contax and
ble
net
nontax personal sumption saving
payments income expenditures
Net
saving as
percent
of disposable
income
Billions of dollars
1929
85.1
2.6
82.5
78.8
3.7
4.5
1930
1931
1932
1933
1934
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
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
78.3
95.3
122.7
150.3
165.9
2.6
3.3
6.0
17.8
18.9
75.7
92.0
116.7
132.4
147.0
72.1
82.3
91.2
102.2
111.6
3.7
9.8
25.6
30.2
35.4
4.9
10.7
21.9
22.8
24.1
1945
1946
1947
1948 ._
1949
171.9
177.7
191.0
209.5
206.1
20.9
18.8
21.5
21.2
18.7
151.1
158.9
169.5
188.4
187.4
123.1
146.9
165. 6
177.4
178.8
28.0
12.0
3.9
10.9
8.6
18.5
7.6
2.3
5.8
4.6
1950 i
222.4
20.4
202.1
190.8
11.3
5.6
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944 .
_
.
.
Annual rates, seasonally adjusted
1949— First half
Second half
.
__
_ _.
1950— First half
Second half 1
1949— First quarter
Second quarter
Third quarter.
_._
Fourth quarter ___
1950— First quarter
Second quarter
Third quarter. J
Fourth quarter
__.
207.7
204.6
18.7
18.7
189.0
186.0
177.9
179.8
11.2
6.2
5.9
3.3
215.8
229.1
19.2
21.4
196.6
207.6
183.8
197.7
12.7
10.0
6.5
4.8
208.6
206.8
203.8
205.4
18.7
18.7
18.7
18.7
189.9
188.2
185.1
186.8
177.4
178.4
179.0
180.6
12.5
9.8
6.2
6.2
6.6
5.2
3.3
3.3
216.4
215.1
224.8
233.4
19.0
19.5
20.0
22.9
197.5
195.6
204.7
210.5
182.4
185.2
198.4
197.0
15.0
10.4
6.4
13.5
7.6
5.3
3.1
6.4
1
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).
177
TABLE A—8.— Total and per capita disposable personal income in current and 1950 prices,
1929-50
Period
Total disposable personal income (billions
of dollars)
Per capita disposable
income (dollars)
Current
prices
Current
prices
1950
prices 1
1950
prices l
Population
(thousands) 2
82.5
115.9
678
952
121, 770
1930 _
1931
1932
1933
1934
73.7
63.0
47.8
45.2
51.6
108.5
103.6
89.5
88.6
95.6
599
508
383
360
408
882
835
717
706
756
123, 077
124, 040
124, 840
125, 579
126,374
1935
1936
1937
1938
1939
58.0
66.1
71.1
65.5
70.2
104.9
118.0
122.4
115.3
124.7
456
516
552
505
536
824
921
950
888
953
127, 250
128, 053
128,825
129, 825
130, 880
75.7
92.0
116.7
132.4
147. 0
133.0
152.3
172. 4
179.4
189.9
574
691
867
970
1,065
1,008
1, 143
1,280
1,314
1,375
131, 970
133, 203
134, 665
136,497
138, 083
151.1
158.9
169.5
188.4
187.4
188.4
183.9
178.8
188.6
190.1
1,082
1,125
1,177
1,285
1,256
1,350
1,302
1,241
1,287
1,274
139, 586
141, 235
144, 024
146, 571
149,215
202.1
202.1
1,332
1,332
151, 772
1929
- _
_ _ ..
1940
1941
1942
1943
1944
1945
1946
1947 1948—
1949
_
1950 3
- .
Annual rates, seasonally adjusted
1949— First half..
Second half
189.0
186.0
190.9
189.4
1,272
1,240
1,284
1,263
148, 639
149, 947
1950— First half 3
Second half
196.6
207.6
200.4
204.1
1,300
1,361
1,326
1,338
151, 188
152, 511
1 Dollar estimates in current prices divided by the price index of personal consumption expenditures.
This price index was based on the Department of Commerce data, shifted from 1939 base.
2 Estimated population of continental United States including armed forces overseas; annual data as of
July 1 and semiannual data as of April 1 and October 1. Population of continental United States on April
1, 1950, including armed forces overseas was 151,132,000, according to the 1950 Census. Estimates made
prior to the 1950 Census and used in this table put total population, including armed forces overseas, at
151,188,000 on April 1, which is] 56,000 higher than the official results of the 1950 Census. Intercensal
estimates used here for 1941 through 1950 will be adjusted later to take care of this small difference.
3 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
Sources: Department of Commerce and Council of Economic Advisers.
178
TABLE A-9.— Gross national product or expenditure in 1939 prices, 1929-50*
[Billions of dollars, 1939 prices]
Personal consumption
expenditures
Total
gross
naProtional
New ducprodDur- Noners'
dur- Serv- Total con- duruct Total able able
struc- able
goods goods ices
tion equipment
Period
Net
foreign
Change inin
State
vestbusi- ment
Total Fedand
ness
eral local
inventories
Private
gross
national
product 2
85.9
62.2
8.0
29.1
25.1
14.9
7.4
6.1
1.5
78.1
72.3
61.9
61.5
67.9
58.6
56.6
51.8
51.1
54.0
6.4
5.3
3.9
3.8
4.4
27.7
27.5
25.2
24.9
27.0
24.5
23.9
22.7
22.4
22.6
10.1
5.9
1.1
1.6
3.5
5.4
3.8
2.1
1.5
1.7
4.8
3.3
1.9
2.0
2.7
-.2
-1.1
-3.0
-1.8
-.8
73.9
83.9
87.9
84.0
91.3
57.2
62.8
65.0
63.9
67.5
5.4
6.6
7.0
5.7
6.7
28.6
31.8
32.9
33.4
35.3
23.2
24.4
25.1
24.8
25.5
6.7
9.3
11.4
6.3
9.9
2.2
3.1
3.8
3.3
4.9
3.6
4.8
5.5
3.9
4.6
.9
1.4
2.1
-1.0
.4
100.0
. 115. 5
129.7
145.7
156.9
71.3
76.6
75.8
78.0
81.1
7.7
8.9
5.7
5.0
4.6
37.1
40.1
41.3
42.6
44.5
26.5
27.6
28.8
30.4
32.0
13.7
17.1
9.3
5.4
6.6
5.4
6.1
3.3
1.9
2.0
153.4 86.3
138.4 95.7
138.6 98.3
143.1 100.0
142.3 102.0
5.3
10.4
12.3
12.6
12.9
47.9
50.2
49.5
49.7
50.4
33.2
35.2
36.4
37.7
38.8
8.3
20.3
19.3
22.8
17.7
19503.... 152.4 107.4
15.8
51.4
40.2
25.1
1929
1930
1931
1932
1933
1934
-.-
1935
1936 _ _
1937_
1938
1939 ._
1940
1941
1942
1943
1944
1945
1946 . _
1947
1948 .
1949
Government purchases of goods
and services
Gross private domestic
investment
7,9
1.3
6.6
81.5
.6 8.7
.3 9.4
.2 8.9
.1 8.7
.3 10.1
1.5
1.6
1.7
2.3
3.1
7.3
7.8
7.2
6.4
7.0
73.5
67.7
57.4
56.5
62.0
0.8
-.1
-.2
.1
1.0
.9
10.1
11.9
11.4
12.7
13.1
3.0
4.9
4.4
5.3
5.2
7.1
7.1
6.9
7.4
7.9
67.6
76.4
80.9
76.4
83.7
6.0
7.2
4.4
3.6
5.1
2.3 1.2
3.8
.7
1.6 -.4
-.1 -2.1
-.5 -2.2
13.8
21.1
45.0
64.3
71.3
6.1
13.8
38.3
58.2
65.4
7.7
7.3
6.7
6.1
6.0
92.1
106.2
116.5
125.3
133.0
2.6
6.0
6.9
8.0
7.9
6.7
9.9
11.8
12.6
11.9
-1.0 -1.8
4.4 2.7
.6 4.8
2.2
1.4
-2.1
.5
60.6
19.6
16.1
19.0
22.0
54.6
12.8
8.5
10.8
12.8
6.0
6.8
7.6
8.2
9.2
129.7
125.6
128.8
133.2
132.0
9.2
14.5
-.4
20.4
(4)
(4)
142.0
1
1.4
See "Survey of Current Business," January 1951, for explanation of conversion of estimates in terms of
current
prices to those in terms of 1939 prices.
2
Total
gross national product less compensation of general government employees.
3
Estimates for 1950 are tentative, based on published figures for first three quarters and forecast of fourth
quarter.
4
Not available.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.
179
TABLE A-10.—Gross national product or expenditure in 1950 prices, 1940-50l
[Billions of dollars, 1950 prices]
Personal consumption
expenditures
Total
gross
Peri- naod tional
product Total
Dur- Nondurable
able
goods goods
Government
purchases of goods
and services
Gross private domestic
investment
ProNew ducers
Serv- Total condurices
struc- able
tion equipment
•KT A
JNet
foreign
Change investin busi- ment
ness
Total
inventories
Fed-
eral
State
and
local
1940__
1941__
1942__
1943__
1944__
184.4
215.0
245.7
277.1
298.4
127.2
137.1
135.1
138.7
144.3
14.4
16.7
10.6
9.3
8.6
73.6
79.6
81.9
84.4
88.3
39.2
40.8
42.6
45.0
47.4
27.6
34.6
19.4
10.5
12.0
12.9
14.5
7.8
4.4
4.7
10.1
12.2
7.5
6.2
8.6
4.6
7.9
4.1
-.1
-1.3
1.1
(2)
-1.8
-5.3
-5.6
28.5
43.5
93.0
133.2
147.7
12.7
28.5
79.3
120.7
135.5
15.8
15.0
13.7
12.5
12.2
1945__
1946__
1947__
1948. _
1949__
289.1
254.0
252.3
263. 0
260.0
153.8
170.7
175.1
177.7
181.1
9.9
19.3
23.0
23.4
23.9
94.8
99.3
98.1
98.5
99.8
49.1
52.1
54.0
55.8
57.4
15.0
39.2
36.5
45.3
34.5
6.1
14.3
16.2
18.8
18.6
11.2
16.6
20.0
21.3
20.2
-2.3
8.3
.3
5.2
-4.3
-5.2
3.6
7.4
.8
-1.0 "
125.5
40.5
33.3
39.2
45.4
113.2
26.5
17.7
22.3
26.5
12.3
14.0
15.6
16.9
18.9
19503. 278.8
190.8
29.4
59.6
48.5
21.7
24.5
2.4
42.1
22.7
19.4
101.8
-2.6
1
These estimates represent a rough conversion of the Department of Commerce series in 1939 prices to
1950 prices. (See appendix table A-9.) This was done by major components, using the implicit price indexes for 1950. Although it would have been preferable to redeflate the series by minor components, this
would not substantially change the results except possibly for the war years, and for the series on changes in
business inventories.
2 Less than 50 million dollars.
a Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Council of Economic Advisers.
180
TABLE A—11.—Labor force, employment, and unemployment, 7929-50
Total
labor
force
(includSingl
armed
forces)^
Period
Civilian labor force
Employment 2
Total
civilian
labor
force
Total
Agricultural
Nonagricultural
Unemployment
Unemployment
as percent of
total
civilian
labor
force
Thousands of persons, 14 years of age and over
Monthly average:
1929
49, 440
49, 180
47,630
10, 450
37, 180
1, 550
3.2
1930
1931
1932
1933.
1934
50, 080
50,680
51, 250
51, 840
52, 490
49, 820
50, 420
51, 000
51, 590
52, 230
45, 480
42, 400
38, 940
38, 760
40, 890
10, 340
10, 290
10, 170
10, 090
9,900
35, 140
32. 110
28, 770
28, 670
30,990
4,340
8,020
12, 060
12, 830
11, 340
8.7
15.9
23.6
24.9
21.7
1935
1936
1937
1938
1939
53, 140
53, 740
54, 320
54, 950
55, 600
52, 870
53, 440
54, 000
54, 610
55, 230
42, 260
44, 410
46, 300
44, 220
45, 750
10, 110
10, 000
9,820
9,690
9,610
32, 150
34, 410
36, 480
34, 530
36, 140
10, 610
9,030
7,700
10, 390
9,480
20.1
16.9
14.3
19.0
17.2
1940
1941
1942 _
1943
1944
56. 030
57, 380
60, 230
64, 410
65, 890
55, 640
55, 910
56, 410
55, 540
54,630
47, 520
50, 350
53, 750
54, 470
53, 960
9,540
9, 100
9,250
9,080
8,950
37, 980
41, 250
44, 500
45, 390
45, 010
8,120
5,560
2,660
1,070
670
14.6
9.9
4.7
1.9
1.2
65, 140
60, 820
61, 608
62, 748
63, 571
53, 860
57, 520
60,168
61, 442
62, 105
52, 820
55, 250
58, 027
59, 378
58, 710
8,580
8,320
8.266
7,973
8,026
44, 240
46, 930
49, 761
51, 405
50,684
1, 040
2,270
2,142
2,064
3,395
1.9
3.9
3.6
3.4
5.5
1945
1946
1947
1948
1949
_ .
_..
.
-
.-_
64, 599
63, 099
59, 957
7,507
52, 450
3,142
5.0
1949— First half
Second half
62, 732
64, 411
61, 249
62, 960
58,060
59, 359
7,940
8,112
50, 120
51, 247
3,189
3,602
5.2
5.7
1950— First half
Second half-- _
63,776
65, 422
62, 429
63, 769
58, 555
61, 358
7, 233
7,781
51, 322
53, 578
3,874
2,410
6.2
3.8
1 94.9— January
FebruaryMarch.
April
May
June _ _ _ _ _
July
August
September
October
November
December
61, 546
61, 896
62, 305
62, 327
63, 452
64, 866
65, 278
65, 105
64, 222
64, 021
64,363
63, 475
60,078
60, 388
60, 814
60, 835
61, 983
63, 398
63, 815
63,637
62, 763
62, 576
62, 927
62,045
57, 414
57, 168
57, 647
57, 819
58, 694
59, 619
59, 720
59, 947
59, 411
59, 001
59, 518
58, 556
6,763
6,993
7,393
7,820
8,974
9,696
9,647
8,507
8,158
7,710
7,878
6,773
50, 651
50, 174
50, 254
49, 999
49, 720
49, 924
50, 073
51, 441
51,254
51, 290
51, 640
51, 783
2,664
3,221
3,167
3,016
3,289
3,778
4,095
3,689
3,351
3,576
3,409
3,489
62, 835
63,003
63, 021
63,513
64, 108
66, 177
65, 742
66, 204
65, 020
65, 438
65, 453
64, 674
61, 427
61,637
61, 675
62, 183
62, 788
64, 866
64, 427
64, 867
63,567
63,704
63,512
62, 538
56, 947
56, 953
57, 551
58, 668
59, 731
61, 482
61, 214
62, 367
61, 226
61, 764
61, 271
60, 308
6, 198
6,223
6,675
7,195
8,062
9,046
8,440
8,160
7,811
8,491
7,551
6,234
50, 749
50, 730
50, 877
51, 473
51, 669
52, 436
52, 774
54, 207
53, 415
53, 273
53, 721
54, 075
4,480
4,684
4,123
3,515
3,057
3,384
3,213
2,500
2,341
1,940
2,240
2,229
1950
1950— January. _.
February
March
April
May
June.
JulyAugust
September _
October
November
December
_
.
-
4.4
5.3
5.2
5.0
5.3
6.0
6.4
5.8
5.3
5.7
5.4
5.6
7.3
7.6
6.7
5.7
4.9
5.2
5.0
3.9
3.7
3.0
3.5
3.6
1 Data for 1940-50 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
the2 Census Bureau from its current estimates for comparability with 1940 data.
Includes part-time workers and those who had jobs but were not at work for such reasons as vacation,
llness, bad weather, temporary lay-off, and industrial disputes.
NOTE.—Labor force data are based on a survey made during the week which includes the 8th of the
month.
Detail will not necessarily add to totals because of rounding.
Sources: Department of Labor (1929-39) and Department of Commerce (1940-50).
181
TABLE A-12.—Number of wage and salary workers in nonagricultural establishments, 1929-50l
[Thousands of employees]
Manufacturing
Period
Monthly average:
1929
Total
wage
and
salary
workers
Total
NonDura- durable
ble
goods goods
GovTransernCon- portament
tion Trade
FiServ- (FedMin- tract
conand
2
nance ice 2
eral,
ing strucpublic ( )
State,
tion
utiliand
ties
local)
3,066
1,078 1,497 3,907 6,401 1,431 3,127
3,149
1,000 1,372 3,675 6,064 1,398 3,084
3,264
864 1,214 3,243 5,531 1,333 2,913
3,225
970 2,804 4,907 1,270 2,682
722
(33)
809 2,659 4,999 1,225 2,614
3,167
735
(3)
862 2,736 5,552 1,247 2,784
3,298
874
()
912 2,771 5,692 1,262 2,883
8,907
3,477
888
26, 792
1935
(33)
(33)
9,653
3,662
28, 802
937 1,145 2,956 6,076 1,313 3,060
1936
(3)
(3)
30, 718 10, 606
1937
(3)
(3) 1,006 1,112 3,114 6,543 1,355 3,233 3,749
882 1,055 2,840 6,453 1,347 3,196
9,253
3,876
28, 902
1938
()
()
1939
845 1,150 2,912 6,612 1,382 3,321
3,987
30,287 10, 078 4,683 5,394
4,192
916 1,294 3,013 6,940 1,419 3,477
32, 031 10, 780 5,337 5,443
1940
1941
4,622
947 1,790 3,248 7,416 1,462 3,705
36, 164 12, 974 6,945 6,028
1942
983 2,170 3,433 7,333 1,440 3,857
5,431
39, 697 15, 051 8,804 6,247
42, 042 17, 381 11, 077 6,304
1943
917 1,567 3,619 7,189 1,401 3,919
6,049
1944
_._
883 1,094 3,798 7,260 1,374 3,934
41, 480 17, 111 10, 858 6,253
6,026
1945
826 1,132 3,872 7,522 1,394 4,055
40, 069 15, 302 9,079 6,222
5,967
852 1,661 4,023 8,602 1,586 4,621
1946
41, 412 14, 461 7,739 6,722
5,607
943 1,982 4,122 9,196 1,641 4,786
5,454
43, 371 15, 247 8,373 6,874
1947 . _
1948
44, 201 15, 286 8,315 6,970
5, 613
981 2,165 4,151 9,491 1,716 4,799
932 2,156 3,979 9,438 1,763 4,782
1949
43, 006 14, 146 7,465 6,681
5,811
44, 089 14, 854 7,980 6,875
1950 4
5,904
905 2,317 4,009 9,519 1,813 4,770
1949— First half
981 2,044 4,016 9,358 1,752 4,760
42, 993 14, 307 7,712 6,595
5,776
Second half— 43, 019 13, 986 7, 218 6,768
883 2,267 3,942 9,518 1,772 4,803
5,847
1950— First half
42, 710 14, 220 7,568 6,653
5,822
870 2,070 3,903 9,281
,797 4,746
Second half <__ 45, 467 15, 487 8,391 7,096
939 2,563 4,114 9,757
5,986
,828 4,793
1949 —January
5,764
991 2,016 4, 054 9,388
43, 449 14, 782 8,044 6,738
,731 4,723
February
986 1,926 4,024 9,292
43, 061 14, 649 7,923 6,726
5,737
,735 4,712
March..
42, 918 14,475 7,819 6,656
981 1,947 3,975 9,310
5,761
,749 4,720
April
984 2, 036 3,991 9,478
42, 966 14, 177 7,656 6,521
5,775
,757 4,768
May
974 2,137 4,021 9,342 1, 763 4,804
42, 731 13, 877 7,441 6,436
5,813
968 2,205 4,031 9,336 1,774 4,834
42,835 13, 884 7,392 6,492
June
5,803
July
42, 573 13, 757 7,255 6,502
943 2,277 4,007 9,220 1,780 4,851 5,738
956 2, 340 3,992 9,213 1,780 4,836
August
42, 994 14, 114 7,302 6,812
5,763
948 2,341 3,959 9,409 1,771 4, 833
September
43, 466 14,312 7,409 6,903
5,893
October
»593 2,313 3,871 9,505 1,767 4,794
42, 601 13, 892 6,986 6,906
5,866
November
42, 784 13, 807 7,050 6,757
917 2,244 3,892 9,607 1,766 4,768
5,783
December
43, 694 14,031 7,303 6,728
6,041
940 2,088 3,930 10, 156 1,770 4,738
1950—January
42, 125 13, 980 7,342 6,638 *861 1,919 3,869 9,246 1,772 4,701
5,777
February
41, 661 13, 997 7,324 6,673
«595 1,861 3,841 9,152 1,777 4,696
5,742
March
42, 295 14, 103 7,418 6,685
938 1,907 3,873 9,206 1,791 4,708
5,769
April
42, 926 14, 162 7,548 6,614
939 2,076 3,928 9,346 1,803 4,757
5, 915
May
43, 311 14, 413 7,809 6,604
940 2,245 3,885 9,326 1,812 4,790
5,900
946 2,414 4,023 9,411 1,827 4,826
June
43, 945 14, 666 7,964 6,702
5,832
44,096 14, 777 7,978 6,799
922 2,532 4,062 9,390 1,831 4,841
July
5,741
August
45, 080 15, 450 8,294 7,156
950 2,629 4,120 9,474 1,837 4,827
5,793
September
*.. 45, 689 15, 682 8,425 7,257
946 2,615 4,138 9,660 1,827 4,817
6,004
October 4
45, 899 15, 819 8,612 7,207
941 2,620 4,135 9,766 1,822 4,757
6,039
November 4.. 45, 756 15, 707 8,647 7,060
936 2,537 4,114 9,880 1,821 4,724
6,037
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 A-ll) 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 Data for the trade and service divisions, beginning with 1939, are not comparable with data shown for
earlier years because of the shift of the automotive repair service industry from the trade to the service
division.
3 Not available.
4 Estimates based on incomplete data.
« Data reflect work stoppages in bituminous coal mining.
NOTE.—Detail will not necessarily add to totals because of rounding.
Adjustments have been made to levels indicated by data of unemployment insurance agencies and the
Bureau of Old-Age and Survivors Insurance through 1947, and have been carried forward from 1947 benchmark levels, thereby providing consistent series.
Source: Department of Labor.
1930
1931
1932
1933
1934
31, 041
10, 534
(3)
(3)
29, 143
26, 383
23, 377
23, 466
25, 699
9,401
8,021
6,797
7,258
8,346
(33)
(3 )
()
(33)
()
8
182
TABLE A-13.—Average gross weekly earnings in selected industries, 1929-50
M anuf actur in g
Period
Total
Monthly average:
1929
$25. 03
Bitumi- Build- Class I
Tele- Wholenous ing con- steam
Retail Hotels
sale
(year
coal
phone trade
strucrailtrade round)
Dura- Non1
roads
ble durable mining tion
goods goods
$27. 22
$22. 93
$25. 72
(2)
$28. 49
(2)
(2)
(2)
(2)
(22)
(2)
(2 )
(22)
(2)
()
(22)
(22)
(2)
(2)
(2)
(22)
(2)
()
(22)
()
(22)
()
(22)
(2)
()
(2)
(22)
(2)
(2)
(2 )
()
(22)
()
(22)
()
(2)
(2)
(22)
(2)
()
(2)
(22)
(2 )
( 2)
( 2)
()
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. 97
27.76
26.76
23.34
23.09
24.32
1935
1936
1937
1838
1939
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
(22)
()
$29. 81
31.53
31.94
1940
1941 .
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
31.55
34.25
38.65
43. 68
46.06
32.44
32.74
33.97
36.30
38.39
1945 _
1946
1947
1948
1949
44.39
43.82
49.97
54.14
54.92
49.05
46.49
52.46
57.11
58.03
38.29
41.14
46.96
50.61
51.41
52. 25
53.73
56.24
58.03
63.30
66.59
72.12 * 68. 85
70.95
63.28
45.69
51.22
54.17
60.34
61.73
(3)
44.04
44.77
48.92
51.78
1930
1931
1932
1933
1934 .
. .. ..
1950 6
()
()
8( )
2
(2)
(2)
(22)
(2)
()
(2)
(22)
()
$51. 99
55.58
57.55
(22)
()
$40. 66
43.85
45.93
(22)
()
$29. 36
31.41
32.84
58.97
62.86
54.43
67.90
73.11 5 62. 93
54.48
59.85
47.72
33.65
1949— First half
Second half- _.
54.64
55.13
57.90
58.01
50.80
52.11
70.94
54.99
70.80 5 60. 39
71.03 « 61. 00
50.90
52.71
57.23
57.84
45.56
46.32
32.60
32.99
1950— First half
Second half 6.
57.08
60.85
60.68
65.04
52.99
55.87
64.50
71.29
70.34 s 62. 57
75.88 5 63. 28
53. 52
55.44
58.80
60.89
46.76
48.68
33.26
34.03
1949 — January
February
March
April. _.
May__
June
July
August
September __.
October
November
December
55.50
55. 20
54.74
53.80
54.08
54. 51
54.63
54.70
55.72
55.26
54.43
56.04
58.83
58.49
57.83
57.21
57.21
57.82
57.31
57.89
58.69
58.17
56.82
59.19
51.35
51. 33
51.07
49.67
50.41
50.97
51. 55
51.31
52.59
52.47
52.07
52.69
76.32
73.56
7 70. 54
72. 33
72.98
7
59. 90
7 47. 94
7 49. 51
7 52. 46
7 63. 10
68.17
7 48. 74
70.88
70.53
69.83
70.33
71.81
71.44
71.28
71.95
70.69
71.80
70.21
70.26
60.21
61.64
60.00
62.51
60.69
57.27
60.37
62.64
60.98
58.98
61.60
61.45
49. 84
50. 84
50.82
50.58
51. 84
51.46
51. 90
51.57
52.61
53.29
54.40
52.49
57.24
56.82
56.88
57.12
57.83
57.49
58.18
57.10
57.35
58.36
57.86
58.20
45.51
45.14
44.95
45. 31
45.98
46.45
46.95
46.87
46.58
46.06
45.63
45.83
32.41
32.47
32.53
32.35
32.99
32.85
32.90
32. 93
32.90
32.84
33.13
33. 24
1950— January
.
February
March
April...
May
June
July—August
6
September
__
October 6 6
November _.
56.29
56.37
56.53
56.93
57.54
58.85
59.21
60.32
60.68
61.99
62.06
59. 40
59. 47
59.74
61. 01
61.57
62.86
63.01
64. 33
65.18
66.39
66.29
52. 91 7 47. 36
53.06 7 49. 83
53.04
78.75
52.17
72.79
52.83 68.37
53.92
69.92
54.73 69.68
55.65
71.04
55.52
71.79
56. 66
72.65
56. 80
(2)
68.76
67.00
68. 83
70.70
72.93
73.82
74.02
75.99
75.62
77.90
(2)
61.69
62.37
63. 73
61.69
61.75
64.19
61.19
65.46
63.18
(22)
()
53. 13
53.69
52.98
53. 44
53.72
54.19
54.96
54.71
55.76
56.33
(2)
58.14
58.27
58.56
58.79
59.11
59.93
61.10
60.90
60.30
61.25
(2)
46.58
46.26
46.26
46.47
46.94
48.06
48.99
48.99
48.48
48.24
(2)
33.06
33.51
33.07
33.26
33.34
33. 33
33.51
33. 92
33.96
34.72
(2)
1
Money payments
2
Not available.
3
only; additional value of room, board, uniforms, and tips not included.
Not available. 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. Beginning
June
1949, data relate to nonsupervisory employees.
4
Not strictly comparable with previous data.
5
Preliminary
average; does not include any retroactive wage payments.
6
Estimates based on incomplete data.
7
Data reflect work stoppages, or 3-day workweek.
NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in railroads, and for all nonsupervisory employees in other industries. Data are for payroll periods ending closest
to the middle of the month except in railroads where monthly data are used.
Adjustments have been made to levels indicated by data of unemployment insurance agencies and the
Bureau of Old-Age and Survivors Insurance through 1947, and have been carried forward from 1947 benchmark levels, thereby providing consistent series.
The half-year data are straight arithmetic averages of the monthly figures and not strictly comparable
with the annual averages which have been weighted by data on man-hours.
Source: Department of Labor.
183
TABLE A-14.—Average hourly earnings in selected industries, 1929-50
Manufacturing
Period
Total
Monthly average:
1929
(2)
(2)
8
8
$0. 795
.644
.651
.600
.595
.602
(2)
(22)
()
(22)
I
.745
.794
.856
.878
.886
.815
.824
.903
.908
.932
.651
.659
.676
.712
.714
8
(2)
$0.774
.816
.822
(2)
(2)
.883
.993
1.059
1.139
1.186
.958
1.010
1.148
1.252
1.319
.717
.751
.824
.897
.938
.827
.820
.843
.870
,911
8
8( )
(2)
$0.681
8
(22)
$0. 497
.472
.556
()
$0. 420
.427
.515
.684
.647
.520
.501
.673
.550
.556
.624
.627
.633
.577
.586
.674
.686
.698
.530
.529
.577
.584
.582
.661
.729
.853
.961
1.019
.724
.808
.947
1.059
1.117
.602
.640
.723
.803
.861
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
6
$0.636
(2)
$0. 566
.552
.515
.446
.442
.532
1945
1946
1947
1948
1949
Bitumi- Build- Class I
nous ing con- steam
Tele- WholeRetail Hotels
sale
(year
coal
strucrailphone trade
Dura- Nontrade round)
1
durable mining tion
roads
ble
goods goods
(2)
1.023
1.086
1.237
1.350
1.401
1.111
1.156
1.292
1.410
1.469
.904
1.015
1.171
1.278
1.325
1.240
1.401
1.636
1.898
1.941
1.379
1.478
1.681
< 1. 848
1.935
()
3
(22)
()
2
(22)
()
(2)
(2)
2
(22)
()
(*)
(2)
(2)
()
8
8
(22)
()
(22)
(2)
()
(22)
()
(22)
(2)
()
(22)
()
8( )
•8
2
(22)
(2)
(2)
(2)
()
(22)
()
.942
1.116
1.170
1.309
1.419
()
1.124
1.197
1.248
1.345
$1. 268
1.359
1.414
$1. 009
1.088
1.137
$0. 650
.709
.743
5 1. 547
1.460
1.529
1.372
2.000
2.017
1.394
1.473
1.176
.768
1949— First half
Second half- _
1.402
1.401
1.468
1.470
1.324
1.327
1.943
1.941
1.928 M.346
1.941 * 1. 482
1.325
1.367
1.408
1.419
1.132
1.141
.736
.749
1950— First half 6
Second half .
1.432
1.483
1.497
1.560
1.354
1.390
1.991
2.008
1.990 « 1. 544
2.044 8 1. 549
1.382
1.405
1.456
1.489
1.156
1.194
.758
.776
1949 —January
February
March
April
May
Juiie
-_ July
August
September
October __
November
December
1.405
1.401
1.400
1.401
1.401
1.405
1.408
1.399
1.407
1.392
1.392
1.408
1.467
1.466
1.464
1.467
1.467
1.475
1.477
1.473
1.482
1.458
1.457
1.476
1.327
1.323
1.323
1.321
1.323
1.324
1.332
1.319
1.328
1.325
1.325
1.334
1.947
1.941
1.938
1.934
1.946
1.951
1.910
1.897
1.943
1.978
1.999
1.919
1.918
1.930
1.933
1.934
1.930
1.924
1.922
1.932
1.938
1.944
1.947
1.964
1.333
1.343
1.318
1.359
1.367
1.354
1.369
1.354
1.540
1.537
1.543
1.547
1.298
1.317
1.327
1.324
1.343
1.340
1.348
1.343
1.363
1.377
1.402
1.367
.403
.403
.401
.407
.421
.416
.426
.403
.409
.427
.425
.423
1.132
1.123
1.121
1.127
1.141
1.147
1.148
1.146
1.150
1.140
1.138
1.126
.735
.738
.731
.732
.738
.745
.746
.745
.746
.743
.753
.759
1950— January
February
March
_ _
April
May
June
July
August
September6..
October 8
November *>__
1.418
1.420
1.424
1.434
1.442
1.453
1.462
1.464
1.480
1.501
1.510
1.485
1.483
1.486
1.499
1.509
1.522
1.533
1.539
1.563
1.577
1.586
1.343
1.350
1.353
1.355
1.358
1.365
1.375
1.374
1.381
1.406
1.413
1.933
1.962
2.009
2.022
2.005
2.015
2.014
2.001
2.011
2.007
(2)
1.976
1.988
1.995
1.986
1.998
1.995
2.006
2.021
2.066
2.083
(2)
1.550
1.567
1.532
1.546
1.536
1.532
1.553
1.533
1.560
(22)
()
1.380
1.391
1.376
1.381
1.381
1.386
1.395
1.392
1.408
1.426
(2)
.432
.446
.453
.466
.463
.476
.494
.489
.478
.494
(2)
1.153
1.145
1.148
1.156
1.162
1.175
1.189
1.192
1.200
1.197
(2)
.753
.765
.755
.756
.756
.761
.765
.771
.779
.791
(2)
1950
1 Money payments only; additional value of room, board, uniforms, and tips not included.
2 Not available.
3 Not available. 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. Beginning
June 1949 data relate to nonsupervisory employees.
* Not strictly comparable with previous data.
5 Preliminary average; does not include any retroactive wage payments.
« Estimates based on incomplete data.
-fi^u-juotiiiciiucs iiavt
Bureau Of Old-Age aim out vivuis ±iisuiam;t; Lmuugu iwt/, aim iiave ueen carried lurwaru irum iy4:/ uenuiimark levels, thereby providing consistent series.
The half-year data are straight arithmetic averages of the monthly figures and not strictly comparable
with the annual averages which have been weighted by data on man-hours.
Source: Department of Labor.
184
TABLE A-15.—Average weekly hours in selected industries, 1929-50
Manufacturing
Bitumi- BuildClass I
ing
nous
steam
conNoncoal
railstruc- roads
mining
durable
Total Durable
tion
goods goods
Period
Monthly average:
1929
(0
38.4
0)
44.8
(0
C1)
0)
P)
841.9
0)
40.0
35.1
33.5
28.3
27.2
29.5
27.0
0)
(0
0)
28.9
43.1
41.1
38.9
38.8
40.4
0)
0)
(0
0)
8
0)
0)
P)
0)
0)
0)
0)
C1)
P)
0)
0)
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
30.1
32.8
33.4
32.1
32.6
41.1
42.5
43.2
42.5
43.4
0)
(0
38.8
38.9
39.1
0)
0)
0)
0)
0)
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
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
43.4
40.4
40.4
40.1
39.2
44.1
40.2
40.6
40.5
39.5
42.3
40.5
40.1
39.6
38.8
42.3
.41.6
40.7
38.0
32.6
39.0
38.1
37.6
337.3
36.7
48.5
45.9
46.3
46.1
43.5
(2)
39.4
37.4
39.2
38.5
0)
0)
0)
0)
0)
0)l
44.2
(0
1930
1931
1932
1933
1934
42.1
40.5
38.3
38.1
34.6
0)l
1935
1936
1937
1938
1939
30.6
39.2
38.6
35.6
37.7
.
1940
1941
1942
1943
1944
-.- _
1915
1946
1947
1948
1949
4
Retail Hotels
Tele- Wholesale
(year
phone trade
trade round)
()
32.6
34.8
33.9
0)1
C)
0)
0)
80)
0)1
C)
0)
P)
0)
0)
0)
80)
0)
P)
P)
0)
(0
40.9
40.7
0)
(0
40.3
40.3
40.4
P)
0)
45.2
44.3
44.2
(41.0
)
40.5
41.1
39.7
33.9
36.3
40.7
39.1
40.7
40.6
43.9
1949— First half
Second half- _
39.0
39.4
39.4
39.4
38.4 *
39.3
36. 5
28.3
36.7
36.6
44.9
41.4
38.4
38.6
40.6
40.8
40.2
40.6
44.3
44.1
1950— First half
Second half *.
39.9
41.0
40.5
41.7
39.1
40.2
32.3
35.5
35.4
37.1
40.5
40.9
38.7
39.4
40.4
40.9
40.4
40.8
43.9
43.8
1949— January _
February
March
April .
May
June
July
August
September. __
October
November. _ _
December
39.5
39.4
39.1
38.4
38.6
38.8
38.8
39.1
39.6
39.7
39.1
39.8
40.1
39.9
39.5
39.0
39.0
39.2
38.8
39.3
39.6
39.9
39.0
40. 1
38.7
38.8
38.6
37.6
38.1
38.5
38.7
38.9
39.6
39.6
39.3
39.5
39.2
37.9
5.36.4
37.4
37.5
530.7
525.1
526.1
527.0
531.9
34.1
525.4
37.0
36.5
36.1
36.4
37.2
37.1
37.1
37.2
36.5
36.9
36.1
35.8
45.2
45.9
45.5
46.0
44.4
42.3
44.1
46.4
39.6
38.3
40.0
39.9
38.4
38.6
38.3
38.2
38.6
38.4
38.5
38.4
38.6
38.7
38.8
38.4
40.8
40.5
40.6
40.6
40.7
40.6
40.8
40.7
40.7
40.9
40.6
40.9
40.2
40.2
40.1
40.2
40.3
40.5
40.9
40.9
40.5
40.4
40.1
40.7
44.1
44.0
44.5
44.2
44.7
44.1
44.1
44.2
44.1
44.2
44.0
43.8
1950—January
February
March
April
May
June
July
August
September <__
October*
November*..
39.7
39.7
39.7
39.7
39.9
40.5
40.5
41.2
41.0
41.3
41.1
40.0
40.1
40.2
40.7
40.8
41.3
41.1
41.8
41.7
42.1
41.8
39.4
39.3
39.2
38.5
38.9
39.5
39.8
40.5
40.2
40.3
40.2
524.5
525.4
39.2
36.0
34.1
34.7
34.6
35.5
35.7
36.2
0)
34.8
33.7
34.5
35.6
36.5
37.0
36.9
37.6
36.6
37.4
C1)
39.8
39.8
41.6
39.9
40.2
41.9
39.4
42.7
40.5
0)1
C)
38.5
38.6
38.5
38.7
38.9
39.1
39.4
39.3
39.6
39.5
C1)
40.6
40.3
40.3
40.1
40.4
40.6
40.9
40.9
40.8
41.0
(0
40.4
40.4
40.3
40.2
40.4
40.9
41.2
41.1
40.4
40.3
0)
43.9
43.8
43.8
44.0
44.1
43.8
43.8
44.0
43.6
43.9
P)
1950
1
2
Not available.
Average for year not available because new series was started in April 1945. Beginning with June 1949
data
relate to nonsupervisory employees only.
3
Not strictly comparable with previous data.
* Estimates based on incomplete data.
* Data reflect work stoppages, or 3-day workweek.
NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in railroads, and for nonsupervisory employees in other industries. Data are for payroll periods ending closest to
the middle of the month except in railroads where monthly data are used.
Adjustments have been made to levels indicated by data of unemployment insurance agencies and the
Bureau of Old-Age and Survivors Insurance through 1947, and have been carried forward from 1947 benchmark levels, thereby providing consistent series.
The half-year data are straight arithmetic averages of the monthly figures and not strictly comparable
with the annual averages which have been weighted by data on man-hours.
Source: Department of Labor.
185
TABLE A-16.—Physical production index of goods and selected services, 1929-50
[1935-39 =100!]
Production of
selected services
Production of goods
Nonagricultural production
Period
x
AgriTotal
cultural
production
proof goods duction
Total
Industrial
production
Construction
Electric
and gas
utilities
Weights: 2
Total
Nonagricultural _.
100.0
19.5
78.0
100.0
65.6
81.6
9.0
11.1
5.8
7.2
1929
1930
1931
1932
1933
1934
1935
1936
1937
.
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950 5
1949— First half
Second half
1950— First half 5
Second half .
110
95
84
68
72
74
87
99
110
93
109
122
153
184
206
201
178
161
174
183
174
194
(3)
(3)
(33)
()
97
95
104
101
93
79
96
85
108
105
106
110
114
128
125
130
129
134
129
141
140
137
(4)
(«)
(«)
0).
113
95
79
60
67
73
85
103
111
90
110
125
162
197
225
218
190
168
185
193
182
208
186
179
198
218
110
91
75
58
69
75
87
103
113
89
109
125
162
199
239
235
203
170
187
192
176
200
181
171
189
211
157
132
109
68
50
59
70
102
103
103
121
127
162
168
95
61
63
115
133
157
168
197
162
173
194
199
88
87
84
76
77
81
87
97
104
100
111
123
141
158
183
191
187
188
214
243
247
276
248
246
269
283
- -
TeleTransphone
porand
tation telegraph
117
104
89
73
76
83
88
101
110
95
106
117
146
185
220
230
217
198
208
209
190
206
197
183
197
214
110
106
101
91
84
86
90
98
102
102
108
115
126
135
143
147
158
182
196
207
212
(3)
%
(33)
()
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 national income data. The weight factors are percentages of the national income for each industry to the total for the 6 industries. The agriculture weight excludes net rents paid by landlords living on farms, imputed rents, and subsidy payments. 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. Manufactures and minerals of the industrial production index were weighted into the total indexes separately
but only the total industrial production index is shown here. See appendix table A-17 for the individual
components of the index of industrial production.
3 Not available.
* Because of the extreme seasonal nature of agricultural crop production, only an annual index has been
computed.
• Estimates based on incomplete data.
NOTE.—A composite index of production of goods and services has not been compiled because of the
inadequate data for measuring the production of services. The only service production data used were for
transportation and for communications by telephone and telegraph. Data for measuring such services
as wholesale and retail trade, finance, insurance, real estate, Government, and communication other than
telephone and telegraph were inadequate for separate indexes and for an index for all services other than
transportation, telephone, and telegraph.
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.
Industrial production: Federal Reserve index of industrial 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.
Electric and gas utilities: Based on the following series: Electric power produced by utilities as reported
by the Federal Power Commission, and sales of manufactured and mixed gas to consumers as reported by
the American Gas Association. The two series are converted into relatives with the average for the period
1935-39 as 100. The relative series are combined into an index with electric power given a weight of 85
and gas 15, the respective percentages of the revenues of each of the utilities to the total revenues produced
by both in the base period 1935-39.
Transportation: Department of Commerce index of transportation.
Telephone and telegraph: Based on Department of Labor production indexes for 1935-49 and on a series
of Works Progress Administration for 1929-34. These indexes are for class A telephone carriers and the
principal wire-telegraph and ocean-cable carriers which file annual reports with the Federal Communications Commission.
186
TABLE A-17.—Industrial production index, 1929-50
[1935-39=100, adjusted for seasonal variation]
Total
industrial
production
Period
Monthly average:
1929
Manufactures
Minerals
Total
Durable
110
110
1930
1931
1932
1933
1934
91
75
58
69
75
90
74
57
1935
1936
1937
1938
1939
87
103
113
89
109
1940..
1941
1942
1943
1944
Nondurable
132
107
67
41
54
65
84
79
70
79
81
93
80
67
76
80
87
104
113
87
109
83
108
122
78
109
90
100
106
95
109
112
97
106
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
1948
1949
203
170
187
192
176
214
177
194
198
183
274
192
220
225
202
166
165
172
177
168
137
134
149
155
135
19501
200
209
187
149
1949—First half
Second half._
181
171
188
179
214
189
167
170
143
126
1950—First half
Second half i
189
211
198
220
220
254
181
193
138
159
1949—January
February
March
_
April
May
June
July
August
September
October
November
December
1950—January
February
March
April
-__
May
June
July..
August
September
October
November L
December»_.
191
189
184
179
174
169
161
170
174
166
173
179
196
193
184
179
175
168
178
184
176
179
188
227
225
223
212
201
194
185
193
199
175
181
203
175
173
168
162
161
161
154
165
172
177
177
176
149
149
136
148
145
133
123
129
119
112
141
132
183
180
187
190
195
199
196
209
211
217
215
216
192
192
194
199
204
208
206
218
220
226
225
226
209
207
211
222
231
237
235
247
251
262
260
266
179
180
181
180
181
184
181
195
194
196
195
194
130
118
144
140
145
151
144
159
164
166
162
161
i Estimates based on incomplete data.
Source: Board of Governors of the Federal Reserve System.
922781—51-
-13
187
TABLE A-18.—New construction activity, 1929-50
[Value put in place, millions of dollars]
Private construction
Total
Resi- Nonnew
Nonresicon- Total denden- Other
Mili- resitial
Total
tary
den- High- Other
struc- pri- buildtial
priand
tion^ vate
tial
ways pubing buildvate 2 public naval
lic a
building
(non-
Period
(nonfarm)
farm)
1929
3,625
2,694
1,988
2,486
19
659
1,266
542
5,883
3,768
1,676
1,231
1,509
2,075
1,565
630
470
625
2,003
1,099
502
406
456
1,805
1,104
544
355
428
2,858
2,659
1,862
1,648
2,211
29
40
34
36
47
660
612
415
230
363
1,516
1,355
958
847
1,000
653
652
455
535
801
4,232
6,497
6,999
6,980
8,198
1,999
2,981
3,903
3,560
4,389
1,010
1,565
1,875
1,990
2,680
472
713
1,085
764
786
517
703
943
806
923
2,233
3,516
3,096
3,420
3,809
37
29
37
62
125
328
701
550
672
970
845
1,362
1,226
1,421
1,381
1,023
1,424
1,283
1,265
1,333
8,682
11, 957
14, 075
8,301
5,259
5,054
6,206
3,415
1,979
2,186
2,985
3,510
1,715
885
815
1,025
1,482
635
233
351
1,044 3,628
1,214 5,751
1,065 10,660
861 6,322
1,020 3,073
385
1,620
5,016
2,550
837
615
1,646
3,685
2,010
1,361
1,302
1,066
734
446
362
1,326
1,419
1,225
1,316
513
5,633 3,235
12,000 9,638
-- 16, 627 13, 131
__. 21, 572 16,665
22, 594 16,204
1,100
4,015
6,310
8,580
8,290
1,020
3,341
3,142
3,621
3,228
1,115
2,282
3,679
4,464
4,686
2,398
2,362
3,496
4,907
6,390
690
188
204
158
137
937
354
599
1,301
2,056
398
895
1,514
1,856
2,129
373
925
1,179
1,592
2,068
27,715 20, 648 12, 500
3,767
4,381
7,067
180
2,310
2,425
2,152
-
1931
1932
1933
1934
_.
1935
1936
1937
1938
1939
---
--
_
1945
1946
1947
1948
1949
ing
8,741
6,427
3,538
2,879
3,720
10, 793 8,307
_
1930
1940
1941
1942
1943
1944
Public construction
1950
Annual rates, seasonally adjusted
22, 104 15, 912
23,084 16, 496
1949— First half
Second half
7,712
8,868
3,418
3,038
4,782
4,590
6,192
6,588
126
148
1,932
2,180
2,152
2,106
1,982
2,154
26, 324 19, 560 11, 760
29, 106 21, 736 13, 240
3,372
4,162
4,428
4,334
6,764
7,370
126
234
2,160
2,460
2,256
2,594
2,222
2,082
1949—January
February
March
April _
May
June
__July
August
September
October
November
December
22, 092
22, 344
22, 260
21, 876
21. 996
22, 056
22. 008
22, 236
22, 764
23, 208
23,820
24,468
16, 128 7,908
16, 164 7,824
16, 104 7,740
15, 708 7,500
15, 660 7,572
15, 708 7,728
15,828 7,992
15, 864 8,112
15, 996 8,472
16, 500 9,024
17, 136 9,504
17, 652 10, 104
3,600
3,564
3,480
3,420
3,312
3,132
3,084
3,048
2,916
2, 940
3,096
3,144
4,620
4,776
4,884
4,788
4,776
4,848
4,752
4,704
4,608
4,536
4,536
4,404
5,964
6,180
6,156
6,168
6,336
6,348
6,180
6,372
6,768
6,708
6,684
6,816
120
132
120
120
120
144
132
144
144
156
156
156
1,896
1,932
1,956
1,896
1,944
1,968
1,896
1,992
2,376
2,412
2,268
2,136
2,160
2,220
2,124
2,124
2,184
2,100
2,112
2,136
2,028
1,920
2,076
2,364
1,788
1,896
1,956
2,028
2,088
2,136
2.040
2,100
2,220
2,220
2,184
2,160
1950—January
February... .
March
April
May
June
July
August
September.
October
24, 948
25, 608
26, 148
26, 724
27, 000
27, 516
27, 996
28, 656
29, 124
29, 448
29, 748
29,664
18, 216
19, 296
19, 104
19, 776
20, 220
20, 748
21, 432
21, 888
22, 032
22, 104
21, 756
21, 204
3,252
3,324
3,300
3,348
3,480
3,528
3,660
3,780
3,972
4,284
4,620
4,656
4,464
4,392
4,404
4,428
4,440
4,440
4.452
4,428
4,320
4,320
4,296
4,188
6,732
6,312
7,044
6,948
6,780
6,768
6,564
6,768
7,092
7,344
7,992
8,460
132
144
120
120
108
132
120
168
216
276
288
336
2,112
2,196
2,172
2,136
2,172
2,172
2,100
2,172
2,328
2,580
2,772
2,808
2,196
1,836
2,556
2,448
2.268
2,232
2,292
2,400
2,496
2,400
2,772
3,204
2,292
2,136
2,196
2,244
2,232
2,232
2,052
2,028
2,052
2,088
2,160
2,112
1950— First half.
Second half
. _. _
_ .
Novp.mhpr
December..
._ _
10, 500
11, 580
11, 400
12. 000
12, 300
12, 780
13, 320
13, 680
13, 740
13, 500
12, 840
12, 360
* Excludes construction expenditures for crude petroleum and natural-gas drilling, and therefore does not
agree with the new construction expenditures included in the gross national product.
a8 Includes public utility, farm and other private construction, not separately shown.
Includes residential, sewer and water, miscellaneous public service enterprises, conservation and development, and all other public construction not separately shown.
Sources: Department of Commerce and Department of Labor.
188
TABLE A—19.—Business expenditures for new plant and equipment^ 1929—51
[Millions of dollars]
Manufacturing and mining Transportation
Period
Total »
Commercial
and
miscellaneous 2
Other
Electric
and gas
utilities
840
(«)
(4)
4,729
(4)
8
(83)
()
865
360
164
101
218
4,204
2,917
1,514
1,044
1,402
Total
Manufacturing
Mining
(')
(3)
Railroad
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
3,738
5,077
6,730
4,520
5,200
1,790
2,450
3,330
1,830
2,310
8 8
81,930 8380
166
306
525
238
280
480
1,782
2, 321
2,875
2,452
1,850
6,490
8,190
6,110
4, 530
5,210
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
440
560
540
460
580
390
340
260
190
280
550
710
680
540
490
1,980
2,490
1,470
730
970
6,630
12, 040
16, 180
19,230
18, 120
3,650
6.470
8,150
9,140
7,990
3,210
5,910
7,460
8,340
7,250
440
560
690
800
740
550
570
910
1,320
1,350
320
660
800
700
520
630
1,040
1,900
2,680
3,140
1,480
3,300
4,430
5,390
5,120
18, 130
21,880
8,640
11, 390
7,950
10, 570
690
820
1,140
1,360
430
620
3,220
3,440
4,700
5,070
_
1935
1936 . . .
1937
1938
1939
1940
1941
1942
1943
1944
_
__
_.
_
1945
1946
1947
1948
1949
1950*
1951 «
.
8( )
4
(4)
8
1 88
<i
(4)
Annual rates, not adjusted for seasonal variation
1949— First half.
Second half—
18, 240
18,000
8,220
7,760
7,460
7,040
760
720
1,480
1,220
540
520
2,920
3,360
5,100
5,160
1950— First half. ..
Second half*
16,060
20, 200
7,380
9,900
6,760
9,140
620
760
1,060
1,200
340
520
2,820
3,620
4,440
4,940
1949— First quarter
Second quarter
Third quarter
Fourth quarter.
17, 840
18, 640
17,480
18, 520
8,160
8,280
7,480
8,040
7,400
7,520
6,760
7,320
760
760
720
720
1,440
1,520
1,240
1,200
520
560
560
480
2,720
3,120
3,160
3,560
5,040
5.160
5,040
5,280
1950— First quarter. _
Second quarter
Third quarter 5
Fourth quarter .
14, 800
17,320
18, 760
21, 640
6,680
8,080
8,920
10,880
6,080
7,440
8,200
10, 080
600
640
720
800
920
1,200
1,120
1,280
320
360
480
560
2,600
3,040
3,280
3,960
4,240
4,640
4,920
4,960
1951— First quarter •
19, 240
9,440
8,760
680
1,280
600
2,960
4,920
1
Excludes agriculture and outlays charged to current account.
* Commercial and miscellaneous include trade, service, finance, and communication for all years shown.
Prior to 1939, miscellaneous also included transportation other than railroad, and electric and gas utilities
which are not available separately for these years.
» Not available separately for years prior to 1939.
* Included in commercial and miscellaneous prior to 1939.
* Estimates for fourth quarter of 1950 and first quarter of 1951 are based on anticipated capital expenditures reported by business in a survey made between mid-October and mid-November; anticipated expenditures for the year 1951 are based on a survey made in December.
NOTE.—These figures do not agree with those shown in column 2 of appendix table A-3 and included in the
gross national product estimates of the Department of Commerce, principally because the latter cover 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 million dollars.
Sources: Securities and Exchange Commission and Department of Commerce (except asjioted).
TABLE A-20.—Inventories and sales in manufacturing and trade, 1939-50
[Adjusted for seasonal variation]
1.73 11, 465
1939
20, 172 11, 109
1940
1941
1942
1943
1944 .
22, 184
28, 772
31, 013
31, 143
30, 887
12, 520
16, 412
19, 240
22, 372
24, 084
1.68
1.53
1.60
.36
.30
1945
1946
1947
1948
1949
30, 571
42, 389
50, 794
56, 756
51, 608
24, 181
27, 576
33, 581
37, 003
34, 848
.27
.29
.41
.46
.56
2.11
P
CO
Millions of
dollars
«
CO
£
c3
CO
Ratio of average
inventories to
monthly sales 3
1
o3
Retail trade
Inventories l
Millions of
dollars
Ratio of average
i n v e n t o r i e s3 to
monthly sales
Wholesale trade
Inventories *
Jj
Ratio of average
i n v e n t o r i e s to
monthly sales 3
Millions of
dollars
1
Inventories *
04
1
CO
Manufacturing
Inventories
Millions of
dollars
Period
Ratio of average
i n v e n t o r i e s3 t o
monthly sales
Total manufacturing
and trade
3,175
2,505
1.21
5.532
3,504
1.53
2.06 3,325
1.78 4,182
1.77 3,858
1.51 3,684
1.45 3,980
2,802
3,620
4,012
4,273
4,561
1.16
1.03
1.02
.86
.86
6,040 3,866
7,630 4,624
7,868 4,803
7,361 5,277
7,400 5, 735
1.47
1.46
1.71
1.38
1.31
12, 883
12, 617
15, 918
17, 811
16, 666
1.48
1.66
1.71
1.72
1.85
4, 638
6, 665
8,653
9,511
9,031
4,983
6,601
7,754
8,355
7,509
.82
.81
1.03
1.09
1.23
7,543 6,315
11, 226 8,358
13, 221 9,909
14, 969 10, 837
13, 698 10, 682
1.20
1.11
1.22
1.32
1.34
1949— First half... 54, 402 35, 230
Second half_ 51, 608 34, 535
1.60 31, 218 16, 859
1.53 28, 879 16, 527
1.91
1.79
9,002
9,031
7,662
7,360
1.22 14, 182 10, 716
1.24 13, 698 10, 648
1.35
1.33
1950— First half... 54, 241 36, 724
1.43 30, 028 17, 874
1.64
9,493
7,652
1.20 14, 720 11, 198
1.26
16, 786
17, 032
17, 359
16, 609
16, 536
16, 831
16, 044
17, 720
17, 621
15, 798
16, 221
15, 756
1.93
1.92
1.87
1.94
1.93
1.87
1.92
1.70
1.68
1.84
1.78
1.83
9, 464
9,479
9,293
9,330
9,153
9,002
9,091
9,061
9,186
9,137
9,113
9,031
7, 723
7,680
7,890
7,422
7, 539
7,718
7,157
7,522
7,518
7,120
7,553
7,291
1.23
1.23
1.19
1.25
1.23
1.18
1.26
1.21
1.21
1.29
1.21
1.24
14, 659
14, 479
14, 700
14, 458
14, 139
14, 182
13, 862
13, 932
14, 355
14, 475
14, 336
13, 698
10, 611
10, 706
10, 724
10, 814
10, 759
10, 684
10,549
10, 669
10, 856
10, 678
10, 630
10, 503
1.40
1.36
1.36
1.35
1.33
1.33
1.33
1.30
1.30
1.35
1.36
1.33
16, 216
16, 877
17, 797
17, 206
19, 309
19,838
20, 269
22, 956
21, 154
21, 229
21, 200
1.79 8,991
1.72 9,035
1.63 9,129
1.70 9,384
1,53 9,478
1.50 9,493
1.48 9,288
1.30 9,562
1.43 9,876
1.47 10, 141
1.52 10, 419
7,173
7,327
7,677
7,359
8,016
8,359
9,013
9,637
8,855
8,840
8,940
1.26
1.23
1.18
1.26
1.18
1.13
1.04
.98
1.10
1.13
1.15
13, 998
13, 800
14, 282
14, 138
14, 416
14, 720
14, 125
15, 076
15, 793
16,540
16, 656
10, 855
11, 101
11, 125
11, 080
11, 327
11, 699
12, 700
12, 682
12, 133
11, 759
11, 390
1.28
1.25
1.26
1.28
1.26
1.25
1.14
1.15
1.27
1.37
1.46
5,100
12, 819 5,852
16, 960 8,168
19, 287 10, 425
20, 098 12, 822
19, 507 13, 788
18, 390
24,498
28, 920
32, 276
28, 879
1949—January
February. __
March
April ..
May
June
July
August
September..
October
November. _
December..-
56, 758
56, 604
56, 438
55, 952
55, 025
54, 402
53, 361
52, 736
52, 861
52, 539
52, 114
51, 608
35, 120
35, 418
35, 973
34, 845
34, 834
35, 233
33, 750
35, 911
35, 995
33, 596
34, 404
33, 550
1.62
1.60
1.57
1.61
1.59
1.55
1.60
1.48
1.47
1.57
1.52
1.55
32, 635
32,646
32, 445
32, 164
31. 733
31, 218
30, 408
29. 743
29. 320
28, 927
28, 665
28, 879
1950—January
February...
March
April
May.
June
July
August
September 4.
October*
November4.
52, 024
51, 825
52, 484
52, 906
53, 553
54, 241
53, 243
54, 496
56, 401
58,465
59, 775
34, 244
35, 305
36, 599
35, 645
38, 652
39, 896
41, 982
45, 275
42, 142
41, 828
41, 530
1.51
1.47
1.43
1.48
1.38
1.35
1.28
1.19
1.32
1.37
1.42
29, 035
28, 990
29, 073
29, 384
29, 659
30, 028
29, 830
29, 858
30, 732
31, 784
32, 700
* Book value, end of period.
* Monthly average shown for year and half year and total for month.
' Average inventories based on centered averages of end-of-period figures.
* Estimates 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.
Source: Department of Commerce.
190
TABLE A—21. Manufacturers* inventories by stage of fabrication and as ratios to sales, 7946-50
[Not adjusted for seasonal variation]
Total manufacturing
Period
Book value of
inventories at
end of period
(billions of
dollars)
Nondurable goods industries
Durable goods industries
Book value of
inventories at
end of period
(billions of
dollars)
Ratio of average inventories
to monthly
sales i
Book value of
inventories at
end of period
(billions of
dollars)
Ratio of average inventories
to monthly
sales 1
MateMateMateMaterials
rials
rials
rials
FinFinFinFinand
and
and
and
ished
ished
ished goods ished goods
goods
goods goods
goods
goods
goods
in
in
in
in
process
process
process
process
MateIrials
if and
goods
in
process
Finished
goods
1946
1947
1948
1949
17.4
19.8
20.8
17.6
7.2
9.3
11.6
11.3
8.8
10.1
10.9
9.0
2.7
3.7
4.5
4.4
1.56
1.51
1.41
1.44
0.50
.52
.56
.68
8.6
9.7
9.9
8.7
4.5
5.6
7.1
7.0
0.94
.95
.94
.93
0.47
.54
.60
.73
1949— First half
Second half—
18.7
17.7
12.3
11.3
10.0
9.0
5.1
4.4
1.51
1.37
.69
.67
8.7
8.7
7.2
7.0
.99
.87
.75
.71
1950— First half
18.0
11.8
9.3
4.6
1.17
.59
8.7
7.2
.89
.70
1949—January
February
March
April
May
June
July
August
September _ _ October
November
December
20.9
20.8
20.4
19.8
19.4
18.7
18.5
18.1
17.8
17.5
17.4
17.6
11.9
12.1
12.2
12.2
12.2
12.3
11.9
11.6
11.3
11.2
11.2
11.3
11.1
11.2
11.0
10.7
10.4
10.0
9.8
9.5
9.3
9.0
8.8
9.0
4.7
4.9
5.0
5.1
5.1
5.1
4.9
4.6
4.4
4.3
4.3
4.4
.58
.59
.42
.50
.56
.43
.61
.32
.25
.39
.37
.33
.67
.69
.64
.71
.76
.71
.81
.65
.61
.66
.66
.64
9.9
9.7
9.4
9.2
9.0
8.7
8.7
8.6
8.5
8.6
8.6
8.7
7.2
7.2
7.2
7.1
7.1
7.2
7.0
7.0
6.9
6.9
6.9
7.0
1.03
1.04
.93
.99
.98
.95
1.00
.84
.81
.82
.87
.92
.74
.76
.70
.76
.77
.77
.82
.68
.66
.66
.70
.74
1950—January
February
March
AprilMay
June..
July
August
September 2 __
October 2
17.8
17.8
17.9
17.9
18.0
18.0
18.5
19.0
19.7
20.7
11.5
11.4
11.4
11.4
11.5
11.8
11.3
10.7
10.8
10.8
8.9
9.0
9.1
9.1
9.3
9.3
9.5
9.7
10.0
10.3
4.5
4.5
4.6
4.6
4.6
4.6
4.4
4.1
4.0
4.1
.34
.32
1.11
1.20
1.10
1.03
1.18
.97
1.03
.99
.66
.66
.57
.61
.55
.51
.56
.43
.42
.39
8.9
8.8
8.8
8.8
8.7
8.7
9.0
9.3
9.7
10.4
7.0
6.9
6.8
6.8
6.9
7.2
6.9
6.6
6.6
6.8
.94
.94
.84
.92
.85
.83
.82
.71
.79
.80
.75
.73
.65
.71
.67
.68
.65
.53
.55
.54
1 Average inventories based on centered averages of end-of-period figures.
2 Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.
191
TABLE A-22.—Sales, stocks, and outstanding orders at 296 department stores, 7939-50
Millions of dollars 1
Period
Monthly average:
1939
1940
1941
1942
1943
1944
..-
1945
1946
1947
1948__
1949
19503
__
~ _ _
.
1949— First half
Second half
1950— First half 3
Second half
1949—January
February
March
April
May
June
July
August
September
October
November
December..
1950—January _
February
March
April
May
June
July .
August
September
October .
November 3
.
_
__ _
_
_
Outstanding
orders
(end of
month)
Ratio of
stocks
to sales
Ratio of
orders
to sales
Ratio of
orders
to stocks
(*>
(»>
Sales
(total for
month)
Stocks
(end of
month)
128
344
136
156
179
204
227
353
419
599
509
535
108
194
263
530
560
2.60
2.69
3.35
2.50
2.36
0.79
1.24
1.47
2.60
2.47
0.31
.46
.44
1.04
1.05
255
318
337
352
333
563
715
826
912
861
729
909
552
465
350
2.21
2.25
2.45
2.59
2.59
2.86
2.86
1.64
1.32
1.05
1.29
1.27
.67
.51
.41
323
944
471
2.92
1.46
.50
304
362
863
860
302
398
2.84
2.38
.99
1.10
.35
.46
298
352
871
1,031
333
637
2.92
2.93
1.12
1.81
.38
.62
267
256
321
348
322
313
234
283
334
344
397
583
797
856
924
914
880
807
759
803
864
954
990
788
389
381
313
239
207
283
390
413
494
445
350
296
2.98
3.34
2.88
2.63
2.73
2.58
3.24
2.84
2.59
2.77
2.49
1.35
1.46
1.49
.98
.69
.64
.90
1.67
1.46
1.48
1.29
.88
.51
.49
.44
.34
.26
.24
.35
.51
.51
.57
.47
.35
.38
256
247
320
319
330
317
292
331
370
361
406
787
854
920
926
906
833
789
918
1,029
1,207
1,214
390
393
326
271
248
369
693
755
702
593
444
3.07
3.46
2.88
2.90
2.75
2.63
2.70
2.77
2.78
3.34
2.99
1.52
1.59
1.02
.85
.75
1.16
2.37
2.28
1.90
1.64
1.09
.50
.46
.35
.29
.27
.44
.88
.82
.68
.49
.37
(2)
2.69
i Not adjusted for seasonal variation.
* Not available.
* 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 hi the United States. Data
are not available prior to 1939.
Source: Board of Governors of the Federal Reserve System.
192
TABLE A-23.—Consumers' price index, 1929-50
For moderate-income families in large cities
[1935-39=100]
All
items
Period
1929
._
Food Apparel Rent
Fuel,
elec- Housetricity, furMisceland re- nish - laneous
ings
frigeration
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
1935 _ .
1936
1937 .
1938
1939 .
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
1940
1941 .
1942
1943
1944
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
169.1
139.1
159.6
193 8
210 2
201 9
145.9
160.2
185 8
198 0
190 1
108.3
108.6
111.2
117 4
120 8
110.3
112.4
121 1
133 9
137 5
145.8
159.2
184.4
195 8
189.0
124.1
128.8
139.9
149.9
154.6
19501
170 6
204 2
187 2
123 9
140 8
189.5
156.7
1949— First half
Second half
169 6
168.6
202 6
201 2
193 3
187 0
120 2
121 4
137 4
137.6
192.4
185.5
154.3
155.0
1950— First half
Second half i - _ _
167.8
173.9
198 0
210.4
185 0
189.9
123.1
124.8
140.0
141.8
185.3
194.6
155.1
158.6
170.9
169 0
169.5
169 7
169.2
169.6
168.5
168 8
169.6
168 5
168.6
167.5
204.8
199 7
201.6
202 8
202.4
204.3
201.7
202 6
204.2
200 6
200.8
197.3
196.5
195 1
193.9
192 5
191.3
190. 3
188.5
187 4
187 2
186 8
186. 3
185.8
119.7
119.9
120.1
120 3
120.4
120.6
120.7
120 8
121.2
121 5
122.0
122.2
138.2
138 8
138.9
137 4
135.4
135.6
135. 6
135 8
137.0
138 4
139.1
139.7
196.5
195. 8
193.8
191.9
189.5
187.3
186.8
184.8
185.6
185 2
185.4
185. 4
154.1
154.1
154. 4
154.6
154.5
154.2
154.3
154.8
155.2
155.2
154.9
155.5
166.9
166.5
167.0
167.3
168.6
170.2
172.5
173.0
173.8
174.8
175.6
196.0
194.8
196.0
196.6
200.3
204 6
210.0
209.0
208 5
209.0
209.5
216.3
185.0
184.8
185 0
185.1
185. 1
185 0
184.7
185.9
190 5
193.4
195.0
122.6
122.8
122.9
123.1
123.5
123.9
124.4
124.8
124.8
125.0
125.4
140.0
140.3
140.9
141.4
138.8
138 9
139.5
140.9
141 8
143.1
143.7
184.7
185.3
185.4
185.6
185.4
185.2
186.4
189.3
195.4
199.8
202.3
155.1
155.1
155.0
154.8
155.3
155.3
156.2
158.1
158.8
159.5
160.5
(2)
1930
1931
1932
1933 _
1934
1945
1946
1947
1948
1949
_
. . .
. .
_
.
_
_ _
_ -
.
_ _
-
_
1949—January 15
February 15
March 15
April 15
May 15
June 15
July 15
August 15
September 15
October 15
November 15
December 15 _ _
1950—January 15
February 15 __
March 15
April 15
May 15 June 15
July 15
August 15
September 15
October 15
November 15
December 15
__
_
. __.
___
___
. _
(2)
(2)
(2)
* Estimates based on data available through November 15, except for food.
Not available.
Source: Department of Labor*
J
193
(2)
(2)
TABLE A-24.—Wholesale price index, 1929-50
[1926=100]
Other than farm products and foods
bO
Period
Monthly average:
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938.
1939
1910
1941
1942
1943. _
1944....
_
.
..
Farm products
All commodities
o>
6
c3
<B M
S
§
«!
s 1
!
8°
.a
I-i
1as
i
•"•8 18
§
"2-3
S* «»a
1 .SW>
a*
S
1|
wd
"3o a
§
§p II
be
£
S
m
Sf
3§
•SM
1
W
1
1ft
1
E-i
95.3 104.9
99.9
91.6 109.1
90.4
83.0 100. 5
95.4
94.0
94.3
82.6
86.4
73.0
64.8
65.9
74.9
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 80.9
78.4 86.6
80.3
66.3
54.9
64.8
72.9
78.
67.
70.
66.
73.
92.1
84.5
80.2
79.8
86.9
89.9
79.2
71.4
77.0
86.2
88.7
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
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.
77.6
76.5
73.1
86.4
87.0
95.7
95.7
94.4
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
73.8
84.8
96.9
97.4
98.4
71.7 95.8 94.8
76.2 99.4 103.2
78.5 103.8 110.2
80.8 103. 8 111.4
83.0 103.8 115.5
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
CO
T3
W
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
83.0
89.0
95.5
96.9
98.5
100.8
108.3
117.7
117.5
116.7
106.2
130.7
168.7
179.1
161.4
99.7
109.5
135.2
151.0
147.3
118.1
137.2
182.4
188.8
180.4
128.2
148.9
181.2
188.3
165.5
9
1
ft
o>
PQ
100.1 84.0 104. 7 117.8
H6.3 90.1 115.5 132.6
141. 7 108.7 145.0 179.7
149.8 134.2 163.6 199.1
140.4 131.7 170.2 193.4
&
95.2
101.4
127.3
135.7
118. 6
to
J3
O
104. 5
111.6
131.1
144.5
145.3
1945
1946
1947
1948
1949
105.8
121.1
152.1
165.1
155.0
19501
1949—January...
February
March...
April.
May
June
July
August _
September
October __
November
December
161.4 170.5 151.6 152.3 191.9 147.7 133.3 173.5 205.9 122.6 152.9 121.1
157.5 170.8 163.2 149.6 180.9 142.8 133.3 172.6 197.6 120.4 147.3 114.7
152.5 160.5 159.7 145.1 180.0 138.2 130.1 167.8 189.3 117.0 143.2 109.8
153.8 160.5 157.4 146.8 180.2 137.2 131.7 169.3 195.6 115.9 145.8 112.1
169.0 180.5 175.0 159.5 203.6 158.2 134.9 177.7 216.2 129.3 160.0 130.0
160.7 173.0 165.8 152.9 184.8 146.1 137.0 175.4 202.3 126.3 148.2 117.3
158.4 168.9 161.6 152.1 182.3 145.2 136.2 176.3 201.5 122.8 148.5 115.3
158.6 171.8 162.9 151.0 180.4 143.8 134.4 175.4 200.0 121.1 148.2 115.7
157.1 170.8 162.9 149.0 179.9 142.1 131.9 172.4 196.5 117.7 147.1 115.6
155.8 171.5 163.8 146.9 179.2 140.4 130.1 168.9 193.9 118.1 146.3 113.5
154.5 168.8 162.4 145.5 178.8 139.1 130.0 167.1 191.4 116.7 145.3 111.0
153.6 166.2 161.3 145.1 177.8 138.0 130.1 167.9 189.0 118.0 143.0 110.3
152.9 162.3 160.6 145.0 178.9 138.1 129.6 168.2 188.3 119.6 142.9 109.8
153.5 163.1 162.0 145.3 181.1 139.0 129.9 168.2 189.4 117.6 142.9 109.6
152.2 159.6 159.6 145.0 181.3 138.0 130.6 167.3 189.3 115.9 143.0 109.0
151.6 156.8 158.9 145.0 180.8 138.0 130.2 167.3 189.6 115.8 143.4 109.7
151.2 154.9 155.7 145. 4 179.9 138.4 130.4 167.8 190.4 115.2 144. 2 110.7
1950—January
February
March
April
May...
June
_
July
August
September
October
November
December 1
151.5
152.7
152.7
152.9
155.9
157.3
162.9
166.4
169.5
169.1
171.6
174.5
1949— First half
Second half
1950— First half
Second half 1
154.7
159.1
159.4
159.3
164.7
165.9
176.0
177.6
180.4
177.8
183.7
187.3
154.8
156.7
155.5
155.3
159.9
162.1
171.4
174.6
177.2
172.5
175.2
178.9
145.8
145.9
146.1
146.4
147.6
148.8
151.5
155.5
159.2
161.5
163.5
165.9
179.3
179.0
179.6
179.4
181.0
182.6
187.2
195.6
202.9
208.5
211.6
215.8
i Estimates based on incomplete data.
Source: Department of Labor.
194
138.5
138.2
137.3
136.4
136.1
136.8
142.6
149.5
158.3
163.1
166.0
169.7
131.4
131.3
131.5
131.2
132.1
132. 7
133.4
134.4
135.1
135.4
135.6
135.6
168.4
168.6
168.5
168.7
169.7
171.9
172.4
174.3
176.7
178.6
180.3
184.1
191.6
192.8
194.2
194.8
198.1
202.1
207.3
213.9
219.6
218.9
217.2
220.0
115.7
115.2
116.3
117.1
116.4
114.5
118.1
122.5
128.6
132.2
135.5
139.1
144.9
145.2
145.5
145.8
146.6
146.9
148.7
153.9
159.2
163.8
166.8
167.9
94.7
100.3
115.5
120.5
112.3
110.0
110.0
110.7
112.6
114.7
114.7
119.0
124.3
127.4
131.3
137.6
140.5
TABLE A-25.—Indexes of prices received and prices paid by farmers, and parity ratio, 1929-50
[1910-14=100]
Prices
received
Period
Monthly average:
Prices paid
(including interest, taxes,
and wage
rates)
Parity
ratio i
1929
148
160
92
1930
1931
1932
1933
1934
125
87
65
70
90
151
130
112
109
120
83
67
58
64
75
1935
1936
1937
1938
1939
109
114
122
97
95
124
124
131
124
122
92
93
78
77
1940
1941
1942
1943
1944
100
123
158
2192
2196
124
132
151
170
182
81
93
104
113
108
1945
1946.
1947
1948
1949
2206
2234
275
285
249
189
207
239
259
250
113
115
110
100
1950...
256
256
100
1949-First half
Second half...
256
242
254
248
101
1950—First half
Second half...
241
272
251
260
96
105
1949—January 15
February 15-_
March 15
April 15
.May 15
June 15
July 15
._
August 15
September 15 _
October 15.—
November 15 _
December 15..
265
255
258
256
253
249
246
244
247
242
237
233
255
252
255
254
253
252
250
249
248
246
246
246
104
101
101
101
100
1950—January 15
February 15._
March 15
April 15
May 15
June 15
July 15
August 15
September 15.
October 15
November 15.
December 15..
235
237
237
241
247
247
263
267
272
268
276
249
248
250
251
254
255
256
258
260
261
263
265
.
* Ratio of prices received to prices paid (including interest, taxes, and wage rates).
Includes subsidy payments between October 1943 and June 1946.
Source: Department of Agriculture.
2
195
100
94
96
95
96
97
97
103
103
105
103
105
108
TABLE A-26.—Consumer credit outstanding, 1929-50
[Millions of dollars]
Instalment credit
End of period
1929
Total
consumer
credit
Total
Automobile
sale credit
Charge
accounts
Other »
Other
consumer
credit 2
6,252
3,158
1,318
1,840
1,749
1,345
5,570
4,636
3,493
3,439
3,846
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
1,611
1,381
1,114
1,081
1,203
1,271
1,051
861
770
783
1935
1936
1937
1938
1939 .
4,773
5,933
6,513
6,128
7,031
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
1,292
1,419
1,459
1,487
1,544
859
996
1,094
1,046
1,063
1940
1941
1942
1943
1944
8,163
8,826
5,692
4,600
4,976
5,417
5,887
3,048
2,001
2,061
1,729
1,942
482
175
200
3,688
3,945
2, 566
1,826
1,861
1,650
1,764
1,513
1,498
1,758
1,096
1,175
1,131
1,101
1,157
5,627
8,677
11, 862
14, 366
16, 809
2,364
4,000
6,434
8,600
10, 890
227
544
1,151
1,961
3,144
2, 137
3,456
5, 283
6,639
7,746
1,981
3, 054
3,612
3,854
3,909
1,282
1,623
1,816
1,912
2,010
19508
20, 000
13, 500
4,200
9,300
4,100
2,400
1949—January
February
March.
April
May
June
July...
August.. _
September
October...
November.
December
13, 796
13,409
13, 460
13, 764
14. 037
14, 313
14, 379
14,611
14, 957
15, 336
15, 884
16, 809
8,424
8,339
8,429
8,630
8,888
9,123
9,335
9,622
9,899
10, 166
10, 441
10,890
1,965
1,996
2,105
2,241
2,386
2,499
2,610
2,761
2,876
2,986
3,085
3,144
6, 459
6,343
6,324
6,389
6,502
6,624
6,725
6,861
7,023
7, 180
7,356
7,746
3,457
3,169
3,121
3, 232
3,235
3,274
3, 123
3,064
3,123
3,197
3, 454
3,909
1,915
1,901
1,910
1, 902
1,914
1,916
1,921
1,925
1,935
1,973
1,989
2,010
16, 368
16, 159
16, 338
16, 639
17, 077
17, 651
18, 295
18,842
19, 329
19, 401
19, 412
20,000
10, 836
10, 884
11,077
11,322
11, 667
12, 105
12, 598
13, 009
13, 344
13, 393
13,319
13,500
3,179
3,256
3, 355
3,470
3,600
3,790
3,994
4,107
4,213
4,227
4,179
4,200
7,657
7,628
7,722
7,852
8,067
8,315
8,604
8,902
9,131
9,166
9,140
9,300
3,506
3,233
3,211
3,241
3,290
3,392
3,527
3,636
3,741
3,703
3,739
4,100
2,026
2,042
2,050
2,076
2.120
2,154
2,170
2,197
2,244
2,305
2, 354
2,400
1930
1931
1932
1933
1934
..
1945
1946
1947
1948
1949
_
1950—January
February
March
April...
_.
May
June
July ..
August
September.
October »
November a
December 3
i Includes other sale credit and loans including repair and modernization loans insured by Federal Housing Administration.
mer<
Federal!
,„
»Estimates based on incomplete data; December 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).
196
TABLE A-27.—Loans and investments of all commercial banks and weekly reporting member banks,
1929-50 »
[Billions of dollars]
Weekly reporting
member banks
All commercial banks
Total
loans
and
investments
End of period *
1929—June «__
1930— June*
1931—June '
1932—June'
1933—June'..
1934—June 3
_..
1935—June *
1936
1937 . ...
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
...
_.
_-.
Investments
Loans
Total
U. S. Government
obligations
Other
securities
Total
loans
(net)
Commercial, industrial, and
agricultural loans
49.4
35.7
13.7
4.9
8.7
16.7
(<)
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
17.0
14.7
11.3
8.9
8.5
(<)
(4)
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
8.0
9.2
9.4
8.4
8.8
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
9.4
11.4
10.3
10.8
13.0
5.0
6.7
6.1
6.4
6.5
124.0
114.0
116.3
114.3
120.2
26.1
31.1
38.1
42.5
43.0
97.9
82.9
78.2
71.8
77.2
90.6
74.8
69.2
62.6
67.0
7.3
8.1
9.0
9.2
10.2
15.8
«19.4
23.3
25.6
24.9
7.3
•11.3
14.6
15.6
13.9
I
0)
W
,6
3.8
4.4
19506
127.2
52.7
74.5
62.3
12.2
31.6
17.8
1949—January _ _
February
March
_._
. __
April
May
June
July
August
__
September
October
November
December
114.6
113.3
112.6
112.5
113,4
113.8
114.7
117.9
118.5
119.5
119.7
120.2
42.5
42.0
42.4
41.3
40.9
41.0
40.5
41.2
41.7
41.8
42.7
43.0
72.1
71.3
70.2
71.2
72.5
72.7
74.2
76.7
76.9
77,7
77.0
77.2
63.0
62.2
60.9
62.0
63.2
63.2
64.4
66.7
66.7
67.6
66.9
67.0
9.1
9.1
9.3
9.2
9.3
9.5
9.8
JO.O
10.2
10.1
10.1
10.2
25.3
219
25.0
24.0
23.7
23.9
23.0
23.5
24.0
23.9
24.6
24.9
15.4
15.2
14.9
14.2
13.6
13.2
12.9
13.0
13.4
13.7
13.8
13.9
1950—January
February
March
April
May
JuneJuly 8 8
August
September 8
October* c
November
December *
121.2
120.6
120.3
120.3
121.2
121.8
122.3
123.3
123.7
124.5
125.5
127.2
42.9
43.1
43.7
43.8
44.1
44.8
46.0
47.3
49.0
49.9
51.7
52.7
78.3
77.5
76.6
76.5
77.1
77.0
76.4
76.0
74.6
74.6
73.9
74.5
68.0
67.1
65.8
65.5
66.1
65.8
65.0
64.2
62.5
62.5
61.8
62.3
10.3
10.4
10.8
11.0
11.0
11.2
11.4
11.8
12.1
12.1
12.1
12.2
24.6
24.6
24.9
24.9
25. 0
25.6
26.4
27.3
28.5
29.1
30.6
31.6
13.9
13.9
13.8
13. 5
13.4
13. 6
13. 9
14. 7
15.7
16.3
17.1
17.8
1
2
Excludes mutual savings banks.
Reporting date nearest end of period.
8 June data are used because complete end-of-year data prior to 1936 are not available for TJ. S. Government
obligations.
4
Not available prior to May 12,1937, when the loan classification was revised.
• Series revised to extend coverage. Previous figures not strictly comparable.
«Estimates for all commercial banks based on incomplete data; December 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).
197
TABLE A-28.-Deposits and currency, 1929-50
[Millions of dollars]
Total
deposits
and
currency
End of period 1
1929
1930
1931
1932
1933
1934
_
_
1935
1936
1937
1938
1939_
1940
1941
1942
1943
1944
1945
1946.__
1947
1948
1949
_.
__
_
Foreign United
States
bank
deposits Government
(net) balances
3
Deposits adjusted and currency
(privately-held money supply)
Total
Demand
Currency
Time
deposits
outside
adjusted a deposits < banks
55, 521
563
403
54,555
22, 809
28,189
3,557
54, 439
49,004
45, 811
42, 813
51, 122
656
403
169
-22
-13
535
740
788
1,303
4,865
53, 248
47, 861
44, 854
41, 532
46, 270
20,967
17, 412
15, 728
15, 035
18, 459
28,676
25, 979
24,457
21, 715
23, 156
3,605
4,470
4,669
4,782
4,655
55, 718
60, 450
60,964
63, 191
68,359
426
479
564
607
1,217
4,019
3,611
4,585
4,518
3,889
51, 273
56, 360
58, 815
58, 066
63, 253
22, 115
25, 483
23, 959
25, 986
29, 793
24,241
25, 361
26, 218
26, 305
27, 059
4,917
5,516
5,638
5,775
6,401
75, 238
82, 811
104, 306
127, 959
155, 960
1,896
1,498
1,615
2,265
2,157
3,334
4,977
11, 392
13, 306
23,578
70, 008
76, 336
91, 299
112, 388
130, 225
34, 945
38, 992
48, 922
60, 803
66, 930
27, 738
27, 729
28, 431
32, 748
39,790
7,325
9,615
13, 946
18, 837
23,505
180, 806
171, 657
175, 348
176, 121
177,313
2,141
1,885
1,682
2,103
2,150
27, 872
5,768
3,658
4,899
5,382
150, 793
164, 004
170, 008
169, 119
169, 781
75, 851
83, 314
87, 121
85, 520
85, 750
48, 452
53, 960
56, 411
57, 520
58,616
26, 490
26, 730
26, 476
26, 079
25,415
1950 «
183, 500
2,400
4,900
176, 200
92, 100
58,900
25, 200
1949— January, ,
February
March
April
May _ _ - .
June...
July
August
September
October
November
December
174, 900
174, 400
172,600
172, 000
171, 300
171, 602
171, 500
173, 800
174, 400
174, 900
175, 300
177,313
2,200
2,200
2,100
2,000
1,800
1,927
1,900
1,900
1,900
2,000
2,100
2,150
4,500
5,900
6,400
4,600
3,900
4,049
3,200
5,000
6,200
5,300
5,100
5,382
168, 200
166,300
164, 200
165, 500
165,600
165,626
166, 300
166,900
166,300
167, 700
168, 100
169, 781
85,400
83,400
81, 100
82,400
82, 500
81, 877
83, 100
83, 400
83, 100
84, 300
85,000
85, 750
57,600
57, 800
58,000
58, 100
58,200
58, 483
58,400
58, 400
58, 400
58, 400
58,000
58, 616
25, 200
25, 100
25, 100
24, 900
25,000
25, 266
24, 900
25, 100
24, 900
24, 900
25,100
25,415
1950 —January
February
March
April
May
_.
June
July 8 8
August
8
September
_. _
October 8 ._8
November5 ..
December
177, 100
176, 200
176,000
176, 100
176, 700
178, 568
178, 200
179, 200
180, 000
180, 300
181, 300
183, 500
2,200
2,200
2,300
2,400
2,400
2,555
2,500
2,400
2,300
2,500
2,300
2,400
5,200
5,900
6,600
5,400
5,100
6,049
5,400
5,800
6,100
4,800
4,800
4,900
169, 700
168, 200
167, 100
168, 400
169, 200
169, 964
170, 200
171,000
171, 700
173,000
174, 200
176, 200
86,400
84, 500
83,200
84,300
85,000
85,040
86, 500
87,400
88, 100
89, 400
90, 700
92, 100
58,700
59,000
59,300
59, 500
59, 500
59, 739
59, 400
59, 100
59, 000
59, 000
58, 700
58,900
24,500
•24,700
24,600
24,600
24,700
25, 185
24,400
24, 500
24, 500
24,600
24,800
25,200
_
1
Reporting date nearest end of period.
2
Includes Treasury cash and balances at
8
commercial, savings, and Federal Reserve banks.
Includes demand deposits, other than interbank and U. S. Government, less cash items in process of
collection.
4
Includes deposits in commercial banks, mutual savings banks, and Postal Savings System.
8
Estimates based on incomplete data; December 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).
[ TABLE A-29.—Estimated ownership of Federal securities* 1939-50
[Billions of dollars—par values!*]
Gross debt and guaranteed obligations outstanding
Held by public
Held by
U.S.
GovernTotal »
ment
State
Com- Federal
agencies Total
local mercial
by and
Reserve
4
and trust held
governbanks
public
banks
8
funds
ments
End of period
Nonbank
private
corpoIndirations viduals*
and
associations «
1939
47.6
6.5
41.1
0.4
15.9
2.5
12.2
10.1
1940
1941
1942
1943
1944
50.9
64.3
112.5
170.1
232.1
7.6
9.5
12.2
16.9
21.7
43.3
54.7
100.2
153.2
210.5
.5
.7
1.0
2.1
4.3
17.3
21.4
41.1
59.9
77.7
2.2
2.3
6.2
11.5
18.8
12.8
16.8
28.2
42.0
56.8
10.6
13.6
23.7
37.6
52.9
278.7
259.5
257.0
252.9
257.2
27.0
30.9
34.4
37.3
39.4
251.6
228.6
222.6
215.5
217.8
6.5
6.3
7.3
7.9
8.0
90.8
74.5
68.7
62.5
66.8
24.3
23.3
22.6
23.3
18.9
66.4
60.5
58.8
56.5
58.0
63.7
63.8
65.3
65.4
66.2
1950
256.7
739.2
7217.5
78.0
761.0
20.8
760.5
767.2
1949—January .
February
March
April
May
June
July
August
September
October
November _
December
252.7
252.7
251.7
251.6
251.9
252.8
253.9
255.9
256.7
256.8
257.0
257.2
37.4
37.5
37.7
37.5
37.5
38.3
38.5
38.9
39.4
39.3
39.3
39.4
215.2
215.2
214.0
214.0
214.4
214.5
215.4
217.0
217.3
217.5
217.7
217.8
7.8
7.9
7.9
7.9
8.0
8.0
8.0
8.1
8.0
8.0
8.0
8.0
62.7
62.1
60.5
61.8
62.7
63.0
64.6
66.4
66.5
67.3
66.8
66.8
22.1
22.3
21.7
21.1
19.7
19.3
18.5
17.5
18.0
17.3
17.7
18.9
56.9
56.8
57.6
56.9
57.5
57.5
57.5
58.2
58.0
58.3
58.7
58.0
65.7
66.1
66.2
66.3
66.4
66.6
66.7
66.8
66.8
66.6
66.5
66.2
39.0
217.9
38.4
218.0
37.6
218.1
37.3 218.4
37.4
219.0
219.5
37.8
38.0
219.6
38.1 219.8
38.9
218.4
39.0
217.9
39.2
217.9
739.2 7217.5
8.0
8.0
8.4
8.4
8.3
8.2
8.3
8.3
8.2
8.1
8.1
7
8.0
67.4
66.4
64.9
65.2
65.8
65.6
64.6
64.0
62.1
62.1
61.3
761.0
17.8
17.7
17.6
17.8
17.4
18.3
18.0
18.4
19.6
19.3
19.7
20.8
58.4
59.2
60.6
60.2
60.6
60.3
61.3
61.6
61.2
61.2
61.5
760.5
66.3
66.6
66.6
66.8
67.0
67.2
67.4
67.5
67.3
67.3
67.3
767.2
- -
1945
1946
1947
1948
1949
1950—January
February. _
March
April
May
June
July
August .
September
October
November
December
__
.
256.9
256.4
255.7
255.7
256.4
257.4
257.6
257.9
257.2
257.0
257.1
256.7
1
2
United States savings bonds, series A-D, E, and F, are included at current redemption values.
Securities issued or guaranteed by the U. S. Government, excluding guaranteed securities held by the
Treasury.
3 Includes^trust, sinking, and investment]jfunds of State and local governments and their agencies, and
Territories
and insular possessions.
4
Includes commercial banks, trust companies, and stock savings banks in the United States and in
Territories and insular possessions; excludes 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 the International Monetary
Fund in special non-interest-bearing notes issued by the U. S. Government; beginning with June 30,1947,
they Include holdings of Federal land banks.
e Includes partnerships and personal trust accounts.
7 Estimates based on incomplete data; by Council of Economic Advisers.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Treasury Department (except as noted).
199
TABLE A-30.—United States Government debt—volume and kind of securities, 1929-50
[Billions of dollars]
Interest-bearing public debt
Gross Marketable public
Issues 2
public
debt and
guaranteed
issues^ Short- Treasury
term
issues 3 bonds
End of period
Nonmarketable
public issues
Noninterest
bearing
Special
4
debt
United Treas-L
issues
States taxury
and
savings savings
bonds notes
Fully
guaranteed
securities
1929
16.3
3.3
11.3
0.6
0.3
1930
1931
1932
1933
1934
16.0
17.8
20.8
24.0
31.5
2.9
2.8
5.9
7.5
11.1
11.3
13.5
13.4
14.7
15.4
.8
.4
.4
.4
.6
.3
.3
.4
.4
.5
0.2
3.1
1935
1936
1937
1938
1939
35.1
39.1
41.9
44.4
47.6
14.2
12.5
12.5
9.8
7.7
14.3
19.5
20.5
24.0
26.9
0.2
.5
1.0
1.4
2.2
.7
.6
2.2
3.2
4.2
1.0
.7
.6
.5
.6
4.5
4.7
4.6
5.0
5.7
1940
1941
1942
1943
1944
50.9
64.3
112.5
170.1
232.1
7.5
8.0
27.0
47.1
69.9
28.0
33.4
49.3
67.9
91.6
3.2
6.1
15.0
27.4
40.4
2.5
6.4
8.6
9.8
5.4
7.0
9.0
12.7
16.3
.6
.5
.9
1.4
1.8
5.9
6.3
4.3
4.2
1.5
278.7
259.5
257.0
252.9
257.2
78.2
57.1
47.7
45.9
50.2
120.4
119.3
117.9
111.4
104.8
48.2
49.8
52.1
55.1
56.7
8.2
5.7
5.4
4.6
7.6
20.0
24.6
29.0
31.7
33.9
2.4
1.5
2.7
2.2
2.1
.6
.3
.1
0* 1
1945
1946
1947
1948
1949
- _._
__.
_
-
1950
1949—January
February
March
April
May
June..
JulyAugust
September
October
November
December
1950—January
February —
March
April
May
June
July
August..
September
October
November
December _.
_
-
___
_
_
256.7
58.3
94.0
58.0
8.6
33.7
2.4
(')
252.7
252.7
251.7
251.6
251.9
252.8
253.9
255.9
256.7
256.8
257. 0
257.2
45.4
45.2
44.0
43.8
43.9
44.6
44.4
45.0
46.4
46.1
46.1
50.2
111.4
111.4
111.4
111.4
111.4
110.4
110.4
110.4
109.1
109.1
109.1
104.8
55.4
55.7
55.9
56.0
56.1
56.3
56.5
56.5
56.6
56.7
56.7
56.7
4.6
4.6
4.4
4.5
4.7
4.9
5.7
6.8
6.9
7.3
7.5
7.6
31.8
31.8
31.9
31.8
31.9
32.8
33.0
33.4
33.9
33.8
33.8
33.9
2.2
2.1
2.1
2.0
2.0
2.0
2.0
1.9
1.9
1.9
1.9
2.1
(J)
s)
256.9
256.4
255.7
255.7
256.4
257.4
257.6
257.9
257.2
257.0
257.1
256.7
49.9
49.8
51.5
51.6
52.0
52.4
52.2
52.2
56.9
56.0
55.9
58.3
104.8
104.8
102.8
102.8
102.8
102.8
102.8
102.8
96.7
96.7
96.7
94.0
57.0
57.2
57.3
57.4
57.5
57.5
57.6
57.5
57.4
58.0
58.0
58.0
7.9
8.0
8.0
8.1
8.3
8.5
8.6
8.9
8.9
9.0
8.9
8.6
33.5
32.9
32.1
31.8
31.9
32.4
32.5
32.7
33.4
33.5
33.7
33.7
2.0
2.0
2.2
2.2
2.2
2.2
2.1
2.1
2.2
2.2
2.2
2.4
5)
fi)
*)
5)
(S)
li
o
6
'8
4
6
5
?
i
(5)
(')
* Includes postal savings bonds, depositary bonds, Armed Forces leave bonds, and 2^j percent Treasury
investment bonds, not shown separately.
* Includes amounts held by Government agencies and trust funds which aggregated 5.4 billion dollars
on December 30,1950.
84 Includes Treasury bills, certificates of indebtedness and Treasury notes.
Issued to United States investment accounts.
' Less than 50 million dollars.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Treasury Department.
200
TABLE A-31.—Bond yields and interest rates, selected years, 1929-50
[Percent per annum]
U. S. Government security
yields
Period
Long-term bonds
9-12
month
issues
Aaa
Partially 15 years bonds
taxand over,
exempt * taxable
1929 average
1933 average
1935 average __
1937 average
1939 average
(2)
3.60
3.31
2.79
2.74
2.41
1941 average
1943 average _
(2)
2.05
1.98
1945 average _ _
1946 average
1947 average
1948 average..
1949 average
High grade corporate bond
yields
(Moody's)
8
8
0.75
.81
.82
.88
1.14
1.14
1950 average 6
1.26
1949— First quarter.
Second quarter
Third quarter
Fourth quarter
1.22
1.20
1.06
1.09
1950— First quarter
Second quarter
Third quarter 6
Fourth quarter _—
1.14
1.19
1.27
1.44
1.66
(55)
(8)
()
«
5
()
(5s)
()
(•)5
()
(6)
8( )
8
Bank
Bankers Federal
rates on accept- Reserve
Bank
short- ances 90 discount
term
daysratebusiness
New
New
Baa
loans
York
York
bonds
4.73
4.49
3.60
3.26
3.01
5.90
7.76
5.75
5.03
4.96
(33)
(3)
(5)
()
2.1
5.03
.63
.13
.43
.44
5.16
2.56
1.50
1.33
1.00
2.47
2.77
2.73
4.33
3.91
2.0
2.6
.44
.44
1.00
*1.00
2.37
2.19
2.25
2.44
2.31
2.62
2.53
2.61
2.82
2.66
3.29
3.05
3.24
3.47
3.42
2.2
2.1
2.1
2.5
2.7
.44
.61
.87
1.11
1.12
*1.00
U.OO
1.00
1.34
1.50
(3)
2.32
2.62
3.24
1.15
1.59
2.40
2.38
2.24
2.20
2.71
2.71
2.63
2.60
3.46
3.46
3.41
3.34
2.70
2.74
2.63
2.65
1.19
1.19
1.06
1.06
1.50
1.50
1.50
1.50
2.24
2.31
2.34
2.38
2.58
2.61
2.63
2.67
3.24
3.25
3.25
3.22
2.60
2.68
2.63
3
()
1.06
1.06
1.18
1.31
1.50
1.50
1.61
1.75
1
Average of yields on all outstanding partially tax-exempt Government bonds due or callable after 12
years,
in 1929 and 1933; and after 15 years, from 1935.
2
Not
available before August 1942.
3
Not available.
* From October 30, 1942, to April 24, 1946, a preferential rate of 0.50 percent was in effect for advances
secured
by Government securities maturing in 1 year or less.
8
No partially tax-exempt bonds due or callable in 15 years and over.
6
Estimates based on incomplete data.
Sources: Treasury Department, Moody's Investors Service, and Board of Governors of the Federal
Reserve System.
201
TABLE A-32.—Profits before and after tax, all private corporations, 1929-50
[Billions of dollars]
Period
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
..
-
_.
_.
. _
_ _
.
_
•
.__
. ...
1945
1946
1947
1948
1949
--
.
_
1950 3
Corporate profits after tax
Corporate
profits
before
tax
Corporate
tax
liability *
9.8
1.4
8.4
5.8
2.6
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
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
3.8
9.3
17.2
21.1
25.1
24.3
2.9
7.8
11.7
14.4
13.5
6.4
9.4
9.4
10.6
10.8
4.0
4.5
4.3
4.5
4.7
2.4
4.9
5.1
6.2
6.1
19.7
23.5
30.5
33.9
27.6
11.2
9.6
11.9
13.0
10.6
8.5
13.9
18.5
20.9
17.0
4.7
5.8
6.6
7.5
7.8
3.8
8.1
12.0
13.4
9.2
40.2
18.3
21.9
8.9
13.0
Total
Dividend
payments
Undistributed
profits
(2)
-.6
-.3
-.9
1.2
Annual rates, seasonally adjusted
1949— First half
Second half
27.4
27.9
10.4
10.7
16.9
17.1
7.8
7.8
9.1
9.4
1950—First half
Second half 3
33.3
47.0
13.6
23.0
19.7
24.0
8.2
9.6
11.6
14.4
28 3
26! 4
28.2
t.27.6
10.9
10.0
10.8
10.6
17.4
16.4
17.3
16.9
7.9
7.7
7.4
8.2
9.5
8.7
10.0
8.7
29.2
37.4
46.0
48.0
12.0
15.1
22.4
23.5
17.2
22.2
23.6
24.5
8.1
8.2
9.4
9.8
9.1
14.0
14.2
14.7
1949— First quarter .
Second quarter
Third quarter
Fourth quarter
1950— First quarter
Second quarter3 .
Third quarter 3
Fourth quarter
_
.__
1 Federal and'State corporate income and excess profits taxes.
2 Minus 8 million dollars.
' Estimates based on incomplete data; third and fourth quarters by Council of Economic Advisers. Cor porate tax liability for the second half of the year includes an estimate for the effect of the higher taxes including the excess profits tax.
NOTE.—No allowance has been made for inventory valuation adjustment. See appendix table A-4 for
profits before tax and inventory valuation adjustment.
Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).
202
TABLE A-33.—Sales and profits of large manufacturing corporations, 1939-50
[Millions of dollars]
Durable goods industries
(106 corporations) l
Period
Nondurable goods industries
(94 corporations) 1
Profits
Profits
Sales
Sales
Before taxes After taxes
1939
_
1940—
1941
1942
1943
1944
1945 „
1946
1947
1948
1949
_
Before taxes After taxes
6,748
734
597
3,843
476
400
8,750
12, 806
15, 362
20,633
22,085
1,226
2,175
2,326
2,389
2,192
830
982
782
755
726
4,257
5,485
6,408
7,607
8,263
617
980
1,069
1,293
1,339
443
538
438
506
529
18, 161
12, 387
19, 502
23,591
23,914
1,288
607
2,312
3,107
3,192
574
295
1, 355
1,836
1,889
8,371
8,940
11,313
13,364
12, 790
1,133
1,426
1,787
2,208
1,843
555
908
1,167
1,474
1,211
Totals for period, not adjusted for seasonal variation
1949— First half.. _
Second half
12, 440
11, 474
1,629
1,563
957
932
6,294
6,496
893
949
577
634
1950— First half
13, 202
2,136
1,191
6,709
1,085
661
6,120
6,320
6,257
5,217
830
799
866
697
487
470
508
424
3,243
3,051
3,163
3,333
496
397
446
503
321
256
292
342
6,005
7,197
7,846
896
1,240
1,402
496
695
778
3,251
3,458
3.908
504
581
774
308
353
464
1949— First quarter .
Second quarter
Third quarter
Fourth quarter
1950— First quarter
Second quarter.
Third quarter 2
_.
1
See Federal Reserve Bulletin, June 1949, and subsequent issues, for similar data for the following industry
groups: primary metals and products, machinery, automobiles and equipment, foods and kindred products,
chemicals and allied products, and petroleum refining.
2 Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Compiled by the Board of Governors of the Federal Reserve System and based on published
reports of various industrial corporations.
922781—51-
-14
203
TABLE A--34.—Relation of profits before and after taxes to stockholders' equity, private manufacturing
corporations, by industry group, 1948-50
Percentage ratio of profits (annual rate) to stockholders'
equity
Industry group
1949
1948
total
1950
Third Fourth First Second Third
Total quarter
quarter quarter quarter quarter
Before Federal taxes
All private manufacturing corporations..
25.6
18.5
18.8
18.0
19.6
24.8
31.2
Food
Tobacco manufactures
Textile mill products
Apparel and finished textiles ._ _ _
Lumber and wood products
21.3
21.9
30.9
20.5
30.4
19.5
20.2
13.0
13.3
14.2
23.2
22.0
10.8
16.0
12.8
18.0
19.6
16.0
9.6
14.8
15.6
16.4
18.0
11.6
16.8
20.4
19.2
17.2
10.4
28.4
28.8
25.2
26.0
26.4
38.0
Furniture and fixtures
Paper and allied products
_ __
Printing and publishing (except newspapers).
Chemicals and allied products
Products of petroleum and coal . .
26.8
26.7
24.0
25.0
26.7
14.6
17.3
19.0
21.2
15.2
13.2
14.8
21.2
22.4
14.0
16.8
20.8
12.0
22.8
14.0
15.6
20.8
20.4
25.2
12.8
23.6
23.2
16.8
28.4
16.8
29.2
28.8
24.0
36.4
20.4
Rubber products
Leather and leather products ___ ._
Stone, clay, and glass products. _
Primary nonferrous metal industries
Primary iron and steel industries
21.5
17.8
24.3
22.3
23.8
13.6
11.1
21.2
13.0
17.0
10.8
12.8
24.4
9.2
14.4
18.4
12.4
20.4
13.2
10.4
14.8
10.8
20.4
16.0
20.0
21.2
12.8
32.4
22.0
26.8
38.0
25.2
39.2
26.8
29.2
Fabricated metal products __
._
Machinery (except electrical and transportation)
Electrical machinery. _
_
Transportation equipment (except motor
vehicles)
Motor vehicles and parts
27.5
17.8
20.4
16.8
18.4
24.8
34.0
27.3
27.6
19.3
22.2
17.2
17.6
16.0
32.8
18.4
29.2
24.4
31.2
26.8
41.2
14.2
34.7
12.5
37.6
11.6
46.8
12.0
34.0
12.0
39.2
17.6
55.2
19.2
58.8
Instruments; photographic and optical goods;
watches and clocks
Miscellaneous manufacturing (including ordnance)
22.6
20.0
19.2
20.8
20.8
26.0
33.2
20.7
12.4
13.6
14.8
10.0
14.8
29.6
After Federal taxes
All private manufacturing corporations _
16.1
11.7
12.0
11.6
12.0
15.6
17.6
Food
Tobacco manufactures
Textile mill products
Apparel and finished textiles
Lumber and wood products
12.9
13.7
18.8
12.2
19 3
11.8
12.6
7.6
7.6
9.0
14.4
13.6
6.4
9.6
8.0
10.8
12.4
9.6
5.2
10.0
9.2
10.0
10.8
6.4
10.4
12.4
12.0
10.4
5.2
18.0
16.4
13.2
14.4
16 4
22.8
Furniture and fixtures
Paper and allied products
Printing and publishing (except newspapers) _
Chemicals and allied products
Products of petroleum and coal
16.0
16.4
14.6
15.8
19.8
8.1
10.7
11.4
13.2
11.9
7.2
9.2
13.2
14.0
11.2
9.6
13.2
6.4
14.8
11.6
8.4
12.8
12.8
15.6
10.0
15.2
14.4
9.6
17.6
13.2
16.0
16.4
14.4
20.8
14.0
Rubber products
Leather and leather products
Stone clay, and glass products
Primary nonferrous metal industries.
Primary iron and steel industries
12.4
10.4
15.0
14.1
14.7
8.6
6.2
13.2
8.0
9.9
6.8
7.2
15.2
5.6
8.4
12.4
7.6
13.2
8.8
6.4
9.6
6.4
12.4
10.4
11.6
13.6
7.2
20.0
14.8
16.0
22.4
14.8
22.0
16.0
15.2
Fabricated metal products
Machinery (except electrical and transportation)
--Electrical machinery
Transportation equipment (except motor
vehicles)
.
Motor vehicles and parts
17.0
10.4
12.0
10.0
11.2
15.6
19.2
16.6
16.1
11.6
13.5
10.4
10.8
9.6
20.8
10.8
17.2
14.8
18.4
14.8
22.0
8.2
19.8
7.8
21.9
7.2
27.2
7.6
20.0
7.2
22.8
10.4
32.4
10.0
28.8
14.0
12.1
11.2
13.2
12.8
16.0
18.8
12.2
7.1
7.6
8.8
5.2
8.4
16.8
Instruments; photographic and optical goods;
watches and clocks
Miscellaneous manufacturing (including
ordnance)
Sources: Federal Trade Commission and Securities and Exchange Commission.
204
TABLE A—35.—Relation of profits before and after taxes to sales, private manufacturing corporations,
by industry group, 1943-50
Profits in cents per dollar of sales
1949
Industry group
1948
total
1950
Third Fourth First Second Third
Total quarter
quarter quarter quarter quarter
Before Federal taxes
All private manufacturing corporations-
11.1
9.3
9.5
9.3
10.1
11.8
13.5
5.6
8.3
13.5
5.1
15.4
5.5
8.2
6.9
3.7
9.3
6.5
8.5
5.9
4.3
8.1
5.3
8.2
7.8
2.6
9.4
4.8
7.4
9.0
3.5
11.2
5.6
8.1
8.9
3.3
15.2
7.5
10.1
11.4
6.3
18.5
Furniture and fixtures
Paper and allied products
Printing and publishing (except newspapers).
Chemicals and allied products
Products of petroleum and coal
9.2
13.8
8.5
13.9
17.4
5.9
10.5
7.4
13.2
12.0
5.7
9.5
8.6
14.5
11.6
6.1
12.0
4.3
14.4
10.9
5.9
12.3
8.5
15.6
10.7
8.4
13.6
6.8
17.1
13.5
9.5
15.6
9.4
20.5
15.2
Rubber products
Leather and leather products
Stone, clay, and glass products
Primary nonferrous metal industries
Primary iron and steel industries.
8.2
5.6
13.9
14.2
12.2
6.0
3.9
13.9
10.7
10.9
4.5
4.3
15.7
8.8
9.9
8.2
4.3
13.6
11.3
9.3
6.6
4.2
14.1
13.5
12.7
7.8
4.9
18.9
15.9
15.1
11.4
7.4
20.5
17.1
15.7
Fabricated metal products
Machinery (except electrical and transportation)
Electrical machinery
Transportation equipment (except motor
vehicles)
Motor vehicles and parts
11.5
8.7
9.5
8.4
9.7
11.4
13.0
12.0
10.1
10.6
9.1
10.2
7.9
9.7
12.5
10.7
11.3
12.6
11.7
13.6
14.0
7.0
12.0
6.3
13.5
6.1
15.4
6.2
14.3
6.2
15.3
8.6
17.8
9.3
18.0
Instruments; photographic and optical goods;
watches and clocks _.
_.
Miscellaneous manufacturing (including ordnance) .
-
12.5
11.6
11.5
11.7
12.6
14.3
16.8
9.5
6.2
6.9
6.7
5.5
7.7
12.5
Food
_
Tobacco manufacturers
Textile mill products
Apparel and finished textiles
LuTTlbcrflTidwood products
__ ._
After Federal taxes
All private manufacturing corporations.
7.0
5.8
6.0
6.0
6.2
7.4
7.6
3.3
5.1
8.2
3.0
9.8
3.3
5.1
4.1
2.1
6.0
4.0
5.3
3.5
2.5
6.2
3.2
5.2
4.7
1.4
6.4
2.8
4.6
5.4
1.9
7.1
3.4
5.0
5.2
1.6
9.7
4.3
5.4
6.5
3.9
11.1
5.5
8.4
5.2
8.8
12.9
3.3
6.5
4.5
8.2
9.4
3.1
5.7
5.4
9.1
9.1
3.5
7.7
2.3
9.2
9.0
3.2
7.5
5.4
9.6
8.2
5.4
8.4
3.8
10.6
10.7
5.3
9.0
5.6
11.7
10.5
Rubber products _ _ _ _
Leather and leather products „ _ _
Stone, clay, and glass products .
Primary nonferrous metal industries
Primary iron and steel industries
4.7
3.3
8.6
9.0
7.5
3.8
2.2
8.6
6.7
6.4
2.9
2.5
9.7
5.6
5.7
5.5
2.7
8.7
7.7
5.7
4.2
2.5
8.6
8.5
7.5
5.0
2.7
11.7
10.5
9.0
6.6
4.3
11.6
10.2
8.2
Fabricated metal products
Machinery (except electrical and transportation)
Electrical machinery
Transportation equipment (except motor
vehicles)
Motor vehicles and parts
7.1
5.1
5.7
5.1
5.9
7.1
7.3
7.3
5.9
6.4
5.6
6.2
4.8
5.7
7.9
6.4
6.7
7.7
7.0
7.6
7.5
4.0
6.9
3.9
7.9
3.7
9.0
3.9
8.4
3.7
8.9
5.1
10.5
4.8
8.8
Food
..
Tobacco manufactures
Textile mill products
Apparel and finished textiles
Lumber and wood products
_ .
Furniture and
fixtures
_
Paper and allied products
Printing and publishing (except newspapers).
Chemicals and allied products
Products of petroleum and coal
__
Instruments; photographic and optical goods;
watches and clocks.
Miscellaneous manufacturing (including
ordnance)
7.8
7.1
6.7
7.4
7.7
8.9
9.4
5.6
3.6
3.9
4.1
2.9
4.5
7.0
Sources: Federal Trade Commission and Securities and Exchange Commission.
205
TABLE A-36.—Relation of profits before and after taxes to stockholders' equity and to sales, all
private manufacturing corporations, by size class, 1948—50
1949
1948
total
Assets class (thousands of
dollars)
Total
Third
quarter
1950
Fourth
quarter
First
quarter
Second
quarter
Third
quarter
Ratio of profits before Federal taxes (annual rate) to stockholders' equity
All sizes
1 to 249
260 to 999
1,000 to 4,999
6,000 to 99,999
100 000 and over
-
25.6
18.5
18.8
18.0
19.6
24.8
31.2
15.5
23.8
24.8
26.4
26.1
9.8
14.1
15.5
17.7
23.2
14.0
16.0
16.0
17.2
30.8
.4
10.4
13.6
17.6
20.8
8.8
13.2
17.2
18.4
21.6
15.2
21.2
21.6
23.6
27.2
26.4
30.4
28.8
31.2
32.0
Profits before Federal taxes 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
_--
11.1
9.3
9.5
9.3
10.1
11.8
13.5
4.0
7.4
9.0
11.3
13.2
2.7
5.2
6.5
9.0
11.8
3.8
6.0
6.9
8.9
11.9
.1
3.9
5.7
9.1
12.6
2.5
5.1
7.3
9.5
12.8
4.2
7.4
8.5
11.3
14.4
6.2
9.8
10.3
13.3
16.0
Ratio of profits after Federal taxes (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 _
. ..
16.1
11.7
12.0
11.6
12.0
15.6
17.6
8.8
14.2
14.8
16.1
16.9
4.9
7.8
9.0
10.8
13.5
8.4
9.2
9.2
10.4
13.6
-2.0
5.6
8.0
11.2
14.0
4.0
7.2
10.0
11.2
13.6
9.6
12.8
13.2
14.8
17.2
19.2
18.8
16.4
17.2
17.6
Profits after Federal taxes 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
_.
7.0
5.8
6.0
6.0
6.2
7.4
7.6
2.3
4.4
4.5
7.0
8.6
1.4
2.9
3.8
5.6
7.6
2.3
3.4
4.0
5.5
7.6
-.6
2.0
3.3
5.8
8.4
1.1
2.7
4.2
5.8
8.1
2.7
4.4
5.2
7.0
9.2
4.5
6.0
5.9
7.4
8.9
Sources: Federal Trade Commission and Securities and Exchange Commission.
206
TABLE A-37.—Sources and uses of corporate funds, 1946-501
[Billions of dollars]
1946
Source or use of funds
Uses:
Plant and equipment outlays Inventories (change in book value)
Change in customer receivables
Cash and U. S. Government securities
Other current assets. .
Total uses
Sources:
Internal:
Ketained profits andldepletion allowances. ._
Depreciation allowances.
__
Total internal sources
External:
Change in trade debt
Change in Federal income tax liability
Other current liabilities _
Change in bank loans
Change in mortgages
Net new issues
1947
1948
1949
16.1
-4.6
1950 2
11.6
11.2
4.8
—4.7
—.7
15.0
7.1
7.5
1.0
—.1
17.5
5.0
2.4
.5
3.0
-.2
17.0
6.5
6.5
65
.5
22.2
30.5
25.4
13.8
37.5
7.6
4.3
11.6
5.2
12.8
6.0
8.6
6.7
12.5
7.0
11.9
16.8
18.8
15.3
19.5
4.0
-1.6
1.8
3.3
.6
2.3
4.4
2.3
.4
2.6
.8
4.4
(3)
.9
.8
-2.2
-2.4
1.1
-1.8
.7
5.4
.6
5.9
3.5
7.0
1.0
2.5
1.0
4.0
Total external source
10.4
14.9
9.3
-.4
19.0
Total sources
22 3
31.7
28.1
15.0
38.0
+.1
+1.2
+2.7
+1.2
+.5
Discrepancy (sources less uses)
1
3
Excludes banks and insurance companies.
Estimates based on incomplete data; by Council of Economic Advisers. Total sources and uses are derived
from
unrounded figures while the components have been rounded to the nearest 0.5 billion dollars.
3
Less than 50 million dollars.
NOTE.—Detail will not necessarily add to totals because of rounding.
Sources: Department of Commerce estimates based on Securities and Exchange Commission and other
financial data (except as noted).
207
TABLE A-38.—The international transactions of the United States, 1947-50
IMillions of dollars]
1950
1947
total
Type of transaction
Exports of goods and2 services:
Recorded goods
Other goods3
_
1948
1949
total
total
First Second Third Fourth
Total i quarter
quarter quarter quarter*
- - 15,340
637
12, 653
774
12, 042
295
10, 233
(4)
2,377
71
2,510
94
2,446
15,977
2,673
1,146
13, 427
12,337
2,296
2,604
1,323
(44)
()
(4)
2,448
1,375
488
335
539
379
2,513
536
425
8( )
15, 956
14, 142
3,271
3,522
3,474
3,875
8,951
(4)
1,888
73
1,927
67
2,386
130
(4)
(«)
0)
(4)
1,961
529
77
1,994
592
125
2,516
789
98
C44)
()
(4)
Total goods
Services
Income on investments
Total exports
2,290
67
2,900
(4)
4
19, 796
17, 092
Imports of goods and services:
Recorded goods
Other goods 3_
5,756
344
7,124
709
6,622
Total goods
Services. _
.
Income on investments
6,100
1,940
249
7,833
2,239
7,144
284
329
8,289
10,356
9,715
12, 327
2,567
2,711
3,403
3,646
9,584
293
5,529
5,420
65
-227
1,282
(4)
489
-2
583
27
60
-63
150
(4)
9,877
5,594
5,193
(<)
487
610
-3
(4)
733
897
51
1,091
54
994
(44)
()
-41
258
-53
254
-253
327
(4)
(4)
11, 507
6,736
6,241
1,815
704
811
71
4,462
780
2
Total imports
Surplus of exports of goods and services:
Recorded goods
Other goods
Total goods
Services..
_
Income on hi vestments
Total surplus of exports
Means of financing surplus
of exports
of goods and services: fi
Liquidation of gold and dollar
assets by foreign countries
Dollar disbursements by:
International M o n e t a r y
Fund .
International Bank
U n i t e d States Government
sources: •
Unilateral transfers
Long- and short-term loansUnited States private sources:
Remittances
Long- and short-term capiital*
522
2,242
-455
203
176
99
38
1,947
3,895
4,161
907
5,304
665
652
756
869
Total means of financing. _ 12, 487 7,748
Errors and omissions
-980 -1,012
229
-679 -1, 579
-3, 573
462
300
2,750
-870
-12
17
11
-8
2
3,957
190
1,021
76
1,131
39
892
43
913
32
515
435
109
113
95
118
616
1,084
75
114
645
250
7,217
-976
2,093
831
-127
729
82
90
-19
443
-214
643
-278
1 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
2 Figures for recorded exports of goods in 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 subsequent years. Such shipments are included in exports as recorded by the Bureau of
the3 Census beginning in 1948 but were not so included hi prior years.
Includes goods sold to or bought from other countries that have not been shipped from or into the United
States customs area and other adjustments.
* Not available.
' Allfiguresfor means offinancingare on a net basis.
fl
Excludes subscriptions to the capital of the International Bank for Reconstruction and Development
and
the International Monetary Fund. For detail see appendix table A-40.
7
Excludes net purchases of notes issued or guaranteed by the International Bank consisting of 7 million
dollars of long-term and 1 million dollars of short-term notes hi 1948,1 million dollars of long-term notes in
first quarter of 1950, and net sales of 1 million dollars of long-term notes hi each of second and third quarters
Source: Department of Commerce (except as noted).
208
TABLE A-39.—United States exports and imports of goods and services, by area, 7937 and 1947-50
[Billions of dollars]
1950
Area
1937
1948
1947
1949
First Second Third Fourth
quar- quar- quar- quarter
ter
ter i
Total i ter
Annual rates
Exports of goods and services: 2
ERP countries
1.60
ERP dependencies
.18
Europe, except ERP countries. .. .13
Canada and Newfoundland
1 2.64
Latin 4American republics
Other
7.22
.93
.56
2.69
4.82
3.58
5.92
.86
.27
2.49
4.27
3.28
5.40
.93
.21
2.57
3.61
3.24
^4.55
19. 80
17.09
15.96
Imports of goods and services: 2
ERP countries
1.33
ERP dependencies ._
.50
Europe, except ERP countries- _.
.15
Canada and Newfoundland .
Latin American
republics
1 2.29
4
Other
1.79
.59
.23
1.52
2.73
1.43
2.27
.76
.24
2.05
3.10
1.94
4.27
8.29
Export surplus of goods and services: 2
ERP countries
0.28
ERP dependencies
-.31
Europe, except ERP countries... -.03
Canada and Newfoundland
Latin 4American republics
Other
Total exports
Total imports
Total export surplus
0.28
4.36
.58
.18
2.09
3.30
2.58
4.42
.52
.18
2.89
3.57
2.52
4.05
.64
.20
2.72
3.89
2.39
14.14
13.08
14.09
13.90
15.50
2.26
.73
.18
2.02
2.95
1.57
1
2.27
.85
.21
1.88
3.40
1.66
2.68
.82
.21
2.34
2.99
1.79
3.02
.90
.23
2.84
4.16
2.46
(3)
(3) «-
10.36
9.72
12.33
10.27
10.84
13.61
14.58
5.43
.34
.33
1.17
2.08
2.15
3.65
.10
.03
.44
1.17
1.34
3.14
.20
.03
.55
.66
1.67
I
2.08
-.27
-.03
.21
-.09
.92
1.74
-.31
-.04
.54
.58
.73
1.02
-.26
-.02
-.12
-.27
06
11.51
6.74
6.24
1.82
2.82
3.24
.28
1
2
(3)
(3)
Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
Includes income on investments.
34 Not available.
Includes international institutions.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (except as noted).
209
i
8
(
3}^
1
.92
TABLE A-40.—-United States Government grants, other unilateral transfers, and loans to foreign
countries, 1947-50
[Millions of dollars]
1950
Type of aid
A. Unilateral payments:
UNRRA and post-UNRRA
Civilian supplies distributed
by the armed forces
Transfers to Philippines
Chinese aid
Korean aid program
Greek-Turkish aid
International Refugee Organization
Interim aid
European Recovery Program 2
Mutual Defense Assistance
Program
Other
Total unilateral payments.
Less unilateral receipts
Equals: Net unilateral payments
__
104.7
1QJQ
1Q4Q
total
total
total
First Second Third Fourth
Total i quarter
quarter quarter quarter*
761
84
2
1,009
91
1,448
130
168
1,059
74
348
203
109
30
171
(33)
(3)
()
(33)
()
121
39
9
22
35
138
27
3
18
14
130
35
3
2
13
(33)
(3
()
(3)
(3)
15
12
89
546
71
(3)
18
17
8
(3)
1,398
3,732
(3)
770
850
548
(3)
(33)
288
133
182
()
5
43
66
40
140
50
(3)
(3)
2,250
4,344
5,559
(33)
()
1,062
41
1,173
42
929
37
(33)
()
3,957
1,021
1,131
892
303
183
255
913
4,161
5,304
2
4
(3)
192
454
300
24
163
(3)
(3)
50
58
40
(3)
(3)
161
476
18
425
59
(3)
(3)
54
18
30
28
49
6
(3)
(3)
Total long-term loans and
investments
Less repayments
7,143
294
1 442
443
675
205
C8")
123
51
116
97
95
56
X3)
Equals net long-term loans
and investments, including
International Bank and
International Monetary
Fund
Less subscriptions to International Bank and International Monetary Fund.__
6 849
999
470
162
72
19
39
32
3,062
Equals net long-term loans
and investments, excluding International Bank
and International Monetary Fund
3,787
999
470
162
72
19
39
32
C. Outflow of short-term capital
(net)
108
-92
173
28
4
20
4
Total net unilateral payments, loans and investments, excluding International Bank and International Monetary Fund
(A+B+C)
5,842
5,068
5,947
4,147
1,097
1,170
935
B. Long-term loans and investments:
Lend-lease credits
Surplus property including
ship sales
Export-Import Bank loans___
United Kingdom loan
Subscriptions to:
International Bank
International Monetary
Fund
European Recovery Program
Other
1,947
273
797
2 850
(3)
1
317
2 745
w
(3)
945
1 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
2 Includes aid to Indonesia of 16 million dollars in first quarter, 21 million dollars in second quarter, and
1 million dollars in third quarter of 1950.
* Not available.
Source: Department of Commerce (except as noted).
210
TABLE A—41.—United States merchandise export surplus, by area. 1936—38 quarterly average and
1947-50
Total
merchandise
export
surplus
Period
Other
Can- Western ERP
Other
coun- Europe
ada i Hemi- tries
2
sphere
Asia 2
Australia Africa
and
Oceania
Millions of dollars
Quarterly average:
1936-38
1947 .
1948
1949 s
1950
1949— First quarter
Second quarter
Third quarter
Fourth quarter
1950— First quarter _
Second quarter
Third quarter 5 3
Fourth quarter
_ -
...
___ _ ___
._
_
_.
__
_
120
2,396
1,382
1,354
320
27
246
88
102
(4)
-7
449
214
113
(4)
130
1,150
802
807
(«)
1,548
1,773
1,216
883
94
188
125
2
174
159
108
11
910
999
668
654
489
583
60
150
-7
52
4
4
()
-85
24
-206
4
()
547
521
258
4
()
1
73
-61
313
183
237
4
()
13
41
-3
17
(4)
8
13
1
3
283
290
217
160
20
11
25
13
60
112
70
41
-12
-11
-12
(4)
97
18
-81
4
()
-12
-15
-18
(4)
-39
-58
()
10.8
1.7
-.2
1.3
12.5
5.1
7.1
5.2
(4)
6
(4)
15
123
98
71
n
4
Percentage of total
Quarterly average:
1936-38
1947
1948
1949
100
100
100
100
22.5
10.3
6.4
7.5
-5.8
18.7
15.5
8.3
108.3
48.0
58.0
59.6
.8
3.0
.4
-50.8
13.1
13.2
17.5
1949— First quarter
Second quarter
Third quarter _
Fourth quarter
100
100
100
100
6.1
10.6
10.3
.2
11.2
9.0
8.9
1.2
58.8
56.3
54.9
74.1
.5
.7
.1
.3
18.3
16.4
17.8
18.1
1.3
.6
2.1
1.5
3.9
6.3
5.8
4.8
1950— First quarter..
Second quarter
Third quarter <
100
100
100
-1.4 -17.4
4.1
8.9
6.7 -343. 3
111.9
89.4
430.0
-2.5
19.8
-1.9
3.1
-20.0 -135. 0
-2.5
-2.6
-30.0
-8.0
-1.2
-96.7
1
Includes Newfoundland and Labrador.
2 Turkey is included with ERP countries and excluded from Asia. Exports to and imports from Germany are included with those of ERP countries and, in the postwar period, relate almost wholly to trade
with
the three western zones.
*43 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
Not
available.
8
Data by area exclude "special category" exports of 172 million dollars in the third quarter of 1950, which
are included in total exports. Thus, the export or import surplus by area will not add to the total export
surplus in this period.
NOTE.—Detail will not necessarily add to totals because of rounding. See also footnote 5.
Source: Department of Commerce (except as noted).
211
TABLE A-42,—United States merchandise exports, including reexports, by area, 1936-38 quarterly
average and 1947—50
Period
Total
Other
exports
Westinclud- Canada * ern
Hemiing reexports
sphere
ERP
Countries 2
Other
Europe
A . 2
Asia
Australia Africa
and
Oceania
Millions of dollars
Quarterly average:
1936-38
1947
1948
1949
1950 3_
742
3,835
3,163
3,010
2, 558
115
528
486
490
(4)
136
1,017
841
724
(4)
282
1,324
1,046
1,018
(4)
31
118
49
41
(4)
122
562
507
533
(4)
23
80
38
49
(4)
32
205
196
155
(4)
1949— First quarter. _ __
Second quarter
Third quarter
Fourth quarter
3,337
3,374
2,693
2,638
472
571
473
444
836
739
670
652
1,160
1,189
843
881
42
46
35
39
611
592
482
448
54
50
47
44
163
186
142
130
1950— First quarter
Second quarter
Third quarter 8_3
Fourth quarter
2,377
2,510
2,446
2,900
397
530
506
(4)
641
668
705
(«)
787
764
582
(«)
32
33
36
(4)
399
381
336
(4)
36
38
30
(4)
84
96
78
(4)
Percentage of total
Quarterly average:
1936-38
1947
1948
1949___
100
100
100
100
15.5
13.8
15.4
16.3
18.3
26.5
26.6
24.1
38.0
34.5
33.1
33.8
4.2
3.1
1.5
1.4
16.4
14.7
16.0
17.7
3.1
2.1
.2
.6
4.3
5.3
6.2
5.1
1949— First quarter
Second quarter
Third quarter
Fourth quarter
100
100
100
100
14.1
16.9
17.6
16.8
25.1
21.9
24.9
24.7
34.8
35.2
31.3
33.4
1.3
1.4
1.3
1.5
18.3
17.5
17.9
17.0
.6
.5
.7
1.7
4.9
5.5
6.3
4.9
1950— First quarter
Second quarter...
Third quarter 8 _
100
100
100
16.7
21.1
20.7
27.0
26.6
28.8
33.1
30.4
23.8
1.3
1.3
1.5
16.8
15.2
13.7
1.5
1.5
1.2
3.5
3.8
3.2
i Includes Newfoundland and Labrador.
* Turkey is included with ERP countries and excluded from Asia. Exports to Germany are included
with those of ERP countries and, in the postwar period, relate almost wholly to exports to the three western
zones.
» Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
*6 Not available.
Data by area exclude "special category" exports of 172 million dollars in the third quarter of 1950,
which are included in total exports. Thus, exports by area wiil not add to total exports in this period.
NOTE.—Data, in this table cover all merchandise, including reexports, shipped from the United States
customs area to foreign countries including, in 1947 to 1950, 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. See also footnote 5.
Source: Department of Commerce (except as noted).
212
TABLE A—43.—United States domestic merchandise exports, by economic class, 1936-38 quarterly
average and 1947-50
Total
SemiManuCrude
Crude factured
manudomestic materials
foodstuffs foodstuffs
factures
exports
Period
Finished
manufactures
Millions of dollars
Quarterly average:
1936-38
1947._
1948
_
1949
1950 »
731
3,791
3,133
2,982
2,522
1949— First quarter _ .
Second quarter
Third quarter
Fourth quarter
...
1950— First quarter
.
Second quarter
Third quarter
Fourth quarter >
34
337
316
335
(')
42
439
328
222
(2)
130
446
343
339
(2)
358
2,168
1,773
1,641
(2)
3,302
3,344
2,666
2,615
167
400
372
445
(')
466
549
329
436
396
349
325
270
256
270
174
186
386
387
310
272
1,798
1,789
1,529
1,450
2,350
2,478
2,411
2,850
431
506
424
(2)
200
180
171
(2)
140
151
156
(2)
256
271
271
(2)
1,324
1,370
1,388
(a)
Percentage of total
Quarterly average:
1936-38
1947
1948
1949
100
100
100
100
22.8
10.6
11.9
14.9
4.7
8.9
10.1
11.2
5.7
11.6
10.5
7.4
17.8
11.8
10.9
11.4
49.0
57.2
56.6
55.0
1949— First quarter
Second quarter. _
Third quarter
Fourth quarter
100
100
100
100
14.1
16.4
12.3
16.7
12.0
10.4
12.2
10.3
7.8
8.1
6.5
7.1
11.7
11.6
11.6
10.4
54.5
53.5
57.4
55.4
100
100
100
18.3
20.4
17.6
8.5
7.3
7.1
6.0
6.1
6.5
10.9
10.9
11.2
56.3
55.3
57.6
1950— First quarter
Second quarter
Third quarter
_
i Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
* Not available.
NOTE.—Data in this table cover all domestic merchandise shipped from the United States customs area
to foreign countries including, in 1947 to 1950, 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 (except as noted).
213
TABLE A-44.—Indexes of quantity and unit value of United States domestic merchandise exports
by economic class, 1936-38 quarterly average and 1947-50
[1936-38=100]
Total
domestic
exports
Period
Crude
materials
ManuCrude
factured
foodstuffs i foodstuffs
i
Semimanufactures
Finished
manufactures
Quantity indexes
Quarterly average:
1936-38
1947
1948
1949 2 . .
1950
100
275
214
221
187
100
123
100
126
126
100
397
362
435
279
100
478
350
297
230
100
203
144
150
124
100
332
257
253
218
1949— First quarter
Second quarter
Third quarter
Fourth quarter
233
243
200
200
129
155
93
125
495
438
439
368
317
366
235
271
162
167
144
128
264
268
236
228
1950— First quarter
Second quarter
Third quarter
181
194
184
125
143
112
287
275
266
215
251
228
121
126
125
208
221
220
October
196
123
304
218
127
235
Unit value indexes
Quarterly average:
1936-38
1947... _
1948
1949 2
1950
1949— First quarter
Second quarter
Third quarter
Fourth quarter
_
1950— First quarter
Second quarter
Third quarter..
October
_
100
188
200
185
178
100
195
223
212
217
100
248
255
225
193
100
218
223
177
156
100
169
184
174
167
100
182
193
181
177
193
188
182
179
216
212
212
208
233
233
216
214
191
175
175
163
184
179
165
164
190
186
181
177
177
174
179
206
212
226
202
190
188
155
143
163
164
166
168
178
174
176
187
240
190
174
178
182
1 Indexes of crude and manufactured foodstuffs, particularly those of unit value in 1950, are influenced by
large shipments of surplus food products. These shipments vary in kind and quantity from month to
month and are sold at prices considerably below market quotations.
2 Average of ten months.
NOTE.—The indexes of quantity are a measure of the volume of trade after the influence on value of changes
i n average prices has been el iminated. 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 change in average
prices that result from changes in the commodity composition of trade. The indexes for 1947 to 1950 are
based on data which include goods destined to the United States armed forces abroad for distribution to
civilians in occupied areas.
Source: Department of Commerce.
214
TABLE A-45.- -United States general merchandise imports, by area, 1936-38 quarterly average and
1947-50
Total
general
imports
Period
Other
ERP
Can- Westcounern
ada i Hemistries 2
phere
Other
Europe
Asia a
Australia Africa
and
Oceania
Millions of dollars
Quarterly average:
1936-38
1947
1948
1949
19503
622
1,439
1,781
1,656
2,238
88
282
398
388
(4)
143
568
627
611
(4)
1949— First quarter
Second quarter _
Third quarter
Fourth quarter.
1,789
1,601
1,478
1,755
378
383
348
442
1950— First quarter
Second quarter
Third quarter 3
Fourth quarter
1,888
1,927
2,386
2,750
404
478
502
(4)
152
174
244
211
4
30
45
49
35
(4)
183
249
324
296
(4)
10
39
41
31
(4)
662
580
562
641
250
190
175
228
34
33
33
36
328
303
265
288
34
39
22
31
103
74
72
89
726
643
911
(4)
240
243
324
(4)
44
44
48
(4)
302
363
417
(4)
49
52
47
(4)
123
103
136
(4)
(;
(4)
17
82
98
84-
Percentage of total
Quarterly average:
1936-38
1947
1948
1949
100
100
100
100
14.1
19.6
22..3
23.4
23.0
39.5
35.2
36.9
24.4
12.1
13.7
12.7
4.8
3.1
2.8
2.1
29.4
17.3
18.2
17.9
1.6
2.7
2.3
1.9
2.7
5.7
5.5
5.1
1949— First quarter
Second quarter
Third quarter
Fourth quarter
100
100
100
100
21.1
23.9
23.5
25.2
37.0
36.2
38.0
36.5
14.0
11.9
11.8
13.0
1.9
2.1
2.2
2.1
18.3
18.9
17.9
16.4
1.9
2.4
1.5
1.8
5.8
4.6
4.9
5.1
1950— First quarter
Second quarter
Third quarter ..
100
100
100
21.4
24.8
21.0
38.5
33.4
38.2
12.7
12.6
13.6
2.3
2.3
2.0
16.0
18.8
17.5
2.6
2.7
2.0
6.5
5.3
5.7
_
1
Includes Newfoundland and Labrador.
2 Turkey is included with ERP countries and excluded from Asia. Imports from Germany are included
with those of ERP countries and, in the postwar period, relate almost wholly to imports from the three
western zones.
34 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
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 (except as noted).
215
TABLE A-46.—United States merchandise imports for consumption, by economic class, 1936-38
quarterly average and 1947—50
Period
Total imports for
consumption
Crude
materials
Crude
foodstuffs
Manufactured
foodstuffs
Semimanufactures
Finished
manufactures
Millions of dollars
Quarterly average:
1936-38
1947
1948
1949
19501
615
1,416
1,773
1,648
2,205
(2)
190
441
537
463
(*)
85
254
318
333
(2)
95
164
183
185
00
126
311
408
355
(2)
120
246
327
311
1949— First quarter
Second quarter
Third quarter
Fourth quarter
1,757
1,590
1,501
1,744
503
449
424
478
340
302
287
403
182
198
194
167
396
336
306
381
336
305
290
315
1950— First quarter
Second quarter
Third quarter l
Fourth quarter
1,872
1,904
2,344
2,700
536
513
631
423
346
516
185
213
275
416
480
542
312
352
380
(2)
(2)
(2)
(2)
(2)
Percentage of total
Quarterly average:
1936-38
1947
1948
1949
100
100
100
100
30.9
31.1
30.3
28.1
13.8
17.9
17.9
20.2
15.4
11.6
10.3
11.2
20.5
22.0
23.0
21.5
19.5
17.4
18.4
18.9
1949 — First quarter
Second quarter
Third quarter
Fourth quarter
100
100
100
100
28.6
28.2
28.2
27.4
19.4
19.0
19.1
23.1
10.4
12.5
12.9
9.6
22.5
21.1
20.4
21.8
19.1
19.2
19.3
18.1
1950— First quarter
Second quarter
Third quarter
100
100
100
28.6
26.9
26.9
22.6
18.2
22.0
9.9
11.2
11.7
22.2
25.2
23.1
16.7
18.5
16.2
* Estimates based on incomplete data; fourth quarter by Council of Economic Advisers,
a Not available.
NotB .—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 (except as noted).
2l6
TABLE A—47.—Indexes of quantity and unit value of United States merchandise imports for
consumption, by economic class, 1936-38 quarterly average and 1947-50
[1936-38=100]
Total
mports for
consumption
Period
Crude
materials
Crude
foodstuffs
Manufactured
foodstuffs
Semimanufactures
Finished
manufactures
Quantity indexes
Quarterly average:
1936-38
1947
1918
1949
1950 1. - -
1949— First quarter
Second quarter
Third quarter
Fourth quarter
_ _
1950— First quarter
Second quarter
Third quarter _.
October
100
108
123
120
145
100
129
139
125
151
100
96
109
119
114
100
83
91
97
119
100
130
149
143
213
100
84
103
101
121
121
116
111
131
129
118
116
136
121
116
104
135
93
105
100
88
140
129
130
169
105
98
94
106
137
135
154
152
139
155
121
94
125
98
113
143
188
213
219
107
119
126
170
169
122
132
266
155
Unit value indexes
Quarterly average:
1936-38— ._
1947
1948 .
1949
1950 » ..
100
213
235
224
236
100
180
203
195
202
100
311
343
330
448
100
208
212
202
201
100
191
217
198
187
100
245
266
258
250
1949— First quarter
Second quarter _
Third quarter
Fourth quarter
235
224
220
217
206
200
193
185
330
306
324
352
205
199
205
201
225
208
187
180
267
261
258
249
1950— First quarter
Second quarter
Third quarter
223
229
248
185
194
215
410
433
485
199
199
203
176
179
197
245
248
253
October
263
238
498
210
215
258
1
...
Average of ten months.
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.
217
TABLE A-48.—Changes in selected economic series since 7939 and 7949 and during 1950
Percentage
change i
1939=100
Source:
Appendix
table
No.
1950
Economic series
1949 to
1949
Total 2
First
half
Second
half a
19502
A-l
Gross national product
Personal consumption expenditures
Gross private domestic investment
.
Net foreign investment
Government purchases of goods and
services
_ ._
...
280
265
333
44
331
321
310
A-4
National income
Compensation of employees _
299
294
326
318
308
304
A-7
Personal income
Disposable personal income
Personal net saving
284
267
319
306
288
419
297
280
470
+9.1
+6.7
+47.0
(3)
-2.8
333
+8.9
344
+8.3
333
316
+7.9
+7.8
296
370 +31.4
A-8
Per capita disposable personal income:
Current prices
1950 prices
234
134
249
140
243
139
254
140
156
151
179
167
159
254
168
156
A-10
_ ._ _
Gross national product, 1950 prices: Total ..
Personal consumption expenditures
Gross private domestic investment
Government purchases of goods and
services
305
283
490
W
292
272
447
(3)
8
(4)
318
293
532
(3)
(4)
(4)
(4)
(4)
+6.1
+4.6
+7.1
+5.3
+41.8
-7.3
1950,
first
half,
to 1950,
second
half 2
+8.9
+7.6
+19.0
-88.9
+7.4
+11.7
+9.7
+6.2
+5.6
-21.3
+4.7
+.9
(44)
(4)
()
(4)
116
114
131
145
78
33
115
113
128
142
75
41
118
115
134
148
81
25
+1.6
+1.6
+2.1
+3.5
-6.5
-7.5
+2.6
+2.1
+4.8
+4.4
+7.6
-37.8
230
265
233
247
284
241
239
270
231
255
299
250
+6.6
+10.5
+7.9
Physical production index of goods: TotaL._
Agricultural
Nonagricultural
._ _
160
132
165
178
129
189
(44)
()
180
A-17
Industrial production : Total
Durable manufactures
Nondurable manufactures.
Minerals.-.,
161
185
154
127
183
217
172
141
173
202
166
130
194
233
177
150
+7.4
+7.3
+3.0
+11. 5
-2.1
+14.3
+13.6
+16.8
+11.3
+10.4
+11.6
+15.5
+6.6
+15.2
A-18
New construction: Total
Private
Residential
Nonresidential
Other private .
Public
276
369
309
411
508
168
338
470
466
479
475
186
321
446
439
429
480
178
355
495
494
530
470
193
+22.7
+27.4
+50.8
+16.7
-6.5
+10.6
+10.6
+11.1
+12.6
+23.4
-2.1
+9.0
A-19
Business expenditures for new plant and
equipment
._
348
349
309
388
+.1
+25.8
A-20
Inventories: Total _
Manufacturing
Wholesale trade
Retail
256
252
284
248
(44)
()
(«)
(4)
269
262
299
266
i
)
3)
314
327
300
305
3
3
331
350
305
320
(44)
( 4)
(4)
()
8
g
170
212
189
116
172
214
186
119
169
208
184
118
A-ll
Labor force, including armed forces
Civilian labor force
"Rmploymfint
Nonagricultural
Agricultural
Unemployment
114
112
128
140
84
36
A-13
Average gross weekly earnings:
Manufacturing. . .
Bituminous coal mining
Building construction
A-16
.._
_.
Sales: Total
Manufacturing
Wholesale trade
Retail
A-23]
Consumers' price index; All items.
Food
Apparel
Rent
-
._
218
8
198
4
175
221
189
120
4
)
4
+.9
+1.1
-1.6
-4-2.6
(4)
(«)
+10.1
3
3
4
4)
)
3
+3.6
+6.3
+2.6
4-1.4
TABLE A-48.—Changes in selected economic series since 1939 and 1949 and during 1950—
Continued
Percentage
change 1
1939=100
Source:
Appendix
table
No.
1950
Economic series
1949
Total 2
First
half
1950,
first
1949 to half,
1950,
Second 19502 to
second
half 2
half 2
A-24
Wholesale price index: All commodities
Farm products
Foods
Other than farm products and foods
201
253
229
181
209
261
215
187
199
246
224
181
219
276
249
196
+4.1
+3.0
6.1
+3.4
+9.9
+12.5
+11.2
+8.7
A-25
Prices received by farmers
_
Prices paid by farmers (including interest,
taxes, and wage rates)
262
269
254
286
+2.8
+12.9
205
210
206
213
+2.4
+3.6
Consumer credit outstanding, end of period _
rnstfllrnfint credit
239
246
284
305
251
274
284
305
+19.0
+24.0
+13.3
+11.5
425
340
205
767
618
438
234
1,083
512
394
216
967
723
480
253
1,200
+45.7
+28.8
+14.1
+41.3
+41.1
+21.8
+17.1
+24.1
6351
5228
s 2, 229
6311
5298
5289
5247
5650 5 1, 082
5323
5330
5571
-11.4
+26.9
-70.8
+8.2
+33.5
-47.2
A-26
A-32
A-39
Profits before tax
Profits after tax__.
Dividend payments
Undistributed profits
..
International transactions in goods and
services:
Exports
Imports
_ _
_
Export surplus
A-42
Merchandise exports, including reexports
6406
6345
6329
6360
-15.0
+9.4
A-45
General merchandise imports
6266
6360
6307
«413
+35.1
+34.6
1 Changes are computed from data as reported and therefore may differ slightly from changes computed
from
the indexes shown here.
2
Estimates based on incomplete data.
a Indexes and percentage change not computed because data change from positive to negative values.
< Not available.
61937=100.
6
1936-38 average=100.
922781—51-
-15
219
Appendix B
The Distribution of Income and Saving in
the United States
CONTENTS
Page
The distribution of income
The distribution of saving and liquid assets
Statistical tables:
B-l. Distribution of spending units and total money income
before and after Federal income tax, by income groups,
1949
B-2. Distribution of characteristics of low and high income
groups, 1949
B-3. Percentage of spending units within various income
groups having income from selected sources, 1949. . .
B-4. Proportion of spending units owning various types of
assets, by income groups, early 1950.
.
B-5. Summary of saving of positive and negative savers, 1948
and 1949
B—6. Money income and positive, negative, and net saving of
each fifth of spending units, 1948 and 1949
B-7. Major types of expenditures of spending units reducing
liquid assets during 1949, by income groups
B-8. Median liquid asset holdings by income level, early 1947,
1948, 1949, and 1950
221
223
225
226
227
227
228
228
229
229
230
The Distribution of Income and Saving in the
United States
The distribution of income
As the people of the United States are called upon to devote an increased
proportion of productive effort to defense, they can consider themselves
fortunate that the period just ended was one of great progress in raising living standards. Not only has total personal income increased, but, as compared with the prewar period, a higher proportion of income now goes to the
middle and lower income groups. Disparities between the quality and style
of goods available to low and higher income groups have been narrowed.
The outstanding example is perhaps automobiles, where low-priced cars are
in elements of serviceability and many elements of style equal to those in
high-priced ranges. The clothing of the average working girl is neat and
modish, and to the casual observer little different from that of her wealthier
sister; the variety of foods on sale in working-class neighborhoods rivals
that of high income localities.
Nevertheless, there are still large numbers of families in the United
States with small or inadequate incomes. According to the 1950 Survey of
Consumer Finances* in 1949, 33 percent of the spending units in the
economy had less than $2,000 money income before taxes, and an additional
21 percent had between $2,000 and $3,000 income before taxes.2 (See
table B-l.) Allowing for Federal income taxes, the proportion of spending
units below $3,000 is raised to 59 percent. State and local incomes taxes are
not included in these computations, but in general they are not very important for lower income groups.
Table B-2 summarizes some of the data with regard to characteristics of
low income families which have been assembled by the Survey of Consumer
Finances. These data indicate that there are some factors which tend to
mitigate the degree of disparity between the status of the very low and
1
The Survey of Consumer Finances has been conducted annually in postwar years for
the Board of Governors of the Federal Reserve System by the Survey Research Center
of the University of Michigan. The detailed findings of the Survey may be found in the
Federal Reserve Bulletin.
The Bureau of the Census data on family income in 1949 collected in connection with the
Current Population Survey and the 1950 Census of Population will be published in the near
future.
2
A spending unit consists of all persons related by blood, marriage, or adoption who live
together and pool their income for major items of expense. A family may contain more
than one spending unit; for example, an aged couple dwelling with children may have
separate financial arrangements. Family income is on the average higher than spending
unit income. According to the Survey of Consumer Finances for 1950, the mean family
income in 1949 was $3,760 as compared with a mean spending unit income of $3,270.
223
middle income groups. For example, as compared with higher income
groups, a greater percentage of the under-$2,000 group are one-person units,
a larger fraction are retired persons, who in some cases have adequate
savings, and a greater proportion live in rural areas, where costs of living
may be somewhat lower. Of those living in rural areas, a considerable
fraction are farm families, who may produce food and fuel for their own
consumption.
After these qualifications are made, however, it is apparent that there still
remains an economic and social problem of great magnitude. For example, 54 percent of the under-$ 1,000 group and 65 percent of the under$2,000 spending units have heads between the ages of 25 and 64 years, a
period of life in which earnings should be adequate. Over half live in
metropolitan or other urban areas. A lack of adequate education is indicated in a large number of cases, since only 29 percent of the under-$ 1,000
group progressed beyond grammar school. The position of families who
must depend on the earnings of a woman head is particularly unfortunate,
due to the pressure of family responsibilities and the discrimination against
women in gainful employment. In the under-$2,000 family income group,
according to statistics of the Bureau of the Census for 1948, 26 percent
of nonfarm families of two or more persons (whose heads were between
21 and 64 years old) were headed by women, as compared with only
6 percent in higher income groups.1
Table B-3 shows that in 1949 a much smaller proportion of the under$2,000 income units received wages and salaries than in higher income
groups, while a relatively high proportion received pensions and allowances. The large number of units at all income levels receiving pensions
and allowances as compared to interest, dividends, and rents is one of the
more interesting findings of the consumer survey. In the $7,500-and-over
group, a surprisingly small proportion, 60 percent, received wages and salaries, while 43 percent received interest and dividends. A relatively large
number in the upper income groups also received entrepreneurial income.
The fact that expenditures of the lower income groups exceed the income
of those groups by large amounts year after year indicates that some low
income units have previously been in a more favorable position. Family income tends to rise with age of the head until about 45 or 50, after which
it declines. Temporary business reverses, fluctuations in farm prices, sickness, and chance factors also contribute to shifting families from one income
level to another. More data are needed on the degree of shifting up
and down the income scale which families undergo over a period of years.
The Survey of Consumer Finances shows that around 67 percent of the
under-$2,000 income group in 1949 were in the same or lower income
group in the preceding year.2
3
"Materials on the Problem of Low-Income Families," assembled by the staff of the
Subcommittee on Low-Income Families of the Joint Committee on the Economic Report.
81st
2 Cong., 2d sess., Table 6, p. 13.
Owing to a relatively large number of cases in which previous income was not ascertainable, these proportions are not exact.
224
About half the spending units in the under-$2,000 income group have
assets worth at least $1,000, while one-fourth have assets worth $5,000
or more. As shown in table B-4, 44 percent of the under-$ 1,000 group
have liquid assets, as compared with 69 percent for all income groups, and
24 percent own automobiles. The fact that a larger proportion of this
income group own homes or farms than in the population at large indicates
a disproportionate number of units with heads in older age classes.
Distribution of saving and liquid assets
In 1949 about 60 percent of spending units had net savings, about 35
percent had expenditures in excess of income, and the remainder about
broke even. Spending units with incomes in excess of expenditures saved
23 billion dollars, compared with 14 billion of negative saving on the part of
spending units with deficits, as shown in table B-5. There was thus a net
saving of 9 billion dollars in 1949 as compared with 11 billion in 1948.1 The
mean saving of all units in 1949 was $180 as compared with $220 in 1948.
As shown in text table 6, the lowest one-fifth of income units spent an
amount equal to one-and-one-half times their incomes in 1949. The middle
fifth broke even and the upper income fifth saved about 16 percent of
income. The saving of this fifth, however, more than counterbalanced all
the dissaving done by the lower segments of the population. Thus the
upper income groups accounted for 131 percent of total net saving of all
units in 1949, as shown in table B-6.
Sixty-two percent of positive saving (i. e., saving of all families with net
positive saving) in 1949 was concentrated in the top one-fifth of income
receivers, while negative saving was more widely distributed. However,
the lowest fifth of income receivers not only dissaved much more heavily in
relation to their incomes than did upper income receivers, but actually performed a disproportionately large amount (30 percent) of total negative
saving.
The purchase of durable goods (which is not included in saving) was
an important reason why saving was low or negative for many families in
the last two or three years. In 1949, 66 percent of spending units with
negative saving purchased durable goods, in comparison with only 46 percent of positive savers. Of the negative savers, 54 percent increased their indebtedness and 58 percent decreased their holdings of liquid assets (bank
deposits, saving and loan shares, and U. S. Government bonds). Table
B-7 shows the major reasons given for reducing liquid assets in 1949 by
spending unit respondents. Medical expense was the most frequent reason given, being cited by 43 percent of units reducing assets. Purchase
of automobiles or other durable goods was given as a reason for reducing
assets in 26 percent of cases. In some cases, liquid assets were converted
3
This concept of saving differs from that of net saving in the national income and
product accounts. See Appendix I to Part IV, 1950 Survey of Consumer Finances
for a discussion of differences.
225
into other types of tangible assets, such as homes, or into business equities.
While a large proportion of spending units have dissaved in each postwar
year, in early 1950 most units were found to have assets greater than outstanding liabilities, indicating that in all probability the same units did not
dissave year after year.
The last table (B-8) shows the postwar decline in median liquid asset
holdings by income level. Not only has the median holding declined fairly
steadily for all income groups, but the percentage of units with no liquid
assets (outside of currency) has grown. Since there has been a steady
growth in the number of spending units, total holdings of liquid assets have
grown somewhat since the end of the war.
TABLE B—1.—Distribution of spending units and total money income before and after
income tax, by income groups, 1949
Federal
[Percent]
Spending units l
Before
Federal
income
tax
Income groups
Under $1,000
$1,000-$1,999
$2,000-$2,999___
$3,000-$3,999 .
$4,000-$4,999—
$5,000-$7,499
$7,500-$9,999
$10,000 and over
.
_ _
All cases
Median income
*
Mean income 6
14
19
21
19
11
11
2
3
Total money income 2
After Federal income
tax (disposable inincome) 3
15
21
23
18
11
8
2 }
2
100
100
$2, 700
$2, 600
$3, 000
$3,270
Before
Federal
income
tax
2
9
16
19
15
19
,0
100
After Federal income
tax (disposable inincome) 3
2
11
19
21
16
16
}
»
100
1
The spending unit consists of all persons related by blood or marriage who live in the same dwelling unit
and
pool their income for major items of expense.
2
Income data for each year are based on interviews during January, February, and March of the following
year.
3 Money income after deduction of estimated Federal personal income tax liability. See Appendix to Part
III, 1950 Survey of Consumer Finances, for method of estimating disposable income. Money income
figures
exclude capital gains or losses and tax estimates make no allowance for such gains or losses.
4
The median amount of income is that of the middle spending unit when all units are ranked by size of
income.
6 The mean amount is the average obtained by dividing aggregate income by the number of spending units.
Source: 1950 Survey of Consumer Finances, sponsored by the Board of Governors of the Federal Reserve
System, and conducted by the Survey Research Center of the University of Michigan.
226
TABLE B—2.—Distribution of characteristics of low and high income groups, 1949
[Percent]
Money income before taxes
Characteristic of spending unit
Size:
One person
Two persons
Three or more persons
Race: 1
White
Negro.-
._
Under
$1,000
$1,000$1,999
$2,000$2,999
$3,000 and
over
. _ _
44
29
27
37
28
25
24
27
49
9
29
62
__
83
15
89
10
92
7
97
3
14
35
51
23
41
36
28
39
33
39
38
23
3
84
13
83
17
81
19
68
32
11
54
35
20
65
14
14
77
8
4
90
5
14
24
15
47
8
11
18
63
4
7
17
72
2
5
9
83
9
61
29
4
47
48
2
45
53
1
29
69
100
100
100
100
Place of residence:
Metropolitan area
Other urban area
Rural area
_ _
Number of income receivers:
None
One .
Two or more
_
_
_
Age of head:
Under 25 years
25-64 years.
65 years and over
...
Occupation of head:
Retired
Farm operators
Unskilled and service workers
All other occupations
....
Education of head:
No education
Grammar school
High school and colleges
All spending units 2
1
2
Less than one-half of 1 percent were "other" race.
Detail for each characteristic will not necessarily add to 100 because of a small percentage of non-ascertainable cases.
Source: Same as appendix table B-l.
TABLE B—3.—Percentage of spending units within various income groups having income from
selected sources, 7949 1
[Percent of units within each income group]
Selected source of income
Money income before taxes
Under $1,000
$1,000-$1,999
$2,000-$2,999
$3,000-$3,999
$4,000-$4,999
$5,000-$7,499
$7,500 and over
AH spending units,
_.
1
Pensions
Wages and and
allowsalaries
ances
Interest
and dividends
46
75
86
91
91
87
60
38
36
28
23
24
18
9
9
7
8
11
12
20
43
7
6
8
9
12
13
23
78
28
12
9
Rent
In addition 9 percent of spending units had income from farming and 9 percent from unincorporated
nonfarm business.
Source: Same as appendix table B-l.
227
TABLE E-4.—Proportion of spending units owning various types of assets, by income groups,
early 1950
[Percent]
Previous year's money income before
taxes
Under $1,000 _.
$1,000-$1,999
$2,000-$2,999
$3,000-$3,999_
$4,000-$4,999
$5,000-$7,499
___
$7,500 and over
Liquid1
assets
_..
_
_
_
__
__
All income groups
Automobile
Home or Other real Business Corporate
farm 2
estate 3 interest « stock •
44
54
68
74
86
94
99
24
37
54
63
74
82
89
50
32
40
46
55
62
66
9
11
12
16
18
26
44
3
5
5
6
10
15
36
2
2
5
7
10
10
30
69
55
46
16
8
7
1
Includes all types of U. S. Government bonds, checking accounts, savings accounts in banks, postal
savings, and shares in saving and loan associations and credit unions. Excludes currency.
2 Owner-occupied home or farm.
3 Real estate other than home or farm on which owner is living. Includes lots, one- or two-family houses,
apartment houses, summer or week-end homes, commercial or rental property, farms owned by nonfarmers
and additional farms and land owned by farmers, and other types.
* Full or part interest in a nonfarm unincorporated business or privately held corporation.
* Common and preferred stock of corporations open to investment by the general public. Excludes stock
of privately held corporations, U. S. Government securities, and bonds of corporations and State, local, and
foreign governments.
Source: Same as appendix table B-l.
TABLE B-5.—Summary of saving of positive and negative savers, 1948 and 1949
Item
Spending units (millions) :
All units
_
_
Positive savers
Zero savers
Negative savers
Aggregate saving (billions1 of dollars) :
All units (net saving)
Positive savers 2
Negative savers 2
_
_
_ __
_.
Mean saving (dollars per spending unit) :
All units (net saving) r
,,.___
Positive savers 2
Negative savers 2
_ _ __
1949
1948
____
„, ^ , _.„.,„
_
51
52
32
3
16
31
3
18
11
9
24
—12
23
—14
220
180
750
—800
750
—790
1 Net saving does not entirely correspond conceptually with personal net saving as denned in the national
income and product statistics. (See chart 26, pp. 147 and 149, and table C-2.) For an explanation of the
differences, see Appendix I to Part IV of the I960 Survey of Consumer Finances, Federal Reserve Bulletin,
November 1950.
2 Aggregate and mean saving of units with positive or negative saving rather than of all items of positive or
negative saving.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Same as appendix table B-l.
228
TABLE B-6.- -Money income and positive-, negative, and net saving of each fifth of spending units,
1948 and 7949
Percentage of total accounted for by each fifth 1
Spending units ranked by size of Money income 2 Positive saving 3 Negative savincome
ing*
1948
Lowest fifth
Second fifth
Third
fifth
Fourth fifth
Highest fifth
______
All spending units
1949
1948
1949
1948
Net savingfi
1949
1948
1949
4
11
17
22
46
4
11
17
23
45
3
6
12
19
60
2
6
12
18
62
26
15
16
18
25
30
18
18
16
18
-22
—4
8
21
97
-41
-12
1
21
131
100
100
100
100
100
100
100
100
* Income and saving data for each year are based on interviews in January-March of the succeeding year.
The figures in this table cannot be used to measure precisely changes in income and saving because of the
limited size of the sample. However, it is believed that the data show with reasonable accuracy the nature
of certain broad changes which occurred in the pattern of income and saving during these years.
The surveys for 1948 and 1949 differ somewhat in their definitions of saving, as discussed in the 1950
Survey
of Consumer Finances, Part IV, Appendix I.
3
Annual money income before taxes; revised from data presented in the "Annual Economic Review,
January
1950" by the Council of Economic Advisers, tables B-4 and B-5, p. 144.
8
Positive saving comprises the saving of all spending units with money incomes in excess of expenditures.
4
Negative saving comprises the dissaving of all spending units with expenditures in excess of money
income.
• Net saving (plus or minus) is positive saving less negative saving for the combination of all units in each
income quintile.
Source: Same as appendix table B-l.
TABLE B—7.—Major types of expenditures of spending units reducing liquid assets during 1949,
by income groups 1
[As percent of spending units reducing liquid assets in each income group]
1949 income of spending units reducing liquid
assets
All income
groups
Medical
_
_
Food, clothing, and nondurable goods *
Automobiles and other durable goods
Investments and reduction of debt 3
Other large outlays *
43
34
26
18
41
Under
$2,000
41
49
13
16
35
$2,000$4,999
46
31
30
16
38
$5,000 and
over
38
17
35
25
57
1 Data are not comparable to the 1949 survey findings on reduction of liquid assets because of changes in
the wording of the questionnaire. This table is based on answers to two questions asked of spending units
reporting reductions in liquid assets: "What sort of things did you use this money for?" and "Did you have
any large expenses we did not talk about, for instance, doctor and hospital bills, expenses for moving or
trips
or the like?"
2
Reported as reasons for reduction of liquid assets.
3 Investments include purchases of securities and real estate and investment in privately owned business.
< Includes repairs and additions to houses, travel, amusement, education, taxes, car repairs, moving, and
farm operating expenses.
Source: Same as appendix table B-l.
229
TABLE B-8.—Median liquid asset holdings by income level, early 1947, 1948, 1949, and 1950
Income before taxes
Under $1,000
$1,000-$1,999
$2,000-$2,999
$3,000-$3,999_._
$4,000-$4,999
$5,000-$7,499
$7,500 and over
,
_.
Percent of
spending
units at
each income level,
1949
14
19
21
19
11
11
5
Median holdings of all units
Median holdings of those with liquid assetsSource: Same as appendix table B-l.
230
Median liquid asset holdings
1947
1948
1949
1950
0
$40
480
900
1,400
2,750
7,250
0
$.80
240
490
840
1,760
6,290
0
$80
150
270
500
1,350
4,500
0
$10
160
350
500
1,130
4,270
$470
$890
$350
$820
$300
$790
$250
$810
Appendix C
The Nation's Economic Budget
CONTENTS
Page
C-l.
C-2.
C-3.
C-4.
C-5.
The Nation's Economic Budget, calendar years 1949 and 1950.
Consumer account, calendar years 1949 and 1950
Business account, calendar years 1949 and 1950
International account, calendar years 1949 and 1950 . . .
Government account (Federal, State, and local), calendar
years 1949 and 1950
C-6. Federal cash receipts from the public other than borrowing,
calendar years 1949 and 1950
C-7. Federal cash payments to the public by function, calendar
years 1949 and 1950
C-8. Federal cash payments to the public by type of recipient and
transaction, calendar years 1949 and 1950
23I
235
236
237
237
238
239
239
240
The Nation's Economic Budget
The Nation's Economic Budget provides a comprehensive view of
national economic activity by major economic groups. Such a summary is
given in table C-l. It shows the total gross national product or expenditure
as well as the receipts and expenditures of the major economic groups and
the net additions or absorption of saving of these groups for calendar year
1949 and the first and second halves of 1950.
Column 1 indicates the major flow of receipts or income. This column
contains not only income arising from current production but also receipts
of government transfer payments and interest. The total of incomes from
current production, shown in roman type, adjusted for the statistical discrepancy between total receipts and expenditures, gives a total equal to the
gross national product. Transfers to individuals, government interest, and
net cash loan transfers abroad are not included in this total. Total government cash receipts, which differ from receipts arising from current production by the amount in line 13, are also shown.
In column 2 of this same table are expenditures for current output by
the four major economic groups: personal consumption expenditures,
gross private domestic investment, net foreign investment, and government expenditures for goods and services. These, shown in roman type, are
equal to the gross national product. Total government cash transfer payments are also shown.
Government cash transfers, on the expenditures side in column 1, are
shown as receipts by consumers, and by foreign countries and international
institutions. The sum of these transfer receipts, however, does not exactly
equal government transfer payments. This is due to the use of somewhat
different bases for measurement of various components of receipts and payments. For example, government interest payments are recorded on a
cash basis; interest receipts in the consumer account are recorded on a net
accrual basis and include interest paid by government corporations. The
difference resulting from the two methods of estimating is included in the
adjustment item (line 20).
Column 3 shows the excess of receipts ( + ) or expenditures ( — ) for the
various accounts. These items include personal net saving, the government
cash surplus or deficit, the excess of international receipts or investment, and
the excess of gross investment over business receipts. The total excess of
receipts must equal the total excess of expenditures, since national income
233
and product are conceptually equal. Personal net saving., for example,
which is an excess of receipts, must be matched by an excess of investment by
business or a government deficit, or both. But the adjustments made in the
receipts items (column 1) must also be made in column 3 in order to
balance the positive and negative items.
While the summary table on the Nation's Economic Budget gives a comprehensive view of the economy, additional detail is needed for analytical
purposes. Such detail is shown in the tables that follow, the "accounts"
for the major economic groups. More complete statistics on national
income and product and their constituents are published in the "Survey of
Current Business," July 1950. Some of this detail can be found in appendix
A of this review. Another source of the data relating to the Federal Government is the Budget of the United States. The Council's Review of
January 1950, appendix A, contains a more extended discussion of the
Nation's Economic Budget.
TABLE G-l.—The Nation's Economic Budget, calendar years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
Economic group
CONSUMERS
1 "Disposable income arising from nvirrfmt prndnfitior)
2. Government transfers and net interest payments
Ul
3. Disposable personal income " .
4. Personal consumption expenditures
5.
Personal net saving (-J-)
_
_ .
BUSINESS
fi. Rfitainp.d business rftopipts from current production
7 O-ross private dom.Astifi investment
8.
Excess of receipts (+) or investment (— )
INTERNATIONAL
9 U S Government cash loan transfers abroad
10. Net foreign investment
11.
Excess of receipts (+) or investment (— )
. _.
_._
GOVERNMENT (Federal, State, and local)
12. Tax payments or liabilities
13 Adjustment to cash basis
14 Cash receipts from the public
15 Purchases of goods and services
16 Government transfers
Excess of
Excess of
Excess of
receipts
Expend- receipts
Expend- receipts
(+)or
Receipts
(+)or
Receipts
Receipts Expend(-f-)or
itures
itures expendiitures
expendiexpenditures (-)
tures (— )
tures (-)
171.2
16.3
174.2
22.3
191.8
187.4
196.6
207.6
30.2
1.1
178.8
33.0
.4
+8.6
30.1
—2.8
— .2
+.7
57.6
-2.0
—2.0
21.
255.6
16.0
183.8
44.3
+12.7
28.4
-14.2
58.8
43.3
16.9
60.2
-2.0
-2.0
255.6
+10.0
-24.3
+S.5
76.2
-13.5
62.7
40.6
68.0
&
266. 8
52.7
-3.4
+1.6
22.4
—8.5
197.7
.1
—1.8
62.2
—3.4
56.2
1.4
17 Cash payments to the public
18.
Excess of receipts (+) or payments (— )
ADJUSTMENTS
19 For receipts relating to gross national product
20 Other adjustments
Gross national product
1950, second half 1
1950, first half
1949
266. 8
59.8
-4.2
&
43.6
16.2
-5.7
+13.6
-5.7
+13.6
290.6
+2.9
290. 6
i Estimates based on incomplete data; third quarter profits and all fourth quarter data by Council of Economic Advisers.
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: Based on the national income and product statistics of the Department of Commerce and on Federal cash receipts from and payments to the public compiled by the
Bureau of the Budget. See also footnote 1.
Explanatory notes to table C-l:
Lines 1-5: See table C-2, Consumer account.
Lines 6-8: See table C-3, Business account.
Lines 9-11: See table C-4, International account.
Lines 12-18: See table C-5, Government account.
Line 19: The adjustments bring the estimates on the receipts side into
agreement with those on the expenditure side of the accounts. They
include the statistical discrepancy less "subsidies less current surplus of
government enterprises." The statistical discrepancy represents the difference between the two independent estimates of gross national product:
income received from current output and expenditures for this output.
"Subsidies less current surplus of government enterprises" are included
in national income, but not in the gross national product.
Line 20: Other adjustments are net and are the amount necessary for balancing the excess of receipts ( + ) and excess of expenditures ( — ) . They
are required because some items of government cash payments are either
not recorded in private receipts at all (such as purchases of existing assets),
or they are recorded in a different time period from that in which payment is made. Government cash receipts also include some items not
deducted from private incomes, or deducted in a different period.
TABLE C-2.—Consumer account, calendar years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1950
Receipts or expenditures
1949
Total i
Personal income arising from current production of goods and
services:
Wage and salary receipts and other labor income
Farm proprietors' income
Business and professional income 2
. ...
Dividends
Private interest and rental income
._
Business transfer payments
First
half
Second
half i
134.9
13.4
21.0
7.8
12.0
.7
145.2
13.0
23.2
89
12.4
.7
138.3
12.2
21.8
82
12.2
.7
152 2
13.6
24.6
96
12.5
7
189.9
203.4
193.4
213 2
4.7
11.6
4.8
27
11.7
4.7
53
12.3
4.8
1
11 1
206.1
18.7
222.4
20.4
215 8
19.2
229 1
21.4
Equals' Disposable personal income
Less : Personal consumption expenditures 3
187.4
178.8
202.1
190.8
196 6
183.8
207 6
197.7
Equals: Personal net saving (-}-)
+8.6
+12 7
+10.0
Total
-
Plus: Net interest paid by government
_
Dividend on National Service Life Insurance
Other government transfers to individuals _
_
_ .
Equals: Total personal income
Less: Personal tax and nontax payments
_. _.
+11.3
ADDENDUM
Personal income arising from current production . __
Less* Personal tax and nontax payments
189.9
18.7
203.4
20.4
193.4
19 2
213.2
21 4
Equals: Disposable income arising from current production
171.2
183.0
174.2
191. 8
i Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
> Includes adjustment for inventory valuation.
* For detail, see appendix table A-2.
NOTE.—Detail will not necessarily add to totals because of rounding.
236
TABLE G-3.—Business account, calendar years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1950
Receipts or investment
1949
Total i
Corporate profits before tax
_
Less: Corporate tax liability
Dividend payments
First
half
Second
halfi
27.6
40.2
33.3
47.0
10.6
7.8
18.3
8.9
13.6
8.2
23.0
9.6
. ._
Equals: Corporate undistributed profits
9.2
13.0
11.6
14.4
Plus: Capital consumption allowances 2
Corporate inventory valuation adjustment 3
18.8
2.2
20.9
-4.7
20.1
-1.6
21.7
-7.7
Equals: Retained business receipts from current production
30.2
29.2
30.1
28.4
Less: Gross private domestic investment 4
33.0
48.5
44.3
52.7
17.3
8.3
9.0
19.5
-3.7
21.7
12.4
9.3
24.5
2.4
20.6
11.6
9.0
21.1
2.7
22.8
13.2
9.6
27.9
2.0
-2.8
-19.3
-14.2
-24.3
Construction . _
Residential (nonfarm)
Other private construction
Producers' durable equipment
Change in inventories
.
Equals: Excess of receipts (+) or investment (—)
1 Estimates based on incomplete data; third quarter profits and all of fourth quarter data by Council of
Economic Advisers. Corporate tax liability for second half includes an estimate for the effect of the excess
profits
tax.
2
Includes capital consumption allowances on noncorporate capital, including residences.
3
The adjustment measures the excess of the value of the change in the volume of nonfarm business inventories,
valued at average prices during the period, over the change in the book value of nonfarm inventories.
4
For additional detail, see appendix table A-3.
NOTE.—Detail will not necessarily add to totals because of rounding.
TABLE C-4.—International account, calendar years 1949 and 1950
[Billions of dollars, annual rates]
1950
Receipts or investment
1949
Total i
U.S. Government cash long-term loans (net) 2
Plus: Cash payments to International
Monetary Fund and
International Bank 3
First
half
Second
halfi
0.1
0.9
0.2
0.3
.2
-.3
-.5
E quals : U . S . Government cash transfers on loans (receipts)
1.1
-.1
-.2
.1
Surplus of exports of goods and services
Less: Net unilateral transfers
*
Government 8
Private
6.2
1.8
3.0
.6
5.3
.5
4.0
.4
4.3
.4
3.6
.4
Equals: Net foreign investment
_
Excess of receipts (+) or investment (— ) _ _
.4
-2.6
-1.8
-3.4
+.7
+2.5
+1.6
+3.5
1
Estimates based on incomplete data; fourth quarter by Council of Economic Advisers.
2
Includes only cash withdrawals under loan agreements. Does not include noncash transactions such as
lend-lease
and surplus property credits.
3
Cash payments on subscriptions. In the first half of 1950 the International Monetary Fund returned
over
500
million
dollars of cash (annual rate) to the U. S. Treasury in exchange for United States notes.
4
Net unilateral transfers are included with government or private expenditures for goods and services.
For example, remittances (gifts) made by American citizens to relatives or charitable groups abroad are
included with consumer expenditures. Government aid in the form of grants is included in government
purchases of goods and services. Thus, net unilateral transfers must be deducted from the export surplus to
avoid
double counting.
5
Unilateral aid included in appendix table C-8 is on a Daily Treasury Statement basis and is gross.
NOTE.—Detail will not necessarily add to totals because of rounding.
237
TABLE G-S.—Government account (Federal, State, and local), calendar years 1949 and 19501
[Billions of dollars, annual rates, seasonally adjusted]
1950
1949
Receipts or expenditures
Total 2
Receipts:
Tax and nontax payments or liabilities: 8
Federal
State and local
39.2
17.0
Total
Adjustment to cash basis:
Noncash receipts *
Excess of cash receipts over tax liabilities or payments «.
Cash receipts from the public
Expenditures:
Purchases of goods and services:
Federal
. _.
State and local
Total
.
Other government payments:
Transfers to individuals.
Cash interest payments to the public *
Loans to foreign governments and subscriptions to In-7
ternational Bank and International Monetary Fund _
All other 8
Total
Cash payments to the public
Cash surplus (-J-) or deficit (—)
Federal:
Cash receipts
Cash payments
.
_ __
50.1
19.1
First
half
43.7
18.4
Second
half 2
56.4
19.8
56.2
69 2
62.2
76 2
—1 8
+3.2
—12
-7.2
—1 3
-2.1
—1 2
-12.3
57.6
60 8
58.8
62 7
25.3
18.0
22.7
19.4
21.8
18.8
23.6
20.0
43.3
42.1
40.6
43.6
11.6
4.3
14.4
4.2
17.6
4.2
11.2
4.1
1.1
-.1
.8
-.2
.8
.1
.8
16.9
19.3
22.4
16. 2
60.2
61.4
63.0
59.8
-2.5
-.6
—4.2
+2.9
41. 3
42.6
42.4
41.9
41.1
44.0
43.8
39.9
+.5
—2.9
+3/9
16.3
17.5
18.4
19.5
17.7
19 0
18.9
19 9
—1.3
—1.1
—1.3
—1.0
ADDENDUM
_ _
Surplus (+) or deficit (— )
_
_
State and local:
Cash receipts
Cash payments
Surplus (+) or deficit (— )
-1.3
* This table reconciles cash receipts and payments to the public with estimates of government receipts
and expenditures included in the national income and product accounts. Cash receipts or payments represent the consolidated cash accounts of the Federal Government, including the trust funds, and State-local
governments. All intergovernmental transactions are excluded. The receipts of government corporations
and the Post Office are offset against expenditures and the net expenditure included as a cash payment.
Grants-in-aid to State and local governments are included as a cash payment of the Federal Government
and not included as either a receipt or payment of the States or localities.
2 Estimates based on incomplete data.
3
Personal and indirect business tax payments, corporation tax liabilities, and contributions for social
insurance.
Estimate for second half of year includes an estimate for the effect of the excess profits tax.
4
Consists of deductions from government employees' salaries for retirement funds, and government
contributions to retirement funds, National Service Life Insurance and U. S. Government life insurance
funds.
^Includes excess of corporation tax receipts over liabilities and excess of personal tax receipts over
payments. Cash receipts also include some items of miscellaneous receipts not included in tax and nontax6 payments, such as receipts from sales of surplus property.
Does not agree with net ^nterest paid by government (appendix table C-2) which is on a net accrual
basis
and includes interest paid by government corporations.
7
See appendix table C-4, International account.
8
Includes all other cash payments less noncash payments for goods and services. Other cash payments
include net payments by government corporations (except capital formation), net prepayments, and the
excess of checks paid over checks issued. Noncash purchases of goods and services include deductions
from government employees' salaries for retirement funds and the government contribution to such funds.
NOTE.—Detail will not necessarily add to totals because of rounding.
238
TABLE C—6.—Federal cash receipts from the public other than borrowing, calendar years 1949 and
1950
[Billions of dollars, annual rates, seasonally adjusted]
1950
Cash receipts
1949
Total i
Direct taxes on individuals
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
_
Total Federal cash receipts from the public
First
half
Second
half i
18.4
12.0
2.5
7.9
.5
10
.4
14
—2.8
19.3
9,9
3.4
8.6
.2
1.2
.5
15
—2.2
18 4
9.9
3.4
8.2
.3
1.1
.5
14
—2.2
20.1
9.9
3.4
9.0
.1
1.3
.5
16
— 2.2
41.3
42 4
41 1
43 8
i Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
TABLE C—7.—Federal cash payments to the public by function, calendar years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1950
Function
1949
Total i
Military services
International security and foreign relations _
Veterans' services and benefits
Social security, welfare, and health
A griculture and agricultural resources
__Interest
Other
.
Deductions from Federal employees' salaries for retirement
Clearing account for outstanding checks and telegraphic reportsTotal Federal cash payments to the public
Second
halfi
12.9
6.0
7.1
2.7
3.0
4.3
7.1
-.3
—.2
13.7
4.1
8.9
3.3
1.3
4.1
6.9
-.4
—.1
11.9
4.4
11.8
3.1
2.4
4.2
7.2
-.4
-.7
15.4
42.6
41.9
44.0
39.9
i Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
First
half
3.9
6.1
3.5
.2
4.1
6.6
-.4
.5
TABLE G-8.—Federal cash payments to the public by type of recipient and transaction, calendar
years 1949 and 1950
[Billions of dollars, annual rates, seasonally adjusted]
1950
Cash payments
1949
Total i
Direct casha payments for goods and services, excluding military
services:
Payments to individuals for services rendered:
Civilian wages
and salaries (excluding Post Office) :
Federal3
._ .
Grants- and loans-in-aid
for performance of specified services, net 4
2.6
2.7
26
.8
,6
.6
6
o O
3.2
33
32
1.5
.4
1.0
1.7
.6
1.0
1.7
.6
.9
1.7
6
1.2
.1
.1
.1
.1
3.0
3.4
3.3
36
,2
1.0
1.9
1.1
.3
1.3
1.6
1.2
.3
1.1
2.2
1.1
.3
15
.9
12
5.5
-.2
1.3
.5
79
—.2
1.2
.3
10.5
—.3
1.2
.3
53
—.1
1.2
3
11.3
13 5
16 4
10 6
19
(8)
.6
.1
.7
10
.1
.8
—1 0
.1
.6
Total
Total
Total
Loans, investments, subsidies and other transfers to business
and agriculture:
Farmers:
Price support, net (including supply program)
International Wheat Agreement
Other loans and direct subsidies to farmersBusiness:
Home mortgage purchases from financial institutions. ..
Loans, net
Direct subsidy payments . .
Subsidy Tarising from the postal deficit
Interest
_ __
._
Total
Loans and transfer payments to foreign countries and international institutions:
European Recovery Program loans and grants
Other loans (net
withdrawals)
_ _
Other grants 9
Subscriptions to the International Bank and Monetary
Fund (net cash withdrawals)
Total
.
.
.
.
Military services—cash payments for goods and services
Clearing account for outstanding checks and telegraphic reports.
Total Federal cash payments to the public .
See footnotes on following page,
24Q
Second
halfi
2.5
Payment to business for goods and services:
Public works:
Federal.
Grants-in-aid and loans for public works
Other goods and services 5
_
Payments to foreign countries and international institutions for goods and services
_
Loans and transfer payments to individuals:
Social insurance and public assistance:
Federal emplovees' retirement benefit payments
Old-age and disability benefit payments
Unemployment insurance benefit payments
.
Grants-in-aid for public assistance Keadjustment
benefits, pensions, and other payments to
6
veterans
Loans to7 home owners, netInterest _.
Other
First
half
8
.6
.2
.4
.2
(8)
()
(8)
.4
.2
.6
3.0
6
2.9
.6
3.0
69
48
61
28
3.3
.1
1.3
4.1
(*)
1.5
.2
(8)
1.2
.4
.1
8
()
.5
2.9
36
(8)
24
1.2
-.3
5.8
3.9
4.2
3.6
12.5
-.2
13.1
-.1
11.4
-.7
14.8
.5
42.6
41.9
44.0
39.9
1
Estimates based on incomplete data.
2 Differs from the national income concept of "government purchases of goods and services" by excluding,
in addition to military services, farm price support expenditures and unilateral aid to foreign countries.
Grants to States and localities for public works, here included as a Federal expenditure, would be included
in the national income accounts as a State and local expenditure. There are other less significant differences
between the two concepts.
3
Excludes payroll deductions for Federal employees' retirement.
4
Includes all 0grants-in-aid and loansj to public bodies for purposes other than public works and public
assistance. Includes, in addition, one-third of Federal expenditures for veterans' tuition, books, and
supplies.
6
This figure is obtained as a residual by deducting all other expenditures from total cash payments to the
public. Owing to the fact that data are incomplete for calendar year 1950, the residual is subject to a high
margin
of error.
6
Includes cashing of terminal-leave bonds, mustering-out pay, and National Service and Government
life insurance refunds and benefits in addition to veterans' pensions and readjustment benefits. Includes
only
one-third of payments for veterans' tuition, books, and supplies.
7
Includes a small amount of interest on tax refunds in addition to interest on the public debt. In addition,
it includes payment of about 150 million dollars to business and about 50 million dollars to individuals in
1949 resulting from a nonrecurring change in the method of reporting interest payments. Interest paid to
business includes over 100 million dollars of interest paid each year by the Federal Government to State
and local governments. Interest in appendix table C-2 is net, and is on an accrual rather than a cash basis;
it 8includes interest paid by State and local governments and by government corporations.
Less than 50 million dollars.
9
Includes expenditures for Mutual Defense Assistance Program.
NOTE.—Detail will not necessarily add to totals because of rounding.
241
@FedFRASER